F&G Annuities & Life, Inc. Q2 FY2025 earnings call

• Launched a new reinsurance vehicle in partnership with Blackstone Managed Funds on August 1, with approximately $1 billion in anticipated capital commitments, supporting the move to a more fee-based, higher margin, and less capital-intensive business model.
• Second quarter had strong sales with $4.1 billion of gross sales, one of the best sales quarters in history, driven by growth in core products like fixed index annuities, IUL, and pension risk transfer.
• Investment portfolio is high quality with 97% of fixed maturities being investment grade, and credit-related impairments have remained low and stable.
• Announced executive management transition: John Currier to retire and transition to senior advisory role, Conor Murphy to take on the role of President of F&G in addition to CFO.

In the second quarter, F&G achieved strong results. Gross sales were $4.1 billion, with core product sales (fixed index annuities, index life, and pension risk transfer) totaling $2.2 billion, up 22% sequentially and 10% year-over-year. Fixed index annuity sales were $1.6 billion, IUL sales reached a record $53 million (up 20% year-over-year), and pension risk transfer sales were over $400 million (up from ~$300 million in Q2 2024). MYGA sales were a record $1.9 billion in Q2, a 73% increase sequentially but down 21% year-over-year due to no funding agreements. Retail channel sales were a record over $3.6 billion in Q2. AUM before flow reinsurance was a record $69.2 billion at the end of Q2, with retained AUM of $55.6 billion, up 13% year-over-year.

• Prioritize pricing discipline and capital allocation to highest return opportunities in the remainder of 2025, expecting mix of sales to shift more to FIA in the back half due to reinsurance sidecar launch.
• Expect operating expenses to AUM before flow reinsurance ratio to decrease from 61 basis points in Q2 2024 to approximately 50 basis points by year-end 2025.
• Committed to achieving Investor Day targets, with progress being made in ROA and ROE improvement through strategies like reinsurance sidecar, owned distribution, etc.

• Opportunistic sales volumes will fluctuate quarter-to-quarter depending on economics and market opportunity.
• Macroeconomic volatility could impact the relative attractiveness of products for consumers.
• Changes in reinsurance market dynamics or regulatory requirements could affect capital position and earnings power.

Q: With $1 billion in commitments raised for the sidecar, how much capacity do you think it will have and what does it mean for the capital-light path?

A: Chris Blunt said the capacity depends on product type, but it will bring multiple billions of incremental AUM and is part of a broader capital-light strategy, highly accretive to earnings. Conor Murphy added it's a significant tool, with more emphasis on FIA side compared to MYGA reinsurance partners and continued belief in owned distribution.

Q: How are MYGA sales shaping up and what's the outlook for Q3?

A: Chris Blunt said Q2 MYGA sales were concentrated in April, expecting a more normalized rate in Q3, with FIA becoming more attractive using the sidecar. Conor Murphy mentioned MYGA sales are in the opportunistic bucket and relative composition can ebb and flow.

Q: How does the balance of opportunity across FIAs versus RILAs look?

A: Conor Murphy said they like the RILA space, it's a great partner with FIAs, with significant growth relative to the book but still a modest book currently, part of expansion plans but less material for now.

Q: Are you currently taking any cap rate action and how does it impact cost of crediting?

A: Chris Blunt said they regularly look at in-force crediting actions, have a good track record of maintaining consistent spreads, and take actions when there are deviations from pricing to maintain reasonable bands and be fair to policyholders, which helps with cost of crediting looking forward.