We actually chose to go ahead and release reserves based on the current accounting guidance. So yes, I would say it could go both ways, but I would also say, we’ve compiled a lot more data than we had several years ago, and we’ll just continue to monitor that as we go forward.
Joshua Shanker: And how many years into the future would we need to go before we can make some comments with confidence about the role COVID mortality might have on the LTC book?
Steven Zabel: Yes, it’s a good question. I think as we think about claimant mortality, we have pretty good confidence that we’ve probably kind of run our course as far as how COVID might have impacted that, because we’re seeing claimant mortality back to pretty much expected levels. I would say the adjustments that we made this quarter around policyholder mortality and lapses in the older age wasn’t necessarily based on any volatility that we maybe saw during COVID. It was just building a better data set, a more robust data set, and then being able to, with confidence, make an adjustment there. But as you know, I mean, this is a very, very long tail business. And so we’ll just have to continue to monitor experience as it comes in over time.
Joshua Shanker: Thank you for the answers.
Steven Zabel: Thanks, Josh.
Operator: Our next question comes from Mike Ward with Citigroup. Your line is open.
Michael Ward: Hey, guys, thanks for squeezing me in. I was just kind of wondering if you could discuss the landscape for risk transfer and I have to imagine that actions between the PDR First Unum contributions and then the credit sort of repositioning, I don’t know, at the margin, does that change the profile at all? Any update there?
Richard McKenney: Yes. Happy to do that, Mike. Thanks for the question. When you think about the risk transfer options, we talked about, the market has been consistent. So there’s no news there. But I think when you talked about the dynamics, it really is about how a potential buyer or a reinsurer might look at the different dynamics we see. So many of the things you talked about, many of the changes are going to be more from our side of the equation. When they look at it from the other side, I think that’s going to be very consistent. So many of the things you talked about in terms of funding levels, PDR, that would just change how we recognize such a transaction. It doesn’t change the ability of somebody else to come in or the ability for us to be able to do the transaction. So I think that world is pretty consistent as it would have been prior to the third quarter.
Michael Ward: Okay. Thanks, guys.
Operator: Our next question comes from Wilma Burdis with Raymond James. Your line is open.
Wilma Burdis: Hey, good morning. Could you talk about the lapse rate assumption on the LTC block? Should we assume that it’s pretty close to zero on the older block with richer benefits?
Steven Zabel: Yes. Well, we haven’t disclosed that and probably won’t. We already had a fairly low lapse rate on those. So it’s a reasonable assumption to assume we’re getting pretty close to zero.
Wilma Burdis: Okay. Just trying to see if there’s any potential for future lapse rate assumption decreases there. And then maybe this is a very obvious question, but should we assume the 500 million of share repurchase authorization to represent a run rate in ’24 and beyond. And if so could you provide — go ahead.
Richard McKenney: Well, just to give you a little bit of a history. So last year, we came into the year at a run rate of $200 million. We upped to $300 million kind of halfway through the year. And you can look at this as we’re upping that run rate again. So the authorization goes in 1/1 ’24, but I think it’s a reasonable assumption that we’ll complete that throughout the course of the year.
Wilma Burdis: Okay. And just if I could get one follow-up on that. Just could you talk about what gives you the confidence to move that up to 500? I think it was around 400 kind of pre-pandemic, pre-PDR, so a pretty meaningful bump up there.
Richard McKenney: Yes. I think it really goes back to the full capital generation model that we have. And a big move that we talked about this quarter is the PDR being fully funded. So there’s not capital that’s going to be going behind long-term care. And when you think of our statutory generation, also the robust positions that we have, both RBC and cash levels. We feel very good about moving that up to 500. And we think even with that, we’re going to still have good flexibility to execute on our strategy. So a lot of confidence about moving that up and also the other opportunities that we have out there to deploy that capital.
Wilma Burdis: Okay. Thank you.
Operator: Our next question comes from Wes Carmichael with Wells Fargo. Your line is open.
Wesley Carmichael: Hey, good morning. I just had one follow-up on Closed Block. And I guess, just curious, I think with the assumption review, you reset the net premium ratio to the low mid-90s. But the LTC loss ratio was 105% around there in the quarter. So just curious if you expect the same level of earnings roughly in the fourth quarter. Should we expect that loss ratio to be in that near 105% range or I’m just curious if it comes down towards the NPR?
Steven Zabel: Yes, this is Steve. I can take that. The guidance that I gave as far as setting different expectations for go-forward earnings in long-term care that would be more resetting the loss ratio from the previously expected 85 up to that level where the new net premium ratio is in the low to mid-90s. What I would say is we did continue to see elevated claims incidents in third quarter. And so we need to see how that plays out in the fourth quarter. But short of those types of variations, we would expect that low to mid-90s to be our loss ratio going forward. And the guidance that I gave around earnings would have been based on that in long-term care or for the total Closed Block.
Wesley Carmichael: Got it. Thanks Steve.
Operator: Our next question comes from Jimmy Bhullar with JPMorgan. Your line is open.
Jimmy Bhullar: I had a couple of questions along the lines of what’s already been discussed on the call. But on long-term care, what were the specific assumptions that you changed that led to the reserve increase? And I’m assuming there’s some puts and takes, but what were the main ones?
Steven Zabel: Yes. I would say just kind of reiterate the comments that I made. It was very focused on lapse and mortality assumptions for our active life policyholders, so those policyholders that are still in force and not on claim. It was very focused on older age policyholders where we’ve built a lot of more data over the last three, four to five years. And then it was also focused on those with richer benefits. So those that would have policyholder benefits that were a lot of lifetime benefits or higher inflation. So just richer benefits within the policies. So that would be one major category. And then as I mentioned, the other would be we did modify then our rate increase program assumption and the value that we do think we’re going to get from that, because we’re basically going to incorporate these other liability assumption changes into how we think about actuarially justified rate increases with the regulators. So those would be the two big areas.
Jimmy Bhullar: And on lapse assumptions and some of the other key assumptions, how are those on a statutory basis versus where you’ve gone on GAAP? Because I realize your overall reserves in stat are higher, but are those assumptions more conservative as well, the ones you changed or not?
