Good morning, ladies and gentlemen, and welcome to the Brighthouse Financial Second Quarter 2024 Earnings Conference Call. My name is Victor, and I will be your coordinator today. As a reminder, the conference is being recorded for replay purposes. I would now like to hand the presentation over to Dana Amante, Head of Investor Relations. Ms. Amante, you may proceed.

Thank you, and good morning. Welcome to Brighthouse Financial Second Quarter 2024 Earnings Call. Materials for today's call were released last night and can be found on the Investor Relations section of our website. We encourage you to review all of these materials. Today, you will hear from Eric Steigerwalt, our President and Chief Executive Officer; and Ed Spehar, our Chief Financial Officer. Following our prepared remarks, we will open the call up for a question-and-answer period. Also here with us today to participate in the discussions are Myles Lambert, our Chief Distribution and Marketing Officer; David Rosenbaum, Head of Product and Underwriting; and John Rosenthal, our Chief Investment Officer. Before we begin, I'd like to note that our discussion during this call may include forward-looking statements within the meaning of the federal securities laws. Brighthouse Financial's actual results may differ materially from the results anticipated in the forward-looking statements as a result of risks and uncertainties described from time to time in Brighthouse Financial's filings with the SEC. Information discussed on today's call speaks only as of today, August 8, 2024. The company undertakes no obligation to update any information discussed on today's call. During this call, we will be discussing certain financial measures that are not based on generally accepted accounting principles, also known as non-GAAP measures. Reconciliation of these non-GAAP measures on a historical basis to the most directly comparable GAAP measures and related definitions may be found in our earnings release, slide presentation and financial supplement. And finally, references to statutory results, including certain statutory-based measures used by management are preliminary due to the timing of the filing of the statutory statements. And now I'll turn the call over to our CEO, Eric Steigerwalt.

