F&G Annuities & Life, Inc. Q2 FY2026 earnings call

• Overall Financial Results & Scale Improvement

  • Q2 2026 adjusted net earnings were largely in line with management expectations, with core spread remaining consistent amid disciplined pricing
  • The operating expense to AUM ratio for reinsurance decreased to 47 basis points at end-Q2 2026, down from 48 basis points in Q1 2026 and 60 basis points at end-2024
  • Book value per share (excluding AOCI) for F&G reached $45.93, up 68% since the 2020 F&F acquisition

• Capital Position & Allocation

  • Management maintains a long-term target of ~25% debt to capitalization (excluding AOCI), and expects the balance sheet to naturally de-lever over time
  • Targets holding company cash and invested assets equal to 2x annualized interest expense ($165 million annualized on $2.3 billion outstanding debt, with a 7% blended yield)
  • Expects to maintain company action-level risk-based capital (RBC) ratio above the 400% target; the NAIC's new higher capital charges for CLOs are expected to only reduce RBC by ~10 points before management actions, which is considered manageable
  • In-force business generates ~$1 billion in annual capital; in the first half of 2026, capital self-funded $75 million in dividends, $80 million in interest expense, and $120 million in opportunistic share repurchases (4.5 million shares bought back at an average price of $26.44)
  • MIGA sales have been de-emphasized at this time because current returns are below the company's return threshold
  • Management remains focused on unlocking unrecognized value from the business via a sum-of-the-parts valuation framework, with strategic alternatives for subsidiary Peak Altitude a key part of this effort

• Leadership Update

  • Interim CFO Mark was thanked for his service during the leadership transition; new permanent CFO Mike Bailey (a life/annuity sector veteran from CoreBridge Financial) has joined the company and will begin participating in earnings calls in Q3 2026

The call does not break out separate financial performance figures, revenue contributions, or absolute results for distinct product segments. All results are reported on an aggregated company basis, with core business split between core retail (annuities including RILA, FIA, MIGA, IUL) and institutional/PRT (pension risk transfer), flow reinsurance, and subsidiary Peak Altitude, but no segment-level financials are provided. Aggregated adjusted net earnings for Q2 2026 were $85 million ($0.65 per share), down $25 million from Q1 2026 and $18 million from Q2 2025. Alternative investments income came in at $49 million ($0.38 per share), below management's 12% long-term expected return. Aggregated adjusted ROE excluding AOCI was 8% for Q2 2026, and adjusted ROA was 68 basis points.

• The company expects the operating expense to AUM ratio for reinsurance will improve further to approximately 45 basis points by year-end 2027, representing a cumulative 15 basis point (25%) improvement from the end of 2024
• Management maintains a 12% long-term expected return for alternative investments; the 12% assumption will be retained for the remainder of 2026, and will be formally revisited during the end-of-year annual review
• Organic net retained AUM growth is expected to remain in the high single-digits, with gross annual AUM growth expected in the range of $5 to $6 billion per year (net growth is lower due to reinsurance of a large share of annuity sales, which boosts ROE even if it does not increase net AUM as quickly)
• The PRT business is targeting $1.5 to $2 billion in new written business for 2026, matching prior year volumes rather than targeting growth to align with the company's balance sheet capacity
• Management expects Q2 2026's temporary softness in PRT book mortality will resolve itself in the second half of 2026

• Short-term alternative investment returns have come in below the 12% long-term target in the first two quarters of 2026, with lower alternative investment returns reducing Q2 2026 adjusted net earnings by $21 million after tax
• The NAIC adopted new higher capital charges for CLO investments in broadly syndicated and middle market loans, which will reduce the company's RBC ratio by approximately 10 percentage points before any management actions to mitigate the impact
• MIGA market returns are currently below the company's internal return threshold, requiring reduced activity in that segment until economics improve
• PRT market volume is softer than in recent years because underlying pension plans are currently better funded, reducing pressure to externalize risk via PRT transactions
• Share repurchase capacity under the current authorization is nearly exhausted, with only $12 to $15 million remaining after Q2 2026's repurchase activity

Q: How did core spreads hold up in Q2 2026 amid the current interest rate environment, similar to how competitors reported stabilizing spreads? / A: Core fixed income spreads came in line with expectations and were higher than Q1 2026, resolving temporary Q1 weakness as management predicted. Cost of crediting for annuity products matched expectations and was consistent with prior quarters, while pre-planned higher DAC amortization (from 2025's third quarter assumption update) put modest pressure on margins. There was minor temporary mortality softness on the PRT book that management expects to reverse in the second half of 2026. The company maintains its target spread corridor successfully for its annual reset indexed products.

Q: Will the company continue the aggressive share repurchase activity seen in Q2, and how does this fit into your current capital allocation? / A: Q2 2026's large buyback was an opportunistic move to deploy capital when the stock was undervalued, and should not be taken as an indication of consistent large repurchases going forward. Share repurchases will remain a conditional tool to deploy excess capital when opportunities arise, but are not a primary capital allocation priority for the foreseeable future. Remaining capacity under the current repurchase authorization is only ~$12-15 million, and management declined to comment on whether the board will approve an increase.

Q: What are the company's top long-term strategic priorities today, and what is the status of strategic alternatives for subsidiary Peak Altitude? / A: Management will continue to focus on growing core retail business, where F&G outperformed the industry in the first half of 2026 (grew 4% while the overall FIA market declined 5%) and momentum continues into Q3. The company will also keep shifting its business mix toward fee-based revenue rather than spread-based revenue, and will continue growing flow reinsurance partnerships (a new partner was added in July 2026). For Peak Altitude, management is early in the process of evaluating strategic alternatives, with the preferred outcome being bringing in a strategic partner to acquire just over 50% of the business while F&G retains a 49% stake. This structure would unlock value for F&G, allow Peak to fund future growth with its own debt, and result in cleaner accounting that better reflects Peak's value.

Q: Is competition increasing in the RILA market, and what is your update on the MIGA business? / A: Competition in the RILA segment has increased overall, and F&G (a top 5-6 competitor in FIA) is part of that increased competition. The RILA segment overall is performing well, and F&G continues to gain positive traction without feeling excessive competitive pressure. For MIGA, activity remains modest in 2026 because returns are still below the company's threshold, though the company will continue writing small volumes and is willing to pivot if economics improve. F&G expects MIGA activity will remain at similarly modest levels in Q3 2026, with focus remaining on higher-return core retail business.