F&G (FG) 2026年第3四半期決算説明会：リテール販売が過去最高、AUMは762億ドルに到達

主要なポイント

• F&G（NYSE: FG）が発表した2026年第3四半期の調整後純利益は9,600万ドル（1株当たり0.74ドル）となった。前四半期比では1,100万ドル増加したものの、前年同期比では6,900万ドル減少した。
• 9月30日時点の再保険前運用資産残高（AUM）は前年同期比7%増の762億ドルと過去最高に達した。自社保有AUMは562億ドルとなった。
• 総販売額は30億ドルとなった。指数連動型年金保険および指数連動型ユニバーサル生命保険による中核個人向け販売額は、前年同期比24%増、前四半期比17%増の21億ドルと過去最高を記録した。
• オルタナティブ投資収益は6,000万ドル（1株当たり0.46ドル）となり、経営陣が掲げる12%の長期期待リターンを下回った。第3四半期のオルタナティブ投資ポートフォリオの年換算リターンは約5%となった。
• 再保険前AUMに対する営業費用比率は46ベーシスポイントに改善し、経営陣が掲げる2027年末の目標値である45ベーシスポイントに近づいた。
• 経営陣は目標リターン基準を満たす商品を継続して優先しており、現在のリターンが目標を下回る複数年確定利回り年金保険への注力度合いを引き下げることなどが含まれる。

主要財務データ

事業および業務実績

F&Gにおける中核個人向け事業の四半期最高実績は、指数連動型確定年金および指数連動型ユニバーサル生命保険商品が牽引した。経営陣はこの好業績について、新商品や新規販売パートナーによるものではなく、既存の販売提携網を通じた着実な取り組みが奏功したことによるものと説明した。

第3四半期の中核機関投資家向け年金リスク移転（PRT）販売額は2億ドルとなり、第1〜第3四半期累計では7億ドルを超えた。オポチュニスティック販売には、6億ドルの資金調達契約（ファンディング・アグリーメント）と1億ドルの複数年確定利回り年金保険が含まれる。

2026年第1〜第3四半期累計の総販売額は約90億ドルで、中核販売が60億ドル、オポチュニスティック販売が約30億ドルを占めた。複数年確定利回り年金保険を除いた総販売額は9%増の85億ドルとなった。

自社保有投資ポートフォリオの満期保有証券のうち、97%が引き続き投資適格水準を維持した。2026年第1〜第3四半期累計の信用リスク関連減損は平均2ベーシスポイントとなり、過去5年間の平均である6ベーシスポイントを下回った。

40億ドル規模のオルタナティブ投資ポートフォリオには、約30億ドルのリミテッド・パートナーシップ（LP出資）と10億ドルのその他株式持分が含まれていた。LP出資は第3四半期に年換算で約9%のリターンを創出したものの、その他株式持分の低調なリターンが響き、オルタナティブ投資全体のリターンは約5%に押し下げられた。

F&Gによると、自社保有ポートフォリオにおけるソフトウェア向けエクスポージャーは5%未満、AIインフラ投資は3%未満であった。経営陣は、AI関連のエクスポージャーについて、信用力の高い取引先との投資適格取引に集中しており、残存期間が短く、保守的な信用保護が講じられていると説明した。

F&G傘下の販売プラットフォームであるPeak Altitudeには約7億ドルが投資され、2025年には約8,000万ドルの年間EBITDAを創出した。同社に関する戦略的選択肢の検討は引き続き進行中であるが、経営陣は結果が出る時期の目処を示していない。

経営陣のガイダンス

• F&Gは、2026年通期の年金リスク移転（PRT）販売額を10億ドル〜15億ドルと見込んでいる。
• 経営陣は、営業費用率を2024年末時点の60ベーシスポイントから引き下げ、2027年末までに45ベーシスポイントとする目標を堅持している。
• 毎年の保険数理的前提の見直しにより、第3四半期の税引後償却費用は約600万ドル増加した。経営陣は、この高水準の費用が2027年を通じて継続し、2028年中には影響が中立的な水準まで減少すると見込んでいる。
• 経営陣は、第4四半期のオルタナティブ投資リターンが第3四半期から改善すると予想しているものの、現時点では12%という長期前提には届かないとみている。
• F&Gは、会社是正措置水準に基づくRBC（リスクベース資本）比率約400%、およびAOCIを除く資本構成に対する負債比率約25%という目標を維持している。
• 経営陣によると、Peak Altitudeからの寄与分を含む保有契約事業は年間約9億ドル〜10億ドルの資本を創出する見込みである。そのうち約3億ドルが予定配当および債務返済に充てられ、残額は成長投資やその他の資本優先事項の原資に充てることができる。

リスクと注視点

オルタナティブ投資のリターンは依然として経営陣の長期前提を下回っており、調整後利益や収益率の変動要因となっている。また、同ポートフォリオは価値創造サイクルの初期段階にとどまっており、短期的な見通しは限られている。

現在の金利環境下において、解約動向は高水準で推移すると経営陣は予想している。契約者の動向は、解約控除期間、市場価格調整（MVA）、アドバイザー主導による取引のタイミングによって異なる可能性がある。

オフショア再保険および責任準備金要件に影響を与える規制変更は現在も検討が続けられている。F&Gは、フロー再保険パートナーの大部分がバミューダに拠点を置いていること、担保額が法定責任準備金を上回っていること、再保険契約が規制当局の審査および資産適合性評価を受けていることから、資本への潜在的影響は管理可能であるとしている。

