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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
--------------------
COMMISSION FILE NUMBER 1-11848
REINSURANCE GROUP OF AMERICA, INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MISSOURI 43-1627032
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1370 TIMBERLAKE MANOR PARKWAY
CHESTERFIELD, MISSOURI 63017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(636) 736-7439
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
--------------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
--- ---
VOTING COMMON STOCK OUTSTANDING ($.01 PAR VALUE) AS OF OCTOBER 29, 1999:
45,129,989 SHARES
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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
PART I - FINANCIAL INFORMATION
<S> <C> <C>
1 Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)
September 30, 1999 and December 31, 1998 3
Condensed Consolidated Statements of Income (Unaudited)
Three and Nine months ended September 30, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine months ended September 30, 1999 and 1998 5
Notes to Condensed Consolidated Financial
Statements (Unaudited) 6-10
2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-32
3 Qualitative and Quantitative Disclosures About Market Risk 32
PART II - OTHER INFORMATION
1 Legal Proceedings 33
4 Submission of Matters to a Vote of Security Holders 33
6 Exhibits and Reports on Form 8-K 34
Signatures 35
Index to Exhibits 36
</TABLE>
2
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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-------------- ------------
(Dollars in thousands)
ASSETS
<S> <C> <C>
Fixed maturity securities
Available for sale-at fair value (amortized cost of $2,196,925 and
$3,613,602 at September 30, 1999, and December 31, 1998, respectively) $ 2,077,586 $ 3,701,617
Mortgage loans on real estate 240,967 216,636
Policy loans 607,257 513,885
Funds withheld at interest 681,620 359,786
Short-term investments 122,430 314,953
Other invested assets 25,890 22,704
----------- -----------
Total investments 3,755,750 5,129,581
Cash and cash equivalents 114,378 15,966
Accrued investment income 58,943 62,447
Premiums receivable 333,824 173,935
Funds withheld 62,585 73,042
Reinsurance ceded receivables 291,098 259,688
Deferred policy acquisition costs 463,486 351,042
Other reinsurance balances 89,933 217,677
Other assets 9,654 35,175
----------- -----------
Total assets $ 5,179,651 $ 6,318,553
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Future policy benefits $ 1,814,763 $ 1,585,506
Interest sensitive contract liabilities 1,674,254 2,985,515
Other policy claims and benefits 526,325 482,049
Other reinsurance balances 66,991 177,806
Deferred income taxes 91,927 121,988
Other liabilities 172,695 105,471
Long-term debt 183,884 107,994
----------- -----------
Total liabilities 4,530,839 5,566,329
Minority interest 2,231 3,747
Commitments and contingent liabilities
Stockholders' equity:
Preferred stock (par value $.01 per share; 10,000,000 shares authorized; no
shares issued or outstanding) - -
Common stock (par value $.01 per share; 75,000,000 shares authorized,
46,268,584 and 39,073,613 shares issued at September 30, 1999 and 463 392
December 31, 1998, respectively)
Non-voting common stock (par value $.01 per share; 7,417,496 shares issued
and outstanding at December 31, 1998; - 74
Additional paid in capital 486,137 486,669
Retained earnings 269,722 251,512
Accumulated other comprehensive income (89,691) 30,305
----------- -----------
Total stockholders' equity before treasury stock 666,631 768,952
Less treasury shares held of 1,138,595 and 1,178,270 at cost at
September 30, 1999, and December 31, 1998, respectively (20,050) (20,475)
----------- -----------
Total stockholders' equity 646,581 748,477
----------- -----------
Total liabilities and stockholders' equity $ 5,179,651 $ 6,318,553
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
REVENUES:
Net premiums $ 295,079 $ 224,327 $ 965,603 $ 705,352
Investment income, net of related expenses 91,697 71,126 264,231 206,180
Realized investment gains/(losses), net (62,239) 639 (61,744) 3,358
Other revenue 1,707 6,573 10,568 16,671
----------- ----------- ----------- -----------
Total revenues 326,244 302,665 1,178,658 931,561
BENEFITS AND EXPENSES:
Claims and other policy benefits 229,684 168,611 776,763 552,415
Interest credited 43,898 38,821 127,141 111,178
Policy acquisition costs and other insurance expenses 49,324 44,824 155,233 130,566
Other operating expenses 19,408 14,094 51,162 41,176
Interest expense 2,475 2,228 6,704 6,440
----------- ----------- ----------- -----------
Total benefits and expenses 344,789 268,578 1,117,003 841,775
----------- ----------- ----------- -----------
Income (loss) before income taxes and minority interest (18,545) 34,087 61,655 89,786
Provision (benefit) for income taxes (4,950) 12,311 27,166 32,279
----------- ----------- ----------- -----------
Income (loss) from continuing operations before minority
interest (13,595) 21,776 34,489 57,507
Minority interest in earnings of consolidated subsidiaries 342 151 801 457
----------- ----------- ----------- -----------
Income (loss) from continuing operations (13,937) 21,625 33,688 57,050
Discontinued operations:
(Loss) on discontinued accident and health operations,
net of taxes (3,212) (968) (8,204) (1,266)
----------- ----------- ----------- -----------
Net income/(loss) $ (17,149) $ 20,657 $ 25,484 $ 55,784
=========== =========== =========== ===========
Earnings/(loss) per share from continuing operations:
Basic earnings per share $ (0.31) $ 0.48 $ 0.74 $ 1.39
=========== =========== =========== ===========
Diluted earnings per share $ (0.31) $ 0.47 $ 0.73 $ 1.38
=========== =========== =========== ===========
Earnings/(loss) per share from net income:
Basic earnings per share $ (0.38) $ 0.46 $ 0.56 $ 1.36
=========== =========== =========== ===========
Diluted earnings per share $ (0.38) $ 0.45 $ 0.56 $ 1.35
=========== =========== =========== ===========
Weighted average number of diluted shares outstanding
(in thousands) 45,311 45,788 45,854 41,474
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
------------------------
1999 1998
----------- -----------
(Dollars in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 25,484 $ 55,784
Adjustments to reconcile net income to net cash provided by
operating activities:
Change in:
Accrued investment income 3,504 (33,618)
Premiums receivable (159,719) (75,846)
Deferred policy acquisition costs (111,722) (52,111)
Funds withheld 10,457 (69,046)
Reinsurance ceded balances (31,554) 28,977
Future policy benefits, other policy claims and benefits, and
other reinsurance balances 311,234 245,705
Deferred income taxes 42,032 24,041
Other assets and other liabilities 88,321 (23,597)
Amortization of goodwill and value of business acquired 647 1,171
Amortization of net investment discounts (17,967) (11,327)
Realized investment (gains)/losses, net 61,744 (3,358)
Minority interest in earnings 799 464
Other, net 1,816 (11)
----------- -----------
Net cash provided by operating activities 225,076 87,228
INVESTING ACTIVITIES:
Sales of investments:
Fixed maturity securities - Available for sale 2,706,080 307,622
Mortgage loans 4,543 -
Maturities of fixed maturity securites - Available for sale 37,075 32,252
Purchases of fixed maturity securities - Available for sale (1,355,448) (1,399,701)
Cash invested in:
Mortgage loans (51,954) (63,516)
Policy loans (93,371) (6,155)
Funds withheld at interest (27,466) (20,104)
Principal payments on:
Mortgage loans 15,159 7,914
Policy loans - 14,752
Change in short-term and other invested assets 187,623 113,532
----------- -----------
Net cash provided (used) by investing activities 1,422,241 (1,013,404)
FINANCING ACTIVITIES:
Dividends to stockholders (7,274) (5,141)
Proceeds from stock offering - 221,837
Reissuance of treasury stock 454 627
Exchange of voting for non-voting shares (665) -
Excess deposits (withdrawls) on universal life and other
investment type policies and contracts (1,616,479) 694,839
Proceeds from debt issuance 75,000 -
----------- -----------
Net cash provided (used) by financing activities (1,548,964) 912,162
Effect of exchange rate changes 59 1,104
----------- -----------
Change in cash and cash equivalents 98,412 (12,910)
Cash and cash equivalents, beginning of period 15,966 37,395
----------- -----------
Cash and cash equivalents, end of period $ 114,378 $ 24,485
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited, condensed, consolidated financial statements of
Reinsurance Group of America, Incorporated and Subsidiaries (the "Company") have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
of normal recurring accruals, considered necessary for a fair presentation have
been included. Operating results for the nine months ended September 30, 1999
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1999. For further information, refer to the consolidated
financial statements and notes thereto included in the Company's Annual Report
for the year ended December 31, 1998, as amended.
The Company has reclassified the presentation of certain prior period segment
information to conform to the 1999 presentation. The condensed consolidated
statements of income for all periods presented have been restated, as
appropriate, to reflect the accident and health division being reported as a
discontinued operation.
2. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share on income from continuing operations (in thousands except per share
information):
<TABLE>
<CAPTION>
------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings:
Income (loss) from continuing operations
(numerator for basic and diluted
calculations) ($13,937) $21,625 $33,688 $57,050
Shares:
Weighted average outstanding shares
(denominator for basic calculation) 45,311 45,279 45,331 41,019
Equivalent shares from outstanding stock
options (denominator for diluted
calculation) -- 509 523 455
------------------------------------------------------------------------
Denominator for diluted calculation 45,311 45,788 45,854 41,474
Earnings (loss) per share:
Basic ($0.31) $ 0.48 $ 0.74 $ 1.39
Diluted ($0.31) $ 0.47 $ 0.73 $ 1.38
------------------------------------------------------------------------
</TABLE>
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The calculation of diluted earnings per share does not include common stock
equivalent shares whose impact would be antidilutive. For the three months ended
September 30, 1999, approximately 0.3 million outstanding stock options were not
included in the calculation of common equivalent shares as their respective
exercise prices were greater than the average market price. These options were
outstanding at the end of period.
3. COMPREHENSIVE INCOME
The following schedule reflects the change in accumulated other comprehensive
income for the three and nine month periods ending September 30, 1999 and 1998
(dollars in thousands):
<TABLE>
<CAPTION>
------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $(17,149) $20,657 $ 25,484 $ 55,784
Accumulated other comprehensive
Income (expense), net of tax:
Unrealized gains (losses) on securities (30,278) 10,601 (120,074) 18,751
Foreign currency items (301) (5,208) 78 (6,851)
------------------------------------------------------------------------
Comprehensive income $(47,728) $26,050 $(94,512) $ 67,684
------------------------------------------------------------------------
</TABLE>
4. SEGMENT INFORMATION
The accounting policies of the segments are the same as those described in the
Summary of Significant Accounting Policies in Note 2 of the 1998 Annual Report.
The Company measures segment performance based on profit or loss from operations
before income taxes and minority interest. There are no intersegment
transactions and the Company does not have any material long-lived assets.
Investment income is allocated to the segments based upon average assets and
related capital levels deemed appropriate to support the segment business
volumes.
The Company's reportable segments are strategic business units that are
segregated by geographic region. Total revenues from continuing operations are
reflected by major product divisions between reinsurance and direct insurance.
Total revenues are primarily from external customers with significant
intercompany activity eliminated through consolidation. Information related to
revenues and income (loss) before income taxes and minority interest of the
Company's continuing operations are summarized below (in thousands).
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<TABLE>
<CAPTION>
------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Reinsurance:
U.S. $213,816 $226,253 $ 835,978 $702,920
Canada 56,954 32,231 163,990 95,048
Latin America 9,523 12,507 49,000 39,720
Asia Pacific 19,380 15,136 53,410 41,822
Other international 8,191 2,707 20,601 4,909
------------------------------------------------------------------------
Total reinsurance revenues 307,864 288,834 1,122,979 884,419
Total direct revenues (Latin America) 16,438 10,555 45,469 39,927
Corporate 1,942 3,276 10,210 7,215
------------------------------------------------------------------------
Total from continuing operations $326,244 $302,665 $1,178,658 $931,561
------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND MINORITY INTEREST
Reinsurance:
U.S. $(23,884) $ 33,017 $46,705 $ 85,074
Canada 9,997 1,814 27,165 10,945
Latin America 2,128 1,506 4,025 2,413
Asia Pacific (217) (1) (7,987) 152
Other international (2,279) (1,099) (3,512) (3,507)
Corporate (4,290) (1,150) (4,741) (5,291)
------------------------------------------------------------------------
Total from continuing operations $(18,545) $ 34,087 $ 61,655 $ 89,786
------------------------------------------------------------------------
</TABLE>
During the third quarter of 1999, U.S. segment assets decreased by approximately
$1.5 billion primarily due to the recapture of funding agreement business by
General American Life Insurance Company ("General American"), a wholly-owned
subsidiary of GenAmerica Corporation ("GenAmerica"), the Company's majority
shareholder. There have been no other material changes in reportable segment
assets from the amounts disclosed in Note 16 of the 1998 Annual Report.
5. SIGNIFICANT TRANSACTIONS
New Reinsurance Agreement
During 1999, the Company entered into a new agreement reinsuring a market value
adjusted annuity product. Pursuant to the terms of the reinsurance agreement,
the annuity liabilities and funds supporting the liabilities are withheld by the
ceding company. To reflect the Company's obligations under the agreement, the
amounts withheld have been reflected in "Funds withheld at interest" and
"Interest sensitive contract liabilities" on the balance sheet. As of September
30, 1999, approximately $294.4 million and $303.2 million related to this
agreement have been included in funds withheld at interest and interest
sensitive contract liabilities, respectively.
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The Company subsequently retrocedes approximately 5/12ths of this business to a
GenAmerica subsidiary and 2/12ths to another retrocessionaire. The Company
reports the effect of the retrocessions by reflecting a net receivable or
payable from/to the retrocessionaires in other reinsurance balances. The
underlying product reinsured by the Company provides the contract holder with a
minimum return guarantee over the life of the product. The Company shares in
this guarantee, which is mitigated by applicable surrender charges over the
first ten years of the contract, pursuant to the reinsurance agreement.
Recapture Transaction
Effective September 29, 1999, General American completed the recapture of the
entire block of General American's funding agreement business reinsured by the
Company. Prior to the recapture, the Company reinsured approximately 25% of
General American's funding agreement business. Pursuant to the recapture
transaction, the Company transferred all remaining liabilities related to the
funding agreement business and an equivalent amount of assets to General
American. Over the course of the third quarter of 1999, the Company transferred
to General American approximately $1.8 billion in assets, including $1.5 billion
in connection with the recapture. Those assets, consisting primarily of
investments in fixed maturity securities and cash, were transferred in
satisfaction of $1.8 billion in funding agreement liabilities. Associated with
the liquidation of investment securities and the transfer of assets to General
American during the third quarter of 1999, the Company incurred an after tax net
capital loss of approximately $33.2 million, including $26.0 million associated
with the recapture transaction.
