MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS lapses. The following table reflects the possible change that would occur in a given year, if assumptions are changed as illustrated, as a percentage of current deferred policy acquisition costs related to asset-intensive products ($236.5 million as of December 31, 2003): The Company continuously reviews the EGP valuation model and assumptions so that the assumptions reflect a reasonable view of the future. Two assumptions are considered to be most significant: (1) estimated interest spread, and (2) estimated future policy  The following table displays DAC balances for asset-intensive  business and non-asset-intensive business by segment as of December 31, 2003: In general, a change in assumption that improves our expectations regarding EGP is going to have the impact of deferring the amorti- zation of DAC into the future, thus increasing earnings and the  current DAC balance. Conversely, a change in assumption that decreases EGP will have the effect of speeding up the amortization of DAC, thus reducing earnings and lowering the DAC balance.  We also adjust DAC to reflect changes in the unrealized gains and losses on available for sale fixed maturity securities since this impacts EGP. This adjustment to DAC is reflected in accumulated other comprehensive income. As of December 31, 2003, the Company estimates that approximately 51.9% of its DAC balance is collateralized by surrender fees due to the Company and the reduction of policy liabilities, in excess of termination values, upon surrender or lapse of a policy. 35 THIS IS RGA. 2003 ANNUAL REPORT (in thousands) Asset-Intensive Non-Asse t-Int ensive Total DAC DAC DAC U.S. $236,509 $ 769,875 $1,006,384 Canada – 153,140 153,140 Asia Pacific – 179,737 179,737 Europe & South Africa – 412,703 412,703 Corporate and Other – 5,132 5,132 Total $236,509 $1,520,587 $1,757,096 One-Time One-Time Increase in DAC Decrease in DAC Quantitative Change in Significant Assumptions: Estimated interest spread increasing (decreasing)  25 basis points from the current spread 1.0% (1.2)% Estimated policy lapse rates decreasing (increasing)  20% on a permanent basis (including surrender charges) 0.2% (0.1)% The DAC associated with the Company’s non asset-intensive busi- ness is less sensitive to changes in estimates for investment yields, mortality and lapses. In accordance with Statement of Financial Accounting Standards No. 60, “Accounting and Reporting by Insurance Enterprises”, the estimates include provisions for the risk of adverse deviation and are not adjusted unless experience signifi- cantly deteriorates to the point where a premium deficiency exists. LIQUIDITY AND CAPITAL RESOURCES 