Corebridge Financial Inc.

Do so by pressing Start, followed by the number 1 on your telephone keypad. I will now turn the call over to our host, Isil Mudirela-Sola, Head of Investor and Rating Agency Relations. Please go ahead.

Good morning, everyone, and welcome to Corbridge Financial's Earnings Update for the first quarter of 2024. Joining me on the call are Kevin Hogan, President and Chief Executive Officer, and Elias Havayev, Chief Financial Officer. We will begin with prepared remarks by Kevin and Elias, and then we will take your questions. Today's comments may contain forward-looking statements which are subject to risks and uncertainties. These statements are not guarantees of future performance or events and are based upon management's current expectations and assumptions. Corbidge filings with the SEC provide details on important factors that may cause actual results or events to differ materially from those expressed or implied by such forward-looking statements. Except as required by the applicable securities laws, Corbridge is under no obligation to update any forward-looking statements if circumstances or management's estimates or opinions should change, and you are cautioned to not place undue reliance on any forward-looking statements. Additionally, today's remarks may refer to non-GAAP financial measures. The reconciliation of such measures to the most comparable GAAP figures is included in our earnings release, financial supplement, and earnings presentation, all of which are available on our website at investors.corbridgefinancials.com. With that, I would like to now turn the call over to Kevin and Elias for their prepared remarks. Kevin?

