Good day, everyone and welcome to the Reinsurance Group of America Third Quarter Conference Call. Today's call is being recorded. At this time, I would like to introduce the President and Chief Executive Officer, Mr. Greig Woodring and Senior Executive Vice President and Chief Financial Officer, Mr. Jack Lay. Please go ahead, Mr. Lay.

Okay. Thank you. Good morning everyone Thanks for joining us this morning for the third quarter conference call. I'll turn the call over to our CEO, Greig Woodring in just a minute. Greig will comment on the results which we released at the end of the day yesterday, and then we'll respond to any questions from our participants. As a reminder, during the call, we plan to make certain statements and discuss certain subjects that will contain forward-looking information, including among others, statements relating to projections of revenue or earnings and future financial performance and growth potential of RGA and its subsidiaries. You are cautioned that actual results could differ materially from expected results. A list of important factors that could cause those actual results to differ materially from expected results is included in the earnings release we issued yesterday. In addition, during the course of the call, we will make comments about our results based upon operating income, both on a pre-tax and after-tax basis. Under SEC regulations, operating income is considered a non-GAAP financial measure. We believe this measure better reflects the ongoing profitability and underlying trends of our continuing operations. Please refer to the tables in the press release for more information on this measure and a reconciliation of operating income to net income for our various business segments. With that, I will turn the call over to Greig, for his comments on the third quarter.

Good morning, Thank you for taking time to join us for the call. After a few brief comments we'll open the line for questions. We reported strong operating results for the quarter on a consolidated basis. It was a strong operating quarter with operating income for the quarter 24% up to $118.5 million from $95.6 million in the prior year. On a per share basis, our reported operating income for the quarter was 186 per diluted share, up 25%. Reported net income for the quarter totaled $25.2 million or $0.40 per diluted share compared to $1.19 last year. Net income for the quarter included $99.8 million in net unrealized or net realized securities related losses including investment, impairments and sales securities. This amount is pre-tax and before the impact of deferred acquisition cost. After tax and DAC losses totaled $75.4 million or approximately 3% of shareholders equity. Net income for the quarter also includes unrealized losses of $21.1 million after tax impact due to the decline of the... in the fair value of embedded derivatives associated with modified co-insurance and funds with held treaties which is also referred as B36. This non-cash unrealized loss is due to the impact of widening credits spreads on the investment portfolios underlying certain of our funds withheld annuity reinsurance treaties. I will comment further on investment losses, our investment portfolio and capital before the end of my prepared remarks. Net premium flow further during quarter increased 6% to $1.3 billion the comparison is distorted by a choppy client reporting in Asia-Pacific in particular last year that lead to higher unusually high premiums in last year's third quarter. You may remember we reported a similar high premium level in that part of our operations in the second quarter of this year. The year-to-date rate of…

Operator I think we are ready to take questions at this point. Question And Answer

[Operator Instructions]. We'll take first question from Jimmy Bhullar of J.P. Morgan.

Hi good morning. I have a few questions the first one is just to your comfort with your liquidity and capital proposition. You mentioned you will have to raise equity if you see opportunity to write large block of business. But given what's going on in the current market do you need to raise equity absence at and if you can give us an idea on like you had $100 million of investment losses in third quarter. How much more can you sustain in realized losses before having to raise equity, ignoring the new business opportunity?

Jimmy, this is, Jack. Let me take a crack at that. First of all on the liquidity front, we can pretty much scheduled cash outflows for the most part and we feel like we're in very liquid position in terms of cash and cash equivalents on hand as well as access to our line of credit and the... FHLB lending facility. So, we feel very comfortable in that respect in terms of capital I thought it's always hard to gauge exactly where we are because we are dealing with our own capital model and those discrete models of each agency. But best estimate is we probably have about a $150 million or so of excess capital at this point. So, in terms of the question, at what point would additional asset losses hamper that, you saw what we considered to be a fairly extraordinary securities related losses in the third quarter. And we still added... not a great deal, but we at least added some to the retained earning space. So, it would take... and I guess the answer to question it would take another quarter or more... probably emphasis on more of similar sort of impairments and securities losses. And our view before it would really hamper the capital base.

And can you write new business at margins, good enough to really offset if you have to raise equity at these levels to the offset the dilution from any share offering?

Well, Jimmy. We don't really know. But, for anything they use as large amounts of capital we will either write them or not write them, if we can get those returns. We think there are opportunities like that out there. And as we said, there are more opportunities then we have capital for that are lined up in our shop right now. And so we are going to be selective in what we do, and what we can reach for, and we'll have to make that call whether we think the opportunities are so good or not.

And then I had a question on your corporate and other segment. On pre-tax basis, excluding realized gains and losses you've had consistently a loss in that segment, this quarter you had $9.2 million in earnings and I noticed interest rate expense declined a lot. Is that an on going number or was there something unusual this quarter that you don't expect to repeat.

Yeah, Jimmy this is Jack. It's more of the later. You may recall and we had a similar pattern last year, we are under FIN 48, once we have settled another tax year than there is --

An accrual?

