UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 1, 2016
FIDELITY & GUARANTY LIFE
(Exact name of registrant as specified in its charter)
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Delaware | | 001-36227 | | 46-3489149 |
(State or other jurisdiction of incorporation) | | (Commission File Number) | | (IRS Employer Identification No.) |
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Two Ruan Center 601 Locust Street, 14th Floor Des Moines, IA
| | 50309 |
(Address of principal executive offices) | | (Zip Code) |
Registrant's telephone number, including area code: (800) 445-6758
Former name or former address, if changed since last report.
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Item 2.02. | Results of Operations and Financial Condition. |
The following information, including the Exhibit referenced in this Item 2.02, is being furnished pursuant to this Item 2.02 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
On August 2, 2016, Fidelity & Guaranty Life issued a press release announcing its results of operations for the quarter ended June 30, 2016. A copy of the press release is furnished as Exhibit 99.1 to this Report. In addition, Fidelity & Guaranty Life is including as Exhibit 99.2 to this report the related quarterly financial supplement.
Dividend Declaration and Announcement of Annual Shareholders Meeting Details
On August 1, 2016, the Company announced that its Board of Directors had declared a quarterly dividend of $0.065 per share. The dividend is payable on September 6, 2016 to the Company’s shareholders of record as of the close of business on August 22, 2016.
In addition, the Company announced that the board of directors had established August 8, 2016 as the record date for determining shareholders entitled to vote at the annual shareholders meeting, which will be held on Friday, September 30, 2016, at 10:00 a.m. Central Time at Two Ruan Center, 601 Locust Street, Des Moines, IA 50309.
A copy of the press release announcing these matters is furnished as Exhibit 99.3 to this Report.
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Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
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Exhibit No. | | Description |
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99.1 | | Earnings Release of Fidelity & Guaranty Life dated August 2, 2016 |
99.2 | | Financial Supplement of Fidelity & Guaranty Life dated August 2, 2016 |
99.3 | | Press Release of Fidelity & Guaranty Life dated August 1, 2016 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| FIDELITY & GUARANTY LIFE | |
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| /s/ Eric L. Marhoun | |
| Name: Eric L. Marhoun | |
| Title: Executive Vice President, General Counsel and Secretary | |
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Dated: August 2, 2016
Fidelity & Guaranty Life Reports Fiscal Third Quarter 2016 Results
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• | Reported net income was $10 million or $0.16 per diluted share for the third quarter |
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• | Adjusted operating income was $48 million or $0.82 per diluted share for the third quarter |
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• | Total annuity sales were $832 million; including fixed indexed annuity ("FIA") sales of $495 million |
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• | Indexed universal life ("IUL") sales increased 50% over prior year to $15 million |
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• | Average assets under management increased to $18.5 billion, up 5% over prior year |
DES MOINES, Iowa: August 2, 2016 -- Fidelity & Guaranty Life (NYSE: FGL), a leading provider of annuities and life insurance, today reported net income of $10 million or $0.16 per diluted common share for the fiscal third quarter of 2016 ended on June 30, 2016(1). The Company reported adjusted operating income of $48 million, or $0.82 per diluted share, compared to adjusted operating income of $25 million or $0.43 per diluted share, in the prior year period.
The table below reconciles after-tax reported net income to adjusted operating income ("AOI"). |
| | | | | | | | | | | | |
(In millions) | | Three months ended June 30, | | |
| | (Unaudited) | | |
Reconciliation from Net Income to AOI(2): | | 2016 | | 2015 | | Increase (decrease) |
Net income | | $ | 10 |
| | $ | 86 |
| | $ | (76 | ) |
Effect of investment (gains) losses, net of offsets | | 5 |
| | (35 | ) | | 40 |
|
Effect of change in FIA embedded derivative discount rate, net of offsets | | 28 |
| | (33 | ) | | 61 |
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Effect of change in fair value of reinsurance related embedded derivative, net of offsets | | 26 |
| | (25 | ) | | 51 |
|
Tax impact of adjusting items | | (21 | ) | | 32 |
| | (53 | ) |
Adjusted operating income | | $ | 48 |
| | $ | 25 |
| | $ | 23 |
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The current quarter included net favorable items of $13 million or $0.22 per diluted share. The prior year quarter included net unfavorable items of ($4) million or ($0.06) per diluted share. The table below details notable items in both periods.
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| Current Year Fiscal Quarter | | | |
| | - Favorable performance within the single premium immediate annuity product line ("SPIA") and other annuity reserve movements | | $4 million | |
| | - Net favorable adjustments related to lower deferred acquisition cost ("DAC") amortization, primarily due to equity market fluctuations | | $7 million | |
| | - Favorable net investment income from tender offers and bond prepayment income | | $2 million | |
| Prior Year Fiscal Quarter | | | |
| | - Unfavorable actual to expected mortality within single premium immediate annuity product line | | ($2) million | |
| | - Higher expense related to legacy incentive compensation plans & merger transaction costs | | ($2) million | |
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"Despite a challenging and volatile environment, we had a great quarter and delivered nice increases in adjusted operating income, assets under management and net investment income," said Chris Littlefield, President and CEO of FGL. "Our FIA sales increased 18% over last quarter while exceeding our targeted returns, and we continue to generate significant growth in our IUL sales. We continue to work closely with Anbang and are engaged with regulators to secure required approvals to complete the pending merger, and we remain committed to closing the transaction once the regulatory approval process concludes.”
Summary Financial Results (Unaudited)
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| | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Nine months ended June 30, |
(In millions, except per share data) | | 2016 | | 2015 | | 2016 | | 2015 |
Fixed indexed annuity sales (2) | | $ | 495 |
| | $ | 507 |
| | $ | 1,350 |
| | $ | 1,755 |
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Total annuity sales (2) | | $ | 832 |
| | $ | 519 |
| | $ | 1,922 |
| | $ | 2,032 |
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Average assets under management (2) | | $ | 18,854 |
| | $ | 17,915 |
| | $ | 18,523 |
| | $ | 17,600 |
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Net investment spread - FIA (2) | | 3.07 | % | | 2.82 | % | | 2.98 | % | | 2.87 | % |
Net investment spread - All products (2) | | 2.41 | % | | 1.94 | % | | 2.27 | % | | 1.90 | % |
Net income | | $ | 10 |
| | $ | 86 |
| | $ | 67 |
| | $ | 88 |
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Net income per diluted share | | $ | 0.16 |
| | $ | 1.48 |
| | $ | 1.14 |
| | $ | 1.51 |
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Adjusted operating income (“AOI”) (2) | | $ | 48 |
| | $ | 25 |
| | $ | 122 |
| | $ | 75 |
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AOI per diluted share (2) | | $ | 0.82 |
| | $ | 0.43 |
| | $ | 2.08 |
| | $ | 1.29 |
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Weighted average basic shares | | 58.3 |
| | 58.1 |
| | 58.3 |
| | 58.1 |
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Weighted average diluted shares | | 58.7 |
| | 58.2 |
| | 58.6 |
| | 58.3 |
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Total common shares outstanding | | 59.0 |
| | 58.8 |
| | 59.0 |
| | 58.8 |
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Book value per share | | $ | 30.22 |
| | $ | 26.53 |
| | $ | 30.22 |
| | $ | 26.53 |
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Book value per share, excluding AOCI (2) | | $ | 25.05 |
| | $ | 23.55 |
| | $ | 25.05 |
| | $ | 23.55 |
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See footnotes below.
Sales In Line With Expectations
Sales of our core fixed indexed annuity product were $495 million in the current period, an increase of 18% as compared to the fiscal second quarter of 2016. The sequential quarter growth reflects continued productive partnerships with our independent marketing organizations ("IMO's"). As expected, FIA sales were down from the prior year quarter as we have intentionally moderated volume to sustain a disciplined approach for new business profitability and capital management.
Sales of multi-year guarantee annuities ("MYGA") were $180 million in the current quarter as compared to $12 million in the same period last year. We continue to view this business as opportunistic; therefore our MYGA volume will fluctuate from period to period.
During the quarter, we entered into a $157 million funding agreement with Federal Home Loan Bank , under an investment spread strategy. This funding agreement is reflected as an institutional spread based product and, similar to MYGA, we view this volume as opportunistic and subject to fluctuation period to period.
Indexed universal life sales in the quarter were $15 million, an increase of 50% compared to $10 million last year. The strong growth in the current period reflects FGL's ongoing efforts to steadily grow indexed universal life sales through its network of core middle-market focused IMO's.
Investment Portfolio Performing Well
Net investment income was $236 million for the quarter, an increase of 11% compared to $212 million for the same period last year. This growth was driven by increases in average assets under management ("AAUM") and earned yields. AAUM increased $0.9 billion or 5% over the prior year due to sales growth and stable policy owner retention trends.
The average earned yield on the total portfolio in the quarter was 5.01%, up 28 basis points from 4.73% in the prior year quarter, primarily due to portfolio repositioning completed last year. Net investment income and earned yields in the quarter also benefited from tender offer and bond prepayment income of $5 million, before DAC amortization and taxes. Asset purchases during the quarter were $0.8 billion at an average yield of 5.00%. Asset purchases during the current quarter were primarily in investment grade corporate bonds and structured securities and high grade preferred stocks. The average NAIC rating for the portfolio remains approximately 1.5.
