Q3 2021 American Equity Investment Life Holding Co Earnings Call
I'd now like to turn the call over to Julie.
My follow coordinator of Investor Relations.
Good morning, and welcome to American equity investment life, holding company's conference call to discuss third quarter 2021 earnings our earnings release and financial supplement can be found on our website at Www American equity Dot com.
Non-GAAP financial measures discussed on today's call and reconciliations of non-GAAP financial measures. The most comparable GAAP measures can be found in those documents or elsewhere on our investor relations portion of our website.
Presenting on today's call are not Paula <unk>, Chief Executive Officer.
Hello, Andre Chief Financial Officer, and Jim have a lineup Chief investment officer.
Some of our comments will contain forward looking statements within indicated by terms such as anticipate assuming elite continue estimate expect forward future intend likely look to may need overtime plan potential project should signal strap.
<unk> target then to be toward trends will and wood, our actual results could significantly differ due to many risks, including the risk factors in our SEC filings and audio replay will be made available on our website. Shortly after todays call. It is now my pleasure to introduce <unk>.
Thank you Julie good morning, and thank you all for your interest in American equity.
Before we speak about third quarter results.
I wanted to share with you about the progress made in each element of our two point on strategy that was first unveiled around this time last year.
We outlined the building blocks in order to execute the strategy.
Proved returns and migrate to the capital efficient business model, we envision.
We introduced the virtuous flywheel of the new.
<unk> business model going forward.
The virtuous flywheel stocks within industry leading.
At scale, a new deal origination platform.
We delivered.
Complete refresh of our general account product suite.
Regain relevance.
And growth in.
<unk> distribution channel.
And built additional distribution with Eagle life, while adding talent to the.
While adding talent to improve productivity and product economics.
Our fund raising abilities to a liability origination platforms.
Allow us to be an investment manager with expertise in both liability driven asset allocation.
And to manage.
Open architecture investment platform that can source avaya, but IP of differentiated investments.
Over the course of this year we.
We have established our investment management pillar capabilities necessary to be fully invested in core fixed income assets managed by Blackrock and counting.
And private assets managed by American equity or strategically aligned investment managers.
We now have 6% to seven fleets of private asset sectors in which we have conviction specifically commercial real estate.
Residential real estate, including mortgages.
And single family rental homes as a landlord.
Infrastructure debt and infrastructure equity.
Middle market loans to private companies.
And lending to recording revenue.
<unk>, our software or an acronym called start with two r's sector companies.
All of which allow E M.
An additional couple of billion dollars each year in private assets, demonstrating moving us towards our goal of 30% to 40% in private assets.
We now have access to the necessary investment capabilities.
And scaling to target allocation will allow aes shareholders to realize the full potential of differentiated asset management with a potentially lower risk profile.
Then other alternate business models.
Finally, we've got the capital structuring and reinsurance capabilities to then attract third party risk bearing capital to this business.
Either for accessing <unk>.
At scale liability origination.
All for access to both our differentiated asset allocations and our attractive cost of funding liabilities through reinsurance.
The former is the visible.
With our first such arrangement being the Brookfield reinsurance transaction completed this quarter with attractive.
Fee like revenues excellent.
Drive and evolution of <unk> to a higher return on equity or ROE business through building a capital efficient return on assets or our earnings.
Earnings model.
Both diversifying and improving the quality of earnings.
The latter will be our focus with our E. L. Bermuda re insurance entity that we expect to go live around the end of this year with plans progressing well for it.
On the Brookdale reinsurance transaction, we executed both in for Us.
And new business flow reinsurance effective July one.
We believe this is a good deal for both parties.
For us the way.
<unk> average fee of the first 5 billion ceded to Brookfield, including $4 billion of in force that was ceded effective July one was 97 basis points.
Other than that 90 basis points originated described last October.
The forward flow reinsurance speeds at 170 170 basis points plus.
Six to seven years is a meaningfully positive signal on the quality of our liability origination and the strength of our franchise.
In summary.
Late last year, we outlined the building blocks for <unk>.
And in 2021, we have executed all proof points for the fundamental building blocks.
Going forward, we expect to reap the financial benefits from scaling regained spread earning assets and private assets investments.
As well as through reinsurance liabilities into fee like Ottawa earnings from future reinsurance transactions or asset management allocation in both public and private assets.
The board and I'm proud of the pace of execution.
