Morning, I'm Tracy Benguigui, Insurance Analyst at Barclays, and I'm very pleased to host a Fireside Chat with Deanna Strable, CFO of Principal. How are you?
I'm doing great, Tracy. Thanks for having me today.
I thought maybe we could kick off with some opening remarks about what you're seeing in the market.
Yeah. So, for those of you that may not know Principal as well, we are a global financial services company, really focused on three businesses: asset management, globally, so, U.S., emerging markets, as well as, developed countries across the globe. Retirement, primarily in the U.S., and then, benefits and protection. So think of the group benefits products, insurance solutions here in the U.S. as well. You know, I think coming into the year, obviously, at the beginning of the year, a lot of macro headwinds, those are starting to turn into some tailwinds. Interest rates are helpful over the long term, but in the short term, it is likely having some pressures on flows in our asset management business, consistent with the rest of the industry.
But we are starting to see a little bit of, kind of green shoots that maybe looks like the second half of the year may show some improvement relative to the first half of the year. But even given some of the, the flow issues, we really do feel really good about our, our outlook. And long term, we feel very well positioned to our long-term targets of 9%-12% EPS growth, 14%-16% ROE, and 75%-85% free cash flow. We have changed our business mix a little bit in the last couple of years. We exited our retail life business, we exited our retail fixed annuity business.
So our general account and balance sheet is smaller, but really are focused on those places where we think we can, we have differentiation and can win and grow above the market in those lines of business. So I'd say those would be my opening comments, and we can go to Q&A.
Okay, I'm going to build off of that. You did reiterate the 75%-85% free cash flow expectation. So you did have lower buybacks in the first half of the year, and tighter HoldCo cash, $800 million, which is your minimum threshold. So can you just walk us through how you think you'll achieve that metric by the balance of the year?
Yeah. So, we do see seasonally lower free cash flow in the first quarter, really driven by, dividends up from our nonlife subsidiaries, as well as bonuses and cash flow relative to that in the first quarter. We also saw really good organic sales opportunities, specifically around pension risk transfer in the first quarter. So that further pressured the free cash flow in the first quarter, but we're not changing our full year expectation on pension risk transfer. So again, it's more of an acceleration rather than an increase in that. We went into second quarter and actually saw free cash flow above 100%. So year to date, I think free cash flow has been really around that, that level.
Buybacks were slightly lower, but it was really given the banking crisis and the real estate, resulting real estate cycle. We wanted to be a little bit cautious, and ultimately, really will look to deploy that as we go into the second half of the year.
Great. So your RBC currently sitting around 407%, and you did experience some positive credit drift. So let's just play out a scenario. If credit drift would shape up to be more negative built into the outlook, what would your RBC look like? Would it still be about 400%?
Yeah, so we're going to manage our dividends out of the life company to ensure that our RBC is at or above that 400% level. So you probably wouldn't see impact on RBC. You'd probably see an impact on, again, the dividends to the HoldCo and ultimately the deployment out of that. Having said that, you did mention we did have slightly positive credit drift in the first half of the year. But when you added in the losses, you know, we were right around a $50 million capital impact from the balance sheet, which is actually pretty in line with what we would expect. And so again, I'd say we're still going to target that 400.
We still feel good about that 75%-85%, and don't really see a significant impact from our credit drift as we go through the rest of the year. You know, I think one of the things I want to focus on there, our balance sheet is smaller. It came down about 25%, so any impact from that will be muted. We also have a very high quality, so we're exit portfolio, and it's very much aligned with our liability structure, so we're not core sellers in those situations. And so again, as I did reiterate, the 75%-85% feels good, and we do feel good about that RBC ratio at the life company as well.
Got it. In your opening remarks, you did talk about some of the strategic updates you've done, and not only have you completed your ULSG/FA deal, but also closed- block. Is there other risk transfer opportunities that you may be contemplating?
Yeah, I'd, I'd say, you know, the first thing I would say is we, we constantly evaluate and manage our portfolio. To go back, at one point, we were in the residential mortgage business, we were in the medical business, we were in Australia. And ultimately, we're going to enter and exit markets when we don't see we can bring value to our customers and value to our shareholders. Having said that, the, the recent transactions really was a culmination of a, a very intensive analysis of our entire portfolio mix. And so sitting here today, we feel really confident.... Don't see anything on the horizon. Obviously, we'll look for those opportunities, but I'd say any additional one in the short term would be modest and much smaller than what we did contemplate here in the last 12 months.
