UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

REINSURANCE GROUP OF AMERICA, INCORPORATED

MISSOURI (State or other jurisdiction of incorporation or organization)		43-1627032 (IRS employer identification number)

1370 Timberlake Manor Parkway
Chesterfield, Missouri 63017
(Address of principal executive offices)

(636) 736-7000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

Large accelerated filer þ     Accelerated filer o     Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o     No þ

Common stock outstanding ($.01 par value) as of July 31, 2007: 61,993,139 shares.

 

 

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

TABLE OF CONTENTS

Item				Page
PART I — FINANCIAL INFORMATION
1		Financial Statements
		Condensed Consolidated Balance Sheets (Unaudited)
		June 30, 2007 and December 31, 2006		3
		Condensed Consolidated Statements of Income (Unaudited)
		Three and six months ended June 30, 2007 and 2006		4
		Condensed Consolidated Statements of Cash Flows (Unaudited)
		Six months ended June 30, 2007 and 2006		5
		Notes to Condensed Consolidated Financial Statements (Unaudited)		6
2		Management’s Discussion and Analysis of
		Financial Condition and Results of Operations		12
3		Quantitative and Qualitative Disclosures About Market Risk		33
4		Controls and Procedures		33
PART II — OTHER INFORMATION
1		Legal Proceedings		33
1A		Risk Factors		34
2		Unregistered Sales of Equity Securities and Use of Proceeds		34
4		Submission of Matters to a Vote of Security Holders		34
6		Exhibits		34
		Signatures		35
		Index to Exhibits		36
Certification
Certification
Certification
Certification

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

		June 30,				December 31,
		2007				2006
		(Dollars in thousands)
Assets
Fixed maturity securities:
Available-for-sale at fair value (amortized cost of $8,419,503 and $7,867,932 at June 30, 2007 and December 31, 2006, respectively)		$	8,716,124			$	8,372,173
Mortgage loans on real estate			802,168				735,618
Policy loans			1,018,215				1,015,394
Funds withheld at interest			4,498,524				4,129,078
Short-term investments			178,668				140,281
Other invested assets			283,226				220,356
Total investments			15,496,925				14,612,900
Cash and cash equivalents			414,888				160,428
Accrued investment income			95,330				68,292
Premiums receivable and other reinsurance balances			668,216				695,307
Reinsurance ceded receivables			599,767				563,570
Deferred policy acquisition costs			2,945,325				2,808,053
Other assets			113,984				128,287
Total assets		$	20,334,435			$	19,036,837
Liabilities and Stockholders’ Equity
Future policy benefits		$	5,784,128			$	5,315,428
Interest sensitive contract liabilities			6,427,896				6,212,278
Other policy claims and benefits			1,909,720				1,826,831
Other reinsurance balances			174,018				145,926
Deferred income taxes			667,245				828,848
Other liabilities			529,025				177,490
Short-term debt			30,132				29,384
Long-term debt			908,658				676,165
Collateral finance facility			850,265				850,402
Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated debentures of the Company			158,779				158,701
Total liabilities			17,439,866				16,221,453
Commitments and contingent liabilities (See Note 5)
Stockholders’ Equity:
Preferred stock (par value $.01 per share; 10,000,000 shares authorized; no shares issued or outstanding)			—				—
Common stock (par value $.01 per share; 140,000,000 shares authorized; 63,128,273 shares issued at June 30, 2007 and December 31, 2006)			631				631
Warrants			66,915				66,915
Additional paid-in-capital			1,090,648				1,081,433
Retained earnings			1,412,105				1,307,743
Accumulated other comprehensive income:
Accumulated currency translation adjustment, net of income taxes			181,956				109,067
Unrealized appreciation of securities, net of income taxes			204,108				335,581
Pension and postretirement benefits, net of income taxes			(11,610	)			(11,297	)
Total stockholders’ equity before treasury stock			2,944,753				2,890,073
Less treasury shares held of 1,135,134 and 1,717,722 at cost at
June 30, 2007 and December 31, 2006, respectively			(50,184	)			(74,689	)
Total stockholders’ equity			2,894,569				2,815,384
Total liabilities and stockholders’ equity		$	20,334,435			$	19,036,837

See accompanying notes to condensed consolidated financial statements (unaudited).

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

		Three months ended June 30,								Six months ended June 30,
		2007				2006				2007				2006
		(Dollars in thousands, except per share data)
Revenues:
Net premiums		$	1,207,646			$	1,076,603			$	2,333,096			$	2,069,045
Investment income, net of related expenses			274,902				168,605				490,645				355,546
Investment related losses, net			(7,092	)			(5,314	)			(15,576	)			(4,682	)
Change in value of embedded derivatives			(7,126	)			(11,075	)			(4,288	)			(6,523	)
Other revenues			20,446				13,717				39,548				28,247
Total revenues			1,488,776				1,242,536				2,843,425				2,441,633
Benefits and Expenses:
Claims and other policy benefits			980,338				874,531				1,883,148				1,686,044
Interest credited			113,652				44,732				174,718				106,261
Policy acquisition costs and other insurance expenses			183,561				172,700				364,435				324,504
Change in deferred acquisition costs associated with change in value of embedded derivatives			(5,545	)			(7,982	)			(3,438	)			(5,225	)
Other operating expenses			56,619				45,830				112,041				92,357
Interest expense			23,232				15,014				43,685				31,781
Collateral finance facility expense			13,206				277				25,893				277
Total benefits and expenses			1,365,063				1,145,102				2,600,482				2,235,999
Income from continuing operations before income taxes			123,713				97,434				242,943				205,634
Provision for income taxes			44,676				33,645				86,969				71,265
Income from continuing operations			79,037				63,789				155,974				134,369
Discontinued operations:
Loss from discontinued accident and health operations, net of income taxes			(1,562	)			(158	)			(2,247	)			(1,668	)
Net income		$	77,475			$	63,631			$	153,727			$	132,701
Basic earnings per share:
Income from continuing operations		$	1.28			$	1.04			$	2.53			$	2.20
Discontinued operations			(0.03	)			—				(0.04	)			(0.03	)
Net income		$	1.25			$	1.04			$	2.49			$	2.17
Diluted earnings per share:
Income from continuing operations		$	1.22			$	1.02			$	2.43			$	2.14
Discontinued operations			(0.02	)			(0.01	)			(0.04	)			(0.02	)
Net income		$	1.20			$	1.01			$	2.39			$	2.12
Dividends declared per share		$	0.09			$	0.09			$	0.18			$	0.18

See accompanying notes to condensed consolidated financial statements (unaudited).

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

		Six months ended
		June 30,
		2007				2006
		(Dollars in thousands)
Cash Flows from Operating Activities:
Net income		$	153,727			$	132,701
Adjustments to reconcile net income to net cash provided by operating activities:
Change in:
Accrued investment income			(26,440	)			(18,680	)
Premiums receivable and other reinsurance balances			42,087				(91,410	)
Deferred policy acquisition costs			(82,761	)			(152,112	)
Reinsurance ceded balances			(36,197	)			(13,392	)
Future policy benefits, other policy claims and benefits, and other reinsurance balances			373,895				384,937
Deferred income taxes			77,666				26,061
Excess tax benefits from share-based payment arrangement			(2,839	)			—
Other assets and other liabilities, net			16,477				58,886
Amortization of net investment discounts and other			(29,674	)			(26,624	)
Investment related losses, net			15,576				4,682
Other, net			9,656				2,870
Net cash provided by operating activities			511,173				307,919
Cash Flows from Investing Activities:
Sales of fixed maturity securities — available for sale			1,132,529				879,617
Maturities of fixed maturity securities — available for sale			106,051				133,734
Purchases of fixed maturity securities — available for sale			(1,531,894	)			(1,273,922	)
Cash invested in mortgage loans on real estate			(91,194	)			(46,189	)
Cash invested in policy loans			(8,750	)			(8,579	)
Cash invested in funds withheld at interest			(46,636	)			(29,765	)
Net increase in securitized lending activities			90,398				76,508
Principal payments on mortgage loans on real estate			24,818				43,575
Principal payments on policy loans			5,929				13,822
Change in short-term investments and other invested assets			(124,582	)			(725,033	)
Net cash used in investing activities			(443,331	)			(936,232	)
Cash Flows from Financing Activities:
Dividends to stockholders			(11,097	)			(11,007	)
Proceeds from long-term debt issuance			295,311				—
Principal payments on debt			—				(100,000	)
Net repayments under credit agreements			(66,602	)			—
Net proceeds from collateral finance facility			—				837,500
Purchases of treasury stock			(3,611	)			—
Excess tax benefits from share-based payment arrangement			2,839				—
Exercise of stock options, net			12,146				2,933
Excess deposits (payments) on universal life and other investment type policies and contracts			(45,155	)			49,831
Net cash provided by financing activities			183,831				779,257
Effect of exchange rate changes			2,787				(616	)
Change in cash and cash equivalents			254,460				150,328
Cash and cash equivalents, beginning of period			160,428				128,692
Cash and cash equivalents, end of period		$	414,888			$	279,020
Supplementary information:
Cash paid for interest		$	50,267			$	33,334
Cash paid (received) for income taxes, net of refunds		$	22,440			$	(12,931	)

See accompanying notes to condensed consolidated financial statements (unaudited).

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Reinsurance Group of America, Incorporated (“RGA”) and its subsidiaries (collectively, the “Company”) have been prepared in conformity with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the six-month period ended June 30, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2006 Annual Report on Form 10-K (“2006 Annual Report”) filed with the Securities and Exchange Commission on February 26, 2007.

The accompanying unaudited condensed consolidated financial statements include the accounts of Reinsurance Group of America, Incorporated and its subsidiaries. All intercompany accounts and transactions have been eliminated. The Company has reclassified the presentation of certain prior-period information to conform to the 2007 presentation.

2. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share on income from continuing operations (in thousands, except per share information):

		Three months ended								Six months ended
		June 30, 2007				June 30, 2006				June 30, 2007				June 30, 2006
Earnings:
Income from continuing operations (numerator for basic and diluted calculations)		$	79,037			$	63,789			$	155,974			$	134,369
Shares:
Weighted average outstanding shares (denominator for basic calculation)			61,898				61,185				61,710				61,162
Equivalent shares from outstanding stock options			2,643				1,524				2,509				1,501
Denominator for diluted calculation			64,541				62,709				64,219				62,663
Earnings per share:
Basic		$	1.28			$	1.04			$	2.53			$	2.20
Diluted		$	1.22			$	1.02			$	2.43			$	2.14

The calculation of common equivalent shares does not include the impact of options or warrants having a strike or conversion price that exceeds the average stock price for the earnings period, as the result would be antidilutive. The calculation of common equivalent shares also excludes the impact of outstanding performance contingent shares, as the conditions necessary for their issuance have not been satisfied as of the end of the reporting period. For the three and six month periods ended June 30, 2007 and 2006, 0.4 million performance contingent shares were excluded from the calculation.