Yes, then there is an impact on accrued interest that we set aside associated with any potential IRS settlement. So that's a fairly typical pattern it didn't surprise us and in fact you'll see something similar in the interest expense line in last year's third quarter as well. That's the primary driver.

Okay, that's all I have. Thank you.

And ladies and gentlemen. [Operator Instructions] We will take our next question from Andrew Kligerman of UBS Financial.

Hi, good morning. Sorry if I asked you redundant question I got on little bit late, but maybe first just with regard to the decline in the fair value of the embedded derivatives, the $21.1 million charge there. Could you give a little more color around that?

Yeah, Andrew, this is Jack. You may recall that our, what we call B36 and that relates to the revaluation of any embedded derivative on the funds withheld portfolio is driven primarily by any changes in credit spreads. And you've seen, obviously credit spreads expanding, increasing over the last several quarters and expanding rather dramatically in the third quarter. The way that that change in the value is calculated, it relates primarily to the change in credit spreads; any change in the underlying risk free interest rates have little impact on that change. So, it's really more the same and if you take a look at last four quarters, really essentially starting midpoint of last year, you'll see that we've had a continued downward revaluation of the embedded derivatives. Now, foreign tax and purposes once... and we obviously hope that credit spreads come in somewhat then you'll see an opposite impact or we'll actually see a gain from the revaluation of that embedded derivative.

And then maybe just in each of your different key regions, given the global economic pressures; sure the market is going to open up massively down this morning, our teams that way anyway. What's your thinking for 2009 in terms of the types of primary markets? What we are going to see in terms of organic growth in the primary markets? And then my follow-up question is in terms of deal activity, what kinds of deals are you seeing? So first part is just more of an organic look at life insurance industry and the second part is what kind of opportunities is RGA going to see?

Yeah, Andrew are the... in terms of the affect of the macro environment on the primary life insurance industry. It's generally not as affected by recessions as other industries, but we would expect economic activities go down considerably in the amount of business flow to just naturally go down and of course, we are always in a new environment, compared to past ones. And we can't exactly predict what's going to happen, but we do expect that organic growth will slow down. Now, remember that our earnings projections and flow projections for next year don't depend really on what happens on the new business front much at all. Just around the edges, we basically depend on what's already on the books for producing the income now there might be a little bit extra in way of pressure and lapses on that, but we don't really don't expect much, because we haven't see much this year if any. And so it doesn't affect our flow of earnings very much next year, but it might affect our expectations for new business levels next year.

And so, in terms of, and then sort of shifting to the demand and you said you were seeing a number quite a number of opportunities, what's the shape and type of those opportunities? Could you give a little color on that?

Well, they are... if I characterize them some common themes they are block transaction possibilities where companies are essentially looking to essentially sell a block of business through reinsurance or reinsure our block of business better way to put it. In order to free up their own capital resources and there are a number of these that we're seeing from really markets everywhere. And it is also potentially support of acquisitions that companies might want to make us another category of opportunities and we've seen quite a few of these.

With the movement out there you would think that there are multitudes of... there is so much capital needed and Jack, just mentioned that you have $150 million or so excess capital. It would seem that probability is high that you might need to raise capital on the near-term if you are to, to take advantage of some of these opportunities, would you agree that probability is pretty high?

Well, certainly what we would agree is that there is a lot more opportunities than we have capital. And we'll have to nurse them down the road a little bit private of it to really make that call Andrew, but if we were to take advantage of these opportunities, yes we would raise capital but we would do it in a way hopefully that there is accretive to our shareholders if we do that.

I mean, it seems that your share prices unfortunately, on my view it's quite under value and with issuing stock at this price, would you be able to manage something accretive?

It's possible but, obviously the lower the stock price be tougher that is and higher stock price the easier that is. So, like I said we have make the call as we go along here.

Yes, and just the last part now, I'll end it on this but are there private equity opportunities or side core type opportunities that might make some of these new business transactions more viable?

Yeah, we are exploring all possibilities, Andrew.

Alright. Thanks a lot.

And we will take our next question from Steven Schwartz with Raymond James and Associates.

Hi, good morning everybody. First, a follow up on one of Jimmy's question's and then I want to get in to my own, Jack, on the interest expense in corporate and other as you noted we saw it down last year saw it down again this year. Should we be remodeling your recurring patterns to see that down again next year?

Yes, Steven, yes. The answer is yes. As you model the third quarter, you won't see that pattern in every quarter, but if you take at look at last year's kind of pattern and what you've seen so far this year. Yeah, we would expect that sort of pattern every year.

Okay, alright. And then, on to my own Greig, you are going pretty fast. What was the effects of commutation in Canada?

Hi, do you mean the recapture in Asia-Pacific or on UK?

I thought you're talking about Canada. Okay, then you are really going faster, then I completed screwed up that. Forget it, I will go back over to transcript and figure it out. And then, could we just talk about --

There was a recapture in the UK.

There was a recapture in the UK?

Yes that affected us by about $8.7 million positive pre-tax.

