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
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(904 ) 854-8100
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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:
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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 ☐
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| 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 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
On August 4, 2020 , Fidelity National Financial, Inc. (the "Company", "FNF") issued an earnings release announcing its financial results for the Second Quarter of 2020. A copy of the FNF earnings release is attached as Exhibit 99.1 to this Current Report on Form 8-K. In addition, the Company is furnishing the quarterly financial supplement for its F&G operating segment as Exhibit 99.2 to this Current Report on Form 8-K.
| Item 9.01. | Financial Statements and Exhibits | |||||||
(d) Exhibits
| Exhibit | Description | |||||||||||||
| 99.1 | ||||||||||||||
| 99.2 | ||||||||||||||
| 101 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. | |||||||||||||
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 thereunto duly authorized.
Fidelity National Financial, Inc. | |||||||||||||||||
| Date: | August 4, 2020 | By: | /s/ Anthony J. Park | ||||||||||||||
| Name: | Anthony J. Park | ||||||||||||||||
| Title: | Chief Financial Officer | ||||||||||||||||
FNF Reports Second Quarter 2020 Diluted EPS from Continuing Operations of $1.09 and Adjusted Diluted EPS from Continuing Operations of $1.09, Pre-Tax Title Margin of 23.7% and Adjusted Pre-Tax Title Margin of 18.4%
Jacksonville, Fla. - (August 4, 2020) - Fidelity National Financial, Inc. (NYSE:FNF), a leading provider of title insurance and transaction services to the real estate and mortgage industries, today reported operating results for the period ended June 30, 2020.
•Total revenue of approximately $2.4 billion in the second quarter versus $2.1 billion in the second quarter of 2019
•Second quarter net earnings from continuing operations of $304 million and adjusted net earnings from continuing operations of $305 million versus net earnings of $266 million and adjusted net earnings of $255 million for the second quarter of 2019
•Second quarter diluted EPS from continuing operations of $1.09 and adjusted diluted EPS from continuing operations of $1.09 versus diluted EPS of $0.96 and adjusted diluted EPS of $0.92 in the second quarter of 2019
•Realized gains were $162 million in the second quarter versus realized gains of $41 million in the second quarter of 2019 primarily due to mark to market accounting treatment of equity and preferred stock securities whether the securities were disposed of in the quarter or continue to be held in our investment portfolio
•We completed the acquisition of FGL Holdings ("F&G") on June 1, 2020. The consolidated FNF results include the results of F&G for the one month period ended June 30, 2020
Title
•Total revenue of approximately $2.2 billion versus approximately $2.1 billion in total revenue in the second quarter of 2019
•Total revenue, excluding realized gains and losses, of approximately $2.1 billion versus approximately $2.0 billion in the second quarter of 2019, an increase of 0.4%
•Pre-tax earnings of $528 million and adjusted pre-tax earnings of $378 million versus pre-tax earnings of $387 million and adjusted pre-tax earnings of $363 million in the second quarter of 2019
•Pre-tax title margin of 23.7% and adjusted pre-tax title margin of 18.4% versus pre-tax title margin of 18.5% and adjusted pre-tax title margin of 17.7% in the second quarter of 2019
•Second quarter refinance orders opened increased 111% on a daily basis and refinance orders closed increased 158% on a daily basis versus the second quarter of 2019; purchase orders opened decreased 20% on a daily basis and purchase orders closed decreased 24% on a daily basis versus the second quarter of 2019
•Total commercial revenue of $184 million, a 36% decline versus total commercial revenue in the second quarter of 2019, driven by a 24% decrease in closed orders and 14% decline in total commercial fee per file; second quarter total commercial orders opened decreased 25% compared to the prior year
•Overall second quarter average fee per file of $1,889, a 29% decrease versus the second quarter of 2019
Title Orders
| Direct Orders Opened * | Direct Orders Closed * | |||||||||||||||||||||||||
| Month | / (% Purchase) | / (% Purchase) | ||||||||||||||||||||||||
| April 2020 | 210,000 | 31% | 157,000 | 34% | ||||||||||||||||||||||
| May 2020 | 218,000 | 39% | 150,000 | 33% | ||||||||||||||||||||||
| June 2020 | 265,000 | 42% | 180,000 | 38% | ||||||||||||||||||||||
| Second Quarter 2020 | 693,000 | 37% | 487,000 | 35% | ||||||||||||||||||||||
1
| Direct Orders Opened * | Direct Orders Closed * | |||||||||||||||||||||||||
| Month | / (% Purchase) | / (% Purchase) | ||||||||||||||||||||||||
| April 2019 | 184,000 | 63% | 114,000 | 65% | ||||||||||||||||||||||
| May 2019 | 179,000 | 63% | 127,000 | 64% | ||||||||||||||||||||||
| June 2019 | 181,000 | 57% | 118,000 | 65% | ||||||||||||||||||||||
| Second Quarter 2019 | 544,000 | 61% | 359,000 | 65% | ||||||||||||||||||||||
* Includes an immaterial number of non-purchase and non-refinance orders
F&G
F&G is a leading provider of annuities and life insurance. Following the acquisition, the company completed its mark-to-market valuation of the investment portfolio, a non-cash adjustment, recognizing a net unrealized loss of approximately $0.5 billion. This discount will accrete over time, net of offsets for value of business acquired (VOBA) amortization and taxes. As a result of acquisition accounting (purchase accounting or PGAAP), financial results for periods after the closing of the transaction 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.
•Fixed Indexed Annuities (FIA) sales of $866 million in the second quarter, an increase of 13% to the prior year, and a 4% increase over the sequential quarter
•Average Assets Under Management (AAUM) of $26.6 billion for the 1 month ended June 30, 2020 down from $27.4 billion from the prior year second quarter as $2.1 billion net new business asset flows were offset by acquisition and purchase accounting effects, including the recognition of a $0.5 billion net unrealized loss and $2.4 billion reduction for discontinued operations
•Net Investment Spread: FIA spread for the 1 month ended June 30, 2020 of 347 basis points, compared to 305 basis points in the historical sequential quarter; Spread across all product lines for the 1 month ended June 30, 2020 of 350 basis points, compared to an historical sequential quarter spread of 224 basis points. The increase in spread was primarily due to acquisition and purchase accounting effects (noted above) which increased the earned yield, as well as lower interest credited
•Net Loss Attributable to Common Shareholders of $39 million for the 1 month ended June 30, 2020 primarily driven by unfavorable mark-to-market and other items which are not included in adjusted net earnings
•Adjusted Net Earnings From Continuing Operations Attributable to Common Shareholders of $37 million for the 1 month ended June 30, 2020 including $8 million of favorable notable items
•Adjusted Return on Equity (ROE) of 16% for the 1 month ended June 30, 2020
•Risk-Based Capital (RBC) ratio for our primary operating subsidiary is estimated at approximately 400% at June 30, 2020
“Our second quarter benefited from strong refinance volumes compared with the 2019 comparable period, despite the ongoing COVID-19 pandemic,” commented Chairman William P. Foley, II. “Our adjusted pre-tax title earnings of $378 million and an adjusted pre-tax title margin of 18.4% was our best quarter since the third quarter of 2003. Refinance opened and closed orders on a daily basis increased 111% and 158%, respectively. Our operational capabilities have ensured that our security and productivity have not been impacted even as approximately 70% of our employees continue to work remotely. As the pandemic intensified in March, we aggressively managed our expenses through the second quarter and will remain focused on order volumes looking forward as we maintain our culture of expense discipline.”
“After three years as a minority owner in F&G, we previously announced our intent to acquire the remaining interest in F&G as a way to diversify our earnings and reduce the risk and volatility inherent in our stand-alone title operations. We closed the acquisition on June 1, 2020 and are pleased to officially welcome F&G’s employees and policy holders to the FNF family. F&G had strong sales in the period, gaining market share while also maintaining pricing discipline. In addition, F&G launched into the independent broker dealer channel in June, through a partnership with one of the largest independent broker dealers in the country. We remain committed to maximizing value for our shareholders through our capital allocation strategy focused on our quarterly dividend, currently $0.33 per share, growing our businesses, and opportunistic share buybacks.”
2
Conference Call
We will host a call with investors and analysts to discuss second quarter 2020 FNF results on Wednesday, August 5, 2020, beginning at 12:00 p.m. Eastern Time. A live webcast of the conference call will be available on the Events and Multimedia page of the FNF Investor Relations website at fnf.com. The conference call replay will be available via webcast through the FNF Investor Relations website at fnf.com. The telephone replay will be available from 3:00 p.m. Eastern Time on August 5, 2020, through August 12, 2020, by dialing 1-844-512-2921 (USA) or 1-412-317-6671 (International). The access code will be 13706371. An expanded quarterly financial supplement providing segment results is available on the FNF Investor Relations website.
About Fidelity National Financial, Inc.
Fidelity National Financial, Inc. (NYSE: FNF) is a leading provider of title insurance and transaction services to the real estate and mortgage industries. FNF is the nation’s largest title insurance company through its title insurance underwriters - Fidelity National Title, Chicago Title, Commonwealth Land Title, Alamo Title and National Title of New York - that collectively issue more title insurance policies than any other title company in the United States. More information about FNF can be found at fnf.com.
About F&G
F&G is part of the FNF family of companies. F&G is committed to helping Americans turn their aspirations into reality. F&G is a leading provider of annuity and life insurance products and is headquartered in Des Moines, Iowa. For more information, please visit www.fglife.bm.
Use of Non-GAAP Financial Information
Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for financial accounting. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions and in the preparation of financial statements. In addition to reporting financial results in accordance with GAAP, FNF has provided non-GAAP financial measures, which it believes are useful to help investors better understand its financial performance, competitive position and prospects for the future. These non-GAAP measures include adjusted net earnings, adjusted earnings per share, adjusted pre-tax title earnings, adjusted pre-tax title earnings as a percentage of adjusted title revenue (adjusted pre-tax title margin), F&G adjusted earnings, F&G adjusted earnings attributable to common shareholders, F&G adjusted operating return on common shareholders’ equity excluding AOCI, F&G net investment spread, F&G average assets under management and F&G sales.
Any non-GAAP measures should be considered in context with the GAAP financial presentation and should not be considered in isolation or as a substitute for GAAP net earnings. Further, FNF's non-GAAP measures may be calculated differently from similarly titled measures of other companies. Reconciliations of these non-GAAP measures to related GAAP measures are provided below.
Forward-Looking Statements and Risk Factors
This press release contains forward-looking statements that involve a number of risks and uncertainties. Statements that are not historical facts, including statements regarding our expectations, hopes, intentions or strategies regarding the future are forward-looking statements. Forward-looking statements are based on management's beliefs, as well as assumptions made by, and information currently available to, management. Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The risks and uncertainties which forward-looking statements are subject to include, but are not limited to: the ability of FNF to successfully integrate F&G's operations and employees; the potential impact of the announcement or consummation of the proposed F&G transaction on relationships, including with employees, suppliers, customers and competitors; changes in general economic, business, political and COVID-19 conditions, including changes in the financial markets; weakness or adverse changes in the level of real estate activity, which may be caused by, among other things, high or increasing interest rates, a limited supply of mortgage funding or a weak U. S. economy; our potential inability to find suitable acquisition candidates; our dependence on distributions from our title insurance underwriters as a main source of cash flow; significant competition that F&G and our operating subsidiaries face; compliance with extensive government regulation of our operating subsidiaries; and other risks detailed in the “Statement Regarding Forward-Looking Information,” “Risk Factors” and other sections of FNF's Form 10-K and other filings with the Securities and Exchange Commission ("SEC").
