x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Cayman Islands | 98-1354810 | |
(State or other jurisdiction of incorporation or organization) | 4th Floor Boundary Hall, Cricket Square Grand Cayman, Cayman Islands KY1-1102 | (I.R.S. Employer Identification No.) |
(Address of principal executive offices, including zip code) | ||
Large Accelerated Filer | x | Accelerated Filer | ¨ |
Non-accelerated Filer | ¨ | Smaller reporting Company | ¨ |
Emerging growth company | ¨ |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Ordinary shares, par value $.0001 per share | FG | New York Stock Exchange |
Warrants to purchase ordinary shares | FG WS | New York Stock Exchange |
Page | |
PART I. FINANCIAL INFORMATION | |
PART II. OTHER INFORMATION | |
March 31, 2019 | December 31, 2018 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Investments: | |||||||
Fixed maturity securities, available-for-sale, at fair value (amortized cost: March 31, 2019 - $21,908; December 31, 2018 - $22,219) | $ | 21,605 | $ | 21,109 | |||
Equity securities, at fair value (cost: March 31, 2019 - $1,226; December 31, 2018 - $1,526) | 1,171 | 1,382 | |||||
Derivative investments | 305 | 97 | |||||
Mortgage loans | 674 | 667 | |||||
Other invested assets | 755 | 662 | |||||
Total investments | 24,510 | 23,917 | |||||
Cash and cash equivalents | 1,357 | 571 | |||||
Accrued investment income | 238 | 216 | |||||
Funds withheld for reinsurance receivables, at fair value | 837 | 757 | |||||
Reinsurance recoverable | 3,113 | 3,190 | |||||
Intangibles, net | 1,421 | 1,359 | |||||
Deferred tax assets, net | 283 | 343 | |||||
Goodwill | 467 | 467 | |||||
Other assets | 220 | 125 | |||||
Total assets | $ | 32,446 | $ | 30,945 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Contractholder funds | $ | 23,881 | $ | 23,387 | |||
Future policy benefits, including $797 and $725 at fair value at March 31, 2019 and December 31, 2018, respectively | 4,677 | 4,641 | |||||
Funds withheld for reinsurance liabilities | 653 | 722 | |||||
Liability for policy and contract claims | 70 | 64 | |||||
Debt | 541 | 541 | |||||
Other liabilities | 873 | 700 | |||||
Total liabilities | 30,695 | 30,055 | |||||
Commitments and contingencies ("Note 12") | |||||||
Shareholders' equity: | |||||||
Preferred stock ($.0001 par value, 100,000,000 shares authorized, 406,510 and 399,033 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively) | — | — | |||||
Common stock ($.0001 par value, 800,000,000 shares authorized, 221,660,974 and 221,660,974 issued and outstanding at March 31, 2019 and December 31, 2018, respectively) | — | — | |||||
Additional paid-in capital | 2,007 | 1,998 | |||||
Retained earnings (Accumulated deficit) | (6 | ) | (167 | ) | |||
Accumulated other comprehensive income (loss) | (216 | ) | (937 | ) | |||
Treasury stock, at cost (4,328,077 shares at March 31, 2019; 600,000 shares at December 31, 2018) | (34 | ) | (4 | ) | |||
Total shareholders' equity | 1,751 | 890 | |||||
Total liabilities and shareholders' equity | $ | 32,446 | $ | 30,945 | |||
Three months ended | |||||||
March 31, 2019 | March 31, 2018 | ||||||
(Unaudited) | (Unaudited) | ||||||
Revenues: | |||||||
Premiums | $ | 16 | $ | 18 | |||
Net investment income | 289 | 263 | |||||
Net investment gains (losses) | 240 | (191 | ) | ||||
Insurance and investment product fees and other | 55 | 48 | |||||
Total revenues | 600 | 138 | |||||
Benefits and expenses: | |||||||
Benefits and other changes in policy reserves | 339 | (39 | ) | ||||
Acquisition and operating expenses, net of deferrals | 44 | 40 | |||||
Amortization of intangibles | 29 | 27 | |||||
Total benefits and expenses | 412 | 28 | |||||
Operating income | 188 | 110 | |||||
Interest expense | (8 | ) | (6 | ) | |||
Income (loss) before income taxes | 180 | 104 | |||||
Income tax expense | (9 | ) | (39 | ) | |||
Net income (loss) | $ | 171 | $ | 65 | |||
Less Preferred stock dividend | 8 | 7 | |||||
Net income (loss) available to common shareholders | $ | 163 | $ | 58 | |||
Net income (loss) per common share: | |||||||
Basic | $ | 0.74 | $ | 0.27 | |||
Diluted | $ | 0.74 | $ | 0.27 | |||
Weighted average common shares used in computing net income per common share: | |||||||
Basic | 219,645,679 | 214,370,000 | |||||
Diluted | 219,681,528 | 214,370,000 | |||||
Cash dividend per common share | $ | 0.01 | $ | — | |||
Supplemental disclosures | |||||||
Total other-than-temporary impairments | $ | (2 | ) | $ | (2 | ) | |
Portion of other-than-temporary impairments included in other comprehensive income | — | — | |||||
Net other-than-temporary impairments | (2 | ) | (2 | ) | |||
Gains (losses) on derivatives and embedded derivatives | 164 | (145 | ) | ||||
Other investment gains (losses) | 78 | (44 | ) | ||||
Total net investment gains (losses) | $ | 240 | $ | (191 | ) |
Three months ended | |||||||
March 31, 2019 | March 31, 2018 | ||||||
(Unaudited) | (Unaudited) | ||||||
Net income (loss) | $ | 171 | $ | 65 | |||
Other comprehensive income (loss): | |||||||
Net change in unrealized gains/losses on investments | 724 | (359 | ) | ||||
Change in reinsurance liabilities held at fair value resulting from a change in the instrument-specific credit risk | (3 | ) | 2 | ||||
Net changes to derive comprehensive income (loss) for the period | 721 | (357 | ) | ||||
Comprehensive income (loss), net of tax | $ | 892 | $ | (292 | ) |
Preferred Stock | Common Stock | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total Shareholders' Equity | ||||||||||||||||||||||
Balance, December 31, 2018 | $ | — | $ | — | $ | 1,998 | $ | (167 | ) | $ | (937 | ) | $ | (4 | ) | $ | 890 | |||||||||||
Treasury shares purchased | — | — | — | — | — | (30 | ) | (30 | ) | |||||||||||||||||||
Dividends | ||||||||||||||||||||||||||||
Preferred stock (paid in kind) | — | — | 8 | (8 | ) | — | — | — | ||||||||||||||||||||
Common stock ($0.01/share) | — | — | — | (2 | ) | — | — | (2 | ) | |||||||||||||||||||
Net income (loss) | — | — | — | 171 | — | — | 171 | |||||||||||||||||||||
Unrealized investment gains (losses), net | — | — | — | — | 724 | — | 724 | |||||||||||||||||||||
Change in reinsurance liabilities held at fair value resulting from a change in the instrument-specific credit risk | — | — | — | — | (3 | ) | — | (3 | ) | |||||||||||||||||||
Stock-based compensation | — | — | 1 | — | — | — | 1 | |||||||||||||||||||||
Balance, March 31, 2019 | $ | — | $ | — | $ | 2,007 | $ | (6 | ) | $ | (216 | ) | $ | (34 | ) | $ | 1,751 |
Preferred Stock | Common Stock | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total Shareholders' Equity | ||||||||||||||||||||||
Balance, December 31, 2017 | $ | — | $ | — | $ | 2,037 | $ | (149 | ) | $ | 75 | $ | — | $ | 1,963 | |||||||||||||
Dividends | ||||||||||||||||||||||||||||
Preferred stock (paid in kind) | — | — | 2 | (7 | ) | — | — | (5 | ) | |||||||||||||||||||
Net income (loss) | — | — | — | 65 | — | — | 65 | |||||||||||||||||||||
Unrealized investment gains (losses), net | — | — | — | — | (359 | ) | — | (359 | ) | |||||||||||||||||||
Change in reinsurance liabilities held at fair value resulting from a change in the instrument-specific credit risk | — | — | — | — | 2 | — | 2 | |||||||||||||||||||||
Cumulative effect of changes in accounting principles | — | — | — | (4 | ) | 4 | — | — | ||||||||||||||||||||
Balance, March 31, 2018 | $ | — | $ | — | $ | 2,039 | $ | (95 | ) | $ | (278 | ) | $ | — | $ | 1,666 |
Three months ended | |||||||
March 31, 2019 | March 31, 2018 | ||||||
(Unaudited) | (Unaudited) | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | 171 | $ | 65 | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Stock based compensation | 1 | — | |||||
Amortization | 4 | 15 | |||||
Deferred income taxes | 5 | 12 | |||||
Interest credited/index credits to contractholder account balances | 308 | (30 | ) | ||||
Net recognized losses (gains) on investments and derivatives | (240 | ) | 191 | ||||
Charges assessed to contractholders for mortality and administration | (32 | ) | (38 | ) | |||
Intangibles, net | (90 | ) | (55 | ) | |||
Changes in operating assets and liabilities: | |||||||
Reinsurance recoverable | (16 | ) | (8 | ) | |||
Future policy benefits | 36 | (40 | ) | ||||
Funds withheld for reinsurers | (129 | ) | (12 | ) | |||
Collateral (returned) posted | 141 | (145 | ) | ||||
Other assets and other liabilities | (63 | ) | 10 | ||||
Net cash provided by (used in) operating activities | 96 | (35 | ) | ||||
Cash flows from investing activities: | |||||||
Proceeds from available-for-sale investments sold, matured or repaid | 962 | 3,286 | |||||
Proceeds from derivatives instruments and other invested assets | 44 | 143 | |||||
Proceeds from mortgage loans | 4 | 20 | |||||
Cost of available-for-sale investments | (421 | ) | (3,699 | ) | |||
Costs of derivatives instruments and other invested assets | (172 | ) | (94 | ) | |||
Costs of mortgage loans | (12 | ) | — | ||||
Capital expenditures | (1 | ) | (3 | ) | |||
Contingent purchase price payment | — | (30 | ) | ||||
Net cash provided by (used in) investing activities | 404 | (377 | ) | ||||
Cash flows from financing activities: | |||||||
Treasury stock | (30 | ) | — | ||||
Draw on revolving credit facility | — | 30 | |||||
Dividends paid | (2 | ) | — | ||||
Contractholder account deposits | 1,225 | 959 | |||||
Contractholder account withdrawals | (907 | ) | (635 | ) | |||
Net cash provided by (used in) financing activities | 286 | 354 | |||||
Change in cash & cash equivalents | 786 | (58 | ) | ||||
Cash & cash equivalents, beginning of period | 571 | 1,215 | |||||
Cash & cash equivalents, end of period | $ | 1,357 | $ | 1,157 | |||
Supplemental disclosures of cash flow information: | |||||||
Interest paid | $ | — | $ | 2 | |||
Income taxes (refunded) paid | $ | (1 | ) | $ | (30 | ) | |
Deferred sales inducements | $ | 35 | $ | 26 |
• | 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 AFS 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 AFS fixed maturity securities as well as an aging analysis for securities that are past due |
• | assumptions used to measure cash flows for traditional and limited-payment contracts must be reviewed at least annually with the effect of changes in those assumptions being recognized in the statement of operations |
• | the discount rate applied to measure the liability for future policy benefits and limited-payment contracts must be updated at each reporting date with the effect of changes in the rate being recognized in other comprehensive income |
• | market risk benefits associated with deposit contracts must be measured at fair value, with the effect of the change in the fair value attributable to a change in the instrument-specific credit risk being recognized in other comprehensive income |
• | deferred acquisition costs are required to be amortized in proportion to premiums, gross profits, or gross margins and those balances must be amortized on a constant level basis over the expected term of the related contracts |
• | deferred acquisition costs must be written off for unexpected contract terminations |
• | disaggregated rollforwards of beginning to ending balances of the liability for future policy benefits, policyholder account balances, market risk benefits, separate account liabilities and deferred acquisition costs, as well as information about significant inputs, judgments, assumptions, and methods used in measurement are required to be disclosed |
March 31, 2019 | |||||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Carrying Value | |||||||||||||||
Available-for sale securities | |||||||||||||||||||
Asset-backed securities | $ | 5,033 | $ | 23 | $ | (82 | ) | $ | 4,974 | $ | 4,974 | ||||||||
Commercial mortgage-backed securities | 2,596 | 60 | (9 | ) | 2,647 | 2,647 | |||||||||||||
Corporates | 10,886 | 60 | (356 | ) | 10,590 | 10,590 | |||||||||||||
Hybrids | 988 | 6 | (33 | ) | 961 | 961 | |||||||||||||
Municipals | 1,211 | 16 | (10 | ) | 1,217 | 1,217 | |||||||||||||
Residential mortgage-backed securities | 1,000 | 27 | (5 | ) | 1,022 | 1,022 | |||||||||||||
U.S. Government | 56 | — | — | 56 | 56 | ||||||||||||||
Foreign Governments | 138 | 2 | (2 | ) | 138 | 138 | |||||||||||||
Total available-for-sale securities | 21,908 | 194 | (497 | ) | 21,605 | 21,605 | |||||||||||||
Equity securities | 1,226 | 3 | (58 | ) | 1,171 | 1,171 | |||||||||||||
Derivative investments | 318 | 74 | (87 | ) | 305 | 305 | |||||||||||||
Commercial mortgage loans | 479 | — | — | 485 | 479 | ||||||||||||||
Residential mortgage loans | 195 | — | — | 199 | 195 | ||||||||||||||
Other invested assets | 759 | — | (4 | ) | 744 | 755 | |||||||||||||
Total investments | $ | 24,885 | $ | 271 | $ | (646 | ) | $ | 24,509 | $ | 24,510 |
December 31, 2018 | |||||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Carrying Value | |||||||||||||||
Available-for sale securities | |||||||||||||||||||
Asset-backed securities | $ | 4,954 | $ | 15 | $ | (137 | ) | $ | 4,832 | $ | 4,832 | ||||||||
Commercial mortgage-backed securities | 2,568 | 9 | (40 | ) | 2,537 | 2,537 | |||||||||||||
Corporates | 11,213 | 16 | (848 | ) | 10,381 | 10,381 | |||||||||||||
Hybrids | 992 | — | (91 | ) | 901 | 901 | |||||||||||||
Municipals | 1,216 | 3 | (32 | ) | 1,187 | 1,187 | |||||||||||||
Residential mortgage-backed securities | 1,027 | 12 | (8 | ) | 1,031 | 1,031 | |||||||||||||
U.S. Government | 120 | — | (1 | ) | 119 | 119 | |||||||||||||
Foreign Governments | 129 | — | (8 | ) | 121 | 121 | |||||||||||||
Total available-for-sale securities | 22,219 | 55 | (1,165 | ) | 21,109 | 21,109 | |||||||||||||
Equity securities | 1,526 | 1 | (145 | ) | 1,382 | 1,382 | |||||||||||||
Derivative investments | 330 | 2 | (235 | ) | 97 | 97 | |||||||||||||
Commercial mortgage loans | 482 | — | — | 483 | 482 | ||||||||||||||
Residential mortgage loans | 185 | — | — | 187 | 185 | ||||||||||||||
Other invested assets | 662 | — | — | 651 | 662 | ||||||||||||||
Total investments | $ | 25,404 | $ | 58 | $ | (1,545 | ) | $ | 23,909 | $ | 23,917 |
March 31, 2019 | |||||||
Amortized Cost | Fair Value | ||||||
Corporates, Non-structured Hybrids, Municipal and Government securities: | |||||||
Due in one year or less | $ | 160 | $ | 160 | |||
Due after one year through five years | 758 | 749 | |||||
Due after five years through ten years | 2,080 | 2,059 | |||||
Due after ten years | 10,281 | 9,994 | |||||
Subtotal | 13,279 | 12,962 | |||||
Other securities which provide for periodic payments: | |||||||
Asset-backed securities | 5,033 | 4,974 | |||||
Commercial mortgage-backed securities | 2,596 | 2,647 | |||||
Residential mortgage-backed securities | 1,000 | 1,022 | |||||
Subtotal | 8,629 | 8,643 | |||||
Total fixed maturity available-for-sale securities | $ | 21,908 | $ | 21,605 |
March 31, 2019 | |||||||||||||||||||||||
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 | $ | 2,696 | $ | (63 | ) | $ | 886 | $ | (19 | ) | $ | 3,582 | $ | (82 | ) | ||||||||
Commercial mortgage-backed securities | 243 | (4 | ) | 250 | (5 | ) | 493 | (9 | ) | ||||||||||||||
Corporates | 684 | (15 | ) | 7,227 | (341 | ) | 7,911 | (356 | ) | ||||||||||||||
Hybrids | 333 | (14 | ) | 343 | (19 | ) | 676 | (33 | ) | ||||||||||||||
Municipals | 45 | — | 482 | (10 | ) | 527 | (10 | ) | |||||||||||||||
Residential mortgage-backed securities | 41 | (1 | ) | 238 | (4 | ) | 279 | (5 | ) | ||||||||||||||
U.S. Government | — | — | 50 | — | 50 | — | |||||||||||||||||
Foreign Government | — | — | 81 | (2 | ) | 81 | (2 | ) | |||||||||||||||
Total available-for-sale securities | $ | 4,042 | $ | (97 | ) | $ | 9,557 | $ | (400 | ) | $ | 13,599 | $ | (497 | ) | ||||||||
Total number of available-for-sale securities in an unrealized loss position less than twelve months | 468 | ||||||||||||||||||||||
Total number of available-for-sale securities in an unrealized loss position twelve months or longer | 1164 | ||||||||||||||||||||||
Total number of available-for-sale securities in an unrealized loss position | 1,632 |
December 31, 2018 | |||||||||||||||||||||||
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 | $ | 2,924 | $ | (116 | ) | $ | 643 | $ | (21 | ) | $ | 3,567 | $ | (137 | ) | ||||||||
Commercial mortgage-backed securities | 1,466 | (34 | ) | 262 | (6 | ) | 1,728 | (40 | ) | ||||||||||||||
Corporates | 8,016 | (772 | ) | 1,465 | (76 | ) | 9,481 | (848 | ) | ||||||||||||||
Hybrids | 858 | (90 | ) | 7 | (1 | ) | 865 | (91 | ) | ||||||||||||||
Municipals | 850 | (27 | ) | 172 | (5 | ) | 1,022 | (32 | ) | ||||||||||||||
Residential mortgage-backed securities | 139 | (3 | ) | 190 | (5 | ) | 329 | (8 | ) | ||||||||||||||
U.S. Government | 69 | — | 50 | (1 | ) | 119 | (1 | ) | |||||||||||||||
Foreign Government | 47 | (3 | ) | 68 | (5 | ) | 115 | (8 | ) | ||||||||||||||
Total available-for-sale securities | $ | 14,369 | $ | (1,045 | ) | $ | 2,857 | $ | (120 | ) | $ | 17,226 | $ | (1,165 | ) | ||||||||
Total number of available-for-sale securities in an unrealized loss position less than twelve months | 1,551 | ||||||||||||||||||||||
Total number of available-for-sale securities in an unrealized loss position twelve months or longer | 556 | ||||||||||||||||||||||
Total number of available-for-sale securities in an unrealized loss position | 2,107 |
Three months ended | |||||||
March 31, 2019 | March 31, 2018 | ||||||
Beginning balance | $ | — | $ | — | |||
Increases attributable to credit losses on securities: | |||||||
OTTI was previously recognized | — | — | |||||
OTTI was not previously recognized | — | — | |||||
Ending balance | $ | — | $ | — |
Three months ended | |||||||
March 31, 2019 | March 31, 2018 | ||||||
Credit impairment losses in operations | $ | (2 | ) | $ | (2 | ) | |
Change-of-intent losses in operations | — | — | |||||
Amortized cost | 1 | — | |||||
Fair value | 1 | — | |||||
Non-credit losses in other comprehensive income for investments which experienced OTTI | — | — |
Three months ended | |||||||
March 31, 2019 | March 31, 2018 | ||||||
Corporates | (2 | ) | (2 | ) | |||
Total | $ | (2 | ) | $ | (2 | ) |
March 31, 2019 | December 31, 2018 | ||||||||||||
Gross Carrying Value | % of Total | Gross Carrying Value | % of Total | ||||||||||
Property Type: | |||||||||||||
Hotel | 21 | 4 | % | 21 | 4 | % | |||||||
Industrial - General | 37 | 8 | % | 37 | 8 | % | |||||||
Industrial - Warehouse | 20 | 4 | % | 20 | 4 | % | |||||||
Multifamily | 55 | 11 | % | 56 | 12 | % | |||||||
Office | 146 | 31 | % | 147 | 30 | % | |||||||
Retail | 200 | 42 | % | 201 | 42 | % | |||||||
Total commercial mortgage loans, gross of valuation allowance | $ | 479 | 100 | % | $ | 482 | 100 | % | |||||
Allowance for loan loss | — | — | |||||||||||
Total commercial mortgage loans | $ | 479 | $ | 482 | |||||||||
U.S. Region: | |||||||||||||
East North Central | $ | 97 | 20 | % | $ | 98 | 20 | % | |||||
East South Central | 19 | 4 | % | 19 | 4 | % | |||||||
Middle Atlantic | 78 | 16 | % | 79 | 17 | % | |||||||
Mountain | 65 | 14 | % | 65 | 13 | % | |||||||
New England | 10 | 2 | % | 10 | 2 | % | |||||||
Pacific | 115 | 24 | % | 116 | 24 | % | |||||||
South Atlantic | 57 | 12 | % | 57 | 12 | % | |||||||
West North Central | 13 | 3 | % | 13 | 3 | % | |||||||
West South Central | 25 | 5 | % | 25 | 5 | % | |||||||
Total commercial mortgage loans, gross of valuation allowance | $ | 479 | 100 | % | $ | 482 | 100 | % | |||||
Allowance for loan loss | — | — | |||||||||||
Total commercial mortgage loans | $ | 479 | $ | 482 |
Debt-Service Coverage Ratios | Total Amount | % of Total | Estimated Fair Value | % of Total | |||||||||||||||||
>1.25 | 1.00 - 1.25 | ||||||||||||||||||||
March 31, 2019 | |||||||||||||||||||||
LTV Ratios: | |||||||||||||||||||||
Less than 50% | $ | 299 | $ | 6 | $ | 305 | 64 | % | $ | 309 | 64 | % | |||||||||
50% to 60% | 163 | — | 163 | 34 | % | 165 | 34 | % | |||||||||||||
60% to 75% | 11 | — | 11 | 2 | % | 11 | 2 | % | |||||||||||||
Commercial mortgage loans | $ | 473 | $ | 6 | $ | 479 | 100 | % | $ | 485 | 100 | % | |||||||||
December 31, 2018 | |||||||||||||||||||||
LTV Ratios: | |||||||||||||||||||||
Less than 50% | $ | 296 | $ | 6 | $ | 302 | 63 | % | $ | 302 | 63 | % | |||||||||
50% to 60% | 169 | — | 169 | 35 | % | 170 | 35 | % | |||||||||||||
60% to 75% | 11 | — | 11 | 2 | % | 11 | 2 | % | |||||||||||||
Commercial mortgage loans | $ | 476 | $ | 6 | $ | 482 | 100 | % | $ | 483 | 100 | % |
March 31, 2019 | ||||||
US State: | Unpaid Principal Balance | % of Total | ||||
Illinois | $ | 29 | 15 | % | ||
Florida | 25 | 13 | % | |||
South Carolina | 24 | 13 | % | |||
All Other States (a) | 112 | 59 | % | |||
Total mortgage loans | $ | 190 | 100 | % |
December 31, 2018 | ||||||
US State: | Unpaid Principal Balance | % of Total | ||||
