David Rosenbaum: Hey Tom, just maybe a couple of comments here. You’ve heard Ed say before many times that we manage the company across a multi-scenario, multiyear view, and that approach applies to our pricing of new products as well. And we talked a little bit about the tremendous growth that we’ve seen in SHIELD over time, and that was 2% of account value back in 2016 and was around 26% at the end of the quarter. So we have maintained our pricing discipline during that period of growth and are comfortable with the economics of the business that we have written and are writing. And just to kind of wrap up, as I mentioned, we have always looked at pricing SHIELD on a stand-alone basis, so this will not change that.
Thomas Gallagher: Okay, thanks.
Operator: Thank you. Our next question will come from the line of Elyse Greenspan with Wells Fargo. Your line is open.
Elyse Greenspan: Hi, thanks. Good morning. My first one, I guess, Ed, you were talking about the distributable earnings earlier. Is the plan still to provide them I don’t — actually, I don’t know if you have told us a specific time frame, would it be, I guess, kind of in line with September when they were disclosed last year?
Edward Spehar: Good morning, Elyse. So I would — we haven’t determined when we’re going to do it yet. But I would remind you that last year was a bit of an off cycle time for the release of distributable earnings. We had a number of things that were going on related to LDTI, I remember, I think I talked about that. There were a number of things that — moving to all of our in-house modeling versus some external modeling that we had been using. And so that’s why we did it in September. If you recall, prior to that, we had been doing it in March of the year. So just to point that out. We haven’t made a decision yet, but last year was a little bit different from a timing standpoint.
Elyse Greenspan: Okay, thanks. And then you typically talk about kind of a 5-point strain on RBC from new business. I know it is different in the Q1 just given the lower charges on the fixed annuity business. So how would you think should we still use that same kind of rule of thumb of kind of 5 points a quarter going forward?
Edward Spehar: Yes. So on the 5 points a quarter, as you correctly note, we have said that you will see the first quarter be actually beneficial to capital because of the timing of the business risk charge, which will roll off at the end of each year and then it grows over time. And so we would assume that you will be using capital beyond the 5 points, everything else being equal. But everything else is not always equal. I mean, you obviously have to consider what is the level of fixed sales in one year versus another because that’s going to be the key driver of that business risk charge. So sales levels will be important for fixed when you think about that. In terms of the amount of strain that we’re seeing now starting to emerge in our normalized statutory earnings, again, I would say we’re in the process of making this change in hedging.
And I don’t really think it’s time to talk about the specifics of what we’re seeing that’s coming through norm stat earnings. So for now, I think you would stick with the what I’ve given you as sort of the outlook for capital strain associated with the business that comes directly through the denominator of the RBC ratio.
Eric T. Steigerwalt: Elyse, it’s Eric. Look, we have no intention of slowing down sales here with respect to SHIELD. And of course, as you heard me discuss LifePath Paycheck, it is going to be coming online throughout the year. Just to give you a little sense, though, in the second quarter, you will see a small amount of FRA sales. So it will be down a fair amount. David, do you want to comment on that?
David Rosenbaum: Sure. So Elyse, we do manage Fixed-Rate Annuities and the Fixed Index Annuity business together. And as Eric mentioned, we do expect really lower sales in Fixed Rate Annuities this year relative to last year. And more specifically, this quarter relative to the first quarter we expect it to be lower. The second quarter versus the first quarter. And really, that is as we are transitioning reinsurers for our FRA business. So that is really the driver of why we expect sales to be lower in the second quarter.
Elyse Greenspan: Okay, thank you.
Operator: Thank you. Our next question comes from the line of Wes Carmichael with Autonomous Research. Your line is now open.
Wes Carmichael: Hey, good morning. On the reinsurance impact, I think you mentioned there was no impact on statutory reserves, but was there a statutory impact related to the retroactive nature of that item?
Edward Spehar: Hey, good morning Wes. Yes, it was $187 million for stat.
Wes Carmichael: Got it, thanks Ed. And just on annuity surrenders in VA and SHIELD, you mentioned they picked up sequentially. You talked about that a little bit in prepared remarks, but should we think about this as kind of being more of a run rate level in 2024, I think, outflows and in that bucket were about $3.8 billion in the quarter?
David Rosenbaum: Hey Wes, this is David. Good morning. So one of the things that Eric had commented on in his prepared remarks and then we talked about really, on the last earnings call is that we expected the elevated surrender activity that we saw in 2023 to continue in 2024 and albeit with a different mix, and we’re seeing that. So with respect to kind of the total outflows, they were flat compared to the last quarter and up over the first quarter given full surrenders of VA and SHIELD really on a higher account and higher average balance given equity market performance. So when we think about it kind of on a sequential basis, so versus the fourth quarter, the majority of that is driven by VA. We do see quarter-to-quarter volatility, and we saw that in the quarter driving higher outflows.
We also had the higher account balances and a slight increase in SHIELD. Overall, outflows are weighted to VA and we do continue to benefit from outflows of the capital-intensive legacy blocks. And with respect to the comments we made a minute ago on fixed-rate annuity sales, that could have an impact on sort of driving overall net flows in the second quarter higher.
