Corebridge Financial (NYSE:CRBG) released second-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below.
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Summary
Corebridge Financial Inc. reported strong financial performance in Q2 2026, with core income up 5% and a 16% increase in run-rate earnings per share year over year.
The company completed a successful shareholder vote for a merger with Equitable, highlighting future growth potential and strategic synergies.
In Q2, Corebridge returned $412 million to shareholders, including $300 million in share repurchases, maintaining a strong balance sheet with cash generation exceeding $400 million for 14 consecutive quarters.
Individual Retirement maintained a top-five provider status, with strong sales momentum in June, while Group Retirement is transitioning from a spread- to fee-based business.
Life Insurance saw robust underwriting results, driven by automated underwriting, and Institutional Markets issued $1.8 billion in GICs, indicating growth potential.
The company is actively preparing for the merger completion by year-end, with leadership structures and regulatory processes in place.
The company remains focused on improving customer experience and digital capabilities, with initiatives like AI agents in customer contact centers.
Investment portfolio management remains disciplined, with new money yields supporting net investment income growth, despite challenges in alternative investments.
The company reaffirmed its full-year guidance despite market volatility, with plans for $350 million in share repurchases in the second half of the year.
Full Transcript
OPERATOR
Hello everyone. Thank you for joining us and welcome to the Corebridge Financial Inc. second quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I would now like to hand the conference over to Ishl Mudirisla, Head of Investor and Rating Agency Relations. Please go ahead.
Ishl Mudirisla, Head of Investor and Rating Agency Relations
Good morning everyone and welcome to Corebridge Financial's earnings update for the second quarter of 2026. Joining me on the call are Mark Costantini, President and Chief Executive Officer, Chris Biliagi, our Interim Chief Financial Officer, and Lisa Longino, our Chief Investment Officer. We will begin with prepared remarks by Mark and Chris 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 the 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 like to now turn the call over to Mark and Chris for their prepared remarks. Mark,
Marc Costantini, President and Chief Executive Officer
Good morning and thanks for joining us. I'm delighted to be with you today. Following the successful shareholder vote approving the merger with Equitable, the shareholder support of this transaction is a powerful validation of the attractiveness of the combined company. We're more confident than ever about the future we're building together. Turning to the second quarter highlights, we delivered strong results consistent with our full year guidance.
Core sources of income were up 5% year over year while variable investment income came in below our long-term expectations. Our underlying fundamentals remain strong. Our run-rate earnings per share were up 16% year over year, consistent with guidance. Our adjusted return on equity excluding VII was up 90 basis points year over year to 10.9% and our cash generation remains strong. We've now generated cash in excess of $400 million for 14 consecutive quarters, showcasing the strength of our balance sheet and underlying businesses.
In the second quarter, we returned $412 million of capital to shareholders, including $300 million of share repurchases, for a year-to-date normalized payout ratio of 84%. Turning to Slide 4, our top-line performance was resilient. While total company sales were down year over year, sales increased sequentially by 13%. Furthermore, on a rolling 12-month basis, which adjusts for seasonal fluctuations and the lumpy nature of the pension risk transfer business, we saw total company sales grow by 4% year over year.
This is a testament to our product depth and commitment to margin integrity across cycles. Equally important, we excel at allocating capital efficiently. Of note, our breadth of distribution enables us to shift between products and businesses to where the risk-adjusted returns are most attractive. In Individual Retirement, we've been a top five provider for more than a decade and are the only insurer with a top 10 sales ranking across all annuity products.
We continue to prioritize pricing discipline given tighter competition. Conditions improved in the latter part of the quarter as yields rose and sales momentum resumed, making June the strongest sales month of the year. All else being equal, we expect steady sales and positive net flows for the rest of the year. In Group Retirement, our transition from a spread- to fee-based business is continuing in line with expectations. In the quarter, our wealth management assets rose to $20 billion, an 18% increase year over year.
We continue to see a $30 billion growth opportunity by further capturing IRA rollovers and consolidating household assets within our current customer base. As a result of our efforts to improve the customer experience, we are also starting to see an uptick in Group Retirement business wins. In our Life business, we've been a top-tier provider of term life for nearly a decade. In the quarter we delivered run-rate earnings above our typical guide, reflecting strong underwriting results.
Our sales continue to benefit from our platform that leverages automated underwriting for more than 80% of the new business. Turning to Institutional Markets, the GIC market has grown rapidly over the past few years, with Corebridge's reserves nearly doubling over the same time period. In the quarter, we issued $1.8 billion of GICs at attractive IRRs and we continue to see meaningful opportunities for the remainder of the year. Our GIC book represents 5% of our general account compared to 10% to 15% for major competitors, demonstrating ample room for additional growth.
In the PRT market, we still expect activity to be weighted in the back half of the year. Nothing in this market has changed. Pension plans remain overfunded, the appetite for de-risking solutions remains strong and we expect the double-digit reserve growth we've achieved since 2021 to continue. Turning to Slide 5. Since we announced the transaction, our conviction has only grown that the merged company will be uniquely positioned to deliver exceptional value.
Our industry is in the midst of significant growth opportunity. Annuity sales have grown from roughly $250 billion a year in 2021 to more than $450 billion in 2025. Despite this growth, new Corebridge research finds that only 28% of people are confident spending in retirement, with fears of running out of money being the top concern. By contrast, those with a decumulation plan, especially one that includes guaranteed lifetime income, are far more confident.
