Chailease Holding Company Ltd
TWSE:5871
Chailease Holding Company Ltd
Chailease Holding Company Ltd., emerging from the vibrant economic landscape of Taiwan, has established itself as a titan in the financial services sector. The company began its journey with a focus on equipment leasing, recognizing the burgeoning demand for flexible financing solutions among small and medium enterprises (SMEs) in Asia. By offering leases that allowed companies to acquire essential machinery and technology without the hefty upfront costs, Chailease tapped into a vital niche, thus creating a strong foundation for its business model. Over the years, the company has diversified its operations into various financial services, including installment sales, factoring, and financing operations, all of which cater to a wide array of industries. Its ability to tailor financial products to meet the specific needs of clients showcases its deep understanding of the market and commitment to fostering business growth.
Earning revenue from interest and lease payments, Chailease strategically positions itself as both a facilitator and a partner to countless enterprises striving for expansion and efficiency. The company navigates the intricate financial landscapes of multiple countries, blending localized insight with robust financial expertise. It leverages its cross-border presence to mitigate risks and capitalize on emerging opportunities, providing a steady cash flow that underlines its financial health and resilience. Additionally, its adeptness at managing credit risk through rigorous evaluation processes ensures a stable portfolio with commendable asset quality. By continually innovating and expanding its suite of financial services, Chailease sustains its growth trajectory and reinforces its stance as a key player in the Asian financial services market.
Earnings Calls
Corebridge Financial reported an impressive fourth quarter, achieving an adjusted operating EPS of $1.23, an 18% year-over-year increase. Leveraging strong sales growth, the company anticipates a consistent annual EPS growth of 10% to 15%, despite potential near-term pressures from interest rate changes. Corebridge raised its dividend by 10% and increased share repurchase authorization by $2 billion, emphasizing shareholder returns. The firm's diversified business model and strong liquidity positions it well for future growth, expecting a payout ratio of 60% to 65% in 2025 while projecting a dividend increase of 5% to 10%.
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Hello, everyone, and welcome to today's Corebridge Financial Fourth Quarter 2024 Earnings Call. My name is Seth, and I'll be the operator for your call today. [Operator Instructions]
I will now hand the floor over to Isil Muderrisoglu to begin. Please go ahead.
Good morning, everyone, and welcome to Corebridge Financial's earnings update for the fourth quarter and full year 2024. Joining me on the call are Kevin Hogan, President and Chief Executive Officer; and Elias Habayeb, Chief Financial Officer. We will begin with prepared remarks by Kevin and Elias, and 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 applicable securities laws, Corebridge is under no obligation to update any forward-looking statements if circumstances or management's estimates or opinions should change, and 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 Kevin and Elias for their prepared remarks. Kevin?
Thank you, Isil, and good morning, everyone. Since our IPO 2 years ago, Corebridge has consistently generated strong top line results and bottom line growth, delivered on commitments and made great progress executing our strategy. We are capitalizing on favorable industry dynamics and attractive market opportunities while navigating persistent inflation, volatile markets and the prospect of lower interest rates. This success is a testament to our leading market positions, diversified business model, strong balance sheet and disciplined execution.
Turning to Slide 3. At the time of our IPO, we established several financial goals to chart our performance as a new public company: achieve an adjusted ROE of 12% to 14%, a payout ratio of 60% to 65% and maintain a Life Fleet RBC ratio at or above 400%. These initiatives have been supported by our efficiency program, Corebridge Forward, with the further goal of reducing our run rate expenses by $400 million.
I am pleased to report that we met or exceeded each of these goals while positioning Corebridge for long-term success and establishing financial and operational independence. We grew run rate ROE over 300 basis points, firmly landing within our range of 12% to 14%. Strong top line growth, margin expansion and lower expenses, combined with the investments we made in our operating model, positioned us to capitalize on historic opportunities. We also improved our quarterly run rate operating earnings per share by 35%, with approximately 2/3 of that improvement from earnings growth and 1/3 from capital management.
For payout ratio, we exceeded the original target by a significant margin. Since the IPO, we delivered a cumulative payout ratio of 73%, returning $4.9 billion to shareholders over that time, an amount equaling 36% of our market cap at the IPO, and we repurchased 14% of our outstanding shares over that same period. Importantly, we actively maintained strong financial flexibility while delivering robust growth in our businesses.
In terms of expenses, we achieved our contracted on $400 million of run rate savings ahead of schedule, with $350 million earned in to date. Over the last 2 years, we reduced expenses by 13% on a comparable basis. As a result of this work, our expense ratio is in the top quartile across our industry and we remain diligently focused on further improving our operational efficiency.
