We're going to get started. Good morning, everyone. I'm Tracy Dolin-Benguigui, Insurance Analyst at Barclays, and I'm pleased to host this fireside chat with Charlie Lowrey, Chairman and CEO of Prudential. Welcome.
Thank you for having me. Appreciate being here.
Yeah. I thought the best way to kick things off is if you could just give some opening remarks on what you're seeing in the market, and I have some prepared questions. You know, if we do have time in the end, maybe we could take some questions from the audience.
Sure. Well, let me start. Thank you for having me, by the way. Appreciate it. Thank you all for being here and your interest in Prudential. Let me start by just kind of talking about the second quarter a little bit and what we're trying to do. So for four years, we've had a very specific strategy, and that is to become a higher growth, less market sensitive and more nimble company. Every single thing we do can be put into one of those three buckets. And if you look at the second quarter as an example, if you look at becoming less market sensitive, we announced two transactions. We closed a VA transaction for $10 billion, a reinsurance transaction. We also announced a reinsurance of part of our GUL book for $12.5 billion.
Then most recently, and I'll talk about this at the end, we just announced another transaction on our structured settlements book for $10 billion through a reinsurer we created in Bermuda, called Prismic. So on the becoming less market sensitive, we are making significant progress. Then there's the growth. How are we becoming a higher growth company? And in the second quarter, you saw that we announced a number of things. One was the acquisition of Deerpath Capital for our alternatives platform with PGIM. It's a private credit business that fits extremely well with Prudential private credit. We talked about Mercado Libre, which is another distribution platform in Brazil, and we are expanding our third-party distribution down there, and now have the third largest life insurance company in Brazil.
We talked about the LRT and PRT transactions that we do, and talked about a large LRT transaction, which augmented a PRT transaction we did in the first quarter. And then finally, we talked about the retirement business and how in individual retirement, we expanded our sales by about 20%. So we're making progress in terms of becoming a higher growth company. The final thing that we announced last week, and Tracy will probably talk more about this, is Prismic itself, which is a Bermudian reinsurer that we created to reinsure blocks of our own business, potentially reinsure forward flow and third-party blocks of business.
That will give assets to Prismic, excuse me, that will give assets to PGIM to manage, along with Warburg, who is our partner, who does the private equity part of the business, and it does a number of other things for us in terms of increasing fees, et cetera. So lots of exciting things that that happened in the second quarter, all consistent with becoming a higher growth, less market sensitive and more nimble company.
Great. You know, we're nearing the end of your three-year plan that you shared in February 2021, to reallocate $5 billion-$10 billion of capital and return $10 billion of capital to shareholders. Are you thinking about some type of phase two, multiyear strategic plan, maybe beginning in 2024?
Yeah. Well, first, let me say that that February of 2021 seems like about 10 years ago at this point, but we have made significant progress. And if you again go through the same three lenses, if you will. On the becoming less market sensitive, we have done 6 de-risking transactions, including the 3 I just mentioned. We have changed our products significantly, so we stopped selling a lot of market-sensitive products, and we've returned over $9 billion of capital to investors. So we've checked a lot of those boxes. In terms of higher growth, we're similar. We've done 5 programmatic acquisitions for PGIM and emerging markets.
Again, we have introduced to replace many of the products that we've stopped selling in annuities and life, which were more market sensitive. We've introduced new products like FlexGuard, FlexGuard Income, et cetera, to take their place, and those have been selling very well, and those are much less market sensitive. So we have looked at capabilities, we've looked at distribution in terms of being able to grow. As I said, we have done the Mercado Libre transaction. We did the transaction with LPL, with our retail advisory solutions. So there's many, many things we've done. Finally, the last part of the strategic plan was to reduce expenses, and we set out a goal of $750 million of expense reduction.
We actually came in at $820 million a year early, and we've looked at processes and procedures and other things, to reduce expenses. We will continue to look at that as an ongoing, as an ongoing continuous improvement. So what I would say, Tracy, is that all the things that we have done that past is prologue, we will continue to do as we go forward, including expense reduction, looking at organizational structure, looking at other, other ways of becoming even more efficient as we go forward. But we'll also focus on becoming higher growth and perhaps potentially doing more programmatic, M&A, and looking at additional de-risking transactions, if appropriate.
Great. I know you discussed a little bit on the second quarter call, your Open Architecture Platform, which is essentially the intersection of asset management and insurance.
Mm-hmm.
Could you elaborate on the framework of this platform and what you're thinking it could do for Prudential?
