FG - Earnings call transcript Q3 2024 | F&G Annuities & Life, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the F&G's third quarter earnings call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Lisa Foxworthy-Parker, Senior Vice President, Investor and External Relations. Please go ahead.

Lisa Foxworthy-Parker

Great. everyone. welcome, and operator, Thanks,

may Joining strategy. do statements me Please duty factors Wendy to to undertake Executive and performance. Litigation results earnings to Blunt, your under discussion do and the Private guarantee are Chief Financial future any Chris to Securities call or those revise from changes update a remarks. Today's events not Young, prepared or differ to forward Act recent following in new reflect Chief forward-looking that most Officer. implied. such refer statements questions information, our actual projections which for Officer; Reform SEC subsequent We or our materially today expressed include could not filings cause We addressing or the look of events

the also This non-GAAP release, been in may our rules that be measures we to within to CEO, are will available and Today's over is measures And accordance GAAP website. believe call financial have investor on the investors. on presentation, I'll company's where our website supplement required the and Non-GAAP SEC recorded call. now turn which webcast to reconciled morning's following available meaningful discussion with being our Chris for be financial Blunt. includes earnings of replay call all

Christopher Blunt

results. hard third of Good begin our growth us their morning, joining everyone. the for I dedication and work want to quarter that for business. discuss our to thanking employees has our incredible Thanks by fueled

our and to on track another proven record. quarter reported terrific continue have We build

year-to-date the year-to-date, X sales XX% of favorable conditions third in sales to gross and $X.X over the agency retail demand the and driven in $XX.X We Retail by quarter, for billion retirement Starting $X.X sales of up year the delivered double prior strong quarter, with up record quarter, XXXX. our market quarter, and over XX% year billion bank the surge, prior were F&G's from sales channels months third continue nearly savings retail products. a first $X.X sales. bringing to broker-dealer billion billion. strong

We tail, as secure offer. want growth that rates, our are a higher guaranteed the benefiting trend principal with and to deferred tax a products demographic from long protection significant consumers relatively

continue We strong term the near expect this demand to the in industry. across

quick a of broker-dealer the RILA, X successfully we distribution with a on As partners modest expect and update sales as of end of launched level XXXX. October, in have

size for distribution sales medium were we RILA the However, With of deal be quarter. partners. PRT sales additional we the million October, $XXX as over XXXX, we in average billions risk the exceeding and term add sales third first our and sales XXXX months with transfer billion Pension $X.X an now potential have XX generated up the of for ramp year to sales in see full million. the $XXX sales in strong of to continue over

Looking ahead funding. to corporate at continue of a trillion full pipeline $X.X with see near or healthy we plans PRT XXXX, pension to

move our more We million or as deal potential strategically upmarket targeted with billion to $X are $XXX size, positioned downmarket to in arise. opportunities to compete

of across the Funding year. no our quarter. $X.X the of half are allocation dependent over agreements first X% returns are a prior reminder, and $X funding increased products. on third in our based in Net the issued billion year there priorities were While we agreements the relative on quarter, opportunistic billion as capital sales

on question our is I'm sales. of cut, the September lower rates is asked Following what Fed the rate impact that one frequently

funds the interest demographics, rate Fed Perhaps rates, a market to trillion a $X cash recently, lot from lock annuities of in Consumers in sidelines. a of every more remaining have than the short-term money that to significant seen interest though, long-term more look higher Boomers provide. the XX,XXX important cut retiring we've relatively continue rates has tailwinds are Baby and more even rates and rates. cash than with to impact than on As long-term day parked

Importantly, of macro lot regardless sales the have opportunities growth, for environment. a we of

distribution to The still agents. are and with retail as our broker-dealer new breadth depth selling existing expand penetrate and bank adding to we is distribution continue partners new further of we partners. We new add and as going distribution

new RILA like We fast-growing products continue markets to new PRT. add and and enter

of XXXX. debt We assets the management and XX% flows the XX of AUM increase of third over reinsurance This over equity to growth XXXX. increase under billion, by $XX.X of at the the of before have XX% under new flow months. driven a the proceeds an grown was over quarter net third quarter, record business assets profitably quarter record billion management an included $XX.X retained end net and last

