10-Q: F&G Annuities & Life Reports Q3 Earnings Surge, YTD Decline

F&G Annuities & Life reported a significant rebound in net earnings for the third quarter of 2025, while year-to-date results saw a substantial decline driven by investment losses and regulatory uncertainties.

Summary

• Net earnings attributable to F&G common shareholders significantly improved for the three months ended September 30, 2025, reaching $114 million compared to a loss of $10 million in the prior year period.
• For the nine months ended September 30, 2025, net earnings attributable to common shareholders decreased to $124 million from $299 million in the prior year.
• Total revenues increased to $1,694 million for the three-month period but decreased to $3,966 million for the nine-month period.
• The nine-month decline in revenues was largely driven by a significant shift in "Recognized gains and (losses), net" from a $401 million gain in 2024 to a $1 million loss in 2025.
• Gross sales increased for the three-month period to $4,238 million but decreased for the nine-month period to $11,246 million.
• Assets Under Management (AAUM) grew to $55,654 million for the three-month period and $54,870 million for the nine-month period, reflecting net new business asset flows and stable inforce retention.
• The company completed a public offering of 8 million common shares for net proceeds of $269 million in March 2025 and issued $375 million in Junior Subordinated Notes in January 2025, while redeeming $300 million in Senior Notes in February 2025.
• Fidelity National Financial, Inc. (FNF) approved a special stock distribution of approximately 16 million F&G common shares, representing about 12% of outstanding shares, to FNF shareholders, payable December 31, 2025.

Sentiment

Score: 6

Explanation: The company demonstrated a strong rebound in net earnings for the most recent quarter, driven by increased revenues and favorable market-related movements in market risk benefits. However, year-to-date net earnings are significantly lower due to a substantial negative swing in recognized gains and losses, and underperformance in alternative investments. Strategic capital raises and AUM growth are positive, but regulatory uncertainties surrounding the New Fiduciary Rule and ongoing legal proceedings present potential headwinds.

Positives

• Net earnings attributable to common shareholders showed a strong turnaround for the three months ended September 30, 2025, from a loss of $10 million to a gain of $114 million.
• Basic and Diluted EPS significantly improved for the three-month period, reaching $0.86 and $0.85 respectively, compared to $(0.08) in the prior year.
• Total revenues increased by $250 million to $1,694 million for the three-month period.
• Life-contingent pension risk transfer premiums increased for both the three-month ($536 million vs. $332 million) and nine-month ($1,279 million vs. $1,240 million) periods.
• Interest and investment income increased for both three-month ($748 million vs. $712 million) and nine-month ($2,096 million vs. $2,012 million) periods, primarily due to invested asset growth.
• Assets Under Management (AAUM) increased to $55,654 million for the three-month period and $54,870 million for the nine-month period, reflecting net new business asset flows and stable inforce retention.
• Owned distribution revenues increased to $24 million for the three-month period and $63 million for the nine-month period, reflecting higher commission revenues.
• Market risk benefit (gains) losses were more favorable for the three-month period, with losses decreasing to $43 million from $71 million.
• Personnel costs and other operating expenses were lower for both three-month ($117 million vs. $125 million) and nine-month ($344 million vs. $364 million) periods, reflecting disciplined expense management and one-time actions.
• Successfully completed a public offering of 8,000,000 common shares, generating net proceeds of $269 million in March 2025.
• Issued $375 million in 7.300% Junior Subordinated Notes due 2065 in January 2025, enhancing capital structure.
• The valuation allowance for deferred tax assets decreased by $11 million for the nine months ended September 30, 2025, primarily related to changes in unrealized losses and utilization of capital loss carryforwards.

Negatives

• Net earnings attributable to common shareholders significantly decreased for the nine months ended September 30, 2025, to $124 million from $299 million in the prior year.
• Basic and Diluted EPS significantly decreased for the nine-month period, to $0.95 and $0.94 respectively, from $2.41 and $2.38 in the prior year.
• Total revenues decreased by $219 million to $3,966 million for the nine-month period.
• "Recognized gains and (losses), net" shifted from a $401 million gain in the nine months ended September 30, 2024, to a $1 million loss in the same period of 2025, primarily due to mark-to-market losses on equity securities and net realized losses on fixed maturity AFS securities.
• Market risk benefit losses increased for the nine-month period to $148 million from $80 million, reflecting unfavorable market related movements and policyholder behavior.
• Gross sales decreased by $547 million to $11,246 million for the nine-month period, and net sales decreased by $408 million to $7,725 million.
• Yield on AAUM slightly decreased for both the three-month (5.38% vs. 5.41%) and nine-month (5.09% vs. 5.26%) periods.
• Investment income from alternative investments was significantly below management's long-term expected return by $67 million for the three-month period and $213 million for the nine-month period.
• The gross unrealized loss position on the fixed maturity available-for-sale and equity portfolio was $3,063 million as of September 30, 2025.
• One commercial mortgage loan (CML) was delinquent in principal or interest payments as of September 30, 2025.
• As of September 30, 2025, $82 million of mortgage loans were over 90 days past due, and $72 million of residential mortgage loans were in the process of foreclosure.

