F&G Annuities & Life, Inc. (FG) September 2026 Conference Transcript

All right. We are going to get going with our next session. I have F&G up here on stage with me. I'll make introductions. Connor Murphy, directly next to me, CEO and President. Mike Bailey, CFO, who recently joined a few months ago. Six weeks ago. Six weeks ago. And then Laina Punjabi is the Chief Investment Officer. But I'm going to start with Connor. You know, you recently took over as CEO of the company at the end of June after you had joined F&G as CFO about 18 months ago. So I wanted to just start by having you discuss what your strategic priorities for F&G are moving forward. Well, thank you.

And thanks for having us. Delighted to be here. I had the opportunity to be here with you last year with Chris Blunt, who recently shifted his role. I would say there's a fair amount of continuity to what we're doing. Growth and momentum are a couple of words that come to mind. We have been, I think, a little bit of an exceptional growth story for larger life and annuity companies. We've been able to grow the gross AUM every single quarter, the net AUM every quarter, but last quarter. And that was just because we had sold the Bermuda business. But otherwise, both of those continue to be metrics that we remain focused on. At the same time, we're an ROE expansion story, and leveraging reinsurance is helping us do that. At this stage in our evolution, and we can talk about, you know, we've been around in one form or another since the 1950s. But really, I'm talking about the F&G that's existed over the last eight years since F&F and Blackstone and others and Chris Blunt. But in that time, we had evolved. We hadn't quite gotten to the segment reporting part, but at year-end, we talked about the continued shift to being more capital-like, more fee-based, and disclosed that the fee composition of earnings had grown from almost nothing a few years ago, if you really fully allocated expenses, to about 15% year-end 25, with an expectation, just by virtue of the three-year plan that we had done at year-end 25, that it would be at about 25% in 2028. I would view that as a pretty easy 25% very achievable and obviously you can get there faster with more reinsurance or you optimize or you prioritize fee businesses over spread businesses so that's been a continuation I think you've heard us in recent quarters to a lot of the focus has been on core core retail has continued to be arguably every quarters better than the equivalent quarter of the year before so that's the iul the fia those are meaningful businesses for us rila's newer for us fia and iul were a top 10 business you know probably top six ish um we were a later entrant to the rival space but that's been noteworthy for us as well and then prt we've been in for about five years that's also become a top we're about number seven number eight um meaningful for us as well so call that core institutional um at the same time we've we've shied away from the MIGA space, FABN, opportunistic, more so late last year, already this year than perhaps currently. And then I'm sure we'll get into it. We have the own distribution business with Peak as well. So yeah, a lot of continued momentum. I would say underneath the covers, it's stability in revenue growth, stability in earnings insofar as you can. The surrenders are obviously a little bit out of our control. The alts portfolio is underperforming, I think probably in line with pretty much everybody else if you haven't read it out. Everything else though is very predictable and hitting our marks. And the last part of it I would say is under the covers too, the core spread. You have heard me say, I would argue we're not really in the spread margin business, we're in the spread maintenance business. And that's part of the reason we really favor the FIA and IUL because we're repricing that every year. And that balancing act is a very thorough process within the company and one that we manage well. So pricing, new business, rate setting, rate renewals, all of that, all much of the same. So yeah, we're adding good value every day.

I wanted to delve into the reinsurance strategy more, which is part of the way you're increasing fee income and being more capital light. I guess, can you review what products you're reinsuring versus retaining at this point on an ongoing basis?

