Fidelity National Financial, Inc. · NYSE:FNF
Fidelity National Financial — Investor Day (October 2023)
118 slides from Fidelity National Financial's investor day presentation, Oct 3, 2023
Slide 1: F&G Investor Day October 3, 2023
F&G Investor Day October 3, 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: Welcome & Opening Remarks
SECTION 4 Welcome & Opening Remarks F&G 2023 Investor Day
Slide 5: Investor Day Agenda
Investor Day Agenda Welcome & Opening Remarks Lisa Foxworthy-Parker SVP Investor & External Relations 9:00 am F&G Strategic Overview Chris Blunt CEO & President 9:05 am Diversified Growth Strategy John Currier President, Retail Markets Matt Christensen EVP, Pension Risk Transfer 9:30 am Margin Expan
Slide 6: Our Goals For The Day
Our Goals For The Day Differentiated Learn about our business and what differentiates F&G Growth Understand our roadmap for profitable growth and margin expansion Opportunity Recognize F&G as an attractive investment opportunity F&G 2023 Investor Day 6
Slide 7: 1. F&G Strategic Overview
SECTION 1. F&G Strategic Overview F&G 2023 Investor Day 7
Slide 8: Key Message: F&G Strategic Overview
Key Message 1 F&G Strategic Overview F&G presents a compelling investment opportunity because we use our competitive advantages to keep winning in large and growing markets F&G 2023 Investor Day 8
Slide 9: 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 10: Our Mission and Vision
*CONFIDENTIAL: Do Not Distribute Outside F&G OUR MISSION We help people turn their aspirations into reality. OUR VISION Every day we will strive to improve the financial lives of more and more people, backed by the passion of our team and grounded in a culture of mutual respect. 1 F&G Strategic Over
Slide 11: Our Recent History
Gross Sales ($B) 3.4 3.9 4.5 9.6 11.3 11.9 ↑ 32% Net Sales ($B) 3.4 3.9 4.5 8.7 9.0 8.5 ↑ 23% AUM ($B) 26.7 26.4 28.6 36.5 43.6 46.3 ↑ 13% AUM before flow reinsurance ($B) 26.7 26.4 28.6 37.3 46.4 51.2 ↑ 16% Adj. ROA (bps) ex significant items 0.86% 0.80% 0.84% 0.93% 1.18% 1.16% ↑ 30 bps Our Recent
Slide 12: F&G's At An Attractive Entry Valuation
F&G’s At An Attractive Entry Valuation Progression of F&G Transaction Prices & Market Capitalization F&G is currently trading well below the intrinsic value of its new business platform and growing inforce book • Average Life & Annuity peer comparables average approximately 7-8x P/E multiple or 1.4x
Slide 13: Our Potential Value Creation – Illustrative
$28.06 +$12.00 +$10.00 +$6.00 +$8.00 +$8.00 FG Closing Price Asset Growth Core Margin Expansion Owned Distribution Margin Expansion Core Multiple Expansion Owned Distribution Multiple Re-rating Our Potential Value Creation – Illustrative F&G 2023 Investor Day 13 Immediate Near-Term Medium-Term We se
Slide 14: Our Competitive Landscape Is Evolving
Our Competitive Landscape Is Evolving In today’s competitive landscape, we believe insurers partnered with asset originators have competitive advantages • The U.S. retirement and middle markets are growing due to demographic tailwinds and the middle market coverage gap • F&G is both well-established
Slide 15: 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 16: 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 17: 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 $4.5T $862B $326B $258B $176B The U.S. retirement and middle markets are growing and we are both well established and well positioned for contin
Slide 18: And We're Winning
… And We’re Winning … Annual Gross Sales by Retail Channel and Institutional Market ($B) 1CAGR reflects 2018-2023F annual periods 2018 2019 2020 2021 2022 2023E 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 ~30%
Slide 19: And Significantly Diversifying Our Business
77% 17% 1% 5% $4.5B 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 FY2020
Slide 20: We Have An Investment Edge
We Have An Investment Edge Our strategic partnership with Blackstone provides a competitive advantage, opportunities for entering higher margin lines and potential to disintermediate investment banks in credit origination Note: Data as of 6/30/2023 • Our strategic, long-term partnership with Blackst
Slide 21: Our Track Record of Attracting Top Talent
