DES MOINES, Iowa, Nov. 7, 2023 /PRNewswire/ — F&G Annuities & Life, Inc. (NYSE: FG) (F&G or the Company) a leading provider of insurance solutions serving retail annuity and life customers and institutional clients, today reported financial results for the third quarter ended September 30, 2023.
Net earnings for the third quarter of $306 million, or $2.45 per diluted share (per share), compared to net earnings of $187 million, or $1.50 per share, for the third quarter 2022. Net earnings for the third quarter of 2023 include $191 million of net favorable mark-to-market effects and $5 million of other unfavorable items; all of which are excluded from adjusted net earnings.
Adjusted net earnings for the third quarter of $120 million, or $0.96 per share, compared to adjusted net loss for the third quarter 2022 of $12 million, or $0.10 per share. Adjusted net earnings (loss) include significant income and expense items and alternative investment portfolio returns from short-term mark-to-market movement that differ from long-term return expectations. As compared to the prior year, adjusted net earnings reflect asset growth, product margin expansion and earnings from accretive flow reinsurance. In addition, the third quarter of 2023 includes short term investment income from alternative investments, whereas the third quarter of 2022 included short term investment losses from alternative investments. Please see “Earnings Results” and “Non-GAAP Measures and Other Information” for further explanation.
Third Quarter Highlights
Steady Sales: Gross sales of $2.8 billion and net sales of $2.3 billion for the third quarter, as compared to $2.9 billion and $2.2 billion, respectively, in the third quarter of 2022. Reflects lower retail channel sales offset by higher institutional market sales. In addition, F&G has increased flow reinsurance to 90% of MYGA sales in September of 2023
Record assets under management: Ending assets under management (AUM) were $47.4 billion as of September 30, 2023, an increase of 13% from $42.0 billion in the third quarter 2022, driven by new business flows, stable inforce retention and net debt proceeds over the past twelve months. AUM before flow reinsurance was $52.9 billion as of September 30, 2023. The investment portfolio is performing well, as expected, with minimal credit-related impairments in the third quarter
Return of capital to shareholders: During the third quarter, F&G returned approximately $27 million of capital to shareholders, including $25 million of common stock dividends and $2 million from share repurchases
Chris Blunt, President and Chief Executive Officer, said, “We delivered strong third quarter results highlighted by record assets under management and sequential growth in adjusted net earnings, adjusted return on assets and adjusted return on equity excluding AOCI, all excluding significant items, while driving a 6% increase in our book value per share excluding AOCI to $43.30. Our results demonstrate the momentum in our business and we remain on track to deliver full year gross sales of $12 to $13 billion, having achieved total gross sales of $9.1 billion thus far in 2023.”
Mr. Blunt continued, “Our client focus can be seen in our #1 ranking by J.D. Power for highest customer satisfaction among annuity providers in their 2023 U.S. Individual Annuity Study. Our top ranking reflects our team’s commitment to delivering best-in-class service to our policyholders, agents and advisors.”
