F&G Annuities & Life, Inc. (FG)·Q4 2024 Earnings Summary

Executive Summary

• Q4 delivered strong profitability and capital metrics: net earnings of $323M ($2.50 diluted EPS) vs a $(299)M net loss in Q4’23, and adjusted net earnings of $143M ($1.12) up 91% YoY, driven by asset growth, fee/margin diversification, and disciplined expenses .
• Sales mix shifted by design: gross sales were $3.47B (–15% YoY) as management prioritized higher-return indexed annuities and record PRT over MYGA and funding agreements; net sales were ~$2.44B, roughly flat YoY .
• AUM before flow reinsurance reached a record $65.3B (+17% YoY); retained AUM rose to $53.8B (+10% YoY); RBC >410% exceeded the 400% target, supporting growth and capital returns .
• Core margin dynamics: adjusted ROA printed 1.06% (YTD metric reported in the quarterly table), while management noted sequential core ROA pressure from timing of CLO/prepays and cautious deployment of ~$1B of Q4 PRT assets; they expect ROA to “rebound in 2025” and anchor around ~127 bps as the base .
• Stock catalysts: continued shift to higher-return product mix (FIA/PRT), owned distribution scaling (2025 EBITDA est. ~$90M), and CFO transition to enable liability optimization/reinsurance strategy could support multiple/ROE targets; dividend raised to $0.22 in Feb’25 underscores capital return momentum .

What Went Well and What Went Wrong

• What Went Well

  • Record AUM and strong capital: AUM before flow reinsurance hit $65.3B (+17% YoY), retained AUM $53.8B (+10%); RBC ratio >410% (vs. 400% target) .
  • Earnings power broadened: adjusted net earnings per share rose to $1.12 (from $0.60) as fee income from flow reinsurance and owned distribution expanded, while opex scaled with AUM . CFO: “Adjusted ROA, excluding significant items, was 127 bps in 2024… flow reinsurance fee income increased from 13 to 16 bps and owned distribution margin expanded from 2 to 9 bps.”
  • Strategic focus on high-return channels: CEO: “we made the decision to allocate capital to the highest returning business specifically indexed annuity and pension risk transfer sales,” supporting returns despite quarterly sales variability .

• What Went Wrong

  • Quarterly sales down YoY from a high base: gross sales $3.47B fell 15% YoY as FG pulled back on MYGA and funding agreements to tilt toward higher-return FIA/PRT; total annuity sales fell to $2.45B (from $2.90B in Q4’23) .
  • Core ROA sequential pressure: analyst flagged ~18 bps sequential compression; management cited timing of CLO/prepay income and deliberate pacing of PRT asset deployment—expecting a rebound as cash is redeployed in 2025 .
  • Alternative investment returns below long-term expectations: Q4 alt returns were ~$0.25/share below 10% long-term assumptions, partially offset by ~$0.17/share of significant income items (CLO redemptions, prepay income, actuarial refinements) .

Financial Results

Quarterly P&L and Margin Snapshot

Q4 YoY Comparisons

Sales and Mix (Channel/Product)

Key Operating/Capital KPIs

Notes and Non-GAAP/One-offs:

• Q4 adjusted EPS of $1.12 included: alternative investment income $1.05/share, CLO redemptions/prepay income $0.12/share, actuarial refinements/other $0.05/share; alt returns were below long-term expectations (10%) by ~$0.25/share in Q4 .
• Sales mix: management reduced MYGA and funding agreements to prioritize higher-return FIA and record PRT; institutional sales included $1.0B PRT in Q4 .

Guidance Changes

*We did not open Doc 12 text; table reflects known 5% increase reference in that release title, with current $0.22 confirmed on 2/21/25 .

Earnings Call Themes & Trends

Management Commentary

• CEO Chris Blunt: “we made the decision to allocate capital to the highest returning business specifically indexed annuity and pension risk transfer sales, which resulted in a reduction in MYGA sales and funding agreements.”
• CFO Wendy Young: “Adjusted ROA, excluding significant items, was 127 bps in 2024… flow reinsurance fee income increased from 13 to 16 bps and owned distribution margin expanded from 2 to 9 bps.”
• CEO on PRT legal overhang: “we’ve not seen any meaningful impact from industry lawsuits… our structure is pretty straightforward… we continue to be optimistic.”
• CEO on RILA: “We have onboarded 7 partners… RILA is a fast-growing market… potential… in the billions over the medium term.”
• CFO on ROA cadence: “prepays were a big driver of that decrease quarter-over-quarter… expect it to rebound in 2025.”

Q&A Highlights

• ROA dynamics: Sequential core ROA pressure stemmed from prepays and uninvested cash from ~$1B PRT; management expects redeployment and renewal actions to normalize 2025 ROA trends .
• PRT environment and litigation: FG competes in $100M–$1B deals; no meaningful litigation impact observed; structure/regulatory oversight seen as advantages .
• Product allocation: Priority is FIA and RILA (higher risk-adjusted returns), then PRT; MYGA maintained selectively; FABN issuance remains opportunistic based on spread conditions .
• Surrenders: Elevated while rates remain high, boosting surrender charge income near-term but creating temporary spread pressure; expected to normalize over time .
• Organizational evolution: Creation of Chief Liability Officer role (Wendy Young) and addition of CFO (Conor Murphy) to optimize liabilities, reinsurance and capital allocation amid growth and regulatory complexity .

Estimates Context

• We attempted to retrieve S&P Global consensus (EPS and revenue) for Q4 2024 but the data was unavailable during this session due to a provider limit. As a result, we cannot definitively assess beats/misses versus Wall Street consensus for Q4. When available, we standardize to S&P Global for estimate comparisons.*

*Consensus estimates were unavailable via S&P Global during this session.

Key Takeaways for Investors

• Mix shift to ROA-accretive businesses: Management is deliberately prioritizing FIA and PRT over MYGA/FABN, supporting sustainable adjusted ROA/ROE despite quarterly sales volatility .
• Capital and liquidity strong: RBC >410%, pro forma debt-to-cap ~27.5% with a path back toward ~25%; recent financings and redemption smooth near-term maturities .
• Margin resilience: Temporary ROA softness tied to timing (prepays, PRT deployment) should abate as cash is redeployed and pricing/renewals offset competitive pressure; 127 bps remains the management “base” .
• Fee/margin diversification: Flow reinsurance and owned distribution are meaningful contributors and growing (2025 owned distribution EBITDA est. ~$90M), improving earnings quality vs. pure spread models .
• PRT momentum intact: $1.0B Q4 PRT and a healthy pipeline, with litigation overhang not impacting FG’s activity to date; continued opportunity within targeted deal sizes .
• Dividend supported by fundamentals: Board declared $0.22 common dividend (payable Mar 31, 2025), signaling confidence in cash generation and capital strength .
• Watch list for 1H’25: pace of RILA platform additions, deployment/repricing actions to lift core ROA, funding agreement issuance conditions, and any regulatory developments around offshore reinsurance (new CLO role enhances focus) .