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|
|
|
|
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
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|
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Delaware
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46-3489149
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Two Ruan Center
601 Locust Street, 14th Floor
Des Moines, Iowa
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50309
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(Address of principal executive offices)
|
(Zip Code)
|
|
|
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Large Accelerated Filer
|
¨
|
|
Accelerated Filer
|
x
|
Non-accelerated Filer
|
¨
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(Do not check if a smaller reporting company)
|
Smaller reporting company
|
¨
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Emerging Growth Company
|
¨
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Page
|
PART I. FINANCIAL INFORMATION & FORWARD LOOKING STATEMENTS
|
|
|
|
PART II. OTHER INFORMATION
|
|
Item 1.
|
Financial Statements
|
|
June 30,
2017 |
|
September 30,
2016 |
||||
|
(Unaudited)
|
|
|
||||
ASSETS
|
|
|
|
||||
Investments:
|
|
|
|
||||
Fixed maturity securities, available-for-sale, at fair value (amortized cost: June 30, 2017 - $19,845; September 30, 2016 - $18,521)
|
$
|
20,766
|
|
|
$
|
19,411
|
|
Equity securities, available-for-sale, at fair value (amortized cost: June 30, 2017 - $732; September 30, 2016 - $640)
|
774
|
|
|
683
|
|
||
Derivative investments
|
361
|
|
|
276
|
|
||
Commercial mortgage loans
|
550
|
|
|
595
|
|
||
Other invested assets
|
176
|
|
|
60
|
|
||
Total investments
|
22,627
|
|
|
21,025
|
|
||
Related party loans
|
71
|
|
|
71
|
|
||
Cash and cash equivalents
|
799
|
|
|
864
|
|
||
Accrued investment income
|
204
|
|
|
214
|
|
||
Reinsurance recoverable
|
3,390
|
|
|
3,464
|
|
||
Intangibles, net
|
1,097
|
|
|
1,026
|
|
||
Other assets
|
214
|
|
|
371
|
|
||
Total assets
|
$
|
28,402
|
|
|
$
|
27,035
|
|
|
|
|
|
||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
||||
|
|
|
|
||||
Contractholder funds
|
$
|
20,342
|
|
|
$
|
19,251
|
|
Future policy benefits
|
3,423
|
|
|
3,467
|
|
||
Funds withheld for reinsurance liabilities
|
1,106
|
|
|
1,172
|
|
||
Liability for policy and contract claims
|
57
|
|
|
55
|
|
||
Debt
|
300
|
|
|
300
|
|
||
Revolving credit facility
|
105
|
|
|
100
|
|
||
Deferred tax liability, net
|
11
|
|
|
10
|
|
||
Other liabilities
|
945
|
|
|
746
|
|
||
Total liabilities
|
26,289
|
|
|
25,101
|
|
||
|
|
|
|
||||
Commitments and contingencies ("Note 12")
|
|
|
|
||||
|
|
|
|
||||
Shareholders' equity:
|
|
|
|
||||
Preferred stock ($.01 par value, 50,000,000 shares authorized, no shares issued at June 30, 2017 and September 30, 2016)
|
$
|
—
|
|
|
$
|
—
|
|
Common stock ($.01 par value, 500,000,000 shares authorized, 58,993,219 issued and outstanding at June 30, 2017; 58,956,127 shares issued and outstanding at September 30, 2016)
|
1
|
|
|
1