Sure. So we're really excited, and we think that Prismic is another arrow in the quiver of what we're trying to do in terms of creating a mutually reinforced business system over time. And Prismic and the Open Architecture Platform is very much a significant part of that. So if you think about what Prismic can do for us in terms of reinsurance, it can reinsure back books, it can reinsure forward flow, which would continue to allow us to grow and feed assets to PGIM. And it allows us to reinsure third-party books, which again would transfer significant assets to PGIM. Warburg doing the private equity piece, PGIM doing the majority of the other parts.
It also enables us to think about augmenting and expanding PGIM's third-party assets as well as alternatives platform. So most of the acquisitions we have made up to this point have been for PGIM, expanding capabilities in the alternatives platform, which could be used for part of the open architecture. The final thing I'll say is just on the advisor to Prismic. We have set up an advisor called PGIM Portfolio Advisors that manages the asset allocation of PGIM. That sits on top of PGIM, or excuse me, manages the asset allocation of Prismic. That sits on top of PGIM. What it enables us to do for the first time is actually take multi-sector institutional mandates to be able to then go within PGIM and select the assets to be in that multi-sector mandate.
We haven't had that before. Investors came inbound into fixed income, equities, alternatives, and this allows us to say to them, "Okay, we will do the asset allocation." And that's, that could be important going forward. So there are a lot of ways in which this can benefit us.
That sounds exciting. So with Prismic, what methods are you looking to ramp up growth with this vehicle? Specifically, what type of liabilities do you attract with?
So longer term, longer term liabilities, but we have a number of different reinsurers in Bermuda, Prismic being one of them. But Prismic would, I think, what would fit very well with investor demand is sort of longer-term liabilities at this point, which is why we looked at structured settlements, and we look at other things as well as we go forward.
Why do you think you may have a competitive advantage in scaling Prismic versus others who may try to replicate the strategy?
Well, certain others have Bermudian reinsurers. But if you think about what we have, we operate at the intersection. We're only in three businesses, right? We're in asset management. We're one of the largest asset managers in the world. We're in insurance, and we're one of the top players globally in insurance, and we're in retirement. Those are our three businesses. And Prismic is at the nexus of that, where it can take the liabilities that we generate through our different businesses or through what we may generate with third parties. But it can take both our back books, which we have plenty of. It can take forward flow, which we generate significant amounts of forward flow.
That gives us, I think, a competitive advantage, and it feeds into the fact that we have one of the largest and best asset managers in the world, I would argue. And so it's a way of expanding that as well. So if you think about the mutually reinforced business system, we have all the pieces necessary to make it work. We don't have to just rely on back books or other things that other people may have to buy.
Got it. So the definition of open architecture from the press release seems to be checking a lot of the boxes. How do you stay focused on delivering?
So again, we have, we have three goals and only three goals. And so I keep it very simple, which is become higher growth, less market sensitive, and more nimble. And everything we do needs to fit into one of those boxes, and Prismic fits into two of those boxes. So becoming less market sensitive, becoming higher growth. So it is squarely in, in the center of what we want to do as we go forward in terms of expanding on each of these boxes.
Great. So Prismic in Bermuda. So let's talk about Bermuda a little bit. You're increasing your use of both affiliated, you have Lotus Re, and unaffiliated Bermuda reinsurance. What is the strategic rationale for these types of transactions?
For the reinsurance transactions?
Yeah.
Yeah. So, we think there are a couple of reasons. One is becoming less market sensitive, the other is to induce higher growth. And so our view on reinsurers is that we want a number of reinsurers, because by definition, reinsurers, you want to spread the risk around, and then we want very high-quality reinsurers as well. And to the extent that Prismic is one of those reinsurers, and has the benefit that we own part of it, we understand it, we can monitor it, we can manage it, that's an important component.
What's the regulatory process in Bermuda? How do you feel about closing your transactions, your process to review the counterparty credit risk? Are you taking into account the BMA's proposed new rules for a scenario-based analysis, which is like the matching adjustment? And do you have minimum Bermuda capital requirements for external reinsurers?
Yeah. So lots of questions there.
Yeah.
I'll try and remember them, and if I don't-
Yeah, I'll come back to you.
