F&G Annuities & Life NYSE:FG provides fixed annuities and life insurance products in the US, and covers areas of the insurance landscape like fixed indexed annuities, multi-year guarantee annuities and pension risk transfer insurance. It serves both real annuity and life customers as well as institutional clients.
Last month F&G Annuities & Life announced cumulative sales of pension risk transfer transactions of more than USD 5bn since it launched this channel in 2021. “In just under three years, F&G has become a meaningful player in the PRT space,” said Matt Christensen, Executive Vice President of PRT at F&G. “Our continued success is a reflection not only of F&G’s overall growth and diversification, but the ability of our best-in-class PRT team to execute at the highest level in this competitive marketplace.”
F&G has developed an efficient and effective approach to how it designs, executes and closes pension risk transfer transactions alongside its consultant and plan sponsor clients. Successful PRT transactions require strong intermediary relationship management, competitive product pricing and outstanding post-sale administration conversion execution.
How has F&G Annuities & Life stock been performing?
The company reported its results for Q1 2024 in the second week of May. The stock has been doing well with strong gains in the autumn which saw it trade close to 50 bucks a share. Since then it has dropped off slightly to trade under $40 at time of writing. Investors are still looking at gains of +78.5 in the last 12 months.
F&G came back on the the market via a 15% stock issuance back in December 2022. Historically known as Fidelity & Guaranty Life, it rebranded as F&G Annuities & Life in 2019. It was acquired by Fidelity National Financial in a deal that closed in 2020, with FNF owning the majority of the stock.
Why take a look at F&G stock?
F&G stock looks like quite a compelling option for investors interested in the US insurance sector. Its latest results position it in the top decile of US financial stocks and it is showing strong performance in both Return on Equity and EBITDA stats. While F&G’s cash flow already looks good, combine that with its income statement and balance sheet, and it starts to shape up into a very good opportunity indeed.
Revenues as reported in May came in at USD 1.5bn with a net income of USD 115m. This represented a sharp rise of 78% in revenues, which always catches my interest. We also saw a substantial +157% rise in earnings per share compared to the corresponding quarter of the previous year.
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Why fund managers are fans of F&G
Investors should also pay attention to the sharp rise in F&G’s EBITDA margin, which went from negative 19.7% in Q1 of 2023 to +12% this year. These increases are usually indicative of companies that are raising prices or implementing optimisation techniques in key business sectors. This can lead to higher EBITDA margins and further improve stock performance going forward.
Free cash flow is also looking good at USD 1.53bn. This is again a significant increase against last year. The company paid out a dividend of USD 26m and also said it would be buying USD 6m of stock. Dividend yield remains at 2.1%.
Apart from me, another fan of the stock is the Ave Maria World Equity Fund, which highlighted F&G in their Q1 investor letter. “The fixed income annuity business is benefiting from the graying of America and the disappearance of the traditional pension plan,” it said. “F&G is gaining significant market share under FNF ownership by capitalizing on Fidelity National Financial’s strong relationships with leading banks and broker dealers.”
