8-K
Fidelity National Financial, Inc. (FNF)
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United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
November 2, 2021
Fidelity National Financial, Inc.
(Exact name of Registrant as Specified in its Charter)
001-32630
(Commission File Number)
| Delaware | 16-1725106 |
|---|---|
| (State or Other Jurisdiction of <br>Incorporation or Organization) | (IRS Employer Identification Number) |
601 Riverside Avenue
Jacksonville, Florida 32204
(Addresses of Principal Executive Offices)
(904) 854-8100
(Registrant's Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassTrading SymbolName of Each Exchange on Which RegisteredFNF Common Stock, $0.0001 par valueFNFNew York Stock Exchange
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 ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02. | Results of Operations and Financial Condition |
|---|
On November 2, 2021, Fidelity National Financial, Inc. (the "Company", "FNF") issued an earnings release announcing its financial results for the Third Quarter of 2021. 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.
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.
| Item 9.01. | Financial Statements and Exhibits |
|---|
(d) Exhibits
| Exhibit | Description | |
|---|---|---|
| 99.1 | Press release announcing FNFThirdQuarter 2021 Earnings | |
| 99.2 | Financial Supplement of F&G, datedNovember 2, 2021 | |
| 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: | November 2, 2021 | By: | /s/ Anthony J. Park | |
| Name: | Anthony J. Park | |||
| Title: | Chief Financial Officer |
Document
FNF Reports Third Quarter 2021 Diluted EPS from Continuing Operations of $2.58 and Adjusted Diluted EPS from Continuing Operations of $2.12, Pre-Tax Title Margin of 16.6% and Adjusted Pre-Tax Title Margin of 21.7%
Jacksonville, Fla. - (November 2, 2021) - Fidelity National Financial, Inc. (NYSE:FNF), a leading provider of title insurance and transaction services to the real estate and mortgage industries and a leading provider of annuity and life insurance products through the Company's wholly-owned subsidiary, F&G, today reported operating results for the period ended September 30, 2021.
•Total revenue of $3.9 billion in the third quarter versus $3.0 billion in the third quarter of 2020
•Third quarter net earnings from continuing operations of $735 million and adjusted net earnings from continuing operations of $604 million versus net earnings from continuing operations of $406 million and adjusted net earnings of $435 million for the third quarter of 2020
•Third quarter diluted EPS from continuing operations of $2.58 and adjusted diluted EPS from continuing operations of $2.12 versus diluted EPS from continuing operations of $1.39 and adjusted diluted EPS from continuing operations of $1.48 in the third quarter of 2020
•Recognized losses were $154 million in the third quarter versus recognized gains of $73 million in the third quarter of 2020 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
Title
•Total revenue of $2.9 billion versus $2.5 billion in total revenue in the third quarter of 2020
•Total revenue, excluding recognized gains and losses, of $3.1 billion versus $2.5 billion in the third quarter of 2020, an increase of 24%
•Pre-tax earnings of $486 million and adjusted pre-tax earnings of $669 million versus pre-tax earnings of $507 million and adjusted pre-tax earnings of $528 million in the third quarter of 2020
•Pre-tax title margin of 16.6% and adjusted pre-tax title margin of 21.7% versus pre-tax title margin of 20.4% and adjusted pre-tax title margin of 21.2% in the third quarter of 2020
•Third quarter purchase orders opened increased 1% on a daily basis and purchase orders closed increased 9% on a daily basis versus the third quarter of 2020; refinance orders opened decreased 33% on a daily basis and refinance orders closed decreased 21% on a daily basis versus the third quarter of 2020
•Total commercial revenue of $366 million, a 69% increase versus total commercial revenue in the third quarter of 2020, driven by a 31% increase in closed orders; third quarter total commercial orders opened increased 15% compared to the prior year
•Overall third quarter average fee per file of $2,581, a 25% increase versus the third quarter of 2020
Title Orders
| Direct Orders Opened * | Direct Orders Closed * | |||||
|---|---|---|---|---|---|---|
| Month | / (% Purchase) | / (% Purchase) | ||||
| July 2021 | 230,000 | 50% | 171,000 | 52% | ||
| August 2021 | 242,000 | 49% | 181,000 | 48% | ||
| September 2021 | 216,000 | 50% | 175,000 | 49% | ||
| Third Quarter 2021 | 688,000 | 50% | 527,000 | 50% | ||
| Direct Orders Opened * | Direct Orders Closed * | |||||
| --- | --- | --- | --- | --- | --- | |
| Month | / (% Purchase) | / (% Purchase) | ||||
| July 2020 | 292,000 | 40% | 187,000 | 43% | ||
| August 2020 | 283,000 | 40% | 186,000 | 42% | ||
| September 2020 | 272,000 | 40% | 198,000 | 40% | ||
| Third Quarter 2020 | 847,000 | 40% | 571,000 | 42% | ||
| * Includes an immaterial number of non-purchase and non-refinance orders |
F&G
F&G, a leading provider of annuities and life insurance, reported operating results for the third quarter of 2021. As a result of acquisition accounting (purchase accounting or PGAAP), financial results for periods after June 1, 2020 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.
•Total Sales of $3.1 billion in the third quarter, an increase of 171% to the prior year, and an increase of 15% from the record sequential quarter
•Total Retail Annuity Sales of $1.5 billion in the third quarter, an increase of 43% to the prior year, and a decrease of 7% from the record sequential quarter. Fixed Indexed Annuities (FIA) Sales of $1.1 billion in the third quarter, an increase of 32% to the prior year, and a decrease of 5% from the record sequential quarter
•Institutional market sales of $1.5 billion in the third quarter and $2.6 billion year to date, including funding agreement-backed note issuances of $1.2 billion in the third quarter and total funding agreements of $2.3 billion year to date. In addition, F&G has closed $371 million of pension risk transfer transactions in the third quarter and secured an additional $564 million of pension risk transfer transactions in October 2021
•Average Assets Under Management (AAUM) of $32.7 billion for the third quarter, up 7% from $30.4 billion in the sequential period driven by net new business asset flows
•Net Investment Spread: FIA spread for the third quarter of 335 basis points; Total Spread, including all product lines, for the third quarter of 285 basis points
•Net Earnings Attributable to Common Shareholders of $373 million for the third quarter, including a $224 million one-time favorable adjustment from an actuarial system conversion which reflects modeling enhancement and other refinements, $57 million net favorable mark-to-market effects, $3 million loss from discontinued operations, and $6 of million other unfavorable items; all of which are excluded from Adjusted Net Earnings
•Adjusted Net Earnings From Continuing Operations Attributable to Common Shareholders of $101 million for the third quarter, including $27 million of net favorable notable items
William P. Foley, II, commented, “For the third quarter, we grew revenues 31% to $3.9 billion which resulted in adjusted net earnings growth of 39% to $604 million, both as compared to the 2020 third quarter. Importantly, holding company cash grew by 25% to $1.5 billion as compared to $1.2 billion at the end of the 2021 second quarter. We grew cash on our balance sheet despite being active with our capital allocation program focused on share buybacks and a steady stream of capital return with our dividend. Our results speak to the dynamic business model that we have created which we believe positions FNF for success through varying market cycles.
Looking at our Title results, we delivered adjusted pre-tax title earnings of $669 million and an adjusted pre-tax title margin of 21.7%, compared to adjusted pre-tax title earnings of $528 million and an adjusted pretax title margin of 21.2% in the 2020 comparable quarter. Our third quarter margins and earnings were the strongest third quarter results in our Company’s history which speaks to our market leading position combined with the outstanding execution of our entire team. Total commercial revenues also continued at record levels as we achieved $366 million of revenues in the third quarter of 2021, an increase of 69% as compared to the year ago third quarter. Commercial opened orders have exceeded 1,000 per day over the last eight months, having consistently been in record territory and will provide momentum for the fourth quarter and the beginning of 2022 given the longer tail for closings in commercial as compared to residential.
Turning to F&G, we are making great strides on our diversified growth strategy. The new Institutional channel is on track to achieve $3 billion of first year sales in 2021 from funding agreements and pension risk transfer transactions. In addition, total retail sales at $1.6 billion in the quarter grew by 44%, as compared to the third quarter of 2020, and reflect productive and expanding relationships with bank, broker dealer and agent distribution partners. F&G continues to maintain attractive spreads, and this disciplined approach to attracting new business has resulted in strong adjusted net earnings that contributed 17% of FNF's consolidated results in the third quarter.
Mr. Foley concluded, "Our capital allocation strategy remains a key focus of the Board. Our disciplined strategy is focused on returning capital to shareholders, while making strategic investments in our businesses to drive profitable growth and attractive returns for our shareholders. We recently announced our fourth quarter dividend of $0.44 per share, an increase of 10% from our previous quarterly dividend, and have continued to make share repurchases throughout the third quarter and into the fourth as we completed our previously announced $500 million share repurchase plan in the first week of October. During the quarter we purchased 1.3 million shares at an average purchase price of $46.29 per share.”
