| Investing in our securities involves certain risks |
| Any of the following risks could materially adversely affect our business, results of operations, or financial condition and could result in a loss of your investment |
| RISKS RELATED TO OUR BUSINESS A DOWNGRADE IN OUR RATINGS OR IN THE RATINGS OF OUR REINSURANCE SUBSIDIARIES COULD ADVERSELY AFFECT OUR ABILITY TO COMPETE Ratings are an important factor in our competitive position |
| Rating organizations periodically review the financial performance and condition of insurers, including our reinsurance subsidiaries |
| These ratings are based on an insurance companyapstas ability to pay its obligations and are not directed toward the protection of investors |
| Rating organizations assign ratings based upon several factors |
| While most of the factors considered relate to the rated company, some of the factors relate to general economic conditions and circumstances outside the rated companyapstas control |
| On August 2, 2005, AM Best reaffirmed our ratings, but revised the outlook for all ratings from "e stable "e to "e negative "e due to weakened operating performance during the second quarter of 2005 and uncertainty regarding the future ownership of a majority of our outstanding common shares by MetLife, Inc, or "e MetLife, "e which is described below under "e MetLife is our majority shareholder and may retain a significant percentage of our outstanding common stock until the completion of any offering; its interests may differ from the interests of RGA and our security holders "e |
| On July 14, 2005, Moodyapstas reaffirmed our ratings and changed the direction from uncertain to stable |
| On February 1, 2005, Standard & Poorapstas placed our ratings and MetLifeapstas ratings on "e credit watch "e with negative implications in response to MetLifeapstas announcement regarding its purchase of certain of the domestic and international life insurance subsidiaries of Citigroup Inc |
| We cannot predict what actions ratings agencies may take or the timing thereof, or what actions we may be required to take in response to the actions of rating agencies, which could adversely affect our business |
| Any downgrade in the ratings of our reinsurance subsidiaries could adversely affect their ability to sell products, retain existing business, and compete for attractive acquisition opportunities |
| Ratings are subject to revision or withdrawal at any time by the assigning rating organization |
| A rating is not a recommendation to buy, sell or hold securities, and each rating should be evaluated independently of any other rating |
| We believe that the rating agencies consider the ratings of a parent company when assigning a rating to a subsidiary of that company |
| The ability of our subsidiaries to write reinsurance partially depends on their financial condition and is influenced by their ratings |
| In addition, a significant downgrade in the rating or outlook of RGA, among other factors, could adversely affect our ability to raise and then contribute capital to our subsidiaries for the purpose of facilitating their operations as well as the cost of capital |
| For example, the facility fee and 17 interest rate for our credit facilities are based on our senior long-term debt ratings |
| A decrease in those ratings could result in an increase in costs for the credit facilities |
| Accordingly, we believe a ratings downgrade of RGA, or of our affiliates, could have a negative effect on our ability to conduct business |
| We cannot assure you that any action taken by the ratings agencies would not result in a material adverse effect on our business and results of operations |
| In addition, it is unclear what effect, if any, a ratings change would have on the price of our securities in the secondary market |
| ADVERSE MORTALITY OR MORBIDITY EXPERIENCE MAY NEGATIVELY AFFECT OUR FINANCIAL RESULTS Our reinsurance contracts expose us to mortality risk, which is the risk that the level of death claims may differ from that which we assumed in pricing our life, critical illness and annuity reinsurance contracts |
| Some of our reinsurance contracts expose us to morbidity risk, which is the risk that an insured person will become critically ill or disabled |
| Our risk analysis and underwriting processes are designed with the objective of controlling the quality of the business and establishing appropriate pricing for the risks we assume |
| Among other things, these processes rely heavily on our underwriting, our analysis of mortality and morbidity trends and lapse rates, and our understanding of medical impairments and their effect on mortality or morbidity |
| We also rely on original underwriting decisions made by, and information provided to us from, our insurance company customers |
| We cannot assure you that these processes or those of our customers will adequately control business quality or establish appropriate pricing |
| We expect mortality and morbidity experience to fluctuate somewhat from period to period, but believe they should remain fairly constant over the long term |
