Q4 2023 F&G Annuities & Life Inc Earnings Call

Operator: www.larryweaver.com Good morning, and welcome to F&G's fourth quarter and full year 2023 Earnings Conference. During today's presentation, all parties will be in a listen-only mode.

Good morning, and welcome to both.

Fourth quarter and full gear twenties twenty-three earnings conference call.

Today's presentation, all parties will be in a listen only mode. Following the presentation at the conference will be open for questions with instructions to follow at that time.

Operator: Following the presentation, the conference will be open for questions, with instructions to follow at that time. As a reminder, this conference is being recorded. I would now like to turn the call over to Lisa Foxworthy Parker, Senior Vice President, Investor and External Relations. Please go ahead.

As a reminder, this conflict being recorded.

And I'd like to turn the call over to Lisa Foxworthy, Parker Senior Vice President Investor and external relations. Please go ahead.

Lisa Foxworthy Parker: 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.

Operator, and welcome everyone. Joining me today are Chris Blanched, Chief Executive Officer, and Windy Young Chief Financial Officer. They look forward to addressing your questions. Following our prepared remarks today's earnings call May include forward looking statements and protections under the private Securities Litigation Reform Act, which do not guarantee future events.

We do not undertake any duty to revise or updates such statements insurance like information subsequent events or changes in strategy.

Lisa Foxworthy Parker: 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 p.m. Eastern Time through February 29th, 2024. Now, I'll turn the call over to our CEO, Chris Blunt. Good morning, everyone.

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 maybe meaningful to investors non-GAAP measures had been reconciled to gap where required in accordance with the F. C. C rules within our earnings release financial supplement an investor presentation, Olive which are available on the company's website.

Today's call is being recorded and will be available for webcast replay at F. T life Dot com.

It will also be available through telephone replay beginning today at one P. M. Eastern time do February 29th 2024.

And now I'll turn the call over to our C E O Chris what.

Chris Blunt: Thanks for joining us to discuss our fourth quarter and full year results. Before reviewing the quarter, I'd like to share with you the progress we've made over the last year. On December 1, 2022, F&F completed its partial spin-off of F&G, retaining an 85% majority interest, and F&G was listed on the New York Stock Exchange. Since then, our first year as a public company has been a very successful one. I'd like to start by recognizing our employees for their hard work and achievements over the last year. Thank you as well to our many partners and to our customers, whose feedback resulted in F&G being ranked number one for highest customer satisfaction among annuity providers in the U.S. by J.D. Power!

Good morning, everyone. Thanks for joining us to discuss our fourth quarter and full year results.

Before reviewing the quarter I'd like to share with you the progress we've made over the last year.

On December 1st 20, twenty-two up enough completed its partial spin off a bath a G.

85% majority interest.

She was listed on the New York Stock Exchange.

Since then her first year as a public company, it's been a very successful.

I'd like to start by recognizing our employees for their hard work and achievements of the last year. Thank you as well to our many partners in to our customers, whose feedback resulted in Athens G being ranked number one for highest customer satisfaction among annuity providers in the U S by Judy power.

Chris Blunt: And lastly, I'd like to express my appreciation to our parent company, F&F, for all of their support throughout the year. In short, 2023 was one of our best years with numerous accomplishments worth highlighting. First, our retail and pension risk transfer businesses continue to generate sustainable asset growth. We reported record gross sales of $13.2 billion in 2023, which exceeded the top end of the $12 to $13 billion range we provided at our Investor Day in October and were up 17% over the prior year, well in line with our goal of growing annual gross sales at a double-digit clip. This demonstrates the strength of our multi-channel distribution platform that is hitting on all cylinders and generated $10 billion of retail gross sales through our agent, bank, and broker-dealer channels, $2 billion of pension risk transfer sales, and $1 billion of FHLB funding agreements.

And lastly, I'd like to express my appreciation to our parent company up and out for all of their support throughout the year.

In short 2023 was one of our best years with numerous accomplishments worth highlighting.

First a retelling Petrobras transfer businesses continue to generate sustainable asset growth.

Record gross sales of 13.2 billion in 2023, which exceeded the top at the the 12 to 13 billion dollar range. We provided that are Investor day in October and we're up 17 per cent over the prior year well in line with our goal of growing annual gross sales of the double digit clip.

This demonstrates the strength of our multichannel distribution platform is hitting on all cylinders and generate a 10 billion of retail gross sales through our agent.

And broker dealer channels 2 billion, a pension was transfer sales and 1 billion a S. H L b funding agreements.

Chris Blunt: We also had record net sales of $9.2 billion in 2023, well above the threshold of $6 to $7 billion of annual net sales needed to grow our retained AUM and manage it in line with our capital targets. Net sales reflect third-party flow reinsurance, which increased from 50% to 90% of MIGA sales during 2023, as expected. F&G has successfully expanded from one to three high quality and established flow reinsurance partners, which provides counterparty diversification and additional capacity. The higher percentage of flow reinsurance provides a lower capital requirement on the seeded new business, while allocating capital to the highest returning retained business enhances cash flow, and generates fee-based earnings, resulting in accretive returns to F&G.

We also had record sales of 9.2 billion in 20 twenty-three well above the threshold six to 7 billion of annual sales needed to grow a routine day, you out and managed in line with our capital targets.

That sounds reflect third party flow reinsurance, which has increased from 50% to 90 per cent of biker sales during 2023 as expected.

F. M. G has successfully expanded from one to three high quality and established.

Hello, reinsurance partners, which provides counterparty diversification and additional capacity.

A higher percentage of flow reinsurance provides a lower capital requirements.

Business, while allocating capital to the highest returning routine business.

Hamsters cash flow and generates P based earnings, resulting accretive returns to laugh at G.

Chris Blunt: We have profitably grown retained assets under management to a record $49.5 billion at December 31. This is an increase of 14% over the prior year and was driven by net new business flows, stable in-force retention, and net debt proceeds over the last 12 months. AUM before flow reinsurance was $56.3 billion, adjusting for the approximately $7 billion of cumulative new business seeded.

Profitably ground retained assets under management to a record 49.5 billion at December 31. This is an increase of 14 per cent over the prior year. It was driven by net new business flows stable enforce retention.

Proceeds over the last 12 months.

Before slowly insurance was 56.3 billion adjusting for the approximately 7 billion accumulative new business eat it.

Chris Blunt: A second area to highlight has been the steady and predictable performance of our profitable in-force book. While markets were volatile through 2023, we benefited from the superior foundation that our In-Force book provides. Importantly, our book has no legacy liability issues.

A secondary to highlight has been a steady predictable performance are are profitable enforce book.

Markets were followed through 2023, we benefited from the Superior Foundation that are in force book provides.

Partly our book has no legacy liability issues.

