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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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46-3489149
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
|
Two Ruan Center
601 Locust Street, 14th Floor Des Moines, Iowa |
50309
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(Address of principal executive offices)
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(Zip Code)
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Title of each class:
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Name of each exchange on which registered:
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Common stock, par value $.01 per share
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New York Stock Exchange
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Large Accelerated Filer
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¨
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Accelerated Filer
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x
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Non-accelerated Filer
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¨
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Page
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PART I
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PART II
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PART III
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PART IV
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•
|
the ability to satisfy the closing conditions, including regulatory approvals, contained in the Merger Agreement
|
•
|
the impact on the stock price, business, financial condition and results of operations if the proposed merger is not consummated or not consummated timely;
|
•
|
the impact of the operating restrictions in the Merger Agreement and their impact on FGL;
|
•
|
litigation arising from the proposed merger;
|
•
|
regulatory changes or actions, including those relating to regulation of financial services affecting (among other things) underwriting of insurance products and regulation of the sale, underwriting and pricing of products and minimum capitalization and statutory reserve requirements for insurance companies, or the ability of our insurance subsidiaries to make cash distributions to us (including dividends or payments on surplus notes those subsidiaries issue to us);
|
•
|
the impact of the Department of Labor "fiduciary" rule, finalized in April 2016, on the Company, its products, distribution and business model;
|
•
|
the impact on our business of new accounting rules or changes to existing accounting rules;
|
•
|
the impact of restrictions in FGL’s debt instruments on its ability to operate its business, finance its capital needs or pursue or expand its business strategies;
|
•
|
the accuracy of management’s assumptions and estimates;
|
•
|
the accuracy of our assumptions regarding the fair value and future performance of our investments;
|
•
|
our ability and our insurance subsidiaries’ ability to maintain or improve financial strength ratings;
|
•
|
our potential need and our insurance subsidiaries’ potential need for additional capital to maintain our and their financial strength and credit ratings and meet other requirements and obligations;
|
•
|
the continued availability of capital required for our insurance subsidiaries to grow;
|
•
|
our ability to defend ourselves against or respond to, potential litigation, enforcement investigations or increased regulatory scrutiny;
|
•
|
the impact of potential litigation, including class action litigation;
|
•
|
the impact of our reinsurers failing to meet or timely meet their assumed obligations, increasing their rates, or becoming subject to adverse developments that could materially adversely impact their ability to provide reinsurance to us at consistent and economical terms;
|
•
|
restrictions on our ability to use captive reinsurers and the impact of the anticipated implementation of principle-based reserving
|
•
|
the impact of interest rate fluctuations and withdrawal demands in excess of our assumptions;
|
•
|
the impact of market and credit risks;
|
•
|
equity market volatility;
|
•
|
credit market volatility or disruption;
|
•
|
changes in the federal income tax laws and regulations which may affect the relative income tax advantages of our products;
|
•
|
increases in our valuation allowance against our deferred tax assets, and restrictions on our ability to fully utilize such assets;
|
•
|
potential adverse tax consequences if we generate passive income in excess of operating expenses;
|
•
|
the performance of third parties including third party administrators, independent distributors, underwriters, actuarial consultants and other service providers;
|
•
|
the loss of key personnel;
|
•
|
interruption or other operational failures in telecommunication, information technology and other operational systems, or a failure to maintain the security, integrity, confidentiality or privacy of sensitive data residing on such systems;
|
•
|
our exposure to unidentified or unanticipated risk not adequately addressed by our risk management policies and procedures;
|
•
|
general economic conditions and other factors, including prevailing interest and unemployment rate levels and stock and credit market performance;
|
•
|
our ability to protect our intellectual property;
|
•
|
the impact on our business of natural and man-made catastrophes, pandemics, and malicious and terrorist acts;
|
•
|
our ability to compete in a highly competitive industry;
|
•
|
our ability to maintain competitive policy expense costs;
|
•
|
adverse consequences if the independent contractor status of our insurance marketing organizations ("IMOs") is successfully challenged;
|
•
|
our ability to attract and retain national marketing organizations and independent agents;
|
•
|
the inability of our subsidiaries and affiliates to generate sufficient cash to service all of their obligations;
|
•
|
conflicts of interest between HRG Group Inc. or its affiliates, including Front Street Re (Cayman) Ltd. (“FSRCI”);
|
•
|
the impact of non-performance of loans originated by Salus Capital Partners, LLC ("Salus");
|
•
|
our subsidiaries’ ability to pay dividends to us;
|
•
|
the ability to maintain or obtain approval of Iowa Insurance Division ("IID") and other regulatory authorities as required for our operations and those of our insurance subsidiaries; and
|
•
|
the other factors discussed in “Risk Factors”, of (Part I, Item 1A of this Form 10-K).
|
•
|
Protect Sales in Our Existing Market
. We believe the demand for retirement and principal protection products in the IMO market will continue even under the Department of Labor "fiduciary" rule
|
•
|
Strengthen the Foundation.
We will execute foundational initiatives that strengthen the business and provide a platform for sustainable growth.
|
•
|
Enhance the FGL Experience.
Building off the foundational initiatives, we will create a more engaging, customer-focused experience through accelerating the use of digital and improving the ease of doing business for our IMO partners and customers.
|
•
|
Leverage Product Capabilities for Additional Distribution.
Capitalize on our manufacturing expertise and distribution partnerships to expand product reach.
|
•
|
Bottom-line, Profit-oriented Objectives
.
We focus on initiatives that we expect will deliver target profits and avoid markets and products when industry pricing makes it difficult to achieve targeted profit margins.
|
Cap rate
|
|
0% to 3%
|
|
3% to 5%
|
|
> 5%
|
|
Total
|
||||||||
1 year gain trigger
|
|
$
|
294
|
|
|
$
|
262
|
|
|
$
|
33
|
|
|
$
|
589
|
|
1-2 year monthly average
|
|
413
|
|
|
808
|
|
|
194
|
|
|
1,415
|
|
||||
1-3 year monthly point-to-point
|
|
3,911
|
|
|
159
|
|
|
—
|
|
|
4,070
|
|
||||
1-3 year annual point-to-point
|
|
1,089
|
|
|
1,819
|
|
|
353
|
|
|
3,261
|
|
||||
3 year step forward
|
|
—
|
|
|
24
|
|
|
127
|
|
|
151
|
|
||||
Total
|
|
$
|
5,707
|
|
|
$
|
3,072
|
|
|
$
|
707
|
|
|
$
|
9,486
|
|
Crediting rate
|
|
1% to 2%
|
|
2% to 3%
|
|
3% to 4%
|
|
4% to 5%
|
|
5% to 6%
|
||||||||||
Account value
|
|
$
|
43
|
|
|
$
|
196
|
|
|
$
|
2,764
|
|
|
$
|
435
|
|
|
$
|
48
|
|
|
|
Fixed and Fixed Index Annuities Account Value
|
|
Percent of Total
|
|
Weighted Average Surrender Charge
|
||||
SURRENDER CHARGE EXPIRATION BY YEAR
|
|
|
|
|
|
|
||||
Out of surrender charge
|
|
$
|
2,394
|
|
|
16
|
%
|
|
—
|
%
|
2016
|
|
203
|
|
|
1
|
%
|
|
3
|
%
|
|
2017-2018
|
|
2,441
|
|
|
16
|
%
|
|
5
|
%
|
|
2019-2020
|
|
1,769
|
|
|
12
|
%
|
|
7
|
%
|
|
2021-2022
|
|
1,964
|
|
|
13
|
%
|
|
8
|
%
|
|
Thereafter
|
|
6,479
|
|
|
42
|
%
|
|
11
|
%
|
|
Total
|
|
$
|
15,250
|
|
|
100
|
%
|
|
|
|
|
September 30, 2016
|
|
September 30, 2015
|
|
September 30, 2014
|
||||||||||||||||||
|
|
Deposits on
Annuity Policies |
|
U.S.
GAAP Reserves |
|
Deposits on
Annuity Policies |
|
U.S.
GAAP Reserves |
|
Deposits on
Annuity Policies |
|
U.S.
GAAP Reserves |
||||||||||||
Products
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed indexed annuities
|
|
$
|
1,861
|
|
|
$
|
13,148
|
|
|
$
|
2,185
|
|
|
$
|
12,094
|
|
|
$
|
1,451
|
|
|
$
|
10,767
|
|
Fixed rate annuities
|
|
539
|
|
|
3,566
|
|
|
211
|
|
|
3,249
|
|
|
708
|
|
|
3,192
|
|
||||||
Single premium immediate annuities
|
|
28
|
|
|
2,917
|
|
|
16
|
|
|
2,956
|
|
|
10
|
|
|
3,202
|
|
||||||
Total
|
|
$
|
2,428
|
|
|
$
|
19,631
|
|
|
$
|
2,412
|
|
|
$
|
18,299
|
|
|
$
|
2,169
|
|
|
$
|
17,161
|
|
Cap rate
|
|
2.5%-5.0%
|
|
5.0-7.5%
|
|
7.5%-10.0%
|
|
10.0-12.5%
|
|
12.5+
|
|
Total
|
||||||||||||
1 year annual point-to-point, Gold Index
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
23
|
|
|
$
|
23
|
|
1 year monthly point-to-point, S&P Index
|
|
32
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32
|
|
||||||
1 year annual point-to-point with 100% par rate, S&P Index
|
|
13
|
|
|
7
|
|
|
26
|
|
|
104
|
|
|
71
|
|
|
221
|
|
||||||
1 year annual point-to-point with 140% par rate, S&P Index
|
|
3
|
|
|
3
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
21
|
|
||||||
Total
|
|
$
|
48
|
|
|
$
|
10
|
|
|
$
|
41
|
|
|
$
|
104
|
|
|
$
|
94
|
|
|
$
|
297
|
|
•
|
a well matched asset/liability profile (asset duration, including cash and cash equivalents, of
6.52
years vs. liability duration of
6.80
years); and
|
•
|
a large exposure to less rate-sensitive assets (
19%
of invested assets).
|
•
|
new business administration;
|
•
|
service of existing policies;
|
•
|
underwriting administration of life insurance applications;
|
•
|
call centers;
|
•
|
information technology development and maintenance;
|
•
|
investment accounting and custody; and
|
•
|
hosting of financial systems.
|
•
|
licensing to transact business;
|
•
|
licensing agents;
|
•
|
prescribing which assets and liabilities are to be considered in determining statutory surplus;
|
•
|
regulating premium rates for certain insurance products;
|
•
|
approving policy forms and certain related materials;
|
•
|
determining whether a reasonable basis exists as to the suitability of the annuity purchase recommendations producers make;
|
•
|
regulating unfair trade and claims practices;
|
•
|
establishing reserve requirements and solvency standards;
|
•
|
regulating the amount of dividends that may be paid in any year;
|
•
|
regulating the availability of reinsurance or other substitute financing solutions, the terms thereof and the ability of an insurer to take credit on its financial statements for insurance ceded to reinsurers or other substitute financing solutions;
|
•
|
|
•
|
fixing maximum interest rates on life insurance policy loans and minimum accumulation or surrender values; and
|
•
|
regulating the type, amounts, and valuations of investments permitted, transactions with affiliates, and other matters.
|
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
FGL Insurance Ordinary Dividend Capacity
|
|
$
|
124
|
|
|
$
|
121
|
|
|
$
|
124
|
|
|
$
|
106
|
|
|
$
|
85
|
|
FGL Insurance Ordinary Dividends Paid
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40
|
|
|
40
|
|
•
|
the establishment of federal regulatory authority over derivatives;
|
•
|
the establishment of consolidated federal regulation and resolution authority over systemically important financial services firms;
|
•
|
the establishment of the Federal Insurance Office;
|
•
|
changes to the regulation of broker dealers and investment advisors;
|
•
|
changes to the regulation of reinsurance;
|
•
|
changes to regulations affecting the rights of shareholders;
|
•
|
the imposition of additional regulation over credit rating agencies;
|
•
|
|
•
|
the imposition of concentration limits on financial institutions that restrict the amount of credit that may be extended to a single person or entity; and
|
•
|
the clearing of derivative contracts.
|
•
|
placing us at a competitive disadvantage relative to our competition or other financial services entities;
|
•
|
changing the competitive landscape of the financial services sector or the insurance industry;
|
•
|
making it more expensive for us to conduct our business;
|
•
|
requiring the reallocation of significant company resources to government affairs;
|
•
|
increasing our legal and compliance related activities and the costs associated therewith; or
|
•
|
otherwise having a material adverse effect on the overall business climate as well as our financial condition and results of operations.
|
•
|
incur additional indebtedness;
|
•
|
pay dividends or certain other distributions on its capital stock other than as allowed under the indenture and the Credit Agreement;
|
•
|
make certain investments or other restricted payments;
|
•
|
engage in transactions with stockholders or affiliates;
|
•
|
sell certain assets or merge with or into other companies;
|
•
|
change our accounting policies;
|
•
|
enter into restrictive agreements;
|
•
|
guarantee indebtedness; and
|
•
|
create liens.
|
•
|
adversely affecting relationships with distributors, IMOs and sales agents, which could result in reduction of sales;
|
•
|
increasing the number or amount of policy lapses or surrenders and withdrawals of funds;
|
•
|
requiring a reduction in prices for our insurance products and services in order to remain competitive;
|
•
|
adversely affecting our ability to obtain reinsurance at a reasonable price, on reasonable terms or at all; and
|
•
|
requiring us to collateralize reserves, balances or obligations under reinsurance and derivatives agreements.
|
•
|
the amount of statutory income or losses generated by our insurance subsidiaries (which itself is sensitive to equity market and credit market conditions);
|
•
|
the amount of additional capital our insurance subsidiaries must hold to support business growth;
|
•
|
changes in reserve requirements applicable to our insurance subsidiaries;
|
•
|
our ability to access capital markets to provide reserve relief;
|
•
|
changes in equity market levels;
|
•
|
the value of certain fixed-income and equity securities in our investment portfolio;
|
•
|
changes in the credit ratings of investments held in our portfolio;
|
•
|
the value of certain derivative instruments;
|
•
|
changes in interest rates;
|
•
|
|
•
|
credit market volatility;
|
•
|
changes in consumer behavior; and
|
•
|
changes to the RBC formulas and interpretation of the NAIC instructions with respect to RBC calculation methodologies.
|
•
|
industry or general market conditions;
|
•
|
domestic and international political and economic factors unrelated to our performance;
|
•
|
actual or anticipated fluctuations in our quarterly operating results;
|
•
|
changes in or failure to meet publicly disclosed expectations as to our future financial performance;
|
•
|
changes in securities analysts’ estimates of our financial performance or lack of research and reports by industry analysts;
|
•
|
action by institutional shareholders or other large shareholders, such as HRG, including sales of large blocks of common stock;
|
•
|
speculation in the press or investment community;
|
•
|
changes in investor perception of us and our industry;
|
•
|
changes in market valuations or earnings of similar companies;
|
•
|
announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;
|
•
|
changes in our capital structure, such as future sales of our common stock or other securities;
|
•
|
changes in applicable laws, rules or regulations, regulatory actions affecting us and other dynamics; and
|
•
|
additions or departures of key personnel.
|
•
|
prepare and file periodic reports, and distribute other shareholder communications, in compliance with the federal securities laws and NYSE listing standards;
|
•
|
define and expand the roles and the duties of our board of directors and its committees;
|
•
|
institute more comprehensive compliance, investor relations and internal audit functions; and
|
•
|
evaluate and maintain our system of internal control over financial reporting, and report on management’s assessment thereof, in compliance with rules and regulations of the SEC and the Public Company Accounting Oversight Board.
|
•
|
authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a takeover attempt;
|
•
|
establish a classified board of directors, as a result of which our board of directors will be divided into three classes, with members of each class serving staggered three-year terms, which prevents shareholders from electing an entirely new board of directors at an annual meeting;
|
•
|
limit the ability of shareholders to remove directors;
|
•
|
|
•
|
provide that vacancies on our board of directors, including vacancies resulting from an enlargement of our board of directors, may be filled only by a majority vote of directors then in office;
|
•
|
prohibit shareholders from calling special meetings of shareholders if HRG ceases to own at least 50% of the outstanding shares of our common stock;
|
•
|
prohibit shareholder action by written consent, thereby requiring all actions to be taken at a meeting of the shareholders, if HRG ceases to own at least 50% of the outstanding shares of our common stock;
|
•
|
establish advance notice requirements for nominations of candidates for election as directors or to bring other business before an annual meeting of our shareholders; and
|
•
|
require the approval of holders of at least 66 2/3% of the outstanding shares of our common stock to amend our amended and restated by-laws and certain provisions of our amended and restated certificate of incorporation if HRG ceases to own at least 50% of the outstanding shares of our common stock.
|
•
|
the requirement that a majority of the board of directors consist of independent directors;
|
•
|
the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;
|
•
|
the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and
|
•
|
the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees.
|
|
|
High
|
|
Low
|
||||
Year ended September 30, 2016
|
|
|
|
|
||||
First Quarter
|
|
$
|
27.87
|
|
|
$
|
24.01
|
|
Second Quarter
|
|
26.55
|
|
|
23.99
|
|
||
Third Quarter
|
|
26.49
|
|
|
22.17
|
|
||
Fourth Quarter
|
|
24.30
|
|
|
21.42
|
|
||
|
|
|
|
|
||||
Year ended September 30, 2015
|
|
|
|
|
||||
First Quarter
|
|
$
|
26.59
|
|
|
$
|
20.12
|
|
Second Quarter
|
|
24.85
|
|
|
20.50
|
|
||
Third Quarter
|
|
24.24
|
|
|
20.53
|
|
||
Fourth Quarter
|
|
27.41
|
|
|
23.01
|
|
|
|
Fidelity & Guaranty Life
|
||||||||||||||||||
|
|
Year Ended September 30,
|
||||||||||||||||||
(In millions, except share data)
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
SUMMARY OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total operating revenues
|
|
$
|
1,139
|
|
|
$
|
961
|
|
|
$
|
1,191
|
|
|
$
|
1,347
|
|
|
$
|
1,222
|
|
Total benefits and expenses
|
|
964
|
|
|
755
|
|
|
979
|
|
|
827
|
|
|
1,062
|
|
|||||
Net income
|
|
$
|
97
|
|
|
$
|
118
|
|
|
$
|
163
|
|
|
$
|
348
|
|
|
$
|
344
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
PER SHARE DATA (a)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income per common share - basic
|
|
$
|
1.67
|
|
|
$
|
2.03
|
|
|
$
|
2.91
|
|
|
$
|
7.40
|
|
|
7.32
|
|
|
Net income per common share - diluted
|
|
1.66
|
|
|
2.02
|
|
|
2.90
|
|
|
7.40
|
|
|
7.32
|
|
|||||
Cash dividends declared per common share (b)
|
|
0.26
|
|
|
0.26
|
|
|
1.11
|
|
|
1.99
|
|
|
0.85
|
|
|||||
Common shares outstanding
|
|
59.0
|
|
|
58.9
|
|
|
58.4
|
|
|
47.0
|
|
|
47.0
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
BALANCE SHEET DATA
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total investments
|
|
$
|
21,025
|
|
|
$
|
19,094
|
|
|
$
|
18,802
|
|
|
$
|
16,223
|
|
|
$
|
16,557
|
|
Total assets
|
|
27,035
|
|
|
24,925
|
|
|
24,153
|
|
|
22,403
|
|
|
20,990
|
|
|||||
Debt
|
|
400
|
|
|
300
|
|
|
300
|
|
|
300
|
|
|
—
|
|
|||||
Total liabilities
|
|
25,101
|
|
|
23,423
|
|
|
22,494
|
|
|
21,264
|
|
|
19,700
|
|
|||||
Total equity
|
|
1,934
|
|
|
1,502
|
|
|
1,659
|
|
|
1,139
|
|
|
1,291
|
|
|||||
Total equity excluding AOCI
|
|
1,495
|
|
|
1,414
|
|
|
1,310
|
|
|
1,026
|
|
|
856
|
|
|||||
Book value per share
|
|
32.80
|
|
|
25.51
|
|
|
28.39
|
|
|
24.23
|
|
|
27.46
|
|
|||||
Book value per share, excluding AOCI (c)
|
|
$
|
25.36
|
|
|
$
|
24.02
|
|
|
$
|
22.41
|
|
|
$
|
21.82
|
|
|
18.22
|
|
|
Annuity Sales
|
|
IUL Sales
|
||||||||||||||||||||
(dollars in millions)
|
Fiscal 2016
|
|
Fiscal 2015
|
|
Fiscal 2014
|
|
Fiscal 2016
|
|
Fiscal 2015
|
|
Fiscal 2014
|
||||||||||||
First Fiscal Quarter
|
$
|
489
|
|
|
$
|
903
|
|
|
$
|
540
|
|
|
$
|
13
|
|
|
$
|
7
|
|
|
$
|
5
|
|
Second Fiscal Quarter
|
601
|
|
|
610
|
|
|
728
|
|
|
11
|
|
|
7
|
|
|
5
|
|
||||||
Third Fiscal Quarter
|
832
|
|
|
519
|
|
|
392
|
|
|
15
|
|
|
10
|
|
|
6
|
|
||||||
Fourth Fiscal Quarter
|
603
|
|
|
434
|
|
|
501
|
|
|
17
|
|
|
11
|
|
|
5
|
|
||||||
Total
|
$
|
2,525
|
|
|
$
|
2,466
|
|
|
$
|
2,161
|
|
|
$
|
56
|
|
|
$
|
35
|
|
|
$
|
21
|
|
|
|
As of September 30, 2016
|
||||||||||||||
(dollars in millions)
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total
|
||||||||
Fixed maturity securities and equity securities available-for-sale:
|
|
|
|
|
|
|
|
|
||||||||
Prices via third party pricing services
|
|
$
|
83
|
|
|
$
|
18,554
|
|
|
$
|
—
|
|
|
$
|
18,637
|
|
Priced via independent broker quotations
|
|
—
|
|
|
—
|
|
|
1,199
|
|
|
1,199
|
|
||||
Priced via other methods
|
|
—
|
|
|
—
|
|
|
258
|
|
|
258
|
|
||||
Total
|
|
$
|
83
|
|
|
$
|
18,554
|
|
|
$
|
1,457
|
|
|
$
|
20,094
|
|
Available-for-sale embedded derivative:
|
|
|
|
|
|
|
|
|
||||||||
Priced via other methods
|
|
—
|
|
|
—
|
|
|
13
|
|
|
13
|
|
||||
Salus participations, included in other invested assets:
|
|
|
|
|
|
|
|
|
||||||||
Priced via other methods
|
|
—
|
|
|
—
|
|
|
21
|
|
|
21
|
|
||||
Total
|
|
$
|
83
|
|
|
$
|
18,554
|
|
|
$
|
1,491
|
|
|
$
|
20,128
|
|
% of Total
|
|
—
|
%
|
|
92
|
%
|
|
8
|
%
|
|
100
|
%
|
|
|
As of September 30, 2015
|
||||||||||||||
(dollars in millions)
|
|
Quoted Prices in
Active Markets for Identical Assets (Level 1) |
|
Significant
Observable Inputs (Level 2) |
|
Significant
Unobservable Inputs (Level 3) |
|
Total
|
||||||||
Fixed maturity securities and equity securities available-for-sale:
|
|
|
|
|
|
|
|
|
||||||||
Prices via third party pricing services
|
|
$
|
86
|
|
|
$
|
17,061
|
|
|
$
|
—
|
|
|
$
|
17,147
|
|
Priced via independent broker quotations
|
|
—
|
|
|
—
|
|
|
1,119
|
|
|
1,119
|
|
||||
Priced via other methods
|
|
—
|
|
|
—
|
|
|
100
|
|
|
100
|
|
||||
Total
|
|
$
|
86
|
|
|
$
|
17,061
|
|
|
$
|
1,219
|
|
|
$
|
18,366
|
|
Available-for-sale embedded derivative:
|
|
|
|
|
|
|
|
|
||||||||
Priced via other methods
|
|
—
|
|
|
—
|
|
|
10
|
|
|
10
|
|
||||
Salus and Energy & Infrastructure Capital ("EIC") participations, included in other invested assets:
|
|
|
|
|
|
|
|
|
||||||||
Priced via other methods
|
|
—
|
|
|
—
|
|
|
119
|
|
|
119
|
|
||||
Total
|
|
$
|
86
|
|
|
$
|
17,061
|
|
|
$
|
1,348
|
|
|
$
|
18,495
|
|
% of Total
|
|
—
|
%
|
|
93
|
%
|
|
7
|
%
|
|
100
|
%
|
(dollars in millions)
|
|
As of September 30, 2016
|
||
|
|
|
||
A change to the long-term interest rate assumption of -50 basis points
|
|
$
|
(56
|
)
|
A change to the long-term interest rate assumption of +50 basis points
|
|
48
|
|
|
An assumed 10% increase in surrender rate
|
|
(4
|
)
|
(dollars in millions)
|
|
Direct
|
|
Reinsurance
Recoverable |
|
Net
|
||||||
|
|
|
|
|
|
|
||||||
Fixed indexed annuities
|
|
$
|
13,148
|
|
|
$
|
(650
|
)
|
|
$
|
12,498
|
|
Fixed rate annuities
|
|
3,566
|
|
|
(330
|
)
|
|
3,236
|
|
|||
Immediate annuities
|
|
2,917
|
|
|
(337
|
)
|
|
2,580
|
|
|||
Universal life
|
|
1,399
|
|
|
(1,061
|
)
|
|
338
|
|
|||
Traditional life
|
|
1,688
|
|
|
(1,086
|
)
|
|
602
|
|
|||
Total
|
|
$
|
22,718
|
|
|
$
|
(3,464
|
)
|
|
$
|
19,254
|
|
•
|
Future reversals of existing taxable temporary differences (i.e., offset of gross deferred tax assets against gross deferred tax liabilities);
|
•
|
Taxable income in prior carryback years, if carryback is permitted under tax law;
|
•
|
Tax planning strategies; and
|
•
|
Future taxable income exclusive of reversing temporary differences and carry-forwards.
