Corebridge Financial, Inc. (CRBG) Q4 2025 Earnings Call Transcript

Hello, everyone, and welcome to today's Corbridge Financial fourth quarter 2025 earnings call. My name is Seb, and I'll be the operator for your call today. If you would like to ask a question during the Q&A session, please press star 1 on your telephone keypad. If you would like to withdraw from the queue, please press star 2. I will now hand it over to Ishil Mederisoglu to begin the call.

Good morning, everyone, and welcome to Corbridge Financial's earnings update for the fourth quarter and full year 2025. Joining me on the call are Mark Costantini, President and Chief Executive Officer, and Elias Habaieb, Chief Financial Officer. We will begin with prepared remarks by Mark 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. Corbridge's 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 at our website at investors.corbridgefinancial.com. With that, I would now like to turn the call over to Mark and Elias for their prepared remarks. Mark?

Good morning, and thanks for joining us. I want to begin by recognizing Kevin Hogan, who led this business for more than a decade, executed Corbridge's successful launch as a standalone company, and established a solid foundation for future growth his help through the transition was invaluable and demonstrated a hallmark of his leadership style his unwavering commitment to the success of his colleagues and company for me it's a tremendous honor to lead this great franchise with its noble purpose customer needs have never been greater for financial protection wealth accumulation and retirements with dignity and confidence. And that means our opportunity to create value for customers and shareholders alike has never been greater. In my remarks this morning, I'd like to recap the company's 2025 performance through a strategic lens and share my early impressions of the company's strengths and opportunities. Then I'll turn it over to Elias for additional color on both our fourth quarter results and the company's 2026 outlook. Corbridge had a strong year in 2025. Earnings per share were up 4% year over year. Return on average equity was up 20 basis points and capital return to shareholders was up 13 percent to create long-term value for shareholders in our industry we must demonstrate an ability to grow profitably and generate consistent and growing cash flows from the insurance companies while preserving balance sheet strength corebridge did all three our growth in 2025 was strong with sales up four percent to a record 42 billion dollars we launched our ryla product market lock in a crowded field and quickly joined the top 10 providers in fact we are the only company to have a top 10 position across every major annuity product category market lock is now available to more than 200 distribution partners across the united states and we expect continued growth in 2026 our diverse businesses at core bridge give us flexibility to adjust our capital allocation between our different offerings based on where risk-adjusted returns are the highest and customer demand is the strongest. An example of that is the higher allocation to our institutional markets business in 2025. We grew institutional market sales by 24% overall, led by pension risk transfers and guaranteed investment contracts to drive both current and future earnings growth actively managing our balance sheet and maintaining financial flexibility are foundational to corbridge in 2025 corbridge executed the industry's largest variable annuity reinsurance transaction to date the final portions of which closed last month the transaction de-risked the company's most complex liabilities and going forward, our legacy liabilities comprise approximately 1% of the balance sheet. In addition, we finished the year with a light fleet RBC ratio above 430% and holding company liquidity of $2.3 billion, both exceeding our targets. Finally, we continue to expand our Bermuda strategy where we have seeded approximately $20 billion of reserves to date, providing critical financial optionality that helped Corbidge deliver on its financial and strategic goals. Disciplined execution of these levers is essential to driving shareholder value and ensuring resilient cash flows. As promised, the company is returning the substantial majority of the proceeds from the VA reinsurance transaction to shareholders in the form of share repurchases which helped lift our 2025 payout ratio to 110%. Excluding the VA reinsurance transaction proceeds, we grew our insurance company dividends to the parent by 6% year-over-year in line with our guidance. Reflecting our continued confidence in our financial flexibility, we are pleased to report that our Board of Directors has approved a 4% increase in our Curly Commons stock dividend to $0.25 