Q2 2023 Brighthouse Financial Inc Earnings Call
Okay.
Good morning, ladies and gentlemen, and welcome to Brighthouse Financial's second quarter 2023 earnings Conference call. My name is Justin and I'll be your coordinator today at this time all participants are in a listen only mode. We will facilitate a question and answer session.
At the end of the conference call.
Baroness to all participants please limit yourself to one question and one follow up as a reminder, the conference is being recorded for replay purposes.
I would now like to turn the presentation over to Dana Monte head of Investor Relations. Mr. <unk> you May proceed.
Thank you Justin and good morning, welcome to Brighthouse Financial's second quarter 2023 earnings call.
Materials for today's call were released last night and can be found on the Investor Relations section of our website.
We encourage you to review all of these materials today.
Today, you will hear from Eric Steigerwalt, our President and Chief Executive Officer, and Ed <unk>, Our Chief Financial Officer.
Following our prepared remarks, we will open the call up for a question and answer period also here with us today to participate in the discussions are Myles Lambert chief distribution, and marketing officer, David Rosenbaum head of product and underwriting and John Rosenthal, Our Chief investment Officer.
Before we begin I'd like to note that our discussion. During this call may include forward looking statements within the meaning of the federal Securities laws.
Brighthouse Financial's actual results may differ materially from the results anticipated in the forward looking statements as a result of risks and uncertainties described from time to time in Brighthouse Financial's filings with the SEC.
Information discussed on today's call speaks only as of today August nine 2023.
The company undertakes no obligation to update any information discussed on today's call.
During this call we will be discussing certain financial measures that are not based on generally accepted accounting principles also known as non-GAAP measures reconciliation of these non-GAAP measures on a historical basis to the most directly comparable GAAP measures and related definitions may be found in our earnings release.
Slide presentation and financial supplement.
And finally references to statutory results, including certain statutory based measures used by management are preliminary due to the timing of the filing of the statutory statements.
And now I'll turn the call over to our CEO Eric Steigerwalt.
Thank you Dana and good morning, everyone.
Bright house financial continues to deliver on its operational strategic and financial management goals.
Demonstrated by the milestones and results we achieved through the first half of 2023.
Our overall priorities are focused on one executing our growth strategy, which is centered around our complimentary and competitive product offerings as well as our expansive distribution footprint.
Two maintaining our focus on prudent financial management to protect our balance sheet through a variety of market conditions.
<unk> the continued execution of our growth strategy in the first half of 2023, we further strengthened our annuity and life insurance product portfolio.
In May we announced enhancements to our shield level annuities product suite <unk>.
Including the launch of shield options with step rate edge a strategy that is designed to help clients keep their plans for retirement on track by providing additional growth opportunities in certain down markets.
Additionally, we have seen great success, with our new shield level pay plus product, which we launched last August .
Year to date through June 30, our shield annuity sales totaled $3 2 billion.
A 5% increase compared with the first half of 2022.
In addition to strong sales of our shield annuities. We also delivered strong fixed deferred annuity sales, which totaled one 5 billion.
Through the first half of 2023, demonstrating the complementary nature of our annuity product portfolio.
We intend to keep our annuity product portfolio refresh, including by expanding our product offerings over time. For example, we are currently working on a new fixed indexed annuity product, which we expect to launch later this year.
Regarding our life insurance business I am very pleased to share that in July we launched a new life insurance product Smart Guard plus a registered index linked Universal life insurance policy that offers clients guaranteed distribution payments that can be used to supplement income and retire.
As well as a guaranteed death benefit.
We also continue our focus on maintaining the competitiveness of our life insurance products and recently re priced our smart care and simply select life products.
Through the first half of 2023, we have seen persistent growth in our total life insurance sales, which increased 23% compared with the first half of 2022, reflecting the strong progress we have made as we execute our life insurance strategy.
Along with the success that we've seen in our sales results. We have also maintained our focus on effectively manage our expenses in order to further reduce our statutory expense ratio over time the.
