Good morning, ladies and gentlemen, and welcome to Voya's Second Quarter 2022 Conference Call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to our host, Hima Inguva, Senior Vice President, Head of Investor Relations. Thank you. You may begin.

Thank you, and good morning. Welcome to Voya Financial's second quarter 2022 earnings conference call. We appreciate all of you who have joined us for this call. As a reminder, materials for today's call are available on our website at investors.voya.com or via the webcast. Turning to Slide 2. Some of the comments made during this conference call may contain forward-looking statements within the meaning of federal securities law. I refer you to this slide for more information. We'll also be referring today to certain non-GAAP financial measures. GAAP reconciliations are available in our press release and financial supplement found on our website, investors.voya.com. Joining me on the call are Rod Martin, our Chairman and Chief Executive Officer; Heather Lavallee, our President and Chief Executive Officer-elect; and Mike Smith, our Vice Chairman and Chief Financial Officer. After their prepared remarks, we will take your questions. For the Q&A session, we have also invited Vice Chairman and Chief Growth Officer, Charlie Nelson; as well as heads of our businesses, specifically Christine Hurtsellers, Investment Management; and Rob Grubka, Health Solutions. With that, let's turn to Slide 3 as I turn the call over to Rod.

Good morning. Let's begin on Slide 4 with some key themes. Our results during the second quarter reflect the continued execution of our strategy and long-term growth plans. This resulted in a number of positive outcomes, including strong adjusted operating EPS, continued momentum across our businesses, as well as disciplined and opportunistic capital deployment. As a result, we generated second quarter adjusted operating EPS of $1.67. Excluding notable items, EPS grew 18% year-over-year. We're pleased with the strong year-over-year growth. This is a result of the diligent execution of our plans, strong relationships with our distribution partners and a shared focus on client needs. Our client-centric focus can be seen in organic growth across our businesses. In Wealth Solutions, Full Service recurring deposits for the trailing 12 months grew 11.2% compared with the prior year period. During the second quarter, we generated positive Full Service net flows of $1 billion. In Health Solutions, annualized in-force premiums grew 9.3% compared with the prior year period. This was driven by growth across all product lines, including a 24% increase in Voluntary. In Investment Management, we generated $559 million of positive net flows during the second quarter. Net flows over the last 12 months were nearly $10 billion, which represent organic growth of 4.6%. Voya is meeting the complex and increasing needs of our clients, as they face challenges and changes in the macroeconomic environment. Despite inflationary pressures and volatility in both the equity and interest rate markets, Voya remains well positioned. At a time when many are seeking help to navigate challenging economic times, both at home and in the workplace, our digital capabilities, insights and focus on client needs enable Voya to remain a trusted partner to our customers. This, along with our continued focus and commitment to execution has us…

Thank you, Rod. Based on the performance of the great team we have at Voya, our company is well positioned for continued growth across each of our businesses as we deliver greater value for all of our stakeholders. We will do so through purposeful steps to continue to provide solutions that meet the growing needs of our clients and customers. The corporate responsibility that we demonstrate and the positive impact that we make in the communities in which we live and work. During my 14 years at Voya, I've had the opportunity to lead our Health Solutions business as well as our Wealth Solutions business, and to work closely with our Investment Management team and enterprise leaders in shaping and driving Voya's growth strategy. Rod has clearly set the bar high for what success looks like at Voya, and our management team looks forward to building on Voya's strong momentum. We remain committed to our strategy and the 3 year growth plan that we shared with you at Investor Day last year. This includes: delivering organic growth, disciplined and opportunistic excess capital deployment, and strong EPS growth. Our strategy puts the needs of employers, employees and intermediaries at the center of all that we do. We help employers optimize their workplace benefits and savings. We partner with intermediaries to work together to enable employees to make the right financial decisions. And we provide investment capabilities that meet the long-term needs of investors and retirement plan participants. I look forward to working closely with all of our talented people as we execute the strategy we have shared, advance our growth plans and deliver greater outcomes for all of our stakeholders. With that, let me turn it over to Mike to provide you more details on our financial performance and results.

