Good morning, everyone, and welcome to F&G's First Quarter Earnings Call. This conference call is being recorded. I would like to now hand it over to Lisa Foxworthy-Parker, Senior Vice President of Investor and External Relations. Please proceed.

Great. Thanks, operator, and welcome, everyone. 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 p.m. Eastern Time through May 16, 2024. And now I'll turn the call over to our CEO, Chris Blunt.

Good morning, everyone. Thanks for joining us to discuss our first quarter results. I'm pleased to share that we're off to a terrific start in 2024, having delivered another strong quarter as we execute on our strategic initiatives. We continue to focus on our growth strategy, maintaining a disciplined and balanced capital management process and diversifying our earnings into more capital-light strategies over time. Starting with sales, we continue to see sustainable momentum across our multichannel new business platform and strong demand for our products in the volatile and higher rate environment. Coming off record sales in the fourth quarter, we reported gross sales of $3.5 billion in the first quarter, our second highest on record, which was up 6% over the first quarter of 2023, which was the third highest on record. Retail channel sales through our agent, bank and broker-dealer channels were $2.8 billion in the first quarter. We reported record fixed indexed annuity sales and lower multiyear guaranteed annuity sales, leading to a higher percentage of net sales retained as compared to the sequential quarter. We also began the rollout of our new registered index-linked annuity, or RILA product in the quarter, which we expect will become a significant contributor to sales over the next few years. In fact, industry RILA sales were nearly $45 billion last year, which is a record level. We believe our product offering is differentiated in the market and will uniquely meet the needs of a relatively younger demographic. Pension risk transfer sales set a new first quarter record at $584 million, reflecting a healthy pipeline out of the gate this year. As announced, we have crossed the $5 billion mark for cumulative pension risk transfer sales with over 100,000 plan participants. This milestone is especially impressive given our market entry was in mid-2021, just under three years ago. We rounded out gross sales with $105 million of FHLB funding agreements in the quarter. We continue to monitor opportunities to return to the market for funding agreement-backed notes or FABN issuances although conditions remain challenging in the first quarter. Net sales were $2.3 billion in the first quarter, reflecting accretive third-party flow reinsurance on 90% of our MYGA sales, in line with our capital targets. As a reminder, flow reinsurance generates fee-based earnings and frees up incremental capital to be deployed to the highest returning retained business. As noted, the higher interest rates have been driving strong product demand over the last few quarters while also leading to a higher level of indexed annuity surrenders. Fixed indexed annuity terminations are up over the prior year quarter as expected, although relatively in line with the fourth quarter of 2023. Our new business continues to well outpace surrenders, providing positive net cash flows and our in-force annuity account balance continues to steadily grow. As a reminder, for insurance companies like F&G, surrenders typically provide a boost to earnings from higher surrender charge fees and freed up capital from the policy lapse. Further, our record new business volumes effectively replace older contracts with newer contracts, having higher surrender charges and longer surrender periods, further improving the liability profile. We have profitably grown retained assets under management to a record $49.8 billion at March 31. This is an increase of $4.5 billion or 10% over the first quarter of 2023 and driven by net new business flows, stable in-force retention and net debt and equity proceeds over the last 12 months. Retained AUM was up nearly $700 million over the fourth quarter of 2023, primarily driven by net new business flows. AUM before flow reinsurance was $58 billion, adjusting for the approximately $8.2 billion of cumulative new business ceded. Looking ahead, we continue to target gross sales growth at a double-digit clip while managing net sales retained to a level that continues to grow our assets under management. I would also highlight that the new Department of Labor fiduciary rules have been released. We view the new structure as manageable and are prepared to make necessary compliance enhancements when they become effective. As a reminder, the industry has been monitoring this development over the past eight years and making enhancements to comply with the NAIC state-based best interest regulation. Our IMOs are very sophisticated firms and many have their own RIAs and broker-dealers. Approximately 21% of our total gross sales were from producers that do not have a registered license with 15% being from qualified accounts, which we expect will have the most impact. Overall, we do not expect the momentum in our business to be impacted, although we do worry that it will discourage agents from serving middle-market clients. Our investment portfolio is well diversified, actively managed through our selective derisking programs and well positioned to perform in varying market conditions. Importantly, our invested assets are well matched to our clean and stable liability profile. Our fixed income yield, excluding alternative investment volatility and variable investment income, has expanded to 4.56% in the first quarter as compared to 4.33% in the first quarter of 2023. This reflects upside from higher yields on new investments and floating rate assets. The portfolio remains high quality with 95% of fixed maturities being investment grade, and credit-related impairments were a modest 2 basis points in the first quarter. We have hedged nearly 60% of our $10 billion in floating rate asset portfolio due to the potential for interest rate decreases in the future. This is locked in about 185 basis points of incremental yield beyond what was originally priced in and translates to approximately 15 to 20 basis points of annual incremental investment margin above our pricing over the next three to five years. I'd like to put a brief spotlight on our $2.6 billion alternatives LP portfolio, which has performed extremely well since inception. The portfolio has generated an average historical return of 13%, comprised of return on investment, mark-to-market and return of capital, and returns have been less volatile than the S&P 500 Index. Since inception, we've received back nearly $1.3 billion or almost half the capital we invested since 2017, providing an approximate 7% yield on distributions alone. And we've experienced approximately 30% appreciation in the value of capital that we invested since 2017, including both distributions and residual value for the portfolio, which is expected to grow as the alts portfolio matures. Turning next to our results for the quarter. Excluding significant items, we delivered adjusted net earnings of $154 million, which generated an adjusted ROA of 125 basis points, and we reported an adjusted ROE of 11%. Notably, our ROA is above our 110-basis-point baseline that we shared at our Investor Day back in October. Wendy will get into the results more in a few minutes, but the quarter once again demonstrates that we are positioned to perform across market cycles and that we can consistently deliver strong results with attractive and expanding margins over time. We have plenty of momentum to continue to deliver sustainable asset growth from our retail and pension risk transfer growth strategies and ongoing margin expansion from enhanced investment margin opportunities, operational scale benefits and fee-based earnings from accretive flow reinsurance. We are also well positioned to diversify our earnings given the strong growth of our middle-market life insurance business and owned distribution strategies. Our strategic investment in owned distribution stakes will generate a meaningfully higher risk-adjusted return on capital than retained business and provides a diversifying source of earnings. Owned distribution further strengthens our relationships with key partners and with industry consolidation underway, we believe we are uniquely positioned to partner as a distribution consolidator. To date, we've invested $530 million, and we expect EBITDA for the portfolio to be $45 million to $50 million in 2024 with double-digit growth over the medium term. Wrapping up, I am very proud of our team's accomplishments. The business is hitting on all cylinders, and we remain focused on our strategic priorities, fulfilling the commitments we made in connection with our Investor Day and creating long-term value for all of our stakeholders. Let me now turn the call over to Wendy to provide further details on F&G's first quarter financial highlights.