The combination of continued sales growth with that.
It's high quality, new business to our in force book and the outflows of our capital intensive legacy variable annuities VA is fundamental to shifting our business mix over time as of June 32023 shield and fixed annuities made up approximately 40%.
Of our total annuity account value an increase of 25 percentage points since year end 2016.
On a more than 10 percentage point increase since year end 2021.
Additionally, roughly 40% is represented by the less capital intensive va's with the higher capital intensive va's, representing only approximately 20% of total annuity account value as of June 30.
Further reflecting the progress we have made towards evolving our business mix.
We expect that this continued mix shift along with the recent proactive de risking measures that we took to further improve the quality of our balance sheet, which we discussed on our first quarter earnings call will help to produce more consistent cash flows through a variety of market scenarios and increase share.
Holder value over time.
In our effort to be a consistent return of capital, we repurchased $152 million of common stock year to date through August four.
While we continue to operate with a cautious view on both the market and economic environment as I've said in the past, we intend to maintain an active and opportunistic share repurchase program.
As we execute on our operational and strategic goals. We also remained disciplined in our financial and risk management and we continue to conservatively manage our investments to maintain a high quality and well diversified portfolio.
As of the end of the second quarter, our combined risk based capital or RBC ratio was estimated to be between 430% and 450% which is at the upper end of our target range of 400% to 450% and normal.
Markets.
Our liquidity position remains robust with over $900 million of cash and liquid assets at the holding company as of the end of the second quarter.
Our achievements and strong results through the first half of 2023 demonstrate our commitment to our shareholders and to supporting the growth of our franchise through a broad range of market scenarios.
I'll now turn the call over to Ed to discuss our financial results in more detail.
Thank you, Eric and good morning, everyone.
Last night Brighthouse financial reported solid results for the second quarter of 2023.
Starting with preliminary statutory results.
As of June 30, our estimated combined statutory total adjusted capital or Tac was $7 6 billion.
Which compares with $8 2 billion as of March 31.
Our estimated combined risk based capital or RBC ratio was between 430% and 450%.
Down from a range of 460% to 480% at March 31.
And is that the upper end of our target range of 400% to 450% in normal markets.
The decline in capital from March 31 was primarily driven by our annuity business.
The largest portion of the annuity related decline was the underlying performance of our variable annuity book of business.
Which was impacted by basis risk and normal volatility in the enforce liability.
Basis risk refers to the difference between the performance of funds in separate accounts and hedges linked to various market indices.
The other significant factor was related to the geography of our shield book of business.
Which we plan to address by enhancing capital efficiency through reinsurance between Brighthouse life insurance company or Black and our New York affiliate for year end.
We expect this reinsurance agreement will result in capital optimization benefits, including the reversal of approximately $200 million of the second quarter decline in Tac.
Moving to the holding company, our cash position remains robust with holding company liquid assets of over $900 million.
As of June 30th.
Which compares with $1 1 billion as of March 31.
The decline in holding company cash is primarily related to the timing of interest expense and subsidiary dividends during the year.
And our ongoing share repurchase program.
As a reminder, on an annual basis non dividend flows to the holding company cover most of our fixed charges and.
And we do not have any debt maturities until 2027.
Finally, while we have not taken any subsidiary dividends in the year to date.
We still expect approximately $300 million of ordinary subsidiary dividends to the holding company in 2023.
Okay.
Before turning to adjusted earnings results I would like to take a moment to touch on the upcoming release of our long term free cash flow projections are what we have previously referred to as distributable earnings.
We are currently working through the later stages of the free cash flow projection process and expect to publish our updated scenarios in September .
We will provide notice on our Investor Relations website, approximately one week before we release the long term free cash flow projections.
Now turning to adjusted earnings.
In the second quarter Brighthouse financial reported adjusted earnings less notable items of $271 million.
Which compares with adjusted earnings on the same basis of $195 million in the first quarter of 2023.
And $353 million in the second quarter of 2022.
