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    Earnings call· Jun 2026(Q2 FY26)

    F&G Annuities & Life Q2 FY26 earnings call FG

    Aug 6, 2026 Source

    Executive summary

    F&G Annuities & Life Q2 FY26 — Strong Core Sales and Capital Return Amidst Alt Investment Headwinds

    F&G Annuities & Life reported strong core retail sales and continued AUM growth in Q2 FY26, reflecting disciplined pricing and strategic capital allocation. The company navigated competitive landscapes and lower alternative investment returns, which impacted adjusted net earnings. Management is focused on expanding fee-based strategies and exploring strategic alternatives for Peak Altitude to unlock shareholder value.

    Highlights

    5

    • AUM before reinsurance increased to $74.7 billion at June 30, up 8% over the prior year.

    • Core retail sales of indexed annuities and indexed life were $1.8 billion for the second quarter, one of the strongest quarters on record.

    • Fixed income yield increased to 4.91% in the second quarter, an increase of 14 basis points over Q1 FY26 and 8 basis points over Q2 FY25.

    • Operating expense to AUM for reinsurance decreased to 47 basis points at the end of Q2 FY26, down from 48 basis points in Q1 FY26.

    • Repurchased 4.5 million shares for $120 million at an average price of $26.44 during the first 6 months of the year.

    Concerns

    4

    • Alternative investment income was $49 million ($0.38 per share), below management's current long-term expected return of 12%.

    • Adjusted net earnings decreased by $25 million QoQ and $18 million YoY, partly due to lower alternative investment returns.

    • The after-tax impact of lower returns on alternative investments was $21 million QoQ.

    • The estimated effect of new NAIC capital charges for the CLO portfolio would translate to a decrease in RBC of approximately 10 points.

    Guidance & targets

    5
    CategoryTargetConfidence
    Operating expense to AUM ratio
    approximately 45 basis points
    medium materiality
    High
    Debt to capitalization
    approximately 25%
    high materiality
    High
    RBC ratio
    above our 400% target
    high materiality
    High
    Pension Risk Transfer (PRT) sales
    $1.5 billion to $2 billion range
    medium materiality
    Medium
    Alternative investments long-term expected return
    12%
    high materiality
    Medium

    Operational metrics

    30
    AUM before reinsurance
    $74.7 billionup 8% over prior year
    Q2 FY26

    Total Assets Under Management before reinsurance.

    Retained AUM
    $55.9 billion
    Q2 FY26

    Reflects positive asset flows offset by $1.8 billion in-force block ceded and $750 million funding agreement back note maturity.

    Gross sales
    $2.7 billion
    Q2 FY26

    Comprised of core and opportunistic sales.

    Core sales
    $2 billion
    Q2 FY26

    Part of total gross sales.

    Opportunistic sales
    $700 million
    Q2 FY26

    Part of total gross sales, MYGA sales deemphasized due to returns below threshold.

    Core retail sales (indexed annuities and indexed life)
    $1.8 billion
    Q2 FY26

    One of the strongest quarters on record for core retail sales, reflecting strong momentum despite industry contraction.

    Institutional sales (pension risk transfer)
    $200 million
    Q2 FY26

    As expected, ahead of seasonal increase typically seen in the second half of the year.

    Net sales
    $1.5 billion
    Q2 FY26

    Reflects flow reinsurance in line with capital targets for fixed indexed annuities and multiyear guaranteed annuities.

    Fixed income yield
    4.91%up 14 bps QoQ, up 8 bps YoY
    Q2 FY26

    Yield on the retained investment portfolio.

    Credit-related impairments
    2 bpsaveraged 6 bps over past 5 years
    H1 FY26

    Remained low and stable.

    Alternative investments portfolio
    $4 billion
    Q2 FY26

    Many investments are in earlier phases of value creation cycle.

    Alternative investments return
    5.9%down from 8.3% in Q1 FY26
    Q2 FY26

    Below management's 12% long-term expected return.

    Peak Altitude deployed capital
    $700 million
    Q2 FY26

    Capital deployed into the Peak Altitude business.

