FG — F&G Annuities & Life, Inc.

F&G Q3 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• Adjusted Net Earnings: $165 million, or $1.22 per share.
• Assets Under Management (AUM): Record $71.4 billion, up 14% year-over-year, with retained AUM at $56.6 billion, an 8% increase.
• Gross Sales: $4.2 billion in Q3, with $11 billion year-to-date; core sales accounted for $2.2 billion in Q3.
• Return on Assets (ROA): Adjusted ROA at 92 basis points, stable year-over-year.
• Return on Equity (ROE): Adjusted ROE at 8.8%, consistent with prior quarter.
• Alternative Investment Income: $67 million, below long-term expectations.
• Operating Expense Ratio: Decreased to 52 basis points from 62 basis points year-over-year.

2. Strategic Updates and Business Highlights

• Sales Performance: Strong sales across all product lines, particularly indexed annuities ($1.7 billion) and pension risk transfer (PRT) ($500 million).
• Reinsurance Sidecar: Launched in August, contributing to accumulation-focused fixed indexed annuity (FIA) sales.
• Flow Reinsurance Strategy: Grown fee income to $41 million, up 46% year-over-year.
• Own Distribution Investments: Expected to generate over $80 million in EBITDA for 2025, with a focus on expanding partnerships.
• Dividend Increase: Raised by 13.6%, reflecting a commitment to shareholder returns.

3. Forward Guidance and Outlook

• AUM Growth: Expected to continue growing, driven by strong demand for retirement savings products.
• PRT Sales Target: On track to achieve $1.5 billion to $2.5 billion for the year.
• Expense Management: Anticipates further reductions in operating expense ratio, aiming for approximately 50 basis points by year-end 2025.

4. Bad News, Challenges, or Points of Concern

• Alternative Investment Performance: Underperformed with a return of 7%, below the long-term expected return of 10%.
• Market Competition: Increased competition in the fixed indexed annuity and retirement income markets, with tighter pricing pressures.
• Hedging and Interest Rate Sensitivity: Limited exposure to short-term interest rate fluctuations, but ongoing monitoring required due to market volatility.
• Variable Investment Income: Fluctuations expected, with a projected run rate in the high single digits.

5. Notable Q&A Insights

• Capital Allocation: Management prioritizes growth in core products (FIAs, IULs, RILAs) and own distribution over share buybacks, especially with the upcoming share distribution from FNF.
• Investment Portfolio Concerns: Management reassured investors about their credit exposure and approach to private credit, emphasizing a cautious stance with limited exposure to high-risk sectors.
• Operating Leverage: Expectation of continued improvement in operating expense ratios, with a focus on maintaining costs relative to AUM growth.
• Competitive Landscape: Noted that while competition is increasing, the overall market remains attractive, particularly in PRT and core product lines.

Overall, F&G reported a strong quarter with significant growth in AUM and sales, while also navigating challenges in investment performance and market competition. The company remains optimistic about its strategic initiatives and future growth potential.