F&G Annuities & Life’s 2026 Q2 Earnings Call: Contradictory Visions for Peak Altitude Ownership and Retained AUM Growth

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Date of Call: Aug 6, 2026

Financials Results

• EPS: $0.65 per share (adjusted), down from $0.38 per share in Q1 2026 and prior year

Guidance:

• Operating expense ratio to AUM expected to improve to ~45 basis points by year-end 2027.
• Long-term target debt to capitalization ~25%, balance sheet to delever over time.
• Maintain RBC ratio above 400% target; NAIC's higher CLO capital charges are manageable.
• Expect net sales to continue growing with disciplined capital allocation between core and opportunistic sales.
• Expect continued momentum in core retail sales; de-emphasize MIGA sales due to returns below threshold.

Business Commentary:

Growth in Assets Under Management (AUM):

• F&G's AUM before reinsurance increased to $74.7 billion at June 30, up 8% over the prior year, with retained AUM of $55.9 billion.
• This growth was driven by positive asset flows, offset by the F&G Life block resale and a funding agreement back note maturity.

Core Sales Performance:

• Core retail sales of indexed annuities and indexed life reached $1.8 billion for Q2, marking one of F&G's strongest quarters on record.
• Despite industry contraction in FIA sales, F&G maintained strong momentum, attributed to disciplined sales growth and capital allocation strategies.

Alternative Investments and Returns:

• The alternative investments portfolio was valued at $4 billion, or approximately 8% of the total retained portfolio, with an annualized return of 5.9%.
• The return decreased from 8.3% in Q1 2026, impacted by external geopolitical factors and the early-stage nature of many investments.

Capital Allocation and Share Repurchases:

• F&G repurchased 4.5 million shares at an average price of $26.44, totaling $120 million in opportunistic share repurchases in the first half of the year.
• This was facilitated by strong capital generation and a strategic decision to deploy capital when stock prices were favorable.

PRT Sales and Seasonal Trends:

• Institutional sales of pension risk transfer (PRT) were $200 million for Q2, aligning with seasonal expectations ahead of increased activity in the second half of the year.
• The company anticipates higher PRT sales in Q3 and Q4, though market conditions may influence the volume due to well-funded plans reducing external funding pressure.

Sentiment Analysis:

Overall Tone: Positive

• Connor Murphy highlighted 'strong momentum' in core retail sales, one of the 'strongest quarters on record.' He stated F&G is 'well-positioned to grow assets under management' and 'create long-term shareholder value.' Mark Wiltsy noted results were 'largely in line with our expectations' and the company has 'strong capital position and financial flexibility.'

Q&A:

• Question from Wilma Burtis (Raymond James): Some of the spread-based competitors have seen spreads stabilize a little bit this quarter. And maybe you can give us a little bit of color on what you're seeing based on FG's book and the prevailing interest rate environment. And along those lines, maybe just talk a little bit about what you saw with the spread in this QQ.
  Response: Core fixed income and cost of crediting were in line with expectations and consistent with prior periods; surrender charges remain elevated but stable; DAC amortization increased due to prior year assumption review; mortality was soft in PRT book but expected to resolve.

• Question from Wilma Burtis (Raymond James): You guys had pretty strong buybacks this quarter, but could you just talk about the appetite going forward given the limited float? Just give us a little bit of color on where you stand with that.
  Response: Q2 buybacks were an opportunistic use of capital when the stock was low; not a primary capital deployment going forward, especially with lower opportunistic sales (MIGAs/SABNs) in the quarter.

• Question from Anne Leong (Barclays): As you think about the business from a longer-term perspective, are there any strategic areas that you're particularly focused on today?
  Response: Focus on maintaining core retail sales momentum, expanding fee-based business over spread-based, optimizing Peak Altitude (strategic alternatives process underway), and leveraging reinsurance partnerships to unlock sum-of-the-parts value.

• Question from Anne Leong (Barclays): Maybe an update on PEAT. Can you help us understand how it fits within your broader capital deployment framework and the factors that you're weighing as you evaluate those strategic alternatives for the business?
  Response: Exploring strategic alternatives to bring in a partner to acquire slightly over half of Peak Altitude, retaining growth potential; preferred a cleaner accounting with a 49% shareholding; early stages with interest but no declaration.

• Question from Mark Hughes (Truist Securities): The PRT business, I think you emphasized that's kind of a second half business. How is that pipeline shaping up?
  Response: Pipeline has been a little muted in H1 with four modest deals; expect higher activity in Q3 and Q4 as seasonally stronger; targeting ~$1.5-2B in business annually, not necessarily growing year-over-year.

