Retirement researchers are often enthusiastic about annuities, but many consumers are reasonably skeptical. Here to discuss basic information about annuities and their pros and cons is Christine Benz, Morningstar’s director of personal finance and retirement planning. This interview has been edited for length and clarity. Q: How do income annuities work, and how they are different from investing in something that pays out income like bonds? A: An annuity is a contract with an insurance company. In the ...

Financial Data and Key Metrics Changes - Adjusted operating income increased by 32% year over year, reaching $427 million or $2.36 per diluted share [25][4] - Net income available to common stockholders was $688 million or $3.80 per diluted share, reflecting positive market risk benefits [25][26] - The estimated RBC ratio remained above 420%, consistent with the company's strategy to maintain a capital buffer above the 400% target [40][22] Business Line Data and Key Metrics Changes - Group Protection business achieved record earnings of $173 million, up 33% year over year, with a margin increase to 12.5% [26][17] - Annuities generated operating income of $287 million, slightly down from $297 million in the prior year, primarily due to traditional variable annuity outflows [32] - Life Insurance reported operating earnings of $32 million, a significant improvement from an operating loss of $35 million in the prior year [37] Market Data and Key Metrics Changes - All four business segments delivered double-digit sales growth in the first half of the year, with notable contributions from previously non-key products [7] - Retirement Plan Services saw first-year sales increase by nearly 50% year over year, with total deposits up by 10% [20] - Annuities sales reached $4 billion, a 6% sequential increase, with fixed annuity sales growing by 41% [9][11] Company Strategy and Development Direction - The company is focused on increasing risk-adjusted returns, reducing volatility, and growing its franchise through disciplined execution [5][6] - Strategic investments are being made in higher-margin products and segments, enhancing digital capabilities, and optimizing the operating model [6][22] - The company aims to deepen its strategic moat and evolve into a more agile organization, aligning capital deployment with strategic priorities [22][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's trajectory, emphasizing the importance of disciplined execution and strategic clarity [46][23] - The economic backdrop remains volatile, but the company is committed to delivering long-term value and sustainable growth [7][22] - Management noted that while results may not be linear, the momentum is building, and they are excited about the path forward [7][8] Other Important Information - The company launched a Bermuda-based reinsurance subsidiary to enhance capital efficiency and respond to market opportunities [6] - The alternative investment portfolio achieved a 10% annualized return, supporting the overall financial performance [25][45] - The company is actively exploring external reinsurance solutions to optimize its legacy life portfolio [88] Q&A Session Summary Question: On group and the shift into smaller local markets and supplemental health products - Management highlighted the successful execution of targeted segment strategies, particularly in local markets and supplemental health, which are expected to continue driving margin expansion [50][51] Question: On the restructuring of the Life Captives - Management indicated that while they are working on optimizing the life portfolio, concrete numbers regarding earnings impact will be provided later [61][62] Question: On RILA product sales and market competition - Management reported a 32% increase in RILA sales year over year, emphasizing a focus on profitable growth and capital efficiency [66][68] Question: On free cash flow conversion guidance for 2026 - Management expressed confidence that the long-term free cash flow conversion rate should be above previous targets, especially with the deployment of Bain Capital [74][76] Question: On distribution growth drivers in the group business - Management discussed the importance of strategic broker relationships and investments in digital capabilities to enhance competitive differentiation and drive growth [80][82] Question: On external reinsurance solutions - Management noted that while it is too early to discuss specifics, they are focused on optimizing the legacy life block through potential reinsurance deals [88]

Group 1 - Apollo Global Management is transforming its asset management model by merging with its insurance and retirement services company, Athene, positioning itself as a principal investor rather than a third-party asset manager [1][11][12] - The company emphasizes a principal-oriented approach, focusing on long-term capital investments to support significant capital expenditure transformations, such as infrastructure and defense in Europe [2][12] - Apollo's strategy includes a diverse capital pool with annual returns ranging from 5% to 20%, allowing for flexible financing solutions tailored to specific company needs [2][27] Group 2 - Apollo manages approximately $800 billion in assets, with a significant portion allocated to credit markets, and has seen annual growth of about $150 billion [10][43] - The company has a unique asset allocation, with around 65% of its balance sheet in investment-grade assets, while its credit business includes both its own assets and third-party investments [43][44] - The firm is actively involved in creating customized financing solutions for major corporations, providing flexibility and off-balance sheet transactions that do not impact their current debt levels [59][60] Group 3 - The current macroeconomic environment presents challenges and opportunities, particularly with rising interest rates affecting investment strategies and asset returns [4][70] - Apollo's innovative approach to asset generation includes acquiring platforms and building capabilities to create a robust asset origination system, which has become increasingly valuable in the current market [36][41] - The company is exploring the potential for increased liquidity in private assets through technological advancements and structural reforms in the European capital markets [81][84] Group 4 - The relationship between limited partners (LPs) and general partners (GPs) is evolving into more collaborative partnerships, reflecting a shift in how investment strategies are developed and executed [48][50] - Apollo's focus on understanding the unique needs of issuers has allowed it to establish itself as a viable alternative financing option for large corporations, diversifying their funding sources [56][58] - The firm anticipates that private assets will become more accessible to retail investors, with a focus on creating semi-liquid structures and risk profiling to meet diverse investor needs [86][88]