F&G Annuities & Life, Inc. (FG) Q3 2026 earnings review
F&G retail annuity sales hit records, but operating profit drops
F&G Annuities & Life sold a record volume of retail retirement policies while its underlying operating profit fell sharply. The annuity and life insurer grew its total managed asset pool by 7% from a year ago to $76.2 billion as chief executive Conor Murphy highlighted record indexed annuity demand. Because F&G passed more than half of its new sales to outside reinsurers and saw lower product margins and private-fund returns, profit excluding one-offs dropped 42% to $96 million.
| Profit excluding one-offs | $96M ($0.74/sh) -42% from a year ago (-36% ex prior-year items) |
|---|---|
| Return on equity excluding bond marks and one-offs | 6.7% 8.0% last quarter and 8.8% a year ago |
| Indexed annuity gross sales | $2,143M +29% from a year ago (record) |
| Retained assets under management | $56.2B -0.8% from a year ago (+0.6% from Q2) |
⚖️ Verdict: 🔴 Bearish
The story got worse because the shift toward reinsurer fees is shrinking earnings faster than fee income can replace them. Retained assets on F&G's own balance sheet stabilized after two quarterly declines, but return on equity excluding unrealized bond losses and one-offs fell to 6.7%, down more than two percentage points in a year. One bright spot: overhead expenses dropped 12% from a year ago while retail indexed annuity sales accelerated.
The question now is whether passing policies to reinsurers will raise return on equity or simply leave F&G with a smaller profit base. If fee revenue compounds fast enough, returns will recover once private-fund income normalizes; if lost interest spread and lower surrender fees outweigh those fees, return on equity stays stuck in the single digits. The third-quarter filing's product margin and fee breakdown will show which side is winning.
🐂 Bull Case
Indexed Annuity Sales Reached a Record $2.1 Billion
"F&G continued to build momentum in the third quarter, with record core retail sales driving assets under management before reinsurance to a record $76.2 billion," chief executive Conor Murphy said. The Iowa insurer sells indexed annuities, which are retirement savings contracts that tie customer returns to a stock market index while protecting the principal.
Sales of those indexed contracts rose 28.7% from a year ago to $2.14 billion, accelerating from 2.5% growth in the second quarter. At the same time, the company purposefully "de-emphasized multiyear guaranteed annuities sales due to returns below our threshold", cutting those fixed-rate annuity sales by 92.5% to $73 million. Because retail savers bought more indexed contracts, core sales grew 5.0% even as total gross sales dropped 29.2% to $3.0 billion.
What to watch: the split between traditional fixed indexed annuities and registered index-linked annuities in the third-quarter filing. A rising share for registered annuities would show the insurer is winning market share in a newer retirement product category.
Operating Expenses Fell 12% While Managed Assets Grew
F&G has been cutting overhead costs as it scales its total asset pool toward a year-end 2027 efficiency goal. In the third quarter, personnel costs dropped 7.6% from a year ago to $73 million, and other operating expenses fell 21.1% to $30 million.
Together, those two overhead lines shrank 12.0% from a year ago to $103 million, or 9.1% of total revenue, while assets under management before reinsurance expanded 6.7% to $76.2 billion. Lower day-to-day overhead helped cushion the drop in product margins caused by selling the Bermuda reinsurance subsidiary earlier this year.
What to watch: the non-GAAP operating expense ratio to assets under management before reinsurance on the conference call. Another decline from the second quarter's 47 basis points would put the insurer ahead of its 45 basis point target for 2027.
🐻 Bear Case
Operating Profit and Return on Equity Dropped Sharply
Murphy pointed to "meaningful progress toward a more fee-based, higher margin and less capital intensive business while growing our core spread-based franchise". F&G passes a portion of its annuity sales to outside reinsurers in exchange for steady fees, which leaves retained assets under management — the investment pool F&G keeps on its own books to earn an interest spread — below last year's level.
- Profit excluding one-offs: $96 million ($0.74 per share), down 41.8% from $165 million ($1.22 per share) a year ago
- Profit excluding prior-year tax and reserve benefits: down 36.4% from $151 million a year ago by our math
- Return on equity excluding unrealized bond losses and one-offs: 6.7%, down from 8.0% last quarter and 8.8% a year ago
- Retained assets under management: $56.21 billion, up $344 million from last quarter but down 0.8% from $56.65 billion a year ago
- Gross sales passed to flow reinsurers: 53.2% ($1.60 billion of $3.00 billion), up from 33.9% a year ago by our math
Passing over half of new sales to reinsurers brings in fee income, but it also shrinks the spread-earning asset base and cuts total profit when other costs rise. The company said product margin fell after the March sale of its Bermuda unit and from "lower surrender charge fee income and higher other liability costs that include increased amortization expense, as expected".
What to watch: dollar product margin and flow reinsurance fee income in the quarterly filing. If fee growth stays around $1 million a quarter, it cannot offset a double-digit million drop in spread and surrender fee income.
