Attached files
| file | filename |
|---|---|
| 8-K - 8-K - Fidelity & Guaranty Life | fgl-12312015x10xqpressrele.htm |
| EX-99.1 - EXHIBIT 99.1 - Fidelity & Guaranty Life | a12312015fglearningsreleas.htm |
Exhibit 99.2
Investor Supplement
First Fiscal Quarter 2016
(Fiscal Year Ended September 30)
The financial statements and financial exhibits included herein are unaudited. These financial statements and exhibits should be read in conjunction with the Company's periodic reports on Form 10-K, Form 10-Q and Form 8-K. The results of operations for interim periods should not be considered indicative of results to be expected for the full year.
Non-GAAP Financial Measures
This document contains non-GAAP financial measures to analyze the Company's operating performance for the periods presented. Because the Company's calculation of these measures may differ from similar measures used by other companies, investors should be careful when comparing the Company's non-GAAP financial measures to those of other companies.
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement
December 31, 2015
Page | |
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Consolidated Financial Highlights
Three Months Ended | |||||||||||||||||||
December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | |||||||||||||||
(Dollars in millions) | |||||||||||||||||||
Revenues: | |||||||||||||||||||
Premiums | $ | 15 | $ | 15 | $ | 17 | $ | 15 | $ | 11 | |||||||||
Net investment income | 222 | 223 | 212 | 208 | 208 | ||||||||||||||
Net investment gains (losses) | 63 | (112 | ) | 74 | (58 | ) | 59 | ||||||||||||
Insurance and investment product fees and other | 29 | 24 | 23 | 22 | 20 | ||||||||||||||
Total revenues | 329 | 150 | 326 | 187 | 298 | ||||||||||||||
Adjusted Operating Income ("AOI") | $ | 31 | $ | 42 | $ | 25 | $ | 23 | $ | 27 | |||||||||
Net income (loss) | $ | 48 | $ | 30 | $ | 86 | $ | (12 | ) | $ | 14 | ||||||||
Per Unrestricted Common Shares Amounts: | |||||||||||||||||||
Basic: | |||||||||||||||||||
AOI | $ | 0.53 | $ | 0.72 | $ | 0.43 | $ | 0.40 | $ | 0.46 | |||||||||
Net income (loss) | $ | 0.82 | $ | 0.52 | $ | 1.48 | $ | (0.21 | ) | $ | 0.24 | ||||||||
Diluted: | |||||||||||||||||||
AOI | $ | 0.53 | $ | 0.72 | $ | 0.43 | $ | 0.40 | $ | 0.46 | |||||||||
Net income (loss) | $ | 0.82 | $ | 0.51 | $ | 1.48 | $ | (0.21 | ) | $ | 0.24 | ||||||||
Dividends Paid to Shareholders Per Share | $ | 0.065 | $ | 0.065 | $ | 0.065 | $ | 0.065 | $ | 0.065 | |||||||||
At Period End | |||||||||||||||||||
Cash and cash equivalents | $ | 568 | $ | 502 | $ | 654 | $ | 849 | $ | 556 | |||||||||
Total investments | $ | 18,953 | $ | 19,094 | $ | 19,391 | $ | 19,465 | $ | 19,335 | |||||||||
Total assets | $ | 25,031 | $ | 24,925 | $ | 25,159 | $ | 25,195 | $ | 24,752 | |||||||||
Contractholder funds | $ | 17,961 | $ | 17,770 | $ | 17,704 | $ | 17,521 | $ | 17,160 | |||||||||
Future policy benefits | $ | 3,473 | $ | 3,468 | $ | 3,465 | $ | 3,481 | $ | 3,484 | |||||||||
Notes payable | $ | 300 | $ | 300 | $ | 300 | $ | 300 | $ | 300 | |||||||||
Total equity | $ | 1,399 | $ | 1,502 | $ | 1,559 | $ | 1,710 | $ | 1,665 | |||||||||
Total equity excluding AOCI | $ | 1,461 | $ | 1,414 | $ | 1,384 | $ | 1,302 | $ | 1,320 | |||||||||
Common shares issued and outstanding | 58.96 | 58.87 | 58.76 | 58.74 | 58.70 | ||||||||||||||
GAAP Book value per share | $ | 23.73 | $ | 25.51 | $ | 26.53 | $ | 29.11 | $ | 28.36 | |||||||||
GAAP Book Value per Share excluding AOCI | $ | 24.78 | $ | 24.02 | $ | 23.55 | $ | 22.17 | $ | 22.49 | |||||||||
Debt to total Capitalization excluding AOCI | 17 | % | 18 | % | 18 | % | 19 | % | 19 | % | |||||||||
Return on average shareholders' equity | 13 | % | 9 | % | 26 | % | (4 | )% | 4 | % | |||||||||
Statutory Book value per share(1) | $ | 21.13 | $ | 20.79 | $ | 21.02 | $ | 20.87 | $ | 20.64 | |||||||||
Statutory Book value per share excluding IMR and AVR(1) | $ | 31.55 | $ | 31.40 | $ | 31.70 | $ | 30.97 | $ | 31.49 | |||||||||
(1) The statutory book value per share and the statutory book value per share excluding interest maintenance reserve ("IMR") and asset valuation reserve ("AVR") are estimates due to the timing of the filing of statutory statements and are prepared consistent with the presentation of the statutory financial statements in the combined annual statement.