Net investment spread across all product lines increased 47 basis points compared to fiscal third quarter 2015. Net investment spread in fixed indexed annuities at 307 basis points held steady with recent quarters' experience. Net realized losses on available-for-sale investments were $7 million in the quarter before DAC amortization and taxes and net of reinsurance. Included in this amount were $3 million of net gains, primarily on tenders, and $7 million gain on the bankruptcy settlement for RadioShack, offset by $17 million of other than temporary impairment losses.
Capital Management Trends
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• | GAAP book value per share at June 30, 2016 was $30.22 on a reported basis; book value per share excluding accumulated other comprehensive income (“AOCI”) was $25.05, an increase of 6% year over year. |
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• | As announced on August 1, 2016, the FGL Board of Directors has declared a quarterly dividend of $0.065 per share. The dividend is payable on September 6, 2016 to shareholders of record as of the close of business on August 22, 2016. |
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
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| June 30,
2016 | | September 30,
2015 |
| (Unaudited) | | |
ASSETS | | | |
Investments: | | | |
Fixed maturity securities, available-for-sale, at fair value (amortized cost: June 30, 2016 - $18,381; September 30, 2015 - $17,622) | $ | 18,972 |
| | $ | 17,746 |
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Equity securities, available-for-sale, at fair value (amortized cost: June 30, 2016 - $600; September 30, 2015 - $597) | 645 |
| | 620 |
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Derivative investments | 216 |
| | 82 |
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Commercial mortgage loans | 622 |
| | 491 |
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Other invested assets | 93 |
| | 155 |
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Total investments | 20,548 |
| | 19,094 |
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Related party loans | 72 |
| | 78 |
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Cash and cash equivalents | 719 |
| | 502 |
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Accrued investment income | 192 |
| | 191 |
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Reinsurance recoverable | 3,476 |
| | 3,579 |
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Intangibles, net | 1,048 |
| | 988 |
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Deferred tax assets | 84 |
| | 228 |
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Other assets | 199 |
| | 265 |
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Total assets | $ | 26,338 |
| | $ | 24,925 |
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| | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | |
| | | |
Contractholder funds | $ | 18,874 |
| | $ | 17,770 |
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Future policy benefits | 3,466 |
| | 3,468 |
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Funds withheld for reinsurance liabilities | 1,190 |
| | 1,267 |
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Liability for policy and contract claims | 45 |
| | 55 |
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Debt | 300 |
| | 300 |
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Other liabilities | 681 |
| | 563 |
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Total liabilities | 24,556 |
| | 23,423 |
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Commitments and contingencies | | | |
| | | |
Shareholders' equity: | | | |
Preferred stock ($.01 par value, 50,000,000 shares authorized, no shares issued at June 30, 2016 and September 30, 2015) | $ | — |
| | $ | — |
|
Common stock ($.01 par value, 500,000,000 shares authorized, 58,961,371 issued and outstanding at June 30, 2016; 58,870,823 shares issued and outstanding at September 30, 2015) | 1 |
| | 1 |
|
Additional paid-in capital | 723 |
| | 714 |
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Retained earnings | 765 |
| | 710 |
|
Accumulated other comprehensive income | 305 |
| | 88 |
|
Treasury stock, at cost (537,613 shares at June 30, 2016; 512,391 shares at September 30, 2015) | (12 | ) | | (11 | ) |
Total shareholders' equity | 1,782 |
| | 1,502 |
|
Total liabilities and shareholders' equity | $ | 26,338 |
| | $ | 24,925 |
|
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
|
| | | | | | | | | | | | | | | |
| Three months ended | | Nine months ended |
| June 30, 2016 | | June 30, 2015 | | June 30, 2016 | | June 30, 2015 |
| (Unaudited) | | (Unaudited) |
Revenues: | | | | | | | |
Premiums | $ | 21 |
| | $ | 17 |
| | $ | 52 |
| | $ | 43 |
|
Net investment income | 236 |
| | 212 |
| | 685 |
| | 628 |
|
Net investment (losses) gains | (28 | ) | | 74 |
| | (7 | ) | | 75 |
|
Insurance and investment product fees and other | 32 |
| | 23 |
| | 93 |
| | 65 |
|
Total revenues | 261 |
| | 326 |
| | 823 |
| | 811 |
|
Benefits and expenses: | | | | | | | |
Benefits and other changes in policy reserves | 216 |
| | 78 |
| | 585 |
| | 474 |
|
Acquisition and operating expenses, net of deferrals | 28 |
| | 26 |
| | 83 |
| | 83 |
|
Amortization of intangibles | (4 | ) | | 88 |
| | 34 |
| | 97 |
|
Total benefits and expenses | 240 |
| | 192 |
| | 702 |
| | 654 |
|
Operating income | 21 |
| | 134 |
| | 121 |
| | 157 |
|
Interest expense | (5 | ) | | (6 | ) | | (17 | ) | | (18 | ) |
Income before income taxes | 16 |
| | 128 |
| | 104 |
| | 139 |
|
Income tax expense | 6 |
| | 42 |
| | 37 |
| | 51 |
|
Net income | $ | 10 |
| | $ | 86 |
| | $ | 67 |
| | $ | 88 |
|
| | | | | | | |
Net income per common share: | | | | | | | |
| | | | | | | |
Basic | $ | 0.16 |
| | $ | 1.48 |
| | $ | 1.14 |
| | $ | 1.51 |
|
Diluted | $ | 0.16 |
| | $ | 1.48 |
| | $ | 1.14 |
| | $ | 1.51 |
|
Weighted average common shares used in computing net income per common share: | | | | | | | |
Basic | 58.3 |
| | 58.1 |
| | 58.3 |
| | 58.1 |
|
Diluted | 58.7 |
| | 58.2 |
| | 58.6 |
| | 58.3 |
|
| | | | | | | |
Cash dividend per common share | $ | 0.065 |
| | $ | 0.065 |
| | $ | 0.195 |
| | $ | 0.195 |
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RECONCILIATION OF BOOK VALUE PER SHARE EXCLUDING AOCI
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| | | | | | | |
(In millions, except per share data) | June 30, 2016 | | September 30, 2015 |
Reconciliation to total shareholder's equity: | | | |
Total shareholder's equity | $ | 1,782 |
| | $ | 1,502 |
|
Less: AOCI | 305 |
| | 88 |
|
Total shareholder's equity excluding AOCI | $ | 1,477 |
| | $ | 1,414 |
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| | | |
Total shares outstanding | 59.0 |
| | 58.9 |
|
Weighted average shares outstanding - basic | 58.3 |
| | 58.1 |
|
Weighted average shares outstanding - diluted | 58.7 |
| | 58.4 |
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Book value per share | $ | 30.22 |
| | $ | 25.51 |
|
Book value per share, excluding AOCI(2) | $ | 25.05 |
| | $ | 24.02 |
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RECONCILIATION OF ADJUSTED OPERATING ROE
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| | | | | | | |
(In millions) | June 30, 2016 | | June 30, 2015 |
Reconciliation to total shareholder's equity: | | | |
Total shareholder's equity | $ | 1,782 |
| | $ | 1,559 |
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Less: AOCI | 305 |
| | 175 |
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Total shareholder's equity excluding AOCI | $ | 1,477 |
| | $ | 1,384 |
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| | | |
Quarterly AOI(3) | $ | 48 |
| | $ | 25 |
|
Quarterly Adjusted Operating ROE(2) | 13 | % | | 7 | % |
Footnotes:
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(1) | Fidelity & Guaranty Life’s fiscal year ends on September 30. |
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(2) | Non-GAAP financial measure. See the Non-GAAP Measures section below for additional information. |
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(3) | See table on reconciliation of net income to AOI for the 2016 and 2015 fiscal quarters. |
Agreement and Plan of Merger with Anbang Insurance Group Co., Ltd. ("Anbang")
On November 8, 2015, FGL and Anbang entered into a definitive merger agreement (the "Merger Agreement") pursuant to which Anbang will acquire all outstanding shares of FGL (the "Merger") for $26.80 per share in cash, without interest. The joint press release can be found on FGL’s investor relations website at www.fglife.com.
FGL and Anbang are committed to securing the remaining regulatory approvals and seek to close the Merger as expeditiously as possible, however, the closing of the Merger, and the timing thereof, is subject to the regulatory review and approval process. The Merger remains subject to the receipt of regulatory approvals from the Iowa Insurance Division, the New York Department of Financial Services and the China Insurance Regulatory Commission ("CIRC"). The parties have obtained requisite regulatory approvals for the Merger from the Vermont Department of Financial Regulation and the Committee on Foreign Investment in the United States ("CFIUS"). The parties will not be required to file a notification of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, due to an available exemption.
Non-GAAP Measures
Management believes that certain non-GAAP financial measures may be useful in certain instances to provide additional meaningful comparisons between current results and results in prior operating periods. Reconciliations of such measures to the most comparable GAAP measures are included herein.
AOI is calculated by adjusting net income to eliminate (i) the impact of net investment gains including other-than-temporary impairment ("OTTI") losses recognized in operations, but excluding gains and losses on derivatives hedging our indexed annuity policies, (ii) the effect of changes in the interest rates used to discount the FIA embedded derivative liability, (iii) the effect of change in fair value of the reinsurance related embedded derivative, and (iv) the effect of class action litigation reserves. All adjustments to AOI are net of the corresponding VOBA and DAC impact. The income tax impact related to these adjustments is measured using an effective tax rate of 35%, as appropriate.
While these adjustments are an integral part of the overall performance of FGL, market conditions impacting these items can overshadow the underlying performance of the business. Accordingly, we believe using a measure which excludes their impact is effective in analyzing the trends of our operations. Our non-GAAP measures may not be comparable to similarly titled measures of other organizations because other organizations may not calculate such non-GAAP measures in the same manner as we do.