• Strong team culture and cohesiveness • Top Workplaces company for 6 consecutive years Our Track Record of Attracting Top Talent 21 Chris Blunt President and CEO 30+ years of experience Joined F&G in 2019 Wendy Young EVP, Chief Financial Officer 30+ years of experience Joined F&G in 2000 John Curri
Slide 22: Key Takeaway: F&G Strategic Overview
Key Takeaway 1 F&G Strategic Overview F&G 2023 Investor Day 22 F&G presents a compelling investment opportunity because we use our competitive advantages to keep winning in large and growing markets
Slide 23: 2. Diversified Growth Strategy
SECTION 2. Diversified Growth Strategy F&G 2023 Investor Day 23
Slide 24: Our Retail Markets Growth Strategy
Our Retail Markets Growth Strategy Our competitive product portfolio meets wide range of consumer needs • Our product set is mission driven to help people turn their aspirations into reality • We provide great service to policyholders as recognized by J.D. Powers, among leading annuity providers Our
Slide 25: We Are A Retail Market Leader
We Are A Retail Market Leader F&G FY22 Channel Ranking – FIA • # 4 in IMO Channel • # 8 in Bank Channel F&G FY22 Channel Ranking – MYGA • # 5 in Broker Dealer Channel • # 6 in Bank Channel F&G FY22 Channel Ranking – IUL • # 7 in IMO Channel • # 3 in number of IUL Policies Source: Wink Annuities and
Slide 26: Our Current Retail Product Offerings
Consumer • Meets consumer risk tolerance • Configurable for multiple needs • Demographic tailwinds for market Distribution Partners • Established distribution partners F&G • Deep product expertise • Strong product margins • Repriced to economics each month Our Current Retail Product Offerings We onl
Slide 27: F&G Indexed Annuities – FIA
Summary of FIA Product Features • Product: Simple deferred annuity product with principal protection from market decline • Market Loss Protection: Index credit is never less than $0; policyholders are protected from loss • Liquidity: Guaranteed surrender values and penalty free withdrawals up to spe
Slide 28: F&G Fixed Annuities – MYGA
10 13 11 11 24 21 31 33 42 39 80 49 41 46 53 50 104 70 2018 2019 2020 2021 2022 1H23 Industry MYGA Sales ($B) Bank/BD Ind./Others F&G Fixed Annuities – MYGA Summary of MYGA Product Features • Product: Offers deferred annuities which credit a guaranteed interest rate for 3, 5 or 7 years and a princip
Slide 29: F&G Indexed Annuities – RILA Launch Planned
Summary of RILA Product Features • Product: Simple deferred annuity product with protected loss profiles • Loss Protection: Policyholders choose their loss profile • Liquidity: Guaranteed surrender values and penalty free withdrawals up to specified amounts • Surrender Charges: Withdrawals above the
Slide 30: F&G Indexed Universal Life
F&G Indexed Universal Life Our Indexed Universal Life (IUL) provides consumers with death benefit protection, as well as a complementary product that allows them to build on their savings with performance linked to a specific market index (primarily S&P 500 Index) with a guaranteed floor Summary of
Slide 31: Our Retail Distribution Is Unique and Proven
Our Retail Distribution Is Unique and Proven Product development partnership & investment for over 20 years Top positions within our partners and advisors as we grow together We adapt to how our partners’ businesses are changing We win by offering customized solutions, taking a consultative approach
Slide 32: Our Retail Distribution Is A Competitive Advantage
Bank • #1 annuity carrier w/ our top banks • $2.1B sales in 1H23; on record pace • Strong relationship scorecards • Growing product & partner footprint Our Retail Distribution Is A Competitive Advantage 1Source: Wink’s Sales & Market Reports FY2022 Agent IMO: Annuity • FIA market leader, #4 market s
Slide 33: We Are Positioned To Win In Retail Markets
We Are Positioned To Win In Retail Markets • FIA in IMO was our primary focus • IUL was steady but ‘niche’ distribution • A steady but constrained competitor with annual sales of $3-$4B • Leading positions in FIA, MYGA & IUL • Launched owned distribution strategy • Steady and strong competitor with
Slide 34: U.S. Pension Risk Transfer Landscape
U.S. Pension Risk Transfer Landscape 2 Diversified Growth Strategy: Institutional PRT 70%+ pension plans are closed or frozen1 60% frozen pension plan assets derisked2 100%+ average pension plan funding3 $2.3T corporate pension assets1 1 For most corporate pension plans, pension risk transfer is a m
