F&g Annuities & Life, Inc. · NYSE:FG
F&g Annuities & Life — Investor Presentation (November 2023)
46 slides from F&g Annuities & Life's investor presentation, November 2023
Slide 1: F&G Investor Update Fall 2023
F&G Investor Update Fall 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 financi al accounting. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions and in the prepara
Slide 4: Well Positioned for Strong Finish in 2023
Well Positioned for Strong Finish in 2023 ✓ Gross sales on track for $12-13B in FY2023 YTD 3Q23 Gross Sales YTD 3Q23 Net Sales $9.1B $6.7B ✓ Record assets under management and + 7% YoY On Plan positioned for sustained asset growth Record Assets Under 3Q23 Portfolio Management (AUM)1 Credit-Related I
Slide 5: Third Quarter Financial Highlights
Third Quarter Financial Highlights F&G expects steady and growing adjusted net earnings over time, excluding significant items which include short-term mark-to-market effects Financial Highlights Significant Items – Quarterly ($M) - except per share data and ROA Quarterly Year-to-Date ANE ($M) and P
Slide 6: About F&G Snapshot
About F&G Snapshot Our Product Lines Five Distinct Distribution Channels Fixed Deferred Annuities Retail Channels • Fixed indexed annuity (FIA) • Independent insurance agents (IMOs) • Multi-year guaranteed annuity (MYGA) • Broker Dealers Pension Risk Transfer (PRT) • Banks Life Insurance Institution
Slide 7: F&G's Competitive Advantages
F&G’s Competitive Advantages v Targeting Large and Growing Markets Superior Ecosystem F&G is a nationwide leader in the large markets we We have long-standing relationships with multiple play in, and we expect demographic trends will distribution channels, an investment edge, and a track provide tai
Slide 8: We Have A Clean & Profitable Inforce Book
We Have A Clean & Profitable Inforce Book 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 investment strategy • Retail fixed annuit
Slide 9: We Are Playing In High Growth Markets
We Are Playing In High Growth Markets 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 Mutual Fund 401(k) Assets1 $4.5T Registered index linked annuities (RILAs) provide alter
Slide 10: … And We're Winning …
… And We’re Winning … Annual Gross Sales by Retail Channel and Institutional Market ($B) ~30% CAGR1 $12-13B $11.3B PRT $9.6B • FNF and F&G Merger Funding • F&G ratings upgrades Agreements (June 2020) Bank $4.5B Broker $3.9B Dealer $3.4B Agent 2018 2019 2020 2021 2022 2023E 1 CAGR reflects 2018-2023E
Slide 11: … And Significantly Diversifying Our Business
… And Significantly Diversifying Our Business FY2020 Sales FY2022 Sales YTD 3Q23 Sales 4% 12% 13% 7% Agent Channel 5% 10% Bank 13% $9.1B Broker Dealer $4.5B 4% $11.3B 43% 6% (9 Mos.) 41% Funding Agreements Pension Risk Transfer (PRT) 84% 28% 30% 1% 5% 12% 13% Fixed Indexed Annuity (FIA) 17% Product
Slide 12: High Quality & Well-Diversified Portfolio
High Quality & Well-Diversified Portfolio1 Portfolio conservatively positioned & well-matched to Investment Portfolio by Asset Class liability profile 29% Corpoates • Fixed income is 96% investment grade 24% Structured Securities 15% Private Origination • Modest average credit-related impairments of
Slide 13: Our Investment Portfolio Key Attributes
Our Investment Portfolio Key Attributes Investment Rationale Fixed Income1,2 (ex. Structured, Mortgage Loan & Private Origination) • Core fixed income: Focus remains high grade public and private securities with strong risk adjusted returns 75% Corporates • Structured credit: Provides access to well
Slide 14: Our Proven Track Record of Profitable Growth
Our Proven Track Record of Profitable Growth Gross Sales ($B) Adjusted Net Earnings ($M) Institutional Markets +7% VPY Significant items 18% VPY Retail Channels ANE ex significant items 11.3 9.6 9.1 2.8 8.5 3.5 2.1 640 2.6 8.5 353 260 6.1 5.9 7.0 223 2021 2022 YTD 3Q22 YTD 3Q23 Net Sales 8.7 9.0 7.1
Slide 15: Our Proven Track Record: Sales
Our Proven Track Record: Sales Gross Sales ($B) Sales are managed to profitability & capital targets Institutional markets Retail channels • Coming off record sales in 1H23, Retail annuity sales were intentionally lower during Q3 as we finalized reinsurance 11.8 agreements and enhanced product featu
Slide 16: Our Proven Track Record: Adj. Net Earnings
Our Proven Track Record: Adj. Net Earnings Adjusted Net Earnings (ANE) ($M) F&G expects steady and growing adjusted net earnings over time, excluding significant items Significant items ANE ex significant items • Growth in ANE ex significant items reflects: 640 390 • asset growth, 353 • margin expan
