Corebridge Financial, Inc. (CRBG) Earnings

Management highlights

- Approved Merger with Equible - Shareholders voted to approve the merger with Equible, with regulatory review proceeding on pace: federal antitrust review and FINRA broker-dealer approval are complete, all state and international regulatory filings have been submitted. The transaction is still expected to close by the end of 2026, with 2027 targets of $5 billion in earnings, $4 billion in cash generation, and 15%+ return on equity, supported by $500 million in cost synergies and additional expected revenue synergies. Leadership and integration planning are on track, with the first three organizational levels finalized. - Overall Q2 2026 Performance - Delivered results consistent with full-year guidance: core income (excluding variable investment income, VII) rose 5% year-over-year, run rate earnings per share increased 16% year-over-year, adjusted return on equity (excluding VII) rose 90 basis points to 10.9%. The firm has generated over $400 million in cash for 14 consecutive quarters, and returned $412 million to shareholders in Q2, including $300 million in share repurchases, for a year-to-date payout ratio of 84%. - Adjusted pre-tax operating income was $664 million, with EPS of $1.12, a 14% increase year-over-year. Adjusted ROE was 11.4% (13.8% run rate), within the 12-14% target range. The total investment portfolio remains high quality, with an average credit rating of A-minus and 96% investment grade, and new money yields exceed roll-off yields to support net investment income growth. - Strategic Industry and Market Positioning - Management highlights large long-term industry tailwinds: annual U.S. annuity sales have grown from ~$250 billion in 2021 to over $450 billion in 2025, with only 28% of Americans confident in retirement spending, creating unmet demand for guaranteed income solutions. A projected $100 trillion intergenerational wealth transfer by mid-century will drive wealth business growth, and 100 million Americans have unmet life insurance coverage needs. The combined company will serve over 10 million customers, with scale advantages, a broad multi-channel distribution network, and an integrated full value chain business model. - Customer and Digital Improvement Initiatives - The firm is prioritizing customer-centric improvements across all segments: group retirement plan sponsor Net Promoter Score rose 19 points year-over-year, with a goal of top-quartile service. AI agents were launched in the group retirement contact center, reducing repeat calls and average handling times. Life insurance enhanced digital service infrastructure and implemented a new business acquisition platform targeting 50% of policies issued in 30 minutes or less. Individual retirement is modernizing advisor tools to reduce application errors and accelerate policy issuance, enabling advisors to focus more time on client service.

Guidance

- Full-year 2026 guidance for base spread income is maintained, with spread compression expected to level off by the end of 2026 as older business rolls off the book. - Management expects VII (variable investment income) returns to remain below long-term target for the full year 2026, amid ongoing market weakness for alternative investments, particularly private equity. - Share repurchase guidance for the second half of 2026 is maintained at approximately $350 million, in line with pre-merger plans. - Pension risk transfer (PRT) activity is still expected to be heavily weighted to the second half of 2026, with continued double-digit reserve growth expected, matching the trend since 2021. Management remains confident in meeting its PRT targets for the second half. - The Equible merger closing is still projected to occur by the end of 2026, with 2027 combined financial targets maintained as originally stated.

Segment performance

1. Individual Retirement: Sales reached $3.8 billion, with sales declining year-over-year and sequentially as the firm prioritizes margin integrity over volume. Fee income increased 17% year-over-year. Adjusted Pre-Tax Operating Income (APTOI) was flat year-over-year, but rose 5% sequentially. Net flows remained positive, supporting growth in assets under management and administration (AUMA). 2. Group Retirement: Fee income increased 15% year-over-year, as the business transitions to capital-light fee-based operations. AUMA rose to $20 billion, an 18% increase year-over-year. Spreads increased sequentially but remained lower year-over-year due to demographic-driven general account outflows. APTOI decreased 7% year-over-year, due to lower spread income and higher operating expenses, partially offset by fee growth. 3. Life Insurance: Sales were $870 million, increasing year-over-year and sequentially. APTOI declined 11% year-over-year, as favorable mortality and underwriting results were less strong than the prior year quarter. On a run rate basis, APTOI was $122 million above the top end of the full-year guidance provided at the start of 2026. This segment provides steady cash flow and stability to the broader portfolio. 4. Institutional Markets: Total quarterly sales were $2.6 billion, including over $1.8 billion in GIC (gig) issuances. The segment's gig book represents 5% of Corbridge's general account, compared to 10-15% for major competitors. Reserves expanded 17% year-over-year, AUMA increased 12% year-over-year, and APTOI rose 36% year-over-year. This segment is the firm's consistent growth engine, with attractive risk-adjusted returns.