3
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
4
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | |||||||||||||||
ASSETS | |||||||||||||||||||
Investments: | |||||||||||||||||||
Fixed maturity securities, available-for-sale, at fair value (amortized cost: December 31, 2015 - $17,684 September 30, 2015 - $17,622) | $ | 17,428 | $ | 17,746 | $ | 17,965 | $ | 18,055 | $ | 17,910 | |||||||||
Equity securities, available-for-sale, at fair value (amortized cost: December 31, 2015 - $601; September 30, 2015 - $597) | 637 | 620 | 583 | 606 | 658 | ||||||||||||||
Derivative investments | 145 | 82 | 220 | 268 | 306 | ||||||||||||||
Commercial mortgage loans | 616 | 491 | 405 | 304 | 207 | ||||||||||||||
Other invested assets | 127 | 155 | 218 | 232 | 253 | ||||||||||||||
Total investments | 18,953 | 19,094 | 19,391 | 19,465 | 19,334 | ||||||||||||||
Related party loans | 81 | 78 | 77 | 75 | 93 | ||||||||||||||
Cash and cash equivalents | 568 | 502 | 654 | 849 | 556 | ||||||||||||||
Accrued investment income | 181 | 191 | 164 | 180 | 164 | ||||||||||||||
Reinsurance recoverable | 3,552 | 3,579 | 3,642 | 3,691 | 3,729 | ||||||||||||||
Intangibles, net | 1,162 | 988 | 808 | 610 | 593 | ||||||||||||||
Deferred tax assets | 286 | 228 | 200 | 104 | 132 | ||||||||||||||
Other assets | 248 | 265 | 223 | 221 | 151 | ||||||||||||||
Total assets | $ | 25,031 | $ | 24,925 | $ | 25,159 | $ | 25,195 | $ | 24,752 | |||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||||||
Contractholder funds | $ | 17,961 | $ | 17,770 | $ | 17,704 | $ | 17,521 | $ | 17,160 | |||||||||
Future policy benefits | 3,473 | 3,468 | 3,465 | 3,481 | 3,484 | ||||||||||||||
Funds withheld for reinsurance liabilities | 1,251 | 1,267 | 1,325 | 1,329 | 1,376 | ||||||||||||||
Liability for policy and contract claims | 64 | 55 | 60 | 60 | 68 | ||||||||||||||
Debt | 300 | 300 | 300 | 300 | 300 | ||||||||||||||
Other liabilities | 583 | 563 | 746 | 794 | 698 | ||||||||||||||
Total liabilities | 23,632 | 23,423 | 23,600 | 23,485 | 23,086 | ||||||||||||||
Shareholders' equity: | |||||||||||||||||||
Preferred stock ($.01 par value, 50,000,000 shares authorized, no shares issued at December 31, 2015 and September 30, 2015) | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Common stock ($.01 par value, 500,000,000 shares authorized, 58,963,902 issued and outstanding at December 31, 2015; 58,870,823 shares issued and outstanding at September 30, 2015) | 1 | 1 | 1 | 1 | 1 | ||||||||||||||
Additional paid-in capital | 718 | 714 | 711 | 710 | 704 | ||||||||||||||
Retained earnings | 754 | 710 | 683 | 601 | 617 | ||||||||||||||
Accumulated other comprehensive (loss) income | (62 | ) | 88 | 175 | 408 | 345 | |||||||||||||
Treasury stock, at cost (534,514 shares at December 31, 2015; 512,391 shares at September 30, 2015) | (12 | ) | (11 | ) | (11 | ) | (10 | ) | (1 | ) | |||||||||
Total shareholders' equity | 1,399 | 1,502 | $ | 1,559 | $ | 1,710 | $ | 1,666 | |||||||||||
Total liabilities and shareholders' equity | $ | 25,031 | $ | 24,925 | $ | 25,159 | $ | 25,195 | $ | 24,752 | |||||||||
5
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
Quarterly Summary - Most Recent 5 Quarters
Three Months Ended | |||||||||||||||||||
December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | |||||||||||||||
(Dollars in millions) | |||||||||||||||||||
Revenues: | |||||||||||||||||||
Traditional life insurance premiums | $ | 10 | $ | 11 | $ | 10 | $ | 12 | $ | 10 | |||||||||
Life contingent immediate annuity | 5 | 4 | 7 | 3 | 1 | ||||||||||||||
Net investment income | 222 | 223 | 212 | 208 | 208 | ||||||||||||||
Net investment gains (losses) | 63 | (112 | ) | 74 | (58 | ) | 59 | ||||||||||||
Surrender charges | 4 | 5 | 5 | 5 | 4 | ||||||||||||||
Cost of insurance fees and other income | 25 | 19 | 18 | 17 | 16 | ||||||||||||||
Total revenues | 329 | 150 | 326 | 187 | 298 | ||||||||||||||
Benefits and expenses: | |||||||||||||||||||
Traditional life insurance policy benefits and change in future policy benefits | 18 | 18 | 20 | 17 | 19 | ||||||||||||||
Life contingent immediate annuity benefits and changes in future policy benefits | 32 | 30 | 29 | 26 | 10 | ||||||||||||||
Interest sensitive and index product benefits and changes in future policy benefits | 131 | 56 | 29 | 129 | 195 | ||||||||||||||
General expenses | 26 | 29 | 22 | 27 | 28 | ||||||||||||||
Acquisition expenses | 73 | 64 | 72 | 74 | 88 | ||||||||||||||
Deferred acquisition costs ("DAC") | (71 | ) | (63 | ) | (68 | ) | (73 | ) | (87 | ) | |||||||||
Amortization of intangibles | 41 | (33 | ) | 88 | (7 | ) | 16 | ||||||||||||
Total benefits and expenses | 250 | 101 | 192 | 193 | 269 | ||||||||||||||
