Please wait
.2


logo2a02a19.jpg




Investor Supplement
Third Fiscal Quarter 2017
(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
June 30, 2017
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 

FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2017
(unaudited)


FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Consolidated Financial Highlights
 
Three Months Ended
 
Nine Months Ended
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
September 30,
2016
 
June 30,
2016
 
June 30,
2017
 
June 30,
2016
 
(Dollars in millions)
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
$
12

 
$
3

 
$
11

 
$
18

 
$
21

 
$
26

 
$
52

Net investment income
257

 
247

 
240

 
238

 
236

 
744

 
685

Net investment gains (losses)
67

 
81

 
51

 
26

 
(28
)
 
199

 
(7
)
Insurance and investment product fees and other
44

 
44

 
38

 
34

 
32

 
126

 
93

Total revenues
380

 
375

 
340

 
316

 
261

 
1,095

 
823

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
32

 
$
22

 
$
108

 
$
30

 
$
10

 
$
162

 
$
67

Adjusted Operating Income ("AOI")
$
37

 
$
36

 
$
41

 
$
40

 
$
48

 
114

 
122

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per Unrestricted Common Shares Amounts:
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
0.54

 
$
0.38

 
$
1.85

 
$
0.52

 
$
0.16

 
$
2.78

 
$
1.14

AOI
$
0.63

 
$
0.62

 
$
0.70

 
$
0.69

 
$
0.82

 
$
1.95

 
$
2.09

Diluted:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
0.54

 
$
0.38

 
$
1.85

 
$
0.52

 
$
0.16

 
$
2.77

 
$
1.14

AOI
$
0.63

 
$
0.62

 
$
0.70

 
$
0.69

 
$
0.82

 
$
1.95

 
$
2.08

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends Paid to Shareholders Per Share
$
0.065

 
$
0.065

 
$
0.065

 
$
0.065

 
$
0.065

 
$
0.195

 
$
0.195

 
 
 
 
 
 
 
 
 
 
 
 
 
 
At Period End
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
799

 
$
887

 
$
632

 
$
864

 
$
719

 
$
799

 
$
719

Total investments
$
22,627

 
$
21,813

 
$
21,076

 
$
21,025

 
$
20,548

 
$
22,627

 
$
20,548

Total assets
$
28,402

 
$
27,897

 
$
26,952

 
$
27,035

 
$
26,338

 
$
28,402

 
$
26,338

Contractholder funds
$
20,342

 
$
20,052

 
$
19,486

 
$
19,251

 
$
18,874

 
$
20,342

 
$
18,874

Future policy benefits
$
3,423

 
$
3,435

 
$
3,453

 
$
3,467

 
$
3,466

 
$
3,423

 
$
3,466

Debt (including revolving credit facility)
$
405

 
$
405

 
$
400

 
$
400

 
$
300

 
$
405

 
$
300

Total equity
$
2,113

 
$
1,908

 
$
1,752

 
$
1,934

 
$
1,782

 
$
2,113

 
$
1,782

Total equity excluding AOCI
$
1,646

 
$
1,617

 
$
1,599

 
$
1,495

 
$
1,477

 
$
1,646

 
$
1,477

Common shares issued and outstanding
58.99

 
58.99

 
58.98

 
58.96

 
58.96

 
58.99

 
58.96

 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Book value per share
$
35.82

 
$
32.34

 
$
29.70

 
$
32.80

 
$
30.22

 
$
35.82

 
$
30.22

GAAP Book Value per Share excluding AOCI
$
27.90

 
$
27.41

 
$
27.11

 
$
25.36

 
$
25.05

 
27.90

 
25.05

Debt to total Capitalization excluding AOCI
19.7
%
 
20.0
%
 
20.0
%
 
21.1
%
 
16.9
%
 
19.7
%
 
16.9
%
Return on average shareholders' equity excluding AOCI
7.8
%
 
5.5
%
 
27.9
%
 
8.1
%
 
2.7
%
 
13.8
%
 
9.1
%
Statutory Book value per share(1)
$
25.18

 
$
26.06

 
$
22.43

 
$
22.39

 
$
21.23

 
25.18

 
21.23

Statutory Book value per share excluding IMR and AVR(1)
$
34.30

 
$
35.28

 
$
32.18

 
$
32.20

 
$
31.35

 
34.30

 
31.35

(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 - June 30, 2017
(unaudited)

FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
September 30,
2016
 
June 30,
2016
ASSETS
 
 
 
 
 
 
 
 
 
      Investments:
 