In some cases like investment management, we have accelerated execution from 2022.
Into 2021.
To be able to exit 2021, with all the fundamental capabilities in place to restock our capital return.
We have $236 million in share repurchase authorization remaining.
And we expect to target a return of $250 million of capital to common shareholders.
For 2021.
Starting immediately with our next regularly scheduled dividend after board approval later this quarter and then share repurchases after approval of Brookfield for me to increase its ownership in <unk> from nine 9% to as high as 19, 9%.
The Brookfield, formerly regulatory hurting in Iowa is now scheduled for November 30th.
Once approval is granted to Brookfield, we intend to start repurchasing shares in the open market.
In terms of other capital initiatives.
We expect the refinancing of redundant statutory reserves on our lifetime income benefit riders with an explicit fee to be completed this quarter with the transaction closing retroactive to October one.
With the closing of the refinancing.
We'll realize a capital savings, including but not only limited to the capital savings, we intended to achieve with a potential reinsurance of $5 billion of imports only block of business to BARDA.
We are no longer pursuing a reinsurance business partnership with them, but we expect to continue an ongoing dialog around asset management.
Additionally, the new redundant reserve financing will save approximately $9 million pretax bulk quarter in financing costs. Once the transaction is closed relative to the prior facility.
Third quarter operating costs already reflected $2 million of savings from the recapture of finance reserve.
<unk> ceded to Brookfield.
Therefore, we expect the refinancing of the remaining redundant reserves currently being financed to result in an additional $7 million of quarterly savings going forward.
We have a strong excess capital position generated by our reinsurance strategies and our business model evolution.
Thereby fueling the growth in both our new business sales are liability origination and further scaling our allocation into higher returning private assets.
While returning capital to shareholders.
We made major strides in the investment strategy pillar.
Let Jim speak to this before touching on business results for the quarter.
Thanks, a lot good morning, everybody.
With a number of recent announcements we finished the last 12 months with a revitalized and reorganized in Rustler Department and the asset management relationships, we need to respond with resilience to changing markets.
Our promise to you was to develop the relationships necessary to transform our investment portfolio towards a 30% to 40% allocation to privately sourced assets. We've made good on this promise and have substantially completed the necessary build out of our asset management partner relationships.
The biggest news was our announcement of the agreement to move our core investment portfolio management to Blackrock and Connie.
In a time when it's become difficult to source good yields and core public investments.
It is extremely important to maximize effectiveness.
Even with $45 billion in core public assets.
American equity can't match, both the breadth and depth of expertise of the large public fixed income asset managers.
Migrating our core public fixed income portfolio to Blackrock and planning will help us obtain better net yields and core fixed income, while allowing us to focus in areas, where we can have an industry, leading expertise like private assets derivative trading differentiated strategic asset allocation.
<unk> and asset liability management.
Blackrock took over management of $45 billion of assets in October and has already invested over $1 $8 billion of company cash into long term securities on our behalf.
With regards to privately sourced assets, we recently announced a strategic investment with Monroe capital to scale, a dedicated platform focused on software technology and recurring revenue or star.
The star acronym.
Our middle market businesses.
As part of this agreement.
We are committed to initially invest $1 billion from our general account and such loans.
The strategy will focus on companies that offer mission critical high return on investment software or technology solutions, resulting in recession resistant revenue streams and lower default rates.
Along with expected to generate returns higher than our restaurants with a similar risk reward profile.
Our hope is to grow the star platform with third party investors, including other insurance companies through structured products based on star platforms loan origination.
We have also provided financing to our residential real estate partner Protium to help support its purchase of anchor loans a specialist in short term mortgage loans in the single family housing market.
In addition, we purchased over $1 billion of mortgage loans related to this transaction that are a particularly good asset liability match for shorter duration liabilities that we may issue.
In addition, we have initiated a partnership an infrastructure debt and are exploring opportunities in infrastructure equity.
All of this is in addition to our existing relationship with <unk> and Adam St.
We've done $327 million with Adam St and middle market loans.
Since beginning our partnership with radio we've invested $779 million and residential mortgages.
Since this summer $301 million and single family rental homes.
Including residential mortgage loans single family rental homes, commercial mortgage and agricultural loans and middle market loans to date, we've invested approximately $2 $5 billion and privately sourced assets during 2021 exceeding our promise of investing $1 2 billion and privately sourced assets. This.