Turning to assets portfolio to was derisk to Since being varying and maturities market the investment-grade. Overall, XX% optimize of $X.X the conditions our improving portfolio. have well quality, the diversified, and repositioned perform selectively high while quality. portfolio than more also investment fixed of billion positioned with in we credit XXXX,

to expanded further X the from we Over years, diversifying XX our classes, last portfolio. asset X have

Our our liability are asset matched allocation well strategy remains profile. to stable, and our invested assets

investment than XXXX, investments. higher in yields from alternative variable yield volatility and X.XX% investment third on income, points Excluding income the of the third fixed XX new higher quarter, our basis benefiting was quarter

public of impact and Our the Blackstone which is mitigate between XXXX, pivot compression. helping spread pricing. private have first to below Through of to exceptionally year, assets, impairments credit-related low. the with basis the X averaged partnership months since X the our points Credit-related provides remained flexibility impairments

with residential, diversified like and Regarding the our sectors industrial. commercial multifamily real vast invested estate majority is quality, debt defensive, portfolio, it high resilient in and

than at is significantly less portfolio, the little average. industry have We of which below office X% our exposure very total

strategy. $XXX To our date, strong to the distribution in owned rapidly owners. generating consolidating distribution. and Next, have agent in distribution turning Independent returns owned invested million we for is industry

expect is $XX over double-digit and term. million well, and portfolio the $XX performing growth current annual EBITDA XXXX now of medium we to Our estimate million in

us of positioned remainder have XXXX. first Overall, the of F&G's X well year the through for months strong results the

We pension from strategies, and our strategies. in risk from have and to flow sustainable deliver enhanced momentum accretive ROA life reinsurance growth benefits investment growth diversifying focused expansion by on and asset driving and scale margin, our strong insurance and through long-term market middle distribution earnings transfer great from retail remain continuing growth earnings fee-based growth generating owned business

items to to We by XX%; towards continue ROE, out excluding Investor XXX the laid Day: adjusted progress and our ROA, good XX%; items, and adjusted XXX expanding our growing financial excluding to make basis XXXX XX% targets we points; significant medium-term increasing to significant AUM at to expanding multiple. AOCI

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

Wendy Young

and near-term income surrender by assumption expense as emergent shareholders floating rates. This share, million $XX well and focus Thanks, review, behavior, $XX well highlights and rate utilization common investments, redemption adjusted reflecting net as included updates rider alternative offset from to quarter, the benefit. assumptions on to of with million from valuation was hedging our $X.XX program, million gains CLO earnings, $XXX Chris. flow capital of million my million asset our for partially expected the earnings, morning, attributable net policyholder the bond This as $XXX allowance $XX on actuarial I'll third strong of and position. Starting earnings was comments quarter net recent investment following: and for updates tax as and reinsurance, experience surrenders liquidity GMWB assumptions for per prepayment the income including adjusted or for

Investment long-term income management's investments was alternative XX% from on and of approximately based return expected million. $XXX

points basis basis quarter. reinsurance of comprised of This basis X reflects owned items, accretive income [ Adjusted significant ROA, adjusted basis a significant up reinsurance points. in adjusted months $XXX quarter margin. of items, in quarter XX expense XX% XXXX points in items, XX was was over basis ] growth, to Adjusted last quarter, XXX ROA, management asset the from to third compared million earnings This the fee points flow distribution, over third the brings excluding the diversification net in expense XX increase planned interest points points the of points retained excluding third 'XX. and basis margin were as of result significant $XXX market up basis higher and capital flow million our XXX ROA XXX third distribution Excluding ROA, activities. of XXX and disciplined was owned and as of

confident and ROE in our ROA of healthy pipeline, to and environment, apart. assets, deliver increase our share and PRT multiples Looking owned and our reinsurance ahead, ability lower set our even I'm on flow we benefit expand grow a to accretive grow demographic F&G in Investor as promises rate distribution distribution which from through strategies, our diversify maintain win tailwinds Day spreads retail our

Turning starting to with quarter, flow some additional for highlights reinsurance. the

on for XX% FIA of best-selling flow July sales allows continue profitable light while flow MYGA existing to us expanding sales, have X accretive reinsurance we initiated reinsurance initiatives. This of one of for products, In most XX% addition meet capital flow and products to and of our reinsurance effective consumer demand X. to our our of

above flow capital reminder, net and needed in down a over us change threshold continue As up adjust of market retained sales are to reinsurance the level our as manage AUM. to grow economics the with we and time allows to able targets. line to our This

surrenders. to Turning

well continue to continues industry account outpace despite volume our steady to due our FIA the see new to business We refinancing record growth in value that terminations.