Florida | $ | 25 | 14 | % | ||
Illinois | 24 | 13 | % | |||
New Jersey | 17 | 9 | % | |||
All Other States (a) | 114 | 64 | % | |||
Total mortgage loans | $ | 180 | 100 | % |
March 31, 2019 | December 31, 2018 | ||||||||||||
Performance indicators: | Carrying Value | % of Total | Carrying Value | % of Total | |||||||||
Performing | $ | 195 | 100 | % | $ | 185 | 100 | % | |||||
Non-performing | — | — | % | — | — | % | |||||||
Total residential mortgage loans, gross of valuation allowance | $ | 195 | 100 | % | $ | 185 | 100 | % | |||||
Allowance for loan loss | — | — | % | — | — | % | |||||||
Total residential mortgage loans | $ | 195 | 100 | % | $ | 185 | 100 | % |
Three months ended | |||||||
March 31, 2019 | March 31, 2018 | ||||||
Fixed maturity securities, available-for-sale | $ | 265 | $ | 242 | |||
Equity securities | 21 | 10 | |||||
Mortgage loans | 7 | 7 | |||||
Invested cash and short-term investments | 3 | 3 | |||||
Funds withheld | 8 | 7 | |||||
Limited partnerships | 8 | 3 | |||||
Other investments | 5 | 1 | |||||
Gross investment income | 317 | 273 | |||||
Investment expense | (28 | ) | (10 | ) | |||
Net investment income | $ | 289 | $ | 263 |
Three months ended | |||||||
March 31, 2019 | March 31, 2018 | ||||||
Net realized gains (losses) on fixed maturity available-for-sale securities | $ | (3 | ) | $ | (37 | ) | |
Net realized/unrealized gains (losses) on equity securities | 78 | (6 | ) | ||||
Realized gains (losses) on other invested assets | 1 | (3 | ) | ||||
Derivatives and embedded derivatives: | |||||||
Realized gains (losses) on certain derivative instruments | (26 | ) | 11 | ||||
Unrealized gains (losses) on certain derivative instruments | 190 | (135 | ) | ||||
Change in fair value of reinsurance related embedded derivatives (a) | (3 | ) | (21 | ) | |||
Change in fair value of other derivatives and embedded derivatives | 3 | — | |||||
Realized gains (losses) on derivatives and embedded derivatives | 164 | (145 | ) | ||||
Net investment gains (losses) | $ | 240 | $ | (191 | ) |
Three months ended | |||||||
March 31, 2019 | March 31, 2018 | ||||||
Proceeds | $ | 474 | $ | 2,778 | |||
Gross gains | 5 | 8 | |||||
Gross losses | (10 | ) | (43 | ) |
March 31, 2019 | December 31, 2018 | ||||||
Assets: | |||||||
Derivative investments: | |||||||
Call options | $ | 304 | $ | 97 | |||
Futures contracts | 1 | — | |||||
Other invested assets: | |||||||
Other derivatives and embedded derivatives | 17 | 14 | |||||
$ | 322 | $ | 111 |
Liabilities: | |||||||
Contractholder funds: | |||||||
FIA embedded derivative | $ | 2,720 | $ | 2,476 | |||
Other liabilities: | |||||||
Preferred shares reimbursement feature embedded derivative | 27 | 29 | |||||
$ | 2,747 | $ | 2,505 |
Three months ended | |||||||
March 31, 2019 | March 31, 2018 | ||||||
Revenues: | |||||||
Net investment gains (losses): | |||||||
Call options | $ | 154 | $ | (122 | ) | ||
Futures contracts | 8 | (2 | ) | ||||
Foreign currency forward | 2 | — | |||||
Other derivatives and embedded derivatives | 3 | — | |||||
Reinsurance related embedded derivatives | (3 | ) | (21 | ) | |||
Total net investment gains (losses) | $ | 164 | $ | (145 | ) | ||
Benefits and other changes in policy reserves: | |||||||
FIA embedded derivatives | $ | 244 | $ | (98 | ) | ||
Acquisition and operating expenses, net of deferrals: | |||||||
Preferred shares reimbursement feature embedded derivative | $ | 2 | $ | (1 | ) |
March 31, 2019 | |||||||||||||||||
Counterparty | Credit Rating (Fitch/Moody's/S&P) (a) | Notional Amount | Fair Value | Collateral | Net Credit Risk | ||||||||||||
Merrill Lynch | A+/*/A+ | $ | 3,496 | $ | 70 | $ | 25 | $ | 45 | ||||||||
Deutsche Bank | A-/A3/BBB+ | 1,151 | 14 | 14 | — | ||||||||||||
Morgan Stanley | */A1/A+ | 1,657 | 25 | 24 | 1 | ||||||||||||
Barclay's Bank | A+/A2/A | 2,752 | 79 | 61 | 18 | ||||||||||||
Canadian Imperial Bank of Commerce | */Aa2/A+ | 1,430 | 41 | 29 | 12 | ||||||||||||
Wells Fargo | A+/A2/A- | 2,034 | 58 | 56 | 2 | ||||||||||||
Goldman Sachs | A/A3/BBB+ | 1,030 | 17 | 16 | 1 | ||||||||||||
Total | $ | 13,550 | $ | 304 | $ | 225 | $ | 79 |
December 31, 2018 | |||||||||||||||||
Counterparty | Credit Rating (Fitch/Moody's/S&P) (a) | Notional Amount | Fair Value | Collateral | Net Credit Risk | ||||||||||||
Merrill Lynch | A+/*/A+ | $ | 3,952 | $ | 25 | $ | — | $ | 25 | ||||||||
Deutsche Bank | A-/A3/BBB+ | 1,327 | 5 | 6 | (1 | ) | |||||||||||
Morgan Stanley | */A1/A+ | 1,648 | 9 | 6 | 3 | ||||||||||||
Barclay's Bank | A+/A2/A | 2,205 | 27 | 20 | 7 | ||||||||||||
Canadian Imperial Bank of Commerce | */Aa2/A+ | 1,716 | 11 | 8 | 3 | ||||||||||||
Wells Fargo | A+/A2/A- | 1,635 | 17 | 16 | 1 | ||||||||||||
Goldman Sachs | A/A3/BBB+ | 647 | 3 | 3 | — | ||||||||||||
Total | $ | 13,130 | $ | 97 | $ | 59 | $ | 38 |
March 31, 2019 | |||||||||||||||||||
Level 1 | Level 2 | Level 3 | Fair Value | Carrying Amount | |||||||||||||||
Assets | |||||||||||||||||||
Cash and cash equivalents | $ | 1,357 | $ | — | $ | — | $ | 1,357 | $ | 1,357 | |||||||||
Fixed maturity securities, available-for-sale: | |||||||||||||||||||
Asset-backed securities | — | 4,466 | 508 | 4,974 | 4,974 | ||||||||||||||
Commercial mortgage-backed securities | — | 2,579 | 68 | 2,647 | 2,647 | ||||||||||||||
Corporates | — | 9,381 | 1,209 | 10,590 | 10,590 | ||||||||||||||
Hybrids | 277 | 674 | 10 | 961 | 961 | ||||||||||||||
Municipals | — | 1,179 | 38 | 1,217 | 1,217 | ||||||||||||||
Residential mortgage-backed securities | — | 403 | 619 | 1,022 | 1,022 | ||||||||||||||
U.S. Government | 51 | 5 | — | 56 | 56 | ||||||||||||||
Foreign Governments | — | 122 | 16 | 138 | 138 | ||||||||||||||
Equity securities | 441 | 657 | 20 | 1,118 | 1,118 | ||||||||||||||
Derivative investments | 1 | 304 | — | 305 | 305 | ||||||||||||||
Other invested assets | — | — | 41 | 41 | 41 | ||||||||||||||
Funds withheld for reinsurance receivables, at fair value | 161 | 664 | 7 | 832 | 832 | ||||||||||||||
Total financial assets at fair value | $ | 2,288 | $ | 20,434 | $ | 2,536 | $ | 25,258 | $ | 25,258 | |||||||||
Liabilities | |||||||||||||||||||
Derivatives: | |||||||||||||||||||
FIA embedded derivatives, included in contractholder funds | — | — | 2,720 | 2,720 | 2,720 | ||||||||||||||
Preferred shares reimbursement feature embedded derivative | — | — | 27 | 27 | 27 | ||||||||||||||
Fair value of future policy benefits | — | — | 797 | 797 | 797 | ||||||||||||||
Total financial liabilities at fair value | $ | — | $ | — | $ | 3,544 | $ | 3,544 | $ | 3,544 |
December 31, 2018 | |||||||||||||||||||
Level 1 | Level 2 | Level 3 | Fair Value | Carrying Amount | |||||||||||||||
Assets | |||||||||||||||||||
Cash and cash equivalents | $ | 571 | $ | — | $ | — | $ | 571 | $ | 571 | |||||||||
Fixed maturity securities, available-for-sale: | |||||||||||||||||||
Asset-backed securities | — | 4,388 | 444 | 4,832 | 4,832 | ||||||||||||||
Commercial mortgage-backed securities | — | 2,470 | 67 | 2,537 | 2,537 | ||||||||||||||
Corporates | — | 9,150 | 1,231 | 10,381 | 10,381 | ||||||||||||||
Hybrids | 265 | 626 | 10 | 901 | 901 | ||||||||||||||
Municipals | — | 1,150 | 37 | 1,187 | 1,187 | ||||||||||||||
Residential mortgage-backed securities | — | 417 | 614 | 1,031 | 1,031 | ||||||||||||||
U.S. Government | 114 | 5 | — | 119 | 119 | ||||||||||||||
Foreign Governments | — | 105 | 16 | 121 | 121 | ||||||||||||||
Equity securities | 454 | 874 | 4 | 1,332 | 1,332 | ||||||||||||||
Derivative investments | — | 97 | — | 97 | 97 | ||||||||||||||
Other invested assets | — | — | 39 | 39 | 39 | ||||||||||||||
Funds withheld for reinsurance receivables, at fair value | 169 | 576 | 4 | 749 | 749 | ||||||||||||||
Total financial assets at fair value | $ | 1,573 | $ | 19,858 | $ | 2,466 | $ | 23,897 | $ | 23,897 | |||||||||
Liabilities | |||||||||||||||||||
Derivatives: | |||||||||||||||||||
FIA embedded derivatives, included in contractholder funds | $ | — | $ | — | $ | 2,476 | $ | 2,476 | $ | 2,476 | |||||||||
Preferred shares reimbursement feature embedded derivative | — | — | 29 | 29 | 29 | ||||||||||||||
Fair value of future policy benefits | — | — | 725 | 725 | 725 | ||||||||||||||
Total financial liabilities at fair value | $ | — | $ | — | $ | 3,230 | $ | 3,230 | $ | 3,230 |
Fair Value at | Valuation Technique | Unobservable Input(s) | Range (Weighted average) | ||||||
March 31, 2019 | March 31, 2019 | ||||||||
Assets | |||||||||
Asset-backed securities | $ | 489 | Broker-quoted | Offered quotes | 97.50% - 105.17% (100.84%) | ||||
Asset-backed securities | 19 | Third-Party Valuation | Offered quotes | 0.00% - 98.30% (28.44%) | |||||
Commercial mortgage-backed securities | 43 | Broker-quoted | Offered quotes | 81.01% - 100.14% (87.90%) | |||||
Commercial mortgage-backed securities | 25 | Matrix Pricing | Quoted prices | 121.01% - 121.01% (121.01%) | |||||
Corporates | 731 | Broker-quoted | Offered quotes | 54.00% - 107.83% (99.49%) | |||||
Corporates | 478 | Matrix Pricing | Quoted prices | 95.94% - 117.55% (101.67%) | |||||
Hybrids | 10 | Matrix Pricing | Quoted prices | 98.84% - 98.84% (98.84%) | |||||
Municipals | 38 | Broker-quoted | Offered quotes | 114.61% - 114.61% (114.61%) | |||||
Residential mortgage-backed securities | 619 | Broker-quoted | Offered quotes | 92.52% - 103.81% (103.34%) | |||||
Foreign governments | 16 | Broker-quoted | Offered quotes | 101.38% - 103.55% (102.06%) | |||||
Equity securities | 16 | Broker-quoted | Offered quotes | 100.00% | |||||
Equity securities (Salus preferred equity) | 4 | Income-Approach | Yield | 7.18% | |||||
Other Invested Assets: | |||||||||
Available-for-sale embedded derivative (AnchorPath) | 16 | Black Scholes model | Market value of AnchorPath fund | 100.00% | |||||
Credit Linked Note | 25 | Broker-quoted | Offered quotes | 100.00% | |||||
Funds withheld for reinsurance receivables at fair value | 6 | Matrix pricing | Quoted prices | 100.00% | |||||
Funds withheld for reinsurance receivables at fair value | 1 | Loan recovery value | Recovery rate | 14.00% | |||||
Total | $ | 2,536 | |||||||
Liabilities | |||||||||
Future policy benefits | $ | 797 | Discounted cash flow | Market value of option | 0.88% - 6.95% (1.90%) | ||||
Mortality multiplier | 90.00% - 100.00% (100.00%) | ||||||||
Surrender rates | 0.65% - 40.00% (4.63%) | ||||||||
Partial withdrawals | 0.00% - 2.50% (0.93%) | ||||||||
Non-performance spread | 0.00% - 0.10% (0.03%) | ||||||||
Option cost | 1.14% - 4.58% (1.72%) | ||||||||
Risk margin to reflect uncertainty | 0.35% - 0.62% (0.44%) | ||||||||
Morbidity risk margin | 0.00% - 2.00% (0.17%) | ||||||||
Derivatives: | |||||||||
FIA embedded derivatives included in contractholder funds | 2,720 | Discounted cash flow | Market value of option | 0.00% - 32.37% (2.23%) | |||||
SWAP rates | 2.29% - 2.41% (2.34%) |
Mortality multiplier | 80.00% - 80.00% (80.00%) | ||||||||
Surrender rates | 0.50% - 75.00% (5.86%) | ||||||||
Partial withdrawals | 1.00% - 2.50% (2.00%) | ||||||||
Non-performance spread | 0.25% - 0.25% (0.25%) | ||||||||
Option cost | 0.18% - 16.61% (2.16%) | ||||||||
Preferred shares reimbursement feature embedded derivative | 27 | Black Derman Toy model | Credit Spread | 4.50% | |||||
Yield Volatility | 20.00% | ||||||||
Total liabilities at fair value | $ | 3,544 |
Fair Value at | Valuation Technique | Unobservable Input(s) | Range (Weighted average) | ||||||
December 31, 2018 | December 31, 2018 | ||||||||
Assets | |||||||||
Asset-backed securities | $ | 405 | Broker-quoted | Offered quotes | 97.00% - 102.00% (99.77%) | ||||
Asset-backed securities | 24 | Matrix Pricing | Quoted prices | 96.07% - 96.07% (96.07%) | |||||
Asset-backed securities | 15 | Third-Party Valuation | Offered quotes | 0.00% - 99.29% (23.05%) | |||||
Commercial mortgage-backed securities | 43 | Broker-quoted | Offered quotes | 77.12% - 100.08% (85.46%) | |||||
Commercial mortgage-backed securities | 24 | Matrix Pricing | Quoted prices | 117.72% - 117.72% (117.72%) | |||||
Corporates | 577 | Broker-quoted | Offered quotes | 74.63% - 104.62% (97.80%) | |||||
Corporates | 654 | Matrix Pricing | Quoted prices | 91.74% - 113.25% (98.86%) | |||||
Hybrids | 10 | Matrix Pricing | Quoted prices | 96.60% - 96.60% (96.60%) | |||||
Municipals | 37 | Broker-quoted | Offered quotes | 111.23% - 111.23% (111.23%) | |||||
Residential mortgage-backed securities | 614 | Broker-quoted | Offered quotes | 89.80% - 100.99% (100.73%) | |||||
Foreign governments | 16 | Broker-quoted | Offered quotes | 98.38% - 99.01% (98.58%) | |||||
Equity securities (Salus preferred equity) | 4 | Income-Approach | Yield | 7.15% | |||||
Other Invested Assets: | |||||||||
Available-for-sale embedded derivative (AnchorPath) | 14 | Black Scholes model | Market value of AnchorPath fund | 100.00% | |||||
Credit Linked Note | 25 | Broker-quoted | Offered quotes | 100.00% | |||||
Funds withheld for reinsurance receivables, at fair value | 4 | Matrix pricing | Calculated prices | 100.00% | |||||
Total | $ | 2,466 | |||||||
Liabilities | |||||||||
Future policy benefits | $ | 725 | Discounted cash flow | Non-Performance risk spread | 0.00% - 0.22% (0.18%) | ||||
Risk margin to reflect uncertainty | 0.35% - 0.71% (0.68%) | ||||||||
Derivatives: | |||||||||
FIA embedded derivatives included in contractholder funds | 2,476 | Discounted cash flow | Market value of option | 0.00% - 31.06% (0.94%) | |||||
SWAP rates | 2.57% - 2.71% (2.63%) | ||||||||
Mortality multiplier | 80.00% - 80.00% (80.00%) | ||||||||
Surrender rates | 0.50% - 75.00% (5.90%) | ||||||||
Partial withdrawals | 1.00% - 2.50% (2.00%) | ||||||||
Non-performance spread | 0.25% - 0.25% (0.25%) | ||||||||
Option cost | 0.11% - 16.61% (2.18%) | ||||||||
Preferred shares reimbursement feature embedded derivative | 29 | Black Derman Toy model | Credit Spread | 5.14% | |||||
Yield Volatility | 20.00% | ||||||||
Total liabilities at fair value | $ | 3,230 |
Three months ended March 31, 2019 | |||||||||||||||||||||||||||||||
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 | $ | 444 | $ | — | $ | 5 | $ | 114 | $ | — | $ | (31 | ) | $ | (24 | ) | $ | 508 | |||||||||||||
Commercial mortgage-backed securities | 67 | — | 2 | — | — | (1 | ) | — | 68 | ||||||||||||||||||||||
Corporates | 1,231 | (1 | ) | 24 | — | (21 | ) | (35 | ) | 11 | 1,209 | ||||||||||||||||||||
Hybrids | 10 | — | — | — | — | — | — | 10 | |||||||||||||||||||||||
Municipals | 37 | — | 1 | — | — | — | — | 38 | |||||||||||||||||||||||
Residential mortgage-backed securities | 614 | — | 16 | 7 | — | (18 | ) | — | 619 | ||||||||||||||||||||||
Foreign Governments | 16 | — | — | — | — | — | — | 16 | |||||||||||||||||||||||
Equity securities | 4 | — | 1 | — | — | — | 15 | 20 | |||||||||||||||||||||||
Other invested assets: | |||||||||||||||||||||||||||||||
Available-for-sale embedded derivative | 14 | 2 | — | — | — | — | — | 16 | |||||||||||||||||||||||
Credit linked note | 25 | — | — | — | — | — | — | 25 | |||||||||||||||||||||||
Funds withheld for reinsurance receivables at fair value | 4 | — | — | 5 | — | — | (2 | ) | 7 | ||||||||||||||||||||||
Total assets at Level 3 fair value | $ | 2,466 | $ | 1 | $ | 49 | $ | 126 | $ | (21 | ) | $ | (85 | ) | $ | — | $ | 2,536 | |||||||||||||
Liabilities | |||||||||||||||||||||||||||||||
FIA embedded derivatives, included in contractholder funds | $ | 2,476 | $ | 244 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 2,720 | |||||||||||||||
Future policy benefits | 725 | 29 | — | — | — | 43 | — | 797 | |||||||||||||||||||||||
Preferred shares reimbursement feature embedded derivative | 29 | (2 | ) | — | — | — | — | — | 27 | ||||||||||||||||||||||
Total liabilities at Level 3 fair value | $ | 3,230 | $ | 271 | $ | — | $ | — | $ | — | $ | 43 | $ | — | $ | 3,544 |
Three months ended March 31, 2018 | |||||||||||||||||||||||||||||||
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 | $ | 412 | $ | — | $ | (2 | ) | $ | 28 | $ | — | $ | (6 | ) | $ | (131 | ) | $ | 301 | ||||||||||||
Commercial mortgage-backed securities | 49 | — | (1 | ) | — | — | (6 | ) | — | 42 | |||||||||||||||||||||
Corporates | 1,169 | — | (20 | ) | 100 | — | (34 | ) | — | 1,215 | |||||||||||||||||||||
Hybrids | 10 | — | — | — | — | — | — | 10 | |||||||||||||||||||||||
Municipals | 38 | — | (1 | ) | — | — | — | — | 37 | ||||||||||||||||||||||
Residential mortgage-backed securities | 66 | — | — | — | — | (1 | ) | — | 65 | ||||||||||||||||||||||
Foreign Governments | 17 | — | — | — | — | — | — | 17 | |||||||||||||||||||||||
Equity securities | 3 | 1 | — | — | — | — | — | 4 | |||||||||||||||||||||||
Other invested assets: | |||||||||||||||||||||||||||||||
Available-for-sale embedded derivative | 17 | — | — | — | — | — | — | 17 | |||||||||||||||||||||||
Funds withheld for reinsurance receivables, at fair value | 4 | — | — | 2 | — | — | — | 6 | |||||||||||||||||||||||
Total assets at Level 3 fair value | $ | 1,785 | $ | 1 | $ | (24 | ) | $ | 130 | $ | — | $ | (47 | ) | $ | (131 | ) | $ | 1,714 | ||||||||||||
Liabilities | |||||||||||||||||||||||||||||||
FIA embedded derivatives, included in contractholder funds | $ | 2,277 | $ | (98 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 2,179 | ||||||||||||||
Future policy benefits | 728 | (20 | ) | — | — | — | 4 | — | 712 | ||||||||||||||||||||||
Preferred shares reimbursements feature embedded derivative | 23 | 1 | — | — | — | — | — | 24 | |||||||||||||||||||||||
Total liabilities at Level 3 fair value | $ | 3,028 | $ | (117 | ) | $ | — | $ | — | $ | — | $ | 4 | $ | — | $ | 2,915 |
March 31, 2019 | |||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total Estimated Fair Value | Carrying Amount | |||||||||||||||
Assets | |||||||||||||||||||
FHLB common stock | $ | — | $ | 56 | $ | — | $ | 56 | $ | 56 | |||||||||
Commercial mortgage loans | — | — | 485 | 485 | 479 | ||||||||||||||
Residential mortgage loans | — | — | 199 | 199 | 195 | ||||||||||||||
Policy loans, included in other invested assets | — | — | 12 | 12 | 23 | ||||||||||||||
Affiliated other invested assets | — | — | 40 | 40 | 40 | ||||||||||||||
Funds withheld for reinsurance receivables, at fair value | — | — | 5 | 5 | 5 | ||||||||||||||
Total | $ | — | $ | 56 | $ | 741 | $ | 797 | $ | 798 | |||||||||
Liabilities | |||||||||||||||||||
Investment contracts, included in contractholder funds | — | — | 18,355 | 18,355 | 21,161 | ||||||||||||||
Debt | — | 543 | — | 543 | 541 | ||||||||||||||
Total | $ | — | $ | 543 | $ | 18,355 | $ | 18,898 | $ | 21,702 |
December 31, 2018 | |||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total Estimated Fair Value | Carrying Amount | |||||||||||||||
Assets | |||||||||||||||||||
FHLB common stock | $ | — | $ | 52 | $ | — | $ | 52 | $ | 52 | |||||||||
Commercial mortgage loans | — | — | 483 | 483 | 482 | ||||||||||||||
Residential mortgage loans | — | — | 187 | 187 | 185 | ||||||||||||||
Policy loans, included in other invested assets | — | — | 11 | 11 | 22 | ||||||||||||||
Affiliated other invested assets | — | — | 39 | 39 | 39 | ||||||||||||||
Funds withheld for reinsurance receivables, at fair value | — | — | 8 | 8 | 8 | ||||||||||||||
Total | $ | — | $ | 52 | $ | 728 | $ | 780 | $ | 788 | |||||||||
Liabilities | |||||||||||||||||||
Investment contracts, included in contractholder funds | $ | — | $ | — | $ | 18,358 | $ | 18,358 | $ | 20,911 | |||||||||
Debt | — | 520 | — | 520 | 541 | ||||||||||||||
Total | $ | — | $ | 520 | $ | 18,358 | $ | 18,878 | $ | 21,452 |
Carrying Value After Measurement | |||||||
March 31, 2019 | December 31, 2018 | ||||||
Equity securities | $ | 53 | $ | 50 | |||
Limited partnership investment, included in other invested assets | 595 | 510 |
Transfers Between Fair Value Levels | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||||||||||
In | Out | In | Out | In | Out | ||||||||||||||||||
Three months ended March 31, 2019 | |||||||||||||||||||||||
Asset-backed securities | $ | — | $ | — | $ | 24 | $ | — | $ | — | $ | 24 | |||||||||||
Corporates | — | — | — | 11 | 11 | — | |||||||||||||||||
Equity securities | 5 | 17 | 2 | 5 | 15 | — | |||||||||||||||||
Funds withheld for reinsurance receivables | — | — | 2 | — | — | 2 | |||||||||||||||||
Total transfers | $ | 5 | $ | 17 | $ | 28 | $ | 16 | $ | 26 | $ | 26 | |||||||||||
Three months ended March 31, 2018 | |||||||||||||||||||||||
Asset-backed securities | $ | — | $ | — | $ | 131 | $ | — | $ | — | $ | 131 | |||||||||||
Hybrids | 15 | — | — | 15 | — | — | |||||||||||||||||
Total transfers | $ | 15 | $ | — | $ | 131 | $ | 15 | $ | — | $ | 131 |
VOBA | DAC | DSI | Total | ||||||||||||
Balance at December 31, 2018 | $ | 866 | $ | 344 | $ | 149 | $ | 1,359 | |||||||
Deferrals | — | 91 | 35 | 126 | |||||||||||
Amortization | (31 | ) | (3 | ) | (2 | ) | (36 | ) | |||||||