FNF-E
SOURCE: Fidelity National Financial, Inc.
CONTACT: Jamie Lillis, Managing Director, Solebury Trout, 203-428-3223, jlillis@soleburytrout.com
3
FIDELITY NATIONAL FINANCIAL, INC.
SECOND QUARTER SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited)
| Consolidated | Title | F&G | Corporate and Other | |||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||
| June 30, 2020 | ||||||||||||||||||||||||||
| Direct title premiums | $ | 575 | $ | 575 | $ | — | $ | — | ||||||||||||||||||
| Agency title premiums | 784 | 784 | — | — | ||||||||||||||||||||||
| Escrow, title related and other fees | 747 | 655 | 20 | 72 | ||||||||||||||||||||||
| Total title and escrow | 2,106 | 2,014 | 20 | 72 | ||||||||||||||||||||||
| Interest and investment income | 152 | 41 | 111 | — | ||||||||||||||||||||||
| Realized gains and losses, net | 162 | 169 | (7) | — | ||||||||||||||||||||||
| Total revenue | 2,420 | 2,224 | 124 | 72 | ||||||||||||||||||||||
| Personnel costs | 692 | 625 | 9 | 58 | ||||||||||||||||||||||
| Agent commissions | 598 | 598 | — | — | ||||||||||||||||||||||
| Other operating expenses | 446 | 374 | 12 | 60 | ||||||||||||||||||||||
| Benefits & other policy reserve changes | 155 | — | 155 | — | ||||||||||||||||||||||
| Depreciation and amortization | 46 | 37 | 3 | 6 | ||||||||||||||||||||||
| Claim loss expense | 61 | 61 | — | — | ||||||||||||||||||||||
| Interest expense | 21 | 1 | 3 | 17 | ||||||||||||||||||||||
| Total expenses | 2,019 | 1,696 | 182 | 141 | ||||||||||||||||||||||
| Pre-tax earnings (loss) from continuing operations | $ | 401 | $ | 528 | $ | (58) | $ | (69) | ||||||||||||||||||
| Income tax expense (benefit) | 89 | 130 | (14) | (27) | ||||||||||||||||||||||
| Earnings (loss) from equity investments | 1 | 2 | — | (1) | ||||||||||||||||||||||
| Earnings from discontinued operations, net of tax | 5 | — | 5 | — | ||||||||||||||||||||||
| Non-controlling interests | 9 | 9 | — | — | ||||||||||||||||||||||
| Net earnings (loss) attributable to common shareholders | $ | 309 | $ | 391 | $ | (39) | $ | (43) | ||||||||||||||||||
| EPS from continuing operations attributable to common shareholders - basic | $ | 1.10 | ||||||||||||||||||||||||
| EPS from discontinued operations attributable to common shareholders - basic | 0.02 | |||||||||||||||||||||||||
| EPS attributable to common shareholders - basic | $ | 1.12 | ||||||||||||||||||||||||
| EPS from continuing operations attributable to common shareholders - diluted | $ | 1.09 | ||||||||||||||||||||||||
| EPS from discontinued operations attributable to common shareholders - diluted | 0.02 | |||||||||||||||||||||||||
| EPS attributable to common shareholders - diluted | $ | 1.11 | ||||||||||||||||||||||||
| Weighted average shares - basic | 277 | |||||||||||||||||||||||||
| Weighted average shares - diluted | 279 | |||||||||||||||||||||||||
4
FIDELITY NATIONAL FINANCIAL, INC.
SECOND QUARTER SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited)
| Consolidated | Title | F&G | Corporate and Other | |||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||
| June 30, 2020 | ||||||||||||||||||||||||||
| Net earnings (loss) attributable to common shareholders | $ | 309 | $ | 391 | $ | (39) | $ | (43) | ||||||||||||||||||
| Earnings from discontinued operations, net of tax | 5 | — | 5 | — | ||||||||||||||||||||||
| Net earnings (loss) from continuing operations attributable to common shareholders | $ | 304 | $ | 391 | $ | (44) | $ | (43) | ||||||||||||||||||
| Non-GAAP Adjustments | ||||||||||||||||||||||||||
| Realized (gains) and losses, net | (117) | (169) | 52 | — | ||||||||||||||||||||||
| Indexed product related derivatives | 42 | — | 42 | — | ||||||||||||||||||||||
| Debt issuance costs | 4 | — | — | 4 | ||||||||||||||||||||||
| Purchase price amortization | 25 | 18 | 2 | 5 | ||||||||||||||||||||||
| Transaction costs | 45 | — | 7 | 38 | ||||||||||||||||||||||
| Other adjustments | 1 | 1 | — | — | ||||||||||||||||||||||
| Adjusted pre-tax earnings (loss) | $ | 401 | $ | 378 | $ | 45 | $ | (22) | ||||||||||||||||||
| Income taxes on non-GAAP adjustments | 4 | 37 | (22) | (11) | ||||||||||||||||||||||
| Non-controlling interest on non-GAAP adjustments | (3) | (2) | — | (1) | ||||||||||||||||||||||
| Total non-GAAP adjustments | $ | 1 | $ | (115) | $ | 81 | $ | 35 | ||||||||||||||||||
| Adjusted net earnings (loss) from continuing operations attributable to common shareholders | $ | 305 | $ | 276 | $ | 37 | $ | (8) | ||||||||||||||||||
| Adjusted EPS from continuing operations attributable to common shareholders - diluted | $ | 1.09 | ||||||||||||||||||||||||
5
FIDELITY NATIONAL FINANCIAL, INC.
SECOND QUARTER SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited)
| Consolidated | Title | Corporate and Other | ||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| June 30, 2019 | ||||||||||||||||||||
| Direct title premiums | $ | 625 | $ | 625 | $ | — | ||||||||||||||
| Agency title premiums | 754 | 754 | — | |||||||||||||||||
| Escrow, title related and other fees | 665 | 613 | 52 | |||||||||||||||||
| Total title and escrow | 2,044 | 1,992 | 52 | |||||||||||||||||
| Interest and investment income | 59 | 54 | 5 | |||||||||||||||||
| Realized gains and losses, net | 41 | 46 | (5) | |||||||||||||||||
| Total revenue | 2,144 | 2,092 | 52 | |||||||||||||||||
| Personnel costs | 685 | 653 | 32 | |||||||||||||||||
| Agent commissions | 579 | 579 | — | |||||||||||||||||
| Other operating expenses | 409 | 373 | 36 | |||||||||||||||||
| Depreciation and amortization | 44 | 38 | 6 | |||||||||||||||||
| Claim loss expense | 62 | 62 | — | |||||||||||||||||
| Interest expense | 12 | — | 12 | |||||||||||||||||
| Total expenses | 1,791 | 1,705 | 86 | |||||||||||||||||
| Pre-tax earnings (loss) | $ | 353 | $ | 387 | $ | (34) | ||||||||||||||
| Income tax expense (benefit) | 86 | 95 | (9) | |||||||||||||||||
| Earnings from equity investments | 3 | 3 | — | |||||||||||||||||
| Non-controlling interests | 4 | 5 | (1) | |||||||||||||||||
| Net earnings (loss) attributable to common shareholders | $ | 266 | $ | 290 | $ | (24) | ||||||||||||||
| EPS attributable to common shareholders - basic | $ | 0.97 | ||||||||||||||||||
| EPS attributable to common shareholders - diluted | $ | 0.96 | ||||||||||||||||||
| Weighted average shares - basic | 273 | |||||||||||||||||||
| Weighted average shares - diluted | 277 | |||||||||||||||||||
6
FIDELITY NATIONAL FINANCIAL, INC.
SECOND QUARTER SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited)
| Consolidated | Title | Corporate and Other | ||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| June 30, 2019 | ||||||||||||||||||||
| Net earnings (loss) attributable to common shareholders | $ | 266 | $ | 290 | $ | (24) | ||||||||||||||
| Non-GAAP Adjustments | ||||||||||||||||||||
| Realized (gains) and losses, net | (41) | (46) | 5 | |||||||||||||||||
| Purchase price amortization | 25 | 21 | 4 | |||||||||||||||||
| Transaction costs | 4 | — | 4 | |||||||||||||||||
| Other adjustments | 1 | 1 | — | |||||||||||||||||
| Adjusted pre-tax earnings (loss) | $ | 342 | $ | 363 | $ | (21) | ||||||||||||||
| Income taxes on non-GAAP adjustments | 3 | 6 | (3) | |||||||||||||||||
| Non-controlling interest on non-GAAP adjustments | (3) | (2) | (1) | |||||||||||||||||
| Total non-GAAP adjustments | $ | (11) | $ | (20) | $ | 9 | ||||||||||||||
| Adjusted net earnings (loss) attributable to common shareholders | $ | 255 | $ | 270 | $ | (15) | ||||||||||||||
| Adjusted EPS attributable to common shareholders - diluted | $ | 0.92 | ||||||||||||||||||
7
FIDELITY NATIONAL FINANCIAL, INC.
YTD SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited)
| Consolidated | Title | F&G | Corporate and Other | |||||||||||||||||||||||
| Six Months Ended | ||||||||||||||||||||||||||
| June 30, 2020 | ||||||||||||||||||||||||||
| Direct title premiums | $ | 1,121 | $ | 1,121 | $ | — | $ | — | ||||||||||||||||||
| Agency title premiums | 1,516 | 1,516 | — | — | ||||||||||||||||||||||
| Escrow, title related and other fees | 1,348 | 1,265 | 20 | 63 | ||||||||||||||||||||||
| Total title and escrow | 3,985 | 3,902 | 20 | 63 | ||||||||||||||||||||||
| Interest and investment income | 205 | 89 | 111 | 5 | ||||||||||||||||||||||
| Realized gains and losses, net | (158) | (144) | (7) | (7) | ||||||||||||||||||||||
| Total revenue | 4,032 | 3,847 | 124 | 61 | ||||||||||||||||||||||
| Personnel costs | 1,306 | 1,266 | 9 | 31 | ||||||||||||||||||||||
| Agent commissions | 1,158 | 1,158 | — | — | ||||||||||||||||||||||
| Other operating expenses | 857 | 754 | 12 | 91 | ||||||||||||||||||||||
| Benefits & other policy reserve changes | 155 | — | 155 | — | ||||||||||||||||||||||
| Depreciation and amortization | 89 | 74 | 3 | 12 | ||||||||||||||||||||||
| Claim loss expense | 119 | 119 | — | — | ||||||||||||||||||||||
| Interest expense | 33 | 1 | 3 | 29 | ||||||||||||||||||||||
| Total expenses | 3,717 | 3,372 | 182 | 163 | ||||||||||||||||||||||
| Pre-tax earnings (loss) from continuing operations | $ | 315 | $ | 475 | $ | (58) | $ | (102) | ||||||||||||||||||
| Income tax expense (benefit) | 61 | 111 | (14) | (36) | ||||||||||||||||||||||
| Earnings (loss) from equity investments | 2 | 3 | — | (1) | ||||||||||||||||||||||
| Earnings from discontinued operations, net of tax | 5 | — | 5 | — | ||||||||||||||||||||||
| Non-controlling interests | 13 | 13 | — | — | ||||||||||||||||||||||
| Net earnings (loss) attributable to common shareholders | $ | 248 | $ | 354 | $ | (39) | $ | (67) | ||||||||||||||||||
| EPS from continuing operations attributable to common shareholders - basic | $ | 0.88 | ||||||||||||||||||||||||
| EPS from discontinued operations attributable to common shareholders - basic | 0.02 | |||||||||||||||||||||||||
| EPS attributable to common shareholders - basic | $ | 0.90 | ||||||||||||||||||||||||
| EPS from continuing operations attributable to common shareholders - diluted | $ | 0.87 | ||||||||||||||||||||||||
| EPS from discontinued operations attributable to common shareholders - diluted | 0.02 | |||||||||||||||||||||||||
| EPS attributable to common shareholders - diluted | $ | 0.89 | ||||||||||||||||||||||||
| FNF, Inc. weighted average shares - basic | 275 | |||||||||||||||||||||||||
| FNF, Inc. weighted average shares - diluted | 278 | |||||||||||||||||||||||||
8
FIDELITY NATIONAL FINANCIAL, INC.
