FG Annuities Life Inc
For the period ended Jun 30, 2024. Filed Aug 7, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 7, 2024
FG$23.38+7.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-10.
0001934850-24-000027
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0001934850-24-000045
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 214 previous paragraphs and 225 current paragraphs.
154 unchanged; 58 reworded; 9 added; 2 removed; 0 previous and 4 current paragraphs rearranged.
Tables are not compared: 28 previous and 28 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
Critical Accounting Policies and Estimates
Current report
The accounting estimates described in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2023 are those we consider critical in preparing our unaudited Condensed Consolidated Financial Statements. Management is required to make estimates and assumptions that can affect the reported amounts of assets and liabilities and disclosures with respect to contingent assets and liabilities at the date of the unaudited Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates. See Note A -Basis of Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional description of certain significant accounting policies that have been followed in preparing our unaudited Condensed Consolidated Financial Statements.
Current report
•PRT agreements decreased for the three months ended June 30, 2024 and increased for the six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, respectively, reflecting the timing of PRT transactions. PRT transactions are subject to fluctuation period to period.
Current report
•Income tax expense for the six months ended June 30, 2024 was $76 million, compared to income tax expense of $25 million for the six months ended June 30, 2023. The effective tax rate was 19% and (63)% for the six months ended June 30, 2024 and June 30, 2023, respectively. The increase in income tax expense period over period is related to the increase in pre-tax income. Income tax expense for the six months ended June 30, 2023 contains an increase in the valuation allowance of $39 million and the period over period increase would have been larger absent this amount.
Current report
•Adjusted net earnings of $139 million for the three months ended June 30, 2024 included $145 million of investment income from alternative investments and $4 million of collateral loan obligations (“CLO”) redemptions and bond prepay income, partially offset by $16 million of actuarial model updates and refinements. Alternative investments investment income based on management’s long-term expected return of approximately 10% was $165 million.
Current report
•Adjusted net earnings of $79 million for the three months ended June 30, 2023 included $82 million of investment income from alternative investments and $5 million of bond prepay income. Alternative investments investment income based on management’s long-term expected return of approximately 10% was $137 million.
Current report
•Adjusted net earnings of $247 million for the six months ended June 30, 2024 included $245 million of investment income from alternative investments and $10 million of CLO redemptions and bond prepay income, partially offset by $16 million of actuarial model updates and refinements. Alternative investments investment income based on management’s long-term expected return of approximately 10% was $317 million.
Current report
On June 4, 2024, F&G completed its public offering of $550 million aggregate principal amount of its 6.50% Senior Notes due 2029 (the “6.50% F&G Notes”). The 6.50% F&G Notes are guaranteed on an unsecured, unsubordinated basis by each of F&G’s subsidiaries that are guarantors of F&G’s obligations under its existing credit agreement. A portion of the net proceeds were used to finance a cash tender offer by its wholly owned subsidiary Fidelity & Guaranty Life Holdings, Inc. (“FGLH”) for an aggregate principal amount of $250 million of FGLH’s 5.50% Senior Notes due 2025 (the “5.50% F&G Notes”). F&G intends to use the remaining net proceeds of this offering for general corporate purposes, which may include the repurchase, redemption or repayment at maturity of outstanding indebtedness. The 6.50% F&G Notes were registered under the Securities Act of 1934 (as amended) (the “Securities Act”).
Current report
Subsequent Event. On July 18, 2024 F&G acquired a 100% majority ownership stake in the equity of PALH, LLC (“PALH”). PALH markets and sells life insurance and annuity products of various insurance carriers to individuals through a network of agents. Prior to the acquisition date, PALH owned a 70% ownership stake in an operating company of which F&G owned 30% equity. Total consideration to acquire the remaining 70% equity is comprised of cash of approximately $216 million.
Removed paragraphs (2)
Previous report
•PRT agreements increased for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, reflecting higher pension risk transfer group annuity obligations.
Previous report
•Adjusted net earnings of $108 million for the three months ended March 31, 2024 included $100 million of investment income from alternative investments and $6 million income of CLO redemption gains and bond prepay income. Alternative investments investment income based on management’s long-term expected return of approximately 10% was $152 million.
