Summary of F&G Conference Call Company Overview - **Company**: F&G (Fidelity & Guaranty Life) - **Industry**: Life Insurance and Annuities Key Points and Arguments Company Positioning and Strategy - F&G has undergone significant changes, including capital raising and a new reinsurance partnership, positioning itself for a more capital-light strategy with a focus on distribution rather than being a balance sheet-heavy company [3][4] - The company has committed $1 billion in capital to pursue this strategy, indicating a shift towards being a distributor for other companies' balance sheets [3] Retail Annuity Sales Growth - The industry has seen a substantial increase in annual annuity sales, from $250 billion to an expected $450 billion this year, attributed to demographic trends and increased acceptance of annuities by financial advisors [5][6] - The penetration rate of fixed annuities remains low, suggesting significant growth potential in this area [5] Competitive Environment - The annuity market has become increasingly competitive, particularly in the Multi-Year Guarantee Annuities (MYGA) space, where sales volume fluctuated significantly [8][9] - F&G maintains a stable business in Fixed Indexed Annuities (FIA), which is considered foundational for the company [9] Expense Management - F&G has taken actions to manage expenses due to spread pressure, aiming to improve the expense ratio by about 10 basis points [4][28] - The company has grown rapidly, leading to a reassessment of its project load and expense base [4] Pension Risk Transfer (PRT) Market - F&G focuses on the $100 million to $1 billion range in the PRT market, with a consistent pipeline of deals and a target of $1.5 to $2.5 billion in annual transactions [21][22] Return on Assets Target - F&G has set a five-year target for return on assets (ROA) of 133 to 155 basis points, with current performance at 129 basis points, indicating progress towards this goal [24][25][27] Reinsurance Strategy - The reinsurance strategy allows F&G to reduce capital requirements significantly, enhancing return on capital and positioning the company as a distributor rather than a balance sheet player [36][37] - The partnership with Blackstone is highlighted as a key component of this strategy, providing access to various asset classes [36][50] Life Insurance Business Performance - F&G's life insurance segment is performing well, with a focus on middle-market and cultural markets, contributing significantly to sales and profitability [57][58] - The company has a strong market share in Indexed Universal Life Insurance, ranking number six in sales [58] Investment Strategy and Market Conditions - The company is cautious about credit spreads and is not willing to stretch for returns, focusing on maintaining a stable investment portfolio [49][50] - F&G has a diversified asset allocation strategy, reducing exposure to floating rate assets as interest rates fluctuate [51] Regulatory Environment - The new NAIC rule on asset adequacy testing for reinsurance is not expected to have a significant impact on F&G, as the company is already compliant with rigorous testing standards [52][53] Future Outlook - F&G is optimistic about its growth trajectory, particularly in the annuity and life insurance markets, and is focused on leveraging its distribution strategy for future success [38][44] Additional Important Insights - The company is investing in technology and operational improvements to enhance productivity and scalability [34][32] - F&G's unique position in the market allows it to capitalize on opportunities in both the annuity and life insurance sectors, with a strong emphasis on independent distribution [44][58]

Financial Data and Key Metrics Changes - The company generated total revenue of $3.6 billion in Q2 2025, compared to $3.2 billion in Q2 2024, excluding net recognized gains and losses [12] - Adjusted net earnings were $318 million or $1.16 per diluted share, down from $338 million or $1.24 per share in Q2 2024 [13] - The title segment contributed $260 million to adjusted net earnings, while the F and G segment contributed $89 million [13] Business Line Data and Key Metrics Changes - The title segment generated $2.2 billion in total revenue in Q2 2025, up from $2 billion in Q2 2024, with direct premiums increasing by 12% [14] - Adjusted pretax title earnings were $337 million, a $13 million or 4% increase from the previous year, with a title margin of 15.5% [5][14] - The F and G segment's assets under management grew to $69.2 billion, a 13% increase year-over-year [10] Market Data and Key Metrics Changes - Daily purchase orders opened increased by 5% compared to Q2 2024, while refinance orders saw a significant 28% increase [6][7] - Commercial volumes showed strong performance with direct commercial revenue of $626 million in the first half of 2025, up 23% from $511 million in the same period of 2024 [8] Company Strategy and Development Direction - The company is focused on long-term growth through strategic investments in security, technology, and recruiting [5] - F and G is pursuing a more fee-based, higher-margin, and less capital-intensive business model, supported by the launch of a new reinsurance vehicle [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about a rebound in transaction volumes and the potential for efficiencies across operations [9] - The company anticipates that elevated health claims will normalize in 2026, and they remain confident in maintaining a 15% to 20% pretax