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Section 1: 8-K (8-K)

Document




 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 8-K

 
CURRENT REPORT

Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): February 27, 2019


FGL HOLDINGS
(Exact name of registrant as specified in its charter)


 
 
 
 
 
 
Cayman Islands
 
001-37779
 
98-1354810
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
 
 
 
 
 
4th Floor
Boundary Hall, Cricket Square
Grand Cayman, Cayman Islands
KY1-1102

(Address of principal executive offices, including zip code)
 
Registrant's telephone number, including area code: 1 (345) 947-5614

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
     
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))





o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o


 
Item 2.02.
Results of Operations and Financial Condition.
 
 The following information, including the Exhibits referenced in this Item 2.02, is being furnished pursuant to this Item 2.02 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

On February 27, 2019, FGL Holdings (the “Company”) issued a press release announcing its results of operations for the quarter and full fiscal year ended December 31, 2018. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K. In addition, the Company is furnishing the related quarterly financial supplement as Exhibit 99.2 to this Current Report on Form 8-K.

Item 8.01
Other Events

On February 27, 2019, the Board of Directors of the Company declared a quarterly cash dividend of $0.01 per ordinary share, payable April 1, 2019 to shareholders of record at the close of business on March 18, 2019.

Item 9.01
Financial Statements and Exhibits.
 
(d) Exhibits
 
 
 
 
 
Exhibit
No.
  
 
Description
 
 
99.1
 

99.2
 

 





 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
 
February 27, 2019
FGL HOLDINGS
 
 
 
 
 
 
By: /s/ Eric L. Marhoun
 
 
Name: Eric L. Marhoun
 
 
Title: Secretary and General Counsel
 
 
 
 



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


FGL Holdings Reports Fourth Quarter and Full Year 2018 Results and Declares Common Stock Dividend
GEORGE TOWN, Cayman Islands: February 27, 2019 - FGL Holdings (NYSE: FG), a leading provider of annuities and life insurance, today announced financial results for the fourth quarter of 2018.
Reported fourth quarter net loss available to common shareholders of $156 million or $0.70 per share driven by mark to market volatility and realized losses related to portfolio reposition actions, neither of which are included in adjusted operating income1 
Delivered fourth quarter adjusted operating income (AOI)1 available to common shareholders of $76 million or $0.34 per share; full year AOI available to common shareholders of $257 million or $1.19 per share
Increased fourth quarter total annuity sales 54 percent to $957 million, including a 44 percent year over year increase in fixed indexed annuities (FIAs) sales to $667 million
Increased full year 2018 total annuity sales 33 percent to $3.3 billion, including a 28 percent year over year increase in FIA sales to $2.3 billion
Increased average assets under management (AAUM) 4 percent to $25.6 billion year over year
Completed a $64 million warrant exchange and $4 million of F&G common stock repurchases during the fourth quarter with remaining capacity under the existing share repurchase authorization of $146 million
Reported risk-based capital ratio at December 31, 2018 of approximately 470 percent
Received upgrade to financial strength rating by A.M. Best for F&G's operating companies to 'A-'
Declared first quarter 2019 common stock dividend of $0.01 per share

"We finished the fourth quarter on a strong earnings trajectory, with our AOI more than double what we delivered in the fourth quarter a year ago. Our sales are strong as well, especially with the news of our ratings upgrade to A-. We continued to make substantial progress on our portfolio reposition, delivering higher yield while improving portfolio diversification and reducing dependence on public corporates,” said Chris Blunt, F&G President and Chief Executive Officer. “With our strong capital position and disciplined capital allocation we are positioning ourselves for profitable organic and inorganic growth.”
As a result of acquisition accounting (purchase accounting or PGAAP), financial results for periods after the closing of the merger transaction on November 30, 2017 are generally not comparable to the results of prior periods. Certain metrics, such as sales and policyholder account values, are not affected by PGAAP and are comparable to prior period data. The Company presents the tables and financial results herein as follows:
Fidelity & Guaranty Life (FGL) (the Predecessor Company)-November 30, 2017 & prior periods
FG (the Successor Company)-December 1, 2017 and subsequent periods





The table below reconciles reported after-tax net income to adjusted operating income (AOI) available to common shareholders.
(In millions)
 
 
 
 
 
 
Period from October 1 to December 31, 2018
 
 
Period from December 1 to December 31, 2017
 
Period from October 1 to November 30, 2017
 
 
FG (Successor)
 
 
FG (Successor)
 
FGL (Predecessor)
Reconciliation from Net Income (loss) to AOI(1):
 
(Unaudited)
 
 
(Unaudited)
 
(Unaudited)
Net income (loss)
 
$
(148
)
 
 
$
(91
)
 
$
28

Dividends on preferred stock (5)
 
(8
)
 
 
(2
)
 

Net income (loss) available to common shareholders
 
(156
)
 
 
(93
)
 
28

Effect of investment losses (gains), net of offsets (2)
 
174

 
 

 
(6
)
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 (2) (3)
 
77

 
 
(8
)
 
(10
)
Effect of change in fair value of reinsurance related embedded derivative, net of offsets (4)
 

 
 

 
(1
)
Effect of integration, merger related & other non-operating items
 
25

 
 
(8
)
 
29

Tax effect of affiliated reinsurance embedded derivative
 
(15
)
 
 
(20
)
 

Net impact of Tax Cuts and Jobs Act
 

 
 
131

 

Tax impact of adjusting items
 
(29
)
 
 
(1
)
 
(4
)
    AOI available to common shareholders (1)
 
$
76

 
 
$
1

 
$
36


Fourth Quarter and Full Year Earnings Results
Fourth quarter 2018 net loss available to common shareholders was $156 million, or $0.70 per share, compared with net loss available to common shareholders of $65 million, or $0.30 per share, in the fourth quarter of 2017. Results for 2018 include the following net unfavorable items, from $77 million FIA embedded derivative market movements and fair value effects related to international subsidiaries, $72 million net unrealized losses driven by market value changes on preferred equity securities, $52 million net realized losses on planned portfolio reposition strategy, $31 million other market and non-operating items and $15 million credit-related impairment losses, partially offset by $15 million reversal of prior period benefit from tax election excluded from AOI; all of which have no impact to AOI.
Fourth quarter 2018 adjusted operating income available to common shareholders was $76 million, or $0.34 per share, up 105 percent from $37 million, or $0.17 per share, in the prior year. The increase was driven by strong and consistent underlying performance trends across the business from invested asset growth, stable underlying net investment spreads and disciplined expense management. Results also included net favorability of $13 million, or $0.06 per share, available to common shareholders from $24 million favorable net tax benefit realized upon recapture of affiliated reinsurance (pursuant to our Tax Reform planning strategy) and $4 million SPIA mortality gains; partially offset by $9 million unfavorable market movement on futures contracts held to manage policyholder behavior, $4 million higher amortization of deferred acquisition costs and $2 million project costs. The prior year quarter for December 2017 included net unfavorable items of ($11) million, or ($0.05) per diluted share. The prior quarter results for October and November 2017 included net favorability of $5 million or $0.08 per diluted share.
Full year 2018 adjusted operating income available to common shareholders was $257 million, or $1.19 per share, up 41 percent from $182 million, or $0.85 per share, in the prior year. Results for 2018 include net favorability of $37 million, or $0.17 per share, available to common shareholders from $24 million favorable net tax benefit realized upon recapture of affiliated reinsurance (pursuant to our Tax Reform planning strategy), $22 million SPIA mortality & other reserve adjustments; partially offset by ($4) million unfavorable market movement on futures contracts held to manage policyholder behavior and ($5) million project costs. The prior year included net favorability of $15 million, or $0.07 per diluted share.






