Corebridge Financial Inc.

net outflows in our variable annuity portfolio. Fee income was flat relative to the fourth quarter, reflecting stabilization in asset values. As Kevin mentioned, general account net flows were positive at nearly $1.3 billion, up from approximately $700 million last quarter, despite an increase in surrender rates. Group retirement reported adjusted pre-tax operating income of $186 million for the quarter, a decrease of 23% year over year, or an increase of 7% after excluding variable investment income. Base spread income grew 20% from the first quarter of 2022 due to spread expansion, while fee income declined 12% year over year due to lower asset valuations and net outflows. Base net investment spread increased 24 basis points year over year, but decreased seven basis points sequentially. The sequential quarter decline is driven by a 10 basis points rise in cost of funds, largely attributed to out of plan fixed annuity product growth, and higher crediting rates based on annual resets to certain enforced products. This more than offset the sequential increase in base yield. Consistent with previous quarters, we continued to see outflows concentrated in the higher GMIR buckets. We expect this trend to improve the profitability of the business over time. Looking at projections for next quarter, we expect net outflows will increase due to additional plan losses, but with limited impact to the general account. As a reminder, plan acquisitions and losses are nonlinear and vary from quarter to quarter. Also, we're seeing a general pickup in plan activity, both acquisitions and losses, as COVID moves from pandemic to endemic and plan sponsors are more willing to put plans out to bid. Life insurance reported adjusted pre-tax operating income of $82 million for the quarter, a decrease of 2% year-over-year, or an increase of 148% after excluding variable investment income. Underwriting margin excluding variable investment income improved 11% year-over-year due to improved mortality experience and higher base portfolio income. With the adoption of LDTI, variability in operating earnings for traditional life products like term is muted given that actual mortality experience will be largely offset by reserve releases in any single period. However, that's not the case for universal life as the accounting is not impacted by LDTI and where our experience was favorable in the first quarter. Institutional markets. reported adjusted pre-tax operating income of $85 million for the quarter, a decrease of 26% year over year, or an increase of 3% after excluding variable investment income. Core sources of income expanded 7% over the prior year, largely due to base spread income, while reserves for our pension risk transfer business grew 33% year over year, on an original discount basis. And lastly, our corporate and other segments report to the loss of $163 million for the quarter. This loss is largely consistent with our expectations given new parent company expenses as well as our standalone capital structure. I will now provide some comments about our balance sheet, liquidity, and capital. We assess our balance sheet through different lenses including but not limited to financial leverage, liquidity, capital, and the overall risk profile. By each of these measures, our balance sheet is very healthy and strong. Adjusted book value was $23.3 billion or $35.88 per share, up 4% year over year, but down 1% from the fourth quarter. The sequential decline was due to not operating mark-to-market losses. Our financial leverage ratio was 27.9%, which is well within our target range. We continue to expect that our balance sheet will naturally de-lever over time as a result of book value growth. And as a reminder, the next debt maturity is in 2025. We ended the quarter withholding company liquidity of $1.8 billion, an increase from $1.5 in the fourth quarter. Our insurance companies distributed $500 million during the first quarter, and as Kevin noted, we paid dividends to our shareholders of approximately $150 million, bringing the total pay to shareholders since the IPO to approximately $450 million. We declared our dividend for the second quarter of 2023, which will be paid on June 30th. Our life fleet RBC ratio remains very strong. We estimate our first quarter life fleet RBC ratio to be in the range of 410 to 420% and exceeding our year-end RBC ratio of 411%. Next. I will spend a few minutes talking about our investment portfolio. CoreBridge has a high-quality, well-diversified investment portfolio that's actively managed. Portfolio construction is backed by rigorous underwriting, monitoring, and credit risk management processes designed to protect and optimize the balance sheet. The GAAP carrying value of our general account investment portfolio was $193 billion as of March 31, 2023. Approximately 94% of our fixed income investments were rated investment grade. Our NAIC 3 to 6 investments were $8.4 billion, a figure that's approximately $600 million lower than the end of 2022, in part due to the de-risking actions that Kevin described earlier. Now, turning to commercial mortgage loans. Like our broader investment strategy, our commercial mortgage loan portfolio is high quality, well diversified, and actively managed to support our insurance liabilities. It's backed by a disciplined and rigorous approach to underwriting and risk management. In addition, the valuations of the underlying properties are updated on an annual basis. As of March 31st, our portfolio was $30.3 billion, making up 16% of total invested assets. These loans are primarily highly rated, longer dated, fixed rate, first lien loans with low LTVs and strong debt service coverage ratios. Each loan is carefully underwritten with embedded covenant protections. Our portfolio is diversified by both geography and sector, with nearly 60% of the portfolio comprised of multifamily and industrial