6. NEW ACCOUNTING STANDARD
In June 1999, the Financial Accounting Standards Board issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133," effective upon issuance. SFAS No. 137
amends SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," deferring the effective date to all fiscal quarters of all fiscal
years beginning after June 15, 2000. SFAS No. 133 requires companies to record
derivatives on the balance sheet as assets or liabilities, measured at fair
value. It also requires that gains or losses resulting from changes in the
values of those derivatives be reported depending on the use of the derivative
and whether it qualifies for hedge accounting. The Company continues to evaluate
the effect, if any, of the implementation of SFAS No. 133 on the results of
operation, financial position, or liquidity.
7. SPECIAL SHAREHOLDERS MEETING
On September 14, 1999, the Company held a special shareholders' meeting at which
an amendment to the Company's restated articles of incorporation, as amended,
was approved which converted 7,417,496 shares of non-voting common stock into
7,194,971 shares of voting common stock, with cash paid in lieu of any
fractional shares.
8. LONG TERM DEBT
The Company entered into a term loan agreement dated as of June 1, 1999 with
General American, whereby it borrowed $75.0 million to continue expansion of the
Company's business. Interest on
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the term loan will be payable quarterly at 100 basis points over the British
Bankers' Association three month LIBOR rate. The term loan matures on June 30,
2004.
9. ADMINISTRATIVE SUPERVISION AND SALE OF GENAMERICA
On August 10, 1999, General American became subject to an order of
administrative supervision from the Missouri Department of Insurance (the
"Department"). This action arose from General American's inability to meet
substantial demands for surrenders of its funding agreement business, also known
as stable value business, without jeopardizing interests of its other
policyholders. General American stated that the unexpected high volume of
withdrawal requests from its funding agreement investors created severe pressure
on General American's liquidity position and its ability to convert assets
within the tight timeframe required. General American stated that it sought
additional time to respond to the requests of the funding agreement clients,
making certain all obligations were honored.
The funding agreement withdrawal activity stemmed from developments associated
with the ratings of General American and ARM Financial Group, Inc., a financial
services company which marketed a highly specialized portfolio of funding
agreements products to institutional investors. In late July, Moody's Investor
Services downgraded General American's financial strength rating from A2 to A3.
The downgrade caused a significant number of funding agreement investors to
recall their funds over a short period of time, creating the liquidity
pressures. Moody's further lowered General American's rating to Ba1 on August 9,
1999 and B1 on August 12, 1999. Moody's traditionally has rated RGA Reinsurance
with the same financial strength as General American. As of October 29, 1999,
Moody's, Standard & Poor's, and A.M. Best rated RGA Reinsurance Ba3, BB and B++,
respectively.
On August 26, 1999, GenAmerica announced a definitive agreement whereby
Metropolitan Life Insurance Company ("MetLife") will acquire GenAmerica,
including GenAmerica's beneficial ownership of approximately 53% of the
outstanding shares of the Reinsurance Group of America, Incorporated ("RGA"),
for approximately $1.2 billion. The transaction is expected to be completed in
the fourth quarter of 1999 or first quarter of 2000, and is subject to
regulatory and judicial approval.
RGA Reinsurance Company, the primary operating subsidiary of the Company ("RGA
Reinsurance"), served as a reinsurer to General American for approximately 25
percent of funding agreement deposits. Effective September 29, 1999, General
American completed the recapture of the entire block of General American's
funding agreement business reinsured by the Company. As a result of the
recapture transaction, RGA Reinsurance no longer retains any obligations related
to General American's funding agreement business. The funding agreement business
contributed to the Company's pre-tax earnings in the amount of approximately $4
million during 1998.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company has five main operating segments segregated primarily by geographic
region: U.S., Canada, Latin America, Asia Pacific, and other international
operations. The U.S. operations provide traditional life reinsurance and
non-traditional reinsurance to domestic clients. Non-traditional business
includes asset-intensive and financial reinsurance. Asset-intensive products
include reinsurance of funding agreement products, bank-owned life insurance,
and annuities. As of September 30, 1999, the Company no longer reinsures funding
agreement products. The Canada operations provide insurers with traditional
reinsurance as well as assistance with capital management activity. The Latin
America operations include direct life insurance through a joint venture and
subsidiaries in Chile and Argentina. The Latin America operations also include
traditional reinsurance and reinsurance of privatized pension products primarily
in Argentina. Asia Pacific operations provide primarily traditional life
reinsurance through RGA Reinsurance Company of Australia, Limited ("RGA
Australia") and RGA Reinsurance. Other international operations include
traditional business from Europe and South Africa, in addition to other markets
being developed by the Company. The operating segment results do not include the
corporate investment activity, general corporate expenses, interest expense of
RGA, and the provision for income tax expense (benefit). In addition, the
Company's discontinued accident and health operations are not reflected in the
continuing operations of the Company. The Company measures segment performance
based upon profit or loss from operations before income taxes and minority
interest.
Consolidated income from continuing operations before income taxes and minority
interest for the third quarter and first nine months of 1999 decreased $52.6
million and $28.1 million, respectively, as compared to the prior-year periods.
After tax diluted earnings (losses) per share from continuing operations were
($0.31) and $0.73 for the third quarter and first nine months of 1999,
respectively, compared with $0.47 and $1.38 for the comparable 1998 periods. The
decrease in earnings for the third quarter and nine months was attributed
primarily to realized capital losses associated with the recapture by General
American of all funding agreement business reinsured by the Company. Excluding
realized capital losses, consolidated income from continuing operations before
income taxes and minority interest for the third quarter and first nine months
of 1999 increased $10.2 million and $37.0 million, respectively, as compared to
the prior-year periods.
For the year ended December 31, 1998, all reinsurance arrangements with General
American represented approximately 5% of the Company's consolidated earnings.
Due primarily to capital losses associated with the recapture of the funding
agreement business, reinsurance arrangements with General American resulted in a
pre-tax loss of approximately $49 million for the nine months ended September
30, 1999.
Further discussion and analysis of the results for 1999 compared to 1998 are
presented by segment.
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U.S. OPERATIONS (dollars in thousands)
FOR THE THREE MONTH PERIOD ENDING SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
----------------------------------------------------------------
TRADITIONAL NON-TRADITIONAL TOTAL
ASSET- FINANCIAL U.S.
INTENSIVE REINSURANCE
----------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Net premiums $ 207,125 $ (62) $ - $ 207,063
Investment income, net of related expenses 30,678 36,851 - 67,529
Realized investment gains (losses), net (9,413) (53,065) - (62,478)
Other revenue (1,526) (18) 3,246 1,702
----------------------------------------------------------------
Total revenues 226,864 (16,294) 3,246 213,816
BENEFITS AND EXPENSES:
Claims and other policy benefits 153,635 167 - 153,802
Interest credited 9,752 33,319 - 43,071
Policy acquisition costs and other insurance
expenses 31,045 727 2,371 34,143
Other operating expenses 6,415 231 38 6,684
----------------------------------------------------------------
Total benefits and expenses 200,847 34,444 2,409 237,700
Income before income taxes and minority
interest $ 26,017 $ (50,738) $ 837 $ (23,884)
----------------------------------------------------------------
</TABLE>
FOR THE THREE MONTH PERIOD ENDING SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
----------------------------------------------------------------
TRADITIONAL NON-TRADITIONAL TOTAL
ASSET- FINANCIAL U.S.
INTENSIVE REINSURANCE
----------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Net premiums $ 160,424 $ 327 $ - $ 160,751
Investment income, net of related expenses 25,354 33,555 - 58,909
Realized investment gains, net 453 144 - 597
Other revenue 113 - 5,883 5,996
----------------------------------------------------------------
Total revenues 186,344 34,026 5,883 226,253
BENEFITS AND EXPENSES:
Claims and other policy benefits 117,964 552 - 118,516
Interest credited 10,467 28,101 - 38,568
Policy acquisition costs and other insurance
expenses 26,207 1,894 3,906 32,007
Other operating expenses 3,927 185 33 4,145
----------------------------------------------------------------
Total benefits and expenses 158,565 30,732 3,939 193,236
Income before income taxes and minority
interest $ 27,779 $ 3,294 $ 1,944 $ 33,017
----------------------------------------------------------------
</TABLE>
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FOR THE NINE MONTH PERIOD ENDING SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
----------------------------------------------------------------
TRADITIONAL NON-TRADITIONAL TOTAL
ASSET- FINANCIAL U.S.
INTENSIVE REINSURANCE
----------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Net premiums $ 696,220 $ 781 $ - $ 697,001
Investment income, net of related expenses 90,511 110,471 - 200,982
Realized investment gains (losses), net (14,988) (56,439) - (71,427)
Other revenue (1,521) 801 10,142 9,422
----------------------------------------------------------------
Total revenues 770,222 55,614 10,142 835,978
BENEFITS AND EXPENSES:
Claims and other policy benefits 529,317 897 - 530,214
Interest credited 29,212 95,958 - 125,170
Policy acquisition costs and other insurance 106,192 2,695 7,434 116,321
expenses
Other operating expenses 16,889 583 96 17,568
----------------------------------------------------------------
Total benefits and expenses 681,610 100,133 7,530 789,273
Income before income taxes and minority
interest $ 88,612 $ (44,519) $ 2,612 $ 46,705
----------------------------------------------------------------
</TABLE>
FOR THE NINE MONTH PERIOD ENDING SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
----------------------------------------------------------------
TRADITIONAL NON-TRADITIONAL TOTAL
ASSET- FINANCIAL U.S.
INTENSIVE REINSURANCE
----------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Net premiums $ 514,961 $ 1,014 $ - $ 515,975
Investment income, net of related expenses 78,296 92,286 - 170,582
Realized investment gains, net 1,717 981 - 2,698
Other revenue 4 - 13,661 13,665
----------------------------------------------------------------
Total revenues 594,978 94,281 13,661 702,920
BENEFITS AND EXPENSES:
Claims and other policy benefits 391,052 2,851 - 393,903
Interest credited 33,064 77,321 - 110,385
Policy acquisition costs and other insurance 86,722 4,503 9,852 101,077
expenses
Other operating expenses 11,827 555 99 12,481
----------------------------------------------------------------
Total benefits and expenses 522,665 85,230 9,951 617,846
Income before income taxes and minority
interest $ 72,313 $ 9,051 $ 3,710 $ 85,074
----------------------------------------------------------------
</TABLE>
During the third quarter and first nine months of 1999, income before income
taxes and minority interest for U.S. operations decreased 172.3% and 45.1%,
respectively, over the comparable prior-year periods. The decrease is primarily
due to the realized loss recognized on the recapture of the General American
funding agreement product. During the third quarter and first nine months of
1999, operating income before realized losses increased 19.0% and 43.4%,
respectively, over the comparable prior-year periods. These increases are
primarily the result of the growth of the business and good mortality experience
on the core traditional block of business. U.S. operations include traditional
and non-traditional reinsurance. The components
13
<PAGE> 14
of non-traditional reinsurance are asset-intensive and financial reinsurance.
Traditional reinsurance accounts for the majority of the growth in this segment.
Traditional Reinsurance
The U.S. traditional reinsurance subsegment is the oldest and largest subsegment
of the Company. This subsegment provides life reinsurance to domestic clients
for a variety of life products through yearly renewable term agreements,
coinsurance, and modified coinsurance arrangements. These reinsurance
arrangements may be either facultative or automatic agreements. During the third
quarter and first nine months of 1999, production remained relatively constant,
totaling $17.7 billion and $70.2 billion, respectively, of new assumed in-force,
compared to $17.3 billion and $72.9 billion for the same periods in 1998.
Production levels are significantly influenced by large transactions and
reporting practices of ceding companies and, therefore, can fluctuate from
period to period. Management believes industry consolidation, demutualizations,
and the trend towards reinsuring mortality risks should continue to provide
reinsurance opportunities, although the level of production is uncertain.
Income before income taxes and minority interest for U.S. traditional
reinsurance decreased 6.3% and increased 22.5% in the third quarter and first
nine months of 1999, respectively. The decrease in income for the quarter was
primarily due to the realized losses of $9.4 million on securities transactions.
The increases in income for the year were primarily attributable to strong
premium growth, an increase in investment income and favorable mortality
experience.
Net premiums for U.S. traditional reinsurance rose 29.1% and 35.2% in the third
quarter and first nine months of 1999. New premium on in-force blocks of
business, renewal premium on existing blocks of business and new business
premiums from facultative and automatic treaties all contributed to this growth.
Premium levels are significantly influenced by large transactions and reporting
practices of ceding companies and therefore can fluctuate from period to period.
Net investment income increased 21.0% and 15.6% in the third quarter and first
nine months of 1999. The increases were due to the continued growth of business
in this subsegment which resulted in an increase of the invested asset base,
which included total investments, cash, and accrued investment income, to $2.0
billion at September 30, 1999 from $1.9 billion at September 30, 1998.
Realized investment losses of approximately $15.0 million were reported for the
first nine months of 1999. These losses included the write-off of the Company's
investment in Thomson Barrett Organization PLC ("TBO"), a 20% owned entity. TBO
was an international financial services consulting firm specializing in the
development of distributions systems. In September, the Company relinquished its
20% interest in TBO for nominal consideration to the other shareholders.
Collaborative Strategies, Incorporated ("CSI"), a GenAmerica subsidiary, assumed
a portion of the debt of TBO in exchange for certain assets, including the
employees, and businesses of TBO. The Company then discharged the debt of TBO
and CSI in exchange for future profits on certain business initiatives. The
Company does not expect any future profits to materialize related to these
initiatives. Therefore, the Company wrote-off its entire investment
14
<PAGE> 15
related to this business in June 1999. The Company also recorded capital gains
associated with the sale of some investments as well as capital losses
recognized on permanent write-downs of various securities.
The amount of claims and other policy benefits increased 30.2% and 35.4% in the
third quarter and first nine months of 1999, primarily resulting from the
increased size of the inforce blocks of business. Claims and other policy
benefits, as a percentage of net premiums, were 74.2% and 76.0% in the third
quarter and first nine months of 1999, respectively, compared to 73.5% and 75.9%
in prior-year periods. Mortality is expected to fluctuate somewhat from period
to period, but remains fairly constant over the long term.
Interest credited relates to amounts credited on the Company's cash value
products in this subsegment, which have a significant mortality component. This
amount fluctuates with the changes in cash surrender value and changes in
interest crediting rates.
The amount of policy acquisition costs and other insurance expenses rose 18.5%
and 22.5% in the third quarter and first nine months of 1999, respectively, over
the comparable prior-year periods. As a percentage of net premiums, policy
acquisition costs and other insurance expenses were 15.0% and 15.3% for the
third quarter and first nine months of 1999, respectively, compared to 16.3% and
16.8% in the prior-year periods. The decreases were primarily attributable to a
change in the mix of business that resulted in less acquisition costs during the
current periods.
Other operating expenses increased 63.4% and 42.8% in the third quarter and the
first nine months of 1999. The increase was primarily due to increases in costs
associated with the growth of the business and an increase in corporate costs
that are allocated based on premium or revenues. Other operating expenses for
the third quarter and first nine months of 1999 and 1998 remained relatively
constant as a percentage of net premiums.