|
•
|
As of
September 30, 2016
, we were in a cumulative income position based on pre-tax income over the prior 12 quarters;
|
•
|
We are projecting significant pre-tax GAAP income from continuing operations;
|
•
|
We have projected that the reversal of taxable temporary timing differences will unwind in the 20-year projection period;
|
•
|
We have a history of utilizing all significant tax attributes before they expire; and
|
•
|
Our inventory of IRC Section 382 limited attributes has been significantly reduced over the past couple years.
|
•
|
§382 limited carry-forwards reduce our ability to utilize tax attributes in future years; and
|
•
|
Brief carryback/carry-forward period for capital losses.
|
|
|
Fiscal Year
|
|
Increase / (Decrease)
|
||||||||||||||||
|
|
2016
|
|
2015
|
|
2014
|
|
2016 compared to 2015
|
|
2015 compared to 2014
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Premiums
|
|
$
|
70
|
|
|
$
|
58
|
|
|
$
|
56
|
|
|
$
|
12
|
|
|
$
|
2
|
|
Net investment income
|
|
923
|
|
|
851
|
|
|
760
|
|
|
72
|
|
|
91
|
|
|||||
Net investment gains (losses)
|
|
19
|
|
|
(37
|
)
|
|
307
|
|
|
56
|
|
|
(344
|
)
|
|||||
Insurance and investment product fees and other
|
|
127
|
|
|
89
|
|
|
68
|
|
|
38
|
|
|
21
|
|
|||||
Total revenues
|
|
1,139
|
|
|
961
|
|
|
1,191
|
|
|
178
|
|
|
(230
|
)
|
|||||
Benefits and expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Benefits and other changes in policy reserves
|
|
791
|
|
|
578
|
|
|
788
|
|
|
213
|
|
|
(210
|
)
|
|||||
Acquisition and operating expenses, net of deferrals
|
|
119
|
|
|
113
|
|
|
102
|
|
|
6
|
|
|
11
|
|
|||||
Amortization of intangibles
|
|
54
|
|
|
64
|
|
|
89
|
|
|
(10
|
)
|
|
(25
|
)
|
|||||
Total benefits and expenses
|
|
964
|
|
|
755
|
|
|
979
|
|
|
209
|
|
|
(224
|
)
|
|||||
Operating income
|
|
175
|
|
|
206
|
|
|
212
|
|
|
(31
|
)
|
|
(6
|
)
|
|||||
Interest expense
|
|
(22
|
)
|
|
(24
|
)
|
|
(23
|
)
|
|
2
|
|
|
(1
|
)
|
|||||
Income before income taxes
|
|
153
|
|
|
182
|
|
|
189
|
|
|
(29
|
)
|
|
(7
|
)
|
|||||
Income tax expense
|
|
56
|
|
|
64
|
|
|
26
|
|
|
(8
|
)
|
|
38
|
|
|||||
Net income
|
|
$
|
97
|
|
|
$
|
118
|
|
|
$
|
163
|
|
|
$
|
(21
|
)
|
|
$
|
(45
|
)
|
|
|
Fiscal Year
|
|
Increase / (Decrease)
|
||||||||||||||||
|
|
2016
|
|
2015
|
|
2014
|
|
2016 compared to 2015
|
|
2015 compared to 2014
|
||||||||||
Fixed maturity securities, available-for-sale
|
|
$
|
869
|
|
|
$
|
799
|
|
|
$
|
723
|
|
|
$
|
70
|
|
|
$
|
76
|
|
Equity securities, available-for-sale
|
|
32
|
|
|
33
|
|
|
23
|
|
|
(1
|
)
|
|
10
|
|
|||||
Commercial mortgage loans, related party loans, invested cash, short term investments, and other investments
|
|
40
|
|
|
39
|
|
|
30
|
|
|
1
|
|
|
9
|
|
|||||
Gross investment income
|
|
941
|
|
|
871
|
|
|
776
|
|
|
70
|
|
|
95
|
|
|||||
Investment expense
|
|
(18
|
)
|
|
(20
|
)
|
|
(16
|
)
|
|
2
|
|
|
(4
|
)
|
|||||
Net investment income
|
|
$
|
923
|
|
|
$
|
851
|
|
|
$
|
760
|
|
|
$
|
72
|
|
|
$
|
91
|
|
|
|
Fiscal Year
|
|
Increase / (Decrease)
|
||||||||||||||||
|
|
2016
|
|
2015
|
|
2014
|
|
2016 compared to 2015
|
|
2015 compared to 2014
|
||||||||||
Yield on AAUM (at amortized cost)
|
|
4.92
|
%
|
|
4.80
|
%
|
|
4.64
|
%
|
|
0.12
|
%
|
|
0.16
|
%
|
|||||
Less: Interest credited and option cost
|
|
(2.65
|
)%
|
|
(2.83
|
)%
|
|
(2.94
|
)%
|
|
0.18
|
%
|
|
0.11
|
%
|
|||||
Net investment spread
|
|
2.27
|
%
|
|
1.97
|
%
|
|
1.70
|
%
|
|
0.30
|
%
|
|
0.27
|
%
|
|||||
AAUM
|
|
$
|
18,738
|
|
|
$
|
17,722
|
|
|
$
|
16,354
|
|
|
$
|
1,016
|
|
|
$
|
1,368
|
|
•
|
The
increase
in net investment income ("NII") of
$72
, or
8%
, from
Fiscal 2015
to
Fiscal 2016
was primarily due increases in AAUM (volume) and earned yields (rate). The volume and rate increases period over period resulted in net investment income growth of $49 and $23, respectively. The increase in earned yields was primarily due to higher overall portfolio yields from repositioning activities completed over the past year as well as an increase in income from tender offer consideration and bond prepayment income.
|
•
|
The
increase
in AAUM of
$1 billion
or
6%
from
Fiscal 2015
to
Fiscal 2016
was primarily due to annuity sales and FHLB institutional spread based sales over the past year and stable in force retention trends.
|
•
|
The
increase
in net investment income of
$91
, or
12%
, from
Fiscal 2014
to Fiscal 2015 was primarily due to higher AAUM (volume) and higher earned yields (rate), driven by higher overall portfolio yields from repositioning activities completed.
|
•
|
The increase in AAUM of $1 billion or 8% from
Fiscal 2014
to
Fiscal 2015
was primarily driven by FIA sales growth over the year and stable in force retention trends.
|
|
|
Fiscal Year
|
|
Increase / (Decrease)
|
||||||||||||||||
|
|
2016
|
|
2015
|
|
2014
|
|
2016 compared to 2015
|
|
2015 compared to 2014
|
||||||||||
Net realized (losses) gains on available-for-sale securities
|
|
$
|
(14
|
)
|
|
$
|
(22
|
)
|
|
$
|
103
|
|
|
$
|
8
|
|
|
$
|
(125
|
)
|
Realized and unrealized gains (losses) on certain derivative instruments
|
|
82
|
|
|
(107
|
)
|
|
246
|
|
|
189
|
|
|
(353
|
)
|
|||||
Change in fair value of reinsurance related embedded derivative
|
|
(49
|
)
|
|
92
|
|
|
(42
|
)
|
|
(141
|
)
|
|
134
|
|
|||||
Net investment gains (losses)
|
|
$
|
19
|
|
|
$
|
(37
|
)
|
|
$
|
307
|
|
|
$
|
56
|
|
|
$
|
(344
|
)
|
•
|
The
increase
in net investment gains on available-for-sale securities of
$8
from
Fiscal 2015
to
Fiscal 2016
was primarily due a decrease in impairments year over year, partially offset by a decrease in net realized gains, as Fiscal 2015 reflected trading gains from our tax planning strategy initiated in 2014. Fiscal 2016 net realized losses on available-for-sale securities includes
$44
of net impairments, primarily related to loan participations and Salus CLO. Comparatively, Fiscal 2015 net realized losses on available-for-sale securities includes of
$82
of net impairments primarily related to direct and indirect investments in RadioShack Corporation ("RSH"), which filed for bankruptcy in February 2015, as well as Salus CLO Equity investment. Refer to impairment disclosures in "Note 4. Investments" of our audited Consolidated Financial Statements for additional details.
|
•
|
Net realized and unrealized gains on certain derivative instruments increased
$189
from
Fiscal 2015
to
Fiscal 2016
. See the table below for primary drivers of this increase.
|
•
|
Partially offsetting the
increase
in net investment gains on available-for-sale securities and derivative instruments from
Fiscal 2015
to
Fiscal 2016
was a
$141
period over period
decrease
in fair value of reinsurance related embedded derivative, which is based on the change in fair value of the underlying assets held in the funds withheld ("FWH") portfolio. Specifically, the reinsurance related embedded derivative decreased
$49
during
Fiscal 2016
resulting from an increase in the net unrealized gain position of the FSRCI FWH portfolio during the year, primarily due to generally positive capital market and commodities price movements during the current year. Comparatively, the reinsurance related embedded derivative increased
$92
in the
Fiscal 2015
as a result of a decrease in fair value of the FWH portfolio primarily due to an increase in credit spreads during a period characterized by increased volatility in the capital markets. The impact of reinsurance related embedded derivative gains (losses) is largely offset in stockholders’ equity as the change in the net unrealized gains (losses) on the FSRCI FWH portfolio is included in AOCI.
|
•
|
The
decrease
in net investment gains of
$344
from
Fiscal 2014
to
Fiscal 2015
was primarily due to a decline in net realized and unrealized gains on certain derivative instruments. See table below for primary drivers of this decline. Also contributing to the year over year decrease were net credit impairment losses of
$82
during
Fiscal 2015
primarily related to direct and indirect investments in RSH. Comparatively, Fiscal 2014 included net realized gains of
$103
primarily related to our tax planning strategy which resulted in the sale of net unrealized built-in gain ("NUBIG") assets sufficient to generate gains to allow for the utilization of capital loss carry forwards.
|
•
|
Partially offsetting the decrease in net investment gains on available-for-sale securities and derivative instruments from
Fiscal 2014
to
Fiscal 2015
was a
$134
increase in fair value of reinsurance related embedded derivative. Specifically, the reinsurance related embedded derivative increased
$92
during
Fiscal 2015
(see above for driver of increase). Comparatively, the reinsurance related embedded derivative decreased
$42
in
Fiscal 2014
due to a decrease in U.S. Treasury rates during the year and a corresponding increase in the fair value of the FSRCI FWH portfolio.
|
|
Fiscal Year
|
|
Increase / (Decrease)
|
||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2016 compared to 2015
|
|
2015 compared to 2014
|
||||||||||
Call Options:
|
|
|
|
|
|
|
|
|
|
||||||||||
(Losses) gains on option expiration
|
$
|
(89
|
)
|
|
$
|
114
|
|
|
$
|
183
|
|
|
$
|
(203
|
)
|
|
$
|
(69
|
)
|
Change in unrealized gains (losses)
|
163
|
|
|
(214
|
)
|
|
37
|
|
|
377
|
|
|
(251
|
)
|
|||||
Futures contracts:
|
|
|
|
|
|
|
|
|
|
||||||||||
Gains (losses) on futures contracts expiration
|
5
|
|
|
(6
|
)
|
|
26
|
|
|
11
|
|
|
(32
|
)
|
|||||
Change in unrealized gains (losses)
|
3
|
|
|
(1
|
)
|
|
—
|
|
|
4
|
|
|
(1
|
)
|
|||||
Total net change in fair value
|
$
|
82
|
|
|
$
|
(107
|
)
|
|
$
|
246
|
|
|
$
|
189
|
|
|
$
|
(353
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Change in S&P 500 Index during the period
|
13
|
%
|
|
(3
|
)%
|
|
17
|
%
|
|
|
|
|
•
|
Realized gains and losses on certain derivative instruments are directly correlated to the performances of the indices upon which the call options and futures contracts are based and the value of the derivatives at the time of expiration compared to the value at the time of purchase. Additionally, the fair value of call options are primarily driven by the underlying performance of the S&P 500 index relative to the S&P index on the policyholder buy dates during each respective year.
|
•
|
The increase in certain derivative instruments from
Fiscal 2015
to
Fiscal 2016
and decrease from
Fiscal 2014
to
Fiscal 2015
was primarily due to the change in net realized and unrealized gains/(losses) on call options and future contracts during the respective years as well as timing of option purchases and expirations. The S&P 500 Index increased
13%
during
Fiscal 2016
, decreased
3%
during
Fiscal 2015
, and increased
17%
during
Fiscal 2014
(the percentages noted are a fiscal period over period comparison of the growth of the S&P 500 Index only and do not reflect the change for each option buy date).
|
•
|
The credits for
Fiscal 2016
,
Fiscal 2015
and
Fiscal 2014
were based on comparing the S&P 500 Index on each issue date in these respective periods to the same issue date in the respective prior year periods. The volatility at different points in these periods created a decline in crediting rates for the point-to-point, monthly average, and monthly point-to-point strategies in
Fiscal 2016
,
Fiscal 2015
and
Fiscal 2014
.
|
•
|
Actual amounts credited to contractholder fund balances may differ from the index appreciation due to contractual features in the FIA contracts (caps, spreads, participation rates and asset fees) which allow us to manage the cost of the options purchased to fund the annual index credits.
|
|
|
Fiscal Year
|
|
Increase / (Decrease)
|
||||||||||||||||
Insurance and investment product fees and other:
|
|
2016
|
|
2015
|
|
2014
|
|
2016 compared to 2015
|
|
2015 compared to 2014
|
||||||||||
Surrender charges
|
|
$
|
22
|
|
|
$
|
19
|
|
|
$
|
21
|
|
|
$
|
3
|
|
|
$
|
(2
|
)
|
Cost of insurance fees and other income
|
|
105
|
|
|
70
|
|
|
47
|
|
|
35
|
|
|
23
|
|
|||||
Total insurance and investment product fees and other
|
|
$
|
127
|
|
|
$
|
89
|
|
|
$
|
68
|
|
|
$
|
38
|
|
|
$
|
21
|
|
•
|
Insurance and investment product fees and other consists primarily of the cost of insurance, policy rider fees and surrender charges assessed against policy withdrawals in excess of the policyholder's allowable penalty-free amounts (up to 10% of the prior year's value, subject to certain limitations).
|
•
|
The
$38
and
$21
increase
s in insurance and investment product fees and other in
Fiscal 2015
and
Fiscal 2016
, respectively, were primarily due to increases in rider fees on FIA policies and in cost of insurance ("COI") charges on IUL policies. Specifically, guaranteed minimum withdrawal benefit ("GMWB") rider fees increased $11 from Fiscal 2014 to Fiscal 2015 and
$18
from Fiscal 2015 to Fiscal 2016 as a result of steady FIA sales over the past two years, which is partially offset by a corresponding increase in income rider reserves (included in Benefits and other changes in policy reserves).
GMWB rider fees are based on the policyholder's benefit base and are collected at the end of the policy year. Thus, FIA sales and growth of benefit base in Fiscal 2015 and 2016 resulted in higher fee income due to policyholder anniversary dates in both periods. The COI charges on IUL policies also increased $10 and
$15
during Fiscal 2015 and Fiscal 2016, respectively, due to growth in life sales over the past two years.
|
|
|
Fiscal Year
|
|
Increase / (Decrease)
|
||||||||||||||||
|
|
2016
|
|
2015
|
|
2014
|
|
2016 compared to 2015
|
|
2015 compared to 2014
|
||||||||||
FIA market value option liability change
|
|
$
|
174
|
|
|
$
|
(219
|
)
|
|
$
|
57
|
|
|
$
|
393
|
|
|
$
|
(276
|
)
|
FIA present value future credits & guarantee liability change
|
|
96
|
|
|
101
|
|
|
(20
|
)
|
|
(5
|
)
|
|
121
|
|
|||||
Index credits, interest credited & bonuses
|
|
316
|
|
|
524
|
|
|
596
|
|
|
(208
|
)
|
|
(72
|
)
|
|||||
Annuity payments
|
|
164
|
|
|
176
|
|
|
188
|
|
|
(12
|
)
|
|
(12
|
)
|
|||||
Other policy benefits and reserve movements
|
|
41
|
|
|
(4
|
)
|
|
(33
|
)
|
|
45
|
|
|
29
|
|
|||||
Total benefits and other changes in policy reserves
|
|
$
|
791
|
|
|
$
|
578
|
|
|
$
|
788
|
|
|
$
|
213
|
|
|
$
|
(210
|
)
|
•
|
The FIA market value option liability change increased
$174
during
Fiscal 2016
, decreased
$219
during
Fiscal 2015
and increased
$57
during
Fiscal 2014
, respectively. The increase of
$393
from
Fiscal 2015
to
Fiscal 2016
and decrease of
$276
from
Fiscal 2014
to
Fiscal 2015
was driven by the corresponding change in fair value of FIA options during the respective periods. In general, a decrease or increase in market value of derivative assets hedging FIA index credits will result in a corresponding decrease or increase in the market value option liability, respectively. See table above for summary and discussion of net unrealized gains (losses) on certain derivative instruments.
|
•
|
The FIA present value of future credits and guarantee liability
increased
$96
and
$101
during
Fiscal 2016
and
Fiscal 2015
, respectively, and decreased
$20
during
Fiscal 2014
. The
decrease
in longer duration risk free rates year over year increased reserves by
$97
and $83 during
Fiscal 2016
and Fiscal 2015, respectively. Additionally, the reserve increase for Fiscal 2016 and 2015 included increases of
$22
and
$18
, respectively, related to annual surrender assumption update which impacted the FIA embedded derivative reserve
|
•
|
Index credits, interest credited & bonuses
decreased
$208
from
Fiscal 2015
to
Fiscal 2016
and decreased
$72
from
Fiscal 2014
to
Fiscal 2015
. The year over year decreases from Fiscal 2015 to Fiscal 2016 and Fiscal 2014 to Fiscal 2015 were primarily due to lower index credits on FIA policies reflecting the unfavorable performance of the S&P 500 Index relative to the S&P 500 Index level on the policyholder buy dates and related decrease in realized gains from options and futures which fund FIA index credits. Fixed interest credits remained in line with historical experience in Fiscal 2016, 2015 and 2014.
|
•
|
Other policy benefits and reserve movements increased
$45
from
Fiscal 2015
to
Fiscal 2016
and
$29
from
Fiscal 2014
to
Fiscal 2015
. The increase from Fiscal 2015 to Fiscal 2016 was primarily due to an increase in GMWB reserves in the current year due to continued growth in FIA policies with the rider, as well as an increase in life contingent immediate annuity reserves due to increased annuitizations during Fiscal 2016. The reserve increase from Fiscal 2014 to
Fiscal 2015
was primarily due to unfavorable mortality experience on life contingent immediate annuity policies during Fiscal 2015. Upon a death, we release the reserve established for the expected remaining benefits which are based on assumptions for mortality among other things. We experience favorable or unfavorable reserve changes to the extent the actual deaths in the period are higher or lower than expected.
|
|
|
Fiscal Year
|
|
Increase / (Decrease)
|
||||||||||||||||
Acquisition and operating expenses, net of deferrals:
|
|
2016
|
|
2015
|
|
2014
|
|
2016 compared to 2015
|
|
2015 compared to 2014
|
||||||||||
General expenses
|
|
$
|
107
|
|
|
$
|
106
|
|
|
$
|
100
|
|
|
$
|
1
|
|
|
$
|
6
|
|
Acquisition expenses
|
|
325
|
|
|
298
|
|
|
219
|
|
|
27
|
|
|
79
|
|
|||||
Deferred acquisition costs
|
|
(313
|
)
|
|
(291
|
)
|
|
(217
|
)
|
|
(22
|
)
|
|
(74
|
)
|
|||||
Total acquisition and operating expenses, net of deferrals
|
|
$
|
119
|
|
|
$
|
113
|
|
|
$
|
102
|
|
|
$
|
6
|
|
|
$
|
11
|
|
•
|
The increase in Acquisition and operating expenses, net of deferrals, during
Fiscal 2016
compared to
Fiscal 2015
reflects an increase in general expenses related to employee headcount growth, nearly offset by lower long term incentive plan costs year over year. Gross acquisition expenses increased $27 from Fiscal 2016 compared to Fiscal 2015 due to higher commissions driven by increased MYGA and IUL sales. This increase was partially offset by a corresponding increase in deferrals of $22.
|
•
|
Acquisition and operating expenses, net of deferrals
increased
during
Fiscal 2015
compared to
Fiscal 2014
as a result of higher general expenses associated with our strategic review and legacy incentive compensation plans as well as higher non-deferred acquisition expenses primarily due to FIA and IUL sales growth year over year.
|
|
|
Fiscal Year
|
|
Increase / (Decrease)
|
||||||||||||||||
Amortization of intangibles related to:
|
|
2016
|
|
2015
|
|
2014
|
|
2016 compared to 2015
|
|
2015 compared to 2014
|
||||||||||
Unlocking
|
|
$
|
(27
|
)
|
|
$
|
(23
|
)
|
|
$
|
(25
|
)
|
|
$
|
(4
|
)
|
|
$
|
2
|
|
Interest
|
|
(45
|
)
|
|
(34
|
)
|
|
(29
|
)
|
|
(11
|
)
|
|
(5
|
)
|
|||||
Amortization
|
|
126
|
|
|
121
|
|
|
143
|
|
|
5
|
|
|
(22
|
)
|
|||||
Total amortization of intangibles
|
|
$
|
54
|
|
|
$
|
64
|
|
|
$
|
89
|
|
|
$
|
(10
|
)
|
|
$
|
(25
|
)
|
•
|
Amortization of intangibles is based on historical, current and future expected gross margins (pre-tax operating income before amortization).