We, in general, let me take a step back. I think we have incredibly constructive relationships with all our regulators, whether it's the BMA, whether it's NJDOBI in New Jersey, whether it's JFSA in Japan, we believe in regulation. We just want there to be good regulation. And so we work extremely constructively with each regulator, to make sure they understand our needs and that we understand their requirements. So we've been working hand in glove with the BMA for a number of years now in terms of setting up Prismic in a way that's consistent with what we need, but also with their standards. And if their standards change, we will adapt accordingly, and we've been discussing that with them over time.
So they're a really good regulator in terms of articulating what they need, but also working with us to make sure that their standards are implemented, but that we understand what they are and we're acting accordingly. As a result of that, we don't anticipate any delays in the closing of the transaction. It's effective September 1, dependent upon or contingent upon regulatory approval, and we would hope to get that in the near term. But the regulation, the regulator, again, in Bermuda is extremely effective and very good.
Can you also provide an update on the Somerset transaction and those discussions?
And so the Somerset transaction, I think, seems to be going very well in addition. And with Somerset and with any reinsurer, what we look at is both the quality of the reinsurer, but as importantly, and I think it's important for everybody to understand, there are structural considerations with any transaction that are really, really important as well. So is there overcollateralization? Do you have control over the asset mix and the asset allocation? So there are a lot of structural considerations that make and can strengthen a transaction relative to any particular reinsurer. We focus both on the quality of the reinsurer and very much on those structural conditions as well, because that is extremely important in thinking about the solidity of the reinsurance and that particular transaction.
Outside the structural considerations, do you have minimum, you know, Bermuda capital requirements require those internal reinsurers?
Yeah, these are all regulated by the BMA, and there are capital requirements associated with that.
Okay. Talk a little bit about capital management. I mean, it's great to see that Pru is unlocking capital from block sales and Prismic. I mean, it all kind of adds up to $1.5 billion over time. And then if I add the piece of the recent NAIC IMR adoption, I think it's up to 10% that surplus should add some RBC to the group. Not to mention, ex -flows and IMR update, your free cash was $4.5 billion in the second quarter, which really is the high end of your $3 billion-$5 billion range. So if I put all that together, how has unlocked capital reshaped your desired capital deployment measures? When you think about all your menu of places like M&A, both programmatic, large-scale, buybacks and reinvestment into the business.
No, I thought you might mention buybacks. What I would say is, first of all, on the IMR, on the IMR part of it, you know, I think we announced in the second quarter that it could be worth $1.3 billion, the IMR. But we had let our RBC ratio go down a little bit, and with the expectation of it coming back up. So we don't, we don't really... You can kind of put that off to the side because we don't really consider that kind of bound capital, if you will. In terms of the rest, we have a very consistent view about capital redeployment, and there, there is, there's kind of a sequencing.
So the first thing we do is make sure we have a rock-solid balance sheet, that is the amount to us fulfilling our promises. It is extremely important to us to keep our double-A rating. Rating agencies obviously have their own requirements, as do we. And so you will always see that we will have adequate capital and capital flexibility going forward. So that's job one. Job two is to invest in our businesses. So we talked about wanting to be a higher company. We need to invest in our businesses. We need to invest in products, capabilities, technology, et cetera. We want to remain extremely competitive in the marketplace. In order to do that, you have to invest in businesses. We'll continue to do that. The third is then returning capital to shareholders, and we've always said we wanted a prudent capital deployment.
First would be dividends, obviously, and we've had 15 years of increasing dividends. We're proud of that track record, and that's something that we focus on. And then finally, fourth is stock buybacks as a way of returning excess capital to shareholders. So that is the order that we think about things. It has been a consistent process for us, and that's the way we will make. We will continue to think about capital deployment in those four tiers as we go forward.
You know, given you're augmenting your capital light business, in your mix, how does that position through on a free cash flow perspective? Can we see some upside to your target 65% free cash flow conversion rate?
No. Now, let me expand. So the... I think our businesses need capital to grow, and so we will continue to invest in the businesses, regardless of whether some are capital like or not. That is, that is what we've done, that's what we'll continue to do. Some years you see that we have less free cash flow, some years we have more free cash flow, but we think that 65% is about the right number, as we go forward. So, you won't see us increase that in the near term.
Okay. Let's talk about PRT. Can you discuss your appetite for pension risk transfers on 70% reinsurance in the current economic environment? Do you feel like there'll be more split transactions like we saw with, for IBM last year?
Yeah, I think you'll see more. The market's tending toward that, especially on bigger transactions like the IBM transaction, which was a $15 billion transaction. The good news about those transactions is usually, even if you split them, we get the administration of the entire block, which has been consistent, given our track record, performance, and expertise. We think that there will be a robust market for PRT and LRT. But we, we've seen it to date. We think it's a $40 billion-$50 billion annual market that's out there, partly because of the funding of the pension funds. They're now overfunded.
