F&G Annuities & Life(FG) - 2025 Q2 - Quarterly Results

Financial Performance - Gross sales for 2Q25 reached $4.1 billion, a 41% increase compared to 1Q25[6] - Net sales for 2Q25 were $2.7 billion, up 23% from 1Q25[6] - Common adjusted net earnings (ANE) for 2Q25 were $546 million, with an adjusted return on assets (ROA) of 0.92%[71] - F&G's adjusted net earnings for the year ended December 31, 2024, were $546 million, reflecting a significant increase from $335 million in 2023[150] - The company reported adjusted net earnings of $91 million for the three months ended March 31, 2025, which included a $16 million reinsurance true-up adjustment[145] - F&G's adjusted net earnings for the three months ended June 30, 2025, were $103 million, with investment income from alternative investments being $83 million below the long-term return expectations[144] Assets Under Management (AUM) - Assets Under Management (AUM) increased to $55.6 billion, reflecting a 7% year-over-year growth[6] - The average assets under management (AUM) reached $69.2 billion before flow reinsurance, with retained AUM of $55.6 billion[69] - The company aims to grow AUM by 50% and expand adjusted ROA to between 1.33% and 1.55%[19] - F&G's assets under management (AUM) are reported net of reinsurance assets ceded, providing insight into the size of its investment portfolio[156] Investment Income - Investment income from alternative investments in 2Q25 was $83 million, significantly above long-term return expectations[8] - Investment income from alternative investments was $153 million below management's long-term expected return of approximately 10% for the year ended December 31, 2023[150] Capital Management - The company completed a common stock offering in 1H25, generating net proceeds of $269 million to support future growth and liquidity[76] - The debt-to-capitalization ratio was managed to a long-term target of 25%, with total equity ex. AOCI at $6.323 billion as of 2Q25[75] - The company returned $65 million of capital to shareholders in 1H25 through common and preferred dividends[83] - F&G's total equity attributable to common shareholders, excluding AOCI, is a key measure for assessing the capital position of the company[163] - The adjusted return on average common shareholder equity, excluding AOCI, is calculated based on the rolling four quarters adjusted net earnings attributable to common shareholders[154] - F&G's debt-to-capital ratio, excluding AOCI, is a critical measure for evaluating its capital structure[160] Portfolio Composition - The portfolio is conservatively positioned, with 97% of fixed income investments rated investment grade[54] - The CLO portfolio has a market value of $5.0 billion, with 96% rated as investment grade[97] - The portfolio is diversified across industries, with 40% in multifamily, 17% in industrial, and 15% in office properties[90] - The Real Estate Debt portfolio has a market value of $12.5 billion and a weighted average life of 5.5 years[108] - The Asset Backed Securities (ABS) focus on high-quality, directly originated specialty finance assets, with 12% in high tech and 11% in healthcare and pharmaceuticals[93] - The CMBS portfolio has a market value of $4.1 billion, with an average NAIC rating of 1.4[115] - The company has a diversified exposure across asset classes, with 32% in CMBS and 30% in CML[107] Market Trends and Demographics - The U.S. population aged 65-100 is projected to increase by 30% over the next 25 years, providing a favorable demographic trend for growth[34] - U.S. consumers are holding nearly $3 trillion in retail money market fund assets, with expectations to lock in higher interest rates through fixed annuities as rates decline[37] Strategic Focus - The company is focused on margin expansion through retained business and diversifying earnings via flow reinsurance and owned distribution[17] - The company expects steady and growing adjusted net earnings over time, driven by asset growth and disciplined expense management[72] - The owned distribution margin was $14 million in 2Q25, contributing to margin expansion and fee-based earnings[47] Credit Quality - The company achieved an upgrade to 'A-' from S&P Global, reflecting improved credit quality[141] - The company has received multiple ratings upgrades, indicating an upward trajectory in financial strength[142] - The CLO portfolio has a par subordination of 26%, indicating structural protection and capital efficiency[97] - The average loan-to-value (LTV) ratio for the Commercial Mortgage Loan (CML) portfolio is approximately 60%, with 71 holdings averaging $30 million each[126] Performance Metrics - Adjusted Return on Assets (ROA) for 1H25 was 8.8%, an increase of 40 basis points year-over-year[6] - Adjusted Return on Equity (ROE) for 2Q25 was 8.8%, consistent with the previous year[7]