Q3 2019 Earnings Call
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Thank you Christian and good morning, everyone. We appreciate you joining earnings call.
Today, we will discuss our financial results for the third quarter 2019, which ended on September Thirtyth.
You can find the financial information for LTL holdings on the Investor section of our website at sea lice Duffy.
Today's presenters include Chris bought President and Chief Executive Officer, and Dennis Benue, Executive Vice President and Chief Financial Officer.
And the comments we make during this call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act, we do not intend to update any comments on this called reflect new information subsequent events or changes in strategy.
A number of risks and uncertainties exists that could cause our actual results to differ materially from those expressed or implied we discuss these factors in detail in our 2018 10-K, we filed with the FCC on March Onest of this here.
During this call we may refer to non-GAAP financial measures that we believe maybe meaningful to investors.
Please refer to our third quarter earnings release financial supplement in Investor presentation that we posted to our website.
These documents contain a reconciliation of non-GAAP financial measures to GAAP and finally, all comparison comments today will be to the third quarter of 2018, unless we state otherwise.
Now I'd like to turn the call over to Chris.
Next well good morning, everyone I'm pleased to announce another set of strong results for the third quarter, we continue to execute on our strategic initiatives that are delivering industry leading returns.
Dennis will go through the details shortly but I'd like to highlight several key items at the outset and provide an overall update on the business.
Before I begin as I announced yesterday, John Florida has been appointed as our new Chief Financial Officer. It up in GI effective November 11th John was recently CFO , New York Life, where I had the privilege of working with him for eight years, John will be a terrific add to our senior leadership team that as we've discussed previously Dennis video.
We remain with up Angie as an executive Vice President reporting to me until his retirement at year end I want to think that as far as effective stewardship of F and G for his work to ensure a smooth transition.
Now nine months into 2019, I want to remind everyone. What are unique franchise, we have here at F and G, including Oh, well matched book of newer liabilities, a sustainable investment atrophy, our partnership with Blackstone longstanding and strategic distribution relationships.
Numerous channel expansion opportunities.
Robust pipeline of potential offshore reinsurance deals and most importantly, a great team with an excellent corporate culture.
And you see this reflected in our third quarter results Dennis is going to walk you through the financial details in a moment, but I want to make a few brief comments.
What do you look at reported or core earnings we had a strong quarter.
27, and 13% respectively.
Turning to sales year to date total product sales were up 29%.
As we mentioned on our last conference call given the steep decline and interest rates. We responded quickly in the second quarter to adjust pricing to achieve our targeted returns and maintain spread.
As expected these actions impacted sales in the third quarter. However, weve sensing competitors follow suit and our recent sales momentum has been strong.
As such for the full year 2019, we remain set to achieve our target of double digit sales growth for annuities.
Now in addition to retail sales up and you re our Bermuda reinsurance platform is generating strong inflows.
Low reinsurance deposits were up 140% to $108 million.
In addition, we are evaluating new flow and block reinsurance opportunities and we expect our volume of flow reinsurance to grow going forward as we bring new partners on line.
Cobbling, our Blackstone driven investment edge with our product expertise and Bermuda domicile, we believe apogee re has a tremendous value proposition to offer clients.
Moreover, the current investment environment has improved our pipeline of flow transactions as a number of direct annuity writer seek to enhance their product economics and diversified counterparty exposure.
No. In addition to our existing channels, we're making significant progress on diversifying our distribution footprint and we'll be launching in the broker dealer channel as planned in the first quarter 2020.
Now before I hand, it off the data so I want to touch on an important point related to our partnership with Blackstone I'm very pleased to announce that is a vote of confidence in F. And G is growth prospects Blackstone has reduced their investment management fees from 30 to 24 basis points on assets over 25.
Billion.
This fee reduction enhances our new business pricing and further alliance both companies interested to drive future growth and value for shareholders.
So without them in a turn the call over to Dennis to discuss our results in more detail.
Thanks, Chris and good morning, everyone. Today I'll focus my comments on the following areas the earnings and performance trends across the business results in our investment portfolio, and then I'll wrap up with where we stand on capital heading into the end of 2019.
Our three third quarter earnings reflect ongoing execution on our strategic priorities.
I'm pleased to share that we have delivered strong results in the current quarter as well as for the first nine months of 2019 amidst what's been a challenging interest rate environment, we have seen solid growth in both top and bottom lines year to date as well as a strong return on equity.
