Great-West Lifeco Inc. (OTCPK:GWLIF) Q1 2022 Earnings Conference Call May 5, 2022 3:30 PM ET

Company Participants

Paul Mahon – President and Chief Executive Officer

Garry MacNicholas – Executive Vice President and Chief Financial Officer

David Harney – President and Chief Operating Officer, Europe

Arshil Jamal – President, Group Head, Strategy, Investment and Corporate Development

Jeff Macoun – President and Chief Operating Officer, Canada

Ed Murphy – President and Chief Executive Officer, Empower

Bob Reynolds – President and Chief Executive Officer, Putnam

Conference Call Participants

Meny Grauman – Scotiabank

Doug Young – Desjardin Capital Markets

Tom MacKinnon – BMO Capital

Gabriel Dechaine – National Bank Financial

Paul Holden – CIBC

Darko Mihelic – RBC Capital Markets

Operator

Thank you for standing by. This is the conference operator. Welcome to the Great-West Lifeco First Quarter 2022 Results Conference Call. I would now like to turn the conference over to Mr. Paul Mahon, President and CEO of Great-West Lifeco. Please go ahead.

Paul Mahon

Thanks, Ariel. Good afternoon and welcome to Great-West Lifeco’s first quarter 2022 conference call. Joining me on today’s call is Garry MacNicholas, Executive Vice President and Chief Financial Officer. And together, we will deliver today’s formal presentation. Also joining us on the call and available to answer your questions are David Harney, President and COO, Europe; Arshil Jamal, President, Group Head, Strategy, Investment and Corporate Development; Jeff Macoun, President and COO, Canada; Ed Murphy, President and CEO of Empower; and Bob Reynolds, President and CEO of Putnam.

Before I start, I will draw your attention to our cautionary notes regarding forward-looking information and non-GAAP financial measures and ratios on Slide 2. These apply to today’s discussion as well as the presentation materials.

Please turn to Slide 4. Great-West Lifeco continued its positive momentum in the first quarter delivering solid results against a challenging macroeconomic backdrop, which saw central banks raising rates, inflation reaching multiyear highs and heightened volatility in global markets. These conditions have in part been driven by the senseless invasion of Ukraine, which is causing such tragic human dislocation and loss. Our hearts go up to those impacted, including so many families that have been separated. Our companies and staff have responded with more than $500,000 in financial support and are actively engaged in refugee resettlement and support efforts. Despite the macro challenges, we have delivered very solid first quarter results.

Base earnings and base EPS were up 9% year-over-year reflecting the strength, resiliency and diversification in our business. Performance across segments was good. And though earnings were impacted by equity market volatility our business benefited from strong yield enhancement gains as we continue to source attractive investment opportunities. We have also advanced our value creation priorities across Lifeco. At Empower, the integrations of MassMutual and Personal Capital are progressing well and on track. We have successfully completed 5 of 8 waves of client migration from MassMutual. While fees are somewhat down from Q4 2021 due to market volatility and the timing of expected client attrition, we’re pleased with our momentum, including cost synergies and client retention, both tracking in line with our original expectations. Garry will cover this more in more detail during his remarks.

With the closing of the Prudential transaction on April 1, Empower’s participant base increases to over 17 million Americans. While we are focused on serving the DC retirement plan needs of these customers, we see significant opportunity to serve their broader wealth management needs. In a few minutes, I will share how we are accelerating the build-out of Empower’s retail wealth management strategy, including leveraging Personal Capital’s digital advice capabilities. Wealth is a core strategic focus for our group, not only at Empower, but in Canada and Europe as well. Our progress is evidenced by strong sales and positive net flows across our wealth businesses, notwithstanding the market volatility experienced in the quarter.

Please turn to Slide 5. This slide shows our medium-term financial objectives and performance over various time periods. We are pleased with Lifeco’s continued strong performance as we execute on our value creation strategies. As previously noted, Lifeco’s base earnings and base EPS were up 9% year-over-year, and we continue to track positively against other objectives.

Please turn to Slide 6. Canada Life continued with strong momentum in group sales. Excluding a couple of large cases last year, growth was very strong in both life and health and wealth sales, particularly in the small and mid-market segments. Both group and individual wealth delivered positive net cash flows. New product launches such as the Canada Life sustainable portfolios and good fund performance are attracting new client inflows.

Wealth Management is a strategic focus for us in Canada as we continue to enhance our products, services and support for advisers. Subsequent to the quarter end, Canada Life and ClaimSecure launched SecurePak. This new bundled offering includes Canada Life’s insurance benefits and ClaimSecure’s modern claims processing services. We expect this will be the first of many collaborations and we see a significant opportunity to extend our offering to plan sponsors via ClaimSecure.

I’m also pleased to share that Brand Finance rated Canada Life the fourth most valuable brand in Canada. We are the first insurance company ever to make it to the top five. This recognition reflects the success of our re-branding efforts following the amalgamation of our 3 insurance companies in 2020. I would like to congratulate Jeff Macoun and his team on this remarkable achievement and for making Canada Life such a trusted and valued brand in the eyes of Canadians.

Please turn to Slide 7. In Europe, insurance and annuity sales were strong in the quarter. Equity release mortgage sales more than doubled year-over-year with continued growth supported by an aging UK population and rising property values. Healthy momentum in bulk annuities was sustained with three deals totaling over $400 million following sales of $320 million last quarter. We have also been growing our wealth management presence across Europe. In recent years, we’ve acquired several smaller brokers and advisers in Ireland to extend our service offering, and we continue to expand distribution partnerships in the UK for our onshore and offshore wealth bonds. In addition, our technology investments are positioning us to grow share through new market segments. In Germany, for example, we’re using a digital platform to access the small group pension market, building on our success in the retail pension savings space.

Please turn to Slide 8. Putnam’s AUM was consistent with prior year at $192 billion. Net outflows of $2.4 billion were primarily due to continued outflows in lower fee fixed income products. Putnam’s investment performance remains strong as demonstrated by 4 and 5-star Morningstar ratings on 25 funds and over 80% of funds performing at levels above the Lipper median on both a 3 and a 5-year basis.

