Prepared remarks
Good morning, ladies and gentlemen, and welcome to Brighthouse Financial's Third Quarter 2024 Earnings Conference Call. My name is Michelle, and I will be your coordinator today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of the conference call. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to Dana Amante, Head of Investor Relations. Mr. Amante, please proceed.
Thank you, and good morning. Welcome to Brighthouse Financial's Third Quarter 2024 Earnings Call. Materials for today's call were released last night and can be found in the Investor Relations section of our website. We encourage you to review all of these materials. Today, you will hear from Eric Steigerwalt, our President and Chief Executive Officer; and Ed Spehar, our Chief Financial Officer. Following our prepared remarks, we will open the call up for a question-and-answer period. Also here with us today to participate in the discussions are Myles Lambert, our Chief Distribution and Marketing Officer; David Rosenbaum, Head of Product and Underwriting; and John Rosenthal, our Chief Investment Officer. Before we begin, I would like to note that our discussion during this call may include forward-looking statements within the meaning of the federal securities laws. Brighthouse Financial's actual results may differ materially from the results anticipated in the forward-looking statements as a result of risks and uncertainties described from time to time in Brighthouse Financial's filings with the SEC. Information discussed on today's call speaks only as of today, November 8, 2024. The company undertakes no obligation to update any information discussed on today's call. During this call, we will be discussing certain financial measures that are not based on generally accepted accounting principles, also known as non-GAAP measures. Reconciliation of these non-GAAP measures on a historical basis to the most directly comparable GAAP measures and related definitions may be found in our earnings release, slide presentation and financial supplement. And finally, references to statutory results, including certain statutory-based measures used by management are preliminary due to the timing of the filing of the statutory statement. I'll now turn the call over to our CEO, Eric Steigerwalt.
Thank you, Dana, and good morning, everyone. Today, I will provide an update on the strategic initiatives that we discussed on our second quarter earnings call, followed by some highlights from the third quarter. Following my remarks, Ed will provide more detail on our financial results in the quarter. I am pleased to share that in the third quarter, we continued to make progress on our strategic initiatives designed to improve capital efficiency, unlock capital, and return our combined risk-based capital or RBC ratio to our target range of 400% to 450% in normal market conditions. As I said on our second quarter conference call, we are comfortable operating below our targeted RBC range for temporary periods. The reason for that is twofold; one, we have a number of strategic initiatives underway that we are confident will improve our RBC ratio; and two, we had $1.3 billion of liquid assets at the holding company as of the end of the third quarter. Our strategic initiatives include reinsurance opportunities, along with actions to help simplify our hedging strategy. We are working on multiple reinsurance opportunities, both in-force and flow reinsurance. We have been working on one particular agreement with a third party to reinsure a legacy block of fixed and payout annuities. We are in the final stages and expect to enter into this reinsurance agreement before year-end, pro forma for this reinsurance agreement. Our September 30 estimated combined RBC ratio would be at the lower end of our targeted range in normal markets. In addition, we have made substantial progress on simplifying our hedging strategy. As we have discussed previously, the significant growth we have seen in our Shield annuity block over the past several years has resulted in a balanced risk profile for our annuity business. But it has also increased the complexity of managing our variable annuity or VA and Shield business on a combined basis. To address this issue, we started to hedge Shield sales on a stand-alone basis with the launch of our new Shield product in July, which we discussed on our second quarter earnings call. We are expanding that approach in the fourth quarter to include our Shield Level Pay + product that was launched in August of 2022 and any remaining sales associated with our Shield product suite. Additionally, we are formulating a revised hedging strategy for our in-force book, which will now essentially be a closed block of business. Despite the refinements to our hedging program, our overall focus remains the same, which is to protect our statutory balance sheet under adverse market scenarios. At the end of the third quarter, we estimate that our combined RBC ratio was between 365% and 385%, and Ed will discuss that in more detail in a moment. As I mentioned earlier, we expect our combined RBC ratio would be at the low end of our target range in normal markets, assuming the entry into the reinsurance agreement on our fixed and payout annuity in-force business. Also, at the end of the quarter, our holding company liquid assets remained very robust and were approximately $1.3 billion. We have consistently stated that it's appropriate for a life insurer to have a conservative cash and liquidity position at the holding company, and our recent experience illustrates why this is a prudent strategy. Our substantial cash at the holding company also supports our common stock repurchase program. In the third quarter, we repurchased $64 million of our common stock with an additional