Operating income | 79 | 49 | 134 | (6 | ) | 29 | |||||||||||||
Interest expense | (6 | ) | (6 | ) | (6 | ) | (6 | ) | (6 | ) | |||||||||
Income before income taxes | 73 | 43 | 128 | (12 | ) | 23 | |||||||||||||
Income tax expense | 25 | 13 | 42 | — | 9 | ||||||||||||||
Net income (loss) | $ | 48 | $ | 30 | $ | 86 | $ | (12 | ) | $ | 14 | ||||||||
Net income (loss) per common share: | |||||||||||||||||||
Basic | $ | 0.82 | $ | 0.52 | $ | 1.48 | $ | (0.21 | ) | $ | 0.24 | ||||||||
Diluted | $ | 0.82 | $ | 0.51 | $ | 1.48 | $ | (0.21 | ) | $ | 0.24 | ||||||||
Weighted average common shares used in computing net income (loss) per common share: | |||||||||||||||||||
Basic | 58.22 | 58.09 | 58.06 | 58.03 | 58.28 | ||||||||||||||
Diluted | 58.54 | 58.42 | 58.24 | 58.03 | 58.45 | ||||||||||||||
6
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
Reconciliation from Net Income (Loss) to Adjusted Operating Income ("AOI ")
All amounts are net of offsets related to value of business acquired ("VOBA") and deferred acquisition cost ("DAC") amortization and income taxes.
Three Months Ended | |||||||||||||||||||||
December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | |||||||||||||||||
(Dollars in millions, except per share data) | |||||||||||||||||||||
Net income (loss) | $ | 48 | $ | 30 | $ | 86 | $ | (12 | ) | $ | 14 | ||||||||||
Adjustments to arrive at AOI: | |||||||||||||||||||||
Effect of investment (gains) losses, net of offsets | 3 | 8 | (23 | ) | 21 | 2 | |||||||||||||||
Effect of change in FIA embedded derivative discount rate, net of offsets | (7 | ) | 23 | (21 | ) | 15 | 20 | ||||||||||||||
Effect of change in fair value of reinsurance related embedded derivative, net of offsets | (13 | ) | (19 | ) | (17 | ) | (1 | ) | (8 | ) | |||||||||||
Effects of class action litigation reserves, net of offsets | — | — | — | — | (1 | ) | |||||||||||||||
AOI | $ | 31 | $ | 42 | $ | 25 | $ | 23 | $ | 27 | |||||||||||
Per diluted common share: | |||||||||||||||||||||
Net income (loss) | $ | 0.82 | $ | 0.51 | $ | 1.48 | $ | (0.21 | ) | $ | 0.24 | ||||||||||
Adjustments to arrive at AOI: | |||||||||||||||||||||
Effect of investment (gains) losses, net of offsets | 0.05 | 0.15 | (0.39 | ) | 0.37 | 0.04 | |||||||||||||||
Effect of change in FIA embedded derivative discount rate, net of offsets | (0.12 | ) | 0.39 | (0.37 | ) | 0.26 | 0.34 | ||||||||||||||
Effect of change in fair value of reinsurance related embedded derivative, net of offsets | (0.22 | ) | (0.33 | ) | (0.29 | ) | (0.02 | ) | (0.15 | ) | |||||||||||
Effects of class action litigation reserves, net of offsets | — | — | — | — | (0.01 | ) | |||||||||||||||
AOI per diluted share | $ | 0.53 | $ | 0.72 | $ | 0.43 | $ | 0.40 | $ | 0.46 | |||||||||||
7
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
NON-GAAP FINANCIAL MEASURES
AOI
AOI is a non-GAAP economic measure we use to evaluate financial performance each period. AOI is calculated by adjusting net income to eliminate (i) the impact of net investment gains including other-than-temporary impairment ("OTTI") losses recognized in operations, but excluding gains and losses on derivatives hedging our indexed annuity policies, (ii) the effect of changes in the interest rates used to discount the FIA embedded derivative liability, (iii) the effect of change in fair value of reinsurance related embedded derivative, and (iv) the effect of class action litigation reserves. All adjustments to AOI are net of the corresponding VOBA, DAC and income tax impact (using an effective tax rate of 35%) related to these adjustments as appropriate. While these adjustments are an integral part of the overall performance of FGL, market conditions impacting these items can overshadow the underlying performance of the business. Accordingly, we believe using a measure which excludes their impact is effective in analyzing the trends of our operations. Our non-GAAP measures may not be comparable to similarly titled measures of other organizations because other organizations may not calculate such non-GAAP measures in the same manner as we do.
Sales
Sales are not derived from any specific GAAP income statement accounts or line items and should not be viewed as a substitute for any financial measure determined in accordance with GAAP. For GAAP purposes annuity sales are recorded as deposit liabilities (i.e. contract holder funds). Management believes that presentation of sales as measured for management purposes enhances the understanding of our business and helps depict longer term trends that may not be apparent in the results of operations due to the timing of sales and revenue recognition.
While management believes that non-GAAP measurements are useful supplemental information, such adjusted results are not intended to replace GAAP financial results and should be read in conjunction with those GAAP results.
8
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
Summary of Adjustments to Arrive at AOI (Unaudited)
Three Months Ended | ||||||||||||||||||||
December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Revenue: | ||||||||||||||||||||
Net investment gains (a) | $ | (21 | ) | $ | (23 | ) | $ | (81 | ) | $ | 49 | $ | (14 | ) | ||||||
(Decrease) increase in total revenues | (21 | ) | (23 | ) | (81 | ) | 49 | (14 | ) | |||||||||||
Benefits and expenses: | ||||||||||||||||||||
Benefits and other changes in policy reserves (b) | (19 | ) | 61 | (64 | ) | 34 | 51 | |||||||||||||
Acquisition and operating expenses, net of deferrals (c) | — | 1 | — | — | (1 | ) | ||||||||||||||
Amortization of intangibles | 14 | (21 | ) | 52 | (29 | ) | (16 | ) | ||||||||||||
Increase (decrease) in total benefits and expenses | (5 | ) | 41 | (12 | ) | 5 | 34 | |||||||||||||
(Decrease) increase in pre-tax operating income | (26 | ) | 18 | (93 | ) | 54 | 20 | |||||||||||||
Increase (decrease) in income tax expense (benefit) | 9 | (6 | ) | 32 | (19 | ) | (7 | ) | ||||||||||||
Increase (decrease) in net income (loss) | $ | (17 | ) | $ | 12 | $ | (61 | ) | $ | 35 | $ | 13 | ||||||||
(a) Net investment gains: includes the effects of net investment gains and change in fair value of the reinsurance related embedded derivative.
(b) Benefits and other changes in policy reserves: includes the effects of the change in fair value of the FIA embedded derivative discount rate.
(c) Acquisition and operating expenses: includes the effects of the class action litigation reserve.
9
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
AOI Analysis (Unaudited)
Each quarterly reporting period, we identify notable items that explain the trends in our AOI. These items are infrequent in nature or involve accounting volatility under general accepted accounting principles. The amounts below are included in disclosures within the Company's earnings releases or earnings calls to explain our AOI results. We believe that understanding these items provides further clarity to the financial performance of the business.
Three Months Ended | ||||||||||||||||||||
December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
AOI | $ | 31 | $ | 42 | $ | 25 | $ | 23 | $ | 27 | ||||||||||
Notable Items Included within AOI [(unfavorable)/favorable] | ||||||||||||||||||||
Legacy incentive compensation (a) | (1 | ) | (1 | ) | (1 | ) | (2 | ) | (2 | ) | ||||||||||
Project expenses (b) | (2 | ) | (2 | ) | (1 | ) | (1 | ) | (1 | ) | ||||||||||
Single premium immediate annuities ("SPIA") mortality & other reserve adjustments (c) | (3 | ) | (5 | ) | (2 | ) | — | 3 | ||||||||||||
Assumption review & DAC unlocking (d) | 2 | 14 | — | — | — | |||||||||||||||
Tax valuation allowance / other (e) | 1 | 2 | — | — | — | |||||||||||||||
(a) Change in the liability for our FGLH stock compensation plan, which as a liability plan, is settled in cash and accounted for at fair value each reporting period.
(b) Expenses associated with corporate development activities, including mergers & acquisitions.
(c) The release of annuity reserves associated with mortality of annuitants which varies due to timing, volume and severity of experience.
(d) Annually in the 4th fiscal quarter, we complete our Annual Assumption Review & DAC Unlocking process by adjusting our valuation assumptions to align with actual
experience. Also includes unlocking in other quarters from updating our DAC amortization models for actual experience and equity market fluctuations.
(e) Changes in the Company's deferred tax valuation allowance and other net favorable activity.
10
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
Capitalization/Book Value per Share
December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | ||||||||||||||||
(Dollars in millions, except per share data) | ||||||||||||||||||||
Capitalization: | ||||||||||||||||||||
Debt | $ | 300 | $ | 300 | $ | 300 | $ | 300 | $ | 300 | ||||||||||
Total debt | 300 | 300 | 300 | 300 | 300 | |||||||||||||||
Total shareholders' equity | 1,399 | 1,502 | 1,559 | 1,710 | 1,665 | |||||||||||||||
Total capitalization | 1,699 | 1,802 | 1,859 | 2,010 | 1,965 | |||||||||||||||
AOCI | (62 | ) | 88 | 175 | 408 | 345 | ||||||||||||||
Total capitalization excluding AOCI (a) | $ | 1,761 | $ | 1,714 | $ | 1,684 | $ | 1,602 | $ | 1,620 | ||||||||||
Total shareholders' equity | 1,399 | 1,502 | 1,559 | 1,710 | 1,665 | |||||||||||||||
AOCI | (62 | ) | 88 | 175 | 408 | 345 | ||||||||||||||
Total shareholders' equity excluding AOCI (a) | $ | 1,461 | $ | 1,414 | $ | 1,384 | $ | 1,302 | $ | 1,320 | ||||||||||
Common shares outstanding | 58.96 | 58.87 | 58.76 | 58.74 | 58.70 | |||||||||||||||
Book Value per Share: (b) | ||||||||||||||||||||
GAAP Book value per share including AOCI | $ | 23.73 | $ | 25.51 | $ | 26.53 | $ | 29.11 | $ | 28.36 | ||||||||||
GAAP Book value per share excluding AOCI (a) | $ | 24.78 | $ | 24.02 | $ | 23.55 | $ | 22.17 | $ | 22.49 | ||||||||||
Twelve months ended | ||||||||||||||||||||
Twelve Month Rolling Average Return on Equity ("ROE") | December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | |||||||||||||||
Return on Shareholders' Equity (c) | ||||||||||||||||||||
Return on average shareholders' equity, excluding AOCI (c) | 11 | % | 9 | % | 10 | % | 8 | % | 11 | % | ||||||||||
Return on Shareholders' Equity - AOI (d) | ||||||||||||||||||||
Adjusted Operating ROE, excluding AOCI (d) | 9 | % | 9 | % | 8 | % | 9 | % | 11 | % | ||||||||||
Three months ended | ||||||||||||||||||||
Quarterly Average ROE | December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | |||||||||||||||
Return on average shareholders' equity, excluding AOCI (c) | 13 | % | 9 | % | 26 | % | (4 | )% | 4 | % | ||||||||||
Adjusted Operating ROE, excluding AOCI (d) | 9 | % | 12 | % | 7 | % | 7 | % | 8 | % | ||||||||||
Debt-to-Capital Ratios: (e) | ||||||||||||||||||||
Long-term debt/Total capitalization excluding AOCI | 17 | % | 18 | % | 18 | % | 19 | % | 19 | % | ||||||||||
11
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
(a) Total capitalization, total stockholders’ equity and book value per share excluding AOCI (a non-GAAP financial measure) are based on stockholders’ equity excluding the effect of AOCI. Since AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale investments, we believe these non-GAAP financial measures provide useful supplemental information.
(b) Book value per share including and excluding AOCI is calculated as total stockholders’ equity and total stockholders’ equity excluding AOCI divided by the total number of shares of common stock outstanding.
(c) Return on Equity, excluding AOCI is a non-GAAP measure. It is calculated by dividing net income by total average equity excluding AOCI. Average equity excluding AOCI for the twelve months rolling, is the average of 5 points throughout the period and for the quarterly average equity is calculated using the beginning and ending equity for the period. For periods less than a full fiscal year, amounts disclosed in the table are annualized.
(d) Adjusted Operating ROE, excluding AOCI is a non-GAAP measure. It is calculated by dividing AOI by total average equity excluding AOCI. Average equity excluding AOCI for the twelve months rolling, is the average of 5 points throughout the period and for the quarterly average equity is calculated using the beginning and ending equity for the period. For periods less than a full fiscal year, amounts disclosed in the table are annualized.
(e) Debt-to-capital ratios are computed using total capitalization excluding AOCI. Adjusted debt includes the total senior unsecured debentures.
Financial Strength Ratings
S&P | A.M. Best | Moody's | Fitch | |||||
As of Date of Financial Supplement | ||||||||
Fidelity and Guaranty Life Insurance Company | BBB- | B++ | Baa3 | BBB | ||||
Fidelity and Guaranty Life Insurance Company of New York | BBB- | B++ | Not Rated | BBB | ||||
Rating Agency Outlook | CreditWatch Developing | Under Review With Developing Implications | Positive | Ratings Watch Evolving | ||||
12
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
Net Investment Spread Results
(Dollars in millions) | Three Months Ended | |||||||
December 31, 2015 | December 31, 2014 | |||||||
Yield on average assets under management "AAUM" (at amortized cost) | 4.87 | % | 4.83 | % | ||||
Less: Interest credited and option cost | (2.73 | )% | (2.99 | )% | ||||
Total net investment spread - All product lines | 2.14 | % | 1.84 | % | ||||
FIA net investment spread | 2.92 | % | 2.87 | % | ||||
Investment book yield - bonds purchased during the period (b) | 5.50 | % | 5.21 | % | ||||
AAUM (a) | $ | 18,239 | $ | 17,266 | ||||
(a) AAUM is a non-GAAP measure and is the sum of (i) total invested assets at amortized cost, excluding derivatives; and including (ii) related party loans and investments and (iii) cash and cash equivalents at the end of each month in the period divided by the number of months in the period.
(b) Investment book yield on bonds purchased during the period excludes yield on short-term treasuries and cash and cash equivalents.
Sales Results by Product
(Dollars in millions) | Three Months Ended | |||||||||||||||||||
December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | ||||||||||||||||
Fixed index annuities | $ | 437 | $ | 424 | $ | 507 | $ | 600 | $ | 648 | ||||||||||
Fixed rate annuities | 52 | 9 | 12 | 10 | 255 | |||||||||||||||
Index universal life | 13 | 11 | 10 | 7 | 7 | |||||||||||||||
All other products | — | 1 | 5 | 7 | 8 | |||||||||||||||
Total Sales | $ | 502 | $ | 445 | $ | 534 | $ | 624 | $ | 918 | ||||||||||
13
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
Annuity Account Balance Rollforward (a)
(Dollars in millions) | Three months ended | |||||||||||||||||||
December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | ||||||||||||||||
Account balances at beginning of period: | $ | 14,154 | $ | 14,000 | $ | 13,655 | $ | 13,254 | $ | 12,643 | ||||||||||
Net deposits | 507 | 435 | 525 | 608 | 828 | |||||||||||||||
Premium and interest bonuses | 12 | 9 | 9 | 9 | 9 | |||||||||||||||
Fixed interest credited and index credits | 66 | 75 | 117 | 115 | 126 | |||||||||||||||
Guaranteed product rider fees | (13 | ) | (8 | ) | (9 | ) | (9 | ) | (7 | ) | ||||||||||
Surrenders, withdrawals, deaths, etc. | (396 | ) | (357 | ) | (296 | ) | (322 | ) | (345 | ) | ||||||||||
Account balance at end of period | $ | 14,330 | $ | 14,154 | $ | 14,001 | $ | 13,655 | $ | 13,254 | ||||||||||
(a) The rollforward reflects the account balance of our fixed index annuities and fixed rate annuities.
Annuity Deposits by Product Type
Three Months Ended | |||||||||
Product Type | December 31, 2015 | December 31, 2014 | |||||||
(Dollars in millions) | |||||||||
Fixed Index Annuities: | |||||||||
Index Strategies | $ | 374 | $ | 572 | |||||
Fixed Strategy | 79 | 79 | |||||||
453 | 651 | ||||||||
Fixed Rate Annuities: | |||||||||
Single-Year Rate Guaranteed | 1 | 12 | |||||||
Multi-Year Rate Guaranteed | 53 | 236 | |||||||
Total before coinsurance ceded | 507 | 899 | |||||||
Coinsurance ceded | — | 71 | |||||||
Net after coinsurance ceded | $ | 507 | $ | 828 | |||||
14
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
Surrender Charge Protection and Account Values by Product Type
Annuity Surrender Charges and Account Values (net of reinsurance) at December 31, 2015:
Surrender Charge | Net Account Value | |||||||||||||
Product Type | Avg. Years at Issue | Avg. Years Remaining | Avg. % Remaining | Dollars in millions | % | |||||||||
Fixed Index Annuities | 11 | 6 | 8 | % | $ | 11,531 | 80 | % | ||||||
Single-Year Rate Guaranteed | 10 | 1 | 1 | % | 650 | 5 | % | |||||||
Multi-Year Rate Guaranteed | 5 | 3 | 6 | % | 2,149 | 15 | % | |||||||
Total | $ | 14,330 | 100 | % | ||||||||||
15
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
Annuity Liability Characteristics
Fixed Annuities Account Value | Fixed Index Annuities Account Value | |||||||
(Dollars in millions) | ||||||||
SURRENDER CHARGE PERCENTAGES: | ||||||||
No surrender charge | $ | 619 | $ | 1,520 | ||||
0.0% < 2.0% | 37 | 144 | ||||||
2.0% < 4.0% | 66 | 804 | ||||||
4.0% < 6.0% | 214 | 659 | ||||||
6.0% < 8.0% | 1,135 | 1,070 | ||||||
8.0% < 10.0% | 675 | 2,414 | ||||||
10.0% or greater | 53 | 4,920 | ||||||
$ | 2,799 | $ | 11,531 | |||||
Fixed and Fixed Index Annuities Account Value | Weighted Average Surrender Charge | ||||||
(Dollars in millions) | |||||||
SURRENDER CHARGE EXPIRATION BY YEAR: | |||||||
Out of Surrender Charge | $ | 2,107 | — | % | |||
2015 | 849 | 3 | % | ||||
2016 - 2017 | 2,645 | 6 | % | ||||
2018 - 2019 | 1,849 | 8 | % | ||||
2020 - 2021 | 1,566 | 9 | % | ||||
Thereafter | 5,314 | 12 | % | ||||
$ | 14,330 | 8 | % | ||||
16
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
Fixed Annuities Account Value | Fixed Index Annuities Account Value | |||||||
(Dollars in millions) | ||||||||
CREDITED RATE (INCLUDING BONUS INTEREST) VS. ULTIMATE MINIMUM GUARANTEED RATE DIFFERENTIAL: | ||||||||
No differential | $ | 1,115 | $ | 991 | ||||
0.0% - 1.0% | 469 | 1,111 | ||||||
1.0% - 2.0% | 233 | 75 | ||||||
2.0% - 3.0% | 923 | 14 | ||||||
3.0% - 4.0% | 59 | 1 | ||||||
4.0% - 5.0% | — | — | ||||||
Allocated to index strategies | — | 9,339 | ||||||
$ | 2,799 | $ | 11,531 | |||||
FIXED INDEX ANNUITIES ACCOUNT VALUE - INDEX STRATEGIES
Monthly Average, Point to Point and Gain Trigger Strategies with Cap
Minimum Guaranteed Cap | ||||||||||||||||||||
1% | 2% | 3% | 5% | 6% | ||||||||||||||||
Current Cap | (Dollars in millions) | |||||||||||||||||||
At minimum | $ | — | $ | — | $ | 764 | $ | 858 | $ | — | ||||||||||
2-3% | 115 | — | — | — | — | |||||||||||||||
3-4% | 523 | — | 740 | — | — | |||||||||||||||
4-5% | 262 | — | 738 | — | — | |||||||||||||||
5-6% | 32 | — | 584 | 27 | — | |||||||||||||||
6-7% | 25 | 1 | 78 | 9 | 2 | |||||||||||||||
7% + | 33 | 8 | 130 | — | 64 | |||||||||||||||
Total: | $ | 990 | $ | 9 | $ | 3,034 | $ | 894 | $ | 66 | ||||||||||
17
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
Monthly Point-to-Point with Cap
Minimum Guaranteed Cap 1% | ||||
Current Cap | (Dollars in millions) | |||
At minimum | $ | 199 | ||
1% to 2% | 2,478 | |||
2% to 3% | 955 | |||
3% + | 406 | |||
Total: | $ | 4,038 | ||
3 Year Step Forward with Cap
Minimum Guaranteed Cap 2% | Minimum Guaranteed Cap 5% | |||||||
Current Cap | (Dollars in millions) | |||||||
At minimum | $ | — | $ | 17 | ||||
2% to 5% | — | — | ||||||
5% to 7% | 2 | 50 | ||||||
7% to 9% | — | 51 | ||||||
9% to 11% | — | 20 | ||||||
11% to 13% | — | 12 | ||||||
13% + | — | — | ||||||
Total: | $ | 2 | $ | 150 | ||||
There is an additional $155 million Account Value allocated to strategies not listed above. Of this $155 million, $16 million is at the guaranteed rates.