Slide 17: Scalable ROA Model (ex Significant Items) – YTD 3Q23
Scalable ROA Model (ex Significant Items) – YTD 3Q23 1 2 3 4 Unique Investment Attractively Priced Scalable Operating Strong Earnings Capabilities Liabilities Platform Growth Potential Overall Product Margin 3: 2.42% As a rule of thumb, target ROA of 100 bps, excluding significant items 515 bps 273
Slide 18: Our Disciplined "Core" Margin Management
Our Disciplined “Core” Margin Management We strive to opportunistically grow stable liabilities that generate our targeted levels of profitability and have a proven track record of protecting our “core” spread-based margins in varying environments • Our multiple channels and markets provide flexibil
Slide 19: Our Accretive Flow Reinsurance Opportunity
Our Accretive Flow Reinsurance Opportunity Flow reinsurance provides a lower capital requirement on ceded new business, while allocating capital to the highest returning retained business, enhancing cash flow and generating fee-based earnings • Reinsurance allows us to grow sales faster, because of
Slide 20: F&G's Owned Distribution Track Record
F&G’s Owned Distribution Track Record As a manufacturer, F&G is uniquely positioned to be a distribution consolidator Access to Partner Support Capabilities F&G Is Building A Proven Track Record F&G is a consolidator of choice in the distribution space • Our deep distribution relationships, long-ter
Slide 21: Book Value Per Share Rollforward
Book Value Per Share Rollforward BVPS ex. AOCI1 – 6/30/2023 to 9/30/2023 BVPS ex AOCI at $43.30 per share in 3Q23 vs. $40.70 per share in 2Q23, $43.50 1.85 $43.30 ↑ 6% or $2.60 per share $43.00 $42.50 • $0.97 per share increase due to $42.00 0.97 41.67 $41.45 underlying business performance $41.50 •
Slide 22: Stable and Strong Capital Profile
Stable and Strong Capital Profile GAAP Capitalization ex AOCI 1 ($M) Solid F&G capitalization; debt-to-capitalization ratio in line with long term target of 25% Debt 6,977 Equity ex. AOCI 6,323 • YTD 3Q23 capital markets highlights, as planned: 1,565 • $500M issuance of 7.40% senior unsecured notes
Slide 23: Our Capitalization Supports Growth & Dividend
Our Capitalization Supports Growth & Dividend 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 flexibility to adjust
Slide 24: Appendix - Investments
Appendix - Investments SECTION F&G Investor Update | Fall 2023 24
Slide 25: Structured Credit – Why We Like It
Structured Credit – Why We Like It Investment Rationale CMBS by Property Type1 • Collateralized loan obligation (CLO) portfolio well diversified across industry, issuer and manager; focus on investment grade with 38% Multifamily ample par subordination 18% Office 10% Hotel • Commercial mortgage-back
Slide 26: Portfolio Spotlight: CLO
Portfolio Spotlight: CLO • 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 Composition – % Fair Value1 Market Value C
Slide 27: Our CLO Portfolio: Look Through Analysis
Our CLO Portfolio: Look Through Analysis Portfolio focused on high quality CLO securities backed by highly diversified pool of loans CLO Managers Companies Industries Manager 1 10.0% Issuer 1 0.7% Industry 1 12.6% Manager 2 3.4% Issuer 2 0.6% Industry 2 12.4% Manager 3 2.9% Issuer 3 0.5% Industry 3
Slide 28: 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 scenarios
Slide 29: Portfolio Spotlight: Real Estate Debt
Portfolio Spotlight: Real Estate Debt BREDS (Blackstone Real Estate Debt Strategies) has assembled a high-quality portfolio with diversified exposure across asset classes and properties Market Value Duration $9.7B 4.0 Real estate portfolio years 35% CMBS 14% RMBS $10B 26% RML Quality 22% CML Weighte
Slide 30: Portfolio Spotlight: CMBS & RMBS
Portfolio Spotlight: CMBS & RMBS By Asset Type By Property Type By NAIC Rating 2% 9% 5% 20% 5% 9% 5% 6% 6% 7% 21% 12% 11% 84% 29% 56% 13% 3Q23 3Q23 3Q23 Conduit (Below A) Multifamily Office RMBS Hotel 1 2 3 4/5/6 Conduit (A or above) Retail SASB Industrial Agency Defeased CRE CLOs Other Note: GAAP F
Slide 31: Portfolio Spotlight: CMBS
Portfolio Spotlight: CMBS Prudent asset selection has led to more multifamily exposure and less retail vs. Conduit CMBS market averages Portfolio Construction Comparison1 Market Value Credit Quality 38% $3.4B 89% CMBS portfolio Investment grade (NRSRO) 25% 13% Quality 8% Credit focus 1.3 A- Average
Slide 32: Portfolio Spotlight: CMLs
