Hello, everyone. Thank you for joining us and welcome to Corebridge Financial, Inc. first quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. I will now hand the conference over to Işıl Müderrisoğlu, Head of Investor and Rating Agency Relations. Please go ahead.
Good morning, everyone, and welcome to Corebridge Financial's earnings update for the 1st quarter of 2026. Joining me on the call are Marc Costantini, President and Chief Executive Officer, Christopher Filiaggi, our Interim Chief Financial Officer and Chief Accounting Officer, and Lisa Longino, our Chief Investment Officer. We will begin with prepared remarks by Marc and Chris, then we will take your questions. Today's comments may contain forward-looking statements which are subject to risks and uncertainties. These statements are not guarantees of future performance or events and are based upon management's current expectations and assumptions. Corebridge's filings with the SEC provide details on important factors that may cause actual results or events to differ materially from those expressed or implied by such forward-looking statements.
Except as required by the applicable securities laws, Corebridge is under no obligation to update any forward-looking statements if circumstances or management's estimates or opinions should change. You are cautioned to not place undue reliance on any forward-looking statements. Additionally, today's remarks may refer to non-GAAP financial measures. The reconciliation of such measures to the most comparable GAAP figures is included in our earnings release, financial supplement, and earnings presentation, all of which are available on our website at investors.corebridgefinancial.com. With that, I would now like to turn the call over to Marc and Chris for their prepared remarks. Marc.
Good morning, and thanks for joining us. I'd like to formally welcome our CFO, Christopher Filiaggi, to the call, as well as our Chief Investment Officer, Lisa Longino. I'll begin this morning with a recap on the strategic rationale of our transformative merger with Equitable and an update on progress we've made to date, followed by some observations on the current market environment and on how Corebridge's business model performed in the first quarter. I'll also spotlight some of the actions we're taking to win with customers. Turning to slide three, we are bringing together three outstanding franchises to create a diversified financial services company with leading positions in retirement, life, wealth, and asset management. Together, we will have more than 12 million customers and 1.5 trillion in assets under management and administration. Our combined distribution capabilities will be formidable.
We will have a large multi-channel distribution ecosystem to reach the broadest possible customer base. Our enhanced scale will drive significant synergies, $500 million in expense synergies plus meaningful upside opportunities from additional revenue, tax, and capital synergies. Our greater scale should reduce our cost of capital, help us provide better customer solutions at lower cost, allow for greater investment, and strengthen our ability to attract top talent. The transaction will allow us to further diversify our source of income, which helps provide resilient earnings across market cycles. Our growth prospects will be considerable across the combined company's businesses with our integrated model allowing us to capture the full value chain. The balance sheet of the combined company will be robust. By 2027, we expect earnings to exceed $5 billion per year. Cash generation will be strong and consistent, topping $4 billion per year.
The merger will be immediately accretive to both earnings per share and cash generation, both of which should increase to 10+% by year-end 2028. Turning to slide four, the upside potential for all our businesses will be strengthened with the merger. In Individual Retirement and Life, we will have meaningful revenue synergies. For example, our fixed and fixed-indexed annuities will complement Equitable's annuity offerings, and their variable universal life product will complement our life offerings. Together, we will be a leader in the 403(b) Group Retirement space with a large workplace distribution force. We will have more capabilities and balance sheet capacity to support our growth in Institutional Markets. In the combined company's asset management and wealth management businesses, AllianceBernstein will have nearly $1 trillion in AUM, and we'll have over 5,000 advisors to drive growth.
We are making good progress on steps required to close this transformative transaction. We already have completed a vast majority of our regulatory filings. Our Form S-4, including the shareholder proxy statement, will be filed with the U.S. Securities and Exchange Commission shortly. We believe the shareholders of both companies will approve the transaction given its compelling rationale. The executive team of the combined company has been determined and will be communicated soon. I'm confident we have the right leadership to execute on all our strategic objectives. Both companies have established integration management offices that are hard at work planning a seamless integration that captures the full value of the synergies. Finally, an important update on the timing of share repurchases.
As we indicated in the eight-K filed earlier this month, we are exploring undertaking share repurchases prior to the closing of the merger, including during the period from filing the preliminary proxy with the SEC until we mail the final proxy to shareholders. We also continue to expect another opportunity when we can repurchase shares after the shareholder vote this summer, subject to normal blackout periods. Any remaining capital we plan to deploy will be facilitated post-close, likely through an accelerated share repurchase. Turning to slide five, Corebridge's demonstrated strong performance driven by favorable industry demographics and sustained customer demand in the first quarter. Despite facing heightened market volatility and competition, our disciplined approach continues to deliver solid results.
Our wide array of product and service offerings enable us to meet a wide variety of customer needs, enhance the stability of our financial results, and allow us to allocate capital where returns are the highest. Our powerful balance sheet continues to give us financial flexibility, and our disciplined execution shows up in everything we do. Our overall performance in the quarter was strong. Excluding variable investment income and notable items, year-over-year operating earnings per share were up 13% and adjusted return on equity was up 120 basis points. The foundation of our success is winning with customers, and I include our distribution partners and plan sponsors in that category. We were proud to be ranked number one by J.D. Power for partner satisfaction in annuity distribution.