 
 
 
 
 
 
 
 
Fixed maturity securities, available-for-sale, at fair value (amortized cost: June 30, 2017 - $19,845; September 30, 2016 - $18,521)
$
20,766

 
$
20,052

 
$
19,437

 
$
19,411

 
$
18,972

Equity securities, available-for-sale, at fair value (amortized cost: June 30, 2017 - $732; September 30, 2016 - $640)
774

 
712

 
696

 
683

 
645

Derivative investments
361

 
351

 
314

 
276

 
216

Commercial mortgage loans
550

 
579

 
582

 
595

 
622

Other invested assets
176

 
119

 
47

 
60

 
93

Total investments
22,627

 
21,813

 
21,076

 
21,025

 
20,548

Related party loans
71

 
71

 
71

 
71

 
72

Cash and cash equivalents
799

 
887

 
632

 
864

 
719

Accrued investment income
204

 
225

 
201

 
214

 
192

Reinsurance recoverable
3,390

 
3,426

 
3,444

 
3,464

 
3,476

Intangibles, net
1,097

 
1,184

 
1,228

 
1,026

 
1,048

Deferred tax assets, net
—

 
87

 
68

 
—

 
84

Other assets
214

 
204

 
232

 
371

 
199

Total assets
$
28,402

 
$
27,897

 
$
26,952

 
$
27,035

 
$
26,338

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
Contractholder funds
$
20,342

 
$
20,052

 
$
19,486

 
$
19,251

 
$
18,874

Future policy benefits
3,423

 
3,435

 
3,453

 
3,467

 
3,466

Funds withheld for reinsurance liabilities
1,106

 
1,134

 
1,142

 
1,172

 
1,190

Liability for policy and contract claims
57

 
60

 
53

 
55

 
45

Debt
300

 
300

 
300

 
300

 
300

Revolving credit facility
105

 
105

 
100

 
100

 
—

Deferred tax liability, net
11

 
—

 
—

 
10

 
—

Other liabilities
945

 
903

 
666

 
746

 
681

Total liabilities
26,289

 
25,989

 
25,200

 
25,101

 
24,556

 
 
 
 
 
 
 
 
 
 
Shareholders' equity:
 
 
 
 
 
 
 
 
 
Preferred stock ($.01 par value, 50,000,000 shares authorized, no shares issued at June 30, 2017 and September 30, 2016)
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Common stock ($.01 par value, 500,000,000 shares authorized, 58,993,219 issued and outstanding at June 30, 2017; 58,956,127 shares issued and outstanding at September 30, 2016)
1

 
1

 
1

 
1

 
1

Additional paid-in capital
716

 
715

 
715

 
714

 
723

Retained earnings
942

 
914

 
896

 
792

 
765

Accumulated other comprehensive income
467

 
291

 
153

 
439

 
305

Treasury stock, at cost (568,847 shares at June 30, 2017; 537,613 shares at September 30, 2016)
(13
)
 
(13
)
 
(13
)
 
(12
)
 
(12
)
Total shareholders' equity
2,113

 
1,908

 
$
1,752

 
$
1,934

 
$
1,782

Total liabilities and shareholders' equity
$
28,402

 
$
27,897

 
$
26,952

 
$
27,035

 
$
26,338


4
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2017
(unaudited)

Quarterly Summary - Most Recent 5 Quarters
 
Three Months Ended
 
Nine Months Ended
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
September 30,
2016
 
June 30,
2016
 
June 30,
2017
 
June 30,
2016
 
(Dollars in millions)
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Traditional life insurance premiums
$
7

 
$
—

 
$
10

 
$
11

 
$
10

 
$
16

 
$
31

Life contingent immediate annuity
5

 
3

 
1

 
7

 
11

 
10

 
21

Net investment income
257

 
247

 
240

 
238

 
236

 
744

 
685

Net investment gains (losses)
67

 
81

 
51

 
26

 
(28
)
 
199

 
(7
)
Surrender charges
9

 
9

 
7

 
8

 
5

 
25

 
15

Cost of insurance fees and other income
35

 
35

 
31

 
26

 
27

 
101

 
78

Total revenues
380

 
375

 
340

 
316

 
261

 
1,095

 
823

Benefits and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Traditional life insurance policy benefits and change in future policy benefits
21

 
11

 
22

 
18

 
18

 
53

 
52

Life contingent immediate annuity benefits and changes in future policy benefits
20

 
18

 
18

 
25

 
31

 
57

 
84

Interest sensitive and index product benefits and changes in future policy benefits
194

