Overview of the Company’s Financial Performance

F&G Annuities & Life, Inc. (F&G) is a leading provider of annuity and life insurance products, primarily serving the middle-income market in the United States. The company has three main retail distribution channels - independent marketing organizations (IMOs), banks, and broker-dealers. It also operates in two institutional markets - funding agreements and pension risk transfer (PRT) solutions.

In 2024, F&G reported strong financial results, with net earnings attributable to common shareholders of $622 million, compared to a net loss of $58 million in 2023. This turnaround was driven by higher revenues, improved investment performance, and disciplined expense management.

Revenue and Profit Trends

F&G’s total revenues increased from $4.5 billion in 2023 to $5.7 billion in 2024, a 27% jump. This was primarily due to:

• Higher life insurance premiums and other fees, which grew from $2.4 billion to $2.9 billion, reflecting increased PRT premiums and higher surrender charges and policyholder fees.

• A $508 million increase in interest and investment income, driven by growth in assets under management (AUM) and higher investment yields.

• $81 million in owned distribution revenues, reflecting commissions from the acquisitions of Roar and PALH in 2024.

• Improved recognized gains and losses, which swung from a $124 million loss in 2023 to an $84 million gain in 2024, as market conditions and hedging strategies were more favorable.

On the expense side, benefits and other changes in policy reserves increased from $3.6 billion to $3.8 billion, primarily due to higher PRT agreement costs. However, market risk benefit gains of $25 million in 2024, compared to losses of $95 million in 2023, helped offset this. Overall, F&G’s net earnings turnaround was driven by the combination of higher revenues and improved expense management.

Strengths and Weaknesses

F&G’s key strengths include:

1. Diversified distribution: The company’s presence across three retail channels and two institutional markets provides multiple avenues for growth.

2. Product innovation: F&G has been successful in developing competitive annuity and life insurance products that align with the evolving needs of the middle-income market.

3. Disciplined risk management: The company has a robust enterprise risk management framework that helps it identify, monitor, and mitigate various market risks.

4. Strong investment portfolio: F&G’s investment portfolio is primarily invested in high-quality fixed-income securities, providing stable earnings and balanced risk.

However, some potential weaknesses include:

1. Regulatory constraints: As an insurance company, F&G is subject to various state regulations that limit its ability to pay dividends and make other distributions from its subsidiaries.

2. Interest rate sensitivity: The company’s earnings are sensitive to changes in interest rates, which can impact the value of its fixed-income investments and the cost of crediting interest to policyholders.

3. Concentration in the middle-income market: While this is a key strength, it also exposes F&G to potential changes in the financial needs and preferences of this target demographic.

Outlook and Future Prospects

The aging of the U.S. population is expected to increase the demand for F&G’s indexed annuity and indexed universal life (IUL) products, as the “baby boomer” generation prepares for retirement. The company believes that the growing need for retirement savings, growth, and income products represents a major growth opportunity.

Additionally, F&G’s expansion into the bank and broker-dealer channels, as well as the institutional PRT and funding agreement markets, provides avenues for further diversification and growth. The company’s recent acquisitions of Roar and PALH also strengthen its owned distribution capabilities, which can generate higher risk-adjusted returns on capital compared to retained business.

However, the company faces potential headwinds from rising interest rates, which could lead to increased asset outflows as policyholders withdraw funds to convert their savings into income. F&G will need to continue to innovate its product offerings and manage its interest rate risk exposure to navigate this environment effectively.

Overall, F&G’s strong financial performance in 2024, diversified business model, and focus on the growing retirement market suggest that the company is well-positioned for future success, provided it can effectively manage the various risks and challenges facing the insurance industry.