F&g Annuities & Life, Inc. · NYSE:FG
F&g Annuities & Life — Q2 2024 Earnings Presentation
48 slides from F&g Annuities & Life's earnings presentation, Aug 5, 2024
Slide 1: F&G Investor Update Summer 2024
F&G Investor Update Summer 2024
Slide 2: Disclaimer & Forward-Looking Statements
Disclaimer & Forward-Looking Statements 2F&G Investor Update | Summer 2024 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
Slide 3: Non-GAAP Financial Measures
Non-GAAP Financial Measures 3F&G Investor Update | Summer 2024 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 summari
Slide 4: Executing To Deliver Shareholder Value
1H24 Adjusted ROA2 1.30% Above 1.10% baseline Executing To Deliver Shareholder Value 4F&G Investor Update | Summer 2024 1As of 6/30/2024 2Attributable to common shareholders; metrics refer to return on assets ex significant items and adjusted return on equity ex AOCI and ex significant items 3As of
Slide 5: Second Quarter Financial Highlights
ANE ($M) and Per Share 2Q23 2Q24 Favorable / (Unfavorable) ($M) Per share ($M) Per share Alternatives investment short-term returns versus long-term return expectations (55) ($0.44) (20) ($0.15) Other significant (income) expense items 5 $0.04 (12) ($0.09) Second Quarter Financial Highlights 5F&G In
Slide 6: We Are Driving Sustainable ROE Expansion
8% 12% 6% (2%) 0% 5% 10% 15% 20% 2020 Earnings MTM & Other 2Q24 We Are Driving Sustainable ROE Expansion 6F&G Investor Update | Summer 2024 1Attributable to common shareholders; metric refers to adjusted net earnings ex significant items. 2020 reflects post merger period from 6/1/2020 to 12/31/2020
Slide 7: With Strong ROE Driving Book Value Growth
… With Strong ROE Driving Book Value Growth 7F&G Investor Update | Summer 2024 BVPS ex AOCI of $39.79; ↑ 45% before MTM vs. 2020 BVPS ex AOCI of $42.52; ↑ 55% after MTM vs. 2020 • $12.74 per share increase due to underlying business performance • ($0.94) per share decrease for capital actions • $2.7
Slide 8: We Are Achieving Higher Ratings Over Time
2020 2021 2022 2023 2024 We Are Achieving Higher Ratings Over Time 8F&G Investor Update | Summer 2024 Upgraded to ‘A-’ FNF Merger Completed F&G Partial Spinoff $2.4B Market Cap Launched Flow Reinsurance Launched Owned Distribution F&G at 7/31/2024 $5.4B Market Cap Upgraded to ‘A-’ Upgraded to ‘Baa1’
Slide 9: About F&G Snapshot
About F&G Snapshot 9F&G Investor Update | Summer 2024 Retail Annuities • Fixed indexed annuity (FIA) • Registered index-linked annuities (RILA) • Multi-year guaranteed annuity (MYGA) Pension Risk Transfer (PRT) Life Insurance • Indexed universal life (IUL) Funding Agreements • Funding agreement back
Slide 10: F&G's Competitive Advantages
F&G’s Competitive Advantages 10F&G Investor Update | Summer 2024 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, whether rates are rising or falling v Targeting L
Slide 11: We Have A Clean & Profitable Inforce Book
We Have A Clean & Profitable Inforce Book 11F&G Investor Update | Summer 2024 Our inforce liabilities are surrender charge protected and our asset and liability cash flows are well matched; our inforce book does not contain typical problematic legacy business • Our liability profile drives our inves
Slide 12: Our FIA Account Value Is Steadily Growing
Our FIA Account Value Is Steadily Growing 12F&G Investor Update | Summer 2024 F&G continues to have positive net inflows, although terminations are elevated in the higher rate environment as expected and seen across the industry • Record new business volumes have improved the liability profile and g
Slide 13: We Are Playing In High Growth Markets
We Are Playing In High Growth Markets 13F&G Investor Update | Summer 2024 The U.S. retirement and middle markets are growing and we are both well established and well positioned for continued growth in our retail channels and institutional markets 11Q24 Quarterly Retirement Market Data, Investment C
