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Good day, and welcome to the Reinsurance Group of America First Quarter 2021 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 Anna Manning, President and Chief Executive Officer. Please go ahead, Mr. Larson.
Thank you. Good morning, and welcome to RGA's First Quarter 2021 Conference Call. With me this morning on the call is Anna Manning, RGA's President and Chief Executive Officer; Alain Néemeh, Chief Operating Officer; Leslie Barbi, our Chief Investment Officer; Jonathan Porter, Chief Risk Officer; and Jeff Hopson, Head of Investor Relations. We will discuss the first quarter results after a quick reminder about forward-looking information and non-GAAP financial measures. Following our prepared remarks, we will 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 our Web site for a discussion of these terms and reconciliations to GAAP measures.
And now I'll turn the call over to Anna for her comments.
Thank you, Todd. Good morning, everyone, and thank you for joining our call today. Last night, we reported a loss of $1.24 in adjusted operating EPS, which included $474 million in COVID-19 impacts or $5.31 per share. In the context of the quarter that saw pandemic related deaths reached their highest peak in some of our markets, this was obviously a challenging quarter for us. But if I take a step back, our core business performed well overall and we consider this another solid quarter, further demonstrating the resilience of our global business platform and franchise. Both our Asia traditional and Financial Solutions businesses had excellent results. US Group and individual health performed well, and Australia was breakeven.
During the quarter, we completed a number of in force transactions deploying $100 million in capital, which will further add value to our underlying earnings [engine]. The transaction pipeline remains very good with opportunities in all our regions. Our approach to capital deployment during this crisis remains balanced and disciplined as we seek opportunities to deliver long term value. I'm also proud to announce that for the 10th consecutive year, RGA has been ranked number one for business capabilities on a global basis by NMG in their 2020 global reinsurance report. Leveraging our capabilities and being a trusted partner as well as a thought leader, has allowed us to deliver value to our clients throughout the past year. A point of personal pride in this organization and a tribute to all our employees and our culture of client centricity.
Results in our US Mortality business were significantly impacted by the certain COVID-19 claims seen in the first three months of the year. Considering the elevated level of population depth, these results are not unexpected. Our large claim experience was in line this quarter after being very favorable in the previous two quarters. And our mortality performance over the past 12 months after adjusting for COVID-19 claims has been in line with our expectations. Todd and Jonathan will provide additional information on COVID-19 impacts for all our businesses. As we look forward, there is reason for optimism as increasing vaccination rates in the US, UK and Canada should reduce the level of COVID-19 deaths through the remainder of the year. And other markets should follow as vaccine availability continues to expand. RGA's business fundamentals are strong, our business prospects are robust and we are taking appropriate actions to protect our business and position RGA for profitable growth.
As a final point, it is worth reflecting that through the end of the first quarter, RGA has incurred over $1.2 billion in COVID-19 claims since the pandemic began. Our ability to absorb these claims is a testament to our financial strength but it also serves as a reminder of the important purpose that our industry and RGA play in helping millions of families around the world who have been affected by this pandemic. Thank you for your interest in RGA, and I hope you all remain safe and stay well.
Let me now turn it over to Todd to go over the detailed financial results.
Thanks, Anna. RGA reported a loss for the quarter of $115 million on a pretax adjusted operating basis. Adjusted operating EPS was a loss of $1.24 per share, which includes COVID-19 impacts of $5.31 per share. Our trailing 12 month adjusted operating ROE was 3.7%, which was reduced by COVID-19 impacts of 8.8%. Reported premiums increased 3% in the quarter. Growth was 5%, excluding the premium decline in Australia, reflecting our continued caution in that market. The effective tax rate on pretax adjusted operating loss was 26.9% for the quarter, above the expected range of 23% to 24% due to the geographical mix of the earnings. Turning to the segment results that are represented on Slides 7 and 8 of our earnings presentation. Beginning with the US, the US and Latin America traditional segment reported a pretax, adjusted operating loss of $344 million in the quarter, including COVID-19 claim cost of $358 million.
Let me spend a minute providing a little bit more detail. For individual mortality, approximately $340 million of claim costs are attributed to COVID-19. The approach used to estimate COVID-19 claims is consistent with that used throughout 2020. We also experienced some excess mortality claims in the quarter that is likely directly or indirectly related to COVID-19, which is not unexpected given the excess mortality experience that has been observed in the general population throughout the pandemic. It is important to note that our mortality experience over the past 12 months excluding COVID-19 was in line with our expectations. Our group and individual health business both performed better than our expectations in the quarter. Variable investment income was strong in the quarter as the limited partnership investment performance was favorable.
