Cayman Islands | 001-37779 | 98-1354810 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
4th Floor Boundary Hall, Cricket Square Grand Cayman, Cayman Islands KY1-1102 | ||||
(Address of principal executive offices, including zip code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. | Results of Operations and Financial Condition. |
Item 9.01 | Financial Statements and Exhibits. |
Exhibit No. | Description | |
99.1 | ||
99.2 |
November 7, 2018 | FGL HOLDINGS | ||
By: /s/ Eric L. Marhoun | |||
Name: Eric L. Marhoun | |||
Title: Secretary and General Counsel | |||
• | Net income available to common shareholders of $49 million or $0.23 per share |
• | Adjusted operating income (AOI)1 available to common shareholders of $62 million or $0.29 per share |
• | Total annuity sales of $842 million increased 43 percent, including $631 million of fixed indexed annuities (FIAs) sales, up 49 percent to the prior year quarter |
• | Average assets under management of $25.4 billion; including $1.8B of net asset flows year over year |
• | On October 9, 2018, FG completed a successful warrant tender offer; the Company issued 7.2 million common shares and $64 million in cash in exchange for 65 million warrants tendered |
• | Fidelity & Guaranty Life (FGL) (the Predecessor Company)-November 30, 2017 & prior periods |
• | FG (the Successor Company)-December 1, 2017 and subsequent periods |
(In millions) | Three Months Ended | ||||||||
September 30, 2018 | September 30, 2017 | ||||||||
FG (Successor) | FGL (Predecessor) | ||||||||
Reconciliation from Net Income to AOI(1): | (Unaudited) | (Unaudited) | |||||||
Net income | $ | 56 | $ | 61 | |||||
Effect of investment losses (gains), net of offsets (2) | 38 | (5 | ) | ||||||
Effect of changes in fair values of FIA related derivatives, net of offsets (2) (3) | (30 | ) | 3 | ||||||
Effect of change in fair value of reinsurance related embedded derivative, net of offsets (4) | — | 5 | |||||||
Effect of integration, merger related & other non-operating items | 4 | 2 | |||||||
Net impact of Tax Cuts and Jobs Act | 3 | — | |||||||
Tax impact of adjusting items | (2 | ) | (1 | ) | |||||
AOI (1) | $ | 69 | $ | 65 | |||||
Dividends on preferred stock (5) | (7 | ) | — | ||||||
AOI available to common shareholders (1) | $ | 62 | $ | 65 |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | |||||||||||||
(In millions, except per share data) | FG (Successor) | FGL (Predecessor) | FG (Successor) | FGL (Predecessor) | ||||||||||||
Fixed indexed annuity (FIA) sales (1) | $ | 631 | $ | 424 | $ | 1,616 | $ | 1,317 | ||||||||
Total annuity sales (1) | $ | 842 | $ | 588 | $ | 2,389 | $ | 1,902 | ||||||||
Average assets under management (1) | $ | 25,883 | $ | 20,840 | $ | 25,437 | $ | 20,524 | ||||||||
Net investment spread - FIA (1) | 2.16 | % | 3.00 | % | 2.36 | % | 3.02 | % | ||||||||
Net investment spread - All products (1) | 1.71 | % | 2.44 | % | 1.89 | % | 2.46 | % | ||||||||
Net income available to common shareholders | $ | 49 | $ | 61 | $ | 140 | $ | 115 | ||||||||
Net income available to common shareholders per diluted share | $ | 0.23 | $ | 1.06 | $ | 0.65 | $ | 1.98 | ||||||||
AOI available to common shareholders (1) | $ | 62 | $ | 65 | $ | 181 | $ | 145 | ||||||||
AOI available to common shareholders per diluted share (1) | $ | 0.29 | $ | 1.11 | $ | 0.84 | $ | 2.48 | ||||||||
Weighted average common basic shares (6) | 214.4 | 58.3 | 214.4 | 58.3 | ||||||||||||
Weighted average common diluted shares (6) | 214.4 | 58.5 | 214.4 | 58.4 | ||||||||||||
Total common shares outstanding (6) | 214.4 | 58.9 | 214.4 | 58.9 | ||||||||||||
Book value per common share | $ | 5.02 | $ | 38.13 | $ | 5.02 | $ | 38.13 | ||||||||
Book value per common share excluding AOCI (1) | $ | 7.67 | $ | 28.92 | $ | 7.67 | $ | 28.92 |
• | GAAP book value per common share(1) at September 30, 2018 was $5.02 on a reported basis; book value per common share excluding accumulated other comprehensive income (AOCI) was $7.67, with 214.4 million common shares outstanding as of September 30, 2018. |
• | On October 9, 2018, the Company settled the warrant exchange offer. A total of 65,373,565, or approximately 92 percent of the warrants were tendered in exchange for 7,191,070 common shares and $64.1 million in cash. A total of 5,509,769 warrants remain outstanding and will expire on November 30, 2022, or upon earlier redemption or liquidation. The additional common shares issued will be reflected in per share metrics commencing in the fourth quarter of 2018. |
• | The Company continues to have a strong and stable capital position, with an estimated Statutory company action level risk-based capital (RBC) on an aggregate basis of approximately 460 percent as of September 30, 2018, including impact of Tax Reform. |
• | For internet webcast, visit investors.fglife.bm/investors at least 15 minutes prior to the start of the call to register. |
• | For conference call, dial 877.883.0383 (U.S. callers) or 412.902.6506 (International callers) approximately 10 minutes prior to the start of the call. The access code is 3970954. |
• | A replay of the event via webcast will be available after the call at investors.fglife.bm/investors. |
• | A replay of the event via telephone will be available by dialing 877.344.7529 (U.S. callers) or 412.317.0088 (International callers). The access code is 10125034. |
September 30, 2018 | December 31, 2017 | ||||||
(Unaudited) | (Audited) | ||||||
ASSETS | |||||||
Investments: | |||||||
Fixed maturity securities, available-for-sale, at fair value (amortized cost: September 30, 2018 - $22,143; December 31, 2017 - $20,847) | $ | 21,421 | $ | 20,963 | |||
Equity securities, at fair value (cost: September 30, 2018 - $1,490; December 31, 2017 - $1,392) | 1,440 | 1,388 | |||||
Derivative investments | 432 | 492 | |||||
Short term investments | 15 | 25 | |||||
Commercial mortgage loans | 497 | 548 | |||||
Other invested assets | 606 | 188 | |||||
Total investments | 24,411 | 23,604 | |||||
Cash and cash equivalents | 944 | 1,215 | |||||
Accrued investment income | 230 | 211 | |||||
Funds withheld for reinsurance receivables, at fair value | 708 | 756 | |||||