liability stickier free boost F&G, capital going older should earnings to and higher like surrender can improve up to charge result contracts. business This be in-force a forward. further For liabilities and that longer new the renewed that insurance in volumes companies from terminations [ deployed fees periods provide and charges surrender with ] profile surrender

charge annuities Our are fixed retail projected. XX% surrender

fixed X-year transfer Our quarter-to-quarter. surrenderable. agreements, maturities that typically not multiyear X-, our are annuities guaranteed having immediate X- predictable, risk annuities rate vary or funding are and pension contractual And

rate Moving floating asset to our portfolio.

hedged stability portfolio. of hedging, pricing. increased which have prior original X% discussed going forward incremental only predictability our XXX by X/X of our points in we floating on have total and yield are our earnings rate calls, As locking basis above we now of assets, Through

balance of the shareholders, share. Finally, attributable to F&G per sheet. common $X.X or billion AOCI, quarter ended with We $XX.XX equity turning our to excluding

ratio, of are quarter details our book per Consolidated the to XX.X%. second in was at capitalization Additional debt billion, provided investor unchanged AOCI, excluding share was from presentation. our and outstanding debt $X.X value

balance, with $XXX issued pay net senior $XXX we proceeds the used remainder corporate were million for our notes, revolver October, During to purposes. used fully being of general down and million

and to cash holding We the over capitalization, excluding at at target AOCI, term. interest XX% assets long invested continue Xx to and company coverage debt

we will Additionally, that expect equity shareholders' delever naturally balance AOCI growth. as excluding our sheet over time

focus cash through to allocation continued shareholders. deploying on investment our maximize as capital our well in business capital to priorities as shareholder Our returning value

F&G at capital self-fund issuances. with generation, scale allows us is our and attractive well returns, and positioned growth growth to in-force capital reinsurance to generate our markets

common to annual capital preferred We as million of commitment, over are and $XXX now regulators expected to maintain annual stock and most dividend continues by sustainable strong our requirements statutory four held as conservatively million balance time. support dividend on well is capitalization also which common dividend the sheet, increase the our offshore priorities our allocation capital across flexibility entities, Our all $XX including rating financial and FNF. the to our managed of F&G stringent agencies. feel

We the of subsidiaries. use and Iowa treaty U.S. all formal business approval new affiliated Notably, each reinsurance, for offshore our by requires our is entities in our originated only regulator.

similar have companies. entities offshore and for as practices our operating reserve onshore management our We risk

quarter on well positioned the remainder proven track third performance our Overall, we are the record, builds of and for our again year. once

of progress towards our operator flow let asset earnings prepared call back significant to our owned Investor concludes the make turn to growth, for distribution. our targets This margin and enhanced questions. from me expansion Day and remarks, now continue reinsurance and We

Operator

from line Thank you. [Operator Instructions] of Piper comes Barnidge Sandler. John question the of Your first

John Barnidge

My the flow first is question on reinsurance.

the view participate you reinsurance the How that flow about net rate coming, especially products? comments a the to with added. gross? your with positioning silver from And of of Given like RILA partners settling to those product tsunami grow opportunity the in into you in the view flow optimistic reinsurance being do of view that's new percent to existing the do where

Christopher Blunt

on Obviously, impact margins I availability now, And out know I quality decisions. to yes, accretive for the we're when we right I availability have constraints set we target lot that does can about to we comes Chris. with to would of there. I of as to continue don't is fit see quite the about the It's How it. Yes, think who sort weigh think to the it would partners. what's good want that well. flow reinsure. more product I don't it reinsurance. morning, say be is flow it a partner individual of us How category. what we It's a of optimistic going Wendy that's reinsurance. make to those But John. in we capacity particular then selective and want of a

John Barnidge

where owned Solutions business owned then question in given capital-light follow-up the grow is, financial given more getting And manner, in more the a kind Wealth larger distribution as the opportunity interest distribution go had sponsors' my a and -- price give distribution gone, has opportunity use in that given you an that owned into that to to maybe before? of thought in than does stock currency to maybe you

Christopher Blunt

Yes.

