Corebridge Financial, Inc. Q3 FY2024 earnings call

• Kevin Hogan highlighted strong Q3 results with operating EPS at $1.38, 31% YOY growth. Core sources of income grew 4% YOY. • Individual Retirement saw premiums/deposits up 40% YOY, launched first registered index-linked annuity (RILA) with strong reception. • Group Retirement had premiums/deposits up 10% YOY excluding acquisitions, advisory/brokerage assets under administration up 22%. • Life Insurance had 14% YOY sales growth, with 80% of new policies auto-decisioned via digital process. • Institutional Markets reserves up 20% YOY, $1 billion issued, robust pipeline for pension risk transfer. • Strategic levers: organic growth, balance sheet optimization, expense efficiency (Corebridge Forward saved ~$320M with $80M more expected by 2025), capital management. • Financial goals progress: run rate ROE 13.3% YTD, 130 bps improvement; YTD run rate EPS $3.70, 13% YOY growth; $1.8B capital returned to shareholders in first 9 months.

Corebridge had a strong quarter with operating earnings per share at $1.38, a 31% YOY increase. Core sources of income grew 4% YOY and 5% sequentially. Individual Retirement: premiums and deposits increased 40% YOY to $5.5 billion. Group Retirement: premiums and deposits grew 10% YOY excluding planned acquisitions. Life Insurance: sales growth 14% YOY, outpacing the industry for eight consecutive quarters. Institutional Markets: reserves increased 20% YOY, and $1 billion was issued this quarter. Fee income (~30% of core sources) improved 11% due to higher account values and growing advisory/brokerage; underwriting margin improved 4% from favorable mortality; base spread income grew 4% YOY but declined 3% sequentially.

• Expect organic growth to continue contributing to earnings per share. • Continue balance sheet optimization, including expanding Bermuda strategy. • Expense efficiency efforts to continue with Corebridge Forward phase 2 focusing on digitizing processes. • Capital management focused on returning significant capital to shareholders, targeting 60%-65% payout ratio. • Sensitivities to rate actions: 25 bps SOFR decrease impacts base yield by less than 2 bps initially, moderating with portfolio runoff, hedging, and crediting rate management.

• Impact of interest rate changes on spread income, with potential short-term pressure in individual retirement. • Macroeconomic uncertainties affecting business conditions. • Potential volatility in mortality experience impacting underwriting margin.

Q: Alex Scott asked about additional opportunities for financial flexibility and expense efficiencies beyond Corebridge Forward.

A: Elias Habayeb mentioned Bermuda strategy progress to support new business and broader opportunities to be explored; Kevin Hogan discussed Corebridge Forward phase 2 focusing on digitizing insurance operations and enhancing finance/actuarial capabilities.

Q: Wes Carmichael inquired about RILA contribution in 2025 and Bermuda's role in capital management.

A: Elias Habayeb said RILA is a strong complement with attractive margins but no specific targets; Bermuda provides capital management toolkit opportunities including seeding new business, portfolio transactions, and attracting third-party capital.

Q: Suneet Kamath asked about annuity sales sustainability and spread income sensitivity to rate changes.

A: Kevin Hogan stated annuity industry drivers remain strong with large retirement-aged population and protection gap; Elias Habayeb explained 25 bps SOFR decrease impacts base yield less than 2 bps, mitigated by hedging and crediting rate adjustments, with spread income expected to grow long-term despite short-term pressure.

Q: Ryan Krueger followed up on short-term rates and macro hedges.

A: Elias Habayeb clarified sensitivity of less than 2 bps on base yield from 25 bps SOFR decrease, with macro hedges managed proactively, and floating rate assets playing role in ALM and liquidity.

Q: Tom Gallagher asked about capital management and ALM repositioning.

A: Elias Habayeb said target capital return 60%-65%, U.K. proceeds deployed; Kevin Hogan explained ALM management with floating rate assets playing role in duration and liquidity, dynamically managed based on yield curve changes.

Q: Elyse Greenspan inquired about PRT deal flow and capital buffer.

A: Kevin Hogan said strong pipeline of full plan terminations for remainder of 2024 and 2025; Elias Habayeb noted parent liquidity above 12-month needs, expected to trend down.

Q: Wilma Burdis asked about fixed annuity duration and market favorability.

A: Kevin Hogan said demand for fixed annuities remains strong, with shorter and longer duration products available based on customer and distributor strategies, environment favorable for annuities overall.

Q: Josh Shanker asked about excess capital and free cash flow conversion.

A: Elias Habayeb stated balance sheet strong, capital ratios above targets, disciplined in balancing capital distribution with business investment, expecting to deliver on shareholder returns.

Q: Dan Bergman asked about alternatives returns and life insurance mortality.

A: Elias Habayeb said Q4 alternatives returns expected between Q2 and Q3 levels, long-term expectation 8%-9%; mortality experience in line with pricing expectations, recaptured business with limited impact on volatility and run rate earnings.