F&G Annuities & Life(FG) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q2 2023, the company reported adjusted net earnings of $79 million or $0.63 per share, a decrease from $155 million or $1.45 per share in Q2 2022, primarily due to unfavorable significant items [5][6] - Adjusted net earnings increased by 14% year-over-year when excluding significant items [7] - The company ended Q2 with a GAAP book value of $5.1 billion or $40.70 per share [19] Business Line Data and Key Metrics Changes - Retail channel sales were $2.3 billion in Q2 2023, up 5% from $2.2 billion in Q2 2022, marking the fifth consecutive quarter of sales exceeding $2 billion [30] - Fixed indexed annuity outflows were slightly elevated compared to previous quarters, but inflows remained strong [10] - The company’s retained assets under management reached $46.3 billion as of June 30, up from $45.4 billion as of March 31 [9] Market Data and Key Metrics Changes - Institutional market sales were nearly $700 million in Q2 2023, down from nearly $900 million in Q2 2022 [36] - The company expects to achieve annual institutional sales of $2 billion in 2023 [77] Company Strategy and Development Direction - The company is focused on diversifying into capital-light fee-based earnings, including flow reinsurance and owned distribution [13] - The strategy includes expanding insurance distribution holdings to enhance relationships and boost presence in underserved markets [14] - The company aims to grow gross sales at a double-digit rate while managing net sales to continue growing retained assets under management [41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company’s ability to expand business and improve profitability despite macroeconomic uncertainties [75] - The company anticipates continued strong demand for fixed annuities, driven by competitive crediting rates [72] - Management highlighted the importance of smart capital allocation and the potential for increased dividends over time [53][48] Other Important Information - The company returned $41 million to shareholders in Q2 2023, including $25 million in common dividends and $16 million in share repurchases [1] - The company’s debt-to-capitalization ratio was 23% as of June 30, below the long-term target of 25% [18] - The company has maintained a fixed income yield above 4% for four consecutive quarters [34] Q&A Session Summary Question: What growth rate is expected for the block if retaining $57 billion? - Management indicated that single-digit growth is expected for the block under those circumstances [46][52] Question: What is the outlook for dividends? - The current annual common dividend of approximately $100 million is viewed as sustainable, translating to a yield of about 3% [48] Question: What is driving the outperformance in ROA? - Management attributed the outperformance to effective investment strategies and tight expense management [67][69] Question: What are the expectations for gross sales in 2024? - Management expects to continue growing gross sales at a double-digit rate in 2024 [72] Question: How is the company managing competitive pressures? - Management noted that while there are aggressive competitors, the company is focused on capital allocation across all channels [54]