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F&G Annuities & Life, Inc. (FG)·Q3 2025 Earnings Summary

Executive Summary

  • Strong quarter with record AUM before flow reinsurance ($71.4B) on $4.2B gross sales; adjusted EPS of $1.22 beat S&P Global consensus of $1.12 and GAAP revenue of $1.694B topped the $1.402B consensus as sales strength, expense discipline, and solid credit performance offset below-trend alternative investment income . Consensus values marked with an asterisk are from S&P Global.*
  • Expense ratio to AUM improved to 52 bps (from 62 bps in Q3’24) with management reiterating a YE25 target of ~50 bps and indicating potential incremental ~1 bp/quarter improvement in 2026, providing a visible margin tailwind .
  • Capital-light pivot advancing: new reinsurance sidecar (effective Aug 1) launched with ~$1B commitments; management expects FIA mix shift and ~50/50 retained vs. flow for FIA over time, supporting ROE expansion .
  • Capital/corporate actions as catalysts: dividend raised 14% to $0.25 per share and majority owner FNF to distribute ~12% of FG shares, increasing public float from ~18% to ~30% and potentially broadening institutional ownership .

What Went Well and What Went Wrong

What Went Well

  • Record AUM before flow reinsurance ($71.4B; +14% YoY) fueled by one of the best sales quarters in history ($4.2B gross; $2.8B net); CEO: “We delivered outstanding third quarter results…record assets under management…one of our best sales quarters in history” .
  • Cost discipline and scale: operating expense to AUM down to 52 bps (from 62 bps in Q3’24); CEO: “our ratio of operating expense to AUM…has improved to 52 basis points, down 10 basis points from the third quarter of 2024, with further improvement expected by the end of the year” .
  • Portfolio quality solid: 96% investment grade, low/stable credit impairments (~6 bps 5-yr avg); CFO noted adjusted ROA LTM at 92 bps and emphasized durable fee income from flow reinsurance and owned distribution .

What Went Wrong

  • Alternatives below plan: investment income from alternatives $67M (≈$0.48/sh) below long-term expectations; LPs the main shortfall vs. direct lending/whole loans; management continues to assume ~10% LT return .
  • Q3 included non-recurring/other items: tax valuation allowance benefit ($10M; $0.07/sh) and actuarial reserve release ($4M; $0.03/sh); prepayment fees were above run-rate ($24M pre-tax) and effective tax rate lower, boosting results—these tailwinds may normalize .
  • Base yield optics: reported fixed income yield up ~10 bps QoQ partly due to a model refinement on floaters; management clarified core fixed income yield was essentially flat QoQ, tempering perceived underlying yield improvement .

Financial Results

Headline vs. Estimates (Q3 2025)

MetricActualS&P Global Consensus*
Revenue (GAAP, $B)$1.694 $1.402*
Adjusted EPS ($)$1.22 $1.1185*

Note: Consensus values marked with an asterisk are from S&P Global.*

P&L Trend (oldest → newest)

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Total Revenues ($B)$1.444 $0.908 $1.364 $1.694
Net EPS (GAAP)$(0.08) $(0.20) $0.26 $0.85
Adjusted EPS ($)$1.22 $0.72 $0.77 $1.22

KPIs and Returns (oldest → newest)

KPIQ3 2024Q1 2025Q2 2025Q3 2025
AUM before Flow Reinsurance ($B)$62.875 $67.398 $69.161 $71.430
Retained AUM ($B)$52.464 $54.546 $55.565 $56.647
Gross Sales ($B)$3.878 $2.902 $4.106 $4.238
Net Sales ($B)$2.386 $2.181 $2.744 $2.800
Adjusted ROA (%)1.05 0.68 0.71 0.87
OpEx / AUM (bps)62 58 56 52
Investment-Grade (% fixed maturities)96 96 97 96

Product Sales Mix ($B) (oldest → newest)

ProductQ1 2025Q2 2025Q3 2025
Indexed Annuities (FIA/RILA)$1.461 $1.701 $1.665
Indexed Universal Life (IUL)$0.043 $0.053 $0.041
Pension Risk Transfer (PRT)$0.311 $0.445 $0.538
Fixed-Rate Annuities (MYGA)$0.562 $1.907 $0.969
Funding Agreements (FABN/FHLB)$0.525 $0.000 $1.025
Gross Sales$2.902 $4.106 $4.238
Net Sales$2.181 $2.744 $2.800

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Operating expense / AUMYE 2025Move from 60 bps (YE’24) to ~50 bps by YE’25 Reiterated ~50 bps by YE’25; potential −~1 bp/quarter avg in 2026 Maintained; added 2026 trajectory
FIA retention vs. flowOngoingNot specifiedEvolving toward ~50/50 retained vs. flow for FIA sales New directional framework
RBC ratioOngoing≥400% Maintain ≥400% Maintained
Debt-to-capital (ex-AOCI)LT target~25% ~25% Maintained
PRT salesFY 2025Target $1.5–$2.5B (implied)“On track” to $1.5–$2.5B Maintained
Quarterly dividendQ4 2025 payable 12/31/25$0.22 prior run-rate$0.25 (+14%) Raised
Public floatAfter FNF distribution~18% public float~30% post-distribution; FNF retains ~70% Increased float

