F&G Annuities: the stock costs 47 cents per dollar of book, and the verdict is hold at $21.50

F&G's spring investor deck has a small chart of what its private equity and real asset funds returned each year since 2019, and the average printed under it is 12%. Take out 2021, when they made 37%, and the other six years average about 7%. Most of the argument about this stock lives in the gap between those two numbers.

At $21.50 on the November 3, 2026 close, F&G trades at 0.47 times its book value excluding unrealized bond losses, 31.4% below my Base value of $28.26. The Bear value is $19.50, 9.3% below the price, and the Bull value is $35.55, 65.3% above it. I assign no probabilities to the cases. The verdict is Hold, with new money waiting for $16.25 or less.

Valuation route: a fixed indexed annuity and life insurer, valued with a residual income model on book value excluding unrealized bond losses, where value depends on how far the return on equity sits from the cost of equity. The stock's own price-to-book history is the cross-check. Cash flow and EBITDA multiples do not apply to an insurer. Values are present fair-value estimates, not 12-month price targets.

What F&G is

F&G sells retirement savings products, mainly fixed indexed annuities through independent marketing organizations, banks and brokers, plus indexed life insurance, pension risk transfer deals and funding agreements for institutions. It collects the premiums, invests them with Blackstone as the main manager, and earns the spread between what the portfolio yields and what it credits to policyholders. Assets under management before reinsurance reached a record $74.7 billion in June, up 8% in a year.

The record is less useful than it looks. Retained assets, the part F&G keeps and earns a spread on, were $55.9 billion, up 1%, because a growing share of new business is passed to reinsurance partners for a fee. That shift is deliberate and needs less capital, but it means the headline growth figure and the earnings base no longer move together.

Fidelity National Financial owns about 70% of the shares after handing 12% to its own shareholders at the end of 2025. Chris Blunt, chief executive since 2019, retired on June 30, 2026. Conor Murphy, the former finance chief, took over, and Michael Bailey joined from Corebridge as finance chief in August.

The latest results

For the first half, adjusted net earnings were $195 million, after a $5 million one-off expense in March, and the reported adjusted return on equity over twelve months was 8.0%. That twelve-month figure still contains the strong second half of 2025. The first half of 2026 alone, annualized and with the preferred stock counted as converted, is about $417 million on $6.27 billion of equity, a 6.7% return (my arithmetic). The June quarter alone annualizes to less than 6%.

Which earnings figure to trust

• Reported net income is not the measure. It swings with the market value of derivatives, embedded options in the annuities and other items. The June quarter loss of $81 million came from $144 million of such swings. Over time it matters, but quarter to quarter it hides more than it shows.
• Adjusted net earnings are the company's measure. They remove those swings but keep the actual return on alternatives. I use them as the starting point and convert them to a return on equity.
• The equity base excludes unrealized bond losses. Accumulated other comprehensive loss, mostly from bonds bought before rates rose, was $1.66 billion, or $12.15 a share. The policy liabilities are not marked to market, and 97% of the bonds are investment grade, so I use book value without these losses, $45.92 a share. A forced sale would turn part of the loss real, which is a Bear risk.
• The alternatives drive the gap. Each percentage point of return on the $4.0 billion portfolio is about $32 million after tax, or 0.5 points of return on equity (my arithmetic at a 21% tax rate). The first half earned about 7%, against the 12% to 14% the company assumes.
• The yardstick moved. In January 2026 the company moved about $6 to $7 billion of loan-like assets out of the alternatives bucket and raised the expected return on what was left from 10% to 12% to 14%. Past shortfalls were restated on the new basis: $145 million in 2024, $216 million in 2025 and $93 million in the first half of 2026.

Capital, debt and shares

The preferred converts at $45 a share, the top of its range, because the stock is far below that level. That is dilutive by 4.2% in share count, but it brings in $250 million of capital already on the balance sheet, so book value per share barely moves. The $500 million due in 2028 is smaller than the undrawn credit line. Higher regulatory capital charges on collateralized loan obligations, pools of corporate loans, cost about 10 points of the capital ratio, according to the company.

On October 26, 2026 Moody's kept the A3 rating of the main insurer but changed the outlook to negative. The reason is the parent: Moody's gives one notch for Fidelity National's support and is no longer sure it deserves it, now that the parent has cut its stake. Moody's also flagged above-average investment risk in private structured securities and large reinsurance counterparty exposure. A ratio of risk-based capital below 400%, debt above 30% of capital or a return on capital below 4% would be downgrade triggers.

Primary valuation: residual income on book value

An insurer is worth its book value plus the present value of what it earns above its cost of equity, or minus what it earns below it. I start from $45.92 a share, project the return on equity for five years, carry the last year forward with 2.5% growth, and discount at 10.5%. Earnings not paid out stay in book value; I assume 65% of earnings goes to dividends and buybacks. The Base value is $28.26, or 0.62 times book.