| Mortality or morbidity experience that is less favorable than the mortality or morbidity rates that we used in pricing a reinsurance agreement will negatively affect our net income because the premiums we receive for the risks we assume may not be sufficient to cover the claims |
| Furthermore, even if the total benefits paid over the life of the contract do not exceed the expected amount, unexpected increases in the incidence of deaths or illness can cause us to pay more benefits in a given reporting period than expected, adversely affecting our net income in any particular quarter or year |
| RGA IS AN INSURANCE HOLDING COMPANY, AND OUR ABILITY TO PAY PRINCIPAL, INTEREST AND/OR DIVIDENDS ON SECURITIES IS LIMITED RGA is an insurance holding company, with our principal assets consisting of the stock of our insurance company subsidiaries, and substantially all of our income is derived from those subsidiaries |
| Our ability to pay principal and interest on any debt securities or dividends on any preferred or common stock depends in part on the ability of our insurance company subsidiaries, our principal sources of cash flow, to declare and distribute dividends or to advance money to us in the form of intercompany loans |
| We are not permitted to pay common stock dividends or make payments of interest or principal on securities which rank equal or junior to our subordinated debentures, until the accrued and unpaid interest on the subordinated debentures is paid |
| Our insurance company subsidiaries are subject to various statutory and regulatory restrictions, applicable to insurance companies generally, that limit the amount of cash dividends, loans and advances that those subsidiaries may pay to us |
| Covenants contained in some of our debt agreements and regulations relating to capital requirements affecting some of our more significant subsidiaries also restrict the ability of certain subsidiaries to pay dividends and other distributions and make loans to us |
| As a result of our insurance holding company structure, in the event of the insolvency, liquidation, reorganization, dissolution or other winding-up of one of our reinsurance subsidiaries, all creditors of that subsidiary would be entitled to payment in full out of the assets of such subsidiary before we, as shareholder, would be entitled to any payment |
| Our subsidiaries would have to pay their direct creditors in full before our creditors, including holders of common stock, preferred stock or debt securities of RGA, could receive any payment from the assets of such subsidiaries |
| IF OUR RISK MANAGEMENT OR INVESTMENT STRATEGY IS NOT SUCCESSFUL, WE COULD SUFFER UNEXPECTED LOSSES Risk management and the success of our investment strategy are crucial to the success of our business |
| In particular, we structure our investments to match our anticipated liabilities under reinsurance treaties to the extent we believe necessary |
| If our calculations with respect to these reinsurance liabilities are incorrect, or if we improperly structure our investments to match such liabilities, we could be forced to liquidate investments prior to maturity at a significant loss |
| Our investment guidelines also permit us to invest up to 5prca of our investment portfolio in non-investment grade fixed maturity securities |
| While any investment carries some risk, the risks associated with lower-rated securities are greater than the risks associated with investment grade securities |
| The risk of loss of principal or interest through default is greater 18 because lower-rated securities are usually unsecured and are often subordinated to an issuerapstas other obligations |
| Additionally, the issuers of these securities frequently have high debt levels and are thus more sensitive to difficult economic conditions, individual corporate developments and rising interest rates which could impair an issuerapstas capacity or willingness to meet its financial commitment on such lower-rated securities |
| The success of any investment activity is affected by general economic conditions, which may adversely affect the markets for interest-rate-sensitive securities and equity securities, including the level and volatility of interest rates and the extent and timing of investor participation in such markets |
| Unexpected volatility or illiquidity in the markets in which we directly or indirectly hold positions could adversely affect us |
| METLIFE IS OUR MAJORITY SHAREHOLDER AND ITS INTERESTS MAY DIFFER FROM THE INTERESTS OF RGA AND OUR SECURITY HOLDERS At December 31, 2005, MetLife was the beneficial owner of approximately 52dtta8prca of our outstanding common stock |
| On April 25, 2005, MetLife disclosed that it continuously evaluates our businesses and prospects, alternative investment opportunities and other factors deemed relevant in determining whether additional shares of our common stock will be acquired by MetLife or whether it will dispose of shares of our common stock |
| Additionally, it indicated that, at any time, depending on market conditions, the trading prices for our common stock, the actions taken by our board of directors, alternative investment opportunities and the outlook for RGA, MetLife may acquire additional shares of our common stock or may dispose of some or all of the shares of our common stock beneficially owned by MetLife, Inc, in either case in the open market, in privately negotiated transactions or otherwise |
