Net income for the first quarter of 2021 included: first, the net after-tax loss from the second phase of the closed block individual disability reinsurance transaction of $56.7 million, which is $0.27 per diluted common share.
Second, the after-tax amortization of the cost of reinsurance of $15.8 million, which is $0.08 per diluted common share and a net after-tax realized investment gain on the company's investment portfolio and this excludes the net realized investment gain associated with the reinsurance transaction of $13.5 million or $0.06 per diluted common share.
Net income in the first quarter of 2020 included a net after-tax realized investment loss of $113.1 million, which is $0.56 per diluted common share.
So excluding these items, after-tax adjusted operating income in the first quarter of 2021 was $212 million or $1.04 per diluted common share compared to $274.1 million or $1.35 per diluted common share in the year-ago quarter.
Most notable, the increase of 2.8% in premium income growth we experienced in our core business segments from the fourth quarter of 2020 to the first quarter of 2021.
Our holding company cash position finished the quarter at $1.7 billion, aided by the successful completion of Phase two of the closed Disability Block Reinsurance transaction.
Risk-based capital for our traditional U.S. insurance companies remained solidly above our targets at 370%, and our leverage is down three points from a year ago.
I'll start with the Unum US segment, which reported adjusted operating income for the first quarter of $115.7 million compared to $143.5 million in the fourth quarter.
Beyond the significant mortality impact, we were pleased with the underlying performance of the rest of the businesses, particularly the 2.7% increase in premium income related to the fourth quarter.
Starting with the Unum US group disability line, adjusted operating income for the first quarter was $64.1 million compared to $64.7 million in the fourth quarter of 2020.
We were very pleased to see premium income increased by 3.5% compared to the fourth quarter, with solid sales this quarter, very good persistency, and natural growth stabilizing.
The benefit ratio was 74.8% compared to the very favorable 72.5% in the fourth quarter.
We continue to expect the annual group disability benefit ratio to run in the 73% to 74% range with some quarterly volatility.
Second, the expense ratio improved nicely, declining to 28.4% in the first quarter from 30.4% in the fourth quarter.
Adjusted operating income for Unum US Group Life and AD&D continue to show the impact of COVID-related mortality, with a loss of $58.3 million in the first quarter compared to a loss of $21.9 million in the fourth quarter.
The change from the fourth to the first quarter is largely explained by the national COVID-related mortality trend that showed an increase from approximately 145,000 nationwide observed deaths in the fourth quarter to approximately 200,000 in the first quarter.
Our 1% claims rule of thumb for Unum share of COVID-related mortality did hold consistent in the quarter, and we estimate that we incurred approximately a 2,050 COVID claims with an average claim size of approximately $50,000.
Second-quarter estimates of U.S. COVID-related mortality are in the 50,000 to 60,000 range compared to the first quarter level of approximately 200,000.
However, the 1% rule of thumb we have experienced throughout the pandemic is likely to change somewhat.
If the age distribution of mortality changes and is skewed more to younger people and away from the elderly population due to the vaccine rollout, we would expect to see a higher percentage of national claim counts and a higher average claim size since working-age policies tend to have higher policy amounts than retired and over age 65 individuals.
This does equate to an approximately $40 million impact to group life income from COVID-related claims compared to over $100 million in the first quarter.
In other words, using these estimates, we would expect our group life earnings to improve by approximately $60 million from the first quarter to the second quarter to an approximately breakeven level of earnings in the second quarter.
Now shifting to the Unum US supplemental and voluntary lines, we saw an improved quarter with adjusted operating income of $109.9 million in the first quarter compared to $100.7 million in the fourth quarter.
The individual disability line continues to generate favorable results with a benefit ratio at 42.4% in the first quarter compared to 42% in the fourth quarter and 52.1% in the year-ago quarter, driven primarily by continued favorable incidence and mortality trends in the block.
Finally, utilization in the dental and vision line was higher this quarter, pushing the benefit ratio to 73.2% in the first quarter compared to 65.4% in the fourth quarter.
Sales for Unum US in total declined by 10.3% in the first quarter compared to the year-ago quarter.
Within that, sales increased 15.9% for the employee benefits lines, which are STD, LTD, group life, and AD&D combined, with a good mix of growth in both large case and core market business.
Our recently issued individual disability sales were down 25.1% in the quarter, coming off a strong pre-pandemic first quarter last year.
Voluntary benefit sales were down 21.5% in the quarter, which is consistent with our view that mid and larger case VB sales will take longer to recover.
Finally, sales in dental and vision were 25.9% lower, caused by the disruption in group sales resulting from discounts and other incentives, many carriers are providing in response to the unusually favorable claims trends seen in the second quarter of last year.
We are seeing a positive offset with higher persistency for dental and vision at 87.4% for the first quarter compared to 81.9% in the year-ago first quarter.
Now let's move on to Unum International segment, where adjusted operating income for the first quarter showed a strong improvement to $26.4 million compared to $20.7 million in the fourth quarter last year.