|
|
||
Additional paid-in capital
|
716
|
|
|
714
|
|
||
Retained earnings
|
942
|
|
|
792
|
|
||
Accumulated other comprehensive income
|
467
|
|
|
439
|
|
||
Treasury stock, at cost (568,847 shares at June 30, 2017; 537,613 shares at September 30, 2016)
|
(13
|
)
|
|
(12
|
)
|
||
Total shareholders' equity
|
2,113
|
|
|
1,934
|
|
||
Total liabilities and shareholders' equity
|
$
|
28,402
|
|
|
$
|
27,035
|
|
|
|
|
|
|
|||||||||||||||
|
Three months ended
|
|
Nine months ended
|
||||||||||||
|
June 30,
2017 |
|
June 30,
2016 |
|
June 30,
2017 |
|
June 30,
2016 |
||||||||
|
(Unaudited)
|
|
(Unaudited)
|
||||||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Premiums
|
$
|
12
|
|
|
$
|
21
|
|
|
$
|
26
|
|
|
$
|
52
|
|
Net investment income
|
257
|
|
|
236
|
|
|
744
|
|
|
685
|
|
||||
Net investment gains (losses)
|
67
|
|
|
(28
|
)
|
|
199
|
|
|
(7
|
)
|
||||
Insurance and investment product fees and other
|
44
|
|
|
32
|
|
|
126
|
|
|
93
|
|
||||
Total revenues
|
380
|
|
|
261
|
|
|
1,095
|
|
|
823
|
|
||||
Benefits and expenses:
|
|
|
|
|
|
|
|
||||||||
Benefits and other changes in policy reserves
|
235
|
|
|
216
|
|
|
523
|
|
|
585
|
|
||||
Acquisition and operating expenses, net of deferrals
|
40
|
|
|
28
|
|
|
101
|
|
|
83
|
|
||||
Amortization of intangibles
|
51
|
|
|
(4
|
)
|
|
207
|
|
|
34
|
|
||||
Total benefits and expenses
|
326
|
|
|
240
|
|
|
831
|
|
|
702
|
|
||||
Operating income
|
54
|
|
|
21
|
|
|
264
|
|
|
121
|
|
||||
Interest expense
|
(6
|
)
|
|
(5
|
)
|
|
(18
|
)
|
|
(17
|
)
|
||||
Income before income taxes
|
48
|
|
|
16
|
|
|
246
|
|
|
104
|
|
||||
Income tax expense
|
(16
|
)
|
|
(6
|
)
|
|
(84
|
)
|
|
(37
|
)
|
||||
Net income
|
$
|
32
|
|
|
$
|
10
|
|
|
$
|
162
|
|
|
$
|
67
|
|
|
|
|
|
|
|
|
|
||||||||
Net income per common share:
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.54
|
|
|
$
|
0.16
|
|
|
$
|
2.78
|
|
|
$
|
1.14
|
|
Diluted
|
$
|
0.54
|
|
|
$
|
0.16
|
|
|
$
|
2.77
|
|
|
$
|
1.14
|
|
Weighted average common shares used in computing net income per common share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
58,335,216
|
|
|
58,309,849
|
|
|
58,313,880
|
|
|
58,278,505
|
|
||||
Diluted
|
58,444,618
|
|
|
58,656,008
|
|
|
58,391,066
|
|
|
58,599,059
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Cash dividend per common share
|
$
|
0.065
|
|
|
$
|
0.065
|
|
|
$
|
0.195
|
|
|
$
|
0.195
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Supplemental disclosures:
|
|
|
|
|
|
|
|
||||||||
Total other-than-temporary impairments
|
$
|
—
|
|
|
$
|
(17
|
)
|
|
$
|
(22
|
)
|
|
$
|
(28
|
)
|
Portion of other-than-temporary impairments included in other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net other-than-temporary impairments
|
—
|
|
|
(17
|
)
|
|
(22
|
)
|
|
(28
|
)
|
||||
Gains (losses) on derivative and embedded derivatives
|
74
|
|
|
(23
|
)
|
|
224
|
|
|
(2
|
)
|
||||
Other realized investment (losses) gains
|
(7
|
)
|
|
12
|
|
|
(3
|
)
|
|
23
|
|
||||
Total net investment gains (losses)
|
$
|
67
|
|
|
$
|
(28
|
