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Investor Supplement
Fourth 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.

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
September 30, 2017
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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


FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Consolidated Financial Highlights
 
Three Months Ended
 
Twelve Months Ended
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
September 30,
2016
 
September 30,
2017
 
September 30,
2016
 
(Dollars in millions, except per share data)
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
$
16

 
$
12

 
$
3

 
$
11

 
$
18

 
$
42

 
$
70

Net investment income
261

 
257

 
247

 
240

 
238

 
1,005

 
923

Net investment gains (losses)
117

 
67

 
81

 
51

 
26

 
316

 
19

Insurance and investment product fees and other
41

 
44

 
44

 
38

 
34

 
167

 
127

Total revenues
435

 
380

 
375

 
340

 
316

 
1,530

 
1,139

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
61

 
$
32

 
$
22

 
$
108

 
$
30

 
$
223

 
$
97

Adjusted Operating Income ("AOI")
$
63

 
$
37

 
$
36

 
$
41

 
$
40

 
$
177

 
$
162

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per Unrestricted Common Shares Amounts:
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
1.06

 
$
0.54

 
$
0.38

 
$
1.85

 
$
0.52

 
$
3.83

 
$
1.67

AOI
$
1.08

 
$
0.63

 
$
0.62

 
$
0.70

 
$
0.69

 
$
3.03

 
$
2.78

Diluted:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
1.06

 
$
0.54

 
$
0.38

 
$
1.85

 
$
0.52

 
$
3.83

 
$
1.66

AOI
$
1.08

 
$
0.63

 
$
0.62

 
$
0.70

 
$
0.69

 
$
3.03

 
$
2.77

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends Paid to Shareholders Per Share
$
0.065

 
$
0.065

 
$
0.065

 
$
0.065

 
$
0.065

 
$
0.260

 
$
0.260

 
 
 
 
 
 
 
 
 
 
 
 
 
 
At Period End
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
885

 
$
799

 
$
887

 
$
632

 
$
864

 
$
885

 
$
864

Total investments
$
23,072

 
$
22,627

 
$
21,813

 
$
21,076

 
$
21,025

 
$
23,072

 
$
21,025

Total assets
$
28,965

 
$
28,402

 
$
27,897

 
$
26,952

 
$
27,035

 
$
28,965

 
$
27,035

Contractholder funds
$
20,792

 
$
20,342

 
$
20,052

 
$
19,486

 
$
19,251

 
$
20,792

 
$
19,251

Future policy benefits
$
3,412

 
$
3,423

 
$
3,435

 
$
3,453

 
$
3,467

 
$
3,412

 
$
3,467

Debt (including revolving credit facility)
$
405

 
$
405

 
$
405

 
$
400

 
$
400

 
$
405

 
$
400

Total equity
$
2,247

 
$
2,113

 
$
1,908

 
$
1,752

 
$
1,934

 
$
2,247

 
$
1,934

Total equity excluding AOCI
$
1,704

 
$
1,646

 
$
1,617

 
$
1,599

 
$
1,495

 
$
1,704

 
$
1,495

Common shares issued and outstanding
58.93

 
58.99

 
58.99

 
58.98

 
58.96

 
58.93

 
58.96

 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Book value per share
$
38.13

 
$
35.82

 
$
32.34

 
$
29.70

 
$
32.80

 
$
38.13

 
$
32.80

GAAP Book Value per Share excluding AOCI
$
28.92

 
$
27.90

 
$
27.41

 
$
27.11

 
$
25.36

 
28.92

 
25.36

Debt to total Capitalization excluding AOCI
19.2
%
 
19.7
%
 
20.0
%
 
20.0
%
 
21.1
%
 
19.2
%
 
21.1
%
Return on average shareholders' equity excluding AOCI
14.6
%
 
7.8
%
 
5.5
%
 
27.9
%
 
8.1
%
 
13.8
%
 
6.6
%
Statutory Book value per share(1)
$
25.91

 
$
25.18

 
$
26.06

 
$
22.43

 
$
22.39

 
25.91

 
22.39

Statutory Book value per share excluding IMR and AVR(1)
$
34.99

 
$
34.30

 
$
35.28

 
$
32.18

 
$
32.20

 
34.99

 
32.20

(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 - September 30, 2017
(unaudited)

FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
September 30,
2016
ASSETS
 
 
 
 
 
 
 
 
 
Investments:
 
 
 
 
 
 
 
 
 
Fixed maturity securities, available-for-sale, at fair value (amortized cost: September 30, 2017 - $20,063; September 30, 2016 - $18,521)
$
21,154

 
$
20,766

 
$
20,052

 
$
19,437

 
$
19,411

Equity securities, available-for-sale, at fair value (amortized cost: September 30, 2017 - $733; September 30, 2016 - $640)
773

 
774

 
712

 
696

 
683

Derivative investments
413

 
361

 
351

 
314

 
276

Commercial mortgage loans
547

 
550

 
579

 
582

 
595

Other invested assets
185

 
176

 
119

 
47

 
60

Total investments
23,072

 
22,627

 
21,813

 
21,076

 
21,025

Related party loans
71

 
71

 
71

 
71

 
71

Cash and cash equivalents
885

 
799

 
887

 
632

 
864

Accrued investment income
231

 
204

 
225

 
201

 
214

Reinsurance recoverable
3,375

 
3,390

 
3,426

 
3,444

 
3,464

Intangibles, net
1,129

 
1,097

 
1,184

 
1,228

 
1,026

Deferred tax assets, net
—

 
—

 
87

 
68

 
—

Other assets
202

 
214

 
204

 
232

 
371

Total assets
$
28,965

 
$
28,402

 
$
27,897

 
$
26,952

 
$
27,035

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
Contractholder funds
$
20,792

 
$
20,342

 
$
20,052

 
$
19,486

 
$
19,251

Future policy benefits
3,412

 
3,423

 
3,435

 
3,453

 
3,467

Funds withheld for reinsurance liabilities
1,083

 
1,106

 
1,134

 
1,142

 
1,172

Liability for policy and contract claims
67

 
57

 
60

 
53

 
55

Debt
300

 
300

 
300

 
300

 
300

Revolving credit facility
105

 
105

 
105

 
100

 
100

Deferred tax liability, net
62

 
11

 
—

 
—

 
10

Other liabilities
897

 
945

 
903

 
666

 
746

Total liabilities
26,718

 
26,289

 
25,989

 
25,200

 
25,101

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

 
—

 
—

 
—

 
—

Common stock ($.01 par value, 500,000,000 shares authorized, 58,933,415 issued and outstanding at September 30, 2017; 58,956,127 shares issued and outstanding at September 30, 2016)
1

 
1

 
1

 
1

 
1

Additional paid-in capital
716

 
716

 
715

 
715

 
714

Retained earnings
1,000

 
942

 
914

 
896

 
792

Accumulated other comprehensive income
543

 
467

 
291

 
153

 
439

Treasury stock, at cost (568,847 shares at September 30, 2017; 537,613 shares at September 30, 2016)
(13
)
 
(13
)
 
(13
)
 
(13
)
 
(12
)
Total shareholders' equity
2,247

 
2,113

 
1,908

 
1,752

 
1,934

Total liabilities and shareholders' equity
$
28,965

 
$
28,402

 
$
27,897

 
$
26,952

 
$
27,035


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

Quarterly Summary - Most Recent 5 Quarters
 
Three Months Ended
 
Twelve Months Ended
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
September 30,
2016
 
September 30,
2017
 
September 30,
2016
 
(Dollars in millions, except per share data)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Traditional life insurance premiums
$
10

 
$
7

 
$
—

 
$
10

 
$
11

 
$
27

 
$
42

Life contingent immediate annuity
6

 
5

 
3

 
1

 
7

 
15

 
28

Net investment income
261

 
257

 
247

 
240

 
238

 
1,005

 
923

Net investment gains (losses)
117

 
67

 
81

 
51

 
26

 
316

 
19

Surrender charges
9

 
9

 
9

 
7

 
8

 
34

 
22

Cost of insurance fees and other income
32

 
35

 
35

 
31

 
26

 
133

 
105

Total revenues
435

 
380

 
375

 
340

 
316

 
1,530

 
1,139

Benefits and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Traditional life insurance policy benefits and change in future policy benefits
18