And then on the reinsured business just how the economics are actually flowing through uh on a for fee income to fng yeah sure so it has and continues to be an expansion so it began mostly with the miga products those we heavily reinsure up to about 90 with a couple of noteworthy partners that we disclosure we could talk about um we have expanded the uh fia reinsurance and broadly speaking we're targeting about 50 on fia about half of our fia is income based about half of it is accumulation based so on the income base we've got a couple of noteworthy reinsurance partners there as well um so they all pay uh they'll pay seating commissions and cover some expenses so that's so when we talk about fee businesses it's the peak business that's fee business it's the flow reinsurance seating commission business and then uh you would bifurcate the life between fee and spread so those are what we're talking about um on the accume side of fia though that's where we have the relatively new what's about a year old now sidecar with blackstone so that's predominantly the call at the capital provider there yeah but at this point time we haven't done more on the FIA we could we haven't done anything with PRT there's been some interest around that we just haven't haven't felt the need to necessarily but we would consider that nor have we done anything with IUL and the RILA is just not big enough yet to to consider doing that so yeah an expansion at the same time it could even just going back over the last five years I mean five years ago on a retained basis so we've grown to 75 billion gross 55 retained five years ago I think we were at 25 and part of that expansion has come from selling large other than rylos similar products but in narrower scope on distribution if you will so the word we now have a couple of dozen broker-dealer and financial institution partners as well so there's an expansion there so that's where we are but i think i'd be inclined to think probably more reinsurance from here than less um another element that i think is noteworthy of the sizable players there aren't many that aren't either owned by an asset manager or own an asset manager um i would argue i think we're a reinsurer of choice for a lot of folks for whom they can then obviously take advantage of their own asset management partnerships or structures to to avail of that whereas we don't it's it's a a nice diversifier from Blackstone. Obviously, anything in our, that we retain, that's almost all of that, Lina, can get into it. The vast majority of that is managed with Blackstone. But anything, obviously, that we reinsure on a flow basis is, you know, is someone else's, which I think works well for a lot of people as well.

And then on growth, how are you thinking about the growth of your total AUM before reinsurance compared to the growth you'd expect in your retained AUM after reinsurance, given the reinsurance strategy you have now?

Yes, so it's the continued growth momentum. I mean, we probably grow 8-ish percent on a gross basis a year or call it $6-ish billion. I would expect that to grow pretty consistently every year, for me, every quarter and every year. The retained numbers, obviously, if you just take, well, less of an emphasis on MIGA, but, you know, it might be half that. But I would still expect that, you know, $2 billion to $3 billion every year on that as well. I think that will likely, I would expect that that would continue. And then the ROAs will probably be a bit corridor-bound for all sorts of different reasons. there's so many components to that but you should see an roe expansion by virtue of the the impact of the flow business coming through and then you know we we have a we've been focused on the scale optimization as well bringing down the expense ratio etc and i think that'll be meaningful too okay and then uh peak altitude so you announced a few months ago you were going to explore strategic alternatives chris blunt is still leading that business yes i guess maybe just to start, what was the reason that led to the decision to explore strategic alternatives for

this business?

So let me take a step back a little bit and talk about maybe why we were in the peak altitude business or how it came to be. While in many ways we've been in this iteration of F&G, might be considered sort of eight-ish years old, the relationships go back decades and more than that. And we have senior employees who've been with us for a quarter of a century or more, one of whom is the president of peak john phelps who works alongside chris and the the backstory would be several of the entities where you have an own distribution business with several founders for whom perhaps their runway has gotten a little short and they're interested or maybe two out of three are interested in getting out and one would like to stay and and where we get very interested is where we have a finding partner who wants to spend another five seven ten years in this business And respectfully, I think their choice, a choice for them would be to sell to private equity. And I think as a general rule, many of them felt they would rather work with a partner they've known for 25 years. And we were approached a number of times over the last half a dozen years or so to see whether we would take a stake in these entities. We focused on predominantly four of them. Two of them, I would say, are life businesses. two are annuity businesses. We own them in various sizes. We have a 100% and a 49% on the life side, a 70 and a 40 on the annuity side. But importantly, the 49 and 40 have a path to majority. Those entities collectively, on that basis, they earn around $80 million of EBITDA. But we've also funded, so we've put about $700 million in, but we've funded some of that through debt at the holding company. So Peak itself has no debt. For us, the growth opportunity for those entities, we view it as very significant for what's literally right in front of their face. Increasing the investments higher to get bigger stakes in the four, but they themselves are rolling up businesses underneath. And that's a playbook that we know well. It's one that the FNF team and Bill Foley knows well and makes a lot of sense. So it's not about adding other entities it's about getting the most out of these entities so from our perspective yeah we've begun a process and now it's hard to say for sure i mean the entities um or the enterprise who show up with interest as we'll find out here in in in in short order in due course we've talked about a we would certainly um appreciate a structure where we could continue to participate in the upside so something like where somebody might have a 51 49 split I would rather own half of an entity that was twice as big and have someone partner with deep pockets it's not wouldn't probably be typically be another insurance company might be just a more of an investment entity continue to invest grow the EBITDA grow our share of that grow with them similarly we have other distribution partners who might be interested but they probably wouldn't want us to remain as a minority. And again, I'd rather stay as a minority. I'd like to continue to participate in the upside of this. And about 30% of our life sales come from these entities, about 10% of our annuity sales, which is noteworthy. So we know the business as well. We like them. We've known them for a long time. So that's the expectation. Then perhaps the silver lining a little bit is some of those entities, the accounting, gap accounting isn't wonderful because of the ownership stakes that we have. 49% would just be cleaner. We'd, you know, punt for punt, you'd be reflecting the value ownership in the businesses. So that's all. But it's a balancing act. You have your regular distribution partners and, you know, you've got to balance everybody's needs here.