Year.
Privately sourced assets currently account for approximately 15% of invested assets.
Looking at the state of the current the current state of the portfolio. The overall credit quality remained strong with an overall rating of single a minus for long term investments.
The net unrealized gain position at quarter end was $4 5 billion down $327 million from the three months earlier.
Interest rates moved higher.
There are minimal credit losses in the quarter and the performance of our commercial and agricultural mortgage loan portfolio remains strong with no delinquencies or forbearance was granted.
From a liquidity standpoint, we continue to hold cash in excess of our current target level of 2% of invested assets.
At September 30, we had $7 6 billion of cash and equivalents and the investment company portfolios compared to $10 billion at June 30.
The level of cash have since come down further with investments in private assets and as Blackrock has begun to redeploy cash and to core our publicly traded securities.
Currently we have approximately $3 billion.
Of uncommitted cash to deploy between now and early 2022 to be fully invested.
For the quarter, new investment asset purchases totaled approximately $400 million.
Almost entirely in privately sourced assets.
The expected return on new money investments in the quarter was approximately four 6% net of fees.
The current point in time yield on the portfolio robust in investment activities through October 31.
It was approximately three 7% so some pressure on investment spread will continue into the fourth quarter.
After the redeployment of our remaining cash.
That is in excess of our target we continue to estimate the yield on our investment portfolio will be approximately 4%.
With regards to redeployment, we expect to have substantially redeployed excess cash by year end and as previously indicated reach our cash target in early 2022.
With that I'll turn it back over to Elias.
Thanks, Jim.
Moving onto sales results for the third quarter total sales of $1 $3 billion went up 11% versus the second quarter of this year.
For the third quarter.
Oh, a fixed indexed annuity sales increased 3% sequentially to $915 million.
We believe this result will be generally in line with the overall market.
Year to date total sales of $4 9 billion positions us to MTO, probably towards the upper end of our 2021 sales growth of $5 billion to $6 billion outlined.
Outlined at the start of the year.
This is a good indication of our ability to pivot in our business mix as it when we see asset side or capital optimization opportunities.
At American equity life.
Total sales through the <unk> channel was $760 million.
Update fixed indexed annuity sales increased 4% to $728 million from $703 million sequentially.
Depressed asset shield Cds.
News with its momentum and got a nice lift from the introduction of its state Street.
FIA sales at Eagle life of $188 million represents a 2% increase versus the second quarter of 2021 and.
<unk>, 210% increase compared to the year ago quarter.
Within FIA sales at Eagle life.
The early signs of a mix shift towards income product sales, albeit off a small base is visible.
<unk> income product sales were up 80% over the second quarter of this year.
Multi year fixed rate annuity sales were up 37% over the second quarter as we entered one of the largest banks in the country.
As part of our distribution footprint expansion unexpected.
And expect to shift mix to fixed index annuities and this bank in 2022.
Excluding one notable item, we reported non-GAAP operating income of $136 million or $1 46 per share.
As expected results benefited from the completion of the impulse reinsurance transaction with Brookfield.
In addition, we recorded historically high levels of income from partnerships and other investment account investments accounted for at fair value.
Prepayments and other bond fees and hedge gains.
With that I'm happy to give my short lived role as interim CFO to our new CFO Exelon rate. We are very pleased that axle joined the American equity team.
And over to him to go deeper into the quarter's numbers.
Thank you and let me extend my appreciation to all of you attending this call.
For the third quarter of 2021, we reported non-GAAP operating income of $79 5 million.
Or <unk> 85 per diluted common share compared to a loss of $249 8 million or $2 72 per diluted common share for the third quarter of 2020.
Excluding ex term assumption updates, which was the first notable item this year and the single notable items this quarter.
Operating income for the third quarter of 2021 was $136 3 million.
$1 46 per diluted common share.
Bandwidth $91 1 million for 98 per diluted common share in the year ago quarter.
Third quarter 2021, non-GAAP operating results were negatively affected by $56 8 million or <unk> 61 per diluted common share from updates to actuarial assumptions.
Third quarter 2020, non-GAAP operating results were negatively affected by $349 million or $3.70 per diluted common share from such a thing.
On a pre tax basis, the effects of the third quarter 2021 updates before the change to earnings spectrum, resulting from these updates.
Decreased amortization of deferred policy acquisition costs and deferred sales inducements by $161 million.
