All right. Good afternoon. I'm Ryan Kruger from KBW, and pleased to have F&G up with me on stage. In the middle, we have Chris Blunt, President and CEO, and Wendy Young, CFO, to the far side. Chris, did you want to just start off by giving a few opening remarks?
Sure, yeah. Do appreciate folks taking time. Some of you know our story, some of you don't. Ours is a spread lending model, so we're a large fixed annuity player with a rapidly growing life insurance business as well. Company goes back to 1959, partnered with Blackstone on the investment management side, and been on a pretty good growth run here, so.
Yeah, I guess, so you held an investor day about a year ago. You established several five-year targets, asset growth, margin expansion, and also other levers to create value for shareholders. Can you start by giving an update on the targets and how the key metrics you laid out are tracking so far?
Yeah, happy to do it, and the investor day really came from a number of you and a number of the sell side folks who cover us of, "Hey, you've talked about the upside levers to the business. Can you quantify that a bit? Can you give us a sense of the art of the possible, if you will?" So back in October 2023, we laid out some markers, where we said we could grow assets by about 50% over the next five years. Felt that we could take our all-in return on assets from a baseline of 110 basis points up to 133-155 basis points.
We spent a lot of time walking what those levers are for achieving that and felt that if we did that we would increase our ROE by about three to four hundred basis points. We hoped that a number of those initiatives would also lead to some multiple expansion. You know, pleased to say, it's not even a year into that plan and we're tracking pretty comfortably ahead on all of those metrics. We're off to a good start.
Great. Let's dig in more on the ROA. So like you said, you know, you started at around 110 basis points. You laid out levers to get to 133- 155. I think if we look at the first half of the year, you had 130.
We were.
So I guess one thing, is there anything unsustainable in that 130 as the jump-off point? And then, you know, from here, what are the further upside drivers?
Yeah, we still have a long way to go, right? Even though we're very successful through since October, we've added kind of a last twelve months ROA in our presentations that we do, and it's around 1.24. So a little bit of noise in the 1.30, but a good jumping-off spot would be 1.24. So how do we get the rest of the way? And we still have a lot of investment optimization that we can continue to do. We've benefited from floaters. That has helped increase our investment margin. We've seen some improvement in our operational scale, about two basis points already, sequential quarter over quarter, so we still have a long runway there. And then, of course, our flow reinsurance is off and running.
We're reinsuring about 90% of our MYGA business, and that's contributing as well, as well as own distribution. Amongst those four items, it'll get us the rest of the way.
Got it. So I mean, I think a key debate, certainly I've heard lately, is just we've had a major increase in annuity sales in the market. You know, certainly has been at least helped some, certainly by interest rates.
Mm-hmm.
Now, we're facing potential prospects of rates declining. You know, how sensitive do you think industry demand will be to a lower interest rate environment? And, I guess, if possible, if we could maybe talk about MYGAs versus FIA, maybe versus RILA, and your thoughts there.
Yeah. So I would say in the macro picture, no, I don't see anything slowing this down anytime soon, and I think if there's a flaw in the logic, it's, hey, if you run the R- squared of the 10-year Treasury and annuity sales, you know, it's kinda correlated with rates. But, you know, it was during a 40-year period where rates basically just went down for 40 years. So we've not lived in this world before. And a couple things I would point to, there's $6 trillion in assets in money market funds. Two years ago, it was $4 trillion. Five years ago, it was $3 trillion. So there are trillions of dollars sitting in cash on the sidelines, and it's logical. Most of you, and if I ask you in the audience, how many of you are holding extra cash?
It's not very punitive right now. Like, I get 5% in my Fidelity Investments Money Market Fund, and, you know, life is good. It's liquid, it's easy. You know, short rates start coming down, those rates are gonna start coming down. And we're already hearing from advisors who are out pitching clients, "Hey, this could be the high-water mark for rates for a while. You should be locking in the rates that you're seeing today." So I actually think the near-term impact of some rates coming down is gonna be an increase in demand for our products. And then you get into all the secular stuff, you know, 10,000 baby boomers retiring every day. People get tired of saying it, but it's true. You know, most of my... I'm a baby boomer, most of my friends are baby boomers.
Most of them still don't know that things like annuities exist, or that you can take a chunk of money and turn it into something that looks like an old-fashioned pension check. So, yeah, I don't think we've come close to penetrating the size of the market. And I would also say the industry has access to more capital than it's ever had. So part of the constraint in the past really wasn't interest rates, it was how much capital did companies have and how much did they wanna commit to fixed annuities, so. And sorry, on your second point, yeah, we're super excited about RILA. We launched RILA very recently.
For those of you who don't know what we're talking about, it's a registered index-linked annuity, where instead of the floor being zero and you get a capped upside in the S&P, we can give you a buffer of say, - 10 or - 20, meaning we'll absorb the first 10 or 20 points of loss, and for that you get a lot more upside. So the client is taking some risk, and the reason we're excited about it is now you're in the world of mutual funds, right? This is direct competition to a mutual fund. It's a younger demographic, it's a more risk-seeking demographic, but we just think that market, that chassis for products is gonna just continue to do nothing but go up.
I had a follow-up on the RILA point you made. So as of now, so RILA has grown a lot in the industry, but the vast majority of the sales are from companies that used to focus on traditional variable annuities-
Mm-hmm.
and they have those distribution partnerships a lot, many of which are the same.
Mm-hmm.
You know, I guess, what is it gonna take for a company like yourselves to penetrate that channel? You know, and I guess how big of an opportunity do you think it could be for you?
Yeah, so you know, the reality is the players that first went in, as you said, were all the VA players, and they had some great initial advantages. They had brand names, relationships with advisors, huge wholesaler networks, and those are all helpful things. But at the end of the day, a RILA is a spread product. It's a completely different product than a variable annuity, right? So, you know, if you've got more spread, you're gonna have better option budgets, you're gonna have better performing contracts. So, you know, relationships do matter, and I don't wanna discount that, but, you know, over time, product performance matters.
And so I think it will ultimately look like the FIA business, and it'll be the domain of the folks that are really good at spread products, many of which are firms that are partnered with, you know, the private credit originators. So, you know, it'll take longer. You know, I don't think, like, I remember when we launched MYGAs and Raymond James, we did, like, $1 billion in the first nine months. I don't think we're gonna see that type of impact. It'll take a little bit longer to ramp, but the market is massive, and we think we're gonna be super competitive there for the same reasons that we're competitive in the FIA business. And the other thing I would say is a lot of agents, they do both.
There's sort of this sense of, you know, you know, registered people just sell RILAs, and independent agents just sell fixed annuities, but these worlds are all morphing together. So we know there are a number of loyal fans of F&G that are independent agents that also themselves are registered and will have interest in selling RILA.
Do you think that... So, like, an FIA and a RILA, there's differences, but there's some general similarities with-
Mm-hmm.
upside equity, market participation, as various levels of downside protection. Like, do you think those, like, are those products gonna compete with each other? In other words, like, do you think there could be any cannibalization if you started selling a lot more RILAs from your FIA sales?
Yeah, there, there's always gonna be some, so it's hard to predict how much of that. I think for us it should be relatively small, and the reason for that is we have a very small broker-dealer footprint today, and that's because of the popularity of RILA, and we didn't offer it. So, so most of where we're gonna see a lot of demand is gonna be there. And then I'd also say you're typically talking to a different customer about those products. It's not that... You know, I own both. I own a fixed index annuity, I own a RILA product as well. So people have different risk tolerances for different buckets of money, that they have. But I think as a general rule, you know, people in a certain age bracket and income bracket are attracted to guarantees.
It comes up naturally in the conversation, versus clients that are, you know, more risk-seeking and a little bit younger. So we're anticipating the vast majority of this is gonna be incremental business for us.
And then I just wanted to go back to MYGA, 'cause I think MYGA is probably where there's the most debate among participants in the industry on what could happen with lower rates. 'Cause I guess if I step back, MYGA sales, I think, have tripled in the last few years in the industry. It seems like the only thing that really changed was interest rates went up. Now, I'm hoping rates don't go down to where they were before either. But I guess it would seem like there would be some sensitivity there, but I hear your point on all the money on the sidelines. So I guess maybe why do you think it might be different this time?
Yeah, it's money on the sidelines. It's also a huge portion of our sales are 1035 s. So, you know, John Currier runs a retail business, and, you know, he said, you know, "Annuities are the roach motel." Like, just, you know, probably a bad analogy, but what he means by that is, like, when someone tires of a CD and wants to embrace an annuity, they tend to leave it there, right? They do a 1035 exchange. They exchange it into a new annuity. They don't go back to paying taxes and accepting a lower rate from a CD. So you've had a flood of money come into the system that is now available for all carriers to compete when those contracts come up. So I think that is a bit different than maybe what we've seen in the past. And then everything's about relative rate.
Everyone's like: "Oh, the rate environment's been great, you guys are killing it." But we've had an inverted yield curve. Like, if you had said to me two years ago, rates are gonna spike 500 basis points, and we're gonna have an inverted yield curve, meaning you could earn as much in a money market as being in a fixed deferred annuity, I probably would have said, "This is gonna be an awful environment," and yet we're killing it. So a curve normalizing and inverting. Like, one of our best years for fixed annuity sales was when, you know, money markets were paying one basis point and CDs were paying one. We were paying two, tax-deferred, and we killed it because when cash was zero, two sounded pretty damn good to you.
So our relative positioning was quite, quite strong, and the only reason our sales weren't as strong as they are today, we just didn't have the distribution network that we have today. So I, I'm not saying that it won't have an impact, it will, but it's always relative to what are my safe money alternatives, and those really haven't changed. It's money markets, and it's certificates of deposit.
That makes sense. I used to look at the two ten spread compared to MYGA sales, and it used to be correlated, and now there's obviously no correlation lately.
Yeah, and I'm a really exciting guy, so you know, I started out on the equity side of the world. Now I get up and I look at the Ten-Year Treasury and the Bankrate CD monitor. Yeah, that's really. Makes you really fun at cocktail parties, too. It's pretty cool.
On the flow reinsurance strategy, so you talked about reinsuring 90% of your MYGA volumes.
Mm-hmm.
to reinsurance partners. Again, how should we think about the earnings and the economics of doing that, you know? And then also, it's focused on MYGAs. Are there other products that you'd also consider?
Mm-hmm. Yeah, the economics are great on that reinsurance business, and the reason is that we're getting a disproportionate amount of our spread in relation to the capital that we have to put up. A fully retained policy, we're holding 15%. On a reinsured policy, it goes to half of that, and then in the second year on the retained, it goes to 7.5%, and on the reinsured policy, it goes to zero. So the capital that you're putting up, that present value, versus the present value of that ceding commission that you're getting, it's very accretive. And so that's why we do that. It's not like we don't like MYGA, but we're being paid as a distribution partner for the reinsurers, so it's very accretive.
Wendy, like last quarter alone, that contributed what to overall spread?
14 basis points.
Yeah. So I mean, it's already significant, and that, and all we're doing is reinsuring out MYGA.
Yeah. So yeah, we'll look at other products to do the same thing, as long as they're as accretive as what we're getting on the MYGA. So more to come, but it's very good business for us.
Got it. And you have a few different reinsurance partners, I think?
We do.
Yeah.
We're splitting it amongst three.