Interest | 4 | 2 | 1 | 7 | |||||||||||
Unlocking | — | — | — | — | |||||||||||
Adjustment for net unrealized investment (gains) losses | (35 | ) | — | — | (35 | ) | |||||||||
Balance at March 31, 2019 | $ | 804 | $ | 434 | $ | 183 | $ | 1,421 |
VOBA | DAC | DSI | Total | ||||||||||||
Balance at December 31, 2017 | $ | 821 | $ | 22 | $ | 10 | $ | 853 | |||||||
Deferrals | — | 59 | 26 | 85 | |||||||||||
Amortization | (30 | ) | (1 | ) | (1 | ) | (32 | ) | |||||||
Interest | 5 | — | — | 5 | |||||||||||
Unlocking | — | — | — | — | |||||||||||
Adjustment for net unrealized investment (gains) losses | 38 | 4 | 1 | 43 | |||||||||||
Balance at March 31, 2018 | $ | 834 | $ | 84 | $ | 36 | $ | 954 |
Estimated Amortization Expense | ||
Fiscal Year | ||
2019 | 48 | |
2020 | 83 | |
2021 | 89 | |
2022 | 84 | |
2023 | 75 | |
Thereafter | 385 |
Cost | Accumulated amortization | Net carrying amount | Weighted average useful life (years) | ||||||||||
Trade marks / trade names | $ | 16 | $ | 2 | $ | 14 | 10 | ||||||
State insurance licenses | 6 | N/A | 6 | Indefinite | |||||||||
Total | $ | 20 |
March 31, 2019 | December 31, 2018 | ||||||
Debt | $ | 541 | $ | 541 |
Three months ended | |||||||||||
March 31, 2019 | March 31, 2018 | ||||||||||
Interest Expense | Amortization | Interest Expense | Amortization | ||||||||
Debt | 8 | — | 5 | — | |||||||
Revolving credit facility | — | — | 1 | — |
Date Declared | Date Paid | Date Shareholders of record | Shareholders of record (in thousands) | Cash Dividend declared (per share) | Total cash paid | |||||
February 27, 2019 | April 1, 2019 | March 18, 2019 | 221,661 | $0.01 | $2 |
Type of Preferred Share | Date Declared | Date Paid | Date Shareholders of record | Shares outstanding at date of record (in thousands) | Method of Payment | Total cash paid | Total shares paid in kind (in thousands) | ||||||
Series A Preferred Shares | March 29, 2019 | April 1, 2019 | March 15, 2019 | 298 | Paid in kind | $— | 6 | ||||||
Series B Preferred Shares | March 29, 2019 | April 1, 2019 | March 15, 2019 | 108 | Paid in kind | $— | 2 |
Type of Preferred Share | Date Declared | Date Paid | Date Shareholders of record | Shares outstanding at date of record (in thousands) | Method of Payment | Total cash paid | Total shares paid in kind (in thousands) | ||||||
Series A Preferred Shares | March 29, 2018 | April 1, 2018 | March 15, 2018 | 277 | Paid in kind | $— | 5 | ||||||
Series B Preferred Shares | March 29, 2018 | April 1, 2018 | March 15, 2018 | 101 | Paid in kind | $— | 1 |
Vesting mechanism | Vest Dates | Number of options subject to these vesting conditions | |||
Service | Each March 15 from 2020 through 2023; subject to continued service | 485 | |||
Service and return on equity performance | March 15 2020, 2021 and 2022 subject to continued service and targeted return on equity | 607 | |||
Service and stock price performance | Each March 15 from 2019 through 2023; subject to continued service and target stock price goals being achieved | 607 |
Stock Option Awards | Options | Weighted Average Exercise Price | ||||
Stock options outstanding at December 31, 2018 | 13,007 | $ | 9.68 | |||
Granted | 1,699 | 10.00 | ||||
Exercised | — | — | ||||
Forfeited or expired | (1,869 | ) | (10.00 | ) | ||
Stock options outstanding at March 31, 2019 | 12,837 | 9.67 | ||||
Exercisable at March 31, 2019 | 485 | 10.00 | ||||
Vested or projected to vest at March 31, 2019 | 12,837 | 9.67 |
Black-Scholes Model | Monte Carlo Model | ||||||
Serviced based | ROE Performance based | Stock Price Performance based | Source of input/ assumption | ||||
Weighted average fair value per options granted | $1.68 | $1.74 | $1.26 | N/A | |||
Risk-free interest rate | 2.48% | 2.50% | 2.54% | US Treasury Curve | |||
Assumed dividend yield | 0.49% | 0.49% | 0.49% | Internal projection | |||
Expected option term | 5.75 years | 6.0 years | N/A | Internal model | |||
Contractual term | N/A | N/A | 7.0 years | N/A | |||
Volatility | 26.00% | 26.00% | 26.00% | Predecessor and peer group experience | |||
Early exercise multiple | N/A | N/A | 2.8 | Hull White model | |||
Cost of equity | N/A | N/A | 10.50% | Capital asset pricing model - 20 year risk free rate |
Restricted Stock Awards | Shares | Weighted Average Grant Date Fair Value | |||||
Restricted shares outstanding at December 31, 2018 | — | $ | — | ||||
Granted | 147 | 6.82 | |||||
Vested | — | — | |||||
Forfeited or expired | — | — | |||||
Vested or expected to vest at March 31, 2019 | 147 | 6.82 |
Phantom units | Shares | Weighted Average Grant Date Fair Value | |||||
Phantom units outstanding at December 31, 2018 | 356 | $ | 8.95 | ||||
Granted | 424 | 8.64 | |||||
Vested | (59 | ) | 10.00 | ||||
Forfeited or expired | (10 | ) | 8.96 | ||||
Phantom units outstanding at March 31, 2019 | 711 | 9.19 |
Three months ended | |||
March 31, 2019 | |||
FGL Incentive Plan | |||
Stock options | $ | 1 | |
Restricted shares | — | ||
1 | |||
Management Incentive Plan | |||
Phantom units | — | ||
— | |||
Total stock compensation expense | 1 | ||
Related tax benefit | — | ||
Net stock compensation expense | $ | 1 |
Unrecognized Compensation Expense | Weighted Average Recognition Period in Years | |||||
FGL Incentive Plan | ||||||
Stock options | $ | 18 | 3 | |||
Restricted shares | 1 | 1 | ||||
19 | ||||||
Management Incentive Plan | ||||||
Phantom units | 3 | 3 | ||||
3 | ||||||
Total unrecognized stock compensation expense | $ | 22 | 3 |
March 31, 2019 | |||
Asset Type | |||
Other invested assets | $ | 1,093 | |
Equity securities | 21 | ||
Fixed maturity securities, available-for-sale | 39 | ||
Other assets | 5 | ||
Total | $ | 1,158 |
Three months ended | |||||||||||
March 31, 2019 | March 31, 2018 | ||||||||||
Net Premiums Earned | Net Benefits Incurred | Net Premiums Earned | Net Benefits Incurred | ||||||||
Direct | 57 | 372 | 60 | 41 | |||||||
Assumed | — | 20 | — | (21 | ) | ||||||
Ceded | (41 | ) | (53 | ) | (42 | ) | (59 | ) | |||
Net | 16 | 339 | 18 | (39 | ) |
Three months ended | |||||||
March 31, 2019 | March 31, 2018 | ||||||
Net income (loss) | $ | 171 | $ | 65 | |||
Less Preferred stock dividend | 8 | 7 | |||||
Net income (loss) available to common shares | 163 | 58 | |||||
Weighted-average common shares outstanding - basic | 219,646 | 214,370 | |||||
Dilutive effect of unvested restricted stock | 36 | — | |||||
Weighted-average shares outstanding - diluted | 219,682 | 214,370 | |||||
Net income (loss) per common share: | |||||||
Basic | $ | 0.74 | $ | 0.27 | |||
Diluted | $ | 0.74 | $ | 0.27 |
• | general economic conditions and other factors, including prevailing interest and unemployment rate levels and stock and credit market performance; |
• | concentration in certain states for distribution of our products; |
• | the impact of interest rate fluctuations; |
• | equity market volatility; |
• | credit market volatility or disruption; |
• | the impact of credit risk of our counterparties; |
• | volatility or decline in the market price of our ordinary shares could impair our ability to raise necessary capital; |
• | changes in our assumptions and estimates regarding the amortization of our deferred acquisition costs, deferred sales inducements and value of business acquired balances; |
• | changes in our methodologies, estimates and assumptions regarding our valuation of investments and the determinations of the amounts of allowances and impairments; |
• | changes in our valuation allowance against our deferred tax assets, and restrictions on our ability to fully utilize such assets; |
• | the accuracy of management’s reserving assumptions; |
• | 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 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 |
• | the impact of the "fiduciary" rule proposals on the Company, its products, distribution and business model; |
• | changes in the federal income tax laws and regulations which may affect the relative income tax advantages of our products; |
• | changes in tax laws which affect us and/or our shareholders; |
• | potential adverse tax consequences if we are treated as a passive foreign investment company; |
• | the impact on our business of new accounting rules or changes to existing accounting rules; |
• | 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; |
• | our ability to successfully acquire new companies or businesses and integrate such acquisitions into our existing framework; |
• | the impact of potential litigation, including class action litigation; |
• | our ability to protect our intellectual property; |
• | our ability to maintain effective internal controls over financial reporting; |
• | the impact of restrictions in the Company's debt instruments on its ability to operate its business, finance its capital needs or pursue or expand its business strategies; |
• | our ability and our insurance subsidiaries’ ability to maintain or improve financial strength ratings; |
• | the continued availability of capital required for our insurance subsidiaries to grow; |
• | the performance of third parties including third party administrators, independent distributors, underwriters, actuarial consultants and other outsourcing relationships; |
• | 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; |
• | 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 attract and retain national marketing organizations and independent agents; |
• | our subsidiaries’ ability to pay dividends to us; and |
• | the other factors discussed in “Risk Factors” of our 2018 Form 10-K. |
Annuity Sales | IUL Sales | ||||||||||||||
(dollars in millions) | 2019 | 2018 | 2019 | 2018 | |||||||||||
First Quarter | $ | 1,053 | $ | 778 | $ | 8 | $ | 6 |
Three months ended | |||||||||||
March 31, 2019 | March 31, 2018 | Increase/ (Decrease) | |||||||||
Revenues: | |||||||||||
Premiums | $ | 16 | $ | 18 | $ | (2 | ) | ||||
Net investment income | 289 | 263 | 26 | ||||||||
Net investment gains (losses) | 240 | (191 | ) | 431 | |||||||
Insurance and investment product fees and other | 55 | 48 | 7 | ||||||||
Total revenues | 600 | 138 | 462 | ||||||||
Benefits and expenses: | |||||||||||
Benefits and other changes in policy reserves | 339 | (39 | ) | 378 | |||||||
Acquisition and operating expenses, net of deferrals | 44 | 40 | 4 | ||||||||
Amortization of intangibles | 29 | 27 | 2 | ||||||||
Total benefits and expenses | 412 | 28 | 384 | ||||||||
Operating income | 188 | 110 | 78 | ||||||||
Interest expense | (8 | ) | (6 | ) | (2 | ) | |||||
Income (loss) before income taxes | 180 | 104 | 76 | ||||||||
Income tax expense | (9 | ) | (39 | ) | 30 | ||||||
Net income (loss) | $ | 171 | $ | 65 | $ | 106 | |||||
Less Preferred stock dividend | 8 | 7 | 1 | ||||||||
Net income (loss) available to common shareholders | $ | 163 | $ | 58 | $ | 105 |
Three months ended | |||||||||||
March 31, 2019 | March 31, 2018 | Increase/ (Decrease) | |||||||||
Fixed index annuities ("FIA") | $ | 668 | $ | 436 | $ | 232 | |||||
Fixed rate annuities ("MYGA") | 280 | 142 | 138 | ||||||||
Institutional spread based | 105 | 200 | (95 | ) | |||||||
Total annuity | $ | 1,053 | $ | 778 | $ | 275 | |||||
Index universal life ("IUL") | $ | 8 | $ | 6 | $ | 2 | |||||
Flow reinsurance | $ | 60 | $ | 33 | $ | 27 |
• | FIA sales during the three months ended March 31, 2019 and 2018 reflect continued strong and productive collaboration with our distribution partners, primarily Independent Marketing Organizations, as well as the overall growth of the FIA market. |
• | MYGA volume and funding agreements are viewed as opportunistic and therefore these volumes will fluctuate from period to period. |
• | Institutional spread based products in three months ended March 31, 2019 and 2018 reflect funding agreements with Federal Home Loan Bank, under an investment strategy that is subject to fluctuation period to period. |
• | The increased flow reinsurance sales in the three months ended March 31, 2019 compared to 2018 reflect the on-boarding of a new flow reinsurance partner effective January 1, 2019. |
Three months ended | |||||||||||
March 31, 2019 | March 31, 2018 | Increase/ (Decrease) | |||||||||
Traditional life insurance | $ | 8 | $ | 9 | $ | (1 | ) | ||||
Life-contingent immediate annuity | 8 | 9 | (1 | ) | |||||||
Premiums | $ | 16 | $ | 18 | $ | (2 | ) |
• | Premiums for the three months ended March 31, 2019 reflects a decrease compared to the three months ended March 31, 3018 primarily due to lower renewals and return of premium block maturing. |
• | Immediate annuity premiums for the three months ended March 31, 2019 reflects a decrease as a result of policyholder behavior for annuitizations. |
Three months ended | |||||||||||
March 31, 2019 | March 31, 2018 | Increase/ (Decrease) | |||||||||
Fixed maturity securities, available-for-sale | $ | 265 | $ | 242 | $ | 23 | |||||
Equity securities | 21 | 10 | 11 | ||||||||
Mortgage loans | 7 | 7 | — | ||||||||
Invested cash and short-term investments | 3 | 3 | — | ||||||||
Funds withheld | 8 | 7 | 1 | ||||||||
Limited partnerships | 8 | 3 | 5 | ||||||||
Other investments | 5 | 1 | 4 | ||||||||
Gross investment income | 317 | 273 | 44 | ||||||||
Investment expense | (28 | ) | (10 | ) | (18 | ) | |||||
Net investment income | $ | 289 | $ | 263 | $ | 26 |
Three months ended | |||||||||||
March 31, 2019 | March 31, 2018 | Increase/ (Decrease) | |||||||||
Yield on AAUM (at amortized cost) | 4.47 | % | 4.21 | % | 0.26 | % | |||||
Less: Interest credited and option cost | (2.30 | )% | (2.33 | )% | 0.03 | % | |||||
Net investment spread | 2.17 | % | 1.88 | % | 0.29 | % | |||||
AAUM | $ | 25,862 | $ | 24,967 | $ | 895 |
• | The increases in AAUM from March 31, 2018 to March 31, 2019 were primarily influenced by $1.9 billion net new business asset flows, partially offset by a decrease as the result of FGL Insurance's reinsurance agreement with Kubera Insurance (SAC) Ltd. acting in respect of Annuity Reinsurance Cell A1 ("Kubera"), effective December 31, 2018. |
• | The 10% increase in NII from the three months ended March 31, 2018 to the three months ended March 31, 2019 was primarily due to $19 from the portfolio reposition lift, $18 from invested asset growth, and $15 lower premium amortization, partially offset by $18 of higher planned investment expense and $8 decrease related to the Kubera reinsurance cession. |
Three months ended | |||||||||||
March 31, 2019 | March 31, 2018 | Increase/ (Decrease) | |||||||||
Net realized and unrealized gains (losses) on fixed maturity available-for-sale securities, equity securities and other invested assets | $ | 76 | $ | (46 | ) | $ | 122 | ||||
Net realized and unrealized gains (losses) on certain derivatives instruments | 164 | (124 | ) | 288 | |||||||
Change in fair value of reinsurance related embedded derivatives | (3 | ) | (21 | ) | 18 | ||||||
Change in fair value of other derivatives and embedded derivatives | 3 | — | 3 | ||||||||
Net investment gains (losses) | $ | 240 | $ | (191 | ) | $ | 431 |
• | For the three months ended March 31, 2019, net realized gains on available-for-sale securities, equity securities and other invested assets includes $77 in the unrealized gains (losses) on equity securities, reflecting market movements during the period, and $2 of credit related impairments. |
• | The fair value of reinsurance related embedded derivative is based on the change in fair value of the underlying assets held in the funds withheld ("FWH") portfolio. |
• | See the table below for primary drivers of gains (losses) on certain derivatives. |
Three months ended | |||||||||||
March 31, 2019 | March 31, 2018 | Increase/ (Decrease) | |||||||||
Call Options: | |||||||||||
Gains (losses) on option expiration | $ | (33 | ) | $ | 5 | $ | (38 | ) | |||
Change in unrealized gains (losses) | 188 | (127 | ) | 315 | |||||||
Futures contracts: | |||||||||||
Gains (losses) on futures contracts expiration | 7 | 6 | 1 | ||||||||
Change in unrealized gains (losses) | 2 | (8 | ) | 10 | |||||||
Total net change in fair value | $ | 164 | $ | (124 | ) | $ | 288 | ||||
Annual Point-to-Point Change in S&P 500 Index during the period | 9 | % | 12 | % | (3 | )% |
• | 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 during each respective year relative to the S&P Index on the policyholder buy dates. |
• | The net change in fair value of the call options and futures contracts for the three months ended March 31, 2019 and 2018 were primarily driven by movements in the S&P 500 Index relative to the policyholder buy dates. |
Three months ended | ||||||||
March 31, 2019 | March 31, 2018 | Increase/ (Decrease) | ||||||
Average Crediting Rate | 1 | % | 5 | % | (4 | )% | ||
S&P 500 Index: | ||||||||
Point-to-point strategy | 2 | % | 4 | % | (2 | )% | ||
Monthly average strategy | 1 | % | 4 | % | (3 | )% | ||
Monthly point-to-point strategy | — | % | 7 | % | (7 | )% | ||
3 year high water mark | 17 | % | 7 | % | 10 | % |
• | Actual amounts credited to contractholder fund balances may differ from the index appreciation due to contractual features in the FIA contracts (caps, spreads and participation rates) which allow the Company to manage the cost of the options purchased to fund the annual index credits. |
• | The credits for the three months ended March 31, 2019 and 2018 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. Due to volatility in the S&P 500 Index, policyholders with anniversaries during the three months ended March 31, 2019, on average, received less credits. |
Three months ended | |||||||||||
March 31, 2019 | March 31, 2018 | Increase/ (Decrease) | |||||||||
Surrender charges | $ | 8 | $ | 14 | $ | (6 | ) | ||||
Cost of insurance fees and other income | 47 | 34 | 13 | ||||||||
Total insurance and investment product fees and other | $ | 55 | $ | 48 | $ | 7 |
• | Cost of insurance fees and other income increased year over year primarily as the result of the amortization of the deferred reinsurance gain established at the inception of FGL Insurance's reinsurance agreement with Kubera, effective December 31, 2018. |
• | Surrender charges were higher in the prior year quarter, primarily due to more universal life policy surrenders. |
Three months ended | |||||||||||
March 31, 2019 | March 31, 2018 | Increase/ (Decrease) | |||||||||
FIA embedded derivative impact | 152 | (263 | ) | 415 | |||||||
Index credits, interest credited & bonuses | 91 | 207 | (116 | ) | |||||||
Annuity payments | 34 | 38 | (4 | ) | |||||||
Other policy benefits and reserve movements | (6 | ) | (7 | ) | 1 | ||||||
Change in fair value of reserve liabilities held at fair value | 68 | (14 | ) | 82 | |||||||
Total benefits and other changes in policy reserves | $ | 339 | $ | (39 | ) | $ | 378 |
• | The FIA market value option liability increased quarter over quarter, driven by the changes in the equity markets and risk free rates during the current quarter, in conjunction with premium growth arising from the quarterly sales result. The movements in risk free rates increased the FAS 133 reserves by approximately $58 during the three months ended March 31, 2019 as compared to an decrease of $97 for the corresponding period in 2018, with the remaining impacts from changes in the equity markets. The change in equity market also impacts the market value of the derivative assets hedging our FIA policies. See table in the net investment gains/losses discussion above for summary and discussion of net unrealized gains (losses) on certain derivative instruments. |
• | The quarter over quarter decreases in index credits, interest credited & bonuses were primarily due to lower index credits on FIA policies, reflecting market movement during the respective periods. |
• | The change in the fair value of reserve liabilities held at fair value represents FSRC's and F&G Re's third-party business. |
Three months ended | |||||||||||
March 31, 2019 | March 31, 2018 | Increase/ (Decrease) | |||||||||
General expenses | $ | 31 | $ | 35 | $ | (4 | ) | ||||
Acquisition expenses | 103 | 54 | 49 | ||||||||
Deferred acquisition costs | (90 | ) | (49 | ) | (41 | ) | |||||
Total acquisition and operating expenses, net of deferrals | $ | 44 | $ | 40 | $ | 4 |
• | The increase in acquisition and operating expenses, net of deferrals, during the quarter ended March 31, 2019 compared to the prior year quarter ended March 31, 2018 reflects higher commissions net of deferrals driven by higher sales, partially offset by a decrease in general expenses related to the mark-to-market movement in the preferred equity remarketing reimbursement embedded derivative liability. |
Three months ended | |||||||||||
March 31, 2019 | March 31, 2018 | Increase/ (Decrease) | |||||||||
Amortization | $ | 36 | $ | 32 | $ | 4 | |||||