 
21

 
11

 
22

 
18

 
72

 
70

Life contingent immediate annuity benefits and changes in future policy benefits
26

 
20

 
18

 
18

 
25

 
82

 
109

Interest sensitive and index product benefits and changes in future policy benefits
276

 
194

 
239

 
(20
)
 
163

 
689

 
612

General expenses
30

 
35

 
30

 
25

 
30

 
120

 
107

Acquisition expenses
65

 
72

 
81

 
92

 
89

 
310

 
325

Deferred acquisition costs ("DAC")
(59
)
 
(67
)
 
(78
)
 
(89
)
 
(83
)
 
(293
)
 
(313
)
Amortization of intangibles
(14
)
 
51

 
33

 
123

 
20

 
193

 
54

        Total benefits and expenses
342

 
326

 
334

 
171

 
262

 
1,173

 
964

Operating income
93

 
54

 
41

 
169

 
54

 
357

 
175

Interest expense
(6
)
 
(6
)
 
(6
)
 
(6
)
 
(5
)
 
(24
)
 
(22
)
Income before income taxes
87

 
48

 
35

 
163

 
49

 
333

 
153

Income tax expense
(26
)
 
(16
)
 
(13
)
 
(55
)
 
(19
)
 
(110
)
 
(56
)
Net income
$
61

 
$
32

 
$
22

 
$
108

 
$
30

 
$
223

 
$
97

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
$
1.06

 
$
0.54

 
$
0.38

 
$
1.85

 
$
0.52

 
$
3.83

 
$
1.67

Diluted
$
1.06

 
$
0.54

 
$
0.38

 
$
1.85

 
$
0.52

 
$
3.83

 
$
1.66

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

 
0.06

 
58.33

 
58.28

 
58.26

 
58.32

 
58.28

Diluted
$
58.48

 
0.06

 
58.38

 
58.37

 
58.35

 
58.42

 
58.58



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


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

 
 
Three Months Ended
 
Twelve Months Ended
 
 
September 30, 2017 (a)
 
June 30, 2017
 
March 31, 2017
 
December 31, 2016
 
September 30, 2016
 
September 30, 2017
 
September 30, 2016
 
 
(Dollars in millions, except per share data)
Net income
 
$
61

 
$
32

 
$
22

 
$
108

 
$
30

 
$
223

 
$
97

Adjustments to arrive at AOI:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effect of investment (gains) losses, net of offsets (b)
 
(5
)
 
4

 
15

 
(1
)
 
5

 
13

 
9

Effect of change in FIA embedded derivative discount rate, net of offsets (b)
 
3

 
(4
)
 
(2
)
 
(92
)
 
(7
)
 
(95
)
 
54

Effect of change in fair value of reinsurance related embedded derivative, net of offsets (b)
 
5

 
8

 
8

 
(10
)
 
17

 
11

 
37

Tax impact of adjusting items
 
(1
)
 
(3
)
 
(7
)
 
36

 
(5
)
 
25

 
(35
)
AOI
 
$
63

 
$
37

 
$
36

 
$
41

 
$
40

 
$
177

 
$
162

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per diluted common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
1.06

 
$
0.54

 
$
0.38

 
$
1.85

 
$
0.52

 
$
3.83

 
$
1.66

Adjustments to arrive at AOI:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effect of investment (gains) losses, net of offsets (b)
 
(0.09
)
 
0.07

 
0.26

 
(0.02
)
 
0.09

 
0.22

 
0.16

Effect of change in FIA embedded derivative discount rate, net of offsets (b)
 
0.05

 
(0.07
)
 
(0.04
)
 
(1.58
)
 
(0.12
)
 
(1.64
)
 
0.92

Effect of change in fair value of reinsurance related embedded derivative, net of offsets (b)
 
0.09

 
0.14

 
0.14

 
(0.17
)
 
0.29

 
0.20

 
0.63

Tax impact of adjusting items
 
(0.02
)
 