| As a result of MetLifeapstas ownership position, until it completes any disposition of some or all of the 32cmam243cmam539 shares of our common stock beneficially owned by it, MetLife may continue to have the ability to significantly influence matters requiring shareholder approval, including without limitation, the election and removal of directors, and mergers, acquisitions, changes of control of our company and sales of all or substantially all of our assets |
| In the event MetLife retains significant share ownership, it would continue to be a substantial shareholder and control voting power that would allow it to prevent certain amendments to our articles of incorporation, which means that MetLife could continue to exert significant, although reduced, influence on us |
| In addition, at least as long as it is our majority shareholder, MetLife is required to consolidate our results of operations into MetLifeapstas financial statements |
| As a result, our board of directors, including the members who are also employed by or affiliated with MetLife, may consider not only the short-term and long-term effect of operating decisions on us, but also the effect of such decisions on MetLife and its affiliates |
| Your interests as a holder of our securities may conflict with the interests of MetLife, and the price of our common stock or other securities could be adversely affected by this influence or by the perception that MetLife may seek to sell shares of common stock in the future |
| INTEREST RATE FLUCTUATIONS COULD NEGATIVELY AFFECT THE INCOME WE DERIVE FROM THE DIFFERENCE BETWEEN THE INTEREST RATES WE EARN ON OUR INVESTMENTS AND INTEREST WE PAY UNDER OUR REINSURANCE CONTRACTS Significant changes in interest rates expose reinsurance companies to the risk of not earning income or experiencing losses based on the difference between the interest rates earned on investments and the credited interest rates paid on outstanding reinsurance contracts |
| Both rising and declining interest rates can negatively affect the income we derive from these interest rate spreads |
| During periods of rising interest rates, we may be contractually obligated to increase the crediting rates on our reinsurance contracts that have cash values |
| However, we may not have the ability to immediately acquire investments with interest rates sufficient to offset the increased crediting rates on our reinsurance contracts |
| During periods of falling interest rates, our investment earnings will be lower because new investments in fixed maturity securities will likely bear lower interest rates |
| We may not be able to fully offset the decline in investment earnings with lower crediting rates on our reinsurance contracts that have cash values |
| While we develop and maintain asset/liability management programs and procedures designed to reduce the volatility of our income when interest rates are rising or falling, we cannot assure you that changes in interest rates will not affect our interest rate spreads |
| Lower interest rates may result in lower sales of certain insurance and investment products of our customers, which would reduce the demand for our reinsurance of these products |
| 19 NATURAL DISASTERS, CATASTROPHES, AND DISASTERS CAUSED BY HUMANS, INCLUDING THE THREAT OF TERRORIST ATTACKS AND RELATED EVENTS, EPIDEMICS AND PANDEMICS MAY ADVERSELY AFFECT OUR BUSINESS AND RESULTS OF OPERATIONS Natural disasters and terrorist attacks, as well as epidemics and pandemics, can adversely affect our business and results of operations because they accelerate mortality risk |
| Terrorist attacks in the United States and in other parts of the world and the threat of future attacks could have a negative effect on our business |
| We believe our reinsurance programs are sufficient to reasonably limit our net losses for individual life claims relating to potential future natural disasters and terrorist attacks |
| However, the consequences of further natural disasters, terrorist attacks, armed conflicts, epidemics and pandemics are unpredictable, and we may not be able to foresee events that could have an adverse effect on our business |
| WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY, WHICH COULD LIMIT OUR ABILITY TO GAIN OR MAINTAIN OUR MARKET SHARE IN THE INDUSTRY The reinsurance industry is highly competitive, and we encounter significant competition in all lines of business from other reinsurance companies, as well as competition from other providers of financial services |
| Our competitors vary by geographic market |
| We believe our primary competitors in the North American life reinsurance market are currently the following, or their affiliates: Transamerica Occidental Life Insurance Company, a subsidiary of Aegon, NV, Swiss Re Life of America, Munich American Reinsurance Company and Scottish Re (US), Inc |
| We believe our primary competitors in the international life reinsurance markets are Swiss Re Life and Health Ltd, General Re, Munich Reinsurance Company and Hannover Reinsurance |