Thanks, Chris. We are very pleased with F&G's overall financial performance for the first quarter. I'd like to point out before we get into our results that we've updated our quarterly financial supplement this quarter to highlight results from our core product margin, flow reinsurance fees and owned distribution, among other enhancements. Now starting with earnings. Adjusted net earnings attributable to common shareholders for the first quarter were $108 million or $0.86 per share and included $100 million or $0.77 per share of investment income from alternative investments and $6 million or $0.05 per share of CLO redemption gains and bond prepayment income. Alternative investment income based on management's long-term expected return of approximately 10% was $152 million or $1.18 per share. Adjusted net earnings for the first quarter of 2023 were $61 million or $0.49 per share and included $99 million or $0.79 per share of investment income from alternative investments partially offset by $37 million or $0.30 per share tax valuation allowance expense. Alternative investments investment income based on management's long-term expected return of approximately 10% was $132 million or $1.05 per share. For comparison, adjusting for these significant items in both periods, adjusted net earnings were $154 million in the first quarter of 2024, up 18% from $131 million in the first quarter of '23. This increase reflects asset growth and diversification of margin from accretive flow reinsurance fees and owned distribution margins, which were partially offset by an increase in interest expense due to planned capital market activity and higher operating costs in line with the growth in sales and assets and continued investments in our operating platform. Our adjusted return on assets, excluding significant items, was 125 basis points in the quarter comfortably above our 110-basis-point baseline as shared at Investor Day in October of 2023. The current quarter includes 5 basis points of favorable actuarial liability movement that is within our expected range and reflects the effects of our methodologies, which can be lumpy for inter-quarter variability. Next, turning to our balance sheet. We ended the quarter with F&G equity attributable to common shareholders, excluding AOCI of $5.2 billion or $41.10 per share with 126 million common shares outstanding as of March 31. There are a couple of pages in our investor presentation providing an analysis of book value per share. F&G's debt-to-capitalization ratio, excluding AOCI, was 24% as of March 31. This is in line with our long-term target of 25% and includes the $250 million preferred stock issuance in January 2024. Our annualized interest expense is approximately $120 million or roughly 6.6% blended yield on the $1.8 billion of total debt outstanding. We continue to target holding company cash and invested assets at 2x fixed charge coverage. Our strong capitalization supports both growth and distributable cash. During the first quarter, F&G paid $26 million of common dividends and a $4 million dividend on its preferred stock held by FNF. F&G is well positioned to self-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. For 2024, specifically, our stable profitable in-force is expected to generate more than $1 billion in capital, and we have strong capital generation in the range of $500 million from existing reinsurance arrangements. In summary, we have great momentum in executing on our strategy and delivered a terrific first quarter. In addition, we continue to maintain strong capitalization and financial flexibility to successfully execute on our growth strategy. This concludes our prepared remarks. Let me now turn the call back to our operator for questions.

