Corebridge Financial Announces Fourth Quarter and Full Year 2022 Results

Corebridge Financial, Inc. ("Corebridge" or the "Company") (NYSE: CRBG) today reported financial results for the fourth quarter and full year ended December 31, 2022.

Kevin Hogan, President and Chief Executive Officer of Corebridge, said, “2022 was a year of significant milestones for our company. We rebranded as Corebridge Financial early in the year as our operational separation from AIG began, and in September, we became a New York Stock Exchange listed company when our initial public offering closed on September 19. We ended the year with strong momentum and remain focused on our core mission of helping individuals plan, save for and achieve secure financial futures.

"In the fourth quarter and throughout the year, our diversified business platform and broad reach enabled robust sales and attractive margins in fixed and fixed index annuities, in addition to strong performance realized across all our businesses. We achieved meaningful growth in base spread income and substantial improvement in underwriting margin, and we benefited from strong deposit flows. We have made progress with Corebridge Forward, our modernization initiative, and are benefiting from our partnerships with Blackstone and BlackRock. We maintained a strong financial position throughout the year and delivered on our capital management goals for 2022.

"As we look ahead, the external environment remains uncertain, but we are steadfastly focused on executing our strategies and delivering on our financial goals. We have a strong balance sheet and free cash flow profile, and we will stay disciplined in deploying capital to create value for our customers, distribution partners and other stakeholders."

CONSOLIDATED RESULTS

Fourth Quarter

Net loss was $0.6 billion, a 118% decrease compared to the prior year quarter. The change was largely driven by $3.0 billion of gains recorded in the fourth quarter of 2021 attributed to the sale of our affordable housing portfolio and $1.2 billion of net realized losses in the fourth quarter of 2022 related to derivatives and foreign exchange movements.

Adjusted pre-tax operating income ("APTOI") was $639 million, a 31% decrease compared to the prior year quarter, largely due to challenging macroeconomic conditions and structural changes in our business profile, including implementation of the Company's new capital structure and divestitures. Variable investment income was lower by $488 million, the largest contributor to the year-over-year decline. Excluding variable investment income, APTOI was $616 million, a 48% increase compared to the prior year quarter, the result of higher base portfolio income, improved mortality experience and lower expenses, partially offset by lower fee income.

Premiums and deposits were $8.7 billion, a 2% increase compared to the prior year quarter. Excluding transactional activity (i.e., pension risk transfer, guaranteed investment contracts and Group Retirement plan acquisitions), premiums and deposits grew 14% when compared to the prior year quarter. These results mainly reflect higher fixed and fixed index annuity deposits partially offset by lower variable annuity deposits in Individual Retirement and Group Retirement.

Net investment income was $2.6 billion, a 13% decrease compared to the prior year quarter, while net investment income on an APTOI basis was $2.3 billion, a 7% decrease compared to the prior year quarter. This decline largely was due to lower variable investment income – notably weaker private equity returns, lower bond call and tender income, and lower commercial mortgage loan prepayment activity – partially offset by higher base portfolio income. Base portfolio income grew 19% when compared to fourth quarter of 2021.

Full Year

Net income was $8.1 billion, an 11% increase year-over-year, primarily the result of higher gains on the Fortitude Re funds withheld embedded derivative and higher net realized gains, partially offset by lower net investment income and a gain recorded in 2021 associated with the sale of our affordable housing portfolio.

APTOI was $2.2 billion, a 41% decrease compared to the prior year, largely related to the impact from structural changes in our business and challenging macroeconomic conditions driving higher base portfolio income, lower variable investment income, lower fee income and higher deferred acquisition costs amortization. Improved mortality experience, as well as a comparatively less adverse result from the annual actuarial assumption review, also impacted results. Variable investment income was lower by $1.6 billion, the largest contributor to the year-over-year decline.

Premiums and deposits were $31.6 billion, a 3% increase compared to the prior year.³ Excluding transactional activity, premiums and deposits grew 8% when compared to 2021. These results primarily reflect higher fixed and fixed index annuity deposits partially offset by lower variable annuity deposits in Individual Retirement and Group Retirement.

Net investment income was $9.6 billion, an 18% decrease compared to the prior year, while net investment income on an APTOI basis was $8.8 billion, a 12% decrease compared to the prior year. This decline largely was due to lower variable investment income – notably weaker private equity returns, lower bond call and tender income, and lower commercial mortgage loan prepayment activity – partially offset by higher base portfolio income. Base portfolio income grew 5% when compared to 2021.