    Peak Altitude annual EBITDA
    $80 million
    FY25

    EBITDA generated by Peak Altitude in 2025.

    Adjusted net earnings
    $85 milliondecreased by $25 million QoQ, decreased by $18 million YoY
    Q2 FY26

    Impacted by lower alternative investment returns and F&G Life resale.

    After-tax impact of lower alt returns
    $21 millionQoQ decrease
    Q2 FY26

    Impact on adjusted net earnings compared to Q1 FY26.

    After-tax impact of F&G Life resale
    $8 millionQoQ decrease
    Q2 FY26

    Reduced incremental earnings compared to Q1 FY26.

    Operating expense to AUM ratio (before reinsurance)
    47 bpsdecreased from 48 bps in Q1 FY26
    Q2 FY26

    Benefiting from increased scale and expense management.

    Adjusted ROA
    68 bps
    Q2 FY26

    As reported for the second quarter.

    Annualized interest expense
    $165 million
    Q2 FY26

    Interest expense on outstanding debt.

    RBC ratio decrease from CLO capital charges
    10 points
    Q2 FY26

    Estimated effect of new NAIC capital charges for CLO portfolio at June 30, before management action.

    Capital generation from in-force
    $1 billion
    Annual

    Expected capital generation from the existing book of business.

    Common and preferred dividends paid
    $75 million
    H1 FY26

    Self-funded capital allocation.

    Holding company interest expense
    $80 million
    H1 FY26

    Self-funded capital allocation.

    Opportunistic share repurchases
    $120 million
    H1 FY26

    Self-funded capital allocation, viewed as an opportunistic tool.

    MYGA business reinsured
    90%
    Q2 FY26

    Percentage of MYGA business reinsured to manage capital and enhance ROE.

    FIA business reinsured
    half
    Q2 FY26

    Proportion of Fixed Indexed Annuities business reinsured.

    Remaining buyback authorization
    $12 million to $15 million
    Q2 FY26

    Capacity left under the current share repurchase authorization.

    PRT deals
    4
    H1 FY26

    Number of modest-sized Pension Risk Transfer deals written in the first half of the year.

    Organic growth rate in retained AUM (net)
    3%
    Q2 FY26

    Estimated underlying organic growth rate in retained AUM on an apples-to-apples net basis, after accounting for reinsurance.

    Industry KPIs

    4
    MetricValueDetails
    Capital returns$195 millionUSD
    ROE operating ROE8%%
    Book value per share$45.93USD
    Statutory regulatory capitalabove 400%%

    Deals & partnerships

    3
    F&G LifeCeded $1.8 billion in-force block$1.8 billion

    In-force block ceded with the F&G Life resale in the first quarter, impacting retained AUM and adjusted net earnings.

    UndisclosedAdded a new noteworthy flow reinsurance partner

    Added in July, further expanding strategic flow reinsurance partnerships to manage capital and support growth.

    Peak AltitudeFormal process to explore strategic alternatives for Peak Altitude

    Chris Blunt launched a process to bring in a strategic partner to acquire slightly over half of Peak, which has $700 million deployed and $80 million in annual EBITDA (2025).

    Risks & headwinds

    5
    Lower alternative investment returnsNear-term (Q3 FY26)

    Q2 return of 5.9%, below 12% long-term expectation; $21 million after-tax impact QoQ

    Mitigation: Management maintains 12% long-term expectation, noting higher returns in later stages of value creation cycle; expects near-term returns around 7-8%.

    NAIC CLO capital chargesAhead of year-end

    Estimated 10-point decrease in RBC ratio

    Mitigation: Management views this as very manageable and plans actions to minimize the capital impact.

    Industry LIA sales contractionQ2 FY26

    Industry LIA sales contracted 5% in H1 FY26

    Mitigation: F&G achieved strong core retail sales, up 4% in H1 FY26, demonstrating continued momentum despite industry trends.

    Elevated surrender chargesQ2 FY26

    58% in Q2 FY26, compared to 56% in Q1 FY26 and 57% in Q4 FY25 (lower than 70% a year ago)

    Mitigation: Impact on product margin is managed through disciplined pricing and product design for annual reset products like FIA and IUL.

