Corebridge Financial, Inc. ("Corebridge" or the "Company") (NYSE: CRBG) today reported financial results for the second quarter ended June 30, 2023.
Kevin Hogan, President and Chief Executive Officer of Corebridge, said, “This was an excellent quarter for Corebridge, where we continued to benefit from our focused execution, disciplined risk management and the competitive strengths of our diversified businesses. We generated nearly $10 billion of premiums and deposits, a 42% increase over the prior year. Base spread income also grew 42% year over year, and our businesses remain well positioned to capitalize on current market opportunities.
“Corebridge returned $750 million to shareholders this quarter, through a combination of dividends and share repurchases. We are pleased to have begun our share repurchase program only nine months after our initial public offering, marking an important milestone in our commitment to provide an attractive capital return to shareholders. Also, we believe the sale of Laya Healthcare unlocks significant value for shareholders and represents an important step in maintaining our focus on the life and retirement businesses in the United States.
“Our financial position is strong, and our results reflect the earnings power of our franchise and the positive momentum across our businesses. Going into the second half of the year, we remain focused on executing our strategies and optimizing our capital to generate long-term growth in shareholder value.”
CONSOLIDATED RESULTS
Three Months Ended
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($ in millions, except per share data) | 2023 | 2022 | ||||||
Net income (loss) attributable to common shareholders | $ | 771 | $ | 2,594 | ||||
Income (loss) per common share attributable to common shareholders | $ | 1.18 | $ | 4.02 | ||||
Adjusted after-tax operating income | $ | 679 | $ | 491 | ||||
Operating EPS | $ | 1.04 | $ | 0.76 | ||||
Book value per common share | $ | 16.61 | $ | 18.99 | ||||
Adjusted book value per common share1 | $ | 36.44 | $ | 35.09 | ||||
Pre-tax income (loss) | $ | 911 | $ | 3,326 | ||||
Adjusted pre-tax operating income1 | $ | 836 | $ | 611 | ||||
Premiums and deposits | $ | 9,941 | $ | 6,991 | ||||
Net investment income | $ | 2,714 | $ | 2,280 | ||||
Net investment income (APTOI basis)1 | $ | 2,480 | $ | 2,109 | ||||
Base portfolio income - insurance operating businesses | $ | 2,366 | $ | 1,858 | ||||
Variable investment income2 - insurance operating businesses | $ | 96 | $ | 120 | ||||
Corporate and other3 | $ | 18 | $ | 131 | ||||
Return on average equity | 27.9 | % | 64.3 | % | ||||
Adjusted return on average equity1 | 11.7 | % | 8.7 | % | ||||
Net income was $771 million, a 70% decrease compared to the prior year quarter. The change largely was driven by lower realized gains recorded for the Fortitude Re funds withheld embedded derivative, partially offset by higher net investment income and changes in the fair value of market risk benefits.
Adjusted pre-tax operating income ("APTOI") was $836 million, a 37% increase compared to the prior year quarter. Base portfolio income was the largest contributor to the year-over-year improvement. Excluding variable investment income, APTOI was $740 million, a 51% increase compared to the prior year quarter, the result of higher base portfolio income, partially offset by lower fee income2 and higher interest expense on financial debt raised during 2022.
Premiums and deposits were $9.9 billion, a 42% increase compared to the prior year quarter. Excluding transactional activity (i.e., pension risk transfer, guaranteed investment contracts and Group Retirement plan acquisitions), premiums and deposits grew 10% when compared to the prior year quarter. These results mainly reflect higher fixed index annuity and fixed annuity deposits partially offset by lower variable annuity deposits in Individual Retirement and Group Retirement.
Net investment income was $2.7 billion, a 19% increase compared to the prior year quarter, while net investment income on an APTOI basis was $2.5 billion, an 18% increase compared to the prior year quarter. This improvement largely was due to higher base portfolio income, which grew $508 million, or 27%, compared to the prior year quarter. This was partially offset by lower variable investment income which declined $24 million, or 20%, over the same period.