Slide 35: U.S. Pension Risk Transfer Annual Premiums
U.S. Pension Risk Transfer Annual Premiums 2 Diversified Growth Strategy: Institutional PRT 36 4 9 14 14 23 27 30 27 38 52 22 -0.50% 0.50% 1.50% 2.50% 3.50% 4.50% 5.50% 6.50% 7.50% - 10 20 30 40 50 60 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 1H23 Total Premium Avg 10 yr UST Average 10
Slide 36: We Are A Top Player In Pension Risk Transfer
We Are A Top 10 Player In Pension Risk Transfer Our proven track record of PRT execution • $3B+ plan transaction value from inception through June 2023; transfer of legacy defined benefit pensions to F&G group annuity • 14 transactions completed, ranging from $65M to $500M in size; nearly 60,000 cov
Slide 37: We Have Selectively Expanded Our Strategy
We Have Selectively Expanded Our Strategy During 1H23, market volumes have shifted toward plan termination transactions • We have expanded our strategy to selectively pursue plan termination transactions and larger retiree buyouts ($500M to $1B) • ~50% of total transactions exceed $200M in size • ~6
Slide 38: Managing The Market Opportunity
… By Managing The Market Opportunity1 45,000+ Pension Plans $2.3T Assets $30-40B+ Annual PRT Market $10-15B F&G Target Mkt. $2-4B F&G annual sales run rate over time, based on appetite & market conditions Pension landscape • Pension plan liabilities increasingly difficult for companies to manage in
Slide 39: We Are Positioned To Win In PRT Market
We Are Positioned To Win In PRT Market Our pension risk transfer business leverages our core competencies and stays true to our risk philosophies (e.g. straight forward liabilities) • We target opportunities and market segments that represent the most achievable and attractive risk/reward • We diffe
Slide 40: Key Takeaways: Diversified Growth Strategy
Key Takeaways We are positioned to win in Retail markets We are positioned to win in the Institutional pension risk transfer market And, we have a compelling market opportunity in the target markets we serve 2 Diversified Growth Strategy F&G 2023 Investor Day 40
Slide 41: 3. Margin Expansion Opportunity
SECTION 41 3. Margin Expansion Opportunity F&G 2023 Investor Day
Slide 42: Key Messages: Margin Expansion
Key Messages: Margin Expansion We focus on investment margin management 3 Margin Expansion Opportunity We expect operational scale benefits over time We are well positioned for accretive flow reinsurance strategy F&G 2023 Investor Day 42
Slide 43: 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 44: Our Strategic Asset Allocation Trend
56% 43% 40% 39% 37% 34% 8% 5% 5% 4% 4% 4% 23% 35% 35% 31% 23% 28% 2% 4% 13% 12% 2% 3% 5% 7% 10% 10% 8% 9% 7% 6% 5% 3% 1% 2% 4% 4% 5% 4% 2% 2% 2% 4% 3% 5% 15 20 25 30 35 40 45 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2017 YE 2018 YE 2019 YE 2020 YE 2021 YE 2022 YE A U M i n $ B il li o n Other Alt
Slide 45: Has Generated Incremental Spread
+120 bps +55 bps +20 bps +25 bps +100 bps Corporate Spread Structured Credit Spread Resi Mtg Loan & Specialty Finance Spread Private Origination Spread Excess Spread … Has Generated Incremental Spread 1B/M BBB Bloomberg Corporate index, Corporate Spread is the average spread from 2018-2022, net of e
Slide 46: We See Potential Upside To Portfolio Yield
5.10% 0.09% 0.08% 0.06% 5.39% 0.06% Base Yield Total Uplift Royalty Finance Triple Net Lease Strategic Platform Investments Potential Banking Regulation We See Potential Upside To Portfolio Yield 1For illustrative purposes only. Base yield reflects portfolio earned yield as of 6/30/2023. Comparison
Slide 47: While Providing Downside Protection
1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% Avg. priced SOFR (hedged assets) Avg. IRS fixed receive …While Providing Downside Protection 1Analysis as of 9/11/2023. All floating assets include reinsurance entities & separate accounts and includes all reference rates; 1M/3M SOFR equal ~83% of total floating ra
Slide 48: Minimal Credit-Related Impairment Losses
9 1 6 6 2020 2021 2022 1H23 Minimal Credit-Related Impairment Losses Credit quality within the portfolio remains strong • The investment portfolio is performing as expected • Conservative underwriting, investing in defensive sectors, and proactive portfolio management in anticipation of market stres
Slide 49: Accretive Flow Reinsurance Opportunity