property, reflecting our strong bias to these sectors over the last decade. Commercial mortgage loans secured by office properties were $7.7 billion, or 4% of total invested assets, as of March 31st. These loans are also high quality, carefully underwritten and covenant heavy with strong credit characteristics. Over the past several years, we've been actively reducing our exposure to office and emphasizing multifamily, industrial and other non-traditional office sectors, as well as properties in Europe. As part of this evolving view, our exposure to traditional US office is down from its peak. The traditional US office portfolio component was $4.5 billion as of March 31st, which is approximately 2% of our total invested assets. The remainder of the portfolio is in life sciences, mixed-use properties, and ground leases, as well as international office properties where the fundamentals are stronger than in the U.S. Our office portfolio enjoys strong credit metrics, which are as follows. It's highly rated with 94% of our loans designated CM1 or CM2. It's high quality with almost 80% of the property consisting of Class A properties in major metropolitan areas and concentrated in central business districts. The weighted average loan-to-value is 63%, and the weighted average debt service coverage ratio is over two times. It has strong occupancy ratios in the mid-80s. 80% of the loans are fixed rate. It has longer-dated loans with a weighted average remaining term of seven and a half years. And only two loans are delinquent, together carrying an outstanding balance of $8 million. Over our history, we have from time to time originated large loans where we felt very comfortable with the fundamentals, sponsor, and location. Within our traditional US office portfolio, we have three loans in excess of $200 million, all originated prior to 2019. Office properties are very building specific, so it's crucial to evaluate each property carefully no matter the size of the loan. We have approximately 1.2 billion of loans secured by traditional U.S. office properties with final maturity dates in 2023 and 2024, a figure that represents less than 1% of our total invested assets. Of that 1.2 billion, approximately $870 million have a final maturity date in 2023. As of May 4th, we have resolved almost half of the 2023 maturities through either payoffs or extensions. Our traditional US office exposure within New York City, where we have longer tenor loans with solid debt service coverage ratios and strong occupancies, is about 1% of total invested assets. Of the 870 million maturities for 2023, approximately 600 million are in New York City. One third of these have already been resolved through either payoffs or extensions, and the remaining properties underlying the 223 maturities have extremely strong fundamentals and occupancy rates over 90%. As part of our standard monitoring process, for any commercial mortgage loans, we proactively engage with borrowers regarding their refinancing plans well in advance of maturity. As a result, before this quarter began, we were already conducting routine surveillance on our upcoming maturities. On the extensions we've agreed to so far, we've been successful in getting a combination of various structural capital enhancements. We are lead lender in approximately 87% of our office originations, which affords us control over negotiations with borrowers regarding any amendments or restructuring. Furthermore, with our real estate equity team, we have the expertise in managing these types of properties and can take over in a workout situation if financially prudent. The current CECL allowance for our office portfolio is 3.5% of GAAP carrying value and slightly over 5% for our traditional U.S. office properties. We believe we have one of the most conservative allowances in the industry and we're adequately reserved for potential credit losses. We believe our balance sheet is strong and our investment portfolio resilient, and we are well-positioned. We regularly stress test our balance sheet for various potential risks, and that informs our decisions about capital management and allocation. For illustrative purposes, on the traditional U.S. office portfolio, if we were to assume a 30% instantaneous reduction in current property valuations, which already reflect a reduction from the peak, and we were to further assume that any loan with an LTV ratio in excess of 100% after the shock is foreclosed upon, the incremental reduction in our life fleet RBC ratio would be approximately 11 RBC points. Our life fleet RBC ratio would have remained above target in this illustration had this scenario occurred as of the end of March. While this illustration assumes an instantaneous shock, it's important to remember that any deterioration in the traditional US office sector will more likely play out over a longer time period. At this time, we expect it to be an earnings event and not a capital event. Finally, our real estate investment team is very experienced and has navigated challenging markets before. We continue to believe our traditional U.S. office exposure, which is only 2% of total invested assets, is manageable, and any developments are likely to emerge over time. Now I'll hand the call back to Kevin. Thanks, Elias.

We're very pleased with the solid progress we're making across CoreBridge. Our balance sheet is very strong. Our profitability levels continue to improve. And we are confident that our well-managed investment portfolio is positioned to withstand near-term pressures. Operator, we are now ready to take questions.

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. When preparing to ask your question, please pick up your handset and ensure that you are unmuted locally. As a reminder, please also limit yourself to one question and one follow-up. Our first question comes from Elise Greenspan from Wells Fargo. Elise, please go ahead. Hi, thanks.