(0.05
)
 
(0.12
)
 
0.62

 
(0.09
)
 
0.43

 
(0.60
)
AOI per diluted share
 
$
1.09

 
$
0.63

 
$
0.62

 
$
0.70

 
$
0.69

 
$
3.04

 
$
2.77


(a) Net income includes two out-of-period actuarial items ("option budget" and "risk free rate") of approximately $10 each, which are mostly offsetting with $0 impact to net income. The "option budget" item also impacted AOI while the "risk free rate" item is included in the AOI adjustments resulting in no net impact to AOI.
(b) 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 - September 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 - September 30, 2017
(unaudited)


Summary of Adjustments to Arrive at AOI

 
 
Three Months Ended
 
Twelve Months Ended
 
 
September 30, 2017
 
June 30, 2017
 
March 31, 2017
 
December 31, 2016
 
September 30, 2016
 
September 30, 2017
 
September 30, 2016
 
 
(Dollars in millions)
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net investment gains (a)
 
$
1

 
$
15

 
$
28

 
$
(12
)
 
$
29

 
$
32

 
$
63

Increase (decrease) in total revenues
 
1

 
15

 
28

 
(12
)
 
29

 
32

 
63

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Benefits and other changes in policy reserves (b)
 
12

 
(10
)
 
(1
)
 
(168
)
 
(16
)
 
(167
)
 
97

Amortization of intangibles (c)
 
(10
)
 
3

 
(6
)
 
77

 
2

 
64

 
(60
)
(Decrease) increase in total benefits and expenses
 
2

 
(7
)
 
(7
)
 
(91
)
 
(14
)
 
(103
)
 
37

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase (decrease) in pre-tax operating income
 
3

 
8

 
21

 
(103
)
 
15

 
(71
)
 
100

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Decrease) increase in income tax expense (benefit) (d)
 
(1
)
 
(3
)
 
(7
)
 
36

 
(5
)
 
25

 
(35
)
Increase (decrease) in net income
 
$
2

 
$
5

 
$
14

 
$
(67
)
 
$
10

 
$
(46
)
 
$
65


(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 and the "risk free rate" item of $26.
(c) Amortization of intangibles includes the impact on DAC and VOBA of the adjustments in a-b above including an ($11) impact on amortization of the "risk free rate" item noted in (b).
(d) The tax expense (benefit) includes the tax impact of the adjustments in a-c above, including a ($5) tax impact of the "risk free rate" item and related amortization noted in (b) and (c).

8
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - September 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
 
Twelve Months Ended
 
 
September 30, 2017 (a)
 
June 30, 2017
 
March 31, 2017
 
December 31, 2016
 
September 30, 2016
 
September 30, 2017
 
September 30, 2016
 
 
(Dollars in millions)
Net income
 
$
61

 
$
32

 
$
22

 
$
108

 
$
30

 
$
223

 
$
97

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AOI
 
$
63

 
$
37

 
$
36

 
$
41

 
$
40

 
$
177

 
$
162

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

 
(1
)
 
(1
)
 
—

 
(2
)
 
(2
)
 
(2
)
Project expenses (c)
 
(2
)
 
(5
)
 
(2
)
 
—

 
—

 
(9
)
 
(4
)
Single premium immediate annuities ("SPIA") mortality & other reserve adjustments (d)
 
(2
)
 
2

 
3

 
2

 
—

 
5

 
7

Assumption review & DAC unlocking (e)
 
21

 
—

 
(3
)
 
—

 
5

 
18

 
17

Other, including bond prepayment income & tax valuation allowance (f)
 
2

 
—

 
—

 
2

 
1

 
4

 
6


(a) Net income includes two out-of-period actuarial items ("option budget" and "risk free rate") of approximately $10 each, which are mostly offsetting with $0 impact to net income. The "option budget" item also impacted AOI while the "risk free rate" item is included in the AOI adjustments resulting in no net impact to AOI.
(b) 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.
(c) Expenses associated with corporate development activities, including mergers & acquisitions.
(d) The release of annuity reserves associated with mortality of annuitants, which varies due to timing, volume and severity of experience, and other reserve adjustments.
(e) 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. Finally, for the three months ended September 30, 2017, includes $10 related to the "option budget" item.
(f) 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 - September 30, 2017
(unaudited)

