# Reinsurance Group of America Inc: Form 10-Q for the period ended Sep 30, 2023

- Company: [Reinsurance Group of America Inc](/companies/rga.md) (CIK 898174)
- Form: 10-Q
- Filed: 2023-11-03
- Accepted by EDGAR: Nov 3, 2023, 14:51 ET
- Period: 2023-09-30
- Accession: 0000898174-23-000137
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/898174/000089817423000137/rga-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/898174/000089817423000137/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $5.15bn | us-gaap:Revenues |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $13.56bn | us-gaap:Revenues |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $72.0m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $188.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $91.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $247.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $287.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $744.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $4.29 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $11.06 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $4.34 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $11.19 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 67,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 67,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$2.82bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $20.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $163.0m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2023-09-30 | $2.82bn | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2023-09-30 | $87.42bn | us-gaap:Assets |
| Total liabilities | at 2023-09-30 | $79.27bn | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $4.45bn | us-gaap:LongTermDebt |
| Shareholders' equity | at 2023-09-30 | $8.06bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 133,140 characters.

### Cautionary Note Regarding Forward-Looking Statements

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and federal securities laws including, among others, statements relating to projections of the future operations, strategies, earnings, revenues, income or loss, ratios, financial performance and growth potential of the Company. Forward-looking statements often contain words and phrases such as “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “if,” “intend,” “likely,” “may,” “plan,” “potential,” “pro forma,” “project,” “should,” “will,” “would,” and other words and terms of similar meaning or that are otherwise tied to future periods or future performance, in each case in all derivative forms. Forward-looking statements are based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Forward-looking statements are not a guarantee of future performance and are subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results, performance, and achievements could differ materially from those set forth in, contemplated by or underlying the forward-looking statements.

Factors that could also cause results or events to differ, possibly materially, from those expressed or implied by forward-looking statements, include, among others: (1) adverse changes in mortality (whether related to COVID-19 or otherwise), morbidity, lapsation or claims experience, (2) inadequate risk analysis and underwriting, (3) adverse capital and credit market conditions and their impact on the Company’s liquidity, access to capital and cost of capital, (4) changes in the Company’s financial strength and credit ratings and the effect of such changes on the Company’s future results of operations and financial condition, (5) the availability and cost of collateral necessary for regulatory reserves and capital, (6) requirements to post collateral or make payments due to declines in the market value of assets subject to the Company’s collateral arrangements, (7) action by regulators who have authority over the Company’s reinsurance operations in the jurisdictions in which it operates, (8) the effect of the Company parent’s status as an insurance holding company and regulatory restrictions on its ability to pay principal of and interest on its debt obligations, (9) general economic conditions or a prolonged economic downturn affecting the demand for insurance and reinsurance in the Company’s current and planned markets, (10) the impairment of other financial institutions and its effect on the Company’s business, (11) fluctuations in U.S. or foreign currency exchange rates, interest rates, or securities and real estate markets, (12) market or economic conditions that adversely affect the value of the Company’s investment securities or result in the impairment of all or a portion of the value of certain of the Company’s investment securities that in turn could affect regulatory capital, (13) market or economic conditions that adversely affect the Company’s ability to make timely sales of investment securities, (14) risks inherent in the Company’s risk management and investment strategy, including changes in investment portfolio yields due to interest rate or credit quality changes, (15) the fact that the determination of allowances and impairments taken on the Company’s investments is highly subjective, (16) the stability of and actions by governments and economies in the markets in which the Company operates, including ongoing uncertainties regarding the amount of U.S. sovereign debt and the credit ratings thereof, (17) the Company’s dependence on third parties, including those insurance companies and reinsurers to which the Company cedes some reinsurance, third-party investment managers and others, (18) financial performance of the Company’s clients, (19) the threat of natural disasters, catastrophes, terrorist attacks, pandemics, epidemics or other major public health issues anywhere in the world where the Company or its clients do business, (20) competitive factors and competitors’ responses to the Company’s initiatives, (21) development and introduction of new products and distribution opportunities, (22) execution of the Company’s entry into new markets, (23) integration of acquired blocks of business and entities, (24) interruption or failure of the Company’s telecommunication, information technology or other operational systems, or the Company’s failure to maintain adequate security to protect the confidentiality or privacy of personal or sensitive data and intellectual property stored on such systems, (25) adverse developments with respect to litigation, arbitration or regulatory investigations or actions (26) the adequacy of reserves, resources and accurate information relating to settlements, awards and terminated and discontinued lines of business, (27) changes in laws, regulations, and accounting standards applicable to the Company or its business, including Long Duration Targeted Improvement accounting changes and (28) other risks and uncertainties described in this document and in the Company’s other filings with the Securities and Exchange Commission (“SEC”).

Forward-looking statements should be evaluated together with the many risks and uncertainties that affect the Company’s business, including those mentioned in this document and described in the periodic reports the Company files with the SEC. These forward-looking statements speak only as of the date on which they are made. The Company does not undertake any obligation to update the forward-looking statements, even though the Company’s situation may change in the future. For a discussion of these risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements, you are advised to see Item 1A – “Risk Factors” in the 2022 Annual Report, as may be supplemented by Item 1A – “Risk Factors” in the Company’s subsequent Quarterly Reports on Form 10-Q.

### Overview

The Company is among the leading global providers of life reinsurance and financial solutions, with $3.5 trillion of life reinsurance in force and assets of $87.4 billion as of September 30, 2023. Traditional reinsurance includes individual and group life and health, disability, and critical illness reinsurance. Financial Solutions includes longevity reinsurance, asset-intensive reinsurance, capital solutions, including financial reinsurance and stable value products. The Company derives revenues primarily from renewal premiums from existing reinsurance treaties, new business premiums from existing or new reinsurance treaties, fee income from Financial Solutions business and income earned on invested assets.

Historically, the Company’s primary business has been traditional 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. To a lesser extent, the Company also reinsures health business typically reinsured for one to three years. Each year, however, a portion of the business under existing treaties terminates due to, among other things, lapses or voluntary surrenders of underlying policies, deaths of insureds, and the exercise of recapture options by ceding companies. The Company has expanded its Financial Solutions business, including significant asset-intensive and longevity risk transactions, which allow its clients to take advantage of growth opportunities and manage their capital, longevity and investment risk.

For its traditional business, the Company’s profitability largely depends on the volume and amount of death- and health-related claims incurred and the 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. For longevity business, the Company’s profitability depends on the lifespan of the underlying contract holders and the investment performance for certain contracts. Additionally, the Company generates profits on investment spreads associated with the reinsurance of investment type contracts and generates fees from financial reinsurance transactions, which are typically shorter duration than its traditional life reinsurance business. The Company believes its sources of liquidity are sufficient to cover potential claims payments on both a short-term and long-term basis.

As is customary in the reinsurance business, clients continually update, refine, and revise reinsurance information provided to the Company. Such revised information is used by the Company in preparation of its condensed consolidated financial statements and the financial effects resulting from the incorporation of revised data are reflected in the current period.

In the first quarter of 2023, the Company adopted Accounting Standards Update (“ASU”): ASU 2018-12, *Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (“ASU 2018-12”).* ASU 2018-12 updates certain requirements for the accounting for long-duration insurance contracts. See Note 2 – “Impact of New Accounting Standard” in the Notes to Condensed Consolidated Financial Statements for additional information.

#### Segment Presentation

The Company has geographic-based and business-based operational segments. Geographic-based operations are further segmented into Traditional and Financial Solutions businesses. The Company allocates capital to its segments based on an internally developed economic capital model, the purpose of which is to measure the risk in the business and to provide a consistent 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 is credited to the segments based on the level of allocated capital. 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. Segment investment performance varies with the composition of investments and the relative allocation of capital to the operating segments.

Segment revenue levels can be significantly influenced by currency fluctuations, large transactions, mix of business and reporting practices of ceding companies, and therefore may fluctuate from period to period. Although reasonably predictable over a period of years, segment claims experience can be volatile over shorter periods. See “Results of Operations by Segment” below for further information about the Company’s segments.

### Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires the application of accounting policies that often involve a significant degree of judgment. Management, on an ongoing basis, reviews estimates and assumptions used in the preparation of financial statements. If management determines that modifications in assumptions and estimates are appropriate given current facts and circumstances, results of operations and financial position as reported in the condensed consolidated financial statements could change significantly.

Management believes the critical accounting policies relating to the following areas are most dependent on the application of estimates and assumptions:

Premiums receivable;

Deferred policy acquisition costs;

Liabilities for future policy benefits and incurred but not reported claims;

Valuation of investments, allowance for credit losses and impairments to specific investments;

Valuation of embedded derivatives and market risk benefits; and

Income taxes.

A discussion of each of the critical accounting policies may be found in the Company’s 2022 Annual Report under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies.” The critical accounting polices related to Deferred Policy Acquisition Costs, estimating the Company’s Liability for Future Policy Benefits and Valuation of Embedded Derivatives and Market Risk Benefits presented below have been updated to reflect the adoption of ASU 2018-12.

#### Deferred Policy Acquisition Costs

ASU 2018-12 simplified the accounting for deferred policy acquisition costs by eliminating the requirement to test deferred policy acquisition costs for impairment or recoverability, an interest component is no longer accrued, and the requirement to adjust deferred policy acquisition costs for unrealized gains and losses (i.e., “shadow adjustments”) has been eliminated. ASU 2018-12 also clarified that deferred policy acquisition costs should only include costs that have been incurred and estimates of future contract renewal costs shall no longer be included, and capitalized costs should be amortized using a simplified method that approximates straight line amortization. As a result of these simplifications, the Company no longer considers the accounting for deferred policy acquisition costs to be a critical accounting policy.

#### Liabilities for Future Policy Benefits and Incurred but Not Reported Claims

The liability for future policy benefits is estimated using the Company’s mortality, morbidity, and persistency assumptions that reflect the Company’s historical experience, industry data, cedant specific experience, and discount rates based on the current yields of upper-medium grade fixed income instruments (A rated credit). These assumptions vary with the characteristics of the reinsurance contract, the year the risk was assumed, age of the insured and other appropriate factors.

The liability for annuities in the payout phase is calculated using expected mortality, discount rates and other assumptions. These assumptions vary with the characteristics of the plan of insurance, year of issue, age of insured, and other appropriate factors. The mortality assumptions are based on the Company’s experience as well as industry experience and standards.

For the purpose of calculating the liability for future policy benefits, the Company’s reinsurance contracts for its Traditional business are grouped into annual cohorts based on the effective date of the reinsurance contract. The annual groupings are further disaggregated based on:

- How the reinsurance contracts are priced and managed;
- Geographical locations;
- Underlying currency of the contract;
- Ceding company and other factors.

Given the unique risks and highly customized nature the Company’s financial reinsurance business, reinsurance contracts for the Financial Solutions business are not aggregated with other contracts for the purpose of calculating the liability for future policy benefits.

With the exception of claim expense assumptions, the Company reviews actual and anticipated experience compared to the assumptions used to establish policy benefits on a quarterly basis and will update those assumptions if evidence suggests the assumptions should be revised. During the third quarter of 2023, the Company completed its annual assumption review resulting in a decrease in its total liability for future polity benefits. The decrease was primarily the result of updated mortality assumptions, which had a favorable impact on the liability for future policy benefits for the Company’s Financial Solutions business and an unfavorable impact on the Company’s Traditional business. Updates may occur in other quarters if information becomes available during the quarter that indicates an assumption update is necessary. The Company has elected to lock-in claims expense assumptions at contract inception and those assumptions are not subsequently reviewed or updated.

The discount rates used to estimate the liability are based on upper-medium grade fixed-income instruments (A rated credit) with similar tenor to the expected liability cash flows. The discount rate assumption is updated quarterly and used to remeasure the liability at the reporting date, with the resulting change reflected in other comprehensive income (loss). For unobservable discount rates, the Company uses estimates consistent with fair value guidance, maximizing the use of relevant, observable market prices and minimizing the use of unobservable inputs.

#### Valuation of Market Risk Benefits and Embedded Derivatives

The Company reinsures certain annuity products that contain terms that are deemed to be market risk benefits or embedded derivatives, primarily variable annuities with guaranteed minimum benefits and equity-indexed annuities.

Variable annuities with guaranteed minimum benefits have been identified as market risk benefits. Market risk benefits are contracts or contract features that both provide protection to the contract holder from other-than-nominal capital market risk and expose the Company to other-than-nominal capital market risk. Market risk benefits are measured at fair value using an option-based valuation model based on current net amounts at risk, market data, Company experience, and other factors. Changes in fair value are recognized in net income each period with the exception of the portion of the change in fair value due to a change in the liability’s credit valuation adjustment (“CVA”), which is recognized in other comprehensive income (loss).

The Company reinsures certain annuity products that contain terms that are deemed to be embedded derivatives, primarily equity-indexed annuities and variable annuities with guaranteed minimum benefits. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated under the general accounting principles for Derivatives and Hedging. If the instrument would not be reported in its entirety at fair value and it is determined that the terms of the embedded derivative are not clearly and closely related to the economic characteristics of the host contract, and that a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is bifurcated from the host contract and accounted for as a freestanding derivative. Such embedded derivatives are carried on the consolidated balance sheets at fair value with the host contract.

Additionally, reinsurance treaties written on a modified coinsurance or funds withheld basis are subject to the general accounting principles for Derivatives and Hedging related to embedded derivatives. The majority of the Company’s funds withheld at interest balances are associated with its reinsurance of annuity contracts, the majority of which are subject to the general accounting principles for Derivatives and Hedging related to embedded derivatives. Management believes the embedded derivative feature in each of these reinsurance treaties is similar to a total return swap on the assets held by the ceding companies.

