Apollo Global Management, Inc. (APO) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to our next session. I'm Ben Budish, Barclays analyst covering the U.S. brokers, asset managers and exchanges. For this chat, we've got Scott Kleinman, Co-President of Apollo. Scott, thanks so much for being here. Welcome.

My pleasure Ben, thanks.

Maybe just to start out to level set, you have an Investor Day coming up on October 1. At your last Investor Day, I think in 2021, you gave us 2026 targets. And while I appreciate you may not preempt your own Investor Day by giving some guidance right here, how should investors be thinking about what you might be getting ready to message?

Yes. No, that's right. So 3 years ago, we did our last Investor Day, where we put out 5-year financial targets as well as just some of the strategic building blocks that it was going to take, we were building out in order to get to that 5-year mark. So this time around, we're going to, of course, judge ourselves against those original metrics, put out some new 5-year targets and also talk about some of the new building blocks, how are we using the things that we've built over the last several years to now scale from the next level. What are the new opportunities, what are the new strategic goals that we have. And so it should be an incredibly enlightening day. I invite you all to come or at the very least tune in and pretty excited about it.

Great. Let's talk a little bit about originations. You kind of [ theme ] a fixed income replacement, I expect a lot more on this in October as well. Growing your proprietary origination capacity is clearly central to your longer-term growth algorithm. How should investors be thinking about the evolution of your broader origination ecosystem over the next several years? And to kind of -- maybe help everybody kind of frame up their models, can you remind us how Apollo monetizes these assets?

Yes, sure. So 3 years ago, when we really first started talking about origination, we -- in our Investor Day, we were running at about $80 billion a year. Today, LTM, we're close to -- well, a little bit north of $140 billion. We had put out a 5-year target of $150 billion. So we're obviously well ahead of that. And we'll provide some new guidance on where that's going. But as you can imagine, it's probably substantially north of that number. And I think we've been very clear, very repetitive on the point that the single most important factor for an alternative asset manager is origination capacity, right? That is the single biggest constraint on growth, not capital formation, not how many people you have. It really is built around, can you originate enough attractive assets to you to meet your needs. And that's why we have been so focused and in fact, some might say maniacally focused on really making sure we are building the right type of origination in the right volumes, looking for the right new places to be doing that because our whole business is about delivering excess return per unit of risk. And if you're just relying on secondary trading picking up stuff off of a bank trading desk or brokered situation, you're losing a lot of that excess return that excess alpha. And for us, in the long run, the best predictor of success is being able to continue to grow and scale attractive origination. To answer the second part of your question about how does the economics work? There's no one standard transaction. But in a perfect world, you've heard us say, for our own balance sheet, we want to own 100% of nothing and 25% of everything. And we really mean that, right? So in a perfect world, we originate a new transaction, a new loan, 25% of that would go to our own balance sheet. About 50-plus percent would go to client pools of capital and 25% would go to syndication, to market participants that we can syndicate. And just to think about the math that follows from that, on the 25% that stays with Apollo, that's SRE income plus FRE income for the 50% that goes to client funds, that's FRE income. And for the 25% that gets syndicated, that's our ACS fees. And so it's pretty attractive to be able to do that. And the reason we do want ACS in there is to really -- it's just a great flywheel. It really allows us to take down whole transactions even if we don't want the whole thing or don't have capacity for the whole thing because when you take a whole transaction down, you can dictate terms better, you can get better outcomes, better structure, better documentation and then having the knowledge and the comfort that you're going to be able to move the remainder, what you can't consume internally or for your clients is really valuable.

Great. And so how should investors think about the growth outlook for that very unique high-grade corporate solutions business? What is the universe of potential transactions look like? Can you talk about maybe the deal you did with Intel over the summer? What's the kind of the pipeline for that sort of opportunity?