Reinsurance recoverable | 2,460 | 2,494 | |||||
Intangibles, net | 1,205 | 853 | |||||
Deferred tax assets, net | 285 | 182 | |||||
Goodwill | 467 | 467 | |||||
Other assets | 250 | 141 | |||||
Total assets | $ | 30,960 | $ | 29,923 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Contractholder funds | $ | 23,164 | $ | 21,827 | |||
Future policy benefits, including $684 and $728 at fair value at September 30, 2018 and December 31, 2017, respectively | 4,631 | 4,751 | |||||
Liability for policy and contract claims | 60 | 78 | |||||
Debt | 540 | 307 | |||||
Revolving credit facility | — | 105 | |||||
Other liabilities | 1,091 | 892 | |||||
Total liabilities | 29,486 | 27,960 | |||||
Commitments and contingencies | |||||||
Shareholders' equity: | |||||||
Preferred stock ($.0001 par value, 100,000,000 shares authorized, 391,694 and 375,000 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively) | — | — | |||||
Common stock ($.0001 par value, 800,000,000 shares authorized, 214,370,000 issued and outstanding at September 30, 2018 and December 31, 2017, respectively) | — | — | |||||
Additional paid-in capital | 2,056 | 2,037 | |||||
Retained earnings (Accumulated deficit) | (13 | ) | (149 | ) | |||
Accumulated other comprehensive income (loss) | (569 | ) | 75 | ||||
Total shareholders' equity | 1,474 | 1,963 | |||||
Total liabilities and shareholders' equity | $ | 30,960 | $ | 29,923 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | ||||||||||||
Successor | Predecessor | Successor | Predecessor | ||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||
Revenues: | |||||||||||||||
Premiums | $ | 12 | $ | 16 | $ | 45 | $ | 31 | |||||||
Net investment income | 267 | 261 | 812 | 765 | |||||||||||
Net investment gains (losses) | 119 | 117 | (74 | ) | 265 | ||||||||||
Insurance and investment product fees and other | 46 | 41 | 139 | 129 | |||||||||||
Total revenues | 444 | 435 | 922 | 1,190 | |||||||||||
Benefits and expenses: | |||||||||||||||
Benefits and other changes in policy reserves | 297 | 320 | 475 | 823 | |||||||||||
Acquisition and operating expenses, net of deferrals | 40 | 36 | 126 | 109 | |||||||||||
Amortization of intangibles | 28 | (14 | ) | 72 | 70 | ||||||||||
Total benefits and expenses | 365 | 342 | 673 | 1,002 | |||||||||||
Operating income | 79 | 93 | 249 | 188 | |||||||||||
Interest expense | (8 | ) | (6 | ) | (21 | ) | (18 | ) | |||||||
Income (loss) before income taxes | 71 | 87 | 228 | 170 | |||||||||||
Income tax expense | (15 | ) | (26 | ) | (67 | ) | (55 | ) | |||||||
Net income (loss) | $ | 56 | $ | 61 | $ | 161 | $ | 115 | |||||||
Less preferred stock dividend | 7 | — | 21 | — | |||||||||||
Net income (loss) available to common shareholders | $ | 49 | $ | 61 | $ | 140 | $ | 115 | |||||||
Net income (loss) per common share: | |||||||||||||||
Basic | $ | 0.23 | $ | 1.06 | $ | 0.65 | $ | 1.98 | |||||||
Diluted | $ | 0.23 | $ | 1.06 | $ | 0.65 | $ | 1.98 | |||||||
Weighted average common shares used in computing net income per common share: | |||||||||||||||
Basic | 214.4 | 58.3 | 214.4 | 58.3 | |||||||||||
Diluted | 214.4 | 58.5 | 214.4 | 58.4 | |||||||||||
Cash dividend per common share | $ | — | $ | 0.065 | $ | — | $ | 0.195 |
(In millions, except per share data) | September 30, 2018 | December 31, 2017 | |||||||
(Unaudited) | (Unaudited) | ||||||||
Reconciliation to total shareholders' equity: | |||||||||
Total shareholders' equity | $ | 1,474 | $ | 1,963 | |||||
Less: AOCI | (569 | ) | 75 | ||||||
Less: Preferred equity | 398 | 377 | |||||||
Total common shareholders' equity excluding AOCI (1) | $ | 1,645 | $ | 1,511 | |||||
Total common shares outstanding | 214.4 | 214.4 | |||||||
Weighted average common shares outstanding - basic | 214.4 | 214.4 | |||||||
Weighted average common shares outstanding - diluted | 214.4 | 214.4 | |||||||
Book value per common share including AOCI (1) | $ | 5.02 | $ | 7.40 | |||||
Book value per common share excluding AOCI(1) | $ | 7.67 | $ | 7.05 |
(In billions) | AAUM | ||||
AAUM as of September 30, 2017 | $ | 20.5 | |||
Purchase accounting mark-to-market valuation of investment portfolio | 1.2 | ||||
Inclusion of acquired Front Street Re and FGL Holdings | 1.9 | ||||
Net new business asset flows | 1.7 | ||||
Other items | 0.1 | ||||
AAUM as of September 30, 2018 | $ | 25.4 |
(1) | Non-GAAP financial measure. See the Non-GAAP Measures section below for additional information. |
(2) | Amounts are net of offsets related to value of business acquired (VOBA), deferred acquisition cost (DAC) and deferred sale inducement (DSI) amortization. |
(3) | The Company adjusted its non-GAAP measure to remove the residual impacts of fair value accounting on its FIA products, for periods after December 31, 2017. |
(4) | Applicable to the Predecessor only due to the merger. |
(5) | Applicable to the Successor only. |
(6) | Predecessor share counts reflect those of the Predecessor entity prior to the merger. |
(7) | Average yield reflects investment book yield on bonds purchased during the quarter. See the Non-GAAP Measures section below for additional information. |
Page | |
Three months ended | One month ended | Two months ended | Three months ended | Nine months ended | |||||||||||||||||||||||||||||
September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | November 30, 2017 | September 30, 2017 | September 30, 2018 | September 30, 2017 | ||||||||||||||||||||||||||
Successor | Successor | Successor | Successor | Predecessor | Predecessor | Successor | Predecessor | ||||||||||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||
(Dollars in millions, except per share data) | |||||||||||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||||
Premiums | $ | 12 | $ | 15 | $ | 18 | $ | 3 | $ | 7 | $ | 16 | $ | 45 | $ | 31 | |||||||||||||||||
Net investment income | 267 | 282 | 263 | 92 | 174 | 261 | 812 | 765 | |||||||||||||||||||||||||
Net investment gains (losses) | 119 | (2 | ) | (191 | ) | 42 | 146 | 117 | (74 | ) | 265 | ||||||||||||||||||||||
Insurance and investment product fees and other | 46 | 45 | 48 | 28 | 35 | 41 | 139 | 129 | |||||||||||||||||||||||||
Total revenues | 444 | 340 | 138 | 165 | 362 | 435 | 922 | 1,190 | |||||||||||||||||||||||||