From a top line perspective, as Chris shared total sales have increased 29% for the first nine months over the prior year and although down on a sequential basis as we protect margins and competitive positioning we are maintaining strong momentum and expect to finish the year with overall double digit growth in sales.
We also have generated meaningful increases in net investment income in overall yield lift compared to the prior year.
As our portfolio reposition benefits continue to emerge.
Even with a challenging interest rate environment, which contributed to a modest decrease in net investment income in yield compared to the sequential quarter.
Overall these benefits combined with disciplined enforce management translating nicely into expanding that investment spreads relative to the prior year, where the reported earnings growth of 27% over the prior year quarter and an overall adjusted operating or are we have 19%.
With those highlights as a backdrop, let me get into a little bit more detail in a few areas.
We reported adjusted operating income available to common shareholders of $79 million, what 36 cents per share compared to 62 million or 29 cents per share last year.
As I mentioned, an increase of 27%.
Our underlying earnings available to common shareholders were 59 million, even after adjusting for net favorable items that although core to our offer overall operating experience.
And performance are not consistent period to period.
The current quarter ally had 20 million of net favorability or nine cents per share from the following items.
An 18 million dollar benefit from the release of a deferred tax asset valuation allowance for one of our offshore subsidiaries pursuant to our tax planning strategies.
7 million favorable annual assumption review results modest as expected given the recent P. GAAP exercise we went through at the end of 2017. Both of these items were partially offset by 3 million unfavorable out of period reinsurance expense structure, and a 2 million dollar unfavorable.
So speaking mortality experience in the quarter.
For comparison last year's third quarter ally of 62 million included a net 10 million a favorable items.
Adjusting for these uneven notable operating items in both periods, we had a very solid third quarter with 13% underlying growth in the quarter. We continue to experience positive uplift in ally driven by ongoing invested asset growth the benefits of the portfolio repositioning left discipline.
And operating expense management, and generally stable net spreads more on spreads and just a moment.
We ended the quarter with a book value per share excluding AOCI I have $7 at 56 cents, including nine cents per share of unfavorable mark to market movements in the quarter. This result was up 3% from last quarter.
Turning to the investment portfolio overall, it is performing well due to the significant reposition activities throughout 2018 and continued funding and maturation of our alternative asset portfolio.
Average assets under management for the nine months totaled 27 billion, reflecting an increase of 1.6 billion net of asset flows year over year in a stable enforced block. This reflects growth of 6% net of reinsurance transactions.
The net average investment yields on new money was 4.7% in the quarter and 4.8% year to date, and including a 5% allocation to alternative assets.
Purchases in the quarter reflect both new money flows and some repositioning including deployment of the remaining proceeds from the 500 million and sales of Triple B rated corporates. We did in the first half of the year and a portion of the proceeds from another 430 million reduction and Triple bees completed in the current quarter.
Proceeds from this nearly 1 billion sale of Triple B assets year to date are fully reinvested as of today and higher quality corporates and structured assets.
In terms of other repositioning activities, we have been working on some additional actions this year, which we will expect to achieve 15 million run rate lift overall once completed we saw approximately 3 million of uplift in the quarter from these reposition actions.
We also continue to build our allocation to alternative assets. This program is making real progress with approximately 1 billion or 3.6% of the portfolio currently funded and a further 1.2 billion of unfunded commitments.
We expect all it's to be funded at about 4% of the portfolio by the end of the year slightly ahead of the original expectation.
Ultimately will build to an overall, 5% allocation in the portfolio.
On average we are assuming a net 12% return for this asset class over the life of the investment and year to date the annualized return on off was about 8% to 9%.
Next turning to net investment income in yield net investment income was 301 million in the quarter up 34 million or 13% over the prior year due to the portfolio reposition uplift in invested asset growth.
Compared to the second quarter of 2019 net investment income was lower by 14 million this quarter, reflecting a few effects of the rate environment.
First 6 million lower end I on the floating rate portfolio.
Secondly, 5 million lower from a measured approach to cash redeployment from the proceeds of the Triple B de risk I mentioned, a moment ago and the large reinsurance block transaction that closed in late June again, as I mentioned earlier excess cash has been fully reinvested as of today.
There was also a 4 million dollar reduction in alternative asset income, which although in line with the expectation overall was lower compared to some outperformance we had in Q2.
These items were.
Further exacerbated by 4 million higher investment expenses about half of which was a catch up from last quarter and half was related to the portfolio mix. All of these items were partially offset by 5 million higher Eni from asset growth.