)
|
|
$
|
199
|
|
|
$
|
(7
|
)
|
|
Three months ended
|
|
Nine months ended
|
||||||||||||
|
June 30,
2017 |
|
June 30,
2016 |
|
June 30,
2017 |
|
June 30,
2016 |
||||||||
|
(Unaudited)
|
|
(Unaudited)
|
||||||||||||
Net income
|
$
|
32
|
|
|
$
|
10
|
|
|
$
|
162
|
|
|
$
|
67
|
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income:
|
|
|
|
|
|
|
|
||||||||
Unrealized investment gains/(losses):
|
|
|
|
|
|
|
|
||||||||
Change in unrealized investment gains/losses before reclassification adjustment
|
374
|
|
|
623
|
|
|
9
|
|
|
497
|
|
||||
Net reclassification adjustment for gains included in net income
|
7
|
|
|
1
|
|
|
22
|
|
|
1
|
|
||||
Changes in unrealized investment gains/losses after reclassification adjustment
|
381
|
|
|
624
|
|
|
31
|
|
|
498
|
|
||||
Adjustments to intangible assets
|
(113
|
)
|
|
(220
|
)
|
|
11
|
|
|
(164
|
)
|
||||
Changes in deferred income tax asset/liability
|
(92
|
)
|
|
(141
|
)
|
|
(14
|
)
|
|
(117
|
)
|
||||
Net changes to derive comprehensive income for the period
|
176
|
|
|
263
|
|
|
28
|
|
|
217
|
|
||||
Comprehensive income net of tax
|
$
|
208
|
|
|
$
|
273
|
|
|
$
|
190
|
|
|
$
|
284
|
|
|
Preferred Stock
|
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Income
|
|
Treasury Stock
|
|
Total Shareholders' Equity
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Balance, September 30, 2016
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
714
|
|
|
$
|
792
|
|
|
$
|
439
|
|
|
$
|
(12
|
)
|
|
$
|
1,934
|
|
Treasury shares purchased
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||||||
Dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
|||||||
Common stock issued under employee plans
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
162
|
|
|
—
|
|
|
—
|
|
|
162
|
|
|||||||
Unrealized investment gains, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28
|
|
|
—
|
|
|
28
|
|
|||||||
Stock compensation
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||||
Balance, June 30, 2017
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
716
|
|
|
$
|
942
|
|
|
$
|
467
|
|
|
$
|
(13
|
)
|
|
$
|
2,113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
|
||||||
|
June 30,
2017 |
|
June 30,
2016 |
||||
|
(Unaudited)
|
||||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
162
|
|
|
$
|
67
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Stock based compensation
|
4
|
|
|
5
|
|
||
Amortization
|
(21
|
)
|
|
(32
|
)
|
||
Deferred income taxes
|
(14
|
)
|
|
27
|
|
||
Interest credited/index credit to contractholder account balances and other reserve movements
|
426
|
|
|
463
|
|
||
Net recognized (gains) losses on investments and derivatives
|
(199
|
)
|
|
8
|
|
||
Charges assessed to contractholders for mortality and administration
|
(99
|
)
|
|
(77
|
)
|
||
Deferred policy acquisition costs, net of related amortization
|
(60
|
)
|
|
(224
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Reinsurance recoverable
|
(8
|
)
|
|
11
|
|
||
Future policy benefits
|
(44
|
)
|
|
(2
|
)
|
||
Funds withheld from reinsurers