YTD SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited)
| Consolidated | Title | F&G | Corporate and Other | |||||||||||||||||||||||
| Six Months Ended | ||||||||||||||||||||||||||
| June 30, 2020 | ||||||||||||||||||||||||||
| Net earnings (loss) attributable to common shareholders | $ | 248 | $ | 354 | $ | (39) | $ | (67) | ||||||||||||||||||
| Earnings from discontinued operations, net of tax | 5 | — | 5 | — | ||||||||||||||||||||||
| Net earnings (loss) from continuing operations attributable to common shareholders | $ | 243 | $ | 354 | $ | (44) | $ | (67) | ||||||||||||||||||
| Non-GAAP Adjustments | ||||||||||||||||||||||||||
| Realized (gains) and losses, net | 203 | 144 | 52 | 7 | ||||||||||||||||||||||
| Indexed product related derivatives | 42 | — | 42 | — | ||||||||||||||||||||||
| Debt issuance costs | 4 | — | — | 4 | ||||||||||||||||||||||
| Purchase price amortization | 48 | 37 | 2 | 9 | ||||||||||||||||||||||
| Transaction costs | 51 | — | 7 | 44 | ||||||||||||||||||||||
| Other adjustments | 1 | 1 | — | — | ||||||||||||||||||||||
| Adjusted pre-tax earnings (loss) | $ | 664 | $ | 657 | $ | 45 | $ | (38) | ||||||||||||||||||
| Income taxes on non-GAAP adjustments | (79) | (42) | (22) | (15) | ||||||||||||||||||||||
| Non-controlling interest on non-GAAP adjustments | (6) | (5) | — | (1) | ||||||||||||||||||||||
| Total non-GAAP adjustments | $ | 264 | $ | 135 | $ | 81 | $ | 48 | ||||||||||||||||||
| Adjusted net earnings (loss) from continuing operations attributable to common shareholders | $ | 507 | $ | 489 | $ | 37 | $ | (19) | ||||||||||||||||||
| Adjusted EPS from continuing operations attributable to common shareholders - diluted | $ | 1.82 | ||||||||||||||||||||||||
9
FIDELITY NATIONAL FINANCIAL, INC.
YTD SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited)
| Six Months Ended | Consolidated | Title | Corporate and Other | |||||||||||||||||
| June 30, 2019 | ||||||||||||||||||||
| Direct title premiums | $ | 1,065 | $ | 1,065 | $ | — | ||||||||||||||
| Agency title premiums | 1,306 | 1,306 | — | |||||||||||||||||
| Escrow, title related and other fees | 1,199 | 1,094 | 105 | |||||||||||||||||
| Total title and escrow | 3,570 | 3,465 | 105 | |||||||||||||||||
| Interest and investment income | 113 | 102 | 11 | |||||||||||||||||
| Realized gains and losses, net | 183 | 188 | (5) | |||||||||||||||||
| Total revenue | 3,866 | 3,755 | 111 | |||||||||||||||||
| Personnel costs | 1,277 | 1,204 | 73 | |||||||||||||||||
| Agent commissions | 1,000 | 1,000 | — | |||||||||||||||||
| Other operating expenses | 753 | 688 | 65 | |||||||||||||||||
| Depreciation and amortization | 88 | 77 | 11 | |||||||||||||||||
| Claim loss expense | 107 | 107 | — | |||||||||||||||||
| Interest expense | 24 | — | 24 | |||||||||||||||||
| Total expenses | 3,249 | 3,076 | 173 | |||||||||||||||||
| Pre-tax earnings (loss) | $ | 617 | $ | 679 | $ | (62) | ||||||||||||||
| Income tax expense (benefit) | 151 | 166 | (15) | |||||||||||||||||
| Earnings from equity investments | 10 | 10 | — | |||||||||||||||||
| Non-controlling interests | 4 | 5 | (1) | |||||||||||||||||
| Net earnings (loss) attributable to common shareholders | $ | 472 | $ | 518 | $ | (46) | ||||||||||||||
| EPS attributable to common shareholders - basic | $ | 1.73 | ||||||||||||||||||
| EPS attributable to common shareholders - diluted | $ | 1.70 | ||||||||||||||||||
| FNF, Inc. weighted average shares - basic | 273 | |||||||||||||||||||
| FNF, Inc. weighted average shares - diluted | 277 | |||||||||||||||||||
10
FIDELITY NATIONAL FINANCIAL, INC.
YTD SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited)
| Consolidated | Title | Corporate and Other | ||||||||||||||||||
| Six Months Ended | ||||||||||||||||||||
| June 30, 2019 | ||||||||||||||||||||
| Net earnings (loss) attributable to common shareholders | $ | 472 | $ | 518 | $ | (46) | ||||||||||||||
| Non-GAAP Adjustments | ||||||||||||||||||||
| Realized (gains) and losses, net | (183) | (188) | 5 | |||||||||||||||||
| Purchase price amortization | 52 | 43 | 9 | |||||||||||||||||
| Transaction costs | 6 | — | 6 | |||||||||||||||||
| Other adjustments | 1 | 1 | — | |||||||||||||||||
| Adjusted pre-tax earnings (loss) | $ | 493 | $ | 535 | $ | (42) | ||||||||||||||
| Income taxes on non-GAAP adjustments | 31 | 36 | (5) | |||||||||||||||||
| Non-controlling interest on non-GAAP adjustments | (6) | (5) | (1) | |||||||||||||||||
| Total non-GAAP adjustments | $ | (99) | $ | (113) | $ | 14 | ||||||||||||||
| Adjusted net earnings (loss) attributable to common shareholders | $ | 373 | $ | 405 | $ | (32) | ||||||||||||||
| Adjusted EPS attributable to common shareholders - diluted | $ | 1.35 | ||||||||||||||||||
FIDELITY NATIONAL FINANCIAL, INC.
SUMMARY BALANCE SHEET INFORMATION
(In millions)
| June 30, 2020 | December 31, 2019 | |||||||||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||||||
| Cash and investment portfolio | $ | 33,321 | $ | 5,760 | ||||||||||||||||
| Goodwill | 4,451 | 2,727 | ||||||||||||||||||
| Title plant | 404 | 404 | ||||||||||||||||||
| Total assets | 48,001 | 10,677 | ||||||||||||||||||
| Notes payable | 2,430 | 838 | ||||||||||||||||||
| Reserve for title claim losses | 1,528 | 1,509 | ||||||||||||||||||
| Secured trust deposits | 735 | 791 | ||||||||||||||||||
| Redeemable non-controlling interests | 344 | 344 | ||||||||||||||||||
| Non-redeemable non-controlling interests | (9) | (17) | ||||||||||||||||||
| Total equity and non-controlling interests | 6,693 | 5,709 | ||||||||||||||||||
| Total equity attributable to common shareholders | 6,358 | 5,382 | ||||||||||||||||||
11
Non-GAAP Measures and Other Information
Title
The table below reconciles pre-tax title earnings to adjusted pre-tax title earnings.
Three Months Ended | Six Months Ended | |||||||||||||||||||
June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | |||||||||||||||||
Pre-tax earnings | $ | 528 | $ | 387 | $ | 475 | $ | 679 | ||||||||||||
Non-GAAP adjustments before taxes | ||||||||||||||||||||
Realized (gains) and losses, net | (169) | (46) | 144 | (188) | ||||||||||||||||
Purchase price amortization | 18 | 21 | 37 | 43 | ||||||||||||||||
Other adjustments | 1 | 1 | 1 | 1 | ||||||||||||||||
Total non-GAAP adjustments | (150) | (24) | 182 | (144) | ||||||||||||||||
Adjusted pre-tax earnings | $ | 378 | $ | 363 | $ | 657 | $ | 535 | ||||||||||||
Adjusted pre-tax margin | 18.4 | % | 17.7 | % | 16.5 | % | 15.0 | % | ||||||||||||
FIDELITY NATIONAL FINANCIAL, INC.