Overall, the reported GAAP earned yield was 4.32% in the quarter down from the 4.6% last quarter by the cash timing and other items I just mentioned.
Given we are now fully reinvested and looking ahead the projected yields on the portfolio should trend towards 4.5% by the end of the year.
Returning to the topic of net investment spreads.
As I mentioned on the second quarter call. While the overall reported yield is an important element of our business. It is just one aspect of profitability. What is most important is that as interest rates fluctuate, which they have and will continue to we actively manage the net investment spread it is net investment spread and not simply.
The yield that ultimately will drive earnings and overall attractive returns on capital.
This quarter is another Great example, as we're able to generally maintained spreads amidst the decline in rates and despite the lower overall portfolio yield.
The portfolio reposition lift combined with active new business pricing and enforce management allows us to continually effectively manage.
Net spreads.
Net investment spread across all products was 205 basis points up 34 basis points compared to the prior year.
The net investment spread for fixed indexed annuities was 269 basis points in the third quarter up 53 basis points compared to the prior year.
All of this importantly was accomplished in a year, where the 10 year treasury yield dropped roughly 100 basis points.
Page eight of our earnings presentation demonstrates the multiyear trend of our achieved spread relative to the 10 year treasury yield over time.
Let me wrap up with a few thoughts on capital and liquidity.
We finished the third quarter in a strong and stable capital position with an estimated risk based capital RBC ratio of 475% on a consolidated basis, reflecting strong statutory earnings.
Next with regard to deployable capital at the end of the quarter. We had about 300 million comprised of insurance company surplus available debt capacity and holding company assets.
Furthermore, we have a 250 million revolver and another one to 200 million of readily available capital through established reinsurance relationships.
Turning to share repurchases since the program was announced in December we've utilized 69 million of the 150 million authorization to buyback 8.7 million shares at an average price of 793 per common share of which 17 million was deployed in the third quarter.
In summary, we continue to have great momentum across the business and delivered a solid third quarter, even adjusting for the notable items in both periods.
For the first nine months of 2019, we have delivered 29% growth in total sales, while achieving new business profit and capital targets, we delivered 25% growth in adjusted operating income and are seeing steadily expanding net investment spreads year over year.
We realized an $18 million tax benefit from this quarter as valuation allowance release, and our reported ally MTR was 14% for the nine month year to date period with the tax benefit and 20% excluding that tax benefit.
We expect that the tiara well grade lower overtime with continued growth and expansion in the offshore business and other tax planning strategies that we are working on for 2020.
Our comprehensive investment portfolio repositioning is completed with the run rate uplift delivered as expected and more to come as we look forward to the full uplift from the growing alternative asset allocation.
Lastly, we are pleased to have received an upgrade from Fitch. This week and are focused on further upgrades in the future.
With that I'll turn the call back to the operator for today.
Thank you.
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We will pause for just a moment to allow everyone just.
Our first question today comes from John Barnidge from Sandler O'neil. Please go ahead.
Thanks first Dennis good luck in retirement.
Okay.
Road bike riding.
My first question can you talk to me about your commentary around double digit full year growth in annuities in the press release for the year as it relates to Four Q1 9 should we be expecting sequential growth in AD buys and Mike as from Three Q1 9 levels.
Hey, John Good morning.
Good question, Here's how I think about sales and how we're focusing on it for the fourth quarter.
Year to date were up 29% for total sales.
Here's some anchor points for you even if we are flat in the fourth quarter to the prior year fourth quarter will still deliver 20% growth in sales year over year.
To give you another data point, even if it were to drop by 10% relative to last year, we still deliver 18% growth year over year.
As I mentioned, we've got great momentum across the business, whether it's in the flow offshore the core phy business onshore and well.
Continues to gain momentum so we feel very good about where we are and.
Very good about where we're going to land for the full year.
Okay, Great and then surrender activity came in at 2.13% of beginning period assets in the quarter, which was the lowest level. Since the transaction was closed this it seemed like a reasonable run rate assumption to assume.
Yes, Great question I'd say, it's within the range of normal maybe it saw a little bit to the lowest side, it's a little tricky and the current interest rate environment and the volatility that's there some of the volatility in the market I think there is.
As it relates to consumer behavior, perhaps and partner behavior.
I just think there's a range of normal and I think what we saw this quarter was within that range, but.