approximately $25 million repurchased through November 1. From the beginning of our share repurchase program, which started in August of 2018, through November 1 of this year, we have repurchased over $2.4 billion of our common stock, reducing our shares outstanding by over 50% over that time and since we became an independent public company in 2017. Along with our commitment to prudent financial management, our overall priorities at Brighthouse Financial have been consistent over the years and are focused on executing our growth strategy, which is centered around our complementary and competitive market offerings as well as our expansive third-party distribution footprint and efficiently managing our expenses as we recognize that being a low-cost producer is very important in our industry. We have continued to execute on this focused strategy, which is demonstrated both by our strong sales results through the third quarter of this year and the year-to-date reduction in our corporate expenses. On a year-to-date basis, through September 30, our total annuity sales were $7.8 billion, consistent with the same period in 2023. Sales of our flagship Shield Annuity products have remained very strong at $5.8 billion year-to-date, a 15% increase over 2023 and a record level for Brighthouse. We intend to remain a leader in the registered index-linked annuity or RILA market with continued growth in our Shield sales. Additionally, we remain pleased with our fixed annuity sales as we continue to see year-over-year growth in our fixed indexed annuities driven by our SecureKey product. While sales of fixed deferred annuities were down on a year-to-date basis, they picked back up in the third quarter as expected as we transitioned to a new reinsurer in June. We've continued to grow in the life insurance space with life insurance sales of $87 million year-to-date through September 30, an increase of 19% compared with the same period last year. I'm pleased with the strong sales results that we continue to deliver and expect further growth in both annuities and life insurance sales as we remain focused on providing a comprehensive and complementary suite of products. I would also like to touch on our expansion into the institutional space with the launch of BlackRock's LifePath Paycheck product earlier this year. As we discussed on our second quarter earnings call, when we received our first deposits, we did not expect to see much activity in the third quarter as the inflows associated with LifePath Paycheck will be uneven on a quarter-to-quarter basis as defined contribution plans implement the solution. While we expect limited activity through the end of this year, we do expect to see additional inflows in 2025, and we remain very excited about this product and its success to date. Along with the continued success in our growth strategy, we remain disciplined with our expense management. Corporate expenses were $203 million in the third quarter and $610 million on a year-to-date basis, a 5% decrease year-over-year. As I have said previously, we expect an increase in the fourth quarter expenses as a result of typical seasonality. We still anticipate full-year corporate expenses for 2024 to come in lower than 2023. In closing, I am pleased with all the progress we have made on our strategic initiatives, which are designed to create more capital efficiency, unlock capital, and return our combined RBC ratio to within target range under normal market conditions. While our work continues, we remain focused on continuing to execute on our strategy, and I look forward to keeping you updated on our progress. With that, I will turn the call over to Ed to discuss our financial results in more detail.
Thank you, Eric, and good morning, everyone. As of September 30, our statutory combined total adjusted capital, or TAC, was $5.7 billion, an increase of $300 million from $5.4 billion at the end of the second quarter. The increase in TAC is associated with our efforts to simplify our VA and Shield hedging program. As Eric mentioned, we have expanded our stand-alone hedging strategy for new business, which creates a simplified approach for risk management. We began the process of managing our Shield product sales on a stand-alone basis in July with the launch of our new product suite. We are expanding that approach in the fourth quarter to include our Shield product with lifetime withdrawal benefits known as Shield Level Pay Plus and the residual sales of our old Shield product suite. As part of this process, we have separated the annuity business into two categories. The first is Shield new business, which represents approximately 95% of total VA and Shield sales. And the second is our in-force block of legacy VA and legacy Shield contracts, which, as Eric mentioned, can essentially be thought of as a closed block. By hedging Shield new business on a stand-alone basis, we are increasingly reflecting all future hedges on the balance sheet today. For the legacy block, we are developing a separate hedging strategy and expect this work to continue into 2025. As a result, we can only reflect our current hedges for our legacy block on the balance sheet today. It is important to highlight again that, while we are revising the hedging strategy, our focus on protecting the statutory balance sheet under adverse scenarios remains unchanged. For example, we would expect to see substantial gains from our hedging program relative to the VA Shield total asset requirement under an extreme bear market scenario. The changes to our hedging program in the third quarter resulted in a positive impact to reserves benefiting TAC with an offsetting increase in required capital, and therefore, a muted impact to the combined risk-based capital or RBC ratio. This benefit to TAC