Risks

• Market conditions can change rapidly with significant positive or negative impacts on results, including volatility pressuring sales and reducing demand.
• Various macroeconomic factors, such as consumer spending, business investment, government spending, government shutdown, capital markets volatility, investor confidence, foreign currency exchange rates, commodity prices, inflation levels, trade policy changes, and supply chain disruptions, are anticipated to drive uncertainty and instability.
• Exposure to interest rate risk, where guaranteed minimum crediting rates on fixed rate annuities could negatively impact earnings if investment portfolio earnings decline, and rising interest rates could lead to policyholders withdrawing assets.
• Significant competition in the insurance industry.
• Compliance with extensive government regulation.
• The DOL's New Fiduciary Rule, if it becomes effective, could significantly broaden the definition of fiduciary, subjecting the company and its agents to greater regulatory risk, increased compliance burden, and potential adverse impacts on business, compensation practices, and liability exposure.
• Credit risk and counterparty risk on derivative instruments and reinsurance recoverables.
• Volatility in preferred and equity security investments can affect results of operations.
• Inherent limitations in internal control systems, including the possibility of human error and the circumvention or overriding of controls and procedures, mean controls can only provide reasonable, not absolute, assurance.
• Legal proceedings, including class action lawsuits related to the MOVEit data incident and a lawsuit alleging breach of contract and discrimination, could result in material losses, though currently not believed to be material.
• Concentration of reinsurance risk with third-party reinsurers (Aspida Life Re Ltd., Somerset Reinsurance Ltd., Everlake Life Insurance Company, and Wilton Reassurance Company) could materially impact financial position if any fail to perform their obligations.

Future Outlook

The company anticipates various macroeconomic factors will continue to drive uncertainty and instability during fiscal year 2025. The aging U.S. population is expected to increase demand for retirement savings, growth, and income solutions, including indexed annuity and IUL products. The company expects to continue adapting to evolving regulatory requirements and risks related to the New Fiduciary Rule. The company does not expect to be in a perpetual Corporate Alternative Minimum Tax (CAMT) position, and the One Big Beautiful Bill Act (OBBBA) is not expected to have a material impact on the unaudited Condensed Consolidated Financial Statements.

Management Comments

• "We believe that the aging of the U.S. population will continue to increase demand for retirement savings, growth, and income solutions, including demand for our indexed annuity and indexed universal life (IUL) products."
• "We serve a growing retirement population, with more than 11,000 Americans turning 65 every day and a projected 30% increase in people age 65-100 over the next 25 years according to the U.S. Census Bureau."
• "The underserved middle-income market represents a major growth opportunity for us."
• "We believe we are uniquely positioned to partner as a distribution consolidator."
• "Management believes these current and emerging developments relating to market conduct standards for the financial services industry may, over time, materially affect the way in which our agents do business, the role of IMOs, sale of IRA products including IRA-to-IRA and employer plan rollovers, how we supervise our distribution force, compensation practices and liability exposure and costs, all of which could adversely impact our business, results of operations and/or financial condition."
• "Management is monitoring further developments closely and will be working with IMOs and distributors to adapt to these evolving regulatory requirements and risks."

Industry Context

The company operates in the insurance industry, specifically targeting the needs of middle-income Americans for retirement savings, growth, and income solutions. This market has shown significant growth, with the fixed index annuity market growing to $130 billion in 2024, registered index-linked annuities (RILA) to $62 billion in 2024, and the indexed universal life (IUL) market to $2 billion in 2024. The company views itself as a potential distribution consolidator within this evolving industry. A significant industry-wide regulatory development is the DOL's New Fiduciary Rule, which could broaden the definition of fiduciary and impact sales practices and liability across the financial services sector.

Comparison to Industry Standards

• The company's assumption updates for deferred acquisition costs (DAC), deferred sales inducements (DSI), and market risk benefits (MRBs) were brought more in line with its own company experience and overall industry experience.
• The company operates in markets (fixed index annuities, RILA, IUL) that have shown significant industry growth, indicating alignment with expanding market trends.

