Good morning, and welcome to F&G's Second Quarter Earnings Conference Call. This conference call is being recorded. I would now like to turn the call over to Lisa Foxworthy-Parker, Senior Vice President of Investor and External Relations. Please go ahead. 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 August 13, 2024. And now, I'll turn the call over to our CEO, Chris Blunt.

Good morning, everyone. Thanks for joining us to discuss our second quarter results. We've delivered another terrific quarter and continue to build on our proven track record. Before reviewing our performance over the last three months, I'd like to highlight the strong progress we've made over the last year in delivering towards our Investor Day value creation levers. During our Investor Day held in October 2023, we outlined the potential for upside from asset growth, margin expansion and multiple uplift. We used performance in the second quarter of 2023 as our baseline and looked out over a five-year medium-term horizon to illustrate key financial targets. Over the last 12 months, our business has been hitting on all cylinders and we are currently on pace to achieve our targets. Starting with asset growth. Second quarter AUM before flow reinsurance of $61.4 billion increased 21% over the last year, driven by retail and PRT sales. We are well on our way toward our targeted 50% growth in AUM before flow reinsurance by 2028. We now expect to achieve this target on a net basis as well. As we deploy proceeds from the $250 million preferred stock investment that FNF made earlier this year to accelerate the growth of our retained AUM above the level considered at the time of our Investor Day. Next, margin expansion. Adjusted return on assets, excluding significant items, expanded to 130 basis points in the second quarter, primarily driven by investment margin, disciplined expense management and accretive flow reinsurance as well as enhanced earnings power from owned distribution. This is above our 110 basis point ROA baseline from our Investor Day and we are closing in on our targeted range of 133 basis points to 155 basis points. This strong performance has generated both ROE and multiple expansion. We've expanded adjusted return on equity, excluding significant items over the last year from 10% to 12% as we advance toward our targeted range of 13% to 14%. Lastly, multiple uplift. We are pleased to see increasing recognition of the intrinsic value of F&G's new business platform and growing in-force book in its stock price, which was trading at approximately 7 times P/E multiple on consensus 2025 earnings at June 30. This is up from the 5 to 6 times multiple a year ago and is now more in line with peers, although not fully yet reflecting our margin expansion and growth rate of earnings. We see further potential for improvement to the market multiple on our core business as well as a multiple rerating from our own distribution strategy. Overall, we continue to have great momentum in executing our strategy, and we're on pace to achieve our financial targets. Now turning to results for the quarter, starting with sales. We delivered record gross sales of $4.4 billion in the second quarter, up 47% over the prior year quarter, driven by record retail sales and robust institutional sales. Record retail sales from our agency bank and broker-dealer channels were $3.2 billion, up 39% over the prior year quarter and topping the $3 billion quarterly level for the first time. This is in line with industry annuity sales that continue to surge due to favorable economic conditions. Robust institutional market sales of $1.2 billion increased from $700 million in the prior year quarter, and can fluctuate quarter-to-quarter. This included $300 million of pension risk transfer sales, which contributed to a new record of $900 million in PRT sales for the first half of the year. And $900 million of funding agreements as we return to the FABN market for the first time in two years, given more favorable market conditions. F&G's retained sales were $3.4 billion in the second quarter, up 55% over the prior year quarter. As a reminder, we manage the level of flow reinsurance in line with our capital targets and are able to adjust up or down over time as market economics change. We have profitably grown retained assets under management to a record $52.2 billion at June 30. This is an increase of $6 billion or 13% over the second 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. AUM before flow reinsurance was $61.4 billion, adjusting for approximately $9.2 billion of cumulative new business seeded. We continue to see sustainable long-term momentum for growth across our multichannel new business platform and strong demand for our products, given very attractive demographic tailwinds as well as large and growing markets. We serve a market with very attractive demographic tailwinds as 10,000 baby boomers are retiring every day. Demand for our fixed annuity products continues to grow as people plan for retirement that could last 30-plus years and are seeking solutions that can withstand market volatility. Both retirees and advisers are turning to fixed annuities for simplicity, relatively higher interest rates, guaranteed tax deferred growth and principal protection as an alternative to the traditional 60/40 investment portfolio. We are strategically positioned for long-term growth by targeting large and growing markets where our products have reached beyond the traditional retail