3. Comprehensive Income

The following schedule reflects the change in accumulated other comprehensive income (dollars in thousands):

		Three months ended								Six months ended
		June 30, 2007				June 30, 2006				June 30, 2007				June 30, 2006
Net income		$	77,475			$	63,631			$	153,727			$	132,701
Accumulated other comprehensive income (expense), net of income tax:
Unrealized losses, net of reclassification adjustment for losses, net included in net income			(136,116	)			(116,249	)			(131,473	)			(230,879	)
Foreign currency items			58,832				34,756				72,889				32,719
Pension and postretirement benefit adjustments			(283	)			—				(313	)			—
Comprehensive income (loss)		$	(92	)		$	(17,862	)		$	94,830			$	(65,459	)

4. Segment Information

The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies in Note 2 of the consolidated financial statements accompanying the 2006 Annual Report. The Company measures segment performance primarily based on profit or loss from operations before income taxes. There are no intersegment reinsurance transactions and the Company does not have any material long-lived assets other than internally developed software. Investment income is allocated to the segments based upon average assets and related capital levels deemed appropriate to support the segment business volumes.

The Company allocates capital to its segments based on an internally developed risk capital model, the purpose of which is to measure the risk in the business and to provide a basis upon which capital is deployed. The economic capital model considers the unique and specific nature of the risks inherent in the Company’s businesses. As a result of the economic capital allocation process, a portion of investment income and investment related gains (losses) are credited to the segments based on the level of allocated equity. In addition, the segments are charged for excess capital utilized above the allocated economic capital basis. This charge is included in policy acquisition costs and other insurance expenses.

Information related to total revenues, income (loss) from continuing operations before income taxes, and total assets of the Company for each reportable segment are summarized below (dollars in thousands).

		Three months ended								Six months ended
		June 30, 2007				June 30, 2006				June 30, 2007				June 30, 2006
Total revenues
U.S.		$	927,982			$	782,387			$	1,767,063			$	1,547,939
Canada			156,684				126,230				285,478				245,738
Europe & South Africa			171,242				149,587				344,719				298,255
Asia Pacific			209,665				177,163				406,922				324,797
Corporate & Other			23,203				7,169				39,243				24,904
Total		$	1,488,776			$	1,242,536			$	2,843,425			$	2,441,633

		Three months ended								Six months ended
		June 30, 2007				June 30, 2006				June 30, 2007				June 30, 2006
Income (loss) from continuing operations before income taxes
U.S.		$	86,215			$	70,935			$	179,392			$	151,271
Canada			24,202				11,074				39,236				19,505
Europe & South Africa			11,846				17,269				32,970				32,066
Asia Pacific			15,609				7,725				25,941				14,339
Corporate & Other			(14,159	)			(9,569	)			(34,596	)			(11,547	)
Total		$	123,713			$	97,434			$	242,943			$	205,634

		Total assets
		June 30,				December 31,
		2007				2006
U.S.		$	13,180,208			$	12,387,202
Canada			2,263,833				2,182,712
Europe & South Africa			1,352,023				1,140,374
Asia Pacific			1,225,084				1,099,700
Corporate and Other			2,313,287				2,226,849
Total		$	20,334,435			$	19,036,837

5. Commitments and Contingent Liabilities

The Company has commitments to fund investments in mortgage loans and limited partnerships in the amount of $132.8 million at June 30, 2007. The Company anticipates that the majority of these amounts will be invested over the next five years, however, contractually these commitments could become due at the request of the counterparties. Investments in mortgage loans and limited partnerships are carried at cost less any other-than-temporary impairment and are included in total investments in the condensed consolidated balance sheets.

The Company is currently a party to three arbitrations that involve its discontinued accident and health business, including personal accident business, which includes London market excess of loss business, and workers’ compensation carve-out business. The Company is also party to a threatened arbitration related to its life reinsurance business. As of June 30, 2007, the parties involved in these actions have raised claims, or established reserves that may result in claims, in the amount of $23.9 million, which is $23.2 million in excess of the amounts held in reserve by the Company. The Company generally has little information regarding any reserves established by the ceding companies, and must rely on management estimates to establish policy claim liabilities. It is possible that any such reserves could be increased in the future. The Company believes it has substantial defenses upon which to contest these claims, including but not limited to misrepresentation and breach of contract by direct and indirect ceding companies. See Note 20, “Discontinued Operations” in the Company’s consolidated financial statements accompanying the 2006 Annual Report for more information. Additionally, from time to time, the Company is subject to litigation related to employment-related matters in the normal course of its business. The Company cannot predict or determine the ultimate outcome of the pending litigation or arbitrations or provide useful ranges of potential losses. It is the opinion of management, after consultation with counsel, that their outcomes, after consideration of the provisions made in the Company’s condensed consolidated financial statements, would not have a material adverse effect on its consolidated financial position. However, it is possible that an adverse outcome could, from time to time, have a material adverse effect on the Company’s consolidated net income in a particular quarter or year.

The Company has obtained letters of credit, issued by banks, in favor of various affiliated and unaffiliated insurance companies from which the Company assumes business. These letters of credit represent guarantees of performance under the reinsurance agreements and allow ceding companies to take statutory reserve credits. At June 30, 2007 and December 31, 2006, there were approximately $20.9 million and $19.4 million, respectively, of outstanding bank letters of credit in favor of third parties. Additionally, the Company utilizes letters of credit to secure reserve

credits when it retrocedes business to its offshore subsidiaries, including RGA Americas Reinsurance Company, Ltd., RGA Reinsurance Company (Barbados) Ltd. and RGA Worldwide Reinsurance Company, Ltd. The Company cedes business to its offshore affiliates to help reduce the amount of regulatory capital required in certain jurisdictions, such as the U.S. and the United Kingdom. The capital required to support the business in the offshore affiliates reflects more realistic expectations than the original jurisdiction of the business, where capital requirements are often considered to be quite conservative. As of June 30, 2007 and December 31, 2006, $459.2 million and $437.7 million, respectively, in letters of credit from various banks were outstanding between the various subsidiaries of the Company. Applicable letter of credit fees and fees payable for the credit facility depend upon the Company’s senior unsecured long-term debt rating. Fees associated with the Company’s other letters of credit are not fixed for periods in excess of one year and are based on the Company’s ratings and the general availability of these instruments in the marketplace.

RGA has issued guarantees to third parties on behalf of its subsidiaries’ performance for the payment of amounts due under certain credit facilities, reinsurance treaties and office lease obligations, whereby if a subsidiary fails to meet an obligation, RGA or one of its other subsidiaries will make a payment to fulfill the obligation. In limited circumstances, treaty guarantees are granted to ceding companies in order to provide them additional security, particularly in cases where RGA’s subsidiary is relatively new, unrated, or not of a significant size. Liabilities supported by the treaty guarantees, before consideration for any legally offsetting amounts due from the guaranteed party, totaled $299.8 million and $276.5 million as of June 30, 2007 and December 31, 2006, respectively, and are reflected on the Company’s condensed consolidated balance sheets in future policy benefits. Potential guaranteed amounts of future payments will vary depending on production levels and underwriting results. Guarantees related to trust preferred securities and credit facilities provide additional security to third parties should a subsidiary fail to make principal and/or interest payments when due. As of June 30, 2007, RGA’s exposure related to these guarantees was $171.5 million.

In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Since this indemnity generally is not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount due under this indemnity in the future.

6. Employee Benefit Plans

The components of net periodic benefit costs were as follows (dollars in thousands):

		Three months ended								Six months ended
		June 30, 2007				June 30, 2006				June 30, 2007				June 30, 2006
Net periodic pension benefit cost:
Service cost		$	472			$	423			$	1,271			$	1,037
Interest cost			258				371				850				848
Expected return on plan assets			(483	)			(411	)			(938	)			(758	)
Amortization of prior service cost			79				6				174				15
Amortization of prior actuarial (gain) loss			(44	)			78				69				184
Net periodic pension benefit cost		$	282			$	467			$	1,426			$	1,326
Net periodic other benefits cost:
Service cost		$	(63	)		$	180			$	143			$	359
Interest cost			79				155				269				311
Expected return on plan assets			—				—				—				—
Amortization of prior service cost			12				—				12				—
Amortization of prior actuarial (gain) loss			(2	)			66				82				132
Net periodic other benefits cost		$	26			$	401			$	506			$	802

The Company made $1.9 million in pension contributions during the second quarter of 2007 and expects this to be the only contribution for the year.

7. Financing Activities

On March 6, 2007, RGA issued 5.625% Senior Notes due March 15, 2017 with a face amount of $300.0 million. These senior notes have been registered with the Securities and Exchange Commission. The net proceeds from the offering were approximately $295.3 million, a portion of which were used to pay down $50.0 million of indebtedness under a U.S. bank credit facility. The remaining net proceeds are designated for general corporate purposes. Capitalized issue costs were approximately $2.6 million.

8. Equity Based Compensation

Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standard (“SFAS”) No. 123(r), “Share-Based Payment” (“SFAS 123(r)”). SFAS 123(r) requires that the cost of all share-based transactions be recorded in the financial statements. The Company has been recording compensation cost for all equity-based grants or awards after January 1, 2003 consistent with the requirement of SFAS No. 123 “Accounting for Stock-Based Compensation”, as amended by SFAS 148, “Accounting for Stock-Based Compensation — Transition and Disclosure — An Amendment of SFAS No. 123”. Equity compensation expense was $2.9 million and $4.8 million in the second quarter of 2007 and 2006, respectively, and $9.5 million and $10.6 million in the first six months of 2007 and 2006, respectively. In the first quarter of 2007, the Company granted 0.3 million incentive stock options at $59.63 weighted average per share and 0.1 million performance contingent units (“PCUs”) to employees. Additionally, non-employee directors were granted a total of 4,800 shares of common stock. As of June 30, 2007, the total compensation cost of non-vested awards not yet recognized in the financial statements was $18.1 million with various recognition periods over the next five years.

9. New Accounting Standards

Effective January 1, 2007 the Company adopted Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income tax recognized in a company’s financial statements. FIN 48 requires companies to determine whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement and classification of income tax uncertainties, along with any related interest and penalties. Previously recorded income tax benefits that no longer meet this standard are required to be charged to earnings in the period that such determination is made.