Capitalization/Book Value per Share

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

 
$
405

 
$
405

 
$
400

 
$
400

Total debt
 
405

 
405

 
405

 
400

 
400

Total shareholders' equity
 
2,247

 
2,113

 
1,908

 
1,752

 
1,934

Total capitalization
 
2,652

 
2,518

 
2,313

 
2,152

 
2,334

AOCI
 
543

 
467

 
291

 
153

 
439

Total capitalization excluding AOCI (a)
 
$
2,109

 
$
2,051

 
$
2,022

 
$
1,999

 
$
1,895

 
 
 
 
 
 
 
 
 
 
 
Total shareholders' equity
 
2,247

 
2,113

 
1,908

 
1,752

 
1,934

AOCI
 
543

 
467

 
291

 
153

 
439

Total shareholders' equity excluding AOCI (a)
 
$
1,704

 
$
1,646

 
$
1,617

 
$
1,599

 
$
1,495

 
 
 
 
 
 
 
 
 
 
 
Common shares outstanding
 
58.93

 
58.99

 
58.99

 
58.98

 
58.96

 
 
 
 
 
 
 
 
 
 
 
Book Value per Share: (b)
 
 
 


 
 
 
 
 
 
GAAP Book value per share including AOCI
 
$
38.13

 
$
35.82

 
$
32.34

 
$
29.70

 
$
32.80

GAAP Book value per share excluding AOCI (a)
 
$
28.92

 
$
27.90

 
$
27.41

 
$
27.11

 
$
25.36

 
 
 
 
 
 
 
 
 
 
 
 
 
Twelve months ended
Twelve Month Rolling Average Return on Equity ("ROE")
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
September 30,
2016
Return on Shareholders' Equity (c)
 
 
 
 
 
 
 
 
 
 
Return on average shareholders' equity
 
11.2
%
 
10.1
%
 
9.6
%
 
9.4
%
 
6.0
%
Return on average shareholders' equity, excluding AOCI (c)
 
13.8
%
 
12.3
%
 
11.1
%
 
10.5
%
 
6.6
%
 
 
 
 
 
 
 
 
 
 
 
Return on Shareholders' Equity - AOI (d)
 
 
 
 
 
 
 
 
 
 
Adjusted Operating ROE, excluding AOCI (d)
 
11.0
%
 
9.8
%
 
10.8
%
 
11.5
%
 
11.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
Quarterly Average ROE
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
September 30,
2016
Return on average shareholders' equity
 
11.2
%
 
6.4
%
 
4.8
%
 
23.4
%
 
6.5
%
Return on average shareholders' equity, excluding AOCI (c)
 
14.6
%
 
7.8
%
 
5.5
%
 
27.9
%
 
8.1
%
Adjusted Operating ROE, excluding AOCI (d)
 
15.0
%
 
9.1
%
 
9.0
%
 
10.6
%
 
10.8
%
 
 
 
 
 
 
 
 
 
 
 
Debt-to-Capital Ratios: (e)
 
 
 
 
 
 
 
 
 
 
Long-term debt/Total capitalization excluding AOCI
 
19.2
%
 
19.7
%
 
20.0
%
 
20.0
%
 
21.1
%

10
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - September 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 Positive
 
Under Review with Developing Implications
 
Stable
 
Stable


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

Net Investment Spread Results
(Dollars in millions)
Three Months Ended
 
Twelve Months Ended
 
September 30, 2017
 
September 30, 2016
 
September 30, 2017
 
September 30, 2016
Yield on average assets under management "AAUM" (at amortized cost)
5.02
 %
 
4.90
 %
 
4.95
 %
 
4.92
 %
Less: Interest credited and option cost
(2.58
)%
 
(2.63
)%
 
(2.53
)%
 
(2.65
)%
Total net investment spread - All product lines (b)
2.44
 %
 
2.27
 %
 
2.42
 %
 
2.27
 %
 
 
 
