Good day and welcome to the Unisys Capital Structure and Pension Strategy Discussion Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone, and to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ms. Michaela Pewarski, Vice President of Investor Relations. Please go ahead, ma'am.
Thank you, operator. Good afternoon, everyone, and thank you for joining us. I'm joined this morning by Mike Thomson, our CEO and President, and Debra McCann, our Chief Financial Officer, both of whom will discuss our capital structure and pension strategy. Today's remarks and question and answer session will not include any information related to the company's second quarter results, which will be reported after market on July 30th, and management's call to discuss the results will take place at 8:00 A.M. Eastern Time on July 31st. As a reminder, certain statements on today's call contain estimates and other forward-looking statements within the meaning of the securities laws. We caution listeners that the current expectations, assumptions, and beliefs forming the basis of our forward-looking statements include many factors that are beyond our ability to control or estimate precisely. This could cause results to differ materially from our expectations.
Please refer to the forward-looking statements section of today's presentation furnished on Form 8-K and in our most recent Forms 10-K and 10-Q filed with the SEC. Today's presentation also includes forward-looking statements and projections relating to future deficit and contributions for our U.S. Qualified Defined Benefit pension plans. These projections were prepared by the company's independent actuary, WTW, and are based on certain estimates and actuarial assumptions that are subject to change. We do not, by including these statements, assume any obligation to review or revise any particular forward-looking statement or projections relating to our pension plans referenced herein in light of future events.
We will also be referring to certain non-GAAP financial measures, such as net leverage or adjusted EBITDA, that exclude certain items such as post-retirement expense, cost reduction activities, and other expenses the company believes are not indicative of its ongoing operations, as they may be unusual or non-recurring. We believe these measures provide a more complete understanding of our financial performance, however, they are not intended to be a substitute for GAAP. The non-GAAP measures have been reconciled to the related GAAP measures, and we have provided reconciliations within the presentation. The slides accompanying today's call are available on our investor website and in the presentation furnished on Form 8-K that we filed this morning. With that, I'd like to turn the call over to Mike.
Thank you, Michaela. Good afternoon, everyone, and thank you for joining us to discuss the meaningful steps we have taken to remove U.S. pension volatility and accelerate the path of full removal. With the recent debt transaction, we have transformed our capital structure to continue the progress we have made over recent years in executing a strategy to reduce the size and volatility of our pension with the end goal of removing it from our balance sheet. The series of transactions we've just completed clears the way for both us and our investors to focus more squarely on operational performance without the ongoing distraction of managing volatility in the pension deficit and the corresponding contributions. While our U.S.
Qualified Defined Benefit pension plans are still underfunded, we have practically eliminated the volatility of our aggregate cash contributions related to market and interest rate movements down to 3% of what we're providing today. This marks a meaningful step forward in simplifying our financial profile and enhancing long-term visibility into future cash flows. Turning to slide four, I'll start by discussing our strategic capital structure objectives listed here. The actions we took in the second quarter were guided by these objectives. Some were achieved immediately, while others require a little more time. We believe this creates a clear path to full removal of the U.S. Qualified Defined Benefit pension plans and accelerates the time it takes to execute our plan. First, we've been very focused on reducing the size of the U.S.
Qualified Defined Benefit pension plans for many years now, with the goal of removing it completely in a cost-efficient manner. Since the inception of our strategy, we have executed many pension risk transfer transactions, reducing liabilities by approximately $1.5 billion. Second, we're focused on creating more certainty in our future cash requirements, particularly as it pertains to our pension contributions, which have seen material fluctuation due to financial market volatility. We believe that this volatility has been a significant barrier to attracting new investors. Third, maintaining a solid liquidity profile with strong cash balances and having access to short-term borrowings through our asset-backed revolver are important elements for managing the peaks and troughs of working capital and mitigating risk from potential unforeseen pressures on the business.
A fourth key objective is to reduce net leverage, which we believe will ultimately result in improved credit ratings and increased access to capital at more favorable terms. Fifth, although we would like to remove the pension as quickly as possible, we believe it's important to take a balanced approach in order to maintain debt capacity for growth opportunities. Finally, once these other objectives are met, we'd like to increase the attractiveness of the company to investors and expand our shareholder base by implementing a capital return program, either through stock repurchases or a stock dividend. Turning to slide five, I'll summarize the key actions we've taken. First, we issued $700 million of debt maturing in January 2031. Most of the proceeds were used to refinance our pre-existing $485 million notes, which removed the near-term risk of accessing the high-yield markets, which can be very episodic.