And so, many of them are saying, "Gosh, given the potential of a recession, given other things, we should hit the bid now rather than later." So I think you see a lot happening in the marketplace. And you see, differences that are occurring in terms of, the plan sponsors saying, "Gosh, I'd like to split it because we think that's a good thing to do from risk perspective." You also see others, reinsuring part of the deals, and that's beginning to happen some. We've done some of that, and others have. So, I think this is all good because there is a lot of demand in the marketplace. And to the extent that we can bring in more capital to share on some of these bigger transactions, I think that's actually a positive development in the market.
But PRT and LRT are here to stay, and the markets, both of the markets are very robust, as you saw from what we were able to do in the first and second quarters.
Sticking with spread business like GICs, also ramping up FA sales, what balance are you trying to strike on taking advantage of higher interest rates, which are near a 15-year high, and reducing market sensitivity business, a key objective you've had for quite some time?
Yeah, I think, I think our goal... It's an interesting question. What we think about is creating a sustainable, profitable growth over time. And what that means is emphasizing or de-emphasizing products, depending upon the markets and what we see in terms of growth in the economy, in terms of inflation, in terms of other things. So you will see us begin, as we introduce new product, to toggle up and down those products based upon the demand of our customers and interest rates on the returns we can get. And, and you've seen us begin to do that more than we have in the past. So FIA is the, is just, you know, the fixed annuities is just, is just an example of what we may do.
It's also an example of how we may be able to use Prismic in the future to reinsure some of the forward flow that we're creating.
Okay. You know, looking at PGIM, how is PGIM influencing your total return on your general account?
PGIM's influencing in a positive way. So if you think about PGIM, roughly, and this isn't exactly, but 20% of the assets are managed or we manage for third-party retail, 40% for third-party institutional, and 40% for our general account. So we're competing every day in the marketplace to create alpha for our institutional investors, and the general account is a beneficiary of the kind of talent we have within PGIM. So we manage, we look at the alpha that's generated every quarter for the general account by each product, and make sure that PGIM is delivering significant value to the general account.
So we've been seeing retail outflows for PGIM. What, what can you do to contain that outflow, and what will it take for this trend to reverse?
I'm not sure you can do a lot to contain the overall outflows that happen in retail. Retail is notoriously fickle when it comes to different market conditions, whether it's equity markets going up or down, whether it's fixed income, and you've got, you know, 400 or 500 basis points increase, that will happen to retail flows. What you can do is mitigate it in a couple of ways. One is to what we call all-weatherized portfolio. So in the Great Recession, when I was managing PGIM, one of the things we tried to do is to create a series of products so that if a retail investor wanted to move out of fixed income into a more stable product, we had that for them to move into.
So that's the first thing, so is to create product and capabilities. We've also, we've also created a lot of alternative capabilities because, as you well know, retail investors, especially in the lower interest rate environment, were more attracted to alternatives. So we've been able to, for high net worths, create alternative platforms. The other thing we've done is to make sure that we have the vehicles through which retail investors can invest in a way they want. So if they want to invest in a product in mutual funds, they can do that. If they want to do that through an ETF, they can do that. In Europe, if you want to use it, we can do that.
So we try and be agnostic in terms of the way they invest and then provide the products by which or into which they can invest. And in that way, at least mitigate, Tracy, to a certain extent, the outflows that inevitably take place when there are big disruptions in markets.
... You know, looking at Morningstar data, about half of U.S. retail investors are using passive MFs or ETF. Over time, as the passive bucket could be even more prominent-
Mm-hmm.
Would you consider cutting your fees to remain competitive?
We have cut our fees. So, in fixed income, as you look at that, these fee levels have been coming down somewhat. Obviously, passive is kind of a race to zero. Active is not, but active fees have come down somewhat. The way we've mitigated that and kept PGIM fees essentially flat is through the open architecture Alternatives portfolio, where fees obviously are higher. People are willing to pay higher fees for performance and performance-based fees. And so as we've expanded our alternatives platform in credit and real estate and mortgages, et cetera, and made some of the acquisitions we've had, we've been able to keep the overall fee at the same level. But let's be clear, some of the active fees have been coming down over time.
Some PGIM institutional flows could be lumpier than retail. What product or solution are you seeing greater pressure, and which one provides the best opportunity?