Portfolio Spotlight: CMLs By State By Loan-To-Value % 24% CA 12% FL 13% LTV < 50% 6% NY 6% TX 32% LTV 50% to 60% $2B 5% NJ $2B 54% LTV 60% to 70% 5% GA 1% LTV > 70% 4% CT 38% Other By Underlying Property Type Investment Rationale 48% Multifamily • Our Commercial Mortgage Loan (CML) portfolio is low
Slide 33: Portfolio Spotlight: Alternatives LPs
Portfolio Spotlight: Alternatives LPs Historical Performance • Alternatives portfolio has demonstrated robust returns; 31.0% historical average of 14% • Commitments to Blackstone and non-Blackstone alternatives total $4.4B; invested capital of $2.3B Historical Avg = 14% • Total Alts NAV of $2.6B or
Slide 34: Blackstone Related Important Disclosures
Blackstone Related Important Disclosures 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, investment, accounting or other advic
Slide 35: Appendix - Finance
Appendix - Finance SECTION F&G Investor Update | Fall 2023 35
Slide 36: How F&G Makes Money – Retained Sales
How F&G Makes Money – Retained Sales Assets Under Product Margin, Spread-Based Gross Sales Management Net of Expenses Earnings 1 2 3 4 F&G invests in high F&G’s yield outpaces Client deposits F&G’s AAUM growth quality and well cost of funds and premium with F&G drives earnings diversified portfolio
Slide 37: How F&G Makes Money – Flow Reinsurance
How F&G Makes Money – Flow Reinsurance Capital “Light”, Gross Sales Flow Reinsurance Fee-Based Earnings Enhanced Returns 1 2 3 4 F&G expands flow F&G onboards new F&G enhances cash flow, Client deposits relationships given business at lower diversifies earnings & premium with F&G high market demand
Slide 38: How F&G Makes Money – Owned Distribution
How F&G Makes Money – Owned Distribution Investment in Owned Dividend Income Capital “Light”, Higher Multiple Distribution Stream Greater Margin Potential Earnings 1 2 3 4 F&G diversifies F&G takes equity stake F&G earns dividend F&G generates higher earnings through in independent agent stream on “
Slide 39: Non-GAAP Measure Reconciliations
Non-GAAP Measure Reconciliations Year ended Three months ended Nine months ended December 31, December 31, September 30, Decembr 31, March 31, June 30, September 30, September 30, September 30, 2021 2022 2022 2022 2023 2023 2023 2022 2023 Net earnings (loss) $1,232 $635 $187 ($176) ($195) $130 $306
Slide 40: ANE – Significant Items
ANE – Significant Items1 Significant Alternatives Weighted Income and Long-term Average Expense Expected Diluted Items Return Not Shares Reflected Reflected Outstanding in ANE in ANE Three months ended September 30, 2023 Adjusted net earnings of $120 million for the three month ended September 30, 2
Slide 41: ANE – Significant Items (cont.)
ANE – Significant Items1 (cont.) Significant Alternatives Weighted Income and Long-term Average Expense Expected Diluted Items Return Not Shares Reflected Reflected Outstanding in ANE in ANE Three months ended September 30, 2023 Adjusted net earnings of $120 million for the three month ended Septemb
Slide 42: Non-GAAP Measures and Definitions
Non-GAAP Measures and Definitions 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 earnings is calculated by adjusting n
Slide 43: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) Adjusted Net Earnings per Common Share Adjusted net earnings per common share is calculated as adjusted net earnings divided by the weighted-average common shares outstanding. Management considers this non-GAAP financial measure to be useful internally and f
Slide 44: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) Assets Under Management (AUM) AUM is comprised of the following components and is reported net of reinsurance qualifying for risk transfer in accordance with GAAP: (i) total invested assets at amortized cost, excluding investments in unconsolidated affiliate
Slide 45: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) Return on Average Equity excluding AOCI Return on average equity excluding AOCI is calculated by dividing the rolling four quarters net earnings (loss), by total average equity excluding AOCI. Average equity excluding AOCI for the twelve months rolling perio
Slide 46: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) Total Debt-to-Capitalization excluding AOCI Debt-to-capital ratio excluding AOCI is computed by dividing total aggregate principal amount of debt by total capitalization (total debt plus total equity excluding AOCI). Management considers this non-GAAP financ
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