Our first question is from John Barnidge with Piper Sandler.

My first question is on the RILA product. How should we be thinking about contribution in '24? And how meaningful was it in the first quarter that it was rolled out?

Sure. Thanks, John. This is Chris. I would say it wasn't particularly significant in the quarter. We launched with only one or two distribution partners. We have several additional partners lined up that I anticipate will roll out in the second and third quarters. So I don't expect it to have a major impact for us this year, but it should become more significant as we move into 2025. Given the current environment, there are plenty of sales opportunities. Therefore, I would say it will be fairly modest this year but is expected to start making a meaningful contribution next year.

And my follow-up question, Chris, competitive dynamics in the PRT market, you talked about finally crossing a big threshold in sales to the cumulative basis and some participants have talked about this year being a bit more competitive in that institutional product.

Yes, I wouldn't say that we've seen a significant change. It was a record first quarter for us, and the team has performed exceptionally well. We tend to be very selective about what we bid on, so our decision-making process is quite thorough before we begin bidding. When we do bid, our success rate has been decent. It will always be competitive in this attractive market, but we are still capturing our fair share and haven't noticed any major changes in return dynamics.

Our next question is from Wes Carmichael with Autonomous.

So the ROA baseline in the quarter, I guess, adjusted for alts was 125 basis points, and that's above, I guess, your recent target of 110. So maybe just hoping you could talk about if you see that as a sustainable level going forward and maybe the drivers of a little bit of that outperformance would be great.

Yes, I'll start, and I know Wendy will jump in. I think there was probably a little bit of positive tailwind to that but not a lot. So yes, we feel really good about what we laid out in our Investor Day was a baseline of 110 basis points, and we thought we could grow that 15 to as much as 30 basis points through a few levers, optimizing the investment portfolio that's feeling quite optimistic for us right now, flow reinsurance, you're already seeing the impact of that and then some operating scale as we continue to grow. So yes, we feel pretty good about that. I don't know, Wendy, if you want to walk through maybe a little more of the dynamics of the quarter itself.

Sure. Referring back to last quarter, there was some fluctuation based on our reserving methodologies. Last quarter had a slight negative impact, while this quarter is showing some positive movement. We've indicated that there might be around 5 basis points of positive variation in our processes. We are optimistic about further expansion from this point. In addition to what Chris mentioned about flow and scalability, our owned distribution performed well in the quarter, and we believe that this growth is sustainable.

