We're gonna get going here. Good morning. Welcome to RGA's 2023 Investor Day. It's great to see everyone in person, and we appreciate your ongoing interest. Before we get going, I want to remind you that we will make certain statements and discuss certain topics today that contain forward-looking and future financial performance. Keep in mind that the actual results could differ materially from the expected results. A list of important factors that could cause this difference in actual versus expected is included in the slide. Also, we will make comments on adjusted operating income, which is considered a non-GAAP measure under SEC regulation. We believe that these measures better reflect the ongoing profitability and underlying trends of our business.
Please refer to the tables at the end of the presentation for information on these measures, as well as the reconciliations to the nearest GAAP measure. In terms of the agenda, we'll take a short break at 9:45 A.M., finish the presentations by 11:00 A.M., then we'll take your questions, so please hold your questions until the end. I would now like to turn over the lectern to our first speaker, RGA's CEO Anna Manning.
Thank you. Good morning. Welcome, everyone. We're very pleased to be back in New York. This year, as we celebrate RGA's 50th anniversary, I believe we are the strongest we've ever been, and I think you'll come away from today feeling as I do, that the future for RGA is very bright. I'll begin the morning by outlining some of RGA's strengths and how they drive our growth and long-term success. At the core of who we are, a signature strength is a constant focus on clients, on delivering the best capabilities and solutions to address not only their risks and challenges, but importantly, to address growth opportunities. We partner with our clients for shared success. Throughout the morning, you'll hear about these partnerships, about the breadth and the depth of our expertise and capabilities.
Reinsurance is a relationship and knowledge business, highly leveraged to people, and we have a lot of talented people at RGA and a culture that is highly collaborative and innovative. You'll also hear about growth strategies, like our product development strategy, and when combined with creative and efficient capital solutions, are not only meeting the needs of our clients, but in many cases, well exceeding their expectations. That has earned the trust, respect, and confidence of clients and has built this large, diversified and valuable business, and one that is exclusively focused on life and health reinsurance. We do not face competing demands for capital or resources when cycles come and go in other parts of the insurance industry. It's the consistency and long-term commitment that go hand in hand with true client centricity.
Throughout the morning, we'll highlight the financial and the strategic benefits of RGA's global franchise and provide increased intermediate term financial targets, reflecting our many strengths and growth opportunities. We've shown a similar slide to this one for a number of years, and in each year, you would have seen us closing the gap on our peers, and I'm very pleased to share that we're now ranked number one in revenue among our global peers. It's worth noting that this is a highly concentrated industry where the top five global reinsurers account for roughly 70% of all new traditional flow reinsurance.
It's also a highly regulated and complex industry, where long-term success requires scale, and not just in terms of balance sheet or risk capacity, but scale that comes from the accumulation of experience and data, and importantly, the insights derived from both, and scale that comes from having a truly global reach and footprint. Long-term success also requires having broad and deep capabilities and technical expertise and, crucially, risk discipline. Capabilities and expertise, partnerships, scale, risk discipline, form natural barriers for new entrants to overcome. While perhaps these barriers are easy to list, they are very difficult to replicate, let alone to successfully master the entire package. We have it all, and that sets us up very nicely to deliver substantial shareholder value for years to come. For the 12th consecutive year, RGA is ranked number one as having the best global capabilities.
No other reinsurer has been ranked number one since this index was first published. It's produced by NMG, an independent global advisory firm. They survey life insurance companies annually and ask them to rate all reinsurers. You're not just hearing that RGA has the best capabilities from us. You're hearing it directly from life insurance companies around the world. What does it mean to be rated number one? It means we have the capabilities that matter most to insurance companies in underwriting, in product development, in the use of new data, in thought leadership and knowledge, and more. In all of these categories, insurance companies rate RGA as having the strongest offerings. It's not only the strength of the capabilities, it's also the consistency, the reliability, the quality of all client interactions.
It's a reflection and a measure of the overall value proposition of being a partner with RGA. It has set RGA apart for many, many years, and we're very proud of this position, and we don't take it for granted. We're not content with being the best. We're committed to getting even better. What you see here is the result of years of delivering on those commitments, years of disciplined growth and expansion, and almost entirely through greenfield efforts. From a single country, single risk reinsurer starting up 50 years ago to today, where we can underwrite and manage almost every life and health insurance risk on both sides of the balance sheet. Importantly, we do it through both traditional flow reinsurance and through in-force block reinsurance, our transactions business.
That's what you see on this slide, a broad geographic footprint, a comprehensive risk portfolio, and a very nice balance of flow reinsurance and in-force reinsurance. Very few in the industry can match this profile. It's part of what's enabled us to weather the challenges and uncertainties of the past few years, confirming the financial and risk benefits of this platform, and it's providing strategic competitive advantage. Competitive advantage is because we can tailor expert solutions, we can create holistic structures, we can support both new business and in-force block needs. We don't see as many competitors who do both flow and block reinsurance or who are comfortable taking large biometric insurance risks as well as the associated asset risks, and not many competitors can confidently underwrite risks in all the major life and health insurance markets around the world.
There are very few competitors at this intersection, the intersection of comprehensive risks, integrated investment capabilities, complete reinsurance structures, and truly global reach, and who have our reputation for execution. By consistently doing that, we become preferred reinsurance partners, reducing competition, leading to higher quality business and better margins. Tony, Ron, and Larry will share some case studies shortly, highlighting this competitive advantage and how it positions us so well to address the growth opportunities. These growth opportunities are being accelerated by industry and macro dynamics, beginning with the demand for new and more valuable products to meet the changing needs of the growing middle classes and aging global populations. Products that provide protection against early death and also against illness, unexpected medical expenses, and products that provide protection against outliving your savings.
There's increasing demand to address all of these needs, and that plays squarely to our strengths. We have the capabilities and expertise and a long track record of creating many first to market new products. With the movement in the level of interest rates, we see continuing demand for de-risking solutions, as well as strong demand for longevity and pension risk transfer solutions. We are very well positioned to respond with access to proprietary data and valuable insights generated from a sizable book of longevity business that we have been accumulating for over 15 years. We also have a notable track record for innovative capital solutions, and in almost every life and health insurance market, there are continuing regulatory, solvency, and accounting changes, all of which generate more demand for what we do so well, for solutions to address inefficiencies and unintended consequences of those changes.
All of these dynamics are favorable catalysts for our business. I'm going to spend a few minutes on this slide outlining RGA's growth drivers, and later in the morning, the business leaders will discuss specific opportunities for their respective businesses. RGA has three primary drivers. We grow when we increase our market share, we grow by expanding the use of reinsurance, and we grow by partnering with clients to increase the growth in the underlying insurance market. That's, in essence, the evolution of RGA's business over the last 50 years. Starting in one market here in the U.S., focused on one product line, individual mortality reinsurance, and back then, reinsurance was a very fragmented market. We grew our market share by responding to an opportunity that other reinsurers weren't addressing.
RGA's founders, a small group of actuaries and underwriters, recognized that every insurance company had unique reinsurance needs as a result of their business strategies, their markets, their distribution, and their risk appetites. They identified an opportunity to better meet those needs with services like facultative underwriting, and with pricing that reflected the insights into the unique mortality experience of each of those companies. That's a hallmark of driver one and how we grow our market share. Leveraging the local market knowledge, the client centricity, and a passion for innovation, creating competitive advantage and differentiation, and getting rewarded through increasing market share. We don't simply stop there. We also look for untapped opportunities to grow the reinsurance market itself.
Often, this means educating clients on the benefits of the broader uses of reinsurance, working with regulators and other industry parties to open up and expand the acceptance of new reinsurance solutions and structures. We were the first reinsurer to introduce the concept of first dollar quota share in the U.S. market. That is not just reinsuring policies in excess of a specified risk level, but reinsuring a share of all policies, regardless of their size. Again, we saw an opportunity to help clients better manage their risk profiles, while also helping them with the capital strain from writing new business. We were also the first to bring coinsurance to the Korea market bring Solvency I and Solvency II solutions to clients. That's driver number two, expanding the use of reinsurance, creating new value for clients, sharing in that value.
Growth driver number three, which is strategically perhaps the most exciting, is increasing growth in the underlying insurance market, expanding access, improving affordability, and the consumer's experience. Success in driver three means we help our clients grow, which is one of their top strategic priorities, are rewarded in kind, and become their strategic reinsurance partner. Our ability to act on all three drivers, individually and collectively, is because of the depth of our expertise, the strength of our capabilities, because of trusted long-term partnerships, and because of a truly global footprint. What I spoke about earlier, the competitive proposition, the intersection, that's what sets RGA apart. It's at the core of our strategy. Our strategy is directed at creating substantial value for all stakeholders. By combining that expertise and innovation, we really excel at this competitive advantage.
It enables us to increase market share, increase the reinsurance market, and increase the underlying insurance market. We do it through partnerships as being their preferred reinsurer by partnering to drive innovation and partnering to increase access to efficient capital. We do it by prioritizing high-growth, capability-driven opportunities that play to our strengths with fewer competitors and a greater likelihood of success, and through active in-force management from a culture and a mindset that is focused on building sustainable and resilient businesses, and delivering material long-term value for all stakeholders and for our shareholders. To this last point, in a long-term business, impact and resilience help define success. An important element to that is our approach to sustainability and corporate responsibility.
Executing on our strategy and delivering on our purpose to make financial protection accessible to all, and delivering on all of our financial and business commitments, comes with accountability, including transparency and reporting. It comes through active engagement with all stakeholders, including investors and rating agencies and clients, to ensure that our commitments, actions, and progress are well understood. We will integrate all actions to align with these goals of building sustainable, resilient, and valuable long-term businesses. I'll conclude by sharing some of the reasons why I'm excited about RGA's future. We have a differentiated, diversified, and valuable global franchise. We have a value proposition that is in great demand and difficult to replicate. We have the drive, experience, and discipline to succeed.
We have all that is needed to capitalize on the many opportunities we see ahead, and we have the talent and the leadership committed to delivering attractive financial results and compelling returns for shareholders. That's why I'm excited and confident about RGA's future. Speaking of the future, it is now my pleasure to turn the podium over to Tony Cheng. Tony is RGA's President and will be RGA's next CEO at the beginning of next year. He is an experienced and highly talented executive, has been leading our Asia, EMEA, and Australia business, and is equally excited about RGA's future. Tony?
Thank you, Anna. Good morning, everyone. 50 years of serving with passion, of turning ideas into solutions, of inspiring one another only to get better. 50 years of running hard, learning lessons along the way, and ultimately, always getting stronger and stronger. This year, RGA marks our 50th anniversary, and I have loved every minute of being with the company for half that time. It is a humbling privilege and exciting to take the reins of this great company at the start of next year. I would like to thank Anna, the board, and the whole team for their endless support. As I travel around the world, three themes continue to emerge: breadth, depth, and connectivity. The breadth of our global reach and capability to provide comprehensive solutions to our clients. The depth of our teams and the technical strength embedded in everything we do.
The connectivity across the globe to take an innovative solution in one market and spread it around the world. When you have breadth, depth, and connectivity, you have the foundation to forge ahead into the future. With our strong foundation, we are positioned exactly where we want to be. We provide services that bring us closer to the client and solutions that solve their biggest and most complex business challenges. This leads to a wealth of opportunities around the world. Our differentiated competitive position means that sometimes we are first in doing what we think makes most sense, only for the others to follow. Our focus will always be on two things: delivering for our stakeholders now and delivering for our stakeholders in the future. Yes, our market position is strong, but we can always be stronger.
Innovation is very much in our DNA, and our leaders know that this must always be the case. The bigger and more complex the challenge, the greater the opportunities for us to deploy all our capabilities to create and share in the greater value. Let us get into some specifics, and I would like to turn to growth driver number one. As you can see, we are a leader in a concentrated market. Driver 1 is about how we continue to grow our market share. There are three points I would like to make. Firstly, we grow in Driver 1 by delivering valuable services. This allows our clients to better serve the end consumer. This could be through facultative services or other underwriting programs, through knowledge sharing, or the many other things that we do.