In short, many more Americans want and need our advice and solutions. Another powerful trend is the massive transfer of wealth between generations, with $100 trillion in assets that is expected to be transferred by mid-century, which will fuel growth in the wealth business. In addition, the life insurance protection gap remains significant with 100 million Americans expressing a need for coverage. The merger creates a company that is well positioned to capture this opportunity and drive profitable growth.
Starting out, the combined firm will have over 10 million customers. Given the tremendous financial needs we see, our aspiration is to significantly grow that number over time. We will have all the right attributes to succeed. Our scale will give us a lower cost of capital, greater efficiency, comprehensive customer solutions and the ability to invest more while attracting top talent. We'll have a large and formidable multi-channel distribution system to reach the broadest possible customer base.
Our integrated business model will capture the full value chain from manufacturing through distribution to asset management. And our commitment to sound financial principles means we'll write business at attractive margins and deliver consistent capital return. By 2027, the combined company is set to unlock a compelling financial performance with $5 billion of earnings, $4 billion in cash generation and a return on equity of over 15%. With $500 million cost synergies directly supporting these targets and a clear pathway to additional value through revenue synergies, we have a clear right to win.
We continue to make excellent progress toward closing the transaction. In addition to the successful shareholder vote, the leadership structure of the combined company continues to take shape. We have determined the first three levels of the organization and I'm confident we're building the right team to win. The Joint Integration and Transformation Office continues to coordinate all merger activity with the goal of ensuring operational excellence for the new company.
We are actively collaborating with key distribution partners to ensure a seamless transition and on day one we are well positioned to win with our customers. The regulatory review process is proceeding on pace. Federal antitrust review is complete, FINRA approval of the broker-dealer change in control is complete and all state and international regulatory filings have been submitted. We expect to announce the board of the new company in the near future and we still anticipate that the transaction will close by year end, allowing us to hit the ground running in 2027.
To win in our industry we need to have a differentiated customer value proposition, go to market with world-class distribution and be the easiest company to do business with. Putting the customer at the center of everything we do is a top-to-bottom commitment. Our Customer Council, sponsored by the Executive Leadership Team, is driving customer focus across a number of initiatives—everything from the frontline service experience and the technology enablement to our corporate culture and customer safeguards.
Our new Customer Champions Network, representing every business and function at Corebridge, is ensuring we bring the voice of the customer and our distribution partners to everything we do across every phase of the customer journey. We're committed to driving continuous improvement. In Group Retirement, our Plan Sponsor Net Promoter Score, a key customer service metric, rose 19 points year over year, but we still have more work to do. My goal for the Group Retirement business is top quartile service.
Digital remains a key focus area. For example, we recently launched AI agents in our Group Retirement customer contact center to provide a better call experience. This quickly reduced repeat calls and average handling times. In Life, we enhanced our digital service infrastructure and more broadly we're implementing a new business acquisition platform. Our goal is an industry-leading new business experience that increases fully digital submissions and speeds up suitability checks, with 50% of policies issued in 30 minutes or less.
Within Individual Retirement, our focus is on empowering financial advisors by removing friction from their day-to-day operations. Through our support of the Insured Retirement Institute's Digital First initiative, we are modernizing the tools advisors rely on while simultaneously refining our internal workflows to eliminate application errors and accelerate policy issuance. By streamlining these touch points, we enable advisors to dedicate more time to their clients and the growth of their practices, all while driving greater operational efficiency behind the scenes.
In closing, I want to express the strong commitment of the entire leadership team to exceptional value creation both now and in the future. Thank you again for your approval of the merger. I'm confident the combined company has the right to win and I can't wait for day one to get here. With that I'll turn the call over to Chris.
Chris
Thank you, Mark. Starting with Slide 6, performance in the second quarter was on track with the full-year guidance provided at the start of the year, highlighting diverse earnings and sustained growth across our businesses. We reported adjusted pretax operating income of $664 million and earnings per share of $1.12, driven by growth in base spread income and fee income. Second quarter results were impacted by underperformance for variable investment income excluding the impact of VII.
EPS increased by 14% year over year. Within VII, alternative investments underperformed, impacted by the market decline in software coupled with market volatility related to the resurgence of conflict in the Middle East and the broader macro and geopolitical environment. As we said earlier in the second quarter, we do not foresee this environment materially changing over the short term and expect VII returns to remain below target for the remainder of the year.
Adjusting for long-term alternative investment returns, we delivered a run-rate operating EPS of $1.35, representing a 16% increase year over year. Finally, adjusted ROE was 11.4%, or 13.8% on a run-rate basis within our 12% to 14% ROE targeted range excluding VII. This reflects a 90 basis point increase year over year, underscoring our commitment to consistent, profitable growth. Turning to Slide 7, core sources of income, which excludes VII, increased 5% year over year, illustrating our ability to grow across a variety of markets.
Within that, spread income increased by 4%, benefiting from asset repositioning and growth in the underlying business as we have consistently reported positive net flows. More notably, these earnings reflect the full earn-in of the 2025 Fed rate cuts and our reduced sensitivity to short-term interest rates. Fee income increased 15%, driven by growth in assets under management and administration and favorable market tailwinds. Lastly, underwriting margins decreased 1% year over year.
