FG - Earnings call 2 2023 | F&G Annuities & Life, Inc.

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Christopher Blunt

[Audio Gap] And we've generated record gross sales, whilst maintaining pricing discipline.

Our gross sales were $6.3 billion in the first half, up 11% over the prior year. We're on track with our stated goal of growing annual gross sales at a double-digit clip. And with net sales of $4.4 billion in the first half, we are on track with our stated goal of managing net sales retained above the $6 billion to $7 billion annual level that continues to grow our retained AUM.

Next, looking at the quarter's results more closely. a of X% in quarter reflected from lumpy the sales sales a second due a gross the U.S. of institutional of over market sales, decrease the with the record reported level $X quarter, boosted the billion quarter, to sequential of We first decrease by which effects X% prior and year volatility crisis. bank regional quarter quarter, billion sales channel were second XXXX. Retail in increase $X.X X% over in second $X.X of an the the of billion This by demand retail billion, products. reflects quarter sales channel of our fifth continued consecutive exceeding $X for driven consumer strong our Fixed annuities and an solution accumulation annuitization growth, guaranteed their for consumers are higher rates, relatively tax-advantaged attractive protection options. and principal given

bank compared Our second in sales mix the consistent to the was agent, broker quarter and the across as X year. including prior dealer channels, retail

Institutional quarter second issuances. funding quarter transfers compared agreement in in the million second market for comprised pension the market agreements. activity $XXX $XXX challenging in by of to notes million were sales risk funding million driven conditions comprised of of as agreements XXXX, solely current was transactions funding $XXX remain and million agreement-backed the FHLB Funding nearly nearly of quarter $XXX second

billion target this $X For months as compared flow expected September management to billion ceded. net billion profitably billion net annual the F&G's market $X.X trend billion $X at its to flow estimate and track first for to of third-party assets on That $XX attractiveness sales XX. at in before reinsurance, brings with billion. to a XX% the reinsurance, retained we of retained quarter were the go, months as the approximately cumulative of $XX XX% second assets is new of June flow under of quarter. sales gross reflects reinsurance. Adjusting XX prior business the for in of F&G X our year XXXX. has This management $X.X from XXXX, grown with X June institutional increased our to record $X.X we billion under of of are MYGA which sales

turning investment Next, our portfolio. to

conviction our to withstand the extensive and perform cycle positioned We through given uncertainty expertise. portfolio that is diversification its the to and environment Blackstone's continue have macro in well

higher yield reflects in in the second and on driven volatility by past our yields assets maintaining Our fixed income over year. XXXX. the floating X.XX% given rate of excluding above yield as This fixed quarter rates alts consecutive X.XX% second higher was quarter, fourth interest to quarter the income compared of investments relatively new X%

quality, points past below to quarter. our basis X and profile. to pricing assumption matched level clean liability over well real portfolio has Our Credit-related skews toward with and maturities impairments averaged being portfolio in is high remained the investment of our well X below XX% estate the our that change no perform industry second Overall, years, commercial last from quarter, and There the stable holdings have is well and of end office fixed our exposure. continues which lower been grade. in

assets above is We one. ROA points Our on XXX spread-based business a a AUM. return our simple target on basis or

fact, Excluding last X quarter well the basis over significant basis consecutive ROA, above have items sixth averaging now significant our target, adjusted our excluding items, of point we XXX points, in quarters. delivered XXX

owned into diversifying fee-based capital-light distribution. reinsurance including earnings, spread-based Beyond we and earnings, flow are further

while capital We the lower to which provides utilize capital returning retained business ceded business. a requirement reinsurance, new flow highest on allocating

earnings accretive cash provides flow, a enhances minutes. to few Wendy addition, in F&G's fee-based the strategy and further provide returns. will In is perspective

segments. in key underserved, we while of with for our This solidifies middle a boosting our relationships expanding have decades been worked insurance We couple market holdings. own strategy have presence distribution with partners that multicultural also and