Our asset intensive business reported results modestly below the expected run rate due to some unfavorable policyholder experience. US Capital Solutions reported results that were in line with our expectations. Moving to Canada. The traditional segment, first quarter results reflected COVID-19 claim cost of approximately $26 million. Our Financial Solutions segment performed well in the first quarter, reflecting favorable longevity experience, which we attribute to COVID-19. In the Europe, Middle East and Africa segment, our traditional business results reflected a meaningful level of COVID-19 claims in both the UK and South Africa. We estimate the COVID-19 claim cost for the EMEA traditional segment in the quarter were $98 million. EMEA's Financial Solutions business results reflect the negative effects of model updates and the longevity offset from COVID-19 was lower than expected as a result of longer reporting lags, but we expect that that benefit to come through in future periods. Turning to our Asia Pacific traditional business. In the first quarter, Asia had favorable underwriting experience across most of the region. While we did see some COVID-19 related impacts, they were modest and within our expectations. Australia results were breakeven for the quarter. While there remains some uncertainty in the Australian market, we are continuing to see progress and remain prudent in our approach to new business and focused on actions to improve results.
Our Asia Pacific Financial Solutions business continued to produce good results in the first quarter, benefiting from organic growth and favorable experience on existing treaties. The Corporate and Other segment reported pretax adjusted operating income of $94 million. As mentioned in our press release and Slide 18 of our earnings presentation, the quarter reflected a onetime adjustment of $92 million to correct accounting for equity method limited partnerships. Adjusting for that, the results were better than expected from our run rate and reflected lower overall expected expenses. Going forward, there is the potential for additional volatility and variable investment income from the change in unrealized gains and losses on our equity method investments.
Moving on to investments. The non spread portfolio yield for the quarter was 5.67%, reflecting strong variable investment income. Excluding the previously mentioned accounting correction, the yield was 4.52% as we had strong contribution this quarter from the limited partnership investments. Our overall investment portfolio, average quality of [A] was maintained and credit impairments were negligible. As shown on Slide 11 of our earnings presentation materials, our excess capital position at the end of the quarter was approximately $1.2 billion. We continue to have ample liquidity as we continue to prudently manage capital during the remainder of the pandemic. RGA's global platform, strong balance sheet, an effective capital management strategy have been vital to RGA's success during this pandemic. While we expect to have some additional COVID-19 claims in 2021, we feel confident about RGA's ability to produce attractive financial results in the future.
I will now turn the call over to Jonathan Porter, our Chief Risk Officer, who will provide some thoughts and updates on COVID-19.
Thanks, Todd. As Anna mentioned, Q1 COVID-19 general population deaths were at their highest levels in many countries, notably the US and the UK. Our models continue to track well to actual results and our overall COVID-19 mortality claim costs, which only include claims that we believe will ultimately be reported with the COVID-19 cause of death were within our expected range based on the level of general population deaths. The US continues to be the driver of our mortality claim costs, accounting for 74% of our global total. This was approximately $17 million per 10,000 US general population deaths at the lower end of our model estimates and very consistent with the prior quarter. Both the UK and Canada had Q1 COVID-19 mortality claim costs in excess of our [model] ranges, which we are attributing primarily to short term volatility. The UK and Canada had a greater number of larger COVID-19 claims in the quarter relative to what we saw in 2020. After considering this quarterly volatility, we are reiterating our previous rules of thumb for claim cost estimates in these markets as shown on Slide 12.
All other markets combined accounted for approximately 10% of our COVID-19 mortality claim costs in line with our expectations, with the majority of this coming from South Africa, consistent with the high level of general population death they experienced this quarter. India accounted for less than 1% of our COVID-19 claim costs in the quarter. Both countries have experienced a significant level of excess mortality beyond what is being reported in general population COVID-19 figures, much of which we believe is likely COVID-19. Since the beginning of the pandemic, over the last 12 months, South Africa has accounted for approximately 5% of a COVID-19 mortality claim costs and India approximately 2%.
