Reinsurance Group America Inc (RGA) Q4 2020 Earnings Call Transcript

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Reinsurance Group America Inc (RGA 0.51%)
Q4 2020 Earnings Call
Feb 9, 2021, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and welcome to the Reinsurance Group of America Fourth Quarter 2020 Results Conference Call. Today's call is being recorded. At this time, I would like to introduce Mr. Todd Larson, Senior Executive Vice President and Chief Financial Officer; and Ms. Anna Manning, President and Chief Executive Officer.

Please go ahead, Mr. Larson.

Todd C. Larson -- Senior Executive Vice President, Chief Financial Officer

Thank you. Good morning and welcome to RGA's fourth quarter 2020 conference call. With me this morning on the call is Anna Manning, RGA's President and Chief Executive Officer; Alain Neemeh, Chief Operating Officer; Leslie Barbi, Chief Investment Officer; Jonathan Porter, Chief Risk Officer; and Jeff Hopson, the Head of Investor Relations.

We will discuss the fourth quarter results after a quick reminder about forward-looking information and non-GAAP financial measures. Following our prepared remarks, we'll be happy to take your questions. Some of our comments or answers to your questions may contain forward-looking statements. Actual results could differ materially from expected results. Please refer to the earnings release we issued yesterday for a list of important factors that could cause actual results to differ materially from expected results. Additionally, during the course of this call, information we provide may include non-GAAP financial measures. Please see our earnings release, earnings presentation, quarterly financial supplement and website for a discussion of these terms and reconciliations to GAAP measures.

And now I'll turn the call over to Anna for her comments.

Anna Manning -- President and Chief Executive Officer

Thank you, Todd. Good morning, everyone and thank you for joining our call today. I hope you are all remaining safe and staying healthy. The loss and anxiety caused by the pandemic is extraordinary. And on behalf of everyone at RGA, I would like to express profound depreciation for those on the front lines in the fight against the pandemic and offer our deepest sympathies to those who have lost loved ones. Through these tough times, I remained incredibly proud of the role that RGA has played in an industry that helps to safeguard the financial futures of millions of families from the unforeseen tragedies of life. Our purpose has never been made clear during this past year.

Let me now move to our results. Last night we reported adjusted operating EPS of $1.19, which we consider another solid quarter in the context of the pandemic. In this quarter, we were able to absorb estimated total COVID-19 related claim costs of $300 million globally and delivered profitable earnings due to the underlying strength in many of our businesses. These include our Asia business, our US group and individual health operations and our US asset-intensive business.

Additionally, excluding the impact of claims attributed to COVID-19. Our US individual mortality experience was again favorable this quarter. Reported premium growth was strong, driven by results in EMEA and Asia. We completed a number of transactions in the quarter and deployed approximately $100 million of capital. The transaction pipeline is very good overall and includes opportunities in all our regions. Our investment portfolio held up well, and we ended the year with a strong balance sheet, an excess capital of $1.3 billion. Our approach to capital deployment during this crisis remains prudent, disciplined and balanced.

As I step back and consider our full year results, we reported adjusted operating EPS of $7.54. This includes absorbing estimated total COVID-19 related claim costs of $720 million globally. And when adjusted for COVID-19 related offsets, including longevity and reduced expenses, we estimate the full year impact of COVID-19 to be roughly $6.80 on adjusted operating EPS. I'm encouraged by the fact that our underlying fundamental performance and client relationships remained strong. This speaks to the resilience of our global franchise, the benefits of our diversified business and to the success of our client-focused strategy.

As we look forward, it is clear that COVID-19 remains both the global health and economic challenge. And we expect to see a meaningful level claims in the first half of 2021. But we believe that the impact will be manageable, given our strong balance sheet and our underlying earnings engine. We are optimistic that we will begin to see the benefits from the global vaccination programs as we move into the rest of the year, after which we expect to see some normalization of results. In the meantime, we will continue to remain focused on protecting our employees, serving our clients and supporting the industry and our communities.

The quality, strength and resilience of our business give us confidence that we will emerge from the pandemic, position to take advantage of the opportunities ahead and continue to build on our long track record of value creation. Thank you for your interest in RGA. And I hope you all continue to remain safe and well.

Let me now turn it over to Todd to go over the detailed financial results.

Todd C. Larson -- Senior Executive Vice President, Chief Financial Officer

Thanks, Anna. Beginning with consolidated premiums. For the quarter, we reported premium growth of approximately 9%, somewhat higher than recent quarters as we saw good business growth in some areas in addition to some client catch-ups have benefited the reported premiums. The effective tax rate on pre-tax adjusted operating income was 18.3% for the quarter. Below the expected range of 23% to 24%, as a result of utilizing foreign tax credits and tax benefits associated with differences in bases and foreign jurisdictions.

Turning to the segment results listed on Slides 8, 9 and 10 of the earnings presentation. The US and Latin America Traditional segment reported pre-tax adjusted operating loss of $89 million in the quarter. Our individual mortality experience for the quarter, excluding the estimated COVID-19 claim cost were favorable.