Conference Call
We will host a call with investors and analysts to discuss third quarter 2021 FNF results on Wednesday, November 3, 2021, 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 November 3, 2021, through November 10, 2021, by dialing 1-844-512-2921 (USA) or 1-412-317-6671 (International). The access code will be 13723639. 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.com.
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 net earnings, F&G adjusted net earnings attributable to common shareholders, 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 consummation of the 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
FIDELITY NATIONAL FINANCIAL, INC.
THIRD QUARTER SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited)
| Consolidated | Title | F&G | Corporate and Other | |||||
|---|---|---|---|---|---|---|---|---|
| Three Months Ended | ||||||||
| September 30, 2021 | ||||||||
| Direct title premiums | $ | 896 | $ | 896 | $ | — | $ | — |
| Agency title premiums | 1,318 | 1,318 | — | — | ||||
| Escrow, title related and other fees | 1,324 | 849 | 431 | 44 | ||||
| Total title and escrow | 3,538 | 3,063 | 431 | 44 | ||||
| Interest and investment income | 508 | 27 | 481 | — | ||||
| Recognized gains and losses, net | (154) | (169) | 15 | — | ||||
| Total revenue | 3,892 | 2,921 | 927 | 44 | ||||
| Personnel costs | 894 | 838 | 32 | 24 | ||||
| Agent commissions | 1,010 | 1,010 | — | — | ||||
| Other operating expenses | 498 | 451 | 22 | 25 | ||||
| Benefits & other policy reserve changes | 185 | — | 185 | — | ||||
| Depreciation and amortization | 252 | 36 | 210 | 6 | ||||
| Claim loss expense | 100 | 100 | — | — | ||||
| Interest expense | 27 | — | 6 | 21 | ||||
| Total expenses | 2,966 | 2,435 | 455 | 76 | ||||
| Pre-tax earnings (loss) from continuing operations | $ | 926 | $ | 486 | $ | 472 | $ | (32) |
| Income tax expense (benefit) | 213 | 126 | 96 | (9) | ||||
| Earnings (loss) from equity investments | 27 | 26 | — | 1 | ||||
| Earnings (loss) from discontinued operations, net of tax | (3) | — | (3) | — | ||||
| Non-controlling interests | 5 | 4 | — | 1 | ||||
| Net earnings (loss) attributable to common shareholders | $ | 732 | $ | 382 | $ | 373 | $ | (23) |
| EPS from continuing operations attributable to common shareholders - basic | $ | 2.60 | ||||||
| EPS from discontinued operations attributable to common shareholders - basic | (0.01) | |||||||
| EPS attributable to common shareholders - basic | $ | 2.59 | ||||||
| EPS from continuing operations attributable to common shareholders - diluted | $ | 2.58 | ||||||
| EPS from discontinued operations attributable to common shareholders - diluted | (0.01) | |||||||
| EPS attributable to common shareholders - diluted | $ | 2.57 | ||||||
| Weighted average shares - basic | 283 | |||||||
| Weighted average shares - diluted | 285 |
FIDELITY NATIONAL FINANCIAL, INC.
THIRD QUARTER SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited)
| Consolidated | Title | F&G | Corporate and Other | |||||
|---|---|---|---|---|---|---|---|---|
| Three Months Ended | ||||||||
| September 30, 2021 | ||||||||
| Net earnings (loss) attributable to common shareholders | $ | 732 | $ | 382 | $ | 373 | $ | (23) |
| Loss from discontinued operations, net of tax | (3) | — | (3) | — | ||||
| Net earnings (loss) from continuing operations attributable to common shareholders | $ | 735 | $ | 382 | $ | 376 | $ | (23) |
| Pre-tax earnings (loss) from continuing operations | $ | 926 | $ | 486 | $ | 472 | $ | (32) |
| Non-GAAP Adjustments | ||||||||
| Recognized (gains) and losses, net | 71 | 169 | (98) | — | ||||
| Indexed product related derivatives | 26 | — | 26 | — | ||||
| Purchase price amortization | 25 | 14 | 7 | 4 | ||||
| Transaction costs | 3 | — | 1 | 2 | ||||
| Other non-recurring items(1) | (284) | — | (284) | — | ||||
| Adjusted pre-tax earnings (loss) | $ | 767 | $ | 669 | $ | 124 | $ | (26) |
| Total non-GAAP, pre-tax adjustments | $ | (159) | $ | 183 | $ | (348) | $ | 6 |
| Income taxes on non-GAAP adjustments | 28 | (44) | 73 | (1) | ||||
| Total non-GAAP adjustments | $ | (131) | $ | 139 | $ | (275) | $ | 5 |
| Adjusted net earnings (loss) from continuing operations attributable to common shareholders | $ | 604 | $ | 521 | $ | 101 | $ | (18) |
| Adjusted EPS from continuing operations attributable to common shareholders - diluted | 2.12 |
(1) See F&G Non-GAAP Measures and Other Information
FIDELITY NATIONAL FINANCIAL, INC.
THIRD QUARTER SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited)
| Consolidated | Title | F&G | Corporate and Other | |||||
|---|---|---|---|---|---|---|---|---|
| Three Months Ended | ||||||||
| September 30, 2020 | ||||||||
| Direct title premiums | $ | 733 | $ | 733 | $ | — | $ | — |
| Agency title premiums | 981 | 981 | — | — | ||||
| Escrow, title related and other fees | 853 | 742 | 60 | 51 | ||||
| Total title and escrow | 2,567 | 2,456 | 60 | 51 | ||||
| Interest and investment income | 336 | 31 | 305 | — | ||||
| Recognized gains and losses, net | 73 | (3) | 77 | (1) | ||||
| Total revenue | 2,976 | 2,484 | 442 | 50 | ||||
| Personnel costs | 782 | 726 | 23 | 33 | ||||
| Agent commissions | 749 | 749 | — | — | ||||
| Other operating expenses | 449 | 386 | 33 | 30 | ||||
| Benefits & other policy reserve changes | 251 | — | 251 | — | ||||
| Depreciation and amortization | 100 | 39 | 56 | 5 | ||||
| Claim loss expense | 77 | 77 | — | — | ||||
| Interest expense | 29 | — | 7 | 22 | ||||
| Total expenses | 2,437 | 1,977 | 370 | 90 | ||||
| Pre-tax earnings (loss) | $ | 539 | $ | 507 | $ | 72 | $ | (40) |
| Income tax expense (benefit) | 133 | 129 | 6 | (2) | ||||
| Earnings from equity investments | 7 | 5 | — | 2 | ||||
| Earnings (loss) from discontinued operations, net of tax | (28) | — | (28) | — | ||||
| Non-controlling interests | 7 | 7 | — | — | ||||
| Net earnings (loss) attributable to common shareholders | $ | 378 | $ | 376 | $ | 38 | $ | (36) |
| EPS from continuing operations attributable to common shareholders - basic | $ | 1.40 | ||||||
| EPS from discontinued operations attributable to common shareholders - basic | $ | (0.10) | ||||||
| EPS attributable to common shareholders - basic | $ | 1.30 | ||||||
| EPS from continuing operations attributable to common shareholders - diluted | $ | 1.39 | ||||||
| EPS from discontinued operations attributable to common shareholders - diluted | $ | (0.10) | ||||||
| EPS attributable to common shareholders - diluted | $ | 1.29 | ||||||
| Weighted average shares - basic | 291 | |||||||
| Weighted average shares - diluted | 293 |
FIDELITY NATIONAL FINANCIAL, INC.
THIRD QUARTER SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited)
| Consolidated | Title | F&G | Corporate and Other | |||||
|---|---|---|---|---|---|---|---|---|
| Three Months Ended | ||||||||
| September 30, 2020 | ||||||||
| Net earnings (loss) attributable to common shareholders | $ | 378 | $ | 376 | $ | 38 | $ | (36) |
| Loss from discontinued operations, net of tax | $ | (28) | $ | — | $ | (28) | $ | — |
| Net earnings (loss) from continuing operations, attributable to common shareholders | $ | 406 | $ | 376 | $ | 66 | $ | (36) |
| Pre-tax earnings (loss) from continuing operations | 539 | 507 | 72 | (40) | ||||
| Non-GAAP Adjustments | ||||||||
| Recognized (gains) and losses, net | (11) | 3 | (15) | 1 | ||||
| Indexed product related derivatives | 14 | — | 14 | — | ||||
| Debt issuance costs | 1 | — | — | 1 | ||||
| Purchase price amortization | 29 | 18 | 7 | 4 | ||||
| Transaction costs | 12 | — | 10 | 2 | ||||
| Adjusted pre-tax earnings (loss) | $ | 584 | $ | 528 | $ | 88 | $ | (32) |
| Total non-GAAP, pre-tax adjustments | $ | 45 | $ | 21 | $ | 16 | $ | 8 |
| Income taxes on non-GAAP adjustments | (15) | (5) | (8) | (2) | ||||
| Non-controlling interest on non-GAAP adjustments | (1) | (1) | — | — | ||||
| Total non-GAAP adjustments | $ | 29 | $ | 15 | $ | 8 | $ | 6 |
| Adjusted net earnings attributable to common shareholders | $ | 435 | $ | 391 | $ | 74 | $ | (30) |
| Adjusted EPS attributable to common shareholders - diluted | $ | 1.48 |
FIDELITY NATIONAL FINANCIAL, INC.