Chris Blunt: Our funding agreements, pension risk transfer, and immediate annuities are non-surrenderable, and our retail fixed annuities are 92% surrender charge protected, with 75% also subject to market value adjustment. We generated very positive and strong net inflows in 2023, and Wendy will provide further insights into our surrender trends in the current market environment in a few minutes. A third area of achievement over the last 12 months has been the outstanding performance of our investment portfolio, which is well matched to our clean and stable liability profile. We continually evaluate opportunities for upside, risk-adjusted returns, and downside protection in our investment portfolio. In 2023, we will enhance the return while improving the credit quality of our portfolio by executing on our dynamic portfolio allocation and continuing to de-risk in light of market dislocations and ongoing macro environment uncertainty. We will also successfully negotiate a new fee agreement with our partner, Blackstone.

Funding agreements pension this transfer at immediate annuities are not surrendered.

And a retail fixed annuities are 92 per cent surrender charge protected with 75% also subject to market value adjustment.

We generated very positive.

Net inflows in 2023.

Wendy will provide further insights to our surrender trends in the current market environment in a few minutes.

A third area of achievement over the last 12 months has been the outstanding performance of our investment portfolio.

It is well matched to her clean and stable liability profile.

We continually evaluate opportunities for upside risk adjusted returns and downside protection and our investment portfolio.

It's 2023, we enhance the return while improving the credit quality of our portfolio by executing out our dynamic portfolio allocation.

Continuing to do risk in light of market dislocations, but I'm going back real environment uncertainty.

We also successfully negotiated a new fee agreement with our partner Blackstone.

Chris Blunt: During 2023, our fixed income yield, excluding alternative investment volatility and variable investment income, expanded to 4.45% in the fourth quarter, as compared to 4.37% in the fourth quarter of 2022. This reflects upside from higher yields on new investments and floating rate assets. At year-end 2023, the portfolio is high quality, 95% of fixed maturities being investment grade. We hold significantly lower exposure to the commercial real estate and office sectors in our CML portfolio.

During 2023, I was fixed income yield excluding alternative investment volatility variable and dusted at any cost.

It's a 4.45% in the fourth quarter as compared to 4.37% in the fourth quarter of 2022.

This reflects upsides from higher yields on new investments and floating right assets.

You're in 2023, the portfolio is high quality 95 per cent of fixed maturity is being investment grade, we hope significantly lower exposure to the commercial real estate and office sectors.

Chris Blunt: Credit-related impairments remain low, averaging five basis points over the past three years, well below our pricing assumptions. Given the potential for an economic slowdown and lower interest rates in the years ahead, we took some downside risk off the table by hedging approximately $5 billion of our $10 billion floating rate asset portfolio, locking in about 190 basis points of incremental yield beyond what was originally priced in. This translates to approximately 12 basis points of annual incremental investment margin above our pricing over the next three to five years. We expect to continue to evaluate hedging additional floating rate assets where it is beneficial and possible. Also, we've refreshed our annual portfolio stress test, which is conservative and assumes no management action, and has once again confirmed that our portfolio is well-positioned to withstand a sharp downturn in the economy.

Portfolio.

Credit related impairments real low averaging five basis points over the past three years, well below our pricing assumptions.

Given the potential for an economic slowdown and lower interest rates in the years ahead, we took some downside risk off the table by hedging approximately 5 billion of our 10 billion dollar floating right asset portfolio.

Walking in about 190 basis points of incremental yield beyond what was originally priced than this.

This translates to approximately 12 basis points of annual incremental investment margin above our pricing over the next three to five years.

We expect to continue to evaluate hedging additional floating right now so that's where it beneficial impossible.

Also be refreshed our annual portfolio stress test, which is conservative and assumes no management action.

And is once again confirmed that our portfolio is well positioned to withstand a sharp downturn economy.

Chris Blunt: A fourth area to highlight in 2023 centers on our balance sheet strength and capital allocation, given we were well prepared to drive growth and capture the market opportunity. In our first year as a public company, F&G self-funded its growth through our enforced capital generation, reinsurance programs, and the planned issuance of senior debt. And we have increased our annual common dividend to $105 million, a 5% increase to $0.21 from $0.20 per share, and allocated capital to launch our new share repurchase program to take advantage of any future market dislocations. Our commitment to strong ratings and achieving ratings upgrades over time was recognized through two rating upgrades to A or Excellent by AM Best last month and to A3 by Moody's in July.

A for theory to highlight in 2023 centers on our balance sheet strength and capital allocation.

We were well prepared to drive growth and capture the market opportunity.

First year as a public company F. M. G. As self funded it's Grove, who are enforced capital generation reinsurance programs and the planned issuance of senior debt.

And we have increased our annual common give it up to 105 million five per cent increase to 21 cents from 20 cents per share.

Capital to launch our new share repurchase program.

[noise] advantage of any future market dislocations.

Our commitment to strong ratings choosing ratings upgrades over time was recognized.

Reading upgrades to a or excellent by a best last month.

A three by Moody's in July.

Chris Blunt: These upgrades provide third-party recognition of our progress, support further organic growth, and give us greater strategic flexibility. Another vote of confidence came from F&F's $250 million mandatory convertible preferred stock investment in F&G last month to further grow retained assets under management given the compelling market opportunity that exists. A final area that I'd like to highlight is our own distribution strategy. As we said at our Investor Day, F&G is uniquely positioned to be a capital provider to key distribution partners. In January of 2024, F&G acquired a 70% majority ownership stake in a wholesaler of life-and-duty products to financial institutions and the broker-dealer community for approximately $270 million. This is our fifth and largest transaction to date and brings our cumulative deployed capital to about $500 million. Owned distribution further strengthens our relationships with key partners, as well as providing us with an earnings stream from our ownership stakes, providing for higher margins and a lower marginal cost of capital, which is expected to be accretive to ROEs.

These upgrades provide third party recognition of our progress support further organic growth and give us greater strategic flexibility.

Another vote of confidence came from after announced 250 million dollar mandatory convertible preferred stock investment.

G last month to further grow retained assets under management, given the compelling market opportunity that exists.

The final area that I'd like to highlight as her own distribution strategy.

Senator Investor Day, I think she is uniquely positioned to be a capital provider to key distribution partners.

In January of 2024.

70% majority ownership stake in a wholesaler of life and the duty products to financial institutions, and the broker dealer community for approximately $270 million.

This is our fifth and largest transaction date and brings our cumulative deployed capital about 500 billion.

Oh and distribution further strengthens our relationships with key partners as well as providing us with an earnings stream from our ownership Stakes.

For higher margins at a lower marginal cost of capital, which is expected to be accretive to orally.

Wendy Young: Overall, 2023 was a big year for us in terms of execution and our first year as a public company. For the full year and excluding significant items, we delivered A&E of $539 million, which generated an adjusted ROA of 117 basis points, and we reported an adjusted ROE in excess of 10%. We continue to execute on the plans we outlined during our Investor Day and are pleased to see investors recognize F&G's success as our market capitalization has more than doubled from $2.4 billion at the time of the partial spinoff in December 2022 to approximately $5.8 billion at the end of 2023. Looking ahead to 2024, 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.