Asset-Intensive Reinsurance
The U.S. asset-intensive reinsurance subsegment includes the reinsurance of
funding agreement products, annuities, and bank-owned life insurance. As of
September 30, 1999, the Company no longer reinsures funding agreement products.
Most of these agreements are coinsurance or modified coinsurance of
non-mortality risks such that the Company recognizes profits or losses primarily
from the spread between the investment earnings and the interest credited on the
underlying deposit liabilities.
Income before income taxes and minority interest decreased significantly in the
third quarter and first nine months of 1999, respectively. The funding agreement
business was primarily responsible for the decrease in earnings. In the first
nine months, funding agreement had a net loss before income taxes and minority
interest of approximately $47.6 million. The Company's parent, General American,
recaptured the business during the month of September. Total after-tax capital
losses of approximately $33.2 million were incurred in connection with
liquidating securities and the recapture by General American. Net premiums
reported in this subsegment
15
<PAGE> 16
relate to a yearly renewable term treaty that reinsures the mortality risk of a
bank-owned life insurance product. Policy acquisition costs and other insurance
expenses relate primarily to the commission payments and premium taxes (if
applicable) on deposits received.
Financial Reinsurance
The U.S. financial reinsurance subsegment includes net fees earned on financial
reinsurance agreements and the equity in the unconsolidated results from the
Company's ownership in RGA/Swiss Financial Group, L.L.C. ("RGA/Swiss").
Financial reinsurance agreements represent low mortality risk business that the
Company assumes and subsequently retrocedes with a net fee earned on the
transaction. The fees earned from the assumption of the financial reinsurance
contracts are reflected in other revenues, and the fees paid to
retrocessionaires are reflected in policy acquisition costs and other insurance
expenses.
Income before income taxes and minority interest decreased to $0.8 million and
$2.6 million in the third quarter and first nine months of 1999, as compared to
$1.9 million and $3.7 million in the prior-year periods. These results were
primarily attributable to the decrease in earnings from RGA/Swiss and the net
fees earned on financial reinsurance agreements. A decrease in outstanding
statutory financial reinsurance also contributed to the earnings decrease.
Policy acquisition costs and other insurance expenses include fees paid for the
subsequent retrocession of these financial reinsurance transactions.
CANADA OPERATIONS (dollars in thousands)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Net premiums $42,763 $25,704 $119,636 $ 75,058
Investment income, net of related
expenses 14,153 6,558 38,125 19,034
Realized investment gains, net - - 6,253 617
Other revenue 38 (31) (24) 339
------------------------------------------------------------------------------
Total revenues 56,954 32,231 163,990 95,048
BENEFITS AND EXPENSES:
Claims and other policy benefits 37,072 25,063 112,890 69,394
Interest credited 451 216 1,356 677
Policy acquisition costs and other
insurance expenses 7,442 3,714 17,161 9,208
Other operating expenses 1,992 1,424 5,418 4,824
------------------------------------------------------------------------------
Total benefits and expenses 46,957 30,417 136,825 84,103
Income before income taxes and
minority interest $ 9,997 $ 1,814 $ 27,165 $ 10,945
------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
Income before income taxes and minority interest increased 451.1% and 148.2% in
the third quarter and first nine months of 1999, respectively. Excluding
realized investment gains, income before income taxes and minority interest
increased 451.1% and 102.5% in the third quarter and first nine month of 1999,
respectively. The increases were driven by a growth in premiums and investment
income and favorable mortality for the quarter and year to date. In addition,
reporting on a large in-force block obtained late in 1998 was refined based upon
better information received from the client. The investment gains were realized
in the second quarter to realign the investment portfolio to achieve a better
match of asset and liability cash flows. The effects of changes in the foreign
exchange rate during 1999 compared to 1998 are not material.
Net premiums increased 66.4% and 59.4% in the third quarter and first nine
months of 1999, respectively. The increases were the result of several major
treaties being signed in 1998 that generated new premiums in the fourth quarter
of 1998 and in 1999, as well as renewal premiums generated by the segment's
production throughout 1998. Net premium levels for the fourth quarter of 1999
are expected to be in line with those experienced during the first three
quarters. The comparable growth in the fourth quarter premiums will be impacted
by the major treaties signed in the fourth quarter of 1998. Premium levels are
significantly influenced by large transactions and reporting practices of ceding
companies and therefore can fluctuate from period to period. Net investment
income increased 115.8% and 100.3% in the third quarter and first nine months of
1999 due to an increase in the invested asset base. The invested asset base
growth was due to operating cash flows on traditional reinsurance, proceeds from
capital contributions made to the segment, and interest on the growth of funds
withheld at interest related to a large in-force block added in 1998.
Claims and other policy benefits increased 47.9% and 62.7% during the third
quarter and first nine months of 1999. Claims and other policy benefits as a
percentage of net premiums were 86.7% and 94.4% in the third quarter and first
nine months of 1999 compared to 97.5% and 92.5% in the prior-year periods. The
lower percentage in the third quarter is the result of refined reporting on a
large in-force block received in late 1998 based on new information and better
than expected mortality for the quarter. The increased percentages experienced
for the nine months are primarily the result of several large in-force blocks
added in 1998. These blocks are mature blocks of level premium business in which
mortality as a percentage of premiums is expected to be higher than the
historical ratios. Investment income on the accumulated assets supporting the
reserve liabilities together with renewal premiums are sufficient to provide an
appropriate profit margin. Mortality is expected to fluctuate somewhat from
period to period but remains fairly constant over the long term.
Policy acquisition costs and other insurance expenses as a percentage of net
premiums totaled 17.4% and 14.3% in the third quarter and first nine months of
1999, respectively, compared to 14.4% and 12.3% in the prior year periods. The
increase in ratios is primarily due to the changing mix of business to
coinsurance from yearly renewable term agreements. These coinsurance agreements
tend to have higher commission costs compared to yearly renewable term
agreements.
17
<PAGE> 18
LATIN AMERICA OPERATIONS (dollars in thousands)
FOR THE THREE MONTH PERIOD ENDING SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
TOTAL LATIN
DIRECT REINSURANCE AMERICA
<S> <C> <C> <C>
REVENUES:
Net premiums $ 11,615 $ 6,624 $ 18,239
Investment income (loss), net of related expenses 4,797 3,025 7,822
Realized investment gains, net - - -
Other revenue 26 (126) (100)
--------------------------------------------------
Total revenues 16,438 9,523 25,961
BENEFITS AND EXPENSES:
Claims and other policy benefits 11,968 7,517 19,485
Interest credited (1) 377 376
Policy acquisition costs and other insurance expenses 837 532 1,369
Other operating expenses 2,369 234 2,603
--------------------------------------------------
Total benefits and expenses 15,173 8,660 23,833
Income before income taxes and minority interest $ 1,265 $ 863 $ 2,128
--------------------------------------------------
</TABLE>
FOR THE THREE MONTH PERIOD ENDING SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
TOTAL LATIN
DIRECT REINSURANCE AMERICA
<S> <C> <C> <C>
REVENUES:
Net premiums $ 9,498 $ 11,612 $ 21,110
Investment income, net of related expenses 829 895 1,724
Other revenue 228 - 228
--------------------------------------------------
Total revenues 10,555 12,507 23,062
BENEFITS AND EXPENSES:
Claims and other policy benefits 7,127 9,794 16,921
Interest credited 37 - 37
Policy acquisition costs and other insurance expenses 1,036 553 1,589
Other operating expenses 2,182 827 3,009
--------------------------------------------------
Total benefits and expenses 10,382 11,174 21,556
Income before income taxes and minority interest $ 173 $ 1,333 $ 1,506
--------------------------------------------------
</TABLE>
18
<PAGE> 19
FOR THE NINE MONTH PERIOD ENDING SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
TOTAL LATIN
DIRECT REINSURANCE AMERICA
<S> <C> <C> <C>
REVENUES:
Net premiums $ 33,882 $ 44,598 $ 78,480
Investment income, net of related expenses 11,471 4,260 15,731
Realized investment gains, net 12 268 280
Other revenue 104 (126) (22)
--------------------------------------------------
Total revenues 45,469 49,000 94,469
BENEFITS AND EXPENSES:
Claims and other policy benefits 35,096 42,645 77,741
Interest credited 239 377 616
Policy acquisition costs and other insurance expenses 2,911 1,190 4,101
Other operating expenses 5,575 2,411 7,986
--------------------------------------------------
Total benefits and expenses 43,821 46,623 90,444
Income before income taxes and minority interest $ 1,648 $ 2,377 $ 4,025
--------------------------------------------------
</TABLE>
FOR THE NINE MONTH PERIOD ENDING SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
TOTAL LATIN
DIRECT REINSURANCE AMERICA
<S> <C> <C> <C>
REVENUES:
Net premiums $ 35,072 $ 37,035 $ 72,107
Investment income, net of related expenses 4,675 2,685 7,360
Other revenue 180 - 180
--------------------------------------------------
Total revenues 39,927 39,720 79,647
BENEFITS AND EXPENSES:
Claims and other policy benefits 30,650 33,712 64,362
Interest credited 116 - 116
Policy acquisition costs and other insurance expenses 3,023 1,511 4,534
Other operating expenses 5,532 2,690 8,222
--------------------------------------------------
Total benefits and expenses 39,321 37,913 77,234
Income before income taxes and minority interest $ 606 $ 1,807 $ 2,413
--------------------------------------------------
</TABLE>
For the Latin America operations, income before income taxes and minority
interest increased 41.3% in the third quarter and 66.8% in the first nine months
of 1999 compared to the same periods in 1998. For the first nine months of 1999,
results improved in the reinsurance operations with continued profitability in
the reinsurance of privatized pensions in Argentina and developing business in
Mexico. While direct insurance business in Chile continued to be profitable, the
Company has begun exploring the possibility of selling its Chilean direct
writing operations. The Company is considering this sale in an effort to focus
on reinsurance business as opposed to direct distribution.
19
<PAGE> 20
Direct Insurance
For the third quarter of 1999, the Latin America direct business reported income
before income taxes and minority interest of $1.3 million compared to $0.2
million for the same period in 1998. For the first nine months of 1999, the
income before taxes and minority interest for the Latin America direct business
increased approximately $1.0 million.
Premiums increased in Chile and Argentina during the third quarter, however
decreased during the first nine months of 1999 compared to the same periods in
1998. In Chile, the sales of annuities have been decreasing due to sluggish
market conditions. Although direct premiums from privatized pensions in
Argentina have decreased as no new contracts were sold since September 1998, the
loss in business was partially off-set by a new contract in group life.
Investment income more than doubled during the third quarter and the first nine
months of 1999. The invested assets for the subsidiaries have increased with
growth in the business and capital contributions from RGA. In addition, the
appreciation of Chilean investment balances that are index-denominated are
included in investment income.
Claims and other policy benefits increased 67.9% during the third quarter and
14.5% during the first nine months of 1999 as a result of continued growth in
the Chilean and Argentine business compared to the level for the same period in
prior year. In addition, Chilean reserves are index-denominated, similar to the
investments, therefore the appreciation in the index will contribute to the
increase in the claims and other policy benefits. Interest credited represents
amounts credited on Argentine universal life products.
Policy acquisition costs and other insurance expenses decreased 19.2% during the
third quarter and 3.7% during the first nine months of 1999 compared to the same
periods in 1998. As a percentage of net premiums, policy acquisition costs and
other insurance expenses represented 7.2% and 8.6% for the third quarter and
first nine months of 1999, respectively, compared to 10.9% and 8.6% in the prior
year periods. The percentages can fluctuate due to variations in the mixture of
business being written in Argentina and Chile. Other operating expenses
increased $0.2 million during the third quarter of 1999, but remained fairly
consistent for the first nine months of 1999 compared to the same period in
1998.
Reinsurance
Income before income taxes and minority interest decreased $0.5 million during
the third quarter, but showed an increase of $0.6 million during the first nine
months of 1999. Results were driven by the reinsurance business from privatized
pensions in Argentina and developing business in Mexico.
Net premiums decreased $5.0 million during the third quarter of 1999, however,
but increased $7.6 million for the first nine months of 1999. The overall growth
was primarily from an increase in privatized pension reinsurance in Argentina
while the decrease in premiums for the quarter was due to reduced quota share
participation in several privatized pension contracts in
20
<PAGE> 21
Argentina, effective July 1, 1999. In general, the number of active treaties has
decreased, however, overall premiums and profitability are expected to remain at
comparable levels.
Net investment income increased during the third quarter and first nine months
of 1999 as a result of the timing of cash flows and adjustments to the segments
allocated investment income. Investment income for RGA Reinsurance is allocated
to the various operating segments on the basis of net capital and investment
performance varies with the composition of investments.
The claims and other policy benefits for the reinsurance business decreased $2.3
million and increased $8.9 million during the third quarter and first nine
months of 1999, respectively. Claims and other policy benefits as a percentage
of net premiums totaled 113.5% and 95.6% for the third quarter and first nine
months of 1999 compared to 84.3% and 91.0% in the prior year periods,
respectively. This percentage fluctuates as claims related to the privatized
pensions in Argentina continue to develop. The Company expects mortality to
fluctuate somewhat from period to period, but believes it is fairly constant
over longer periods of time. The Company continues to monitor mortality trends
to determine the appropriateness of reserve levels.
Policy acquisition costs and other insurance expenses remained fairly level for
the third quarter and first nine months of 1999 compared to the same periods in
1998. Policy acquisition costs and other insurance expenses as a percentage of
net premiums represented 8.0% and 2.7% for the third quarter and first nine
months of 1999 compared to 4.8% and 3.1% in the prior year periods,
respectively. These percentages fluctuate primarily due to changes in the mix of
business.
ASIA PACIFIC OPERATIONS (dollars in thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Net premiums $18,867 $14,224 $51,188 $37,630
Investment income, net of related expenses
256 563 1,612 1,715
Realized investment gains, net - 0 (33) 1
Other revenue 257 349 643 2,476
------------------------------------------------------------------------
Total revenues 19,380 15,136 53,410 41,822
BENEFITS AND EXPENSES:
Claims and other policy benefits 14,078 6,513 41,242 21,669
Policy acquisition costs and other
insurance expenses 3,749 6,685 14,193 14,312
Other operating expenses 1,647 1,824 5,607 5,353
Interest expense 123 115 355 336
------------------------------------------------------------------------
Total benefits and expenses 19,597 15,137 61,397 41,670
(Loss) income before income taxes and
minority interest $ (217) $ (1) $(7,987) $ 152
------------------------------------------------------------------------
</TABLE>
21
<PAGE> 22
The Company conducts reinsurance business in the Asia Pacific region through
branch operations in Hong Kong, Japan, and a new a liaison office in Taiwan
opened during the first quarter of 1999. Business is also conducted through RGA
Australia, a wholly owned subsidiary in Australia. The principal types of
reinsurance provided in the region are life, critical care, superannuation, and
financial reinsurance.