Summary Financial Results (Unaudited)
 
 
Three Months Ended
 
Year Ended
 
 
December 31, 2018
 
December 31, 2017
 
December 31, 2018
 
December 31, 2017
(In millions, except per share data)
 
FG (Successor)
 
 
 
FG (Successor)
 
 
Fixed indexed annuity (FIA) sales (1)
 
$
667

 
$
462

 
$
2,283

 
$
1,779

Total retail annuity sales (1)
 
$
957

 
$
623

 
$
3,346

 
$
2,525

Average assets under management (1) (8)
 
$
26,140

 
$
24,722

 
$
25,619

 
$
24,722

Net investment spread - FIA (1)
 
2.55
%
 
2.64
%
 
2.41
%
 
2.92
%
Net investment spread - All products (1)
 
2.10
%
 
1.93
%
 
1.95
%
 
2.33
%
Net income (loss) available to common shareholders
 
$
(156
)
 
$
(65
)
 
$
(16
)
 
$
50

Net income (loss) available to common shareholders per diluted share(6)
 
$
(0.70
)
 
$
(0.30
)
 
$
(0.07
)
 
$
0.23

AOI available to common shareholders (1)
 
$
76

 
$
37

 
$
257

 
$
182

AOI available to common shareholders per diluted share (1) (6)
 
$
0.34

 
$
0.17

 
$
1.19

 
$
0.85

Weighted average common basic shares (6)
 
220.9

 
214.4

 
216.0

 
214.4

Weighted average common diluted shares (6)
 
220.9

 
214.4

 
216.0

 
214.4

Total common shares outstanding (6)
 
221.1

 
214.4

 
221.1

 
214.4

Book value per common share
 
$
2.19

 
$
7.40

 
$
2.19

 
$
7.40

Book value per common share excluding AOCI (1)
 
$
6.43

 
$
7.05

 
$
6.43

 
$
7.05


See footnotes below.

Strong Sales Continue
Total sales in the fourth quarter of 2018 were $1.0 billion, an increase of 14 percent from the third quarter 2018 and 60 percent compared to the prior year. For the full year 2018, total sales were $3.6 billion, an increase of 39 percent compared with the full year 2017. The increase in overall sales volumes reflects expanding relationships with distribution partners, as well as traction from new products and a comprehensive product portfolio that meets a broad range of consumer needs. Higher sales volumes were delivered while achieving new business profit and capital targets. Finally, the Company is also seeing ongoing progress in its flow reinsurance business, which achieved $185 million in deposits this year.
Total retail annuity sales were $957 million for the fourth quarter, an increase of 14 percent from the preceding quarter and 54 percent compared to the fourth quarter of 2017. For the full year 2018, total retail annuity sales of $3.3 billion increased 33 percent.
Sales of core fixed indexed annuity product in the fourth quarter were $667 million, increased 6 percent from the third quarter of 2018 and 44 percent over the prior year period. FIA sales were $2.3 billion for the full year 2018, up 28 percent. The Company continues to execute on its growth strategy and is seeing increased sales from existing distribution partners as well as new agent recruitment, which contributed 16 percent of FIA sales in 2018. F&G's newer performance-based income and accumulation product series accounted for 17 percent of FIA sales in the quarter and 12 percent for the full year 2018.
Sales of multi-year guarantee annuities (MYGA's) were $185 million in the current quarter, an increase of 15 percent compared to $161 million in the same period last year. Sales increases were driven by strong market positioning through the strength of distribution partnerships and supported by enhanced asset sourcing capabilities. During the quarter, F&G completed a $105 million funding agreement with the Federal Home Loan Bank (FHLB), under an investment spread strategy. There were no funding agreements in the prior period.
Indexed universal life (IUL) sales in the quarter were $8 million, up from $7 million last year. Stable IUL sales reflect the Company's focus on quality of new business and pricing discipline. The Company is targeting IUL growth momentum through expanded distribution and new advisors, particularly following the ratings upgrade to A- by A.M. Best in November 2018.





In the fourth quarter, F&G Reinsurance Ltd. generated $53 million of flow reinsurance deposits. For the full year 2018, flow reinsurance deposits were $185 million, with volume expected to expand as additional opportunities come online in 2019.
Investment Management
The investment portfolio is performing well and providing enhanced yield and returns, benefiting from Blackstone's investment management expertise. Significant progress was made on the portfolio reposition with the initial two phases now complete and a third phase to build out the alternative asset portfolio making significant strides as well.
Specifically, fixed income asset purchases during the fourth quarter were $2.7 billion at an average net yield(7) of 5.47 percent. Fixed income asset purchases included $2.3 billion of structured securities (CLO, CMBS and ABS), $0.2 billion residential mortgage loans and $0.1 billion public corporate bonds. Overall, the average NAIC rating for the portfolio is stable at approximately 1.5. The Company made significant progress in repositioning its portfolio to shift from corporate to structured securities and to also build out its alternative asset portfolio. F&G completed a $4 billion rotation to structured products in 2018, and structured assets now comprise 34 percent of the overall portfolio. Alternative asset fundings were $550 million or 2 percent of the portfolio at year-end and are expected to increase to approximately 3.5 percent by year-end 2019.
Average assets under management were $25.6 billion at December 31, 2018 on a year-to-date basis. AAUM increased $0.9 billion compared to the prior year period due to $1.1 billion net new business asset flows. AAUM increased $1.3 billion excluding non-economic impacts of purchase accounting. A roll forward of AAUM can be found in the non-GAAP measurements section of this release.
Net investment income was $295 million in the fourth quarter of 2018, up $29 million, or 11 percent, from the prior year quarter. Net investment income grew approximately $34 million from invested asset growth and $31 million from the portfolio reposition lift in the quarter. Offsetting this was approximately $18 million of premium amortization resulting from the fair value mark on the investment portfolio at merger transaction close and $18 million of higher planned investment fees.
Relative to the third quarter of 2018, net investment income in the fourth quarter was up $28 million, or 10 percent. The average earned yield on the total portfolio was 4.51 percent, compared to 4.13 percent in the third quarter of 2018. Entering 2019, the run rate portfolio yield is approximately 4.75 percent and will continue to rise as the alternative portfolio lift emerges.
Net investment spread across all products was 210 basis points, up 39 basis points on a sequential basis primarily due to an increase in the average earned yield on the portfolio, and up 17 basis points to the prior year period reflecting an increase in portfolio yield and stable interest credited and option costs. Net investment spread for fixed indexed annuities was 255 basis points in the fourth quarter of 2018 compared to 216 basis points in the sequential quarter an increase of 39 basis points which reflects strong progress in the portfolio reposition and stable interest credited and option costs.
For the full year 2018, the investment portfolio yield was approximately 4.9 percent on a Statutory or economic basis. Net recognized losses on investments excluding derivatives were $202 million in the quarter before amortization and taxes, primarily from $94 million net unrealized losses driven by market value changes on preferred equity securities, $78 million net realized losses on the planned portfolio reposition strategy, and $22 million credit-related impairment losses, the effects of which are excluded from AOI.
Capital Management
In October 2018, the Company settled the warrant exchange offer. A total of 65.4 million or approximately 92 percent of the warrants were tendered in exchange for 7.2 million common shares and $64.1 million in cash. A total of 5.5 million warrants remain outstanding and will expire on November 30, 2022, or upon earlier redemption or liquidation. The additional common shares issued are reflected in per share metrics commencing in the fourth quarter of 2018.
The Company repurchased 600,000 common shares during the quarter at an average price of $6.49 per common share for a total of $4 million. Capacity remaining under the existing share repurchase authorization was $146 million at the end of the quarter.
The Board of Directors declared a quarterly dividend of $0.01 per common share. The dividend is payable on April 1, 2019, to shareholders of record as of the close of business on March 18, 2019.
GAAP book value per common share, including accumulated other comprehensive income (AOCI) at December 31, 2018 was $2.19 with 221.1 million common shares outstanding. Book value per common share, excluding AOCI (1) was $6.43, including per share reductions for the following items: ($0.66) mark to market movements, much of which has rebounded strongly since year-end, and planned capital investment actions of ($0.58) portfolio reposition losses





and ($0.49) impact of the warrant exchange offer, which are expected to drive significant shareholder value in future periods.
The Company continues to have a strong and stable capital position, with an estimated Statutory company action level risk-based capital (RBC) on an aggregate basis of approximately 470 percent as of December 31, 2018, including the impact of Tax Reform.