| Many of our competitors have greater financial resources than we do |
| Our ability to compete depends on, among other things, our ability to maintain strong financial strength ratings from rating agencies, pricing and other terms and conditions of reinsurance agreements, and our reputation, service, and experience in the types of business that we underwrite |
| However, competition from other reinsurers could adversely affect our competitive position |
| Our target market is large life insurers |
| We compete based on the strength of our underwriting operations, insights on mortality trends based on our large book of business, and responsive service |
| We believe our quick response time to client requests for individual underwriting quotes and our underwriting expertise are important elements to our strategy and lead to other business opportunities with our clients |
| Our business will be adversely affected if we are unable to maintain these competitive advantages or if our international strategy is not successful |
| TAX LAW CHANGES OR A PROLONGED ECONOMIC DOWNTURN COULD REDUCE THE DEMAND FOR SOME INSURANCE PRODUCTS, WHICH COULD ADVERSELY AFFECT OUR BUSINESS Under the Internal Revenue Code of 1986, income tax payable by policyholders on investment earnings is deferred during the accumulation period of some life insurance and annuity products |
| To the extent that the Internal Revenue Code is revised to reduce the tax-deferred status of life insurance and annuity products, or to increase the tax-deferred status of competing products, all life insurance companies would be adversely affected with respect to their ability to sell such products, and, depending on grandfathering provisions, by the surrenders of existing annuity contracts and life insurance policies |
| In addition, life insurance products are often used to fund estate tax obligations |
| Congress has adopted legislation to reduce, and ultimately eliminate, the estate tax |
| Under this legislation, our US life insurance company customers will face reduced demand for some of their life insurance products, which in turn could negatively affect our reinsurance business |
| We cannot predict what future tax initiatives may be proposed and enacted that could affect us |
| In addition, a general economic downturn or a downturn in the equity and other capital markets could adversely affect the market for many annuity and life insurance products |
| Because we obtain substantially all of our revenues through reinsurance arrangements that cover a portfolio of life insurance products, as well as annuities, our business would be harmed if the market for annuities or life insurance was adversely affected |
| In addition, the market for annuity reinsurance products is currently not well developed, and we cannot assure you that such market will develop in the future |
| THE AVAILABILITY AND COST OF COLLATERAL, INCLUDING LETTERS OF CREDIT, ASSET TRUSTS AND OTHER CREDIT FACILITIES, COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION, OPERATING COSTS, AND NEW BUSINESS VOLUME We reinsure, or retrocede, business to affiliated and unaffiliated offshore reinsurers to reduce the amount of regulatory reserves and capital we are required to hold in various jurisdictions, including the United States and Canada |
| The regulatory requirements may be significantly higher than the reserves required under GAAP A regulation in the US, commonly referred to as Regulation XXX, has significantly increased the level of regulatory, or statutory, reserves that US life insurance and life reinsurance companies must hold on their statutory financial statements for various types of life insurance business, primarily certain level term life products |
| The reserve levels required under Regulation XXX increase over time and are normally in excess of reserves required under GAAP The degree to which these reserves will increase and 20 the ultimate level of reserves will depend upon the mix of our business and future production levels in the United States |
| Based on the assumed rate of growth in our current business plan, and the increasing level of regulatory reserves associated with some of this business, we expect the amount of required regulatory reserves to grow significantly |
| In order to reduce the effect of Regulation XXX, our principal US operating subsidiary, RGA Reinsurance, has retroceded Regulation XXX related reserves to affiliated and unaffiliated reinsurers |
| Additionally, our reinsurance subsidiary in Canada, RGA Canada, has entered into various reinsurance arrangements with affiliated and unaffiliated reinsurers in order to reduce its statutory capital and reserve requirements |
| As a general matter, for us to reduce regulatory reserves on business that we retrocede, the affiliated or unaffiliated offshore reinsurer must provide an equal amount of collateral, usually in the form of a letter of credit from a commercial bank or by placing assets in trust for our benefit |
| In connection with these reserve requirements, we face the following risks: - The availability of collateral and the related cost of such collateral in the future could affect the type and volume of business we reinsure and could increase our costs |