Management Changes

Corporate Governance

Legal Proceedings

• Insurance Distribution Consulting, LLC v. Fidelity & Guaranty Life Insurance Company: Plaintiff alleges FGL Insurance failed to pay commissions and diverted them, claiming over $162 million for breach of contract and over $11 million for statutory discrimination. FGL Insurance denies allegations and is vigorously contesting.
• Syncis Insurance Solutions, LLC v. Insurance Distribution Consulting, LLC: A counterclaim was filed by IDC against Peak Altitude Equity, LLC (a subsidiary of F&G) with allegations overlapping the FGL Insurance lawsuit. Peak filed a motion to dismiss.
• Roofers Local 149 Pension Fund v. Fidelity National Financial Inc., William P. Foley, F&G Annuities & Life Inc.: A stockholder derivative lawsuit alleging breach of fiduciary duty related to F&G's sale of $250 million preferred stock to FNF was dismissed with prejudice on May 9, 2025, as the plaintiff failed to plead specific facts.
• Miller v. F&G and Cooper v. Progress Software Corp.: Two putative class action lawsuits against F&G related to the alleged compromise of customer personal information due to a MOVEit software vulnerability. These cases have been transferred to a Multidistrict Litigation (MDL), and F&G was not selected as a bellwether defendant. F&G does not believe the incident will have a material impact on its business, operations, or financial results.
• The company receives inquiries and requests for information from state insurance departments, attorneys general, and other regulatory agencies, and may be assessed fines or enter into settlements, which are not anticipated to have a material adverse effect.

Related Party Transactions

• F&G is a majority-owned subsidiary of Fidelity National Financial, Inc. (FNF).
• FNF's Board of Directors approved a special stock distribution of approximately 16 million shares of F&G common stock to FNF shareholders.
• In connection with F&G's public offering, FNF agreed to resell 4,500,000 shares of common stock to FNF at $33.60 per share.
• F&G has a revolving note agreement with FNF for up to $200 million capacity, which matured October 29, 2025, and was replaced by a new agreement effective October 30, 2025.
• The dismissed stockholder derivative lawsuit alleged that a preferred stock investment was advantageous to FNF and unfair to F&G.
• The company is included in the controlled group of FNF for Corporate Alternative Minimum Tax (CAMT) calculation purposes.

Stakeholder Impact

• Shareholders are impacted by FNF's special stock distribution of F&G shares, F&G's common stock dividends, and the stock repurchase program. They also face potential impacts from legal proceedings and regulatory changes.
• Employees are affected by management changes, including John Currier's transition and Conor Murphy's expanded role. The company's goodwill includes the 'assembled workforce'.
• Customers (policyholders) are impacted by product offerings, interest credited rates, and the potential compromise of personal information due to the MOVEit incident.
• Creditors and noteholders are impacted by the issuance of Junior Subordinated Notes, the redemption of Senior Notes, and the company's compliance with debt covenants.
• Reinsurers face significant concentration of reinsurance risk with key third-party reinsurers, requiring ongoing monitoring of their financial condition.

Next Steps

• FNF's special stock distribution of F&G common stock to FNF shareholders is scheduled for December 31, 2025.
• F&G's quarterly cash dividend of $0.25 per share of common stock is payable on December 31, 2025.
• F&G's quarterly cash dividend of $0.8594 per share of FNF preferred stock is payable on January 15, 2026.
• The company will continue to evaluate the impact of the One Big Beautiful Bill Act (OBBBA) on its financial results.
• The company is assessing the impact of FASB ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation) upon their respective adoptions.
• The company is still assessing FASB ASU 2025-06 (Internal-Use Software) and its impact upon adoption.
• Management is monitoring further developments and will be working with IMOs and distributors to adapt to evolving regulatory requirements and risks related to the New Fiduciary Rule.
• Appeals regarding the New Fiduciary Rule are in abeyance, awaiting new agency officials' determination on how to proceed.
• The mandatory conversion of FNF preferred stock into common stock is expected on January 15, 2027.

Key Dates

Recommendation

While the company showed a strong rebound in net earnings for the most recent quarter and continues to grow its Assets Under Management, the year-to-date GAAP net earnings are significantly down due to substantial mark-to-market losses and underperformance in alternative investments. The strategic capital raises and FNF's special stock distribution are positive for liquidity and shareholder value, but the ongoing legal challenges and the evolving regulatory landscape, particularly the New Fiduciary Rule, introduce considerable uncertainty and potential future costs. The mixed financial performance and regulatory headwinds suggest a "Hold" recommendation, advising investors to monitor developments closely before making further investment decisions.

Keywords

Annuities, Life Insurance, SEC Filing, 10-Q, Financial Results, Earnings, Investments, Capital Raise, Fiduciary Rule, Market Risk, Corporate Governance, Insurance, Financial Services