8-K: F&G Annuities & Life Reports Strong First Quarter 2024 Results, Driven by Sales Growth and Investment Returns

F&G Annuities & Life reported a net income of $111 million for the first quarter of 2024, a significant turnaround from a net loss in the same period last year, driven by strong sales and investment performance.

Summary

• F&G Annuities & Life reported a net income of $111 million, or $0.88 per diluted share, for the first quarter of 2024, compared to a net loss of $195 million, or $1.56 per share, in the first quarter of 2023.
• Adjusted net earnings were $108 million, or $0.86 per share, compared to $61 million, or $0.49 per share, in the same period last year.
• Gross sales increased by 6% year-over-year to $3.5 billion, driven by strong retail and institutional sales.
• Assets under management (AUM) reached a record $49.8 billion, a 10% increase from $45.3 billion in the prior year quarter.
• AUM before flow reinsurance was $58.0 billion as of March 31, 2024, an 18% increase compared to the first quarter of 2023.
• The company paid common dividends of $0.21 per share, totaling $26 million, in the first quarter.
• F&G received a $250 million investment from its parent company, Fidelity National Financial, Inc., through a mandatory convertible preferred stock offering.

Sentiment

Score: 8

Explanation: The document presents a very positive outlook with strong financial results, sales growth, and strategic initiatives. The company's performance is significantly improved compared to the previous year, and management expresses confidence in future growth. The sentiment is very positive, with only minor concerns about market volatility and regulatory risks.

Positives

• The company demonstrated strong sales growth across multiple channels.
• F&G achieved record assets under management, indicating strong business momentum.
• The investment portfolio is performing well with minimal credit-related impairments.
• The company's balance sheet is solid, supporting both organic growth and return of capital to shareholders.
• Adjusted return on assets remains above the baseline target.
• The company is confident in its outlook for double-digit gross sales growth in 2024.
• The recently launched RILA product is expected to become a significant contributor to sales.
• F&G anticipates further margin expansion through improved investment opportunities and expense leverage.

Negatives

• Net earnings for the first quarter of 2024 included $17 million of net favorable mark-to-market effects and $14 million of other unfavorable items, which are excluded from adjusted net earnings.
• The first quarter of 2023 included $250 million of net unfavorable mark-to-market effects and $6 million of other unfavorable items, which are also excluded from adjusted net earnings.
• The adjusted net earnings increase was partially offset by an increase in interest expense due to planned capital market activity and higher operating costs.

Risks

• The company is subject to general economic conditions, including interest rate fluctuations and market volatility.
• Regulatory changes or actions could impact the company's operations and financial performance.
• Changes in assumptions and estimates regarding amortization of deferred acquisition costs could affect financial results.
• The company faces credit risk from its counterparties.
• The company's concentration in certain states for product distribution could pose a risk.
• The company's forward-looking statements are subject to known and unknown risks and uncertainties.

Future Outlook

F&G is confident in its outlook for double-digit gross sales growth in 2024 and expects its recently launched RILA product to become a significant contributor to sales over the next few years. The company also anticipates further margin expansion through improved investment margin opportunities and expense leverage.

Management Comments

• Chris Blunt, President and Chief Executive Officer, commented, 'We achieved record assets under management before flow reinsurance in the first quarter of $58.0 billion, an increase of 18% as compared to the year ago first quarter.'
• Chris Blunt also stated, 'Excluding significant items, we also delivered $154 million of adjusted net earnings and an adjusted return on assets of 125 basis points, above our baseline of 110 basis points.'
• He further added, 'Taken together, this demonstrates our ability to deliver robust growth and returns through both low and rising interest rate environments and we remain confident in our outlook for double digit gross sales growth in 2024.'

Industry Context

The results reflect a positive trend in the insurance and annuity sector, with F&G demonstrating strong growth in sales and assets under management. The company's focus on both retail and institutional markets, along with its diversified product offerings, positions it well within the competitive landscape.

Comparison to Industry Standards

• F&G's 6% gross sales growth is a positive indicator, especially when compared to industry averages which may be lower due to market volatility.
• The 10% increase in AUM and 18% increase in AUM before flow reinsurance are strong results, suggesting F&G is gaining market share and effectively managing its assets.
• The adjusted return on assets of 125 basis points, exceeding the baseline of 110 basis points, indicates strong profitability compared to industry benchmarks.
• The company's focus on flow reinsurance and owned distribution aligns with industry trends towards capital-light business models and diversified revenue streams.
• F&G's investment portfolio, with 96% investment grade fixed income, demonstrates a conservative approach compared to some competitors who may take on higher risk.

Related Party Transactions

• F&G received a $250 million investment from its parent company, Fidelity National Financial, Inc., through a mandatory convertible preferred stock offering.

Stakeholder Impact

• Shareholders will benefit from the improved financial performance and the return of capital through dividends.
• Employees may experience increased job security and potential for career growth due to the company's positive trajectory.
• Customers will benefit from the company's continued investment in product development and service quality.
• Suppliers and creditors will benefit from the company's strong financial position and ability to meet its obligations.

Next Steps

• F&G will host a conference call with investors and analysts on May 9, 2024, to discuss the first quarter 2024 results.
• The company will continue to focus on growing its assets under management and expanding its sales channels.
• F&G will continue to monitor market conditions and adjust its strategies as needed.

Key Dates

Keywords

annuities, insurance, financial results, assets under management, investment returns, sales growth, adjusted net earnings, dividends, reinsurance, pension risk transfer