I guess maybe you talked about the path to 25% fee, fee income, I believe. I guess, how does what you end up doing with peak altitude affect that? Because I assume if you sell 51% of it, that's going to lower your fee income, but then you're also growing the re-interest business.

And I, yeah, but I would also expect to, maybe that's why my preferred path would be to continue to retain roughly half interest and we would continue to invest. So we might, I wouldn't want to necessarily take on more debt at F&G to do that, but I'd be more than willing to reinvest the dividends. Like today, the dividends from Peak that we receive service the debt to some extent. I'd be more than happy to continue to just reinvest in that, have Peak bring on some debt, grow that way, and just participate in the upside of that growth. So you'd get there in a different way. But you're right. I think the life business, we're the number six rider of IUL in terms of premium, but we're actually the number three in terms of policy count. So we're continuing to see good growth there. So that's an expansion we would expect to continue. And then, like I said, the reinsurance, it's really up to us. If we could write more business, reinsure it more heavily. I should acknowledge our partners' appetites can change. I mean, that's one of the advantages of having the sidecar is it's a bit, you know, what you're getting day in, day out. But I would balance that with we have so far had no shortage of noteworthy entities who want to continue to be reinsurance partners with. So, yeah, maybe more of that. It's a nice position to be in where you can pick and choose.

Maybe shifting to the retail annuity market and competitive conditions. could you discuss your view of the competitive conditions currently in the market and and also and differentiate between myga fia i guess maybe mostly those but you are a newer entrant in rila too so if you want to touch on rila but yeah um and and to what extent you've seen changes i guess in the environment competitively over the last year or so okay so it's pretty different in our space in each one.