 
239

 
(20
)
 
163

 
167

 
413

 
449

General expenses
35

 
30

 
25

 
30

 
26

 
90

 
77

Acquisition expenses
72

 
81

 
92

 
89

 
88

 
245

 
236

Deferred acquisition costs ("DAC")
(67
)
 
(78
)
 
(89
)
 
(83
)
 
(86
)
 
(234
)
 
(230
)
Amortization of intangibles
51

 
33

 
123

 
20

 
(4
)
 
207

 
34

        Total benefits and expenses
326

 
334

 
171

 
262

 
240

 
831

 
702

Operating income
54

 
41

 
169

 
54

 
21

 
264

 
121

Interest expense
(6
)
 
(6
)
 
(6
)
 
(5
)
 
(5
)
 
(18
)
 
(17
)
Income before income taxes
48

 
35

 
163

 
49

 
16

 
246

 
104

Income tax expense
(16
)
 
(13
)
 
(55
)
 
(19
)
 
(6
)
 
(84
)
 
(37
)
Net income
$
32

 
$
22

 
$
108

 
$
30

 
$
10

 
$
162

 
$
67

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
$
0.54

 
$
0.38

 
$
1.85

 
$
0.52

 
$
0.16

 
$
2.78

 
$
1.14

Diluted
$
0.54

 
$
0.38

 
$
1.85

 
$
0.52

 
$
0.16

 
$
2.77

 
$
1.14

Weighted average common shares used in computing net income per common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
58.34

 
58.33

 
58.28

 
58.26

 
58.31

 
58.31

 
58.28

Diluted
58.44

 
58.38

 
58.37

 
58.35

 
58.66

 
58.39

 
58.60



5
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2017
(unaudited)


Reconciliation from Net Income to Adjusted Operating Income ("AOI ")



 
Three Months Ended
 
Nine Months Ended
 
June 30, 2017
 
March 31, 2017
 
December 31, 2016
 
September 30, 2016
 
June 30, 2016
 
June 30, 2017
 
June 30, 2016
 
(Dollars in millions, except per share data)
 
 
 
 
Net income
$
32

 
$
22

 
$
108

 
$
30

 
$
10

 
$
162

 
$
67

Adjustments to arrive at AOI:
 
 
 
 
 
 
 
 
 
 
 
 
 
Effect of investment (gains) losses, net of offsets (a)
4

 
15

 
(1
)
 
5

 
5

 
18

 
4

Effect of change in FIA embedded derivative discount rate, net of offsets (a)
(4
)
 
(2
)
 
(92
)
 
(7
)
 
28

 
(98
)
 
61

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

 
8

 
(10
)
 
17

 
26

 
6

 
20

Tax impact of adjusting items
(3
)
 
(7
)
 
36

 
(5
)
 
(21
)
 
26

 
(30
)
AOI
$
37

 
$
36

 
$
41

 
$
40

 
$
48

 
$
114

 
$
122

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per diluted common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
0.54

 
$
0.38

 
$
1.85

 
$
0.52

 
$
0.16

 
$
2.77

 
$
1.14

Adjustments to arrive at AOI:
 
 
 
 
 
 
 
 
 
 
 
 
 
Effect of investment (gains) losses, net of offsets (a)
0.07

 
0.26

 
(0.02
)
 
0.09

 
0.09

 
0.31

 
0.07

Effect of change in FIA embedded derivative discount rate, net of offsets (a)
(0.07
)
 
(0.04
)
 
(1.58
)
 
(0.12
)
 
0.48

 
(1.68
)
 
1.04

Effect of change in fair value of reinsurance related embedded derivative, net of offsets (a)
0.14

 
0.14

 
(0.17
)
 
0.29

 
0.44

 
0.10

 
0.34

Tax impact of adjusting items
$
(0.05
)
 
$
(0.12
)
 
$
0.62

 
$
(0.09
)
 
$
(0.35
)
 
$
0.45

 
$
(0.51
)
AOI per diluted share
$
0.63

 
$
0.62

 
$
0.70

 
$
0.69

 
$
0.82

 
$
1.95

 
$
2.08


(a) amounts are net of offsets related to value of business acquired ("VOBA") and deferred acquisition cost ("DAC") amortization



6
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2017
(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, and (iii) the effect of change in fair value of the reinsurance related embedded derivative. 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 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.