Reworded paragraphs (58)
Previous wording
The following factors represent some of the key trends and uncertainties that have influenced the development of the Company and its historical financial performance, and we believe these key trends and uncertainties will continue to influence the business and financial performance of the Company in the future. See “Risk Factors” in this Quarterly Report on Form 10-Q and Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2023 for further discussion of risk factors that could affect our business, including risk factors that could affect market conditions and discussion of current and emerging developments relating to market conduct standards for the financial industry emerging from the Department of Labor’s (“DOL”) implementation of the “fiduciary rule” .
Current wording
The following factors represent some of the key trends and uncertainties that have influenced the development of the Company and its historical financial performance, and we believe these key trends and uncertainties will continue to influence the business and financial performance of the Company in the future. See “Risk Factors” in this Quarterly Report on Form 10-Q and Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2023 for further discussion of risk factors that could affect our business, including risk factors that could affect market conditions and discussion of current and emerging developments relating to market conduct standards for the financial industry emerging from the Department of Labor’s (“DOL”) implementation of the “fiduciary rule”, as well as recent legislative challenges to the fiduciary rule.
Previous wording
We also own stakes in IMOs and Network Marketing Groups (“NMG”) through our owned distribution strategy. Our GAAP financial statements reflect dividend income for minority owned interests in Interest and Investment Income and unaffiliated commissions revenues in Owned Distribution Revenue and unaffiliated expenses in Personnel Costs and Other Operating Expenses for majority owned interests in our unaudited Condensed Consolidated Statements of Operations.
Current wording
We also own stakes in IMOs and Network Marketing Groups (“NMG”) through our owned distribution strategy. For our minority owned interests, our unaudited Condensed Consolidated Statements of Operations reflects dividend income in Interest and investment income. For our majority owned interests, unaffiliated commission revenue is recorded in Owned distribution revenue and unaffiliated expenses are recorded in Personnel costs and Other operating expenses in our unaudited Condensed Consolidated Statements of Operations
Previous wording
F&G hedges certain portions of its exposure to product related equity market risk by entering into derivative transactions. We purchase derivatives consisting predominantly of call options and, to a lesser degree, futures contracts (specifically for indexed annuity contracts) on the equity indices underlying the applicable policy. These derivatives are used to offset the reserve impact of the index credits due to policyholders under the indexed annuity and IUL contracts. The majority of all such call options are one-year options purchased to match the funding requirements underlying the indexed annuity/IUL contracts. We attempt to manage the cost of these purchases through the terms of our indexed annuity/IUL contracts, which permit us to change caps, spread, or participation rates on each policy's annual anniversary, subject to certain guaranteed minimums that must be maintained. The call options and futures contracts are marked to fair value with the change in fair value included as a component of net investment gains (losses). The change in fair value of the call options and futures contracts includes the gains and losses recognized at the expiration of the instruments’ terms or upon early termination and the changes in fair value of open positions. In addition, to reduce market risks from interest rate changes on our earnings associated with our floating rate investments, during 2023 we began to execute pay-float and receive-fixed interest rate swaps.
Current wording
F&G hedges certain portions of its exposure to product related equity market risk by entering into derivative transactions. We purchase derivatives consisting predominantly of equity options and, to a lesser degree, futures contracts (specifically for indexed annuity contracts) on the equity indices underlying the applicable policy. These derivatives are used to offset the reserve impact of the index credits due to policyholders under the indexed annuity and IUL contracts. The majority of all such equity options are one-year options purchased to match the funding requirements underlying the indexed annuity/IUL contracts. We attempt to manage the cost of these purchases through the terms of our indexed annuity/IUL contracts, which permit us to change caps, spread, or participation rates on each policy's annual anniversary, subject to certain guaranteed minimums that must be maintained. The equity options and futures contracts are marked to fair value with the change in fair value included as a component of net investment gains (losses). The change in fair value of the equity options and futures contracts includes the gains and losses recognized at the expiration of the instruments’ terms or upon early termination and the changes in fair value of open positions. In addition, to reduce market risks from interest rate changes on our earnings associated with our floating rate investments, during 2023 we began to execute pay-float and receive-fixed interest rate swaps.
Previous wording
Earnings from products accounted for as deposit liabilities are primarily generated from the excess of net investment income earned over the sum of interest credited to policyholders and the cost of hedging our risk on indexed annuity/IUL policies. With respect to indexed annuities/IULs, which includes the expenses incurred to fund the index credits. Proceeds received upon expiration or early termination of call options purchased to fund annual index credits are recorded as part of the change in fair value of derivatives and are largely offset by an expense for index credits earned on annuity contractholder fund balances.