|
Summary Financial Results1 |
||||||||||||||||
|
(In millions, except per share data) |
Three Months Ended |
Nine Months Ended |
||||||||||||||
|
September 30, |
September 30, |
2023 |
2022 |
|||||||||||||
|
Total gross sales |
$ |
2,781 |
$ |
2,873 |
$ |
9,070 |
$ |
8,535 |
||||||||
|
Net sales |
$ |
2,268 |
$ |
2,213 |
$ |
6,689 |
$ |
7,095 |
||||||||
|
Assets under management (AUM) |
$ |
47,437 |
$ |
41,988 |
$ |
47,437 |
$ |
41,988 |
||||||||
|
Average assets under management (AAUM) YTD |
$ |
45,541 |
$ |
39,246 |
$ |
45,541 |
$ |
39,246 |
||||||||
|
AUM before flow reinsurance |
$ |
52,910 |
$ |
44,017 |
$ |
52,910 |
$ |
44,017 |
||||||||
|
Adjusted return on assets |
0.76 % |
0.76 % |
0.76 % |
0.76 % |
||||||||||||
|
Net earnings (loss) |
$ |
306 |
$ |
187 |
$ |
241 |
$ |
811 |
||||||||
|
Net earnings (loss) per diluted share |
$ |
2.45 |
$ |
1.50 |
$ |
1.93 |
$ |
7.24 |
||||||||
|
Adjusted net earnings (loss) |
$ |
120 |
$ |
(12) |
$ |
260 |
$ |
223 |
||||||||
|
Adjusted net earnings (loss) per diluted share |
$ |
0.96 |
$ |
(0.10) |
$ |
2.08 |
$ |
1.99 |
||||||||
|
Weighted average diluted shares |
125 |
125 |
125 |
112 |
||||||||||||
|
Common shares outstanding |
125 |
125 |
125 |
125 |
||||||||||||
|
Book value per share |
$ |
18.98 |
$ |
19.14 |
$ |
18.98 |
$ |
19.14 |
||||||||
|
Book value per share excluding AOCI |
$ |
43.30 |
$ |
43.37 |
$ |
43.30 |
$ |
43.37 |
||||||||
|
1 See definition of non-GAAP measures below |
||||||||||||||||
Sales ResultsTotal gross sales were $2.8 billion in the third quarter, a decrease of 3% from $2.9 billion in the third quarter 2022, driven by lower retail channel sales offset by higher institutional market sales, which we expect to be lumpier and more opportunistic than our retail channels.
Profitable retail channel sales were $1.9 billion for the third quarter, a 17% decrease from $2.3 billion in the third quarter of 2022. Coming off record sales in the first half of the year, retail sales were intentionally lower in the third quarter as we finalized our reinsurance agreements and enhanced product features to position us to finish strong in 2023 and create momentum for 2024.
Institutional market sales were $0.9 billion in the third quarter, comprised of $0.5 billion pension risk transfer and $0.4 billion funding agreements, compared to $0.6 billion in the third quarter of 2022, comprised solely of pension risk transfer.
Net sales retained were $2.3 billion in the third quarter, compared to $2.2 billion in third quarter 2022. In addition, F&G has increased flow reinsurance to 90 percent of MYGA sales in September of 2023. As a reminder, F&G utilizes flow reinsurance which provides a lower capital requirement on ceded new business, while allocating capital to the highest returning retained business. This enhances cash flow, provides fee-based earnings and is accretive to F&G’s returns.
Assets under management (AUM) were $47.4 billion as of September 30, 2023, an increase of 13% from $42.0 billion as of September 30, 2022, driven by net new business flows, stable inforce retention and net debt proceeds over the past twelve months. AUM before flow reinsurance was $52.9 billion as of September 30, 2023. A rollforward of AUM can be found in the Non-GAAP Measures section of this release.
Earnings ResultsAdjusted net earnings for the third quarter of $120 million, or $0.96 per share, compared to adjusted net loss for the third quarter 2022 of $12 million, or $0.10 per share. The increase was primarily due to higher alternative investment income. Adjusted net earnings (loss) include significant income and expense items and alternative investment portfolio returns from short-term mark-to-market movement that differ from long-term return expectations.
Adjusted net earnings for the third quarter of 2023 included $114 million, or $0.91 per share, of investment income from alternative investments. Alternative investments investment income based on management’s long-term expected return of approximately 10% was $142 million, or $1.13 per share.
Adjusted net loss for the third quarter of 2022 included $11 million, or $0.09 per share, of investment loss from alternative investments and $11 million, or $0.09 per share, of other net expense items. Alternative investments investment income based on management’s long-term expected return of approximately 10% was $106 million, or $0.85 per share.
As compared to the prior year, adjusted net earnings reflect asset growth, product margin expansion and earnings from accretive flow reinsurance. In addition, the third quarter of 2023 includes short term investment income from alternative investments, whereas the third quarter of 2022 included short term investment losses from alternative investments.