The third quarter and first nine months of 1999 showed an increase in premiums
of 32.5% and 36.0%, respectively. For the third quarter of 1999, the loss before
income taxes and minority interest was in line with expectations, with premiums,
claims, and changes in reserves at expected levels. For the first nine months of
1999, the loss was caused by higher than expected claims and increases in
reserves in the first quarter. In addition, the discontinuance of a financial
reinsurance treaty with a Japanese issuer during the first quarter of 1999
negatively affected the segment's profitability.
Renewal premiums from the existing block of business, new business premiums from
facultative and automatic treaties, and premium flows from larger blocks of
business all contributed to the premium increase. Business premium levels are
significantly influenced by large transactions and reporting practices of ceding
companies and therefore can fluctuate from period to period. Net investment
income decreased during the third quarter and first nine months by 54.5% and
6.0%, respectively. Investment income for RGA Reinsurance is allocated to the
various operating segments on the basis of average net capital and investment
performance varies with the composition of investments and the relative
allocation of capital to units. Other revenue during 1998 represented profit and
risk fees associated with the financial reinsurance in Japan. A lower level of
fees were reported in the third quarter and were substantially lower in the
first nine months of 1999, as discussed above.
Claims and other policy benefits increased by 116.2% and 90.3% in the third
quarter and first nine months or 1999 compared to the prior year periods. Claims
and other policy benefits for 1999 include claims paid, claims in the course of
payment and establishment of additional reserves to provide for unreported
claims. Claims and other policy benefits as a percentage of net premiums
increased to 74.6% and increased to 80.6% in the third quarter and first nine
months of 1999, respectively, from 45.7% and 57.6% in 1998. The increase in the
third quarter was caused by an increase in the reserves for incurred but
unreported claims in Hong Kong and Japan. The large increase for the first nine
months was caused by several large claims in Japan and Hong Kong and the
establishment of additional reserves for unreported claims in Japan and
Australia. The Company expects mortality to fluctuate somewhat from period to
period, but believes it is fairly constant over longer periods of time. The
Company continues to monitor mortality trends to evaluate the appropriateness of
reserve levels and adjusts the reserve levels on a periodic basis.
Policy acquisition costs and other insurance expenses decreased 43.9% and 0.8%
in the third quarter and first nine months of 1999, respectively, versus the
prior year periods. Policy acquisition costs and other insurance expenses as a
percentage of net premiums were 19.9% and 27.7% in the third quarter and first
nine months of 1999 versus 46.9% and 38.0% in the prior year periods,
respectively. These percentages fluctuate due to the timing of client company
22
<PAGE> 23
reporting and variations in the mixture of business being written in Asia
Pacific. In addition, the 1998 results include a higher level of charges
relating to the financial reinsurance in Japan, which was discontinued in the
first quarter of 1999. Other operating expenses for the third quarter and first
nine months of 1999 decreased to $1.6 million and increased to $5.6 million,
respectively. As a percentage of premiums, other operating expenses decreased to
8.7% and 11.0% in the third quarter and first nine months 1999 from 12.8% and
14.2% in the prior year periods. The Company believes that sustained growth in
premiums should lessen the burden of start-up expenses and expansion costs over
time.
OTHER INTERNATIONAL OPERATIONS (dollars in thousands)
<TABLE>
<CAPTION>
------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Net premiums $ 8,148 $ 2,538 $ 19,298 $ 4,582
Investment income, net of related expenses 80 96 608 274
Realized investment gains, net 155 42 275 42
Other revenue (192) 31 420 11
------------------------------------------------------------------------
Total revenues 8,191 2,707 20,601 4,909
BENEFITS AND EXPENSES:
Claims and other policy benefits 5,247 1,598 14,676 3,087
Policy acquisition costs and other
insurance expenses 2,621 814 3,456 1,420
Other operating expenses 2,602 1,394 5,981 3,909
------------------------------------------------------------------------
Total benefits and expenses 10,470 3,806 24,113 8,416
Loss before income taxes and minority
interest $ (2,279) $ (1,099) $ (3,512) $ (3,507)
------------------------------------------------------------------------
</TABLE>
The other international segment is the newest segment of the Company. This
segment provides life reinsurance to international clients throughout Europe and
South Africa. The principal type of reinsurance being provided has been life
reinsurance for a variety of life products through yearly renewable term and
coinsurance agreements. These agreements may be either facultative or automatic
agreements. The Company has efforts underway to license a life reinsurance
subsidiary in the United Kingdom. In addition, the Company has offices in Cape
Town and Johannesburg, South Africa.
Net premiums increased to $8.1 million and $19.3 million in the third quarter
and first nine months of 1999, respectively, primarily as a result of business
generated from an automatic treaty with a United Kingdom client. Investment
income for RGA Reinsurance is allocated to the
23
<PAGE> 24
segment on the basis of average net capital and the investment performance
varies with the composition of investments.
Claims and other policy benefits are relatively flat as a percentage of premiums
at 64.4% and 76.1% in the third quarter and first nine months of 1999,
respectively, from 62.3% and 67.4% during the same periods in 1998. Year to year
comparisons of premiums and claims and other policy benefits are not considered
meaningful due to the start-up nature of this segment. Other operating expenses
increased $1.2 million and $2.1 million during the third quarter and first nine
months of 1999, respectively, compared to the same periods in 1998. The overall
increase in operating expenses was attributed to increases in costs associated
with the expansion efforts within the segment.
CORPORATE AND OTHER SELECTED CONSOLIDATED INFORMATION
Corporate activity generally represents investment income on the undeployed
proceeds from the Company's capital raising efforts and corporate investment
income allocation, corporate expenses that include unallocated overhead and
executive costs, as well as the interest on corporate debt. In addition, the
provision for income taxes is generally calculated based on the overall
operations of the Company.
Consolidated investment income from continuing operations increased 28.9% and
28.2% during the third quarter and first nine months of 1999, respectively.
Investment income will be negatively affected in the near future due to the
reduction in invested assets related to the recapture of the funding agreement
business by General American on September 29, 1999. The cost basis of invested
assets decreased $0.6 billion, or 12.9% from September 30, 1998. The decrease in
the invested assets was primarily a result of the recapture. This decrease was
offset, in part, by an increase in operating cash flows, new reinsurance
transactions involving asset-intensive products, and proceeds from the issuance
of $75.0 million of long-term debt to General American during the second
quarter. The average yield earned on investments was 6.87% and 6.97% for the
first nine months of 1999 and 1998, respectively. The decrease in overall yield
reflected a general decline in interest rates and the impact of the funding
agreement reinsurance product that are generally of a shorter duration and carry
a lower average yield. Investment income has been allocated to the operational
segments on the basis of average required capital per segment.
Consolidated other expenses represent general corporate expenses that are not
allocated to the operational segments.
Consolidated provision for income taxes for continuing operations decreased
140.2% and 15.8% for the third quarter and first nine months of 1999,
respectively, as a result of pre-tax losses for the quarter and lower pre-tax
income for the first nine months. The effective tax rates for the third quarter
and first nine months of 1999 were affected by significant realized capital
losses domestically and operating losses from foreign subsidiaries for which
deferred tax assets cannot be fully established. Excluding realized capital
losses, the effective tax rate would have been approximately 38.5% and 39.5% for
the third quarter and first nine months of 1999, respectively.
24
<PAGE> 25
DISCONTINUED OPERATIONS
At December 31, 1998, the Company formally reported its accident and health
division as a discontinued operation for financial reporting purposes. The
accident and health division was placed into run-off with all treaties
(contracts) being terminated at the earliest possible date. This discontinued
segment reported a loss of $3.2 million and $8.2 million for the third quarter
and first nine months of 1999 up from a loss of $1.0 million and $1.3 million
for the comparable prior year periods, primarily a result of adverse development
on the treaties in run-off. The nature of the underlying risks is such that the
claims may take years to reach the reinsurers involved. Thus, the Company
expects to pay claims out of existing reserves over a number of years as the
level of business diminishes. The experience on this block of business will
continue to be monitored as the business runs off.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1999, the Company generated $225.1 million in
cash from operating activities and $1.4 billion in cash from investing
activities. These increases were offset by cash used by financing activities of
$1.6 billion, primarily a result of withdrawals on universal life and other
investment type policies and contracts related to the General American funding
agreements recapture. The sources of funds of the Company's operating
subsidiaries consist of premiums received from ceding insurers, investment
income, and proceeds from sales and redemption of investments. Premiums are
generally received in advance of related claim payments. Funds are primarily
applied to policy claims and benefits, operating expenses, income taxes, and
investment purchases.
As the Company continues its expansion efforts, management continually analyzes
capital adequacy issues. The Company has access to a $25.0 million demand line
of credit. At September 30, 1999, $15.0 million was drawn upon that line. This
liability is included in other liabilities on the balance sheet at September 30,
1999. During the second quarter of 1999, the Company borrowed $75.0 million in
the form of a term loan from General American to continue expansion of the
Company's business. The term loan is included in long-term debt on the balance
sheet at September 30, 1999. The ability of the Company and its subsidiaries to
make principal and interest payments, and of the Company to continue to pay
dividends to stockholders, is ultimately dependent on the earnings and surplus
of the Company's subsidiaries, the investment earnings on the undeployed funds
at the Company, and the Company's ability to raise additional capital. At
September 30, 1999, RGA Reinsurance and RGA Canada had statutory capital and
surplus of $321.1 million and $141.1 million, respectively. The transfer of
funds from the subsidiaries to the Company is subject to applicable insurance
laws and regulations. Any future increases in liquidity needs due to relatively
large policy loans or unanticipated material claim levels would be met first by
operating cash flows and then by selling fixed-income securities or short-term
investments.
On August 26, 1999, GenAmerica announced a definitive agreement whereby
Metropolitan Life Insurance Company ("MetLife") will acquire GenAmerica,
including GenAmerica's beneficial ownership of 53% of the outstanding shares of
the Company, for approximately $1.2 billion. The
25
<PAGE> 26
transaction is expected to be completed in the fourth quarter of 1999 or first
quarter of 2000, and is subject to regulatory and judicial approval.
The Company plans to complete a private placement of approximately $125 million
in common equity with MetLife during the fourth quarter of 1999. The parties
have agreed in principle that the transaction will be priced at the September 28
closing quoted share price of 26-1/8 for the RGA common stock. That equity
placement, together with a moderate amount of debt expected to be incurred in
the first half of 2000, would address the immediate capital needs associated
with the growth of the Company's primary businesses. The shares of common stock
proposed to be sold in the private placement to MetLife will not be registered
under the Securities Act of 1933 and may not be offered or sold in the United
States absent registration or an applicable exemption from registration
requirements. The private placement is subject to execution of definitive
agreements and subject to customary closing conditions.
The Company has several treaties that provide clients the right to recapture,
generally subject to 90 days written notice, if the Company's ratings fall below
certain thresholds. While the Company's ratings have fallen below these
thresholds, the Company has not been notified of any such recaptures. The extent
of any realized gains or losses associated with such recaptures would depend on
market conditions at the time of recapture.
INVESTMENTS
Invested assets decreased to $3.8 billion at September 30, 1999, compared to
$5.1 billion at December 31, 1998. The decrease resulted primarily from
recapture of the funding agreement business. The Company has historically
generated positive cash flows from operations.
At September 30, 1999, the Company's portfolio of fixed maturity securities
available for sale had net unrealized losses before tax of $119.3 million.
MARKET RISK
Market risk is the risk of loss that may occur when fluctuation in interest and
currency exchange rates and equity and commodity prices change the value of a
financial instrument. Both derivative and nonderivative financial instruments
have market risk so the Company's risk management extends beyond derivatives to
encompass all financial instruments held that are sensitive to market risk. RGA
is primarily exposed to interest rate risk and foreign currency risk.
Interest Rate Risk
The Company manages interest rate risk and credit risk to maximize the return on
the Company's capital and to preserve the value created by its business
operations. As such, certain management monitoring processes are designed to
minimize the impact of sudden and sustained changes in interest rates on fair
value, cash flows, and net interest income.
The Company's exposure to interest rate price risk and interest rate cash flow
risk is reviewed on a quarterly basis. Interest rate price risk exposure is
measured using interest rate sensitivity
26
<PAGE> 27
analysis to determine the change in fair value of the Company's financial
instruments in the event of a hypothetical change in interest rates. Interest
rate cash flow risk exposure is measured using interest rate sensitivity
analysis to determine the Company's variability in cash flows in the event of a
hypothetical change in interest rates. If estimated changes of fair value, net
interest income, and cash flows are not within the limits established by the
Board, the Board may direct management to adjust its asset and liability mix to
bring interest rate risk within Board-approved limits.
Interest rate sensitivity analysis is used to measure the Company's interest
rate price risk by computing estimated changes in fair value of fixed rate
assets in the event of a range of assumed changes in market interest rates. This
analysis assesses the risk of loss in market risk sensitive fixed rate
instruments in the event of a sudden and sustained 100 to 300 basis points
increase or decrease in the market interest rates. The following table presents
the Company's projected change in fair value of all financial instruments for
the various rate shock levels at September 30, 1999. All market risk sensitive
instruments presented in this table are available for sale. RGA has no trading
securities.
The calculation of fair value is based on the net present value of estimated
discounted cash flows expected over the life of the market risk sensitive
instruments, using market prepayment assumptions and market rates of interest
provided by independent broker quotations and other public sources as of
September 30, 1999, with adjustments made to reflect the shift in the Treasury
yield curve as appropriate.
<TABLE>
<CAPTION>
Estimated Fair Value Percentage
-------------------- ----------
of Fixed Rate Hypothetical Hypothetical
------------- ------------ ------------
Percentage Change in Interest Rates Instruments Change Change
- ----------------------------------- ----------- ------ ------
(Dollars in thousands)
<S> <C> <C> <C>
300 basis point rise $ 1,669,728 $(519,131) -23.72%
200 basis point rise $ 1,813,237 $(375,622) -17.16%
100 basis point rise $ 1,983,891 $(204,968) -9.36%
Base Scenario $ 2,188,859 $ - 0.00%
100 basis point decline $ 2,439,202 $ 250,343 11.44%
200 basis point decline $ 2,756,092 $ 567,233 25.91%
300 basis point decline $ 3,187,590 $ 998,731 45.63%
</TABLE>
Interest rate sensitivity analysis is also used to measure the Company's
interest rate cash flow risk by computing estimated changes in the annual cash
flows expected attributable to floating rate assets, liabilities, and
off-balance sheet items in the event of a range of assumed changes in market
interest rates. This analysis assesses the risk of loss in cash flows of market
risk sensitive floating rate instruments in the event of a sudden and sustained
100 to 300 basis points increase or decrease in the market interest rates. The
following table presents the Company's estimated
27
<PAGE> 28
change in annual cash flows associated with floating-rate instruments for
various rate shock levels at September 30, 1999. All floating rate interest
sensitive instruments presented in this table are classified as available for
sale.