| - We may need to raise additional capital to support higher regulatory reserves, which could increase our overall cost of capital |
| - If we, or our reinsurers, are unable to obtain or provide sufficient collateral to support our statutory ceded reserves, we may be required to increase regulatory reserves |
| In turn, this reserve increase could significantly reduce our statutory capital levels and adversely affect our ability to satisfy required regulatory capital levels that apply to us, unless we are able to raise additional capital to contribute to our operating subsidiaries |
| - Because term life insurance is a particularly price-sensitive product, any increase in insurance premiums charged on these products by life insurance companies, in order to compensate them for the increased statutory reserve requirements or higher costs of insurance they face, may result in a significant loss of volume in their, and as a result, our life reinsurance operations |
| We cannot assure you that we will be able to implement actions to mitigate the effect of increasing regulatory reserve requirements |
| WE COULD BE FORCED TO SELL INVESTMENTS AT A LOSS TO COVER POLICYHOLDER WITHDRAWALS, RECAPTURES OF REINSURANCE TREATIES OR OTHER EVENTS Some of the products offered by our insurance company customers allow policyholders and contract holders to withdraw their funds under defined circumstances |
| Our reinsurance subsidiaries manage their liabilities and configure their investment portfolios so as to provide and maintain sufficient liquidity to support anticipated withdrawal demands and contract benefits and maturities under reinsurance treaties with these customers |
| While our reinsurance subsidiaries own a significant amount of liquid assets, a portion of their assets are relatively illiquid |
| Unanticipated withdrawal or surrender activity could, under some circumstances, require our reinsurance subsidiaries to dispose of assets on unfavorable terms, which could have an adverse effect on us |
| Reinsurance agreements may provide for recapture rights on the part of our insurance company customers |
| Recapture rights permit these customers to reassume all or a portion of the risk formerly ceded to us after an agreed upon time, usually ten years, subject to various conditions |
| Recapture of business previously ceded does not affect premiums ceded prior to the recapture, but may result in immediate payments to our insurance company customers and a charge for costs that we deferred when we acquired the business but are unable to recover upon recapture |
| Under some circumstances, payments to our insurance company customers could require our reinsurance subsidiaries to dispose of assets on unfavorable terms |
| OUR REINSURANCE SUBSIDIARIES ARE HIGHLY REGULATED, AND CHANGES IN THESE REGULATIONS COULD NEGATIVELY AFFECT OUR BUSINESS Our reinsurance subsidiaries are subject to government regulation in each of the jurisdictions in which they are licensed or authorized to do business |
| Governmental agencies have broad administrative power to regulate many aspects of the insurance business, which may include premium rates, marketing practices, advertising, policy forms, and capital adequacy |
| These agencies are concerned primarily with the protection of policyholders rather than shareholders or holders of debt securities |
| Moreover, insurance laws and regulations, among other things, establish minimum capital requirements and limit the amount of dividends, tax distributions, and other payments our reinsurance subsidiaries can make without prior regulatory approval, and impose restrictions on the amount and type of investments we may hold |
| The State of Missouri also regulates RGA as an insurance holding company |
| 21 Recently, insurance regulators have increased their scrutiny of the insurance regulatory framework in the United States and some state legislatures have considered or enacted laws that alter, and in many cases increase, state authority to regulate insurance holding companies and insurance companies |
| In light of recent legislative developments the NAIC and state insurance regulators have begun re-examining existing laws and regulations, specifically focusing on insurance company investments and solvency issues, guidelines imposing minimum capital requirements based on business levels and asset mix, interpretations of existing laws, the development of new laws, the implementation of nonstatutory guidelines, and the definition of extraordinary dividends, including a more stringent standard for allowance of extraordinary dividends |
| We are unable to predict whether, when or in what form the state of Missouri will enact a new measure for extraordinary dividends, and we cannot assure you that more stringent restrictions will not be adopted from time to time in other jurisdictions in which our reinsurance subsidiaries are domiciled, which could, under certain circumstances, significantly reduce dividends or other amounts payable to us by our subsidiaries unless they obtain approval from insurance regulatory authorities |