The remaining $200 million of proceeds, in addition to $50 million of company cash, were used to contribute $250 million to our U.S. Qualified Defined Benefit pension plans. Please note that this discretionary contribution is incremental to our 2025 planned contributions, which we expect to fund with cash generated from the business. We also amended our $125 million asset-backed revolver, extending its maturity to June 2030. The last element of what we've completed is to reallocate pension plan assets such that the movement in assets matches the movement in liabilities, practically eliminating the market volatility. Looking ahead, and now that the volatility has been mitigated, our strategy will focus on liability removal through annuity purchases, which Deb will discuss in more detail. At the same time as we make contributions, the deficit will continue to decline. These two components, total liabilities and deficit, determine the ultimate cost of removal.
The second of our next steps is to increase our capacity to fund the cost of removal. We currently expect to achieve this through a focus on increasing our EBITDA and generating excess cash. Turning to slide six, I want to quickly run through the benefits of the $700 million issuance and pension actions we've just completed and how that removes pension overhang in near term while advancing us toward the goal of full removal. First, I want to reemphasize that the $250 million contribution, combined with recent changes to our U.S. Investment strategy removes substantially all volatility in total contributions projected for the next five years. Deb will discuss in a moment how our asset allocation has changed and how this factored into the timing of our issuance.
Second, the one-time contribution brings our funded ratio above thresholds that are required for continued annuity purchases, which, as I mentioned, are an important part of the next phase of our strategy. This represents a continuation of the strategy that brought us to the point that allowed us to carry out this transaction. We expect to remove additional liabilities of approximately $600 million through annuity purchases by the end of 2026, removing approximately one-third of the remaining U.S. planned liabilities. Another benefit of our transaction is a meaningful reduction of both U.S. GAAP deficit and future contributions. The $250 million incremental contribution we made reduces the pension deficit dollar for dollar, which keeps the transaction roughly leverage-neutral and significantly lowers projected contributions between 2026 and 2029.
Importantly, this is cash flow accretive over the next five years because contributions have come down by more than the interest on the incremental $200 million of debt we issued. We have included detailed calculations of the post-transaction deficit and contributions later in the presentation, and again, the aggregate contributions will have minimal volatility going forward. Lastly, we expect this transaction will enable us to fully remove our U.S. Qualified Defined Benefit pension plans in the next three to five years as we execute on the next steps of reducing the cost of and increasing our capacity to fund full removal. We hope that this session provides a deeper understanding of what we've achieved and where we expect to go, and that it charts a clear course to putting our pension exposure fully behind us in a relatively short time while not over-levering the company.
This reflects a commitment to protecting financial flexibility and creating long-term value for our shareholders. I'll now turn it over to Deb to discuss some specifics around the new debt and the analysis supporting these transactions, which is really the culmination of years of planning and execution that the team has put into mitigating the pension.
Thank you, Mike. We truly believe this is a transformative change which will result in a stronger company and increased flexibility going forward. Turning to slide seven, I won't go through all the terms of the new debt in detail, but I do want to highlight the redemption terms. During the non-PAW period, we have the ability to pay up to 10% of the debt, approximately $70 million, every 12-month period at a redemption price of 103%. It's important to note that the analysis on the following pages does not assume any early debt repayment or additional discretionary pension contributions. However, with excess cash available, having the flexibility to either reduce debt and/or further fund the pension plans provides meaningful upside. These options would make the financial outcomes we'll review in a moment even more favorable.
Turning to slide eight, the initial overall impact of these actions is largely leverage neutral. Just a quick note, as we haven't reported our second quarter results, the table on this page and my commentary reflect values as of March 31st, except for pension deficit figures, which are as of year-end 2024. Gross leverage declined slightly, driven by the use of balance sheet cash for the pension contribution. On the other hand, net leverage increased modestly due to transaction-related fees. Importantly, our liquidity position remains strong with a cash balance of over $300 million and full availability under our $125 million asset-backed revolver. Turning to slide nine, this slide outlines the recent changes we've made to the U.S. Pension Plan Investment Strategy, changes that are expected to significantly reduce volatility in both contributions and deficits going forward.