Net income (loss) | $ | 56 | $ | 40 | $ | 65 | $ | (91 | ) | $ | 28 | $ | 61 | $ | 161 | $ | 115 | ||||||||||||||||
Adjusted Operating Income ("AOI") (1) | $ | 69 | $ | 65 | $ | 68 | $ | 3 | $ | 36 | $ | 65 | $ | 202 | $ | 145 | |||||||||||||||||
Dividends on preferred stock | (7 | ) | (7 | ) | (7 | ) | (2 | ) | — | — | (21 | ) | — | ||||||||||||||||||||
AOI available to common shareholders | 62 | 58 | 61 | 1 | 36 | 65 | 181 | 145 | |||||||||||||||||||||||||
Per Unrestricted Common Shares Amounts: | |||||||||||||||||||||||||||||||||
Basic: | |||||||||||||||||||||||||||||||||
Net income (loss) available to common shareholders | $ | 0.23 | $ | 0.15 | $ | 0.27 | $ | (0.44 | ) | $ | 0.48 | $ | 1.06 | $ | 0.65 | $ | 1.98 | ||||||||||||||||
AOI available to common shareholders (1) | $ | 0.29 | $ | 0.27 | $ | 0.28 | $ | — | $ | 0.62 | $ | 1.11 | $ | 0.84 | $ | 2.49 | |||||||||||||||||
Diluted: | |||||||||||||||||||||||||||||||||
Net income (loss) available to common shareholders | $ | 0.23 | $ | 0.15 | $ | 0.27 | $ | (0.44 | ) | $ | 0.47 | $ | 1.06 | $ | 0.65 | $ | 1.98 | ||||||||||||||||
AOI available to common shareholders (1) | $ | 0.29 | $ | 0.27 | $ | 0.28 | $ | — | $ | 0.62 | $ | 1.11 | $ | 0.84 | $ | 2.48 | |||||||||||||||||
Dividends Paid to Common Shareholders Per Share | $ | — | $ | — | $ | — | $ | — | $ | 0.065 | $ | 0.065 | $ | — | $ | 0.195 | |||||||||||||||||
Three months ended | One month ended | Two months ended | Three months ended | Nine months ended | |||||||||||||||||||||||||||||
September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | November 30, 2017 | September 30, 2017 | September 30, 2018 | September 30, 2017 | ||||||||||||||||||||||||||
Successor | Successor | Successor | Successor | Predecessor | Predecessor | Successor | Predecessor | ||||||||||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||
At Period End | |||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 944 | $ | 1,710 | $ | 1,157 | $ | 1,215 | $ | 924 | $ | 885 | $ | 944 | $ | 885 | |||||||||||||||||
Total investments | $ | 24,411 | $ | 22,860 | $ | 23,232 | $ | 23,604 | $ | 23,326 | $ | 23,072 | $ | 24,411 | $ | 23,072 | |||||||||||||||||
Total assets | $ | 30,960 | $ | 30,004 | $ | 29,651 | $ | 29,923 | $ | 29,227 | $ | 28,965 | $ | 30,960 | $ | 28,965 | |||||||||||||||||
Contractholder funds | $ | 23,164 | $ | 22,504 | $ | 22,045 | $ | 21,827 | $ | 21,083 | $ | 20,792 | $ | 23,164 | $ | 20,792 | |||||||||||||||||
Future policy benefits | $ | 4,631 | $ | 4,710 | $ | 4,711 | $ | 4,751 | $ | 3,401 | $ | 3,412 | $ | 4,631 | $ | 3,412 | |||||||||||||||||
Debt (including revolving credit facility) | $ | 540 | $ | 540 | $ | 442 | $ | 412 | $ | 405 | $ | 405 | $ | 540 | $ | 405 | |||||||||||||||||
Total equity | $ | 1,474 | $ | 1,382 | $ | 1,666 | $ | 1,963 | $ | 2,284 | $ | 2,247 | $ | 1,474 | $ | 2,247 | |||||||||||||||||
Total equity excluding Accumulated Other Comprehensive Income (AOCI) | $ | 2,043 | $ | 1,985 | $ | 1,944 | $ | 1,888 | $ | 1,729 | $ | 1,704 | $ | 2,043 | $ | 1,704 | |||||||||||||||||
Common shares issued and outstanding | 214.37 | 214.37 | 214.37 | 214.37 | 59.00 | 58.93 | 214.37 | 58.93 | |||||||||||||||||||||||||
GAAP Book value per common share (1) | $ | 5.02 | $ | 4.62 | $ | 5.98 | $ | 7.40 | $ | 38.71 | $ | 38.13 | $ | 5.02 | $ | 38.13 | |||||||||||||||||
GAAP Book value per common share excluding AOCI (1) | $ | 7.67 | $ | 7.44 | $ | 7.28 | $ | 7.05 | $ | 29.31 | $ | 28.92 | $ | 7.67 | $ | 28.92 | |||||||||||||||||
Debt to total Capitalization excluding AOCI (1) | 21.2 | % | 21.7 | % | 18.5 | % | 17.9 | % | 19.0 | % | 19.2 | % | 21.2 | % | 19.2 | % | |||||||||||||||||
Return on average common shareholders' equity excluding AOCI (1) | 12.1 | % | 8.4 | % | 15.1 | % | N/M | 6.5 | % | 14.6 | % | 11.8 | % | 14.6 | % | ||||||||||||||||||
Statutory Book value per share (1) | $ | 8.51 | 8.55 | 8.13 | 8.04 | $ | 25.91 | $ | 25.91 | $ | 8.51 | $ | 25.91 | ||||||||||||||||||||
Statutory Book value per share excluding IMR and AVR (1) | $ | 11.34 | 11.27 | 10.80 | 10.70 | $ | 34.99 | $ | 34.99 | $ | 11.34 | $ | 34.99 |
September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | ||||||||||||||||
Successor | Successor | Successor | Successor | Predecessor | ||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Investments: | ||||||||||||||||||||
Fixed maturity securities, available-for-sale, at fair value (amortized cost: September 30, 2018 - $22,143; December 31, 2017 - $20,847) | $ | 21,421 | $ | 20,326 | $ | 21,040 | $ | 20,963 | $ | 21,154 | ||||||||||
Equity securities, at fair value (cost: September 30, 2018 - $1,490; December 31, 2017 - $1,392) | 1,440 | 1,344 | 1,095 | 1,388 | 773 | |||||||||||||||
Derivative investments | 432 | 312 | 293 | 492 | 413 | |||||||||||||||
Short term investments | 15 | — | — | 25 | — | |||||||||||||||
Commercial mortgage loans | 497 | 525 | 528 | 548 | 547 | |||||||||||||||
Other invested assets | 606 | 353 | 276 | 188 | 185 | |||||||||||||||
Total investments | 24,411 | 22,860 | 23,232 | 23,604 | 23,072 | |||||||||||||||
Related party loans | — | — | — | — | 71 | |||||||||||||||
Cash and cash equivalents | 944 | 1,710 | 1,157 | 1,215 | 885 | |||||||||||||||
Accrued investment income | 230 | 215 | 240 | 211 | 231 | |||||||||||||||
Funds withheld for reinsurance receivables, at fair value | 708 | 769 | 748 | 756 | — | |||||||||||||||
Reinsurance recoverable | 2,460 | 2,476 | 2,495 | 2,494 | 3,375 | |||||||||||||||
Intangibles, net | 1,205 | 1,070 | 947 | 853 | 1,129 | |||||||||||||||
Deferred tax assets, net | 285 | 283 | 260 | 182 | — | |||||||||||||||
Goodwill | 467 | 467 | 467 | 467 | — | |||||||||||||||
Other assets | 250 | 154 | 105 | 141 | 202 | |||||||||||||||
Total assets | $ | 30,960 | $ | 30,004 | $ | 29,651 | $ | 29,923 | $ | 28,965 | ||||||||||
September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | ||||||||||||||||
Successor | Successor | Successor | Successor | Predecessor | ||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||||||||
Contractholder funds (a) | $ | 23,164 | $ | 22,504 | $ | 22,045 | $ | 21,827 | $ | 20,792 | ||||||||||
Future policy benefits, including $684 and $728 at fair value at September 30, 2018 and December 31, 2017, respectively (b) | 4,631 | 4,710 | 4,711 | 4,751 | 3,412 | |||||||||||||||
Funds withheld for reinsurance liabilities (d) | — | — | — | — | 1,083 | |||||||||||||||
Liability for policy and contract claims (c) | 60 | 74 | 70 | 78 | 67 | |||||||||||||||
Debt | 540 | 540 | 307 | 307 | 300 | |||||||||||||||
Revolving credit facility | — | — | 135 | 105 | 105 | |||||||||||||||
Deferred tax liability, net | — | — | — | — | 62 | |||||||||||||||
Other liabilities | 1,091 | 794 | 717 | 892 | 897 | |||||||||||||||
Total liabilities | 29,486 | 28,622 | 27,985 | 27,960 | 26,718 | |||||||||||||||
Shareholders' equity: | ||||||||||||||||||||
Preferred stock ($.0001 par value, 100,000,000 shares authorized, 391,694 and 375,000 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively) | — | — | — | — | — | |||||||||||||||
Common stock ($.0001 par value, 800,000,000 shares authorized, 214,370,000 issued and outstanding at September 30, 2018 and December 31, 2017, respectively) | — | — | — | — | 1 | |||||||||||||||
Additional paid-in capital | 2,056 | 2,047 | 2,039 | 2,037 | 716 | |||||||||||||||
Retained earnings (Accumulated deficit) | (13 | ) | (62 | ) | (95 | ) | (149 | ) | 1,000 | |||||||||||
Accumulated other comprehensive income (loss) | (569 | ) | (603 | ) | (278 | ) | 75 | 543 | ||||||||||||
Treasury stock, at cost (no shares at September 30, 2018; no shares at December 31, 2017) | — | — | — | — | (13 | ) | ||||||||||||||
Total shareholders' equity | 1,474 | 1,382 | 1,666 | 1,963 | 2,247 | |||||||||||||||
Total liabilities and shareholders' equity | $ | 30,960 | $ | 30,004 | $ | 29,651 | $ | 29,923 | $ | 28,965 | ||||||||||
Equity attributable to preferred shareholders (1) | $ | 398 | $ | 391 | $ | 384 | $ | 377 | $ | — |
Three months ended | One month ended | Two months ended | Three months ended | Nine months ended | |||||||||||||||||||||||||||||
September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | November 30, 2017 | September 30, 2017 | September 30, 2018 | September 30, 2017 | ||||||||||||||||||||||||||
Successor | Successor | Successor | Successor | Predecessor | Predecessor | Successor | Predecessor | ||||||||||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||
(Dollars in millions, except per share data) | |||||||||||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||||
Traditional life insurance premiums | $ | 7 | $ | 7 | $ | 9 | $ | 3 | $ | 6 | $ | 10 | $ | 23 | $ | 17 | |||||||||||||||||
Life contingent immediate annuity | 5 | 8 | 9 | — | 1 | 6 | 22 | 14 | |||||||||||||||||||||||||
Net investment income | 267 | 282 | 263 | 92 | 174 | 261 | 812 | 765 | |||||||||||||||||||||||||
Net investment gains (losses) | 119 | (2 | ) | (191 | ) | 42 | 146 | 117 | (74 | ) | 265 | ||||||||||||||||||||||
Surrender charges | 9 | 12 | 14 | 3 | 10 | 9 | 35 | 27 | |||||||||||||||||||||||||
Cost of insurance fees and other income | 37 | 33 | 34 | 25 | 25 | 32 | 104 | 102 | |||||||||||||||||||||||||
Total revenues | 444 | 340 | 138 | 165 | 362 | 435 | 922 | 1,190 | |||||||||||||||||||||||||
Benefits and expenses: | |||||||||||||||||||||||||||||||||
Traditional life insurance policy benefits and change in future policy benefits | 17 | 22 | 18 | 7 | 12 | 18 | 57 | 50 | |||||||||||||||||||||||||
Life contingent immediate annuity benefits and changes in future policy benefits | 13 | 13 | 18 | 11 | 13 | 26 | 44 | 64 | |||||||||||||||||||||||||
Interest sensitive and index product benefits and changes in future policy benefits | 267 | 182 | (75 | ) | 106 | 202 | 276 | 374 | 709 | ||||||||||||||||||||||||
General expenses | 31 | 37 | 34 | 11 | 47 | 30 | 103 | 95 | |||||||||||||||||||||||||
Acquisition expenses | 94 | 94 | 55 | 27 | 44 | 65 | 242 | 218 | |||||||||||||||||||||||||
Deferred acquisition costs ("DAC") | (85 | ) | (85 | ) | (49 | ) | (22 | ) | (40 | ) | (59 | ) | (219 | ) | (204 | ) | |||||||||||||||||
Amortization of intangibles | 28 | 17 | 27 | 4 | 36 | (14 | ) | 72 | 70 | ||||||||||||||||||||||||
Total benefits and expenses | 365 | 280 | 28 | 144 | 314 | 342 | 673 | 1,002 | |||||||||||||||||||||||||
Operating income | 79 | 60 | 110 | 21 | 48 | 93 | 249 | 188 | |||||||||||||||||||||||||
Interest expense | (8 | ) | (7 | ) | (6 | ) | (2 | ) | (4 | ) | (6 | ) | (21 | ) | (18 | ) | |||||||||||||||||
Income before income taxes | 71 | 53 | 104 | 19 | 44 | 87 | 228 | 170 | |||||||||||||||||||||||||
Income tax expense | (15 | ) | (13 | ) | (39 | ) | (110 | ) | (16 | ) | (26 | ) | (67 | ) | (55 | ) | |||||||||||||||||
Net income (loss) | $ | 56 | $ | 40 | $ | 65 | $ | (91 | ) | $ | 28 | $ | 61 | $ | 161 | $ | 115 | ||||||||||||||||
Less Preferred stock dividend | 7 | 7 | 7 | 2 | — | — | 21 | — | |||||||||||||||||||||||||
Net income (loss) available to common shareholders | 49 | 33 | 58 | (93 | ) | 28 | 61 | 140 | 115 | ||||||||||||||||||||||||
Net income (loss) per common share: | |||||||||||||||||||||||||||||||||
Basic | $ | 0.23 | $ | 0.15 | $ | 0.27 | $ | (0.44 | ) | $ | 0.48 | $ | 1.06 | $ | 0.65 | $ | 1.98 | ||||||||||||||||
Diluted | $ | 0.23 | $ | 0.15 | $ | 0.27 | $ | (0.44 | ) | $ | 0.47 | $ | 1.06 | $ | 0.65 | $ | 1.98 | ||||||||||||||||
Weighted average common shares used in computing net income per common share: | |||||||||||||||||||||||||||||||||
Basic | 214.37 | 214.37 | 214.37 | 214.37 | 58.34 | 58.34 | 214.37 | 58.33 | |||||||||||||||||||||||||
Diluted | 214.42 | 214.38 | 214.37 | 214.37 | 58.49 | 58.48 | 214.39 | 58.44 |
Three months ended | One month ended | Two months ended | Three months ended | Nine months ended | |||||||||||||||||||||||||||||
September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | November 30, 2017 | September 30, 2017 | September 30, 2018 | September 30, 2017 | ||||||||||||||||||||||||||
Successor | Successor | Successor | Successor | Predecessor | Predecessor | Successor | Predecessor | ||||||||||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||
(Dollars in millions, except per share data) | |||||||||||||||||||||||||||||||||
Net income (loss) | $ | 56 | $ | 40 | $ | 65 | $ | (91 | ) | $ | 28 | $ | 61 | $ | 161 | $ | 115 | ||||||||||||||||
Adjustments to arrive at AOI: | |||||||||||||||||||||||||||||||||
Effect of investment losses (gains), net of offsets (a) | 38 | 37 | 39 | — | (6 | ) | (5 | ) | 114 | 14 | |||||||||||||||||||||||
Effect of changes in fair values of FIA related derivatives, net of hedging costs (a) (b) | (30 | ) | (9 | ) | (63 | ) | (8 | ) | (10 | ) | 3 | (102 | ) | (3 | ) | ||||||||||||||||||
Effect of change in fair value of reinsurance related embedded derivative, net of offsets (a) (c) | — | — | — | — | (1 | ) | 5 | — | 21 | ||||||||||||||||||||||||
Effect of integration, merger related & other non-operating items | 4 | 3 | 8 | (8 | ) | 29 | 2 | 15 | 9 | ||||||||||||||||||||||||
Effects of extinguishment of debt | — | (2 | ) | — | — | — | — | (2 | ) | — | |||||||||||||||||||||||
Tax effect of affiliated reinsurance embedded derivative | — | — | 15 | (20 | ) | — | — | 15 | — | ||||||||||||||||||||||||
Net impact of Tax Cuts and Jobs Act | 3 | — | — | 131 | — | — | 3 | — | |||||||||||||||||||||||||
Tax impact of adjusting items | (2 | ) | (4 | ) | 4 | (1 | ) | (4 | ) | (1 | ) | (2 | ) | (11 | ) | ||||||||||||||||||
AOI | $ | 69 | $ | 65 | $ | 68 | $ | 3 | $ | 36 | $ | 65 | $ | 202 | $ | 145 | |||||||||||||||||
Dividends on preferred stock | (7 | ) | (7 | ) | (7 | ) | (2 | ) | — | — | (21 | ) | — | ||||||||||||||||||||
AOI available to common shareholders | $ | 62 | $ | 58 | $ | 61 | $ | 1 | $ | 36 | $ | 65 | $ | 181 | $ | 145 | |||||||||||||||||
Per diluted common share: | |||||||||||||||||||||||||||||||||
Net income (loss) available to common shareholders | $ | 0.23 | $ | 0.15 | $ | 0.27 | $ | (0.44 | ) | $ | 0.47 | $ | 1.06 | $ | 0.65 | $ | 1.98 | ||||||||||||||||
Adjustments to arrive at AOI: | |||||||||||||||||||||||||||||||||
Effect of investment (gains) losses, net of offsets (a) | 0.18 | 0.17 | 0.18 | — | (0.10 | ) | (0.09 | ) | 0.53 | 0.24 | |||||||||||||||||||||||
Effect of changes in fair values of FIA related derivatives, net of hedging costs (a) (b) | (0.14 | ) | (0.04 | ) | (0.29 | ) | (0.04 | ) | (0.17 | ) | 0.05 | (0.47 | ) | (0.06 | ) | ||||||||||||||||||
Effect of change in fair value of reinsurance related embedded derivative, net of offsets (a) (c) | — | — | — | — | (0.02 | ) | 0.09 | — | 0.37 | ||||||||||||||||||||||||
Effect of integration, merger related & other non-operating items | 0.02 | 0.01 | 0.04 | (0.04 | ) | 0.50 | 0.02 | 0.07 | 0.14 | ||||||||||||||||||||||||
Effects of extinguishment of debt | — | (0.01 | ) | — | — | — | — | (0.01 | ) | — | |||||||||||||||||||||||
Tax effect of affiliated reinsurance embedded derivative | — | — | 0.07 | (0.09 | ) | — | — | 0.07 | — | ||||||||||||||||||||||||
Net impact of Tax Cuts and Jobs Act | 0.01 | — | — | 0.61 | — | — | 0.01 | — | |||||||||||||||||||||||||
Tax impact of adjusting items | (0.01 | ) | (0.01 | ) | 0.01 | — | (0.06 | ) | (0.02 | ) | (0.01 | ) | (0.19 | ) | |||||||||||||||||||
AOI available to common shareholders per diluted share | $ | 0.29 | $ | 0.27 | $ | 0.28 | $ | — | $ | 0.62 | $ | 1.11 | $ | 0.84 | $ | 2.48 |
Three months ended | One month ended | Two months ended | Three months ended | Nine months ended | |||||||||||||||||||||||||||||
September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | November 30, 2017 | September 30, 2017 | September 30, 2018 | September 30, 2017 | ||||||||||||||||||||||||||
Successor | Successor | Successor | Successor | Predecessor | Predecessor | Successor | Predecessor | ||||||||||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||||||||||
Revenue: | |||||||||||||||||||||||||||||||||
Insurance and investment product fees and other (a) | $ | — | $ | — | $ | — | $ | (12 | ) | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Net investment gains (losses) (b) | (92 | ) | (3 | ) | 163 | — | (8 | ) | 1 | 68 | 44 | ||||||||||||||||||||||
Increase (decrease) in total revenues | (92 | ) | (3 | ) | 163 | (12 | ) | (8 | ) | 1 | 68 | 44 | |||||||||||||||||||||
Benefits and expenses: | |||||||||||||||||||||||||||||||||
Benefits and other changes in policy reserves (c) | 105 | 39 | (188 | ) | (10 | ) | (19 | ) | 12 | (44 | ) | 1 | |||||||||||||||||||||
Acquisition and operating expenses, net of deferrals | (1 | ) | 3 | 8 | 4 | 29 | 2 | 10 | 9 | ||||||||||||||||||||||||
Amortization of intangibles (d) | — | (8 | ) | 1 | 2 | 10 | (10 | ) | (7 | ) | (13 | ) | |||||||||||||||||||||
(Decrease) increase in total benefits and expenses | 104 | 34 | (179 | ) | (4 | ) | 20 | 4 | (41 | ) | (3 | ) | |||||||||||||||||||||
Increase (decrease) in pre-tax operating income | 12 | 31 | (16 | ) | (16 | ) | 12 | 5 | 27 | 41 | |||||||||||||||||||||||
(Decrease) increase in interest expense | — | (2 | ) | — | — | — | — | (2 | ) | — | |||||||||||||||||||||||
(Decrease) increase in income tax expense (benefit) (e) | 1 | (4 | ) | 19 | 110 | (4 | ) | (1 | ) | 16 | (11 | ) | |||||||||||||||||||||
Increase (decrease) in net income | $ | 13 | $ | 25 | $ | 3 | $ | 94 | $ | 8 | $ | 4 | $ | 41 | $ | 30 |
Three months ended | One month ended | Two months ended | Three months ended | Nine months ended | |||||||||||||||||||||||||||||
September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | November 30, 2017 | September 30, 2017 | September 30, 2018 | September 30, 2017 | ||||||||||||||||||||||||||
Successor | Successor | Successor | Successor | Predecessor | Predecessor | Successor | Predecessor | ||||||||||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||||||||||
Net income (loss) | $ | 56 | $ | 40 | $ | 65 | $ | (91 | ) | $ | 28 | $ | 61 | $ | 161 | $ | 115 | ||||||||||||||||
AOI | $ | 69 | $ | 65 | $ | 68 | $ | 3 | $ | 36 | $ | 65 | $ | 202 | $ | 145 | |||||||||||||||||
Notable Items (Not Trendable) Included within AOI and Net Income [(unfavorable)/favorable] | |||||||||||||||||||||||||||||||||
Legacy incentive compensation (a) | — | — | — | — | — | — | — | (2 | ) | ||||||||||||||||||||||||
Project expenses (b) | — | (3 | ) | — | — | — | — | (3 | ) | — | |||||||||||||||||||||||
Single premium immediate annuities ("SPIA") mortality & other reserve adjustments (c) | 5 | 5 | 8 | (2 | ) | 1 | (2 | ) | 18 | 3 | |||||||||||||||||||||||
