FLIAC Swings to Profit Amidst Strategic Reinsurance Deals

TL;DR

**FLIAC's Q3 profit rebound and strategic reinsurance moves signal a stronger financial footing, making it a cautious buy for long-term stability.**

AI Summary

Fortitude Life Insurance & Annuity Company (FLIAC) reported a net income of $19 million for the three months ended September 30, 2025, a significant turnaround from a net loss of $23 million in the same period of 2024. For the nine months ended September 30, 2025, net income was $26 million, down from $92 million in 2024. Total revenues for the three months ended September 30, 2025, decreased to $152 million from $459 million in 2024, primarily due to a net investment loss of $56 million compared to a gain of $234 million in 2024. However, total benefits and expenses also saw a substantial reduction, falling to $70 million from $483 million in the prior year's quarter. The company established a funding agreement backed notes (FABN) program in September 2025, with Fortitude Global Funding purchasing $500 million of funding agreements from FLIAC in October 2025. FLIAC also closed a reinsurance agreement in October 2025 to cede at least 85% of these funding agreement liabilities to a Bermuda-domiciled affiliate. Total assets increased to $30,182 million as of September 30, 2025, from $29,939 million at December 31, 2024, while total equity slightly decreased to $1,138 million from $1,149 million over the same period.

Why It Matters

FLIAC's return to profitability in Q3 2025, despite a significant drop in overall revenue, suggests effective cost management and strategic shifts. The establishment of the FABN program and subsequent reinsurance agreement with a Bermuda-domiciled affiliate indicates a proactive approach to capital management and risk transfer, potentially enhancing FLIAC's financial stability and competitive positioning in the life insurance and annuity market. Investors should note the impact of these reinsurance transactions on future earnings and risk exposure. For employees, a more stable financial outlook could mean greater job security, while customers might see continued product offerings backed by a more robust balance sheet. The broader market will observe how these capital and risk management strategies play out in a competitive landscape.

Risk Assessment

Risk Level: medium — The company's net investment losses of $56 million for the three months ended September 30, 2025, and $119 million for the nine months ended September 30, 2025, compared to gains in the prior year, indicate significant market risk exposure. Additionally, the 'Accumulated other comprehensive loss' increased to $(87) million as of September 30, 2025, from $(50) million at December 31, 2024, reflecting adverse changes in fair value not recognized in net income, which could impact future financial flexibility.

Analyst Insight

Investors should closely monitor the impact of FLIAC's new FABN program and reinsurance agreements on its long-term profitability and risk profile. While the Q3 profit is positive, the significant investment losses and declining total revenues warrant a cautious approach. Consider FLIAC for a long-term, stable portfolio, but be aware of potential volatility from market-sensitive investments and the ongoing economic environment.

Financial Highlights

debt To Equity

25.52

revenue

$152M

operating Margin

53.9%

total Assets

$30.18B

total Debt

$1.45B

net Income

$19M

eps

N/A

gross Margin

N/A

cash Position

$652M

revenue Growth

-66.9%

Revenue Breakdown

Key Numbers

• $19M — Net Income (Q3 2025) (Significant turnaround from a $23M net loss in Q3 2024.)
• $26M — Net Income (9 months 2025) (Decrease from $92M in the same period of 2024.)
• $152M — Total Revenues (Q3 2025) (Down from $459M in Q3 2024, primarily due to investment losses.)
• $56M — Net Investment Losses (Q3 2025) (Contrasts with $234M in investment gains in Q3 2024.)
• $70M — Total Benefits & Expenses (Q3 2025) (Substantial reduction from $483M in Q3 2024.)
• $30.18B — Total Assets (Sep 30, 2025) (Increased from $29.94B at Dec 31, 2024.)
• $1.14B — Total Equity (Sep 30, 2025) (Slight decrease from $1.15B at Dec 31, 2024.)
• $500M — Funding Agreements Issued (Oct 2025) (Part of the new FABN program, with 85% reinsured.)
• $3B — FABN Program Capacity (Board-authorized capacity for future funding agreements.)
• $(87)M — Accumulated Other Comprehensive Loss (Sep 30, 2025) (Increased from $(50)M at Dec 31, 2024, indicating adverse fair value changes.)

Key Players & Entities

• Fortitude Life Insurance & Annuity Company (company) — Registrant and wholly-owned subsidiary of Fortitude Group Holdings, LLC
• Fortitude Group Holdings, LLC (company) — Parent company owning all of FLIAC's Common Stock
• Fortitude Global Funding (company) — Special-purpose unaffiliated trust that offers FABNs to institutional investors
• $19 million (dollar_amount) — Net income for the three months ended September 30, 2025
• $23 million (dollar_amount) — Net loss for the three months ended September 30, 2024
• $26 million (dollar_amount) — Net income for the nine months ended September 30, 2025
• $92 million (dollar_amount) — Net income for the nine months ended September 30, 2024
• $56 million (dollar_amount) — Net investment losses for the three months ended September 30, 2025
• $500 million (dollar_amount) — Value of funding agreements purchased by Fortitude Global Funding from FLIAC in October 2025
• $3 billion (dollar_amount) — Board-authorized capacity under the FABN program

