Good day, and welcome to the Reinsurance Group of America 4th quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star then 1 on a touch-tone phone. To withdraw your question, please press Star then 2. Please note, this event is being recorded. I would now like to turn the conference over to Todd Larson, Senior Executive Vice President and Chief Financial Officer. Please go ahead.
Thank you. Welcome to RGA's Fourth Quarter 2022 Conference Call. I'm joined on the call this morning with Anna Manning, RGA's Chief Executive Officer, Leslie Barbi, our Chief Investment Officer, Jonathan Porter, our Chief Risk Officer, and Jeff Hopson, Head of Investor Relations. A quick reminder before we get started regarding forward-looking information and non-GAAP financial measures. Some of our comments or answers to your questions may contain forward-looking statements. Actual results could differ materially from expected results. Please refer to the earnings release we issued yesterday for a list of important factors that could cause actual results to differ materially from expected results. Additionally, during the course of this call, information we provide may include non-GAAP financial measures. Please see our earnings release, earnings presentation, and quarterly financial supplement, all of which are posted on our website, for discussion of these terms and reconciliation to GAAP measures.
Now I'll turn the call over to Anna for her comments.
Good morning, and thank you for joining our call. Last night, we reported adjusted operating earnings for the fourth quarter and full year of $2.99 per share and $14.43 per share, respectively. This was a solid quarter that included favorable performance across many of our segments and business. Areas of particular strength this quarter include our Global Financial Solutions business in all regions and product lines, Asia Pacific Traditional, and U.S. Group and Individual Health. We continue to see very good new business activity and momentum with notable premium growth on a constant currency basis. Our product development capabilities, capital solutions, and underwriting expertise are particular strengths that serve as valuable differentiators and are leading to first to market and exclusive new business opportunities. Our overall investment performance was good and the quarter saw minimal impairments.
This was also a solid quarter for capital deployment, with $80 million deployed into in-force and other transactions across a range of geographies and product lines, which brings the year-to-date total to $430 million. Another successful year. The transaction pipelines remain very active and broad-based across our many risks and geographies, and we expect the strong demand to continue. As I look back on 2022, I am proud of our many accomplishments. First, we achieved record adjusted operating EPS of $14.43, despite absorbing $5.02 of COVID-19 claims and $0.53 of foreign currency headwinds, demonstrating the strength of the underlying earnings power of our business. Second, our client-centric solutions-oriented strategy is driving good quality new business opportunities.
Third, global non-COVID underwriting experience was favorable, led by our U.S. individual mortality business and our Asia Pacific Traditional segment. Fourth, Global Financial Solutions had another record performance year. We completed many transactions at attractive returns, adding to the substantial underlying earnings power and the diversification of our business. Fifth, investment results were favorable, in part benefiting from higher available yields and some nice realized gains on our real estate joint ventures and limited partnerships. Interest rates have shifted from a multi-year headwind to a tailwind, and we are seeing a measurable benefit. Finally, I am proud of the progress we made on our ESG efforts. In 2022, we published our first sustainability report, providing transparency into our ESG strategy, targets, and accomplishments, and demonstrating our ongoing commitments. As proud as I am of these accomplishments, I'm even more excited about the future.
The life insurance industry delivered on its purpose during the course of the last three years, and RGA demonstrated its leadership position and the strength of our business and long-term client partnerships. We have a great franchise, have highly engaged and talented teams, and are very well-positioned in all our markets. Our business is resilient, our strategy is delivering value to our clients and returns to our shareholders, and I am optimistic about our future growth prospects. After 17 years with RGA and more than 42 years in the insurance industry, I will be retiring at the end of 2023.
As you've heard me say over many years, one of our key strengths is the depth and breadth of our leadership team. That was certainly highlighted with the recent announcement that Tony Cheng, who has been with RGA for more than 25 years, was named President, and will become CEO on January 1, 2024 upon my retirement. Tony, besides being a very capable and talented executive, has played an instrumental role in the growth of our business in Asia and more recently in his leadership role overseeing EMEA and Australia. He understands and appreciates our many strengths and our unique culture, and I'm confident that RGA will be in great hands. Thank you for your interest in RGA, and I'll now turn it over to Todd to review the detailed financial results.