YTD SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited)
| Consolidated | Title | F&G | Corporate and Other | |||||
|---|---|---|---|---|---|---|---|---|
| Nine Months Ended | ||||||||
| September 30, 2021 | ||||||||
| Direct title premiums | $ | 2,546 | $ | 2,546 | $ | — | $ | — |
| Agency title premiums | 3,632 | 3,632 | — | — | ||||
| Escrow, title related and other fees | 3,123 | 2,433 | 557 | 133 | ||||
| Total title and escrow | 9,301 | 8,611 | 557 | 133 | ||||
| Interest and investment income | 1,424 | 83 | 1,341 | — | ||||
| Recognized gains and losses, net | 121 | (258) | 370 | 9 | ||||
| Total revenue | 10,846 | 8,436 | 2,268 | 142 | ||||
| Personnel costs | 2,596 | 2,418 | 93 | 85 | ||||
| Agent commissions | 2,787 | 2,787 | — | — | ||||
| Other operating expenses | 1,432 | 1,281 | 76 | 75 | ||||
| Benefits & other policy reserve changes | 734 | — | 734 | — | ||||
| Depreciation and amortization | 540 | 103 | 419 | 18 | ||||
| Claim loss expense | 278 | 278 | — | — | ||||
| Interest expense | 83 | — | 21 | 62 | ||||
| Total expenses | 8,450 | 6,867 | 1,343 | 240 | ||||
| Pre-tax earnings (loss) from continuing operations | $ | 2,396 | $ | 1,569 | $ | 925 | $ | (98) |
| Income tax expense (benefit) | 555 | 389 | 189 | (23) | ||||
| Earnings (loss) from equity investments | 54 | 48 | — | 6 | ||||
| Earnings from discontinued operations, net of tax | 8 | — | 8 | — | ||||
| Non-controlling interests | 14 | 13 | — | 1 | ||||
| Net earnings (loss) attributable to common shareholders | $ | 1,889 | $ | 1,215 | $ | 744 | $ | (70) |
| EPS from continuing operations attributable to common shareholders - basic | $ | 6.57 | ||||||
| EPS from discontinued operations attributable to common shareholders - basic | 0.03 | |||||||
| EPS attributable to common shareholders - basic | $ | 6.60 | ||||||
| EPS from continuing operations attributable to common shareholders - diluted | $ | 6.53 | ||||||
| EPS from discontinued operations attributable to common shareholders - diluted | 0.03 | |||||||
| EPS attributable to common shareholders - diluted | $ | 6.56 | ||||||
| Weighted average shares - basic | 286 | |||||||
| Weighted average shares - diluted | 288 |
FIDELITY NATIONAL FINANCIAL, INC.
YTD SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited)
| Consolidated | Title | F&G | Corporate and Other | |||||
|---|---|---|---|---|---|---|---|---|
| Nine Months Ended | ||||||||
| September 30, 2021 | ||||||||
| Net earnings (loss) attributable to common shareholders | $ | 1,889 | $ | 1,215 | $ | 744 | $ | (70) |
| Earnings from discontinued operations, net of tax | 8 | — | 8 | — | ||||
| Net earnings (loss) from continuing operations attributable to common shareholders | $ | 1,881 | $ | 1,215 | $ | 736 | $ | (70) |
| Pre-tax earnings (loss) from continuing operations | $ | 2,396 | $ | 1,569 | $ | 925 | $ | (98) |
| Non-GAAP Adjustments | ||||||||
| Recognized (gains) and losses, net | 6 | 258 | (243) | (9) | ||||
| Indexed product related derivatives | (84) | — | (84) | — | ||||
| Purchase price amortization | 74 | 42 | 20 | 12 | ||||
| Transaction costs | 13 | — | 5 | 8 | ||||
| Other non-recurring items(1) | (284) | — | (284) | — | ||||
| Adjusted pre-tax earnings (loss) | $ | 2,121 | $ | 1,869 | $ | 339 | $ | (87) |
| Total non-GAAP, pre-tax adjustments | $ | (275) | $ | 300 | $ | (586) | $ | 11 |
| Income taxes on non-GAAP adjustments | 47 | (72) | 121 | (2) | ||||
| Non-controlling interest on non-GAAP adjustments | (1) | — | — | (1) | ||||
| Total non-GAAP adjustments | $ | (229) | $ | 228 | $ | (465) | $ | 8 |
| Adjusted net earnings (loss) from continuing operations attributable to common shareholders | $ | 1,652 | $ | 1,443 | $ | 271 | $ | (62) |
| Adjusted EPS from continuing operations attributable to common shareholders - diluted | $ | 5.74 |
(1) See F&G Non-GAAP Measures and Other Information
FIDELITY NATIONAL FINANCIAL, INC.
YTD SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited)
| F&G | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Nine Months Ended | Consolidated | Title | Corporate and Other | ||||||
| September 30, 2020 | |||||||||
| Direct title premiums | $ | 1,854 | $ | 1,854 | $ | — | $ | — | |
| Agency title premiums | 2,497 | 2,497 | — | — | |||||
| Escrow, title related and other fees | 2,201 | 2,007 | 80 | 114 | |||||
| Total title and escrow | 6,552 | 6,358 | 80 | 114 | |||||
| Interest and investment income | 541 | 120 | 416 | 5 | |||||
| Recognized gains and losses, net | (85) | (147) | 70 | (8) | |||||
| Total revenue | 7,008 | 6,331 | 566 | 111 | |||||
| Personnel costs | 2,088 | 1,992 | 32 | 64 | |||||
| Agent commissions | 1,907 | 1,907 | — | — | |||||
| Other operating expenses | 1,306 | 1,140 | 45 | 121 | |||||
| Benefits & other policy reserve changes | 406 | — | 406 | — | |||||
| Depreciation and amortization | 189 | 113 | 59 | 17 | |||||
| Claim loss expense | 196 | 196 | — | — | |||||
| Interest expense | 62 | 1 | 10 | 51 | |||||
| Total expenses | 6,154 | 5,349 | 552 | 253 | |||||
| Pre-tax earnings (loss) from continuing operations | $ | 854 | $ | 982 | $ | 14 | $ | (142) | |
| Income tax expense (benefit) | 194 | 240 | (8) | (38) | |||||
| Earnings from equity investments | 9 | 8 | — | 1 | |||||
| Earnings (loss) from discontinued operations, net of tax | (23) | — | (23) | — | |||||
| Non-controlling interests | 20 | 20 | — | — | |||||
| Net earnings (loss) attributable to common shareholders | $ | 626 | $ | 730 | $ | (1) | $ | (103) | |
| EPS from continuing operations attributable to common shareholders - basic | $ | 2.32 | |||||||
| EPS from discontinued operations attributable to common shareholders - basic | $ | (0.08) | |||||||
| EPS attributable to common shareholders - basic | $ | 2.24 | |||||||
| EPS from continuing operations attributable to common shareholders - diluted | $ | 2.29 | |||||||
| EPS from discontinued operations attributable to common shareholders - diluted | $ | (0.08) | |||||||
| EPS attributable to common shareholders - diluted | $ | 2.21 | |||||||
| Weighted average shares - basic | 280 | ||||||||
| Weighted average shares - diluted | 283 |
FIDELITY NATIONAL FINANCIAL, INC.
YTD SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited)
| Consolidated | Title | F&G | Corporate and Other | |||||
|---|---|---|---|---|---|---|---|---|
| Nine Months Ended | ||||||||
| September 30, 2020 | ||||||||
| Net earnings (loss) attributable to common shareholders | $ | 626 | $ | 730 | $ | (1) | $ | (103) |
| Loss from discontinued operations, net of tax | (23) | — | (23) | — | ||||
| Net earnings (loss) from continuing operations attributable to common shareholders | $ | 649 | $ | 730 | $ | 22 | $ | (103) |
| Pre-tax earnings (loss) from continuing operations | 854 | 982 | 14 | (142) | ||||
| Non-GAAP Adjustments | ||||||||
| Recognized (gains) and losses, net | 186 | 147 | 31 | 8 | ||||
| Indexed product related derivatives | 57 | — | 57 | — | ||||
| Debt issuance costs | 5 | — | — | 5 | ||||
| Purchase price amortization | 77 | 55 | 9 | 13 | ||||
| Transaction costs | 63 | — | 17 | 46 | ||||
| Other adjustments | 1 | 1 | — | — | ||||
| Adjusted pre-tax earnings (loss) | $ | 1,243 | $ | 1,185 | $ | 128 | $ | (70) |
| Total non-GAAP, pre-tax adjustments | $ | 389 | $ | 203 | $ | 114 | $ | 72 |
| Income taxes on non-GAAP adjustments | (93) | (47) | (29) | (17) | ||||
| Non-controlling interest on non-GAAP adjustments | (7) | (6) | — | (1) | ||||
| Total non-GAAP adjustments | $ | 289 | $ | 150 | $ | 85 | $ | 54 |
| Adjusted net earnings (loss) attributable to common shareholders | $ | 938 | $ | 880 | $ | 107 | $ | (49) |
| Adjusted EPS attributable to common shareholders - diluted | $ | 3.31 |
FIDELITY NATIONAL FINANCIAL, INC.
