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Formed as a spinoff from AIG and incorporated in 2022, Corebridge Financial is one of the largest providers of retirement solutions and insurance products in the U.S. The company offers a broad suite of annuities, life insurance, retirement plans, and institutional products through its four core business segments: individual retirement, group retirement, life insurance, and institutional markets. The company serves individuals, employers, and institutions with solutions such as fixed and variable annuities, group retirement plans, open architecture record-keeping, and a range of life insurance products, as well as specialized offerings for corporations and financial institutions.

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Corebridge Financial (CRBG): Company Profile, Stock Price, News, Rankings

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Corebridge Financial

corebridge financial

Ladies and gentlemen, the Corbridge Financial Inc. First Quarter twenty twenty five Earnings Call will begin shortly with your host, Michelle Mudarisoglu. We appreciate your patience as we prepare your session today. During the call, we encourage participants to raise any questions they may have. Good morning, all, and thank you for joining us for the Corbridge Financial Inc.

First Quarter twenty twenty five Earnings Call. My name is Carly, and I'll be coordinating the call today. I'd now like to hand over to our host, Michelle Mudrysu. Floor is yours.

Good morning, everyone, and welcome to Corbridge Financial's earnings update for the first quarter of twenty twenty five. Joining me on the call are Kevin Hogan, President and Chief Executive Officer and Elias Habayeb, Chief Financial Officer. We will begin with prepared remarks by Kevin and Elias, and then we will take your questions. Today's comments may contain forward looking statements, which are subject to risks and uncertainties. These statements are not guarantees of future performance or events and are based upon management's current expectations and assumptions.

CorBridge's filings with the SEC provide details on important factors that may cause actual results or events to differ materially from those expressed or implied by such forward looking statements. Except as required by the applicable securities laws, CorBridge is under no obligation to update any forward looking statements if circumstances or management's estimates or opinions should change and you are cautioned to not place undue reliance on any forward looking statements. Additionally, today's remarks may refer to non GAAP financial measures. The reconciliation of such measures to the most comparable GAAP figures is included in our earnings release, financial supplement and earnings presentation, all of which are available on our website at investors.corbridgefinancial.com. With that, I would like to now turn the call over to Kevin and Elias for their prepared remarks.

Good morning, everyone, and thank you for joining. The macroeconomic uncertainty and heightened volatility of these past few months remind us that we live in a complex, ever changing world. At times like this, when conditions are uncertain, the mission of CorBridge to proudly partner with individuals, financial professionals and institutions to make it possible for more people to take action in their financial lives becomes more relevant than ever. Over 11,000 Americans are turning 65 every day, and the long term impact of a market downturn can be significant for retirees and those nearing retirement. Our company stands ready to support our customers in times like these, and our strength and stability have enabled us to serve through many periods of volatility and uncertainty.

Turning to first quarter results on Slide three. We are pleased to report another strong quarter that reflects the continued benefits of our diversified business model, strong balance sheet and disciplined execution. CorBridge reported operating earnings per share of $1.16 and ROE of 11.8%. We also returned $454,000,000 to shareholders delivering a payout ratio of 70%. Our balance sheet remains resilient with holding company liquidity of $2,400,000,000 in a high quality general account investment portfolio conservatively positioned with an average rating of single A.

Central to our success are four strategic pillars that drive EPS growth and long term value creation: organic growth, balance sheet optimization, expense efficiencies and active capital management. I will review the results of the quarter in the context of each. First, organic growth, where the breadth and diversity of our product portfolio and distribution platform are meaningful differentiators. CorBridge had a very good start to the year, delivering robust premiums and deposits of $9,300,000,000 although lower in total than last year's exceptionally strong level. We are seeing sustained customer demand driven by an aging U.