BUSINESS RESULTS

• Premiums and deposits increased $519 million, or 16%, as compared to the prior year quarter largely driven by growth of fixed and fixed index annuity deposits, partially offset by lower variable annuity deposits. Net flows increased $244 million, or 718%, when compared to the fourth quarter of 2021 primarily the result of stronger fixed annuity flows
• Base net investment spread of 2.21% for the quarter expanded 54 basis points and 27 basis points on a prior year and sequential quarter basis, respectively
• APTOI decreased $68 million, or 13%, year-over-year primarily due to lower variable investment income and lower fee income, partially offset by higher base spread income and lower expenses

• Premiums and deposits increased $381 million, or 20%, as compared to the prior year quarter due to higher plan acquisitions and out-of-plan fixed annuity deposits, partially offset by lower out-of-plan variable annuity deposits. Net flows increased $116 million, or 11%, when compared to the fourth quarter of 2021, primarily the result of stronger in-plan flows
• Base net investment spread of 1.59% for the quarter expanded 17 basis points on a prior year quarter basis. Results were unchanged sequentially
• APTOI decreased $138 million, or 44%, year-over-year primarily due to lower variable investment income and lower fee income, partially offset by higher base spread income

• APTOI increased $91 million year-over-year primarily due to higher underwriting margin driven by improved mortality experience and higher base portfolio income
• COVID mortality experience was in line with the previously disclosed estimate of exposure sensitivity of $65 million to $75 million per 100,000 population deaths based on the reported fourth quarter 2022 COVID-related deaths in the United States

• Premiums and deposits decreased $682 million, or 31%, as compared to the prior year quarter driven by lower volume of new pension risk transfer activity, partially offset by higher structured settlement annuities. Pension risk transfer sales were $1.3 billion for the fourth quarter of 2022
• APTOI decreased $102 million, or 61%, year-over-year primarily due to lower variable investment income

• APTOI decreased $70 million, or 108%, year-over-year primarily due to higher interest expense on financial debt driven by the Company’s recapitalization in connection with the IPO

CAPITAL AND LIQUIDITY HIGHLIGHTS

• Life Fleet RBC Ratio estimated to exceed 400% target
• Financial leverage ratio of 29.6%, within our 25% to 30% targeted range
• Parent liquidity of $1.5 billion as of December 31, 2022
• $200 million of normalized distributions from our insurance companies during the fourth quarter, with $2.2 billion of normalized distributions for the full year of 2022
• Adjusted book value grew $1.8 billion, or 9%, year-over-year by delivering strong earnings while also paying $876 million in dividends ($296 million since the IPO)
• Declared quarterly dividend of $0.23 per share of common stock on February 16, 2023, payable on March 31, 2023, to shareholders of record at the close of business on March 17, 2023

CONFERENCE CALL

Corebridge will host a conference call on Friday, February 17, 2023, at 8:30 a.m. EST to review these results. The call is open to the public and can be accessed via a live listen-only webcast in the Investors section of corebridgefinancial.com. A replay will be available after the call at the same location.

Supplemental financial data and our investor presentation are available in the Investors section of www.corebridgefinancial.com.

About Corebridge Financial

Corebridge Financial makes it possible for more people to take action in their financial lives. With more than $355 billion in assets under management and administration as of December 31, 2022, Corebridge is one of the largest providers of retirement solutions and insurance products in the United States. We proudly partner with financial professionals and institutions to help individuals plan, save for and achieve secure financial futures. For more information, visit corebridgefinancial.com and follow us on LinkedIn, YouTube, Facebook and Twitter. These references with additional information about Corebridge have been provided as a convenience, and the information contained on such websites is not incorporated by reference into this press release.

In the discussion below, “we,” “us” and “our” refer to Corebridge and its consolidated subsidiaries, unless the context refers solely to Corebridge as a corporate entity.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This release contains forward-looking statements. Words such as “expects,” “believes,” “anticipates,” “intends,” “seeks,” “aims,” “plans,” “assumes,” “estimates,” “projects,” “should,” “would,” “could,” “may,” “will,” “shall” or variations of such words are generally part of forward-looking statements. Also, forward-looking statements include, without limitation, all matters that are not historical facts. Forward-looking statements are made based on management’s current expectations and beliefs concerning future developments and their potential effects upon Corebridge and its consolidated subsidiaries. There can be no assurance that future developments affecting Corebridge and its consolidated subsidiaries will be those anticipated by management.

