Corebridge sees higher surrenders, but stronger sales, too, in Q1 earnings

Corebridge Financial continues to separate from American International Group, seeing higher fixed annuity surrenders during first-quarter earnings, but also even higher sales.

Premiums and deposits in the individual retirement segment increased $1 billion, or 26%, as compared to the prior-year quarter largely driven by growth of fixed and fixed index annuity deposits, partially offset by lower variable annuity deposits, Corebridge announced.

General account net flows decreased 2% compared to the first quarter of 2022 but increased 71% on a sequential quarter basis due to higher premiums and deposits, partially offset by elevated surrenders.

Spooked by troubling economic trends, retirement investors flocked to protection-focused annuities in 2022. That trend continued into 2023.

Surrenders were up 15%, which prompted several questions from analysts on a Tuesday morning call, but is still within Corebridge projections, executives stressed.

"The higher interest rates that have been driving our strong retail-based spread products over the last few quarters are, as expected, also leading to higher levels of fixed annuity surrenders," President and CEO Kevin Hogan said. "That said, sales growth continues to outpace surrenders in our individual retirement business."

Corebridge reported a loss of $459 million in its first quarter.

The Houston-based company said it had a loss of 70 cents per share. Earnings, adjusted for non-recurring costs, were 97 cents per share. The results topped Wall Street expectations. The average estimate of five analysts surveyed by Zacks Investment Research was for earnings of 84 cents per share.

The financial services company posted revenue of $5.36 billion in the period, which also topped Street forecasts. Three analysts surveyed by Zacks expected $4.21 billion.

Still separating

Corebridge is the rebranded former life and retirement unit of AIG. The separation effort began in 2021 and AIG is underwriting a decreasing amount of the business. During its own earnings call Friday, AIG said it has delayed a secondary share sale in the life and retirement business unit due to heightened market volatility fueled by the banking crisis.

AIG had planned the share sale in the first quarter. Corebridge, which listed on the stock market in September 2022, has seen its shares drop by more than 20% since going public.

"We remain committed to reducing our ownership interest in Corebridge and will explore other options that are aligned with the best interest of shareholders," AIG chairman and CEO Peter Zaffino told analysts.

The Corebridge IPO was one of the largest of 2022 raising $1.7 billion. AIG still controls nearly 78% of Corebridge’s shares, with 10% held by Blackstone.

The separation remains on track, Hogan said, and has cost Corebridge about $230 million to date.

"Given the progress we have made in establishing our capabilities as a publicly traded company, the bulk of what remains is focused on the separation of shared IT applications, which we expect will be mostly completed in 2023," he explained.

Zaffino broke the news Friday that AIG will pursue the sale of Laya Healthcare, the second-largest health insurer in Ireland. Laya is part of the Corebridge portfolio.

Calling it "a very good business" with a good management team, Hogan said Laya just doesn't fit with Corebridge.

"The health insurance industry is not core to life and retirement and our other expertise," he added.

Retirement plan success

Corebridge executives touted growth in the Group Retirement unit, where premiums and deposits increased $358 million, or 19%, as compared to the prior-year quarter due to higher plan acquisitions and out-of-plan fixed annuity deposits. Gains were partially offset by lower out-of-plan variable annuity deposits, Corebridge reported.

Net flows were flat compared to the first quarter of 2022 but increased 14% on a sequential quarter basis due to lower surrenders and withdrawals.

"We're seeing a general pickup in plan activity, both acquisitions and losses, as Covid moves from pandemic to endemic and plan sponsors are more willing to put plans out to bid," said Elias Habayeb, chief financial officer.

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

© Entire contents copyright 2023 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.