MIGA, almost since I joined, we have talked about calling MIGA, you know, differentiating between core and opportunistic. And MIGA has stayed very much in the opportunistic. Now, to be clear, we are still in the MIGA space, but we're picking our spots. And in fact, second quarter of last year, we did write a fair amount of MIGAs and that made lot of sense for us at the time but since then i think we've now had four quarters in a row with a reduced level of miga um in the second quarter for example we we looked at the marketplace and one of the decisions we made is we'll sell less my gun we did um for us a reasonably large amount of buybacks but that was almost like a straight capital trade the capital for the buybacks was the capital we didn't spend on the micas um and mike is interesting and everybody will give you their own view. From our perspective, a lot of the space is maybe the entities that are owned by an asset manager or the mutuals. There aren't too many large-ish or large public life and annuity entities. There are some, and we know them well. He's smiling because he just left one of them. So there's that. But relatively speaking, we haven't seen the returns to write as much. We're still writing them but not as much and obviously then you've got the what's the appetite for your flow partner because sometimes it's a decent miga with a great return on the seeding commission sometimes that one or other of those numbers can go up or down and you play it out but it's been a relative choice right and so I should be careful FIA for us it yeah it has been competitive as well but honestly we've been able to write FIA at a consistent return I would say in 25 it was probably a little tighter than 24 first half of 26 it's probably somewhere in between um so is it competitive yeah and in any individual quarter or even over 12 months if you looked at the top 10 writers the the table the ranking table can shift a lot within a year but you look over five years Ryan, it's hardly shifted at all. It's the same 10 folks who've written 70% of the business, and that includes us as well. And I think we would sit here and go, yeah, we've written 15% to 20% more in that time frame. I think everybody else, if you really leveled at all, I think we'd all be very similar. Now, we like that space very much, but the other thing for us too is, I mentioned, we do sell in a couple of dozen broker, dealer, finance institutions, but we sell an awful lot in the own distribution space and it's it's a different space it's again it's middle america it's multicultural america um it's not as competitive it's more of a relationship business there um at the advisor level at the firm level so i think that probably dampens the impact of the competitiveness a little bit um and then shifting to ryla we i personally like the royal space a lot i think it's a great first annuity product for a lot of people certainly the first annuity product i bought you know where i came from obviously i spent a lot of my career at matt and bright house and um familiar with the space we were later to the party i think there were probably more than 20 maybe 25 players in the space by the time we came in for us it has um it is still smaller compared you know it's not the others as i mentioned we're we're top six ish in in prt iul fia ryla we're probably you know we're in the teens uh probably in the higher teams. Having said that, we've already written more RILID this year than all of last year. Not huge numbers yet, but the momentum is wonderful. And we'll continue to focus on that. So I like the product very much. Yes, there's more competitiveness there, but remember, we weren't a VA shop. One of the nice things about us is we don't have any legacy liabilities that are complicated, right? There's no VA, ULSG, LTC, disability, anything like that. So we're not trying to replace VA business with Ryla business. We're just adding Ryla to the portfolio. And again, for that middle America, multicultural America, for whom they're maybe getting introduced to the product for the first time, I think there's a lot of appetite. So where we compete, I think will grow nicely. It will become, it is absolutely core for us. It's just not that big yet, but it will get there, I think, probably easier than anything else.

A few different follow ups on this. So one would just be on Myga. Given that you reinsure 90% of it to partners, how do you actually, like, is the amount of volumes of RILA that you write mostly contingent on the pricing of the reinsurance partners, given that you don't retain much of it? So, I guess, how do you actually go about that? Are you making the decision first, and then you find the partners? Or do you kind of, is it the opposite? The partners tell you what the pricing is, and then you decide if you want to write MAGA?

It is a, there are two parts to that. It is a hand-in-glove together, literally hand-in-hand. We know on an ongoing basis what everybody's appetite, what the rates are, if you will, what the Seeding Commission. So it's a decision at every stage, knowing what the economic commitment from the other side is. That is part of it. But part of it with MIGAs, too, is that some of the places that we sell, you have to show up with some MIGAs as well. So, yeah, I've heard another industry executive refer to it as the gateway drug, right? And I can kind of understand what that means, right? So there is a little bit of, there are some places where if you're not, if you're looking to sell FIA, you're selling some MIGA as well. And that's a bit of a balancing act as well.

Then on FIA, so, you know, I don't know how many years ago, but you used to almost solely sell through IMOs, I think. you've been expanding into financial institutions and other distributors like where are you at and you are also I think just talking that in some cases IMOs are I'm really sorry no worries um but yeah I guess if just any any um context on the how the mix of from for FIAs has evolved with distribution and is it an ongoing priority to continue to diversify the distribution there It is, but the competition is tougher in the financial institution part.