As a result of implementation of FIN 48, the Company recognized a $17.3 million increase in the liability for unrecognized tax benefits, a $5.3 million increase in the interest liability for unrecognized tax benefits, and a corresponding reduction to the January 1, 2007 balance of retained earnings of $22.6 million. The Company’s total amount of unrecognized tax benefits upon adoption of FIN 48 was $196.3 million. The Company reclassified, at adoption, $9.1 million of current tax liabilities to the liability for unrecognized tax benefits. The Company also reclassified, at adoption, $169.9 million of deferred income tax liabilities to the liability for unrecognized tax benefits for tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. The total amount of unrecognized tax benefits as of January 1, 2007 that would affect the effective tax rate if recognized is $26.4 million. The Company also had $29.8 million of accrued interest, as of January 1, 2007. The Company classifies interest accrued related to unrecognized tax benefits in interest expense, while penalties are included within income tax expense.

The Company files income tax returns in the U.S. federal jurisdiction and various state and non U.S. jurisdictions. With a few exceptions, the Company is no longer subject to U.S. federal, state and local, or non U.S. income tax examinations by tax authorities for years before 2003. There were no significant changes in the liability for unrecognized tax benefits during the six months ended June 30, 2007.

Effective January 1, 2007, the Company adopted the provisions of the FASB’s Emerging Issues Task Force (“EITF”) Issue 06-5. This issue, titled “Accounting for the Purchases of Life Insurance — Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4”, clarified that the amount of the DAC receivable beyond one year generally must be discounted to present value under Accounting Principles Board

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Opinion 21. The adoption of EITF Issue 06-05 did not have a material impact on the Company’s condensed consolidated financial statements.

Effective January 1, 2007, the Company adopted Statement of Position (“SOP”) 05-1, “Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts” (“SOP 05-1”). SOP 05-1 provides guidance on accounting by insurance enterprises for DAC on internal replacements of insurance and investment contracts other than those specifically described in SFAS No. 97, “Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments”. SOP 05-1 defines an internal replacement as a modification in product benefits, features, rights, or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. SOP 05-1 is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. In addition, in February 2007, the American Institute of Certified Public Accountants (“AICPA”) issued related Technical Practice Aids (“TPAs”) to provide further clarification of SOP 05-1. The TPAs are effective concurrently with the adoption of the SOP. The adoption of SOP 05-1 and related TPAs did not have a material impact on the Company’s condensed consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits all entities the option to measure most financial instruments and certain other items at fair value at specified election dates and to report related unrealized gains and losses in earnings. The fair value option will generally be applied on an instrument-by-instrument basis and is generally an irrevocable election. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is evaluating which eligible financial instruments, if any, it will elect to account for at fair value under SFAS 159 and the related impact on the Company’s condensed consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in GAAP and requires enhanced disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements. The pronouncement is effective for fiscal years beginning after November 15, 2007. The guidance in SFAS 157 will be applied prospectively with certain exceptions. The Company is currently evaluating the impact of SFAS 157 and does not expect that the pronouncement will have a material impact on the Company’s condensed consolidated financial statements.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company’s primary business is life reinsurance, which involves reinsuring life insurance policies that are often in force for the remaining lifetime of the underlying individuals insured, with premiums earned typically over a period of 10 to 30 years. Each year, however, a portion of the business under existing treaties terminates due to, among other things, lapses or surrenders of underlying policies, deaths of policyholders, and the exercise of recapture options by ceding companies.

The Company derives revenues primarily from renewal premiums from existing reinsurance treaties, new business premiums from existing or new reinsurance treaties, income earned on invested assets, and fees earned from financial reinsurance transactions. The Company believes that industry trends have not changed materially from those discussed in its 2006 Annual Report.

The Company’s profitability primarily depends on the volume and amount of death claims incurred and its ability to adequately price the risks it assumes. While death claims are reasonably predictable over a period of many years, claims become less predictable over shorter periods and are subject to significant fluctuation from quarter to quarter and year to year. The maximum amount of coverage the Company retains per life is $6 million. Claims in excess of this retention amount are retroceded to retrocessionaires; however, the Company remains fully liable to the ceding company for the entire amount of risk it assumes. The Company believes its sources of liquidity are sufficient to cover potential claims payments on both a short-term and long-term basis.

The Company measures performance based on income or loss from continuing operations before income taxes for each of its five segments. The Company’s U.S., Canada, Europe & South Africa and Asia Pacific operations provide traditional life reinsurance to clients. The Company’s U.S. operations also provide asset-intensive and financial reinsurance products. The Company also provides insurers with critical illness reinsurance in its Canada, Europe & South Africa and Asia Pacific operations. Asia Pacific operations also provide financial reinsurance. The Corporate and Other segment results include the corporate investment activity, general corporate expenses, interest expense of RGA, operations of RGA Technology Partners, Inc., a wholly-owned subsidiary that develops and markets technology solutions for the insurance industry, Argentine business in run-off and the provision for income taxes. The Company’s discontinued accident and health operations are not reflected in its results from continuing operations.

The Company allocates capital to its segments based on an internally developed risk capital model, the purpose of which is to measure the risk in the business and to provide a basis upon which capital is deployed. The economic capital model considers the unique and specific nature of the risks inherent in RGA’s businesses. As a result of the economic capital allocation process, a portion of investment income and investment related gains (losses) are credited to the segments based on the level of allocated equity. In addition, the segments are charged for excess capital utilized above the allocated economic capital basis. This charge is included in policy acquisition costs and other insurance expenses.

Results of Operations

Consolidated income from continuing operations before income taxes increased $26.3 million, or 27.0%, and $37.3 million, or 18.1%, for the second quarter and first six months of 2007, respectively, primarily due to increased premiums in all segments. Also, contributing to these increases were improved mortality experience in the Canada segment partially offset by adverse mortality experience in the Europe and South Africa segment. Consolidated net premiums increased $131.0 million, or 12.2%, and $264.1 million, or 12.8%, during the second quarter and first six months of 2007, respectively, due to growth in life reinsurance in force. Foreign currency fluctuations favorably affected net premiums by approximately $21.2 million and $34.3 million in the second quarter and first six months of 2007, respectively, as compared to the same periods in 2006.

Consolidated investment income, net of related expenses, increased $106.3 million, or 63.0%, and $135.1 million, or 38.0%, during the second quarter and first six months of 2007, respectively, primarily due to market value changes related to the Company’s funds withheld at interest investment in certain equity index annuity products, which are substantially offset by a corresponding increase in interest credited to policyholder account balances resulting in a negligible effect on net income, a larger invested asset base, and a higher effective yield. Invested

assets as of June 30, 2007 totaled $15.5 billion, a 15.4% increase over June 30, 2006. A portion of the increase in invested assets is related to the Company’s investment of the net proceeds from the issuance of senior notes in March 2007. The average yield earned on investments, excluding funds withheld, increased slightly from 5.72% in the second quarter of 2006 to 5.90% for the second quarter of 2007. The average yield will vary from quarter to quarter and year to year depending on a number of variables, including the prevailing interest rate and credit spread environment and changes in the mix of the underlying investments and the timing of dividends and distributions on certain investments. Net investment related losses totaled $15.6 million for the first six months of 2007 as the Company recognized a $10.5 million foreign currency translation loss related to its decision to sell its direct insurance operations in Argentina. The Company does not expect the ultimate sale of that subsidiary to generate a material financial impact. Investment income and a portion of investment related gains (losses) are allocated to the segments based upon average assets and related capital levels deemed appropriate to support the segment business volumes.

The effective tax rate on a consolidated basis was 36.1% for the second quarter of 2007, compared to 34.5% for the prior-year period. The effective tax rates for the first and second quarters of 2007 were affected by the application of FIN 48. However, on an ongoing basis, the Company does not anticipate that this will have a material impact on its effective tax rate.

Critical Accounting Policies

The Company’s accounting policies are described in Note 2 in the 2006 Annual Report. The Company believes its most critical accounting policies include the capitalization and amortization of deferred acquisition costs (“DAC”); the establishment of liabilities for future policy benefits, other policy claims and benefits, including incurred but not reported claims; the valuation of investment impairments; and the establishment of arbitration or litigation reserves. The balances of these accounts are significant to the Company’s financial position and require extensive use of assumptions and estimates, particularly related to the future performance of the underlying business.

Additionally, for each of the Company’s reinsurance contracts, it must determine if the contract provides indemnification against loss or liability relating to insurance risk, in accordance with applicable accounting standards. The Company must review all contractual features, particularly those that may limit the amount of insurance risk to which the Company is subject or features that delay the timely reimbursement of claims. If the Company determines that the possibility of a significant loss from insurance risk will occur only under remote circumstances, it records the contract under a deposit method of accounting with the net amount receivable or payable reflected in premiums receivable and other reinsurance balances or other reinsurance liabilities on the condensed consolidated balance sheets. Fees earned on the contracts are reflected as other revenues, as opposed to net premiums, on the condensed consolidated statements of income.

Costs of acquiring new business, which vary with and are primarily related to the production of new business, have been deferred to the extent that such costs are deemed recoverable from future premiums or gross profits. Deferred policy acquisition costs reflect the Company’s expectations about the future experience of the business in force and include commissions and allowances as well as certain costs of policy issuance and underwriting. Some of the factors that can affect the carrying value of DAC include mortality assumptions, interest spreads and policy lapse rates. The Company performs periodic tests to determine that DAC remains recoverable, and the cumulative amortization is re-estimated and, if necessary, adjusted by a cumulative charge or credit to current operations.

Liabilities for future policy benefits under long-term life insurance policies (policy reserves) are computed based upon expected investment yields, mortality and withdrawal (lapse) rates, and other assumptions, including a provision for adverse deviation from expected claim levels. The Company primarily relies on its own valuation and administration systems to establish policy reserves. The policy reserves the Company establishes may differ from those established by the ceding companies due to the use of different mortality and other assumptions. However, the Company relies upon its clients to provide accurate data, including policy-level information, premiums and claims, which is the primary information used to establish reserves. The Company’s administration departments work directly with its clients to help ensure information is submitted by them in accordance with the reinsurance contracts. Additionally, the Company performs periodic audits of the information provided by ceding companies. The Company establishes reserves for processing backlogs with a goal of clearing all backlogs within a ninety-day period. The backlogs are usually due to data errors the Company discovers or computer file compatibility issues, since much of the data reported to the Company is in electronic format and is uploaded to its computer systems.