Our clients know we are innovative, easy to do business with, and most importantly, always listening to their changing needs. Our clients see the value in this. This leads to greater pool shares and deeper relationships. The second way we grow in driver one is by entering into new areas of the market. This can be best exhibited by our recent entry into the U.S. Pension Risk Transfer business. There are other business lines we examine and choose not to get into until the conditions are right. Two years ago, we won our first three material longevity transactions in the Netherlands. This was after being patient for a number of years for conditions to improve. We constantly seek out new opportunities to deploy our capabilities and solutions. We do so only when the circumstances make the most sense.
The third point I would like to make on growth driver number one is that our risk framework is the lens through which we make our decisions. With our technical strength and our expertise, we are often first to diagnose an issue, report it, and ultimately prosper from the situation. I recall an example in Taiwan, where we simply weren't comfortable with a particular product that had been requested by our valued clients. Despite all our best efforts, we simply did not think it was a prudent decision, we did not advance. As it turned out, the product was not viable. That's when we stepped in to deliver an alternative, innovative product that took care of the same consumer need. This strengthened our market position, both financially and reputationally. Driver number one is all about being close to our clients and solving challenges day in and day out.
It's about having the risk management skills and discipline to get into the new market at the right time and shy away if needed. Let's now turn to driver two, which is about how we grow the reinsurance market through expanding the use of reinsurance. One of the first lessons I learned in RGA 25 years ago is that there is a reinsurance solution for most insurance company challenges. You see a slide here on Japan, but let me start with the history of how we pioneered uses of reinsurance in our home market here in the United States. 50 years ago, clients used reinsurance to remove the risk on any one big individual case. RGA gave birth to widespread facultative reinsurance. As you heard from Anna, RGA pioneered the use of first dollar quota share reinsurance for capital management purposes.
Today, we are increasingly seeing reinsurers in the U.S. provide expertise in product development and teaming up with others on distribution initiatives. Even in the most mature reinsurance market in the world, we are still seeing new uses of reinsurance. What about Japan, which is a massive insurance market, but still not one of the largest life and health reinsurance markets in the world? Japan is the third largest insurance market in the world, and given its penetration, is only currently growing at 2% per annum. However, for RGA, it has been one of our highest growth markets over the past 10 years. We pioneered facultative underwriting, substandard underwriting programs, and capital management solutions to help grow the reinsurance market at 5% per annum.
Through these pioneering efforts, we received a big share of the growth, increased our market share, and this led to our business growing at a CAGR of 15% over the past decade. Japanese clients are increasingly becoming more receptive of considering how reinsurance is used in other countries, such as the United States. The Japanese reinsurance market is an example of how we can grow the reinsurance market by executing on new uses of reinsurance. Let's now turn to growth driver number three. This is about growing the reinsurance market, but it's through growing the underlying insurance market. Let me illustrate through a story. Some years ago, I was having lunch with the chief marketing officer of the largest life insurer in Indonesia. He said to me, "Tony, the product is a home run." He was sharing the outcome of a new product we had just launched.
Our teams had worked together with him on this product, which started with a blank piece of paper some six months earlier. He was clearly delighted with the outcome, as his distributors were excited and the product was already selling very well. Our people were also delighted with the groundbreaking work they had achieved, as seen in this powerful product launch. Finally, our investors would be delighted as we were able to generate strong sales and margins that both RGA and its partners could share in. In subsequent years, [audio distortion] the Chief Marketing Officer said something that I'll never forget and stopped me in my tracks. "Oh, and by the way, the product is selling 15,000 policies a month." I did the math in my head, and that was almost 200,000 policies a year.
Given Indonesia has an average family size of five, this meant that 1 million people a year were being protected by what, six months earlier, was a blank piece of paper. RGA's purpose is to make financial protection accessible to all. When I say in the future, our focus is to live our purpose and delight all our stakeholders, I hope you recall this story. This slide has many examples of new products, and I won't go through them individually. One of our greatest assets is this library of solutions. We are very proficient in adapting and transporting these new products over time and across geographies to meet the demands of consumers. To be honest, this only makes sense. Humans are humans, and they have the same protection needs, depending on socioeconomics, demographics, and their stage of life.
This Growth Driver 1 solutions today are Growth Driver 3 solutions elsewhere tomorrow. Let us now get deeper into the relationship amongst the growth drivers. We have three drivers of growth that we pursue in all our global markets, but these drivers do not exist in isolation and leverage the strength of our strategy pillars. We start with create, bringing our expertise and innovation to a client to create new solutions that either expand their use of reinsurance or help them grow their underlying business. After we launch a new solution, we learn what is working well and what we need to improve on to perfect the solution. We can then scale this solution with the client to different markets or to expand it to new clients in that market. The accelerate pillar of our strategy focuses on impact and scale.
We are able to leverage a first mover advantage to get ahead of the competition by calling on the capabilities of our strong, local, and global teams. Eventually, many of our new innovations will be broadly adopted by the industry. We count this as a sign of success. These are all key components of the sustain pillar of our strategy. When solutions get to this stage of their life cycle, yes, we are competing for market share as a driver one opportunity, but we do so with the data and insights that we have captured over time across multiple markets. We are very well positioned to compete in a disciplined way without sacrificing margin. Of course, by then, we will have moved on to the next driver two or three solution, starting the process all over again. What about the future?
I'm sure by now you can feel my excitement, and I assure you that this excitement is shared by the rest of the team. We have such a strong foundation through our capabilities, our teams, our global platform, and our innovative drive to provide solutions. It is this foundation that enables us to execute on our exciting and ambitious strategy to accelerate future growth. We don't just wait for the new business opportunities, we create them. This leaves us with a strong portfolio of businesses across the world. Let me introduce some of these. Our U.S. GFS business is a major and key contributor to our company. Our Canadian business is the largest in the market and consistently number one for NMG Business Capability Index. Our EMEA Traditional business is our leading area for insurtech partnerships and other forms of innovation. We strive to do more.
We will highlight four other areas of notable, exciting, and significant growth in the following section. Firstly, our Asian Traditional business, which I will have the great pleasure to speak about for the last time as I transition into my new role. Ron Herrmann will speak about our exciting U.S. Traditional business, which combines innovation and scale. Larry Carson will share the exciting opportunities in Longevity/P ension Risk Transfer, as well as our Asian Asset-Intensive business. Thank you all for your support and interest in RGA. I commit to you that we will not rest on our laurels. We will continue to be ambitious and execute in order to achieve our updated EPS growth and ROE targets. Thank you. All right. I now have the great pleasure to kick off a deeper dive in four exciting and sizable growth opportunities for RGA.
I will speak about our Asian Traditional business. As Asian economies reopened last year, I was absolutely delighted by the new business results I was seeing. It was great to see the volume, it was the quality of the new business that excited me most. By quality, I mean the proportion of new business coming from exclusive opportunities. This was the clearest sign that we were delivering significant value to our clients. If we weren't, they would not be committing to working with us on an exclusive basis. This was not only happening in one or two markets, but across the board. Back in 2002, I moved from St. Louis to our Hong Kong office to lead a team of six. The reinsurance market back then was small. To reach RGA's ambitions, I knew we had to grow the market by developing solutions.
These were solutions to grow the strategic use of reinsurance and to grow the underlying insurance market itself. That's what we did. We established a broad use of reinsurance for product development, underwriting, and capital management in various markets across Asia. Next month, I moved back to St. Louis, leaving Asia in the hands of a great team. This team has 800 or so colleagues, fully steeped in the principles of combining technical strength with client focus to innovate and impact markets. Through innovating together, we have developed strong partnerships throughout Asia. We will continue to serve our clients through innovative solutions to grow our businesses together. In the seven years after I arrived in Hong Kong, we were impacted by both SARS and the global financial crisis.
These events moved consumers away from buying products heavily focused on savings towards more balanced ones with increased insurance coverage. This continues today and has only been strengthened by events of recent years. On top of this, higher interest rates make products more affordable and attractive. When you combine more affordable products with stronger insurance awareness, you expect to see greater insurance sales. When you have greater insurance sales, with the increasing strategic use of reinsurance, you see the favorable industry dynamics we see today. As a market leader, with the favorable industry dynamics, we are well positioned for continued long-term value creation. We have as capable and deep a team as any. Thus, we do not shy away from the most impactful and complex client challenges. The solutions to these challenges become our innovations. We spread these innovations through the largest footprint within the region.
This further strengthens our track record of success, and the cycle continues as partners trust us again on their next complex challenge. Let me now go into each of these key messages in greater detail. I've spoken about many of these attributes that makes us a leading reinsurer in Asia. However, there is one of these attributes I want to emphasize that strongly differentiates us. It is the fact that RGA is able to reinsure both sides of the balance sheet in many markets throughout Asia. Several reinsurers are able to reinsure the liability side, but our asset-intensive reinsurance capabilities sets us apart. Anna mentioned this in her opening when she spoke about our differentiated competitive proposition. This has led to two tremendous channels of growth. Firstly, the use of coinsurance that help our clients optimize their capital, which Larry will share more on later today.
Secondly, the combination of our product development leadership with our asset-intensive reinsurance capabilities has generated many exclusive opportunities. This has led to the evolution of our product development strategy and accelerated the growth of our largest business, Hong Kong. You will see later that this is not only critical for our growth in Hong Kong, but we do expect other, over time, other countries will follow. We believe that we have the leadership team and strategic position in place to be successful. Asia is also fortunate to be in a region with favorable macro trends that is further strengthening this position. Let us look at some of these in greater detail. Firstly, as people enter the middle class, they have a greater need for insurance as they have more to protect.
Asia will be the home to the majority of people entering the middle class for the foreseeable future. This is driven by the higher GDP in the region relative to the rest of the world. The events of recent years will only place greater urgency for the middle class to demand increased amounts of insurance. The second macro trend is the launch of new capital frameworks throughout Asia. Regulators have adopted best practices and very much followed global standards, which recognize more types of reinsurance structures. This has led to more reinsurance transactions across the region. We have recently seen first-time transactions in Korea, Taiwan, and Southeast Asia in anticipation of the new capital standards that are emerging. The third notable macro trend is the expectation for our clients to provide increased ROEs and shareholder dividends.
Now, Asian insurers continue to be relied upon for growth, however, they are increasingly also having to deliver higher shareholder dividends and ROEs. As a result, this has led to greater demand for partnership with reinsurers. Insurers seek reinsurance partners that can help them optimize their capital management and grow their new business. Growth in new business comes when we help our clients grow the underlying insurance market through new products. Let us now cover this off in greater detail. Similar to my earlier story about Indonesia, we grow the underlying insurance market through innovative first-to-market products. This slide shows the most recent example of this. We have many strong partnerships throughout the region, and of course, AIA is one of them. We, as a B2B company, take particular delight when we help our clients receive industry accolades and recognition.
We are also delighted when our clients call out something we have materially helped them with. This is highlighted on the right-hand side of the slide in the excerpt from their most recent earnings call. Allow me to share with you how we got to this point. It truly does take 10 - 20 years to be an overnight success. This success story from China begins nearly 20 years ago with our Korean business. In 2005, we launched the first critical illness product in Korea with one of the leading companies there. This product was a tremendous success and sold 1 million policies in 18 months and 2 million in three years. It triggered the first wave of critical illness products that lasted about a decade before slowing down. In 2013, we launched the second generation of the critical illness product.
Using the data and knowledge, we were able to simplify the underwriting and target the product towards a different segment. This drove growth in our Korean business for the next several years. Getting back to China. China has just finished their first wave of critical illness products. This first wave, similar to Korea, lasted for about a decade and led to enormous protection sales. We decided to follow the Korean playbook. In late 2022, we tailored and launched a simplified issue product in China, similar to the Korean product launched in 2013. This is the product you see on this slide. We are optimistic it will kick off a second wave for critical illness products in China, leading to growth for RGA. We've talked a lot about product development.
