Corebridge Financial: VA Exit Unlocks Capital While RILA Launch Drives Growth (NYSE:CRBG) - CRBG Stock Research Report

## Executive Summary / Key Takeaways * Corebridge Financial has executed the most significant value creation action since its IPO by reinsuring $51 billion of variable annuity liabilities to Venerable, releasing $2.1 billion in net proceeds that will fuel accelerated share repurchases and fundamentally de-risk the business profile. * The MarketLock RILA product has achieved $1.7 billion in sales within nine months of launch, demonstrating the company's product innovation capabilities and securing a top-10 position across all four major annuity categories—a unique competitive advantage in the industry. * A Bermuda reinsurance strategy has ceded $18 billion of reserves since inception, providing capital flexibility and improving earnings quality by shifting from capital-intensive legacy products to higher-return new business. * While 2025 EPS growth will fall below the 10-15% long-term target due to Federal Reserve rate actions from 2024, underlying business momentum remains robust with 34% premium growth and expanding market share in key retirement and institutional markets. * The company trades at 1.18x book value with a 3.2% dividend yield and has returned $1.4 billion to shareholders year-to-date through Q3 2025, positioning it as a compelling capital return story in a sector starved for consistent shareholder distributions. ## Setting the Scene: From AIG Overhang to Standalone Powerhouse Corebridge Financial, incorporated in 1998 as SAFG Retirement Services and headquartered in Houston, Texas, spent most of its existence as a subsidiary of AIG (TICKER:AIG) burdened by legacy variable annuity liabilities and complex corporate structures. This history explains why the stock has traded at a persistent discount to peers—the market viewed Corebridge as a repository for AIG's financial crisis-era problems rather than a growth-oriented retirement solutions provider. The 2022 IPO began the separation process, but the real transformation has unfolded in 2024-2025 through three strategic pillars: balance sheet optimization, product innovation, and expense discipline. The company operates in perhaps the most attractive demographic tailwind in American finance: over 11,000 Americans turn 65 every day, creating a perpetual demand engine for retirement income and accumulation products. Unlike pure-play annuity providers, Corebridge has built a diversified platform across Individual Retirement, Group Retirement, Life Insurance, and Institutional Markets. This diversification provides multiple levers for growth and capital generation while insulating the company from single-product cyclicality that has plagued competitors like Jackson Financial (TICKER:JXN) and Brighthouse Financial (TICKER:BHF). \ The competitive landscape reveals Corebridge's emerging strength. While Equitable Holdings (TICKER:EQH) and Jackson Financial (TICKER:JXN) focus heavily on retail annuities, and Voya Financial (TICKER:VOYA) emphasizes group record-keeping, Corebridge has achieved something unique: top-10 market share across fixed annuities, fixed index annuities, RILAs, and variable annuities. Crucially, distribution relationships in insurance are sticky—advisors and brokers who trust a company in one product category are more likely to expand into others, creating a powerful cross-sell engine that competitors cannot easily replicate. ## Technology, Products, and Strategic Differentiation The MarketLock RILA launch represents more than a new product—it signals Corebridge's ability to innovate at the pace of market demand. RILAs have become the fastest-growing annuity category because they offer downside protection with upside participation, perfectly suited for investors navigating volatile markets. Corebridge's $1.7 billion in RILA sales within nine months, including nearly $800 million in Q3 2025 alone, demonstrates execution velocity, which is significant for two reasons. First, it shows the company can compete with established RILA players who had a multi-year head start. Second, the October 2025 approval to sell RILAs in New York state, one of the largest annuity markets, provides a clear runway for continued growth into 2026. The Bermuda reinsurance strategy, which has ceded $18 billion of reserves since July 2024, operates as a capital optimization engine that competitors lack. By reinsuring new business and in-force blocks through its affiliated Bermuda reinsurer, Corebridge reduces required capital, improves returns on equity, and creates financial optionality. This strategy allows the company to grow premiums without proportionally increasing capital strain—a critical advantage in a rising rate environment where new business yields exceed roll-off yields by approximately 100 basis points. The strategy also provides a natural hedge against regulatory changes, as Bermuda's regulatory framework offers more flexibility than U.S. state-based insurance regulation. Digitalization efforts, particularly in Life Insurance where automated underwriting now processes 80% of new decisions instantaneously, directly impact expense ratios and customer acquisition costs. This capability is important because middle-market life insurance has historically been a high-friction, low-margin business. By reducing underwriting time from weeks to seconds, Corebridge can profitably serve a demographic segment that competitors have largely abandoned, creating a stable, less interest-sensitive earnings stream that diversifies away from spread-based products. ## Financial Performance & Segment Dynamics: Evidence of Strategic Execution

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\ The Individual Retirement segment's performance tells a story of growth investment temporarily compressing margins but building long-term value. Adjusted pre-tax operating income declined 9% year-over-year in Q3 2025 to $451 million, but this decline stems from higher DAC amortization {{EXPLANATION: DAC amortization,Deferred Acquisition Costs (DAC) are expenses incurred by insurance companies to acquire new business, such as commissions and underwriting costs. DAC amortization is the process of expensing these costs over the expected life of the policies, impacting reported earnings.}} and commissions associated with record sales volumes. Why does this matter? Because Corebridge is deliberately sacrificing short-term earnings to capture market share in a rising rate environment where new money yields significantly exceed portfolio roll-off yields. The segment generated $1.4 billion in general account net inflows, up 27% year-over-year, while index annuity sales hit an all-time high. This trade-off between current earnings and future spread income is rational and strategic, positioning the segment for accelerated earnings growth as the new business seasons.

