8-K: F&G Annuities & Life Reports Mixed Third Quarter Results Amidst Strong Sales Growth

F&G Annuities & Life reported a net loss for the third quarter of 2024, despite a significant increase in gross sales and assets under management.

Summary

• F&G Annuities & Life reported a net loss of $10 million, or $0.08 per diluted share, for the third quarter of 2024, a decrease from a net income of $306 million, or $2.45 per share, in the same quarter of 2023.
• The net loss included $150 million of net unfavorable mark-to-market effects and $16 million of other unfavorable items, which are excluded from adjusted net earnings.
• Adjusted net earnings for the third quarter were $156 million, or $1.22 per share, compared to $120 million, or $0.96 per share, in the third quarter of 2023.
• Gross sales for the third quarter reached $3.9 billion, a 39% increase year-over-year, primarily driven by record retail channel sales of $3.5 billion, which nearly doubled from the previous year.
• Assets under management before flow reinsurance reached a record $62.9 billion, a 20% increase from the third quarter of 2023, including record AUM of $52.5 billion, an 11% increase.
• The company returned $31 million of capital to shareholders through common and preferred dividends during the quarter.
• The adjusted return on assets (ROA) expanded above the baseline of 110 basis points shared at the Investor Day in October 2023, with a trailing twelve months adjusted ROA of 126 basis points.

Sentiment

Score: 6

Explanation: The sentiment is mixed. While the company shows strong sales growth and AUM, the net loss and market volatility concerns temper the positive aspects. The company is making progress towards its goals, but the results are not uniformly positive.

Positives

• F&G experienced significant sales growth, with gross sales up 39% year-over-year.
• The company achieved record assets under management before flow reinsurance, indicating strong business growth.
• Adjusted net earnings increased compared to the same quarter last year, demonstrating improved profitability when excluding market fluctuations.
• The company's adjusted return on assets (ROA) expanded, showing improved efficiency in generating profits from assets.
• F&G returned capital to shareholders through dividends, indicating a commitment to shareholder value.
• The company's retail channel sales nearly doubled year-over-year, highlighting strong demand for their products.
• The company's book value per common share, excluding AOCI, increased by $1.86, or 5%, during the first nine months of the year.

Negatives

• F&G reported a net loss of $10 million for the third quarter of 2024, a significant decrease from the net income of $306 million in the same quarter of 2023.
• The net loss was impacted by $150 million of net unfavorable mark-to-market effects and $16 million of other unfavorable items.
• Institutional market sales decreased to nearly $0.4 billion of pension risk transfer, compared to $0.9 billion in the third quarter of 2023, although these sales are described as opportunistic and variable.
• Book value per common share excluding AOCI decreased by $0.24, or 1%, during the current quarter.

Risks

• The company's financial results are subject to market fluctuations, as evidenced by the $150 million net unfavorable mark-to-market effects.
• Institutional sales are opportunistic and volumes vary quarter to quarter, which could lead to inconsistent revenue streams.
• The company's performance is subject to general economic conditions, interest rate fluctuations, and equity market volatility.
• Changes in regulatory requirements could impact the company's operations and profitability.
• The company's assumptions and estimates regarding amortization of deferred acquisition costs and other balances could impact financial results.

Future Outlook

The company is confident in its ability to expand its margin even in a lower rate environment and will continue to benefit from its accretive flow reinsurance and owned distribution strategies. F&G expects steady and growing adjusted net earnings over time, excluding significant items.

Management Comments

• Chris Blunt, Chief Executive Officer, commented, 'Our strong results through the first nine months have positioned us well for the remainder of the year and we continue to make great progress toward our Investor Day targets.'
• Chris Blunt also stated, 'We have profitably grown assets under management before flow reinsurance to a record $62.9 billion at the end of the quarter.'
• He further added, 'We continue to benefit as consumers want to secure the relatively higher interest rates, guaranteed tax deferred growth and principal protection that annuity products offer, and we are seeing a healthy PRT pipeline with some significant early wins in the fourth quarter.'

Industry Context

The announcement reflects the broader trend of increased demand for retirement savings products, particularly annuities, as consumers seek to secure higher interest rates and guaranteed growth. The company's focus on flow reinsurance and owned distribution aligns with industry efforts to diversify revenue streams and enhance profitability.

Comparison to Industry Standards

• F&G's 39% year-over-year gross sales growth in Q3 2024 significantly outpaces the industry average for annuity sales, which has seen moderate growth.
• The company's adjusted ROA of 1.05% is competitive with other major players in the insurance sector, but the net loss highlights the impact of market volatility.
• F&G's AUM growth of 20% before flow reinsurance is higher than the average growth rate of assets under management for similar insurance companies.
• Compared to companies like Athene and Global Atlantic, F&G's focus on retail sales through multiple channels is a key differentiator.
• The company's debt-to-capitalization ratio of 26.5% is within the range of industry standards for insurance companies, indicating a stable capital structure.

Stakeholder Impact

• Shareholders experienced a net loss for the quarter, but also received dividends.
• Employees are part of a company that is experiencing significant growth and expansion.
• Customers are benefiting from a company that is offering competitive retirement savings products.
• Creditors are dealing with a company that has a stable capital structure and is actively managing its debt.

Next Steps

• The company will host a conference call with investors and analysts on November 7, 2024, to discuss the third quarter results.
• F&G will continue to focus on expanding its margin and benefiting from its flow reinsurance and owned distribution strategies.
• The company will continue to monitor market conditions and manage its investment portfolio to mitigate risks.

Key Dates

Keywords

annuities, insurance, financial results, sales growth, assets under management, adjusted net earnings, return on assets, pension risk transfer, retail sales, mark-to-market, dividends, book value, reinsurance