Earnings Call Transcript
Corebridge Financial, Inc. (CRBG)
Earnings Call Transcript - CRBG Q3 2025
Operator, Operator
Hello, and welcome, everyone, to the Corebridge Financial Third Quarter 2025 Earnings Call. My name is Becky, and I'll be your operator today. I will now hand over to your host, Isil Muderrisoglu, Head of Investor and Rating Agency Relations, to begin. Please go ahead.
Isil Muderrisoglu, Head of Investor Relations
Good morning, everyone, and welcome to Corebridge Financial's earnings update for the third quarter of 2025. Joining me on the call are Kevin Hogan, President and Chief Executive Officer, and Elias Habayeb, 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. Corebridge'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, Corebridge is under no obligation to update any forward-looking statements as 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.corebridgefinancial.com. With that, I would like to now turn the call over to Kevin and Elias for their prepared remarks. Kevin?
Kevin Hogan, CEO
Good morning, everyone, and thank you for joining. I'll start this morning by providing some context around the announcement we made on Friday. As you have seen, our CFO, Elias Habayeb, will be leaving Corebridge in April to take a senior leadership position at a publicly listed company that we do not consider a competitor. Elias and I have worked together for many years, and I know he will be missed at Corebridge. We've engaged a leading executive search firm and have begun a search process. We are pleased that there will be a 6-month transition period that will allow for Elias to oversee the completion and filing of 2025 financial statements and the finalization of the 2026 budget and business and operating plans while the search is underway. I would also note that one of Elias's important contributions as CFO of Corebridge has been building a very strong finance team that I am confident will support the ongoing execution of our 4 strategic pillars and our trajectory for continued growth. I know that this search will be one of Marc Costantini's top priorities when he arrives next month, and I am confident that he and the Board will select the right person for Corebridge's next chapter. We expect this to be a seamless transition. With that, let me turn to third quarter results. Corebridge delivered another quarter of solid performance with our diversified businesses generating the highest sales since the IPO, even as we further strengthened our balance sheet and once again delivered both strong earnings and an attractive capital return to shareholders. Our financial results as presented reflect our position after the previously announced variable annuity transaction with Venerable, which marks an important inflection point for Corebridge. Our company is now simpler, with a lower risk profile, higher quality of earnings and greater growth potential. Corebridge has been working since the IPO to strengthen every element of our value proposition. Our diversified business model is founded on a broad spectrum of products and services, distribution channels and market segments delivering diversified sources of income that enable us to generate sustainable cash flows and perform through various market cycles. Across our businesses, we are committed to deploying capital where the risk-adjusted returns are the highest and customer demand is the greatest. While our spread income is now a larger percentage of the whole, our sources of spread income streams themselves are diversified. We have a high-quality investment portfolio and minimal legacy liabilities. Our strong balance sheet provides us with financial flexibility to achieve our strategic objectives. We have maintained capital ratios of our insurance companies above their targets. And at $1.8 billion, including partial proceeds from the VA reinsurance transaction, we have more than ample liquidity at the parent. Finally, we continue to emphasize disciplined execution. The team at Corebridge has done an excellent job to date managing through a complex corporate separation, divesting our international businesses, launching our strategy in Bermuda, executing one of the largest VA reinsurance transactions to date, upgrading our technology and customer service capabilities and meeting or exceeding every financial target we set at the time of the IPO. It is a very strong foundation for continued success and shareholder value creation. Turning to Slide 4. Our results in the quarter once again demonstrate that we continue to execute on all 4 of our strategic pillars. First, we delivered strong organic growth with total premiums and deposits of $12.3 billion, reflecting ongoing strength in Individual Retirement. Sales of our RILA product were nearly $800 million in the third quarter and have topped $1.7 billion year-to-date. We are now the only company to have a top 10 ranking across all 4 major annuity product categories as measured by LIMRA. In October, we received regulatory approval to sell our RILA in New York state, one of the nation's largest annuity markets and one where we feel very well positioned. We remain on track to launch by the end of the year. In addition to our individual businesses, we had very strong performance in Institutional Markets in both GICs and pension risk transfer transactions. Overall, general account net inflows were $1.4 billion, up 27%, supporting general account growth of 6% year-over-year. Across all of our businesses, we remain disciplined in how we price new business, adjusting as market conditions evolve. For example, interest rates declined through the third quarter, prompting us to take rate actions to preserve margin. We generally respond quickly when conditions change, even at the risk of short-term production, and that discipline remains a hallmark of how we run the business. Our diversified business model gives us optionality to allocate capital to where it will earn the highest risk-adjusted returns. We are focused on growing earnings and being responsible with the capital that our shareholders have entrusted us with. Turning to our second pillar. We remain focused on optimizing our balance sheet and creating greater capital efficiency. The capital freed up by our transformative VA reinsurance transaction was significant. As we've said before, we continue to