Interest | (7 | ) | (5 | ) | (2 | ) | |||||
Unlocking | — | — | — | ||||||||
Total amortization of intangibles | $ | 29 | $ | 27 | $ | 2 |
• | Amortization of intangibles is based on historical, current and future expected gross margins (pre-tax operating income before amortization). The quarter over quarter increase in total net amortization was primarily due to higher actual gross profits ("AGPs"). AGPs were driven primarily by higher net investment gains, partially offset by higher change in reserves in the three months ended March 31, 2019 compared to the three months ended March 31, 2018. |
Three months ended | |||||||||||
March 31, 2019 | March 31, 2018 | Increase/ (Decrease) | |||||||||
Debt | $ | 8 | $ | 5 | $ | 3 | |||||
Revolving credit facility | — | 1 | (1 | ) | |||||||
Total interest expense | $ | 8 | $ | 6 | $ | 2 |
• | The three months ended March 31, 2019 reflects increased debt interest expense incurred on the $550 5.50% Senior Notes as compared to the historical $300 6.375% Senior Notes. |
Three months ended | |||||||||||
March 31, 2019 | March 31, 2018 | Increase/ (Decrease) | |||||||||
Income before taxes | $ | 180 | $ | 104 | $ | 76 | |||||
Income tax before valuation allowance | 30 | 34 | (4 | ) | |||||||
Change in valuation allowance | (21 | ) | 5 | (26 | ) | ||||||
Income tax | $ | 9 | $ | 39 | $ | (30 | ) | ||||
Effective rate | 5 | % | 38 | % | (33 | )% |
• | Income tax expense for the three months ended March 31, 2019 was $9, net of a valuation allowance release of $21, compared to income tax expense of $39 for the three months ended March 31, 2018, inclusive of a valuation allowance expense of $5. The decrease in income tax expense of $30 quarter over quarter was primarily due to the valuation allowance release on the partial recovery of the unrealized loss position for the US life companies, as well as higher international income in zero tax jurisdictions for the three months ended March 31, 2019. For the three months ended March 31, 2018 there was a $15 expense related to F&G Life Re. For further details, refer to "Note 11. Income Taxes". |
Three months ended | |||||||||||
March 31, 2019 | March 31, 2018 | Increase/ (Decrease) | |||||||||
Net income (loss) | $ | 171 | $ | 65 | $ | 106 | |||||
Adjustments to arrive at AOI: | |||||||||||
Effect of investment losses (gains), net of offsets (a) | (70 | ) | 39 | (109 | ) | ||||||
Impacts related to changes in the fair values of FIA related derivatives and embedded derivatives, net of hedging cost, and the fair value accounting impacts of assumed reinsurance by our international subsidiaries (a) (b) | (17 | ) | (63 | ) | 46 | ||||||
Effect of change in fair value of reinsurance related embedded derivative, net of offsets (a) | 19 | — | 19 | ||||||||
Effects of integration, merger related & other non-operating items | (3 | ) | 8 | (11 | ) | ||||||
Tax effect of affiliated reinsurance embedded derivative | — | 15 | (15 | ) | |||||||
Tax impact of adjusting items | (10 | ) | 4 | (14 | ) | ||||||
AOI | $ | 90 | $ | 68 | $ | 22 |
• | AOI increased $22 from $68 in the three months ended March 31, 2018 to $90 for the three months ended March 31, 2019. The current quarter results included $14 net favorable actual to expected mortality within the single premium immediate annuity ("SPIA") product line, and $5 bond prepay income and other, partially offset by $2 project costs. Comparatively, the three months ended March 31, 2018 AOI included $8 net favorable actual to expected mortality within the SPIA product line and other annuity reserve movements. |
March 31, 2019 | December 31, 2018 | ||||||||||||
Fair Value | Percent | Fair Value | Percent | ||||||||||
Fixed maturity securities, available for sale: | |||||||||||||
United States Government full faith and credit | $ | 56 | — | % | $ | 119 | — | % | |||||
United States Government sponsored entities | 104 | — | % | 106 | — | % | |||||||
United States municipalities, states and territories | 1,217 | 5 | % | 1,187 | 5 | % | |||||||
Foreign Governments | 138 | 1 | % | 121 | 1 | % | |||||||
Corporate securities: | |||||||||||||
Finance, insurance and real estate | 4,003 | 16 | % | 4,113 | 17 | % | |||||||
Manufacturing, construction and mining | 619 | 3 | % | 574 | 2 | % | |||||||
Utilities, energy and related sectors | 2,322 | 9 | % | 2,281 | 10 | % | |||||||
Wholesale/retail trade | 1,431 | 6 | % | 1,376 | 6 | % | |||||||
Services, media and other | 2,215 | 9 | % | 2,037 | 9 | % | |||||||
Hybrid securities | 961 | 4 | % | 901 | 4 | % | |||||||
Non-agency residential mortgage-backed securities | 918 | 4 | % | 925 | 4 | % | |||||||
Commercial mortgage-backed securities | 2,647 | 11 | % | 2,537 | 10 | % | |||||||
Asset-backed securities | 4,974 | 20 | % | 4,832 | 20 | % | |||||||
Total fixed maturity available for sale securities | 21,605 | 88 | % | 21,109 | 88 | % | |||||||
Equity securities (a) | 1,171 | 5 | % | 1,382 | 6 | % | |||||||
Commercial mortgage loans | 485 | 2 | % | 483 | 2 | % | |||||||
Residential mortgage loans | 199 | 1 | % | 187 | 1 | % | |||||||
Other (primarily derivatives and limited partnerships) | 1,049 | 4 | % | 748 | 3 | % | |||||||
Short term investments | — | — | % | — | — | % | |||||||
Total investments | $ | 24,509 | 100 | % | $ | 23,909 | 100 | % |
March 31, 2019 | December 31, 2018 | ||||||||||||
Rating | Fair Value | Percent | Fair Value | Percent | |||||||||
AAA | $ | 741 | 3 | % | $ | 627 | 3 | % | |||||
AA | 1,476 | 7 | % | 1,415 | 7 | % | |||||||
A | 5,599 | 26 | % | 5,354 | 25 | % | |||||||
BBB | 8,242 | 38 | % | 8,328 | 39 | % | |||||||
Not rated (c) | 3,733 | 17 | % | 3,612 | 17 | % | |||||||
Total investment grade | 19,791 | 91 | % | 19,336 | 91 | % | |||||||
BB (a) | 1,311 | 6 | % | 1,307 | 6 | % | |||||||
B and below (b) | 384 | 2 | % | 351 | 2 | % | |||||||
Not rated (c) | 119 | 1 | % | 115 | 1 | % | |||||||
Total below investment grade | 1,814 | 9 | % | 1,773 | 9 | % | |||||||
Total | $ | 21,605 | 100 | % | $ | 21,109 | 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 |
March 31, 2019 | |||||||||||
NAIC Designation | Amortized Cost | Fair Value | Percent of Total Fair Value | ||||||||
1 | $ | 11,302 | $ | 11,297 | 52 | % | |||||
2 | 9,240 | 8,998 | 42 | % | |||||||
3 | 1,066 | 1,017 | 5 | % | |||||||
4 | 191 | 183 | 1 | % | |||||||
5 | 73 | 72 | — | % | |||||||
6 | 36 | 38 | — | % | |||||||
Total | $ | 21,908 | $ | 21,605 | 100 | % | |||||
December 31, 2018 | |||||||||||
NAIC Designation | Amortized Cost | Fair Value | Percent of Total Fair Value | ||||||||
1 | $ | 11,245 | $ | 10,928 | 52 | % | |||||
2 | 9,677 | 9,003 | 43 | % | |||||||
3 | 1,064 | 967 | 4 | % | |||||||
4 | 155 | 139 | 1 | % | |||||||
5 | 71 | 65 | — | % | |||||||
6 | 7 | 7 | — | % | |||||||
Total | $ | 22,219 | $ | 21,109 | 100 | % | |||||
March 31, 2019 | |||||||
Top 10 Industry Concentration | Fair Value | Percent of Total Fair Value | |||||
ABS collateralized loan obligation ("CLO") | $ | 3,418 | 15 | % | |||
Banking | 2,348 | 10 | % | ||||
Whole loan collateralized mortgage obligation ("CMO") | 2,332 | 10 | % | ||||
ABS Other | 1,553 | 7 | % | ||||
Life insurance | 1,407 | 6 | % | ||||
Municipal | 1,216 | 5 | % | ||||
Electric | 952 | 4 | % | ||||
CMBS | 870 | 4 | % | ||||
Pipelines | 820 | 4 | % | ||||
Technology | 571 | 3 | % | ||||
Total | $ | 15,487 | 68 | % |
December 31, 2018 | |||||||
Top 10 Industry Concentration | Fair Value | Percent of Total Fair Value | |||||
ABS collateralized loan obligation ("CLO") | $ | 3,283 | 15 | % | |||
Banking | 2,491 | 11 | % | ||||
Whole loan collateralized mortgage obligation ("CMO") | 2,234 | 10 | % | ||||
ABS Other | 1,545 | 7 | % | ||||
Life insurance | 1,376 | 6 | % | ||||
Municipal | 1,187 | 5 | % | ||||
Electric | 939 | 4 | % | ||||
CMBS | 874 | 4 | % | ||||
Pipelines | 812 | 4 | % | ||||
Property and casualty insurance | 542 | 2 | % | ||||
Total | $ | 15,283 | 68 | % |
March 31, 2019 | December 31, 2018 | ||||||||||||||
Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||
Corporate, Non-structured Hybrids, Municipal and Government securities: | |||||||||||||||
Due in one year or less | $ | 160 | $ | 160 | $ | 191 | $ | 191 | |||||||
Due after one year through five years | 758 | 749 | 817 | 794 | |||||||||||
Due after five years through ten years | 2,080 | 2,059 | 2,219 | 2,137 | |||||||||||
Due after ten years | 10,281 | 9,994 | 10,443 | 9,587 | |||||||||||
Subtotal | $ | 13,279 | $ | 12,962 | $ | 13,670 | $ | 12,709 | |||||||
Other securities which provide for periodic payments: | |||||||||||||||
Asset-backed securities | $ | 5,033 | $ | 4,974 | $ | 4,954 | $ | 4,832 | |||||||
Commercial-mortgage-backed securities | 2,596 | 2,647 | 2,568 | 2,537 | |||||||||||
Residential mortgage-backed securities | 1,000 | 1,022 | 1,027 | 1,031 | |||||||||||
Subtotal | $ | 8,629 | $ | 8,643 | $ | 8,549 | $ | 8,400 | |||||||
Total fixed maturity available-for-sale securities | $ | 21,908 | $ | 21,605 | $ | 22,219 | $ | 21,109 |
March 31, 2019 | December 31, 2018 | ||||||||||||
NAIC Designation: | Fair Value | Percent of Total | Fair Value | Percent of Total | |||||||||
1 | $ | 237 | 91 | % | $ | 245 | 92 | % | |||||
2 | 12 | 5 | % | 18 | 7 | % | |||||||
3 | 9 | 3 | % | — | — | % | |||||||
4 | 2 | 1 | % | 4 | 1 | % | |||||||
5 | 1 | — | % | — | — | % | |||||||
6 | — | — | % | — | — | % | |||||||
Total | $ | 261 | 100 | % | $ | 267 | 100 | % | |||||
NRSRO: | |||||||||||||
AAA | $ | 1 | — | % | $ | 1 | — | % | |||||
AA | 10 | 4 | % | 11 | 4 | % | |||||||
A | 24 | 9 | % | 25 | 9 | % | |||||||
BBB | 8 | 3 | % | 8 | 3 | % | |||||||
Not rated - Above investment grade (a) | 47 | 18 | % | 46 | 17 | % | |||||||
BB and below | 171 | 66 | % | 176 | 66 | % | |||||||
Total | $ | 261 | 100 | % | $ | 267 | 100 | % | |||||
Vintage: | |||||||||||||
2017 | $ | 12 | 5 | % | $ | 12 | 4 | % | |||||
2016 | 15 | 6 | % | 15 | 6 | % | |||||||
2007 | 50 | 19 | % | 51 | 19 | % | |||||||
2006 | 62 | 24 | % | 63 | 24 | % | |||||||
2005 and prior | 122 | 46 | % | 126 | 47 | % | |||||||
Total | $ | 261 | 100 | % | $ | 267 | 100 | % |
March 31, 2019 | December 31, 2018 | ||||||||||||
Asset Class | Fair Value | Percent | Fair Value | Percent | |||||||||
ABS CLO | $ | 3,418 | 69 | % | $ | 3,283 | 68 | % | |||||
ABS auto | — | — | % | 1 | — | % | |||||||
ABS credit card | 3 | — | % | 3 | — | % | |||||||
ABS other | 1,553 | 31 | % | 1,545 | 32 | % | |||||||
Total ABS | $ | 4,974 | 100 | % | $ | 4,832 | 100 | % |
March 31, 2019 | |||||||||||||||
Number of securities | Amortized Cost | Unrealized Losses | Fair Value | ||||||||||||
Fixed maturity securities, available for sale: | |||||||||||||||
United States Government full faith and credit | $ | 7 | $ | 50 | $ | — | $ | 50 | |||||||
United States Government sponsored agencies | 64 | 84 | — | 84 | |||||||||||
United States municipalities, states and territories | 49 | 537 | (10 | ) | 527 | ||||||||||
Foreign Governments | 8 | 83 | (2 | ) | 81 | ||||||||||
Corporate securities: | |||||||||||||||
Finance, insurance and real estate | 252 | 3,125 | (107 | ) | 3,018 | ||||||||||
Manufacturing, construction and mining | 76 | 543 | (28 | ) | 515 | ||||||||||
Utilities, energy and related sectors | 172 | 1,716 | (71 | ) | 1,645 | ||||||||||
Wholesale/retail trade | 181 | 1,281 | (91 | ) | 1,190 | ||||||||||
Services, media and other | 192 | 1,602 | (59 | ) | 1,543 | ||||||||||
Hybrid securities | 47 | 709 | (33 | ) | 676 | ||||||||||
Non-agency residential mortgage backed securities | 93 | 200 | (5 | ) | 195 | ||||||||||
Commercial mortgage backed securities | 67 | 502 | (9 | ) | 493 | ||||||||||
Asset backed securities | 424 | 3,664 | (82 | ) | 3,582 | ||||||||||
Total fixed maturity available for sale securities | 1,632 | 14,096 | (497 | ) | 13,599 | ||||||||||
Equity securities | 80 | 1,141 | (58 | ) | 1,083 | ||||||||||
Total investments | $ | 1,712 | $ | 15,237 | $ | (555 | ) | $ | 14,682 |
December 31, 2018 | |||||||||||||||
Number of securities | Amortized Cost | Unrealized Losses | Fair Value | ||||||||||||
Fixed maturity securities, available for sale: | |||||||||||||||
United States Government full faith and credit | $ | 15 | $ | 120 | $ | (1 | ) | $ | 119 | ||||||
United States Government sponsored agencies | 72 | 88 | (2 | ) | 86 | ||||||||||
United States municipalities, states and territories | 103 | 1,054 | (32 | ) | 1,022 | ||||||||||
Foreign Governments | 16 | 123 | (8 | ) | 115 | ||||||||||
Corporate securities: | |||||||||||||||
Finance, insurance and real estate | 300 | 3,721 | (230 | ) | 3,491 | ||||||||||
Manufacturing, construction and mining | 86 | 613 | (57 | ) | 556 | ||||||||||
Utilities, energy and related sectors | 237 | 2,347 | (222 | ) | 2,125 | ||||||||||
Wholesale/retail trade | 211 | 1,469 | (144 | ) | 1,325 | ||||||||||
Services, media and other | 266 | 2,179 | (195 | ) | 1,984 | ||||||||||
Hybrid securities | 67 | 956 | (91 | ) | 865 | ||||||||||
Non-agency residential mortgage backed securities | 110 | 249 | (6 | ) | 243 | ||||||||||
Commercial mortgage backed securities | 205 | 1,768 | (40 | ) | 1,728 | ||||||||||
Asset backed securities | 419 | 3,704 | (137 | ) | 3,567 | ||||||||||
Total fixed maturity available for sale securities | 2,107 | 18,391 | (1,165 | ) | 17,226 | ||||||||||
Equity securities | 95 | 1,523 | (145 | ) | 1,378 | ||||||||||
Total investments | $ | 2,202 | $ | 19,914 | $ | (1,310 | ) | $ | 18,604 |
March 31, 2019 | ||||||||||||||
Number of securities | Amortized Cost | Fair Value | Gross Unrealized Losses | |||||||||||
Investment grade: | ||||||||||||||
Less than six months | 1 | $ | 5 | $ | 4 | $ | (1 | ) | ||||||
Six months or more and less than twelve months | 1 | 3 | 2 | (1 | ) | |||||||||
Twelve months or greater | 3 | 35 | 27 | (8 | ) | |||||||||
Total investment grade | 5 | 43 | 33 | (10 | ) | |||||||||
Below investment grade: | ||||||||||||||
Less than six months | 2 | 1 | 1 | — | ||||||||||
Six months or more and less than twelve months | 1 | — | — | — | ||||||||||
Twelve months or greater | 3 | 8 | 6 | (2 | ) | |||||||||
Total below investment grade | 6 | 9 | 7 | (2 | ) | |||||||||
Total | 11 | $ | 52 | $ | 40 | $ | (12 | ) |
December 31, 2018 | ||||||||||||||
Number of securities | Amortized Cost | Fair Value | Gross Unrealized Losses | |||||||||||
Investment grade: | ||||||||||||||
Less than six months | 3 | $ | 23 | $ | 18 | $ | (5 | ) | ||||||
Six months or more and less than twelve months | 10 | 72 | 55 | (17 | ) | |||||||||
Twelve months or greater | 4 | 25 | 19 | (6 | ) | |||||||||
Total investment grade | 17 | 120 | 92 | (28 | ) | |||||||||
Below investment grade: | ||||||||||||||
Less than six months | 3 | 11 | 9 | (2 | ) | |||||||||
Six months or more and less than twelve months | 9 | 31 | 22 | (9 | ) | |||||||||
Twelve months or greater | 5 | 12 | 9 | (3 | ) | |||||||||
Total below investment grade | 17 | 54 | 40 | (14 | ) | |||||||||
Total | 34 | $ | 174 | $ | 132 | $ | (42 | ) |
(dollars in millions) | Three months ended | ||||||
March 31, 2019 | March 31, 2018 | ||||||
Cash provided by (used in): | |||||||
Operating activities | $ | 96 | $ | (35 | ) | ||
Investing activities | 404 | (377 | ) | ||||
Financing activities | 286 | 354 | |||||
Net increase (decrease) in cash and cash equivalents | $ | 786 | $ | (58 | ) |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
(Dollars in millions) | ||||||
Duration | Amortized Cost | % of Total | ||||
0-4 | $ | 8,975 | 37 | % | ||
5-9 | 7,074 | 29 | % | |||
10-14 | 6,693 | 27 | % | |||
15-19 | 1,801 | 7 | % | |||
20-25 | 32 | — | % | |||
Total | $ | 24,575 | 100 | % |
(Dollars in millions) | Financial Strength Rating | |||||||
Parent Company/Principal Reinsurers | Reinsurance Recoverable | AM Best | S&P | Moody's | ||||
Wilton Re | $1,541 | A+ | Not Rated | Not Rated | ||||
Kubera Insurance (SAC) Ltd | 681 | Not Rated | Not Rated | Not Rated | ||||
Security Life of Denver | 162 | A | A | A2 | ||||
Hannover Re | 130 | A+ | AA- | Not Rated | ||||
London Life | 108 | A+ | Not Rated | Not Rated |
Item 4. | Controls and Procedures |
Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs | Approximate dollar value of shares that may yet be purchased under the plans or programs (1) | ||||||||||
Period | |||||||||||||
January 1 to January 31, 2019 | 1,051,347 | $ | 7.12 | 1,051,347 | $ | 138 | |||||||
February 1 to February 28, 2019 | 20,652 | 7.49 | 20,652 | 138 | |||||||||
March 1 to March 31, 2019 | 2,656,078 | 8.35 | 2,656,078 | 116 | |||||||||
Total | 3,728,077 | $ | 8.00 | 3,728,077 | $ | 116 |
Exhibit No. | Description of Exhibits | |
10.1 | ||
31.1 * | ||
31.2 * | ||
32.1 * | ||
32.2 * | ||
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 |
FGL HOLDINGS (Registrant) | |||
Date: | May 7, 2019 | By: | /s/ Dennis R. Vigneau |
Chief Financial Officer | |||
(on behalf of the Registrant and as Principal Financial Officer) |
1. | I have reviewed this quarterly report on Form 10-Q for the period ended March 31, 2019 of FGL Holdings; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ CHRISTOPHER O. BLUNT | |
Christopher O. Blunt | |
President & Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q for the period ended March 31, 2019 of FGL Holdings; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ DENNIS R. VIGNEAU | |
Dennis R. Vigneau | |
Chief Financial Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ CHRISTOPHER O. BLUNT | |
Christopher O. Blunt | |
President & Chief Executive Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ DENNIS R. VIGNEAU | |
Dennis R. Vigneau | |
Chief Financial Officer |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Apr. 30, 2019 |
|
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | FG | |
Entity Registrant Name | FGL Holdings | |
Entity Central Index Key | 0001668428 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 221,660,974 |
Investments - Proceeds From The Sale of Fixed-maturity available for-sale-securities - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Schedule of Available-for-sale Securities [Line Items] | ||
Document Period End Date | Mar. 31, 2019 | |
Available-for-sale Securities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Proceeds from available-for-sale investments, sold, matured or repaid: | $ 962 | $ 3,286 |
Available-for-sale Securities | Total fixed maturities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Proceeds from available-for-sale investments, sold, matured or repaid: | 474 | |
Gain on sale of investments | 5 | |
Loss on Sale of Investments | $ 10 | |
Predecessor | Available-for-sale Securities | Total fixed maturities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Proceeds from available-for-sale investments, sold, matured or repaid: | 2,778 | |
Gain on sale of investments | 8 | |
Loss on Sale of Investments | $ 43 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Fixed maturity securities, available-for-sale, at fair value (amortized cost) | $ 21,908 | $ 22,219 |
Equity securities, available-for-sale, at fair value (amortized cost) | 1,226 | 1,526 |
Future policy benefits. at fair value | $ 797 | $ 725 |
Preferred Stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred Stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Preferred Stock, shares issued (in shares) | 406,510 | 399,033 |
Preferred Stock, shares outstanding (in shares) | 406,510 | 399,033 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 800,000,000 | 800,000,000 |
Common stock, shares issued (in shares) | 211,660,974 | 211,660,974 |
Common stock, shares outstanding (in shares) | 211,660,974 | 211,660,974 |
Treasury Stock, shares (in shares) | 0 | 0 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Net income (loss) | $ 171 | $ 65 |
Unrealized investment gains/losses: | ||
Net change in unrealized gains/losses on investments | 724 | (359) |
Other Comprehensive Income (Loss), Financial Liability, Fair Value Option, before Tax, after Reclassification Adjustment | (3) | 2 |
Net changes to derive comprehensive income (loss) for the period | 721 | (357) |
Comprehensive income (loss), net of tax | $ 892 | (292) |
Predecessor | ||
Net income (loss) | $ 65 |