If it were to tick up a little bit.
As we go forward that wouldn't that wouldn't surprise me.
But it's well within our pricing and.
If not over the last several years, it's been a bit better than pricing.
Okay. Great. My last question paid six this slide deck talked about full launch into the broker dealer channel in early 2020 can you. Please talk about what level of volume you see that adding it maybe possibly new product introduction to fuel that specific channel. Thank you.
Hey, John this is Chris.
Yeah, we're excited we've.
I've got some relationships in place already so we're doing a small volume of sales right now.
But we're really talking about the full rollout into some of the more meaningful independent broker dealers and regional banks as a channel of opportunity, but I would say first year, it's going to be modest and thats by design. We spent a lot of time on the technology Hookups again. This is the world that I grew up in and.
You know as well you get one shot to launch and leave a good impression as far service and everything else. So I think few hundred million is probably a reasonable expectation in year, one, but we would expect that to grow very dramatically as we get into year two of our efforts there.
Okay. Thank you.
We will now take our next question from John NATO from Yes. Please go ahead. Your line is open.
Hey, good morning, and.
All the best Dennis absolutely.
Hi, a couple of questions just wanted to nail down a couple of items on portfolio yield and spread.
I think if I'm doing the math reasonably well here, if I think about that drag from more measured pace of investing.
Some of the cash proceeds from your repositioning during the quarter and maybe that couple million dollar impact from the from the catch up on investment expenses.
Getting it to the right place that that 4.32% yields for the quarter would have been more like 4.42, maybe about 10 basis points buyer.
Yes, yes, John I think thats right in the ballpark, what would've been a normalized yield for the quarter.
Okay. All right. So that's helpful and then.
Just wanted to square two items I think in your prepared remarks, you talked about.
Gross new money yields for the quarter that was four seven or 48.
I think in the supplement so it looks like it's 4.3 is it just the difference between sort of fixed income versus alternatives there.
That's right.
Just two points to clarify one.
The 4.7 with what we put new money.
Our two including a 5% allocation to alternatives. So thats, what we would expect.
To get on that new tranche of business going forward. The 4.3 in the supplement is only references what we just happened to buy in the current period.
Chose to help you wouldn't look at that number on an aggregate for the whole year that number is going to be much higher.
Okay understood.
And then just a point of clarification on the on the reduction in the fee rate to Blackstone from 30 to 24.
Above 25 billion of asset so theres already some assets on the books that you'll benefit from here was there any benefit in the third quarter from that and then secondarily is that applicable to fall asset growth above 25 billion inclusive of any deals you might do.
Yes, great there wasn't any benefit in the quarters, we'll start seeing that in the fourth quarter on asset above 25 billion and it would apply to all asset classes that that is the I am a fee that sent over overlay.
Perfect. Thank you so much.
Yeah, you bet.
Thank you.
Next question comes from.
Andrew.
From Credit Suisse. Please go ahead your line is open.
Hey, Thank you and good morning.
With regard to that fee reduction, that's that's a pretty significant moves and.
As John was just saying you're already above 25 billion in a win.
What was the thinking behind that.
Yes, Hi, Andrew it's Chris.
Thinking was really pretty straight forward, which is you know we're interested in.
Hi ambitions to grow.
As does Blackstone and I think it was just trying to bring continued alignment between the two organizations. So that as we grow we experienced economies of scale.
At FG. It obviously helps us immediately with our competitiveness in terms of new product pricing of pricing new deals. So I think.
On the Blackstone part it was wanting to be a good partners at mentioned before where their largest client globally.
And for US it was quite self serving which is we want to make sure we get economies of scale and can continue to compete.
My personal belief is the impact on accelerated asset growth is going to more than.
Hey back whatever the lower initial fees might be to Blackstone, but.
It was a.
Very pleasant development for us.
Yes, it sounds very pleasant, okay shifting over to.
The ability to reprice the business I think you have 87 basis points to guaranteed minimums.
Could you talk about your.
Your plans going forward has a lot of this been done in the quarter.
Maybe maybe how much do you think we could see going forward I mean treasuries have job.
Richard basis points or more in the last year.
Yes, Hey, Andrew extend this.
They have come down, but as we all know our recently there theyre up I think tenuous at 188 today somewhere in that ballpark.
So hopefully it just hangs in there.
My philosophy on managing and enforce book and how to.
Suggests you think about it.
We have roughly 112 of the business that renewing every month.