Current wording
Earnings from products accounted for as deposit liabilities are primarily generated from the excess of net investment income earned over the sum of interest credited to policyholders and the cost of hedging our risk on indexed annuity/IUL policies. With respect to indexed annuities/IULs, which includes the expenses incurred to fund the index credits. Proceeds received upon expiration or early termination of equity options purchased to fund annual index credits are recorded as part of the change in fair value of derivatives and are largely offset by an expense for index credits earned on annuity contractholder fund balances.
Previous wording
iv. owned distribution margin generated from a meaningfully higher risk adjusted return on capital than retained business and providing a diversifying source of earnings while further strengthening our relationships with key partners,
Current wording
iv. owned distribution margin generated from a meaningfully higher risk adjusted return on capital than retained business and providing a diversifying source of earnings while further strengthening our relationships with key partners, and
Previous wording
v. and lastly, through our disciplined expense management and the costs of acquiring new business (principally commissions to agents and bonuses credited to policyholders).
Current wording
v. through our disciplined expense management and the costs of acquiring new business (principally commissions to agents and bonuses credited to policyholders).
Previous wording
The results of operations for the three months ended March 31, 2024 and March 31, 2023 were as follows (in millions):
Current wording
The results of operations for the three and six months ended June 30, 2024 and June 30, 2023 were as follows (in millions):
Previous wording
•Total annuity sales were slightly higher for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, reflecting F&G's productive and expanding retail distribution through independent agents, banks and broker dealers, enhanced product features and pricing actions taken to align to the macro environment.
Current wording
•Total annuity sales were higher for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, reflecting F&G's productive and expanding retail distribution through independent agents, banks and broker dealers, enhanced product features and pricing actions taken to align to the macro environment.
Previous wording
•Funding agreements, reflecting new Federal Home Loan Bank funding (“FHLB”) agreements, were lower for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 and are subject to fluctuation period to period based on economic conditions and the timing of entering the new agreements.
Current wording
•Funding agreements, reflecting new FABN and FHLB agreements, were higher for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, and are subject to fluctuation period to period based on economic conditions and the timing of entering the new agreements.
Previous wording
•PRT sales increased for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 reflecting the robust PRT market. During the three months ended March 31, 2024, we closed three pension risk transfer transactions.
Current wording
•PRT sales decreased for the three months ended June 30, 2024 and increased for the six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, respectively, reflecting the timing of PRT transactions that are also subject to fluctuation period to period. During the three and six months ended June 30, 2024, we closed two and four pension risk transfer transactions, respectively.
Previous wording
•Sales attributable to flow reinsurance to third parties were higher during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, reflecting the addition of new reinsurers and changes in the percentages ceded during the periods partially offset by the lower level of multi-year guarantee annuities (“MYGA”) sales.
Current wording
•Sales attributable to flow reinsurance to third parties were higher during the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, primarily reflecting the higher level of multi-year guarantee annuities (“MYGA”) sales during the periods.
Previous wording
Life insurance premiums and other fees primarily reflect premiums on life-contingent PRTs and traditional life insurance products, which are recognized as revenue when due from the policyholder, as well as policy rider fees primarily on indexed annuity policies, the cost of insurance on IUL policies and surrender charges assessed against policy withdrawals in excess of the policyholder's allowable penalty-free amounts (up to 10% of the prior year's value, subject to certain limitations). The following table summarizes the Life insurance premiums and other fees, on the unaudited Condensed Consolidated Statements of Operations (in millions), for the three months ended March 31, 2024 and March 31, 2023:
Current wording
Life insurance premiums and other fees primarily reflect premiums on life-contingent PRTs and traditional life insurance products, which are recognized as revenue when due from the policyholder, as well as policy rider fees primarily on indexed annuity policies, the cost of insurance on IUL policies and surrender charges assessed against policy withdrawals in excess of the policyholder's allowable penalty-free amounts (up to 10% of the prior year's value, subject to certain limitations). The following table summarizes the Life insurance premiums and other fees, on the unaudited Condensed Consolidated Statements of Operations (in millions), for the three and six months ended June 30, 2024 and June 30, 2023:
Previous wording
•Life-contingent pension risk transfer premiums increased for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, reflecting the higher PRT sales.
