10-K: F&G Annuities & Life Reports Strong 2024 Results, AUM Climbs to $53.8 Billion

F&G Annuities & Life announces positive financial results for 2024, highlighting growth in sales, assets under management, and strategic diversification.

Summary

• F&G Annuities & Life reported net earnings of $639 million for the year ended December 31, 2024.
• Adjusted net earnings attributable to F&G common shareholders were $546 million, with an adjusted return on assets of 106 basis points.
• Gross sales increased to $15.3 billion in 2024, up from $4.5 billion in 2020.
• Assets under management (AUM) grew to $53.8 billion as of December 31, 2024, compared to $26.5 billion at the time of acquisition by FNF in June 2020.
• The company's investment portfolio is diversified, with 96% of fixed maturity securities rated NAIC 1 or NAIC 2.
• FGL Insurance's estimated U.S. RBC ratio was over 410% as of December 31, 2024, exceeding the target of 400%.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, growth in key metrics, and strategic diversification. While risks are acknowledged, the overall tone is optimistic.

Positives

• Financial strength ratings have improved since the acquisition by FNF, with upgrades from S&P, Fitch, Moody's, and A.M. Best.
• The company has expanded into new retail channels and diversified its annuity distribution.
• F&G has a strategic partnership with Blackstone, providing a durable investment management edge.
• The company has a clean and profitable in-force book, with approximately 93% of fixed indexed and fixed rate annuities account value surrender-charge protected.
• F&G has a track record of attracting top talent, with a deep and experienced management team.
• The company has a clear governance structure and a disciplined approach for considering new lines of business.

Negatives

• The company's debt instruments may restrict current and future operations.
• A financial strength ratings downgrade could increase the cost of capital and hinder the ability to participate in certain market segments.
• The company may face losses if actual experience differs significantly from reserving assumptions.
• Equity market volatility could negatively impact the business.
• The company is subject to the credit risk of its counterparties, including reinsurance companies.
• The company relies on outsourcing relationships, which could lead to operational difficulties if not managed effectively.

Risks

• General economic conditions and market volatility could adversely affect the business.
• Regulatory changes or actions could impact the underwriting of insurance products and the ability of insurance subsidiaries to make cash distributions.
• The company may be the target of future litigation or increased scrutiny.
• The company may not be able to protect its intellectual property and may be subject to infringement claims.
• Changing rules and stakeholder expectations on ESG-related matters create risks for the business.
• The company is a holding company and depends on distributions from its subsidiaries for cash.

Future Outlook

F&G is focused on driving sustainable asset growth, generating ROA expansion, and diversifying earnings through retail and pension risk transfer growth strategies, enhanced investment margin opportunities, scale benefits, fee-based earnings from accretive flow reinsurance, and strong growth in the middle market life insurance business and owned distribution strategies.

Management Comments

• F&G is a national leader in the markets we play in, and demographic trends provide tailwinds and significant room to continue growing.
• Our business model gives us a sustainable competitive advantage.
• We have great momentum and remain focused on continuing to deliver long-term growth.

Industry Context

The document highlights F&G's position in the U.S. retirement and middle markets, noting the vast opportunity and underutilization of insurance solutions. It also mentions the growing demand for fixed annuity products as people plan for retirement and seek solutions that can withstand market volatility.

Comparison to Industry Standards

• In the retail markets F&G ranks: (i) 5th and 11th in FIA sales in the IMO and bank channels and 7th in FIA industry sales; (ii) 7th and 4th in MYGA sales in the broker-dealer and bank channels and 6th in MYGA industry sales; and (iii) 5th in IUL sales in the IMO channel, 4th in the number of IUL policies sold and 6th in IUL industry sales, in each case, for the year to date as of September 30, 2024, as sourced from Winks Sales and Market Report.
• In the pension risk transfer market, F&G ranks as 8th in the PRT industry sales for the year to date as of September 30, 2024, as sourced from the Life Insurance Marketing and Research Association.

Legal Proceedings

• F&G is a defendant in two putative class action lawsuits that allege certain of F&Gs customers personal information was disclosed due to a vulnerability in the MOVEit file transfer software.
• A stockholder derivative lawsuit was filed in the Chancery Court of the State of Delaware against defendants FNF and William P. Foley, alleging breach of fiduciary duty related to F&Gs January 11, 2024 sale of $250 million of 6.875% Series A Mandatory Convertible Preferred Stock to FNF.

Related Party Transactions

• FNF owns approximately 85% of F&G's outstanding common stock and 5,000,000 shares of F&G Preferred Stock.
• A number of persons who currently are our directors are also officers, directors or employees of FNF (or officers, directors or employees of affiliates of FNF) and, thus, have professional relationships with FNFs officers, directors or employees.
• We and certain of our subsidiaries file consolidated federal income tax returns with FNF.
• On January 12, 2024, F&G completed a $250 million preferred stock investment from FNF.

Stakeholder Impact

• Policyholders benefit from the safety and protection of F&G's fixed annuity and life insurance products.
• Shareholders benefit from the company's profitable growth and potential for future dividends.
• Employees benefit from the company's commitment to cultural values and flexible work environment.

Next Steps

• F&G will continue to focus on driving sustainable asset growth from retail and pension risk transfer growth strategies.
• The company will focus on generating ROA expansion from enhanced investment margin, scale benefits, and fee-based earnings from accretive flow reinsurance.
• F&G will continue to diversify earnings through strong growth in the middle market life insurance business and owned distribution strategies.

Key Dates

Keywords

annuities, insurance, AUM, pension risk transfer, fixed indexed annuities, financial results, investment management, reinsurance, financial strength ratings, risk management