per share, above the pace of inflation. As Elias will discuss further, we've also taken action to reduce our sensitivity to short-term interest rate movements down nearly 75% since mid-2024. At the 10-week mark in my tenure as CEO, I want to provide some initial thoughts on the business. The four strategic The strategic pillars that have guided Corbridge for the past few years remain a useful lens to view the company's prospects, although I am adding a fifth called win with customers. As I've told the team, my focus on delivering a superior customer value proposition could not be stronger. Everything from ongoing product innovation to industry-leading service to a seamless end-to-end digital experience. As I look at our key strengths and opportunities, I'll begin with the powerful demographic tailwinds that are driving strong customer demand for retirement solutions. Corbridge is well-positioned to meet these needs. I believe our vast distribution network provides us with a clear competitive advantage. The average relationship with our top 25 partners is a quarter century long, and more than 40 percent of the annuity sales came from products that have bespoke features tailored for each specific distributor with many partners not only are they one of our top distributors but we are one of their top manufacturers commanding significant shelf space i've competed against this distribution powerhouse in the past and i can tell you how hard it is to replicate Furthermore, our diversified business model is a proven source of strength. Our breadth of product and service offerings helps provide more stability to our financial results, allowing us to allocate capital to where returns are the most attractive and demand is the strongest. I also believe Corbridge has an underappreciated critical differentiator that supports growth. Some Some companies in our space are liability-driven, designing products and then searching for assets to support them. Others are asset-driven, originating attractive opportunities and then finding suitable liabilities. CoreBridge excels at both. Another strength is our Bermuda strategy. It is an important lever for growth, profitability, and capital efficiency. and we will continue to take full advantage of it. One area of opportunity is fee-based earnings. We plan to grow them faster to achieve better balance across our sources of earnings. In group retirement, for example, there is a tremendous potential to grow wealth management by capturing more IRA rollovers and consolidating household assets, a captive opportunity with in- and out-of-plan clients to further expand and deepen our relationship. We believe this alone represents a $30 billion opportunity. But we have some work to do. We are actively investing to significantly enhance customer experience, adding more advisors, and upgrading our digital wealth management capabilities. Collectively, we believe these investments will improve retention levels and grow our wealth management business. I also believe we are striking the right balance between returning capital to shareholders and investing for growth. Our 60 to 65% payout ratio rewards shareholders with cash today, while our reinvestment in the business rewards shareholders with cash in the future. Since the IPO, the company has successfully reduced expenses with the Corbridge Forward Program, which is a testament to the work the team has done to get ready to compete as a standalone entity. Going forward, I believe Corbridge must do two things at once, deliver continuous improvement in our operating leverage while also making strategic investments to drive faster growth. We need to invest more to accelerate the pace of digitization, which is essential to improving our productivity as well as our distribution partners and customers' experience. The easier we are to do business with, the greater the share market we can capture from the demographic surge fueling growth in our industry, all of which adds up to my most important early impression. The significant opportunity Corbridge has to grow faster and more profitably. As we further differentiate our customer value proposition and more fully capitalize on our world-class distribution, we will continue to create sustained shareholder value. In closing, I joined Corbridge because I believe in this franchise and believe we are capable of more than we've ever achieved before. We have a huge opportunity in front of us, we have hard to replicate competitive advantages, and we have a world-class team ready to show what they can do. Finally, as this is his last earnings call, I want to express my heartfelt thanks to Elias. He is an excellent CFO who helped me get under the hood and quickly understand all the moving parts at Corbridge. I wish him all the best in his next chapter. Elias.