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The Company periodically reviews actual historical experience and relative anticipated experience compared to the assumptions used to establish aggregate policy reserves. Further, the Company establishes premium deficiency reserves if actual and anticipated experience indicates that existing aggregate policy reserves, together with the present value of future gross premiums, are not sufficient to cover the present value of future benefits, settlement and maintenance costs and to recover unamortized acquisition costs. The premium deficiency reserve is established through a charge to income, as well as a reduction to unamortized acquisition costs and, to the extent there are no unamortized acquisition costs, an increase to future policy benefits. Because of the many assumptions and estimates used in establishing reserves and the long-term nature of the Company’s reinsurance contracts, the reserving process, while based on actuarial science, is inherently uncertain. If the Company’s assumptions, particularly on mortality, are inaccurate, its reserves may be inadequate to pay claims and there could be a material adverse effect on its results of operations and financial condition.

Other policy claims and benefits include claims payable for incurred but not reported losses, which are determined using case-basis estimates and lag studies of past experience. These estimates are periodically reviewed and any adjustments to such estimates, if necessary, are reflected in current operations. The time lag from the date of the claim or death to the date when the ceding company reports the claim to the Company can be several months and can vary significantly by ceding company and business segment. The Company updates its analysis of incurred but not reported claims, including lag studies, on a periodic basis and adjusts its claim liabilities accordingly. The adjustments in a given period are generally not significant relative to the overall policy liabilities.

The Company primarily invests in fixed maturity securities, and monitors these fixed maturity securities to determine potential impairments in value. With the Company’s external investment managers, it evaluates its intent and ability to hold securities, along with factors such as the financial condition of the issuer, payment performance, the extent to which the market value has been below amortized cost, compliance with covenants, general market and industry sector conditions, and various other factors. Securities, based on management’s judgments, with an other-than-temporary impairment in value are written down to management’s estimate of fair value.

Differences in experience compared with the assumptions and estimates utilized in the justification of the recoverability of DAC, in establishing reserves for future policy benefits and claim liabilities, or in the determination of other-than-temporary impairments to investment securities can have a material effect on the Company’s results of operations and financial condition.

The Company is currently a party to various litigation and arbitrations. While it is difficult to predict or determine the ultimate outcome of the pending litigation or arbitrations or even to provide useful ranges of potential losses, it is the opinion of management, after consultation with counsel, that the outcomes of such litigation and arbitrations, after consideration of the provisions made in the Company’s condensed consolidated financial statements, would not have a material adverse effect on its consolidated financial position. However, it is possible that an adverse outcome could, from time to time, have a material adverse effect on the Company’s consolidated net income in a particular quarter or year. See Note 20, “Discontinued Operations” of the consolidated financial statements accompanying the 2006 Annual Report for more information.

Further discussion and analysis of the results for 2007 compared to 2006 are presented by segment. References to income before income taxes exclude the effects of discontinued operations.

U.S. OPERATIONS

U.S. operations consist of two major sub-segments: Traditional and Non-Traditional. The Traditional sub-segment primarily specializes in mortality-risk reinsurance. The Non-Traditional sub-segment consists of Asset-Intensive and Financial Reinsurance.

For the three months ended June 30, 2007 (dollars in thousands)

		Traditional				Non-Traditional								Total
						Asset-				Financial				U.S.
						Intensive				Reinsurance				Operations
Revenues:
Net premiums		$	718,753			$	1,598			$	—			$	720,351
Investment income, net of related expenses			87,151				117,319				99				204,569
Investment related losses, net			(4,497	)			(1,144	)			(7	)			(5,648	)
Change in value of embedded derivatives			—				(7,126	)			—				(7,126	)
Other revenues			300				9,690				5,846				15,836
Total revenues			801,707				120,337				5,938				927,982
Benefits and expenses:
Claims and other policy benefits			594,619				(553	)			—				594,066
Interest credited			14,579				98,324				—				112,903
Policy acquisition costs and other insurance expenses			101,807				22,295				2,001				126,103
Change in deferred acquisition costs associated with change in value of embedded derivatives			—				(5,545	)			—				(5,545	)
Other operating expenses			11,604				1,705				931				14,240
Total benefits and expenses			722,609				116,226				2,932				841,767
Income before income taxes		$	79,098			$	4,111			$	3,006			$	86,215

For the three months ended June 30, 2006 (dollars in thousands)

		Traditional				Non-Traditional								Total
						Asset-				Financial				U.S.
						Intensive				Reinsurance				Operations
Revenues:
Net premiums		$	662,301			$	1,605			$	—			$	663,906
Investment income, net of related expenses			74,657				48,424				(152	)			122,929
Investment related losses, net			(2,506	)			(2,511	)			—				(5,017	)
Change in value of embedded derivatives			—				(11,075	)			—				(11,075	)
Other revenues			276				3,908				7,460				11,644
Total revenues			734,728				40,351				7,308				782,387
Benefits and expenses:
Claims and other policy benefits			545,640				727				—				546,367
Interest credited			11,796				31,930				—				43,726
Policy acquisition costs and other insurance expenses			101,229				14,539				2,326				118,094
Change in deferred acquisition costs associated with change in value of embedded derivatives			—				(7,982	)			—				(7,982	)
Other operating expenses			8,732				1,413				1,102				11,247
Total benefits and expenses			667,397				40,627				3,428				711,452
Income (loss) before income taxes		$	67,331			$	(276	)		$	3,880			$	70,935

For the six months ended June 30, 2007 (dollars in thousands)

		Traditional				Non-Traditional								Total
						Asset-				Financial				U.S.
						Intensive				Reinsurance				Operations
Revenues:
Net premiums		$	1,388,172			$	3,224			$	—			$	1,391,396
Investment income, net of related expenses			172,079				185,271				119				357,469
Investment related losses, net			(4,835	)			(1,927	)			(7	)			(6,769	)
Change in value of embedded derivatives			—				(4,288	)			—				(4,288	)
Other revenues			406				17,114				11,735				29,255
Total revenues			1,555,822				199,394				11,847				1,767,063
Benefits and expenses:
Claims and other policy benefits			1,137,205				3,970				1				1,141,176
Interest credited			28,849				144,482				—				173,331
Policy acquisition costs and other insurance expenses			201,187				42,481				4,195				247,863
Change in deferred acquisition costs associated with change in value of embedded derivatives			—				(3,438	)			—				(3,438	)
Other operating expenses			23,472				3,326				1,941				28,739
Total benefits and expenses			1,390,713				190,821				6,137				1,587,671
Income before income taxes		$	165,109			$	8,573			$	5,710			$	179,392

For the six months ended June 30, 2006 (dollars in thousands)

		Traditional				Non-Traditional								Total
						Asset-				Financial				U.S.
						Intensive				Reinsurance				Operations
Revenues:
Net premiums		$	1,274,138			$	3,079			$	—			$	1,277,217
Investment income, net of related expenses			145,699				119,321				(155	)			264,865
Investment related losses, net			(3,735	)			(5,844	)			—				(9,579	)
Change in value of embedded derivatives			—				(6,523	)			—				(6,523	)
Other revenues			(44	)			7,197				14,806				21,959
Total revenues			1,416,058				117,230				14,651				1,547,939
Benefits and expenses:
Claims and other policy benefits			1,053,786				(142	)			1				1,053,645
Interest credited			23,283				81,467				—				104,750
Policy acquisition costs and other insurance expenses			183,401				30,934				4,660				218,995
Change in deferred acquisition costs associated with change in value of embedded derivatives			—				(5,225	)			—				(5,225	)
Other operating expenses			18,858				3,189				2,456				24,503
Total benefits and expenses			1,279,328				110,223				7,117				1,396,668
Income before income taxes		$	136,730			$	7,007			$	7,534			$	151,271

Income before income taxes for the U.S. operations segment totaled $86.2 million and $179.4 million for the second quarter and first six months of 2007, respectively, compared to $70.9 million and $151.3 million for the same periods in the prior year. This increase in income can be primarily attributed to growth in total business in force and improved mortality experience over the first half of 2006.

Traditional Reinsurance

The U.S. Traditional sub-segment provides life reinsurance to domestic clients for a variety of life products through yearly renewable term, coinsurance and modified coinsurance agreements. These reinsurance arrangements may be

either facultative or automatic agreements. During the second quarter and first six months of 2007, this sub-segment added $44.1 billion and $84.4 billion of new business in force, measured by face amount of insurance in force, respectively, compared to $41.7 billion and $89.6 billion during the same periods in 2006. Management believes industry consolidation and the established practice of reinsuring mortality risks should continue to provide opportunities for growth.

Income before income taxes for U.S. Traditional reinsurance increased $11.8 million, or 17.5%, and $28.4 million, or 20.8%, in the second quarter and first six months of the 2007, respectively. Stronger premiums and higher investment income were the primary contributors to the increase in net income. Mortality experience also improved compared to the comparable six month period.

Net premiums for U.S. Traditional reinsurance totaled $718.8 and $1,388.2 for the second quarter and first six months of 2007. Comparable prior year numbers were $662.3 and $1,274.1, respectively. The 9.0% increase in year to date net premiums was driven primarily by the growth of total U.S. business in force, which totaled just over $1.2 trillion of face amount as of June 30, 2007. This represents a 7.2% increase over the amount in force on June 30, 2006.

Investment income and investment related gains and losses are allocated to the various operating segments based on average assets and related capital levels deemed appropriate to support the segment business volumes. Investment performance varies with the composition of investments and the relative allocation of capital to the operating segments. During the second quarter of 2007, investment income in the sub-segment totaled $87.2 million, a 16.7% increase over the same period in the prior year. Year to date 2007, investment income grew 18.1% over the first six months of 2006. This increase can be primarily attributed to growth in the invested asset base.

Mortality experience for the first six months of 2007 improved over the same year prior period while quarter over quarter the experience was relatively consistent. Claims and other policy benefits, as a percentage of net premiums (loss ratios), were 82.7% for the second quarter and 81.9% for the first six months of 2007. The loss ratios for the same prior-year periods were 82.4% and 82.7%, respectively. Death claims are reasonably predictable over a period of many years, but are less predictable over shorter periods and are subject to significant fluctuation.

Interest credited relates to amounts credited on cash value products, which have a significant mortality component. The amount of interest credited fluctuates in step with changes in deposit levels, cash surrender values and investment performance. Income before income taxes is affected by the spread between the investment income and the interest credited on the underlying products. Interest credited expense for the second quarter and first six months of 2007 totaled $14.6 million and $28.8 million, respectively, compared to $11.8 million and $23.3 million for the same periods in 2006. The increase is primarily the result of one treaty in which the credited loan rate increased from 4.6% in 2006 to 5.6% in 2007 based on an increase in the related market index. A corresponding increase in investment income offset this additional expense.