Any forward-looking statements included herein are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements, including, among others, risks related to:

• market conditions, including risks related to rapidly increasing interest rates, declining or negative interest rates, deterioration of market conditions, geopolitical tensions, equity market declines or volatility and the COVID-19 pandemic;
• insurance risk and related exposures, including risks related to insurance liability claims exceeding reserves, reinsurance becoming unavailable and the occurrence of events causing acceleration of the amortization of deferred acquisition costs;
• our investment portfolio and concentration of investments, including risks related to realization of gross unrealized losses on fixed maturity securities and changes in investment valuations;
• liquidity, capital and credit, including risks related to our access to funds from our subsidiaries being restricted, the possible incurrence of additional debt, the ability to refinance existing debt, the illiquidity of some of our investments, a downgrade in our insurer financial strength ratings and non-performance by counterparties;
• our business and operations, including risks related to pricing for our products, guarantees within certain of our products, our use of derivatives instruments, marketing and distribution of our products through third parties, our reliance on third parties to provide business and administrative services, maintaining the availability of our critical technology systems, our risk management policies becoming ineffective, significant legal or regulatory proceedings, our business strategy becoming ineffective, intense competition, catastrophes, changes in our accounting principles and financial reporting requirements, our foreign operations, business or asset acquisitions and dispositions and our ability to protect our intellectual property;
• the intense regulation of our business;
• estimates and assumptions, including risks related to estimates or assumptions used in the preparation of our financial statements differing materially from actual experience, the effectiveness of our productivity improvement initiatives and impairments of goodwill;
• competition and employees, including risks related to our ability to attract and retain key employees and employee error and misconduct;
• our investment managers, including our reliance on agreements with Blackstone ISG-1 Advisors L.L.C. which we have a limited ability to terminate or amend and increased regulation or scrutiny of investment advisers and investment activities;
• our separation from AIG, including risks related to the replacement or replication of functions and the loss of benefits from AIG’s global contracts, our inability to file a single US consolidated income federal income tax return for a five-year period, and limitations on our ability to use deferred tax assets to offset future taxable income;
• our agreements with Fortitude Reinsurance Company Ltd.; and
• other factors discussed in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the U.S. Securities and Exchange Commission pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended.

Forward-looking statements should be read in conjunction with the other cautionary statements, risks, uncertainties and other factors identified in our filings with the Securities and Exchange Commission. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.

NON-GAAP FINANCIAL MEASURES

Throughout this release, we present our financial condition and results of operations in the way we believe will be most meaningful and representative of our business results. Some of the measurements we use are ‘‘non-GAAP financial measures’’ under Securities and Exchange Commission rules and regulations. We believe presentation of these non-GAAP financial measures allows for a deeper understanding of the profitability drivers of our business, results of operations, financial condition and liquidity. These measures should be considered supplementary to our results of operations and financial condition that are presented in accordance with GAAP and should not be viewed as a substitute for GAAP measures. The non-GAAP financial measures we present may not be comparable to similarly-named measures reported by other companies.

Adjusted pre-tax operating income (“APTOI”) is derived by excluding the items set forth below from income from operations before income tax. These items generally fall into one or more of the following broad categories: legacy matters having no relevance to our current businesses or operating performance; adjustments to enhance transparency to the underlying economics of transactions; and recording adjustments to APTOI that we believe to be common in our industry. We believe the adjustments to pre-tax income are useful for gaining an understanding of our overall results of operations.

APTOI excludes the impact of the following items:

FORTITUDE RELATED ADJUSTMENTS:

The modco reinsurance agreements with Fortitude Re transfer the economics of the invested assets supporting the reinsurance agreements to Fortitude Re. Accordingly, the net investment income on Fortitude Re funds withheld assets and the net realized gains (losses) on Fortitude Re funds withheld assets are excluded from APTOI. Similarly, changes in the Fortitude Re funds withheld embedded derivative are also excluded from APTOI.