explore additional opportunities that would be value accretive. One example is expanding our Bermuda strategy, which is off to a great start with $18 billion of reserves ceded since inception. Third, we continue to focus on further improving our operating leverage, and we recently completed our voluntary early retirement program, which is creating capacity to invest in and upskill in key areas such as digital. By continuing to modernize our operations, we see ongoing opportunities to improve our customer and distribution partner experience, which is essential to growth and to further increase our operating leverage. Fourth and finally, we remain committed to active capital management. Year-to-date, we returned more than $1.4 billion to shareholders through buybacks and dividends. While our payout ratio over the period was 80%, reflecting the impact of the VA reinsurance transaction, our target payout ratio remains 60% to 65%. Reflecting on the market, the macro environment remains attractive. The need for people to take care of themselves financially by growing their assets and locking in secure retirement income is a powerful tailwind for our Individual and Group Retirement businesses. In Life Insurance, the large protection gap continues to represent a significant opportunity in those areas of the market where our advantages can drive attractive returns. In Institutional Markets, pension plan funding levels remain very strong, and plan sponsors are resolute in their intention to divest these liabilities. Corebridge is well positioned to capitalize on those trends, and we'll do it with the same commitment to strong financial metrics that you've come to expect from us, a 12% to 14% return on equity, an average 10% to 15% annual EPS growth rate over time and a 60% to 65% payout ratio, all while maintaining the Life Fleet RBC ratio above target. As I prepare to hand the reins over to Marc, I'm pleased to be doing so from a position of strength. Corebridge has market-leading businesses, a very strong balance sheet and robust opportunities for continued profitable growth. That's why I believe Corebridge remains a compelling investment proposition. With that, I'll turn the call over to Elias.
Elias Habayeb, CFO
Thank you, Kevin. I'll begin my comments today on Slide 5. Excluding VII and notable items, Corebridge reported third quarter adjusted pretax operating income of $678 million and operating earnings per share of $0.99. This quarter included one notable item that represented the charge of $98 million, resulting from the impact of our annual actuarial assumption update. At the total company level, the annual actuarial assumption update is expected to have a limited impact on the go-forward run rate earnings. The details by business are provided in the appendix to the earnings deck. Annualized alternative investment returns this quarter were $0.11 per share below our long-term expectations, with outperformance in private equity, partially offset by underperformance in hedge funds and real estate equity. Looking forward, we're beginning to see a pickup in M&A activity, which should benefit alternative investment returns. However, we're also seeing a continued lag in real estate equity performance. Accordingly, based on what we know today, we expect alternative investment returns for the fourth quarter will be below our long-term expectations of 8% to 9%. Adjusting alternative investment returns to long-term expectations and notable items, we delivered run rate operating EPS of $1.21, which represents a 6% year-over-year increase and an adjusted run rate ROE of 12.9%, which is up 70 basis points versus the prior year. Moving to Slide 6. Total sources of income increased approximately 1% year-over-year after excluding VII and notable items. Despite the 100 basis points of Fed rate cuts in 2024, spread income was down only 1% as business growth paired with asset optimization actions mitigated the headwinds. Fee income was up 7% year-over-year, primarily from favorable market, while underwriting margins were essentially flat year-over-year. Turning to Slide 7. I'll focus on our capital and liquidity positions. In the quarter, our insurance company distributions totaled more than $1.3 billion, including approximately $700 million of proceeds from our VA reinsurance transaction. Capital return in the quarter was a strong $509 million, including $381 million of share repurchases. Furthermore, since September 30, we have begun deploying the proceeds from the VA reinsurance transactions and have returned over $370 million to shareholders. Our holding company liquidity remains robust at $1.8 billion, well above our next 12-month needs in large part due to undeployed proceeds from the transaction. With our Life Fleet RBC ratio remaining above target and our recent VA reinsurance transaction generating significant distributable proceeds, you can expect to see elevated levels of share repurchases in the coming quarters, pursuant to the $2 billion increase to our share repurchase authorized by the Board in June. 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. Additionally, while we remain focused on prudently managing our expenses, we did see a short-term increase across all segments, resulting from higher compensation-related expenses, consistent with our prior guidance as well as a one-time medical expense accrual. In Individual Retirement, core sources of income were flat year-over-year as the impact of Fed rate actions was partially offset by strong growth and asset optimization. We saw continued strength in new business. Index annuity sales were at an all-time high and RILA sales continued to grow reflecting strong customer demand and the benefit of our deep distribution network. Net flows were up 13% year-over-year, mostly driven by higher index annuity and RILA sales. Adjusted pretax operating income declined by 9% year-over-year. The biggest driver was higher DAC amortization and commissions, reflecting several factors, including growth in the business. Higher fee income and lower base spread income offset each other as a result of market movements over the past year. Group Retirement results in the third quarter demonstrate the ongoing transition from a spread-based to a fee-based revenue stream. Core sources of income grew 1% as fee income increased 4.5% year-over-year, while