QUARTERLY OPERATING STATISTICS
(Unaudited)
| Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 | Q4 2018 | Q3 2018 | |||||||||||||||||||||||||||||||||||||||||||
| Quarterly Opened Orders ('000's except % data) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total opened orders* | 693 | 682 | 492 | 592 | 544 | 438 | 379 | 456 | ||||||||||||||||||||||||||||||||||||||||||
| Total opened orders per day* | 10.8 | 11.0 | 7.8 | 9.3 | 8.5 | 7.2 | 6.0 | 7.2 | ||||||||||||||||||||||||||||||||||||||||||
| Purchase % of opened orders | 37 | % | 41 | % | 50 | % | 52 | % | 61 | % | 65 | % | 67 | % | 69 | % | ||||||||||||||||||||||||||||||||||
| Refinance % of opened orders | 63 | % | 59 | % | 50 | % | 48 | % | 39 | % | 35 | % | 33 | % | 31 | % | ||||||||||||||||||||||||||||||||||
| Total closed orders* | 487 | 377 | 417 | 409 | 359 | 263 | 301 | 339 | ||||||||||||||||||||||||||||||||||||||||||
| Total closed orders per day* | 7.6 | 6.1 | 6.6 | 6.4 | 5.6 | 4.3 | 4.8 | 5.4 | ||||||||||||||||||||||||||||||||||||||||||
| Purchase % of closed orders | 35 | % | 46 | % | 49 | % | 55 | % | 65 | % | 66 | % | 69 | % | 71 | % | ||||||||||||||||||||||||||||||||||
| Refinance % of closed orders | 65 | % | 54 | % | 51 | % | 45 | % | 35 | % | 34 | % | 31 | % | 29 | % | ||||||||||||||||||||||||||||||||||
| Commercial (millions, except orders in '000's) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial revenue | $ | 184 | $ | 245 | $ | 321 | $ | 301 | $ | 286 | $ | 231 | $ | 328 | $ | 276 | ||||||||||||||||||||||||||||||||||
| Total commercial opened orders | 43.9 | 56.3 | 55.1 | 56.0 | 58.6 | 49.8 | 46.0 | 48.9 | ||||||||||||||||||||||||||||||||||||||||||
| Total commercial closed orders | 25.7 | 31.0 | 39.1 | 36.4 | 34.0 | 30.0 | 35.2 | 31.2 | ||||||||||||||||||||||||||||||||||||||||||
| National commercial revenue | $ | 96 | $ | 132 | $ | 186 | $ | 172 | $ | 163 | $ | 122 | $ | 195 | $ | 155 | ||||||||||||||||||||||||||||||||||
| National commercial opened orders | 15.2 | 21.5 | 22.6 | 23.8 | 25.3 | 20.6 | 19.1 | 19.8 | ||||||||||||||||||||||||||||||||||||||||||
| National commercial closed orders | 8.8 | 10.7 | 16.2 | 14.1 | 12.7 | 10.5 | 13.2 | 12.0 | ||||||||||||||||||||||||||||||||||||||||||
| Total Fee Per File | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Fee per file | $ | 1,889 | $ | 2,224 | $ | 2,384 | $ | 2,459 | $ | 2,677 | $ | 2,567 | $ | 2,803 | $ | 2,623 | ||||||||||||||||||||||||||||||||||
| Residential fee per file | $ | 1,614 | $ | 1,744 | $ | 1,792 | $ | 1,928 | $ | 2,075 | $ | 1,964 | $ | 2,003 | $ | 2,032 | ||||||||||||||||||||||||||||||||||
| Total commercial fee per file | $ | 7,200 | $ | 7,900 | $ | 8,200 | $ | 8,300 | $ | 8,400 | $ | 7,700 | $ | 9,300 | $ | 8,800 | ||||||||||||||||||||||||||||||||||
| National commercial fee per file | $ | 10,900 | $ | 12,300 | $ | 11,500 | $ | 12,200 | $ | 12,900 | $ | 11,600 | $ | 14,800 | $ | 13,000 | ||||||||||||||||||||||||||||||||||
| Total Staffing | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total field operations employees | 10,900 | 12,500 | 12,300 | 12,200 | 12,000 | 11,700 | 11,800 | 12,400 | ||||||||||||||||||||||||||||||||||||||||||
| Actual title claims paid ($ millions) | $ | 51 | $ | 48 | $ | 53 | $ | 52 | $ | 66 | $ | 49 | $ | 58 | $ | 55 | ||||||||||||||||||||||||||||||||||
* Includes an immaterial number of non-purchase and non-refinance orders
12
F&G
The table below reconciles the reported after-tax net loss from continuing operations to adjusted earnings from continuing operations attributable to common shareholders.
| One month ended | |||||
| June 30, 2020 | |||||
| (Unaudited) | |||||
| Net earnings (loss) from continuing operations attributable to common shareholders | $ | (44) | |||
| Non-GAAP adjustments (1,2): | |||||
| Realized (gains) and losses, net | 52 | ||||
| Indexed product related derivatives | 42 | ||||
| Purchase price amortization | 2 | ||||
| Transaction costs | 7 | ||||
| Income taxes on non-GAAP adjustments | (22) | ||||
| Adjusted earnings (loss) from continuing operations attributable to common shareholders | $ | 37 | |||
Adjusted earnings from continuing operations include $8 million of favorable notable items in the period.
The table below provides summary financial highlights.
| One Month Ended | |||||
| (In millions) | June 30, 2020 | ||||
Average assets under management (AAUM)(1) | $ | 26,582 | |||
Net investment spread - FIA(1) | 3.47 | % | |||
Net investment spread - All products(1) | 3.50 | % | |||
| Net earnings (loss) from continuing operations | $ | (44) | |||
Adjusted earnings from continuing operations attributable to common shareholders(1) | $ | 37 | |||
The table below provides a summary of sales, which are not affected by PGAAP and are comparable to prior period data.
| One Month Ended | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||
| (In millions) | June 30, 2020 | June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | |||||||||||||||||||||||||||
Fixed indexed annuity (FIA) sales(1) | $ | 244 | $ | 866 | $ | 767 | $ | 1,697 | $ | 1,435 | ||||||||||||||||||||||
Total retail annuity sales(1) | $ | 258 | $ | 913 | $ | 1,122 | $ | 1,958 | $ | 2,175 | ||||||||||||||||||||||
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), deferred sale inducement (DSI) amortization, and unearned revenue (UREV) amortization, as applicable.
13
DEFINITIONS
The following represents the definitions of non-GAAP measures used by F&G.
Adjusted Earnings
Adjusted Earnings is a non-GAAP economic measure we use to evaluate financial performance each period. Adjusted earnings is calculated by adjusting net earnings (loss) from continuing operations to eliminate:
(i) Realized (gains) and losses, net: the impact of net investment gains/losses, including changes in allowance for expected credit losses and other than temporary impairment ("OTTI") losses, recognized in operations; the impact of market volatility on the alternative asset portfolio; and the effect of changes in fair value of the reinsurance related embedded derivative;
(ii) Indexed product related derivatives: the impacts related to changes in the fair value, including both realized and unrealized gains and losses, of index product related derivatives and embedded derivatives, net of hedging cost, and the fair value accounting impact of assumed reinsurance,
(iii) Purchase price amortization: the impacts related to the amortization of certain intangibles (internally developed software, trademarks and value of distribution asset (VODA)) recognized as a result of acquisition activities, and
(iv) Transaction costs: the impacts related to acquisition, integration and merger related items.
Adjustments to Adjusted Earnings 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 F&G, 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.
Adjusted Earnings Attributable to Common Shareholders
Adjusted Earnings attributable to common shareholders is a non-GAAP economic measure we use to evaluate financial performance attributable to our common shareholders each period. Adjusted Earnings attributable to common shareholders is calculated by adjusting net earnings (loss) available to common shareholders to eliminate the same items as described in the Adjusted Earnings paragraph above. 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.
Adjusted Return on Average Common Shareholders’ Equity Excluding AOCI
Adjusted Return on Common Shareholders’ Equity Excluding AOCI is calculated by dividing Adjusted Earnings Attributable 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 acquisition, the starting point for calculation of average Common Shareholders’ Equity was reset to June 1, 2020. The rolling average will be updated from the acquisition date forward to use available historical data points 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
Net investment spread is the excess of net investment income, adjusted for market volatility on the alternative asset investment portfolio, earned over the sum of interest credited to policyholders and the cost of hedging our risk on indexed product 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.
14
Average Assets Under Management (AAUM)
AAUM is calculated as 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.
Sales (FIA Sales and Total Retail Annuity 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. 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.
###
15
Exhibit 99.2
FGL Holdings (“F&G”) - An Operating Segment of Fidelity National Financial, Inc. (NYSE:FNF)
Financial Supplement
June 30, 2020
(Year Ended December 31)
The financial statements and financial exhibits included herein are unaudited. F&G is an operating segment of FNF and these financial statements and exhibits should be read in conjunction with FNF's periodic reports on Form 10-K, Form 10-Q and Form 8-K.
F&G (formerly NYSE:FG) was acquired by FNF (the "Business Combination") on June 1, 2020 ("Closing Date"). As a result of the Business Combination, F&G delisted from the NYSE and became a subsidiary of FNF. Our financial statement presentation includes the financial statements of F&G and its subsidiaries as a standalone entity ("Pre-Merger") for the periods prior to the completion of the Business Combination, and F&G and its subsidiaries as an operating segment of FNF ("Post-Merger") for periods from and after the Closing Date.
All dollar amounts are presented in millions.
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 F&G's operating segment performance for the periods presented. These measures should be considered supplementary to our segment financial results in accordance with GAAP and should not be viewed as a substitute for the GAAP measures and are not intended to replace GAAP financial 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.
1
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
| Page | |||||
| 4 | |||||
Reconciliation of Total Shareholders' Equity to Common Shareholders' Equity Excluding AOCI | |||||
| Reconciliation of Return on Equity (ROE) to Adjusted ROE | |||||
Total Product Net Investment Spread | |||||
| FIA Net Investment Spread | |||||
2
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
Consolidated Financial Highlights
| One month ended | Two months ended | Three months ended | ||||||||||||||||||||||||||||||||||||
| June 30, 2020 | May 31, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||||||||||||||||||||
| Post-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | |||||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||||||||||
| Select Income Statement Data: | ||||||||||||||||||||||||||||||||||||||
| Net earnings (loss) attributable to common shareholders | (39) | 19 | (346) | 217 | 58 | 38 | ||||||||||||||||||||||||||||||||
| Adjusted earnings (loss) attributable to common shareholders (1) | 37 | 40 | 33 | 94 | 79 | 65 | ||||||||||||||||||||||||||||||||
| Select Metrics: | ||||||||||||||||||||||||||||||||||||||
| Return on average common shareholders' equity (1) | (16.2) | % | 209.5 | % | (118.7) | % | 39.0 | % | 11.6 | % | 9.6 | % | ||||||||||||||||||||||||||
| Adjusted return on common shareholders' equity, excluding AOCI (1) | 16.3 | % | 10.9 | % | 8.1 | % | 21.8 | % | 19.7 | % | 16.6 | % | ||||||||||||||||||||||||||
| Average Assets Under Management ("AAUM") (1) | 26,582 | 29,285 | 28,924 | 28,332 | 27,871 | 27,388 | ||||||||||||||||||||||||||||||||
| Net investment spread (1) | 3.50 | % | 1.92 | % | 2.24 | % | 2.41 | % | 2.05 | % | 2.26 | % | ||||||||||||||||||||||||||
| Sales | ||||||||||||||||||||||||||||||||||||||
| FIA | 244 | 622 | 831 | 795 | 590 | 767 | ||||||||||||||||||||||||||||||||
| Fixed rate annuities (MYGA) | 14 | 33 | 114 | 126 | 107 | 263 | ||||||||||||||||||||||||||||||||
| Institutional spread based | — | — | 100 | — | 100 | 92 | ||||||||||||||||||||||||||||||||
| Total annuity | 258 | 655 | 1,045 | 921 | 797 | 1,122 | ||||||||||||||||||||||||||||||||
| Index universal life | 4 | 8 | 11 | 11 | 9 | 10 | ||||||||||||||||||||||||||||||||
| Flow reinsurance | 34 | 108 | 122 | 122 | 108 | 104 | ||||||||||||||||||||||||||||||||
| Total Sales | $ | 296 | $ | 771 | $ | 1,178 | $ | 1,054 | $ | 914 | $ | 1,236 | ||||||||||||||||||||||||||
| (1) Refer to "Non-GAAP Financial Measures Definitions" | ||||||||||||||||||||||||||||||||||||||
3
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
Appendix to Consolidated Financial Highlights
Effective June 1, 2020, certain blocks of business were designated as discontinued operations by FNF. Amounts related to these blocks of business are presented herein as adjustments to key financial metrics, solely for comparison between Pre-Merger and Post-Merger periods. See FNF 10Q for further discussion on discontinued operations.