    Muted Pension Risk Transfer (PRT) marketH2 FY26

    H1 FY26 saw 4 modest deals; full-year target $1.5 billion to $2 billion

    Mitigation: Underlying pension plans are well-funded, reducing pressure for external solutions. F&G expects to get its fair share of deals and is not trying to grow PRT volume each year, but maintain it.

    What to watch in Q3 FY26

    5

    Peak Altitude Strategic Alternatives

    As soon as something meaningful or tangible
    CurrentFormal process launched, early days
    TargetUpdate on strategic partner acquisition (e.g., 51% stake)

    Why it matters

    Unlocking intrinsic value for F&G shareholders and providing cleaner accounting for the business.

    Chris has launched a formal process to explore strategic alternatives for peak altitude to capture its significant growth opportunities and unlock that intrinsic value for F&G shareholders.

    Q&A highlights

    7

    Can you provide color on spread stabilization, cost of crediting, surrender charges, and acquisition costs, and how they performed this quarter?

    Core fixed income was in line with expectations and higher than Q1. Cost of crediting was consistent QoQ but higher YoY due to higher rates on PRT/funding agreements. Surrender charges remained elevated industry-wide but consistent QoQ. Noted increased DAC amortization from a Q3 assumption review and slight softness in mortality on the PRT book.

    “If I start with the core fixed income that was very much in line with our expectations. It was higher than Q1. In Q1, we had a few things that we mentioned that we believe were temporary and would resolve themselves in Q2. And indeed, that is the fact.”

    asked by Wilma Jackson Burdis · answered by Conor Murphy

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Focus under New CEO

    New CEO Conor Murphy outlined a strategic vision focused on continuing momentum in core retail sales, expanding fee-based and less capital-intensive business models, and leveraging F&G's position as a large seller of annuities and life insurance. The company aims to unlock value not fully reflected in its current market valuation, particularly through strategic alternatives for Peak Altitude, which is currently viewed as a spread business.

    02

    Investment Portfolio Performance

    F&G's retained investment portfolio is high quality, with 97% of fixed maturities being investment grade and well-matched to liabilities. The fixed income yield increased to 4.91% in Q2 FY26. Alternative investments, comprising $4 billion or 8% of the retained portfolio, generated an annualized return of 5.9% in Q2, down from 8.3% in Q1 FY26, and below the 12% long-term expected return. Management noted that many alternative investments are in earlier phases of their value creation cycle and expect higher returns as they mature.

    03

    Capital Management and Allocation

    The company maintains a strong capital position, targeting approximately 25% debt to capitalization (excluding AOCI) and an RBC ratio above 400%. F&G self-funded $75 million in common and preferred dividends, $80 million in holding company interest expense, and $120 million in opportunistic share repurchases (4.5 million shares at $26.44 average price) during the first half of the year. Capital allocation prioritizes the highest return opportunities, leading to a deemphasis on MYGA sales due to returns currently below threshold.

    04

    Peak Altitude Strategic Review

    Chris Blunt is leading a formal process to explore strategic alternatives for Peak Altitude, a business with approximately $700 million deployed and $80 million in annual EBITDA in 2025. The primary intention is to bring in a strategic partner to acquire slightly over half of Peak, allowing F&G to retain growth opportunities in its remaining share. This move is expected to provide cleaner accounting and unlock intrinsic value for F&G shareholders, as Peak currently has no debt and could fund future growth.

    05

    Sales Strategy and Reinsurance

    F&G focuses on disciplined sales growth, balancing core retail sales ($1.8 billion in Q2 FY26) and opportunistic sales ($700 million). The company leverages strategic flow reinsurance partnerships and its sidecar to manage capital, adjust retained sales levels, and support cash from operations. A new noteworthy flow reinsurance partner was added in July, reinforcing F&G's position as a partner of choice for the industry, particularly for reinsuring MYGA (90%) and FIA (half) business to enhance ROE.

    AI-generated summary of the company’s earnings call. Not investment advice.