title margin [15][45] Other Important Information - The company repurchased 2.9 million shares for $159 million at an average price of $55.2 per share during Q2 2025 [20] - The company returned nearly $300 million of capital to shareholders through dividends and share repurchases in the second quarter [21] Q&A Session Summary Question: Thoughts on holding separate businesses under the same company - Management is pleased with F and G's performance and sees continued value in the current structure, contributing 32% of adjusted earnings [27][28] Question: Details on personnel expenses - Personnel expenses increased due to active recruiting and elevated health claims, with a significant impact from medical claims [29][32] Question: Margin and expense outlook - Management expects health claims to peak this quarter and then moderate, maintaining confidence in the 15% to 20% margin range [44][45] Question: Commercial order momentum - National open orders were up 22% year-over-year, with strong expectations for continued growth in the back half of the year [49][50] Question: Buyback strategy - The company plans to remain active in share buybacks, particularly if share prices show weakness [55][60] Question: Dividend capacity for the second half - Approximately $250 million is available from regulated entities, with an additional $60 million from F and G [67]

Financial Data and Key Metrics Changes - First quarter reported adjusted net earnings were $91 million or $0.72 per share, compared to $108 million or $0.86 per share in the first quarter of 2024, reflecting a decrease of $17 million primarily driven by margin compression and higher interest expense [27][28] - First quarter adjusted return on assets (ROA) was 68 basis points, pressured from near-term headwinds, with a last twelve-month adjusted ROA of 100 basis points, down six basis points from the previous quarter [29] - Reported adjusted return on equity (ROE), excluding AOCI, was 9.7%, up 2.3% over the first quarter of 2024 [29] Business Line Data and Key Metrics Changes - F&G reported record assets under management (AUM) before flow reinsurance of $67.4 billion as of March 31, reflecting a 169% increase compared to the first quarter of 2024 [21] - Gross sales were $2.9 billion, a 17% decrease from the first quarter of 2024, primarily due to lower MYGA sales, while indexed annuity sales remained strong at $1.5 billion [21][22] - Pension risk transfer (PRT) sales were $311 million, down from $584 million in the first quarter of 2024, with funding agreements at $525 million compared to $105 million in the prior year [23] Market Data and Key Metrics Changes - The investment portfolio is well matched to the liability profile, with 96% of fixed maturities being investment grade, and credit-related impairments averaging six basis points over the last five years [12][29] - The fixed income yield was 4.53% in the first quarter, a decrease of three basis points from the first quarter of 2024, reflecting the runoff of higher-yielding in-force assets [13] Company Strategy and Development Direction - The company continues to diversify earnings between spread-based and fee-based sources, with a focus on optimizing return on capital and maintaining pricing discipline [19][20] - F&G is committed to achieving its 2023 Investor Day targets while navigating near-term headwinds and macro uncertainty [31] Management's Comments on Operating Environment and Future Outlook - Management believes that the near-term headwinds are temporary and expects improvement in sales and profitability throughout 2025 [7][9] - The company remains confident in its business model's resilience and its ability to generate long-term shareholder value despite current market volatility [84] Other Important Information - The company has successfully completed recent capital markets activities, including issuing $375 million of junior subordinated notes and a public offering of 8 million shares of common stock [30][31] - The owned distribution portfolio is performing well, with double-digit annual growth of EBITDA expected over the medium term [19] Q&A Session Summary Question: Growth opportunity for the Ryla product - Management expressed excitement about the Ryla product, noting that it has taken time to get onto platforms but is now adding broker dealers consistently, with medium-term potential in the billions [35][38] Question: Impact of lower industry volume on own distribution - Management indicated that the slowdown in owned distribution was balanced between industry volume and investments supported by the company, with a rebound observed in April [39][40] Question: Thoughts on capital deployment after raising common equity - Management stated that the capital raised would be deployed thoughtfully into new business, maintaining a disciplined approach to pricing and capital allocation [43][44] Question: Cost of funds increase and market competition - Management acknowledged the increase in cost of funds and attributed it to lower surrender income and market volatility, but remains disciplined in pricing [47][48] Question: Performance of the alternatives portfolio - Management noted that the direct lending portfolio performed well, while the limited partnerships came in lower than expectations, impacting overall yield [75][76] Question: Surrender activity expectations - Management projected that surrender activity would remain similar in Q2 compared to Q1, with ongoing uncertainty regarding future surrenders [78][80]