SUMMARY BALANCE SHEET INFORMATION
(In millions)
| September 30,<br>2021 | December 31,<br>2020 | |||||
|---|---|---|---|---|---|---|
| (Unaudited) | (Unaudited) | |||||
| Cash and investment portfolio | $ | 45,422 | $ | 37,766 | ||
| Goodwill | 4,515 | 4,495 | ||||
| Title plant | 400 | 404 | ||||
| Total assets | 58,506 | 50,455 | ||||
| Notes payable | 3,097 | 2,662 | ||||
| Reserve for title claim losses | 1,734 | 1,623 | ||||
| Secured trust deposits | 1,147 | 711 | ||||
| Non-controlling interests | 42 | 41 | ||||
| Total equity and non-controlling interests | 9,374 | 8,392 | ||||
| Total equity attributable to common shareholders | 9,332 | 8,351 |
Non-GAAP Measures and Other Information
Title
The table below reconciles pre-tax title earnings to adjusted pre-tax title earnings.
| Three Months Ended | Nine Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in millions) | September 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | ||||||||
| Pre-tax earnings | $ | 486 | $ | 507 | $ | 1,569 | $ | 982 | ||||
| Non-GAAP adjustments before taxes | ||||||||||||
| Recognized (gains) and losses, net | 169 | 3 | 258 | 147 | ||||||||
| Purchase price amortization | 14 | 18 | 42 | 55 | ||||||||
| Other adjustments | — | — | — | 1 | ||||||||
| Total non-GAAP adjustments | 183 | 21 | 300 | 203 | ||||||||
| Adjusted pre-tax earnings | $ | 669 | $ | 528 | $ | 1,869 | $ | 1,185 | ||||
| Adjusted pre-tax margin | 21.7 | % | 21.2 | % | 21.5 | % | 18.3 | % |
FIDELITY NATIONAL FINANCIAL, INC.
QUARTERLY OPERATING STATISTICS
(Unaudited)
| Q3 2021 | Q2 2021 | Q1 2021 | Q4 2020 | Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Quarterly Opened Orders ('000's except % data) | ||||||||||||||||||||||||
| Total opened orders* | 688 | 695 | 770 | 728 | 847 | 693 | 682 | 492 | ||||||||||||||||
| Total opened orders per day* | 10.8 | 10.9 | 12.6 | 11.6 | 13.2 | 10.8 | 11.0 | 7.8 | ||||||||||||||||
| Purchase % of opened orders | 50 | % | 53 | % | 42 | % | 38 | % | 40 | % | 37 | % | 41 | % | 50 | % | ||||||||
| Refinance % of opened orders | 50 | % | 47 | % | 58 | % | 62 | % | 60 | % | 63 | % | 59 | % | 50 | % | ||||||||
| Total closed orders* | 527 | 568 | 597 | 617 | 571 | 487 | 377 | 417 | ||||||||||||||||
| Total closed orders per day* | 8.2 | 8.9 | 9.8 | 9.8 | 8.9 | 7.6 | 6.1 | 6.6 | ||||||||||||||||
| Purchase % of closed orders | 50 | % | 47 | % | 34 | % | 38 | % | 42 | % | 35 | % | 46 | % | 49 | % | ||||||||
| Refinance % of closed orders | 50 | % | 53 | % | 66 | % | 62 | % | 58 | % | 65 | % | 54 | % | 51 | % | ||||||||
| Commercial (millions, except orders in '000's) | ||||||||||||||||||||||||
| Total commercial revenue | $ | 366 | $ | 347 | $ | 257 | $ | 322 | $ | 216 | $ | 184 | $ | 245 | $ | 321 | ||||||||
| Total commercial opened orders | 66.8 | 69.4 | 62.2 | 57.0 | 58.1 | 43.9 | 56.3 | 55.1 | ||||||||||||||||
| Total commercial closed orders | 40.1 | 42.3 | 34.8 | 39.5 | 30.6 | 25.7 | 31.0 | 39.1 | ||||||||||||||||
| National commercial revenue | $ | 183 | $ | 176 | $ | 127 | $ | 177 | $ | 113 | $ | 96 | $ | 132 | $ | 186 | ||||||||
| National commercial opened orders | 27.7 | 27.4 | 23.4 | 21.4 | 21.7 | 15.2 | 21.5 | 22.6 | ||||||||||||||||
| National commercial closed orders | 14.8 | 14.9 | 11.2 | 13.4 | 9.8 | 8.8 | 10.7 | 16.2 | ||||||||||||||||
| Total Fee Per File | ||||||||||||||||||||||||
| Fee per file | $ | 2,581 | $ | 2,444 | $ | 1,944 | $ | 2,116 | $ | 2,063 | $ | 1,889 | $ | 2,224 | $ | 2,384 | ||||||||
| Residential fee per file | $ | 2,097 | $ | 2,030 | $ | 1,644 | $ | 1,661 | $ | 1,803 | $ | 1,614 | $ | 1,744 | $ | 1,792 | ||||||||
| Total commercial fee per file | $ | 9,100 | $ | 8,200 | $ | 7,400 | $ | 8,200 | $ | 7,100 | $ | 7,200 | $ | 7,900 | $ | 8,200 | ||||||||
| National commercial fee per file | $ | 12,400 | $ | 11,800 | $ | 11,300 | $ | 13,200 | $ | 11,500 | $ | 10,900 | $ | 12,300 | $ | 11,500 | ||||||||
| Total Staffing | ||||||||||||||||||||||||
| Total field operations employees | 13,700 | 13,500 | 13,200 | 12,800 | 12,300 | 10,900 | 12,500 | 12,300 | ||||||||||||||||
| Actual title claims paid ($ millions) | $ | 55 | $ | 56 | $ | 46 | $ | 54 | $ | 50 | $ | 51 | $ | 48 | $ | 53 |
* Includes an immaterial number of non-purchase and non-refinance orders
F&G
The table below reconciles the reported after-tax net earnings from continuing operations to adjusted earnings from continuing operations attributable to common shareholders.
| Three Months Ended | Nine Months Ended | |||||
|---|---|---|---|---|---|---|
| September 30, 2021 | September 30, 2020 | September 30, 2021 | ||||
| (Dollars in millions) | ||||||
| Net earnings (loss) attributable to common shareholders | $ | 373 | $ | 38 | $ | 744 |
| Less: Earnings (loss) from discontinued operations, net of tax | (3) | (28) | 8 | |||
| Net earnings (loss) from continuing operations attributable to common shareholders | $ | 376 | $ | 66 | $ | 736 |
| Non-GAAP adjustments (1,2): | ||||||
| Recognized (gains) and losses, net | (98) | (15) | (243) | |||
| Indexed product related derivatives | 26 | 14 | (84) | |||
| Purchase price amortization | 7 | 7 | 20 | |||
| Transaction costs | 1 | 10 | 5 | |||
| Other non-recurring items(4) | (284) | — | (284) | |||
| Income taxes on non-GAAP adjustments | 73 | (8) | 121 | |||
| Adjusted earnings from continuing operations attributable to common shareholders | $ | 101 | $ | 74 | $ | 271 |
Adjusted earnings from continuing operations include $27 million and $61 million of net favorable items in the three and nine months ended September 30, 2021 respectively and $10 million net favorable items in the three months ended September 30, 2020.
The table below provides summary financial highlights.
| Three Months Ended | Nine Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| (Dollars in millions) | September 30, 2021 | September 30, 2020 | September 30, 2021 | ||||||
| Average assets under management (AAUM)(1) | $ | 32,692 | $ | 26,990 | $ | 30,706 | |||
| Net investment spread - FIA(1) | 3.35 | % | 3.17 | % | 3.22 | % | |||
| Net investment spread - All products(1) | 2.85 | % | 2.62 | % | 2.78 | % | |||
| Net earnings (loss) from continuing operations attributable to common shareholders | $ | 376 | $ | 66 | $ | 736 | |||
| Adjusted earnings from continuing operations attributable to common shareholders(1) | $ | 101 | $ | 74 | $ | 271 |
The table below provides a summary of sales highlights, which are not affected by PGAAP and are comparable to prior period data.
| Three Months Ended | Nine Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| (In millions) | September 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | ||||
| Total sales(1) | $ | 3,076 | $ | 1,133 | $ | 7,397 | $ | 3,378 |
| Fixed indexed annuity (FIA) sales(1) | $ | 1,073 | $ | 815 | $ | 3,255 | $ | 2,512 |
| Total annuity sales(1) | $ | 1,531 | $ | 1,068 | $ | 4,692 | $ | 2,926 |
| Institutional sales(1)(3) | $ | 1,521 | $ | — | $ | 2,646 | $ | — |
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.
