NOTES TO CONSOLIDATED FINANCIAL STATEMENTS assumed. The Company generally maintains a consistent level of provision for adverse deviation between eras.  The reserving process includes normal periodic reviews of  assumptions used and adjustments of reserves to incorporate the refinement of the assumptions. Any such adjustments relate only  to policies assumed in recent periods and the adjustments are reflected by a cumulative charge or credit to current operations.  The Company reinsures asset-intensive products, including annu- ities and corporate-owned life insurance. The investment portfolios for these products are segregated for management purposes within the general account of RGA Reinsurance. The liabilities under asset-intensive reinsurance contracts are included in interest- sensitive contract liabilities on the consolidated balance sheet. Other Policy Claims and Benefits . Claims payable for incurred but not reported losses are determined using case basis estimates and lag studies of past experience. These estimates are periodically reviewed and required adjustments to such estimates are reflected in current operations. Other Liabilities . Liabilities primarily related to investments in  transit, separate accounts, employee benefits, and current federal income taxes payable are included in other liabilities on the consol- idated balance sheet. The Company occasionally enters into sales of investment securities under agreements to repurchase the same securities. These transactions are reported as collateralized financings and the repurchase obligation is a component of other liabilities.  At December 31, 2003 and 2002, there were no repurchase  agreements outstanding. Income Taxes . RGA and its eligible U.S. subsidiaries file a consoli- dated federal income tax return. The U.S. consolidated tax return includes RGA, RGA Reinsurance, RGA Barbados, RGA Technology Partners, Inc., RCM and Fairfield Management Group, Inc. (“Fairfield”). Due to rules which affect the ability of an entity to join in a consolidated tax return, RGA Americas Reinsurance Company, Ltd. files a separate tax return even though it is considered to be a U.S. taxpayer. The Company’s Argentine, Australian, Bermudan, Canadian, Malaysian, South African, Irish and United Kingdom  subsidiaries are taxed under applicable local statutes.  For all years presented the Company uses the asset and liability method to record deferred income taxes. Accordingly, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, using enacted tax rates. Company-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely Junior Subordinated Debentures of the Company . During December 2001, RGA Capital Trust I (the “Trust”), a wholly-owned subsidiary of RGA, sold Preferred Income Equity Redeemable Securities (“PIERS”) Units. Each unit consists of a preferred security issued by the Trust with a detachable warrant to purchase 1.2508 shares of RGA common stock. The Trust sold 4.5 million PIERS units. The market value of the preferred security on the date issued is recorded in liabilities on the consolidated  balance sheet under the caption “Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated debentures of the Company.”  Warrants. The market value of the detachable warrants on the date the PIERS units were issued is recorded in stockholders’ equity on the consolidated balance sheet under the caption “Warrants.”  Foreign Currency Translation . The functional currency is the Argentine peso for the Company’s Argentine operations, the Australian dollar for the Company’s Australian operations, the Canadian dollar for the Company’s Canada operations, the South African rand for the Company’s South African operations and the British pound for the Company’s United Kingdom operations. The translation of the foreign currency into U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during each year. Gains or losses, net of deferred income taxes, resulting from such translation are included in accumulated currency translation adjustments, net of income taxes, in accumulated other comprehensive income on the consolidated balance sheet.  Retrocession Arrangements and Reinsurance Ceded Receivables . The Company generally reports retrocession activity on a gross basis. Amounts paid or deemed to have been paid for reinsurance are reflected in reinsurance ceded receivables. The cost of reinsurance related to long-duration contracts is recognized over the terms of the reinsured policies on a basis consistent with the reporting of those policies. In the normal course of business, the Company seeks to limit its exposure to losses on any single insured and to recover a portion of benefits paid by ceding reinsurance to other insurance enterprises or reinsurers under excess coverage and coinsurance (quota share) contracts. Effective July 1, 2003, the Company increased its  retention amount from $4.0 million of coverage per individual life to $6.0 million. RGA Reinsurance has a number of retrocession arrangements whereby certain business in force is retroceded on an automatic or facultative basis. The Company also retrocedes most of its financial reinsurance business to other insurance companies to alleviate capital requirements created by this business.  THIS IS RGA. 2003 ANNUAL REPORT 55