NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 14 COMMITMENTS AND CONTINGENT  LIABILITIES The Company is currently a party to various litigation and  arbitrations that involve medical reinsurance arrangements, personal accident business, and aviation bodily injury carve-out business.  As of January 31, 2004, the ceding companies involved in these disputes have raised claims, or established reserves that may result in claims, that are $62.6 million in excess of the amounts held in reserve by the Company. The Company generally has little information regarding any reserves established by the ceding companies, and it is possible that any such reserves could be increased in the future. The Company believes it has substantial defenses upon which to contest these claims, including but not limited to misrepresentation and breach of contract by direct and indirect ceding companies. In addition, the Company is in the process of auditing ceding companies which have indicated that they anticipate asserting claims in the future against the Company that are $12.5 million in excess of the amounts held in reserve by the Company. Depending upon the audit findings in these cases, they could result in litigation or arbitrations in the future. See Note 21, “Discontinued Operations” for more information. Additionally, from time to time, the Company is subject to litigation and arbitration related to its life reinsurance business and to employment-related matters in the normal course of its  business. While it is not feasible to predict or determine the ultimate outcome of the pending litigation or arbitrations or provide reasonable ranges of potential losses, it is the opinion of management, after consultation with counsel, that their outcomes, after consideration of the provisions made in the Company’s consolidated financial statements, would not have a material adverse effect on its  consolidated financial position.  The Company has reinsured privately owned pension funds that were formed as a result of reform and privatization of Argentina’s social security system. The Company ceased renewal of reinsurance treaties associated with privatized pension contracts in Argentina during 2001 because of adverse experience on this business, as several aspects of the pension fund claims flow did not develop as was contemplated when the reinsurance programs were initially priced. It is the Company’s position that actions of the Argentine government, which may affect future results from this business for the Company, constitute violations of the Treaty on Encouragement  and Reciprocal Protection of Investments, between the Argentine Republic and the United States of America, dated November 14, 1991 (the “Treaty”). The Company has put the Argentine Republic on notice of the Company’s intent to file a request for arbitration of its dispute relating to these violations pursuant to the Washington Convention of 1965 on the Settlement of Investment Disputes under the auspices of the International Centre for Settlement of Investment Disputes of the World Bank (the “ICSID Arbitration”),  if an amicable settlement can not be reached. The Company is also exploring other possible remedies under U.S. and Argentine law. 71 THIS IS RGA. 2003 ANNUAL REPORT RGA has issued guarantees to third parties on behalf of its  subsidiaries’ performance for the payment of amounts due under certain credit facilities, reinsurance treaties and an office lease obligation, whereby if a subsidiary fails to meet an obligation, RGA or one of its other subsidiaries will make a payment to fulfill the obligation. In limited circumstances, treaty guarantees are granted to ceding companies in order to provide them additional security, particularly in cases where RGA’s subsidiary is relatively new,  unrated, or not of a significant size, relative to the ceding company. Liabilities supported by the treaty guarantees, before consideration for any legally offsetting amounts due from the guaranteed party, totaled $188.3 million as of December 31, 2003 and are reflected on the Company’s consolidated balance sheet in future policy benefits. Potential guaranteed amounts of future payments will vary depending on production levels and underwriting results. Guarantees related  to credit facilities provide additional security to third party banks should a subsidiary fail to make principal and/or interest payments when due. As of December 31, 2003, RGA’s exposure related to credit facility guarantees was $48.6 million and is reflected on  the consolidated balance sheet in long-term debt. RGA’s maximum potential guarantee under the credit facilities is $53.1 million.  RGA has issued a guarantee on behalf of a subsidiary in the event the subsidiary fails to make payment under its office lease obligation. As of December 31, 2003, the maximum potential exposure was approximately $3.0 million. The Company has obtained letters of credit in favor of various  affiliated and unaffiliated insurance companies from which the Company assumes business. This allows the ceding company to take statutory reserve credits. The letters of credit issued by  banks represent a guarantee of performance under the reinsurance agreements. At December 31, 2003, there were approximately $38.7 million of outstanding letters of credit in favor of third-party entities. Additionally, the Company utilizes letters of credit to secure reserve credits when it retrocedes business to its offshore subsidiaries, including RGA Americas and RGA Barbados. As of December 31, 2003, $396.3 million in letters of credit from  various banks were outstanding between the various subsidiaries  of the Company. Fees associated with letters of credit are not fixed for periods in excess of one year and are based on the Company’s ratings and the general availability of these instruments in the  marketplace. While it is not feasible to predict or determine the ultimate outcome of the contemplated ICSID Arbitration, other remedies that the Company may pursue, or provide reasonable ranges of potential losses if the Argentine government continues with its present course of action, it is the opinion of management, after consultation with counsel, that their outcomes, after consideration of the provisions made in the Company’s financial statements, would not have a material adverse effect on its consolidated financial position.