Got it. And I just wanted to maybe follow up on John's question on PRT. I think one of your private equity/insurance peers made some comments on their earnings call this quarter that there's some recent lawsuits that are likely to chill some of the volumes in the PRT market in 2024. And they also mentioned that they said spreads weren't very attractive this year versus last year. So I just wanted to get any additional perspective on if you think you could see some lower volumes or if that's not the case and if you still see decent spreads in that market.

Sure. Yes. I think there's clearly the potential for that to cast a bit of a pall over the markets, so we're watching for. We haven't really seen that yet. I mean there are quite a few deals in the queue for us and everybody to go bid on. So the spread piece, it's really hard to compare across firms because the single biggest driver is do you have access to unique longer-duration originated credit. And if you do, we're still earning good spreads. If you don't, then it's tough. It's going to be difficult. And that's everything from triple-net leases to infrastructure debt, et cetera. So it can be very bespoke asset specific types of opportunities. And so again, I think it's kind of hard to generalize across the industry. But yes, it's something that we clearly are on. We'll look out for raising our profile on everything from how we use reinsurance to transparency about everything that we do.

And maybe just one more on funding agreements. But you did a little bit of FHLB borrowing in the quarter. You mentioned that conditions were challenging for FABNs in the first quarter. I think there were some peers that kind of returned to that market, but just wanted to get your perspective on the rest of the year, if it looks more attractive in your outlook for FABN issuance.

Yes, I believe it does. It's currently a favorable environment to be an issuer. During the quarter, it was on the verge of improvement, and it definitely appears more appealing now. I'm not sure if you want to add anything to that, Wendy.

Yes, I was just going to say, we monitor it, Wes, just to see how we're doing from the spread perspective. Our rating is a little bit lower than some of the ones that have gone out in the first quarter, and that impacts the spread. But we are monitoring, and it looks like it's getting better every day.

Yes, Wes, I want to emphasize that we're focused on maximizing our return on capital. Currently, we see attractive opportunities in retail and PRT, which we consider as potential funding sources and cost of funds. Wendy and I are continuously working to optimize these aspects. Reflecting on the quarter, I have a strong impression that this might have been our best quarter ever, with robust inflows and a positive mix shift towards FIAs from MYGAs. Given that FIAs are our most profitable product and have a longer duration, we are capturing spreads for an extended period. We're already noticing margin expansion as you mentioned. While we should remain cautious and not celebrate too soon, we are off to a very promising start compared to our Investor Day projections, and we feel optimistic about our progress.

Our next question is from of Mark Hughes with Truist Securities.

I apologize if this has already been addressed since I joined late. I believe you mentioned being optimistic about RILA sales, which are expected to become a larger part of your offerings. Could you discuss your perspective on the long-term relationship between RILAs and fixed indexed annuities and how your distribution strategy is aligned to support one or the other, as well as how it might adapt over time to enhance RILA sales if necessary?

Sure. That's a great question, Mark. If we consider a fixed indexed annuity, it has a minimum return of 0 and provides a chance to participate in market gains, but it also has a limit on potential earnings. On the other hand, RILA offers the chance to take on some risk below 0, usually via a buffer of, say, 5%, 10%, or even 20%, which the carrier absorbs, allowing for greater potential upside. Typically, this appeals to a younger demographic, individuals with a higher risk tolerance. This is a market we haven't previously tapped into, so all of this is new territory for us and should lead to additional sales and margin growth. Additionally, from a distribution perspective, RILA is generally more favored in the broker-dealer channel, while fixed indexed annuities are more popular in the IMO and bank channels. Our efforts to expand our distribution partnerships over the past couple of years have been aimed at bringing in more broker-dealers in preparation for the RILA launch. This younger demographic with a higher risk tolerance opens up a significant market opportunity. People generally should own some mutual funds for long-term growth, but with that comes a lot of volatility, and many prefer the certainty of a more predictable outcome. I believe this category will be quite appealing for the industry. Lastly, this aligns with our core strengths; we're essentially acquiring a different type of option with a broader range of outcomes. At the end of the day, it's still a product based on spreads, and the factors that have driven our success in the fixed indexed annuity market should also apply to the RILA market.

