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Good morning all and thank you for joining us for the Corebridge Financial Inc. First Quarter 2025 Earnings Call. My name is Carlin, I'll be the operator for your call today. [Operator Instructions] And I'd like to hand over to our host, Isil Muderrisoglu. The floor is yours.

Good morning everyone and welcome to Corebridge Financial's earnings update for the first quarter of 2025. Joining me on the call are Kevin Hogan, President and Chief Executive Officer; and Elias Habayeb, Chief Financial Officer. We will begin with prepared remarks by Kevin and Elias, and then we will take your questions. Today's comments may contain forward-looking statements, which are subject to risks and uncertainties. These statements are not guarantees of future performance or events and are based upon management's current expectations and assumptions. Corebridge's filings with the SEC provide details on important factors that may cause actual results or events to differ materially from those expressed or implied by such forward-looking statements. Except as required by the applicable securities laws, Corebridge is under no obligation to update any forward-looking statements if circumstances or management's estimates or opinions should change, and you are cautioned to not place undue reliance on any forward-looking statements. Additionally, today's remarks may refer to non-GAAP financial measures. The reconciliation of such measures to the most comparable GAAP figures is included in our earnings release, financial supplement and earnings presentation, all of which are available on our website at investors.corebridgefinancial.com. With that, I would like to now turn the call over to Kevin and Elias for their prepared remarks. Kevin?

Good morning everyone and thank you for joining. The macroeconomic uncertainty and heightened volatility of these past few months remind us that we live in a complex, ever-changing world. At times like this, when conditions are uncertain, the mission of Corebridge to proudly partner with individuals, financial professionals and institutions to make it possible for more people to take action in their financial lives becomes more relevant than ever. Over 11,000 Americans are turning 65 every day, and the long-term impact of a market downturn can be significant for retirees and those nearing retirement. Our company stands ready to support our customers in times like these, and our strength and stability have enabled us to serve through many periods of volatility and uncertainty. Turning to first quarter results on Slide 3. We are pleased to report another strong quarter that reflects the continued benefits of our diversified business model, strong balance sheet, and disciplined execution. Corebridge reported operating earnings per share of $1.16 and ROE of 11.8%. We also returned $454 million to shareholders delivering a payout ratio of 70%. Our balance sheet remains resilient with holding company liquidity of $2.4 billion in a high-quality general account investment portfolio conservatively positioned with an average rating of single A. Central to our success are four strategic pillars that drive EPS growth and long-term value creation; organic growth, balance sheet optimization, expense efficiencies, and active capital management. I will review the results of the quarter in the context of each. First, organic growth, where the breadth and diversity of our product portfolio and distribution platform are meaningful differentiators. Corebridge had a very good start to the year, delivering robust premiums and deposits of $9.3 billion, although lower in total than last year's exceptionally strong level. We are seeing sustained customer demand driven by an aging US population and an adviser community that recognizes the value of annuities. In support of our growth, we are investing in digital capabilities, expanding our product offerings and deepening relationships with our distribution partners while also developing new channels. In individual retirement, we continue to benefit from favorable market and demographic conditions, producing premiums and deposits of $4.7 billion. We have consistently maintained a top-tier market position over the last 10 years as our broad product suite serves a wide range of retirement needs. We are also building momentum following the successful introduction of our RILA product in October 2024, delivering over $260 million of sales in the first quarter. We are now actively selling through our largest distribution partners, and after launching in California last month, are admitted in all the two states. Looking forward, we are well positioned in the fast-growing RILA market given our strong product, broad reach and long tenured relationships. Group Retirement continues to deliver steady periodic in-plan deposits driven by increased adviser focus and sustained client demand. Our employee adviser force is growing, and the investments we are making in adviser productivity are beginning to yield results with implant average enrollments up 9% and implant average deposits up 10%. Additionally, I am pleased to note that we added our RILA product to the out-of-plan offering, delivering approximately $50 million of sales in the first quarter. We also continued to grow our advisory and brokerage business with 5% AUMA growth year-over-year, even with lower equity market performance in 2025. Life Insurance delivered another quarter of attractive performance, including both strong sales and mortality results better than expectations. This business continues to perform well supported by our strong product positioning, digital and automated underwriting capabilities and expanding distribution. With nearly $1 trillion of gross in-force, this business remains a mainstay for Corebridge, providing stability during periods of market volatility. Institutional Markets, has continued to focus on growing our GIC program with discipline, and I am pleased to say that we have been successful with GIC reserves increasing 48% year-over-year. We also continue to capture attractive opportunities in pension risk transfer with a promising pipeline of transactions developing over the rest of the year. Across Corebridge, we are proud of the new business we are generating, the discipline we have maintained and the momentum we are building. We remain focused on targeting profitable business with double-digit IRRs even as conditions evolve sometimes rapidly. We have consistently demonstrated the ability to pivot across product and channel, dialing up or down to focus our efforts where risk-adjusted returns are the most attractive and customer needs the greatest. Turning to the second strategic pillar, optimizing our balance sheet, we have also made meaningful progress. Through proactive asset liability management and disciplined risk oversight, we are enhancing our financial strength while positioning Corebridge for long-term success. Bermuda continues to be an important part of our capital management strategy. And in the first quarter, we ceded approximately $2 billion in reserves to our affiliated reinsurer. We also remain active in exploring opportunities across our company to enhance capital efficiency and increase shareholder value. Moving to the third strategic pillar, we continue to drive operating efficiency and improve operating leverage. These efforts help support disciplined growth and financial flexibility. As we continue to transform Corebridge, we recently conducted a voluntary early retirement program for eligible colleagues in the US. Through this program, we expect to further reduce our expense base and at the same time, create capacity to invest in new skills and capabilities and reshape our workforce. We are also pursuing opportunities to enhance efficiency as we further digitize end-to-end processes that support our insurance operations. Additionally, we continue to make investments to further modernize our finance and actuarial capabilities. Turning to the fourth strategic pillar. We are committed to providing an attractive and growing return to our shareholders in a thoughtful and balanced manner while maintaining the flexibility to pursue growth and innovation. Over the last 12 months, through our share repurchase program, we have reduced share count by over 10%. Together, these four strategic pillars are helping us build a stronger, more agile company, and we are well positioned to generate sustainable growth and create long-term value for shareholders. Moving to our financial targets. I am pleased to note that Corebridge continues to deliver. Our expectation is for annual run rate EPS to increase on average in the range of 10% to 15% over the long term. Elias will provide more perspective on our outlook as well as an update on our market sensitivities. Corebridge achieved a run rate ROE of 12.3% in the first quarter, and we remain committed to our 12% to 14% annual target. The Life Fleet RBC ratio remains above target, even with recent market volatility. We also delivered a 70% payout ratio and are maintaining our target of 60% to 65%. Moving to slide 5. Since 2017, regardless of market cycle, Corebridge has been able to significantly grow our business while maintaining a strong balance sheet and consistent cash generation. To put that in numbers, over the last eight years, we have increased sales by over 50%. At the same time, our Life Fleet RBC ratio has consistently exceeded target, and our insurance companies have generated, on average, over $2.1 billion in cash annually. These outcomes collectively demonstrate the Corebridge value proposition. We are well positioned across a range of macro environments to continue creating shareholder value and to continue delivering for our customers. And now I will hand the call over to Elias.

