DES MOINES, Iowa, Feb. 6, 2014 /PRNewswire/ -- Fidelity &
Guaranty Life ("FGL") (NYSE: FGL), a leading provider of fixed
annuity and fixed universal life products, today announced its
results for the first quarter of fiscal 2014 ended on December 31, 2013(1).
(Logo:
http://photos.prnewswire.com/prnh/20140122/MM51073LOGO )
Lee Launer, FGL Chief Executive
Officer, said, "The results reflect a strong quarter of sales for
FGL. This quarter, we recorded the strongest sales within the last
seven quarters, as we launched products targeting the needs of the
underserved middle market. We are also pleased with the warm
reception we received in Iowa with
our redomestication, allowing us to further expand upon our growth
plans."
Phil Gass, FGL Chairman of the
Board, said, "Our first reported quarter of results as a public
company is a testament to the success of the management team as we
begin executing on our growth strategy. With the additional capital
raised from the initial public offering, we are benefiting from
attractive market fundamentals as we increase sales, build our
adjusted operating income, and grow book value."
First Quarter Fiscal 2014 Highlights:
- Total annuity sales of $540.6
million represented a 119% increase from $247.3 million in Q1 2013 and a 119% increase
from Q4 2013.
- Pretax adjusted operating income ("Pretax AOI") of $44.1 million increased 38% compared to
$31.9 million in the prior year first
quarter; GAAP net income was $42.7
million in the current period.
- GAAP book value per share excluding AOCI reached $24.88 from $20.20
in the prior year first quarter, an increase of 23%.
- The primary life insurance subsidiary successfully redomiciled
to Iowa on November 1, 2013.
- FGL successfully listed shares on the New York Stock Exchange
on December 13, 2013
(NYSE:FGL).
Summary Financial
Results
|
|
|
|
Three months ended
December 31
|
|
(unaudited)
|
|
|
|
|
2013
|
2012
|
(Amounts in millions,
except share data)
|
Total
|
Per diluted
share
|
Total
|
Per diluted
share
|
Annuity sales
(2)
|
$540.6
|
|
$247.3
|
|
Net income
|
$42.7
|
$0.87
|
$110.6
|
$2.35
|
Pretax adjusted
operating income ("Pretax AOI") (2)
|
$44.1
|
$ 0.89
|
$31.9
|
$0.68
|
Total shares
outstanding
|
58,270,822
|
|
47,000,000
(3)
|
|
Weighted average
diluted shares
|
49,263,675
|
|
47,000,000
(3)
|
|
Book value per
share
|
$27.03
|
|
$29.20
|
|
Book value per share,
excluding accumulated other comprehensive income ("AOCI")
(2)
|
$24.88
|
|
$20.20
|
|
|
|
(1)
|
Fidelity &
Guaranty Life's fiscal year ends each year on September
30.
|
(2)
|
This is a financial
measure not calculated based on U.S. Generally Accepted Accounting
Principles (Non-
|
|
GAAP). See the Use of
Non-GAAP Measures section of this press release for additional
information
|
(3)
|
Common shares
outstanding and per share amounts give retroactive effect to our
statutory conversion on
|
|
August 26, 2013 and
the 4,700-for-1 stock split of our shares of common stock effected
on November 26,
|
|
2013.
|
Detail on First Quarter Fiscal 2014 Results:
Total annuity sales of $540.6
million for the first quarter represented an increase of
119% from $247.3 million as compared
to the prior year quarter. On a sequential basis, total annuity
sales also increased 119% as compared to Q4 2013. Strong sales for
both fixed index and multi-year guarantee product offerings
contributed to the current period results. Additionally,
indexed universal life sales grew by 7% on a sequential basis,
reflecting an expansion of the product portfolio and marketing
efforts.
FGL reported net income of $42.7
million for the first quarter, compared to $110.6 million in the prior year. The prior year
included $81.7 million of net
investment gains, net of tax and other adjustments, related to a
strategic repositioning of the investment portfolio.
Pretax AOI was $44.1 million for
the first quarter, an increase of $12.2
million or 38%, from $31.9
million in the prior year. This increase is due to higher
fee income and higher net investment spread compared to prior
year.
FGL ended the first quarter with a book value per diluted share
excluding AOCI of $24.88, up from
$20.20 in the prior year quarter.
This reflects a $43.0 million special
dividend FGL paid to Harbinger Group Inc. on December 18, 2013.
On November 1, 2013, Fidelity
& Guaranty Life Insurance Company ("FGLIC") redomesticated to
Iowa. FGLIC moved its headquarters
to the state to position the organization for strong growth in the
future. FGL plans to hire 50 employees in the state over the next
three years and capitalize on the strong talent pool in the
area.
In December 2013, FGL completed
its initial public offering, and FGL's common stock began trading
on the New York Stock Exchange. FGL issued 11,212,500 shares
of common stock in the offering at a price to the public of
$17 per share, valuing the company at
approximately $990 million. FGL
received $173.0 million in proceeds
from the offering, net of underwriting and issuance expenses of
$17.6 million.
