F&G Annuities & Life(FG) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - F&G Annuities & Life, Inc. reported record gross sales of $15.3 billion for the full year 2024, a 16% increase over 2023, with $3.5 billion in the fourth quarter [8] - Adjusted net earnings for Q4 2024 were $153 million, up 17% from $131 million in Q4 2023, and for the full year 2024, adjusted net earnings were $657 million, a 22% increase from $539 million in 2023 [36] - The company achieved an adjusted return on equity (ROE) of 12% in Q4 2024, compared to approximately 10% in Q4 2023, and expanded adjusted ROE from 10% to over 12% over the last year [42][26] Business Line Data and Key Metrics Changes - Retail channel sales reached $12 billion for the full year, a 20% increase over 2023, with record sales in fixed indexed annuities (FIA), multi-year guaranteed annuities (MYGA), and indexed universal life (IUL) products [9] - Institutional market sales totaled $3.3 billion for the year, with pension risk transfer (PRT) sales of nearly $2.3 billion, reflecting a 15% increase over 2023 [12] - Funding agreements were $1 billion for the full year, down from $1.6 billion in 2023, with no funding agreements in Q4 [15] Market Data and Key Metrics Changes - The company’s assets under management (AUM) reached a record $65.3 billion at the end of Q4 2024, a 17% increase over Q4 2023, driven by net new business flows [18] - The retained portfolio was high quality, with 97% of fixed maturities being investment grade, and the company holds very little office exposure at 1.7% of the total portfolio [19][20] Company Strategy and Development Direction - The company is focused on diversifying earnings beyond spread-based sources and driving margin expansion, with a strategic emphasis on flow reinsurance and owned distribution [23] - F&G Annuities & Life, Inc. plans to continue expanding its distribution channels and has entered the registered indexed linked annuity (RILA) market, expecting significant sales growth in the medium term [10][11] - The company aims to grow AUM by 50% and increase adjusted ROA to 133 to 155 basis points, while targeting an adjusted ROE of 13% to 14% [48] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing secular demand for their products, particularly as baby boomers age and seek fixed income solutions [64] - The company has not seen meaningful impacts from industry lawsuits related to pension risk transfer and continues to see opportunities in the $100 million to $1 billion deal size market [57] - Management anticipates a rebound in fixed income yield in 2025 as they fully deploy cash and refine strategic asset allocation [21] Other Important Information - The company has invested $680 million in strategic owned distribution companies, with an estimated annualized EBITDA of approximately $90 million expected in 2025 [24] - F&G Annuities & Life, Inc. returned $125 million of capital to shareholders through dividends and received upgrades in financial strength ratings from AM Best and Moody's [25] Q&A Session Summary Question: Can you talk about the evolving organizational structure at the company and what that growth opportunity means? - Management indicated that the organizational changes are in response to significant growth and the need to drive value through new distribution channels and flow reinsurance arrangements [54] Question: Can you discuss the impact of industry lawsuits related to pension risk transfer? - Management noted that they have not felt any impact from industry lawsuits and continue to see opportunities in their targeted market segment [57] Question: What is the outlook for growth in net sales or retained AUM over the next few years? - Management remains optimistic about growth, citing strong secular demand and the addition of distribution partners as key drivers [62][66] Question: How do you expect the ROA to trend from here? - Management expects ROA to rebound in 2025, with adjustments made to asset allocation and renewal rate settings to mitigate any compression [71] Question: What is the current state of MYGA sales and market demand? - Management indicated that while MYGA sales have seen a decline, they do not anticipate a significant long-term decline in demand for MYGA products [114] Question: Can you provide insights on the funding agreement-backed note market? - Management explained that they will issue funding agreement-backed notes opportunistically based on capital allocation priorities and market conditions [81][83]