Turning to longevity. Our experience was positive in the quarter, driven by higher overall general population mortality in the UK. The majority of our Q1 longevity experience is based on reporting from Q4 2020, and the significant increase in UK general population mortality in Q1 of 2021 is not yet reflected in our results. We do expect to see this impact over the next several quarters as reporting is received. Going forward, the ultimate longevity offset to our global mortality claim costs may be lower than our 10% rule of thumb given our concentration of this business in the UK and the success of their vaccination efforts to date. The significant reduction in general population mortality rates as vaccination levels rise in the US, the UK and Canada is expected to reduce our COVID-19 mortality claim costs over the remainder of 2021. At the same time, we continue to closely monitor the impact that the pandemic variants are having incountries that are at earlier stages of vaccine rollouts where higher mortality could persist for a longer period of time.
Let me hand it back to Todd.
Thank you, Jonathan. That concludes our prepared remarks. We'd now like to open it up for your questions.
[Operator Instructions] And our first question is Jimmy Bhullar with JPMorgan.
I just had a question first on your margins, especially in the European business. And I guess in the US and some of the other regions, it wasn't -- the claims were sort of within or close to the ranges that you'd outlined before obviously worse than in 2020, but not that surprising. Europe, the claims seemed a lot higher than what they had been over the past year, even if you adjust for the higher level of deaths. So can you talk about what it is that you saw there both in sort of UK and outside of the UK? And then what your expectations are and why is it for that market and why is it that you're not adjusting your range higher in terms of your sensitivity to COVID deaths for that region?
So for the UK, as I mentioned, I think we believe that the primary increase this quarter is caused by larger face amount claims for COVID related deaths. So we definitely saw an increase in that in Q1 versus prior quarters. If kind of normalize for that difference and you look sort of in aggregate across four quarters, because there can just be volatility quarter to quarter. We are at the high end of our range or maybe slightly over, but still not materially. The other thing to keep in mind is that when we set those ranges, FX rates have moved and the US dollar has weakened somewhat. So by about 10%, I guess, versus the British pound. So that's probably causing a little bit more of the increase, too.
As far as the rest of EMEA, so primarily South Africa this quarter, the results are really consistent with what we're seeing in the general population there. So the severity of the pandemic in South Africa has been quite high. And again, there are issues with reporting of COVID deaths, we believe. So the actual number of COVID deaths in the general population in South Africa is in the order of magnitude of probably 3 times higher than what's being reported. If you just look at excess death data, which again, is a little bit spotty to get but that's really what's driving our results in that market is just the impact of COVID-19. If you look sort of at results after Q1 for South Africa, mortality so far in Q2, and we're almost halfway through the quarter, is really running much lower than what we saw in Q1. So there's no current surge happening in South Africa and general population deaths are lower, which bodes well for the quarter.
And you mentioned this a little bit, but is it pretty much a given that the higher debts in Europe would help longevity results in the second quarter, or are there some other potential factors that will sort of go in the other direction?
We do expect to see a benefit from longevity. As I mentioned, reporting is lag there. So if you think about it, our longevity business, we've seen reporting probably extend even a little bit this quarter. So we're kind of talking four to five months on average of reporting lengths. So that what's being reflected in our financials at this stage is really going back to probably on average, November of last year. And the large spikes we saw in the UK in mortality really started to happen around that time and extended into Q1. So that's why we think there's -- we do expect to see a benefit, but it will occur over the next couple of quarters. One other thing to keep in mind, too, in the UK is beyond COVID mortality. General population excess mortality has actually been good, ex-COVID, so that is potentially reducing the aggregate mortality sort of beyond what you just see in the COVID numbers.
And our next question is from Ryan Krueger with KBW.
Could you give us any more perspective on the magnitude of non-COVID mortality that you saw in the quarter? And then, I guess, as a second part to that, I know this is a difficult question to answer, but as you study some of the underlying data on what you think might be driving non-COVID mortality? How you think that may play out as we emerge out of COVID.
Let me start, I think, just a little on our quarter, and then maybe Jonathan can fill in some points on COVID specific mortality. I think if you back out COVID mortality from our quarter, we think, generally speaking, our quarter was in line with our expectations. Now I will say, as I think was talked about in the script, we have seen normalization of large claims in the quarter in the US. So we had very good, large claims volatility the last couple of quarters that's normalized this quarter. We've also seen some level of excess claims, which isn't inconsistent with what we've seen throughout the pandemic. So we've got COVID specific mark claims and then you've got an excess amount that likely is directly or indirectly related to that, so we've seen some of that. And then given the spiking claims towards the end of last year, I think we also saw some claims come into this quarter. So I think when you back all that out, though, we're feeling pretty good about the underlying business. And I would say, certainly, over the last year and even this quarter, our results are very much in line with what we would have expected.