And increased the liability for future payments under lifetime income benefit riders by $233 million for a total decrease in pre tax operating income of $72 million.
The actuarial adjustments to amortization of the FERC policy acquisition costs and deferred sales inducements as well as the increase in the liability for future payments under lifetime income benefit riders, primarily reflected changes in our assumptions regarding future interest margins that station mortality.
And lifetime income benefit rider utilization.
We have updated our assumption for aggregate spread at American equity life to increase from 2% to 5% in the fourth quarter of 2021.
To two 4% by year end 2022, and then move modestly higher to two 5%.
At the end of the year with version periods.
With a near term discount rates through 2023 of 155 basis points and eventually grading to 210 basis points by the end of the AGM reversion period.
Last year, we had center assumptions for IBM spreads to increase from two 4% in the near term to two 6% at the end of the AGM reversion period.
With a discount rate of one 6% grading fairly linearly to an ultimate discount rate of two 1%.
The effect of this change was to increase back in DSI amortization by <unk> by $67 million pre tax.
While increasing the liability for guaranteed lifetime income benefit payments by $77 million pre tax.
His experience continues to emerge we slightly lowered lapse station <unk>.
Mortality and lifetime income benefit rider utilization assumptions.
Combined net effect was a decrease in DAC and DSI amortization by $234 million pre tax.
Increasing the reserve for guaranteed lifetime income benefit payments by $169 million pre tax.
The quarter included $7 6 million of additional revenues from reinsurance stemming from our Brookfield reinsurance transaction.
Included in revenues was $2 7 million of asset liability management fees, and $4 $9 million, reflecting amortization of deferred gain on a GAAP basis.
These are recurring type revenues, which are expected to grow over time as we migrate liabilities to the ROA business model.
Average yield on invested assets was 391% in the third quarter of 2021 compared to $3 five 1% in this year's second quarter.
The increase was attributable to an 18 basis points benefit from lower cash relative to invested assets.
A 2020, a 22 basis point increase from returns on partnerships and other investments accounted for at fair value.
And a two basis point increase from prepayments and other fee income.
Reflecting the enforce reinsurance transaction with Brookfield cash and equivalents and the investment portfolio averaged $7 billion over the third quarter down from 10 million in this year's second quarter.
The aggregate customer money for annuity liabilities was 151 basis points down from 166 basis points in the second quarter of this year.
The cost of money in the third quarter benefited from eight basis points of hedging gains compared to four basis points of gains in the second quarter.
The slight decrease in the cost of money reflects the still relatively high cost of option purchases made in the second quarter of 2020 prior to renewal rate changes that became effective in late June and July of next year.
Brookfield enforced reinsurance transaction lowered the absolute cost of money for differ than immediate in dollars by $12 $9 million.
Investment spread in the third quarter was 240 basis points up from 195 basis points from the second quarter.
Excluding prepayment income and hedging gains adjusted spread in the third quarter was 220 basis points compared to 181 basis points for the second quarter.
In line with US, we would anticipate our investment spread.
Excluding the high levels of prepayment income and hedge gains to rise back to expected levels once remaining excess cash as we deploy.
Should the yields available to us decrease or the cost of money rise, we have the flexibility to reduce our rates if necessary and could decrease our cost of money by roughly 58 basis points. If we reduce current rates to guaranteed minimums unchanged from our second quarter call.
Excluding the effect of assumption revisions the liability for guaranteed lifetime income benefit payments increased $43 million. This quarter. After net positive experience and adjustments of $15 million relative to our model to our modeled expectations.
The better than expected results, primarily reflected the benefit from continued high index credits in the quarter offset impart by lower taxation in certain policy blocks and higher than modeled deliver election, our lifetime income benefit rider connection in certain cohorts.
Reinforce reinsurance transaction with Brookfield lowered the expected accretion by $7 million.
While assumption revisions increased expected accretion by $2 million for a net of $5 million.
Deferred acquisition costs, and deferred sales inducement amortization totaled $93 million for the quarter $12 million less than modeled expectations due to strong index credits in the quarter offset partly by higher than modeled interest margins.
The in force reinsurance transaction with Brookfield lowered the expected level of amortization expense by $7 million, while assumption revisions lower the expected amortization by an additional $21 million.
Other operating costs and expenses decreased to $57 million from 65 million in the second quarter.