life and annuity sector and a lot of cash currently remains on the sidelines with more than $6 trillion of cash parked in money market funds and investors are expected to start putting their money to work as money market rates come down. We expect our industry will continue to see a strong surge in sales in the near term as consumers look to lock in higher rates through products like fixed annuities. Earlier this year, we entered the fast-growing registered index-linked annuities market or RILA, which generated $45 billion of industry sales in 2023. Our product offering is differentiated in the market, uniquely meeting the needs of a relatively younger demographic. We are focused on onboarding key partners in the broker-dealer channel in 2024 and expect steady growth towards meaningful sales in 2025. We expect RILA will be a significant contributor to sales over the next few years with the potential to grow as big as our FIA sales are today. Additionally, we continue to see a healthy pipeline in the pension risk transfer industry with $3.8 trillion of corporate pension plans at or near full funding. We are positioned to compete in our targeted $100 million to $1 billion deal size with potential to strategically move more upmarket or down market as opportunities arise. Overall, F&G is well-positioned for growth and has terrific momentum as we leverage our strong relationships with our distribution partners, our comprehensive and competitive product portfolio designed to meet consumer needs, our multi-channel new business platform across both retail and institutional markets and our investments for growth, including our superior and scalable ecosystem. Most importantly, we have a consistent track record of success managing through market cycles. In 2020, we grew sales and generated stable return on assets when interest rates were nearly zero. In 2023, we grew sales and generated stable and expanding return on assets when interest rates were at multi-decade highs. That is the resiliency of our business model. F&G performs well in a low rate environment and even better at a higher rate environment. Turning to our investment portfolio. Our fixed income yield, excluding alternative investment volatility and variable investment income was 4.6% in the second quarter, 26 basis points higher than the second quarter of 2023. This reflects upside from higher yields on new investments. Going forward, we have now hedged two-thirds of our floating rate asset exposure, which should make our investment income less susceptible to lower rates over time. Wendy will speak more to this in a moment. The portfolio remains high quality with 96% of fixed maturities being investment grade. Credit-related impairments averaged five basis points over the last three years, which was exceptionally low given the market disruption during 2020 to 2023 from the pandemic, regional bank crisis and sharp uptick in interest rates. Through the first half of the year, credit-related impairments remained below our pricing. Regarding our commercial real estate debt portfolio, it is high quality, diversified with the vast majority invested in defensive sectors. Our commercial mortgage loan portfolio is entirely first mortgages with an average loan-to-value of 60%. Healthy debt service coverage ratio is above one time for nearly 99% of the book and only 8% of loans maturing in the next 24 months. Regarding the office sector, we have a below-average concentration. CMBS, CML and limited partnerships comprised 18% of the total portfolio with only 1.8% in office. Overall, our total portfolio is diversified, well-positioned and actively managed through our selective derisking programs to perform in varying market conditions. Our asset allocation strategy remains stable and our invested assets are well matched to our clean and stable liability profile. Next, turning to our own distribution strategy. During July of 2024, F&G increased its ownership stake in Freedom Equity Group, or FEG, a top life IMO and longtime F&G partner from approximately 30% to 100%. FEG was our first investment in own distribution, having taken a minority ownership stake in late 2021, and our successful partnership has exceeded expectations. FEG is strategically positioned in the rapidly expanding multicultural markets and our joint efforts position us to accelerate IUL sales growth to meet the risk and retirement needs of those underserved market segments. FEG is a great example of our own distribution strategy, which generates a meaningfully higher risk-adjusted return on capital than retain business and provides a diversifying source of earnings. Our own 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. Our strategy is already proving to be a meaningful contributor to overall margin. To date, we have invested $680 million, and we expect EBITDA from the portfolio to be $60 million to $65 million in 2024 with double-digit annual growth over the medium term. In summary, the first half has positioned us well for another strong year of performance in 2024. We have plenty of momentum to continue to deliver sustainable asset growth from our retail and pension risk transfer growth strategies as well as ongoing margin expansion from enhanced investment margin opportunities, operational scale benefits and fee-based earnings from accretive flow reinsurance. We are poised to further diversify our earnings given the strong growth of our middle-market life insurance business and own distribution strategies.