And then maybe I'll just add Alain just more specific to COVID itself, so we talked about South Africa already. But again, that's a similar phenomenon. We're seeing with significantly lower general population deaths that is happening in -- quarter-over-quarter in the US and the UK for sure as well. So just the UK has had about less than 1,000, I think, as of yesterday, COVID marked death in Q2, and that's versus 53,000 that happened in Q1. So we are seeing reductions in some of our larger markets, which is good news.
I mean, as a follow-up. I think generally, the prevailing thought was that after a pandemic general population mortality would improve for some period of time given the pull forward of deaths. It seems like there’s more uncertainty this time around given some of the other effects that maybe COVID and putting off doctor visits and things like that that could have. What are your latest thoughts on that topic?
I mean, I think you're exactly right. There's some pluses and minuses, and it's really not clear at this point yet what that effect will be. So as you mentioned, one of the potential negatives is people delaying diagnosis by not going to the doctor and being diagnosed with conditions at a later stage, which could be more severe. On the other hand, you also mentioned the acceleration effect, which we do think will have some beneficial impact, potentially modest but it will be positive. Then you also think about things like vaccine technology, developments, people’s just behavior, social distancing, we saw that in the flu season this year. So those could also be positive, but I think it will take some time for the data to play out.
[Operator Instructions] Our next question is Hung-Fai Lee, Dowling & Partners.
My first question is just to follow up on the non-COVID US mortality piece. You talked about this reporting lag and then I assume there may be some adverse developments. Can you size that impact for this quarter?
I mean, in terms of the question sort of reporting like an adverse impact, so I think it's more just a little bit of reporting lag and that's largely related to the big flux of claims or big influx of claims that we saw towards the end of last year. In terms of sizing it, tens of millions, thereabouts…
Yes, because you did put up IBNR reserve of $100 million at the end of the quarter, I mean, last quarter, so clearly, blew pass that. So that's the driver. And I guess maybe exiting first quarter, where do you stand in terms of IBNR reserves?
Yes, we did set up the IBNR at the end of the year. We took the best information that we had and made the best estimate that we had, and it was reasonable, we thought at the time. As Alain mentioned, there was a pretty significant acceleration of deaths that towards the end of the year as we all saw. So we missed it by a little but that's not unusual. The quarterly IBNR, either are below or above where you need to be, and that's just an ongoing fact. And again, given the volume of debts that were out there towards the end of the year, we just understated it a little bit. And then again, for first quarter, we again, looked at the information that we had available to us and reset what we thought the appropriate IBNR balance is for the end of the first quarter. Now it would have come down a little bit given that the number of deaths, if you will, has come down as you got towards the end of the quarter.
I want to step back for a minute. And I want to make sure that when we talk about our performance over the last 12 months, adjusted for COVID, and it's been in line that we appreciate what that includes. So in the last 12 months in the US there have been approximately 550,000 deaths reported, COVID deaths reported. But in addition to those deaths, there's been roughly 150,000 excess deaths, not specifically identified as COVID. Now we believe those excess are likely COVID related directly or indirectly and likely temporary in nature as we come out of the pandemic. When we say we adjust our business we're only adjusting for the impact of the 550,000 specific deaths, that means our business is wearing the other 150,000 deaths. I just want to make sure that that's clear. So to me that's a signal of good performance over the course of the last 12 months.
My follow up question is you talked about, in the prepared remarks, you talked about the exposure to India, and it has only been 2% of your claim cost to date. But given the spike in deaths over there, and I recall, you had $20 million impact in the fourth quarter. Like how should we think about that going into the second quarter given the much worse numbers that's coming through right now.
So first, let me just caveat with coming up with the claims cost sort of the estimate for India, just given the situation with sort of the availability of data as well as just the very kind of current nature of what's happening in that country with respect to the [30.44] happening it's difficult. Since that information is still developing and considering what's happened to us in the past, I think if we had to put a number or a range on it, we're thinking of it sort of in the $50 million to $100 million pretax range. But again, there's a very wide range of a funnel of doubt or account of doubt around those numbers, just given the situation and how it's developing.
And our next question is from Erik Bass, Autonomous Research.