Conference Call and Earnings Release
This press release and the financial supplement will be posted to the Company’s website at investors.fglife.bm.

F&G will conduct a webcast and conference call on Thursday, February 28, 2019 at 9:00 a.m. ET to discuss fourth quarter 2018 results.
The event can be accessed the following ways:
For internet webcast, visit investors.fglife.bm/investors at least 15 minutes prior to the start of the call to register.
For conference call, dial 877.883.0383 (U.S. callers) or 412.902.6506 (International callers) approximately 10 minutes prior to the start of the call. The access code is 3211077.
A replay of the event via webcast will be available after the call at investors.fglife.bm/investors.
A replay of the event via telephone will be available by dialing 877.344.7529 (U.S. callers) or 412.317.0088 (International callers). The access code is 10127109.
The replay information will be available through March 21, 2019.






FGL HOLDINGS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
 
December 31,
2018
 
December 31,
2017
 
(Audited)
 
(Audited)
ASSETS
 
 
 
Investments:
 
 
 
Fixed maturity securities, available-for-sale, at fair value (amortized cost: December 31, 2018 - $22,219; December 31, 2017 - $20,847)
$
21,109

 
$
20,963

Equity securities, at fair value (cost: December 31, 2018 - $1,526; December 31, 2017 - $1,392)
1,382

 
1,388

Derivative investments
97

 
492

Short term investments

 
25

Mortgage loans
667

 
548

Other invested assets
662

 
188

Total investments
23,917

 
23,604

Cash and cash equivalents
571

 
1,215

Accrued investment income
216

 
211

Funds withheld for reinsurance receivables, at fair value
757

 
756

Reinsurance recoverable
3,190

 
2,494

Intangibles, net
1,359

 
853

Deferred tax assets, net
343

 
182

Goodwill
467

 
467

Other assets
125

 
141

Total assets
$
30,945

 
$
29,923

 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
 
Contractholder funds
$
23,387

 
$
21,827

Future policy benefits, including $725 and $728 at fair value at December 31, 2018 and December 31, 2017, respectively
4,641

 
4,751

Funds withheld for reinsurance liabilities
722

 
2

Liability for policy and contract claims
64

 
78

Debt
541

 
307

Revolving credit facility

 
105

Other liabilities
700

 
890

Total liabilities
30,055

 
27,960

 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 Shareholders' equity:
 
 
 
Preferred stock ($.0001 par value, 100,000,000 shares authorized, 399,033 and 375,000 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively)

 

Common stock ($.0001 par value, 800,000,000 shares authorized, 221,660,974 and 214,370,000 issued and outstanding at December 31, 2018 and December 31, 2017, respectively

 

Additional paid-in capital
1,998

 
2,037

Retained earnings (Accumulated deficit)
(167
)
 
(149
)
Accumulated other comprehensive income (loss)
(937
)
 
75

Treasury stock, at cost (600,000 shares at December 31, 2018; no shares at December 31, 2017)
(4
)
 

Total shareholders' equity
890

 
1,963

Total liabilities and shareholders' equity
$
30,945

 
$
29,923






FGL HOLDINGS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)

 
 
 
Year Ended
 
Period from October 1 to December 31, 2018
 
Period from December 1 to December 31, 2017
 
Period from October 1 to November 30, 2017
 
December 31,
2018
 
September 30, 2017
 
 
 
 
 
Predecessor
 
 
 
Predecessor
 
(Unaudited)
 
(Audited)
 
(Audited)
 
(Audited)
 
(Audited)
Revenues:
 
 
 
 
 
 
 
 
 
Premiums
$
9

 
$
3

 
$
7

 
$
54

 
$
42

Net investment income
295

 
92

 
174

 
1,107

 
1,005

Net investment gains (losses)
(555
)
 
42

 
146

 
(629
)
 
316

Insurance and investment product fees and other
40

 
28

 
35

 
179

 
167

Total revenues
(211
)
 
165

 
362

 
711

 
1,530

Benefits and expenses:
 
 
 
 
 
 
 
 
 
Benefits and other changes in policy reserves
(52
)
 
124

 
227

 
423

 
843

Acquisition and operating expenses, net of deferrals
55

 
16

 
51

 
181

 
137

Amortization of intangibles
(23
)
 
4

 
36

 
49

 
193

        Total benefits and expenses
(20
)
 
144

 
314

 
653

 
1,173

Operating income
(191
)
 
21

 
48

 
58

 
357

Interest expense
(8
)
 
(2
)
 
(4
)
 
(29
)
 
(24
)
Income (loss) before income taxes
(199
)
 
19

 
44

 
29

 
333

Income tax expense
51

 
(110
)
 
(16
)
 
(16
)
 
(110
)
        Net income (loss)
$
(148
)
 
$
(91
)
 
$
28

 
$
13

 
$
223

Less preferred stock dividend
8

 
2

 

 
29

 

Net income (loss) available to common shareholders
$
(156
)
 
$
(93
)
 
$
28

 
$
(16
)
 
$
223

 
 
 
 
 
 
 
 
 
 
Net income (loss) per common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
$
(0.70
)
 
$
(0.44
)
 
$
0.48

 
$
(0.07
)
 
$
3.83

Diluted
$
(0.70
)
 
$
(0.44
)
 
$
0.47

 
$
(0.07
)
 
$
3.83

Weighted average common shares used in computing net income per common share:
 
 
 
 
 
 
 
 
 
Basic
220.9

 
214.4

 
58.3

 
216.0

 
58.3

Diluted
220.9

 
214.4

 
58.5

 
216.0

 
58.4

 
 
 
 
 
 
 
 
 
 
Cash dividend per common share
$

 
$

 
$
0.07

 
$

 
$
0.26







RECONCILIATION OF BOOK VALUE PER COMMON SHARE EXCLUDING AOCI

(In millions, except per share data)
December 31, 2018
 
 
 
December 31, 2017
 
(Unaudited)
 
 
 
(Unaudited)
Reconciliation to total shareholders' equity:
 
 
 
 
 
Total shareholders' equity
$
890

 
 
 
$
1,963

     Less: AOCI
(937
)
 
 
 
75

     Less: Preferred equity
406

 
 
 
377

Total common shareholders' equity excluding AOCI (1)
$
1,421

 
 
 
$
1,511

 
 
 
 
 
 
Total common shares outstanding
221.1

 
 
 
214.4

Weighted average common shares outstanding - basic (6)
220.9

 
 
 
214.4

Weighted average common shares outstanding - diluted (6)
220.9

 
 
 
214.4

 
 
 
 
 
 
Book value per common share including AOCI (1)
$
2.19

 
 