We continue to see positive underwriting results, though they were less favorable than the prior-year quarter. Echoing Mark's comments regarding the investments we are making to become the easiest company to do business with, we reported an increase in second-quarter general operating expenses in line with the guidance provided at the start of the year. Turning to Slide 8 and looking at our capital position, our balance sheet continues to be healthy and strong.
We ended the quarter with over $1.4 billion in holding company liquidity, supported by our insurance company distributions of $475 million of dividends in the quarter, and our liquidity exceeds the holding company's needs for the next 12 months. Capital returned to shareholders was $412 million in the quarter, excluding proceeds from the earlier VA reinsurance transaction. We maintained our payout target with a year-to-date payout ratio of 84%, which reflects the acceleration of share repurchases in the first half of the year.
Looking ahead, we are committed to approximately $350 million in share repurchases in the second half of the year. Lastly, our insurance companies remain well capitalized with capital ratios exceeding our targets. Next, I'll review a few highlights from each of our businesses, the details of which can be found in the appendix to our earnings presentation. Note that these results exclude the impact of variable investment income and notable items. Starting with Individual Retirement, sales were $3.8 billion and net flows remained positive, contributing to continued growth in AUMA.
While sales declined year over year and sequentially, I want to emphasize Mark's point earlier: we continue to prioritize margin integrity over volume. By adhering to our rigorous pricing hurdles, we have effectively pivoted our capital deployment toward higher-growth areas of our portfolio that offer superior risk-adjusted returns. As we look at the full year, we still expect spread compression to level off by the end of 2026 as older business continues to roll off, and we reaffirm our estimate for base spread income to be approximately $2.55 billion.
In addition, CSM increased 17% year over year, reflecting growth in the underlying business. Lastly, APTOI was flat year over year, reflecting increased spread and fee income offset by higher sales-related expenses, while APTOI increased 5% sequentially. Turning to Group Retirement, our results this quarter illustrate our broader strategy to grow capital-light earnings with the transition from spread-based products toward capital-light, fee-based business.
Reflecting that shift, fee income increased 15% year over year. Spreads increased sequentially, reflecting the benefit of asset repositioning, though they remain lower year over year due to general account outflows. In line with the demographic mix shift, AUMA continued to grow sequentially and year over year even with the net outflows for the quarter. Looking ahead, we do not expect any large plan surrenders for the remainder of the year. APTOI decreased 7% year over year, reflecting lower spread income and higher operating expenses, partially offset by growth in fee income.
We continue to be excited about the opportunities for Group Retirement. We believe our competitive advantage lies in our ability to serve as a lifelong partner to our customers as they transition their needs from in-plan to out-of-plan, ensuring we provide value at every stage of their retirement journey. Turning to Life Insurance, we generated $870 million in sales this quarter, an increase year over year and sequentially. APTOI declined 11% year over year.
Mortality and underwriting results were favorable, less so than the prior-year quarter. On a run-rate basis, APTOI was $122 million above the top end of our guide we provided at the start of the year. We remain confident in the steady cash flow and stability the segment provides for the broader portfolio. Institutional Markets remains a consistent growth engine. We continue to be attracted to the risk-adjusted returns, as evidenced by both underlying reserves and total earnings trending upwards.
Second-quarter sales were strong at $2.6 billion, illustrating our ability to efficiently allocate capital across our businesses. Sales included over $1.8 billion of GIC issuances, maintaining the consistent momentum we've seen and highlighting our ongoing commitment to the market. APTOI increased 36% year over year. This growth was underpinned by a 17% expansion in our reserves and a 12% increase in AUMA. Lastly, on pension risk transfer, sales in the space are inherently lumpy.
While we and the entire industry have seen lower activity in the market, we still anticipate an uptick when we move into the second half of 2026. Looking at our investment portfolio, we continue to manage our portfolio with discipline through a dynamic market environment while remaining proactive in identifying opportunities that support attractive risk-adjusted returns. The portfolio remains high quality with an average credit rating of A and 96% investment grade.
We also continue to see positive credit migration across both corporate bonds and securitized products, reinforcing the strength and resilience of the portfolio. New money yields remain above roll-off yields, which continues to support growth in net investment income. As I mentioned earlier, we were able to execute asset repositioning at higher yields, further enhancing the earnings of our investment earnings without taking on additional risk. Within private debt, the book remains 91% investment grade, and our private credit assets continue to perform in line with our expectations.
Overall, we remain comfortable with the position of our investment portfolio. It is well diversified, actively managed, and aligned with the nature and duration of our liabilities. In closing, our second-quarter results reflect the resilience and strategic discipline that define Corebridge Financial. We delivered solid performance in line with our expectations, supported by strong underlying fundamentals in our core businesses, and are well positioned to navigate the current environment.
We remain confident in our ability to generate earnings and deliver on our commitments to shareholders. We appreciate your continued trust and are excited about the path ahead. With that I will turn the call back to Eshel.
Ishl Mudirisla, Head of Investor and Rating Agency Relations
Thank you, Chris. As a reminder, please limit yourselves to one question and one follow-up. Operator, we are now ready to begin the Q&A portion of the call.