Thank you, Mark. Turning to slide five, Corbridge delivered another quarter with strong financial performance driven by the strategic pillars we have consistently executed on since the IPO. We reported adjusted pre-tax operating income of $760 million or operating EPS of $1.22, representing a 15% year-over-year increase. This quarter's operating EPS included $0.10 of notable items and $0.07 from alternative investment returns driven by underperformance in real estate equity. Adjusting for these two items, our run rate operating EPS was $1.19, which represents a 7% year-over-year increase. Finally, our adjusted ROE was 12.5%, an increase of 140 basis points from the fourth quarter of 2024 and consistent with our goal of 12 to 14 percent turning to slide six our core sources of income excluding notable items were up one percent year over year driven by improved spread and fee income partially offset by lower underwriting margins fee income which makes up approximately 20 percent of our core income sources improved by nine percent driven by increased product fees and growth in assets under management and administration, benefiting primarily from favorable market conditions. Base spread income grew 4%, driven by strong sales and general accounts net flows, robust asset origination, and effective portfolio management capabilities. Lastly, underwriting margin, excluding VII and notable items, decreased 10% year-over-year due to lower mortality gains. Our broad suite of retirement and protection offerings allow for the generation of resilient and growing distributable cash flows across a variety of market conditions, which would not have been possible had we been dependent on a single product or channel. Turning to slide 7, full year 2025 capital return totaled $2.6 billion, including $1.2 billion in the fourth quarter alone. This brings our annual payout ratio to 110% or 75% when excluding the VA reinsurance proceeds. We concluded the year with holding company liquidity exceeding $2.3 billion, dollars, supported by 1.3 billion dollars in distributions from our U.S. insurance subsidiaries in the fourth quarter. Next, I'll briefly review a few highlights from each of our businesses, the details of which can be found in the appendix to our earnings presentation. As a reminder, results exclude the impact of VII and notable items where applicable. In individual retirement, APTY increased 3% year-over-year. This was driven by an increase in both spread and fee income, partially offset by higher DAC and non-deferrable commissions due to continued growth in the business. The Fed rate cuts in 2025 contributed to the six basis points compression in base spreads. Excluding the impact of the rate cuts, the base spread compression in the quarter was marginal. More importantly, base spread income increased both year over year and sequentially, even with the earning of the Fed rate cuts, thanks to continued strong demand for our product. Fourth quarter sales were $4.3 billion. While this reflects some softening due to our pricing discipline and typical year-end seasonality, our full-year sales remained strong at $20.6 billion. Net flows for the quarter remained positive at over $600 million, supported by our successful Rila launch, which generated full-year sales of $1.9 billion. Surrender activity in the quarter was in line with expectations. Turning to group retirement, we continue to see a natural evolution of the business as we adapt to our customers nearing peak retirement age. This key demographic change is driving a purposeful mixed shift from spread to fee income, which requires less capital. Accordingly, APTY decreased 1% year-over-year, reflecting lower base spread income from this demographic evolution. This is partially offset by growth in fee income, which increased 2% year-over-year. Sales were up 13% year-over-year due to the growth of our RILA product and our out-of-plan offering. Finally, expenses were slightly elevated this quarter due to a modest litigation reserve. In life insurance, AP2I declined 30% year-over-year, primarily due to lower underwriting margins. While mortality experience was favorable this quarter, it was less pronounced than the meaningfully more favorable results we saw last year. On a run rate basis, this quarter results were consistent with our prior guidance of approximately $110 million to $120 million per quarter, other than the first quarter of each year where mortality experience is the highest. Turning to institutional markets, total APTOI was up 8% year-over-year, with full-year earnings up 19% from 2024 levels. There's been significant growth across the business where reserves grew by 23% year-over-year, driven by attractive opportunities in pension risk transfer transactions and GICs. This demonstrates the strength of our business model as we opportunistically allocated capital to where we saw the highest relative risk-adjusted returns. Lastly, I want to provide additional details regarding our outlook as we enter 2026. We remain committed to delivering on our financial targets, and this reflects our confidence in the strength of the business and its financial performance for the year ahead. We expect to grow our total sources of income for the year on the strengths of our favorable demographic trends, a competitive and diverse product suite, and industry-leading distribution. While our retirement businesses' base spread income will face some pressure from additional Fed rate cuts, that sensitivity is dramatically reduced, as Mark noted. Specifically, an additional 25 basis points reduction in SOFR will impact operating earnings by $20 to $25 million on a go-forward basis. The impact would have been $45 million as of last September. Consistent with prior guidance, we estimate that the base spread compression in individual retirement should level off by the end of 2026 based on the latest market outlook, assuming two Fed rate cuts in 2026, our current net flows projection, and investment plans. We also estimate that overall base spread income for the individual retirement business will be in the zip code of $2.55 billion for 2026. In addition, we expect alternative investment returns to be more in line with our long-term expectations, though we do see some softness in the first quarter from lower real estate equity returns. Next, as Mark mentioned earlier, we see the opportunity to make strategic investments to drive faster growth. Specifically, investing in digitization and broadening our internal capabilities to improve customer and distribution partner experience. Accordingly, in 2026, we expect the ratio of our operating expenses to normalize run rate revenues to remain consistent with 2025. This reflects modest growth in our operating expenses in the near term, approximately 4% to 5% or $60 million in operating GOE before the full benefits of these strategic investments begin to be realized. Lastly, our disciplined and proactive balance sheet management has enabled Corbridge to pursue profitable growth while delivering on financial and capital management goals. We've been very disciplined in our buyback program, accelerating our share repurchases to take advantage of dislocations in the market. In the first half of 2026, we expect approximately $900 million worth of share repurchases associated with the VA reinsurance transaction, an amount that's above our normal 60% to 65% payout As a reminder, our 2026 EPS growth rate will be impacted as we have yet to fully deploy these proceeds. Accounting for all these varying drivers, I want to reiterate that we expect to meet our key financial targets for adjusted ROE, capital return, and run rate EPS growth, though at the lower end of our targeted range of 10 to 15%. We believe the underlying fundamentals of our business remain not only strong, but compelling. Looking forward, as we further differentiate our customer value proposition and more fully capitalize on our world-class distribution, we believe we will continue to create sustained shareholder value and deliver on our key financial targets. Finally, as this is my final call as Corbridge's CFO, I want to thank my colleagues who have been great partners in this amazing journey that began for me in 2021. I'm very proud of everything that we have accomplished, and I'm equally excited for what the future holds for Corbridge under Mark's leadership as the company embarks on the next chapter of its story. And with that, I will turn the call back to Isha.

