F&g Annuities & Life, Inc. · NYSE:FG
F&g Annuities & Life — Investor Day (October 2023)
118 slides from F&g Annuities & Life's investor day presentation, Oct 3, 2023
Slide 1: F&G Investor Day
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
Welcome & Opening Remarks SECTION F&G 2023 Investor Day 4
Slide 5: Investor Day Agenda
Investor Day Agenda Welcome & Opening Remarks 9:00 am Q&A Session #1 10:45 am Lisa Foxworthy-Parker & Break SVP Investor & External Relations F&G Strategic Overview 9:05 am Investments Overview 11:15 am Chris Blunt Leena Punjabi CEO & President EVP, Chief Investment Officer Diversified Growth Strate
Slide 6: Our Goals For The Day
Our Goals For The Day Differentiated Growth Opportunity Learn about our business Understand our roadmap Recognize F&G and what differentiates F&G for profitable growth as an attractive and margin expansion investment opportunity F&G 2023 Investor Day 6
Slide 7: 1. F&G Strategic Overview
1. F&G Strategic Overview SECTION F&G 2023 Investor Day 7
Slide 8: Key Message
1 F&G Strategic Overview Key Message 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 Snapshot
1 F&G Strategic Overview About F&G Snapshot Our Product Lines Five Distinct Distribution Channels / Markets Fixed Deferred Annuities Retail Channels • Fixed indexed annuity (FIA) • Independent insurance agents (IMOs) • Multi-year guaranteed annuity (MYGA) • Broker Dealers Pension Risk Transfer (PRT)
Slide 10: Our Mission and Vision
1 F&G Strategic Overview OUR VISION Every day we will strive to OUR MISSION improve the financial lives of We help people turn their more and more people, backed aspirations into reality. by the passion of our team and grounded in a culture of mutual respect. *CONFIDENTIAL: Do Not Distribute Outside
Slide 11: Our Recent History
1 F&G Strategic Overview Our Recent History 1 4 8 Acquired by Acquired by F&G Partial CF Corp FNF Spinoff 6 7 Launched (NYSE: FG) Launched 2 3 5 Upgraded to Bank & Institutional 9 10 Formed Upgraded Positive Upgraded A- by S&P & Broker Markets Blackstone to A- by Outlook by to A3 by Fitch, Baa1 by D
Slide 12: F&G's At An Attractive Entry Valuation
1 F&G Strategic Overview F&G’s At An Attractive Entry Valuation Progression of F&G Transaction Prices & Market Capitalization $1.8B $2.7B $2.4B $3.5B $5.1B purchase price purchase price F&G market cap F&G market cap F&G GAAP by CF Corp1 on by FNF on at partial spinoff at present Equity ex AOCI Nov 3
Slide 13: Our Potential Value Creation – Illustrative
1 F&G Strategic Overview Our Potential Value Creation – Illustrative We see potential upside from asset growth, margin expansion and multiple uplift over the medium term Immediate Near-Term Medium-Term F&G Share Price (NYSE: FG) - Illustrative Share Price at 6x Price-to-Normalized Earnings1 +$8.00 +
Slide 14: Our Competitive Landscape Is Evolving
1 F&G Strategic Overview Our Competitive Landscape Is Evolving Mutuals Traditional Stock Insurers Partnered with Companies Asset Originators • Lower cost of capital • More earnings pressure • Superior returns on capital • Higher credit ratings • Higher capital costs • Capital efficiency • Less earni
Slide 15: F&G's Competitive Advantages
1 F&G Strategic Overview 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
Slide 16: We Have A Clean & Profitable Inforce Book
1 F&G Strategic Overview 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 strat
Slide 17: We Are Playing In High Growth Markets
1 F&G Strategic Overview 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 $4.5T Registered index linked annuit
Slide 18: ... And We're Winning ...