• Why 7.5%: today's run rate is 6.7% with alternatives at about 7%. If they earn 9%, still well below the company's 12% to 14%, the return rises to about 7.6%. Fee income from reinsurance partners grows, but tighter spreads on new business offset part of it.
• Why 10.5%: a 10-year Treasury yield of about 4.4% plus 1.26 times a 5% equity premium gives 10.7%. I use 10.5%, which leans slightly generous, and show 11.5% in the grid.
• What the value is made of: book value $45.92, minus $5.80 for five years of earning below the cost of equity, minus $11.86 for the years after. The Base value is below book because F&G does not earn its cost of equity in any year of my Base. Two thirds of the discount to book comes from the years after 2031.
• Buybacks: the model treats buybacks as if they happened at book value. Buying at 0.47 times book is worth more than that, about $0.86 of book value per share for each $100 million spent, but the authorization had only about $12 to $15 million left after June. I leave the gain out of all cases.

Value per share by stable return on equity (rows) and cost of equity (columns), with 2.5% growth on today's book. This shortcut gives $28.70 at 7.5%, slightly above the five-year path because the path starts lower.

Rules of thumb from the model: each point of return on the alternatives is worth about $2.80 a share, half a point of return on equity about $2.75, $10 million a year of adjusted earnings about $0.88, and each $1 of book value lost to credit about $0.62.

Cross-check: the stock's own price-to-book history

A second model built on the same return on equity would only repeat the first, so the check is the market's own history. At six quarter ends from December 2024 to June 2026, F&G traded at 0.92, 0.73, 0.69, 0.68, 0.54 and 0.57 times book excluding unrealized losses (my arithmetic from market value and reported equity). The median of 0.68 times applied to $45.92 gives $31.40, 11% above my Base. Most of those quarters had a twelve-month return on equity of 8% to 10%, above today's run rate, so the history is a ceiling for the current earnings rather than a target.

There is no meaningful growth-adjusted multiple here. Reported earnings per share swing between profit and loss with market values, and adjusted earnings per share fell from $4.30 in 2024 to $3.64 in 2025, so a price to earnings to growth ratio has no stable denominator.

Valuation triangulation

• Primary (residual income, Base): $28.26. This is the central value.
• Cross-check (median price-to-book history): $31.40, 10.5% from the Base, below the 20% level that would need a closer look.
• Nearby assumptions (cost of equity 10% to 11%, long-run return 7.25% to 7.75%): $25.45 to $31.48.

I do not average the two. The history comes from a period of higher returns, and averaging would lift the Base on evidence that is weaker than the earnings themselves.

What is the market already pricing in?

The market is not pricing a disaster. It is pricing the June quarter as permanent: alternatives that earn about 6%, no recovery, and a company that never earns its cost of equity. That is a reasonable bet after three years of shortfalls, and it is also exactly why the stock would react to two good quarters.

Bear, base and bull scenarios

• Bear: a credit and private markets downturn. The alternatives lose 15% of their value ($3.47 a share after tax) and credit losses of 0.5% hit about $29 billion of the riskier assets ($0.84), so book falls by $4.30. After that the company earns 6.0%, with alternatives near 5% and spreads under pressure, and long-run growth is 2%.
• Base: as described above.
• Bull: alternatives reach the company's expected 12% to 14% and fee income keeps growing, so the return reaches 9.0% by 2029, with 3% long-run growth. Even then F&G earns less than 10.5%, which is why the Bull is still below book.

The cost of equity is 10.5% in all cases, so the same risk is not counted in both the earnings and the discount rate. The Bear is close to the price because the price already assumes weak earnings; what the Bear adds is a loss of capital on top.

How the buy price is set

Confidence is C, which carries a default margin of safety of 42.5%. I add nothing to it, because the risks above already sit in the scenarios. That gives a maximum buy price of $16.25, 42.5% below the Base.

With a cost of equity between 10% and 11% and a long-run return between 7.25% and 7.75%, the same margin gives buy prices from $14.64 to $18.10. The price of $21.50 is above all of them, so the decision does not depend on which one is right. The 52-week low is $18.75.

Total return over three years at today's price and today's price-to-book, on the Base path:

The first column is the return with no change in valuation, so it comes from the business, not from the market changing its mind. The buyback row needs a new authorization and enough statutory capital to fund it, neither of which I can confirm.

Dividend and buybacks

F&G pays $0.25 a quarter, $1.00 a year, a 4.65% yield at $21.50. It was raised by 14% in late 2025. At the first-half run rate of about $3.06 of adjusted earnings per share, the payout is about a third. The holding company also pays about $165 million of interest and $17 million of preferred dividends a year, and the cash for all of it comes from statutory dividends of the insurance subsidiaries, which the company does not report quarterly. In the first half it bought back 4.5 million shares at an average of $26.44, about 0.57 times book.

Reasons to own F&G

• The price is 0.47 times book excluding unrealized losses and assumes today's weak earnings forever, so even partial recovery in the alternatives adds value quickly, about $2.80 a share per point of return.
• The bond portfolio has held up: 97% investment grade, credit impairments of 6 basis points a year over five years and 2 in the first half of 2026.
• Core retail sales are growing while the company walks away from fixed-rate annuities that do not meet its return threshold, which is a sign of pricing discipline rather than chasing volume.
• Reinsurance partners and a sidecar take a growing share of new business for a fee, which needs less capital and should lift the return on equity over time.
• A 4.65% dividend covered about three times by current adjusted earnings, and buybacks done at about half of book.

What could go wrong?

• Alternatives. The $4.0 billion portfolio is 64% of equity and 73% private equity. If it keeps earning 6% to 7%, the return on equity stays near the price's assumption and the discount to book is justified.
• Parent support. Moody's put the rating on negative outlook over Fidelity National's falling stake. A downgrade would raise funding costs and could hurt sales through banks and brokers.
• Reinsurance counterparties. Recoverables are $20.9 billion, 3.3 times equity. Most are backed by assets F&G holds, but the exposure is large for a company this size.
• Credit. Private structured securities and loan pools are a large part of the portfolio. Losses have been low, but a recession would test them, as in the Bear.
• Rates and surrenders. A sharp rise in rates would deepen unrealized losses and tempt policyholders to move money. Most retail annuities carry surrender charges, which limits but does not remove this.
• Governance. Fidelity National controls the board and capital decisions, and the leadership changed in the middle of 2026.

Management execution

• Asset growth has been delivered: $74.7 billion before reinsurance, a record.
• Returns have not. The alternatives have missed the expected return every year since 2022, and the twelve-month adjusted return on equity fell from 8.8% to 8.0% in a year.
• The January 2026 redefinition of the alternatives raised the expected return at the same time as the results fell short of it, which makes the shortfall harder to compare with the past.
• Capital decisions have been sound lately: buybacks at about 0.57 times book, a capital ratio above target, and fixed-rate annuity sales cut when returns were too low. The 2025 share sale at $35 was below book value.
• Guidance is qualitative. Management gave no numbers for 2026 earnings, which leaves each quarter as the only test.

On my ten-point management check (two points each), F&G scores 10 of 20: strong on balance sheet discipline, buybacks and dividend coverage, weak on investment returns, earnings conversion and consistency of definitions.

Stock Analyza scorecard

The valuation score is 67.5 of 100.

On the insurance scorecard F&G scores 3 of 12, a standard company rather than a compounder: the return is below the cost of equity, adjusted earnings per share fell, and the retained book barely grows. Business quality and valuation are shown separately and are not averaged. A cheap stock with a weak return is a Hold, not a Buy.

Confidence score

The grade measures how well the model is identified, not the chance of a loss.

What I would watch from here

The September quarter report on November 5 should show four things for the Base to hold: adjusted earnings of at least $0.75 a share, alternatives back at 7% or more annualized, book value excluding unrealized losses of at least $46 a share, and a capital ratio still above 400% after the new loan fund charges. A new buyback authorization would also matter at this price.

The three most important thesis breakers

1. The alternatives keep earning about 6%, so the return on equity stays near 6% and the Base value falls toward $20.
2. A credit or private markets loss takes book value below $44, as in the Bear.
3. A downgrade after Fidelity National steps back further, raising funding costs and slowing sales.

Stress test and independent check

I recomputed every scenario value with a separate script. A dividend discount version of the same assumptions gives identical values to the cent, which checks the arithmetic of the book value roll-forward, not the forecasts.

The weakest point is the long-run return on equity, because each half point moves the value by about $2.75 and the main input is a portfolio that has missed its own target for years. The strongest bull argument is that the price assumes no recovery at all, and alternatives earning 9%, still well short of the company's 12% to 14%, are enough to reach the Base of $28.26. The strongest bear argument is that a company earning 6% to 7% on equity for three straight years is telling you what it earns, and the price is fair for that. The analysis uses figures to June 30, 2026, a day before the September quarter report, and the verdict will be revisited after it.

Final verdict: hold at $21.50

Book value is real, the bonds are fine and the dividend is covered. What is missing is a return on that book anywhere near what it costs to own it. Half of book is a fair price for an insurer that earns 6%; it becomes cheap only once the alternatives start earning what the company's own long-term assumption says they should.

Verdict: HOLD at $21.50, watchlist for new money. Base $28.26, 31.4% above the price, Bear $19.50, Bull $35.55, cross-check $31.40, Confidence C (15/25). Required margin of safety 42.5%, maximum buy price $16.25, range $14.64 to $18.10 under nearby assumptions.

New money buys only at or below $16.25. For an existing holder the original cost is irrelevant, and a Base value above the price supports holding with a 4.65% dividend; I would review a holding above the Base of about $28. The next test is the September quarter report on November 5, 2026.

Sources

Primary sources are F&G's second quarter 2026 results release (August 5, 2026), the first quarter 2026 quarterly filing, the second quarter filing and annual report for 2025, the spring 2026 investor update, earnings call transcripts for the fourth quarter of 2025 and the first and second quarters of 2026, the leadership change announcement (June 16, 2026) and Fidelity National's share distribution notice (December 2025).

The rating action is from Moody's announcement of October 26, 2026. The reference market price is $21.50, the November 3, 2026 NYSE close, and quarter-end market values come from market data accessed through Bigdata.com. The 10-year Treasury yield of about 4.4% is a mid-2026 level and an approximation.