Corebridge Financial, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023; unaudited. Corebridge provides retirement solutions and life insurance. AIG owned 65.3% of the company at quarter-end.
Financial performance and position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Total revenue | $5.757bn | $6.790bn | $10.019bn | $14.030bn |
| Net income attributable to Corebridge | $771m | $2.594bn | $312m | $5.960bn |
| Diluted EPS | $1.18 | $4.02 | $0.48 | $9.24 |
| Adjusted pre-tax operating income (APTOI) | $836m | $611m | $1.560bn | $1.520bn |
| Adjusted after-tax operating income | $679m | $491m | $1.311bn | $1.234bn |
| Operating cash flow | — | $1.572bn | $535m |
Drivers: GAAP earnings fell sharply year over year, mainly because prior-year results included large gains on the Fortitude Re funds-withheld embedded derivative: $2.394bn in Q2 2022 and $5.231bn in the first half of 2022, compared with $122m and a $903m loss, respectively, in 2023. Higher investment income partly offset this. APTOI, which excludes specified market and other items, rose $225m in Q2 and $40m for the first half.
Q2 premiums rose to $2.443bn from $1.011bn, primarily reflecting new pension risk transfer (PRT) business in Institutional Markets. Its APTOI was $126m, versus $76m a year earlier; Individual Retirement APTOI increased to $574m from $365m. First-half Life Insurance APTOI declined to $158m from $181m.
Balance sheet at June 30: Assets were $367.470bn; liabilities $356.002bn; total equity $11.468bn, including Corebridge shareholders’ equity of $10.561bn. Investments totaled $222.435bn, including $156.908bn of available-for-sale bonds and $46.497bn of net mortgage and other loans. Cash was $751m; cash and restricted cash totaled $788m. AOCI was a loss of $15.182bn. Long-term debt was $7.873bn and short-term debt $1.500bn; debt of consolidated investment entities was $2.654bn and is generally non-recourse.
Parent and intermediate holding companies reported $4.051bn of liquidity sources, including $1.551bn cash and short-term investments and $2.500bn available under a committed revolving facility. First-half dividends were $700m, including a special dividend; the company also repurchased approximately 12.2m shares for $200m. The board had authorized a $1bn repurchase program.
Changes, outlook, risks and unusual items
- Accounting and comparability: Corebridge adopted the long-duration contract accounting standard (LDTI) in 2023 and retrospectively adjusted comparative periods. Adoption changed measurement and presentation of reserves, market risk benefits and acquisition costs; the filing reports a $2.3bn decrease to beginning AOCI and a $1.2bn increase to beginning shareholders’ net investment at the January 2021 transition date.
- Business trends: First-half premiums and deposits were $20.282bn, up from $14.144bn, largely due to Institutional Markets PRT and GIC activity. Individual Retirement net flows were $304m positive for the first half, but Group Retirement net flows were negative $2.565bn. Q2 surrender rates increased year over year to 15.9% for Individual Retirement fixed annuities and 13.0% for Group Retirement.
- Investment and market risks: Net investment income increased, supported by higher base portfolio income and reinvestment yields. Rising rates also contributed to Q2 unrealized investment losses; other comprehensive loss was $1.114bn for the quarter, while first-half comprehensive OCI was positive $1.691bn. Available-for-sale bonds had $23.608bn of gross unrealized losses at quarter-end; management attributed these principally to non-credit factors and said it did not intend, and did not expect to be required, to sell before recovery. Commercial and other loans carried a $689m credit-loss allowance.
- Key exposures: Results and liabilities are sensitive to interest rates, credit spreads, equity markets, policyholder behavior, mortality, investment valuations and derivative counterparties. Management cautions that variable-annuity hedges do not fully offset GAAP market-risk-benefit changes. Commercial real estate conditions, higher annuity surrenders, reinsurance recoverability and liquidity are also relevant risks.
- Costs and plans: Management targets approximately $400m of annual pre-tax run-rate expense reductions through Corebridge Forward, with most expected within 24 months of the IPO; approximately $300m of exit run-rate savings had been acted on or contracted by June 30. The initiative is expected to incur about $300m of one-time costs. Estimated separation costs are $350m–$450m, of which about $303m had been incurred by quarter-end. These are management targets, not earnings guidance.
- Other items: AIG closed a secondary share offering in June. AIG guarantee arrangements and tax-sharing matters remain relevant; certain guarantee provisions could require collateral following specified rating downgrades. The company disclosed YRT reinsurance rate disputes and the Moriarty California life-insurance litigation, with probable-loss estimates accrued. After quarter-end, Corebridge announced an agreement to sell Laya for €650m, subject to approvals and closing conditions.
The filing does not provide a clear numerical full-year earnings or revenue forecast. It describes market conditions and strategic targets but cautions that forward-looking outcomes are subject to risks and uncertainties.
Most important facts for investors to verify
- How much of reported and adjusted earnings reflects recurring underwriting and spread performance versus Fortitude Re, market movements and other excluded items.
- Whether higher annuity surrenders and negative Group Retirement flows persist, and how they affect funding, earnings and liquidity.
- The quality and valuation of the investment portfolio, particularly unrealized bond losses, commercial real estate exposure, loan allowances and private/alternative investments.
- Insurance subsidiary statutory capital and dividend capacity; the filing cites a 400% minimum target Life Fleet RBC ratio but provides the latest ratio as of December 31, 2022, not June 30, 2023.
- Progress and costs of Corebridge Forward and separation, and the timing, proceeds and conditions for the Laya sale.
- Developments in reinsurance disputes, litigation, AIG-related guarantees and any resulting collateral or cash requirements.
- The effect of LDTI and other non-GAAP adjustments when comparing reported results across periods or with other insurers.