The valuation of the various embedded derivatives requires complex calculations based on actuarial and capital markets inputs and assumptions related to estimates of future cash flows and interpretations of the primary accounting guidance continue to evolve in practice. The valuation of embedded derivatives is sensitive to the investment credit spread environment. Changes in investment credit spreads are also affected by the application of a credit valuation adjustment (“CVA”). The fair value calculation of an embedded derivative in an asset position utilizes a CVA based on the ceding company’s credit risk. Conversely, the fair value calculation of an embedded derivative in a liability position utilizes a CVA based on the Company’s credit risk. Generally, an increase in investment credit spreads, ignoring changes in the CVA, will have a negative impact on the fair value of the embedded derivative (decrease in income).

### Consolidated Results of Operations

*Results from Operations – 2023 compared to 2022*

The following table summarizes net income for the periods presented.

*(Dollars in millions, except per share data)*

| Revenues | Three months ended September 30, 2023 | 2022 | 2023 vs 2022 | Nine months ended September 30, 2023 | 2022 | 2023 vs 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net premiums | $4,255 | $3,247 | $1,008 | $10,977 | $9,632 | $1,345 |
| Net investment income | 922 | 769 | 153 | 2,635 | 2,333 | 302 |
| Investment related losses, net | (126) | (154) | 28 | (326) | (533) | 207 |
| Other revenues | 102 | 188 | (86) | 274 | 438 | (164) |
| Total revenues | 5,153 | 4,050 | 1,103 | 13,560 | 11,870 | 1,690 |
| **Benefits and expenses** |  |  |  |  |  |  |
| Claims and other policy benefits | 3,959 | 3,048 | 911 | 10,035 | 8,857 | 1,178 |
| Future policy benefits remeasurement (gains) losses | (82) | 226 | (308) | (95) | 302 | (397) |
| Market risk benefits remeasurement (gains) losses | (21) | 23 | (44) | (38) | 29 | (67) |
| Interest credited | 223 | 189 | 34 | 647 | 468 | 179 |
| Policy acquisition costs and other insurance expenses | 348 | 341 | 7 | 1,028 | 1,021 | 7 |
| Other operating expenses | 274 | 251 | 23 | 799 | 720 | 79 |
| Interest expense | 72 | 49 | 23 | 188 | 136 | 52 |
| Total benefits and expenses | 4,773 | 4,127 | 646 | 12,564 | 11,533 | 1,031 |
| **Income before income taxes** | 380 | (77) | 457 | 996 | 337 | 659 |
| Provision for income taxes | 91 | (2) | 93 | 247 | 109 | 138 |
| **Net income** | $289 | $(75) | $364 | $749 | $228 | $521 |
| Net income (loss) attributable to noncontrolling interest | 2 | 1 | 1 | 5 | 2 | 3 |
| **Net income (loss) available to RGA, Inc. shareholders** | $287 | $(76) | $363 | $744 | $226 | $518 |
| **Earnings per share** |  |  |  |  |  |  |
| Basic earnings per share | $4.34 | $(1.13) | $5.47 | $11.19 | $3.38 | $7.81 |
| Diluted earnings per share | $4.29 | $(1.13) | $5.42 | $11.06 | $3.35 | $7.71 |

#### Three months ended September 30, 2023 compared to three months ended September 30, 2022

The increase in income for the three months ended September 30, 2023, was primarily the result of:

- During the third quarter of 2023, the Company completed its annual assumption review resulting in a future policy benefits remeasurement gain of $3 million compared to a future policy benefits remeasurement loss of $326 million in the third quarter of 2022. See Note 5 – “Future Policy Benefits” for additional information.
- An increase in net investment income attributable to an increase in the average invested asset base and higher interest rates earned on new investments.
- A $1 million increase in investment related losses associated with the changes in the fair value of embedded derivatives on modco/funds withheld treaties for the three month period ended September 30, 2023, compared to a decrease of $17 million for the three month period ended September 30, 2022.
- A remeasurement gain of $21 million in the current period related to market risk benefits compared to a remeasurement loss of $23 million in the prior year.

#### Nine months ended September 30, 2023 compared to nine months ended September 30, 2022

The increase in income for the nine months ended September 30, 2023, was primarily the result of:

- An increase in net investment income attributable to an increase in the average invested asset base and higher interest rates earned on new investments.
- $18 million improvement in investment related losses associated with changes in the fair value of embedded derivative on modco/funds withheld treaties for the nine month period ended September 30, 2023, compared to a decrease of $106 million for the nine month period ended September 30, 2022.
- Favorable claims experience in the U.S. and Latin America and Asia Traditional segment during the nine month period ended September 30, 2023 and future policy benefits remeasurement gains as a result of favorable assumption updates during the third quarter of 2023. The unfavorable experience in the prior period, included in future policy benefits remeasurement (gains) losses, was primarily attributable to higher than expected claims as a result of COVID-19 incurred in the first quarter of 2022 and unfavorable assumption updates in the third quarter of 2022.
- A decrease in other revenue, which was the result of a recapture fee received in the prior year related to a U.S. Capital Solutions transaction, and reduced surrender and market value adjustment charges on a single premium annuity block of business in Asia.
- A remeasurement gain of $38 million related to market risk benefits for the nine months ended September 30, 2023, compared to a remeasurement loss of $29 million for the nine months ended September 30, 2022.

Foreign currency fluctuations can result in variances in the financial statement line items. Foreign currency exchange fluctuations increased (decreased) income before taxes for the three and nine months ended September 30, 2023, by $1 million and $(21) million, respectively, primarily due to the strengthening and weakening of the Canadian Dollar compared to the U.S. dollar. Unless otherwise stated, all amounts discussed below are net of foreign currency fluctuations.

#### Premiums and business growth

The increase in premiums for the three and nine months ended September 30, 2023, was primarily due to single premium pension risk transfer (“PRT”) transactions completed in the first and third quarters of 2023. The PRT single premiums received were offset by an increase in reserves. The remaining increase in premiums for the three and nine months ended September 30, 2023, was attributable to organic growth on existing treaties and new business production, measured by the face amount of life reinsurance in force, of $265.5 billion and $316.4 billion during the nine months ended September 30, 2023 and 2022, respectively. Consolidated assumed life reinsurance in force increased to $3,499.4 billion as of September 30, 2023, from $3,272.6 billion as of September 30, 2022, due to new business production and changes in foreign exchange rates.

#### Net investment income and investment related gains (losses), net

The increase in net investment income was primarily attributable to an increase in the average invested asset base and interest rates earned on new investments, partially offset by a decrease in variable investment income associated with joint venture and limited partnership investments:

- The average invested assets at amortized cost, excluding spread related business, totaled $35.9 billion and $34.5 billion in 2023 and 2022, respectively.
- The average yield earned on investments, excluding spread related business, was 4.72% and 4.40% for the three month periods ended September 30, 2023 and 2022, respectively, and 4.62% and 4.78% for the nine months ended September 30, 2023 and 2022, respectively. The increase in yield for the three months ended September 30, 2023, compared to the prior year was attributable to higher interest rates. The decrease in yield for the nine months ended September 30, 2023, compared to the prior year was attributable to lower variable investment income associated with joint ventures and limited partnerships partially offset by higher interest rates.

The average yield will vary from period to period depending on several variables, including the prevailing risk-free interest rate and credit spread environment, prepayment fees and make-whole premiums, changes in the mix of the underlying investments and cash and cash equivalents balances. Variable investment income from joint ventures and limited partnerships will also vary from period to period and is highly dependent on the timing of dividends and distributions on certain investments. Investment income is allocated to the operating segments based upon average assets and related capital levels deemed appropriate to support segment operations.

The decrease in investment related losses, net is primarily attributable to the following:

- During the three and nine months ended September 30, 2023, the Company repositioned its portfolio generating net capital losses of $49 million and $119 million, respectively, compared to net capital losses of $86 million and $171 million during the three and nine months ended September 30, 2022, respectively.
- Changes in the fair value of embedded derivatives associated with modco/funds withheld treaties increased by $1 million and $18 million for the three and nine months ended September 30, 2023, respectively, compared to decreases of $17 million and $106 million for the three and nine months ended September 30, 2022, respectively.
- The Company uses various derivative instruments such as interest rate swaps, credit default swaps and foreign exchange forwards for risk management purposes that either do not qualify or have not been elected for hedge accounting treatment. Changes in the fair value of these instruments are included in investment related gains (losses), net. During the three and nine months ended September 30, 2023, the fair value of these instruments decreased by $98

million and $222 million, respectively, compared to decreases of $51 million and $251 million during the first three and nine months of 2022. See Note 12 – “Derivative Instruments” for additional information.

The effective tax rate was 24.2% and 24.9% for the three and nine months ended September 30, 2023, respectively, compared to 2.7% and 32.5% for the three and nine months ended September 30, 2022. See Note 14 – “Income Tax” for additional information on the Company’s consolidated effective tax rate.

#### Impact of certain derivatives and market risk benefits

The Company recognizes in consolidated income any changes in the fair value of embedded derivatives on modco or funds withheld treaties and equity index annuities (“EIAs”). In addition, the Company recognizes the changes in fair value of market risk benefits associated with guaranteed minimum benefit riders in market risk benefits remeasurement gains (losses). The Company utilizes freestanding derivatives to minimize the income statement volatility due to changes in the fair value of market risk benefits associated with guaranteed minimum benefit riders. The following table presents the effect of embedded derivatives, market risk benefits and related freestanding derivatives on income before income taxes for the periods indicated (dollars in millions):

| Modco/Funds withheld: | Three months ended September 30, 2023 | 2022 | 2023 vs. 2022 | Nine months ended September 30, 2023 | 2022 | 2023 vs. 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Change in fair value of funds withheld embedded derivatives | $1 | $(17) | $18 | $18 | $(106) | $124 |
| EIAs: |  |  |  |  |  |  |
| Embedded derivatives – interest credited | 7 | 10 | (3) | 11 | 54 | (43) |
| Market Risk Benefits: |  |  |  |  |  |  |
| Market risk benefits remeasurement gains (losses) | 21 | (23) | 44 | 38 | (29) | 67 |
| Related freestanding derivatives | (42) | (12) | (30) | (82) | (39) | (43) |
| Net effect | (21) | (35) | 14 | (44) | (68) | 24 |
| Total net effect after freestanding derivatives | $(13) | $(42) | $29 | $(15) | $(120) | $105 |

73

### Results of Operations by Segment

### U.S. and Latin America Operations

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

The following table summarizes income before income taxes for the Company’s U.S. and Latin America operations for the periods presented:

*(dollars in millions)*

| Revenues | Three months ended September 30, 2023 | 2022 | 2023 vs 2022 | Nine months ended September 30, 2023 | 2022 | 2023 vs 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net premiums | $2,566 | $1,653 | $913 | $6,111 | $4,854 | $1,257 |
| Net investment income | 494 | 468 | 26 | 1,426 | 1,447 | (21) |
| Investment related gains (losses), net | (61) | (33) | (28) | (111) | (172) | 61 |
| Other revenues | 65 | 59 | 6 | 175 | 234 | (59) |
| Total revenues | 3,064 | 2,147 | 917 | 7,601 | 6,363 | 1,238 |
| **Benefits and expenses** |  |  |  |  |  |  |
| Claims and other policy benefits | 2,462 | 1,561 | 901 | 5,745 | 4,644 | 1,101 |
| Future policy benefits remeasurement (gains) losses | (45) | 155 | (200) | (19) | 226 | (245) |
| Market risk benefits remeasurement (gains) losses | (21) | 23 | (44) | (38) | 29 | (67) |
| Interest credited | 156 | 148 | 8 | 454 | 390 | 64 |
| Policy acquisition costs and other insurance expenses | 231 | 217 | 14 | 690 | 667 | 23 |
| Other operating expenses | 68 | 59 | 9 | 191 | 173 | 18 |
| Total benefits and expenses | 2,851 | 2,163 | 688 | 7,023 | 6,129 | 894 |
| Income (loss) before income taxes | $213 | $(16) | $229 | $578 | $234 | $344 |

The increases in income before income taxes for the third quarter and first nine months of 2023 were primarily the result of favorable impacts of assumption updates in 2023 as compared to the prior year, favorable claims experience in the U. S. Traditional lines of business, fluctuations in investment related gains (losses) due to changes in the fair value of market risk benefits, net of hedging, and embedded derivatives associated with modco/funds withheld treaties in the Financial Solutions segment, partially offset by a recapture fee earned on a terminated Capital Solutions transaction in the second quarter of 2022.

#### Traditional Reinsurance

*(dollars in millions)*

| For the three months ended September 30, Revenues | Three months ended September 30, 2023 | 2022 | 2023 vs 2022 | Nine months ended September 30, 2023 | 2022 | 2023 vs 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net premiums | $1,746 | $1,640 | $106 | $5,111 | $4,812 | $299 |
| Net investment income | 195 | 201 | (6) | 568 | 676 | (108) |
| Investment related gains (losses), net | 2 | 8 | (6) | — | 42 | (42) |
| Other revenues | 6 | 6 | — | 14 | 22 | (8) |
| Total revenues | 1,949 | 1,855 | 94 | 5,693 | 5,552 | 141 |
| **Benefits and expenses** |  |  |  |  |  |  |
| Claims and other policy benefits | 1,611 | 1,520 | 91 | 4,650 | 4,491 | 159 |
| Future policy benefits remeasurement (gains) losses | (20) | 160 | (180) | 11 | 252 | (241) |
| Market risk benefits remeasurement (gains) losses | — | — | — | — | — | — |
| Interest credited | 19 | 18 | 1 | 55 | 52 | 3 |
| Policy acquisition costs and other insurance expenses | 184 | 182 | 2 | 546 | 544 | 2 |
| Other operating expenses | 50 | 44 | 6 | 143 | 132 | 11 |
| Total benefits and expenses | 1,844 | 1,924 | (80) | 5,405 | 5,471 | (66) |
| Income (loss) before income taxes | $105 | $(69) | $174 | $288 | $81 | $207 |
| **Key metrics** |  |  |  |  |  |  |
| Life reinsurance in force |  |  |  | $1,693.1 billion | $1,662.7 billion |  |
| Future policy benefits remeasurement (gains) losses |  |  |  |  |  |  |
| Effect of changes in cash flow assumptions | $17 | $170 |  | $17 | $170 |  |
| Effect of actual variances from expected experience | $(37) | $(10) |  | $(6) | $82 |  |
| Loss ratio (1) | 91.1% | 102.4% |  | 91.2% | 98.6% |  |
| Policy acquisition costs and other insurance expenses as a percentage of net premiums | 10.5% | 11.1% |  | 10.7% | 11.3% |  |
| Other operating expenses as a percentage of net premiums | 2.9% | 2.7% |  | 2.8% | 2.7% |  |

(1) Includes Claims and other policy benefits and Future policy benefits remeasurement (gains) losses

The increase in income before income taxes for the third quarter and the first nine months of 2023 was primarily the result of favorable impacts from assumption updates in the third quarter of 2023 as compared to the third quarter of 2022 and favorable claims experience across all businesses, driven in large part by COVID-19 claims in the first quarter of 2022.