|
(76
|
)
|
|
(68
|
)
|
||
Collateral posted
|
59
|
|
|
79
|
|
||
Other assets and other liabilities
|
(34
|
)
|
|
30
|
|
||
Net cash provided by operating activities
|
96
|
|
|
287
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Proceeds from available-for-sale investments sold, matured or repaid
|
2,190
|
|
|
1,744
|
|
||
Proceeds from derivatives instruments and other invested assets
|
340
|
|
|
167
|
|
||
Proceeds from commercial mortgage loans
|
45
|
|
|
8
|
|
||
Cost of available-for-sale investments acquired
|
(3,240
|
)
|
|
(2,511
|
)
|
||
Costs of derivatives instruments and other invested assets
|
(291
|
)
|
|
(215
|
)
|
||
Originated commercial mortgage loans
|
—
|
|
|
(99
|
)
|
||
Other capital expenditures
|
(9
|
)
|
|
(6
|
)
|
||
Net cash (used in) investing activities
|
(965
|
)
|
|
(912
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Treasury stock
|
(1
|
)
|
|
(1
|
)
|
||
Common stock issued under employee plans
|
1
|
|
|
2
|
|
||
Draw on revolving credit facility
|
5
|
|
|
—
|
|
||
Dividends paid
|
(12
|
)
|
|
(12
|
)
|
||
Contractholder account deposits
|
2,272
|
|
|
2,138
|
|
||
Contractholder account withdrawals
|
(1,461
|
)
|
|
(1,285
|
)
|
||
Net cash provided by financing activities
|
804
|
|
|
842
|
|
||
Change in cash & cash equivalents
|
(65
|
)
|
|
217
|
|
||
Cash & cash equivalents, beginning of period
|
864
|
|
|
502
|
|
||
Cash & cash equivalents, end of period
|
$
|
799
|
|
|
$
|
719
|
|
|
|
|
|
||||
Supplemental disclosures of cash flow information
|
|
|
|
||||
Interest paid
|
$
|
22
|
|
|
$
|
10
|
|
Taxes paid
|
$
|
114
|
|
|
$
|
5
|
|
Deferred sales inducements
|
$
|
10
|
|
|
$
|
14
|
|
|
June 30, 2017
|
||||||||||||||||||
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Carrying Value
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Available-for sale securities
|
|
|
|
|
|
|
|
|
|
||||||||||
Asset-backed securities
|
$
|
2,777
|
|
|
$
|
33
|
|
|
$
|
(7
|
)
|
|
$
|
2,803
|
|
|
$
|
2,803
|
|
Commercial mortgage-backed securities
|
950
|
|
|
12
|
|
|
(12
|
)
|
|
950
|
|
|
950
|
|
|||||
Corporates
|
11,877
|
|
|
714
|
|
|
(116
|
)
|
|
12,475
|
|
|
12,475
|
|
|||||
Equities
|
732
|
|
|
45
|
|
|
(3
|
)
|
|
774
|
|
|
774
|
|
|||||
Hybrids
|
1,362
|
|
|
86
|
|
|
(17
|
)
|
|
1,431
|
|
|
1,431
|
|
|||||
Municipals
|
1,589
|
|
|
152
|
|
|
(15
|
)
|
|
1,726
|
|
|
1,726
|
|
|||||
Residential mortgage-backed securities
|
1,205
|
|
|
97
|
|
|
(8
|
)
|
|
1,294
|
|
|
1,294
|
|
|||||
U.S. Government
|
85
|
|
|
2
|
|
|
—
|
|
|
87
|
|
|
87
|
|
|||||
Total available-for-sale securities
|
20,577
|
|
|
1,141
|
|
|
(178
|
)
|
|
21,540
|
|
|
21,540
|
|
|||||
Derivative investments
|
220
|
|
|
146
|
|
|
(5
|
)
|
|
361
|
|
|
361
|
|
|||||
Commercial mortgage loans
|
550
|
|
|
—
|
|
|
—
|
|
|
551
|
|
|
550
|
|
|||||
Other invested assets
|
176
|
|
|
—
|
|
|
—
|
|
|
174
|
|
|
176
|
|
|||||
Total investments
|
$
|
21,523
|
|
|
$
|
1,287
|
|
|
$
|
(183
|
)
|
|
$
|
22,626
|
|
|
$
|
22,627
|
|
|
September 30, 2016
|
||||||||||||||||||
