Fidelity & Guaranty Life Reports Quarterly Results
PR Newswire Association LLC |
"The second quarter results were marked by solid performance on several fronts. Our annuity sales of
Second Quarter Fiscal 2014 Highlights:
- Total annuity sales reached
$728 million in the current period; the highest quarterly sales level in five years; a two-fold increase over the second quarter of 2013. - The top 15 distribution partners grew sales of fixed index annuities ("FIA's) 35% over the prior year.
- Sales of indexed universal life increased 12% over the prior year.
- Net investment spread increased to 1.6% in the current quarter, a 40 basis point improvement over the prior year.
- After-tax adjusted operating income ("AOI") was
$47.8 million ; an increase of 139% compared to the same period of 2013. - GAAP book value grew to
$1.52 billion , up 4% compared to the same period last year. GAAP book value excluding accumulated other comprehensive income ("AOCI") grew to$1.25 billion , an increase of 20% compared to the prior year period. - Implemented scheduled new product introductions, including Performance Pro and LegendMark, in the second quarter.
Summary Financial Results (Unaudited)
|
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Three months ended |
Six months ended |
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(In millions, except per share data) |
2014 |
2013 |
2014 |
2013 |
||||||||||||
Annuity sales (2) |
$ |
727.5 |
$ |
243.8 |
$ |
1,268.1 |
$ |
491.1 |
||||||||
Net income |
$ |
24.8 |
$ |
73.2 |
$ |
67.5 |
$ |
183.8 |
||||||||
Net income per diluted share |
$ |
0.42 |
$ |
1.56 |
$ |
1.26 |
$ |
3.91 |
||||||||
Adjusted operating income ("AOI") (2) |
$ |
47.8 |
$ |
20.0 |
$ |
72.8 |
$ |
44.6 |
||||||||
AOI per diluted share (2) |
$ |
0.82 |
$ |
0.43 |
$ |
1.35 |
$ |
0.95 |
||||||||
Weighted average basic shares |
58.3 |
47.0(3) |
53.7 |
47.0(3) |
||||||||||||
Weighted average diluted shares |
58.4 |
47.0(3) |
53.8 |
47.0(3) |
||||||||||||
Total common shares outstanding |
58.4 |
47.0(3) |
58.4 |
47.0(3) |
||||||||||||
Book value per share |
$ |
26.1 |
$ |
31.1 |
$ |
26.1 |
$ |
31.1 |
||||||||
Book value per share, excluding AOCI (2) (4) |
$ |
21.3 |
$ |
22.1 |
$ |
21.3 |
$ |
22.1 |
(1) |
Fidelity & Guaranty Life's fiscal year ends each year on |
|||||||||||||||
(2) |
This is a financial measure not calculated based on U.S. Generally Accepted Accounting Principles (Non-GAAP). See the Non-GAAP Measures section of this press release for additional information. |
|||||||||||||||
(3) |
Common shares outstanding and per share amounts give retroactive effect to our statutory conversion on |
|||||||||||||||
(4) |
Book value per share, excluding AOCI is calculated by dividing total book value, excluding AOCI, at the end of the period by total number of shares of common stock outstanding. |
STRONG SALES MOMENTUM IN ALL PRODUCT LINES
Total annuity sales were
INVESTMENT PORTFOLIO PERFORMING WELL
Asset purchases during the quarter total
EARNINGS PERFORMANCE
FGL reported net income of
Three months ended |
||||||||||||
Reconciliation from Net Income to AOI(1): |
2014 |
2013 |
Increase (decrease) |
|||||||||
Net Income |
$ |
24.8 |
$ |
73.2 |
$ |
(48.4) |
