F&G Annuities & Life, Inc.

Good morning, and welcome to F&G's first quarter 2025 earnings call. During today's presentation, all callers will be placed in a listen-only mode. Following management's prepared remarks, the conference will be open for questions with instructions to follow at that time. I'd like to turn the call over to Lisa Foxworthy-Parker, Senior Vice President of Investor and External Relations. Thank you. You may begin.

Thanks, Operator, and welcome, everyone. I'm joined today by Chris Blunt, Chief Executive Officer, and Connor Murphy, Chief Financial Officer. Also, Wendy Young, Chief Liability Officer, will be available for Q&A. Before we get started, I wanted to note that we have recast prior period financial results during the quarter. We have removed CLO redemption and bond prepay income from our significant items and have updated definitions for the cost of funds and flow reinsurance fee income within our A&E Management View Income Statement. Importantly, Historical reported net earnings and adjusted net earnings, or A&E, have not changed. The recast financial results are available in our quarterly financial supplement and earnings release, as well as our spring 2025 investor presentation. Also, starting this quarter, we are presenting our financial results on an as-reported basis throughout our earnings materials. Therefore, these results, including A&E, ROA, and ROE, are no longer presented on an excluding significant items basis. On page six of our quarterly financial supplement, you can find a summary of the impacts to A&E from significant items and investment income from alternative investments. Today's earnings call may include forward-looking statements and projections under the Private Securities Litigation Reform Act, which do not guarantee future events or performance. We do not undertake any duty to revise or update such statements to reflect new information, subsequent events, or changes in strategy. Please refer to our most recent quarterly and annual reports and other SEC filings for details on important factors that could cause actual results to differ materially from those expressed or implied. This morning's discussion also includes non-GAAP measures which management believes are relevant in assessing the financial performance of the business. Non-GAAP measures have been reconciled to GAAP where required and in accordance with SEC rules within our earnings materials available on the company's investor website. Please note that today's call is being recorded and will be available for webcast replay. And with that, I'll hand the call over to Chris Blunt.