Net investment spread is the excess of net investment income earned over the sum of interest credited to policyholders and the cost of hedging our risk on FIA policies.
Average assets under management ("AAUM") is the sum of (i) total invested assets at amortized cost, excluding derivatives, (ii) related party loans and investments and (iii) cash and cash equivalents at the end of each month in the period divided by the number of months in the period.
Book value per share excluding AOCI is calculated as total stockholders' equity excluding AOCI divided by the total number of shares of common stock outstanding.
Adjusted operating return on equity ("ROE") is calculated by dividing AOI by total average equity excluding AOCI. Average equity excluding AOCI is the average of the beginning and ending equity excluding AOCI for the period.
Sales are not derived from any specific GAAP income statement accounts or line items and should not be viewed as a substitute for any financial measure determined in accordance with GAAP. For GAAP purposes annuity sales are recorded as deposit liabilities (i.e. contract holder funds). Management believes that presentation of sales as measured for management purposes enhances the understanding of our business and helps depict longer term trends that may not be apparent in the results of operations due to the timing of sales and revenue recognition.
While management believes that non-GAAP measurements are useful supplemental information, such adjusted results are not intended to replace GAAP financial results and should be read in conjunction with those GAAP results.
Conference Call
In light of the announced merger with Anbang, FGL has elected to discontinue conference calls to discuss quarterly and annual results, pending the closing of the transaction. FGL will continue to issue its earnings press releases and quarterly financial supplement.
About Fidelity & Guaranty Life
Fidelity & Guaranty Life, an insurance holding company, helps middle-income Americans prepare for retirement. Through its subsidiaries, the company offers fixed annuity and life insurance products distributed by independent agents through an established network of independent marketing organizations. Fidelity & Guaranty Life, headquartered in Des Moines, Iowa, trades on the New York Stock Exchange under the ticker symbol FGL. For more information, please visit www.fglife.com.
Forward Looking Statements
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995: This document contains, and certain oral statements made by our representatives from time to time may contain, forward-looking statements, including those statements regarding our subsidiaries' ability to pay dividends. Such statements are subject to risks and uncertainties that could cause actual results, events and developments to differ materially from those set forth in, or implied by, such statements. These statements are based on the beliefs and assumptions of FGL's management and the management of FGL's subsidiaries (including target businesses). Generally, forward-looking statements include information concerning possible or assumed future distributions from subsidiaries, other actions, events, results, strategies and expectations and are generally identifiable by use of the words "believes," "expects," "intends," "anticipates," "plans," "seeks," "estimates," "projects," "may," "will," "could," "might," or "continues" or similar expressions. Factors that could cause actual results, events and developments to differ include, without limitation: the accuracy of FGL's assumptions and estimates; FGL's and its insurance subsidiaries' ability to maintain or improve financial strength ratings; FGL's ability to manage its business in a highly regulated industry; regulatory changes or actions; the impact of FGL's reinsurers failing to meet their assumed obligations; restrictions on FGL's ability to use captive reinsurers; the impact of interest rate
fluctuations; changes in the federal income tax laws and regulations; litigation (including class action litigation), enforcement investigations or regulatory scrutiny; the performance of third parties; the loss of key personnel; telecommunication, information technology and other operational systems failures; the continued availability of capital; new accounting rules or changes to existing accounting rules; general economic conditions; FGL's ability to protect its intellectual property; the ability to maintain or obtain approval of the Iowa Insurance Department and other regulatory authorities as required for FGL's operations; and other factors discussed in FGL's filings with the SEC including its Form 10-K for the year ended September 30, 2015, which can be found at the SEC's website www.sec.gov.
All forward-looking statements described herein are qualified by these cautionary statements and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized. FGL does not undertake any obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operation results.
Investor Contact:
Lisa Foxworthy-Parker
Fidelity & Guaranty Life
Investor.Relations@fglife.com
515-330-3307
Media Contact:
Sard Verbinnen & Co
Jamie Tully or David Millar, 212-687-8080
Source: Fidelity & Guaranty Life
Exhibit 99.2
Investor Supplement
Third Fiscal Quarter 2016
(Fiscal Year Ended September 30)
The financial statements and financial exhibits included herein are unaudited. These financial statements and exhibits should be read in conjunction with the Company's periodic reports on Form 10-K, Form 10-Q and Form 8-K. The results of operations for interim periods should not be considered indicative of results to be expected for the full year.
Non-GAAP Financial Measures
This document contains non-GAAP financial measures to analyze the Company's operating performance for the periods presented. Because the Company's calculation of these measures may differ from similar measures used by other companies, investors should be careful when comparing the Company's non-GAAP financial measures to those of other companies.
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Consolidated Financial Highlights
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| June 30,
2016 | | March 31,
2016 | | December 31,
2015 | | September 30,
2015 | | June 30,
2015 | | June 30,
2016 | | June 30,
2015 |
| (Dollars in millions) | | | | |
Revenues: | | | | | | | | | | | | | |
Premiums | $ | 21 |
| | $ | 16 |
| | $ | 15 |
| | $ | 15 |
| | $ | 17 |
| | $ | 52 |
| | $ | 43 |
|
Net investment income | 236 |
| | 227 |
| | 222 |
| | 223 |
| | 212 |
| | 685 |
| | 628 |
|
Net investment gains (losses) | (28 | ) | | (42 | ) | | 63 |
| | (112 | ) | | 74 |
| | (7 | ) | | 75 |
|
Insurance and investment product fees and other | 32 |
| | 32 |
| | 29 |
| | 24 |
| | 23 |
| | 93 |
| | 65 |
|
Total revenues | 261 |
| | 233 |
| | 329 |
| | 150 |
| | 326 |
| | 823 |
| | 811 |
|
| | | | | | | | | | | | | |
Net income | $ | 10 |
| | $ | 9 |
| | $ | 48 |
| | $ | 30 |
| | $ | 86 |
| | $ | 67 |
| | $ | 88 |
|
Adjusted Operating Income ("AOI") | $ | 48 |
| | $ | 43 |
| | $ | 31 |
| | $ | 42 |
| | $ | 25 |
| | 122 |
| | 75 |
|
| | | | | | | | | | | | | |
Per Unrestricted Common Shares Amounts: | | | | | | | | | | | | | |
Basic: | | | | | | | | | | | | | |
Net income | $ | 0.16 |
| | $ | 0.16 |
| | $ | 0.82 |
| | $ | 0.52 |
| | $ | 1.48 |
| | $ | 1.14 |
| | $ | 1.51 |
|
AOI | $ | 0.82 |
| | $ | 0.74 |
| | $ | 0.53 |
| | $ | 0.72 |
| | $ | 0.43 |
| | $ | 2.09 |
| | $ | 1.29 |
|
Diluted: | | | | | | | | | | | | | |
Net income | $ | 0.16 |
| | $ | 0.16 |
| | $ | 0.82 |
| | $ | 0.51 |
| | $ | 1.48 |
| | $ | 1.14 |
| | $ | 1.51 |
|
AOI | $ | 0.82 |
| | $ | 0.73 |
| | $ | 0.53 |
| | $ | 0.72 |
| | $ | 0.43 |
| | $ | 2.08 |
| | $ | 1.29 |
|
| | | | | | | | | | | | | |
Dividends Paid to Shareholders Per Share | $ | 0.065 |
| | $ | 0.065 |
| | $ | 0.065 |
| | $ | 0.065 |
| | $ | 0.065 |
| | $ | 0.195 |
| | $ | 0.195 |
|
| | | | | | | | | | | | | |
At Period End | | | | | | | | | | | | | |
Cash and cash equivalents | $ | 719 |
| | $ | 496 |
| | $ | 568 |
| | $ | 502 |
| | $ | 654 |
| | $ | 719 |
| | $ | 654 |
|
Total investments | $ | 20,548 |
| | $ | 19,580 |
| | $ | 18,953 |
| | $ | 19,094 |
| | $ | 19,391 |
| | $ | 20,548 |
| | $ | 19,391 |
|
Total assets | $ | 26,338 |
| | $ | 25,499 |
| | $ | 25,031 |
| | $ | 24,925 |
| | $ | 25,159 |
| | $ | 26,338 |
| | $ | 25,159 |
|
Contractholder funds | $ | 18,874 |
| | $ | 18,295 |
| | $ | 17,961 |
| | $ | 17,770 |
| | $ | 17,704 |
| | $ | 18,874 |
| | $ | 17,704 |
|
Future policy benefits | $ | 3,466 |
| | $ | 3,463 |
| | $ | 3,473 |
| | $ | 3,468 |
| | $ | 3,465 |
| | $ | 3,466 |
| | $ | 3,465 |
|
Debt | $ | 300 |
| | $ | 300 |
| | $ | 300 |
| | $ | 300 |
| | $ | 300 |
| | $ | 300 |
| | $ | 300 |
|
Total equity | $ | 1,782 |
| | $ | 1,511 |
| | $ | 1,399 |
| | $ | 1,502 |
| | $ | 1,559 |
| | $ | 1,782 |
| | $ | 1,559 |
|
Total equity excluding AOCI | $ | 1,477 |
| | $ | 1,468 |
| | $ | 1,461 |
| | $ | 1,414 |
| | $ | 1,384 |
| | $ | 1,477 |
| | $ | 1,384 |
|
Common shares issued and outstanding | 58.96 |
| | 58.96 |
| | 58.96 |
| | 58.87 |
| | 58.76 |
| | 58.96 |
| | 58.76 |
|
| | | | | | | | | | | | | |
GAAP Book value per share | $ | 30.22 |
| | $ | 25.63 |
| | $ | 23.73 |
| | $ | 25.51 |
| | $ | 26.53 |
| | $ | 30.22 |
| | $ | 26.53 |
|
GAAP Book Value per Share excluding AOCI | $ | 25.05 |
| | $ | 24.90 |
| | $ | 24.78 |
| | $ | 24.02 |
| | $ | 23.55 |
| | 25.05 |
| | 23.55 |
|
Debt to total Capitalization excluding AOCI | 16.9 | % | | 17.0 | % | | 17.0 | % | | 17.5 | % | | 17.8 | % | | 16.9 | % | | 17.8 | % |
Return on average shareholders' equity | 2.7 | % | | 2.5 | % | | 13.4 | % | | 8.6 | % | | 25.6 | % | | 9.1 | % | | 9.0 | % |
Statutory Book value per share(1) | $ | 21.23 |
| | $ | 21.28 |
| | $ | 21.13 |
| | $ | 20.79 |
| | $ | 21.02 |
| | 21.23 |
| | 21.02 |
|
Statutory Book value per share excluding IMR and AVR(1) | $ | 31.35 |
| | $ | 31.43 |
| | $ | 31.55 |
| | $ | 31.40 |
| | $ | 31.70 |
| | 31.35 |
| | 31.70 |
|
(1) The statutory book value per share and the statutory book value per share excluding interest maintenance reserve ("IMR") and asset valuation reserve ("AVR") are estimates due to the timing of the filing of statutory statements and are prepared consistent with the presentation of the statutory financial statements in the combined annual statement.
