F&g Annuities & Life, Inc. · NYSE:FG
F&g Annuities & Life — Investor Presentation (2023)
45 slides from F&g Annuities & Life's investor presentation, 2023
Slide 1: F&G Investor Update Summer 2023
F&G Investor Update Summer 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: Strong Start In First Half of 2023
Strong Start In First Half of 2023 ✓ Record organic growth in higher rate environment 1H23 Gross Sales 1H23 Net Sales $6.3B $4.4B ✓ Record assets under management, driven by positive + 11% YoY On Plan net flows and net debt proceeds Record AUM1 Portfolio Quality1 ✓ Diversified, high quality investme
Slide 5: Second Quarter Financial Highlights
Second Quarter Financial Highlights F&G expects steady and growing adjusted net earnings over time, excluding significant items which include short-term mark-to-market effects Financial Highlights Significant Items – Quarterly ($M) - except per share data and ROA Quarterly Year-to-Date ANE ($M) and
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: Compelling Investment Case for F&G
Compelling Investment Case for F&G v Targeting Large and Growing Markets Superior Ecosystem F&G is a nationwide leader in the large markets we play in, and demographic trends will provide tailwinds Our long-standing relationships with multiple to give us significant room to continue growing – distri
Slide 8: 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 9: 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 10: 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 11: 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 12: 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 U.S. Consumer Savings1 $862B Consumers increasingly rely on personal savings for retir
Slide 13: … And We're Winning …
… And We’re Winning … Annual Gross Sales by Retail Channel and Institutional Market ($B) +35% CAGR1 $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 2023F 1CAGR reflects 2018-2022 annual pe
Slide 14: … And Significantly Diversifying Our Business
… 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 $11.3B Broker Dealer 4% 43% (6 Mos.) Funding Agreements Pension Risk Transfer (PRT) 84% 28% 33% 1% 5% 12% 12% Fixed Indexed Annuity (FIA) 7% Produ
Slide 15: High Quality & Well-Diversified Portfolio
High Quality & Well-Diversified Portfolio Portfolio conservatively positioned & well-matched to Investment Portfolio by Asset Class1 liability profile 29% Corporates 24% Structured Securities • Fixed income is 95% investment grade 14% Private Origination • Modest average credit-related impairments o
Slide 16: Our Investment Portfolio Key Attributes
Our Investment Portfolio Key Attributes Investment Rationale Fixed Income1,2 (ex. Structured, Mortgage Loan & Private Origination) • Core fixed income: Focus remains high grade public and private securities with strong risk adjusted returns • Structured credit: Provides access to well diversified, h
Slide 17: Our Proven Track Record of Profitable Growth
Our Proven Track Record of Profitable Growth Gross Sales ($B) Adjusted Net Earnings ($M) Institutional Markets +11% VPY Significant Income & Expense Items 18% VPY Retail Channels 11.3 ANE ex Significant Items 9.6 2.8 3.5 5.7 6.3 2.0 1.2 640 8.5 6.1 5.1 3.7 353 2021 2022 1H22 1H23 235 140 Net Sales 8
Slide 18: Our Proven Track Record: Sales
Our Proven Track Record: Sales Gross Sales ($B) Sales are managed to profitability & capital targets Institutional markets • Retail sales > $2B for 5th consecutive quarter, reflecting Retail channels higher rates and consumers seeking principal protection 11.3 • 2Q23 reflects a ‘reset’ following 1Q2
Slide 19: Our Proven Track Record: Adj. Net Earnings
Our Proven Track Record: Adj. Net Earnings Adjusted Net Earnings (ANE) ($M) F&G expects steady and growing adjusted net earnings over time, excluding significant income and expense Significant Income & Expense Items items ANE ex Significant Items • Excluding significant items, adjusted net earnings
Slide 20: Book Value Per Share Rollforward
Book Value Per Share Rollforward BVPS ex. AOCI1 – 3/31/2023 to 6/30/2023 BVPS ex AOCI at $40.70 per share in 2Q23 vs. $39.94 per share in 1Q23, $40.80 0.44 $40.70 ↑ 2% or $0.76 per share 0.63 $40.58 $40.60 • $0.64 per share increase due to $40.40 0.01 $40.26 underlying business performance $40.20 (0
Slide 21: Stable and Strong Capital Profile