ムーディーズはF&Gの格付けを据え置いたものの、同社の単体信用力を評価する中で見通しを「ネガティブ」に維持した。経営陣は、引き続きA格水準の資本基準を満たす形で事業運営を行っていると述べている。

アナリスト質疑応答の要点

個人向け販売と市場シェア：経営陣は、中核個人向け販売の過去最高記録について、既存パートナーとの持続的なモメンタムと規律ある価格設定を反映したものだと述べた。電話会議で引用された情報によると、業界全体が第1〜第3四半期累計で6%減少したのに対し、F&Gの指数連動型確定年金販売額は12%増加した。

フロー再保険：F&Gは第3四半期中に指数連動型確定年金販売額の約3分の2近くを再保険に出し、概ね50%とする通常目標を上回った。経営陣はこの増加の要因として、インカム商品の好調な販売と、新たな再保険パートナーからの引き受け枠の追加を挙げた。

資本配分：経営陣は、成長投資が引き続き資本の最優先事項であり、自社株買いは他の投資機会と比較しながら検討されたと述べた。F&Gが最初の9カ月間に1億2,000万ドルの自社株買いを完了した後、取締役会はさらに1億ドルの自社株買い枠を承認した。

責任準備金規制：経営陣はVM-22を前向きな進展と捉えており、事業の一部において早期適用の可能性を見据えてモデル構築を進めている。実施の詳細がより明確になり次第、F&Gはケイマン法人への年金リスク移転（PRT）の出再を見直す可能性がある。

死亡率の動向：経営陣によると、第3四半期の死亡率改善の約半分は、第2四半期に見られた一時的な悪影響の反動によるものであった。残りの改善分は、今後見込まれる巡航水準に近いと説明された。

決算説明会 文字起こし全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good morning, and welcome to F&G's third quarter earnings call. During today's presentation, all calls will be placed in a listen-only mode. [Operator Instructions] I would like to turn the conference over to Lisa Foxworthy Parker, Senior Vice President, Investor and External Relations. Please go ahead.

Unknown Executive

Thanks, operator, and welcome, everyone. I'm joined today by Con Murphy, Chief Executive Officer and President; and Mike Bailey, Chief Financial Officer. Today's earnings call may include forward-looking statements and projections under the Private Securities Litigation Reform Act, which do not guarantee future events or performance.

We do not undertake any duty to revise or update such statements to reflect new information, subsequent events or changes in strategy. Please refer to our most recent quarterly and annual reports and other SEC filings for details on important factors that could cause actual results to differ materially from those expressed or implied. This morning's discussion also includes non-GAAP measures, which management believes are relevant in assessing the financial performance of the business.

Non-GAAP measures have been reconciled to GAAP where required and in accordance with SEC rules within our earnings materials available on the company's investor website. Please note that today's call is being recorded and will be available for a webcast replay. And with that, I'll hand the call over to Conor Murphy.

Conor Murphy

Good morning, and thank you for joining today's call. We delivered strong third quarter results demonstrating solid performance across our business as our momentum continues heading into year-end. We generated record AUM before flow reinsurance and the investment portfolio is performing very well.

We continue to expand our retail and institutional franchises and delivered our best core retail sales quarter in history. We have made great progress on our operating expense target. We delivered strong adjusted net earnings in the third quarter that were right in line with our expectations, and we remain focused on expanding the earnings contribution of our fee-based flow reinsurance, middle market life insurance and own distribution strategies.

As proud as I am of our financial performance, I'm especially proud of our team. Following the leadership transition last quarter, we have truly coalesced around our shared mission to help people turn their aspirations into reality. Together, we proudly serve over 1 million customers and their families through our annuity and life solutions on over 150,000 pensioners who have trusted F&G to help them navigate their futures.

Today, I would like to share some perspective on our AUM growth and highlights of our third quarter sales results discuss the performance and positioning of our investment portfolio and briefly touch on owned distribution. Then I'll turn it over to Mike to cover our results in more detail.

From a top line perspective, AUM before reinsurance increased to $76.2 billion at September 30, up 7% over the prior year. This includes retained assets under management of $56.2 billion. One question that I often receive is how we view growth? As a reminder, we view AUM as our primary metric to track the top line growth of our business since sales volumes may fluctuate year-to-year depending on opportunities and returns.

Our top line AUM growth is driven by positive net flows. This is where our strategy over the past 5 years has really paid off. We have successfully scaled the business from $26 billion gross AUM in 2019 and to over $76 billion AUM today, while significantly diversifying by product and channel. Today, we are 1 of the largest sellers of annuities and life insurance in the industry with a diverse product suite across multiple distribution channels.

Importantly, we remain disciplined and right business that clears our return targets. In today's competitive environment, others may have shorter-term needs to prioritize growth over profitability. However, we are focused on creating long-term value. Our business model provides the flexibility to choose our product mix sales volume and level of reinsurance as market conditions change.

And this is where our pristine predictable in-force book comes into play. This is a younger book. There are no problematic legacy liabilities. Retail annuities are 92% surrender-protected, Pension risk transfer, funding agreements and immediate annuities are not surrenderable. Asset and liability cash flows are well matched. Our new business and in-force are actively managed to maintain our return targets. This results in strong in-force capital generation and in-force flows that complement our new business loads.