1 F&G Strategic Overview … And We’re Winning … Annual Gross Sales by Retail Channel and Institutional Market ($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
Slide 19: ... And Significantly Diversifying Our Business
1 F&G Strategic Overview … And Significantly Diversifying Our Business FY2020 Sales FY2022 Sales 1H23 Sales Channel & Market 4% 12% 7% 12% 5% 7% Agent 13% Bank 7% $6.3B 41% $4.5B $11.3B Broker Dealer 4% 43% (6 Mos.) Funding Agreements Pension Risk Transfer (PRT) 84% 28% 33% 1% 5% 12% 12% Fixed Index
Slide 20: We Have An Investment Edge
1 F&G Strategic Overview 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 About Blackstone Inc. (NYSE: BX) • Our strategic, lon
Slide 21: Our Track Record of Attracting Top Talent
1 F&G Strategic Overview Our Track Record of Attracting Top Talent Our management team has a record of long-term success and has delivered impressive results in the last few years • Extensive, diverse experience in insurance sector • Strong team culture and cohesiveness • Operated through numerous e
Slide 22: Key Takeaway
1 F&G Strategic Overview Key Takeaway 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 22
Slide 23: 2. Diversified Growth Strategy
2. Diversified Growth Strategy SECTION F&G 2023 Investor Day 23
Slide 24: Our Retail Markets Growth Strategy
2 Diversified Growth Strategy: Retail Our Retail Markets Growth Strategy We have grown and diversified in a thoughtful way, building on our core strengths of product expertise, distribution relationships and pricing discipline Our Products Meet We Are Trusted We Are Winning In Consumer Needs By Dist
Slide 25: We Are A Retail Market Leader
2 Diversified Growth Strategy: Retail We Are A Retail Market Leader F&G FY22 Channel Ranking – FIA F&G FY22 Channel Ranking – MYGA F&G FY22 Channel Ranking – IUL • # 4 in IMO Channel • # 5 in Broker Dealer Channel • # 7 in IMO Channel • # 8 in Bank Channel • # 6 in Bank Channel • # 3 in number of IU
Slide 26: Our Current Retail Product Offerings
2 Diversified Growth Strategy: Retail Our Current Retail Product Offerings We only offer products that meet customer needs, leverage our core competencies & provide stable, predictable liabilities Fixed Indexed Annuity (FIA) MultiYear Guaranteed Annuity Indexed Universal Life (IUL) Principal protect
Slide 27: F&G Indexed Annuities – FIA
2 Diversified Growth Strategy: Retail F&G Indexed Annuities – FIA Our Fixed Indexed Annuities (FIAs) are versatile and meet a range of consumer needs, whether accumulation or guaranteed income, with performance linked to a specific market index (primarily S&P 500 Index) with a guaranteed floor • Pro
Slide 28: F&G Fixed Annuities – MYGA
2 Diversified Growth Strategy: Retail F&G Fixed Annuities – MYGA Our Multi-Year Guaranteed Annuities (MYGAs) provide consumers with safe, fixed-income-like accumulation These deferred annuity products offer a crediting rate that is guaranteed for a specified number of years • Product: Offers deferre
Slide 29: F&G Indexed Annuities – RILA Launch Planned
2 Diversified Growth Strategy: Retail F&G Indexed Annuities – RILA Launch Planned One of the fastest growing segments of the annuity space, Registered Index Linked Annuities (RILAs) are similar to FIA’s and meet consumer needs for either accumulation or guaranteed income with performance linked to a
Slide 30: F&G Indexed Universal Life
2 Diversified Growth Strategy: Retail 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 Inde
Slide 31: Our Retail Distribution Is Unique and Proven
2 Diversified Growth Strategy: Retail Our Retail Distribution Is Unique and Proven We win by offering customized solutions, taking a consultative approach to growing our partners’ businesses, and developing deep relationships at all levels of the F&G organization from the CEO down Time Tested Growin
Slide 32: Our Retail Distribution Is A Competitive Advantage
2 Diversified Growth Strategy: Retail Our Retail Distribution Is A Competitive Advantage Agent IMO: Annuity Bank Broker Dealer • FIA market leader, #4 market share1 • #1 annuity carrier w/ our top banks • Continued success since market • $2.5B sales in 1H23; on record pace • $2.1B sales in 1H23; on
Slide 33: We Are Positioned To Win In Retail Markets
