MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CANADA OPERATIONS The Company conducts reinsurance business in Canada through RGA Life Reinsurance Company of Canada (“RGA Canada”), a  wholly-owned company RGA Canada is a leading life reinsurer in Canada, assisting clients with capital management activity and mortality risk management, and is primarily engaged in traditional individual life reinsurance, including preferred underwriting products, as well as non-guaranteed critical illness products. (in thousands) FOR THE YEAR ENDED DECEMBER 31,  2003 2002 2001 Revenues: Net premiums $214,738 $181,224 $173,269 Investment income, net of related expenses 87,212 70,518 65,006 Realized investment gains (losses), net 13,423 (163) 9,148  Other revenues (212) 136 201 Total revenues 315,161 251,715 247,624 Benefits and expenses: Claims and other policy benefits 223,375 186,398 172,799 Interest credited 1,488 1,070 299 Policy acquisition costs and other insurance expenses 20,293 16,136 14,101 Other operating expenses 10,441 9,480 8,909 Total benefits and expenses 255,597 213,084 196,108 Income before income taxes $ 59,564 $ 38,631 $ 51,516 the amount of net premiums reported of $2.1 million, or 1.2%,  in 2002. Premium levels are significantly influenced by large  transactions, mix of business, and reporting practices of ceding companies and therefore can fluctuate from period to period. The Canadian operation is one of the leading life reinsurers in Canada. RGA Canada’s reinsurance in force totaled approximately $84.0 billion and $64.5 billion at December 31, 2003 and 2002, respectively. At December 31, 2003, RGA Canada includes most  of the life insurance companies in Canada as clients. Income before income taxes increased 54.2% in 2003 and decreased 25.0% in 2002. The increase in 2003 was the result of an increase of $13.6 million or 35.2% in realized investment gains as well as more favorable mortality experience in the current year. Additionally, the Canadian dollar strengthened against the U.S.  dollar during 2003 relative to 2002, and contributed $6.7 million, or 17.3%, to income before income taxes in 2003. In local currency, income before income taxes increased by 39.7%. The decrease  in 2002 was the result of a $9.3 million decrease in realized investment gains and unfavorable mortality experience, primarily due to two treaties, and favorable mortality experience in 2001.  Net premiums increased by 18.5%, to $214.7 million in 2003, and increased by 4.6%, to $181.2 million in 2002. In original  currency, net premiums increased by 5.2% in 2003 and 6.5% in 2002. A stronger Canadian dollar in 2003 contributed $24.1 million, or 13.3%, to net premiums reported in 2003. The decline in the strength of the Canadian dollar in 2002 had an adverse effect on Claims and other policy benefits, as a percentage of net premiums, were 104.0% of total 2003 net premiums compared to 102.9% in 2002 and 99.7% in 2001. The increased percentages are primarily the result of several large in force blocks assumed in 1998 and 1997. These blocks are mature blocks of level premium business  Net investment income increased by 23.7% and 8.5% during 2003 and 2002, respectively. Investment income is allocated to the segments based upon average assets and related capital levels deemed appropriate to support business volumes. The investment income allocation to the Canadian operations was $5.8 million and $5.2 million in 2003 and 2002, respectively. Investment performance varies with the composition of investments. In 2003, the increase in investment income was mainly the result of a stronger Canadian dollar during 2003 compared to 2002, an increase in the invested asset base due to operating cash flows on traditional reinsurance, and interest on an increasing amount of funds withheld at interest related to one treaty. In 2002, the invested asset base growth was due to operating cash flows on traditional reinsurance, proceeds from capital contributions, and interest on an increasing amount of funds withheld at interest related to one treaty. THIS IS RGA. 2003 ANNUAL REPORT 28