Yeah, luckily, the decrease in flows have been decreasing. So in the second quarter, I think we had $3 billion of outflows. That was less than the first quarter, which was less than the fourth quarter. So institutional flows have been changing, and have been coming down. That's the good news. Where we see institutional interest is in a number of areas. We've seen it in higher-yielding credit, we've seen it in mortgages, we've seen it certainly in private placements, we've seen it in secondary private equities. So a lot of the areas where we have expertise, we've seen increased interest. What I would also say is that institutional flows on the fixed income side tend to get soft or go negative in a rising interest rate environment, obviously.
But as interest rates begin to peak, we think we'll see the interest in fixed income come back again as people say, "Okay, we've hit the peak. Let's start investing," because we'll start to see outperformance in the fixed income arena.
Turning to individual life, and mortality risk, what is your longer-term view of mortality versus pre-2020?
We think it's about the same as the pandemic turns into an endemic. So you're starting to see some increase in COVID again, but people are now treating, and it seems to be more, I hope, more like a flu symptoms. So we're not seeing any difference. And if you looked at the second quarter and the assumption updates, we didn't see a lot of difference. So I think we're hopefully past any of the COVID surge.
Do you think COVID led to mortality pull forward, or are you assuming less mortality improvements than you once thought?
Less mortality improvements than we once thought, than we once thought. And again, if you think about second quarter and assumption updates, we didn't as we looked at plan versus actual, it was reasonably as expected. So we might, we thought it might be different a couple of quarters ago, but we're not seeing that.
Well, in the second quarter call, you've been constructive about growing individual life, given the diversification benefits to their mortality risk. At the same time, individual life has been a lesser contributor to overall earnings. So how do you reconcile the need for diversification credit in achieving acceptable individual life returns on the under-risk side or on a basis?
Yeah. It's a great question. Certainly, LDTI did not help our earnings situation in that it sort of pushed out earnings going forward, and that made depressed current level of earnings. But a couple of comments. One, three comments. One, individual life is core to our purpose of who we are, and we feel passionately about the $12 trillion gap that exists in life insurance in the U.S. and being able to expand access to hopefully fill that gap somewhat between existing products and simplified solutions, which we're working on, and other things. So that's one comment. Another comment I'd make is that we are actually very pleased with the profitability of what we're selling now.
And it is, we're selling, we think, a good product, less market-sensitive product, a product that is significantly above our cost of capital. And so we are, to your point, you know, we're quite comfortable with the product we're selling and the profitability of the product and the, how it relates to consumers' needs. So this is an important part of who we are. I think it contributes to our profitability and will increase over time, as the new product we sell becomes a bigger part of the back book, essentially.
Having experience with Japan, you know, how could shareholders unlock value from your $50 billion of unrealized insurance margin?
Well, the good news is we have a lot of insurance margin. Now, if you think about what insurance margin is, it's really the present value of future premiums less the claims that we think will pay. And that really is the definition of sort of earnings and cash flow going forward. So the $50 billion will translate into free cash flow over time. Now, one way to unlock that might be potentially to do reinsurance transactions, but on the other hand, this is an important component or is the component of free cash flow and consistent cash flow from Japan over time. So we look at it, we say we're glad it's there, and it's going to be an important part of our cash flow generation capability as we go forward.
In Japan, does the proposed ESR framework change your hedging strategy, types of products you would sell, and the uses of internal or external reinsurance?
Yeah. Good question. Well, first of all, ESR framework won't come into place until April of 2025, so we still have time. Second of all, we're one of a small working group. I said earlier, we have great relationships with all the regulators. We were asked to be part of a small working group of companies that are working with the JFSA to look at and then propose ICS, but the ICS, you know, the international capital standards, developed for Europe and translate those into Japan and look at both the intended and unintended consequences of doing so. So, the short answer is, you know, more to come because we still don't know what those regulations are.
On the other hand, I think the good news is that we have the ability to change product or to reinsure blocks or to do other things, depending upon how the regulations come out. I think the industry itself, we're not alone in that. I think the industry itself is looking at all these things. But we're working, again, very constructively with the regulators to help them think through, again, the intended, but also the unintended consequences of the implementation of ESR.
In corporate and other, what were some of the reasons for expenses materializing worse than expectations, and what does the rest of the year look like?
Okay. So in the second quarter, the expenses were higher in corporate and other, for a couple of reasons. There were some one-timers in there, but there was also a increased initiative spending. We pulled some of that up from the businesses. So I think the way to look at expenses is actually just say, what are the overall expenses of Prudential, not just in corporate and other, because corporate and other has increased, but the expenses in the business has decreased. What we're trying to do is to keep expenses flat on an overall basis as we go through. So there'll be puts and takes in corporate and other.
But I think it's more constructive to look at the overall expense base of Prudential, which gets back to what we're trying to do in terms of expense management and the program we went through to cut $750 million of expenses over the time period we did.
So, how do you feel about the credit environment in general? More specifically, what makes you comfortable with your private credit and commercial real estate exposure?
So, I think the credit market in general is a little bit soft. We, I think our view is that we can take the tail off of the scenarios, and that I don't think we don't think there's going to be a significant deep recession. Could there be a softening, soft landing? Yes, absolutely. Would that have some credit implications? Yes. And so we're watching our watch list very carefully. But what I will say, having managed PGIM through the Great Recession and being front and center with a while ago, we have an extremely robust risk framework. So both with our private credit and with our real estate groups, we have taken a lot of steps to mitigate this.
As an example, in real estate, we started reducing office exposure on the mortgage side in 2017. We are underweight office, we are underweight retail. Office is only 2% of the portfolio. So it's a de minimis amount, and we have very high, very low loan-to-values, very high debt service coverage. So we think we're in good shape there. On the private placement front, we are also, we have a unique private placement ability in that we directly originate most of the majority of the loans that we do. So we have direct relationships with our lenders, and we are the only lender. And so if there is a problem, first of all, we know, we have strong dialogue with those lenders.
We know if there are problems coming up immediately, we can work proactively to mitigate those problems through either implementation of the covenants that are in place or just through negotiations. So we have actually a relatively low defaults and very high recoveries relative to the industry. So I've seen this movie before. I've seen these groups that work, you know, they know they're extremely experienced, they know what they're doing, and I, for one, feel very comfortable about our ability to weather anything that comes in these two asset classes.
It's interesting you mentioned covenants.
They all have covenants. So, yeah, Covenants is not something that we went covenant light on in private placements. We've seen value of covenants in downturns, and they, yeah, we'll have, you know, yield step-ups. We'll have all sorts of things in there which we can use as negotiation. And actually, the borrowers really like it because, again, they're dealing with a partner. They're dealing with one person. They're not dealing with a group of lenders. And we can go in there early, and we can go in there fast, and we can constructively work with them to come up with a solution that works for them and us, and that has inured to our benefit time and time again.
...Going on the commercial real estate side could take many years to play out.
Mm-hmm.
You know, how do you think your portfolio will be impacted?
I mean, it'll be impacted over time. Obviously, we do have office exposure. That, that's our biggest exposure. It's a small exposure because, as I said, we started to decrease. We're underweight office and started to decrease that in 2017. And we're underweight retail. We're overweight multifamily, ag, and industrial. So I think the portfolio is very defensively positioned, and we feel very good about it. Again, high debt service coverage at over 2.4%, low loan-to-value at under 60%. So, you know, will there be issues? Of course, there are, there'll always be. But in general, do we feel very good about our exposure? Yes, we do.
We'll have a couple of minutes left. Maybe I have time for one question from the audience, if anyone has.
I think back there.
Hi. Good morning, Charles. Maybe just a quick question on the LPL deal that you did. So what was the value proposition for Pru? And, you know, especially considering some of your proprietary products, like what... Why is LPL the platform you chose? Any color would be great.
Sure. We think, we think, we're actually very excited about this. So we, we have, so I think 3,000, and don't quote me on this, but we have about 3,000 advisors. It's a very, very important distribution system for us and platform for us. They're, they're our biggest distributor of both annuities and life. But if you think about 3,000 advisors, and you think about the investments we need to make in technology and, and, other things, we don't have the scale that others do, that, that can be cost-effective. So what we want to do is link up with a world-class provider, that has the platform, the technology, the investments necessary to provide our, our advisors with a world-class solutions and, and more importantly, a world-class platform.
And so we looked around, and we decided that LPL was the partner we wanted to go with in order to do that. So we keep the front end, we keep all the products we want to sell, et cetera, et cetera, but we now have access to LPL's platform and other things which will be a huge help. They become the broker-dealer. They take over all the regulatory requirements, but we keep the front end and the distribution. So I think it's the best of both worlds. And we're very excited about what this can do for our advisors going forward.
Okay. And with that, thank you so much, Charlie. Let's give a round of applause.
Yeah.