our capital. plays strategy Over key of a helps providing lower time, marginal expertise stream the F&G will at these their cost from higher a our accelerate earn stakes, and to dividend growth. team, management companies within ownership experience to which for Importantly, margins

power distribution earnings accretive We strategic-owned we primary stakes strong we're to streams companies the the and expected of the our upgrades these is over financial to ratings and committed be capital-light are of value Moody's which business F&G also strength outlook positive execute ratings achieving recognizing from A.M. upgraded and strength Best, to growth that We diversified on remain strategy. last to time. ROE. F&G's operating month, pleased financial AX of as stability on F&G's with

all doubled gross for FNF adjusted team execute with and growth items our before nearly reinsurance to on done thank significant net our X to excluding diversified like merger earnings, AUM ago. that they years since have having I'd the strategy, doubled

Our be possible not success without them. would

and on have focused the us we drive of further value ahead to improved we with And strong We into our as head momentum to second our half the delivering expansion opportunities shareholders. many of business, remain which returns. ultimately year will long-term margin expand

Let me to F&G's call Young quarter highlights. details provide further financial second the on Wendy now turn over to

Wendy Young

more about drivers, leverage wrap up reinsurance and and results additional Thanks, positions strategy. on with our thoughts a I'll financial provide liquidity Chris. our capital details Today, few performance and key

proven execute quarter to we second capitalization and and successfully strategy. Overall, growth and strong to our performance was builds strong record, continue our F&G's track financial in have flexibility financial the on

adjusted with earnings. net Starting

million XXXX, of quarter second $X.XX we reported share. the adjusted net earnings For or per of $XX

$X.XX, income. our after $X.XX of unfavorable core share consistent bond per not $X.XX returns alternative earnings share for per These are significant of share investment expectations to period. significant were below by prepay adjusting items long-term offset include $X.XX per period share partially per that for items Our

periods, quarter of earnings year's favorable or net significant Adjusting quarter share For of analysts also investor and XXXX, both per disclosure presentation. with quarter per over comparison, in and XXXX first items X-K the that investors these of XX% second financial included I adjusted $XXX an supplemental XX, share. by supplement to a $X.XX provide wanted last prior million year. our second filed July highlight net earnings increased on and adjusted items XX-K significant $X.XX F&G for to

A&E recast market-related period line standard movements, this We market prior with peers. calculation income. adjustment believe in our revised approach for current F&G's all from of for refinement accounting be to risk the including benefit remove filing LDTI to This

a in had benefit modest net years. is change to and adjusted first This in favorable our expect results, earnings, persist which future XXXX half to in reflected we XXXX

time. Importantly, consistent F&G generated over has economics

of excluding As adjusted X has significant consecutive points, above Chris mentioned, XXX ROA basis quarters averaging F&G basis XXX items, delivered points.

our flow quarters. by at maturity of management cash This of past outflows. looking with our expected quarter, new book, be asset dates These asset business up Now our $X.X $XX.X growth, second retained results were billion XX, saw predictable of couple reinsurance inforce as inflows XX. billion under with $X.X more to billion from products quarter, With to closely over partially billion set and as are reflects March we assets starting the the this outflows of offset on June from regard flows quarter of net in at line right origination. in lumpy MYGA and contractual depending $XX.X time

to annuity and also past death During quarter, withdrawals outflows fixed compared slightly surrenders, combined indexed as elevated couple were saw the of quarters. we for second

to strong notably, we market and continue not inflows. Although concerning experience conditions given

serve comprised adjustment XX% with annuities to features account of surrender value surrender a approximately as retail roughly fixed at also surrender-protected value for X% net of reserves an are protection. market early. annuities Our remaining disincentive these of total and fixed our of policies XX% policyholders have charge which and average policy XX% have

surrender net charge inflows. capital have boost to continues reminder, surrenders. benefit disciplined next, And positive the turning and F&G fees to our we freed-up a from Overall, from as earnings from management. higher policy a expense And to

business more and X than doubling flow and tripling modernized grown, AUM its reinsurance. years, Over while gross sales its the has past before diversified F&G topline

to disciplined under We are by expense it gross to To our growth CAGR put our on before operating focus approach assets sales in perspective and CAGR. management help gross and flow in XXXX XX% management assets. and XXXX, we a by XX% relative sales in grew from reinsurance expenses

expense significant in make operating that of by To a needed other costs net platform increased and our expenses from partners CAGR. generate and investments operating deferred allowances acquisition costs personnel we growth, and XX% to reinsurance

expect would base will about our as to in sales, gross of continue increase line are cost a as grow generally roughly which which are our operating with we to X/X expected variable ahead, Looking at expenses, well click. growing our in-force book double-digit

will operating growth grow which We at that that $XXX basis single-digit are also on our expenses, base approximately or parties. about expense expense million through of cost a we expect the annual policy reserve over reinsurance time an under expect or flow our And rate. in other benefits reported changes fixed of benefit our separately are increase item generation cash will to line reinsurance and third as that allowances X/X reimbursements

operating leverage the continued our All will in, allowances, and relative from that expense as in the we a time generating at to management slower growth business, costs with albeit rate reinsurance over before under grow gross a continue flow scale sales our we gross and assets reinsurance the to measured benefit and expect invest at thereby operating pace.

turning interest next, to expense. And

XXXX and into the or facility Our the of half on X points needs. drawn to ROA the XXXX. basis million to reflects million compared in our XX senior $XXX in months credit $XX first note of which million put to place our support the $XXX basis points has first first XXXX and interest $XX new quarter increased as of in in of was growth issuance XXXX quarter future of ROA million as This expense planned fourth or of liquidity X revolving

June million of outstanding. annual on a blended XX, of $X.X $XX debt-to-capitalization excluding as expense ratio, F&G's X% XX% Our interest of below was XX%. billion yield debt our the AOCI remains approximately roughly target total long-term or

ended outstanding $XX.XX $X.X share value of million book XXX our analysis of turning June XX. presentation AOCI of share. quarter page There the investor billion our a with with to We or as providing book per value, common shares a balance Now is in an sheet. excluding second GAAP per

to invested coverage. at cash holding company target and We fixed assets charge continue Xx

and Our strong distributable capitalization supports growth cash.

share returned quarter, to $XX repurchase for During an dividends XXX,XXX $XX repurchases. repurchased million second million share million second of quarter, F&G the was per common approximately million million remaining average authorization XXXX. at including of of shares we $XX $X.X at June Capacity $XX.X shareholders, In $XX.XX capital price million share. of and XX, the under $XX the

share, of based billion of approximately current value annual our demonstrates of announcement F&G's on business strength $XXX for $X.X to capitalization into commitment well as approximately a as dividend in the of our third and creating approximately our yesterday's sustainable. translates This the as recent view of shareholders. market million X% dividend cash underlying our $X.XX quarter Following per yield common we dividend

flows, book cash our to to is The and sheet continued uses available debt quarterly is alternative to increase capital reviewed over subject growth well opportunities dividend growing expected in-force for value balance fund F&G delivers and as program. positive with capacity positioned conditions. over of and and growth time ample reinsurance its capital time, generation, market future with

an Let update me flow wrap on strategy. reinsurance up with

new ability to is quarter, not especially with flow generate asset for illustrate and last for the attractive shared of Chris As asset from to F&G. economics fees paired premiums them our on the third-party who are to the an business means insurer to managers, take growth platform those generate a as

of amount meaningful business is This that flow highest our reinsurance, in-force million estimated of help from billion that the approximately generation up $XXX to is in the XX% we $XX in XXXX. capital $X redeploy every block and put business. nearly to entire million to of retained new perspective, free returning For capital

excess with continue are the gross inflows, growing long In at grow estimate still Importantly, capital. our to are a spread, we expect retained smaller sales as but grow block. net albeit as level sales managing sales in this of to We significantly little clip that double-digit $X billion outflows, a a as grow less sales billion that at scenario, we with $X to gross of we retain net could continues AUM. to while to as retained well required

we XXXX, level XX% reinsurance expect to additional new parameters, the these current increase high-quality established on and XX% by our onboarding during flow partners. much business from the as to second of Within as flow half MYGA reinsurance

fee-based provides a generating reinsurance than ROE retained flow also sales. MYGA higher while fully Importantly, earnings

approximately the Additionally, spread-based X/X on which fully ROA with X/X capital would expect contrast point for ROA receive thumb sales our of the we requirement. business XXX for based of could in basis rule or reinsurance less economics, change, the retained about proportionately current to of to

quarter. look half and We forward to I details of for are our reinsurance 'XX, providing well further into flow next opportunities the execution second of

our prepared and turn to concludes This our remarks for let call the back operator now me questions.

Operator

Mark comes Securities. first Truist Instructions] Your Hughes question with [Operator from

Mark Hughes

to talk about of digits? would you about number? thinking low you're block, you of the be retain grow Or block? what's that grow $XX rate billion, just when that When Is kind sufficient right the if are offset you growth what outflows, do talking single the

Wendy Young

it's digits, say, on upper but would single I end. the

Mark Hughes

under excess reinsuring the circumstances, capital is you're retaining capital of a thumb single-digit rule of kind in -- about Okay. those get And you're of of the kind the to capital XX% enough return MYGA or if a if generation, block. there growth

relative you what say, capital does to for as -- return? usage, improves your that Your capital ROA your profile mean

Wendy Young

Yes.

time. the able increase So we be dividend believe over we'll to

Christopher Blunt

are on ROEs flow that. is meaningfully business. the right would And at only pretty I is north now, economics Chris, thing The that business to getting on we're mid-teen that, new of least new this add

show relatively terms will quickly in expand this its overall think spread. of we up net to So ability

Mark Hughes

Chris, but still quarter, quite strong digits. terms, mid-single year-over-year, absolute the then, sales up in this And

the probably, to situation? growth suggest as quarter? -- the not a overall attractive Did again, growth rate, what's but I was you think criticize dynamic the that's was good I what quarter? numbers industry the higher think this this not just this quite competitive that. sales Was was MYGA And than somewhat

Christopher Blunt

Yes.

So terms seeing of always products There's you it. in aggressive to nothing say, of not go environment. I really you're choose chase no, competitive perhaps pockets someone where bit changed a be and would has

where of us, allocate across think all deciding -- when I look channels capital. for to it's we now the

for continued borrowings, cetera. to mind, have keep targets in also et We've quite business. return say PRT us be writing would But I no, attractive. got So we're FHLB

absolute to So looked quarter-over-quarter But pretty in keep it the capital. want an we we mind, just process, real where through -- quarter. we a The go first little it's like had allocate we time slowed just of blowout bit.

pace now, to our billion a $XX business on sales do retail its So right is own. on of

So sales right opportunity of no, now. we're just tons feeling like there's

Operator

Instructions] [Operator

A.J. from Next question comes Hayes with Stephens.

Austin Hayes

Chris your the normalized your And said, out at back basis Wendy, any ROA, XX% approximately when been quarter, on look ROA we out alternative points Congrats called or long-term other this X return of both guys prepared as now. but your consecutive has remarks, you one-timers, on over your expected and XXX during utilize for assumption assets. we you quarters

to what this then of is But that. should outperformance? you XXX generally So points expect the first foreseeable here? we above kind off, can for talk congrats on trend to hovering of And driving whether future continue this basis

Wendy Young

points we're owned the and where help expanding that's you Yes, for trying to give some and the distribution. discussion some reinsurance with modeling

above a in And You should that the experienced. -- existing interest A.J., to run-up how NII seeing demonstrates currently expand had business. see floaters We've rates, in the we that the spread -- performing with has expansion exhibit are the that the we We're ROA that line. well. we the even contributed the QFS, show very levels in nice

the what's causing expansion. margin but cost funds, some of is product had that the in have We increase basically