FIDELITY &
GUARANTY LIFE AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(In thousands,
except share data)
|
|
|
December 31,
2013
|
|
September 30,
2013
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
Investments:
|
|
|
|
Fixed maturities
securities, available-for-sale, at fair value
|
$
|
16,327,617
|
|
|
$
|
15,541,526
|
|
Equity securities,
available-for-sale, at fair value
|
286,922
|
|
|
271,075
|
|
Derivative
investments
|
294,531
|
|
|
221,758
|
|
Other invested
assets
|
316,552
|
|
|
188,180
|
|
Total
investments
|
17,225,622
|
|
|
16,222,539
|
|
Related party loans
and investments
|
96,442
|
|
|
119,044
|
|
Cash and cash
equivalents
|
759,471
|
|
|
1,204,334
|
|
Accrued investment
income
|
157,785
|
|
|
159,287
|
|
Reinsurance
recoverable
|
3,723,693
|
|
|
3,728,632
|
|
Intangibles,
net
|
601,444
|
|
|
563,758
|
|
Deferred tax
assets
|
225,908
|
|
|
226,351
|
|
Other
assets
|
155,292
|
|
|
205,230
|
|
Total
assets
|
$
|
22,945,657
|
|
|
$
|
22,429,175
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDER'S EQUITY
|
|
|
|
|
|
|
|
Contractholder
funds
|
$
|
15,519,722
|
|
|
$
|
15,248,216
|
|
Future policy
benefits
|
3,545,881
|
|
|
3,556,808
|
|
Funds withheld for
reinsurance liabilities
|
1,381,238
|
|
|
1,407,713
|
|
Liability for policy
and contract claims
|
60,331
|
|
|
51,456
|
|
Long-term
debt
|
300,000
|
|
|
300,000
|
|
Other
liabilities
|
806,662
|
|
|
700,097
|
|
Total
liabilities
|
21,613,834
|
|
|
21,264,290
|
|
|
|
|
|
|
|
|
|
Shareholder's
equity:
|
|
|
|
Common stock ($.01
par value, 500,000,000 shares authorized, 58,270,822 issued
and outstanding at December 31, 2013; 47,000,000 shares issued and
outstanding at September 30, 2013)
|
583
|
|
|
—
|
|
Additional paid-in
capital
|
700,528
|
|
|
527,124
|
|
Retained
earnings
|
524,572
|
|
|
524,871
|
|
Accumulated other
comprehensive income
|
106,140
|
|
|
112,890
|
|
Total
shareholder's equity
|
1,331,823
|
|
|
1,164,885
|
|
Total liabilities
and shareholder's equity
|
$
|
22,945,657
|
|
|
$
|
22,429,175
|
|
|
|
|
|
FIDELITY &
GUARANTY LIFE AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In thousands,
except share data)
|
|
|
Three months
ended
|
|
December 31,
2013
|
|
December 31,
2012
|
|
(Unaudited)
|
Revenues:
|
|
|
|
Premiums
|
$
|
13,705
|
|
|
$
|
13,796
|
|
Net investment
income
|
183,437
|
|
|
170,298
|
|
Net investment
gains
|
123,417
|
|
|
146,475
|
|
Insurance and
investment product fees and other
|
15,552
|
|
|
13,729
|
|
Total
revenues
|
336,111
|
|
|
344,298
|
|
Benefits and
expenses:
|
|
|
|
Benefits and other
changes in policy reserves
|
216,856
|
|
|
83,644
|
|
Acquisition and
operating expenses, net of deferrals
|
26,004
|
|
|
26,914
|
|
Amortization of
intangibles
|
22,892
|
|
|
69,511
|
|
Total benefits and
expenses
|
265,752
|
|
|
180,069
|
|
Operating
income
|
70,359
|
|
|
164,229
|
|
Interest
expense
|
(5,624)
|
|
|
(34)
|
|
Other
income
|
—
|
|
|
225
|
|
Income before income
taxes
|
64,735
|
|
|
164,420
|
|
Income tax
expense
|
22,041
|
|
|
53,815
|
|
Net
income
|
$
|
42,694
|
|
|
$
|
110,605
|
|
|
|
|
|
Net income per common
share:
|
|
|
|
|
|
|
|
Basic
|
$
|
0.87
|
|
|
$
|
2.35
|
|
Diluted
|
$
|
0.87
|
|
|
$
|
2.35
|
|
Weighted average
common shares used in computing net income per common
share:
|
|
|
|
Basic
|
49,142,208
|
|
|
47,000,000
|
|
Diluted
|
49,263,675
|
|
|
47,000,000
|
|
|
|
|
|
Supplemental
disclosures:
|
|
|
|
Total
other-than-temporary impairments
|
$
|
(34)
|
|
|
$
|
(509)
|
|
Less non-credit
portion of other-than-temporary impairments included in other
comprehensive income
|
—
|
|
|
—
|
|
Net
other-than-temporary impairments
|
(34)
|
|
|
(509)
|
|
Gains (losses) on
derivative instruments
|
111,538
|
|
|
(25,568)
|
|
Other realized
investment gains
|
11,913
|
|
|
172,552
|
|
Total
net investment gains
|
$
|
123,417
|
|
|
$
|
146,475
|
|
PRETAX AOI ADJUSTMENTS TO NET INCOME
Pretax AOI is a non-GAAP insurance industry measure that
eliminates the impact of realized investment gains (losses), the
effect of interest rate changes on the fixed indexed annuities
("FIA") embedded derivative liability and the effects of
transaction-related reinsurance, net of the corresponding VOBA and
DAC impact related to these adjustments. Return on average assets
under management ("AAUM") is a non-U.S. GAAP measure calculated by
dividing Pretax AOI by AAUM. AAUM is the sum of the assets under
management ("AUM") at the end of each month in the period divided
by the number of months in the period.
(In
millions)
|
|
Fiscal
Quarter
|
Reconciliation to
income before income taxes:
|
|
2014
|
|
2013
|
Income before
taxes
|
|
$
|
64.7
|
|
|
$
|
164.4
|
|
Interest expense and
other
|
|
5.6
|
|
|
(0.2)
|
|
Operating income
(loss)
|
|
70.3
|
|
|
164.2
|
|
Effect of investment
(gains) losses, net of offsets
|
|
(9.8)
|
|
|
(125.7)
|
|
Effect of change in
FIA embedded derivative discount rate, net of offsets
|
|
(20.4)
|
|
|
(6.6)
|
|
Effects of
transaction-related reinsurance
|
|
4.0
|
|
|
—
|
|
Pretax AOI
|
|
$
|
44.1
|
|
|
$
|
31.9
|
|
|
|
|
|
|
AAUM
|
|
$15,588.4
|
|
|
$16,349.3
|
|
Return on
AAUM
|
|
0.3
|
%
|
|
0.2
|
%
|
BOOK VALUE PER SHARE, EXCLUDING AOCI,
ADJUSTMENTS TO SHAREHOLDER'S EQUITY
Book value per common share, excluding AOCI, is a non-GAAP
measure that eliminates the impact of accumulated other
comprehensive income.
(In millions, except
share data)
|
|
As of December
31,
|
Reconciliation to
total shareholder's equity:
|
|
2013
|
|
2012
|
Total shareholder's
equity
|
|
$
|
1,331.8
|
|
|
$
|
1,372.4
|
|
Less: AOCI
|
|
106.1
|
|
|
422.9
|
|
Total shareholder's
equity excluding AOCI
|
|
$1,225.7
|
|
|
$949.5
|
|
|
|
|
|
|
|
|
Total shares
outstanding
|
|
58,270,822
|
|
|
47,000,000
|
(1)
|
Weighted average
shares outstanding – basic
|
|
49,142,208
|
|
|
47,000,000
|
(1)
|
Weighted average
shares outstanding – diluted
|
|
49,263,675
|
|
|
47,000,000
|
|
|
|
|
|
|
|
|
Book value per
diluted share
|
|
$27.03
|
|
|
$29.20
|
|
Book value per
diluted share, excluding AOCI
|
|
$24.88
|
|
|
$20.20
|
|
|
|
|
|
|
|
|
(1)
|
Common shares
outstanding and per share amounts give retroactive effect to our
statutory conversion on
|
|
August 26, 2013 and
the 4,700-for-1 stock split of our shares of common stock effected
on November 26,
|
|
2013.
|
About Fidelity & Guaranty Life
Fidelity & Guaranty Life is the parent company of Fidelity
& Guaranty Life Insurance Company. Originally incorporated in
1959, the direct insurance writer has a solid commitment to serving
the individuals it knows best – consumers seeking the safety,
protection, accumulation and income features of secure life
insurance and annuity products. Through its insurance subsidiaries,
Fidelity & Guaranty Life Insurance Company and Fidelity &
Guaranty Life Insurance Company of New
York, FGL is a leading provider of fixed indexed annuity and
fixed indexed universal life products. Visit us at:
www.fglife.com.
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.
FGL uses Pretax AOI, a non-GAAP financial measure frequently
used throughout the insurance industry. Pretax AOI is calculated by
adjusting the reported operating income to eliminate the impact of
net investment gains, excluding gains and losses on derivatives and
including net other-than-temporary impairment losses recognized in
operations, the effect of changes in the rates used to discount the
FIA embedded derivative liability and the effects of
transaction-related reinsurance transactions. 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.
Annuity 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).
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.
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 Registration Statement on
Form S-1, as amended (File No. 333-190880), 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:
Paul Tyler
Fidelity & Guaranty Life
paul.tyler@fglife.com
410-895-0131
914-356-2138
Media Contact:
Sard Verbinnen & Co
Jamie Tully or David Millar, 212-687-8080
SOURCE Fidelity & Guaranty Life