F&G Annuities & Life Reports Q2 2026 Results: Full Earnings Call Transcript

F&G Annuities & Life (NYSE: FG ) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. This content is powered APIs. 7 billion as of June 30, driven by strong core retail sales of indexed annuities and indexed life.

5 billion in net sales reflecting disciplined capital allocation between core and opportunistic sales. 65 per share, impacted by lower returns on alternative investments and the F&G Life re-sale. 91%, and the investment portfolio remains high quality with 97% of fixed maturities being investment grade. F&G Annuities & Life continued to focus on expanding its fee-based, higher-margin business model and announced a strategic review of Peak Altitude to unlock shareholder value.

The company maintains a strong capital position with a target debt to capitalization ratio of 25% and an RBC ratio above 400%. The management expressed confidence in future growth through strategic partnerships, disciplined sales growth, and maintaining a strong focus on core retail business. Full Transcript OPERATOR Good morning and welcome to F&G Annuities & Life second quarter earnings call. During today's presentation, all callers will be placed in listen-only mode.

Following management's prepared remarks, the conference will be open for questions with instructions to follow at that time. I would now like to turn the call over to Lisa Foxworthy Parker, Senior Vice President, Investor Relations. Please go ahead. Lisa Foxworthy Parker, SVP, Investor Relations Thanks, operator, and welcome, everyone.

I'm joined today by our new CEO and President, Conor Murphy, and interim CFO, Mark Wiltse. We're also glad to welcome F&G Annuities & Life's incoming CFO, Michael Bailey, who joined the company earlier this week and will listen in on today's call. Today's earnings call may include forward-looking statements and projections under the Private Securities Litigation Reform Act which do not guarantee future events or performance. We do not undertake any duty to revise or update such statements to reflect new information, subsequent events, or changes in strategy.

Please refer to our most recent quarterly and annual reports and other SEC filings for details on important factors that could cause actual results to differ materially from those expressed or implied. This morning's discussion also includes non-GAAP measures which management believes are relevant in assessing the financial performance of the business. Non-GAAP measures have been reconciled to GAAP where required and in accordance with SEC rules within our earnings materials available on the company's investor website. Please note that today's call is being recorded and will be available for webcast replay.

And with that, I'll hand the call over to Conor Murphy. Conor Murphy, Chief Executive Officer & President Good morning, and thanks for joining today's call. I'm very honored to speak with you today on my first earnings call as Chief Executive Officer and President. Since joining the company in April of last year, I have served as CFO, ingraining myself in the financial elements of F&G Annuities & Life, and President, running the day-to-day insurance company and building relationships with our teams and distribution partners.

What drew me to F&G Annuities & Life was an appreciation for the business, both in terms of what has been written and the opportunity to expand our services to an increasingly larger customer base, as well as the exceptional culture of the team. I would also like to thank Chris Blunt for bringing me to the company and his partnership over the last year. I have a huge amount of respect for Chris and what he and the team have built here at F&G Annuities & Life.

I'm very excited to continue the momentum as we expand our retail and institutional franchises and accelerate our move toward a more fee-based, higher-margin, and less capital-intensive business, a natural advantage of our position as one of the largest sellers of annuities and life insurance in the industry. Now I would like to share some highlights of our second quarter results, which were largely in line with our expectations, as well as details of our investment portfolio and provide an owned distribution update. Then I'll turn it over to Mark to cover our results in more detail from a top-line perspective. 7 billion at June 30, up 8% over the prior year.

9 billion. 8 billion in-force block ceded with the F&G Annuities & Life resale in the first quarter and a $750 million funding agreement-backed note maturity in the second quarter. 0 billion of core sales and $700 million of opportunistic sales. As F&G Annuities & Life navigates the competitive landscape, we are focused on disciplined sales growth and capital allocation priorities between core and opportunistic sales to power our AUM growth.

8 billion for the second quarter. This is one of our strongest quarters on record for core retail sales and reflects continued momentum for F&G Annuities & Life despite another quarter of contraction in industry FIA sales as compared to the prior year. For institutional sales of pension risk transfer were $200 million for the second quarter, as expected ahead of the seasonal increase in PRT sales typically seen in the second half of the year. Opportunistic sales were primarily comprised of $600 million of funding agreements as well as $100 million of multi-year guaranteed annuities, which we have de-emphasized due to returns currently below our threshold.