 
 
 
 
 
FIA net investment spread
3.00
 %
 
2.98
 %
 
3.02
 %
 
2.97
 %
 
 
 
 
 
 
 
 
Investment book yield - bonds purchased during the period (c)
4.95
 %
 
4.83
 %
 
5.06
 %
 
5.35
 %
 
 
 
 
 
 
 
 
AAUM (a)
$
20,840

 
$
19,381

 
$
20,324

 
$
18,738


(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
 
Twelve Months Ended
 
 
September 30, 2017
 
June 30, 2017
 
March 31, 2017
 
December 31, 2016
 
September 30, 2016
 
September 30, 2017
 
September 30, 2016
Fixed index annuities ("FIA")
 
$
424

 
$
455

 
$
438

 
$
551

 
$
482

 
1,868

 
1,832

Fixed rate annuities ("MYGA")
 
164

 
127

 
158

 
97

 
121

 
546

 
536

Institutional spread based (1)
 
—

 
—

 
136

 
—

 
—

 
136

 
157

Total Annuity
 
$
588

 
$
582

 
$
732

 
$
648

 
$
603

 
$
2,550

 
$
2,525

Index universal life
 
6

 
9

 
14

 
17

 
17

 
46

 
56

Total Sales
 
$
594

 
$
591

 
$
746

 
$
665

 
$
620

 
$
2,596

 
$
2,581

(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 - September 30, 2017
(unaudited)


Annuity Account Balance Rollforward (a)

(Dollars in millions)
 
Three months ended
 
 
September 30, 2017
 
June 30, 2017
 
March 31, 2017
 
December 31, 2016
 
September 30, 2016
Account balances at beginning of period:
 
$
16,430

 
$
16,114

 
$
15,603

 
$
15,250

 
$
14,935

Net deposits
 
598

 
591

 
603

 
655

 
598

Premium and interest bonuses
 
11

 
12

 
12

 
13

 
10

Fixed interest credited and index credits
 
147

 
154

 
153

 
87

 
81

Guaranteed product rider fees
 
(17
)
 
(18
)
 
(18
)
 
(16
)
 
(12
)
Surrenders, withdrawals, deaths, etc.
 
(350
)
 
(423
)
 
(239
)
 
(386
)
 
(362
)
Account balance at end of period
 
$
16,819

 
$
16,430

 
$
16,114

 
$
15,603


$
15,250

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

Annuity Deposits by Product Type

 
 
Three Months Ended
 
Twelve Months Ended
Product Type
 
September 30, 2017
 
September 30, 2016
 
September 30, 2017
 
September 30, 2016
 
 
(Dollars in millions)
Fixed Index Annuities:
 
 
 
 
 
 
 
 
Index Strategies
 
$
347

 
$
388

 
$
1,503

 
$
1,502

Fixed Strategy
 
84

 
98

 
390

 
359

 
 
431


486


1,893


1,861

 
 
 
 
 
 
 
 
 
Fixed Rate Annuities:
 
 
 
 
 
 
 
 
Single-Year Rate Guaranteed
 
2

 
—

 
10

 
4

Multi-Year Rate Guaranteed
 
165

 
111

 
547

 
535

 
 
 
 
 
 
 
 
 
Total before coinsurance ceded
 
598

 
597

 
2,450

 
2,400

Coinsurance ceded
 
—

 
—

 
2

 
1

Net after coinsurance ceded
 
$
598


$
597


$
2,448


$
2,399





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

Surrender Charge Protection and Account Values by Product Type
Annuity Surrender Charges and Account Values (net of reinsurance) at September 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
%
 
$
13,285

 
79
%
Single-Year Rate Guaranteed
 
10
 
1
 
1
%
 
592

 
4
%
Multi-Year Rate Guaranteed
 
5
 
3
 
7
%
 
2,942

 
17
%
Total
 
 
 
 
 
 
 
$
16,819

 
100
%



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



Annuity Liability Characteristics

 
 
Fixed Annuities Account Value
 
Fixed Index Annuities Account Value
 
 
(Dollars in millions)
SURRENDER CHARGE PERCENTAGES:
 