Please turn to Slide 9. Empower continued to experience strong business momentum in the quarter. We’ve split Empower sales between defined contribution and individual retirement accounts known as IRAs and this is to highlight the top line performance each. This view will be increasingly important as we continue to grow the retail wealth management business at Empower. DC sales were strong this quarter at $35 billion. This included a mega sale of $15 billion in the quarter compared to last year where we had a large sale of $49 billion. Retail wealth management, which combines Empower IRA and Personal Capital, experienced strong growth driven by positive cash flows and saw asset levels increased 30% year-over-year. I will cover this more in detail on the following page.

Empower’s overall assets reached $1.1 trillion at the end of the quarter. This number grows to $1.4 trillion, including Prudential. As noted earlier, our MassMutual and Personal Capital integration programs are progressing well and on track. We remain on track to achieve our cost synergy targets and are pleased with performance on all key metrics, including AUA and participant growth, retail asset growth and client retention. The close of the Prudential acquisition last month marked another milestone for Empower as it represented the latest of three transformative acquisitions in the past 2 years. These transactions are pivotal to our longer-term strategy for Empower, both as a leader in DC retirement and as a growing retail wealth manager.

Please turn to Slide 10. As noted, I will now take a few moments to update you on the build-out of our retail wealth management strategy at Empower. We’ve made significant progress in the last 2.5 years. I recall sharing on the second quarter call in 2019 that empower IRA assets that reached $10 billion. Since then, we’ve seen strong growth both organically and through personal capital and today, retail wealth assets are $48 billion and growing. Personal Capital sales grew by 31% compared to Q1 last year with assets under management up by 30% over the same period, Empower IRA sales are up 53% over Q1 last year and assets under administration increased by 30% over 2021. And this growth has come before we were able to leverage Personal Capital’s technology and tools.

Over the last few months, we have started to rollout our new digital participant experience at Empower, leveraging Personal Capital’s capabilities. The new experience is now available to 3.5 million plan participants growing to $8 million by the end of May. To support this retail growth opportunity, we’ve accelerated hiring, including over 250 sales and service staff, with half of those just in the past quarter. While increasing our costs in the short term, we are confident these investments will lead to strong IRA and retail growth as we work to fulfill the ever-growing need for advice and guidance from the millions of customers we serve.

Please turn to Slide 11. Capital and Risk Solutions base earnings increased 17% year-over-year, a strong result, driven in part by new business growth, including U.S. health transactions and an innovative Israeli reinsurance transaction. U.S. traditional life reinsurance results improved and while still impacted by COVID-19, we’re in line with industry experience. Capital and Risk Solutions has produced solid quarterly results reflecting its well-diversified reinsurance portfolio. The new business pipeline is strong in both structured and longevity reinsurance portfolios. We remain focused on our core U.S. and European markets as we pursue expansion opportunities in new markets such as Japan and Israel.

And with that, I will now turn the call over to Gary to review the financial highlights. Gary?

Garry MacNicholas

Thank you, Paul. Please turn to Slide 13. Overall, as Paul noted, Lifeco produced solid financial results this quarter. In addition to the underlying momentum we see across the business, the results also reflect the mix of challenges and opportunities the current environment presents. Rising rates and widening spreads, downward trends in stock markets with increased volatility and elevated inflation and continuing COVID impacts.

Compared to the prior year, base EPS of $0.87 was up 9% and 12% in constant currency, reflecting a stronger Canadian dollar against European currencies. The EPS increase was due to several factors, including higher stock market levels year-over-year, broad-based business growth and attractive yield enhancement opportunities. Experience pressures in certain businesses were offset by positive outcomes and others, delivering a solid overall result across a diversified book of business. At the Lifeco level, net EPS of $0.83, grew 9% from Q1 2021, primarily due to the increase in base earnings as excluded items were similar impacted in both periods.

Starting with Canada, base earnings were $272 million, down 9% from Q1 last year. Insurance experience was a headwind this quarter with lower group long-term disability results after several favorable quarters and an increase in individual life claims. New business gain and policyholder behavior was lower this quarter. However, Canada benefited from another strong contribution from yield enhancement supported by widening spreads and continuing volumes of equity release mortgages. In the U.S., base earnings were up 15% year-over-year, led by strong organic growth at Empower, including the mass retail business. We have combined these businesses for reporting in 2022 as they become increasingly more tightly integrated. We will continue to report on integration costs and synergies until the program closes out later this year.

The Prudential business, which comes on board starting in Q2, will be shown separately for 2022 and will include separate reporting of the synergies and associated integration costs. Empower base earnings of U.S. $117 million were up 23% year-over-year, unchanged from the prior quarter. As a reminder, about two-thirds of the fees at Empower are asset based. These fees benefited from the growth in markets year-over-year. However, they were negatively impacted by the decline in U.S. markets in Q1 this year. Fees were also impacted by expected client attrition and repricing in the acquired Mass veto portfolio which was more concentrated at year-end given the January 1 renewal dates. I would note that client asset and revenue retention is going very well so far, running a little better than our acquisition modeling.

Expenses were up year-over-year in line with the steady organic growth in DC plan participants and down from the elevated Q4 expenses as anticipated. Also, as Paul noted earlier, we have accelerated the build-out of the retail wealth strategy with additional sales hires in Q1 2022, along with the necessary support staff and this is expected to drive revenue growth in future quarters.

On the integration front, the rollout of Personal Capital digital capabilities to the broader Empower client base continues at pace with over 3.5 million participants now having access and over 4 million more coming on board in May. MassMutual expense synergies remain at $80 million on an annualized run rate basis and are on track to deliver the $160 million target once the integration is completed later this year. It is worth calling out that integration savings tend to be more pronounced at the start and at the end of a program, with early savings from eliminating duplicate overhead costs and then later savings arising as the prior admin systems and service agreements are discontinued post conversion to Empower’s platform. Putnam earnings were similar to Q1 last year, impacted by lower AUM-based fees plus seed capital losses due to market declines in the quarter. As we have seen in prior years, Q1 is a seasonally lower quarter for Putnam and Q4s are typically seasonally higher.

The Europe segment had a very strong quarter in Q1 with base earnings up 22% year-over-year or 29% in constant currency, allowing for the appreciation of the Canadian dollar against euro and sterling. UK base earnings were up 15% year-over-year, benefiting from strong yield enhancement gains, driven by the successful renegotiation of 2 large leases and good group mortality experience.

Ireland base earnings increased 60% over a softer Q1 last year, largely driven by a turnaround in insurance experience. The results this year also included $6 million of earnings from Ark Life, a close block acquired late last year. Base earnings in Germany were up 5% year-over-year, in line with continued growth, particularly in the retail pensions business.

