Fidelity & Guaranty Life - FORM 8-K - EX-99.1 - EXHIBIT - February 10, 2014

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FIDELITY & GUARANTY LIFE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

 
December 31,
2013
 
September 30,
2013
 
(Unaudited)
 
 
ASSETS
 
 
 
Investments:
 
 
 
Fixed maturities securities, available-for-sale, at fair value
$
16,204,024

 
$
15,541,526

Equity securities, available-for-sale, at fair value
286,922

 
271,075

Derivative investments
294,531

 
221,758

Other invested assets
316,552

 
188,180

Total investments
17,102,029

 
16,222,539

Related party loans and investments
96,442

 
119,044

Cash and cash equivalents
751,639

 
1,204,334

Accrued investment income
157,778

 
159,287

Reinsurance recoverable
3,723,693

 
3,728,632

Intangibles, net
560,930

 
523,245

Deferred tax assets
240,091

 
240,531

Other assets
157,023

 
205,891

Total assets
$
22,789,625

 
$
22,403,503

 
 
 
 
LIABILITIES AND SHAREHOLDER'S EQUITY
 
 
 
 
 
 
 
Contractholder funds
$
15,519,722

 
$
15,248,216

Future policy benefits
3,545,881

 
3,556,808

Funds withheld for reinsurance liabilities
1,381,238

 
1,407,713

Liability for policy and contract claims
60,331

 
51,456

Long-term debt
300,000

 
300,000

Other liabilities
805,182

 
700,053

Total liabilities
21,612,354

 
21,264,246

 
 
 
 
 
 
 
 
Shareholder's equity:
 
 
 
Common stock
—

 
—

Additional paid-in capital
468,166

 
468,166

Retained earnings
602,971

 
558,201

Accumulated other comprehensive income
106,134

 
112,890

Total shareholder's equity
1,177,271

 
1,139,257

Total liabilities and shareholder's equity
$
22,789,625

 
$
22,403,503

 
 
 
 





FIDELITY & GUARANTY LIFE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)

 
Three months ended
 
December 31,
2013
 
December 31,
2012
 
(Unaudited)
Revenues:
 
 
 
Premiums
$
13,705

 
$
13,796

Net investment income
183,429

 
169,645

Net investment gains
123,417

 
146,475

Insurance and investment product fees and other
15,552

 
13,728

Total revenues
336,103

 
343,644

Benefits and expenses:
 
 
 
Benefits and other changes in policy reserves
216,856

 
83,644

Acquisition and operating expenses, net of deferrals
23,920

 
25,226

Amortization of intangibles
22,892

 
69,511

Total benefits and expenses
263,668

 
178,381

Operating income
72,435

 
165,263

Interest expense
(5,624
)
 
(5,486
)
Income from continuing operations before income taxes
66,811

 
159,777

Income tax expense
22,041

 
53,815

Net income
$
44,770

 
$
105,962

 
 
 
 
 
 
 
 
Supplemental disclosures:
 
 
 
Total other-than-temporary impairments
$
(34
)
 
$
(509
)
Less non-credit portion of other-than-temporary impairments included in other comprehensive income
—

 
—

Net other-than-temporary impairments
(34
)
 
(509
)
Gains (losses) on derivative instruments
111,538

 
(25,568
)
Other realized investment gains
11,913

 
172,552

        Total net investment gains
$
123,417

 
$
146,475






FIDELITY & GUARANTY LIFE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
 
 
Three months ended
 
 
December 31,
2013
 
December 31,
2012
 
 
(Unaudited)
Net income
 
$
44,770

 
$
105,962

 
 
 
 
 
Other comprehensive income
 
 
 
 
Unrealized investment (losses) gains:
 
 
 
 
Changes in unrealized investment (losses) gains before reclassification adjustment
 
(10,284
)
 
126,252

Net reclassification adjustment for (gains) included in net investment gains
 
(8,134
)
 
(172,043
)
Changes in unrealized investment (losses) after reclassification adjustment
 
(18,418
)
 
(45,791
)
Adjustments to intangible assets
 
8,026

 
27,961

Changes in deferred income tax asset/liability
 
3,636

 
6,241

Net change to derive comprehensive income (loss) for the period
 
(6,756
)
 