Overall 2023 was a big year for us in terms of execution in our first year as a public company.

For the full year and excluding significant items, we delivered.

539 million, which generated and adjusted R. O a of 117 basis points.

Reported and adjusted or are we in excess of 10 per side.

You continue to execute on the plans we outlined during our Investor day and are pleased to see busters recognize effigies success.

Capitalization has more than doubled from 2.4 billion at the time, but the partial spin off.

In December 20, twenty-two to approximately 5.8 billion at the end of 2023.

Looking ahead. The 2024, we have plenty of momentum to continue to deliver sustainable asset growth from a retail and pension risk transfer Greg strategies and ongoing margin expansion from enhanced investment margin opportunities operational scale benefits and T based earnings from accretive flow reinsurance.

Wendy Young: We are also well positioned to diversify our earnings given the strong growth of our middle market life insurance business and owned distribution strategies. I'm very proud of our accomplishments and confident that F&G will continue to generate shareholder value through continued execution of our strategic priorities and because of the strong culture that we've created, which has allowed us to recruit and develop exceptional talent. Let me now turn the call over to Wendy to provide further details on F&G's full year and fourth quarter financial highlights. Thanks, Chris.

We're also well positioned to diversify or earnings given the strong growth in part they don't bark at life insurance business and owned distribution strategies.

I'm very proud of our accomplishments with confident that athletes you will continue to generate shareholder value.

10, you'd execution of our strategic priorities because of the strong culture that we've created which has allowed us to recruit Ah develop exceptional talent.

Let me now turn the call over to Wendy to provide further details on effigies full year and fourthquarter financial highlights. Thanks crash. We are pleased with refugees overall financial performance for the full year and we continue to maintain strong capitalization and financial flexibility to successively execute are great.

Wendy Young: We are pleased with F&G's overall financial performance for the full year, and we continue to maintain strong capitalization and financial flexibility to successfully execute our growth strategy. Adjusted net earnings for the full year 2023 were $335 million, or $2.68 per share, and included $405 million, or $3.24 per share, of investment income from alternative investments and $51 million, or $0.41 per share, of other significant expense items. Alternative investment investment income is based on management's long-term expected return of approximately 10% on $558 million, or $4.46 per share. Adjusted net earnings for the full year 2022 were $353 million, or $3.07 per share, and included $202 million, or $1.75 per share, of investment income from alternative investments and $99 million, or $0.86 per share, of other significant income items. Alternative investment income based on management's long-term expected return of approximately 10% was $419 million, or $3.64 per share.

Strategy.

Justin that earnings for the full year, 2023, or 335 million or $2.68 per share and included 405 million or $3.24 per share of investment income from alternative investment and 51 million or 41 cents per share other significant extent items.

Alternative investments investment income based on management longterm expected return the approximately 10 per cent with 558 million or $4.46 per share.

Just isn't that our names for the full year, 2022, or $353 million or $3.07 per share and included $202 million.75 per share of investment income from alternative investment and 99 million or 86 cents per share of other significant income item alter.

Alternative investment investment income based on management Longterm expected return at approximately 10 per cent was $419 million or $3.64 for sure.

Wendy Young: For comparison, adjusting for these significant items in both periods, adjusted net earnings were $539 million in full year 2023, up 14% from $471 million in full year 2022, and reflect asset growth, product margin expansion, and accretive flow reinsurance fees, partially offset by an increase in interest expense due to planned capital market activity and higher operating costs in line with our growth in sales and assets and continued investments in our operating platform. Adjusted return on assets was 117 basis points in full year 2023, above our 110 basis point forecast and in line with 118 basis points in the prior year, excluding significant items. Adjusted return on equity, excluding AOCI, was 10.4% in 2023 as compared to approximately 9.6% in 2022. Next, turning to the results for the quarter, adjusted net earnings for the fourth quarter of 2023 were $75 million, or $0.60 per share, and included $110 million, or $0.88 per share of investment income from alternative investments and $19 million, or $0.15 per share of other significant expense items comprised of $9 million unfavorable actuarial industry assumption update and $10 million one-time fixed asset impairment charge. Alternative investment income based on management's long-term expected return of approximately 10% was $147 million, or $1.18 per share.

For comparison adjusting for these significant items in both periods adjusted net earnings for three 539 million and a four year 2023 14 per cent from 471 million in full year 2022, and reflect asset growth product margin expansion and it credit slow reinsurance fees.

Partially offset by an increase in interest expense due to plan capital market activity and higher operating costs in line with our growth in sales and assets and continued investments in our operating platform.

I just did return on assets was 117 basis points and four year 2023 above 110 basis points forecast and in line with 118 basis points in the prior year.

Excluding significant items adjusted return on equity excluding a O C. I was 10.4% in 2023 as compared to approximately 9.6 per cent and 2022.

Next turning to the results for the quarter.

[noise] net earnings for the fourth quarter of 2000, twenty-three, where 75 million or 60 cents per share and included 110 million or 88 cents per share of investment income from alternative investments and 19 million or 15 cents per share of other significant expense items comprised of 9 million unfavorable.

Actuarial industry assumption update and 10 million, one time fixed asset impairment charge alternative investment investment income based on management longterm expected return of approximately 10 per cent was 147 million or a dollar and 18 cents per share.

Wendy Young: Adjusted net earnings for the fourth quarter of 2022 were $130 million or $1.04 per share and included $41 million or $0.32 per share of investment income from alternative investments and $58 million or $0.46 per share of significant income for a one-time tax benefit from carryback of capital losses. On alternative investments, investment income based on management's long-term expected return of approximately 10% was $113 million or $0.90 per share. For comparison, adjusting for these significant items in both periods, adjusted net earnings were $131 million in the fourth quarter of 2023, down 9% from $144 million in the fourth quarter of 2022, and reflect modest product margin expansion due to an inherent timing lag between the precipitous decline in rates and our pricing actions in the fourth quarter of 2023 and accretive flow reinsurance fees, which were more than offset by higher interest expense due to planned capital market activity This result is primarily driven by an unfavorable mark-to-market movement which is excluded from adjusted net earnings.

[noise] at net earnings for the fourth quarter of 2022, or 130 million or a dollar and four cents per share and included 41, nine or 32 cents per share of investment income from alternative investments and 58, nine or 46 cents per share a significant income for a one time tax benefit from Kerry backup capital losses.

Alternative investments investment income based on management's longterm expected return proximately 10 per cent was $113 million or 90 cents per share barking.

For comparison adjusting for these significant items in both periods adjusted net earnings for 131 million in the fourth quarter 20, twenty-three down 9% from 144 million in fourth quarter of 2022 and reflect modest product margin expansion due to inherent timing lag between the precipitous decline in rates and Ah.

Missing actions in the fourth quarter of 2023, and a creative flow reinsurance fees, which are more than offset by higher interest expense due to plan capital market activity in higher operating costs in line with our growth in sales and assets and continued investment in our operating platform.