How do we enhance our product development offerings and move them to the next level? We have covered many of the Asian operations this morning. However, let me tell you about our Hong Kong business, which is our largest in Asia. I mentioned earlier, to reach our ambitions, we needed to grow the use of reinsurance and grow the underlying insurance market itself. The early years in Hong Kong were about convincing clients to use reinsurance for product development. The best way, of course, was to have as many success stories as possible. Once this occurred, our business grew and generated strong growth in revenue and profits. In 2014, that growth in revenue and profits accelerated. We launched a new product with one of our major insurers. Shortly after launch, we received word from the client that the product was doing very well.
It was actually doing too well as it was taking up too much of their capital. The client was worried that they would have to slow down sales. The answer turned out to be the most logical one. We have a capital solutions business in Hong Kong dedicated to asset-intensive reinsurance. We combined this knowledge, expertise, and capability with the product that was selling so well. The client could keep selling, we both derived greater value, and more consumers could get the coverage they needed. I want to emphasize two points: firstly, combinations of solutions and capabilities are critical to innovation in every sphere of business. This is the same in the reinsurance business and for RGA. Product development itself is great. Asset-intensive reinsurance itself is great.
However, in combination, it can be transformational. The second point is RGA has a playbook for the Asian markets that we apply to individual markets as they mature. This playbook is that we firstly educate the insurers in using reinsurance for capital and product development purposes. Secondly, we create new products through our close client relationships and strong local teams. Our third step is to use our regional footprint to tailor these products for other markets and launch when the time is right. You see this with the Korean example being exported to China. Finally, we combine the product development leadership with our asset-intensive reinsurance capabilities to elevate our product development solutions to the next level. This is what you have been seeing in Hong Kong since 2014. Of course, the next step is to replicate this to other markets, such as Japan.
I've spoken about Japan in my earlier presentation, but let me share a little bit more detail. Since 2014, Japan has seen the emergence of asset-intensive reinsurance, but less so the use of product development reinsurance. We don't just wait for the favorable factors in a market to emerge. Given what we saw in Hong Kong, we decided in 2018 to build a product team in Japan ahead of the demand for such reinsurance. We did this to establish this form of reinsurance and stimulate the demand for it. We are starting to see this pay off and are excited by the huge potential of the next stage of the Japanese business evolution. Once executed in Japan, we will, of course, follow this playbook further for the other Asian markets down the road.
In summary, the macro trends are increasing insurance sales, expanding the use of reinsurance, and strategically improving our position. We have an incredible team that is steeped in the culture of innovation and fully driven to provide solutions. RGA has the greatest presence around the region, and clients trust our ability to deliver on innovation and to grow our businesses together. We have an edge in being so complete in our ability to reinsure both sides of the balance sheet. We have a playbook that we have executed and continue to execute as markets mature. When you combine all of this, you can see why we are so excited about our Asian traditional business and why it's one of our exciting and sizable growth opportunities. There is, however, one thing better than all of this.
It is that this is just one of the four exciting and sizable growth opportunities we will highlight in greater depth today. I'll soon pass it over to Ron Herrmann, who will share the story of the U.S. traditional business. Ron and I have extremely different backgrounds, but we are very similar in that we share in the same passion to serve our partners and are strongly driven to grow the business. This has been instrumental in creating a situation in our home market of the United States that's exciting in its own right. Afterwards, Ron will pass it on to Larry Carson, who leads a very strong business unit and has not one, but two exciting business areas to share. It's my great pleasure to hand it over to Ron. Thank you.
Thank you, Tony. Certainly appreciate the warm introduction. As Tony had mentioned to you earlier, I oversee the U.S. and Latin American businesses. I'll be talking to you today about North America, which also includes our Canadian business as well. Across North America and Latin America, we're a well-respected leader, regularly earning high marks for our innovative business capabilities. As we celebrate our 50th anniversary, we reflect on the deep and long-standing client relationships we have built over many years on our ability to partner and help solve the most complex challenges. Progress over the past several years has accelerated as we continue to find ways to grow the overall markets. Data continues to be the gold standard as clients look to evolve strategy and accomplish their goals and objectives. Our aggregation, insight, and analysis has enabled us to build tools and provide proprietary support.
When we think about the potential markets and opportunities looking forward, the underwriting experience is key to enabling the end customer the ability to acquire insurance in a timely and effective manner. We are not only a trusted partner, but key to the development across the entire underwriting value chain. Our ability to support digital acceleration and automation, as well as full-service facultative programs, has differentiated us across the industry. Not only have we built tools to support our clients, we have built tools to support the industry overall. Economic and regulatory change continue to create opportunities for in-force transactions as clients look to reduce capital and volatility. We have a strong balance sheet, and our relationships and capabilities enable us to partner on these transactions and deliver effective results. Another key area for expansion is the group healthcare business.
We've been in this market for more than three decades. The increasing costs of healthcare are creating opportunities to partner with insurance companies and their clients as many look to self-fund the programs they offer to employees. We have developed several products to support these markets across the North American territory. Additionally, an innovative effort focused on growing the underlying insurance market is stemming from the partnerships we are creating with our clients, insurance companies, and specific targeted distribution. The goal is to drive more insurance demand and create more reinsurance opportunities. In the U.S., we are currently piloting a program with one of the larger independently owned distribution organizations, as well as a leading insurtech business. In Canada, we have provided the tools and expertise to enable a digital distribution platform, partnered with an insurance company to deliver a highly regarded customer experience.
PolicyMe, as it is called, is a great example of our ability to align and support these innovative outcomes. Successfully capitalizing on market opportunities in the past, today, and in the future, delivers substantial, but also by focusing on management of our in-force. There's significant value embedded in our in-force. We are sustaining this value through expense discipline, regular evaluation of investment portfolio positioning, and ongoing capital management. Further, active in-force management is an ongoing process to make sure that economics align with our expectations. We work with our clients holistically to monitor and evaluate the overall performance. There are three business lines across the North American territory: individual life, individual health, and group life and health. I'll touch on individual life, as noted on this slide first. This is RGA's longest standing business, dating back to 1973, as you heard from Anna.
We have clients across the U.S., Canada, and Latin America, serving over 90% of the top 100 insurance companies. We have the largest in-force block in North America, and our data, insights, and analysis have enabled us to be an expert at risk assessment and selection. Supporting the underwriting process has been a key differentiator for RGA, and we continue to expand on those capabilities. We have historically provided underwriting expertise and insights to drive program development and exclusive reinsurance opportunities. As clients' demand for improved consumer experience has grown and underwriting resources have become limited, automation and technology platforms have grown in importance. Demand for RGA's underwriting resources has grown significantly. We have been instrumental in the development and implementation of accelerated underwriting on programs across the industry.
Our underwriting strategy focuses on directly addressing the top challenges we hear from our clients, expanding the opportunities for automated, accelerated underwriting, evolution and support of core underwriting process, and the advancement of medical evidence. I will touch on these points individually. Expanding on the opportunities for automated accelerated underwriting landscape, leading to our ability to minimize mortality slippage and introduce the latest in digital underwriting evidence. The pandemic further enhanced our client relationships due to our ability to support their immediate need to expand into this area quickly. Our automated engine, AURA NEXT, continues to gain market traction, especially in support of carrier introduction of new products and distribution. On the evolution and support of core underwriting process, we are well known in the industry for our facultative services, and we have been a market leader in this area for years.
Expanding those skills into complete underwriting support in exchange for reinsurance, has helped us grow our flow business. Strategic Underwriting Program, SUP, as we call it, is our ability to staff an underwriting team and underwrite on behalf of our clients, enabling them to reduce cost, increase efficiency, and balance capacity strengths. We have invested in top talent, and we maintain a staff of experienced underwriters. In combination, these exclusive underwriting solutions are an important competitive differentiator. Finally, the advancement of medical evidence. Medical research for the advancement of underwriting is in our DNA, allowing RGA to truly look around the corner and translate the latest medical advances into underwriting guidelines. RGA employs nearly 40 medical directors across the globe, the largest amongst reinsurers, covering virtually every medical specialty, including cardiology, genetics, and oncology.
Our medical specialists and their research are constantly noted as best in class, as reflected by NMG. Individual health is our second business line. We've been in this market since 2008. It is primarily long-term care products in the U.S., where we have been very selective in the risks that we assume. Typically, coinsurance arrangements, where we work closely with our clients to maintain an effective premium rate structure. It is overseen by a talented technical team who are respected as industry experts. The business has provided consistent earnings and focuses on two key areas. First, opportunities with similar block characteristics to our existing block. Business issued 2006 and later, very little lifetime benefits, a low percentage of limited pay policies, and a minimal amount of premium, return of premium riders.
Second, product development in partnership with clients to address opportunities for potential market expansion. The remaining business is the group life and health. This business spans across all of the North American territories and delivers a diversified portfolio of products, including group life, accident, and disability, as well as our complete package of healthcare reinsurance products. Treaties are generally one to two years in duration, and we have extensive experience in serving these markets. Highly rated year after year for innovation by NMG, the teams have created unique proprietary tools to support our clients. One example is MedScore, a differentiated solution that allows group life, health, and disability clients to customize their specific objectives regarding pricing, risk selection, and underwriting triage, enabling optimization of case underwriting, workflow processes, and profitability. Another example would be a unique support service we call ROSE.
It's a consulting group of registered nurses that work with our clients to optimize cost containment solutions by navigating through complex claims and healthcare challenges, leading to additional savings for our clients and RGA as well. As I mentioned earlier, there's an opportunity to grow our healthcare business. The employer stop-loss market has grown from $8 billion in 2011 to $27 billion in 2021. The Centers for Medicare & Medicaid Services are projecting national healthcare expenditures to consistently grow at a rate comparable to that of GDP over the next 10 years. Many employers are transitioning to self-funded arrangements to deal with rising costs. We have reinsurance products to support our clients as this market grows. Our core strengths, as noted at the bottom of this slide, are prevalent across all of our business lines.
They are overseen by a very experienced management team and have strong skills across all technical functions. U.S. is the largest insurance and reinsurance market in the world, providing significant opportunity to capture and increase our overall share. The information shown here depicts total volume of the underlying individual market, as well as cession rates since 2015. The individual market is our largest business segment, and as you heard from Tony, we're expecting enhanced growth in the U.S., and we are well-established in Canada. In the U.S., cession rates have grown significantly since 2015. Growth in the underlying market and higher cession rates leads to growth in the reinsurance market. As you heard earlier from Anna and Tony, growing the reinsurance market and our share of it, as well as growing the underlying insurance market, is an important element of our overall strategy.
I believe cession rates will continue to trend up across the industry as demand for reinsurance remains strong. The graph on this slide shows U.S. growth rates over the same time frame for the underlying market, the reinsurance market, as well as RGA's growth. As you can see, RGA is outpacing the growth of both markets. We're expanding into product development, underwriting services supported by data and innovation, as well as aligning organizations to target the needs of specific market segments. Focused on all three growth drivers, we have been a top-tier performer, continuing to accelerate our growth of new business. These volumes represent both automatically ceded business as well as facultative business. We get our fair share of automatically ceded business, but we're a leading facultative provider with more than 100 experienced underwriters and uniquely positioned programs to support this market.
As an example, I've mentioned our supplemental underwriting program to you earlier. The program directly focuses on the challenges that our clients are having and provides significant benefits with immediate results. We have been and will continue to be a leader in this segment of the market. I've chosen to show the past 13 years of our underwriting evolution and innovation. I could have gone all the way back to our beginning in 1973. As you look at this slide, you see the constant impacts we have made on the industry and the support we have provided throughout the entire underwriting journey. We have been and will be instrumental in the development and assessment of new evidence.
Looking forward, we will continue to innovate, digitize, and automate the acceleration of data to modernize the underwriting process we've made with the non-traditional approaches you heard me mention earlier, to grow the underlying insurance market. I'm providing you an example of a most recent partnership where all three of the growth drivers have come into play. The client want to enter a new market with a new product and a service model that would be new to their organization. They realized they needed to find a partner with the expertise to deliver a solution that would meet the needs of the targeted customer base, as well as taking into consideration the tools necessary for the distribution to accomplish specific objectives.
