Corebridge Financial Inc.

Hello everyone and welcome to the Corbridge Financial Inc third quarter 2024 earnings call. My name is Charlie and I'll be coordinating the call today. You will have the opportunity to ask a question at the end of the presentation. If you'd like to register a question, please press star followed by one on your telephone keypads. If all questioners could please mute locally once they've asked their question to reduce the risk of background noise, that would be greatly appreciated. I'll now hand over to our host Ishil Muduasulu, Head of Investor and Rating Agency Relations to begin. issue, please go ahead.

Good morning, everyone, and welcome to core bridge financials earnings update for the third quarter of 2024. Joining me on the call or Kevin Hogan, President and Chief Executive Officer and Elias have a chief financial officer, we will begin with prepared remarks by Kevin and Elias and then we will take your questions. Today's comments may contain forward looking statements which are subject to risks and uncertainties. These statements are not guarantees of future performance or events and are based upon management's current expectations and assumptions. Corbridge's filings with the SEC provide details on important factors that may cause actual results or events to differ materially from those expressed or implied by such forward-looking statements. Except as required by the applicable securities laws, Corbridge is under no obligation to update any forward-looking statements if circumstances or management's estimates or opinions should change, and you are cautioned to not place undue reliance on any forward-looking statements. Additionally, today's remarks may refer to non-GAAP financial measures. The reconciliation of such measures to the most comparable GAAP figures is included in our earnings release, financial supplement, and earnings presentation, all of which are available on our website at investors.corbridgefinancial.com. With that, I would like to now turn the call over to Kevin and Elias for their prepared remarks. Kevin?

