F&G Annuities & Life, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Sales Performance: Full year 2024 gross sales were $15.3 billion, a 16% increase over 2023, with $3.5 billion in the fourth quarter. Retail channel had record sales of $12 billion, up 20% from 2023. Institutional PRT had record sales of nearly $2.3 billion, up 15% from 2023.
• Product Launches: RILA product launched in 2024, with 7 partners onboarded, and potential for billions in annual sales over medium term.
• Balance Sheet and Capital: Strong balance sheet, returned $125 million to shareholders through dividends. AM Best financial strength rating upgraded to A, and Moody's long-term issuer rating upgraded. Statutory capital position strong, with RBC ratio over 410% for primary operating subsidiary.
• Organizational Changes: Wendy Young appointed Chief Liability Officer effective April 1st; Connor Murphy to join as CFO on April 1st, bringing extensive industry experience.

Segment Performance

• Retail Channel: Full year 2024 retail gross sales were $12 billion, a 20% increase over 2023. This included $2.5 billion in the fourth quarter. The retail channel achieved record FIA, MYGA, and IUL gross sales. Retail sales contribution to total gross sales: Retail sales were $12B out of $15.3B full-year gross sales, so ~78.4%.
• Institutional Markets: Full year robust institutional sales were $3.3 billion, comprising $2.3 billion of pension risk transfer (PRT) and $1 billion in funding agreements. Full year PRT sales were $2.3 billion, a 15% increase over 2023, with $1 billion in the fourth quarter. Funding agreements were $1 billion for the full year, down from $1.6 billion in 2023, with no funding agreements in the fourth quarter. PRT in-force block crossed $6.5 billion milestone, serving over 100,000 participants.

Guidance

• Progress toward 2023 Investor Day targets, including growing AUM by 50%, expanding adjusted ROA excluding significant items to 133-155 basis points, increasing adjusted ROE excluding AOCI and significant items to 13%-14%, and expanding PE multiple.
• Adjusted ROA excluding significant items was 127 basis points in 2024, closing in on the lower end of the target range. Expect moderate pace going forward, focusing on sustainable asset growth from retail and PRT strategies, ROA expansion from investment margin and fee-based earnings.

Risks

• Monitoring industry lawsuits related to pension risk transfer, but no meaningful impact seen yet.
• Regulatory changes in offshore entities and NAIC activities, including asset adequacy testing for reinsurance and capital charges for structured securities.

Question and Answer

• Q: John Barnidge asked about the evolving organizational structure and impact of industry lawsuits on PRT. **A: Chris Blunt mentioned organizational structure change due to business growth and opportunity, and stated no meaningful impact from industry lawsuits on PRT, with continued opportunities in the $100M to $1B deal size.
• Q: Wes Carmichael asked about core ROA and funding agreement-backed note market. **A: Wendy Young noted prepays were a driver of ROA compression, expecting rebound in 2025; Chris Blunt discussed order priority of capital allocation for product sales, with fixed index annuities, RILA, PRT as highest priority.
• Q: Mark Hughes asked about MYGAs and FIA market growth. **A: Chris Blunt said MYGA demand remains, with fall-off in Q4 due to strong FIA sales; FIA market growth driven by macro trends and distribution channel expansion.
• Q: Wes Carmichael asked about regulatory front and Wendy Young's transition. **A: Chris Blunt mentioned regulatory activity in offshore entities and NAIC, with focus on transparency and communication with regulators.