2 Diversified Growth Strategy: Retail We Are Positioned To Win In Retail Markets We will continue to grow and diversify in a thoughtful way, building on our core strengths of developing and building distribution relationships, product expertise & pricing discipline Then Now Tomorrow Focused on one d
Slide 34: U.S. Pension Risk Transfer Landscape
2 Diversified Growth Strategy: Institutional PRT U.S. Pension Risk Transfer Landscape 1 $2.3T 70%+ 60% 100%+ corporate pension pension plans are frozen pension plan average pension plan assets1 closed or frozen1 assets derisked2 funding3 2 Defined benefit plans create unwanted cost, risk, and volati
Slide 35: U.S. Pension Risk Transfer Annual Premiums
2 Diversified Growth Strategy: Institutional PRT U.S. Pension Risk Transfer Annual Premiums PRT Market Annual Premium1 ($B) The PRT market has evolved over time 60 Average 10 Year US Treasury Yield: 2.25% 7.50% • Pre-2012: “Plan terminations” annual market < $3B 52 50 6.50% • Transfers pension liabi
Slide 36: We Are A Top 10 Player In Pension Risk Transfer
2 Diversified Growth Strategy: Institutional PRT We Are A Top 10 Player In Pension Risk Transfer F&G assessed Our proven track record of PRT execution market; $1.1B $1.4B $0.8M decision to (7 deals) (4 deals) (3 deals) • $3B+ plan transaction value from inception through launch, 1st case with larges
Slide 37: We Have Selectively Expanded Our Strategy
2 Diversified Growth Strategy: Institutional PRT We Have Selectively Expanded Our Strategy F&G PRT Sales By Size and Type ($M) During 1H23, market volumes have shifted toward plan termination transactions 600 Retiree Plan • We have expanded our strategy to selectively pursue Buyout Termination plan
Slide 38: ... By Managing The Market Opportunity
2 Diversified Growth Strategy: Institutional PRT … By Managing The Market Opportunity1 U.S. Pension Landscape vs. F&G Target Market Pension landscape • Pension plan liabilities increasingly difficult for companies to manage in today’s market & regulatory environment 45,000+ Pension Plans • Plans >$1
Slide 39: We Are Positioned To Win In PRT Market
2 Diversified Growth Strategy: Institutional PRT 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) Value-Add Proposition Expert Team Selective Positioning • We target o
Slide 40: Key Takeaways
2 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 F&G 2023 Investor Day 40
Slide 41: 3. Margin Expansion Opportunity
3. Margin Expansion Opportunity SECTION F&G 2023 Investor Day 41
Slide 42: Key Messages: Margin Expansion
3 Margin Expansion Opportunity Key Messages: Margin Expansion 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 42
Slide 43: Our Disciplined "Core" Margin Management
3 Margin Expansion Opportunity 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 channe
Slide 44: Our Strategic Asset Allocation Trend
3 Margin Expansion Opportunity Our Strategic Asset Allocation Trend We have continued to expand new asset classes and prune portfolio risk when valuations are rich, resulting in a diversified, high quality portfolio that is well positioned to withstand market uncertainty 100% 2% 2% 2% 3% 5% 45 Other
Slide 45: ... Has Generated Incremental Spread
3 Margin Expansion Opportunity … Has Generated Incremental Spread Annual Indicative Investment Spread Uplift (bps)1 Over the past five years, we have diversified the portfolio by adding high quality asset classes with incremental +25 bps +100 bps investment spread, while reducing credit risk +20 bps
Slide 46: We See Potential Upside To Portfolio Yield
3 Margin Expansion Opportunity We See Potential Upside To Portfolio Yield New Opportunities to Enhance Portfolio Yield1 We see potential for margin expansion • From our revised asset management cost structure Potential up to +30 bps • Combined with opportunities to enhance yield from market 5.39% di
Slide 47: ...While Providing Downside Protection
3 Margin Expansion Opportunity …While Providing Downside Protection We have executed on a hedge program in 3Q23 to lock in a portion of our floating rate asset yields, given the shift from low to higher interest rates, and provide downside protection in this environment Measured Approach SOFR at Pri
Slide 48: Minimal Credit-Related Impairment Losses