<TABLE>
<CAPTION>
Estimated Annual
----------------
Cash Flows of Percentage
------------- ----------
Floating Rate Hypothetical Hypothetical
------------- ------------ ------------
Percentage Change in Interest Rates Instruments Change Change
- ----------------------------------- ----------- ------ ------
(Dollars in thousands)
<S> <C> <C> <C>
300 basis point rise $ 49,795 $ 5,130 11.49%
200 basis point rise $ 48,005 $ 3,340 7.48%
100 basis point rise $ 46,556 $ 1,891 4.23%
Base Scenario $ 44,665 $ - 0.00%
100 basis point decline $ 43,247 $(1,418) -3.17%
200 basis point decline $ 41,711 $(2,954) -6.61%
300 basis point decline $ 40,392 $(4,273) -9.57%
</TABLE>
Computations of prospective effects of hypothetical interest rate changes are
based upon numerous assumptions, including relative levels of market interest
rates and mortgage prepayments, and should not be relied upon as indicative of
future results. Further, the computations do not contemplate any actions
management could undertake in response to changes in interest rates.
Certain shortcomings are inherent in the method of analysis presented in the
computation of the estimated fair value of fixed rate instruments and the
estimated cash flows of floating rate instruments, which estimates constitute
forward-looking statements. Actual values may differ materially from the
projections presented due to a number of factors, including, without limitation,
market conditions that may vary from assumptions used in the calculation of the
fair value. In the event of a change in interest rates, prepayments could
deviate significantly from those assumed in the calculation of fair value.
Finally, the desire of many borrowers to repay their fixed-rate mortgage loans
may decrease in the event of interest rate increases.
FOREIGN CURRENCY RISK
The Company is subject to foreign currency translation, transaction, and net
income exposure. The Company generally does not hedge the foreign currency
translation exposure related to its investment in foreign subsidiaries as it
views these investments to be long-term. Translation differences resulting from
translating foreign subsidiary balances to U.S. dollars are reflected in equity.
The Company generally does not hedge the foreign currency exposure of its
subsidiaries transacting business in currencies other than their functional
currency (transaction exposure). Currently, the Company believes its foreign
currency transaction exposure is not material to the consolidated results of
operations. Net income exposure which may result from the
28
<PAGE> 29
strengthening of the U.S. dollar to foreign currencies will adversely affect
results of operations since the income earned in the foreign currencies is worth
less in U.S. dollars. When evaluating investments in foreign countries, the
Company considers the stability of the political and currency environment.
Devaluation of the currency after an investment decision has been made will
affect the value of the investment when translated to U.S. dollars for financial
reporting purposes.
YEAR 2000
Many computer systems worldwide currently record years in a two-digit format. If
not addressed, such computer systems will be unable to properly interpret dates
beyond the year 1999, which could lead to business disruptions in the U.S. and
internationally (the "Year 2000" issue). The potential costs and uncertainties
associated with the Year 2000 issue will depend on a number of factors,
including software, hardware and the nature of the industry in which a company
operates. Also, costs and uncertainties associated with the Year 2000 issue may
vary country by country. Additionally, companies must coordinate with other
entities with which they interact electronically. The Company does not have a
mainframe computer and its "legacy" systems are based on technology that
correctly handles the Year 2000 issue. A legacy system typically represents
older systems that are not currently being maintained or enhanced. As the
Company continues to grow, the steady investment in technology has allowed it to
keep its systems current and handle impending problems, such as Year 2000, in
the normal course of business.
Assessment
The Company established a plan to address the Year 2000 issue and the work was
completed in accordance with that plan. The Company identified all systems that
are critical to the Company's reinsurance operations and has completed
substantial testing of those mission critical systems. The Company foresees
potential Year 2000 exposure at our foreign subsidiaries, due primarily to
external Year 2000 infrastructure issues in these geographic areas. The
Company's contingency plans should help to mitigate some of the effects of these
issues. Inventories of substantially all software, hardware, and trading
partners are compiled in a Year 2000 database. Each of these items has been
researched for Year 2000 compliance, and all required components have been
verified as Year 2000 compliant. In addition to internal systems, the Company
relies on external systems and has included in the assessment and inventories
those systems of significant external parties such as vendors, ceding companies
and retrocessionaires. There is no known method to completely determine
compliance of external systems, but an effort is being made to assure compliance
of these external systems to the extent practicable. The Company has been
working with external parties in conjunction with the Company's testing efforts;
however the Company could be adversely affected if external parties fail to
comply with the Year 2000 issue. This is a situation over which the Company has
no direct control.
With respect to non-information technology systems, the Company moved its St.
Louis office in August 1999 and believes that the new leased premises and all
equipment with embedded technology is upgraded and Year 2000 compliant. The
Company believes the only material non-information technology system outside of
St. Louis is in the premise occupied by the Company's
29
<PAGE> 30
Canadian segment. The Company has received confirmation from that building's
management that the building will be functional, accessible, and not materially
affected by the Year 2000 issue.
Testing
The Company completed testing of all critical systems. These tests revealed
minor issues that have been addressed. As of December 31, 1998, 100% of the core
systems were tested successfully. The Company has since concluded gathering data
from external parties. The testing and assessment of the Company's Year 2000
readiness has been completed in accordance with the Company's plan.
Contingency Plan
A contingency plan has been developed to reduce the possibility that any
disruption caused by the Year 2000 issue would materially affect the Company's
business or results of operations; however, no assurance can be given that the
contingency plan would be successful. The contingency plan was formulated in
conjunction with the compliance testing process. The plan includes an assessment
of the Company's ability to manually enter data for clients that cannot provide
electronic data, to estimate data for clients that have Year 2000 issues and
cannot provide data to the Company, and to implement a recovery plan in the case
of certain Year 2000 failures.
Costs
The Company expects to incur most of the costs of the Year 2000 effort primarily
from testing of the administrative systems in St. Louis and Montreal. These
systems support the administration of the majority of the Company's business.
Therefore, the combined costs of these two locations would effectively represent
substantially all of the Company's Year 2000 costs. The Company is continuing to
work with its subsidiaries to ensure their compliance with the Year 2000 effort.
Costs for St. Louis and Montreal were approximately $300,000 through December
31, 1998. The Company incurred costs of approximately $58,000 during 1999 and
anticipates that the remaining costs for the project will be approximately
$244,000. The Company has estimated future costs based on its current knowledge
and testing.
Although the Company met its goal to be substantially Year 2000 compliant by
June 30, 1999, key external parties or service providers may fail to make their
systems Year 2000 compliant. There are no assurances that there will not be
failures on the part of external parties. The failure to correct a material Year
2000 problem could result in an interruption in, or failure of, certain normal
business activities and operations of the Company. Such failures could adversely
affect the Company's results of operations, liquidity and financial condition,
particularly as a result of the uncertainty of the Year 2000 readiness of
third-party suppliers and clients. The Company believes that, with the
completion of the compliance effort, the possibility of significant
interruptions of normal operations has been significantly reduced. The Company
also believes that a reasonably likely worst case scenario would occur in the
event that clients are unable to provide data to process the reinsurance
activity. In this event, the Company would estimate existing business based on
the historical information in the Company's database. New business would be
calculated based on the initial information used by the Company during its
evaluation of the client's business. In these scenarios, the Company believes it
can still administer reinsurance business based on estimates until reliable
client data can be received.
30
<PAGE> 31
NEW ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133," effective upon issuance. SFAS No. 137
amends SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," deferring the effective date to fiscal quarters beginning after
June 15, 2000. SFAS No. 133 requires companies to record derivatives on the
balance sheet as assets or liabilities, measured at fair value. It also requires
that gains or losses resulting from changes in the values of those derivatives
be reported depending on the use of the derivative and whether it qualifies for
hedge accounting. The Company has not yet determined the effect, if any, of the
implementation of SFAS No. 133 on the results of operation, financial position,
or liquidity. The Company plans to adopt the provisions of SFAS No. 133 in 2000.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The statements included in this Form 10-Q regarding future financial performance
and results and the other statements that are not historical facts are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These "forward-looking" statements include,
without limitation, certain statements in the "Management's Discussion and
Analysis of Financial Condition and Results of Operations." Such statements also
may include, but are not limited to, statements regarding the Company's ability
to meet reinsurance and debt obligations, projections of earnings, revenues,
income or loss, estimated fair values of fixed rate instruments, estimated cash
flows of floating rate instruments, capital expenditures, plans for future
operations and financing needs or plans, growth prospects and targets, industry
trends, trends in or expectations regarding operations and capital commitments,
the sufficiency of claims reserves, and Year 2000 compliance as well as
assumptions relating to the foregoing. The words "expect," "project,"
"estimate," "anticipate," "should," "believe" and similar expressions also are
intended to identify forward-looking statements. Forward-looking statements are
inherently 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.
Numerous factors could cause actual results and events to differ materially from
those expressed or implied by forward-looking statements including, without
limitation, (1) the contemplated acquisition of GenAmerica by MetLife, (2)
market conditions and the timing of sales of investment securities, (3)
regulatory action taken by the Missouri Department of Insurance with respect to
General American or the Company or its subsidiaries, (4) changes in the
Company's credit ratings and the effect of recent ratings downgrades on the
Company's future results of operations and financial condition, (5) material
changes in mortality and claims experience, (6) competitive factors and
competitors' responses to the Company's initiatives, (7) general economic
conditions affecting the demand for insurance and reinsurance in the Company's
current and planned markets (8) successful execution of the Company's entry into
new markets, (9) successful development and introduction of new products, (10)
the stability of governments and economies in foreign markets, (11) fluctuations
in U.S. and foreign currency exchange rates, interest rates and securities and
real estate markets, (12) the success of the Company's clients,
31
<PAGE> 32
including General American Life Insurance Company ("General American") and its
affiliates, and (13) changes in laws, regulations, and accounting standards
applicable to the Company and its subsidiaries. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual outcomes may vary materially from those indicated.
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE FORWARD-LOOKING
STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. ALL SUBSEQUENT WRITTEN AND
ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON
ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THIS CAUTIONARY
STATEMENT. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO RELEASE PUBLICLY ANY
REVISIONS TO SUCH FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS AND CIRCUMSTANCES
AFTER THE DATE HEREOF TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
See "Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations - Market Risk" and " - Foreign Currency Risk" which are
incorporated by reference herein.
32
<PAGE> 33
PART II - OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
From time to time, the Company is subject to litigation and arbitration related
to its reinsurance business and to employment-related matters in the normal
course of its business. Management does not believe that the Company is a party
to any such pending litigation or arbitration that would have a material adverse
effect on its future operations.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) A Special Meeting of Shareholders of the Company was held on September 14,
1999
(b) At the Special Meeting, the following proposal was voted upon by the
shareholders as indicated below:
1. To approve the amendment to the Restate Articles of Incorporation of
RGA in order to reclassify the existing and separate class of Non-Voting Common
Stock into Voting Common Stock by converting each outstanding share of
Non-Voting Common Stock into 0.97 of a share of Voting Common Stock.
<TABLE>
<CAPTION>
Voted
Voted For Against Abstained No Vote
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Voting 34,021,598 995,629 5,177 0
Non-Voting 6,002,872 125,570 4,450 0
</TABLE>
33
<PAGE> 34
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
(a) See index to exhibits.
(b) The following reports on Form 8-K were filed with the Securities and
Exchange Commission during the three months ended September 30, 1999:
1. The Company filed a Current Report on Form 8-K on August 25, 1999,
dated as of August 10, 1999, to report under Item 3 that General American had
become subject to an order of administrative supervision by the Missouri
Department of Insurance.
2. The Company filed a Current Report on Form 8-K on September 10,
1999, dated as of August 26, 1999, to report under Item 1 a potential change
in control resulting from the proposed acquisition of GenAmerica by MetLife.
3. The Company filed a Current Report on Form 8-K on September 30,
1999, dated as of September 17, 1999, to report under Item 3 that the Circuit
Court of Cole County, Missouri, entered an order of rehabilitation placing
General American Mutual Holding Company into rehabilitation and approving
notice of a hearing to approve a Plan of Reorganization.
34
<PAGE> 35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Reinsurance Group of America, Incorporated
By: /s/ A. Greig Woodring November 12, 1999
-------------------------------------------
A. Greig Woodring
President & Chief Executive Officer
(Principal Executive Officer)
/s/ Jack B. Lay November 12, 1999
-------------------------------------------
Jack B. Lay
Executive Vice President & Chief Financial
Officer
(Principal Financial and Accounting Officer)
35
<PAGE> 36
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
3.1 Restated Articles of Incorporation of Reinsurance Group of America,
Incorporated, as amended.
3.2 Bylaws of Reinsurance Group of America, Incorporated, as amended.
3.3 Form of Certificate of Designations for Series A Junior Participating
Preferred Stock, incorporated by reference to Exhibit 3.3 to Amendment
No. 1 to Form 10-Q for the quarter ended March 31, 1997 (No. 1-11848)
filed May 21, 1997.
4.1 Third Amendment to Rights Agreement dated as of August 12, 1999,
between Reinsurance Group of America, Incorporated and ChaseMellon
Shareholder Services, L.L.C. (as successor to Boatmen's Trust
Company), as Rights Agent, incorporated by reference to Exhibit 4.4 to
Form 8-K dated August 10, 1999 (No. 1-11848), filed August 25, 1999.
4.2 Fourth Amendment to Rights Agreement dated as of August 23, 1999,
between Reinsurance Group of America, Incorporated and ChaseMellon
Shareholder Services, L.L.C. (as successor to Boatmen's Trust
Company), as Rights Agent, incorporated by reference to Exhibit
4.1 to Form 8-K dated August 26, 1999 (No. 1-11848), filed
September 10, 1999.
36
<PAGE> 1
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF
REINSURANCE GROUP OF AMERICA, INCORPORATED
Reinsurance Group of America, Incorporated, a Missouri
corporation, does hereby restate its Articles of Incorporation and certifies
that the Restated Articles of Incorporation correctly sets forth, without
change, the corresponding provisions of the Articles of Incorporation as
theretofore amended and that the Restated Articles of Incorporation supersede
the original Articles of Incorporation and all amendments thereto.
ARTICLE ONE
NAME
The name of the corporation (hereinafter referred to as the
"Corporation") is: Reinsurance Group of America, Incorporated.
ARTICLE TWO
REGISTERED OFFICE AND AGENT
The address, including street and number, if any, of the
Corporation's initial registered office in this state is 700 Market Street, St.
Louis, Missouri 63101. The name of its initial agent at such address is James E.
Sherman.
ARTICLE THREE
CAPITAL STOCK
A. Class and Number of Shares. The aggregate number, class and
par value, if any, of shares which the Corporation shall have authority to issue
is 85,000,000 shares, consisting of 75,000,000 shares of Common Stock, par value
$.0l per share, and 10,000,000 shares of Preferred Stock, par value $.0l per
share ($850,000.00 aggregate total).
B. Voting Rights of the Common Stock. Each holder of the
Common Stock shall been titled to one vote per share of Common Stock on all
matters to be voted on by the shareholders.