Thanks, Anna. RGA reported pre-tax adjusted operating income of $245 million for the quarter and adjusted operating EPS of $2.99, which includes a COVID-19 impact of $0.78 per share and a foreign currency headwind of $0.22 per share. The full year we reported record adjusted operating EPS of $14.43, which includes a COVID-19 impact of $5.02 per share and a foreign currency headwind of $0.53 per share. The trailing 12 months adjusted operating ROE was 10.3%, which is net of estimated COVID-19 impact of 1.5%.
We are pleased with the solid quarterly results produced across the organization and in other fundamental metrics, such as new business production, constant currency premium growth, capital deployed into in-force and other transactions, and investment returns. For the full year, our book value per share, excluding AOCI, grew 4.8% to $146.22. This was achieved after absorbing $447 million of COVID-19 claim impacts. Reported premiums were up 1.1% for the quarter. After adjusting for adverse foreign currency impacts, premiums were up 6% on a constant currency basis. For the full year, premiums totaled $13.1 billion, representing an increase of 8.4% on a constant currency basis. We continue to see good momentum across our various business segments.
Turning to the quarterly segment results, starting on slide 7 in our earnings presentation that can be found on RGA's investor relations website. The U.S. and Latin America traditional segment results reflected both unfavorable individual mortality experience and COVID-19 claims that totaled approximately $48 million. We believe some of the excess mortality relates to the early flu season. Jonathan will provide some additional insights in a minute. Variable investment income was a positive contribution, although below the recent run rate. The U.S. individual health business had favorable experience, and our group business results were above our expectations as most lines performed well. The U.S. asset intensive business results were strong, reflecting favorable investment spreads, and our capital solutions business continues to be within our expectations. The Canada traditional results reflected unfavorable experience in the group life and disability business, with COVID-19 claim costs totaling $3 million.
The financial solutions business was above expectations due to favorable longevity experience. In the Europe, Middle East, and Africa segment, the traditional business results were in line with expectations, reflecting unfavorable mortality in the U.K., offset by favorable overall experience otherwise. COVID-19 claim costs were $2 million for the quarter. EMEA's financial solutions business results reflected modestly favorable experience. Turning to our Asia Pacific Traditional business, Asia results reflected favorable underwriting experience across the region, absorbing COVID-19 claim costs of $13 million. Australia reported another good quarter with a pre-tax profit of $6 million, driven by favorable group experience. The Asia Pacific Financial Solutions business results were very strong, reflecting strong new business and favorable investment spreads. We also saw a decline in the COVID-19 costs related to medical hospitalization claims in Japan.
The corporate and other segment reported a pre-tax adjusted operating loss of $89 million, higher than our expected quarterly range due to higher general expenses and some elevated financing costs. Included in the higher general expenses are some incentive compensation true-ups, consulting fees, and a number of one-off items. Moving on to investments on slides 13 through 15 in our earnings presentation. The non-spread portfolio yield for the quarter was 4.45%, reflecting a positive contribution from variable investment income, although lower than the recent run rate. The quarter was also positively impacted by higher new money rates as well as some benefit from existing floating rate securities.
For non-spread business, our new money rate was 5.05% in the quarter compared to 3.31% in the fourth quarter of last year. Our new money rate was modestly lower than the third quarter due to a more conservative asset allocation of new money and some lower spreads available. Looking at the base yield before variable investment income, we have moved from 3.78% in the fourth quarter of last year to 4.14% in this quarter. Meanwhile, credit impairments were minimal, and we believe the portfolio is well-positioned as we move through a more uncertain economic environment. We have taken action recently to lower our high yield bond exposure. We have also selectively extended duration to lock in higher interest rates.
As shown on slide 16 and 17 of our earnings presentation, our capital and liquidity position remains strong, and we ended the quarter with excess capital of approximately $1.2 billion. In the quarter, we deployed $80 million of capital into in-force and other transactions and continue to see a very active deal pipeline. We also returned a total of $78 million of capital to shareholders through share repurchases and dividends. For the full year, we deployed $430 million of capital into in-force and other transactions and returned $280 million of capital to shareholders through share repurchases and dividends.