Thanks, Chris. This morning, I'll focus my comments on the following: adjusted net earnings, details on our surrender experience and strong positive cash flow position, an update on our floating rate asset hedging program as well as our strong capital and liquidity position. Starting with earnings. Adjusted net earnings attributable to common shareholders for the second quarter was $139 million or $1.10 per share and included $145 million or $1.11 per share of investment income from alternative investments and $4 million or $0.03 per share of CLO reduction gains and bond prepayment income. The quarter also included $16 million or $0.12 per share of net expense from actuarial model updates and refinements, which are separate from our annual actuarial assumption review that will be performed in the third quarter. Investment income from alternative investments based on management's long-term expected return of approximately 10% was $165 million or $1.26 per share. Excluding significant items, adjusted net earnings were $171 million in the second quarter, up 33% over $129 million in the second quarter of 2023. This increase reflects asset growth, margin diversification from accretive flow reinsurance and owned distribution, disciplined expense management and higher interest expense as a result of planned capital market activity. Adjusted return on assets, excluding significant items was 130 basis points in the second quarter, comprised of 107 basis points of core margin, 14 points of flow reinsurance fee income and 9 basis points of owned distribution margin. This was up 14 basis points over the second quarter 2023 and brings our adjusted ROA over the last 12 months to 124 basis points. With regard to surrenders, we continue to see steady growth in our FIA account value as net deposits from new business continued to well outpace terminations. FIA positive net inflows were over $575 million in the second quarter, consistent with the first quarter as shown on Page 12 of our Summer 2024 investor presentation. As a reminder, for insurance companies like F&G, terminations typically provide a boost to earnings from the surrender charge fees and release capital that, in turn, can be deployed to new business volumes having higher surrender charges and longer surrender periods than the older contracts, further improving the liability profile. F&G benefits from a diversified and predictable in-force book. Our funding agreements, pension risk transfer and immediate annuities are non-surrenderable. Fixed rate multi-year guaranteed annuities typically have a three, five or seven-year contractual maturity that are lumpy. Further details on net flows for both indexed and fixed rate annuities are disclosed on Page 13, in our quarterly financial supplement. Turning to our floating rate asset portfolio, we have now hedged $6.7 billion or approximately two-thirds of our floating rate assets to preserve the investment margin on existing assets. Our floating rate exposure was very beneficial over the last couple of years as interest rates increased. Through hedging, we have increased our earnings stability and predictability going forward by locking in about 188 basis points of incremental yield above original pricing. This translates into approximately 15 to 20 basis points of annual incremental investment margin above pricing over the next three to five years. For now, we expect the remaining net floating rate asset exposure to remain around the current level of $3.4 billion to help support our asset liability management objectives as most are short-term and will mature within three years. Finally, turning to our balance sheet, we ended the quarter with F&G equity attributable to common shareholders, excluding AOCI of $5.4 billion were $42.52 per share with 126 million common shares outstanding as of June 30. There are a couple of pages in our investor presentation providing an analysis of book value per share. Our consolidated debt outstanding increased to $2.1 billion at June 30, reflecting a $300 million net increase for the successful refinance and partial tender offer of our upcoming 2025 senior note maturity. Our debt to capitalization ratio, excluding AOCI, was 26.4% as of June 30. We expect this ratio to revert to our long-term target of 25% once the remaining $300 million of senior notes mature in 2025. Our annual interest expense is approximately $130 million or roughly a 7% blended yield on the $2.1 billion of total debt outstanding. We continue to target holding company cash and invested assets at two-times interest coverage. Our capital allocation priorities, focused on deploying our capital to maximize shareholder value through continued investment in our business, as well as returning cash to shareholders. F&G is well positioned to generate growth at attractive returns. And our scale allows us to self-fund our growth with in-force capital generation, reinsurance and capital market issuances. For 2024, our stable and profitable in-force book is expected to generate more than $1 billion in capital, and we have a strong capital generation from existing reinsurance arrangements in the range of $500 million. Our capital allocation priorities also support our approximately $105 million annual dividend to common shareholders as well as $16 million annual dividend on the preferred stock held by FNF. We feel the common dividend is sustainable and expected to increase over time. F&G continues to maintain strong capitalization and financial flexibility with all of our statutory balance sheets, including our offshore entities, which are conservatively managed to the most stringent of capital requirements of our regulators and our four rating agencies. In summary, we continue to build on our proven track record. We have good momentum in executing our strategy and delivered another solid quarter. We remain focused on achieving our Investor Day objectives and we are seeing good momentum in driving both retained asset growth and margin expansion. Importantly, this 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.