This validates our strategic focus on the advisor experience and our goal of being the easiest firm in the industry to do business with. We also continue to see strong momentum in our Group Retirement NPS, with plan sponsor satisfaction rising year-over-year. I'll have more to say about how we're investing in customer experience in a minute. In Individual Retirement, we delivered strong sales of $4.3 billion while maintaining pricing discipline and consistently positive net flows. The market outlook remains positive. The Peak 65 surge is continuing, with another four million Americans hitting that retirement milestone this year. In Group Retirement, we continue to see the transition from a spread to fee-based business. Fee-based earnings are approximately 60% of the total, with advisory and brokerage assets rising to all-time new highs, growing 14% year-over-year, benefiting from record levels of net inflows.
In Life Insurance, excluding VII and seasonally higher mortality, we continue to deliver earnings within our guided range, reinforcing a stable earnings for the company. In Institutional Markets, the underlying business continues to grow with an 18% increase in reserves. We issued $1 billion of guaranteed investment contracts in January, including our first-ever Canadian dollar-denominated GIC. The pension risk transfer pipeline remains healthy, with greater activity expected in the second half of the year. I believe the key to our success will be a relentless focus on putting the customer at the center of everything we do. Our roadmap is simple, deliver a differentiated customer value proposition, be the easiest company to do business with, and maintain a world-class distribution. That is how we generate more value for customers and investors alike.
As I said on my first earnings call three months ago, we're going to make the investments needed to improve the customer experience. Those efforts are well underway at Corebridge in 2026. A few highlights. We've launched a customer council steered by the executive leadership group and comprised of cross-functional senior leaders from across the company. They are showcasing key initiatives, sharing best practices, identifying quick wins, and above all, ensuring we maintain a customer-first mindset. Across our retail operations, we're modernizing how new business is onboarded by further enhancing digital submissions, strengthening upfront suitability checks, and improving real-time application status, all of which helps remove uncertainty, delay, and friction from the process. We've launched a new wealth management digital experience last month that allows clients to seamlessly navigate their product and service relationship with us and stay connected with their financial advisor.
We're moving permanent life products onto our digital submission platform, and we're launching a new payroll platform that makes it easier for Group Retirement plan sponsors to integrate their payroll data with us. In closing, we're excited about the future of our business. Externally, powerful demographic tailwinds are creating a large market opportunity. Internally, our customer-first mindset and emphasis on operating at speed will enable us to capture a significant share of that opportunity. The result will be a company that delivers significant growth in earnings per share, cash generation, and shareholder value. This is true of Corebridge today and will continue into the future as a combined company. With that, I'm pleased to turn the call over to Chris.
Thank you, Marc. I'm excited to join today's call and will provide further color on our performance for the first quarter. Starting with slide 6, our results this quarter underscore the strength of the Corebridge model, consistent growth and active capital deployment balanced by expense control and portfolio optimization. Performance was largely in line with our guidance from the fourth quarter, highlighting our diverse, stable earnings patterns and agility in capital management. We reported adjusted pretax operating income of $629 million and earnings per share of $1.05. First quarter results were impacted by underperformance of our variable investment income. Excluding the impact of VII and notables, EPS increased by 13% year-over-year, demonstrating the underlying strength of our core businesses.
VII returns were impacted by several components, including positive alternative investment returns, offset by unrealized mark-to-market losses on investments accounted for at fair value, with changes in fair value reported in adjusted pre-tax operating income. Adjusting for long-term alternative investment returns and notable items, we delivered a run rate operating EPS of $1.17, representing a 9% increase year-over-year. Finally, adjusted ROE was 10.6% or approximately 12% on a run rate basis. Excluding VII and notables, this reflects a 120 basis point increase year-over-year, underscoring our commitment to consistent profitable growth. Turning to slide 7, our businesses continue to evolve, delivering highly diversified sources of earnings and strong, stable cash generation regardless of the market environment.
Our core sources of income, excluding alternatives and notable items, increased 1% year-over-year with some variation in the underlying components. Fee income increased by 9%, driven by growth in assets under management and advisory alongside favorable market tailwinds. Spread income increased by 1%, which is in line with our guidance around the earning of the majority of the 2025 Fed rate cuts. To put that in perspective, had those rate cuts not occurred, base spread income would have been approximately $20 million-$25 million higher. Underwriting margin decreased 2% year-over-year due to exceptionally favorable mortality in the first quarter of 2025. Lastly, general operating expenses were in line with our expectations. This reflects ongoing investments we are making in our platform, as Marc highlighted earlier, as well as typical first quarter seasonality.
Looking ahead, we remain fully committed to disciplined expense management and improving our operating leverage over time. Turning to slide eight and looking at our capital position, our balance sheet continues to be healthy and strong. We ended the quarter with over $1.7 billion in holding company liquidity, supported by our U.S. insurance companies distributing $925 million in dividends in the quarter. Our level of liquidity exceeds the holding company's needs for the next 12 months. Capital return to shareholders reached $1.4 billion in the quarter. This included the completion of our planned capital returns related to the VA reinsurance transaction, totaling $1.8 billion. Excluding those VA reinsurance proceeds, we maintained our payout target with a payout ratio of 88%. Lastly, our insurance companies remain well-capitalized with capital ratios exceeding our targets.
Next, I'll review a few highlights from each of our businesses, the details of which can be found in the appendix to our earnings presentation. These results exclude the impact of notable items and variable investment income. Starting with Individual Retirement, we continue to be very positive about this business. The outlook is backed by strong fundamentals and demographic tailwinds that continue to drive demand for our retirement solutions. Premiums and deposits were $4.3 billion, demonstrating growth both sequentially and on a year-over-year basis. Leveraging LIMRA's first quarter industry projections, we maintained our market share of total annuity sales year-over-year. This includes our newer RILA products, highlighting our success with key distribution partners. Net flows into the general account remained positive at approximately half a billion dollars, contributing to continued growth in the underlying business. We saw surrender activity in line with our expectations.
