Welcome to the American Equity Investment Life Holding Company's Q2 2022 Conference C all. At this time, for opening remarks and introductions, I would like to turn the call over to Julie Heidemann, Coordinator of Investor Relations. Ms. Heidemann, please go ahead. Good morning, and welcome to American Equity Investment Life Holding Company's Conference Call to discuss Q2 2022 earnings. Our earnings release and financial supplement can be found on our website at www.american-equity.com. Non-GAAP financial measures discussed on today's call and reconciliations of non-GAAP financial measures to the most comparable GAAP measures can be found in those documents or elsewhere on our investor relations portion of our website. Presenting on today's call are Anant Bhalla, Chief Executive Officer, Jim Hamalainen, Chief Investment Officer, Axel André, Chief Financial Officer. Some of our comments will contain forward-looking statements which refer to or relate to future results, many of which we have identified in our earnings release. Our actual results could significantly differ due to many risks, including the risk factors in our SEC filings. An audio replay will be made available on our website shortly after today's call. It is now my pleasure to introduce Anant Bhalla. Thank you, Julie. Good morning, and thank you all for your interest in American Equity. American Equity continues to execute on all aspects of the flywheel of our business strategy. The American Equity ship can best be summed up as steady as she goes. Reflecting on the broader external environment, as supply constraints impact the outlook for inflation and the Fed remains steadfast in its resolve of balancing its dual mandate of maximum employment and price stability, we expect continued capital market volatility for the remainder of the year. In this environment, we see opportunity in investment returns driven by potential large changes in relative value across various private and public asset sectors, the timing of which will vary depending on the sector. Starting with both a substantial and a strong, resilient balance sheet will give AEL an advantage. I will let Jim and Axel walk you through specifics in a few moments, but we continued to see meaningful opportunities to play offense and will continue to return capital to shareholders, including having repurchased 4.95 million shares in the Q2 at an average price of $38.20. Total first half common stock repurchases were 9.4 million shares at an average price of $39.20. With this, we have fully repurchased the 6.8 million shares issued to Brookfield in early January and additionally repurchased $109 million of shares through the Q2. Even in these uncertain macro conditions, we will remain active in our capital return plan. We see great opportunity on the investing side, both in public and private assets as markets reprice risk-return attractiveness of various subsectors. Relative value across assets is changing rapidly as different sector returns reprice at different speeds. In the quarter, we put an additional $1.4 billion to work in private assets, bringing our total allocation to private assets to 16.6% of the investment portfolio. We remain bullish on residential real estate loans where yields are now north of 6%. That said, the recent increase in rates on public assets will allow us to wait for certain private asset sectors like infrastructure equity to reprice further before we deploy. Hence, we stay true to our more opportunistic bent in private assets investing versus traditional programmatic approaches that are more typical at insurance companies. American Equity's private asset mindset is similar to an alternate asset manager seeking opportunistic investment returns to support a permanent fund base. Therefore, from time to time, we may be more measured in deploying in private assets while still enhancing our investment spread. In the go-to-market area, we saw a decline in sales of fixed index annuities of 12% compared to the Q1 as we chose pricing discipline over chasing the market as interest rates fluctuated. With our focus on growing income product sales, American Equity Life's IncomeShield sales rose 2% from the Q1 and were basically flat with the comparable period a year earlier, and Eagle Select Income Focus increased 14% sequentially. In accumulation products, we saw sales decline driven by commoditized rate-based competition. The sales climate remains deeply competitive. In the income space, a number of competitors raised payouts and deferral bonus rates during the quarter. In the accumulation space, we are seeing levels of commoditized price competition that strike us as extreme. As a disciplined player who is already at scale, we are more measured in price changes, particularly for shorter duration products. As we see a true reset into higher rate investment yield regimes, we have chosen to raise new money rates for longer duration, less commoditized products, while focusing on other areas of differentiation like our product design in the income space and continued loyalty from a core set of producers that provide ballast to the steady state of a couple of billion of origination year in and year out across market cycles. In June, we began