As we emerge from the pandemic and a strong 2022, we are confident in our earnings power and capital generation. We expect to be active in the deploying of capital into in-force and other transactions and returning excess capital to shareholders through dividends and share repurchases. We have included some updated LDTI information in the earnings presentation on slide 21. The LDTI adjustments as of January and December of 2021 are consistent with our previously provided ranges. As of September 30th, 2022, we estimate a decrease in retained earnings of $500 million-$800 million after tax compared to current financial reporting. We estimate an increase of AOCI of $2.1 billion-$4.1 billion, reflecting the higher interest rate environment.
As we have previously commented, we believe the new financial reporting standard will provide better insight into RGA's long-term performance and, along with the new disclosures, provide additional transparency of our business to investors. We are excited about the future and believe our well-diversified global platform and underlying earnings power positions us to continue to support our clients and deliver attractive financial returns to shareholders over time. I will now turn the call over to Jonathan Porter, our Chief Risk Officer.
Thanks, Todd. As indicated on slide 8, aggregate non-COVID-19 underwriting experience was modestly unfavorable in the quarter. We continue to benefit from globally diversified book of risks as higher claims in some markets were in large part offset by favorable underwriting experience in others. Total COVID-19 impacts continue to remain moderate, totaling $70 million pre-tax across all segments. Starting 1st with U.S. individual mortality, we experienced elevated non-COVID-19 claim costs due to higher claims frequency. Large claim experience was in line with our expectations after two very favorable quarters in Q2 and Q3. Our higher frequency of claims is directionally consistent with the excess levels of U.S. general population mortality as reported by the CDC. Non-COVID-19 population deaths continue to remain elevated, which was compounded by the 1st material influenza season since the start of the pandemic.
Although total flu cases and estimated mortality appear to be in line with an average pre-pandemic flu season, influenza cases peaked about 8- 10 weeks earlier than historic norms, which we believe shifted the majority of deaths into the fourth quarter. U.S. general population data continues to show COVID-19 deaths are primarily at ages above 65, where there is less life insurance exposure. In the quarter, in our U.S. individual mortality business, estimated COVID-19 claim costs of $44 million, which is $13 million per 10,000 general population deaths, was at the lower end of our rule of thumb range. Aggregate underwriting results in all other markets were favorable, driven by strong performance across Asia.
As expected, we saw a material quarter-over-quarter reduction in medical claim costs in Japan to $11 million, consistent with the narrowing of eligibility for at-home COVID-19 claims reimbursement that occurred at the end of September. Turning to slide 10 in the earnings presentation, our overall year-to-date non-COVID-19 underwriting results were strong. U.S. individual mortality had both favorable large claims experience and lower overall claims frequency, and Asia Pacific Traditional also had very positive underwriting results across the region. U.S. individual health and U.S. group results were ahead of expectations, and Global Financial Solutions underwriting results were also positive, primarily due to better-than-expected longevity experience. These favorable results were partially offset by unfavorable mortality experience in Canada and the U.K. due to both higher frequency and severity.
Full-year COVID-19 claim costs of $447 million, with the majority in U.S. individual mortality, was a substantial decrease from 2021. That concludes our prepared remarks. We would now like to open it up for questions.
We will now begin the question-and-answer session. To ask a question, you may press Star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press Star then 2. In the interest of time, please limit yourself to one question and one follow-up. If you have additional questions, please re-queue. At this time, we will pause momentarily to assemble our roster. The first question today comes from Jimmy Bhullar with JP Morgan. Please go ahead.
Thanks. Hey, good morning. Had a question first, on just capital deployment. Should we assume sort of a similar allocation between deals and buybacks this coming year as you've had in the past year?
This is Todd. It'll be somewhat dependent on the level of deal activity that we see, and right now the pipeline looks, you know, very active around our different geographies. I think if you look back historically, it's, you know, we've, you know, pulled all the different levers between capital deployment into the transactions, the share buybacks and dividends. I think you'll see us continue that going forward. We, you know, do intend to be active. To the extent there are not attractive transactions to deploy the capital, we will look to bring down that excess capital level over time through share repurchases and the dividend level.
