F&G Annuities & Life Inc ((FG)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The recent earnings call for F&G Annuities & Life Inc. reflected a mixed sentiment, highlighting both achievements and challenges faced by the company. While the firm celebrated a record in assets under management (AUM) and robust sales in fixed indexed annuities, it also grappled with declining MYGA sales and lower adjusted net earnings. Improvements in the operating expense ratio were noted, yet concerns about margin compression and underperformance in alternative investments were evident.
Record Assets Under Management
F&G Annuities & Life Inc. reported a record AUM before flow reinsurance of $67.4 billion as of March 31, marking a 16% increase compared to the first quarter of 2024. This achievement underscores the company’s growth and ability to manage assets effectively, even amid market volatility.
Strong Fixed Indexed Annuity Sales
The company showcased resilience in a volatile market with strong indexed annuity sales totaling $1.5 billion in the first quarter. This performance was consistent with the previous year’s first quarter, highlighting the continued demand for these products.
Improved Operating Expense Ratio
F&G demonstrated improved operational efficiency, with the operating expense ratio decreasing to 58 basis points from 63 basis points a year ago. This reduction indicates better cost management and operational effectiveness.
Quality Investment Portfolio
The company’s investment portfolio remains robust, with 96% of fixed maturities being investment-grade. Additionally, the real estate exposure is characterized by high quality and moderate leverage, reflecting prudent investment strategies.
Decline in MYGA Sales
Despite overall strong sales, F&G experienced a 17% decline in gross sales compared to the first quarter of 2024, primarily due to reduced MYGA sales. This decline poses a challenge for the company as it seeks to balance its product offerings.
Lower Adjusted Net Earnings
The first quarter saw adjusted net earnings of $91 million, or $0.72 per share, down from $108 million, or $0.86 per share, in the first quarter of 2024. This decrease was mainly attributed to margin compression and higher interest expenses.
Margin Compression
Margin compression was a significant factor in the reduced adjusted net earnings, with a $17 million decrease driven by near-term headwinds. This issue highlights the financial pressures the company is navigating.
Alternative Investments Underperformance
Investment income from alternative investments fell short of expectations, coming in $63 million below management’s long-term expected return. This underperformance is a concern as it impacts overall profitability.
Forward-Looking Guidance
Looking ahead, F&G remains optimistic about improving key drivers throughout 2025 despite current pressures. The company aims to meet its 2023 Investor Day targets and expects better performance as the year progresses. The investment portfolio’s credit quality has improved, and strategic capital market activities have been completed to maintain a healthy financial position.
In summary, F&G Annuities & Life Inc.’s earnings call presented a nuanced picture of the company’s current standing. While there are notable achievements, such as record AUM and strong annuity sales, challenges like declining MYGA sales and margin compression remain. The company is focused on navigating these hurdles and improving its performance in the coming quarters.