||||||
Effect of investment (gains) losses, net of offsets |
(3.6) |
(39.0) |
35.4 |
|||||||||
Effect of change in FIA embedded derivative discount rate, net of offsets |
10.4 |
(11.5) |
21.9 |
|||||||||
Effect of change in fair value of reinsurance related embedded derivative, net of offsets |
15.1 |
— |
15.1 |
|||||||||
Effects of class action litigation reserves, net of offsets |
1.1 |
— |
1.1 |
|||||||||
Residual net income of distributed subsidiaries |
— |
(2.7) |
2.7 |
|||||||||
AOI |
$ |
47.8 |
$ |
20.0 |
$ |
27.8 |
(1) |
This is a financial measure not calculated based on U.S. Generally Accepted Accounting Principles (Non-GAAP). See the Non-GAAP Measures section of this press release for additional information. |
Adjusted operating income for the current period included a
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES |
|||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||||
(In millions, except share data) |
|||||||
|
|
||||||
(Unaudited) |
|||||||
ASSETS |
|||||||
Investments: |
|||||||
Fixed maturities securities, available-for-sale, at fair value |
|
16,865.1 |
$ |
15,541.4 |
|||
Equity securities, available-for-sale, at fair value |
353.1 |
271.1 |
|||||
Derivative investments |
273.0 |
221.8 |
|||||
Other invested assets |
323.4 |
188.2 |
|||||
Total investments |
17,814.6 |
16,222.5 |
|||||
Related party loans and investments |
145.7 |
119.0 |
|||||
Cash and cash equivalents |
701.5 |
1,204.3 |
|||||
Accrued investment income |
178.7 |
159.3 |
|||||
Reinsurance recoverable |
3,694.0 |
3,728.6 |
|||||
Intangibles, net |
540.3 |
563.8 |
|||||
Deferred tax assets |
173.2 |
226.4 |
|||||
Other assets |
134.4 |
205.2 |
|||||
Total assets |
$ |
23,382.4 |
$ |
22,429.1 |
|||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|||||||
Contractholder funds |
$ |
15,998.3 |
$ |
15,248.2 |
|||
Future policy benefits |
3,533.7 |
3,556.8 |
|||||
Funds withheld for reinsurance liabilities |
1,362.3 |
1,407.7 |
|||||
Liability for policy and contract claims |
60.5 |
51.5 |
|||||
Long-term debt |
300.0 |
300.0 |
|||||
Other liabilities |
604.9 |
700.0 |
|||||
Total liabilities |
21,859.7 |
21,264.2 |
|||||
Shareholders' equity: |
|||||||
Common stock ( |
0.6 |
— |
|||||
Additional paid-in capital |
701.1 |
527.1 |
|||||
Retained earnings |
545.5 |
524.9 |
|||||
Accumulated other comprehensive income |
275.5 |
112.9 |
|||||
Total shareholders' equity |
1,522.7 |
1,164.9 |
|||||
Total liabilities and shareholders' equity |
$ |
23,382.4 |
$ |
22,429.1 |
FIDELITY & GUARANTY LIFE AND SUBSIDIARIES |
|||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||||||||||
(In millions) |
|||||||||||||||
Three months ended |
Six months ended |
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|
|
|
|
||||||||||||
(Unaudited) |
(Unaudited) |
||||||||||||||
Revenues: |
|||||||||||||||
Premiums |
$ |
14.6 |
$ |
14.1 |
$ |
28.3 |
$ |
27.9 |
|||||||
Net investment income |
184.3 |
167.9 |
367.7 |
338.2 |
|||||||||||
Net investment (losses) gains |
(1.7) |
206.7 |
121.7 |
353.2 |
|||||||||||
Insurance and investment product fees and other |
17.1 |
|
14.6 |
32.7 |
28.5 |
||||||||||
Total revenues |
214.3 |
403.3 |
550.4 |
747.8 |
|||||||||||