(11,589
)
 
 
 
 
 
Comprehensive income, net of tax
 
$
38,014

 
$
94,373






FIDELITY & GUARANTY LIFE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
(In thousands)

(in thousands)
 
Common Stock
 
Additional Paid-in Capital/Contributed Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total Shareholder’s Equity
 
 
 
 
 
 
 
 
 
 
 
Balance, September 30, 2012
 
$
—

 
$
254,999

 
$
294,245

 
$
434,482

 
$
983,726

Dividend payment
 
—

 
—

 
(73,000
)
 
—

 
(73,000
)
Net income
 
—

 
—

 
336,956

 
—

 
336,956

Unrealized investment losses, net
 
—

 
—

 
—

 
(321,592
)
 
(321,592
)
Stock compensation
 
—

 
(163
)
 
—

 
—

 
(163
)
Debt to equity conversion
 
—

 
213,330

 
—

 
—

 
213,330

Balance, September 30, 2013
 
$
—

 
$
468,166

 
$
558,201

 
$
112,890

 
$
1,139,257

Net income
 
—

 
—

 
44,770

 
—

 
44,770

Unrealized investment losses, net
 
—

 
—

 
—

 
(6,756
)
 
(6,756
)
Balance, December 31, 2013
 
$
—

 
$
468,166

 
$
602,971

 
$
106,134

 
$
1,177,271

 
 
 
 
 
 
 
 
 
 
 






FIDELITY & GUARANTY LIFE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
Three months ended
 
December 31,
2013
 
December 31,
2012
 
(Unaudited)
Cash flows from operating activities:
 
 
 
Net income
$
44,770

 
$
105,962

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation of properties
1,102

 
908

Amortization of intangibles
22,892

 
69,511

Stock-based compensation
6,148

 
(163
)
Amortization of debt issuance costs
843

 
—

Deferred income taxes
4,078

 
122,033

Interest credited/index credits and other changes to contractholder account balances
178,298

 
55,936

Amortization of fixed maturity discounts and premiums
(14,845
)
 
13,235

Net recognized (gains) on investments and derivatives
(123,417
)
 
(146,475
)
Charges assessed to contractholders for mortality and administration
(9,577
)
 
(6,778
)
Deferred policy acquisition costs
(52,551
)
 
(35,698
)
Changes in operating assets and liabilities:
 
 
 
Accrued investment income
1,509

 
38,572

Reinsurance recoverable
(17,748
)
 
(21,934
)
Future policy benefits
(10,927
)
 
(22,517
)
Funds withheld from reinsurers
(39,924
)
 
(672
)
Collateral (returned) posted
2,739

 
—

Liability for policy and contract claims
8,875

 
8,574

Other operating
37,214

 
(108,661
)
Net cash provided by operating activities
39,479

 
71,833

Cash flows from investing activities:
 
 
 
Proceeds from investments sold, matured or repaid:
 
 
 
Fixed maturities
1,663,700

 
2,913,381

Equity securities
42,249

 
21

Derivatives instruments and other invested assets
102,702

 
49,243

Cost of investments acquired:
 
 
 
Fixed maturities
(2,411,744
)
 
(3,379,147
)
Equity securities
(63,154
)
 
(15,965
)
Derivatives instruments and other invested assets
(167,943
)
 
(45,335
)
Related party loans and investments
22,602

 
(32,443
)
Capital expenditures
(2,960
)
 
(1,349
)
Net cash (used in) investing activities
(814,548
)
 
(511,594
)
Cash flows from financing activities:
 
 
 
Contractholder account deposits
772,257

 
491,480

Contractholder account withdrawals
(449,883
)
 
(475,558
)
Payment on note payable
—

 
(20,000
)
Net cash provided by (used in) financing activities
322,374

 
(4,078
)
Change in cash & cash equivalents
(452,695
)
 
(443,839
)
Cash and cash equivalents at beginning of period
1,204,334

 
1,049,374

Cash and cash equivalents at end of period
$
751,639

 
$
605,535

 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
Interest paid
$
9,775

 
$
15,723

Income taxes paid
$
—

 
$
1,683




Fidelity & Guaranty Life Reports