F&g Annuities & Life, Inc. · NYSE:FG
F&g Annuities & Life — FY2023 Earnings Presentation
47 slides from F&g Annuities & Life's earnings presentation, Feb 21, 2024
Slide 1: F&G Investor Update Winter 2023
F&G Investor Update Winter 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: Executed Strategy & Delivered Shareholder Value
Executed Strategy & Delivered Shareholder Value ✓ Record gross sales of $13.2B in 2023 ✓ Record assets under management and positioned for sustained asset growth ✓ Diversified, high quality investment portfolio well matched to liabilities ✓ Consistent economics and margin expansion over time despite
Slide 5: Fourth Quarter Financial Highlights
($M) - except per share data and ROA Quarterly Full Year Period ended December 31 4Q22 4Q23 2022 2023 Gross sales $2,719 $4,083 $11,254 $13,153 Net sales $1,911 $2,549 $9,006 $9,238 Assets under management (AUM) $43,568 $49,453 $43,568 $49,453 AUM before flow reinsurance $46,432 $56,278 $46,432 $56,
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: F&G's Competitive Advantages
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 Large and Growing Markets We have long-standing relationships with
Slide 8: We Have A Clean & Profitable Inforce Book
Weighted average time remaining in surrender charge period 6 Years % Surrender protected 92% Average remaining surrender charge (% of account value) 7% % Subject to market value adjustment (MVA) 75% Average cost of options/interest credited 2.6% Distance to guaranteed minimum crediting rates 170 bps
Slide 9: We Are Playing In High Growth Markets
We Are Playing In High Growth Markets Mutual Fund 401(k) Assets1 U.S. Consumer Savings2 Retail Life & Annuities3 Pension Risk Transfer4 Funding Agreements6 $4.3T $777B $326B $260B $182B The U.S. retirement and middle markets are growing and we are both well established and well positioned for contin
Slide 10: And We're Winning: Annual Gross Sales
… And We’re Winning … Annual Gross Sales by Retail Channel and Institutional Market ($B) 1CAGR reflects 2018-2023 annual periods 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 • F&G ratings upgrades (June 2020) $11.3B ~31% C
Slide 11: While Significantly Diversifying Our Business
43% 28% 4% 13% 12% $11.3B 36% 39% 1% 9% 15% $13.2B 84% 5% 7% 4% $4.5B … While Significantly Diversifying Our Business Note: Reflects Total Gross Sales 38% 31% 7% 9% 15% $13.2B FY2022 Sales FY2023 Sales Bank Broker Dealer Agent Funding Agreements Pension Risk Transfer (PRT) C h a n n e l P ro d u c t
Slide 12: High Quality & Well-Diversified Portfolio
High Quality & Well-Diversified Portfolio1 Investment Portfolio by Asset Class Investment Portfolio by NAIC Designation F&G Investor Update | Winter 2023 12 Portfolio conservatively positioned & well-matched to liability profile • Fixed income is 96% investment grade • Modest average credit-related
Slide 13: Structured Credit Portfolio and Key Attributes
Structured Credit Portfolio1,2 58% Residential 20% Multifamily 10% Industrial 6% Office 2% Retail 2% Student Housing 2% Other³ Our Investment Portfolio Key Attributes Investment Rationale • Core fixed income: Focus remains high grade public and private securities with strong risk adjusted returns •
Slide 14: Our Proven Track Record of Profitable Growth
Our Proven Track Record of Profitable Growth Gross Sales ($B) Average Assets Under Management (AAUM) ($B) Adjusted Net Earnings ($M) 6.1 8.5 10.0 2.5 3.0 3.5 2.8 3.2 1.1 9.6 11.3 13.2 2.7 4.1 2021 2022 2023 4Q22 4Q23 Institutional Markets Retail Channels Net Sales 8.7 9.0 9.2 1.9 2.5 +52% VPY+17% VP
Slide 15: Our Proven Track Record: Sales
Our Proven Track Record: Sales Gross Sales ($B) Gross sales reflect diversified growth strategy; sales volumes effectively managed within profitability & capital targets • Record gross sales for 2023 reflect record retail sales and robust institutional sales • Net sales reflect third party flow rein
Slide 16: Our Proven Track Record: Adj. Net Earnings
640 353 335 130 61 79 120 75 2021 2022 2023 4Q22 1Q23 2Q23 3Q23 4Q23 Significant items ANE ex significant items Our Proven Track Record: Adj. Net Earnings 16F&G Investor Update | Winter 2023 Adjusted Net Earnings (ANE) ($M) Net earnings (loss) 1,240 635 (58) (176) (195) 130 306 (299) ANE per share $
Slide 17: Scalable ROA Model (ex Significant Items) – FY2023
Scalable ROA Model (ex Significant Items) – FY2023 516 bps 275 bps 124 bps 117 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 Platfo
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 Capital release from flow reinsurance Drives ROE enhancem
Slide 20: F&G's Owned Distribution Track Record
F&G’s Owned Distribution Track Record F&G is a consolidator of choice in the distribution space Access to Partner Support Capabilities As a manufacturer, F&G is uniquely positioned to be a distribution consolidator F&G Is Building A Proven Track Record • Our deep distribution relationships, long-ter
Slide 21: Book Value Per Share Rollforward
Book Value Per Share Rollforward 21F&G Investor Update | Winter 2023 BVPS ex. AOCI1 – 12/31/2022 to 12/31/2023 $41.45 $43.94 $43.38 $40.42 2.49 (0.56) (2.96) $38.00 $39.00 $40.00 $41.00 $42.00 $43.00 $44.00 $45.00 2022 ANE & Other 2023 Before MTM & Return of Capital Return of Capital 2023 Before MTM
Slide 22: Stable and Strong Capital Profile