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1–Q2 2025)Current Period (Q3 2025)Trend
Capital-light strategy (flow reinsurance & sidecar)Sidecar launched Aug 1 with ~$1B commitments; fee-based earnings emphasized Began flowing accumulation FIA; expect ~50/50 retained vs. flow; fee income growing Improving
Expense discipline / scalePath to ~50 bps YE’25; 56 bps in Q2 52 bps in Q3; reiterate ~50 bps YE’25; potential −1 bp/qtr in 2026 Improving
Product mix (FIA vs. MYGA; RILA momentum)Expect shift toward FIA in H2; RILA gaining traction Core sales steady; FIA $1.7B; RILA modest but growing; MYGA moderated vs. Q2 spike Mix shifting to FIA
Alternatives performanceQ1: Alts −$63M below LT; Q2: −$83M below LT; LPs lag Q3: −$67M below LT; LPs still main drag; variable prepay income $24M pre-tax Stabilizing below LT
Portfolio quality / credit96–97% IG; low impairments 96% IG; low impairments; minimal exposure to highlighted credits Stable
Competitive/pricing landscapeMYGA opportunistic; funding agreements ebb/flow Competitive but “reasoned” in FIA/RILA/IUL; PRT active in mid-size deals Stable
Surrenders/refinancingQ1 surrenders lower after prior peak; normalization expected Not a major swing factor called out in Q3; base spread maintained via pricing actions Stabilized
Capital/floatEquity raise in Q1; sidecar in Q3 FNF distribution increases float to ~30% Positive market access

Management Commentary

  • “We delivered outstanding third quarter results highlighted by record assets under management before flow reinsurance of $71 billion…one of our best sales quarters in history…launch of our new reinsurance sidecar…We are becoming a more fee based, higher margin and capital light business” — CEO Chris Blunt .
  • “Adjusted ROA on a last 12-month basis was 92 bps…indicative of our current run rate…Adjusted ROE ex-AOCI was 8.8%…Fee income from accretive flow reinsurance has grown to $41M YTD, up 46% YoY” — President & CFO Conor Murphy .
  • “We expect we will evolve toward 50/50 retained versus flow for FIA sales…we will continue to grow retained AUM as we balance retaining business versus optimizing flow reinsurance and preserving capital flexibility” — Conor Murphy .
  • “Operating expense to AUM…decreased to 52 bps…we expect…~50 bps by year-end 2025…potential to decrease by an additional 1 bp per quarter on average in 2026” — Conor Murphy .

Q&A Highlights

  • Capital allocation priorities: focus on growth in FIA, IUL, PRT and owned distribution; buybacks low priority while float is being increased via FNF distribution; dividend increased 13.6% (now formalized at +14%) .
  • Variable investment income: run-rate for non-alt variable AII guided to high single-digit/≈10% of “normal” levels; Q3 was elevated at ~$24M pre-tax .
  • Alternatives/LPs: LPs remain below LT return vs. direct lending/whole loans closer to expectations, consistent with continued lag in realizations .
  • Fixed income yield optics: ~10 bps sequential uplift partly a modeling refinement on floaters; core fixed income yield essentially flat QoQ .
  • Competition: pricing competitive but rational across FIA/RILA/IUL; mid-sized PRT pipeline active; asset origination “tighter in spots,” but market depth supports deployment .

Estimates Context

  • F&G beat consensus on both revenue and adjusted EPS in Q3 2025: revenue $1.694B vs. $1.402B consensus*; adjusted EPS $1.22 vs. $1.1185 consensus* . Consensus values marked with an asterisk are from S&P Global.*
  • Given the above-trend variable prepayment fees, below-LT alts, and expense tailwinds, estimate revisions may modestly rise on EPS and revenue, while models should normalize variable items and reflect the expense trajectory and sidecar-driven mix shift .

Key Takeaways for Investors

  • Clean beat on both top-line and adjusted EPS, underpinned by strong sales and disciplined expenses; headline items (prepay income, tax rate) provided incremental lift but do not obscure underlying momentum .
  • Expense ratio trajectory (52 bps → ~50 bps YE’25; potential further improvement in 2026) provides a visible operating leverage tailwind to ROA/ROE over the next 12–18 months .
  • Capital-light earnings mix is accelerating with the sidecar and flow reinsurance; expect a greater FIA mix and ~50/50 retained vs. flow over time, supporting higher fee income and capital flexibility .
  • Credit quality remains strong (96% IG; low impairments) and portfolio risks appear well-managed, helping de-risk spread earnings durability through cycles .
  • Dividend increase (+14% to $0.25) and FNF’s planned distribution (public float to ~30%) should broaden institutional ownership and potentially improve trading liquidity/valuation over time .
  • Alts remain below the 10% LT assumption; LP realizations lag, but non-alt variable income was above run-rate in Q3—models should normalize both .
  • Near-term setup: stable to improving narrative (expense leverage, fee-mix expansion, robust PRT pipeline), with catalysts from higher float and capital-light scale-up; watch for sustainability of sales mix, alts normalization, and expense execution .

Sources:

  • Q3 2025 press release and financial tables
  • Q3 2025 earnings call transcript
  • Q2 2025 press release and call
  • Q1 2025 press release and call
  • Dividend increase press release

Estimates note: Consensus values marked with an asterisk are from S&P Global.*