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Carrying Value
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Available-for-sale securities
|
|
|
|
|
|
|
|
|
|
||||||||||
Asset-backed securities
|
$
|
2,528
|
|
|
$
|
16
|
|
|
$
|
(45
|
)
|
|
$
|
2,499
|
|
|
$
|
2,499
|
|
Commercial mortgage-backed securities
|
850
|
|
|
23
|
|
|
(9
|
)
|
|
864
|
|
|
864
|
|
|||||
Corporates
|
10,712
|
|
|
760
|
|
|
(132
|
)
|
|
11,340
|
|
|
11,340
|
|
|||||
Equities
|
640
|
|
|
47
|
|
|
(4
|
)
|
|
683
|
|
|
683
|
|
|||||
Hybrids
|
1,356
|
|
|
77
|
|
|
(47
|
)
|
|
1,386
|
|
|
1,386
|
|
|||||
Municipals
|
1,515
|
|
|
206
|
|
|
(4
|
)
|
|
1,717
|
|
|
1,717
|
|
|||||
Residential mortgage-backed securities
|
1,327
|
|
|
63
|
|
|
(28
|
)
|
|
1,362
|
|
|
1,362
|
|
|||||
U.S. Government
|
233
|
|
|
10
|
|
|
—
|
|
|
243
|
|
|
243
|
|
|||||
Total available-for-sale securities
|
19,161
|
|
|
1,202
|
|
|
(269
|
)
|
|
20,094
|
|
|
20,094
|
|
|||||
Derivative investments
|
221
|
|
|
78
|
|
|
(23
|
)
|
|
276
|
|
|
276
|
|
|||||
Commercial mortgage loans
|
595
|
|
|
—
|
|
|
—
|
|
|
614
|
|
|
595
|
|
|||||
Other invested assets
|
60
|
|
|
—
|
|
|
—
|
|
|
58
|
|
|
60
|
|
|||||
Total investments
|
$
|
20,037
|
|
|
$
|
1,280
|
|
|
$
|
(292
|
)
|
|
$
|
21,042
|
|
|
$
|
21,025
|
|
|
June 30, 2017
|
||||||
|
Amortized Cost
|
|
Fair Value
|
||||
Corporates, Non-structured Hybrids, Municipal and U.S. Government securities:
|
|
|
|
||||
Due in one year or less
|
$
|
325
|
|
|
$
|
327
|
|
Due after one year through five years
|
1,711
|
|
|
1,762
|
|
||
Due after five years through ten years
|
3,254
|
|
|
3,393
|
|
||
Due after ten years
|
8,871
|
|
|
9,468
|
|
||
Subtotal
|
14,161
|
|
|
14,950
|
|
||
Other securities which provide for periodic payments:
|
|
|
|
||||
Asset-backed securities
|
2,777
|
|
|
2,803
|
|
||
Commercial mortgage-backed securities
|
950
|
|
|
950
|
|
||
Structured hybrids
|
752
|
|
|
769
|
|
||
Residential mortgage-backed securities
|
1,205
|
|
|
1,294
|
|
||
Subtotal
|
5,684
|
|
|
5,816
|
|
||
Total fixed maturity available-for-sale securities
|
$
|
19,845
|
|
|
$
|
20,766
|
|
|
June 30, 2017
|
||||||||||||||||||||||
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
||||||||||||||||||
|
Fair Value
|
|
Gross Unrealized
Losses
|
|
Fair Value
|
|
Gross Unrealized
Losses
|
|
Fair Value
|
|
Gross Unrealized
Losses
|
||||||||||||
Available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Asset-backed securities
|
$
|
518
|
|
|
$
|
(2
|
)
|
|
$
|
437
|
|
|
$
|
(5
|
)
|
|
$
|
955
|
|
|
$
|
(7
|
)
|
Commercial mortgage-backed securities
|
206
|
|
|
(4
|
)
|
|
170
|
|
|
(8
|
)
|
|
376
|
|
|
(12
|
)
|
||||||
Corporates
|
1,227
|
|
|
(31
|
)
|
|
721
|
|
|
(85
|
)
|
|
1,948
|
|
|
(116
|
)
|
||||||
Equities
|
40
|
|
|
(1
|
)
|
|
69
|
|
|
(2
|
)
|
|
109
|
|
|
(3
|
)
|
||||||
Hybrids
|
54
|
|
|
(2
|
)
|
|
299
|
|
|
(15
|
)
|
|
353
|
|
|
(17
|
)
|
||||||
Municipals
|
170
|
|
|
(11
|
)
|
|
40
|
|
|
(4
|
)
|
|
210
|
|
|
(15
|
)
|
||||||
Residential mortgage-backed securities
|
2
|
|
|
—
|
|
|
233
|
|
|
(8
|
)
|
|
235