| We cannot predict the effect that any NAIC recommendations or proposed or future legislation or rule-making in the United States or elsewhere may have on our financial condition or operations |
| WE ARE EXPOSED TO FOREIGN CURRENCY RISK We have foreign currency risk on business denominated and investments in foreign currencies to the extent that the exchange rates of the foreign currencies are subject to adverse change over time |
| Approximately 35prca of our revenues and 33prca of our fixed maturity securities available for sale were denominated in currencies other than the US dollar as of and for the year ended December 31, 2005 |
| Fluctuations in exchange rates can negatively or positively affect premiums and earnings |
| We generally hold fixed-maturity investments denominated in foreign currencies as a natural hedge against liabilities based in those currencies |
| We generally do not hedge the foreign currency exposure associated with our net investments in foreign subsidiaries due to the long-term nature of these investments |
| We cannot predict whether exchange rate fluctuations will significantly harm our operations or financial results in the future |
| ACQUISITIONS AND SIGNIFICANT TRANSACTIONS INVOLVE VARYING DEGREES OF INHERENT RISK THAT COULD AFFECT OUR PROFITABILITY We have made, and may in the future make, strategic acquisitions, either of selected blocks of business or other companies |
| Acquisitions may expose us to operational challenges and risks, including: - the ability to integrate the acquired business operations and data with our systems; - the availability of funding sufficient to meet increased capital needs; - the ability to hire management personnel required for expanded operations; - the ability to fund cash flow shortages that may occur if anticipated revenues are not realized or are delayed, whether by general economic or market conditions or unforeseen internal difficulties; and - the possibility that the value of investments acquired in an acquisition, may be lower than expected or may diminish due to credit defaults or changes in interest rates and that liabilities assumed may be greater than expected (due to, among other factors, less favorable than expected mortality or morbidity experience) |
| A failure to successfully manage the operational challenges and risks associated with or resulting from significant transactions, including acquisitions, could adversely affect our financial condition or results of operations |
| WE DEPEND ON THE PERFORMANCE OF OTHERS, AND THEIR FAILURE TO PERFORM IN A SATISFACTORY MANNER WOULD NEGATIVELY AFFECT US In the normal course of business, we seek to limit our exposure to losses from our reinsurance contracts by ceding a portion of the reinsurance to other insurance enterprises or reinsurers |
| We cannot assure you that these insurance enterprises or reinsurers will be able to fulfill their obligations to us |
| As of December 31, 2005, the reinsurers participating in our retrocession facilities that have been reviewed by AM Best Company, were rated "e B++ "e , the fifth highest rating out of fifteen possible ratings, or better |
| We are also subject to the risk that our clients will be unable to fulfill their obligations to us under our reinsurance agreements with them |
| We use the services of third-party investment managers to manage specialty assets where our investment management expertise is limited |
| We rely on these investment managers to provide investment advice and execute investment transactions that are within our investment policy guidelines |
| Poor performance on the part of our outside investment managers could negatively affect our financial performance |
| 22 For some reinsurance agreements, the ceding company withholds and legally owns and manages assets equal to the net statutory reserves, and we reflect these assets as funds withheld at interest on our balance sheet |
| In the event that a ceding company were to become insolvent, we would need to assert a claim on the assets supporting our reserve liabilities |
| We attempt to mitigate our risk of loss by offsetting amounts for claims or allowances that we owe the ceding company with amounts that the ceding company owes to us |
| We are subject to the investment performance on the withheld assets, although we do not directly control them |
| To mitigate some of this risk, we help to set, and monitor compliance with, the investment guidelines followed by these ceding companies |
| However, to the extent that such investment guidelines are not appropriate, or to the extent the ceding companies do not adhere to such guidelines, our risk of loss could increase, which could materially adversely affect our financial condition and results of operations |
| During 2005, interest earned on funds withheld represented 4dtta2prca of our consolidated revenues |
| Funds withheld at interest totaled dlra3dtta5 billion and dlra2dtta7 billion as of December 31, 2005 and 2004, respectively |
| As with all financial services companies, our ability to conduct business depends on consumer confidence in the industry and our financial strength |