3.Institutional sales include funding agreements (FABN/FHLB) and pension risk transfer.
4.Reflects adjustments to benefits and other changes in policy reserves and depreciation and amortization resulting from the implementation of a new actuarial valuation system.
DEFINITIONS
The following represents the definitions of non-GAAP measures used by F&G.
Adjusted Net Earnings
Adjusted net earnings is a non-GAAP economic measure we use to evaluate financial performance each period. Adjusted net earnings is calculated by adjusting net earnings (loss) from continuing operations to eliminate:
(i) Recognized (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;
(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;
(iv) Transaction costs: the impacts related to acquisition, integration and merger related items, and
(v) Other "non-recurring", "infrequent" or "unusual items": Management excludes certain items determined to be “non-recurring”, “infrequent” or “unusual” from adjusted net earnings when incurred if it is determined these expenses are not a reflection of the core business and when the nature of the item is such that it is not reasonably likely to recur within two years and/or there was not a similar item in the preceding two years.
Adjustments to Adjusted net 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 Net Earnings Attributable to Common Shareholders
Adjusted net 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 net 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 net 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.
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.
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.
16
Document
Exhibit 99.2
F&G Annuities & Life, Inc. (“F&G”) - An Operating Segment of Fidelity National Financial, Inc. (NYSE:FNF)
Financial Supplement
September 30, 2021
(Year Ended December 31)
The financial statements and financial exhibits included herein are unaudited. F&G is an operating segment of FNF (the Company) and these financial statements and exhibits should be read in conjunction with the Company's periodic reports on Form 10-K, Form 10-Q and Form 8-K.
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.
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 the Company's operating performance and capital position for the periods presented. These measures should be considered supplementary to our results in accordance with GAAP and should not be viewed as a substitute for the GAAP measures 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. Refer to the non-GAAP measures reconciliations and definitions within for further information.
F&G - An Operating Segment of FNF
Financial Supplement - September 30, 2021
(All periods are unaudited)
| Page | |
|---|---|
| A. Financial Highlights | |
| Consolidated Financial Highlights | 3 |
| Sales Results by Product | 3 |
| Condensed Consolidated Balance Sheets | 4 |
| Reconciliation of Total Shareholders' Equity to Total Shareholders' Equity Excluding AOCI | 5 |
| Condensed Consolidated Statements of Operations | 6 |
| Reconciliation from Net Earnings (Loss) to Adjusted Net Earnings | 7 |
| Notable Items | 7 |
| Adjusted Net Earnings Statement | 8 |
| Financial Strength Ratings | 9 |
| Total Product Net Investment Spread | 10 |
| FIA Net Investment Spread | 11 |
| B. Product Summary | |
| Average Assets Under Management Rollforward | 12 |
| Annuity Account Balance Rollforward | 12 |
| Annuity Liability Characteristics | 13 |
| C. Investment Summary | |
| Summary of Invested Assets by Asset Class | 14 |
| Credit Quality of Fixed Maturity Securities | 15 |
| Summary of Residential Mortgage Backed Securities by Collateral Type and NAIC Designation | 16 |
| D. Counterparty Risk | |
| Top 5 Reinsurers | 16 |
| E. Non-GAAP Financial Measures Definitions | 17 |
F&G - An Operating Segment of FNF
Financial Supplement - September 30, 2021
(All periods are unaudited)
Consolidated Financial Highlights
| Three months ended | Nine months ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | September 30, 2021 | |||||||
| Select Income Statement Data: | ||||||||||||
| Net earnings (loss) attributable to common shareholders | 373 | 82 | 289 | 137 | 38 | 744 | ||||||
| Adjusted net earnings from continuing operations attributable to common shareholders (1) | 101 | 92 | 78 | 128 | 74 | 271 | ||||||
| Select Metrics: | ||||||||||||
| Average Assets Under Management ("AAUM") (1) | 32,692 | 30,423 | 29,016 | 27,864 | 26,990 | 30,706 | ||||||
| Net investment spread (1) | 2.85 | % | 2.95 | % | 2.55 | % | 2.55 | % | 2.62 | % | 2.78 | % |
(1) Refer to "Non-GAAP Financial Measures Definitions"
Sales Results by Product
The table below provides a summary of sales, which are not affected by the June 1, 2020 Business Combination, and are comparable to prior period data.
| Three months ended | Nine months ended | Nine months ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | September 30, 2021 | September 30, 2020 | |||||||||
| Sales | |||||||||||||||
| Fixed indexed annuities (FIA) | 1,073 | 1,135 | 1,047 | 947 | 815 | 3,255 | 2,512 | ||||||||
| Fixed rate annuities (MYGA) | 458 | 512 | 467 | 362 | 253 | 1,437 | 414 | ||||||||
| Total annuity | 1,531 | 1,647 | 1,514 | 1,309 | 1,068 | 4,692 | 2,926 | ||||||||
| Index universal life (IUL) | 24 | 20 | 15 | 13 | 14 | 59 | 37 | ||||||||
| Funding agreements (FABN/FHLB) | 1,150 | 1,000 | 125 | 100 | — | 2,275 | 100 | ||||||||
| Pension risk transfer (PRT) | 371 | — | — | — | — | 371 | — | ||||||||
| Flow reinsurance | — | — | — | 37 | 51 | — | — | 315 | |||||||
| Total Sales | $ | 3,076 | $ | 2,667 | $ | 1,654 | $ | 1,459 | $ | 1,133 | $ | 7,397 | $ | 3,378 |
F&G - An Operating Segment of FNF
Financial Supplement - September 30, 2021
(All periods are unaudited)
Condensed Consolidated Balance Sheets
| June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Assets | |||||||||
| Investments: | |||||||||
| Fixed maturity securities available for sale, at fair value, net of allowance for credit losses of 7 at September 30, 2021 | 28,550 | $ | 27,616 | $ | 25,768 | $ | 25,499 | $ | 24,218 |
| Preferred securities, at fair value | 882 | 908 | 965 | 917 | |||||
| Equity securities, at fair value | 176 | 141 | 82 | 54 | |||||
| Derivative investments | 691 | 542 | 548 | 381 | |||||
| Mortgage loans, net of allowance for credit losses of 33 at September 30, 2021 | 2,794 | 2,374 | 2,031 | 1,614 | |||||
| Investments in unconsolidated affiliates (a) | 1,667 | 1,281 | 1,156 | 1,125 | |||||
| Other long-term investments | 448 | 447 | 449 | 438 | |||||
| Short-term investments | 356 | 72 | 456 | 34 | |||||
| Total investments | 36,375 | $ | 34,630 | $ | 31,533 | $ | 31,186 | $ | 28,781 |
| Cash and cash equivalents | 1,016 | 995 | 889 | 1,014 | |||||
| Trade and notes receivables | 11 | 11 | 10 | 2 | |||||
| Reinsurance recoverable, net of allowance for credit losses of 19 at September 30, 2021 (a) | 3,297 | 3,404 | 3,174 | 3,152 | |||||
| Goodwill (a) | 1,756 | 1,751 | 1,751 | 1,731 | |||||
| Prepaid expenses and other assets | 415 | 470 | 413 | 448 | |||||
| Lease assets | 8 | 8 | 8 | 7 | |||||
| Other intangible assets, net (a) | 2,060 | 2,061 | 1,918 | 1,956 | |||||
| Property and equipment, net | 13 | 13 | 11 | 7 | |||||
| Income taxes receivable | — | — | 15 | 19 | |||||
| Deferred tax asset (a) | 51 | 130 | 44 | 107 | |||||
| Assets of discontinued operations | — | 311 | 327 | 2,618 | |||||
| Total assets | 46,723 | $ | 43,257 | $ | 40,687 | $ | 39,746 | $ | 39,842 |
| (a) These line items included adjustments that were recorded during the remeasurement period subsequent to the June 1, 2020 acquisition. The following adjustments were recorded as of the opening balance sheet at June 1, 2020 during the quarter ending September 30, 2020: Investment in unconsolidated affiliates, 31, Goodwill, 6, Other intangible assets, net, (37), and Deferred tax asset, 3. The following adjustments were recorded as of the opening balance sheet at June 1, 2020 during the quarter ending December 31, 2020: Goodwill, 20, Other intangible assets, net, (56), Reinsurance recoverable, 47, and Deferred tax asset, 10. The following adjustments were recorded as of the opening balance sheet at June 1, 2020 during the quarter ending June 30, 2021: Reinsurance recoverable, (289), Goodwill, 5, Other intangible assets, net, 61, and Deferred tax asset, 1. |
All values are in US Dollars.