Basis of Presentation and Nature of Business |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Nature of Business | Basis of Presentation FGL Holdings (the “Company”), a Cayman Islands exempted company, markets products through its wholly-owned insurance subsidiaries, Fidelity & Guaranty Life Insurance Company (“FGL Insurance”) and Fidelity & Guaranty Life Insurance Company of New York (“FGL NY Insurance”), which together are licensed in all fifty states and the District of Columbia. F&G Reinsurance Ltd (“F&G Re”), an exempted company incorporated in Bermuda with limited liability, provides a platform for non-affiliated international business. Front Street Re Cayman Ltd (“FSRC”), an exempted company incorporated in the Cayman Islands with limited liability, has a license to carry on business as an Unrestricted Class “B” Insurer that permits FSRC to conduct offshore direct and reinsurance business. F&G Re and FSRC (together herein referred to as the “F&G Reinsurance Companies”), are indirect wholly owned subsidiaries of FGL Holdings and parties to reinsurance transactions. The accompanying unaudited condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and with the instructions for the Securities and Exchange Commission (“SEC”) Quarterly Report on Form 10-Q, including Article 10 of Regulation S-X, for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. Therefore, the information contained in the Notes to Consolidated Financial Statements included in the Company's 2018 Form 10-K, should be read in connection with the reading of these interim unaudited condensed consolidated financial statements. In the opinion of management, these statements include all normal recurring adjustments necessary for a fair presentation of the Company’s results. Operating results for the three months ended March 31, 2019, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2019. Amounts reclassified out of other comprehensive income are reflected in net investment gains in the unaudited Condensed Consolidated Statements of Operations. Dollar amounts in the accompanying sections are presented in millions, unless otherwise noted. |
Significant Accounting Policies and Practices |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant Accounting Policies and Practices | Adoption of New Accounting Pronouncements Premium Amortization on Purchased Callable Debt Securities In March 2017, the FASB issued new guidance on the amortization of callable securities (ASU 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities), effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The ASU requires premiums paid on purchased debt securities with an explicit call option to be amortized to the earliest call date, as opposed to the maturity date (as under current GAAP). The updated guidance is applicable to instruments that are callable based on explicit, non-contingent call features that are callable at fixed prices on preset dates. The amendments in this update should be applied using the modified retrospective method through a cumulative effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company adopted this new accounting guidance effective January 1, 2019, as required, and it had an immaterial impact on its unaudited condensed consolidated financial statements. Amendments to Lease Accounting In February 2016, the FASB issued amended guidance (ASU 2016-02, Leases (Topic 842)), effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Notable amendments in this update will:
The amendments are required to be applied at the beginning of the earliest period presented using a modified retrospective approach (including several optional practical expedients related to leases commenced before the effective date). The Company has adopted this standard effective January 1, 2019, as required, and it had an immaterial impact on its unaudited condensed consolidated financial statements. Future Accounting Pronouncements Accounting pronouncements that will impact the Company in future periods have been disclosed in the Company’s 2018 Form 10-K. There have not been any additional accounting pronouncements issued during the quarter ended March 31, 2019 that are expected to impact the Company. The following two pronouncements were discussed in our 2018 Form 10-K but have been included below so as to provide an update on the Company’s status of adoption. New Credit Loss Standard In June 2016, the FASB issued new guidance (ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments), effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Notable amendments in this update will change the accounting for impairment of most financial assets and certain other instruments in the following ways:
The amendments in this ASU may be early adopted during any interim or annual period beginning after December 15, 2018, however the Company has elected not to. The Company has identified the material asset classes impacted by the new guidance and is in the process of assessing the accounting, reporting and/or process changes that will be required to comply with the new guidance. The Company has developed a project plan to complete our adoption of this new standard, and is evaluating the impact of the new guidance on its consolidated financial statements. Long-Duration Contracts In August 2018, the FASB issued new guidance (ASU 2018-12, Financial Services-Insurance (Topic 944), Targeted Improvements to the Accounting for Long-Duration Contracts), effective for fiscal years beginning after December 15, 2020 including interim periods within those fiscal years. Under this update:
The amendments in this ASU may be early adopted as of the beginning of an annual reporting period for which financial statements have not yet been issued, including interim financial statements. The Company does not currently expect to early adopt this standard. The Company has identified specific areas that will be impacted by the new guidance and is in the process of assessing the accounting, reporting and/or process changes that will be required to comply as well as the impact of the new guidance on its consolidated financial statements. |
Significant Risks and Uncertainties |
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Mar. 31, 2019 | |
Risks and Uncertainties [Abstract] | |
Significant Risks and Uncertainties | Significant Risks and Uncertainties Federal Regulation In April 2016, the Department of Labor (“DOL”) issued the “fiduciary” rule which could have had a material impact on the Company, its products, distribution, and business model. The rule provided that persons who render investment advice for a fee or other compensation with respect to an employer plan or individual retirement account ("IRA") are fiduciaries of that plan or IRA and would have expanded the definition of fiduciary under ERISA to apply to commissioned insurance agents who sell the Company’s IRA products. On June 21, 2018, the United States Court of Appeals for the Fifth Circuit formally vacated the DOL fiduciary rule in total when it issued its mandate following the court’s decision on March 15, 2018, in U.S. Chamber of Commerce v. U.S. Department of Labor, 885 F.3d 360 (5th Cir. 2018). Management will continue to monitor for potential action by state officials or the SEC to implement rules similar to the vacated DOL rule. Use of Estimates and Assumptions The preparation of the Company's unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions used. Concentrations of Financial Instruments As of March 31, 2019 and December 31, 2018, the Company’s most significant investment in one industry, excluding United States ("U.S.") Government securities, was its investment securities in the Banking industry with a fair value of $2,348 or 10% and $2,491 or 10%, respectively, of the invested assets portfolio and an amortized cost of $2,416 and $2,691, respectively. As of March 31, 2019, the Company’s holdings in this industry include investments in 107 different issuers with the top ten investments accounting for 35% of the total holdings in this industry. As of March 31, 2019 the Company had no investments in issuers that exceeded 10% of shareholders' equity. As of December 31, 2018, the Company had 16 investments in issuers that exceeded 10% of shareholders' equity, with a total fair value of $1,634 or 7% of the invested assets portfolio: JP Morgan Chase & Co, Metropolitan Transportation Authority (NY), AT&T Inc, HSBC Holdings, Wells Fargo & Company, General Motors Co, Nationwide Mutual Insurance Company, Goldman Sachs Group Inc, United Mexican States, Energy Transfer Partners, Prudential Financial Inc, Citigroup Inc, HP Enterprise Co, Viacom Inc, Kinder Morgan Energy Partners, and Fuel Trust. The Company's largest concentration in any single issuer as of March 31, 2019 and December 31, 2018 was AT&T and JP Morgan Chase & Co, respectively, with a total fair value of $124 or 1% and $115 or 1% of the invested assets portfolio, respectively. Concentrations of Financial and Capital Markets Risk The Company is exposed to financial and capital markets risk, including changes in interest rates and credit spreads which can have an adverse effect on the Company’s results of operations, financial condition and liquidity. The Company expects to continue to face challenges and uncertainties that could adversely affect its results of operations and financial condition. The Company attempts to mitigate the risk, including changes in interest rates by investing in less rate-sensitive investments, including senior tranches of collateralized loan obligations, non-agency residential mortgage-backed securities, and various types of asset backed securities. The Company’s exposure to such financial and capital markets risk relates primarily to the market price and cash flow variability associated with changes in interest rates. A rise in interest rates, in the absence of other countervailing changes, will increase the net unrealized loss position of the Company’s investment portfolio and, if long-term interest rates rise dramatically within a six to twelve month time period, certain of the Company’s products may be exposed to disintermediation risk. Disintermediation risk refers to the risk that policyholders surrender their contracts in a rising interest rate environment, requiring the Company to liquidate assets in an unrealized loss position. Management believes this risk is mitigated to some extent by surrender charge protection provided by the Company’s products. Concentration of Reinsurance Risk The Company has a significant concentration of reinsurance risk with third party reinsurers, Wilton Reassurance Company (“Wilton Re”) and Kubera Insurance (SAC) Ltd. acting in respect of Annuity Reinsurance Cell A1 ("Kubera") that could have a material impact on the Company’s financial position in the event that Wilton Re or Kubera fail to perform their obligations under the various reinsurance treaties. Wilton Re is a wholly-owned subsidiary of Canada Pension Plan Investment Board ("CPPIB"). CPPIB has an AAA issuer credit rating from Standard & Poor's Ratings Services ("S&P") as of March 31, 2019. Kubera is not rated, however, management has attempted to mitigate the risk of non-performance through the funds withheld arrangement. As of March 31, 2019, the net amount recoverable from Wilton Re was $1,541 and the net amount recoverable from Kubera was $681. The Company monitors both the financial condition of individual reinsurers and risk concentration arising from similar activities and economic characteristics of reinsurers to attempt to reduce the risk of default by such reinsurers. Wilton Re and Kubera are current on all amounts due as of March 31, 2019. On March 6, 2019, Scottish Re (U.S.), Inc. (“SRUS”), a Delaware domestic life and health reinsurer of FGL Insurance, was ordered into receivership for purposes rehabilitation. As of March 31, 2019, the net amount recoverable from SRUS was $47. The financial exposure related to these ceded reserves are substantially mitigated via a reinsurance agreement whereby Wilton Re assumes treaty non-performance including credit risk for this business. |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | Investments The Company’s fixed maturity securities investments have been designated as available-for-sale and are carried at fair value with unrealized gains and losses included in AOCI, net of associated adjustments for deferred acquisition costs ("DAC"), value of business acquired ("VOBA"), deferred sales inducements ("DSI"), unearned revenue ("UREV"), and deferred income taxes. The Company's equity securities investments are carried at fair value with unrealized gains and losses included in net income. The Company’s consolidated investments at March 31, 2019 and December 31, 2018 are summarized as follows:
Included in AOCI were cumulative gross unrealized gains of $0 and gross unrealized losses of $0 related to the non-credit portion of other-than-temporary-impairments ("OTTI") on non-agency residential mortgage backed securities ("RMBS") for both March 31, 2019 and December 31, 2018. Securities held on deposit with various state regulatory authorities had a fair value of $16,135 and $19,930 at March 31, 2019 and December 31, 2018, respectively. Under Iowa regulations, insurance companies are required to hold securities on deposit in an amount no less than the legal reserve. At March 31, 2019 and December 31, 2018, the Company held no material investments that were non-income producing for a period greater than twelve months. In accordance with the Company's FHLB agreements, the investments supporting the funding agreement liabilities are pledged as collateral to secure the FHLB funding agreement liabilities and are not available to the Company for general purposes. The collateral investments had a fair value of $1,186 and $1,401 at March 31, 2019 and December 31, 2018, respectively. The amortized cost and fair value of fixed maturity available-for-sale securities by contractual maturities, as applicable, are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or pre-pay obligations.
The Company's available-for-sale securities with unrealized losses are reviewed for potential OTTI. For factors considered in evaluating whether a decline in value is other-than-temporary, please refer to “Note 2. Significant Accounting Policies and Practices" to the Company’s 2018 Form 10-K. The Company analyzes its ability to recover the amortized cost by comparing the net present value of cash flows expected to be collected with the amortized cost of the security. Additionally, the Company considers other factors, including, but not limited to: whether the issuer is currently meeting its financial obligations and its ability to continue to meet these obligations, its existing cash available, and its access to additional available capital. For mortgage-backed and asset-backed securities, cash flow estimates consider the payment terms of the underlying assets backing a particular security, including interest rate and prepayment assumptions, based on data from widely accepted third-party data sources or internal estimates. In addition to interest rate and prepayment assumptions, cash flow estimates also include other assumptions regarding the underlying collateral including default rates and recoveries, which vary based on the asset type and geographic location, as well as the vintage year of the security. For structured securities, the payment priority within the tranche structure is also considered. For all other fixed maturity securities, cash flow estimates are driven by assumptions regarding probability of default and estimates regarding timing and amount of recoveries associated with a default. If the net present value is less than the amortized cost of the investment, an OTTI is recognized. Based on the results of our process for evaluating available-for-sale securities in unrealized loss positions for OTTI, as discussed above, the Company determined the unrealized losses as of March 31, 2019 decreased due to lower interest rates during the first quarter in conjunction with tighter credit spreads over Treasuries. The fair value and gross unrealized losses of available-for-sale securities, aggregated by investment category and duration of fair value below amortized cost, were as follows:
At March 31, 2019 and December 31, 2018, securities in an unrealized loss position were primarily concentrated in corporate debt. At March 31, 2019 and December 31, 2018, securities with a fair value of $40 and $132, respectively, had an unrealized loss greater than 20% of amortized cost (excluding U.S. Government and U.S. Government sponsored agency securities), which were insignificant to the carrying value of all investments, respectively. The following table provides a reconciliation of the beginning and ending balances of the credit loss portion of OTTI on fixed maturity available-for-sale securities held by the Company for the three months ended March 31, 2019 and 2018, for which a portion of the OTTI was recognized in AOCI:
The following table breaks out the credit impairment loss type, the associated amortized cost and fair value of the investments at the balance sheet date and non-credit losses in relation to fixed maturity securities and other invested assets held by the Company for the three months ended March 31, 2019 and 2018:
Details of OTTI that were recognized in "Net income (loss)" and included in net realized gains on securities were as follows:
Mortgage Loans The Company's mortgage loans are collateralized by commercial and residential properties. Commercial Mortgage Loans Commercial mortgage loans ("CMLs") represented approximately 2% of the Company’s total investments as of March 31, 2019 and December 31, 2018. The Company primarily invests in mortgage loans on income producing properties including hotels, industrial properties, retail buildings, multifamily properties and office buildings. The Company diversifies its CML portfolio by geographic region and property type to attempt to reduce concentration risk. The Company continuously evaluates CMLs based on relevant current information to ensure properties are performing at a consistent and acceptable level to secure the related debt. The distribution of CMLs, gross of valuation allowances, by property type and geographic region is reflected in the following tables:
All of the Company's investments in CMLs had a loan-to-value ("LTV") ratio of less than 75% at March 31, 2019 and December 31, 2018, as measured at inception of the loans unless otherwise updated. As of March 31, 2019, all CMLs are current and have not experienced credit or other events which would require the recording of an impairment loss. LTV and DSC ratios are measures commonly used to assess the risk and quality of mortgage loans. The LTV ratio is expressed as a percentage of the amount of the loan relative to the value of the underlying property. A LTV ratio in excess of 100% indicates the unpaid loan amount exceeds the underlying collateral. The DSC ratio, based upon the most recently received financial statements, is expressed as a percentage of the amount of a property’s net income to its debt service payments. A DSC ratio of less than 1.00 indicates that a property’s operations do not generate sufficient income to cover debt payments. We normalize our DSC ratios to a 25-year amortization period for purposes of our general loan allowance evaluation. The following table presents the recorded investment in CMLs by LTV and DSC ratio categories and estimated fair value by the indicated loan-to-value ratios at March 31, 2019 and December 31, 2018:
(a) N/A - Current DSC ratio not available. The Company establishes a general mortgage loan allowance based upon the underlying risk and quality of the mortgage loan portfolio using DSC ratio and LTV ratio. The Company believes that the LTV ratio is an indicator of the principal recovery risk for loans that default. A higher LTV ratio will result in a higher allowance. The Company believes that the DSC ratio is an indicator of default risk on loans. A higher DSC ratio will result in a lower allowance. The Company recognizes a mortgage loan as delinquent when payments on the loan are greater than 30 days past due. At March 31, 2019 and December 31, 2018, the Company had no CMLs that were delinquent in principal or interest payments. Mortgage loan workouts, refinances or restructures that are classified as troubled debt restructurings ("TDRs") are individually evaluated and measured for impairment. As of March 31, 2019 and December 31, 2018, our CML portfolio had no impairments, modifications or TDRs. Residential Mortgage Loans Residential mortgage loans ("RMLs") represented approximately 1% of the Company’s total investments as of March 31, 2019 and December 31, 2018. The Company's residential mortgage loans are closed end, amortizing loans. 100% of the properties are located in the United States. The Company diversifies its RML portfolio by state to attempt to reduce concentration risk. The distribution of RMLs by state with highest-to-lowest concentration are reflected in the following tables:
(a) The individual concentration of each state is less than 9% as of March 31, 2019.