OPERATOR
We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one. Again, we ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Ryan Krueger with KBW.
Your line is open. Please go ahead.
Ryan Krueger, Analyst at KBW
Hey, thanks. Good morning. My first question was on retail annuities and the competitive dynamics. I was curious a little bit more on what you saw change during the quarter. I think you cited pretty competitive conditions earlier in the quarter that led to softer sales, but then a better June. So hoping to get a little bit more color on what you're seeing there.
Marc Costantini, President and Chief Executive Officer
Hey, good morning, Ryan. It's Mark here. Good to hear your voice. Thanks for your question. So, yeah, I would say as we were finishing up on Q1 and heading into Q2, we saw some additional competitive tension, I would say, in the simple designs. And as you know, and as we've mentioned before, we have a significant depth and breadth of distribution across multiple channels. In our view, and this is an important point here, we see ourselves first and foremost as judicious capital allocators.
And when I say distribution channels, I look at not only the retail and across all those distribution channels, but our Institutional Markets as well and the great business we have there. So, and we saw more opportunities going into Q2 on the Institutional Markets side and we took advantage of that. And, you know, we hold our risk-return kind of attributes and objectives very strongly and we manage very dynamically against those. And that's what you saw in Q2.
Now, as you mention, we saw the dynamic fluctuate over the quarter, and we ended the quarter, you know, in June being our strongest sales month on the retail side. And we entered July with some very good momentum, and we saw that momentum continue to July. So we expect, obviously, our retail sales to rebound in Q3. Having said so, we see, and we continue to see, very significant opportunities on the Institutional Markets side. So I think that, you know, capital allocation and the dynamic nature of our distribution is evidenced through these results and what we'll see the rest of the year.
So thank you.
Ryan Krueger, Analyst at KBW
Thanks. And then I had a question on Individual Retirement base spread income. You reiterated the full-year guidance despite some of the benefits from the opportunistic asset repositioning actions you took in the quarter. I mean, maybe it's splitting hairs, but just curious kind of why no upside to the original guidance given those actions, or maybe they were contemplated to begin with.
Chris
Hey Ryan, it's Chris. Thanks for the question. So I think the way that I would think about it, yes, we are reiterating the guidance of $2.55 billion. You know, while we did see some improvements in the base spread, as the book continues to roll off, we would still expect to see some compression in spreads over the next couple of quarters, which we would still expect to bottom out at the end of 2026. You know, so I think that's how you should think about it.
While there's some, you know, there's some positivity this quarter, there's still going to be natural roll-off in the book, which is going to have single digit
OPERATOR
Your next question comes from the line of Tom Gallagher with Evercore ISI. Your line is open. Please go.
Tom Gallagher, Analyst at Evercore ISI
Hey, first question, just a follow-up on institutional spread product, Mark, that you were highlighting. Is this really your growth there? Was that really a function of being more opportunistic at a time when retail was challenged, or do you see that as a bigger runway and growth opportunity in the coming quarters when you think about capacity and pricing and margin and that sort of thing?
Marc Costantini, President and Chief Executive Officer
Yeah. Tom, good morning. Great to hear your voice as well. So I would say that overall, you know, we see a lot of opportunity on the institutional market side and we see a lot of upside as we move forward. I think, as I mentioned in my remarks, you know, our funding agreement-backed business is like 5% or so of our balance sheet. If you look at the environment, you know, a lot of players hover more around 10 to 15%. I think so. So we have a lot of runway and upside there.
I think when you combine the balance sheets of ourselves and Equitable, I think you'll have even more, I would say, demand and appeal for that type of offering for us. So I do see some growth at attractive risk-return margins as we move forward. In addition to, you know, as Chris mentioned in his remarks, you know, at the back half of the year we see opportunities on the pension risk transfer side, and I would say we started in Q3 with some, I would say, tailwinds in both those businesses.
Again, I mentioned to Ryan that we have some tailwinds on the retail side as well going into Q3. So that's kind of my perspective.
Tom Gallagher, Analyst at Evercore ISI
Thanks. Thanks for that. My follow-up is just any update on how things are progressing with potential collaboration with Nippon Life on Japanese annuity products? Is that still super early, unclear, or is there any line of sight on anything tangible coming together there?
Marc Costantini, President and Chief Executive Officer
Yeah. Thanks, Tom. I would say that we continue to have very robust discussions with Nippon about co-manufacturing products for the local Japanese market. We and they feel that their economy and the demand for products that, you know, where we have significant expertise at manufacturing is growing in Japan, and it's not lost on Nippon that, you know, there's a vibrant opportunity there to their proprietary channel and to their third-party broker-dealer channel and bank channels.
So, you know, I guess the way I'll say it is we're probably in the, you know, third or fourth inning of those discussions, but, you know, they are moving in a good direction. But it's too early to tell, you know, when we kind of agree on whatever we could put together, and then obviously, like it is the case here in North America, you know, you need to file a product with the FSA, it needs to be developed and, you know, manufactured and, you know, start issuing it.
So there's a time lag there as well. But, you know, we are cautiously optimistic that there will be a lot of opportunity for us at Nippon, and they have wonderful brand and distribution there, and the collaboration is strong across both firms. So, you know, we are excited about the prospects as you mentioned there.
Tom Gallagher, Analyst at Evercore ISI
Okay, thank you.