Thank you, Heather. The leadership team is excited to see you stepping into your new role, and is confident Voya will continue to see great success under your leadership. Let's turn to our results on Slide 8. Despite the ongoing macro headwinds facing our industry, we delivered strong results this quarter, with adjusted operating earnings of $1.67 per share. This includes two notable items. First, $0.06 of net alternative and prepayment investment income below long-term expectations. And second, $0.03 of unfavorable DAC unlocking. Excluding these notable items, we grew our adjusted operating earnings per share by 18% year-over-year despite the equity market headwinds. This result reflects the diversification of our revenue sources, coupled with disciplined expense and capital management. We remain confident in achieving double-digit EPS growth in 2022 before the accretive impacts from AllianzGI. Second quarter GAAP net income of $64 million reflects strong operating earnings, offset by an impairment on owned real estate, investment losses associated with higher rates and wider spreads, and the legal accrual related to businesses we have exited. Roughly half of the differences between GAAP net income and adjusted operating earnings impacted capital generation for the quarter. Moving to Slide 9. Wealth Solutions continues to deliver strong earnings and operating margin given its diversified revenue streams. For second quarter, the business generated adjusted operating earnings of $186 million. Second quarter adjusted operating margin was at the top end of our target range of 34% to 36%. Net revenue, excluding notable items, has grown nearly 8% over the last 12 months. Our spread-based income is benefiting from the higher rate environment, largely offsetting the impact of equity markets on fee-based income. Third quarter spread income is expected to be slightly above Q1 levels, given investment income one-timers in the second quarter and higher credited interest…

Thank you. [Operator Instructions] Our first question comes from Ryan Krueger with KBW. Please state your question.

Hi, thanks. Good morning. My first question was, could you comment a little bit more on your flow expectations in Investment Management, I guess, in the second half of the year and how to think about potential disruption within Allianz and the shift in the international distribution?

Ryan, good morning. It's Rod. Christine, do you want to start?

Certainly. Thank you. So how to think about second half of the year flows? I would say, what we see - the pipeline that we have in our core business of opportunities on unfunded wins continues to be strong. And as you know, certainly, it's been a challenging environment year-to-date for asset managers generally, and yet we continue to deliver positive net cash flows including this quarter, so very excited about that. Now looking forward and how to think about AGI and some possible headwinds to our flows, I would say really is in the international business that we currently have. So as you know, we have a long-standing distribution partner NNIP, which is now part of GSAM. And it's natural as far as new opportunity introductions and things that they normally do have slowed down. So think about this as a bit of a ramp, right, where we have somewhat of an off-ramp with our existing distribution partnership and certainly a very strong on-ramp with AGI. So how to think about this? The second half of the year, that part of our business, a little less certain, if you will, than what we normally have. But what we see going forward and we're so excited. So think about this as a point in time that when we look at AGI, we've already had conversations amongst distribution and product of what use its platform to launch at the beginning of the year. We're doing training on our product. And so when you think about them, just their brand, their global reach, they have 500 salespeople. They're #1 in Taiwan, #3 in Japan, so a really formidable market share in many, many countries. So again, we're super excited about the growth possibilities and what we're going to be able to do on a strategic basis with their partnership.

Thanks. And a quick follow-up. Could you help us think about the pro forma fee rate in Investment Management relative to the roughly 25 basis points has been historically?

Sure. So on a pro forma basis with the new teams and the assets coming over, think about it with that measure of not changing dramatically. Because essentially, the calculation is revenues divided by AUM. And as part of the partnership with Allianz Global Investors, we do have a revenue share on some of the existing products that are coming over. So how to think about the revenue yield or the margin expansion going forward? I would say, number one, the strategies or the teams and the assets that they acquire, when you look at sort of the fund level basis, they are higher than the existing basis points of assets under management. So a way to think about it is as we're already introducing them to our institutional and our consultant relations -- relationships here in North America, we're already in conversation about new capabilities of mutual funds to launch that our intermediary distribution can really get behind. So when you think about it in that way, the basis points of those assets are higher. So that, coupled with our focus and strength in private asset classes, which tend to garner higher fees, think about this, Ryan, on a path to expand the basis points of assets under management. And one of the key things we're focusing on top line growth as well, expense management. So a lot of ways and a lot of energy behind the margin expansion that we're going to deliver in the months and quarters to come.