| One month ended | Two months ended | Three months ended | ||||||||||||||||||||||||||||||||||||
| June 30, 2020 | May 31, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||||||||||||||||||||
| Post-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | |||||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||||||||||
| Select Income Statement Data: | ||||||||||||||||||||||||||||||||||||||
| Net earnings (loss) attributable to common shareholders | (39) | 19 | (346) | 217 | 58 | 38 | ||||||||||||||||||||||||||||||||
| Less: discontinued operations [(earnings)/loss] | (5) | (22) | 155 | (46) | (14) | 13 | ||||||||||||||||||||||||||||||||
| As adjusted for discontinued operations | (44) | (3) | (191) | 171 | 44 | 51 | ||||||||||||||||||||||||||||||||
| Adjusted Earnings attributable to common shareholders(1) | 37 | 40 | 33 | 94 | 79 | 65 | ||||||||||||||||||||||||||||||||
| Less: discontinued operations [(earnings)/loss] | — | 8 | 26 | (4) | (18) | (5) | ||||||||||||||||||||||||||||||||
| As adjusted for discontinued operations | 37 | 48 | 59 | 90 | 61 | 60 | ||||||||||||||||||||||||||||||||
| Less: Notable items [(unfavorable)/favorable] (2) | 8 | 5 | (6) | 15 | 2 | (4) | ||||||||||||||||||||||||||||||||
| As adjusted for discontinued operations and notable items | 29 | 43 | 65 | 75 | 59 | 64 | ||||||||||||||||||||||||||||||||
| Select Metrics: | ||||||||||||||||||||||||||||||||||||||
| Adjusted return on common shareholders' equity, excluding AOCI (1) | 16.3 | % | 10.9 | % | 8.1 | % | 21.8 | % | 19.7 | % | 16.6 | % | ||||||||||||||||||||||||||
| Less: discontinued operations [(earnings)/loss] | — | % | 5.7 | % | 10.4 | % | 5.3 | % | (0.5) | % | 1.6 | % | ||||||||||||||||||||||||||
| As adjusted for discontinued operations | 16.3 | % | 16.6 | % | 18.5 | % | 27.1 | % | 19.2 | % | 18.2 | % | ||||||||||||||||||||||||||
| AAUM (1) | 26,582 | 29,285 | 28,924 | 28,332 | 27,871 | 27,388 | ||||||||||||||||||||||||||||||||
| Less: discontinued operations [(earnings)/loss] | — | (2,236) | (2,266) | (2,183) | (2,040) | (1,869) | ||||||||||||||||||||||||||||||||
| As adjusted for discontinued operations | 26,582 | 27,049 | 26,658 | 26,149 | 25,831 | 25,519 | ||||||||||||||||||||||||||||||||
| Net investment spread (1) | 3.50 | % | 1.92 | % | 2.24 | % | 2.41 | % | 2.05 | % | 2.26 | % | ||||||||||||||||||||||||||
| Less: discontinued operations [(earnings)/loss] | — | % | (0.07) | % | (0.02) | % | 0.03 | % | 0.04 | % | 0.09 | % | ||||||||||||||||||||||||||
| As adjusted for discontinued operations | 3.50 | % | 1.85 | % | 2.22 | % | 2.44 | % | 2.09 | % | 2.35 | % | ||||||||||||||||||||||||||
| (1) Refer to "Non-GAAP Financial Measures Definitions" | ||||||||||||||||||||||||||||||||||||||
(2) Noteable items from continuing operations. For full list of noteable items, refer to page 8 "Noteable Items" | ||||||||||||||||||||||||||||||||||||||
4
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
Condensed Consolidated Balance Sheets
| June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||||||||||||||||||
| Post-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | |||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||
| Investments: | |||||||||||||||||||||||||||||||||||
| Fixed maturity securities available for sale, at fair value, net of allowance for credit losses of $15 at June 30, 2020 | 23,014 | 21,140 | 23,726 | 23,907 | 23,362 | ||||||||||||||||||||||||||||||
| Preferred securities, at fair value | 875 | 873 | 1,001 | 1,027 | 1,084 | ||||||||||||||||||||||||||||||
| Equity securities, at fair value | 54 | 42 | 70 | 70 | 60 | ||||||||||||||||||||||||||||||
| Derivative investments | 333 | 188 | 587 | 454 | 383 | ||||||||||||||||||||||||||||||
| Mortgage loans, net of allowance for credit losses of $28 at June 30, 2020 | 1,777 | 1,769 | 1,267 | 836 | 760 | ||||||||||||||||||||||||||||||
| Investments in unconsolidated affiliates | 1,045 | 1,071 | 1,013 | 923 | 878 | ||||||||||||||||||||||||||||||
| Other long-term investments | 404 | 421 | 289 | 155 | 153 | ||||||||||||||||||||||||||||||
| Short-term investments | 38 | 36 | 38 | 37 | 66 | ||||||||||||||||||||||||||||||
| Total investments | 27,540 | 25,540 | 27,991 | 27,409 | 26,746 | ||||||||||||||||||||||||||||||
| Cash and cash equivalents | 909 | 740 | 931 | 953 | 705 | ||||||||||||||||||||||||||||||
| Trade and notes receivables | 2 | 1 | 1 | 1 | 2 | ||||||||||||||||||||||||||||||
| Funds withheld for reinsurance receivable, at fair value | — | 2,050 | 2,172 | 2,045 | 1,922 | ||||||||||||||||||||||||||||||
| Reinsurance recoverable, net of allowance for credit losses of $22 at June 30, 2020 | 3,182 | 3,186 | 3,213 | 3,250 | 3,264 | ||||||||||||||||||||||||||||||
| Goodwill | 1,725 | 467 | 467 | 467 | 467 | ||||||||||||||||||||||||||||||
| Prepaid expenses and other assets | 381 | 384 | 355 | 435 | 356 | ||||||||||||||||||||||||||||||
| Lease assets | 8 | 9 | 9 | 3 | 3 | ||||||||||||||||||||||||||||||
| Other intangible assets, net | 2,060 | 2,071 | 1,495 | 1,438 | 1,457 | ||||||||||||||||||||||||||||||
| Property and equipment, net | 2 | 2 | 2 | 1 | 1 | ||||||||||||||||||||||||||||||
| Deferred tax asset | 180 | 264 | 61 | 92 | 150 | ||||||||||||||||||||||||||||||
| Assets of discontinued operations | 2,502 | — | — | — | — | ||||||||||||||||||||||||||||||
| Total assets | $ | 38,491 | $ | 34,714 | $ | 36,697 | $ | 36,094 | $ | 35,073 | |||||||||||||||||||||||||
5
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
Condensed Consolidated Balance Sheets (continued) | |||||||||||||||||||||||||||||||||||
| June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||||||||||||||||||
| Post-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | |||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||||||||
| Liabilities and Shareholders' Equity | |||||||||||||||||||||||||||||||||||
| Contractholder funds | 26,628 | 26,226 | 25,684 | 25,355 | 24,828 | ||||||||||||||||||||||||||||||
| Future policy benefits | 4,092 | 5,658 | 5,735 | 5,714 | 5,641 | ||||||||||||||||||||||||||||||
| Accounts payable and accrued liabilities | 1,800 | 1,828 | 1,998 | 1,926 | 1,824 | ||||||||||||||||||||||||||||||
| Notes payable | 589 | 543 | 542 | 542 | 542 | ||||||||||||||||||||||||||||||
| Lease liabilities | 13 | 9 | 9 | 3 | 3 | ||||||||||||||||||||||||||||||
| Income taxes payable | (24) | (22) | (15) | (21) | (24) | ||||||||||||||||||||||||||||||
| Liabilities of discontinued operations | 2,347 | — | — | — | — | ||||||||||||||||||||||||||||||
| Total liabilities | 35,445 | 34,242 | 33,953 | 33,519 | 32,814 | ||||||||||||||||||||||||||||||
| Shareholders' equity: | |||||||||||||||||||||||||||||||||||
| Additional paid-in-capital | 2,737 | 2,041 | 2,032 | 2,022 | 2,014 | ||||||||||||||||||||||||||||||
| Retained earnings (accumulated deficit) | (39) | (72) | 300 | 85 | 29 | ||||||||||||||||||||||||||||||
| Accumulated other comprehensive income (loss) | 348 | (1,428) | 481 | 520 | 251 | ||||||||||||||||||||||||||||||
| Treasury stock | — | (69) | (69) | (52) | (35) | ||||||||||||||||||||||||||||||
| Total shareholders' equity | 3,046 | 472 | 2,744 | 2,575 | 2,259 | ||||||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 38,491 | $ | 34,714 | $ | 36,697 | $ | 36,094 | $ | 35,073 | |||||||||||||||||||||||||
6
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
Condensed Consolidated Statements of Operations
| One month ended | Two months ended | Three months ended | ||||||||||||||||||||||||||||||||||||
| June 30, 2020 | May 31, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||||||||||||||||||||
| Post-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | |||||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||||||||
| Life insurance premiums and other fees (a) | $ | 20 | $ | 52 | $ | 41 | $ | 43 | $ | 51 | $ | 45 | ||||||||||||||||||||||||||
| Interest and investment income | 111 | 111 | 316 | 324 | 301 | 315 | ||||||||||||||||||||||||||||||||
| Realized gains and losses (net) | (7) | 257 | (692) | 196 | 103 | 135 | ||||||||||||||||||||||||||||||||
| Total revenues | 124 | 420 | (335) | 563 | 455 | 495 | ||||||||||||||||||||||||||||||||
| Benefits and expenses: | ||||||||||||||||||||||||||||||||||||||
| Benefits and other changes in policy reserves | 155 | 356 | (41) | 119 | 331 | 268 | ||||||||||||||||||||||||||||||||
| Personnel costs | 9 | 15 | 21 | 21 | 17 | 19 | ||||||||||||||||||||||||||||||||
| Other operating expenses | 12 | 40 | 74 | 64 | 28 | 126 | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | 3 | 1 | (60) | 78 | 14 | 14 | ||||||||||||||||||||||||||||||||
| Interest expense | 3 | 5 | 8 | 8 | 8 | 8 | ||||||||||||||||||||||||||||||||
| Total benefits and expenses | 182 | 417 | 2 | 290 | 398 | 435 | ||||||||||||||||||||||||||||||||
| Pre-tax earnings (loss) from continuing operations | (58) | 3 | (337) | 273 | 57 | 60 | ||||||||||||||||||||||||||||||||
| Federal income tax expense | 14 | 17 | (1) | (48) | 9 | (13) | ||||||||||||||||||||||||||||||||
| State income tax expense | — | (1) | — | — | (1) | (1) | ||||||||||||||||||||||||||||||||
| Net earnings (loss) from continuing operations | (44) | 19 | (338) | 225 | 65 | 46 | ||||||||||||||||||||||||||||||||
| Earnings from discontinued operations, net of tax | 5 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Less Preferred stock dividend | — | — | (8) | (8) | (7) | (8) | ||||||||||||||||||||||||||||||||
| Net earnings (loss) attributable to common shareholders | $ | (39) | $ | 19 | $ | (346) | $ | 217 | $ | 58 | $ | 38 | ||||||||||||||||||||||||||
(a) Included within "Escrow, title-related and other fees" in FNF 10-Q
7
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
Reconciliation from Net Earnings (Loss) to Adjusted Earnings (1)
| One month ended | Two months ended | Three months ended | ||||||||||||||||||||||||||||||||||||
| June 30, 2020 | May 31, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||||||||||||||||||||
| Post-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | |||||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||||||||||
| Net earnings (loss) from continuing operations | $ | (44) | $ | 19 | $ | (338) | $ | 225 | $ | 65 | $ | 46 | ||||||||||||||||||||||||||
| Less Preferred stock dividend | $ | — | $ | — | $ | (8) | $ | (8) | $ | (7) | $ | (8) | ||||||||||||||||||||||||||
| Net earnings (loss) attributable to common shareholders | $ | (44) | $ | 19 | $ | (346) | $ | 217 | $ | 58 | $ | 38 | ||||||||||||||||||||||||||
| Non-GAAP adjustments (1): | ||||||||||||||||||||||||||||||||||||||
| Realized (gains) and losses, net | 52 | 68 | 94 | (34) | (26) | (32) | ||||||||||||||||||||||||||||||||
| Indexed product related derivatives | 42 | (28) | 287 | (134) | 63 | 69 | ||||||||||||||||||||||||||||||||
| Purchase price amortization | 2 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Transaction costs | 7 | 4 | 34 | 11 | (6) | (3) | ||||||||||||||||||||||||||||||||
| Income taxes on non-GAAP adjustments | (22) | (23) | (36) | 34 | (10) | (7) | ||||||||||||||||||||||||||||||||
| Adjusted earnings attributable to common shareholders | $ | 37 | $ | 40 | $ | 33 | $ | 94 | $ | 79 | $ | 65 | ||||||||||||||||||||||||||
Notable Items
Each quarterly reporting period, we identify notable items that help explain the trends in our Net earnings (loss) from continuing operations attributable to common shareholders and Adjusted earnings (loss) from continuing operations attributable to common shareholders as we believe these items provide further clarity to the financial performance of the business.