7
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2017
(unaudited)


Summary of Adjustments to Arrive at AOI

 
Three Months Ended
 
Nine Months Ended
 
June 30, 2017
 
March 31, 2017
 
December 31, 2016
 
September 30, 2016
 
June 30, 2016
 
June 30, 2017
 
June 30, 2016
 
(Dollars in millions)
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net investment gains (a)
$
15

 
$
28

 
$
(12
)
 
$
29

 
$
44

 
$
31

 
$
34

Increase (decrease) in total revenues
15

 
28

 
(12
)
 
29

 
44

 
31

 
34

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Benefits and other changes in policy reserves (b)
(10
)
 
(1
)
 
(168
)
 
(16
)
 
53

 
(179
)
 
113

Amortization of intangibles
3

 
(6
)
 
77

 
2

 
(38
)
 
74

 
(62
)
(Decrease) increase in total benefits and expenses
(7
)
 
(7
)
 
(91
)
 
(14
)
 
15

 
(105
)
 
51

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase (decrease) in pre-tax operating income
8

 
21

 
(103
)
 
15

 
59

 
(74
)
 
85

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Decrease) increase in income tax expense (benefit) (c)
(3
)
 
(7
)
 
36

 
(5
)
 
(21
)
 
26

 
(30
)
Increase (decrease) in net income
$
5

 
$
14

 
$
(67
)
 
$
10

 
$
38

 
$
(48
)
 
$
55


(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) The tax expense (benefit) includes the tax impact of the adjustments in a-b above.


8
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2017
(unaudited)

Notable Items Included in Net Income and AOI

Each quarterly reporting period, we identify notable items that explain the trends in our Net Income and 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 to explain our Net Income and AOI results.  We believe that understanding these items provides further clarity to the financial performance of the business.   
 
Three Months Ended
 
Nine Months Ended
 
June 30, 2017
 
March 31, 2017
 
December 31, 2016
 
September 30, 2016
 
June 30, 2016
 
June 30, 2017
 
June 30, 2016
 
(Dollars in millions)
 
 
 
 
Net Income
$
32

 
$
22

 
$
108

 
$
30

 
$
10

 
$
162

 
$
67

 
 
 
 
 
 
 
 
 
 
 
 
 
 
AOI
$
37

 
$
36

 
$
41

 
$
40

 
$
48

 
$
114

 
$
122

Notable Items Included within AOI [(unfavorable)/favorable]
 
 
 
 
 
 
 
 
 
 
 
 
 
Legacy incentive compensation (a)
(1
)
 
(1
)
 
—

 
(2
)
 
1

 
(2
)
 
—

Project expenses (b)
(5
)
 
(2
)
 
—

 
—

 
(1
)
 
(7
)
 
(4
)
Single premium immediate annuities ("SPIA") mortality & other reserve adjustments (c)
2

 
3

 
2

 
—

 
4

 
7

 
7

Assumption review & DAC unlocking (d)
—

 
(3
)
 
—

 
5

 
7

 
(3
)
 
12

Other, including bond prepayment income & tax valuation allowance (e)
—

 
—

 
2

 
1

 
2

 
2

 
5


(a) Change in certain long term incentive compensation costs, including the 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, and other reserve adjustments.
(d) Reflects unlocking from updating our DAC amortization models for actual experience and equity market fluctuations. Also, 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.
(e) Bond prepayment income, changes in tax valuation, and other allowances related to reinsurance and agent debt, reinsurance settlements and other net favorable activity.

9
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2017
(unaudited)

Capitalization/Book Value per Share

 
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
September 30,
2016
 
June 30,
2016
 
 
(Dollars in millions, except per share data)
Capitalization:
 
 
 
 
 
 
 
 
 
 
Debt
 
$
405

 
$
405

 
$
400

 
$
400

 
$
300

Total debt
 
405

 
405

 
400

 
400

 
300

Total shareholders' equity
 
2,113

 
1,908

 
1,752

 
1,934

 
1,782

Total capitalization
 
2,518

 
2,313

 
2,152

 
2,334

 
2,082

AOCI
 
467

 
291

 
153

 
439

 
305

Total capitalization excluding AOCI (a)
 
$
2,051

 
$
2,022

 
$
1,999

 
$
1,895

 
$
1,777

 
 
 
 
 
 
 
 
 
 
 
Total shareholders' equity
 
2,113

 
1,908

 
1,752

 
1,934

 
1,782

AOCI
 
467

 
291

 
153

 
439

 
305

Total shareholders' equity excluding AOCI (a)
 
$
1,646

 
$
1,617

 
$
1,599

 
$
1,495

 
$
1,477

 
 
 
 