making the following changes to longer duration products, specifically increase in guaranteed income on IncomeShield to regain a top position in the guaranteed retirement income space, increase in guaranteed income on Eagle Select Income Focus, which will become effective shortly. Last Friday, we announced several actions to make EstateShield more competitive, including increasing the benefit account value bonus, payout factors, and crediting rates on all strategies, and increased cap and participation rates on both S&P and proprietary strategies to be reflective of a higher core fixed income return environment while sidestepping the more commoditized pure rate-based competition areas. As equity markets experience turbulence, we believe that a more durable lifetime income product suite with index participation rates will see a revival, a trend that reversed in the recent decade-plus bull market in equities when the singular focus on fixed income annuity growth was about accumulation-only products. This current macroeconomic environment-based resetting of return expectations will be a longer-term tailwind for our product solutions, especially for retail clients. We believe that most, if not all, financial planning roadmaps eventually need to lead towards income replacement for clients for which FIAs are a core product solution, while equity market recovery stories tilt the dialogue in FIA accumulation towards participation rate strategies, which provide the consumer with the best chance to capture a rebound in the market beyond just standard S&P cap rates alone. We are driving the education of these income and participation rate stories with key IMO partners and independent broker-dealer distributors. Moving on to earnings results, we were generally pleased with the quarter reporting non-GAAP operating earnings per share of $0.98, driven by strong yields on the investment portfolio, in-line expenses, and continued decline in share count driven by our robust capital return execution. Axel will get into all the details in a bit, but now I'll turn the call over to Jim to provide a little deep dive into our investment portfolio. Thank you, Anant, and good morning, everyone. I'm going to take you through some information today on our investment portfolio, including a discussion about the progress we're making transforming the investment portfolio mix. As part of today's discussion, I'll speak to how we have used this transformation to reduce risk in segments of our core portfolio while redeploying funds into privately sourced investments that improve our portfolio diversification with a strong risk-reward profile and greater control over investment structure and outcomes. Speaking of future outcomes, I'll talk to some of the scenario testing that we do on sectors of the portfolio to assess how our investments might perform under stresses such as an economic downturn and how that informs our portfolio construction and transformation decisions. During the quarter, we increased the allocation to private assets by over 1% as we source private assets primarily across real estate sectors. With the Fed continuing on a path of increasing short-term rates, inflation remaining high, and slowing economic growth, our focus has been to source assets where we expect good long-term returns that are able to weather a contractionary economic period. Residential real estate is the area of the market where we sourced the most assets this past quarter. While residential real estate has slowed quickly from the frenzied growth earlier this year, with price increases slowing and transaction volume declining from the peak, demand continues to remain strong by historical standards. While the economic outlook is never certain, we operate from a position of balance sheet strength. Over the past two years, we have worked to reduce risk in those sectors and securities of the portfolio that we felt had the highest probability of principal losses in an economic slowdown or a recessionary environment. Our focus of that work has been on lower-rated securities in the corporate credit and securitized asset sectors. Starting with corporate credit, we've constructed a portfolio that is well-diversified. Holdings in BBB-rated securities are focused in sectors that are more defensive and resilient like consumer non-cyclicals, utilities, telecom, insurance. Through risk reduction trades over the past two years, we reduced the exposure to BBB-rated corporate securities by approximately three percentage points of the investment portfolio to 27.9%. In addition, we reduced our exposure to below investment-grade corporate securities by over half, and it now stands under 1% of the investment portfolio. The focus of these proactive changes over the past two years was on sectors where we felt the fundamentals will be most at risk of deterioration in a slowdown and those securities where we felt the risk of principal loss was not balanced with the return. In addition to managing exposure to principal loss, we also concentrate on managing potential ratings migration in the portfolio, which limits the impact to capital from downgrades. In the securitized asset portfolio over the past two years, we have reduced the overall exposure