This reflects fixed and indexed annuities reaching the end of their surrender charge periods. As we look at the full year, we reaffirm our estimate for base spread income to be approximately $2.55 billion. While we continue to see some spread compression, we still expect it to level off by the end of 2026, assuming the current market outlook and two additional Fed rate cuts. Lastly, APTOI increased 1% year-over-year, supported by growth in spread and fee income, highlighting the growth in the underlying business. Turning to Group Retirement, we are seeing this business evolve as a growing percentage of the American workforce is reaching retirement age. This demographic shift and the steps we are taking because of it are fundamentally changing how we generate value, moving us toward a more diversified and resilient earnings profile.
Continued momentum in our advisory and brokerage initiatives resulted in record level AUMA and net flows of over $300 million in the first quarter. This strong performance is directly related to our efforts focused on the advisor experience and operational ease of doing business, which is delivering early measurable wins as we continue to invest in the platform. APTOI decreased 17% year-over-year. This reflects lower spread income, partially offset by growth in fee income. This transition is intentional. As our clients move into the decumulation phase, we are seeing a natural mix shift away from the spread-based products and towards fee-based income. This aligns with our broader strategy to emphasize capital-light earnings, which now account for nearly 60% of Group Retirement earnings.
Our Life Insurance business delivered another strong quarter in line with the guidance we provided back in the fourth quarter, reflecting higher seasonal mortality in the range of $15 million-$20 million. This performance is consistent with both our historical experience and seasonal expectations for the start of the year. We generated $850 million in sales this quarter in line with first quarter expectations. APTOI declined 5% year-over-year. While mortality trends were favorable and aligned with first quarter expectations, they were below the exceptional mortality experience in the prior year quarter. Going forward, we remain confident in the steady cash flow and stability this segment provides for the broader portfolio. Institutional Markets continues to be a consistent growth engine with both underlying reserves and total earnings trending upward.
First quarter sales included over $1 billion in GICs, maintaining the consistent momentum we've seen highlighting our ongoing commitment to the GIC and FABN market. APTOI increased 15% year-over-year. This growth was underpinned by an 18% expansion in our reserves and a 13% increase in assets under management and administration. Lastly, a comment on pension risk transfer. Sales in this space are inherently episodic. While we expect volume variability from quarter to quarter, our pipeline remains strong. We anticipate an uptick in activity we move into the second half of 2026. Next, I'd like to take a moment to address recent headlines regarding the life insurance industry and its investment portfolios. Corebridge has a long-standing history in private placements, recognizing that the vast majority of companies today are privately held rather than public.
We are able to utilize this asset class to achieve diversification across our portfolio that isn't available through public issuance alone. These assets are a natural fit for our liabilities and allow us to not only capture an illiquidity premium, but to do so with the protection of financial covenants while maintaining a high-quality investment grade profile. Corebridge maintains control over all aspects of our asset portfolio and risk profile. Whether our private debt is originated internally or externally, we maintain rigorous ongoing processes to underwrite, re-underwrite, rate, and model our private assets. Out of the $284 billion statutory investment portfolio, $49 billion is in private debt, which is a high-quality diversified book where 91% of the assets are rated investment grade.
To provide further context on our private debt, I'll address a couple of recent areas of focus, beginning with private credit or what we categorize as middle market lending. Our allocation here stands at $3.3 billion, representing only 1% of our total portfolio. These investments have attractive risk-adjusted returns, and we continue to expect any losses in the middle market lending will be yield adjustments and not credit events. Further, within the middle market allocation, our debt exposure to the software sector is less than $300 million, and all of it is currently performing. Another area of focus in the financial press has been BDCs. Like middle market lending, this represents a small part of our portfolio where we hold $1.7 billion of debt issued by BDCs. Our entire exposure consists of debt instruments with no equity holdings in these originations.
Generally, we are a senior lender in these investments, the average asset coverage ratio is approaching 2x, meaning significant asset impairment would be necessary to impact our position in the capital stack. Given our current exposure, robust management processes, and the alignment of our liabilities, we remain very comfortable with our positioning. Our rating migration has been net positive over the last four years, we routinely perform sensitivity testing to ensure we remain well-capitalized across all market cycles. In closing, we remain focused on maintaining a strong balance sheet while generating growing returns to shareholders. Our guidance laid out in the fourth quarter remains largely in place, we continue to believe 8%-9% is the appropriate expectation for alternative investment returns over the long term. We do anticipate continued market-driven headwinds based on the current environment.
With that, I will turn the call back to Işıl Müderrisoğlu.
Thank you, Chris. As a reminder, please limit yourselves to one question and one follow-up. Operator, we are now ready to begin the Q&A portion of the call.
Your first question comes from the line Suneet Kamath with Jefferies. Please go ahead.
Great. Thanks. Good morning. Marc, I wanted to start on distribution. Just curious what you're hearing from your distribution partners post the merger announcement. You know, is there anything that we should be thinking about in terms of sort of limitations on how much product they wanna get from any one counterparty, or is that not really a concern? Thanks.
Yeah. Good morning, Suneet. Thanks for your question. I appreciate it. It's actually a very good question because as we were going through the process with Equitable, you know, when we were looking at various levels of synergies, we did challenge ourselves in terms of what I guess I would refer to as dyssynergies. As we announced it, you know, both firms obviously reached out to all of our distribution partners. I must say to our delight, we haven't heard any, I would say, apprehension about the depth and breadth of the presence we'll have across these channels. You know, part of it is because the suite of products both companies are bringing to the merger are very complementary.