Thank you. We will now start the question-and-answer session. Our first question today will come from John Barnidge with Piper Sandler. Please proceed.

Good morning. Thanks for the opportunity. Can you maybe talk about the decision to increase the ownership stake in Freedom Equity Group to 130% pipeline for additional deployment. You clearly chopped a lot of wood here in a short amount of time on the owned capital in deploying that $1 billion target into targets. So, yes, curious about Freedom Equity Group and the pipeline for additional? Thank you.

Sure, thanks, John. I want to highlight a few points. First, we genuinely appreciate the business relationship we have; it's been a long-term partnership. They account for a significant portion of our IUL sales, which is among our most profitable products. We are very enthusiastic about the business, its growth, and its earnings performance. They hold a strong position in the middle market, particularly within cultural markets in the US, which are experiencing rapid growth. When we acquired our minority stake, we hoped it would develop in this manner, and we're pleased with the outcome. We have invested nearly $700 million into our owned distribution, and as Wendy mentioned, it is already contributing significantly to our earnings and diversifying our revenue streams. Regarding our pipeline, it's primarily deal-specific, so the $1 billion figure reflects the opportunities available rather than a short-term deployment goal. We believe there are likely more interesting opportunities ahead. Thank you for your question.

Thanks for that answer, Chris. My follow-up question is on the floating rate portfolio. You clearly reduced your exposure by about two-thirds. Can you maybe talk about the earnings sensitivity of the remaining portion of the floating portfolio to movements in rates? And then maybe how is your new money rate trended as well? Thank you.

Yes, we're very pleased with our hedging approach. The key for us has been to avoid being greedy. Over the last four or five years, we've undertaken several measures to derisk our portfolio. From a credit standpoint, we've continually tightened our portfolio in anticipation of a potential shift in the credit cycle. We’ve applied a similar strategy regarding interest rates. At one point, we had nearly 20% of our portfolio in floating rates, a decision made when short-term rates were nearly zero, which seemed wise at the time. As rates increased, we took the chance to lower that risk and have since reduced our exposure to around 6.6% of the portfolio. This adjustment significantly mitigates the impact of a drop in short-term interest rates on our overall yield. With just 6.6% in floaters, a 100 basis point decrease in short-term rates would only affect our yield by 6.6 basis points. Regarding new money rates, they remain strong. Recently, there's been some volatility, with treasury rates decreasing by about 40 to 50 basis points and corporate spreads widening by 12 to 15 basis points. However, we run a very dynamic business and frequently reprice our products. For us, it’s essential to stay attuned to market spreads and identify opportunities to quickly utilize those premiums. Overall, we feel positive about the market environment.