Great. Maybe just in regards to commercial real estate, you shared some good disclosures. I'm wondering, just within maybe office loans that are greater than 90% LTV currently, of those loans, what are the dates of the last appraisal or internal valuation? What is the debt yield on those loans?
I don't have the debt yield, but I think one thing, we only actually have one loan that has a greater than a 90% LTV, and it's fully reserved for. So any loss on that would not have any additional capital impact. It's already come through the balance sheet there. So I come back to a very high, high quality, I'm sorry, commercial mortgage book. Also a high quality office book. We are reevaluating internally those valuations quarterly, and we're committed to continuing to look at that office portfolio every quarter, at least by the end of the year, and then we'll reevaluate where the market is at that point. Having said that, we've actually brought down our values around 25% from the peak.
Actually, if you compare our values to kind of third-party indexes, we're, we're more than 20% less. So when you see our LTVs, they're based on a very current valuation. I think our office LTV is right around 57%, even given those revalued levels. And as mentioned, there was one loan with an LTV greater than 90%.
You know, there's been a lot of focus about upcoming office maturities, but I'm wondering if I could ask you maybe a question that's less, you know, readily available. The tenant lease expiration, is there anything to come on in 24 months? Otherwise, we could talk about upcoming maturities.
Yeah, I don't— There's nothing that I'm concerned about from that perspective. You know, obviously we're taking a look at anything that could be impactful to us from a capital perspective or risk perspective over the next, you know, 2023 and 2024, have looked very closely at those. And again, even to your question, nothing that I'm concerned about relative to that.
Just looking at your businesses, you have simplified your financial reporting in a couple of segments, you know, Principal Global Investors, Principal International into Principal Asset Management, the retirement into one segment, U.S. Solutions for Benefits and Protection. Do these moves improve your expense structure? Can you share examples of how that simplification may have enhanced leadership or investment or client-facing opportunities?
Yeah.
with segment reporting?
Yeah, a couple of things there, and I'll go through a few of them pretty quickly and then probably spend a little bit more time on the Principal Asset Management one. So, the Benefits and Protection is honestly just a renaming. As we got out of the retail life business, focused our life business more on business owners, we felt that Benefits and Protection better described the businesses that were within that. So nothing relative to that other than a rename. On the retirement side, we used to have a retirement fee and a retirement spread. What was happening again after we acquired Wells Fargo Retirement and Trust business, that was becoming very blurred, and we were actually almost manufacturing a split.
And so combining that into one segment more reflects how we're managing that business and how Chris Littlefield thinks about how the economics and the business works together. And so again, that much more is reflecting how we are managing that business and going to market. The one that probably has a little bit more explanation needed is we took what has historically been Principal Global Investors, and this is our global asset management business, Principal International, which was pension, retirement and asset management in emerging markets, and we brought that under common leadership. At this point in time, in our supplement, you can still see the financials of those separately, but over time, I think that will move as well.
We do think there could be some expense synergies coming from that, but that was not the significant driver of that change. Really, the driver of that was listening to our customers, and we think ultimately more revenue opportunities as we go to market as a consolidated basis versus separately. So what we were seeing over time, really driven by, kind of the maturing of those emerging markets and the sophistication of our clients, is the actual investors in those emerging markets were much more interested in global products rather than just very locally based products. And on the flip side, as we talked to institutional customers around the globe, they actually were interested in, actually some of those very specific emerging market capabilities as well. And so we're bringing those together really to drive two fronts.
One, as we think about best practices for those investment teams, making sure we're leveraging those across both the local and the regional and the global teams. But then more importantly, as we go to market and listen to the needs of the customers, we want to make sure we're bringing all we can to bear as we meet the needs of both those local and sophisticated institutional customers as well. And so I think over time, that's really where we're focused. You know, it's not going to be a big bang, it's going to be as we build, but that really was the driver of those changes.
... What is your outlook on fee compression and any offsets you can make, like growth in your customer base on the expense?
That's specific on the retirement?
On retirement.
Retirement side.
Yeah.
