F&G Annuities & Life(US:FG)2024-05-11 23:21Financial Data and Key Metrics Changes - Adjusted net earnings for Q1 2024 were $154 million, up 18% from $131 million in Q1 2023, reflecting asset growth and diversification of margin [54][26] - Adjusted return on assets (ROA) was 125 basis points, above the target of 110 basis points, indicating strong performance [30][26] - Retained assets under management (AUM) reached a record $49.8 billion, a 10% increase from Q1 2023 [8] Business Line Data and Key Metrics Changes - Gross sales for Q1 2024 were $3.5 billion, a 6% increase from Q1 2023, with retail channel sales at $2.8 billion [17] - Pension risk transfer (PRT) sales set a new record at $584 million for Q1 2024, contributing to cumulative sales exceeding $5 billion [48] - Fixed indexed annuity (FIA) terminations increased compared to the prior year, but new business volumes continued to outpace surrenders, resulting in positive net cash flows [49] Market Data and Key Metrics Changes - The investment portfolio remains high quality, with 95% of fixed maturities being investment grade, and credit-related impairments at a modest 2 basis points [25] - The fixed income yield, excluding alternative investment volatility, expanded to 4.56% in Q1 2024 from 4.33% in Q1 2023 [50] Company Strategy and Development Direction - The company is focused on diversifying earnings into more capital-light strategies and maintaining a disciplined capital management process [11] - The rollout of the new registered index-linked annuity (RILA) product is expected to significantly contribute to sales in the coming years [47] - The company aims to leverage its owned distribution strategies to enhance risk-adjusted returns and strengthen relationships with key partners [52] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business's ability to perform through market cycles and highlighted strong sales opportunities despite potential regulatory impacts [73][24] - Concerns were raised about the new Department of Labor fiduciary rules potentially discouraging agents from serving middle market clients, but overall momentum in business is expected to remain strong [24][71] Other Important Information - The company has invested $530 million in its alternatives portfolio, which is expected to generate EBITDA of $45 million to $50 million in 2024 [27] - The debt-to-capitalization ratio was 24% as of March 31, aligning with the long-term target of 25% [55] Q&A Session Summary Question: How should we think about the contribution of the RILA product in 2024? - Management indicated that the RILA product's contribution will be modest in 2024 but is expected to become significant in 2025 as more distribution partners are onboarded [57] Question: What is the outlook for the PRT market given recent competitive dynamics? - Management acknowledged that while the market is competitive, they believe they can maintain good spreads and volumes, with a healthy pipeline of deals [62][74] Question: How does the company view the impact of the new fiduciary rules? - Management noted that while compliance costs will increase, they do not expect it to significantly impact their forecasts, although it may affect agents serving the middle market [71][72]