#### Revenues

- The increase in net premiums was primarily due to organic growth as well as new business treaties. The segment added new life business production, measured by face amount of life reinsurance in force, of $106.4 billion and $109.5 billion during the first nine months of 2023 and 2022, respectively. Also contributing to the increase in net premiums was the recapture of a retrocession treaty, effective April 1, 2023, which resulted in a reduction in ceded premium in the second and third quarters of 2023.
- The decrease in net investment income during the nine months ended September 30, 2023, was primarily due to a decrease in variable investment income.
- The decrease in future policy benefits remeasurement losses for the third quarter and first nine months of 2023 was attributable to a remeasurement loss as result of the Company’s 2023 annual assumption review of $17 million as compared to a remeasurement loss of $170 million in the third quarter of 2022, and favorable claims experience relative to the prior-year, primarily in the U.S. Individual Life business and, in large part, related to COVID-19 claims in the first quarter of 2022.
- The decrease in policy acquisition costs and other insurance expenses as a percentage of net premiums is less than 1% and is primarily due to varying allowance levels within coinsurance type arrangements and the mix of new business between coinsurance versus yearly renewable term.

#### Financial Solutions

*(dollars in millions)*

| For the three months ended September 30, Revenues | 2023 Asset-Intensive | Capital Solutions | Total | 2022 Asset-Intensive | Capital Solutions | Total | 2023 vs 2022 Asset-Intensive | Capital Solutions | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net premiums | $820 | $— | $820 | $13 | $— | $13 | $807 | $— | $807 |
| Net investment income | 298 | 1 | 299 | 265 | 2 | 267 | 33 | (1) | 32 |
| Investment related gains (losses), net | (63) | — | (63) | (41) | — | (41) | (22) | — | (22) |
| Other revenues | 35 | 24 | 59 | 29 | 24 | 53 | 6 | — | 6 |
| Total revenues | 1,090 | 25 | 1,115 | 266 | 26 | 292 | 824 | (1) | 823 |
| **Benefits and expenses** |  |  |  |  |  |  |  |  |  |
| Claims and other policy benefits | 851 | — | 851 | 41 | — | 41 | 810 | — | 810 |
| Future policy benefits remeasurement (gains) losses | (25) | — | (25) | (5) | — | (5) | (20) | — | (20) |
| Market risk benefits remeasurement (gains) losses | (21) | — | (21) | 23 | — | 23 | (44) | — | (44) |
| Interest credited | 137 | — | 137 | 130 | — | 130 | 7 | — | 7 |
| Policy acquisition costs and other insurance expenses | 45 | 2 | 47 | 36 | (1) | 35 | 9 | 3 | 12 |
| Other operating expenses | 14 | 4 | 18 | 11 | 4 | 15 | 3 | — | 3 |
| Total benefits and expenses | 1,001 | 6 | 1,007 | 236 | 3 | 239 | 765 | 3 | 768 |
| Income before income taxes | $89 | $19 | $108 | $30 | $23 | $53 | $59 | $(4) | $55 |

*(dollars in millions)*

| For the nine months ended September 30, Revenues | 2023 Asset-Intensive | Capital Solutions | Total | 2022 Asset-Intensive | Capital Solutions | Total | 2023 vs 2022 Asset-Intensive | Capital Solutions | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net premiums | $1,000 | $— | $1,000 | $42 | $— | $42 | $958 | $— | $958 |
| Net investment income | 856 | 2 | 858 | 767 | 4 | 771 | 89 | (2) | 87 |
| Investment related gains (losses), net | (111) | — | (111) | (214) | — | (214) | 103 | — | 103 |
| Other revenues | 86 | 75 | 161 | 86 | 126 | 212 | — | (51) | (51) |
| Total revenues | 1,831 | 77 | 1,908 | 681 | 130 | 811 | 1,150 | (53) | 1,097 |
| **Benefits and expenses** |  |  |  |  |  |  |  |  |  |
| Claims and other policy benefits | 1,095 | — | 1,095 | 153 | — | 153 | 942 | — | 942 |
| Future policy benefits remeasurement (gains) losses | (30) | — | (30) | (26) | — | (26) | (4) | — | (4) |
| Market risk benefits remeasurement (gains) losses | (38) | — | (38) | 29 | — | 29 | (67) | — | (67) |
| Interest credited | 399 | — | 399 | 338 | — | 338 | 61 | — | 61 |
| Policy acquisition costs and other insurance expenses | 138 | 6 | 144 | 122 | 1 | 123 | 16 | 5 | 21 |
| Other operating expenses | 38 | 10 | 48 | 32 | 9 | 41 | 6 | 1 | 7 |
| Total benefits and expenses | 1,602 | 16 | 1,618 | 648 | 10 | 658 | 954 | 6 | 960 |
| Income before income taxes | $229 | $61 | $290 | $33 | $120 | $153 | $196 | $(59) | $137 |

The increase in income before income taxes for the U.S. and Latin America Financial Solutions segment for the three and nine months ended September 30, 2023, was primarily due to the change in the fair value of embedded derivatives on funds withheld at interest, the change in market risk benefits remeasurement gains (losses), net of the change in the fair value of the associated free standing derivatives, and higher net investment income due to increases in interest rates.

The increase in premiums for the three and nine months ended September 30, 2023, was primarily due to single premium pension risk transfer (“PRT”) transactions completed in the first and third quarters of 2023. The PRT single premiums received were offset by an increase in reserves.

The book value of the invested asset base supporting asset-intensive transactions decreased to $23.0 billion as of September 30, 2023, from $24.2 billion as of September 30, 2022.

- The decrease in the asset base was primarily due to $2.2 billion in net run off of existing in force transactions, partially offset by $1.0 billion from new transactions.
- As of September 30, 2023 and 2022, $3.8 billion and $4.3 billion, respectively, of the invested assets were funds withheld at interest, of which greater than 90% was associated with two clients.

As of September 30, 2023 and 2022, the amount of reinsurance assumed in Capital Solutions transactions, as measured by pre-tax statutory surplus, risk based capital and other financial structures was $25.9 billion and $25.3 billion, respectively.

#### Impact of certain derivatives and market risk benefits

The Company recognizes in consolidated income any changes in the fair value of embedded derivatives on modco or funds withheld treaties and equity indexed annuities (“EIAs”). In addition, the Company recognizes the changes in fair value of market risk benefits associated with guaranteed minimum benefit riders. The Company utilizes freestanding derivatives to minimize the income statement volatility due to changes in the fair value of market risk benefits associated with guaranteed minimum benefit riders.

Income from the asset-intensive business tends to be volatile due to changes in the fair value of certain derivatives, including embedded derivatives associated with reinsurance treaties structured on a modco or funds withheld basis, embedded derivatives associated with the Company’s reinsurance of EIAs, and changes in the fair value of market risk benefits associated with guaranteed minimum benefit riders. Fluctuations occur period to period primarily due to changing investment conditions including, but not limited to, interest rate movements (including risk-free rates and credit spreads), implied volatility and equity market performance, all of which are factors in the calculations of the fair value of the assets and liabilities.

The following table summarizes the asset-intensive results and quantifies the impact of these embedded derivatives and market risk benefits for the periods presented. Revenues before certain derivatives, benefits and expenses before certain derivatives, and income before income taxes and certain derivatives should not be viewed as substitutes for GAAP revenues, GAAP benefits and expenses, and GAAP income before income taxes.

*(dollars in millions)*

| Revenues | Three months ended September 30, 2023 | 2022 | Nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Total revenues | $1,090 | $266 | $1,831 | $681 |
| Less: |  |  |  |  |
| Embedded derivatives – modco/funds withheld treaties | (1) | (23) | 18 | (147) |
| Derivatives hedging market risk benefits | (44) | (12) | (86) | (39) |
| Revenues before certain derivatives and market risk benefits | 1,135 | 301 | 1,899 | 867 |
| **Benefits and expenses** |  |  |  |  |
| Total benefits and expenses | 1,001 | 236 | 1,602 | 648 |
| Less: |  |  |  |  |
| Equity-indexed annuities | (7) | (10) | (11) | (54) |
| Market risk benefits remeasurement (gains) losses | (21) | 23 | (38) | 29 |
| Benefits and expenses before certain derivatives and market risk benefits | 1,029 | 223 | 1,651 | 673 |
| **Income before income taxes:** |  |  |  |  |
| Income (loss) before income taxes | 89 | 30 | 229 | 33 |
| Less: |  |  |  |  |
| Embedded derivatives – modco/funds withheld treaties | (1) | (23) | 18 | (147) |
| Market risk benefits remeasurement (gains) losses and related free standing derivatives | (23) | (35) | (48) | (68) |
| Equity-indexed annuities | 7 | 10 | 11 | 54 |
| Income before income taxes and certain derivatives | $106 | $78 | $248 | $194 |

*Embedded Derivatives – Modco/Funds Withheld Treaties –* Represents the change in the fair value of embedded derivatives on funds withheld at interest associated with treaties written on a modco or funds withheld basis. The Company’s utilization of a credit valuation adjustment did not have a material effect on the change in fair value of these embedded derivatives for the three and nine months ended September 30, 2023 and 2022.

The change in fair value of the embedded derivatives related to modco/funds withheld treaties, increased (decreased) income before income taxes by $(1) million and $(23) million for the third quarter and $18 million and $(147) million for the nine months ended September 30, 2023 and 2022, respectively. The decrease in income for the third quarter was due to rising interest rates, offset by tightening credit spreads. The decrease in income for the third quarter of 2022 was due to widening credit spreads. The increase in income for the nine months ended September 30, 2023, was due to tightening credit spreads, and the decrease in income for the nine months ended September 30, 2022, was due to higher risk-free interest rates and wider credit spreads.

*Market Risk Benefits –* Represents the impact related to market risk benefits, which consist of guaranteed minimum benefits associated with the Company’s reinsurance of variable and equity-indexed annuities, including the associated free standing derivatives (interest rate swaps, financial futures and equity options), purchased by the Company to economically hedge the market risk benefit. The change in fair value of the market risk benefits, net of the changes in the associated free standing derivatives, decreased income before income taxes by $23 million and $48 million for the three and nine months ended September 30, 2023, respectively, due to increasing interest rates. The decrease in income of $35 million and $68 million for the three and nine months ended September 30, 2022, respectively, was also due to increasing interest rates.

*Equity-Indexed Annuities –* Represents changes in the liability for equity-indexed annuities in excess of changes in account value. The change in fair value of embedded derivative liabilities associated with equity-indexed annuities increased income before income taxes by $7 million and $10 million for the three and nine months ended September 30, 2023 and $11 million and $54 million for the three and nine months ended September 30, 2023 and 2022, respectively, due to an increase in risk free interest rates which has the impact of lowering the fair value of the liability.

#### Discussion and analysis before certain derivatives and market risk benefits

The changes in derivatives and market risk benefits discussed above are considered unrealized by management and do not affect current cash flows, crediting rates or spread performance on the underlying treaties. Fluctuations occur period to period primarily due to changing investment conditions including, but not limited to, interest rate movements (including benchmark rates and credit spreads), implied volatility and equity market performance, all of which are factors in the calculations of fair value. Therefore, management believes it is helpful to distinguish between the effects of changes in these derivatives and market risk benefits as the primary factors that drive profitability of the underlying treaties are investment income, fee income (included in other revenues) and interest credited.

- Income before income taxes and certain derivatives and market risk benefits increased by $29 million and $55 million for the three and nine months ended September 30, 2023, as compared to the same periods in 2022, primarily due to higher investment income, net in coinsurance and funds withheld portfolios due to increases in interest rates and remeasurement gain as a result of the assumption update completed in the third quarter of 2023.
- Revenue before certain derivatives and market risk benefits increased by $834 million and $1,032 million for the three and nine months ended September 30, 2023, as compared to the same periods in 2022. The increase in the third quarter of 2023 and nine months ended was primarily due to PRT single premiums and higher investment income due to an increase in interest rates. PRT premiums are offset by a corresponding increase in future policy benefits.
- Benefits and expenses before certain derivatives and market risk benefits increased by $805 million and $977 million for the three and nine months ended September 30, 2023, as compared to the same periods in 2022. The increase in the three and nine months ended September 30, 2023, was primarily due to the establishment of liabilities for future policy benefits associated with PRT transactions.

### Canada Operations

The Canada operations are primarily engaged in traditional reinsurance, which consists mainly of traditional individual life reinsurance, and to a lesser extent creditor, group life and health, critical illness and disability 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 individual life insurance. The Canada Financial Solutions segment consists of longevity and capital solutions.