| One month ended | Two months ended | Three months ended | ||||||||||||||||||||||||||||||||||||
| June 30, 2020 | May 31, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||||||||||||||||||||
| Post-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | |||||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||||||||||
| Adjusted earnings attributable to common shareholders (1) | $ | 37 | $ | 40 | $ | 33 | $ | 94 | $ | 79 | $ | 65 | ||||||||||||||||||||||||||
| Notable items [(unfavorable)/favorable] | ||||||||||||||||||||||||||||||||||||||
| Project expenses (a) | — | (2) | (2) | (10) | — | (11) | ||||||||||||||||||||||||||||||||
| Single premium immediate annuities ("SPIA") mortality & other reserve adjustments (b) | 4 | 6 | (5) | 15 | (2) | 3 | ||||||||||||||||||||||||||||||||
| Assumption review and unlocking (c) | — | (4) | — | 4 | 7 | — | ||||||||||||||||||||||||||||||||
| Other (d) | 4 | 5 | (25) | 15 | 15 | 4 | ||||||||||||||||||||||||||||||||
(1) Refer to "Non-GAAP Financial Measures Definitions"
(a) Costs incurred during research and exploration of potential merger or acquisition of a business or a group of insurance policies via asset acquisition or (inforce) reinsurance agreement.
(b) The release of annuity reserves associated with mortality of annuitants, which varies due to timing, volume and severity of experience, and other reserve adjustments.
(c) Reflects unlocking from updating our DAC, VOBA, DSI and cost of reinsurance amortization models for actual experience and equity market fluctuations. Also, annually in the 3rd calendar quarter, we complete our Annual Assumption Review & Unlocking process by adjusting our valuation assumptions to align with actual experience.
(d) Bond prepayment income, changes in tax valuation, and other net activity.
8
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
Adjusted Earnings Statement (1)
| One month ended | Two Months Ended | Three months ended | ||||||||||||||||||||||||||||||||||||
| June 30, 2020 | May 31, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||||||||||||||||||||
| Post-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | |||||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||||||||
| Life insurance premiums and other fees (a) | 20 | 42 | 53 | 44 | 49 | 48 | ||||||||||||||||||||||||||||||||
| Interest and investment income (b) | 120 | 200 | 317 | 324 | 301 | 315 | ||||||||||||||||||||||||||||||||
| Realized gains and losses (net) (c) | 4 | 22 | (34) | 23 | 5 | 11 | ||||||||||||||||||||||||||||||||
| Total revenues | 144 | 264 | 336 | 391 | 355 | 374 | ||||||||||||||||||||||||||||||||
| Benefits and expenses: | ||||||||||||||||||||||||||||||||||||||
| Benefits and other changes in policy reserves (d) | 60 | 131 | 161 | 151 | 175 | 93 | ||||||||||||||||||||||||||||||||
| Personnel costs | 9 | 15 | 21 | 21 | 17 | 19 | ||||||||||||||||||||||||||||||||
| Other operating expenses (e) | 4 | 37 | 41 | 53 | 35 | 130 | ||||||||||||||||||||||||||||||||
| Depreciation and amortization (f) | 23 | 32 | 27 | 42 | 34 | 31 | ||||||||||||||||||||||||||||||||
| Interest expense | 3 | 5 | 8 | 8 | 8 | 8 | ||||||||||||||||||||||||||||||||
| Total benefits and expenses | 99 | 220 | 258 | 275 | 269 | 281 | ||||||||||||||||||||||||||||||||
| Pre-tax earnings (loss) from continuing operations | 45 | 44 | 78 | 116 | 86 | 93 | ||||||||||||||||||||||||||||||||
| Federal Income Tax Expense | (8) | (5) | (37) | (14) | — | (20) | ||||||||||||||||||||||||||||||||
| State Income Tax Expense | — | 1 | — | — | — | — | ||||||||||||||||||||||||||||||||
| Adjusted earnings | $ | 37 | $ | 40 | $ | 41 | $ | 102 | $ | 86 | $ | 73 | ||||||||||||||||||||||||||
| Less Preferred stock dividend | $ | — | $ | — | $ | (8) | $ | (8) | $ | (7) | $ | (8) | ||||||||||||||||||||||||||
| Adjusted earnings attributable to common shareholders | $ | 37 | $ | 40 | $ | 33 | $ | 94 | $ | 79 | $ | 65 | ||||||||||||||||||||||||||
| Noteable items included in adjusted earnings attributable to common shareholders(2) | $ | 8 | $ | 5 | $ | (32) | $ | 24 | $ | 20 | $ | (4) | ||||||||||||||||||||||||||
(1) Refer to "Non-GAAP Financial Measures Definitions"
(2) Refer to page 8 "Noteable Items" for further detail of noteable items.
(a) Life insurance premiums and other fees have been adjusted to remove the effect of cost of reinsurance.
(b) Interest and investment income has been adjusted to remove the market volatility on the alternative investment portfolio for periods after March 31, 2020.
(c) Realized gains and losses (net) have been adjusted to remove the effect of realized (gains) losses including changes in allowance for expected credit losses and OTTI; changes in fair values of indexed product related derivatives and embedded derivatives, net of hedging costs; and the change in fair value of the reinsurance related embedded derivative.
(d) Benefits and other changes in policy reserves has been adjusted to remove the effects of the changes in fair values of indexed product embedded derivatives, changes in allowance for expected credit losses on reinsurance recoverables, and the fair value impacts of assumed reinsurance.
(e) Other operating expenses have been adjusted to remove the effects of transaction costs.
(f) Depreciation and amortization has been adjusted to remove the impact on DAC, VOBA, DSI and SOP03-1 of the adjustments above, as applicable, and purchase price amortization.
9
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
Reconciliation of Total Shareholders' Equity to Common Shareholders' Equity Excluding AOCI
| June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | ||||||||||||||||||||||||||||
| Post-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | ||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||||
| Total shareholders' equity | 3,046 | 472 | 2,743 | 2,575 | 2,260 | |||||||||||||||||||||||||||
| Equity attributable to preferred shareholders (1) | — | 446 | 438 | 430 | 422 | |||||||||||||||||||||||||||
| Common shareholders' equity | 3,046 | 26 | 2,305 | 2,145 | 1,838 | |||||||||||||||||||||||||||
| AOCI | 348 | (1,428) | 481 | 520 | 251 | |||||||||||||||||||||||||||
| Total common shareholders' equity excluding AOCI (1) | $ | 2,698 | $ | 1,454 | $ | 1,824 | $ | 1,625 | $ | 1,587 | ||||||||||||||||||||||
Reconciliation of Return on Equity (ROE) to Adjusted ROE
| Twelve months ended | ||||||||||||||||||||||||||||||||
| Reconciliation of the Twelve Month Rolling ROE to Adjusted ROE | June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||||||||||||||
| Post-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | ||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||||
| Return on average common shareholders' equity (1) | (16.2) | % | (2.2) | % | 29.4 | % | 7.5 | % | 8.2 | % | ||||||||||||||||||||||
| AOCI | (1.0) | % | 0.1 | % | 0.3 | % | (0.9) | % | (2.2) | % | ||||||||||||||||||||||
| Return on average common shareholders' equity, excluding AOCI (1) | (17.2) | % | (2.1) | % | 29.7 | % | 6.6 | % | 6.0 | % | ||||||||||||||||||||||
| Aggregate adjustments to arrive at adjusted earnings available to common shareholders (2) | 33.5 | % | 18.9 | % | (9.7) | % | 12.7 | % | 12.3 | % | ||||||||||||||||||||||
| Adjusted return on common shareholders' equity, excluding AOCI (1) | 16.3 | % | 16.8 | % | 20.0 | % | 19.3 | % | 18.3 | % | ||||||||||||||||||||||
| Three months ended | ||||||||||||||||||||||||||||||||
| Reconciliation of Quarterly ROE to Adjusted ROE | June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||||||||||||||
| Post-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | ||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||||
| Return on average common shareholders' equity (1) | (16.2) | % | (118.7) | % | 39.0 | % | 11.6 | % | 9.6 | % | ||||||||||||||||||||||
| AOCI | (1.0) | % | 34.3 | % | 11.3 | % | 2.8 | % | 0.1 | % | ||||||||||||||||||||||
| Return on average common shareholders' equity, excluding AOCI (1) | (17.2) | % | (84.4) | % | 50.3 | % | 14.4 | % | 9.7 | % | ||||||||||||||||||||||
| Aggregate adjustments to arrive at adjusted earnings available to common shareholders (2) | 33.5 | % | 92.6 | % | (28.5) | % | 5.3 | % | 6.9 | % | ||||||||||||||||||||||
| Adjusted return on common shareholders' equity, excluding AOCI (1) | 16.3 | % | 8.1 | % | 21.8 | % | 19.7 | % | 16.6 | % | ||||||||||||||||||||||
(1) Refer to "Non-GAAP Financial Measures Definitions"