Slide 14: With A Lot Of Cash Still On The Sidelines
… With A Lot Of Cash Still On The Sidelines 14F&G Investor Update | Summer 2024 We continue to see sustainable demand for our retail fixed annuity products given current environment • U.S. consumers are holding more than $6 trillion in money market fund assets; once money market rates start to decli
Slide 15: And We're Winning
… And We’re Winning … 15F&G Investor Update | Summer 2024 1CAGR reflects 2018-2023 annual periods Annual Gross Sales by Retail Channel and Institutional Market ($B) 2018 2019 2020 2021 2022 2023 Funding Agreements Agent PRT Broker Dealer Bank $9.6B $4.5B $3.9B $3.4B FNF and F&G Merger (June 2020) $1
Slide 16: While Significantly Diversifying Our Business
42% 28% 5% 13% 12% $7.9B (6 Mos.) … While Significantly Diversifying Our Business 16F&G Investor Update | Summer 2024 Note: Reflects Total Gross Sales 38% 31% 7% 9% 15% $13.2B 84% 5% 7% 4% $4.5B FY2023 Sales C h a n n e l P ro d u c t 36% 39% 1% 9% 15% $13.2B 77% 17% 1% 5% $4.5B FY2020 Sales 1H24 Sa
Slide 17: F&G's Owned Distribution Track Record
F&G’s Owned Distribution Track Record 17F&G Investor Update | Summer 2024 As a manufacturer, F&G is uniquely positioned to be a distribution consolidator F&G Is Building A Proven Track Record Deals Closed1 ~$680M Pro forma ~20%+ ROI’s over time F&G is a consolidator of choice in the distribution spa
Slide 18: High Quality & Well-Diversified Portfolio
High Quality & Well-Diversified Portfolio1 18F&G Investor Update | Summer 2024 1GAAP Fair Values as of 6/30/2024 (net of reinsurance FWH) 2Other consists of ICOLI, FHLB stock, LIHTC, options and private origination equity tranches 3Cash includes actual cash and treasuries Investment Portfolio by Ass
Slide 19: Our Investment Portfolio
Our Investment Portfolio Key Attributes 19 Investment Rationale • Core fixed income: Focus remains high grade public and private securities with strong risk adjusted returns • Structured credit: Provides access to well diversified, high-quality assets across CLOs, CMBS and ABS • Mortgage loans: Supe
Slide 20: Our Track Record of Profitable Growth
353 335 140 247 2022 2023 1H23 1H24 Our Track Record of Profitable Growth Gross Sales ($B) Average Assets Under Management (AAUM) ($B) Common Adjusted Net Earnings (ANE) ($M) F&G Investor Update | Summer 2024 20 40.1 46.0 44.8 50.2 2022 2023 1H23 1H24 12% VPY+15% VPY Ending AUM 43.6 49.1 46.0 52.2 A
Slide 21: Robust Gross Sales With Pricing Discipline
Robust Gross Sales With Pricing Discipline Gross Sales Growth ($B) Gross sales sustainable across multi-channel new business platform; sales volumes effectively managed within profitability & capital targets • Strong demand for our products given demographic tailwinds, prior investments in building
Slide 22: Growing Adjusted Net Earnings Over Time
353 335 442 79 120 75 108 139 2022 2023 2Q24 LTM 2Q23 3Q23 4Q23 1Q24 2Q24 Net earnings (loss) 635 (58) 316 130 306 (299) 111 198 Op Exp (bps)1 59 63 61 61 63 63 63 61 ANE per share $3.07 $2.68 $3.47 $0.63 $0.96 $0.60 $0.86 $1.10 Adj. ROA2 1.18% 1.17% 1.24% 1.16% 1.20% 1.17% 1.25% 1.30% Adj. ROE2 10%
Slide 23: Expanding ROA Despite Volatile Rates
Expanding ROA Despite Volatile Rates F&G’s primary “spread model” generates stable return on assets (ROA) despite volatility in interest rates • 2019-2021: Maintained adjusted ROA as interest rates declined and repriced inforce book • 2022-1H24: Expanded adjusted ROA from scale, accretive flow reins
Slide 24: Scalable Adjusted ROA Model – 1H24