C. Issuance of Preferred Stock, Rights and Preferences
Thereof.
1. The Preferred Stock may be issued from time to time in
one or more series, with such voting powers, full or limited, or no voting
powers, and such designations, preferences and relative, participating, optional
or other special rights and qualifications, limitations or restrictions thereof,
as shall be stated in the resolution or resolutions providing for the issuance
of such stock adopted from time to time by the Board of Directors. Without
limiting the generality of the foregoing, in the resolution or resolutions
providing for the issuance of such
<PAGE> 2
shares of each particular series of Preferred Stock, subject to
the requirements of the laws of the State of Missouri, the Board of Directors is
also expressly authorized:
(a) To fix the distinctive serial designation of the shares
of the series;
(b) To fix the consideration for which the shares of the
series are to be issued;
(c) To fix the rate or amount per annum, if any, at which
the holders of the shares of the series shall be entitled to receive dividends,
the dates on which and the conditions under which dividends shall be payable,
whether dividends shall be cumulative or noncumulative, and if cumulative, the
date or dates from which dividends shall be cumulative;
(d) To fix the price or prices at which, the times during
which, and the other terms, if any, upon which the shares of the series may be
redeemed;
(e) To fix the rights, if any, which the holders of shares
of the series have in the event of dissolution or upon distribution of the
assets of the Corporation;
(f) From time to time to include additional shares of
Preferred Stock which the Corporation is authorized to issue in the series;
(g) To determine whether or not the shares of the series
shall be made convertible into or exchangeable for other securities of the
Corporation, including shares of the Common Stock of the Corporation or shares
of any other series of the Preferred Stock of the Corporation, now or hereafter
authorized, or any new class of Preferred Stock of the Corporation hereafter
authorized, the price or prices or the rate or rates at which conversion or
exchange may be made, and the terms and conditions upon which the conversion or
exchange rate shall be exercised;
(h) To determine if a sinking fund shall be provided for
the purchase or redemption of shares of the series and, if so, to fix the terms
and the amount or amounts of the sinking fund; and
(i) To fix the other preferences and rights, privileges and
restrictions applicable to the series as may be permitted law.
D. Conversion.
1. All outstanding shares of Non-Voting Common Stock, par
value $.0l per share, of RGA ("Non-Voting Common Stock") previously authorized
by the Certificate of Amendment of Articles of Incorporation of the Corporation
issued on May 29, 1998, shall, as of the date of effectiveness of this
Certificate of Amendment, be converted, without the action of any holder
thereof, into 0.97 shares of Common Stock. The Non-Voting Common Stock shall no
longer be authorized by the Corporation.
2
<PAGE> 3
2. Following the effective date of this Certificate of
Amendment, each certificate representing shares of Non-Voting Common Stock shall
be deemed to be a certificate representing 0.97 shares of Common Stock. No
fractional shares will be issued in connection with this amendment. Rather,
holders of Non-Voting Common Stock who would otherwise be entitled to receive a
fraction of a share of Voting Common Stock (after taking into account all
certificates held by such shareholder) will receive in lieu thereof cash
(without interest) in an amount equal to such fractional part of a share of
Voting Common Stock multiplied by the closing sales price of Voting Common Stock
on the date this amendment is filed with the Missouri Secretary of State. No
holder of Non-Voting Common Stock will be entitled to dividends, voting rights
or any other rights as a shareholder in respect of any fractional share.
ARTICLE FOUR
ADDITIONAL PROVISIONS REGARDING
CERTAIN SHAREHOLDER RIGHTS
A. Preemptive Rights. All preemptive rights of shareholders
are hereby denied, so that no stock or other security of the Corporation shall
carry with it and no holder or owner of any share or shares of stock or other
security or securities of the Corporation shall have any preferential or
preemptive right to acquire additional shares of stock or any other security of
the Corporation.
B. Cumulative Voting. All cumulative voting rights are hereby
denied, so that none of the Common Stock, the Preferred Stock or any other
security of the Corporation shall carry with it and no holder or owner of any
Common Stock, Preferred Stock or any other security shall have any right to
cumulative voting in the election of directors or for any other purpose.
ARTICLE FIVE
INCORPORATOR
The name and place of residence of the incorporator is:
Donna J. Holsten
6140 Wanda
St. Louis, Missouri 63116
ARTICLE SIX
DIRECTORS
A. Number and Classes of Directors. The number of directors to
constitute the initial Board of Directors of the Corporation is three.
Thereafter, the number of directors shall be fixed by, or in the manner provided
in, the Bylaws of the Corporation. The Board of Directors shall be divided into
three classes, as nearly equal in number as possible, with the mode of such
classification to be provided for in the Bylaws of the Corporation. Directors
other than certain Directors elected to the initial Board of Directors shall be
elected to hold office for a
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term of three years, with the term of office of one class expiring each year. As
used in these Articles of Incorporation, the term "entire Board of Directors"
means the total number of Directors fixed by, or in accordance with, these
Articles of Incorporation or the Bylaws of the Corporation.
B. Removal of Directors. Subject to the rights, if any, of the
holders of any class of capital stock of the Corporation (other than the Common
Stock) then outstanding, (1) any Director, or the entire Board of Directors, may
be removed from office at any time prior to the expiration of his term of office
only for cause and only by the affirmative vote of the holders of record of
outstanding shares representing at least 85% of all of the then outstanding
shares of capital stock of the Corporation then entitled to vote generally in
the election of Directors, voting together as a single class at a special
meeting of shareholders called expressly for that purpose (such vote being in
addition to any required class or other vote); and (2) any Director may be
removed from office by the affirmative vote of a majority of the entire Board of
Directors at any time prior to the expiration of his term of office, as provided
by law, in the event that the Director fails to meet any qualifications stated
in the Bylaws for election as a Director or in the event that the Director is in
breach of any agreement between the Director and the Corporation relating to the
Director's service as a Director or employee of the Corporation.
C. Nominations. Subject to the rights, if any, of holders of
any class of capital stock of the Corporation (other than the Common Stock) then
outstanding, nominations for the election of Directors may be made by the
affirmative vote of a majority of the entire Board of Directors or by any
shareholder of record entitled to vote generally in the election of Directors.
Any shareholder who otherwise desires to nominate one or more persons for
election as a Director at any meeting of shareholders held at any time may do so
only if the shareholder has delivered timely notice of the shareholder's intent
to make such nomination or nominations, either by personal delivery or by United
States mail, postage prepaid, to the Secretary of the Corporation not less than
60 days nor more than 90 days prior to the meeting; provided, however, that if
less than 70 days' notice or prior public disclosure of the date of the meeting
is given or made to shareholders, such notice by the shareholder to be timely
must be received not later than the close of business on the 10th day following
the day on which the notice of the date of meeting was mailed or public
disclosure was made, whichever occurs first. A shareholder's notice to the
Secretary shall set forth: (1) the name and address of record of the shareholder
who intends to make the nomination; (2) a representation that the shareholder is
a holder of record of shares of capital stock of the Corporation entitled to
vote at the meeting and intends to appear in person or by proxy at the meeting
to nominate the person or persons specified in the notice; (3) the class and
number of shares of the capital stock that are beneficially owned by the
shareholder on the date of such notice; (4) the name, age, business and
residential address, and principal occupation or employment of each proposed
nominee; (5) the class and number of shares of capital stock that are
beneficially owned by such nominee on the date of such notice; (6) a description
of all arrangements or understandings between the shareholder and each nominee
and the name of any other person or persons pursuant to which the nomination or
nominations are to be made by the shareholder; (7) any other information
regarding each proposed nominee that would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission; and (8) the written consent of each proposed nominee to being named
as a nominee in the proxy statement and to serve as a Director of the
Corporation if
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so elected. The Corporation may require any proposed nominee to furnish any
other information it may reasonably require to determine the eligibility of the
proposed nominee to serve as a Director of the Corporation. The presiding
officer of the meeting may, if the facts warrant, determine that a nomination
was not made in accordance with the foregoing procedure, and if he should make
that determination, he shall so declare at the meeting and the defective
nomination shall be disregarded.
D. Vacancies. Subject to the rights, if any, of the holders of
any class of capital stock of the Corporation (other than the Common Stock) then
outstanding, any vacancies in the Board of Directors which occur for any reason
prior to the expiration of the term of office of the class in which the vacancy
occurs, including vacancies which occur by reason of an increase in the number
of Directors, shall be filled only by the Board of Directors, acting by the
affirmative vote of a majority of the remaining Directors then in office
(although less than a quorum).
ARTICLE SEVEN
DURATION
The duration of the Corporation is perpetual.
ARTICLE EIGHT
PURPOSES
The Corporation is formed for the following purposes:
1. To purchase, take, receive, subscribe or otherwise acquire,
own, hold, use, employ, sell, mortgage, loan, pledge, or otherwise dispose of,
and otherwise deal in and with the shares or other interests in, or obligations
of, other domestic and foreign corporations, associations, partnerships or
individuals;
2. To be a general or limited partner in any general or
limited partnership;
3. To take such actions and transact such other business as
are incidental to and connected with the purposes set forth above; and
4. To do anything permitted of corporations pursuant to the
provisions of The General and Business Corporation Law of Missouri, as amended
from time to time.
ARTICLE NINE
SHAREHOLDERS' MEETINGS
A. Special Meetings. A special meeting of the shareholders may
be called only by the Board of Directors pursuant to a resolution adopted by the
affirmative vote of a majority of the entire Board of Directors or by the
Chairman of the Board of Directors or the President. Only such business shall be
conducted, and only such proposals shall be acted upon, as are specified in the
call of any special meeting of shareholders.
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B. Annual Meetings. At any annual meeting of shareholders only
such business shall be conducted, and only such proposals shall be acted upon,
as shall have been properly brought before the meeting by the Board of Directors
or by a shareholder of record entitled to vote at such meeting. For a proposal
to be properly brought before an annual meeting by a shareholder, the
shareholder must have given timely notice, either by personal delivery or by
United States mall, postage prepaid, to the Secretary of the Corporation not
less than 60 days nor more than 90 days prior to the annual meeting; provided,
however, that if less than 70 days' notice or prior public disclosure of the
date of the annual meeting is given or made to shareholders, notice by the
shareholder to be timely must be received not later than the close of business
on the 10th day following the earlier of (1) the day on which notice of the date
of the annual meeting was mailed or (2) the day on which public disclosure was
made. A shareholder's notice to the Secretary shall set forth as to each matter
the shareholder proposes to bring before the annual meeting: (a) a brief
description of the proposal desired to be brought before the annual meeting and
the reasons for conducting this business at the annual meeting; (b) the name and
address of record of the shareholder proposing the business and any other
shareholders known by such shareholder to be supporting the proposal; (c) the
class and number of shares of the capital stock which are beneficially owned by
the shareholder on the date of the shareholder notice and by any other
shareholders known by such shareholder to be supporting the proposal on the date
of the shareholder notice; and (d) any material interest of the shareholder in
the proposal.
The Board of Directors may reject any shareholder proposal
submitted for consideration at the annual meeting which is not made in
accordance with the terms of this Article Nine or which is not a proper subject
for shareholder action in accordance with provisions of applicable law.
Alternatively, if the Board of Directors fails to consider the validity of any
shareholder proposal, the presiding officer of the annual meeting may, if the
facts warrant, determine and declare at the annual meeting that the shareholder
proposal was not made in accordance with the terms of this Article Nine and, if
he should make that determination, he shall so declare at the meeting and the
business or proposal shall not be acted upon. This provision shall not prevent
the consideration and approval or disapproval at the annual meeting of reports
of officers, directors and committees of the Board of Directors, but, in
connection with such reports, no new business shall be acted upon at the meeting
unless stated, filed and received as herein provided.
C. Action by Written Consent. Any action required or permitted
to be taken by the shareholders of the Corporation may, if otherwise allowed by
law, be taken without a meeting of shareholders only if consents in writing,
setting forth the action so taken, are signed by all of the shareholders
entitled to vote with respect to the subject matter thereof.
ARTICLE TEN
AMENDMENT OF BYLAWS
The Bylaws of the Corporation may be amended, altered, changed
or repealed, and a provision or provisions inconsistent with the provisions of
the Bylaws as they exist from time to time may be adopted, only by the majority
of the entire Board of Directors.
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ARTICLE ELEVEN
AMENDMENT OF ARTICLES OF
INCORPORATION
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in these Articles of Incorporation in the manner
now or hereafter prescribed by law, and all rights and powers conferred herein
on the shareholders, directors and officers of the Corporation are subject to
this reserved power; provided, that (in addition to any required class or other
vote) the affirmative vote of the holders of record of outstanding shares
representing at least 85% of all of the outstanding shares of capital stock of
the Corporation then entitled to vote generally in the election of Directors,
voting together as a single class, shall be required to amend, alter, change or
repeal, or adopt any provision or provisions inconsistent with Articles Four,
Six, Nine, Ten, Twelve, or this Article Eleven of these Articles of
Incorporation.
ARTICLE TWELVE
INDEMNIFICATION AND RELATED MATTERS
A. Actions Involving Directors and Officers. The Corporation
shall indemnify each person (other than a party plaintiff suing on his own
behalf or in the right of the Corporation) who at any time is serving or has
served as a director or officer of the Corporation against any claim, liability
or expense incurred as a result of this service, or as a result of any other
service on behalf of the Corporation, or service at the request of the
Corporation as a director, officer, employee, member or agent of another
corporation, partnership, joint venture, trust, trade or industry association or
other enterprise (whether incorporated or unincorporated, for-profit or
not-for-profit), to the maximum extent permitted by law. Without limiting the
generality of the foregoing, the Corporation shall indemnify any such person who
was or is a party (other than a party plaintiff suing on his own behalf or in
the right of the Corporation), or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including, but not limited to, an
action by or in the right of the Corporation) by reason of such service against
expenses (including, without limitation, attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding.
B. Actions Involving Employees or Agents.
1. The Corporation may, if it deems appropriate and as may
be permitted by this Article, indemnify any person (other than a party plaintiff
suing on his own behalf or in right of the Corporation) who at any time is
serving or has served as an employee or agent of the Corporation against any
claim, liability or expense incurred as a result of such service or as a result
of any other service on behalf of the Corporation, or service at the request of
the Corporation as a director, officer, employee, member or agent of another
corporation, partnership, joint venture, trust, trade or industry association or
other enterprise (whether incorporated or unincorporated, for-profit or
not-for-profit), to the maximum extent permitted by law or to such lesser extent
as the Corporation, in its discretion, may deem appropriate. Without limiting
the generality of the foregoing, the Corporation may indemnify any such person
who was or is a party (other than a party plaintiff suing on his own behalf or
in the right of the
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Corporation), or is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including, but not limited to, an action by or in the right of
the Corporation) by reason of such service against expenses (including, without
limitation, attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the action, suit or
proceeding.
2. To the extent that an employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section B (l) of this Article, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the action, suit or preceding.