18
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
Summary of Invested Assets by Asset Class
(Dollars in millions) | December 31, 2015 | September 30, 2015 | ||||||||||||||||||||
Amortized Cost | Fair Value | Percent | Amortized Cost | Fair Value | Percent | |||||||||||||||||
Fixed maturity securities, available-for-sale: | ||||||||||||||||||||||
United States Government full faith and credit | $ | 233 | $ | 240 | 1 | % | $ | 233 | $ | 244 | 1 | % | ||||||||||
United States Government sponsored entities | 128 | 130 | 1 | % | 134 | 137 | 1 | % | ||||||||||||||
United States municipalities, states and territories | 1,543 | 1,631 | 9 | % | 1,520 | 1,608 | 8 | % | ||||||||||||||
Corporate securities: | ||||||||||||||||||||||
Finance, insurance and real estate | 4,454 | 4,572 | 24 | % | 4,272 | 4,446 | 23 | % | ||||||||||||||
Manufacturing, construction and mining | 938 | 796 | 4 | % | 867 | 772 | 4 | % | ||||||||||||||
Utilities, energy and related sectors | 2,047 | 1,917 | 10 | % | 1,893 | 1,849 | 10 | % | ||||||||||||||
Wholesale/retail trade | 1,058 | 1,050 | 6 | % | 1,018 | 1,027 | 5 | % | ||||||||||||||
Services, media and other | 1,576 | 1,490 | 8 | % | 1,483 | 1,436 | 8 | % | ||||||||||||||
Hybrid securities | 1,174 | 1,160 | 6 | % | 1,211 | 1,214 | 6 | % | ||||||||||||||
Non-agency residential mortgage-backed securities | 1,391 | 1,416 | 8 | % | 1,965 | 2,025 | 11 | % | ||||||||||||||
Commercial mortgage-backed securities | 848 | 835 | 4 | % | 878 | 882 | 5 | % | ||||||||||||||
Asset-backed securities | 2,294 | 2,191 | 12 | % | 2,148 | 2,106 | 11 | % | ||||||||||||||
Equity securities | 601 | 637 | 3 | % | 597 | 620 | 3 | % | ||||||||||||||
Commercial mortgage loans | 616 | 602 | 3 | % | 491 | 490 | 3 | % | ||||||||||||||
Other (primarily derivatives and loan participations) | 358 | 270 | 1 | % | 382 | 235 | 1 | % | ||||||||||||||
Total | $ | 19,259 | $ | 18,937 | 100 | % | 19,092 | $ | 19,091 | 100 | % | |||||||||||
Credit Quality of Fixed Maturity Securities at December 31, 2015
NAIC Designation | Fair Value | Percent | Rating Agency Rating | Fair Value | Percent | |||||||||||
(Dollars in millions) | (Dollars in millions) | |||||||||||||||
1 | $ | 9,897 | 57 | % | AAA | $ | 1,554 | 9 | % | |||||||
2 | 6,554 | 38 | % | AA | 1,843 | 11 | % | |||||||||
3 | 715 | 4 | % | A | 4,350 | 25 | % | |||||||||
4 | 193 | 1 | % | BBB | 7,454 | 43 | % | |||||||||
5 | 68 | — | % | BB | 758 | 4 | % | |||||||||
6 | 1 | — | % | B and below | 1,469 | 8 | % | |||||||||
$ | 17,428 | 100 | % | $ | 17,428 | 100 | % | |||||||||
19
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
Managed and Direct Related Party Investments
(Dollars in Millions) | December 31, 2015 | |||||||||
Type | Balance Sheet Classification | Amortized Cost | Fair Value | |||||||
Investments managed by related parties: | ||||||||||
Salus collateralized loan obligations | Fixed maturities, available-for-sale | $ | 164 | $ | 164 | |||||
Fortress Investment Group collateralized loan obligations | Fixed maturities, available-for-sale | 190 | 184 | |||||||
Salus participations (b) | Other invested assets | 85 | 76 | |||||||
Energy & Infrastructure Capital ("EIC") participations | Other invested assets | 9 | 8 | |||||||
Total investments managed by related parties | $ | 448 | $ | 432 | ||||||
Direct investment in related parties: | ||||||||||
HGI energy loan | Related party loans | 78 | 78 | |||||||
Salus preferred equity | Equity securities, available-for-sale | 3 | 5 | |||||||
Foreign exchange derivatives and embedded derivatives | Other invested assets | 12 | 12 | |||||||
Salus promissory note (90 day term) | Related party loans | 3 | 3 | |||||||
Total direct investment in related parties | $ | 96 | $ | 98 | ||||||
Assets above included in FSRCI Funds withheld portfolio: | ||||||||||
Fortress Investment Group collateralized loan obligations | Fixed Maturities, available-for-sale | 19 | 17 | |||||||
HGI energy loan | Related Party Loans | 28 | 28 | |||||||