BUSINESS RESULTS
Individual Retirement | Three Months Ended
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($ in millions) | 2023 | 2022 | ||||
Premiums and deposits | $ | 4,045 | $ | 3,620 | ||
Spread income | $ | 684 | $ | 448 | ||
Base spread income | $ | 654 | $ | 420 | ||
Variable investment income | $ | 30 | $ | 28 | ||
Fee income | $ | 280 | $ | 301 | ||
Adjusted pre-tax operating income | $ | 574 | $ | 365 | ||
- Premiums and deposits increased $0.4 billion, or 12%, as compared to the prior year quarter largely driven by growth of fixed index annuity deposits, partially offset by lower fixed annuity and variable annuity deposits. General account net flows for the second quarter of 2023 remained positive at $0.4 billion
- Base net investment spread1 of 2.41% for the second quarter of 2023 expanded 81 basis points and 10 basis points on a prior year and sequential quarter basis, respectively
- APTOI increased $209 million, or 57%, year over year primarily due to higher base spread income, partially offset by lower fee income
Group Retirement | Three Months Ended
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($ in millions) | 2023 | 2022 | ||||
Premiums and deposits | $ | 1,923 | $ | 1,772 | ||
Spread income | $ | 213 | $ | 205 | ||
Base spread income | $ | 193 | $ | 171 | ||
Variable investment income | $ | 20 | $ | 34 | ||
Fee income | $ | 178 | $ | 177 | ||
Adjusted pre-tax operating income | $ | 197 | $ | 179 | ||
- Premiums and deposits increased $151 million, or 9%, as compared to the prior year quarter due to higher out-of-plan fixed annuity deposits, partially offset by lower out-of-plan variable annuity deposits and plan acquisitions
- Base net investment spread of 1.55% for the second quarter of 2023 expanded 23 basis points and 3 basis points on a prior year quarter and sequential quarter basis, respectively
- APTOI increased $18 million, or 10%, year over year primarily due to higher base spread income and lower expenses, partially offset by lower variable investment income
Life Insurance | Three Months Ended
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($ in millions) | 2023 | 2022 | ||||
Premiums and deposits | $ | 1,063 | $ | 1,049 | ||
Underwriting margin2 | $ | 361 | $ | 389 | ||
Underwriting margin excluding variable investment income | $ | 355 | $ | 340 | ||
Variable investment income | $ | 6 | $ | 49 | ||
Adjusted pre-tax operating income | $ | 76 | $ | 97 | ||
- APTOI decreased $21 million, or 22%, due to lower variable investment income partially offset by higher base portfolio income. Mortality experience was marginally favorable year over year
Institutional Markets | Three Months Ended
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($ in millions) | 2023 | 2022 | ||||
Premiums and deposits | $ | 2,910 | $ | 550 | ||
Spread income | $ | 117 | $ | 67 | ||
Base spread income | $ | 77 | $ | 61 | ||
Variable investment income | $ | 40 | $ | 6 | ||
Fee income | $ | 16 | $ | 16 | ||
Underwriting margin | $ | 20 | $ | 19 | ||
Underwriting margin excluding variable investment income | $ | 20 | $ | 16 | ||
Variable investment income | $ | — | $ | 3 | ||
Adjusted pre-tax operating income | $ | 126 | $ | 76 | ||
- Premiums and deposits increased $2.4 billion, or 429%, as compared to the prior year quarter driven by higher volume of pension risk transfer and guaranteed investment contracts. Pension risk transfer sales were $1.9 billion for the second quarter of 2023 compared to $450 million for the second quarter of 2022. Guaranteed investment contract issuances were $917 million for the second quarter of 2023
- APTOI increased $50 million, or 66%, year over year primarily due to higher base spread income and variable investment income
Corporate and Other3 | Three Months Ended
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($ in millions) | 2023 | 2022 | ||||||
Corporate expenses | $ | (47 | ) | $ | (33 | ) | ||
Interest on financial debt | $ | (106 | ) | $ | (73 | ) | ||
Asset management | $ | 11 | $ | 8 | ||||
