Tom Gallagher: Okay, thanks.
Operator: Next we move on to Jimmy Bhullar with JPMorgan. Please go ahead.
Jimmy Bhullar: Hi, good morning. So first I had a question on just retirement spreads. Should we assume that core spreads in the RIS business will maybe compress a little bit as you go through 2024, given expiration of caps? Or are there other puts and takes?
John McCallion: Good morning, Jimmy, it’s John. As you said so good strong core spreads this quarter similar to last quarter just to you guide to fourth. We think something in the same vicinity maybe 135 to 40 is a good range to think about for fourth quarter. And then as you mentioned over the course of 2024 we will have some expiration of some of the caps. As we said before, this whole thing was constructed in a way for the caps to provide us time for the long rates to find their way into spreads. And those things you’ve seen that come through in a healthy way. So we’ll give some more guidance on that on the outlook call and provide some more detail as to how to think about 2024.
Jimmy Bhullar: Okay. And then on the CRE portfolio, the metrics almost seem deceptively too good and stable. But you mentioned you’ve resolved 88% of your 2023 maturities. Are you resolving them similar to how you would have done in the past like in terms of either extending them yourself or third-party financing or stuff? Or are there differences in how the loans are being – how the maturities are being resolved now versus maybe a few years ago when things were much more stable than CRE?
John McCallion: Yes, it’s John, again. Thanks. I take issue with your deceptively comments. But besides that only kidding. But on the maturities, it’s roughly speaking, we’ve talked about these contractual extension options. That’s been about 60% of the maturities and how they’ve all had contractual right. If you’re in good standing, you meet all the financial tests. They tend to be in the mid-50s LTV. So strong financial metrics, almost 30% as well in terms of paid off or refinanced. And then the remainder is probably 10% of that is loan modifications, and then the remaining small single digits is the foreclosure or net payoff, which is honestly that level is somewhat similar to what we’ve seen in the past. So, nothing out of the ordinary given the environment.
So I think overall, roughly in line with historical, maybe the people on the contractual options those are floating rate. They’re tending to wait to see when they lock in their long-term rates. So, maybe there’s been a little extra, in terms of contractual extension options, but nothing out of the ordinary. I think is the way to think about it.
Jimmy Bhullar: And the remaining 12% that’s just like a matter of time and you’re going through stuff? Or is there something unique about those properties, either by property location or otherwise?
John McCallion: Yes. And the — the levels I gave you just now, they incorporate what we expect for the remaining 12%. So nothing unique or out of the ordinary. So I think — I think the punchline, we would share is everything is effectively in line, with what we said in the first quarter when we gave an outline of what our expectation was for the year.
Jimmy Bhullar: Thank you.
Operator: And our next question is from the line of Suneet Kamath with Jefferies. Please go ahead.
Suneet Kamath: Thanks. Just first question on the value of new business side. So the amount of capital, you’ve been deploying has sort of been the $3.7 billion. It’s pretty similar to what you did in 2018 and 2019. But given where interest rates are, are you seeing incremental opportunities to deploy more capital in the business? And then relatedly, should we expect that IRR of 17% which I acknowledge is pretty healthy, does that have upside in this rate environment?
John McCallion: Good morning. Sumeet. It’s John. Good question. So just in terms of deployment of capital remember last year, I mean just one reason for that I,s we had IBM case that came through in the third quarter of last year. But nonetheless, like you pointed out, very strong unlevered IRRs strong payback periods. Very pleased with the results. We saw some great results actually in Japan as well. That’s actually helping boost the VNB as well over the course of 2022. In terms of IRRs, some of the things we’ve talked about is we do see I think broadly speaking yes I mean we’re starting to see demand for these annuity-type products to pick up, right? So I think a volume aspect is emerging. I’d say, it’s still emerging in the institutional and retail space broadly speaking.
In terms of IRR and pricing, typically the rate environment will price in. These — the counterparties were buying or selling however you want to look at it, they’re pricing in the current rate environment. So I wouldn’t expect a big uptick in IRRs. I think 17% IRR is a pretty healthy level to be at. But we’ll see how things evolve.
Suneet Kamath: Okay. Got it. And then just on capital should we expect a pickup in the sort of the pace of buyback once you close the Global Atlantic deal?
Michel Khalaf: Yes. Hi, Suneet. It’s Michel. So really pleased, with the fact that we’ve secured all regulatory approvals for the Global Atlantic transaction. As we had mentioned, we expect that to add about 60 points to our RBC and we consider that to be excess capital. When we announced the transaction we increased the authorization by $1 billion and that was to signal the sustainability of our buyback activity. We also have a track record post major divestitures of returning capital and a deliberate and expeditious manner. So I would suggest that we would conduct ourselves in the same manner here.
Suneet Kamath: Okay. Thank you.
Operator: And our next question is from Wes Carmichael with Wells Fargo. Please go ahead.
Wes Carmichael: Hey, Good morning. A follow-up on the Group business. It seems like we’re seeing pretty favorable results across the industry maybe not deceptively good but definitely good. But just wondering what your outlook is for the industry to retain better margins in that business or if it’s kind of given back over pricing in the next couple of years?
Ramy Tadros: Good morning, Wes. It’s Ramy here. I mean, look, I think a couple of points to note here. So one we’re of course extremely pleased with our record quarter here which is by the way a record even, if you exclude the notable in the quarter. In general, what we tend to see in our results is there’s seasonality. And while the dynamics are different by product line in aggregate the third quarter tends to be the most favorable over the course of the year. If I think for us specifically on a go-forward basis, you should think about the mortality ratio which is below the guidance for this quarter. Think about that coming back in the fourth quarter to be within line for our guidance range. The other one, I would perhaps talk about here is disability.