Okay. So different topic. You know, in addition to third-party distribution, you have your own distribution strategy, which, you know, I'd say like in the IMO space, that's pretty unique for-
Mm-hmm
... for an annuity manufacturer to also have ownership stakes in the IMOs, and you've invested $680 million so far. I guess, can you talk about what led you to do this, pursue this strategy, your return targets on those investments? And then just, you know, do you see more opportunities as well?
Mm-hmm. Yeah, so I maybe start with what it's not. You know, traditionally, sometimes carriers bought independent distribution with the idea of, "Oh, we're, you know, we're going to force higher sales and get more market share," and the reality is, it doesn't work. It's independent distribution for a reason. One, they don't have the level of control people think they have, and if, you know, somebody loves Athene, and I try to force them to sell F&G, they're just going to go to a different IMO that will let them buy an Athene contract. So that, that's not what we're trying to do.
It stemmed very simply from many of these are decades-old relationships, and we have good strategic relationships with our top partners, and when we talked to them, we talked about things other than how we sell more F&G, and many of them were approached by private equity, approached for roll-ups, and for a variety of reasons, just decided they didn't want to go down that path. But liked the notion of, hey, maybe I could take a little chips off the table. Most of them have built these firms out of their own money. They built these incredible franchises, and so really, it's us sliding in as an alternative to private equity. If you think about it, insurance companies are the ultimate permanent capital vehicles. You know, we don't have to flip something every five years.
So it started out as that, and then it just snowballed off, you know, they're just great businesses. We look at the return profiles, and it's higher than what we can get on a retained annuity sale, and it's highly diversifying for us. So we feel great about this. You know, ultimately, this is potentially something that could be big enough. We could, you know, think about even spinning it out as a, as its own thing. But for now, it's really been about cementing some relationships, getting a good return on some incremental capital, and diversifying the business. And it's across the board. I mean, some of these are middle market, corporate market, life platforms, some are more affluent-oriented annuity platforms, so it's a pretty nice portfolio that we've put together.
Are you... When you've made these investments, are you trying to then create, like an overarching platform that has synergies between them, or do you view these more as just, as kind of each individual investment into these IMOs?
Yeah, there are opportunities, you know, so we have been able to get a couple of them to work together, where, you know, maybe they're life-oriented, but they see an annuity opportunity, and they want to partner with someone with more expertise around annuities. So there has been some low-hanging fruit there, where I guess you could say we're paying ourselves. You know, we get the portfolio companies working together. I think over time, there's probably an opportunity for some back-office synergies as well. You know, who's got the best commission system, and could we modernize that and leverage it across other platforms? So yeah, I think there's the normal operating, you know, private equity value add, I think we, we would have. You know, Bill Foley is our chairman. He's pretty good at this roll-up thing, too, so that's probably helps.
Are there synergies? I think you kind of explained why this might not be the case, but like, are there synergies with your own business? Or because they're truly independent, are you just viewing these as a good investment opportunity?
Yeah, I mean, it's a little bit of both. I mean, as you can imagine, when, you know, you sit on someone's board and you're trying to give good strategic advice, it probably opens up opportunities that maybe other carriers might not see. But again, I think the key is we still have a very separate team who wakes up every morning and is just trying to get more than its fair share of annuity business, right or life insurance business. But, you know, when we're wearing our own distribution hat, it's really about: How do we make these businesses successful? You know, one example, one of the first deals that we did, one of our competitors was aggressively trying to onboard sales, and good for them, and they got a lot of sales, and, you know, it was kinda nice.
Most of those commissions flowed to us. So it wasn't. It was actually a good feeling, and, you know, and I say that when I do talk to my competitors, I tell them the same thing. I like, "I want nothing more than your success," 'cause what we're really trying to do is get these companies to be highly successful. And frankly, we have so many spread lending opportunities between annuities and life insurance, like, it's actually more valuable to us to have a diversified source of earnings. So, you know, if I had to choose, if you said, "You have to give a tiny bit of market share, but these firms are gonna be wildly successful," you know, that's the path we would choose. But right now, it's...
We seem to be benefiting on both sides.
Great. So shifting gears to the institutional businesses, can you just talk about the growth opportunities in both pension risk transfer and in FABNs and other? Yeah, I guess I'll start there, and then I'll follow up.
Okay. Yeah, with the pension risk transfer, the amount of the number of pension funds that are fully funded or nearly fully funded is large, and we're able to take advantage because the sponsors want to de-risk their balance sheets. So we're able to capitalize on that and participate in that PRT. We've had our best first half ever in our short time that we've been in the PRT market at $900 million in the first half of this year, and we see the full year for the full industry at a $40-$50 billion type of sales scenario. So we'll be able to participate in that. We participate in a smaller chunk of that, in the $100 million-$1 billion, say, size.
And where we play, we win probably 25% of that, so it's a good outlook for us for the rest of the year. And then FABN, we're opportunistic in that, depending on the interest rate environment, and it's getting a little bit better. We participated in May a $600 million deal, and we'll continue to look at that as we're looking at where we want to put our capital.
Got it. Are there other products or product categories in the institutional side that you'd be interested in, or are these kind of the real focus?
Yeah, just, just like even on our retail side and the different channels, we feel we're in the right spots for us, but we'll continue to look to see if we have a competitive advantage in other areas that we could participate.
Yeah, and the only thing I'd add to that is we're. We try to be as thoughtful as we can, right, before entering a business. Like, we studied PRT for over two years.
Mm-hmm.
And you might say, "Well, why'd you have to study it so long?" But the reality is a lot of carriers entered with trumpets and elephants and parades and didn't... and then really didn't have any success there. So it was really important for us, and like, I even made a bunch of those calls personally to the intermediaries of, you know, what causes someone to win or lose. We did a mathematical breakdown of how important is the investment spread relative to mortality assumptions, et cetera, et cetera. And ultimately, at the end of the day, concluded, "Hey, we can play here." This is a different distribution channel, but it's what we are really good at, and so very proud of the team.
We're, I think, number seven or six in PRT market share, which is pretty remarkable given that, like, we weren't in the business two years ago.
Mm-hmm.
And really sticky assets, you know. I mean, these are... You're basically selling a thousand SPIAs at one shot, and so these assets, they take a long time to run off, and that's attractive as well. So yeah, we love it.
Do you think the pension funds have are de-risked enough now that you know that even if in a lower rate environment they'll still be well-funded to keep pursuing PRT deals? We used to think I feel like there used to be more talk of a lower rate environment. You tend to have lower PRT volumes but it seems less clear now given the funded status.
It can change quickly. We've seen that in the past, so, you know, the way we're looking at it, if the CFOs aren't looking at it right now, and, you know, as rates are coming down, that they should question that. So we don't think it's gonna-
Yeah
... dry up when rates go down. I don't think we're gonna see as big a move going down as we saw coming up.
Yeah.
I think you're right. I think LDI strategies have really taken off. I mean, I'm on a few nonprofit investment committees, some big pension plans, some not so big, and pretty much everybody understands what LDI is, and that when you get to a certain level, you really should be trying to immunize your portfolio. So you're right. Having said that, you know, the PBGC taxes that they have to pay are pretty onerous. There's a lot of reasons for a CFO to want to get that volatility off their balance sheet. So yeah, I don't. It's hard to envision what would cause that to slow down in the near term.
Annuity surrenders, for both the industry and yourselves have been-
Mm
... have been increasing in the higher rate environment, which is logical. Can you talk about what you've seen, you know, how does it compare to what you would have expected-
Mm-hmm
... in this type of rate environment? And then, I guess, how is it actually impacting your margins at this point?
Yeah, so we do a stress test that was this exact scenario in the past. So, you know, we're prepared for it. We understand what it would look like, and it's actually happened exactly the way we would expect it to have happened. You know, you've got policyholders that don't have surrender charge, and they absolutely should be moving their money. And then you have policyholders that still do have some surrender charges, and it makes sense for them, too. So we call it the industry refinancing, and it's not a bad thing. You know, for those companies that are seeing net inflows, it's a really good thing because what's happening is that the business that you're now putting on the books is gonna be very sticky. As interest rates start coming down, it's gonna be harder for them to move money in the future.
So it's gonna be very sticky business that you've replaced the margins, basically, if you're in a net inflow. So we've benefited from it. Yes, the margins are up a little bit for the surrender charges, but again, that's why we look at that last twelve months to kinda smooth that out a bit.
Yeah, and, you know, policyholders are better off, too. I think that's the piece. Like, I made a comment in the quarterly call, and I got a little grief online of, you know, "Oh, CEO is encouraging surrenders." We're not encouraging surrenders, but, you know, if you bought a policy with a 5% cap, and you can get one with a 13% cap, and maybe you have to hold it an extra two years, well, you know, we should probably do that. Everybody should probably do that. And so the real key is, like, are you open for new business? If you're competitive and you're getting more than your fair share of that movement of policies. Because it's very hard for an agent to 1035 from the same, to the same company.
It's a weird thing, but the regulators don't like it 'cause they're worried that people are gonna be proactively trying to churn their own book. So the reality is, it's much easier to put an FG policy with Athene or an Athene policy with FG. So there is a bit of a shuffling. Policyholders, it has to go through a suitability process.
Mm-hmm.
It won't last forever. It's very unique. It's, it's unique to a 500 basis point spike in rates. Most of the time, that math just doesn't work and doesn't get through a suitability. But to, to Wendy's point, what people aren't pricing in is, we just replaced a big chunk of our book that was the most vulnerable with policies that it will be close to impossible to move. So these will be very sticky assets, if in fact, rates have peaked and start to-
Mm-hmm
... start to come down.
Some companies have talked, have seen some level of spread compression-
Mm-hmm
... the last two or three quarters, and I, I'd say the most common explanation has been higher surrenders of low-cost liabilities, and then in F&G, you know, new business returns, while maybe meeting hurdles, still being a little bit less attractive than the in-force business. Does it seem like you, you've experienced this?
No. Mm-hmm.
But what, what's your perspective on this?
Yeah, others may have experienced that. We haven't, and there's a couple reasons. First, you know, the advantage that we have with Blackstone as our asset manager, right? We have the ability to move between private and public credit, back and forth, wherever the credit spreads rates are, right? And others might not have that optionality. And our new business yields are continuing to increase because we have that capability. So on the new business front, we're meeting our targets, right? When we price new business, we have a set target spread, and we're meeting those, and it's going up. You look at our results, our yield outside of the LPs, we show that fixed income, and that has continuously gone up.
And then on the in-force, again, it's managing your target spread. When the new business, whether, you know, after you take into account the surrenders, you're managing to that target, you get to reset those rates. And then if your inflows are more than your outflows, you know, like we have, we're just not seeing that compression at all.
Yeah, I think, I think the other thing, too, is private markets always lag the public markets. So there was that period of time where, you know, frankly, you could throw a dart at the corporate bond index and earn a really good return. And so if the, if the source of your outperformance during that period was corporates, when you see a rate move like this and spreads start to compress, well, you see it immediately. Whereas you have the opposite, the private markets lagged. Well, they lag on the way down as well. And if you've got that ability to pivot back and forth, and one of the advantages of being part of Blackstone is they're like, I think, the largest originator of stuff in the world.
Just when we think they're running out of interesting ideas, they originate new asset classes and new things for us to look at. So yeah, if I had to guess, I would say that's part of the main reason is just our menu of stuff to pick from is just deeper and broader.
You talked about benefiting from floating rate, and now we're kind of in the situation where, you know, rates might go down. I think you've taken a fair amount of actions-
Mm-hmm
... to hedge the floating-rate bonds. Can you talk about what you've done? I guess, I assume there was a cost to doing so as well, so kind of how much it costs, and then, what's your sensitivity from here to short-term rates?
Yeah, I'll start. Yeah, and credit goes to our CIO, Leena Punjabi, who basically said: "Look, we can lock in pretty significant outperformance relative to pricing," 'cause most of these securities we put on when you know, LIBOR was 50 basis points. And it was sort of more in the category of, like, don't be greedy, right? We can lock in a lot of outperformance. We can take a variable off the table. Rates will inevitably come down. Everybody knows it's the same with credit, right? If you wait and to de-risk, when it's clear you need to de-risk, you missed your window... right? 'Cause markets move really quickly. It's the same thing here. I feel like once it's crystal clear rates are coming down is not probably when you want to start hedging rate exposure out of a portfolio. So we're not rate traders.
We weren't, you know, looking to start a hedge fund, but the timing was really good. So yeah, it cost us the day we did it, but that didn't last very long, 'cause really all you're doing is you know, hedge rates stayed higher. Obviously, we were giving up NII, but in the theme of don't be greedy, and if you can take risk off the table and it's relatively painless to do that, you should go do it. But right now, that's way in the money. Like, that was. Our timing was pretty good there. So yeah, we're down to 6.5% of our portfolio in floaters.
Is that on a?
Net.
6.5% net of hedging?
Mm-hmm.
Net of hedging.
Got it.
Net of hedging.
So the ROE, I think, is around 12%-
Mm-hmm
... year to date. Your target is 13%-14% over a multi-year period.
Mm.
When you think about the upside from here, is it more about just improving the ROA and getting there that way, or is there also some denominator effect on the capital side?
No, it's purely the ROA that I talked about earlier. You know, we still have plenty of runway in all the components that we've listed during Investor Day to march up, you know, additional 1%-2%.
Okay. Like, on capital generation, you I think you've talked about a billion or more of in-force capital-
Mm-hmm
... generation. How, how should we think about the new business strain against that to get to more of a net capital generation number? If we could start there.
Yeah. So you're right. The in-force, where we get to that billion dollars is what I referred to a little bit earlier, where that second year after a policy is put on, you're holding half the capital, and then on that reinsured policy, it goes to zero. So all of that capital is being released. We're right now choosing to put it back into the business to grow it, and that covers that strain. So we're self-supporting ourselves in that way, and that's what our board wants us to do. They want us to grow. But we're also supporting a pretty good dividend for a growth company, and we'll continue to make those choices.
Other than the dividend, do you have any, I guess, other capital deployment priorities between, you know, I guess, additional investments in distribution, own distribution, or buybacks or anything like that?
Yeah, I would say, buybacks we're not really... You know, we have the program available to us, but it's more for dislocation like we saw, you know, a year and a half ago when-
Yeah
... the stock dropped significantly below what we thought the intrinsic value was. That's why it's there, but so it's not an active program that we'll utilize. It's all about putting it back into the business, and Chris can talk more about own distribution. Depends on what the opportunities are there.
Yeah, when the stock was at $18, I was the buyback program. Yeah, I think with respect to own distribution, there are absolutely opportunities, and as I said before, when we did our first couple of deals, that sort of generated a lot of interest from others of, "Hey, that's a really interesting idea," of, you know, we can get some of the benefits we could get from a private equity partner, but with people that we've known for decades, and we trust, and we already have a business relationship with. So yeah, there are opportunities there. There's opportunities to then obviously roll up some smaller agencies, if you will, underneath some of the folks that we have. So, it is a priority.
Having said that, we're getting huge scale benefits right now, so we want to keep growing AUM and our spread business, and particularly given, you know, the environment that we're in right now. So, you know, it's an ongoing discussion with our board. How quickly do you want to build out the own distribution piece? Are there other sources of financing for that, separately other than the business itself? So yeah, we at the moment feel pretty good that we can keep feeding both at a pretty good pace.