Current wording
•Life-contingent pension risk transfer premiums decreased for the three months ended June 30, 2024 and increased for the six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, respectively, reflecting the timing of PRT transactions. As noted above, PRT premiums are subject to fluctuation period to period.
Previous wording
•Surrender charges increased for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily reflecting increases in withdrawals from policyholders with surrender charges and market value adjustments (“MVAs”), primarily on our indexed annuities policies.
Current wording
•Surrender charges increased for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, primarily reflecting increases in withdrawals from policyholders with surrender charges and market value adjustments (“MVAs”), primarily on our indexed annuities policies.
Previous wording
•Policyholder fees and other income increased for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, primarily due to increased guaranteed minimum withdrawal benefit (“GMWB”) rider fees and cost of insurance charges, net of changes in unearned revenue liabilities (“URL”) on IUL policies from growth in business. GMWB rider fees are based on the policyholder's benefit base and are collected at the end of the policy year.
Current wording
•Policyholder fees and other income increased for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, primarily due to increased guaranteed minimum withdrawal benefit (“GMWB”) rider fees and cost of insurance charges, net of changes in unearned revenue liabilities (“URL”) on IUL policies from growth in business. GMWB rider fees are based on the policyholder's benefit base and are collected at the end of the policy year.
Previous wording
Interest and investment income is shown net of amounts attributable to certain funds withheld reinsurance agreements which is passed along to the reinsurer in accordance with the terms of these agreements. Interest and investment income attributable to these agreements, and thus excluded from the totals in the table above, was $127 million and $58 million for the three months ended March 31, 2024 and March 31, 2023, respectively.
Current wording
Interest and investment income is shown net of amounts attributable to certain funds withheld reinsurance agreements which is passed along to the reinsurer in accordance with the terms of these agreements. Interest and investment income attributable to these agreements, and thus excluded from the totals in the table above, was $155 million and $282 million for the three and six months ended June 30, 2024, respectively, and $76 million and $134 million for the three and six months ended June 30, 2023, respectively.
Previous wording
•AAUM was higher for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, reflecting net new business asset flows, stable inforce retention and net debt proceeds.
Current wording
•AAUM was higher for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, reflecting net new business asset flows, stable inforce retention and net debt proceeds.
Previous wording
•Interest and investment income was higher for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to $60 million from invested asset growth, $55 million of all other rate impacts, partially offset by $(18) million from returns on alternative investments.
Current wording
•Interest and investment income was higher for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to $60 million from invested asset growth, $41 million of all other rate impacts and $58 million from returns on alternative investments.
Previous wording
•Owned distribution revenue represents commissions received from our majority owned distribution partner(s) generated by third-party annuity and life insurance sales. Override and bonus commissions are recognized as revenue upon policy issuance. Owned distribution revenues for the three months ended March 31, 2024 represent revenues associated with Roar, and primarily reflect commission revenues.
Current wording
•Owned distribution revenue represents commissions received from our majority owned distribution partner(s) generated by third-party annuity and life insurance sales. Override and bonus commissions are recognized as revenue upon policy issuance. Owned distribution revenues for the three and six months ended June 30, 2024 represent revenues associated with Roar, and primarily reflect commission revenues.
Previous wording
Recognized gains and (losses), net is shown net of amounts attributable to certain funds withheld reinsurance agreements which is passed along to the reinsurer in accordance with the terms of these agreements. Recognized gains and (losses) attributable to these agreements, and thus excluded from the totals in the table above, was $(19) million and $(22) million for the three months ended March 31, 2024 and March 31, 2023, respectively.
Current wording
Recognized gains and (losses), net is shown net of amounts attributable to certain funds withheld reinsurance agreements which is passed along to the reinsurer in accordance with the terms of these agreements. Recognized gains and (losses) attributable to these agreements, and thus excluded from the totals in the table above, was $10 million and $(9) million for the three and six months ended June 30, 2024, respectively, and $21 million and $(1) million for the three and six month periods ended June 30, 2023, respectively.
Previous wording
•For the three months ended March 31, 2024, net realized and unrealized gains (losses) on fixed maturity available-for-sale securities, equity securities and other invested assets is primarily the result of unrealized fair value option (“FVO”) gains on owned distribution investments and preferred securities, partially offset by realized losses on fixed maturity available-for-sale securities and mark-to-market losses on our equity securities.