Finally, we have consistently demonstrated financial discipline. Our regulatory capital levels have exceeded the 400% target as we proactively manage our high-quality assets and liabilities while maintaining strong parent liquidity.
Moving to Slide 4. We have built a solid foundation since the IPO, and 2024 was another successful year for Corebridge. I will review our full year results and Elias will cover the fourth quarter.
In 2024, Corebridge increased full year operating earnings per share by 18% year-over-year to $4.83. We grew ROE to 12.8%, and on a run rate basis, ROE improved over 100 basis points year-over-year to 13.2%. At the same time, in 2024, we returned $2.3 billion to shareholders. Additionally, excluding notable items and the sale of our U.K. Life insurance business, we grew core sources of income by 4%, seeing improvement across all 3 sources.
Corebridge achieved these positive results through our focus on 4 strategic pillars: organic growth, balance sheet optimization, expense efficiencies and active capital management. To drive organic growth, we work with our extensive network of distribution partners and leveraged our broad suite of products and services. Our businesses continue to thrive as we fulfilled strong customer demand. We delivered robust sales volumes in 2024 with premiums and deposits of $41.7 billion, a 5% increase over what was a very strong 2023.
Our distribution platform remains an important differentiator for Corebridge. We have, for many years, taken a long-term approach to our distribution partnerships, which has created active, productive and long-lasting relationships. The insight we have into our partner strategies is key. With this insight, we can more effectively meet the needs of their clients and manufacture products that align with their business plans, giving us the opportunity to compete beyond price.
Customized products and specialized strategies have been essential to our success and represent an important part of our product development emphasis. With the fourth quarter launch of our [ market lock ] registered index-linked annuity, or RILA, Corebridge now has offerings in every major product category. We are proud of our broad product range and recognize the value of choice for financial professionals.
Our second pillar is balance sheet optimization, which includes strategic use of reinsurance, strong asset origination and proactive management of our portfolio of high-quality assets and liabilities. We launched our Bermuda affiliated reinsurance strategy in July, and began ceding fixed and fixed index annuity new business. By year-end, we added both in-force and new business for structured settlements and term life. In total, we have ceded just over $12 billion of reserves to our affiliate in Bermuda.
Relative to asset origination, our unique investment platform, which includes our own internal teams and our external partners, Blackstone and BlackRock, has been instrumental in sourcing attractive high-quality assets. These investments support our target returns and product management and collectively, we sourced over $43 billion of assets in 2024. We continue to develop new and expanded asset strategies and maximize the value of our strategic partners. This work has improved credit quality while enhancing income and yield also supporting increased levels of new business volume.
Our third pillar is expense discipline. We are very focused on expense management and operational efficiency. And in 2024, Corebridge delivered with full year GOE lower by 4% over the prior year on a comparable basis. Looking forward, we see more opportunity as we further digitize end-to-end processes that support our insurance operations and begin to build on the significant investments we made as part of our separation process to further modernize our finance and actuarial capabilities.
Our fourth strategic pillar is active capital management. In 2024, we increased full year dividends from our U.S. insurance subsidiaries by 10%, supporting a full year payout ratio of 81% or 62% excluding proceeds from the sale of U.K. Life. Corebridge is proactive with balance sheet and capital management to ensure we deliver on our financial goals while also pursuing profitable growth and creating financial flexibility.
Reflecting the strength of our financial position and our continuing commitment to an attractive return for shareholders, I am pleased to announce that our Board of Directors increased the existing share repurchase authorization by $2 billion and increased the quarterly dividend to $0.24 per share.
Corebridge will continue to build on these 4 pillars: organic growth, balance sheet optimization, expense efficiencies and active capital management to generate further growth and shareholder returns.
As we look ahead, we expect our annual run rate EPS to increase on average in the range of 10% to 15% over the long term, but this growth will not be linear. In some years, the increase may be higher and in others, lower. Based on current expectations for short-term interest rates, we may see some pressure during the year as we manage our floating rate portfolio, but we view this as only temporary. Additionally, as we look ahead, we expect dividends from our insurance companies to increase another 5% to 10% in 2025.
And now I will hand it over to Elias to cover our fourth quarter results.
Thank you, Kevin. I will begin my remarks today on Slide 5. The fourth quarter was a continuation of our strong performance since the IPO fueled by organic growth, balance sheet optimization, expense efficiencies and active capital management.
Corebridge reported fourth quarter adjusted pretax operating income of $878 million or operating earnings per share of $1.23, an 18% increase year-over-year on a per share basis. Our operating EPS included one notable item this quarter, resulting in an unfavorable impact of $0.02. Details can be found in our earnings presentation.