And then perhaps this may not be as interesting to you, given you're already doing flow reinsurance with the reinsurers, but you have seen a number of companies establish third-party capital-
Mm-hmm
... sidecars. You know, is that something that could be of interest to FNG?
Yeah, I mean, we've looked at it over and over again, and right now our flow economics are so good. So the sidecar economics haven't been as good as flow, so we'll continue to look at it, and when it gets as good as the flow opportunities, well, we might jump on that bandwagon as well.
Just, one last one. Like, how do you think about the competitive environment generally? Because I think we've had so many new companies enter the space that are interested in various spread businesses, but volumes are also up a lot. So, maybe there's probably enough, maybe enough for everyone now, but what's your view of that?
Yeah, this is a hot topic of conversation today in the one-on-one meetings, and I would say we haven't seen, really have not seen any dramatic shift in the competitive environment or, you know, more aggressive pricing, for example, frankly, in any of our channels. So some of it is our core independent agent channel, which is our most profitable. You know, that's not so easy to just crack into. You know, you can sell MYGAs to maybe some of the smaller IMOs for some period of time, but, you know, getting real scale and being a big FIA player, for example, is just not so easy to break into. And I would also say the most-...
Competitive players are also the most price disciplined, so we tend not to see pricing where we just scratch our head and go, "What, what the hell are those guys doing?" You know? So I think that's a pretty positive dynamic. Same thing in PRT. I mean, we haven't really noticed a meaningful change in the dynamic there. It might be where we play, you know, we tend to play in the, like, $100 million-$600 million plan size, and we kinda run into the same players, and we know how we compete, and they know what the basis they compete on. So it really has been relatively stable type of an environment.
Now, part of that, to Wendy's point, like, you know, working with our investment team in Blackstone, we're in our sixth year now, so it doesn't matter if it's basketball or whatever it is, in your sixth year, you're just better at what you do. And so our ability to optimize the portfolio, to suss out new opportunities, find new and interesting asset classes, you know, real-time defeasance a liability. You know, the advantage of being partnered with some of the structured deals is you're not a price taker, you know.
So sometimes they'll come to us with, you know, whatever, it's equipment finance deal, and the they're thinking five-year floating, and we say, "Yeah, that's interesting, but if you could do seven-year fixed, we would double our appetite 'cause of the liability improvement that would give us." And nine times out of ten, we're able to do that. So it's a pretty powerful lever, so I don't know if, like, that's what allows us maybe to not feel some of the same pressures that others might see. And then lastly, I would say it depends on where you've been.
In the low-rate environment, if you weren't hitting your targets and you were in with your boss begging for time, you know, like, "Ah, this really sucks, but it's gonna get better, trust me." And then it gets better, and you start hitting your targets, it's kinda hard to go to that well again, right? And so, and so the irrational pricing, you know, it generally comes when someone's getting a little desperate, right? Occasionally, you can see it in PRT. Someone hasn't closed a sale all year, and the, you know, it's getting late in the year, and somebody gives an aggressive bid. But yeah, by and large, it's been remarkably stable. Again, John Currier runs our retail business. He would say the pricing targets haven't changed in twenty years, and the questions have been asked for 20 years.
It's a great business, everybody's making money, but at some point, you know, the margins have to just start coming in, and it just... I mean, it hasn't. At least that's our experience has been it hasn't. But it's really hard to generalize. I think anytime someone says it's an industry issue, I'd just be leery because everybody's investment basket is different, their liabilities are different, you know, they can be impacted by their non-annuity liabilities. You know, rates come down, we don't have, like, a no-lapse guarantee book that might need capital or a long-term care book. Like, none of that affects us, you know, and I really mean this, like, once we invest the money, we, we really do not care where interest rates go.
Great. We're gonna wrap it up there. Thank you very much, Chris and Wendy.
Awesome. You're welcome. Thank you.
Thank you.