We want to take as much cash out of the insurance companies as possible, and we prefer to have it as the holding company. And over time, that’s — you’ve seen that in the consistent cash flow as we generated.
Alex Scott: Understood. So this is something that sounds to me like it’s more specific to 2024 dividends?
Robin Raju: Correct.
Alex Scott: Got it. Okay. follow-up I had is just on the BlackRock clients that are coming on board in 2024. Can you help us think about how impactful that is? And I mean, is that just an initial group of clients, but that will build? I mean, can you help us think about the magnitude of that opportunity and how we should think about it over the next few years?
Nick Lane: Sure. This is Nick. First, we see this market as offering significant, I would say, long-term opportunity as we highlighted in the call, the 401(k) market represents over $7 trillion with qualified default options capturing roughly 50% of that. This is the initial stages of that that’s emerged over time with the passage of SECURE Act is both the insurance leading asset managers and receivers into solutions. We expect to get flows from BlackRock over this year. They will come in, in a lumpy fashion with large initial deposits but then supported by recurring premium. So overall, we’re excited about the long-term prospects and view this as part of the solution to solve the emerging U.S. retirement crisis.
Alex Scott: Thank you.
Operator: Your next question comes from the line of Tom Gallagher with Evercore ISI. Your line is open.
Tom Gallagher: Good morning, and first is just wanted to get a better directional sense on capital return, how you’re thinking about it, the $1.3 billion authorization? How should we think about that? Because if I look at what you’re — if you’re just really planning on generating what your free cash flow guidance implies, it would probably suggest your buybacks run at a similar level to what you return this quarter, $240 million or so, at least in that ballpark. Obviously, the $1.3 billion buyback is quite a bit above that level. Can you comment on, are you planning on stepping it up, staying at the $240 million level? Just directionally, can you help bridge that?
Robin Raju: I think the most important number to have in mind is the $2 billion of holdco cash that we have. That provides us the flexibility. The authorization itself, it doesn’t expire so that will provide us timing. If markets ended up coming higher and earnings were higher, we can have higher share buybacks. But the ultimate guide is the 60% to 70% payout ratio. Since IPO, we’ve always been consistent in maintaining in the payout ratio guidance we’ve had. And if we see markets are good and earnings are higher, then we’ll return more. And that’s what the flexibility of the authorization provides us.
Tom Gallagher: Got you. The — Robin, the follow-up is the $200 million to $300 million level of protection annual guidance. If we think about you potentially finding a reinsurance solution that reduces the volatility. Is it fair to assume the level of earnings will likely go down because obviously, you’re going to have to pay for the protection? Or do you just see the range narrowing? I just want to understand like how to think about dimensioning how you’re approaching that?
Robin Raju: Yes. I think it’s fair to assume that when you do reinsurance, you’re giving up some economic cost. That may not translate into earnings now, that may translate into lower earnings in the future. Life businesses are long tailed, so it could be 15 to 20 years. But it’s an economic cost trade-off that we’re measuring against. But we would expect by — if we did something that it would lower or narrow the band for the Protection Solutions earnings base. But we’re looking at a range of potential options. And what we’re trying to find is what provides most economic value for shareholders.
Tom Gallagher: Got you. Thanks. And if I could just sneak in one more. Just on the whole commercial real estate market, we’ll call it concern that NYCB has created and you’ve had some other issues occurring here, they get started with a people were — have been concerned about office and now it seems to be spreading to multifamily. Just curious if you guys have a broader market view, if you think things are going to get worse from a broader market perspective and what that might mean for your exposure to CRE?
Robin Raju: Yes. Maybe quickly on broader market, but I’ll use your question to give you some more details on our portfolio as well. Look, the broader market obviously remains challenged across — mainly on the office space we see primarily across, it could dip into multifamily. But again, just like anything and more specifically on real estate, it’s all about where you are, what type of buildings you’re in and location really does matter. And the debt and equity structure matter. So you can’t always think about the headlines, what the bank zone are sometimes of different quality, what the insurance company owns just by the capital nature of these securities as well. For Equitable, the office portfolio represents about 5% of our total general account.
It’s a pretty high-quality portfolio with solid operating results. We’re on Class A buildings. I think the metric that I looked at, at the end of the year for us internally was our debt-to-service coverage ratio, it actually went up to 2.3 times as of the fourth quarter, which was up from 2.1 times and that reflects improved operating income from the properties that we have. The overall mortgage portfolio LTV was 64%, which bodes well. It’s slightly higher than last year, but that’s just due to the lower valuations. We successfully resolved all of our 2023 maturities, and we only have five office loans maturing in 2024. We had one delinquent loan at year-end, and that loss was reflected in GAAP CECL and also our year-end statutory results and included in our 2024 capital plan.
So we continue to be very comfortable with our overall loan portfolio and our ability to manage through cycles. As you said that, and as I mentioned, the market is challenging, though. But with rates peaking in Q3, Q4 that should help some of the fundamentals in the business going forward.
Tom Gallagher: Okay, thanks.
Operator: Your next question comes from the line of Jimmy Bhullar with JPMorgan. Your line is open.
Jimmy Bhullar: I had a question first just on AllianceBernstein flows. Your comments on the pipeline have been pretty upbeat, but flows have been, I think, negative the last three quarters, six of the last 8 quarters and many other asset managers have had similar issues. So what are your views on the strong pipeline materializing into inflows if rates keep moving around? Or should we assume weaker flows until there’s some stability in rates?
Onur Erzan: Onur from Alliance Bernstein. Definitely, we remain confident about our sales prospects. If you break our business into its three components, our retail business continues to net flow consistently. If you look at the larger segments like U.S. retail, they have grown sales for the last eight years. And we have been in organic net flows over the last five years, capturing market share. Similarly, our Asia ex-Japan fixed income franchise had a lot of momentum carrying into the new year. And we have other opportunities as well, such as strong Japanese retail equity franchise. And then on private wealth, although we had some seasonal outflows in the fourth quarter with tax cost harvesting, et cetera, which skews towards high net worth and ultra-high net worth individuals.
We have been in organic net flows for the three consecutive years. And structurally, we believe we’re going to benefit in terms of our proprietary private wealth business. I think where we had more idiosyncratic challenges partially influenced by some of the recent performance in a few strategies in the institutional space. Again, it’s very hard to predict lumpy outflows from individual mandates. So that creates the year-to-year or quarter-to-quarter fluctuations in net flows. But if you take a long-term structural view, we remain confident in our growth engines, both from a distribution perspective, as well as the strength of our pipeline, which skews heavily towards private alts. As you know, that private alts raises the embedded fee rate in the pipeline to 56 basis points.
and that’s 3 times the underlying channel fees. So we have a lot of embedded revenue growth in the pipeline. We don’t expect huge disruptions in terms of deployment of that pipeline, actually, we added to that pipeline in the fourth quarter, more so than we did in the third quarter and the first quarter. But also if you look at the realizations since realizations were nice, our pipeline came down. So it’s good to see both the additions as well as realizing the deployments, which turns into fees right away.
Jimmy Bhullar: Okay. And just following up on individual life. Your margins have been better the last couple of quarters, and they were obviously weaker prior to that. Do you have better confidence in results going forward, like was the early part of 2023 more of an aberration? Or do you still expect results to continue to be volatile in the short-term?