(2) Refer to "Reconciliation from Net Earnings (Loss) to Adjusted earnings" for further details on individual adjustments
10
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
Financial Strength Ratings
| A.M. Best | S&P | Moody's | Fitch | |||||||||||||||||||||||
| Holding Company Ratings | ||||||||||||||||||||||||||
| FGL Holdings | ||||||||||||||||||||||||||
| Issuer Credit / Default Rating | Not Rated | BBB- | Ba2 | BBB | ||||||||||||||||||||||
| Outlook | Stable | Stable | Negative | |||||||||||||||||||||||
| CF Bermuda Holdings Limited | ||||||||||||||||||||||||||
| Issuer Credit / Default Rating | Not Rated | BBB- | Ba1 | BBB | ||||||||||||||||||||||
| Outlook | Stable | Stable | Negative | |||||||||||||||||||||||
| Fidelity & Guaranty Life Holdings, Inc. | ||||||||||||||||||||||||||
| Issuer Credit / Default Rating | bbb- | BBB- | Not Rated | BBB | ||||||||||||||||||||||
| Outlook | Stable | Stable | Negative | |||||||||||||||||||||||
| Senior Unsecured Notes | bbb- | BBB | Baa2 | BBB | ||||||||||||||||||||||
| Outlook | Stable | Stable | ||||||||||||||||||||||||
| Operating Subsidiary Ratings | ||||||||||||||||||||||||||
| Fidelity & Guaranty Life Insurance Company | ||||||||||||||||||||||||||
| Financial Strength Rating | A- | A- | Baa1 | A- | ||||||||||||||||||||||
| Outlook | Stable | Stable | Stable | Negative | ||||||||||||||||||||||
| Fidelity & Guaranty Life Insurance Company of New York | ||||||||||||||||||||||||||
| Financial Strength Rating | A- | A- | Not Rated | A- | ||||||||||||||||||||||
| Outlook | Stable | Stable | Negative | |||||||||||||||||||||||
| F&G Reinsurance Ltd | ||||||||||||||||||||||||||
| Financial Strength Rating | A- | Not Rated | Not Rated | BBB | ||||||||||||||||||||||
| Outlook | Stable | Negative | ||||||||||||||||||||||||
| F&G Life Re Ltd | ||||||||||||||||||||||||||
| Financial Strength Rating | Not Rated | A- | Baa1 | BBB | ||||||||||||||||||||||
| Outlook | Stable | Stable | Negative | |||||||||||||||||||||||
| *Reflects current ratings and outlooks as of date of filing | ||||||||||||||||||||||||||
11
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
| Total Product Net Investment Spread | ||||||||||||||||||||||||||||||||||||||
| One month ended | Two months ended | Three months ended | ||||||||||||||||||||||||||||||||||||
| June 30, 2020 | May 31, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||||||||||||||||||||
| Post-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | |||||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||||||||||
| Net investment income | $ | 111 | $ | 111 | $ | 317 | $ | 324 | $ | 301 | $ | 315 | ||||||||||||||||||||||||||
| AAUM (1) | 26,582 | 29,285 | 28,924 | 28,332 | 27,871 | 27,388 | ||||||||||||||||||||||||||||||||
| Yield on AAUM (1) | 5.01 | % | 2.27 | % | 4.38 | % | 4.57 | % | 4.32 | % | 4.60 | % | ||||||||||||||||||||||||||
| Alternative investment yield adjustment (1) | 0.41 | % | 1.83 | % | ||||||||||||||||||||||||||||||||||
| Adjusted Yield on AAUM (1) | 5.42 | % | 4.10 | % | ||||||||||||||||||||||||||||||||||
| Interest credits | $ | 21 | $ | 53 | $ | 76 | $ | 76 | $ | 79 | $ | 82 | ||||||||||||||||||||||||||
| Option & futures costs | 19 | 43 | 60 | 63 | 63 | 62 | ||||||||||||||||||||||||||||||||
| Total interest credited and option costs | $ | 40 | $ | 96 | $ | 136 | $ | 139 | $ | 142 | $ | 144 | ||||||||||||||||||||||||||
| Average account value | 25,330 | 26,463 | 25,453 | 25,476 | 25,049 | 24,568 | ||||||||||||||||||||||||||||||||
| Interest credited & option cost | 1.92 | % | 2.18 | % | 2.14 | % | 2.16 | % | (2.27) | % | 2.34 | % | ||||||||||||||||||||||||||
| Net investment spread (1) | 3.50 | % | 1.92 | % | 2.24 | % | 2.41 | % | 2.05 | % | 2.26 | % | ||||||||||||||||||||||||||
| (1) Refer to "Non-GAAP Financial Measures Definitions" for further details. Periods after April 1, 2020 include alternative investment yield adjustment. | ||||||||||||||||||||||||||||||||||||||
12
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
| FIA Net Investment Spread | ||||||||||||||||||||||||||||||||||||||
| One month ended | Two months ended | Three months ended | ||||||||||||||||||||||||||||||||||||
| June 30, 2020 | May 31, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||||||||||||||||||||
| Post-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | |||||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||||||||||
| Net investment income | $ | 68 | $ | 57 | $ | 216 | $ | 223 | $ | 196 | $ | 197 | ||||||||||||||||||||||||||
| AAUM (1) | 18,267 | 18,623 | 18,111 | 17,628 | 17,120 | 16,648 | ||||||||||||||||||||||||||||||||
| Yield on AAUM (1) | 4.47 | % | 1.84 | % | 4.77 | % | 5.06 | % | 4.57 | % | 4.73 | % | ||||||||||||||||||||||||||
| Alternative investment yield adjustment (1) (a) | 0.59 | % | 2.67 | % | ||||||||||||||||||||||||||||||||||
| Adjusted Yield on AAUM (1) | 5.06 | % | 4.51 | % | ||||||||||||||||||||||||||||||||||
| Interest credits | $ | 4 | $ | 8 | $ | 13 | $ | 14 | $ | 13 | $ | 13 | ||||||||||||||||||||||||||
| Option & futures costs | $ | 19 | $ | 43 | $ | 60 | $ | 63 | $ | 63 | $ | 62 | ||||||||||||||||||||||||||
| Total interest credited and option costs | 23 | 51 | 73 | 77 | 76 | 75 | ||||||||||||||||||||||||||||||||
| Average account value | 17,688 | 17,501 | 17,065 | 16,565 | 16,213 | 15,850 | ||||||||||||||||||||||||||||||||
| Interest credited & option cost | 1.59 | % | 1.76 | % | 1.72 | % | 1.85 | % | 1.88 | % | 1.89 | % | ||||||||||||||||||||||||||
| Net investment spread (1) | 3.47 | % | 2.75 | % | 3.05 | % | 3.21 | % | 2.69 | % | 2.84 | % | ||||||||||||||||||||||||||
(1) Refer to "Non-GAAP Financial Measures Definitions" for further details. Periods after April 1, 2020 include alternative investment yield adjustment.
13
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
Average Assets Under Management Rollforward
| One month ended | Two months ended | Three months ended | ||||||||||||||||||||||||||||||||||||
| June 30, 2020 | May 31, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||||||||||||||||||||
| Post-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | |||||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||||||||||
| AAUM at beginning of period (1) | $ | 26,529 | $ | 28,924 | $ | 28,332 | $ | 27,871 | $ | 27,388 | $ | 25,862 | ||||||||||||||||||||||||||
| Net new business sales | 66 | 473 | 600 | 494 | 484 | 492 | ||||||||||||||||||||||||||||||||
| Net reinsurance transactions and other | (13) | (112) | (8) | (33) | (1) | 1,034 | ||||||||||||||||||||||||||||||||
| AAUM at end of period | $ | 26,582 | $ | 29,285 | $ | 28,924 | $ | 28,332 | $ | 27,871 | $ | 27,388 | ||||||||||||||||||||||||||
| (1) Beginning balance for June 30, 2020 represents assets under management at June 1, 2020 and reflects $2.3 billion decrease from the exclusion of discontinued operations and $0.5 billion decrease from purchase accounting mark-to-market effect as compared to the May 31, 2020 ending balance. | ||||||||||||||||||||||||||||||||||||||
Annuity Account Balance Rollforward (a)
| One month ended | Two months ended | Three months ended | ||||||||||||||||||||||||||||||||||||
| June 30, 2020 | May 31, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||||||||||||||||||||
| Post-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | Pre-Merger | |||||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||||||||||
| Account balances at beginning of period | $ | 21,332 | $ | 20,999 | $ | 20,402 | $ | 20,052 | $ | 19,701 | $ | 19,191 | ||||||||||||||||||||||||||
| Net deposits | 245 | 675 | 940 | 920 | 696 | 1,047 | ||||||||||||||||||||||||||||||||
| Surrenders, withdrawals, deaths, etc. | (161) | (381) | (452) | (675) | (420) | (436) | ||||||||||||||||||||||||||||||||
| Net flows | 84 | 294 | 488 | 245 | 276 | 611 | ||||||||||||||||||||||||||||||||
| Premium and interest bonuses | 4 | 12 | 17 | 19 | 16 | 16 | ||||||||||||||||||||||||||||||||
| Fixed interest credited and index credits | 29 | 50 | 123 | 118 | 86 | 95 | ||||||||||||||||||||||||||||||||
| Guaranteed product rider fees | (7) | (23) | (31) | (32) | (27) | (27) | ||||||||||||||||||||||||||||||||
| Account balance at end of period | $ | 21,442 | $ | 21,332 | $ | 20,999 | $ | 20,402 | $ | 20,052 | $ | 19,701 | ||||||||||||||||||||||||||
(a) The rollforward reflects the vested account balance of our fixed index annuities and fixed rate annuities, net of reinsurance.