There were no notable items in the second quarter of 2023.
The adjusted earnings results in the quarter were generally in line with our quarterly run rate expectation.
This was a straightforward quarter on an adjusted earnings basis as alternative investment returns and mortality, where both are generally in line with expectations.
There are no market impacts on the amortization of deferred acquisition costs or DAC post the implementation of long duration targeted improvements are ELD DTI.
As of January one 2023.
Turning to segment results.
Annuity adjusted earnings were $291 million in the quarter.
Sequentially annuity results reflect higher reserves, along with higher expenses, partially offset by higher fees and higher net investment income.
Adjusted earnings in the life segment were $15 million.
Higher net investment income was the driver of the change sequentially.
The run off segment reported an adjusted loss of $16 million.
On a sequential basis results were driven by higher net investment income and a higher underwriting margin.
Corporate and other had an adjusted loss of $19 million.
Reflecting higher expenses sequentially.
To wrap up.
Through the second quarter of this year, we have continued to support growth in our franchise, while delivering solid financial results with strong adjusted earnings and a continued robust capital and cash position.
Since separation, we have taken actions to lower the risk profile of our company.
And optimized capital.
And we continue to see opportunities to create long term shareholder value.
With that we would like to turn the call over to the operator for your questions.
And thank you.
As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
And one moment for our first question.
And our first question comes from Elyse Greenspan from Wells Fargo. Your line is now open.
Hi, Thanks, good morning.
And my first question you guys reaffirm you reaffirm that you guys are expecting to take that $300 million dividend from Blake in the second half of the year.
Any timing you can provide there are thoughts around Q3 versus.
Q4.
Good morning, Elyse, Yeah, I think we'll just stick with the plan to take it in the second half at this point.
Okay, that's what I thought you'd say and then.
Think about the timing if you just take that dividend up to parity because I know you said right.
Non dividend sources of cash right can fund interest.
Interest expense should.
Should we think about buybacks potentially increasing or would you look to maintain kind of the similar cadence of repurchases. We've seen so far this year.
Yes, so I mean first of all there is some seasonality in the interest expense, which I think youre alluding to.
As we have about I think it's about $60 million more of interest expense in the second quarter and the fourth quarter than we have in the first quarter in the third quarter because of the.
The debt that we have outstanding and the timing of the coupons.
The the question about buyback I don't really think I would look at a linkage here between what we do with our repurchase.
The timing of our dividends up to the holding company.
Okay. Thanks.
And then.
Eric you provided some color just in terms of shield sales and how they've trended.
Well pretty well so far this year could you just looking for a little incremental color on how you think.
Sales could trend in the back half of the year and when you think you guys are seeing just in terms of the competitive conditions in the market.
Well I'll start and models is probably going to want to jump in.
We're very pleased with sales in the first half and I don't really think we're going to see much of a difference in the second half.
It's a good environment I believe.
You didn't ask about fixed but fixed has been coming down a little bit we will see what happens with interest rates, where we're very pleased with the sales we're getting now there as well.
It depends on a couple of different factors.
Economy does matter to some degree.
But mostly we're pleased across the board with our shield sales at all of our distributors. So Myles I don't know if you want to add anything.
Yes, absolutely Eric and good morning, I guess, what I would say is we do expect to see continued growth with our suite of shield products in the second half of the year.
There's a few reasons for that I think we're starting to see a shift in the industry.
Customers are going back to.
Some of the other products <unk> products away from FRE FRE was down in the industry a little bit in the second quarter.
We continue to enhance our offering right, we launched shield level pay plus last year, which is our income solution that is being well received in the market and we launched separate edge as Eric mentioned, a few moments ago earlier this year, which is also being well received in the market.
But the landscape remains competitive out there, but we do believe we will be able to continue to grow sales in the second half of this year.
Thank you.
And thank you.
And we do ask that you limit yourself to one question one follow up and one moment our next question.
And our next question comes from Ryan Krueger from K VW. Your line is now open.