Thank you, Ishul, and good morning, everyone. Today, I will review our results for the third quarter and detail how CoreBridge Financial once again delivered on our value proposition. Through our diversified business model, strong balance sheet, and focused execution, we continued to create shareholder value demonstrated by growth in earnings and cash generation and return of significant capital to shareholders. Moving to slide three, Corbridge had a very strong quarter as we grew operating earnings per share to $1.38, a 31% increase year over year. Additionally, our run rate EPS increased 13% over the same period. With solid fundamentals across our diversified businesses, our core sources of income grew 4% year over year, and 5% sequentially. Each of our sources of income, fee spread and underwriting, increased year over year. We achieved these attractive business results while also maintaining a strong balance sheet, one supported by high quality assets and liabilities, prudent risk management, and diversification. We are heavily focused on asset liability management, which is embedded across all facets of CoreBridge. Our asset strategy is driven by our liability profile and our broad product portfolio reflects a long tradition of thoughtful product design and dynamic product management. Reflecting our risk management focus, CoreBridge had no significant reserve adjustments as part of our 2024 annual actuarial assumption update. Built on our strong foundation, CoreBridge continues to create shareholder value through disciplined execution. Total capital return to shareholders for the third quarter was $848 million, including part of the proceeds from the sale of our UK life insurance business. Moving to slide four. Our market leading businesses continue to serve customers' needs and support our distribution partners' strategies. Our addressable markets are significant and each benefit from strong tailwinds given a large and growing retirement aged US population and a life insurance protection gap. The macroeconomic environment also continues to be supportive of our business. Interest rates at mid-durations are expected to remain at attractive levels and new money rates were in excess of 6%. As Elias will expand upon, there may be some short-term impacts from lower rates at the short end of the yield curve, but these will be more than offset by growth in the overall portfolio over time. A steeper curve is generally better for our business. Now turning to the businesses. In individual retirement, premiums and deposits increased 40% year over year to $5.5 billion. General account net flows supported by strong sales volume and improving surrenders were nearly $1.7 billion for the quarter and $5.3 billion for the year to date, a level that already exceeds what we reached for full year 2023. These strong flows in the general account continue to serve as a platform to drive current and future earnings. Last month, individual retirement expanded on what is already one of the broadest annuity platforms in the industry with the launch of our first registered index-linked annuity, or RILA. As part of the product development process, we leverage the long standing relationships we have with distribution partners and our deep understanding of their strategies. Our Ryla brings together the most sought after features already in the market, together with a lock strategy that is exclusive to CoreBridge. The product is already resonating with our partners and we are pleased with the reception to date. Financial professionals at nearly 200 of our top distribution partners were positioned to sell our Ryla from day one, making it our largest new product launch ever. CorBridge now stands as the only top three annuity provider with an offering in every major product category. Group retirement produced another solid quarter. Excluding plan acquisitions, premiums and deposits grew 10% year over year. advisory and brokerage assets under administration increased 22%, and out-of-plan proprietary annuity premiums and deposits increased 17%. The long-term growth opportunity for advisory, brokerage, and out-of-plan annuities is significant as 1.6 million of our customers are in-plan only. Both in-plan and out-of-plan Our experienced team of financial professionals are an essential part of our success, and we have been investing to further improve their efficiency, resulting in an increase in average productivity per advisor of 15% year over year. Life insurance, an important part of our diversified portfolio, had a very strong quarter. Sales growth was 14% year over year, which continues to outpace the industry as it has for eight consecutive quarters. Our modern approach to new business is a key reason for this success. With our data-driven practices, 80% of newly issued policies are auto-decisioned. Building off this capability, we have developed a digital policy application process called Simply Now that provides a contemporary purchasing experience with the underwriting decision typically delivered in a matter of minutes. This feature is attractive to many financial professionals, facilitating further expansion of our life insurance distribution platform. Institutional markets also had a strong quarter. Reserves increased 20% year over year, supporting ongoing earnings growth, and we issued $1 billion of DICs this quarter, furthering our strategy to become a more regular issuer. With pension risk transfer, We see a robust pipeline of large potential transactions for the remainder of this year and going into 2025. As a reminder, we specialize in complex transactions that take time to develop and are not consistent quarter to quarter. Turning to slide five, you will see the four strategic levers that CoreBridge is focused on to grow earnings per share and cash flows. The first is organic growth. I just spent a few minutes talking about our strong business fundamentals and the opportunities ahead. We believe CoreBridge will continue to grow our balance sheet organically, which will in turn contribute to increase earnings per share over time. The second strategic lever is balance sheet optimization. We will continue to pursue opportunities to actively manage both our assets and liabilities to drive higher return on capital. To this end, we are expanding our Bermuda strategy and continue to explore additional opportunities to enhance our financial flexibility. The third is expense efficiency. We successfully delivered on core bridge forward the first phase of our modernization and expense efficiency program. As of September 30 approximately $320 million in savings have earned in from this program. and we expect the final $80 million to earn in through 2025. CoreBridge is moving to the next phase of modernization. We are further digitizing end-to-end processes that support our insurance operations to improve the customer journey and the distribution partner experience. We are also building on the significant investments we made as part of our separation process to further modernize our finance and actuarial capabilities. We are committed to delivering improved performance and enhanced operational efficiency over time. The fourth lever is capital management. Corbridge remains focused on effectively managing capital to drive increased shareholder returns, executing on opportunities with the goal to provide an attractive and growing cash return to shareholders. Next, I want to spend a moment to update you on the progress we are making against some of our key financial goals. First, adjusted return on average equity. Year to date, we have delivered a run rate ROE of 13.3%, a 130 basis point improvement year over year, and well within our 12 to 14% target range. Third quarter ROE represents a 315 basis point increase since the IPO. Second, operating earnings per share. Year to date, we have delivered run rate EPS of $3.70, a 13% improvement year over year. Discrete third quarter EPS represents a 36% improvement since the IPO. And third, capital return. CorBridge has returned $1.8 billion to shareholders over the first nine months of the year, and we are on target to achieve a payout ratio of 60 to 65% for the year excluding proceeds from the sale of our UK life insurance business. Since the IPO, Corbridge has returned $4.3 billion of capital to shareholders, including over $1 billion from our international life divestitures. Corbridge has consistently demonstrated the discipline to allocate capital to growth opportunities where risk-adjusted returns are the most attractive and where customer needs are the greatest, while also delivering significant returns to shareholders and maintaining a strong financial position. Looking forward, we are focused on growing earnings per share and cash flows and continuing to increase long-term shareholder value. I will now turn the call over to Elias.

Thank you, Kevin. I will begin my remarks today on slide six, where I'll provide an overview of our key financial results for the quarter. Corbridge reported adjusted pre-tax operating income of $1 billion or operating earnings per share of $1.38, a 31% improvement year over year on a per share basis. Our operating EPS included four notable items this quarter, resulting in a favorable impact of 11 cents. Details can be found in our earnings presentation. Annualized alternative investment returns were approximately 7% in the quarter, which were two cents short of our long-term expectation of 8% to 9%. Positive returns in traditional private equity benefited from a corporate event and foreign exchange movements. This was partially offset by a mark-to-market loss from one investment in our hedge fund portfolio. As expected, real estate equity returns improved from the first half of the year. Adjusting for notable items and alternative investment returns, we delivered run rate operating EPS of $1.29, a 13% increase year-over-year and a 36% increase since the IPO. This improvement was driven by continued organic growth, balance sheet optimization, expense efficiencies, and active capital management. Turning to slide seven, our earnings are driven by diverse sources of income that positions CoreBridge to deliver attractive returns under different market conditions. And this quarter was no exception. Core sources of income, excluding notable items, grew 4% year over year by an increase in each of our sources. Fee income, which comprises approximately 30% of our core sources of income improved 11% driven by higher account values along with our growing advisory and brokerage business. On a comparable basis, underwriting margin improved 4% by more favorable mortality experience. Base spread income improved 1% over the prior year but declined 3% sequentially. The drivers behind the growth in base spread income were consistent with prior quarters. The sequential decline was driven by the impact of hedging floating rate exposures in individual retirement, as well as elevated prepayments on higher yielding assets in group retirement. Even with that, base net investment spread in individual retirement has remained relatively stable over the last three quarters. Looking forward, given the Fed entered into its easing cycle, we wanted to provide you with sensitivities to potential rate actions. Before any additional management actions, a 25 basis points decrease in SOFR would impact base yield by less than two basis points in the first 12 months. We expect this impact will moderate as a result of the runoff of the portfolio additional hedging activities, and active management of crediting rates on enforced business. Floating rate assets have been a source of attractive yields and play an important role in duration management, complementing other tools we use to actively maintain alignment of the balance sheet. Currently, our floating rate exposures, net of hedging, and floating rate liabilities is approximately 8% of the general account investment portfolio. A significant portion of these assets back annuities that are outside their surrender charge period. Separately, we have entered into certain macro hedges as part of our balance sheet management strategy. Under the same scenario I just mentioned, any potential impact could equate to less than one basis points on base yield. As with the case of any macro hedge, we adjust our positions relative to the prevailing market conditions. While we expect to see base spread income in individual retirement to continue to grow over time, we could see some pressure in the short term. Furthermore, we expect to see continued growth in institutional market spread earnings aligned with the growth in the business. Moving to slide eight. CoreBridge has a long track record of delivering attractive financial results under different market conditions. We're not beholden to any one business or product, and our four businesses complement each other. For instance, underwriting margin, which has been a steady and reliable source of income, serves as a natural counterbalance to other sources of income that are more sensitive to macroeconomic conditions such as spread and fee income. Further, when interest rates have declined, asset values have risen, driving an increase in fee income and alternative investment returns that have offset impacts to spread income. As a result, core sources of income have shown steady resilience over the longer term, enabling us to generate consistent and growing cash flows from our insurance companies and ultimately delivering strong returns to our shareholders. The combination of our diversified market-leading businesses working together is a key component of our shareholder value proposition. Now, turning to individual business highlights, which exclude the impact of notable items, variable investment income, and the sale of our international life business. In individual retirement, Adjusted pre-tax operating income grew by 5% year over year, primarily driven by the growth in both spread and fee income. Fixed annuity surrenders continued to improve from their peak earlier in the year and were 13% for the quarter. Group retirement delivered another steady quarter through its combination of spread and fee income. Fee income increased 12% year over year. We continue to see this business transition to a more capitalized fee-based revenue stream, reflecting the changing dynamics in the business. As our in-plant customers transition from employment to retirement, we're seeing advisory and brokerage services grow while net outflows continue in the general account. Both spread and fee income will continue to reflect the impact of net flows and asset values. Looking to the fourth quarter, there's seasonality in net flows with raised levels of outflows at the end of the year resulting from required minimum distribution by plan participants. Additionally, we've been informed of two upcoming large group plan exits, but they're predominantly invested in our group mutual fund product, thus having a limited impact to earnings. In life insurance, adjusted pre-tax operating income increased by 8% year over year. This expansion was primarily driven by more favorable mortality experience. In institutional markets, adjusted pre-tax operating income grew by 50% year over year, primarily driven by higher spread income arising from portfolio growth. Our reserves have grown $7 billion or 20% year over year with the expansion of our pension risk transfer business and higher volume of GIC issuances. Our financial results for the quarter demonstrate the benefits from multiple sources of income as well as the ability to improve efficiency while also growing the balance sheet. On that point, General operating expenses for our insurance businesses and parent company were favorable by 3% year over year after excluding the sale of our international life business, bringing our cumulative improvement from the end of 2022 to 14%. This was driven primarily by expense efficiencies from core bridge forward. Looking forward to the fourth quarter, we expect some seasonality in expenses. Now turning to the annual actuarial assumption update. This year's update resulted in almost no impact to adjusted pre-tax operating income and is the third consecutive year with limited impact on operating earnings. Moving to slide nine. CoreBridge continues to maintain a strong balance sheet and our ability to generate consistent cash flows from our insurance subsidiaries provides us with the flexibility to act on attractive opportunities and deliver on commitments to our shareholders. Holding company liquidity remains strong at $2 billion, and the life fleet RBC is above target. We issued $750 million of junior subordinated notes in September, paying off the remaining $250 million balance on the delayed draw term loan and earmarking $500 million for pre-funding a portion of our debt maturing in 2025. Adjusting for the pre-funding, our financial leverage ratio would have been 29.6%. Distributions from the domestic insurance companies were $550 million in the third quarter, bringing the year-to-date distribution to $1.7 billion. a 10% increase over the prior year. We are on track to distribute over $2 billion in 2024. In conclusion, our diversified business model, strong balance sheet, and disciplined execution continue to create shareholder value as demonstrated by the growth in our earnings and cash generation. With that, I'll now turn the call back to Isha.

Thank you, Elias. As a reminder, please limit yourselves to one question and one follow-up. Operator, we are now ready to begin the Q&A portion of the call.

Thank you. If you'd like to ask a question, please press star followed by 1 on your telephone keypad. If you'd like to withdraw your question, please press star followed by 2. When preparing to ask your question, please ensure you're unmuted locally. We ask that all questioners please mute locally once they've asked their question to reduce the risk of any background noise. And as a reminder, that's star followed by one. Our first question comes from Alex Scott of Barclays. Alex, your line is open. Please go ahead.

Hi, good morning. First one I had is on some of the comments around financial flexibility. I think it was specifically noted that you're Alex, I'm sorry, we can barely hear you.

Can you speak up?

My apologies. Is that better?

That's better. Thank you.

So I just wanted to ask about the additional opportunities for financial flexibility. I know you all have already done a lot on this front, but was hoping you could add some context on what you're looking at specifically.

So, Alex, it's Elias. So, you know, as you know, we're very proactive with managing our balance sheet. And we look for opportunities kind of to improve our financial flexibility as we did with our Bermuda strategy, as well as look for opportunities, creating shareholder value as we did with their international life operations. The Bermuda strategy is progressing as we've talked about before. whereby we're leveraging the excess capital we have in Bermuda to support new business generation and individual retirement. That reduces some of the strain we have on new business, and that's part of the strategy to grow earnings and cash flows over time. And as we've said before, we see broader opportunities for Bermuda that will be explored, and we'll be back to you guys when we have something to talk about.

Understood. Thanks. You know, one of the other things I noticed from the presentation was it was just referenced that you're generating expense efficiencies beyond just Corbridge Forward. And, you know, I was interested if you could give us some more color on, you know, some of the things you're doing there and, you know, what you're doing to improve efficiency.

Yeah. Thanks, Alex. Look, Corbridge Forward gave us a great start. And through it, we updated our operating model. We modernized a lot of our IT infrastructure. We moved a lot of that infrastructure to the cloud. All of our IT is now sitting in one version of the cloud or another. We exited our data centers and we upgraded most of our enterprise platforms, including some of the finance and actuarial platforms, in part in preparation for LDTI, but also in part in preparation for the separation. And so the next phase is actually being able to put a lot of that capability and tools to work. And the areas that are our immediate focus are, you know, after transitioning much of our middle and back office insurance operations work, we now have the opportunity to automate and digitize that and eliminate a lot of the work associated with it while improving the underlying customer and distribution partner experience. And then we've also have an opportunity to further enhance our finance and actuarial practices. Those are the two, you know, immediate areas of focus because of the tools that we put in place, along with the investments that we made preparing for separation. We don't have a particular target or announcement of a program in place at this time. We're working through the plan. But, you know, this modernization journey has just begun for us.

Very helpful. Thank you.

Thank you. Our next question comes from Wes Carmichael of Autonomous Research. Wes, your line is open. Please go ahead.

Hey, thank you. Good morning. First question is on Ryla. You talked about being up and running with a number of distribution partners on day one. I guess, how are you thinking about the contribution from Ryla maybe in 2025? How long do you expect sales of that product to ramp up?

Yeah, thanks. Look, I mean, Ryla has been one of the fastest growing parts of the market over the last couple of years. And the reality is our largest distribution partners have been asking us to, uh, to, to provide a Ryla entry. Uh, and, um, you know, we feel we brought our historical creativity, uh, you know, to our version of the product. And frankly, the initial reception has been very strong, uh, in the, in the first couple of weeks, but it is just the, you know, the first couple of weeks. uh um the pipeline is building quickly the number of producers that have been uh you know uh trained on the product is increasing on a daily basis and and we're seeing that pipeline you know continue to build and now we're excited about the ryla product because uh you know it has attractive margins it supports our overall diversification and it fits within our overall strategy which is to support our distribution products partners with a range of products that support different customers' needs and risk appetites at different times. And the Rilo product supports a different customer risk appetite than indexed annuities or the variable annuity products. And so, you know, we're seeing an expansion of our overall capabilities there. In terms of what it may contribute in 2025, you know, each of our individual retirement products are in a strong position. and contribute attractive margins. And so we see it as a strong compliment, but aren't prepared to talk about any targets at this point in time.

Okay. Thanks Kevin. My follow-up was on capital and thinking about Bermuda and you talked about it a little bit, Elias, but going forward, should we expect cash flows to the parent company from, from your Bermuda company, or we should, should we really expect you to kind of effectively utilize the excess capital that there is there to support new business from individual retirement?

Yeah, thanks, Wes. So look, I mean, as we've talked about before, we think of Bermuda as the next tool in our capital management toolkit. It provides a lot of opportunities for us. Right now, we're focusing on our fixed and indexed annuity new business, but there's other products that may benefit from us seeding new business into Bermuda. we could potentially, you know, engage in portfolio transactions, you know, on the in-force business. And then, you know, ultimately Bermuda is an environment that, you know, has been attractive for attracting third-party capital, which is an option we'll consider, you know, at an appropriate point in time. But all of these we look as part of our capital management toolkit, which is designed to facilitate our ability to you know, invest in new business at attractive margins and then be able to maintain a strong balance sheet and provide an attractive and growing cash return to shareholders over time. Thanks.

Our next question comes from Sunit Kamar. Sunit, your line is open. Please go ahead.

Uh, thanks. I wanted to start with, with annuities. Um, you know, Kevin, the industry sales have been strong. Your, your sales have been strong, uh, held up pretty well, even with the pullback in rates in the third quarter. So I guess the question is how sustainable do you think. Um, not like your level of sales industry level of sales is, as we kind of move from 20, uh, this year kind of into next year.

Yeah, thanks to needs. Um, what, what I would say is, is that the underlying drivers for the annuity industry don't change with the short end of the curve. And really the need for people in this country to plan and prepare for their own retirement is huge and getting larger. And structurally, I think that's one of the things that has driven the opportunity. Now, certainly the environment the last couple of years has been very favorable, but it's really the five to 10 year part of the curve that's most relevant in pricing uh you know the the annuities products the spread uh businesses and that part of the curve based on the current outlook is going to continue to allow for these products to be a very attractive part of a long-term savings plan the second thing i would say is that the advisor community uh you know there's been a whole new range of advisors in the last couple of years that have learned about the value of annuities as part of that long-term savings program. And so we believe that the conditions for the annuity business are going to continue to be very supportive. And so whether the volumes will continue at the pace of the last couple of quarters is really going to depend on what the conditions are each quarter, where interest rates are, and where people believe interest rates are going to go.

Got it. And then I guess, Elias, on the base spread income commentary that you had in your prepared remarks, I guess I was hoping you could unpack that just a little bit because what I wasn't clear on is how much of this impact and pressure that you talked about is actually going to happen and sort of how much of it could happen if the Fed decides to move a certain way. So can you just maybe revisit that with a little bit of granularity? Thanks.

Yeah. So, Sunit, it's Elias. The sensitivity we gave to the extent there's a 25 basis point rate cut, and we've already had 50, is the impact on us from a base net yield perspective is less than two basis points. And to put that in context, we've increased our base yield by over 100 basis points in the last two years, since the beginning of 22 there. So there will be some sensitivity that we would expect to play out. That over, you know, will be mitigated to some extent with additional hedging activities. You know, the floaters do have a shorter duration, so they'll run up quicker than some of the other bonds in our portfolio, as well as most of the floating rate positions we have back annuities that are outside the surrender charge period. And we're pretty active from a crediting perspective, but that will take some time since you can only adjust it at the annual anniversary date of the annuity. That being said, we continue to believe that spread income and individual retirement will grow over time, but there could be some short-term pressure. But we continue to believe we will continue to grow our earnings per share and deliver on our financial targets irrespective of the rate environment and what the Fed might do.

Okay, thanks. Thank you. Our next question comes from Ryan Kruger of KBW. Ryan, your line is open. Please go ahead.

Hey, good morning. One more follow-up on the short-term rates. Just wanted to make sure I understood. Was the message that 25 basis point decline in SOFR has less than a two basis point impact on your yield, but then the additional macro hedges reduces that to more like one basis point? Did I understand that correctly?

Hey, Ryan, it's Elias. Now, the way it works is this is a point-in-time sensitivity. So with respect to the investment portfolio, the sensitivity is less than two basis points. The macro hedges, if they don't change, is additive. But with respect to the macro hedges, those are part of our enterprise balance sheet management strategy, which we're proactive in managing. We've actually reduced these positions over the course of the year. And based on what the outlook is now, there's a chance that I think we would expect to reduce them even further. So I would look at the macro hedges kind of a little different. The only reason we are giving that sensitivity is for a completeness as a point in time. But if you look at the investment portfolio, that's where the true sensitivity is. And every 25 basis points there is less than two basis points on base yield, which since the BNF-22, we've increased it by over 100 basis points.

Okay, got it. That makes sense. And then just at a higher level, I mean, I think you were certainly mentioning other levers you have outside of spread income. I guess when you think about maybe 2025, Do you expect that you'll be able to grow consolidated earnings on a run rate basis in dollars despite the spread pressure you're facing?

So, Ryan, there are a number of variables that play in it. We're focused on growing earnings as well as growing EPS by both growing earnings as well as growing capital. There's obviously some sensitivity to our earnings that we view as short term. But the longer term trajectories we expect to be growing earnings as well as growing EPS through earnings and capital return.

Yeah. And Brian, Hey, this is Kevin. I just, uh, I just jumped in. I said, each of our businesses is actually in a very strong position, individual retirement. I think, you know, we've explained the, the, the, the difference between the overall dynamic of new sales being at very attractive margins and expected to continue to be based on where the middle of the curve five to 10 years. is anticipated to be. There are some short-term impacts, as Elias just described, but we see an attractive ongoing condition for this business. In group retirement, fee income now exceeds spread income. This is a dynamic we've been talking about in this portfolio some time, and the sources of our spread are fee income. The in-plan fee asset base is up 10% year over year. The advisory and brokerage asset base is up 22%. Out-of-plan assets are up 11%. So group retirement continues to, I think, grow its potential sources of earnings. Our life business is in excellent shape. We've outgrown the market eight quarters in a row after really focusing our portfolio on less interest-sensitive parts of the business. And then institutional markets is in a strong position. So this short-term impact on spreads, I wouldn't overstate. are multiple sources of income. That's a strategy that we benefit from in different market conditions. And each of the businesses is well positioned relative to its market.

Thank you.

Thank you. Our next question comes from Tom Gallagher of Evercore. Tom, your line is open. Please proceed.

morning um first question on capital management second one on asset liability management but the the capital management question is just um obviously a very strong level of share repurchase in 3q can you remind us um a how much you've used up from the uk life proceeds and how we should think about a run rate heading into 4q if i just look at normalized buybacks from capital generation, it's probably half of that amount that you did in Q3. But curious if you still have access that you might lean into if there's opportunities in the fourth quarter.

So, Tom, it's Elias. So, our target overall capital return, both share repurchase dividends is 60% to 65%. We expect to cover that organically. The UK proceeds were extra. and we've deployed a meaningful portion of the uk proceeds in the third quarter i would be thinking in terms of 60 to 65 percent uh in the fourth quarter for this year gotcha and my my alm question is elias i heard what you said about the floating rate eight percent of the general account uh mainly backing annuities outside of surrender charge um

I presume that's an ALM set up to prevent against a rising rate shock type scenario. Just thinking about why you would position it that way. So we'll call it more hedge oriented, defensive oriented. Given that we're seeing a change in the macro Fed beginning to cut rates, would you consider repositioning that or at least hedging it in a way where it we'll call it maybe optimizes the change in macro here, or are you comfortable just sticking with this big floating rate portfolio backing that block?

Hey, Tom, it's Kevin. I think I'll jump in here. Let's unpack it a little bit. So we always manage ALM and our ALM equation carefully as part of our balance sheet management. And as interest rates change, dynamic changes, you know, that will change, you know, either the liabilities will lengthen or shorten. And, you know, as we saw a couple of years ago when interest rates started to rise sharply. And so floating rate assets play an important role for us, you know, in ALM in helping manage duration. And as the overall, you know, shape of the yield curve changes, that will determine the length of the liabilities and will dynamically manage our floating rate portfolio accordingly. But another role that the floating rate assets play is liquidity, you know, relative to particularly those annuities that are outside the surrender charge period. And just as a reminder, we never have reinsured our back book, and we've benefited from that in the recent environment. We continue to benefit actually from that in-force business, but the floating rate portfolio has been a part of that benefit to that to that enforced business. So, you know, floaters are not purely from a perspective of ALM, but they've been very attractive risk-adjusted returns, and we respond to that. We do have some shorter-dated liabilities that they support, particularly in the annuities business. The last couple of years, some of the three-year, four-year surrender business has become more popular. And then we have, we also have the annuities outside of surrender. So we'll continue to dynamically manage the floating rate portfolio. It isn't just a defensive hedge the way that you described it.