Corebridge Financial, Inc. quarterly report, Q1 FY2024

Corebridge Financial, Inc. — Q1 2024 Form 10-Q

Business context and reporting period. This unaudited report covers the three months ended March 31, 2024, with balance-sheet comparisons to December 31, 2023. Corebridge provides U.S.-focused retirement solutions and life insurance through Individual Retirement, Group Retirement, Life Insurance, Institutional Markets, and Corporate and Other. AIG owned approximately 52.7% of the company at quarter-end.

Key financial results and liquidity

Metric	Q1 2024	Q1 2023 / prior date
Total revenue	$5.836 billion	$4.262 billion
Net income (loss) attributable to Corebridge	$878 million	$(459) million
Diluted earnings (loss) per share	$1.41	$(0.70)
Adjusted pre-tax operating income (APTOI; non-GAAP)	$837 million	$724 million
Adjusted after-tax operating income (non-GAAP)	$688 million	$632 million
Operating cash flow	$598 million	$301 million
Cash and restricted cash at period end	$426 million	$524 million
Total assets	$385.588 billion	$379.270 billion at Dec. 31, 2023
Total equity	$12.386 billion	$12.635 billion at Dec. 31, 2023
Short-term and long-term debt	$250 million and $9.118 billion	Unchanged from Dec. 31, 2023

Revenue includes $320 million of net realized losses, versus $1.458 billion of losses a year earlier. The improvement in GAAP earnings primarily reflected lower realized losses and a favorable change in fair value of market risk benefits (MRBs); these items can make reported results volatile. The effective tax rate on income from operations was 18.6%.

Net cash used in investing activities was $2.645 billion and financing activities provided $1.844 billion; cash and restricted cash declined $202 million during the quarter. Corebridge Parent and intermediate holding companies reported $4.248 billion of liquidity sources, including $1.748 billion of cash and short-term investments and $2.5 billion available under a committed revolving facility. These holding-company resources are distinct from total consolidated cash.

At March 31, adjusted book value per common share, a non-GAAP measure, was $37.73, compared with $36.82 at year-end; GAAP book value per share was $18.81, compared with $18.93. Management reported the Life Fleet RBC ratio above its 400% minimum target at December 31, 2023; the filing does not provide a March 31, 2024 ratio.

Material changes versus the prior comparable period

APTOI rose $113 million to $837 million. Higher base portfolio income, PRT premiums, and lower operating expenses and interest expense more than offset increased policyholder benefits and interest credited.
Individual Retirement APTOI increased to $622 million from $534 million, supported by improved investment spreads. However, segment net flows shifted to $514 million of outflows from $662 million of inflows; fixed-annuity, fixed-index-annuity, and variable-annuity surrender rates all increased year over year.
Group Retirement APTOI rose to $200 million from $186 million, but net outflows widened to $1.891 billion from $819 million and the surrender rate increased to 13.6% from 11.0%.
Life Insurance APTOI declined to $54 million from $82 million, including lower underwriting margin and the absence of Laya income following its 2023 sale.
Institutional Markets APTOI increased to $112 million from $85 million, with premiums and deposits rising to $2.586 billion from $2.163 billion, primarily on new PRT and GIC business.
Higher interest rates contributed to a $1.1 billion decline in unrealized investment values in Q1 2024, compared with a $4.0 billion increase in Q1 2023. This contributed to comprehensive income attributable to Corebridge of $235 million, versus $2.337 billion.

Outlook, management commentary, risks and unusual items

Outlook: The filing provides no specific quarterly or annual earnings guidance. Management says rising rates improve yields on new investments and may support spread-based sales, but can also increase surrenders, pressure fee income and require higher renewal crediting rates. Management reported $394 million of annualized pre-tax expense savings acted upon or contracted under Corebridge Forward through March 31, toward a roughly $400 million annual run-rate reduction target; estimated cumulative costs to achieve are approximately $300 million, of which $181 million had been incurred.
Capital returns: The company repurchased approximately 9.5 million shares for $243 million in Q1 and paid $143 million in common dividends. After quarter-end, the board authorized an additional $2.0 billion repurchase program on April 30, 2024; this is authorization, not a commitment to repurchase.
Sales and portfolio risks: Management identifies interest rates, equity and credit markets, inflation, commercial real estate, geopolitical events, policyholder behavior, and the timing and severity of insurance claims as factors that may affect results. It also cautions that annuity surrenders may rise as rates increase. The commercial mortgage portfolio was $34.7 billion; $546 million was on nonaccrual at March 31, compared with $419 million at year-end. Management reported a weighted-average commercial mortgage loan-to-value ratio of 59% and debt-service coverage of 1.9x.
Reinsurance and valuation: Approximately $26.1 billion of reserves had been ceded to Fortitude Re. Changes in the funds-withheld embedded derivative can cause substantial net-income volatility, which management says is largely offset in OCI. The company remains exposed if reinsurers fail to meet obligations; it reported approximately 100% of $27.7 billion of reinsurance recoverables as investment grade under its ratings assessment.
Unusual items: Corebridge recorded a $67 million out-of-period adjustment that increased Q1 earnings, primarily correcting net investment income; management concluded it was not material to prior periods or expected to be material for full-year 2024. The company also recorded a $194 million increase in valuation allowance related to unrealized tax capital losses, allocated to OCI; the related balance-sheet allowance was $1.2 billion.
Transactions and legal matters: The sale of AIG Life to Aviva closed April 8, 2024 for gross proceeds of £453 million ($569 million). The company has litigation and arbitration matters, including disputes over requested reinsurance rate increases and California life-insurance notice cases; outcomes and ultimate losses may be uncertain. It had $4.4 billion of investment and real-estate commitments at March 31.
Other items: The SEC climate-disclosure rules were stayed pending judicial review, and Corebridge was evaluating potential impacts. The Department of Labor’s updated investment-advice fiduciary rule was published after quarter-end; the company was evaluating its impact. Management stated that disclosure controls were effective as of March 31, 2024.

Important facts for investors to verify

How much of the earnings improvement came from recurring operating performance versus market-sensitive realized losses and MRB valuation changes; review GAAP results alongside APTOI and adjusted after-tax operating income.
Whether higher annuity surrender rates and negative Individual and Group Retirement net flows persist, and how they affect liquidity, spreads, and future sales.
Commercial real-estate loan performance, nonaccrual trends, credit-loss allowances, and exposure to refinancing or property-value pressure.
Fortitude Re’s performance and credit exposure, including the distinction between reinsurance assets and the funds-withheld arrangements’ reported earnings and OCI effects.
Execution of the expense-savings target and cost-to-achieve estimate, and the effect of the AIG Life sale on future segment results.
Capital availability and capital returns: confirm subsidiary-dividend constraints, holding-company liquidity, debt maturities and ratings-trigger collateral requirements, and actual repurchases under the new authorization.
Changes in tax valuation allowances, unresolved litigation and reinsurance disputes, and any material developments in regulatory requirements.