Through a collaborative effort, we were able to enter the market in a very effective way, meeting or exceeding the goals of the overall program, therefore strengthening the relationship we have with this organization. Looking forward, we will continue our momentum. I have discussed several things that are delivering value to our client base and RGA. They are paying dividends now and will continue to do so into the future. We have strong client relationships, and we are well-positioned to take advantage of the current market conditions. We have a very talented and experienced team leading a diversified portfolio of businesses with an innovative culture. Thank you. It is now my great pleasure to introduce Larry Carson.
Thank you, Ron. Good morning. In RGA's Global Financial Solutions or GFS business unit, we design and deliver customized solutions. We leverage RGA's people, expertise, capabilities, and counterparty strength. We do so to provide valuable solutions to our clients for their most complex challenges. Our strengths line up very nicely with some key macro trends that we're seeing. We have proven capabilities and a successful track record over decades. That's why we are confident we will continue to provide meaningful income growth and strong returns for RGA shareholders, and we'll do so while helping to diversify RGA's earnings and risks. We have strong growth momentum around the world and are optimistic about our future. Let me start by spending a few minutes reminding you about the three product lines in GFS.
First, our largest line of business, typically representing around 60% of GFS earnings, is what we call asset-intensive. This is full risk coverage of investment-oriented products, where credit, market, and interest rate risks are the primary drivers of capital and sources of earnings. Most of this business is transacted on a coinsurance basis. This line includes longevity transactions that are on a funded basis, such as coinsurance of payout annuities. This line also includes, and I'll talk about this more in a little bit, direct Pension Risk Transfer or PRT business. We have done meaningful asset-intensive business in the U.S., Japan, Hong Kong, the U.K., and Europe, with more to come. The underlying reserve balances in our asset-intensive business are over $40 billion, and RGA has been in this business for over 25 years.
It's important to keep in mind that a significant portion of this business features liabilities that have no policyholder optionality, such as payout annuities. Another substantial portion of this business is generally stickier based on the characteristics such as age of the policyholders, distribution channel, underlying guarantees, and so on. Our second largest line of business is our longevity business, typically representing around 25% of GFS earnings. This consists of what are known as longevity swaps, which are simply reinsurance treaties that transfer the pure longevity risk, but not the investment-related risks on payout annuities. The gross underlying benefits that we reinsure here are over $70 billion on a present value basis. Leveraging RGA's strong mortality expertise, and especially our knowledge of older age mortality, we've been writing this business for over 15 years.
We constantly analyze all the data from our experience, combined with industry and other data sources, to create continued insights that we feed back into our pricing. We started this business in the U.K., but have also completed substantial transactions in markets including Canada, continental Europe, and the U.S. Been in the longest, for four decades. This is our capital solutions line of business. Sometimes called financial reinsurance or surplus relief, these are remote risk solutions designed to help companies manage regulatory capital for a fee. An example in the U.S. context would be financing of XXX redundant statutory reserves. As a fee business, in addition to being a significant income contributor, it also enhances our overall return on capital. All these lines of business are based on our core strengths in structuring and risk assessment.
With all our business, we start with a strong foundation of risk management, starting at time of pricing and continuing through the life of each and every transaction. We bring our creative and innovative energy to every opportunity, and we're focused laser-like on making sure that we do what we promise for our clients. In short, in GFS, we have three high-quality lines of business that contribute meaningful income, growth, and returns to the organization. I'd like to provide some context by talking about some macro trends that we're seeing and what they mean for our business. I'll line these up against RGA's capabilities and describe what we see. Business, all those trends continue. Others, such as the rise in interest rates over the past year or so, are more recent and should lead to more growth going forward.
The first such trend is what's going on in the economy, specifically market volatility and most notably in interest rates. This market volatility in turn drives some volatility in our clients' solvency and accounting results, that leads to demand for solutions to help them with these challenges. Higher interest rates also drive increases in the funded ratios of pension plans, that makes Pension Risk Transfer more attractive and feasible. In a number of our markets, it's this growth in PRT that drives opportunities in both our longevity line of business as well as our asset-intensive line of business. Finally, higher interest rates can make reinsurance risk transfer more affordable, leading to growth across the board.
It's worth noting that we've had plenty of success and strong results when interest rates were lower than they are today, so we feel we're well positioned to succeed in various rate environments. Changes in regulatory, accounting, or solvency requirements also lead to business opportunities for us, and again, across all our lines of business. Excuse me. As we saw with the introduction of previous changes of this nature, such as Solvency II, the business opportunities may lag the regulatory changes. Of course, RGA has done the research and thinking to understand these changes so that we're positioned to work with our clients early and often and be prepared for when they're ready to transact. Those changes continue around the world. IFRS 17, newer revised RBC regimes in various Asian countries, and coming changes to Solvency II in the U.K.
Finally, the long-term and continuing demographic shifts we're seeing in markets around the world, specifically aging populations, lead to an increased focus on products and solutions focused on savings, retirement, and lifetime income guarantees. With RGA's strong expertise in an appetite for longevity and asset-intensive risks, we are well positioned to help our clients on this journey. RGA's capabilities and positioning line up very well with these trends. It starts with RGA's expertise in biometric risk, especially mortality, and within that category, older age mortality, which is most relevant to longevity risk. Leslie will tell you in a little bit about the strengths of our investments platform, where origination and management are fully integrated with all of RGA and have been built that way from the very beginning. Long-standing relationships are critical to success, and we have boots on the ground in all our major markets.
We've developed a reputation for innovation, creativity, and execution. Our focus on client centricity is a competitive advantage. Just within the GFS team, we have a strong local presence that works very closely with all the component parts of RGA to create the complete solution set that Anna covered earlier in describing our differentiated competitive proposition. Please allow me to reiterate what that solution set is. It's the expertise to underwrite all the life, health, and annuity risks in markets all around the world, fully integrated with our strong investment platform. This allows us to focus on the best opportunities, regardless of geography or product line, remaining disciplined and providing lots of optionality.
Combined with our history of innovative and first-to-market transactions, our strong counterparty, and our long-term partnership approach, we have a combination of attributes and the strength, ability, and willingness to bring them all together that sets us apart. Then you add to that the most important ingredient, our people. We have an advanced and experienced team with lots of actuaries, quants, risk managers, and other talented professionals. Our leadership team within GFS is seasoned with strong knowledge of our markets, trends, clients, and products, and that's just the people within GFS. We work together as a unified RGA team to provide those creative solutions for our clients. Now, you've heard my colleagues speak about creativity and innovation at RGA, and it's no different for GFS. Much of this business falls into growth driver number two that Anna and Tony talked about earlier, where our efforts grow the reinsurance market.
What you see here is a long history of expanding our solution set and our geographic and product reach. This includes any number of times where we created brand new solutions that the industry had never seen before in a particular market. One example is U.S. longevity swaps, where we've completed the only 2 ever done in this market. Another is coinsurance in South Korea, where we worked for years with the regulator to allow that form of reinsurance, and then completed the very first coinsurance transaction. By staying at the forefront, we remain highly relevant to our clients and have a long track record of achieving healthy margins. When you put together these trends with RGA's capabilities and positioning, as well as our track record of innovation and market firsts. You get some pretty nice results.
Just over the past five years, RGA has deployed into GFS transactions over $1.9 billion in capital. This was a major contributor to a 12.8% CAGR in pre-tax adjusted operating income within GFS over this five-year period, an all-in increase of over 80%. Over our history, our transactions have performed favorably compared to our pricing expectations. Most importantly, you can see very clearly here that we operate in a flexible and disciplined manner. We're not going to chase business if we're not happy with the risk-return profile. That, combined with being in a business that focuses largely, though not exclusively, on in-force block transactions, will lead to some unavoidable lumpiness in our business.
However, when you take a step back and look at the global picture, you'll see a lot more stability in our overall capital deployment from one year to the next. For example, as we've seen fewer attractive opportunities in the U.S. over the past few years, you can see that we've pivoted more toward opportunities in Asia and EMEA. This is the strategic advantage and value of being a global organization with the breadth and depth of expertise to underwrite all these risks on both sides of the balance sheet and in countries around the world. Thinking about the future, when we bring all this together, we are currently looking at some large growth opportunities that Tony mentioned earlier. The first of these is asset-intensive business in Asia.
With the trends mentioned earlier, there are a number of opportunities on both in-force block and flow new business coinsurance opportunities. RGA continues to leverage our strong global investment capabilities, along with our long-standing client and regulatory relationships, and our expertise in mortality and morbidity risks to bring a complete solution set. This leads us to our key focus in Asia, block and flow opportunities that combine material biometric risk with investment risk. This includes providing coinsurance support behind RGA's product development efforts in numerous markets. We've seen very strong growth in our Asia Asset-Intensive business, and this is a trend that has been going on for a few years now. You saw the capital deployment on the prior slide, and here you can see how we've grown our asset-intensive business in Asia over the past five years.
We have already completed a number of both block and flow transactions so far this year, with a very strong pipeline for the remainder of this year and into 2024. Our second major growth opportunity arises from supporting our clients with solutions around longevity and PRT risks. It's important to note that while a lot of our opportunities are driven by growth in the underlying PRT markets, that's not the only driver. We help insurance companies to de-risk their back books of business. We also support our clients on individual payout annuities, both standard and enhanced or underwritten. Higher funding ratios for pension plans are contributing to the opportunities we are seeing related to PRT. We see this playing out in the major PRT markets: the U.K., the Netherlands, Canada, and the U.S.
Our 15-year track record of supporting our clients, combined with our counterparty strength and resilience, really resonate in these markets. Note, these opportunities may be in either or both our asset-intensive or longevity lines of business. Our focus is on markets with good data, and RGA has been at the forefront of creating robust tools to make the best use of both our own data as well as industry data to create insights into older age mortality. We see great opportunities continuing in all these markets. As you can see from the numbers shown here on the right-hand side, PRT is a large market and there's lots of runway for many years to come, and that's just from these four countries.
While we continue to devote substantial resources to these markets, we also continue to explore longer-term opportunities in markets elsewhere around the world as those countries' PRT markets and regulations around them continue to develop. Part of this growth area is what we're doing in the U.S. PRT market. Let me start by spending a few moments providing some market context for what we're doing in this space. What you see here are some statistics for the past few years on buyout activity. You'll note that this market is showing tremendous growth, and specifically at the large segment and above. These segments are where the bulk of the sales volumes come from and where competition is more limited.
The number of transactions, which are shown in each part of the stacked bars, the number of transactions in these segments is relatively small. We expect the trend in sales volumes at the higher end of the market to continue, as a significant majority of defined benefit pension plan assets are in that small number of plans whose size is in the billions. It's those segments of the market in the area above the dotted red line where RGA is focusing. As you know, we recently announced our first U.S. PRT transaction with our partner insurer, Legal & General Retirement America. We have a long-standing reinsurance partnership supporting L&G in both the U.K. and the U.S., two of their key markets. This is a natural extension of that partnership.
While participating in the U.S. PRT market is directly new for RGA, the underlying risks, mortality and investment related risks, are ones that RGA knows well and has a long track record of analyzing, pricing, and managing successfully. This is simply asset-intensive longevity business. What's different here is how we're going to market. The way we've supported our clients in other markets has been via reinsurance. For various reasons, the approach we're taking here as a direct participant is more efficient than reinsurance as a way of supporting our clients in the U.S. PRT space. These so-called split transactions are not new to the U.S. market. In fact, a jumbo transaction from last year falls into this category. What we are doing here is new.
We're bringing that partnership concept to market on a prearranged basis with partner insurers at the large end of the market, with case sizes starting in the several hundreds of millions of dollars and up from there, extending into multiple billions of dollars. These partnership agreements between RGA and a partner insurer provide for coordination and exclusivity on certain transactions. This model creates additional capacity for these transactions, which is why, in addition to this initiative being in Growth Driver 1, growing our market share, it's also in Growth Driver 3, growing the underlying market. This model even brings benefits to the end consumer as they get the benefit of two rather than one strong insurers backing their monthly annuity payments. We continue to work on additional side-by-side partnership opportunities and are excited about what the future holds.
We are highly confident in our market proposition, and we are getting very positive market reaction. We're currently working on an active pipeline of opportunities. With the positive momentum and market reaction we're seeing, we feel excellent about our growth prospects here as well. In summary, we see macro trends around economics, regulatory, accounting, and solvency changes, and demographics. RGA has the capabilities that line up with these trends. Our integrated expertise and solutions on both sides of the balance sheet, our counterparty strength, our strong and long-standing client relationships around the world, and most importantly, the experienced RGA team. When you put these together, we believe that we are well positioned to benefit from these trends and provide strong growth to the organization.
This time, we're now going to take our scheduled break. Please make sure you're back in our seats, your seat soon, because when we come back, you'll hear from our fantastic Chief Investment Officer, Leslie Barbi. Thank you.
Welcome back. I'm Leslie Barbi, RGA's Chief Investment Officer. I oversee our global investment platform and team, a key part of RGA's differentiated, integrated capabilities that power our creative client solutions. Investments has a proven strategy that includes disciplined underwriting and ongoing diligence, integrated with strong risk capabilities and management. At RGA, we approach things holistically, with teams sharing insights and analysis to understand the features of specific liabilities and transactions, and developing asset solutions that make the most sense in that context. With that insight and our broad platform, we're able to provide tailored solutions, including value-added, diversified portfolios. As the global leader in life and health reinsurance, RGA has built an innovative, solutions-oriented franchise that already has the advantage of a vertically integrated platform with the power of deep technical expertise on both sides of the balance sheet.
Our investments advantage is fueled by the alignment and integration of our platform. We have a singular focus: to provide an excellent asset platform customized for RGA, designed for and integral to RGA's strategy. We built the capabilities and the scale we have for the express purpose of delivering the skills, the asset types and volumes, and the risk-adjusted returns needed to achieve the shared success we bring our clients. We're very aligned strategically and well-positioned for the expanding opportunities and robust pipeline you've heard about today. Additionally, the vast majority of our assets are sourced and managed by internal capabilities established over the last two decades, with our own employees sourcing, vetting, and managing these investments. Keep in mind that when we're coming up with best ideas and sourcing desirable assets, all of these are for RGA's use.
This priority access to our asset sourcing drives extra value for RGA and our clients while remaining nimble and innovative. We're also deeply integrated in the way we work together. Our multidisciplinary teams of experts excel at designing and executing specialized client solutions. RGA's culture, which is known for trust and collaboration, takes that to another level. To work together the way we do, takes a special, collaborative, and aligned culture. Our investment team has a long track record of building investment capabilities and sourcing, of delivering on what we promised in the integrated solutions, and of managing in a way that supports RGA's financial strength, because long-term success matters. You'll have seen a similar slide in our quarterly earnings presentation. Our investment strategy balances risk and return to build a portfolio to weather cycles. We have a disciplined approach, strong underwriting is foundational.
We emphasize higher quality fixed income assets in our portfolio. Over 94% of the fixed maturity securities are investment grade, and the high-yield securities are heavily skewed to B B. We have delivered and maintained a diversified, resilient portfolio while targeting assets well-aligned to the characteristics of the specific liabilities and the types of business that we reinsure, because the actual goal is an overall resilient business, with well-matched assets and liabilities and integrated risk management. A benefit of our in-house capabilities is the ability to adjust the portfolio characteristics and manage risk and opportunities with more precision. Later in the risk section, Jonathan Porter will cover additional actions we've taken over the last year that further enhance RGA's enterprise positioning and demonstrate the integrated way we work across asset, liability, and risk management.
To deliver our advantage, we have a talented global team located across North America, the U.K., and Asia, with experienced leaders who average 27 years of investment experience. I can tell you from my own career over the last three decades, how impactful it is to have seasoned leaders at the helm who have successfully navigated multiple difficult economic and market cycles. That judgment, track record, and pers- [audio distortion] of our broad platform, with the key capabilities on the left from global portfolio management, investment solutions, and strategic initiatives to asset liability management, hedging, modeling, and more. What might catch your eye about the two columns, the lists of public and private asset types, is the substantial breadth of both. We list about a dozen flavors of private assets here. I'll talk more about that later.
The assets we source and manage support the integrated reinsurance solutions we provide to clients in regions around the globe. Here's a few indicators of the success of our strategy. On the right side, we show percentage of assets supporting businesses in those regions. On the left side, you can see that our assets have grown at about 13% annualized since 2007. In the center of the page, we show how the portion of assets we manage internally has increased to 85% now, up substantially from 43% 15 years ago. The internal focus reflects the fact that we value the deep expertise of our team, as well as the level of integration and alignment that is hard to replicate.
That shift to more internal happened at the same time assets were growing and our global footprint expanded, which I would suggest is a proof point that the customized, aligned asset capabilities we have built are delivering as promised on RGA's integrated strategy. To be clear, we're committed to providing the full suite of capabilities RGA needs, so where it enhances our platform, we purposefully forge strategic relationships with select external partners, one of which we announced publicly last year with Velocity Capital Advisors. We also use a curated set of external managers, selected and managed by our global portfolio management team using a rigorous audited process. Our platform is geared to deliver the assets that are integral to RGA's strategy.
The broad lineup of asset types and capabilities ensures that we can create optimal, diversified strategies for the business we reinsure, and that we can take advantage of more attractive asset opportunities that may be available at any given time. At a high level, our portfolio allocation is 78% public assets and 22% private assets. Public securities provide liquidity and a wide range of maturities to match liability profiles. They can be a source of credit and complexity risk premiums we can earn across sectors like corporate credit, structured products, and sovereign emerging credit. The largest single asset allocation in our overall portfolio is investment-grade corporate credit. The team does a great job utilizing sector allocations and credit and security selection. The good performance we had over time, including in the recent banking stress, reflects the skill of our team.
The private asset categories provide additional diversification, and we have strong capabilities that enhance expected returns across investment-grade, high yield, and private equity asset types. Again, most of these types of assets are internal capabilities. Philosophically and economically, we like the control and alignment of the underwriting, the expertise, and the risk management. Where external partners can enhance the platform and extend our breadth and optionality, we are purposeful in considering and negotiating those partnerships. To showcase the build-out we have accomplished over the last few decades, this is a timeline of private asset milestones. Each box is an asset type we added to the platform. In 2003, the first box, we started investing in commercial mortgage loans, or CMLs. I'll address the current portfolio later, since it's topical. Here, I want to point out the evolution. Originally, we used an external partner.
Later, after we had put resources in place, we started originating loans ourselves. What was a $1 billion portfolio at that point is now close to $7 billion as we continued to commit the talent and resources needed to originate and manage those loans. Another example of our ability to grow capabilities: in 2015, we started investing in lifetime mortgages in the U.K., a form of reverse or equity release mortgage. These assets aid us in providing long-duration pension solutions. Over time, we found that some clients' so-solutions required that the whole loans be securitized. RGA expanded its capabilities, and in 2021, we executed a public securitization of recently originated lifetime mortgage loans, something that had not been done since 2004. This was such an accomplishment that RGA won GlobalCapital's 2021 Securitization of the Year award.
Next, I'll point to aviation lending. In 2020, when aviation was under stress and when European bank lenders were already pulling back for regulatory reasons, we collaborated with an external experienced partner to invest in relatively low LTV loans on new narrow-body planes, the ones that were in high demand. We were able to get a few hundred basis points more in spread than where these loans price now. Because we were capable and nimble, we were able to attract and select a strong partner, evaluate the investments, and make the loans while the opportunity was still available. Beyond asset types, we have significant long-standing private asset platforms established over 10 years ago. Our real estate platform, known as ReCap, gives us great access to both commercial mortgage loans and equity real estate joint ventures.
Our experienced team has managed wealth through cycles, and they originate the loans we put in our portfolio. With nine regional offices that provide boots on the ground, local expertise, partnership, and surveillance. Our private debt and equity platform includes seasoned leaders with strong relationships and a disciplined underwriting process. They deliver our substantial capability in sourcing lower middle-market loans, along with fund and direct equity investment expertise. A benefit of our private asset capability is the alternative equity portfolio that we have strategically grown over many years, including the real estate joint ventures and private equity mentioned earlier. The returns we generate from the selection and management of these investments drive a majority of our variable investment income, which supports overall income to business and client solutions.
These investments have certainly punched above their weight over the last five years, as what is now about 3% of the portfolio delivered about 7% of the realized operating investment income. Part of that period was a particularly strong environment. On a go-forward basis, we're assuming a long-term annual return of 10%-12%. Near term, we expect it to be less so. There are a lot of factors that can move the number up or down over shorter periods. You will have seen a similar slide to this in the first quarter earnings presentation. Our CML portfolio is high quality and structured to provide us with solid returns and a lot of protection. The 56% average LTV means there's generally a lot of equity ahead of our loans that would absorb property price declines before our loan amount would be at risk.
Valuations are reviewed at least annually. We further mitigate risk with a well-laddered maturity profile. Only 2% of our CMLs mature in the balance of this year, and 6% mature in 2024. You can see on the map that the CML portfolio is well-diversified geographically, from north to south, east to west, and many of the places in between. On the right-hand side, you see data by state. Only six of the states represent 5% or more of the portfolio. Perhaps not surprisingly, the two largest states are themselves large geographically, with multiple submarkets represented. The office portion of the CML portfolio is $1.7 billion. Our strategy focuses on suburban office properties. The office portfolio has an average LTV of 57% and is diversified across more than 150 loans, with an average loan size of $11 million.
Our investments are located across more than 50 metropolitan statistical areas, providing strong geographical diversification as well. We are realistic about the environment, and as you would expect from RGA, we're actively monitoring our office portfolio, and our process includes proactively engaging with our borrowers as maturities or lease expirations approach, or where we see changing performance metrics. While this environment of transition in office use presents some market challenges, I'm confident that we have the portfolio, the people, and the process. For each transaction we do, we provide customized investment strategies designed to contribute to successful solutions aligned to risk, appetite, and business strategy. Our solutions benefit from specific asset types we can source, our selection skill, and the further value of having internal capabilities, including collecting origination fees.
Here we look at how we did relative to the expected contributions from investments that we used in pricing the transactions. The case study covers all U.S. asset-intensive transactions greater than $1 billion in asset size that we executed since 2017, and which have at least three years of experience. At the transaction level, what we found was that in each case, we met or modestly outperformed the expectations set when we priced the transaction. The graph shows the combined transactions over time. While there can be some volatility around results as we onboard large transactions, we mitigate risk with well-defined execution plans, and we are patient, disciplined, and opportunistic in our management. We can adjust our execution both at the time of onboarding as well as over the life of the liabilities, informed by ongoing assessments from our product liability experts as well.
For instance, if risk premiums are less attractive, we can go up in quality at the initial repositioning and then move to the planned allocation at a later time when they're more attractive again. If there's a particular sector that becomes more attractive, we can increase the allocation from the original plan. Our portfolio yield benefits from our broad asset platform, starting in 2022, new money yields became a tailwind as well, after a long decade of low interest rates. The higher line on the graph is the new money rate. It's well above the other line, which is the portfolio yield, excluding spread business and variable investment income. Clearly, investments made in the current yield environment will continue to support a rising portfolio yield. The point I've tried to drive home today is that investments is part of an integrated success story, delivering customized, creative solutions.
We define investment success as providing RGA with a customized platform and strategies that contribute to long-term success in the reinsurance business as a strong, trusted partner. As we showed in the case study, we contribute to integrated solutions and then strive to deliver on meeting those expectations. In addition to the success of our strategy and our track record show that we always work to improve further. For clients, we bring the ability to accept both asset and liability risks. Looking forward, we're well positioned for the expanding opportunities and continued momentum talked about today, because we built a substantial platform, customized and aligned to RGA's strategy. Our platform, strategy, execution, expertise, alignment, integration, agility, and culture are a powerful combination. Now that you've heard from a number of our business leaders and about investments, this is the perfect time for our next speaker, Jonathan Porter.
Thanks, Leslie, and good morning, everyone. I'm very happy to be here today to provide some insights into risk management at RGA. I'm very proud of RGA's strong risk management capabilities that have been proven over time, across multiple risks, and through a number of adverse events. As the impacts of the COVID-19 crisis continue to decline, our robust approach to managing risk has ensured that we're in a strong position to capitalize on opportunities to provide ongoing risk solutions to our global clients. At RGA, we're in the risk-taking business. Risk is our business. Therefore, our risk framework is a lens through which we make all of our decisions. We have a well-established governance framework and a strong risk culture that has been built up over the 50 years that we have been in the reinsurance business.
These elements, together with our diversified risk profile, our strong capital position, leading technical expertise, and the scale and breadth of our global operations, creates a strategic differentiator to deliver significant value to all of our stakeholders across a range of future outcomes. A strong risk culture is at the center of everything we do at RGA. Risk management is the responsibility of all associates across the enterprise. This is clearly demonstrated through day-to-day actions and decisions. We have well-established governance practices, starting with our risk limits that are clearly defined and aligned with our long-term strategy. We assess emerging risks and perform regular stress testing to understand the impact of adverse scenarios on key financial and non-financial metrics. That this information can be incorporated into strategic and tactical decisions.
Significant effort is spent in the risk assessment process at the time of underwriting and pricing, both for traditional flow business and in-force transactions. This is where our deep technical expertise provides us with a competitive advantage in risk evaluation. This discipline, combined with our strong capital and liquidity positions and the power of a diversified risk portfolio, has allowed us to successfully navigate through multiple adverse events, including the worst pandemic in the last 100 years, the largest single risk that we face as a life and health reinsurer. In addition to paying significant COVID-19 related claims over the past three years, we've continued to support our clients with innovative solutions, add significant long-term value through capital deployment into new business, return capital to investors through dividends and share repurchases, and produce positive net income and grow book value per share.
We have a diversified book of business, slide 79 provides a clear demonstration of the power of this diversification through actual operating results. The graph shows pre-tax adjusted operating income prior to LDTI restatement, split into two components, mortality product lines and all other product lines. Results in 2019, before the pandemic, were relatively evenly split between mortality and non-mortality business, the result of purposeful diversification over many years. The significant impact of the pandemic drove 2020 and 2021 mortality results to be negative, before partially recovering to a positive result in 2022. At the same time, our non-mortality business had excellent results, doubling pre-tax operating income from 2019 - 2022, with favorable underwriting results and strong investment performance.
Despite the headwinds from COVID-19 in 2022, our total pre-tax operating income also surpassed pre-pandemic levels, and we produced record earnings. I don't think there's a better way to show the tangible value of diversification in action. We believe that we are well positioned to navigate through the environment. Starting first with biometric risks, the top chart on the left-hand side of slide 80 shows our 2022 mix of longevity, mortality, and morbidity risks based on our internal economic capital model. The chart on the bottom of the slide shows our expected mix of the same three biometric risks at the end of our current strategy in 2026. The presentation.
We expect to see growth in all of our biometric risks with a material increase in the weight on longevity risk over time, given the excellent opportunities we see in the market, resulting in both higher earnings and a more balanced risk profile. We expect that higher levels of mortality relative to pre-pandemic expectations will persist in our key markets over the intermediate term, although on a declining basis going forward. This higher level of mortality is a result of the endemic phase of COVID-19, as well as excess non-COVID-19 mortality that we see to varying degrees and different sources from market to market. Proactive factors, both positive and negative, that impact trends.
While it is difficult to predict the exact timing of impacts, and there's always a degree of uncertainty around this assumption, we believe that ongoing and advancing improvements in prevention and treatment of disease, as well as a growing focus on the underlying factors of aging itself, along with technological advances, will continue to be key drivers of long-term mortality improvement. Looking at our other biometric risks, we expect our growing longevity business will have a tailwind in the current mortality environment, as we have seen over the past three years. As always, we are managing our mortality, longevity, and morbidity business in the context of these dynamics, specifically adjusting our new business pricing to reflect developing views, updating underwriting guidelines and working with clients to ensure that higher risk cases are screened and classified accordingly.
Regularly reviewing our in-force portfolios and working with clients to implement actions using various alternatives. Evaluating our assumptions and other risks. Shifting now to market risks. Our proactive approach and strong asset liability management again, positions us well to navigate through elevated levels of uncertainty. We regularly stress test our assets and liabilities to understand performance under a variety of scenarios and take advantage of opportunities to improve return and reduce risk. Some examples include extending asset duration, including swapping some floating rate assets to fixed term rates to take advantage of a higher yield environment and lock in attractive returns while better matching our liability profile. Purchasing out of the money options to protect against short-term interest rate spikes that could lead to some short-term volatility for asset-intensive products.
Reducing exposure to below investment-grade credit, in particular in emerging markets, where we feel that the risk return profile is less desirable in the current environment. Our liability portfolio is also less sensitive to market movements, both because of our higher weight towards insurance risks or policyholder behavior risk. In other words, our liability cash flows are relatively predictable and expose us to less liquidity risk, meaning that we can manage our assets through cycles without being a forced seller in a high interest rate environment when market values are depressed. We also have only a modest amount of variable annuity guarantee business, which we dynamically hedge. Our hedge effectiveness has been a very solid 96% over the past five years.
Reinforcing what Leslie has already covered for investments, we also have a disciplined approach to asset management with well-defined risk limits, a focus on balancing risk and return when constructing portfolios, and significant diversification both within and across asset classes. I'm confident about RGA's future. The inherent uncertainty in biometric and market trends, together with the proven value of reinsurance as a risk and capital management tool, creates a demand for RGA-provided solutions. You've heard about several of these opportunities from Anna, Tony, Ron, and Larry earlier today. At RGA, we view risk management as a strategic enabler that positions us well to capitalize on market dynamics. Our technical expertise on both sides of the balance sheet, combined with our global scale and ability to accept all key biometric and market risks, creates significant option value.
We are disciplined risk takers and can target the best risk return trade-offs, whether they are traditional flow business or in-force transactions. This ensures that we are not overly dependent on any one source of growth. Finally, our large portfolio of mortality risk makes us a natural home for the significant growth potential we see for our Longevity and Pension Risk Transfer businesses. Writing more longevity business will not only grow our bottom line, but it will result in a more diversified set of risks in the future. Thank you, and I'll turn it over to Todd Larson, our CFO, who will wrap up the day with a formal presentation part of the day with a financial overview. Todd?
Thanks, Jonathan, and good morning, everyone. I'd like to add to the comments you've heard throughout the morning and further emphasize the financial benefits of RGA's operating model. We've built out the business over 50 years to be well-diversified by geography and by product. This success would not be possible without a balanced capital management strategy, strong balance sheet, quality investment portfolio, and a stable liability profile. RGA is in a long-term business, and we've consistently grown book value per share over time, including during the pandemic. As you know, we are now reporting under the new financial reporting standard, LDTI, which includes increased disclosures on certain parts of our business, and today, I will take the opportunity to provide more detail on the value of our business that is already on our books.
As you've heard from Anna, Tony, Larry, and Ron, we see growth opportunities in our businesses that we believe will produce quality financial results in the future. We've updated our financial outlook, and our current intermediate financial targets are adjusted operating earnings per share growth of 8%-10% and adjusted operating return on equity of 11%-13%. $0.69 under LDTI. If you exclude the impact of notable items or assumption updates, we earned $16.40 per share. These earnings reflect lower impacts of COVID-19, good performance across our various business segments, and we benefited from strong variable investment income and a tailwind from higher interest rates. Adjusted return on equity was 10.5%, and when excluding assumption updates, adjusted return on equity for 2022 was 12.5%.
We are very proud of our results last year, which is a testament to the strength of our global operating platform. Turning to premiums, we continue to be pleased with our premium growth over time. In 2022, premium grew at 8.4% on a constant currency basis and has averaged around 6.5% growth each year since 2018. As you can see on the slide, premium growth did slow somewhat during the pandemic, but it has rebounded nicely to high single digits. In 2022, operating revenue grew at 7.7% on a constant currency basis, and has averaged around 7% each year since 2018. We like to look at operating revenue that captures our Global Financial Solutions business as well.
The strong revenue growth presented on the slide is a demonstration of our business activity and momentum highlighted throughout today's presentation. The map here shows our first quarter 2023 pre-tax operating earnings by geography. The strategic build-out of our business has produced strong, diversified, underlying earnings power. Over time, our Global Financial Solutions business has grown to be a substantial portion of our overall earnings, and as Jonathan just mentioned, performed very well during the pandemic. This demonstrates the diversification of our earnings power, we expect this diversification to result in- [audio distortion] -capital structure over time that supports our business. We have prudently laddered the maturities of our senior debt and hybrid securities so that we do not have any significant amounts coming due in any single year.
We are also expanding access to alternative forms of capital, most recently, through the issuance of a surplus note, supported by the embedded value of a portion of our U.S. traditional life business. Our financial leverage ratios are within our targeted ranges and support our financial strength ratings. We are committed to maintaining our ratings as it is important for us to remain a strong counterparty for our clients. RGA's corporate structure has evolved over time to meet our clients' needs and provide financial and operational efficiency and flexibility. RGA has multiple legal entities made up of a holding company and operating other companies domiciled in our key markets. RGA's corporate structure allows capital to be more fungible across the enterprise. Our operating companies maintain strong capital levels and ratings.
We make sure we have sufficient liquidity at the holding company, while also maintaining appropriate capital and solvency levels at our various operating companies. From a consolidated perspective, this structure provides flexibility to our operating companies to support our growth and maintain our competitive position. At the holding company, we target one and a half years of dividends and interest service, and have a committed credit facility that we can use for cash borrowings and letters of credit to support our business. We have ample dividend capacity from our operating companies up to the holding company. We will take this action as needed. As I mentioned earlier, our capital management strategy includes maintaining capital flexibility. This flexibility includes our ability to raise alternative forms of capital in addition to traditional debt and equity.
We have been efficient in funding our growth using alternative forms of capital, including the surplus note mentioned earlier and the execution of a strategic retro session in the past. We like alternative forms of capital as it generally places the financing cost at the operating company level that has the cash flow to fund the financing cost. We are in the business of helping our clients manage their capital, which we believe is core to what we do. We leverage that expertise and knowledge when funding our own capital needs to support our growth. We also take a balanced approach in deploying our capital to support traditional flow reinsurance growth, invest in in-force and other transactions, and return capital to our investors via dividends and share repurchases.
The deployment into in-force and other transactions can be lumpy, but as you can see on the slide, we have been successful over time and complement it with dividends and share repurchases. Part of this lumpiness is expected and intentional, because as Larry mentioned earlier, we are not going to chase business if we are not happy with the risk-return profile, and we take a disciplined approach to pursuing new business. To that point, from 2018 through the end of the first quarter of this year, we deployed over $2 billion into in-force and other transactions, and returned $1.7 billion to our shareholders via dividends and share repurchases. We generate sufficient capital to fund our traditional flow reinsurance and have excess capital to deploy into in-force and other transactions.
Of the income that we generate, on average, approximately 50% - 60% flows through as excess capital after funding the traditional flow reinsurance business. We have good traditional flow reinsurance and in-force transaction growth opportunities, utilize the capital at our operating companies to fund the growth. As you can appreciate, we have multiple lenses of how we view our capital, including regulatory, rating agencies, and our own economic capital framework. We evaluate deployable capital based on capital levels at our operating companies and liquidity at the holding company. We have approximately $1.4 billion of excess deployable capital and are comfortable taking that amount down by deploying into transactions and other capital management actions, which include returning excess capital to shareholders. RGA has demonstrated attractive book value per share growth over time.
As we have seen through various cycles, RGA differentiated position as a pure play, life and health reinsurer allows us to place our full focus on our life and health clients, and not be distracted by non-core lines of business. Our deep technical expertise and innovative services and solutions have helped expand our capabilities and will continue helping our clients provide affordable and appropriate life and health protection products, consistently grow book value per share. Now I'd like to spend a few minutes on the new financial reporting standard, LDTI. The new standard impacts the reserve calculation of our long-term mortality, morbidity, and longevity products, which represents the majority of our traditional business and a smaller portion of our GFS segment. The business subject to LDTI represents a little more than half of our total reserves.
I want to emphasize that there is no change to the underlying economics of our business. The updated reserve methodology is generally expected to lead to reduced earnings volatility from claims, with some exceptions. We believe LDTI presentation better reflects the nature of our long-term business and provides expanded insights into the business. This slide helps demonstrate the long-term value of our business. The value represents the positive difference between the present value of our future premiums and the present value of future claim benefits and allowances and deferred acquisition costs for the part of our. These values are derived from estimated cash flows used to determine LDTI reserves, which are reviewed as part of the annual audit. About $23 billion of pre-tax underwriting margin exists for the business that is already on our books.
These margins will continue to contribute to significant future earnings before consideration of investment income and operating expenses. One of the reasons I wanted to highlight the information on this slide is to put into context with our current market capitalization of about $10 billion. If you consider the value of our remaining business, not included here, existing retained earnings and the value of future new business, we believe there's substantial upside to the value of RGA. Turning to financial targets, these growth rates represent our financial targets that are consistent with our strategic plan, noting some normalization for the pandemic and based on reporting under LDTI. As you have consistently heard this morning, we see favorable industry dynamics and market opportunities. RGA is well positioned to capitalize on these opportunities and produce profitable growth.
When combined with our capital management strategy, we have increased our intermediate financial targets to 8%-10% adjusted operating earnings per share compound growth, and adjusted operating return on equity range of 11%-13%. On this slide, we've broken down the run rates by segment and provided updated intermediate growth rates targets by geography. These are 2023 annual run rates that would represent base case for our targets in the future. We note that they do not reflect the Q1 actual results. Tony Cheng laid out, we see notable opportunities in our U.S. Traditional, Asia Traditional, and Asia Asset-Intensive businesses, as well as Longevity and Pension Risk Transfer across the globe. You might notice that LDTI has modestly impacted the expected run rates of the various segments, with some seeing increases and others modest decreases.
The overall total is fairly consistent with past communication. As we close with our prepared remarks, you should take away several key messages. We are very happy with our recent results and proud to have a very strong and diversified global franchise, and we are well positioned to continue executing on our strategy. Our business has demonstrated its resilience and underlying earnings power. As our leaders discussed throughout today's presentation, we believe that the industry dynamics are favorable and will continue providing many opportunities. RGA's talented team, proven strategy, and are confident that these dynamics will allow us to deliver attractive financial returns for our shareholders over time. Thank you for your interest in RGA. We ask that you please stay seated as we take a brief pause to reset the stage for our Q&A session. Thank you.
For the Q&A session, we would like to ask you to provide your name and affiliation, and then in order to give everyone a chance, to ask a question, please limit yourself to one initial and one follow-up, and then you can join the queue. Thank you.
All right, Emily?
[audio distortion] Autonomous. Thank you. I guess, first question, for Todd, just on your financial outlook. I just want to ground a couple of things. First, in the run rate for 2023, what are you assuming for variable investment income or mortality? Then as we think about the intermediate term growth rates, what are you factoring in for capital deployed for block acquisitions or growth of the PRT business?
So for the very variable income, it's really sort of around the same levels that we're sort of expecting now, at least in the near term here. As Leslie showed over time, you know, the expected returns on that one slide, it could be, what, 10%-12% or so on the variable income. Overall mortality, I think, you know, we have considered, you know, ongoing, you know, impacts of COVID, as well as the other, you know, pluses and minuses that go into the mortality assumption. I don't think there's any, you know, as far as ongoing run rates, no major impact on from the mortality side, going forward.
You know, we do assume, you know, active capital management, both, you know, deployment into the, you know, transactional activity as well as other, you know, actions like assuming bringing down some capital if we don't deploy it into the, you know, transactions through, you know, share repurchases and that type of thing.
Thanks. The second question: You mentioned the 50% - 60% of your earnings that become excess capital each year. Should we think of that as somewhat equivalent to free cash flow that would be deployable for buybacks, dividends, paying down debt, or is that more excess capital that's kind of built in the subsidiaries?
Yeah. As I, as I mentioned, you know, the stated goal is to make sure we keep one and a half times of the dividend and interest coverage at the holding company. You know, we've, you know, most of the capital is generated, as you can imagine, at the operating company level. To the extent we see us deploying that capital back into the business, we'll leave it at the operating company and have it support the transactions. To the extent, you know, we don't see opportunities, we can dividend that excess capital back up to the holding company and use it for capital management actions.
Got it. Just to clarify, is the 50%-60%, is that after interest expense as well, since some of that's borne at the operating subs, or?
No, that's just the ongoing, you know, it's sort of the percentage of our net income that's mainly generated down at the operating company level, that would remain at the operating company level unless we decide to dividend it up.
Thanks.
Eric, if I could just add, I think your first question about mortality expectations in those run rates as well as variable investment income, it's consistent with what you heard from Leslie, right? 10-12 long term, but there are expected short term, some headwinds there. Mortality, in particular, is consistent with what Jonathan was saying about our outlook. There is continuing headwind in our expectation because of COVID and non-COVID related mortality. Just wanted to tie.
Hey, Wes Carmichael, Wells Fargo. Regarding Pension Risk Transfer, I think you guys talked about a focus on the large and the jumbo end of the market. We saw a $16 billion deal last year split between two carriers. Just curious about your appetite in terms of how much capital you might be willing to deploy there?
As much as Todd will give me. No, no, we have a significant, we have significant runway within our, existing, risk limits for, longevity risk and, asset-intensive risks. That would certainly be, the type of transaction that we'd love to go after.
Curious, if LDTI, if you think that continues to be kind of a driver of more risk transfer from incumbents, has that kind of played out, or do you see that, you know, being a benefit to you over time?
Why don't I start and then kick it off? I think LDTI as the accounting change is still early days and isn't really driving much of the demand yet in for solutions, risk transfer. I think risk transfer is coming about for all the various reasons you heard from the leaders. Market conditions, rates being higher, the funding levels in pension plans, our clients looking at non-core businesses and really wanting solutions to release the trapped capital in the non-core businesses, that then they could turn around and allocate to higher growth, higher return. those type of motivations that come to market, I think, are the predominant ones. LDTI is still too early stage. Everyone's embedding it, learning from it, but like most other changes, we expect that there will be opportunities over time.
Yeah, I would just add to that. You know, when we talk about regulatory accounting and solvency changes, driving opportunities, it's typically more sort of local accounting, local statutory accounting. For instance, something like IFRS 17, which is both the basis for public reporting for a number of companies around the world, but also the local statutory basis, or will be soon enough, for companies around the world.
John Barnidge, Piper Sandler, thank you for the opportunity. You had a slide about cession rates, and looking at it over a long-term perspective, it seems secularly up and to the right. Can you talk about where you think cession rates migrate over time?
John, thanks for the question. That was in my deck. As you saw from 2015, before the pandemic, they started trending up. Not drastic, 1%-2% a year. That consisted through the pandemic, which would make sense, given the impact and the volatility that some companies were experiencing. I think what's driving them now going forward are some of the new opportunities that I have presented around partnering on certain things like product development to target specific segments of the market overall. I think a key differentiator for us is the underwriting capabilities that we have across the entire value chain. From accelerated all the way up through core underwriting, where, you know, we can basically underwrite on their platform for their specific cases and move that forward.
I don't think you're going to see a drastic move up. I think you will continue to see a slow trend, you know, as we look forward, as I've sit here today, and then I think I'll continue to adjust that moving, you know, as I see how our performance has occurred year by year, the slow growth up.
John, just to add to that, I mean, globally, obviously, that's growth driver, too. The statistics around the globe are not as clear as the U.S., but we would feel penetration starting point now is probably lower. On the ground, you know, every time we find a new way to use reinsurance, obviously, that means penetration is going up.
Thank you for the answers. My follow-up question is on accelerated or digital underwriting. It's a broadening capability within the insurance ecosystem. When you think about how much of it went through digital five years ago to today to where it's going, how do you think about that? Then the same on face value, too.
It's certainly evolving, and I think that's what you're alluding to, and I think it will continue to evolve. As we sit here today, there are new evidences that are being considered. Digital health records, digital claims data, that's adding to it. It's about 10% of our new business as we sit here today, and I do think that that will continue to evolve over time as we think about approaching specific markets. I would say underwriting doesn't exist in its own standalone entity, because when clients come in, if they don't get accelerated, what happens to them?
Where we're able to differentiate in the market is our ability to not only support the acceleration, you heard the comments I made about that, but then think about the various swim lanes that those clients would go through, ultimately up to the core underwriting process, where we are uniquely differentiated to provide it. I do see it growing, but I also see the opportunity to do the people part of the underwriting and the human evaluation of underwriting continuing as well.
Hi, this is Alex Scott from Goldman Sachs. Thanks for taking the question. First one I had is on mortality results, and, you know, I'd be interested in your perspective on a little bit of a divergence we've been seeing between your performance that's been seemingly pretty healthy versus some of the large primaries in the U.S. that have had unfavorable mortality. I'd say that more often than not, they're revising down earnings in those segments, et cetera. What, in your view, is driving that divergence? Is it some of those in-force management actions you're taking? You know, could you help us think through that?
Jonathan, do you want to take this one?
Yeah, I can start, and then others, feel free to join in as well. I mean, first, I think, Alex, it's difficult to, obviously, to understand what's happening at other organizations. I mean, I think what we're seeing in our books is a declining impact from COVID, as we've talked about, declining impact from excess mortality beyond COVID, which is leading to the improvements that we're seeing, and I think we expect to continue to see over the next several years as well. I mean, I think, you know, Ron did talk about in-force management, so I think we are seeing a positive impact from that as well, which is improving some of our results. That's, you know, not a new strategy for us.
It's a strategy we've been employing for some time and will continue to employ in the future, too, as we take a holistic approach and kind of overarching view on our results across our global client base. Yeah, it's difficult for me to sort of hone in on what could be different in those books. I mean, other than maybe one more thing to add is, you know, our reinsurance book of business obviously is not the same as you would see in other direct companies as well. It's hard to compare apples to apples necessarily between our book of business and what one individual company would have.
The second question I had is on Global Financial Solutions. Between some of the comments made on growth during that portion of the presentation and also just looking through the risk management portion, suggesting a lot of longevity risk added over time, looks like that's gonna be one of the biggest sources of growth to your company. I mean, my understanding is that that market can be competitive. There's private equity-backed companies that have, I think, made it more competitive over time. Could you talk about how the return profile looks like, and are you able to leverage your competitive advantage associated with being the long-standing insurance company in the industry that, you know, you don't need to worry about, you know, credit counterparty risk with?
You've almost answered the question.
Yeah. I mean, we're certainly very happy with our positioning in those markets. Let's take a step back. Recall that it's not only asset-intensive every insurance, so sort of, you know, the funded support for clients on PRT, but it's also the pure longevity reinsurance risk transfer, the longevity swaps. Generally, while those are competitive as well, it's actually a different set of competitors more generally. Generally, the private equity players are not providing that coverage. We're very happy with our price for returns and our performance on this business.
Again, it's all based on the expertise, the data, and insights that RGA has built up around mortality over many years, and that specifically we've built up over the past 15 years on the longevity business. Very happy with our positioning.
I think maybe just to add on top of that, you know, again, as I mentioned, it does help with diversification of risk overall as well. Not only are we happy with the returns we're getting on a standalone basis for that product, but it does improve our overall risk profile, which is also a nice outcome.
Thanks. Ryan Krueger from KBW. I had a question on in-force management. I know you've taken a holistic approach, but it does seem like in the last couple of years, you may have, I guess, increased the amount of actual pricing actions on in-force business. Can you talk about, I guess, how far you think you're along on that type of strategy going at this point?
Yeah, I'll take that, and then maybe others can jump in. Thanks for the question, Ryan. In-force management is something that we do on a continuous basis. As you heard Jonathan say, it's not new. The focus over the last few years, I would say, hasn't changed.
We work holistically with our clients, we have a, you know, set of expectations for the economics of how our treaties perform. When we start to see a variance from that, we start talking to our clients immediately. There are various levers that we can pull. You know, some are rate actions, which you saw in the, you know, the first quarter, but they're not all rate actions. We really look at the clients across the globe and communicate as one RGA, as we think through and evaluate what potential solutions that we would take. That process isn't stopping at this moment either. It will continue to, you know, to go forward.