F&G - An Operating Segment of FNF
Financial Supplement - September 30, 2021
(All periods are unaudited)
| Condensed Consolidated Balance Sheets (continued) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | ||||||
| Liabilities and Shareholders' Equity | ||||||||||
| Contractholder funds (a) | $ | 33,988 | $ | 32,166 | $ | 29,592 | $ | 28,718 | $ | 27,488 |
| Future policy benefits (a) | 3,985 | 3,670 | 3,959 | 4,010 | 4,048 | |||||
| Accounts payable and accrued liabilities (a) | 1,670 | 1,276 | 1,368 | 1,174 | 1,056 | |||||
| Income taxes payable | 3 | 17 | 5 | — | — | |||||
| Deferred tax liability | 9 | — | — | — | — | |||||
| Notes payable | 979 | 589 | 589 | 589 | 589 | |||||
| Funds withheld for reinsurance liabilities | 1,508 | 1,271 | 1,026 | 806 | 814 | |||||
| Lease liabilities | 14 | 14 | 14 | 14 | 12 | |||||
| Liabilities of discontinued operations | — | — | 339 | 361 | 2,462 | |||||
| Total liabilities | $ | 42,156 | $ | 39,003 | $ | 36,892 | $ | 35,672 | $ | 36,469 |
| Shareholders' equity: | ||||||||||
| Additional paid-in-capital | 2,748 | 2,746 | 2,744 | 2,741 | 2,739 | |||||
| Retained earnings (accumulated deficit) | 880 | 507 | 425 | 136 | (1) | |||||
| Accumulated other comprehensive income (loss) ("AOCI") | 939 | 1,001 | 626 | 1,197 | 635 | |||||
| Total shareholders' equity | $ | 4,567 | $ | 4,254 | $ | 3,795 | $ | 4,074 | $ | 3,373 |
| Total liabilities and shareholders' equity | $ | 46,723 | $ | 43,257 | $ | 40,687 | $ | 39,746 | $ | 39,842 |
(a) Contractholder funds included a $3 adjustment that was recorded as of the opening balance sheet at June 1, 2020 during the quarter ending September 30, 2020; Contractholder funds, Future policy benefits, and Accounts payable and accrued liabilities included ($5), ($7), and $33 adjustments as of the opening balance sheet at June 1, 2020, respectively, during the quarter ending December 31, 2020; Additionally, Future policy benefits and Accounts payable and accrued liabilities included ($228) and $6 adjustments as of the opening balance sheet at June 1, 2020, respectively, during the quarter ending June 30, 2021
Reconciliation of Total Shareholders' Equity to Total Shareholders' Equity Excluding AOCI
| September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Total shareholders' equity | $ | 4,567 | $ | 4,254 | $ | 3,795 | $ | 4,074 | $ | 3,373 |
| AOCI | 939 | 1,001 | 626 | 1,197 | 635 | |||||
| Total shareholders' equity excluding AOCI (1) | $ | 3,628 | $ | 3,253 | $ | 3,169 | $ | 2,877 | $ | 2,738 |
| (1) Refer to "Non-GAAP Financial Measures Definitions" |
F&G - An Operating Segment of FNF
Financial Supplement - September 30, 2021
(All periods are unaudited)
Condensed Consolidated Statements of Operations
| Three months ended | Nine months ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | September 30, 2021 | |||||||
| Revenues: | ||||||||||||
| Life insurance premiums and other fees (a) | $ | 431 | $ | 62 | $ | 64 | $ | 58 | $ | 60 | $ | 557 |
| Interest and investment income | 481 | 487 | 373 | 327 | 305 | 1,341 | ||||||
| Recognized gains and losses, net | 15 | 253 | 102 | 282 | 77 | 370 | ||||||
| Total revenues | 927 | 802 | 539 | 667 | 442 | 2,268 | ||||||
| Benefits and expenses: | ||||||||||||
| Benefits and other changes in policy reserves | 185 | 575 | (26) | 460 | 251 | 734 | ||||||
| Personnel costs | 32 | 32 | 29 | 33 | 23 | 93 | ||||||
| Other operating expenses | 22 | 26 | 28 | 30 | 33 | 76 | ||||||
| Depreciation and amortization | 210 | 65 | 144 | 64 | 56 | 419 | ||||||
| Interest expense | 6 | 7 | 8 | 8 | 7 | 21 | ||||||
| Total benefits and expenses | 455 | 705 | 183 | 595 | 370 | 1,343 | ||||||
| Pre-tax earnings (loss) from continuing operations | 472 | 97 | 356 | 72 | 72 | 925 | ||||||
| Income tax expense | (96) | (21) | (72) | 67 | (6) | (189) | ||||||
| Net earnings (loss) from continuing operations | 376 | 76 | 284 | 139 | 66 | 736 | ||||||
| Earnings from discontinued operations, net of tax | (3) | 6 | 5 | (2) | (28) | 8 | ||||||
| Net earnings (loss) attributable to common shareholders | $ | 373 | $ | 82 | $ | 289 | $ | 137 | $ | 38 | $ | 744 |
(a) Included within "Escrow, title-related and other fees" in FNF 10-K/ 10-Q
F&G - An Operating Segment of FNF
Financial Supplement - September 30, 2021
(All periods are unaudited)
Reconciliation from Net Earnings (Loss) to Adjusted Net Earnings (1)
| Three Months Ended | Nine months ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | September 30, 2021 | |||||||
| Net earnings (loss) from continuing operations | $ | 376 | $ | 76 | $ | 284 | $ | 139 | $ | 66 | $ | 736 |
| Non-GAAP adjustments (1): | ||||||||||||
| Recognized (gains) and losses, net | (98) | (63) | (82) | (76) | (15) | (243) | ||||||
| Indexed product related derivatives | 26 | 75 | (185) | 54 | 14 | (84) | ||||||
| Purchase price amortization | 7 | 6 | 7 | 7 | 7 | 20 | ||||||
| Transaction costs | 1 | 2 | 2 | 4 | 10 | 5 | ||||||
| Other non-recurring items (2) | (284) | — | — | — | — | (284) | ||||||
| Income taxes on non-GAAP adjustments | 73 | (4) | 52 | — | (8) | 121 | ||||||
| Adjusted net earnings from continuing operations attributable to common shareholders (1) | $ | 101 | $ | 92 | $ | 78 | $ | 128 | $ | 74 | $ | 271 |
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 net earnings (loss) from continuing operations attributable to common shareholders as we believe these items provide further clarity to the financial performance of the business.
| Three Months Ended | Nine months ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | September 30, 2021 | |||||||
| Adjusted net earnings from continuing operations attributable to common shareholders (1) | $ | 101 | $ | 92 | $ | 78 | $ | 128 | $ | 74 | $ | 271 |
| Notable items [(unfavorable)/favorable] | ||||||||||||
| Single premium immediate annuities ("SPIA") mortality & other reserve adjustments (a) | 7 | 3 | 7 | — | 10 | 17 | ||||||
| Assumption review and unlocking (b) | — | 8 | — | — | — | 8 | ||||||
| Other notable items (c) | 20 | 11 | 5 | 68 | — | 36 |
(1) Refer to "Non-GAAP Financial Measures Definitions"
(2) Reflects adjustments to benefits and other changes in policy reserves and depreciation and amortization resulting from the implementation of a new actuarial valuation system.
(a) The release of annuity reserves associated with mortality of annuitants, which varies due to timing, volume and severity of experience, and other reserve adjustments.
(b) Reflects unlocking from updating our DAC, VOBA, DSI and cost of reinsurance amortization models for actual experience and equity market fluctuations.
(c) 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, income from bond prepayment and CLO redemptions, changes in tax valuation and other net activity.
F&G - An Operating Segment of FNF
Financial Supplement - September 30, 2021
(All periods are unaudited)
Adjusted Net Earnings Statement (1)
| Three Months Ended | Nine months ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | September 30, 2021 | |||||||
| Revenues: | ||||||||||||
| Life insurance premiums and other fees (a) | $ | 430 | $ | 62 | $ | 64 | $ | 61 | $ | 60 | $ | 556 |
| Interest and investment income (b) | 381 | 377 | 333 | 315 | 314 | 1,091 | ||||||
| Recognized gains and losses, net (c) | — | — | — | — | (1) | — | ||||||
| Total revenues | 811 | 439 | 397 | 376 | 373 | 1,647 | ||||||
| Benefits and expenses: | ||||||||||||
| Benefits and other changes in policy reserves (d) | 577 | 214 | 188 | 202 | 177 | 979 | ||||||
| Personnel costs | 32 | 32 | 29 | 33 | 23 | 93 | ||||||
| Other operating expenses (e) | 22 | 24 | 26 | 25 | 23 | 72 | ||||||
| Depreciation and amortization (f) | 49 | 46 | 48 | 46 | 56 | 143 | ||||||
| Interest expense | 6 | 7 | 8 | 8 | 7 | 21 | ||||||
| Total benefits and expenses | 686 | 323 | 299 | 314 | 286 | 1,308 | ||||||
| Pre-tax earnings (loss) from continuing operations | 125 | 116 | 98 | 62 | 87 | 339 | ||||||
| Income tax expense | (24) | (24) | (20) | 66 | (13) | (68) | ||||||
| Adjusted net earnings from continuing operations attributable to common shareholders (1) | $ | 101 | $ | 92 | $ | 78 | $ | 128 | $ | 74 | $ | 271 |
| Notable items included in adjusted net earnings attributable to common shareholders (2) | $ | 27 | $ | 22 | $ | 12 | $ | 68 | $ | 10 | $ | 61 |
(1) Refer to "Non-GAAP Financial Measures Definitions"
(2) Refer to page 7 "Notable Items" for further detail of notable items.