Thank you. Our next question comes from Tom Gallagher with Evercore ISI. Please go ahead.

Thanks. First question is just can you talk about the sustainability of the earnings run rate in wealth, whether there were any onetime benefits to baseline net investment income? And if so, how much would you expect that to fade as we roll into 3Q and beyond?

Sure, Tom. Heather will begin.

Yeah. Good morning, Tom. And thank you for the question. So as you heard Mike talk about in his comments, we do expect there were some onetime items in the investment income in the quarter that we don't expect to repeat in the third quarter. However, when you look at the trend in investment spread revenue over the last several quarters, we have absolutely benefited from the higher -- the increase in rates, and we expect that will continue going forward. Now one of the other items that you saw in the second quarter and that we often see in volatile markets is that we did see an increase in transfers from variable to fix from our participants. And that is something that also had some positive in revenue that we would expect to continue, because you're just basically seeing higher general account asset base. So going forward, we expect that we're going to continue to see some tailwinds from the rise in rates. And the other thing that I would point out, Tom, is at Voya, and particularly within Wealth Solutions, we're really the beneficiaries of diversification around business mix as well as different sources of revenue. So here, we've seen some nice growth in the spread income. We have also diversification in terms of fee participant transaction-based revenue. And to your point about sustainability, we've also demonstrated that we're very good operators in terms of expense management to be able to maintain our operating margin of 34% to 36%. So all totaled, we think that while there are just onetime items here, we expect strong momentum in revenue going forward.

Thanks, Heather. Just anything you can give us more specifically. Are we looking at a $10 million or $15 million step down in baseline NII, if you're able to just quantify the level of the favorability?

Yes. Tom, I'll take that. Thanks for the question. I think if you think of it in terms of 3Q spread being a little bit higher than the 1Q investment spread, I think that will be the best way to get at it. Credited rate - credited interest will be a little higher next quarter for -- because of, A, conditions, and B, the length of the quarter. And as I said - as Heather was saying, there were a couple of onetime items in the investment yield that will not repeat or we don't expect them to repeat.

Thank you. Our next question comes from John Barnidge with Piper Sandler. Please state your question.

Thank you very much for the opportunity. My question is on withdrawal activity and behavior. Given the market volatility, I was somewhat surprised that Wealth Solutions didn't really see an increase withdrawal activity. And so one of these things that given that the market volatility is being driven by inflationary concerns, they are actually seeing your institutional business partners continue to try and save more?

John, happy to - it's Heather, happy to take your question. So there are a couple of factors that are really driving participant behavior. And we see that's both showing up in terms of flows as well as recurring deposits. So if I kind of take a macro step and look at participant behavior, I mentioned, first, the fact that in the market volatility, we saw greater transfers from variable to fix. So there's a little bit of that flight to conservative investments. But in terms of participant behavior, we are seeing the benefits of both inflation and higher wage growth within the Wealth Solutions business. And what do I mean by that is specifically, we saw higher employer contributions. That is something a trend we have continued as we're seeing the war on talent continue. And we also saw increased savings rates from our participants, both in terms of their actual contribution rates and that the increase in the number of net participant savings. So absolutely seeing some positive behaviors there. One of the other things that you mentioned about withdrawals, and we have not necessarily seen an increase in withdrawal activity from participants. If anything, participants are really staying the course and generating good savings behavior. So all totaled, we have not seen any type of a negative impact on participant behavior within the Wealth Solutions business. But really just benefiting from some of those tailwinds in the macro market I mentioned.

John, I'm going to ask Charlie to just add a little more dimension to that also. Thank you, Heather.