 
$
7.40

Book value per common share excluding AOCI(1)
$
6.43

 
 
 
$
7.05



ROLLFORWARD OF AVERAGE ASSETS UNDER MANAGEMENT(1) (AAUM) (Unaudited)

 
 
 
 
(In billions)
 
 
AAUM
AAUM as of December 31, 2017
 
 
$
24.7

Net new business asset flows
 
 
1.1

PGAAP amortization
 
 
(0.4
)
Net proceeds of senior note issuance / paydown
 
 
0.2

AAUM as of December 31, 2018
 
 
$
25.6


Footnotes:
(1)
Non-GAAP financial measure. See the Non-GAAP Measures section below for additional information.
(2)
Amounts are net of offsets related to value of business acquired (VOBA), deferred acquisition cost (DAC) and deferred sale inducement (DSI) amortization.
(3)
The Company adjusted its non-GAAP measure to remove the residual impacts of fair value accounting on its FIA products, for periods after December 31, 2017 and the fair value accounting impacts of assumed reinsurance by our international subsidiaries for periods after September 30, 2018.
(4)
Applicable to the Predecessor only due to the merger.
(5)
Applicable to the Successor only.
(6)
Predecessor share counts reflect those of the Successor entity post merger for comparability.
(7)
Average yield reflects investment book yield on bonds purchased during the quarter. See the Non-GAAP Measures section below for additional information.
(8)
2017 AAUM reflects the one month period from December 1, 2017 to December 31, 2017


Purchase Accounting
On November 30, 2017, Fidelity & Guaranty Life completed its merger transaction with CF Corp, emerging as FGL Holdings. As of the merger date, the Company applied the acquisition method of accounting (purchase accounting or PGAAP), including the initial recognition of most of FGL's and Front Street Re assets and liabilities at fair value, and the recognition of goodwill and other merger-related intangible assets. Prior period results are not restated for the new basis of accounting, which is used in the preparation of future financial statements and related disclosures.






Non-GAAP Measures
Management believes that certain non-GAAP financial measures may be useful in certain instances to provide additional meaningful comparisons between current results and results in prior operating periods. Reconciliations of such measures to the most comparable GAAP measures are included herein.
The Company updated its AOI definition as to remove the residual impacts of fair value accounting on its FIA products, including gains and losses on derivatives hedging those policies. Management believes the revised measure enhances the understanding of the business post-merger and is more useful and relevant to investors as compared to the previous definition which eliminated only the effects of changes in the interest rates used to discount the FIA embedded derivative.
AOI is a non-GAAP economic measure we use to evaluate financial performance each period. AOI is calculated by adjusting net income (loss) to eliminate:
(i) the impact of net investment gains/losses, including other than temporary impairment ("OTTI") losses recognized in operations, but excluding gains and losses on derivatives hedging our indexed annuity policies,
(ii) the 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,
(iii) the tax effect of affiliated reinsurance embedded derivative,
(iv) the effect of change in fair value of the reinsurance related embedded derivative,
(v) the effect of integration, merger related & other non-operating items,
(vi) impact of extinguishment of debt, and
(vii) net impact from Tax Cuts and Jobs Act.
Adjustments to AOI are net of the corresponding impact on amortization of intangibles, as appropriate. The income tax impact related to these adjustments is measured using an effective tax rate, as appropriate by tax jurisdiction. While these adjustments are an integral part of the overall performance of the Company, market conditions and/or the non-operating nature of these items can overshadow the underlying performance of the core business. Accordingly, Management considers this to be a useful measure internally and to investors and analysts in analyzing the trends of our operations.

Beginning with the quarter ended March 31, 2018, the Company updated its AOI definition to remove the residual impacts of fair value accounting on its FIA products, including gains and losses on derivatives hedging those policies. Management believes the revised measure enhances the understanding of the business post-merger and is more useful and relevant to investors as compared to the previous definition which eliminated only the effects of changes in the interest rates used to discount the FIA embedded derivative. Periods shown prior to March 31, 2018 have not been adjusted to reflect the new definition.Beginning with the quarter ended December 31, 2018, the Company updated its AOI definition to remove the incremental change due to the impact of the fair value accounting election for international subsidiaries. Management believes this revision will enhance the understanding of our business as the Company executes its growth strategy through international third party assumed business and is more relevant to investors as the impact of fair value accounting election can create an increases/decreases in the assumed liabilities that does not match the increase/decrease of the corresponding assets. This change will be applied on a prospective basis as the Company executes its growth strategy through international third party assumed reinsurance.

AOI available to common shareholders is a non-GAAP economic measure we use to evaluate financial performance attributable to our common shareholders each period. AOI available to common shareholders is calculated by adjusting net income (loss) available to common shareholders to eliminate the same items as described in the AOI paragraph above. While these adjustments are an integral part of the overall performance of the Company, market conditions impacting these items can overshadow the underlying performance of the business. Accordingly, Management considers this to be a useful measure internally and to investors and analysts 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.

Adjusted Operating Return on Common Shareholders’ Equity Excluding AOCI is calculated by dividing AOI Available to Common Shareholders’ by total average Common Shareholders’ Equity Excluding AOCI. Average Common Shareholders’ Equity Excluding AOCI for the twelve months rolling, is the average of 5 points throughout the period and for the quarterly average Common Shareholders Equity is calculated using the beginning and ending Common Shareholders Equity, Excluding AOCI, for the period. For periods less than a full fiscal year, amounts disclosed in the table are annualized. As a result of the merger, the starting point for calculation of average Common Shareholders’ Equity was reset to December 1, 2017. The rolling average will be updated from the merger date forward to use available historical data points for the successor until 5 historical





data points are available. Since AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale investments, Management considers this non-GAAP financial measure to provide useful supplemental information internally and to investors and analysts assessing the level of adjusted earned return on common equity.

Net investment spread is the excess of net investment income earned over the sum of interest credited to policyholders and the cost of hedging our risk on FIA policies. Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the performance of the Company’s invested assets against the level of investment return provided to policyholders, inclusive of hedging costs.
AAUM is the sum of (i) total invested assets at amortized cost, excluding derivatives; (ii) related party loans and investments; (iii) accrued investment income; (iv) funds withheld at fair value; (v) the net payable/receivable for the purchase/sale of investments and (iv) cash and cash equivalents, excluding derivative collateral, at the beginning of the period and the end of each month in the period, divided by the total number of months in the period plus one. Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the rate of return on assets available for reinvestment.
Investment book yield on bonds purchased during the period excludes yield on short-term treasuries and cash and cash equivalents. Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the level of return on the Company’s income generating invested assets.

Common Shareholders’ Equity is based on Total Shareholders’ Equity excluding Equity Available to Preferred Shareholders. Management considers this to be a useful measure internally and to investors to assess the level of equity that is attributable common stock holders.

Common Shareholders’ Equity Excluding AOCI is based on Common Shareholders' 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, Management considers this non-GAAP financial measure to provide useful supplemental information internally and to investors and analysts assessing the level of earned equity on common equity.