FAQ

Risk Factors

• Investment Performance Volatility [high — financial]: The company experienced a substantial net investment loss of $56 million in Q3 2025, a sharp contrast to the $234 million gain in Q3 2024. This volatility directly impacts net income and revenue, highlighting the sensitivity of FLIAC's financial results to market fluctuations.
• Funding Agreement Program Risks [medium — financial]: The establishment of a $500 million FABN program and subsequent reinsurance of 85% of liabilities to an offshore affiliate introduces complexity and potential counterparty risk. The financial health of the Bermuda affiliate and the terms of the reinsurance are critical.
• Accumulated Other Comprehensive Loss [medium — financial]: The Accumulated Other Comprehensive Loss (AOCL) increased to $(87) million as of September 30, 2025, from $(50) million at December 31, 2024. This indicates adverse fair value changes in investments or other equity components, impacting total equity.
• Regulatory Scrutiny of Reinsurance [medium — regulatory]: The use of reinsurance, particularly with offshore affiliates, can attract regulatory attention regarding capital adequacy, solvency, and risk transfer. Compliance with evolving insurance regulations in multiple jurisdictions is crucial.
• Leverage from Secured Borrowing [medium — financial]: Liabilities associated with secured borrowing arrangements increased to $1,451 million from $1,200 million. This increased leverage requires careful management to ensure adequate liquidity and debt servicing capacity.

Industry Context

The life insurance and annuity sector is characterized by intense competition, evolving regulatory landscapes, and sensitivity to interest rate movements and investment market performance. Companies like FLIAC focus on managing investment portfolios, product development, and operational efficiency to maintain profitability and solvency.

Regulatory Implications

FLIAC's use of offshore reinsurance and new funding agreement programs may attract increased regulatory scrutiny regarding capital adequacy and risk management. Compliance with solvency requirements and accounting standards for these complex transactions is paramount.

What Investors Should Do

1. Monitor investment performance closely.
2. Analyze the impact of the FABN program and reinsurance.
3. Assess the trend in Accumulated Other Comprehensive Loss (AOCL).
4. Evaluate expense management effectiveness.

Key Dates

• 2025-09-30: End of Q3 2025 — Reported net income of $19M, a turnaround from a $23M loss in Q3 2024. Total assets reached $30.18B, while equity was $1.14B.
• 2025-10-01: Funding Agreement Backed Notes (FABN) program established — Marks a new financing initiative for the company.
• 2025-10-01: Fortitude Global Funding purchases $500M in funding agreements — Initial transaction under the FABN program, providing capital.
• 2025-10-01: Reinsurance agreement closed — Cedes at least 85% of FABN liabilities to a Bermuda affiliate, reducing FLIAC's risk exposure.
• 2024-09-30: End of Q3 2024 — Reported a net loss of $23M and total revenues of $459M, with significant investment gains.
• 2024-12-31: End of Fiscal Year 2024 — Total assets were $29.94B and total equity was $1.15B.

Glossary

Funding Agreement Backed Notes (FABN)

A type of financial instrument where a company issues funding agreements, which are then backed by notes, often used for capital raising. (FLIAC established a new FABN program in September 2025, indicating a new source of funding and potential liabilities.)

Reinsurance

An insurance arrangement where one insurance company (the reinsurer) agrees to indemnify another insurance company (the ceding company) against all or part of the loss that the latter may sustain. (FLIAC reinsured 85% of its new funding agreement liabilities to a Bermuda affiliate, transferring risk and potentially impacting capital requirements.)

Accumulated Other Comprehensive Loss (AOCL)

A component of shareholders' equity that includes unrealized gains and losses on certain investments, foreign currency translation adjustments, and other items not included in net income. (FLIAC's AOCL increased to $(87)M, indicating negative fair value adjustments impacting equity.)

Separate account assets

Assets held in segregated accounts, typically for variable annuity or life insurance products, where the investment risk is borne by the policyholder. (These represent a significant portion of FLIAC's assets ($22.74B), but are generally offset by corresponding liabilities.)

Modified Coinsurance

A reinsurance agreement where the reinsurer shares in the premiums, investment income, and losses of the ceding company, but the ceding company retains the reserves. (FLIAC has a net modified coinsurance payable of $144M, indicating ongoing reinsurance arrangements.)

Year-Over-Year Comparison

Compared to the prior year's third quarter, FLIAC has achieved a significant turnaround in net income, moving from a $23 million loss to a $19 million profit. However, this was driven by a drastic reduction in benefits and expenses rather than revenue growth; total revenues plummeted by 66.9% to $152 million, primarily due to a $290 million swing in investment gains/losses. While total assets saw a modest increase to $30.18 billion, total equity slightly declined to $1.14 billion, with a notable increase in accumulated other comprehensive loss.