As a result of entering into the reinsurance agreements with Fortitude Re we recorded a loss which was primarily attributed to the write-off of DAC, VOBA and deferred cost of reinsurance assets. The total loss and the ongoing results associated with the reinsurance agreement with Fortitude Re have been excluded from APTOI as these are not indicative of our ongoing business operations.

INVESTMENT RELATED ADJUSTMENTS:

APTOI excludes “Net realized gains (losses),” including changes in the allowance for credit losses on available-for-sale securities and loans, as well as gains or losses from sales of securities, except for gains (losses) related to the disposition of real estate investments. Net realized gains (losses), except for gains (losses) related to the disposition of real estate investments, are excluded as the timing of sales on invested assets or changes in allowances depend largely on market credit cycles and can vary considerably across periods. In addition, changes in interest rates may create opportunistic scenarios to buy or sell invested assets. Our derivative results, including those used to economically hedge insurance liabilities, also included in Net realized gains (losses) are similarly excluded from APTOI except earned income (periodic settlements and changes in settlement accruals) on derivative instruments used for non-qualifying (economic) hedges or for asset replication. Earned income on such economic hedges is reclassified from Net realized gains and losses to specific APTOI line items based on the economic risk being hedged (e.g., Net investment income and Interest credited to policyholder account balances).

Our investment-oriented contracts, such as universal life insurance, and fixed, fixed index and variable annuities, are also impacted by net realized gains (losses), and these secondary impacts are also excluded from APTOI. Specifically, the changes in benefit reserves and DAC, VOBA and DSI assets related to net realized gains (losses) are excluded from APTOI.

VARIABLE, FIXED INDEX ANNUITIES AND INDEX UNIVERSAL LIFE INSURANCE PRODUCTS ADJUSTMENTS:

Certain of our variable annuity contracts contain guaranteed minimum withdrawal benefits (“GMWBs”) and are accounted for as embedded derivatives. Additionally, certain fixed index annuity contracts contain GMWB or indexed interest credits which are accounted for as embedded derivatives, and our index universal life insurance products also contain embedded derivatives. Changes in the fair value of these embedded derivatives, including rider fees attributed to the embedded derivatives, are recorded through “Net realized gains (losses)” and are excluded from APTOI.

Changes in the fair value of securities used to hedge guaranteed living benefits are excluded from APTOI.

OTHER ADJUSTMENTS:

Other adjustments represent all other adjustments that are excluded from APTOI and includes the net pre-tax operating income (losses) from noncontrolling interests related to consolidated investment entities. The excluded adjustments include, as applicable:

• restructuring and other costs related to initiatives designed to reduce operating expenses, improve efficiency and simplify our organization;
• non-recurring costs associated with the implementation of non-ordinary course legal or regulatory changes or changes to accounting principles;
• separation costs;
• non-operating litigation reserves and settlements;
• loss (gain) on extinguishment of debt;
• losses from the impairment of goodwill; and
• income and loss from divested or run-off business.

Adjusted after-tax operating income attributable to our common shareholders (“Adjusted After-tax Operating Income” or “AATOI”) is derived by excluding the tax effected APTOI adjustments described above, as well as the following tax items from net income attributable to us:

• changes in uncertain tax positions and other tax items related to legacy matters having no relevance to our current businesses or operating performance; and
• deferred income tax valuation allowance releases and charges.

Book value, excluding AOCI, adjusted for the cumulative unrealized gains and losses related to Fortitude Re’s funds withheld assets (“Adjusted Book Value”) is used to eliminate the asymmetrical impact resulting from changes in fair value of our available-for-sale securities portfolio where there is largely no offsetting impact for certain related insurance liabilities that are not recorded at fair value. In addition, we adjust for the cumulative unrealized gains and losses related to Fortitude Re’s funds withheld assets since these fair value movements are economically transferred to Fortitude Re.

Adjusted Book Value per Common Share is computed as adjusted book value divided by total common shares outstanding.

Adjusted Return on Average Equity (“Adjusted ROAE”) is derived by dividing AATOI by average Adjusted Book Value and is used by management to evaluate our recurring profitability and evaluate trends in our business. We believe this measure is useful to investors because it eliminates items that can fluctuate significantly from period to period, including changes in fair value of our available-for-sale securities portfolio and foreign currency translation adjustments. This measure also eliminates the asymmetrical impact resulting from changes in fair value of our available-for-sale securities portfolio for which there is largely no offsetting impact for certain related insurance liabilities. In addition, we adjust for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets since these fair value movements are economically transferred to Fortitude Re.