Yeah, maybe just a couple other points. As Ron mentioned, this is not new for us. Obviously, under LDTI accounting, the impacts of this as we do it on, you know, capped cohorts is obviously more pronounced, given it gets present value. That's the first thing. I guess second point is, you know, our experience around the world, as Ron said, taking a holistic approach, is very, very important because, obviously, life insurance is a long-term business. Our partners are long-term. In my experience, whenever we've worked through in any relationship, you work through an issue, and you work through it respectfully and holistically, it only strengthens the relationship going forward. It truly can be, in some sense, a source of new opportunities down the road.
Maybe I'll just say maybe one other quick point, Ryan, is that as, you know, as we transition to LDTI, it will impact the way that the actions are taken really do hit our financials as well. It'll depend what cohorts they're in and all of that looking forward.
A question on Pension Risk Transfer. You have the Legal & General partnership, but is the strategy that you're planning to have several partnerships with primary companies, or is it gonna be isolated to Legal & General?
We would expect that over time, we would have multiple such partnerships.
Thank you.
Thanks. Tom Gallagher, Evercore ISI. Jonathan, just want to come back to a comment you made about expectation of mortality. You said you expect some level of excess mortality to persist. Can you talk about, I don't know, give some dimension of sizing this? You know, I think during the middle of the pandemic, I had heard numbers 15%-20% excess during the peak. Where are we now? Is it 5%? Is it 3%? How do you see that playing out, and over what period of time do you expect excess to persist, and how are you reserving for this? Have you embedded some level of, you know, we'll call it additional reserves that would capture this level of persisting excess mortality?
Let me see if I can hit all those. Yes, I mean, I think we're definitely encouraged by the decline that we're seeing in the general population sorry, I'm talking about the decline in the excess mortality. You're right. At the peak of the pandemic in the U.S., excess mortality was about 20%, give or take. The last four quarters, it's been about 5% in the population. Again, that's not a direct translation to our book of business, because our book is different than the population, but, you know, that directional move is consistent with what we're seeing in our results, too, and you can see that in our financial impacts.
You know, from a reserving perspective, we do, we have built in our assumptions, as we have to under LDTI, our best estimate expectations of future mortality, as well as, you know, future lapse, future interest rates, et cetera. Yeah, we do have an expectation that's in our reserves, which has a heightened level of mortality over the intermediate term. It does vary by market, and, you know, by underlying product potentially as well, and by age. It's, you know, it's a very specific assumption, so it's hard to give sort of one quantification or range of what that number is. You know, that will function to offset additional claims we would expect to see over the next several years because of the higher mortality. I think you had three things, and I missed one of them. Can you just repeat? Is there something I missed that you asked?
Just over what period of time do you expect this to play out? Or is this a couple of more years? Is this five years? Just in terms of this level of excess persisting.
Yeah, we're thinking of it as a range. Again, I wouldn't put one point estimate on it for a number of years, but it would be over the next several years. Like, the intermediate term is how we're thinking about it. Again, we haven't changed our long-term expectations for our assumptions. I guess one other thing, just as a reminder, is that, you know, on a mortality business, obviously, it's a potentially a negative impact, but it's a tailwind for our longevity business. You know, as we've talked about, that's a growing book of business, and particularly in markets like the U.K., where we have a very balanced portfolio between longevity and mortality. The net effect of elevated mortality is actually pretty neutral for us in that country.
Just for my follow-up, Tony, you had mentioned in response to the cession rate question that John had asked, and that was U.S.-specific, that I guess now is up to low to mid-30s. You'd mentioned globally, you didn't have hard statistics, but I presume it's a lot lower than those levels. How big of a tailwind is that when you think about EMEA, Asia, you know, other regions? I assume you guys have some approximation of cession rates, and how do you see that changing over time?
Yeah, I'd say a couple of things. The numbers really aren't there. I don't think anyone publishes them. It does depend on the underlying products in the market. In Asia, there's a lot of products with savings and protection elements. To answer your real question of tailwinds, how long in the runway, I mean, that is our growth driver number two. It is as critical as are the part of our strategy in those markets to keep growing. Yeah, like I said, some of those markets take time to change, and it's educating clients, it's also talking to regulators. We can see that change happen before our eyes, we're very excited by the change and then executing on what we can do to use that change to grow our business.
Tracy Benguigui, Barclays. Todd, you mentioned that you feel comfortable managing down your $1.4 billion of excess capital. I'm wondering if you could quantify your comfort zone. I think in the past, you might have mentioned $700 million-$800 million.
Yeah. Hi, Tracy. Yeah, no, that's right. We're comfortable managing it down from this current level, and yes, comfortable, you know, under the Depending on the circumstances, down to the $700 million-$800 million level, and even in the right circumstance, depending on, you know, potential, you know, transaction opportunities and that type of thing, you know, even willing to go down below that. You know, of course, we would talk to rating agencies and that type of thing to make sure that they were comfortable. You know, I think we've proven that we can, you know, through alternative forms of capital and that type of thing, that, and through our earnings power, that we can replenish the excess capital fairly quickly.
We definitely comfortable going down to that $700 million-$800 million level, and like I said, even below that, under the right circumstances, for transactions.
Over what period? Wait.
Oh, as far as bringing it down, or?
Yeah.
Yeah. What we'll do is, as we always have, you know, we'll balance it with, you know, what we see on the transaction or the pipeline front. If we don't see, you know, opportunities, then we'll, you know, work through what capital management actions we should take. I think as you've heard this morning, you know, we feel we've got a pretty healthy, active, you know, transaction pipeline and a lot of opportunities ahead of us to deploy it back into the business as well.
My next question is for Tony. If I talk to life insurers, they're actually pretty constructive about ESR in Japan. They think it's more economic, get rid of a lot of those accounting asymmetries. I'm wondering how you see that as an increase of demand for reinsurance.
Yeah, let me take it, and then I'm going to pass it on to Larry, if you don't mind, to share more. You've hit one of the big macro changes, which is the change in the capital frameworks. That is very important for our business, because for two things. One is, any change and any added complexity is always good for our business. These capital frameworks, given they're in Asia, very aligned to the global standard. The challenge we've had in Asia, sometimes in using reinsurance for capital purposes, was the regulator really did not fully understand it, or did not allow some forms of reinsurance. Given they're now aligning to a global standard, which does allow these forms of reinsurance, it's really opened up the doors for us.
ESR itself is an opportunity to perhaps reveal some of the challenges financially the companies have had, and we're aiding and supporting that. Larry, I don't know if there's anything further.
Yeah, I think that's exactly right, Tony. I mean, anything where you're better reflecting the economics, and especially in a market like Japan, where they have a lot of this old negative spread business, that's going to be fairly capital intensive, and then under ESR, might even be a little bit more volatile with respect to interest rate movements. I think that's going to drive demand, not only for asset-intensive solutions, but as both Tony and I talked about, I think it opens up new business opportunities as well, for find different ways for us to support our clients in that market.
Okay.
Hi, Jimmy Bhullar from JP Morgan. Had a couple of questions. First, Anna, good luck in the future. Tony, you as well. Maybe if you could talk about competition in your various businesses. It seems like there hasn't been much of a change in competitive dynamics in the mortality side. Asset- intensive, there's a lot more companies from different types of industries and a lot of deals have been done recently. RGA hasn't been on as many of them as we would have seen in the past. How do you think about competition across your various businesses, specifically on the asset-intensive pension closeouts and how intense some of the newer competitors are in terms of pricing?
Sure. I think it's important here to go back to the concept that we're operating globally and in a flexible manner. No doubt it is the case, and you've certainly seen them announced, as have we, some large asset-intensive transactions, done in the U.S. We've been seeing that competitive situation as well. We've certainly done our share transactions. We completed a very nice and sizable one in 2021, a couple of smaller ones last year, and we continue to look at any number of opportunities. As you could very clearly see from the capital deployment slide, we think right now there are better opportunities in various Asian markets, that's where we've been focusing more of our attention.
Certainly, our efforts in the U.S. PRT space are an opportunity for us, as Anna and Tony, and really all of us have spoken about, to bring all of our capabilities to bear, where you're talking about taking both biometric risk and investment risk. That's why we like that as an opportunity in the U.S. market.
Your guidance on pre-tax operating income is the same as that on EPS, and I recognize there's a two-point range. Is the buybacks that you're building into your guidance, is it a fair assumption that that's within that one to two-point range, or is it just a coincidence that the numbers are similar?
I'm sorry, I didn't hear the last part.
Just the fact that if we look at your pre-tax operating income guidance, that's 8%-10%, and so is your EPS. Should we assume that you're building in maybe a point of buybacks or somewhere in that neighborhood, in your EPS guidance?
In our guidance, we are assuming some share repurchases over the intermediate term.
I think the answer is yeah, that's probably a fair assumption.
Thanks. Suneet Kamath from Jefferies. Tony, you'd mentioned, I think, in your comments, that in the past, you've avoided problematic areas where there has been demand for the solutions that you guys provided. Just wondering, as you think about what's going on right now, are there products or regions where you are seeing a lot of demand for what you guys do and you just don't feel comfortable stepping in?
You know, we just generally, I mean, what you see is the businesses we obviously participate in. you know, we continually monitor a lot of other businesses and really are waiting for the right circumstances to get into it. I might hand it over, I mean, to some of the business heads to share just if there's any problematic areas we're particularly avoiding.
Sure. I'll give you an example. As Jonathan mentioned, we have a modestly sized variable annuity book of business in the U.S. The hedging works very well. We understand the risks very well. In fact, in recent years, some of our U.S. asset-intensive transactions have included, as a portion of those blocks, some variable annuity business. It's something we're willing to do as part of the right opportunity. Having said that, I don't think that we are necessarily the right home for these large legacy variable annuity blocks. That's an example of something where, yeah, we have the expertise, probably not for us.
And I would give another example, too, just to about the long-term care market. You know, we're very comfortable with the business we have. We're very happy with the returns and the experience of that business. We have evaluated a lot of in-force opportunities that just don't meet our criteria that you heard me mention earlier, and so we turn away. Now, you know, if we find something similar to our existing block or an opportunity to sort of build a new product, that has the right level of risk expectations and experience and returns and economics, we would consider it. In that case, there are many that we turn away.
Got it.
[crosstalk]
Sorry. Follow-up was, it looks like you took your EPS growth range up by a point. Is the right interpretation there is you took it up by a point despite lower VI and higher mortality? Just when you say intermediate term, I just want to understand, like, what you're building into that.
Yes. By intermediate term, it means sort of over our strategy period, which goes over the next three or four years. You know, I think you've heard, you know, the optimism that we have across all the different, you know, business units. We think we're well positioned, you know, going forward. We have the, you know, interest rate, you know, tailwind from the past, you know, versus the past. You know, there's also, you know, the impact from LDTI as well. I think if we add all these things up, we are comfortable that... As we look at the execution of our strategy and the underlying notes results that go along with that, we're comfortable with moving that range up.
I think we have time for one more question. Thank you.
Hi, this is Wilma Burdis at Raymond James. Could you please provide a few more details on the potential launch of a third-party investment vehicle, maybe some things like timing, how much capital you could raise, and the pipeline for deals, and also how it differs from Langhorne Re?
Todd, do you want to take that?
You know, Langhorne has been, you know, wound up. But third-party capital continues to be, you know, part of our, you know, strategy. You know, we've learned some lessons, you know, from Langhorne. As we've talked about in the past, you know, we got very close with a few transactions, but for one reason or another, they didn't go forward. You know, we're taking our lessons learned from Langhorne in, you know, analyzing, developing what we think could be a viable sort of a new third-party capital structure going forward. I think it would be, you know, probably of, you know, modest size, probably a little bit smaller than what Langhorne was contemplated to be, just to make sure we could deploy the capital fairly quickly.
All right. That wraps up our Investor Day. On behalf of the team that you see here and the team throughout the room, we thank you for your interest, we thank you for your support, we wish you a successful day. Thank you.