(a) The individual concentration of each state is less than 9% as of December 31, 2018. Residential mortgage loans have a primary credit quality indicator of either a performing or nonperforming loan. The Company defines non-performing residential mortgage loans as those that are 90 or more days past due and/or in nonaccrual status which is assessed monthly. The credit quality of RMLs as at March 31, 2019 and December 31, 2018, respectively, was as follows:
Net Investment Income The major sources of “Net investment income” on the accompanying unaudited Condensed Consolidated Statements of Operations were as follows:
Net Investment Gains (Losses) Details underlying “Net investment gains (losses)” reported on the accompanying unaudited Condensed Consolidated Statements of Operations were as follows:
(a) Change in fair value of reinsurance related embedded derivatives is due to F&G Re and FSRC unaffiliated third party business. The proceeds from the sale of fixed-maturity available for-sale-securities and the gross gains and losses associated with those transactions were as follows:
Unconsolidated Variable Interest Entities FGL Insurance owns investments in VIEs that are not consolidated within the Company’s financial statements. VIEs do not have sufficient equity to finance their own activities without additional financial support and certain of its investors lack certain characteristics of a controlling financial interest. These VIEs are not consolidated in the Company’s financial statements for the following reasons: 1) FGL Insurance either does not control or does not have any voting rights or notice rights; 2) the Company does not have any substantive rights to remove the investment manager; and 3) the Company was not involved in the design of the investment. These characteristics indicate that FGL Insurance lacks the ability to direct the activities, or otherwise exert control, of the VIEs and is not considered the primary beneficiary of them. The Company previously executed a commitment of $75 to purchase common shares in an unaffiliated private business development company ("BDC"). The BDC invests in secured and unsecured fixed maturity and equity securities of middle market companies in the United States. Due to the voting structure of the transaction, the Company does not have voting power. The initial capital call occurred June 30, 2015, with the remaining commitment expected to fund June 2019. The Company has funded $54 as of March 31, 2019. The Company invests in various limited partnerships as a passive investor. These investments are in corporate credit and real estate debt strategies that have a current income bias. Limited partnership interests are accounted for under the equity method and are included in “Other invested assets” on the Company’s consolidated balance sheet. The Company's maximum exposure to loss with respect to these investments is limited to the investment carrying amounts reported in the Company's consolidated balance sheet in addition to any required unfunded commitments. As of March 31, 2019, the Company's maximum exposure to loss was $595 in recorded carrying value and $1,093 in unfunded commitments. |
Derivative Financial Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | Derivative Financial Instruments The carrying amounts of derivative instruments, including derivative instruments embedded in FIA contracts, is as follows:
The change in fair value of derivative instruments included in the accompanying unaudited Condensed Consolidated Statements of Operations is as follows:
Additional Disclosures Other Derivatives and Embedded Derivatives The Company holds a $35 fund-linked note issued by Nomura International Funding Pte. Ltd. The note provides for an additional payment at maturity based on the value of an embedded derivative in AnchorPath Dedicated Return Fund (the "AnchorPath Fund") of $11 which was based on the actual return of the fund. At March 31, 2019, the fair value of the fund-linked note and embedded derivative were $27 and $17, respectively. At December 31, 2018, the fair value of the fund-linked note and embedded derivative were $26 and $14, respectively. At maturity of the fund-linked note, FGL Insurance will receive the $35 face value of the note plus the value of the embedded derivative in the AnchorPath Fund. The additional payment at maturity is an embedded derivative reported in "Other invested assets", while the host is an available-for-sale security reported in "Fixed maturities, available-for-sale". Fixed Index Annuity ("FIA") Embedded Derivative and Call Options and Futures The Company has FIA Contracts that permit the holder to elect an interest rate return or an equity index linked component, where interest credited to the contracts is linked to the performance of various equity indices, primarily the S&P 500 Index. This feature represents an embedded derivative under GAAP. The FIA embedded derivative is valued at fair value and included in the liability for contractholder funds in the accompanying Condensed Consolidated Balance Sheets with changes in fair value included as a component of “Benefits and other changes in policy reserves” in the unaudited Condensed Consolidated Statements of Operations. See a description of the fair value methodology used in "Note 6. Fair Value of Financial Instruments". The Company purchases derivatives consisting of a combination of call options and futures contracts on the applicable market indices to fund the index credits due to FIA contractholders. The call options are one, two, three, and five year options purchased to match the funding requirements of the underlying policies. On the respective anniversary dates of the index policies, the index used to compute the interest credit is reset and the Company purchases new one, two, three, or five year call options to fund the next index credit. The Company manages the cost of these purchases through the terms of its FIA contracts, which permit the Company to change caps, spreads or participation rates, subject to guaranteed minimums, on each contract’s anniversary date. The change in the fair value of the call options and futures contracts is generally designed to offset the portion of the change in the fair value of the FIA embedded derivative related to index performance. The call options and futures contracts are marked to fair value with the change in fair value included as a component of “Net investment gains (losses).” The change in fair value of the call options and futures contracts includes the gains and losses recognized at the expiration of the instrument term or upon early termination and the changes in fair value of open positions. Other market exposures are hedged periodically depending on market conditions and the Company’s risk tolerance. The Company’s FIA hedging strategy economically hedges the equity returns and exposes the Company to the risk that unhedged market exposures result in divergence between changes in the fair value of the liabilities and the hedging assets. The Company uses a variety of techniques, including direct estimation of market sensitivities, to monitor this risk daily. The Company intends to continue to adjust the hedging strategy as market conditions and the Company’s risk tolerance change. Preferred Equity Remarketing Reimbursement Embedded Derivative Liability On November 30, 2017 the Company issued 275,000 Series A cumulative preferred shares and 100,000 Series B cumulative preferred shares (together the “Preferred Shares”). The Preferred Shares do not have a maturity date and are non-callable for the first five years. From and after November 30, 2022, the original holders of the Preferred Shares may request and thus require, the Company (subject to customary blackout provisions) to remarket the Preferred Shares on their existing terms. If the remarketing is successful and the original holders elect to sell their preferred shares at the remarketed price and proceeds from such sale are less than the outstanding balance of the applicable shares (including dividends paid in kind and accumulated but unpaid dividends), the Company will be required to reimburse the sellers, up to a maximum of 10% of the par value of the originally issued preferred shares (including dividends paid in kind and accumulated but unpaid dividends) with such amount payable either in cash, ordinary shares, or any combination thereof, at the Company's option (the “Reimbursement Feature”). The Reimbursement Feature represents an embedded derivative that is not clearly and closely related to the preferred stock host and must be bifurcated. The Reimbursement Feature liability is held at fair value within “Other liabilities” in the accompanying Condensed Consolidated Balance Sheets using a Black Derman Toy model incorporating among other things the paid in kind dividend coupon rate and the Company’s call option. Changes in fair value of this derivative are recognized within “Acquisition and operating expenses, net of deferrals” in the accompanying unaudited Condensed Consolidated Statements of Operations. Credit Risk The Company is exposed to credit loss in the event of non-performance by its counterparties on the call options and reflects assumptions regarding this non-performance risk in the fair value of the call options. The non-performance risk is the net counterparty exposure based on the fair value of the open contracts less collateral held. The Company maintains a policy of requiring all derivative contracts to be governed by an International Swaps and Derivatives Association (“ISDA”) Master Agreement. Information regarding the Company’s exposure to credit loss on the call options it holds is presented in the following table:
(a) An * represents credit ratings that were not available. Collateral Agreements The Company is required to maintain minimum ratings as a matter of routine practice as part of its over-the-counter derivative agreements on ISDA forms. Under some ISDA agreements, the Company has agreed to maintain certain financial strength ratings. A downgrade below these levels provides the counterparty under the agreement the right to terminate the open option contracts between the parties, at which time any amounts payable by the Company or the counterparty would be dependent on the market value of the underlying option contracts. The Company's current rating doesn't allow any counterparty the right to terminate ISDA agreements. In certain transactions, the Company and the counterparty have entered into a collateral support agreement requiring either party to post collateral when the net exposures exceed pre-determined thresholds. For all counterparties, except one, this threshold is set to zero. As of March 31, 2019 and December 31, 2018, counterparties posted $225 and $59 of collateral, respectively, of which $200 and $59 is included in "Cash and cash equivalents" with an associated payable for this collateral included in "Other liabilities" on the Condensed Consolidated Balance Sheets. The remaining $25 and $0 of non-cash collateral was held by a third-party custodian and may not be sold or re-pledged, except in the event of default, and, therefore, is not included in the Company's Condensed Consolidated Balance Sheets at March 31, 2019 and December 31, 2018, respectively. This collateral generally consists of U.S. treasury bonds and mortgage-backed securities. Accordingly, the maximum amount of loss due to credit risk that the Company would incur if parties to the call options failed completely to perform according to the terms of the contracts was $79 and $38 at March 31, 2019 and December 31, 2018, respectively. The Company is required to pay counterparties the effective federal funds rate each day for cash collateral posted to FGL for daily mark to market margin changes. The Company reinvests derivative cash collateral to reduce the interest cost. Cash collateral is invested in short term Treasury securities and A1/P1 commercial paper which are included in "Cash and cash equivalents" in the accompanying Condensed Consolidated Balance Sheets. The Company held 774 and 664 futures contracts at March 31, 2019 and December 31, 2018, respectively. The fair value of the futures contracts represents the cumulative unsettled variation margin (open trade equity, net of cash settlements). The Company provides cash collateral to the counterparties for the initial and variation margin on the futures contracts which is included in "Cash and cash equivalents" in the accompanying Condensed Consolidated Balance Sheets. The amount of cash collateral held by the counterparties for such contracts was $4 and $3 at March 31, 2019 and December 31, 2018, respectively. |
Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company’s measurement of fair value is based on assumptions used by market participants in pricing the asset or liability, which may include inherent risk, restrictions on the sale or use of an asset, or non-performance risk, which may include the Company’s own credit risk. The Company’s estimate of an exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability (“exit price”) in the principal market, or the most advantageous market for that asset or liability in the absence of a principal market as opposed to the price that would be paid to acquire the asset or assume a liability (“entry price”). The Company categorizes financial instruments carried at fair value into a three-level fair value hierarchy, based on the priority of inputs to the respective valuation technique. The three-level hierarchy for fair value measurement is defined as follows: Level 1 - Values are unadjusted quoted prices for identical assets and liabilities in active markets accessible at the measurement date. Level 2 - Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are observable or can be corroborated by market data for the term of the instrument. Such inputs include market interest rates and volatilities, spreads, and yield curves. Level 3 - Certain inputs are unobservable (supported by little or no market activity) and significant to the fair value measurement. Unobservable inputs reflect the Company’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date based on the best information available in the circumstances. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. When a determination is made to classify an asset or liability within Level 3 of the fair value hierarchy, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement. Because certain securities trade in less liquid or illiquid markets with limited or no pricing information, the determination of fair value for these securities is inherently more difficult. In addition to the unobservable inputs, Level 3 fair value investments may include observable components, which are components that are actively quoted or can be validated to market-based sources. The carrying amounts and estimated fair values of the Company’s financial instruments for which the disclosure of fair values is required, including financial assets and liabilities measured and carried at fair value on a recurring basis, with the exception of investment contracts, related party loans, portions of other invested assets and debt which are disclosed later within this footnote, was summarized according to the hierarchy previously described, as follows:
Valuation Methodologies Fixed Maturity Securities & Equity Securities The Company measures the fair value of its securities based on assumptions used by market participants in pricing the security. The most appropriate valuation methodology is selected based on the specific characteristics of the fixed maturity or equity security, and the Company will then consistently apply the valuation methodology to measure the security’s fair value. The Company's fair value measurement is based on a market approach, which utilizes prices and other relevant information generated by market transactions involving identical or comparable securities. Sources of inputs to the market approach include third-party pricing services, independent broker quotations, or pricing matrices. The Company uses observable and unobservable inputs in its valuation methodologies. Observable inputs include benchmark yields, reported trades, broker-dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data. In addition, market indicators and industry and economic events are monitored and further market data will be acquired when certain thresholds are met. For certain security types, additional inputs may be used, or some of the inputs described above may not be applicable. The significant unobservable input used in the fair value measurement of equity securities for which the market approach valuation technique is employed is yield for comparable securities. Increases or decreases in the yields would result in lower or higher, respectively, fair value measurements. For broker-quoted only securities, quotes from market makers or broker-dealers are obtained from sources recognized to be market participants. Management believes the broker quotes are prices at which trades could be executed based on historical trades executed at broker-quoted or slightly higher prices. The Company has an equity investment in a private business development company which is not traded on an exchange or valued by other sources such as analytics or brokers. The Company based the fair value of this investment on an estimated net asset value provided by the investee. Management did not make any adjustments to this valuation. The fair value of the Company's investment in mutual funds is based on the net asset value published by the respective mutual fund and represents the value the Company would have received if it withdrew its investment on the balance sheet date. The Company did not adjust prices received from third parties as of March 31, 2019 or December 31, 2018. However, the Company does analyze the third-party valuation methodologies and related inputs to perform assessments to determine the appropriate level within the fair value hierarchy. Derivative Financial Instruments The fair value of call option assets is based upon valuation pricing models, which represents what the Company would expect to receive or pay at the balance sheet date if it canceled the options, entered into offsetting positions, or exercised the options. Fair values for these instruments are determined internally, based on valuation pricing models which use market-observable inputs, including interest rates, yield curve volatilities, and other factors. The fair value of futures contracts represents the cumulative unsettled variation margin (open trade equity, net of cash settlements) which represents what the Company would expect to receive or pay at the balance sheet date if it canceled the futures contract or entered into offsetting positions. These contracts are classified as Level 1. The fair value measurement of the FIA embedded derivatives included in contractholder funds is determined through a combination of market observable information and significant unobservable inputs. The market observable inputs are the market value of option and interest swap rates. The significant unobservable inputs are the mortality multiplier, surrender rates, non-performance spread and option costs. The mortality multiplier at March 31, 2019 and December 31, 2018 was applied to the Annuity 2000 mortality tables. Significant increases or decreases in the market value of an option in isolation would result in a higher or lower, respectively, fair value measurement. Significant increases or decreases in interest swap rates, mortality multiplier, surrender rates, or non-performance spread in isolation would result in a lower or higher fair value measurement, respectively. Generally, a change in any one unobservable input would not directly result in a change in any other unobservable input. The fair value of the Reimbursement Feature is determined using a Black Derman Toy model, incorporating the paid in kind dividend coupon, the Company's redemption option and the preferred shareholder's remarketing feature. The remarketing feature allows the shareholder to put the preferred shares to the Company for a value of par after five years and, if after a successful remarketing event the amount is less than 90% par, up to a maximum of 10% of liquidation price defined. Fair value of this derivative decreased $2 during the three months ended March 31, 2019, due to changes in the credit spread. Other Invested Assets Fair value of the AnchorPath embedded derivative is based on an unobservable input, the net asset value of the AnchorPath fund at the balance sheet date. The embedded derivative is similar to a call option on the net asset value of the AnchorPath fund with a strike price of zero since FGL Insurance will not be required to make any additional payments at maturity of the fund-linked note in order to receive the net asset value of the AnchorPath fund on the maturity date. A Black-Scholes model determines the net asset value of the AnchorPath fund as the fair value of the call option regardless of the values used for the other inputs to the option pricing model. The net asset value of the AnchorPath fund is provided by the fund manager at the end of each calendar month and represents the value an investor would receive if it withdrew its investment on the balance sheet date. Therefore, the key unobservable input used in the Black-Scholes model is the value of the AnchorPath fund. As the value of the AnchorPath fund increases or decreases, the fair value of the embedded derivative will increase or decrease. FSRC and F&G Re Funds Withheld for Reinsurance Receivables and Future Policy Benefits FSRC and F&G Re elected to apply the Fair Value Option to account for its funds withheld receivables and future policy benefits liability related to its assumed reinsurance. FSRC and F&G Re measures the fair value of the Funds Withheld for Reinsurance Receivables based on the fair values of the securities in the underlying funds withheld portfolio held by the cedant. FSRC and F&G Re use a discounted cash flows approach to measure the fair value of the Future Policy Benefits Reserve. The cash flows associated with future policy premiums and benefits are generated using best estimate assumptions (plus a risk margin, where applicable) and are consistent with market prices, where available. Risk margins are typically applied to non-observable, non-hedgeable market inputs such as long term volatility, mortality, morbidity, lapse, etc. The significant unobservable inputs used in the fair value measurement of the FSRC and F&G Re future policy benefit liability are undiscounted cash flows, non-performance risk spread and risk margin to reflect uncertainty. Undiscounted cash flows used in our March 31, 2019 discounted cash flow model equaled $1,152. Increases or decreases in non-performance risk spread and risk margin to reflect uncertainty would result in a lower or higher fair value measurement, respectively. Quantitative information regarding significant unobservable inputs used for recurring Level 3 fair value measurements of financial instruments carried at fair value as of March 31, 2019 and December 31, 2018, are as follows:
Changes in unrealized losses (gains), net in the Company’s FIA embedded derivatives are included in "Benefits and other changes in policy reserves" in the unaudited Condensed Consolidated Statements of Operations. The following tables summarize changes to the Company’s financial instruments carried at fair value and classified within Level 3 of the fair value hierarchy for the three months ended March 31, 2019 and 2018, respectively. This summary excludes any impact of amortization of VOBA and DAC. The gains and losses below may include changes in fair value due in part to observable inputs that are a component of the valuation methodology.
(a) The net transfers out of Level 3 during the three months ended March 31, 2019 were exclusively to Level 2.
(a) The net transfers out of Level 3 during the three months ended March 31, 2018 were exclusively to Level 2. Valuation Methodologies and Associated Inputs for Financial Instruments Not Carried at Fair Value The following discussion outlines the methodologies and assumptions used to determine the fair value of our financial instruments not carried at fair value. Considerable judgment is required to develop these assumptions used to measure fair value. Accordingly, the estimates shown are not necessarily indicative of the amounts that would be realized in a one-time, current market exchange of all of our financial instruments. Mortgage Loans The fair value of mortgage loans is established using a discounted cash flow method based on credit rating, maturity and future income. This yield-based approach is sourced from our third-party vendor. The ratings for mortgages in good standing are based on property type, location, market conditions, occupancy, debt service coverage, loan-to-value, quality of tenancy, borrower, and payment record. In the event of an impairment, the carrying value is based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s market price, or the fair value of the collateral if the loan is collateral-dependent. The inputs used to measure the fair value of our mortgage loans are classified as Level 3 within the fair value hierarchy. Policy Loans (included within Other Invested Assets) Fair values for policy loans are estimated from a discounted cash flow analysis, using interest rates currently being offered for loans with similar credit risk. Loans with similar characteristics are aggregated for purposes of the calculations. Investment Contracts Investment contracts include deferred annuities, FIAs, indexed universal life policies ("IULs") and immediate annuities. The fair value of deferred annuity, FIA, and IUL contracts is based on their cash surrender value (i.e. the cost the Company would incur to extinguish the liability) as these contracts are generally issued without an annuitization date. The fair value of immediate annuities contracts is derived by calculating a new fair value interest rate using the updated yield curve and treasury spreads as of the respective reporting date. At March 31, 2019 and December 31, 2018, this resulted in lower fair value reserves relative to the carrying value. The Company is not required to, and has not, estimated the fair value of the liabilities under contracts that involve significant mortality or morbidity risks, as these liabilities fall within the definition of insurance contracts that are exceptions from financial instruments that require disclosures of fair value. Debt The fair value of debt is based on quoted market prices. The inputs used to measure the fair value of our outstanding debt are classified as Level 2 within the fair value hierarchy. Our revolving credit facility debt is classified as Level 3 within the fair value hierarchy, and the estimated fair value reflects the carrying value as the revolver has no maturity date. The following tables provide the carrying value and estimated fair value of our financial instruments that are carried on the Condensed Consolidated Balance Sheets at amounts other than fair value, summarized according to the fair value hierarchy previously described.
The following table includes assets that have not been classified in the fair value hierarchy as the fair value of these investments are measured using the net asset value per share practical expedient. For further discussion about this adoption see “Note 2. Significant Accounting Policies and Practices” to the Company's 2018 Form 10-K.
For investments for which NAV is used as a practical expedient for fair value, the Company does not have any significant restrictions in their ability to liquidate their positions in these investments, other than obtaining general partner approval, nor does the Company believe it is probable a price less than NAV would be received in the event of a liquidation. The Company reviews the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and out of Level 3, or between other levels, at the beginning fair value for the reporting period in which the changes occur. The transfers into and out of Level 3 were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value. The Company’s assessment resulted in gross transfers into and gross transfers out of certain fair value levels by asset class for the three months ended March 31, 2019 and 2018, are as follows:
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Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets | Intangibles A summary of the changes in the carrying amounts of the Company's VOBA, DAC and DSI intangible assets are as follows:
Amortization of VOBA, DAC, and DSI is based on the historical, current and future expected gross margins or profits recognized, including investment gains and losses. The interest accrual rate utilized to calculate the accretion of interest on VOBA ranged from 0.05% to 4.01%. The adjustment for unrealized net investment losses (gains) represents the amount of VOBA, DAC, and DSI that would have been amortized if such unrealized gains and losses had been recognized. This is referred to as the “shadow adjustments” as the additional amortization is reflected in AOCI rather than the unaudited Condensed Consolidated Statements of Operations. As of March 31, 2019 and 2018, the VOBA balances included cumulative adjustments for net unrealized investment (gains) losses of $40 and $22, respectively, the DAC balances included cumulative adjustments for net unrealized investment (gains) losses of $5 and $0, respectively, and the DSI balance included net unrealized investment (gains) losses of $2 and $2, respectively. Estimated amortization expense for VOBA in future fiscal periods is as follows:
The Company had an unearned revenue liability balance of $(39) as of March 31, 2019, including deferrals of $(9), amortization of $2, unlocking of $0, and adjustment for net unrealized investment gains (losses) of $9. Definite and Indefinite Lived Intangible Assets Amortizable intangible assets as of March 31, 2019 consist of the following:
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt The carrying amount of the Company's outstanding debt as of March 31, 2019 and December 31, 2018 is as follows:
As of March 31, 2019 and December 31, 2018, the company had not drawn on the revolver, which would have carried interest rates equal to 5.25% and 5.27%, respectively, had we drawn on the revolver. As of March 31, 2019 and December 31, 2018, the amount available to be drawn on the revolver was $250. The interest expense and amortization of debt issuance costs for the three months ended March 31, 2019 and 2018, respectively, were as follows:
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Equity |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity | Equity Share Repurchases On December 19, 2018, the Company's Board of Directors authorized a share repurchase program of up to $150 of the Company's outstanding common stock. This program will expire on December 15, 2020, and may be modified at any time. Under the share repurchase program, the Company may repurchase shares from time to time in open market transactions or through privately negotiated transactions in accordance with applicable federal securities laws. Repurchases may also be made pursuant to a trading plan under Rule 10b5-1 of the Securities Exchange Act of 1934. The extent to which the Company repurchases its shares, and the timing of such purchases, will depend upon a variety of factors, including market conditions, regulatory requirements and other considerations, as determined by the Company. During the three months ended March 31, 2019, the Company repurchased 3,728 thousand shares for a total cost of $30. As of March 31, 2019, the Company had repurchased a total of 4,328 thousand shares for a total cost of $34. Dividends The Company declared the following cash dividend to its common shareholders during the three months ended March 31, 2019.