 
 
 
 
 
 
 
Common shares outstanding
 
58.99

 
58.99

 
58.98

 
58.96

 
58.96

 
 
 
 
 
 
 
 
 
 


Book Value per Share: (b)
 


 
 
 
 
 
 
 
 
GAAP Book value per share including AOCI
 
$
35.82

 
$
32.34

 
$
29.70

 
$
32.80

 
$
30.22

GAAP Book value per share excluding AOCI (a)
 
$
27.90

 
$
27.41

 
$
27.11

 
$
25.36

 
$
25.05

 
 
 
 
 
 
 
 
 
 
 
 
 
Twelve months ended
Twelve Month Rolling Average Return on Equity ("ROE")
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
September 30,
2016
 
June 30,
2016
Return on Shareholders' Equity (c)
 
 
 
 
 
 
 
 
 
 
Return on average shareholders' equity
 
10.1
%
 
9.6
%
 
9.4
%
 
6.0
%
 
6.3
%
Return on average shareholders' equity, excluding AOCI (c)
 
12.3
%
 
11.1
%
 
10.5
%
 
6.6
%
 
6.7
%
 
 
 
 
 
 
 
 
 
 
 
Return on Shareholders' Equity - AOI (d)
 
 
 
 
 
 
 
 
 
 
Adjusted Operating ROE, excluding AOCI (d)
 
9.8
%
 
10.8
%
 
11.5
%
 
11.1
%
 
11.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
Quarterly Average ROE
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
September 30,
2016
 
June 30,
2016
Return on average shareholders' equity
 
6.4
%
 
4.8
%
 
23.4
%
 
6.5
%
 
2.4
%
Return on average shareholders' equity, excluding AOCI (c)
 
7.8
%
 
5.5
%
 
27.9
%
 
8.1
%
 
2.7
%
Adjusted Operating ROE, excluding AOCI (d)
 
9.1
%
 
9.0
%
 
10.6
%
 
10.8
%
 
13.1
%
 
 
 
 
 
 
 
 
 
 
 
Debt-to-Capital Ratios: (e)
 
 
 
 
 
 
 
 
 
 
Long-term debt/Total capitalization excluding AOCI
 
19.7
%
 
20.0
%
 
20.0
%
 
21.1
%
 
16.9
%

10
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2017
(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 financial 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, excluding AOCI, 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 financial 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, excluding AOCI, 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 and revolving credit facility.



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++
 
Baa2
 
BBB
Fidelity and Guaranty Life Insurance Company of New York
 
BBB-
 
B++
 
Not Rated
 
BBB
Rating Agency Outlook
 
Credit Watch Developing
 
Under Review with Developing Implications
 
Stable
 
Rating Watch Evolving

11
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2017
(unaudited)

Net Investment Spread Results
(Dollars in millions)
Three Months Ended
 
Nine Months Ended
 
June 30, 2017
 
June 30, 2016
 
June 30, 2017
 
June 30, 2016
Yield on average assets under management "AAUM" (at amortized cost)
5.01
 %
 
5.01
 %
 
4.92
 %
 
4.93
 %
Less: Interest credited and option cost
(2.47
)%
 
(2.60
)%
 
(2.51
)%
 
(2.66
)%
Total net investment spread - All product lines (b)
2.54
 %
 
2.41
 %
 
2.41
 %
 
2.27
 %
 
 
 
 
 
 
 
 
FIA net investment spread
3.02
 %
 
3.07
 %
 
3.03
 %
 
2.98
 %
 
 
 
 
 
 
 
 
Investment book yield - bonds purchased during the period (c)
5.27
 %
 
5.00
 %
 
5.08
 %
 
5.52
 %
 
 
 
 
 
 
 
 
AAUM (a)
$
20,569

 
$
18,854

 
$
20,153

 
$
18,523


(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) 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.
(c) 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
 
Nine Months Ended
 
June 30, 2017
 
March 31, 2017
 
December 31, 2016
 
September 30, 2016
 
June 30, 2016
 
June 30, 2017
 
June 30, 2016
Fixed index annuities ("FIA")
$
455

 
$
438

 
$
551

 
$
482

 
$
495

 
$
1,444

 
1,350

Fixed rate annuities ("MYGA")
127

 
158

 
97

 
121

 
180

 
382

 
415

Institutional spread based (1)
—

 
136

 
—

 
—

 
157

 
136

 
157

Total Annuity
$
582

 
$
732

 
$
648

 
$
603

 
$
832

 
$
1,962

 
$
1,922

Index universal life
9

 
14

 
17

 
17

 
15

 
40

 
39

Total Sales
$
591

 
$
746

 
$
665

 
$
620

 
$
847

 
$
2,002

 
$
1,961


(1) Institutional spread based product sales from funding agreement investment contracts issued with the Federal Home Loan Bank and held in our separate account.


