Elias Habayeb: So Eric, hi. So there’s been like three drivers behind our base NII and base spread income growth year-over-year through ’22. And we expect that trend to continue into 2023. We’re benefiting from the higher new money rates. So on the reinvestment side, in the fourth quarter, as Kevin quoted, purchase yields on average are about 7%. That’s about 400 basis points up relative to the beginning of the year and 300 basis points above where the portfolio yield was in the fourth quarter. And that’s going to continue to earn in. You also got floaters, and the floaters will be impacted by more short-term rate side, but some of it is matching floating rate liabilities. So that we will give back given what happens to rate. And finally, growth. The portfolio is growing, as you’ve seen during the quarter of ’22. So those three drivers should continue to contribute to growth in base NII as well as base spread income next year.
Erik Bass: Got it. Thank you. And then apologies if I missed this, but Elias, can you spike out what you’re including in the $0.16 of favorable items that you mentioned?
Elias Habayeb: Yes. So the $0.16 is on the — in the earnings deck. It’s a combination of — we had a lower tax rate. We’ve had a onetime item on investments associated with it. But it’s in the earnings that we gave you the details on it.
Erik Bass: Okay, thank you.
Kevin Hogan : Thank you.
Operator: The next question comes from Suneet Kamath with Jefferies. Please go ahead.
Suneet Kamath: Great, thanks. I wanted to ask about the $2.2 billion of distributions to the holding company despite the weaker markets. Is there a way to think about how much of that was RBC drawdown versus capital generated and maybe some thoughts on what you expect for 2023?
Kevin Hogan : Suneet, good to hear from you. So the $2.2 billion is made up of two things. It’s made up of dividends that were paid to the holding company, which is about $1.8 billion as well as about $400 million in tax sharing payments paid to AIG. And those are related to tax strategies that increase taxable income but not statutory income. Those strategies ended with the IPO when we deconsolidated from AIG on a tax basis and they reduced kind of dividend capacity dollar for dollar in the past. So that’s why we give you this normalized view $2.2 billion. As it relates to the year, if you look at the past year, the insurance companies distributed about $2.2 billion. We also had the macro environment, and we also grew new business during the course of the year.
But in totality, we still ended the year above our target of $400 million. So we’re at $410 million to $420 million which still puts us in a healthy position. And if you look historically, our insurance companies distributed about $2 billion a year, that’s been our historical trend from there.
Suneet Kamath: Got it. Okay. And then I guess maybe a separate question just on your annuity philosophy. It seems like you are one of the few companies that’s not pursuing the RILA market. And so I’m just curious, why not when it seems like pretty much everybody else is entering that market?
Kevin Hogan : Yes. Thanks, Suneet. When we started developing our index annuity — our index annuity strategy, we recognize that our suite of both income-oriented and accumulation-oriented index annuities serves a similar population as to the RILA marketplace, albeit with a potential advantage of a zero floor. And we have a broad range of index options for investors to invest in, and our fixed index annuity portfolio continues to expand and grow. We added an additional option more recently from Dimensional Fund Advisors that seems quite popular. So we haven’t necessarily ruled out entering the RILA marketplace, but serving a similar market with a different product has worked well for us so far.
Suneet Kamath : Okay, thanks Kevin.
