F&g Annuities & Life, Inc. · NYSE:FG
F&g Annuities & Life — Q2 2023 Earnings Presentation
45 slides from F&g Annuities & Life's earnings presentation, Aug 8, 2023
Slide 1: F&G Investor Update Summer 2023
F&G Investor Update Summer 2023
Slide 2: Disclaimer & Forward-Looking Statements
Disclaimer & Forward-Looking Statements This presentation contains forward-looking statements that are subject to known and unknown risks and uncertainties, many of which are beyond our control. Some of the forward-looking statements can be identified by the use of terms such as “believes”, “expects
Slide 3: Non-GAAP Financial Measures
Non-GAAP Financial Measures Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for financial accounting. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions and in the preparat
Slide 4: Strong Start In First Half of 2023
Strong Start In First Half of 2023 ✓ Record organic growth in higher rate environment ✓ Record assets under management, driven by positive net flows and net debt proceeds ✓ Diversified, high quality investment portfolio well matched to liabilities ✓ Consistent economics over time despite short-term
Slide 5: Second Quarter Financial Highlights
($M) - except per share data and ROA Quarterly Year-to-Date Period ended June 30 2Q22 2Q23 1H22 1H23 Gross sales $3,073 $3,008 $5,662 $6,289 Net sales $2,529 $2,212 $4,882 $4,421 Assets under management (AUM) $40,322 $46,260 $40,322 $46,260 Adjusted return on assets (ROA) 1.23% 0.62% 1.23% 0.62% Net
Slide 6: About F&G
About F&G Snapshot Our Product Lines Fixed Deferred Annuities • Fixed indexed annuity (FIA) • Multi-year guaranteed annuity (MYGA) Pension Risk Transfer (PRT) Life Insurance • Indexed universal life (IUL) Funding Agreements • Funding agreement backed notes (FABN) • Federal Home Loan Bank (FHLB) Back
Slide 7: Compelling Investment Case for F&G
v Track Record of Success We have delivered consistent top line growth and return on assets across varying market cycles, and we expect to continue to outperform the rest of the market, especially in a rising rate environment v Targeting Large and Growing Markets Our long-standing relationships with
Slide 8: How F&G Makes Money – Retained Sales
How F&G Makes Money – Retained Sales Client deposits premium with F&G 1 F&G invests in high quality and well diversified portfolio 2 F&G’s yield outpaces cost of funds and expenses 3 F&G’s AAUM growth drives earnings 4 Spectrum of client needs met (accumulation, income & wealth transfer), with no pr
Slide 9: How F&G Makes Money – Flow Reinsurance
How F&G Makes Money – Flow Reinsurance Client deposits premium with F&G 1 F&G expands flow relationships given high market demand 2 F&G onboards new business at lower marginal cost of capital 3 F&G enhances cash flow, diversifies earnings & increases ROE 4 Spectrum of client needs met (accumulation,
Slide 10: How F&G Makes Money – Owned Distribution
How F&G Makes Money – Owned Distribution F&G takes equity stake in independent agent distribution 1 F&G earns dividend stream on “capital light” distribution 2 F&G generates higher margins at lower marginal cost of capital 3 F&G diversifies earnings through accretive owned distribution 4 F&G’s deep
Slide 11: We Have A Clean & Profitable Inforce Book
Weighted average time remaining in surrender charge period 6 Years % Surrender protected 91% Average remaining surrender charge (% of account value) 7% % Subject to market value adjustment (MVA) 73% Average cost of options/interest credited 2.5% Distance to guaranteed minimum crediting rates 150 bps
Slide 12: We Are Playing In High Growth Markets
