F&G Annuities & Life(FG) - 2025 Q4 - Annual Results

Financial Performance - F&G reported a 12% year-over-year increase in assets under management (AUM), reaching $73.1 billion as of December 31, 2025[6]. - The company achieved gross sales of $15.262 billion and net sales of $10.571 billion for the full year 2025, reflecting a decline from 2024[7]. - Adjusted return on assets (ROA) decreased to 0.87% in 2025, while adjusted return on equity (ROE) also fell to 8.2%[7]. - F&G's net earnings for 2025 were $248 million, translating to $1.88 per diluted share, down from $4.88 in 2024[7]. - Common Adjusted Net Earnings (ANE) for FY2025 were $546 million, with an ANE per share of $2.68[63][62]. - Adjusted net earnings for the year ended December 31, 2025, are projected at $442 million, with alternative investment income falling $278 million below long-term expectations[163]. Strategic Goals - The company aims to grow AUM by 50% and expand adjusted ROA to between 1.33% and 1.55% by 2025[20]. - The company expects to grow its share of fee-based earnings to approximately 25% by year-end 2028, up from 15% in FY2025[70]. - The company is transitioning to a more fee-based, higher margin, and less capital-intensive business model, focusing on cash flow generation[18]. Capital Management - The debt-to-capitalization ratio was managed to a long-term target of 25%, with total equity expected to grow naturally[73][74]. - The company returned $137 million of capital to shareholders in FY2025 through common and preferred dividends[81]. - Excess capital before stress testing was $0.7 billion, representing 350% of Risk-Based Capital (RBC)[147]. - The company maintains a strong capitalization and financial flexibility, actively managing to stringent capital requirements[161]. Investment Portfolio - The investment portfolio is well-diversified, with 27% in corporates and 21% in structured securities, conservatively positioned to match the liability profile[88]. - The investment portfolio consists of $56 billion, with 97% of fixed income being investment grade and a modest average credit-related impairment of 6 basis points over the last 5 years[91]. - The private origination portfolio is approximately $11 billion, representing 20% of the retained portfolio, with 92% rated as investment grade[100]. - The CLO portfolio is highly diversified, with 36% rated AAA and 40% par subordination, providing structural protection against defaults[110]. - The real estate debt portfolio totals $13 billion, with 33% in residential mortgage loans and 30% in commercial mortgage-backed securities[121]. - Alternative LPs account for $3 billion or 6% of the total portfolio, generating positive annual returns with a historical average return of 12%[144]. - The commercial mortgage loan (CML) portfolio is low risk with an average loan-to-value ratio of approximately 60% and 1.8% of the portfolio having a debt service coverage ratio below 1x[139]. - The structured credit portfolio includes 39% multifamily and 16% office properties, focusing on seasoned CMBS for visibility into credit performance[108]. - The investment strategy emphasizes high-grade public and private securities, structured credit, and diversified private credit exposure[95]. - The total retained portfolio has less than 1% rated by Egan Jones, with private letter ratings accounting for approximately 17%[100]. - The investment portfolio's net floating rate exposure is $2.8 billion, or about 5% of the total[91]. Market Position and Trends - F&G is strategically positioned in large, growing markets, targeting sustainable demand for guaranteed income solutions[26]. - U.S. consumers are holding $3 trillion in retail money market fund assets, with a projected 30% increase in the population aged 65-100 over the next 25 years[43][40]. - FY2025 gross sales reached $14.6 billion, slightly below the all-time record of $15.3 billion in FY2024, with 4Q25 gross sales at $3.4 billion[61]. - Record AUM before flow reinsurance was $73.1 billion, including retained AUM of $57.6 billion, reflecting a 12% year-over-year increase[52][61]. - Core sales in 4Q25 were strong at $2.8 billion, driven by indexed annuities and pension risk transfer sales[61]. Risk Management - In a moderate recession scenario, total portfolio loss is projected at $0.7 billion, with a loss percentage of -1.4%[147]. - Under severe recession conditions, total portfolio loss increases to $1.1 billion, reflecting a loss percentage of -2.2%[147]. - Stagflation scenario indicates a total portfolio loss of $0.8 billion, with a loss percentage of -1.6%[147]. - Management actions could mitigate losses by up to $1.3 billion, including $150 million from reduced new business and $950 million from revolver capacity utilization[151]. - The stress test methodology included cumulative historical credit migration and defaults, assuming an instantaneous shock with no management actions[146]. Ratings and Financial Strength - The company received an S&P Global upgrade to 'A-' and a Moody's upgrade to 'Baa1', reflecting improved financial strength[160]. - Investment income from alternative investments was consistently below the expected long-term return of approximately 10%, with variances of $153 million, $145 million, and $278 million in 2023, 2024, and 2025 respectively[164][163].