Benefits and expenses: |
|||||||||||||||
Benefits and other changes in policy reserves |
178.9 |
240.9 |
395.8 |
324.5 |
|||||||||||
Acquisition and operating expenses, net of deferrals |
32.0 |
23.4 |
58.0 |
50.4 |
|||||||||||
Amortization of intangibles |
11.3 |
28.9 |
34.2 |
98.4 |
|||||||||||
Total benefits and expenses |
222.2 |
293.2 |
488.0 |
473.3 |
|||||||||||
Operating (loss) income |
(7.9) |
110.1 |
62.4 |
274.5 |
|||||||||||
Interest expense |
(5.6) |
— |
(11.2) |
— |
|||||||||||
Income before income taxes |
(13.5) |
110.1 |
51.2 |
274.5 |
|||||||||||
Income tax (benefit) expense |
(38.3) |
36.9 |
(16.3) |
90.7 |
|||||||||||
Net income |
$ |
24.8 |
$ |
73.2 |
$ |
67.5 |
$ |
183.8 |
|||||||
Net income per common share: |
|||||||||||||||
Basic |
$ |
0.43 |
$ |
1.56 |
$ |
1.26 |
$ |
3.91 |
|||||||
Diluted |
$ |
0.42 |
$ |
1.56 |
$ |
1.26 |
$ |
3.91 |
|||||||
Weighted average common shares used in computing net income per common share: |
|||||||||||||||
Basic |
58.3 |
47.0 |
53.7 |
47.0 |
|||||||||||
Diluted |
58.4 |
47.0 |
53.8 |
47.0 |
|||||||||||
Cash dividend per common share |
$ |
0.065 |
$ |
— |
$ |
0.065 |
$ |
— |
RECONCILIATION OF BOOK VALUE PER SHARE EXCLUDING AOCI |
|||||||
(In millions, except per share data) |
|
|
|||||
Reconciliation to total shareholder's equity: |
|||||||
Total shareholder's equity |
$ |
1,522.7 |
$ |
1,164.9 |
|||
Less: AOCI |
275.5 |
112.9 |
|||||
Total shareholder's equity excluding AOCI |
$ |
1,247.2 |
$ |
1,052.0 |
|||
Total shares outstanding |
58.4 |
47.0(1) |
|||||
Weighted average shares outstanding - basic |
58.3 |
47.0(1) |
|||||
Weighted average shares outstanding - diluted |
58.4 |
47.0(1) |
|||||
Book value per diluted share |
$ |
26.1 |
$ |
24.8 |
|||
Book value per diluted share, excluding AOCI(2) |
$ |
21.3 |
$ |
22.4 |
(1) |
Common shares outstanding and per share amounts give retroactive effect to our statutory conversion on |
(2) |
Book value per common share, excluding AOCI, is a non-GAAP measure that eliminates the impact of accumulated other comprehensive income to remove fair value fluctuations of the available-for-sale portfolio due to market volatility. |
RECONCILIATION OF ADJUSTED OPERATING ROE |
|||||||
(In millions) |
|
|
|||||
Reconciliation to total shareholder's equity: |
|||||||
Total shareholder's equity |
$ |
1,522.7 |
$ |
1,463.3 |
|||
Less: AOCI |
275.5 |
423.8 |
|||||
Total shareholder's equity excluding AOCI |
$ |
1,247.2 |
$ |
1,039.5 |
|||
AOI(1) |
$ |
47.8 |
$</p> |
20.0 |
|||
Adjusted Operating Return On Equity ("ROE")(2) |
15.5 |
% |
8.0 |
% |
(1) |
See table above for reconciliation of net income to AOI for the 2014 and 2013 fiscal quarters |
(2) |
Adjusted Operating ROE is a non-GAAP measure. It is calculated by dividing AOI by total average equity (excluding AOCI). Average equity (excluding AOCI) is the average of the beginning and ending equity for the period. |
Non-GAAP Measures
Management believes that certain non-GAAP financial measures may be useful in certain instances to provide additional meaningful comparisons between current results and results in prior operating periods. Reconciliations of such measures to the most comparable GAAP measures are included herein.