Hey, Thanks. Good morning first question was that in New York is the impact of the internal reinsurance transaction expected to be.
The 200 million reversal that occurred in the second quarter or are there additional impacts beyond that that you would expect as well.
Good morning, Ryan.
Just to give a little background on this I think you've heard us say that the shield book of business isn't natural offset to the risk of our VA book and as a result, the combination creates capital efficiency for us.
So the issue that we have.
With.
Our New York affiliate now is that the balance sheet is primarily shield exposure with very little exposure to VA. So as the shield book has grown at the New York affiliate.
Our operating capital.
Our operating subsidiary capital structure has become less efficient.
And has given us a chance to look for some ways to optimize that.
This proposed reinsurance is going to.
Benefit us from a capital standpoint, and I would say, it's the $200 million that we saw in the second quarter as well as capital optimization beyond that so.
At this point 200 million reversal of what we saw the impact in the second quarter is as far as we would go but certainly we expect that this reinsurance.
Arrangement will support future growth of shield in our New York affiliate.
Okay. Thanks, and then.
Any color you can provide in terms of the format.
Upcoming free cash flow projections and if if it.
Will be different than how you got about it in the past.
Well I would just say every year that we do this we try to put out something that provides the investment community with the best view of how we would think about.
The future cash flows that should feed into the intrinsic value assessment of our company over time and so we.
Please look for ways to improve the format to help you get to the ability to model out and think about what this company is worth and so.
I'd leave it at that but.
As as we said.
It's not going to be long before youre going to see what the results are and we will give you a little bit of notice on the IR website, so that you're prepared for when that that release occurs.
Okay, great. Thank you.
And thank you.
And one moment for our next question.
And our next question comes from Alex Scott from Goldman Sachs. Your line is now open.
Hi, good morning.
First one I had is actually on the on the net income performance this quarter.
I had been under the understanding that the market risk benefits who's a little more in line with market neutral in that.
In a quarter where rates increased I think historically in every quarter you've reported under L. DTI net income relative to adjusted would sort of follow the direction of rates in this quarter. It went the opposite direction.
Pretty big magnitude difference from from what we would've expected. So I just wanted to find out if.
What has changed there I mean is the notional of interest rate hedges significantly moved up from what was in the <unk> statutory filings and then maybe if you could just help us think through your interest rate hedging program and your approach to it in general.
Good morning, Alex.
So first of all I would say, we did have a benefit from rates going up in the market risk benefit so.
There was a benefit from rates, but there are a lot of other factors as well.
We did put on.
A lot more rate hedges last year, and so that will certainly impact the <unk>.
A relative sensitivity versus what you had seen from the.
Restated historical GAAP numbers for <unk>.
One thing I think it might be helpful. Here is to step back and think about.
Our hedge target and how that relates to L. DTI.
So it's fair to say that new GAAP accounting is a significant improvement over old GAAP, because now we have both assets and liabilities mark to market.
Under the market risk benefit framework.
However, we hedged to stat and there are key differences between stat, and statutory and the market risk benefit and just to give you a few of those I think you probably know this but.
The <unk> is based on a mean expected return versus statutory is a tail metric.
The MRV assumes.
A risk free rate is the driver of returns across all asset classes versus statutory is a real world return framework.
And finally, the market risk benefit is rider fees only versus the statutory.
Calculation includes all fees and expenses.
And just on that last point using that to illustrate some of these differences and drivers for this quarter.
When you are hedging on stat, and you have a liability where it's taking into account all fees.
That would suggest that you might have more equity hedging for a statutory framework than you would if you were just targeting gap.
And so that was a driver of.
This loss in the quarter that we.
Were shorter equities from the standpoint of.
The GAAP framework.
Of managing to the Stat framework.
And then I would also add I mentioned basis risk now obviously basis risk is a factor for both GAAP and stat. So that's another contributor as well.
So theres no change in.
How we think about our interest rate hedges I think.
There was a question that came up last night I believe about.
Are you amortizing.
Hedging.
