F&G Annuities & Life(US:FG)2025-11-10 18:32Financial Performance - Total revenues for Q3 2025 were $1,694 million, up from $1,444 million in Q3 2024, representing a 17.3% increase [327]. - Net earnings attributable to F&G common shareholders for Q3 2025 were $114 million, compared to a loss of $10 million in Q3 2024 [327]. - Core sales for indexed annuities, IUL, and PRT were $2,244 million in Q3 2025, slightly higher than $2,223 million in Q3 2024 [327]. - Gross sales for the nine months ended September 30, 2025, were $11,246 million, down from $11,793 million in the same period of 2024, a decrease of 4.6% [327]. - Net sales for Q3 2025 were $2,800 million, compared to $2,386 million in Q3 2024, indicating a 17.4% increase [327]. - Life insurance premiums and other fees increased to $711 million for the three months ended September 30, 2025, compared to $506 million for the same period in 2024, reflecting a growth of 40.5% [329]. - Interest and investment income for Q3 2025 was $748 million, compared to $712 million in Q3 2024, reflecting a 5.1% increase [330]. - Adjusted net earnings for the three months ended September 30, 2025, were $165 million, compared to $156 million for the same period in 2024 [349]. - Total revenues for the nine months ended September 30, 2025, were $11 million, while total expenses were $136 million, resulting in a net loss of $118 million [417]. Market Trends - The fixed index annuity market grew from nearly $12 billion in sales in 2002 to $130 billion in 2024, while the registered index-linked annuities market increased from $17 billion in 2019 to $62 billion in 2024 [301]. - The indexed universal life (IUL) market has expanded from $100 million in annual sales in 2002 to $2 billion in 2024, reflecting growing demand for financial certainty among middle-income Americans [301]. - The aging U.S. population is projected to increase the demand for retirement savings solutions, with over 11,000 Americans turning 65 every day and a 30% increase in the population aged 65-100 expected over the next 25 years [300]. Investment Strategy - The company’s investment strategy focuses on high-grade fixed-income assets across various sectors, including corporate and government securities [353]. - The company’s investment portfolio is designed to balance risk across diverse asset classes, primarily invested in high-quality fixed income securities [351]. - The company reported a decrease in investment income from alternative investments, which was $67 million below the long-term expected return of approximately 10% for the three months ended September 30, 2025 [349]. - The company maintains a focus on NAIC 1 rated instruments, with 98% of municipal bond exposure rated NAIC 1 as of September 30, 2025 [369]. Asset Management - As of September 30, 2025, the company's reserves, net of reinsurance, were $6.6 billion with a weighted average crediting rate of 4.71%, compared to $6.4 billion and 4.42% as of December 31, 2024 [298]. - The profitability of the company is significantly influenced by the amount of assets under management (AUM), which increases when cash inflows exceed cash outflows [313]. - Average Assets Under Management (AAUM) increased to $55,654 million for the three months ended September 30, 2025, compared to $52,661 million in 2024 [331]. - The average crediting rate for the three months ended September 30, 2025, was 4%, down from 5% in 2024 [338]. Risk Management - The company has begun executing pay-float and receive-fixed interest rate swaps to manage market risks associated with interest rate changes on floating rate investments [310]. - The company utilizes derivatives to hedge exposure to product-related equity market risks, primarily through equity options and futures contracts [310]. - The company is required to pay guaranteed minimum crediting rates on fixed rate annuities, which could negatively impact earnings if investment portfolio earnings decline [298]. Distribution Strategy - The company has expanded its distribution strategy through majority and minority ownership stakes in several Independent Marketing Organizations (IMOs), enhancing earnings and risk-adjusted returns [305]. - The company retains approximately 82% ownership of F&G common stock as of September 30, 2025, following a pro rata distribution of 15% of common stock on December 1, 2022 [307]. Tax and Regulatory - Income tax expense for the three months ended September 30, 2025, was $11 million, compared to an income tax benefit of $25 million for the same period in 2024 [348]. - The effective tax rate for the three months ended September 30, 2025, was 8%, compared to 83% for the same period in 2024 [348]. - The maximum ordinary dividend capacity for FGL Insurance in 2025 is $0, indicating regulatory constraints on dividend payments [400].