Consolidated investment entities | $ | 5 | $ | (13 | ) | |||
Other | $ | — | $ | 5 | ||||
Adjusted pre-tax operating income (loss) | $ | (137 | ) | $ | (106 | ) | ||
- APTOI decreased $31 million year over year primarily due to higher interest expense on financial debt driven by the Company’s recapitalization in connection with the IPO
CAPITAL AND LIQUIDITY HIGHLIGHTS
- Holding company liquidity of $1.6 billion as of June 30, 2023
- Financial leverage ratio of 28.0%
- Life Fleet RBC Ratio estimated to remain above our 400% target
- Adjusted book value per share1 of $36.44 grew on a sequential quarter basis due to strong earnings while also returning $750 million to shareholders
- Paid special dividend of $0.62 per share of common stock in addition to regular quarterly cash dividend of $0.23 per share of common stock
- Repurchased $200 million of shares from AIG and Blackstone
- Declared quarterly dividend of $0.23 per share of common stock on August 3, 2023, payable on September 29, 2023, to shareholders of record at the close of business on September 15, 2023
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1 | This release refers to financial measures not calculated in accordance with generally accepted accounting principles (non-GAAP); definitions of non-GAAP measures and reconciliations to their most directly comparable GAAP measures can be found in "Non-GAAP Financial Measures" below | |
2 | This release refers to key operating metrics and key terms. Information about these metrics and terms can be found in "Key Operating Metrics and Key Terms" below | |
3 | Includes consolidations and eliminations | |
CONFERENCE CALL
Corebridge will host a conference call on Friday, August 4, 2023, at 8:30 a.m. EDT to review these results. The call is open to the public and can be accessed via a live listen-only webcast in the Investors section of corebridgefinancial.com. A replay will be available after the call at the same location.
Supplemental financial data and our investor presentation are available in the Investors section of corebridgefinancial.com.
About Corebridge Financial
Corebridge Financial, Inc. makes it possible for more people to take action in their financial lives. With more than $370 billion in assets under management and administration as of June 30, 2023, Corebridge Financial is one of the largest providers of retirement solutions and insurance products in the United States. We proudly partner with financial professionals and institutions to help individuals plan, save for and achieve secure financial futures. For more information, visit corebridgefinancial.com and follow us onLinkedIn,YouTube and Facebook. These references with additional information about Corebridge have been provided as a convenience, and the information contained on such websites is not incorporated by reference into this press release.
In the discussion below, “we,” “us” and “our” refer to Corebridge and its consolidated subsidiaries, unless the context refers solely to Corebridge as a corporate entity.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this press release and other publicly available documents may include statements of historical or present fact, which, to the extent they are not statements of historical or present fact, constitute “forward looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of words such as “expects,” “believes,” “anticipates,” “intends,” “seeks,” “aims,” “plans,” “assumes,” “estimates,” “projects,” “should,” “would,” “could,” “may,” “will,” “shall” or variations of such words are generally part of forward-looking statements. Also, forward-looking statements include, without limitation, all matters that are not historical facts. Forward-looking statements are made based on management’s current expectations and beliefs concerning future developments and their potential effects upon Corebridge and its consolidated subsidiaries. There can be no assurance that future developments affecting Corebridge and its consolidated subsidiaries will be those anticipated by management.