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\ Group Retirement's transition from spread-based to fee-based revenue represents a fundamental margin structure improvement. Fee income now accounts for approximately 60% of core revenue, growing 4.5% year-over-year in Q3 2025 while spread income declined 4%. This shift is significant because fee-based revenue is more stable, requires less capital, and generates higher returns on equity. Advisory and brokerage assets grew 9% year-over-year to record levels, and adviser productivity increased 10% year-over-year. While net flows remain negative due to planned exits and required minimum distributions, the underlying trend shows improving advisor retention and productivity that should drive positive flows in 2026. Life Insurance's volatility in Q3 2025—adjusted pre-tax income of $25 million versus $156 million in the prior year—illustrates the impact of one-time items on an otherwise stable business. The $98 million annual actuarial assumption update, combined with systems conversion costs, masked strong underlying fundamentals. Adjusted for these items, quarterly earnings were $115 million, consistent with management's $110-120 million quarterly guidance. This demonstrates the segment's resilience and predictability, with nearly $1 trillion of gross in-force providing stability during market volatility. The 19% growth in fully digital senior life products shows the segment is successfully modernizing its distribution. Institutional Markets has emerged as a capital-efficient growth engine, with adjusted revenues surging to $2.2 billion in Q3 2025 from $832 million in the prior year, driven by $1.5 billion in pension risk transfer transactions and continued GIC issuance above $1 billion for the sixth consecutive quarter. This is important because PRT transactions, particularly full plan terminations, have fewer competitors and more attractive economics than traditional spread products. The segment's 17% year-over-year reserve growth and strong pipeline position Corebridge to capitalize on pension plan derisking trends that show no signs of abating as funding levels remain historically strong. The Corporate and Other segment's $141 million loss in Q3 2025, widening from $124 million in the prior year, reflects the inclusion of the variable annuity business post-reinsurance agreement and higher interest expense from debt issuances. This isolates legacy earnings volatility from the core business, providing investors with cleaner visibility into ongoing operations. The $2.8 billion VA transaction, which closed its largest portion in August 2025, will reduce this segment's drag while providing $2.1 billion in deployable capital. ## Outlook, Management Guidance, and Execution Risk Management's long-term EPS growth target of 10-15% annually remains credible despite 2025's expected sub-10% performance. The shortfall stems entirely from the lagged impact of 2024 Federal Reserve rate actions on floating rate asset yields, not from fundamental business deterioration. This distinction is crucial, separating temporary headwinds from structural issues. The company is offsetting spread compression through 8% general account growth, new money yields 100 basis points above roll-off yields, and the Bermuda reinsurance strategy. As Fed rate cuts from 2025 begin to earn into the portfolio in 2026, spread income should reaccelerate, supporting the long-term growth algorithm. The VA reinsurance transaction's capital deployment timeline creates a temporary EPS headwind that masks underlying strength. Management expects the transaction to be accretive by the second half of 2026 once $2.1 billion in proceeds are fully deployed through share repurchases. This creates a clear catalyst timeline for investors. The company has already repurchased $381 million in Q3 2025 and $1.4 billion year-to-date, with $3.3 billion remaining authorization. The interim EPS drag from undeployed capital is a known quantity that disciplined investors can model, making the 2026 accretion catalyst more tangible.