Salus collateralized loan obligations | Fixed Maturities, available-for-sale | 8 | 8 | |||||||
Salus participations | Other Invested Assets | 5 | 5 | |||||||
Salus preferred equity | Equity securities, available-for-sale | 3 | 5 | |||||||
Total assets included in FSRCI Funds withheld portfolio | $ | 63 | $ | 63 | ||||||
(b) Includes loan participations with 12 different borrowers with an average loan fair value of $6 as of December 31, 2015. | ||||||||||
20
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
Summary of Residential Mortgage Backed Securities by Collateral Type and NAIC Designation
December 31, 2015 | ||||||||||||
Collateral Type | Principal Amount | Amortized Cost | Fair Value | |||||||||
(Dollars in millions) | ||||||||||||
Total by collateral type | ||||||||||||
Government agency | $ | 123 | $ | 128 | $ | 130 | ||||||
Prime | 278 | 236 | 239 | |||||||||
Subprime | 413 | 354 | 363 | |||||||||
Alt-A | 1,069 | 801 | 814 | |||||||||
$ | 1,883 | $ | 1,519 | $ | 1,546 | |||||||
Total by NAIC designation | ||||||||||||
1 | $ | 1,848 | $ | 1,493 | $ | 1,523 | ||||||
2 | 14 | 7 | 6 | |||||||||
3 | 4 | 4 | 4 | |||||||||
4 | 8 | 8 | 7 | |||||||||
5 | 9 | 7 | 6 | |||||||||
$ | 1,883 | $ | 1,519 | $ | 1,546 | |||||||
21
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
Top 10 Holdings by Issuers
(Dollars in millions) | December 31, 2015 | ||||||
Issuer (a): | Fair Value | Percentage of Total Invested Assets | |||||
Wells Fargo & Company | $ | 156 | 0.8 | % | |||
Goldman Sachs Group, Inc. | 141 | 0.7 | % | ||||
Metropolitan Transportation Authority (NY) | 114 | 0.6 | % | ||||
General Electric Company | 109 | 0.6 | % | ||||
JP Morgan Chase & Co. | 104 | 0.5 | % | ||||
Bank of America Corp | 103 | 0.5 | % | ||||
Nationwide Mutual Insurance Company | 90 | 0.5 | % | ||||
Cooperatieve Centrale Raiffeis | 86 | 0.5 | % | ||||
Metlife, Inc. | 84 | 0.4 | % | ||||
TIAA Board of Overseers | 81 | 0.4 | % | ||||
(a) Issuers excluding U.S. Governmental securities and any securities held in our funds withheld portfolio.
22
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
Reinsurance Counterparty Risk
(Dollars in millions) | Financial Strength Rating | |||||||||
Parent Company/Principal Reinsurers | Reinsurance Recoverable (a) | AM Best | S&P | Moody's | ||||||
Wilton Reinsurance | $ | 1,492 | A | Not Rated | Not Rated | |||||
Front Street Re | 1,198 | Not Rated | Not Rated | Not Rated | ||||||
Security Life of Denver | 143 | A | A | A2 | ||||||
Scottish Re | 143 | Not Rated | Not Rated | Not Rated | ||||||
London Life | 107 | A | Not Rated | Not Rated | ||||||
(a) Reinsurance recoverables do not include unearned ceded premiums that would be recovered in the event of early termination of certain traditional life policies.
23
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
Shareholder Information
Corporate Offices:
Fidelity & Guaranty Life
Two Ruan Center
601 Locust Street, 14th Floor
Des Moines, IA 50309
Investor Contact:
Lisa Foxworthy-Parker
Fidelity & Guaranty Life
Lisa.Parker@fglife.com
515-330-3307
Media Contact:
Sard Verbinnen & Co
Jamie Tully or David Millar, 212-687-8080
Common stock and Dividend Information:
New York Stock Exchange symbol: "FGL"
High | Low | Close | Dividend Declared | |||||||||||||
FY2016 | ||||||||||||||||
First Quarter | $ | 27.87 | $ | 24.01 | $ | 25.37 | $ | 0.065 | ||||||||
Transfer Agent
American Stock Transfer & Trust
59 Maiden Lane, Plaza Level
New York, NY 10038
Phone: (800) 937-5449
Fax: (718) 236-2641
http://www.amstock.com
24
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - December 31, 2015
(unaudited)
Research Analyst Coverage
Jimmy Bhullar
J.P. Morgan
(212) 622-6397
jimmy.s.bhullar@jpmorgancom
Sean Dargan
Macquarie Capital (USA) Inc.
212-231-0663
sean.dargan@macquarie.com
Eric Berg
RBC Capital Markets
(212) 618-7593
eric.berg@rbccm.com
John Barnidge
Sandler O'Neill + Partners
(312) 281-3412
jbarnidge@sandleroneill.com
25