Fiscal 2016
results included
$27
of favorable unlocking primarily from equity market fluctuations and aforementioned annual assumption updates. Comparatively, net VOBA and DAC amortization expense during
Fiscal 2015
included
$23
of favorable unlocking primarily due to annual assumption updates. The year over year increase in amortization of
$5
was primarily due to higher actual gross profits ("AGPs") on the DAC lines of business (LOBs), excluding the impact of the reinsurance related embedded derivative. The year over year increase in AGPs during 2016 was primarily driven by an increase in net investment income (see net investment income discussion above) and lower net losses on available for sale securities (see net investment gain/(loss) discussion above), partially offset by an increase in FIA reserves due to market movements in risk free rates (see benefit and reserve discussion above). Interest increased year-over-year due to continued growth of our in force book of business.
|
•
|
Fiscal 2015
results included favorable unlocking and amortization adjustments of $23 primarily related to annual assumption updates made during the fourth quarter. Also contributing to the year over year decrease was lower overall gross margins in Fiscal 2015 primarily due to the year over year decrease in net investment gains (losses), excluding the impact of the reinsurance related embedded derivative, as discussed above. Partially offsetting these decreases was a year over year increase in amortization resulting from a reinsurance related embedded derivative gain of $92 in Fiscal 2015 compared to a loss of $42 in Fiscal 2014.
|
|
|
Fiscal Year
|
|
Increase / (Decrease)
|
||||||||||||||||
|
|
2016
|
|
2015
|
|
2014
|
|
2016 compared to 2015
|
|
2015 compared to 2014
|
||||||||||
Income before taxes
|
|
$
|
153
|
|
|
$
|
182
|
|
|
$
|
189
|
|
|
$
|
(29
|
)
|
|
$
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income tax before valuation allowance
|
|
125
|
|
|
63
|
|
|
66
|
|
|
62
|
|
|
(3
|
)
|
|||||
Change in valuation allowance
|
|
(69
|
)
|
|
1
|
|
|
(40
|
)
|
|
(70
|
)
|
|
41
|
|
|||||
Income tax
|
|
$
|
56
|
|
|
$
|
64
|
|
|
$
|
26
|
|
|
$
|
(8
|
)
|
|
$
|
38
|
|
Effective rate
|
|
37
|
%
|
|
35
|
%
|
|
14
|
%
|
|
2
|
%
|
|
21
|
%
|
•
|
Income tax expense for
Fiscal 2016
was
$56
, net of a valuation allowance release of
$69
, compared to income tax expense of
$64
for
Fiscal 2015
, inclusive of valuation allowance expense of
$1
. The decrease in income tax expense of
$8
from
Fiscal 2015
to
Fiscal 2016
was primarily due to a decrease in pre-tax income of $29 year over year. The valuation allowance release for Fiscal 2016 is related to the removal of the valuation allowance against life company capital loss deferred tax assets that expired and were written off in the first quarter of 2016, and therefore had no net impact to the overall tax expense.
|
•
|
Income tax expense for
Fiscal 2015
was
$64
, inclusive of valuation allowance expense of
$1
, compared to income tax expense of
$26
for
Fiscal 2014
, net of a valuation allowance release of
$40
. The increase in income tax expense of
$38
from
Fiscal 2014
to
Fiscal 2015
was primarily due to a valuation allowance release in
Fiscal 2014
related to the adoption of a tax planning strategy. See below for additional details.
|
|
|
Fiscal Year
|
|
Increase / (Decrease)
|
||||||||||||||||
Reconciliation from Net Income to AOI:
|
|
2016
|
|
2015
|
|
2014
|
|
2016 compared to 2015
|
|
2015 compared to 2014
|
||||||||||
Net income
|
|
$
|
97
|
|
|
$
|
118
|
|
|
$
|
163
|
|
|
$
|
(21
|
)
|
|
$
|
(45
|
)
|
Adjustments to arrive at AOI:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Effect of investment losses (gains), net of offsets
|
|
9
|
|
|
13
|
|
|
(85
|
)
|
|
(4
|
)
|
|
98
|
|
|||||
Effect of change in FIA embedded derivative discount rate, net of offsets
|
|
54
|
|
|
56
|
|
|
8
|
|
|
(2
|
)
|
|
48
|
|
|||||
Effect of change in fair value of reinsurance related embedded derivative, net of offsets
|
|
37
|
|
|
(69
|
)
|
|
34
|
|
|
106
|
|
|
(103
|
)
|
|||||
Effects of class action litigation reserves, net of offsets
|
|
—
|
|
|
(1
|
)
|
|
2
|
|
|
1
|
|
|
(3
|
)
|
|||||
Tax impact of adjusting items
|
|
(35
|
)
|
|
1
|
|
|
14
|
|
|
(36
|
)
|
|
(13
|
)
|
|||||
AOI
|
|
$
|
162
|
|
|
$
|
118
|
|
|
$
|
136
|
|
|
$
|
44
|
|
|
$
|
(18
|
)
|
•
|
AOI increased $44 from $118 to $162 in Fiscal 2016. The current year results included approximately $17 of net favorable adjustments related to lower DAC amortization and reserve changes, primarily due to equity market fluctuations and annual assumption updates; $7 of net favorable performance in the immediate annuity product line and other reserve movements; and $6 of bond prepayment income. Partially offsetting these favorable items was $4 of expenses related to merger transaction costs and $2 of stock compensation expense related to our Performance Restricted Stock Units which were reclassified from an equity plan to a liability plan in the fourth quarter of 2016 (refer to “Note 10 Stock Compensation” of our audited Consolidated Financial Statements for additional details). Comparatively, Fiscal 2015 AOI included approximately $16 of net favorable adjustments, primarily related to annual actuarial assumption review and prepayment income; partially offset by net unfavorable adjustments of approximately $14 primarily related to mortality experience on life contingent immediate annuity polices as well as legacy incentive compensation and strategic review related expenses.
|
•
|
AOI
decrease
d
$18
from
$136
for
Fiscal 2014
to
$118
in Fiscal 2015. Fiscal 2015 AOI included approximately $16 of net favorable adjustments, primarily related to annual actuarial assumption review and prepayment income; partially offset by net unfavorable adjustments of approximately $14 primarily related to mortality experience on life contingent immediate annuity polices as well as legacy incentive compensation and strategic review related expenses. Comparatively, Fiscal 2014 included $46 of net favorable items primarily related to tax benefits.
|
|
|
September 30, 2016
|
|
September 30, 2015
|
||||||||||
|
|
Fair Value
|
|
Percent
|
|
Fair Value
|
|
Percent
|
||||||
|
|
|
|
|
|
|
|
|
||||||
Fixed maturity securities, available for sale:
|
|
|
|
|
|
|
|
|||||||
United States Government full faith and credit
|
$
|
243
|
|
|
1
|
%
|
|
$
|
244
|
|
|
1
|
%
|
|
United States Government sponsored entities
|
115
|
|
|
1
|
%
|
|
137
|
|
|
1
|
%
|
|||
United States municipalities, states and territories
|
1,717
|
|
|
8
|
%
|
|
1,608
|
|
|
8
|
%
|
|||
Corporate securities:
|
|
|
|
|
|
|
|
|
||||||
Finance, insurance and real estate
|
5,463
|
|
|
26
|
%
|
|
4,446
|
|
|
23
|
%
|
|||
Manufacturing, construction and mining
|
863
|
|
|
4
|
%
|
|
772
|
|
|
4
|
%
|
|||
Utilities, energy and related sectors
|
1,881
|
|
|
9
|
%
|
|
1,849
|
|
|
10
|
%
|
|||
Wholesale/retail trade
|
1,277
|
|
|
6
|
%
|
|
1,027
|
|
|
5
|
%
|
|||
Services, media and other
|
1,856
|
|
|
9
|
%
|
|
1,436
|
|
|
8
|
%
|
|||
Hybrid securities
|
1,386
|
|
|
7
|
%
|
|
1,214
|
|
|
6
|
%
|
|||
Non-agency residential mortgage backed securities
|
1,247
|
|
|
6
|
%
|
|
2,025
|
|
|
11
|
%
|
|||
Commercial mortgage backed securities
|
864
|
|
|
4
|
%
|
|
882
|
|
|
5
|
%
|
|||
Asset backed securities
|
2,499
|
|
|
12
|
%
|
|
2,106
|
|
|
11
|
%
|
|||
Total fixed maturity available for sale securities
|
19,411
|
|
|
93
|
%
|
|
17,746
|
|
|
93
|
%
|
|||
Equity securities (a)
|
683
|
|
|
3
|
%
|
|
620
|
|
|
3
|
%
|
|||
Commercial mortgage loans
|
614
|
|
|
3
|
%
|
|
490
|
|
|
3
|
%
|
|||
Other (primarily derivatives and loan participations)
|
334
|
|
|
1
|
%
|
|
235
|
|
|
1
|
%
|
|||
Total investments
|
$
|
21,042
|
|
|
100
|
%
|
|
$
|
19,091
|
|
|
100
|
%
|
|
|
September 30, 2016
|
|
September 30, 2015
|
||||||||||
Rating
|
|
Fair Value
|
|
Percent
|
|
Fair Value
|
|
Percent
|
||||||
AAA
|
|
$
|
1,509
|
|
|
8
|
%
|
|
$
|
1,633
|
|
|
9
|
%
|
AA
|
|
1,933
|
|
|
10
|
%
|
|
1,930
|
|
|
11
|
%
|
||
A
|
|
5,126
|
|
|
27
|
%
|
|
4,141
|
|
|
23
|
%
|
||
BBB
|
|
8,404
|
|
|
43
|
%
|
|
7,242
|
|
|
41
|
%
|
||
BB (a)
|
|
1,017
|
|
|
5
|
%
|
|
720
|
|
|
4
|
%
|
||
B and below (b)
|
|
1,422
|
|
|
7
|
%
|
|
2,080
|
|
|
12
|
%
|
||
Total
|
|
$
|
19,411
|
|
|
100
|
%
|
|
$
|
17,746
|
|
|
100
|
%
|
|
|
September 30, 2016
|
|
September 30, 2015
|
||||||||||
Rating
|
|
Fair Value
|
|
Percent
|
|
Fair Value
|
|
Percent
|
||||||
AAA
|
|
$
|
90
|
|
|
10
|
%
|
|
$
|
88
|
|
|
9
|
%
|
AA
|
|
58
|
|
|
7
|
%
|
|
69
|
|
|
7
|
%
|
||
A
|
|
84
|
|
|
10
|
%
|
|
87
|
|
|
9
|
%
|
||
BBB
|
|
247
|
|
|
28
|
%
|
|
293
|
|
|
30
|
%
|
||
BB
|
|
155
|
|
|
18
|
%
|
|
168
|
|
|
17
|
%
|
||
B and below
|
|
238
|
|
|
27
|
%
|
|
273
|
|
|
28
|
%
|
||
Total
|
|
$
|
872
|
|
|
100
|
%
|
|
$
|
978
|
|
|
100
|
%
|
NAIC Designation
|
|
NRSRO Equivalent Rating
|
1
|
|
AAA/AA/A
|
2
|
|
BBB
|
3
|
|
BB
|
4
|
|
B
|
5
|
|
CCC and lower
|
6
|
|
In or near default
|
|
|
September 30, 2016
|
|||||||||
NAIC Designation
|
|
Amortized Cost
|
|
Fair Value
|
|
Percent of Total Fair Value
|
|||||
1
|
|
$
|
10,052
|
|
|
$
|
10,678
|
|
|
55
|
%
|
2
|
|
7,209
|
|
|
7,534
|
|
|
39
|
%
|
||
3
|
|
885
|
|
|
866
|
|
|
5
|
%
|
||
4
|
|
277
|
|
|
255
|
|
|
1
|
%
|
||
5
|
|
94
|
|
|
75
|
|
|
—
|
%
|
||
6
|
|
4
|
|
|
3
|
|
|
—
|
%
|
||
Total
|
|
$
|
18,521
|
|
|
$
|
19,411
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|||||
|
|
September 30, 2015
|
|||||||||
NAIC Designation
|
|
Amortized Cost
|
|
Fair Value
|
|
Percent of Total Fair Value
|
|||||
1
|
|
$
|
10,062
|
|
|
$
|
10,323
|
|
|
58
|
%
|
2
|
|
6,654
|
|
|
6,586
|
|
|
37
|
%
|
||
3
|
|
603
|
|
|
567
|
|
|
3
|
%
|
||
4
|
|
238
|
|
|
210
|
|
|
1
|
%
|
||
5
|
|
65
|
|
|
60
|
|
|
1
|
%
|
||
6
|
|
—
|
|
|
—
|
|
|
—
|
%
|
||
Total
|
|
$
|
17,622
|
|
|
$
|
17,746
|
|
|
100
|
%
|
|
|
September 30, 2016
|
|||||||||
NAIC Designation
|
|
Amortized Cost
|
|
Fair Value
|
|
Percent of Total Fair Value
|
|||||
1
|
|
$
|
308
|
|
|
$
|
307
|
|
|
35
|
%
|
2
|
|
202
|
|
|
206
|
|
|
24
|
%
|
||
3
|
|
159
|
|
|
153
|
|
|
17
|
%
|
||
4
|
|
159
|
|
|
154
|
|
|
18
|
%
|
||
5
|
|
58
|
|
|
49
|
|
|
6
|
%
|
||
6
|
|
4
|
|
|
3
|
|
|
—
|
%
|
||
Total
|
|
$
|
890
|
|
|
$
|
872
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|||||
|
|
September 30, 2015
|
|||||||||
NAIC Designation
|
|
Amortized Cost
|
|
Fair Value
|
|
Percent of Total Fair Value
|
|||||
1
|
|
$
|
356
|
|
|
$
|
352
|
|
|
36
|
%
|
2
|
|
282
|
|
|
250
|
|
|
26
|
%
|
||
3
|
|
170
|
|
|
158
|
|
|
16
|
%
|
||
4
|
|
205
|
|
|
188
|
|
|
19
|
%
|
||
5
|
|
34
|
|
|
30
|
|
|
3
|
%
|
||
6
|
|
—
|
|
|
—
|
|
|
—
|
%
|
||
Total
|
|
$
|
1,047
|
|
|
$
|
978
|
|
|
100
|
%
|
|
|
September 30, 2016
|
|||||
Top 10 Industry Concentration
|
|
Fair Value
|
|
Percent of Total Fair Value
|
|||
Banking
|
|
$
|
2,448
|
|
|
12
|
%
|
ABS collateralized loan obligation ("CLO")
|
|
2,084
|
|
|
10
|
%
|
|
Municipal
|
|
1,985
|
|
|
10
|
%
|
|
Life insurance
|
|
1,200
|
|
|
6
|
%
|
|
Electric
|
|
1,096
|
|
|
5
|
%
|
|
Property and casualty insurance
|
|
966
|
|
|
5
|
%
|
|
Whole loan collateralized mortgage obligation ("CMO")
|
|
909
|
|
|
5
|
%
|
|
Other financial institutions
|
|
825
|
|
|
4
|
%
|
|
CMBS
|
|
740
|
|
|
4
|
%
|
|
Pipelines
|
|
480
|
|
|
2
|
%
|
|
Total
|
|
$
|
12,733
|
|
|
63
|
%
|
|
|
September 30, 2015
|
|||||
Top 10 Industry Concentration
|
|
Fair Value
|
|
Percent of Total Fair Value
|
|||
Banking
|
|
$
|
1,979
|
|
|
11
|
%
|
ABS CLO
|
|
1,811
|
|
|
10
|
%
|
|
Municipal
|
|
1,796
|
|
|
10
|
%
|
|
Whole loan CMO
|
|
1,431
|
|
|
8
|
%
|
|
Life insurance
|
|
959
|
|
|
5
|
%
|
|
CMBS
|
|
877
|
|
|
5
|
%
|
|
Electric
|
|
858
|
|
|
5
|
%
|
|
Property and casualty insurance
|
|
798
|
|
|
4
|
%
|
|
Other financial institutions
|
|
694
|
|
|
4
|
%
|
|
Pipelines
|
|
496
|
|
|
3
|
%
|
|
Total
|
|
$
|
11,699
|
|
|
65
|
%
|
|
|
September 30, 2016
|
|
September 30, 2015
|
||||||||||||
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
||||||||
Corporate, Non-structured Hybrids, Municipal and U.S. Government securities:
|
|
|
|
|
|
|
|
|
||||||||
Due in one year or less
|
|
$
|
261
|
|
|
$
|
263
|
|
|
$
|
156
|
|
|
$
|
158
|
|
Due after one year through five years
|
|
1,863
|
|
|
1,919
|
|
|
1,801
|
|
|
1,818
|
|
||||
Due after five years through ten years
|
|
3,233
|
|
|
3,407
|
|
|
2,947
|
|
|
2,948
|
|
||||
Due after ten years
|
|
7,710
|
|
|
8,346
|
|
|
6,895
|
|
|
6,993
|
|
||||
Subtotal
|
|
$
|
13,067
|
|
|
$
|
13,935
|
|
|
$
|
11,799
|
|
|
$
|
11,917
|
|
Other securities which provide for periodic payments:
|
|
|
|
|
|
|
|
|
|
|
||||||
Asset-backed securities
|
|
$
|
2,528
|
|
|
$
|
2,499
|
|
|
$
|
2,148
|
|
|
$
|
2,106
|
|
Commercial-mortgage-backed securities
|
|
850
|
|
|
864
|
|
|
878
|
|
|
882
|
|
||||
Structured hybrids
|
|
749
|
|
|
751
|
|
|
698
|
|
|
679
|
|
||||
Residential mortgage-backed securities
|
|
1,327
|
|
|
1,362
|
|
|
2,099
|
|
|
2,162
|
|
||||
Subtotal
|
|
$
|
5,454
|
|
|
$
|
5,476
|
|
|
$
|
5,823
|
|
|
$
|
5,829
|
|
Total fixed maturity available-for-sale securities
|
|
$
|
18,521
|
|
|
$
|
19,411
|
|
|
$
|
17,622
|
|
|
$
|
17,746
|
|
|
|
September 30, 2016
|
|
September 30, 2015
|
||||||||
NAIC Designation:
|
|
|
|
|
|
|
|
|
||||
1
|
|
1,026
|
|
|
99
|
%
|
|
1,747
|
|
|
99
|
%
|
2
|
|
2
|
|
|
—
|
%
|
|
15
|
|
|
1
|
%
|
3
|
|
4
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
4
|
|
7
|
|
|
1
|
%
|
|
—
|
|
|
—
|
%
|
5
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
6
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
Total
|
|
1,039
|
|
|
100
|
%
|
|
1,762
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
||||
NRSRO:
|
|
|
|
|
|
|
|
|
||||
AAA
|
|
13
|
|
|
1
|
%
|
|
36
|
|
|
2
|
%
|
AA
|
|
8
|
|
|
1
|
%
|
|
10
|
|
|
1
|
%
|
A
|
|
47
|
|
|
5
|
%
|
|
66
|
|
|
4
|
%
|
BBB
|
|
27
|
|
|
3
|
%
|
|
22
|
|
|
1
|
%
|
BB and below
|
|
944
|
|
|
90
|
%
|
|
1,629
|
|
|
92
|
%
|
Total
|
|
1,039
|
|
|
100
|
%
|
|
1,763
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
||||
Vintage:
|
|
|
|
|
|
|
|
|
||||
2007
|
|
210
|
|
|
20
|
%
|
|
449
|
|
|
25
|
%
|
2006
|
|
381
|
|
|
37
|
%
|
|
721
|
|
|
41
|
%
|
2005 and prior
|
|
448
|
|
|
43
|
%
|
|
593
|
|
|
34
|
%
|
Total
|
|
1,039
|
|
|
100
|
%
|
|
1,763
|
|
|
100
|
%
|
|
|
September 30, 2016
|
|
September 30, 2015
|
||||||||||
Asset Class
|
|
Fair Value
|
|
Percent
|
|
Fair Value
|
|
Percent
|
||||||
ABS CLO
|
|
$
|
2,084
|
|
|
83
|
%
|
|
$
|
1,811
|
|
|
86
|
%
|
ABS auto
|
|
13
|
|
|
1
|
%
|
|
19
|
|
|
1
|
%
|
||
ABS home equity
|
|
—
|
|
|
—
|
%
|
|
7
|
|
|
—
|
%
|
||
ABS other
|
|
402
|
|
|
16
|
%
|
|
269
|
|
|
13
|
%
|
||
Total ABS
|
|
$
|
2,499
|
|
|
100
|
%
|
|
$
|
2,106
|
|
|
100
|
%
|
|
Debt-Service Coverage Ratios
|
|
Total Amount
|
|
% of Total
|
|
Estimated Fair Value
|
|
% of Total
|
||||||||||||||||
|
>1.25
|
|
1.00 - 1.25
|
|
N/A(a)
|
|
|
|
|
||||||||||||||||
September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
LTV Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Less than 50%
|
$
|
158
|
|
|
$
|
18
|
|
|
$
|
1
|
|
|
$
|
177
|
|
|
29
|
%
|
|
$
|
181
|
|
|
29
|
%
|
50% to 60%
|
189
|
|
|
—
|
|
|
—
|
|
|
189
|
|
|
32
|
%
|
|
194
|
|
|
32
|
%
|
|||||
60% to 75%
|
230
|
|
|
—
|
|
|
—
|
|
|
230
|
|
|
39
|
%
|
|
239
|
|
|
39
|
%
|
|||||
Commercial mortgage loans
|
$
|
577
|
|
|
$
|
18
|
|
|
$
|
1
|
|
|
$
|
596
|
|
|
100
|
%
|
|
$
|
614
|
|
|
100
|
%
|
September 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
LTV Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Less than 50%
|
$
|
115
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
126
|
|
|
25
|
%
|
|
$
|
125
|
|
|
25
|
%
|
50% to 60%
|
161
|
|
|
20
|
|
|
—
|
|
|
181
|
|
|
37
|
%
|
|
180
|
|
|
37
|
%
|
|||||
60% to 75%
|
185
|
|
|
—
|
|
|
—
|
|
|
185
|
|
|
38
|
%
|
|
185
|
|
|
38
|
%
|
|||||
Commercial mortgage loans
|
$
|
461
|
|
|
$
|
20
|
|
|
$
|
11
|
|
|
$
|
492
|
|
|
100
|
%
|
|
$
|
490
|
|
|
100
|
%
|
|
September 30, 2016
|
|||||||||||||
|
Number of securities
|
|
Amortized Cost
|
|
Unrealized Losses
|
|
Fair Value
|
|||||||
Fixed maturity securities, available for sale:
|
|
|
|
|
|
|
|
|||||||
United States Government full faith and credit
|
2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
United States Government sponsored agencies
|
29
|
|
|
30
|
|
|
(1
|
)
|
|
29
|
|
|||
United States municipalities, states and territories
|
18
|
|
|
111
|
|
|
(4
|
)
|
|
107
|
|
|||
Corporate securities:
|
|
|
|
|
|
|
|
|
||||||
Finance, insurance and real estate
|
56
|
|
|
349
|
|
|
(16
|
)
|
|
333
|
|
|||
Manufacturing, construction and mining
|
29
|
|
|
224
|
|
|
(31
|
)
|
|
193
|
|
|||
Utilities, energy and related sectors
|
72
|
|
|
444
|
|
|
(47
|
)
|
|
397
|
|
|||
Wholesale/retail trade
|
32
|
|
|
181
|
|
|
(7
|
)
|
|
174
|
|
|||
Services, media and other
|
60
|
|
|
378
|
|
|
(31
|
)
|
|
347
|
|
|||
Hybrid securities
|
29
|
|
|
500
|
|
|
(47
|
)
|
|
453
|
|
|||
Non-agency residential mortgage backed securities
|
141
|
|
|
612
|
|
|
(27
|
)
|
|
585
|
|
|||
Commercial mortgage backed securities
|
46
|
|
|
235
|
|
|
(9
|
)
|
|
226
|
|
|||
Asset backed securities
|
211
|
|
|
1,765
|
|
|
(45
|
)
|
|
1,720
|
|
|||
Total fixed maturity available for sale securities
|
725
|
|
|
4,829
|
|
|
(265
|
)
|
|
4,564
|
|
|||
Equity securities
|
11
|
|
|
130
|
|
|
(4
|
)
|
|
126
|
|
|||
Total
|
736
|
|
|
$
|
4,959
|
|
|
$
|
(269
|
)
|
|
$
|
4,690
|
|
|
September 30, 2015
|
|||||||||||||
|
Number of securities
|
|
Amortized Cost
|
|
Unrealized Losses
|
|
Fair Value
|
|||||||
Fixed maturity securities, available for sale:
|
|
|
|
|
|
|
|
|||||||
United States Government sponsored agencies
|
21
|
|
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
31
|
|
United States municipalities, states and territories
|
60
|
|
|
427
|
|
|
(15
|
)
|
|
412
|
|
|||
Corporate securities:
|
|
|
|
|
|
|
|
|
||||||
Finance, insurance and real estate
|
129
|
|
|
1,136
|
|
|
(52
|
)
|
|
1,084
|
|
|||
Manufacturing, construction and mining
|
77
|
|
|
588
|
|
|
(105
|
)
|
|
483
|
|
|||
Utilities, energy and related sectors
|
151
|
|
|
997
|
|
|
(96
|
)
|
|
901
|
|
|||
Wholesale/retail trade
|
94
|
|
|
399
|
|
|
(26
|
)
|
|
373
|
|
|||
Services, media and other
|
126
|
|
|
904
|
|
|
(75
|
)
|
|
829
|
|
|||
Hybrid securities
|
46
|
|
|
672
|
|
|
(42
|
)
|
|
630
|
|
|||
Non-agency residential mortgage backed securities
|
135
|
|
|
712
|
|
|
(26
|
)
|
|
686
|
|
|||
Commercial mortgage backed securities
|
50
|
|
|
405
|
|
|
(10
|
)
|
|
395
|
|
|||
Asset backed securities
|
197
|
|
|
1,696
|
|
|
(47
|
)
|
|
1,649
|
|
|||
Total fixed maturity available for sale securities
|
1086
|
|
|
7,967
|
|
|
(494
|
)
|
|
7,473
|
|
|||
Equity securities
|
22
|
|
|
147
|
|
|
(4
|
)
|
|
143
|
|
|||
Total
|
1,108
|
|
|
$
|
8,114
|
|
|
$
|
(498
|
)
|
|
$
|
7,616
|
|
|
September 30, 2016
|
|
September 30, 2015
|
||||||||||||||||||||||||||
|
Number of securities
|
|
Amortized Cost
|
|
Fair Value
|
|
Gross Unrealized Losses
|
|
Number of securities
|
|
Amortized Cost
|
|
Fair Value
|
|
Gross Unrealized Losses
|
||||||||||||||
Investment grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Less than six months
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
35
|
|
|
$
|
279
|
|
|
$
|
200
|
|
|
$
|
(79
|
)
|
Six months or more and less than twelve months
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
31
|
|
|
18
|
|
|
(13
|
)
|
||||||
Twelve months or greater
|
6
|
|
|
125
|
|
|
96
|
|
|
(29
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total investment grade
|
6
|
|
|
125
|
|
|
96
|
|
|
(29
|
)
|
|
37
|
|
|
310
|
|
|
218
|
|
|
(92
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Below investment grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Less than six months
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29
|
|
|
126
|
|
|
84
|
|
|
(42
|
)
|
||||||
Six months or more and less than twelve months
|
3
|
|
|
9
|
|
|
7
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Twelve months or greater
|
23
|
|
|
142
|
|
|
80
|
|
|
(62
|
)
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total below investment grade
|
26
|
|
|
151
|
|
|
87
|
|
|
(64
|
)
|
|
30
|
|
|
126
|
|
|
84
|
|
|
(42
|
)
|
||||||
Total
|
32
|
|
|
$
|
276
|
|
|
$
|
183
|
|
|
$
|
(93
|
)
|
|
67
|
|
|
$
|
436
|
|
|
$
|
302
|
|
|
$
|
(134
|
)
|
|
|
Fiscal Year
|
|
Increase / (Decrease)
|
||||||||||||||||
Cash provided by (used in):
|
|
2016
|
|
2015
|
|
2014
|
|
2016 compared to 2015
|
|
2015 compared to 2014
|
||||||||||
Operating activities
|
|
$
|
365
|
|
|
$
|
35
|
|
|
$
|
174
|
|
|
$
|
330
|
|
|
$
|
(139
|
)
|
Investing activities
|
|
(1,186
|
)
|
|
(1,024
|
)
|
|
(1,659
|
)
|
|
(162
|
)
|
|
635
|
|
|||||
Financing activities
|
|
1,183
|
|
|
915
|
|
|
857
|
|
|
268
|
|
|
58
|
|
|||||
Net increase (decrease) in cash & cash equivalents
|
|
$
|
362
|
|
|
$
|
(74
|
)
|
|
$
|
(628
|
)
|
|
$
|
436
|
|
|
$
|
554
|
|
(dollars in millions)
|
|
As of September 30, 2016
|
|
As of September 30, 2015
|
||||
Subsidiary Name:
|
|
|
|
|
|
|||
Fidelity & Guaranty Life Insurance Company
|
|
$
|
1,320
|
|
|
$
|
1,224
|
|
Fidelity & Guaranty Life Insurance Company of New York
|
|
62
|
|
|
64
|
|
||
Raven Reinsurance Company
|
|
210
|
|
|
196
|
|
|
|
As of September 30, 2016
|
|
As of September 30, 2015
|
||||||||||||||||||
(dollars in millions)
|
|
CAL
|
|
TAC
|
|
Ratio
|
|
CAL
|
|
TAC
|
|
Ratio
|
||||||||||
Fidelity & Guaranty Life Insurance Company
|
|
$
|
345
|
|
|
$
|
1,436
|
|
|
417
|
%
|
|
$
|
337
|
|
|
$
|
1,337
|
|
|
397
|
%
|
Fidelity & Guaranty Life Insurance Company of New York
|
|
10
|
|
|
66
|
|
|
694
|
%
|
|
10
|
|
|
68
|
|
|
709
|
%
|
|
|
Financial Strength Rating Scale
|
|
Senior Unsecured Notes
Credit Rating Scale
|
Rating Agency
|
|
|
|
|
A.M. Best(1)
|
|
“A++” to “S”
|
|
“aaa to rs”
|
S&P(2)
|
|
“AAA” to “R”
|
|
“AAA to D”
|
Moody's(3)
|
|
“Aaa” to “C”
|
|
“Aaa to C”
|
Fitch(4)
|
|
“AAA” to “C”
|
|
“AAA to D”
|
(1)
|
A.M. Best’s financial strength rating is an independent opinion of an insurer’s financial strength and ability to meet its ongoing insurance policy and contract obligations. It is based on a comprehensive quantitative and qualitative evaluation of a company’s balance sheet strength, operating performance and business profile. A.M. Best’s long-term credit ratings reflect its assessment of the ability of an obligor to pay interest and principal in accordance with the terms of the obligation. Ratings from “aa” to “ccc” may be enhanced with a “+” (plus) or “-” (minus) to indicate whether credit quality is near the top or bottom of a category. A.M. Best’s short-term credit rating is an opinion to the ability of the rated entity to meet its senior financial commitments on obligations maturing in generally less than one year.
|
(2)
|
S&P’s insurer financial strength rating is a forward-looking opinion about the financial security characteristics of an insurance organization with respect to its ability to pay under its insurance policies and contracts in accordance with their terms. A “+” or “-” indicates relative standing within a category. An S&P credit rating is an assessment of default risk, but may incorporate an assessment of relative seniority or ultimate recovery in the event of default. Short-term issuer credit ratings reflect the obligor’s creditworthiness over a short-term time horizon.
|
(3)
|
Moody’s financial strength ratings are opinions of the ability of insurance companies to repay punctually senior policyholder claims and obligations. Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Moody’s long-term credit ratings are opinions of the relative credit risk of fixed-income obligations with an original maturity of one year or more. They address the possibility that a financial obligation will not be honored as promised. Moody’s short-term ratings are opinions of the ability of issuers to honor short-term financial obligations.
|
(4)
|
Fitch’s financial strength ratings provide an assessment of the financial strength of an insurance organization. The IFS Rating is assigned to the insurance company’s policyholder obligations, including assumed reinsurance obligations and contract holder obligations, such as guaranteed investment contracts. Within long-term and short-term ratings, a “+” or a “-” may be appended to a rating to denote relative position within major rating categories.
|
|
|
Payment Due by Fiscal Period (b)
|
||||||||||||||||||
(dollars in millions)
|
|
Total
|
|
2017
|
|
2018 and 2019
|
|
2020 and 2021
|
|
After 2021
|
||||||||||
Annuity and universal life products (a)
|
|
$
|
29,781
|
|
|
$
|
2,224
|
|
|
$
|
4,391
|
|
|
$
|
3,974
|
|
|
$
|
19,192
|
|
Operating leases
|
|
8
|
|
|
2
|
|
|
4
|
|
|
3
|
|
|
—
|
|
|||||
Debt
|
|
300
|
|
|
—
|
|
|
—
|
|
|
300
|
|
|
—
|
|
|||||
Revolving credit facility
|
|
100
|
|
|
100
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Interest expense
|
|
95
|
|
|
19
|
|
|
38
|
|
|
38
|
|
|
—
|
|
|||||
Total
|
|
$
|
30,284
|
|
|
$
|
2,345
|
|
|
$
|
4,433
|
|
|
$
|
4,315
|
|
|
$
|
19,192
|
|
(a)
|
Amounts shown in this table are projected payments through the year 2030 which we are contractually obligated to pay our annuity and IUL policyholders. The payments are derived from actuarial models which assume a level interest rate scenario and incorporate assumptions regarding mortality and persistency, when applicable. These assumptions are based on our historical experience, but actual amounts will differ.
|
Item 7A.
|
Quantitative and Qualitative Disclosures about Market Risk
|
•
|
Management of the business has primary responsibility for the day-to-day management of risk.
|
•
|
The risk management function has the primary responsibility to align risk taking with strategic planning through risk tolerance and limit setting.
|
•
|
The internal audit function provides an ongoing independent and objective assessment of the effectiveness of internal controls, including financial and operational risk management.
|
•
|
At-risk limits on sensitivities of regulatory capital to the capital markets provide the fundamental framework to manage capital markets risks including the risk of asset / liability mismatch;
|
•
|
Duration and convexity mismatch limits;
|
•
|
Credit risk concentration limits; and
|
•
|
Investment and derivative guidelines.
|
•
|
Regulatory Capital Sensitivities: the potential reduction, under a range of moderate to extreme capital markets stress scenarios, of the excess of available statutory capital above the minimum required under the NAIC regulatory RBC methodology; and
|
•
|
Earnings Sensitivities: the potential reduction in results of operations over a 30 year time horizon under the same moderate to extreme capital markets stress scenario. Maintaining a consistent level of earnings helps us to finance our operations, support our capital requirements and provide funds to pay dividends to stockholders.
|
•
|
The timing and amount of redemptions and prepayments in our asset portfolio;
|
•
|
Our derivative portfolio;
|
•
|
Death benefits and other claims payable under the terms of our insurance products;
|
•
|
Lapses and surrenders in our insurance products;
|
•
|
Minimum interest guarantees in our insurance products; and
|
•
|
Book value guarantees in our insurance products.
|
(dollars in millions)
|
|
|
|
|
|||
Duration
|
|
Amortized Cost
|
|
|
% of Total
|
|
|
0-4
|
|
$
|
7,956
|
|
|
41
|
%
|
5-9
|
|
5,728
|
|
|
30
|
%
|
|
10-14
|
|
4,468
|
|
|
23
|
%
|
|
15-19
|
|
1,148
|
|
|
6
|
%
|
|
20-25
|
|
8
|
|
|
—
|
%
|
|
Total
|
|
$
|
19,308
|
|
|
100
|
%
|
(dollars in millions)
|
|
September 30, 2016
|
|
September 30, 2015
|
||||||||||||||||||||||||||||||
Counterparty
|
|
Credit Rating
(Fitch/Moody's/S&P) (a) |
|
Notional
Amount |
|
Fair Value
|
|
Collateral
|
|
Net Credit Risk
|
|
Notional
Amount |
|
Fair Value
|
|
Collateral
|
|
Net Credit Risk
|
||||||||||||||||
Merrill Lynch
|
|
A/*/A
|
|
$
|
2,302
|
|
|
$
|
55
|
|
|
$
|
10
|
|
|
$
|
45
|
|
|
$
|
2,233
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
16
|
|
Deutsche Bank
|
|
*/Baa3/BBB+
|
|
1,620
|
|
|
46
|
|
|
12
|
|
|
34
|
|
|
2,482
|
|
|
26
|
|
|
—
|
|
|
26
|
|
||||||||
Morgan Stanley
|
|
*/A1/A
|
|
2,952
|
|
|
87
|
|
|
58
|
|
|
29
|
|
|
4,086
|
|
|
35
|
|
|
7
|
|
|
28
|
|
||||||||
Barclay's Bank
|
|
*/A2/A-
|
|
1,389
|
|
|
39
|
|
|
—
|
|
|
39
|
|
|
392
|
|
|
4
|
|
|
—
|
|
|
4
|
|
||||||||
Canadian Imperial Bank of Commerce
|
|
AA-/A3/A+
|
|
1,623
|
|
|
49
|
|
|
48
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Total
|
|
|
|
$
|
9,886
|
|
|
$
|
276
|
|
|
$
|
128
|
|
|
$
|
148
|
|
|
$
|
9,193
|
|
|
$
|
81
|
|
|
$
|
7
|
|
|
$
|
74
|
|
(dollars in millions)
|
|
|
|
Financial Strength Rating
|
||||
Parent Company/Principal Reinsurers
|
|
Reinsurance Recoverable
|
|
AM Best
|
|
S&P
|
|
Moody's
|
Wilton Reinsurance
|
|
$1,523
|
|
A
|
|
Not Rated
|
|
Not Rated
|
Front Street Re
|
|
1,120
|
|
Not Rated
|
|
Not Rated
|
|
Not Rated
|
Scottish Re
|
|
153
|
|
Not Rated
|
|
Not Rated
|
|
Not Rated
|
Security Life of Denver
|
|
143
|
|
A
|
|
A
|
|
A2
|
London Life
|
|
104
|
|
A
|
|
Not Rated
|
|
Not Rated
|
Item 9A.
|
Controls and Procedures
|
Exhibit
No.
|
|
Description of Exhibits
|
|
|
|
2.1
|
|
Agreement and Plan of Merger, dated as of November 8, 2015, by and among Anbang Insurance Group Co., Ltd., AB Infinity Holding, Inc., AB Merger Sub, Inc., and Fidelity & Guaranty Life (incorporated by reference to our Form 8-K, filed on November 9, 2015 (File No. 001-36227)).
|
3.1
|
|
Amended and Restated Certificate of Incorporation of Fidelity & Guaranty Life (incorporated by reference to our Registration Statement on Form S-8, filed on December 13, 2013 (File No. 333-192849)).
|
3.2
|
|
Second Amended and Restated Bylaws of Fidelity & Guaranty Life (incorporated by reference to our Current Report on Form 8-K, filed on October 7, 2014 (File No. 001-36227)).
|
4.1
|
|
Reference is made to Exhibits 3.1 and 3.2.
|
4.2
|
|
Form of Common Stock Certificate (incorporated by reference to our Registration Statement on Form S-1/A, filed on December 3, 2013 (File No. 333-192849)).
|
4.3
|
|
Indenture, dated March 27, 2013, among Fidelity & Guaranty Life Holdings, Inc., as issuer, the Subsidiary Guarantors from time to time parties thereto and Wells Fargo Bank, National Association, as trustee, relating to the 6.375% Senior Notes due 2021 (incorporated by reference to our Registration Statement on Form S-1/A, filed on October 17, 2013 (File No. 333-192849)).
|
4.4
|
|
First Supplemental Indenture, dated March 27, 2013, among Fidelity & Guaranty Life Holdings, Inc., as issuer, the Subsidiary Guarantors from named therein and Wells Fargo Bank, National Association, relating to the 6.375% Senior Notes due 2021 (incorporated by reference to our Registration Statement on Form S-1/A, filed on October 17, 2013 (File No. 333-192849)).
|
4.5
|
|
Registration Rights Agreement, dated December 18, 2013, between Fidelity & Guaranty Life, and HRG Group, Inc. (incorporated by reference to our Quarterly Report on Form 10-Q, filed on February 7, 2014 (file No. 001-36227)).
|
10.1
|
|
Employment Agreement, dated January 27, 2014, between Dennis Vigneau and Fidelity & Guaranty Life Business Services, Inc. (incorporated by reference to our Current Report on Form 8-K, filed on January 28, 2014 (File No. 001-36227)).
|
10.2
|
|
Consent to Change in Reporting Structure and Waiver of Good Reason, dated October 30, 2013, between Leland C. Launer, Jr. and Fidelity & Guaranty Life Business Services, Inc. (incorporated by reference to our Registration Statement on Form S-1/A, filed on November 22, 2013 (File No. 333-190880)).
|
10.3
|
|
Amended and Restated Employment Agreement, dated November 14, 2013, between Fidelity & Guaranty Life Business Services, Inc. and John P. O’Shaughnessy (incorporated by reference to our Registration Statement on Form S-1/A, filed on November 22, 2013 (File No. 333-190880)).
|
10.4
|
|
Employment Agreement, dated November 14, 2013, between Fidelity & Guaranty Life Business Services, Inc. and John Phelps (incorporated by reference to our Registration Statement on Form S-1/A, filed on November 22, 2013 (File No. 333-190880)).
|
10.5
|
|
Amended and Restated Employment Agreement, dated November 14, 2013, between Fidelity & Guaranty Life Business Services, Inc. and Rajesh Krishnan (incorporated by reference to our Registration Statement on Form S-1/A, filed on November 22, 2013 (File No. 333-190880)).
|
10.6
|
|
Employment Agreement, dated November 14, 2013, between Fidelity & Guaranty Life Business Services, Inc. and Wendy J.B. Young (incorporated by reference to our Registration Statement on Form S-1/A, filed on November 22, 2013 (File No. 333-190880)).
|
10.7
|
|
Form of Director Indemnification Agreement (incorporated by reference to our Registration Statement on Form S-1/A, filed on November 26, 2013 (File No. 333-190880)).
|
10.8
|
|
Fidelity & Guaranty Life Employee Incentive Plan (incorporated by reference to our Registration Statement on Form S-1/A, filed on October 17, 2013 (File No. 333-190880)).
|
10.9
|
|
Fidelity & Guaranty Life 2013 Stock Incentive Plan, as Amended (incorporated by reference to Annex A of our Proxy Statement on Schedule 14A, filed on December 30, 2014 (File No. 001-36227)).
|
10.10
|
|
Form of Fidelity & Guaranty Life 2013 Non-Statutory Stock Option Agreement (incorporated by reference to our Registration Statement on Form S-1/A, filed on November 26, 2013 (File No. 333-190880)).
|
10.11
|
|
Form of Fidelity & Guaranty Life 2013 Restricted Stock Agreement (incorporated by reference to our Registration Statement on Form S-1/A, filed on November 26, 2013 (File No. 333-190880)).
|
10.12
|
|
Form of Fidelity & Guaranty Life Performance RSU Grant Agreement (incorporated by reference to our Registration Statement on Form S-1/A, filed on November 26, 2013 (File No. 333-190880)).
|
10.13
|
|
Form of Second Amended and Restated Fidelity & Guaranty Life Holdings, Inc. Stock Incentive Plan (incorporated by reference to our Registration Statement on Form S-1/A, filed on December 3, 2013 (File No. 333-190880)).
|
10.14
|
|
Form of Amendment No. 1 to the Fidelity & Guaranty Life Holdings, Inc. 2012 Dividend Equivalent Plan (incorporated by reference to our Registration Statement on Form S-1/A, filed on December 3, 2013 (File No. 333-190880)).
|
10.15
|
|
Form of Amendment No. 1 to the Restricted Stock Agreement (incorporated by reference to our Registration Statement on Form S-1/A, filed on December 3, 2013 (File No. 333-190880)).
|
10.16
|
|
Form of Amendment No. 2 to the Restricted Stock Agreement between Leland C. Launer, Jr. and Fidelity & Guaranty Life Holdings, Inc. (incorporated by reference to our Registration Statement on Form S-1/A, filed on December 3, 2013 (File No. 333-190880)).
|
10.17
|
|
Form of Fidelity & Guaranty Life 2013 Restricted Stock Agreement for Compensation Committee Members (incorporated by reference to our Quarterly Report on Form 10-Q, filed on February 7, 2014 (File No. 001-36227)).
|
10.18
|
|
Form of Fidelity & Guaranty Life 2013 Non-Statutory Stock Option Agreement for Compensation Committee Members (incorporated by reference to our Quarterly Report on Form 10-Q, filed on February 7, 2014 (File No. 001-36227)).
|
10.19
|
|
Form of Fidelity & Guaranty Life 2013 Unrestricted Stock Agreement (incorporated by reference to our Quarterly Report on Form 10-Q, filed on February 7, 2014 (File No. 001-36227)).
|
10.20
|
|
Form of Fidelity & Guaranty Life 2013 Unrestricted Stock Agreement for Compensation Committee Members (incorporated by reference to our Quarterly Report on Form 10-Q, filed on February 7, 2014 (File No. 001-36227)).
|
10.21
|
|
Credit Agreement between Fidelity & Guaranty Life Holdings, Inc. as borrower, the Company as guarantor, and RBC Capital Markets and Credit Suisse Securities (USA) LLC together as joint lead arrangers for the lenders, dated as of August 26, 2014 (incorporated by reference to our Current Report on Form 8-K, filed on August 26, 2014 (File No. 001-36227)).
|
10.22
|
|
Revolving Loan Note, dated August 26, 2014 (incorporated by reference to our Current Report on Form 8-K, filed on August 26, 2014 (File No. 001-36227)).
|
10.23
|
|
Guarantee Agreement, dated as of August 26, 2014, among Fidelity & Guaranty Life, other Guarantors, and Royal Bank of Canada, as Administrative Agent (incorporated by reference to our Current Report on Form 8-K, filed on August 26, 2014 (File No. 001-36227)).
|
10.24
|
|
Employment Agreement, dated October 6, 2014, between Chris Littlefield and Fidelity & Guaranty Life Business Services, Inc. (incorporated by reference to our Current Report on Form 8-K, filed on October 7, 2014 (File No. 001-36227)).
|
10.25
|
|
Omnibus Amendment to Equity Award Agreements by and among Fidelity & Guaranty Life, Fidelity & Guaranty Life Business Services, Inc. and Leland C. Launer Jr. dated as of March 31, 2015 (incorporated by reference to our Form 8-K, filed on April 2, 2015 (File No. 001-36227)).
|
10.26
|
|
Employment Agreement by and between Fidelity & Guaranty Life Business Services, Inc. and Christopher J. Littlefield, dated as of May 6, 2015 (incorporated by reference to our Form 8-K, filed on May 8, 2015 (File No. 001-36227)).
|
10.27
|
|
Fidelity & Guaranty Life 2015 Severance Plan, effective as of June 16, 2015 (incorporated by reference to our Quarterly Report on Form 10-Q, filed on August 5, 2015 (File No. 001-36227)).
|
10.28
|
|
Form of Retention Letter from Fidelity & Guaranty Life to its executive officers, dated July 10, 2015 (incorporated by reference to our Quarterly Report on Form 10-Q, filed on August 5, 2015 (File No. 001-36227)).
|
10.29
|
|
Form of Indemnification Agreement by and between Fidelity & Guaranty Life and its directors and executive officers, dated as of July 14, 2015 (incorporated by reference to our Quarterly Report on Form 10-Q, filed on August 5, 2015 (File No. 001-36227)).
|
21*
|
|
Subsidiaries of the Company.
|
23*
|
|
Consent of Independent Registered Public Accounting Firm.
|
24*
|
|
Power of Attorney (set forth on the signature page).
|
31.1 *
|
|
Certification of Chief Executive Officer, pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2 *
|
|
Certification of Chief Financial Officer, pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1 *
|
|
Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2 *
|
|
Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101.INS *
|
|
XBRL Instance Document.
|
101.SCH *
|
|
XBRL Taxonomy Extension Schema.
|
101.CAL *
|
|
XBRL Taxonomy Extension Calculation Linkbase.
|
101.DEF *
|
|
XBRL Taxonomy Definition Linkbase.
|
101.LAB *
|
|
XBRL Taxonomy Extension Label Linkbase.
|
101.PRE *
|
|
XBRL Taxonomy Extension Presentation Linkbase.
|
*
|
Filed herewith
|
|
|
FIDELITY & GUARANTY LIFE (Registrant)
|
|
|
|
|
|
Date:
|
November 21, 2016
|
By:
|
/s/ Dennis R. Vigneau
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
(on behalf of the Registrant and as Principal Financial Officer)
|
Signature
|
Title
|
Date
|
|
|
|
/s/ Christopher J. Littlefield
|
|
|
Christopher J. Littlefield
|
Chief Executive Officer and Director (Principal Executive Officer)
|
November 21, 2016
|
/s/ Dennis R. Vigneau
|
|
|
Dennis R. Vigneau
|
Executive Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
|
November 21, 2016
|
/s/ Joseph S. Steinberg
|
|
|
Joseph S. Steinberg
|
Chairman
|
November 21, 2016
|
/s/ Omar M. Asali
|
|
|
Omar M. Asali
|
Director
|
November 21, 2016
|
/s/ William J. Bawden
|
|
|
William J. Bawden
|
Director
|
November 21, 2016
|
/s/ James M. Benson
|
|
|
James M. Benson
|
Director
|
November 21, 2016
|
/s/ William P. Melchionni
|
|
|
William P. Melchionni
|
Director
|
November 21, 2016
|
/s/ John H. Tweedie
|
|
|
John H. Tweedie
|
Director
|
November 21, 2016
|
/s/ Thomas A. Williams
|
|
|
Thomas A. Williams
|
Director
|
November 21, 2016
|
|
Page
|
|
September 30,
2016 |
|
September 30,
2015 |
||||
|
|
|
|
||||
ASSETS
|
|
|
|
||||
Investments:
|
|
|
|
||||
Fixed maturity securities, available-for-sale, at fair value (amortized cost: September 30, 2016 - $18,521; September 30, 2015 - $17,622)
|
$
|
19,411
|
|
|
$
|
17,746
|
|
Equity securities, available-for-sale, at fair value (amortized cost: September 30, 2016 - $640; September 30, 2015 - $597)
|
683
|
|
|
620
|
|
||
Derivative investments
|
276
|
|
|
82
|
|
||
Commercial mortgage loans
|
595
|
|
|
491
|
|
||
Other invested assets
|
60
|
|
|
155
|
|
||
Total investments
|
21,025
|
|
|
19,094
|
|
||
Related party loans
|
71
|
|
|
78
|
|
||
Cash and cash equivalents
|
864
|
|
|
502
|
|
||
Accrued investment income
|
214
|
|
|
191
|
|
||
Reinsurance recoverable
|
3,464
|
|
|
3,579
|
|
||
Intangibles, net
|
1,026
|
|
|
988
|
|
||
Deferred tax assets
|
—
|
|
|
228
|
|
||
Other assets
|
371
|
|
|
265
|
|
||
Total assets
|
$
|
27,035
|
|
|
$
|
24,925
|
|
|
|
|
|
||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
||||
|
|
|
|
||||
Contractholder funds
|
$
|
19,251
|
|
|
$
|
17,770
|
|
Future policy benefits
|
3,467
|
|
|
3,468
|
|
||
Funds withheld for reinsurance liabilities
|
1,172
|
|
|
1,267
|
|
||
Liability for policy and contract claims
|
55
|
|
|
55
|
|
||
Debt
|
300
|
|
|
300
|
|
||
Revolving credit facility
|
100
|
|
|
—
|
|
||
Deferred tax liability
|
10
|
|
|
—
|
|
||
Other liabilities
|
746
|
|
|
563
|
|
||
Total liabilities
|
25,101
|
|
|
23,423
|
|
||
|
|
|
|
||||
Commitments and contingencies ("Note 12")
|
|
|
|
||||
|
|
|
|
||||
Shareholders' equity:
|
|
|
|
||||
Preferred stock ($.01 par value, 50,000,000 shares authorized, no shares issued at September 30, 2016 and September 30, 2015)
|
—
|
|
|
—
|
|
||
Common stock ($.01 par value, 500,000,000 shares authorized, 58,956,127 issued and outstanding at September 30, 2016; 58,870,823 shares issued and outstanding at September 30, 2015)
|
1
|
|
|
1
|
|
||
Additional paid-in capital
|
714
|
|
|
714
|
|
||
Retained earnings
|
792
|
|
|
710
|
|
||
Accumulated other comprehensive income
|
439
|
|
|
88
|
|
||
Treasury stock, at cost (537,613 shares at September 30, 2016; 512,391 shares at September 30, 2015)
|
(12
|
)
|
|
(11
|
)
|
||
Total shareholders' equity
|
1,934
|
|
|
1,502
|
|
||
Total liabilities and shareholders' equity
|
$
|
27,035
|
|
|
$
|
24,925
|
|
|
|
|
|
|
|||||||||||
|
Year ended September 30,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
|
|
|
|
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Premiums
|
$
|
70
|
|
|
$
|
58
|
|
|
$
|
56
|
|
Net investment income
|
923
|
|
|
851
|
|
|
760
|
|
|||
Net investment gains (losses)
|
19
|
|
|
(37
|
)
|
|
307
|
|
|||
Insurance and investment product fees and other
|
127
|
|
|
89
|
|
|
68
|
|
|||
Total revenues
|
1,139
|
|
|
961
|
|
|
1,191
|
|
|||
Benefits and expenses:
|
|
|
|
|
|
||||||
Benefits and other changes in policy reserves
|
791
|
|
|
578
|
|
|
788
|
|
|||
Acquisition and operating expenses, net of deferrals
|
119
|
|
|
113
|
|
|
102
|
|
|||
Amortization of intangibles
|
54
|
|
|
64
|
|
|
89
|
|
|||
Total benefits and expenses
|
964
|
|
|
755
|
|
|
979
|
|
|||
Operating income
|
175
|
|
|
206
|
|
|
212
|
|
|||
Interest expense
|
(22
|
)
|
|
(24
|
)
|
|
(23
|
)
|
|||
Income before income taxes
|
153
|
|
|
182
|
|
|
189
|
|
|||
Income tax expense
|
56
|
|
|
64
|
|
|
26
|
|
|||
Net income
|
$
|
97
|
|
|
$
|
118
|
|
|
$
|
163
|
|
|
|
|
|
|
|
||||||
Net income per common share - adjusted to reflect stock split:
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Basic
|
$
|
1.67
|
|
|
$
|
2.03
|
|
|
$
|
2.91
|
|
Diluted
|
$
|
1.66
|
|
|
$
|
2.02
|
|
|
$
|
2.90
|
|
Weighted average common shares used in computing net income per common share:
|
|
|
|
|
|
||||||
Basic
|
58,275,013
|
|
|
58,117,884
|
|
|
55,969,912
|
|
|||
Diluted
|
58,578,163
|
|
|
58,360,841
|
|
|
56,011,436
|
|
|||
|
|
|
|
|
|
||||||
Cash dividend per common share
|
$
|
0.26
|
|
|
$
|
0.26
|
|
|
$
|
1.11
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Supplemental disclosures
|
|
|
|
|
|
||||||
Total other-than-temporary impairments
|
$
|
(45
|
)
|
|
$
|
(82
|
)
|
|
$
|
(1
|
)
|
Portion of other-than-temporary impairments included in other comprehensive income
|
(1
|
)
|
|
—
|
|
|
—
|
|
|||
Net other-than-temporary impairments
|
(44
|
)
|
|
(82
|
)
|
|
(1
|
)
|
|||
Gains (losses) on derivatives and embedded derivatives
|
33
|
|
|
(8
|
)
|
|
206
|
|
|||
Other investment gains
|
30
|
|
|
53
|
|
|
102
|
|
|||
Total net investment gains
|
$
|
19
|
|
|
$
|
(37
|
)
|
|
$
|
307
|
|
|
Year ended September 30,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
|
|
|
|
|
||||||
Net income
|
$
|
97
|
|
|
$
|
118
|
|
|
$
|
163
|
|
|
|
|
|
|
|
||||||
Other comprehensive income (loss):
|
|
|
|
|
|
||||||
Unrealized investment gains (losses):
|
|
|
|
|
|
||||||
Change in unrealized investment gains (losses) before reclassification adjustment
|
788
|
|
|
(650
|
)
|
|
622
|
|
|||
Net reclassification adjustment for losses (gains) included in net income
|
9
|
|
|
29
|
|
|
(101
|
)
|
|||
Changes in unrealized investment gains (losses) after reclassification adjustment
|
797
|
|
|
(621
|
)
|
|
521
|
|
|||
Adjustments to intangible assets
|
(258
|
)
|
|
220
|
|
|
(157
|
)
|
|||
Changes in deferred income tax asset/liability
|
(187
|
)
|
|
140
|
|
|
(128
|
)
|
|||
Net unrealized gains (losses) on investments
|
352
|
|
|
(261
|
)
|
|
236
|
|
|||
Non-credit related other-than-temporary impairment:
|
|
|
|
|
|
||||||
Changes in non-credit related other-than-temporary impairment
|
(1
|
)
|
|
—
|
|
|
—
|
|
|||
Net non-credit related other than-temporary impairment
|
(1
|
)
|
|
—
|
|
|
—
|
|
|||
Net changes to derive comprehensive income (loss) for the period
|
351
|
|
|
(261
|
)
|
|
236
|
|
|||
Comprehensive income (loss), net of tax
|
$
|
448
|
|
|
$
|
(143
|
)
|
|
$
|
399
|
|
|
Preferred Stock
|
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Treasury Stock
|
|
Total Shareholders' Equity
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Balance, September 30, 2013
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
527
|
|
|
$
|
499
|
|
|
$
|
113
|
|
|
$
|
—
|
|
|
$
|
1,139
|
|
Dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(55
|
)
|
|
—
|
|
|
—
|
|
|
(55
|
)
|
|||||||
Stock split
|
—
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Proceeds from issuance of common stock, net of transaction fees
|
—
|
|
|
—
|
|
|
173
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
173
|
|
|||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
163
|
|
|
—
|
|
|
—
|
|
|
163
|
|
|||||||
Unrealized investment gains, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
236
|
|
|
—
|
|
|
236
|
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|||||||
Balance, September 30, 2014
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
702
|
|
|
$
|
607
|
|
|
$
|
349
|
|
|
$
|
—
|
|
|
$
|
1,659
|
|
Treasury shares purchased
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
|
(11
|
)
|
|||||||
Dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(15
|
)
|
|
—
|
|
|
—
|
|
|
(15
|
)
|
|||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
118
|
|
|
—
|
|
|
—
|
|
|
118
|
|
|||||||
Unrealized investment losses, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(261
|
)
|
|
—
|
|
|
(261
|
)
|
|||||||
Common stock issued under employee plans
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|||||||
Balance, September 30, 2015
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
714
|
|
|
$
|
710
|
|
|
$
|
88
|
|
|
$
|
(11
|
)
|
|
$
|
1,502
|
|
Treasury shares purchased
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||||||
Dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(15
|
)
|
|
—
|
|
|
—
|
|
|
(15
|
)
|
|||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
97
|
|
|
—
|
|
|
—
|
|
|
97
|
|
|||||||
Unrealized investment gains, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
351
|
|
|
—
|
|
|
351
|
|
|||||||
Common stock issued under employee plans
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|||||||
Balance, September 30, 2016
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
714
|
|
|
$
|
792
|
|
|
$
|
439
|
|
|
$
|
(12
|
)
|
|
$
|
1,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended September 30,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
|
|
|
|
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
97
|
|
|
$
|
118
|
|
|
$
|
163
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Stock based compensation
|
8
|
|
|
7
|
|
|
8
|
|
|||
Amortization
|
(40
|
)
|
|
(60
|
)
|
|
(35
|
)
|
|||
Deferred income taxes
|
51
|
|
|
50
|
|
|
(25
|
)
|
|||
Interest credited/index credits to contractholder account balances
|
632
|
|
|
420
|
|
|
659
|
|
|||
Net recognized (gains) losses on investments and derivatives
|
(19
|
)
|
|
37
|
|
|
(307
|
)
|
|||
Charges assessed to contractholders for mortality and administration
|
(103
|
)
|
|
(68
|
)
|
|
(45
|
)
|
|||
Deferred policy acquisition costs, net of related amortization
|
(296
|
)
|
|
(253
|
)
|
|
(149
|
)
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||||||
Reinsurance recoverable
|
(2
|
)
|
|
46
|
|
|
(16
|
)
|
|||
Future policy benefits
|
(1
|
)
|
|
(36
|
)
|
|
(53
|
)
|
|||
Funds withheld from reinsurers
|
(89
|
)
|
|
(62
|
)
|
|
(101
|
)
|
|||
Collateral posted (returned)
|
111
|
|
|
(128
|
)
|
|
64
|
|
|||
Other assets and other liabilities
|
16
|
|
|
(36
|
)
|
|
11
|
|
|||
Net cash provided by operating activities
|
365
|
|
|
35
|
|
|
174
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Proceeds from available-for-sale investments sold, matured or repaid
|
2,264
|
|
|
4,947
|
|
|
5,084
|
|
|||
Proceeds from derivatives instruments and other invested assets
|
246
|
|
|
439
|
|
|
518
|
|
|||
Proceeds from commercial mortgage loans
|
35
|
|
|
139
|
|
|
17
|
|
|||
Cost of available-for-sale investments
|
(3,359
|
)
|
|
(5,746
|
)
|
|
(6,775
|
)
|
|||
Costs of derivatives instruments and other invested assets
|
(266
|
)
|
|
(296
|
)
|
|
(367
|
)
|
|||
Costs of commercial mortgage loans
|
(99
|
)
|
|
(535
|
)
|
|
(133
|
)
|
|||
Related party loans
|
1
|
|
|
35
|
|
|
6
|
|
|||
Capital expenditures
|
(8
|
)
|
|
(7
|
)
|
|
(9
|
)
|
|||
Net cash (used in) investing activities
|
(1,186
|
)
|
|
(1,024
|
)
|
|
(1,659
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Treasury stock
|
(1
|
)
|
|
(11
|
)
|
|
—
|
|
|||
Proceeds from issuance of common stock, net of transaction fees
|
—
|
|
|
—
|
|
|
176
|
|
|||
Common stock issued under employee plans
|
2
|
|
|
2
|
|
|
—
|
|
|||
Debt issuance costs
|
—
|
|
|
—
|
|
|
(4
|
)
|
|||
Draw on revolving credit facility
|
100
|
|
|
—
|
|
|
—
|
|
|||
Dividends paid
|
(15
|
)
|
|
(15
|
)
|
|
(55
|
)
|
|||
Contractholder account deposits
|
2,780
|
|
|
2,503
|
|
|
2,365
|
|
|||
Contractholder account withdrawals
|
(1,683
|
)
|
|
(1,564
|
)
|
|
(1,625
|
)
|
|||
Net cash provided by financing activities
|
1,183
|
|
|
915
|
|
|
857
|
|
|||
Change in cash & cash equivalents
|
362
|
|
|
(74
|
)
|
|
(628
|
)
|
|||
Cash & cash equivalents, beginning of period
|
502
|
|
|
576
|
|
|
1,204
|
|
|||
Cash & cash equivalents, end of period
|
$
|
864
|
|
|
$
|
502
|
|
|
$
|
576
|
|
|
|
|
|
|
|
||||||
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
||||||
Interest paid
|
$
|
19
|
|
|
$
|
19
|
|
|
$
|
19
|
|
Income taxes paid
|
$
|
7
|
|
|
$
|
38
|
|
|
$
|
34
|
|
Deferred sales inducements
|
$
|
27
|
|
|
$
|
26
|
|
|
$
|
7
|
|
|
|
Year ended September 30,
|
||||||||||
Product Type
|
|
2016
|
|
2015
|
|
2014
|
||||||
Fixed indexed annuities
|
|
$
|
1,861
|
|
|
$
|
2,185
|
|
|
$
|
1,451
|
|
Fixed rate annuities
|
|
539
|
|
|
211
|
|
|
708
|
|
|||
Single premium immediate annuities
|
|
28
|
|
|
16
|
|
|
10
|
|
|||
Life insurance (a)
|
|
181
|
|
|
163
|
|
|
143
|
|
|||
Total
|
|
$
|
2,609
|
|
|
$
|
2,575
|
|
|
$
|
2,312
|
|
(a)
|
Life insurance includes Universal Life (“UL”) and traditional life insurance products.
|
•
|
The estimated range and period until recovery;
|
•
|
Current delinquencies and nonperforming assets of underlying collateral;
|
•
|
Expected future default rates;
|
•
|
Collateral value by vintage, geographic region, industry concentration or property type;
|
•
|
Subordination levels or other credit enhancements as of the balance sheet date as compared to origination; and
|
•
|
Contractual and regulatory cash obligations and the issuer's plans to meet such obligations.
|
•
|
The Company does not expect full recovery of its amortized cost based on the estimate of cash flows expected to be collected;
|
•
|
The Company intends to sell a security; or
|
•
|
It is more likely than not that the Company will be required to sell a security prior to recovery.
|
•
|
require performance targets that affect vesting and that could be achieved after the requisite service period to be treated as performance conditions.
|
•
|
exclude such performance targets from the grant-date fair value calculation of the award
|
•
|
require compensation cost to be recorded when it is probable the performance target will be reached and should represent the compensation cost attributable to period(s) for which the requisite service has already been rendered
|
•
|
modifying the criteria used to evaluate whether limited partnerships and similar legal entities are VIEs or voting interest entities and revising the primary beneficiary determination of a VIE
|
•
|
eliminating the specialized consolidation model and guidance for limited partnerships thereby removing the presumption that a general partner should consolidate a limited partnership
|
•
|
reducing the criteria in the variable interest model contained in ASC Topic 810, Consolidation, that is used to evaluate whether the fees paid to a decision maker or service provider represents a variable interest
|
•
|
exempting reporting entities from consolidating money market funds that operate in accordance with Rule 2a-7 of the Investment Company Act of 1940
|
•
|
debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts or premiums
|
•
|
the cost of issuing debt to no longer be recorded as a separate asset, except when incurred before the receipt of the funding from the associated debt liability
|
•
|
debt issuance costs to be presented on the balance sheet as a direct deduction from the carrying amount of the related debt liability, and the costs will be amortized to interest expense using the effective interest method.
|
•
|
if a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses
|
•
|
if a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract
|
•
|
investments for which fair value is measured at net asset value per share (or its equivalent) using the practical expedient should not be categorized in the fair value hierarchy. Removing those investments from the fair value hierarchy not only eliminates the diversity in practice resulting from the way in which investments measured at net asset value per share (or its equivalent) with future redemption dates are classified, but also ensures that all investments categorized in the fair value hierarchy are classified using a consistent approach
|
•
|
investments that calculate net asset value per share (or its equivalent), but for which the practical expedient is not applied will continue to be included in the fair value hierarchy
|
•
|
require all equity securities (other than equity investments accounted for under the equity method of accounting or requiring the consolidation of the investee) to be measured at fair value with changes in fair value recognized through net income. Equity securities may be measured at cost minus impairment that do not have readily determinable fair values
|
•
|
require qualitative assessment for impairment of equity investments without readily determinable fair values at each reporting period and, if the qualitative assessment indicates that impairment exists, to measure the investment at fair value
|
•
|
eliminate the requirement to disclose the methods and significant assumptions used to estimate fair value (which is currently required to be disclosed for financial instruments measured at amortized cost on the balance sheet)
|
•
|
require entities to recognize the rights and obligations resulting from all leases or lease components of contracts, including operating leases, as lease assets and lease liabilities, with an exception allowed for leases with a term of 12 months or less
|
•
|
create a distinction between finance leases and operating leases, with classification criteria substantially similar to that for distinguishing between capital leases and operating leases under previous guidance
|
•
|
not retain the accounting model for leveraged leases under previous guidance for leases that commence after the effective date of ASU 2016-02
|
•
|
provide additional guidance on separating the lease components from the nonlease components of a contract
|
•
|
require qualitative disclosures along with specific quantitative disclosures to provide information regarding the amount, timing, and uncertainty of cash flows arising from leases
|
•
|
include modifications to align lessor accounting with the changes to lessee accounting, as well as changes to the requirements of recognizing a transaction as a sale and leaseback transaction, however, these changes will have no impact on the Company's current lease arrangements
|
•
|
financial assets (or a group of financial assets) measured at amortized cost will be required to be presented at the net amount expected to be collected, with an allowance for credit losses deducted from the amortized cost basis, resulting in a net carrying value that reflects the amount the entity expects to collect on the financial asset at purchase
|
•
|
credit losses relating to available-for-sale fixed maturity securities will be recorded through an allowance for credit losses, rather than reductions in the amortized cost of the securities. The allowance methodology recognizes that value may be realized either through collection of contractual cash flows or through the sale of the security. Therefore, the amount of the allowance for credit losses will be limited to the amount by which fair value is below amortized cost because the classification as available for sale is premised on an investment strategy that recognizes that the investment could be sold at fair value, if cash collection would result in the realization of an amount less than fair value
|
•
|
the income statement will reflect the measurement of expected credit losses for newly recognized financial assets as well as the expected increases or decreases (including the reversal of previously recognized losses) of expected credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount
|
•
|
disclosures will be required to include information around how the credit loss allowance was developed, further details on information currently disclosed about credit quality of financing receivables and net investments in leases, and a rollforward of the allowance for credit losses for available-for-sale fixed maturity securities as well as an aging analysis for securities that are past due
|
•
|
cash payments for debt prepayment or debt extinguishment costs will be classified as cash outflows for financing activities
|
•
|
the settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing should be classified as follows: the portion of the cash payment attributable to the accreted interest related to the debt discount as cash outflows for operating activities, and the portion of the cash payment attributable to the principal as cash outflows for financing activities
|
•
|
a reporting entity must make an accounting policy election to classify distributions received from equity method investees using either:
|
◦
|
the cumulative earnings approach, which considers distributions received as returns on the investment and are classified as cash inflows from operating activities (with an exception when cumulative distributions received less distributions received in prior periods that were classified as returns of investment exceeds cumulative equity in earnings, in which case the current period distribution up to this excess amount will be considered a return of investment and classified as cash inflows from investing activities); or
|
◦
|
the nature of the distribution approach, which classifies distributions received based on the nature of the activity or activities of the investee that generated the distribution (would be considered either a return on investment and classified as cash inflows from operating activities or a return of investment and classified as cash inflows from investing activities)
|
•
|
in the absence of specific GAAP guidance, an entity should classify cash receipts and payments that have aspects of more than one class of cash flows by determining and appropriately classifying each separately identifiable source or use within the cash receipts and cash payments on the basis of the underlying cash flows. If cash receipts and payments have aspects of more than one class of cash flows and cannot be
|
•
|
the characteristics of a primary beneficiary do not change, but the way in which their existence is determined does change
|
•
|
in determining whether there exists an obligation to absorb the losses of, or to receive benefits from, a VIE that could potentially be significant to the VIE (the second characteristic of a primary beneficiary), an entity will be required to include all of its direct variable interests in a VIE and, on a proportionate basis (as opposed to in its entirety as under current guidance), its indirect variable interests in a VIE held through related parties (including related parties under common control with the reporting entity)
|
•
|
an entity should recognize current and deferred income taxes for an intra-entity transfer of an asset other than inventory at the time of the transfer
|
•
|
the entity will no longer delay recognition of the income tax consequences of these types of intra-entity asset transfers until the asset has been sold to an outside party, as is practiced under current guidance
|
|
September 30, 2016
|
||||||||||||||||||
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Carrying Value
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Available-for sale securities
|
|
|
|
|
|
|
|
|
|
||||||||||
Asset-backed securities
|
$
|
2,528
|
|
|
$
|
16
|
|
|
$
|
(45
|
)
|
|
$
|
2,499
|
|
|
$
|
2,499
|
|
Commercial mortgage-backed securities
|
850
|
|
|
23
|
|
|
(9
|
)
|
|
864
|
|
|
864
|
|
|||||
Corporates
|
10,712
|
|
|
760
|
|
|
(132
|
)
|
|
11,340
|
|
|
11,340
|
|
|||||
Equities
|
640
|
|
|
47
|
|
|
(4
|
)
|
|
683
|
|
|
683
|
|
|||||
Hybrids
|
1,356
|
|
|
77
|
|
|
(47
|
)
|
|
1,386
|
|
|
1,386
|
|
|||||
Municipals
|
1,515
|
|
|
206
|
|
|
(4
|
)
|
|
1,717
|
|
|
1,717
|
|
|||||
Residential mortgage-backed securities
|
1,327
|
|
|
63
|
|
|
(28
|
)
|
|
1,362
|
|
|
1,362
|
|
|||||
U.S. Government
|
233
|
|
|
10
|
|
|
—
|
|
|
243
|
|
|
243
|
|
|||||
Total available-for-sale securities
|
19,161
|
|
|
1,202
|
|
|
(269
|
)
|
|
20,094
|
|
|
20,094
|
|
|||||
Derivative investments
|
221
|
|
|
78
|
|
|
(23
|
)
|
|
276
|
|
|
276
|
|
|||||
Commercial mortgage loans
|
595
|
|
|
—
|
|
|
—
|
|
|
614
|
|
|
595
|
|
|||||
Other invested assets
|
60
|
|
|
—
|
|
|
—
|
|
|
58
|
|
|
60
|
|
|||||
Total investments
|
$
|
20,037
|
|
|
$
|
1,280
|
|
|
$
|
(292
|
)
|
|
$
|
21,042
|
|
|
$
|
21,025
|
|
|
September 30, 2015
|
||||||||||||||||||
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Carrying Value
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Available-for-sale securities
|
|
|
|
|
|
|
|
|
|
||||||||||
Asset-backed securities
|
$
|
2,148
|
|
|
$
|
5
|
|
|
$
|
(47
|
)
|
|
$
|
2,106
|
|
|
$
|
2,106
|
|
Commercial mortgage-backed securities
|
878
|
|
|
14
|
|
|
(10
|
)
|
|
882
|
|
|
882
|
|
|||||
Corporates
|
9,533
|
|
|
351
|
|
|
(354
|
)
|
|
9,530
|
|
|
9,530
|
|
|||||
Equities
|
597
|
|
|
27
|
|
|
(4
|
)
|
|
620
|
|
|
620
|
|
|||||
Hybrids
|
1,211
|
|
|
45
|
|
|
(42
|
)
|
|
1,214
|
|
|
1,214
|
|
|||||
Municipals
|
1,520
|
|
|
103
|
|
|
(15
|
)
|
|
1,608
|
|
|
1,608
|
|
|||||
Residential mortgage-backed securities
|
2,099
|
|
|
89
|
|
|
(26
|
)
|
|
2,162
|
|
|
2,162
|
|
|||||
U.S. Government
|
233
|
|
|
11
|
|
|
—
|
|
|
244
|
|
|
244
|
|
|||||
Total available-for-sale securities
|
18,219
|
|
|
645
|
|
|
(498
|
)
|
|
18,366
|
|
|
18,366
|
|
|||||
Derivatives investments
|
218
|
|
|
13
|
|
|
(149
|
)
|
|
82
|
|
|
82
|
|
|||||
Commercial mortgage loans
|
491
|
|
|
—
|
|
|
—
|
|
|
490
|
|
|
491
|
|
|||||
Other invested assets
|
164
|
|
|
—
|
|
|
(9
|
)
|
|
153
|
|
|
155
|
|
|||||
Total investments
|
$
|
19,092
|
|
|
$
|
658
|
|
|
$
|
(656
|
)
|
|
$
|
19,091
|
|
|
$
|
19,094
|
|
|
September 30, 2016
|
||||||
|
Amortized Cost
|
|
Fair Value
|
||||
Corporates, Non-structured Hybrids, Municipal and U.S. Government securities:
|
|
|
|
||||
Due in one year or less
|
$
|
261
|
|
|
$
|
263
|
|
Due after one year through five years
|
1,863
|
|
|
1,919
|
|
||
Due after five years through ten years
|
3,233
|
|
|
3,407
|
|
||
Due after ten years
|
7,710
|
|
|
8,346
|
|
||
Subtotal
|
13,067
|
|
|
13,935
|
|
||
Other securities which provide for periodic payments:
|
|
|
|
||||
Asset-backed securities
|
2,528
|
|
|
2,499
|
|
||
Commercial mortgage-backed securities
|
850
|
|
|
864
|
|
||
Structured hybrids
|
749
|
|
|
751
|
|
||
Residential mortgage-backed securities
|
1,327
|
|
|
1,362
|
|
||
Subtotal
|
5,454
|
|
|
5,476
|
|
||
Total fixed maturity available-for-sale securities
|
$
|
18,521
|
|
|
$
|
19,411
|
|
|
September 30, 2016
|
||||||||||||||||||||||
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
||||||||||||||||||
|
Fair Value
|
|
Gross Unrealized
Losses
|
|
Fair Value
|
|
Gross Unrealized
Losses
|
|
Fair Value
|
|
Gross Unrealized
Losses
|
||||||||||||
Available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Asset-backed securities
|
$
|
352
|
|
|
$
|
(4
|
)
|
|
$
|
1,368
|
|
|
$
|
(41
|
)
|
|
$
|
1,720
|
|
|
$
|
(45
|
)
|
Commercial mortgage-backed securities
|
44
|
|
|
(1
|
)
|
|
182
|
|
|
(8
|
)
|
|
226
|
|
|
(9
|
)
|
||||||
Corporates
|
413
|
|
|
(9
|
)
|
|
1,031
|
|
|
(123
|
)
|
|
1,444
|
|
|
(132
|
)
|
||||||
Equities
|
51
|
|
|
(1
|
)
|
|
75
|
|
|
(3
|
)
|
|
126
|
|
|
(4
|
)
|
||||||
Hybrids
|
41
|
|
|
(2
|
)
|
|
412
|
|
|
(45
|
)
|
|
453
|
|
|
(47
|
)
|
||||||
Municipals
|
69
|
|
|
(2
|
)
|
|
38
|
|
|
(2
|
)
|
|
107
|
|
|
(4
|
)
|
||||||
Residential mortgage-backed securities
|
70
|
|
|
(1
|
)
|
|
544
|
|
|
(27
|
)
|
|
614
|
|
|
(28
|
)
|
||||||
Total available-for-sale securities
|
$
|
1,040
|
|
|
$
|
(20
|
)
|
|
$
|
3,650
|
|
|
$
|
(249
|
)
|
|
$
|
4,690
|
|
|
$
|
(269
|
)
|
Total number of available-for-sale securities in an unrealized loss position less than twelve months
|
|
|
|
|
|
|
|
|
|
|
193
|
|
|||||||||||
Total number of available-for-sale securities in an unrealized loss position twelve months or longer
|
|
|
|
|
|
|
|
|
|
|
543
|
|
|||||||||||
Total number of available-for-sale securities in an unrealized loss position
|
|
|
|
|
|
|
|
|
|
|
736
|
|
|
September 30, 2015
|
||||||||||||||||||||||
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
||||||||||||||||||
|
Fair Value
|
|
Gross Unrealized
Losses
|
|
Fair Value
|
|
Gross Unrealized
Losses
|
|
Fair Value
|
|
Gross Unrealized
Losses
|
||||||||||||
Available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Asset-backed securities
|
$
|
816
|
|
|
$
|
(14
|
)
|
|
$
|
833
|
|
|
$
|
(33
|
)
|
|
$
|
1,649
|
|
|
$
|
(47
|
)
|
Commercial mortgage-backed securities
|
262
|
|
|
(8
|
)
|
|
133
|
|
|
(2
|
)
|
|
395
|
|
|
(10
|
)
|
||||||
Corporates
|
2,342
|
|
|
(201
|
)
|
|
1,328
|
|
|
(153
|
)
|
|
3,670
|
|
|
(354
|
)
|
||||||
Equities
|
37
|
|
|
—
|
|
|
106
|
|
|
(4
|
)
|
|
143
|
|
|
(4
|
)
|
||||||
Hybrids
|
88
|
|
|
(4
|
)
|
|
542
|
|
|
(38
|
)
|
|
630
|
|
|
(42
|
)
|
||||||
Municipals
|
220
|
|
|
(6
|
)
|
|
192
|
|
|
(9
|
)
|
|
412
|
|
|
(15
|
)
|
||||||
Residential mortgage-backed securities
|
423
|
|
|
(10
|
)
|
|
294
|
|
|
(16
|
)
|
|
717
|
|
|
(26
|
)
|
||||||
Total available-for-sale securities
|
$
|
4,188
|
|
|
$
|
(243
|
)
|
|
$
|
3,428
|
|
|
$
|
(255
|
)
|
|
$
|
7,616
|
|
|
$
|
(498
|
)
|
Total number of available-for-sale securities in an unrealized loss position less than twelve months
|
|
|
|
|
|
|
|
|
|
|
712
|
|
|||||||||||
Total number of available-for-sale securities in an unrealized loss position twelve months or longer
|
|
|
|
|
|
|
|
|
|
|
396
|
|
|||||||||||
Total number of available-for-sale securities in an unrealized loss position
|
|
|
|
|
|
|
|
|
|
|
1,108
|
|
|
Year ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
Beginning balance
|
$
|
3
|
|
|
$
|
3
|
|
Increases attributable to credit losses on securities:
|
|
|
|
||||
OTTI was previously recognized
|
—
|
|
|
—
|
|
||
OTTI was not previously recognized
|
—
|
|
|
—
|
|
||
Ending balance
|
$
|
3
|
|
|
$
|
3
|
|
|
Year ended September 30,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
OTTI recognized in net income:
|
|
|
|
|
|
||||||
Asset-backed securities
|
$
|
12
|
|
|
$
|
36
|
|
|
$
|
—
|
|
Corporates
|
6
|
|
|
2
|
|
|
—
|
|
|||
Related party loans
|
4
|
|
|
—
|
|
|
—
|
|
|||
Residential mortgage-backed securities
|
—
|
|
|
8
|
|
|
—
|
|
|||
Other invested assets
|
22
|
|
|
36
|
|
|
1
|
|
|||
Total
|
$
|
44
|
|
|
$
|
82
|
|
|
$
|
1
|
|
|
|
|
|
Year Ended
|
||
|
|
|
|
September 30, 2015
|
||
Type
|
|
Balance Sheet Classification
|
|
OTTI Losses
|
||
Collateralized loan obligations ("CLOs") (a)
|
|
Fixed maturities, available-for-sale
|
|
$
|
25
|
|
Preferred equity (a)
|
|
Equity securities, available-for-sale
|
|
21
|
|
|
Participations
|
|
Other invested assets
|
|
35
|
|
|
OTTI, gross of reinsurance
|
|
|
|
$
|
81
|
|
CLOs (a)
|
|
Fixed maturities, available-for-sale
|
|
(1
|
)
|
|
Preferred equity (a)
|
|
Equity securities, available-for-sale
|
|
(21
|
)
|
|
OTTI, net of reinsurance
|
|
|
|
$
|
59
|
|
•
|
CLOs - The Company utilized a price from a third party valuation firm which considered the sufficiency of underlying loan collateral for the RSH loan and other loans.