 
 
 
No surrender charge
 
$
705

 
$
1,932

0.0% < 2.0%
 
39

 
319

2.0% < 4.0%
 
27

 
314

4.0% < 6.0%
 
188

 
606

6.0% < 8.0%
 
977

 
1,618

8.0% < 10.0%
 
1,562

 
2,432

10.0% or greater
 
36

 
6,064

 
 
$
3,534

 
$
13,285


 
 
Fixed and Fixed Index Annuities Account Value
 
Weighted Average Surrender Charge
 
 
(Dollars in millions)
 
 
SURRENDER CHARGE EXPIRATION BY YEAR:
 
 
 
 
Out of surrender charge
 
$
2,605

 
—
%
2017
 
197

 
5
%
2018 - 2019
 
2,194

 
5
%
2020 - 2021
 
1,912

 
7
%
2022 - 2023
 
2,181

 
8
%
Thereafter
 
7,730

 
11
%
 
 
$
16,819

 
7
%


15
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - September 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
 
$
998

 
$
1,330

0.0% - 1.0%
 
374

 
1,259

1.0% - 2.0%
 
308

 
56

2.0% - 3.0%
 
1,834

 
13

3.0% - 4.0%
 
20

 
—

Allocated to index strategies
 
—

 
10,627

 
 
$
3,534

 
$
13,285

    
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
 
$
—

 
$
—

 
$
1,465

 
$
613

 
$
—

 2-3%
 
693

 
—

 
—

 
—

 
—

 3-4%
 
1,061

 
—

 
389

 
—

 
—

 4-5%
 
413

 
—

 
482

 
—

 
—

 5-6%
 
76

 
2

 
121

 
4

 
—

 6-7%
 
35

 
2

 
18

 
—

 
6

 7% +
 
66

 
35

 
180

 
—

 
66

Total:
 
$
2,344

 
$
39

 
$
2,655

 
$
617

 
$
72

    









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

Monthly Point-to-Point with Cap
 
 
Minimum Guaranteed Cap 1%
Current Cap
 
(Dollars in millions)
At minimum
 
$
1,370

 1% to 2%
 
2,328

 2% to 3%
 
641

 3% +
 
161

 Total:
 
$
4,500


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%
 
9

 
50

 7% to 9%
 
—

 
41

 9% to 11%
 
—

 
18

 11% to 13%
 
—

 
7

 Total:
 
$
11

 
$
135


There is an additional $251 million Account Value allocated to strategies not listed above. Of this $251 million, $13 million is at the guaranteed rates.












Summary of Invested Assets by Asset Class

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


(Dollars in millions)
 
September 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
 
$
105

 
$
107

 
—
%
 
$
233

 
$
243

 
1
%
    United States Government sponsored entities
 
127

 
128

 
1
%
 
112

 
115

 
1
%
    United States municipalities, states and territories
 
1,573

 
1,726

 
8
%
 
1,515

 
1,717

 
8
%
Corporate securities:
 
 
 
 
 
 
 
 
 
 
 
 
    Finance, insurance and real estate
 
5,400

 
5,806

 
25
%
 
5,084

 
5,463

 
26
%
    Manufacturing, construction and mining
 
980

 
1,018

 
4
%
 
847

 
863

 
4
%
    Utilities, energy and related sectors
 
2,109

 
2,202

 
10
%
 
1,811

 
1,881

 
9
%
    Wholesale/retail trade
 
1,342

 
1,408

 
6
%
 
1,205

 
1,277

 
6
%
    Services, media and other
 
2,196

 
2,296

 
10
%
 
1,765

 
1,856

 
9
%
Hybrid securities
 
1,388

 
1,465

 
6
%
 
1,356

 
1,386

 
7
%
Non-agency residential mortgage-backed securities
 
1,017

 
1,135

 
5
%
 
1,215

 
1,247

 
6
%
Commercial mortgage-backed securities
 
974

 
978

 
4
%
 
850

 
864

 
4
%
Asset-backed securities
 
2,852

 
2,885

 
13
%
 
2,528

 
2,499

 
12
%
Equity securities
 
733

 
773

 
3
%
 
640

 
683

 
3
%
Commercial mortgage loans
547

 
552

 
2
%
 
595

 
614

 
3
%
Other (primarily derivatives)
 