Thanks for the answers. Appreciate it.

And our next question will come from John Campbell with Stephens. Please go ahead.

Hey, guys. This is Jonathan on for John. Thanks for taking my questions. So you guys had a few different records this quarter, so congrats there. I want to touch on one of those records, annuity sales in particular. You touched on the trends that are driving the strength there and it seems like that's going to continue, obviously. But maybe thinking how should we think about the growth trajectory in the back half of this year? And I know 25% is still a ways out, but any kind of direction you could provide there would be appreciated.

Sure. This is Chris. I'll start, and Wendy may want to add to this as well. The momentum remains highly positive. There seems to be a misconception that rates will begin to decrease and that demand for fixed annuities will decline. In fact, I believe we will see the opposite trend. As I mentioned earlier, money market fund assets have substantially increased post-COVID, rising from $3 trillion to $6 trillion. This indicates a significant amount of cash is available, and I anticipate that as money market yields drop from 5 to 4.5 to potentially 4, investors will seek to secure a better rate, which should benefit our core products greatly. Additionally, if short-term rates decrease while longer-term rates remain relatively stable, this traditional steepening of the yield curve should also positively impact demand. Furthermore, with approximately 10,000 baby boomers retiring each day in the U.S., I am confident in the demand outlook for the second half of the year and for 2025. I don’t foresee any factors slowing down our top-line growth at this time.

Thank you. As a follow-up, during your last Analyst Day, you mentioned the upward pressure you expect on normalized ROA, which you have clearly experienced. However, it seems you are progressing slightly ahead of schedule. Last quarter, you achieved a record but adjusted the sustainability, and this quarter, you set another record. This could be due to conservatism or some favorable factors at play. I would like you to elaborate on the strength seen this quarter. Additionally, how do you view the import metric moving forward, and does that outlook change significantly with the rate environment?

Yes. I'll just frame a couple of high-level things. And then Wendy can talk to the specifics of how you should think about the quarter itself. But again, I take everybody back to our Investor Day presentation of October of last year. And we were try to be really specific about where the uplift was going to come from. We saw uplift on the investment portfolio of just continually optimizing the portfolio, and we've seen good progress there. We've seen some uplift, obviously, from the rise in short-term rates, and we had a significant portion of the portfolio in floaters. We're getting operating expense scale as we've been growing our assets at a pretty healthy clip. And yet, we've committed to hold our fixed expenses to a single-digit rate, and we've been doing that. So that's a source of uplift. And then as you're starting to see, we're getting tremendous leverage from flow reinsurance. When we take a sale and put it on a reinsurance balance sheet, we're generally capturing a disproportionate amount of the spread relative to the amount of required capital. So that's obviously accretive. And then lastly, has been owned distribution. So yes, I would say, overall, those things are progressing at a faster clip than we probably anticipated. So you want to get too excited, right? The game is not over in the third inning, but you'd rather be up by a few runs in the third than down. And then, Wendy, do you want to talk about 130 and maybe some of the one-timers that might be in there?

Sure. Thanks, Chris. So, I'll point you to Page 22 of the investor presentation. We've added a column last quarter, the last 12 months. And that will kind of normalize out even any noise that we get quarter-to-quarter, there'll be some positive and negatives in there. This quarter, we had some additional CLO prepayments and then we had a model conversion that we put into place due to materiality in the quarter, so a bit of noise in there. But the last 12 months is now at 124, and we view that as very sustainable.

Our next question will come from Wes Carmichael with Autonomous Research. Please go ahead.

Hey good morning. First question is on funding agreement issuance in the quarter. Can you talk about what made that market a little bit more attractive? And how should we think about your outlook for issuance for the remainder of the year in FABN?

