Greetings, and welcome to the F&G Annuities & Life's Third quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Lisa Foxworthy Parker, Senior Vice President Investor and External Relations. Thank you, you may begin.

Great, thanks operator, and welcome everyone to F&G's third quarter 2023 earnings call. Joining me today are Chris Blunt, Chief Executive Officer, and Wendy Young, Chief Financial Officer. We look forward to addressing your questions following our prepared remarks. Today's earnings call may include forward-looking statements and projections under the Private Securities Litigation Reform Act, which do not guarantee future events or performance. We do not undertake any duty to revise or update such statements to reflect new information, subsequent events, or changes in strategy. Please refer to our most recent SEC filings for a discussion of the factors that could cause actual results to differ materially from those expressed or implied. This morning's discussion also includes non-GAAP financial measures that we believe may be meaningful to investors. Non-GAAP measures have been reconciled to GAAP where required in accordance with SEC rules within our earnings release, financial supplement, and investor presentation, all of which are available on the company's website. Today's call is being recorded and will be available for webcast replay at fglife.com. It will also be available through telephone replay beginning today at 1:00 PM Eastern Time through November 22, 2023. And now, I'll turn the call over to our CEO, Chris Blunt.

Good morning, and thanks for joining us today. I'm pleased to announce another set of strong results for the third quarter as we continue to execute on our diversified growth strategy while maintaining a disciplined and balanced capital management process. I'd like to recognize and thank our team for all that they have done to deliver record growth sales in the first nine months of this year, which have in turn generated record assets under management and an adjusted return on assets excluding significant items that is well above our expectations. All of this while pursuing opportunities to further grow assets, expand our future profitability, and deliver long-term value for our shareholders. Starting with year-to-date results, we have generated record growth sales while maintaining pricing discipline and executing on our flow reinsurance strategy. Growth sales were $9.1 billion for the nine months ended September 30, up 7% over $8.5 billion in the prior year. Year-to-date retail growth sales were $7 billion, up 17% over the prior year period. Institutional sales were $2.1 billion, comprised of $1.2 billion of pension risk transfer, and $900 million of funding agreements. We are on track to deliver 2023 annual growth sales of between $12 and $13 billion in line with our stated goal of growing at a double-digit clip. Our net sales were $6.7 billion in the first nine months of the year. On an annualized basis, this places us well above our stated goal of managing net sales retained above the $6 billion to $7 billion annual level that continues to grow our retained assets under management. Next, looking at third quarter results more closely. Coming off record sales in the first half of the year, retail sales were intentionally lower in the quarter as we finalized our reinsurance agreements and enhanced product features to position us to finish strong in 2023 and create momentum for 2024. Within this market environment, we've seen a sharp uptick in submitted annuity premium in September and October, which positions us for strong growth in annuity sales in the fourth quarter. Growth sales were $2.8 billion in the third quarter, a decrease of 3% from the prior year quarter, and down 7% from the sequential second quarter. Retail channel sales were $1.9 billion in the third quarter, a decrease of 17% from $2.3 billion in both the third quarter of 2022 and sequential quarter. Institutional market sales were $900 million in the third quarter, comprised of $500 million of pension risk transfers and $400 million of funding agreements. F&G's net sales retained were over $2 billion in the third quarter in line with the prior year and sequential quarters. In addition, and as expected, we have increased flow reinsurance to 90% of MYGA sales in September. Stepping back, we feel confident about finishing 2023 strong and being well-positioned as we move into 2024. The industry continues to report record annuity sales as consumers find annuities to be attractive solutions given their relatively higher rates, guaranteed growth, principal protection, and tax-advantaged accumulation and annuitization options. We are very proud to be ranked number one in customer satisfaction in this year's JD Power individual annuity study. We attribute this recognition to our deep distribution relationships and commitment to operational excellence in prioritizing improvements that matter most to customers and have the biggest impact on their experience. Also, we're excited to launch our new Registered Index Linked Annuity or RILA product through key broker-dealer partners in the first quarter of 2024. RILA is one of the fastest growing markets in recent years and we believe this further enhances our retail product suite, offering customers another way to gain access to market returns with downside protection. These factors together with the fourth quarter typically providing a healthy pipeline for pension risk transfer sales sets us up well for another record year of gross sales in 2023 and to continue growing gross sales at a double-digit pace in 2024. F&G has profitably grown its retained assets under management to a record $47 billion at September 30, assets under management before flow reinsurance with $53 billion, adjusting for the approximately $6 billion of cumulative new business seeded. Our investment portfolio continues to perform well and is well matched to our clean and stable liability profile. The portfolio is high quality with 95% of fixed maturities being investment grade. Credit-related impairments have averaged five basis points over the past three years, well below our pricing assumption and remain below that level in the third quarter. We continually evaluate opportunities for upside risk-adjusted returns and downside protection in our investment portfolio. Through our portfolio asset allocation, yield enhancement opportunities to maintain competitive positioning and floating rate portfolio interest rate hedge, about $9.5 billion or 20% of the portfolio is invested in floating rate assets, of which $8 billion are linked to the secured overnight financing rate or SOFR and are easily hedgeable. Notably, we have now hedged approximately $2.7 billion of floating rate assets, locking in about 213 basis points of incremental yield versus what was originally priced in. This translates to approximately 12 basis points of annual incremental investment margin above our pricing over the next three to five years. We expect to continue to evaluate hedging additional floating rate assets where beneficial and possible. Next, turning to F&G's recent Investor Day which was held on October 3rd and included a deep dive into our proven track record of profitable and diversified growth. We are pleased to see investor recognition of F&G's success as our market capitalization has increased from $2.4 billion at the time of the partial spin-off last December to approximately $4 billion today, and we feel our prospects are bright. During our Investor Day, we highlighted the strategic levers that the team is employing to create value for our stakeholders and which will benefit F&G as our majority shareholder. To recap, F&G sees future potential upside from the following areas: first, sustainable asset growth from our retail and pension risk transfer growth strategies. Next, margin expansion from three sources: enhanced investment margin opportunities, effectively managing operating expenses for operational scale benefit over time, and incremental fee-based earnings from accretive flow reinsurance and enhanced earnings power from owned distribution. Finally, we believe there is potential for F&G's share price to more fully reflect its core business performance and the accretive nature of its flow reinsurance and owned distribution strategies as they scale over time. Wendy and I look forward to providing updates and progress on these strategic initiatives and priorities in future quarterly earnings calls. Let me now turn the call over to Wendy Young to provide further details on F&G's third quarter financial highlights.

Thanks, Chris. We are very pleased with F&G's financial performance in the third quarter, and we continue to maintain strong capitalization and financial flexibility to successfully execute our growth strategy. Starting with our year-over-year increase, adjusted net earnings were $120 million or $0.96 per share for the third quarter of 2023 and included $114 million or $0.91 per share of investment income from alternative investments. Alternative investments' income based on management's long-term expected return of approximately 10% was $142 million or $1.13 per share. Last year, we reported an adjusted net loss of $12 million or $0.10 per share for the third quarter of 2022, which included $11 million or $0.09 per share of investment loss from alternative investments and $11 million or $0.09 per share of other net expense items. Alternative investment income based on management's long-term expected return of approximately 10% was $106 million or $0.85 per share. For comparison, adjusting for these significant items in both periods, adjusted net earnings were $148 million, up 28% from $116 million in the third quarter of 2022, and adjusted return on assets was 119 basis points as compared to 111 basis points in the prior year quarter. This $32 million increase in adjusted net earnings and eight basis points increase in ROA was generated by $56 million or 24 basis points from higher product margin over the prior year driven by asset growth, floating rate asset uplifts, and disciplined pricing, and $14 million or seven basis points increase from credit flow reinsurance, which includes expense allowance reimbursement partially offset by $34 million or 21 basis points decrease from higher expenses related to higher interest expense in line with our capital markets activity and higher operating costs in line with our growth in sales and assets and continued investments in our operating platform, and $4 million or two basis points decrease from our annual actual assumption updates and others. Excluding significant items, adjusted return on equity, excluding AOCI, was 10.5% in the third quarter as compared to approximately 9% in the third quarter of 2022. To recap, this quarter's performance not only builds on our proven track record, but also demonstrates progress toward our targeted value creation levels of asset growth, margin expansion, and enhanced earnings from flow reinsurance. Next, turning to owned distribution. As we said at our Investor Day, F&G is uniquely positioned to be a distribution consolidator. In the third quarter, F&G signed an agreement to acquire a majority ownership stake in an annuity IMO for approximately $270 million, which is expected to close in early 2024. This is our largest transaction to date and brings our cumulative deployed capital above $500 million. Looking forward, we see an opportunity to deploy another roughly $500 million in the next few years. Owned distribution generates a dividend stream from our ownership stake, providing for higher margins at a lower marginal cost of capital, which is expected to be accretive to ROE and drive multiple re-rating for our F&G share price over time. Now, turning to our balance sheet. We ended the third quarter with a GAAP book value excluding AOCI of $5.4 billion or $43.30 per share with 125 million common shares outstanding as of September 30. This reflects a 6% increase over the sequential quarter. There is a page in our investor presentation providing an analysis of book value per share. F&G's debt to capitalization ratio excluding AOCI was 22% as of September 30, below our long-term target of 25%. Our interest expense has increased to $71 million or 21 basis points of ROA in the nine months of 2023 as compared to $23 million or eight basis points of ROA in the nine months of 2022, as expected in line with our capital markets activity over the last 12 months. Our annual interest expense remains approximately $95 million or roughly a 6% blended yield on the $1.6 billion of total debt outstanding. We continue to target holding company cash and invested assets at two times fixed charge coverage. Our strong capitalization supports growth and distributable cash. During the third quarter, we returned $27 million of capital to shareholders, including $25 million of common dividend and $2 million of share repurchase. In the third quarter, F&G repurchased approximately 82,000 shares for $1.9 million at an average price of $23.77 per share. F&G is well-positioned to fund its continued growth with positive and growing in-force capital generation, available debt capacity as our balance sheet delevers with book value growth over time, and ample opportunity for future reinsurance programs. This concludes our prepared remarks and let me now turn the call back to our operator for questions.

Thank you. We will now be conducting a question and answer session. Thank you. Our first question comes from the line of John Campbell with Stephens. Please proceed with your question.

Hey guys, good morning and nice work on the continuation of really great results.

Thanks John.

Sure. On the normalized ROAs, if we factor in the long-term alternative investment yield, we'd normalize that. I mean that's been creeping higher, I think 120 bits or so this quarter. At your Investor Day, Chris, I think you talked to expected degree of upwards pressure over time. Nothing meaningful, but maybe just some kind of upwards momentum. Are you still feeling confident about that and then maybe moving forward call it near to medium term, do you think you can hold near this mark or possibly keep moving it modestly higher?

Yes, I think it was a particularly good quarter, but it's the same drivers, right? So we've seen an uptick in short-term interest rates that's helped the floaters in the portfolio. We're getting a little bit of expense scale we would expect to get over time. And then as we've said before, we think it's quite accretive of some of the flow reinsurance deals that we've put in place. Lastly, Wendy mentioned some of the hedging we've done on the floaters trying to lock in some outperformance there. So yes, we still feel good about upside in terms of margin from here.

Okay, very helpful. And then, Chris, just maybe two more here. On the annual growth sales, you mentioned $12 billion to $13 billion. As we start doing the modeling for 4Q, I'm thinking PRT is probably the answer here. But what else should we consider for kind of the key swing factors from the low to high end of that range?

Yes, I think it's across the board. We're having a good fourth quarter in retail. Pipeline and PRT is usually quite strong in the fourth quarter, and that's the case here. So, I would quite frankly say we're probably going to be at the higher end of the range that we gave for annual sales.

Okay, that's great to hear. And then on the dividend, it was nice to see the 5% raise. You guys announced yesterday. It looks like you've got a lot of wiggle room. I mean, if I go up the last 12 months of the kind of normalized earnings I was talking to earlier, that $0.21 dividend is implying like a 19% payout ratio. I could probably get this later, but I'm hoping you guys might be able to shortcut it. What are your peers paying out typically from a payout ratio standpoint? And then thinking about it longer term, what do you guys feel comfortable as far as payout ratio might be concerned?

Yes, it's interesting. I don't know that we necessarily think about it that way because one thing that's just different from us from our peers is, one, we don't really have a legacy block that's running off. It's frankly all new business, and we're earning terrific returns right now in that new business. So, the primary source of capital return for us is going to be the dividend. We've said we believe it's sustainable. We believe it's something we can grow at a healthy clip going forward. So, I don't think anything changes with respect to that. We did also up the share buyback authorization, but that's more just because some of the limited flow, we've seen some volatility in our stock, and we wanted to make sure we had that lever available. I don't know, Wendy, if there's anything you want to add to that.

You hit all the key factors. A lot of the competitors' payout ratios often include larger repurchase programs. So, ours won't be as high.

Yes, I think part of that, again, to be clear, we hear this directly from investors is - hey, if you're generating the types of return you're generating for effectively taking investment-grade fixed income risk, which is how we think about the business, then we want you to continue to invest in the business. I think the point on the dividend is just, you know, it opens up a set of investors that obviously like a steady and growing dividend stream.

Yes, I agree with that. Makes a lot of sense. Thanks, guys.

Awesome, thank you.

Thank you. We have reached the end of the question-and-answer session. Mr. Blunt, I would like to turn the floor back over to you for closing comments.

Thank you. So, we're pleased, obviously, with our overall results, despite the uncertainty and volatility in the current macro environment. F&G remains poised to benefit from this higher rate environment and is well-positioned as we enter the fourth quarter and move into 2024. As we outlined in our recent Investor Day, we have clear levers to deliver enhanced results with a focus on asset growth and margin expansion, which we believe will drive multiple expansion and deliver value to shareholders. Thanks for your time this morning. We appreciate your interest in F&G, and we look forward to updating you on our fourth quarter earnings call.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.