Thank you, Elias. As a reminder, please limit yourselves to one question and one follow-up. Operator, we are now ready to begin the Q&A portion of the call.

Thank you. As a reminder, to ask a question, please press star 1 on your telephone keypad. The first question is from Sunit Kamath with Jeffries. Please go ahead.

Thanks, and good morning, Elias. best of luck in your new role. The first question is on the SOFR sensitivity. I guess, how were you able to reduce that so significantly? I would imagine there's got to be some give up somewhere. So just curious on how you're able to do that. Thanks.

Hey, Sunit, it's Elias. Thank you. On the SOFR sensitivity, listen, you know, our investment strategy is liability driven And, you know, we manage the ALM profile of the balance sheet very tightly. As we've disclosed in the past, we had some macro hedges. We were able, over the course, to adjust the investment allocation, which gave us the flexibility to reduce these macro hedges. And that's what kind of reduced our sensitivity.

So we were able to better align the ALM profile with assets, and we didn't need the derivatives anymore. okay understood and then i guess for mark in your prepared remarks you spent some time talking about investment spending um should we view the incremental 60 million that you're talking about for uh 2026 as sort of the go forward annual amount of spending that you're going to do or are you thinking about something that could be bigger than that thanks yeah thank you sunit and thanks for your question and that's great to be on this call and i appreciate all the interest and attention from all of you on the call and i know it's my first and i look forward to many so to answer your question what i start at the macro level and say operating leverage is very important

for us and underlying all of our work we do here we will continue to drive operating leverage to growth in our franchise and our business so that will always be one of the fundamental objectives which you'll see and has been demonstrated by this firm over the last number of years we are driving operating leverage having said so to your point we need to invest in our business you know and i mentioned my remarks that you know winning with customers is very important right and and then that starts and stops as well with the delivery to our distribution to the end consumer which we need to further digitize and those investments are spread across the firm to achieve that and continue to obviously put the core bridge at the forefront of delivering customer value so as we look at the outlook i would say we'll continue to invest there and you know the zip code of investment you're looking at is right now what we're you know what we're forecasting for 2026 but i would take away that the operating leverage will continue to be driven to our franchise so okay thanks thank you next question is from john barnage with piper sandler please go ahead good morning thanks for the opportunity my first question can you talk about the prq volume it was real active quarter what's your outlook for that for the year and how do you think about operating globally in that market thank you hey john it's mark thanks for the question good morning so i would say our institutional management business as elias gave the details you know it's grown by over 24 in 2025 and obviously that was on the back of a growing prt franchise and a growing geek franchise amongst other things as well as some of our off balance sheet products uh you know one of the key things that as well elias mentioned is the judicious capital allocation you know around the franchise to the highest return businesses we have and that was manifested obviously in the results of our institutional management business you know credit to that team you know we do look primarily obviously in the U.S. and in the U.K. for opportunities in the PRT business and we came across some attractive ones in 2025 you know that business by its nature is lumpy right so it'll go up and down but we feel we have a value proposition that's differentiated in the market, and we continue to be, you know, quite optimistic about its future. So, we do see some bright lights as we look forward in that business.

And, John, if I may add, if you look at pension plans, still, you know, they're overfunded. So, when we think about the opportunity, there's, you know, meaningful opportunity for continued corporate balance sheet de-risking.

Thank you for that.

And my follow-up question, can you maybe talk about your exposure to software in the investment portfolio and then maybe as it relates to the real estate footprint exposure to that asset class i don't know software as well thank you yeah i'll start uh john and then i'll pass it to elias uh for some more detail kind of uh at a high level i would say we're not worried about our software exposure and that's the main takeaway uh and that's driven by obviously uh how we look at you know concentration to names how we look at concentration to segments and how we look the concentration to industries and make sure we have a diversified balance sheet across all sectors so our exposure there is you know not very big and alias is going to give you details here

okay john on the software side listen from a direct exposure side we got a billion in our public credit side and that's mostly to the likes of more microsoft and oracle and then we have about 350 million within our direct lending book which to us when you think of a balance sheet over $250 billion, it's the minimus. On the real estate side, to clarify, I'm assuming you're asking about data centers?

Yeah.

Yeah. On the data center side, we do invest in debt backed by data centers. We're very selective in where we invest in. It's typically associated with hyperscalers, and we make sure the debt matures before the leases on those property mature.