If you even pick the largest distributors on each side, you know, the overlap is de minimis, and the overall volume. You know, at the end of the day, you know, we feel strongly, and this is a strong premise, around this transaction, that, you know, scale matters, you know, and the manufacturing depth and breadth matters. It's easier, we feel, for an advisor, for he or she to, you know, learn a handful of stories and be comfortable dealing with a handful of manufacturers. When it comes to, you know, obviously the distribution side, there's a servicing side as well, you know, and how they live their brand. We feel that's value add.
The answer to your question is, you know, we haven't heard of any, and we were obviously very pleased by that outcome.
Okay, that's helpful. Then I guess, just wanna make sure we're thinking about this right. When you talk about the $4 billion of cash and the $5 billion of earnings, I mean, that would sort of imply, free cashflow conversion of, like, 80%, which seems high. I'm assuming that $4 billion of cash is sort of before holdco expenses. Just wanted to get a little bit more color on how you're coming up with those numbers and what they include. Thanks.
Yeah, thank you, Say. Yeah, the short answer is, you are correct. That's kind of the pro formas that both firms put out there when we obviously communicated this transaction a month or so ago. I'll leave it at that. That's right, you know, that's pro forma guidance of where we expect the obviously operating income to be and the flows obviously from the operating entities. You know, it reflects obviously the, you know, very attractive synergies we'll get out of the transaction as well.
Okay, thanks.
Your next question comes from Alex Scott with Barclays. Please go ahead.
Hi, good morning. First one I had for you is on, you know, just how you envision wealth management strategy evolving over time. I know you're not ready to give, you know, revenue synergies, that kind of thing. Marc, I've heard you talk about wealth management. I know Equitable, I think, has maybe even gotten a little further down the road with their build out of wealth management. How do you expect to leverage that? What are you planning to do on that front? Even if you just provide something more qualitative.
Yeah, good morning, Alex. It's great to hear your voice. You're right. We, and the collective we, are very bullish on the wealth management space. I think if I objectively look at, you know, what Equitable Advisors has done and what they've done with that business and the margins and the accretion and the growth of the margins over time and the volume and the AUMs, I think they have a wonderful story, and obviously they have an operating model that's proven to be successful. And they've got, you know, 4,500-4,600 advisors, you know, obviously, in the market. On our side, I'm gonna round to about 1,000 advisors we have, you know, as part of that business.
You know, we are investing a lot on the infrastructure there to, as you know, cross-sell and up-sell, obviously into those plan participants, and we feel there's a great opportunity there. I think we mentioned in the last call that we think that's upwards of $30 billion of upside there, and we're as, you know, Chris mentioned in his remarks, we are harvesting that opportunity right now. Having said all that, you know, your implicit observation there that their platform is more mature and advanced is true, right? The, in the category of the devil is in the detail that if, you know, we are working through now and between now and close and into, you know, after close, how we bring both organizations to bear and, you know, ensure that one plus one equals three.
We are very sensitive to the fact that, you know, we're talking about individuals that are advisors that have clients that wanna grow their own book of business opportunistically. You know, we are being obviously attentive to that as we bring the two organizations together. It's too early to tell exactly what it looks like. You know, we are very obviously bullish on that business as we look forward.
Got it. Helpful. Second one I had for you is just on artificial intelligence and the investment that you're gonna make there over time. You know, I heard some of the comments in your introductory commentary around the initiatives you've already got going on, some of the digital interfaces that I think you mentioned. How, how are you coordinating those efforts with Equitable? I mean, how quickly can you start working together on, you know, AI adoption, just given, you know I know this transaction probably takes some time to get the closure and so forth, but that, you know, a lot of these initiatives are taking shape very quickly in the background.
Yeah. Thank you. That's, obviously a very important topic, and I'll give you three perspectives. The, the first one is that, you know, each firm, is operating independently between now and close, right? Let's assume close is towards year-end. You know, what we do now is compare notes about, you know, the history and what we've done and not, and develop plans as to how we come together and they integrate the firm. We operate very much independently until the close. Some of the initiatives that they have ongoing will, I'm sure, continue, and some of that we have, which I'll talk about in a second here, will definitely, continue.
We are being thoughtful though, if there's, you know, overlap in some of these initiatives so that we identify, let's say, the go forward platform or approach, so that, you know, when we plan for integration, we reflect that. The second point I'll make is that, yes, we are accelerating our investment and deployment of AI capabilities. I wanna highlight the point that, you know, we wanna invest in differentiated outcomes. What I mean there is that we wanna invest heavily in the front end, and how do we enable and accelerate the distribution of our products and services through our various channels.
And I say this by wanting to arm and facilitate our distribution to, you know, provide a better service and guidance and identify faster, the better clients for the products and services that we offer and help people retire with. That is a very key focus of ours. It's enabling a differentiated, I would say brand, and how they live our brand, and that comes to the tail-end servicing and claims. I would say that a simple example of what we've deployed over the last few months is, you know, digital agents that help our Group Retirement plans, you know, manage their affairs.
As you can imagine, when people call and want to do certain things with their Group Retirement plan, there's a lot of complexity for the servicing individuals to get to the right information and get the right outcome. We've got digital agents there now helping surface the right characteristics of every plan and contract that individual has. That would be one example of how we've deployed it. I think there'll be more, you know, as time goes on. The one aspect, you've heard me say this last quarter, is that, you know, obviously winning with customers and putting the customer at the forefront of everything we do is very important.
