Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- F&G Annuities & Life Inc (FG, Financial) reported strong gross sales of $3.9 billion in the third quarter, up 39% from the prior year.
- Retail sales from agency, bank, and broker dealer channels reached a record $3.5 billion in the third quarter.
- Assets under management grew to a record $62.9 billion, a 20% increase over the third quarter of 2023.
- The investment portfolio is diversified and high quality, with 96% of fixed maturities being investment grade.
- The company has successfully launched Ryla with four broker dealer distribution partners, with potential for significant sales growth in the medium term.
Negative Points
- Elevated surrender activity due to higher interest rates has impacted earnings, although the company has adjusted assumptions accordingly.
- There were no new funding agreements in the third quarter, indicating potential challenges in capital allocation priorities.
- The impact of lower interest rates on sales remains a concern, although demographic tailwinds are expected to mitigate this.
- The company faces competition in the pension risk transfer market, which could affect future sales growth.
- The alternative investments portfolio has underperformed long-term assumptions recently, impacting overall returns.
Q & A Highlights
Q: How do you view the opportunity to grow flow reinsurance with existing partners into new products, especially with Ryla being added?
A: Christopher Blunt, CEO: We haven't set a specific target for reinsurance. It's more about the capacity available, product category fit, and how creative it is. Currently, we don't see constraints on flow reinsurance availability, and we're optimistic about its impact on margins.
Q: Given the opportunity in own distribution, does the current stock price allow you to use it as currency to expand more than initially thought?
A: Christopher Blunt, CEO: We are optimistic about the opportunity but want to be thoughtful. We're not aiming to be the largest roll-up provider but to form strategic partnerships. We believe this is a great asset that could eventually be its own entity.
Q: What was the impact of higher surrender charges, and how does it compare to last quarter?
A: Lisa Foxworthy-Parker, SVP: Elevated surrenders are expected as long as interest rates remain high. We point to the last 12 months' ROA of 126 basis points to smooth out any lumpiness. The impact quarter over quarter wasn't significantly different.
Q: Can you discuss the outlook for flows, particularly funding agreements and PRTs, heading into the new year?
A: Christopher Blunt, CEO: We remain bullish on retail opportunities and expect PRT sales to grow, with pipelines strong. Funding agreements are opportunistic, depending on market conditions and relative returns.
Q: Can you explain the assumption review driven by elevated surrender activity?
A: Lisa Foxworthy-Parker, SVP: We adjusted assumptions for short-term elevated surrenders due to high rates. The impact was minor, about $5 million. For GM WB utilization, changes will reduce future volatility as benefits are locked in immediately.
Q: How is the Cayman reinsurance business capitalized and managed, given industry comments on capital haircuts?
A: Lisa Foxworthy-Parker, SVP: We run our Cayman business on a statutory basis, similar to R BC, with differences mainly in mortality assumptions. All activities are approved by Iowa regulators, and stress testing is aggregated and shared.
Q: Have you seen progress in targeting younger demographics for Ryla products?
A: Christopher Blunt, CEO: Volumes are still too small to draw conclusions, but industry data shows Ryla products reach younger demographics. We expect similar trends.
Q: What does your new money allocation look like, especially with opportunities for spread in privately originated assets?
A: Christopher Blunt, CEO: We rotate between privates and publics based on opportunities. Blackstone has expanded our asset classes from six to 14. This year, there's a slight tilt toward privates, but decisions are made in real-time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