533 bps 291 bps 14 bps 9 bps (135) bps 130 bps1,2 Portfolio Earned Yield Cost of Funds Flow Reinsurance Fee Income Owned Distribution Margin Expenses (Operating, Interest, Taxes, Pref. Dividends) Common Adjusted Net Earnings excluding significant items Scalable Adjusted ROA Model1 – 1H24 24F&G Inves
Slide 25: Stable and Strong Capital Profile
Stable and Strong Capital Profile 25F&G Investor Update | Summer 2024 Solid F&G capitalization; debt-to-capitalization ratio in line with long term target of 25% • $300M net increase in debt in 2Q24 reflects successful refinance and partial tender offer of upcoming 2025 senior note maturity • Pro fo
Slide 26: Our Capitalization Supports Growth & Dividend
Our Capitalization Supports Growth & Dividend 26F&G Investor Update | Summer 2024 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 sharehol
Slide 27: Appendix – Investments
APPENDIX Appendix – Investments
Slide 28: Structured Credit – Why We Like It
38% Multifamily 14% Office 11% Hotel 11% Industrial 7% Retail 5% Defeased 2% Mixed Use 1% Self-Storage 1% Special Purpose 1% ManufacturedHousing 9% Other (< Top 10) $3.9B Structured Credit – Why We Like It 28F&G Investor Update | Summer 2024 Investment Rationale • Collateralized loan obligation (CLO
Slide 29: Portfolio Spotlight: CLO
Portfolio Spotlight: CLO 29F&G Investor Update | Summer 2024 Highly diversified portfolio with ample par subordination • Blackstone’s broad & deep understanding of the asset class, and ability to perform loan level underwriting, distinguishes F&G’s portfolio from its peers F&G CLO Portfolio Composit
Slide 30: Our CLO Portfolio: Look Through Analysis
Our CLO Portfolio: Look Through Analysis 30F&G Investor Update | Summer 2024 Portfolio focused on high quality CLO securities backed by highly diversified pool of loans Note: GAAP Fair Values as of 6/30/2024 IndustriesCompaniesCLO Managers 91 CLO managers 1,899 Companies 33 Industries 8.9% 3.9% 3.1%
Slide 31: U.S. CLO Impairment Frontier
U.S. CLO Impairment Frontier 31F&G Investor Update | Summer 2024 CLO debt is well insulated from higher defaults and lower recovery rates • BBB CLOs can withstand an annualized default of 9.4% (that would have to occur every year) assuming a 63.5% average long- term loan recovery rate U.S. CLO Impai
Slide 32: Portfolio Spotlight: Real Estate Debt
Portfolio Spotlight: Real Estate Debt 32F&G Investor Update | Summer 2024 Blackstone Real Estate Debt Strategies (BREDS) has assembled a high-quality portfolio with diversified exposure across asset classes and properties Note: GAAP Fair Values as of 6/30/2024 37% CMBS 28% RML 17% CML 15% RMBS 3% NN
Slide 33: Portfolio Spotlight: CMBS & RMBS
Portfolio Spotlight: CMBS & RMBS 33F&G Investor Update | Summer 2024 Note: GAAP Fair Values as of 6/30/2024 By Asset Type By Property Type By NAIC Rating 29% 27% 19% 11% 9% 5% 2Q24 RMBS SASB CRE CLOs Conduit (Below A) Conduit (A or above) Agency 56% 10% 10% 8% 8% 5% 3% 2Q24 Multifamily Office Other
Slide 34: Portfolio Spotlight: CMBS
Portfolio Spotlight: CMBS 34F&G Investor Update | Summer 2024 Prudent asset selection has led to more multifamily exposure and less retail vs. Conduit CMBS market averages Portfolio Construction Comparison1 Note: GAAP Fair Values as of 6/30/2024 1BAML Conduit Data as of 3/31/2024 38% 7% 13% 25% Mult
Slide 35: Portfolio Spotlight: CMLs
Portfolio Spotlight: CMLs 35F&G Investor Update | Summer 2024 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% • 74 holdings, with average loan size of $28M • 1.4% of CML
Slide 36: Portfolio Spotlight: Alternatives LPs
Portfolio Spotlight: Alternatives LPs 36F&G Investor Update | Summer 2024 Alternatives portfolio has demonstrated robust returns • Commitments to Blackstone and non-Blackstone alternatives total $4.9B; invested capital of $2.6B • Total Alts NAV of $2.2B or 4% of total portfolio • The portfolio is we