Stable and Strong Capital Profile 22F&G Investor Update | Winter 2023 GAAP Capitalization ex AOCI1 ($M) 4,201 5,223 5,093 5,093 250 950 1,100 1,760 1,760 5,151 6,323 6,853 7,103 YE 2021 YE 2022 YE 2023 Pro Forma YE 2023 Debt Preferred Stock Equity ex. AOCI Adj. Debt to Capital % 18.4% 17.4% 25.7% 24
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
SECTION Appendix - Investments F&G Investor Update | Winter 2023 24
Slide 25: Investment Portfolio Stress Testing
Investment Portfolio Stress Testing 25F&G Investor Update | Winter 2023 • Moderate, Severe Recession and Stagflation scenarios modeled by F&G and Blackstone investments and risk teams • Moderate Recession: Based on characteristics from recessions in 1990/1991 (1st Gulf War), 2001 (dot-com and 9/11)
Slide 26: Stress Test: Results & No Management Actions
Stress Test: Results & No Management Actions 26F&G Investor Update | Winter 2023 Stress Test Scenario Results by Asset Class 1Reflects fixed income other than temporary impairment (OTTI) Before Stress Test, excess capital at 350% RBC is $600M Moderate Recession Severe Recession Stagflation 4Q23 Port
Slide 27: Stress Test: Management Actions to Mitigate Impact
Stress Test: Management Actions to Mitigate Impact 27F&G Investor Update | Winter 2023 Capital Position Before & After Stress & Management Actions ($M) Moderate Stress Impact on Excess Capital Severe Stress Impact on Excess Capital Stagflation Impact on Excess Capital 600 35 (565) Exc Cap 12/31/23 S
Slide 28: Our Origination Premiums Enhance Yield
Our Origination Premiums Enhance Yield Our direct origination platform provides additional spread, while limiting additional credit risk, as compared to the broadly syndicated market • Borrowers & originators value certainty of execution & ability to customize terms of debt, resulting in higher yiel
Slide 29: 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 30: Portfolio Spotlight: CLO
10% 11% 40% 29% 10% AAA AA A BBB BB and Below 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 Portfo
Slide 31: 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 Note: GAAP Fair Values as of 12/31/2023 IndustriesCompaniesCLO Managers 96 CLO managers 1,880 Companies 33 Industries F&G Investor Update | Winter 2023 31 8.9% 3.4% 2.
Slide 32: 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 33: Portfolio Spotlight: Real Estate Debt
Portfolio Spotlight: Real Estate Debt 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 12/31/2023 F&G Investor Update | Winter 2023 33 36% CMBS 27% RML 18% CML 16% RMBS 3%
Slide 34: Portfolio Spotlight: CMBS & RMBS
Portfolio Spotlight: CMBS & RMBS By Asset Type By Property Type By NAIC Rating F&G Investor Update | Winter 2023 34 Note: GAAP Fair Values as of 12/31/2023 31% 21% 19% 12% 11% 6% 4Q23 RMBS SASB CRE CLOs Conduit (Below A) Conduit (A or above) Agency 58% 12% 9% 8% 6% 6% 1% 4Q23 Multifamily Office Othe
Slide 35: 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 Note: GAAP Fair Values as of 12/31/2023 1BAML Conduit Data as of 12/31/2023 F&G Investor Update | Winter 2023 35 41% 8% 13% 25% M
Slide 36: 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 37: Portfolio Spotlight: Alternatives LPs
Portfolio Spotlight: Alternatives LPs • Alternatives portfolio has demonstrated robust returns; historical average of 14% • Commitments to Blackstone and non-Blackstone alternatives total $4.5B; invested capital of $2.4B • Total Alts NAV of $2.7B or 6% of total portfolio • The portfolio is well-dive
Slide 38: 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 39: Appendix - Finance
SECTION 39 Appendix - Finance F&G Investor Update | Winter 202339 of XX
Slide 40: Non-GAAP Measure Reconciliations
Non-GAAP Measure Reconciliations All amounts in millions (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
Slide 41: ANE – Significant Items
ANE – Significant Items1 1Refer to “Non-GAAP Financial Measures Definitions” F&G Investor Update | Winter 2023 41 Significant Income and Expense Items Reflected in ANE Alternatives Long-term Expected Return Not Reflected in ANE Weighted Average Diluted Shares Outstanding Year ended December 31, 2023
Slide 42: ANE – Significant Items (cont.)
ANE – Significant Items1 (cont.) 1Refer to “Non-GAAP Financial Measures Definitions” F&G Investor Update | Winter 2023 42 Significant Income and Expense Items Reflected in ANE Alternatives Long-term Expected Return Not Reflected in ANE Weighted Average Diluted Shares Outstanding Three months ended D
Slide 43: Non-GAAP Measures and Definitions
Non-GAAP Measures and Definitions F&G Investor Update | Winter 2023 43 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 44: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) F&G Investor Update | Winter 2023 44 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
Slide 45: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) F&G Investor Update | Winter 2023 45 Adjusted Return on Average Equity excluding AOCI Adjusted return on average equity is calculated by dividing the rolling four quarters adjusted net earnings (loss), by total average equity excluding AOCI. Average equity e
Slide 46: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) F&G Investor Update | Winter 2023 46 Book Value per Share excluding AOCI Book value per share excluding AOCI is calculated as total equity (or total equity excluding AOCI) divided by the total number of shares of common stock outstanding. Management consider
Slide 47: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) F&G Investor Update | Winter 2023 47 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). Mana