to CMBS and CLOs as well as improved the risk profile within those asset classes. We will continue to migrate the portfolio up in quality through both purchase activity as well as risk reduction trades. Relative to total invested assets, our total CLO exposure has decreased from 9.4% to 6.7% over the past two years, and our overall CMBS exposure over that time has decreased from 10.1% to 8.2%. In addition, the percentage of CLO holdings rated BBB or lower has decreased from 5.9% to 3.5% of the investment portfolio. Finally, over that time frame, we cut in half our CMBS holdings rated BBB or lower from 0.8% of the investment portfolio to 0.4%. To assess the risk in our current holdings, we run stress tests to estimate potential losses and downgrades across economic scenarios. This analysis gives insights into those securities that could deteriorate in a downturn or recession and helps define and shape the composition of the portfolio and the risks we take. These stress tests have shown that our overall portfolio is well protected from losses in a moderate recession. In both the CLO and CMBS portfolios, the BBB or lower-rated securities show very manageable losses, even in stress scenarios that are similar in severity to the great financial crisis. In that scenario, we project some downgrades, but the impact from the downgrades is manageable given our ability to generate organic capital through investment earnings on the rest of the portfolio, and we do not expect it would impact our capital plans for the business. In addition to running stress tests, we've evolved and improved our strategic asset allocation models and processes and aim to be an industry leader in this area and to be an opportunistic asset allocator across sectors based on tactical market opportunities. This is an important element in optimizing the portfolio and ensuring we are operating within the risk-return characteristics of our risk management framework. As we continue to optimize our portfolio toward a greater allocation to privately sourced investments, we also continue to evaluate the overall risk profile of the portfolio in order to support our product liabilities and to maintain our balance sheet strength. With that, I'd like to turn the call over to Axel. Thank you, Jim. Let me extend my appreciation to all of you attending this call. For the Q2 of 2022, we reported non-GAAP operating income of $91.1 million or $0.98 per diluted common share. The quarter included $9.2 million of revenue from reinsurance stemming from our Brookfield Reinsurance relationship, up from $80.6 million in the Q1 of this year. The expansion of the relationship to include sales of EstateShield and Eagle Select Income Focus will be included in Q3 results effective July 1st, 2021. The account value and notional value of in-force subject to recurring fees we will cede on these two products, reflecting sales from July 1st, 2021 and June 30th, 2022, are expected to be approximately $260 million and $235 million, respectively. These result in recurring revenues, which are expected to grow over time as we migrate liabilities to the fee-based business model. Average yield on invested assets was 4.33% in the Q2 of 2022 compared to 4.15% in the Q1. The increase was primarily attributable to lower average cash balances and a benefit from the increase in short-term rates on our floating-rate assets. The average adjusted yield, excluding nontrendable prepayments, was 4.28% in the Q2 of 2022 compared to 4.12% in the Q1 of 2021. In the quarter, yield increased by 8 basis points due to the increase in short-term rates and 9 basis points from a decrease in average cash balance. While the benefit from partnership income was lower than in the Q1, this was mostly offset by stronger valuations on owned single-family rental property. Partnerships and other mark-to-market assets contributed $27 million to investment income in excess of assumed rates of return used in our investment process. At quarter end, cash and equivalents in the investment portfolio was $544 million, basically flat with March 31st. Average cash and equivalents for the quarter was $526 million, down from $1.7 billion for the Q1. During the quarter, we invested $2 billion at a yield of 4.88%, including $1.4 billion of privately sourced assets at an expected return of 5.10%. Our allocation to privately sourced assets was 16.6% of invested assets as of quarter end compared to 15.4% at March 31st. For the month of July, we invested $542 million at an average yield of 7.08%. The July rate on new money is probably a bit on the higher side as it was predominantly in private assets, primarily real estate and middle market loans. That said, we would expect higher new money rates than in the past, as we historically have large amounts of core bond purchases that brought down the overall yield as we redeployed large amounts of cash and otherwise reduced portfolio risk. As of June 30th, the point in time yield on our investment portfolio is 4.05%, reflecting the benefit from the increase in LIBOR and the further increase in our allocation to privately sourced assets, partly offset by higher expected expenses as we build out our investment platform. For the Q3, we expect an additional