And then I think a somewhat competitor of yours has talked a bit more about integrating their annuity products into these retirement, the dated funds that they're starting to see some movement there. Can you talk on that opportunity, whether that's something you're pursuing directly as another distribution channel source of growth?

I would say it's not our top priority at the moment. There are many complications and challenges in that market. Progress has been slow. I believe the products could significantly benefit society by helping individuals participate in their 401(k) plans. However, currently, we feel that focusing on our distribution opportunities in both institutional and retail markets is a better priority. Nonetheless, we are keeping an eye on it and want to stay engaged. If it makes sense, we think we could compete in that market if we decide to pursue it.

Do you think the economics are not quite favorable yet, or is it simply that there isn't much demand in the 401(k) market?

Yes, I'm probably not the best expert on this topic, although I studied it years ago at a different firm quite intensively. I think the biggest issues are record keeping. So it's kind of the expense and complication of getting plan sponsors to adopt it and more importantly, record keepers to pay for all the enhancements to make it work. And then the other is for it to be get broad-based acceptance, you do end up with a lot of smaller accounts. Now that can be solved for through some sort of omnibus structure. But yes, it's just a little more complicated. I would also think carriers with a big recognized brand name and/or retirement plans, presence of their own, probably will have a little bit of a leg up there. So hopefully, that helps.

I just had a question on the capital consumption on the RILA product versus an FIA or a MYGA. I imagine there's the same charge on the premium. But when you look at RBC, is the RILA product favorable relative to a fixed annuity sale? Or is there not much of a difference there?

Wendy, do you want to tackle that one?

Sure. Thank you. Yes, there's not much of a difference. As Chris mentioned, the distinction between the products lies in the option we purchase, and there is really no difference in the capital charge associated with that.

Okay. Great. And then just maybe just following up on the DoL and the final rule, obviously, your new business origination capabilities are much more diversified than the last time we saw this, but I think you mentioned 15% or so of gross sales might be the most impacted. Can you maybe just give us any additional perspective on what changed this time around with this version? And if there's any way to kind of dimension the potential expense impact, that would be great.

Yes. To be honest, not much has changed. This is the industry's frustration, as it closely resembles the previous situation. There will be increased compliance costs, but I don’t think it will reach a level that would make us question our forecast. It’s more of an annoyance. Many believe it’s unnecessary considering the existing regulations. My main concern, as I noted earlier, is that it may hinder agents who serve the middle market from advancing. However, I believe it will take time for this impact to be realized. Right now, we have more sales opportunities than capital; our constraint isn’t sales opportunities. Therefore, none of this will alter our plans. My concern is that it will significantly affect certain agents, particularly those serving the middle market. Wendy, do you have anything to add?

Yes. I think I would just add, Wes, the biggest difference is that F&G is different, right? Back in the original rule, we weren't in the bank and broker dealer market. So that has significantly improved those percentages that Chris was talking about of where we would be impacted.

Yes. And then we also weren't in the PRT or FABN market. So if you go back five years ago, we were doing probably $3 billion of sales. It was all through independent agents. And now as you see, we're $13 billion plus. And we continue to grow the IMO space. And a number of those IMOs, I think, actually will thrive during this because they're fairly sophisticated, it may force independent agents to need to affiliate with one IMO versus multiple IMOs. So I think the best players actually look at this and say, we can build some nice moats for ourselves adapting to this. But there's just a lot of agents and a lot of smaller agents calling on middle market clients that this is going to be quite disruptive for.

Thank you. Ladies and gentlemen, this will conclude our question-and-answer session. I will now turn the conference back over to CEO, Chris Blunt, for his closing remarks. Chris?

Great. Thanks, everybody. Look, we're really pleased with our overall results, which demonstrate the competitive strength and resilience of our business. F&G is positioned to perform through the cycle, and we're successfully executing on our strategic priorities to generate continued growth and profitability. Thanks for joining us. We appreciate your interest in F&G and look forward to updating you on our second quarter earnings call.

The conference of F&G has now concluded. Thank you for your participation. You may now disconnect your lines.