<unk>, we do not.
Rail ourselves.
Is it S. S. AP 108, I believe so we do not amortize any gains or losses associated with that.
With our with our variable annuity hedges just to clarify on that.
Thank you I appreciate all that color.
Next one I had is on normalized stat earnings.
It's been a little weaker so far through the year ex the impact of the mean reversion point change earlier in <unk>.
Could you help us think through what is a good run rate here I know, there's a lot of things can move around so probably not great to just look at the year to date number. So any way you can help us think through what we should expect over the next 12 months out of norm Stat earnings.
Yes, I think it's very difficult to to talk about a run rate for norm Stat earnings.
We've said in the past that we can have a couple of hundred million dollars movement in that number in a quarter in either direction that is outside of what you might anticipate given equity and interest rate movements in the quarter.
I think that looking at metrics like norm Stat earnings.
It's better to do that.
Over time, I think when we give you our free cash flow disclosures next month.
You can think about those numbers and there is a linkage between norm stat and free cash flow because norm stat as supposed to measure.
Excess capital generation over time, so I think when you see those free cash flow numbers and you think about multiyear periods.
It's best to think about it in that fashion, because I just don't see how you can give a run rate for this metric.
A short time period.
Understood. Thanks for all the answers.
And thank you.
Okay.
And one moment our next question.
And our next question comes from Tracy <unk> from Barclays. Your line is now open.
Good morning.
Are you seeing basis risks since youre using more customized indices and is there a simple way to put it like a percentage of hedging breakage.
Hi, Tracy.
We are we are always looking for ways to improve the effectiveness of our VA risk management strategy, which is obviously includes hedging.
Yeah.
We look for ways and we have had success I would say in terms of reducing basis risk by introducing more indices into our hedging program.
I don't think I would.
Go beyond that other than to say if you look at the $200 million norm stat loss. This quarter the biggest driver of that was basis risk.
So you know.
That was that was a key factor this quarter, we had basis risk in other quarters, but there have been offsetting items and in this quarter I think it stood out more than what we have seen on a net basis than what we've talked about in the past.
Okay.
One of your competitors also completed an internal reinsurance transaction from New York to a non New York entity or they had to pay a ceding commission.
To be sure. When you are talking about 200 million reversal is that a net figure where you're taking into account any ceding Commission to New York.
I'm also just wondering just by moving to shield reserves to like Delaware does that leave RBC more compressed at your New York entity.
It will be helpful. Just to understand how well capitalize New York will be post transaction.
Sure. So the first thing is remember.
New York is a wholly owned subsidiary of Blake. So the net impact of the ceding Commission is not an issue.
And then secondly.
The expectation is the capital metrics for Blake, New York will improve as a result of this.
Meaningfully.
Okay. So they both improved.
Okay.
Correct.
Okay. Thank you.
And thank you.
And one moment our next question.
And our next question comes from John Barnidge from Piper Sandler Your line is now open.
Okay.
Good morning, and thanks for the opportunity can you maybe talk about the new fixed indexed annuity products, you're talking about rolling out and how widely you anticipate it initially being rolled out through your distribution. Thank you.
Hey, David Youre on mute, yes. Thank you got it hey, good morning, John sorry about that.
So as Eric mentioned, we are.
Working on a new fixed indexed annuity product to launch.
Later this year as you know our footprint in fixed indexed annuities.
Relatively small and that's been intentional it is a big marketplace. However, sales last year were <unk>.
<unk> 80 billion and <unk>.
Sales so far this year almost $50 billion, so a big market and and so we're looking to enter that.
More broad.
Broadway.
So what we're what we're thinking about and what we're planning to really to target.
A handful of distribution partners.
We have solid relationships.
To to really start are really more of our entry into this market and that's kind of how we're going to kind of start. It later this year so more to come.
Thank you for that and then my follow up question.
You all have been reducing your office exposure for a number of years at a modestly fell again, what's the targeted level you'd like to get too. Thank you.
Hi, John its John Thanks for the question.