Looking at our sales results more closely. For the third quarter, gross sales were $3 billion. This was comprised of $2.3 billion of core sales and nearly $700 million of opportunistic sales as we continue to allocate capital to the highest return opportunities. Record core retail sales of indexed annuities and index life were $2.1 billion for the third quarter, a 24% increase over the prior year quarter and a 17% increase over the sequential quarter.

This reflects our continued focus to grow core retail sales over the prior year quarter, while maintaining our target returns. Once again, F&G has demonstrated noteworthy growth in contrast to industry FIA sales, which contracted again this quarter versus the prior year. The majority of our fixed indexed annuity sales are sold through independent marketing organizations to middle-market consumers.

We believe this is 1 of the most attractive segments of the market on 1 where our scale, product capabilities and distribution relationships provide meaningful competitive advantage. Core institutional sales of pension risk transfers were $200 million for the third quarter. We have sold over $700 million of PRT in the first 9 months and expect to generate between $1 billion to $1.5 billion for the full year. Opportunistic sales were comprised of $600 million of funding agreements and $100 million of multiyear guaranteed annuity for the third quarter. As a reminder, we have deemphasized MYGA sales over the past year due to returns currently below our threshold. We have significant flexibility in our product mix and are not dependent on any 1 product to sustain attractive inflows.

For the first 9 months of the year, gross sales were approximately $9 billion, comprised of $6 billion of core sales and nearly $3 billion of opportunistic sales. Excluding MYGAs gross sales were $8.5 billion in the first 9 months of 2026, up 9% over $7.8 billion in the first 9 months of 2025. F&G's net sales were $5.1 billion in the first 9 months of 2026, including $1.4 billion in the third quarter. This reflects low reinsurance in line with capital targets for about 50% of fixed indexed annuities and about 90% of MYGAs.

Next, turning to F&G's retained investment portfolio, which has performed very well once again this quarter. Our portfolio was high quality with 97% of fixed maturities being investment grade. It is well matched to the liability profile and diversified across asset types. Our fixed income yield was 4.98% in the third quarter, an increase of 7 basis points over the second quarter of 2026 and 5 basis points over the third quarter of 2025.

Credit-related impairments have remained low and stable, averaging 6 basis points over the past 5 years and a modest 2 basis points in the first 9 months of the year. Our private credit portfolio continues to perform well as expected. Our software exposure across the retained portfolio is below 5%. We are highly selective with most positions protected by high switching costs, large competitive moats, regulatory barriers and embedded in workflows that are integral and difficult to disrupt.

Our investments in AI infrastructure are below 3% of the retained portfolio. We are focused on investment-grade deals with high-quality counterparties, that fully amortized within the initial contract and have no reliance on terminal value. They have short maturities, strict underwriting and robust conservative credit protections.

Our alternative investments portfolio was $4 billion. This includes approximately $3 billion of limited partnerships that comprise 5% of the retained portfolio and $1 billion of other equity interests that comprised 2% of the retained portfolio. Many of these alternative investments are still in the earlier phases of their value creation cycle, so we are not yet fully realizing the long-term expected returns.

During the third quarter, we saw our annualized return at approximately 5%, down from 6% in the sequential quarter and 8% in the first quarter of 2026. To break this down further, our limited partnerships generated an annualized return of approximately 9% in the third quarter, in line with the sequential quarter and in line with our expectation for returns in the early to mid-stage of their life cycle.

However, this was partially offset by a lower return in the third quarter on the other equity interest component of the alternatives portfolio. As seen, our limited partnership portfolio has momentum and although hard to predict, we don't expect as much offset from the other equity interests in the fourth quarter.

Turning to the questions that we have all received around affiliated investments in recent months, for F&G, this is very straightforward. There are a lot of reasons why our strategic partnership with Blackstone, which is now in its ninth year is important to us. Starting with the notion of affiliated investments, Blackstone is not an affiliate of F&G.

Blackstone owns 0% equity stake in F&G. F&G owns 0% equity stake in Blackstone. F&G's credit exposure to Blackstone portfolio companies is modest at only 2% of the retained portfolio. And F&G has flexibility to add new asset managers to augment origination and through flow reinsurance. For our $76 billion of AUM before reinsurance, the majority of the $56 billion retained book is managed by Blackstone and the majority of the $20 billion of cumulative net reinsurance to third parties is largely managed by other asset managers.

Turning to our independent governance model. F&G's CIO and CRO offices set strategic asset allocation and risk limits. We start with F&G's liability profile, which drives the investment strategy. F&G's investment committee reviews and determines whether or not the recommended investments are appropriate and approve all major decisions. F&G's robust internal risk assessment process ensures suitability for our insurance company balance sheet. Blackstone is solely F&G's asset management partner, it does not own nor is it involved in governance of the insurance company, and Blackstone is responsible for idea generation on security selection.

As our Chief Investment Officer, often describes, we pick the neighborhood Blackstone picks the houses and we inspect the house. Next turning to our commitment to transparency. As a public company, we give serious consideration to the level and quality of our investment disclosures and continue to expand and evolve them based on investor and analyst feedback. Our investment portfolio was managed completely separate from SNFs and there are no sports franchises, entertainment venues, or related hospitality properties in our investment portfolio.

To be clear, we have no affiliated investments with either Blackstone or FMS. F&G's affiliated investments under a statutory definition are our wholly owned subsidiaries. And finally, we also have regular engagement with our Iowa regulator who is an active group supervisor that monitors the investment portfolio and approves all reinsurance transactions.