You know, obviously, the digitization and implementation of thoughtful AI to our platform will be a key part of, you know, getting to that outcome.
Good. Thank you.
Your next question comes from Thomas Gallagher with Evercore ISI. Please go ahead.
Good morning. One question on the deal, then a separate question on investment exposure. My question on the deal is the revenue synergies. Marc, I know you're still getting through more detailed estimates for what these opportunities represent, but the fact that you're highlighting it as one of the parts of the strategic rationale for doing the deal, is it fair to assume that this could be material to earnings? You know, I'll define that as 5% or more as a percent of earnings when we look to 2028 and beyond in terms of the potential opportunity here, or is it more modest? I just wanna get a broader sense because I think this is part of the strategic rationale for doing the deal.
Yeah. Good morning, Tom. Thanks for the question. I guess, there will be ample revenue synergies that we expect out of transaction. I think we've, we obviously guided towards the $100 billion of assets coming from, you know, the corporate side of the equation to AllianceBernstein over time, and that'll be, you know, from the general account and obviously the separate account assets. You know, there's a lot of cross revenue synergies about, you know, us, corporate selling some of our fixed annuities and fixed-indexed annuities into the Equitable Advisors channel, which, I think, you've heard obviously that there's dollar billions there being written that we have access to.
There's a VUL product on their side that, you know, was on our design table that we'll be able to introduce, and then there's the cross-sell and up-sell into these Group Retirement plans that I was just talking to, you know, to Suneet Kamath, or actually, I think it was Alex Scott asking. You know, it's too early to put a number on it. I wouldn't wanna say above or below your number and provide guidance that we haven't worked through at this point. I think, you know, as Robin and I have been mentioning to all of you, we will have an investor day in the first half of next year.
You know, you know, at the top of the list or as part of the key aspects of that will be to provide additional guidance on this revenue synergy. So far, obviously, we've indexed on the expense synergies given they were easier to identify as we went through the process, and that's what we're guiding to. There will be obviously some capital tax and revenue synergies as well tied to the transaction, which is why we think this one, this transaction is obviously appealing on, you know, across many dimensions, including this one.
Okay. Fair, fair point. I guess my question on the investment side is, I appreciate the disclosure on the BDC debt, the $1.7 billion. Gotten a number of questions on that. Can you just give a little more clarity on I think there's this perception out there that since a lot of the BDCs own risky debt, 10% plus yielding type loans, single B quality, how certain investors sorta equivocate that to, "That must be the risk for that exposure," and I think it's not. Can you talk about how you think about that $1.7 billion of BDC debt? Is it all investment grade? I assume it largely is, but how that's very different than the underlying exposures that the BDCs have themselves.
Yeah. Tom, I was gonna have Lisa, who's on our call, give you context there. Lisa, please.
Great. Hi, Tom. It's nice to meet you. Thanks for the question. Look, the way we think about BDCs is, you know, first and foremost, we look at the larger ones. We look at ones that could be public or really the majority of ours are non-traded. Given that, you know, they're closed-end funds, they are regulated under the '40 Act, and they, you know, they have some regulatory covenants in there that help. We view it as the portfolios are highly cash generative, diversified pool, you know, first liens with I mean, the conservative leverage and the low LTVs. We spend a lot of time looking at that, and our asset managers will go in and regularly look at the portfolio monthly. How's it doing? What does the cash look like? You know, what is picked?
What, you know, what trades are they doing? You know, because it is loan investments and there is leverage at the portfolio companies, we spend a lot of time doing that. The risk mitigants really are significant portfolio diversity and the low LTV. Even when we look at stress cases there, it does point to some solid recovery through the unsecured BDC debt because of the structuring. You know, we really constantly review the asset coverage ratio. All of this is investment grade, solid investment grade. Again, as Chris mentioned, we don't have any equity exposure.
Okay, thanks.
Your next question comes from Ryan Krueger with KBW. Please go ahead.
Hey, good morning. I think your Individual Retirement sales were roughly flat year-over-year, and I think you said market share was pretty consistent. That, you know, suggests that the industry was also about flat. Just any commentary on why you think sales have slowed at this point? I think the rate environment's still pretty similar to what it was. We obviously have the continued aging of the population. Just was wondering if you had any perspective on why you think annuity sales have been slowing a bit after the big uptick in the last several years.
Yeah. Good morning, Ryan. It's Mark. How are you? Thank you for your question. Yeah, I think, as you mentioned, our sales are relatively flat year-over-year and quarter-over-quarter across our Individual Retirement side. I would note that, you know, we continue to have very robust activity in the Individual Retirement side, annuity side. As you mentioned, we continue to believe that the demographic trends are very positive and a tailwind, right? We don't have, you know, yet the Q1 market share data, right? When we guide that we've maintained our share, from our perspective, it's based on, you know, us accumulating data from our distributors and all that.
You know, our gut tells us that actually our share will have somewhat increased, which does mean as well, obviously, that the flows across the industry maybe have tempered a bit. I feel that that is very temporary. You know, we feel obviously here at Corebridge that, you know, we purposely obviously have a depth and breadth of product for different obviously solutions for the, you know, Americans as they accumulate, you know, savings for retirement and then draw retirement income, right? We believe there's robust demand and, you know, we don't make a quarter a trend or a conclusion as to what the direction of travel, and we feel that there's still a lot of growth in that space overall.