*(dollars in millions)*

| Revenues | Three months ended September 30, 2023 | 2022 | 2023 vs 2022 | Nine months ended September 30, 2023 | 2022 | 2023 vs 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net premiums | $324 | $317 | $7 | $972 | $983 | $(11) |
| Net investment income | 63 | 65 | $(2) | 187 | 188 | (1) |
| Investment related gains (losses), net | — | 2 | (2) | 6 | (3) | 9 |
| Other revenues | 5 | 2 | 3 | 12 | 9 | 3 |
| Total revenues | 392 | 386 | 6 | 1,177 | 1,177 | — |
| **Benefits and expenses** |  |  |  |  |  |  |
| Claims and other policy benefits | 302 | 294 | 8 | 895 | 910 | (15) |
| Future policy benefits remeasurement (gains) losses | (7) | 7 | (14) | (12) | (1) | (11) |
| Market risk benefits remeasurement (gains) losses | — | — | — | — | — | — |
| Interest credited | 1 | — | 1 | 1 | — | 1 |
| Policy acquisition costs and other insurance expenses | 47 | 56 | (9) | 140 | 160 | (20) |
| Other operating expenses | 13 | 11 | 2 | 37 | 32 | 5 |
| Total benefits and expenses | 356 | 368 | (12) | 1,061 | 1,101 | (40) |
| Income (loss) before income taxes | $36 | $18 | $18 | $116 | $76 | $40 |

The increase in income before income taxes for the three and nine months ended September 30, 2023, was primarily due to future policy benefits remeasurement gains as compared to future policy benefits remeasurement losses for the same period in 2022 and favorable experience on the Financial Solutions segment as compared to the same period in 2022. The increase in income for the nine months ended September 30, 2023, was primarily due to higher future policy benefits remeasurement gains, an increase in investment related gains (losses), net, and overall favorable experience, as compared to the same period in 2022.

Foreign currency fluctuations can result in variances in the financial statement line items. Foreign currency fluctuations resulted in decreases in income before income taxes of $1 million and $6 million for the three and nine months ended September 30, 2023. Unless otherwise stated, all amounts discussed below are net of foreign currency fluctuations.

#### Traditional Reinsurance

*(dollars in millions)*

| Revenues | Three months ended September 30, 2023 | 2022 | 2023 vs 2022 | Nine months ended September 30, 2023 | 2022 | 2023 vs 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net premiums | $302 | $293 | $9 | $904 | $911 | $(7) |
| Net investment income | 62 | 64 | (2) | 184 | 184 | — |
| Investment related gains (losses), net | — | 2 | (2) | 6 | (3) | 9 |
| Other revenues | 2 | — | 2 | 4 | 3 | 1 |
| Total revenues | 366 | 359 | 7 | 1,098 | 1,095 | 3 |
| **Benefits and expenses** |  |  |  |  |  |  |
| Claims and other policy benefits | 284 | 272 | 12 | 836 | 844 | (8) |
| Future policy benefits remeasurement (gains) losses | 16 | 9 | 7 | 18 | 8 | 10 |
| Market risk benefits remeasurement (gains) losses | — | — | — | — | — | — |
| Interest credited | 1 | — | 1 | 1 | — | 1 |
| Policy acquisition costs and other insurance expenses | 46 | 56 | (10) | 138 | 159 | (21) |
| Other operating expenses | 13 | 10 | 3 | 35 | 30 | 5 |
| Total benefits and expenses | 360 | 347 | 13 | 1,028 | 1,041 | (13) |
| Income (loss) before income taxes | $6 | $12 | $(6) | $70 | $54 | $16 |
| **Key metrics** |  |  |  |  |  |  |
| Life reinsurance in force |  |  |  | $477.2 billion | $448.7 billion |  |
| Future policy benefits remeasurement (gains) losses |  |  |  |  |  |  |
| Effect of changes in cash flow assumptions | $13 | $6 |  | $13 | $6 |  |
| Effect of actual variances from expected experience | $3 | $3 |  | $5 | $2 |  |
| Loss ratio (1) | 99.3% | 95.9% |  | 94.5% | 93.5% |  |
| Policy acquisition costs and other insurance expenses as a percentage of net premiums | 15.2% | 19.1% |  | 15.3% | 17.5% |  |
| Other operating expenses as a percentage of net premiums | 4.3% | 3.4% |  | 3.9% | 3.3% |  |

(1) Includes Claims and other policy benefits and Future policy benefits remeasurement (gains) losses

The decrease in income before income taxes for the three months ended September 30, 2023, was primarily due to higher future policy benefits remeasurement losses as compared to the same period in 2022. The increase in income before income taxes for the nine months ended September 30, 2023, was primarily due favorable experience and higher investment related gains (losses),net, partially offset by higher future policy benefits remeasurement losses as compared to the same period in 2022.

#### Revenues

- The increase in total revenues for the three months ended September 30, 2023 was primarily due to an increase in net premiums as compared to the same period in 2022 and the increase in total revenues for the nine months ended September 30, 2023 was primarily due to investment related gains as compared to investment related losses for the same period in 2022 partially offset by lower net premiums as compared to the same period in 2022.
- The increase in net premiums for the three months ended September 30, 2023, is primarily due to organic growth, partially offset by foreign currency fluctuations. The decrease in net premiums for the nine months ended September 30, 2023 is due to foreign currency fluctuations. Excluding the impact of foreign currency fluctuations the increase in net premiums is primarily due to organic growth.
- The segment added new life business production, measured by face amount of life reinsurance in force, of $33.0 billion and $36.3 billion during the first nine months of 2023 and 2022, respectively.
- The increase in loss ratios for the three and nine months ended September 30, 2023, are primarily due to higher future policy remeasurement losses as compared to the same period in 2022.
- During the third quarter of 2023, the Company completed its annual assumption review resulting in a future policy benefits remeasurement loss of $13 million compared to a future policy benefits remeasurement loss of $6 million in the third quarter of 2022 due to updating mortality assumptions.
- The decrease in policy acquisition costs for the three and nine months ended September 30, 2023, is primarily due to lower allowances and ceded expenses.

#### Financial Solutions

*(dollars in millions)*

| Revenues | Three months ended September 30, 2023 | 2022 | 2023 vs 2022 | Nine months ended September 30, 2023 | 2022 | 2023 vs 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net premiums | $22 | $24 | $(2) | $68 | $72 | $(4) |
| Net investment income | 1 | 1 | — | 3 | 4 | (1) |
| Investment related gains (losses), net | — | — | — | — | — | — |
| Other revenues | 3 | 2 | 1 | 8 | 6 | 2 |
| Total revenues | 26 | 27 | (1) | 79 | 82 | (3) |
| **Benefits and expenses** |  |  |  |  |  |  |
| Claims and other policy benefits | 18 | 22 | (4) | 59 | 66 | (7) |
| Future policy benefits remeasurement (gains) losses | (23) | (2) | (21) | (30) | (9) | (21) |
| Market risk benefits remeasurement (gains) losses | — | — | — | — | — | — |
| Interest credited | — | — | — | — | — | — |
| Policy acquisition costs and other insurance expenses | 1 | — | 1 | 2 | 1 | 1 |
| Other operating expenses | — | 1 | (1) | 2 | 2 | — |
| Total benefits and expenses | (4) | 21 | (25) | 33 | 60 | (27) |
| Income (loss) before income taxes | $30 | $6 | $24 | $46 | $22 | $24 |
| **Key metrics** |  |  |  |  |  |  |
| Future policy benefits remeasurement (gains) losses |  |  |  |  |  |  |
| Effect of changes in cash flow assumptions | $(22) | $— |  | $(22) | $— |  |
| Effect of actual variances from expected experience | $(1) | $(2) |  | $(8) | $(9) |  |

The increase in income for the three and nine months ended September 30, 2023, compared to the same periods in 2022, was the result of a future policy remeasurement gain of $22 million due to a change in mortality assumptions.

### Europe, Middle East and Africa Operations

The Europe, Middle East and Africa (“EMEA”) operations include business primarily generated by offices in France, Germany, Ireland, Italy, the Middle East, the Netherlands, Poland, South Africa, Spain and the United Kingdom (“UK”). EMEA consists of two major segments: Traditional and Financial Solutions. The Traditional segment primarily provides reinsurance through yearly renewable term and coinsurance agreements on a variety of life, health and critical illness products. Reinsurance agreements may be facultative or automatic agreements covering primarily individual risks and, in some markets, group risks. The Financial Solutions segment consists of reinsurance and other transactions associated with longevity closed blocks, payout annuities, capital management solutions and financial reinsurance.

*(dollars in millions)*

| Revenues | Three months ended September 30, 2023 | 2022 | 2023 vs 2022 | Nine months ended September 30, 2023 | 2022 | 2023 vs 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net premiums | $565 | $548 | $17 | $1,647 | $1,673 | $(26) |
| Net investment income | 79 | 55 | 24 | 216 | 162 | 54 |
| Investment related gains (losses), net | (21) | (9) | (12) | (36) | (15) | (21) |
| Other revenues | 8 | 4 | 4 | 14 | 12 | 2 |
| Total revenues | 631 | 598 | 33 | 1,841 | 1,832 | 9 |
| **Benefits and expenses** |  |  |  |  |  |  |
| Claims and other policy benefits | 524 | 506 | 18 | 1,469 | 1,504 | (35) |
| Future policy benefits remeasurement (gains) losses | 10 | (4) | 14 | — | (14) | 14 |
| Market risk benefits remeasurement (gains) losses | — | — | — | — | — | — |
| Interest credited | (2) | (5) | 3 | (4) | (22) | 18 |
| Policy acquisition costs and other insurance expenses | 27 | 21 | 6 | 70 | 66 | 4 |
| Other operating expenses | 48 | 41 | 7 | 140 | 129 | 11 |
| Total benefits and expenses | 607 | 559 | 48 | 1,675 | 1,663 | 12 |
| Income (loss) before income taxes | $24 | $39 | $(15) | $166 | $169 | $(3) |

81

- The decrease in income before income taxes for the three months ended September 30, 2023, as compared to the same period in 2022, was primarily due to higher losses from future policy benefits remeasurement and unfavorable mortality experience in select markets. The decrease for the nine months ended September 30, 2023, as compared to the same period in 2022, was primarily due to higher losses from future policy benefits remeasurement, unfavorable mortality experience with some offset from favorable longevity experience.
- Foreign currency fluctuations can result in variances in the financial statement line items. Foreign currency fluctuations resulted in a $2 million increase and $4 million decrease in income before income taxes for the three and nine months ended September 30, 2023. Unless otherwise stated, all amounts discussed below are net of foreign currency fluctuations.

#### Traditional Reinsurance

*(dollars in millions)*

| Revenues | Three months ended September 30, 2023 | 2022 | 2023 vs 2022 | Nine months ended September 30, 2023 | 2022 | 2023 vs 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net premiums | $447 | $436 | $11 | $1,314 | $1,314 | $— |
| Net investment income | 23 | 18 | 5 | 69 | 55 | 14 |
| Investment related gains (losses), net | — | — | — | — | — | — |
| Other revenues | 1 | 2 | (1) | (1) | 3 | (4) |
| Total revenues | 471 | 456 | 15 | 1,382 | 1,372 | 10 |
| **Benefits and expenses** |  |  |  |  |  |  |
| Claims and other policy benefits | 429 | 409 | 20 | 1,202 | 1,182 | 20 |
| Future policy benefits remeasurement (gains) losses | 43 | (7) | 50 | 47 | (5) | 52 |
| Market risk benefits remeasurement (gains) losses | — | — | — | — | — | — |
| Interest credited | — | — | — | — | — | — |
| Policy acquisition costs and other insurance expenses | 25 | 19 | 6 | 64 | 61 | 3 |
| Other operating expenses | 34 | 30 | 4 | 98 | 91 | 7 |
| Total benefits and expenses | 531 | 451 | 80 | 1,411 | 1,329 | 82 |
| Income (loss) before income taxes | $(60) | $5 | $(65) | $(29) | $43 | $(72) |
| **Key metrics** |  |  |  |  |  |  |
| Life reinsurance in force |  |  |  | $814.5 billion | $671.3 billion |  |
| Future policy benefits remeasurement (gains) losses |  |  |  |  |  |  |
| Effect of changes in cash flow assumptions | $47 | $13 |  | $47 | $13 |  |
| Effect of actual variances from expected experience | $(4) | $(20) |  | $— | $(18) |  |
| Loss ratio (1) | 105.6% | 92.2% |  | 95.1% | 89.6% |  |
| Policy acquisition costs and other insurance expenses as a percentage of net premiums | 5.6% | 4.4% |  | 4.9% | 4.6% |  |
| Other operating expenses as a percentage of net premiums | 7.6% | 6.9% |  | 7.5% | 6.9% |  |

(1) Includes Claims and other policy benefits and Future policy benefits remeasurement (gains) losses

The decreases in income before income taxes for the three and nine months ended September 30, 2023, as compared to the same periods in 2022, were primarily due to increased claims and increased future policy benefits remeasurement losses.

#### Revenues

- The increase in net premiums for the three months ended September 30, 2023, was primarily due to foreign currency fluctuations. Net premiums for the first nine months of 2023 were unchanged compared to the same period last year. Excluding the impact of foreign currency fluctuations, business volume on new and existing treaties increased in the first nine months of 2023.
- The segment added new life business production, measured by face amount of life reinsurance in force, of $97.6 billion and $133.8 billion during the nine months ended September 30, 2023 and 2022, respectively.
- The increases in the loss ratios for the third quarter and first nine months of 2023 were primarily due to an update of mortality assumptions primarily in the UK and a worsening in mortality experience primarily in the UK and South Africa.
- During the third quarter of 2023, the Company completed its annual assumption review resulting in a future policy benefits remeasurement loss of $47 million compared to a future policy benefits remeasurement loss of $13 million in the third quarter of 2022 due to updating mortality assumptions.

#### Financial Solutions

*(dollars in millions)*

| Revenues | Three months ended September 30, 2023 | 2022 | 2023 vs 2022 | Nine months ended September 30, 2023 | 2022 | 2023 vs 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net premiums | $118 | $112 | $6 | $333 | $359 | $(26) |
| Net investment income | 56 | 37 | 19 | 147 | 107 | 40 |
| Investment related gains (losses), net | (21) | (9) | (12) | (36) | (15) | (21) |
| Other revenues | 7 | 2 | 5 | 15 | 9 | 6 |
| Total revenues | 160 | 142 | 18 | 459 | 460 | (1) |
| **Benefits and expenses** |  |  |  |  |  |  |
| Claims and other policy benefits | 95 | 97 | (2) | 267 | 322 | (55) |
| Future policy benefits remeasurement (gains) losses | (33) | 3 | (36) | (47) | (9) | (38) |
| Market risk benefits remeasurement (gains) losses | — | — | — | — | — | — |
| Interest credited | (2) | (5) | 3 | (4) | (22) | 18 |
| Policy acquisition costs and other insurance expenses | 2 | 2 | — | 6 | 5 | 1 |
| Other operating expenses | 14 | 11 | 3 | 42 | 38 | 4 |
| Total benefits and expenses | 76 | 108 | (32) | 264 | 334 | (70) |
| Income (loss) before income taxes | $84 | $34 | $50 | $195 | $126 | $69 |
| **Key metrics** |  |  |  |  |  |  |
| Future policy benefits remeasurement (gains) losses |  |  |  |  |  |  |
| Effect of changes in cash flow assumptions | $(34) | $— |  | $(34) | $— |  |
| Effect of actual variances from expected experience | $1 | $3 |  | $(13) | $(9) |  |

The increases in income before income taxes for the three and nine months ended September 30, 2023, were primarily due to increases in net investment income and higher future policy benefits remeasurement gains. The first nine months also had favorable claims experience related to closed longevity blocks, partially offset by decreased net premiums.

#### Revenues

- The decrease in net premiums for the first nine months was primarily due to an increase in the ceded premium on closed block longevity transactions.
- The increase in net investment income was primarily related to higher yield and higher income associated with unit-linked policies which fluctuate with market performance and are offset by an increase in interest credited related to the unit-linked liabilities.
- The increase in investment related losses for the third quarter and first nine months was attributable to fluctuations in the fair market value of CPI swap derivatives due to changes in future inflation expectations. The increase in investment related losses for the nine months ended September 30, 2023, was also attributable to higher investment related losses on fixed-income securities.
- The decrease in claims and other policy benefits for the first nine months of 2023 was the result of favorable longevity experience and an increased level of external retrocession coverage on closed block longevity transactions.
- During the third quarter of 2023, the Company completed its annual assumption review resulting in a future policy benefits remeasurement gain of $34 million. There were no changes to assumptions in the prior period.

### Asia Pacific Operations

The Asia Pacific operations include business generated by its offices principally in Australia, China, Hong Kong, India, Japan, Malaysia, New Zealand, Singapore, South Korea and Taiwan. The Traditional segment’s principal types of reinsurance include individual and group life and health, critical illness, disability and superannuation. Reinsurance agreements may be facultative or automatic agreements covering primarily individual risks, and in some markets, group risks. Superannuation is the Australian government mandated compulsory retirement savings program. Superannuation funds accumulate retirement funds for employees, and, in addition, typically offer life and disability insurance coverage. The Financial Solutions segment includes financial reinsurance, asset-intensive and certain disability and life blocks.

*(dollars in millions)*

| Revenues | Three months ended September 30, 2023 | 2022 | 2023 vs 2022 | Nine months ended September 30, 2023 | 2022 | 2023 vs 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net premiums | $800 | $729 | $71 | $2,247 | $2,122 | $125 |
| Net investment income | 177 | 128 | 49 | 533 | 320 | 213 |
| Investment related gains (losses), net | (65) | (90) | 25 | (162) | (279) | 117 |
| Other revenues | 19 | 124 | (105) | 61 | 195 | (134) |
| Total revenues | 931 | 891 | 40 | 2,679 | 2,358 | 321 |
| **Benefits and expenses** |  |  |  |  |  |  |
| Claims and other policy benefits | 671 | 687 | (16) | 1,926 | 1,799 | 127 |
| Future policy benefits remeasurement (gains) losses | (40) | 68 | (108) | (64) | 91 | (155) |
| Market risk benefits remeasurement (gains) losses | — | — | — | — | — | — |
| Interest credited | 54 | 38 | 16 | 154 | 80 | 74 |
| Policy acquisition costs and other insurance expenses | 67 | 68 | (1) | 192 | 194 | (2) |
| Other operating expenses | 61 | 56 | 5 | 178 | 163 | 15 |
| Total benefits and expenses | 813 | 917 | (104) | 2,386 | 2,327 | 59 |
| Income (loss) before income taxes | $118 | $(26) | $144 | $293 | $31 | $262 |

- The increases in income before taxes for the three and nine months ended September 30, 2023, as compared to the same periods in 2022, were primarily due to increased net investment income related to an increase in the asset base from new asset-intensive transactions, increased net premiums and lower investment related losses, and favorable underwriting results.
- Foreign currency fluctuations can result in variances in the financial statement line items. Foreign currency fluctuations resulted in increases of $1 million and decreases of $4 million in income before income taxes during the three and nine months ended September 30, 2023. Unless otherwise stated, all amounts discussed below are net of foreign currency fluctuations.

#### Traditional Reinsurance

*(dollars in millions)*

| Revenues | Three months ended September 30, 2023 | 2022 | 2023 vs 2022 | Nine months ended September 30, 2023 | 2022 | 2023 vs 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net premiums | $737 | $660 | $77 | $2,076 | $1,950 | $126 |
| Net investment income | 60 | 51 | 9 | 183 | 144 | 39 |
| Investment related gains (losses), net | 1 | 4 | (3) | 6 | 9 | (3) |
| Other revenues | 3 | 5 | (2) | 17 | 21 | (4) |
| Total revenues | 801 | 720 | 81 | 2,282 | 2,124 | 158 |
| **Benefits and expenses** |  |  |  |  |  |  |
| Claims and other policy benefits | 604 | 627 | (23) | 1,746 | 1,644 | 102 |
| Future policy benefits remeasurement (gains) losses | (39) | 68 | (107) | (62) | 91 | (153) |
| Market risk benefits remeasurement (gains) losses | — | — | — | — | — | — |
| Interest credited | — | — | — | — | — | — |
| Policy acquisition costs and other insurance expenses | 46 | 47 | (1) | 136 | 146 | (10) |
| Other operating expenses | 56 | 51 | 5 | 160 | 149 | 11 |
| Total benefits and expenses | 667 | 793 | (126) | 1,980 | 2,030 | (50) |
| Income (loss) before income taxes | $134 | $(73) | $207 | $302 | $94 | $208 |
| **Key metrics** |  |  |  |  |  |  |
| Life reinsurance in force |  |  |  | $501.8 billion | $479.4 billion |  |
| Future policy benefits remeasurement (gains) losses |  |  |  |  |  |  |
| Effect of changes in cash flow assumptions | $(2) | $140 |  | $(2) | $117 |  |
| Effect of actual variances from expected experience | $(37) | $(72) |  | $(60) | $(26) |  |
| Loss ratio (1) | 76.7% | 105.3% |  | 81.1% | 89.0% |  |
| Policy acquisition costs and other insurance expenses as a percentage of net premiums | 6.2% | 7.1% |  | 6.6% | 7.5% |  |
| Other operating expenses as a percentage of net premiums | 7.6% | 7.7% |  | 7.7% | 7.6% |  |

(1) Includes Claims and other policy benefits and Future policy benefits remeasurement (gains) losses

The increases in income before income taxes for the three and nine months ended September 30, 2023, were primarily the result of higher total revenue and favorable underwriting results.

#### Revenues

- The increases in net premiums were primarily due to continued business growth in the segment.
- The segment added new life business production, measured by face amount of life reinsurance in force, of $25.7 billion and $36.7 billion during the nine months ended September 30, 2023 and 2022, respectively.
- The increases in net investment income were attributable to increase in investment yield due to an increase in interest rates.
- The decrease in the loss ratio for the three and nine months ended September 30, 2023, as compared to the same period in 2022, was primarily due to favorable claims experience.
- During the third quarter of 2023, the Company completed its annual assumption review resulting in a future policy benefits remeasurement gain of $2 million compared to a future policy benefits remeasurement loss of $140 million in the third quarter of 2022 due to updating mortality assumptions.

#### Financial Solutions

*(dollars in millions)*

| Revenues | Three months ended September 30, 2023 | 2022 | 2023 vs 2022 | Nine months ended September 30, 2023 | 2022 | 2023 vs 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net premiums | $63 | $69 | $(6) | $171 | $172 | $(1) |
| Net investment income | 117 | 77 | 40 | 350 | 176 | 174 |
| Investment related gains (losses), net | (66) | (94) | 28 | (168) | (288) | 120 |
| Other revenues | 16 | 119 | (103) | 44 | 174 | (130) |
| Total revenues | 130 | 171 | (41) | 397 | 234 | 163 |
| **Benefits and expenses** |  |  |  |  |  |  |
| Claims and other policy benefits | 67 | 60 | 7 | 180 | 155 | 25 |
| Future policy benefits remeasurement (gains) losses | (1) | — | (1) | (2) | — | (2) |
| Market risk benefits remeasurement (gains) losses | — | — | — | — | — | — |
| Interest credited | 54 | 38 | 16 | 154 | 80 | 74 |
| Policy acquisition costs and other insurance expenses | 21 | 21 | — | 56 | 48 | 8 |
| Other operating expenses | 5 | 5 | — | 18 | 14 | 4 |
| Total benefits and expenses | 146 | 124 | 22 | 406 | 297 | 109 |
| Income (loss) before income taxes | $(16) | $47 | $(63) | $(9) | $(63) | $54 |
| **Key metrics** |  |  |  |  |  |  |
| Future policy benefits remeasurement (gains) losses |  |  |  |  |  |  |
| Effect of changes in cash flow assumptions | $— | $— |  | $— | $— |  |
| Effect of actual variances from expected experience | $(1) | $— |  | $(2) | $— |  |

The decrease in income (loss) before income taxes during the third quarter of 2023 and the nine months ended September 30, 2023, as compared to the same periods in 2022, was due to the impact of higher surrender fess and market value adjustments, reflected in other revenues, from a single premium annuity transaction recognized in the prior year.

The invested asset base supporting asset-intensive transactions increased to $14.4 billion as of September 30, 2023, from $11.6 billion as of September 30, 2022. The increase in the asset base compared to September 30, 2022, was primarily due to approximately $2.0 billion in additional assets from recently executed transactions and net organic growth of $0.8 billion from existing in-force blocks. The amount of reinsurance assumed from client companies, as measured by pre-tax statutory surplus, risk based capital and other financial reinsurance structures was $1.1 billion and $1.0 billion for the nine months ended September 30, 2023 and 2022, respectively. Fees earned from this business can vary significantly depending on the size, complexity and timing of the transactions and, therefore, can fluctuate from period to period.

#### Revenues

- The decreases in net premiums for the three and nine months ended September 30, 2023, as compared to the same periods in 2022, were the result of lower contributions from single premium asset-intensive transactions, partially offset by contributions from recently executed asset-intensive transactions.
- The increase in net investment income was due to a growing asset base and improved yields from increased interest rates.
- The decrease in investment related losses, net during the quarter ended September 30, 2023, as compared to the same period in 2022, was attributable to investment losses associated with higher lapses in the prior year. The decrease in investment related losses, net for the first nine months of 2023, as compared to 2022, was attributable to an increase in the fair value of derivatives of $98 million and investment losses associated with higher lapses in the prior year. Investment losses associated with higher lapses in the prior year were offset by surrender fees and market value adjustment charges, as described below.
- The decreases in other revenue for the three and nine months ended September 30, 2023, as compared to the same periods in 2022, were due to surrender fees and market value adjustment charges associated with higher lapses in the prior year.
- The increases in claims and other policy benefits for the three and nine months ended September 30, 2023, as compared to the same periods in 2022, were the result of recently executed asset-intensive transactions.

### Corporate and Other

Corporate and Other revenues primarily include investment income from unallocated invested assets, investment related gains and losses and service fees. Corporate and Other expenses consist of the offset to capital charges allocated to the operating segments within the policy acquisition costs and other insurance income line item, unallocated overhead and executive costs, interest expense related to debt, and the investment income and expense associated with the Company’s collateral finance and securitization transactions and service business expenses. Additionally, Corporate and Other includes results from certain wholly-owned subsidiaries that, among other activities, develop and market technology, and provide consulting and outsourcing solutions for the insurance and reinsurance industries. The Company continues to invest in this area in an effort to both support its clients and accelerate the development of innovative solutions and services to increase consumer engagement within the life insurance industry and hence generate new future revenue streams.

*(dollars in millions)*

| Revenues | Three months ended September 30, 2023 | 2022 | 2023 vs 2022 | Nine months ended September 30, 2023 | 2022 | 2023 vs 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net premiums | $— | $— | $— | $— | $— | $— |
| Net investment income | 109 | 53 | 56 | 273 | 216 | 57 |
| Investment related gains (losses), net | 21 | (24) | 45 | (23) | (64) | 41 |
| Other revenues | 5 | (1) | 6 | 12 | (12) | 24 |
| Total revenues | 135 | 28 | 107 | 262 | 140 | 122 |
| **Benefits and expenses** |  |  |  |  |  |  |
| Claims and other policy benefits | — | — | — | — | — | — |
| Future policy benefits remeasurement (gains) losses | — | — | — | — | — | — |
| Market risk benefits remeasurement (gains) losses | — | — | — | — | — | — |
| Interest credited | 14 | 8 | 6 | 42 | 20 | 22 |
| Policy acquisition costs and other insurance expenses | (24) | (21) | (3) | (64) | (66) | 2 |
| Other operating expenses | 84 | 84 | — | 253 | 223 | 30 |
| Interest expense | 72 | 49 | 23 | 188 | 136 | 52 |
| Total benefits and expenses | 146 | 120 | 26 | 419 | 313 | 106 |
| Loss before income taxes | $(11) | $(92) | $81 | $(157) | $(173) | $16 |

The decrease in loss before income taxes for the three months ended September 30, 2023, was primarily attributable to an increase in net investment income, increase in investment related gains (losses), net, partially offset by an increase in interest expense. The decrease in loss before income taxes for the nine months ended September 30, 2023, was primarily attributable to an increase in net investment income, increase in investment related gains (losses), net, increase in interest credited, increase in other operating expenses and increase in interest expense.

#### Revenues

- The increases in net investment income for the three and nine months ended September 30, 2023, were attributable to higher yields and a higher unallocated invested asset base.
- The increase in investment related gains (losses), net for the three months ended September 30, 2023, was primarily attributable to unrealized gains on limited partnerships in the current period compared to net losses on sales of fixed maturity securities in the prior period. The decrease in investment related losses, net for the nine months ended September 30, 2023, was primarily attributable to a decrease in net losses on sales of fixed maturity securities.
- The increase in other revenues was primarily due to an increase in the cash surrender value on corporate-owned life insurance for the three and nine months ended September 30, 2023, compared to a decrease in value in the prior year.

#### Expenses

- The increase in interest credited for the nine months ended September 30, 2023, was primarily attributable to an increase in interest rates on FHLB funding agreements.
- The increase in other operating expenses for the nine months ended September 30, 2023, was primarily attributable to an increase in incentive compensation expense.
- The increases in interest expense for the three and nine months ended September 30, 2023, were primarily attributable to an increase in outstanding debt.

### Liquidity and Capital Resources

### Overview

The Company believes that cash flows from the source of funds available to it will provide sufficient cash flows for the next twelve months to satisfy the current liquidity requirements of the Company under various scenarios that include the potential risk of early recapture of reinsurance treaties, market events and higher than expected claims. The Company performs periodic liquidity stress testing to ensure its asset portfolio includes sufficient high quality liquid assets that could be utilized to bolster its liquidity position under stress scenarios. These assets could be utilized as collateral for secured borrowing transactions with various third parties or by selling the securities in the open market if needed. The Company’s liquidity requirements have been and will continue to be funded through net cash flows from operations. However, in the event of significant unanticipated cash requirements beyond normal liquidity needs, the Company has multiple liquidity alternatives available based on market conditions and the amount and timing of the liquidity need. These alternatives include the sale of invested assets subject to market conditions, borrowings under committed credit facilities, secured borrowings, and if necessary, issuing long-term debt, preferred securities or common equity.

### Current Market Environment

The Company’s average investment yield, excluding spread related business, for the three months ended September 30, 2023, was 4.72%, 32 basis points above the same period in 2022 primarily attributable to higher interest rates and an increase in variable investment income associated with joint ventures and limited partnerships. The average yield will vary from year to year depending on several variables, including the prevailing risk-fee interest rate and credit spread environment, prepayment fees and make-whole premiums, changes in the mix of the underlying investments and cash and cash equivalents balances. Variable investment income from joint ventures and limited partnerships will also vary from year to year and is highly dependent on the timing of dividends and distributions on certain investments. Gross unrealized gains on fixed maturity securities available-for-sale decreased from $0.6 billion at December 31, 2022, to $0.4 billion at September 30, 2023. Additionally, gross unrealized losses increased from $7.3 billion at December 31, 2022, to $8.5 billion at September 30, 2023.

The Company continues to be in a position to hold any investment security showing an unrealized loss until recovery, provided it remains comfortable with the credit of the issuer. The Company does not rely on short-term funding or commercial paper and to date it has experienced no liquidity pressure, nor does it anticipate such pressure in the foreseeable future.

The Company projects its reserves to be sufficient and it would not expect to be required to take any actions to augment capital, even if interest rates remain at current levels for the next five years, assuming all other factors remain constant. To mitigate disintermediation risk, the Company purchased swaptions to protect it against a material increase in interest rates. While the Company has felt the pressures of sustained low interest rates, followed by the recent significant increase in risk-free rates, and volatile equity markets, its business and results of operations are not overly sensitive to these risks. Mortality and morbidity risks continue to be the most significant risk for the Company. Although management believes the Company’s current capital base is adequate to support its business at current operating levels, it continues to monitor new business opportunities and any associated new capital needs that could arise from the changing financial landscape.

### The Holding Company

RGA is an insurance holding company whose primary uses of liquidity include, but are not limited to, the immediate capital needs of its operating companies, dividends paid to its shareholders, repurchase of common stock and interest payments on its indebtedness. 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 RGA Reinsurance Company (“RGA Reinsurance”), RGA Life and Annuity Insurance Company (“RGA Life and Annuity”) and Rockwood Reinsurance Company (“Rockwood Re”) and dividends from operating subsidiaries. As the Company continues its growth efforts, RGA will continue to be dependent upon these sources of liquidity. The following tables provide comparative information for RGA (dollars in millions):

|  | Three months ended September 30, 2023 | 2022 | Nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Interest and dividend income | $134 | $135 | $205 | $287 |
| Interest expense | 53 | 45 | 153 | 128 |
| Capital contributions to subsidiaries | 8 | 5 | 20 | 17 |
| Issuance of unaffiliated debt | — | 690 | 400 | 690 |
| Dividends to shareholders | 56 | 54 | 163 | 152 |
| Purchase of treasury stock | 50 | 25 | 150 | 50 |

88

|  | September 30, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Cash and invested assets | $537 | $903 |

See Item 15, Schedule II – “Condensed Financial Information of the Registrant” in the 2022 Annual Report for additional financial information related to RGA.

The undistributed earnings of substantially all of the Company’s foreign subsidiaries have been reinvested indefinitely in those non-U.S. operations, as described in Note 9 – “Income Tax” in the Notes to Consolidated Financial Statements in the 2022 Annual Report. As U.S. Tax Reform generally eliminated U.S. federal income taxes on dividends from foreign subsidiaries, the Company does not expect to incur material income taxes if these funds are repatriated.

RGA endeavors to maintain a capital structure that provides financial and operational flexibility to its subsidiaries, credit ratings that support its competitive position in the financial services marketplace, and shareholder returns. As part of the Company’s capital deployment strategy, it has in recent years repurchased shares of RGA common stock and paid dividends to RGA shareholders, as authorized by the board of directors.

On February 25, 2022, RGA’s board of directors authorized a share repurchase program for up to $400 million of RGA’s outstanding common stock. The authorization was effective immediately and does not have an expiration date. In connection with this authorization, the board of directors terminated the stock repurchase authority granted in 2019. During the nine months ended September 30, 2023, RGA repurchased 1,069,113 shares of common stock under this program for $150 million, and as of September 30, 2023, $200 million may be purchased under this program.

The pace of repurchase activity depends on various factors such as the level of available cash, an evaluation of the costs and benefits associated with alternative uses of excess capital, such as acquisitions and in force reinsurance transactions, and RGA’s stock price.

Details underlying dividend and share repurchase program activity were as follows (in millions, except share data):

|  | Nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Dividends to shareholders | $163 | $152 |
| Purchase of common stock (1) | 150 | 50 |
| Total amount paid to shareholders | $313 | $202 |
| Number of common shares purchased (1) | 1,069,113 | 414,350 |
| Average price per share | $140.30 | $120.67 |

(1) Excludes shares utilized to execute and settle certain stock incentive awards.

In October 2023, RGA’s board of directors declared a quarterly dividend of $0.85 per share. All future payments of dividends are at the discretion of RGA’s board of directors and will depend on the Company’s earnings, capital requirements, insurance regulatory conditions, operating conditions, and other such factors as the board of directors may deem relevant. The amount of dividends that RGA can pay will depend in part on the operations of its reinsurance subsidiaries. See Note 4 – “Equity” in the Notes to Condensed Consolidated Financial Statements for information on the Company’s share repurchase program.

### Debt

Certain of the Company’s debt agreements contain financial covenant restrictions related to, among others, liens, the issuance and disposition of stock of restricted subsidiaries, minimum requirements of consolidated net worth, maximum ratios of debt to capitalization and change of control provisions. The Company renewed its syndicated credit facility in the first quarter of 2023. Under the terms of the new facility the Company is required to maintain a minimum consolidated net worth, as defined in the debt agreements, $5.8 billion effective with the June 30, 2023, covenant calculations. Also, consolidated indebtedness, calculated as of the last day of each fiscal quarter, cannot exceed 35% of the sum of the Company’s consolidated indebtedness plus adjusted RGA Inc’s shareholders’ equity. A material ongoing covenant default could require immediate payment of the amount due, including principal, under the various agreements. Additionally, the Company’s debt agreements contain cross-acceleration covenants, which would make outstanding borrowings immediately payable in the event of a material uncured covenant default under any of the agreements, including, but not limited to, non-payment of indebtedness when due for an amount in excess of the amounts set forth in those agreements, bankruptcy proceedings, or any other event that results in the acceleration of the maturity of indebtedness.

As of September 30, 2023 and December 31, 2022, the Company had $4.5 billion and $4.0 billion, respectively, in outstanding borrowings under its debt agreements and was in compliance with all covenants under those agreements. As of September 30, 2023 and December 31, 2022, the average interest rate on long-term debt outstanding was 5.10% and 4.71%, respectively. The ability of the Company to make debt principal and interest payments depends on the earnings and surplus of subsidiaries, investment earnings on undeployed capital proceeds, available liquidity at the holding company, and the Company’s ability to raise additional funds.

The Company enters into derivative agreements with counterparties that reference either the Company’s debt rating or its financial strength rating. If either rating is downgraded in the future, it could trigger certain terms in the Company’s derivative agreements, which could negatively affect overall liquidity. For the majority of the Company’s derivative agreements, there is a termination event should the long-term senior debt ratings drop below either BBB+ (S&P) or Baa1 (Moody’s) or the financial strength ratings drop below either A- (S&P) or A3 (Moody’s).

The Company may borrow up to $850 million in cash and obtain letters of credit in multiple currencies on its revolving credit facility that matures in March 2028. As of September 30, 2023, the Company had no cash borrowings outstanding and no issued, but undrawn, letters of credit under this facility.

On June 8, 2023, the Company issued 6.0% fixed rate senior notes due 2033 with a face amount of $400 million, which were used to repay upon maturity the $400 million 4.70% Senior Notes that matured on September 15, 2023. Capitalized issuance costs were $4 million.

On March 23, 2023, Chesterfield Reinsurance Company, a subsidiary of RGA, issued 7.125% Surplus Notes due 2043, with a face amount of $500 million. Capitalized issue costs were approximately $6 million. The loan is expected to be repaid over the term of the loan based on available funds and regulatory approval. As of September 30, 2023 the amount outstanding is $500 million.

Based on the historic cash flows and the current financial results of the Company, management believes RGA’s cash flows will be sufficient to enable RGA to meet its obligations for at least the next 12 months.

### Credit and Committed Facilities

On March 13, 2023, The Company entered into a new syndicated revolving credit facility with a five year term and an overall capacity of $850 million. The new facility replaced the existing $850 million syndicated revolving credit facility, which was scheduled to mature in August 2023. See Note 13 – “Debt” in the Notes to Consolidated Financial Statements in the 2022 Annual Report for further information about these facilities.

The Company has obtained bank letters of credit 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. Certain of these letters of credit contain financial covenant restrictions similar to those described in the “Debt” discussion above. At September 30, 2023, there were approximately $53 million of outstanding bank letters of credit in favor of third parties. Additionally, in accordance with applicable regulations, the Company utilizes letters of credit to secure statutory reserve credit when it retrocedes business to its affiliated subsidiaries. The Company cedes business to its affiliates to help reduce the amount of regulatory capital required in certain jurisdictions, such as the U.S. and UK. The Company believes the capital required to support the business in the affiliates reflects more realistic expectations than the original jurisdiction of the business, where capital requirements are often considered to be quite conservative. As of September 30, 2023, $768 million in letters of credit from various banks were outstanding, but undrawn, backing reinsurance between the various subsidiaries of the Company.

### Cash Flows

The Company’s principal cash inflows from its reinsurance operations include premiums and deposit funds received from ceding companies. The primary liquidity concerns with respect to these cash flows are early recapture of the reinsurance contract by the ceding company and lapses of annuity products reinsured by the Company. The Company’s principal cash inflows from its invested assets result from investment income and the maturity and sales of invested assets. The primary liquidity concerns with respect to these cash inflows relates to the risk of default by debtors and interest rate volatility. The Company manages these risks very closely. See “Investments” below.

Additional sources of liquidity to meet unexpected cash outflows in excess of operating cash inflows and current cash and equivalents on hand also includes drawing funds under a revolving credit facility, under which the Company had availability of $850 million as of September 30, 2023. The Company also has $766 million of funds available through collateralized borrowings from the FHLB as of September 30, 2023. As of September 30, 2023, the Company could have borrowed these additional amounts without violating any of its existing debt covenants.

The Company’s principal cash outflows relate to the payment of claims liabilities, interest credited, operating expenses, income taxes, dividends to shareholders, purchases of treasury stock, and principal and interest under debt and other financing obligations. The Company seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding reinsurance to other insurance enterprises or reinsurers under excess coverage and coinsurance contracts (See Note 2 – “Significant Accounting Policies and Pronouncements” in the Notes to Consolidated Financial Statements in the 2022 Annual Report). The Company performs annual financial reviews of its retrocessionaires to evaluate financial stability and performance. The Company has never experienced a material default in connection with retrocession arrangements, nor has it experienced any difficulty in collecting claims recoverable from retrocessionaires; however, no assurance can be given as to the future performance of such retrocessionaires nor to the recoverability of future claims. The Company’s management believes its cash and cash equivalents along with its current sources of liquidity are adequate to meet its cash requirements for the next 12 months.

#### Summary of Primary Sources and Uses of Liquidity and Capital

The Company’s primary sources and uses of liquidity and capital are summarized as follows (dollars in millions):

| Sources: | For the nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $2,818 | $1,077 |
| Proceeds from long-term debt issuance | 900 | 700 |
| Change in cash collateral for derivative positions and other arrangements | 300 | 99 |
| Change in deposit asset on reinsurance | 41 | — |
| Net deposits to investment-type policies and contracts | — | 4,156 |
| Net change in noncontrolling interest | — | 88 |
| Total sources | 4,059 | 6,120 |
| Uses: |  |  |
| Net cash used in investing activities | 2,592 | 4,795 |
| Dividends to shareholders | 163 | 152 |
| Repayment of collateral finance and securitization notes | — | 181 |
| Debt issuance costs | 10 | 10 |
| Principal payments of long-term debt | 402 | 153 |
| Purchases of treasury stock | 169 | 54 |
| Change in deposit asset on reinsurance | — | 32 |
| Net withdrawals from investment-type policies and contracts | 768 | — |
| Effect of exchange rate changes on cash | 62 | 179 |
| Total uses | 4,166 | 5,556 |
| Net change in cash and cash equivalents | $(107) | $564 |

*Cash Flows from Operations –* The principal cash inflows from the Company’s reinsurance activities come from premiums, investment and fee income, annuity considerations and deposit funds. The principal cash outflows relate to the liabilities associated with various life and health insurance, annuity and disability products, operating expenses, income tax payments and interest on outstanding debt obligations. The primary liquidity concern with respect to these cash flows is the risk of shortfalls in premiums and investment income, particularly in periods with abnormally high claims levels.

*Cash Flows from Investments –* The principal cash inflows from the Company’s investment activities come from repayments of principal on invested assets, proceeds from maturities of invested assets, sales of invested assets and settlements of freestanding derivatives. The principal cash outflows relate to purchases of investments, issuances of policy loans and settlements of freestanding derivatives. The Company typically has a net cash outflow from investing activities because cash inflows from insurance operations are reinvested in accordance with its asset/liability management discipline to fund insurance liabilities. The Company closely monitors and manages these risks through its credit risk management process. The primary liquidity concerns with respect to these cash flows are the risk of default by debtors and market disruption, which could make it difficult for the Company to sell investments.

*Financing Cash Flows –* The principal cash inflows from the Company’s financing activities come from issuances of RGA debt and equity securities, and deposit funds associated with universal life and other investment type policies and contracts. The principal cash outflows come from repayments of debt, payments of dividends to shareholders, purchases of treasury stock, and withdrawals associated with universal life and other investment type policies and contracts. A primary liquidity concern with respect to these cash flows is the risk of early contractholder and policyholder withdrawal.

### Contractual Obligations

There were no material changes in the Company’s contractual obligations from those reported in the 2022 Annual Report, except for the following:

- The Company’s contractual obligations associated with other investment related commitments increased from $1.0 billion at December 31, 2022 to $1.4 billion at September 30, 2023, primarily relating to increases in securities borrowing, lending and repurchase/reverse repurchase agreements. See Note 11 Investments for further details.

### Asset / Liability Management

The Company actively manages its cash and invested 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 its operating segments, which represent the investment strategies intended to profitably fund its liabilities within acceptable risk parameters. These strategies include objectives and limits for effective duration, yield curve sensitivity and convexity, liquidity, asset sector concentration and credit quality.

The Company’s asset-intensive products are primarily supported by investments in fixed maturity securities reflected on the Company’s balance sheet and under funds withheld arrangements with the ceding company. Investment guidelines are established to structure the investment portfolio based upon the type, duration and behavior of products in the liability portfolio so as to achieve targeted levels of profitability. The Company manages the asset-intensive business to provide a targeted spread between the interest rate earned on investments and the interest rate credited to the underlying interest-sensitive contract liabilities. The Company periodically reviews models projecting different interest rate scenarios and their effect on profitability. Certain of these asset-intensive agreements, primarily in the U.S. and Latin America Financial Solutions operating segment, are generally funded by fixed maturity securities that are withheld by the ceding company.

The Company’s liquidity position (cash and cash equivalents and short term investments) was $3.0 billion and $3.1 billion at September 30, 2023 and December 31, 2022, respectively. 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.

See “Securities Borrowing, Lending and Repurchase/Reverse Repurchase Agreements” in Note 11 – “Investments” in the Notes to Condensed Consolidated Financial Statements for information related to the Company’s securities borrowing, lending and repurchase/reverse repurchase programs. In addition to its security agreements with third parties, certain RGA’s subsidiaries have entered into intercompany securities lending agreements to more efficiently source securities for lending to third parties and to provide for more efficient regulatory capital management.

The Company is a member of the FHLB and holds $60 million of FHLB common stock, which is included in other invested assets on the Company’s condensed consolidated balance sheets. The Company has entered into funding agreements with the FHLB under guaranteed investment contracts whereby the Company has issued the funding agreements in exchange for cash and for which the FHLB has been granted a blanket lien on the Company’s commercial and residential mortgage-backed securities and commercial mortgage loans used to collateralize the Company’s obligations under the funding agreements. The Company maintains control over these pledged assets, and may use, commingle, encumber or dispose of any portion of the collateral as long as there is no event of default and the remaining qualified collateral is sufficient to satisfy the collateral maintenance level. The funding agreements and the related security agreements represented by this blanket lien provide that upon any event of default by the Company, the FHLB’s recovery is limited to the amount of the Company’s liability under the outstanding funding agreements. The amount of the Company’s liability for the funding agreements with the FHLB was $1.2 billion at September 30, 2023 and $1.3 billion at December 31, 2022, which is included in interest-sensitive contract liabilities on the Company’s condensed consolidated balance sheets. The advances on these agreements are collateralized primarily by commercial and residential mortgage-backed securities, commercial mortgage loans, and U.S. Treasury and government agency securities. The amount of collateral exceeds the liability and is dependent on the type of assets collateralizing the guaranteed investment contracts.

### Investments

#### Management of Investments

The Company’s investment and derivative strategies involve matching the characteristics of its reinsurance products and other obligations. The Company seeks to closely approximate the interest rate sensitivity of the assets with estimated interest rate sensitivity of the reinsurance liabilities. The Company achieves its income objectives through strategic and tactical asset allocations, applying security and derivative strategies within asset/liability and disciplined risk management frameworks. Derivative strategies are employed within the Company’s risk management framework to help manage duration, currency, and other risks in assets and/or liabilities and to replicate the credit characteristics of certain assets.

The Company’s portfolio management groups work with the Enterprise Risk Management function to develop the investment policies for the assets of the Company’s domestic and international investment portfolios. All investments held by the Company, directly or in a funds withheld at interest reinsurance arrangement, are monitored for conformance with the Company’s stated investment policy limits as well as any limits prescribed by the applicable jurisdiction’s insurance laws and regulations. See Note 11 – “Investments” in the Notes to Condensed Consolidated Financial Statements for additional information regarding the Company’s investments.

#### Portfolio Composition

The Company had total cash and invested assets of $75.1 billion and $73.4 billion as of September 30, 2023 and December 31, 2022, respectively, as illustrated below (dollars in millions):

|  | September 30, 2023 | % of Total | December 31, 2022 | % of Total |
| --- | ---: | ---: | ---: | ---: |
| Fixed maturity securities available-for-sale | $54,171 | 72.1% | $52,901 | 72.0% |
| Equity securities | 133 | 0.2 | 134 | 0.2 |
| Mortgage loans | 7,231 | 9.6 | 6,590 | 9.0 |
| Policy loans | 1,180 | 1.6 | 1,231 | 1.7 |
| Funds withheld at interest | 5,725 | 7.6 | 6,003 | 8.2 |
| Limited partnerships and real estate joint ventures | 2,560 | 3.4 | 2,327 | 3.2 |
| Short-term investments | 141 | 0.2 | 154 | 0.2 |
| Other invested assets | 1,091 | 1.5 | 1,140 | 1.5 |
| Cash and cash equivalents | 2,820 | 3.8 | 2,927 | 4.0 |
| Total cash and invested assets | $75,052 | 100.0% | $73,407 | 100.0% |

#### Investment Yield

The following table presents consolidated average invested assets at amortized cost, net investment income, investment yield, variable investment income (“VII”), and investment yield excluding VII, which can vary significantly from period to period (dollars in millions). The table excludes spread related business. Spread related business is primarily associated with contracts on which the Company earns an interest rate spread between assets and liabilities. To varying degrees, fluctuations in the yield on other spread related business is generally subject to corresponding adjustments to the interest credited on the liabilities.

|  | Three months ended September 30, 2023 | 2022 | Increase/ (Decrease) | Nine months ended September 30, 2023 | 2022 | Increase/ (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Average invested assets at amortized cost | $37,051 | $34,579 | $2,472 | $35,934 | $34,494 | $1,440 |
| Net investment income | $430 | $374 | $56 | $1,238 | $1,228 | $10 |
| Annualized investment yield (ratio of net investment income to average invested assets at amortized cost) | 4.72% | 4.40% | 32 bps | 4.62% | 4.78% | (16) bps |
| VII (included in net investment income) | $39 | $38 | $1 | $95 | $249 | $(154) |
| Annualized investment yield excluding VII (ratio of net investment income, excluding VII, to average invested assets, excluding assets with only VII, at amortized cost) | 4.51% | 4.12% | 39 bps | 4.46% | 3.96% | 50 bps |

Investment yield increased for the three months ended September 30, 2023, in comparison to the same period in the prior year, primarily due to the recent increase in interest rates. Investment yield decreased for the nine months ended September 30, 2023, in comparison to the same period in the prior year, primarily due to decreased variable income from limited partnerships and real estate joint ventures, partially offset by increased yield from the recent increase in interest rates.

#### Fixed Maturity Securities Available-for-Sale

See “Fixed Maturity Securities Available-for-Sale” in Note 11 – “Investments” in the Notes to Condensed Consolidated Financial Statements for tables that provide the amortized cost, allowance for credit losses, unrealized gains and losses and estimated fair value of these securities by type as of September 30, 2023 and December 31, 2022.

Important factors in the selection of investments include diversification, quality, yield, call protection and total rate of return potential. The relative importance of these factors is determined by market conditions and the underlying reinsurance liability and existing portfolio characteristics. As of September 30, 2023 and December 31, 2022, approximately 94.0% and 94.3%, respectively, of the Company’s consolidated investment portfolio of fixed maturity securities were investment grade.

The Company owns floating rate securities that represent approximately 8.0% and 7.4% of the total fixed maturity securities as of September 30, 2023 and December 31, 2022, respectively. These investments have a higher degree of income variability than the other fixed income holdings in the portfolio due to fluctuations in interest payments. The Company holds floating rate investments to match specific floating rate liabilities primarily reflected in the condensed consolidated balance sheets as collateral finance notes, as well as to enhance asset management strategies.

The largest asset class in which fixed maturity securities were invested was corporate securities, which represented approximately 65.5% and 64.2% of total fixed maturity securities as of September 30, 2023 and December 31, 2022, respectively. See “Corporate Fixed Maturity Securities” in Note 11 – “Investments” in the Notes to Condensed Consolidated Financial Statements for tables showing the major sector types, which comprise the corporate fixed maturity holdings as of September 30, 2023 and December 31, 2022.

As of September 30, 2023 and December 31, 2022, the Company’s investments in Canadian government securities represented 6.2% and 6.9%, respectively, of the fair value of total fixed maturity securities. These assets are primarily high quality, long duration provincial strip bonds, the valuation of which is closely linked to the interest rate curve. These assets are longer in duration and held primarily for asset/liability management to meet Canadian regulatory requirements.

As of September 30, 2023 and December 31, 2022, the Company’s investments in Japanese government securities represented 5.0% and 4.8%, respectively, of the fair value of total fixed maturity securities. These assets are primarily long duration government bonds matching the liability profile of the Company’s Japanese business.

The Company references rating agency designations in some of its investments disclosures. These designations are based on the ratings from nationally recognized statistical rating organizations, primarily Moody’s, S&P and Fitch. Structured securities held by the Company’s insurance subsidiaries that maintain the NAIC statutory basis of accounting utilize the NAIC rating methodology. The NAIC assigns designations to publicly traded as well as privately placed securities. The designations assigned by the NAIC range from class 1 to class 6, with designations in classes 1 and 2 generally considered investment grade (BBB or higher rating agency designation). NAIC designations in classes 3 through 6 are generally considered below investment grade (BB or lower rating agency designation). If no rating is available from a rating agency or the NAIC, then an internally developed rating is used.

The quality of the Company’s available-for-sale fixed maturity securities portfolio, as measured at fair value and by the percentage of fixed maturity securities invested in various ratings categories, relative to the entire available-for-sale fixed maturity securities portfolio, as of September 30, 2023 and December 31, 2022 was as follows (dollars in millions):

| NAIC Designation | Rating Agency Designation | September 30, 2023 Amortized Cost | Estimated Fair Value | % of Total | December 31, 2022 Amortized Cost | Estimated Fair Value | % of Total |
| ---: | --- | ---: | ---: | ---: | ---: | ---: | ---: |
| 1 | AAA/AA/A | $38,876 | $33,799 | 62.4% | $36,217 | $32,295 | 61.1% |
| 2 | BBB | 19,959 | 17,134 | 31.6 | 20,188 | 17,580 | 33.2 |
| 3 | BB | 2,902 | 2,780 | 5.1 | 2,734 | 2,607 | 5.0 |
| 4 | B | 439 | 368 | 0.7 | 397 | 331 | 0.6 |
| 5 | CCC and lower | 104 | 81 | 0.2 | 103 | 71 | 0.1 |
| 6 | In or near default | 52 | 9 | — | 24 | 17 | — |
|  | Total | $62,332 | $54,171 | 100.0% | $59,663 | $52,901 | 100.0% |

The Company’s fixed maturity portfolio includes structured securities. The following table shows the types of structured securities the Company held as of September 30, 2023 and December 31, 2022 (dollars in millions):

| ABS: | September 30, 2023 Amortized Cost | Estimated Fair Value | % of Total | December 31, 2022 Amortized Cost | Estimated Fair Value | % of Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Collateralized loan obligations (“CLOs”) | $2,022 | $1,967 | 28.2% | $1,825 | $1,702 | 26.4% |
| ABS, excluding CLOs | 2,540 | 2,269 | 32.5 | 2,499 | 2,176 | 33.8 |
| Total ABS | 4,562 | 4,236 | 60.7 | 4,324 | 3,878 | 60.2 |
| CMBS | 1,959 | 1,710 | 24.5 | 1,835 | 1,623 | 25.2 |
| RMBS: |  |  |  |  |  |  |
| Agency | 454 | 388 | 5.6 | 476 | 427 | 6.6 |
| Non-agency | 718 | 642 | 9.2 | 578 | 514 | 8.0 |
| Total RMBS | 1,172 | 1,030 | 14.8 | 1,054 | 941 | 14.6 |
| Total | $7,693 | $6,976 | 100.0% | $7,213 | $6,442 | 100.0% |

94

The Company’s ABS portfolio primarily consists of CLOs, aircraft and single-family rentals. The principal risks in holding ABS are structural, credit, capital market and interest rate risks. Structural risks include the securities’ cash flow priority in the capital structure and the inherent prepayment sensitivity of the underlying collateral. Credit risks include the adequacy and ability to realize proceeds from the collateral. Credit risks are mitigated by credit enhancements that include excess spread, over-collateralization and subordination. Capital market risks include general level of interest rates and the liquidity for these securities in the marketplace.

The Company’s CMBS portfolio primarily consists of large pool securitizations that are diverse by property type, borrower and geographic dispersion. The principal risks in holding CMBS are structural and credit risks. Structural risks include the securities’ cash flow priority in the capital structure and the inherent prepayment sensitivity of the underlying collateral. Credit risks include the adequacy and ability to realize proceeds from the collateral. The Company focuses on investment grade rated tranches that provide additional credit support beyond the equity protection in the underlying loans. These assets are viewed as an attractive alternative to other fixed income asset classes.

The Company’s RMBS portfolio includes agency-issued pass-through securities and collateralized mortgage obligations. Agency-issued pass-through securities are guaranteed or otherwise supported by the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, or the Government National Mortgage Association. The principal risks inherent in holding RMBS are prepayment and extension risks, which will affect the timing of when cash will be received and are dependent on the level of mortgage interest rates. Prepayment risk is the unexpected increase in principal payments from the expected, primarily as a result of owner refinancing. Extension risk relates to the unexpected slowdown in principal payments from the expected. In addition, non-agency RMBS face credit risk should the borrower be unable to pay the contractual interest or principal on their obligation. The Company monitors its mortgage-backed securities to mitigate exposure to the cash flow uncertainties associated with these risks.

As of September 30, 2023 and December 31, 2022, the Company had $8.5 billion and $7.3 billion, respectively, of gross unrealized losses related to its fixed maturity securities. The Company monitors its fixed maturity securities to determine impairments in value and evaluates factors such as financial condition of the issuer, payment performance, compliance with covenants, general market and industry sector conditions, current intent and ability to hold securities, and various other subjective factors. Based on management’s judgment, an allowance for credit losses in the amount that fair value is less than the amortized cost is recorded for securities determined to have expected credit losses.

#### Mortgage Loans

The Company’s mortgage loan portfolio consists of U.S., Canada and UK based investments primarily in commercial offices, light industrial properties and retail locations. The mortgage loan portfolio is diversified by geographic region and property type as discussed further under “Mortgage Loans” in Note 11 – “Investments” in the Notes to Condensed Consolidated Financial Statements. Most of the mortgage loans in the Company’s portfolio range in size up to $30 million, with the average mortgage loan investment as of September 30, 2023, totaling approximately $10 million.

As of September 30, 2023 and December 31, 2022, the Company’s recorded investment in mortgage loans, gross of unamortized deferred loan origination fees and expenses and allowance for credit losses, were distributed geographically as follows (dollars in millions):

| U.S. Region: | September 30, 2023 Recorded Investment | % of Total | December 31, 2022 Recorded Investment | % of Total |
| --- | ---: | ---: | ---: | ---: |
| West | $2,726 | 37.2% | $2,420 | 36.4% |
| South | 2,427 | 33.2 | 2,215 | 33.3 |
| Midwest | 1,197 | 16.4 | 1,147 | 17.2 |
| Northeast | 522 | 7.1 | 474 | 7.1 |
| Subtotal - U.S. | 6,872 | 93.9 | 6,256 | 94.0 |
| Canada | 274 | 3.7 | 239 | 3.6 |
| United Kingdom | 174 | 2.4 | 158 | 2.4 |
| Total | $7,320 | 100.0% | $6,653 | 100.0% |

See “Allowance for Credit Losses and Impairments” in Note 2 – “Significant Accounting Policies and Pronouncements” of the Company’s 2022 Annual Report and “Mortgage Loans” in Note 11 – “Investments” in the Notes to Condensed Consolidated Financial Statements for information regarding the Company’s policy for allowance for credit losses on mortgage loans.

#### Allowance for Credit Losses and Impairments

The Company’s determination of whether a decline in value necessitates the recording of an allowance for credit losses includes an analysis of whether the issuer is current on its contractual payments, evaluating whether it is probable that the Company will be able to collect all amounts due according to the contractual terms of the security and analyzing the overall ability of the Company to recover the amortized cost of the investment. See “Allowance for Credit Losses and Impairments” in Note 2 – “Significant Accounting Policies and Pronouncements” of the Company’s 2022 Annual Report for additional information. The table below summarizes investment related gains (losses), net related to allowances for credit losses and impairments for the three and nine months ended September 30, 2023 and 2022 (dollars in millions).

| 2023 | Three months ended September 30, 2022 | 2023 | Nine months ended September 30, 2022 |  |
| --- | ---: | ---: | ---: | ---: |
| Change in allowance for credit losses on fixed maturity securities | $7 | $3 | $(31) | $(21) |
| Impairments on fixed maturity securities | — | (12) | (1) | (15) |
| Change in mortgage loan allowance for credit losses | (17) | (5) | (23) | (8) |
| Other impairment losses | (4) | (1) | (4) | (1) |
| Investment related gains (losses) related to credit losses and impairments | $(14) | $(15) | $(59) | $(45) |

The change in allowance for credit losses on fixed maturity securities for the three months ended September 30, 2023, was primarily related to write offs charged against allowance. The change in allowance for credit losses on fixed maturity securities for the nine months ended September 30, 2023, was primarily related to the March 2023 banking crisis. The change in allowance for credit losses on fixed maturity securities for the three and nine months ended September 30, 2022, corresponded to the reversal of previously recorded allowances due to intent to sell primarily related to high-yield securities. The increase in mortgage loan allowance for credit losses for the three and nine months ended September 30, 2023, was primarily due to growth in the asset base and updated model assumptions that take into account economic factors. For the three months ended September 30, 2023, the decrease in other impairment losses was due to real estate held for investment.

See “Unrealized Losses for Fixed Maturity Securities Available-for-Sale” in Note 11 – “Investments” in the Notes to Condensed Consolidated Financial Statements for tables that present the estimated fair value and gross unrealized losses for securities that have estimated fair values below amortized cost by class and grade, as well as the length of time the related estimated fair value has remained below amortized cost as of September 30, 2023 and December 31, 2022.

As of September 30, 2023 and December 31, 2022, the Company classified approximately 11.1% and 10.8%, respectively, of its fixed maturity securities in the Level 3 category (refer to Note 13 – “Fair Value of Assets and Liabilities” in the Notes to Condensed Consolidated Financial Statements for additional information). These securities primarily consist of private placement corporate and asset-backed securities.

See “Securities Borrowing, Lending and Repurchase/Reverse Repurchase Agreements” in Note 11 – “Investments” in the Notes to Condensed Consolidated Financial Statements for information related to the Company’s securities borrowing, lending and repurchase/reverse repurchase agreements.

#### Funds Withheld at Interest

For reinsurance agreements written on a modified coinsurance basis and certain agreements written on a coinsurance basis, assets equal to the net statutory reserves are withheld and legally owned and managed by the ceding company and are reflected as funds withheld at interest on the Company’s condensed consolidated balance sheets. In the event of a ceding company’s insolvency, the Company would need to assert a claim on the assets supporting its reserve liabilities. However, the risk of loss to the Company is mitigated by its ability to offset amounts it owes the ceding company for claims or allowances against amounts owed by the ceding company. Interest accrues to the total funds withheld at interest assets at rates defined by the treaty terms. The Company is subject to the investment performance on the withheld assets, although it does not directly control them. These assets are primarily fixed maturity investment securities and pose risks similar to the fixed maturity securities the Company owns. To mitigate this risk, the Company helps set the investment guidelines followed by the ceding company and monitors compliance. Ceding companies with funds withheld at interest had an average financial strength rating of “A” as of September 30, 2023 and December 31, 2022. Certain ceding companies maintain segregated portfolios for the benefit of the Company.

#### Other Invested Assets

Other invested assets include lifetime mortgages, derivative contracts, FHLB common stock, unit-linked investments, and real estate held for investment. See “Other Invested Assets” in Note 11 – “Investments” in the Notes to Condensed Consolidated Financial Statements for a table that presents the carrying value of the Company’s other invested assets by type as of September 30, 2023 and December 31, 2022.

The Company utilizes derivative financial instruments to protect the Company against possible changes in the fair value of its investment portfolio as a result of interest rate changes, to hedge against risk of changes in the purchase price of securities, to hedge liabilities associated with the reinsurance of variable annuities with guaranteed living benefits and to manage the portfolio’s effective yield, maturity and duration. In addition, the Company utilizes derivative financial instruments to reduce the risk associated with fluctuations in foreign currency exchange rates. The Company uses exchange-traded, centrally cleared, and customized over-the-counter derivative financial instruments.

See Note 12 – “Derivative Instruments” in the Notes to Condensed Consolidated Financial Statements for a table that presents the notional amounts and fair value of investment related derivative instruments held as of September 30, 2023 and December 31, 2022.

The Company may be exposed to credit-related losses in the event of non-performance by counterparties to derivative financial instruments. Generally, the credit exposure of the Company’s derivative contracts is limited to the fair value and accrued interest of non-collateralized derivative contracts in an asset position at the reporting date. As of September 30, 2023, the Company had credit exposure of $13 million.

The Company manages its credit risk related to over-the-counter derivatives by entering into transactions with creditworthy counterparties, maintaining collateral arrangements and through the use of master agreements that provide for a single net payment to be made by one counterparty to another at each due date and upon termination. As exchange-traded futures are affected through regulated exchanges, and positions are marked to market on a daily basis, the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties. See Note 12 – “Derivative Instruments” in the Notes to Condensed Consolidated Financial Statements for more information regarding the Company’s derivative instruments.

The Company holds $900 million and $868 million of beneficial interest in lifetime mortgages in the UK, net of allowance for credit losses, as of September 30, 2023 and December 31, 2022, respectively. Investment income includes $11 million and $9 million in interest income earned on lifetime mortgages for the three months ended September 30, 2023 and 2022, respectively, and $29 million and $28 million in interest income earned on lifetime mortgages for the nine months ended September 30, 2023 and 2022, respectively. Lifetime mortgages represent loans provided to individuals 55 years of age and older secured by the borrower’s residence. Lifetime mortgages are comparable to a home equity loan by allowing the borrower to utilize the equity in their home as collateral. The amount of the loan is dependent on the appraised value of the home at the time of origination, the borrower's age and interest rate. Unlike a home equity loan, no payment of principal or interest is required until the death of the borrower or sale of the home. Lifetime mortgages may also be either fully funded at origination, or the borrower can request periodic funding similar to a line of credit. Lifetime mortgages are subject to risks, including market, credit, interest rate, liquidity, operational, reputational and legal risks.

### New Accounting Standards

Changes to the general accounting principles are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates to the FASB Accounting Standards CodificationTM.

See Note 2 – “Impact of Adoption of New Accounting Standard” in the Notes to Condensed Consolidated Financial Statements for information on the Company’s adoption of ASU 2018-12 on January 1, 2023. See Note 19 – “New Accounting Standards Not Yet Adopted” in the Notes to Condensed Consolidated Financial Statements for information on new accounting pronouncements and their impact, if any, on the Company’s results of operations and financial position.

### Cybersecurity Incident

As previously disclosed on October 26, 2023, the Company experienced a cybersecurity incident in which an unauthorized third party gained access to certain technology systems of the Company. Following detection of the incident, the Company initiated response protocols, launched an investigation, engaged the services of cybersecurity and forensics experts and advisors, and notified certain insurance regulatory authorities, law enforcement authorities and clients. Based on its investigation to date, the Company does not believe that any client policy holder data was accessed or extracted.

The Company has incurred, and may continue to incur, certain incremental expenses related to this incident, including expenses to respond to, remediate and investigate this incident.

Based on information currently known, the Company does not believe this incident will have a material adverse effect on its business, operations or financial results.

## Market risk

As filed, 860 characters.

Market risk is the risk of fluctuations in the value of financial instruments as a result of absolute or relative changes in interest rates, foreign currency exchange rates, equity prices or commodity prices. To varying degrees, the Company products and services, and the investment activities supporting them, generate exposure to market risk. The market risk incurred, and the Company’s strategies for managing this risk, vary by product. As of September 30, 2023, there have been no material changes in the Company’s economic exposure to market risk or the Company’s Enterprise Risk Management function from December 31, 2022, a description of which may be found in its Annual Report on Form 10-K, for the year ended December 31, 2022, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” filed with the Securities and Exchange Commission.

## Controls and procedures

As filed, 724 characters.

The Chief Executive Officer and the Chief Financial Officer have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that these disclosure controls and procedures were effective.

There was no change in the Company’s internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) during the quarter ended September 30, 2023, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Filed Nov 3, 2023.
Source: SEC EDGAR, the filing index for accession 0000898174-23-000137. Last ingested by Listed: Nov 6, 2026, 17:11 ET. No prices; not investment advice.