On May 7, 2019, the Company's Board of Directors declared a quarterly cash dividend of $0.01 per share. The dividend will be paid on June 10, 2019 to shareholders of record as of the close of business on May 28, 2019. The Company did not declare a cash dividend to its common shareholders during the three months ended March 31, 2018. The Company declared the following dividends to its preferred shareholders during the three months ended March 31, 2019:
The Company declared the following dividends to its preferred shareholders during the three months ended March 31, 2018:
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Stock Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Compensation | Stock Compensation On August 8, 2017, the Company adopted a stock-based incentive plan (the “FGL Incentive Plan”) that permits the granting of awards in the form of qualified stock options, non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights, unrestricted stock, performance-based awards, dividend equivalents, cash awards and any combination of the foregoing. The Company’s Compensation Committee is authorized to grant up to 15,006 thousand equity awards under the Incentive Plan. At March 31, 2019, 5,588 thousand equity awards are available for future issuance. FGL Incentive Plan On February 26, 2019 FGL granted 1,699 thousand stock options to a certain officer of the Company. The following table summarizes the vesting conditions for these options:
The total fair value of the options granted on February 26, 2019 was $3. The fair value of the awards is expensed over the service period, which generally corresponds to the vesting period. At March 31, 2019, the intrinsic value of stock options outstanding or expected to vest was $76. At March 31, 2019, the weighted average remaining contractual term of stock options outstanding, exercisable and vested or expected to vest was 7 years, 6 years and 7 years, respectively. At March 31, 2019 there were 485 options that were exercisable. A summary of the Company’s outstanding stock options as of March 31, 2019, and related activity during the three months ended March 31, 2019, is as follows (share amount in thousands):
To value the options granted with service and return on equity performance vesting conditions, we used a Black Scholes valuation model. To value the options granted with stock price market performance vesting conditions, we used a Monte Carlo simulation. The following inputs and assumptions were used in the determination of the grant date fair values of the February 26, 2019 grants for each.
The Company granted 147 thousand restricted shares to directors in the three months ended March 31, 2019. These shares will vest on December 31, 2019. The total fair value of the restricted shares granted in the three months ended March 31, 2019 was $1. A summary of the Company’s nonvested restricted shares outstanding as of March 31, 2019, and related activity during the three months ended, is as follows (share amount in thousands):
Management Incentive Plan In the three months ended March 31, 2019, the Company granted 424 thousand phantom units to members of management under a management incentive plan (the "Management Incentive Plan"). The total fair value of the restricted shares granted in the three months ended March 31, 2019 was $4. One half of the phantom units vest in three equal installments on each March 15th from 2020 to 2022, subject to awardees continued service with the Company. The other half will begin vesting on March 15, 2021 and cliff vest on March 15, 2022 based on continued service and attainment of a performance metric: adjusted operating income return on equity. At March 31, 2019, the liability for phantom units of $1 was based on the number of units granted, the elapsed portion of the service period and the fair value of the Company’s common stock on that date which was $7.87. A summary of the Management Incentive Plan nonvested phantom units outstanding as of March 31, 2019, and related activity during the three months ended, is as follows (share amount in thousands):
The Company recognized total stock compensation expense related to the FGL Incentive Plan and Management Incentive Plan is as follows:
The stock compensation expense is included in "Acquisition and operating expenses, net of deferrals" in the unaudited Condensed Consolidated Statements of Operations. Total compensation expense related to the FGL Incentive Plan and Management Incentive Plan not yet recognized as of March 31, 2019 and the weighted-average period over which this expense will be recognized are as follows:
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Income Taxes |
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Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company is a Cayman-domiciled corporation that has operations in Bermuda and the U.S. Neither the Cayman Islands nor Bermuda impose a corporate income tax. The Company’s U.S. non-life subsidiaries file a consolidated non-life U.S. Federal income tax return. The Company’s US life insurance subsidiaries file a separate life consolidated U.S. Federal income tax return. The life insurance companies will be eligible to join in a consolidated filing with the U.S. non-life companies in 2022. The provision for income taxes represents federal income taxes. The effective tax rate for the three months ended March 31, 2019 was 5%. The effective tax rate for the three months ended March 31, 2018 was 38%. The effective tax rate on pre-tax income for the current three months ended March 31, 2019 differs from the U.S Federal statutory rate for 2019 of 21% primarily due to two factors. First, in 2018, a partial valuation allowance was established against the US Life companies' unrealized loss deferred tax assets because there were not sufficient sources of income to recover those assets. During the first quarter of 2019, the unrealized loss position recovered enough that the valuation allowance was no longer needed and it was released. Secondly, the Company had substantial income in jurisdictions that do not impose an income tax. The effective tax rate on pre-tax income for the three months ended March 31, 2018 differed from the U.S. Federal statutory rate for 2018 of 21% primarily due to the impact of an intended tax election. During the first quarter of 2018, there was uncertainty surrounding the impact of the Base-Erosion and Anti-Abuse Tax ("BEAT") that was enacted as part of the Tax Cut and Jobs Act and how it would impact the reinsurance agreement between F&G Life Re and FGL Insurance. As a result of the uncertainty, F&G Life Re intended to make an election under IRC Code Section 953(d) for the 2018 tax year to be treated as if it were a US taxpayer for the year. As such, an opening balance sheet deferred tax liability was set up resulting in a discrete expense being recorded in the first quarter of 2018 that increased the first quarter effective rate. Based on clarifying guidance, the Company ultimately decided not to make that election in the fourth quarter of 2018. As of March 31, 2019, the Company had a partial valuation allowance of $33 against its gross deferred tax assets of $316. The valuation allowance is an offset to the non-life companies deferred tax assets and FSRC deferred tax assets. The non-life insurance company subsidiaries have a history of losses and insufficient sources of future income that would allow for recognition of any of their deferred tax assets. FSRC is in a cumulative loss position and does not have a sufficient track record of earnings to recognize any portion of its deferred tax assets The valuation allowance is reviewed quarterly and will be maintained until there is sufficient positive evidence to support a release. At each reporting date, management considers new evidence, both positive and negative, that could impact the future realization of deferred tax assets. Management will consider a release of the valuation allowance once there is sufficient positive evidence that it is more likely than not that the deferred tax assets will be realized. Any release of the valuation allowance will be recorded as a tax benefit increasing net income or other comprehensive income. All other deferred tax assets are more likely than not to be realized based on expectations as to our future taxable income and considering all other available evidence, both positive and negative. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies Commitments The Company has unfunded investment commitments as of March 31, 2019 based upon the timing of when investments are executed compared to when the actual investments are funded, as some investments require that funding occur over a period of months or years. A summary of unfunded commitments by invested asset class are included below:
As of March 31, 2019, the Company had unfunded commitments in affiliated investments which are included in the table above. See "Note 14. Related Party Transactions" for further information. Lease Commitments The Company leases office space under non-cancelable operating leases that expire in May 2021. Rent expense and minimum rental commitments under non-cancelable leases are immaterial. Contingencies Regulatory and Litigation Matters The Company is involved in various pending or threatened legal proceedings, including purported class actions, arising in the ordinary course of business. In some instances, these proceedings include claims for unspecified or substantial punitive damages and similar types of relief in addition to amounts for alleged contractual liability or requests for equitable relief. In the opinion of the Company's management and in light of existing insurance and other potential indemnification, reinsurance and established accruals, such litigation is not expected to have a material adverse effect on the Company's financial position, although it is possible that the results of operations and cash flows could be materially affected by an unfavorable outcome in any one period. The Company is assessed amounts by state guaranty funds to cover losses to policyholders of insolvent or rehabilitated insurance companies. Those mandatory assessments may be partially recovered through a reduction in future premium taxes in certain states. At March 31, 2019, the Company has accrued $2 for guaranty fund assessments that is expected to be offset by estimated future premium tax deductions of $2. The Company has received inquiries from a number of state regulatory authorities regarding our use of the U.S. Social Security Administration’s Death Master File (“Death Master File”) and compliance with state claims practices regulations and unclaimed property or escheatment laws. We have established procedures to periodically compare our in-force life insurance and annuity policies against the Death Master File or similar databases; investigate any identified potential matches to confirm the death of the insured; and determine whether benefits are due and attempt to locate the beneficiaries of any benefits due or, if no beneficiary can be located, escheat the benefit to the state as unclaimed property. We believe we have established sufficient reserves with respect to these matters; however, it is possible that third parties could dispute these amounts and additional payments or additional unreported claims or liabilities could be identified which could be significant and could have a material adverse effect on our results of operations. On June 30, 2017, a putative class action complaint was filed against FGL Insurance, FGL, and FS Holdco II Ltd in the United States District Court for the District of Maryland, captioned Brokerage Insurance Partners v. Fidelity & Guaranty Life Insurance Company, Fidelity & Guaranty Life, FS Holdco II Ltd, and John Doe, No. 17-cv-1815. The complaint alleges that FGL Insurance breached the terms of its agency agreement with Brokerage Insurance Partners (“BIP”) and other agents by changing certain compensation terms. The complaint asserts, among other causes of action, breach of contract, defamation, tortious interference with contract, negligent misrepresentation, and violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”). The complaint seeks to certify a class composed of all persons who entered into an agreement with FGL Insurance to sell life insurance and who sold at least one life insurance policy between January 1, 2015 and January 1, 2017. The complaint seeks unspecified compensatory, consequential, and punitive damages in an amount not presently determinable, among other forms of relief. On September 1, 2017, FGL Insurance filed a counterclaim against BIP and John and Jane Does 1-10, asserting, among other causes of action, breach of contract, fraud, civil conspiracy and violations of RICO. On September 22, 2017, Plaintiff filed an Amended Complaint, and on October 16, 2017, FGL Insurance filed an Amended Counterclaim against BIP, Agent Does 1-10, and Other Person Does 1-10. The parties also filed cross-Motions to Dismiss in Part. On August 17, 2018, the Court in the BIP Litigation denied all pending Motions to Dismiss filed by all parties without prejudice, pending a decision as to whether the BIP Litigation will be consolidated into related litigation, captioned Fidelity & Guaranty Life Insurance Company v. Network Partners, et al., Case No. 17-cv-1508. On August 31, 2018, FGL Insurance filed its Answer to BIP’s Amended Complaint. Also on that date, FGL Insurance filed its Answer to Amended Complaint, Affirmative Defenses, and Counterclaim, Filed Pursuant to Fed. R. Civ. P. 12(a)(4)(A). As of March 31, 2019, BIP has not filed any paper or pleading in response to the Court’s August 17, 2018 Order or to FGL Insurance’s filing. BIP's response date has been adjourned to May 15, 2019. As of the date of this report, the Company does not have sufficient information to determine whether it has exposure to any losses that would be either probable or reasonably estimable. |
Reinsurance |
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Reinsurance Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reinsurance | Reinsurance The Company reinsures portions of its policy risks with other insurance companies. The use of indemnity reinsurance does not discharge an insurer from liability on the insurance ceded. The insurer is required to pay in full the amount of its insurance liability regardless of whether it is entitled to or able to receive payment from the reinsurer. The portion of risks exceeding the Company's retention limit is reinsured. The Company primarily seeks reinsurance coverage in order to limit its exposure to mortality losses and enhance capital management. The Company follows reinsurance accounting when there is adequate risk transfer. Otherwise, the deposit method of accounting is followed. The Company also assumes policy risks from other insurance companies. The effect of reinsurance on net premiums earned and net benefits incurred (benefits incurred and reserve changes) for the three months ended March 31, 2019 and 2018 were as follows:
Amounts payable or recoverable for reinsurance on paid and unpaid claims are not subject to periodic or maximum limits. The Company did not write off any significant reinsurance balances during the three months ended March 31, 2019 and 2018. The Company did not commute any ceded reinsurance treaties during the three months ended March 31, 2019 or 2018. No policies issued by the Company have been reinsured with any foreign company, which is controlled, either directly or indirectly, by a party not primarily engaged in the business of insurance. The Company has not entered into any reinsurance agreements in which the reinsurer may unilaterally cancel any reinsurance for reasons other than non-payment of premiums or other similar credit issues. Effective January 1, 2017, FGL Insurance entered into an indemnity reinsurance agreement with Hannover Re, a third party reinsurer, to reinsure an inforce block of its FIA and fixed deferred annuity contracts with GMWB and Guaranteed Minimum Death Benefit (“GMDB”) guarantees. In accordance with the terms of this agreement, FGL Insurance cedes a quota share percentage of the net retention of guarantee payments in excess of account value for GMWB and GMDB guarantees. The effects of this agreement are not accounted for as reinsurance as it does not satisfy the risk transfer requirements for GAAP, since it is not “reasonably possible” that the reinsurer may realize significant loss from assuming the insurance risk. Effective July 1, 2017, FGL Insurance extended this agreement to include new business issued during 2017. Effective January 1, 2018 FGL Insurance extended this agreement to include new business issued during 2018, and extended the recapture period from 8 to 12 years. Effective January 1, 2019, FGL Insurance extended this agreement to include new business issued during 2019. FGL Insurance incurred risk charge fees of $4 during the three months ended March 31, 2019, in relation to this reinsurance agreement. Effective December 31, 2018, FGL Insurance entered into a reinsurance agreement with Kubera to cede approximately $758 of certain MYGA and deferred annuity GAAP reserve on a coinsurance funds withheld basis, net of applicable existing reinsurance. In accordance with the terms of this agreement, FGL Insurance cedes a 40%, 45%, and 63% quota share percentage of these annuity plans for issue years 2013, 2001 through 2012, and 2000 and prior, respectively. Effective December 31, 2018, FGL Insurance entered into a reinsurance agreement with Kubera to cede approximately $4 billion of certain FIA statutory reserve on a coinsurance funds withheld basis, net of applicable existing reinsurance. In accordance with the terms of this agreement, FGL Insurance cedes an 80% and 90% quota share percentage of these annuity plans for issue years 2013 through 2014, and 2007 and prior, respectively. The effects of this agreement are not accounted for as reinsurance as it does not satisfy the risk transfer requirements for GAAP, since it is not “reasonably possible” that the reinsurer may realize significant loss from assuming the insurance risk. F&G Reinsurance Companies FSRC, an affiliate of FGL Insurance, has entered into various reinsurance agreements on a funds withheld basis, meaning that funds are withheld by the ceding company from the coinsurance premium owed to FSRC as collateral for FSRC's payment obligations. Accordingly, the collateral assets remain under the ultimate ownership of the ceding company. FSRC manages the assets supporting the reserves assumed in accordance with the internal investment policy of the ceding companies and applicable law. At March 31, 2019, FSRC had $286 of funds withheld receivables and $270 of insurance reserves related to these reinsurance treaties. F&G Re, an affiliate of FGL Insurance, has entered into two reinsurance agreements on a funds withheld basis with unaffiliated parties. At March 31, 2019, F&G Re had $551 of funds withheld receivables and $527 of insurance reserves related to these reinsurance treaties. See a description of FSRC’s and F&G Re's accounting policy for its assumed reinsurance contracts in "Note 2. Significant Accounting Policies and Practices" within the Company's 2018 Form 10-K. |
Related Party Transactions |
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Mar. 31, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions Affiliated Investments The Company, and certain subsidiaries of the Company, entered into investment management agreements with Blackstone ISG-I Advisors LLC ("BISGA"), a wholly-owned subsidiary of The Blackstone Group LP ("Blackstone") on December 1, 2017. Pursuant to the terms of the investment management agreements, BISGA may delegate certain of its investment management services to sub-managers and any fees or other remuneration payable to such sub-managers is payable by the Company out of the assets managed by such sub-managers. BISGA has delegated certain investment management services to its affiliates, Blackstone Real Estate Special Situations Advisors L.L.C. (“BRESSA”) and GSO Capital Advisors II LLC (“GSO Capital Advisors II”), pursuant to sub-management agreements executed between BISGA and each of BRESSA and GSO Capital Advisors. As of March 31, 2019 and December 31, 2018, the Company has a net liability of $25 and $20, respectively, for the services consumed under the investment management agreements and related sub-management agreements, partially offset by fees received and expense reimbursements from BISGA. During the three months ended March 31, 2019, the Company received expense reimbursements from BISGA for the services consumed under these agreements. Fees received for these types of services are $2 for the three months ended March 31, 2019. The Company holds certain fixed income security interests, limited partnerships and bank loans issued by portfolio companies that are affiliates of Blackstone Tactical Opportunities, an affiliate of Blackstone Tactical Opportunities LR Associates-B (Cayman) Ltd (the “Blackstone Fixed Income Securities”) both on a direct and indirect basis. Indirect investments include an investment made in an affiliates’ asset backed fund while direct investments are an investment in affiliates' equity or debt securities. As of March 31, 2019 and December 31, 2018, the Company held $1,549 and $1,461 in affiliated investments, respectively, which includes foreign exchange unrealized loss of $(4) and $(2), respectively. As of March 31, 2019 and December 31, 2018, the Company had unfunded commitments relating to affiliated investments of $971 and $990, respectively. The Company purchased $12 and $185 of residential loans from Finance of America Holdings LLC, a Blackstone affiliate, during the three months ended March 31, 2019 and on December 17, 2018, respectively. On December 1, 2017, the Company executed an agreement with Blackstone Tactical Opportunities Advisors LLC ("BTO Advisors") and Fidelity National Financial, Inc. ("FNF"), to provide the Company transactional and operational services and advice through December 31, 2018. The agreement was amended on November 2, 2018 to provide services through June 30, 2019. The Company will pay fees to BTO Advisors (or its designee(s)), and to FNF in consideration for such services in cash, ordinary shares or warrants exercisable for ordinary shares of the Company. As of March 31, 2019, no such services have been provided. The Company paid-in-kind dividends on preferred shares held by GSO Capital Partners, an indirect wholly owned subsidiary of The Blackstone Group LP, of 6 thousand shares for the three months ended March 31, 2019. The Company had no gross realized gains or realized impairment losses on related party investments during the three months ended March 31, 2019 and 2018. |
Earnings Per Share |
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Earnings Per Share | Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share (share amounts in thousands):
The number of shares of common stock outstanding used in calculating the weighted average thereof reflects the actual number of FGL Holdings shares of common stock outstanding, excluding unvested restricted stock and shares held in treasury. The calculation of diluted earnings per share for the three months ended March 31, 2019 excludes the incremental effect of 6 million weighted average common stock warrants outstanding due to their anti-dilutive effect. This calculation also excludes the potential dilutive effect of the 406 thousand preferred stock shares outstanding as of March 31, 2019 as the contingency that would allow for the preferred shares to be converted to common shares has not yet been met. The calculation of diluted earnings per share for the three months ended March 31, 2019 excludes the incremental effect related to certain outstanding stock options due to their anti-dilutive effect. The number of weighted average equivalent shares excluded is 1,737 thousand shares for the three months ended March 31, 2019. The calculation of diluted earnings per share for the three months ended March 31, 2018 excludes the potential dilutive effective of the 377 thousand preferred stock shares outstanding as of March 31, 2018 as the contingency that would allow for the preferred shares to be converted to common shares has not yet been met. |
Insurance Subsidiary Financial Information and Regulatory Matters |
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Insurance [Abstract] | |
Insurance Subsidiary Financial Information and Regulatory Matters | Insurance Subsidiary Financial Information and Regulatory Matters The Company’s U.S. insurance subsidiaries file financial statements with state insurance regulatory authorities and the National Association of Insurance Commissioners (“NAIC”) that are prepared in accordance with Statutory Accounting Principles (“SAP”) prescribed or permitted by such authorities, which may vary materially from GAAP. Prescribed SAP includes the Accounting Practices and Procedures Manual of the NAIC as well as state laws, regulations and administrative rules. Permitted SAP encompasses all accounting practices not so prescribed. The principal differences between SAP financial statements and financial statements prepared in accordance with GAAP are that SAP financial statements do not reflect DAC, DSI and VOBA, some bond portfolios may be carried at amortized cost, assets and liabilities are presented net of reinsurance, contractholder liabilities are generally valued using more conservative assumptions and certain assets are non-admitted. Accordingly, SAP operating results and SAP capital and surplus may differ substantially from amounts reported in the GAAP basis financial statements for comparable items. FSRC (Cayman), F&G Re (Bermuda), and F&G Life Re (Bermuda) file financial statements with their respective regulators that are based on U.S. GAAP. FGL Insurance applies Iowa-prescribed accounting practices that permit Iowa-domiciled insurers to report equity call options used to economically hedge FIA index credits at amortized cost for statutory accounting purposes and to calculate FIA statutory reserves such that index credit returns will be included in the reserve only after crediting to the annuity contract. This resulted in a $48 decrease and $30 increase to statutory capital and surplus at March 31, 2019 and December 31, 2018, respectively. FGL Insurance’s statutory carrying value of Raven Re reflects the effect of permitted practices Raven Re received to treat the available amount of a letter of credit as an admitted asset which increased Raven Re’s statutory capital and surplus by $100 and $110 at March 31, 2019 and December 31, 2018, respectively. Raven Re is also permitted to follow Iowa prescribed statutory accounting practice for its reserves on reinsurance assumed from FGL Insurance which increased Raven Re’s statutory capital and surplus by $1 and $0 at March 31, 2019 and December 31, 2018, respectively. Without such permitted statutory accounting practices Raven Re’s statutory capital and (deficit) surplus would be $(4) and $(16) as of March 31, 2019 and December 31, 2018, respectively, and its risk-based capital would fall below the minimum regulatory requirements. The letter of credit facility is collateralized by NAIC 1 rated debt securities. If the permitted practice was revoked, the letter of credit could be replaced by the collateral assets with Nomura’s consent. FGL Insurance’s statutory carrying value of Raven Re at March 31, 2019 and December 31, 2018 was $97 and $94, respectively. As of March 31, 2019, FGL NY Insurance did not follow any prescribed or permitted statutory accounting practices that differ from the NAIC's statutory accounting practices. The prescribed and permitted statutory accounting practices have no impact on the Company’s unaudited condensed consolidated financial statements which are prepared in accordance with GAAP. |
Significant Accounting Policies and Practices (Policies) |
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Principles of Consolidation | Principles of Consolidation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and all other entities in which the Company has a controlling financial interest and any variable interest entities ("VIEs") in which we are the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation. |
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VIE | We are involved in certain entities that are considered VIEs as defined under GAAP. Our involvement with VIEs is primarily to invest in assets that allow us to gain exposure to a broadly diversified portfolio of asset classes. A VIE is an entity that does not have sufficient equity to finance its own activities without additional financial support or where investors lack certain characteristics of a controlling financial interest. We assess our relationships to determine if we have the ability to direct the activities, or otherwise exert control, to evaluate if we are the primary beneficiary of the VIE. If we determine we are the primary beneficiary of a VIE, we consolidate the assets and liabilities of the VIE in our unaudited condensed consolidated financial statements. The Company has determined that we are not the primary beneficiary of a VIE as of March 31, 2019. See "Note 4. Investments" to the Company’s unaudited condensed consolidated financial statements for additional information on the Company’s investments in unconsolidated VIEs. |
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Significant Accounting Policies and Practices | Adoption of New Accounting Pronouncements Premium Amortization on Purchased Callable Debt Securities In March 2017, the FASB issued new guidance on the amortization of callable securities (ASU 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities), effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The ASU requires premiums paid on purchased debt securities with an explicit call option to be amortized to the earliest call date, as opposed to the maturity date (as under current GAAP). The updated guidance is applicable to instruments that are callable based on explicit, non-contingent call features that are callable at fixed prices on preset dates. The amendments in this update should be applied using the modified retrospective method through a cumulative effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company adopted this new accounting guidance effective January 1, 2019, as required, and it had an immaterial impact on its unaudited condensed consolidated financial statements. Amendments to Lease Accounting In February 2016, the FASB issued amended guidance (ASU 2016-02, Leases (Topic 842)), effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Notable amendments in this update will:
The amendments are required to be applied at the beginning of the earliest period presented using a modified retrospective approach (including several optional practical expedients related to leases commenced before the effective date). The Company has adopted this standard effective January 1, 2019, as required, and it had an immaterial impact on its unaudited condensed consolidated financial statements. Future Accounting Pronouncements Accounting pronouncements that will impact the Company in future periods have been disclosed in the Company’s 2018 Form 10-K. There have not been any additional accounting pronouncements issued during the quarter ended March 31, 2019 that are expected to impact the Company. The following two pronouncements were discussed in our 2018 Form 10-K but have been included below so as to provide an update on the Company’s status of adoption. New Credit Loss Standard In June 2016, the FASB issued new guidance (ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments), effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Notable amendments in this update will change the accounting for impairment of most financial assets and certain other instruments in the following ways:
The amendments in this ASU may be early adopted during any interim or annual period beginning after December 15, 2018, however the Company has elected not to. The Company has identified the material asset classes impacted by the new guidance and is in the process of assessing the accounting, reporting and/or process changes that will be required to comply with the new guidance. The Company has developed a project plan to complete our adoption of this new standard, and is evaluating the impact of the new guidance on its consolidated financial statements. Long-Duration Contracts In August 2018, the FASB issued new guidance (ASU 2018-12, Financial Services-Insurance (Topic 944), Targeted Improvements to the Accounting for Long-Duration Contracts), effective for fiscal years beginning after December 15, 2020 including interim periods within those fiscal years. Under this update:
The amendments in this ASU may be early adopted as of the beginning of an annual reporting period for which financial statements have not yet been issued, including interim financial statements. The Company does not currently expect to early adopt this standard. The Company has identified specific areas that will be impacted by the new guidance and is in the process of assessing the accounting, reporting and/or process changes that will be required to comply as well as the impact of the new guidance on its consolidated financial statements. |
Investments (Tables) |
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Investments Classified by Contractual Maturity Date [Table Text Block] | The amortized cost and fair value of fixed maturity available-for-sale securities by contractual maturities, as applicable, are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or pre-pay obligations.
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Consolidated Investments | The Company's equity securities investments are carried at fair value with unrealized gains and losses included in net income. The Company’s consolidated investments at March 31, 2019 and December 31, 2018 are summarized as follows:
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Fair Value and Gross Unrealized Losses of Available-for-Sale-Securities | The fair value and gross unrealized losses of available-for-sale securities, aggregated by investment category and duration of fair value below amortized cost, were as follows:
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Reconciliation of Other-than-Temporary Impairment on Fixed Maturity | Details of OTTI that were recognized in "Net income (loss)" and included in net realized gains on securities were as follows:
The following table provides a reconciliation of the beginning and ending balances of the credit loss portion of OTTI on fixed maturity available-for-sale securities held by the Company for the three months ended March 31, 2019 and 2018, for which a portion of the OTTI was recognized in AOCI:
The following table breaks out the credit impairment loss type, the associated amortized cost and fair value of the investments at the balance sheet date and non-credit losses in relation to fixed maturity securities and other invested assets held by the Company for the three months ended March 31, 2019 and 2018:
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Schedule of Accounts, Notes, Loans and Financing Receivable | The distribution of CMLs, gross of valuation allowances, by property type and geographic region is reflected in the following tables:
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Schedule of Investment in Mortgage Loans by Loan to Value and Debt Service Coverage Ratios | The following table presents the recorded investment in CMLs by LTV and DSC ratio categories and estimated fair value by the indicated loan-to-value ratios at March 31, 2019 and December 31, 2018:
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Derivative Financial Instruments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block] | The carrying amounts of derivative instruments, including derivative instruments embedded in FIA contracts, is as follows:
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FGL's Exposure to Credit Loss on Call Options Held | Information regarding the Company’s exposure to credit loss on the call options it holds is presented in the following table:
(a) An * represents credit ratings that were not available. |
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Derivative Instruments, Gain (Loss) [Table Text Block] | The change in fair value of derivative instruments included in the accompanying unaudited Condensed Consolidated Statements of Operations is as follows:
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Fair Value of Financial Instruments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets and Liabilities Carrying at Fair Value on Recurring Basis | The carrying amounts and estimated fair values of the Company’s financial instruments for which the disclosure of fair values is required, including financial assets and liabilities measured and carried at fair value on a recurring basis, with the exception of investment contracts, related party loans, portions of other invested assets and debt which are disclosed later within this footnote, was summarized according to the hierarchy previously described, as follows:
The following tables provide the carrying value and estimated fair value of our financial instruments that are carried on the Condensed Consolidated Balance Sheets at amounts other than fair value, summarized according to the fair value hierarchy previously described.
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Schedule of Unobservable Inputs Used for Level Three Fair Value Measurements of Financial Instruments on Recurring Basis | Quantitative information regarding significant unobservable inputs used for recurring Level 3 fair value measurements of financial instruments carried at fair value as of March 31, 2019 and December 31, 2018, are as follows:
Changes in unrealized losses (gains), net in the Company’s FIA embedded derivatives are included in "Benefits and other changes in policy reserves" in the unaudited Condensed Consolidated Statements of Operations. |
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Changes in Fair Value of Financial Instruments - Assets | The following tables summarize changes to the Company’s financial instruments carried at fair value and classified within Level 3 of the fair value hierarchy for the three months ended March 31, 2019 and 2018, respectively. This summary excludes any impact of amortization of VOBA and DAC. The gains and losses below may include changes in fair value due in part to observable inputs that are a component of the valuation methodology.
(a) The net transfers out of Level 3 during the three months ended March 31, 2019 were exclusively to Level 2.
(a) The net transfers out of Level 3 during the three months ended March 31, 2018 were exclusively to Level 2. |
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Changes in Fair Value of Financial Instruments - Liabilities | The following tables summarize changes to the Company’s financial instruments carried at fair value and classified within Level 3 of the fair value hierarchy for the three months ended March 31, 2019 and 2018, respectively. This summary excludes any impact of amortization of VOBA and DAC. The gains and losses below may include changes in fair value due in part to observable inputs that are a component of the valuation methodology.
(a) The net transfers out of Level 3 during the three months ended March 31, 2019 were exclusively to Level 2.
(a) The net transfers out of Level 3 during the three months ended March 31, 2018 were exclusively to Level 2. |
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Schedule of Net Asset Value | The following table includes assets that have not been classified in the fair value hierarchy as the fair value of these investments are measured using the net asset value per share practical expedient. For further discussion about this adoption see “Note 2. Significant Accounting Policies and Practices” to the Company's 2018 Form 10-K.
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Gross Transfers Into and Out of Certain Fair Value Levels by Asset Class | The Company’s assessment resulted in gross transfers into and gross transfers out of certain fair value levels by asset class for the three months ended March 31, 2019 and 2018, are as follows:
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Intangible Assets (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Information Regarding Intangible Assets, VOBA and DAC | A summary of the changes in the carrying amounts of the Company's VOBA, DAC and DSI intangible assets are as follows:
Amortization of VOBA, DAC, and DSI is based on the historical, current and future expected gross margins or profits recognized, including investment gains and losses. The interest accrual rate utilized to calculate the accretion of interest on VOBA ranged from 0.05% to 4.01%. The adjustment for unrealized net investment losses (gains) represents the amount of VOBA, DAC, and DSI that would have been amortized if such unrealized gains and losses had been recognized. This is referred to as the “shadow adjustments” as the additional amortization is reflected in AOCI rather than the unaudited Condensed Consolidated Statements of Operations. As of March 31, 2019 and 2018, the VOBA balances included cumulative adjustments for net unrealized investment (gains) losses of $40 and $22, respectively, the DAC balances included cumulative adjustments for net unrealized investment (gains) losses of $5 and $0, respectively, and the DSI balance included net unrealized investment (gains) losses of $2 and $2, respectively. |
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Estimated Amortization Expense for VOBA in Future Fiscal Periods | Estimated amortization expense for VOBA in future fiscal periods is as follows:
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Debt (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Debt | The interest expense and amortization of debt issuance costs for the three months ended March 31, 2019 and 2018, respectively, were as follows:
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Equity (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends Declared | The Company declared the following cash dividend to its common shareholders during the three months ended March 31, 2019.
On May 7, 2019, the Company's Board of Directors declared a quarterly cash dividend of $0.01 per share. The dividend will be paid on June 10, 2019 to shareholders of record as of the close of business on May 28, 2019. The Company did not declare a cash dividend to its common shareholders during the three months ended March 31, 2018. The Company declared the following dividends to its preferred shareholders during the three months ended March 31, 2019:
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Commitments and Contingencies (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
Summary of Unfunded Commitments | summary of unfunded commitments by invested asset class are included below:
As of March 31, 2019, the Company had unfunded commitments in affiliated investments which are included in the table above. See "Note 14. Related Party Transactions" for further information. |
Reinsurance (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reinsurance Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effect of Reinsurance on Premiums Earned, Benefits Incurred and Reserve Changes | The effect of reinsurance on net premiums earned and net benefits incurred (benefits incurred and reserve changes) for the three months ended March 31, 2019 and 2018 were as follows:
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Earnings Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Basic and Diluted EPS | The following table sets forth the computation of basic and diluted earnings per share (share amounts in thousands):
|
Basis of Presentation and Nature of Business - Narrative (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Goodwill | $ 467 | $ 467 |
Significant Accounting Policies and Practices (Details) |
3 Months Ended |
---|---|
Mar. 31, 2018 | |
Benefits and Other Changes in Policy Reserves [Member] | |
Condensed Balance Sheet Statements, Captions [Line Items] | |
Immaterial Error Correction | 21 |
Amortization of Intangible Assets [Member] | |
Condensed Balance Sheet Statements, Captions [Line Items] | |
Immaterial Error Correction | 4 |
income tax expense [Member] | |
Condensed Balance Sheet Statements, Captions [Line Items] | |
Immaterial Error Correction | 4 |
Investments - Credit Impairment Loss Type (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Schedule of Investments [Line Items] | |||
Other Than Temporary Impairment Credit Losses Recognized In Earnings Additions Including Credit Impairments | $ (2) | $ (2) | |
Other than Temporary Impairment, Credit Losses Recognized in Earnings, Reductions, Change in Status | 0 | 0 | |
Amortized cost | 21,908 | $ 22,219 | |
Available-for-sale Securities | 21,605 | $ 21,109 | |
Other than temporary impairment, non-credit losses recognized in OCI | 0 | 0 | |
Asset Backed Securities and Corporate Securities [Member] | |||
Schedule of Investments [Line Items] | |||
Amortized cost | 1 | 0 | |
Available-for-sale Securities | $ 1 | $ 0 |
Investments - Reconciliation of Other than Temporary Impairment on Fixed Maturity (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward] | ||
Balance at the beginning of the period | $ 0 | $ 0 |
Increases attributable to credit losses on securities: | ||
OTTI was previously recognized | 0 | 0 |
OTTI was not previously recognized | 0 | 0 |
Balance at the end of the period | $ 0 | $ 0 |
Investments - Other-than-Temporary Impairments (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Schedule of Investments [Line Items] | ||
Document Period End Date | Mar. 31, 2019 | |
Total other-than-temporary impairments | $ (2) | $ (2) |
Corporates | ||
Schedule of Investments [Line Items] | ||
Total other-than-temporary impairments | $ (2) | (2) |
Predecessor | ||
Schedule of Investments [Line Items] | ||
Total other-than-temporary impairments | $ (2) |
Investments - Net Investment Gains (Losses) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Gain (Loss) on Investments [Line Items] | ||
Document Period End Date | Mar. 31, 2019 | |
Net realized losses on fixed maturity available-for-sale securities | $ (3) | $ (37) |
Realized gains on equity securities | 78 | (6) |
Change in fair value of other derivatives and embedded derivatives | 3 | 0 |
Realized losses on other invested assets | 1 | (3) |
Realized gains (losses) on certain derivative instruments | (26) | 11 |
Unrealized gains (losses) on certain derivative instruments | 190 | (135) |
Derivative, Gain (Loss) on Derivative, Net | (3) | (21) |
Change In Fair Value Derivatives, Including Other Derivatives | 164 | (145) |
Realized gains (losses) on hedging derivatives and reinsurance-related embedded derivatives | 164 | (145) |
Net investment gains (losses) | $ 240 | (191) |
Predecessor | ||
Gain (Loss) on Investments [Line Items] | ||
Net investment gains (losses) | $ (191) |
Investments Impact of Adoption of New Accounting Pronouncement (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Net investment gains (losses) | $ 240 | $ (191) |
Gain (Loss) on Sale of Equity Investments | 78 | (6) |
Unrealized Gain (Loss) on Investments | $ 724 | $ (359) |
Derivative Financial Instruments - Fair Value of Derivative Instruments (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Derivative [Line Items] | ||
Total asset derivatives | $ 322 | $ 111 |
Total liability derivatives | 2,747 | 2,505 |
Call options | Derivative Instruments | ||
Derivative [Line Items] | ||
Total asset derivatives | 304 | 97 |
Futures contracts | Derivative Instruments | ||
Derivative [Line Items] | ||
Total asset derivatives | 1 | 0 |
Other derivatives and embedded derivatives | Other invested assets | ||
Derivative [Line Items] | ||
Total asset derivatives | 17 | 14 |
FIA embedded derivative | Contractholder funds | ||
Derivative [Line Items] | ||
Total liability derivatives | 2,720 | 2,476 |
Preferred shares reimbursement feature embedded derivative | Other Liabilities [Member] | ||
Derivative [Line Items] | ||
Total liability derivatives | $ 27 | $ 29 |
Intangible Assets - Schedule of Acquired Intangible Assets (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Carrying amount | $ 1,421 | $ 1,359 |
FGL [Member] | Trademarks and Trade Names [Member] | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Finite-Lived Intangible Assets, Net | $ 14 | |
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 10 years | |
FGL [Member] | Licensing Agreements [Member] | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Carrying amount | $ 6 |
Intangible Assets - Definite Lived Intangible Assets (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Intangibles, net | $ 1,421 | $ 1,359 |
FGL [Member] | Trademarks and Trade Names [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Finite-Lived Intangible Assets, Gross | 16 | |
Finite-Lived Intangible Assets, Accumulated Amortization | 2 | |
Finite-Lived Intangible Assets, Net | $ 14 | |
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 10 years | |
FGL [Member] | Licensing Agreements [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Finite-Lived Intangible Assets, Net | $ 6 | |
Licensing Agreements [Member] | FGL [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangibles, net | $ 6 |
Intangible Assets - Estimated Amortization Expense for VOBA in Future Fiscal Periods (Detail) |
Mar. 31, 2019
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
2019 | $ 48,000,000 |
2020 | 83,000,000 |
2021 | 89,000,000 |
2022 | 84,000,000 |
2023 | 75,000,000 |
Thereafter | $ 385,000,000 |
Debt - Narrative (Detail) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Debt Instrument [Line Items] | ||
Debt Instrument, Face Amount | $ 541 | |
Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Revolving credit facility | $ 0 | $ 0 |
Interest rate if revolver drawn | 5.00% | |
Remaining borrowing capacity | $ 250 | |
Predecessor | ||
Debt Instrument [Line Items] | ||
Long-term Debt | $ 541 |
Debt - Schedule of Debt (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Debt Instrument [Line Items] | |||
Debt Instrument, Face Amount | $ 541 | ||
Interest expense excluding amortization | 8 | ||
Amortization of debt issuance costs | 0 | ||
Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Revolving credit facility | 0 | $ 0 | |
Interest expense excluding amortization | 0 | ||
Amortization of debt issuance costs | $ 0 | ||
Predecessor | |||
Debt Instrument [Line Items] | |||
Long-term Debt | $ 541 | ||
Interest expense excluding amortization | $ 5 | ||
Amortization of debt issuance costs | 0 | ||
Predecessor | Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Interest expense excluding amortization | 1 | ||
Amortization of debt issuance costs | $ 0 |
Equity - Schedule of Dividends (Details) - USD ($) $ / shares in Units, $ in Millions |
Dec. 14, 2015 |
Nov. 12, 2015 |
Mar. 31, 2019 |
Dec. 31, 2018 |
Nov. 30, 2015 |
---|---|---|---|---|---|
Accelerated Share Repurchases [Line Items] | |||||
Common stock, shares outstanding (in shares) | 211,660,974 | 211,660,974 | 221,661,000 | ||
Cash dividend per common share (in dollars per share) | $ 0.01 | ||||
Total cash paid | $ 2 |
Income Taxes - Narrative (Detail) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Tax Credit Carryforward [Line Items] | ||
Effective tax rate | 5.00% | 38.00% |
Valuation allowance | $ 33,000,000 | |
Deferred Tax Assets, Gross | $ 316,000,000 |
Commitments and Contingencies - Schedule of Investment Commitments (Details) - Commitment to Invest $ in Millions |
Mar. 31, 2019
USD ($)
|
---|---|
Other Commitments [Line Items] | |
Unfunded investment commitment | $ 1,158 |
Other invested assets | |
Other Commitments [Line Items] | |
Unfunded investment commitment | 1,093 |
Equity securities | |
Other Commitments [Line Items] | |
Unfunded investment commitment | 21 |
Fixed maturity securities, available-for-sale | |
Other Commitments [Line Items] | |
Unfunded investment commitment | 39 |
Other assets | |
Other Commitments [Line Items] | |
Unfunded investment commitment | $ 5 |
Commitments and Contingencies - Narrative (Details) |
Mar. 31, 2019
USD ($)
|
---|---|
Loss Contingencies [Line Items] | |
Accrued amount of guaranty fund assessments | $ 2 |
Estimated future premium tax deductions | $ 2 |
Reinsurance - Effect of Reinsurance on Premiums Earned, Benefits Incurred and Reserve Changes (Detail) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Benefits and Other Changes in Insurance Policy Reserves: | ||
Net | $ 339 | |
Traditional life insurance premiums | ||
Premiums and other considerations: | ||
Direct | 57 | |
Assumed | 0 | |
Ceded | (41) | |
Net | 16 | |
Benefits and Other Changes in Insurance Policy Reserves: | ||
Direct | 372 | |
Assumed | 20 | |
Ceded | (53) | |
Net | $ 339 | |
Predecessor | ||
Benefits and Other Changes in Insurance Policy Reserves: | ||
Net | $ (39) | |
Predecessor | Traditional life insurance premiums | ||
Premiums and other considerations: | ||
Direct | 60 | |
Assumed | 0 | |
Ceded | (42) | |
Net | 18 | |
Benefits and Other Changes in Insurance Policy Reserves: | ||
Direct | 41 | |
Assumed | (21) | |
Ceded | (59) | |
Net | $ (39) |
Insurance Subsidiary Financial Information and Regulatory Matters - Narrative (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Statutory Accounting Practices [Line Items] | ||
Change in statutory capital surplus | $ 100 | $ 110 |
Non-permitted statutory accounting practices | (4) | (16) |
Statutory capital and surplus | 97 | 94 |
Increase (decrease) in statutory capital surplus | 48 | 30 |
IOWA | ||
Statutory Accounting Practices [Line Items] | ||
Change in statutory capital surplus | $ 1 | $ 0 |
Label | Element | Value |
---|---|---|
Treasury Stock [Member] | ||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest | $ 0 |
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