12
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2017
(unaudited)


Annuity Account Balance Rollforward (a)

(Dollars in millions)
Three Months Ended
 
June 30, 2017
 
March 31, 2017
 
December 31, 2016
 
September 30, 2016
 
June 30, 2016
Account balances at beginning of period:
$
16,114

 
$
15,603

 
$
15,250

 
$
14,935

 
$
14,599

Net deposits
591

 
603

 
655

 
598

 
687

Premium and interest bonuses
12

 
12

 
13

 
10

 
11

Fixed interest credited and index credits
154

 
153

 
87

 
81

 
45

Guaranteed product rider fees
(18
)
 
(18
)
 
(16
)
 
(12
)
 
(14
)
Surrenders, withdrawals, deaths, etc.
(423
)
 
(239
)
 
(386
)
 
(362
)
 
(393
)
Account balance at end of period
$
16,430

 
$
16,114

 
$
15,603


$
15,250


$
14,935

(a) The rollforward reflects the account balance of our fixed index annuities and fixed rate annuities.

Annuity Deposits by Product Type

 
Three Months Ended
 
Nine Months Ended
Product Type
June 30, 2017
 
June 30, 2016
 
June 30, 2017
 
June 30, 2016
 
(Dollars in millions)
 
 
 
 
Fixed Index Annuities:
 
 
 
 
 
 
 
Index Strategies
$
370

 
$
411

 
$
1,156

 
$
1,114

Fixed Strategy
93

 
91

 
306

 
261

 
463


502


1,462


1,375

 
 
 
 
 
 
 
 
Fixed Rate Annuities:
 
 
 
 
 
 
 
Single-Year Rate Guaranteed
3

 
1

 
7

 
4

Multi-Year Rate Guaranteed
126

 
184

 
382

 
424

Total before coinsurance ceded
592

 
687

 
1,851

 
1,803

Coinsurance ceded
1

 
—

 
2

 
1

Net after coinsurance ceded
$
591


$
687


$
1,849


$
1,802






13
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2017
(unaudited)

Surrender Charge Protection and Account Values by Product Type
Annuity Surrender Charges and Account Values (net of reinsurance) at June 30, 2017:
 
 
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
%
 
$
13,026

 
79
%
Single-Year Rate Guaranteed
 
10
 
1
 
1
%
 
598

 
4
%
Multi-Year Rate Guaranteed
 
5
 
3
 
7
%
 
2,806

 
17
%
Total
 
 
 
 
 
 
 
$
16,430

 
100
%



14
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2017
(unaudited)



Annuity Liability Characteristics

 
 
Fixed Annuities Account Value
 
Fixed Index Annuities Account Value
 
 
(Dollars in millions)
SURRENDER CHARGE PERCENTAGES:
 
 
 
 
No surrender charge
 
$
709

 
$
1,888

0.0% < 2.0%
 
41

 
300

2.0% < 4.0%
 
32

 
364

4.0% < 6.0%
 
274

 
585

6.0% < 8.0%
 
988

 
1,537

8.0% < 10.0%
 
1,323

 
2,469

10.0% or greater
 
37

 
5,883

 
 
$
3,404

 
$
13,026


 
 
Fixed and Fixed Index Annuities Account Value
 
Weighted Average Surrender Charge
 
 
(Dollars in millions)
SURRENDER CHARGE EXPIRATION BY YEAR:
 
 
 
 
Out of Surrender Charge
 
$
2,573

 
—
%
2017
 
436

 
4
%
2018 - 2019
 
2,240

 
5
%
2020 - 2021
 
1,918

 
8
%
2022 - 2023
 
1,949

 
8
%
Thereafter
 
7,314

 
11
%
 
 
$
16,430

 
7
%


15
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2017
(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
 
$
1,017

 
$
1,334

0.0% - 1.0%
 
383

 
1,259

1.0% - 2.0%
 
283

 
58

2.0% - 3.0%
 
1,700

 
14

3.0% - 4.0%
 
21

 
—

Allocated to index strategies
 
—

 
10,361

 
 