3 Margin Expansion Opportunity Minimal Credit-Related Impairment Losses F&G Credit-Related Impairments (bps)1 Credit quality within the portfolio remains strong • The investment portfolio is performing as expected • Conservative underwriting, investing in defensive sectors, 9 and proactive portfolio
Slide 49: Accretive Flow Reinsurance Opportunity
3 Margin Expansion 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 • Reinsurance allows us to gro
Slide 50: We See Core Margin Expansion Opportunity
3 Margin Expansion Opportunity We See Core Margin Expansion Opportunity1 We believe there is potential for core margin expansion from investment margin, operational scale benefit and accretive flow reinsurance, in addition to core multiple growth Adjusted Net Earnings ex significant items ($M) Illus
Slide 51: Key Takeaways: Margin Expansion
3 Margin Expansion Opportunity Key Takeaways: Margin Expansion 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
4. Owned Distribution Strategy SECTION F&G 2023 Investor Day 52
Slide 53: Key Messages: Owned Distribution
4 Owned Distribution Strategy 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 distribut
Slide 54: Owned Distribution Landscape
4 Owned Distribution Strategy Owned Distribution Landscape Independent agent distribution is rapidly consolidating and generating strong returns for buyers Channel Channel Commission CommissionRevenue ($B)1 ($B)1 Revenue Estimated Change of IMO Ownership (# IMOs)2 Independent Marketing Organization
Slide 55: F&G's Owned Distribution Track Record
4 Owned Distribution Strategy 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 distri
Slide 56: F&G Positioned As A Distribution Consolidator
4 Owned Distribution Strategy F&G Positioned As A Distribution Consolidator F&G has operating advantages in owned distribution … which plays to key experience and expertise within the F&G management team which, in turn, helps the IMO’s to accelerate their growth Life Network Life • Our deep distribu
Slide 57: We See Owned Distribution Strategy Uplift
4 Owned Distribution Strategy We See Owned Distribution Strategy Uplift1 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 multiple re-rating over time … in ad
Slide 58: Precedent for Multiple Re-Rating Strategies
4 Owned Distribution Strategy Precedent for Multiple Re-Rating Strategies Business Mix • “Capital light” insurers have F&G1 U.S. Life Industry2,3 AMP4 PRI5 consistently traded at premium PRT/ Life FAs Retirement & NII & Other valuations FABN 5% Life 6% Protection 6% 12% 10% International/ Solutions
Slide 59: Case Study: Primerica Capital Light Model
4 Owned Distribution Strategy Case Study: Primerica Capital Light Model At IPO (based on closing price) • Ahead of its IPO in November 2009, Primerica entered Price / Book (ex. AOCI) Price / FY + 1 EPS1 into several reinsurance agreements with Citi, and 1.17x 27% Premium 13% Premium reduced 80 to 90
Slide 60: Case Study: VOYA Capital Light Model
4 Owned Distribution Strategy Case Study: VOYA Capital Light Model Earnings Mix Shift Return on Average Equity1 2016 2022 Legacy Balance Transition to Capital Light Health Solutions Health 11% Sheet Heavy2 Capital Light2 Solutions Individual Life Wealth 25% 13.9% 5% Solutions Wealth 40% Solutions 10
Slide 61: Key Takeaways: Owned Distribution
4 Owned Distribution Strategy 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 distribu
Slide 62: Q&A Session #1
Q&A Session #1 F&G 2023 Investor Day 62
Slide 63: 5. Investments
5. Investments SECTION F&G 2023 Investor Day 63
Slide 64: Key Messages: Investments
5 Investments Overview 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 Our portfolio is well positioned to withstand potential macroec
Slide 65: Investments Key Highlights
5 Investments Overview Investments Key Highlights Our Differentiated Our Liabilities Drive Our Strategic Partnership Investment Approach Investment Strategy with Blackstone We have a differentiated asset Our liability profile and risk appetite Our long-term partnership with Blackstone management mod
Slide 66: Our Differentiated Investment Approach
5 Investments Overview Our Differentiated Investment Approach F&G Blackstone Investment Idea Generation & Strategy & Risk Portfolio Security Selection How We Manage The Investment Portfolio • Clear & Robust Governance • F&G’s Chief Investment & Risk Offices set strategic asset allocation and risk li