Adjusted revenues exclude Net realized gains (losses) except for gains (losses) related to the disposition of real estate investments, income from non-operating litigation settlements (included in Other income for GAAP purposes) and changes in fair value of securities used to hedge guaranteed living benefits (included in Net investment income for GAAP purposes).

Net investment income (APTOI basis) is the sum of base portfolio income and variable investment income.

Normalized distributions are defined as dividends paid by the Life Fleet subsidiaries as well as the international insurance subsidiaries, less non-recurring dividends, plus dividend capacity that would have been available to Corebridge absent strategies that resulted in utilization of tax attributes. We believe that presenting normalized distributions is useful in understanding a significant component of our liquidity as a stand-alone company.

Operating EPS is calculated by dividing AATOI by weighted average diluted shares.

Premiums and deposits is a non-GAAP financial measure that includes direct and assumed premiums received and earned on traditional life insurance policies, group benefit policies and life-contingent payout annuities, as well as deposits received on universal life insurance, investment-type annuity contracts and GICs. We believe the measure of premiums and deposits is useful in understanding customer demand for our products, evolving product trends and our sales performance period over period.

KEY OPERATING METRICS AND KEY TERMS

Assets Under Management and Administration

• Assets Under Management (“AUM”) include assets in the general and separate accounts of our subsidiaries that support liabilities and surplus related to our life and annuity insurance products.
• Assets Under Administration (“AUA”) include Group Retirement mutual fund assets and other third-party assets that we sell or administer and the notional value of SVW contracts.
• Assets Under Management and Administration (“AUMA”) is the cumulative amount of AUM and AUA.

Net Investment Income

• Base portfolio income includes interest, dividends and foreclosed real estate income, net of investment expenses and non-qualifying (economic) hedges.
• Variable investment income includes call and tender income, commercial mortgage loan prepayments, changes in market value of investments accounted for under the fair value option, interest received on defaulted investments (other than foreclosed real estate), income from alternative investments, affordable housing investments and other miscellaneous investment income, including income of certain partnership entities that are required to be consolidated. Alternative investments include private equity funds which are generally reported on a one-quarter lag.

Base spread income means base portfolio income less interest credited to policyholder account balances, excluding the amortization of deferred sales inducements assets.

Base net investment spread means base yield less cost of funds, excluding the amortization of deferred sales inducements.

Base yield means the returns from base portfolio income including accretion and impacts from holding cash and short-term investments.

Cost of funds means the interest credited to policyholders excluding the amortization deferred of sales inducement assets.

Fee and Spread Income and Underwriting Margin

• Fee income is defined as policy fees plus advisory fees plus other fee income.
• Spread income is defined as net investment income less interest credited to policyholder account balances, exclusive of amortization of deferred sales inducement assets. Spread income is comprised of both base spread income and variable investment income.
• Underwriting margin for our Life Insurance segment includes premiums, policy fees, advisory fee income, net investment income, less interest credited to policyholder account balances and policyholder benefits and excludes the annual assumption update. For our Institutional Markets segment, select products utilize underwriting margin, which includes premiums, net investment income, non-SVW fee and advisory fee income, less interest credited and policyholder benefits and excludes the annual assumption update.

Life Fleet RBC Ratio

• Life Fleet includes our three primary risk-bearing entities, American General Life Insurance Company (“AGL”), The United States Life Insurance Company in the City of New York (“USL”) and The Variable Annuity Life Insurance Company (“VALIC”). AGL, USL and VALIC are domestic insurance entities with a statutory surplus greater than $500 million on an individual basis. The Life Fleet does not include AGC Life Insurance Company, as it has no operations outside of internal reinsurance.
• Life Fleet RBC Ratio is the risk-based capital (“RBC”) ratio for the Life Fleet. RBC ratios are quoted using the Company Action Level.

RECONCILIATIONS

The following tables present a reconciliation of pre-tax income (loss)/net income (loss) attributable to Corebridge to adjusted pre-tax operating income (loss)/adjusted after-tax operating income (loss) attributable to Corebridge:

The following table presents Corebridge’s adjusted pre-tax operating income by segment: