Corebridge Financial, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Leadership Recognition: Marc recognized Kevin Hogan's contributions in leading Corebridge's launch and establishing a strong foundation.
• 2025 Performance: Earnings per share up 4%, return on average equity up 20 basis points, capital returned to shareholders up 13%. Sales reached a record $42 billion, with RILA product launch quickly joining top 10 providers across major annuity categories.
• Strategic Flexibility: Diversified business model allows capital allocation to highest risk-adjusted returns, e.g., higher allocation to institutional markets in 2025 with 24% growth in institutional market sales.
• Balance Sheet Management: Executed large VA reinsurance transaction, derisking complex liabilities; legacy liabilities now ~1% of balance sheet. Life Fleet RBC ratio above 430%, holding company liquidity $2.3 billion.
• Bermuda Strategy: Ceded ~$20 billion of reserves, providing financial optionality.
• Opportunities: Focus on growing fee-based earnings, e.g., $30B opportunity in Group Retirement's Wealth Management through cross-sell/upsell. Investing in digitization and wealth management to enhance customer experience.
• Dividends and Buybacks: Board approved 4% increase in common stock dividend to $0.25/share. Plan ~$900M share repurchases in first half of 2026 from VA reinsurance proceeds.

Segment Performance

• Individual Retirement: 2025 full year sales were $20.6 billion, with Q4 sales at $4.3 billion. Adjusted pretax operating income details, net flows remained positive at over $600 million supported by successful RILA launch (full year sales $1.9 billion). Base spread income increased year-over-year and sequentially despite Fed rate cuts.
• Group Retirement: Sales up 13% year-over-year due to growth of RILA products and out-of-plan offering. APTI decreased 1% year-over-year reflecting demographic shift from spread to fee income, partially offset by 2% growth in fee income. Expenses slightly elevated due to modest litigation reserve.
• Life Insurance: APTI declined 30% year-over-year primarily due to lower underwriting margins. On a run rate basis, results consistent with prior guidance of ~$110 million to $120 million per quarter, excluding first quarter mortality spikes.
• Institutional Markets: Total APTI up 8% year-over-year with full year earnings up 19% from 2024. Reserves grew 23% year-over-year driven by pension risk transfer transactions and GICs, demonstrating strength in opportunistic capital allocation.

Guidance

• Income Growth: Expect to grow total sources of income in 2026 driven by favorable demographic trends, competitive product suite, and industry-leading distribution.
• Interest Rate Impact: Fed rate cuts will impact base spread income in Individual Retirement, but sensitivity reduced by 75% since mid-2024. Base spread compression in Individual Retirement expected to level off by end of 2026.
• Investments: Expect alternative investment returns to align with long-term expectations, though first quarter may have softness from real estate equity returns.
• Share Repurchases: ~$900M share repurchases in first half of 2026 associated with VA reinsurance transaction.
• Financial Targets: Expect to meet key financial targets for adjusted ROE, capital return, and run rate EPS growth, but at lower end of 10%-15% range.

Risks

• Interest Rate Sensitivity: Continued sensitivity to short-term interest rate movements, though reduced by ALM adjustments.
• Competitive Pressures: Intense competition in annuity market, requiring focus on customer value proposition and distribution.
• Market Volatility: Volatility in real estate equity returns affecting alternative investment returns.
• Regulatory Changes: Impact of NAICs VM22 reserving changes, though Corebridge expects no surprises in its impact.

Question and Answer

• Q: On SOFR sensitivity, how reduced?

A: Elias Habayeb stated that the liability-driven investment strategy and adjusting investment allocation to align ALM profile reduced sensitivity.

• Q: Investment spending in 2026?

A: Marc Costantini mentioned ~$60M expected in 2026 for digitization and customer experience enhancements.

• Q: PRT volume outlook?

A: Marc Costantini said institutional markets grew 24% in 2025, lumpy but optimistic about future prospects in PRT business.

• Q: Exposure to software and real estate?

A: Elias Habayeb noted de minimis exposure to software, and selective real estate investments in data centers backed by hyperscalers.

• Q: Group Retirement spread outlook?

A: Marc Costantini said Group Retirement is transitioning from spread to fee income, with trough expected in 12-24 months.

• Q: Longer-term EPS growth?

A: Marc Costantini stated it's a combination of business segment growth and free cash flow generation.

• Q: Competitive landscape in Individual Retirement?

A: Marc Costantini emphasized differentiated value proposition via distribution and unique product features like income/living benefits.

• Q: Preferred raise for Bermuda?

A: Elias Habayeb said preferred used for capital optimization, confident in cash flow generation and dividend growth.

• Q: RILA product and crypto-linked index?

A: Marc Costantini said new crypto-linked RILA product is risk-managed, early days for take-up but confident in risk management approach.