Yes. Thanks, Rod and Heather. We've been very pleased with our growth office sales and retention effort in the Wealth area, in particular. The value prop is very strong and resonating, and the brand is strong. And how we see the brand resonating in the market is in our strong retention numbers. We've had very, very strong sales retention of our business in the Wealth side. On the other side of that, though, certainly, market churn is down. In other words, churn being what employers are -- are they changing from provider A to provider B. But that's where I see our brand resonating and being strong because in difficult times, as we saw even in COVID, our brand range strong and helped in a lot of ways. So as we go through recessionary times, I think our brand will be a key part to help our retention as well as our sales. And we're seeing that right now. Year-to-date, our planned sales are up quite significantly year-to-date, year-over-year, but they've been even down with the market. And the equity markets impacted that, and we see very strong RFP activity. And that makes us feel good about the latter part of this year and going into next year because, in particular, we've got double-digit percentage of new plans and takeover plans in the process of implementation, which will help us go through the third and fourth quarter. Now I would note that the market -- equity market activity is going to mute some of that. But we also think that there will be some fuel for future growth as the equity markets rebound in the future. So we feel good about both the activity, our retention in the market, as we drive towards strong revenue growth and achieving our target margins within the -- in particular, the Wealth business.

Thank you very much. Best of luck in the quarter ahead.

Thank you, John.

Thank you. Our next question comes from Alex Scott with Goldman Sachs. Please state your question.

Hi, good morning. First one I had is on expenses. You touched on it some in the remarks already, but I just wanted to see if there was any additional commentary specifically for Wealth Solutions that you can provide. I mean just given the combination of top line pressure from AUM and inflationary pressure on expenses, I was expecting that sort of similar to a lot of the asset managers, we've seen that there'd be a little more margin pressure. Could you give us color around like some of the things you're doing to mitigate it? Were there any onetime items in the quarter? Anything else we should note?

Yeah, Alex, it's Heather. Thank you for the question. So second quarter expenses in Wealth were favorable to first quarter really due to some payroll seasonality, and there were some favorable timing benefits in the quarter that we don't necessarily expect to continue going forward. However, we've often pointed, too, in a macro environment, we continue to be good operators and very disciplined in our expense management, which you should expect to see us continue going into the second half of the year. We continue to be very balanced in both investing in our businesses to support growth, both in terms of technology to drive innovation and really support some of that brand and the differentiation of the value proposition that Charlie talked about, as well as investing in our people to make sure that we are providing the service levels and the commitments that we make to our customers. So for us, it really is focusing in on doing what is needed to make sure we maintain the operating margin guidance of 34% to 36%, and we will continue to be good stewards of expense management going forward.

Got it. Thank you. And second question I had is on the Stop Loss business within Health Solutions. Just noticing that the growth is slowing down to a greater degree. I know this can be a little cyclical too. Can you just describe what you're seeing that's causing me to dial back there? And if we should expect any impact to earnings as we think through the next handful of quarters?

Rob?

Yes. Thanks. Alex, so Stop Loss sort of did a little bit of playback to last quarter. We talked about strong sales on the top line side of things. A little bit different than the retention story across both the Health and Wealth business, where we really benefited in most of our product areas. Stop Loss is a little bit different in the renewal season. For 1/1, it was just a little bit more competitive than it had been in the previous few years. As we like to talk about, being disciplined on pricing in that business, you got to know when to walk away. And so we didn't fight tooth and nail for everything that we were trying to renew. But again, as I think about the forward path from here, from a growth perspective, still a lot of confidence in what we're doing in that space. As Charlie was alluding to RFP activity, I'd say that story is the same in the Health business. In particular, with Stop Loss, we feel good about what we're going to do with 7/1 [ph] which is, obviously, we'll talk about next quarter. So we've got good eyes on what that looks like and feel like we go and get that growing as we think about moving forward. We had talked at Investor Day about stretching down market a bit. Across the business, we've been pretty consistent with our focus on middle market and up. We see opportunity in just growth in the Stop Loss market that's unique to it. Are a little bit different of smaller employers continuing to seek out self-funding of their health risk. And so there's work underway and spend underway to invest and broaden our capabilities there and again, contribute to growth as we look forward. But again, overall, confidence in that space and a little bit episodic, I would say, on what we saw this last 1/1 [ph] cycle is driving, to your question.

Thank you. Our next question comes from Nigel Dally with Morgan Stanley. Please state your question.

Thanks, good morning. I wanted to ask a couple of questions about capital. First, on financial leverage, it looks to be a little on the high side. Does that lead you to consider potentially allocating more of your excess capital deployment to debt reduction going forward? Also, you have been drawing down your excess capital, should we expect a further drawdown? Or does it perhaps make sense to hold on to a little higher buffer given the uncertain environment?

Nigel, thanks for the question. This is Mike. Maybe we'll start with just the leverage ratio and make sure it's clear that the recent increase in the leverage ratio that we report includes AOCI and the denominator. And given the increase in rates and the widening of spreads that we saw effective at the end of the quarter that drove almost all of the increase in the leverage ratio. The important thing to remember, though, is that improved interest rates, increased interest rates and wider spreads, and we just talked about this earlier with the Wealth business, is unquestionably a long-term positive from a credit perspective for Voya. So we entered the position -- entered the quarter in a position of strength, right? We've got solid excess capital. We've got an improving economic picture from an interest rate perspective. And so we feel very good about where we are. As it relates to capital management and allocation, nothing is changing as a result of the change in environment. We remain very focused on shareholder value and driving that. We talked -- both Rod and I mentioned the amount of share repurchase we've done over the last 12 months and the last -- and for the balance of so far in 2022. That continues to be a key focus of ours. As we look at the -- ahead, one of the things we said consistently over the last couple of years now is that as we buy back shares, we will have to attend to debt, and we will buy down debt in roughly proportionate to the share repurchase. And you think of that as in the neighborhood of 30%. So very tactically, in the third quarter, given that we did $250 million in ASR at the end of 2Q and we did $22 million of debt extinguishment in 2Q, we will likely lean in a bit on debt extinguishment in the third quarter just to catch up, if you will. So that won't be dollar for dollar or $0.30 for every $1. It will be a little bit lumpy. There are tactical factors that affect when you can do debt repurchase and so on. So that said though, no change in our posture. We're very focused on the use of share repurchase as a lever to improve EPS growth. We've, I think, demonstrated that consistently. Second quarter was another example of us leaning in when share price gave us an opportunity driven by the overall market conditions.

Nigel, it's Rod, I'd just add one piece. The combination of what you're hearing from the team is, again, leading to our confidence in achieving the North Star of 12% to 17% EPS growth rate. We signaled at the end of Q1, double-digit growth. We're reaffirming that. When you add the AGI transaction to that, we've got a great deal of confidence in spite of the market, based on market conditions that we can see today, that we will be on a path and a track to accomplish that objective. And I think when you step back and look at the marketplace and the levers and the controllables that we have, it's a very good outcome for our shareholders.

Great, thanks.

And Nigel, you did ask about - sorry, you did ask about the excess and the buffer, I apologize, I need to come back to that. No change there either. We continue to believe that excess is excess. And so if there is a good use for it, we will put it to use. We remain pretty sanguine and confident in the credit position that we're seeing in the marketplace in our portfolio. That would be the sort of bellwether to keep an eye on to the extent that, that view starts to change, that would be a time to potentially pull back. But we have -- we're not seeing anything at this point that would cause us to do that. Sorry for that.

Thanks.

Our next question comes from Elyse Greenspan with Wells Fargo. Please go ahead.

Hi, thanks. Good morning. My first question, you guys mentioned some large losses impacting the group Life Loss ratio in Health. Can you talk about how you think about your outlook for the elevated non-COVID claims for the remainder of the year? And as you look forward to your annual assumption review, do you expect any mortality related impacts to have a onetime or ongoing impact on the Health segment?

Rob will start and then Mike will jump in also. Rob?

Yes. Thanks, Elyse. Yes. So as Mike alluded to, severity was the driving explanation around the experience in the quarter. I'll say a bit more on that. So within the business the way we slice the data, which we've all gotten really good at across the industry over the last couple of years on life experience, it really boiled down to severity. And so think about claims in excess of $250,000, which in the workplace market is -- those are sizable. On average, you'd think about something in the $40,000 to $50,000 range as sort of being a typical average severity within the business. And we saw about 30% more claims activity in that larger part of the spectrum of benefits. And so as we peel that back, maybe that doesn't sound dramatic, but it drives up the average sufficiently such that you saw the impact that we're getting there. That was a predominant driver of the miss. As we think about things moving forward, and we've tried to make it very clear that what we're thinking about from a margin perspective and where we expect loss ratios to end up from a trailing 12-month perspective for the year, we feel like we're going to still be within range. So we're confident on that based on what we know here today. We'll obviously continue to monitor it closely, and be on top of the experience that we're seeing. But we feel good about the margin that we're achieving as we look forward and have a lot of confidence in continuing to hit what we laid out at Investor Day. As Rod and others have said, the growth story is incredibly strong given what we've been through the last couple of years, and we continue to post it. And then it's about the discipline from a pricing perspective, which I feel really good about. Thank you.

You were going to add on the second part of the question?

Can you repeat the second part, Elyse, please sorry?

Yes. The second part was to storm. As you guys look forward to the annual assumption review, are you expecting any mortality really the impact to have a onetime ongoing impact on the Health segment?

No. I mean, nothing material would come from that. And even more broadly, I think our assumption review process should be, just given the nature of the changes we've made through our business portfolio and certainly, on the ongoing business, you should expect that to be pretty benign. It won't be zerp, but it's not going to be anything like some of the numbers that you can see with peers or with us way back in the past. There could be some noise on the reinsured portion of the Life business that we've exited, but that's a noncash accounting kind of impact and nothing that I think should cause concern for investors.

Thanks. And then my follow-up on Heather, as you take the reins in addition to executing on the 3-year plan, can you just tell us what your largest strategic priorities are or what you'd like to -- where you would like to focus our energy to drive change at Voya?

Good morning, Elyse. Thanks for the question. And I'll give you an answer. It's really no changes. I've had the benefit, as Rod mentioned, of being part of this management team for 14 years, helped to co-create our Investor Day strategy we shared last fall. Very, very proud to lead a purpose-driven organization like Voya that is just -- we have so much talented and diverse leaders across our organization who are aligned on the strategy we set out. So really, my priority is, as we move forward, are executing on our growth strategy that we shared at Investor Day, continuing to be balanced and disciplined in how we manage capital, advancing our culture and continuing on the legacy that Rod has built over the last decade that our teams are unbelievably proud to showcase every day and that has become a differentiator for us, not only in our businesses but just in terms of how we show up in our communities. And the last piece, Elyse, is just a reminder that EPS will continue to be the North Star for us going forward.

Thank you. Our next question comes from Andrew Kligerman with Credit Suisse. Please state your question.

Hey, good morning. First, on Health Solutions. The administrative expenses look a little elevated in the last few quarters. Could you provide a little color on that and what we should think about going forward?

Yes, sure. Thanks, Andrew. So on the expense side, we've obviously highlight the growth in the business. That's a big part of the driver. Keep in mind also the benefit strategies acquisition happened sort of 7/1 a year ago. And so when you start looking at the numbers, keep that in mind, that's a few million from a quarterly perspective that will show up there. And when you look at 1Q to 2Q, it did what we guide the market towards from a perspective of coming down because of seasonality of the numbers. As we think about the next couple of quarters, it will be in and around where we're at today. Obviously, just when we think about the targets that we set, the margin expectations that we set, we're firmly on track to deliver what we expected to that support the guidance that we gave you from a margin standpoint. So hopefully, that's helpful to your question.

That's definitely very helpful. And maybe, Mike, with -- you've closed out the Allianz transaction in Investment Management. Any thoughts on the other business about activity there for M&A?

Let me jump in, it's Rod. A great example, we announced a small transaction just yesterday that Mike spoke about on the call. And if I can just go back to kind of the broad guidance that we've given, we're going to continue to, first, organically invest in our businesses, as Mike and I and Heather and the business leaders have talked about. And we remain open to things that would be additive from a capability perspective, from enhancing the customer experience and the intermediary experience that we go through. But we're going to measure that against as we have for a decade, the share repurchase and stewardship of the capital that we've done. So the areas that we talked about at Investor Day that we will continue to review, have not changed. And the discipline and approach that we're going to take coequally has not changed. That said, we're proud of what we just announced with Allianz and the contribution that that's going to make, which gives us a very high level of confidence in the 12% to 17% EPS growth, combination of organic and inorganic growth. And I think it's demonstrating to the market that we have the ability to both source and execute on a timely basis, those tools and capabilities or properties that add value in pursuing again that outcome.

Thank you. Our next question comes from Erik Bass with Autonomous Research. Please state your question.