So that's what you have to weigh up. The nice thing for us too is we're not selling a single FIA product. We have a number of products, some that cater more to the own distribution, some to the financial institutions and broker-dealers. and it's if you bifurcated it i would say you know income is probably a little easier at the moment than accumulation and own distribution is a little easier than financial institution and having the uh the diversification is helpful now that can shift on a dime but that's that's probably q2 2026 is what i would say okay yeah and on prt so yeah i mean for really the whole industry it's been a bit quieter so far at least in the first half of the year i guess or at least for a lot of the companies i guess why do you think that is and then um how is your pipeline look as we go forward okay so that's been interesting um for us so we ride about a billion and a half to two billion a year at this stage have done over the last couple of years and on the other on the core retail like we're always trying to write maybe a little more than we have in the equivalent quarter of the prior year, assuming that the economic environment is there to do that. And there's some flexibility around that. With PRT, we're probably trying to write about the same. I'm not really trying to write more PRT business, given our ratings, the size of our balance sheet. That's probably about a decent amount for us. And we compete largely in the 100 million to 6, 7, 800 million. So we're not in the big, big leagues, the billion plus where some of the large players are. I actually like the smaller, but it depends on the business. If it's a nice, clean, easy-to-operate piece of business, smaller is great. If it's complicated, it's almost not worth it. So I would say over the last couple of years, we have, you know, you show up, you bid for this business, and we've probably, we probably win about one in every four or five bids. In the first half of the year, like I think in Q1, we only saw three deals. We wrote one of them. um i would say we saw on one that on the other two i would say a noteworthy name pretty aggressive and a big name who came down to a lower level so that's interesting um i think q2 was also a bit quiet not a lot of bids we we won our fair share it was fine um so you see a modest q1 q2 you see more in Q3 and even more in Q4. Q3, it's probably a bit less than other Q3s. There's certainly some out there. I noticed more mutual presence. Some of the big mutuals who have been reasonably quiet in the space recently are showing up again. So that's interesting. That will just add to the competitiveness. So I think we'll get our fair share. It might end up being closer to a billion and a billion and a half, something like that. The nice thing for us, though, is because we're established at this stage, we have a number of these deals are from big entities that parse them out in individual components. So we're at the stage now where I can think of at least one large American company where we've done four deals with the same company, and we show up well from a, call it an operational perspective. I mean, again, you're looking after policyholders or pensioners. um so we do we probably we probably punch above our weight there um but occasionally you'll lose in a tie because a very large very highly rated entity will will just will just will be picked out of you um so i love this the business i think it's great it's it's predictable i like the mortality level of it it can bounce around a little bit um i i did mention in the second quarter and we had a little bit of that but overall the book if you look back and go well what were your expectations and how is it turning out like it's pretty easy um it's pretty predict i shouldn't say easy it's pretty predictable you don't get a lot of surprises the the range of outcomes is pretty narrow which is a good thing so it's a comfortable business to write maybe that's a better way to say it then uh iul it's uh i feel like it's not discussed as much you know with your company but i think it is does have strategic importance so can you talk a little bit about more on how you compete in that market and how meaningful is it financially to the company well so it's interesting um you you can speak this even better than i can but you know one of the nuances as you will of gap accounting is we throw numbers together where we have life premiums and annuity deposits which is which makes a little sense right when you actually look under the cover we have about a million customers half of the roughly and in terms of the big businesses half a million of them are annuitants and half a million of them are life IUL so we have as many actually slightly more life customers as we have annuity customers and the economics in terms of returns are comparable in fact they're probably better on the life side so that's a big part of how we look at it what what is interesting in terms of this year so So I think we're number six in IUL in dollars, but number three in policies, back to middle America, multicultural America. I would say, because I want to sit here and tell you everything's perfect, I would say our numbers there are down a little. It's not because we're writing fewer policies, it's because those policyholders can't afford the same average premium. So our average policy is about, it's a little under $250,000. So you're talking premiums in the $1,250 to $1,500 range, but we're seeing a bit of a shift in just the affordability for those customers to buy. It's very often the first life policy they buy. So I think we're seeing an economic impact on IUL, not a competitive impact, which is very different from what we just talked about on the FIA side. But it's an interesting one.

I think maybe shifting more to profitability. So you laid out some targets towards the end of 2023. I think over the last 12 months, if we normalize for alts and some expense items, your ROE, I believe, is 119 basis points. And your ROE, I think, is 11 percent, both over the trailing 12 months. How are you thinking about the progress towards the medium-term targets that you had laid out?