More to come as all the actual stats come out, you know, is what I would say as well.
Thanks. Then just had a question on the Japan commercial partnership you're pursuing with Nippon Life. When do you think that could become operational? You know, how meaningful of an opportunity do you think that could actually be for the company over time?
Yeah. It's a very good question, and we have very rich and ongoing discussions with Nippon. As you know, and you're, you've mentioned here, Nippon is a very important strategic investor in our firm. They'll be obviously a very important strategic investor in the go-forward firm. And that stems as well from the co-manufacturing opportunities we have with them. As you've heard me say many times, brand and distribution matters, and you need world-class, and they have that in spade in Japan. We are working on co-manufacturing products. Their economy there is re-inflating. There's a need for the same products we sell.
Having said so, you know, they have a process as well as they evaluate what goes through their distribution channels and what's right for the end consumer there. We're trying to develop products with them that meet those needs, and then they gotta be filed, they gotta be approved, and they gotta be deployed. I would say that if there's anything that would be announced that takes through the course of 2026, if that happens, it takes at least another 9-12 months from then to actually have something in market, right? Because of the nature of the regulatory process and the filing process and making sure it gets on the appropriate distribution shelf appropriately. That's kind of the frame I would give you.
We're working in collaboration with our, you know, obviously with Nippon there. You know, I am cautiously optimistic that there will be something that we will do with Nippon over the course of time. That's kind of the timeline.
All right. Thank you.
The other thing I'll say maybe that, is that if we look post-merger, you know, we have obviously some great asset management through AllianceBernstein, and they have a great global presence and, you know, that is another part of the equation where, we think there's great, you know, revenue synergies eventually, you know, as we partner, you know, across the world.
Your next question comes from Wesley Carmichael with Wells Fargo. Please go ahead.
Hey, good morning. Thank you. First question was on Individual Retirement. Just on the surrender rate in fixed-indexed annuities and FIA, that ticked up a little bit sequentially. Just curious if you think that's gonna continue to kind of stay that level from here. Was there a bit of maybe just volatility in the quarter from product exiting surrender charge? Did you see any elevated surrender charge income come through in the quarter?
Yeah. Thank you, Wes. Appreciate the question. Good morning. I think as we've guided in prior quarters, you know, there is some business that is approaching the surrender charge period across our fixed annuity and fixed indexed annuity. Typically, those products have a five to six year kind of surrender charge period, and they're getting to the end of that point. Over the course of the, you know, 2026, 2027, and 2028, we do see a spike in that business maturing, and we would expect to see obviously more redemptions, you know, out of that, you know, just natural behavior and maturity of the block. We do expect and always strive to have net positive flows, right?
You know, to the question earlier about the $4.3 billion of flows in a quarter, you know, I'd like to think of our business as a $5 billion a quarter, you know, gross flows, through various cycles, right? You're looking at a circa $20 billion, you know, annuity book on an annual basis. You know, we feel that, you know, the maturity of the block and as business flows out, that will generate a steady stream of net positive, you know, kind of flows to our book. That's how I would think about it versus looking at any given quarter. That's. We do expect a heightened. It's natural maturity of the business, not necessarily any type of, you know, unexpected behavior from our policyholders.
There's no, I think the other question you had was around surrender charge revenue. There's no, there's no unexpected, I would say, you know, revenue or headwind tied to that, in our business right now.
Got it. That's helpful. Thanks, Marc. I guess just second question on the insurance company cash distributions in the quarter, I think that was nearly $650 million when you exclude the VA proceeds, and it sets up nicely sequentially in year-over-year. Do you kind of view that as indicative of a new run rate? Was there anything in the quarter that maybe favorably impacted that?
Yeah. I think, you know, I'll offer a comment, and then I'll hand it to Chris. I think, you know, we had heightened flows from the insurance companies in Q1, and I would expect the run rate to be lower. Chris, maybe you want to give some color there.
Yeah, sure. Thanks, Wes. Appreciate the question. First, let me reiterate our guidance on the insurance company dividends. Our expectation was that we would have insurance company distributions at around $2.3 billion in 2026. That does include dividend, the dividend of the final $300 million from the Venerable transaction. That leaves us with about $2 billion of normalized insurance dividends. We did accelerate a portion of our dividends in 1Q, directionally, you should expect dividends to be lower for the rest of the year, you know, more in the $450-$500 range.
Great. Thanks so much.
The next question comes from Cyvo Montazeri with Deutsche Bank. Please go ahead.
Thank you. Both my questions are gonna be on Marc's comment of making Corebridge the easiest company to do business with. The first one is on this newly created customer council. The initiatives that they're working on, are they mainly digital initiatives, or does that go beyond technology? Maybe, can you share some of the quick wins you've identified that you want to start working on next?
Okay, Cave. Thank you very much. Good morning. I appreciate the question. We are striving to be the easiest company to do business with, so I appreciate you spiking that out. You know, when we launched and rolled out the win with customers, you know, I would say the win with customers was always part of the fabric of Corebridge and AIG Life & Retirement business. I think the separation, obviously, you know, took precedence and priority. It was always there in the DNA. When we launched it internally and we communicated this broadly to our employees, that we had an immense sense of excitement across the organization to, you know, to pivot to and pivot back to this kind of focus.