$
3,404

 
$
13,026

    
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
 
$
—

 
$
—

 
$
1,488

 
$
634

 
$
—

 2-3%
 
647

 
—

 
—

 
—

 
—

 3-4%
 
1,006

 
—

 
391

 
—

 
—

 4-5%
 
397

 
—

 
499

 
—

 
—

 5-6%
 
70

 
1

 
133

 
4

 
—

 6-7%
 
30

 
2

 
19

 
—

 
5

 7% +
 
59

 
33

 
177

 
—

 
67

Total:
 
$
2,209

 
$
36

 
$
2,707

 
$
638

 
$
72

    









16
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2017
(unaudited)

Monthly Point-to-Point with Cap
 
 
Minimum Guaranteed Cap 1%
Current Cap
 
(Dollars in millions)
At minimum
 
$
1,334

 1% to 2%
 
2,176

 2% to 3%
 
660

 3% +
 
164

 Total:
 
$
4,334


3 Year Step Forward with Cap
 
 
Minimum Guaranteed Cap 2%
 
Minimum Guaranteed Cap 5%
Current Cap
 
(Dollars in millions)
At minimum
 
$
—

 
$
19

 2% to 5%
 
2

 
—

 5% to 7%
 
8

 
49

 7% to 9%
 
—

 
43

 9% to 11%
 
—

 
18

 11% to 13%
 
—

 
7

 Total:
 
$
10

 
$
136


There is an additional $218 million Account Value allocated to strategies not listed above. Of this $218 million, $13 million is at the guaranteed rates.














17
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2017
(unaudited)

Summary of Invested Assets by Asset Class

(Dollars in millions)
 
June 30, 2017
 
September 30, 2016
 
 
Amortized Cost
 
Fair Value
 
Percent
 
Amortized Cost
 
Fair Value
 
Percent
Fixed maturity securities, available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
    United States Government full faith and credit
 
$
85

 
$
87

 
—
%
 
$
233

 
$
243

 
1
%
    United States Government sponsored entities
 
132

 
133

 
1
%
 
112

 
115

 
1
%
    United States municipalities, states and territories
 
1,589

 
1,726

 
8
%
 
1,515

 
1,717

 
8
%
Corporate securities:
 
 
 
 
 
 
 
 
 
 
 
 
    Finance, insurance and real estate
 
5,342

 
5,723

 
25
%
 
5,084

 
5,463

 
26
%
    Manufacturing, construction and mining
 
985

 
1,009

 
5
%
 
847

 
863

 
4
%
    Utilities, energy and related sectors
 
1,989

 
2,046

 
9
%
 
1,811

 
1,881

 
9
%
    Wholesale/retail trade
 
1,343

 
1,398

 
6
%
 
1,205

 
1,277

 
6
%
    Services, media and other
 
2,218

 
2,299

 
10
%
 
1,765

 
1,856

 
9
%
Hybrid securities
 
1,362

 
1,431

 
6
%
 
1,356

 
1,386

 
7
%
Non-agency residential mortgage-backed securities
 
1,073

 
1,161

 
6
%
 
1,215

 
1,247

 
6
%
Commercial mortgage-backed securities
 
950

 
950

 
4
%
 
850

 
864

 
4
%
Asset-backed securities
 
2,777

 
2,803

 
13
%
 
2,528

 
2,499

 
12
%
Equity securities
 
732

 
774

 
3
%
 
640

 
683

 
3
%
Commercial mortgage loans
550

 
551

 
2
%
 
595

 
614

 
3
%
Other (primarily derivatives and loan participations)
 
396

 
535

 
2
%
 
281

 
334

 
1
%
Total
 
$
21,523

 
$
22,626

 
100
%
 
20,037

 
$
21,042

 
100
%

Credit Quality of Fixed Maturity Securities at June 30, 2017
NAIC Designation
 
Fair Value
 
Percent
 
Rating Agency Rating
 
Fair Value
 
Percent
 
 
(Dollars in millions)
 
 
 
 
 
(Dollars in millions)
 
 
1
 
$
10,753

 
52
%
 
AAA
 
$
1,643

 
8
%
2
 
8,758

 
42
%
 
AA
 
1,895

 
9
%
3
 
1,047

 
5
%
 
A
 
5,520

 
27
%
4
 
141

 
1
%
 
BBB
 
9,473

 
46
%
5
 
65

 
—
%
 
BB
 
1,057

 
5
%
6
 
2

 
—
%
 
B and below
 
1,178

 
5
%
 
 
$
20,766

 
100
%
 
 
 
$
20,766

 
100
%

18
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2017
(unaudited)