Policy acquisition costs and other insurance expenses, as a percentage of net premiums, were 14.2% for the second quarter of 2007 and 14.5% for the first six months of 2007. Comparable ratios for the second quarter and first six months of 2006 were 15.3% and 14.4%, respectively. Overall, while these ratios are expected to remain in a certain range, they may fluctuate from period to period due to varying allowance levels within coinsurance-type arrangements. In addition, the amortization pattern of previously capitalized amounts, which are subject to the form of the reinsurance agreement and the underlying insurance policies, may vary. Finally, the mix of first year coinsurance business versus yearly renewable term business can cause the percentage to fluctuate from period to period.

Other operating expenses, as a percentage of net premiums, were 1.6% for the second quarter of 2007 and 1.7% year to date, compared to 1.3% and 1.5% for the second quarter and year to date, respectively, in 2006. The expense ratio can fluctuate slightly from period to period, however, the size and maturity of the U.S. operations segment indicates it should remain relatively constant over the long term.

Asset-Intensive Reinsurance

The U.S. Asset-Intensive sub-segment assumes investment risk within underlying annuities and corporate-owned life insurance policies. Most of these agreements are coinsurance, coinsurance with funds withheld or modified coinsurance of non-mortality risks whereby the Company recognizes profits or losses primarily from the spread between the investment income earned and the interest credited on the underlying deposit liabilities.

In accordance with the provisions of SFAS No. 133 Implementation Issue No. B36, “Embedded Derivatives: Modified Coinsurance Arrangements and Debt Instruments That Incorporate Credit Risk Exposures That Are Unrelated or Only Partially Related to the Creditworthiness of the Obligor under Those Instruments” (“Issue B36”), the Company recorded a change in value of embedded derivatives of $(7.1) million and $(4.3) million within revenues for the second quarter and first six months of 2007, respectively, and $(5.5) million and $(3.4) million of related deferred acquisition costs. Significant fluctuations may occur as the fair value of the embedded derivatives is tied primarily to the movements in credit spreads. These fluctuations have no impact on cash flows or interest spreads on the underlying treaties. Therefore, Company management believes it is helpful to distinguish between the effects of Issue B36 and the primary factors that drive profitability of the underlying treaties, namely investment income, fee income, and interest credited. Additionally, over the expected life of the underlying treaties, management expects the cumulative effect of Issue B36 to be immaterial.

The Asset-Intensive sub-segment reported income before income taxes equal to $4.1 million for the second quarter of 2007 and $8.6 million year to date. Comparable figures for 2006 were $(0.3) million and $7.0 million, respectively. Of the $4.4 million increase quarter over quarter, Issue B36 contributed $1.5 million. The remaining $2.9 million can be attributed to both the improved spread between the investment income and the interest credited on the underlying deposit liabilities and a decrease in investment related losses. In 2006, an increased interest rate environment allowed the Company to sell bonds at lower book yields and reinvest in higher book yielding securities. This strategy resulted in investment losses at the time of sale, but should generate higher future investment income. The year over year increase in income before income taxes of $1.1 million, excluding Issue B36, is primarily the result of smaller investment losses offset in part by higher benefits due to an increase in benefit claims on a single premium universal life reinsurance treaty.

Total revenues increased $80.0 million for the second quarter of 2007 and $82.2 million for the first six months of 2007. Issue B36 related revenues increased $3.9 million for the second quarter of 2007 and $2.2 million for the first six months of the year, resulting in revenue growth of $76.1 and $80.0 million, respectively, excluding Issue B36. The primary driver of this increase in revenue was a $68.9 million increase in investment income quarter over quarter and $66.0 million year over year. The majority of this variation can be attributed to market value changes related to the Company’s funds withheld at interest investment in certain equity index annuity products. This increase in investment income is offset by an increase in interest credited expense, with minimal impact on income before income taxes. Also contributing to the overall growth in revenue are the mortality and expense charges earned on a variable annuity reinsurance treaty open for new business. Mortality and expense charges are included in other revenues. Additionally, as mentioned above, investment related losses decreased quarter over quarter and year over year.

The average invested asset base supporting this sub-segment grew from $4.2 billion in the second quarter of 2006 to $4.7 billion for the second quarter of 2007. The growth in the asset base is primarily driven by new business written on one existing annuity treaty. Invested assets outstanding as of June 30, 2007 were $4.7 billion, of which $3.4 billion were funds withheld at interest. Of the $3.4 billion of total funds withheld balance as of June 30, 2007, 91.5% of the balance is associated with one client.

Total benefits and expenses, which are comprised primarily of interest credited and policy acquisition costs, increased $75.6 million from the second quarter of 2006 and $80.6 million year to date. Issue B36 related expenses contributed $2.4 million and $1.8 million to the second quarter and year to date increases, respectively, resulting in increased expenses of $73.2 million and $78.8 million, respectively, excluding Issue B36. The majority of the change in benefits and expenses relates to interest credited expense, which contributed $66.4 million and $63.0 million quarter over quarter and year over year, respectively. As mentioned above, a large part of this variance is offset in investment income. Also contributing to the increase in benefits and expenses year over year is an increase in benefit claims on a single premium universal life reinsurance treaty in the first quarter of 2007.

Financial Reinsurance

The U.S. Financial Reinsurance sub-segment income consists primarily of net fees earned on financial reinsurance transactions. The majority of the financial reinsurance risks are assumed by the Company and retroceded to other insurance companies or brokered business in which the company does not participate in the assumption of risk. The fees earned from the assumption of the financial reinsurance contracts are reflected in other revenues, and the fees

paid to retrocessionaires are reflected in policy acquisition costs and other insurance expenses. Fees earned on brokered business are reflected in other revenues.

Income before income taxes decreased $0.9 million and $1.8 million in the second quarter and first six months of 2007, respectively, compared to the same periods in 2006. In 2006, both the domestic and a portion of various Asia Pacific financial reinsurance treaties were reflected in this segment. Beginning in 2007, the Asia Pacific-based treaties are included with the Company’s Asia Pacific segment with reimbursement to the U.S. segment for costs incurred by U.S. personnel. Total U.S. financial reinsurance business remained consistent quarter over quarter and year over year.

At June 30, 2007 and 2006, the amount of reinsurance provided, as measured by pre-tax statutory surplus, was $1.1 billion and $1.8 billion respectively. This decrease is a result of the aforementioned change in reporting for Asia Pacific-based treaties. The pre-tax statutory surplus includes all business assumed or brokered by the Company in the U.S. Fees earned from this business can vary significantly depending on the size of the transactions and the timing of their completion and therefore can fluctuate from period to period.

CANADA OPERATIONS

The Company conducts reinsurance business in Canada through RGA Life Reinsurance Company of Canada (“RGA Canada”), a wholly-owned subsidiary. RGA Canada assists clients with capital management activity and mortality risk management, and is primarily engaged in traditional individual life reinsurance, as well as creditor, critical illness, and group life and health reinsurance. Creditor insurance covers the outstanding balance on personal, mortgage or commercial loans in the event of death, disability or critical illness and is generally shorter in duration than traditional life insurance.

(dollars in thousands)		For the three months ended								For the six months ended
		June 30, 2007				June 30, 2006				June 30, 2007				June 30, 2006
Revenues:
Net premiums		$	122,580			$	97,120			$	222,072			$	191,522
Investment income, net of related expenses			32,363				25,998				58,795				51,303
Investment related gains, net			1,648				2,345				4,432				2,146
Other revenues			93				767				179				767
Total revenues			156,684				126,230				285,478				245,738
Benefits and expenses:
Claims and other policy benefits			105,667				95,449				196,815				184,528
Interest credited			185				207				371				412
Policy acquisition costs and other insurance expenses			21,343				15,769				39,819				33,589
Other operating expenses			5,287				3,731				9,237				7,704
Total benefits and expenses			132,482				115,156				246,242				226,233
Income before income taxes		$	24,202			$	11,074			$	39,236			$	19,505

Income before income taxes increased by $13.1 million or 118.5%, and $19.7 million or 101.2%, in the second quarter and first six months of 2007, respectively. These increases were primarily the result of higher premium volume, favorable mortality experience in the current periods and an increase of $2.3 million in investment related gains for the first six months.

Net premiums increased by $25.5 million, or 26.2%, and $30.6 million or 16.0% in the second quarter and first six months of 2007, respectively. The increase is primarily due to new business from new and existing treaties. In addition, an increase in premium from creditor treaties contributed $6.9 million and $13.3 million of the premium increase in the second quarter and first six months of 2007, respectively. Creditor and group life and health premiums represented 18.0% and 13.9% of net premiums in the first six months of 2007 and 2006, respectively. A stronger Canadian dollar resulted in an increase in net premiums of $2.7 million and $1.1 million in the second

quarter and first six months of 2007, respectively, as compared to 2006. Premium levels are significantly influenced by large transactions, mix of business and reporting practices of ceding companies and therefore can fluctuate from period to period.

Net investment income increased $6.4 million or 24.5%, and $7.5 million or 14.6% in the second quarter and first six months of 2007, respectively. Investment income and investment related gains and losses are allocated to the segments based upon average assets and related capital levels deemed appropriate to support business volumes. Investment performance varies with the composition of investments and the relative allocation of capital to the operating segments. The increase in investment income was mainly the result of an increase in the allocated asset base due to growth in the underlying business volume.

Loss ratios for this segment were 86.2% and 88.6% in the second quarter and first six months of 2007, respectively, compared to 98.3% and 96.3% in the comparable prior-year periods. During 2006 and 2005, the Company entered into three significant creditor reinsurance treaties. The loss ratios on this type of business are normally lower than traditional reinsurance, however, allowances are normally higher as a percentage of premiums. Excluding creditor business, the loss ratios for this segment were 94.8% and 97.5% in the second quarter and first six months of 2007, respectively, compared to 106.4% and 103.7% in the comparable prior-year periods. The lower loss ratios in 2007 are primarily due to favorable mortality experience compared to the prior year. Historically, the loss ratio increased primarily as the result of several large permanent level premium in-force blocks assumed in 1997 and 1998. These blocks are mature blocks of permanent level premium business in which mortality as a percentage of net premiums is expected to be higher than historical ratios. The nature of permanent level premium policies requires the Company to set up actuarial liabilities and invest the amounts received in excess of early-year mortality costs to fund claims in the later years when premiums, by design, continue to be level as compared to expected increasing mortality or claim costs. Claims and other policy benefits, as a percentage of net premiums and investment income were 68.2% and 70.1% in the second quarter and first six months of 2007, respectively, compared to 77.5% and 76.0% in the comparable prior-year periods. Death claims are reasonably predictable over a period of many years, but are less predictable over shorter periods and are subject to significant fluctuation.