Thank you, Dana. Good morning to everyone, and thank you for joining the call. While the second quarter had many positive developments, including record sales of our flagship Shield Annuities, the first deposits received through BlackRock's LifePath Paycheck and strong adjusted earnings results, our preliminary statutory results were disappointing. Our estimated statutory combined risk-based capital or RBC ratio was between 380% and 400%, which is at or modestly below the low end of our target range of 400% to 450% in normal markets. I would like to provide a few perspectives on the change in statutory capital and our estimated RBC ratio, and Ed will provide more details during his prepared remarks. As we have said in the past, the financial and risk management strategy at Brighthouse was founded on maintaining a strong capital position at our life insurance companies as defined by a target combined RBC ratio of between 400% and 450% normal market conditions, coupled with substantial liquidity at the holding company. In the second quarter, our capital and liquidity position remained strong, but the RBC ratio declined driven by the underlying performance of our variable annuity or VA and Shield business, resulting in an approximately $600 million decline in statutory combined total adjusted capital. However, we have maintained a robust liquidity position, with liquid assets at the holding company of $1.2 billion as of June 30. While our capital and liquidity position remains strong, we are not pleased with our statutory results this year. To that end, we have been actively engaged in a number of specific initiatives, including reinsurance opportunities, which are designed to improve capital efficiency, unlock capital, and restore the RBC ratio to the target range within the next 6 to 12 months. Importantly, we believe that our strong capital and liquidity position supports continued capital return to shareholders. Although the year-to-date results are below our plan, we continue to be pleased with the progress we have made derisking the company since our separation from MetLife. Since year-end 2017, our spread-based business has grown by over 225% on an account value basis, primarily driven by continued growth in our Shield business, and our variable annuity account value has decreased by approximately 27% over that same period. Along the way, we also substantially derisked the company by lowering our equity risk tolerance before the pandemic and moving from a tactical to strategic position on interest rate risk in 2022 when long-term interest rates were roughly 3.50% to 4%. Now let me turn to our continued progress on executing our focused strategy. In the second quarter, corporate expenses were $200 million, bringing year-to-date corporate expenses through June 30 to $407 million, which is approximately 6% lower compared with the same period in 2023. While we expect expenses to increase in the second half of 2024, we still anticipate full year 2024 corporate expenses to be lower than full year 2023 corporate expenses. We remain committed to disciplined expense management and continue to evaluate potential areas of improvement to manage expenses and generate additional savings over the next several years. Moving to distribution and sales. I'm proud of the success of our distribution franchise. I've said that before. The second quarter sales results further demonstrate our complementary and diversified suite of annuity and life insurance products. Year-to-date, through June 30, total annuity sales were $5.3 billion, consistent with the same period in 2023. We remain a leader in the registered index-linked annuity market with record sales of our Shield annuities, which exceeded $2 billion in the quarter. Year-to-date, Shield sales exceeded $3.9 billion, a record level for the first half of the year and an increase of 23% over the same period in 2023. Also contributing to total annuity sales in the first half of 2024 were $351 million in fixed indexed annuity or FIA sales, a 60% increase over 2023 driven by our SecureKey product, which was launched last November. The growth in Shield and FIA was offset by lower fixed deferred annuity sales. As we mentioned on our first quarter earnings call, we expected second quarter fixed deferred annuity sales to be lower as we transition to a new reinsurer for this product. That went into effect in June of this year. Life insurance sales in the second quarter were $28 million, which contributed to record year-to-date life insurance sales of $57 million, an increase of approximately 19% compared with the same period of 2023. I am pleased with the continued steady growth in both our annuity and life insurance sales, and we continue to focus on refreshing our products over time. Last month, as an example, we launched our newest iteration of our Shield product, along with new enhancements to our SmartCare product suite. I am also extremely excited about BlackRock's LifePath Paycheck that launched at the end of April. In the quarter, we received our first deposits of over $340 million through this innovative solution. We expect inflows associated with LifePath Paycheck to be uneven on a quarter-to-quarter basis as defined contribution plans implement the solution, so we do not expect much activity in the third quarter, but we expect more activity in the fourth quarter. We are thrilled with the launch and LifePath Paycheck's success to date. In addition, year-to-date through August 2, we repurchased $151 million of our common stock, with $64 million repurchased in the second quarter and an additional $25 million of common stock repurchased through August 2. We continue to believe that our strong capital and liquidity position supports our commitment to returning capital to shareholders through common stock repurchases. In closing, while we had many successes in the quarter, we have a number of specific initiatives underway designed to improve capital efficiency, unlock capital, and return the RBC ratio to our target range within the next 6 to 12 months. We have successfully managed through many challenges over the last several years related to macroeconomic volatility, regulatory changes, and of course, a global pandemic. With our disciplined and focused execution, we have accomplished a significant amount over the last several years, and we expect to continue that progress in the future. We have a strategy in place that we are focused on executing, and I look forward to updating you on our progress later this year. I will now turn the call over to Ed to discuss our second quarter financial results in more detail.