Let me provide a little more detail. Approximately $230 million of claims are attributed to COVID-19, including $100 million of IBNR claims. The approach is to attribute COVID-19 claims is consistent with that used in the second and third quarter, which continues to track quite well. We also continue to see excess mortality in the quarter consistent with CDC, reporting a significant levels in the general population. Although, we believe a portion of this is likely related to COVID-19, we have chosen not to include it in our estimated COVID-19 claim costs.

Overall, when we simply adjust for 2019 specific death, our experience this quarter would have been favorable, primarily due to lower large claims. I would also note that our 1999 to 2004 business, excluding COVID-19 continues to perform in line with our mortality expectations as we set back in 2015. Also our Group and Individual Health business performed well in the quarter. Our Asset-Intensive business reported a good result for the fourth quarter, benefiting from higher variable investment income and strong equity markets. US Capital Solutions reported fourth quarter pre-tax adjusted operating results that were better than our expectations, albeit the decrease against the strong prior-year period.

Moving to Canada. The Traditional segment fourth quarter results were in line with our expectations and reflected modestly unfavorable individual mortality experience, primarily due to the impact from COVID-19, offset by favorable underwriting experience in other lines of business. Our Financial Solutions segment performed well in the quarter, reflecting favorable longevity experience.

In the Europe, Middle East and Africa segment our Traditional business fourth quarter results reflected unfavorable mortality experience, partially explained by COVID-19. The COVID-19 claims are concentrated in South Africa and the UK. Additionally, as we've seen in the US, there's significant level of excess mortality experience in the population in South Africa, over and above reported COVID-19. EMEA Financial Solutions business fourth quarter results reflected modestly unfavorable longevity experience.

Turning to our Asia Pacific Traditional business. In the fourth quarter, Asia had a favorable underwriting experience across most of the region. While we did see some COVID-19 related impacts, these were offset by favorable non-COVID experience as well as some data catch-ups on client reporting.

Australia experienced a loss of approximately $26 million. This reflects a number of one-off, including an increase in reserves to reflect our recently updated industry table and in IBNR for estimated COVID-19 claims. Without these one-off, we would have been near breakeven for the quarter. For the year, we saw a much improved result over 2019 and when excluding the Q4 one-offs, would have reported a small profit this year. While there remains some uncertainty in the Australian market, we saw progress in 2020 and we continue to be prudent about new business and focused on actions to improve results. Our Asia Pacific Financial Solutions business continued to produce good results in the fourth quarter, benefiting from the growth of business in Asia. The Corporate and Other segment reported a pre-tax adjusted operating loss of $24 million, relatively in line with the average run rate.

Moving to investments. The nonspread portfolio yield for the quarter was 4.2%, a significant improvement relative to that in the third quarter, primarily due to above average run rate for variable investment income as we experienced a high level of commercial mortgage prepayments and some realizations in our various private partnerships. We believe our portfolio will defensively positioned coming into the crisis, credit performance continues to benefit from diligent security selection as well as economic reopening and policy responses. Our portfolio average quality of A was maintained and credit impairments were minimal in the quarter.

As shown on Slide 13 of our presentation materials, our excess capital position at the end of the quarter was approximately $1.3 billion. RGA's leverage ratios remained stable at the end of the year, following the second quarter senior debt issuance and our liquidity remains strong with cash and cash equivalents of $3.4 billion.

Looking forward, we expect to see some level of ongoing COVID-19 impacts that will negatively affect our earnings until this crisis is resolved. However, we continue to view this as manageable and believe that our strong balance sheet, the power of our earnings engine and the benefits of our global franchise positions us to emerge from the pandemic in good shape to continue to produce attractive returns to our shareholders over time.

I'd also like to comment on Slide 13 of the earnings materials. As you know, we are very proud of our track record of book value per share growth over the years. And while 2020 was a difficult year as a result of the pandemic, we have every confidence that we will continue creating value for our shareholders.

I also want to comment on the topic of financial guidance. We have historically provided intermediate-term financial guidance in conjunction with our fourth quarter results. However, given the near-term uncertainty surrounding the COVID-19 pandemic, we have decided not to provide guidance at this time.

I will now turn the call over to Jonathan Porter, our Chief Risk Officer, who will provide some thoughts and updates on COVID-19.

Jonathan Porter -- Executive Vice President, Global Chief Risk Officer

Thanks, Todd. COVID-19 mortality claim costs for Q4 continue to be toward the lower end of our model expectations relative to general population reported COVID-19 deaths and we continue to see lower insured mortality relative to the general population. The US still accounts for the majority of our estimated COVID-19 claim costs. Our ongoing mortality model updates did not result any material changes in the quarter. So we are reiterating our mortality rules of thumb for our major markets as shown on Slide 14.