Policy acquisition costs and other insurance expenses as a percentage of net premiums totaled 17.4% and 17.9% in the second quarter and first six months of 2007, respectively, compared to 16.2% and 17.5% in the comparable prior-year periods. Excluding creditor business, policy acquisition costs and other insurance expenses as a percentage of net premiums totaled 11.0% and 11.9% in the second quarter and first six months of 2007, respectively, compared to 11.3% and 13.0% in the comparable prior-year periods. Overall, while these ratios are expected to remain in a certain range, they may fluctuate from period to period due to varying allowance levels, significantly caused by the mix of first year coinsurance business versus yearly renewable term business. In addition, the amortization pattern of previously capitalized amounts, which are subject to the form of the reinsurance agreement and the underlying insurance policies, may vary.

Other operating expenses increased $1.6 million, or 41.7%, and $1.5 million, or 19.9%, in the second quarter and first six months of 2007, respectively. Other operating expenses as a percentage of net premiums totaled 4.3% and 4.2% in the second quarter and first six months of 2007, respectively, compared to 3.8% and 4.0% in the comparable prior-year periods.

EUROPE & SOUTH AFRICA OPERATIONS

The Europe & South Africa segment has operations in France, India, Italy, Mexico, Poland, Spain, South Africa and the United Kingdom (“UK”). The segment provides life reinsurance for a variety of products through yearly renewable term and coinsurance agreements, and reinsurance of critical illness coverage. Reinsurance agreements may be either facultative or automatic agreements covering primarily individual risks and in some markets, group risks.

(dollars in thousands)		For the three months ended								For the six months ended
		June 30, 2007				June 30, 2006				June 30, 2007				June 30, 2006
Revenues:
Net premiums		$	164,796			$	146,073			$	332,592			$	291,224
Investment income, net of related expenses			7,103				3,873				12,877				7,265
Investment related losses, net			(630	)			(181	)			(854	)			(147	)
Other revenues			(27	)			(178	)			104				(87	)
Total revenues			171,242				149,587				344,719				298,255
Benefits and expenses:
Claims and other policy benefits			128,828				101,034				242,982				206,680
Interest credited			564				156				1,016				346
Policy acquisition costs and other insurance expenses			17,129				21,821				43,189				41,078
Other operating expenses			12,875				9,307				24,562				18,085
Total benefits and expenses			159,396				132,318				311,749				266,189
Income (loss) before income taxes		$	11,846			$	17,269			$	32,970			$	32,066

Income before income taxes was $11.8 million in the second quarter of 2007 as compared to $17.3 million for the second quarter of 2006, and $33.0 million for the first six months of 2007 as compared to $32.1 million for the first six months of 2006. The decrease for the second quarter was primarily due to an increase in the loss ratio for the second quarter of 2007 compared to the second quarter of 2006, as mortality experience for the segment was favorable in the second quarter 2006. The six month increase in 2007 over 2006 was due to growth in net premiums and investment income which was partially offset by an increase in the loss ratio for the first six months of 2007 compared to 2006. Foreign currency exchange fluctuations resulted in an increase to income before income taxes totaling approximately $0.1 million for the second quarter and approximately $0.8 million during the first six months of 2007.

Europe & South Africa net premiums increased $18.7 million, or 12.8%, in the second quarter compared to the same period last year, and increased $41.4 million or 14.2% during the six months ended June 30, 2007 compared to the same period last year. This increase was primarily the result of new business from both existing and new treaties. During the second quarter and for the first six months of 2007, several foreign currencies, particularly the British pound and the euro strengthened against the U.S. dollar and increased net premiums by approximately $10.0 million and $19.2 million for the second quarter and first six months of 2007, respectively, over the prior year. A significant portion of the net premiums were due to reinsurance of critical illness coverage, primarily in the UK. This coverage provides a benefit in the event of the diagnosis of a pre-defined critical illness. Net premiums earned from policies including this coverage totaled $57.9 million and $114.9 million during the second quarter and first six months of 2007, respectively, compared to $52.4 million and $101.6 million in the comparable prior-year periods. Premium levels are significantly influenced by large transactions and reporting practices of ceding companies and therefore can fluctuate from period to period.

Investment income increased $3.2 million for the second quarter compared to the same period in 2006 and increased $5.6 million for the six months ended June 30, 2007 compared to the same period in 2006. This increase was

primarily due to an increase in allocated investment income. Investment income and investment related gains and losses are allocated to the various operating segments based on average assets and related capital levels deemed appropriate to support the segment business volumes. Investment performance varies with the composition of investments and the relative allocation of capital to the operating segments.

Loss ratios increased from 69.2% for the second quarter of 2006 to 78.2% for the second quarter of 2007, and from 71.0% for the six months ended June 30, 2006 to 73.1% for the six months ended June 30, 2007. The increase in loss ratios is due primarily to favorable claims experience in the UK during 2006. Death claims are reasonably predictable over a period of many years, but are less predictable over shorter periods and are subject to significant fluctuation.

Policy acquisition costs and other insurance expenses as a percentage of net premiums were 10.4% in the second quarter of 2007 compared to 14.9% in the second quarter of 2006, and 13.0% for the six months ended June 30, 2007 compared to 14.1% for the six months ended June 30, 2006. These percentages fluctuate due to timing of client company reporting, variations in the mixture of business being reinsured and the relative maturity of the business. In addition, as the segment grows, renewal premiums, which have lower allowances than first-year premiums, represent a greater percentage of the total net premiums.

Other operating expenses for the quarter increased from 6.4% of premiums in 2006 to 7.8% in 2007, and for the first six months it increased from 6.2% to 7.4%. This increase was due to higher costs associated with maintaining and supporting the increase in business over the past several years. The Company believes that sustained growth in net premiums should lessen the burden of start-up expenses and expansion costs over time.

ASIA PACIFIC OPERATIONS

The Asia Pacific segment has operations in Australia, Hong Kong, Japan, Malaysia, Singapore, New Zealand, South Korea, Taiwan and mainland China. The principal types of reinsurance for this segment include life, critical illness, disability income, superannuation, and financial reinsurance. Superannuation is the Australian government mandated compulsory retirement savings program. Superannuation funds accumulate retirement funds for employees, and in addition, offer life and disability insurance coverage. Reinsurance agreements may be either facultative or automatic agreements covering primarily individual risks and in some markets, group risks.

(dollars in thousands)		For the three months ended								For the six months ended
		June 30, 2007				June 30, 2006				June 30, 2007				June 30, 2006
Revenues:
Net premiums		$	198,971			$	168,852			$	385,809			$	308,065
Investment income, net of related expenses			8,610				6,822				17,273				13,318
Investment related losses, net			(499	)			(92	)			(570	)			(77	)
Other revenues			2,583				1,581				4,410				3,491
Total revenues			209,665				177,163				406,922				324,797
Benefits and expenses:
Claims and other policy benefits			151,664				131,866				302,147				242,222
Policy acquisition costs and other insurance expenses			28,173				27,567				52,787				49,572
Other operating expenses			14,219				10,005				26,047				18,664
Total benefits and expenses			194,056				169,438				380,981				310,458
Income before income taxes		$	15,609			$	7,725			$	25,941			$	14,339

Income before income taxes increased $7.9 million in the second quarter of 2007 and $11.6 million for the six months ended June 30, 2007, as compared to the same periods in 2006. Favorable mortality experience in Korea and favorable results related to disability insurance coverage in New Zealand allowed these two operations combined to contribute an additional $20.4 million to income before income taxes for the first six months of 2007

compared to the same period in 2006. Higher mortality experience in Australia caused this operation to contribute $7.0 million less to income before income taxes for the second quarter of 2007 than they contributed during the same period of 2006. Foreign currency exchange fluctuations were neutral to income before income taxes for the first six months of 2007.

Net premiums grew $30.1 million, or 17.8%, during the current quarter, and $77.7 million, or 25.2%, for the six months ended June 30, 2007, as compared to the same periods in 2006. This premium growth was primarily the result of continued increases in the volume of business in Australia and Japan. Due to continued growth with two significant clients, premiums in Australia increased by $19.1 million in the second quarter of 2007, and $34.4 million for the six months ended June 30, 2007, as compared to the same periods in 2006. Premiums in Japan increased by $22.9 million in the second quarter of 2007, and $47.0 million for the six months ended June 30, 2007 as compared to the same periods in 2006, primarily due to a single new significant treaty. Premium levels are significantly influenced by large transactions and reporting practices of ceding companies and can fluctuate from period to period.

A portion of the net premiums for the segment in each period presented represents reinsurance of critical illness coverage. This coverage provides a benefit in the event of the diagnosis of a pre-defined critical illness. Reinsurance of critical illness in the Asia Pacific operations is offered primarily in South Korea, Australia and Hong Kong. Net premiums earned from this coverage totaled $24.6 million and $50.6 million during the second quarter and first six months of 2007, respectively, compared to $23.2 million and $34.9 million during the second quarter and first six months of 2006, respectively.

Foreign currencies in certain significant markets, particularly the Australian dollar, the Korean won and the New Zealand dollar, have strengthened against the U.S. dollar during the first six months of 2007; however, the Japanese yen has weakened against the U.S. dollar during the same period. The overall effect of changes in local Asia Pacific segment currencies was an increase in net premiums of approximately $8.5 million in the second quarter of 2007 and an increase of approximately $14.0 million in net premiums for the six months ended June 30, 2007, as compared to the same periods in 2006.

Net investment income increased $1.8 million in the current quarter compared to the prior-year quarter, and $4.0 million for the six months ended June 30, 2007 compared to the six months ended June 30, 2006. This increase was primarily due to growth in the invested assets in Australia. Investment income and investment related gains and losses are allocated to the various operating segments based on average assets and related capital levels deemed appropriate to support the segment business volumes. Investment performance varies with the composition of investments and the relative allocation of capital to the operating segments.