C. Determination of Right to Indemnification in Certain
Circumstances. Any indemnification required under Section A of this Article or
authorized by the Corporation in a specific case pursuant to Section B of this
Article (unless ordered by a court) shall be made by the Corporation unless a
determination is made reasonably and promptly that indemnification of the
director, officer, employee or agent is not proper under the circumstances
because he has not met the applicable standard of conduct set forth in or
established pursuant to this Article. Such determination shall be made (1) by
the Board of Directors by a majority vote of a quorum consisting of Directors
who were not parties to such action, suit or proceeding, or (2) if such a quorum
is not obtainable, or even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by majority
vote of the shareholders; provided that no such determination shall preclude an
action brought in an appropriate court to challenge such determination.
D. Advance Payment of Expenses. Expenses incurred by a person
who is or was a director or officer of the Corporation in defending a civil or
criminal action, suit or proceeding shall be paid by the Corporation in advance
of the final disposition of an action, suit or proceeding, and expenses incurred
by a person who is or was an employee or agent of the Corporation in defending a
civil or criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding as
authorized by or at the direction of the Board of Directors, in either case upon
receipt of an undertaking by or on behalf of the director, officer, employee or
agent to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in or pursuant to
this Article.
E. Not Exclusive Right. The indemnification provided by this
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled, whether under the Bylaws of the Corporation or
any statute, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in an official capacity and as to action in another
capacity while holding such office.
F. Indemnification Agreements Authorized. Without limiting the
other provisions of this Article, the Corporation is authorized from time to
time, without further action by the shareholders of the Corporation, to enter
into agreements with any director, officer,
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employee or agent of the Corporation providing such rights of indemnification as
the Corporation may deem appropriate, up to the maximum extent permitted by law.
Any agreement entered into by the Corporation with a director may be authorized
by the other directors, and such authorization shall not be invalid on the basis
that similar agreements may have been or may thereafter be entered into with
other directors.
G. Standard of Conduct. Except as may otherwise be permitted
by law, no person shall be indemnified pursuant to this Article (including
without limitation pursuant to any agreement entered into pursuant to Section F
of this Article) from or on account of such person's conduct which is finally
adjudged to have been knowingly fraudulent, deliberately dishonest or willful
misconduct. The Corporation may (but need not) adopt a more restrictive standard
of conduct with respect to the indemnification of any employee or agent of the
Corporation.
H. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or who is or was otherwise serving on behalf or at the
request of the Corporation against any claim, liability or expense asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
him against such liability under the provisions of this Article.
I. Certain Definitions. For the purposes of this Article:
1. Any director or officer of the Corporation who shall
serve as a director, officer or employee of any other corporation, partnership,
joint venture, trust or other enterprise of which the Corporation, directly or
indirectly, is or was the owner of 20% or more of either the outstanding equity
interests or the outstanding voting stock (or comparable interests), shall be
deemed to be so serving at the request of the Corporation, unless the Board of
Directors of the Corporation shall determine otherwise. In all other instances
where any person shall serve as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise of
which the Corporation is or was a shareholder or creditor, or in which it is or
was otherwise interested, if it is not otherwise established that such person is
or was serving as a director, officer, employee or agent at the request of the
Corporation, the Board of Directors of the Corporation may determine whether
such service is or was at the request of the Corporation, and it shall not be
necessary to show any actual or prior request for such service.
2. References to a corporation include all constituent
corporations absorbed in a consolidation or merger as well as the resulting or
surviving corporation so that any person who is or was a director, officer,
employee or agent of a constituent corporation or is or was serving at the
request of a constituent corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise
shall stand in the same position under the provisions of this Article with
respect to the resulting or surviving corporation as he would if he had served
the resulting or surviving corporation in the same capacity.
3. The term "other enterprise" shall include, without
limitation, employee benefit plans and voting or taking action with resect to
stock or other assets therein; the term "serving at the request of the
corporation" shall include, without limitation, any service
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as a director, officer, employee or agent of the corporation which imposes
duties on, or involves services by, a director, officer, employee or agent with
respect to any employee benefit plan, its participants, or beneficiaries; and a
person who acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have satisfied any standard of care required by or pursuant
to this Article in connection with such plan; the term "fines" shall include,
without limitation, any excise taxes assessed on a person with respect to an
employee benefit plan and shall also include any damages (including treble
damages) and any other civil penalties.
J. Survival. Any indemnification rights provided pursuant to
this Article shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person. Notwithstanding any other
provision in these Articles of Incorporation, any indemnification rights arising
under or granted pursuant to this Article shall survive amendment or repeal of
this Article with respect to any acts or omissions occurring prior to the
effective time of such amendment or repeal and persons to whom such
indemnification rights are given shall be entitled to rely upon such
indemnification rights with respect to such acts or omissions as a binding
contract with the Corporation.
K. Liability of the Directors. It is the intention of the
Corporation to limit the liability of the directors of the Corporation, in their
capacity as such, whether to the Corporation, its shareholders or otherwise, to
the fullest extent permitted by law. Consequently, should The General and
Business Corporation Law of Missouri or any other applicable law be amended or
adopted hereafter so as to permit the elimination or limitation of such
liability, the liability of the directors of the Corporation shall be so
eliminated or limited without the need for amendment of these Articles or
further action on the part of the shareholders of the Corporation.
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EXHIBIT 3.2
BYLAWS
OF
REINSURANCE GROUP OF AMERICA, INCORPORATED
ARTICLE I. OFFICES
The Corporation may have such corporate offices either in or
outside of Missouri, as the Board of Directors may from time to time appoint, or
as the business of the Corporation may require. The "principal" office may be
designated by the Board of Directors but the location of the Corporation in
Missouri shall for all purposes be deemed to be in the city or county in which
the "registered" office is maintained. The registered office shall be determined
from time to time by the Board of Directors and its identity put on file with
the appropriate office of the State of Missouri.
ARTICLE II. SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the
shareholders shall be held on the fourth Wednesday in May in each year, if not a
legal holiday, and if a legal holiday, then on the next day not a legal holiday.
The day fixed for the annual meeting may be changed in any year, by resolution
of the Board of Directors, to another day, not a legal holiday, that the Board
of Directors deems appropriate, but this power is subject to applicable
limitations of law. At this meeting members of the Board of Directors shall be
elected to succeed those whose terms are then expiring and such other business
shall be transacted as may properly be brought before the meeting.
SECTION 2. Special Meetings. Special meetings of the
shareholders, unless otherwise prescribed by statute or by the Articles of
Incorporation, may only be called by the Chairman of the Board of Directors or
by the President or by a majority of the entire number of the Board of
Directors. The person or persons requesting a special meeting of the
shareholders shall deliver to the Secretary of the Corporation a written request
stating the purpose of the proposed meeting. Upon such request, subject to any
requirements or limitations imposed by the Corporation's Articles of
Incorporation, by these Bylaws, or by law, it shall be the duty of the Secretary
to call a special meeting of the shareholders, to be held at such time as is
specified in the request.
SECTION 3. Place and Hour of Meeting. Every meeting of the
shareholders, whether an annual or special meeting, shall be held at nine
o'clock in the forenoon at the principal office of the Corporation or at such
other place or time as is specified by proper notice from the Board of
Directors.
SECTION 4. Notice of Meeting. Written or printed notice of
each meeting of shareholders stating the place, day and hour of the meeting, and
in case of a special meeting, the purpose or purposes for which the meeting is
called, shall be delivered not less than 10 nor more than 70 days before the
date of the meeting either personally or by mail, by or at the direction of the
President, or the Secretary, or the persons calling the meeting, to each
<PAGE> 2
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the stock transfer
books of the Corporation, with postage thereon prepaid. Attendance of a
shareholder at any meeting shall constitute waiver of notice of that meeting
except when a shareholder attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened.
SECTION 5. Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. In no event shall a quorum
consist of less than a majority of the outstanding shares entitled to vote, but
if less than a majority of the outstanding shares are represented at a meeting,
a majority of the shares which are represented may adjourn the meeting to a
specified date not longer than ninety days after such adjournment without
further notice. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally set forth.
SECTION 6. Proxies. At all meetings of shareholders, a
shareholder may vote in person or by proxy executed in writing by the
shareholder or by his duly authorized attorney in fact. Such proxy shall be
filed with the Secretary of the Corporation before or at the time of the
meeting. No proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.
SECTION 7. Voting of Shares. Subject to the rights of any
holders of preferred stock, each outstanding share entitled to vote shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders. Provided a quorum is present, the affirmative vote of a majority
of the shares represented at a meeting and entitled to vote shall be the act of
the shareholders unless the vote of a greater number of shares is required by
the Corporation's Articles of Incorporation, by these Bylaws, or by law.
SECTION 8. Voting of Shares by Certain Holders. Shares
standing in the name of another corporation may be voted by such officer, agent,
or proxy as the bylaws of such corporation may prescribe, or, in the absence of
such provision, as the board of directors of such corporation may determine.
Shares held by an administrator, executor, guardian, or
conservator may be voted by him, either in person or by proxy, without a
transfer of such shares into his name. Shares standing in the name of a trustee
may be voted by him, either in person or by proxy, but no trustee shall be
entitled to vote shares held by him without a transfer of such shares into his
name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority so to do
be contained in an appropriate order of the court by which such receiver was
appointed.
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A shareholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the shares so
transferred.
Shares of its own stock held by the Corporation, and unissued
shares, shall not be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.
Shares owned by a subsidiary of the Corporation shall likewise not be voted or
counted in determining the number of shares outstanding.
SECTION 9. Informal Action by Shareholders. Unless otherwise
prescribed by the Corporation's Articles of Incorporation, any action which is
required or allowed to be taken at a meeting of the shareholders, may be taken
without a meeting if a consent or approval in writing, setting forth the action
so taken, shall be signed by all of the shareholders entitled to vote with
respect to the subject matter thereof.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the
Corporation shall be managed by its Board of Directors.
SECTION 2. Number and Tenure. The number of Directors of the
Corporation shall be three; provided, however, that except as otherwise
specified in the Corporation's Articles of Incorporation, the number of
Directors may be amended by affirmative vote of a majority of the Board of
Directors from time to time. Any change in the number of Directors shall be
reported to the Secretary of State of Missouri as required by law. Directors
will be elected by class so as to equalize as nearly as possible the number in
each class of members. There shall be three classes of members, each class
serving for a three-year term expiring one year after expiration of the term of
the immediately preceding class, so that the term of one class will expire each
year. No reduction in the number of Directors shall affect the term of office of
any incumbent Director. With respect to the initial Board of Directors of the
Corporation, the first class of Directors shall hold office until the first
annual meeting of shareholders, the second class of Directors shall hold office
until the second annual meeting of shareholders, and the third class of
Directors shall hold office until the third annual meeting of shareholders.
Thereafter, Directors shall be elected to hold office for a term of three years,
and at each annual meeting of shareholders, the successors to the class of
Directors whose terms shall then expire shall be elected for a term expiring at
the third succeeding annual meeting after that election. Notwithstanding the
foregoing, each Director shall hold office until his successor shall have been
elected and qualified or, in the case of a Director elected by the Board to
increase the number of Directors as provided in Section 12 below, until the next
annual meeting of the shareholders.
SECTION 3. Qualifications. No person shall be qualified to be
elected and to hold office as a Director if such person is determined by a
majority of the Board of Directors to have acted in a manner contrary to the
best interests of the Corporation. A Director need not be a resident of the
State of Missouri or a shareholder.
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SECTION 4. Directors Emeritus and Advisory Directors. The
Board of Directors may from time to time create one or more positions of
Director Emeritus and Advisory Director, and may fill such position or positions
for such terms as the Board of Directors deems proper. Each Director Emeritus
and Advisory Director shall, upon the invitation of the Board of Directors, have
the privilege of attending meetings of the Board of Directors but shall do so
solely as an observer. Notice of meetings of the Board of Directors to a
Director Emeritus or Advisory Director shall not be required under any
applicable law, the Articles of Incorporation, or these Bylaws. Each Director
Emeritus and Advisory Director shall be entitled to receive such compensation as
may be fixed from time to time by the Board of Directors. No Director Emeritus
or Advisory Director shall be entitled to vote on any business coming before the
Board of Directors, nor shall he or she be counted as members of the Board of
Directors for the purpose of determining the number of Directors necessary to
constitute a quorum, for the purpose of determining whether a quorum is present,
or for any other purpose whatsoever. In the case of a Director Emeritus or
Advisory Director, the occurrence of any event which in the case of a Director
would create a vacancy on the Board of Directors, shall be deemed to create a
vacancy in such position; but the Board of Directors may declare the position
terminated until such time as the Board of Directors shall again deem it proper
to create and to fill the position.
SECTION 5. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this bylaw immediately after,
and at the same place as, the annual meeting of shareholders. At such meeting
the Board may elect one of their members to act as Chairman of the Board. The
Board of Directors may provide, by resolution naming the time and place, for the
holding of additional regular meetings without other notice than such
resolution. Any business may be transacted at a regular meeting.
SECTION 6. Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board, the
President, or any two Directors. Any such special meeting shall be held at the
place set out in the resolution for regular meetings or at the registered office
of the corporation in Missouri if no such regular meeting place has been set or
at such other place, within or without the State of Missouri, as may be
specified in the notice of such special meeting. Directors may participate in
any meeting of the Board of Directors, or of any committee of the Board of
Directors, by means of conference telephone or similar communications equipment
whereby all persons participating in the meeting can hear each other, and
participation in a meeting in this manner shall constitute presence in person at
the meeting.
SECTION 7. Notice. Notice of any special meeting shall be
given at least twenty-four hours previously thereto by written, oral, telefax,
or telegraphic means. If mailed, such notice shall be deemed to be delivered
five days after such notice is deposited in the United States mail, so
addressed, with postage thereon prepaid. Any Director may waive notice of any
meeting as to himself. The attendance of a Director at a meeting shall
constitute a waiver of notice of such meeting, except where a Director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice or waiver of notice of such
meeting.
4
<PAGE> 5
SECTION 8. Quorum. A majority of the number of Directors shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors, but if less than such majority is present at a meeting, a majority
of the Directors present may adjourn the meeting from time to time. If the
meeting is adjourned for more than twenty-four (24) hours, notice of the time
and place of the adjourned meeting shall be given to the directors who were not
present at the time of the adjournment.
SECTION 9. Manner of Acting. The act of the majority of the
Directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors, unless the act of a greater number is required by the
Corporation's Articles of Incorporation, by these Bylaws, or by law.
SECTION 10. Action Without a Meeting. Any action that may he
taken by the Board of Directors at a meeting may be taken without a meeting,
provided that all of the Directors sign consents setting forth the action so
taken. The written consents shall be filed with the minutes of the meetings of
the Board of Directors and shall have the same force and effect as a unanimous
vote at a meeting of Directors. This provision applies to committees of the
Board of Directors as well, which can act with the unanimous consent of all
committee members.
SECTION 11. Resignation. Any Director of the Corporation may
resign at any time by giving written notice of such resignation to the Board of
Directors, the Chairman of the Board of Directors, the President, or the
Secretary of the Corporation. Any such resignation shall take effect at the time
specified therein or, if no time be specified, upon receipt thereof by the Board
of Directors or one of the above-named Officers; and, unless specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
SECTION 12. Vacancies. Any vacancy occurring in the Board of
Directors may be filled by the affirmative vote of a majority of the remaining
Directors though less than a quorum of the Board of Directors. A Director
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office. Any directorship to be filled by reason of an increase in
the number of Directors may be filled by election by the Board of Directors and
shall be added to such class of Directors as may be necessary so that all
classes of Directors shall be as nearly equal in number as possible.
SECTION 13. Compensation. By resolution of the Board of
Directors, each Director may be paid his expenses, if any, of attendance at each
meeting of the Board of Directors or a Committee thereof and may be paid a
stated salary as director or a fixed sum for attendance at each such meeting or
both. No such payment shall preclude any Director from serving the Corporation
in any other capacity and receiving compensation therefor.
SECTION 14. Presumption of Assent. A Director of the
Corporation who is present at a meeting of the Board of Directors at which
action on any corporate matter is taken shall be presumed to have assented to
the action taken unless his dissent shall be entered in the minutes of the
meeting or unless he shall file his written dissent to such action with the
person acting as the secretary of the meeting before the adjournment thereof or
shall forward such
5
<PAGE> 6
dissent by registered mail to the Secretary of the Corporation immediately after
the adjournment of the meeting. Such right to dissent shall not apply to a
Director who voted in favor of such action.
SECTION 15. Indemnification of Directors and Officers. The
Corporation shall have such powers of indemnification as are provided in its
Articles of Incorporation and not inconsistent with the laws of Missouri.
SECTION 16. Executive Committee and Other Committees. The
Board of Directors may, by resolution or resolutions passed by a majority of the
whole board, designate an executive committee, such committee to consist of
three or more directors of the Corporation, which committee, to the extent
provided in said resolution or resolutions, shall have and may exercise all of
the authority of the Board of Directors in the management of the Corporation;
but the designation of such committee and the delegation thereto of authority
shall not operate to relieve the Board of Directors, or any member thereof, of
any responsibility imposed upon the Board or a Director by the General and
Business Corporation law of Missouri.
The Board of Directors may also, by resolution or resolutions
passed by a majority of the whole board, designate other committees, with such
persons, powers, and duties as it deems desirable and as are not inconsistent
with law.
SECTION 17. Meetings and Reports of Committees. A committee
shall meet from time to time on call of the chairman of the committee or of any
two or more members of the committee. Notice of each such meeting, stating the
place, date and hour thereof, shall be mailed at least four (4) days before the
meeting, or shall be served personally on each member of the committee,
telegraphed or telephoned to his address on the books of the Corporation, at
least forty-eight (48) hours before the meeting. No such notice need state the
business proposed to be transacted at the meeting. No notice of a meeting of the
committee need be given to any member who signs a waiver of notice, whether
before or after the meeting, or who attends the meeting without protesting,
prior there to or at its commencement, the lack of notice to such director. No
notice need be given of an adjourned meeting of the committee unless the meeting
is adjourned for more than twenty-four (24) hours, in which case notice of the
time and place of the adjourned meeting shall be given to the members of the
committee who were not present at the time of adjournment. Meetings of the
committee may be held at such place or places, either within or outside of the
State of Missouri, as the committee shall determine, or as may be specified or
fixed in the respective notices or waivers thereof. Vacancies in the membership
of each committee shall be filled by the Board of Directors at any regular or
special meeting of the Board of Directors. A majority of the committee
constitutes a quorum for the transaction of business. Every act or decision done
or made by a majority of the members of the committee present at a meeting duly
held at which a quorum is present shall be regarded as the act of the committee.
A committee may fix its own rules of procedure. It shall keep a record of its
proceedings and shall report these proceedings to the Board of Directors prior
to the regular meeting of the Board to be held next after a committee meets.
6
<PAGE> 7
ARTICLE IV. OFFICERS
SECTION 1. Number. The officers of the Corporation shall be a
Chairman of the Board, a President, and a Secretary, each of whom shall be
elected by the Board of Directors. Such other officers and such assistant
officers as may be deemed necessary may be elected or appointed by the Board of
Directors, including one or more Vice Presidents, a Treasurer, and such other
officers as the Board of Directors may deem appropriate. Any two or more offices
may be held by the same person, except the offices of President and Secretary.
No officer need be a shareholder.
SECTION 2. Election and Term of Office. The officers of the
Corporation to be elected by the Board of Directors shall be elected annually by
the Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of the shareholders. If the election of officers shall not
be held at such meeting, such election shall be held as soon thereafter as
conveniently may be.
Each officer shall hold office until his successor shall have
been duly elected and shall have qualified or until his death or until he shall
resign or shall have been removed in the manner hereinafter provided.
SECTION 3. Removal. Any officer or agent may be removed with
or without cause by the Board of Directors whenever, in its judgment, the best
interests of the Corporation will be served thereby. Election or appointment of
an officer or agent shall not of itself create contract rights and no cause for
removal need be specified in any Board resolution.
SECTION 4. Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification, or otherwise may be filled by the
Board of Directors for the unexpired portion of the term.
SECTION 5. Chairman of the Board. The Chairman shall preside
at all meetings of the shareholders and Directors at which he is present and
shall perform any other duties prescribed by the Board of Directors or these
Bylaws. He shall have full authority in respect to the signing and execution of
instruments of the Corporation.
SECTION 6. President. The President shall be the principal
executive officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the Corporation. He shall, if not also Chairman of the Board, preside
in the absence of the Chairman of the Board at meetings of the shareholders and
of the Board of Directors. He may sign, with the Secretary or any other proper
officer of the Corporation thereunto authorized by the Board of Directors,
certificates for shares of the corporation, and he may execute all other
instruments which the Board of Directors has authorized to be executed, except
in cases where the signing and execution thereof shall be expressly delegated by
the Board of Directors or by the bylaws to some other officer or agent of the
Corporation, or shall be required by law to be otherwise signed or executed; and
in general shall perform all duties incident to the office of President and such
other duties as may be prescribed by the Board of Directors from time to time.
7
<PAGE> 8
SECTION 7. The Vice President. In the absence of the President
or in the event of his death, inability, or refusal to act, the Vice-President
(or in the event there be more than one Vice-President, the Vice-Presidents in
the order designated at the time of their election, or in the absence of any
designation, then in the order of their election) shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. In addition, any Vice-President
shall perform such other duties as from time to time may be assigned to him by
the President or by the Board of Directors.
SECTION 8. The Secretary. The Secretary shall: (a) keep the
minutes of the proceedings of the shareholders and of the Board of Directors in
one or more books provided for that purpose; (b) see that all notices are duly
given in accordance with the provisions of the bylaws or as required by law; (c)
be custodian of the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all documents the execution of
which on behalf of the Corporation under its seal is duly authorized and
required; (d) keep a register of the address of each shareholder as furnished by
such shareholder; (e) sign with the President certificates for shares of the
Corporation, the issuance of which shall have been authorized by resolution of
the Board of Directors; (f) have general charge of the stock transfer books of
the Corporation; and (g) in general perform all duties incident to the office of
Secretary and such other duties as form time to time may be assigned to him by
the President or by the Board of Directors, or as prescribed in these bylaws.
SECTION 9. The Treasurer. The Treasurer shall: (a) have charge
and custody of and be responsible for all funds and securities of the
Corporation; (b) receive and give receipts for moneys due and payable to the
Corporation from any source whatsoever, and deposit all such moneys in the name
of the Corporation in such banks, trust companies or other depositaries as the
Board of Directors may select; and (c) in general perform all of the duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned to him by the President or by the Board of Directors. If
required by the Board of Directors, the Treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the Board of Directors shall determine.
SECTION 10. Salaries. The salaries of the officers shall be
fixed from time to time by the Board of Directors and no officer shall be
prevented from receiving such salary by reason of the fact that he is also a
Director of the Corporation.
ARTICLE V. CERTIFICATES FOR SHARES
AND THEIR TRANSFER
SECTION 1. Stock Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate, in any form approved by the
Board of Directors, certifying the number and class of shares owned by the
shareholder in the Corporation, signed by the Chairman, the President, or a Vice
President and by the Secretary or Treasurer or an Assistant Secretary or
Assistant Treasurer of the Corporation and sealed with the seal of the
Corporation. If the certificate is countersigned by a transfer agent other than
the Corporation or its employee, or by a registrar other than the Corporation or
its employee, any other signature on the certificate
8
<PAGE> 9
may be a facsimile signature, or may be engraved or printed. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed on the certificate shall have ceased to be an officer,
transfer agent, or registrar before the certificate is issued, the certificate
may nevertheless be issued by the Corporation with the same effect as if such
person were an officer, transfer agent, or registrar at the date of issue.
SECTION 2. Transfer of Stock. The shares of stock of the
Corporation shall be transferable only upon its books by the holders thereof in
person or by their duly authorized attorneys or legal representatives. Upon
transfer, the old certificates shall be surrendered to the Corporation by the
delivery thereof to thc person in charge of the stock and transfer books and
ledgers, or to such other persons as the Board of Directors may designate, by
whom they shall be cancelled and new certificates shall thereupon be issued.
Except as otherwise expressly provided by the statutes of the State of Missouri,
the Corporation shall be entitled to treat the holder of record of any share or
shares of stock as the absolute owner thereof for all purposes and, accordingly,
shall not be bound to recognize any legal, equitable, or other claim to or
interest in such share or shares on the part of any other person whether or not
it or they shall have express or other notice thereof.
SECTION 3. Closing of Transfer Books and Fixing of Record
Date. The Board of Directors shall have the power to close the transfer books of
the Corporation for a period not exceeding 70 days prior to the date of any
meeting of shareholders, or the date for payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of shares shall go into effect. In lieu of so closing the transfer
books, the Board of Directors may fix in advance a record date for the
determination of the shareholders entitled to notice of and to vote at any
meeting and any adjournment thereof, or entitled to receive payment of any
dividend or any allotment of rights, or entitled to exercise the rights in
respect of any change, conversion, or exchange of shares, up to 70 days prior to
the date of any meeting of shareholders, or the date for the payment of any
dividend, or the date for the allotment of rights, or the date when any change
or conversion or exchange of shares shall go into effect. In such case only the
shareholders who are shareholders of record on the record date so fixed shall be
entitled to receive notice of and to vote at such meeting and any adjournment
thereof, or to receive payment of such dividend, or to receive payment of such
dividend, or to receive such allotment of rights, or to exercise such rights as
the case may be, notwithstanding any transfer of any shares on the books of the
Corporation after the date of closing of the transfer books or the record date
fixed as aforesaid. If the Board of Directors does not close the transfer books
or set a record date for the determination of the shareholders entitled to
notice of and to vote any meeting of shareholders, only the shareholders who are
shareholders of record at the close of business on the 20th day preceding the
date of the meeting shall be entitled to notice of and to vote at the meeting
and upon any adjournment of the meeting, except that if prior to the meeting
written waivers of notice of the meeting are signed and delivered to the
Corporation by all of the shareholders of record at the time the meeting is
convened, only the shareholders who are shareholders of record at the time the
meeting is convened, shall be entitled to vote at the meeting and any
adjournment of the meeting.
Section 4. Lost or Destroyed Certificates. The holder of any
shares of stock of the Corporation shall immediately notify the Corporation and
its transfer agents
9
<PAGE> 10
and registrars, if any, of any loss or destruction of the certificates
representing the same. The Corporation may issue a new certificate in place of
any certificate theretofore issued by it which is alleged to have been lost or
destroyed and the Board of Directors may require the owner of the lost or
destroyed certificate or the owner's legal representative to give the
Corporation a bond in a sum and in a form approved by the Board of Directors,
and with a surety or sureties which the Board of Directors finds satisfactory,
to indemnify the Corporation and its transfer agents and registrars, if any,
against any claim or liability that may be asserted against or incurred by it or
any transfer agent or registrar on account of the alleged loss or destruction of
any certificate or the issuance of a new certificate. A new certificate may be
issued without requiring any bond when, in the judgment of the Board of
Directors, it is proper so to do. The Board of Directors may delegate to any
Officer or Officers of the Corporation any of the powers and authorities
contained in this section.
Section 5. Transfer Agents and Registrars. The Board of
Directors may appoint one or more transfer agents or transfer clerks and one or
more registrars which may be banks, trust companies, or other financial
institutions located within or without the State of Missouri; may define the
authority of such transfer agents and registrars of transfers; may require all
stock certificates to bear the signature of a transfer agent or a registrar of
transfers, or both; and may change or remove any such transfer agent or
registrar of transfers.
ARTICLE VI. FISCAL YEAR
The fiscal year of the Corporation shall begin on the first
day of January and end on the thirty-first day of December in each year.
ARTICLE VII. DIVIDENDS
The Board of Directors may, from time to time, declare and the
Corporation may pay dividends on its outstanding shares in the manner, and upon
the terms and conditions provided by law and its Articles of Incorporation.
ARTICLE VIII. CORPORATE SEAL
The Board of Directors may provide a corporate seal which
shall be circular in form and shall have inscribed thereon the name of the
Corporation and the state of incorporation and the words, "Corporate Seal." The
seal shall be in the charge of the Secretary.
ARTICLE IX. WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder
or director of the Corporation under the provisions of these Bylaws or under the
provisions of the Articles of Incorporation or under the provisions of the
General and Business Corporation law of Missouri, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice.
10
<PAGE> 11
ARTICLE X. AMENDMENTS
These Bylaws may be altered, amended, or repealed and new
Bylaws may be adopted by a majority of the entire Board of Directors at any
regular or special meeting of the Board of Directors, provided that no Bylaw may
be adopted or amended so as to be inconsistent with the Articles of
Incorporation of the Corporation, or the Constitution or laws of the State of
Missouri.
ARTICLE XI. CONSTRUCTION
Whenever a word in the masculine gender is used in these
Bylaws it shall be understood to be in or include the feminine gender when
appropriate under the circumstances. These Bylaws are to be construed to be
consistent with applicable law, and if such construction is not possible then
the invalidity of a Bylaw or portion thereof shall not affect the validity of
the other Bylaws of the Corporation, which shall remain in full force and
effect.
ARTICLE XII. CONTROL SHARE ACQUISITIONS
Section 351.407 of the General and Business Corporation Law of
Missouri, as amended from time to time (relating to control share acquisitions),
shall not apply to control share acquisitions of shares of capital stock of the
Corporation.
11
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
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<CIK> 0000898174
<NAME> REINSURANCE GROUP OF AMERICA
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<FISCAL-YEAR-END> DEC-31-1999
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<RECOVER-REINSURE> 291,098
<DEFERRED-ACQUISITION> 463,486
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0
0
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965,603
<INVESTMENT-INCOME> 264,231
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<INCOME-TAX> 27,166
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