Yeah. So, you know, as we look specifically at our retirement, think of that more probably specifically to our record-keeping business. And so it's more primarily defined contribution, but there is some defined benefit, ESOP, and other items in there as well. We've seen a modest fee pressure. Think of it as 1-3 basis points per year perspective, and really driven by a couple of things. One is, as our clients look to their lineup, their investment lineup within the 401(k), they're more and more looking to add lower cost options, and those lower cost options then translate into revenue, many times also offset by the expense side. So from an actual earnings perspective, not as impactful, but from a revenue rate perspective, you'll see some of that impact.
The other impact that you have is one, just given competition, you will see that what we bring on new sales is at a lower sale rate or a lower fee rate than our legacy block. And over time, we have to reprice some of that legacy block as well. And so again, we do think it was built into our long-term revenue outlook for that business, a continuation of that fee compression. But the other thing I want to keep in mind is, for every $1 of revenue that we see in that business, it contributes $0.30 to other parts of the complex. Think of it as asset management. Think of it as a bank. Think of it as our annuity products, our non-qualified business, and the protection.
We see that growing as we continue to focus on those opportunities as well. But it is a competitive market. We are a market leader in that, but we do think there will be continued competition and some level of fee compression.
Also, seeing with retirement, we see cash flows impacted by large case lapses. You've already highlighted to us as a source of volatility that will likely not subside in the second half of the year. What gives you confidence that your investment performance relative to indices could turn those around in the second half of the year? Why wouldn't we see the retail flow go to positive product?
Yeah. So, really what you're highlighting there is more our account value net cash flow than our AUM net net cash flow. And so if you think of our record-keeping business, there is some of that account value that is using third-party investments. Some of that is to our own Principal Global Investors. And much of that volatility is actually being given by more of the expected shock lapses that came from our acquisition of the Wells Fargo business. What I would say there is, it's happening probably later than normal, primarily due to COVID. Those same sponsors were a little preoccupied during COVID, went ahead and transferred that business to us. And then also now they're assessing where they think the right fit for that business is.
In total, we're still tracking at or better than what we thought we would get relative to that acquisition. But it's some of that natural movement is more elongated and could continue for over the next, you know, 12 months. What we are seeing positively is the pipeline to new transfer, both on the small to medium-sized business as well as the medium to large business. So also, one of the things that we have highlighted is that our SMB net cash flow, so small, medium-sized business, net cash flow continues to be positive. Again, that happens to be higher revenue, ultimately driving really good growth. But you will continue to see natural volatility, both positive and negative, in that large case market on a quarterly basis.
Ultimately, you know, we want all of our, our segments to have positive net cash flow, but the nature of the business on large case is there will be volatility. Our focus is driving revenue growth, driving earnings growth, and some of those larger case opportunities were pretty low revenue, and so not as impactful to the economics of the business.
Moving on to specialty benefits, how are you approaching Q1 renewal, thinking about some of the favorable experience you and others have seen within disability and group life?
Yeah. So just a little bit of a background on our group benefits business. So the first thing I would say is very diversified by product. So about half of our premium actually comes from dental, as well as the remainder with group disability and then a growing supplemental benefit perspective. But probably more different from the industry is we are almost entirely focused on the small to medium-sized business. So our average case size would be less, you know, 30-40 lives. And because of that, 1/1 is not as critical as, those businesses that focus in the small to, large business or mid to large business. Our renewal dates are slightly higher for 1/1 , but are actually much more spread out throughout the year.
The other thing that I think is important is because of that nature, more of our business, almost all of it, is one-year renewable. Whereas if you as you go up market, that can be more three-year rate guarantees, five-year rate guarantees. So any impact, positive and negative, takes longer to reflect in the rates. And so, you know, we have a natural process to ultimately reflect any of that experience in our rates.... Our loss ratios in that business, like you mentioned, has been, slightly better than what we would expect. We're seeing very good experience in our life business. We're seeing very good experience in our disability business, which is partially offset by some higher utilization in our dental business.
And so as we think of a pricing strategy, we are thinking of a slight increase on our dental business, offset by some slight decreases on our life and disability business. That's more on the new case perspective. On a renewal perspective, it'll be more modest. So, you'll start to see that flow through as we go through the end of this year and into next year.
Great. What is your path of growth within your joint ventures in Principal International?
Yeah. So, you know, post-COVID, I've had the opportunity to visit with a lot of our premier joint ventures across the globe. And so, you know, we're privileged to have strong joint venture partnerships with a few of the very large banks, China Construction Bank, Bank of Brazil, and CIMB in Southeast Asia. That gives us... Those are long partnerships. Many of those have been in place for 20+ years. We're bringing kind of asset management and retirement expertise to the table, and they're bringing the brand in the local market as well as distribution expertise. China is one where we have recently expanded that relationship.