Capital and Liquidity HighlightsGAAP book value excluding AOCI was $5.4 billion or $43.30 per share, based on 125 million common shares outstanding as of September 30, 2023. This reflects an increase of $2.60 or 6% during the quarter, including $0.97 increase in adjusted net earnings, $0.22 decrease from capital deployment actions and $1.85 per share net increase for mark-to-market movements and other during the quarter.
|
Book value per share excluding AOCI as of June 30, 2023 |
$ |
40.70 |
|
Adjusted net earnings |
0.97 |
|
|
Book value per share excluding AOCI, before capital actions & mark-to-market |
$ |
41.67 |
|
Return of capital to shareholders (dividend and share repurchases) |
(0.22) |
|
|
Book value per share excluding AOCI, before mark-to-market |
$ |
41.45 |
|
Mark-to-market movement and other |
1.85 |
|
|
Book value per share excluding AOCI as of September 30, 2023 |
$ |
43.30 |
The debt-to-capitalization ratio, excluding AOCI, was 22% as of September 30, 2023, below our long-term target of 25%.
F&G repurchased approximately 82,000 shares for $1.9 million, at an average price of $23.77 per share, in the third quarter. Capacity remaining under the existing share repurchase authorization was $6.7 million at September 30, 2023.
F&G paid a quarterly dividend of $0.20 per common share during the third quarter of 2023.
Conference CallWe will host a call with investors and analysts to discuss F&G’s third quarter 2023 results on Wednesday, November 8, 2023, beginning at 9:00 a.m. Eastern Time. A live webcast of the conference call will be available on the F&G Investor Relations website at fglife.com. The conference call replay will be available via webcast through the F&G Investor Relations website at fglife.com. The telephone replay will be available from 1:00 p.m. Eastern Time on November 8, 2023, through November 22, 2023, by dialing 1-844-512-2921 (USA) or 1-412-317-6671 (International). The access code will be 13735025.
About F&GF&G is committed to helping Americans turn their aspirations into reality. F&G is a leading provider of insurance solutions serving retail annuity and life customers and institutional clients and is headquartered in Des Moines, Iowa. For more information, please visit fglife.com.
Use of Non-GAAP Financial InformationGenerally 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, this presentation includes non-GAAP financial measures, which the Company believes are useful to help investors better understand its financial performance, competitive position and prospects for the future. Management believes these non-GAAP financial measures may be useful in certain instances to provide additional meaningful comparisons between current results and results in prior operating periods. 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. The presentation of this financial information is not intended to be considered in isolation of or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. By disclosing these non-GAAP financial measures, the Company believes it offers investors a greater understanding of, and an enhanced level of transparency into, the means by which the Company’s management operates the Company. 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, net earnings attributable to common shareholders, or any other measures derived in accordance with GAAP as measures of operating performance or liquidity. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are provided within.
Forward-Looking Statements and Risk FactorsThis press release contains forward-looking statements that are subject to known and unknown risks and uncertainties, many of which are beyond our control. Some of the forward-looking statements can be identified by the use of terms such as “believes”, “expects”, “may”, “will”, “could”, “seeks”, “intends”, “plans”, “estimates”, “anticipates” or other comparable terms. 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: general economic conditions and other factors, including prevailing interest and unemployment rate levels and stock and credit market performance; natural disasters, public health crises, international tensions and conflicts, geopolitical events, terrorist acts, labor strikes, political crisis, accidents and other events; concentration in certain states for distribution of our products; the impact of interest rate fluctuations; equity market volatility or disruption; the impact of credit risk of our counterparties; changes in our assumptions and estimates regarding amortization of our deferred acquisition costs, deferred sales inducements and value of business acquired balances; regulatory changes or actions, including those relating to regulation of financial services affecting (among other things) underwriting of insurance products and regulation of the sale, underwriting and pricing of products and minimum capitalization and statutory reserve requirements for insurance companies, or the ability of our insurance subsidiaries to make cash distributions to us; and other factors discussed in “Risk Factors” and other sections of F&G’s Form 10-K and other filings with the Securities and Exchange Commission (SEC).