Sure. That's totally massive. Totally massive, right. So when you think about the Intel transaction, as an example. But really, it's our high-grade capital solutions, private IG is another way to think of it. We're in a world now where for the extended foreseeable future, companies just have an unprecedented level of capital they need to spend. So whether it's on deglobalization -- so rebuilding the industrial infrastructure in new countries, new places. The decarbonization that's going on, the digital infrastructure and digitization of just about everything that has to be built and the whole supply chain for that, right? These are massive, massive, hundreds of trillions of dollars over the next 20 years. And companies just don't have the internal capital to be able to do that. And they don't even have the ability to just borrow all that in the traditional debt markets. If you were a big IG company, right, historically, you really only have 2 sources of capital. You have your bank debt or IG bonds, right, which are, I'd say, very low cost, but very rigid. They're fairly inflexible. They have a certain indenture. They have to be out of certain rated boxes, et cetera, et cetera, or you have equity, right, and equity is super flexible, but often very expensive. And these big IG companies haven't had something in the middle in any meaningful way in the past. And so our ability because of our scale, combined with our cost of capital, our ability to approach a big IG company for a few hundred basis points more than their IG bonds and be able to deliver in size, $5 billion, $10 billion, even more, $15 billion, $20 billion at a clip, where we can speak for the whole thing and take it down one-on-one sort of bilaterally, negotiate a package that makes sense for the company to meet certain needs, that's incredibly attractive. And big companies, big blue chip companies, are actually starting to pay attention and focus on this because they've never had the ability, they've never had the need to do it in the past and they've never really had the ability to do it. And so you're just -- this was -- Intel was a marquee transaction. We've had a number of other big transactions this summer. I think you're going to continue to see more and more of this. It's an incredibly attractive product for both the issuer, the company as well as for us and our investors.

Great. Maybe moving over to the LP side. So you've talked about an opportunity under the fixed income replacement kind of umbrella to serve your traditional LPs, not just on the alternatives bucket, but on the fixed income side. Where are we in this evolution? Any anecdotes from initial conversations with the clients you can share? And then can you kind of help us size a TAM for this opportunity set, which is different from the traditional alternatives, kind of landscape we typically think about?

Yes. Yes. So fixed income replacement, fixed income replacement is kind of a concept that isn't talked about fairly regularly, but it's something you're going to hear more and more coming from us. So what is that, right. Fixed income replacement is really just the realization that the historic model of public versus private right, is -- might have made sense 20 years ago, it doesn't make sense today. There was this historic belief that public is liquid and therefore, public is safe. Private is illiquid, and therefore, unsafe. And that was a simple heuristic that CIOs used and they split their books up that way in the past and manage their risk that way. But a couple of things have happened. One, over the last decade, it's become pretty clear. And certainly over the last couple of years, we've seen numerous examples, where public isn't so liquid, right. Its liquid on the way up, but on the way down, it's actually incredibly illiquid. Telling a fixed income manager, you can have liquidity 10 points down is not liquidity, right. And you saw that whether it was the LDI crisis, treasury -- like you've seen huge moves like that in the market in relatively short order. On the flip side, private, the market for private credit products, private fixed income is starting to grow to a scale where there is real liquidity or certainly more liquidity than was perceived. And over time, you're going to see more and more. We're certainly moving in a direction where I can envision a day in the not-too-distant future, where Apollo makes a market in all of the privately originated credit that we produce. And [ Greg ], you'll get a bid anytime, anywhere. And eventually, that liquidity differential between public and private will completely evaporate. Now you'll still get this premium, but what are you giving up? So folks were giving up this premium, this 150, 200, 250 basis point premium, right, in order for -- to maintain this perceived belief and liquidity that actually is proving not to be there. So we see this convergence happening. This convergence is happening first in fixed income. Eventually, it's going to happen in other markets. But as we spent the last decade utilizing these techniques to really scale and win at Athene and our own balance sheet, which, by the way, requires 90-plus percent investment grade. So we've had to find ways to create additional spread, additional alpha, for our own balance sheet, it dawned on us that if it's good for us, it might be good for others. And so other third-party insurance companies have definitely started embracing this. And now we're starting to make headway into more traditional fixed income investors. Pension funds, sovereign funds and otherwise. And we've now productized different products so that, that's consumable for traditional credit investors. So the answer is, we're on our way. This is going to be a long journey, but the TAM is massive. There's a $40 trillion fixed income market. Well, 100% of it be private credit? No. But a meaningful -- I mean you look at our own insurance balance sheet and probably 1/3 of that book is private IG, if you will. That's incredibly realistic over time.

Very interesting. Maybe moving over to the asset management business. How would you describe the current deployment environment? Where are you finding the most compelling opportunities? And then can you also touch on some of the longer-term themes. How are you thinking about digital infrastructure, climate, those sort of areas for investment?

Yes, yes. it's actually been a really interesting time for us to be deploying -- when I think about our equity-oriented businesses. It's -- we've had a really busy year. On the private equity side, we've, over the last 12 months, in a number of public to private transactions. You look at the S&P, you look at the markets and say, it must be a really expensive time to be deploying. But the reality is there's a real bifurcation in the public markets, right? You have 7 or 10 stocks that really represent most of the gain in the S&P. And half the public companies are just sort of drifting that there's a change going on in just the nature of the public markets. And if you're a small or midsized public company, it hasn't been particularly fun. And because no matter what you do, you can't really attract the level of interest. And so a lot of these companies are trading at reasonable valuations and actually more interested than ever in going private. And so from that perspective, it's been a pretty interesting time to be doing transactions. I'd say the other theme before I get to some specific industry themes that's going on is, look, it's no secret, right. There is a massive backlog in the portfolio of the private equity industry, right? It's been -- you had 15 years -- 14 years of declining and 0% interest rates, which pushed valuations ever higher, allowed financing to get cheaper and cheaper and therefore, higher and higher leverage levels. So you have a, I'd say, a bloated portfolio of companies in private equity hands right now above normal where they would want to be on their realization curve. And these companies or these sponsors need to find ways to monetize. Now I'll start with the premise that most of these companies are actually really good companies, right. They are good companies, they were just paid a price for, in a different valuation environment, that we're probably not going back to. And so it's been tougher to sell for a lot of these sponsors. So that means they're holding it longer. If they're holding it longer they want to start figuring out ways to return capital back to their LPs, right. And so that could be structured investment for our hybrid business, other businesses. Or it could be a situation where you're holding it longer, you have equity value, maybe not as much as you had hoped, but there's equity value in there. But because of the rate environment then versus now, you have a refinancing coming up, but you have too much debt, right? So you got to pay some of that debt down in order to get to the other side to unlock that equity value. Again, a perfect example for hybrid-type investments, structured investments to be able to come in. So we're having numerous dialogues. We're doing deals that really allows sponsors to either return capital to their LPs or deleverage in order to get a refinancing done. And so that's been an incredibly active theme. And that's -- regardless of where rates go over the next 6, 9, 12 months, right? They're not going back to 0, right. They're going down 50, 100, 150 basis points. It's still a -- it's not going to change the fundamental valuation environment and the leverage environment for a lot of these companies. And so that's the opportunity set. As far as some of the macro themes around, yes, decarbonization, deglobalization, these are -- and digitization, right? These are huge themes that we are investing behind across our entire platform. Our infra business, our climate business, our private equity business, our private lending business. All of this is really lining up thematically behind a lot of that because, like I said earlier, so much capital is required to support these trends.

Got it. Maybe kind of similar topic deployment and let's talk about Capital Solutions for a minute. The business reached a new record in the second quarter. It seems like deal activity has picked up since then. How is the back half of the year shaking up? And how do you think about the potential of this business to keep scaling over the next few years?

Yes. Well, you're right. Q2 was a really particularly great quarter for our ACS business. I think the back half of the year, as we've publicly predicted, it will be a more normalized level. But again, going back to that Investor Day from 3 years ago, we were running a Capital Solutions business of around $250 million a year. We predicted $500 million by year 5, we achieved that last year. This year, we've indicated a number around $600 million. And again, I hate to be a broken record, but you'll see in a few weeks at our Investor Day, a new set of forecasts that show you where we think that business could go. But again, spoiler alert, it's going to be substantially higher than it's running at today. The -- fundamentally, as we continue to grow the types of assets that were origination, the volume of assets that we're originating, expand our syndication capabilities, this will fundamentally continue to grow in a pretty meaningful way and in a very repeatable way. That $600 million I referenced, that represents a couple of hundred transactions. That is, yes, there are a few big transactions that might pop you up in any 1 quarter. But the steady progression of just the volume of the business moving through is just a pretty interesting stairstep to see. So we see more and more of that. And the only other thing I'll say about ACS, and we'll talk a little bit more about this at Investor Day, this room, this crowd focuses on it for its revenue potential. But from my standpoint, the most powerful thing about our ACS business and what we've built there, is the flywheel effect of the client, bringing in new clients, right? So we have many, many clients that started out just as -- we sold them a piece of a transaction. We syndicated a loan to -- a piece of a loan to them, and we did it again, and then we did it again. And then they said, well, this is a really interesting stuff. You guys are producing interesting stuff. Can I get an SMA or what type of funds you have? Maybe I can put some more [indiscernible] so I get a more regular flow of this. And we've converted many, many clients from a transactional client to a fund fee paying client. And that is really the power of this ACS machine that allows us to continue to expand the type of clients we would touch and over time, bring them in as more recurring clients.

Got it. Maybe one last question on the asset management business. So traditional private equity is -- seems to be less of a key growth driver. Your performance there has been quite good. How should we think about the evolution of that franchise and maybe some of the newer equity adjacent franchises longer term within Apollo?

Yes. Well, look, We're nothing if not consistent. And our philosophy of a value-oriented investment strategy has really stood the test of time. And so our private equity business, I think as you rightly point out, the performance there has been quite good because we've stayed true to that value orientation, and we're not suffering a lot of the pain that I think the industry is, or maybe hasn't admitted yet, but will be suffering as a result of kind of chasing too much of that growth at any cost over the last several years. All that, it was sort of lonely in the wilderness for a decade, staying true to that value orientation, but it has served us really well. As we pushed into adjacent strategies, that theme of value orientation carries through. And so in the last 5 years, we've started a number of businesses, infrastructure, climate, secondaries, hybrid has started a little bit before that, and that's now in, I'd say, the medium stages. But a lot of these earlier businesses, we are huge believers in, but it takes a decade to grow a franchise. And we are -- we've put the investment in, we put the time in. We're now at Fund II and Fund III of many of these things. And I think you'll see we'll lay out some very specific thoughts on what that looks like at Investor Day. But we're -- the next 5 years, we will be reaching the fatter part of that curve. So pretty excited about it. And from a timing standpoint, sometimes better to be lucky than smart. But things like infrastructure and climate, everything we've been talking about all morning, right, is pointing towards the need for more capital there. So we're feeling pretty good about that.

Great. Now let's move over to the private wealth side now. Maybe just to start, can you give us a bit of an overview of your semi-liquid retail products, how your offerings are differentiated from your competitors? And maybe what other strategies are you looking to bring in the next couple of years?

Yes. Yes. So again, this is one of the building blocks, one of the key building blocks that we pointed out 3 years ago that we were going to go build. I mean, 3 years ago, we had virtually no wealth business to speak of. We had just gotten into that business. We've invested extensively in this. This is a truly a huge opportunity, and we can talk a little bit about that in a second. But I think at this point, it's well understood by the marketplace just how fundamentally game-changing the wealth market can be for alternatives. And I would say, in these last 3 years, we've added close to probably 200 people who spend most or all their time in the wealth space, in some form or fashion, in the distribution of wealth. That is a huge investment, a huge undertaking. And as a result, this is not -- you're not going to see 100 companies, 100 alternative managers that can enter and be active and be meaningful in this space. The upfront investment is just so massive in order to do that. So I think you'll see under a dozen companies really sort of dominate the alternative wealth space. And really, you have 3 or 4 -- like any industry, right, 3, 4, 5 are going to garner the most market share in that. It's our objective to be top 3 in pretty much every product that we operate in. And today, from a standing start 3 years ago, today, we have 10 products in the semi liquid category. We're selling about $1 billion a month across. We think we have a pretty full lineup now across credit, real assets, infrastructure, equity. So we're pretty pleased with that. I think the pace of bringing 1 or 2 products out every quarter will probably slow down now that we have the products we want now. It's about pushing sell-through and really starting to get these things to scale in a much more meaningful way. And so that's the opportunity set, but we're pretty pleased about it. As far as I think the last part of your question, you asked some newer products or some things we're doing. Earlier this year, we launched a infrastructure product. So -- I guess he doesn't like what I said -- we launched an infrastructure product. That's -- from a standing start, that will be approaching $1 billion by the end of the year in that vehicle. This summer we launched our ABF, our asset-backed product for the wealth market. We have enormous interest in that. That is starting to really scale in a much more meaningful way. And actually, next month, we will be breaking escrow on our secondary product. So lots of interesting stuff in the market, and I think we are only in the first or second inning of this global wealth revolution accessing alternatives.

Great. I want to ask you a little bit more about product innovation, but maybe just for AAA, you've indicated in the past, you think you could be your biggest product. Can you just give us an update on investment performance fundraising momentum, distribution reach, where are you with that one specifically?

Yes. Yes. No, AAA is doing well. Its performing exactly where we said it would. I think LTM is right -- a little under 11% net. So very steady. The whole premise of AAA was, it'll do 8% in a bad year, 14% or 15% in the good year. But otherwise, you're not going to see much volatility out of that. And so replicating an equity-like return, equity plus with really a fraction of the volatility. And that's performing exactly the way we would have expected. That product today, we're -- I mean, from a distribution standpoint, we're now on I think, approaching about a dozen global banks. We're here in North America, we're on distribution platforms in Europe, in Asia, independent platforms. We're raising, I think it's north of $200 million a month now from this and sort of growing pretty steadily. So feel quite good about that. Total footprints in the sort of mid- to high teens, billion dollars. So it's a great product and it's -- I think the attractiveness is being understood every day by more and more clients.

Great. Maybe one last question on the wealth side. So how are you thinking about the evolution of product wrappers and structures to access a broader swath of the retail market? I think even earlier this morning, you announced or filed for an ETF with State Street, maybe correct me if I'm mischaracterizing that. I had just a minute to look at the announcement. But -- maybe if you could talk about that announcement and then your kind of high-level thoughts on the evolution of product design and the wrappers?

Totally, totally. And just to respond -- so yes, this morning, State Street did announce it's -- or it filed registration with the SEC on a new private -- fixed income product, which will include some assets delivered by Apollo -- private assets delivered by Apollo. It's in registration. I can't -- it's in the quiet period, so I can't really talk about it. But just zooming out to your broader question, this is just one example of, I think, what you're going to see more and more of, which is other ways to deliver alternatives, other ways to deliver private assets to a broader swath of investors. Like I was saying earlier on the fixed income replacement side, it's not just institutional investors that are figuring out that they are giving up alpha by not being in private assets. But wealth investors want access to that too. Wealth managers want to provide that to their clients. And you're going to see continued ways of access. Everything we've been doing so far has been -- if you think about the pyramid, right, the ultra-high net worth and the high net worth, then the qualified purchaser. Well, how do you reach that bottom [indiscernible] mass, right? It's probably not going to be in a very meaningful way, firms like Apollo selling directly to the mass that's going to have to go through other products, partnerships, other -- partnering with other long-only type manufacturers. And there's just a lot of -- I mean you can think about whether it's the DC and 401(k) market, whether it's the long-only fund market, ETF market, these are all ways that I think you're going to see over the next few years, just more and more products, pushing into that to -- on the fixed income side, because that's where it's easiest but eventually on the equity side as well, where you're going to find investors having more and more interesting ways to access private assets. Just by way of this concept of convergence, and you're going to hear us talking about this convergence more and more. I talked about the fixed income convergence. Just think about equity and equity convergence, right? You've got -- over the last 20 years, 8,000 public companies going to 4,000 public companies, right? You have -- the S&P being dominated by a smaller and smaller, you're trying to create a diversified basket of stocks through an ETF or something. But you're really just getting more and more concentrated. You have active managers who have struggled to beat their indexes for a long period of time. Public companies, all public companies in the U.S. represent less than 15% of employment, 15% of GDP, right? You're not getting a representative swath of the economy. Private companies and finding ways to access private companies, not necessarily as private equity, right, because that is a levered higher return, higher risk strategy, but finding ways to access private companies in a thoughtful way for the public consumer is definitely -- you're going to see that over the next 3, 4, 5 years, more and more ways to be able to do that. So you have that on the fixed income side, you have convergence on the equity side. This is all coming. And whether it's the State Street structure or others, you're just going to see more and more access points, if you will, through different creative structures to allow individual investors to access that.

Great. Well, we're talking about retail, let's pivot over to Athene perhaps. So how should we think about the potential inflow profile in 2025 versus the $70 billion target for '24? Retail makes up the largest portion of that. And then retail, specifically, can you talk about increasing competitive pressures on the annuity side, the extent to which a declining rate environment might impact demand? What are your thoughts there?

Yes, yes, yes. And -- sorry about the broken record again, but you're going to see a lot of detail on this in a few weeks as we really roll out our forecast for Athene and where that's going and some bridges of how you get there. I will say though, at a high level, right, Athene has been growing double digits for the last decade. Last 2 years, we actually had insanely strong growth, 20% to 30% type growth, which is abnormally high for this industry. But fundamentally, annuities are an attractive product for retirees, for savers. And it's only becoming more and more. So the need for guaranteed income, the need for safe recurring income is only growing. The shift in rates, the massive shift in rates, did bring a whole bunch of new entrants into -- meaning consumers, policyholders, into the annuity environment. We've just seen when a consumer enters the annuity environment, they stay there. Even as these things roll off, they'll keep those dollars in the annuity space. And so it is -- it is pretty clear to me that the annuity market continues to grow pretty handsomely. That Athene continues to grow share in that annuity space whether it's through adding -- continuing to add selling agreements with more and more banks and other channels and then selling through, it takes several years to ramp up to sort of full scale through a particular wealth distribution system. So we see a lot of runway ahead of us from that standpoint and feel pretty good about it.

Maybe just thinking about growth. Can you unpack a little bit about the opportunity in Japan, how that opportunity has evolved? It's become an increasingly prevalent talking point from Apollo. How much could it eventually contribute to Athene? And maybe what's kind of driving the evolution in that market?

Yes. Yes. Look, I mean, the need for attractive excess spread, safe yield exists everywhere, right? And Japan is sort of the poster child for that. And so we started pushing into that market a few years ago. Today, we're up to about $7 billion -- I think last year, it was about $7 billion of reinsurance into the Japanese market. That -- we see that over the next several years, growing to $10 billion plus -- just keep growing. There's just, like I said, a real need for this type of safe, safe return in Japan and nothing from our mind is going to really slow that down.

Got it. Maybe just talking about the balance sheet side, thinking about credit risk. So one of the fears we hear from investors is that directly originated private credit on insurance balance sheets haven't been properly tested in the cycle. How would you respond to that concern? How do you think about the performance of Athene's balance sheet, could look like in a more severe credit cycle. How much of the balance sheet, I think you mentioned earlier, it's about 1/3 directly invested in Apollo privately origination assets. Is that the right kind of way to think about what it looks like in the future, too?

Yes, yes. So a lot of this comes from -- well, private credit -- is private credit risky? Is private credit not risky? First up, the thing to remember for Athene, 95% for Athene is fixed income, 90% of that is IG fixed income. So Athene's got a predominantly 90% IG balance sheet, right, which -- okay. You can start. That doesn't mean it's nothing bad can happen, but it's not the type of private credit that you read about some crazy loan originated by so and so that has all these pick features and this and that and whatever. This is IG. Secondly, I mean we, Apollo, built the entire sort of asset side of that balance sheet. So we know everything that's on that balance sheet. And have been very -- whether it was directly originated. And in total, when you include all we include some other asset classes, about a little less than half, about 45% of Athene's balance sheet is originated product from Apollo. The other, a little more than half, is a secondary product that our traders, our asset managers put on the balance sheet. So again, we understand the credit profile of that balance sheet very well. We've had a couple of tests along the way. Yes, we haven't had a GFC yet. But the 2020 COVID crisis was a great little snapshot at least for a month, as to what that could look like. And we came through that with flying colors. Obviously, when rates move 500 basis points over the course of a year, that put pressure on a lot of other people's balance sheets. We knew exactly what we had. So again, I feel incredibly good about the strength of the credit profile of the Athene balance sheet. But you're not the first person who has made that comment to me.

Yes. Maybe one last question on the Athene side. So can you talk on the financial side, can you talk a bit about the guidance revision from the last quarter? What kind of gives you confidence that you can return to low double-digit SRE growth in 2025? Again, I'm sure we'll get more details come October. But how should investors be thinking about the potential to kind of return to that growth profile that you've indicated?

Yes. Yes. Look, as I alluded to a couple of minutes ago, the annuity market continues to grow, continues to be very robust. Athene continues to take share in that market. The -- in addition to that, new product development, which we'll detail on Investor Day, whether that's pushing into D.C., altitude, other products that -- guaranteed lifetime income products, there's a lot of top line building blocks that we're pushing towards. Obviously, we're heading into a rate down environment, what that is. I mean, I'm not going to predict. Feels once again, like the markets ahead of itself, but on what it might be. But regardless, the 2 things to sort of significantly mitigate that, one is, we took a bunch of pain this year to put on a massive amount of hedges to really protect ourselves from future rate down. And I would say, secondly, there's enormous management actions that you're able to take in a rate-up environment but then differently in a rate-down environment. And as the ability to reposition your book to take gains, use those gains to make reinvestments. Like there's just a lot of levers to pull, if you will, in the system to be able to drive back to that historic trajectory of double-digit growth, we feel pretty comfortable about that.

Great. Well, we're just about at the time, so we'll have to leave it there. But Scott, thanks so much for being with us and looking forward to seeing what else you have for us come October 1.

Great. Thank you so much.