Assumption review & DAC, VOBA and DSI unlocking (d) | 5 | — | — | (9 | ) | 4 | 21 | 5 | 18 | ||||||||||||||||||||||||
Bond prepay income / other (e) | — | 4 | — | — | — | 2 | 4 | 2 |
September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | ||||||||||||||||
Successor | Successor | Successor | Successor | Predecessor | ||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||
(Dollars in millions, except per share data) | ||||||||||||||||||||
Capitalization: | ||||||||||||||||||||
Debt | $ | 550 | $ | 550 | $ | 442 | $ | 412 | $ | 405 | ||||||||||
Total debt | 550 | 550 | 442 | 412 | 405 | |||||||||||||||
Total shareholders' equity | 1,474 | 1,382 | 1,666 | 1,963 | 2,247 | |||||||||||||||
Total capitalization | 2,024 | 1,932 | 2,108 | 2,375 | 2,652 | |||||||||||||||
AOCI | (569 | ) | (603 | ) | (278 | ) | 75 | 543 | ||||||||||||
Total capitalization excluding AOCI (1) | $ | 2,593 | $ | 2,535 | $ | 2,386 | $ | 2,300 | $ | 2,109 | ||||||||||
Total shareholders' equity | 1,474 | 1,382 | 1,666 | 1,963 | 2,247 | |||||||||||||||
Equity available to preferred shareholders | 398 | 391 | 384 | 377 | — | |||||||||||||||
Common shareholders' equity | 1,076 | 991 | 1,282 | 1,586 | 2,247 | |||||||||||||||
AOCI | (569 | ) | (603 | ) | (278 | ) | 75 | 543 | ||||||||||||
Total common shareholders' equity excluding AOCI (1) | $ | 1,645 | $ | 1,594 | $ | 1,560 | $ | 1,511 | $ | 1,704 | ||||||||||
Common shares outstanding | 214.37 | 214.37 | 214.37 | 214.37 | 58.93 | |||||||||||||||
Book Value per Share: (1) | ||||||||||||||||||||
GAAP Book value per common share including AOCI (1) | $ | 5.02 | $ | 4.62 | $ | 5.98 | $ | 7.40 | $ | 38.13 | ||||||||||
GAAP Book value per common share excluding AOCI (1) | $ | 7.67 | $ | 7.44 | $ | 7.28 | $ | 7.05 | $ | 28.92 | ||||||||||
Debt-to-Capital Ratios: (1) | ||||||||||||||||||||
Total Debt to Capitalization, excluding AOCI (1) | 21.2 | % | 21.7 | % | 18.5 | % | 17.9 | % | 19.2 | % | ||||||||||
Rating Agency Adjusted Debt to Capitalization, excluding AOCI (1) | 28.9 | % | 29.4 | % | 26.6 | % | 26.1 | % | 19.2 | % | ||||||||||
Twelve months ended | ||||||||||||||||||||
Twelve Month Rolling Average Return on Equity ("ROE") | September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | |||||||||||||||
Successor | Successor | Successor | Successor | Predecessor | ||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||
Return on Common Shareholders' Equity (1) | ||||||||||||||||||||
Return on average common shareholders' equity | 15.1 | % | 14.1 | % | 16.2 | % | N/M | 11.2 | % | |||||||||||
Return on average common shareholders' equity, excluding AOCI (1) | 11.8 | % | 11.7 | % | 15.1 | % | N/M | 13.8 | % | |||||||||||
Return on Common Shareholders' Equity - AOI (1) | ||||||||||||||||||||
Adjusted Operating return on common shareholders' equity, excluding AOCI (1) | 15.3 | % | 15.3 | % | 15.9 | % | 0.8 | % | 11.5 | % | ||||||||||
Three months ended | ||||||||||||||||||||
Quarterly Average ROE | September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | |||||||||||||||
Successor | Successor | Successor | Successor | Predecessor | ||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||
Return on average common shareholders' equity | 19.0 | % | 11.6 | % | 16.2 | % | N/M | 11.2 | % | |||||||||||
Return on average common shareholders' equity, excluding AOCI (1) | 12.1 | % | 8.4 | % | 15.1 | % | N/M | 14.6 | % | |||||||||||
Adjusted Operating return on common shareholders' equity, excluding AOCI (1) | 15.3 | % | 14.7 | % | 15.9 | % | 0.8 | % | 15.5 | % | ||||||||||
A.M. Best | Fitch | Moody's | S&P | |||||
Holding Companies | ||||||||
FGL Holdings | ||||||||
Issuer Credit / Default Rating | Not Rated | BB+ | Ba3 | BB+ | ||||
Outlook | Stable | Stable | Positive | |||||
CF Bermuda Holdings Limited | ||||||||
Issuer Credit / Default Rating | Not Rated | BB+ | Ba2 | BB+ | ||||
Outlook | Stable | Stable | Positive | |||||
Fidelity &Guaranty Life Holdings, Inc. | ||||||||
Issuer Credit / Default Rating | bb+ | BB+ | Not Rated | BB+ | ||||
Outlook | Positive | Stable | Not Rated | Positive | ||||
Senior Unsecured Notes | bb+ | BB | Ba2 | BB+ | ||||
Outlook | Positive | Stable | Stable | |||||
Insurance Subsidiaries | ||||||||
F&G Life Re Ltd | ||||||||
Financial Strength Rating | Not Rated | BBB | Baa2 | BBB+ | ||||
Outlook | Stable | Stable | Stable | |||||
Fidelity & Guaranty Life Insurance Company | ||||||||
Financial Strength Rating | B++ | BBB | Baa2 | BBB+ | ||||
Outlook | Positive | Stable | Stable | Stable | ||||
Fidelity & Guaranty Life Insurance Company of New York | ||||||||
Financial Strength Rating | B++ | BBB | Not Rated | BBB+ | ||||
Outlook | Positive | Stable | Not Rated | Stable | ||||
*Reflects current ratings and outlooks as of date of filing |
(Dollars in millions) | Three months ended | Nine months ended | ||||||||||||||||
September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | |||||||||||||||
Successor | Predecessor | Successor | Predecessor | |||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||
Yield on average assets under management "AAUM" (1) | 4.13 | % | 5.02 | % | 4.26 | % | 4.98 | % | ||||||||||
Less: Interest credited and option cost | (2.42 | )% | (2.58 | )% | (2.37 | )% | (2.52 | )% | ||||||||||
Total net investment spread - All product lines (1) | 1.71 | % | 2.44 | % | 1.89 | % | 2.46 | % | ||||||||||
FIA net investment spread | 2.16 | % | 3.00 | % | 2.36 | % | 3.02 | % | ||||||||||
Gross investment book yield - bonds purchased during the period (1) | 5.58 | % | 4.92 | % | 5.25 | % | 4.86 | % | ||||||||||
Net investment book yield - bonds purchased during the period (1) | 5.23 | % | 4.82 | % | 4.99 | % | 4.75 | % | ||||||||||
AAUM (1) | $ | 25,883 | $ | 20,840 | $ | 25,437 | $ | 20,524 | ||||||||||
(1) Refer to "Non-GAAP Financial Measures" for further details | ||||||||||||||||||
Total Product Net Investment Spread | ||||||||||||||||||
(Dollars in millions) | Three months ended | Nine months ended | ||||||||||||||||
September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | |||||||||||||||
Successor | Predecessor | Successor | Predecessor | |||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||
Net Investment Income | $ | 267 | $ | 261 | $ | 812 | $ | 765 | ||||||||||
AAUM | 25,883 | 20,840 | 25,437 | 20,524 | ||||||||||||||
Yield | 4.13 | % | 5.02 | % | 4.26 | % | 4.98 | % | ||||||||||
Interest Credits, less DSI | $ | 77 | $ | 75 | $ | 222 | $ | 220 | ||||||||||
Option & Futures Costs | 59 | 50 | 167 | 139 | ||||||||||||||
Total interest credited and option costs | $ | 136 | $ | 125 | $ | 389 | $ | 359 | ||||||||||
Average Account Value | 22,367 | 19,371 | 21,895 | 19,026 | ||||||||||||||
Interest credited & option cost | 2.42 | % | 2.58 | % | 2.37 | % | 2.52 | % | ||||||||||
Net Investment spread | 1.71 | % | 2.44 | % | 1.89 | % | 2.46 | % | ||||||||||
FIA Net Investment Spread | ||||||||||||||||||
(Dollars in millions) | Three months ended | Nine months ended | ||||||||||||||||
September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | |||||||||||||||
Successor | Predecessor | Successor | Predecessor | |||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||
Net Investment Income | $ | 158 | $ | 164 | $ | 491 | $ | 476 | ||||||||||
AAUM | 15,181 | 13,020 | 15,143 | 12,778 | ||||||||||||||
Yield | 4.15 | % | 5.03 | % | 4.32 | % | 4.96 | % | ||||||||||
Interest Credits, less DSI | $ | 15 | $ | 17 | $ | 46 | $ | 49 | ||||||||||
Option & Futures Costs | 59 | 50 | 167 | 139 | ||||||||||||||
Total interest credited and option costs | $ | 74 | $ | 67 | $ | 213 | $ | 188 | ||||||||||
Average Account Value | 14,766 | 13,140 | 14,495 | 12,892 | ||||||||||||||
Interest credited & option cost | 1.99 | % | 2.03 | % | 1.96 | % | 1.94 | % | ||||||||||
Net Investment spread | 2.16 | % | 3.00 | % | 2.36 | % | 3.02 | % |
(Dollars in millions) | Three months ended | Nine months ended | |||||||||||||||||||||||||||
September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | September 30, 2018 | September 30, 2017 | |||||||||||||||||||||||
Successor | Successor | Successor | Successor | Predecessor | Successor | Predecessor | |||||||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||
Fixed index annuities (FIA) | $ | 631 | $ | 549 | $ | 436 | $ | 462 | $ | 424 | $ | 1,616 | $ | 1,317 | |||||||||||||||
Fixed rate annuities (MYGA) | 211 | 220 | 142 | 161 | 164 | 573 | 449 | ||||||||||||||||||||||
Institutional spread based | — | — | 200 | — | — | 200 | 136 | ||||||||||||||||||||||
Total annuity | $ | 842 | $ | 769 | $ | 778 | $ | 623 | $ | 588 | $ | 2,389 | $ | 1,902 | |||||||||||||||
Index universal life | 7 | 7 | 6 | 7 | 6 | 20 | 29 | ||||||||||||||||||||||
International flow reinsurance | 45 | $ | 54 | $ | 33 | 8 | — | 132 | — | ||||||||||||||||||||
Total Sales | $ | 894 | $ | 830 | $ | 817 | $ | 638 | $ | 594 | $ | 2,541 | $ | 1,931 |
(Dollars in millions) | Three months ended | One month ended (b) | Two months ended (a) | Three months ended | ||||||||||||||||||||
September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | November 30, 2017 | September 30, 2017 | |||||||||||||||||||
Successor | Successor | Successor | Successor | Predecessor | Predecessor | |||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||
Account balances at beginning of period: | $ | 18,769 | $ | 18,326 | $ | 18,041 | $ | 17,892 | $ | 16,819 | $ | 16,430 | ||||||||||||
Net deposits | 845 | 756 | 548 | 223 | 404 | 598 | ||||||||||||||||||
Premium and interest bonuses | 14 | 14 | 14 | 5 | 9 | 11 | ||||||||||||||||||
Fixed interest credited and index credits | 148 | 143 | 177 | 71 | 130 | 147 | ||||||||||||||||||
Guaranteed product rider fees | (21 | ) | (23 | ) | (22 | ) | (8 | ) | (14 | ) | (17 | ) | ||||||||||||
Surrenders, withdrawals, deaths, etc. | (420 | ) | (447 | ) | (432 | ) | (142 | ) | (256 | ) | (350 | ) | ||||||||||||
Account balance at end of period | $ | 19,335 | $ | 18,769 | $ | 18,326 | $ | 18,041 | $ | 17,092 | $ | 16,819 |
Three months ended | Nine months ended | ||||||||||||||||
Product Type | September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | |||||||||||||
Successor | Predecessor | Successor | Predecessor | ||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
(Dollars in millions) | |||||||||||||||||
Fixed Index Annuities: | |||||||||||||||||
Index Strategies | $ | 556 | $ | 347 | $ | 1,338 | $ | 1,066 | |||||||||
Fixed Strategy | 75 | 84 | 229 | 271 | |||||||||||||
631 | 431 | 1,567 | 1,337 | ||||||||||||||
Fixed Rate Annuities: | |||||||||||||||||
Single-Year Rate Guaranteed | 1 | 2 | 4 | 8 | |||||||||||||
Multi-Year Rate Guaranteed | 213 | 165 | 578 | 450 | |||||||||||||
Total before coinsurance ceded | 845 | 598 | 2,149 | 1,795 | |||||||||||||
Coinsurance ceded | — | — | — | 2 | |||||||||||||
Net after coinsurance ceded | $ | 845 | $ | 598 | $ | 2,149 | $ | 1,793 |
Surrender Charge | Net Account Value | |||||||||||||
(Unaudited) | ||||||||||||||
Product Type | Avg. Years at Issue | Avg. Years Remaining | Avg. % Remaining | Dollars in millions | % | |||||||||
Fixed Index Annuities | 11 | 6 | 8 | % | $ | 14,975 | 78 | % | ||||||
Single-Year Rate Guaranteed | 10 | 1 | 1 | % | 604 | 3 | % | |||||||
Multi-Year Rate Guaranteed | 5 | 3 | 7 | % | 3,756 | 19 | % | |||||||
Total | $ | 19,335 | 100 | % |
Fixed Annuities Account Value | Fixed Index Annuities Account Value | |||||||
(Unaudited) | ||||||||
(Dollars in millions) | ||||||||
SURRENDER CHARGE PERCENTAGES: | ||||||||
No surrender charge | $ | 757 | $ | 2,383 | ||||
0.0% < 2.0% | 13 | 190 | ||||||
2.0% < 4.0% | 31 | 206 | ||||||
4.0% < 6.0% | 760 | 931 | ||||||
6.0% < 8.0% | 864 | 2,067 | ||||||
8.0% < 10.0% | 1,909 | 2,936 | ||||||
10.0% or greater | 25 | 6,262 | ||||||
$ | 4,359 | $ | 14,975 |
Fixed and Fixed Index Annuities Account Value | Weighted Average Surrender Charge | ||||||
(Unaudited) | |||||||
(Dollars in millions) | |||||||
SURRENDER CHARGE EXPIRATION BY YEAR: | |||||||
Out of surrender charge | $ | 2,991 | — | % | |||
2018 | 591 | 4 | % | ||||
2019 - 2020 | 3,035 | 6 | % | ||||
2021 - 2022 | 2,973 | 7 | % | ||||
2023 - 2024 | 2,789 | 9 | % | ||||
Thereafter | 6,956 | 11 | % | ||||
$ | 19,335 | 8 | % |
Fixed Annuities Account Value | Fixed Index Annuities Account Value | |||||||
(Unaudited) | ||||||||
(Dollars in millions) | ||||||||
CREDITED RATE (INCLUDING BONUS INTEREST) VS. ULTIMATE MINIMUM GUARANTEED RATE DIFFERENTIAL: | ||||||||
No differential | $ | 1,000 | $ | 1,342 | ||||
0.0% - 1.0% | 385 | 1,301 | ||||||
1.0% - 2.0% | 317 | 39 | ||||||
2.0% - 3.0% | 2,644 | 10 | ||||||
3.0% - 4.0% | 13 | — | ||||||
Allocated to index strategies | — | 12,284 | ||||||
$ | 4,359 | $ | 14,976 |
Minimum Guaranteed Cap | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
1% | 2% | 3% | 5% | 6% | ||||||||||||||||
Current Cap | (Dollars in millions) | |||||||||||||||||||
At minimum | $ | — | $ | — | $ | 1,650 | $ | 613 | $ | 3 | ||||||||||
2-3% | 982 | — | — | — | — | |||||||||||||||
3-4% | 1,064 | — | 376 | — | — | |||||||||||||||
4-5% | 441 | — | 285 | — | — | |||||||||||||||
5-6% | 156 | 3 | 36 | 1 | — | |||||||||||||||
6-7% | 71 | 3 | 21 | — | 4 | |||||||||||||||
7% + | 87 | 51 | 200 | — | 69 | |||||||||||||||
Total: | $ | 2,801 | $ | 57 | $ | 2,568 | $ | 614 | $ | 76 |
Minimum Guaranteed Cap 1% | ||||
(Unaudited) | ||||
Current Cap | (Dollars in millions) | |||
At minimum | $ | 2,014 | ||
1% to 2% | 2,656 | |||
2% to 3% | 613 | |||
3% + | 108 | |||
Total: | $ | 5,391 |
Minimum Guaranteed Cap 2% | Minimum Guaranteed Cap 5% | |||||||
(Unaudited) | ||||||||
Current Cap | (Dollars in millions) | |||||||
At minimum | $ | — | $ | 19 | ||||
2% to 5% | 2 | — | ||||||
5% to 7% | 12 | 50 | ||||||
7% to 9% | — | 41 | ||||||
9% to 11% | — | 17 | ||||||
11% to 13% | — | 8 | ||||||
Total: | $ | 14 | $ | 135 |
(Dollars in millions) | September 30, 2018 | December 31, 2017 | |||||||||||||||||||||
Successor | Successor | ||||||||||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||||||||||
Amortized Cost | Fair Value | Percent | Amortized Cost | Fair Value | Percent | ||||||||||||||||||
Fixed maturity securities, available for sale: | |||||||||||||||||||||||
United States Government full faith and credit | $ | 141 | $ | 139 | 1 | % | $ | 84 | $ | 84 | 1 | % | |||||||||||
United States Government sponsored entities | 115 | 108 | — | % | 123 | 122 | 1 | % | |||||||||||||||
United States municipalities, states and territories | 1,562 | 1,381 | 6 | % | 1,736 | 1,747 | 7 | % | |||||||||||||||
Foreign Governments | 164 | 160 | 1 | % | 198 | 197 | 1 | % | |||||||||||||||
Corporate securities: | |||||||||||||||||||||||
Finance, insurance and real estate | 4,755 | 4,524 | 19 | % | 5,464 | 5,500 | 23 | % | |||||||||||||||
Manufacturing, construction and mining | 969 | 616 | 3 | % | 994 | 1,002 | 4 | % | |||||||||||||||
Utilities, energy and related sectors | 2,408 | 2,545 | 10 | % | 2,262 | 2,281 | 10 | % | |||||||||||||||
Wholesale/retail trade | 1,550 | 1,503 | 6 | % | 1,420 | 1,428 | 6 | % | |||||||||||||||
Services, media and other | 2,785 | 2,446 | 10 | % | 2,327 | 2,359 | 10 | % | |||||||||||||||
Hybrid securities | 956 | 951 | 4 | % | 1,066 | 1,067 | 4 | % | |||||||||||||||
Non-agency residential mortgage-backed securities | 1,241 | 1,572 | 6 | % | 1,156 | 1,155 | 5 | % | |||||||||||||||
Commercial mortgage-backed securities | 1,257 | 1,794 | 7 | % | 956 | 956 | 4 | % | |||||||||||||||
Asset-backed securities | 3,158 | 3,682 | 15 | % | 3,061 | 3,065 | 13 | % | |||||||||||||||
Equity securities | 1,378 | 1,440 | 6 | % | 1,392 | 1,388 | 6 | % | |||||||||||||||
Commercial mortgage loans | 525 | 488 | 2 | % | 548 | 549 | 2 | % | |||||||||||||||
Other (primarily derivatives) | 687 | 1,034 | 4 | % | 647 | 678 | 3 | % | |||||||||||||||
Short term investments | — | 15 | — | % | 25 | 25 | — | % | |||||||||||||||
Total (a) | $ | 23,651 | $ | 24,398 | 100 | % | $ | 23,459 | $ | 23,603 | 100 | % | |||||||||||
(a) Asset duration, including cash and cash equivalents, of 7.02 years and 6.72 years vs. liability duration of 6.34 years and 6.76 years for the periods ending September 30, 2018 and December 31, 2017, respectively |
NAIC Designation | Fair Value | Percent | Rating Agency Rating | Fair Value | Percent | ||||||||||||
(Dollars in millions) | (Dollars in millions) | ||||||||||||||||
1 | $ | 10,915 | 51 | % | AAA | $ | 2,711 | 13 | % | ||||||||
2 | 9,031 | 42 | % | AA | 1,454 | 7 | % | ||||||||||
3 | 1,270 | 6 | % | A | 5,159 | 24 | % | ||||||||||
4 | 167 | 1 | % | BBB | 9,829 | 46 | % | ||||||||||
5 | 33 | — | % | BB | 1,326 | 6 | % | ||||||||||
6 | 5 | — | % | B and below | 942 | 4 | % | ||||||||||
$ | 21,421 | 100 | % | $ | 21,421 | 100 | % |
Successor | ||||||||
(Unaudited) | ||||||||
Collateral Type | Amortized Cost | Fair Value | ||||||
Total by collateral type | ||||||||
Government agency | $ | 111 | $ | 108 | ||||
Prime | 722 | 721 | ||||||
Subprime | 228 | 228 | ||||||
Alt-A | 616 | 622 | ||||||
$ | 1,677 | $ | 1,679 | |||||
Total by NAIC designation | ||||||||
1 | $ | 1,652 | $ | 1,655 | ||||
2 | 19 | 19 | ||||||
3 | 4 | 4 | ||||||
4 | — | — | ||||||
5 | 1 | 1 | ||||||
$ | 1,676 | $ | 1,679 |
(Dollars in millions) | September 30, 2018 | ||||||
Successor | |||||||
(Unaudited) | |||||||
Issuer (a): | Fair Value | Percentage of Total Invested Assets | |||||
AT&T Inc. | $ | 119 | 0.5 | % | |||
JP Morgan Chase & Co. | 119 | 0.5 | % | ||||
Wells Fargo & Company | 116 | 0.5 | % | ||||
HSBC Holdings | 114 | 0.5 | % | ||||
General Motors Co | 114 | 0.5 | % | ||||
Metropolitan Transportation Authority (NY) | 114 | 0.5 | % | ||||
United Mexican States | 114 | 0.5 | % | ||||
Verizon Communications Inc. | 111 | 0.5 | % | ||||
Metlife, Inc. | 108 | 0.4 | % | ||||
Energy Transfer Partners | 107 | 0.4 | % |
(Dollars in millions) | (Unaudited) | |||||||||
Financial Strength Rating | ||||||||||
Parent Company/Principal Reinsurers | Reinsurance Recoverable (a) | AM Best | S&P | Moody's | ||||||
Wilton Re. | $ | 1,546 | A+ | Not Rated | Not Rated | |||||
Security Life of Denver | 164 | A | A | A2 | ||||||
Hannover Re | 125 | A+ | AA- | Not Rated | ||||||
London Life | 110 | A+ | Not Rated | Not Rated | ||||||
Swiss Re Life and Health | 103 | A+ | AA- | Aa3 |
High | Low | Close | Dividend Declared | |||||||||||||
2018 (Successor unaudited) | ||||||||||||||||
First Quarter | $ | 10.74 | $ | 8.65 | $ | 10.15 | $ | — | ||||||||
Second Quarter | $ | 10.22 | $ | 8.14 | $ | 8.39 | $ | — | ||||||||
Third Quarter | $ | 9.63 | $ | 8.35 | $ | 8.95 | $ | — |
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