GAAP Book Value per Common Share including and excluding AOCI is calculated as Common Shareholders’ Equity and Common Shareholders Equity Excluding AOCI divided by the total number of shares of common stock outstanding. Management considers this to be a useful measure internally and for investors and analysts to assess the capital position of the Company.
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. Annuity and IUL sales are recorded as deposit liabilities (i.e. contractholder funds) within the Company's unaudited condensed consolidated financial statements in accordance with GAAP. 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.
About FGL Holdings
FGL Holdings-the F&G family of insurance companies-is committed to helping Americans prepare for and live comfortably in their retirement. Through its subsidiaries, F&G is a leading provider of annuity and life insurance products. FGL Holdings, domiciled in the Cayman Islands, trades on the New York Stock Exchange under the ticker symbol FG. For more information, please visit www.fglife.bm.
Forward Looking Statements
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995: This document contains, and certain oral statements made by our representatives from time to time may contain, forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results, events and developments to differ materially from those set forth in, or implied by, such statements. These statements are based on the beliefs and assumptions of FG's management and the management of FG's subsidiaries (including target businesses). Forward-looking statements are generally identifiable by use of the words "believes," "expects," "intends," "anticipates," "plans," "seeks," "estimates," "projects," "may," "will," "could," "might," or "continues" or similar expressions. Factors that could cause actual results, events and developments to differ





include, without limitation:  the accuracy of FG's assumptions and estimates; FG's and its insurance subsidiaries' ability to maintain or improve financial strength ratings; FG's ability to manage its business in a highly regulated industry; regulatory changes or actions; the impact of FG's reinsurers failing to meet their assumed obligations; restrictions on FG's ability to use captive reinsurers; the impact of interest rate fluctuations; changes in the federal income tax laws and regulations; litigation (including class action litigation), enforcement investigations or regulatory scrutiny; the performance of third parties; the loss of key personnel; telecommunication, information technology and other operational systems failures; the continued availability of capital; new accounting rules or changes to existing accounting rules; general economic conditions; FG's ability to protect its intellectual property; the ability to maintain or obtain approval of the Iowa Insurance Department and other regulatory authorities as required for FG's operations; FG's ability to successfully acquire new companies and integrate such acquisitions; and other factors discussed in FG’s most recent Annual Report on Form 10-K for the year ended December 31, 2017, and its Quarterly Reports on Form 10-Q, which can be found at the SEC's website www.sec.gov.
All forward-looking statements described herein are qualified by these cautionary statements and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized. FG does not undertake any obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operation results, except as required by law.

Investor Contact:
Diana Hickert-Hill
FGL Holdings
Investors@fglife.bm
410.487.8898

Source: FGL Holdings


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Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit
Exhibit 99.2

396906480_fglletterheada11.jpg



FGL Holdings (“F&G”; NYSE: FG)
Investor Supplement
December 31, 2018
(Year Ended December 31)

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.

Fidelity & Guaranty Life (“FGL”; NYSE: FGL), a former majority owned subsidiary of HRG Group, Inc. (“HRG”; NYSE: HRG), completed the merger with CF Corporation (NASDAQ: CFCO) (“CF Corp”) and its related entities (“CF Entities”), on November 30, 2017 ("Closing Date"). As a result of the Business Combination completed November 30, 2017, CF Corp changed their name to FGL Holdings (NYSE: FG). For accounting purposes, FGL Holdings was determined to be the acquirer and FGL was deemed the acquired party and accounting predecessor. In addition, on November 30, 2017 CF Corp acquired all of the issued and outstanding shares of Front Street Re Cayman Ltd. (“FSRC”) and F&G Reinsurance, Ltd. (“F&G Re”) (formerly known as Front Street Re Ltd., and, together with FSRC herein referred to as the “FSR Companies”). Our financial statement presentation includes the financial statements of FGL and its subsidiaries as “Predecessor” for the periods prior to the completion of the Business Combination and FGL Holdings, including the consolidation of FGL and its subsidiaries and FSR Companies, for periods from and after the Closing Date.

As disclosed in the Company’s Form 10-K for the year ended December 31, 2018, the Company identified immaterial errors during the quarters ended September 30, 2018 and June 30, 2018. Management recorded immaterial out of period adjustments and updated the respective balance previously reported for the quarters ended June 30, 2018 and March 31, 2018 and the period ended December 31, 2017 within the financial statements and financial exhibits included herein. See "Note 2. Significant Accounting Policies and Practices" to our audited consolidated financial statements for additional information.

Non-GAAP Financial Measures

This document contains certain non-GAAP financial measures commonly used in our industry that, together with the relevant GAAP measures, may enhance a user’s ability to analyze the Company's operating performance and capital position for the periods presented. These measures should be considered supplementary to our results in accordance with GAAP and should not be viewed as a substitute for the GAAP measures.



FGL HOLDINGS
Financial Supplement
December 31, 2018
(All periods are unaudited)
 
Page
 
 
 
 


FGL HOLDINGS
Financial Supplement - December 31, 2018
(unaudited)


NON-GAAP FINANCIAL MEASURES
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. 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. The following represents the definitions of non-GAAP measures used by the FGL Holdings.
Adjusted Operating Income (AOI)
AOI is a non-GAAP economic measure we use to evaluate financial performance each period. AOI is calculated by adjusting net income (loss) to eliminate:
(i) the impact of net investment gains/losses, including other than temporary impairment ("OTTI") losses recognized in operations, but excluding gains and losses on derivatives hedging our indexed annuity policies,
(ii) the 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,
(iii) the tax effect of affiliated reinsurance embedded derivative,
(iv) the effect of change in fair value of the reinsurance related embedded derivative,
(v) the effect of integration, merger related & other non-operating items,
(vi) impact of extinguishment of debt, and
(vii) net impact from Tax Cuts and Jobs Act.
Adjustments to AOI are net of the corresponding impact on amortization of intangibles, as appropriate. The income tax impact related to these adjustments is measured using an effective tax rate, as appropriate by tax jurisdiction. While these adjustments are an integral part of the overall performance of the Company, market conditions and/or the non-operating nature of these items can overshadow the underlying performance of the core business. Accordingly, Management considers this to be a useful measure internally and to investors and analysts in analyzing the trends of our operations.
Beginning with the quarter ended March 31, 2018, the Company updated its AOI definition to remove the residual impacts of fair value accounting on its FIA products, including gains and losses on derivatives hedging those policies. Management believes the revised measure enhances the understanding of the business post-merger and is more useful and relevant to investors as compared to the previous definition which eliminated only the effects of changes in the interest rates used to discount the FIA embedded derivative. Periods shown prior to March 31, 2018 have not been adjusted to reflect the new definition. Beginning with the quarter ended December 31, 2018, the Company updated its AOI definition to remove the incremental change due to the impact of the fair value accounting election for international subsidiaries. Management believes this revision will enhance the understanding of our business as the Company executes its growth strategy through international third party assumed business and is more relevant to investors as the impact of fair value accounting election can create an increases/decreases in the assumed liabilities that does not match the increase/decrease of the corresponding assets. This change will be applied on a prospective basis as the Company executes its growth strategy through international third party assumed reinsurance.
AOI Available to Common Shareholders
AOI available to common shareholders is a non-GAAP economic measure we use to evaluate financial performance attributable to our common shareholders each period. AOI available to common shareholders is calculated by adjusting net income (loss) available to common shareholders to eliminate the same items as described in the AOI paragraph above. While these adjustments are an integral part of the overall performance of the Company, market conditions impacting these items can overshadow the underlying performance of the business. Accordingly, Management considers this to be a useful measure internally and to investors and analysts in analyzing the trends of our operations.