(a) Life insurance premiums and other fees are included within "Escrow, title-related and other fees" in FNF 10-K/ 10-Q, and have been adjusted here 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.
(c) Recognized gains and losses (net) have been adjusted to remove the effect of recognized (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, the fair value impacts of assumed reinsurance, those resulting from the implementation of a new actuarial system at September 30, 2021, and changes in the SOP 03-1 reserve resulting from the adjustments above, as applicable.
(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, and DSI of the adjustments above, as applicable, purchase price amortization and those resulting from the implementation of a new actuarial valuation system at September 30, 2021.
F&G - An Operating Segment of FNF
Financial Supplement - September 30, 2021
(All periods are unaudited)
Financial Strength Ratings
| A.M. Best | S&P | Fitch | Moody's | |
|---|---|---|---|---|
| Holding Company Ratings | ||||
| F&G Annuities & Life, Inc. (formerly known as FGL Holdings) | ||||
| Issuer Credit / Default Rating | Not Rated | BBB- | BBB | Ba2 |
| Outlook | Stable | Stable | Stable | |
| CF Bermuda Holdings Limited | ||||
| Issuer Credit / Default Rating | Not Rated | BBB- | BBB | Ba1 |
| Outlook | Stable | Stable | Stable | |
| Fidelity & Guaranty Life Holdings, Inc. | ||||
| Issuer Credit / Default Rating | bbb- | BBB- | BBB | Not Rated |
| Outlook | Stable | Stable | Stable | |
| Senior Unsecured Notes | bbb- | BBB | BBB | Baa2 |
| Outlook | Stable | Stable | ||
| Operating Subsidiary Ratings | ||||
| Fidelity & Guaranty Life Insurance Company | ||||
| Financial Strength Rating | A- | A- | A- | Baa1 |
| Outlook | Stable | Stable | Stable | Stable |
| Fidelity & Guaranty Life Insurance Company of New York | ||||
| Financial Strength Rating | A- | A- | A- | Not Rated |
| Outlook | Stable | Stable | Stable | |
| F&G Life Re Ltd | ||||
| Financial Strength Rating | Not Rated | A- | A- | Baa1 |
| Outlook | Stable | Stable | Stable | |
| F&G Cayman Re Ltd | ||||
| Financial Strength Rating | Not Rated | Not Rated | A- | Not Rated |
| Outlook | Stable |
F&G - An Operating Segment of FNF
Financial Supplement - September 30, 2021
(All periods are unaudited)
| Total Product Net Investment Spread | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended | Nine months ended | |||||||||||||||||
| September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | September 30, 2021 | |||||||||||||
| Net investment income | $ | 481 | $ | 487 | $ | 373 | $ | 327 | $ | 305 | $ | 1,341 | ||||||
| AAUM (1) | 32,692 | 30,423 | 29,016 | 27,864 | 26,990 | 30,706 | ||||||||||||
| Yield on AAUM (1) | 5.89 | % | 6.40 | % | 5.15 | % | 4.69 | % | 4.52 | % | 5.82 | % | ||||||
| Alternative investment yield adjustment (1) | (1.23) | % | (1.43) | % | (0.56) | % | (0.17) | % | 0.13 | % | (1.09) | % | ||||||
| Adjusted Yield on AAUM (1) | 4.66 | % | 4.97 | % | 4.59 | % | 4.52 | % | 4.65 | % | 4.73 | % | ||||||
| Interest credits | $ | 63 | $ | 73 | $ | 74 | $ | 67 | $ | 67 | $ | 210 | ||||||
| Option & futures costs | 75 | 70 | 65 | 63 | 64 | 210 | ||||||||||||
| Total interest credited and option costs | $ | 138 | $ | 143 | $ | 139 | $ | 130 | $ | 131 | $ | 420 | ||||||
| Average account value | 30,469 | 28,273 | 27,252 | 26,450 | 25,688 | 28,766 | ||||||||||||
| Interest credited & option cost | 1.81 | % | 2.02 | % | 2.04 | % | 1.97 | % | 2.03 | % | 1.95 | % | ||||||
| Net investment spread (1) | 2.85 | % | 2.95 | % | 2.55 | % | 2.55 | % | 2.62 | % | 2.78 | % | ||||||
| (1) Refer to "Non-GAAP Financial Measures Definitions" for further details. |
F&G - An Operating Segment of FNF
Financial Supplement - September 30, 2021
(All periods are unaudited)
| FIA Net Investment Spread | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended | Nine months ended | |||||||||||||||||
| September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | September 30, 2021 | |||||||||||||
| Net investment income (1) | $ | 368 | $ | 377 | $ | 276 | $ | 235 | $ | 215 | $ | 1,021 | ||||||
| AAUM (2) | 22,146 | 20,896 | 20,217 | 19,097 | 18,312 | 21,097 | ||||||||||||
| Yield on AAUM (1) (2) | 6.65 | % | 7.22 | % | 5.46 | % | 4.92 | % | 4.70 | % | 6.45 | % | ||||||
| Alternative investment yield adjustment (2) | (1.81) | % | (2.20) | % | (0.81) | % | (0.25) | % | 0.20 | % | (1.62) | % | ||||||
| Adjusted Yield on AAUM (1) (2) | 4.84 | % | 5.02 | % | 4.65 | % | 4.67 | % | 4.90 | % | 4.83 | % | ||||||
| Interest credits | $ | 2 | $ | 13 | $ | 15 | $ | 13 | $ | 14 | $ | 30 | ||||||
| Option & futures costs | 75 | 70 | 65 | 63 | 64 | 210 | ||||||||||||
| Total interest credited and option costs | $ | 77 | $ | 83 | $ | 80 | $ | 76 | $ | 78 | $ | 240 | ||||||
| Average account value | 20,680 | 19,842 | 19,028 | 18,442 | 17,948 | 19,856 | ||||||||||||
| Interest credited & option cost | 1.49 | % | 1.67 | % | 1.67 | % | 1.65 | % | 1.73 | % | 1.61 | % | ||||||
| Net investment spread (1) (2) | 3.35 | % | 3.35 | % | 2.98 | % | 3.02 | % | 3.17 | % | 3.22 | % |
(1) In December 2020, we restated prior period FIA net investment spread to reflect immaterial updates to FIA net investment income amounts. There was no impact to total product net investment spread amounts.
(2) Refer to "Non-GAAP Financial Measures Definitions" for further details.
F&G - An Operating Segment of FNF
Financial Supplement - September 30, 2021
(All periods are unaudited)
Average Assets Under Management Rollforward
| Three Months Ended | Nine months ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | September 30, 2021 | |||||||
| AAUM at beginning of period (1) | $ | 30,423 | $ | 29,016 | $ | 27,864 | $ | 26,990 | $ | 26,582 | $ | 27,322 |
| Net new business sales | 2,524 | 1,668 | 1,197 | 874 | 408 | 3,764 | ||||||
| Net reinsurance transactions and other | (255) | (261) | (45) | — | — | (380) | ||||||
| AAUM at end of period | $ | 32,692 | $ | 30,423 | $ | 29,016 | $ | 27,864 | $ | 26,990 | $ | 30,706 |
Annuity Account Balance Rollforward (a)
| Three Months Ended | Nine months ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | September 30, 2021 | |||||||
| Account balances at beginning of period: | $ | 24,774 | $ | 23,803 | $ | 22,992 | $ | 22,106 | $ | 21,442 | $ | 22,992 |
| Net deposits | 1,311 | 1,390 | 1,265 | 1,305 | 1,046 | 3,966 | ||||||
| Surrenders, withdrawals, deaths, etc. | (625) | (628) | (585) | (533) | (482) | (1,838) | ||||||
| Net flows | 686 | 762 | 680 | 772 | 564 | 2,128 | ||||||
| Premium and interest bonuses | 20 | 21 | 18 | 20 | 17 | 59 | ||||||
| Fixed interest credited and index credits | 217 | 225 | 148 | 131 | 114 | 590 | ||||||
| Guaranteed product rider fees | (35) | (37) | (35) | (37) | (31) | (107) | ||||||
| Account balance at end of period | $ | 25,662 | $ | 24,774 | $ | 23,803 | $ | 22,992 | $ | 22,106 | $ | 25,662 |
(a) The rollforward reflects the vested account balance of our fixed index annuities and fixed rate annuities, net of reinsurance.