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
|
| | | | | | | | | | | | | | | | | | | |
| June 30,
2016 | | March 31,
2016 | | December 31,
2015 | | September 30,
2015 | | June 30,
2015 |
ASSETS | | | | | | | | | |
Investments: | | | | | | | | | |
Fixed maturity securities, available-for-sale, at fair value (amortized cost: June 30, 2016 - $18,381; September 30, 2015 - $17,622) | $ | 18,972 |
| | $ | 18,057 |
| | $ | 17,428 |
| | $ | 17,746 |
| | $ | 17,965 |
|
Equity securities, available-for-sale, at fair value (amortized cost: June 30, 2016 - $600; September 30, 2015 - $597) | 645 |
| | 620 |
| | 637 |
| | 620 |
| | 583 |
|
Derivative investments | 216 |
| | 158 |
| | 145 |
| | 82 |
| | 220 |
|
Commercial mortgage loans | 622 |
| | 613 |
| | 616 |
| | 491 |
| | 405 |
|
Other invested assets | 93 |
| | 132 |
| | 127 |
| | 155 |
| | 218 |
|
Total investments | 20,548 |
| | 19,580 |
| | 18,953 |
| | 19,094 |
| | 19,391 |
|
Related party loans | 72 |
| | 76 |
| | 81 |
| | 78 |
| | 77 |
|
Cash and cash equivalents | 719 |
| | 496 |
| | 568 |
| | 502 |
| | 654 |
|
Accrued investment income | 192 |
| | 209 |
| | 181 |
| | 191 |
| | 164 |
|
Reinsurance recoverable | 3,476 |
| | 3,512 |
| | 3,552 |
| | 3,579 |
| | 3,642 |
|
Intangibles, net | 1,048 |
| | 1,170 |
| | 1,162 |
| | 988 |
| | 808 |
|
Deferred tax assets | 84 |
| | 228 |
| | 286 |
| | 228 |
| | 200 |
|
Other assets | 199 |
| | 228 |
| | 248 |
| | 265 |
| | 223 |
|
Total assets | $ | 26,338 |
| | $ | 25,499 |
| | $ | 25,031 |
| | $ | 24,925 |
| | $ | 25,159 |
|
| | | | | | | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | | |
Contractholder funds | $ | 18,874 |
| | $ | 18,295 |
| | $ | 17,961 |
| | $ | 17,770 |
| | $ | 17,704 |
|
Future policy benefits | 3,466 |
| | 3,463 |
| | 3,473 |
| | 3,468 |
| | 3,465 |
|
Funds withheld for reinsurance liabilities | 1,190 |
| | 1,210 |
| | 1,251 |
| | 1,267 |
| | 1,325 |
|
Liability for policy and contract claims | 45 |
| | 51 |
| | 64 |
| | 55 |
| | 60 |
|
Debt | 300 |
| | 300 |
| | 300 |
| | 300 |
| | 300 |
|
Other liabilities | 681 |
| | 669 |
| | 583 |
| | 563 |
| | 746 |
|
Total liabilities | 24,556 |
| | 23,988 |
| | 23,632 |
| | 23,423 |
| | 23,600 |
|
| | | | | | | | | |
Shareholders' equity: | | | | | | | | | |
Preferred stock ($.01 par value, 50,000,000 shares authorized, no shares issued at June 30, 2016 and September 30, 2015) | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Common stock ($.01 par value, 500,000,000 shares authorized, 58,961,371 issued and outstanding at June 30, 2016; 58,870,823 shares issued and outstanding at September 30, 2015) | 1 |
| | 1 |
| | 1 |
| | 1 |
| | 1 |
|
Additional paid-in capital | 723 |
| | 720 |
| | 718 |
| | 714 |
| | 711 |
|
Retained earnings | 765 |
| | 759 |
| | 754 |
| | 710 |
| | 683 |
|
Accumulated other comprehensive income | 305 |
| | 43 |
| | (62 | ) | | 88 |
| | 175 |
|
Treasury stock, at cost (537,613 shares at June 30, 2016; 512,391 shares at September 30, 2015) | (12 | ) | | (12 | ) | | (12 | ) | | (11 | ) | | (11 | ) |
Total shareholders' equity | 1,782 |
| | 1,511 |
| | $ | 1,399 |
| | $ | 1,502 |
| | $ | 1,559 |
|
Total liabilities and shareholders' equity | $ | 26,338 |
| | $ | 25,499 |
| | $ | 25,031 |
| | $ | 24,925 |
| | $ | 25,159 |
|
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
Quarterly Summary - Most Recent 5 Quarters
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| June 30,
2016 | | March 31,
2016 | | December 31,
2015 | | September 30,
2015 | | June 30,
2015 | | June 30,
2016 | | June 30,
2015 |
| (Dollars in millions) | | | | |
Revenues: | | | | | | | | | | | | | |
Traditional life insurance premiums | $ | 10 |
| | $ | 11 |
| | $ | 10 |
| | $ | 11 |
| | $ | 10 |
| | $ | 31 |
| | $ | 32 |
|
Life contingent immediate annuity | 11 |
| | 5 |
| | 5 |
| | 4 |
| | 7 |
| | 21 |
| | 11 |
|
Net investment income | 236 |
| | 227 |
| | 222 |
| | 223 |
| | 212 |
| | 685 |
| | 628 |
|
Net investment (losses) gains | (28 | ) | | (42 | ) | | 63 |
| | (112 | ) | | 74 |
| | (7 | ) | | 75 |
|
Surrender charges | 5 |
| | 5 |
| | 4 |
| | 5 |
| | 5 |
| | 15 |
| | 14 |
|
Cost of insurance fees and other income | 27 |
| | 27 |
| | 25 |
| | 19 |
| | 18 |
| | 78 |
| | 51 |
|
Total revenues | 261 |
| | 233 |
| | 329 |
| | 150 |
| | 326 |
| | 823 |
| | 811 |
|
Benefits and expenses: | | | | | | | | | | | | | |
Traditional life insurance policy benefits and change in future policy benefits | 18 |
| | 16 |
| | 18 |
| | 18 |
| | 20 |
| | 52 |
| | 56 |
|
Life contingent immediate annuity benefits and changes in future policy benefits | 31 |
| | 21 |
| | 32 |
| | 30 |
| | 29 |
| | 84 |
| | 65 |
|
Interest sensitive and index product benefits and changes in future policy benefits | 167 |
| | 151 |
| | 131 |
| | 56 |
| | 29 |
| | 449 |
| | 353 |
|
General expenses | 26 |
| | 25 |
| | 26 |
| | 29 |
| | 22 |
| | 77 |
| | 77 |
|
Acquisition expenses | 88 |
| | 75 |
| | 73 |
| | 64 |
| | 72 |
| | 236 |
| | 234 |
|
Deferred acquisition costs ("DAC") | (86 | ) | | (73 | ) | | (71 | ) | | (63 | ) | | (68 | ) | | (230 | ) | | (228 | ) |
Amortization of intangibles | (4 | ) | | (3 | ) | | 41 |
| | (33 | ) | | 88 |
| | 34 |
| | 97 |
|
Total benefits and expenses | 240 |
| | 212 |
| | 250 |
| | 101 |
| | 192 |
| | 702 |
| | 654 |
|
Operating income | 21 |
| | 21 |
| | 79 |
| | 49 |
| | 134 |
| | 121 |
| | 157 |
|
Interest expense | (5 | ) | | (6 | ) | | (6 | ) | | (6 | ) | | (6 | ) | | (17 | ) | | (18 | ) |
Income before income taxes | 16 |
| | 15 |
| | 73 |
| | 43 |
| | 128 |
| | 104 |
| | 139 |
|
Income tax expense | 6 |
| | 6 |
| | 25 |
| | 13 |
| | 42 |
| | 37 |
| | 51 |
|
Net income | $ | 10 |
| | $ | 9 |
| | $ | 48 |
| | $ | 30 |
| | $ | 86 |
| | $ | 67 |
| | $ | 88 |
|
| | | | | | | | | | | | | |
Net income per common share: | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Basic | $ | 0.16 |
| | $ | 0.16 |
| | $ | 0.82 |
| | $ | 0.52 |
| | $ | 1.48 |
| | $ | 1.14 |
| | $ | 1.51 |
|
Diluted | $ | 0.16 |
| | $ | 0.16 |
| | $ | 0.82 |
| | $ | 0.51 |
| | $ | 1.48 |
| | $ | 1.14 |
| | $ | 1.51 |
|
Weighted average common shares used in computing net income per common share: | | | | | | | | | | | | | |
Basic | 58.31 |
| | 58.31 |
| | 58.22 |
| | 58.09 |
| | 58.06 |
| | 58.28 |
| | 58.13 |
|
Diluted | 58.66 |
| | 58.61 |
| | 58.54 |
| | 58.42 |
| | 58.24 |
| | 58.60 |
| | 58.33 |
|
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
Reconciliation from Net Income (Loss) to Adjusted Operating Income ("AOI ")
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | June 30, 2016 | | March 31, 2016 | | December 31, 2015 | | September 30, 2015 | | June 30, 2015 | | June 30, 2016 | | June 30, 2015 |
| | (Dollars in millions, except per share data) | | | | |
Net income | | $ | 10 |
| | $ | 9 |
| | $ | 48 |
| | $ | 30 |
| | $ | 86 |
| | $ | 67 |
| | $ | 88 |
|
Adjustments to arrive at AOI: | | | | | | | | | | | | | | |
Effect of investment (gains) losses, net of offsets (a) | | 5 |
| | (5 | ) | | 4 |
| | 12 |
| | (35 | ) | | 4 |
| | — |
|
Effect of change in FIA embedded derivative discount rate, net of offsets (a) | | 28 |
| | 43 |
| | (10 | ) | | 35 |
| | (33 | ) | | 61 |
| | 21 |
|
Effect of change in fair value of reinsurance related embedded derivative, net of offsets (a) | | 26 |
| | 14 |
| | (20 | ) | | (29 | ) | | (25 | ) | | 20 |
| | (40 | ) |
Effects of class action litigation reserves, net of offsets (a) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) |