Alternative Investments Missed the 12% Target Again
F&G invests roughly $4 billion of its portfolio in limited partnerships and private equity funds, which it calls alternative investments. At the start of 2026, management raised its long-term expected return on this portfolio from 10% to a range of 12% to 14%, and it asks investors to judge its return on equity as if the portfolio earned 12%.
In the third quarter, actual income from alternative investments fell $60 million, or $0.46 per share, "below management's current long-term expected return of approximately 12%". That shortfall widened from $49 million ($0.38 per share) in the second quarter and $53 million ($0.38 per share) a year ago, bringing the nine-month gap to $153 million. Even if you add back the entire $60 million shortfall on top of reported profit, earnings still fell 23.5% from a year ago by our math.
What to watch: the annualized percentage return on alternative investments disclosed on the earnings call, and whether management lowers the 12% return assumption at year-end. A return below the 7% to 8% range discussed last quarter would explain why the dollar gap widened.
Pension Risk Transfer Sales Dropped 68% in Q3
In its institutional business, F&G takes over corporate pension obligations from employers in transactions known as pension risk transfers. On the last two earnings calls, Murphy targeted $1.5 billion to $2.0 billion of annual sales in this line and noted that volume is normally heavier in the second half of the year.
Instead of stepping up in the third quarter, pension risk transfer sales dropped 68.0% from a year ago to $172 million, down from $232 million in the second quarter and $317 million in the first. That leaves nine-month sales at $721 million. By our math, F&G must close at least $779 million of pension deals in the fourth quarter just to reach the bottom of its $1.5 billion annual target.
What to watch: fourth-quarter pension risk transfer deal pipeline commentary on the conference call. A cut to the $1.5 billion to $2.0 billion annual target would confirm that well-funded corporate pension plans are delaying deals.
Risks this quarter didn't answer
Four standing concerns around capital allocation, asset sales and credit quality received no update or slowed down in the earnings release.
- Share buybacks: nine-month repurchases stayed at $120 million, which means F&G bought back zero shares in the third quarter by our math while parent Fidelity National Financial still owns about 72% of the company.
- Peak Altitude review: the release gave no update on the plan to sell a 51% stake in its insurance distribution agencies, while owned distribution revenue fell 16.7% from a year ago to $20 million.
- Subsidiary dividend capacity: the release did not update statutory capital at lead underwriter FGL Insurance, which had zero ordinary dividend capacity in the first half; the quarterly filing will show it.
- Mortgage credit drift: the release reported low bond impairments but gave no non-accrual table for mortgage loans, which grew 29.8% over nine months to $10.25 billion; the filing's loan note will show delinquency rates.
👓 Other Themes
Actuarial Reserve Release Lifted Book Value by $5.44
Book value per common share excluding unrealized bond losses jumped 11.8% from June to $51.37, and headline GAAP net earnings hit $736 million ($5.48 per share). Nearly all of that gain came from $652 million of non-operating accounting adjustments, including a $297 million reserve release after F&G updated its annual actuarial assumptions. Separately, closing adjustments cut the one-time book value gain on the March Bermuda unit sale from $0.10 to $0.05 per share.
💲 Other KPIs
Mortgage loans on the balance sheet expanded by $981 million in the third quarter and are up 29.8% from $7,891 million at the end of 2025. While bond holdings shrank slightly over the first nine months, commercial and residential mortgages accounted for all net balance-sheet investment growth.
Reinsurance recoverable — the policy obligations F&G has passed on to third-party reinsurers — rose by $1,062 million from the second quarter and is up 25.0% since December 2025. The balance now equals 21.1% of total company assets, reflecting heavy use of flow reinsurance for new annuity sales.
Diluted share count fell 2.9% from 139 million a year ago because the insurer retired 4.5 million shares during the first half of 2026. Basic common shares outstanding held steady from June at 131 million after the company paused buybacks in the third quarter.
❓ Key Questions
Why did F&G omit forward targets from the release?
The earnings release included no numerical outlook for fourth-quarter alternative investment returns or full-year pension risk transfer sales, which had been guided to $1.5–$2.0 billion on prior calls. With nine-month pension sales at $721 million, investors need to know if the annual target still stands.
What caused product margin to drop so sharply?
Profit excluding one-offs fell $55 million from a year ago even after stripping out last year's tax and reserve benefits, while the alternative investment shortfall widened by only $7 million. Management did not disclose the dollar decline in core spread product margin or surrender charge fees.
Where does the Peak Altitude sale process stand?
Management said in August it intended to sell a 51% stake in its Peak Altitude distribution business to a partner, but the third-quarter release did not mention the process. Owned distribution revenue declined 16.7% from a year ago to $20 million in the quarter.
Did the $297 million reserve release help statutory capital?
F&G released $297 million of GAAP reserves after its annual actuarial review, lifting book value per share by $5.44. Investors need to know whether statutory reserves at FGL Insurance saw a similar benefit or if ordinary dividend capacity to the holding company remains at zero.