FGN Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics

Assets Under Management (AUM): Increased to $74.7 billion, up 8% year-over-year. Retained AUM was $55.9 billion.

Gross Sales: Totaled $2.7 billion, with $2 billion from core sales and $700 million from opportunistic sales.

Net Sales: Reported at $1.5 billion, reflecting disciplined capital allocation.

Adjusted Net Earnings: $85 million, or $0.65 per share, down from $110 million in Q1 2026.

Alternative Investment Income: $49 million, below the long-term expected return of 12%.

Return on Equity (ROE): Adjusted ROE was 8%, with a potential increase of 3.1 percentage points if alternative investment returns met expectations.

Operating Expense Ratio: Decreased to 47 basis points, down from 48 basis points in Q1 2026.

2Strategic Updates and Business Highlights

Leadership Transition: Connor Murphy has taken over as CEO, with Mike Bailey joining as CFO.

Focus on Fee-Based Business: F&G aims to transition towards a more fee-based, higher-margin business model, leveraging its position in annuities and life insurance.

Peak Altitude: A strategic review is underway to explore alternatives for Peak Altitude, aiming to unlock its value.

Investment Portfolio: High-quality portfolio with 97% of fixed maturities rated investment grade. The fixed income yield increased to 4.91%.

Reinsurance Partnerships: New partnerships are being established to enhance flexibility and capital management.

3Forward Guidance and Outlook

Core Retail Sales Momentum: Continued growth is expected in core retail sales, particularly in indexed annuities and life insurance.

Pension Risk Transfer (PRT) Business: Anticipated increase in PRT sales in the second half of the year, targeting $1.5 billion to $2 billion.

Capital Allocation: F&G will remain disciplined in capital allocation, focusing on high-return opportunities and maintaining a strong capital position.

4Bad News, Challenges, or Points of Concern

Declining Alternative Investment Returns: The return on alternative investments fell to 5.9% in Q2, down from 8.3% in Q1, raising concerns about the realization environment.

Impact of FG Life Re Sale: The sale negatively impacted earnings by $8 million compared to Q1 and $12 million compared to Q2 2025.

Competitive Pressures: Increased competition in the RILA and MYGA markets, although F&G is maintaining a positive trajectory.

Surrender Charges and Acquisition Costs: Elevated surrender charges and increased amortization expenses are impacting product margins.

5Notable Q&A Insights

Interest Rate Environment: Management noted that the cost of crediting remains consistent, with no significant pressure from competitors.

Buyback Strategy: While Q2 saw strong buybacks, the future appetite for buybacks will be evaluated based on market conditions and capital deployment opportunities.

Peak Altitude Valuation: The strategic review aims to find a partner that would allow F&G to retain growth potential while unlocking value.

Organic Growth Rate: Retained AUM growth is expected to remain in high single digits, with a net growth rate potentially around 3% due to reinsurance practices. Overall, F&G reported solid financial results in Q2 2026, with a focus on strategic growth areas and disciplined capital management, despite facing challenges in alternative investment returns and competitive pressures.