Hi.
Im not sure we have a specific targeted level in mind.
We're at 24% of the portfolio right now.
And given that.
We're not going to be any more office or investing in any more office loans generally.
Over the over the near term, we'd expect that figure to come down.
With portfolio roll off, but we don't have a specific target in mind.
Thanks for the answers.
And thank you.
And one moment our next question.
And our next question comes from Zach buyer from Autonomous Research. Your line is now open.
Hi, Thank you.
I guess.
On the reinsurance transaction I guess optimizing your balance sheet. I was just curious are there other opportunities you are considering to further optimize the balance sheet going forward.
Hi, Zack it's Ed.
I think we have done a pretty good job of taking advantage of opportunities to optimize the balance sheet, we're always looking for opportunities.
Opportunities to do more when it makes sense, we will but at this point I don't.
I don't see anything specifically that I would point out.
Got it.
And then just.
The wireless so as the markets evolved and expanded and Theres been more new entrants how have you seen product designing competitive dynamics evolve.
Evolve as well and just thinking about your market share is there a difference between your products versus competitors or if not what do you think has allowed the market leaders to retain their relative leading positions.
Well I'll start and then I'm sure miles will probably want to jump in.
Yes, I think from.
From a product design perspective.
One of the things that we've thought about from the beginning is that simplicity and transparency matter.
And Thats kind of how we have built our product design and the enhancements that we add and.
There are 20 or so players in the market. So it is competitive.
<unk>.
When we think about the the economics, we're comfortable with the economics.
We are maintaining our pricing discipline.
We have been looking to enhance our product and really enable us to compete in a variety of market conditions and you heard some of the enhancements that Eric.
Talked about earlier in the prepared remarks, and we will continue to look to do that as well as addressing more client needs and we did that.
Thinking about.
Supplementing income in retirement with the launch of shield level pay plus.
In August of last year.
Yes, so I guess I would add to what David said I agree with what he said our focus continues to be on our top distributors and I think thats been a real differentiator for us and we continue to round out our suite of shield offerings as David said, a moment ago to address multiple cluster.
Needs as well as to make sure that the product can compete in a variety of market conditions and that type of focus without comprehensive approach has allowed us to continue to maintain share and overtime.
The expectations are going to continue to grow share.
And thank you.
If you would like to ask a question that is star one one again, if you'd like to ask a question. It is star 111 moment. Our next question.
Okay.
And our next question comes from Tom Gallagher from Evercore ISI.
Your line is now open.
Good morning.
First a question on the hedge performance.
It's really all of that coming from our legacy VA or is any of that breakage and basis risk coming from shield.
Yes, I would we manage this overall as a block so I don't know that I would.
Be able to break that out for you specifically I mean remember. This is this is managed together. So I don't think it's I don't think there is there is a good answer to give you on that.
And the reason I ask is.
Listening to what you were seeing in the beginning about the mix shift, which sounds like there's been a meaningful change in underlying.
Okay.
And underlying earnings power coming from we'll call it a higher multiple more stable business I just want to make sure.
As we roll the clock forward 234 more years, but we still going to see the same level of net income volatility potentially.
Potentially coming from shield.
Already or do you see them being meaningfully different when you think about.
Hedging performance my understanding has always been the buffer annuities are much much tighter when you think about the a L. M aspect to the hedging and I just wanted to know does the accounting.
Represent a similar story or does it also have some high degree of volatility associated with the newer product on the yield side.
Okay. So so first of all I mean remember that that shield is liquid indices and so it does not contribute to basis risk generally and as meaningful away as VA. Okay. So I would say that without giving getting any more specific on your first question.
The second is again, we're managing this together right. So I think if you say if you were if you're saying Oh, yes, I look at shield and I, you know I buy a call spread and I write a put right like it's it's pretty straightforward right I think thats, what youre, referring to as tighter.
Hedging I think you used the word tighter hedging I don't know Ryan putting goods anymore, but.