Operating costs in the second quarter included $5 million of expenses associated with patterns transition, while third quarter operating costs, reflecting reflected $2 million of savings from the recapture of finance reserves that were then seeded to Brookfield.
We expect the refinancing of the remaining redundant reserves to be effective as of October one.
Resulting in an additional $7 million quarterly savings going forward.
At September 30, cash and equivalents at the holding company were in excess of target by approximately $300 million.
We expect to take an ordinary dividend.
American equity life insurance company, the operating company this quarter given.
Given the excess capital position and the life companies.
Further growing holding company cash by year end, 'twenty 2021 to be able to largely supports both our 2021 and 2022 capital return plans.
This is a solid sign of the progress made just in the past 12 months and becoming AGL to auto.
Now I'll turn the corner over to the operator to begin Q&A.
At this time, if you'd like to ask a question. Please press Star then the number one on your telephone keypad.
We ask that you please limit yourself to one question and one follow up then reenter the queue for any additional questions that you may have.
Your first question will come from Ryan Krueger with K B W.
Hi, good morning could you.
Give any detail on how much capital you expect to be freed up from the redundant or is there <unk>.
Financing transaction.
I'll start and then actual can add in higher Ed and good morning.
We expect that to be.
To free up capital everything we expected from the Verde reinsurance transaction plus some additional amount of capital so north of $400 million.
That's correct.
400.
Okay, great and Theres really no.
There's no real cost of that right and you actually get savings along with the capital freed up.
Correct, we see a run rate expenses of $9 million a quarter.
Plus the capital free up of 400 million plus from Brookfield, we've freed up around $230 million. So add those up north of 600 to currency for $50 million of capital save them.
Thanks, and then.
On DAC and DSI amortization it.
It was $93 million in the quarter.
Are there.
There is some moving parts with excess liquidity can you could you give us any sense of once you fully.
Redeploy the excess cash.
The rough level of quarterly DAC, and DSI amortization might be.
Sure so yes.
As mentioned as we redeploy cash and become fully invested you would expect our yield to to pick up as a result or interest margins would pick up and the impact of ethanol monetization is that the amortization rate would increase.
Roughly speaking, we expect it to to increase from the run rate of around $105 million back up to about $120 million.
Okay. Thanks.
Your next question will come from with credit Suisse.
Hi, Good morning could you talk a little bit about Eagle life sales channel.
So very strong fixed annuity sales.
I guess my question is will that translate ultimately into FIA sales I know you mentioned kind of 2022.
But that is the FIA sales were only up I think kind of 2% quarter over quarter. So just curious about that.
Hi, Mark Good morning, yes, it will translate because thats, how we intend to pay them.
And I think performance alignment is very important with pay we're aware jokes apart.
FIA long duration products, that's our sweet spot that's how we differentiate in investment allocation and then finding the right asset.
If you enter a new channel you enter new relationship in the first quarter columns sixth of May I mentioned P&C.
The financial institution, we entered we entered therefore might've sales were higher a fixed rate annuity sales were higher but eventually the pivot half dropping to <unk>, that's how we measure success.
Yes women. This is Jim Hamilton to one thing I'll add to that is that we have spent the last year building out the organization and the sales and distribution organization within the company. So.
Yes.
It's been a process thats taken over the past year and so we expect to see some impact from that going forward also.
Just one quick follow up any concerns on the pricing for the <unk>.
And that's been a big.
<unk>.
It's a very good question Ivy and gets onto why we have focused on sourcing.
Short duration asset, while we differentiate ourselves with long term assets. We've also demonstrated like you look at our acquisition of a $1 billion portfolio of Agco alone.
Where yields are north of 5%.
We don't pay.
We don't pay north of 3%, our all in cost of funds and Mike advantage of being the two within your cost and fund the high twos, So youre, making if you back that up with short term assets.
Yielding north of 4% to 5% you are making a very solid spread but the key is.
Could be opportunistic we got asset sourcing, so I'm ceiling, Jim and let him item right. After that and then the second part is to be disciplined.
Make that mix shift.
My Dear fixed rate fixed annuities to EFI.
Both are key Jim you want add something.
Exactly right and we have we have made the shift and are focusing on FAA now in that channel also in that in that particular bank.
Okay, great. Thank you.
Our next question will come from Erik bass with Autonomous research.
Hi, Thank you.