Tax impact of adjusting items | | (21 | ) | | (18 | ) | | 9 |
| | (6 | ) | | 32 |
| | (30 | ) | | 7 |
|
AOI | | $ | 48 |
| | $ | 43 |
| | $ | 31 |
| | $ | 42 |
| | $ | 25 |
| | $ | 122 |
| | $ | 75 |
|
| | | | | | | | | | | | | | |
Per diluted common share: | | | | | | | | | | | | | | |
Net income | | $ | 0.16 |
| | $ | 0.16 |
| | $ | 0.82 |
| | $ | 0.51 |
| | $ | 1.48 |
| | $ | 1.14 |
| | $ | 1.51 |
|
Adjustments to arrive at AOI: | | | | | | | | | | | | | | |
Effect of investment (gains) losses, net of offsets (a) | | 0.09 |
| | (0.09 | ) | | 0.07 |
| | 0.21 |
| | (0.60 | ) | | 0.07 |
| | — |
|
Effect of change in FIA embedded derivative discount rate, net of offsets (a) | | 0.48 |
| | 0.73 |
| | (0.17 | ) | | 0.60 |
| | (0.57 | ) | | 1.04 |
| | 0.37 |
|
Effect of change in fair value of reinsurance related embedded derivative, net of offsets (a) | | 0.44 |
| | 0.24 |
| | (0.34 | ) | | (0.50 | ) | | (0.43 | ) | | 0.34 |
| | (0.69 | ) |
Effects of class action litigation reserves, net of offsets (a) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (0.02 | ) |
Tax impact of adjusting items | | $ | (0.35 | ) | | $ | (0.31 | ) | | $ | 0.15 |
| | $ | (0.10 | ) | | $ | 0.55 |
| | $ | (0.51 | ) | | $ | 0.12 |
|
AOI per diluted share | | $ | 0.82 |
| | $ | 0.73 |
| | $ | 0.53 |
| | $ | 0.72 |
| | $ | 0.43 |
| | $ | 2.08 |
| | $ | 1.29 |
|
(a) amounts are net of offsets related to value of business acquired ("VOBA") and deferred acquisition cost ("DAC") amortization
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
NON-GAAP FINANCIAL MEASURES
AOI
AOI is a non-GAAP economic measure we use to evaluate financial performance each period. AOI is calculated by adjusting net income to eliminate (i) the impact of net investment gains including other-than-temporary impairment ("OTTI") losses recognized in operations, but excluding gains and losses on derivatives hedging our indexed annuity policies, (ii) the effect of changes in the interest rates used to discount the FIA embedded derivative liability, (iii) the effect of change in fair value of the reinsurance related embedded derivative, and (iv) the effect of class action litigation reserves. All adjustments to AOI are net of the corresponding VOBA and DAC impact. The income tax impact related to these adjustments is measured using an effective tax rate of 35%, as appropriate. While these adjustments are an integral part of the overall performance of FGL, market conditions impacting these items can overshadow the underlying performance of the business. Accordingly, we believe using a measure which excludes their impact is effective in analyzing the trends of our operations. Our non-GAAP measures may not be comparable to similarly titled measures of other organizations because other organizations may not calculate such non-GAAP measures in the same manner as we do.
Sales
Sales are not derived from any specific GAAP income statement accounts or line items and should not be viewed as a substitute for any financial measure determined in accordance with GAAP. For GAAP purposes annuity sales are recorded as deposit liabilities (i.e. contract holder funds). Management believes that presentation of sales as measured for management purposes enhances the understanding of our business and helps depict longer term trends that may not be apparent in the results of operations due to the timing of sales and revenue recognition.
While management believes that non-GAAP measurements are useful supplemental information, such adjusted results are not intended to replace GAAP financial results and should be read in conjunction with those GAAP results.
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
Summary of Adjustments to Arrive at AOI
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | June 30, 2016 | | March 31, 2016 | | December 31, 2015 | | September 30, 2015 | | June 30, 2015 | | June 30, 2016 | | June 30, 2015 |
| | (Dollars in millions) | | | |
Revenue: | | | | | | | | | | | | | | |
Net investment gains (a) | | $ | 44 |
| | $ | 11 |
| | $ | (21 | ) | | $ | (23 | ) | | $ | (81 | ) | | $ | 34 |
| | $ | (47 | ) |
Increase (decrease) in total revenues | | 44 |
| | 11 |
| | (21 | ) | | (23 | ) | | (81 | ) | | 34 |
| | (47 | ) |
| | | | | | | | | | | | | | |
Benefits and expenses: | | | | | | | | | | | | | | |
Benefits and other changes in policy reserves (b) | | 53 |
| | 80 |
| | (19 | ) | | 61 |
| | (64 | ) | | 113 |
| | 21 |
|
Acquisition and operating expenses, net of deferrals (c) | | — |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| | (1 | ) |
Amortization of intangibles | | (38 | ) | | (39 | ) | | 14 |
| | (21 | ) | | 52 |
| | (62 | ) | | 7 |
|
Increase (decrease) in total benefits and expenses | | 15 |
| | 41 |
| | (5 | ) | | 41 |
| | (12 | ) | | 51 |
| | 27 |
|
| | | | | | | | | | | | | | |
Increase (decrease) in pre-tax operating income | | 59 |
| | 52 |
| | (26 | ) | | 18 |
| | (93 | ) | | 85 |
| | (20 | ) |
| | | | | | | | | | | | | | |
(Decrease) increase in income tax expense (benefit) (d) | | (21 | ) | | (18 | ) | | 9 |
| | (6 | ) | | 32 |
| | (30 | ) | | 7 |
|
Increase (decrease) in net income (loss) | | $ | 38 |
| | $ | 34 |
| | $ | (17 | ) | | $ | 12 |
| | $ | (61 | ) | | $ | 55 |
| | $ | (13 | ) |
(a) Net investment gains: includes the effects of net investment gains and change in fair value of the reinsurance related embedded derivative.
(b) Benefits and other changes in policy reserves: includes the effects of the change in fair value of the FIA embedded derivative discount rate.
(c) Acquisition and operating expenses: includes the effects of the class action litigation reserve.
(d) The tax expense (benefit) includes the tax impact of the adjustments in a-c above.
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
AOI Analysis
Each quarterly reporting period, we identify notable items that explain the trends in our AOI. These items are infrequent in nature or involve accounting volatility under general accepted accounting principles. The amounts below are included in disclosures within the Company's earnings releases to explain our AOI results. We believe that understanding these items provides further clarity to the financial performance of the business.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | June 30, 2016 | | March 31, 2016 | | December 31, 2015 | | September 30, 2015 | | June 30, 2015 | | June 30, 2016 | | June 30, 2015 |
| | (Dollars in millions) | | | | |
AOI | | $ | 48 |
| | $ | 43 |
| | $ | 31 |
| | $ | 42 |
| | $ | 25 |
| | $ | 122 |
| | $ | 75 |
|
Notable Items Included within AOI [(unfavorable)/favorable] | | | | | | | | | | | | | | |
Legacy incentive compensation (a) | | 1 |
| | — |
| | (1 | ) | | (1 | ) | | (1 | ) | | — |
| | (5 | ) |
Project expenses (b) | | (1 | ) | | (1 | ) | | (2 | ) | | (2 | ) | | (1 | ) | | (4 | ) | | (3 | ) |
Single premium immediate annuities ("SPIA") mortality & other reserve adjustments (c) | | 4 |
| | 5 |
| | (3 | ) | | (5 | ) | | (2 | ) | | 7 |
| | 1 |
|
Assumption review & DAC unlocking (d) | | 7 |
| | 4 |
| | 2 |
| | 14 |
| | — |
| | 12 |
| | — |
|
Other, including bond prepayment income & tax valuation allowance (e) | | 2 |
| | 2 |
| | 1 |
| | 2 |
| | — |
| | 5 |
| | — |
|
(a) Change in the liability for our FGLH stock compensation plan, which as a liability plan, is settled in cash and accounted for at fair value each reporting period.