Current wording
•For the three months ended June 30, 2024, net realized and unrealized gains (losses) on fixed maturity available-for-sale securities, equity securities and other invested assets is primarily the result of realized gains on fixed maturity available-for-sale securities, mark-to-market gains on our equity securities and unrealized fair value option (“FVO”) gains on owned distribution investments.
Previous wording
•For the three months ended March 31, 2023, net realized and unrealized gains (losses) on fixed maturity available-for-sale securities, equity securities and other invested assets is primarily the result of mark-to-market losses on our equity securities and realized losses on fixed maturity available-for-sale securities.
Current wording
•For the three and six months ended June 30, 2023, net realized and unrealized gains (losses) on fixed maturity available-for-sale securities, equity securities and other invested assets is primarily the result of mark-to-market losses on our equity securities and realized losses on fixed maturity available-for-sale securities.
Previous wording
•For all periods, net realized and unrealized gains (losses) on certain derivative instruments primarily relate to the net realized and unrealized gains (losses) on options and futures used to hedge indexed annuity and IUL products, including gains on option and futures expiration and changes in the fair value of interest rate swaps. See the table below for primary drivers of gains (losses) on certain derivatives.
Current wording
•For all periods, net realized and unrealized gains (losses) on certain derivative instruments primarily relate to the net realized and unrealized gains (losses) on equity options and futures used to hedge indexed annuity and IUL products, including gains on option and futures expiration and changes in the fair value of interest rate swaps. See the table below for primary drivers of gains (losses) on certain derivatives.
Previous wording
We utilize a combination of static (call options) and dynamic (long futures contracts) instruments in our product hedging strategy. A substantial portion of the call options and futures contracts are based upon the S&P 500 Index with the remainder based upon other equity, bond and gold market indices.
Current wording
We utilize a combination of static (equity options) and dynamic (long futures contracts) instruments in our product hedging strategy. A substantial portion of the equity options and futures contracts are based upon the S&P 500 Index with the remainder based upon other equity, bond and gold market indices.
Previous wording
•Realized gains and losses on certain derivative instruments are directly correlated to the performance of the indices upon which the call options and futures contracts are based and the value of the derivatives at the time of expiration compared to the value at the time of purchase.
Current wording
•Realized gains and losses on certain derivative instruments are directly correlated to the performance of the indices upon which the equity options and futures contracts are based and the value of the derivatives at the time of expiration compared to the value at the time of purchase.
Previous wording
•The changes in unrealized gains (losses) due to the net changes in fair value of call options and futures contracts are primarily driven by the underlying performance of the S&P 500 Index during each respective period relative to the S&P 500 Index on the policyholder buy dates.
Current wording
•The changes in unrealized gains (losses) due to the net changes in fair value of equity options and futures contracts are driven by the underlying performance of the indices (for example, the S&P 500 Index) upon which the equity options and futures contracts are based during each respective period relative to the respective indices on the policyholder buy dates.
Previous wording
•The indexed annuities/IUL market related liability movements during the three months ended March 31, 2024 and March 31, 2023, respectively, are mainly driven by changes in the equity markets, non-performance spreads, and risk free rates during the periods. The change in risk free rates and non-performance spreads (decreased) increased the indexed annuities market related liability by $(84) million and $65 million during the three months ended March 31, 2024 and March 31, 2023, respectively. The remaining changes in market value of the market related liability movements for all periods was driven by equity market impacts. See “Revenues—Recognized gains and (losses), net”above for summary and discussion of net unrealized gains (losses) on certain derivative instruments.
Current wording
•The indexed annuities/IUL market related liability movements during the three and six months ended June 30, 2024 and June 30, 2023, respectively, are mainly driven by changes in the equity markets, non-performance spreads, and risk free rates during the periods. The change in risk free rates and non-performance spreads (decreased) increased the indexed annuities market related liability by $(85) million and $(59) million during the three months ended June 30, 2024 and June 30, 2023. The change in risk free rates and non-performance spreads (decreased) increased the FIA market related liability by $(168) million and $6 million during the six months ended June 30, 2024 and June 30, 2023, respectively. The remaining changes in market value of the market related liability movements for all periods was driven by equity market impacts. See “Revenues—Recognized gains and (losses), net”above for summary and discussion of net unrealized gains (losses) on certain derivative instruments.