3

FGL HOLDINGS
Financial Supplement - December 31, 2018
(unaudited)

Common Shareholders’ Equity
Common Shareholders’ Equity is based on Total Shareholders’ Equity excluding Equity Available to Preferred Shareholders. Management considers this to be a useful measure internally and to investors to assess the level of equity that is attributable common stock holders.
Common Shareholders’ Equity Excluding AOCI
Common Shareholders’ Equity Excluding AOCI is based on Common Shareholders' 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, Management considers this non-GAAP financial measure to provide useful supplemental information internally and to investors and analysts assessing the level of earned equity on common equity.
Equity Available to Preferred Shareholders
Equity available to preferred shareholders is equal to the product of (a) the number of preferred shares outstanding plus share dividends declared but not yet issued and (b) the original liquidation preference amount per share. Management considers this non-GAAP measure to provide useful information internally and to investors and analysts to assess the level of equity that is attributable to preferred stock holders.
Total Capitalization Excluding AOCI
Total Capitalization Excluding AOCI is based on shareholders’ 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, Management considers this non-GAAP financial measure to provide useful supplemental information internally and to investors and analysts to help assess the capital position of the Company.
GAAP Book Value per Common Share (including and excluding AOCI)
GAAP Book Value per Common Share including and excluding AOCI is calculated as Common Shareholders’ Equity and Common Shareholders Equity Excluding AOCI divided by the total number of shares of common stock outstanding. Management considers this to be a useful measure internally and for investors and analysts to assess the capital position of the Company.
Statutory Book Value per Common Share (including and excluding Interest maintenance reserve ("IMR") and asset valuation reserve ("AVR"))
Statutory Book Value per Common Share including IMR and AVR is calculated as Fidelity & Guaranty Life Insurance Company ("FGL Insurance")’s statutory basis capital and surplus plus the international insurance entities’ common shareholder’s equity and related distributable capital, excluding AOCI divided by the total number of shares of common stock outstanding at FGL Holdings. Statutory Book Value per Common Share excluding IMR and AVR is calculated as FGL Insurance’s statutory basis capital and surplus excluding IMR and AVR plus the international insurance entities’ common shareholder’s equity and related distributable capital, excluding AOCI, divided by the total number of shares of common stock outstanding at FGL Holdings. Management considers this to be a useful measure internally and for investors and analysts to assess the capital position of our primary insurance entities.
Return on Average Common Shareholders’ Equity
Return on Average Common Shareholders' Equity is calculated by dividing net income (loss) available to common shareholders by total average Common Shareholders’ Equity. Average Common Shareholders Equity for the twelve months rolling, is the average of 5 points throughout the period and for the quarterly average Common Shareholders Equity is calculated using the beginning and ending Common Shareholders’ Equity for the period. For periods less than a full fiscal year, amounts disclosed in the table are annualized. As a result of the merger, the starting point for calculation of average Common Shareholders’ Equity was reset to December 1, 2017. The rolling average will be updated from the merger date forward to use available historical data points for the successor until 5 historical data points are available. Since AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale investments, Management considers this to be a useful measure internally and for investors and analysts to assess the level of return driven by the Company that is attributable to common shareholders.

Return on Average Common Shareholders Equity Excluding AOCI

4

FGL HOLDINGS
Financial Supplement - December 31, 2018
(unaudited)

Return on Average Common Shareholders' Equity Excluding AOCI is calculated by dividing net income (loss) available to common shareholders by total average Common Shareholders’ Equity Excluding AOCI. Average Common Shareholders Equity Excluding AOCI for the twelve months rolling, is the average of 5 points throughout the period and for the quarterly average Common Shareholders Equity Excluding AOCI is calculated using the beginning and ending Common Shareholders’ Equity, excluding AOCI, for the period. For periods less than a full fiscal year, amounts disclosed in the table are annualized. As a result of the merger, the starting point for calculation of average Common Shareholders’ Equity was reset to December 1, 2017. The rolling average will be updated from the merger date forward to use available historical data points for the successor until 5 historical data points are available. Since AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale investments, Management considers this to be a useful measure internally and for investors and analysts to assess the level of return driven by the Company that is attributable to common shareholders.
Adjusted Operating Return on Average Common Shareholders’ Equity Excluding AOCI
Adjusted Operating Return on Common Shareholders’ Equity Excluding AOCI is calculated by dividing AOI Available to Common Shareholders’ by total average Common Shareholders’ Equity Excluding AOCI. Average Common Shareholders’ Equity Excluding AOCI for the twelve months rolling, is the average of 5 points throughout the period and for the quarterly average Common Shareholders Equity is calculated using the beginning and ending Common Shareholders Equity, Excluding AOCI, for the period. For periods less than a full fiscal year, amounts disclosed in the table are annualized. As a result of the merger, the starting point for calculation of average Common Shareholders’ Equity was reset to December 1, 2017. The rolling average will be updated from the merger date forward to use available historical data points for the successor until 5 historical data points are available. Since AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale investments, Management considers this non-GAAP financial measure to provide useful supplemental information internally and to investors and analysts assessing the level of adjusted earned return on common equity.
Debt-to-Capital excluding AOCI
Debt-to-capital ratio is computed by dividing total debt by total capitalization excluding AOCI. Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing its capital position.
Rating Agency Adjusted Debt to Capitalization, excluding AOCI
Rating Agency Adjusted Debt to Capitalization, excluding AOCI is computed by dividing the sum of total debt and 50% Equity Available to Preferred Shareholders by total capitalization excluding AOCI less a 50% credit for Equity Available to Preferred Shareholders. Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing its capital position.
Average Assets Under Management (AAUM)
AAUM is the sum of (i) total invested assets at amortized cost, excluding derivatives; (ii) related party loans and investments; (iii) accrued investment income; (iv) funds withheld at fair value; (v) the net payable/receivable for the purchase/sale of investments and (iv) cash and cash equivalents, excluding derivative collateral, at the beginning of the period and the end of each month in the period, divided by the total number of months in the period plus one. Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the rate of return on assets available for reinvestment.
Yield on AAUM
Yield on AAUM is calculated by dividing annualized net investment income by AAUM. Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the level of return earned on AAUM.
Net Investment Spread
Net investment spread is the excess of net investment income earned over the sum of interest credited to policyholders and the cost of hedging our risk on FIA policies. Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the performance of the Company’s invested assets against the level of investment return provided to policyholders, inclusive of hedging costs.
Investment Book Yield

5

FGL HOLDINGS
Financial Supplement - December 31, 2018
(unaudited)

Investment book yield on bonds purchased during the period excludes yield on short-term treasuries and cash and cash equivalents. Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the level of return on the Company’s income generating invested assets.
NON-GAAP FINANCIAL MEASURES : Predecessor
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. The Predecessor's 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. The following represents the definitions of non-GAAP measures used by the Predecessor entity.
AOI
AOI is a non-GAAP economic measure the Predecessor used 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 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 the reinsurance related embedded derivative and (iv) the effect of integration and merger related expenses. All adjustments to AOI are net of the corresponding VOBA and DAC impact. The income tax impact related to these adjustments is measured using an effective tax rate of 35%, as appropriate. While these adjustments were an integral part of the overall performance of the Predecessor, market conditions impacting these items could overshadow the underlying performance of the Predecessor's business. Accordingly, the Predecessor believed using a measure which excluded their impact was effective in analyzing the trends of their operations. For the period ended November 30, 2017, the Predecessor changed their definition of AOI to exclude the effects of integration and merger related expenses due to the volume of integration and merger expenses incurred during the two months ended November 30, 2017. Predecessor management believed the exclusion of these charges provided users of the financial statements a more representative view of the results of the core business of the Predecessor for that period. Predecessor periods shown prior to November 30, 2017 have been adjusted to reflect the new definition.
Total Capitalization Excluding AOCI
Total Capitalization Excluding AOCI is based on shareholders’ 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, the Predecessor considered this non-GAAP financial measure to provide useful supplemental information internally and to investors and analysts to help assess capital position of the Predecessor.
Book Value per share (including and excluding AOCI) (presented herein as Book Value per common share including and excluding AOCI)
Book Value per share including and excluding AOCI is calculated as shareholders’ equity and shareholders’ equity excluding AOCI divided by the total number of shares of common stock outstanding. The Predecessor considered this non-GAAP financial measure to provide useful supplemental information internally and to investors and analysts to help assess capital position of the Predecessor.
Return on Average Shareholders’ Equity (presented herein as Return on Average Common Shareholders’ Equity)
Return on Average Shareholders’ Equity is calculated by dividing net income (loss) available to shareholders by total average shareholders’ equity. Average shareholders’ equity for the twelve months rolling, is the average of 5 points throughout the period and for the quarterly average shareholders’ equity is calculated using the beginning and ending shareholders’ equity for the period. For periods less than a full fiscal year, amounts disclosed in the table are annualized. The Predecessor considered this to be a useful measure internally and for investors and analysts to assess the level of return driven by the Company that is attributable to common shareholders.
Return on Average Shareholders’ Excluding AOCI (presented herein as Return on Average Common Shareholders’ Equity Excluding AOCI)
Return on Average Shareholders’ Equity Excluding AOCI is calculated by dividing net income (loss) available to common shareholders by total average shareholders’ equity excluding AOCI. Average shareholders’ equity excluding AOCI for the twelve months rolling, is the average of 5 points throughout the period and for the quarterly average shareholders’ equity excluding AOCI is calculated using the beginning and ending shareholders’ equity, excluding AOCI, for the period. For periods less than a full fiscal year, amounts disclosed in the table are annualized. Since AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale investments, the