Risks & headwinds

- Variable investment income (VII), particularly alternative investments, is underperforming long-term targets due to software market declines, broader market volatility driven by geopolitical conflict (including renewed unrest in the Middle East), and macroeconomic uncertainty. A large backlog of unrealized private equity exits has reduced realized gains, and high interest rates continue to pressure mark-to-market valuations for real estate funds. VII returns are expected to remain below target for the full year 2026. - Increased competitive tension in simple retail annuity products created pricing pressure in the first half of 2026, though sales momentum recovered in late Q2. The firm maintains a discipline of prioritizing margin integrity over sales volume, which has resulted in lower year-over-year sales for the individual retirement segment. PRT sales are inherently lumpy, with lower than expected activity in the first half of 2026, though this is expected to reverse in the second half. - Long-term mortality and longevity trends represent ongoing uncertainty, though current mortality results for the life insurance segment have been more favorable than expected, and PRT mortality is priced using separate tables that reflect the different covered population.

Analyst Q&A

• Q: What is driving institutional market growth, and is it just a temporary shift from challenging retail markets, or does it have long-term runway? /

  A: Management states there is significant long-term upside for institutional growth. The firm's GIC business currently makes up only 5% of its general account, compared to 10-15% for peer firms, leaving substantial room for expansion. The combined entity post-merger with Equible will have even greater capacity and appeal for institutional products, and management expects continued growth at attractive risk-adjusted margins. There are also tailwinds for both institutional GIC and PRT business heading into Q3 2026, alongside recovering retail momentum.

• Q: Why is full-year base spread guidance maintained despite positive asset repositioning benefits in Q2? Is there no upside to the original guidance? /

  A: Management confirms that while Q2 asset repositioning delivered some near-term improvements to base spreads, natural roll-off of older, higher-spread business will continue to create moderate single-digit spread compression over the remaining quarters of 2026. Compression is still expected to bottom out at the end of 2026, so the original full-year guidance remains appropriate, with no upward revision needed.

• Q: What is the update on collaboration with Nippon Life for co-manufacturing Japanese annuity products? /

  A: Discussions with Nippon Life are progressing well, and are currently in the third or fourth inning. There is growing demand in Japan for the annuity products Corbridge has expertise manufacturing, and Nippon Life has strong existing distribution channels in the Japanese market. While both firms are cautiously optimistic about the opportunity, it is too early to set a timeline for final agreement, product development, and regulatory approval from Japanese authorities.

• Q: Alternative investment performance is weak at peer firms but you expect continued weakness in H2 2026 — is this unique to Corbridge's portfolio? /

  A: Corbridge's alternative allocation makes up less than 3% of its total balance sheet, intentionally aligned to match long-tail liabilities from PRT and life business. Underperformance this quarter was driven primarily by mark-to-market declines in private equity funds, which had consistently met long-term expectations prior to this quarter. Broad market weakness across sectors reduced exit activity for existing PE investments, cutting off realized gains that normally offset weaker marks, and geopolitical uncertainty and higher rates continue to pressure valuations. While H2 returns may be positive, the portfolio will not meet its full-year long-term return target in 2026.

• Q: Post-merger, are there any other subscale businesses the firm plans to divest, similar to Equitable's recent employee benefits divestiture? /

  A: Management states that the only subscale business that fit this description has already been addressed, and all remaining business lines post-merger will have leading market positions, clear growth upside, and strategic fit. There are no current plans for additional divestments of business units ahead of or after the merger closes.