Duncan Russell: I think, I got your question Michael. And you’re right. We think that roughly half the value of the VA block i.e. with the value will emerge in the next five years. And that’s actually one of the considerations we had when we weighed up transaction and the complexity of that versus keeping it in that, because the value is quite short term and its emergence we felt that the keep scenario €“ that had a similar waiting to keep scenario. In terms of how it runs off, roughly as I said, and I know it’s roughly, there’s a 10% reduction per annum in the policy count. So that runs off relatively stably per annum. What actually happens to the capital obviously is a bit sensitive to markets. So as markets go up over the period that means that the capital runoff less rapidly than the policy count, and if they don’t then vice versa.
So, capital is a bit more nuanced, because of the influence of markets, but the book is running off quite rapidly and as I said roughly half of value most in the first five years.
Matt Rider: I’ll take the next one. So, this is on the cost of the reinsurance transaction between TLB and Transamerica Life Insurance Company, the legal entity in Iowa. So in general from €“ I think easiest to talk about it from an operating capital generation perspective. So this is sort of a left pocket, right pocket thing. So you can think of Transamerica Life, Bermuda operating cap gen will come down by 30. US operating cap gen will come up by about 30 and is a wash. Obviously, nothing is really happening economically, although the reinsurance transaction does allow us to release capital more quickly through this mechanism, which is part of the point in doing this. The other one that you had mentioned was that, yes, there was a company in the US that had announced a significant charge as a result of revising lapse rate assumptions on secondary guarantee universal life contracts.
And you are correct that, it happened again in the second quarter. So we kind of say, the same thing here. We are already operating under a granular lapse rate assumption where for the secondary guarantee universal life business, the business is quite sensitive to lapses, specifically at the older ages, specifically with higher face amounts and specifically if they’re we say in money. And in this case we are €“ we have let’s say over age 80 which is a very sensitive group. We have lapse rates that are less than 1% for policies that are age 80 and over $1 million in face amount. Our lapse rate is 0.5%. And if they’re in the money in other words no account value but remaining to pay premiums, which is particularly sensitive we take a quarter of these levels.
So we are already at the most sensitive areas close to a zero lapse rate. So this is something that we have taken care of over the years and we continue to update it every second quarter if there are changes then we make them, but we’re already on very granular lapse rate assumption.
Michael Huttner: And just a reminder how much is this €“ any adjustments you made in Q2 how much it did cost back then?
Matt Rider: The — very small amount. It was a negligible amount really on our balance sheet on IFRS purposes. I think it was something in the order of maybe 200 million or something in that space.
Michael Huttner: Thank you so much. And thanks for all the lovely answers. Thank you and good luck.
Operator: Thank you for your question. We are now taking our next question from Ashik Musaddi from Morgan Stanley.