410

 
595

 
3
%
 
281

 
334

 
1
%
Total
 
$
21,753

 
$
23,074

 
100
%
 
$
20,037

 
$
21,042

 
100
%

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


Credit Quality of Fixed Maturity Securities at September 30, 2017
NAIC Designation
 
Fair Value
 
Percent
 
Rating Agency Rating
 
Fair Value
 
Percent
 
 
(Dollars in millions)
 
 
 
 
 
(Dollars in millions)
 
 
1
 
$
10,989

 
52
%
 
AAA
 
$
1,624

 
8
%
2
 
8,757

 
41
%
 
AA
 
1,970

 
9
%
3
 
1,209

 
6
%
 
A
 
5,762

 
27
%
4
 
139

 
1
%
 
BBB
 
9,582

 
45
%
5
 
57

 
—
%
 
BB
 
1,056

 
5
%
6
 
3

 
—
%
 
B and below
 
1,160

 
6
%
 
 
$
21,154

 
100
%
 
 
 
$
21,154

 
100
%


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


Managed and Direct Related Party Investments

(Dollars in Millions)
 
 
 
September 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

 
$
175

 
 
Total investments managed by related parties
 
$
173

 
$
175

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

 
$
71

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

 
2

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

 
2

 
 
Total direct investment in related parties
 
$
75

 
$
75

 
 
 
 
 
 
 
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

 
2

 
 
Total assets included in FSRCI Funds withheld portfolio
 
$
85

 
$
85

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 


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

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

 
 
September 30, 2017
Collateral Type
 
Amortized Cost
 
Fair Value
 
 
(Dollars in millions)
Total by collateral type
 
 
 
 
Government agency
 
$
127

 
$
128

Prime
 
157

 
166

Subprime
 
260

 
279

Alt-A
 
600

 
690

 
 
$
1,144

 
$
1,263

Total by NAIC designation
 
 
 
 
1
 
$
1,116

 
$
1,236

2
 
20

 
20

3
 
8

 
7

4
 
—

 
—

5
 
—

 
—

 
 
$
1,144

 
$
1,263




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

Top 10 Holdings by Issuers

(Dollars in millions)
 
September 30, 2017
Issuer (a):
 
Fair Value
 
Percentage of Total Invested Assets
Wells Fargo & Company
 
$
150

 
0.7
%
Metropolitan Transportation Authority (NY)
 
121

 
0.5
%
General Electric Company
 
114

 
0.5
%
JP Morgan Chase & Co.
 
109

 
0.5
%
Nationwide Mutual Insurance Company
 
101

 
0.4
%
Entergy Corp
 
93

 
0.4
%
Goldman Sachs Group, Inc.
 
91

 
0.4
%
Metlife, Inc.
 
90

 
0.4
%
Bank of New York Mellon Corp
 
90

 
0.4
%
Rabobank Nederland
 
86

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

22
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - September 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
 
$
1,535

 
 A+
 
 Not Rated
 
 Not Rated
Front Street Re
 
1,016

 
 Not Rated
 
 Not Rated
 
 Not Rated
Scottish Re
 
158

 
Not Rated
 
Not Rated
 
Not Rated
Security Life of Denver
 
147

 
A
 
A
 
A2
London Life
 
101

 
 A
 
 Not Rated
 
 Not Rated

(a) Reinsurance recoverables do not include unearned ceded premiums that would be recovered in the event of early termination of certain traditional life policies.



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

Shareholder Information

Corporate Offices:
Fidelity & Guaranty Life
Two Ruan Center
601 Locust Street, 14th Floor
Des Moines, IA  50309


Investor Contact:
Diana Hickert-Hill
Fidelity & Guaranty Life
Investors@fglife.com
410-487-0992


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

Fourth Quarter
 
$
31.38

 
$
30.95

 
$
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


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FIDELITY & GUARANTY LIFE AND SUBSIDIARIES
Financial Supplement - September 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

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