And that's kind of important from an underwriting perspective so again we feel very comfortable with that exposure thanks for the answers thank you our next question is from alex scott with barclays please go ahead hi uh first one i had is on group retirement you know i heard the a little bit more detailed outlook that you gave for spread and individual and and i thought maybe i'd ask the same question of group that's a spot where there's been a fair amount of spread compression and there's some offsetting i guess fee growth over time but i just want to understand how that dynamic will look in 26 and what to

expect yeah good morning alex it's mark thanks for the question uh maybe i'll start a bit as a view of the business our group retirement business is an important segment for us obviously it's a source of diversification for us it's a first source of diversification and you know a few respects one of them is distribution related and as you'll find out as we have these discussions the distribution is very important to me and the firm and this gives us access to different distribution the different access to the customer to obviously the record-keeping platform but more importantly as we pivot the business which is implicit in your question you know the wealth management aspects right and we're cross-selling and upselling into those plans uh you know i mentioned in my remarks we have upwards of 1.5 million plus enforced participants you know we have 250 000 or so out of plan participants and we're growing that out of plan kind of value proposition which is fee-based right which is important for our future as well as we try to balance obviously the revenue profile of the firm so but the business is in transition right and it's in transition from spread business to fee business and that takes some time we think there's another 12 to 24 months in that transition if well we hit the trough there in terms of overall revenue and then we'll start to increase so that's how we view the business but we're still very so an important component of our firm, and it's one that we want to see continue growing.

Got it. Helpful. The second one I have to you is on the broader competitive landscape for individual retirement.

Could you comment just on the adequacy of the IRRs and prices you're able to get right now, how you're viewing the market and willingness to kind of go bigger with growth over the next few years yeah so uh very good question thank you uh you know i'll say that you know i've been in this business for 35 36 years and you know you always have you know competitive pressures and it's a very competitive segment but we have tailwinds as an industry obviously there's a retirement need as in a need we meet so i think there'll be growth overall and that's what creates the competitive interest obviously the interest rate cycle over the last you know, in a few years, and as well, obviously, the, you know, the spread environment, the corporate spread and credit spread environment has tightened, and that's created at some additional pressures, as you mentioned here. But, you know, we have something that very few others have to rely on, which is incredible distribution. And as I mentioned in my remarks, you know, we're, you know, top quartile, you know, across many firms, we've obviously introduced this Rylo product or last year and very quickly, you know, became a top 10 provider. You know, As we launched that product, we had the ambition of being a top five player, which is where we are across all our product lines. And as I mentioned to the prior question as well, we have this availability of kind of moving our capital around where we see the highest IRR. So while we're very responsive to the rate environment, and that causes us to obviously course correct our pricing on our fixed annuities, we do obviously have the opportunity to deploy it elsewhere in the IM side. But, yeah, there is competition on the retail side, but we're not adverse to the competition. And, you know, we offer as well some income benefits and living benefits that perhaps not everybody else does. So we have, you know, a value proposition that's differentiated on the main, on the whole, like we feel comfortable with the risk-return profile of our business. Thank you.

Thank you. Our next question is from Yaron Kinnar from Mizuho. Please go ahead.

Thank you. Good morning. So I'm trying to think through the longer term 10 to 15 percent EPS growth target. It's the idea that the boost from the excess capital deployment from the VA deal will be ultimately replaced by accelerating sales and deposit growth through that new fifth pillar that you introduced, Mark. And would that also mean that 2027 and eight may actually be transition years with less EPS growth as that fifth pillar is still ramping up?

Yeah, thank you, Jaron. I appreciate the question. I guess I want to say, you know, we provided guidance and obviously Elias espoused on it, and I think as we look at 2026 and we look at, obviously, what the interest rate cycle has done and what credit spreads have done, that's working its way through 2026. And, you know, we feel that at the end of 26 and going into 27, obviously, we'll have a turnaround there. So, you know, our guidance is obviously in the lower half for 2026 of our stated objectives. But as we turn to 2027, I would look at 2027 guidance to be in the upper half of our guidance, as opposed to the lower half in 2026. And that's how I would see, and obviously that would bleed into 2028 and beyond. And is that driven by that fifth pillar, or is that more from the residual impact of the buybacks in 2026? you know i would say it's a combination of everything we do you know so it's the the growth and penetration across all of our business segments and as well obviously our commitment to the free cash flow generation and the return to our shareholders so it's a combination of the two that's going to drive that growth um and then my my second question can you size the two planned departures that are expected for the second and third quarters it's elias um i don't have those

exactly in front of me but i think in total they're in the two to three billion range across the board thank you very much and uh good luck elias with uh your transition well thank you thank you our next question is from tom gallagher with evercore isi please go ahead good morning um elias good luck mark welcome um the i guess mark first question i had for you i was listening to your prepared remarks and other comments you've made and you seem to be describing core bridge as having a competitive moat on the distribution side and i think you referenced 40 of annuity sales having some bespoke and tailored products for specific distribution anyway i think the investor perception on core bridge is that you're in a you're selling a commodity product in an increasingly crowded field with alt managers muscling their way in. So clearly, your view, and you've been in this industry a very long time through different roles, is very different than, I think, the common perception. What would you say, what gives you the confidence that your view is the right view?