Thank you, Kevin. I will begin my comments today on slide 6. Corebridge reported first quarter adjusted pre-tax operating income of $810 million or operating earnings per share of $1.16, a 5% increase year-over-year on a per share basis. Our operating EPS included two notable items this quarter, resulting in a favorable impact of $0.01. Details can be found in our earnings presentation. Annualized alternative investment returns were $0.06 short of our long-term expectations, largely due to real estate equity returns. Adjusting for notable items and alternative investment returns, we delivered run rate operating EPS of $1.21 and adjusted ROE of 12.3%. Moving to Slide 7, core sources of income, excluding notable items and the sale of our International Life business grew by 1% year-over-year driven by higher fee income and improved underwriting margin. Base spread income declined by 3% over the same period. This was driven by profitable growth, offset by the earning of Fed rate actions from the second half of 2024 and dynamics in Group Retirement as its earnings transition from spread to fee income. Sequentially, base spread income increased by 3%, this change was mainly driven by profitable growth, that outweighed the earn-in of fed rate actions, which was in line with our prior guidance. In total, the underlying fundamentals behind base spread income continue to be bolstered by 8% growth in the general account and attractive new money yields, which exceeded roll-off yields in the portfolio by approximately 100 basis points. Additionally, fee income improved by 1% year-over-year, largely as a result of higher account values along with our growing advisory and brokerage business. Underwriting margin improved by 12% year-over-year driven by more favorable mortality experience. Pivoting to expenses, first quarter general operating expenses for our Insurance businesses and parent company were 5% higher year-over-year, after excluding the sale of our International Life business. This largely reflects savings from Corebridge Forward, offset by costs attributable to business growth as well as higher compensation and benefit expenses. Our first quarter results reflect both planned investments in talent to support growth and timing of our annual performance-related equity grants. Adding to Kevin's earlier comments about the voluntary early retirement program, we currently estimate this will have a one-time cost of $85 million. As this program demonstrates, Corebridge remains disciplined, in our approach to expense management, and is committed to managing costs thoughtfully while supporting key strategic initiatives and business priorities. Next, I will briefly review a few highlights from each of our businesses. Details on the four segments can be found in our earnings presentation. As a reminder, results exclude the impact of notable items, variable investment income and the sale of our International Life business. While adjusted pre-tax operating income for individual retirement declined by 10% year-over-year, the fundamentals for this business remain strong and the market condition is attractive. As I previously shared, spread income was impacted by two factors we see as short-term in nature, Fed rate actions and our hedging activities to maintain alignment between assets and liabilities. Consistent with prior guidance, these items collectively reduced base spread income by approximately $50 million for the quarter. In addition, results were impacted by higher DAC and commissions related to business growth, also consistent with our prior guidance. For the general account, individual retirement generated net inflows of $1.1 billion, demonstrating the strength of our asset origination capabilities, product portfolio and distribution network, supported by ongoing strong customer demand. Group Retirement delivered another steady quarter with core earnings of $167 million. Of note, this quarter's base spread income benefited from opportunistic asset repositioning efforts. Given the ongoing shift in our customer base and resulting net outflows, we expect to see continuation of the transition from spread to fee-based income over time. As a result, net outflows were $1.8 billion, which is consistent with our prior guidance and in line with levels observed in the first half of 2024. We continue to be excited about the opportunities in this space especially as customers seek solutions to position their portfolios for retirement. And as such, we remain focused on efforts to grow the advisory and brokerage business. Life Insurance continues to be a strong performer. Adjusted pretax operating income increased by 23% year-over-year, primarily driven by more favorable mortality experience. In Institutional Markets, adjusted pretax operating income was virtually flat year-over-year. That said, total sources of income grew by 33%, supported by a robust reserve growth of 17% over the same period. As a reminder, earnings from this segment may reflect some quarterly volatility, but we expect earnings to increase over time as the reserves growth. Overall, Corebridge continues to benefit from our diversified and complementary portfolio of market leading businesses, which remains