F&G Annuities & Life, Inc. (FG) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong financial performance with record sales in key segments, increased assets under management, and improved operating metrics. Despite some uncertainties in alternative investments and vague responses in the Q&A, the overall sentiment is positive due to robust growth, strategic moves towards a capital-light model, and stable margins. The market cap suggests a moderate reaction, leading to a predicted stock price movement in the positive range (2% to 8%) over the next two weeks.
Key Financial Performance
Gross Sales $4.1 billion in Q2 2025, one of the best sales quarters in history. This is compared to the all-time record of $4.4 billion in Q2 2024, which included $900 million of funding agreements. The current quarter had no funding agreements.
Core Product Sales $2.2 billion in Q2 2025, up 22% sequentially from Q1 2025 and up 10% from Q2 2024. Growth driven by fixed index annuities, index life, and pension risk transfer.
Indexed Annuity Sales $1.6 billion in Q2 2025, higher than Q2 2024. FIA remains the largest contributor to indexed annuity sales.
Indexed Universal Life (IUL) Sales $53 million in Q2 2025, a record and up 20% from Q2 2024. Growth attributed to meeting the needs of the underserved multicultural middle market.
Pension Risk Transfer (PRT) Sales More than $400 million in Q2 2025, compared to approximately $300 million in Q2 2024. PRT sales reached $700 million for the first half of 2025.
Multi-Year Guaranteed Annuity (MYGA) Sales $1.9 billion in Q2 2025, a record and up 73% sequentially from Q1 2025. However, down 21% from Q2 2024 due to no funding agreements in the current quarter. MYGA sales increased 27% over Q2 2024.
Retail Channel Sales More than $3.6 billion in Q2 2025, a record quarter driven by indexed annuities, IUL, and MYGA.
Assets Under Management (AUM) Before Flow Reinsurance $69.2 billion at the end of Q2 2025, a record and up 13% from Q2 2024. Retained AUM was $55.6 billion, up 7% from Q2 2024, driven by net new business flows.
Adjusted Net Earnings $103 million or $0.77 per share in Q2 2025. Investment income from alternative investments was $83 million or $0.62 per share below management's long-term expected return.
Operating Expense Ratio Decreased to 56 basis points in Q2 2025 from 61 basis points in Q2 2024, reflecting increased scale and disciplined expense management.
Adjusted Return on Assets (ROA) 92 basis points on a last 12-month basis in Q2 2025, compared to 91 basis points in Q2 2024.
Adjusted Return on Equity (ROE) Excluding AOCI 8.8% in Q2 2025, up 40 basis points from Q2 2024.
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Operating Highlights
Reinsurance Sidecar Launch: F&G launched a new reinsurance vehicle in partnership with Blackstone Managed Funds, providing $1 billion in anticipated capital commitments. This supports a shift towards a fee-based, higher-margin, and less capital-intensive business model.
Core Product Sales Growth: Core product sales, including fixed index annuities, index life, and pension risk transfer, reached $2.2 billion, up 22% sequentially and 10% year-over-year.
Indexed Universal Life (IUL) Sales: Achieved a record $53 million in IUL sales, up 20% year-over-year, targeting the underserved multicultural middle market.
Annuity Market Expansion: The total annuity market has grown due to favorable demographics and macroeconomic conditions, with consumers seeking guaranteed lifetime income and principal protection.
Retail Channel Sales: Retail channel sales hit a record $3.6 billion in Q2 2025, driven by indexed annuities, IUL, and MYGA products.
Expense Management: Operating expenses to AUM ratio decreased to 56 basis points in Q2 2025 from 61 basis points in Q2 2024, with further improvements expected.
Investment Portfolio Quality: 97% of fixed maturities in the retained portfolio are investment grade, with low and stable credit-related impairments.
Executive Management Transition: John Currier will retire and transition to a senior advisory role, while Conor Murphy will take on the role of President in addition to CFO responsibilities.
Capital Allocation Strategy: The reinsurance sidecar and dynamic capital allocation framework aim to optimize capital efficiency and expand fee-based earnings.
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Risk or Challenges
Market Volatility: Macroeconomic volatility increases the relative attractiveness of fixed annuity products, but it also poses risks to the company's ability to maintain consistent sales and profitability.
Product Mix and Pricing Discipline: The company plans to shift its sales mix more towards Fixed Index Annuities (FIA) in the latter half of the year, which could be impacted by market economics and pricing discipline challenges.
Capital Allocation and Reinsurance: The launch of the reinsurance sidecar introduces a new capital source, but its success depends on market conditions and the ability to dynamically adjust MYGA volumes.
Investment Portfolio: While the retained portfolio is high quality, credit-related impairments, though low, remain a potential risk. Additionally, the company is exposed to fluctuations in the spread environment.
Operational Efficiency: The company is targeting a reduction in operating expense ratios, but achieving this goal depends on disciplined expense management and scaling efficiencies.
Regulatory and Rating Agency Requirements: The company must maintain RBC at or above 400% and adhere to other regulatory and rating agency requirements, which could constrain operational flexibility.
Leadership Transition: The retirement of John Currier and transition of Conor Murphy to President introduces potential risks related to leadership continuity and strategic execution.
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Guidance & Outlook
Revenue and Sales Projections: F&G expects a shift in sales mix towards Fixed Index Annuities (FIA) in the second half of 2025 due to improved economics from the reinsurance sidecar launched in Q3 2025. The company anticipates continued strong sales momentum, with a focus on pricing discipline and capital allocation to high-return opportunities.
Capital Allocation and Reinsurance: The newly launched reinsurance sidecar, backed by $1 billion in anticipated capital commitments, will support scaling FIA products in a capital-efficient manner. F&G plans to dynamically adjust MYGA volumes based on market economics and capital targets.
Operational Efficiency: F&G aims to reduce its operating expense ratio from 60 basis points at the end of 2024 to approximately 50 basis points by the end of 2025, driven by expense management actions taken in Q2 2025.
Return on Equity (ROE) and Fee-Based Earnings: The company is transitioning towards a more fee-based, higher-margin, and capital-light business model. The reinsurance sidecar and other strategies are expected to expand fee-based earnings and improve ROE over time.
Investment Portfolio and Yield: F&G sees opportunities for further uplift in fixed income yield as the spread environment becomes more attractive. The company has made progress in deploying excess cash, increasing fixed income yield by 5 basis points in Q2 2025.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:With $1 billion in commitments raised for the sidecar, how much capacity will that have and how quickly will it be filled?
A:The capacity depends on the product type, but it will provide multiple billions of incremental AUM. It is part of a broader strategy to move towards a capital-light path and will be highly accretive to earnings.
Q:What does the capital-light path mean for additional consolidation on the owned distribution side?
A:The company aims to make smart capital allocation decisions. Owned distribution is generating strong returns and will continue to grow. The capital-light path will generate more free cash flow, but investors are not necessarily looking for substantial dividend increases given the returns from owned distribution and flow reinsurance.
Q:How are MYGA sales shaping up in Q3 compared to Q2?
A:MYGA sales are expected to normalize, with some volatility. The company flows out the majority of MYGA business and evaluates market opportunities monthly. With the sidecar, indexed annuities (FIAs) are becoming a more attractive use of capital, potentially leading to lower MYGA sales but higher indexed annuity sales.
Q:How do you see funding agreements shaping up in Q3?
A:Funding agreements are viewed opportunistically. The funding agreement market is currently attractive, and the company will compare it with other opportunities in Q3.
Q:What is the balance of opportunity between FIAs and RILAs?
A:The company likes the RILA space, which complements FIAs. While RILA has seen significant growth, it remains a modest part of the business and is less material at this stage.
Q:What is the progress on return on assets (ROA) and Investor Day targets?
A:The company is ahead of its 5-year goal to increase AUM by 50%. ROA has improved from a baseline spread of 110 to the mid-120s, with further improvements expected from expense ratio reductions. The sidecar and owned distribution are expected to be accretive to ROE.
Q:How are alternative investments (alts) performing, and what is the outlook for Q3?
A:The long-term assumption for alts is 10%. The company has not seen meaningful realizations recently but is optimistic about a better deal environment. Alts contributed 37 basis points to the last 12 months' ROA, with a base of 92 basis points.
Q:Are you taking any cap rate actions, and how will that impact the cost of crediting?
A:The company regularly reviews in-force crediting actions to maintain consistent spreads. Adjustments are made where deviations from pricing occur, balancing competitiveness and fairness to policyholders.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on how quickly the sidecar capacity would be filled, citing variability based on product type. Additionally, they used vague language when discussing cap rate actions, avoiding specifics due to competitive concerns.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AUM
Conor detail
MYGA sale
President
Research Division
adviser
annuity sale
capital light
consumer
core sale
economics
fee margin
flow reinsurance
funding agreement
index
industry
launch reinsurance
life insurance
margin capital
pension risk
portfolio
product
quarter history
record IUL
record funding
reinsurance sidecar
risk transfer
role
sale FIA
sale quarter
sale record
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F&G Annuities & Life, Inc. (FG) Q2 2025 Earnings Call Transcript
Positive8-7
The earnings call highlights strong financial performance with record sales in key segments, increased assets under management, and improved operating metrics. Despite some uncertainties in alternative investments and vague responses in the Q&A, the overall sentiment is positive due to robust growth, strategic moves towards a capital-light model, and stable margins. The market cap suggests a moderate reaction, leading to a predicted stock price movement in the positive range (2% to 8%) over the next two weeks.
FG Report
Frequently Asked Questions
Where does this earnings call transcript come from?
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