CONTACT:
Lisa Foxworthy-Parker
SVP of Investor & External Relations
[email protected]
515.330.3307
|
F&G ANNUITIES & LIFE, INC. CONSOLIDATED BALANCE SHEETS (In millions, except per share data) (Unaudited) |
||||
|
September 30, 2023 |
December 31, 2022 |
|||
|
Assets: |
||||
|
Investments: |
||||
|
Fixed maturity securities available for sale, at fair value, (amortized cost of $41,884), net of allowance for credit losses of $38 at September 30, 2023 |
$ 36,871 |
$ 31,218 |
||
|
Preferred securities, at fair value |
605 |
722 |
||
|
Equity securities, at fair value |
116 |
101 |
||
|
Derivative investments |
420 |
244 |
||
|
Mortgage loans, net of allowance for credit losses of $64 at September 30, 2023 |
5,174 |
4,554 |
||
|
Investments in unconsolidated affiliates (certain investments at fair value of $272 at September 30, 2023) |
2,920 |
2,455 |
||
|
Other long-term investments |
594 |
537 |
||
|
Short-term investments |
168 |
1,556 |
||
|
Total investments |
$ 46,868 |
$ 41,387 |
||
|
Cash and cash equivalents |
1,742 |
960 |
||
|
Reinsurance recoverable, net of allowance for credit losses of $10 at September 30, 2023 |
7,462 |
5,417 |
||
|
Goodwill |
1,749 |
1,749 |
||
|
Prepaid expenses and other assets |
1,076 |
941 |
||
|
Other intangible assets, net |
4,005 |
3,429 |
||
|
Market risk benefits asset |
118 |
117 |
||
|
Income taxes receivable |
27 |
28 |
||
|
Deferred tax asset, net |
576 |
600 |
||
|
Total assets |
$ 63,623 |
$ 54,628 |
||
|
Liabilities and Equity: |
||||
|
Contractholder funds |
$ 46,011 |
$ 40,843 |
||
|
Future policy benefits |
5,823 |
5,021 |
||
|
Market risk benefits liability |
278 |
282 |
||
|
Accounts payable and accrued liabilities |
1,452 |
1,260 |
||
|
Notes payable |
1,569 |
1,114 |
||
|
Funds withheld for reinsurance liabilities |
6,118 |
3,703 |
||
|
Total liabilities |
$ 61,251 |
$ 52,223 |
||
|
Equity: |
||||
|
F&G common stock $0.001 par value; authorized 500,000,000 shares as of September 30, 2023; outstanding and issued shares of 125,496,745 and 126,374,176 as of September 30, 2023, respectively |
— |
— |
||
|
Additional paid-in-capital |
3,178 |
3,162 |
||
|
Retained earnings |
2,252 |
2,061 |
||
|
Accumulated other comprehensive (loss) income (“AOCI”) |
(3,040) |
(2,818) |
||
|
Treasury stock, at cost (877,431 shares as of September 30, 2023) |
(18) |
— |
||
|
Total equity |
$ 2,372 |
$ 2,405 |
||
|
Total liabilities and equity |
$ 63,623 |
$ 54,628 |
||
|
F&G ANNUITIES & LIFE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS THIRD QUARTER AND YTD INFORMATION (In millions, except per share data) (Unaudited) |
|||||||||
|
Three months ended |
Nine months ended |
||||||||
|
September 30, 2023 |
September 30, 2022 |
September 30, 2023 |
September 30, 2022 |
||||||
|
Revenues: |
|||||||||
|
Life insurance premiums and other fees |
$ 582 |
$ 702 |
$ 1,523 |
$ 1,369 |
|||||
|
Interest and investment income |
578 |
340 |
1,622 |
1,216 |
|||||
|
Recognized gains and (losses), net |
(309) |
(140) |
(257) |
(863) |
|||||
|
Total revenues |
851 |
902 |
2,888 |
1,722 |
|||||
|
Benefits and expenses: |
|||||||||
|
Benefits and other changes in policy reserves |
292 |
570 |
1,921 |
396 |
|||||
|
Market risk benefit (gains) losses |
(49) |
(68) |
(20) |
(187) |
|||||
|
Other operating expenses |
38 |
28 |
107 |