I don't know if there's, maybe it was just that point you made, but is there anything you could say to demonstrate or disprove that commodity perception yeah tom good morning thanks for uh thanks for the question and i appreciate it so i think there's two things we have to do uh to counter the effect of the competitive forces uh and it's driven by uh winning with customers which to me means uh being the easiest company to do business with and we have to strive to be the easiest company to do business with because that'll give you an avenue of growth and revenue growth that will not be completely based on that commodity pricing you're referring to the second one is need a distribution powerhouse to touch that you know ultimate customers who advisors brokers financial planners and the like so and we feel and i feel strongly that we have that differentiated value proposition on the distribution side and we are building the platform to be the easiest company to do business with and the combination of the two will allow you to compete effectively and print the target margins we seek to provide in our business and that's how we're going to approach it and as well you know one of the comments i made is tied to the fact that you know we have liability driven expertise and we have asset driven expertise and not every company has that and we feel that provides us a competitive advantage to you know take some thoughtful you know i would say biometric

insurance risk to combine it with the asset risk and you know some of our competitors not all of them are comfortable taking all those risks but we're you know we're comfortable and we've proven our ability to manage through those risks through time so that's what that's why i feel we're different gotcha thanks thanks for that and for my follow-up elias um just a question on i know you raised what was a fairly expensive 500 million dollar preferred in 4q and i think the proceeds are largely going to Bermuda to fund capital needs there how do how do how should we think about cash flow capital generation for the next few years I mean on one hand it looks like maybe you've paid up front for the cost of some capital optimization strategy and so I guess I guess the the reason I'm asking all of that is I'm just wondering because now now we have to factor in the cost of that preferred but are you going to get a benefit on that on the on the back end here where maybe free cash flow conversion is a bit better than the 60 to 65. so uh tom the way i look at it is like listen if you look at 2026 and 2025 and 26 given the va deal we've distributed a lot of capital out of our us companies and we're using most of it to return back to shareholders

in the form of share repurchases, and we're being mindful of the kind of what we do with the U.S. companies. What the preferred security does, and I don't look at it necessarily as very expensive. I look at it as to what's the opportunity that we use that capital for, and if you look at the IRRs where we're selling new business at, it's secretive, and so that takes care of Bermuda for 2026 from our strategy there, you know, we grew putting aside the proceeds from the VA deal, you know, dividends from the insurance companies by 6% in 25 relative to 26. That's consistent with the guidance we gave you. I think that's a good guidance to think about for 26 also. And we're confident, like, listen, as we grow our business and the denominator grows, We're going to deliver on the 60% to 65% organically. And with the denominator growing, that means we're returning more cash every year to shareholders. Now, the one clarification is on the 20. For insurance company dividend distributions for 26, you've got to re-baseline 2025 for the lost distributable earnings from the VA transaction. Once you do that, our anticipation will be growing it in the 5% to 10% range.

Gotcha. Thank you.

Thank you. Our next question is from Joel Hurwitz with Dowling & Partners. Please go ahead.

Hey, good morning. Just wanted to come back to the retail annuities competitive landscape. Just given, right, your sales were down pretty significantly quarter over quarter and flows were well below where they've been for several quarters now. And we see more and more enter the market.

So just curious how the competitive dynamics have been evolving there and what exactly you saw in the fourth quarter. yeah thank you joel it's mark i appreciate the question uh so uh maybe some uh overall comments before we talk about q4 in particular uh when you look at the full year uh you know we were in very positive net sales for in our individual retirement business uh you know well over seven billion of net sales our assets continue growing the business continues growing uh obviously the interest rate cycle i mentioned earlier in my remarks that uh you know we are responsive on a weekly basis to the interest rate cycle and to the credit cycle. So obviously we were responsive to that in Q4 and it had some temporary effect on our sales. I'll go back to the fact that in Ryla, we are going to be a top five player in that market. That's our ambition and we'll get there. We are a top five player in every other segment. As we look towards 2026, we are looking to grow that fixed annuity business, individual retirement business. So we are confident going into 2026 about our portfolio and our prospects.

And to add to Mark and part of the modeling guidance we gave Joel is, you know, we expect from our retail annuity business to continue to have positive net flows going into the future. You know, the fundamentals are pretty strong and we see demand kind of strong for needs for retirement solutions.

Got it. That's helpful. And then Mark, you talked about the wealth opportunity. How do you see that developing over the coming years? And can you elaborate more on some of the investments that you think you have to make to fully capture that opportunity?