benefit of roughly 16 basis points in yield, reflecting the increase in LIBOR on our $5.2 billion of floating rate assets. The aggregate cost of money for annuity liabilities was 169 basis points, up from 164 basis points in the Q1. The cost of money in the Q2 benefited from 2 basis points of hedging gains compared to 3 basis points of hedging gains in the Q1. The increase in the cost of money, excluding hedging gains, reflects a higher cost of options in the Q2 of 2022 compared to the run-off of lower cost options purchased in the Q1 of 2021. Cost of options in the Q2 of 2022 averaged 1.61% compared to 1.60% in the Q1. Investment spread in the Q2 was 2.64% compared to 2.51% in the previous quarter. Excluding prepayment income and hedging gains, adjusted spread was 2.57% in the Q2 compared to 2.45% in the prior quarter, reflecting strong investment returns offset modestly by the increase in cost of money. By delivering on our investment returns, we expect to offset increased option costs. Deferred acquisition costs and deferred sales inducement amortization totaled $133 million compared to $129 million in the Q1, reflecting $8 million of additional expense due to lower index credits than in the Q1 and partially offset by lower expense due to lower living benefits utilization than in the Q1. Q2 amortization was $6 million greater than the modeled expectations, primarily due to higher interest margin and lower than expected index credits. Given the low level of projected index credits and projected increase in net investment spread, we would expect amortization of DAC and DSI to be in the $140 million-$145 million range in the Q3 under current best estimate actuarial assumptions. The liability for guaranteed lifetime income benefit payments increased $96 million this quarter compared to $85 million last quarter, primarily due to lower index credits than in the Q1 and partially offset by lower LIBOR utilization and higher lapses than in the Q1. Q2 LIBOR reserve increase was $34 million higher than modeled expectations, primarily due to lower than expected index credits and higher LIBOR utilization than modeled expectations. Given a minimal level of expected index credits at current S&P 500 levels, we would expect the increase in LIBOR reserve in the Q3 to be similar to the Q2 change. Other operating costs and expenses were $60 million in the Q2 compared to $58 million reported in the Q1, in line with previously stated expectations. We continue to build out our teams with specialized expertise and invest in the systems infrastructure and other projects necessary to support our growth as the new AEL, and still expect other operating costs and expenses to be in the $240 million range for the full year as project costs that have been capitalized will begin to be amortized in the second half of the year. Over the long term, we expect to manage expenses at a certain level of basis points of policyholder funds under management and administration. At June 30th and July 31st, cash and equivalents at the holding company were $278 million and $562 million respectively, with the increase at July 31st reflecting $300 million of proceeds from the previously announced drawdown of a term loan facility. This additional capital flexibility will be deployed for continued execution of investment management partnerships and other potential growth opportunities for long-term value creation for our shareholders. On January 1st, 2023, LDTI will become effective. For American Equity, given our mix of business, the impact to retained earnings will primarily be due to the change of reserves for LIBOR benefits from the SOP 03-1 framework to the market risk benefit framework. In addition, there will be an impact to AOCI due to the elimination of shadow DAC, DSI, and SOP balances. Our current estimated impact to retained earnings is expected to be less than $100 million as of January 1st, 2021. Including AOCI, our current estimated impact to total equity as of January 1st, 2021, is an increase between $1.5 billion and $2 billion. The majority of the impact to AOCI is related to the elimination of the concept of shadow DAC, DSI, and shadow SOP balances in the new methodology. Secondly, to the change in value of market risk benefit reserves due to changes in own credit spread from time of policy issue to the transition date, January 1st, 2021. Given our estimate of retained earnings as of January 1st, 2021, and the beneficial increase in interest rates since then, we view the adoption of LDTI as nonsignificant. Now I'll turn the call over to the operator to begin Q&A. Thank you, sir. To ask a question, you'll need to press star one one on your phone. We ask that you please limit yourself to one question and one follow-up. Stand by as we compile the Q&A roster. One moment. Our first question will come from Pablo Singzon of JPMorgan. Your line is open. Hi. Thank you. The first one I had is for Anant. I'd be interested to hear how you see the current environment, and you sort of described it, right? You referenced higher rates, changes in relative valuation. How do you see all that affecting your ability to attract third-party capital? And I guess the question is with, you know, interest rates higher across asset classes, do you think the appetite for private assets will be as strong as before, given that the incremental spread there might not be as wide as before? Hi, Pablo. Good morning. Short answer is yes, we still see a lot of appetite, in fact, increasing appetite from third-party capital because at the end of the day, what does a sidecar or reinsurance vehicle allow for third-party capital to get? It allows third-party capital to get a permanent structure in accessing reinsured liabilities as a form of leverage to have a 12:1, 13:1, 15:1 leverage structure. It's like it's a permanent fund replacement. We're in it for delivering investment returns. It comes to the 60/40 mix between public and private. Private asset returns will be at a premium to public market returns, and so we still see it being an enduring structure, enduring permanent structure for third-party capital. I'll take any follow-on if you have on that or any other question. No. That was here. Thanks, Anant. The second one I had is for Axel. I appreciate your comments on index credits. I was wondering if you'd comment on how index credits might impact capital generation and deployment this year next, given that index credits feed into statutory income. Thank you. Yeah. I think the impact of index credits is really a lower rate of growth in account value overall, you know, assets, basically assets under management, as is probably obvious. As far as the impact that would have on long-term capital generation, it's really minimal. We, you know, like we said at the beginning of the call, remain committed to our capital return plans. I'll leave it at that. All right. Thank you. Thank you. One moment please for our next question. Our next question will come from Erik Bass of Autonomous Research. Your line is open. Hi. Thank you. I know you don't disclose an interim RBC ratio. I was hoping you could discuss how you're thinking about AEL's overall capital position, including holdco liquidity, and also how you're thinking about leverage and the decision to draw down the term loan in July. Hi, Eric. It's Anant. I'll start. I'll let Axel add in after me. Just strategically how we think about the things you mentioned was, you're spot on right. RBC becomes a lot less relevant for us as we run as a solid A financial from the different rating agencies. We look at our capitalization on a consolidated balance sheet basis, where we want to be a strong A-rated company from S&P, AM Best, for example, so that becomes relevant. On the concept of using proceeds that we just brought in from debt, as Axel mentioned, we're thinking strategically. This business is one where we're like a merchant bank. We will bring in the liabilities, we'll keep some for ourselves, we'll put some into a sidecar, which is third-party capital. We're not really looking to be a high financial leverage institution. We're looking to have modest amount of financial leverage, which I would say is we have low leverage right now, and commensurate with our ratings, you could be easily north of 20% and you would still be moderate. That gives us a lot of dry powder. We have a lot of dry powder from a leverage point of view to make strategic moves. For now, building our investment partnerships is where we will deploy some capital in addition to returning to shareholders. Axel? Yeah, no. Thank you, Anant. That's great. Yeah, just to add some numbers behind what you said in terms of leverage. Even post the draw on the term loan facility, our leverage ratios are in the mid-teens, which provides us with ample capacity consistent with the solid A rating that Anant mentioned. Got it. We clearly heard the message on capital return for this year, but how are you thinking about capital return plans post 2022? Is the $250 million-$300 million you talked about at the time of the AEL 2.0 rollout still the right baseline to think about? Early days to give you a baseline for the future. I think as we execute our sidecar, we'll talk about it more. I would point you to page 11 of the supplement, right, where we're making around 95 basis points on reinsured liabilities. So that's like $45 million of earnings, much higher multiple of that in ceding commission that's coming in each year because we have to amortize those ceding commissions over the expected life, but we're realizing them over seven years. So very high free cash flow conversion over there, which is all going to go to shareholders. If you just even look at the balance sheet as of now, we have, if you'll do the math there, in excess of $100 million of cash on the ROA business, which could easily be returned to shareholders. As we ramp that's a source of sustainable capital return to shareholders, and we'll come up with more guidance on that or forward-looking views on that as we execute our sidecar. That's the path to capital return, not just from freed up capital. We're gonna have plenty of freed up capital as we go forward as well. Axel? You very well said, Anant. I don't think I have anything to add. Thank you. Hey. Just one last thing. Sorry, go ahead. Sorry. I'm just gonna say the dynamic that, you know, GAAP earnings of ROA are more muted than cash generation is one that I would just re-emphasize. The multiple of