OPERATOR
Your next question comes from the line of Sunit Kamath with Jefferies. Your line is open. Please go ahead.
Sunit Kamath, Analyst at Jefferies
Great, thanks. Wanted to start with annuities and the expense ratio. Just based on some of the work we've done, it looks like on a pro forma basis your expense ratio is going to be materially below some of your peers. So I wanted to sort of test that with you. And then relatedly, if that's true, I would assume one of the potential outcomes is, you know, in environments where things are a little bit irrational from a competitive perspective, that expense advantage should allow you to continue to grow and hit your returns.
So just want to test those two ideas out with you. Thanks.
Marc Costantini, President and Chief Executive Officer
Hey, Sunit, good morning, it's Marc. How are you? So, thanks for your question. You know, I would say as we, you know, announced the transaction — and you've heard, obviously, Robin and myself in particular talk about it a lot — we expect expense savings of 500 plus 100 million a year, you know, within two years of, obviously, the merger. So that speaks to, obviously, the expense efficiency. And, obviously, scale is a big part of the reason that, you know, this market remains attractive to us.
You need scale. There's a fixed cost to, you know, kind of digitize our business, implementing and deploying AI. And there's an obvious scale advantage to the expense ratio, as you're implicitly referring to here, in our business. And we do expect to see the benefit of that. But I would say it will span a number of dimensions from the efficiency of our capital use, the efficiency and the depth and breadth of our distribution, our ability to pivot products depending on where we see the opportunities and their client needs, the institutional market side that I just discussed with Tom here.
So I would say, and obviously on the origination side, the great partnership we'll have with AllianceBernstein, our own origination, and the great partnership we have with Blackstone and BlackRock, I think will give us, on the main, across all these dimensions, a very significant competitive presence. And that's why looking forward to the merger very much so. All of that, I would say, would factor into how we see the market.
Sunit Kamath, Analyst at Jefferies
Okay, that's helpful. And then I guess shifting gears to alternatives. It sounds like a lot of the other companies that have reported are guiding to a better sort of second half relative to the first half. And I think you're saying things will still be challenged in the second half. So is there something sort of unique about your portfolio versus others, or are you just being conservative there? Thanks.
Marc Costantini, President and Chief Executive Officer
Yeah. I'll mention one comment and I'll pass it to Lisa, our Chief Investment Officer, which will give you some perspective. But, you know, I would remind everybody that when you look at the concentration of alts on our balance sheet, it's like less than 3%. Right. And it's very thoughtfully, you know, to that level which, you know, lines up with, you know, our long-tail liabilities. And you can see a lot of the alts being deployed against our institutional markets and, more specifically, our pension risk transfer business, which has longer-tail liabilities — some of our life business, obviously.
And, you know, it's an economically attractive asset that fits those long-tail liabilities where otherwise there are no credit assets available. Right. So I think that's the frame we need to think about it. When you think about how we manage the portfolio, not to the specific question you have. I'll pass it to Lisa.
Lisa M. Longino CFA, Chief Investment Officer
Thanks, Marc. Good morning. You know, as Marc mentioned, we think about our long-term return, and so it's over the very long term and over multiple cycles. And, you know, our portfolio is primarily PE, but it's real estate equity in the form of funds and then there's residual hedge funds. And, you know, what you have seen in the past is our alt performance has been impacted by maybe real estate returns or hedge funds. But in this quarter, you know, the marks on our PE funds drove the underperformance.
And up until this time, PE has really been meeting our long-term expectations. And so what you're seeing is normally with our PE portfolio, it's very broad and diverse and we'll have weakness in one sector offset by strength in another. Unfortunately, in this past quarter the market was weaker all around. The large backlog of PE exits and existing investments have not been meaningfully reduced, so we're not getting the realizations that would, you know, generate gains to offset some of our marks.
We did guide lower and we think just continued in the market around, you know, AI valuations, geopolitical uncertainty — you know, that could impact returns going forward. Higher rates can certainly impact the mark-to-market on real estate funds. And although we think we could see positive returns in the second half, we are not going to hit, or do not expect to hit, our long-term expectations for this year in particular.
Sunit Kamath, Analyst at Jefferies
Okay, thanks.
OPERATOR
Your next question comes from the line of Joel Hurwitz with Dowling and Partners. Your line is open. Please go ahead.
Joel Hurwitz, Analyst at Dowling & Partners
Hey, good morning. Wanted to start on base spreads — have another one there. Can you just provide some more color on the actions that you took in the quarter to support the expansion? How much was repositioned, and do you see further similar opportunities in the back half of the year?
Lisa M. Longino CFA, Chief Investment Officer
So I'll take that. Hi Joel, it's Lisa Longino. Thanks for the question. You know, with our portfolio, as we, as Chris mentioned in his script, you know, this is a very high-quality, well-diversified portfolio and 96% of it is investment grade. The portfolio has remained resilient through a variety of cycles, but we do proactively manage the portfolio with a focus on our overall balance sheet. And regarding asset repositioning that we've done, it really entails assessing names or sectors we're less sanguine in, and we'll rotate into other sectors where we prefer the outlook or we see relative value opportunity.
So this is very proactive. And given the move in rates, this repositioning has allowed us to increase yield while maintaining our credit quality. I mean, so we feel pretty comfortable with it. It's something we continue to do. And so that really sums it up.