Turning to reporting that income on that basis, we reported 299 million that lost in the fourth quarter of 2023, and 858 million net loss.

2023 for full year this.

This result is primarily driven by unfavorable mark to market and isn't it which is excluded from adjusted net earnings we view the short term mark to market movements.

Wendy Young: We view the short-term mark-to-market movement as point-in-time, accounting-driven, and not economic. Given adequate liquidity levers, we do not expect to sell securities and realize losses to meet corporate liquidity needs. To recap, despite some volatility in our earnings in the fourth quarter, our full year performance nonetheless builds on our proven track record over successive years and demonstrates progress toward our targeted value creation levers of asset growth, margin expansion, and enhanced earnings from Flow Reinsurance. I'd now like to provide additional perspective on the volatility that we encountered this past year. From a retention perspective, in 2023, we saw predictable outflows from our MIGA fixed-rate annuities, which are aligned to the contractual maturity date set at origination. For fixed-indexed annuities, we have seen elevated surrenders this year, although offset by higher inflows.

Point in time, accounting, driven and not economic.

Given adequate liquidity lovers, we didn't I expect to sell securities unrealized losses to meet corporate liquidity need to recap. Despite some volatility in our earnings in the fourth quarter are full year performance. Nonetheless bills on our proven track record over successive years and demonstrates progress toward are targeted value creation lepers of I.

Gross margin expansion and enhanced earnings from slow reinsurance.

I would like to provide additional perspective on the volatility that we encountered this past year.

From our retention perspective in 2023, we saw predictable outflows from our Maiga fixed rate annuities, which are aligned to the contractual maturity date set at origination for fixed indexed annuities, we have seen elevated surrenders. This year, although offset by higher inflows. This was expected given to spike in your money.

Wendy Young: This was expected given the spike in new money rates that the industry hasn't seen in over a decade, which can spur consumer demand to surrender their annuities for new policies under the 1035 exchanges. We generated very strong positive net inflows in 2023, given our record new business volumes, which restart the surrender charge period, further improving the liability profile. And our enforced annuity account balance continues to steadily grow on both a quarterly and annual basis. As a reminder, for insurance companies like F&G, surrenders typically provide a boost to earnings from the higher surrender charge fees and freed up capital from the policy lapse.

Re set the industry hasn't seen in over a decade, which can spur consumer demand to surrender their noticed for new policies under 10 35 exchanges.

We generated very strong positive net inflows in 2023, given our record news business Lions, which restart the surrender charged period further and praising liability profile and are enforced annuity account balanced continues to steadily grow on both accordingly, an annual basis as a reminder for insurance companies like F and G.

Surrenders typically provide a boost to earnings from the higher surrender charge fees and freed up capital from the policy lapse and.

Wendy Young: Importantly, our new business and in-force are actively managed to maintain pricing targets over time. That being said, we can expect pockets of market volatility. During the fourth quarter, we saw some margin compression from the interest rate volatility that the annuities industry experienced as rates fell dramatically through the end of the year and consumers rushed to lock in rates, creating a dynamic environment for crediting rates and strategies.

Importantly, our new business and enforce are actively managed to maintain pricing targets overtime that being said, we can expect pockets of market volatility during the fourth quarter. We saw some margin compression from the interest rate volatility that the annuities industry experienced as rates fell dramatically through the end of the year and consume.

He was rushed to lock in rates, creating a dynamic environment for cutting rates and strategy.

Wendy Young: We were disciplined and actively managed to maintain new business pricing targets. However, there are expected timing lags between precipitous rate movements and our pricing actions for both new business pricing and annual enforced renewal rate setting. This is not the first time we have navigated these issues, and in our experience, we view the resulting quarterly volatility as a blip, given the rapid movement in rates. There is no change in our economics or expectations for 2024 margins, and the long-term outlook for our business remains unchanged. We are positioned to sustain our product margin in a variety of interest rate and economic environments. Our proven track record in recent years demonstrates that we can profitably grow the business and maintain consistent pricing in any rate and spread environment, whether peak or trough. Next, I'd like to provide an update on our own distribution strategy. During 2023, our own distribution stakes increased throughout the year from approximately $20 million to $260 million.

We were disciplined and actually actively managed to maintain your business pricing targets. However, they are expected timing lags between precipitous rate movements and our pricing actions for both new business pricing and annual and forest renewal rate setting. This is not the first time, we have navigated these issues and and our experience we view, the resulting quarterly varlet.

As a blip given the rapid movement and right. There is no change in our economics, our expectation for 2024, Martin and the longterm outlook for our business remains unchanged, we're physician to sustain our product margin in a variety of interest rate and economic environment are proven track record in recent years demonstrates that we can profitably grow.

The business and maintain consistent pricing and any rate and spread and environment, whether peak or trough.

Next I would like to provide an update on our own distribution strategy.

2023, our own distribution stakes increase throughout the year from approximately 20 million to 260 million.

Wendy Young: Notably, this excludes the majority ownership stake in a life and annuity wholesaler that we closed in January of 2024 for approximately $270 million that Chris mentioned earlier. We are working on enhancements to our financial supplement for the first quarter 2024 to reflect the emerging performance of owned distribution on a gap reporting basis, which we expect to provide feed-based earnings and higher returns over time. Now, turning to our balance sheet, we ended the year with a gap book value excluding AOCI of $5.1 billion, or $40.42 per share, with 126 million common shares outstanding as of December 31st. There is a page in our investor presentation providing an analysis of book value per share. F&G's debt-to-capitalization ratio, excluding AOCI, was 25.7% as of December 31st.

This excludes the majority ownership stake a life and annuity wholesaler that we closed in January of 2024 for approximately 270 million that Chris mentioned earlier.

We are working on enhancements to our financial supplement for the first quarter 2024 to reflect the emerging performance of one distribution like App reporting basis, which we expect to provide fee based earnings and higher returns over time now.

Now turning to her balance sheet, we ended the year with a gap book value, excluding a O C. I, a 5.1 billion or $40.42 per share with 126 million common shares outstanding as of December 31st There's a page and our investor presentation, providing an analysis of book value for sure.

F N G is that the capitalization ratio, excluding a S. C I was 25.7%.

December 31st this is in line with our long term target of 25 per cent and excludes the 250 million preferred stock issuance in January 2024.

Wendy Young: This is in line with our long-term target of 25% and excludes the $250 million preferred stock issuance in January 2024. During 2023, we successfully executed on two senior note issuances, including a $345 million issuance in December and $500 million issuance in January 2023, with proceeds used to support AUM growth and a revolver partial pay down. On February 16, 2024, we entered into an amended and restated credit agreement, which included an increase to the size of the facility commitments to $750 million from $665 million and extended the maturity of the facility by two years to November of 2027, thereby enhancing our liquidity profile and financial flexibility. The outstanding balance is $365 million, which reflects a $150 million pay-down in the fourth quarter.