Annualized alternative investment returns were $0.03 short of our long-term expectation. This reflected positive trends across traditional private equity, hedge funds and real estate equity as returns improved in 2024 with activities slightly picking up in the second half of the year. Adjusting for notable items and alternative investment returns, we delivered a run rate operating EPS of $1.28, an 11% increase year-over-year on a competitive basis.
Moving to Slide 6. The diversity in our sources of income allows Corebridge to consistently deliver attractive financial results under different market conditions. Core sources of income, excluding notable items, grew 4% year-over-year, driven by increases in fee income and underwriting margin.
Fee income, which comprises approximately 30% of our core sources of income, improved 10% as a result of higher account values along with our growing advisory and brokerage business. On a comparable basis, underwriting margin improved 22%, driven by more favorable mortality experience.
Base spread income declined 5% from the strong levels of the previous year, driven by the impact of net outflows in our Group Retirement business as well as the impact from changes in short-term interest rates and related hedging activities to maintain alignment between assets and liabilities. The sequential decline was in line with the interest rate sensitivity we shared last quarter.
We anticipate the impact of changes in short-term interest rates along with the related hedging activities and the runoff of our floating rate portfolio will only be a near-term headwind. Underlying base spread income continues to be strong driven by general account growth and higher new money yields.
Overall, Corebridge continues to fire on all cylinders and the combination of our diversified market leading businesses working together continues to be a key component of our shareholder value proposition.
Before moving on, I want to spend a moment on highlights from each of our businesses. For purposes of this discussion, results exclude the impact of notable items, variable investment income and the sale of our International Life business.
In Individual Retirement, adjusted pretax operating income declined 7% year-over-year, primarily driven by base spread compression arising from the impact of changes in short-term interest rates and related hedging activities on floating rate asset exposure.
Strong sales in the quarter reflected pricing discipline and the $5 billion of premiums and deposits represents another very good quarter. Our broad product suite allows us to fulfill not only growing customer demand, but also evolve with changes in customer appetite, serving as a meaningful differentiator.
General account net inflows of $1.6 billion in the fourth quarter further demonstrate the value of our origination capabilities, product portfolio and distribution network. Full year net inflows were $6.9 billion, nearly double the level achieved in the prior year. The fixed annuity surrender rate dropped to 9.7% for the quarter as surrenders continue to improve from their peak earlier in the year. We expect to see our surrender rates increase in the coming year with large lots of fixed and fixed index annuities exiting their surrender charge period. That said, we expect continued net inflows in the general account from individual retirement.
Group Retirement delivered another steady quarter through its balanced contribution from spread and fee income. Both spreads and fee income will continue to reflect the impact of net outflows and asset values. Advisory and brokerage sales grew 31% year-over-year, supported by strong customer demand and favorable equity market performance while out-of-plan annuity sales in the current quarter mirrored broader industry trends. We saw net outflows of $3.5 billion in the fourth quarter due to planned losses and required minimum distributions by plan participants. Excluding these 2 items, net flows remained relatively stable throughout the year. Looking forward, we expect first quarter Group Retirement net flows to be more consistent with levels observed in the first half of 2024.
Life Insurance continues to be a strong performer. Adjusted pretax operating income increased more than 100% year-over-year, primarily driven by more favorable universal life mortality experience. Sales volumes continued to outpace the industry as a result of strong product positioning, investments in our digital and automated underwriting capabilities and expanded distribution.
In Institutional Markets, adjusted pretax operating income was virtually flat year-over-year. As a reminder, earnings from this segment may reflect some quarterly volatility, but core earnings should increase as reserves grow over time.
Full year earnings increased 17%, in line with reserves. We continue to grow our FABN program as a disciplined but consistent issuer and continue to see an attractive pipeline for pension risk transfer transactions in the coming year.
Our financial results for the quarter demonstrate the benefits of multiple sources of income as well as our ability to improve expense efficiency while also growing the balance sheet. From the end of 2022, the cumulative improvement in our operating expenses was 13%, primarily driven by efficiencies from Corebridge Forward. On a year-over-year basis, fourth quarter general operating expenses for our insurance businesses and parent company were modestly lower after excluding the sale of our International Life business and the onetime notable item. This largely was the result of savings from our expense efficiency program, offset by costs attributable to sales growth as well as some nonrecurring and seasonally higher expenses.
