10-Q: Corebridge Financial Reports Mixed Q3 Results Amidst Market Volatility and Strategic Shifts

Corebridge Financial's Q3 2024 results reveal a net loss, influenced by market volatility and strategic adjustments, despite growth in certain areas.

Summary

• Corebridge Financial reported a net loss of $1.187 billion for the third quarter of 2024, a significant downturn compared to the $2.069 billion net income in the same period last year.
• The company's adjusted pre-tax operating income (APTOI) was $1.031 billion, an increase from $813 million in the prior year, reflecting growth in certain business segments.
• Total revenues decreased to $2.616 billion from $5.505 billion year-over-year, primarily due to lower net realized gains and losses.
• Net investment income increased to $3.296 billion from $2.657 billion year-over-year, driven by higher base portfolio income and variable investment income.
• The company's total assets were $399.422 billion as of September 30, 2024, compared to $379.270 billion at the end of 2023.
• Corebridge repurchased approximately 25.9 million shares of its common stock for an aggregate purchase price of $715 million during the third quarter of 2024.
• The company's book value per common share was $23.69, while adjusted book value per common share was $37.32 as of September 30, 2024.

Sentiment

Score: 4

Explanation: The document presents mixed results with a significant net loss, but also shows growth in certain areas and strategic initiatives. The overall tone is cautious, reflecting the challenges of the current market environment.

Positives

• Net investment income increased year-over-year, driven by higher base portfolio income and variable investment income.
• Adjusted pre-tax operating income (APTOI) increased year-over-year, reflecting growth in certain business segments.
• The company has a strong liquidity position with $4.5 billion in liquidity sources at Corebridge Parent and its intermediate holding companies.
• Corebridge has completed $400 million of expense reductions as part of its Corebridge Forward program.

Negatives

• The company reported a net loss of $1.187 billion for the third quarter of 2024.
• Total revenues decreased year-over-year, primarily due to lower net realized gains and losses.
• The company experienced a significant increase in net realized losses, primarily driven by higher losses on the Fortitude Re balances.
• The company experienced an unfavorable change in the fair value of market risk benefits, net, primarily driven by the impacts of interest rates.

Risks

• The company's financial results are subject to market volatility, including changes in interest rates, equity prices, and credit spreads.
• The company's reinsurance agreements with Fortitude Re create volatility in net income due to the embedded derivative in the funds withheld payable.
• The company's variable annuity guaranteed benefit riders expose it to market risk, which is partially mitigated by its hedging program.
• The company's financial results are subject to regulatory and governmental investigations and actions, and litigation and other forms of dispute resolution.
• Failure to complete the Nippon Transaction may negatively impact the company's ongoing business and stock price.

Future Outlook

The company expects to continue to manage its liquidity and capital resources prudently through a well-defined risk management framework. Corebridge expects to continue to adjust crediting rates on in-force business, as appropriate, to be responsive to changing rate environments. The company expects to continue to monitor the progress of the litigation related to the DOL rule while continuing to evaluate potential impact of the DOL rule to its business. The company expects to continue to refine its estimated CAMT liability based on future guidance.

Industry Context

The results reflect the challenges of operating in a volatile market environment with rising interest rates and inflationary pressures. The company's strategic partnerships and focus on expense management are aimed at improving long-term profitability and competitiveness. The company is also adapting to regulatory changes and evolving market conditions.

Comparison to Industry Standards

• Corebridge's performance is mixed when compared to industry peers. While the company has shown growth in adjusted pre-tax operating income and net investment income, the net loss and decline in total revenues are concerning.
• The company's reliance on spread-based products and exposure to market volatility are common in the insurance industry, but the magnitude of the impact on Corebridge's results is notable.
• The company's strategic partnerships with Blackstone and BlackRock are similar to strategies employed by other large insurance companies to enhance investment returns and manage risk.
• The company's focus on expense management and operational efficiency is consistent with industry trends aimed at improving profitability.

Legal Proceedings

• AGL continues to defend against Moriarty v. American General Life Insurance Co. (S.D. Cal.), a putative class action involving Sections 10113.71 and 10113.72 of the California Insurance Code.
• AGL is also defending other actions in California involving similar issues: Allen v. Protective Life Insurance Co. and American General Life Insurance Co. (E.D. Cal.), Chuck v. American General Life Insurance Co. (C.D. Cal.), Koch Family Insurance Trust v. American General Life Insurance Co. (C.D. Cal.), Wong v. American General Life Insurance Co. (C.D. Cal.) and People of the State of California v. American General Life Insurance Co., et al. (Cal. Superior Court, San Diego County).

Related Party Transactions

• Corebridge has historically entered into various transactions with AIG, some of which are continuing.
• Corebridge has a long-term asset management relationship with Blackstone to manage a portion of its investment portfolio.
• Corebridge has investment management agreements with BlackRock and its investment advisory affiliates.
• Corebridge has various arrangements with VIEs, and consolidates the VIE if it is determined to be the primary beneficiary.

Stakeholder Impact

• Shareholders may be concerned about the net loss and the decline in total revenues.
• Policyholders may be affected by changes in interest rates and market conditions, which could impact the value of their contracts.
• Employees may be affected by the ongoing implementation of the Corebridge Forward program.
• Creditors may be affected by changes in the company's credit ratings and financial performance.

Next Steps

• The company will continue to monitor market conditions and adjust its investment strategies accordingly.
• The company will continue to implement its Corebridge Forward program to reduce expenses and improve efficiency.
• The company will continue to evaluate the potential impacts of the new SEC climate-related disclosure rules.
• The company will continue to monitor the progress of the litigation related to the DOL rule while continuing to evaluate potential impact of the DOL rule to its business.

Key Dates

Keywords

Corebridge Financial, financial results, net loss, adjusted pre-tax operating income, net investment income, share repurchase, market risk benefits, Fortitude Re, annuities, insurance, debt, derivatives, reinsurance, capital, liquidity