base spread income declined by 4%. Overall, fee income now accounts for approximately 60% of Group Retirement's core revenue. Adjusted pretax operating income increased 1% year-over-year as higher fee income offset lower base spread income. While assets under management and administrations were flat year-over-year, advisory and brokerage assets continued their strong growth and were up 9% year-over-year to a new record high. Premiums and deposits excluding advisory and brokerage were down 10% year-over-year, reflecting previous plan exits and lower out-of-plan fixed annuity sales. As we look ahead, we're making considerable investments in the business to upgrade the quality of our in-plan services and further build up our wealth management offerings, which should increase enrollments and rollover recaptures. To that end, our adviser headcount is the highest it's been in 2 years, and our adviser productivity is up 10% year-over-year, both supporting our growth initiatives. We expect our growing number of financial advisers as well as their increased productivity to be a positive earnings driver for Group Retirement in the future. In our Life Insurance business, core sources of income were flat year-over-year. Adjusted pretax operating income was down 8% year-over-year largely due to some one-time costs related to systems conversion and higher expenses mentioned earlier. Mortality continues to trend favorably, demonstrating strong underwriting on the block. Adjusting for one-time items, this quarter's Life adjusted pretax operating income was $115 million, in line with our previous guidance. We continue to believe this business will generate earnings of $110 million to $120 million per quarter other than in the first quarter, which typically has higher mortality. While new business sales were down 6% year-over-year, we grew our fully digital senior life products by 19%. In Institutional Markets, we had the strongest sales quarter since the IPO with both PRT and GIC showing exceptional growth. This was the sixth consecutive quarter with GIC issuances in excess of $1 billion. The outlook for PRT transactions remains promising, both for the fourth quarter and longer term as pension plans in the U.S. and the U.K. have continued appetite for derisking as planned funding levels remain very strong. That said, given the nature of PRT transactions, you can expect some continued variability in quarterly volume. Total reserves grew by $8 billion or 19%. Core sources of income were up 5% year-over-year, while adjusted pretax operating income was up 3%. Before I close, I wanted to provide a few thoughts on the state of the market and credit, in particular. Currently, the Fed has begun its easing cycle, so short rates are moving lower, and the curve is steepening. With that, you have credit spreads at the tight end of the range and defaults remain relatively low. In addition, there's been recent headlines about increasing signs of pressure in the broadly syndicated loan market. We believe these events are idiosyncratic, and we have negligible exposure to those names. The current market environment is factored into both our asset allocation and our asset and liability management strategy. We focus on liability origination and originate assets that are predominantly high quality and fixed rate to match those liabilities. Floating rate assets along with derivatives play a smaller and specific role in our duration management. Floaters can also offer incremental value and diversification. Given the tightness in spreads, we prefer higher quality assets that provide collateralized cash flows with credit enhancement and/or covenants rather than lower quality unsecured or idiosyncratic risk. In the context of our broader investment portfolio, it remains resilient and well positioned to manage through volatility. The portfolio is 95% investment grade and is highly diversified among asset class, industrial sectors and geographies. In the third quarter, our portfolio continued to experience positive rating migration for bonds and commercial mortgages. We also have a deeply experienced credit team that operates in a highly rigorous and iterative underwriting process with multiple levels of approvals and ongoing monitoring and proactive portfolio management. We underwrite through the cycles and focus on capital preservation and risk of loss. In terms of the broader balance sheet, we carry moderate leverage, a comfortable liquidity position and access to the capital markets. We regularly run various stress tests of our capital and liquidity positions and remain comfortably within our risk appetite. I also want to provide a reminder about our earnings trajectory over the next few quarters. We published a revised financial supplement that recasts Individual Retirement's VA earnings below the line going back to the first quarter of 2024. As we have said previously, we expect the VA reinsurance transaction to be accretive to the pre-recast EPS by the second half of 2026 once we complete the share repurchases funded by the proceeds from the transaction. Due to timing, EPS over the next few quarters will be lower than they would have been if we had deployed the proceeds on day one. Additionally, similar to 2024, any Fed rate actions are expected to have a short-term impact on spread income as we expect to mitigate the effects through growth in the business, asset optimization and other management actions. Finally, as you know, this is our last earnings call with Kevin as CEO. I want to take this opportunity to thank Kevin for his friendship, guidance and leadership. The value Corebridge has created for shareholders on his watch has been truly outstanding, and I'm deeply honored to have worked with him. With regard to my announcement, I have worked at Corebridge and AIG for over 20 years, and it's been very gratifying both on a personal and professional level. I'm pursuing an opportunity that I believe is the right next chapter for me. I can't disclose details at this time, but an announcement will be made in due course. I'm very proud of the finance team we have built at Corebridge, and I am committed to ensuring a smooth transition for the benefit of the team, all my Corebridge colleagues, our incoming CEO, my successor and our shareholders. With that, I will turn the call back to Isil.