So I think you ended the quarter with $1.2 billion of excess capital, and you sound pretty optimistic of return to profitability and kind of good or improving performance going forward. So just wanted to get a sense of how you're thinking about the level of excess capital and your comfort level in drawing that down? And going forward, whether it's for block M&A or at some point, potentially returning to shareholders?
We continue to prudently manage the capital throughout the pandemic. I think as you've seen historically, we have balanced deployment into the transactions where we kind of obtain good returns and we like the underlying risk profile, the dividend level and then also done some share repurchases over time. I think we still need some more time to pass here and more certainty to come into view, but we'll continue to follow a prudent and balanced capital management approach. We did deploy $100 million of capital in the first quarter, as Anna mentioned in her comments and we were comfortable with that. It was a very nice underlying profile of liabilities, very stable long term cash flows. It was a follow on transactions with an important client in Asia and had some other benefits as well. So I think we'll continue to be prudent as we continue to work through this pandemic period, but we'll continue to evaluate what the best alternatives and opportunities are for the capital deployment.
And then we've seen a surge in demand for term life, particularly in the middle market in recent quarters. I'm just wondering, are you capturing much of this business and maybe how are you seeing the growth outlook in US traditional kind of for this year and as we move past the pandemic?
No, you're quite right. I think we are seeing some very good production. In fact, interestingly, MIB, I think, just came out with some statistics that show a record level of application activity in the month of March and very strong Q1 results, and that's not just over last year but over pre pandemic type quarters. So I think that's wonderful to see. We've talked about in the past an expectation, maybe a hope, to some extent, but an expectation that we would see a resurgence in desire or thinking about life insurance from people in the general population. So we're certainly seeing that now. I'd say as we look ahead, it's difficult to say whether this is, call it, a new sustained level of business or whether it's maybe a little bit of catch up, a little bit of return to normalcy. So clearly, we'll follow that along. But as we've talked about as well previously, direct companies have invested, significantly accelerated their investments in digital efforts and distribution efforts to try and get to that middle market. So it seems to be paying dividends, and we're certainly quite excited by what we're seeing.
And our next question is Andrew Kligerman please go ahead with Crédit Suisse.
Sorry to continue on this indirect non-COVID-19 question, but help me out a little bit on the math, because it's not clear to me. So ex COVID effects in US and LATAM, you would have been at negative [$55 million]. If life were normal, which is not, I'd say we'd be at a base of maybe $170 -- maybe $110 million, $120 million of earnings. So what that tells me is that these -- what you may believe to be non-COVID but indirectly related, it's half the level of the COVID claims. And then I'm looking at -- and that was very helpful adding [150,000] of excess deaths against the total of [550] and it's much smaller. So I guess maybe could you help think through this issue, was it a frequency issue this quarter, was it severity issue this quarter? And ultimately, what should the run rate earnings be assuming none of this challenging very difficult situation with COVID-19 were recuring?
I'll take a stab at this first, a couple of comments to make. I think all, backing out COVID claims and then looking at the rest, I think I'd start by saying there's certainly some impact from non-COVID labels but likely related type claims. That would be number one. We have had some slippage, as I mentioned, from last quarter into this quarter. And then maybe the only other thing I'd say, it's very difficult to talk about a run rate on any one quarter. Certainly, when we look back over the last number of years, we see a certain level of seasonality in our business. Just because we have a lower flu season doesn't necessarily mean that all of that seasonality goes away because seasonality has to do with weather time of year, as well as some input from the flu. So look, I would say, I think we're probably around, call it, $300 million annually on traditional. But as we look at this quarter, it's difficult to talk about a run rate for first quarter. But certainly, I would say when we look at the underlying business, we're pretty happy with what's transpired this quarter.
And then just maybe -- I think Todd was touching on Australia being breakeven, but then he said there's still some uncertainty. So I just want to make sure I understand what that potential uncertainty might be?
I think if I look back over the last few years, we certainly talked about some issues in the underlying market with respect to terms and conditions and level of competitiveness in new business. And so I think you wouldn't be surprised that we've seen our business volumes come down. And in fact, when we look at this quarter over first quarter last year, we're seeing a significant reduction in premiums. That has to do with two super fund reinsurance treaties that we had that are no longer on our books, one of which, just as a matter of interest, the underlying client would have lost. But the other one, we couldn't come to terms on the reinsurance business as it came for renewal. So we're continuing to be cautious. I think when we talk about a certain level of uncertainty, it has a lot to do with the fact that we're looking at products and terms and conditions in new products, and we're looking to see them get back to a level of normalcy that we'd like to see.