Previous wording
•Annually, typically in the third quarter, we review assumptions associated with reserves for policy benefits and product guarantees. During the three months ended March 31, 2024 and March 31, 2023, based on increases in interest rates and pricing changes, we updated certain indexed annuity assumptions used to calculate the fair value of the embedded derivative component within contractholder funds. These changes resulted in an increases in contractholder funds of $57 million and $102 million, respectively.
Current wording
•Annually, typically in the third quarter, we review assumptions associated with reserves for policy benefits and product guarantees. During the first quarters of 2024 and 2023, based on increases in interest rates and pricing changes, we updated certain indexed annuity assumptions related to the option budget used to calculate the fair value of the embedded derivative component within contractholder funds. During the first quarter of 2023 we also aligned reserves to actual policyholder behavior. These changes resulted in increases in total benefits and other changes in policy reserves of approximately $57 million and $102 million for the six months ended June 30, 2024 and June 30, 2023, respectively.
Previous wording
•Index credits, interest credited and bonuses for the three months ended March 31, 2024, were higher compared to the three months ended March 31, 2023, primarily reflecting higher index credits and interest credited on indexed annuities and other policies as a result of market movement during the respective periods and higher interest credited associated with the growth in PRT agreements.
Current wording
•Index credits, interest credited and bonuses for the three and six months ended June 30, 2024, were higher compared to the three and six months ended June 30, 2023, primarily reflecting higher index credits and interest credited on indexed annuities and other policies as a result of market movement during the respective periods and higher interest credited associated with the growth in PRT agreements.
Previous wording
•Market risk benefits (gains) losses is primarily driven by attributed fees collected, effects of market related movements (including changes in equity markets and risk-free rates), actual policyholder behavior as compared with expected and changes in assumptions during the periods.
Current wording
•Market risk benefit (gains) losses is primarily driven by attributed fees collected, effects of market related movements (including changes in equity markets and risk-free rates), actual policyholder behavior as compared with expected and changes in assumptions during the periods.
Previous wording
•Changes in market risk benefit (gains) losses for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, primarily reflect favorable market related movements.
Current wording
•Changes in market risk benefit (gains) losses for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, primarily reflect changes in market related movements for the respective periods.
Previous wording
•DAC, VOBA and DSI are amortized on a constant level basis for the grouped contracts over the expected term of the related contracts to approximate straight-line amortization. Depreciation and amortization increased for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily reflecting increased DAC and DSI associated with the growth of the business, as well as a slightly increased amortization rate on some DAC and DSI balances due to updates to the surrender and mortality assumptions for the indexed annuity and fixed-rate annuity blocks that occurred in the third quarter of 2023.
Current wording
•DAC, VOBA and DSI are amortized on a constant level basis for the grouped contracts over the expected term of the related contracts to approximate straight-line amortization. Amortization of DAC, VOBA and DSI increased for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, primarily reflecting increased DAC and DSI associated with the growth of the business, as well as a slightly increased amortization rate on some DAC and DSI balances due to updates to the surrender and mortality assumptions for the indexed annuity and fixed-rate annuity blocks that occurred in the third quarter of 2023. In addition, VOBA amortization increased approximately $15 million for the three and six months ended June 30, 2024 reflecting actuarial model updates and refinements.
Previous wording
•The three months ended March 31, 2024 also includes amortization of other intangible assets from our majority owned interest in Roar.
Current wording
•Amortization of other intangible assets and fixed asset depreciation for the three and six months ended June 30, 2024 included amortization of other intangible assets from our majority owned interest in Roar.
Previous wording
•Personnel costs and other operating expenses for the three months ended March 31, 2024 were higher compared to the three months ended March 31, 2023, reflecting costs in line with the growth in sales and assets along with continued investments in our operating platform. In addition, the three months ended March 31, 2024 includes $11 million from our majority owned interest in Roar.
Current wording
•Personnel costs and other operating expenses for the three and six months ended June 30, 2024 were higher compared to the three and six months ended June 30, 2023, reflecting costs in line with the growth in sales and assets along with continued investments in our operating platform. In addition, the three and six months ended June 30, 2024 includes $7 million and $18 million, respectively, from our majority owned interest in Roar.