We Are Playing In High Growth Markets … U.S. Consumer Savings1 Certificate of Deposit2 Retail Life & Annuities3 Pension Risk Transfer4 Funding Agreements6 $862B $600B $326B $245B $176B The U.S. retirement and middle markets are growing and we are both well-established and well-positioned for continu
Slide 13: … And We’re Winning
… And We’re Winning … Annual Gross Sales by Retail Channel and Institutional Market ($B) 1CAGR reflects 2018-2022 annual periods 2018 2019 2020 2021 2022 2023F Funding Agreements Agent PRT Broker Dealer Bank $9.6B $4.5B $3.9B $3.4B • FNF and F&G Merger • F&G ratings upgrades (June 2020) $11.3B +35%
Slide 14: … And Significantly Diversifying Our Business
43% 28% 4% 13% 12% $11.3B 39% 41% 1% 7% 12% $6.3B (6 Mos.) 84% 5% 7% 4% $4.5B … And Significantly Diversifying Our Business Note: Reflects Gross Sales 41% 33% 7% 7% 12% $6.3B (6 Mos.) FY2022 Sales 1H23 Sales C h a n n e l & M a rk e t P ro d u c t 41% 33% 1% 13% 12% $11.3B 77% 17% 1% 5% $4.5B FY2020
Slide 15: High Quality & Well-Diversified Portfolio
High Quality & Well-Diversified Portfolio Investment Portfolio by Asset Class1 Investment Portfolio by NAIC Designation1 1GAAP Fair Values as of June 30, 2023 (ex. portion of deferred annuities to Kubera Somerset and Aspida Re) 2Other consists of ICOLI, FHLB stock, LIHTC, Real Estate Owned (REO) pro
Slide 16: Structured Credit Portfolio and Key Attributes
Structured Credit Portfolio1,2 56% Residential 21% Multifamily 10% Industrial 7% Office 2% Retail 2% Student Housing 2% Other ³ Our Investment Portfolio Key Attributes Investment Rationale • Core fixed income: Focus remains high grade public and private securities with strong risk adjusted returns •
Slide 17: Our Proven Track Record of Profitable Growth
Our Proven Track Record of Profitable Growth Gross Sales ($B) Average Assets Under Management (AAUM) ($B) Adjusted Net Earnings ($M) 6.1 8.5 3.7 5.1 3.5 2.8 2.0 1.2 9.6 11.3 5.7 6.3 2021 2022 1H22 1H23 Institutional Markets Retail Channels Net Sales 8.7 9.0 4.9 4.4 +11% VPY18% VPY 31.9 40.1 38.4 44.
Slide 18: Our Proven Track Record: Sales
Our Proven Track Record: Sales 18F&G Investor Update | Summer 2023 Sales are managed to profitability & capital targets • Retail sales > $2B for 5th consecutive quarter, reflecting higher rates and consumers seeking principal protection • 2Q23 reflects a ‘reset’ following 1Q23 record inflows from U.
Slide 19: Our Proven Track Record: Adj. Net Earnings
Our Proven Track Record: Adj. Net Earnings 19F&G Investor Update | Summer 2023 F&G expects steady and growing adjusted net earnings over time, excluding significant income and expense items • Excluding significant items, adjusted net earnings reflect asset growth, expanding product margins, discipli
Slide 20: Book Value Per Share Rollforward
Book Value Per Share Rollforward 20F&G Investor Update | Summer 2023 BVPS ex AOCI at $40.70 per share in 2Q23 vs. $39.94 per share in 1Q23, ↑ 2% or $0.76 per share • $0.64 per share increase due to underlying business performance • ($0.32) per share from capital actions; primarily common dividends •
Slide 21: Stable and Strong Capital Profile
Stable and Strong Capital Profile 21F&G Investor Update | Summer 2023 GAAP Capitalization ex AOCI1 ($M) 4,201 5,223 5,128 950 1,100 1,565 5,151 6,323 6,693 2021 2022 1H23 Debt Equity ex. AOCI Adj. Debt to Capital % 18% 17% 23% 1Excluding accumulated other comprehensive income (ex AOCI) Solid F&G cap
Slide 22: Our Strong Capitalization Supports Growth & Distributable Cash
Our Strong Capitalization Supports Growth & Distributable Cash F&G’s capital allocation priorities focus on deploying capital to best maximize shareholder value through both continued investment in our business and generation of distributable cash for return of capital to shareholders • F&G has flex