| Actions of competitors, and financial difficulties of other companies in the industry, and related adverse publicity, could undermine consumer confidence and harm our reputation |
| OUR OBLIGATIONS TO PAY CLAIMS, INCLUDING SETTLEMENTS OR AWARDS, ON CLOSED OR DISCONTINUED LINES OF BUSINESS MAY EXCEED THE RESERVES WE HAVE ESTABLISHED TO COVER SUCH CLAIMS AND MAY REQUIRE US TO ESTABLISH ADDITIONAL RESERVES, WHICH WOULD REDUCE OUR NET INCOME As of December 31, 1998, we formally reported our accident and health division as a discontinued operation |
| The accident and health operation was placed into run-off, and all treaties were terminated at the earliest possible date |
| The nature of the underlying risks is such that the claims may take years to reach the reinsurers involved |
| Accordingly, we expect to pay claims out of existing reserves over a number of years as the level of business diminishes |
| We are a party to a number of disputes relating to the accident and health operation, some of which are currently in arbitration or may be subject to arbitration in the future |
| We have established reserves for some of these treaties based upon our estimates of the expected claims, including settlement or arbitration outcomes |
| As of January 31, 2006, the parties involved in these actions have raised claims, or established reserves that may result in claims, in the amount of dlra24dtta2 million, which is dlra23dtta5 million in excess of the amount we held as reserves |
| If the amount of claims, including awards or settlements, resulting from this discontinued line of business, exceeds our current reserves, we may incur future charges to pay these claims and may need to establish additional reserves |
| It is possible that an adverse outcome could, from time to time, have a material adverse effect on our consolidated net income or cash flows in particular quarterly or annual periods |
| WE HAVE RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS In 2005, approximately 28dtta1prca of our net premiums and dlra75dtta7 million of income from continuing operations before income taxes came from our operations in Europe, South Africa and Asia Pacific |
| One of our strategies is to grow these international operations |
| International operations subject us to various inherent risks |
| In addition to the regulatory and foreign currency risks identified above, other risks include the following: - managing the growth of these operations effectively, particularly the recent rates of growth; - changes in mortality and morbidity experience and the supply and demand for our products that are specific to these markets and that may be difficult to anticipate; - political and economic instability in the regions of the world where we operate; - uncertainty arising out of foreign government sovereignty over our international operations; and - potentially uncertain or adverse tax consequences, including regarding the repatriation of earnings from our non-US subsidiaries |
| We cannot assure you that we will be able to manage these risks effectively or that they will not have an adverse effect on our business, financial condition or results of operations |
| 23 RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK THE MARKET PRICE FOR OUR COMMON STOCK MAY BE HIGHLY VOLATILE The market price for our common stock has fluctuated, ranging between dlra40dtta76 and dlra48dtta73 per share for the 52 weeks ended December 31, 2005 |
| The overall market and the price of our common stock may continue to be volatile |
| There may be a significant effect on the market price for our common stock due to, among other things: - changes in investors &apos and analysts &apos perceptions of the risks and conditions of our business, including those that may result from any potential sale of some or all of the shares of our common stock owned by MetLife; - the size of the public float of our common stock; - the announcement of acquisitions by us or our competitors; - variations in our anticipated or actual operating results or the results of our competitors; - fluctuations in foreign currency exchange rates; - regulatory developments; - market conditions; and - general economic conditions |
| FUTURE SALES OF OUR COMMON STOCK OR OTHER SECURITIES MAY DILUTE THE VALUE OF THE COMMON STOCK Our board of directors has the authority, without action or vote of the shareholders, to issue any or all authorized but unissued shares of our common stock, including securities convertible into or exchangeable for our common stock and authorized but unissued shares under our stock option and other equity compensation plans |
| In the future, we may issue such additional securities, through public or private offerings, in order to raise additional capital |
| Any such issuance will dilute the percentage ownership of shareholders and may dilute the per share projected earnings or book value of the common stock |
| In addition, option holders may exercise their options at any time when we would otherwise be able to obtain additional equity capital on more favorable terms |
| LIMITED TRADING VOLUME OF OUR COMMON STOCK MAY CONTRIBUTE TO ITS PRICE VOLATILITY Our common stock is traded on the New York Stock Exchange |