a key component of our shareholder value proposition. Moving to slide 8, where I will focus on three key areas of Corebridge, capital, liquidity and the balance sheet. Excluding $1 billion to cover the April 2025 debt maturity, Corebridge ended the quarter with $1.4 billion of cash on hand at the holding company, supported by $600 million of distributions from our US insurance companies in this quarter. This level exceeds the holding company's needs for the next 12 months, and I will note that we have no material debt maturities until 2027. Our insurance companies have a strong liquidity profile, driven by positive operating cash flows, liquid invested assets and contingent liquidity sources, all of which help provide ample flexibility to respond to a range of macro environments. Our insurance companies also remain well-capitalized with their respective capital ratios exceeding target. Corebridge continues to actively manage capital in a disciplined and forward-looking manner, maintaining a sufficient buffer to withstand market volatility and capture attractive growth opportunities. This active management includes our hedging programs, which continue to perform as expected. These programs help safeguard statutory capital, support our ability to deliver consistent cash flows and protect long-term value for shareholders. Further, they are important to our balance sheet management strategy and are designed to help protect it against market movements, including during periods of volatility like we're currently experiencing. Given the uncertain economic landscape and growing concerns about a recession, we understand there's heightened focus on insurers' investment portfolios. So let me pause here and offer a few highlights on our $223 billion investment portfolio. First and foremost, our portfolio is diversified across asset class, sector, geography and issuer, making it less vulnerable to systemic risk, and it's proven to be resilient across past credit cycles. Approximately 97% is invested in fixed income and short-term investments, the bulk of which consists of liquid high-quality bonds. 95% of our fixed maturities are rated investment grade. This portfolio reflects actions taken over the past few years to improve credit quality and return on capital. As our investment strategy is liability-driven, our credit portfolio is a mix of public, private and structured products put together with the goal of maximizing risk-adjusted returns, while maintaining tight alignment between our assets and liabilities. For public credit, we maintain a high-quality bias with significant exposure to investment-grade corporate bonds that provide liquidity and regulatory capital efficiency. Private credit allocations, the vast majority of which are traditional investment-grade corporate private placements benefits from illiquidity premiums and contain negotiated protective financial covenants. Corebridge believes this asset class will generally perform better during a downturn due to the protections built into the transactions. And structured products provide us with exposures to diversified collateral, approximately 95% is comprised of the more senior tranches with significant credit enhancements. Lastly, commercial mortgage loans are performing as expected, and we have maintained our conservative reserving approach. I will now wrap up with our latest sensitivities. We previously commented on the fourth quarter 2024 earnings call that 2025 EPS growth would be below our long-term expectations of 10% to 15% due to the drag from the earn-in of Fed rate actions. At that time, we anticipated EPS in 2025 would grow by mid-single digits from the 2024 base of $4.99. These projections assume annual equity market returns of 8%, alternatives improving over the course of the year to achieve our 8% to 9% target return by the end of 2025, and 50 basis points of Fed rate cuts in 2025. Given recent increased volatility, we are providing updated sensitivities to equity markets and interest rates. The net impact from an immediate 10% change in the S&P 500 Index on the combination of fee income and advisory fee expense is approximately $85 million over the first 12 months. Further, each 25 basis points move in SOFR impacts base portfolio income by approximately 2 basis points. This SOFR rate sensitivities lower than our prior guidance, due to a reduction in net floating rate exposures, over the past two quarters. Lastly, given the lack of deal activity because of current market uncertainty, we expect alternative investment returns to fall short of our long-term return expectations of 8% to 9% in 2025. For the second quarter, we expect alternative investment returns will be approximately half the level in the first quarter based on the information available to us at this time. In conclusion, our proactive balance sheet management supported by strong reserving practices and risk controls has enabled Corebridge to pursue profitable growth across multiple cycles, while delivering on financial and capital management goals. Corebridge will remain disciplined in managing our financial flexibility, balancing prudence with the agility to invest in the future. Now I will turn the call back to Isil.

Thank you, Elias. As a reminder, please limit yourself to one question and one follow-up. Operator, we are now ready to begin the Q&A portion of the call.

Thank you. We’d now open the lines for Q&A [Operator Instructions] Our first question comes from Dan Bergman of Cowen. Dan, your line is live

Thanks. Good morning. Your base yield took a nice step-up quarter-over-quarter, particularly in the Group Retirement segment. I know you mentioned some actions you took to reposition the portfolio this quarter. I wanted to see if you could just give a little more detail around those actions. And given you previously talked about some opportunities to optimize the asset portfolio. I guess what inning are you in for that process? And as we look ahead, how should we think about the ability for you to take further steps to improve yields in the coming quarters?

Yes. Thanks, Dan. Appreciate the question. Look, I'll start, and then I'll pass over to Elias. As you noted, the sequential increase in the Group Retirement based spreads and spread income kind of as in the case of individual retirement reflects some opportunistic asset repositioning, which is really part of our regular active portfolio management strategy that Elias will touch on in a bit. But I think what's important to take away is that we don't expect a change in the trend over time. We see this business transitioning from spread to a fee-based business. Fee income is already the predominant source of revenues for that business. There are going to be some variances quarter-to-quarter, driven by sort of one-time items and some seasonality related to where we credit interest. But we think this is a positive trend over time from spread to fee income. Now in terms of the yield questions, I'll pass that over to Elias.

Yes. Thanks, Elyse. Look, we continue to see very robust opportunities for pension risk transfer. For quite some time, we've been focused on full plan terminations, which are -- transactions generally in the region of $500 million to $1.5 billion. We carefully underwrite these. They are essentially like little mini M&A transactions where we have to carefully evaluate both liabilities and asset strategies. And pension plans continue to be well funded. Generally, these transactions result from committed corporate risk management strategies. They, like M&A transactions are not predictable. We don't necessarily expect them to land regularly quarter-by-quarter. But the pipeline both in the U.S. and also in the U.K. continues to be as strong as we've seen it. And we don't necessarily see any indications that volatility is going to have a significant impact on timing or pursuit of these transactions.

Thank you very much. Next question comes from Joel Hurwitz of Dowling and Partners. Joel, your line is now open.

Hi, good morning. First, a couple on expenses. Expenses in individual retirement and corporate were up from where you've been running. How much would you attribute that to seasonality? And then on the voluntary separation, any expectation for expense savings running through operating earnings?

Hey, Joel, it's Elias. So with the components of what you're seeing in Individual Retirement and the parent and the total across the board is seasonality. Typically, the first quarter is higher tied to the Rule of 65, which is people based on age and years of service. If they meet the 65 equity grants are expensed upfront versus over three years. And this year, we had a higher dollar amount of equity grants meeting the Rule of 65. So that's a component of it. And the second component are payroll taxes and 401(k) matches are kind of front-loaded and actually progress in the year, those will come down. So there's definitely seasonality there. I would say about 50% of the increase in IRR is tied to that -- on that part. With respect to early retirement program, that's kind of one of the initiatives we are undertaking to continue to modernize our organization and improve our operating leverage. The expectation is a portion of the savings out of the early retirement program will drop to the bottom line and a portion we're going to use to fund investments in new capabilities for the next leg of our journey. We do expect that to benefit our expense run rate, but given the timing of when people depart, it will not fully earn into the run rate until the beginning of 2016.

Okay. Very helpful. And then just a second one. In group, you've been talking about growing your out-of-plan business in the advisory and brokerage business. Can you just provide an update on the organic growth that you're seeing there? And then what sort of traction your advisers are gaining?

Yes. Thanks. Appreciate the question, Joel. I mean Group Retirement, as you pointed out, and as I mentioned, is not solely a spread business. And we're seeing very attractive opportunities in the out of plan and the advisory and brokerage space. Overall, our adviser force is growing, and the advisers support both the in plan and the outer plan strategies with in plan having advisory options as well. Our advisory and brokerage assets are now $16 billion. They're up 5% year-over-year. And if you look at the combination of the auto plan plus the advisory and brokerage assets, it's a significant earnings base at $99 billion. We've been investing in adviser productivity, and as my prepared remarks, we're seeing some improvements in the productivity in terms of enrollments and deposits. And maybe the most important numbers of all is of our 1.9 million customers in this business, 1.6 million of them are still implant-only customers. And our advisers are building relationships with them in order to prepare for that important movement of household asset consolidation. And so we're in the early stages of the change in the trend from spread to a fee-based business, but the signs are very positive across the board.

Okay. Thank you.

Yes. Thanks, Suneet. Good morning. Yes, what we said last quarter, we do expect higher levels of fixed annuity and index annuity volumes to be exiting their surrender charge period, and that is, in particular, in the second half of this year. And we see this as kind of natural given the significant growth in the whole portfolio over the last few years, but in particular, since 2022, when the rate environment really started to change, and so this increase in volumes exiting surrender charge periods, it's not going to be consistent quarter-to-quarter. It really reflects where large volumes of products were sold in the past. On the other hand, in our experience, surrender rates reflect really where yields and credit spreads are at a given time. And over the last few cycles, we haven't seen anything that's outside of our expectations along those lines. And we've seen generally that when surrender rates are higher, usually, the conditions for new business are also very attractive, which is important as really what we're focused on is the long-term growth of our general account net of any surrenders. So it's not necessarily -- I mean, we look at options as to how we may preserve surrenders, but more importantly, we look at new business pricing and new business pricing is very attractive. And so irrespective of the surrender behaviors and activity, we expect that the general account and spread income will continue to grow over time. And the environment continues to be very robust for our entire range of individual retirement products, index annuities, fixed annuities, and most recently, our RILA, which is off to a great start.

Got it. That's helpful. Thanks. And then on Slide 5, I thought that picture of cash generation over time was pretty impressive. But if I look at the data, it looks like it's been relatively flattish at that kind of $2 billion-ish level? And I think on the last call, you talked about increasing it by 10%. So, I just want to understand what's different now that allows you to grow it? And should we think about that 10% is really just a bump up? Or is that more of a -- on an annual basis, you want to increase that by 10%? Thanks.

Hey, Suneet, it's Elias. So, if you look back historically, there is a different kind of strategy at the time and the historical numbers are a bit normalized. And you could find that in the S-1 in our public filings. I must talk now about the strategy since we've gone public. Our strategy has been to grow earnings and increased cash generation to deliver on the 60% to 65% payout ratio. Our target for this year is to grow the insurance company dividends by 5% to 10%, and we believe we're on track to delivering it. And sitting here today, despite the market volatility, we remain confident in our expectation to deliver the increased 5% to 10% in dividends from the insurance companies and deliver on our payout ratio. And we'd expect that to continue to grow over time as we grow the profitability of the business.

Okay, that’s helpful. Thanks.

Thank you very much. Our next question comes from Cave Montazeri with Deutsche Bank. Cave, your line is now open.

Good morning. My first question is on your guidance for base spread income. So, you've reduced your sensitivity to short-term interest rates. And I think in your prepared remarks, you mentioned that it was mainly due to would you see your exposure to floating rates. So, I guess I'm wondering, a, is that the right answer? And then two, how are you thinking about your hedging philosophy and how maybe that could impact your sensitivity going forward?

Yes. Thanks, Cave. Good morning. Look, maybe I'll unpack the IR spread income story a little bit for you. So, as we just talked about, right, the first quarter spreads and spread income, as in the case of Group Retirement did benefit from some asset repositioning, which helped to offset the impact that we had guided to relative to the fourth quarter Fed rate actions and how they affected particular SOFR. And looking ahead, we actually continue to expect that base spread income will grow over time, even if there is a little bit of marginal spread compression, we provided the SOFR cut sensitivity and just remind you that those are generally short term in impact. And we have lowered our sensitivity since the fourth quarter from the 3 bps to the 2 bps, but really the overriding driver of spread income is ultimately business operations. And they are very powerful drivers on the macro side that I'm not going to necessarily repeat, and current new business pricing is at or above our medium-term return expectations. The investment environment is good. Our new money rates are still 100 basis points over the roll-off. And so, it's not going to be a straight line. There'll be a little variability quarter-to-quarter. But the fundamental trend is that the general account -- we're growing the general account reserves over time and base spread income will grow over time irrespective of underlying spread dynamics, which will be an important contributor to our growth targets. I'll hand it over to Elias to talk a little bit about the hedging question.

Yes. And listen, from the hedging question, we've talked in the past like one of the aspects of how we manage the balance sheet is the ALM profile of the balance sheet and our investment strategy is liability-driven. So we adjust the asset side to what we see on the liability side. And what we have done is reduce our net floating rate exposure. We've held floaters in the portfolio for 2 reasons. One, we find them as an attractive asset class and on a relative value basis, at times, they've offered better returns than fixed rate bonds. And separately, we've used them as a tool to manage the ALM profile of the balance sheet. So when rates increased in '22 and liability durations came in significantly we used, in addition to derivatives, we used an increased allocation to floaters to shorten the duration of the assets. So -- and we will continue to manage it within that discipline, and as a result of what's played out in our portfolio, we've reduced the floating rate exposure. So if you recall, at the end of September when we first talked about it, we said about 8% of the investment portfolio was in a net floating rate position. That's not about 5% as of the end of March from it. And that's been the driver behind why the sensitivity has improved since then. And that's also kind of consistent to what we hinted back at the third quarter earnings call when we gave the initial sensitivity that we expected that sensitivity to decline over time. So it's playing out kind of consistent with what we expected. And just to echo Kevin's comments, our guidance on spread income in Individual Retirement is we expect it to grow over time. The business dynamics is great. If you look at the new money yields relative to what's rolling off and I quoted it in my script, this quarter, we had 100 basis point differential that's kind of accretive. And if you look at what happened to spread the income in the quarter, while the earn-in of the 100 basis points was consistent with the prior guidance we gave you, it's what we were able to mitigate it with growth in the business side, as well as some asset repositioning to take advantage of opportunities to improve returns in the investment portfolio within our risk and capital parameters.

Thank you. That's very helpful. If I can pivot to technology, just want -- wonder if we can get an update on SimpliNow and some of the other new tech initiatives you have going on. I think in the past you mentioned at least for Life Insurance, that 80% of new policies were other decisions. Just wondering, if you can expand that maybe what you're seeing in other segments, and how you're using digital capabilities to further improve your process, not just on the cost side, but also to drive top line growth?

Yes. Thanks, Cave. Look, we're really proud of our Life Insurance business, and we have been investing in that business over a number of years, starting with our data strategy and then ultimately building into our digital capabilities and automated underwriting, which is ultimately what's driving I think a lot of the success there. The work we've done also in repositioning our product strategy was, kind of, hand in glove with that and focusing on products that are less interest rate sensitive and also maybe a little bit less pricing sensitive. And we're pleased with the strong position that we have there. Elias talked about the fact that after our voluntary early retirement program, I mean, part of those savings will drop to the bottom line, but part of those are being reinvested in the business, important investments that we're making include further investments in our data and digital and automation strategies. We're starting to see some of the benefits of those in our Retirement Services business. You'll see some of that in the adviser efficiency numbers that I quoted in my prepared remarks. And then we're also adopting a strategy of enhancing our capabilities in our finance and actuarial and our other administrative support activities. And so the benefits of the data, digital and automation strategies, we're in the early stages of exploring tools like advanced practices and artificial intelligence, but that's something that is on our path, and we do see it as an important opportunity to increase our scalability and our operating efficiency and operating leverage over time.

Thank you.

Thanks very much. Our next question comes from Alex Scott of Barclays. Alex, your line is now open.

Good morning. The first one I had for you is on the relationship with Nippon. I think the last time you were asked on one of these calls about the relationship, you hadn't gotten through some of the regulatory approvals and so forth. It's hard to talk more about it. And I was interested if you had any more color on just the way that your two firms may work together in partnership?

Yes. Thanks, Alex. I appreciate the question. Look, we're very excited about our relationship with Nippon Life. They've joined the Board. They're already contributing there. We're both large diverse companies that -- we will operate in very different markets and we have a lot that we can learn from each other. We're taking a structured approach to looking at what are the various areas in which we may be able to generate some mutually beneficial commercial activities, and we're working our way through evaluating those opportunities. And I'm sure that both companies will be excited to come forward when we have something significant that we've identified and that we're in a position to announce.

Got it. That's helpful. Second one I have to you is just going to the asset portfolio. And I know you mentioned some in your opening remarks. I just wanted to ask about, if there's anything you could provide that would help frame for us, how you'd expect the portfolio to perform in different types of scenarios if we were to get some credit event. And the reason I ask is just there is a little bit more invested average just given you're more of a fixed annuity company. And this -- between now and the next time you have an earnings call, the environment could potentially change more significantly. So I just wanted to see if we could get a feel for how you'd expect that to perform?

Yes. Thanks, Alex. Look, I'll hand over to Elias in a minute here, but I'll just start off with, look, we're very comfortable with our overall asset portfolio and our credit exposure, and it reflects both years of actions to improve the quality, but also the fact that we very much focus on an asset strategy to support our liability portfolio. And I'll let Elias go through the characteristics of the portfolio that put us in this position where we're comfortable with the exposure.

Hey, Alex. From a credit perspective, credit risk is like one of the top risks we proactively manage in our portfolio. And part of our strategy, in addition to be liability-driven is to maintain diversification, so we don't have concentration risk and maintain a high-quality portfolio. And right now, 95% of the book is investment grade, and we've migrated the average credit rating of the fixed maturities to a single A over the last couple of years. And we have a high allocation to liquid assets. So we do subject the portfolio to various forms of sensitivities and stress testing, and that kind of helps inform us on decisions we take. We feel comfortable from a credit loss perspective. On the portfolio, our biggest allocation is to public credits. On the private side, the largest allocation is the traditional investment-grade private placements, which is not a new asset class for the insurance companies and not for us. And those come with strong financial covenants that gives us protections if there's stress. In addition, on structured products, we tend to be at the top end of -- or the higher end of the capital structure, which gives us significant enhancements. And we're proactive. If we start seeing things that are going sideways, we'll take action, exit positions to cut our losses before things play out. And we do carry a pretty meaningful allowance for loan losses on the loan side. So we feel comfortable with it. So from the loss perspective, we feel comfortable. There's always risk on rating downgrades. But again, we've got tools available to us to mitigate that impact. And finally, kind of remember, we're in a very -- we have a strong balance sheet. Our RBC at the end of the year was 4.26%. You combine the balance sheet with the high credit quality portfolio with diversification and conservative reserving on the portfolio, and we kind of feel comfortable with where we are right now.

That’s really helpful. Thank you.

Thank you very much. Our next question comes from Jimmy Bhullar of JPMorgan. Jimmy, your line is now open. Jimmy, please also check your lines likely muted.

Hi. My questions were actually answered, and I pressed star-1, but I guess it didn't go through. Maybe I'll ask one on just your RBC ratio. It's still above 400%. But I wanted to see if you saw some decline in the direction that you’d see in the quarter given the most in the market? And just moves in interest rates as well?

So, hey Jimmy, it's Elias. I'm happy to answer. So there is some sensitivity to rates in equity markets from an RBC perspective, it's different than the sensitivities on GAAP operating income because on an RBC basis, you've got to think through the impact available as well as required capital. But given the diversification in our balance sheet as well as the hedging programs we have in place, that impact is limited. And you've got the proof points with slide 5, if you go back because some of those were during periods of volatility in the market and RBC was maintained above 400. The other thing I would say around market volatility and the impact of RBC, that's kind of temporary and short term. And as markets reverse, the impact reverses as well with it. So to us, we look at that more as a temporary impact for us, and the impact is limited given the hedging and the diversification. Credit to us is more meaningful from an RBC perspective, and that's what we try to proactively manage to.

Okay. And then I think, Kevin, in his remarks and you as well had given out some numbers on sensitivity to the weak market and potentially weak alternative investment income, and you were referring to adjusted earnings, should we assume that the impact on cash flows is similar? Or is it higher or lower for some?

So the impact, if you think about it in terms of fee income, that will be mirrored on the cash flow side. If you think about it in terms of alternatives, that's more mark-to-market impact in earnings versus distributions. That being said, we remain confident in the cash flows in our business. And we've demonstrated over time, stability in the cash generation, given the diversification in the business model. And sitting here today, we remain confident in being able to deliver on our payout ratio target for the year.

Thank you.

Thank you very much. Our next question comes from Tom Gallagher of Evercore ISI. Tom, your line is now open.

Good morning. First question, just on the portfolio repositioning and then I had a follow-up on risk transfer. But on the portfolio repositioning, I guess, two-part question. One, how involved are you on the reallocation considering your outsourcing most of the portfolio, individual fixed income decisions to Blackstone and BlackRock. Are you actually involved in the bond by bond trades between them? Or is it more of a broader overall portfolio allocation type of responsibility you now have? And then can you provide a little more color for if you're selling down your floaters, what are you repositioning that into? Is it private credit? Is it something else? A little bit of more elaboration on what's going on beneath the surface here? Thanks.

Yeah. Thanks, Tom. Look, I'll start. We control our investment strategy. We have very powerful origination partners and they're an extension of what our capabilities are. But the strategy is ours, the risk appetite is ours, and we provide very clear guidelines, and allocations, and instructions, and are actively managing the portfolio through our partners. But I'll hand it over to Elias, to address some of your other questions.

Yeah, Tom, it's Elias. So to Kevin's point, we drive the decisions around repositioning as well as the decisions around where money gets invested. There are different managers, BlackRock, Blackstone, but there's also -- our own internal team is still sourcing assets for us. It's based on what they -- they get the allocations based on what they think they could source for us and how that fits within the liabilities we offer. With respect to the repositioning, we did in the first quarter, they got reinvested in combination. Some of it was public credit. Some of it was private credit. And we sold down some lower-yielding bonds and reinvested the money.

Got you. Thank you for that. And then just on risk transfer, I guess we've had two recent deals in the market, one, VA, another pretty big Life deal, I would describe them as the pricing on VA was low. The pricing on high was pretty robust. How important is the pricing versus the view of tail risk? Because I guess when I look at your VA block, I don't really think about it as being high risk. It seems like pretty low risk, even though it's a high-risk category, I guess you can call it. So just curious, how you're approaching those two different businesses when you consider risk transfer? Is it really about optimizing shareholder value or reducing tail risk?

So any transaction that we would pursue has to be accretive on a risk-adjusted basis, just repeating what I said before. And that means both in terms of price and structure. Credit protection is important, price is important. And there's -- we're constantly looking at what is the value-add opportunity for the company.

And Tom, we do look at what the company would look like after that transaction. So it's really looking at -- you factor in the tail risk and improving the risk profile of the balance sheet as long as what you're getting for it in exchange. And we need to be a fair price in exchange.

Got you. Thank you.

Thank you very much. I'd now like to hand back to Kevin Hogan. for any further remarks.

Yeah. Thanks. Look, I just want to take a moment here to thank our people and our partners, for being a source of strength for our customers, supporting them in both good times and bad. What we do matters and moments of uncertainty highlight the importance of how we help people take action in their financial lives. Thanks for your questions. Thanks for joining us today. And have a good day.