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 3 Margin Expansion Opportunity Capital release from flow rein
Slide 50: We See Core Margin Expansion Opportunity
520 296 471 2021 2022 LTM 2Q23 2024E+ We See Core Margin Expansion Opportunity1 F&G 2023 Investor Day 50 Adjusted Net Earnings ex significant items ($M) Core margin expansion Asset growth 1Metrics refer to adjusted net earnings ex significant items, return on assets ex significant items and adjusted
Slide 51: Key Takeaways: Margin Expansion
Key Takeaways: Margin Expansion 3 Margin Expansion Opportunity We focus on investment margin management We expect operational scale benefits over time We are well positioned for accretive flow reinsurance strategy F&G 2023 Investor Day 51
Slide 52: 4. Owned Distribution Strategy
SECTION 4. Owned Distribution Strategy F&G 2023 Investor Day 52
Slide 53: Key Messages: Owned Distribution
Key Messages: Owned Distribution Industry consolidation of independent agent distribution is underway F&G is uniquely positioned to partner as a distribution consolidator Generates a capital light, diversifying source of fee-based earnings for F&G As our owned distribution scales, potential for high
Slide 54: Owned Distribution Landscape
Owned Distribution Landscape 1.7 2.2 1.7 2.1 2.4 7.3 9.0 7.1 8.7 9.9 2018 2019 2020 2021 2022 Net Earnings OpEx Channel Commission Revenue ($B)1 1WINK 2018-22 independent agent & broker dealer industry sales, excludes term life products 2S&P Capital IQ - Transactions Data and InsuranceNewsNet.com -
Slide 55: 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 56: F&G Positioned As A Distribution Consolidator
F&G Positioned As A Distribution Consolidator Life Network Marketing IMO Traditional Annuity IMO “B2B” Annuity IMO Life Brokerage IMO • Our deep distribution relationships and long-term focus provide an opportunity for us to bring value to our network in ways private equity backed acquirers cannot •
Slide 57: We See Owned Distribution Strategy Uplift
520 296 471 2021 2022 LTM 2Q23 2024E+ We See Owned Distribution Strategy Uplift1 F&G 2023 Investor Day 57 Owned distribution generates a dividend stream from our ownership stakes, providing for higher margins at a lower marginal cost of capital, which is expected to be accretive to ROE and drive mul
Slide 58: Precedent for Multiple Re-Rating Strategies
Precedent for Multiple Re-Rating Strategies FAs 83% PRT/ FABN 12% Life 5% F&G1 Business Mix P/E (2024E) Source: Prepared by Barclays based on Company financials. Peer market data as of 7/6/2023 Note: Annuity peers include EQH, LNC, BHF and JXN. Diversified peers include MET, AFL, PRU, PFG, CRBG, GL,
Slide 59: Case Study: Primerica Capital Light Model
Price / Book (ex. AOCI) Case Study: Primerica Capital Light Model • Ahead of its IPO in November 2009, Primerica entered into several reinsurance agreements with Citi, and reduced 80 to 90% of Primerica’s mortality risk • In addition, it entered into third party reinsurance arrangements to reinsure
Slide 60: Case Study: VOYA Capital Light Model
Case Study: VOYA Capital Light Model Wealth Solutions 40% Investment Mgt. 15% Annuities 29% Individual Life 5% Health Solutions 11% 2016 Earnings Mix Shift Wealth Solutions 61% Investment Mgt. 14% Health Solutions 25% 2022 • VOYA has taken steps to reduce its exposure to interest rates and mortality
Slide 61: Key Takeaways: Owned Distribution
Key Takeaways: Owned Distribution Industry consolidation of independent agent distribution is underway F&G is uniquely positioned to partner as a distribution consolidator Generates a capital light, diversifying source of fee-based earnings for F&G As our owned distribution scales, potential for hig
Slide 62: Q&A Session #1
Q&A Session #1 F&G 2023 Investor Day 62
Slide 63: 5. Investments
SECTION 5. Investments F&G 2023 Investor Day 63
Slide 64: Key Messages: Investments
Key Messages: Investments We have a differentiated asset management model Our liability profile and risk appetite drives our investment strategy Our strategic partnership with Blackstone is a competitive advantage 5 Investments Overview Our portfolio is well positioned to withstand potential macroec
Slide 65: Investments Key Highlights