Overall longevity experience was modestly favorable in the quarter, but less than the prior quarter run rate. This lower offset was expected due to lower longevity -- sorry, due to longer longevity reporting lives and differences in country specific mortality rates over the period. We expect elevated claim cost to continue in the first half of 2021 based on the level of ongoing COVID-19 death in the general population. Although, uncertainty exists and the ultimate impact of new COVID-19 variance, it is good to see some recent positive signs as well. Many countries are experiencing decreases in new case counts and deaths from the peak of the holiday season waves and the preliminary data from the global rollout of vaccines looks promising. We expect the vaccines will have a material beneficial impact on general population mortality in particular as those that are most vulnerable to severe outcomes are vaccinated. We continue to closely monitor all of these developments, and we'd expect to update our views if needed, as new data emerges.

Let me now hand it back to Todd.

Todd C. Larson -- Senior Executive Vice President, Chief Financial Officer

Thank you, Jonathan. That concludes our prepared remarks. We now like to open it up to you for your questions.

Questions and Answers:

Operator

[Operator Instructions] We'll now take our first question from Humphrey Lee of Dowling & Partners. Please go ahead.

Humphrey Lee -- Dowling & Partners -- Analyst

Good morning and thank you for taking my questions. I think you mentioned that you continue to see the difference between the insurer and general population mortality experience. Since many of the primary companies saw worsening results, especially on the group side, I was wondering if that are insured versus general population will tell a difference remains kind of the same compared to early stages or if you've seen any kind of convergence between the two?

Anna Manning -- President and Chief Executive Officer

Good morning. Thank you, Humphrey. May I address that question to Jonathan?

Jonathan Porter -- Executive Vice President, Global Chief Risk Officer

Yes. Hi, Humphrey. So in our results, they've been somewhat consistent over the quarters. I mean, obviously there is some ups and downs, but the difference between insured and general population with respect to our claims has been relatively the same. And that's kind evidenced by the fact that we are at the lower end of our rules of thumb. So our expectations are being maintained.

Humphrey Lee -- Dowling & Partners -- Analyst

Okay. That's helpful. And then in terms of the non-US COVID-19 claims, they seem to be weaker than the guidance -- what the guidance was implied especially because they are coming from countries that you don't really have much exposure. Can you provide some colors in terms of what you saw in the quarter?

Anna Manning -- President and Chief Executive Officer

Todd, may I ask you to respond and address that question?

Todd C. Larson -- Senior Executive Vice President, Chief Financial Officer

Yes. Hi, Humphrey. So, yes, it's going to spread around a little bit. So for the quarter and these are estimated numbers, I would say the COVID for South Africa was around $13 million, for India around $19 million, both Canada and the UK about $6 million each, Australia an estimated $8 million and US group business about $13 million.

Jonathan Porter -- Executive Vice President, Global Chief Risk Officer

Yes. Todd, this is Jonathan. Maybe I'll just add on to that. Over the course of the year, so in any one quarter results could go up and down. But when you look at the full-year results, it's pretty close to what we expected. So about 80% of our claim costs are in the US, about 10% are in the UK and Canada and about 10% at the world.

Operator

Thank you. We'll now take our next question from Andrew Kligerman of Credit Suisse. Please go ahead.

Andrew Kligerman -- Credit Suisse -- Analyst

Thank you. Good morning. So two questions. For the first one, from an accounting standpoint in all states recent life and [Technical Issues] that LDTI impacts would have accounted for half of their book value. And instead they shows to divested a $3-plus billion loss. Now I know all states business mix is different versus RGA's, but what might make us comfortable that RGA won't take a similar magnitude of charges, especially on term business. It's not accounted for under [Indecipherable] when LDTI does come in play in 2023. And if possible maybe discuss the different lines of business and the potential impacts.

Anna Manning -- President and Chief Executive Officer

Todd, may I ask you to address that question?

Todd C. Larson -- Senior Executive Vice President, Chief Financial Officer

Sure. Hi, Andrew. So yes, as you mentioned the standard was deferred again another year into 2023. We're certainly working through everything that we need to do to implement in other standard for our existing, what's called the [Indecipherable] business. One thing that I would point out, the overall economics of the underlying business haven't really changed with the new accounting standard is just how the financial reporting will look like as we go through implementation and then new accounting under the new standard as we go forward. It would be premature for us to provide any numerical information at this point as we're still looking at the various assumptions of applying some of the interpretations that we need to make as a reinsurance company. So as time goes on and we are further along in the implementation, we'll start sharing some information. At this point, it's very difficult to comment on any impact.

Andrew Kligerman -- Credit Suisse -- Analyst

Got it, Todd. Okay. Thank you. And then with regard--

Anna Manning -- President and Chief Executive Officer

Andrew may I -- sorry, may I also offer an additional perspective and that is we have business around the globe. So our book different then the book that you referenced. We also have a very long history of performance on mortality -- global mortality business as well as our GFS business and all our other businesses. So I would offer that up for some context, as well.

Andrew Kligerman -- Credit Suisse -- Analyst

Got it. Got it. Thank you, Anna. And then my other question. I just have three data points upfront to the question, and I'll get to it. So first in 2015, RGA's CEO Greig Woodring acknowledged that this pricing of the 1998-2004 business, I think Todd you mentioned a little earlier in the call that it's performing in line. At the time, Greig had stated that RGA would -- in line with expectations, Greig had said that it would probably lose about $60 million a year over several years.

The second point is that in each of the three years before COVID-19, RGA has posted greater than a 10% return on equity. And then the third point is that in contrast, in life reinsurance two of your three leading global reinsurance competitors are targeting mid to high single-digit returns and the other is targeting 10% to 12%. But all three have taken sizable charges on their 1998 to 2004 blocks. So my question is, how is the $60 million a year evidence in your test 10-plus ROEs and your targeted 10% to 12%, because it's just not appearing evident.

Anna Manning -- President and Chief Executive Officer

I will ask both Alain and Todd to address the aspects of that question, Andrew. Todd, Alain, if I may.

Alain P. Neemeh -- Senior Executive Vice President, Chief Operating Officer

Sure, Todd maybe I'll start. Hi. Andrew, Alain here. As you referenced, we did mention that that block of business was underperforming. I think perhaps when Greig made those comments, there was a sense that that block was going to get smaller over time, I think that is happening. I would say that the mortality as Todd alluded to has been performing in line with our recent expectations, certainly though we've probably been facing some additional interest rate headwinds as we have on the whole of our traditional block of business. I don't know that we necessarily break up the blocks of business to look at actual ROEs. But I'll let Todd comment on sort of ROEs in the totality of our business.

Todd C. Larson -- Senior Executive Vice President, Chief Financial Officer

Yes. So, on ROEs and certainly we've produced those ROEs overall from an enterprise perspective, there's going to be some lines are above some lines that are below. But overall, we've been able to deliver that level ROE. And as far as comparing to competitors, there's is different accounting bases that are used that are directly comparable to ours. I'm not sure if I can directly reconcile the two.

Alain P. Neemeh -- Senior Executive Vice President, Chief Operating Officer

Yes. The other thing maybe Andrew -- sorry, it's Alain Neemeh, just to add in. We've talked in the past about taking the long view on our client relationships and certainly looking at the totality. And in that vein, we have -- I'll say work to identify where there are material balances and look to restore a better balance with those clients. You referenced our competition and some of the charges and some of the actions they've taken. I think we've been pretty clear. We don't have a broad-based rate action strategy, but that doesn't preclude the possibility of taking or having taking rate actions were appropriate. We just prefer to work through those types of issues with clients directly.

Operator

Thank you. We'll now take our next question of Erik Bass of Autonomous Research. Please go ahead.

Eric Bass -- Autonomous Research -- Analyst

Hi. Thank you. In EMEA, can you talk about results in the Financial Solutions business this quarter? And the level of COVID impacts in the longevity business? And then given the delays in reporting, you talked about are we more likely to see the surge in population deaths that occurred in December show up in your first quarter results.

Anna Manning -- President and Chief Executive Officer

Erik, Thank you for the question. I think that should be -- that's directed to Todd and perhaps Jonathan.

Todd C. Larson -- Senior Executive Vice President, Chief Financial Officer

Yes. We did see -- as we mentioned, slightly unfavorable longevity in the quarter. And also in the quarter, as you know, we have pluses and minuses when we get data catch-up reporting from our clients. And that was a little bit not negative but not as much as we would have expected in the quarter, just due to what information we received. I think taking a step back, given the block, we still view it as very positively and would expect to continue to perform on average as you seen it perform historically, which is quite well.

Jonathan Porter -- Executive Vice President, Global Chief Risk Officer

Yes. And this is Jonathan. Maybe just to talk about the lag in reporting. I mean, you're right, there are longer lags in longevity reporting, which means the results that we're seeing in Q4, although we can put into an exact timeframe, just given it's a bit variable depending on the treaty. It's really -- moving more reflective of the summer level of mortality that we saw and those rates were generally quite a bit lower than we saw both in Q2 and in Q4. That's a particular issue for the UK, which is where most of our longevity business is concentrated, but there was very little excess mortality actually in summer months. So we do expect this to be lumpy quarter-to-quarter and due to timing, as well and by geographies. But our rule of thumb that we've been thinking about longevity business that, which is around 10% ultimately relative to mortality. We still feel is a reasonable estimate.

Eric Bass -- Autonomous Research -- Analyst

Thank you. That's helpful. And then maybe sticking with EMEA. Can you provide some more color on a couple of the recent larger block deals that you've done in the region? And do these change your view of the normal quarterly earnings run rate for that business going forward?

Anna Manning -- President and Chief Executive Officer

I think that's Alain, if you could address the transactions and Todd on the run rate?