And it was as part of that this idea of forming a customer council tied, that, you know, we have a significant, I would say, members of our senior leadership group participating. Now what are they up to? They're sharing best practices, they're sharing ideas, they're implementing, to your point, right? And I would say that you saw in some of my prepared remarks there that, you know, we've deployed capability, and a lot of it is through digitization, to answer your question, right? A lot of it is how do we make the lives of our distributors, of our plan sponsors and our customers easier when they do business with Corebridge. How do we make it more predictable? Excuse me.
I think, you know, as you saw there, we are deploying some digital assets and new infrastructure to help employers through payroll deductions and distributions on the Group Retirement side. We are facilitating more straight-through processing on the Life Insurance side, and we are digitizing some of the interactions on the annuity side. Sorry, I'm getting over a cold here. That's kind of the things that we've been doing, I guess I would say, Cave.
Great. My follow-up, somewhat linked to this is, merging with Equitable is gonna help you know, be an easier company to do business with. You'll have more products, et cetera, to offer. That could also be a bit of a nightmare in terms of integrating the different platforms, IT systems, et cetera. Do you guys plan on kind of trying to run all of the, you know, back office, for lack of a better terms, separately for a while and just to make sure nothing breaks?
Is the plan to really just integrate everything under one umbrella as quickly as possible, you know, in order to just really optimize the data that you guys have and that they have and really just offer kind of the best experience for the customers going forward?
Yeah, Cave, that's another very good question. You know, I would say, when we worked very closely with our Equitable colleagues, as part of the identification and sending of the $500 million of run rate synergies, you know, kind of platform, you know, kind of, what we did with the platform, how they came together, and how we picked the best platform on a go-forward basis to best serve the customers was a key part of, you know, the some of the outcomes here. There's a lot of dollar investments tied to that that were, you know, planned for. The teams right now are working through the details of that.
I think, you know, as with anything that comes with this type of territory, you know, every business and every function and every infrastructure will be a bit different. The idea will be to enhance the customer experience but not be disruptive to the customers as well, right? I think it's kind of the, it'll depend, depending on the business and the product line, how we approach it. The spirit of what you're saying is definitely, you know, what we're aiming to achieve over time. It won't happen day one, as you can imagine, given the nature and intricacy of the, you know, the model we need to operate under.
Fair enough.
The next question comes from Joel Hurwitz with Dowling & Partners. Please go ahead.
Hey, good morning. I want to touch on variable investment income. Can you just provide some color on?
On what flows through other variable investment income that was negative in the quarter, are you seeing any rebound thus far in Q2? Maybe talk about what you're expecting for VII in the second quarter.
Yeah. I'll have Lisa answer that one.
Hi, Joel. Nice to meet you. Thanks for the question. As Chris went through on VII, you know, we in the quarter, we had a bit lower in alts. In the non-alt, that was really just non-recurring marks on otherwise fixed income assets that are held in vehicles, and so it gets marked through operating income versus OCI. That has reversed. You know, we're not expecting to see that again. In addition, as we look forward into second quarter, in general, we're seeing VII slightly better. We still think second quarter could be below expectations just given the volatility in the market.
Got it. That's helpful. Then just on buybacks, you have a nice liquidity cushion at the Holdco versus your needs. I guess, just any commentary on your willingness to significantly draw that down in this open window, and particularly if AIG comes to the market with the rest of its stake.
Yeah, Joel, it's Marc. Thanks for the question. As you noted, obviously, we did $1.25 billion of buybacks in Q1 before obviously, we went quiet because of the, you know, the proceedings that took place with Equitable. As I mentioned in my remarks and as we, you know, as part of our Form 8-K filing not too long ago, you know, as we file our proxy, and we expect to, you know, later today, we do plan, you know, obviously in concert with our, with Equitable to go back in the market to do buybacks between the, you know, obviously the filing and the mailing of the proxies.
You know, we won't guide as to the amount we'll do, obviously, in the market, and we can certainly not speak to what AIG's, you know, will be. You know, I know, their CEO, I guess, as part of their year-end call said that, you know, they would like to be out of their holdings of Corebridge by year-end. You know, we have no insight otherwise to provide here, and nor would it be our place to do so. We, you know, as we said, we will be active in the market between the filing and the mailing, and obviously, we intend to be in the market as well after the vote later this summer.
We do have liquidity to deploy, as you say, but, you know, we've guided obviously to how much we would do over the course of the year, and we're gonna hold to that, you know, to that guidance right now, so.
Got it. Thank you.
Your next question comes from Jack Meehan with BMO Capital Markets. Please go ahead.
Good morning. Maybe one on Group Retirement. I know it's been in transition. I guess, can you help us frame the timeline for when Corebridge expects earnings to stabilize in that business? Are we getting close to that point now, or do you think it's more likely maybe after the merger closes and you see some synergies from that combination?
Yeah, good morning, Jack. Thanks for the question. You know, our expectation is that there's another, you know, 12-24 months for this transition to take place. We feel that, you know, we are trying to pivot this business and are pivoting this business from, you know, a fee spread business to a fee business, and we're seeing green shoots there, as Chris mentioned in his prepared remarks. Obviously, we had some very good, you know, flows into that business. We're getting, you know, to the $20 billion point in terms of fee-based businesses.
There's still room to make headway there, and obviously the spread level income on that business, you know, is heavier than the fee base, which is why it creates that obviously headwind that'll take 12-24 months from here to work through. To your comment and question, as we try to, you know, make that pivot and, you know, cross-sell and up-sell to the participants, obviously the merger presents opportunities here in terms of the discussion we had earlier about the, you know, Equitable Advisors and, you know, teaming up with that platform and those individuals to further penetrate our plans. Do I expect that to happen day one after the close? No. It takes some time for the teams to get together.