And then what would be the key upside drivers you'd expect from here? yeah so so it's interesting so you know the metrics were laid out a few years ago as you said the a the AUM metric would very much still be intact you know we're on a nice path to get to a hundred billion dollars here in in in a few years so that's noteworthy the ROA I've said this in over the last few quarters I think we're will be somewhat corridor bind here if you get into the components we we definitely benefited from some expansion on the investment portfolio which lena can get into that's real and that will remain um surrenders have been higher um no that's fine i am agnostic on surrenders honestly like i i would like to keep the business i can replace the business on broadly economic terms as i keep it right back to this whole spread maintenance thing um but i it's hard to imagine that the level of surrenders will stay this high for several years. It might for several quarters. I don't know if it will for several years. That's okay. That's kind of a wash for me, but it'll impact the ROA math. Bouncing that on the other side, we've had our shift in the expense scale. We've gone from an expense ratio of 60 basis points at year-end 24. We brought it down to 50 by year-end 25, and we're on a path to 45. We said we would get to 45 by the end of next year, but we got to 47 already this year, and it can move a little bit, but we're ahead of progress, I would say, on that. So I think that'll be a bit more range-bound, and it's hard to predict exactly spreads and all of the other pieces that go with that. The ROE, yeah, I think the target is 14, and I think, yeah, we bounce around a little bit. We're sort of in that 11 to 12 range, so that is an expectation that you should hold us to task for, that we do that. That's a very key focus of ours. um i should probably acknowledge there was probably a multiple at the in those metrics as well that we haven't achieved and that's moved around but that's obviously a lot harder to control um so yeah for me i think that yeah range bound roa expand the roe continue the growth momentum we didn't have a capital light or fee element so i would add that um and yeah and and you know underscoring all of that is keep the core retail momentum going keep i mean i have profitability margins to maintain that's true and we will do that um but also you know we're we're capital

self-sufficient i think that's important that wasn't maybe made a metric three years ago but i think it's a very important one for everybody probably one for you know for all of us everyone in this room they want to know that we can do this so that's um that's important as well so i we have more metrics they're just not quite the same yeah i guess is that maybe to summarize it sounds like maybe the roa is more range bound but you still feel like you'll get roe expansion from the shift towards more capital right absolutely absolutely yes i mean you just mentioned it so maybe we'll go into capital generation just what what is your view of of organic capital generation for the company after you fund the retained business growth i mean at this point roughly speaking, we spend about a billion dollars on writing this level of business.

Maybe a little less, but the debt service is about 150. The dividends are about 150. I mean, the crazy part when the stock gets low is you're comparing yourself with money market funds. I mean, it's a heck of a yield. I wish it weren't so, but it is. So as I mentioned, we've made the decision in the second quarter to take some of that capital towards buybacks. I put that in the opportunistic category as well. So for us, if we want to write a lot more, and I'm not sure we would, like with less MIGA, less opportunity maybe for FABN in the near term, PRT, we may end up writing less just circumstantially. So that gives us maybe arguably more flexibility. To do meaningful, more RILA, FIA, IUL, then we'd have to weigh up, okay, are we taking from something else? So two things. Are we taking from something else? Are you reinsuring more? But I should also acknowledge we're doing all of this with, you know, our alternative portfolio is about $4 billion. It's about 8% of our portfolio. And it's, you know, for the last three and a half years, it's probably been yielding seven-ish compared to the long-term expectation of 12. five points and four billion that's 200 million you're three and a half years in and I don't know I'm not sure those numbers add up as well so obviously all of that coming through or coming true depending on which way you want to look at it makes a very significant change to the capital but I have to have a lens of but if that takes a while longer then you know obviously I want to keep you know we've got to keep the engine keep the engine going as well but that's kind of the unknown and i have both an optimistic and a conservative lens on that in terms of managing

the company maybe lena can get into this a little bit but just everyone's pretty much everyone has had somewhat below plant alts for the last few years but i think you've also talked a little bit about some vintage considerations too for your portfolio can you touch on that a bit Yeah, yeah.