Isil Muderrisoglu, Head of Investor Relations
Thank you, Elias. Operator, we are now ready to begin the Q&A portion of the call.
Operator, Operator
Operator Instructions. Our first question comes from Joel Hurwitz from Dowling & Partners.
Joel Hurwitz, Analyst
And first, I just want to wish you both the best in the future. In terms of my questions, I wanted to start on Individual Retirement and the base spread yield. Could you just unpack the drivers of the 7 basis point decline quarter-over-quarter?
Elias Habayeb, CFO
Yes, happy to, Joel. So listen, as we've said before, we expect spread income in Individual Retirement to grow over time and that hasn't changed. We do expect some marginal compression for the dynamics we talked about in the past with the differential between the spread on new business versus in-force, and that we expect to be marginal. Based on what we know today, factoring in the latest outlook on rate cuts, we expect that to go through the end of '26 and level off and potentially start growing from there. Now when you come to this quarter itself, the base spread compression due to the dynamics we've explained is in the 1 to 2 basis points. But with the VA transaction that we did, that we closed on the Texas side, which is about 90% of it, we had to reallocate the assets to come up with a portfolio that we transferred to the other side. That's kind of creating noise, and it's a one-time impact of about 5 basis points. And that kind of level sets a new baseline where to measure compression going forward from.
Joel Hurwitz, Analyst
Got it. That's helpful. That makes sense. And then Elias, in your prepared remarks, you mentioned considerable investments in the group business for, I think, in-plan guarantees and in wealth management. Can you just elaborate on the level of expected spend there and what exactly these investments are?
Kevin Hogan, CEO
Yes. Joel, it's Kevin. Look, I mean there's a couple of areas we're investing in the Group Retirement business. On the in-plan business, we continued to invest in our automation and digitization initiatives, improving the customer and participant experience there. In terms of the wealth management, it's really growing the adviser force and professionalizing the adviser force. We've been investing in increasing the footprint of the advisers, serving both the in-plan and the out-of-plan opportunity. To a certain extent, we're expanding our product and service shelf to cater to the needs of that, what we call wealth management, which is serving the former in-plan participants in the out-of-plan area. We're not putting a particular number on the investments that we're making. This is part of the opportunity that we have to continue investing in the growth of the business. We've seen the results from it. Our advisory and brokerage assets are up 9% year-over-year to a new record of $17.6 billion. Our out-of-plan assets have reached $28.8 billion. Between the in-plan fee business, the out-of-plan business, and the advisory and brokerage that makes up our wealth management platform, it's a big earnings base of $108 billion in assets, which is up 2% year-over-year. So we're seeing green shoots, but we continue to invest in the business.
Operator, Operator
Our next question comes from Alex Scott from Barclays.
Taylor Scott, Analyst
Best wishes in your next phase here. I guess my first question is on the private credit. I know you gave some comments already. But I was just interested if you could provide a little more color around some of the metrics like how much of your bonds are what you would consider private credit or any commentary on the way that you have those rated and which of the rating agencies you use? Just trying to get a little more color on some of the concerns that are more broadly out there on private credit.
Elias Habayeb, CFO
Alex, it's Elias. Yes, private credit is a broad category for us; it includes private placements, which insurance companies have developed over the years and is currently around $30 billion in size. About 90% of it is investment grade. We typically rely on the major rating agencies for assessments. The portion below investment grade is relatively small, primarily consisting of middle market loans, which totals around a $3.5 billion portfolio. This portfolio was originated some time ago and is performing well within its asset class. Although we have noticed some deterioration, it remains within the expected yield, and we do not anticipate any principal loss.
Taylor Scott, Analyst
Got it. Can you also talk about just the competitive environment for pricing on the retail annuities that you're selling and how the trade-off between volume and spread is expected to translate into absolute earnings growth in spread over the next couple of years in that business?
Kevin Hogan, CEO
Yes, sure. Thanks, Alex. Look, I mean, first of all, the demand for annuities remains robust, and the belly of the curve and the forward suggests it's going to remain supportive, even while the short-term sort of rate outlook is a little uncertain. The long-term macro drivers are there with the aging of the population and the supportive adviser community and people realizing they need to look after themselves. Once again, in the third quarter, we saw conditions that were quite supportive. Rates did come down during the quarter. Thus, we repriced our fixed annuities and indexed annuities several times in response and also actively managed our in-force crediting rates. We still saw very strong opportunities in indexed annuities, especially those with income benefits where we had a second successive record quarter. RILA was also very strong, at $800 million across the company, $650 million in Individual Retirement, which continues to be very well received in the market. We just got our approval to launch in New York, which we believe is, if not the largest, one of the largest annuity markets in the country, which we expect before the end of the year. So that momentum will continue. Fixed annuities is the most immediately sensitive business. While it was a little lower, we still produced $2 billion, which is quite strong. We will continue to be disciplined in allocating capital where the risk-adjusted returns are the highest. In the second half of the quarter, we saw compelling opportunities in Institutional Markets, including in pension risk transfer, where we concluded $1.5 billion, plus we remain a regular GIC issuer with our sixth quarter in a row over $1 billion. We're comfortable with our overall position. The environment remains competitive, but we have tools by which to respond. Individual Retirement is one of our spread businesses, but Institutional Markets is another one. Above all, we remain confident in growing both our enterprise and our individual retirement general account and spread income over time. Fed actions will present occasional short-term headwinds. But we expect spread income to continue to contribute to our EPS growth targets over time.
Operator, Operator
Our next question comes from Jack Matten from BMO. We currently aren't getting any response from this line. So we'll move on to our next question from Tom Gallagher from Evercore ISI.
Thomas Gallagher, Analyst
Can you guys hear me?
Isil Muderrisoglu, Head of Investor Relations
We can, Tom.
Thomas Gallagher, Analyst
Okay. Great. So I just had a few questions on the Group Retirement business. First one is just on how do I think about the surrenders and then how much you're capturing in your wealth management business. If I look at the numbers, in-plan, it's about 5% annual decay. When you factor in how much you're retaining on the wealth management piece as you're capturing some of the outflows, how much would that shrink the 5% annually? How do I think about that as kind of a go-forward organic growth number when you add those 2 pieces in?
Kevin Hogan, CEO
So Tom, on the in-plan business, the average age of the participants exceeded 59.5 about 10 years ago. So there's kind of a natural outflow on the in-plan part of the business, which is consistent with what I think the entire defined contribution industry has been experiencing. That's to a certain extent what you're seeing in the transition of the portfolio from spread income to fee income over time. That is the trend that we expect to continue. As I mentioned, we're investing in the footprint of the adviser base to support both the in-plan and the out-of-plan businesses, and we do expect that to be a gradual transition as we shift to more of the fee income businesses. This trend has been happening in the 403(b) space for some time. If you go back 10 years ago, most new customers were rolling into or investing in a 403(b) type of a program, whereas that shifted to the group mutual funds. Over the last couple of years, we've seen a transition from the group mutual fund entry platform to the advisory platform. There's a natural trend there that the in-plan business is gradually going to be replaced by the out-of-plan business. We haven't published a number on our recapture rate, but it is a very successful part. You can see that in the growth of the advisory and brokerage assets, which are up 9% year-over-year. I'll just briefly touch on the larger surrenders. The larger surrenders that we saw continue to be in the health care space. There's a lot of consolidation going on there. Those are generally episodic. If there's a merger where our plan is the smaller of the 2 plans, those are ultimately consolidated. We don't know if that takes 2 or 3 years from the time of the merger, but we do try to provide an announcement when we learn about those. Those are generally the group mutual fund platform, which has a smaller impact on earnings than the 403(b) part of the business.
Thomas Gallagher, Analyst
My follow-up is just I recognize both of you are going to be transitioning out. But I'm curious about your view of the strategic importance of VALIC within Corebridge. On one hand, I think it's a great franchise within the 403(b) market, has its stand-alone legal entity. But on the other hand, it shrinks organically, and I recognize there's some offset there from the wealth business. But is this something that would be under consideration of potential divestiture if you got a great price on the asset? Or do you think that's a long-term keeper when you think about within the broader franchise here?
Kevin Hogan, CEO
Well, Tom, my personal opinion, and I think that this is something that is fully supported by the Board as well as the executive leadership of the company is that the retirement services, Group Retirement business is an extremely valuable strategic asset. The differentiating aspect of the value proposition of that business is VALIC Financial Advisors, which is our field force of financial professionals that support these customers through their working period and have the opportunity to develop a relationship with them and continue to serve them and their families after they retire at the time of household asset consolidation, where the real opportunity in the wealth management piece of that business has been. There are 1.9 million customers in this business; 1.6 million of those customers are still in-plan only customers and therefore represent a future opportunity for that out-of-plan capability that we're enhancing through the investments we're making in both the adviser force and the platforms to support the adviser force. So this trend in the transition from a spread to a fee-based business is something that is going to take place over a longer period of time, but the strategic opportunity for this business is absolutely enormous, driven by the unique value proposition of VALIC Financial Advisors. It was over 6 or 7 years ago we made the decision to double down on the role of the human adviser. Therefore, we have been focusing on plans that want our advisers on site and engaged, and that's what gives them the opportunity to develop those relationships. I look straight past the short-term financial transition that's taking place, and I look at the bright future strategic opportunity of this business as a tremendous asset for the company.
Elias Habayeb, CFO
And with that transition, Tom, this is Elias. I like to add on. You're improving the free cash flow conversion profile of the company over time by shifting earnings to more of a capital-light or fee-based stream from a balance sheet-heavy general account basis.
Operator, Operator
Our next question comes from Jack Matten from BMO.
Francis Matten, Analyst
First question on Institutional Markets. It was a strong new business quarter not just for PRT, but also GICs and corporate markets. I guess those non-PRT businesses, can you talk about what's driving your growth there, what you like about those products and what you're achieving from a spread margin standpoint?
Kevin Hogan, CEO
Well, in Institutional Markets, the main businesses are the guaranteed investment contracts and the pension risk transfer. We manage those as we do any of our spread businesses relative to a target margin. There's also the other businesses in Institutional Markets include the BOLI business and the COLI business, which includes insurance COLI, which is kind of similar to the BOLI business. Occasionally, we also have transactions in that space. There's been an increasing demand for insurance COLI that we've recently observed, and we are a participant in that market. Those are the 3 main areas. We have a modest structured settlements business that has grown incrementally. Where we see the future of this business is in the GICs and in the pension risk transfers. In pension risk transfers, we focus on the full plan termination space, we have for almost 10 years now, and we've built specialized capabilities there. Full plan terminations are a subset of the overall PRT market, but the pipeline for full plan terms is very strong in both the U.S. and the U.K. This is a significant part of the upside we see in the business.
Francis Matten, Analyst
Got it. And a follow-up is on cash flow. I guess first part just on the timing of incremental dividends from the VA transaction. When do you expect to get the remainder of those up to the holding company? And the second part is on the, I guess, $600 million or so of maybe underlying dividends ex those additional proceeds. Is that still a good run rate to think about moving forward? Or would you expect a near-term kind of step down just from the VA transaction?
Elias Habayeb, CFO
Jack, it's Elias. With respect first to the proceeds from the VA transactions, we expect to take those distributions out of the insurance companies over a couple of quarters. We had $700 million in September, we'd look to another piece in December and then another piece early next year on that front. With respect to the $600 million, that's been our run rate. It will step down a bit, given the change in the distributable earnings profile of the insurance companies. That being said, we can expect to continue to grow it over time to deliver on our 60% to 65% payout ratio.
Operator, Operator
Our next question comes from Ryan Krueger from Keefe, Bruyette, & Woods.
Ryan Krueger, Analyst
You had mentioned that you took actions to mitigate some of the short-term rate headwinds over the last year or so. Are you seeing any existing opportunities now given the Fed has begun a rate cutting cycle again? Or do you view that as more opportunistic in the future?
Kevin Hogan, CEO
Well, Ryan, let me just start. I mean we're sort of managing in 2 different areas. I think you maybe are asking about 2 different things. Let me start about what I mentioned in terms of managing the pricing of the product. That's more driven by where the belly of the curve is, the 5- and 10-year part of it, not so much the short-term Fed actions.
Elias Habayeb, CFO
Yes, Ryan, we manage our balance sheet with discipline, particularly from an asset-liability management perspective. We will adjust our net floating rate exposure as we observe changes on the liability side, which has decreased by over 50% since June 2024. This is something we monitor closely and will continue to reduce when opportunities arise, considering the outlook. Our approach to managing the balance sheet involves consistently looking for ways to optimize it and enhance our return on capital. You can see our track record since the IPO reflects that we have taken steps on the asset side to improve returns, which also helps mitigate the effect of rate cuts on earnings. Our spread income remains flat year-over-year, partly due to our actions on the asset side and growth in the portfolio. Looking ahead, we expect rate cuts to be a temporary hurdle, but we have the tools to navigate through it and anticipate growth in spread income over time, backed by strong fundamentals in our spread products. We offer these products across three of our businesses and have the flexibility, similar to what we demonstrated in the third quarter, to focus on the most attractive returns and allocate our capital accordingly.
Ryan Krueger, Analyst
In the Life Insurance business, it's performed pretty well over time, but there's also been a robust market for in-force reinsurance transactions. Is there anything within that business that you see as a potential opportunity when it comes to potential risk transfer?
Elias Habayeb, CFO
Well, when it comes to risk transfer, Ryan, we are always actively seeking opportunities to increase shareholder value and optimize the portfolio. With respect to the Life business, we have repositioned this business substantially over the last couple of years to focus on less interest-sensitive businesses and more middle market. We've invested a lot in our automated underwriting and our digital platforms, and we're very pleased with the performance there. We did move a substantial amount of life reserves into Fortitude Re when we created it a number of years ago before divesting that. We continue to look for opportunities across the portfolio, whether that's in the form of our Bermuda strategy, external reinsurance or potential external transactions. Above all, we're very pleased with the performance of the Life business. We've invested a lot in our underwriting capabilities over the years, and our mortality has continued to actually emerge at or better than pricing expectations, and we have a very healthy in-force that we expect to continue to contribute at the level of earnings that we had earlier guided to the $110 million to $120 million a quarter except for the first quarter, which is always a little bit lower.
Operator, Operator
Our next question comes from Elyse Greenspan from Wells Fargo.
Elyse Greenspan, Analyst
My first question is on capital return. Elias, I think you said you guys returned $370 million Q4 to date. I'm assuming that's just repurchases and that ignores the dividend, correct me if I'm wrong. And then is that the pace that we should think about for capital return for the rest of the quarter?
Elias Habayeb, CFO
Elyse, it's Elias. So that number, you're correct, is only share repurchases. We expect to return a higher amount of capital in the fourth quarter. Given the distributions on the VA proceeds we got in September, I would not take the October number and extrapolate it as if it's all going to be at the same pace. It'd be a bit more front-loaded in the quarter, but it will be less than this run rate.
Elyse Greenspan, Analyst
And then I guess my second question is a follow-up on private credit. It seems like you guys are comfortable with the allocation given Alex's question earlier in the call. I'm just curious, there's lots of headlines just on regulation. Just if you have a view on just the regulatory regime and the direction things are headed in and then just the overall allocation you guys have to private credit.
Elias Habayeb, CFO
No, happy to. Our investment strategy is liability-driven. We look at opportunities where we could get attractive returns and where we can afford to have private credit; we pursue it. But we're very disciplined on the underwriting side. We're aware of what's developing on the regulatory front, and we're engaged with it. That kind of becomes a consideration if we think there's a risk on how we allocate capital. At this point, our strategy, we're comfortable with it. We understand the potential implications on the regulatory side. Based on what we know today, we don't think it will have a material impact or materially change what we've been doing.
Operator, Operator
Our next question comes from Suneet Kamath from Jefferies.
Suneet Kamath, Analyst
Congrats to both of you. I wanted to come back to risk transfer because, Kevin, in your prepared remarks, you had mentioned that you're open to it. But sort of in a follow-up to Tom's question. You do have a new CEO coming in. You do have a new CFO eventually coming in. Is it fair to assume that you're probably not going to do anything major until those 2 seats are filled and those folks have a chance to look at the overall strategy? Or is that not the right way of thinking about it?
Kevin Hogan, CEO
Look, I would draw your attention to my prepared remarks relative to the transition. We have a very strong foundation in place. We have a strong team. We have a track record of execution. I'm looking forward to welcoming Marc. Elias is here for 6 months through the transition. I'm going to change my role to be an adviser to the Board for 6 months. We're looking forward to a very smooth transition process.
Elias Habayeb, CFO
And Suneet, they're not letting me take a garden leave. I expect to be working the full 6 months.
Suneet Kamath, Analyst
Got it. Okay. I'm sorry to hear that. Regarding Bermuda, how should we think about it? Over the long term, I'm not referring to the near term; will this eventually enable you to enhance your free cash flow conversion ratio, or is it more about the ability to grow faster due to optimized capital?
Elias Habayeb, CFO
Suneet, the way I look at it is it gives us financial optionality. With that optionality, we'll evaluate what's the best utility of that optionality and how we maximize shareholder value, and we'll allocate our capital accordingly.
Kevin Hogan, CEO
Yes. Just following up from that, I mean, it really gives us potentially as we further grow and develop our Bermuda strategy, the option to do both. I think that is ultimately what a mature Bermuda strategy that leverages all the capabilities associated with that will lead us to.
Operator, Operator
Our next question is from Cave Montazeri from Deutsche Bank.
Cave Montazeri, Analyst
My first question is thank you for the insights on the credit portfolio; they are very valuable. I'd like to follow up on your point about being well diversified by sector. Can we also expect that your private credit is well diversified from a sector perspective? Are there specific sectors where you have a greater exposure, for example, any outside exposure to the auto sector?
Elias Habayeb, CFO
On the private credit side, the majority of our exposure is investment-grade private placement, and that's kind of diversified across sectors from there. We follow the same kind of principles on private credit as we do kind of overall allocation to credit in general. It's a fair assumption that the private credit portfolio is similarly diversified as the overall portfolio.