Slide 67: Liabilities & Risk Appetite Drives Investments
5 Investments Overview 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 Assets • Short, intermediate & long duration liabi
Slide 68: Our Fully Developed Asset Class Toolkit
5 Investments Overview Our Fully Developed Asset Class Toolkit Before Blackstone Partnership After Blackstone Partnership • 6 asset classes • 14 asset classes • Access mostly limited to public markets • Access to both public and private markets • Heavy reliance on credit risk premium for spread • Di
Slide 69: What's Different About F&G and Blackstone
5 Investments Overview 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 • Blackstone se
Slide 70: We Benefit From Blackstone's Capabilities
5 Investments Overview We Benefit From Blackstone’s Capabilities Credit Real Estate Asset-Based Finance A Leading Corporate Credit A Leading Global Real Estate Proprietarily Sourced Investment Platform Business Assets Through • One of the world’s largest CLO • One of the largest global real Blacksto
Slide 71: Our Origination Premiums Enhance Yield
5 Investments Overview Our Origination Premiums Enhance Yield Structured Private Origination vs. Comparable Our direct origination platform provides additional spread, Duration & Quality Corporates while limiting additional credit risk, as compared to the Spread (bps) broadly syndicated market 500 •
Slide 72: High Quality & Well Diversified Portfolio
5 Investments Overview High Quality & Well Diversified Portfolio Portfolio conservatively positioned for macro environment Investment Portfolio by Asset Class1 uncertainty and well matched to liability profile 29% Corporates 24% Structured Securities • Fixed income is 95% investment grade 14% Privat
Slide 73: Our Investment Portfolio Key Attributes
5 Investments Overview 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 74% Corporates • Structured credit:
Slide 74: Why CLOs Are A Better Investment
5 Investments Overview Why CLOs Are A Better Investment F&G has higher CLO % allocation vs. Peers’ higher CML % CLO % of Total Portfolio1 CML % of Total Portfolio1 • CLOs have diversified risk, liquidity, structural protection and 12% 15% self-correcting mechanism vs. illiquidity & idiosyncratic ris
Slide 75: We Are Valuation Sensitive And Opportunistic
5 Investments Overview We Are Valuation Sensitive And Opportunistic F&G was early to allocate to CLOs and reduced exposure as spreads tightened, while peers continued to add exposure Allocation fell as spreads CLO A Spreads CLO BBB Spreads were stable / grind tighter Reduced allocation as spreads ti
Slide 76: U.S. CLO Impairment Frontier
5 Investments Overview 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 Frontie
Slide 77: Demonstrated Lower Relative Risk For CLOs
5 Investments Overview Demonstrated Lower Relative Risk For CLOs CLOs have a different risk profile and economic outcomes than holding the underlying loans directly Lower Historical Loss vs. Structural Protection Broader Economic Impact Corporates & Other Structured • Diversification • Lower default
Slide 78: Private Credit: Specialty Finance
5 Investments Overview Private Credit: Specialty Finance Asset Class Description: Investments in narrowly syndicated, agented, bilaterally Market Value sourced assets backed by a wide variety of collateral $2.3B Why We Like It: ✓ Unique credit opportunities with high quality spreads to comparable co
Slide 79: Private Credit: Asset Backed & Consumer Loans
5 Investments Overview Private Credit: Asset Backed & Consumer Loans Asset Class Description: Primarily consumer and asset backed whole loans across Market Value different segments $1.7B Why We Like It: ✓ Risk premium from proprietary deal sourcing and operational complexity ✓ Originators value cert
Slide 80: Private Credit: Corporate Lending
5 Investments Overview Private Credit: Corporate Lending Asset Class Description: Directly originated senior secured loans to private U.S. companies; Market Value borrowers are primarily larger performing U.S. middle market companies $3.2B Why We Like It: ✓ Superior documentation and structure; cove
Slide 81: Private Credit: Underwriting & Risk Mgmt