Managed and Direct Related Party Investments

(Dollars in Millions)
 
 
 
June 30, 2017
Type
 
Balance Sheet Classification
 
Amortized Cost
 
Fair Value
Investments managed by related parties:
 
 
 
 
 
 
Fortress Investment Group collateralized loan obligations
 
Fixed maturities, available-for-sale
 
$
173

 
$
174

 
 
Total investments managed by related parties
 
$
173

 
$
174

 
 
 
 
 
 
 
Direct investment in related parties:
 
 
 
 
 
 
HGI energy loan
 
Related party loans
 
72

 
71

Salus preferred equity
 
Equity securities, available-for-sale
 
1

 
1

Spectrum Brands, Inc.
 
Fixed maturities, available-for-sale
 
2

 
2

 
 
Total direct investment in related parties
 
$
75


$
74

 
 
 
 
 
 
 
Assets above included in FSRCI Funds withheld portfolio:
 
 
 
 
 
 
Fortress Investment Group collateralized loan obligations
 
Fixed maturities, available-for-sale
 
10

 
10

HGI energy loan
 
Related party loans
 
72

 
71

Spectrum Brands, Inc.
 
Fixed maturities, available-for-sale
 
2

 
2

Salus preferred equity
 
Equity securities, available-for-sale
 
1

 
1

 
 
Total assets included in FSRCI Funds withheld portfolio
 
$
85

 
$
84

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a) Includes loan participations with 2 different borrowers.

 
 
 
 


19
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2017
(unaudited)

Summary of Residential Mortgage Backed Securities by Collateral Type and NAIC Designation

 
 
June 30, 2017
Collateral Type
 
Amortized Cost
 
Fair Value
 
 
(Dollars in millions)
Total by collateral type
 
 
 
 
Government agency
 
$
132

 
$
133

Prime
 
175

 
182

Subprime
 
272

 
287

Alt-A
 
626

 
692

 
 
$
1,205

 
$
1,294

Total by NAIC designation
 
 
 
 
1
 
$
1,176

 
$
1,266

2
 
20

 
20

3
 
9

 
8

4
 
—

 
—

5
 
—

 
—

 
 
$
1,205

 
$
1,294




20
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2017
(unaudited)

Top 10 Holdings by Issuers

(Dollars in millions)
 
June 30, 2017
Issuer (a):
 
Fair Value
 
Percentage of Total Invested Assets
Wells Fargo & Company
 
$
149

 
0.7
%
Metropolitan Transportation Authority (NY)
 
120

 
0.5
%
General Electric Company
 
114

 
0.5
%
JP Morgan Chase & Co.
 
109

 
0.5
%
Nationwide Mutual Insurance Company
 
101

 
0.4
%
Entergy Corp
 
92

 
0.4
%
Metlife, Inc.
 
91

 
0.4
%
Goldman Sachs Group, Inc.
 
90

 
0.4
%
Bank of New York Mellon Corp
 
88

 
0.4
%
Rabobank Nederland
 
85

 
0.4
%
(a) Issuers excluding U.S. Governmental securities and any securities held in our funds withheld portfolio.

21
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2017
(unaudited)

Reinsurance Counterparty Risk- Top 5 Reinsurers


 
 
 
 
 
 
 
 
 
(Dollars in millions)
 
 
 
Financial Strength Rating
Parent Company/Principal Reinsurers
 
Reinsurance Recoverable (a)
 
AM Best
 
S&P
 
Moody's
Wilton Reinsurance
 
$
1,536

 
 A+
 
 Not Rated
 
 Not Rated
Front Street Re
 
1,037

 
 Not Rated
 
 Not Rated
 
 Not Rated
Scottish Re
 
154

 
 Not Rated
 
 Not Rated
 
 Not Rated
Security Life of Denver
 
143

 
A
 
A
 
A2
London Life
 
102

 
 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.




22
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2017
(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
FY2017
 
 
 
 
 
 
 
 
First Quarter
 
$
24.25

 
$
21.10

 
$
23.70

 
$
0.065

Second Quarter
 
$
27.95

 
$
23.45

 
$
27.80

 
$
0.065

Third Quarter
 
$
31.30

 
$
27.15

 
$
31.05

 
$
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



23
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - June 30, 2017
(unaudited)

Research Analyst Coverage


Jimmy Bhullar
J.P. Morgan
(212) 622-6397
jimmy.s.bhullar@jpmorgan.com


John Barnidge
Sandler O'Neill + Partners
(312) 281-3412
jbarnidge@sandleroneill.com














24