Cave Montazeri, Analyst
Great. My follow-up question is on PRT. Obviously, quite a lumpy business. I think it's the only business you have left that's international after the repositioning of the business. Are you still comfortable retaining an international exposure when it comes to PRT? Or would that eventually become a U.S. business only? And what is kind of the near-term outlook for PRT?
Kevin Hogan, CEO
Thanks, Cave. Our U.K. business is a reinsurance business, and reinsurance is, to a certain extent, a global business. We can use our U.S. balance sheet as we do in the U.K. for PRT as a reinsurer for other potential international opportunities, and that is something that we have an opportunity to explore and expand. We don't have any admitted international operations, but that doesn't mean we don't retain the expertise and interest in growing in international markets in the form of reinsurance. Regarding pension risk transfer, the opportunity is extremely robust. As per my prepared remarks, pension plans are attractively funded. Companies are very interested in no longer being fiscally responsible or fiduciarily responsible for those plans. Management teams are committed to exiting those liabilities. There's a subset of the pension risk transfer market, both in the U.S. and the U.K., which is in a single negotiated transaction where a company can go through multiple stages of exiting a plan. That's called a full plan termination. We are a specialist in that part of the market. There are fewer competitors in that part of the market, and we find the economics more attractive as a result. We've built the administration capabilities to manage the complexity of those plans for active and deferred populations, in addition to retirees. We've invested in the underwriting resources to have the expertise in managing the liabilities. We have an excellent position in that business. The pipelines are extremely strong in the U.S. and the U.K. The economics are attractive, and we remain very well positioned. We're extremely optimistic about the pension risk transfer position that we have.
Operator, Operator
Our next question comes from Wesley Carmichael from Autonomous.
Wesley Carmichael, Analyst
First question, in Individual Retirement, and I guess it's a question on margin. But for your fixed indexed annuity portfolio, is there an opportunity there to adjust crediting rates via caps and participation rates? I guess, relatedly, we're hearing from some in the market that there's some higher competition for FIAs where it's tied to the S&P 500. Curious if you're seeing that as well.
Kevin Hogan, CEO
Look, the entire individual retirement market is a competitive market. We're seeing competition, I think, everywhere. I don't think it's any heightened in indexed annuities or fixed annuities or RILA. It's an active and competitive space. Through a combination of the very strong distribution relationships we have, the historical product creativity that we've been able to manage, and the discipline with which we manage our new business pricing, we continue to produce attractive new business there. As I mentioned in the index annuity, we're definitely focused more on the income benefit aspects of that part of the portfolio. We have a broad range of index products as well as our other products, and we work with a variety of distribution channels, which helps us overcome some of those market competitive considerations. We're very comfortable with the overall position in the individual retirement businesses, whether that's our index business, our RILA, which is performing very well, or the fixed annuity business, which is a little more sensitive to external conditions, and we are thus able to respond quickly when there are pricing changes in that environment.
Wesley Carmichael, Analyst
And just a follow-up. But on longer-term guidance, I think you talked about a long-term EPS growth guide of 10% to 15% or something in that range. Just curious if anything has changed there. I know there's quite a bit of buyback that probably supports 2027. But if you think underneath the surface, when you think about rate, long term, short term, anything that's changed your view in that respect?
Elias Habayeb, CFO
Wes, it's Elias. Listen, we still think the 10% to 15% average annual growth is the right guidance for the company. This will be driven by growing earnings as well as share repurchases. Some years will be higher, some years will be lower, but we think that's still the right target for this company. I think it's a pretty attractive target to be able to deliver 10% to 15% on average. It will be influenced from time to time by different factors, some outside our control, but the things we're focused on are accretive to achieving that target, whether it's on organic growth, balance sheet optimization, expense discipline, capital management, all those things, the stuff we control will be accretive to that target.
Operator, Operator
This concludes our Q&A session for today. So I will hand back to Kevin for closing remarks.
Kevin Hogan, CEO
Thank you, operator. This is my last earnings call, so I would like to share a few thoughts. In a career spanning 4 decades, it has been the honor of my professional life to serve Corebridge as CEO. I am very proud of our executive leadership, the ladies and gentlemen of Corebridge, and also our partners, and especially of the value we have created for Corebridge's stakeholders. Our employees now work for a strong independent company with significant upside career potential. Our customers and distribution partners can rely on our commitment to innovation, modernization, and professional service. We work hard to give back to the communities in which we operate. Our shareholders have seen the value of their investment in Corebridge appreciate. Going forward, I'm confident the company is in very good hands with Marc Costantini, who can build off the strong foundation we have set in place. We look forward to introducing him to all of you soon. I've received a lot of notes from folks; I'd like to thank you for your wishes. Thanks to everyone again, who joined us for the call. Have a great day.
Operator, Operator
Thank you. This concludes today's call. Thank you for joining us. You may now disconnect your lines.