quite thought for everything It else, some time, a long process. started worked bullish their of like us think partners opportunity. we're on bottom I the you with as know, in strategic engaging we've up

for thoughtful and to partnerships, to well. scale The scale's right? continue be the to these that But sure we make we're roll-up picking here trying them provider not be to there. we having We largest strategic sake, be So said We're to want are isn't careful. goal that, and want optimistic.

about feel hear. to great portfolio. to starting in It's We I the stock think price. nice our get recognized do it's

I be of the at what's strategic from next that But its think use as perspective best some everything even the great entity. return think a asset capital we could own dollar look perspective. it's a point or yes, else, yes, So is at this it we like of

quite So it. we're about optimistic

Operator

of Barclays. Your next Alex Scott from question the comes of line

Unknown Analyst

This for Alex. is Jack on

how how would the So it a last to surrender more time? to these And over higher do impact? has view my quarter? question And level What you charges. exactly compare with normal was did

Wendy Young

Jack. Thanks,

to So going as in up, surrenders we're stay long we see elevated industry as as rates going about talk are interest industry to the that refinancing.

our point months' basis results, is the look last you points. to XX we which about at everybody If ROA, XXX

the smooth last to in any lumpiness try surrenders out year. have the over of the occurred to Just that

had quarters Some bit a higher of surrenders. quarters were We've quarters. than little higher back-to-back other

you that, But that improvement Does help? an XX ROA kind all in all, the gives months that of the without we're last underlying surrenders. had we've even without of -- indication that significant

Christopher Blunt

And I'd consistent. It's add gigantic differential. you it the -- think only thing quarter-to-quarter, fairly wasn't when a is I

Unknown Analyst

quick outlook heading in I particular, new Do PRTs flows, discussing you agreements And follow-up. Great. then guess the mind for funding year? into the X and

Christopher Blunt

the Sure, didn't, are going to retail. that we're opportunity, we've start. footprint. this industry maybe with even just we And the fact I'll bullish is But close not I Chris. I'll actually come still Again, continue start expand. incredibly they think -- sales to remain on distribution if to nowhere penetrating our

the we honestly, what's can total happening So to pie. grow regardless of

So that outlook retail. for would be

with I think yes, October. had we to respect PRT, terrific a

So already $X over billion. we're

surpassed sales PRT be year's strong. pipelines last continue we've So to

in we retail, I'll the in returns category that's we in an relative PRT would the it, and billion are owned types $X relative where any where $X of to simply call what is expect generating to So range to for with target year. are reason pipeline, grow, a we distribution. broader And what's of capital given billion availability it's our to

PRT complicated bit there I'm plenty will answer, it's a of that. be confident of opportunities. but little So more

agreements issue, Funding up invest, the could We constantly our relative other look more at that opportunistic. market, spread where we opportunities. are stack we where how does just could to

that's one want be So be going to of to pretty we notes. issuer But where again, agreement-backed funding continue opportunistic. it's an to

Operator

[Operator Autonomous. Instructions] comes from Carmichael the question line Wesley of next of Your

Wesley Carmichael

little that that first near The surrender talked And driven like us? Can you just unpack question, think bit for elevated activity. a happening review Wendy, what's talk about just term? being assumption had and the I maybe about you by

Wendy Young

Sure.

it's to we're So the rates earlier our So to And question, as looking as long are assumptions, right? to be How going we elevated, up, a the going still do other just making last. surrenders. continue to said surrenders I decision. think at we're seen, as there's as stay you've elevated

overall going assumption the the assumption. that -- of a necessarily changed larger part very just $XX shorter we a the longer-term term, small million. So into And over was not

DAC that assumption. million $X we'll minor as on see that about it the [ returns call on go-forward surrender ] impact from a So the just unlocking that that from

of been product that's a because with less to in product and the actual going right product what those you're away, we've Now unlocking so features is right are for fluctuation no changes on electing away. lot going selling that GMWB the this there, And policyholders is make the volatile new utilization this benefit the MRB the locking do there's policies. forward

forward. but So increase it's assumption volatility that a change, going kind reserve to there's for it of onetime the hit for in no

Wesley Carmichael

Got guess, some it. reinsurance, can capital there by I [ than kind your ] jurisdiction for haircut saying XX%. And quarter comments positive around [ this as X maybe follow-up, sure of big ] of a Cayman a less you competitors had

So Wendy, in and But about you talked in manage comments conservatively. talk you that business about offshore and particular how your is I you Cayman just capitalized reinsurance know maybe that can managed?