5 Investments Overview Private Credit: Underwriting & Risk Mgmt Blackstone originated private deals executed to date have DL: Loss Rate2 CNL: Asset-Backed performed better vs. underwriting assumptions & Consumer Deals3 Expected CNL at • Outperformed returns vs comparable benchmarks BXC MML Strategy
Slide 82: Portfolio Spotlight: Alternatives LPs
5 Investments Overview Portfolio Spotlight: Alternatives LPs Our alternatives portfolio has demonstrated robust returns Historical Performance • Alternative LPs portfolio has returned 14% over 2019-20221 31.0% • Inception-to-date, realized IRRs on mature funds of prior Historical Avg = 14% vintages
Slide 83: Portfolio Spotlight: Alternatives
5 Investments Overview Portfolio Spotlight: Alternatives • Commitments to Blackstone and non-Blackstone Alternatives Summary ($B)1 alternatives total $4.4B Commitments $4.4 • Funded ~$2.6B or ~6% of total investment portfolio Unfunded commitments $2.1 • The portfolio is well diversified by underlyin
Slide 84: Portfolio Spotlight: Commercial Real Estate
5 Investments Overview Portfolio Spotlight: Commercial Real Estate • High quality commercial real estate (CRE) debt portfolio with diversified exposure across various properties and states • Only 1.3% of loans in the commercial mortgage loan (CML) portfolio have debt service coverage ratio (DSCR) <1
Slide 85: We Have Proactively "De-Risked" Portfolio
5 Investments Overview We Have Proactively “De-Risked” Portfolio Total Assets Sold Since 2020: ~$1.6B¹ COVID Pandemic Recession Fears • $480M sold, comprising Banking Crisis • $484M sold, comprising mostly below investment of Corporates, CLOs, • $62M sold of regional grade bonds CMBS and Preferreds
Slide 86: Investment Portfolio Stress Testing
5 Investments Overview Investment Portfolio Stress Testing Stress Testing Scenarios and Methodology • 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
Slide 87: Stress Test: Results & No Management Actions
5 Investments Overview Stress Test: Results & No Management Actions Stress Test Scenario Results by Asset Class Before Stress Test, excess capital at 350% RBC is > $500M • Impact of default losses & Moderate Recession Severe Recession Stagflation credit drift are mitigated by 4Q22 reduced required c
Slide 88: Stress Test: Management Actions To Mitigate Impact
5 Investments Overview Stress Test: Management Actions To Mitigate Impact Capital Position Before & After Stress & Management Actions ($M) Moderate Stress Impact on Excess Capital Severe Stress Impact on Excess Capital Stagflation Impact on Excess Capital 540 540 540 1 374 59 0 14 1 0 (481) (554) (9
Slide 89: Key Takeaways: Investments
5 Investments Overview 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 Our portfolio is well positioned to withstand potential macro
Slide 90: 6. Financial Update
6. Financial Update SECTION F&G 2023 Investor Day 90
Slide 91: Key Messages: Financial
6 Financial Update Key Messages: Financial Our strong capitalization supports organic growth and distributable cash We generate consistent returns through a variety of macroeconomic environments We have a track record of profitable growth and clear levers to enhance ROE F&G 2023 Investor Day 91
Slide 92: Our Capitalization Supports Growth & Dividend
6 Financial Update 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 fl
Slide 93: Expanding ROA Despite Volatile Rates
6 Financial Update Expanding ROA Despite Volatile Rates Adjusted Return on Assets vs. 10-year UST Yield F&G’s primary “spread model” generates stable return on assets (ROA) despite volatility in interest rates 10-Year UST • Adjusted ROA driven by asset growth and increasing 6.0% Adjusted Return on A
Slide 94: Our Proven Track Record of Profitable Growth
6 Financial Update Our Proven Track Record of Profitable Growth Gross Sales ($B) Adjusted Net Earnings ($M)1 Institutional Markets Significant Items 353 Retail Channels ANE ex Significant Items 11.3 140 9.6 640 2.8 257 264 247 3.5 6.3 3.4 3.9 4.5 1.2 8.5 4.3 6.1 5.1 3.1 3.6 2018 2019 2020 2021 2022
Slide 95: We Have Clear Levers To Enhance ROE
6 Financial Update We Have Clear Levers To Enhance ROE1 Adjusted Return on Average Equity, excluding AOCI Immediate Near-Term Medium-Term ~13% to 14% +0.6% – 1.0% +2.0% – 3.0% 10% 1 F&G 2Q23 Adj. ROE Core Margin Expansion Owned Distribution Margin Run Rate Adj. ROE Expansion (Medium term) Margin exp