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\ Alternative investment returns, which were $0.11 per share below long-term expectations in Q3 2025, represent a manageable risk rather than a structural problem. Management expects continued weakness in real estate equity and slower deal activity to pressure second-half 2025 returns below the 8-9% long-term target. This impacts quarterly earnings volatility but not core spread income or fee-based earnings. With 95% of the portfolio in investment-grade securities and a highly diversified asset base, Corebridge has limited exposure to the credit deterioration that could threaten less disciplined competitors. ## Risks and Asymmetries: What Could Break the Thesis Interest rate risk remains the primary macro threat, but Corebridge's positioning has evolved to mitigate this exposure. While rising rates benefit new money yields, they also increase surrender activity as policyholders seek higher returns elsewhere. The fixed annuity surrender rate dropped to 9.7% in Q4 2024, but management acknowledges that higher volumes will exit surrender charge periods as the portfolio grows. This creates a potential earnings headwind if rates rise rapidly and persistently. However, the company's diversified product mix, with growing fee-based revenue and institutional markets exposure, provides natural hedges that pure annuity players lack. Regulatory changes pose asymmetric risks that could impact capital requirements and product design. The NAIC's new Risk-Based Capital Model Governance Task Force could alter RBC calculations, while updates to Actuarial Guideline LV {{EXPLANATION: Actuarial Guideline LV,A specific regulatory guideline from the National Association of Insurance Commissioners (NAIC) that provides rules for calculating reserves for certain types of life insurance and annuity products. It ensures adequate financial backing for policyholder obligations, particularly for reinsurance treaties.}} enhance asset adequacy analysis for reinsurance treaties. The Department of Labor's fiduciary rule, currently stayed in the courts, could disrupt distribution if reinstated. These factors create uncertainty around capital deployment and product profitability. Corebridge's 420-430% estimated RBC ratio provides a substantial buffer, and the Bermuda reinsurance strategy offers regulatory arbitrage flexibility that domestic-only competitors cannot access. The VA reinsurance transaction's completion risk, while largely mitigated by the August 2025 closing of the AGL component, still presents execution uncertainty. The remaining USL agreement and SAAMCo sale are expected in Q4 2025 and Q1 2026, respectively. Failure to close would negate the de-risking thesis and strand capital. This represents the one remaining operational hurdle in an otherwise successful transformation. Management's track record of meeting IPO goals—12-14% ROE target, 60-65% payout ratio, and $400 million expense savings ahead of schedule—suggests high completion probability. Competitive pressure in annuities is intensifying, with industry sales reaching record levels in 2025. Corebridge's management acknowledges the market is "active and competitive" across all product categories. This could compress new business spreads or increase commission expenses. However, the company's top-10 position across all four major categories and its ability to generate 34% premium growth while maintaining pricing discipline suggests sustainable competitive advantages in distribution relationships and product innovation that smaller players cannot match. ## Valuation Context: Pricing the Transformation At $30.02 per share, Corebridge trades at 20.4x trailing earnings, 1.18x book value, and 9.35x operating cash flow. Peer comparisons highlight Corebridge's relative attractiveness. Equitable Holdings (TICKER:EQH) trades at a negative book value and 76.7% payout ratio with lower growth, while Jackson Financial's (TICKER:JXN) 13.7x P/E comes with higher leverage and less diversification. Brighthouse Financial's (TICKER:BHF) 4.6x P/E reflects its narrower product focus and historical volatility. Voya Financial's (TICKER:VOYA) 1.35x book value trades at a premium to Corebridge, while its 12.0x P/E is lower, despite Voya's lower annuity market share. This suggests the market has not yet repriced Corebridge for its improved risk profile and capital flexibility. The enterprise value of $24.9 billion, at 1.35x revenue and 10.9x EBITDA, positions Corebridge as a mid-cap insurance player with large-cap potential. The debt-to-equity ratio of 1.03x is conservative for the sector, and with no material debt maturities until 2027, the company has ample financial flexibility to execute its capital return strategy. This removes balance sheet risk from the investment equation, allowing investors to focus on business fundamentals and capital deployment. ## Conclusion: A Capital Return Story in Disguise Corebridge Financial has engineered a remarkable transformation from AIG's (TICKER:AIG) legacy annuity repository to a focused capital return machine. The VA reinsurance transaction, by removing $51 billion of market-sensitive liabilities and releasing $2.1 billion in deployable capital, has fundamentally altered the company's risk profile and strategic options. This creates a rare combination in insurance: a growing, market-share-gaining business with a shrinking share count and improving returns on equity. The RILA product's $1.7 billion in nine-month sales and New York state approval provide a visible growth engine that can offset temporary spread compression from Fed rate actions. The Bermuda reinsurance strategy and Group Retirement's fee-based transition demonstrate management's ability to optimize capital and improve margin structure simultaneously. These initiatives demonstrate the company's ability to grow while becoming more efficient, a combination that should drive the 10-15% long-term EPS growth target once 2025's rate headwinds abate. The investment thesis hinges on two variables: the timely completion of the remaining VA transaction components and management's discipline in deploying the $2.1 billion in proceeds. With $3.3 billion in remaining buyback authorization and a demonstrated commitment to the 60-65% payout ratio, Corebridge appears poised to deliver substantial capital returns while building a more profitable, less volatile business. For investors willing to look through near-term earnings noise, the stock offers an attractive entry point into a company that has finally escaped its legacy overhang and is beginning to capitalize on America's retirement savings imperative.