You are correct, but remember we're not managing this separately we are managing this together with our VA block. So it is a slightly different.
Different.
When you think about it in that fashion. The other thing that I would say is again going back to the answer I gave to Alex's question.
We.
We have chosen our hedge target that we think makes the most sense for us.
As a regulated entity that is looking to generate free cash flow.
And then as measured by cash to the holding company from our operating subsidiaries overtime.
Protecting the statutory balance sheet, which is critically important to our distribution franchise.
And that in our opinion is the right target when you pick that target I think by definition. It means all of our targets our secondary and what happens relative to those other targets is secondary.
If you try to manage to all of them I would argue you managed to none of them.
And we think we are managing to the appropriate one so.
When you talk about net income.
Got it.
I anticipate it will be volatile.
And it will be difficult to predict.
And I think we can talk about some of the drivers of why it is what it is but at the end of the day.
We're making decisions to try to generate a growing stream of free cash flow a convergence of free cash flow across scenarios. So we have a more predictable overall free cash flow profile.
That that makes sense.
Just for a follow up.
Can you talk a little bit about <unk>.
<unk> are you seeing me I'll turn it back to insurers.
Getting more aggressive in the buffer annuity space I think.
I recall.
A couple of quarters ago hearing that they're rolling out products, but they are kind of on the fringe is that that's still generally true is that still the domain of the traditional insurers.
Are you really competing against there.
So just any any color any further elaboration on who the competitors are and the buffer annuity space. Thanks.
Yes, it's Myles I'll go ahead and jump in on that one in any of my colleagues can contribute as well.
The competitive landscape in the <unk> category has become significant over the years over the last decade or so.
And you are competing with a variety of different competitors.
So it's not just the insurers that are backed by some.
Alternative.
Investment shops, it's really across the board.
And Youre seeing obviously the product portfolio enhancing a number of ways.
Obviously, not only protecting accumulation strategies by custom indices now youre seeing the evolution of income and I think youll continue to see a number of enhancements moving forward. So I personally expect to see that this category will become even more competitive over time, but it is not really focus on one particular type of insurer.
You got 19 tires from the category now and I think a couple of other had filed for products. So it's pretty much across the board.
Okay. Thank you.
And they in Q.
And one moment our next question.
And our next question comes from <unk> Kamath from Jefferies. Your line is now open.
Thanks, Good morning.
Can you just give us an update on the sales stream that you expect from new business I think in the recent quarter Ed you'd put it at maybe five RBC points just given your sales expectations for the second half are we still in that neighborhood or has it changed.
Hi, good morning <unk>.
So I will tell you that in the second quarter. It was in that neighborhood.
So what I would consider to be the more normal, let's say five a quarter right.
I pointed out.
On the first quarter call that growth was actually a contributor.
The RPC I believe I pointed that out in the first quarter call in the first quarter, because when you sell a lot of fixed annuities fixed rate annuities like we did in 2022.
A big.
See for capital charge, an upfront charge that you have to hold for the year and then you release it at the beginning of the subsequent year right. So.
We did see.
A benefit to RBC in the first quarter and now this quarter, we're back to the more you know more normal type of impact.
I would just say overall with RBC I mean, obviously feel very good about the fact that we are at the upper end of our target for normal markets and if you take into account the.
The benefit that we think we get on Tac from this reinsurance topic that we discussed earlier, that's another 10 plus points to RBC. So.
We feel good about the RBC ratio, we feel like we are in a good position to fund growth obviously funding growth for US is an important part of this story as we continue to shift our business mix toward a higher cash flow lower risk products.
Got it and then do you have an update on the unassigned surplus as of the end of the second quarter.
For Blake.
Yes, let me.
<unk>.
Let me check on that we might have to get back to you on that one.
Okay, that's fine thanks.
And thank you.
And I am showing no further questions I would now like to turn the call back over to Dana a monitor for closing remarks.
Thank you Jonathan and thank you all for joining us today have a great day.
This concludes today's conference call. Thank you for participating you may now disconnect.
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