Slide 23: Appendix - Investments
SECTION Appendix - Investments F&G Investor Update | Summer 2023 23
Slide 24: Structured Credit – Why We Like It
Structured Credit – Why We Like It Investment Rationale • Collateralized loan obligation (CLO) portfolio well diversified across industry, issuer and manager; focus on investment grade with ample par subordination • Commercial mortgage-backed securities (CMBS) focus on seasoned CMBS which allows for
Slide 25: F&G CLO Portfolio Overview
F&G CLO Portfolio Overview • Highly diversified portfolio with ample par subordination • Blackstone’s broad & deep understanding of the asset class, and ability to do loan level underwriting, distinguishes F&G’s portfolio from its peers F&G CLO Portfolio Composition Note: As of June 30, 2023 1Reflec
Slide 26: F&G CLO Overview: Look Through Analysis
0.7% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.4% 0.4% 0.0% 0.5% 1.0% 100% Issuer 1 Issuer 2 Issuer 3 Issuer 4 Issuer 5 Issuer 6 Issuer 7 Issuer 8 Issuer 9 Issuer 10 Other 10.5% 3.3% 2.9% 2.7% 2.5% 2.4% 2.2% 2.1% 2.1% 2.1% 0.0% 5.0% 10.0% 15.0% 70.0% Manager 1 Manager 2 Manager 3 Manager 4 Manager 5 Mana
Slide 27: U.S. CLO Impairment Frontier
U.S. CLO Impairment Frontier • CLO debt is well insulated from higher defaults and lower recovery rates • BBB CLOs can withstand an annualized default of 9.6% (that would have to occur every year) assuming a 64.3% average long-term loan recovery rate U.S. CLO Impairment Frontier (First-loss scenario
Slide 28: Portfolio Spotlight: Real Estate Debt
Duration 3.9 years Quality 1.3 Average NAIC rating Market Value $9.3B Real estate portfolio Weighted Average Life 5.6 years Portfolio Spotlight: Real Estate Debt BREDS (Blackstone Real Estate Debt Strategies) has assembled a high-quality portfolio with diversified exposure across asset classes and p
Slide 29: Portfolio Spotlight: CMBS & RMBS
Portfolio Spotlight: CMBS & RMBS By Asset Type By Property Type By NAIC Rating F&G Investor Update | Summer 2023 29 12% 29% 13% 21% 7% 18% 0% 20% 40% 60% 80% 100% Q2'23 Conduit (Below A) RMBS Conduit (A or above) SASB Agency CRE CLOs 56% 13% 10% 6% 5% 5% 5% 0% 20% 40% 60% 80% 100% Q2'23Multifamily O
Slide 30: CMBS Portfolio Overview
CMBS Portfolio Overview Prudent asset selection has led to more multifamily exposure and less retail vs. Conduit CMBS market averages Portfolio Construction Comparison1 Note: As of June 30, 2023 1BAML Conduit Data as of June 30, 2023 39% 9% 14% 25% Multifamily Retail F&G Portfolio Post-Crisis Condui
Slide 31: Portfolio Spotlight: CMLs
Portfolio Spotlight: CMLs By State By Underlying Property Type By Loan-To-Value % Investment Rationale • Our Commercial Mortgage Loan (CML) portfolio is low risk, low leveraged and well diversified • All first mortgage loans, with average loan-to-value of ~60% • 77 holdings, with average loan size o
Slide 32: Portfolio Spotlight: Alternatives
Portfolio Spotlight: Alternatives • Commitments to Blackstone and non-Blackstone alternatives total $4.4B • Funded ~$2.6B or approximately 6% of total portfolio • The portfolio is well-diversified by underlying asset type, vintage year and geography • Only 2.6% of Alternative LPs portfolio in office
Slide 33: Blackstone Related Important Disclosures
Blackstone Related Important Disclosures This document (together with any attachments, appendices, and related materials, the “Materials”) is provided on a confidential basis for informational due diligence purposes only and is not, and may not be relied on in any manner as legal, tax, investment, a
Slide 34: Blackstone Related Important Disclosures (cont.)