Other revenues increased by $1.0 million for the second quarter of 2007, as compared to the same period in 2006, and increased by $0.9 million for the six months ended June 30, 2007, as compared to the same period in 2006. The primary source of other revenues in 2007 and 2006 has been fees from financial reinsurance treaties, which increased to $4.8 million during the first six months of 2007 from $2.7 million during the first six months of 2006. Prior to 2007, a portion of the fee income generated by certain Asia Pacific financial reinsurance treaties was reflected in the U.S. financial reinsurance segment. Beginning in 2007, all of the fee income from the Asia Pacific-based financial reinsurance treaties is included within the Asia Pacific segment with reimbursement to the U.S. segment for costs incurred by U.S. personnel. The first six months of 2006 included $0.6 million of other revenue generated by the recapture of a modified coinsurance treaty in Hong Kong. Additionally, during the first six months of 2007, other revenues were reduced by $0.5 million associated with a funds withheld treaty in Hong Kong.

Loss ratios were 76.2% and 78.1% for the second quarter of 2007 and 2006, respectively, and 78.3% and 78.6% for the six months ended June 30, 2007 and June 30, 2006, respectively. The decreased loss ratio for the second quarter of 2007 was due to favorable experience in New Zealand’s disability income products as compared to the same period of 2006. Loss ratios will fluctuate due to timing of client company reporting, variations in the mixture of business being reinsured and the relative maturity of the business. Death claims are reasonably predictable over a period of many years, but are less predictable over shorter periods and are subject to significant fluctuation.

Policy acquisition costs and other insurance expenses as a percentage of net premiums were 14.2% during the second quarter of 2007, as compared to 16.3% for the second quarter of 2006. Policy acquisition costs and other insurance expenses as a percentage of net premiums were 13.7% during the six months ended June 30, 2007, as compared to 16.1% for the six months ended June 30, 2006. The ratio of policy acquisition costs and other

insurance expenses as a percentage of net premiums will generally decline as the business matures, however, the percentage does fluctuate periodically due to timing of client company reporting and variations in the mixture of business being reinsured.

Other operating expenses increased to 7.1% of net premiums in the current quarter, and 6.8% of net premiums for the six months ended June 30, 2007, up from 5.9% and 6.1% in the comparable prior-year periods. The timing of premium flows and the level of costs associated with the entrance into and development of new markets in the growing Asia Pacific segment may cause other operating expenses as a percentage of net premiums to fluctuate over periods of time.

CORPORATE AND OTHER

Corporate and Other revenues include investment income from invested assets not allocated to support segment operations and undeployed proceeds from the Company’s capital raising efforts, in addition to unallocated investment related gains and losses. Corporate expenses consist of the offset to capital charges allocated to the operating segments within the policy acquisition costs and other insurance expenses line item, unallocated overhead and executive costs, and interest expense related to debt and the $225.0 million of 5.75% Company-obligated mandatorily redeemable trust preferred securities. Additionally, Corporate and Other includes results from RGA Technology Partners, Inc., a wholly-owned subsidiary that develops and markets technology solutions for the insurance industry, the Company’s Argentine privatized pension business, which is currently in run-off, an insignificant amount of direct insurance operations in Argentina and the investment income and expense associated with the Company’s collateral finance facility.

(dollars in thousands)		For the three months ended								For the six months ended
		June 30, 2007				June 30, 2006				June 30, 2007				June 30, 2006
Revenues:
Net premiums		$	948			$	652			$	1,227			$	1,017
Investment income, net of related expenses			22,257				8,983				44,231				18,795
Investment related gains (losses), net			(1,963	)			(2,369	)			(11,815	)			2,975
Other revenues			1,961				(97	)			5,600				2,117
Total revenues			23,203				7,169				39,243				24,904
Benefits and expenses:
Claims and other policy benefits			113				(185	)			28				(1,031	)
Interest credited			—				643				—				753
Policy acquisition costs and other insurance expenses			(9,187	)			(10,551	)			(19,223	)			(18,730	)
Other operating expenses			9,998				11,540				23,456				23,401
Interest expense			23,232				15,014				43,685				31,781
Collateral finance facility expense			13,206				277				25,893				277
Total benefits and expenses			37,362				16,738				73,839				36,451
Loss before income taxes		$	(14,159	)		$	(9,569	)		$	(34,596	)		$	(11,547	)

Loss before income taxes increased $4.6 million and $23.0 million for the three and six month periods ended June 30, 2007, respectively. The increase for the three months ended June 30, 2007 is primarily due to the implementation of FIN 48, while the increase for the six months ended June 30, 2007 is primarily due to investment related losses and the implementation of FIN 48. Contributing to the increase in investment income in 2007 is the impact of the Company’s investment of the net proceeds from its collateral finance facility in June 2006 which is largely offset by the recognition of collateral finance facility expense. Investment income and investment related gains are the result of an allocation to other segments based upon average assets and related capital levels deemed appropriate to support their business volumes. The increase in investment related losses for the six months ended June 30, 2007, is primarily due to the recognition of a $10.5 million currency translation loss related to the

Company’s decision to sell its direct insurance operations in Argentina, which occurred in the first quarter. The increase in interest expense is largely related to the implementation of FIN 48 and the issuance $300 million in senior notes in March 2007.

Discontinued Operations

The discontinued accident and health operations reported a loss, net of taxes, of $1.6 million for the second quarter of 2007 compared to a loss, net of taxes, of $0.2 million for the second quarter of 2006. As of June 30, 2007 amounts in dispute or subject to audit exceed the Company’s reserves by approximately $18.9 million. The calculation of the claim reserve liability for the entire portfolio of accident and health business requires management to make estimates and assumptions that affect the reported claim reserve levels. Management must make estimates and assumptions based on historical loss experience, changes in the nature of the business, anticipated outcomes of claim disputes and claims for rescission, and projected future premium run-off, all of which may affect the level of the claim reserve liability. Due to the significant uncertainty associated with the run-off of this business, net income in future periods could be affected positively or negatively.

Liquidity and Capital Resources

The Holding Company

RGA is a holding company whose primary uses of liquidity include, but are not limited to, the immediate capital needs of its operating companies associated with the Company’s primary businesses, dividends paid by RGA to its shareholders, interest payments on its indebtedness, and repurchases of RGA common stock under a plan approved by the board of directors. The primary sources of RGA’s liquidity include proceeds from its capital raising efforts, interest income on undeployed corporate investments, interest income received on surplus notes with two operating subsidiaries, and dividends from operating subsidiaries. As the Company continues its expansion efforts, RGA will continue to be dependent on these sources of liquidity.

The Company believes that it has sufficient liquidity to fund its cash needs under various scenarios that include the potential risk of the early recapture of a reinsurance treaty by the ceding company and significantly higher than expected death claims. Historically, the Company has generated positive net cash flows from operations. However, in the event of significant unanticipated cash requirements beyond normal liquidity, the Company has multiple liquidity alternatives available based on market conditions and the amount and timing of the liquidity need. These options include borrowings under committed credit facilities, secured borrowings, the ability to issue long-term debt, capital securities or common equity and, if necessary, the sale of invested assets.

Cash Flows

The Company’s net cash flows provided by operating activities for the periods ended June 30, 2007 and 2006 were $511.2 million and $307.9 million, respectively. Cash flows from operating activities are affected by the timing of premiums received, claims paid, and working capital changes. The $203.3 million net increase in operating cash flows for the six months of 2007 compared to the same period in 2006 was primarily a result of cash inflows related to premiums and investment income increasing more than cash outflows related to claims, acquisition costs, income taxes and other operating expenses. Cash from premiums and investment income increased $397.6 million and $127.3 million, respectively, and was offset by higher operating cash outlays of $321.6 million for the current six month period. The Company believes the short-term cash requirements of its business operations will be sufficiently met by the positive cash flows generated. Additionally, the Company believes it maintains a high quality fixed maturity portfolio with positive liquidity characteristics. These securities are available for sale and could be sold if necessary to meet the Company’s short- and long-term obligations.

Net cash used in investing activities was $443.3 million and $936.2 million in the first six months of 2007 and the comparable prior-year period, respectively. This change is primarily due to a decrease in the change in other invested assets. Other invested assets grew substantially in June 2006 due to the net proceeds from the Company’s collateral finance facility. Additionally, the sales and purchases of fixed maturity securities are related to the management of the Company’s investment portfolios and the investment of excess cash generated by operating and financing activities.

Net cash provided by financing activities was $183.8 million and $779.3 million in the first six months of 2007 and 2006, respectively. This change was due primarily to net proceeds from the Company’s collateral finance facility partially offset by $100.0 million principal payments on debt in 2006. Net cash provided by financing activities in 2007 includes $295.3 million of the net proceeds from the Company’s issuance of Senior Notes in March 2007, partially offset by a $66.6 million decrease in the net borrowings under revolving credit agreements. Also contributing to the change were net withdrawals from universal life and other investment type policies and contracts of $45.2 million during the current period compared to excess deposits of $49.8 million in 2006.

Debt and Preferred Securities

As of June 30, 2007, the Company had $938.8 million in outstanding borrowings under its debt agreements and was in compliance with all covenants under those agreements.

On March 6, 2007, RGA issued 5.625% Senior Notes due March 15, 2017 with a face amount of $300.0 million. These senior notes have been registered with the Securities and Exchange Commission. The net proceeds from the offering were approximately $295.3 million, a portion of which were used to pay down $50.0 million of indebtedness under a U.S. bank credit facility. The remaining net proceeds are designated for general corporate purposes. Capitalized issue costs were approximately $2.6 million.

The Company maintains three revolving credit facilities. The largest is a syndicated credit facility with an overall capacity of $600.0 million that expires in September 2010. The overall capacity available for issuance of letters of credit is reduced by any cash borrowings made by the Company against this credit facility. The Company may borrow up to $300.0 million of cash under the facility. As of June 30, 2007 the Company had no outstanding cash balance under this credit facility. The Company’s other credit facilities consist of a £15.0 million credit facility that expires in May 2008 and an A$50.0 million Australian credit facility that expires in June 2011. The Company’s foreign denominated credit facilities had a combined outstanding balance of $42.9 million as of June 30, 2007.

As of June 30, 2007, the average interest rate on all long-term and short-term debt outstanding, excluding the Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated debentures of the Company (“Trust Preferred Securities”), was 6.38%. Interest is expensed on the face amount, or $225 million, of the Trust Preferred Securities at a rate of 5.75%.

