“We expect to maintain our 2 year average free cash flow ratio of 65% to 75% of adjusted earnings, excluding total notable items.”

In context

“near-term outlook. We assume COVID-19 to be endemic, consistent with the recent trends that we have been experiencing. We expect continued uncertainty to persist around inflation and a potential recession in 2023. Based on the 12/31/22 forward curve, we expect interest rates to rise in 2023. Finally, for purposes of the near-term outlook, we assume a 5% annual return for the S&P 500 and a 12% annual return for private equity. This is consistent with our long-term historical returns for PE. Moving to near-term targets. We are increasing our adjusted ROE range to 13% to 15%. This increase of 100 basis points from our prior 12% to 14% ROE range is a function of the growing impact of our mix of business and higher new business returns over the last several years as well as the impact of LDTI. We expect to maintain our 2 year average free cash flow ratio of 65% to 75% of adjusted earnings, excluding total notable items. Our direct expense ratio guidance for 2023 is being recalibrated to reflect LDTI by approximately 30 basis points to 12.6%. This captures an approximate $1 billion reduction in adjusted PFOs, excluding PRTs, due to the change in accounting. This is primarily related to certain annuity contracts within RIS as well as shifting certain variable annuity fees to market risk benefits, which are reported outside adjusted earnings. Since this change in accounting to LDTI will be retroactively applied back to the beginning of 2021, our previously reported direct expense ratios will likewise be recalibrated to put 2021 and 2022 on the same basis as 2023 and beyond. Our VII for 2023 is expected to be approximately $2 billion after applying our historical average returns on asset balances. I'll provi”