was partially offset by a normalized statutory loss of approximately $300 million in the quarter. Normalized statutory results reflect the continuation of a negative impact from new business strain, which we anticipate will be less in future quarters as a result of hedging all of our Shield new business on a stand-alone basis. In addition, flow reinsurance is another initiative that could further reduce new business strain in 2025. We also had a modest loss associated with the significant change in the interest rate environment in the quarter. The normalized statutory loss led to the change in our combined RBC ratio, which we estimate to be between 365% and 385% at the end of the third quarter. As Eric mentioned, pro forma for the pending reinsurance transaction that is expected to close before year-end, our estimated combined RBC ratio would have been at the lower end of our target range of 400% to 450% in normal markets at September 30th. Our cash position remains robust with holding company liquid assets of $1.3 billion at September 30th. We have consistently stated that it is appropriate for a life insurer to have a conservative cash and liquidity position at the holding company, and our recent experience illustrates why this is a prudent strategy. Now turning to adjusted earnings results in the third quarter. Adjusted earnings, excluding the impact from notable items were $243 million, which compares with adjusted earnings on the same basis of $346 million in the second quarter of 2024 and $275 million in the third quarter of 2023. The notable items in the quarter were related to the annual actuarial assumption review and related model refinements, which had a net favorable impact on adjusted earnings of $524 million after tax. As part of this assumption review, we increased our assumed GAAP long-term mean reversion rate for the 10-year US Treasury from 3.75% to 4%. We continue to assume that mean reversion occurs over 10 years. The increase in our long-term interest rate assumption, as well as an actuarial model refinement related to expenses, drove a substantial benefit to adjusted earnings in our runoff segment. The total impact in the runoff segment from the actuarial assumption review and related model refinements was $570 million after tax. Our annual assumption review also included consideration of emerging experience and industry experience studies, which resulted in modest changes to our life and annuity segments. Excluding the impact of notable items, the adjusted earnings results in the third quarter were approximately $30 million below our quarterly average run rate expectation, driven by lower alternative investment returns. The alternative investment yield was 1.6% in the quarter. As a reminder, we expect returns between 9% to 11% annually over the long term for our alternative investment portfolio. The underwriting margin was in line with our quarterly average run rate expectation. However, it was lower sequentially driven by normal fluctuations in the volume and severity of claims, net of reinsurance. In the third quarter, the Runoff segment experienced higher net claims, which was partially offset by favorable net claims experienced within the Life segment. Turning to segment results. In the third quarter, the Annuities segment reported adjusted earnings of $307 million, excluding notable items. On a sequential basis, Annuity results reflect lower fees driven by seasonality. Adjusted earnings, less notable items, were $41 million in the Life segment. Sequentially, lower net investment income driven by lower alternative investment returns was mostly offset by a higher underwriting margin. The Runoff segment reported an adjusted loss of $107 million, excluding notable items. The sequential results reflect lower net investment income and a lower underwriting margin. Corporate and other was flat sequentially with $2 million of adjusted earnings. In conclusion, we are simplifying our hedging strategy while pursuing multiple initiatives to improve capital efficiency and unlock capital. And we anticipate that these actions will have a positive impact on our combined RBC ratio. We are confident in our financial position, which is a combination of our statutory balance sheet and cash at the holding company, and we continue to have substantial protection for adverse market environments.
Questions and answers
Thank you. Our first question is from Suneet Kamath with Jefferies. Your line is open, please go ahead.
Thanks. Good morning. Just want to start with Eric. Eric, have you and the Board talked about bringing in more risk management experience? And the reason I ask is, this is now, I think, four quarters in a row where the RBC has been under some pressure. The pure multiples that we've seen in the market are materially higher than yours. It's one of the best environments we've seen for your business model, and we keep getting these RBC surprises. So, I just wanted to get your thoughts on, do you need to bring in some more help just to get this thing back on track?
Yes. Thanks, Suneet. It's a good question. We have brought in more help. We brought in a number of external resources, and frankly, we've hired up in the last six months in the hedging area and finance area. So, yes, as we've reached sort of that delta neutral situation between new Shield business and the gross amount of shield business that we put on the books, we have generally, from a hedging perspective, hedged against the old VA block, which we've talked about for years now. Now, we're in a situation where we feel it is appropriate to refine that hedging strategy, and we have brought in a number of resources to help us do that. We're making a lot of progress there. We still have progress to make. Ed, do you want to comment at all in addition?