S. Population and an advisor community that recognizes the value of annuities. In support of our growth, we are investing in digital capabilities, expanding our product offerings and deepening relationships with our distribution partners while also developing new channels. In Individual Retirement, we continue to benefit from favorable market and demographic conditions, producing premiums and deposits of $4,700,000,000 We have consistently maintained a top tier market position over the last ten years as our broad product suite serves a wide range of retirement needs. We are also building momentum following the successful introduction of our Vila product in October 2024, delivering over $260,000,000 of sales in the first quarter.

We are now actively selling through our largest distribution partners and after launching in California last month are admitted in all but two states. Looking forward, we are well positioned in the fast growing RILA market given our strong product, broad reach and long tenured relationships. Group Retirement continues to deliver steady periodic in plan deposits driven by increased advisor focus and sustained client demand. Our employee advisor force is growing, and the investments we are making in advisor productivity are beginning to yield results, with in plan average enrollments up 9% and in plan average deposits up 10%. Additionally, I am pleased to note that we added our Ryla product to the out of plan offering, delivering approximately $50,000,000 of sales in the first quarter.

We also continued to grow our advisory and brokerage business with 5% AUMA growth year over year, even with lower equity market performance in 2025. Life Insurance delivered another quarter of attractive performance, including both strong sales and mortality results better than expectations. This business continues to perform well supported by our strong product positioning, digital and automated underwriting capabilities and expanding distribution. With nearly $1,000,000,000,000 of gross in force, this business remains a mainstay for Corbridge, providing stability during periods of market volatility. Institutional Markets has continued to focus on growing our GIC program with discipline, and I am pleased to say that we have been successful with GICT reserves increasing 48% year over year.

We also continue to capture attractive opportunities in pension risk transfer with a promising pipeline of transactions developing over the rest of the year. Across CoreBridge, we are proud of the new business we are generating, the discipline we have maintained and the momentum we are building. We remain focused on targeting profitable business with double digit IRRs even as conditions evolve sometimes rapidly. We have consistently demonstrated the ability to pivot across product and channel, dialing up or down to focus our efforts where risk adjusted returns are the most attractive and customer needs the greatest. Turning to the second strategic pillar, optimizing our balance sheet, we have also made meaningful progress.

Through proactive asset liability management and disciplined risk oversight, we are enhancing our financial strength while positioning CoreBridge for long term success. Bermuda continues to be an important part of our capital management strategy. And in the first quarter, we ceded approximately $2,000,000,000 in reserves to our affiliated reinsurer. We also remain active in exploring opportunities across our company to enhance capital efficiency and increase shareholder value. Moving to the third strategic pillar, we continue to drive operating efficiency and improve operating leverage.

These efforts help support disciplined growth and financial flexibility. As we continue to transform CoreBridge, we recently conducted a voluntary early retirement program for eligible colleagues in The U. S. Through this program, we expect to further reduce our expense base and at the same time, create capacity to invest in new skills and capabilities and reshape our workforce. We are also pursuing opportunities to enhance efficiency as we further digitize end to end processes that support our insurance operations.

Additionally, we continue to make investments to further modernize our finance and actuarial capabilities. Turning to the fourth strategic pillar. We are committed to providing an attractive and growing return to our shareholders in a thoughtful and balanced manner while maintaining the flexibility to pursue growth and innovation. Over the last twelve months, through our share repurchase program, we have reduced share count by over 10%. Together, these four strategic pillars are helping us build a stronger, more agile company, and we are well positioned to generate sustainable growth and create long term value for shareholders.

Moving to our financial targets, I am pleased to note that CorBridge continues to deliver. Our expectation is for annual run rate EPS to increase on average in the range of 10% to 15% over the long term. Elias will provide more perspective on our outlook as well as an update on our market sensitivities. Corporidge achieved a run rate ROE of 12.3% in the first quarter and we remain committed to our 12% to 14% annual target. The Life Fleet RBC ratio remains above target even with recent market volatility.

We also delivered a 70% payout ratio and are maintaining our target of 60% to 65%. Moving to Slide five. Since 2017, regardless of market cycle, Corbridge has been able to significantly grow our business while maintaining a strong balance sheet and consistent cash generation. To put that in numbers, over the last eight years, we have increased sales by over 50%. At the same time, our Life Fleet RBC ratio has consistently exceeded target and our insurance companies have generated on average over $2,100,000,000 in cash annually.

