F&G Q2 2026 earnings: Mark-to-market effects drive a GAAP loss

F&G Annuities & Life (NYSE: FG) reported second-quarter 2026 revenue of $1.421 billion for the period ended June 30, up about 4% from $1.364 billion a year earlier, while diluted EPS swung to a loss of $0.62 from earnings of $0.26. Net unfavorable mark-to-market effects were the main driver of the GAAP loss, while adjusted earnings also declined amid lower alternative-investment income and product-margin pressure. AUM before reinsurance nevertheless reached a record $74.7 billion.

Core Financial Results

Revenue increased as interest and investment income rose to $718 million from $682 million and net recognized gains increased to $290 million from $51 million. That was partly offset by life insurance premiums and other fees declining to $394 million from $608 million.

Total benefits and expenses rose faster than revenue, reaching $1.515 billion compared with $1.307 billion. Benefits and other changes in policy reserves increased to $1.149 billion from $993 million, contributing to a $94 million pre-tax loss.

Adjusted net earnings are a non-GAAP measure that excludes specified market-related, accounting and nonrecurring items. They should be considered alongside the GAAP loss rather than as a replacement for it.

Business and Sales Performance

AUM before reinsurance increased 8% to $74.7 billion from $69.2 billion, setting a company record. Retained AUM, however, increased only 1% to $55.9 billion. F&G said retained AUM reflected positive asset flows offset by the $1.8 billion in-force block ceded in the F&G Life Re (Bermuda) sale and a $750 million funding agreement-backed note maturity.

Sales declined primarily because F&G reduced opportunistic volumes. The prior-year quarter included near-record opportunistic sales, while the company prioritized pricing discipline and capital allocation in Q2 2026. Core retail sales remained comparatively stable, supported by indexed annuities.

The main change within opportunistic sales was the reduction in multiyear guaranteed annuities, partly offset by higher funding agreements. F&G noted that these opportunistic volumes can vary substantially depending on pricing economics and market conditions. Sales are management operating metrics and are not equivalent to GAAP revenue; many annuity and funding-agreement sales are recorded as deposit liabilities.

Profitability and Balance Sheet

Adjusted return on equity excluding AOCI declined to 8.0% from 8.8%, while adjusted return on assets eased to 68 basis points from 71 basis points. Adjusted ROA for the last 12 months was 85 basis points, in line with full-year 2025.

Total assets increased to $103.6 billion at June 30 from $98.4 billion at December 31, 2025. Cash and cash equivalents rose to $2.1 billion from $1.5 billion, while notes payable remained nearly unchanged at $2.24 billion.

Common shareholders’ equity excluding AOCI was $6.0 billion, equal to $45.93 per share. Book value per share excluding AOCI increased by $1.50 from $44.43 at the end of 2025. GAAP total equity declined to $4.7 billion as the accumulated other comprehensive loss widened and treasury stock increased.

F&G returned $128 million to shareholders during the quarter, consisting of $37 million in common and preferred dividends and $91 million used to repurchase approximately 3.3 million common shares at an average price of $27.27. The company did not characterize these repurchases as an assessment of intrinsic value.

Credit performance remained stable. Investment-grade securities represented 97% of retained fixed maturities, while credit-related impairments averaged six basis points over the past five years and remained below pricing assumptions through the first half of 2026.

Market Effects Drove the GAAP Loss, but Adjusted Earnings Also Weakened

F&G attributed $144 million of the quarterly GAAP loss to net unfavorable mark-to-market effects and another $22 million to other unfavorable items excluded from adjusted earnings. Market effects are reflected across investment, derivative and liability-related accounting lines, so the recognized-gains revenue line should not be considered in isolation.

Even after removing those items, adjusted net earnings declined from $103 million to $85 million. Alternative-investment income fell to $49 million, or $0.38 per share, from $67 million, or $0.50 per share, and remained below management’s long-term expected return of approximately 12% in both periods.

F&G said core spread remained consistent because of disciplined pricing. However, total product margin was reduced by the F&G Life Re (Bermuda) sale, lower surrender-charge fee income and higher other liability costs. Asset growth, flow-reinsurance fees, owned-distribution margin and expense discipline provided partial offsets.

Management Perspective

CEO and President Conor Murphy emphasized record AUM before reinsurance, continued momentum in core retail sales and stable credit performance. Management presented the reduction in opportunistic sales as a deliberate result of pricing and capital-allocation discipline.

F&G’s longer-term priorities include expanding fee-based, higher-margin and less capital-intensive earnings streams while continuing to operate its spread-based insurance business. Management also pointed to reinsurance relationships and in-force earnings generation as sources of financial flexibility.

Risks Investors Need to Watch

• Market-related earnings volatility: The $144 million unfavorable mark-to-market impact demonstrates that investment, derivative and liability remeasurements can produce significant swings in GAAP earnings.
• Alternative-investment returns: Alternative-investment income declined year over year and remained below management’s long-term expected return, weighing on adjusted earnings and returns on assets.
• Lower sales and retained asset growth: Gross and net sales fell substantially, while retained AUM grew only 1% despite an 8% increase before reinsurance. Continued sales reductions or higher reinsurance flows could limit growth in retained assets.
• Product-margin pressure: The Bermuda reinsurance transaction, lower surrender-charge income and higher liability costs reduced total product margin. The duration of these pressures will affect the path of adjusted earnings.

Summary

F&G’s Q2 2026 results combined record AUM before reinsurance with lower sales and weaker profitability. Market-related accounting effects drove the GAAP loss, but adjusted earnings also declined because of lower alternative-investment income and reduced product margins. The main items to monitor are retained AUM growth, the mix between core and opportunistic sales, alternative-investment returns and whether asset growth and expense discipline can offset ongoing margin pressures.