I think I talked last quarter about individual DI standards coming into play as regulated by the regulator in October. So I think that will be good news. But I think some of it also has to do, when we look back over the last year, we've been more or less right around breakeven every quarter, which I think is certainly an improvement over prior couple of years. There's still some maybe caution around disability claims and potential mental illness. Now Australia has had better results with respect to the pandemic. But they've also had more shutdowns. So I think the type of thing, we're simply just being cautious about in all of our markets, but I would say we're feeling better about our Australia business for sure. The next step, though, is to see new products get to a point where we get excited about them and then potentially start to put new business back on. But for now, still that cautious approach Todd was alluding to. I hope that answers your question.
Our next question is Dan Bergman with Citi.
I guess to start, maybe just following up on excess capital. It looked like your excess capital only declined by around $100 million in the first quarter versus the year end 2020 level despite absorbing, I think, almost $500 million of COVID claims and deploying $100 million into block deals. So I was hoping you could give some more color on the offsets that allowed for that strong result? And if there's any benefit in your capital model from that accounting change on the LP investments? And maybe just finally on that going forward with COVID claims seemingly likely to decline materially post the first quarter. Should we be expecting an inflection on the capital side with excess capital likely starting to build from here before factoring in capital deployment, block deals, repurchases, et cetera?
We actually had positive net income for the quarter. I think it was around $139 million. So we actually net added capital from that perspective. I mean we had no capital gains in that number for repositioning some of the investment portfolio. Also, as you mentioned, we did have some positive impact in there from the correction for the accounting for the limited partnerships. So that's where -- even though we deployed some capital, it's still -- overall, it declined by about $100 million for the quarter. And then we continue to evaluate what should that level of excess be as we emerge from COVID, and we're still looking through that, but I do feel that we will be in a place where we'll find and follow a very effective and balanced approach to how we, over time, manage the capital base. I think, as you know, we don't true it up each quarter. Quarter-to-quarter, we do look at it more over a longer period of time given the nature of our long term business.
And then I know you reiterated your prior COVID claims sensitivity guidance, but I wanted to see if there are any additional thoughts you can provide around how the vaccination program might impact COVID claims or sensitivities going forward. For example, should we be expecting a material difference in vaccination rates between the general and insured populations? And then also just with the timing of older higher risk populations generally getting the vaccine earlier. Could that impact near term claims trends or sensitivities, could get some of the mortality over the next several quarters be skewed towards younger individuals versus what we've seen early in pandemic? Maybe a little bit of a broad question, but any thoughts on that would be great.
So I’ll just try to sort of give a couple of points on this. So I think generally speaking, we would expect our rules of thumb to still be applicable as vaccinations programs are rolled out. So as general population mortality declines, our insurance population will decline. And that's not going to be a perfect match but at a macro level, I think it will sort of track reasonably well. And as we see data emerge, obviously, we'll update those rules of thumbs as required. I think to your point about kind of will it be more mortality in different age groups? I kind of think of it as we're essentially eliminating mortality in some age groups. So sort of by definition, that means it will be more proportionate in the groups that have not had the full vaccination. So it's not really a shift in my mind. It's more just we're getting rid of some excess mortality for those age groups and people that have been vaccinated, and the residual mortality will still be there for the other age groups. So yes, we might see something that looks a little different by population components. But again, overall, I think it's because aggregate mortality is going down and our rules of thumb would suggest that we'll see the same results on our books.
Our next question is from John Barnidge with Piper Sandler.
Can you talk about directionality of session rates broadly that you've seen maybe across geographies. I asked that because the traditional business got some top line growth in the quarter.
I would say, generally speaking, we haven't seen any movement on session rates per se. So our business volumes have very much been driven by the level of new business at the direct company level, and we've seen our share of reinsurance commitment. Now I say that recognizing that with every market and every client in each of those markets, there are reinsurance pools and we participate on some, not all, and with varying degrees of percentages per pool. Those typically will fluctuate year-to-year as new products come out. But generally speaking, I would say, if I understand your question correctly, the level of section rates has generally stayed the same in all of the markets and our positioning has remained quite consistent.
And then a follow up. On the excess mortality, just briefly, is it one of these things where it was a COVID claim they didn't make it of a hospital or is it similar to the flu and that the flu was the first step that started the decay process into depth sadly? Just trying to dimension between those two.
I would say, very tough to tell this early on. I think, I mean, Jonathan may have a little bit more information than I. But these are, in many cases, hot off the press already for COVID type deaths, we're needing to, I'll say, average up from the perspective that our cause of death reporting isn't yet complete this early after a quarter end. So when we talk about excess deaths, we're really relating it to what we're seeing in the general population, relating it to what we've seen in the last few quarters. But it's difficult, I think, from my perspective to get that granular, but I don't know if any one of my colleagues, anything to add to that.
When we look back sort of over time, where the data is more complete. I mean, clearly, we saw excess mortality beyond what was explained by COVID in the US, specifically I'm talking about now in 2020. So it's not unreasonable to expect that it would continue. Clearly, flu deaths have been minimal or almost zero. So that would be an offset to that but the net of the two still seems to be a drag.
Our next question is Mike Ward with UBS.
I'm just trying to think about high level earnings power. As you touched on the average 1Q earnings for US and LATAM, I think, is really breakeven over the last several years because of that 1Q [mortality] or seasonality. So if we're thinking post COVID 2022, I'm not asking for guidance. But at a high level, if you think about your kind of earnings power for '22 and beyond today versus before COVID, has anything really changed at all?
No, that's sort of the way I was going to sort of frame it. If you go back to pre-COVID we had a very diversified, both globally and product wise earnings profile, where it's called half came from our traditional business as far as bottom line and half from the Global Financial Solutions. And throughout COVID, the Global Financial Solutions business has continued to perform very well. So as we emerge post-COVID and things get back to, I'll call it, more normal we're very confident our underlying business, if you will, and our relationships with our clients and so on, it's still very much intact. So we would be optimistic that we could get back to those pre-COVID earnings levels and then continue on as we were pre-COVID.
And then just to expand on the capital discussion. I guess, if there's going to be a fraction of global COVID deaths this quarter in 2Q, and COVID really is close to being fully in the rearview mirror and you did an equity raise last year for COVID. Your stock is, of course, pretty attractive. So I guess what would be stopping you from really ramping up back capital return in a bigger way?
Just go back to my comments earlier, we're going to prudently manage the capital so that we don't have to raise capital in the future as well. So we're going to keep a close eye on it and look at what opportunities are out there from the business perspective and what type of attractive returns and underlying transaction types that potentially are. And as we did pre-COVID, we'll lay that against the various alternatives as we look at how we want to deploy capital going forward. I don't think we want to get too far out ahead of ourselves.
And our next question is from Tom Gallagher with Evercore.
I appreciated the color on the India sensitivity. My question is, are there any other countries in particular you're keeping a closer eye on where mortality is worsening right now, like Brazil or -- I don't think you have much exposure there. But I'm just trying to get a sense, are there any other areas that we should be considering here?
So obviously, as you say, it's a pretty dynamic situation. We're monitoring all of our business, clearly. Given the current circumstances, though there's nothing significant from what we already talked about. So outside of India, the pandemic is in Asia, the pandemic is still being very well controlled, I think, in those markets in Australia. Latin America, I think the way you characterize it is correct. There are some global hotspot issues in Latin America. But based on the size of our business, which is quite modest and the nature of it, so it's almost entirely annually renewable business. It also is a very large health component and the relatively limited impacts we've seen there to date. So Latin America, in total, has represented about 1% of our inception to date mortality and morbidity impacts. We don't have a specific concern about those markets right now.
And then just a follow up question on IBNR. How much IBNR did you book as a percentage of your total claims for COVID in Q1, if you could quantify that?
So you kind of have to think IBNR, it's really a balance, correct. So there is movement in the quarter. So as Todd mentioned earlier, because the mortality rates came down in Q1 from what we saw in Q4, our IBNR balance actually decreased over the course of the quarter. If you look at our COVID specific IBNR that we still have on our books, it's probably in the order of magnitude for both mortality and morbidity of about $120 million, give or take, that's in addition to all of our regular IBNR we would hold for our normal course business.
It appears that there are no further questions at this time. Mr. Todd Larson, I'd like to turn the conference back to you for any additional closing remarks.
Thank you. And thank you, everyone, for participating on our first quarter earnings call. We appreciate that and we also appreciate your continued interest in RGA. So thank you very much.
And this concludes today's call. Thank you for your participation. You may now disconnect.