Christopher Blunt

talked Yes. pretty topline is, thing we've on to we only I'd incredible at I the which about grown the a And clip. mean, call, the that add

the know, years effectively in rate a you X%. But grown now words, new expenses As that to think investments some of pretty look, good that. despite was see channels doubled earnings upon still getting should we've expense some synergies. grown And I well at technologies going X and execute goal other fixed we've at. sales forward. we've we've new and what more to assets had that, In significant we're below we And make when in

it's board. across the really So

are continuing as terms said, the Wendy additional forward, portfolio manage than straight would it's for continue XXX tightly to working And it's points XXX with Blackstone a that basis there growing. a fixed to say, have growth investment hard we we've is I spread attractive then good as more that. generate margins, pretty picture. has team job say done to product think in going been the of expense for I our And a tailwinds with terrific averaged to when goal yes, and headwinds face us

Austin Hayes

track your I But it these color more you transactions sales XXXX far so of in lumpy mentioned quarter? hitting that of more the to any in was achieving Chris, $X could goal here. on here believe billion $X you're XQ? you of Have billion to you during Great. had institutional institutional provide

Christopher Blunt

have. We

X we transaction. or I'll So good. $XXX is closed it million double check, was so. Pipeline

on to sophisticated to decided want an activity. narrowed like go in continue hit team after. we lower-rated we despite, deal. impressive on asset the our after that we've and There's in it and being think even good We the really to even -- market line But and lines uses lot. a We've players the we quite profile of of the do had X a the bid selective once deal. on really the and market. We a up funnel what X with effectively on one lot we well It's rate of we've like it. a assess availability, We're sight competing go frankly, of

a see that the like profile we it's small a there. team. upside So And of long We lot duration but business. mighty of

And people bringing about got about sales. are leverage, we this talk a so of in these we billions a expense effort, dozen of leading assets, group

that positive all contribution So around.

Austin Hayes

strong. sales looking at institutional just been has gross here, channel then And Okay.

Retail You achieve well that expect been channel goal as to I well that previously performing there. has just mentioned here.

the in here hit XXXX? strong expectation reasonable maybe year again kind Can expectation is we're clip a XXXX? for You double-digit where sales Is the talk you expect gross So in to that of XXXX. expecting. XXXX a to in

Christopher Blunt

that's the entering avenues RIA and a of it which well. would really to think products market, close the be will pockets new and in attractive. We've us, for about I other PRT. Yes. We got I up of talked is. think distribution I open to We're going say, lot as works

I off is there's charts now. tailwinds you just then right there. some annuities, numbers certainly, referenced demand the of retail fixed industry think And for really the

crediting principal looking You're at guarantee. rates percent deferred of with tax X-ish

So our is again, now sourcing most really cooking important new I engine from down And don't I it's job And along business behalf see for -- honestly allocate got us, premiums a we've smartly. of anytime soon. view that slowing that's to capital in -- directions. we shareholders multiple on don't our

to will So we a double-digit the continue topline -- continue expect to yes, at grow clip.

Operator

floor for the back to Blunt like now would turn over remarks. Mr. to I closing

Christopher Blunt

Great. overall macro volatility think current this environment. We the to despite Look, in the results pleased is environment F&G of we're uncertainty a rate the in to start is year. strong first half and higher in our off with poised benefit and the

a We which on over expansion profitability, time value expand to expect multiple to focus we shareholders. further business drive improving deliver with our our believe will to

Along strategies emerging in these our we upcoming discussing at and more forward look October detail on lines, Day business growth our X. Investor to

investor the site Additional closer be on event. get we information as our will provided to

Thanks your F&G. for we appreciate interest joining today, us in and

Operator

Thank presentation, call you attending concluded. for conference today's has and the

You now disconnect. may

F&G Annuities & Life (FG) 9 Aug 232023 Q2 Earnings call transcript