Question-and-Answer Session
Operator
(Operator Instructions) We’ll go first to Andrew Kligerman with UBS.
Andrew Kligerman – UBS
Good morning. A lot of good color around RBC and cash at the hold co. Could you put that into context of what you deem to be excess capital at this point in time, and what your plans would be with respect to paying down TARP, maybe a time line?
Dennis Glass
Andrew let me take the second one first. As a matter of practice, we don’t discuss the specifics on capital raising events, so we can’t give you a time line. What I can tell you, as we’ve been saying all along, is that the milestones repayment that we need to see achieved, are a clear, sustainable recovery, and normally functioning capital markets, and that our goal is to repay in as cost-effective manner as we can, and as soon as we can.
I don’t think at this moment in time we are convinced of the milestones, and so we’re going to continue to pay attention to what’s going on in the economy and capital markets, and continue to plan accordingly. I’m going to turn over the excess capital question to Fred.
Fred Crawford
Sure. Andrew, first in terms of the notion of excess capital, my general philosophy on that is, there’s a difference between excess capital and capital cushion. Excess capital is capital that you have available to return at any point in time, or use in a strategic manner at any point in time. Capital cushion is where you’re holding a level of additional capital in anticipation or at least in defense of what maybe weak conditions in the economy or so forth.
What we try to do is target in and around 350% or better risk based capital, and as I mentioned, we’re traveling around 400%. The numerator and denominator in that calculation would be, rough just a little north of $6 billion of total adjusted capital and a little north of $1.5 billion of risk based capital in the denominator. So you can assess from that a level of capital cushion if you will, in our RBC versus our targets.
At the holding company level, we are obviously in a strong net liquidity position, which is going to be our matter of practice going forward. We’re going to carry a level of excess liquidity at the holding company for financial flexibility going forward.
- To read the full transcript on Seeking Alpha, click here »