Collateral Finance Facility

In June 2006, RGA’s subsidiary, Timberlake Financial, L.L.C. (“Timberlake Financial”), issued $850.0 million of Series A Floating Rate Insured Notes due June 2036 in a private placement. The notes were issued to fund the collateral requirements for statutory reserves required by the U.S. valuation of Life Policies Model Regulation (commonly referred to as Regulation XXX) on specified term life insurance policies reinsured by RGA Reinsurance Company. Proceeds from the notes, along with a $112.7 million direct investment by the Company, have been deposited into a series of trust accounts that collateralize the notes and are not available to satisfy the general obligations of the Company. Interest on the notes will accrue at an annual rate of 1-month LIBOR plus a base rate margin, payable monthly. The payment of interest and principal on the notes is insured through a financial guaranty insurance policy with a third party. The notes represent senior, secured indebtedness of Timberlake Financial with no recourse to RGA or its other subsidiaries. Timberlake Financial will rely primarily upon the receipt of interest and principal payments on a surplus note and dividend payments from its wholly-owned subsidiary, Timberlake Reinsurance Company II (“Timberlake Re”), a South Carolina captive insurance company, to make payments of interest and principal on the notes. The ability of Timberlake Re to make interest and principal payments on the surplus note and dividend payments to Timberlake Financial is contingent upon South Carolina regulatory approval and the performance of specified term life insurance policies with guaranteed level premiums retroceded by RGA’s subsidiary, RGA Reinsurance Company, to Timberlake Re.

Asset / Liability Management

The Company actively manages its assets using an approach that is intended to balance quality, diversification, asset/liability matching, liquidity and investment return. The goals of the investment process are to optimize after-tax, risk-adjusted investment income and after-tax, risk-adjusted total return while managing the assets and liabilities on a cash flow and duration basis.

The Company has established target asset portfolios for each major insurance product, which represent the investment strategies intended to profitably fund its liabilities within acceptable risk parameters. These strategies include objectives for effective duration, yield curve sensitivity and convexity, liquidity, asset sector concentration and credit quality.

The Company’s liquidity position (cash and cash equivalents and short-term investments) was $593.6 million and $300.7 million at June 30, 2007 and December 31, 2006, respectively. The increase in the Company’s liquidity position from December 31, 2006 is primarily due to the timing of cash received late in the second quarter. Liquidity needs are determined from valuation analyses conducted by operational units and are driven by product portfolios. Periodic evaluations of demand liabilities and short-term liquid assets are designed to adjust specific portfolios, as well as their durations and maturities, in response to anticipated liquidity needs.

The Company occasionally enters into sales of investment securities under agreements to repurchase the same securities to increase the Company’s earned yield on invested assets. These transactions are reported as securitized lending obligations within other liabilities. There were $90.4 million of these agreements outstanding at June 30, 2007 and there were no agreements outstanding at December 31, 2006.

Future Liquidity and Capital Needs

Based on the historic cash flows and the current financial results of the Company, subject to any dividend limitations which may be imposed by various insurance regulations, management believes RGA’s cash flows from operating activities, together with undeployed proceeds from its capital raising efforts, including interest and investment income on those proceeds, interest income received on surplus notes with two operating subsidiaries, and its ability to raise funds in the capital markets, will be sufficient to enable RGA to make dividend payments to its shareholders, to make interest payments on its senior indebtedness, trust preferred securities and junior subordinated notes, repurchase RGA common stock under the board of director approved plan and meet its other obligations.

A general economic downturn or a downturn in the equity and other capital markets could adversely affect the market for many annuity and life insurance products. Because the Company obtains substantially all of its revenues through reinsurance arrangements that cover a portfolio of life insurance products, as well as annuities, its business would be harmed if the market for annuities or life insurance were adversely affected.

Investments

The Company had total cash and invested assets of $15.9 billion and $14.8 billion at June 30, 2007 and December 31, 2006, respectively. All investments made by RGA and its subsidiaries conform to the qualitative and quantitative limits prescribed by the applicable jurisdiction’s insurance laws and regulations. In addition, the boards of directors of the various operating companies periodically review the investment portfolios of their respective subsidiaries. RGA’s board of directors also receives reports on material investment portfolios. The Company’s investment strategy is to maintain a predominantly investment-grade, fixed maturity portfolio, to provide adequate liquidity for expected reinsurance obligations, and to maximize total return through prudent asset management. The Company’s earned yield on invested assets, excluding funds withheld, was 5.90% in the second quarter of 2007, compared with 5.72% for the second quarter of 2006. See “Note 4 — Investments” in the Notes to Consolidated Financial Statements of the 2006 Annual Report for additional information regarding the Company’s investments.

The Company’s fixed maturity securities are invested primarily in commercial and industrial bonds, public utilities, U.S. and Canadian government securities, as well as mortgage- and asset-backed securities. As of June 30, 2007, approximately 97.1% of the Company’s consolidated investment portfolio of fixed maturity securities was investment grade. Important factors in the selection of investments include diversification, quality, yield, total rate of return potential and call protection. The relative importance of these factors is determined by market conditions and the underlying product or portfolio characteristics. Cash equivalents are invested in high-grade money market instruments. The largest asset class in which fixed maturities were invested was in corporate securities, including commercial, industrial, finance and utility bonds, which represented approximately 53.5% of fixed maturity securities as of June 30, 2007 and had an average Standard and Poor’s (“S&P”) rating of “A”. The Company owns floating rate securities that represent approximately 19.5% of the total fixed maturity securities at June 30, 2007. These investments have a higher degree of income variability than the other fixed income holdings in the portfolio due to the floating rate nature of the interest payments. The Company holds these investments to match specific floating rate liabilities primarily reflected in the condensed consolidated balance sheets as collateral finance facility.

Within the fixed maturity security portfolio, the Company holds approximately $500.7 million in asset-backed securities at June 30, 2007, which include credit card and automobile receivables, home equity loans, manufactured housing bonds and collateralized bond obligations. The Company’s asset-backed securities are diversified by issuer and contain both floating and fixed rate securities. In addition to the risks associated with floating rate securities, principal risks in holding asset-backed securities are structural, credit and capital market risks. Structural risks include the securities’ priority in the issuer’s capital structure, the adequacy of and ability to realize proceeds from collateral, and the potential for prepayments. Credit risks include consumer or corporate credits such as credit card holders, equipment lessees, and corporate obligors. Capital market risks include general level of interest rates and the liquidity for these securities in the marketplace. As of June 30, 2007, the Company held investments in securities with subprime mortgage exposure with an amortized cost totaling $300.2 million and an estimated fair value of $299.7 million. Those amounts include exposure to subprime mortgages through securities held directly in the Company’s investment portfolios as well as securities backing the Company’s funds withheld at interest investment. The securities are highly rated with a weighted average S&P credit rating of “AA+”. Additionally, the Company has largely avoided investing in securities originated in the second half of 2005 and beyond, which management believes was a period of lessened underwriting quality. The majority of the Company’s holdings are originations from 2005 and prior periods. In light of the high credit quality of the portfolio, the Company does not expect to realize any material losses despite the recent increase in default rates and market concern over future performance of this asset class.

The following table presents a summary of the securities by rating (dollars in thousands):

		Amortized								% of Fair
S&P Rating		Cost				Fair Value				Value
AAA		$	134,556			$	134,527				44.9	%
AA			116,268				115,976				38.7	%
A			48,054				47,823				16.0	%
BBB			1,325				1,332				0.4	%
Total		$	300,203			$	299,658				100.0	%

The Company monitors its fixed maturity securities to determine impairments in value and evaluates factors such as financial condition of the issuer, payment performance, the length of time and the extent to which the market value has been below amortized cost, compliance with covenants, general market conditions and industry sector, current intent and ability to hold securities and various other subjective factors. Based on management’s judgment, securities determined to have an other-than-temporary impairment in value are written down to fair value. The Company recorded $1.9 million in other-than-temporary write-downs on fixed maturity securities for the six months ending June 30, 2007. The Company recorded $0.2 million in other-than-temporary write-downs on fixed maturity securities for the six months ending June 30, 2006. During the six months ended June 30, 2007, the Company sold fixed maturity securities and equity securities with a fair value of $629.0 million, which were below amortized cost, at a loss of $18.4 million. Generally, such losses are insignificant in relation to the cost basis of the investment and are largely due to changes in interest rates from the time the security was purchased. The securities are classified as available-for-sale in order to meet the Company’s operational and other cash flow requirements. The Company does not engage in short-term buying and selling of securities to generate gains or losses.

The following table presents the total gross unrealized losses for 1,341 fixed maturity securities and equity securities as of June 30, 2007, where the estimated fair value had declined and remained below amortized cost by the indicated amount (dollars in thousands):

		At June 30, 2007
		Gross Unrealized
		Losses				% of Total
Less than 20%		$	164,683				97.6	%
20% or more for less than six months			4,009				2.4	%
20% or more for six months or greater			—				—
Total		$	168,692				100.0	%

While all of these securities are monitored for potential impairment, the Company’s experience indicates that the first two categories do not present as great a risk of impairment, and often, fair values recover over time. These securities have generally been adversely affected by overall economic conditions, primarily an increase in the interest rate environment.

The following tables present the estimated fair values and gross unrealized losses for the 1,341 fixed maturity securities and equity securities that have estimated fair values below amortized cost as of June 30, 2007. These investments are presented by class and grade of security, as well as the length of time the related market value has remained below amortized cost.

		As of June 30, 2007
										Equal to or greater than
(dollars in thousands)		Less than 12 months								12 months								Total
						Gross								Gross								Gross
		Estimated				Unrealized				Estimated				Unrealized				Estimated				Unrealized
		Fair Value				Loss				Fair Value				Loss				Fair Value				Loss
Investment grade securities:
Commercial and industrial		$	651,520			$	22,318			$	370,138			$	18,325			$	1,021,658			$	40,643
Public utilities			295,270				9,761				99,383				6,346				394,653				16,107
Asset-backed securities			281,962				2,655				19,389				400				301,351				3,055
Canadian and Canadian provincial governments			213,421				11,192				3,026				141				216,447				11,333
Mortgage-backed securities			1,251,600				23,080				490,875				18,848				1,742,475				41,928
Finance			1,041,635				25,573				148,215				9,899				1,189,850				35,472
U.S. government and agencies			105				—				981				25				1,086				25
State and political subdivisions			44,963				1,186				14,792				947				59,755				2,133
Foreign governments			168,873				6,385				70,416				2,250				239,289				8,635
Investment grade securities			3,949,349				102,150				1,217,215				57,181				5,166,564				159,331
Non-investment grade securities:
Commercial and industrial			65,560				2,045				56,016				2,108				121,576				4,153
Finance			13,322				281				—				—				13,322				281
Public utilities			24,353				751				2,940				39				27,293				790
Non-investment grade securities			103,235				3,077				58,956				2,147				162,191				5,224
Total fixed maturity securities		$	4,052,584			$	105,227			$	1,276,171			$	59,328			$	5,328,755			$	164,555
Equity securities		$	96,121			$	3,069			$	18,227			$	1,068			$	114,348			$	4,137