Thank you, Eric, and good morning, everyone. I will begin with commentary on our preliminary statutory results and the change in capital in the second quarter and then close with a review of our adjusted earnings. As of June 30, 2024, our statutory combined risk-based capital or RBC ratio was estimated to be between 380% and 400%, which as Eric mentioned, is at or modestly below the lower end of our target range of 400% to 450% in normal market conditions. Our statutory combined total adjusted capital, or TAC, was $5.4 billion at June 30, down from $6 billion as of March 31, and we had a normalized statutory loss of approximately $600 million in the quarter. The statutory results in the quarter were driven by the performance of our variable annuity or VA and Shield business as a result of three primary factors. First, basis risk, which as we have said before, fluctuates quarter-to-quarter, accounted for almost 40% of the normalized statutory loss in the quarter. Basis risk refers to the difference between the performance of separate account funds and the corresponding hedges linked to various market indices. Second, the underperformance of equity hedges relative to Shield liability movement accounted for approximately 30% of the loss in the quarter. We are seeing additional complexity associated with managing the VA and Shield risk on a combined basis now that we have achieved a balanced risk profile, which I discussed on the first quarter earnings call, and post the implementation of the new statutory requirement at year-end 2023 to reflect all future anticipated hedges on our balance sheet. We have a number of initiatives underway designed to address these issues, and one specific action that was implemented last month is stand-alone hedging for all Shield new business. Finally, as discussed on the first quarter earnings call, we are now in a position where capital strain from new Shield business reduces normalized statutory earnings, and this accounted for approximately 10% of the loss in the quarter. This dynamic contrasts with a capital benefit or a contribution to normalized statutory earnings associated with new Shield sales for most of our existence as a public company because of the historical risk offset provided by Shield to the variable annuity business. As Eric said, we have a number of specific initiatives underway designed to unlock capital and improve capital efficiency, and one of these initiatives is related to Shield new business. While our RBC ratio was at or modestly below the lower end of our target range, our liquidity position remains robust with holding company liquid assets of $1.2 billion as of June 30. We have a solid capital structure with no debt maturities until 2027, and annual non-dividend flows to the holding company cover most of our fixed charges. Moving to adjusted earnings results. Adjusted earnings were strong in the second quarter and approximately $60 million above our quarterly average run rate, driven by a higher underwriting margin and seasonal items, which include lower corporate expenses. There were no notable items in the quarter. Second quarter adjusted earnings were $346 million or $5.57 per share, which compares with adjusted earnings less notable items of $268 million in the first quarter of 2024 and adjusted earnings of $271 million in the second quarter of 2023. The underwriting margin was higher compared with the first quarter of 2024 and above our quarterly average run rate expectation. Net claims were favorable versus expectations as claim volume and severity of claims were lower in the second quarter. Corporate expenses were lower than our quarterly average run rate and were favorable sequentially. Turning to the sequential results by segment. Adjusted earnings in the Annuities segment were $332 million in the quarter. Annuity results reflect a higher underwriting margin for our income annuities, higher fees, and lower expenses sequentially. The Life segment reported adjusted earnings of $42 million in the quarter. On a sequential basis, results reflect higher net investment income, partially offset by a lower underwriting margin. The adjusted loss of $30 million in the runoff segment reflects a higher underwriting margin sequentially. Corporate & Other reported adjusted earnings of $2 million, which reflects higher net investment income and a higher tax benefit sequentially. To wrap up, we are committed to a strong balance sheet and an RBC ratio of 400% to 450% in normal markets. Our confidence in our financial position and ability to execute on initiatives to unlock capital and improve capital efficiency is reflected in our plan to continue our share repurchase program. With that, I would like to turn the call over to the operator for your questions.

Our first question will come from Wes Carmichael from Autonomous Research.

Ed, I was hoping you could talk a little bit more about your comments on basis risk. And we've seen a little bit more volatility in equities this quarter and a pretty significant divergence between smaller cap stocks in the S&P 500. So I'm just trying to get a sense of if you think that's going to be an ongoing drag in the near-term.

Yes, Wes. So the answer to the question is no, because we believe that basis risk, and our work would suggest that this will continue, that it is volatile from quarter-to-quarter but there is no reason to expect it to be either positive long term or negative long-term. So this was a quarter where we had it as the biggest driver of the results, the norm stat loss. But it is not something that I would be forecasting either positive or negative going forward.

Okay. That's helpful. Now the other.

Just one last thing to say. Sorry, Wes. Just to be clear though, we have never given quarterly guidance on norm stat earnings because we don't feel that it's appropriate to be that precise about a number that can move around. And so when we focused on our outlook for norm stat, it's been more in the context of the long-term statutory free cash flow disclosures that we provide that are multiyear in nature.

Yes. Got it. And I think you talked a little bit about your initiatives on capital, including reinsurance, but also it sounds like sales in Shields are consuming some more capital at this point. So is that a lever? Or would you expect gross sales to continue to grow and maybe just use the insurance on new business?