Yes, I would say that this market has been quite inactive for us over the past few years. However, as rates have begun to stabilize and decrease, there is a lag effect on the statutory rate that influences our cost of capital. At the same time, new money yields have been rising, creating attractive investment opportunities where we can achieve a good spread. We are continually examining this. When it makes sense, especially compared to other uses of that capital, we usually engage in it. Wendy, do you want to add anything?

No, you hit the nail on the head there. As far as going forward, those factors, it will depend on the valuation rate and the spread that we can earn off of that. So if it looks positive, then we potentially could see additional activity. But it's kind of a week-to-week view of the market, and we just monitor it very closely.

Got it. Can you discuss the experience with surrenders and FIA during the quarter? I understand you are still seeing net flows, but there has been a significant increase recently, and there are a couple of billion in FIA account values outside of the surrender charge at this time. Are you anticipating a rise in surrenders in the near future?

Yes. Two things I would say if they're out of surrender charge, we would expect that and priced for that already. So that's not necessarily wouldn't be an outlier in terms of how we planned going forward. And I just want to reiterate what Wendy said, someone this is more analogous, probably to refinancing your mortgage. So that's what's happening. You're in this huge refinancing where the movement rates were so strong that yes, add blocks of business and policies where it's actually smart for the customer to move into a new policy, get better terms. Agents are obviously incented to do that as well. So they're doing well. And actually, for us, it's not a bad thing at all. I mean, we're capturing surrender charge income. So we're covered from that perspective. And now we're writing a new policy, and I think people underestimate the impact of that, meaning what the stuff we're writing right now might prove to be some of the stickiest assets we've ever written because if rates do, in fact, move down from here, it's going to be very hard to move those contracts prematurely. So yes, I don't think there was anything in the activity that either surprised us or was troubling. And I think we're going to see it probably continue for another couple of quarters and would expect that will probably stabilize next year. But Wendy, anything you want to call out specifically?

No. I mean if we're looking just at the FIA, yes, there was an uptick, but there's a lot of activity going on in that refinancing, as Chris indicated, and there's also lags to that. So as Chris said, we do expect excess renders to continue until rates drop significantly.

And the only thing I'd add less to that is obviously, it benefits a lot of our own distribution because some of the investments we've made have been in annuity-oriented IMOs and they're just crushing it in this environment, not only in terms of new sales, but obviously in terms of smart replacement sales.

That's helpful. I have one more question. Regarding base spreads, if we set aside all other factors, I believe there was a slight contraction quarter-over-quarter. I'm curious about your outlook on this moving forward, particularly in light of the current macroeconomic conditions. Several of your peers have suggested that investment spreads may have peaked and could potentially compress in the future. I'm interested in your perspective on that.

I would just say, Wes, it's really hard to generalize because everyone has access to different investment opportunities. We wouldn't consider a few basis points material. You're going to see fluctuations from quarter to quarter. However, I wouldn't say we're currently experiencing spread compression. There will be some volatility, but it's not like we are replacing highly profitable blocks with less profitable ones. We're quite comfortable with the returns from our new business right now. Additionally, some of the core margin could depend on how much we decide to distribute versus retain. Wendy, would you like to add to that?

Yes, that's the direction I was heading, Wes. If you examine our return on assets and financial internal assessments, the core margin did increase from the previous period, and there are additional contributions from flow and our distribution efforts. We have tried to emphasize that in the Quarterly Financial Summary. You can look back at what we define as core by evaluating the product margin against the expenses, and that has seen an increase.

Thank you. And this will conclude our question-and-answer session. I'd like to turn the conference back over to CEO, Chris Blunt, for any closing remarks.

Great. Thanks. We're very pleased with our performance through the first half of the year. F&G's business is well positioned for the current market and for the longer-term growth. Our opportunities are compelling with many prospects ahead to drive asset growth, deliver margin expansion and generate accretive returns. So thanks for joining us. We appreciate your interest in F&G. And look forward to updating you on our third quarter earnings call.

Thank you for attending today's presentation. And the conference has now concluded. You may now disconnect your lines at this time.