F&G - An Operating Segment of FNF
Financial Supplement - September 30, 2021
(All periods are unaudited)
Annuity Liability Characteristics
| Fixed Annuities Account Value | Fixed Index Annuities Account Value | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2021 | ||||||||||
| SURRENDER CHARGE PERCENTAGES: | ||||||||||
| No surrender charge | $ | 341 | $ | 2,478 | ||||||
| 0.0% < 2.0% | 8 | 112 | ||||||||
| 2.0% < 4.0% | 41 | 711 | ||||||||
| 4.0% < 6.0% | 612 | 1,640 | ||||||||
| 6.0% < 8.0% | 1,765 | 3,364 | ||||||||
| 8.0% < 10.0% | 1,799 | 7,464 | ||||||||
| 10.0% or greater | — | 5,326 | ||||||||
| $ | 4,566 | $ | 21,095 | Fixed Annuities Account Value | Fixed Index Annuities Account Value | |||||
| --- | --- | --- | --- | --- | ||||||
| September 30, 2021 | ||||||||||
| CREDITED RATE (INCLUDING BONUS INTEREST) VS. ULTIMATE MINIMUM GUARANTEED RATE DIFFERENTIAL: | ||||||||||
| No differential | $ | 487 | $ | 1,376 | ||||||
| 0.0% - 1.0% | 650 | 1,253 | ||||||||
| 1.0% - 2.0% | 1,528 | 8 | ||||||||
| 2.0% - 3.0% | 1,901 | — | ||||||||
| Allocated to index strategies | — | 18,458 | ||||||||
| $ | 4,566 | $ | 21,095 |
F&G - An Operating Segment of FNF
Financial Supplement - September 30, 2021
(All periods are unaudited)
Summary of Invested Assets by Asset Class
| September 30, 2021 | December 31, 2020 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Amortized Cost | Fair Value | Percent | Amortized Cost | Fair Value | Percent | |||||||
| Fixed maturity securities, available for sale: | ||||||||||||
| United States Government full faith and credit | $ | 479 | $ | 472 | 1 | % | $ | 45 | $ | 45 | — | % |
| United States Government sponsored entities | 83 | 85 | — | % | 105 | 106 | — | % | ||||
| United States municipalities, states and territories | 1,241 | 1,301 | 4 | % | 1,243 | 1,309 | 4 | % | ||||
| Foreign Governments | 132 | 137 | 1 | % | 128 | 140 | — | % | ||||
| Corporate securities: | ||||||||||||
| Finance, insurance and real estate | 4,509 | 4,758 | 13 | % | 4,267 | 4,572 | 15 | % | ||||
| Manufacturing, construction and mining | 856 | 920 | 3 | % | 839 | 936 | 3 | % | ||||
| Utilities, energy and related sectors | 2,636 | 2,764 | 9 | % | 2,532 | 2,762 | 9 | % | ||||
| Wholesale/retail trade | 2,226 | 2,345 | 6 | % | 1,900 | 2,106 | 7 | % | ||||
| Services, media and other | 2,911 | 3,032 | 8 | % | 2,568 | 2,793 | 9 | % | ||||
| Hybrid securities | 808 | 893 | 2 | % | 888 | 963 | 3 | % | ||||
| Non-agency residential mortgage-backed securities | 621 | 646 | 2 | % | 677 | 694 | 2 | % | ||||
| Commercial mortgage-backed securities | 2,602 | 3,006 | 8 | % | 2,468 | 2,806 | 9 | % | ||||
| Asset-backed securities | 3,752 | 3,830 | 11 | % | 1,920 | 1,999 | 6 | % | ||||
| CLO securities | 4,164 | 4,361 | 12 | % | 4,021 | 4,268 | 14 | % | ||||
| Alternative investments: | ||||||||||||
| Private equity | 933 | 933 | 2 | % | 614 | 614 | 2 | % | ||||
| Real assets | 318 | 321 | 1 | % | 280 | 288 | 1 | % | ||||
| Credit | 768 | 768 | 2 | % | 254 | 254 | 1 | % | ||||
| Equity securities | 950 | 1,026 | 2 | % | 959 | 1,047 | 3 | % | ||||
| Commercial mortgage loans | 1,984 | 2,011 | 5 | % | 903 | 926 | 3 | % | ||||
| Residential mortgage loans | 1,500 | 1,473 | 4 | % | 1,128 | 1,123 | 4 | % | ||||
| Other (primarily derivatives and company owned life insurance) | 896 | 1,035 | 3 | % | 815 | 997 | 4 | % | ||||
| Short term investments | 258 | 258 | 1 | % | 456 | 456 | 1 | % | ||||
| Total (a) | $ | 34,627 | $ | 36,375 | 100 | % | $ | 29,010 | $ | 31,204 | 100 | % |
| (a) Asset duration of 6.2 years and 6.8 years vs. liability duration of 7.4 years and 6.7 years for the periods ending September 30, 2021 and December 31, 2020, respectively. |
F&G - An Operating Segment of FNF
Financial Supplement - September 30, 2021
(All periods are unaudited)
Credit Quality of Fixed Maturity Securities
| September 30, 2021 | ||||
|---|---|---|---|---|
| NAIC Designation | Fair Value | Percent | ||
| 1 | $ | 14,770 | 52 | % |
| 2 | 10,899 | 38 | % | |
| 3 | 1,927 | 7 | % | |
| 4 | 747 | 2 | % | |
| 5 | 149 | 1 | % | |
| 6 | 58 | — | % | |
| $ | 28,550 | 100 | % | |
| September 30, 2021 | ||||
| --- | --- | --- | --- | --- |
| Rating Agency Rating | Fair Value | Percent | ||
| AAA | $ | 982 | 3 | % |
| AA | 1,921 | 7 | % | |
| A | 7,273 | 25 | % | |
| BBB | 9,804 | 34 | % | |
| Not rated | 5,869 | 21 | % | |
| Total investment grade | 25,849 | 90 | % | |
| BB | 1,621 | 6 | % | |
| B and below | 565 | 2 | % | |
| Not rated | 515 | 2 | % | |
| Total below investment grade | 2,701 | 10 | % | |
| $ | 28,550 | 100 | % |
F&G - An Operating Segment of FNF
Financial Supplement - September 30, 2021
(All periods are unaudited)
Summary of Residential Mortgage Backed Securities by Collateral Type and NAIC Designation
| September 30, 2021 | ||||
|---|---|---|---|---|
| Total by collateral type | Amortized Cost | Fair Value | ||
| Government agency | $ | 83 | $ | 85 |
| Prime | 483 | 507 | ||
| Subprime | 59 | 59 | ||
| Alt-A | 79 | 80 | ||
| $ | 704 | $ | 731 | |
| September 30, 2021 | ||||
| Total by NAIC designation | Amortized Cost | Fair Value | ||
| 1 | $ | 673 | $ | 699 |
| 2 | 17 | 18 | ||
| 3 | 7 | 7 | ||
| 4 | 6 | 6 | ||
| 5 | 1 | 1 | ||
| $ | 704 | $ | 731 |
Top 5 Reinsurers
| September 30, 2021 | ||||||
|---|---|---|---|---|---|---|
| Financial Strength Rating | ||||||
| Parent Company/Principal Reinsurers | Reinsurance Recoverable (a) | AM Best | S&P | Fitch | Moody's | |
| Wilton Re | $ | 1,287 | A+ | not rated | A+ | not rated |
| Kubera Insurance (SAC) Ltd | 789 | not rated | not rated | not rated | not rated | |
| Aspida Life Re Ltd | 717 | A- | not rated | BBB | not rated | |
| Security Life of Denver | 103 | not rated | A- | A- | Baa1 | |
| London Life Reinsurance Co. | 102 | 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.
F&G - An Operating Segment of FNF
Financial Supplement - September 30, 2021
(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 Net Earnings |
|---|
| Adjusted net earnings is a non-GAAP economic measure we use to evaluate financial performance each period. Adjusted net earnings is calculated by adjusting net earnings (loss) from continuing operations to eliminate: |
| (i) Recognized (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; |
| (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; |
| (iv) Transaction costs: the impacts related to acquisition, integration and merger related items; and |
| (v) Other "non-recurring", "infrequent" or "unusual items": Management excludes certain items determined to be “non-recurring”, “infrequent” or “unusual” from adjusted net earnings when incurred if it is determined these expenses are not a reflection of the core business and when the nature of the item is such that it is not reasonably likely to recur within two years and/or there was not a similar item in the preceding two years. |
| Adjustments to Adjusted net 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 Net Earnings from Continuing Operations Attributable to Common Shareholders |
| Adjusted Net Earnings from continuing operations attributable to common shareholders is a non-GAAP economic measure we use to evaluate financial performance attributable to our common shareholders each period. Adjusted net earnings from continuing operations 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 Net 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. |
| Total Shareholders’ Equity Excluding AOCI |
| Total Shareholders’ Equity Excluding AOCI is based on Total 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 Total Shareholders' equity. |
F&G - An Operating Segment of FNF
Financial Supplement - September 30, 2021
(All periods are unaudited)
| Non-GAAP Financial Measures Definitions (continued) |
|---|
| 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) the net payable/receivable for the purchase/sale of investments, and |
| (v) 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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