Good morning everyone, and welcome to Corebridge Financial's earnings update for the third quarter of 2025. 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 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 not to 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 Kevin and Elias for their prepared remarks. Kevin?
Good morning everyone, and thank you for joining. I'll start this morning by providing some context around the announcement we made on Friday. As you have seen, our CFO, Elias Habayeb, will be leaving Corebridge in April to take a senior leadership position at a publicly listed company that we do not consider a competitor. Elias and I have worked together for many years, and I know he will be missed at Corebridge. We've engaged a leading executive search firm and have begun a search process. We are pleased that there will be a six-month transition period that will allow for Elias to oversee the completion and filing of 2025 financial statements and the finalization of the 2026 budget and business and operating plans while the search is underway.
I would also note that one of Elias's important contributions as CFO of Corebridge has been building a very strong finance team that I am confident will support the ongoing execution of our four strategic pillars and our trajectory for continued growth. I know that this search will be one of Marc Costantini's top priorities when he arrives next month, and I am confident that he and the board will select the right person for Corebridge's next chapter. We expect this to be a seamless transition. With that, let me turn to third quarter results. Corebridge delivered another quarter of solid performance, with our diversified businesses generating the highest sales since the IPO, even as we further strengthened our balance sheet and once again delivered both strong earnings and an attractive capital return to shareholders.
Our financial results as presented reflect our position after the previously announced variable annuity transaction with Venerable, which marks an important inflection point for Corebridge. Our company is now simpler, with a lower risk profile, higher quality of earnings, and greater growth potential. Corebridge has been working since the IPO to strengthen every element of our value proposition. Our diversified business model is founded on a broad spectrum of products and services, distribution channels, and market segments, delivering diversified sources of income that enable us to generate sustainable cash flows and perform through various market cycles. Across our businesses, we are committed to deploying capital where the risk-adjusted returns are the highest and customer demand is the greatest. While our spread income is now a larger percentage of the whole, our sources of spread income streams themselves are diversified. We have a high-quality investment portfolio and minimal legacy liabilities.
Our strong balance sheet provides us with financial flexibility to achieve our strategic objectives. We have maintained capital ratios of our insurance companies above their targets, and at $1.8 billion, including partial proceeds from the VA reinsurance transaction, we have more than ample liquidity at the parent. Finally, we continue to emphasize disciplined execution. The team at Corebridge has done an excellent job to date managing through a complex corporate separation, divesting our international businesses, launching our strategy in Bermuda, executing one of the largest VA reinsurance transactions to date, upgrading our technology and customer service capabilities, and meeting or exceeding every financial target we set at the time of the IPO. It is a very strong foundation for continued success and shareholder value creation. Turning to slide four, our results in the quarter once again demonstrate that we continue to execute on all four of our strategic pillars.
First, we delivered strong organic growth with total premiums and deposits of $12.3 billion. Reflecting ongoing strength in individual retirement. Sales of our RILA product were nearly $800 million in the third quarter and have topped $1.7 billion year to date. We are now the only company to have a top 10 ranking across all four major annuity product categories as measured by LIMRA. In October, we received regulatory approval to sell our RILA in New York State, one of the nation's largest annuity markets and one where we feel very well positioned, and we remain on track to launch by the end of the year. In addition to our individual businesses, we had very strong performance in institutional markets in both GICs and pension risk transfer transactions. Overall, general account net inflows were $1.4 billion. Up 27%. Supporting general account growth of 6% year-over-year.
Across all of our businesses, we remain disciplined in how we price new business, adjusting as market conditions evolve. For example, interest rates declined through the third quarter, prompting us to take rate actions to preserve margin. We generally respond quickly when conditions change, even at the risk of short-term production, and that discipline remains a hallmark of how we run the business. Our diversified business model gives us optionality to allocate capital to where it will earn the highest risk-adjusted returns. We are focused on growing earnings and being responsible with the capital that our shareholders have entrusted us with. Turning to our second pillar, we remain focused on optimizing our balance sheet and creating greater capital efficiency. The capital freed up by our transformative VA reinsurance transaction was significant, and as we've said before, we continue to explore additional opportunities that would be value accretive.
One example is expanding our Bermuda strategy, which is off to a great start with $18 billion of reserves seeded since inception. Third, we continue to focus on further improving our operating leverage, and we recently completed our voluntary early retirement program, which is creating capacity to invest in and upskill in key areas such as digital. By continuing to modernize our operations, we see ongoing opportunities to improve our customer and distribution partner experience, which is essential to growth and to further increase our operating leverage. Fourth and finally, we remain committed to active capital management. Year to date, we returned more than $1.4 billion to shareholders through buybacks and dividends. While our payout ratio over the period was 80%, reflecting the impact of the VA reinsurance transaction, our target payout ratio remains 60%-65%. Reflecting on the market, the macro environment remains attractive.
The need for people to take care of themselves financially by growing their assets and locking in secure retirement income is a powerful tailwind for our individual and group retirement businesses. In life insurance, the large protection gap continues to represent a significant opportunity in those areas of the market where our advantages can drive attractive returns. In institutional markets, pension plan funding levels remain very strong, and plan sponsors are resolute in their intention to divest these liabilities. Corebridge is well positioned to capitalize on those trends, and we'll do it with the same commitment to strong financial metrics that you've come to expect from us: a 12%-14% return on equity, an average 10%-15% annual EPS growth rate over time, and a 60%-65% payout ratio, all while maintaining the life fleet RBC ratio above target.
As I prepare to hand the reins over to Marc, I'm pleased to be doing so from a position of strength. Corebridge has market-leading businesses, a very strong balance sheet, and robust opportunities for continued profitable growth. That's why I believe Corebridge remains a compelling investment proposition. With that, I'll turn the call over to Elias.
Thank you, Kevin. I'll begin my comments today on slide five. Excluding VII and notable items, Corebridge reported third quarter adjusted pre-tax operating income of $678 million and operating earnings per share of $0.99. This quarter included one notable item that represented a charge of $98 million, resulting from the impact of our annual actuarial assumption update. At the total company level, the annual actuarial assumption update is expected to have a limited impact on the go-forward run rate earnings. The details by business are provided in the appendix to the earnings deck.
Annualized alternative investment returns this quarter were $0.11 per share below our long-term expectations, with outperformance in private equity partially offset by underperformance in hedge funds and real estate equity. Looking forward, we're beginning to see a pickup in M&A activity, which should benefit alternative investment returns. However, we're also seeing a continued lag in real estate equity performance. Accordingly, based on what we know today, we expect alternative investment returns for the fourth quarter will be below our long-term expectations of 8%-9%. Adjusting alternative investment returns to long-term expectations and notable items, we delivered run rate operating EPS of $1.21, which represents a 6% year-over-year increase and an adjusted run rate ROE of 12.9%, which is up 70 basis points versus the prior year. Moving to slide six, total sources of income increased approximately 1% year-over-year after excluding VII and notable items.
Despite the 100 basis points of Fed rate cuts in 2024. Spread income was down only 1%. As business growth paired with asset optimization action mitigated the headwinds. Fee income was up 7% year-over-year, primarily from favorable markets, while underwriting margins were essentially flat year-over-year. Turning to slide seven, I'll focus on our capital and liquidity positions. In the quarter, our insurance company distributions totaled more than $1.3 billion. Including approximately $700 million of proceeds from our VA reinsurance transaction. Capital return in the quarter was a strong $509 million. Including $381 million. Of share repurchases. Furthermore, since September 30th, we have begun deploying the proceeds from the VA reinsurance transactions and have returned over $370 million to shareholders. Our holding company liquidity remains robust at $1.8 billion. Well above our next 12-month needs, in large part due to undeployed proceeds from the transaction.
With our life fleet RBC ratio remaining above target and our recent VA reinsurance transaction generating significant distributable proceeds, you can expect to see elevated levels of share repurchases in the coming quarters, pursuant to the $2 billion increase to our share repurchase authorized by the board in June. Next, I'll briefly review a few highlights from each of our businesses, the details of which can be found in the appendix to our earnings presentation. As a reminder, results exclude the impact of VII and notable items where applicable. Additionally, while we remain focused on prudently managing our expenses, we did see a short-term increase across all segments resulting from higher compensation-related expenses consistent with our prior guidance, as well as a one-time medical expense accrual.
In individual retirement, core sources of income were flat year-over-year as the impact of Fed rate actions was partially offset by strong growth and asset optimization. We saw continued strength in new business. Index annuity sales were at an all-time high, and RILA sales continued to grow, reflecting strong customer demand and the benefit of our deep distribution network. Net flows were up 13% year-over-year, mostly driven by higher index annuity and RILA sales. Adjusted pre-tax operating income declined by 9% year-over-year. The biggest driver was higher DAC amortization and commission, reflecting several factors including growth in the business. Higher fee income and lower base spread income offset each other as a result of market movements over the past year. Group retirement results in the third quarter demonstrate the ongoing transition from a spread-based to a fee-based revenue stream.
Core sources of income grew 1% as fee income increased 4.5% year-over-year, while base spread income declined by 4%. Overall, fee income now accounts for approximately 60% of group retirement's core revenue. Adjusted pre-tax operating income increased 1% year-over-year as higher fee income offset lower base spread income. While assets under management and administrations were flat year-over-year, advisory and brokerage assets continued their strong growth and were up 9% year-over-year to a new record high. Premiums and deposits, excluding advisory and brokerage, were down 10% year-over-year, reflecting previous plan exits and lower out-of-plan fixed annuity sales. As we look ahead, we're making considerable investments in the business to upgrade the quality of our in-plan services and further build up our wealth management offerings, which should increase enrollments and rollover recaptures.
To that end, our advisor headcount is the highest it's been in two years, and our advisor productivity is up 10% year-over-year, both supporting our growth initiatives. We expect our growing number of financial advisors, as well as their increased productivity, to be a positive earnings driver for group retirement in the future. In our life insurance business, core sources of income were flat year-over-year. Adjusted pre-tax operating income was down 8% year-over-year, largely due to some one-time costs related to systems conversion and higher expenses mentioned earlier. Mortality continues to trend favorably, demonstrating strong underwriting on the block. Adjusting for one-time items, this quarter's life adjusted pre-tax operating income was $115 million in line with our previous guidance. We continue to believe this business will generate earnings of $110 million-$120 million per quarter, other than in the first quarter, which typically has higher mortality.
While new business sales were down 6% year-over-year, we grew our fully digital senior life products by 19%. In institutional markets, we had the strongest sales quarter since the IPO, with both PRT and GIC showing exceptional growth. This was the sixth consecutive quarter with GIC issuances in excess of $1 billion. The outlook for PRT transactions remains promising, both for the fourth quarter and longer term, as pension plans in the U.S. and the U.K. have continued appetite for de-risking, as plan funding levels remain very strong. That said, given the nature of PRT transactions, you can expect some continued variability in quarterly volumes. Total reserves grew by $8 billion, or 19%. Core sources of income were up 5% year-over-year, while adjusted pre-tax operating income was up 3%. Before I close, I wanted to provide a few thoughts on the state of the market and credit in particular.
Currently, the Fed has begun its easing cycle, so short rates are moving lower and the curve is steepening. With that, you have credit spreads at the tight end of the range, and defaults remain relatively low. In addition, there's been recent headlines about increasing signs of pressure in the broadly syndicated loan market. We believe these events are idiosyncratic, and we have negligible exposure to those names. The current market environment is factored into both our asset allocation and our asset and liability management strategy. We focus on liability origination and originate assets that are predominantly high quality and fixed rate to match those liabilities. Floating rate assets, along with derivatives, play a smaller and specific role in our duration management. Floaters can also offer incremental value and diversification.
Given the tightness in spreads, we prefer higher quality assets that provide collateralized cash flows with credit enhancement and/or covenants rather than lower quality unsecured or idiosyncratic risks. In the context of our broader investment portfolio, it remains resilient and well-positioned to manage through volatility. The portfolio is 95% investment grade and is highly diversified among asset class, industrial sectors, and geographies. In the third quarter, our portfolio continued to experience positive rating migration for bonds and commercial mortgages. We also have a deeply experienced credit team that operates in a highly rigorous and iterative underwriting process. With multiple levels of approvals and ongoing monitoring and proactive portfolio management. We underwrite through the cycles and focus on capital preservation and risk of loss. In terms of the broader balance sheet, we carry moderate leverage, a comfortable liquidity position, and access to the capital markets.
We regularly run various stress tests of our capital and liquidity positions and remain comfortably within our risk appetite. I also want to provide a reminder about our earnings trajectory over the next few quarters. We published a revised financial supplement that recaps Individual Retirement's VA earnings below the line going back to the first quarter of 2024. As we have said previously, we expect the VA reinsurance transaction to be accretive to the pre-recast EPS by the second half of 2026, once we complete the share repurchases funded by the proceeds from the transaction. Due to timing, EPS over the next few quarters will be lower than they would have been if we had deployed the proceeds on day one.
Additionally, similar to 2024, any Fed rate actions are expected to have a short-term impact on spread income, as we expect to mitigate the effects through growth in the business, asset optimization, and other management actions. Finally, as you know, this is our last earnings call with Kevin as CEO. I want to take this opportunity to thank Kevin for his friendship, guidance, and leadership. The value Corebridge has created for shareholders on his watch has been truly outstanding, and I'm deeply honored to have worked with him. With regard to my announcement, I have worked at Corebridge and AIG for over 20 years, and it's been very gratifying both on a personal and professional level. I'm pursuing an opportunity that I believe is the right next chapter for me. I can't disclose details at this time, but an announcement will be made in due course.
Thank you, Elias. As a reminder, please limit yourself to one question and one follow-up. Operator, we are now ready to begin the Q&A portion of the call.