Sure. So let me start with maybe how I would think about conceptually what we're trying to accomplish with these initiatives. So all of the initiatives that we are looking at, and we did mention reinsurance and we mentioned it as both in-force as well as new business. They are all to benefit near-term capital generation and will not harm the long-term franchise value of the company. So the answer to the question about, is there any change in our view of growth and what we would like to accomplish, the answer is no. We're very excited about our Shield product. We're very excited about LifePath Paycheck as two examples. And you heard our comments on Life as well. So there is no intention to slow growth in our core business. Our thought process is similar to the actions we took back in 2022 to narrow the range of outcomes for market scenarios. So when we were looking at the environment in '22 with interest rates up a lot, we decided that it made sense to trade some of the upside cash flows in good environments to create a much more favorable outcome in an adverse scenario. What we're looking at today, and you've seen it in all of our statutory free cash flow disclosures over the years, is we show significant cash flows in out years. And there's always been a material improvement in the latter part of those projections versus the near-term. So what we're trying to do here is think about trading some of the strong cash flows in the future to create a better statutory cash generation profile today. So that's one way I would think about this conceptually. When you talk about the impact of new Shield sales, this is clearly a change versus what we've had historically as a public company because it has gone from a capital generator to a capital user.

Wes, it's Eric. I'll just add in here. These initiatives were started earlier in the year, so before the second quarter. I mean, obviously, we're tying in here now the notion that both changes to the hedging program and these initiatives, which are material, will get us back to the 400% to 450% that we want to be at. I mean we're slightly below it right now. That doesn't overly concern me because we've got $1.2 billion at the holding company. We're continuing to buy back stock because we feel comfortable here. But these initiatives, of course, will serve double duty. They will not only work on capital efficiency, as I already said, but they will also help us restore our RBC ratio to the 400% to 450% that we want to operate in.

Our next question will come from the line of Tom Gallagher from Evercore.

The first question is, how long do you think it's going to take to execute these reinsurance contracts? Will it take 6 to 12 months for those to begin or do you think it will happen sooner?

Tom, it's Ed. So our expectation is the combination of these initiatives and what we would anticipate from our results in the second half of the year, I mean, obviously, they can be volatile, but the combination of those two would get us back to our target range of 400% to 450% in normal markets by year-end.

Tom, it's Eric. I'll just add to this. Look, we've got a number of initiatives, right? So we're not dependent on any one, and these will happen when they happen. We started them previously. Some of the initiatives including some of the reinsurance initiatives could come on sooner than later but I expect various of these to come online over the coming quarters.

Got you. That's helpful, guys. And then the 2 other questions, if I could. One is just, after you would expect to fully implement these reinsurance arrangements, and let's just assume for a minute some of this volatility and hedge results, basis risk, et cetera, calms down and you have a neutral result. What do you expect the pro forma free cash flow generation level to be? And I get the point that it's going to be elevated now. It's going to reduce some of the future cash flow. But if you then said, okay, what is the normal run rate after you execute these? Just ballpark, I'm not looking for a precise number.

Yes, Tom, it's Ed. We plan to release the updated long-term statutory free cash flows in the first half of next year. We're returning to our standard disclosure schedule for this, unlike last year when we provided it in September due to several factors occurring in 2023. One reason was LDTI, and another was the transition to fully in-house modeling results. To give you an idea of what normal free cash flow looks like at this point is challenging. If you look at the historical data, you'll observe considerable volatility, but the average has been just below $400 million of normalized statutory earnings per year. This average was influenced by two significant years: a strong year in 2019 when we derisked equities and distributed a large dividend in 2020, and also 2022, when we generated about $1 billion in normalized statutory earnings due to favorable positioning in anticipation of a rising rate environment. So, there's been notable fluctuation, and the average spans over five years. We released disclosures in September, but I'd be cautious about relying on those given our current situation. However, I can't provide a specific number right now ahead of the free cash flow analysis as I believe that wouldn't be appropriate.