Stable and Strong Capital Profile GAAP Capitalization ex AOCI1 ($M) Solid F&G capitalization; debt-to-capitalization ratio in line with long term target of 25% Debt • 1H23 capital markets highlights, as planned: 6,693 Equity ex. AOCI 6,323 • $500M issuance of 7.40% senior unsecured notes due 1,565 2
Slide 22: Our Strong Capitalization Supports Growth & Distributable Cash
Our Strong Capitalization Supports Growth & Distributable Cash 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 flex
Slide 23: Appendix - Investments
Appendix - Investments SECTION F&G Investor Update | Summer 2023 23
Slide 24: 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 25: F&G CLO Portfolio Overview
F&G CLO Portfolio Overview • 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 Market Value Credit Quality 52% 4
Slide 26: F&G CLO Overview: Look Through Analysis
F&G CLO Overview: 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 8
Slide 27: 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 scenario
Slide 28: 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 29: 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 Multifamily 2Q23 Q2'23 2Q23 Q2'23 Conduit (Below A) Office RMBS Hotel 1 2 3 4
Slide 30: CMBS Portfolio Overview
CMBS Portfolio Overview 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 rati
Slide 31: 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 32: Portfolio Spotlight: Alternatives
Portfolio Spotlight: Alternatives Historical Performance • Commitments to Blackstone and non-Blackstone alternatives total $4.4B 31.0% • Funded ~$2.6B or approximately 6% of total portfolio • The portfolio is well-diversified by underlying asset type, vintage year and geography • Only 2.6% of Altern
Slide 33: Blackstone Related Important Disclosures
Blackstone Related Important Disclosures This document (together with any attachments, appendices, and related materials, the “Materials”) is provided on a confidential basis for informational due diligence purposes only and is not, and may not be relied on in any manner as legal, tax, investment, a
Slide 34: Blackstone Related Important Disclosures (cont.)
Blackstone Related Important Disclosures (cont.) Diversification; Potential Lack Thereof. Diversification is not a guarantee of either a return or protection against loss in declining markets. The number of investments which a Fund makes may be limited, which would cause the Fund’s investments to be
Slide 35: Blackstone Related Important Disclosures (cont.)
Blackstone Related Important Disclosures (cont.) Images. The Materials contain select images of certain investments that are provided for illustrative purposes only and may not be representative of an entire asset or portfolio or of a Fund’s entire portfolio. Such images may be digital renderings of
Slide 36: Blackstone Related Important Disclosures (cont.)
Blackstone Related Important Disclosures (cont.) Reliance on Key Management Personnel. The success of a Fund will depend, in large part, upon the skill and expertise of certain Blackstone professionals. In the event of the death, disability or departure of any key Blackstone professionals, the busin
Slide 37: Appendix - Finance
Appendix - Finance SECTION F&G Investor Update | Summer 2023 37
Slide 38: Scalable ROA Model (ex Significant Items) – 1H23
Scalable ROA Model (ex Significant Items) – 1H23 1 2 3 4 Unique Investment Attractively Priced Scalable Operating Strong Earnings Capabilities Liabilities Platform Growth Potential Overall Product Margin 3: 2.37% As a rule of thumb, target ROA of 100 bps, excluding significant items 510 bps 273 bps
Slide 39: ANE – Significant Income and Expense Items
ANE – Significant Income and Expense 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 June 30, 2023 Adjusted net earnings of $79 million for the three months ended J
Slide 40: ANE – Significant Income and Expense Items (cont.)
ANE – Significant Income and Expense 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 June 30, 2023 Adjusted net earnings of $79 million for the three months
Slide 41: Non-GAAP Measure Reconciliations
Non-GAAP Measure Reconciliations Year ended Three months ended Six months ended December 31, December 31, March 31, June 30, September 30, Decembr 31, March 31, June 30, June 30, June 30, 2021 2022 2022 2022 2022 2022 2023 2023 2022 2023 Net earnings (loss) $1,232 $635 $239 $385 $187 ($176) ($195) $
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 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 44: 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 45: 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