Historically, the plan maintained a 65% allocation to growth assets, which introduced considerable asset volatility. Under the new strategy, we've retained a modest allocation to growth assets for diversification, but the portfolio is now structured to hedge liability movements. Importantly, the risk premium associated with growth assets has declined in recent years, making this an opportune time to de-risk the investment strategy, as the spread between the return we can secure and the expected return at our previous asset allocation has narrowed. This was an important factor considered as we timed our issuance. While this shift does result in a lower expected return, which may result in a modest increase to the contributions in the years following 2029 compared to prior estimates, we expect to fully remove the U.S. plans within the next three to five years, subject to market conditions prior to reaching those outer years.
Turning to slide ten, this slide illustrates the cash flow benefit of raising an additional $200 million and using $50 million of balance sheet cash to fund a discretionary contribution to the pension plans. As a result of this contribution, required contributions to the U.S. plans are expected to decline by approximately $165 million through 2029. Offsetting this, the incremental interest expense on the $200 million of new debt, along with the lost interest income on the $50 million of cash, is expected to total about $95 million. This results in a net cash benefit of roughly $70 million through 2029. Importantly, this benefit could increase further if we choose to use excess cash from operations to either pay down the debt and/or make additional pension contributions.
With the volatility reduction we have achieved by changing the asset allocation, the aggregate expected contributions through 2029 could shift from the forecast on this page by about 3% in aggregate, though there could be some additional movement between years. Turning to slide 11, we've outlined the projected cost of fully removing the U.S. pension plan by 2029. This projection includes an assumed annuity purchase premium of 10% to 15% over the accounting liability. For context, our historical annuity transactions have averaged a premium of just 3%. If we're able to continue executing annuity purchases over the next five years at or near historical levels, there's a significant opportunity to reduce the total cost of full removal of the U.S. plans. This underscores the value of our proactive annuity purchase strategy to reduce the cost of full removal of the U.S. plans.
Turning to slide 12, this slide summarizes the multiple benefits of the transformation we've been discussing and the key points we hope you take away from today's discussion. While the transaction is clearly cash flow accretive, the real value lies in the impact on the pension plan. By significantly reducing the volatility around both contributions and the deficit, we've created a more stable and predictable financial profile. We believe this positions us well for continued progress toward fully removing the U.S. plans while maintaining strong financial flexibility. With that, I'll turn it back to Mike, and we can take questions.
Great. Thank you, Deb. Operator, please open up the line for questions.
Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. The first question will come from Rod Bourgeois with DeepDive Equity Research. Please go ahead.
Hey, guys, thanks for this update and the details here. I have a scenario question to start with. Going forward, if there were to be the same type of extreme interest rate moves as occurred in 2022, what would volatility in your contributions look like in that kind of extreme scenario? Would the maximum volatility still be around 3%, even in that extreme situation?
Hey, Rod, thank you for the question. One of these days, we'll get your last name right as usual, but we'll get there eventually. I love how you, you know, we start off with the softball question, so thanks for that. You always have the good one, that's for sure. Great question, and I'm glad you asked it. You know, it's super important. I'm going to try to answer it plainly, and then I'll give a little more color. If you want me to dive in even further, we can do that as well. The short answer is no, we don't believe the volatility will be affected by the market movements that we've talked about. I think it's important that we understand what happened in 2022, and that'll help explain how we've mitigated that currently.
What happened in 2022, and I know you know this, but for the audience here, we essentially had an increase in our contributions of about $800 million. That was really related to the 25-year average interest rates that are used for funding purposes. We saw a significant rise in interest rates, as you've indicated, from a market perspective. We are now doing our forecasting on market-based rates as opposed to the 25-year average for that. We've also seen, and it's really part of the process here, when we saw that movement in rate, essentially what that does is it creates a distortion between the rate used for forecasting purposes in the contribution schedule as opposed to the real interest rate.
The fact that we were able to kind of understand that that was the implication of it, we looked at the movement to market rates and we're really timing the reduction of the risk transfer rate. When you look at our return on assets, there's a portion of our assets that are really tied into the equity side of the portfolio, which is our risk return. The spread there has tightened considerably, right? We're only about two basis points away from our fixed rate return versus our equity rate return. Moving all of those assets over to fixed rate, ensuring that we've got a matching between that asset portfolio of assets and liabilities and changing the plan so that it's moving at market rates, you have a balance between the asset return and the movement in the liability.