Alain P. Neemeh -- Senior Executive Vice President, Chief Operating Officer

Sure, Anna. The transactions are very much in line with what we've done previously, so longevity swaps transaction. We've done some financial solution type transactions as well outside of EMEA. But in EMEA is mainly longevity.

Todd C. Larson -- Senior Executive Vice President, Chief Financial Officer

And as far as run rate, Erik, I don't have any one at this point, but certainly it's good this year. A couple of nice deals closed.

Operator

Thank you. We'll now take our next question from Jimmy Bhullar of PG Morgan. Please go ahead. JPMorgan, I apologize. Please go ahead.

Jimmy Bhullar -- JPMorgan -- Analyst

No, it's OK. So first, I just had a question on the Asia business and specifically on Australia. If you could talk about what specifically it was that caused the loss this quarter and any new developments that you've seen in that market?

Anna Manning -- President and Chief Executive Officer

Yes. Again, I think the first to Todd and the question on the market to Alain.

Todd C. Larson -- Senior Executive Vice President, Chief Financial Officer

Yes. Jimmy, there was a new industry table that was published during the year that the regulators expect the companies to adopt and provided some updated information on some of the disability income, the termination rates and that type of thing. Once we looked at that in our table and it provide some experience from the longer duration type claims that may stay on claims for a while. And so, once we took a look at that, we did have an increase in our reserve levels and then we also set up some IBNR claims related to COVID-19. And some of that was partially offset by some changes, but not the other way. But the table was a big driver along with the COVID-19. If you back out those one-offs, as I mentioned in my comments, it was right around the breakeven quarter.

Jimmy Bhullar -- JPMorgan -- Analyst

And is there any ongoing impact from the new data or is it just a catch-up?

Todd C. Larson -- Senior Executive Vice President, Chief Financial Officer

I would view the industry table is more of a catch-up.

Jimmy Bhullar -- JPMorgan -- Analyst

Okay. And then if you think about your results, you had given sensitivity on COVID claims in the US and each of the last two quarters, your actual results have been better. Any thoughts you have given to sort of reassessing that sensitivity or because it does seem like and it's only two quarters, but it seems a little bit overly conservative?

Anna Manning -- President and Chief Executive Officer

Jonathan, may I ask you address that question.

Jonathan Porter -- Executive Vice President, Global Chief Risk Officer

Yes. I'll take that and then maybe Alain if you want to talk about the market in Australia. Yes. You're right, Jimmy, we have been obviously tracking this and we continue to come up toward the lower end. I think exactly what you said, though it's a couple of quarters. There is some variability, obviously that we would expect to see in the future. So I think we just feel the appropriate position is to leave it the same for now and reassess as we do regularly each quarter whether a change is required or not going forward.

Anna Manning -- President and Chief Executive Officer

Thank you for that Jonathan. Back to Alain if you could address the question on the Australia market.

Alain P. Neemeh -- Senior Executive Vice President, Chief Operating Officer

Sure. Thanks, Anna. We've talked in the past Jimmy about the need for the industry to work through some issues. But I guess, one positive development is after the regulator has announced new DI product requirements that need to be in place in October of this year with the aim of making disability income products more sustainable. So I think the industry is moving in the right direction. There is still obviously some stress on the financial results across the industry. And I think in that light, we're pretty pleased with our results for the year, which is slightly positive when you back out the industry table and the COVID accrual.

Maybe just a little bit more on the industry table that really was an attempt for the industry to bring into line -- I would say, DI termination assumptions in the later durations where there is less information. So to Todd point, I think we're quite comfortable. This is a catch-up and sort of very comfortable with the balance sheet moving forward.

Operator

Thank you. We'll now take our next question from Dan Bergman of the Citi. Please go ahead.

Dan Bergman -- Citi -- Analyst

Thanks. Good morning. I guess, to start, as we start thinking about the first quarter, that's typically when we'd see a seasonally high level of flu related mortality in the US. And clearly this year 1Q results will be significantly pressured by COVID. But I just wanted to see if you had any high-level comments on how we should be thinking about other -- the other non-COVID mortality factors? On the one hand, I know you guys have been pressured in recent quarters by the excess population mortality not directly identified as COVID that you called out. Placed on the other hand, it sounds like factors like masking and social distancing and the potential to the flu season less severe than typical. Just any thoughts on those two opposing trends, what you're seeing and really any help just thinking about that directional net impact would be helpful.

Anna Manning -- President and Chief Executive Officer

Thank you, Dan. I think a very low flu season would obviously be very welcomed. But I think any relief from the flu season would be modest in the context of our pandemic. I'll ask Jonathan maybe to provide a little bit more color in terms of the relative sizes of those pluses and minuses. Jonathan?