These outcomes collectively demonstrate the CoreBridge value proposition. We are well positioned across a range of macro environments to continue creating shareholder value and to continue delivering for our customers. And now I will hand the call over to Elias.

Thank you, Kevin. I will begin my comments today on Slide six. CorBridge reported first quarter adjusted pretax operating income of $810,000,000 or operating earnings per share of $1.16 a 5% increase year over year on a per share basis. Our operating EPS included two notable items this quarter, resulting in a favorable impact of $01 Details can be found in our earnings presentation. Annualized alternative investment returns were $06 short of our long term expectations, largely due to real estate equity returns.

Adjusting for notable items and alternative investment returns, we delivered run rate operating EPS of $1.21 and adjusted ROE of 12.3%. Moving to Slide seven. Core sources of income, excluding notable items and the sale of our International Life business, grew by 1% year over year, driven by higher fee income and improved underwriting margin. Base spread income declined by 3% over the same period. This was driven by profitable growth offset by the earn in of Fed rate actions from the second half of twenty twenty four and dynamics in group retirement as its earnings transition from spread to fee income.

Sequentially, base spread income increased by 3%. This change was mainly driven by profitable growth that outweighed the earn in of Fed rate actions, which was in line with our prior guidance. In total, the underlying fundamentals behind base spread income continued to be bolstered by 8% growth in the general account and attractive new money yields, which exceeded roll off yields in the portfolio by approximately 100 basis points. Additionally, fee income improved by 1% year over year largely as a result of higher account values along with our growing advisory and brokerage business. Underwriting margin improved by 12% year over year driven by more favorable mortality experience.

Pivoting to expenses, first quarter general operating expenses for our insurance businesses and parent company were 5% higher year over year after excluding the sale of our International Life business. This largely reflects savings from corporate forward offset by costs attributable to business growth as well as higher compensation and benefit expenses. Our first quarter results reflect both planned investments in talent to support growth and timing of our annual performance related equity grants. Adding to Kevin's earlier comments about the voluntary early retirement program, we currently estimate this will have a onetime cost of $85,000,000 As this program demonstrates, Corporate remains disciplined in our approach to expense management and is committed to managing costs thoughtfully while supporting key strategic initiatives and business priorities. Next, I will briefly review a few highlights from each of our businesses.

Details on the four segments can be found in our earnings presentation. As a reminder, results exclude the impact of notable items, variable investment income and the sale of our International Life business. While adjusted pretax operating income for Individual retirement declined by 10% year over year, the fundamentals for this business remain strong and the market conditions attractive. As I previously shared, spread income was impacted by two factors we see as short term in nature: Fed rate actions and our hedging activities to maintain alignment between assets and liabilities. Consistent with prior guidance, these items collectively reduced base spread income by approximately $50,000,000 for the quarter.

In addition, results were impacted by higher DAC and commissions related to business growth, also consistent with our prior guidance. For the general account, Individual Retirement generated net inflows of $1,100,000,000 demonstrating the strength of our asset origination capabilities, product portfolio and distribution network supported by ongoing strong customer demand. Group Retirement delivered another steady quarter with core earnings of $167,000,000 Of note, this quarter's base spread income benefited from opportunistic asset repositioning efforts. Given the ongoing shift in our customer base and resulting net outflows, we expect to see continuation of the transition from spread to fee based income over time. As a result, net outflows were $1,800,000,000 which is consistent with our prior guidance and in line with levels observed in the first half of twenty twenty four.

We continue to be excited about the opportunities in this space, especially as customers seek solutions to position their portfolios for retirement. And as such, we remain focused on efforts to grow the advisory and brokerage business. Life insurance continues to be a strong performer. Adjusted pretax operating income increased by 23% year over year, primarily driven by more favorable mortality experience. In institutional markets, adjusted pretax operating income was virtually flat year over year.

That said, total sources of income grew by 33% supported by robust reserve growth of 17% over the same period. As a reminder, earnings from this segment may reflect some quarterly volatility, but we expect earnings to increase over time as reserves grow. Overall, Corbridge continues to benefit from our diversified and complementary portfolio of market leading businesses, which remains a key component of our shareholder value proposition. Moving to Slide eight, where I will focus on three key areas of capital, liquidity and the balance sheet. Excluding $1,000,000,000 to cover the April 2025 debt maturity, CorBridge ended the quarter with $1,400,000,000 of cash on hand at the holding company, supported by $600,000,000 of distributions from our U.

S. Insurance companies in this quarter. This level exceeds the holding company's needs for the next twelve months, and I will note that we have no material debt maturities until 2027. Our insurance companies have a strong liquidity profile driven by positive operating cash flows, liquid invested assets and contingent liquidity sources, all of which help provide ample flexibility to respond to a range of macro environments. Our insurance companies also remain well capitalized with their respective capital ratios exceeding target.

CorBridge continues to actively manage capital in a disciplined and forward looking manner, maintaining a sufficient buffer to withstand market volatility and capture attractive growth opportunities. This active management includes our hedging programs, which continue to perform as expected. These programs help safeguard statutory capital, support our ability to deliver consistent cash flows and protect long term value for shareholders. Further, they are important to our balance sheet management strategy and are designed to help protect it against market movements, including during periods of volatility like we're currently experiencing. Given the uncertain economic landscape and growing concerns about a recession, we understand there's heightened focus on insurers' investment portfolios.

So let me pause here and offer a few highlights on our $223,000,000,000 investment portfolio. First and foremost, our portfolio is diversified across asset class, sector, geography and issuer, making it less vulnerable to systemic risk, and it's proven to be resilient across past credit cycles. Approximately 97% is invested in fixed income and short term investments, the bulk of which consists of liquid high quality bonds. 95% of our fixed maturities are rated investment grade. This portfolio reflects actions taken over the past few years to improve credit quality and return on capital.

As our investment strategy is liability driven, our credit portfolio is a mix of public, private and structured products, put together with the goal of maximizing risk adjusted returns while maintaining tight alignment between our assets and liabilities. For public credit, we maintain a high quality bias with significant exposure to investment grade corporate bonds that provide liquidity and regulatory capital efficiency. Private credit allocations, the vast majority of which are traditional investment grade corporate private placements, benefits from illiquidity premiums and contain negotiated protective financial covenants. Corbridge believes this asset class will generally perform better during a downturn due to the protections built into the transactions. And structured products provide us with exposures to diversified collateral.

Approximately 95% is comprised of the more senior tranches with significant credit enhancements. Lastly, commercial mortgage loans are performing as expected and we have maintained our conservative reserving approach. I will now wrap up with our latest sensitivities. We previously commented on the fourth quarter twenty twenty four earnings call that 2025 EPS growth would be below our long term expectations of 10% to 15% due to the drag from the earn in of Fed rate actions. At that time, we anticipated EPS in 2025 would grow by mid single digits from the 2024 base of $4.99 These projections assume annual equity market returns of 8%, alternatives improving over the course of the year to achieve our 8% to 9% target return by the end of 2025 and fifty basis points of Fed rate cuts in 2025.

Given recent increased volatility, we are providing updated sensitivities to equity markets and interest rates. The net impact from an immediate 10% change in the S and P 500 Index on the combination of fee income and advisory fee expense is approximately $85,000,000 over the first twelve months. Further, each 25 basis points move in SOFR impacts base portfolio income by approximately two basis points. This sulfur rate sensitivity is lower than our prior guidance due to a reduction in net floating rate exposures over the past two quarters. Lastly, given the lack of deal activity because of current market uncertainty, we expect alternative investments returns to fall short of our long term return expectations of 8% to 9% in 2025.

For the second quarter, we expect alternative investment returns will be approximately half the level in the first quarter based on the information available to us at this time. In conclusion, our proactive balance sheet management, supported by strong reserving practices and risk controls, has enabled Corbridge to pursue profitable growth across multiple cycles while delivering on financial and capital management goals. Corbridge will remain disciplined in managing our financial flexibility, balancing prudence with the agility to invest in the future. Now I will turn the call back to Isha.

Thank you, Elias. As a reminder, please limit yourselves to one question and one follow-up. Operator, we are now ready to begin the Q and A portion of the call.

Thank you. We'd now like to open the lines for Q Our first question comes from Dan Bergmann of Cowen. Dan, your line is now open.

Your base yield took a nice step up quarter over quarter, particularly in the Group Retirement segment. I know you mentioned some actions you took to reposition the portfolio this quarter. I wanted to see if you could just give a little more detail around those actions. And given you previously talked about some opportunities to optimize the asset portfolio, I guess what inning are you in for that process? And as we look ahead, how should we think about the ability for you to take further steps to improve yields in the coming quarters?

Yes. Thanks, Dan. Appreciate the question. Look, I'll start and then I'll pass over to Elias. As you noted, the sequential increase in the Group Retirement based spreads and spread income kind of as in the case of individual retirement reflects some opportunistic asset repositioning, which is really part of our active our regular active portfolio management strategy that Elias will touch on in a bit.

But I think what's important to take away is that we don't expect a change in the trend over time. We see this business transitioning from spread to a fee based business. Fee income is already the predominant source of revenues for that business. There are going to be some variances quarter to quarter driven by sort of one time items and some seasonality related to where we credit interest. But we think this is a positive trend over time from spread to fee income.

Now in terms of the yield questions, I'll pass that over to Elias.

Hey, thanks, Kevin. And hey, Dan, if you look at our track record, we've taken advantage opportunistically from time to time where we had opportunities to reposition assets and pick up yields and improve return on capital. And when looking at the first quarter, what we did in Group Retirement, we saw a similar opportunity and we did to some extent also on the individual retirement space take advantage of it. And we'll continue to do that whenever the opportunity arises and when it and when within our risk parameters. And if you look at the what we did in '22, '20 '3, '20 '4 also against the in force and individual retirement, this is kind of no different than the stuff we've done previously.

Got it. That's really helpful. Thank you.

a broad one. But given the recent market volatility, just wanted to see if you could provide an update on what you're seeing in the market for your various individual retirement products. I guess how is industry demand holding up amidst the volatility? And how are you finding the competitive environment across your different product areas?

Yes, sure. Thanks. Look, the demand for annuities remains robust. The belly of the yield curve remains supportive. Credit spreads, I think are also relevant there.

And above all, the long term macro drivers are really very powerful trends, the aging of the population, the need for people to look after their own retirements and a supportive advisor community. And based on our experience market uncertainty actually further increases the demand for our products sometimes in the income benefits and sometimes in the accumulation areas. Of our various products fixed annuities are the most sort of immediately sensitive. And in the first the fourth quarter and the first quarter there were a few periods of lower sales in the face of some of the market changes. And while we maintained our usual pricing discipline.

But I wouldn't read too much into that. We see very strong demand continuing for the index product in particular. Fixed annuity conditions remain very attractive. And we're off to a great start with our Ryla product. We continue to see the way I define rationality of pricing and competition is whether or not we're able to meet our margins on new business and we continue to see attractive new business margins.

Now I would point out second quarter of last year was kind of an exceptional period where everything came together. And I wouldn't expect that type of quarter to necessarily repeat. But overall, the conditions are very attractive and we're confident in growing our individual retirement overall general accounts and spread income over time.

Thank you very much. Our next question comes from Elyse Greenspan of Wells Fargo. Elyse, your line is now open.

Hi, thanks. You guys said this quarter, which I know you typically say in calls, just that you guys are continuing to explore opportunities across the company to enhance capital efficiency. Can you just expand on I guess what's top of mind on that list today?

Yes. So Elyse, thanks for the question. Look, we're always looking for opportunities increase our efficiency, increase shareholder value and optimize our portfolio. We continue to expand our Bermuda strategy, which is an important part of our capital management toolkit. And we added an additional $2,000,000,000 of reserves this quarter.

So we've ceded $14,000,000,000 with the new strategy to date. And we are early in the stages of our Bermuda strategy. We see further opportunities for both in force and new business sessions. In addition to that, obviously external reinsurance transactions are something that we evaluate from time to time. And any transaction we've consistently said must be accretive on a risk adjusted basis.

And so we continue to explore those opportunities. We're always open to considering ways to increase shareholder value and we'll be happy to share anything new at an appropriate time.

Thanks. And then my second question, you guys the opening commentary you're pointing to, I think you said a promising pipeline of PRT deals over the rest of the year. I know some peers have just pointed to volatility perhaps impacting deal flow in that business this year. Can you just kind of talk to what you're seeing and how you expect things to transpire over the rest of the year? Thank you.

Yes. Thanks, Elyse. Look, we continue to see very robust opportunities for pension risk transfer. For quite some time, we've been focused on full plan terminations, which are transactions generally in the region of $500,000,000 to $1,000,000,000 We carefully underwrite these. They're essentially like little mini M and A transactions where we have to carefully evaluate both liabilities and asset strategies.

Pension plans continue to be well funded. Generally, these transactions result from committed corporate risk management strategies. They like M and A transactions are not predictable. We don't necessarily expect them to land regularly quarter by quarter. But the pipeline both in The U.

S. And also in The UK continues to be as strong as we've seen it. And we don't necessarily see any indications that volatility is going to have significant impact on timing or pursuit of these transactions.

Thank you very much. Next question comes from Joel Hurwitz of Dowling and Partners. Joel, your line is now open.

Hey, good morning. First, a couple on expenses. Expenses in individual retirement and corporate were up from where you've been running. How much would you attribute that to seasonality? Then on the voluntary separation, any expectation for expense savings running through operating earnings?

Hey, Joel, it's Elias. So with this is a component of what you're seeing in individual retirement and the parent and in total across the board is seasonality. Typically, first quarter is higher tied to the rule of 65, which is people based on age and years of service. If they meet the rule of 65, equity grants are expensed upfront versus over three years. And this year, we had a higher dollar amount of equity grants meeting the Rule of 65.

So that's a component of it. And the second component is our payroll taxes and four zero one matches are kind of front loaded. And as you progress in the year, those will come down. So there's definitely seasonality there. I would say about 50% of the increase in IR is tied to that on that spot.

With respect to early retirement program, that's kind of one of the initiatives we are undertaking to continue to modernize our organization and improve our operating leverage. The expectation is a portion of the savings out of the early retirement program will drop to the bottom line and a portion we're going to use to fund investments in new capabilities for the next leg of our journey. We do expect that to benefit our expense run rate. But given the timing of when people depart, it will not fully earn into the run rate till the beginning of twenty twenty six.

Okay. Very helpful. And then just a second one. In group, you've been talking about growing your out of plan business in the advisory and brokerage business. Can you just provide an update on the organic growth that you're seeing there?

And then what sort of traction your advisers are gaining?

Yes. Thanks. Appreciate the question, Joel. I mean Group Retirement as you pointed out and as I mentioned is not solely a spread business. And we're seeing very attractive opportunities in the out of plan and the advisory and brokerage space.

Overall, our advisor force is growing And the advisors support both the in plan and the out of plan strategies with in plan having advisory options as well. Our advisory and brokerage assets are now $16,000,000,000 They're up 5% year over year. And if you look at the combination of the out of plan plus the advisory and brokerage assets, it's a significant earnings base at $99,000,000,000 We're seeing we've been investing in advisor productivity. And as per my prepared remarks, we're seeing some improvements in the productivity in terms of enrollments and deposits. And maybe the most important numbers of all is of our 1,900,000 customers in this business, 1,600,000 of them are still implant only customers.

And our advisers are building relationships with them in order to prepare for that important moment of household asset consolidation. And so we're in the early stages of the change in the trend from a spread to a fee based business, but the signs are very positive across the board.

Thank you very much. Our next question comes from Suneet Kamath of Jefferies. Suneet, your line is now open.

Great. Thank you. So you had guided to elevated surrenders in Individual Retirement, I think, in 1Q and then 3Q and 4Q. It didn't seem like we saw a big change here in 1Q. Is that because the surrenders will roll off more in the latter half of the year?

And then do you have a sense of what rolled off? Like what were you able to retain through other products?

Yes. Thanks, Suneet. Good morning. Yes. What we said last quarter, we do expect higher levels of fixed annuity and indexed annuity volumes to be exiting their surrender charge period.

And that is in particular in the second half of this year. And we see this as kind of natural given the significant growth in the whole portfolio over the last few years, but in particular since 2022 when the rate environment really started change. And so this increase in volumes exiting surrender charge periods, it's not going to be consistent quarter to quarter. It really reflects where large volumes of product were sold in the past. On the other hand, in our experience surrender rates reflect really where yields and credit spreads are at a given time.

And over the last few cycles, we haven't seen anything that's outside of our expectations along those lines. And we've seen generally that when surrender rates are higher, usually the conditions for new business are also very attractive, which is important as really what we're focused on is the long term growth of our general account net of any surrenders. So it's not necessarily I mean, we look at options as to how we may preserve surrenders, but more importantly, we look at new business pricing and new business pricing is very attractive. And so irrespective of the surrender behaviors and activity, we expect that the general account and spread income will continue to grow over time. And the environment continues to be very robust for our entire range of individual retirement products index annuities, fixed annuities and most recently our RILA which is off to a great start.

Got it. That's helpful. Thanks. And then on Slide five, I thought that picture of cash generation over time was pretty impressive. But if I look at the data, it looks like it's been relatively flattish at that kind of $2,000,000,000 ish level.

And I think on the last call you talked about increasing it by 10%. So I just want to understand what's different now that allows you to grow it? And should we think about that 10% as really just a bump up? Or is that more of a on an annual basis, you want to increase that by 10%?

Suneet, it's Elias. So if you look back historically, there was a different kind of strategy at the time and the historical numbers are a bit normalized. And you could find that in the S-one in our public filings. Let's talk now about the strategy since we go public we've gone public. Our strategy has been to grow earnings and increase cash generation to deliver on the 60% to 65% payout ratio.

Our target for this year is to grow the insurance company dividends by 5% to 10% and we believe we're on track to delivering it. And sitting here today despite the market volatility, we remain confident in our expectation to deliver the increased 5% to 10% in dividends from the insurance companies and deliver on our payout ratio. We'd expect that to continue to grow over time as we grow the profitability of the business.

Thank you very much. Our next question comes from K. V. Montesire with Deutsche Bank. K.

Good morning. My first question is on your guidance for base spread income. So you've reduced your sensitivity to short term interest rates. And I think in your prepared remarks, you mentioned that it was mainly due to reducing your exposure to floating rates. So I guess I'm wondering, A, is that the right answer?

And then two, how are you thinking about your hedging philosophy and how maybe that could impact your sensitivity going forward?

Yes. Thanks, KV. Good morning. Look, maybe I'll unpack the IR spread income story a little bit for you. So as we just talked about, right, the first quarter spreads and spread income as in the case of Group Retirement did benefit from some asset repositioning, which helped to offset the impact that we had guided to relative to the fourth quarter Fed rate actions and how they affected in particular sulfur.

And looking ahead, we actually continue to expect that base spread income will grow over time even if there is a little bit of marginal spread compression. We provided the sulfur cut sensitivity and just remind you that those are generally short term in impact. And we have lowered our sensitivity since the fourth quarter from the three bps to the two bps. But really the overriding driver of spread income is ultimately business operations. And there are very powerful drivers on the macro side that I'm not going to necessarily repeat.

In current new business pricing is at or above our medium term return expectations. The investment environment is good. Our new money rates are still 100 basis points over the roll off. And so it's not going to be a straight line. There'll be a little variability quarter to quarter.

But the fundamental trend is that the general account we're growing the general account reserves over time and base spread income will grow over time irrespective of underlying spread dynamics, which will be an important contributor to our growth targets. I'll hand it over to Elias to talk a little bit about the hedging question.

Yes. And listen, from the hedging question, we've talked in the past like one of the aspects of how we manage the balance sheet is the ALM profile of the balance sheet, and our investment strategy is liability driven. So we adjust the asset side to what we see on the liability side. And what we have done is reduced our net floating rate exposure. We've held floaters in the portfolio for two reasons.

One, we find them as an attractive asset class and on a relative value basis. At times, they've offered better returns than to fixed rate bonds. And separately, we've used them as a tool to manage the ALM profile of the balance sheet. So when rates increased in 2022 and liability durations came in significantly, we used in addition to derivatives, we used an increased allocation to floaters to shorten the duration of the asset. So and we will continue to manage it within that discipline.

And as a result of what's played out in our portfolio, we've reduced the floating rate exposure. So if you recall, at the September, when we first talked about it, we said about 8% of the investment portfolio was in a net floating rate position. That's down to about 5% as of the March from it. And that's been the driver behind why the sensitivity has improved since then. And that's also kind of consistent to what we hinted at back at the third quarter earnings call when we gave the initial sensitivity that we expected that sensitivity to decline over time.

So it's playing out kind of consistent with what we expected. And just to echo Kevin's comments, our guidance on spread income in Individual Retirement is we expect it to grow over time. The business dynamics is great. If you look at the new money yields relative to what's rolling off, and I quoted it in my script, this quarter we had 100 basis point differential that's kind of accretive. And if you look at what happened to spread income in the quarter, while the earning of the 100 basis points was consistent with the prior guidance we gave you, it's where we were able to mitigate it with growth in the business side as well as some asset repositioning to take advantage of opportunities to improve returns in the investment portfolio within our risk and capital parameters.

Thank you. That's very helpful. Second pivot to technology. Just wondering if you can get an update on Simply Now and some of the other new tech initiatives you have going on. I think in the past, you've mentioned, at least for life insurance, 80% of new policies were auto decision.

Just wondering if you can expand that maybe what you're seeing in other segments and how you're using digital capabilities to further improve your process not just on the cost side, but also to drive top line growth.

Yes. Thanks, KZ. Look, we're really proud of our life insurance business and we have been investing in that business over a number of years, starting with our data strategy and then ultimately building into our digital capabilities and automated underwriting, which is ultimately what's driving I think a lot of the success there. The work we've done also in repositioning our product strategy is kind of hand in glove with that and focusing on products that are less interest rate sensitive and also maybe a little bit less pricing sensitive. And we're pleased with the strong position that we have there.

Elias talked about the fact that after our early voluntary early retirement program, I mean, part of those savings will drop to the bottom line, but part of those are being reinvested in the business. Important investments that we're making include further investments in our data and digital and automation strategies. We're starting to see some of the benefits of those in our Retirement Services business. You'll see some of that in the advisor efficiency numbers that I quoted in my prepared remarks. And then we're also adopting a strategy of enhancing our capabilities in our finance and actuarial and our other sort of administrative support activities.

And so the benefits of the data, digital and automation strategies, We're in the early stages of exploring tools like advanced practices and artificial intelligence, but that's something that is on our path. And we do see it as an important opportunity to increase our scalability and our operating efficiency and operating leverage over time.

Thank you very much. Our next question comes from Alex Scott of Barclays. Alex, your line is now open.

Corebridge Financial (CRBG) Q1 2025 Earnings Call Transcript

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