Kevin Hogan : Yes. Thanks, Elyse. So the environment for fixed annuities is very attractive, right? The higher rates, the wider spreads means both higher sales, but also very attractive margins. And it does come along with higher surrenders, which are quite natural. And I think that there’s three things to keep in mind relative to the surrenders as we look at this portfolio. The first is that while the surrenders are higher, they are lower than our expectations based on where rates and spreads were during the fourth quarter. And so it is a natural part of managing a fixed annuity portfolio to manage surrenders and understand the right time to accept the surrender and essentially replace it with new business at higher margins.
And that’s essentially what we’ve chosen to do. Now in order to be able to do that, you need to have the liquidity associated with that to be able to support the surrender without diluting the margin on the new business. And that has long been a part of our strategy to maintain that liquidity. So that’s the first thing to keep in mind. The surrenders, whilst they are higher, are naturally higher based on where the rates were, but lower than what we are prepared for. The second thing I would say is that kind of indicative of that is that despite the higher surrenders, because of the strength of the new business, we have had strong positive flows of $700 million in the fourth quarter, as Elias pointed out, and $4 billion in the full year. So the general account is growing.
And the third thing I would say is that we do actively manage crediting rates. We have the opportunity to manage crediting rates even for the business beyond the surrender charge period. And that’s really where we make the economic decision relative to the value of a surrender as opposed to the opportunity for new business. So we’re quite comfortable where the fixed annuity portfolio is. It’s possible if rates rise further, spreads widen further, that surrenders may rise, but that means that new business is also likely to rise and the margin is likely even more attractive than what we found in the fourth quarter.
Elyse Greenspan : And then my second question, the parent liquidity went down $500 million in the quarter. I know the interest and dividend’s around $250 million. What were the other sources and uses that took that down? And as we think about going forward, is the target — are you looking for that to still be, I guess, last quarter, I think you said around $1.1 billion after you go through some of the expenses associated with the separation and the program?
Elias Habayeb: Elyse, it’s Elias. So we manage our liquidity at the parent to cover the next 12 month worth of expenses or needs from the parent. And we treat the $600 million annual dividend to our shareholders as if it’s a fixed cost. So we reserve for it from that perspective. Now — and that’s going to be our philosophy, how we manage liquidity going forward. Where we ended up the year at $1.5 billion, it approximates our next 12 month needs. And with respect to what drove the decline from the end of September down to the end of December, one element is debt service. Our debt service payments are lumped between the second and the fourth quarter. In addition, we didn’t pay the third quarter dividend until October. So you had another $150 million there. And finally, we’re making progress on the onetime expenses and that’s kind of another contributor to the drop from the third quarter.
Elyse Greenspan : Thank you.
Operator: The next question comes from Alex Scott with Goldman Sachs. Alex, please go ahead.