Investments Key Highlights We have a differentiated asset management model • F&G sets investment strategy & risk limits • F&G investment committee reviews & approves all strategic investment decisions • Blackstone is responsible for idea generation and security selection • Flexibility to use other p
Slide 66: Our Differentiated Investment Approach
Our Differentiated Investment Approach F&G Blackstone Strategy & Risk Idea Generation & Security Selection Investment Portfolio • Clear & Robust Governance • F&G’s Chief Investment & Risk Offices set strategic asset allocation and risk limits • New investment asset classes undergo an internal risk a
Slide 67: Liabilities & Risk Appetite Drives Investments
Liabilities & Risk Appetite Drives Investments Asset allocation decisions for the investment portfolio begin with a deep understanding of our liability profile, resulting in a well matched asset / liability profile Liabilities • Short, intermediate & long duration liabilities • “Sticky” & predictabl
Slide 68: Our Fully Developed Asset Class Toolkit
Our Fully Developed Asset Class Toolkit Before Blackstone Partnership • 6 asset classes • Access mostly limited to public markets • Heavy reliance on credit risk premium for spread • Lower portfolio credit quality After Blackstone Partnership • 14 asset classes • Access to both public and private ma
Slide 69: What's Different About F&G and Blackstone
What’s Different About F&G and Blackstone Since inception in 2017, our relationship with Blackstone is strong as ever and characterized by mutual respect; Blackstone demonstrated its long-term commitment to F&G with new efficient asset management cost structure 5 Investments Overview • Blackstone pr
Slide 70: We Benefit From Blackstone's Capabilities
We Benefit From Blackstone’s Capabilities Credit A Leading Corporate Credit Investment Platform • One of the world’s largest CLO managers with a proven track record; highly integrated CLO and credit teams Highly Experienced Team • 289 investment professionals integrated within 490 total Blackstone C
Slide 71: 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 72: 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 6/30/2023 (net of funds withheld reinsurance (FWH)) 2Other consists of ICOLI, FHLB stock, LIHTC, Real Estate Owned (REO) properties, options, swaps and com
Slide 73: Investment Portfolio 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 74: Why CLOs Are A Better Investment
5% 2% 0% 15% 4% 1% Total CML CM2 CM3 F&G Peer Avg Why CLOs Are A Better Investment 1F&G as of 12/31/2022. JPM Peer study (YE 2022). Peers consist of NYL, MET, CRBG, PRU, Athene, KKR, LNC, PFG, BHF, Protective, AEL, Symetra, VOYA, SBL, RGA, Delaware, GL and FBFS 2Indicative Yields as of 9/8/2023. 3As
Slide 75: We Are Valuation Sensitive And Opportunistic
258 174 257 229 235 207 348373 260 384 322 351 319 514 CLO A Spreads CLO BBB Spreads Blackstone begins to manage F&G investments F&G capitalized on the spread widening during the market dislocation into year-end Allocation fell as spreads were stable / grind tighter Opportunistically increased expos
Slide 76: 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 77: Demonstrated Lower Relative Risk For CLOs
Demonstrated Lower Relative Risk For CLOs CLOs have a different risk profile and economic outcomes than holding the underlying loans directly 1Source: Citi Research, US CLOs, 7/7/2022 2Source: Standard & Poor’s, 1981-2022 for Corporate default rates. Moody’s, 1993-2022 for US CLO impairment rates 3S
Slide 78: Private Credit: Specialty Finance
Private Credit: Specialty Finance Asset Class Description: Investments in narrowly syndicated, agented, bilaterally sourced assets backed by a wide variety of collateral Why We Like It: ✓ Unique credit opportunities with high quality spreads to comparable corporates ✓ Borrowers value certainty of ex
Slide 79: Private Credit: Asset Backed & Consumer Loans
Private Credit: Asset Backed & Consumer Loans Asset Class Description: Primarily consumer and asset backed whole loans across different segments Why We Like It: ✓ Risk premium from proprietary deal sourcing and operational complexity ✓ Originators value certainty of execution vs. securitization mark
Slide 80: Private Credit: Corporate Lending
Private Credit: Corporate Lending Asset Class Description: Directly originated senior secured loans to private U.S. companies; borrowers are primarily larger performing U.S. middle market companies Why We Like It: ✓ Superior documentation and structure; covenants give lenders favorable protection, a
Slide 81: Private Credit: Underwriting & Risk Mgmt
Private Credit: Underwriting & Risk Mgmt 1Corporate lending: based on funded par. Asset backed finance (ABF): Specialty finance, asset backed and consumer loans from 2022 to 9/2023; includes restructures/rebalances and in some instances includes multiple rounds of upgrades 2Source: JPM default monit
Slide 82: Portfolio Spotlight: Alternatives LPs Diversification Benefits
Diversification Benefits from Alternative LPs3 2.8% 3.0% 3.1% 2.7% 2.8% 2.8% 2.9% 2.9% 3.0% 3.0% 3.1% 3.1% 3.2% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%C a p it a l A d ju s te d N e t Y ie ld % Alternatives Portfolio Spotlight: Alternatives LPs ¹Includes Blackstone and Non-Blackstone Funds ²Equal weighted
Slide 83: Portfolio Spotlight: Alternatives
Portfolio Spotlight: Alternatives Vintage Geographic RegionSector Note: Reflects NAV as of 6/30/2023; includes Blackstone and Non-Blackstone NAV 1As of 6/30/2023 • Commitments to Blackstone and non-Blackstone alternatives total $4.4B • Funded ~$2.6B or ~6% of total investment portfolio • The portfol
Slide 84: Portfolio Spotlight: Commercial Real Estate
Portfolio Spotlight: Commercial Real Estate Note: Fair value as of 6/30/2023 1Single Asset Single Borrower (SASB) 5 Investments Overview • High quality commercial real estate (CRE) debt portfolio with diversified exposure across various properties and states • Only 1.3% of loans in the commercial mo
Slide 85: We Have Proactively De-Risked Portfolio
We Have Proactively “De-Risked” Portfolio 2020 COVID Pandemic • $480M sold, comprising mostly below investment grade bonds 2021 Inflation fears • $306M sold, comprising corporate high yield and CMBS bonds 2022 January 2023 Average portfolio quality of fixed income portfolio improved from 1.6 to 1.4
Slide 86: Stress Testing Scenarios and Methodology
Stress Testing Scenarios and Methodology Investment Portfolio Stress Testing • Recession and Stagflation scenarios are 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) and 2020
Slide 87: Stress Test Scenario Results by Asset Class
Stress Test Scenario Results by Asset Class Stress Test: Results & No Management Actions • Impact of default losses & credit drift are mitigated by reduced required capital from lower alternative asset market value and improved covariance benefit • Mark-to-market (MTM) impact on alternatives is unre
Slide 88: Stress Test: Management Actions To Mitigate Impact
Stress Test: Management Actions To Mitigate Impact Base modeling assumed no management actions; however active portfolio management affords many opportunities to mitigate loss and credit drift impact • Alts & Preferred Stock MTM losses are considered temporary (unrealized) and expect to normalize ov
Slide 89: Key Takeaways: Investments
Key Takeaways: Investments We have a differentiated asset management model Our liability profile and risk appetite drives our investment strategy Our strategic partnership with Blackstone is a competitive advantage 5 Investments Overview Our portfolio is well positioned to withstand potential macro
Slide 90: 6. Financial Update
SECTION 6. Financial Update F&G 2023 Investor Day 90
Slide 91: Key Messages: Financial
Key Messages: Financial We have a track record of profitable growth and clear levers to enhance ROE We generate consistent returns through a variety of macroeconomic environments Our strong capitalization supports organic growth and distributable cash 6 Financial Update F&G 2023 Investor Day 91
Slide 92: 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 93: 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 • Adjusted ROA driven by asset growth and increasing margins from scale over time Adjusted Return on Assets vs. 10-year UST Yield 10-Year UST 6 Financial Upd
Slide 94: Our Proven Track Record of Profitable Growth
257 264 247 640 353 140 2018 2019 2020 2021 2022 1H23 Significant Items ANE ex Significant Items Our Proven Track Record of Profitable Growth Gross Sales ($B) Average Assets Under Management (AAUM) ($B) Adjusted Net Earnings ($M)1 3.1 3.6 4.3 6.1 8.5 5.1 3.5 2.8 1.2 3.4 3.9 4.5 9.6 11.3 6.3 2018 201
Slide 95: We Have Clear Levers To Enhance ROE
We Have Clear Levers To Enhance ROE1 F&G 2023 Investor Day 95 10% F&G 2Q23 Adj. ROE Core Margin Expansion Owned Distribution Margin Expansion Run Rate Adj. ROE +2.0% – 3.0% +0.6% – 1.0% Immediate Near-Term Medium-Term ~13% to 14% Adjusted Return on Average Equity, excluding AOCI 1 6 Financial Update
Slide 96: Closing Remarks
Closing Remarks F&G 2023 Investor Day 96
Slide 97: Key Takeaway
Key Takeaway F&G 2023 Investor Day 97 F&G presents a compelling investment opportunity because we use our competitive advantages to keep winning in large and growing markets
Slide 98: Our Potential Value Creation – Illustrative
$28.06 +$12.00 +$10.00 +$6.00 +$8.00 +$8.00 FG Closing Price Asset Growth Core Margin Expansion Owned Distribution Margin Expansion Core Multiple Expansion Owned Distribution Multiple Re-rating Our Potential Value Creation – Illustrative F&G 2023 Investor Day 98 Immediate Near-Term Medium-Term We se
Slide 99: Q&A Session #2
Q&A Session #2 F&G 2023 Investor Day 99
Slide 100: Appendix
Appendix F&G 2023 Investor Day 100
Slide 101: Appendix – Investments
APPENDIX Appendix – Investments F&G 2023 Investor Day 101
Slide 102: Structured Credit – Why We Like It
13% High Tech 12% Healthcare & Pharmaceuticals 9% Banking, Finance, Insurance & Real Estate 7% Services: Business 5% Media: Broadcasting & Subscription 5% Hotels, Gaming & Leisure 4% Telecommunications 4% Construction & Building 4% Capital Equipment 4% Chemicals, Plastics & Rubber 33% Other $4B Stru
Slide 103: 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 do loan level underwriting, distinguishes F&G’s portfolio from its peers F&G CLO Portfolio Composition – % Fair Value1 1Reflects Fair Valu
Slide 104: Our Robust CLO Investment Process
• Portfolio of ~200 individual loans • Characteristics: • Weighted average rating • Weighted average spread • Weighted average price • Weighted average recovery rate CLO Assets CLO StructureCLO Managers • Team • Infrastructure • Track record • Investment style • Portfolio compliance history Blacksto
Slide 105: Our CLO Portfolio: 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 106: CLO Equity Historical Returns
CLO Equity Historical Returns 1PitchBook Data, Inc. 2022 2BofA Research CLO Equity Data. Aug 2022. BofA Global Research, Intex as of 9/13/2022. CLO equity data reflect deals issued in a given year which have been redeemed. No data available for 2009 CLO equities have demonstrated better downside per
Slide 107: 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 108: Portfolio Spotlight: CMBS & RMBS
Portfolio Spotlight: CMBS & RMBS By Asset Type By Property Type By NAIC Rating 108 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 Office Hotel Retail Industrial Def
Slide 109: 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: As of 6/30/2023 1BAML Conduit Data as of 6/30/2023 39% 9% 14% 25% Multifamily Retail F&G Portfolio Post-Crisis Conduit CMBS
Slide 110: 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 111: 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 112: Appendix – Finance
APPENDIX Appendix – Finance F&G 2023 Investor Day 112
Slide 113: 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, includes a one-time favorable adjustment to benefits and other changes in policy reserves resulting from an actuarial system conversion in 3Q21, whi
Slide 114: Non-GAAP Measure Reconciliations
Non-GAAP Measure Reconciliations All amounts in millions (a)Refer to “Non-GAAP Financial Measures Definitions” 114F&G 2023 Investor Day Three months ended March 31, 2022 June 30, 2022 September 30, 2022 Decembr 31, 2022 March 31, 2023 June 30, 2023 Net earnings (loss) $239 $385 $187 ($176) ($195) $1
Slide 115: Non-GAAP Measures and Definitions
Non-GAAP Measures and Definitions 115 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 adjusti
Slide 116: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) 116 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 financial measure to be useful internall
Slide 117: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) 117 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. Management considers this non-GAAP
Slide 118: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) 118 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 sale investments, changes in instrum
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