Previous wording
•Interest expense increased for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily reflects interest on the issuance of the 7.95% F&G Notes in December of 2023.
Current wording
•Interest expense increased for the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, primarily reflecting interest on the debt issuances in December 2023 and June 2024, partially offset by lower interest resulting from a partial repayment of the 5.5% F&G Notes in June 2024 and lower balances on the revolving credit facility.
Previous wording
•Income tax expense for the three months ended March 31, 2024 was $26 million, compared to income tax benefit of $(8) million for the three months ended March 31, 2023. The effective tax rate was 18% and 4% for the three months ended March 31, 2024 and March 31, 2023 respectively. The increase in income tax expense quarter over quarter is primarily related to the increase in pre-tax income, partially offset by the valuation allowance expense for the three months ended March 31, 2023.
Current wording
•Income tax expense for the three months ended June 30, 2024 was $50 million, compared to income tax expense of $33 million for the three months ended June 30, 2023. The effective tax rate was 20% for both the three months ended June 30, 2024 and June 30, 2023, respectively. The increase in income tax expense period over period is primarily related to the increase in pre-tax income.
Previous wording
•Adjusted net earnings of $61 million for the three months ended March 31, 2023 included $99 million of investment income from alternative investments, offset by $37 million tax valuation allowance. Alternative investments investment income based on management’s long-term expected return of approximately 10% was $132 million.
Current wording
•Adjusted net earnings of $140 million for the six months ended June 30, 2023 included $181 million of investment income from alternative investments and $5 million of bond prepay income, offset by $37 million tax valuation allowance expense. Alternative investments investment income based on management’s long-term expected return of approximately 10% was $269 million.
Previous wording
As of March 31, 2024 and December 31, 2023, the fair value of our investment portfolio was approximately $53 billion and $52 billion, respectively, and was divided among the following asset classes and sectors (dollars in millions):
Current wording
As of June 30, 2024 and December 31, 2023, the fair value of our investment portfolio was approximately $55 billion and $52 billion, respectively, and was divided among the following asset classes and sectors (dollars in millions):
Previous wording
(a)Includes investment grade non-redeemable preferred stocks ($333 million and $428 million at March 31, 2024 and December 31, 2023, respectively).
Current wording
(a)Includes investment grade non-redeemable preferred stocks ($283 million and $428 million at June 30, 2024 and December 31, 2023, respectively).
Previous wording
The fair value of our investments in subprime securities and Alt-A RMBS securities were $33 million and $47 million as of March 31, 2024, respectively, and $33 million and $49 million as of December 31, 2023, respectively. As of both March 31, 2024 and December 31, 2023, approximately 95% of the subprime and Alt-A RMBS exposures were rated NAIC 2 or higher.
Current wording
The fair value of our investments in subprime securities and Alt-A RMBS securities were $30 million and $46 million as of June 30, 2024, respectively, and $33 million and $49 million as of December 31, 2023, respectively. As of both June 30, 2024 and December 31, 2023, approximately 95% of the subprime and Alt-A RMBS exposures were rated NAIC 2 or higher.
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Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
•Interest and investment income was higher for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to $120 million from invested asset growth, $96 million of all other rate impacts and $40 million from returns on alternative investments.
Current report — wording carried from elsewhere
•For the six months ended June 30, 2024, net realized and unrealized gains (losses) on fixed maturity available-for-sale securities, equity securities and other invested assets is primarily the result of unrealized FVO gains on owned distribution investments and preferred securities and mark-to-market gains on our equity securities.
Current report — wording carried from elsewhere
On July 31, 2024, our Board of Directors declared (a) a quarterly cash dividend of $0.8594 per share on the FNF Preferred Stock for the period from July 15, 2024 to and excluding October 15, 2024, to be paid on October 15, 2024, to FNF Preferred Stock record holders on October 1, 2024 and, (b) a quarterly cash dividend of $0.21 per common share, payable on September 30, 2024, to F&G common shareholders of record as of September 16, 2024.
Current report — wording carried from elsewhere
There are no restrictions on our retained earnings regarding our ability to pay dividends to our shareholders, although there are limits on the ability of certain subsidiaries to pay dividends to us, as described below. As discussed above, there are certain conditions on the declaration and payment of dividends pursuant to our recent preferred stock issuance. The declaration of any future dividends is at the discretion of our Board of Directors.