So like Conor said, the ALS portfolio is about $4 billion. $3 billion is LPs and a billion, a little over a billion is about residuals. And the structural thing that is impacting our performance is that our LP portfolio is very young and the returns for a typical LP drawdown portfolio sort of emerge and pick up in the mid to late stages. So we did analysis earlier this year. So we look back at how equity LPs had done historically. And if you think of the lifetime of an LP fund as 15 years, and you break it down into three, five-year stages, so early stage, mid stage, and late stage, the way the returns emerges in the past first five years it was around six percent if you expand that to first 10 years it was around 10 percent and then if you extend that to the entire lifetime 15 years it was 15 percent and so 85 percent of our portfolio is in the early to mid stage and that's really what is dampening down our returns it's expected and then to add to that, there is some macro impact as well as M&A activity has slowed down. So that impacts realizations. But it's really the structural piece that is impacting our performance. We don't own a lot of real estate. It's mostly in equity LPs. And our peers, on the other hand, do own a lot of real estate. And real estate has been sort of under pressure for a while. So that's impacting their performance, but that's not what's impacting ours.

If I were to exclude alts, can you also talk about how the rest of the investment portfolio is performing, maybe both credit and returns?

Yeah, absolutely. So the portfolio is very well diversified and aligned with our liability profile. About 97% of the retained fixed income portfolio is investment grade. And it's done really well. So second quarter, our core fixed income yield was 4.91%, which was 14 basis points above the prior quarter and eight basis points above the prior year. So the yield is emerging nicely. And then in terms of credit related impairments, which would tell you how it's performed, the trailing five years, it's been six basis points, which is half of where the industry average is. So credit related impairments, which sort of tell you, you know, performance has been really, really good for us.

But that's not an accident. I mean, Lina and the team have done a fair amount of weeding and revising the portfolio over the last several years.

Yeah. So post-COVID, you know, just given and even prior to that, retail real estate was under pressure. Post-COVID, office real estate was under pressure. We had the regional banking crisis. So banking was under pressure. And so through all of this, you know, thankfully for us, our real estate exposures were more liquid. We had more in CMBS versus CMLs. And so we were able to rotate out of where we thought there was true fundamental deterioration as a result of COVID. And that has really helped us in terms of performance. So we did about over $3 billion of repositionings over the last five years, which increased the portfolio quality, which has also meant that our impairments have been much better than the industry.

We've done a lot on the disclosures. We sat down in early spring with our big credit investor and said, what would you want to see about our portfolio? And a lot of it was, you know, details on middle market. We've added a whole host of disclosures with that. And I can honestly tell you, every single thing they asked for, unless it was nonsensical and I can't even think of anything it was, we were like, sure, there was nothing that I would have been uncomfortable or any of us would have been uncomfortable disclosing, and we've done all of that. So I think that's helped a lot. And obviously, outside factors can raise new concerns, but certainly in terms of private credit or middle market lending or anything like that, we've really tried to tackle everything head on. And Blackstone have been a great partner for us.

We're almost out of time, but I just wanted to touch on one final thing I'm sure people are curious about, which is if you do sell part of the stake in the own distribution businesses, what would be your capital priorities for the freed up capital?

Well, I have to be careful. Obviously, that's a board decision. I expect, I mean, I think it would be a nice balancing act. you would the three logical places you would you would consider would you pay down a little bit of debt maybe we don't have anything actually coming to for another 18 months or so or would you at least maybe align a piece that maybe that's maybe the less attractive of the three what do you want to do from an investment you know what are the opportunities to invest the capital right up and obviously I expect the board would weigh up the the advantages of a call it an off-cycle dividend type thing which which sort of makes sense for us right we have all I mean if I may I know we're right at the end but you know we have a valuable book that I'm not sure is being reflected in the company right you know if you you know we're trading at half of book value if you were going to do a sum of the part if you did a sum of the parts evaluation from our organization or an intrinsic value of cash flows I think you'd come up with numbers that are broadly close to that to that book value basis so then the question is well okay if part of this is you can take something that is underappreciated today if you turn it into cash it's pretty hard to value it at 50 cents on the dollar when it's cash so yeah I mean a lot of food for thought there but that's part of the part of the logic here excellent all right well we're out of time so we're gonna wrap it up but Thanks, Connor, and then the F&G team.

Thank you. All right, excellent.