I can infer some insights based on your guidance for improvement related to RBC. My final question pertains to hedging. I acknowledge your comments about hedging new sales for Shield on a stand-alone basis. However, since a significant portion of the loss this quarter stemmed from the hedging performance of both Shield and variable annuities, are there any adjustments required? Is there something within the new framework that is causing increased volatility? What actions are being taken to address the volatility in both variable annuities and Shield? Additionally, what is your confidence level regarding a reduction in breakage moving forward?

Yes, Tom. There are a few questions there. I'd start by saying that we are exploring various ways to address the more complex system we face due to the new statutory requirement and the balanced risk profile between Shield and VA. It's important to note that we anticipated and desired this inflection point for our business, which we have discussed for years. The transition from the risk profile we had when we separated from MetLife to where we are now has been a significant achievement. This shift has introduced some level of complexity, particularly with the new statutory requirement. Consequently, our situation is more intricate than others because we manage VA and Shield together and are focused on statutory concerns, creating a unique scenario for us. Additionally, our results have always shown fluctuations, which I mentioned in response to Wes' question. What is different now is the change in the relative sizes of Shield versus VA, with Shield experiencing significant growth while VA has stagnated, as it mainly consists of legacy blocks. To illustrate, we've discussed how Shield has shifted from being a capital generator to a capital consumer. This quarter, the net impact of Shield on our norm stat results, factoring in funding growth and some volatility in the performance of the equity hedges related to the Shield liability, negatively affected our norm stat earnings by approximately $250 million. In contrast, if we had faced similar conditions in the past quarter, the net impact would have been around $100 million. This change stems from the shift from generating capital to consuming it with Shield, resulting in more pronounced volatility, which is influencing some actions we are taking to mitigate this issue.

Got you. And then that's super helpful. And then just anything on VA that you think you need to change from hedging?

Yes. I think the objective is to explore various ways to make things simpler. While it will never be completely simple, we aim to simplify processes. This will be a crucial factor in how we manage overall risk.

Our next question will come from Elyse Greenspan at Wells Fargo.

I guess my first question, you guys obviously have a good amount of capital at parent. Why not, A, just downstream some capital to help shore up the RBC position right away? And then B, I guess, can you just provide more details on why you guys, I guess, did not or choosing not to take a pause with the buyback program here?

Elyse, I'll start, and I think Eric probably is going to want to add something here. Just starting off, first of all, our capital return plan isn't dependent on cash from the operating company. So I mean, I think that's an important point to make. I would say that given our performance in the first half, which is off of our plan, it doesn't seem likely today that we would take money up from Brighthouse Life Insurance Company. But we'll see how the second half plays out before we make a final decision later this year. We have the equivalent of 85 RBC points at the holding company with no reliance on cash to cover fixed charges and no debt coming due until 2027. So I would say that where we are today with the first half results is the reason that I've said for years, that a life insurance company should always have a conservative cash position at the holding company. We don't feel the need to change our approach on repurchase because of the combination of where we are with holding company cash, where we are with the initiatives and where we think things are going to play out.

Elyse, it's Eric. Obviously, I agree with what Ed just said. I would just add, look, we're slightly below our targeted range, okay? I am not happy with our statutory earnings, as you can imagine. But where we stand from sort of a capital position, slightly below the normal operating range where we generally want to be, $1.2 billion at the holding company and no debt coming due until '27, I just don't see any reason that we need to downstream anything right now. We're just going to operate the way we operate right now, and we are going to work on both the initiatives that I talked about and the specific hedging initiatives that Ed talked about. So I think between the two of us, there's the answer.

It seems that there are multiple initiatives regarding reinsurance and possible block deals. Should we understand that you anticipate some benefit from your business in RBC during the latter half of the year, and that we might see several transactions as you aim to return to that range before the year ends?

I mean certainly, there should be some transactions, multiple. I don't know. We'll have to see how this plays out. I mean, look, when I said, and I think Ed reiterated it in his comments as well, 6 to 12 months here. Look, we don't want to be cavalier about just saying this, getting back to our 400% to 450% range will happen in the course of a couple of weeks. That just doesn't seem appropriate to do that. We've never operated that way and I've never spoken that way. So I'm saying, we feel comfortable that we can be within our target range within 6 to 12 months. Do I think we're going to be in our target range before the end of the year? I do. But I think it's prudent to throw a range out like I just did. And is there a possibility of more than one initiative coming to fruition before year-end? Yes, there is. I think that answered your question.

Elyse, I would like to emphasize the term initiative rather than transaction because I feel that transactions imply a lengthy process. I encourage you to consider this from a broader perspective and focus on initiatives instead of transactions.

Our next question will come from the line of Suneet Kamath from Jefferies.

Going back to RBC for a minute. I guess as I think about it for the past sort of 3 quarters, we've had some sort of RBC issue that came as a bit of a surprise to us, at least to us externally. I guess the first question is, did this, what happened here in the second quarter, come as a surprise to you? Like what pieces of the TAC decline were you sort of thinking, okay, this could happen? And then what pieces were sort of a surprise? And then relatedly, obviously, here in the third quarter, we've seen volatility spike. How confident are you that your RBC might not take another step down before you start to put in these initiatives to build it back up.

I would start by saying that approximately 70% of this norm stat loss was unexpected. We do anticipate basis risk, but we expect it to be neutral over time. This loss contributed to that 70% of our performance. Additionally, regarding the Shield, which has transitioned from being a capital contributor to a capital consumer, there's less margin to manage volatility. Specifically addressing your question about the current unsettled market environment, if you look back at our decision in the fourth quarter of 2022 to reduce our share buyback by half, we did that out of concern about credit. While credit spending has been fine, that concern was a factor for us. It wouldn't be surprising to assume that if we had reservations about credit, we were not particularly optimistic about the equity market either. Although that outlook might have been premature, our modeling indicates significant gains in a severe bear market. We're not wishing for that outcome, but we have adopted a more conservative approach during major equity market downturns than what we would typically consider our normal strategic positioning. This caution has resulted in some lost norm stat earnings in 2023 and year-to-date 2024.

Got it. Okay. So better positioned against market volatility. Okay. And then, I guess, now that we have LifePath Paycheck and we have Shield consuming capital, where are you in terms of just capital consumption due to sales? Like what is the strain level that you're at now? I think in the past, Ed, you talked about 5 RBC points. Is that significantly higher now with LPP and Shield on its own?

Yes, Suneet, I would say that with Shield, that is definitely a factor that we are considering as we look at these capital efficiency, specifically on the capital efficiency side of the initiatives that we've referred to.

Okay. And if I could just throw one more in. The higher costs that you talked about at the corporate level in the second half, is that just seasonality? Or is that some expenses related to some of these initiatives that you're considering?

Suneet, it's Eric. You're talking about second half costs being slightly higher than first half?

Yes, I think that's what you said.

Yes, our fourth quarter usually sees the highest performance, which is common among many companies. While some of the increase in expenses may relate to certain initiatives, I believe it is mainly due to seasonality. We've experienced two strong quarters, with the second quarter having the lowest corporate expenses we've ever recorded. Even though we will remain cautious with our spending, it's typical for expenses to rise a bit in the second half of the year, though I don't anticipate anything excessive. We will maintain strict discipline regarding expenses as we progress into the second half. So, I would attribute this mainly to seasonality.

Our next question will come from Wilma Burdis from Raymond James.

Could you talk a little bit about the trajectory for BlackRock flows? I understand you noted, a little bit lumpy. But is there any color you could give on the coming quarters?

Sure. It's Eric. We don't expect a lot in the third quarter but we are expecting more in the fourth. Obviously, this is still pretty new. We're bringing on a lot of new companies quarter after quarter after quarter. But we do have enough insights here for the next two, and I just gave you those.

Okay. I know you've discussed the buyback extensively, but could you share more about the pace? Is there any chance of a pullback or possibly even an opportunity to increase the buyback?

Sorry about that. I began a great answer without my microphone on. So as we have said in the past, we have not been forward-looking on what we're doing with respect to the buybacks. But I think it's reasonable to at least assume that it's going to be roughly the same for the foreseeable future.

Yes. Wilma, I would just add, we've not been forward-looking. We have said historically that we have been opportunistic.

Our next question will come from Ryan Krueger from KBW.

On the initiatives that you're looking into, I think most of the questions have been revolving around external reinsurance, but is internal reinsurance also part of the potential initiatives that you're looking to?

Ryan, so a couple of things. First of all, we already have a lot of capital efficiency, we believe, with our reinsurance captive, Brighthouse Reinsurance Company at Delaware. So we are benefiting from a captive in our structure. The second thing I would say is that the state of the reinsurance market today, we believe that we can avail ourselves of the attractive characteristics of certain structures without necessarily creating the structures ourselves. The final thing I would say is we are always looking at and considering different options. Given where we've talked today about initiatives where we expect them to have a material impact in a reasonable period of time, that's something also to consider versus the idea of the lead time and the effort involved in creating the type of structure you're talking about, especially if you feel like you can lever those structures already as they exist in the marketplace. Hopefully, that gives you some sense of where our head is on this.

Got it. And then maybe just on the holding company. Can you give us some sense of where you target minimum liquidity at the holding company, whether it be something like 2x fixed charge coverage or anything you can help us to think about what the minimum buffer you'd like to have there?

Yes. Ryan, it's Ed again. So I think this is a good quarter to remind people of what I have said repeatedly over the years, which is we don't give out that minimum buffer target because it's situational. And I've given you examples in the past of where are we in terms of debt maturities, right? Because the amount of cash you're going to want to have if you have a debt maturity in the next 12 to 24 months, it's going to be different than if you have a debt maturity that's beyond 24 months, for example. Where are you based on what might be happening in the market environment, what might be happening on an idiosyncratic basis, we're very happy to be sitting here with $1.2 billion of cash right now as we're talking about the fact that we're at or slightly below the low end of the target range in normal markets because 85 RBC points at the holding company is a very nice position to have. So I'm not going to give a number, but I will say that when you talk about these minimums that others have referred to, they frequently look at some coverage relative to fixed charges, right? And in my comments today and in the past, I've said we don't need holding company cash for fixed charges. We have most of those fixed charges covered by non-dividend flows, and also the amount of money that we have consistently taken up from New England Life Insurance Company, which is a runoff entity.

Our next question will come from John Barnidge from Piper Sandler.

My first question, can you talk about your exposure sensitivity to floaters should rates decline, please?

John, it's John. Our floating rate assets generally back floating rate or short-term liabilities. So any net margin impact from declining short-term rates should really be minor.

Okay. Great. And then my follow-up question. Is there an opportunity for external partnerships to alleviate some of the capital strain brought about executing on that opportunity for not just Shield, but now LifePath Paycheck? I don't know, maybe an external asset management partnership beyond just the reinsurance that you're exploring?

John, it's Eric. While we don't have any plans right now with respect to LPP, look, we'll consider anything. We're constantly evaluating opportunities. So I think it's a good question. We'll see what might happen in the future. I don't have anything really on LPP specifically, though.

I just want to add that we are very pleased with our position and I can't think of a better company to partner with on an initiative like this. We are really happy about it.

I'm not showing any further questions in the queue. I would now like to turn the call back over to Dana Amante for any closing remarks.

Thank you, Victor, and thank you, everyone, for joining the call today. Have a great day.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.