Yeah, thank you, Joel. Yeah, it's, you know, we are very ambitious on that business. And it's a cross sell and upsell to obviously our record keeping business. And we have a, you know, a selective opportunity to, you know, to go into those plans and to actually, you know, grow our relationship with those participants. And I'll give you a couple of proof points, right? If you look at our record-keeping business that's about 80 billion or so I would say the average balance you know we have for those participants is 50 to 60 thousand you know on average if you look at our outer plan you know kind of relationships where we've basically obviously have a bigger share wallet of those families you know it's close to triple that level so that's why we're thinking and that's why I mentioned in my opening remarks that we think we have a 30 billion dollar opportunity there so so that's the upside and how do we capture that upside. Well, you know, we got to, you know, have a more robust offering on the wealth management side. We got to obviously digitize. We got to hire more wealth advisors and we have to professionalize and continue to professionalize that workforce, you know, to attempt to go after those participants. And that's where we're doing. And that's where those investment dollars are going.

Got it. Thank you.

Thank you. Our next question is from Wilma Burtis with Raymond James. Please go ahead.

Hey, good morning. GIX and similar products seem to have taken a step back in 4Q25, not just at Corbridge, but maybe across a few different companies. We're wondering if there's something specific to the interest rate and or credit environment in 4Q25 or if that's just a quarterly fluctuation. Thanks.

Hey, Wilma, just to be clear, you were asking about GIX? Yeah, I think what you see, if you go back to fourth quarter, there was volatility in the rate environment, which kind of limited some windows out there. But, you know, I think you've got to look at it. We look at it on an opportunistic basis, where the opportunity is. And we do both in the capital markets as well as private placement. So key to us is what assets do we have? What returns can we get? And does it achieve our return hurdle? And that kind of drives us. But, you know, if you follow, we did one in January, which is not in the fourth quarter results. So I think the market is still there, just that in the fourth quarter, there's a period of volatility.

Okay. Thank you.

And realize it's a while out, but should we expect benefits in 27 from the reduction in short-term interest rate sensitivity? And is there any way to quantify any cash benefit for the change in the derivatives program? Thanks.

Yeah, listen, I think on the derivatives program and the sensitivity, we gave you that sensitivity. Our balance sheet will continue to evolve with how the liability side evolves, and we'll kind of update you on sensitivities going forward. And in terms of the derivatives, when we think about it, you know, no, I think what we've done is by getting the derivatives off the books is we've reduced the sensitivities to interest rates, our short-term interest rates. And where we stand right now with our outlook and with the market outlook is we see this kind of exposure from potential Fed easing ending in 26. And as we look into 27, you know, we see lower exposure from that perspective. And to Mark's earlier comment, you know, we expect to grow earnings in 27 that together with capital management puts us in the top half of our 10 to 15 range. And the earnings growth is going to come as a result of continued growth in the business and improving our operating leverage from the investments that are being made.

Thank you.

Thank you. Our next question comes from Wes Carmichael with Wells Fargo. Please go ahead.

Hey, thank you. First question on the modeling items for all returns. I think, Elias, for 2026, you're expecting returns to be closer to the long-term assumption of eight to nine, but you mentioned lower real estate equity returns in the first quarter. I just wonder if you could maybe size that for us in the first quarter.

Yeah, happy to. So, yeah, so we think the economic environment is supportive. when we look at the full year to deliver on the 8% to 9% return on our alternative. You know, it's a little early, but we are seeing some softness in the first quarter with real estate equity. You know, its recovery is lagging what we're seeing on the private equity side. You know, I think right now, but it's very early, maybe $20 million to $30 million impact, but that's very early.

Thanks. That's helpful. And I guess my follow-up on the asset side, Mark, you mentioned that corporate spreads are very tight. We can all see that. And you've got the relationship with Blackstone and BlackRock. But I just wanted to ask, are there additional opportunities to think about on the asset side, whether that's maybe expanding the Blackstone relationship? Would you look at additional partnerships with other alternative managers? I'm just curious if there's more to do where you could increase the net yield on the portfolio.

Yeah, thank you, Wes. I appreciate the question. And I guess, you know, in 2025, when you look at the size of our firm and the origination, we originated upwards of $55 billion in 2025 alone. And that was done in partnership, obviously, with our own, you know, investment team that originated a third of it. BlackRock originated another third of it. And Blackstone, as you mentioned, originated another third of it. So, you know, we feel we've got, you know, three world-class teams originating, you know, very choice assets with the right risk-return profile. Obviously, we're very prudent there and want to be thoughtful about investing for the long term. And, you know, and I think we're quite happy with those two strategic relationships we have with Blackstone and BlackRock, and they have provided us a source of very attractive assets. Now, you know, the credit markets are the credit markets, so, you know, I think what we have to be is thoughtful about where we place our money, how we invest it, and make sure we do the prudent thing, you know, over different cycles and not necessarily fall into the trap of going after the yield and regretting it in the future. So, but we're quite happy with those partnerships, and I think they're sourcing very good assets for us. Thank you.