By shifting all the assets into fixed, you eliminate the possibilities for that kind of volatility to happen in the future. In order to do that, we also needed to put an infusion into the plan, which is why we borrowed the additional $250 million. Putting that $250 million, increasing the assets in the plan, shifting all the assets over while we saw that reduction in the risk-related returns and an increase in the fixed component allows us to mitigate that volatility from a future rate perspective. I think being able to get the additional $250 million obviously had to be tied into the timing of the high-yield markets being available to us, being available to upsize, and doing it in a period where we were not going to pay a premium or a penalty for refinancing early.
We had a bunch of different market conditions that we had to wait for in order to execute this plan. In the interim, as you know, we have removed over $1.5 billion worth of gross liability from the plan. The fact that the plan is significantly smaller, the deficit is significantly smaller, that reduces the exposure. Now the assets all being in fixed income reduces the volatility. I will commend the team for the continued effort that we have put in over the course of the last three years, waiting for these conditions to be right that we could execute this. When the conditions were right, we basically executed it flawlessly. We are really happy with the team's performance and really happy that we have removed the volatility from the plan. We do not believe it can extend in the aggregate greater than that 3%.
Yeah, impressive technical.
Rod, this is Deb. Just a quick clarification. We borrowed an incremental $200 million and used $50 million of our cash on hand. Just a quick clarification, thank you for the question. I didn't mean to interrupt. Go ahead.
No problem. That's just an impressive technical detail on pension coming from a CEO. In my 25 years of asking CEOs questions, I think that might have been the most technical detail in terms of an answer. On that note, Mike, a big picture question, right? You've been working on this pension strategy stuff since, I think, even before you were Unisys' CFO a number of years ago. I just want to ask your overall take on what this pension news means for you and Unisys. In other words, what's the most important thing that you see stemming from this transaction when the company goes forward from here? Thanks.
Yeah, thank you, Rod, for that. And thank you for the kind words. Look, this is something we've been working on for a long time. It's been a significant overhang from the company's perspective. We have definitely seen and heard from equity holders that the complexity in valuing the company and valuing, you know, this pension was a barrier to increasing the share participation in the stock. I think it marks really a tremendous upside from the company perspective. It really, again, solidifies our position. I hate to say it in this manner because it's never autopilot, but it's basically going to be on autopilot. We'll continue the annuitizations, as we talked about during the plan here, to continue to mitigate any future exposure as far as the full remediation of the plan.
By my calculations, with the $1.5 billion that we've already taken out and the anticipated $600 million that we're targeting, that would allow us to remove this plan at about $200 million, $210 million less of cash out the door to get this off our books. It has taken a tremendous amount of time, effort, management thought process, et cetera. I think this really just allows us to focus 100% on the business and hopefully allows the investor community to really focus 100% on the business. I think it's really a milestone for the company, and I'm thrilled to be part of it.
Thank you, guys.
Thanks, Rod.
The next question will come from.
Thanks, Rod.
The next question will come from Anja Soderstrom with Sidoti & Company. Please go ahead. Ms. Soderstrom, your line is open. The next question will come from Arun Seshadri with Forza Investment Group. Please go ahead.
Hi, everyone. Just a couple of questions for me. Thank you for hosting this call. Trying to understand, have you put in anything in place today that allows, mechanically, for the removal of the U.S. Qualified Defined Benefit in 2029? Is there something specific that you had to do? The capital return program that you've talked about, potentially either buybacks or dividends, is that, I guess, following the retirement of the U.S. clients? Thank you.
Great. Thanks, Arun. Appreciate the questions. I'll do the second one first because it's a little more direct. Yes, it is following the retirement. Look, we've always said that we wanted to be on this kind of path to normalcy as it pertains to our capital structure and the like. Many of our competitors obviously have one or more of those types of programs. We think that's an important element to ultimately attract new investors to the stock. That's something that we wanted to make sure we were clear about that is in our future roadmap, but it is post us essentially taking care of the pension obligation. As far as your first question, the mechanics to do that is really just the passing of time and the execution of our existing planning structure, right?
There's nothing specific that we have to do from a mechanics point of view to execute in that timeframe other than to continue what we've been doing. We mentioned the annuity purchase programs that we're looking at over the course of the next, I'll call it two years, that $600 million takedown. Everything we do in that, at the average of 103% that Debra McCann talked about earlier on the call, is 10% to 12% better than a full annuitization would be. We'll continue down the path we've been on. We'll get that to a point where it's a manageable value, and then we'll execute the transaction to remove it from our books. There's nothing else that has to happen from a mechanics point of view for us to execute that.
Got it. Thank you, Mike. On the new, I guess, the sort of restructured profile of the assets, what is the duration or the average duration of the treasury and the corporate bond portfolio that you've used now? That's all I had. Thank you.
Yeah, Debra, do you want that one?
As far as the duration of the new, yeah, the planned liabilities duration is about seven years, and bonds are similar to the liabilities.
Thanks, Deb.
Yep.
The next question will come from Anja Soderstrom with Sidoti & Company.
Hi, can you hear me now?
Yep, we can hear you. Hi, Anja Soderstrom. How are you?
Okay, hi. I'm sorry about earlier. Thank you for making this call. First, I'm curious if you could talk about how you approached the decisions of when to time this transaction and what the optimal size of the deal and contribution was.
Yeah, the timing actually was kind of tied into the dialogue that we had with Rod's question as well, Anja. Essentially, we needed a couple of things to happen, right? We needed to have that spread ultimately shrink between the rate premium for the risk assets and the increase in the fixed asset. We needed the timing of the debt to be aligned to our ability to refinance because we would have had to do that to upsize. Thank you, Deb, for the clarification on the upsize there to get that additional $200 million in. We needed to make that additional contribution to that asset before we could shift those assets over from a fixed perspective. There were a handful of, I'll say, technical barriers from a timing perspective, and we needed to wait for that alignment to happen to execute.
The $250 million, which was made up of the incremental $200 million that we borrowed plus $50 million of cash off our balance sheet, all of our modeling told us the sweet spot on the contribution was between $250 million and $300 million. We were really just waiting to see what the rate structure would be on the new debt to determine how much we wanted to actually incrementally borrow to do that. The other little nuance there is we had to contribute at least $200 million to get our funded status up in the plan so that we can continue the annuitization program. The size was really dictated by how much on the annuitization program, how it balanced our overall cash contributions over the next five years. We knew it was going to be between the $250 million and $300 million.
The determination to go from a contribution of $250 million or the extra borrowings of $200 million was really going to be rate determinative as to what the market would bear.
Okay, thank you. That was helpful. I'm also curious, you said you see about a three to five-year path to fully removal of the plan. What gives you confidence in that, and what are the biggest risks to that not happening?
The confidence is, we know what that contribution schedule looks like. That is now fixed. We also, as I mentioned, have already done $1.5 billion worth of risk transfers. We are very confident in our ability to continue those annuitizations. Clearly, we will want to do that at the historic rates that we've been working under, which was the $103 million that Debra McCann mentioned, but confident that we'll be able to execute those in the same manner that we've been doing over the last five years. The rest of it is really just the execution of our operating plan and continuing down that path.
Executing our plan that we're on and continuing on the annuitization path that we've been doing for the last five years positions us to have that additional improvement in EBITDA, the additional improvement in cash flow generation, which allows us to be confident in that three to five-year removal.
Okay, thank you. That was helpful.
Yeah, the last point I'll make there just to close it out is, you know, doing that over that timeframe, we think is very prudent as opposed to paying, you know, a much larger premium at the end. I mentioned in the construct of the question with Rod that, you know, we've already taken $1.5 billion off the gross liability at a 10% premium, right? That's $150 million of cash that we would have to pay if we hadn't done that program. We're talking about an additional $600 million, which again, at a 10% additional premium, would be another $60 million. We think this is a really prudent way for us to do that. Ultimately, it reduces the amount of cash that we're going to need to totally defuse the pension obligation, and they're aligned to the contributions schedule that we've already provided.
Okay, thank you very much.
Thank you, Anja.
The next question will come from Kellen DeLiva with Jefferies. Please go ahead.
Thank you for taking the question. Just to put a hopefully final point on that removal plan over the next three to five years, in terms of the way in which to achieve that, it'll be the $600 million of annuity purchases and then just the annual contributions, and then business as usual to take you into a position that you feel like you can get rid of the entire U.S. plan by the end of that five-year period. Are there other deals or actions that need to be executed to achieve that?
I think, Kellen, I'll record that and play it back because it was perfect. That's exactly.
Okay, great. Thank you so much. I think that's all I had. Thank you.
Great, thank you.
The next question will come from Matthew Swope with Baird. Please go ahead.
Yeah, thanks, guys, for doing the call. Can I just, sorry to continue this, but when she made, when she laid those three pieces out, the third one was business as usual. When we think about business as usual, does that mean the production of a certain amount of free cash flow over those three to five years to handle that last piece?
Yes, it does. Again, we've laid out plans in our 2023 Investor Day. I was probably being a little too flippant with my response to Kellen. There's always a risk that we don't perform in the manner in which we expect to perform. I would say to you that the business as usual component, that's why we gave a three to five-year viewpoint in removal. If we do exactly like we set out to do from a business as usual performance, it's going to be closer to the three-year window. If we have some slippage or movement in that business as usual performance, that may extend into year four or year five. I don't have a crystal ball in the construct of how everything's going to play out over the next three to five years. What I meant by that is we don't need any other mechanical thing to happen.
We don't need any extraordinary component of our business to change in any manner to do it. It's really just the timing to get to the point of the free cash flow generation that allows us to ultimately take that pension obligation out. There are other avenues beyond business as usual. That would be our preferential way to do it. If you look at the normal contribution schedule that we've got over the next couple of years and the annuity purchases that we've been doing, clearly there could be a situation two or three years down the road where maybe we would borrow or do other means of capital to get the premium component to take the rest of that obligation out. I think we'll have a lot of flexibility over the course of that three years.
But in a perfect scenario, we operate against our current plan and we have the excess cash to do it without any incremental borrowings or other means of raising capital. Certainly, there's no requirement that we have to do it in three to five years. We could just let the continued contributions go out to its natural progression as well.
Is it possible to put a number or a range of numbers on the free cash flow that you need to generate for that business as usual three to five years?
Yeah, look, what I would say is we've already put out in our Investor Day what we think that cash flow projection would look like. We're talking about a pre-pension free cash flow this year in the $100 million-ish range. We've projected that out to have some growth in it in subsequent years. We're not talking about doubling and tripling that correspondence. If you look at slide 11 in the materials we provided, you'll see what those free cash flow projections look like. I can call them out here if you need to see them.
No, that's helpful. I see them on 11.
Slide 10 it was. I apologize, not 11.
Yeah, slide 10 is the impact to the cash flow.
Got it. Maybe this is too nitpicky, but when you're doing the analysis here, Deb, on the interest, the sort of the cost-benefit of this, wouldn't it make sense to also bake in the increased coupon that you have on the new bond versus the old 6.875% that you had?
Yeah, you know, we were going to need to refinance anyway. That was what we had anticipated already and was built into our long-term plan. This was just incremental to that. As far as the rates that we had built into our long-term plan, they're fairly similar to what we ended at. Similar with the credit spread, the credit spread's similar to what we had done on our last, our $485 million. That was already built into our long-term plans. This is just demonstrating that incremental amount versus what we saved on the pension contribution.
I see. No, that's certainly fair. Obviously, you got an extra three years, so you have to factor that in too. To the point on those bonds, those have traded really well, you know, $105-ish kind of dollar price now. As you go through all this, does it make any sense to tap that new issue and try to raise a little more cash while the market is pretty excited about that?
Yeah, I mean, we're always looking at it. Go ahead, Mike.
Yeah, I was going to say basically the same thing. We've looked at it. Our concern here, and it has been, is that we don't want to over-lever. There's really no need for us to over-lever at this point. We think we're on a really good trajectory here. We've got it where we need it to execute this plan. The opportunity is there, of course, if we needed to, but we really hit all the elements of the execution of the strategy that we wanted to.
Could I just ask one last one? Mike, you referenced the $103 million a couple of times that Deb mentioned. Are you just talking about the $103 million 10% call that you have up to the call period, or were you referencing something else with that?
I'm sorry. I was referencing the amount we were paying on the annuitization. The average of the $1.5 billion that we already took down, typically there's a 3% premium to offload those off your books. It does happen to correspond to the $103 million for the non-call provision in the debt instrument itself. The context was really around the annuitizations being done at the same historic rate that we've been able to execute in the past.
No, that's helpful. That makes a lot more sense. Thank you, guys.
Great. Thanks, Matt.
Thanks, Matt.
This will conclude our question and answer session, as well as our conference call for today. Thank you for attending today's presentation. You may now disconnect.