Corebridge books big loss, touts soaring premiums as AIG split nears

Corebridge Financial reported a $1.3 billion loss in the fourth quarter as it nears full separation from American International Group. But executives stressed the many positives in the underlying sales of its life and annuity products.

Premiums and deposits of $10.9 billion in Q4 represented a 20% increase over the year-ago quarter. Full-year premiums and deposits totaled $39.9 billion, or 26% higher than 2022.

Fourth-quarter base spread income of $987 million was up 21% over the prior-year quarter. For the year, base spread income increased 30% to $3.7 billion.

"We manufacture a wide range of products that appeal to different market segments, but are also designed to generate attractive returns," said Corebridge CEO Kevin Hogan during a call with analysts today. "We have a high-quality in-force portfolio and have managed it carefully. The diversity in our product suite and the breadth of our distribution strategy allow us to be nimble and react to the evolving market conditions."

The $1.3 billion loss compares to a $207 million loss in the prior-year quarter. Corebridge said the Q4 loss resulted from "realized losses recorded for the Fortitude Re funds withheld embedded derivative, partially offset by higher net investment income."

The financial services company posted revenue of $3.35 billion in the quarter, falling short of Wall Street forecasts. Four analysts surveyed by Zacks expected $5.42 billion. For the year, the company reported profit of $1.1 billion, with revenue reported as $18.88 billion.

Corebridge is the former life and retirement segment of AIG and is midway through a separation. During a conference call with Wall Street analysts Wednesday, AIG executives said their ownership stake in Corebridge is down to 52% and the full "deconsolidation" could take place during the new stock offering.

A massive undertaking, the separation costs are up to $425 million, Hogan said.

"On the IT side, just as one example, we migrated nearly 700 physical applications, hundreds of operating platforms, and thousands of end users," Hogan explained. "These efforts did not distract us from continuing to serve our customers and distribution partners."

Surrenders will increase

Annuity sales are setting quarterly and annual records with nearly every new report. Powered by unprecedented fixed annuity sales, total annuity sales were $385 billion in 2023, 23% higher than the record set in 2022, LIMRA reported last month.

Corebridge is capitalizing on those hot products. In its individual retirement segment, premiums and deposits increased $1.5 billion, or 38%, over the prior-year quarter driven by growth of fixed annuity and fixed index annuity deposits, partially offset by lower variable annuity deposits.

Net flows increased $562 million, or 268%, over the fourth quarter of 2022 primarily from strong fixed annuity flows, Corebridge said in a news release.

"Complementing this growth, we leveraged our unique investment platform to scale the origination of attractive assets that are well matched to our liabilities, and to opportunistically lock in favorable yields, for which we expect to see benefits for years to come," Hogan said. "Our new operating model enabled us to rapidly expand capacity to support record sales volumes, especially in the latter part of the year."

Annuity surrender rates are a concern Corebridge is tracking, said Elias Habayeb, chief financial officer.

"In the first quarter of 2024, we expect the higher volume of annuities exiting the surrender charge protection, which should result in an elevated surrendering," he explained.

Interest rate changes not a concern

Rising interest rates is credited for offering consumers a much better annuity product. But even if rates fall, Hogan said Corebridge is confident in its product suite.

Fed chair Jerome Powell told CBS News' "60 Minutes" earlier this month that the central bank wants to have more confidence that inflation is receding "before we take that very important step of beginning to cut interest rates."

"We're very proud of our execution in working with our distribution partners to mobilize these very attractive products," Hogan said. "And even if rates were to come back a little bit, we still see extremely attractive margins."

In the group retirement segment, premiums and deposits decreased $160 million, or 7%, from the prior-year quarter due to lower plan acquisitions and out-of-plan variable annuity deposits, partially offset by higher out-of-plan fixed annuity and fixed index annuity deposits, the release said.

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.