Thank you. Our next question is from Jack Matten with BMO. Please go ahead.

Hey, good morning. Just one follow-up on the individual retirement spread outlook. I guess if you look at the longer-term kind of base spread profile over the past decade plus, it's currently going to attract me closer to the lower end of that range. I guess, do you think that's like more of a new normal now once we see spreads stabilize given where current spreads are in competition in that space? Or is your expectation that we could eventually see maybe an upward reversion over time toward the longer-term average margin in that business?

Hey, Jack, it's Elias. Listen, if you look at what's driving the compression in our base spreads, a big driver of it is the relative margins between where new business margins are and where the enforce is. And if you look at our enforce, we have a lot of annuities that were written in a lower interest rate environment, and we were successful in repositioning assets to take advantage of higher yields in the last three years from it. So that's one of the factors that's contributing to that compression. You know, we see that playing out through the end of 26. When we look beyond 26, you know, we do expect, you know, the margins will start growing from that point on, given the dynamics that's changing within our, you know, enforced portfolio relative to new business and easing of any, you know, the sensitivities or pressure from what the Fed might do.

That's helpful. And just to follow up on the NAIC's VM22 reserving changes, just any thoughts on what those could mean for Corbridge? I think there could be some puts and takes across different lines of business, but I'm just curious how you kind of see that playing out given your business mix.

Hey, Jack, it's Mark. Obviously, it's something that we follow closely, and we work very closely, obviously, with the industry and the NAIC, And we participate actively, obviously, in testing our own balance sheet. And, you know, without getting into any of the details, we feel quite comfortable with the impact this, you know, VM22 would have on our balance sheet if, you know, when implemented. So, you know, I think you'll see, you know, some no surprises from Corbridge when it comes to that.

Thank you. Thank you. Our next question is from Tracy Van Giege from Wolf Research. Please go ahead.

Good morning. When I think about RILA, there are many puts and takes, including pricing, distribution, product design. On product design, you talked about some of the benefit features. But turning to the indices, I see that you introduced a crypto-linked RILA. What is the take-up by policyholders? And should I think about relatively higher basis risk for a crypto index than, let's say, the S&P 500? And if so, how are you managing that?

Hey, Tracy, it's Mark. Thank you for your question. You are correct that we did introduce a new version of our Ryla product just a few weeks ago, and we're quite proud of the fact that it's differentiating and has some crypto exposure. Before we do any introduction of such new features or whatever, it goes through a justice process on the risk management side and making sure that some of the components that you mentioned there are well managed through the cycle. It's too early to tell where the take-up rate is given as a couple of weeks in, But, you know, we feel quite comfortable that we've met all of our usual approach to risk manage the portfolio.

And, Tracy, what I'd add is to kind of this is a good example of what Mark was talking about, you know, where we look to differentiate ourselves in the market based on product features. So we're not just competing on price. So, you know, this is a good example of one where it demonstrates that.

Well, I also had a question on the preferred race. uh mark you said bermuda is one of your strengths can you share your vision on how core bridge could optimize capital further through sessions to your affiliated bermunion entity and what the shorter term capital needs are i'm just curious if you could support future capital needs through organic capital generation um or be since preferred as a new category for you for rating agency purposes would you envision any other type of hybrid debt raising Yeah.

So, Tracy, maybe I'll start and, you know, Elias may want to add some more detailed colors. So at a high level, you know, we will and we always strive to deliver on our guidance, right, which includes obviously the free cash flow generation of 60 to 65 and obviously the return through dividends and buybacks associated with that. So whatever, you know, kind of capital management activity we have, we do so against, you know, obviously delivering on that guidance. Obviously, Bermuda, as we and others use, is a good, obviously, capital management kind of optimization approach, and obviously, Elias and one of your colleagues were discussing that earlier. We will continue to look at our business and optimize it from a capital management perspective and the cash flow and economics underlying it, and Bermuda will be a very important component of that and it will continue to be in the future.

How we manage the overall capital profile of the business and leverage as well, we have, obviously our stated objectives there which we uh we uh you know we try to manage against judiciously so and how we go about it i think we'll uh you know will be something we're always thoughtful about as we move forward so i don't know if elias has anything to that no i agree with everything mark says and i tracy i point you to 2024 and 2025 where we in each year we hit record sales and we've increased the dividends from the insurance companies without the financial flexibility bermuda provides we would not have been able to accomplish that the other thing i just want to clarify uh tracy the uh bitcoin index that we've provided was an index annuity

not in the rila product oh thanks for clarifying for me and thank you for your answers thank you we have no further questions in the queue so this concludes today's corporate financial fourth quarter 2025 earnings call thank you all very much for joining and you may now disconnect