5 billion in the second quarter. This reflects flow reinsurance in line with capital targets for fixed indexed annuities and multi-year guaranteed annuities. F&G Annuities & Life's retained investment portfolio performed very well once again this quarter. Our portfolio is high quality, with 97% of fixed maturities being investment grade.

It is well matched to the liability profile and diversified across asset types. 91% in the second quarter, an increase of 14 basis points over the first quarter of 2026 and 8 basis points over the second quarter of 2025. Credit-related impairments have remained low and stable, averaging 6 basis points over the past five years and a modest 2 basis points in the first half of the year. Our alternative investments portfolio was $4 billion, or approximately 8% of the total retained portfolio.

This includes approximately $3 billion of limited partnerships and $1 billion of other equity interests. Many of these alternative investments are still in the earlier phases of their value-creation cycle, so we are not yet fully realizing the long-term expected return. 3% in the first quarter of 2026. Turning to our owned distribution portfolio, as previously announced, Chris Blunt is continuing as a Director of F&G Annuities & Life and CEO of Peak Altitude, a business that Chris has been building over time.

With approximately $700 million deployed into this business and approximately $80 million in annual EBITDA in 2025, we believe the market is ascribing little to no value in our share price today for the value of Peak. As a result, Chris has launched a formal process to explore strategic alternatives for Peak Altitude and to capture its significant growth opportunities and unlock that intrinsic value for F&G Annuities & Life shareholders. We believe that both F&G Annuities & Life and subsidiary Peak Altitude have plenty of runway ahead to continue growing AUM, growing earnings, and growing shareholder value. 93, up 68% since the 2020 FNF acquisition.

We believe that the components of our business—our new business platform, our profitable in-force block, and our capital-light, fee-based strategies—represent a distinct and measurable source of value. Taken together, we believe a sum-of-the-parts framework reveals meaningful value that is not yet fully reflected in F&G Annuities & Life's current market valuation, and we remain focused on closing that gap, with strategic alternatives for Peak being an important part of this process. Let me now turn the call over to Mark to provide further details on F&G Annuities & Life's second quarter highlights. Mark Wiltse, Chief Accounting Officer (Interim CFO) Thank you, Conor.

Starting with earnings, overall second quarter results were largely in line with our expectations and core spread remained consistent as the business maintained disciplined pricing. 65 per share, in the second quarter. 38 per share, below management's current long-term expected return of 12%, but in line with our post-tax estimate of $51 million preannounced in early July. Compared to the first quarter of 2026, adjusted net earnings decreased by $25 million.

The after-tax impact of lower returns on alternative investments was $21 million, and the after-tax effect of the F&G Life re-sale on March 1st, 2026 reduced incremental earnings by $8 million in the second quarter as compared to the first quarter. These items were partially offset by consistent core spread, growing fees from accretive flow reinsurance and owned distribution margin, and operating expense discipline. Compared to the second quarter of 2025, adjusted net earnings decreased by $18 million. The after-tax effect of the F&G Life re-sale reduced earnings by $12 million in the second quarter as compared to the prior-year quarter.

Product margin also reflects lower surrender charge fee income and higher other liability costs that include increased amortization expense. As expected, these items were partially offset by higher returns on alternative investments, consistent core spread, steady fees from flow reinsurance and owned distribution margin, and disciplined expense management. Next, turning to our scale benefit: as AUM grows and we continue to manage expenses, we are benefiting from increased scale. Our ratio of operating expense to AUM for reinsurance decreased to 47 basis points at the end of the second quarter as compared to 48 basis points in the first quarter of 2026.

We have reduced the operating expense ratio from 60 basis points at the end of 2024 to 50 basis points at year-end 2025 and expect further improvement to approximately 45 basis points by year-end 2027, for a cumulative 15 basis point, or 25%, improvement over the three-year period. Now regarding our returns, as reported, adjusted ROE excluding AOCI was 8% for the second quarter, and also as reported adjusted ROA was 68 basis points for the second quarter. 1 percentage points of additional ROE and 35 basis points of additional ROA for the quarter.