Overall, we have a clear governance structure, a mature enterprise risk management capabilities, and we have a very clean governance model with Blackstone with no inherent conflict of interest.

Turning briefly to peak altitude, our attractive small cap distribution franchise. As a reminder, our own distribution strategy is a capital-light diversified source of fee-based earnings. Here, we have invested approximately $700 million in drilling life and annuity distribution businesses that generated approximately $80 million in annual EBITDA in 2025.

The portfolio is performing well with plenty of runway ahead to continue to grow. We believe the market is ascribing little to no value in our share price today for the value peak as previously announced, we have launched a process to explore strategic alternatives for Peak altitude to capture its significant growth opportunities and unlock that intrinsic value for F&G shareholders.

Today, I can report that the process is active and ongoing, and we'll provide more specifics at the appropriate time. F&G reported GAAP equity, excluding AOCI of $6.7 billion at quarter end, and has grown its book value per share, excluding AOCI, to $51.37 up 87% since the 2020 FNF acquisition.

We believe that the components of our business, our new business platform, our profitable in-force block and our capital-light fee-based strategies represent a distinct and measurable source of value. I think 1 of the most important, and in our view, underappreciated aspects of our business is that we have such a clean and simple in-force book without any problematic legacy liabilities.

That was a big part of what attracted me and Mike to the company. The $54 billion retained in-force book is the engine that funds new business growth and contributes to positive net flows that together with the new business engine drives steady AUM growth.

Taken together, we believe that sum of the parts framework reveals meaningful value that has not yet fully reflected in F&G's current market valuation. I would also highlight that at recent levels, the F&G stock has an especially attractive dividend yield of around 5%, which is above average for the publicly traded life and annuity sector.

Our focus remains on executing against the opportunities in front of us, maintaining our return discipline, growing our AUM and earnings and creating long-term value for our shareholders. Let me now turn the call over to Mike to provide further details on F&G's third quarter highlights.

Michael Bailey

Thank you, Conor. Starting with earnings. On a reported basis, adjusted net earnings were $96 million or $0.74 per share in the third quarter. Alternative investment income was $60 million or $0.46 per share below management's current long-term expected return of 12%.

Alternative investment income was at the low end of the range that was preannounced in early October. We completed our annual actuarial assumption review in the third quarter. As a result, amortization expense was approximately $6 million after tax hire in the third quarter.

We expect that level of higher amortization to remain during 2027 and diminished to neutral during 2028. For the third quarter, this was more than offset by a benefit from favorable PRT and IUL mortality, reflecting quarterly variability and timing, as Conor had described the last quarter.

Compared to the second quarter of 2026, adjusted net earnings increased by $11 million. This reflects higher product margin, steady fee-based flow reinsurance fee income, 1 distribution margin and IUL product fees and disciplined expense management.

These items were partially offset by lower returns on alternative investments. Compared to the third quarter of 2025, adjusted net earnings decreased by $69 million with 3 primary drivers as expected. First, the after-tax effect of lower returns on alternative investments and bond prepaid income was $32 million.

Secondly, the after-tax incremental benefit of F&G Life prior to its sale was $21 million in the prior year period. Finally, the after-tax effect of lower surrender charge fee income was $6 million. Otherwise, business fundamentals were solid year-over-year with consistent core spread, steady fee-based flow reinsurance fee income, owned distribution margin and IUL product fees and disciplined expense management.

Next, turning to scale benefit. As AUM grows and we continue to manage expenses, we are benefiting from increased scale. As a reminder, we are targeting a cumulative 15 basis points or 25% improvement in our operating expense ratio over the 3-year period from 60 basis points at year-end 2024 and to 45 basis points by year-end 2027.

At the end of the third quarter, our ratio of operating expense to AUM before reinsurance decreased to 46 basis points. The third quarter ratio decreased despite the typical seasonal increase in operating expenses that we expect in Q3, which continues into Q4 as well.

Now regarding our returns. As reported, adjusted ROE, excluding AOCI, was 6.7% for the third quarter. Taking into consideration management's long-term expected return for alternative investments would have resulted in 3.4 percentage points of additional ROE.

Notably, reported ROE reflects higher average adjusted equity in the denominator resulting from favorable GAAP net income. This was driven by market risk benefit liability adjustments, which are excluded from adjusted net earnings. Total FMG equity be attributable to common shareholders, excluding AOCI, was $6.7 billion or $51.37 per share as of September 30, 2026. This reflects an increase of $712 million or $5.44 per share as compared with June 30, 2026, primarily driven by $355 million of favorable market risk benefit liability adjustments and $297 million of actuarial reserve releases following the annual assumption review.

As reported, adjusted ROA was 69 basis points for the third quarter. Taking into consideration management's long-term expected return for alternative investments would have resulted in 37 basis points of additional ROA for the quarter. Turning to our strong capital position. We remain committed to our long-term target of approximately 25% debt to capitalization, excluding AOCI, and we were below that target at quarter end.

We continue to target holding company cash and invested assets at 2x interest coverage, which covers more than 1 year of holdco liquidity requirements. Our annualized interest expense is approximately $165 million or roughly a 7% blended yield on the $2.3 billion of total debt outstanding. We expect to maintain our estimated company action level risk-based capital or RBC ratio at our target of approximately 400%.

F&G maintains strong capitalization and financial flexibility. We conservatively manage to the most stringent capital requirements of our regulators and 4 rating efficiencies.

Turning quickly to our ratings. Recently, Moody's affirmed our ratings, and we are not currently under any negative credit watch. Following their review, which highlighted FNS reduced ownership stake in F&G at year-end that increased the public float and was beneficial for us. Moody's commented that their outlook for F&G was negative. Over the outlook period, Moody's will evaluate the evolution of F&G's stand-alone profile, both with and without the current 1 notch support of F&F.

I would highlight that F&G already holds stand-alone financial strength ratings of A- by Fitch and A by A.M. Best, in addition to our A- rating by S&P and A3 rating by Moody's. In our view, nothing has inherently changed in our business. And regardless of our cart ratings, we continue to manage the business to an A level.

We also have multiple reliable sources of capital supporting our business. Our strong in-force book provides a stable foundation of earnings and capital generation. We expect even stronger capital flexibility in the future as we move towards a more fee-based, higher-margin and less capital-intensive business model. Our reinsurance sidecar provides on-demand third-party capital that we can access without diluting shareholders.

For the inaugural year, we have seen steady usage of the $1 billion reinsurance sidecar, with approximately $800 million of remaining capacity at September 30. Our strategic flow reinsurance partnerships add another layer of flexibility allowing us to adjust retained sales levels and support cash from operations as we grow.

We have added yet another noteworthy flow reinsurance partner in July as we continue to be a partner of choice for the industry. Our statutory excess capital provides additional capital strength in line with our ratings. And as the balance sheet continues to delever, our available debt capacity will only grow over time.

For the first 9 months, our capital self-funded the following: $113 million of holding company interest expense, $112 million of common and preferred dividends paid and $120 million in opportunistic share repurchases. We view repurchases as a tool at our disposal that we weigh up against other opportunities while balancing the public float. We did all of this while maintaining momentum in our core retail and core institutional businesses.

As Conor mentioned, we remain disciplined in allocating capital to our highest return opportunities and have deemphasized MYGA sales at this time due to returns currently below our threshold.

Taken together, our capital allocation reflects the financial strength and flexibility we have built and our confidence in the future. I look forward to partnering with Connor to continue to build an industry-leading business. I was drawn to F&G because it is well positioned for success through continuing to scale Leveraging our pristine balance sheet, which contains no variable annuity, universal life with secondary guarantee or long term care liabilities, expanding strong relationships, including key long-term distribution partners Blackstone and other complementary asset managers and strategic relationships with highly rated reinsurers.

Maintaining pricing discipline and our commitment to return targets, being diligent in allocating to the highest return opportunities, delivering on our more fee-based, higher-margin and less capital-intensive strategy, innovating through our agile operating model, and cultivating the extensive and diverse experience of our leadership team in the insurance sector, all of which leads to creating long-term shareholder value. This concludes our prepared remarks. And let me now turn the call back to our operator for questions.

Operator

The first question comes from Wilma Burtis with Raymond James.

質疑応答

Unknown Analyst

Can you just talk about retail sales in FIA and Ryland, which were some of the highest to date -- what are you seeing in the market? And have you seen market share open up amidst some, I guess, regulatory pressures at some other carriers.

Conor Murphy

So yes, as we mentioned, this was our best quarter ever with respect to core retail, and we're particularly focused on core retail compared perhaps with the more opportunistic. I'll start off with saying it's not because of anything revolutionary or very different. This is the momentum that's been building throughout the last many quarters continuing into this quarter. It's not because of new products or capabilities in particular. It's just -- it's the grinding of the sales team and kudos to them. And it's been in the same -- it's been with the same partners. We didn't have any new distribution partners or anything else.

So we've been very disciplined. We've been maintaining our profitability profile. So it's just been a really solid recognition of what we have been able to do and I mentioned a little bit in the opening remarks, but on the FIA basis, I got Limmer information yesterday that suggested that the industry was down 6% in the first 9 months and we were up 12% on the FIA basis. So that's good.

So I think we're right around that #5, #6 spot on FIA. I think you mentioned Rail as well. Obviously, we were a later entrant to that. So we're top 20. We're not top 10. But yes, we wrote -- I think by August, we had written as much RILA this year as we wrote in all of last year.

I think part of that, too, is that there's such a need for these products, particularly in Middle America, multicultural America. Light business has been strong as well, but I would say we've written about the same number of policies as last year, but the premium dollars are down a bit because Middle America accounted for the same level of premium payments that perhaps they could a year ago. So that's good.

I know you -- your reference to other entities, perhaps being off some shelves -- that -- I don't expect that will be noteworthy for us in the grand scheme of things. We do sell through the banks and broker dealers. I would argue that's probably the most competitive spot. So it will definitely create room for folks but we sell more in the independent distribution organization.

So it will be less meaningful of a shift for us. But I would also say, in a particular year, any company can show higher or lower growth but in the FIA space over sort of a 5-year period, it's mostly the same entities that write, broadly speaking, the same level of business, and it all kind of evens out pretty much over the longer term.

Unknown Analyst

Okay. And then can you talk about expected VII returns is 12% to 14% to next year or even maybe in 2018, especially in light of the higher interest rate environment.

Conor Murphy

Yes. So right now, we do have an expected return of 12%. As we mentioned on the call, it was a good quarter with respect to the LP portfolio. That's 3/4 of what's in there for us. So they, on a stand-alone basis were over 9% in the quarter. So that was pretty good.