77 |
|||||
|
Depreciation and amortization |
108 |
82 |
302 |
238 |
|||||
|
Personnel costs |
58 |
46 |
167 |
110 |
|||||
|
Interest expense |
24 |
6 |
71 |
23 |
|||||
|
Total benefits and expenses |
471 |
664 |
2,548 |
657 |
|||||
|
Earnings (loss) before income taxes |
380 |
238 |
340 |
1,065 |
|||||
|
Income tax expense (benefit) |
74 |
51 |
99 |
254 |
|||||
|
Net earnings (loss) |
$ 306 |
$ 187 |
$ 241 |
$ 811 |
|||||
|
Net earnings (loss) per common share: |
|||||||||
|
Basic |
$ 2.47 |
$ 1.50 |
$ 1.94 |
$ 7.24 |
|||||
|
Diluted |
$ 2.45 |
$ 1.50 |
$ 1.93 |
$ 7.24 |
|||||
|
Weighted average common shares used in computing net earnings (loss) per common share: |
|||||||||
|
Basic |
124 |
125 |
124 |
112 |
|||||
|
Diluted |
125 |
125 |
125 |
112 |
|||||
|
Non-GAAP Measures and Other Information RECONCILIATION OF NET EARNINGS (LOSS) AND ADJUSTED NET EARNINGS (LOSS) |
|||||||||
|
Three months ended |
Nine months ended |
||||||||
|
September 30, 2023 |
September 30, 2022 |
September 30, 2023 |
September 30, 2022 |
||||||
|
Net earnings (loss) |
$ 306 |
$ 187 |
$ 241 |
$ 811 |
|||||
|
Non-GAAP adjustments(1): |
|||||||||
|
Recognized (gains) losses, net |
|||||||||
|
Net realized and unrealized (gains) losses on fixed maturity available-for-sale securities, equity securities and other invested assets |
14 |
70 |
89 |
336 |
|||||
|
Change in allowance for expected credit losses |
5 |
6 |
33 |
13 |
|||||
|
Change in fair value of reinsurance related embedded derivatives |
(36) |
(94) |
(34) |
(357) |
|||||
|
Change in fair value of other derivatives and embedded derivatives |
13 |
(7) |
12 |
(11) |
|||||
|
Recognized (gains) losses, net |
(4) |
(25) |
100 |
(19) |
|||||
|
Market related liability adjustments |
(237) |
(237) |
(95) |
(751) |
|||||
|
Purchase price amortization |
5 |
5 |
16 |
16 |
|||||
|
Transaction costs and other non-recurring items |
1 |
4 |
3 |
8 |
|||||
|
Income taxes on non-GAAP adjustments |
49 |
54 |
(5) |
158 |
|||||
|
Adjusted net earnings (loss)(1) |
$ 120 |
$ (12) |
$ 260 |
$ 223 |
|||||
|
1See definition of non-GAAP measures below |
Adjusted net earnings of $120 million, or $0.96 per share, for the third quarter of 2023 included $114 million, or $0.91 per share, of investment income from alternative investments. Alternative investments investment income based on management’s long-term expected return of approximately 10% was $142 million, or $1.13 per share.
Adjusted net loss of $12 million, or $0.10 per share, for the third quarter of 2022 included $11 million, or $0.09 per share, of investment loss from alternative investments and $11 million, or $0.09 per share, of other net expense items. Alternative investments investment income based on management’s long-term expected return of approximately 10% was $106 million, or $0.85 per share.
Adjusted net earnings of $260 million, or $2.08 per share, for the nine months ended September 30, 2023 included $295 million, or $2.36 per share, of investment income from alternative investments and $5 million, or $0.04 per share, of bond prepay income, partially offset by $37 million, or $0.30 per share, tax valuation allowance expense. Alternative investments investment income based on management’s long-term expected return of approximately 10% was $411 million, or $3.29 per share.