[noise] 2023, we successfully executed on two senior note issuances, including a 345 million issuance in December and 500 million issuance in January 2023, with proceeds used to support AUN growth and a revolver partial pay down.

On February 16th 2024, we entered into an amended and restated credit agreement, which included an increase to the size of the facility and that and that's two 750 million from 665 million and extended the maturity of the facility by two years to November of 2027, thereby enhancing our liquidity profile.

And financial flexibility the outstanding balance is 365 million, which reflects 150 million pay down in the fourth quarter.

And 20 twenty-three our interest expense was $97 million or 21 basis points of adjusted R. O E as compared to 29 million or seven basis points of adjusted our away in 2022 as expected and in line with our capital markets activity over the last 12 months are annualized interest expenses approximately $120 million.

Wendy Young: In 2023, our interest expense will be $97 million, or 21 basis points of adjusted ROA, as compared to $29 million, or 7 basis points of adjusted ROA, in 2022, as expected and in line with our capital markets activity over the last 12 months. Our annualized interest expense is approximately $120 million, or roughly 6.8% blended yield on the $1.8 billion of total debt outstanding. We continue to target holding company cash and invested assets at two times fixed charge coverage. Our strong capitalization supports both growth and distributable cash. During 2023, F&G returned $119 million of capital to shareholders, including $101 million of common dividends and $18 million of share repurchases. During the year, we repurchased approximately 870,000 shares at an average cost per share of $21.07.

Or roughly 6.8% blended yield on the 1.8 billion a total debt outstanding we.

We continue to target holding company cash and invested assets at two times sticks charged coverage.

Are strong capitalization supports both growth and distributable cash during 20 twenty-three F. M. G returned $119 million of capital to shareholders, including $101 million of common dividends and 18 million of share repurchases. During the year, we repurchased approximately 870000 shares at an average cost per share of.

$21.07.

Ah November seven we expanded.

The capacity of the share repurchase program from 25 million to 50 million remaining authorization yet to be purchased under the program was 32 million as of December 31st to take advantage of future market dislocation.

On February 15th 2024, we declared a 21 cents per share dividend payable on March 29th to the stock holders of record as of March 15th.

Wendy Young: On November 7th, we expanded the capacity of the share repurchase program from $25 million to $50 million. The remaining authorization yet to be purchased under the program was $32 million as of December 31st to take advantage of future market dislocations. On February 15, 2024, we declared a $0.21 per share dividend payable on March 29 to the stockholders of record as of March 15. As Chris mentioned earlier, F&F's recent investment in F&G will accelerate the growth of our retained AUM given the current market opportunity. Here's a few points.

As Chris mentioned earlier Fnf's recent investment in F and G will accelerate the growth of our retained AUN given the current market opportunity here's a few points.

On January 16th 2024, F and F and S. M. G announced the closing of a 250 million mandatory convertible preferred stock investment issued by F. N G annuities and life are top holding company to <unk>.

I think he intends to use net proceeds from the investment to support growth of its assets under management.

A portion of the proceeds will be held too fun to six and seven eighths preferred dividend, which is subject to declaration by the board of directors. The preferred dividends can be paid in either cash or common shares if dividends are deferred until the mandatory conversion date in 2027, the cumulative payment of dividends will be converted into.

Wendy Young: On January 16, 2024, F&F and F&G announced the closing of a $250 million mandatory convertible preferred stock investment issued by F&G Annuities & Life, our top holding company to F&F. F&G intends to use net proceeds from the investment to support growth of its assets under management. A portion of the proceeds will be held to fund the six and seven-eighths preferred dividend, which is subject to declaration by the Board of Directors. The preferred dividends can be paid in either cash or common shares.

Common shares.

On February 15th 2024, we declared a quarterly cash dividend a 0.8976 cents per share on its preferred stock held by F enough.

On a pro forma basis or year, and 20 twenty-three debt capitalization ratio, excluding a O C. I would be 24.8% based on current debt outstanding, including the new preferred stock as equity.

Going forward, we would expect to conform our earnings presentation to report net earnings available to common shareholders and adjusted net earnings available to common shareholders.

Wendy Young: If dividends are deferred until the mandatory conversion date in 2027, the cumulative payment of dividends will be converted into common shares. On February 15, 2024, we declared a quarterly cash dividend of $0.8976 per share on its preferred stock held by F&F. On a pro forma basis, our year-end 2023 debt-to-capitalization ratio, excluding AOCI, would be 24.8% based on current debt outstanding, including the new preferred stock as equity. Going forward, we would expect to conform our earnings presentation to report net earnings available to common shareholders and adjusted net earnings available to common shareholders. Now, moving on to our strong statutory capital position, as expected, we ended the year with a strong and stable capital position, having an estimated company action level risk-based capital or RBC ratio of approximately 440% for our primary operating subsidiary, in line with the prior year and providing a buffer well above our 400% target. Notably, our RBC ratio as of December 31st excludes net proceeds of the $250 million preferred stock investment from FNF in January of

Now moving on to a strong statutory capital position as expected. We ended the year with a strong stable capital position, having an estimated company action level risk based capital R. R. B C ratio of approximately 440 per cent for primary operating subsidiary in line with the prior year and providing.

Buffer well above her 400 per cent target, notably our RBC ratio as of December 31st excludes net proceeds of the $250 million preferred stock investment from F enough in January of 2024.

F and G as well positioned to self fund its continued growth with positive and growing enforce capital generation available that capacity as our balance sheet Delevers with book value growth over time and ample opportunity for future reinsurance program, we expect to be active in the capital markets in 2024 to fund our growth.

Pay down the a revolver in debt maturities. We also expect our stable profitable enforced to generate more than 1 billion and capital.

Let me now turn the call over to Chris to wrap up.

Thanks.

[noise] to conclude we have real momentum across our platform as we enter 2024 positions us to deliver sustainable asset growth ongoing margin expansion of improved returns as well as in the hamstrings powers, we strive to build upon this past year's Betty successes.

Importantly, I remain optimistic that we can continue to deliver.

Wendy Young: F&G is well positioned to self-fund its continued growth with positive and growing enforced capital generation, available debt capacity as our balance sheet de-levers with book value growth over time, and ample opportunity for future reinsurance programs. We expect to be active in the capital markets in 2024 to fund our growth and pay down our revolver and debt maturities. We also expect our stable, profitable enforcement to generate more than $1 billion in capital. Let me now turn the call over to Chris to wrap up. Thanks, Wendy.

Double digit growth sales growth in 2024, driven by a retail and pension was transferred growth strategies.

The launch of a Royal a product earlier this month will be a nice tailwind to our sales growth as we enter a large and fast growing market in fact industry wireless sales are forecasted to be between 44 and 48 billion.

This past year, which is a record level.

We believe our product offering is differentiated in the market and will uniquely meet customers needs. So it will obviously take some time to gain traction and ramp up.