6

FGL HOLDINGS
Financial Supplement - December 31, 2018
(unaudited)

Predecessor considered this non-GAAP financial measure to provide useful supplemental information internally and to investors and analysts assessing the level of earned return on shareholders’ equity.
Adjusted Operating Return on Equity Excluding AOCI (presented herein as Adjusting Operating return on common shareholders’ equity, excluding AOCI)
Adjusted Operating Return on Equity Excluding AOCI is calculated by dividing AOI by total average shareholders’ equity excluding AOCI. Average shareholders’ equity excluding AOCI for the twelve months rolling, is the average of 5 points throughout the period and for the quarterly average shareholders’ equity is calculated using the beginning and ending shareholders’ equity, excluding AOCI, for the period. For periods less than a full fiscal year, amounts disclosed in the table are annualized. The Predecessor considered this non-GAAP financial measure to provide useful supplemental information internally and to investors and analysts assessing the level of adjusted earned return on equity.
Total Debt to Capitalization, excluding AOCI
Total Debt to Capitalization, excluding AOCI is computed by dividing total debt by total capitalization excluding AOCI. Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing its capital position.
Rating Agency Adjusted Debt to Capitalization, excluding AOCI
Rating Agency Adjusted Debt to Capitalization, excluding AOCI is computed by dividing the sum of total debt and 50% preferred equity by total capitalization excluding AOCI less a 50% preferred equity credit. Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing its capital position.
Average Assets Under Management (AAUM)
AAUM is the sum of (i) total invested assets at amortized cost, excluding derivatives; (ii) related party loans and investments; and (iii) cash and cash equivalents, excluding derivative collateral, at the beginning of the period and the end of each month in the period, divided by the total number of months in the period plus one. The Predecessor considered this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the rate of return on assets available for reinvestment.
Yield on AAUM
Yield on AAUM is calculated by dividing annualized net investment income by AAUM. The Predecessor considered this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the level of return earned on AAUM.
Net Investment Spread
Net investment spread is the excess of net investment income earned over the sum of interest credited to policyholders and the cost of hedging the Predecessor’s risk on FIA policies. The Predecessor considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the performance of the Predecessor’s invested assets against the level of investment return provided to policyholders, inclusive of hedging costs.
Investment Book Yield
Investment book yield on bonds purchased during the period excludes yield on short-term treasuries and cash and cash equivalents. The Predecessor considered this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the level of return on their income generating invested assets.

7

FGL HOLDINGS
Financial Supplement - December 31, 2018
(unaudited)


FGL HOLDINGS
Consolidated Financial Highlights

 
Three months ended
 
One month ended
 
 
Two months ended
 
Year ended
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
 
 
November 30, 2017
 
December 31, 2018
 
 
December 31, 2017
 

 

 
 
 
 
 
 
 
 
Predecessor
 
 
 
 
 
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
 
(Unaudited)
 
(Unaudited)
 
 
(Unaudited)
 
(Dollars in millions, except per share data)
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
$
9

 
$
12

 
$
15

 
$
18

 
$
3

 
 
$
7

 
$
54

 
 
$
41

Net investment income
295

 
267

 
282

 
263

 
92

 
 
174

 
1,107

 
 
1,031

Net investment gains (losses)
(555
)
 
119

 
(2
)
 
(191
)
 
42

 
 
146

 
(629
)
 
 
453

Insurance and investment product fees and other
40

 
46

 
45

 
48

 
28

 
 
35

 
179

 
 
192

Total revenues
(211
)
 
444

 
340

 
138

 
165

 
 
362

 
711

 
 
1,717

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
$
(148
)
 
$
56

 
$
40

 
$
65

 
$
(91
)
 
 
$
28

 
$
13

 
 
$
52

Adjusted Operating Income ("AOI") (1)
$
84

 
$
69

 
$
65

 
$
68

 
$
3

 
 
$
36

 
$
286

 
 
$
184

Dividends on preferred stock
(8
)
 
(7
)
 
(7
)
 
(7
)
 
(2
)
 
 

 
(29
)
 
 
(2
)
AOI available to common shareholders
76

 
62

 
58

 
61

 
1

 
 
36

 
257

 
 
182

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per Unrestricted Common Shares Amounts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) available to common shareholders
$
(0.70
)
 
$
0.23

 
$
0.15

 
$
0.27

 
$
(0.44
)
 
 
$
0.48

 
$
(0.07
)
 
 
$
0.23

AOI available to common shareholders (1)
$
0.34

 
$
0.29

 
$
0.27

 
$
0.28

 
$

 
 
$
0.62

 
$
1.19

 
 
$
0.85

Diluted:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) available to common shareholders
$
(0.70
)
 
$
0.23

 
$
0.15

 
$
0.27

 
$
(0.44
)
 
 
$
0.47

 
$
(0.07
)
 
 
$
0.23

AOI available to common shareholders (1)
$
0.34

 
$
0.29

 
$
0.27

 
$
0.28

 
$

 
 
$
0.62

 
$
1.19

 
 
$
0.85

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends Paid to Common Shareholders Per Share
$

 
$

 
$

 
$

 
$

 
 
$
0.065

 
$

 
 
$
0.260

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

8

FGL HOLDINGS
Financial Supplement - December 31, 2018
(unaudited)

 
Three months ended
 
One month ended
 
 
Two months ended
 
Year ended
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
 
 
November 30, 2017
 
December 31, 2018
 
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Predecessor
 
 
 
 
 
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
 
(Unaudited)
 
(Unaudited)
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At Period End
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
571

 
$
944

 
$
1,710

 
$
1,157

 
$
1,215

 
 
$
924

 
$
571

 
 
$
1,215

Total investments
$
23,917

 
$
24,411

 
$
22,860

 
$
23,232

 
$
23,604

 
 
$
23,326

 
$
23,917

 
 
$
23,604

Total assets
$
30,945

 
$
30,960

 
$
30,004

 
$
29,651

 
$
29,923

 
 
$
29,227

 
$
30,945

 
 
$
29,923

Contractholder funds
$
23,387

 
$
23,164

 
$
22,504

 
$
22,045

 
$
21,827

 
 