So we entered that relationship nearly 20 years ago, but our sole joint venture in China, up until late last year, was really in the asset management mutual fund perspective. Grown that at a pretty good clip as we sit here today. But we're excited in the fourth quarter that we were also able to enter a joint venture partnership with them on the pension, which is a fairly new market within China and includes some good prospects for growth. And then we also actually did a 50/50 joint venture partnership with China Construction Bank on the real estate side, very much focused in logistics and infrastructure, and we see some good prospects there as well. Bank of Brazil is another one I'll just mention.
We are a market leader with them in the voluntary retirement perspective, over a 30% market share and continue to be the market leader in both market total market as well as net cash flows. There was some pressure over the last two or three years just given COVID, but we're starting to see that kind of turn around and see signs for good growth there as well. And so as we focus on those joint venture partners, we continue to see a path to double-digit revenue growth in those markets, and ultimately an improving return. As more and more of that business is focused in Brazil and China, those are higher margin products, and that will contribute to an increased margin profile as well.
Can you touch on any updates on your $7 billion of committed but unfunded real estate mandate you anticipate to be invested in the next 12-18 months?
Yeah. So you know, I'll just step back a little bit. We are one of the top U.S. asset managers in the real estate space in the U.S. And as I just mentioned, we've now started a joint venture in China, and we also have a real estate presence in Europe as well. Those are long-standing relationships. You know, a lot of positive flows, if you look at historically, even in the third-party space, has come from real estate. And we have many customers that have entrusted their real estate sleeve to us and continue to look to us to provide that solution. Sitting here today, we want to be good fiduciaries of that money.
As we work with our clients, they have committed to us that $7 billion across a number of different customers, institutional customers, but we are sitting on it to find the right time to put that money to work, and in the right asset classes. So, again, that $7 billion has been there for the last few quarters because we have not been putting that money to work. But we are seeing opportunities in the third quarter being very selective on which asset classes those are. We saw some opportunities in Europe. We saw some opportunities here in the U.S. with a data fund launch of the fund. So we'll continue to gradually put that to work.
I think Pat Halter, who leads our asset management business and used to lead our real estate business, thinks that probably will more ramp up in the fourth quarter and in 2024. But I think we're seeing some select opportunities even as we sit here today.
Great. What is the outlook on flows at the end of the year? Do you have visibility on the institutional sales pipeline?
Yeah. So, obviously, if you look across the asset management business, our industry flows have been fairly pressured, and we are primarily active, and so I'd say that would be, you know, you've seen actually even bigger pressure as you look at that. One of the things I would say is, you know, there's been a few trends that have caused our net cash flow and our asset management business to be negative the first half of the year. Many of it similar to the rest of the industry, but also the real estate environment has been the other driver of that negative flows. Just to put that in perspective, if you would have looked over the last probably five years, we probably averaged $4 billion-$6 billion of positive flows driven by real estate.
In the first half of this year, that was sub $500 million. And so again, from a delta perspective, it's having a sizable impact on that. And then I'd say the other drivers, both institutional and retail, is similar to what everyone is seeing. And I, it's really people staying on the sidelines, taking opportunities to put money in, you know, money market and other things that are yielding very high returns. And they're somewhat waiting for the Fed to signal a stop in increasing rates. But then I, I do think we're starting to have some really good discussion with those institutional investors that are waiting for that and then ultimately have some real interest in putting that money to work, whether that be in fixed income or other asset classes as well.
And so again, we do have some visibility into those institutional discussions and flows. We do think the second half of the year will be improved from the first half of the year. Whether that happens in fourth quarter or third quarter, those discussions are still underway. But I do again—we're starting to see some momentum as we sit today.
Great. Love to hear your macro outlook. Could you walk through your second half of the year key assumptions you're making for equity market, interest rates, foreign exchange and other variables?
Yeah. If I could make those accurately, I probably wouldn't be sitting in this chair. But I think what we would say is we continue to think there's going to be volatility, right? And so we want to make sure we're positioned for that volatility. I do think we think that the Fed is close to pretty much toward the end of their tightening, but we actually don't see reductions in rates probably until at the earliest, mid-next year. From an equity market perspective, we forecast based on 2% a quarter. 1.5% of that would be market appreciation, the other half would be dividends. You know, we've obviously experienced much greater than that increase in the first half of the year.