Blackstone Related Important Disclosures (cont.) Diversification; Potential Lack Thereof. Diversification is not a guarantee of either a return or protection against loss in declining markets. The number of investments which a Fund makes may be limited, which would cause the Fund’s investments to be
Slide 35: Blackstone Related Important Disclosures (cont.)
Blackstone Related Important Disclosures (cont.) Images. The Materials contain select images of certain investments that are provided for illustrative purposes only and may not be representative of an entire asset or portfolio or of a Fund’s entire portfolio. Such images may be digital renderings of
Slide 36: Blackstone Related Important Disclosures (cont.)
Blackstone Related Important Disclosures (cont.) Reliance on Key Management Personnel. The success of a Fund will depend, in large part, upon the skill and expertise of certain Blackstone professionals. In the event of the death, disability or departure of any key Blackstone professionals, the busin
Slide 37: Appendix - Finance
SECTION 37 Appendix - Finance F&G Investor Update | Summer 2023
Slide 38: Scalable ROA Model (ex Significant Items) – 1H23
Scalable ROA Model (ex Significant Items) – 1H23 510 bps 273 bps 121 bps 116 bps1,2 Portfolio Earned Yield Cost of Funds Expenses (Operating, Interest & Taxes) Adjusted Net Earnings excluding significant items Unique Investment Capabilities Attractively Priced Liabilities Scalable Operating Platform
Slide 39: ANE – Significant Income and Expense Items
ANE – Significant Income and Expense Items1 1Refer to “Non-GAAP Financial Measures Definitions” F&G Investor Update | Summer 2023 39 Significant Income and Expense Items Reflected in ANE Alternatives Long-term Expected Return Not Reflected in ANE Weighted Average Diluted Shares Outstanding Three mon
Slide 40: ANE – Significant Income and Expense Items (cont.)
ANE – Significant Income and Expense Items1 (cont.) 1Refer to “Non-GAAP Financial Measures Definitions” F&G Investor Update | Summer 2023 40 Significant Income and Expense Items Reflected in ANE Alternatives Long-term Expected Return Not Reflected in ANE Weighted Average Diluted Shares Outstanding T
Slide 41: Non-GAAP Measure Reconciliations
Non-GAAP Measure Reconciliations (a)Refer to “Non-GAAP Financial Measures Definitions” (b)For the year ended December 31, 2021, reflects a one-time favorable adjustment to benefits and other changes in policy reserves resulting from an actuarial system conversion at September 31, 2021, which reflect
Slide 42: Non-GAAP Measures and Definitions
Non-GAAP Measures and Definitions F&G Investor Update | Summer 2023 42 DEFINITIONS The following represents the definitions of non-GAAP measures used by F&G: Adjusted Net Earnings Adjusted net earnings is a non-GAAP economic measure we use to evaluate financial performance each period. Adjusted net
Slide 43: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) F&G Investor Update | Summer 2023 43 Adjusted Net Earnings per Diluted Share Adjusted net earnings per diluted share is calculated as adjusted net earnings divided by the weighted-average diluted shares outstanding. Management considers this non-GAAP financi
Slide 44: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) F&G Investor Update | Summer 2023 44 Average Assets Under Management (AAUM) (Quarterly and YTD) AAUM is calculated as AUM at the beginning of the period and the end of each month in the period, divided by the total number of months in the period plus one. Ma
Slide 45: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) F&G Investor Update | Summer 2023 45 Total Equity excluding AOCI Total equity excluding AOCI is based on total equity excluding the effect of AOCI. Since AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sal