In Capital and Risk Solutions, the reinsurance business continues to perform well with growth in the structured portfolio, experience gains in the longevity book and continued improvement in U.S. life reinsurance mortality claims experience. For several quarters now, we have highlighted expected profit trends in CRM as a better measure of growth in volume since sales and AUM are not as meaningful. We are presenting an expanded view of CRS expected profit this quarter as part of the source of earnings additional details in order to provide more color into the movement period to period, and I’ll come back to that shortly.

Turning to Slide 14, we can see here the impact of the various excluded items, which net to minus $39 million overall. These are predominantly acquisition-related, including Personal Capital MassMutual as well as recent smaller Irish acquisitions in the wealth space. There were also impacts on actuarial liabilities, partly from minor assumption updates and partly market-related impacts in the period.

Turning to Slides 15 and 16, these next two slides highlight the source of earnings. First, from a base earnings perspective and then a net earnings view. I’ll focus comments on Slide 16, the net earnings SOE with a reminder, the amounts above line are pretax. Expected profit was up 6% year-over-year notwithstanding some currency pressure with the euro down 7% and sterling down 3% and also the lower contribution from CRS expected profit noted earlier. The increase reflects higher fee income on higher markets, partially offset by higher expenses. Expected profit was down 4% versus the prior quarter due to seasonality in performance fees and compensation expenses at Putnam and higher expected expenses in Canada.

Moving to new business impacts, the strain in Canada was higher than last year due to pricing pressures on term business and lower large case sales offset by new business gains in reinsurance. Experience gains contributed positively in the quarter, and I’ll cover these in more detail on the next slide. Earnings on surplus of minus $41 million, is down from minus $31 million last year, primarily due to seed capital losses in Canada and higher financing costs. The effective tax rate this quarter was 10% on base shareholder earnings and 9% on net earnings, primarily this reflects the jurisdictional mix of earnings this period. The effective tax rate on base earnings in Q1 2021 was also 10%.

Turning to Slide 17, these tables expand on the experience results as well as the management actions and changes in assumptions to highlight various items in the quarter, some of which we’ve touched on already. As shown in the chart on the left, yield enhancement continued to contribute positively, particularly in Canada and the UK this quarter with several large lease extensions in the UK and a continuing steady volume of new equity release forages to back liabilities in both the UK and Canada.

The net impact of mortality, longevity and morbidity was positive this period as we continue to benefit from diversification across risk types and geography. Annuitant mortality in CRS and Canada was favorable. Overall, morbidity experience was positive with higher disability claims in Canada more than offset by the combined impact of positive disability experience in Ireland and positive health experience in both Canada and Ireland.

Overall mortality was in line with expectations. Credit-related impacts were broadly neutral, actually slightly positive this quarter as our high-quality investment portfolio continues to perform well. The expense variance generally reflects strategic project costs and investments in growth, and I’ll review expenses in more detail on the next slide. The table on the right highlights that there are no material basis changes this quarter and the acquisition-related transaction costs are just continued consideration provisions related to recent acquisitions in Ireland.

Moving to Slide 18. Here, as I mentioned earlier here, we have broken out the expected profit for the Capital Risk Solutions group into two components. First, the fees and margins on reinsurance business such as structured life and P&C catastrophe, which have been increasing as a result in growth in these lines of business. The second component is the release of actuarial margins known as PFADs, or provisions for adverse deviations, which predominantly applies to long-tail liabilities such as life reinsurance and annuities. As can be seen in the chart, we made changes to our balance sheet that have reduced the PFADs coming into 2022. At a high level, we released actuarial margins on the longevity businesses and strengthened our best estimate liabilities in traditional life reinsurance. All else being equal, this produces lower PFAD releases and expected profit, but better experience gains.

Interestingly, as we move to IFRS 17, you will see more of this type of split with the reporting for fees and other margins largely unchanged, the PFADs being replaced by risk adjustment and, of course, a contractual service margin release will be on top of that. We are not yet in a position to share actual figures that will come in 2023, but conceptually, this is how it would play out.

Moving to Slide 19 and this slide highlights the operating expenses by segment. Expenses are up year-over-year, as expected, given the increase in business, both organically and through M&A. As is the case with many businesses, we are experiencing some modest inflationary pressure in labor and other costs. This is an area we will monitor closely, increasing the focus on achieving productivity gains in our operations. In Canada, expenses were up 4% year-over-year reflecting the acquisition of ClaimSecure and growth in sub-advisory fees. In the U.S., the expenses were up 6% year-over-year, which primarily reflects the organic growth in DC plan participants and the investments in the retail wealth strategy at Empower that Paul noted earlier.

In Europe, expenses were steady year-over-year, but as noted earlier for earnings, currency movement had an impact with expenses up 8% in constant currency. The increase is mainly due to acquisition-related costs in Ireland, including the Ark Life closed block and organic business growth across the segment. In Capital and Risk Solutions, expense growth is off a very small base, and is aligned with growth in the business, including the continued expansion into newer markets.

Please turn to Slide 20. The Q4 book value per share of $24.57 was up 5% year-over-year, primarily driven by strong retained earnings given the solid results in each of the last 4 quarters. Currency translation in OCI has been a headwind to this year with the strengthening Canadian dollar. However, the rise in interest rates has produced, are largely offsetting gains in pension OCI. The LICAT ratio at Canada Life remained strong at 119% within our target range of 110% to 120%. The ratio was down 5 points compared to last quarter, driven by interest rate increases, particularly at longer term rates, in line with our sensitivity disclosures in the MD&A. We would describe the decline as a formulaic issue rather than economic since, in general, our business benefits from higher interest rates. As a reminder, under LICAT, a portion of the available capital is calculated at fair value, which declined this quarter as interest rates rose. However, the required capital is largely calculated at fixed rates as defined by ASB and so did not move in the same manner.

In addition, I’d note that we switched LICAT scenarios last quarter and scenario changes are smoothing under LICAT, and the remaining smoothing is expected to lead to an increase of 1 point per quarter for the next four quarters. Lastly, Lifeco cash, which is not included in the LICAT ratio, ended the quarter at $0.7 billion, a modest increase from last quarter, and this would convert to about 3 points on Canada Life’s LICAT ratio.

Back to you, Paul.

