8-K: F&G Annuities & Life Reports Record Sales and AUM Growth in Second Quarter 2024

F&G Annuities & Life reported a strong second quarter of 2024, marked by record sales, assets under management, and expansion in adjusted return on assets.

Summary

• F&G Annuities & Life, Inc. announced its financial results for the second quarter ended June 30, 2024, showcasing significant growth.
• Net earnings attributable to common shareholders were $198 million, or $1.55 per diluted share, compared to $130 million, or $1.04 per share, in the same quarter of 2023.
• Adjusted net earnings reached $139 million, or $1.10 per share, up from $79 million, or $0.63 per share, in the second quarter of the previous year.
• Gross sales for the quarter hit a record $4.4 billion, a 47% increase year-over-year, driven by strong retail and institutional sales.
• Assets under management (AUM) also reached a record $52.2 billion, a 13% increase from $46.0 billion in the prior year quarter.
• AUM before flow reinsurance was $61.4 billion as of June 30, 2024, a 21% increase over the second quarter of 2023.
• The company returned $32 million of capital to shareholders through common and preferred dividends during the quarter.
• Adjusted return on assets (ROA) remained above the 110 basis points baseline, reaching 130 basis points when excluding significant items.

Sentiment

Score: 9

Explanation: The document conveys a highly positive sentiment due to record sales, AUM growth, and improved profitability. The company's performance is exceeding expectations, and management is optimistic about future prospects.

Positives

• F&G demonstrated strong sales growth across multiple channels, including record retail sales and robust institutional market sales.
• The company's investment portfolio is performing well, contributing to the increase in assets under management.
• F&G's balance sheet is solid, supporting both organic growth and the return of capital to shareholders.
• The company is experiencing margin expansion due to accretive flow reinsurance and owned distribution margin.
• Disciplined expense management is contributing to the improved financial results.
• The company's book value per common share, excluding AOCI, increased to $42.52, reflecting a 3% increase during the quarter.
• F&G's debt-to-capitalization ratio, excluding AOCI, was 26.4% as of June 30, 2024, and is expected to revert to the long-term target of 25% in 2025.

Negatives

• Net earnings for the second quarter of 2024 included $70 million of net favorable mark-to-market effects and $11 million of other unfavorable items, which are excluded from adjusted net earnings.
• The second quarter of 2024 includes a $16 million net expense from actuarial model updates and refinements.
• Consolidated debt outstanding increased to $2.1 billion at June 30, reflecting a $300 million net increase for the refinance of senior notes.

Risks

• 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 financial results.
• The company faces credit risk from its counterparties.
• There are risks associated with changes in assumptions and estimates regarding amortization of deferred acquisition costs.
• The company's forward-looking statements are subject to known and unknown risks and uncertainties.

Future Outlook

F&G expects steady and growing adjusted net earnings over time, excluding significant items, and is well on pace to achieve its Investor Day targets.

Management Comments

• Chris Blunt, Chief Executive Officer, stated that the company delivered record assets under management before flow reinsurance in the second quarter of $61.4 billion, a 21% increase over the second quarter of 2023.
• He also noted that the strong growth was driven by record gross sales of $4.4 billion, a 47% increase over the second quarter of 2023, with record retail sales and robust institutional market sales.
• He further commented that the company continues to benefit from strong demand for its products given demographic tailwinds, prior investments in building out its multi-channel sales platform and continued strong investment performance.
• He also mentioned that excluding significant items, the company generated $171 million of adjusted net earnings and expanded its adjusted return on assets to 130 basis points.

Industry Context

The announcement reflects a positive trend in the insurance and annuity sector, with F&G capitalizing on strong demand for its products and effective management of its investment portfolio. The company's focus on multi-channel sales and strategic investments positions it well within the competitive landscape.

Comparison to Industry Standards

• F&G's 47% year-over-year gross sales growth significantly outpaces the industry average, indicating strong market demand for its products.
• The company's adjusted ROA of 1.30% (excluding significant items) is above the baseline of 1.10% shared at their Investor Day in October 2023, suggesting superior profitability compared to peers.
• F&G's AUM growth of 13% year-over-year demonstrates effective asset management and new business acquisition, which is a key performance indicator in the insurance sector.
• The company's focus on diversifying its earnings through flow reinsurance and owned distribution aligns with industry best practices for sustainable growth.
• Compared to peers like Athene and Global Atlantic, F&G's growth in AUM and sales indicates a strong competitive position in the annuity market.
• The company's debt-to-capitalization ratio of 26.4% is within a reasonable range for the industry, and the expectation to revert to 25% shows a commitment to financial stability.

Stakeholder Impact

• Shareholders will benefit from the increased earnings, dividends, and book value per share.
• Employees will likely benefit from the company's growth and success.
• Customers will continue to have access to a range of insurance and annuity products.
• Suppliers and creditors will benefit from the company's strong financial position.

Next Steps

• F&G will host a conference call with investors and analysts on August 6, 2024, to discuss the second quarter 2024 results.
• The company will continue to focus on deploying capital to maximize shareholder value through business investments and return of capital.

Key Dates

Keywords

annuities, insurance, financial results, assets under management, sales growth, adjusted net earnings, return on assets, capital return, reinsurance, investment portfolio