Have you, do you see a similar environment in terms of competition for deals? 'Cause it seems like in the non-mortality, like asset intensive businesses, there's just a lot more interest in those blocks from companies backed by, alternative asset managers.
Thank you for the question, Jimmy. It's Anna. First let me shape out the pipelines. As Todd mentioned our pipelines are very good. Strong demand across everything that we do and right across our geographies and the various regions. Now from a competitive environment, yes, deal environment is competitive. It varies by size, and it varies by the underlying risks. We typically will see, and do see less competition when there are more complex elements of the deal or as you mentioned, when there's more insurance risks, these biometric risks. Also we tend to see less competition on the larger size deals. Now, in terms of our competitive positioning, the way I think about it, Jimmy, is really, our proposition is all about bringing a complete package to the table.
It's in part how we differentiate from our competitors. The package including we have an excellent brand. You know, we have a reputation for getting things done, for being creative, for finding new solutions, and we also have a reputation on delivering. You know, we honor and meet our commitments. We, you know, we have very long and strong, well-established client relationships. You add the strength of RGA's counterparty and our long-term commitment to this business, that's a pretty complete package. That's how we compete, and that's how we win deals. You've seen it time and time again. You've seen it through, you know, the entire time of the pandemic. Our approach is really to prioritize and pick our sweet spots and we expect to continue to be competitive, be active and be successful.
The next question comes from John Barnidge with Piper Sandler. Please go ahead.
Thank you very much. Premium growth in Asia declined. Know there is some 4Q true-ups that occurred last year, given elevated mortality that didn't this time, fortunately. Now that we're arriving at a period of general improved mortality, how should we be thinking about this impacting premium growth given that dynamic in Asia going forward, but also in other geographies? Thank you.
Thank you for the question. I'll, I'll start. I would say the dynamics in Asia also reflected that in some markets through most of 2022, there were still COVID related restrictions that were being that were causing new business to be at lower levels than we had seen historically. Most if not all of those restrictions have now been lifted, so we see momentum really picking up. In terms of growth globally, as I think about growth for our traditional business, we're driving a fair amount of that growth with the work we do with our clients on new underwriting programs. Things like simplified issue or accelerated or automated programs. It's not just these programs, it's also providing the underwriting services for cases that are rejected or fall out of the programs.
As we've shared many times in the past, also providing the more traditional facultative services, those are for cases that require fluids or that are more complex. We layer on product development where we combine all those services, all that expertise to generate new products and new underwriting methods. It's that ability to support all of their needs, that is an advantage for us. I see that contributing to growth. We see that contributing to growth. We see momentum picking up as we get into 2023 and beyond.
Thank you. And my follow-up question. Todd, you had talked about a number of one-time items and consulting fees in the prepared remarks. Is there a way to categorize that, the degree or dimension, the size of that? And was any of that related to kind of work for replacement vehicle to Langhorne Re? Thank you.
Yeah, it was a variety of, as far as the other one-off type items. You know, there were some fees related to the push, to get, you know, the LDTI implementation ready to go for 2023. There were some, you know, various, sort of local and state tax items that don't necessarily flow through the income tax line, but flow through the income expense, you know, general expense line. Just a variety of, you know, little things that added up. I would say that, you know, going forward as our business grows, and, you know, as we mentioned, there's some elevated, of, you know, financing expenses, including interest expense. We do expect the corporate loss average run rate to increase.
For now, the size that I would say, you know, going forward, I would expect it to be more in the, you know, the average quarterly loss rate to be more in the range of, call it $30 million-$40 million, and we can, you know, revisit that as we go forward. Certainly we're seeing an increase in that, you know, quarterly, loss rate from the sort of the $25 million-$30 million we were seeing previously.
The next question comes from Ryan Krueger with KBW. Please go ahead.
Hi. Thanks. Good morning. I guess when you look back at the full year 2022 for the U.S. traditional business, are you able to give us, I guess, a rough sense of how mortality experience was relative to your typical expectation?
Yeah. Hi, Ryan, this is Jonathan. I mean, I think overall we had great results for the year, so we're very happy with the results in U.S. mortality. It was a combination of both better claims frequency relative to our expectations, as well as some favorable large claims experience, in particular in Q2 and Q3 that I mentioned. Of course, that's excluding the impact of COVID, which again, I think came in at the lower end of our ranges. For there, as we've seen the impact of COVID mortality go more into the older age groups, that's also resulted in us staying at the low end of our $10 million-$20 million range, which is also positive.
Do you have any quantification of the deviation versus expected?
I mean, it's, I think if you, again, if you pull out COVID relative to our expected for 2022, which would have included some assumption for excess mortality, it would be in the high double-digit millions.
The next question comes from Dan Bergman with Jefferies. Please go ahead.
Thanks. Good morning. I think in the past, you've talked about a $60 million-$65 million or so expected quarterly earnings range for the U.S. asset intensive business. Just given the block has outperformed this range for a number of quarters in a row now, I just wanted to see if you could give any more color on the drivers of the recent strong performance. How much is from one-time items versus maybe more sustainable tailwinds, like the benefit from higher interest rates? Just trying to get a sense, is $60 million-$65 million still the right range we should be thinking about, or has that run rate moved higher?
Yeah, a lot of the variance in the quarter was due to some higher investment spread and, you know, the impact of some of the higher income on the floating rate assets allocated to that portfolio. I will remind you that, you know, the asset-intensive business is of a little bit of a shorter duration, so there is some amortization off each year as well that we need to replace with new business. I think the range of $60 million-$65 million on a quarterly rate, I think is, I would stick with that for now. Certainly, I will update that as appropriate as we go forward.
Got it. Thanks. Then maybe just shifting gears to Australia. I just want to see if you could give any update or more color on what you're seeing there. It looks like Australia's been profitable, I think it was four of the last five quarters by my count. Are you at the point now where you'd expect consistent profitability in Australia? Is there a path for that business maybe to become a more meaningful earnings generator over time? Any color you can give there would be great.
Yeah. Hi, it's Todd. It's very good to see Australia producing consistent, you know, profitability. You know, we've got a very strong team there, very well-positioned in the market in Australia. We're seeing, you know, positive signs in the industry as well, as far as making it a more sustainable insurance environment. That's good as well. We're optimistic, positive, going forward that we can continue to improve the profitability in Australia.
Yeah. I would add on your question about making it m eaningfully higher. In the past, we have not, from a competitive position, been successful on the new business side in Australia. We were just, our view of the risk-return was just quite a bit different than the clearing prices in the market. We are starting to see that come back to us. We haven't changed our views on risk-return. We haven't changed our targets, we are seeing a pull towards us from the competition and expect that, you know, gradually and prudently, and with discipline, we will reengage and start to look to grow that business.
The next question comes from Erik Bass with Autonomous Research. Please go ahead.
Hi, thank you. I was hoping you could talk a bit more about the higher non-COVID mortality in the U.S. this quarter. Are you able to link the elevated claims frequency to the flu that you talked about? I think you mentioned the CDC data indicating an earlier than normal flu season this year. Do you view some of this as a pull forward of claims that you would typically expect to see in the first quarter?
Yeah, Erik, thanks for the question. This is Jonathan. Yeah, just to reiterate what I said in my prepared remarks, this is the first material flu season since the start of the pandemic. There is clear evidence in the general population that claims have been accelerated probably about 8- 10 weeks or so. I think consistent with what's showing up in the CDC data, we did see an increase in our frequency in our own claims in the second half of the quarter. That was factored into our year-end IBNR calculation and therefore impacted Q4 results. What we've seen so far through January, updated reporting for deaths occurring prior to the end of the year, it's consistent with our IBNR assumptions, which is good.
Looking ahead to Q1, since the flu appears to have peaked in December and has fallen off sharply in January, we would expect that the impacts in Q1 would be lower than a normal historical flu season as the majority of the deaths likely have been shifted to Q4.
Thank you. Maybe one for Todd. You've mentioned in the past that quarterly results should be smoother under LDTI accounting. Is this an example of a quarter where under LDTI, you wouldn't have seen as material a decline in the U.S. traditional earnings since the variance in actual versus expected mortality doesn't affect your future assumptions for claims?
Hi, Erik. Yeah. You know, we do expect, you know, with, you know, any of the claims volatility or the majority of the claims volatility will be smoothed or muted under LDTI. It will be somewhat, you know, dependent on the underlying cohorts that the claims, where the claims are incurred. You know, certainly under LDTI, we do expect the volatility to be muted and smoothed over time.
Yeah. Just to, just to add, we expect the smoothing will be both on volatility, which is severity, but it'll also be on the frequency. Performance plus or minus all cause will over time get smoothed because of the new accounting standard.
The next question comes from Tom Gallagher with Evercore ISI. Please go ahead.
Good morning. Just a follow-up to Erik's question on the, on the change in volatility. Is it fair to say then on the new accounting, we're not gonna see as much seasonality? You know, because during, you know, from a historic perspective, you would have dramatically different earnings patterns throughout the quarters with obviously Q2, Q3, being much stronger. Will that seasonality also be smoothed out, so we're gonna see kind of a more consistent quarterly earnings pattern here? Also, can you dimension at all for us when you say reduced volatility, you know, if we compare last quarter $5, this quarter $3, are we talking about dramatically reduced volatility or, you know, is it gonna get cut in half? Any way you can dimension that? Thanks.
Certainly, qualitatively, I can provide some comments. you know, as we've always discussed, in the past, you know, our business is a very long-term business. the impact of the new financial reporting standard, you know, does take a more of a look at the long-term nature of the business and looks at the, you know, experience and the profitability over time on the business versus letting the short-term volatility flow through to the bottom line as current GAAP accounting does. we certainly do intend to see and we'll see, you know, a smoothing of both the positives and the negatives as far as the claims activity under the new financial reporting. I don't have specific, you know, dollar quantification for you on the call today.
We do plan towards the late February, early March timeframe to provide restated LDTI information and have a call to discuss some of those results that should give you know, more information and detail behind what the impacts and the differences are between sort of old GAAP and the new LDTI financial reporting. Again, we'll plan to discuss that later on in March, early April timeframe.
Okay, thanks. My follow-up is, can you comment on related to the flu, mortality in Q4? How much IBNR did you put up, dollar-wise? The range of $13,000-$43,000 is a big range. Should we assume you assumed the middle of that? Where did you come in with your estimate?
Yeah. Hi, this is Jonathan. Rather than give you the sort of the IBNR, because that includes changes for things other than the flu, maybe I can give you sort of an estimate of what we're thinking of for the flu itself. You know, there's a wide range, like you pointed out, around the estimate of the population flu deaths. There's also a basis difference between how that translates into our book of business. Having said that, I think you can think of it sort of using our COVID rule of thumb, on CDC population estimates is probably not an unreasonable way to think about the impact of the flu that would be included in the total IBNR change that we put through.
If you do that calculation, it works out to probably be in the range of $30 million-$50 million pre-tax of additional, recognition in Q4 that's been pulled forward from Q1.
The next question comes from Tracy Benguigui with Barclays. Please go ahead.
Good morning. you know, we usually see lower mortality for the insured population versus the general population, yet you mentioned that your non-COVID deaths on the frequency side in the fourth quarter were directionally consistent with the U.S. general population. I'm wondering what is driving that.
Yeah. No. Your initial comment is totally correct. We definitely see lower population on in our insured book versus the general population. I guess as a relative percentage difference, though, is what I meant when I say directionally. Absolutely our mortality is better than the general population. When you see the percentage of general population deaths go up, that increase sort of comes through in our book of business on a relative basis. You can use the rule of thumb.
Okay. Just how it moves the premium.
Just one more comment. You can use the rule of thumb that we've provided for COVID as a way to sort of estimate that impact.
All right, got it. I'm also wondering if you share the same view on escalating future mortality losses on U.S. term YRT treaties as European reinsurers that are basically reinsuring the same business. For instance, one of your European reinsurer competitors recently called that out with respect to IFRS 17 adoption.
Yeah. Maybe on that, I mean, just to get, you know, go back a little bit in time. You know, as an organization, we've actually been on the forefront of research and activity, looking at post-level term. We performed the early studies related to this, came up with some industry information which is used, I think, broadly across the industry. I think we consider ourselves to be experts in this space. You know, what we're seeing on our post-level term business is that it's performing as expected after adjusting for COVID. There's nothing specific I would point out, I guess, at this point.
The next question comes from Michael Ward with Citi. Please go ahead.
Thank you, guys. Good morning. I was wondering if you could help us thinking about the underlying annual kind of run rate earnings power for the U.S. traditional business? I think last quarter you mentioned you might have some incremental quantifications on this.
You know, no specific update on the run rate. We certainly will be updating, as I mentioned earlier, when we provide the updated LDTI information, we can provide some more expectations under the new financial reporting standard. You know, we are, as, you know, very comfortable with that business. We do see, you know, the continued positives from the higher interest rate environment and good momentum around the new business generation as well in the U.S. segment. We certainly will provide you better and more updated information in a few weeks here.
Okay. Thanks, Todd. I guess if we think about Asia overall as a growth opportunity for RGA, curious about the strategy. Should we think about growth in Asia as a potential maybe offset to the natural maturation of the traditional U.S. business that you guys have spoken about in prior years? Could growth in Asia over time change RGA's ROE or capital return strategy?
Thanks for that question. Very good question. Let me piece it out. I think there were a few components to that question. Strategy in Asia. Both on our traditional business, and then I'll also speak to the strategy on our GFS business. On the traditional business, really, I mentioned it before, it's around bringing a package. It's about introducing new products, supporting them with underwriting programs and services. It leads to a much better competitive position for us. In fact, many of the deals that, and transactions that we work on are exclusive because we're taking the idea to the clients, and in exchange, we get agreement to get all of the reinsurance on that business. That's not a new strategy.
That's been a growth strategy in that Asia for quite a while, and it's been, as you can see, a successful growth strategy. Further, because of our global footprint in Asia, we can leverage the ideas, the successful ideas market to market. So again, another growth lever. On the GFS, you've also seen that we've been successful, and we've been growing that business. I would point to it's an earlier stage of development, and really it requires very deep knowledge of the business and also the conditions. For us, what is an advantage is we've been there for many, many years, decades, and we have boots on the ground, local teams who are very familiar, very experienced. Another growth engine for us in Asia.
I would say that also is in other markets, that strategy of product development and underwriting programs and expertise and being creative on the GFS side. Look, we see momentum, and we see good growth opportunities. Yes, Asia will have on balance, higher rates of growth, but we fully expect to grow our business in all our regions as we move forward.
The next question comes from Andrew Kligerman with Credit Suisse. Please go ahead.
Hey, good morning. I'm still trying to kind of get clarity around these flu numbers. I know it came up in the last few questions, but, you know, if we look at the midpoint of your estimate, it's about 29,000. If we look back historically at the flu season deaths from, say, 2010 through 2019, it was around, say, 36,000. You know, was the unfavorable mortality in the quarter due to flu or was it something else? That's what I'm trying to get a handle on. I think Tom was asking a question about IBNR and so forth and the pull forward. Have you lowered your assumptions next quarter for flu mortality? Two parts.
Hi, Andrew. This is Jonathan. Let me take a crack at that. I think you're right. What we're seeing just in the flu data now is about the same level as the typical average flu season pre-pandemic. I guess the key difference is those deaths largely have appeared in Q4 as opposed to Q1. It's not that the absolute amount of the flu impact will be that different probably, but that it's just it's occurred earlier, which is why we've adjusted our IBNR at the end of the quarter. That's also the reason why we were talking about the pull forward effect. Yes, I would expect all else being equal to see lower seasonality in Q1.
It doesn't mean there'll be zero seasonality because there are other things other than the flu, just the winter weather and other things affect mortality in the first quarter of the year too. You know, the flu portion of it, we think has been shifted to Q4. One other thing to keep in mind, of course, is as we switch accounting bases, as Todd has talked about already today to LDTI, that will again mean that the full experience impacts of any seasonality will be smoothed out largely over time as well. That will also impact what shows up in Q1.
With that new accounting, will you share what the actual mortality is? Is that one of the disclosures that will be required under LDTI?
Andrew, you certainly you'll start seeing, some more, you know, transparency on what's going on with the underlying, you know, book of business, including, you know, when we've updated any material manner our, you know, underlying assumptions. You'll start seeing some of that transparency, and we can talk to that, you know, going forward.
The next question comes from Alex Scott with Goldman Sachs. Please go ahead.
Hi, everyone. First one I had is just on the leadership changes. Was wondering, yes, I appreciate we still have some time. Was wondering if you could sort of unpack, you know, the direction of the company and sort of how Tony, you know, fits into all of that high level, as we think through that transition?
Morning, Alex. Thanks for the question. I expect that Tony will continue our partnership approach. He'll continue our solutions approach. I also believe he'll continue the focus on technical expertise and strong risk management and risk culture. Tony's been with us for 25 years. He knows our people, our business. He knows our clients. He knows the industry really well. Rather than me answering the question for him, you'll have many opportunities through the course of this year to hear directly from him. Including on these calls, he'll be joining our calls starting with the Q1 call, and he will be at our Investor Day, which we are hosting in New York in the summer. Tony and I will also spend the remaining 11 months of the transition going out to see our clients, to see investors and you. I, you know, Great question.
Thank you. I'll leave it there and leave it for Tony to answer.
Fair enough. The second one I had for you is just on the, you know, sort of block transaction environment in the U.S. I mean, we've heard from some companies, you know, that have had RBC impacts, whether it's from like legacy SG&A type stuff or, you know, other impacts, I think even relating to like VUL and term life and things like that under Principle-Based Reserving and so forth. You know, I was just interested if you're seeing any increased activity around that to help some of these companies optimize their balance sheets a bit.
Yeah. Yeah. Yes, we have seen more demand on products like Universal Life with ULSG. I would say that on that risk in particular, we have in the past looked at it on both a flow new business basis and on an in-force block basis. Haven't completed any deals in large part because we were too far apart from what our clients were looking for. Their expectations and our expectations just weren't compatible. We are starting to see. I would say our participation on products like that has been limited to providing reinsurance on just the mortality risk element, and we've been successful and it's part of our business and it's performing.
I would say that what we're seeing in addition to higher demand, higher interest, is we're starting to see some clients adjust their expectations, so we're taking another look. We're not changing our strategy. We're not going to change our risk-return approach or our targets. Not sure yet if we're close enough, but I would say the demand is there. We have all of the knowledge and capabilities to do it, would love to be able to support our clients, for the right opportunity.
The next question comes from Ryan Krueger with KBW. Please go ahead.
Hey, thanks for the follow-up. I guess I just had one more question. You're gonna give us more LDTI info later. If we just remain in an endemic state, and you kind of have some level of ongoing excess mortality for a period of time, I guess under LDTI, would that have a material impact on your reported results? Is the smoothing aspect so meaningful that it wouldn't really we wouldn't see that come through as much anymore?
No, no. Hi, Ryan. We would expect, again, the way the underlying new reporting works, we would expect both any adverse mortality or, you know, positive mortality as well to be smoothed out, you know, over time. Again, we always do mention as well, though, you know, some of it, you know, may come through currently depending on the underlying cohort, you know, where the claim activity or experience is. The point of the new accounting is, given it's a long-term business, to smooth out some of the shorter-term experience.
Yeah. Ryan, I'd also like to point out, you know, we have other business. Yes, we have a substantial book of mortality business, but we also have a sizable book of longevity business. We're at a stage now where we cover roughly 2 million pensioners and have, you know, present value of future benefits in the order of $70+ billion. With the environment that you've, you know, sort of sketched out, there are offsets in other parts of our business. When we consider that, you know, yields have turned, available yields have turned from a multi-decade headwind for us to this tailwind, we're really confident in the power of the earnings in this global business.
Great. Thank you.
This concludes our question and answer session. I would like to turn the conference back over to Anna Manning for any closing remarks.
Thank you for your questions and your continued interest in RGA. As we stated throughout this call, this was a solid quarter, and 2022 was a very strong year. It demonstrates the continued resilience and earnings power of our business. We're well-positioned in our markets to capitalize on the growth opportunities we see right across our global platform, and I remain confident that we will continue to deliver substantial long-term value for our investors. Thank you, and that concludes our 4th quarter call.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.