We take.
A long term view with an eye towards making sure that the actions we take over the life.
On the liability on the books is to achieve at the end of the day.
A lifetime return that we set out to when that business was put on the books, we track that by tranche of business I.
I would say, we we take a balanced approach we to enforce management.
We want to achieve our margins, but we also want to maintain business on the books, we want to make sure we're maintaining strong distribution relationships and.
It's more art than science at the end of today as we navigate.
On ongoing basis every month, the interest rate environment would dealt.
What we can invest and and I think we've demonstrated a pretty good track record of being able to do that across a multitude of.
Economic environment right I think that page eight in the presentation really hammers home.
How we think about it the consistency of the actions we take.
What you generally won't ever see us do is take.
Draconian draft dramatic action on the portfolio Thats not our philosophy, we think we can effectively manage that.
With small adjustments as we go we don't manage it every single quarter.
To hit the exact targeted spread right, it's a bit of.
It tends to flex there may be quarters, where were above our target. There are a quarter, where you may see the spread go down but at the end of the day, where we've demonstrated we've got an ability to manage it effectively and I think I'd just leave it there and.
Yes, I just had one quick thing, which is it all goes back to the sustainable competitive edge via the partnership with Blackstone, they're able to source private credit with meaningful yield differential.
Don't need a lot of that to be able to be a stable provider to your distributors be consistently competitive which we've proven we can do and still generate really attractive spreads I mean this was a year.
I mean think of the volatility it was unbelievable into data point, we're going on we're going to land the plane pretty much right smack on the tarmac and so I actually feel like it's a it's a phenomenal case study of the resilience in the consistency of this business.
Got it Okay, and then just lastly.
On fixed annuity sales and I know you have the ability to get a nice double digit growth rate on the year, but as we looked at the quarter for fixed annuity sales they were down 6% year over year.
Down through 23% sequentially and I think I understand that you cut crediting rates on your new new new annuities.
Where are we going now as you look at the fourth quarter, our there's still.
Significant sales pressures that youre seeing where have they lifted.
We're not there yet yeah. This is Chris let me I'll start Dennis can jump in here.
Secretary and the gates here on that question I would say just a reminder to everybody we.
We were out ahead of everybody. So I haven't yet to see someone fruit that's not the case, we not only adjusted crediting rates, we just a comp we adjusted cap rates.
But we communicated really well their distribution like nobody likes to be making those types of cuts, but our view wasn't blackstone's view as this is not going to be transitory.
We explained that we also explain the by being early the magnitude of ultimate cuts. We thought would just be less by trying to get ahead of it.
Impacted sales because you know when you're out ahead, you know you do see a drop off I would say we been rewarded for Prudence I think we've got to really strong relationship with our distribution. So I think our view ultimately was was validated and we've got really good current momentum right now so yes, it's unfortunate by how the.
Quarter fell.
Look at the year over year comparison, but to Dennis is earlier point I think we're feeling really good about our outlook for the year for sales.
So so they see the momentum it sounds like you kind of pick back up after everybody caught it caught up on crediting rates and then just maybe overall do you see industry pressures on sales into the fourth quarter Heck XF G.
Is there generally a bit of a pressure given the lower interest rate environment.
Yes, I would add maybe answer differently, we're not seeing a rational behavior.
So again, we're feeling really good about our ability to generate good spreads and remain competitive.
And get sales so we haven't seen anything crazy going on the market.
And we're not feeling like we need to make dramatic changes in terms of preserving our competitive position.
And industry volumes and yeah, I guess I was getting at industry volumes, not so much pricing competition, but our volumes coming down or up.
Yes, that's not always comes with a lag in terms of the industry numbers I. It's hard for me to judge where we are right. This second and you do get quarterly volatility, but I would come back to this is no longer just a product. This is the preferred chassis for insurance companies and so I think the.
The tailwind, which we've talked around around demographics need for the product.
But frankly, it's just a superior chassis. So we saw accumulation products. We sell median income products. We sell deferred income products. You know we sell hybrid products all off of the same chassis. So I actually think the demand for this category is just going to continue to rise we may see a blip here there quarter by quarter, but I think.
That's a that's a wave that's not going to stop anytime soon.
Got it thanks, so much.
Thank you.
Next question comes from.
Things from Jpmorgan. Please.
Please go ahead your line is open.