Slide 96: Closing Remarks
Closing Remarks F&G 2023 Investor Day 96
Slide 97: Key Takeaway
Key Takeaway 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 97
Slide 98: Our Potential Value Creation – Illustrative
Our Potential Value Creation – Illustrative We see potential upside from asset growth, margin expansion and multiple uplift over the medium term Immediate Near-Term Medium-Term F&G Share Price (NYSE: FG) - Illustrative Share Price at 6x Price-to-Normalized Earnings1 +$8.00 +$8.00 +$6.00 (1x Multiple
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 – Investments APPENDIX F&G 2023 Investor Day 101
Slide 102: 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 39% Multifamily across industry, issuer and manager; focus on investment grade with 18% Office ample par subordination 14% Hospitality • Commercial mortgag
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 Market Value Credit
Slide 104: Our Robust CLO Investment Process
Our Robust CLO Investment Process Blackstone Credit (BXC) CLO investments are based on deep, robust analysis from the asset level up • Blackstone does not rely on gross assumptions based on market and portfolio averages CLO Assets CLO Managers CLO Structure • Portfolio of ~200 individual loans • Tea
Slide 105: 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 10.5% Industry 1 12.6% Issuer 1 0.7% Manager 2 3.3% Issuer 2 0.5% Industry 2 12.4% Manager 3 2.9% Issuer 3 0.5% Industry 3
Slide 106: CLO Equity Historical Returns
CLO Equity Historical Returns CLO equities have demonstrated better downside performance through cycles compared to venture capital funds • Of the past 17 vintages of CLO creation: • Investors in the 25th percentile would experience an IRR worse than (1%) only once, similar to private equity funds •
Slide 107: 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 $9.3B 3.9 Real estate portfolio years 35% CMBS 15% RMBS $9B 27% RML Weighted Average Life Qu
Slide 108: Portfolio Spotlight: CMBS & RMBS
Portfolio Spotlight: CMBS & RMBS By Asset Type By Property Type By NAIC Rating 100% 100% 5% 100% 1% 5% 18% 5% 9% 5% 80% 80% 6% 80% 7% 10% 21% 13% 60% 60% 60% 13% 40% 40% 40% 85% 29% 56% 20% 20% 20% 12% 0% 0% 0% 2Q23 Q2'23 2Q23 Q2'23 2Q23 Q2'23 Multifamily Conduit (Below A) Office RMBS Hotel 1 2 3 4
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 Market Value Credit Quality 39% 25% $3.4B 88% CMBS portfolio Investment grade (NRSRO) 9% 14% Quality Credit focus A- 1.3 NRSRO ra
Slide 110: Portfolio Spotlight: CMLs
Portfolio Spotlight: CMLs By State By Loan-To-Value % 24% CA 12% FL 13% LTV < 50% 6% NY 32% LTV 50% to 60% 6% TX $2B 5% NJ $2B 54% LTV 60% to 70% 5% GA 1% LTV > 70% 4% CT 38% Other By Underlying Property Type Investment Rationale • Our Commercial Mortgage Loan (CML) portfolio is low 47% Multifamily
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 – Finance APPENDIX F&G 2023 Investor Day 112
Slide 113: Non-GAAP Measure Reconciliations
Non-GAAP Measure Reconciliations Six months Year ended ended Period from Period from December 31, December 31, January 1 to June 1 to December 31, December 31, June 30, 2018 2019 May 31, December 31, 2021 2022 2023 2020 2020 Predecessor Predecessor (As Restated) Net earnings (loss) $13 $361 ($200) $
Slide 114: Non-GAAP Measure Reconciliations
Non-GAAP Measure Reconciliations Three months ended March 31, June 30, September 30, Decembr 31, March 31, June 30, 2022 2022 2022 2022 2023 2023 Net earnings (loss) $239 $385 $187 ($176) ($195) $130 Non-GAAP adjustments (a): Recognized (gains) and losses, net Net realized and unrealized (gains) los
Slide 115: 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 116: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) 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 internally an
Slide 117: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) 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 fina
Slide 118: Non-GAAP Measures and Definitions (cont.)
Non-GAAP Measures and Definitions (cont.) Total Capitalization excluding AOCI Total Capitalization excluding AOCI is based on Total Equity and the total aggregate principal amount of debt and Total Equity excluding the effect of AOCI. Since AOCI fluctuates from quarter to quarter due to unrealized c