14
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
Annuity Liability Characteristics
| Fixed Annuities Account Value | Fixed Index Annuities Account Value | |||||||||||||
| June 30, 2020 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| SURRENDER CHARGE PERCENTAGES: | ||||||||||||||
| No surrender charge | $ | 404 | $ | 2,309 | ||||||||||
| 0.0% < 2.0% | 15 | 50 | ||||||||||||
| 2.0% < 4.0% | 19 | 429 | ||||||||||||
| 4.0% < 6.0% | 483 | 1,569 | ||||||||||||
| 6.0% < 8.0% | 1,281 | 2,167 | ||||||||||||
| 8.0% < 10.0% | 1,500 | 4,177 | ||||||||||||
| 10.0% or greater | 3 | 7,035 | ||||||||||||
| $ | 3,705 | $ | 17,736 | |||||||||||
| Fixed Annuities Account Value | Fixed Index Annuities Account Value | |||||||||||||
| June 30, 2020 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| CREDITED RATE (INCLUDING BONUS INTEREST) VS. ULTIMATE MINIMUM GUARANTEED RATE DIFFERENTIAL: | ||||||||||||||
| No differential | $ | 496 | $ | 1,271 | ||||||||||
| 0.0% - 1.0% | 194 | 1,420 | ||||||||||||
| 1.0% - 2.0% | 753 | 32 | ||||||||||||
| 2.0% - 3.0% | 2,262 | 2 | ||||||||||||
| Allocated to index strategies | — | 15,011 | ||||||||||||
| $ | 3,705 | $ | 17,736 | |||||||||||
15
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
Summary of Invested Assets by Asset Class
| June 30, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||||||||
| Post-Merger | Pre-Merger | ||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||||||||||||||||
| Amortized Cost | Fair Value | Percent | Amortized Cost | Fair Value | Percent | ||||||||||||||||||||||||||||||||||||
| Fixed maturity securities, available for sale: | |||||||||||||||||||||||||||||||||||||||||
| United States Government full faith and credit | $ | 35 | $ | 35 | — | % | $ | 33 | $ | 34 | — | % | |||||||||||||||||||||||||||||
| United States Government sponsored entities | 122 | 123 | — | % | 133 | 134 | — | % | |||||||||||||||||||||||||||||||||
| United States municipalities, states and territories | 1,321 | 1,361 | 5 | % | 1,284 | 1,343 | 5 | % | |||||||||||||||||||||||||||||||||
| Foreign Governments | 150 | 155 | 1 | % | 138 | 155 | 1 | % | |||||||||||||||||||||||||||||||||
| Corporate securities: | |||||||||||||||||||||||||||||||||||||||||
| Finance, insurance and real estate | 4,081 | 4,184 | 15 | % | 4,038 | 4,234 | 15 | % | |||||||||||||||||||||||||||||||||
| Manufacturing, construction and mining | 778 | 799 | 3 | % | 739 | 771 | 3 | % | |||||||||||||||||||||||||||||||||
| Utilities, energy and related sectors | 2,320 | 2,375 | 9 | % | 2,345 | 2,452 | 9 | % | |||||||||||||||||||||||||||||||||
| Wholesale/retail trade | 1,587 | 1,635 | 6 | % | 1,576 | 1,617 | 6 | % | |||||||||||||||||||||||||||||||||
| Services, media and other | 2,366 | 2,436 | 9 | % | 2,353 | 2,523 | 9 | % | |||||||||||||||||||||||||||||||||
| Hybrid securities | 970 | 975 | 4 | % | 983 | 1,027 | 4 | % | |||||||||||||||||||||||||||||||||
| Non-agency residential mortgage-backed securities | 783 | 766 | 3 | % | 784 | 820 | 3 | % | |||||||||||||||||||||||||||||||||
| Commercial mortgage-backed securities | 2,423 | 2,560 | 9 | % | 2,788 | 2,922 | 10 | % | |||||||||||||||||||||||||||||||||
| Asset-backed securities | 1,685 | 1,717 | 6 | % | 1,774 | 1,813 | 6 | % | |||||||||||||||||||||||||||||||||
| CLO securities | 3,816 | 3,893 | 14 | % | 3,946 | 3,881 | 14 | % | |||||||||||||||||||||||||||||||||
| Alternative investments | 1,044 | 1,045 | 4 | % | 1,084 | 1,077 | 4 | % | |||||||||||||||||||||||||||||||||
| Equity securities | 929 | 929 | 3 | % | 999 | 1,002 | 4 | % | |||||||||||||||||||||||||||||||||
| Commercial mortgage loans | 576 | 583 | 2 | % | 422 | 435 | 2 | % | |||||||||||||||||||||||||||||||||
| Residential mortgage loans | 1,201 | 1,177 | 4 | % | 845 | 848 | 3 | % | |||||||||||||||||||||||||||||||||
| Other (primarily derivatives and limited partnerships) | 752 | 760 | 3 | % | 628 | 867 | 3 | % | |||||||||||||||||||||||||||||||||
| Short term investments | 38 | 38 | — | % | 38 | 38 | — | % | |||||||||||||||||||||||||||||||||
| Total (a) | $ | 26,977 | $ | 27,546 | 100 | % | $ | 26,930 | $ | 27,993 | 100 | % | |||||||||||||||||||||||||||||
| (a) Asset duration, including cash and cash equivalents, of 6.51 years and 6.63 years vs. liability duration of 6.79 years and 6.80 years for the periods ending June 30, 2020 and December 31, 2019, respectively. | |||||||||||||||||||||||||||||||||||||||||
16
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
Credit Quality of Fixed Maturity Securities
| June 30, 2020 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| NAIC Designation | Fair Value | Percent | ||||||||||||
| 1 | $ | 12,309 | 53 | % | ||||||||||
| 2 | 9,099 | 40 | % | |||||||||||
| 3 | 1,182 | 5 | % | |||||||||||
| 4 | 291 | 1 | % | |||||||||||
| 5 | 132 | 1 | % | |||||||||||
| 6 | 1 | — | % | |||||||||||
| $ | 23,014 | 100 | % | |||||||||||
| June 30, 2020 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| Rating Agency Rating | Fair Value | Percent | ||||||||||||
| AAA | $ | 531 | 2 | % | ||||||||||
| AA | 1,528 | 7 | % | |||||||||||
| A | 6,398 | 28 | % | |||||||||||
| BBB | 8,280 | 36 | % | |||||||||||
| Not rated | 4,234 | 18 | % | |||||||||||
| Total investment grade | 20,971 | 91 | % | |||||||||||
| BB | 1,471 | 7 | % | |||||||||||
| B and below | 491 | 2 | % | |||||||||||
| Not rated | 81 | — | % | |||||||||||
| Total below investment grade | 2,043 | 9 | % | |||||||||||
| $ | 23,014 | 100 | % | |||||||||||
17
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
Summary of Residential Mortgage Backed Securities by Collateral Type and NAIC Designation
| June 30, 2020 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| Total by collateral type | Amortized Cost | Fair Value | ||||||||||||
| Government agency | $ | 114 | $ | 113 | ||||||||||
| Prime | 588 | 574 | ||||||||||||
| Subprime | 81 | 79 | ||||||||||||
| Alt-A | 122 | 123 | ||||||||||||
| $ | 905 | $ | 889 | |||||||||||
| June 30, 2020 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| Total by NAIC designation | Amortized Cost | Fair Value | ||||||||||||
| 1 | $ | 855 | $ | 839 | ||||||||||
| 2 | 39 | 39 | ||||||||||||
| 3 | 1 | 1 | ||||||||||||
| 4 | 10 | 10 | ||||||||||||
| 5 | — | — | ||||||||||||
| $ | 905 | $ | 889 | |||||||||||
18
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
Top 10 Holdings by Issuers
| June 30, 2020 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| Issuer (a): | Fair Value | Percentage of Total Invested Assets | ||||||||||||
| HP Enterprise Co | $ | 132 | 0.5 | % | ||||||||||
| HSBC Holdings | 132 | 0.5 | % | |||||||||||
| Prudential Financial Inc | 115 | 0.4 | % | |||||||||||
| Metropolitan Transportation Authority (NY) | 113 | 0.4 | % | |||||||||||
| Verizon Communications Inc. | 113 | 0.4 | % | |||||||||||
| AT&T Inc. | 111 | 0.4 | % | |||||||||||
| Blackstone Div Alt Issuer | 107 | 0.4 | % | |||||||||||
| CVI CVF III Master Fund II LL | 106 | 0.4 | % | |||||||||||
| Nationwide Mutual Insurance Company | 105 | 0.4 | % | |||||||||||
| Entergy Corp | 105 | 0.4 | % | |||||||||||
(a) Issuers excluding U.S. Governmental securities.
19
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
Top 5 Reinsurers
| June 30, 2020 | ||||||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||||||
| Financial Strength Rating | ||||||||||||||||||||||||||||||||
| Parent Company/Principal Reinsurers | Reinsurance Recoverable (a) | AM Best | S&P | Fitch | Moody's | |||||||||||||||||||||||||||
| Wilton Re | $ | 1,478 | A+ | Not Rated | A+ | Not Rated | ||||||||||||||||||||||||||
| Kubera Insurance (SAC) Ltd | 828 | Not Rated | Not Rated | Not Rated | Not Rated | |||||||||||||||||||||||||||
| Security Life of Denver | 153 | Not Rated | A+ | A | A3 | |||||||||||||||||||||||||||
| Hannover Re | 130 | A+ | AA- | Not Rated | Not Rated | |||||||||||||||||||||||||||
| London Life | 126 | A+ | Not Rated | 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.
20
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
Non-GAAP Financial Measures Definitions
The following represents the definitions of non-GAAP measures used by F&G, as an operating segment of FNF:
Adjusted Earnings
Adjusted Earnings is a non-GAAP economic measure we use to evaluate financial performance each period. Adjusted earnings is calculated by adjusting net earnings (loss) from continuing operations to eliminate:
(i) Realized (gains) and losses, net: the impact of net investment gains/losses, including changes in allowance for expected credit losses and other than temporary impairment ("OTTI") losses, recognized in operations; the impact of market volatility on the alternative asset portfolio; and the effect of changes in fair value of the reinsurance related embedded derivative;
(ii) Indexed product related derivatives: the impacts related to changes in the fair value, including both realized and unrealized gains and losses, of index product related derivatives and embedded derivatives, net of hedging cost, and the fair value accounting impact of assumed reinsurance,
(iii) Purchase price amortization: the impacts related to the amortization of certain intangibles (internally developed software, trademarks and value of distribution asset (VODA)) recognized as a result of acquisition activities, and
(iv) Transaction costs: the impacts related to acquisition, integration and merger related items.
Adjustments to Adjusted Earnings 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 F&G, 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.
Effective April 1, 2020, F&G changed their definition of Adjusted Earnings to exclude the impact of market volatility on the alternative asset portfolio. Alternative investment valuations and GAAP net income can reflect significant non-cash impacts of market and economic conditions that are not indicative of expected returns over the life of the investments. Management invests in alternative investments to back future policyholder obligations consistent with its asset liability management strategy. Management evaluates the performance of the alternative investments and calculates Adjusted Earnings using a rate of return that is consistent with its investment strategy and indicative of expected returns. Management believes this change provides users of the financial statements and other financial communications a more representative view of the results of the core business of F&G for the periods after April 1, 2020. Previous periods have not been adjusted.
Adjusted Earnings Attributable to Common Shareholders
Adjusted Earnings attributable to common shareholders is a non-GAAP economic measure we use to evaluate financial performance attributable to our common shareholders each period. Adjusted Earnings attributable to common shareholders is calculated by adjusting net earnings (loss) available to common shareholders to eliminate the same items as described in the Adjusted Earnings paragraph above. 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.
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.
21
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
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 Attributable to Preferred Shareholders
Equity attributable 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. (Note: F&G no longer has any preferred shareholders following the Business Combination)
Return on Average Common Shareholders’ Equity
Return on Average Common Shareholders' Equity is calculated by dividing net earnings (loss) attributable 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 June 1, 2020. The rolling average will be updated from the merger date forward to use available historical data points until 5 historical data points are available.
Return on Average Common Shareholders Equity Excluding AOCI
Return on Average Common Shareholders' Equity Excluding AOCI is calculated by dividing net earnings (loss) attributable 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 June 1, 2020. The rolling average will be updated from the merger date forward to use available historical data points 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 Return on Average Common Shareholders’ Equity Excluding AOCI
Adjusted Return on Common Shareholders’ Equity Excluding AOCI is calculated by dividing Adjusted Earnings Attributable 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 June 1, 2020. The rolling average will be updated from the merger date forward to use available historical data points 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.
22
F&G - An Operating Segment of FNF
Financial Supplement - June 30, 2020
(All periods are unaudited)
Average Assets Under Management (AAUM)
AAUM is calculated as 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.
Alternative Investment Yield Adjustment
Alternative investment yield adjustment is the current period yield impact of market volatility on the alternative investment portfolio. 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.
Adjusted Yield on AAUM
Adjusted Yield on AAUM is calculated by dividing annualized net investment income by AAUM, plus or minus the alternative investment yield adjustment. 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, adjusted for market volatility on the alternative asset investment portfolio, earned over the sum of interest credited to policyholders and the cost of hedging our risk on indexed product 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.
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