Thank you, Eric. I want to echo everything Eric mentioned. Looking ahead, we expect to experience less strain from new business due to our current implementations. Historically, managing VA and Shield together has benefited our capital, but now that we have a balanced risk profile, we need to adjust. The main financial advantage we anticipate is reduced strain. Additionally, while it’s hard to quantify, simplifying our hedging strategy is also a significant benefit over time. The impact of strain management will be more noticeable in the fourth quarter and beyond for a couple of reasons. First, we have begun hedging our new Shield product suite, launched in July, on a stand-alone basis. This new product suite accounted for about 30% of our combined Shield and VA sales in the third quarter. In contrast, we expect that by the fourth quarter, the expansion of our hedging for new business on a stand-alone basis will represent approximately 95% of our total Shield and VA sales. We anticipate a substantial benefit from this change.
I understand. My follow-up question is, without the reinsurance deal, do you feel confident that your RBC ratio has reached its lowest point, assuming normal market conditions and no further setbacks? If so, Eric, have you considered increasing the buyback, given the current valuation? Thank you.
So let me start on that. We don't give projections of what the RBC is going to be. And I know you understand better than most, that it is a complicated and conservative calculation. And there are always elements that are difficult to predict. So I think I would go back to, number one, with this pending reinsurance deal, we would see our pro forma third quarter and RBC ratio at the low end of our 400% to 450% range. Secondly, we would anticipate that our strain from new business will be substantially improved from the experience that we've seen in year-to-date. And you can see in the year-to-date, it has been a significant negative for the risk-based capital ratio.
I'll step in for a moment. To address your first question briefly before moving to the second one, Ed provided a lot of insight in his response. I want to summarize a bit. First, we are always willing to assist, which shouldn't be surprising. If you’ve been following what Ed and I have said over the past few quarters, this is about the challenges and complexities involved in managing the hedging of the VA business alongside the Shield business. In the past, we have made moves to reduce risk for the company, such as through equity derisking and adjusting our strategy regarding interest rate hedging. What we're focused on now is the intersection of managing the hedging for both Shield and VA, along with the strain we’re experiencing from the Shield operations. I won't go over the details again unless someone asks about it, including our expectations for the first quarter. Regarding your second question, we've taken advantage of opportunities in the past. Currently, I can share that we have a strong capital position at the holding company, and we are continuing to buy back stock.
Okay. Thank you.
Thank you. One moment for our next question. Our next question is going to come from the line of Ryan Krueger with KBW. Your line is open. Please go ahead.
Thanks. Good morning. I appreciate the commentary on the new business strain. I was hoping to focus more on, I guess, on the Ed, based on the numbers you gave, imports still had a negative impact on RBC this year. I'm trying to, I guess, better understand why that's happening, just given the growth in Shield that you've had over time and the runoff of legacy. Why the in-force would still be producing a negative impact of RBC? And I guess to what extent do you think that can change as you simplify the hedging strategy?
Thank you, Ryan. I want to begin by noting that our normalized statutory earnings, when excluding the strain-related factors we discussed so far this year, have not met our expectations. Throughout the year, we've highlighted various issues. We mentioned basis risk during one quarter, but examining it over the first nine months shows it to be rather minor, so it's not really a significant factor. Earlier, we also discussed the actual versus expected impacts on in-force, which I believe we addressed in the first quarter. Overall, it's been a challenging year for normalized statutory outcomes when excluding strain. However, we don't forecast normalized statutory earnings on an annual basis due to their inherent volatility. When we share our expectations regarding statutory results, we always approach it from a multiyear perspective as that makes more sense with the way we calculate these figures. Additionally, it's essential to emphasize that our calculation of normalized statutory earnings is conservative compared to how we think of adjusted earnings.
Got it. Thanks. And then on reinsurance, can you give any more color? It sounds like you're still looking at other in-force opportunities beyond the ones that you expect to complete before the year-end. Can you give any more color on what sorts of things you're looking at beyond that?
Well, we've got a number of possibilities, Ryan. I don't want to really go too far into this. In that, we've got a lot of negotiations going on, et cetera, et cetera. But yes, in-force opportunities. And then, as Ed has already said, flow reinsurance opportunities as well. So, we're looking at a number of opportunities. And I highlighted in my comments, and Ed probably did as well in his comments with respect to a particular reinsurance agreement that we think will close in the fourth quarter.
Okay. Thank you.
Thank you. One moment for our next question. Our next question is going to come from the line of John Barnidge with Piper Sandler. Your line is open. Please go ahead.
Thank you, and good morning. Appreciate the opportunity. Is there an opportunity to optimize the investment portfolio at all? I know you're looking at the liabilities, but is an IMA possible?
It's certainly possible. And when I think about my comments in the second quarter, John, we're looking at any number of possibilities. So we would never exclude the investment portfolio from that list. So it's a good question.
Okay. Within that framework of not excluding anything, now that you mentioned the in-force block being considered a closed block, how do you view the opportunity for enhanced annuitizations or buyouts as well?
Sure, John. Generally, we have avoided buyouts for two main reasons. First, many distributors are not in favor of them because these are products they have sold to their clients for financial needs, and we have supported those for decades. Secondly, the take rate doesn’t make a significant difference in the long run. It involves a lot of work and is quite disruptive, which explains why we haven't pursued them previously. We are exploring various opportunities, but for the reasons I mentioned, buyouts are likely not something we would undertake.
Okay. Can I ask one more question? How do you perceive the total addressable market for the liabilities? Is it essentially the entire closed block at this stage? Thank you.
I understand your question. What kind of deal are you considering? Is that what you meant, John?
Yes, that's correct.
Yes, that’s what I thought. Okay. Again, we're looking at everything. I don't think there's any reason to exclude anything from the 100,000-foot point of view. But then when you get into the details, we've got to figure out the art of the possible. We've got to prioritize because we can't have 30 things going on here. And so I think what I just said probably gives you your answer, right? We're looking at everything. We're seeing the degree of difficulty in certain transactions or potential transactions and then we're prioritizing from there. It's a great question, John. Thanks.
Thank you. And one moment for our next question. Our next question is going to come from the line of Alex Scott with Barclays. Your line is open. Please go ahead.
Hey, good morning. I wanted to see if you could provide some color on just norm stat earnings over a longer period of time. I get that you can't estimate it near-term. And I think there is still potentially a hockey stick down the line and it gets better. So I'm just trying to understand like you guys, I think, for years were kind of pointing to a handful of years out in the future that, that would happen. I mean, is there still an inflection to consider here? I mean, can you help us think at all around what that could look like and how much it could change from a reinsurance deal?
Good morning, Alex, it's Ed. We plan to provide the long-term statutory free cash flow disclosures next year. There is a lot of work involved, so I don't want to elaborate too much, but based on historical trends, I would expect to see similar outcomes. However, the timeline has shifted due to cash flows this year not meeting our expectations from five years ago. I anticipate a ramp-up as the legacy variable annuity block eventually runs off, leading to capital benefits as the associated CTEs are released. I previously outlined the rationale behind our strategy for some of these initiatives. Currently, while we are focused on benefiting capital, there may be some trade-offs in free cash flow in the later years, which we believe is reasonable given the strong cash flows anticipated in those years. We have adopted a similar approach regarding cash flow timelines and actions taken to narrow the range of outcomes under market scenarios, aiming to stabilize cash flows while sacrificing some capital generation in the later years to enhance near-term capital generation.
Got it. That's helpful. The other thing I wanted to check on was just the product structure of Shield and whether it's being changed at all? I mean, I listen to what you're saying, and when I hear Shield legacy block, or a Shield closed block, it makes me a little nervous that maybe there wasn't something quite right about that product beyond just combining the hedging program. I mean, can you just help demystify like, is it simply like what you're talking about is just around the hedging or are there actually things about the product that needed to change?
Yes, Alex, it's Ed. It's the former. It's around the hedging. It's not around any statement on the profitability or the desirability of the old block of Shield.
I'll just jump in and say that doesn't mean we won't update the product with new features or ideas for how it can be used. I agree with everything Ed just said.
Thank you. Our next question comes from an unidentified analyst with Wells Fargo. Your line is open. Please go ahead.
Hey, good morning. Thanks. A lot of my questions have been answered here, but I was just wondering if you could maybe give a little information on like if this reinsurance deal in the fourth quarter is going to be onshore or offshore, just to get an idea from like a timing perspective because I think we've seen a lot of these things kind of get pushed out and not really hit deadlines. So any color there would be helpful.
Nick, it's Eric. Look, I don't want to get into any of that stuff. I'll just tell you that we're confident that it will close in the fourth quarter. I get why you're asking the question. So hopefully, that answer works for you.
Yes, that makes sense. I appreciate the information on the new hedging program for the stand-alone Shield. Should we expect Shield sales to continue at this strong pace, or should we anticipate a decline in the near term? How are you all approaching this?
I want to clarify something regarding the new hedging program for everyone on the call. From the beginning, we have maintained significant protection on our balance sheet to guard against adverse market scenarios. While we are implementing changes and exploring new business opportunities separate from our legacy block, it's important to note that we still have considerable protection in place. Our goal remains to achieve a statutory MAX first loss framework, which is a crucial point to ensure we properly understand what the new hedging entails. Let me pass it to Eric.
Nick, I'll address this in a few ways. First, we want to ensure that the operating company has sufficient capital. Since the beginning, we have maintained a large buffer at the holding company, and we plan to keep doing that. There are two things on my mind: first, making sure our capital levels are appropriate, and second, ensuring that we can write new business. I sense that your question might imply whether we intend to slow down sales. We do not have any plans to do so. We experienced a very strong October. Given our goals of maintaining appropriate capital levels and being able to write new business, all our initiatives are aimed at achieving both. I believe that addresses your overall question, Nick.
Yeah, it did. Thanks.
Thank you. One moment for our next question. Our next question comes from the line of Wes Carmichael with Autonomous Research. Your line is open. Please go ahead.
Hey thanks. Good morning. I just wanted to follow-up around separating the hedging strategy for new business and in-force, and can you maybe just talk about the changes for the legacy block that you're contemplating? It sounded like it still may be somewhat in flux, but I'm just wondering from a big-picture conceptual standpoint, what you think makes sense there?
Hey, Wes, it's early for us to provide you any details. As I said in my prepared remarks, we are developing a separate hedging strategy, and we do expect this work to continue into 2025. And I know this came up yesterday on some of the calls. If you look at the footnote on norm stat earnings when we show that the TAC was up was by 600 approximately and CTE98 was up by $1 billion. The related impact from that is just that as we are in this period of time developing this strategy, we can only reflect the hedges on our balance sheet for that block. And that was the reason for the statutory change. Now the net impact to RBC was insignificant. I would anticipate that given that this block is like a closed block and so is running off over time that there will be some stability in the profile of the hedges that you have related to that runoff expected over time. But other than that, I don't know that there is much we could say at this point.
Got it. Thanks. And I guess just since it's still in flux, I know you said 2025 for the free cash flow projections, but do you expect that to push the timing out a little bit?
I would say that we would want to have our strategy buttoned up before we would want to provide the statutory free cash flow projections.
Yeah, makes sense. And then I guess if can ask one more, just on the runoff segment, I think if we look at the core ex notables number, that was maybe a little bit below year run rate. Is there anything going on in that segment this quarter that we should think about in terms of run rate earnings power?
Yes, I don't think so. I think if you look at our underwriting margin in the quarter, it was consistent with what we would assume to be a normal margin, but we did have worse than our normal assumption for Runoff, and that was offset by better than normal in Life. I think if you look at mortality in the year-to-date, it's generally been good. And this was another quarter that's consistent with what we would expect. It's just by segment, there was some volatility.
Yes, thank you.
Thank you. We have a follow-up question from the line of Alex Scott with Barclays. Your line is open, please go ahead.
Hey, thanks for taking the follow-up. I think it was mentioned during the remarks that there was a June reinsurer switch that occurred, I think it was like fixed annuities that improved sales. I just wanted to see if you could unpack that a bit for us.
Yes, thanks, Alex. This is David. We changed reinsurers earlier this year, and the new reinsurance agreement took effect in June. As a result, we saw FRA sales rebound a bit in the third quarter, along with strong overall market demand.
Okay. And then final question for me. I just wanted to ask around the hedging program. I think at times, you all have kind of had some tactical posturing like one way or the other on rates or I think more on the rate side than equities with your hedging. Just recognizing that rate has kind of spiked up here, particularly after the election. Could you help us think through like whether you had any kind of tactical posturing on this quarter? And just so that we have a good idea of how to think through marketing for rates and how that could impact you?
Hey Alex, it's Ed. I wouldn't say we have any tactical positioning on rates right now. We definitely had some tactical positioning on rates before 2022, and we did a lot of long-term hedging to protect ourselves against low rates when the 10-year was around 3.5% to 4%. When we mentioned rates and their impact in the third quarter, we were really pointing out that while long rates dropped by about 50 to 60 basis points, short rates fell more by around 100. It was that steepening of the yield curve that resulted in a modest loss for us in the quarter.
Okay, got it. Thanks.
Thank you. And I would now like to hand the conference back to Dana Amante for closing remarks.
If everyone could stay for just a moment, I believe we have received all the necessary approvals for the reinsurance transaction we previously discussed. We expect to execute this by September 30. As noted in the comments made by Ed and me during this call, I will now turn it over to Dana.
All right. Well, thank you. Thank you all for joining today, and have a great day.
This concludes today's conference call. Thank you for participating. You may now disconnect.