We also expect to deliver ongoing margin expansion from enhanced investment opportunities effectively managing our operating expenses, while scaling our organization overtime.

Chris Blunt: To conclude, we have real momentum across our platform as we enter 2024 that positions us to deliver sustainable asset growth, ongoing margin expansion, and improved returns, as well as enhanced earnings power as we strive to build upon this past year's many successes. Importantly, I remain optimistic that we can continue to deliver double-digit gross sales growth in 2024, driven by our retail and pension risk transfer growth strategies. The launch of our RYLA product earlier this month will be a nice tailwind to our sales growth as we enter a large and fast-growing market. In fact, industry RYLA sales are forecasted to be between $44 and $48 billion this past year, which is a record level.

Driving fee based earnings from accretive flew reinsurance.

We have historically spoken of a goal delivering it adjusted our away excluding significant items of 100 basis points, which we have been exceeding and therefore, risa 210 basis points as the new baseline during our Investor day.

We expect to deliver 15 to 30 basis points of core margin expansion.

Additional 815 basis points of one distribution margin expansion increase our baseline adjusted or away excluding significant items over the medium term.

Chris Blunt: We believe our product offering is differentiated in the market and will uniquely meet customers' needs, though it will obviously take some time to gain traction and ramp up. We also expect to deliver ongoing margin expansion from enhanced investment margin opportunities, effectively manage our operating expenses while scaling our organization over time, and drive fee-based earnings from accretive flow reinsurance. We have historically spoken of a goal of delivering an adjusted ROA, excluding significant items, of 100 basis points, which we have been exceeding and therefore reset to 110 basis points as the new baseline during our investor debt. We expect to deliver 15 to 30 basis points of core margin expansion and an additional 8 to 15 basis points of owned distribution margin expansion to increase our baseline adjusted ROA, excluding significant items, over the medium term. We also expect to achieve 300 to 400 basis points of expansion in adjusted ROE, excluding AOCI and significant items, over that same time horizon.

We also expect to achieve 300, a quarter basis points of expansion two adjusted R. O E. Excluding a O C. I am significant items over that same time horizon.

Lastly, we continue to diversify it enhancer earnings power as we execute on our own distribution strategy.

Chip steak generate a higher margin earnings stream at a lower cost of capital, which we expect to be accretive to our returns over time.

Cause you can tell I could not be more excited with the opportunities we have in front of us as we enter 2024.

This concludes our prepared remarks, so let me now turn the call back to our operating or for questions.

Thank you we will know conduct a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

A confirmation tone would indicate your line is in a question Q you.

You May press Star too if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before parts of this darkies. Once again, that's star one at this time, one moment, while we pulled far first question.

Our first question comes from John being Rich with Piper Centre. Please proceed.

Chris Blunt: Lastly, we continue to diversify and enhance our earnings power as we execute on our own distribution strategy. Our ownership stakes generate a higher-margin earning stream at a lower cost of capital, which we expect to be accretive to our returns over time. As you can tell, I could not be more excited with the opportunities we have in front of us as we enter 2024. This concludes our prepared remarks, and let me now turn the call back to our operator for questions. Thank you.

Good morning, Thanks for the opportunity.

The new roller product can you talk about.

How you use the ramp maybe total addressable market as needed cost and then distributions positioning for that thank you.

Yeah happy to morning, John This is Chris So yeah, we're really really excited about this so just to put it in perspective royalist the fastest growing category.

An annuity or one of the fastest growing category.

Operator: We will now conduct a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

47 billion O'brien will sales.

Last year, but as you've probably heard me say before I think it's just scratching. The surface. You know I think this is a product that now starts to compete very actively with mutual funds, which is you know is a trillion dollar.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Once again, that's star one at this time. One moment while we pull for our first question. Our first question comes from John Bainbridge with Piper Sender. Please proceed. Good morning.

Marketplace. So we're really psyched about it was that we got our first few.

<unk> contracts in this week, so it's really big milestones Ross, we think we're well positioned obviously it'll take time to get approved on various broker dealer shelves, but this is something we're really really excited about it and frankly, our clients on the distribution side of individual agents have been asking for so we're pretty pumped.

Chris Blunt: Thanks for the opportunity. The new Ryla product, can you talk about how you need the ramp, maybe the total addressable market and needed costs, and then the distribution positioning for that? Thank you. Yeah, happy to. Morning, John. This is Chris.

Thank you.

Chris Blunt: So, yeah, we're really, really excited about this. So, just to put it in perspective, RILA is the fastest growing category, or one of the fastest growing categories, about, I think, 47 billion dollars of Ryla sales last year. But, as you've probably heard me say before, I think it's just scratching the surface.

The actuarial charge is there any impact to go forward earnings out of that.

When do you want to take that one.

Sure. Thanks, John mm [noise] no. This is this all happened every year around this time.

Where.

The actuarial tables get updated for the <unk> the guarantee withdrawal benefit so that impacts the M. R b, but I don't expect any.

Chris Blunt: I think this is a product that now starts to compete very actively with mutual funds, which, as you know, is a trillion dollar marketplace. So we're really psyched about it. In fact, we got our first few RILA contracts in this week.

Significant changes to how the M R b.

Changes over time again that reserve will fluctuate a little bit more than the old reserve regime, but I don't expect that this current charge it impacted significantly.

Chris Blunt: So it's a really big milestone for us. We think we're well-positioned. Obviously, it'll take time to get approved on various broker-dealer shelves, but this is something we're really, really excited about. And frankly, our clients on the distribution side and individual agents have been asking for it. So we're pretty pumped. Thank you. The actuarial charge, is there any impact on going forward earnings out of that? When do you want to pick that one?

Great. Thank you.

The next question comes from John Bass with Stevens. Please proceed.

Hey, guys. Thanks for taking my questions, maybe creaky your latest thoughts on Capitol on location I know there are a few moving parts considering the common and preferred dividend. You also have a lot of authorization remaining on your buyback you've also talk to an been active in recent quarters with the one distribution strategies maybe.

Wendy Young: Sure. Thanks, John. No, this will happen every year around the same time when the actuarial tables get updated for the Guaranteed Withdrawal Benefit, so that impacts the MRB, but I don't expect any....................................................................................... Again, that reserve will fluctuate a little bit more than the old reserve regime, but I don't expect that this current charge will impact it significantly. Great, thank you. The next question comes from John Baswitz-Stevens. Please proceed.

If you guys could just give your view on all of it.

Yeah, I'll start and I'm sure when he was gonna chime in as well, but you know number one priority right now is retained assets under management I mean, we're in just a.

Fantastic environment for our products demand is is quite robust. So the first priority would be to continue to fund new sales were really pleased with the returns we're getting a new business right now I'm, having flow reinsurance and place just allows us to expand gross sales overall is accretive.

Chris Blunt: Hey guys, thanks for taking my questions. Maybe can we get your latest thoughts on capital allocation? I know there are a few moving parts considering the common and now preferred dividend. You also have a lot of authorization remaining on your buyback. And you've also talked to and been active in recent quarters with the own distribution strategy. So maybe if you guys could just give your view on all of it.