(b) Expenses associated with corporate development activities, including mergers & acquisitions.
(c) The release of annuity reserves associated with mortality of annuitants, which varies due to timing, volume and severity of experience, and other reserve adjustments.
(d) Annually in the 4th fiscal quarter, we complete our Annual Assumption Review & DAC Unlocking process by adjusting our valuation assumptions to align with actual
experience. Also includes unlocking in other quarters from updating our DAC amortization models for actual experience and equity market fluctuations.
(e) Changes in the Company's deferred tax valuation allowance, receipt of bond prepayment income and other net favorable activity.
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
Capitalization/Book Value per Share
|
| | | | | | | | | | | | | | | | | | | | |
| | June 30,
2016 | | March 31,
2016 | | December 31,
2015 | | September 30,
2015 | | June 30,
2015 |
| | (Dollars in millions, except per share data) |
Capitalization: | | | | | | | | | | |
Debt | | $ | 300 |
| | $ | 300 |
| | $ | 300 |
| | $ | 300 |
| | $ | 300 |
|
Total debt | | 300 |
| | 300 |
| | 300 |
| | 300 |
| | 300 |
|
Total shareholders' equity | | 1,782 |
| | 1,511 |
| | 1,399 |
| | 1,502 |
| | 1,559 |
|
Total capitalization | | 2,082 |
| | 1,811 |
| | 1,699 |
| | 1,802 |
| | 1,859 |
|
AOCI | | 305 |
| | 43 |
| | (62 | ) | | 88 |
| | 175 |
|
Total capitalization excluding AOCI (a) | | $ | 1,777 |
| | $ | 1,768 |
| | $ | 1,761 |
| | $ | 1,714 |
| | $ | 1,684 |
|
| | | | | | | | | | |
Total shareholders' equity | | 1,782 |
| | 1,511 |
| | 1,399 |
| | 1,502 |
| | 1,559 |
|
AOCI | | 305 |
| | 43 |
| | (62 | ) | | 88 |
| | 175 |
|
Total shareholders' equity excluding AOCI (a) | | $ | 1,477 |
| | $ | 1,468 |
| | $ | 1,461 |
| | $ | 1,414 |
| | $ | 1,384 |
|
| | | | | | | | | | |
Common shares outstanding | | 58.96 |
| | 58.96 |
| | 58.96 |
| | 58.87 |
| | 58.76 |
|
| | | | | | | | | |
|
|
Book Value per Share: (b) | |
|
| | | | | | | | |
GAAP Book value per share including AOCI | | $ | 30.22 |
| | $ | 25.63 |
| | $ | 23.73 |
| | $ | 25.51 |
| | $ | 26.53 |
|
GAAP Book value per share excluding AOCI (a) | | $ | 25.05 |
| | $ | 24.90 |
| | $ | 24.78 |
| | $ | 24.02 |
| | $ | 23.55 |
|
| | | | | | | | | | |
| | Twelve months ended |
Twelve Month Rolling Average Return on Equity ("ROE") | | June 30,
2016 | | March 31,
2016 | | December 31,
2015 | | September 30,
2015 | | June 30,
2015 |
Return on Shareholders' Equity (c) | | | | | | | | | | |
Return on average shareholders' equity, excluding AOCI (c) | | 6.7 | % | | 12.3 | % | | 11.0 | % | | 8.8 | % | | 9.6 | % |
| | | | | | | | | | |
Return on Shareholders' Equity - AOI (d) | | | | | | | | | | |
Adjusted Operating ROE, excluding AOCI (d) | | 11.4 | % | | 10.0 | % | | 8.8 | % | | 8.7 | % | | 7.8 | % |
| | | | | | | | | | |
| | Three months ended |
Quarterly Average ROE | | June 30,
2016 | | March 31,
2016 | | December 31,
2015 | | September 30,
2015 | | June 30,
2015 |
Return on average shareholders' equity, excluding AOCI (c) | | 2.7 | % | | 2.0 | % | | 13.4 | % | | 8.6 | % | | 25.6 | % |
Adjusted Operating ROE, excluding AOCI (d) | | 13.1 | % | | 11.7 | % | | 8.6 | % | | 12.0 | % | | 7.4 | % |
| | | | | | | | | | |
Debt-to-Capital Ratios: (e) | | | | | | | | | | |
Long-term debt/Total capitalization excluding AOCI | | 16.9 | % | | 17.0 | % | | 17.0 | % | | 17.5 | % | | 17.8 | % |
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
(a) Total capitalization, total stockholders’ equity and book value per share excluding AOCI (a non-GAAP financial measure) are based on stockholders’ equity excluding the effect of AOCI. Since AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale investments, we believe these non-GAAP financial measures provide useful supplemental information.
(b) Book value per share including and excluding AOCI is calculated as total stockholders’ equity and total stockholders’ equity excluding AOCI divided by the total number of shares of common stock outstanding.
(c) Return on Equity, excluding AOCI is a non-GAAP financial measure. It is calculated by dividing net income by total average equity excluding AOCI. Average equity excluding AOCI for the twelve months rolling, is the average of 5 points throughout the period and for the quarterly average equity is calculated using the beginning and ending equity for the period. For periods less than a full fiscal year, amounts disclosed in the table are annualized.
(d) Adjusted Operating ROE, excluding AOCI is a non-GAAP financial measure. It is calculated by dividing AOI by total average equity excluding AOCI. Average equity excluding AOCI for the twelve months rolling, is the average of 5 points throughout the period and for the quarterly average equity is calculated using the beginning and ending equity for the period. For periods less than a full fiscal year, amounts disclosed in the table are annualized.
(e) Debt-to-capital ratios are computed using total capitalization excluding AOCI. Adjusted debt includes the total senior unsecured debentures.
Financial Strength Ratings
|
| | | | | | | | |
| | S&P | | A.M. Best | | Moody's | | Fitch |
As of Date of Financial Supplement | | | | | | | | |
Fidelity and Guaranty Life Insurance Company | | BBB- | | B++ | | Baa3 | | BBB |
Fidelity and Guaranty Life Insurance Company of New York | | BBB- | | B++ | | Not Rated | | BBB |
Rating Agency Outlook | | CreditWatch Developing | | Under Review With Developing Implications | | Positive | | Ratings Watch Evolving |
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
Net Investment Spread Results
|
| | | | | | | | | | | | | | | |
(Dollars in millions) | Three Months Ended | | Nine Months Ended |
| June 30, 2016 | | June 30, 2015 | | June 30, 2016 | | June 30, 2015 |
Yield on average assets under management "AAUM" (at amortized cost) | 5.01 | % | | 4.73 | % | | 4.93 | % | | 4.76 | % |
Less: Interest credited and option cost | (2.60 | )% | | (2.79 | )% | | (2.66 | )% | | (2.86 | )% |
Total net investment spread - All product lines | 2.41 | % | | 1.94 | % | | 2.27 | % | | 1.90 | % |
| | | | | | | |
FIA net investment spread | 3.07 | % | | 2.82 | % | | 2.98 | % | | 2.87 | % |
| | | | | | | |
Investment book yield - bonds purchased during the period (b) | 5.00 | % | | 4.76 | % | | 5.52 | % | | 4.85 | % |
| | | | | | | |
AAUM (a) | $ | 18,854 |
| | $ | 17,915 |
| | $ | 18,523 |
| | $ | 17,600 |
|
(a) AAUM is a non-GAAP measure and is the sum of (i) total invested assets at amortized cost, excluding derivatives; and including (ii) related party loans and investments and (iii) cash and cash equivalents at the end of each month in the period divided by the number of months in the period.
(b) Investment book yield on bonds purchased during the period excludes yield on short-term treasuries and cash and cash equivalents.
Sales Results by Product
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars in millions) | | Three Months Ended | | Nine Months Ended |
| | June 30, 2016 | | March 31, 2016 | | December 31, 2015 | | September 30, 2015 | | June 30, 2015 | | June 30, 2016 | | June 30, 2015 |
Fixed index annuities ("FIA") | | $ | 495 |
| | $ | 418 |
| | $ | 437 |
| | $ | 424 |
| | $ | 507 |
| | $ | 1,350 |
| | 1,755 |
|
Fixed rate annuities ("MYGA") | | 180 |
| | 183 |
| | 52 |
| | 10 |
| | 12 |
| | 415 |
| | 277 |
|
Institutional spread based (1) | | 157 |
| | — |
| | — |
| | — |
| | — |
| | 157 |
| | — |
|
Total Annuity | | $ | 832 |
| | $ | 601 |
| | $ | 489 |
| | $ | 434 |
| | $ | 519 |
| | $ | 1,922 |
| | $ | 2,032 |
|
Index universal life | | 15 |
| | 11 |
| | 13 |
| | 11 |
| | 10 |
| | 39 |
| | 24 |
|
Total Sales | | $ | 847 |
| | $ | 612 |
| | $ | 502 |
| | $ | 445 |
| | $ | 529 |
| | $ | 1,961 |
| | $ | 2,056 |
|
(1) Institutional spread based product sales from funding agreement investment contracts issued with the Federal Home Loan Bank and held in our separate account.
