FG Q3 Deep Dive: Fee-Based Earnings and Distribution Expansion Support Outperformance

Insurance solutions provider F&G Annuities & Life (NYSE:FG) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 16.5% year on year to $1.69 billion. Its non-GAAP profit of $1.22 per share was 25.4% above analysts’ consensus estimates.

Is now the time to buy FG? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

F&G Annuities & Life delivered a strong Q3, with management highlighting robust sales momentum and record assets under management as primary drivers for the positive results. CEO Christopher Blunt attributed the outperformance to “one of our best sales quarters in history, the launch of our new reinsurance sidecar, and strong performance across the business.” The company’s focus on balancing spread-based earnings with the expansion of fee-based, higher-margin products contributed to both sales and margin growth. Management also credited disciplined capital allocation and operating expense control as significant contributors to the quarter’s performance.

Looking ahead, F&G Annuities & Life’s outlook is shaped by its ongoing transition to a more fee-based, capital-light business model and continued expansion in core annuity and life insurance products. Management expects demographic trends, particularly the growing retirement population’s need for guaranteed income, to sustain demand for annuities. President and CFO Conor Murphy noted, “We expect continued strong demand for retirement savings products, including a growing demand for annuities by consumers and financial advisors for retirement security.” The company also anticipates further efficiency gains as it leverages scale and continues to optimize its distribution strategy.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to strong sales growth, the launch of the reinsurance sidecar, and continued operating efficiency, while highlighting a strategic focus on expanding fee-based earnings.

• Sales diversification across products: Management reported strength across all product lines, including fixed index annuities (FIA), MYGA, and pension risk transfer (PRT), with the new reinsurance sidecar helping capture more fee-based revenue and improve margins.
• Distribution channel expansion: The company’s own distribution portfolio, spanning independent marketing organizations (IMOs) in both life and annuity segments, performed ahead of expectations and is expected to generate over $80 million in EBITDA for 2025, supporting profitable growth.
• Flow reinsurance and sidecar adoption: F&G continued to shift toward a capital-light, fee-based model by increasing the use of flow reinsurance and launching a reinsurance sidecar for accumulation-focused FIA sales, which management believes will drive a 50-50 balance between retained and reinsured sales.
• Expense ratio improvements: Operating expense as a percentage of assets under management (AUM) declined from 62 basis points in the prior year to 52 basis points in Q3, with expectations to reach 50 basis points by year-end, reflecting ongoing efficiency initiatives and scale benefits.
• Increased public float and shareholder base: The announced distribution of F&G shares by its majority owner, FNF, is expected to boost the company’s public float from 18% to 30%, potentially increasing institutional ownership and market visibility.

Drivers of Future Performance

Management expects continued demand for retirement products, operating leverage, and a strategic shift toward fee-based business to drive results, while monitoring competitive and macroeconomic headwinds.

• Demographic and market trends: Management cited the growing retirement-age population and ongoing market volatility as long-term drivers for annuity demand, emphasizing the appeal of guaranteed lifetime income and principal protection among consumers and financial advisors.
• Efficiency and margin focus: The company plans to further lower its operating expense ratio as it benefits from scale and ongoing cost discipline, aiming for an annual decrease of about one basis point per quarter in 2026, which should support margin expansion even as the business grows.
• Competitive and economic headwinds: While management remains optimistic about core product demand and distribution expansion, they acknowledged increased competition in both liability and asset origination, and noted that opportunistic sales volumes (like MYGA) will fluctuate based on market economics.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be monitoring (1) the pace of adoption and profitability in F&G’s fee-based and reinsured product lines, (2) continued improvements in operating expense ratios as a sign of sustainable margin expansion, and (3) further growth in the company’s own distribution portfolio and penetration into the underserved middle-market life segment. Institutional investor interest following the increased public float will also be a key area to watch.

F&G Annuities & Life currently trades at $30.81, up from $29.88 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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