Good morning, everyone. Our team continues to execute with focus, and we are delivering on our commitments to customers and shareholders. During today's call, I will discuss what has been a strong start to the year for CoreBridge. In addition to reviewing high-level results for our first quarter, I will share trends we are seeing across our company and how well we are positioned for the future. Elias will then follow with more detail on our performance. This morning, we reported adjusted after-tax operating income of $688 million, or operating earnings per share of $1.10 a 13% increase year over year. We also reported adjusted return on average equity of 11.9%, a 110 basis point improvement over the prior year quarter. Our run rate return on equity, which is adjusted for alternative investment returns that are below our long-term expectations and notable items, was 13.1%. That is solidly within our target range of 12 to 14%. This first quarter run rate represents a 140 basis points improvement year over year and 250 basis points increase since our IPO. Looking at the quarter, we see four key factors contributing to the growth of our franchise value. Our diversified business model, continuing strong sales, attractive margins, and significant expense savings. I will address each in turn and then comment on our business. The first factor is our diversified business model, which includes our broad product and distribution platform and generates multiple sources of income that enables strong cash flows. The wide range of products and channels across our four businesses is a competitive advantage for Corbridge, positioning us to perform across different market conditions and prudently generate new business. In any given market, we can capitalize on prevailing dynamics to focus on growth opportunities where the risk-adjusted returns are the most attractive, optimizing our mix of spread fee and underwriting margin. For base spread income, which grew 14% year over year, we leverage our portfolio of general account products to meet the evolving needs of our customers and partners. At the same time, we are seeing favorable dynamics for fee income, which increased 9% year over year. With equity markets moving higher, fee income is on the rise, rebounding from prior year lows. Our assets under management and administration have grown to $393 billion, a 7% improvement year over year. This large asset base will be an earnings driver for our spread-based and fee-based businesses. Underwriting margin this quarter was impacted by one-time reinsurance related items as well as seasonal mortality. Our overall mortality remains within expectations. Our diversified sources of income create financial flexibility which enables our insurance operations to generate consistent and strong cash flows of over $2 billion annually. These cash flows position the company to deliver on our commitments to shareholders and provide an attractive capital return across market cycles. The second factor is our robust sales volume. Cordridge delivered $10.6 billion of premiums and deposits in the first quarter and $50 billion over the last five quarters. We expect demand for our products and services to remain strong as we are well positioned in the large and growing markets where we compete. Further, these markets are favorably supported by prevailing demographics and macroeconomic trends. The third factor is that we continue to produce attractive margins. We actively manage our business portfolios to ensure we maintain strong profitability levels with double digit IRRs. And the fourth factor, in addition to growing our aggregate core sources of income and actively managing our capital, we have also been reducing our expenses. We successfully completed our modernization program, Corbridge Forward, having acted on or contracted for the full $400 million of run rate savings. While we are pleased to have completed this initiative, we are building off our momentum to adopt the philosophy of continuous improvement as we are committed to increasing our efficiency over time. Turning to our segments, In individual retirement, we continue to deliver strong sales. We remain well positioned to meet the needs of an aging U.S. population and to partner with a new generation of advisors who are recognizing the value of annuities as part of a long-term investment plan. Our sales volume for fixed and fixed index annuities was $4.5 billion for the quarter, remaining near historic highs. General account net inflows were over $600 million for the first quarter, despite a higher volume of fixed annuities exiting their surrender charge protection. Turning to group retirement, it delivered premiums and deposits of $2 billion this quarter. There are three parts to this business, in-plan, out-of-plan, and advisory and brokerage, all distributed by our own field force of financial professionals. The in-plan business represents defined contribution plans serving tax-exempt and public sector organizations, whereas in the out-of-plan business, we extend our relationship to provide services beyond employer-sponsored retirement plans. Our advisory and brokerage platform supports both businesses, where we provide customers access to a range of third-party products or services. Group retirement is a consistent contributor to our results with a balanced mix of spread and fee income driven by a $126 billion asset base, which grew 7% year over year. This business is well positioned to serve the need for financial planning advice as we focus on plan sponsors that value the role of our advisors. We differentiate ourselves with our field force of experienced financial professionals and proprietary tools that support financial planning capabilities for both in-plan and out-of-plan customers. In life insurance, we continue to generate attractive growth in our U.S. business. Recently, we have been outpacing the market, and in the first quarter, we increased U.S. sales 9% over the prior year. Our distribution partners and customers continue to see value in our select range of products including simple protection products designed for the middle market and CoreBridge remains well positioned to meet demand. With our digital end-to-end platform and our automated underwriting tools, we make it quicker and easier for our customers to purchase life insurance. In early April, we announced that we closed the sale of our UK life insurance business to Aviva. With this transaction now closed, we are fully focused on life and retirement products and solutions in the world's largest life insurance market, the U.S. This sale was highly accretive, and together with last year's sale of Leah Healthcare in Ireland, we have unlocked approximately $1.3 billion of value for shareholders with a negligible impact on future earnings. In institutional markets, we closed $1.8 billion of pension risk transfers during the quarter at attractive margins. CoreBridge is well positioned to support the growing demand for pension risk transfers, including full plan terminations, which we have focused on for years, investing to develop what we believe is a competitive advantage, serving employers looking to holistically exit their pension obligations. We expect to continue to see a robust pipeline in 2024 as more plans are fully funded and many companies are highly motivated to act. We also issued $600 million of gifts in the first quarter, having become a more regular FABN issuer, and we expect to incrementally grow this book, building on our 2023 volumes. The new business volume we have generated across the company is robust, and we are investing in attractive assets to support these levels. Our asset origination platform put over $9 billion to work in the first quarter, investing at an average of single A plus, incrementally improving the credit quality of our portfolio. New money yields remained strong in the first quarter, approximately 160 basis points above the average yield on assets rolling out of the portfolio. Our investment portfolio remains well diversified and high quality, with over 95% of our fixed income assets rated investment grade, and we remain committed to achieving strong risk-adjusted returns while matching the duration and liquidity needs of our liabilities. Turning to our financial position, our balance sheet remains strong. We maintain a comprehensive risk management framework and are selective in the liabilities we originate, putting us in a position where we can continue to invest in our business while also returning attractive levels of capital to shareholders. We are also continuing our work to expand the capabilities of our Bermuda entity to support further business development activities. The regulatory process remains on track and when we receive the required approvals, we anticipate leveraging this structure in 2024. When complete, these capabilities will give us the opportunity to expand our financial flexibility and provide additional capacity to support growth and optimize our capital.