The returns that were getting so I would say that as a priority number one for US obviously, we want to continue to pay a strong and growing common dividend.

And we've been able to do that I think there will be opportunistically. Some one distribution you know acquisition opportunities for US you saw that we just did our largest deal which brings us to about 500 million.

Chris Blunt: Yeah, I'll start, and I'm sure Wendy's going to want to chime in as well, but, you know, the number one priority right now is retained assets under management. I mean, we're in just a fantastic environment for our products. Demand is quite robust.

Management.

<unk> invested capital distributions.

Distribution space, obviously, you know whether you can speak to what the annual that cost is now and the cost of the preferred dividend, but I don't think that's going to dramatically change how would you think.

Chris Blunt: So I think our first priority would be to continue to fund new sales. We're really pleased with the returns we're getting on new business right now. Having flow reinsurance in place just allows us to expand gross sales overall and is accretive to the returns that we're getting. So I would say that is priority number one for us.

About allocating capital Fortunately the sock has been doing well so we have a buyback authorization, but I think that's really employees.

Should there be some pretty dramatic market disruptions I don't know, whether if there's anything you want to add to that.

Chris Blunt: Obviously, we want to continue to pay a strong and growing common dividend, and we've been able to do that. I think there will be opportunistically some own distributions, you know, acquisition opportunities for us. You saw that we just did our largest deal, which brings us to about $500 million of assets under management or invested capital in the own distribution space. Obviously, you know, Wendy can speak to what the annual debt cost is now and the cost of the preferred dividend, but I don't think that's going to dramatically change how we think about allocating capital. Fortunately, the stock has been doing well, so we have a buyback authorization, but I think that's really in place should there be some pretty dramatic market disruptions. I don't know, Wendy, if there's anything you want to add to that.

Now you had on all the key key points.

Okay. Thank you and then maybe you could you give us some commentary on the the reinsurance market as you guys see it are there any significant changes to reinsurance economics or maybe the outlook you're anticipating for 2024.

What do you want it you start.

Sure. Thanks.

I don't see any significant changes and outlook, we continue to get approached by potential partners, but as Chris said when I grow that retained.

Sales N a U M. So I'm I'm not expecting us to expand too much in 24, but as we head into 25, we can see.

Wendy Young: I know you hit on all the key points. Okay, thank you. And then maybe could you give us some commentary on the reinsurance market as you guys see it? Are there any significant changes to reinsurance economics or maybe the outlook you're anticipating for 2024? Wendy, why don't you start? Sure, thanks. I don't see any significant changes in the outlook.

Differences in the market, depending on where the interest rates go and go from there.

Perfect. Thank you guys.

Once again to ask a question that star one at this time. Our next question comes from a Mark huge with Jewish Securities. Please proceed.

Wendy Young: We continue to get approached by potential partners, but as Chris said, we want to grow that retained earnings and AUM. So I'm not expecting us to expand too much in 24, but as we head into 25, we could see differences in the market depending on where the interest rates go and go from there. Perfect. Thank you, guys. Once again, to ask a question, that's Star 1 at this time.

Yeah. Thanks, good morning.

Where do you think assets under management will and the year, you've given a lot of guidance on new sales with double digit.

Got a billion in capital generation internally.

Chris Blunt: Our next question comes from Mark Hughes with Truist Securities. Please proceed. Yeah, thanks. Good morning. Morning, Mark.

I'd stay long.

In terms of.

Capital.

I think you mentioned.

Chris Blunt: Where do you think assets under management will end the year? You've given a lot of guidance on new sales of double digits, got a billion in capital generation internally, you've got the upstate in terms of debt, and capital... I think you mentioned you need $67 billion of net sales to grow assets under management. Any kind of rough thoughts about where you think, you know, given the opportunity here, given your balance sheet, where you anticipate AUM1? Sure. I'll maybe drop some breadcrumbs, and Wendy could probably give you a little more specifics on that.

Six to 7 billion net sales to go with that sort of management any just kind of rough thoughts about.

Where do you think you know given the opportunity to ear, giving your balance sheet, where you.

A U M Linda.

Sure I'll I'll, maybe drop some bread crumbs and and.

Maybe a little more specifics around that but yeah I think the top line environment is is fantastic. So you know you saw this past year, we did 13 billion of gross sales.

Chris Blunt: But yeah, I think the top line environment is fantastic. So, you saw this past year we did $13 billion in gross sales. I want to say nine and change in net sales. So obviously, the capital infusion from F&F is helpful. And we've said publicly, we still think we can continue to grow top line at a healthy double-digit pace. We've obviously done better than that in years past.

I Wanna say 909 am changing that.

<unk>. So you know obviously the capital infusion from up enough is helpful.

So we said publicly we still think we can continue to grow top line at a healthy double digit pace, we've obviously done better that better than that in years past I think now we can retain a higher level given what's there I think if you look at our traditional growth in net sales my guess.

Chris Blunt: I think now we can retain a higher level given what's there. I think if you look at our traditional growth in net sales, my guess is that's still a pretty decent barometer for what we can add despite the fact that we've doubled assets in the last three years. So yeah, we feel really good about it.

Is that still a pretty decent.

Barometer for we can add despite the fact that we double the house. So it's in the in the law.

Last three years, so yeah, we feel really good about it you know there's been a lot of hoopla about will surrenders her up but but inflows are way up.

Wendy Young: There's been a lot of hoopla about, well, surrenders are up, but inflows are way up. And so, I know it sounds odd, but unlike a bank, someone surrendering a very old contract with a small surrender charge but then bringing in a brand new contract with a brand new surrender charge, ironically, we're actually improving the risk profile of our liabilities. And generally, we're booking a profit when someone's paying a surrender charge. So, it's an unusual scenario where, yes, surrenders are up a little bit. But I don't think it changes the material kind of our, our pattern of net sales. I don't know, Wendy, if there's any more precise you can give there.

So I know it sounds odd, but unlike a bank someone's surrendering a very old contract with a small surrender charge, but then bringing in a brand new contract with a brand new surrender charge Ironically, we're actually improving.

The risk profile of our liabilities and generally we're booking a profit when someone's paying oh.

Surrender charge so.

It's an unusual scenario, where it yes surrenders her up a little bit, but I don't think it changes materially kind of our our pattern of that sales <unk>.

If there's any more precise you can get there.

Chris Blunt: Yep. So Mark, if you think about what we said in the past, every billion dollars of retained business costs us about 150 million. So you can do the math on what that 250 million can possibly do to increase our net retained earnings. Okay. Thank you for that.

Yep. So mark if you think about what we said in the past Ah every billion dollars of retained business cost us about 130 million. So you can do the math on what that 250 million can possibly due to increasing our net retained.

Okay. Thank you for that the Oh, the assumption about the 10 per cent return.