Have a nice deployable capital cushion today, which will certainly support your near term capital return plans I was just hoping you could talk a little bit about where <unk> sits today in terms of organic free cash flow generation and how that will build overtime.
Hi, Eric Good morning, it's <unk> I'll start I'll, let the others chime in.
Youre right we are.
Freed up a good amount of capital like in my answer to Brian North of $600 million without reinsurance transactions and reserve financing.
Going forward, what you will see this migration to rou assets and you'll see on page 12 of the financial supplement we've got a.
Additional notional value subject to recurring fees as the robot Ottaway business I think a good question Youll ask us over time is how do you make that $3 $9 billion $10 billion $15 billion are bigger and as that grows.
That is lower earnings on a GAAP basis, because you have to amortize the GAAP gain over the expected life of that.
Policy of let's just say 16, 17, 18 years, but youre, earning has cash earnings over 6% to seven so a long winded way of saying.
Earnings translation of auto it will be in excess of 100%.
It is cash earnings are higher than GAAP earnings in excess of 100% and then we look to redeploy.
Not only drew ottaway, but right new business, where a lot of the capital is coming from third party sources. So we keep 25% in the auto side of the house by private assets on a nice spread revenue.
75% in the auto side of the house on a $101 50 170 basis points by the way the Brookfield deal at 170 basis points as you can see.
And Thats, what will translate into very limited capital if any needed from earnings future earnings 2023 onwards kind of mining.
Two final growth after liability origination and therefore very high translation into cash generation. It's a very long answer to your simple question, but I'm going to pause and let you ask a follow on and then do another one in Q1.
That's helpful. So basically.
It sounds like Youre expecting free cash flow to really ramp up in 2023 onwards, and that will be somewhat contingent on.
Kind of diversifying the funding sources.
Summarizing that correctly.
Correct that is correct, both growing capital to grow the ROE insight plus we're going to have a higher level of earnings will be as Jim mentioned, we're going to be at 4%. Once we're fully deployed and deployed in terms of portfolio yield and then grow from there.
At the close of the next $10 billion in private assets and portfolio yield goes north of 4%. That's also going to be higher earnings power coming in we don't think we're going to need much capital from retained earnings to fund sales growth. When you look at 2023 and 2024.
And that is very powerful because the earnings out of private assets.
Plus the earnings power of our OE through regarding fees, which is a very high quality of earnings because that balance number by the way that you see on page 12, that's not market sensitive that's not detriment sensitive that's locked and loaded for the next six to seven years.
Right.
Frankly should have double digit significant double digit multiple on it so that earnings power will drive the capital return.
Thank you very.
Very helpful. And then just a quick follow up can you talk about how you expect the flow reinsurance agreement with Brookfield.
To build or how do you expect volumes to build on that over time.
We expect that to be since income she'll right now.
What's flowing through there.
We are focused on growing income products with the launch of its states shield with the launch of.
Eagle select income focus in the Eagle side, it's only income share right. Now we would expect income products like income showed to be around $1 billion of sales here.
Frankly, I'd like it to be larger we are repositioning this company to point out is coming together, we're going to scale out over the next couple of years I am really focused with this management team to make this the financial dignity company that provides people income or other means of solutions for dignity for life as we do that.
Brookfield reinsurance could grow but right now, let's just say a 1 billion a year.
25% back for our balance sheet, 75% goes to that.
Great. Thank you very much.
Your next question will come from John Barnidge with Piper Sandler.
Thank you can you talk maybe about run rate operating expenses as we should be thinking about it into the fourth quarter and I ask this in light of the economy and Blackrock.
Alex Smith are there any anticipated severance expenses to be incurred in the fourth quarter.
Sure.
I think that this is XL.
So as I mentioned operating expenses were $57 million for the third quarter.
We mentioned the reserve financing transaction, which is expected to result in a $7 million save relative to that into the fourth quarter. So you already got coming down from 57% to 50.
I think we've talked in the past about high <unk> two to <unk> as being a normalized run rates.
Operating expenses in.
In terms of the severance that is already baked into the Q3 number and it actually flows through the NII volume.
Great. Thank you very much and if I could ask a follow up you previously talked about our servicing tech platform being part of the ABL three points.
Now that we've migrated.
Through ABL to fully how should we think about that again, maybe revisit it. Thank you.
John did you say a service you broke out you said servicing tech platform.
Our servicing platform built around technology.