Hi, Dennis I wanted to get more insight into your enforce management philosophy and common. So I guess is there a way to think of how you approach management by certain factors that type of business. They are the book or you know maybe even the gap between current rates and minimums. Like for example, I think if you haven't missed thats younger or maybe was sourced by I think.
Warranted or perhaps than you were just usually relationship you might be more measured interesting rates there.
Yeah, Here's how I would sum it up when when we put up traunch business on the books, we write down in record what target.
Net spread is to achieve our ultimate IR.
We look at that monthly I would say, we generally are not looking at that relationship I relationship we look at it.
By the overall product in and more its advantage and we make adjustments.
When and when and where we believe we have flexibility to effectively manage the overall.
Business to its target targeted spread so I.
I think that's how I'd ask you to think about it.
Okay, and then second question so.
You guys have been pretty evident calibrating volumes against price on the retail annuity side.
But I was wondering if you you have had to do similar repricing recalibrating actions and the flow reinsurance or I know that so clearly volumes there are pretty healthy, but I'm just wondering if there's a similar underlined in dynamic going on there.
I think just given the very nature of the product right. These are net spread products you will see similar trends, but what I will say as some of our flow reinsurance relationships.
Have different characteristics than are treated our traditional core business that we're writing a directly on our platform. So.
I think it varies but the one constant certainly has been the investment volatility this year, and but I think whether onshore or reinsurance.
Business, we've been able to respond pretty effectively.
Yes, Hey, Pablo it's John Bay, or maybe maybe just to quickly add to that.
In terms of the flow reinsurance.
Opportunity set to Dennis is point around investment volatility in that in the recent environment, we actually have seen a pretty nice build over the last several months given that environment.
Relative to our competitive strengths not just on the investment side, but the.
The product capabilities as well as our.
Offshore tax structure.
We have so I think it's the environment that we're in is actually benefiting and enabling us to lean into some of these flow reinsurance opportunities, perhaps more so than than some of our competitors. So.
We're very upbeat about the opportunities there.
Got it and maybe last question for Chris So one of your competitors had hinted at it might overshot, that's a price reduction efforts and.
Good there for pressing the guys again I'm just interested to hear your thoughts there.
Your assessment, the visual and repricing actions. So far you think it's appropriate you think there's murder girl or maybe you can serve or.
Or do you think that there's an opportunity for years or pick up sales again from here.
Yes, I guess, if those are the three choices I'd say the latter I think we feel really good about where we're positioned right now as we said I think we feel validated by being early although there's always a sweaty moment when you're out early in your app start to start to drop off so yeah. I think we feel really good about current.
Momentum.
Okay. Thanks.
Thank you.
We'll take our next question from Dan Bergman from Citi. Please go ahead. Your line is open.
Thanks, Good morning, first I just wanted to see if there any updated thoughts you could provide about the level of activity you're seeing in the block reinsurance market and the potential for more deals. There I'm just of the deal pipeline you know been been impacted at all by the year to date drop in interest rates.
Yes, Hey, Dan John Bair again, thanks for the question I look I think it's it's.
The evitable.
For some of the blocks up particularly in the larger side.
That you see.
Potential impediment financially, obviously, that's not the only motivation that our potential.
Clients and Counterparties would have been transacting a block, but I think more so if there's if there's if theres been a little bit a tail off its been there certainly as we look at that sort of smaller and ms. that mid sized opportunity, we're still seeing quite a lot of a pipeline.
On that front so.
Yes.
Given given our size and as we're building our offshore capabilities are our offshore.
The.
Size I think it's.
There's a lot of.
Deals that are going to be very needle moving for us we believe in that in the near term.
Yeah, I might do I think I'd add to that and John said it well is.
Our focus has tended to be.
Smaller.
Medium sized blocks, but just flow opportunities right now that pipeline looks really attractive. So if your motivation is a carrier is some capital relief will that doesn't change in the current environment. If we can offer better economics to them well that doesn't change on a flow deal that makes it even more attractive to John's point so yes.
You were trying to unloaded $20 billion block you might be a little hesitant right now given the volatility of interest rates, but.
That doesn't need to be our market, where we don't have to do elephant hunting right now there's a lot of singles and doubles, we can hit.
When the game here.
That's great. Thanks.
Maybe just a quick clarification question I believe you guided to have a 4.5% deal by the end of the year. So just to confirm should we view that as more of an expectation for the for the fourth quarter result, or more of a run rate level. You expect you got to by the end of that quarter and kind of a baseline heading into 2020.