Slide 37: Blackstone Related Important Disclosures
Blackstone Related Important Disclosures 37F&G Investor Update | Summer 2024 This document (together with any attachments, appendices, and related materials, the “Materials”) is provided for informational due diligence purposes only and is not, and may not be relied on in any manner as legal, tax, i
Slide 38: Appendix – Finance
APPENDIX 38F&G Investor Update | Summer 2024 Appendix – Finance
Slide 39: Book Value Per Share Growth – Quarterly
Book Value Per Share Growth – Quarterly 39F&G Investor Update | Summer 2024 BVPS ex AOCI of $42.52; ↑ 3% after MTM vs. 1Q24 • $1.01 per share increase due to underlying business performance • ($0.15) per share decrease for return of capital • $0.56 per share increase due to mark-to-market movements
Slide 40: Non-GAAP Measure Reconciliations
Non-GAAP Measure Reconciliations1 40F&G Investor Update | Summer 2024 All amounts in millions 1Refer to “Non-GAAP Measures Definitions” Year ended Three months ended December 31, 2022 December 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 March 31, 2024 June 30, 2024 June 30, 2023 June
Slide 41: ANE – Significant Items
ANE – Significant Items1 41F&G Investor Update | Summer 2024 1Refer to Reconciliation of net earnings (loss) to adjusted net earnings attributable to common shareholders on page 41 ($ and shares in table in millions) Significant Income and Expense Items (Reflected in Adjusted Net Earnings) Alternati
Slide 42: ANE – Significant Items (cont.)
ANE – Significant Items1 (cont.) 42F&G Investor Update | Summer 2024 1Refer to Reconciliation of net earnings (loss) to adjusted net earnings attributable to common shareholders on page 41 ($ and shares in table in millions) Significant Income and Expense Items (Reflected in Adjusted Net Earnings) A
Slide 43: Non-GAAP Measures Definitions
Non-GAAP Measures Definitions 43F&G Investor Update | Summer 2024 The following represents the definitions of non-GAAP measures used by F&G Adjusted Net Earnings attributable to common shareholders Adjusted net earnings attributable to common shareholders is a non-GAAP economic measure we use to eva
Slide 44: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) 44F&G Investor Update | Summer 2024 Adjusted Weighted Average Diluted Shares Outstanding Adjusted weighted average diluted shares outstanding is the same as weighted average diluted shares outstanding except for periods in which our preferred stocks are calc
Slide 45: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) 45F&G Investor Update | Summer 2024 Adjusted Return on Average Common Shareholder Equity, excluding AOCI Adjusted return on average common shareholder equity is calculated by dividing the rolling four quarters adjusted net earnings attributable to common sha
Slide 46: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) 46F&G Investor Update | Summer 2024 AUM before Flow Reinsurance AUM before Flow Reinsurance is comprised of components consistent with AUM, but also includes flow reinsured assets. Management considers this non-GAAP financial measure to be useful internally
Slide 47: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) 47F&G Investor Update | Summer 2024 Sales Annuity, IUL, funding agreement and non-life contingent PRT sales are not derived from any specific GAAP income statement accounts or line items and should not be viewed as a substitute for any financial measure dete
Slide 48: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) 48F&G Investor Update | Summer 2024 Total F&G Equity attributable to common shareholders, excluding AOCI Total F&G equity attributable to common shareholder, excluding AOCI is based on total F&G Annuities & Life, Inc. shareholders' equity excluding the effec