| During the twelve months ended December 31, 2005 the average daily trading volume for our common stock as reported by the NYSE was 213cmam590 shares |
| As a result, relatively small trades may have a significant effect on the price of our common stock |
| OUR ARTICLES OF INCORPORATION, BYLAWS AND MISSOURI LAW MAY LIMIT THE ABILITY OF OUR SHAREHOLDERS TO CHANGE OUR DIRECTION OR MANAGEMENT, EVEN IF THEY BELIEVE SUCH A CHANGE WOULD BE BENEFICIAL Our articles of incorporation, bylaws and Missouri law contain certain provisions that make it more difficult for our shareholders to replace directors even if the shareholders consider it beneficial to do so |
| In addition, these provisions may discourage certain types of transactions that involve an actual or threatened change of control |
| While these provisions are designed to encourage persons seeking to acquire control to negotiate with our board of directors, they could have the effect of discouraging a prospective purchaser from making a tender offer or otherwise attempting to obtain control and may prevent a shareholder from receiving the benefit of any premium over the market price of our common stock offered by a bidder in a potential takeover |
| In particular, our articles of incorporation, bylaws and Missouri law: - restrict various types of business combinations with significant shareholders; - provide for a classified board of directors; - limit the right of shareholders to remove directors or change the size of the board of directors; - limit the right of shareholders to fill vacancies on the board of directors; - limit the right of shareholders to call a special meeting of shareholders or propose other actions; - require unanimity for shareholders to act by written consent, in accordance with Missouri law; - require a higher percentage of shareholders than would otherwise be required under Missouri law to amend, alter, change or repeal some of the provisions of our articles of incorporation; 24 - provide that our bylaws may be amended only by the majority vote of the entire board of directors, and shareholders will not be able to amend the bylaws without first amending the articles of incorporation; and - authorize the issuance of preferred stock with any voting powers, designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions of such rights as may be specified by our board of directors, without shareholder approval |
| Even in the absence of an attempt to effect a change in management or a takeover attempt, these provisions may adversely affect the prevailing market price of our common shares if they are viewed as discouraging changes in management and takeover attempts in the future |
| APPLICABLE INSURANCE LAWS MAY MAKE IT DIFFICULT TO EFFECT A CHANGE OF CONTROL OF RGA Before a person can acquire control of a US insurance company, prior written approval must be obtained from the insurance commission of the state where the domestic insurer is domiciled |
| Missouri insurance laws and regulations provide that no person may acquire control of us, and thus indirect control of our Missouri reinsurance subsidiaries, including RGA Reinsurance, unless: - such person has provided certain required information to the Missouri Department of Insurance and - such acquisition is approved by the Missouri Director of Insurance after a public hearing |
| Under Missouri insurance laws and regulations, any person acquiring 10prca or more of the outstanding voting securities of a corporation, such as our common stock, is presumed to have acquired control of that corporation and its subsidiaries |
| Canadian federal insurance laws and regulations provide that no person may directly or indirectly acquire "e control "e of or a "e significant interest "e in our Canadian insurance subsidiary, RGA Canada, unless: - such person has provided information, material and evidence to the Canadian Superintendent of Financial Institutions as required by him, and - such acquisition is approved by the Canadian Minister of Finance |
| For this purpose, "e significant interest "e means the direct or indirect beneficial ownership by a person, or group of persons acting in concert, of shares representing 10prca or more of a given class |
| "e Control "e of an insurance company exists when: - a person, or group of persons acting in concert, beneficially owns or controls an entity that beneficially owns securities, such as our common stock, representing more than 50prca of the votes entitled to be cast for the election of directors and such votes are sufficient to elect a majority of the directors of the insurance company, or - a person has any direct or indirect influence that would result in control in fact of an insurance company |
| Prior to granting approval of an application to directly or indirectly acquire control of a domestic or foreign insurer, an insurance regulator may consider such factors as the financial strength of the applicant, the integrity of the applicantapstas board of directors and executive officers, the applicantapstas plans for the future operations of the domestic insurer and any anti-competitive results that may arise from the consummation of the acquisition of control |