Jonathan Porter: Yes. Ryan, it’s Jonathan. I mean as you mentioned, there is a difference in the populations that we’re talking about. So that could be some of why we’re seeing different experience. It is also relative to the expectations that you said as well. So if you recall, over the last couple of years, we have been including excess mortality expectations in our reserving assumptions, in particular, under LDTI, when we move to best estimate. So our expectations include our best estimate of what we think that excess mortality will be. And as you said, the results are coming in a little bit favorable relative to those expectations.
Ryan Krueger: Okay, thanks. Makes sense. And then can you give any rough sensitivity on your exposure to floating rate assets? Either just the amount of floating rate assets that you have or the potential impact on earnings from let’s say, a 25 basis point change in short-term rates?
Leslie Barbi: This is Leslie. So floating rate overall, I will first say that, obviously, some decline in rates has been expected for quite a while, and so we already have assumptions in the run rate guidance that are similar to where the market is currently. So you’re starting from a fine point there. And then we have taken actions over 2023 as we thought we were near those take short-term rates to do some floating to fixed swaps on some of the floaters and net in the portfolio, it’s less than 4% of the total exposure. So you’re talking on the quarter of under $10 million over the course of the year for a 50 basis point move. But again, the forwards that already predict moves down in interest rates this year are already in our guidance.
Ryan Krueger: Great, thanks a lot.
Operator: Our next question comes from Wilma Burdis with Raymond James. Please go ahead.
Wilma Burdis: Hey, good morning. I guess, could you talk a little bit about the unfavorable experience in the capped cohort, specifically, if there were any trends you noticed there? And somewhat related to that, could you talk about any mortality trends you’re seeing in this kind of winter flu and COVID season? Thank you.
Jonathan Porter: Yes. Thanks, Wilma. This is Jonathan. So for the quarter, when we looked at our experience, we did see some adverse experience in older ages and in larger policy sizes as Todd mentioned. And again, those large policies can be volatile period over period, just sort of the nature of the business. We did — our experience overall was favorable or in line with other age groups and sizes though. When we think about the flu, I think so far, based on data that we’ve seen this year, who is expected to be. It’s a little earlier than what sort of a typical season would be, but not nearly as significant as what we saw last year. Based on the trending, it looks like it’s probably going to be an average flu season this year, maybe a little bit below average or a little bit better than what we’d see in a typical year based on deaths and hospitalizations observed so far. And that’s pretty consistent with what we’ve seen around the globe as well.
Wilma Burdis: And anything I note on COVID?
Jonathan Porter: Yes. I mean COVID is really difficult to get an accurate count of COVID on its own, so which is why we look at it more from a total excess mortality perspective, but based on the data we are able to observe, I think our expectation is there’s no sign of a major fall or winter surge, but it’s — again, it’s difficult to parse out the COVID based on the reporting quality these days.
Wilma Burdis: And then just one more. If you guys could talk a little bit about how you’re thinking about longevity exposure going forward? I know that’s something that you used to kind of give some targets around increasing longevity exposure. Just maybe you can give us an update there.
Jonathan Porter: Yes. This is Jonathan. I’ll go first, and others can add on. I think our expectation is the same as what we would have shared before at Investor Day. We do expect to see our proportion of longevity risk as a percentage of our overall biometric risk increase over the next few years. We expect our mortality in our morbidity business to grow, but we just think there’s a great opportunity on the longevity side. So we do think it will increase — it’s going to be moving from more like a 10% to 15% of our total biometric risk to 20% to 25%, something in that magnitude. So we’ll still be more weighted towards mortality, but just a little bit more balanced, which is a positive from a diversification perspective, obviously.
Tony Cheng: Yes. Perhaps let me just add, and I’ll just kind of queue off what Jonathan said on diversification. So obviously, we will be mortality long for quite a period of time. but the longevity adds some diversification. But just to get a bit more finer, yes, our mortality block tends to be higher socioeconomics in younger age. Our longevity block obviously tends to be blue collar and retirees. So with medical advances that we would expect to continue to see, as we’ve always seen, in a way, it favors the mortality block more so than the negative on the longevity block.
Wilma Burdis: Thank you.
Operator: The next question comes from Alex Scott with Goldman Sachs. Please go ahead.
Alex Scott: Hi, good morning. First one I had for you is on the regulatory front. I know in Bermuda, I think you guys don’t use a scenario-based approach and your U.S. taxpayer, so a little less applicable to you. But I guess, you’re just interested in a broad update. Are you seeing it affect to the competitive environment at all? For some of the relationships and transactions you have? I mean any kind of price sensitivity change related to it?
Tony Cheng: Thanks, Alex. Thanks for the question. I think we’ve previously shared, we have anecdotally seen some impact on the competition. There was a previous quotation where due to an announcement in Bermuda overnight, the number of competitors on a certain individual quotation drop dramatically. We obviously are very mindful of regulations around the world, Bermuda, the U.S., even Europe and U.K., we’re seeing obviously some discussions. We’re not overly concerned by that, we always continue to focus on what we’re doing. And in some sense, that’s why we’re very delighted with the Belgium transaction that we did. There is a lot of discussion on regulatory issues in the continent but we were very delighted with that transaction. We believe it can open up further opportunities in Belgium and broader throughout the continent.
Alex Scott: And I guess for a second question, could you just kind of give us a feel for how fashion rates are trending in the U.S. market, something I don’t track quite as closely. So I’d just be interested if you have an update on sort of where things are moving there.
Tony Cheng: Yes, maybe I’ll take that one. I mean I think directionally, it’s in a positive direction. Our job is always, as I mentioned earlier, continue to innovate, find new ways to have a win-win with our partners, so they have a strong compelling reason to reinsure. I would say session rates as they usually track is on new business. What we have seen increasing interesting as some of the clients move towards a more capital-light derisking their in-force blocks of business. That creates greater opportunities for us on an in-force perspective, reinsuring mortality on back books and so on.
Alex Scott: That’s very helpful, thank you.
Operator: The next question comes from Mike Ward with Citi. Please go ahead.
Mike Ward: Thanks guys, good morning. So we have the new run rate guidance and there’s the 8% to 10% earnings growth, which I think is for dollars of earnings and EPS. So I’m just kind of wondering, is there a component that you — with the 8% to 10%, is there a component in there from just improved new money yields or just NII in general, growing?
Todd Larson: Mike, it’s Todd. I just start out by saying the increase in the overall run rate that we provided last night compared to the Investor Day back in June, there’s really three components, I would say. There’s the higher investment yields. And then there’s the good experience on the in-force book overall across the diversified platform. And then there’s the added margin for the strong new business volumes that we’ve been able to achieve during the year.