Paul Mahon

Thanks, Gary. Please turn to Slide 21. We are pleased with the momentum across Lifeco in the first quarter and remain focused on delivering on our medium-term financial objectives as we work to successfully integrate acquired businesses and execute on our strategy. Core to our strategy are four value-creating priorities that represent areas of strength, advice, digital capabilities, workplace relationships and risk and investment expertise.

We believe the execution against these priorities will create greater value for shareholders and other stakeholders. This will include continued discipline and deployment of capital and advancing our commitment to making a positive impact in the world around us, especially related to the environment, diversity, equity and inclusion and sustainability. It’s with this mindset that we introduced three areas of focus for Lifeco’s corporate purpose and social impact journey at our annual meeting this morning. These focus areas are truth and reconciliation, building inclusive communities that thrive and investing in solutions that enable a more sustainable future. We recognize our role and responsibility to help address societal challenges and that by doing so, we become more inclusive and reflective of the communities where we live and work.

That concludes my formal remarks. Operator, please open the line for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from Meny Grauman of Scotiabank. Please go ahead.

Meny Grauman

Hi, good afternoon. You had a strong result in Europe this past quarter. But if we overlay expectations, most economists expect Europe to be in recession this year. So wondering as you see it, what are the implications for your European business, given the sound economic outlook? And if you focus on countries or products or both, where are you more vulnerable and where are you less vulnerable?

Paul Mahon

Thanks, Meny. It’s Paul. I’ll start off and then I’ll hand it off to David Harney, who is responsible for that business segment. I’d start out by saying that I would refer to our businesses in Europe is very focused on needs-based financial services. So we do provide a lot of pension savings support. We’re involved in payout annuities and those types of products and savings vehicles are really products that people will continue to act on and transact on in a lot of ways, regardless of the environment. Obviously, market levels will have some sort of an impact. But rising interest rates also make many of those products more attractive, things like payout annuities. And then things like bulk annuities are – those are institutional transactions where there are going to be organizations that are going to be looking to sort of offload that liability, and we’re well positioned to handle those. So as I think about our businesses, and I’ll let David get into it in more detail, I view our business is pretty resilient and strong, notwithstanding financial cycles, but I’ll let David go into a bit more detail. David?

David Harney

Yes. Thanks, Paul. I’d probably repeat the same point. So maybe just to share some sentiment from Europe. Like I wouldn’t say there are recessionary concerns or fears in Europe that are different than anywhere else in the rest of the world at the moment, like obviously there are generous concerns around inflation and rising interest rates, but I wouldn’t touch any particular concern to Europe as a segment compared to other segments around the world. Look, we’ve had a strong quarter again this quarter, obviously boosted a little by yield enhancement. But even with that aside, we’ve had good results again this quarter and like as was the split of our earnings by the three markets, we’ve almost 50% in the UK, 30% in Ireland and 20% in Germany. I suppose if we were to be worried anywhere about the recession and maybe proximity to Ukraine will be mostly in Germany. But there, and that’s probably our region in Europe that’s growing the strongest. And we have a very good position in the retail pension market there on the smaller occupation market and we’re growing market share there. So even if Germany softer a little bit more, we still expect that business to perform strongly over the next period. And then we have more mature positions in Ireland and the UK, Paul talked about some of the product mix that we had in the UK, which may not move that much even if there were some recessionary pressures. And then within Europe, Ireland is a very fast-growing economy and it’s true I called it Ireland is one of the few economies within Europe that showed growth. So hopefully, that gives some color.

Meny Grauman

Yes, thanks for that. And then maybe just switching gears, if I heard you correctly, there was some discussion earlier in the presentation about accelerating investments in U.S. retail wealth. So I wanted to make sure I heard that correctly. And so is that sounds like a change in the pace of investment there. And so I’m just wondering what drove that change? Why is it being accelerated now? Thanks.

Paul Mahon

Yes. So, Meny, I’ll start off with that. I would characterize that when we looked at the Personal Capital and the various – the MassMutual and Prudential acquisitions, we’d always had a vision towards building out a retail wealth business. And that goes beyond thinking about the IRA rollover business. It’s a broader opportunity. And when we talk about accelerate, I think our focus has always been that once we started to actually integrate the personal capital capabilities into the system, we were going to be far better positioned to actually now reach out and to connect with clients and to offer these additional services and it’s a timing issue. So I’ll let Ed give you some context around why now and why this timing makes sense relative to the work we’ve done with Personal Capital. Ed?

Ed Murphy

Sure. Thank you, Paul. Yes, I think if you look at the opportunity that we have, we have somewhere between $70 billion to $85 billion of money that’s in motion every year, coming off of our platform due to early retirement, job changes, other life events. And so there is a real opportunity for us to work with many of those participants and guide them through the process around whether those actions to stay in plan, roll to a third party, role to us. So we have a very needs-based approach to do that. So, as we have scaled the business, particularly over the last 18 months and we are adding millions of participants on the platform. It’s important that we continue to build out those capabilities so that we can serve customers, not just while they are an in-plan participant, but out of plan. We also have a number of those customers that are in plan participants that have an understanding of our capabilities, particularly after the Personal Capital acquisition where we can help them and work with them in other areas, other goal areas, other objectives, whether it’s college savings, whether it’s emergency savings, and so that creates a real opportunity for us. So, just a really significant demand and appetite for advice, for guidance, for a holistic approach that’s been emerging over the last few years. And so I think what you’ve seen here over the last year and particularly in the last quarter, you’re going to continue to see more investment and more growth in the business. We will be adding more talent to support the demand.

Meny Grauman

And just to be clear, so are you responding to any change out there in the market, any sort of competitive change or any sort of regulatory change that’s pushing you to move faster here?

Ed Murphy

No, I think it’s just the fact that over 70% of Americans today don’t have a financial plan. They don’t have a retirement plan and all the surveys, including our customer surveys suggest that there is just an insatiable appetite for guidance and advice. People aren’t clear on what to do and they typically want to talk to somebody. And so what we’re doing is, obviously, building out a state-of-the-art digitally enabled capability, sales and service but also incorporating the human dynamic, so the ability to work with a human adviser and someone that can help them and guide them through this process.

Meny Grauman

Thank you.

Paul Mahon

Meny, I might just add one thing. When we actually position the two acquisitions of MassMutual and Pru, in both instances, we talked about the expense synergies, and we also talked about revenue synergies. The revenue synergies there were more broadly the traditional IRA rollover capture opportunity. What Ed is talking about here is stepping well beyond that. And I think that has been part of the vision we talked about, but the real value unlock for us and Fred and his team is the deployment of this personal capital, hybrid digital advice. But if we’re actually going to have it out there, we’re going to have potentially – well, potentially 17 million Americans reaching out for help. We actually have to have people to actually support that hybrid digital experience. So the timing is now that we need to start ramping up the capabilities so we can really start to build out and unlock this retail wealth management growth.

Meny Grauman

Alright. Thank you.

Operator

Our next question comes from Doug Young of Desjardin Capital Markets. Please go ahead.

Doug Young

Hi, good afternoon. Just sticking with Empower, a two-pronged question, of that $70 million to $85 million in annual money in motion, how much do you capture today…

Paul Mahon

Billion.

Doug Young

Billion, sorry, $1 billion in money in motion, how much are you capturing today? And where do you plan to take that? And then second question, just the annualized run rate cost synergies of $80 million didn’t change quarter-over-quarter. And I think in the prepared remarks, it was talked a bit about the front and the end being more impactful. Just hoping you can flesh out – I would have expected a little bit more in terms of annual run rate cost synergies from MassMutual sequentially, but just hoping to get a little color on that. And then I have a follow-up.

Paul Mahon

So I think Ed you’re well positioned to respond to both of those.

Ed Murphy

Well, I think the – on the second part of your question, I would say that the prepared remarks, I think, really reflect what we’re seeing. And as we noted, we expect to hit our targets of $160 million pretax run rate synergies in – at the end of 2022. So, it’s – we were probably slightly ahead of plan early on, but we’re on target with what we’ve conveyed to everyone. In terms of – I think your first question had to do with the capture opportunity. Yes, as we see – as we implement better tools, better capabilities, particularly through the Personal Capital acquisition. We believe we’re going to see more efficiency and more effectiveness there. I will say that the approach that we take is very much a needs-based approach 99% of our plan sponsors, the institutions that we serve have effectively signed off on our service because of the approach that we take. And so what we do is we want to understand what the client’s objectives are. And sometimes it’s a benefit to them to stay in the plan, even though they have retired where they have changed jobs, they could leave the money in the plan and get the benefit of institutional pricing. Some have an existing relationship, and they may roll to an existing relationship and others are not working with an adviser. And so there is an opportunity for us to help them. So I think what we will see – what we have seen and what we will continue to see is higher effectiveness, higher efficiency, higher capture rates given the strength of our value proposition.

Doug Young

And maybe to a finer point on it, how much of – like have you talked a bit about – have you talked or disclosed how much you’re capturing of that right now and where you think you can take it? Because I know others have. And I think 50%, obviously, would be high, but I think others are achieving that. Just wondering where you are.

Ed Murphy

Well, first of all, it’s – people do the math differently. There are – as I mentioned, there are customers that decide to stay in plan, there is a large percentage of customers that actually cash out. They pay the penalty. They pay the 10% penalty. They pay the taxes and they cash out. So it’s really – you really have to look at what the numerator is. I think at this point, we wouldn’t disclose those capture rates, but I would submit that they are industry-leading at this stage, and we believe we can improve upon them.

Doug Young

Okay. Can I just…

Paul Mahon

Doug, I was just going to say, we’re not at the point where we’re going to disclose the details of what our current capture rate and exactly where we’re going to go, but we actually see – we’re at a point right now where we see a double upside. The first upside is a more digital, better customer R&D experience is going to result in people being more satisfied and wanting to buy into the opportunity with Empower. And then the second one is, as you go from 7 million to 12 million to 17 million participants, you now have, as Ed said, $80 billion of money in motion as opposed to before where we had $25 billion, $30 billion of money in motion. So therefore, we’re investing to grow this business. And it’s an opportunity that’s before us and one that we think is a significant one.

Doug Young

Okay. And then just second on Canada. I guess two questions. First is new business strain was higher, which I was a bit surprised given where interest rates went. So just hoping to get a better sense of dynamic, maybe there is a mix change. And then the group morbidity side, was negative. I’m just trying to get a sense of was the group morbidity experience long-term disability experience negative? Or was it just less favorable than what you’re seeing last year? Because I thought it sounded like the message was a bit different than what we heard last quarter.

Paul Mahon

Yes. So I’ll start off at a high level. And Gary may want to talk to the new business stream. And I know Jeff will want to share with you his insights into the group. I’ll start off on the group one. No, we did not lose money on this. This is – what we saw in the period was reduced gains because of the nature of claims incidents and claims termination rates. But I always like to remind that we’ve been at this business for a long time. I would argue, we are the best at it in Canada and perhaps maybe one of the top in North America or the world because we actually have the experience, the insights, and we take action when we see challenges in the business. So we have seen LTD volatility many times before. We’ve responded to it, and we always get back on track. So we look at this as an in-period issue. But I think Jeff could provide a little bit of insight into the in-period issue. And then maybe Gary could speak to new business strain after that. Gary – Jeff, do you want to speak to the LTD and…

Jeff Macoun

Thanks, Doug. Paul, thank you. Yes, I was just reflecting, I think it’s been, gosh, at least six quarters in a row of sort of stellar results on the group LTD. I’d say this – I mean, our fundamentals are still very, very much in place I think about this business here. Our renewals – this is generally a 1-year renewable business. We renew the business at or above the targets, and we’ve been doing that. So that’s in place. We’re very careful on our case selection. That’s still in place. The rate adjustments that we place each year are at target or above. We took pricing action in ‘21 that’s now flowing through the system. And we also proacted in early ‘22 with further rate adjustments on this business and managing this and our persistency has remained well. So we are very bullish on this business. As Paul outlined, Doug, we did see in quarter a small spike on incidents. And our terminations or claims coming off were in line, but they were smaller. And so, when there was a small impact on inflation, but we continue to be quite bullish. The fundamentals are in place and feel strong about this business.

Paul Mahon

Gary, do you want to comment on new business strain in the quarter?

Garry MacNicholas

Yes, just make a couple of quick comments there. First off, part of this was due, and I think I mentioned in the speaking comments, there was there are some pricing pressures in the term market in Canada, and that had a lower contribution to new business. And that’s not as impacted by interest rates. Also, the interest rates tended to rise towards the back end of the quarter. So it’s something I think that the rising interest rates, you are correct, Doug. This will benefit the strain calculations in future quarters. But there wasn’t much of an impact from the interest rates in the quarter. And then as I think Paul also noted that we didn’t have as many the larger sales that would cover some of the acquisition costs, so it’s a little more stranded acquisition cost that contributes to that new business result. So a little worse, but nothing we’re overly concerned about.

Doug Young

Okay, thank you.

Paul Mahon

Thanks, Doug.

Operator

Our next question comes from Tom MacKinnon of BMO Capital. Please go ahead.

Tom MacKinnon

Yes. Thanks for taking my question and good afternoon, everyone. A question with respect to LICAT at 119% and 5 points down quarter-over-quarter on rising interest rates. Rates continue to rise here. And if we look at the U.S. tenure, its second quarter to-date, it’s almost up as much as it was in all of the first quarter. So conceptually, that could be another up to 5 basis points hit on your LICAT. So wondering what your thoughts are with respect to maintaining that LICAT within your 110% to 120% preferred range as rates continue to go up. What kind of levers do you have here other than downstreaming some money from the holdco? And I’ve got a follow-up. Thanks.

Paul Mahon

Yes, okay. Thanks, Tom. I’m going to turn that one right over to Gary. Gary?

Garry MacNicholas

Yes, sure. So obviously, as you pointed out, Tom, right now, we’re right near the top end of our target range. So there is obviously room within the range comfortably. And so starting from that position also to remind, we do have those four points of scenarios smoothing that are going to be adding to the ratio we period. So we look at those as – and with higher interest rates, that keeps us in that scenario. So those four points are looking good. You mentioned the Lifeco cash that could be downstream. I think that wouldn’t be our preference in the short-term, but it is an option available to us. It’s another 3 points at quarter end. So in terms of beyond that, I think there is – you’d be looking at ALM strategies. But when we are doing that, we are minded our work suggests that IFRS 17 is not as sensitive to this, has some offsetting sensitivities. And so we expect to hear from the OSFI on – from OSFI around the second quarter results, where their transition rules are but I think that might also come into play in as LICAT unfolds for the rest of this year. So at this point, we’re comfortable where we are. We are watching the rates. And I think just one other thing I should point out, you mentioned U.S. rates. There are sensitivities that are largest to the Canadian and the sterling and a little bit on the euro. So – and it’s a longer rate like 10 to 20-year type rates that we’d – so you have short-term rates, bank and Fed putting rates up. It’s really those longer-term rates you’ve got to be looking at, and it’s really across those three currencies are the main ones that drive it because this is the, again, the fair values on the PfAD backing our long liabilities, which is Canada of long tail insurance and European paid annuities primarily.

Tom MacKinnon

So with respect to the LICAT, it’s best to look at the longer rates associated with Canada and euro. Is that because that’s where you have some of this excess capital?

Garry MacNicholas

That’s where we have these actuarial PfADs. OSFI allows you to count your insurance PfADs in the available capital but they are measured at fair value. And our margins are against our annuity books and against our insurance books. So yes, it is the long-term rate for Sterling, Canada and euros.

Tom MacKinnon

Thanks. And then as a follow-up, with respect to Empower here, if I look at over the last four quarters, second, third, fourth and the first, the AUA has been relatively flat. Participants are up, but the earnings – the base earnings for Empower in U.S. dollars in the second and the third quarter last year were substantially higher than what they have been in the fourth quarter of last year and the first quarter of this year. So I used to think that it was driven by AUA and participants. But is this trend that we’re seeing here with the earnings now kind of flat quarter-over-quarter at Empower and down if we look from second and third quarter last year, down at least 15% over those levels. Is this because you are investing in the business? And going forward is there any other seasonality associated with the earnings here at Empower that would – because now it’s poised to look like if they are flat quarter-over-quarter, they are going to be down substantially year-over-year.

Paul Mahon

I’ll let – well, I will tell you, Tom, we’re actually feeling quite – very confident in the acquisition integrations. We’re capturing the percentage of clients we expected are better. We’re on track to deliver on the synergies. So ultimately, driving forward the value creation, we’re very confident in that. The one thing we can’t control is what’s happening with equity market levels and because there is significant fee income that features in Empower earnings. But I’m going to let Garry provide a little bit of context on the relative quarter-to-quarter performance. Garry?

Garry MacNicholas

Yes. Thanks, Paul. So Tom, just on the – generally speaking, I mean, the AUA and participants is high-level metrics give you good – some good trending to keep an eye on. Obviously, the mix in AUA can have an impact and a certain types of businesses, certainly, institutional versus retail, those types of things can have an impact for your specific questions on the – and so the growth of retail should actually prove to be a benefit going forward. In terms of the quarters you called out specifically, and you may recall having discussions on this in the quarters last year, we had some very favorable surplus income gains in both Q2 and Q3 and to a lesser extent, Q4 last year. Just again, these aren’t seasonal. They – some of these were some of our alternatives our early investments in some of the alternative strategies. We are paying off. We had some good realized gains in those two quarters that probably gave you some a little bit higher income in that than just looking at the straight AUA and plan participants. This quarter, if anything, we were a little below what we might typically see in the surplus income. It was positive, but it was not at the levels in those quarters by any stretch. There were some FX headwinds, for example, that probably dragged down a few million. So, the surplus income in the back can also have moved that around a bit. And again, the synergies, obviously, we are picking up synergies as we go through. We didn’t have any new synergy wins coming in, in this period. But there are certainly – as we go through the rest of this year, we would expect those synergy gains to come in and add. And again, that’s not going to attract to AUA or participants. That’s going to be on top of that growth.

Tom MacKinnon

Thanks Garry. That’s helpful.

Operator

Our next question comes from Gabriel Dechaine of National Bank Financial. Please go ahead.

Gabriel Dechaine

Good afternoon. Can you just give me a little explanation as to the shift in the makeup of your Reinsurance business earnings like EPF – earnings on – expected profit are going down, but you will have more experience gains, something like that. What happened to the business that caused this shift?

Paul Mahon

Thanks Gab. I am going to turn that one over to Garry. Garry?

Garry MacNicholas

Sure. The first I would point out, nothing has actually happened to the business. This is I mean the business has been growing quite well. A lot of this is geography in the source of earnings display. And that’s always important to keep in mind that this is just the – both the timing of earnings and also the geography of them. So, I think if you recall, we had – we have seen quite a bit of growth. We had really strong growth in our reinsurance business over the last few years, and that included significant longevity transactions. And then also, if you recall, going back a number of years ago, we had very sizable longevity reserve releases as we updated our longevity best estimate assumptions and this impacted the UK as well as reinsurance. And the UK would have had it with their bulk acquisitions. In both cases, as we made those steps brought on the new business or released some of those, we held back prudent PfADs because we wanted to observe this playing out over a couple of years. But given the trends we have observed and the experience we have had, we have actually reduced these PfADs in line with the lower risks that we now see. And so they would have come into our earnings last year as basis changes. At the same time, given other trends we are seeing in the U.S. Life Mortality segment, and obviously, COVID had some impact here. Those trends, what we did there was we strengthened our best estimate. So, that gives you a greater chance of – the stronger your best estimate, the greater chance you have future higher gains or lower losses in the future period. So, changing – overall, we didn’t see a lot of P&L impact last year. But if we view from a lighter PfADs and stronger best estimates, and it changes the geography and the source for instance. Does that make sense?

Gabriel Dechaine

Yes, I guess you were having consistent longevity gains and then release released the excess PfADS or maybe you have front-ended some profits essentially last year and prior year?

Garry MacNicholas

Yes, we would have brought those PfADs into earnings last year. So, we are not getting them on the DRIP each quarter as it goes through.

Gabriel Dechaine

Got it.

Paul Mahon

And Gabe, one of the things we have talked about was the offsetting movement of the longevity business and the insurance business related to COVID, and this kind of plays to that right, but then we are even seeing – have we been lost?

Gabriel Dechaine

Can you hear me?

Paul Mahon

Can you hear?

Garry MacNicholas

Yes. We can hear you, Gabriel.

Gabriel Dechaine

I can hear you. Must have been a glitch.

Paul Mahon

Yes, I was saying this plays to the theme we have talked about with COVID with longevity challenges, obviously, for – and seeing what’s going on with life mortality. So, we were essentially following the risk and making sure that we have the right strength in our balance sheet.

Gabriel Dechaine

Okay. I got a question about the group business now. One, okay, so I got the explanation about the disability experience this quarter. I don’t know if you ever look at – I am sure you do, but I know in Canadian earnings insurance calls, we never talk about the benefit ratio. But if I look at the supplement and I – the claims paid divided by premium, we are in the low-60s, last year was in the high-50s, I guess. So, I mean – but if I look at pre-COVID levels, mid to high-80s. I mean is it reasonable to be looking at that benefits ratio and think, well, what we are seeing today is maybe some normalization and normalization could actually mean more pressure on earnings growth in group down the road that the benefits ratio like we had pre-COVID?

Paul Mahon

I would start by saying I think the benefits ratio at an overall level like there is a pretty blunt instrument. Our mix of business can be – your mix of business can have a significant impact on that. So, for example, if you are growing your large case business, you could be shifting a lot to fee-based income opposed to claims-based income. Your health benefits will have a very different claims ratio than your LTD benefits. So, I wouldn’t want to go to something like that over – at that level to really get in underneath that. The reality is we are in a competitive market where every case is renewed with a broker and with a client who is looking for value for the services they have received, and the reality is we are always going to be competing on that on a very – on the front foot, but making sure that we are providing good value to customers.

Gabriel Dechaine

Okay. Well, I am just a hammer looking for a nail, that number, maybe we revisit in the future. But thanks for that.

Paul Mahon

Thanks Gabe.

Operator

Our next question comes from Paul Holden of CIBC. Please go ahead.

Paul Holden

Thanks. Good afternoon. I want to go back to the discussion on regulatory capital. And I guess my first question, I want to make sure there is no LICAT impact from closing the Prudential acquisition. Can you remind us on that?

Paul Mahon

Yes, I will let Garry speak to the LICAT matters, Garry?

Garry MacNicholas

No. There is no LICAT impact closing Prudential.

Paul Holden

Okay. Perfect. And then sort of a follow-up question to what was being asked before because your answer was interesting. Clearly, there is interest rate sensitivity to the LICAT ratio, and it’s fairly significant. Is your answer suggesting that you think with discussions with OSFI and potentially simply putting in ALM derivative strategies today, you can kind of bridge the gap between now and when IFRS 17 is implemented next year and thereby avoid having to unnecessarily issue capital. Like that’s what I kind of got from your message, but I want to make sure I interpret it correctly.

Paul Mahon

Yes. I think broadly, Paul, you are on track. Our view is that the movement we have seen in LICAT is really not economic. It’s formulaic. We have got – we are at the top end of our range. We have got the benefit of the scenario switch that’s coming in. There is actions we can take that makes sense for our invested assets both today and under IFRS 17. And so as we look at it, we have got lots of strength. We are not – and we wouldn’t be minded to do something that cost real money that had a real economic impact on the – on our balance sheet or on our income statement when there is a non-economic impact going on. So, that’s probably the way I would think about it for a period of nine months. It would make no sense to do that. So, what we are going to do is we are going to manage with the tools we have got. We are going to take advantage of the strength we have got in the business, and we are going to really work towards a smooth transition to IFRS 17.

Paul Holden

Okay. I think I understand from your position, I guess really the concern I would have does OSFI have a similar view, and maybe you can’t speak on behalf of OSFI, but I think I appreciate what you are saying.

Paul Mahon

I can’t speak on behalf OSFI, but we actually have a very good interaction with OSFI. We have been working with them effectively as have our industry counterparts. They understand the dynamics of this as well. And I think sound minds will land in the right place as we transition to IFRS 17.

Paul Holden

Got it. Okay. That’s helpful. Thank you, Paul. And then next question is going back to Capital Risk Solutions and that new disclosure around the PfADs versus other margin and fees, so that disclosure is helpful. I guess my question is and maybe this is where CSM accounting will actually be helpful. Where can we kind of expect that PfAD release drawdown to reach a point of equilibrium, i.e. how much based on roughly what you would expect for new business volumes? Like does it continue to decline quarter-over-quarter for a few more quarters? Does it stabilize relative to Q1? Any kind of characterization you can provide us there would be helpful.

Paul Mahon

That’s one for Garry for sure. Garry?

Garry MacNicholas

Sure. Yes. I think really just to get to the heart of the question, the – I don’t see anything that would have the PfADs drifting upwards over the next few quarters for that business. It’s a fairly stable block, primarily the annuity and reinsurance business there. And there is no major plan changes pre IFRS 17 conversion. So, not expecting anything to move there other – there will be currency impacts, obviously, if that moves, but because we are in foreign currencies. But no, that should be fairly stable.

Paul Holden

Understood. Thank you. And then last question is with respect to individual insurance sales in Canada. They were down 15% year-over-year. So, may be some commentary there? Do you think that’s due to industry headwinds, or is there anything company specific we should be aware of?

Paul Mahon

That’s the question, Paul that I will turn over to Jeff Macoun. Jeff, do you want to take that?

Jeff Macoun

Sure. Thanks, Paul. And thanks for asking that question. I mean just in general, if I could, on sales in the quarter. Overall, I was quite pleased with our sales and we did call out on the group side to one-timers that didn’t repeat, but both of those businesses were up significantly, 62% on group GRS and about 100% on Group Life and Health. On the individual life, Paul, we – it’s a relatively lumpy business to par business in the high-net worth market. In quarter our term business was up about 13% year-over-year. And I look upon the term business as sort of confidence in the company. So, we had high – 13% growth in quarter. So, I was very pleased with that. The par was down. It’s a lumpy business. You win and lose at times by the big cases and some of the big cases did not come in quarter. And just to finish off the sort of the circle I was quite pleased with our retail wealth side. We had good net flows. But on the individual life insurance side, term was up, sales – the par didn’t meet our expectations. It’s lumpy. I am confident that I will come back later in the year.

Paul Holden

Okay. Thank you for that. That’s all the questions I had. Thank you.

Paul Mahon

Thanks Paul.

Operator

[Operator Instructions] Our next question comes from Darko Mihelic of RBC Capital Markets. Please go ahead.

Darko Mihelic

Hi. Thank you. And just to return one more time back to the Capital and Risk Solutions expected profit slide. I just didn’t quite understand your answer, Garry, when you said it’s a stable block, okay, it’s a stable block. But were you also suggesting that the PfAD releases get smaller every subsequent quarter from here on in, or did you mean it’s stable, i.e. the $76 million that was released, this quarter will remain stable at $76 million for the next three quarters?

Garry MacNicholas

It was the latter. It’s a fairly stable block. I mean if we have new sales, obviously, that’s going to – would add to the PfAD run rate. But typically, there is a natural sort of decline of the block. So, your new sales typically just to replace your in-force as it runs down. So, you end up quite stable is what I was referring to. But you can’t predict the number and you can’t predict the currency. But using your example is good.

Darko Mihelic

Okay. Thank you. That’s helpful. And then just on – just so I understand what you are doing actuarially because it strikes me that sometimes when I hear your language, it’s different from others. In other words, I think one of the things you said was in your U.S. life mortality block, you strengthened your best estimate. Typically, when I speak to other insurers, they will say that, yes, we strengthened the best estimate. And as a result, we increased the PfAD as well. But in your case, it sounded – it didn’t sound that way. So, did you actually lower your margin for adverse deviation, or why would you not have built your PfAD when you strengthened your best estimate?

Paul Mahon

Garry, that’s definitely for you.

Garry MacNicholas

Sure. So, when we – and I will start with the two things to clear up. One, first on the U.S. life mortality, that was strengthening our best estimate we already had a good healthy margin on top of that. And so if it’s x percent of the best estimate, it stayed as x percent. So, you strengthened your best estimate is the move we made there and the margins we already felt were quite sufficient for that. So, the margins sit on top of the best estimate. That’s important to remember. So, we moved our best estimate and the margin that’s out on top of it was x percent above that, and we have kept that the same. What I was referring to here, reducing the margins, that’s where in prior years, we had lowered our best of I could – made our best estimate to a more favorable outcome for the future for the longevity business, and this was in Europe, and that has come over a number of years. And for a temporary period, well, for a number of years, we kept higher margins on top of that best estimate until we saw the trends play out. And so we – last year, as we said, we have been watching this for a number of years. And obviously, we are looking out further, just how COVID impacted. We are saying, yes, we really feel that those are beyond the higher end of our range, and we release some of those. So, release some margins on the longevity side. So, the release of those margins was not directly tied to U.S. mortality other than, obviously, we are looking at the same sort of outlook in a post-COVID world for both of them. But it was more – there are two different decisions on the two different blocks.

Darko Mihelic

Okay. Understood. I think I can make two other inferences from that as well. But I will leave it there on the actuarial side. And I just wanted to go back again to the Prudential acquisition. So, I appreciate there is no impact on LICAT, but it certainly does hit your leverage ratios, which would reduce some of the flexibility, I think in managing capital. Can you talk to us about a pro forma leverage after approval?

Paul Mahon

Sure. I will pass it over to Garry. Actually, I will start out by saying we have used a very efficient financing structure in relation to Pru as a starting point. And we have clear intentions to try and – not to try, to take down our leverage ratios on a proactive basis. Obviously, we will do that in a very balanced way. But we actually have clear plans. We work with the rating agencies who have good insight into where we are going. And I will allow Garry to sort of speak to that.

Garry MacNicholas

Yes. So, as you recall, as part of the financing, we have short-term debt that we were adding to this. And this is what would cause the leverage to go up in the near-term. And we didn’t end up adding as much of the short-term debt as we would originally. So, I think we had originally called out $1 billion and it ended up just over $800 million, I think it was $823 million in U.S. in terms of the short-term debt. So, that’s something that’s as the business grows, and obviously, as the U.S. drops its earnings, we will be able to pay that down quite promptly. So, our leverage ratio will pop up in the near-term. I think it will be around in the 36% range. And then as we pay down that short-term, those short-term facilities it will come down into our targets. And we have discussed all this financing plan with the rating agencies well in advance. And you may recall, a large part of the financing that we put in place last year was our LRCN, limited recourse capital notes. So – and those are already in all the numbers and obviously and have favorable rating agency treatments. So, it really is just the short-term sleeve.

Darko Mihelic

Okay. That’s very helpful. Thanks very much Garry.

Paul Mahon

Thanks Darko.

Operator

This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Mahon for any closing remarks.

Paul Mahon

Thanks, Ariel. And I would like to thank everyone for attending our Q1 call. Please feel free to reach out to our IR team for any follow-up questions you may have. We hope that everyone enjoys the beginning of spring and a bit of an early summer break. And we really look forward to reconnecting at our second quarter call in August. Take care.

Operator

This concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

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