F&G Annuities & Life NYSE: FG reported second-quarter adjusted net earnings of $85 million, or $0.65 per share, as lower alternative-investment returns and the impact of a reinsurance transaction weighed on results. Management said the quarter was largely in line with expectations and highlighted growth in assets under management, strong core retail sales and continued efforts to shift toward more fee-based, higher-margin and less capital-intensive businesses.
CEO and President Conor Murphy, speaking on his first earnings call in the role, said the company is focused on expanding its retail and institutional franchises while maintaining disciplined capital allocation. Murphy previously served as F&G's chief financial officer and president before becoming CEO.
Assets, Sales and Investment Portfolio
Assets under management before reinsurance rose 8% from a year earlier to $74.7 billion as of June 30. Retained AUM totaled $55.9 billion, reflecting positive asset flows that were partly offset by the first-quarter cession of a $1.8 billion in-force block associated with the F&G Life Re sale and a $750 million Funding Agreement-Backed Note maturity during the second quarter.
Gross sales totaled $2.7 billion, including $2 billion of core sales and $700 million of opportunistic sales. Core retail sales of indexed annuities and indexed life insurance reached $1.8 billion, which Murphy described as one of F&G's strongest quarters on record for core retail sales. He said the result came despite a year-over-year contraction in industry fixed indexed annuity sales.
Core institutional pension risk transfer sales were $200 million, while opportunistic sales included roughly $600 million of funding agreements and $100 million of Multi-Year Guaranteed Annuities, or MYGAs. Management said it has de-emphasized MYGA sales because current returns are below its threshold. Net sales were $1.5 billion, reflecting reinsurance activity consistent with the company's capital targets for fixed indexed annuities and MYGAs.
F&G said 97% of fixed maturities in its retained investment portfolio were investment grade. Fixed-income yield increased to 4.91% from 4.77% in the first quarter and 4.83% in the prior-year quarter. Credit-related impairments averaged six basis points over the past five years and were two basis points during the first half of 2026.
The alternative-investment portfolio totaled $4 billion, or about 8% of the retained portfolio, including approximately $3 billion of limited partnerships and $1 billion of other equity interests. Annualized alternative-investment returns were approximately 5.9% in the second quarter, down from 8.3% in the first quarter. Murphy said many of those investments remain in earlier stages of their value-creation cycles.
Earnings and Capital Position
Interim CFO Mark Wiltse said second-quarter alternative-investment income was $49 million, or $0.38 per share, below management's 12% long-term expected return but in line with its previously announced post-tax estimate of $51 million.
Adjusted net earnings declined $25 million from the first quarter. Wiltse attributed $21 million of the after-tax reduction to lower alternative-investment returns and $8 million to the incremental effect of the F&G Life Re resale completed March 1. Those factors were partially offset by consistent core spread, higher fees from accretive flow reinsurance, owned-distribution margin and expense discipline.
Compared with the second quarter of 2025, adjusted net earnings declined $18 million. The F&G Life Re resale reduced earnings by $12 million from the year-earlier period, while lower surrender-charge fee income and higher other liability costs, including expected increased amortization expense, also affected product margins.
- Adjusted return on equity excluding accumulated other comprehensive income was 8% in the second quarter.
- Adjusted return on assets was 68 basis points.
- Operating expenses as a percentage of AUM before reinsurance declined to 47 basis points from 48 basis points in the first quarter.
- Management expects the operating expense ratio to improve to approximately 45 basis points by year-end 2027, compared with 60 basis points at the end of 2024.
F&G reported GAAP equity excluding AOCI of $6 billion and book value per share excluding AOCI of $45.93. The company targets debt-to-capitalization, excluding AOCI, of approximately 25% and expects to maintain its estimated company action-level risk-based capital ratio above 400%.
Wiltse said the estimated effect of newly adopted NAIC capital charges on the company's collateralized loan obligation portfolio would reduce its RBC ratio by about 10 points as of June 30, before management actions. He described the impact as manageable.
Capital Allocation, Peak Alternatives and Outlook
During the first six months of 2026, F&G funded $75 million of common and preferred dividends, $80 million of holding-company interest expense and $120 million of share repurchases. The company bought back 4.5 million shares at an average price of $26.44. Murphy said the second-quarter repurchases were opportunistic and should not be viewed as a primary use of capital going forward. He said approximately $12 million to $15 million remained under the current authorization, while any expansion would be a decision for the board.
Management also discussed Peak Altitude, F&G's owned-distribution business. Peak had approximately $700 million deployed into it and generated about $80 million of annual EBITDA in 2025, according to Murphy. Former CEO Chris Blunt, who remains an F&G director and is CEO of Peak Altitude, has launched a formal process to explore strategic alternatives for the business.
Murphy said F&G would ideally retain a minority ownership position in Peak while bringing in a strategic partner that acquires slightly more than half of the business. He said there has been interest but that the process remains in its early stages.
Looking ahead, management expects continued emphasis on core retail sales, fee-based businesses, life insurance, pension risk transfer and reinsurance partnerships. Murphy said F&G added another flow reinsurance partner in July. He expects pension risk transfer activity to increase in the second half, although he said the company is targeting annual PRT volume in the range of $1.5 billion to $2 billion rather than seeking year-over-year expansion.
F&G also announced that Mike Bailey, most recently retail CFO at Corebridge Financial, joined the company as incoming CFO. Bailey is expected to formally participate in F&G's third-quarter earnings call.
About F&G Annuities & Life (NYSE:FG)
F&G Annuities & Life is the principal life insurance and annuity subsidiary of F&G Financial Group, Inc NYSE: FG, a publicly traded financial services holding company headquartered in Des Moines, Iowa. The company focuses on designing and issuing retirement income solutions that address longevity risk, capital preservation, and wealth transfer for individual and institutional clients.
Its product suite includes fixed indexed annuities, which offer the potential for market-linked growth with downside protection; fixed-rate annuities, delivering guaranteed interest over a defined term; and a range of life insurance policies such as term, universal, and variable universal life.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
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