Chris Blunt: The all assumption about the 10% return. Is that, Is that still a good return assumption? Seems like, you know, there's been a lot of market volatility lately, challenging the better equity markets, they're more likely to hit that bogeyman. How should we think about that?

Is that still a good return assumption. It seems like you know obviously been a lotta market volatility lately.

Challenging with the better equity markets are more likely to hit that bogey, especially if you think about that.

Yeah I mean this is something we look at.

Chris Blunt: Yeah, I mean, this is something we look at on a very regular basis; we have a lot of robust debate on what the right return expectation is, but I would say we're still very comfortable with that number. Obviously, there's a lot sitting in dry powder in terms of opportunities we've traditionally done comfortably better than that. I do think you're going to see more volatility just because the markets are down, but again, could be a very attractive opportunity going forward, particularly in private equity and probably selectively in real estate. I would think the same way. But yeah, I don't think anything has happened to cause us to want to move off that long-term plan. And then anything you can share in terms of the valuation parameters around the $270 million deal you did in January, you know, PE, EBITDA. Estimated Earnings Contribution, I think you've touched on some of that, but could you expand on that? Yeah, yeah, sure. I'll start at the highest level, which is, you know, one...

A very regular basis, we have a lot of robust debate on what what is the right return expectation, but I would say, we're still very comfortable.

With that number obviously, there's a lot sitting in dry powder in terms of opportunities. We've done traditionally comfortably better than that I do think you're gonna see more volatility just because of.

Realizations are down, but again could be a very attractive opportunity going forward, particularly.

And private equity probably selectively in real estate I would think.

Same way, but yeah, I don't I don't think anything has happened to cause us to move off that longterm number.

Is there anything you can share in terms of the valuation parameters around the.

270 million dollar deal you did in January.

P E EBITDA.

[noise] expected earnings contribution.

I think you've touched on some of that but you could.

Ah to expand them yeah, yeah sure. So I'll I'll start at the highest level, which is you know one.

Chris Blunt: It has to come with at least an equal, if not better, return expectation than just running our daily playbook, which is using it to retain Asset Center Management. And so, yeah, when we look at all of these acquisitions, but that one in particular, we're looking at, you know, high team, if not north of 20%, IRRs, our expectations. These are businesses that are generally not capital intensive, right? They're heavy cash flow businesses, so that's helpful as well. And, most importantly, they're not ongoing capital intensive.

It has to come without.

At least an equal if not better return expectation than just you know running our daily play Buck, which is using it to retain.

Assets under management and so yeah. When we look at all of these acquisitions with that one.

In particular were working hi team, if not north of 20 per cent.

<unk> our expectations Uhm. These are <unk> generally not capital intensive right if they're heavy cash flow businesses. So that's helpful. As well and then most importantly, they're not ongoing capital intensive so there's a hope which I believe that over time.

Chris Blunt: So there's a hope, which I believe, that over time, we will get rewarded in our multiple for the consistency of those earnings, and the diversification of those earnings. But most importantly, we're making investments in businesses that we know well, management teams that we have a lot of confidence in, and ones that we think are going to give us an even higher return than we could get by putting them into a new AUM. And then, obviously, there is some justifiable long-term strategic benefit. I mean, many of these are relationships that, you know, the company has had for 20 years.

We will get rewarded in our multiple for the consistency of those earnings the diversification of those earnings, but most importantly, we're making investments and businesses that we know well management team. So we have a lot of confidence in and ones that we think are gonna give us an even higher return that we could get by putting a.

Into a new a new women then obviously there is some just longterm strategic benefit I mean, many of these are relationships that you know the company has had for 20 years and so just further cementing.

Chris Blunt: And so just further cementing that relationship is something we think has a lot of strategic benefit. Okay, appreciate it. Thank you. Our next question is a follow-up from John Barnidge with Piper Stanley. Please proceed.

That relationship to something we think is a lot of strategic benefits.

Okay I appreciate it thank you.

Our next question is a follow up by John Barnidge with Piper family. Please proceed.

Chris Blunt: Thank you for the opportunity. You talked about hedging your floating portion of the portfolio and considering devaluing other options for the remainder of that. What's the line of sight into that, and can you talk about that a little bit more, the sensitivity to the short end of the curve that remains?

Thank you for the opportunity you talked about Hedgie you're floating.

Portion of the portfolio and considering to evaluate other ops.

Options for the remainder of that what's the line of sight into that and.

Can you talk about that a little bit more of the sensitivity to the short into the curb.

Chris Blunt: Yeah, 100%. So, you know, maybe start by saying what it's not. You know, we don't fancy ourselves as rate traders or having, you know, deep insights about where interest rates are going. But I think our chief investment officer had a very good insight, which was that given where we put a lot of that floating rate exposure on, we had an ability to lock in some excess profitability and just take some variability off the table. So we, you know, we had a pretty substantial position in floating rate assets. We've effectively now cut that by more than half by doing some hedging. I think you saw in the commentary, we locked in approximately 190 basis points of outperformance. So I would say it's just consistent with how we think about the world, which is, you know, don't be greedy.

That remains.

Yeah 100 per cent. So you know maybe start by saying what it's not you know we we don't fancy ourselves was raped traders are having deep insights about where interest rates are going but I think our chief investment officer had a very good insight, which was given where we put a lot of that floating rate exposure on we had.

And the ability to lock in some excess profitability.

Just take some variability off the table. So we you know we had a pretty substantial opposition.

Physician in floating rate houses, we've effectively now cut that by more than half.

By doing some hedging <unk> Saddam common.

Commentary reluctant approximately 190 basis points about performance. So obviously, it's just consistent with how we think about the world, which is you know there'll be greedy and when you have opportunities to take some risk off the table. So.

Chris Blunt: And when you have opportunities to take some risk off the table. So look, at some point, nobody knows exactly when we're going to see rates march back down. And this was a choice on our part of letting go for stability there. You know, how much more you do going forward is kind of an open question of what's the ultimate landing spot for your floating rate exposure. But I would expect in the near term that it's going to come down. It's going to continue to come down a bit more.

Look at some point nobody knows exactly when we're gonna see rates March back down and this was a.

Choice on our part of let's go for stability. There you know how much more you do going forward is kind of an open question, what's the ultimate landing spot for your floating rate exposure, but I would expect in the near term, it's gonna come down Oh, that's good.

Cause you to come down a bit more.

Chris Blunt: Great. Thanks a lot for the opportunity. Thank you, and this will conclude our question and answer session. Thank you for attending today's presentation, and the conference call has concluded.

Great. Thanks, a lot for the opportunity.

Thank you and this will conclude our question and answer session. Thank.

Thank you for attending today's presentation and the conference call has concluded you may now disconnect your lines.

Operator: You may now disconnect your line, www. Fanshawec.ca www.larryweaver.com www.fanshawec.ca www.larryweaver.com F&G Annuities F&G, www. Fanshawec.ca www.larryweaver.com www.fanshawec.ca www.FNDC.org

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