• Question from Oscar Nieves (Stevens): I would like to double click on that last part on the alt investment shortfall. If I looked at it, it narrowed both in dollar terms and per share of this quarter versus last year. Is that an early sign that the realization environment is turning, or is it too soon to call that a trend? And you kind of mentioned this earlier, but just to make sure, practically speaking, what would need to happen for you to revisit that 12% long-term return assumption?
  Response: Near-term alternative investment returns expected to remain around 7-8% similar to H1; long-term 12% assumption is being consistently reviewed but not expected to change near-term; will reassess after market movements over next six months.

• Question from Oscar Nieves (Stevens): If I strip out the Bermuda session and the funding on grooming maturity, what would you say the underlying organic growth rate in retained AUM looks like right now?
  Response: Gross AUM growth expected in high single digits (e.g., ~$5-6B/year), but net growth after reinsurance would be roughly half, around 3% on an apples-to-apples basis; reinsurance leverage is an attractive ROE driver.

• Question from Oscar Nieves (Stevens): You mentioned, you talked earlier about the current thinking around the buybacks, but can you remind us how much capacity is left under the current authorization?
  Response: Approximately $12-15 million remaining under the current buyback authorization.

• Question from Vadip (Raymond James): Just with a quick follow-up for Wilma, you talked about 12 or 15 million remaining on the current buyback authorization. Is there any chance FG will increase that authorization given a lot of it was used up this quarter?
  Response: No comment; authorization decision is up to the board.

Contradiction Point 1

Peak Altitude Strategic Alternatives Framework

Different structures proposed for a potential partner investment in Peak Altitude.

What are your key takeaways from the latest earnings report? - Anne Leong (Barclays)

2026Q2: Exploring options to capture intrinsic value... partner to acquire a slight majority (~51%) while F&G retains ability to grow its stake. - Connor Murphy(CEO)

What is the current status of Peak Altitude (PEAT) in capital deployment and what factors are being considered for strategic alternatives? - Ailing (Barclays, for Alex Scott)

2026Q2: Preferred strategic alternative is to find a partner to acquire slightly over half of Peak (e.g., 51%). This would provide cleaner accounting... - Conor Murphy(CEO)

Contradiction Point 2

Underlying Organic Growth Rate in Retained AUM

Contradictory measures provided for the same metric.

Oscar Nieves (Stevens) - Oscar Nieves (Stevens)

2026Q2: Underlying retained AUM growth is expected to be in the high single digits (gross)... a more apples-to-apples measure would be around 3%. - Connor Murphy(CEO)

What is the organic growth rate of retained AUM, excluding Bermuda and FABN? - Oskar Nieves (Stephens)

2026Q2: Underlying organic growth in retained AUM is expected to be in the high single digits (e.g., ~$5-$6B annually). Net growth would be lower due to reinsurance... - Conor Murphy(CEO)

Contradiction Point 3

Characterization and Strategic Focus on Peak Altitude (Owned Distribution Business)

Contradiction in describing the business's growth and strategic importance.

Anne Leong (Barclays) - Anne Leong (Barclays)

2026Q2: Focus remains on continuing strong momentum in core retail sales... and leveraging the Peak Altitude business (with a strategic alternatives process underway)... - Connor Murphy(CEO)

What are the key strategic areas of focus for long-term growth? - Mark Hughes (Truist Securities)

2026Q1: The business has grown substantially and is now seen as a real company with nice growth. The current exercise is to determine the optimal capital structure and ownership. - Chris Blunt(CFO)

Contradiction Point 4

Outlook and Management of Alternative Investments Returns

Contradiction in the forward-looking return expectation for the alternative investments portfolio.

Oscar Nieves (Stevens) - Oscar Nieves (Stevens)

2026Q2: The Q2 alts return was better than peers... with a modest near-term expectation of around 7-8%. - Connor Murphy(CEO)

Is the narrowing alternative investment shortfall an early sign of a turning realization environment, and what would need to happen to revisit the 12% long-term return assumption for alts? - Wilma Burdis (Raymond James)

2026Q1: The business is planning for a long-term return in the 12%-14% range for the LP and equities portfolio but is using a more conservative number for capital purposes. - Conor Murphy(CEO)

Contradiction Point 5

Capital Deployment Strategy and Buyback Appetite

Contradiction on the strategic importance and future use of share buybacks.

Wilma Burtis (Raymond James) - Wilma Burtis (Raymond James)

2026Q2: Buybacks in Q2 were seen as a significant opportunity due to the stock price, but they are not a primary capital deployment tool going forward. - Connor Murphy(CEO)

Given the strong buybacks this quarter, what is the appetite for future buybacks considering the limited float? - Taylor Scott (Barclays Bank PLC)

2025Q4: The company will remain disciplined and patient on capital deployment. - Conor Murphy(CFO)

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