Any forward-looking statements included herein are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected or implied in such forward-looking statements, including, among others, risks related to:
- changes in interest rates and changes to credit spreads, the deterioration of economic conditions, an economic slowdown or recession, changes in market conditions, weakening in capital markets, volatility in equity markets, inflationary pressures, pressures on the commercial real estate market, stress and instability in the banking sector, geopolitical tensions, including the continued armed conflict between Ukraine and Russia;
- insurance risk and related exposures, including risks related to insurance liability claims exceeding reserves and reinsurance becoming unavailable;
- our investment portfolio and concentration of investments, including risks related to realization of gross unrealized losses on fixed maturity securities and changes in investment valuations;
- liquidity, capital and credit, including risks related to our access to funds from our subsidiaries being restricted, the possible incurrence of additional debt, the ability to refinance existing debt, the illiquidity of some of our investments, a downgrade in our insurer financial strength ratings and non-performance by counterparties;
- our business and operations, including risks related to pricing for our products, guarantees within certain of our products, our use of derivatives instruments, marketing and distribution of our products through third parties, our reliance on third parties to provide and adequately perform business and administrative services, maintaining the availability of our critical technology systems, our risk management policies becoming ineffective, significant legal or regulatory proceedings, our business strategy becoming ineffective, intense competition, catastrophes, changes in our accounting principles and financial reporting requirements, our foreign operations, business or asset acquisitions and dispositions and our ability to protect our intellectual property;
- the intense regulation of our business;
- estimates and assumptions, including risks related to estimates or assumptions used in the preparation of our financial statements differing materially from actual experience, the effectiveness of our productivity improvement initiatives and impairments of goodwill;
- competition and employees, including risks related to our ability to attract and retain key employees and employee error and misconduct;
- our investment managers, including our reliance on agreements with Blackstone ISG-1 Advisors L.L.C. which we have a limited ability to terminate or amend, the historical performance of our investment managers not being indicative of future results of our investment portfolio, and increased regulation or scrutiny of investment advisers and investment activities;
- our separation from AIG, including risks related to the replacement or replication of functions and the loss of benefits from AIG’s global contracts, our inability to file a single US consolidated income federal income tax return for a five-year period, and limitations on our ability to use deferred tax assets to offset future taxable income;
- our agreements with Fortitude Reinsurance Company Ltd.; and
- other factors discussed in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” and “Risk Factors” in our Registration Statement on Form S-1 filed on June 5, 2023 with the U.S. Securities and Exchange Commission.
Forward-looking statements should be read in conjunction with the other cautionary statements, risks, uncertainties and other factors identified in our filings with the Securities and Exchange Commission. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.
NON-GAAP FINANCIAL MEASURES
Throughout this release, we present our financial condition and results of operations in the way we believe will be most meaningful and representative of our business results. Some of the measurements we use are “non-GAAP financial measures” under Securities and Exchange Commission rules and regulations. We believe presentation of these non-GAAP financial measures allows for a deeper understanding of the profitability drivers of our business, results of operations, financial condition and liquidity. These measures should be considered supplementary to our results of operations and financial condition that are presented in accordance with GAAP and should not be viewed as a substitute for GAAP measures. The non-GAAP financial measures we present may not be comparable to similarly-named measures reported by other companies.
Adjusted pre-tax operating income (“APTOI”) is derived by excluding the items set forth below from income from operations before income tax. These items generally fall into one or more of the following broad categories: legacy matters having no relevance to our current businesses or operating performance; adjustments to enhance transparency to the underlying economics of transactions; and recording adjustments to APTOI that we believe to be common in our industry. We believe the adjustments to pre-tax income are useful for gaining an understanding of our overall results of operations.
APTOI excludes the impact of the following items:
FORTITUDE RELATED ADJUSTMENTS:
The modco reinsurance agreements with Fortitude Re transfer the economics of the invested assets supporting the reinsurance agreements to Fortitude Re. Accordingly, the net investment income on Fortitude Re funds withheld assets and the net realized gains (losses) on Fortitude Re funds withheld assets are excluded from APTOI. Similarly, changes in the Fortitude Re funds withheld embedded derivative are also excluded from APTOI.
The ongoing results associated with the reinsurance agreement with Fortitude Re have been excluded from APTOI as these are not indicative of our ongoing business operations.
INVESTMENT RELATED ADJUSTMENTS:
APTOI excludes “Net realized gains (losses)”, including changes in the allowance for credit losses on available-for-sale securities and loans, as well as gains or losses from sales of securities, except for gains (losses) related to the disposition of real estate investments. Net realized gains (losses), except for gains (losses) related to the disposition of real estate investments, are excluded as the timing of sales on invested assets or changes in allowances depend largely on market credit cycles and can vary considerably across periods. In addition, changes in interest rates may create opportunistic scenarios to buy or sell invested assets. Our derivative results, including those used to economically hedge insurance liabilities or are recognized as embedded derivatives at fair value are also included in Net realized gains (losses) and are similarly excluded from APTOI except earned income (periodic settlements and changes in settlement accruals) on derivative instruments used for non-qualifying (economic) hedges or for asset replication. Earned income on such economic hedges is reclassified from Net realized gains and losses to specific APTOI line items based on the economic risk being hedged (e.g., Net investment income and Interest credited to policyholder account balances).