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
Annuity Account Balance Rollforward (a)
|
| | | | | | | | | | | | | | | | | | | | |
(Dollars in millions) | | Three months ended |
| | June 30, 2016 | | March 31, 2016 | | December 31, 2015 | | September 30, 2015 | | June 30, 2015 |
Account balances at beginning of period: | | $ | 14,599 |
| | $ | 14,330 |
| | $ | 14,154 |
| | $ | 14,000 |
| | $ | 13,655 |
|
Net deposits | | 687 |
| | 608 |
| | 507 |
| | 435 |
| | 525 |
|
Premium and interest bonuses | | 11 |
| | 11 |
| | 12 |
| | 9 |
| | 9 |
|
Fixed interest credited and index credits | | 45 |
| | 41 |
| | 66 |
| | 75 |
| | 117 |
|
Guaranteed product rider fees | | (14 | ) | | (14 | ) | | (13 | ) | | (8 | ) | | (9 | ) |
Surrenders, withdrawals, deaths, etc. | | (393 | ) | | (377 | ) | | (396 | ) | | (357 | ) | | (296 | ) |
Account balance at end of period | | $ | 14,935 |
| | $ | 14,599 |
| | $ | 14,330 |
|
| $ | 14,154 |
|
| $ | 14,001 |
|
(a) The rollforward reflects the account balance of our fixed index annuities and fixed rate annuities.
Annuity Deposits by Product Type
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
Product Type | | June 30, 2016 | | June 30, 2015 | | June 30, 2016 | | June 30, 2015 |
| | (Dollars in millions) | | | | |
Fixed Index Annuities: | | | | | | | | |
Index Strategies | | $ | 411 |
| | $ | 440 |
| | $ | 1,114 |
| | $ | 1,532 |
|
Fixed Strategy | | 91 |
| | 72 |
| | 261 |
| | 228 |
|
| | 502 |
|
| 512 |
|
| 1,375 |
|
| 1,760 |
|
| | | | | | | | |
Fixed Rate Annuities: | | | | | | | | |
Single-Year Rate Guaranteed | | 1 |
| | 11 |
| | 4 |
| | 31 |
|
Multi-Year Rate Guaranteed | | 184 |
| | 3 |
| | 424 |
| | 244 |
|
| | | | | | | | |
Total before coinsurance ceded | | 687 |
| | 526 |
| | 1,803 |
| | 2,035 |
|
Coinsurance ceded | | — |
| | 1 |
| | 1 |
| | 74 |
|
Net after coinsurance ceded | | $ | 687 |
|
| $ | 525 |
|
| $ | 1,802 |
|
| $ | 1,961 |
|
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
Surrender Charge Protection and Account Values by Product Type
Annuity Surrender Charges and Account Values (net of reinsurance) at June 30, 2016:
|
| | | | | | | | | | | | | | |
| | Surrender Charge | | Net Account Value |
Product Type | | Avg. Years at Issue | | Avg. Years Remaining | | Avg. % Remaining | | Dollars in millions | | % |
Fixed Index Annuities | | 11 | | 6 | | 8 | % | | $ | 11,851 |
| | 79 | % |
Single-Year Rate Guaranteed | | 10 | | 1 | | 1 | % | | 632 |
| | 4 | % |
Multi-Year Rate Guaranteed | | 5 | | 3 | | 7 | % | | 2,452 |
| | 17 | % |
Total | | | | | | | | $ | 14,935 |
| | 100 | % |
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
Annuity Liability Characteristics
|
| | | | | | | | |
| | Fixed Annuities Account Value | | Fixed Index Annuities Account Value |
| | (Dollars in millions) |
SURRENDER CHARGE PERCENTAGES: | | | | |
No surrender charge | | $ | 605 |
| | $ | 1,708 |
|
0.0% < 2.0% | | 38 |
| | 210 |
|
2.0% < 4.0% | | 114 |
| | 609 |
|
4.0% < 6.0% | | 446 |
| | 587 |
|
6.0% < 8.0% | | 1,023 |
| | 1,142 |
|
8.0% < 10.0% | | 809 |
| | 2,543 |
|
10.0% or greater | | 50 |
| | 5,052 |
|
| | $ | 3,085 |
| | $ | 11,851 |
|
|
| | | | | | | |
| | Fixed and Fixed Index Annuities Account Value | | Weighted Average Surrender Charge |
| | (Dollars in millions) | | |
SURRENDER CHARGE EXPIRATION BY YEAR: | | | | |
Out of Surrender Charge | | $ | 2,301 |
| | — | % |
2016 | | 392 |
| | 3 | % |
2017 - 2018 | | 2,521 |
| | 5 | % |
2019 - 2020 | | 1,787 |
| | 7 | % |
2021 - 2022 | | 1,870 |
| | 9 | % |
Thereafter | | 6,064 |
| | 11 | % |
| | $ | 14,935 |
| | 7 | % |
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
|
| | | | | | | | |
| | Fixed Annuities Account Value | | Fixed Index Annuities Account Value |
| | (Dollars in millions) |
CREDITED RATE (INCLUDING BONUS INTEREST) VS. ULTIMATE MINIMUM GUARANTEED RATE DIFFERENTIAL: | | | | |
No differential | | $ | 1,075 |
| | $ | 1,063 |
|
0.0% - 1.0% | | 448 |
| | 1,184 |
|
1.0% - 2.0% | | 290 |
| | 76 |
|
2.0% - 3.0% | | 1,215 |
| | 14 |
|
3.0% - 4.0% | | 57 |
| | 1 |
|
4.0% - 5.0% | | — |
| | — |
|
Allocated to index strategies | | — |
| | 9,512 |
|
| | $ | 3,085 |
| | $ | 11,850 |
|
FIXED INDEX ANNUITIES ACCOUNT VALUE - INDEX STRATEGIES
Monthly Average, Point to Point and Gain Trigger Strategies with Cap
|
| | | | | | | | | | | | | | | | | | | | |
| | Minimum Guaranteed Cap |
| | 1% | | 2% | | 3% | | 5% | | 6% |
Current Cap | | (Dollars in millions) |
At minimum | | $ | — |
| | $ | — |
| | $ | 1,100 |
| | $ | 767 |
| | $ | — |
|
2-3% | | 170 |
| | — |
| | — |
| | — |
| | — |
|
3-4% | | 704 |
| | — |
| | 533 |
| | — |
| | — |
|
4-5% | | 367 |
| | — |
| | 625 |
| | — |
| | — |
|
5-6% | | 61 |
| | — |
| | 420 |
| | 9 |
| | — |
|
6-7% | | 23 |
| | 2 |
| | 55 |
| | 6 |
| | 4 |
|
7% + | | 51 |
| | 16 |
| | 151 |
| | — |
| | 67 |
|
Total: | | $ | 1,376 |
| | $ | 18 |
| | $ | 2,884 |
| | $ | 782 |
| | $ | 71 |
|
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
Monthly Point-to-Point with Cap |
| | | | |
| | Minimum Guaranteed Cap 1% |
Current Cap | | (Dollars in millions) |
At minimum | | $ | 678 |
|
1% to 2% | | 2,054 |
|
2% to 3% | | 1,042 |
|
3% + | | 285 |
|
Total: | | $ | 4,059 |
|
3 Year Step Forward with Cap |
| | | | | | | | |
| | Minimum Guaranteed Cap 2% | | Minimum Guaranteed Cap 5% |
Current Cap | | (Dollars in millions) |
At minimum | | $ | — |
| | $ | 17 |
|
2% to 5% | | — |
| | — |
|
5% to 7% | | 4 |
| | 53 |
|
7% to 9% | | — |
| | 45 |
|
9% to 11% | | — |
| | 21 |
|
11% to 13% | | — |
| | 10 |
|
13% + | | — |
| | — |
|
Total: | | $ | 4 |
| | $ | 146 |
|
There is an additional $174 million Account Value allocated to strategies not listed above. Of this $174 million, $15 million is at the guaranteed rates.
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
Summary of Invested Assets by Asset Class
|
| | | | | | | | | | | | | | | | | | | | | | |
(Dollars in millions) | | June 30, 2016 | | September 30, 2015 |
| | Amortized Cost | | Fair Value | | Percent | | Amortized Cost | | Fair Value | | Percent |
Fixed maturity securities, available-for-sale: | | | | | | | | | | | | |
United States Government full faith and credit | | $ | 233 |
| | $ | 245 |
| | 1 | % | | $ | 233 |
| | $ | 244 |
| | 1 | % |
United States Government sponsored entities | | 117 |
| | 122 |
| | 1 | % | | 134 |
| | 137 |
| | 1 | % |
United States municipalities, states and territories | | 1,528 |
| | 1,741 |
| | 8 | % | | 1,520 |
| | 1,608 |
| | 8 | % |
Corporate securities: | | | | | | | | | | | | |
Finance, insurance and real estate | | 4,916 |
| | 5,233 |
| | 25 | % | | 4,272 |
| | 4,446 |
| | 23 | % |
Manufacturing, construction and mining | | 866 |
| | 854 |
| | 4 | % | | 867 |
| | 772 |
| | 4 | % |
Utilities, energy and related sectors | | 1,910 |
| | 1,955 |
| | 10 | % | | 1,893 |
| | 1,849 |
| | 10 | % |
Wholesale/retail trade | | 1,146 |
| | 1,201 |
| | 7 | % | | 1,018 |
| | 1,027 |
| | 5 | % |
Services, media and other | | 1,825 |
| | 1,884 |
| | 9 | % | | 1,483 |
| | 1,436 |
| | 8 | % |
Hybrid securities | | 1,326 |
| | 1,317 |
| | 6 | % | | 1,211 |
| | 1,214 |
| | 6 | % |
Non-agency residential mortgage-backed securities | | 1,275 |
| | 1,282 |
| | 6 | % | | 1,965 |
| | 2,025 |
| | 11 | % |
Commercial mortgage-backed securities | | 844 |
| | 846 |
| | 4 | % | | 878 |
| | 882 |
| | 5 | % |
Asset-backed securities | | 2,395 |
| | 2,292 |
| | 11 | % | | 2,148 |
| | 2,106 |
| | 11 | % |
Equity securities | | 600 |
| | 645 |
| | 3 | % | | 597 |
| | 620 |
| | 3 | % |
Commercial mortgage loans | 622 |
| | 622 |
| | 3 | % | | 491 |
| | 491 |
| | 3 | % |
Other (primarily derivatives and loan participations) | | 317 |
| | 309 |
| | 2 | % | | 382 |
| | 237 |
| | 1 | % |
Total | | $ | 19,920 |
| | $ | 20,548 |
| | 100 | % | | 19,092 |
| | $ | 19,094 |
| | 100 | % |
Credit Quality of Fixed Maturity Securities at June 30, 2016
|
| | | | | | | | | | | | | | | | |
NAIC Designation | | Fair Value | | Percent | | Rating Agency Rating | | Fair Value | | Percent |
| | (Dollars in millions) | | | | | | (Dollars in millions) | | |
1 | | $ | 10,349 |
| | 55 | % | | AAA | | $ | 1,400 |
| | 7 | % |
2 | | 7,200 |
| | 38 | % | | AA | | 2,055 |
| | 11 | % |
3 | | 1,077 |
| | 6 | % | | A | | 4,830 |
| | 26 | % |
4 | | 260 |
| | 1 | % | | BBB | | 8,058 |
| | 42 | % |
5 | | 82 |
| | — | % | | BB | | 1,169 |
| | 6 | % |
6 | | 4 |
| | — | % | | B and below | | 1,460 |
| | 8 | % |
| | $ | 18,972 |
| | 100 | % | | | | $ | 18,972 |
| | 100 | % |
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
Managed and Direct Related Party Investments
|
| | | | | | | | | | |
(Dollars in Millions) | | | | June 30, 2016 |
Type | | Balance Sheet Classification | | Amortized Cost | | Fair Value |
Investments managed by related parties: | | | | | | |
Salus collateralized loan obligations | | Fixed maturities, available-for-sale | | $ | 113 |
| | $ | 113 |
|
Fortress Investment Group collateralized loan obligations | | Fixed maturities, available-for-sale | | 191 |
| | 180 |
|
Salus participations (b) | | Other invested assets | | 41 |
| | 39 |
|
Energy & Infrastructure Capital ("EIC") participations | | Other invested assets | | 9 |
| | 8 |
|
| | Total investments managed by related parties | | $ | 354 |
| | $ | 340 |
|
| | | | | | |
Direct investment in related parties: | | | | | | |
HGI energy loan | | Related party loans | | 72 |
| | 72 |
|
Salus preferred equity | | Equity securities, available-for-sale | | 3 |
| | 4 |
|
Foreign exchange derivatives and embedded derivatives | | Other invested assets | | 8 |
| | 8 |
|
Salus promissory note (90 day term) | | Related party loans | | — |
| | — |
|
| | Total direct investment in related parties | | $ | 83 |
| | $ | 84 |
|
| | | | | | |
Assets above included in FSRCI Funds withheld portfolio: | | | | | | |
Fortress Investment Group collateralized loan obligations | | Fixed Maturities, available-for-sale | | 19 |
| | 17 |
|
HGI energy loan | | Related Party Loans | | 26 |
| | 26 |
|
Salus collateralized loan obligations | | Fixed Maturities, available-for-sale | | 8 |
| | 8 |
|
Salus participations | | Other Invested Assets | | 3 |
| | 3 |
|
Salus preferred equity | | Equity securities, available-for-sale | | 3 |
| | 4 |
|
| | Total assets included in FSRCI Funds withheld portfolio | | $ | 59 |
| | $ | 58 |
|
| | | | | | |
| | | | | | |
(b) Includes loan participations with 4 different borrowers with an average loan fair value of $11 as of June 30, 2016
| | | | |
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
Summary of Residential Mortgage Backed Securities by Collateral Type and NAIC Designation
|
| | | | | | | | | | | | |
| | June 30, 2016 |
Collateral Type | | Principal Amount | | Amortized Cost | | Fair Value |
| | (Dollars in millions) |
Total by collateral type | | | | | | |
Government agency | | $ | 112 |
| | $ | 117 |
| | $ | 122 |
|
Prime | | 255 |
| | 219 |
| | 217 |
|
Subprime | | 383 |
| | 329 |
| | 335 |
|
Alt-A | | 975 |
| | 727 |
| | 730 |
|
| | $ | 1,725 |
| | $ | 1,392 |
| | $ | 1,404 |
|
Total by NAIC designation | | | | | | |
1 | | $ | 1,700 |
| | $ | 1,370 |
| | $ | 1,384 |
|
2 | | 6 |
| | 4 |
| | 4 |
|
3 | | 3 |
| | 3 |
| | 3 |
|
4 | | 9 |
| | 8 |
| | 8 |
|
5 | | 8 |
| | 7 |
| | 5 |
|
| | $ | 1,726 |
| | $ | 1,392 |
| | $ | 1,404 |
|
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
Top 10 Holdings by Issuers
|
| | | | | | | |
(Dollars in millions) | | June 30, 2016 |
Issuer (a): | | Fair Value | | Percentage of Total Invested Assets |
Wells Fargo & Company | | $ | 161 |
| | 0.8 | % |
Goldman Sachs Group, Inc. | | 141 |
| | 0.7 | % |
Metropolitan Transportation Authority (NY) | | 126 |
| | 0.6 | % |
General Electric Company | | 116 |
| | 0.6 | % |
JP Morgan Chase & Co. | | 107 |
| | 0.5 | % |
Nationwide Mutual Insurance Company | | 95 |
| | 0.5 | % |
Bank of America Corp | | 91 |
| | 0.4 | % |
Cooperatieve Centrale Raiffeis | | 87 |
| | 0.4 | % |
Metlife, Inc. | | 84 |
| | 0.4 | % |
AT&T Inc. | | 84 |
| | 0.4 | % |
(a) Issuers excluding U.S. Governmental securities and any securities held in our funds withheld portfolio.
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
Reinsurance Counterparty Risk- Top 5 Reinsurers
|
| | | | | | | | | | |
| | | | | | | | |
(Dollars in millions) | | | | Financial Strength Rating |
Parent Company/Principal Reinsurers | | Reinsurance Recoverable (a) | | AM Best | | S&P | | Moody's |
Wilton Reinsurance | | $ | 1,541 |
| | A | | Not Rated | | Not Rated |
Front Street Re | | 1,143 |
| | Not Rated | | Not Rated | | Not Rated |
Scottish Re | | 145 |
| | Not Rated | | Not Rated | | Not Rated |
Security Life of Denver | | 135 |
| | A | | A | | A2 |
London Life | | 105 |
| | A | | Not Rated | | Not Rated |
(a) Reinsurance recoverables do not include unearned ceded premiums that would be recovered in the event of early termination of certain traditional life policies.
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
Shareholder Information
Corporate Offices:
Fidelity & Guaranty Life
Two Ruan Center
601 Locust Street, 14th Floor
Des Moines, IA 50309
Investor Contact:
Lisa Foxworthy-Parker
Fidelity & Guaranty Life
Lisa.Parker@fglife.com
515-330-3307
Media Contact:
Sard Verbinnen & Co
Jamie Tully or David Millar, 212-687-8080
Common stock and Dividend Information:
New York Stock Exchange symbol: "FGL"
|
| | | | | | | | | | | | | | | | |
| | High | | Low | | Close | | Dividend Declared |
FY2016 | | | | | | | | |
First Quarter | | $ | 27.87 |
| | $ | 24.01 |
| | $ | 25.37 |
| | $ | 0.065 |
|
Second Quarter | | $ | 26.55 |
| | $ | 23.99 |
| | $ | 26.24 |
| | $ | 0.065 |
|
Third Quarter | | $ | 26.49 |
| | $ | 22.17 |
| | $ | 23.18 |
| | $ | 0.065 |
|
Transfer Agent
American Stock Transfer & Trust
59 Maiden Lane, Plaza Level
New York, NY 10038
Phone: (800) 937-5449
Fax: (718) 236-2641
http://www.amstock.com
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2016
(unaudited)
Research Analyst Coverage
Jimmy Bhullar
J.P. Morgan
(212) 622-6397
jimmy.s.bhullar@jpmorgan.com
Eric Berg
RBC Capital Markets
(212) 618-7593
eric.berg@rbccm.com
John Barnidge
Sandler O'Neill + Partners
(312) 281-3412
jbarnidge@sandleroneill.com
This regulatory filing also includes additional resources:
pressrelease.pdf
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