Hi, thanks. I want to come back to the international sales opportunity in the AGI partnership. I was just hoping to see if there's any way to gauge how big this opportunity could be over time? And maybe it would be helpful to think about it in context of how international sales have been historically? And is it right to think the AGI sort of distribution pipes being larger than what you had historically through NNIP?

I'm going to throw it to Christine, Erik, but if we're on a Zoom call, you see a big smile on my face. It's huge. And we've got a significant footprint, as Christine has talked about, to partner with and a partner that's fully aligned with both our and their ambitions. But, Christine?

Yes. Thank you, Rod, and thank you, Erik, for the questions. So how to gauge it? So let me just start with -- when we're looking at projections and we're talking about margin expansion and everything, what are in those assumptions and what aren't in those assumptions, and that's where I get really, really excited. We basically are modeling, continuing to distribute the AGI U.S. teams that we've just added to Voya, and continuing to distribute those globally. So that was kind of the assumption. So when you start to think about, well, where is some of the upside? Certainly, the upside is pretty tremendous in a couple of key ways. And so when you think about their international distribution footprint, right, with just Allianz's overall relationships with banks and intermediaries, I mean, it's just an incredible credibility and door opener for our product lineup. And one of the things that they're very excited about as well is that, within North America, they didn't really have the scale, if you will, of global fixed income that we delivered to them, as well as some of our capabilities like private credit. So think about the opportunities to really leverage that top global brand recognition and partner, both in Europe and Asia, with credit, with some of our equity strategies as well, such as machine learning, which is -- has just tremendous performance. So overall, I would say we couldn't be more excited. We're in the background, really working with them about prioritizing product launches, starting to educate them in our strategies. And one final thing that also isn't in the model per se, is that we will be representing or distributing their Allianz Capital Partner private strategies in North America and Canada. So they have some capabilities such as infrastructure debt that we think are really going to resonate with our insurance clients. So again, we just see a lot of opportunities here. And so again, as Rod said, not only does Rod have a smile on his face, if you could see and hopefully, you can hear the smile on my voice with just the energy of how we just truly could not have picked a better global partner to really accelerate our international growth.

Yes. Thank you. That's really helpful color. And then just one quick one maybe. Do you have any view on kind of what you'd expect for alternatives returns in the second half of the year?

Mike?

Erik, thanks for the question. So just as a refresher, we were asked coming into last -- this quarter, second quarter, what our expectations would be, and we range bound that as minus 3% to plus 3%, and we came in roughly 2%, give or take. So while I would not express enormous confidence in our ability to predict how alternatives will perform, based on our best visibility today, we do think third quarter will be not as good as second. We're currently bounding that at 0% on the upper end to minus 6% on the lower end. That's the total return in the quarter, it's not an annualized number or anything like that. So think of that as anywhere from no gain on the alternatives, which would still be below our expectations to a potential loss of $100 million on the alternatives. Now that all said, and we put that into context, right? First, think about that in the context of overall earnings and capital generation. That would offset a lot of the earnings, but not all, all else being equal in terms of our expectations. So we would still be able to generate capital in the quarter barring some other event. Second, and we did add this in the back of the analyst presentation, I'm sure you've noticed it, just a historical perspective on our alternatives portfolio. Since IPO, we've earned over 14% on the alternatives. And so while there is quarter-to-quarter volatility, we think our shareholders have been very well served. And our policyholders and customers, too, by our ability to generate those kind of returns. So we're very pleased with the overall -- we're not pleased with a tough quarter but pleased with the overall investment. We recognize that comes with it, and we're happy with where we are.

Thank you. That's all the time we have for questions today. I'll turn the floor back to management for any closing remarks.

Thank you. Our success continues to reflect the purposeful decisions that we've made as a company as well as the commitment and dedication of our people. As we look forward, we remain confident in our long-term strategy, and we'll continue to execute on a number of organic, capital and margin initiatives to achieve our plans. At the same time, we're excited about the additive inorganic growth that will result from our recently completed transaction with AllianzGI. This transaction fully aligns with our company's focus on growth and delivering greater value for all of our stakeholders. We look forward to updating you on our progress. Thank you, and good day.

Thank you. This concludes today's conference. All parties may disconnect. Have a great day.