In our instance, we also have equity residuals. So within our space, we had the equity residuals where we had just some negative market sentiment running through the process that the valuation agents run. And I think that can lead to a -- we had a bit of a mark, if you will, in the quarter, which led to a negative return.

We do this on a 1 quarter lag, and we know -- we've got pretty good color on that segment of the market for our Q4 already, and it's pretty benign. It's a positive number. It's not a negative that pulled us down last quarter. So my crystal ball on this, honestly, isn't much more than a quarter. Do I expect a pretty good third -- sorry, fourth quarter, yes. But it's probably an expectation that better than Q3, I don't expect it will be the full 12%. And then we'll continue to revisit these all the time. We'll revisit them as part of the planning process, et cetera, as well.

So if I could just remind you and for everybody, it's in the the disclosure the 1 page in the presentation or on the alts portfolio, with the aging, if you will, the maturity of our portfolio, this is right around where we expect to be. So we have a longer-term expectation, but we're not -- they're not -- they're not fully grown yet. So these are the types of returns that we expect. But again, I'm trying to be careful to not go more than kind of a quarter eye on that perspective.

Unknown Analyst

Understood. And then is the $6 million DAC the only notable related to the assumption update in this quarter's adjusted net earnings? And maybe just if you could give us a little bit more color there.

Conor Murphy

Yes. So I would say there it's Mike. Two things. So the $6 million after tax that I quoted is notable item in terms of A&E for the quarter from a net income perspective, as we covered. We did have roughly $300 million reduction in reserves. In addition, there were some market risk benefit liabilities that reduced as well, causing kind of a strong net income quarter.

But if I think about the unlocking, I mean, really what happens here is we've seen elevated surrenders. We've been seeing that in surrender income and we sort of trued up our starting the assumptions to what we think will be our best estimate. And so that $6 million after tax will be sort of elevated DAC amortization over 2027 and into 2028, that should normalize back to shorter current levels as the business projects out.

If I may, just to be clear on where we'll see that in cost of funds, in our financial supplement, we do break apart cost of funds. And we do show kind of a sequential approximately $11 million pretax improvement in the line item that would include that number.

So if I were to normalize that for DAC amortization, absent the increase in amortization coming from unlocking, we would have seen there's roughly a $20 million improvement period-over-period. And that's driven by favorable mortality relative to the second quarter.

Connor has signaled on the second quarter earnings call that we thought there were some timing impacts relative to mortality, that's worth about half of the $20 million and then the remaining is more in line with what we would expect to generate from the block.

Operator

The next question comes from Joel Hurwitz with Dowling & Partners.

Unknown Analyst

Just wanted to start on flow reinsurance. On the FIA side, you've talked about around flowing out around 50%, but it looks to have have dipped -- or I guess, your retained portion has dipped below that 50% mark the past couple of quarters. Just -- any color on what's driving the increased use of flow reinsurance the past 2 quarters and how you're thinking about that going forward?

Unknown Executive

Yes. Joe, thank you. it's a little bit as we go. So within the FIA space, we have the income products and the accumulation products, I would say that it was a particularly strong quarter on the income side, where we have a couple of noteworthy reinsurance partners, but 1 of them only came on board at the beginning of the third quarter.

So when you have strong reinsurance partners with a healthy appetite that can impact the level that you reinsure. And I think we reinsured out probably closer to 2/3 this period. the accumulation side is where we have the sidecar with Blackstone. So it can move a little bit within that range, but it's not -- I said it's really down to what the best economic return opportunity is for us in conjunction with our partners.

Unknown Analyst

Got it. That's helpful. And then just shifting to the regulatory front. The NAIC is exploring new risk charges on reinsurance to nonreciprocal jurisdictions like the Caymans -- you guys have some exposure there. both with an affiliate as well as the side car? Just interested how you're thinking about the potential implications if that's pushed through -- and then just on, just wanted to see if there's an update on the M22 implementation and potential impacts there for you guys.

Unknown Executive

Joel, it's Mike. I'm glad you asked that question. Regulatory developments are an important topic for us, and we continually monitor at both the federal and state levels. We have been tracking the work being done by the NAIC committee on nonreciprocal jurisdictions.

We understand that AG 55 related disclosures are sort of being reviewed across the industry, and we certainly appreciate the focus on those disclosures, and we welcome fair and appropriate regulation, but we do prefer that such regulation and changes to regulation be properly vetted and based on detailed analysis.

We view the NAIC's work in this area as very manageable for our third-party reinsurance business. While the details of the proposal are still emerging based on how we structure our offshore reinsurance treaties, we are very comfortable that there would not be a material impact to our capital position. And we based that on -- first of all, the majority of our flow reinsurance partners are based in Bermuda, which has reciprocal jurisdiction.

Secondly, the majority of our reinsurance partners were holding assets equal to the statutory reserves on our balance sheet. Additionally, we're holding over collateralization to the tune of 3% to 4%. And then third, we review each of these reinsurance treaties with our Iowa regulator and every treaty is subject to AG55 asset adequacy testing and analysis.

And then finally, we ensure that our reinsurance partners follow the Iowa investment guidelines to ensure appropriate asset allocations. So we view the NAIC work in this area very manageable for our affiliated reinsurance business, which I think is what you're specifically asking about, while F&G has a Cayman entity where we see 80% of our PRT business for the purpose of differentiating between white collar and blue collar mortality.

This has been reviewed by our Iowa regulator and undergoes G55/cash flow testing analysis. And this appropriate mortality differentiation has not been available under the current U.S. statutory framework. And that results we've done in reserve. We expect the new statutory framework, M22, to update this PRT mortality requirement.

And at that time, we would expect to reevaluate PRT sessions to our Cayman entity. We would also have the option to recapture business ceded to king, and we're monitoring the NAIC's discussion around the ability to retrospectively apply 22 which in every capture scenario would put us on equal footing similar to our current utilization of our human entity.

One last point, our Blackstone sidecar uses full U.S. stat reserving with over collateralization and a full RBC with no modifications. So if we sort of bring all that together, we continue to work with our regulators and on the issue, and we do not expect a noteworthy impact on F&G's capital position from the proposals that are partly floating around.

Unknown Analyst

Okay. I guess just anything else more broader on VM22 implementation? I know you touched on it a little there on the PRT side, what about on?

Unknown Executive

Yes. And so we'll just add a little more to that, Joel. We're actively building models. We have -- we anticipate early adoption of 2 for some of our businesses. And then we certainly will -- PRT being a perfect -- perfect example, we have V-22 model available, and we just need to make sure that we have clarity on when we're adopting and what we're allowed to do retrospectively.

We view VM-22 as a positive development. in certain situations, we're using certain third-party reinsurance partners to hold what is essentially much more of a principle-based reserve, and we would love to do that directly within our own Iowa-based entity.

Operator

The next question comes from Alex Scott with Barclays.

Unknown Analyst

I have 1 on capital and capital management. When I look at the flows and the growth, it slowed down a bit, which is totally reasonable and rational, I think just based on the competitive environment. That being said, if capital is not being deployed as heavily towards growth.

And I just want to understand where it is getting deployed. Seeing the buybacks, I think, were not active this quarter. I just want to understand like how is that capital going to redeployed? Is there capital building because of all the flow reinsurance and slower growth? And how do you plan to use it?

Unknown Executive

Thanks, Alex. Yes, I'm not sure I'm fully aligned with. I think from a growth perspective, I would argue we've got the growth that we want -- so we've been sort of setting out at the core retail level around what do we do in the prior year's quarter. Can we keep the momentum going? Can we write perhaps marginally more, and we've done better than that. So I would argue we probably written more on the high end of core retail than perhaps what we might have expected because we are seeing the opportunity to write that at a very profitable margin.

And the reason I would say that is, I can envision the quarter in the future where you may say, hey, you didn't write quite as much as we did in the prior year. And the answer would be, well, the returns were not quite as strong. And the upsell of thus we have more capital to to deploy when the returns swing back again. But that hasn't been the case.

And yes, we shied away from MYGAs, but that's been more because we haven't seen the returns we shied away from FABNs. Again, probably just with the gapping out on the credit side. We did -- I would argue that the buybacks we did in Q2 and Q1 was sort of a reallocation from what might have been kind of ascribed towards the sales budget. So that's opportunistic for us.

But it's not -- we do -- obviously, we're capital self-sufficient and we do prioritize putting a lot of that into the growth engine. But could we have sold more in the quarter? Yes, but you're at that sort of efficient frontier of sales and returns. So again, it's kind of hard to think that way, when you had the best core retail quarter you've ever had. But I think -- yes, I mean, we've got -- clearly, we have a -- we have capital all the way out to 2 -- so we're balancing it with a very long-term horizon.

But yes, I would -- I mean, if you ask me, did we execute the capital plan this quarter or indeed all 3 quarters of this year. pretty much exactly in line with our expectations. I would say we did with maybe the 1 switch being we did a bit more towards the -- a little bit more towards the buybacks than maybe we had initially anticipated at the start of the year.

I might also point out, but there have been a lot of regulatory changes. I mean I would suggest that the regulatory changes that have actually come through this year we're probably north of $500 million in terms of impact from the capital point of view, and we've navigated through all of that as well with various things we don't need to revisit. So we're constantly we're constantly navigating a balancing act, but 1 that we feel very comfortable because we're absolutely in control of.

Michael Bailey

Yes. Alex, this is Mike. I'll just add a couple of things here. So the -- we've talked previously before, the in-force is currently construed inclusive of any contributions from peak will contribute somewhere in the $900 million to $1 billion of capital every year.

As we outlined in some of our prepared remarks, we've got about $300 million of holdco needs in the form of planned dividends and and servicing guests. And the balance is really what we use to sort of fund the new business growth.

So if we're looking sort of at a capital attribution in terms of where we're heading, that's what we would do. Now obviously, in there, there's all kinds of factors like Conor is referring to where we can dial up -- we can redeploy capital to different purposes depending on where we see the returns. We also have to be mindful of the current environment where we do see some capital creep in as the NAIC has made some changes to its capital structure, what's going to impact us as well.

Unknown Executive

And I'll just add 2 more things because this is important for us. Like we're -- I'm not sure there's a growth story like us in the industry in terms of meaningful insurance companies. And that's really the key -- the metric that we focus on is continuing to grow profitably. And nothing about that has changed. I might fun, by the way, we did announce an additional $100 million buyback capacity that got approved by the Board yesterday.

Unknown Analyst

Got it. That's all helpful. Yes, I mean, I -- on the growth front, I hear you on the sales growth, the surrenders have been higher, too, though. If I just look at average AUM that we're calculating our return on assets off of, I think it's been fairly flat.

And I know there's like an interest rate impact in there, but it's -- I think it's flat year-over-year, and part of that is the flow reinsurance becoming more fee-based too. Like you're still selling a lot of gross business, I get it. But the benefit to all of that, I would think, would be the growth algorithm doesn't take away from capital generation and ability to redeploy that as much.

And so that was the intent of the question while I'm trying to understand it. I would just say, as we look year-over-year in terms of net retained assets under management, we should just be careful that we're picking up the impact of the FG Life Re Bermuda sale. n there, what's going to obviously kind of impact that those net assets under management. So we're happy to unpack that with you.

Unknown Executive

Yes. That's almost a $2 billion AUM switch from that sale. So that's impactful as well.

Unknown Analyst

Yes. Understood. Okay. Can you talk a bit about your exposure to data centers hyperscalers that kind of thing and just capacity to do that kind of business? And just the risk of what you see in that? It's a question we're getting increasingly from investors.

Unknown Executive

Yes, yes, go. So -- and I did reference this in the opening remarks as well. I mean, for us, -- it's pretty modest. It's under 3% with respect to -- I'm going to kind of right to the, call it, the AI infrastructure debt. We talked about really being focused on the investment-grade deals, the high-quality counterparts that having contracts in place that are sufficient in terms of the loan balances.

And look, I understand within that, there's various types of deals, you've got your construction and refinancing and cash flow deals. -- that are longer. You've got your power deals in the middle and kind of your chip deals that are more short duration. But across all of that, we just -- we stick to our guns in terms of we have the choice and the ability to just go to the highest end of those investment opportunities.

And obviously, there's a lot of conversation around how what the events of this week may do and to the landscape at a -- certainly at a state level. But where we are, we're already investing in things that are in place. rather than speculation for what's coming. So if anything, we are probably more secure now than we were last week. If there's less availability for the demand. I would argue that what we've already invested in will probably hold up even better than we probably expected a week ago.

Unknown Analyst

Got it. That's helpful. And could I just ask for a quick update on peak in the strategic, I guess, initiatives there?

Unknown Executive

Yes. So there's really not there's nothing I can really add beyond what I had said in the prepared remarks. So we're in a process. There is interest in those properties from an overarching and even indeed from an individual level. So we're going to weigh all of that up and make the best decisions, and we'll come back to you with news on that when we have something more substantial to share.

Operator

The next question comes from Mark Hughes with Truist Securities.

Unknown Analyst

The surrenders, withdrawals were down a little bit on -- in absolute terms. Any observations on the behavior you're seeing there?

Unknown Executive

It's Mike. Happy to take that one. I think overall, we've seen increased surrender activities. I think the other thing that I would note is -- we did see a pretty big increase in rates during the quarter. If I look at the 10-year on -- at the end of the second quarter, it was $4.46 and was up at 52983 basis points higher at the end of the third quarter. But most of that increase sort of came at the tail end of the quarter.

So I think surrenders were kind of -- were kind of within the range of our expectations, but also it can take some time for a policyholder and aniline to work with their adviser to actually work towards whatever their plans action is in response to the rate environment.

So sometimes that can come in somewhat slowly. It can also depend -- it can be very bespoke in terms of where policies are with respect to their surrender charge period or how much of a market value adjustment there may be. So I would say we continue to expect elevated surrenders, especially in this rate environment. And I wouldn't view the level in the quarter as anything outside of our -- within our range of expectations.

Operator

We have a follow-up question from Will Burtis with Raymond James.

Unknown Analyst

Has the mortality in the IUL and PRT block leveled off for a more steady cost of funds rate? Just a little bit of volatility there. Just want to understand what we should expect going forward.

Unknown Executive

Yes. So thanks, Will. I'll try I'll try to give you a little bit more color there. Let's go back to the second quarter. We saw relatively 10 million adverse mostly mortality developed in the second quarter. Our thought just based on looking at the data, but this was a timing issue, and that turned out to be the case.

And so that -- I would say that $10 million sort of reversed -- so I would say there's -- if you look at that kind of if we spread that $10 million evenly over the second and third quarter, that's a factor there. And then I would say the remaining sort of favorable impact, I think, is what we could look to as much more in line with what our expectation is.

So if you look at the schedule in our financial supplement, that is going to talk about the impact of cost of funds in sort of that all other bucket. Once we normalize out for the increased DAC amortization from the actuarial assumption update, end up in roughly a $20 million period-over-period improvement from mortality and roughly half of that should be thought as the catch-up from timing from the second quarter and the remaining half is something that we could is what we would sort of expect going kind of a newer run rate or established run rate going forward.

Operator

Thank you. And this will conclude our question-and-answer session. I will now turn the conference back over to the CEO and President, Conor Murphy for closing remarks.

Conor Murphy

Thanks, Latania, and thanks again, everyone, for joining us this morning. We're really pleased with our momentum through the third quarter, expect that momentum to continue in the year-end. And we'll continue to generate AUM growth. We'll remain disciplined in our approach to pricing and profitability. We'll prioritize business that meets our return targets, and we'll keep allocating capital to the most attractive opportunities. We really appreciate your continued interest in F&G as we remain focused on delivering long-term shareholder value. We look forward to updating you on the fourth quarter earnings call.

Operator

Thank you for attending today's presentation and the conference call has concluded. You may now disconnect, and have a great day.