Jonathan Porter -- Executive Vice President, Global Chief Risk Officer

Yes. Thanks, Anna. I mean, you're right, I mean, really what we're seeing in a flu data is quite incredible so far with essentially zero. And that's not due to lack of testing. In fact, you can see places were testing is actually even higher. So it really is quite amazing that the flu to slow. When you think of the flu season and the impact to us, and I'll talk -- we'll focus on the US here. Usually you'd see about 50,000 to 60,000 general population deaths in a typical flu season, it ranges obviously based on severity. So you can kind of I think of that level of general population that's relative to the amount of COVID deaths that we would incur plus the excess deaths that you mentioned, we do expect that those will continue as well just based on what we've seen so far in 2020. So that will offset if the flu is really close to zero, would be somewhere probably the middle of that range of 15,000 to 16,000.

Dan Bergman -- Citi -- Analyst

Got it. That's very helpful. Thank you. And then maybe just now switching gears a little bit. Now that we're further into the pandemic. I just wanted to see if there's any update you could provide on life reinsurance market conditions. Are you seeing any impact from COVID on session rates or the demand for life reinsurance? And have you noticed any change in competitive conditions? And how you -- overall industry as a whole are thinking about mortality pricing in light of COVID?

Anna Manning -- President and Chief Executive Officer

Perhaps I'll turn that one over to Alain and Jonathan, if you really have anything to add, please feel free.

Alain P. Neemeh -- Senior Executive Vice President, Chief Operating Officer

Sure. Thanks, Anna. I think from -- let me start maybe with just life insurance. I think certainly the pandemic has triggered increased awareness in the population the need for insurance protection. There's few studies out there from Lumira and MIB that show that the desire or the thinking about buying insurance is like quite substantially. So for example, there's about 30% of consumers that were surveyed that are likely to buy insurance in the next 12 months. That's probably a few months stated now. Search traffic for life insurance is quite a bit up on Google Search traffic. So I think from a consumer perspective, we're certainly hopeful that that's going to get traction. Companies have accelerated investments in digital effort to try and reach those consumers.

So I think the outlook, I would say is pretty good from a direct insurance standpoint. From a reinsurance standpoint, I would say we haven't seen much in the way of ups or downs. I think it continues to progress really along the lines that it has over the last few years. Certainly, I think as reinsurers, we've demonstrated value by working with clients to adapt to the changing conditions through the pandemic. And I think that's generally been well regarded. Transactional activity continues to be good. I think, when one thinks of consumer needs and sort of producing different products, our product development areas is quite strong. So I think we can play an important part of that. But I think all like to say, reinsurance demand I think continues pretty much as it has.

Operator

Thank you. We'll now take our next question from Tom Gallagher of Evercore. Please go ahead.

Tom Gallagher -- Evercore -- Analyst

Good morning. If you would mentioned that you were getting some selective rate increases, but not something that you would implement it in a broader way across your business, would you say, is a lot of that related to the early to mid-2000's block in terms of the rate increases you've gotten. And would you say those are largely done or are those still ongoing?

Anna Manning -- President and Chief Executive Officer

Alain, I turn this one to you.

Alain P. Neemeh -- Senior Executive Vice President, Chief Operating Officer

Yes. Look, I would say, Tom, we're continually evaluating the profitability of our different businesses and the relationships with clients and the balance are imbalance there on. I would say, for the most part our underperforming business has been very much isolated to the 1999-2004 block. And I'd say it's a continuing activity to monitor and manage that business the way we believe it should be managed.

Tom Gallagher -- Evercore -- Analyst

So is there -- I guess, just a follow-up on that. Would you say generally broadly like you're closer to the end of the repricing? Or is that just an ongoing adjustment that you think might continue for over a series of years? if you're able to answer it that way.

Alain P. Neemeh -- Senior Executive Vice President, Chief Operating Officer

I would say, very much part of our ongoing management of our business.

Operator

Thank you. We'll now take our next question of Ryan Krueger from KBW. Please go ahead.

Ryan Krueger -- KBW -- Analyst

Hi. Good morning. The last couple of quarters you've had favorable large claims experience in the US mortality. I was wondering if you thought that was actually related at all to COVID or if it's just a more random result that you had the last couple of quarters?

Anna Manning -- President and Chief Executive Officer

Yes. We've had this internal conversation ongoing for both in fourth quarter and the third quarter. Ryan, I think you can appreciate that it is very difficult to assess and make any definitive statement about whether it is or isn't. But perhaps I'll ask Jonathan to share some of the observations or some of the opinions or at least what we're thinking about in respect of that. Jonathan?

Jonathan Porter -- Executive Vice President, Global Chief Risk Officer

Yes. Thanks, Anna. At this point, again, we believe it's more of just a part of the fluctuations inherent in our business. So these adjustments can go both directions. So in the past, as we've noted, we have seen adverse large claims experience. It's nice to see a couple of quarters now of positive large claims experience. But I wouldn't point to being a trend of anything that we can tie back to. So I'd say, it's just part of the fluctuations we would expect to see quarter-on-quarter in our underlying business.

Ryan Krueger -- KBW -- Analyst

Got it. And then one more on the US traditional. There were some moving parts in that business in 2020 and they will continue to the impacts from COVID. Is your view of the underlying earnings power of that business once we get out of the pandemic, so in that $300 million that $320 million on annual earnings range.