I believe you had talked about previously as part of <unk> three point out yes.
Thank you for that clarification, yes, so how to think about it is if you look the virtuous flywheel up our strategy all of those have come together between go to market investment management and capital structure, not even look at the foundational capabilities of the company. We've always been known as the company that took care of customer service both though.
Distributor as well as the paying client.
And as we look to reposition ourselves.
This is not a branding exercise what I am calling this financial dignity company. It's a re imagination of this company Reframing operate as a company that takes care of clients.
Working with intermediaries, maybe working directly with clients in certain cases.
And that would require using technology in the way, we service people and delight clients.
To be a way we operate we will make some investments of that over the next coming years.
If we decide to redeploy some capital in that re tooling. It will happen, it's something we're looking at.
How do you leapfrog just like what we've done in assets, but it's not something that's going to give you a financial result that just going to re imagine this company.
If you look at EFI business.
$80 billion in <unk>.
<unk> and trunks for every year, thereby businesses $80 billion.
Some of you will ask me why are you not getting other annuities and we can get into other annuity then will grow but it's not just annuities.
Is it.
Trillion dollars of assets and movement in the retirement space.
And you can provide financial dignity for retirement and other needs. So we are refraining ourselves to work with the producer with the agent with the advisor to go after the trillion dollar market.
Originating liabilities not just the $80 billion FIA market and then Jim is going after the multi trillion dollar market on the asset side Thats not serviced by banks are available of Wall Street as structured products through public you guys securities. So thats one of the things, we're bringing together a much bigger market on the liability side and the assets that together.
And technology is a key enabler over there. So nothing that you can built into the models, but come 2023 come 2020 for this company is going to be fishing in a much bigger part.
Thank you very much best of luck.
Okay.
Once again, ladies and gentlemen for any questions or comments. Please press star one now.
I have a question from Mark Hughes with tourists.
Yes. Thank you. Good morning, if you laid out or can you share in 2022 sales target.
Nice try Marc.
Good morning by the way.
<unk> 20 billion sales target youre going to make my sales guys I'll get answered by start, giving you that numbers before them, but I would say the key point is what Jim and I, both mentioned, which is grow fixed.
Fixed index annuity sales.
In alignment with the appetite opportunities.
<unk> proven through two things one is revitalizing go to market and we are very relevant not only in one channel I'm open also eagle life.
So we've got multi engines on the plane if I may use that metaphor that analogy to do it to go to markets, where you've got <unk> origination platform. That's good the second as you can see with our new business reinsurance transaction not only we are seeing the returns are good but you have third party is validating that through reinsurance and our Florida age when with Brookfield.
And that translates into this auto platform, we will look at the market opportunities and manage accordingly, but I am not looking to grow sales beyond the $6 billion next year.
The opportunity is there between the asset side and the returns on the libraries that Shouldnt do it and we have the capital for it but if we think the better return for capital is terrific to shareholders.
Invest in private asset and sell a little less salmon in the range, where we remain very relevant to core partners.
That's what we'll do.
We like where we are we really like where we are.
Hopefully I answered your question.
Doug Yes. Thank you.
When you have relationships with P&C and U.
Initiate those with that Mike is there a contractual of follow on related to FIA or your experiences.
Once you get in the door youre able to widen up that relationship.
We have plans to be in that particular distributor with FIA shortly scaling in 2022.
We are ready to go within that high is probably the way out and then you'll see the results in 2020.
Thank you very much.
And you have a follow up from Ryan Krueger with K B W.
Hey, Thanks for taking the follow up.
Couple of quick one just on the buyback is the goal to complete the 250 for 'twenty, one and the 250 for 2002 by the by the end of 2022.
Yes.
And then on.
On the yields of 4% yield and the spread target that you laid out do both of those.
Do they assume.
A normal level of yield.
The yield on the alternative assets and Prepays or is that just like our book yield.
Yes.
We take the investment question and ask the second question rather than normal that would that would be a normalized level of any unusual income like pre pays for example, so over the course that would be the core yield on our portfolio and we're talking about 4%.
Got it thank you.
There are no further questions at this time I'll now like to turn the call back to Julia for any closing remarks.
Thank you for your interest in American equity and for participating in today's call should you have any follow up questions. Please feel free to contact us.
Thank you for your participation. This does conclude today's conference you may now disconnect.
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Thank you.
Okay.
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Okay.
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