Wendy Young

Sure.

our Cayman on calculate also and RBC. So we run a basis statutory

So it's very similar.

about heard onshore in the around I -- mortality utilized the being the basically think that's offshore. you've assumption difference versus us reserves is talk

a instead use blue best table. more collar can blended for and estimate the white You collar of

So not purely in the reserves. the around It's around it's capital. required redundancy

Christopher Blunt

And Chris. it's Wes,

As this stress it's When of done a reminder, by shared. that in around is all all to reported of Iowa. gets an do Iowa, up capital, and we basis, aggregated it testing approved gets

or of the to yes, none comments in way, us is short So form. those shape apply answer any

Operator

Next question ] [ the comes from of Maxwell line Truist. Fitcher from

Unknown Analyst

color mentioned Mark know maybe there for think I there de any Last you you for in you minimis a would targeting have quarter, younger I or mentioned had any in XQ? the probably seen mentioned early products. RILA XQ appreciated. you Hughes. XXXX, progress and -- had had demographic be on I'm but Have you effect

Christopher Blunt

to body there's think pretty of conclusions that a are reaching really entire the are still younger with answer good industry the volumes there. data meaningful a honest draw The product. demographic any is for small I that too Yes. you that But

say if really I to are trend there. reason, too yes, some So for we soon an would but be outlier I'd the broader tell, surprised to

Operator

And a line question from we Wes have follow-up of coming Carmichael. the

Wesley Carmichael

-- little where looks most work, of portfolio. get money bit you have spread the new more detail originated A stuff putting opportunities you Blackstone? some just to a privately couple maybe today, on that if of new you're what attractive can can investment allocation give us where like some you from But especially on your and money

Christopher Blunt

not share tend to origination rotate we'll matter, It's the find is and want don't private necessarily on saying done Blackstone secret was originated. and keeping with where good new really up probably I to opportunity a diversifying asset Wes, of sauce, I too general public, as much, right? Yes. being to has but between and continuing a classes. what's job depending a

heard this XX. before. classes now think [ asset pre-Blackstone to I X ] Leena say from gone you've We've

So was robust been rates have the year, opportunities spiked in for lot us there private a of pretty up whereas year, quite when quickly, corporate. opportunity this last

those literally on are. So tilt probably where time that yes, year-to-date, the depending real slight toward are decisions say but a getting I would opportunities privates are made that --

Wesley Carmichael

it. investment the follow-up portfolio the [ on alts would be regarding I And got guess my I allocation. ]

to do term? is Like to calculation, Or where kind just definition think, is trend industry or little the your that at is expect private than private and of higher longer higher. private of bit I like I credit. peers, estate I I real your includes on lower alts XX% XX% looked And aren't a -- allocation that just the like be? or it's across it if versus I you'd that and just curious mean, some equity and things AUM. know -- you seems want But you

Christopher Blunt

Yes.

utilized. LP about be assumptions meaning it's It's that's about X. to making said bit we way you're that I with precise capital term, So gets commitments, X. hard higher the even long guess -- think than a because alts, super around little and And right, called we commitments how but true some

we recently, Some alts had underperformed of I the really good when it in mean, obviously capital. were we is long-term but the years some assumption proportion portfolio. blockbuster is early deploying it's our

that probably yes, equity. tends allocation we're when range, like in longer in But sometimes yes, alts, are say about the skew thinking X of tranches to up X. residual would X that right for say now, it's that There And private to LP It bucket. term. it's commitments. I get true us, equity So you scooped pure

and estate. plays half the next almost The So things data amount everything of centers, small classic commercial tends nature, equity. of private big from credit Blackstone in that to And that so solar a se, is then would portfolio chunk be funds. of not real infrastructure, be per

hopefully, that So helps.

Operator

no at further are questions this There time.

back Chris for concluding the Blunt call over remarks. Turning to

Christopher Blunt

overall quarter the margin to for us. with we're call. F&G's opportunities performance. excited returns. updating F&G growth, ahead joining is forward the look market, Look, to our interest our in you pleased for well and We earnings current you continue asset generate deliver business to Great. and very drive we're appreciate on positioned your about and accretive Thank fourth expansion

Operator

Ladies please gentlemen, and and lines. you call this that for today. We concludes ask you. your participating for you Thank disconnect thank conference your

F&G Annuities & Life (FG) 7 Nov 242024 Q3 Earnings call transcript