Anna Manning -- President and Chief Executive Officer

Todd, if I could ask you to address that question.

Todd C. Larson -- Senior Executive Vice President, Chief Financial Officer

Yes. So that's something certainly we'll take a take a look at. As you know, and Alain mentioned this earlier, we do have some interest rate headwinds for some of the book there. But we'll see, certainly it's going to be pressure. But overall, the other -- the US mortality markets, the group and the long-term care business has been performing quite well. So I don't have a direct answer for you. But we'll reassess it as we go through the next quarter or two and have a clear view into the pandemic and the impact of the pandemic.

Ryan Krueger -- KBW -- Analyst

Okay. Thank you.

Operator

Thank you. We'll now take our next question from John Barnidge of Piper Sandler. Please go ahead.

John Barnidge -- Piper Sandler -- Analyst

Thank you. Israel has been the country that's been most aggressive in their vaccination program. Do you see any markers early on in the week sense it's begun that suggest any insight to how we should be thinking of maybe COVID vaccine programs globally impacting a tapering off of desk?

Anna Manning -- President and Chief Executive Officer

Jonathan, I think this one is for you.

Jonathan Porter -- Executive Vice President, Global Chief Risk Officer

Yes. I mean, I think the short answer is, we are very encouraged -- I'd say, the rollout of the vaccine happening around the world. One of the things that starting to emerge in data, we mentioned Israel specifically as well that just a real world validation that the vaccines are showing the same level of efficacy that they did in the clinical trial, so that's positive. In Israel there are data points that we've looked at which showed that for individuals then had enough time-lapse since receiving the full vaccine. But there are clear indications of a significant reduction in both cases of COVID-19, but also reduced severity and hospitalization. So I think both of these, if they continue should have a meaningful impact on a reduction in general population mortality, which then translates through, of course, reinsured mortality. One of the other things to keep in mind with vaccination programs is that many governments are targeting the most vulnerable group's first, which should accelerate the benefit in mortality. So when you think of it sort of 80-20 rule, 20% or 25% of the population, probably account for a large portion of the deaths related to COVID-19. So population groups get vaccinated faster than mortality should also reduce at that same pace. So I think the signs you're seeing now early, but promising.

Anna Manning -- President and Chief Executive Officer

Great. John, if I could just add a comment, perhaps a longer-term perspective optimism about the longer-term. And that in respect of the new technologies that underpin some of these vaccines, we're cautiously optimistic that this is going to be a one and done that there's been a lot of money put into the development. And that they could be used potentially for other diseases, perhaps like the flu or perhaps cancers. So I want to also leave you with that longer-term observation. I'm sorry, did you have a follow-up as well.

John Barnidge -- Piper Sandler -- Analyst

I did, and it's nice to have some optimistic news too. How do you -- I asked this question with all seriousness, how do you view cryptocurrencies within their investment portfolio? We had an S&P 500 company come out and say it's part of their cash and cash equivalents. We now have other public companies MicroStrategy, Overstock that have allocations that in their cash. So I was wondering how RGA view this as well.

Anna Manning -- President and Chief Executive Officer

Todd, may I ask you to address this?

Todd C. Larson -- Senior Executive Vice President, Chief Financial Officer

So I didn't quite -- John -- quite catch the first part of your question.

John Barnidge -- Piper Sandler -- Analyst

How do you view cryptocurrencies i.e., Bitcoin or digital gold as a part of your investment portfolio or cash and cash equivalents. There are public companies now allocating a portion of their cash and cash equivalents or the investment portfolio to Bitcoin or other cryptocurrencies?

Todd C. Larson -- Senior Executive Vice President, Chief Financial Officer

Okay. Thanks. Thanks for repeating. Well, from my perspective and maybe I'll let Leslie chime in. I haven't been in a lot of conversations around investing in that. So sitting here, I haven't had much in the way of any discussions. Leslie, I don't know if you guys have looked at it at all.

Leslie Barbi -- Executive Vice President, Chief Investment Officer

Sure. Hi, this is -- yeah, I'm on. So we're not currently investing in cryptocurrency. I think if we look to that you would think about it as a currency, we tend of more kind of match our business currency exposure. And I don't think I think of it, it's cash that you have currency exposure if you're not doing business in crypto. So I agree with that, and as well that my understanding is currently the accounting is different than other currencies and can create more volatility. So we're not currently doing it, we keep our minds open. We're looking at all different things that currently fit our currency framework.

Operator

Thank you. We'll now take our next question from Brian Meredith. Please go ahead.