Okay, alright. And then, I just want look at new business assumed. And if you give me an idea about what's normal and maybe just what's kind of reporting issues. Looks like Europe and South Africa new businesses assumed was up 60% or may be you can higher, ex-currency. Meanwhile Asia-Pacific was probably down 65% and Canada was up 31%.

As you can see reporting it bounces those numbers all around. I wouldn't read too much into quarterly numbers of because a lot of the reporting, especially for new business, tends to be really chunky.

Okay. Does looking at year-to-date make some sense?

Yes. Year-to-date is a lot better, technically.

Okay, all right. Great, that's what I got.

And we'll take our next question from Mark Finkelstein of Fox-Pitt Kelton.

Hey, good morning. Few question, I guess, Greig can you just expand on your comments on the rate environment, sounds like you are seeing more opportunity being selective. But, I think you said that rates are relatively stable. I guess in this environment why aren't we seeing maybe a little bit firming of rates and when or/if do you expect this to occur?

Mark, I think that there is a distinction to be made between the regular flow of business that is contracted and stays in place for a long period of time and just takes place. New opportunities come up to quote recently. There really haven't been a lot of quoting opportunities, say, in the big U.S. market in the last couple of months. So the testing of the new environment, we're reflecting that current cost of capital in quotes. So that will tend to you drive up the price, but what I'm talking about predominantly, what l talk about high return opportunities are some of these block opportunistic transactions where companies are seeking support from the reinsurance market.

Okay. I guess just from a trend I mean, I started to hear some movement from like YRT to coinsurance another... other kind of ways of wanting to place some of these risk, what are you seeing specifically in terms of those trends?

Yeah, we have seen a request or two for co-insurance instead of YRT. We frankly expected to see a lot more of that earlier and it's been slow to develop with the surprises to begin seeing a lot more request for co-insurance simply to transfer the XXX problem onto the reinsures and sort of keeping it at primary companies.

Okay. I guess how should we think about earnings going forward in the asset-intensive segment just for the volatility I mean what's the interplay in that area, I know you have a fairly sizable index annuity block, with hedging cost and volatility size, how should we think about that?

Well, it's clearly not the best of touch for any of the variable annuity or index annuity transactions. We have fixed annuities in that segment too. And generally they are performing solidly given the environment, which is to say less than we expect the run rate to be. They'll probably have some ups and downs over the quarter unfortunately, that is the small piece of our overall plan and it doesn't have that big of an effect on our overall rolled up results.

Okay, alright thanks.

And ladies and gentlemen we do have one remaining question in the question at this time [Operator Instructions] We'll go now to Jeff Schumann of KBW.

Good morning. This is actually Ryan Krueger filling in for, Jeff. Just a couple of quick one, on the $100 million of GAAP pre-tax impairments can you did those map write over to stat or was there a difference in stat impairment.

This is, Jack. Yeah they were mere to the extent that they are included in RGA which is the primary U.S. operating company. So that $100 million obviously was a consolidated number but a large share of those were in RGA Re.

Okay and then, can you talk a hint increased opportunity specifically to reinsure variable annuity business and if so what's your appetite to participate in that market?

Yeah we are seeing a lot of request for our variable annuity in that block transactions but just to regular transactions I would say we are going extremely slow as you can imagine in that market. We are analyzing these and watching the current environment. We are not likely to deter into any new deal that we haven't already entered into.

Okay, great. Thanks.

And we will go now to Craig Rothman of Millennium Partners.

Thanks guys. When you say accretive when you are looking at these potential deals. What are you exactly looking at, you're looking at accretive to EPS book value and then are you making some assumption on your cost of capital there?

EPS.

EPS.

Yes, clearly there is an implied assumption about of how much we can take capital in and what we can earn on the business.

Okay. If you guys... I mean there is lot of people out of shareholders out there that would probably very gladly give you capital, has been my perception. And we certainly do want to, and maybe you thought about raising capital privately rather than going to the market, because just mentioning that clearly has an impact in your stock.

Well. First of all, plans are not... we have no active plans to program to do anything at the moment. But we are looking at it very strongly, because we do have all these opportunities. And we'll try to take the best course possible to actually think about all the different opportunities there might be.

All right. Well, if you're thinking about opportunity and I am just... just keep the sign of list of cost because, I guess, I think there is a lot of people that would definitely who won't give you a lot of capital to take advantage of these opportunities?

Okay. Thank you.

And ladies and gentlemen [Operator Instructions]. And there are no further questions. I'll now turn the conference back to our speakers for any additional or closing remarks.

Okay. Thanks to everyone who joined us on the call this morning. Couple of notes, a replay of this call will be available on our website, some time tomorrow morning, following the filing of the transcript with the SEC. And given the interest in the investment portfolio and kind of where we... what we are with respect to any kind of unrealized loss, and that sort of thing, we will have an investment supplement available probably within an hour on our website that will provide more detail than we did in the press release. With that, we will end the call. Thank you, very much.

This does conclude today's conference. We thank you for joining us today. And hope that you have a great day. .