Seeing some give back as we sit here today in the third quarter. We think there will be continued volatility as we go throughout the year. So again, we forecast on that 2% range, but we then actually do a lot of scenarios around that to ensure that our expenses are aligned with those revenue forecasts. We are being very disciplined, especially in those equity market-driven businesses, on the expense side, to make sure that we're prepared for whatever environment plays out for us.
Well, likewise, how do you envision alternative investment returns, real estate sales, and prepayment fees shape up for the balance of the year?
Yeah. So again, I think what Tracy is referring to is the drivers of our variable investment income that back our spread in insurance businesses. And, you know, we had a time in 2021 and early 2022 where those were causing enhanced earnings, where those were all running more positive than what we anticipated. And late in 2022 and then into 2023, we've actually been seeing some pressure on that. Sitting here today, really what we've seen is, we actually have most of our variable investment income that's driven by real estate sales. And then we do have impact from alts and prepays as well. Prepays have been not surprising.
Most of our prepays would be on our bond portfolio, and that has been basically zero for the first half of the year, and we don't really see much of that changing as we go through the rest of the year. Maybe toward the end, maybe we'll start to see a little bit of that. Real estate sales has also been pressured. Again, back to some of the comments I made earlier, but alts has actually been actually right on track with what our longer term expectations are. And actually that's more improved than what we thought coming into the year. And so again, I think that would be the bright spot relative to variable investment income, but we're still seeing some pressure on real estate sales and prepays. We do see potentially some real estate sales in the second half of the year.
You know, that will have some impact, again, on Variable Investment Income, but probably still be at a level lower than run rate expectations.
You know, in your opening remarks, you talked about already seeing some green shoots starting to emerge, if you could elaborate.
Yeah, I think I've touched on some of those already. You know, ultimately, equity markets turning around. SMB continues to be strong. And then ultimately, we're seeing investors have in fixed interest and starting to think about putting money back to work in risk-bearing asset classes. And so I'd say those are all positive as well. One of the things that I haven't mentioned is, you know, we have committed ourselves to a 40% dividend payout ratio. You know, that would be higher than most of our insurance peers, slightly lower, but much more consistent than our asset management peers. We had kept that flat, since our strategic review and our transactions, really for two reasons. One is we did lose some earnings power from those transacted businesses, so we needed to kind of grow back into those.
And then I'd also say macro being negative, had some impact on that. Since this last quarter, we've announced an increase in that, for the first time since then, which obviously, I think hopefully is a sign that we're seeing confidence in, in a return to growth, and ultimately our ability to maintain and continue to have an increased dividend profile overall. And so I'd say those green shoots are across the businesses. But again, I'm feeling good about our prospects for growth and our, ultimately, meeting progress and ultimately them making shareholder back.... Great. Do you want to take a pause here and see if there's any questions from the audience? I do have some mic runners. If anyone has questions, please raise your hand. I see first question.
Hi. You mentioned, early on, the Pension Risk Transfer-
Yep.
Area is a new focus, and could you comment a bit on how much appetite do you see in the potential seller of this to transact at current or respectively higher rates? And what the competition you see the board is looking at. And then from your perspective, part of that, of course, comes with a longevity risk.
Yes.
How much appetite do you have for it, and how much market is there to lay it off to either investors or insurance-
Yep.
-operators?
Yeah, some great questions there. So just to talk a little bit, we've actually been in the pension risk transfer business for over 50 years, so it is a core competence of ours. And I think one of the things that's interesting about our risk transfer business is not unlike what I've talked about, much more small to medium-sized business. And so if you look at our sales activity in a given year, we tend to be top five, both in the number of plans we do and the premium levels we do. Whereas a lot of times what you'll see by our peers is they're either skewed to very high-end premiums because they're jumbo or they're skewed much more on the plan side.
And so we do, on a given year, we may do 90-100 plans, but we are targeting around $2.5 billion of sales in a given year. And about, I think it's really interesting, about 25% of the sales we do in a given year actually are conversions from our defined benefit record-keeping business. And so I think we play a little bit different than our peers. We aren't going after those jumbo cases that you read about in the Wall Street Journal. One, because competition is way too high, and because of that, the returns that we feel we can get on that are not as attractive as what we can do lower in the market there. We are seeing really good opportunities.
