F&G Annuities & Life Signals Growth Amid Volatility

F&G Annuities & Life Inc ((FG)) has held its Q1 earnings call. Read on for the main highlights of the call.

F&G Annuities & Life’s latest earnings call carried a cautiously optimistic tone, as management balanced record asset growth and rising efficiency with honest acknowledgement of near‑term earnings pressure from alternatives and fixed‑income yield noise. Overall, the message was that scale, diversification, and capital strength are firmly in place, while returns should improve as temporary headwinds fade.

Record AUM and Strong Growth

F&G reported nearly $75 billion of gross assets under management at quarter‑end, up 11% from $67 billion in 2025 and compounding at 18% annually since 2019. Management framed this scale as a key competitive asset, supporting broader distribution, product diversity, and operating leverage.

Retained AUM and Net Sales Momentum

Retained AUM reached $56 billion, up 3% year over year after excluding a $1.8 billion in‑force block reinsured in March, underscoring structural impacts from reinsurance. Net sales of $2.2 billion for the quarter showed that inflows remain solid even as the company fine‑tunes its capital and risk profile.

Strong New Business and Sales Mix

First‑quarter gross sales climbed 10% to $3.2 billion, with core sales up 11% to $2.0 billion and opportunistic sales up 9% to $1.2 billion. Management also highlighted a recurring pension risk transfer pipeline, which they expect to run at $1.5 billion to $2.0 billion annually.

Solid Earnings and Per‑Share Performance

Adjusted net earnings came in at $110 million, or $0.82 per share, reflecting steady profitability despite investment volatility. Adjusted return on equity excluding AOCI was 8.4%, while adjusted return on assets was 76 basis points for the quarter and 87 basis points over the last twelve months.

High‑Quality Diversified Investment Portfolio

F&G’s retained investment portfolio totaled $53 billion, with 97% of fixed maturities rated investment grade, underscoring a conservative credit stance. The mix spans $18 billion in fixed income, $11 billion in public structured assets, $11 billion in private originations, $7 billion in mortgage loans, and $4 billion in alternatives.

Alternative Returns and Portfolio Yield Trends

Alternative investments delivered an annualized return of 8.3% in the quarter, improving from 7.8% sequentially but still below long‑term goals. The fixed‑income portfolio yielded 4.77%, and management argued that core spreads remain consistent when one‑time and timing‑related items are stripped out.

Low Credit Impairments and Ongoing De‑Risking

Credit‑related impairments averaged just 6 basis points over the past five years and were 3 basis points through the first quarter, indicating limited credit stress. Since 2020 the company has repositioned over $2 billion of assets to reduce risk and enhance credit quality, reinforcing its conservative investment stance.

Capital Returns and New Buyback Authorization

In the quarter F&G returned $67 million to shareholders, splitting $38 million in dividends and $29 million in buybacks of about 1.2 million shares at an average $24.14. The board approved a fresh three‑year share repurchase program of up to $100 million, adding flexibility on capital deployment.

Efficiency Gains and Expense Discipline

The operating expense ratio to AUM before reinsurance improved to 48 basis points, down from 50 basis points at year‑end 2025 and 60 basis points at the end of 2024. Management is targeting around 45 basis points by year‑end 2027, which would represent about a 25% cumulative efficiency gain.

Strong Capitalization and Funding Profile

GAAP equity excluding AOCI stood at $6.2 billion, translating to book value per share of $46.51, up 70% since the 2020 acquisition by FNF. The company aims to keep debt‑to‑capital around 25% and maintain capital ratios comfortably above regulatory action levels, with annual interest expense of roughly $165 million on $2.3 billion of debt.

Alternative Returns Below Long‑Term Targets

Alternative investment income totaled $44 million, or $0.32 per share, and the 8.3% annualized return remains well under management’s revised long‑term expectation of 12% to 14%. Executives stressed that many alternative positions are early in their value‑creation cycle, implying more upside over time but less predictability near term.

Fixed Income Yield Pressure and One‑Time Items

Quarterly fixed‑income yield declined by 16 basis points versus 2025, driven by asset sales tied to the FG Life Re divestiture, softer floating‑rate yields, seasonal dips in preferred dividends, and an investment expense true‑up. Management estimates about one‑third of this yield decline is permanent, with the remainder linked to timing and one‑off factors.

Alternative Volatility Weighing on ROE and ROA

Reported adjusted ROE and ROA were meaningfully dampened by short‑term swings in alternative income, masking the underlying run‑rate economics. Management indicated that applying long‑term alternative assumptions would lift quarterly ROE by about 3.4 percentage points and ROA by roughly 34 basis points.

Normalization in Opportunistic Product Demand

The multiyear guaranteed annuity market has started to normalize, and consumer urgency has eased, leading F&G to intentionally trim sales to about $200 million in the quarter. Capital is being redirected to other opportunities, but this pullback could weigh on near‑term opportunistic sales growth.

Significant Item Slightly Dragging Earnings

Adjusted net earnings absorbed a small unfavorable significant item of $5 million, or roughly $0.03 per share, tied to investment and other income true‑ups. Management characterized this as a minor, non‑recurring drag rather than a structural change in the earnings power of the franchise.

Software and Private Origination Exposure

Software exposure across the total retained portfolio is under 5%, which management described as manageable even in a rapidly evolving tech and AI landscape. However, software makes up about 20% of the private origination sub‑portfolio, and while positions reportedly feature high switching costs and short durations, this area remains under active monitoring.

Reinsurance Impact on Retained AUM Growth

While gross AUM expanded 11% year over year, retained AUM rose only 3% due to the reinsurance of a $1.8 billion in‑force block associated with the FG Life Re sale. The move underscores how reinsurance can reshape the balance sheet and earnings mix, even as overall platform scale continues to climb.

Dependence on Alternatives and Timing Risk

Management acknowledged that near‑term earnings are sensitive to the timing of alternative investment realizations and performance, despite conservative underwriting assumptions. They framed alternatives as the largest swing factor for quarterly results, even as the long‑term role of these assets in boosting returns remains central to the strategy.

Forward‑Looking Guidance and Strategic Priorities

Looking ahead, F&G expects AUM to keep growing, underpinned by strong sales, a recurring pension risk transfer pipeline, and a disciplined product mix shift toward fee‑based, capital‑light offerings. The company reaffirmed targets for higher fee income, lower expense ratios, robust capital buffers, and gradually improving returns as alternative performance converges toward its 12% to 14% long‑term range.

Management closed the call emphasizing that F&G’s record AUM, diversified investment book, and tightening cost structure lay a solid foundation for higher profitability over time. For investors, the key watchpoints will be alternative returns, yield normalization, and the pace of fee‑based growth, but the overall story remains one of steady strategic execution with a shareholder‑friendly capital plan.