Joel Hurwitz, Analyst at Dowling & Partners
Got it. That's helpful. And then just wanted to touch on buyback expectations for the back half of the year. Chris, I think you said around 350 million in the second half, which will bring you back to your payout ratio target. But I guess just given strong capital and cash generation and where the stock's trading at, would you consider drawing down some of the excess to exceed your payout ratio for this year?
Chris
Yeah. Joel, Chris, thanks for the question. So, you know, we do have about $1.4 billion of capital at the hold — at the Holdco — that is in excess of our 12-month needs. But at this point we remain committed to, you know, approximately $350 million of share repurchases during the year in line with our pre-merger plans. You know, for 2026, that would mean we purchased about $1.9 billion share purchases. And if you look at 25 and 26, you know, we would have purchased over $4 billion of share repurchases.
So I think overall at this point we feel comfortable with our levels, and as we look to the combined company and the $4 billion of cash generation of the NewCo, I think we'll have an opportunity to revisit that as part of our investor day.
Joel Hurwitz, Analyst at Dowling & Partners
Sounds good. Thank you.
OPERATOR
Your next question comes from the line of Wes Carmichael with Wells Fargo. Your line is open. Please go ahead.
Wes Carmichael, Analyst at Wells Fargo
Hey, thank you. Good morning. Had a question. Equitable announced the divestiture of the company's employee benefits business. Sounds like maybe that was a little bit unique as the company was approached by The Hartford. But as you look at the portfolio post the VA transaction, are there any other subscale businesses you'd think about divesting? Any risk transfer you might see ahead of the merger or closely after?
Marc Costantini, President and Chief Executive Officer
Hey, good morning, Wes, it's Marc here. Thanks for the question. And yes, you know, that was a great transaction in my opinion and a wonderful one for Hartford and a wonderful One for actual and for the new Equitable as we move forward. And, you know, I think you will have heard from Mark and Robin there, obviously it's selling a subscale business but a wonderful platform that augments what Hartford is doing, so win-win on many dimensions. Now to your question, I would say that that was the only subscale operation when you looked at the combination. Everything else, I think we will have a leadership kind of position and an opportunity for growth and upside.
So the short answer to your question is no, we don't see any other businesses currently, activities that we see as having the same characteristics that led to this transaction. So that's my perspective.
Wes Carmichael, Analyst at Wells Fargo
No, thanks, Mark. Just switching gears in life insurance. You've seen some pretty good core results there in the quarter. But just taking a step back, how are you thinking about longer-term mortality trends in that business? It seems like mortality for the industry at least has been more favorable. So do you see that continuing and how are you thinking about that headed into the assumption review?
Marc Costantini, President and Chief Executive Officer
Yeah, thank you, Wes. That's a very good question. You know, one of the things, and I think I may have mentioned this to some of you over the six, seven months I've been here, when I dug into the balance sheet and the businesses, I saw mortality results being very favorable here versus expected for a number of quarters, which speaks very highly to the quality of the underwriting, the quality of business, the quality of the distribution. And that continues to be the case.
And we saw that continue in Q2 with some very strong mortality results. And you've seen, I think, in some pockets across the industry some very favorable mortality. And there's some impact, I think, of coming out of COVID and what that did, as well as some of these new drugs obviously that are affecting people's longevity. So all in all, we are bullish on the life business. And as well, in line with some of the comments I made before, I see no reason why our business should not be twice the size it is right now, given the distribution option we have and the attractive risk-return profile and the complementary nature of that liability versus everything else we're doing. And I'll mention as well that as we come together with Equitable, we'll have access to the VUL product. And I think we've mentioned there's a lot of revenue synergies and that's definitely going to be one, in terms of adopting that chassis into our distribution offices. So we see upside on the life side based on mortality and other dynamics in the market and demand obviously from Americans for protection.
OPERATOR
Thank you. Your next question comes from the line of Yaron Kanar with Dowling and Partners. Your line is open. Please go ahead.
Yaron Kanar, Analyst at Mizuho
Thank you. Actually, with Mizuho, you had mentioned that sales in the individual retirement business were getting a bit better in June. In which of the retirement products are you seeing that improvement? Has it come across the board? Are you still seeing more pressure in fixed annuities?
Marc Costantini, President and Chief Executive Officer
Yeah. Good morning, Yaron, it's Mark here. How are you? So I would say that the nice trends in sales we've seen heading into June and into Q3 are across the board. But, you know, we introduced some enhancements to our products and our features on our index annuity, we refined some of our living benefit offerings, and we introduced some additional indices and structures. So it's a complementary aspect of some new solutions for our distribution as well as some upside across a number of the product lines.
So I would say it's across the board and not one in particular. But again, I would say there's a lot of competitive activity in the simpler structures and we try to focus on some of the more sophisticated client solutions.
Yaron Kanar, Analyst at Mizuho
Thank you. And then on the rotation into some of the new assets that allowed you to get some better yields, can you maybe talk about the asset classes that you rotated in? Are they still the same classes? Namely, are you still in kind of corporate debt or are you moving more into private credit? Where were these opportunities showing up?