Adjusted net earnings of $223 million, or $1.99 per share, for the nine months ended September 30, 2022 included $161 million, or $1.44 per share, of investment income from alternative investments, $66 million, or $0.59 per share, gain from actuarial assumption updates, $24 million, or $0.21 per share, income of CLO redemption gains and other investment income, partially offset by $38 million, or $0.34 per share, tax valuation allowance expense and $11 million, or $0.10 per share, of other net expense items. Alternative investments investment income based on management’s long-term expected return of approximately 10% was $306 million, or $2.73 per share.
|
RECONCILIATION OF TOTAL EQUITY, TOTAL EQUITY EXCLUDING ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI), BOOK VALUE PER SHARE AND BOOK VALUE PER SHARE EXCLUDING AOCI |
||||||||
|
As of |
||||||||
|
September 30, 2023 |
June 30, 2023 |
March 31, 2023 |
December 31, 2022 |
|||||
|
Total Equity |
2,372 |
2,518 |
2,485 |
2,405 |
||||
|
Less: AOCI |
(3,040) |
(2,610) |
(2,548) |
(2,818) |
||||
|
Total Equity excluding AOCI(1) |
$ 5,412 |
$ 5,128 |
$ 5,033 |
$ 5,223 |
||||
|
Common shares outstanding |
125 |
126 |
126 |
126 |
||||
|
Book value per common share |
$ 18.98 |
$ 19.98 |
$ 19.72 |
$ 19.09 |
||||
|
Book value per common share, excluding AOCI |
$ 43.30 |
$ 40.70 |
$ 39.94 |
$ 41.45 |
||||
|
ASSETS UNDER MANAGEMENT (AUM) ROLLFORWARD, AVERAGE ASSETS UNDER MANAGEMENT (AAUM) AND AUM BEFORE FLOW REINSURANCE |
||||||||
|
Three months ended |
||||||||
|
September 30, 2023 |
June 30, 2023 |
March 31, 2023 |
December 31, 2022 |
|||||
|
AUM at beginning of period (a) |
$ 46,260 |
$ 45,422 |
$ 43,568 |
$ 41,988 |
||||
|
Net new business asset flows |
1,707 |
1,925 |
2,387 |
1,868 |
||||
|
Net flow reinsurance to third parties |
(530) |
(1,087) |
(992) |
(835) |
||||
|
Debt issuance (repayment) proceeds, net |
— |
— |
459 |
547 |
||||
|
AUM at end of period(1) |
$ 47,437 |
$ 46,260 |
$ 45,422 |
$ 43,568 |
||||
|
AAUM(1) – YTD |
$ 45,541 |
$ 44,948 |
$ 44,393 |
$ 40,069 |
||||
|
AUM before flow reinsurance(1) |
$ 52,910 |
$ 51,203 |
$ 49,278 |
$ 46,432 |
||||
|
SALES HIGHLIGHTS |
|||||||||
|
Three months ended |
Nine months ended |
||||||||
|
(In millions) |
September 30, 2023 |
September 30, 2022 |
September 30, 2023 |
September 30, 2022 |
|||||
|
Total annuity sales |
$ 1,858 |
$ 2,217 |
$ 6,870 |
$ 5,853 |
|||||
|
Indexed universal life sales |
38 |
36 |
117 |
92 |
|||||
|
Funding agreements (FABN/FHLB) |
415 |
— |
871 |
1,443 |
|||||
|
Pension risk transfer |
470 |
620 |
1,212 |
1,147 |
|||||
|
Gross sales(1) |
$ 2,781 |
$ 2,873 |
$ 9,070 |
$ 8,535 |
|||||
|
Sales attributable to flow reinsurance to third parties |
(513) |
(660) |
(2,381) |
(1,440) |
|||||
|
Net Sales(1) |
$ 2,268 |
$ 2,213 |
$ 6,689 |
$ 7,095 |
|||||
|
1See definition of non-GAAP measures below |
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) 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; and the effects of changes in fair value of the reinsurance related embedded derivative and other derivatives, including interest rate swaps and forwards;
(ii) Market related liability adjustments: 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; the impact of initial pension risk transfer deferred profit liability losses, including amortization from previously deferred pension risk transfer deferred profit liability losses; and the changes in the fair value of market risk benefits by deferring current period changes and amortizing that amount over the life of the market risk benefit;
(iii) Purchase price amortization: the impacts related to the amortization of certain intangibles (internally developed software, trademarks and value of distribution asset recognized as a result of acquisition activities);
(iv) Transaction costs: the impacts related to acquisition, integration and merger related items;
(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; and
(vi) Income taxes: the income tax impact related to the above-mentioned 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 should not be used as a substitute for net earnings (loss). However, we believe the adjustments made to net earnings (loss) in order to derive adjusted net earnings provide an understanding of our overall results of operations.