Good morning, everyone, and thanks for joining our call. Our first quarter results reflect near-term headwinds from the volatility of the overall environment, the majority of which we believe to be temporary in nature. From a top-line perspective, we continue to manage sales and enforce profitability to optimize our return on capital. This resulted in a reduction in MIGA sales in the first quarter with continued strong fixed indexed annuity and pension risk transfer sales, which are our highest returning businesses. From a bottom line perspective, while we gave up some spread during the first quarter, we believe much of that was short-term in nature and not indicative of any longer-term challenge to our business model. The four main drivers were excess cash due to CLO prepayments coupled with a drop in cash rates, lower surrender income as there was a noticeable pause in refinancing of old policies by agents. A relatively weaker quarter for our own distribution business, largely driven by the same slowdown, as well as some one-time growth investments by one of our distribution companies. And simply the timing effect of enforced pricing changes, which can occur in periods where there are precipitous increases or decreases in interest rates. As things stand today, we would expect each of these drivers to improve throughout 2025, and we remain committed to achieving our 2023 Investor Day targets. Connor will provide more details on our sales and financial results later in the call. Overall, our Enforce book of business and the investment portfolio are performing well, and as expected in the current environment. For the Enforce book, we have a young fixed annuity block that is surrender charge protected. We lock in spread at the time of sale and also have the flexibility to reprice a large majority of our liabilities to economics on an annual basis. We maintain pricing discipline over the life cycle of the product. And during periods of market volatility, like we're seeing now, we take a measured approach to renewal rates, balancing pricing consistency with distribution. Next, turning to the investment portfolio in more detail. The portfolio is well matched to our liability profile and diversified across asset types. We are now in the seventh year of our seasoned partnership with Blackstone and have a fully developed public and private asset toolkit. This enables us to be competitive without taking on additional credit risk. If spreads in one asset class are shrinking, we have many others to choose from. The retained portfolio is high quality with 96% of fixed maturities being investment grade. We continue to invest in defensive sectors having an up in quality bias. Our real estate exposure is high quality and moderate leverage with diversified exposure across property types. Notably, we hold very little office exposure at 1.6% of our total portfolio. Our portfolio credit quality has improved since 2020 through implementation of various portfolio repositioning programs. We have had excellent credit performance in the portfolio. Credit-related impairments have remained low and stable, averaging six basis points over the last five years and two basis points in the first quarter, well below pricing. The portfolio is conservatively positioned to outperform under various economic scenarios while maintaining the ability to withstand a downturn. During the first quarter, we have modestly increased our hedge ratio to 75 percent of our floating rate assets which are now only 5% of our total portfolio net of hedging. Our fixed income yield was 4.53% in the first quarter, a decrease of three basis points from the first quarter of 2024. This reflects the benefit of higher yields on new investments offset by the runoff of higher yielding in-force assets. On a sequential basis, our fixed income yield decreased six basis points from the fourth quarter primarily due to the runoff of higher-yielding, shorter-duration in-force assets that generated excess cash. We continually look for opportunities to add yield over time by taking advantage of the market dislocations and continuing to work with Blackstone to source new asset categories. Next, I'd like to provide a few brief topical updates on tariff exposure, CLOs, and alternative limited partnerships. During the first quarter, we conducted a comprehensive analysis across the portfolio to assess direct tariff exposure and broader economic implications. Our analysis confirmed that the portfolio is resilient and largely insulated from tariff-related impacts due to our focus on credit and the robust structural protections that we have in place. Turning to our CLO portfolio, we have a diversified portfolio that represents $3.7 billion or 7% of the total retained portfolio. It's a well-seasoned portfolio that is approximately 89% investment grade and is outperformed, with most purchases dating prior to 2021. And many have already prepaid since spreads have narrowed, which is reflected in our net investment income as prepaid income. Our CLOs are backed by a highly diversified pool of loans with ample power subordination. Our portfolio uses 85 CLO managers and invests in close to 2,000 companies operating within 30-plus industries. By industries, CLOs skew toward high-tech, healthcare and pharma, and financial industries with low exposure to energy and retail. Historic studies have shown that CLOs have had superior performance compared to corporates, and we benefit from Blackstone's capabilities and expertise, which allows our CLO portfolio to be underwritten at the underlying loan level. Within our overall alternative investments, I want to spend a few minutes on limited partnerships. We held 6% of the portfolio in LPs as of March 31st. As a reminder, our target allocation is 5%, and we expect that our allocation will move between a range of 5% to 7%, given that the pace of capital calls and distributions can vary. The LP portfolio is very well diversified from a sector, vintage, and funds perspective with 37 different funds. By asset class, our LP portfolio is 57% in private equity, 27% in real estate, and 16% in credit for the first quarter. And by sector, the real estate funds skew towards industrial, residential, and REITs, while the private equity funds are weighted toward financials, information technology, and industrials. The bottom line is that we do not have a lot of direct tariff exposure. And for our private equity holdings, we remain confident that there's real value in these underlying companies despite a delay in realizations. Our LP portfolio is a relatively young book. Since the inception of our LP portfolio build-out with Blackstone in 2018, we have seen a return of over half of the capital invested. As an asset class, we like LPs because they provide our portfolio with a long-duration asset and a very attractive return on capital. Turning to our growth strategies, beyond AUM growth, we continue to diversify our earnings between spread-based and fee-based sources, including our own distribution stakes. In aggregate, we've invested $680 million in our own distribution companies through two majority stakes taken in 2024 and two minority stakes purchased in 2023. These stakes are held at the holding company level under our peak altitude entity and our strategic longstanding relationships. Our holdings are diversified by product and market and reflect growing businesses with strong leadership. Overall, the owned distribution portfolio is performing well and creating value, with double-digit annual growth of EBITDA expected over the medium term. Looking ahead to the remainder of 2025, we will continue to execute on our strategy while prioritizing pricing discipline, and allocating capital to the highest return opportunities. Let me now turn the call over to Connor to provide further details on F&G's first quarter sales and financial highlights.