Corebridge Financial's (CRBG) variable annuity, or VA, reinsurance deal with Venerable eliminated the company's fundamental downside risk of persistent VA outflows, UBS said in a note Friday.

The investment firm upgraded Corebridge to neutral from sell and increased its price target to $37 from $28.

"We favor lifecos completely exiting such businesses given benefits from reduced complexity and tail risk," UBS said, adding that Corebridge's shares are "fairly valued" after the VA reinsurance deal.

UBS said that by by reinsuring its entire $51 billion individual variable annuity business, CRBG monetized its "most complex" and "low-multiple business" for $2.1 billion of distributable proceeds.

However, after the proceeds are deployed, "free cash flow generation levels and/or multiple expansion" may prove challenging, UBS said.

Price: 34.34, Change: -0.23, Percent Change: -0.65