MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 2002, and 8.1% in 2001. The increase in this ratio is primarily due to the changing mix of business. In 2003 and 2002, more business was derived from coinsurance agreements than yearly renewable term agreements than in the prior year. The coinsurance agreements tend to have higher commission costs compared to yearly renewable term agreements.  Other operating expenses increased $1.0 million in 2003 and  $0.6 million in 2002 compared to their respective prior-year  periods. The increase in 2003 is attributable to the strengthening of the Canadian dollar. in which mortality as a percentage of premiums is expected to be higher than the historical ratios and increase over time. The nature of level premium policies requires that the Company invest the amounts received in excess of mortality costs to fund claims in  the later years. Claims and other policy benefits, as a percentage of net premiums and investment income, were 74.0% during 2003 compared to 74.0% in 2002 and 72.5% in 2001. Death claims are reasonably predictable over a period of many years, but are  less predictable over shorter periods and are subject to  significant fluctuation. Policy acquisition costs and other insurance expenses as a  percentage of net premiums totaled 9.5% in 2003, 8.9% in  The segment provides life reinsurance for a variety of products through yearly renewable term and coinsurance agreements, and reinsurance of accelerated critical illness coverage (pays on the earlier of death or diagnosis of a pre-defined critical illness). Reinsurance agreements may be either facultative or automatic agreements covering primarily individual risks and in some markets, group risks.  Europe & South Africa net premiums grew 60.6% during 2003  and 139.3% in 2002. The growth was primarily the result of new business from existing treaties and from new treaties, combined with favorable currency exchange rates. Several foreign currencies, particularly the British pound, the euro, and the South African rand strengthened against the U.S. dollar in 2003. The effect of the strengthening of the local currencies was an increase in 2003  premiums of $41.7 million over 2002. Also, a significant portion  of the growth of premiums was due to reinsurance of accelerated critical illness. This coverage provides a benefit in the event of a death from or the diagnosis of a defined critical illness. Premiums earned from this coverage totaled $145.7 million, $103.5 million and $29.6 million in 2003, 2002 and 2001, respectively. Premium levels are significantly influenced by large transactions and reporting practices of ceding companies and therefore can  fluctuate from period to period. Net investment income increased $2.9 million in 2003, and decreased $0.5 million in 2002. The increase in 2003 was  primarily due to growth in the investment assets in the U.K.  and South Africa, growth in the allocated invested asset base and favorable exchange rates. Investment performance varies with the THIS IS RGA. 2003 ANNUAL REPORT 29 FOR THE YEAR ENDED DECEMBER 31,  2003 2002 2001 Revenues: Net premiums $364,203 $226,846 $94,800 Investment income, net of related expenses 3,869 1,009 1,536 Realized investment gains (losses), net 3,999 894 (137) Other revenues 1,067 2,064 256 Total revenues 373,138 230,813 96,455 Benefits and expenses: Claims and other policy benefits 230,895 130,975 59,429 Policy acquisition costs and other insurance expenses 105,062 82,700 26,753 Other operating expenses 15,866 13,049 10,555 Interest expense 1,043 680 681 Total benefits and expenses 352,866 227,404 97,418 Income (loss) before income taxes $ 20,272 $3 ,409 $ (963) (in thousands) EUROPE & SOUTH AFRICA OPERATIONS