A big driver of this improvement was improved results in Unum U.K. with adjusted operating income of GBP18.6 million in the first quarter compared to GBP15.4 million in the fourth quarter.
Unum Poland has seen adverse impacts from COVID on its results in the first quarter relative to the year-ago quarter, but we are pleased with the growth we're seeing in this business with growth in premium income of 11.7% on a year-over-year basis.
Next, we are very pleased with the results generated by Colonial Life, with adjusted operating income of $73.3 million in the first quarter compared to $71.2 million in the fourth quarter.
The benefit ratio of 55.4% was slightly improved from 56.6% in the fourth quarter but did remain higher than our historical trends due to the continued impact from COVID on our life insurance line.
Premium income for the first quarter picked up slightly from the fourth quarter, increasing 1.8%, primarily the result of favorable persistency trends.
We will need to see further recovery in new sales to rebuild premium growth back to the historic levels of 5% to 6%.
Although quarterly sales were down 9.2% year-over-year, that has sharply improved from the 31% cumulative decline we experienced for the last three quarters of 2020.
We look forward to further improvement in sales momentum over the balance of 2021.
We are encouraged by the uptake we are seeing in our recently developed digital enrollment tools, which in the quarter accounted for about 1/3 of our enrollments.
Adjusted operating income, excluding the impact of the Closed Block individual disability reinsurance transaction, was $97 million in the first quarter compared to $104.2 million in the fourth quarter last year, both strong quarters relative to our historical levels of income for this segment.
Looking at the primary business lines within the Closed Block, for the LTC block, the interest adjusted loss ratio was 77.7% for the first quarter compared to 60.2% in the fourth quarter, excluding the income of the reserve assumption update in the fourth quarter of last year.
The results for the first quarter remain favorable to our long-term assumption of a range of 85% to 90%, primarily due to the continued impact of COVID-related mortality on our claimant block.
In the first quarter, we estimate the accounts were approximately 15% higher than expected, a similar trend to what we experienced in the fourth quarter.
For the Closed Disability Block, the interest adjusted loss ratio was 68.9% in the first quarter and 79.5% in the fourth quarter, both excluding the impacts from the reinsurance transaction in these quarters.
Then wrapping up my commentary on the quarter's financial results, the adjusted operating loss in the corporate segment was $38.9 million in the first quarter.
This is favorable to the fourth quarter 2020 adjusted operating loss of $42.7 million, primarily due to higher net investment income, which offset a slightly higher level of operating expenses.
Phase two involved the transfer of approximately $767 million of assets to the reinsurer and the recording of a net after-tax loss on the transaction of $56.7 million.
In addition, the amortization of the after-tax cost of reinsurance was $15.8 million this quarter.
With the transaction now completed, we are very pleased with the ultimate release of approximately $600 million of capital to holding company cash and the flexibility that creates for us.
First, we recorded an after-tax net realized investment gain of $66.9 million in the first quarter.
Of that gain, $53.4 million was associated with the completion of Phase two of the Closed Block individual disability reinsurance transaction.
The balance of this quarter's realized investment gains, which result from normal investment operations was $13.5 million and was largely driven by a positive mark on our Modco embedded derivative balance.
Second, as I mentioned previously, we continue to see a strong recovery in the valuation mark on our alternative invested assets of $35.9 million this quarter, following a positive mark of $29.4 million in the fourth quarter.
Given the current portfolio size, we would expect quarterly positive marks in the portfolio of $8 million to $10 million.
Third, with Phase two of the reinsurance transaction, we were able to retain approximately $361 million of invested assets that were not transferred to the reinsurer.
Of that amount, $234 million of investment-grade assets with a book value -- with a book yield of 7.4% have been allocated to the LTC portfolio.
During the first quarter, we saw only $92 million of investment-grade bonds downgraded to below investment grade and $13 million of upgrades of below-investment-grade bonds to investment-grade status.
Our holdings of high-yield fixed-income securities were 7.7% of total fixed income securities at the end of the first quarter, which was down from 7.9% at year-end 2020.
The risk-based capital ratio for our traditional U.S. insurance companies is slightly over 370% and holding company cash is at $1.7 billion as of the end of the first quarter, both well above our targeted levels.
In addition, I'd note that our leverage ratio has declined to 26%, providing additional flexibility.
With our fourth-quarter reporting in February, we outlined our expectation of a modest decline of 5% to 6% for full-year 2021 adjusted operating income per share relative to the 2020 level of $4.93 per diluted common share.

Summary:
So excluding these items, after-tax adjusted operating income in the first quarter of 2021 was $212 million or $1.04 per diluted common share compared to $274.1 million or $1.35 per diluted common share in the year-ago quarter.
Our 1% claims rule of thumb for Unum share of COVID-related mortality did hold consistent in the quarter, and we estimate that we incurred approximately a 2,050 COVID claims with an average claim size of approximately $50,000.
We look forward to further improvement in sales momentum over the balance of 2021.