8-K: F&G Annuities & Life Reports Record Sales and Asset Growth Despite Q4 Net Loss

F&G Annuities & Life reported record gross sales and asset growth for 2023, though the fourth quarter saw a net loss due to market volatility.

Summary

• F&G Annuities & Life reported a net loss of $299 million for the fourth quarter of 2023, compared to a net loss of $176 million in the same period of 2022.
• The full year 2023 resulted in a net loss of $58 million, a significant decrease from the net earnings of $635 million in 2022.
• Adjusted net earnings for the fourth quarter were $75 million, down from $130 million in the fourth quarter of 2022.
• For the full year, adjusted net earnings were $335 million, compared to $353 million in the previous year.
• The company achieved record gross sales of $4.1 billion in the fourth quarter, a 52% increase year-over-year, and $13.2 billion for the full year, a 17% increase year-over-year.
• Assets under management reached a record $49.5 billion as of December 31, 2023, a 14% increase from the previous year.
• The company returned $119 million of capital to shareholders in 2023, including $101 million in dividends and $18 million in share repurchases.
• F&G's primary operating subsidiary has an estimated risk-based capital ratio of approximately 440%, well above the 400% target.
• A.M. Best upgraded F&G's financial strength ratings to 'A' (Excellent) from A(Excellent) on January 12, 2024.
• F&G closed a $250 million mandatory convertible preferred stock investment from Fidelity National Financial, Inc. on January 16, 2024.

Sentiment

Score: 6

Explanation: The document presents a mixed picture with strong sales and asset growth offset by net losses and decreased adjusted earnings. The positive outlook and strategic initiatives provide some optimism, but the current financial results temper the overall sentiment.

Positives

• F&G experienced record gross sales and asset growth in 2023, demonstrating strong business momentum.
• The company's risk-based capital ratio is well above the target, indicating a strong solvency position.
• The financial strength rating upgrade from A.M. Best reflects the company's stability and growth strategy.
• The $250 million investment from FNF will support further growth in assets under management.
• F&G has a diversified investment portfolio with minimal credit-related impairments.
• The company is actively returning capital to shareholders through dividends and share repurchases.

Negatives

• F&G reported a net loss for both the fourth quarter and the full year of 2023, primarily due to unfavorable mark-to-market effects.
• Adjusted net earnings decreased in both the fourth quarter and the full year compared to the previous year.
• The company experienced higher interest expenses due to planned capital market activity.
• Operating costs increased in line with sales and asset growth, impacting profitability.

Risks

• The company's financial results are susceptible to interest rate volatility, as seen in the fourth quarter of 2023.
• Equity market volatility and credit risk of counterparties could impact the company's performance.
• Changes in regulatory requirements could affect the company's operations and profitability.
• The company's assumptions and estimates regarding amortization of deferred acquisition costs could impact financial results.

Future Outlook

The company expects to deliver double-digit sales growth in 2024, supported by the launch of a new product and continued margin expansion through effective expense management and enhanced investment opportunities.

Management Comments

• Chris Blunt, President and CEO, expressed pride in the company's accomplishments, highlighting record sales and AUM.
• Mr. Blunt noted that the fourth quarter results were impacted by interest rate volatility but the long-term outlook remains unchanged.
• He is optimistic about delivering double-digit sales growth in 2024 and expanding margins through expense management and investment opportunities.
• Mr. Blunt stated that the company is well-positioned to continue executing on its owned distribution strategy.

Industry Context

The announcement reflects the broader trends in the insurance and annuity industry, including the impact of interest rate fluctuations on financial results and the increasing focus on diversified growth strategies and capital management.

Comparison to Industry Standards

• F&G's 14% AUM growth year-over-year is strong compared to industry averages, which typically range from 5-10% for established players.
• The company's RBC ratio of 440% is well above the regulatory minimum and the 400% target, indicating a robust capital position compared to peers.
• The A.M. Best upgrade to 'A' (Excellent) places F&G among the top-rated insurance companies, enhancing its competitive position.
• While the net loss is a concern, the adjusted net earnings and sales growth demonstrate underlying strength, which is comparable to other companies experiencing similar market volatility.
• F&G's focus on flow reinsurance and owned distribution aligns with industry trends towards capital-efficient growth and diversified revenue streams.

Related Party Transactions

• F&G closed a $250 million mandatory convertible preferred stock investment from its parent Fidelity National Financial, Inc. (FNF).

Stakeholder Impact

• Shareholders will receive a quarterly dividend of $0.21 per share, payable on March 29, 2024.
• The company's strong capital position and growth strategy are expected to benefit shareholders in the long term.
• Employees will benefit from the company's continued growth and positive culture.
• Customers will benefit from the company's commitment to customer satisfaction and strong financial position.
• The company's growth and stability will benefit suppliers and creditors.

Next Steps

• F&G will host a conference call with investors and analysts on February 22, 2024, to discuss the fourth quarter and full year 2023 results.
• The company will continue to focus on driving profitable growth and capturing market opportunities.
• F&G will continue to execute on its owned distribution strategy.
• The company will continue to manage operating expenses and benefit from enhanced investment margin opportunities.

Key Dates

Keywords

annuities, insurance, financial results, assets under management, sales, risk-based capital, A.M. Best rating, dividends, share repurchases, investment, reinsurance