Adjusted Net Earnings per Diluted Share
Adjusted net earnings per diluted share is calculated as adjusted net earnings divided by the weighted-average diluted shares outstanding.
Management considers this non-GAAP financial measure to be useful internally and for investors and analysts to assess the level of return driven by the Company that is available to common shareholders.
Adjusted Return on Assets
Adjusted return on assets is calculated by dividing year-to-date annualized adjusted net earnings by year-to-date AAUM. Return on assets is comprised of net investment income, less cost of funds, and less expenses (including operating expenses, interest expense and income taxes) consistent with our adjusted net earnings definition and related adjustments. Cost of funds includes liability costs related to cost of crediting as well as other liability costs. Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing financial performance and profitability earned on AAUM.
Adjusted Return on Average Equity excluding AOCI
Adjusted return on average equity is calculated by dividing the rolling four quarters adjusted net earnings (loss), by total average equity excluding AOCI. Average equity excluding AOCI for the twelve month rolling period is the average of 5 points throughout the period. Since AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale investments, changes in instrument-specific credit risk for market risk benefits and discount rate assumption changes for the future policy benefits, management considers this non-GAAP financial measure to be a useful internally and for investors and analysts to assess the level return driven by the Company’s adjusted earnings (loss).
Assets Under Management (AUM)
AUM is comprised of the following components and is reported net of reinsurance qualifying for risk transfer in accordance with GAAP:
(i) total invested assets at amortized cost, excluding investments in unconsolidated affiliates and derivatives;
(ii) investments in unconsolidated affiliates at carrying value;
(iii) related party loans and investments;
(iv) accrued investment income;
(v) the net payable/receivable for the purchase/sale of investments; and
(vi) cash and cash equivalents excluding derivative collateral at the end of the period.
Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the size of our investment portfolio that is retained.
AUM before Flow Reinsurance
AUM before Flow Reinsurance is comprised of components consistent with AUM, but also includes flow reinsured assets.
Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the size of our investment portfolio including reinsured assets.
Average Assets Under Management (AAUM) (Quarterly and YTD)
AAUM is calculated as AUM 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 retained assets.
Book Value per Share excluding AOCI
Book value per share excluding AOCI is calculated as total equity (or total equity excluding AOCI) divided by the total number of shares of common stock outstanding. Management considers this to be a useful measure internally and for investors and analysts to assess the capital position of the Company.
Return on Average Equity excluding AOCI
Return on average equity excluding AOCI is calculated by dividing the rolling four quarters net earnings (loss), by total average equity excluding AOCI. Average equity excluding AOCI for the twelve month rolling period is the average of 5 points throughout the period. Since AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale investments, changes in instrument-specific credit risk for market risk benefits and discount rate assumption changes for the future policy benefits, management considers this non-GAAP financial measure to be useful internally and for investors and analysts to assess the level of return driven by the Company that is available to common shareholders.
Sales
Annuity, IUL, funding agreement and non-life contingent PRT 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. Sales from these products are recorded as deposit liabilities (i.e., contractholder funds) within the Company’s consolidated financial statements in accordance with GAAP. Life contingent PRT sales are recorded as premiums in revenues within the consolidated financial statements. 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.
Total Capitalization excluding AOCI
Total capitalization excluding AOCI is based on total equity and the total aggregate principal amount of debt and total 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, changes in instrument-specific credit risk for market risk benefits and discount rate assumption changes for the future policy benefits, management considers this non-GAAP financial measure to provide useful supplemental information internally and to investors and analysts to help assess the capital position of the Company.
Total Debt-to-Capitalization excluding AOCI
Debt-to-capital ratio excluding AOCI is computed by dividing total aggregate principal amount of debt by total capitalization (total debt plus total equity excluding AOCI). Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing its capital position.
Total Equity excluding AOCI
Total equity excluding AOCI is based on total 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, changes in instrument-specific credit risk for market risk benefits and discount rate assumption changes for the future policy benefits, 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 equity.
SOURCE F&G Annuities & Life, Inc.