As we mentioned earlier, before we close, we operate independently, right? We can plan, but we can't execute. I suspect that execution will take place in the first half of 2027, and then we see the green shoots appear afterwards across the various platforms, including this one. That's kind of our perspective on that.
That's helpful. Thank you. Then maybe a follow-up on the annuities marketplace. I guess, is your view that the competition is still intensifying in any of the product categories where you currently focus, or do you think the market's settling into a annuity equilibrium at this point? Then maybe it gives you kind of confidence in spreads stabilizing by the end of this year. I think you said earlier that higher surrenders could potentially persist into next year or 2028. Just looking for any color there.
Yeah. Sure. So two perspectives there in your question. The first one was the, you know, how intense the competition is. You know, I always find that a very interesting question because I never felt any quarter there was no competition. You know, the intensity of the competition, you know, it ebbs and flows depending on, you know, who wants to pick their spots where. You know, you are correct that at the low end of the curve, there is, you know, a lot more capital being deployed there. As you're seeing in our sales, you know, we're being judicious as how we allocate that capital, and we typically redeploy it to our Institutional Markets business. You saw us do obviously $1 billion plus of GICs in Q1.
That's how we kind of judge the allocation of capital, but that's what I would say about the market competitiveness of the business. In terms of spreads. We continue to believe that our spreads on the IR business will level off towards year-end. Given where we are in the interest rate cycle and where spreads are that, you know, we will basically expand from that point on. We still expect, let's say, this year-end or thereabouts to be where they would level off and then start growing. We would still guide to what we have set out there, last quarter about that business as well.
Thank you.
Your next question comes from Wilma Burdis with Raymond James. Please go ahead.
Good morning. Given the combined scale of Corebridge and Equitable and the investments you plan to make in wealth, is it possible to accelerate the goal of making wealth, the wealth business self-clearing? If I'm recalling correctly, this would add quite a bit of margin, and I'm estimating over $100 million of annual wealth earnings. Any color you can provide there on the plans. Thanks.
Yeah. Good morning, Wilma. Thanks for that question. I think you're primarily referring to Equitable's Wealth Advisors business that is not self-clearing yet. You know, obviously scale gets you there. I'm not gonna offer a view yet. We're not informed enough to really have any view on that. I understand the economics you're referring to and the potential benefits, but, you know, we're not ready to guide to that. You know, I will wait again to, you know, what we do tied to any investor day or thereabouts about our view on that business and how we think we will continue to grow it. As I mentioned earlier, we are very, very, you know, bullish on this business, and it's one that's core to our future.
Makes sense. Thank you. We looked at the commentary that you all have given on capital and tax benefits and calculated that, just sort of back calculated it implied around $500 million to $1.5 billion of capital freed up, just via synergies between the two companies. Just wanted to check if that estimate is in the ballpark or if there's anything that we are missing or any other direction you can point me in. Thanks.
Yeah. I, thank you for that follow-up. I would say that we have non-guiding to specifics, you know, capital and tax benefits. I think we've guided to the fact that we think we'll have 10%+ EPS accretion run rate, you know, after 2028, which will be a combination of factors which will include those you're mentioning. You know, we'll more to come on all of that, including the revenue synergies. I would point back to the discussion, you know, with Thomas Gallagher earlier about, you know, Investor Day and, you know, Robin and myself and others coming to all of you with more specifics across all of that. We do firmly believe the transaction will be, you know, double-digit accretion, you know, over the next 24 months for sure.
Thank you very much.
Your next question comes from Michael Ward with UBS. Please go ahead.
Thank you for squeezing me in. I was just wondering about kind of the Corebridge brand in the merger scenario. You know, it's certainly younger than, you know, the Equitable brand. Just wondering, based on what you guys saw coming out of AIG, you know, thinking through any kind of shock lapse, is that kind of done with, or could there be a, you know, a temporary uptick post-merger?
Yeah. Good morning, Mike. Thank you for the question. Yeah, so we have decided that we are gonna go forward with the Equitable brand post merger. Obviously, the Equitable brand has an incredible history and legacy, you know, a 167-year-old brand. We are obviously gonna continue to maintain and invest in the AllianceBernstein brand on the asset management side. That, you know, brand itself has a, you know, incredible cachet across all our markets. Which means that we are, you know, moving on from the Corebridge brand. It was, you know, not that easy of a decision, even though it's a three, four -year-old brand. You know, a lot of people, you know, associated with Corebridge had a lot of pride in the brand and wore the purple very proudly.
You know, having said so, it's a three, four-year-old brand versus a 167-year-old one. The right decision is to move forward with the Equitable brand, which we will do proudly as a combined company. We don't expect any, you know, business ramification out of bringing the brands together, and we actually think it'll be value add to represent the collective firm with Equitable on a go-forward basis.
Okay. There's proposed changes to the RBC factors for CLOs and collateral loans. Just was wondering if you guys had any early reads on the potential impacts for you?
Hi, Marc, this is Lisa. Nice to meet you. Thank you for the question. Regarding the changes for CLOs, you know, where it's going to have, you know, incrementally more capital charge for the lower-rated tranches and less for the upper, all our indications are it's gonna be a minimal impact to us, given the structure of our CLO portfolio. We're pretty comfortable with that.
Thank you.
We have run out of time, and therefore, we have reached the end of the Q&A session. This does conclude today's call. Thank you for attending. You may now disconnect.