Lisa M. Longino CFA, Chief Investment Officer
I can answer that. Thanks for the question. So, in terms of what we sold, we really sold lower-yielding high-yield assets, some EM, and we actually sold some lower-yielding private assets that we have a secondary private trader on, and that shows liquidity actually in that asset class. And really what we rotated into was investment-grade — that was public assets, RMBS, and some private ABS. But over 50% of the purchases were in single-A or higher.
So, again, felt very good about incremental yield while maintaining, or in some cases improving, the credit quality.
Yaron Kanar, Analyst at Mizuho
Thanks so much.
OPERATOR
Your next question comes from the line of Tracy Benguicci with Wolf Research. Your line is open. Please go ahead.
Tracy Benguicci, Analyst at Wolfe Research
Thank you. Good morning. A question on adding 100 billion of AUM to AB through the Equitable merger over time. How does that stack up against the existing Blackstone mandate, which looks about 20 billion short of the 92.5 billion target by Q3 '27? To confirm if the base case is just to absorb the make-whole rather than reallocate internally managed assets to Blackstone, since forcing that mandate would actually skew the general account more heavily towards private credit.
Otherwise, if satisfying the Blackstone mandate takes priority, doesn't defeating that make-whole and hitting that mandate push out the revenue synergies from the incremental AB AUM?
Marc Costantini, President and Chief Executive Officer
Good morning, Tracy, it's Mark. How are you? So I'm going to try to deconstruct your comments or questions here. The first comment I will make is Blackstone is a great partner of ours. They originate very good assets at very attractive yield, and the fees they charge are more than made up by the overall yield and quality of the origination and how complementary it is to the rest of what we do, as is the case, by the way, for BlackRock and our own origination team, and what the new relationship with AllianceBernstein will do.
So I just want to say that. And it is true that we have a commitment to get to 92.5 billion by end of Q3. However, we look at the sourcing, we look at the nature of liabilities we write, we look at the need, and then we find the best origination to meet that need, irrespective of where the source is and how it comes to be. Whether we're 20 billion, 15 billion, or anything else short, it's a temporary kind of process. So if there's a make-whole to be made, it's going to be a temporary charge, if that's the case.
And we will get to 92 and a half given the size of the balance sheet and the growth we have across our business organically. Now, you asked about the hundred billion that is going to AllianceBernstein over time. That is going to be complementary to whatever Blackstone does. I think we mentioned that the combined entity will need origination of 80-plus billion a year. If you look at the six-to-seven-year duration on our products, that means that 15 or so percent turns over every year.
So you'll get some natural attrition on the current assets that will flow to AB. As we grow the business, we'll have origination and, yes, we will reposition some of the assets on our current balance sheet to AllianceBernstein, and we see a significant opportunity of partnering with AllianceBernstein and this great origination capability we have on a go-forward basis. And we'll be able to be very complementary to Blackstone, as I mentioned in my original comments here.
So thanks for your question.
Teresa, Analyst
Great. I have a question on the GIC market where you're pretty active. We saw reinsurers assume 500 million FABN as part of a risk transfer deal, and this is a more capital-light business. I could see the attraction by the counterparty. Can you see yourselves lending your higher rating that helps get a decent cost of funds and reinsuring that to a counterparty with maybe a lower rating and earn some fee from that? I'm just curious if we could see this type of market.
Marc Costantini, President and Chief Executive Officer
Yeah, thanks, Teresa. I think you're referring to a recent transaction that was announced and, obviously, best to ask them the details as to the structures on how it all came to be. But you're talking about, you know, is there a source of, you know, leveraging capital and capital deployment and capital allocation. And I would say that whether it's through structures such as you're saying or other structures, I would say that Corebridge Financial, Equitable, and the combined entity will be highly focused on capital allocation, as you saw in terms of our sales between the retail and institutional markets, but as well using various tools available to optimize the outcomes for all our stakeholders and all of you on the phone, obviously. So I won't point to exactly that structure, but I would say capital allocation and optimized capital allocation is something that we do.
Teresa, Analyst
Thank you.
OPERATOR
Your next question comes from the line of Pablo Sinjon from JP Morgan. Your line is open. Please go ahead.
Pablo Sinjon, Analyst at JP Morgan
Hi, good morning. First one, you had mentioned some of the product enhancements you implemented this quarter in retail annuities, but I was wondering if the asset repositioning was also meant to improve your competitive position in the market, or was that adjustment just more about portfolio and spread optimization?
Marc Costantini, President and Chief Executive Officer
So, Pablo, we kind of lost you at the end, but I think we got the gist of your question. It's Mark. So I would say that any action that Lisa spoke about tied to the prior questions, our in-force management — we have obviously a pricing matrix and a pricing approach that is very, I would say, robust between, you know, Lisa Alm and our liability folks on a weekly basis for all of our new business activities. And that's how we approach it. And then we optimize the portfolio, the balance sheet as we see the capital markets and the environment around us evolve.
Pablo Sinjon, Analyst at JP Morgan
Got it. That makes sense, Mark. And then second question, just the mortality — I wanted to flip it to the longevity and PRT side. Right. So I'm aware that the covered populations aren't exactly the same, but I was wondering if you're seeing some negative offset to the life insurance benefit as you look at your pension annuitants potentially living longer. Thank you.
Marc Costantini, President and Chief Executive Officer
Yeah, thank you very much. Question. Your question is, if we're seeing better mortality on the insurance side, are we seeing additional longevity on our PRT business? And I think you answered your own question when you say a very different population base, very different origination, and very different mortality tables used in both markets to price the business, which is reflective of the actual mortality in each of those markets.
Pablo Sinjon, Analyst at JP Morgan
Thank you.
OPERATOR
Your next question comes from the line of Joshua Shanker with Bank of America. Your line is open. Please go ahead.
Joshua Shanker, Analyst at Bank of America
Yeah, by the way, thank you for taking my question and good morning. There was a lot of talk about the opportunity in the back half of the year on the PRT market. I want to understand, are those transaction discussions currently underway, or do you have a high confidence that Corebridge will be the winner of those transactions? And are we in a new sort of era where PRT is a back-half-weighted sort of business for you guys?
Marc Costantini, President and Chief Executive Officer
Yeah. Thank you, Josh. It's Marc here. Appreciate that question. And I think you've seen some evidence for us that our PRT sales and activity are weighted to the back half. What I think is different in 2026 is that there's been lesser activity in the front half of the year than otherwise we would have seen, which, you know, enhances obviously the amount of activity we expect in the back half of the year. Now, specifically to Corebridge, you know, we target a certain case size and we target a certain, I would say, plan type that has both current and deferred kind of retirees.
That positions us well, tied to the prior discussion we just had about mortality, longevity, and expertise and underwriting there. And the pipeline for, you know, businesses like the PRT business, you know, takes four to six months to build by the time, you know, the plans that are very well funded, by the way, and obviously the interest rate levels are very attractive. So that's why we think there'll be robust activity in the back half. In combination with the pipeline we see and activity in the market and, you know, we do feel we can, you know, get the business that we target, given the value add we bring to some of those structures, which is why, you know, we said what we said about, you know, what we see for the balance of the year.
Joshua Shanker, Analyst at Bank of America
But just trying to— debating is occurring right now with you and a number of key PRT players.
Marc Costantini, President and Chief Executive Officer
Sorry, you kind of— we lost your question there. It didn't come in clear. Can you repeat it?
Joshua Shanker, Analyst at Bank of America
Yeah, I'm just trying to— right now there's a bidding process: who can execute this best for their customers. And are you and a number of PRT competitors in the bidding process right now, or is this already basically baked into the back half of the year?
Marc Costantini, President and Chief Executive Officer
Yeah, so I would say it's a combination of everything you're saying. There are processes at different levels of maturity and, you know, we have a sense of where we are in each of the processes and how we view our ability to be successful. Now time will tell whether what we're guiding here will happen, but we feel pretty good about our prospects in the second half of the year.
Joshua Shanker, Analyst at Bank of America
Thank you.
OPERATOR
Your next question comes from the line of Wilma Burdes with Raymond James. Your line is open. Please go ahead.
Wilma Burdes, Analyst at Raymond James
Hey, good morning. Life insurance sales were elevated this quarter. Is there anything in particular driving the increase that we can expect going forward for life sales? Thanks.
Marc Costantini, President and Chief Executive Officer
Yeah. Good morning, Wilma. Thank you for your question. I would say we are bullish on our life business. As I mentioned earlier, I expect and want our sales to double over the course of time. We feel we have great distribution opportunity and, you know, some of the things that have been holding us back over the last few years are tied to, you know, connectivity to our various distribution. You know, we've been obviously focused on the separation and now we're very much deploying our investment dollars to make sure that we make ourselves the easiest company to do business with and we make ourselves, obviously, very easy for our distribution partners to do business with. And we're seeing green shoots in our life tied to that, and I think that's where we see the growth and that's what's driving the growth of our business. And as I mentioned, there's obviously a need for protection across America. So there's an unmet need there that we'd like to get ahead of.
Wilma Burdes, Analyst at Raymond James
Thank you. And then going to kind of combine two questions. But pensions are well funded. Do you think that pushes some of the PRT deals into next year? And then I guess along those lines, I know you touched on it earlier, but maybe you can talk a little bit more about the opportunity to expand institutional business when you combine with Equitable. Thanks.
Marc Costantini, President and Chief Executive Officer
Thank you, Wilma. Yeah, so on the PRT side, I don't have much more to add than to say that we feel pretty good about the second half of the year, and we feel pretty good about that space in the ensuing years in 2027 plus. Then one of the implicit kind of questions or comments in this is, as we bring together the two balance sheets and, you know, our much stronger and bigger capital base and balance sheet, I think that will give us an opportunity to take bigger sizes of the PRT.
So when you think about revenue synergies and things we'll talk about more at Investor Day next year, I would say growing our institutional markets business across, obviously, the funding agreement side, but as well the PRT side and other services we offer, will be one of the revenue synergies of this merger, which then speaks to the second half of your question, which is, do we see more opportunity on the spread lending side of our institutional markets business?
And the answer is yes. You know, and as I mentioned in my remarks, you know, 5 or so percent of our balance sheet is tied to FABM kind of offerings, where that's a much greater percentage for some of our peers. So there's a lot of upside for the new Corebridge and the new Equitable as we move forward.
Wilma Burdes, Analyst at Raymond James
Thank you.
OPERATOR
There are no further questions at this time. Thank you all for attending. This concludes today's call, and you may now disconnect.
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