Moving to Slide 7. Corebridge remains well capitalized with strong liquidity. We ended the year with holding company liquidity of $2.2 billion. This includes approximately $1 billion of proceeds from debt issuance in September and November that prefunds our upcoming maturities in 2025. Our disciplined and proactive balance sheet management has enabled Corebridge to pursue profitable growth while delivering our financial and capital management goals.
Our U.S. insurance companies distributed $550 million in the fourth quarter, bringing full year distributions to $2.2 billion, a 10% increase year-over-year. At the same time, we returned $527 million of capital to shareholders during the quarter, including nearly $400 million of share repurchases. The $1.8 billion of share repurchases for the full year includes proceeds from the sale of our U.K. Life Insurance business, which we have fully deployed. Corebridge continues to target a 60% to 65% payout ratio for 2025.
Our strong balance sheet, which saw asset growth of 7% year-over-year, continues to reflect a clean in-force portfolio backed by high-quality assets. We estimate our life fleet RBC ratio to be in the range of 420% to 430% as of the end of 2024.
In conclusion, our diversified business model, strong balance sheet and disciplined execution should continue to lead to growing cash flow, earnings and financial flexibility, which strengthen our franchise and ultimately increase shareholder value.
With that, I will now turn the call to Isil.
Thank you, Elias. As a reminder, please limit yourself to 1 question and 1 follow-up. Operator, we are now ready to begin the Q&A portion of the call.
[Operator Instructions] Our first question is from Cave Montazeri at Deutsche Bank.
My first question is on base spread income. As it stands today, it's probably not unreasonable to think that the Fed has started cutting rates and could remain on hold throughout the year. With that in mind, how should we think about base spread income in the first half of 2025 versus the second half when we lapse the lagged impact of the 2024 rate cuts, which you previously mentioned, take about 2 quarters to earn in.
Yes. Thanks, Cave. First, what I would say is that across the board, the business conditions remain excellent. Our distribution platform is very strong and vibrant. And all of our businesses are supported by macro trends. So we expect our spread income as well as our other sources of income to grow over time, notwithstanding some of the short-term impacts of the rate reductions.
We provided our sensitivity to SOFR rates last quarter, and our results are consistent with that sensitivity. And let me unpack it a little bit. When the Fed cuts rates, right, it creates short-term headwinds in spread income and spreads as the floating rate assets reset. And this impact generally earns in over 2 quarters, like you said. Some resets are within 30 days, most are within 90 of the day of the cuts. So it does depend to a certain extent when the cuts occur how those earn in.
I'll also add, most of the effect is in our Individual Retirement segment. As these floating rate assets are used to align the ALM profile with our liabilities that are beyond their surrender charge period. And so we saw the sequential impact in the fourth quarter, which was around $30 million. And as we earlier stated, our Individual Retirement spreads also reflects a marginal single-digit spread compression as the new business cost of funds are lower than the in-force cost of funds. And of the 18 bps of sequential compression, most of it was due to resets.
So once the floater reset cycle earns through, we do expect spread income to continue to grow because the new business conditions, including margins, are very supportive. And we expect to continue above all to enjoy positive net flows in the general account, further supporting our future growth and spread income and are confident in achieving our financial objectives and growing, not only the spread income, but our other sources of income and increasing our earnings per share over time.
And my follow-up is on the EPS growth target of 10% to 15% that you mentioned. What is the baseline EPS we should be using for 2024 for that? Like should we just use the 3.1x notable items and normalizing for VII?
Cave, it's Elias. Yes, I would go with the reported EPS going forward. As we've -- Kevin said in his comments, we expect to grow it, on average, 10% to 15% per year, '25 will be on the lighter end of that, given the earn in of the actions the Fed has already taken into consideration.
But I repeat, we've got 4 levers on how we're going to deliver the growth in EPS, whether it's organic growth, balance sheet optimization, continued focus on expenses and capital management. So those levers that brought us to here have more upside and we're confident in our ability to continue to grow EPS going forward.
Our next question comes from Alex Scott at Barclays.
First one I have is on the cash flow. I think you mentioned that you expect some growth off of the subsidiary dividends and the holdco that you had in '24 as we look into '25. And so I just wondered if you could help us think through the components of that. I mean the spread compression is a little bit of a headwind, but what are some of the things that are benefiting cash flow, whether it's Bermuda or other things?
Alex, it's Elias. So there's different variables that contribute to the cash generation in the insurance companies. And part of it is the diversified revenue sources we have, and that contributed to stability in the cash flow generation over time. We are also focused on expenses and reducing expenses in the business units. And then what Bermuda does, it's another tool in our capital management toolkit that gives us financial flexibility to make sure we deliver on our capital management objectives while creating capacity to grow the business and allow us to grow earnings and cash flows over time.
So the combination of those things gives us the confidence in increasing the dividends from the insurance companies while continuing to grow the business.
That's helpful. And just on the pillar that you kind of talked about with the capital optimization. Now that Bermuda, I don't want to say, is fully behind you, but it sounds like a lot of the work has been done there at this point. I mean where does your focus turn in terms of what's next on work that's being done there? Are you still exploring potential third-party reinsurance? Are there other things that you can do internally? I'd just be interested in any color there.
Yes. Thanks. I mean there's a couple of different levers relative to balance sheet optimization. We've done a lot of work in the asset portfolio, but there continues to be some additional opportunities there. As you've pointed out, I mean reinsurance is another lever that we have available. We have been working a lot on Bermuda as an extension of our capital management toolkit. In the midyear, we started seeding the fixed annuity and index annuity new business. And towards the end of the year. We added our first in-force transaction as well as new business on structured settlements and term life. But we still have further opportunities, both for in-force and new business sessions, and we continue to evaluate opportunities there.
But while we focused on Bermuda in 2024, we continue to evaluate potential external transactions, some discussions further along than others, and we continue to evaluate all options in the interest of driving shareholder value.
And then the other thing I would say on balance sheet is we do expect VII to recover to our long-term expectations of 8% to 9% this year, albeit the back half of the year is going to be stronger than the first half based on our expectations.
The next question is from Ryan Krueger at KBW.
I wanted to come back to the EPS growth because I think I just want to make sure we get 2025 on the right basis with your expectations. So I guess, given the spread pressures that I know are near term in nature, but I guess to me, it would seem logical that your EPS growth would be less than 10% in 2025. I know you said lighter end, but I don't want to get in a situation where we all assume 10% and then consensus is too high. So can you give any more clarification on how you're thinking about this?
Yes. Ryan. And I want to clarify also my response to Cave. We're looking at what's our core EPS. That's what we're targeting for growth. Right now, given the current outlook, we do think it will -- EPS will grow, it will be less than 10%. There are a number of dynamics. As you mentioned, spread income, but that's only like 50% of our revenue sources. There's a short-term impact in the front part of the year. But if you look at our fee income and the underwriting margins we have, we do see favorable conditions for those to grow in 2025. And as Kevin said, around VII, we are -- based on the current outlook, we do expect it to recover close to our long-term expectations and we're focused on reducing expenses and we're also focused on returning capital to shareholders. So collectively, that will grow EPS, but we do think it could be lighter than 10%.
Sorry to belabor this, but the starting point. I think you reported [ $4.83 ] Is that -- are we -- should we be normalizing for both notable items and lower VII or what's the right basis?
No, that would be the right basis. So adjust the VII performance as well as adjust for notable items.
Okay. And then just on -- can you expand on the potential for further expense efficiencies? I think -- and I guess, how meaningful you're thinking that could be over the next several years?
Yes. I mean first of all, what I'd say is that we have the other $50 million on Corebridge Forward that's going to earn in throughout the course of the year. And our current focus is on the -- our data, our actuarial and finance and applying digitization and automation capabilities across the business. On a same-store basis, we are looking to reduce our unit costs over time. We don't have any particular targets to announce at this point relative to expenses, but we continue to work through our opportunities and plans and do expect to increase our expense efficiencies over time.
The next question is from Elyse Greenspan at Wells Fargo.
My first question was on Individual Retirement. You guys highlighted that surrender rates would increase over the coming year. Can you just give a little bit more color about expectations there for Q1, but even throughout 2025.
Yes. Thanks, Elyse. Look, from our experience, surrender rates reflect where market interest rates and credit spreads are at any given time. Also pointing out that these are the same factors that reflect in new business volumes. And we have not seen anything in the last several cycles of surrender rates that were outside of our expectations in this respect. And we do expect that surrender rates going forward will continue to reflect that. Certainly in the fourth quarter, based on the conditions there, we saw lower surrender rates than we have experienced in some time.
What I will point out is there's a natural growth in our portfolio. We've consistently been growing indexed annuities for basically a decade. And the last couple of years, fixed annuity growth has been several -- has been strong for several years. So that will impact the volume of product exiting the surrender charge protection, but not necessarily the surrender rates. Those surrender rates are going to reflect where the new business conditions are.
And what I'd say right now is that the current environment and expectations are that new business conditions are very supportive. The margins are attractive. And we continue to expect our general accounts and spread income will grow over time. And also, I'll point out, spread income is just one of our sources of income. And we're also expanding our portfolio, such as most recently with the launch of our RILA product, which is off to a great start.
So the surrender rates will reflect where market conditions are, but our portfolio has been growing over time. So the amount of surrender -- on a product exiting surrender charge protection, that's what's expected to increase over time.
And then my second question on capital return. Is the baseline expectation just that you'll be within the 60% to 65% target in all of the 4 quarters of the year? And then given that we're almost done with Corebridge Forward, I'm assuming, should we just think about holdco cash, obviously, adjust for the $1 billion of debt, think about what you want to have on hand as kind of annual needs, thinking about interest and dividend? Or is there anything else we need to consider?
No. Elyse, it's Elias. So with respect to your -- the first part of your question on capital return, the baseline right now is 60% to 65% over the course of the year. And as you see, we've been, other than before deploying the U.K. proceeds, have been pretty consistent over the course of '24.
In terms of the holdco liquidity, we ended the year at $2.2 billion. We had about $1 billion in -- we prefunded for 2025. Putting that aside, we were still in a very strong position. And our philosophy is to hold cash equal to the parent needs for the next year, which includes debt service as well as parent expenses, which are coming down as well as for the dividend, which is different than what others might do. We prefund the full year dividend from it.
So the philosophy around how much liquidity we need to hold at the parent hasn't changed. That number has come down as we worked through all the onetime expenses that the parent was covering.
Our next question is from Joel Hurwitz at Dowling & Partners.
So the Life results were strong in the quarter and for the full year. I guess, can you guys just mention how favorable mortality was both in Q4 and for '24? Just trying to get a better sense of how sustainable these levels of earnings are in Life.
Joe, it's Elias. So listen, we've been working on improving the performance of our Life business. And that's kind of coming through our numbers. Our run rate is -- we think is in the [ $1.10 to $1.20 ] range on a quarterly basis on average for the Life business, with the exception of the first quarter where seasonally, we expect mortality to be higher by about $15 million, maybe $20 million. But I think the new run rate for us is you should be thinking around [ $1.10 to $1.20 ] a quarter other than the first quarter for the Life business.
Great. That's helpful. And then just shifting to the new RILA product. Can you just provide us how much that contributed to sales in the fourth quarter? And any color on expectations for sales contribution in 2025?
Yes. Thanks, Joel. So we've observed RILA is an increasingly important product in the market as seen in the fourth quarter where looks like sales for the first time exceeded traditional variable annuity sales in the -- across the market. In our case, we're very pleased with the RILA launch so far. I would point out that some of the largest states have yet to come online, and some of our largest distribution partners won't come online until first quarter or later in the year. But the response has been excellent by year-end. We had already received over $90 million worth of applications.
And so we came into the first quarter, seeing strong momentum as some of our larger distribution partners are now coming online. And so we feel this is a very good start, and we are looking forward to continuing to report our progress. We do expect over time that we will attain our sort of national market share in this product alongside our other products.
Our next question is from Suneet Kamath at Jefferies.
On the surrenders in Individual Retirement, is there any way that you can help us size what you expect might happen in 2025? And are the spreads on that business pretty consistent with the overall segment? Or are they different one way or the other?
So yes. Look, as I had pointed out, we do believe that the surrenders are going to reflect what market conditions are at a given time and interest rates and credit spreads. So at this point in time, we're not really projecting any dramatic difference from the conditions that you would read into the forward curve.
In terms of the increase in volumes. It's an incremental increase in volumes, but that also, we expect, is going to reflect the increase in the overall earnings in the portfolio. So it's impossible to predict what ultimate conditions will be, but we're comfortable with the fact that we're going to be able to continue to grow the general account and grow spread earnings over time once we get through the impact of the rate resets.
Yes. Suneet. If you look at 2024, we had higher surrenders, but we had strong sales and the net influence to the general account was about $9 billion -- sorry, $7 billion for the year, and we grew the general account in Individual Retirement by 9%.
Looking into 2025, the fundamentals in the business and Individual Retirement, as Kevin said, are very strong. So even though we may have higher surrenders, we're expecting strong inflows into the general account for 2025. We expect to grow spread income in the business. Once we're past earning in the 100 basis points rate cut, we expect spread income to grow. The fundamentals in that business are very strong, whether you want to look at market conditions, you want to look at the demographic conditions. And this fourth quarter, had it not been for the rate cuts, spread income would have grown sequentially.
So we're bullish on the business. It's an important source of business for us, and we expect it to be continuing to grow and delivering strong results going forward.
Got it. Okay. And then on the fixed annuities. It looked like, on a sequential basis, your sales were down a decent amount more than the industry. Just wondering if that -- if there was anything unusual going on there, maybe more of a focus on RILA or something else from a pricing perspective? And would you expect fixed annuity sales to grow in '25 relative to '24?
Yes. Thanks, Suneet. I mean we price very dynamically relative to where market conditions are. Normally, we reprice our fixed annuity business on a weekly basis. And there are micro cycles through the course of the quarter that reflect where our pricing may be relative to others, often when rates are increasing certain parts of the curve. We can price ahead of that. And likewise, when rates are coming down, we can price ahead of that. And that's, I think, what you saw in the fourth quarter.
The conditions -- our strategy is to focus the capital where the risk-adjusted returns are the most attractive at a given point in time. And so we saw very strong outcomes in the fixed index annuity in the first quarter. So it's not a matter of anything other than reflective of where we believe the competitive pricing was. We see a very robust environment for fixed annuity still, and it continues to be a very valuable product. There's a whole new range of advisers that have discovered the importance of fixed income like products as part of a long-term retirement savings, asset allocation, and we see that trend continue. And as I pointed out and as Elias reinforced, new business conditions right now appear excellent. So we expect momentum coming through the year, and we do expect that. We'll continue to focus our capital where the risk-adjusted returns are the most attractive.
The next question is from Jack Matten at BMO.
Just a follow-up on the base spreads. In Individual Retirement, they fell 18 basis points sequentially. And I think sensitivity you gave last quarter was something maybe closer to 10 basis points given the number of rate cuts so far. I guess the remainder, was that just from the new business cost of funds impact that you mentioned or anything else you'd call out? How would you expect base spreads to trend moving forward, excluding the impact of short-term rates?
Jack, it's Elias. So the 3 basis point impact from rate cuts we gave on the last quarter was for the full company. So with the floating rate exposure is concentrated in Individual Retirement, you've got to multiply that by 2, just given the denominator is almost half the total company denominator. So you've had 100 basis points worth of cuts, let's ignore December. If you just go through November, that would imply 18 basis points reduction in base yields in Individual Retirement if all 3 cuts fully earned in.
Now they didn't all fully earn in given timing and the timing of resets, but what we're seeing is the majority of the 18 basis point compression in the base spreads in Individual Retirement is coming from the impact of the rate cuts as well as the impact of us reducing our floating rate exposure. And if you look at the investment portfolio, we reduced our floating rate exposure from about 8% to 6% in the portfolio at the end of December through a combination of additional hedging or just a natural runoff of the book from it. So the margin compression was small and kind of in line with our expectation when you think in terms of base spreads this quarter.
That's helpful. And just a follow-up on capital generation. Is the 5% to 10% growth rate a good proxy for kind of the longer run growth that you would expect? I guess, for 2025 is the outlook at all impacted by sales levels? Like if sales moderated this year, would that potentially drive near-term cash flows with [ less new ] business trend?
So listen, there's different variables that influence how much capital we generate. Sales, the profitability of the business, all those are variables. We're very disciplined in how we manage our balance sheet and how we allocate capital, giving priority to maintaining a strong balance sheet and delivering on our capital management objectives. And we look at the capacity to support new business in there, which is important to continue investing in the company to grow earnings and cash flow over time. As a baseline for the next couple of years, 5% to 10% increase in the annual dividend is kind of a fair assumption right now.
The next question is from John Barnidge at Piper Sandler.
Looks like institutional markets business has had some good funding agreement distribution and pension risk transfer continues to have some volume. In your pipeline commentary, seemed upbeat on that. So can you talk about how the impact of some of the industry litigation is impacting your opportunity or the volumes in the market?
Yes. Thanks, John. I'm not going to comment a lot about it. I think that the insurance industry is very well positioned with the mechanisms that it has to protect policyholders. Fundamentally, some of these lawsuits seem to be challenging. That element of the regulatory mechanism of the insurance industry. it's -- we haven't seen any impact whatsoever relative to the pipeline and the willingness of plan sponsors to transact.
As you pointed out, we have, since the time of the IPO, committed to being a more regular GIC issuer, and we expect to continually incrementally grow our GIC and our FABN portfolio. And we continue to be disciplined but optimistic about our pension risk transfer business, both in the U.S. and the U.K. where the pipelines are very strong, the conditions remain supportive and clients appear prepared to transact.
My follow-up question stick with Institutional Markets. Do you view ASR capital regime change in Japan as an opportunity for Corebridge to participate in?
Well, it's a significant development for the market there. And if you look at other markets that have introduced similar solvency regime, that certainly has created opportunities. And we do believe that there are opportunities that we can explore. Our Institutional Markets business is in a good position to engineer and risk manage large transactions and expanding our position as a reinsurer beyond the U.K. where we've focused on the pension risk transfer market is certainly an opportunity that we're exploring.
Our next question is from Tom Gallagher at Evercore ISI.
The elevated expense in Individual Retirement on DAC amortization and nondeferrable insurance commissions. Can you talk a little bit about what's happening there? And do you expect this sort of elevated level to continue into '25?
Yes. Tom, it's Elias. So the commission one is a good expense. It's because we're growing the business. And so that should be viewed as sort of a run rate going forward. And on the DAC piece, it's a combination of tied to volume as well as the sensitivity to rates with a significant rise in like long-term rates in the fourth quarter, there is an acceleration in the amortization on it. But none of these items have any impact on our ability to grow EPS or deliver 12% to 14% ROE or deliver 60% to 65% payout ratio.
I look at it, the growth component, that's a good thing. We're growing the business.
No, that makes sense. I guess, my follow-up is, can you quantify the FA and FIA blocks that are exiting surrender charge in '25? Can you tell us the amount? The AUM amount of those? And do you -- as those come off surrender, presumably they're low credit, lower crediting rate, do you try and aggressively defend those? Do you look to raise crediting rate to try? And do you have like an ongoing retention program? Or is it just you'll let them play out as they will?
Well, Tom, we've been in the fixed and index annuity business for a long time, consistently and managing the economics of new business versus crediting rates on the in-force is an extremely important part of our analysis and management of this business.
And actually, earlier in the interest rate cycle, we talked about this quite a bit. I mean we look at the economics of increasing crediting rates on the portfolio versus the attractiveness of relative new business. Even surrender rates, when they're 10% or 12% or 14%, to increase crediting rates, you're essentially paying the other 86% of the portfolio or 88% of the portfolio in order to protect 12% or 14% of it. And so -- and we do factor into the economics, what our crediting rate strategies are.
In terms of specifically retention type strategies, I mean we have to be cognizant of the fact that the advisers that we work with are focused on the best interest of their customers. And so it's really maintaining a competitive position on new business. And managing the liquidity necessary to support the surrenders is the management element of the behaviors that we're most focused on.
And then the size of those?
So listen, we're not providing kind of details on it. The dollar amounts will increase, but in time, what's more important is the net flows, and we expect the net flows in the business to be very strong for 2025. You saw what happened in '24. That was roughly $7 billion of net inflows, and we expect '25 to be another strong year and continue to grow our individual retirement business.
The next question is from Wes Carmichael at Autonomous Research.
On Group Retirement, you had a couple of lumpy outflows in the quarter. It seems like core flows, ex those, was relatively in line with your expectations. But are you aware of any more of those into 2025? I think you said nothing really in the first quarter, but anything longer term?
There's a fair time line between when we learn of large account decisions to consolidate or move to another provider. And we'll continue to provide a heads up when we have large accounts that we have learned, have made a decision that results in a surrender and an outflow for us.
What I would point out is that whilst we had some large surrenders and outflows in the fourth quarter, the bulk of those assets were group mutual fund assets, which have a lower immediate impact to earnings. And it's important to monitor the sort of spread-based versus fee-based assets, and that's why we provide that disclosure in the financial supplement. Not every dollar of outflows is equal. And we continue to grow our out of plan and advisory brokerage base in this business, and it continues to be a very attractive contributor to our portfolio over time.
Okay. Got you. And regarding the Blackstone relationship, can you just update us on how much Blackstone is currently managing in the general account? And any perspective on how you view the yield uplift net of expenses on that portfolio on a relative basis?
Yes. The Blackstone partnership is very productive, and the origination continues to be very attractive. It's helped support some of our new business sales and our new money rates. The book value at the end of the year is about $69 billion in assets. And in the third quarter, they originated just under $4.5 billion with a coupon of just under 6.6%.
This now concludes the Q&A session. So I will hand the floor back to Kevin for closing remarks..
Before we end the call, I want to welcome our new partner, Nippon Life. We look forward to working with Nippon in exploring how we may collaborate and learn from one another. I also want to take a moment to thank our many partners who helped us deliver another strong year. And finally, I would like to thank everyone at Corebridge. All of you work so hard to achieve our success, while at the same time, living out our larger purpose to make it possible for more people to take action in their financial lives.
Operator, you may end the call.
Thank you all for joining today's Corebridge's Financial Fourth Quarter 2024 Earnings Call. You may now disconnect.