Obviously, with the interest rate environment the way it is, funding ratios are at or slightly above 100%. So very conducive for people to rethink their liabilities relative to that. I think the market is going to be very strong for the year, but we are very diligent in how much capital we want to put at that. And so as I work with the leader of that business, we give them a budget, and it's up to him to optimize returns relative to that budget. And ultimately, that kind of $2.5 billion range, you know, will slightly grow every year, but that's a good range to think about for our business. And we're able to get returns, you know, 12%-14% when as we look across those blocks of sales.
Relative to longevity risk, we're actually not scared away from that. You know, given our actuarial background, given our pension consulting that we do for our defined benefit customers, and given that in some situations we can offset that with mortality risk on the life side and diversify away that risk, we feel that we're appropriately managing that risk, and the size of that, we feel, is at the right level and is not outsized relative to that business. So not looking to offload that risk. It's more how we can manage it and price it appropriately, and we feel good about our expertise there.
I know you've done a number of transactions and de-risking and, but could maybe you just describe the current state of the business in terms of, you know, the size of remaining legacy businesses-
Yep.
-in terms of reserves or what have you? And then, if so, can you just kind of characterize what those lines are composed of?
Yeah. So our current general account is right around that $75 billion level. That's down from around $100 billion. So that would be, you know, ultimately kind of the reduction that we made. Think of that as pension risk transfer, group benefits, variable, a small amount of variable annuity. Life, we do have some legacy retail life, much more. We got rid of the ULSG, but we still have some term in UL on a legacy basis, whereas our go-forward strategy is to grow that much more focused on the business owner. And then the other part of the balance sheet would be more MTNs and GIC, both third party as well as part of our record-keeping retirement platform. So those would be the types of liabilities that are on the book.
And ultimately, I'd say the assets are very aligned to those liabilities, very ALM focused. We do expect to continue to grow those businesses, but we'll be smart at the returns that we're pricing those for and ultimately demanding in the business. So those would be the general account kind of liabilities. I'll pivot a little bit. You were talking about kind of transactions and acquisitions. So I'd say the first thing I'd want to reiterate is we don't feel we need to do an acquisition to deliver on the promises that we make. We feel we have the capabilities and the scale to be competitive and ultimately to deliver on that. When we talked about our capital management strategy. We have earmarked about 0%-10% to go toward M&A.
But we also have a very low leverage ratio, so that gives us opportunities, if those opportunities arise. We're going to be very selective, primarily focused in the asset management space. We will look at retirement benefits, but it needs to be very aligned strategically, and I'd say a pretty high bar from a financial perspective.
No, I would want to piggyback on an earlier question on PRT and around longevity risk. Do you feel comfortable with taking on deferred lives, which is a little bit different, you know, if you could walk us through deferred and being able to price for that risk?
Yeah. So, again, I come back to, you know, 25% of our business is coming from customers that we've recorded to their DB plan for a number of years. So that gives us really, really good insight into how those different lives are going to perform, what the turnover is, how their plan designs kind of work. And so we leverage those, you know, hundreds of actuaries that we leverage on the consulting side to obviously help us think through the PRT business as well and bringing that on. And so, we see one, the competition is less. It allows us to get enhanced return. But, you know, I'd say we've seen that business through...
You know, we've been in the business for 50 years and seen the cycles, seen the different components, and our return on that business and the volatility around that has not been anything that I'm uncomfortable taking. So we do feel, again, like I said, very good about that. It's not every case that we're bringing on has deferred lives, but we are comfortable with it, and we think the mix of business that we have and the spread of that across a number of small to medium-sized customers actually serves us well.
Okay. And you've also said that your outlook for PRT pipeline is $2.3 billion this year, but then I think one of the questions you said your typical run rate is $2.5 billion. Is there an update you want to make to the-
No, you know, no, 2.3% is really what we're targeting this year. That can grow a little bit every year from that. So you know, that's a modest amount of difference, but 2.3%, I'd say, is what we're targeted on this year. If we see other, so let's say we don't see good opportunities for MTN or IO business, and we see a great opportunity on PRT, we may pivot and shift some of the capital allocation there, so it might flex up a little bit, but the total will be very in line with our total capital allocation.
Wonderful. Well, I think we're just about out of time, so let's give a round of applause to Deanna. Thank you so much.
Thank you, Tracy.
Thank you.