$
21,083

 
$
23,387

 
 
$
21,827

Future policy benefits
$
4,641

 
$
4,631

 
$
4,710

 
$
4,711

 
$
4,751

 
 
$
3,401

 
$
4,641

 
 
$
4,751

Debt (including revolving credit facility)
$
541

 
$
540

 
$
540

 
$
442

 
$
412

 
 
$
405

 
$
541

 
 
$
412

Total equity
$
890

 
$
1,474

 
$
1,382

 
$
1,666

 
$
1,963

 
 
$
2,284

 
$
890

 
 
$
1,963

Total equity excluding Accumulated Other Comprehensive Income (AOCI)
$
1,827

 
$
2,043

 
$
1,985

 
$
1,944

 
$
1,888

 
 
$
1,729

 
$
1,827

 
 
$
1,888

Common shares issued and outstanding
221.06

 
214.37

 
214.37

 
214.37

 
214.37

 
 
59.00

 
221.06

 
 
214.37

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Book value per common share (1)
$
2.19

 
$
5.02

 
$
4.62

 
$
5.98

 
$
7.40

 
 
$
38.71

 
$
2.19

 
 
$
7.40

GAAP Book value per common share excluding AOCI (1)
$
6.43

 
$
7.67

 
$
7.44

 
$
7.28

 
$
7.05

 
 
$
29.31

 
$
6.43

 
 
$
7.05

Debt to total Capitalization excluding AOCI (1)
23.1
 %
 
21.2
%
 
21.7
%
 
18.5
%
 
17.9
%
 
 
19.0
%
 
23.1
 %
 
 
17.9
%
Return on average common shareholders' equity excluding AOCI (1)
(40.7
)%
 
12.1
%
 
8.4
%
 
15.1
%
 
N/M

 
 
6.5
%
 
(1.0
)%
 
 
N/M

Statutory Book value per share (1) (2)
$
8.15

 
$
8.83

 
$
8.87

 
$
8.32

 
$
8.30

 
 
$
25.91

 
$
8.15

 
 
$
8.30

Statutory Book value per share excluding IMR and AVR (1) (2)
$
10.78

 
$
11.65

 
$
11.58

 
$
10.98

 
$
10.97

 
 
$
34.99

 
$
10.78

 
 
$
10.97

(1) Refer to "Non-GAAP Financial Measures" for further details
(2) Statutory book value per share measures reflect an increase in the share count at December 31, 2018 as a result of the tender of warrants on our common stock. The book value of our international subsidiaries and statutory per share measures have been trued-up in prior periods to be more representative of our combined regulatory capital position.
N/M - Not meaningful

9

FGL HOLDINGS
Financial Supplement - December 31, 2018
(unaudited)

FGL HOLDINGS
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
 
December 31, 2018
 
September 30, 2018
 
June 30,
2018
 
March 31, 2018
 
December 31, 2017
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
ASSETS
 
 
 
 
 
 
 
 
 
Investments:
 
 
 
 
 
 
 
 
 
Fixed maturity securities, available-for-sale, at fair value (amortized cost: December 31, 2018 - $22,219; December 31, 2017 - $20,847)
$
21,109

 
$
21,421

 
$
20,326

 
$
21,040

 
$
20,963

Equity securities, at fair value (cost: December 31, 2018 - $1,526; December 31, 2017 - $1,392)
1,382

 
1,440

 
1,344

 
1,095

 
1,388

Derivative investments
97

 
432

 
312

 
293

 
492

Short term investments

 
15

 

 

 
25

Mortgage loans
667

 
497

 
525

 
528

 
548

Other invested assets
662

 
606

 
353

 
276

 
188

Total investments
23,917

 
24,411

 
22,860

 
23,232

 
23,604

Cash and cash equivalents
571

 
944

 
1,710

 
1,157

 
1,215

Accrued investment income
216

 
230

 
215

 
240

 
211

Funds withheld for reinsurance receivables, at fair value
757

 
708

 
769

 
748

 
756

Reinsurance recoverable
3,190

 
2,460

 
2,476

 
2,495

 
2,494

Intangibles, net
1,359

 
1,205

 
1,070

 
947

 
853

Deferred tax assets, net
343

 
285

 
283

 
260

 
182

Goodwill
467

 
467

 
467

 
467

 
467

Other assets
125

 
250

 
154

 
105

 
141

Total assets
$
30,945

 
$
30,960

 
$
30,004

 
$
29,651

 
$
29,923

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

10

FGL HOLDINGS
Financial Supplement - December 31, 2018
(unaudited)

 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
Contractholder funds (a)
$
23,387

 
$
23,164

 
$
22,504

 
$
22,045

 
$
21,827

Future policy benefits, including $725 and $728 at fair value at December 31, 2018 and December 31, 2017, respectively (b)
4,641

 
4,631

 
4,710

 
4,711

 
4,751

Funds withheld for reinsurance liabilities
722

 
3

 
2

 
3

 
2

Liability for policy and contract claims (c)
64

 
60

 
74

 
70

 
78

Debt
541

 
540

 
540

 
307

 
307

Revolving credit facility

 

 

 
135

 
105

Other liabilities
700

 
1,088

 
792

 
714

 
890

Total liabilities
30,055

 
29,486

 
28,622

 
27,985

 
27,960

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shareholders' equity:
 
 
 
 
 
 
 
 
 
Preferred stock ($.0001 par value, 100,000,000 shares authorized, 399,033 and 375,000 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively)

 

 

 

 

Common stock ($.0001 par value, 800,000,000 shares authorized, 221,660,974 and 214,370,000 issued and outstanding at December 31, 2018 and December 31, 2017, respectively

 

 

 

 

Additional paid-in capital
1,998

 
2,056

 
2,047

 
2,039

 
2,037

Retained earnings (Accumulated deficit)
(167
)
 
(13
)
 
(62
)
 
(95
)
 
(149
)
Accumulated other comprehensive income (loss)
(937
)
 
(569
)
 
(603
)
 
(278
)
 
75

Treasury stock, at cost (600,000 shares at December 31, 2018; no shares at December 31, 2017)
(4
)
 

 

 

 

Total shareholders' equity
890

 
1,474

 
1,382

 
1,666

 
1,963

Total liabilities and shareholders' equity
$
30,945

 
$
30,960

 
$
30,004

 
$
29,651

 
$
29,923

 
 
 
 
 
 
 
 
 
 
Equity attributable to preferred shareholders (1)
$
406

 
$
398

 
$
391

 
$
384

 
$
377

(1) Refer to "Non-GAAP Financial Measures" for further details
(a) Contractholder funds include amounts on deposit for annuity and universal life contracts plus the fair value of future index credits and guarantees on our FIA and IUL products.
(b) Future policy benefits include the present value of future benefits on our traditional life insurance products, life contingent SPIA contracts, long-term care block and offshore reinsurance annuity products.
(c) Liability for policy and contract claims represents policyholder pending claims.


11

FGL HOLDINGS
Financial Supplement - December 31, 2018
(unaudited)

Quarterly Summary - Most Recent 5 Quarters
 
Three months ended
 
One month ended
 
 
Two months ended
 
Year ended
 
December 31, 2018
 
September 30, 2018
 
June 30,
2018
 
March 31, 2018
 
December 31, 2017
 
 
November 30, 2017
 
December 31, 2018
 
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Predecessor
 

 
 
 
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
 
(Unaudited)
 
(Unaudited)
 
 
(Unaudited)
 
(Dollars in millions, except per share data)
 
 
 
 
 
Revenues: