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Business and Basis of Presentation
12 Months Ended
Dec. 31, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Business and Basis of Presentation BUSINESS AND BASIS OF PRESENTATION
Business
Reinsurance Group of America, Incorporated (“RGA”) is an insurance holding company that was formed on December 31, 1992. RGA and its subsidiaries (collectively, the “Company”) engage in providing traditional reinsurance, which includes individual and group life and health, disability, and critical illness reinsurance. The Company also provides financial solutions, which includes longevity reinsurance, asset-intensive products, primarily annuities, financial reinsurance, capital solutions and stable value products.
Reinsurance is an arrangement under which an insurance company, the reinsurer, agrees to indemnify another insurance company, the ceding company, for all or a portion of the insurance risks underwritten by the ceding company. Reinsurance is designed to:
(i)reduce the net amount at risk on individual risks, thereby enabling the ceding company to increase the volume of business it can underwrite, as well as increase the maximum risk it can underwrite on a single risk;
(ii)enhance the ceding company’s financial strength and surplus position;
(iii)stabilize operating results by leveling fluctuations in the ceding company’s loss experience; and
(iv)assist the ceding company in meeting applicable regulatory requirements.
Basis of Presentation
The consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates include those used in determining, premiums receivable, future policy benefits, incurred but not reported claims, income taxes, valuation of investments and investment impairments, and valuation of embedded derivatives and market risk benefits. Actual results could differ materially from the estimates and assumptions used by management.
The accompanying consolidated financial statements include the accounts of RGA and its subsidiaries, all of which are wholly owned, and any variable interest entities where the Company is the primary beneficiary. The Company evaluates variable interest entities in accordance with the general accounting principles for Consolidation. Entities in which the Company has significant influence over the operating and financing decisions but are not required to be consolidated are reported under the equity method of accounting. Intercompany balances and transactions have been eliminated.
There were no subsequent events that would require disclosure or adjustments to the accompanying consolidated financial statements through the date the consolidated financial statements were issued.
Standards Issued and Implemented
In the first quarter of 2023, the Company adopted Accounting Standards Update (“ASU”): ASU 2018-12, Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (“ASU 2018-12”). ASU 2018-12 updates certain requirements for the accounting for long-duration insurance contracts.
Cash flow assumptions and measuring liability for future policy benefits – ASU 2018-12 requires the Company to review its cash flow assumptions at least annually and update, if necessary, with the impact recognized in net income in the period of the change. The liability for future policy benefits includes required adjustments at the cohort level to cap the net premium ratio at 100% and eliminate negative reserves.
Upon adoption, an adjustment was recorded to retained earnings as a result of capping the net premium ratio at 100% and eliminating negative reserves on certain issue year cohorts.
Discount rate – The discount rate assumption is prescribed by ASU 2018-12 as an upper-medium (low credit risk) fixed-income yield and is required to be updated every quarter. The change in the liability as a result of updating the discount rate assumption is recognized in other comprehensive income (loss) (“OCI”).
Upon adoption, an adjustment was recorded to accumulated other comprehensive income (loss) (“AOCI”) as a result of remeasuring in force contract liabilities using the current upper-medium grade fixed income instrument yields as of
the date of transition. The adjustment reflects the difference between discount rates locked-in at contract inception versus current discount rates at transition.
Deferred policy acquisition costs and similar balances – Deferred policy acquisition costs (“DAC”) and other capitalized costs such as unearned revenue should be amortized on a constant level or straight-line basis over the expected term of the contracts.
Upon adoption, an adjustment was recorded to AOCI for the removal of cumulative adjustments to DAC associated with unrealized investment gains and losses previously recorded in accumulated other comprehensive income (loss).
Market risk benefits – Market risk benefits, which are contracts or contract features that provide protection to the policyholder from capital market risk and expose the Company to other-than-nominal capital market risk, are measured at fair value. The periodic change in fair value is recognized in net income with the exception of the periodic change in fair value related to the liability’s instrument-specific credit risk, which is recognized in OCI.
Upon adoption, an adjustment was recorded to retained earnings for the difference between the fair value and carrying value of the contracts at the transition date, excluding changes in the instrument-specific credit risks, and an adjustment to AOCI for the cumulative effect of changes in the instrument-specific credit risk between contract issue date and transition date.