Dan Houston: So, Ryan and Pat, the only thing I might add to that on that preferred securities mandate, they took that in-house in spite of very strong performance from our preferred spectrum asset management. So again, it was a tough loss for us, especially considering the strong performance. Next question, operator?
Operator: Thank you. Our next questions come from the line of Jimmy Bhullar with J.P. Morgan. Please proceed with your questions.
Jimmy Bhullar: Hey, good morning. So first for Pat, PGI performance fees were very strong in the third quarter. And if you could just give us some color on what drove that and what your outlook is either over the next quarter or over the next year? Because I would have thought that performance fees would have suffered in this type of an environment, but obviously, the quarterly number was very good.
Dan Houston: Thanks, Jimmy, for the question. Pat?
Pat Halter: Yeah. Jimmy, thanks for the question. As you’ve heard me in prior comments, we always have a large pipeline of different investments that are at different stages of maturity in terms of harvesting gains or performance fees. And as you can imagine, performance fees are relatively lumpy, depending on market conditions and when we can optimize the actual sort of hopefully alpha generation that we see in the real estate portfolios that we’re managing. We did have a $22 million gross performance fee in the third quarter. That was in two different transactions. As we look forward, we probably think that the first half of the year where we saw performance fees, which were muted, we’ll probably see that in the fourth quarter.
But I would suggest to you that as we look into 2024, if the market conditions provide an opportunity for us. We still have confidence that as we’ve indicated in past discussions that we should expect performance fees to be in the $30-plus million range which has been a consistent guidance and a consistent realization of where we’ve seen performance fees, probably in the second half of 2024 versus the first half of 2024, but we continue to believe we have a diverse portfolio of different investment strategies that can be harvested in the future years.
Jimmy Bhullar: Okay, thanks. And then secondly, on RIS net flows in the fee business. You saw some high lapses this quarter. I think you mentioned large cap lapses on the wealth platform you bought. The acquisition happened several years ago. So I would have thought that by now, those short lapses would have been over. But is it part – is it that? Or is it competition? What’s really causing the weak flows in the fee-based business?
Dan Houston: Hey, Jimmy, let me make just a couple of really quick comments before handing it over to Chris. First thing I want to do is, thank Chris for his leadership in advancing our domestic retirement strategy. It’s a challenging environment out there. He’s done an amazing job, recruiting talent from the industry and leveraging our existing talent. Our focus still remains on small, mid and large plans. Each one of those have different characteristics that can be volatile. But most importantly, our continued doubling down on our abilities to create a unique TRS solution for defined benefit, defined contribution, ESOP and non-qualified. And certainly, we’ve seen some volatility in these businesses, but I’d like to think that in large part, the integration has taken place and Chris is growing it from here. So Chris, can you please respond?
ChrisLittlefield: No, thanks for the question, Jimmy. I think what you have to keep in mind is that, as a result of the pandemic and some of the market volatility that has probably dampened some of the bid activity, and we certainly have seen an uptick in bid activity across the industry as we’ve gotten into ‘23. So I don’t think it’s something that’s going to continue to create a lot of pressure. And in fact, we see a very significant and meaningful moderation in contract lapses heading into ‘24. But yeah, we definitely are working through that. I mean from a perspective of flows, we had a positive quarter, and we’re starting to see the pickup in sales and transfer deposits. I mean, if you look at 78% increase in transfer deposits in the quarter.
SMB was up mid double-digits. All of that is really positive, and we continue to see those trends continue in the fourth quarter. So, I think, yes, we are seeing some lag from more pandemic activity and some of the market volatility that it’s really hard to move plans when the market is really volatile. So I think that’s going to pretty much sort out here over the next quarter or so.
Jimmy Bhullar: Thank you.
Dan Houston: Thanks, Jimmy.
Operator: Thank you. Our next questions come from the line of Suneet Kamath with Jefferies. Please proceed with your questions.
Suneet Kamath: Yeah. Thanks, good morning. Just for Deanna to start on the assumption review. Any sort of ongoing GAAP impacts that we should expect? And then similarly, is there any sort of either statutory impact from the review or implications for taxes based on that negative item that showed up in the tax rate?
Deanna Strable: Yeah. Thanks, Suneet for the question. From a run rate perspective, it does cause a slight benefit in RIS, a slight pressure in Life, no impact in SPB. I think it is of note though that those would be reflected in the third quarter run rate operating earnings that we gave you on a pre-tax basis. So those have all been kind of factored in. As we move to capital, the tax item did cause a capital hit. And so that was unknown, and we had slightly positive offsetting – modest positive capital impact that offset a portion of that from the AR. But ultimately, those would be the moving pieces. From a tax perspective, no ongoing impact that was a one-time impact that really trued up and reversed some credits that we had taken in previous years. And so no impact as we go forward.
Suneet Kamath: Got it. Okay. Thanks. And then, I guess, maybe for Amy. On the disability business, we continue to see really good results, not only from you guys, but other companies. And I guess I’m just trying to understand or like to understand how quickly you think this strong or these strong results will be sort of factored into pricing? I would imagine that would occur at some point, but I just want to get a sense of, from a timing perspective, what the glide path looks like? Thanks.
DanHouston: Sure. Amy, please.
Amy Friedrich: Yeah. Yeah. So let me – I’ll give you my perspective on this, Suneet. It’s going to vary a bit by kind of the – how your block is made up. But if you have most of your block, which we do in an ability to kind of annually rerate. I think that those – the reratable nature of that business is going to mean that we pass on that good performance relatively quickly. I will say we’re pretty committed to making sure that when we’ve got good performance, we’re putting that back into our rates. We know that, that’s good for our customers. We know more income protection products out there in the industry and in the economy or good for the economy. And we know that it’s good for our future growth rates if we continue to put that in.