Unidentified Participant

Thanks. This is Mike [Phonetic] on for Brian. So, just following up on 1998-2004 block. So there's clearly a lot of investor interest or almost concern about this year. So I'm hoping you can maybe share some more details. But just from my perspective, there are three key things to note. One you restated, I think 30% of the block in 2014. Two, I think you're actually known as a high-priced reinsure during that period, particularly relative to your European counterparts. And then third, I think it's conceivable that COVID is actually accelerating maybe some of that roll off of mortality. So maybe if you could -- if you agree with any of these or if you could add anything I think will be helpful for investors just because when there is sort of a lack of information people tend to assume a negative bias. Thanks.

Anna Manning -- President and Chief Executive Officer

Thank you for that question, Mike. Alain and Jonathan, would you please address?

Alain P. Neemeh -- Senior Executive Vice President, Chief Operating Officer

Yes, sure. It's Alain. I guess, what I would say a couple of things, first off, the 1999-2004 block probably represents about of our quarter of our US individual block today it's declining over time. The older issue wages in that block are probably about 4% of the whole. So it's a block that is slowly running off. I think in terms of whether we're a high price reinsurer or not. Look, I would say, it's a good solid competitive environment. I think that comment probably draws from the fact that during that period of time, our market share would have dropped. So whether we were high price to whether we perhaps saw some of the risks or felt that the pricing environment was maybe a little bit too sharp. I don't know that's sort of a longtime back. But I think we tend to look at it in the context of our overall block of business. And when one considers the age of that block and the impact of COVID on our different age groups, I think it is quite possible to think that some of those people are perhaps starting off a little bit more quicker than we might have expected. I think it's probably too early to draw any kinds of conclusions. But I'll kind of leave it at that. I don't know Jonathan if you want to add anything.

Jonathan Porter -- Executive Vice President, Global Chief Risk Officer

Yes. Just on acceleration piece. I mean, you added it's difficult just given we don't have current underwriting information to otherwise project to how people who will have died from COVID-19, how long they would have lived otherwise. But I think again it's reasonable, I believe, expect that it will be some benefit. And at this time, I think that we feel it will be a modest tailwind for us.

Unidentified Participant

Thanks, guys.

Operator

Thank you. We'll now take our next question from Tom.

Tom Gallagher -- Evercore -- Analyst

Hi. Thanks for the follow-up. Just a few detailed questions on the US and Latin traditional. What exactly is your Latin American exposure? You're not providing any sensitivity. So I assume it's not very high that some of the countries that have been hit hard.

Jonathan Porter -- Executive Vice President, Global Chief Risk Officer

Yes. This is John. Our net amount at risk exposure in Latin America, it's about 1% of our total net amount at risk. So it is very modest. It's also a mix of both morbidity and mortality risks.

Tom Gallagher -- Evercore -- Analyst

Got you. And then the follow-up is, I assume that favorable health was long-term care this quarter. What the portion of your earnings in that segment is coming from long-term care?

Anna Manning -- President and Chief Executive Officer

Todd?

Todd C. Larson -- Senior Executive Vice President, Chief Financial Officer

Yes. So long-term care, it's -- I was trying to think how best interest as a percentage of the total given the unusual total this year. Maybe the best way to -- in a size that is in the long-term care business, which in the US individual health, what we call individual health, our expectations would be in around a $100 million pre-tax income on an annual basis.

Tom Gallagher -- Evercore -- Analyst

So that's normal -- under normal condition. So I assume that's running better than that. Currently is that a fair way to think about it.

Todd C. Larson -- Senior Executive Vice President, Chief Financial Officer

Yes, it did run better than that the expectation this year.

Tom Gallagher -- Evercore -- Analyst

So that's like over a quarter of the year, US and LatAm traditional earnings. I didn't realize it was that high.

Todd C. Larson -- Senior Executive Vice President, Chief Financial Officer

And it's been about that level of last couple of years or so I would say. But it is not growing significantly just given, develop a lot of new business activity in that line of business.

Tom Gallagher -- Evercore -- Analyst

Okay. Thank you.

Operator

Thank you. No further questions at this time, I would like to turn the conference back over to the speakers for any additional or closing remarks. Thank you.

Todd C. Larson -- Senior Executive Vice President, Chief Financial Officer

Okay. Well, thank you everyone for joining us today and your continued interest in RGA. And I hope everyone and their families stay safe. Thank you very much.

Duration: 55 minutes

Call participants:

Todd C. Larson -- Senior Executive Vice President, Chief Financial Officer

Anna Manning -- President and Chief Executive Officer

Jonathan Porter -- Executive Vice President, Global Chief Risk Officer

Alain P. Neemeh -- Senior Executive Vice President, Chief Operating Officer

Leslie Barbi -- Executive Vice President, Chief Investment Officer

Humphrey Lee -- Dowling & Partners -- Analyst

Andrew Kligerman -- Credit Suisse -- Analyst

Eric Bass -- Autonomous Research -- Analyst

Jimmy Bhullar -- JPMorgan -- Analyst

Dan Bergman -- Citi -- Analyst

Tom Gallagher -- Evercore -- Analyst

Ryan Krueger -- KBW -- Analyst

John Barnidge -- Piper Sandler -- Analyst

Unidentified Participant

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