cash generation to GAAP earnings on our ROA side is well north of 100%. That's why we can return much more capital as that ramps. Got it. I just wanna make sure I heard you right. Did you say that kinda the cash generation from fee earnings is running at about $100 million? Then I guess the other thing, it sounds like from your comments to Pablo that you're still confident in getting a third-party sidecar capital raise. Is that something you still expect to have in place by year-end? Yes to the first answer. The second one will be next year. Okay. Thank you. Thank you. One moment please for our next question. Our next question will come from John Barnidge of Piper Sandler. Your line is open. Thank you very much, and good morning. Could you maybe talk, you had did $1.4 billion into private assets in the quarter. Can you maybe talk about what the plan was entering the quarter, how market changes impacted that? 'Cause it does sound like, you're gonna wait on some repricing before deploying further. I think infrastructure was called out, so maybe volume for the second half too. Thank you. Sure, John. This is Jim Hamalainen. You know, as far as you know, the $1.4 billion relative to plan, you know, some of the sources of private assets we have are steady sources where we're sourcing a set amount each month. Some of them really come in you know, in deal size where you might put on 200 or 300 million at a point in time. The $1.4 billion is a little higher than we had expected, but really is really dependent on what we see for flows. You know, we see opportunities out in the market, and so we continue to source private assets in size in those areas that we feel make the most sense to put on today where we get the returns that we want, but also feel there's a level of protection for an economic downturn, which we expect at some point in time in the future. We expect to continue to source private assets at a good clip. Okay. Thank you. Maybe my follow-up. Mark's benefited, I think it was about 20 basis points to the yield. Can you talk about how we should be thinking about a reversal of that a little bit given more market. Thanks. Is that related to floaters, did you say? Or what was that? Sorry. No, that was related to the 20 basis points benefit from partnership marks and other mark-to-market assets. That was the genesis of the question. Thank you. Yeah. Sure. I mean, you know, some of that, you know, the valuations on those are done on a lag. You know, it's not always necessarily, you know, clear when you look at what actually happened in the quarter. You know, some of the valuations are done at different times of the year. Certainly, you know, we're happy with all of our partnerships and the mark-to-market assets that we have and expect that we'll continue to get strong returns from those. The exact level of those is pretty hard to predict, though. Great. Thank you very much for the answers, and best of luck in the quarter ahead. Thank you. One moment please for our next question. Our next question will come from Ryan Krueger of KBW. Your line is open. Hi. Thanks. Good morning. Appreciate the comments on the moves you've made on repositioning the ratings within the asset portfolio. I guess, first though, could you just give us what the ratings profile is of the existing CLO and ABS portfolios, please? Sure. I mean, the ratings. I mean, generally, our CLO portfolio, vast majority of it's investment grade. We do hold some below investment grade there, and a lot of it's triple Bs on the investment grade side. In the CMBS portfolio, that is, almost entirely investment grade and single A or higher. Much more skewed for single A and higher ratings for CMBS. We have much smaller holdings in the asset-backed and the RMBS portfolios. But those generally tend to be skewed toward higher ratings. I just add one thing on. Got it. I'll just add one thing, Ryan, nice to hear, was to Jim's comments, is that, you know, when Jim and I got here two years ago, we looked at the CMBS book and the CLO book in great detail. If you'll recall back at the end of 2020 and early 2021, we did a lot of de-risking on the BBB stuff. Frankly, came to the conclusion that we wanted to bring in BlackRock and Octagon at Conning to help us figure out ahead of a down cycle. We feel relatively good about the actions we did, including pretty heavy selling. Just to give you a data point, you know, we actually have seen some upgrades on the one of the BBBs or the BBs this quarter, which is a very small portion. Jim, I don't know if you want to say anything on that, but. I mean, we have seen some positive action there. Even within, you know, if you think about, you know, all BBBs of course aren't created alike. You look within the portfolio, we've been very diligent at digging through and also working with our partners, BlackRock and Conning, on making sure that within even those categories that we are focused on reducing risk in those securities that we feel, you know, hold the most risk and where the risk return profile doesn't make sense. Really the things that we hold are securities where we feel they're commensurate with the risks that we have. Thanks. Maybe the statistic that 92% of the CLO portfolio is rated an NAIC 1 or 2, and that's been stable for quite some time. Got it. My follow-up is then NAIC continued to seemingly spend quite a bit of time looking at CLOs and what the right capital charges are against them, and there's some preliminary proposals to require more capital against CLOs. Can you provide any commentary on how you're thinking about that and what the potential risk could be? Yeah, I can start. We spent a lot of time thinking about that. It's, I think, one core part of our business is that we're not a structured asset shop, right? We've stayed clear of the fact that CLOs and particularly BBB CLOs. We just don't see that's the right way to play the game in the spread business. Maybe there are others who are far better than us in figuring it out. God bless them. We'll wish them all the best. That's why you've seen a lot of the commoditized rate action also on the product sales side. You know, those who have more conviction in playing in BBB CLOs and figuring out, you know, that the Nth level of optimization there, which is to your NAIC point, we just think life's too short for that. Yes, I think looking at that, we have looked at, you know, there's a wide range of proposals and thoughts and ideas out there for capital for CLOs. It's really hard to pin it down right now. Just there's so many unknowns, and it's a pretty extraordinarily wide range of proposals that we've seen. Understood. Appreciate it. Thank you. One moment for our next question, please. Our next question will come from Mark Hughes of Truist. Your line is open. Yeah, thank you. Good morning. I think you just touched on this a bit, but your point about the commoditization of the accumulation product is that kind of a function of the volatility in the interest rate environment? Everybody's sort of jockeying for position or making assumptions or is there some other structural driver there? Hi, Mark. Anant here. Yes. There's both parts of that. There is commoditization driven by those who are willing to play the more structured product arena on using those rates. For case in point, you know, I think AAA, AA CLOs right now are very, very attractive. We're not really backing up the truck on them, but I do think that's part. Those who use like single-A and BBB CLOs to price that business are really driving commoditization in short duration products. The other part that we do see as an opportunity is to your point about rate volatility. Rates ran up a lot in the quarter, then they came back some in the quarter. We have to take a more resilient view because renewal rate integrity is a big part of what AEL was built on. We don't wanna like have a rate for one year and have it meaningfully change in the second year. We've been measured in raising rates, frankly, as the Fed gave us some 75 basis points moves, and we've been studying with others. Is it really different this time in terms of rates? There clearly is a structural regime change in the term premium out there. We expect that rates are gonna be higher for a bit longer, maybe not forever, and so we're taking that forward view in and have been more measured and avoided the commoditized parts of the space. We've got more competitive at the end of the quarter. I think we're gonna really grow much more in the income space and find the pockets to grow in accumulation, where we can make double-digit returns. The key is you have to make double-digit returns without being heroic on the asset side. Understood. Thank you. How sensitive are the results gonna be to, in the residential real estate portfolio, to home price fluctuation? Sure. You know, residential real estate, a number of different areas that we invest. Certainly on the loan side, you know, prices are not a big impact. On the single-family rental side, you know, the multiple avenues for return there, but the actual rent collected is a big part of that. You may see some based on pricing of residential real estate. You may see some noise and valuations, but it is not the key and not the only driver of returns there. We're fully expecting. You've seen it already, a backing off of the frenzied residential real estate market that we had earlier this year. You know, if you look at almost any chart and you take 2020 and 2021 out of the chart, you'd look at today and say, "This is the hottest market ever for residential real estate." It will continue to slow down from here. You know, the rental market is just driven by such a supply-demand imbalance right now with you know, supply being millions of houses short by anybody's measure, that you know, while we will not expect to see the increases in rental rates going forward that we have in the past couple of years, we still expect that market to hold up nicely. Two strategic points to add to what Jim said. One is price exposure versus rent growth exposure. We're more sensitive to rent. Is that fair, Jim? Yeah. Right? We like the rental business because the second strategic point is, you know, we have an equity investment in Pretium, one of our asset managers, that is a specialist in this space. Our relationship with them has really deepened meaningfully. We play resi with them. We did the anchor loan transaction with them. We've got a super specialist manager with whom we're picking the spots to play, just to add the strategic overlay to what Jim just said. Thank you. Thank you. One moment please for the next question. Our next question will come from Tom Gallagher of Evercore ISI. Your line is open. Hey, good morning. Just wanted to come back to the LIBOR utilization. I think you mentioned that it came down from 1Q, but just curious if that was still elevated versus, you know, a typical quarter. If utilization assumption is something you'd look harder at as we approach the 3Q balance sheet review. Yep. Hi, Tom. Thanks for the question. This is Axel. For the quarter, LIBOR utilization was higher than expectation, again, in specific, very specific segments of the block, and we talked about that last quarter. In particular, it's the certain policies that they reach an anniversary and there's a reset in the product. That's kind of the point in time in the specific vintages for which we've observed this higher utilization, and that's what's driving the numbers. It was less than the prior quarter in terms of a dollar impact relative to the SOP reserve. The higher utilization this quarter was responsible for $16 million of SOP reserve higher than expectation. Again, it's part of that particular piece of data of experience in policyholder behavior is part of the data we collect throughout the year that we analyze, and that ultimately results in the potential revision of assumptions in the Q3. Got you. That's helpful. The second one I had was, you know, appreciate the color on the quantification on the book value impacts from LDTI. Just hoping you could maybe give some thoughts on maybe the earnings impacts as we approach transition directionally or otherwise. Yeah. Thanks, [so]. I think we're not gonna address that at this point in time. I think as we approach, you know, as we approach next year, 2023, we'll be getting into that, but not at this point in time. Gotcha. Thanks very much. Thank you. One moment, please, for the next question. The next question will come from Dan Bergman of Jefferies. Your line is open. Thanks. Good morning. I guess to start, following up on your commentary related to Mark's first question, I wanted to see if you could provide some more thoughts around the outlook for FIA sales. Are you still looking for low to mid single digit growth off of last year's base, which I think would imply a step up in the pace of sales in the second half? Just based on what you're currently seeing in terms of competition and the, you know, recent and planned product changes you discussed. Any updated thoughts or color on these dynamics would be great. Hi, Dan. It's Anant. I think you're right, that still remains the plan. The key is finding pockets in the accumulation phase where we can write double-digit unlevered IRR business and not get sucked into the commoditization game. We have areas of focus over there. In the income area, we'll do very well with the changes we're implementing right now. We expect that to drive it. That's the plan. The plan is to deliver those type of volumes this year. The key is not to give away $1 for 95 cents, right? I mean, that's what we don't like about the commoditized space. Got it. That makes sense. Thanks. I apologize if I missed it, but can you give an update on the level of partnership and mark-to-market assets that you currently have in the portfolio as of the end of the Q2? Is there any high-level breakdown you can give in terms of the mix of what you're holding? For example, how much is real estate versus other asset class? Sure. The total of partnerships and mark-to-market assets was $1.66 billion. You know, it's across. If you think about the mark-to-market assets, the good majority of that is in residential real estate in single-family rentals. In partnerships, it's across, you know, a number of different investments. Got it. Thank you. Thank you. One moment for our next question. Our next question is a follow-up from Pablo of JP Morgan. Your line is open. Hi. Thanks. I was just wondering if you could quantify for us how much of the benefit you expect from, you know, short-term interest rates, just given that they've continued to run up. I guess if you sort of look forward even maybe until next year, in your own modeling, are you sort of assuming what the forward curve is saying, where LIBOR could go as high as maybe 3.5%? I'm just curious what your thoughts are. Thanks. Yep. Hi, Pablo. It's Axel. So I think I may have mentioned earlier that for the Q3, we expect the impact of the rise in LIBOR to be about a 16 basis points benefit to investment yield. That's obviously behind us. We've already seen the LIBOR. It's in most of our floating rate assets reset in kind of that third week of the first month of the quarter. As far as long-term planning assumptions, you know, we really look at a range of assumptions. Some include the forward curve, some include holding rates flat. Got it. Thanks, Axel. Thank you. I see no further questions in the queue. I would now like to turn the conference back to Ms. Julie Heidemann for closing remarks. Thank you for your interest in American Equity and for participating in today's call. Should you have any follow-up questions, please feel free to contact us.