AOI is calculated by adjusting net income to eliminate (i) the impact of net investment gains, excluding gains and losses on derivatives and including OTTI losses recognized in operations, (ii) the effect of changes in the rates used to discount the FIA embedded derivative liability, (iii) the effect of change in fair value of reinsurance related embedded derivative, (iv) the effect of class action litigation reserves and (v) residual net income of distributed subsidiaries we no longer own. All adjustments to AOI are net of the corresponding VOBA, DAC and income tax impact related to these adjustments as appropriate. While these adjustments are an integral part of the overall performance of FGL, market conditions impacting these items can overshadow the underlying performance of the business. Accordingly, we believe using a measure which excludes their impact is effective in analyzing the trends of our operations. Our non-GAAP measures may not be comparable to similarly titled measures of other organizations because other organizations may not calculate such non-GAAP measures in the same manner as we do.
In the second quarter of 2014, we revised our definition of AOI from a pre-tax basis to an after-tax basis to better reflect the basis on which the performance of our business is internally assessed. AOI now includes interest expense and an effective tax rate of 35% is now applied to reconciling items made to net income. All prior periods presented have been revised to reflect this new definition. Additionally, during the second quarter of 2014 we revised our definition of AOI to exclude the effect of class action litigation reserves, net of the corresponding VOBA, DAC and income tax impact related to these adjustments. This change has been reflected in the current period calculation. Lastly, during the second quarter of 2014 we revised our definition of AOI to exclude residual net income of distributed subsidiaries; specifically the portion of Front Street Re income not already accounted for in the AOI adjustments above. From the inception of the reinsurance treaty on
Annuity sales are not derived from any specific U.S. GAAP income statement accounts or line items and should not be viewed as a substitute for any financial measure determined in accordance with U.S. GAAP. For U.S. GAAP purposes annuity sales are recorded as deposit liabilities (i.e. contract holder funds). Management believes that presentation of sales as measured for management purposes enhances the understanding of our business and helps depict longer term trends that may not be apparent in the results of operations due to the timing of sales and revenue recognition.
While management believes that non-GAAP measurements are useful supplemental information, such adjusted results are not intended to replace GAAP financial results and should be read in conjunction with those GAAP results.
Conference Call and Financial Supplement Information
This press release and the second quarter 2014 financial supplement will be posted on the company's website.
Fidelity & Guaranty Life will conduct a conference call on
About Fidelity & Guaranty Life
Fidelity & Guaranty Life is the parent company of
Forward Looking Statements
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995: This document contains, and certain oral statements made by our representatives from time to time may contain, forward-looking statements, including those statements regarding our subsidiaries' ability to pay dividends. Such statements are subject to risks and uncertainties that could cause actual results, events and developments to differ materially from those set forth in, or implied by, such statements. These statements are based on the beliefs and assumptions of FGL's management and the management of FGL's subsidiaries (including target businesses). Generally, forward-looking statements include information concerning possible or assumed future distributions from subsidiaries, other actions, events, results, strategies and expectations and are generally identifiable by use of the words "believes," "expects," "intends," "anticipates," "plans," "seeks," "estimates," "projects," "may," "will," "could," "might," or "continues" or similar expressions. Factors that could cause actual results, events and developments to differ include, without limitation: the accuracy of FGL's assumptions and estimates; FGL's and its insurance subsidiaries' ability to maintain or improve financial strength ratings; FGL's ability to manage its business in a highly regulated industry; regulatory changes or actions; the impact of FGL's reinsurers failing to meet their assumed obligations; restrictions on FGL's ability to use captive reinsurers; the impact of interest rate fluctuations; changes in the federal income tax laws and regulations; litigation (including class action litigation), enforcement investigations or regulatory scrutiny; the performance of third parties; the loss of key personnel; telecommunication, information technology and other operational systems failures; the continued availability of capital; new accounting rules or changes to existing accounting rules; general economic conditions; FGL's ability to protect its intellectual property; the ability to maintain or obtain approval of the
All forward-looking statements described herein are qualified by these cautionary statements and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized. FGL does not undertake any obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operation results.
Investor Contact:
[email protected]
410-895-1008
443-570-6893
Media Contact:
Sard Verbinnen & Co
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SOURCE Fidelity & Guaranty Life
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Police Blotter: Thursday, May 8, 2014
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