Turning to our strong capital position, we remain committed to our long-term target of approximately 25% debt to capitalization excluding AOCI and expect that our balance sheet will naturally delever over time. We continue to target holding company cash and invested assets at 2 times interest coverage. 3 billion of debt outstanding. We expect to maintain our estimated company action level risk-based capital, or RBC, ratio above our 400% target.

We view the NAIC's adoption of higher capital charges on CLOs invested in both broadly syndicated loans and middle market loans as very manageable after properly adjusting for funds withheld reinsurance assets. The estimated effect of the new capital charges for our CLO portfolio at June 30 would translate to a decrease in RBC of approximately 10 points. Note this is before any management action to minimize the capital impact ahead of year-end. Importantly, F&G Annuities & Life maintains strong capitalization and financial flexibility.

We conservatively manage to the most stringent capital requirements of our regulators and four rating agencies. We also have multiple reliable sources of capital supporting our business. Our in-force generates approximately $1 billion from the existing book of business. We expect even stronger capital generation in the future as we rapidly move toward a more fee-based, higher-margin, and less capital intensive business model.

Our reinsurance sidecar provides on-demand third-party capital that we can access without diluting shareholders. Our strategic flow reinsurance partnerships add another layer of flexibility, allowing us to adjust retained sales levels and support cash from operations as we grow. We have added yet another noteworthy flow reinsurance partner in July as we continue to be a partner of choice for the industry. Our statutory excess capital provides additional capital strength in line with our ratings and, as the balance sheet continues to delever, our available debt capacity will only grow over time.

44. We view repurchases as a tool at our disposal that we weigh up against other opportunities. We did all of this while maintaining momentum in our core retail and core institutional businesses and opportunistically taking advantage of attractive market windows for funding agreements, including a FABN issuance earlier this year. As Conor mentioned, we remain disciplined in allocating capital to our highest return opportunities and have de-emphasized MYGA sales at this time due to returns currently below our threshold.

Taken together, our capital allocation reflects the financial strength and flexibility we have built and our confidence in the future. Let me now turn the call over to Conor to wrap up. Conor Murphy, Chief Executive Officer & President Thank you, Mark. I would personally like to thank Mark for stepping in as interim CFO.

As expected, he has brought deep financial management and operational expertise to guide our strong finance organization during the leadership transition period. I'm also very excited to officially welcome Mike Bailey to F&G Annuities & Life as our next CFO. Mike is an actuary with deep knowledge and extensive experience in the life and annuity sector, having held a variety of executive roles at industry-leading insurance companies. Most recently, Mike was the Retail Chief Financial Officer at Corebridge Financial.

Mike joined F&G Annuities & Life just a couple of days ago and, while he is in the room with me, we can expect him to formally join the call in Q3. I look forward to partnering with Mike to continue to build an industry-leading business. We believe F&G Annuities & Life is well positioned to grow assets under management aligned with disciplined sales and capital allocation to the highest return opportunities, expand return on equity through strong, high-quality earnings generation, and create long-term shareholder value. This concludes our prepared remarks.

Let me now turn the call back to our operator for questions. OPERATOR Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad.

A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we poll for questions.

Our first question will hear from Wilma Burdis with Raymond James. Please go ahead with your question. Wilma Burdis, Analyst at Raymond James Hey, good morning. Some of the spread-based competitors have seen spreads stabilize a little bit this quarter, and maybe you can give us a little bit of color on what you're seeing based on F&G Annuities & Life's book and the prevailing interest rate environment.

And along those lines, maybe just talk a little bit about what you saw with the spread in this Q2. Thanks. Conor Murphy, Chief Executive Officer & President Hey, Wilma. Thank you very much.

Okay, there's quite a lot to that, so let me break it down into a few different components. If I start with the core fixed income, that was very much in line with our expectations. It was higher than Q1. In Q1, we had a few things that we mentioned that we believe were temporary and would resolve themselves in Q2, and indeed that is the fact.

Then if we look at—maybe I could separate cost of crediting from surrender charges and the acquisition costs—I would say on the cost of crediting, that is also almost exactly where we expected it to be. Very consistent with both Q1 and Q4 of last year, but it's a little higher than a year ago. But I want to be careful to explain why.