MARKET RISK BENEFIT ADJUSTMENTS:
Certain of our variable annuity, fixed annuity and fixed index annuity contracts contain guaranteed minimum withdrawal benefits (“GMWBs”) and/or guaranteed minimum death benefits (“GMDBs”) which are accounted for as MRBs. Changes in the fair value of these MRBs (excluding changes related to our own credit risk), including certain rider fees attributed to the MRBs, along with changes in the fair value of derivatives used to hedge MRBs are recorded through “Change in the fair value of MRBs, net” and are excluded from APTOI.
Changes in the fair value of securities used to economically hedge MRBs are excluded from APTOI.
OTHER ADJUSTMENTS:
Other adjustments represent all other adjustments that are excluded from APTOI and includes the net pre-tax operating income (losses) from noncontrolling interests related to consolidated investment entities. The excluded adjustments include, as applicable:
- restructuring and other costs related to initiatives designed to reduce operating expenses, improve efficiency and simplify our organization;
- non-recurring costs associated with the implementation of non-ordinary course legal or regulatory changes or changes to accounting principles;
- separation costs;
- non-operating litigation reserves and settlements;
- loss (gain) on extinguishment of debt, if any;
- losses from the impairment of goodwill, if any; and
- income and loss from divested or run-off business, if any.
Adjusted after-tax operating income attributable to our common shareholders (“Adjusted After-tax Operating Income” or “AATOI”) is derived by excluding the tax effected APTOI adjustments described above, as well as the following tax items from net income attributable to us:
- changes in uncertain tax positions and other tax items related to legacy matters having no relevance to our current businesses or operating performance; and
- deferred income tax valuation allowance releases and charges.
Adjusted Book Value is derived by excluding AOCI, adjusted for the cumulative unrealized gains and losses related to Fortitude Re’s funds withheld assets. We believe this measure is useful to investors as it eliminates the asymmetrical impact resulting from changes in fair value of our available-for-sale securities portfolio for which there is largely no offsetting impact for certain related insurance liabilities that are not recorded at fair value with changes in fair value recorded through OCI. It also eliminates asymmetrical impacts where our own credit non-performance risk is recorded through OCI. In addition, we adjust for the cumulative unrealized gains and losses related to Fortitude Re’s funds withheld assets since these fair value movements are economically transferred to Fortitude Re.
Adjusted Book Value per Common Share is computed as adjusted book value divided by total common shares outstanding.
Adjusted Return on Average Equity (“Adjusted ROAE”) is derived by dividing AATOI by average Adjusted Book Value and is used by management to evaluate our recurring profitability and evaluate trends in our business. We believe this measure is useful to investors as it eliminates the asymmetrical impact resulting from changes in fair value of our available-for-sale securities portfolio for which there is largely no offsetting impact for certain related insurance liabilities that are not recorded at fair value with changes in fair value recorded through OCI. It also eliminates asymmetrical impacts where our own credit non-performance risk is recorded through OCI. In addition, we adjust for the cumulative unrealized gains and losses related to Fortitude Re’s funds withheld assets since these fair value movements are economically transferred to Fortitude Re.
Adjusted revenues exclude Net realized gains (losses) except for gains (losses) related to the disposition of real estate investments, income from non-operating litigation settlements (included in Other income for GAAP purposes) and changes in fair value of securities used to hedge guaranteed living benefits (included in Net investment income for GAAP purposes).
Net investment income (APTOI basis) is the sum of base portfolio income and variable investment income.
Operating Earnings per Common Share ("Operating EPS") is derived by dividing AATOI by weighted average diluted shares.
Premiums and deposits is a non-GAAP financial measure that includes direct and assumed premiums received and earned on traditional life insurance policies and life-contingent payout annuities, as well as deposits received on universal life insurance, investment-type annuity contracts and GICs. We believe the measure of premiums and deposits is useful in understanding customer demand for our products, evolving product trends and our sales performance period over period.
KEY OPERATING METRICS AND KEY TERMS
Assets Under Management and Administration
- Assets Under Management (“AUM”) include assets in the general and separate accounts of our subsidiaries that support liabilities and surplus related to our life
