Ramy Tadros: Good morning, Tom. It’s Ramy here. And I would say at the highest level in terms of our near-term outlook here is, this is driven by the changing business mix, both in terms of the customer segments that we serve as well as the products that we offer. So from a customer perspective, we’ve executed well on our strategy to target higher growth in regional markets. We’re seeing the benefits of that. In terms of growth, regional markets has grown two to three percentage points higher than the overall average, and we see a clear path for that growth to continue. And regional market is a segment that does carry a lower loss ratio across both the life underwriting ratio and non-medical health. And we’re also seeing a shift from a product perspective.
We’ve executed well on our employee paid strategy in general, and voluntary strategy in particular and in voluntary we’ve seen double-digit growth over many years and we expect that to persist in the future given customer needs and the opportunity to drive penetration in the workplace. And the loss ratio here tends to be also more favorable to the overall portfolio. So between that customer segment and that product view, if you think about this over time, we feel kind of a shift to the outlook is warranted. Let me tell you what it’s not been driven by. On the Life ratio, this quarter was very favorable and it’s really driven, as John pointed out, to the population mortality experience. So this is not one quarter makes a trend, this is one quarter here that was favorable.
And we do expect the Q1 numbers to tick up given the seasonality of Life claims. And then on the disability side, our outlook in terms of the ratios does include an expectation that the profitability of our disability line of business will moderate over time. But that is outweighed by the other factors that I’ve just mentioned. And back to Q1 as well, there – just remember, there’s also seasonality in that ratio in Q1 given the seasonality of the dental business. So net-net, think about it as business mix, customer and product mix. That’s really driving this shift downwards in the ranges.
Tom Gallagher: That’s helpful. Thanks.
Operator: Next, we go to the line of Jimmy Bhullar with JPMorgan. Please go ahead.
Jimmy Bhullar: So the first question on retirement spreads. Can you discuss the driver of the sequential decline in spreads each of the last two quarters? And how much of this is being driven by mix of business versus maybe competition, because what we’re seeing is your yields have gone up, but crediting rates seem to be rising even faster than that?
John McCallion: Good morning, Jimmy. It’s John. The simple answer just sequentially for us is the lower rates late in the quarter caused a bit of compression on the spread number. Just how – we had the caps were in the money and lower rates were – came in. So it was different than the forward curve at the time of the third quarter when we gave the 135 to 140 range came in at 134 xviii. So that’s the main driver. It’s not pricing. Pricing has actually been pretty healthy, relatively speaking, we haven’t seen any change in pricing. So anything – if anything, it’s really just a simple change in the curve.
Jimmy Bhullar: Okay. And then on the CRE portfolio, you mentioned resolving all of the maturities for 2023. Can you give us a sense of how much of your book is coming due over the next one to two years, especially in office properties? And as you’re resolving these loans, are you having to extend more of them than you’ve done in the past, or are you resolving them similar to how you would have done it over the last several years?
John McCallion: Yes, sure. Jimmy, it’s John again. So, just as a reminder, for 2023, just rough percentages of the resolution. About 30% was payoff or refinance. Another 60% was these contractual extensions where the borrower has to be in good financial condition. We have some pretty high level of requirements there. So those are contractual. If you meet those requirements, then you have the right. And they generally be – tend to be more floating rate nature loans, where they’re just waiting to lock in fixed rates. There’s less than 10% on just, I’ll say, maturity extensions. Where we agree with the borrower, there’s a good positive situation for us to extend, and then there’s kind of a couple of points of foreclosures. In terms of 2024, about 10% of the balance comes due.
In terms of maturities, the overall PBO that we have, I’d say that in terms of resolutions, probably a similar mix to what we saw in terms of percentage. And I think in terms of – we gave a little bit of magnitude this past year in terms of what we thought were at risk loans and level of charge offs. Our view in 2024 is that we’d see a similar order of magnitude on both loans at risks and level of charge offs as well.
Jimmy Bhullar: Thank you.
Operator: Next we go to the line of Elyse Greenspan with Wells Fargo. Please go ahead.
Elyse Greenspan: Hi. Thanks. Good morning. My first question is on the PRT side. I think we’ve stopped seeing why the seasonality where deals know much more weighted to the fourth quarter. So just trying to get a sense of your outlook for 2024 and how we should think about the cadence of potential transactions there?
Ramy Tadros: Good morning, Elyse. It’s Ramy here. I think you’re right to point out that kind of the, we’ve seen less of that seasonality where we’re seeing deals being done throughout the year. Our outlook there remains pretty positive. We continue to see a very healthy pipeline, in particular, a pipeline at the larger end of the market where we are most competitive. And all the macro indicators in terms of what DB plan sponsors are saying, in terms of the funding level, the magnitude of assets sitting in frozen defined benefit plan all kind of indicate expectations of continued kind of high level of activity in this market into 2024. So no change in terms of our view of the robustness of the pipeline and look, if you step back and look at RIS more broadly, the liability exposures are up 3% year-over-year.