Key Financial Figures

• $100 — he registrant's Common Stock (par value $100) consisting of 100 voting shares and 24

Filing Documents

• fliac-20250930.htm (10-Q) — 3055KB
• a3q25exhibit311.htm (EX-31.1) — 10KB
• a3q25exhibit312.htm (EX-31.2) — 10KB
• a3q25exhibit321.htm (EX-32.1) — 4KB
• a3q25exhibit322.htm (EX-32.2) — 4KB
• 0000881453-25-000060.txt ( ) — 16175KB
• fliac-20250930.xsd (EX-101.SCH) — 43KB
• fliac-20250930_cal.xml (EX-101.CAL) — 69KB
• fliac-20250930_def.xml (EX-101.DEF) — 338KB
• fliac-20250930_lab.xml (EX-101.LAB) — 615KB
• fliac-20250930_pre.xml (EX-101.PRE) — 507KB
• fliac-20250930_htm.xml (XML) — 4819KB

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements: Unaudited Interim Consolidated Statements of Financial Position as of September 30, 2025 and December 31, 2024 5 Unaudited Interim Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2025 and 2024 6 Unaudited Interim Consolidated Statements of Equity for the three and nine months ended September 30, 2025 and 2024 7 Unaudited Interim Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 8 Notes to Unaudited Interim Consolidated Financial Statements 9 1. Business and Basis of Presentation 9 2. Significant Accounting Policies and Pronouncements 10 3. Segment Information 12 4. Fair Value of Assets and Liabilities 15 5. Investments 31 6. Derivatives, Hedging and Offsetting 34 7. Income Taxes 38 8. Equity 39 9. Commitments and Contingent Liabilities 39 10. Related Party Transactions 41 11. Separate Accounts 42 12. Credit and Liquidity Agreements 43

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 44

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 52

Controls and Procedures

Item 4. Controls and Procedures 53

- OTHER INFORMATION

PART II - OTHER INFORMATION 53

Legal Proceedings

Item 1. Legal Proceedings 53

Risk Factors

Item 1A. Risk Factors 53

Exhibits

Item 6. Exhibits 54

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS Certain of the statements included in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as "expects," "believes," "anticipates," "includes," "plans," "assumes," "estimates," "projects," "intends," "should," "will," "shall" or variations of such words are generally part of forward-looking statements. Forward-looking statements are made based on management's current expectations and beliefs concerning future developments and their potential effects upon Fortitude Life Insurance & Annuity Company (FLIAC). There can be no assurance that future developments affecting FLIAC will be those anticipated by management. These forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements, including, among others: (1) the ongoing impact of the uncertain and evolving economic environment on the global economy, financial markets and our business; (2) losses on investments or financial contracts due to deterioration in credit quality or value, or counterparty default; (3) losses on insurance products due to mortality experience or policyholder behavior experience that differs significantly from our expectations when we price our products; (4) changes in interest rates and equity prices that may (a) adversely impact the profitability of our products, the value of separate accounts supporting these products or the value of assets we manage, (b) result in losses on derivatives we use to hedge risk or increase collateral posting requirements and (c) limit opportunities to invest at appropriate returns; (5) guarantees within certain of our products which are market sensitive and may decrease our earnings or increase the volatil

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements Fortitude Life Insurance & Annuity Company Unaudited Interim Consolidated Statements of Financial Position (in millions, except share data) September 30, 2025 December 31, 2024 ASSETS Fixed maturity securities, at fair value $ 5,216 $ 5,022 Mortgage loans, at fair value 344 364 Short-term investments — 8 Other invested assets (includes $ 489 and $ 354 of assets measured at fair value at September 30, 2025 and December 31, 2024 , respectively) 503 395 Total investments 6,063 5,789 Cash and cash equivalents 652 563 Accrued investment income 58 58 Reinsurance recoverables, at fair value 159 163 Deposit asset, at fair value 314 364 Income taxes 96 76 Other assets (Receivables from parent and affiliates: September 30, 2025 - $ 50 ; December 31, 2024 - $ 10 ) 100 69 Separate account assets, at fair value 22,740 22,857 TOTAL ASSETS $ 30,182 $ 29,939 LIABILITIES AND EQUITY LIABILITIES Insurance liabilities, at fair value $ 4,447 $ 4,380 Net modified coinsurance payable, at fair value 144 145 Liabilities associated with secured borrowing arrangements 1,451 1,200 Other liabilities (Payables to parent and affiliates: September 30, 2025 - $ 5 ; December 31, 2024 - $ 4 ) 262 208 Separate account liabilities, at fair value 22,740 22,857 TOTAL LIABILITIES 29,044 28,790 COMMITMENTS AND CONTINGENT LIABILITIES (See Note 9) EQUITY Common stock, $ 100 par value; 25,000 shares authorized, issued and outstanding 3 3 Additional paid-in capital 1,714 1,714 Retained deficit ( 492 ) ( 518 ) Accumulated other comprehensive loss ( 87 ) ( 50 ) TOTAL EQUITY 1,138 1,149 TOTAL LIABILITIES AND EQUITY $ 30,182 $ 29,939 See Notes to Unaudited Interim Consolidated Financial Statements 5 Fortitude Life Insurance & Annuity Company Unaudited Interim Consolidated Statements of Operations and Comprehensive Income (Loss) (in millions) September 30 Three Months Ended Nine Months Ended 2025 2024 2025 2024 REVENUES Premi

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