F&G Annuities & Life NYSE: FG
Capital bypermission.
F&G is making its investments harder to sell while new deposits already fall short of payouts on the annuities it retains.
F&G earns the spread between investment returns and what it pays policyholders, lenders and operating expenses. Blackstone chooses most retained investments. The main insurer, FGLIC, owes the policyholders even after reinsuring their contracts.
General-account assets at FGLIC, the Iowa insurer that owes F&G’s policyholders. Each square is $665 million.
The capital behind them. $1.38 billion of statutory capital and surplus, plus a $2.17 billion asset valuation reserve that also counts toward regulatory capital.
of capital and reserve for every $100 of assets. A thin cushion for a business moving deeper into private credit and relying heavily on reinsurance.
We believe F&G’s common equity is worth zero.
A withdrawal shock, credit losses or tighter capital treatment could leave its insurers needing cash and capital while restricting the distributions that service the parent’s debts. We expect the new capital needed to repair the balance sheet to arrive on terms that wipe out existing common shareholders.
We hold substantial short positions in F&G’s common stock and in the parent’s notes. We expect losses for parent noteholders, with potentially significant losses for funding-agreement creditors as well. This site accompanies the November 12 report.
Why we expect shareholders to be wiped out
Too much investment risk for too little capital
Blackstone chooses most retained investments. Public securities fell from 55.1% to 49.2% of retained cost in nine months. Select a family to open it.
100% of retained amortized cost
Inside public securities
The opening shows FGLIC’s June statutory general account. This September view covers the group’s retained investments on the supplement’s cost basis, excluding funds-withheld assets and including Kubera. The two totals have different scopes.
Portfolio table · supplement p. 11Public securities fell below half of the portfolio
Retained public securities fell $4.1 billion at cost in the first nine months of 2026, while private origination and whole mortgages grew $2.6 billion.
Across retained investments, including derivatives and equities, the cost-to-fair-value gap before liability-value offsets widened from $2.729 billion to $5.022 billion.
FGLIC owns the rated notes and the first-loss layer beneath them
At December 2025, FGLIC held $4.84 billion across 23 structures in which it owned both rated notes and first-loss interests. All 143 note positions carried private-letter designations.
The NAIC says an insurer owning every tranche holds “the exact same investment risk” as direct ownership.
FGLIC, December 31, 2025. Book value before reinsurance. Select a layer to read about it.
Investment grade in March and 61 cents on the dollar in June
FGLIC’s general account held $10.4 billion across 519 positions with private-letter designations at year-end 2025. The statutory schedule reports the grades without the rating letters or assumptions.
Ground Lease Trust SP2015B carried 1.G PL at December 2025 after a $5.791 million impairment. The grade remained 1.G PL in March but was 6.PL at the June 15 paydown. FGLIC received $12.09 million, or 60.6 cents per dollar of principal, and recognized another $2.08 million loss.
- 1.G PLAfter a $5.791m impairment
- 1.G PLThe grade remained
- 6.PLGrade at the paydown
Received per dollar of principal
Blackstone earns more as F&G takes more private risk
F&G tells investors that Blackstone “is not an affiliate.” Blackstone selects investments across most of F&G’s $56 billion of retained assets under management, earns more on private lending and is connected to two reinsurers holding $3.74 billion of F&G’s gross recoverables.
An affiliate of Executive Chairman William Foley received $10.8 million in 2025 tied to those fees. F&G bears losses on retained investments.
How much capital stands behind the investments
FGLIC ended 2025 with a 433% risk-based capital ratio, $266 million above management’s approximately 400% target. September surplus was $991 million.
Two reinsurers F&G owns would fail their capital minimums without regulators’ permission
F&G Cayman Re reported $1.215 billion of September surplus, of which only $57 million remained without two permitted practices. Corbeau reported $236 million of year-end 2025 surplus; removing its $1.488 billion permitted accounting benefit leaves a $1.253 billion deficit.
to replace the disclosed benefits at both captives while preserving their reported surplus, in our scenario.
Capital by permission
Reported surplus counts the permitted accounting. Cayman’s regulator allows bank letters of credit to count as assets and lower reserves against pension obligations. Vermont allows Corbeau to count an excess-of-loss promise as an asset.
Corbeau at December 2025, Cayman at September 2026.
Reinsurance can send the bill back to F&G
At year-end 2025, FGLIC had ceded $38.0 billion, or 57%, of its gross general-account contract reserves and deposit-type obligations. FGLIC owes the policyholders even after reinsuring their contracts.
F&G Cayman Re
Pension reserves ceded at December 2025
FGLIC ceded $6.3 billion of pension separate-account reserves to Cayman while retaining the assets and its obligation to retirees. If Cayman cannot meet its share, FGLIC still owes the pensions.
Cayman reported $1.215 billion of September surplus, of which only $57 million remained without two permitted practices. It also holds $225 million of FGLIC surplus notes, a subordinated claim on the insurer it supports.
Selected counterparties. Amounts use different measures and dates.
of first-loss interests sat in FGLIC’s year-end funds-withheld pool, without allocation by reinsurer. First-loss assets sit inside the protection management invokes.
overcollateralization above statutory reserves is what Bailey said F&G holds for most reinsurance partners. F&G has not shown how losses on first-loss assets would affect each treaty’s cushion.
of the $38.0 billion of reserve credit involved non-U.S. reinsurers or statutory affiliates.
Withdrawals can force the asset losses into the open
Five consecutive quarters of retained annuity outflows have taken $2.7 billion of funding out of F&G’s investment book. More than a quarter of retained annuity account value carries surrender charges below 6%.
A $1.888bn funding outflow in nine months
Deposits against withdrawals, deaths and other benefits
Both deposits and payouts fell year over year, but incoming deposits contracted faster.
$8.955bn, or 26.8%, sits below a 6% surrender charge
Fixed-rate and indexed annuity account value, by surrender charge
$33.382 billion of account value, net of reinsurance, excluding pension obligations and funding agreements. The contracts also permit limited charge-free withdrawals, typically after the first year.
An adviser-led loss of confidence could accelerate departures and force private-asset sales below F&G’s marks
F&G reports 4.5 years of asset duration against 4.8 years for liabilities. Floating-rate loans and reinvesting vehicles can keep principal committed for years.
A $736 million profit that F&G’s own measure puts at $96 million
The adjusted figure removes a $652 million pretax gain from revaluing what F&G owes its customers. Bailey said F&G had “trued up our surrender assumptions.” F&G books that benefit immediately; actual departures drain cash and remove future income.
Four stresses can push FGLIC into regulatory control
With a full 21% tax offset and all losses recognized at FGLIC, the modeled capital ratio falls from 433% to 119% of company action level. Adding a reinsurance shortfall, withdrawal sales and a higher capital requirement takes it to 25%, below the 35% mandatory-control threshold.
What remains unchanged
Public corporate $17.432bn · Government $1.836bn · Cash $1.683bn · Other securities $2.530bn. Their modeled haircut is 0%.
1 Software’s $2bn and office’s $1bn are assumed allocations within reported categories. All 12 categories sum to $34.383bn.
Below management’s target
35% mandatory control · 100% company action level · 400% management’s target
September 2026 group retained investments against December 2025 FGLIC capital. The recognized share is an assumption; the exact entity allocation is not established. No new earnings or capital.
Read the model boundaries
Capital ratio = remaining total adjusted capital ÷ company action level. Tax relief is applied once. Reinsurance and forced-sale losses are additional, not another deduction of the same assets. Higher requirements change the denominator. The $2.65bn permission-replacement scenario is excluded.
Regulatory action begins at 75%; authorized control at 50%; mandatory control at 35%. Iowa can act earlier on hazardous-condition grounds. Mandatory control allows up to 90 days’ deferral where recovery is reasonably expected.
The mandatory-control threshold is $3.22 billion of net capital losses, or 4.9% of FGLIC’s general-account assets. At 75% asset-loss recognition, the combined ratio is 87%. Without usable tax relief, that case falls to 19%.
F&G took $250 million out of an insurer that was losing money
FGLIC lost $75 million in the third quarter and returned $250 million to its owners. It had zero ordinary dividend capacity for 2026. Iowa separately approved the capital return.
Where the $250 million went
USD millions, rounded. The nine-month residual includes a $413 million addition to the asset valuation reserve in the first half; that reserve counts toward the regulatory capital ratio.
The parent borrowing group’s cash and investments rose $196 million to $444 million; without that transfer, they would have fallen $54 million.
Shareholders received $112 million in dividends and $123 million in treasury-stock purchases. The November 5 authorization permits another $100 million of discretionary repurchases.
Who can fund the repair
Spending all $444 million and drawing both facilities to fund the $2.65 billion permission-replacement scenario would still leave $1.25 billion to raise and increase parent debt by $950 million.
September parent resources. The undrawn debt is $750 million from banks and $200 million from FNF; drawing both increases parent debt by $950 million.
of annual coupons are implied by September debt, including $27 million on $375 million of junior notes.
caps payments under Cayman’s first executed keepwell. F&G must also reimburse drawings on the $150 million Nomura letter of credit supporting Raven Re if Raven fails to pay.
of the capital replacement scenario would be covered by sale proceeds equal to the approximately $700 million invested in Peak Altitude.
What shareholders and creditors stand to recover
Insurer assets first support insurer claims. Parent creditors depend on cash or residual value reaching the parent. Choose a security to see where its claim sits.
The path to zero common equity
September common book equity was $4.124 billion against $52.842 billion of retained investments. Further retained losses of 1% and 5% would consume $528 million and $2.642 billion.
Our downside case is a recapitalization that keeps F&G’s insurers operating while transferring their value away from current shareholders. Regulatory capital requirements and support obligations force F&G to seek financing before common book equity reaches zero.
- 1Secured creditors take their collateral · the FHLB holds $5.7 billion
- 2Administration claims
- 3Policyholders and qualifying funding agreements · Class 2
- 4Intervening creditor classes
- 5Surplus notes · Class 8
- 6The insurer’s owner · Class 9
- 1Senior unsecured notes and bank claims
- 27.300% junior subordinated notes due 2065 · $375 million
- 3FNF’s preferred stock · converts into common shares on January 15, 2027
- 4Common shareholdersCommon stock
Common shareholders receive the residual after parent creditors
At the November 11 closing price of $24.80, F&G traded at 79% of reported common book equity. Recapitalization terms determine what remains for existing shareholders. The preferred stock FNF holds converts into common shares on January 15, 2027. Ambac cancelled its old common stock in its 2013 restructuring while its insurance subsidiary stayed out of the bankruptcy.
F&G already commands a premium on reported adjusted earnings
At the November 11 closing prices, its shares traded at 7.8 times trailing adjusted common earnings, compared with 5.0 times at Jackson and 5.3 times at Lincoln. Reported adjusted earnings definitions and product mixes differ.
What to watch
FGLIC’s September statutory statement is due. It will show the insurer’s capital and its asset valuation reserve at September. The NAIC’s life capital working group considers exposing a charge, drafted at 4.81%, on reinsurance ceded outside reciprocal jurisdictions.
The new CLO capital factors apply at year end. FGLIC’s year-end surplus and 2026 operating result set its 2027 distribution threshold.
The preferred stock FNF holds converts into common shares.
Raven’s $150 million Nomura letter of credit terminates.
The $750 million bank facility matures.
$500 million and $550 million of senior notes mature.
A further capital return from FGLIC needs Iowa’s approval. F&G authorized another $100 million of buybacks on November 5.
F&G’s September senior-debt ratings sit at the lowest investment grade, and Moody’s outlook is negative. A qualifying parent debt downgrade activates the bank agreement’s quarterly 300% capital test. A cut of the 2029 notes to BB+ by S&P or Fitch also increases their coupon.
FNF reduced its stake by distributing F&G shares to its own shareholders at the end of 2025. A further reduction would test the support Moody’s counts.
Questions for F&G and Iowa
- 1
Will F&G publish the city vehicles’ rating agencies, private letters, loan tapes and complete issued capital structures? How does capital on its combined holdings, after reinsurance, compare with holding the underlying assets directly?
- 2
What does BilCar do for the payments F&G has agreed to make through March 2033?
- 3
F&G’s filing says Corbeau falls below its minimum capital without Vermont’s permission. FNF’s filing for the same dates says it stays above. Which is correct, and what was Corbeau’s deficit at September 30?
- 4
How much independently funded capital stands behind Fort Greene’s $1.861 billion and Ancient Re’s $1.642 billion of obligations to F&G?
- 5
How much loss can the $1.110 billion of first-loss interests among the assets F&G holds for its reinsurers absorb before the 3% to 4% cushion management cites is gone?
- 6
How much of the third quarter’s $652 million liability benefit came from assuming that more customers will surrender their policies?
- 7
How much of management’s $900 million to $1 billion annual capital-generation estimate can reach the parent after funding replacement business and required capital? How much would remain after a sale of Peak Altitude?
- 8
Why did F&G’s Iowa insurer return $250 million of capital in a quarter in which it lost $75 million and had no capacity to pay an ordinary dividend?
- 9
Will Iowa require F&G to back its captives’ reported surplus with capital that needs no accounting permission before it approves another withdrawal from the insurer?
- 10
FGLIC needed Iowa’s approval to send its parent $250 million this year. If Iowa declines the next request, what pays the parent’s $159 million of annual interest and the $500 million and $550 million of notes due in 2028 and 2029?
We believe F&G’s common equity is worth zero.
We expect the new capital needed to repair the balance sheet to arrive on terms that wipe out existing common shareholders.