Yes, I think we're going to be.
Trending towards that Fourfifty, whether it's for 52 for 48, I think there's a range of outcomes there to the earlier point. If you just adjust for the items in the third quarter or in the.
Low for 40 is we've got a number of good.
Items in the pipeline, particularly on the alternative front so.
I feel pretty good that.
As we trend towards that Fourfifty, there's probably not going to be too much delta between that being a full year view versus the run rate, but there is enough items and the hopper that I'd like to thank if we can get enough of those close maybe we'll see.
Run rate or maybe the ASCO is higher than that but.
Time will tell and it'll play out.
Got it thanks, so much.
Thank you.
As a reminder to all participants installed one to ask a question and start to to remove yourself from the Q.
We will now take our next question from Alex Scott Goldman Sachs. Please go ahead. Your line is open.
Hey, thanks for taking the questions.
Someone might have been answered already but I thought I'd ask just in light of the ratings upgrades any thoughts on diversifying.
Product distribution further whether it's more push on the life side in the pension risk transfer is possibly funny to groom banknotes or if there's any anything else that you're contemplating I mean, how far away is.
Some of that.
Could that could that your growth.
Yeah. Thanks, Alex This is Chris.
Could add to the growth, but I think the view that you hit on are more likely 2021.
Growth opportunities I'd say in 2020, we've got our hands full with the broker dealer expansion the pipeline in Bermuda, just organic growth through our existing channels. We are having a number of conversations including you know with other carriers, where there might be some clever partnerships right, where we maybe able to attack.
Some of those channels, you've mentioned a bit quicker given that we are still a minus from A.M. best. So there are some of those channels it might require our rating and we've talked to some higher rated carriers that we might.
Harder with but I think you should think about that as as we think about it which is that's probably the next wave of lift in 2021 I think for 2020, we got plenty of things going on right now to have pretty robust growth in 2020.
Alright, thank you.
Thank you.
We will now take a follow up question from John Barnidge from Sandler O'neil. Please go ahead, Sir your line is open.
Thanks, given were shares have traded up to how should we be thinking from a modeling perspective about share repurchase activity going forward along with the growth opportunities you are planning for next year. Thank you.
Yes, Hey, John Dennis you know as Weve talked in the past and now as we've sort of operated since we put the authorization in place we're going to continue to be opportunistic on share repurchase balancing that against all the other capital deployment, but we've been active all year will continue to be opportunistic and.
We've got I think roughly 80 million left as of today in the current authorization from the board.
Thank you.
Thank you.
Next question.
Comes from Pablo Singzon from Jpmorgan go ahead, Sir your line is open.
Hi, Thanks for taking my thoughts so Dennis I just wanted to ask do you expect any forward earnings impact from the assumption review weather in Texas or other assumptions that you adjusted.
And I would say not too material I mean, we did have the our adjustment related.
On the annual review as SLP, three very modest tweak to utilization I.
I don't think has got to be material again, we just be GAAP back at the end of 17 so.
That's why you're seeing such them a modest outcome I would've expected anything material and we didn't get anything material and.
I don't think the adjustments we've made are going to be.
Noticeable going forward.
Okay. Thank you.
Thank you our next question.
Alex Scott from Goldman Sachs Go ahead, Sir your line is open.
Hey, Thanks for taking my follow up just just one more quick win I guess when I'm thinking about some of the actions you're taking them to deepen your distribution next year.
Wondering if we're going to see any kind of like elevated expenses, we wish we prepared for associated with that.
Yeah. This is Chris I think we'd gotten ahead of most of that so we a lot of it was frankly technology built on the operation side and the rest of it is primarily variable expense and so we added some sales professionals channel leaders in marketing.
Thanks.
As I said some development activities to make sure we have the right technology plug and play for the channels or defer to data, but I don't we're not anticipating anything significant in 2020, no I think it'll just be the variable costs associated with new business as it comes through the door.
Got it thank you.
You bet. Thank you.
And ladies and gentlemen, this will conclude our question and answer session I'd now turn the conference back over to CEO , Chris Blunt.
The remarks.
Great. Thank you. So appreciate everybodys really good questions and your interest in tuning in I just go to wrap up by saying look this is a great business. We have really really good and very strong momentum right now on multiple fronts and candidly. We think we're just getting started so thank you.
Thank you, Sir ladies and gentlemen, the conference has concluded. Thank you for attending today's presentation. You may now disconnect.