|
•
|
Preferred equity - The Company utilized a price from a third party valuation firm which considered the updated fair value estimates of the Salus Capital Partners LLC ("Salus") CLO and the Salus participation in RSH, in which Salus owns investment interests.
|
•
|
Participations - The Company considered the recovery of the underlying loan collateral for RSH based on the evidence obtained.
|
|
|
|
|
Year ended September 30,
|
||||||
|
|
|
|
2016
|
|
2015
|
||||
Type
|
|
Balance Sheet Classification
|
|
OTTI Losses
|
||||||
CLOs
|
|
Fixed maturities, available-for-sale
|
|
$
|
12
|
|
|
$
|
13
|
|
Preferred equity (a)
|
|
Equity securities, available-for-sale
|
|
—
|
|
|
9
|
|
||
Participations
|
|
Other invested assets
|
|
24
|
|
|
2
|
|
||
OTTI, gross of reinsurance
|
|
|
|
$
|
36
|
|
|
$
|
24
|
|
CLOs (a)
|
|
Fixed maturities, available-for-sale
|
|
(1
|
)
|
|
(1
|
)
|
||
Preferred equity (a)
|
|
Equity securities, available-for-sale
|
|
—
|
|
|
(9
|
)
|
||
Participations (a)
|
|
Other invested assets
|
|
(2
|
)
|
|
(1
|
)
|
||
OTTI, net of reinsurance
|
|
|
|
$
|
33
|
|
|
$
|
13
|
|
|
September 30, 2016
|
|
September 30, 2015
|
||||||||||
|
Gross Carrying Value
|
|
% of Total
|
|
Gross Carrying Value
|
|
% of Total
|
||||||
Property Type:
|
|
|
|
|
|
|
|
||||||
Funeral Home
|
$
|
1
|
|
|
—
|
%
|
|
$
|
1
|
|
|
—
|
%
|
Hotel
|
23
|
|
|
4
|
%
|
|
13
|
|
|
3
|
%
|
||
Industrial - General
|
58
|
|
|
10
|
%
|
|
38
|
|
|
8
|
%
|
||
Industrial - Warehouse
|
64
|
|
|
11
|
%
|
|
76
|
|
|
15
|
%
|
||
Multifamily
|
70
|
|
|
11
|
%
|
|
64
|
|
|
13
|
%
|
||
Office
|
160
|
|
|
27
|
%
|
|
137
|
|
|
28
|
%
|
||
Retail
|
220
|
|
|
37
|
%
|
|
163
|
|
|
33
|
%
|
||
Total commercial mortgage loans, gross of valuation allowance
|
$
|
596
|
|
|
100
|
%
|
|
$
|
492
|
|
|
100
|
%
|
Allowance for loan loss
|
(1
|
)
|
|
|
|
(1
|
)
|
|
|
||||
Total commercial mortgage loans
|
$
|
595
|
|
|
|
|
$
|
491
|
|
|
|
||
|
|
|
|
|
|
|
|
||||||
U.S. Region:
|
|
|
|
|
|
|
|
||||||
East North Central
|
$
|
137
|
|
|
23
|
%
|
|
$
|
121
|
|
|
25
|
%
|
East South Central
|
21
|
|
|
4
|
%
|
|
12
|
|
|
2
|
%
|
||
Middle Atlantic
|
97
|
|
|
16
|
%
|
|
87
|
|
|
18
|
%
|
||
Mountain
|
67
|
|
|
12
|
%
|
|
42
|
|
|
9
|
%
|
||
New England
|
14
|
|
|
2
|
%
|
|
9
|
|
|
2
|
%
|
||
Pacific
|
136
|
|
|
23
|
%
|
|
113
|
|
|
23
|
%
|
||
South Atlantic
|
67
|
|
|
11
|
%
|
|
69
|
|
|
13
|
%
|
||
West North Central
|
14
|
|
|
2
|
%
|
|
14
|
|
|
3
|
%
|
||
West South Central
|
43
|
|
|
7
|
%
|
|
25
|
|
|
5
|
%
|
||
Total commercial mortgage loans, gross of valuation allowance
|
$
|
596
|
|
|
100
|
%
|
|
$
|
492
|
|
|
100
|
%
|
Allowance for loan loss
|
(1
|
)
|
|
|
|
(1
|
)
|
|
|
||||
Total commercial mortgage loans
|
$
|
595
|
|
|
|
|
$
|
491
|
|
|
|
|
Debt-Service Coverage Ratios
|
|
Total Amount
|
|
% of Total
|
|
Estimated Fair Value
|
|
% of Total
|
||||||||||||||||
|
>1.25
|
|
1.00 - 1.25
|
|
N/A(a)
|
|
|
|
|
||||||||||||||||
September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
LTV Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Less than 50%
|
$
|
158
|
|
|
$
|
18
|
|
|
$
|
1
|
|
|
$
|
177
|
|
|
29
|
%
|
|
$
|
181
|
|
|
29
|
%
|
50% to 60%
|
189
|
|
|
—
|
|
|
—
|
|
|
189
|
|
|
32
|
%
|
|
194
|
|
|
32
|
%
|
|||||
60% to 75%
|
230
|
|
|
—
|
|
|
—
|
|
|
230
|
|
|
39
|
%
|
|
239
|
|
|
39
|
%
|
|||||
Commercial mortgage loans
|
$
|
577
|
|
|
$
|
18
|
|
|
$
|
1
|
|
|
$
|
596
|
|
|
100
|
%
|
|
$
|
614
|
|
|
100
|
%
|
September 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
LTV Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Less than 50%
|
$
|
115
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
126
|
|
|
25
|
%
|
|
$
|
125
|
|
|
25
|
%
|
50% to 60%
|
161
|
|
|
20
|
|
|
—
|
|
|
181
|
|
|
37
|
%
|
|
180
|
|
|
37
|
%
|
|||||
60% to 75%
|
185
|
|
|
—
|
|
|
—
|
|
|
185
|
|
|
38
|
%
|
|
185
|
|
|
38
|
%
|
|||||
Commercial mortgage loans
|
$
|
461
|
|
|
$
|
20
|
|
|
$
|
11
|
|
|
$
|
492
|
|
|
100
|
%
|
|
$
|
490
|
|
|
100
|
%
|
|
September 30, 2016
|
|
September 30, 2015
|
||||
Gross balance commercial mortgage loans
|
$
|
596
|
|
|
$
|
492
|
|
Allowance for loan loss
|
(1
|
)
|
|
(1
|
)
|
||
Net balance commercial mortgage loans
|
$
|
595
|
|
|
$
|
491
|
|
|
September 30, 2016
|
|
September 30, 2015
|
||||
Current to 30 days
|
$
|
596
|
|
|
$
|
492
|
|
Past due
|
—
|
|
|
—
|
|
||
Total carrying value
|
$
|
596
|
|
|
$
|
492
|
|
|
|
Year ended September 30,
|
||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||
Fixed maturity securities, available-for-sale
|
|
$
|
869
|
|
|
$
|
799
|
|
|
$
|
723
|
|
Equity securities, available-for-sale
|
|
32
|
|
|
33
|
|
|
23
|
|
|||
Commercial mortgage loans
|
|
24
|
|
|
11
|
|
|
3
|
|
|||
Related party loans
|
|
4
|
|
|
6
|
|
|
7
|
|
|||
Invested cash and short-term investments
|
|
3
|
|
|
2
|
|
|
—
|
|
|||
Other investments
|
|
9
|
|
|
20
|
|
|
20
|
|
|||
Gross investment income
|
|
941
|
|
|
871
|
|
|
776
|
|
|||
Investment expense
|
|
(18
|
)
|
|
(20
|
)
|
|
(16
|
)
|
|||
Net investment income
|
|
$
|
923
|
|
|
$
|
851
|
|
|
$
|
760
|
|
|
Year ended September 30,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Net realized gains on fixed maturity available-for-sale securities
|
$
|
11
|
|
|
$
|
11
|
|
|
$
|
104
|
|
Realized gains (losses) on equity securities
|
1
|
|
|
—
|
|
|
(1
|
)
|
|||
Change in fair value of other derivatives and embedded derivatives
|
—
|
|
|
7
|
|
|
2
|
|
|||
Realized losses on other invested assets
|
(26
|
)
|
|
(40
|
)
|
|
(2
|
)
|
|||
Net realized (losses) gains on available-for-sale securities
|
(14
|
)
|
|
(22
|
)
|
|
103
|
|
|||
Realized (losses) gains on certain derivative instruments
|
(84
|
)
|
|
108
|
|
|
209
|
|
|||
Unrealized gains (losses) on certain derivative instruments
|
166
|
|
|
(215
|
)
|
|
37
|
|
|||
Change in fair value of reinsurance related embedded derivative
|
(49
|
)
|
|
92
|
|
|
(42
|
)
|
|||
Realized gains (losses) on hedging derivatives and reinsurance-related embedded derivatives
|
33
|
|
|
(15
|
)
|
|
204
|
|
|||
Net investment gains (losses)
|
$
|
19
|
|
|
$
|
(37
|
)
|
|
$
|
307
|
|
|
September 30, 2016
|
|
September 30, 2015
|
||||
Assets:
|
|
|
|
||||
Derivative investments:
|
|
|
|
||||
Call options
|
$
|
276
|
|
|
$
|
81
|
|
Futures contracts
|
—
|
|
|
1
|
|
||
Other invested assets:
|
|
|
|
||||
Other derivatives and embedded derivatives
|
13
|
|
|
21
|
|
||
Other assets:
|
|
|
|
||||
Reinsurance related embedded derivative
|
119
|
|
|
168
|
|
||
|
$
|
408
|
|
|
$
|
271
|
|
Liabilities:
|
|
|
|
||||
Contractholder funds:
|
|
|
|
||||
FIA embedded derivative
|
$
|
2,383
|
|
|
$
|
2,149
|
|
Funds withheld for reinsurance liabilities
|
|
|
|
||||
Call options payable to FSRCI
|
11
|
|
|
5
|
|
||
Other liabilities:
|
|
|
|
||||
Futures contracts
|
—
|
|
|
—
|
|
||
|
$
|
2,394
|
|
|
$
|
2,154
|
|
|
Year ended September 30,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Net investment (losses) gains:
|
|
|
|
|
|
||||||
Call options
|
$
|
74
|
|
|
$
|
(100
|
)
|
|
$
|
220
|
|
Futures contracts
|
8
|
|
|
(7
|
)
|
|
26
|
|
|||
Other derivatives and embedded derivatives
|
—
|
|
|
7
|
|
|
2
|
|
|||
Reinsurance related embedded derivative
|
(49
|
)
|
|
92
|
|
|
(42
|
)
|
|||
|
$
|
33
|
|
|
$
|
(8
|
)
|
|
$
|
206
|
|
Benefits and other changes in policy reserves:
|
|
|
|
|
|
||||||
FIA embedded derivatives
|
$
|
234
|
|
|
$
|
241
|
|
|
$
|
363
|
|
|
|
|
|
September 30, 2016
|
|
September 30, 2015
|
||||||||||||||||||||||||||||
Counterparty
|
|
Credit Rating
(Fitch/Moody's/S&P) (a)
|
|
Notional
Amount
|
|
Fair Value
|
|
Collateral
|
|
Net Credit Risk
|
|
Notional
Amount
|
|
Fair Value
|
|
Collateral
|
|
Net Credit Risk
|
||||||||||||||||
Merrill Lynch
|
|
A/*/A
|
|
$
|
2,302
|
|
|
$
|
55
|
|
|
$
|
10
|
|
|
$
|
45
|
|
|
$
|
2,233
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
16
|
|
Deutsche Bank
|
|
*/Baa3/BBB+
|
|
1,620
|
|
|
46
|
|
|
12
|
|
|
34
|
|
|
2,482
|
|
|
26
|
|
|
—
|
|
|
26
|
|
||||||||
Morgan Stanley
|
|
*/A1/A
|
|
2,952
|
|
|
87
|
|
|
58
|
|
|
29
|
|
|
4,086
|
|
|
35
|
|
|
7
|
|
|
28
|
|
||||||||
Barclay's Bank
|
|
*/A2/A-
|
|
1,389
|
|
|
39
|
|
|
—
|
|
|
39
|
|
|
392
|
|
|
4
|
|
|
—
|
|
|
4
|
|
||||||||
Canadian Imperial Bank of Commerce
|
|
AA-/A3/A+
|
|
1,623
|
|
|
49
|
|
|
48
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Total
|
|
|
|
$
|
9,886
|
|
|
$
|
276
|
|
|
$
|
128
|
|
|
$
|
148
|
|
|
$
|
9,193
|
|
|
$
|
81
|
|
|
$
|
7
|
|
|
$
|
74
|
|
|
September 30, 2016
|
||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Fair Value
|
|
Carrying Amount
|
||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
864
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
864
|
|
|
$
|
864
|
|
Fixed maturity securities, available-for-sale:
|
|
|
|
|
|
|
|
|
|
||||||||||
Asset-backed securities
|
—
|
|
|
2,327
|
|
|
172
|
|
|
2,499
|
|
|
2,499
|
|
|||||
Commercial mortgage-backed securities
|
—
|
|
|
785
|
|
|
79
|
|
|
864
|
|
|
864
|
|
|||||
Corporates
|
—
|
|
|
10,219
|
|
|
1,121
|
|
|
11,340
|
|
|
11,340
|
|
|||||
Hybrids
|
—
|
|
|
1,386
|
|
|
—
|
|
|
1,386
|
|
|
1,386
|
|
|||||
Municipals
|
—
|
|
|
1,676
|
|
|
41
|
|
|
1,717
|
|
|
1,717
|
|
|||||
Residential mortgage-backed securities
|
—
|
|
|
1,362
|
|
|
—
|
|
|
1,362
|
|
|
1,362
|
|
|||||
U.S. Government
|
61
|
|
|
182
|
|
|
—
|
|
|
243
|
|
|
243
|
|
|||||
Equity securities, available-for-sale
|
22
|
|
|
617
|
|
|
44
|
|
|
683
|
|
|
683
|
|
|||||
Derivative financial instruments
|
—
|
|
|
276
|
|
|
—
|
|
|
276
|
|
|
276
|
|
|||||
Reinsurance related embedded derivative, included in other assets
|
—
|
|
|
119
|
|
|
—
|
|
|
119
|
|
|
119
|
|
|||||
Other invested assets
|
—
|
|
|
—
|
|
|
34
|
|
|
34
|
|
|
34
|
|
|||||
Total financial assets at fair value
|
$
|
947
|
|
|
$
|
18,949
|
|
|
$
|
1,491
|
|
|
$
|
21,387
|
|
|
$
|
21,387
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivatives:
|
|
|
|
|
|
|
|
|
|
||||||||||
FIA embedded derivatives, included in contractholder funds
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,383
|
|
|
$
|
2,383
|
|
|
$
|
2,383
|
|
Call options payable for FSRCI, included in funds withheld for reinsurance liabilities
|
—
|
|
|
11
|
|
|
—
|
|
|
11
|
|
|
11
|
|
|||||
Total financial liabilities at fair value
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
2,383
|
|
|
$
|
2,394
|
|
|
$
|
2,394
|
|
|
September 30, 2015
|
||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Fair Value
|
|
Carrying Amount
|
||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
502
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
502
|
|
|
$
|
502
|
|
Fixed maturity securities, available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Asset-backed securities
|
—
|
|
|
2,068
|
|
|
38
|
|
|
2,106
|
|
|
2,106
|
|
|||||
Commercial mortgage-backed securities
|
—
|
|
|
738
|
|
|
144
|
|
|
882
|
|
|
882
|
|
|||||
Corporates
|
—
|
|
|
8,566
|
|
|
964
|
|
|
9,530
|
|
|
9,530
|
|
|||||
Hybrids
|
—
|
|
|
1,214
|
|
|
—
|
|
|
1,214
|
|
|
1,214
|
|
|||||
Municipals
|
—
|
|
|
1,569
|
|
|
39
|
|
|
1,608
|
|
|
1,608
|
|
|||||
Residential mortgage-backed securities
|
—
|
|
|
2,162
|
|
|
—
|
|
|
2,162
|
|
|
2,162
|
|
|||||
U.S. Government
|
60
|
|
|
184
|
|
|
—
|
|
|
244
|
|
|
244
|
|
|||||
Equity securities available-for-sale
|
26
|
|
|
560
|
|
|
34
|
|
|
620
|
|
|
620
|
|
|||||
Derivative financial instruments
|
1
|
|
|
81
|
|
|
—
|
|
|
82
|
|
|
82
|
|
|||||
Reinsurance related embedded derivative, included in other assets
|
—
|
|
|
168
|
|
|
—
|
|
|
168
|
|
|
168
|
|
|||||
Other invested assets
|
—
|
|
|
11
|
|
|
129
|
|
|
140
|
|
|
140
|
|
|||||
Total financial assets at fair value
|
$
|
589
|
|
|
$
|
17,321
|
|
|
$
|
1,348
|
|
|
$
|
19,258
|
|
|
$
|
19,258
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivatives:
|
|
|
|
|
|
|
|
|
|
||||||||||
FIA embedded derivatives, included in contractholder funds
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,149
|
|
|
$
|
2,149
|
|
|
$
|
2,149
|
|
Call options payable for FSRCI, included in funds withheld for reinsurance liabilities
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
|
5
|
|
|||||
Total financial liabilities at fair value
|
$
|
—
|
|
|
$
|
5
|
|
|
$
|
2,149
|
|
|
$
|
2,154
|
|
|
$
|
2,154
|
|
|
|
Fair Value at
|
|
|
|
|
|
Range (Weighted average)
|
||
|
|
September 30, 2016
|
|
Valuation Technique
|
|
Unobservable Input(s)
|
|
September 30, 2016
|
||
Assets
|
|
|
|
|
|
|
|
|
||
Asset-backed securities
|
|
$
|
144
|
|
|
Broker-quoted
|
|
Offered quotes
|
|
97.54% - 101.55%
(99.66%) |
Asset-backed securities
|
|
9
|
|
|
Matrix Pricing
|
|
Quoted prices
|
|
98.75% - 98.75%
(98.75%) |
|
Asset-backed securities (Salus CLO equity tranche)
|
|
19
|
|
|
Third-Party Valuation
|
|
Offered quotes
|
|
28.37% - 28.37%
(28.37%) |
|
|
|
|
|
|
|
Discount rate
|
|
15.00%
|
||
|
|
|
|
|
|
RSH Recovery
|
|
5.50%
|
||
|
|
|
|
|
|
Other loan recoveries
|
|
0.00% - 100.00%
|
||
Commercial mortgage-backed securities
|
|
75
|
|
|
Broker-quoted
|
|
Offered quotes
|
|
104.31% - 122.19%
(114.10%) |
|
Commercial mortgage-backed securities
|
|
4
|
|
|
Matrix Pricing
|
|
Quoted prices
|
|
98.41% - 98.41%
(98.41%) |
|
Corporates
|
|
920
|
|
|
Broker-quoted
|
|
Offered quotes
|
|
50.00% - 118.33%
(103.37%) |
|
Corporates
|
|
201
|
|
|
Matrix Pricing
|
|
Quoted prices
|
|
99.00% - 150.23%
(107.65%) |
|
Municipals
|
|
41
|
|
|
Broker-quoted
|
|
Offered quotes
|
|
119.04%
|
|
Equity securities available-for-sale
|
|
41
|
|
|
Net Asset Value
|
|
Not applicable
|
|
100.00%
|
|
Equity securities available-for-sale (Salus preferred equity)
|
|
3
|
|
|
Market-approach
|
|
Yield
|
|
11.00%
|
|
|
|
|
|
|
|
RSH Recovery
|
|
5.50%
|
||
|
|
|
|
|
|
Discount rate
|
|
15.00%
|
||
|
|
|
|
|
|
Salus CLO Equity
|
|
28.37%
|
||
Other invested assets:
|
|
|
|
|
|
|
|
|
||
Available-for-sale embedded derivative
|
|
13
|
|
|
Black-Scholes model
|
|
Market value of AnchorPath fund
|
|
100.00%
|
|
Loan participations - Other
|
|
2
|
|
|
Market Pricing
|
|
Offered quotes
|
|
100.00%
|
|
Loan participations - JSN Jewellery, Inc.
|
|
17
|
|
|
Liquidation value – 52.5% Recovery Estimate
|
|
Recovery estimate (wind-down costs)
|
|
49.93% - 56.67% (52.50%)
|
|
Loan participation - RadioShack (RSH) Corporation
|
|
2
|
|
|
Liquidation value – 5% Recovery Estimate
|
|
Recovery estimate (wind-down costs)
|
|
1.36% - 14.28%
|
|
Total
|
|
$
|
1,491
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
||
Derivatives:
|
|
|
|
|
|
|
|
|
||
FIA embedded derivatives, included in contractholder funds
|
|
$
|
2,383
|
|
|
Discounted Cash Flow
|
|
Market value of option
|
|
0.00% - 26.64%
(2.55%) |
|
|
|
|
|
|
SWAP rates
|
|
1.18% - 1.46%
(1.31%) |
||
|
|
|
|
|
|
Mortality multiplier
|
|
80.00% - 80.00%
(80.00%) |
||
|
|
|
|
|
|
Surrender rates
|
|
0.50% - 75.00%
(9.59%) |
||
|
|
|
|
|
|
Non-performance spread
|
|
0.25% - 0.25%
(0.25%) |
||
|
|
|
|
|
|
Future option budget
|
|
1.15% - 5.57% (2.91%)
|
||
Total liabilities at fair value
|
|
$
|
2,383
|
|
|
|
|
|
|
|
|
|
Fair Value at
|
|
|
|
|
|
Range (Weighted average)
|
||
|
|
September 30, 2015
|
|
Valuation Technique
|
|
Unobservable Input(s)
|
|
September 30, 2015
|
||
Assets
|
|
|
|
|
|
|
|
|
||
Asset-backed securities
|
|
$
|
10
|
|
|
Broker-quoted
|
|
Offered quotes
|
|
100.37% - 107.84%
(102.42%) |
Asset-backed securities (Salus CLO equity tranche)
|
|
28
|
|
|
Third-Party Valuation
|
|
Offered quotes
|
|
41.80%
|
|
|
|
|
|
|
|
Discount rate
|
|
15.00%
|
||
|
|
|
|
|
|
Constant default rate
|
|
2.00%
|
||
|
|
|
|
|
|
RSH Recovery
|
|
30.00%
|
||
|
|
|
|
|
|
Other loan recoveries
|
|
4.00% - 100.00%
|
||
Commercial mortgage-backed securities
|
|
144
|
|
|
Broker-quoted
|
|
Offered quotes
|
|
99.32% - 119.00%
(110.95%) |
|
Corporates
|
|
898
|
|
|
Broker-quoted
|
|
Offered quotes
|
|
56.75% - 113.83%
(100.69%) |
|
Corporates
|
|
66
|
|
|
Matrix Pricing
|
|
Quoted prices
|
|
104.58% - 142.43%
(110.03%) |
|
Municipals
|
|
39
|
|
|
Broker-quoted
|
|
Offered quotes
|
|
111.47%
|
|
Equity securities available-for-sale
|
|
25
|
|
|
Net Asset Value
|
|
Not applicable
|
|
100.00%
|
|
Equity securities available-for-sale
|
|
6
|
|
|
Matrix Pricing
|
|
Quoted prices
|
|
100.00%
|
|
Equity securities available-for-sale (Salus preferred equity)
|
|
3
|
|
|
Market-approach
|
|
Yield
|
|
11.00%
|
|
|
|
|
|
|
|
RSH recovery
|
|
30.00%
|
||
|
|
|
|
|
|
Discount rate
|
|
15.00%
|
||
|
|
|
|
|
|
Salus CLO Equity
|
|
41.80%
|
||
Other invested assets:
|
|
|
|
|
|
|
|
|
||
Available-for-sale embedded derivative
|
|
10
|
|
|
Black-Scholes model
|
|
Market value of AnchorPath fund
|
|
100.00%
|
|
Loan participations
|
|
104
|
|
|
Market Pricing
|
|
Offered quotes
|
|
100.00%
|
|
Salus participation - RSH Corporation
|
|
15
|
|
|
Liquidation value – 30% Recovery Estimate
|
|
Recovery estimate (wind-down costs)
|
|
30.00% - 34.00%
|
|
Total
|
|
$
|
1,348
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
||
Derivatives:
|
|
|
|
|
|
|
|
|
||
FIA embedded derivatives, included in contractholder funds
|
|
$
|
2,149
|
|
|
Discounted Cash Flow
|
|
Market value of option
|
|
0.00% - 33.83%
(1.01%) |
|
|
|
|
|
|
SWAP rates
|
|
1.38% - 2.00%
(1.69%) |
||
|
|
|
|
|
|
Mortality multiplier
|
|
80.00% - 80.00%
(80.00%) |
||
|
|
|
|
|
|
Surrender rates
|
|
0.50% - 75.00%
(10.13%) |
||
|
|
|
|
|
|
Non-performance spread
|
|
0.25% - 0.25%
(0.25%) |
||
|
|
|
|
|
|
Future option budget
|
|
1.19% - 5.25% (2.93%)
|
||
Total liabilities at fair value
|
|
$
|
2,149
|
|
|
|
|
|
|
|
|
Year ended September 30, 2016
|
||||||||||||||||||||||||||||||
|
Balance at Beginning
of Period |
|
Total Gains (Losses)
|
|
Purchases
|
|
Sales
|
|
Settlements
|
|
Net transfer In (Out) of
Level 3 (a) |
|
Balance at End of
Period |
||||||||||||||||||
|
|
Included in
Earnings |
|
Included in
AOCI |
|
|
|
|
|
||||||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Fixed maturity securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Asset-backed securities
|
$
|
38
|
|
|
$
|
(12
|
)
|
|
$
|
3
|
|
|
$
|
141
|
|
|
$
|
—
|
|
|
$
|
(3
|
)
|
|
$
|
5
|
|
|
$
|
172
|
|
Commercial mortgage-backed securities
|
144
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
(66
|
)
|
|
79
|
|
||||||||
Corporates
|
964
|
|
|
—
|
|
|
32
|
|
|
154
|
|
|
(3
|
)
|
|
(26
|
)
|
|
—
|
|
|
1,121
|
|
||||||||
Hybrids
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Municipals
|
39
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41
|
|
||||||||
Equity securities available-for-sale
|
34
|
|
|
—
|
|
|
(1
|
)
|
|
17
|
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
44
|
|
||||||||
Other invested assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Available-for-sale embedded derivative
|
10
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
||||||||
Loan participations
|
119
|
|
|
(21
|
)
|
|
9
|
|
|
54
|
|
|
—
|
|
|
(140
|
)
|
|
—
|
|
|
21
|
|
||||||||
Total assets at Level 3 fair value
|
$
|
1,348
|
|
|
$
|
(30
|
)
|
|
$
|
49
|
|
|
$
|
366
|
|
|
$
|
(9
|
)
|
|
$
|
(172
|
)
|
|
$
|
(61
|
)
|
|
$
|
1,491
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
FIA embedded derivatives, included in contractholder funds
|
$
|
2,149
|
|
|
$
|
234
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,383
|
|
Total liabilities at Level 3 fair value
|
$
|
2,149
|
|
|
$
|
234
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,383
|
|
|
Year ended September 30, 2015
|
||||||||||||||||||||||||||||||
|
Balance at Beginning
of Period |
|
Total Gains (Losses)
|
|
Purchases
|
|
Sales
|
|
Settlements
|
|
Net transfer In (Out) of
Level 3 (a) |
|
Balance at End of
Period |
||||||||||||||||||
|
|
Included in
Earnings |
|
Included in
AOCI |
|
|
|
|
|
||||||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Fixed maturity securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Asset-backed securities
|
$
|
74
|
|
|
$
|
(37
|
)
|
|
$
|
3
|
|
|
$
|
73
|
|
|
$
|
(15
|
)
|
|
$
|
(31
|
)
|
|
$
|
(29
|
)
|
|
$
|
38
|
|
Commercial mortgage-backed securities
|
83
|
|
|
—
|
|
|
(2
|
)
|
|
63
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
144
|
|
||||||||
Corporates
|
834
|
|
|
4
|
|
|
10
|
|
|
202
|
|
|
(1
|
)
|
|
(61
|
)
|
|
(24
|
)
|
|
964
|
|
||||||||
Municipals
|
37
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39
|
|
||||||||
Equity securities available-for-sale
|
40
|
|
|
(30
|
)
|
|
(1
|
)
|
|
25
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34
|
|
||||||||
Other invested assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Available-for-sale embedded derivative
|
11
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
||||||||
Loan participations
|
213
|
|
|
(39
|
)
|
|
(5
|
)
|
|
88
|
|
|
—
|
|
|
(138
|
)
|
|
—
|
|
|
119
|
|
||||||||
Total assets at Level 3 fair value
|
$
|
1,292
|
|
|
$
|
(103
|
)
|
|
$
|
7
|
|
|
$
|
451
|
|
|
$
|
(16
|
)
|
|
$
|
(230
|
)
|
|
$
|
(53
|
)
|
|
$
|
1,348
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
FIA embedded derivatives, included in contractholder funds
|
$
|
1,908
|
|
|
$
|
241
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,149
|
|
Total liabilities at Level 3 fair value
|
$
|
1,908
|
|
|
$
|
241
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,149
|
|
(a)
|
The net transfers out of Level 3 during the
year ended
September 30, 2015
were exclusively to Level 2.
|
|
Year ended September 30, 2014
|
||||||||||||||||||||||||||||||
|
Balance at Beginning
of Period |
|
Total Gains (Losses)
|
|
Purchases
|
|
Sales
|
|
Settlements
|
|
Net transfer In (Out) of Level 3 (a)
|
|
Balance at End of
Period |
||||||||||||||||||
|
|
Included in
Earnings |
|
Included in
AOCI |
|
|
|
|
|
||||||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Fixed maturity securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Asset-backed securities
|
$
|
246
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
36
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(207
|
)
|
|
$
|
74
|
|
Commercial mortgage-backed securities
|
6
|
|
|
—
|
|
|
—
|
|
|
83
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
83
|
|
||||||||
Corporates
|
461
|
|
|
—
|
|
|
19
|
|
|
382
|
|
|
(12
|
)
|
|
(2
|
)
|
|
(14
|
)
|
|
834
|
|
||||||||
Municipals
|
—
|
|
|
—
|
|
|
2
|
|
|
35
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
37
|
|
||||||||
Equity securities available-for-sale
|
—
|
|
|
—
|
|
|
1
|
|
|
39
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40
|
|
||||||||
Other invested assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Available-for-sale embedded derivative
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
||||||||
Loan participations
|
157
|
|
|
—
|
|
|
(1
|
)
|
|
187
|
|
|
—
|
|
|
(130
|
)
|
|
—
|
|
|
213
|
|
||||||||
Total assets at Level 3 fair value
|
$
|
870
|
|
|
$
|
—
|
|
|
$
|
20
|
|
|
$
|
773
|
|
|
$
|
(12
|
)
|
|
$
|
(132
|
)
|
|
$
|
(227
|
)
|
|
$
|
1,292
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
FIA embedded derivatives, included in contractholder funds
|
$
|
1,545
|
|
|
$
|
363
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,908
|
|
Total liabilities at Level 3 fair value
|
$
|
1,545
|
|
|
$
|
363
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,908
|
|
(a)
|
The net transfers out of Level 3 during the year ended September 30, 2014 were exclusively to Level 2.
|
|
September 30, 2016
|
||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Estimated Fair Value
|
|
Carrying Amount
|
||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial mortgage loans
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
614
|
|
|
$
|
614
|
|
|
$
|
595
|
|
Policy loans, included in other invested assets
|
—
|
|
|
—
|
|
|
13
|
|
|
13
|
|
|
14
|
|
|||||
Limited partnership investment, included in other invested assets
|
—
|
|
|
—
|
|
|
12
|
|
|
12
|
|
|
12
|
|
|||||
Related party loans
|
—
|
|
|
—
|
|
|
71
|
|
|
71
|
|
|
71
|
|
|||||
Total
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
710
|
|
|
$
|
710
|
|
|
$
|
692
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||||
Investment contracts, included in contractholder funds
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,884
|
|
|
$
|
14,884
|
|
|
$
|
16,868
|
|
Debt
|
—
|
|
|
300
|
|
|
100
|
|
|
400
|
|
|
400
|
|
|||||
Total
|
$
|
—
|
|
|
$
|
300
|
|
|
$
|
14,984
|
|
|
$
|
15,284
|
|
|
$
|
17,268
|
|
|
September 30, 2015
|
||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Estimated Fair Value
|
|
Carrying Amount
|
||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial mortgage loans
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
490
|
|
|
$
|
490
|
|
|
$
|
491
|
|
Policy loans, included in other invested assets
|
—
|
|
|
—
|
|
|
9
|
|
|
9
|
|
|
11
|
|
|||||
Limited partnership investment, included in other invested assets
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
|
4
|
|
|||||
Related party loans
|
—
|
|
|
—
|
|
|
78
|
|
|
78
|
|
|
78
|
|
|||||
Total
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
581
|
|
|
$
|
581
|
|
|
$
|
584
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||||
Investment contracts, included in contractholder funds
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,126
|
|
|
$
|
14,126
|
|
|
$
|
15,621
|
|
Debt
|
—
|
|
|
312
|
|
|
—
|
|
|
312
|
|
|
300
|
|
|||||
Total
|
$
|
—
|
|
|
$
|
312
|
|
|
$
|
14,126
|
|
|
$
|
14,438
|
|
|
$
|
15,921
|
|
|
|
VOBA
|
|
DAC
|
|
Total
|
||||||
Balance at September 30, 2015
|
|
$
|
187
|
|
|
$
|
801
|
|
|
$
|
988
|
|
Deferrals
|
|
—
|
|
|
350
|
|
|
350
|
|
|||
Adjustments
|
|
|
|
|
|
|
||||||
Unlocking
|
|
25
|
|
|
2
|
|
|
27
|
|
|||
Interest
|
|
11
|
|
|
34
|
|
|
45
|
|
|||
Amortization
|
|
(41
|
)
|
|
(85
|
)
|
|
(126
|
)
|
|||
Adjustment for unrealized investment gains
|
|
(163
|
)
|
|
(95
|
)
|
|
(258
|
)
|
|||
Balance at September 30, 2016
|
|
$
|
19
|
|
|
$
|
1,007
|
|
|
$
|
1,026
|
|
|
|
|
|
|
|
|
||||||
Accumulated amortization
|
|
$
|
396
|
|
|
|
|
|
|
|
VOBA
|
|
DAC
|
|
Total
|
||||||
Balance at September 30, 2014
|
|
$
|
59
|
|
|
$
|
456
|
|
|
$
|
515
|
|
Deferrals
|
|
—
|
|
|
317
|
|
|
317
|
|
|||
Adjustments
|
|
|
|
|
|
|
||||||
Unlocking
|
|
19
|
|
|
4
|
|
|
23
|
|
|||
Interest
|
|
12
|
|
|
22
|
|
|
34
|
|
|||
Amortization
|
|
(68
|
)
|
|
(53
|
)
|
|
(121
|
)
|
|||
Adjustment for unrealized investment losses
|
|
165
|
|
|
55
|
|
|
220
|
|
|||
Balance at September 30, 2015
|
|
$
|
187
|
|
|
$
|
801
|
|
|
$
|
988
|
|
|
|
|
|
|
|
|
||||||
Accumulated amortization
|
|
$
|
391
|
|
|
|
|
|
|
|
VOBA
|
|
DAC
|
|
Total
|
||||||
Balance at September 30, 2013
|
|
$
|
192
|
|
|
$
|
331
|
|
|
$
|
523
|
|
Deferrals
|
|
—
|
|
|
238
|
|
|
238
|
|
|||
Adjustments
|
|
|
|
|
|
|
||||||
Unlocking
|
|
22
|
|
|
3
|
|
|
25
|
|
|||
Interest
|
|
15
|
|
|
14
|
|
|
29
|
|
|||
Amortization
|
|
(87
|
)
|
|
(56
|
)
|
|
(143
|
)
|
|||
Adjustment for unrealized investment gains
|
|
(83
|
)
|
|
(74
|
)
|
|
(157
|
)
|
|||
Balance at September 30, 2014
|
|
$
|
59
|
|
|
$
|
456
|
|
|
$
|
515
|
|
|
|
|
|
|
|
|
||||||
Accumulated amortization
|
|
$
|
354
|
|
|
|
|
|
|
|
September 30, 2016
|
|
September 30, 2015
|
||||
Debt
|
|
$
|
300
|
|
|
$
|
300
|
|
Revolving credit facility
|
|
100
|
|
|
—
|
|
|
|
Year ended September 30,
|
||||||||||||||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||||||||||||||
|
|
Interest Expense
|
|
Amortization
|
|
Interest Expense
|
|
Amortization
|
|
Interest Expense
|
|
Amortization
|
||||||||||||
Debt
|
|
$
|
19
|
|
|
$
|
2
|
|
|
$
|
19
|
|
|
$
|
4
|
|
|
$
|
19
|
|
|
$
|
4
|
|
Revolving credit facility
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
Date Declared
|
|
Date Paid
|
|
Date Shareholders of record
|
|
Shareholders of record (in thousands)
|
|
Cash Dividend declared (per share)
|
|
Total cash paid
|
November 18, 2014
|
|
December 15, 2014
|
|
December 1, 2014
|
|
58,279
|
|
$0.065
|
|
$4
|
February 10, 2015
|
|
March 9, 2015
|
|
February 23, 2015
|
|
57,975
|
|
$0.065
|
|
$4
|
May 1, 2015
|
|
June 1, 2015
|
|
May 18, 2015
|
|
57,932
|
|
$0.065
|
|
$4
|
July 31, 2015
|
|
August 31, 2015
|
|
August 17, 2015
|
|
57,976
|
|
$0.065
|
|
$4
|
November 12, 2015
|
|
December 14, 2015
|
|
November 30, 2015
|
|
58,144
|
|
$0.065
|
|
$4
|
February 2, 2016
|
|
March 7, 2016
|
|
February 22, 2016
|
|
58,210
|
|
$0.065
|
|
$4
|
April 28, 2016
|
|
May 30, 2016
|
|
May 16, 2016
|
|
58,211
|
|
$0.065
|
|
$4
|
August 1, 2016
|
|
September 6, 2016
|
|
August 22, 2016
|
|
58,211
|
|
$0.065
|
|
$4
|
|
|
Year ended September 30,
|
||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||
FGL Plans
|
|
|
|
|
|
|
||||||
Stock options
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
Restricted shares
|
|
2
|
|
|
6
|
|
|
1
|
|
|||
Performance restricted stock units
|
|
10
|
|
|
3
|
|
|
1
|
|
|||
Unrestricted shares
|
|
—
|
|
|
—
|
|
|
1
|
|
|||
|
|
12
|
|
|
10
|
|
|
3
|
|
|||
FGLH Plans
|
|
|
|
|
|
|
||||||
Stock Incentive Plan - stock options
|
|
—
|
|
|
1
|
|
|
6
|
|
|||
2011 DEP
|
|
—
|
|
|
—
|
|
|
1
|
|
|||
Amended and Restated Stock Incentive Plan - stock options
|
|
1
|
|
|
5
|
|
|
5
|
|
|||
Amended and Restated Stock Incentive Plan - restricted stock units
|
|
—
|
|
|
2
|
|
|
2
|
|
|||
2012 DEP
|
|
—
|
|
|
1
|
|
|
—
|
|
|||
|
|
1
|
|
|
9
|
|
|
14
|
|
|||
Total stock compensation expense
|
|
13
|
|
|
19
|
|
|
17
|
|
|||
Related tax benefit
|
|
5
|
|
|
7
|
|
|
6
|
|
|||
Net stock compensation expense
|
|
$
|
8
|
|
|
$
|
12
|
|
|
$
|
11
|
|
|
|
Unrecognized Compensation
Expense |
|
Weighted Average Recognition
Period in Years |
||
FGL Plans
|
|
|
|
|
||
Stock options
|
|
$
|
—
|
|
|
1
|
Restricted shares
|
|
2
|
|
|
1
|
|
Total unrecognized stock compensation expense
|
|
$
|
2
|
|
|
1
|
Stock Option Awards
|
|
Options
|
|
Weighted Average
Exercise Price
|
|||
Stock options outstanding at September 30, 2015
|
|
317
|
|
|
$
|
21.60
|
|
Granted
|
|
119
|
|
|
25.75
|
|
|
Exercised
|
|
(77
|
)
|
|
24.31
|
|
|
Forfeited or expired
|
|
(13
|
)
|
|
22.12
|
|
|
Stock options outstanding at September 30, 2016
|
|
346
|
|
|
22.40
|
|
|
Vested and exercisable at September 30, 2016
|
|
114
|
|
|
19.52
|
|
|
2016
|
2015
|
2014
|
Weighted average fair value per options granted
|
$1.01
|
$4.96
|
$3.76
|
Risk-free interest rate
|
0.42%
|
1.41%-1.50%
|
1.40% - 1.41%
|
Assumed dividend yield
|
1.14%
|
1.18%-1.19%
|
1.30%-1.50%
|
Expected option term
|
0.5 years
|
4.5 years
|
4.5 years
|
Volatility
|
14.55%
|
25.00%
|
25.00%
|
Weighted average fair value per option modified
|
$2.53
|
Risk-free interest rate
|
0.20%
|
Assumed dividend yield
|
1.18%
|
Expected option term
|
0.75 years
|
Volatility
|
25.00%
|
Restricted Stock Awards
|
|
Shares
|
|
Weighted Average Grant
Date Fair Value
|
|||
Restricted shares outstanding at September 30, 2015
|
|
246
|
|
|
$
|
21.92
|
|
Granted
|
|
26
|
|
|
25.75
|
|
|
Vested
|
|
(100
|
)
|
|
21.32
|
|
|
Forfeited or expired
|
|
(18
|
)
|
|
22.46
|
|
|
Restricted shares outstanding at September 30, 2016
|
|
154
|
|
|
22.91
|
|
Performance Restricted Stock Units (PRSUs)
|
|
Shares
|
|
Weighted Average Grant
Date Fair Value |
|||
PRSUs outstanding at September 30, 2015
|
|
515
|
|
|
$
|
17.69
|
|
Granted
|
|
63
|
|
|
17.82
|
|
|
Vested
|
|
(578
|
)
|
|
17.71
|
|
|
Forfeited or expired
|
|
—
|
|
|
—
|
|
|
PRSUs outstanding at September 30, 2016
|
|
—
|
|
|
—
|
|
|
|
FGLH
|
|||||
Stock Option Awards
|
|
Options
|
|
Weighted Average
Exercise Price
|
|||
Stock options outstanding at September 30, 2015
|
|
87
|
|
|
$
|
45.04
|
|
Granted
|
|
—
|
|
|
—
|
|
|
Exercised
|
|
(4
|
)
|
|
48.71
|
|
|
Forfeited or expired
|
|
(1
|
)
|
|
49.45
|
|
|
Stock options outstanding at September 30, 2016
|
|
82
|
|
|
44.82
|
|
|
Vested and exercisable at September 30, 2016
|
|
82
|
|
|
44.82
|
|
|
|
2016
|
|
2015
|
Weighted average stock option fair value
|
|
$78.62
|
|
$74.99
|
FGLH common stock fair value
|
|
$123.76
|
|
$122.02
|
FGL common stock value
|
|
$23.19
|
|
$24.54
|
Risk-free interest rate
|
|
0.26%
|
|
0.48%-0.74%
|
Assumed dividend yield
|
|
1.12%
|
|
1.16%
|
Expected option term
|
|
0.25 years
|
|
1.50 - 2.25 years
|
Volatility
|
|
15.0%
|
|
25.0%
|
Restricted Stock Awards
|
|
Shares
|
|
Weighted Average Grant
Date Fair Value (a)
|
|||
Restricted shares outstanding at September 30, 2015
|
|
11
|
|
|
$
|
49.57
|
|
Granted
|
|
—
|
|
|
—
|
|
|
Vested
|
|
(11
|
)
|
|
49.57
|
|
|
Forfeited or expired
|
|
—
|
|
|
49.45
|
|
|
Restricted shares outstanding at September 30, 2016
|
|
—
|
|
|
—
|
|
(a)
|
Fair value is based on the value of FGLH’s common stock, not the value of the Company’s common stock.
|
|
|
Year ended September 30,
|
||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||
Pretax income (loss):
|
|
|
|
|
|
|
||||||
United States
|
|
$
|
153
|
|
|
$
|
182
|
|
|
$
|
189
|
|
Outside the United States
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total pretax income
|
|
$
|
153
|
|
|
$
|
182
|
|
|
$
|
189
|
|
|
|
Year ended September 30,
|
||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||
Current:
|
|
|
|
|
|
|
||||||
Federal
|
|
$
|
(5
|
)
|
|
$
|
(14
|
)
|
|
$
|
(51
|
)
|
State
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total current
|
|
$
|
(5
|
)
|
|
$
|
(14
|
)
|
|
$
|
(51
|
)
|
|
|
|
|
|
|
|
||||||
Deferred:
|
|
|
|
|
|
|
||||||
Federal
|
|
$
|
(51
|
)
|
|
$
|
(50
|
)
|
|
$
|
25
|
|
State
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total deferred
|
|
$
|
(51
|
)
|
|
$
|
(50
|
)
|
|
$
|
25
|
|
|
|
|
|
|
|
|
||||||
Income tax (expense)/benefit
|
|
$
|
(56
|
)
|
|
$
|
(64
|
)
|
|
$
|
(26
|
)
|
|
|
Year ended September 30,
|
||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||
Expected income tax (expense)/benefit at Federal statutory rate
|
|
$
|
(54
|
)
|
|
$
|
(64
|
)
|
|
$
|
(66
|
)
|
Valuation allowance for deferred tax assets
|
|
69
|
|
|
(1
|
)
|
|
40
|
|
|||
Amortization of low income housing tax credits
|
|
(2
|
)
|
|
(1
|
)
|
|
—
|
|
|||
Benefit on LIHTC under proportional amortization method
|
|
3
|
|
|
1
|
|
|
—
|
|
|||
Write off of expired capital loss carryforward
|
|
(73
|
)
|
|
—
|
|
|
—
|
|
|||
Other
|
|
1
|
|
|
1
|
|
|
—
|
|
|||
Reported income tax (expense)/benefit
|
|
$
|
(56
|
)
|
|
$
|
(64
|
)
|
|
$
|
(26
|
)
|
|
|
|
|
|
|
|
||||||
Effective tax rate
|
|
37
|
%
|
|
35
|
%
|
|
14
|
%
|
|
|
Year ended September 30,
|
||||||
|
|
2016
|
|
2015
|
||||
Deferred tax assets:
|
|
|
|
|
||||
Net operating loss, credit and capital loss carryforwards
|
|
$
|
93
|
|
|
$
|
169
|
|
Insurance reserves and claim related adjustments
|
|
511
|
|
|
424
|
|
||
Investments
|
|
—
|
|
|
24
|
|
||
Other
|
|
44
|
|
|
32
|
|
||
Valuation allowance
|
|
(51
|
)
|
|
(120
|
)
|
||
Total deferred tax assets
|
|
$
|
597
|
|
|
$
|
529
|
|
|
|
|
|
|
||||
Deferred tax liabilities:
|
|
|
|
|
||||
Value of business acquired
|
|
$
|
(7
|
)
|
|
$
|
(65
|
)
|
Investments
|
|
(312
|
)
|
|
—
|
|
||
Deferred acquisition costs
|
|
(277
|
)
|
|
(209
|
)
|
||
Other
|
|
(11
|
)
|
|
(27
|
)
|
||
Total deferred tax liabilities
|
|
$
|
(607
|
)
|
|
$
|
(301
|
)
|
|
|
|
|
|
||||
Net deferred tax assets and (liabilities)
|
|
$
|
(10
|
)
|
|
$
|
228
|
|
Asset Type
|
September 30, 2016
|
||
Other invested assets
|
$
|
55
|
|
Fixed maturity securities, available-for-sale
|
16
|
|
|
Other assets
|
32
|
|
|
Total
|
$
|
103
|
|
Fiscal Year
|
|
Amount
|
||
2017
|
|
$
|
2
|
|
2018
|
|
2
|
|
|
2019
|
|
2
|
|
|
2020
|
|
2
|
|
|
2021
|
|
1
|
|
|
Thereafter
|
|
—
|
|
|
Total
|
|
$
|
9
|
|
|
Year ended September 30,
|
||||||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||||||||||||||
|
Net Premiums Earned
|
|
Net Benefits Incurred
|
|
Net Premiums Earned
|
|
Net Benefits Incurred
|
|
Net Premiums Earned
|
|
Net Benefits Incurred
|
||||||||||||
Direct
|
$
|
261
|
|
|
$
|
1,069
|
|
|
$
|
260
|
|
|
$
|
833
|
|
|
$
|
267
|
|
|
$
|
1,103
|
|
Assumed
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
36
|
|
|
28
|
|
||||||
Ceded
|
(192
|
)
|
|
(279
|
)
|
|
(202
|
)
|
|
(255
|
)
|
|
(247
|
)
|
|
(343
|
)
|
||||||
Net
|
$
|
70
|
|
|
$
|
791
|
|
|
$
|
58
|
|
|
$
|
578
|
|
|
$
|
56
|
|
|
$
|
788
|
|
Revenues:
|
|
Year ended September 30, 2016
|
|
Year ended September 30, 2015
|
|
Year ended September 30, 2014
|
||||||
Premiums
|
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Net investment income
|
|
61
|
|
|
63
|
|
|
64
|
|
|||
Net investment gains (losses)
|
|
(8
|
)
|
|
(30
|
)
|
|
25
|
|
|||
Insurance and investment product fees
|
|
3
|
|
|
4
|
|
|
5
|
|
|||
Total revenues
|
|
59
|
|
|
38
|
|
|
95
|
|
|||
|
|
|
|
|
|
|
||||||
Benefits and expenses:
|
|
|
|
|
|
|
||||||
Benefits and other changes in policy reserves
|
|
(47
|
)
|
|
(42
|
)
|
|
(60
|
)
|
|||
Acquisition & operating expenses, net of deferrals
|
|
(4
|
)
|
|
(4
|
)
|
|
(6
|
)
|
|||
Total benefits and expenses
|
|
(51
|
)
|
|
(46
|
)
|
|
(66
|
)
|
|||
|
|
|
|
|
|
|
||||||
Operating income (loss)
|
|
$
|
8
|
|
|
$
|
(8
|
)
|
|
$
|
29
|
|
|
|
|
|
September 30, 2016
|
||||||||||
Type
|
|
Balance Sheet Classification
|
|
Asset carrying value
|
|
Accrued Investment Income
|
|
Total carrying value
|
||||||
Salus CLOs
|
|
Fixed maturities, available for sale
|
|
$
|
19
|
|
|
$
|
—
|
|
|
$
|
19
|
|
Fortress Investment Group CLOs
|
|
Fixed maturities, available for sale
|
|
225
|
|
|
2
|
|
|
227
|
|
|||
Salus preferred equity (a)
|
|
Equity securities, available for sale
|
|
3
|
|
|
—
|
|
|
3
|
|
|||
Salus participations (b)
|
|
Other invested assets
|
|
21
|
|
|
—
|
|
|
21
|
|
|||
HGI energy loan (c)
|
|
Related party loans
|
|
71
|
|
|
—
|
|
|
71
|
|
|
|
|
|
September 30, 2015
|
||||||||||
Type
|
|
Balance Sheet Classification
|
|
Asset carrying value
|
|
Accrued Investment Income
|
|
Total carrying value
|
||||||
Salus CLOs
|
|
Fixed maturities, available for sale
|
|
$
|
245
|
|
|
$
|
—
|
|
|
$
|
245
|
|
Fortress Investment Group CLOs
|
|
Fixed maturities, available for sale
|
|
181
|
|
|
2
|
|
|
183
|
|
|||
Salus preferred equity (a)
|
|
Equity securities, available for sale
|
|
3
|
|
|
—
|
|
|
3
|
|
|||
Salus participations (b)
|
|
Other invested assets
|
|
110
|
|
|
1
|
|
|
111
|
|
|||
EIC participations
|
|
Other invested assets
|
|
9
|
|
|
—
|
|
|
9
|
|
|||
Foreign exchange derivatives and embedded derivatives
|
|
Other invested assets
|
|
11
|
|
|
—
|
|
|
11
|
|
|||
HGI energy loan (c)
|
|
Related party loans
|
|
70
|
|
|
1
|
|
|
71
|
|
|||
Salus 2012 participations
|
|
Related party loans
|
|
4
|
|
|
—
|
|
|
4
|
|
|||
Salus promissory note
|
|
Related party loans
|
|
3
|
|
|
—
|
|
|
3
|
|
|
|
|
|
Year ended September 30,
|
||||||||||
|
|
|
|
2016
|
|
2015
|
|
2014
|
||||||
Type
|
|
Investment Income Classification
|
|
Net investment income
|
|
Net investment income
|
|
Net investment income
|
||||||
Salus CLOs
|
|
Fixed maturities
|
|
$
|
9
|
|
|
$
|
11
|
|
|
$
|
13
|
|
Fortress Investment Group CLOs
|
|
Fixed maturities
|
|
11
|
|
|
8
|
|
|
2
|
|
|||
Leucadia National Corporation
|
|
Fixed maturities
|
|
—
|
|
|
—
|
|
|
1
|
|
|||
Jefferies Group Inc.
|
|
Fixed maturities
|
|
—
|
|
|
—
|
|
|
1
|
|
|||
Salus preferred equity
|
|
Equity securities
|
|
—
|
|
|
—
|
|
|
2
|
|
|||
Salus participations
|
|
Other invested assets
|
|
4
|
|
|
15
|
|
|
19
|
|
|||
EIC participations
|
|
Other invested assets
|
|
1
|
|
|
—
|
|
|
—
|
|
|||
HGI energy loan
|
|
Related party loans
|
|
4
|
|
|
5
|
|
|
6
|
|
|||
Salus 2012 participations
|
|
Related party loans
|
|
—
|
|
|
—
|
|
|
1
|
|
|||
Salus promissory note
|
|
Related party loans
|
|
—
|
|
|
1
|
|
|
1
|
|
|||
Salus revolver
|
|
Related party loans
|
|
—
|
|
|
—
|
|
|
1
|
|
|
|
Year ended September 30,
|
||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||
Net income attributable to common shares - basic
|
|
$
|
97
|
|
|
$
|
118
|
|
|
$
|
163
|
|
|
|
|
|
|
|
|
||||||
Weighted-average common shares outstanding - basic
|
|
58,275
|
|
|
58,118
|
|
|
55,970
|
|
|||
Dilutive effect of unvested restricted stock and unvested performance restricted stock
|
|
271
|
|
|
208
|
|
|
31
|
|
|||
Dilutive effect of stock options
|
|
32
|
|
|
35
|
|
|
10
|
|
|||
Weighted-average shares outstanding - diluted
|
|
58,578
|
|
|
58,361
|
|
|
56,011
|
|
|||
|
|
|
|
|
|
|
||||||
Net income per common share:
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
1.67
|
|
|
$
|
2.03
|
|
|
$
|
2.91
|
|
Diluted
|
|
$
|
1.66
|
|
|
$
|
2.02
|
|
|
$
|
2.90
|
|
|
|
Subsidiary (state of domicile)(a)
|
||||||
|
|
FGL Insurance (IA)(b)
|
|
FGL NY Insurance (NY)
|
||||
Statutory Net Income (loss):
|
|
|
|
|
||||
Year ended December 31, 2015
|
|
$
|
(53
|
)
|
|
$
|
(1
|
)
|
Year ended December 31, 2014
|
|
105
|
|
|
2
|
|
||
Year ended December 31, 2013
|
|
118
|
|
|
1
|
|
||
|
|
|
|
|
||||
Statutory Capital and Surplus:
|
|
|
|
|
||||
December 31, 2015
|
|
$
|
1,239
|
|
|
$
|
59
|
|
December 31, 2014
|
|
1,212
|
|
|
61
|
|
(a)
|
FGL NY Insurance is a subsidiary of FGL Insurance, and the columns should not be added together.
|
|
|
Year ended September 30,
|
||||||
|
|
2016
|
|
2015
|
||||
Amounts payable for investment purchases
|
|
$
|
106
|
|
|
$
|
125
|
|
Retained asset account
|
|
221
|
|
|
213
|
|
||
Option collateral liabilities
|
|
118
|
|
|
7
|
|
||
Remittances and items not allocated
|
|
77
|
|
|
42
|
|
||
Amounts payable to reinsurers
|
|
36
|
|
|
17
|
|
||
Accrued expenses
|
|
60
|
|
|
43
|
|
||
Deferred reinsurance revenue
|
|
25
|
|
|
27
|
|
||
Other
|
|
103
|
|
|
89
|
|
||
Total
|
|
$
|
746
|
|
|
$
|
563
|
|
|
Quarter Ended
|
||||||||||||||
|
September 30, 2016
|
|
June 30, 2016
|
|
March 31, 2016
|
|
December 31, 2015
|
||||||||
|
(Dollars in millions, except per share data)
|
||||||||||||||
Premiums
|
$
|
18
|
|
|
$
|
21
|
|
|
$
|
16
|
|
|
$
|
15
|
|
Net investment income
|
238
|
|
|
236
|
|
|
227
|
|
|
222
|
|
||||
Net realized gains (losses)
|
26
|
|
|
(28
|
)
|
|
(42
|
)
|
|
63
|
|
||||
Insurance and investment product fees and other
|
34
|
|
|
32
|
|
|
32
|
|
|
29
|
|
||||
Total revenue
|
316
|
|
|
261
|
|
|
233
|
|
|
329
|
|
||||
Total expenses
|
262
|
|
|
240
|
|
|
212
|
|
|
250
|
|
||||
Net income
|
30
|
|
|
10
|
|
|
9
|
|
|
48
|
|
||||
Net income per common share - basic
|
0.52
|
|
|
0.16
|
|
|
0.16
|
|
|
0.82
|
|
||||
Net income per common share - diluted
|
0.52
|
|
|
0.16
|
|
|
0.16
|
|
|
0.82
|
|
|
Quarter Ended
|
||||||||||||||
|
September 30, 2015
|
|
June 30, 2015
|
|
March 31, 2015
|
|
December 31, 2014
|
||||||||
|
(Dollars in millions, except per share data)
|
||||||||||||||
Premiums
|
$
|
15
|
|
|
$
|
17
|
|
|
$
|
15
|
|
|
$
|
11
|
|
Net investment income
|
223
|
|
|
212
|
|
|
208
|
|
|
208
|
|
||||
Net realized (losses) gains
|
(112
|
)
|
|
74
|
|
|
(58
|
)
|
|
59
|
|
||||
Insurance and investment product fees and other
|
24
|
|
|
23
|
|
|
22
|
|
|
20
|
|
||||
Total revenue
|
150
|
|
|
326
|
|
|
187
|
|
|
298
|
|
||||
Total expenses
|
101
|
|
|
192
|
|
|
193
|
|
|
269
|
|
||||
Net income (loss)
|
30
|
|
|
86
|
|
|
(12
|
)
|
|
14
|
|
||||
Net income (loss) per common share - basic
|
0.52
|
|
|
1.48
|
|
|
(0.21
|
)
|
|
0.24
|
|
||||
Net income (loss) per common share - diluted
|
0.51
|
|
|
1.48
|
|
|
(0.21
|
)
|
|
0.24
|
|
|
|
Amortized Cost
|
|
Fair Value
|
|
Amount at which shown on the balance sheet
|
||||||
Fixed Maturities:
|
|
|
|
|
|
|
||||||
Bonds:
|
|
|
|
|
|
|
||||||
United States Government and government agencies and authorities
|
|
$
|
345
|
|
|
$
|
358
|
|
|
$
|
358
|
|
States, municipalities and political subdivisions
|
|
1,515
|
|
|
1,717
|
|
|
1,717
|
|
|||
Foreign governments
|
|
5
|
|
|
5
|
|
|
5
|
|
|||
Public utilities
|
|
1,811
|
|
|
1,881
|
|
|
1,881
|
|
|||
All other corporate bonds
|
|
14,623
|
|
|
15,215
|
|
|
15,215
|
|
|||
Redeemable preferred stock
|
|
222
|
|
|
235
|
|
|
235
|
|
|||
Total fixed maturities
|
|
18,521
|
|
|
19,411
|
|
|
19,411
|
|
|||
|
|
|
|
|
|
|
||||||
Equity securities:
|
|
|
|
|
|
|
||||||
Common stocks:
|
|
|
|
|
|
|
||||||
Public utilities
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Banks, trust, and insurance companies
|
|
104
|
|
|
103
|
|
|
103
|
|
|||
Industrial, miscellaneous and all other
|
|
4
|
|
|
3
|
|
|
3
|
|
|||
Nonredeemable preferred stock
|
|
532
|
|
|
577
|
|
|
577
|
|
|||
Total equity securities
|
|
640
|
|
|
683
|
|
|
683
|
|
|||
|
|
|
|
|
|
|
||||||
Derivative investments
|
|
221
|
|
|
276
|
|
|
276
|
|
|||
Commercial mortgage loans
|
|
595
|
|
|
614
|
|
|
595
|
|
|||
Other long-term investments
|
|
60
|
|
|
58
|
|
|
60
|
|
|||
Total investments
|
|
$
|
20,037
|
|
|
$
|
21,042
|
|
|
$
|
21,025
|
|
|
|
September 30, 2016
|
|
September 30, 2015
|
||||
|
|
|
|
|
||||
ASSETS
|
|
|
|
|
||||
Investments in consolidated subsidiaries
|
|
$
|
1,913
|
|
|
$
|
1,464
|
|
Fixed maturity securities, available for sale
|
|
5
|
|
|
7
|
|
||
Equity securities, available-for-sale, at fair value
|
|
12
|
|
|
17
|
|
||
Cash and cash equivalents
|
|
2
|
|
|
13
|
|
||
Other assets
|
|
2
|
|
|
1
|
|
||
Total assets
|
|
$
|
1,934
|
|
|
$
|
1,502
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
||||
Total liabilities
|
|
—
|
|
|
—
|
|
||
Shareholders' equity
|
|
|
|
|
||||
Preferred stock
|
|
—
|
|
|
—
|
|
||
Common stock
|
|
1
|
|
|
1
|
|
||
Additional paid in capital
|
|
714
|
|
|
714
|
|
||
Retained earnings
|
|
792
|
|
|
710
|
|
||
Accumulated other comprehensive income
|
|
439
|
|
|
88
|
|
||
Treasury stock
|
|
(12
|
)
|
|
(11
|
)
|
||
Total shareholder's equity
|
|
1,934
|
|
|
1,502
|
|
||
Total liabilities and shareholder's equity
|
|
$
|
1,934
|
|
|
$
|
1,502
|
|
|
|
Year ended September 30,
|
||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
|
|
|
|
|
|
||||||
Revenues
|
|
$
|
(2
|
)
|
|
$
|
(9
|
)
|
|
$
|
2
|
|
|
|
(2
|
)
|
|
(9
|
)
|
|
2
|
|
|||
Operating expenses:
|
|
|
|
|
|
|
||||||
General and administrative expenses
|
|
3
|
|
|
6
|
|
|
6
|
|
|||
Total operating expenses
|
|
3
|
|
|
6
|
|
|
6
|
|
|||
Operating loss
|
|
(5
|
)
|
|
(15
|
)
|
|
(4
|
)
|
|||
Other income:
|
|
|
|
|
|
|
||||||
Equity in net income of subsidiaries
|
|
103
|
|
|
133
|
|
|
167
|
|
|||
Income before income taxes
|
|
98
|
|
|
118
|
|
|
163
|
|
|||
Income tax expense
|
|
1
|
|
|
—
|
|
|
—
|
|
|||
Net income
|
|
$
|
97
|
|
|
$
|
118
|
|
|
$
|
163
|
|
|
|
Year ended September 30,
|
||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
|
|
|
|
|
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
97
|
|
|
$
|
118
|
|
|
$
|
163
|
|
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
||||||
Realized capital and other gains on investments
|
|
2
|
|
|
9
|
|
|
(1
|
)
|
|||
Equity in net income of subsidiaries
|
|
(103
|
)
|
|
(133
|
)
|
|
(167
|
)
|
|||
Stock based compensation
|
|
(2
|
)
|
|
10
|
|
|
3
|
|
|||
Other assets and other liabilities
|
|
2
|
|
|
2
|
|
|
(2
|
)
|
|||
Net cash (used in) provided by operating activities
|
|
(4
|
)
|
|
6
|
|
|
(4
|
)
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
|
||||||
Proceeds from available-for-sale investments, sold, matured or repaid:
|
|
5
|
|
|
30
|
|
|
125
|
|
|||
Cost of available-for-sale investments:
|
|
—
|
|
|
(15
|
)
|
|
(174
|
)
|
|||
Net cash provided by (used in) investing activities
|
|
5
|
|
|
15
|
|
|
(49
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
|
||||||
Proceeds from issuance of common stock, net of transactions fees
|
|
2
|
|
|
2
|
|
|
173
|
|
|||
Dividends payments
|
|
(15
|
)
|
|
(15
|
)
|
|
(54
|
)
|
|||
Treasury stock
|
|
(1
|
)
|
|
(11
|
)
|
|
—
|
|
|||
Distribution to FGLH and subsidiaries
|
|
2
|
|
|
(50
|
)
|
|
—
|
|
|||
Net cash (used in) provided by financing activities
|
|
(12
|
)
|
|
(74
|
)
|
|
119
|
|
|||
Change in cash and cash equivalents
|
|
(11
|
)
|
|
(53
|
)
|
|
66
|
|
|||
Cash and cash equivalents at beginning of period
|
|
13
|
|
|
66
|
|
|
—
|
|
|||
Cash and cash equivalents at end of period
|
|
$
|
2
|
|
|
$
|
13
|
|
|
$
|
66
|
|
|
|
|
|
|
|
|
|
|
Year ended September 30,
|
||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
|
|
|
|
|
|
||||||
Life Insurance (single segment):
|
|
|
|
|
|
|
||||||
Deferred acquisition costs
|
|
$
|
1,007
|
|
|
$
|
801
|
|
|
$
|
456
|
|
Future policy benefits, losses, claims and loss expenses
|
|
3,467
|
|
|
3,468
|
|
|
3,504
|
|
|||
Other policy claims and benefits payable
|
|
55
|
|
|
55
|
|
|
58
|
|
|||
Premium revenue
|
|
70
|
|
|
58
|
|
|
56
|
|
|||
Net investment income
|
|
923
|
|
|
851
|
|
|
760
|
|
|||
Benefits, claims, losses and settlement expenses
|
|
(791
|
)
|
|
(578
|
)
|
|
(788
|
)
|
|||
Amortization of deferred acquisition costs
|
|
(49
|
)
|
|
(27
|
)
|
|
(39
|
)
|
|||
Other operating expenses
|
|
(119
|
)
|
|
(113
|
)
|
|
(102
|
)
|
For the year ended September 30, 2016
|
|
Gross Amount
|
|
Ceded to other companies
|
|
Assumed from other companies
|
|
Net Amount
|
|
Percentage of amount assumed of net
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Life insurance in force
|
|
$
|
3,081
|
|
|
$
|
(2,024
|
)
|
|
$
|
—
|
|
|
$
|
1,057
|
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Premiums and other considerations:
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Traditional life insurance premiums
|
|
$
|
261
|
|
|
$
|
(192
|
)
|
|
$
|
1
|
|
|
$
|
70
|
|
|
1
|
%
|
Annuity product charges
|
|
191
|
|
|
(67
|
)
|
|
—
|
|
|
124
|
|
|
—
|
%
|
||||
Total premiums and other considerations
|
|
$
|
452
|
|
|
$
|
(259
|
)
|
|
$
|
1
|
|
|
$
|
194
|
|
|
1
|
%
|
For the year ended September 30, 2015
|
|
Gross Amount
|
|
Ceded to other companies
|
|
Assumed from other companies
|
|
Net Amount
|
|
Percentage of amount assumed of net
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Life insurance in force
|
|
$
|
2,933
|
|
|
$
|
(2,010
|
)
|
|
$
|
—
|
|
|
$
|
923
|
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Premiums and other considerations:
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Traditional life insurance premiums
|
|
$
|
260
|
|
|
$
|
(202
|
)
|
|
$
|
—
|
|
|
$
|
58
|
|
|
—
|
%
|
Annuity product charges
|
|
156
|
|
|
(69
|
)
|
|
—
|
|
|
87
|
|
|
—
|
%
|
||||
Total premiums and other considerations
|
|
$
|
416
|
|
|
$
|
(271
|
)
|
|
$
|
—
|
|
|
$
|
145
|
|
|
—
|
%
|
For the year ended September 30, 2014
|
|
Gross Amount
|
|
Ceded to other companies
|
|
Assumed from other companies
|
|
Net Amount
|
|
Percentage of amount assumed of net
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Life insurance in force
|
|
$
|
2,786
|
|
|
$
|
(2,014
|
)
|
|
$
|
16
|
|
|
$
|
788
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Premiums and other considerations:
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Traditional life insurance premiums
|
|
$
|
267
|
|
|
$
|
(247
|
)
|
|
$
|
36
|
|
|
$
|
56
|
|
|
65
|
%
|
Annuity product charges
|
|
139
|
|
|
(73
|
)
|
|
—
|
|
|
66
|
|
|
—
|
%
|
||||
Total premiums and other considerations
|
|
$
|
406
|
|
|
$
|
(320
|
)
|
|
$
|
36
|
|
|
$
|
122
|
|
|
30
|
%
|