REINSURANCE GROUP OF AMERICA INC

The Company uses adjusted operating income before income taxes to analyze the performance of its operating segments. Adjusted operating income before income taxes is not determined in accordance with U.S. GAAP. The Company principally uses adjusted operating income before income taxes in evaluating performance because the Company believes that such measure, when reviewed in conjunction with relevant U.S. GAAP measure (i.e., income before income taxes), presents a clearer picture of its operating performance and is used by the Company in the allocation of its resources. The Company believes that this financial measure provides investors and other third parties with a better understanding of the Company’s results of operations, financial statements and the underlying profitability drivers and trends of the Company’s businesses by excluding specified items which may not be indicative of the Company’s ongoing operating performance and may fluctuate significantly from period to period. These measures should be considered supplementary to the Company’s financial results that are presented in accordance with U.S. GAAP and should not be viewed as a substitute for U.S. GAAP measures. Other companies may use similarly titled non-GAAP financial measures that are calculated differently from the way the Company calculates such measures. Consequently, the Company’s non-GAAP financial measures may not be comparable to similar measures used by other companies.

The Company’s significant segment expenses are (1) adjusted claims and other policy benefits which exclude the non-economic losses at contract inception for direct pension risk transfer single premium business, (2) future policy benefits remeasurement gains and losses, (3) adjusted interest credited, which excludes the change in the fair value of embedded derivatives associated with equity-indexed annuities and (4) interest expense. See Note 19 – “Segment Information” in the Notes to Consolidated Financial Statements for additional information regarding the presentation of segment results and the Company’s definition of adjusted operating income.

U.S. and Latin America Operations

The U.S. and Latin America operations consist of two major segments: Traditional and Financial Solutions. The Traditional segment primarily specializes in the reinsurance of individual mortality-risk, health and long-term care, universal life products and, to a lesser extent, group reinsurance. The Financial Solutions segment consists of Asset-Intensive and Capital Solutions. Asset-Intensive within the Financial Solutions segment includes coinsurance of annuities, corporate-owned life insurance policies, pension risk transfer (“PRT”) group annuity contracts and, to a lesser extent, fee-based synthetic guaranteed investment contracts, which include investment-only, stable value contracts. Capital Solutions within the Financial Solutions segment primarily involves assisting ceding companies in meeting applicable regulatory requirements by enhancing the ceding companies’ financial strength and regulatory surplus position through relatively low risk reinsurance and other transactions. Typically, these transactions do not qualify as reinsurance under GAAP, due to the low-risk nature of the transactions, therefore only the related net fees are reflected in other revenues on the consolidated statements of income.

The following table sets forth the U.S. and Latin America operating results for the periods indicated (dollars in millions). See additional information in the Traditional and Financial Solutions sections.

The increase in adjusted operating income before income taxes in 2024 was primarily the result of favorable impacts of management in force actions, partially offset by lower contributions from Financial Solutions new business and a decrease in variable investment income.

The increase in adjusted operating income before income taxes in 2023 was primarily the result of a decrease in remeasurement losses due to assumption updates and favorable claims experience in 2023 as compared to the prior year in U.S. Traditional lines of business, partially offset by a recapture fee earned on a terminated Capital Solutions transaction in 2022.

The following table sets forth the U.S. and Latin America Traditional segment operating results for the periods indicated (dollars in millions):

(1)Includes claims and other policy benefits and future policy benefits remeasurements (gains) losses.

The increase in adjusted operating income before income taxes in 2024 for the U.S. and Latin America Traditional segment was primarily the result of management in force actions, such as rate increases and recaptures, and contributions from new transactions.

•The increase in net premiums was primarily due to organic growth and contributions from new transactions, as well as the recapture of a large retrocession treaty, effective April 1, 2023.

•Higher investment income was driven by a higher asset base as a result of an increase in the volume and size of new transactions that closed during 2024.

•The future policy benefits remeasurement gain in 2024 was attributable to favorable impacts of management in force actions and net favorable assumption updates, partially offset by a remeasurement loss in the amount of $83 million as a result of the change in per life retention limit. The future policy benefits remeasurement loss in 2023 was attributable to unfavorable assumption updates of $17 million and unfavorable claims experience, primarily for the U.S. Individual Life business.

•The increase in policy acquisition costs and other insurance expenses as a percentage of net premiums was less than 1% and primarily due to varying allowance levels within coinsurance type arrangements and the mix of new business between coinsurance versus yearly renewable term.

•The increase in adjusted operating income before income taxes in 2023 for the U.S. and Latin America Traditional segment was primarily due to organic growth on existing treaties as well as contributions from new transactions, a decrease in remeasurement losses due to assumption updates in 2023 as compared to the prior year and improved claims experience across all lines of business in 2023, driven in large part by a significant reduction in COVID-19 claims compared to 2022, partially offset by lower variable investment income in the current period.

The following table sets forth the U.S. and Latin America Financial Solutions segment operating results for the periods indicated (dollars in millions):

The decrease in adjusted operating income before income taxes in 2024 for the U.S. and Latin America Financial Solutions segment was primarily due to lower contributions from new business, runoff of in force business and a decrease in variable investment income.

•The increase in premiums was primarily due to several single premium pension risk transfer (“PRT”) transactions completed in 2024, which were offset by an associated increase in reserves reflected in adjusted claims and other policy benefits.

•The book value of the invested asset base supporting asset-intensive transactions increased to $22.0 billion as of December 31, 2024, from $20.9 billion as of December 31, 2023, resulting in an increase in investment income.

•The increase in the asset base was primarily due to $3.3 billion from new transactions, partially offset by $1.8 billion of net run off in existing in force transactions and $0.4 billion associated with an external retrocession transaction.

•As of December 31, 2024 and 2023, $3.3 billion and $3.7 billion, respectively, of the invested assets were funds withheld at interest, of which greater than 90% was associated with two clients.

•The increase in adjusted claims and other policy benefits was primarily due to the increase in reserves on PRT transactions completed in 2024, partially offset by the decrease in reserves associated with an external retrocession transaction.

•The increase in policy acquisition costs and other insurance expenses was primarily due to an increase in other insurance expenses associated with the external retrocession transaction.

The increase in adjusted operating income before income taxes in 2023 for the U.S. and Latin America Financial Solutions segment was primarily due to higher net investment income due to an increase in interest rates and an increase in the asset base, partially offset by a decline in other revenues due to a recapture fee earned on a terminated Capital Solutions transaction in 2022.