|
|
|
(8
|
)
|
||||||
U.S. Government
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
||||||
Total available-for-sale securities
|
$
|
2,223
|
|
|
$
|
(51
|
)
|
|
$
|
1,969
|
|
|
$
|
(127
|
)
|
|
$
|
4,192
|
|
|
$
|
(178
|
)
|
Total number of available-for-sale securities in an unrealized loss position less than twelve months
|
|
|
|
|
|
|
|
|
|
|
357
|
|
|||||||||||
Total number of available-for-sale securities in an unrealized loss position twelve months or longer
|
|
|
|
|
|
|
|
|
|
|
324
|
|
|||||||||||
Total number of available-for-sale securities in an unrealized loss position
|
|
|
|
|
|
|
|
|
|
|
681
|
|
|
September 30, 2016
|
||||||||||||||||||||||
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
||||||||||||||||||
|
Fair Value
|
|
Gross Unrealized
Losses
|
|
Fair Value
|
|
Gross Unrealized
Losses
|
|
Fair Value
|
|
Gross Unrealized
Losses
|
||||||||||||
Available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Asset-backed securities
|
$
|
352
|
|
|
$
|
(4
|
)
|
|
$
|
1,368
|
|
|
$
|
(41
|
)
|
|
$
|
1,720
|
|
|
$
|
(45
|
)
|
Commercial mortgage-backed securities
|
44
|
|
|
(1
|
)
|
|
182
|
|
|
(8
|
)
|
|
226
|
|
|
(9
|
)
|
||||||
Corporates
|
413
|
|
|
(9
|
)
|
|
1,031
|
|
|
(123
|
)
|
|
1,444
|
|
|
(132
|
)
|
||||||
Equities
|
51
|
|
|
(1
|
)
|
|
75
|
|
|
(3
|
)
|
|
126
|
|
|
(4
|
)
|
||||||
Hybrids
|
41
|
|
|
(2
|
)
|
|
412
|
|
|
(45
|
)
|
|
453
|
|
|
(47
|
)
|
||||||
Municipals
|
69
|
|
|
(2
|
)
|
|
38
|
|
|
(2
|
)
|
|
107
|
|
|
(4
|
)
|
||||||
Residential mortgage-backed securities
|
70
|
|
|
(1
|
)
|
|
544
|
|
|
(27
|
)
|
|
614
|
|
|
(28
|
)
|
||||||
Total available-for-sale securities
|
$
|
1,040
|
|
|
$
|
(20
|
)
|
|
$
|
3,650
|
|
|
$
|
(249
|
)
|
|
$
|
4,690
|
|
|
$
|
(269
|
)
|
Total number of available-for-sale securities in an unrealized loss position less than twelve months
|
|
|
|
|
|
|
|
|
|
|
193
|
|
|||||||||||
Total number of available-for-sale securities in an unrealized loss position twelve months or longer
|
|
|
|
|
|
|
|
|
|
|
543
|
|
|||||||||||
Total number of available-for-sale securities in an unrealized loss position
|
|
|
|
|
|
|
|
|
|
|
736
|
|
|
Three months ended
|
|
Nine months ended
|
||||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||||||
Beginning balance
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
3
|
|
Increases attributable to credit losses on securities:
|
|
|
|
|
|
|
|
||||||||
OTTI was previously recognized
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
OTTI was not previously recognized
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Ending balance
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
Three months ended
|
|
Nine months ended
|
||||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||||||
OTTI Recognized in Net Income:
|
|
|
|
|
|
|
|
||||||||
Asset-backed securities
|
$
|
1
|
|
|
$
|
4
|
|
|
$
|
2
|
|
|
$
|
9
|
|
Corporates
|
—
|
|
|
—
|
|
|
20
|
|
|
6
|
|
||||
Related party loans
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
||||
Other invested assets
|
(1
|
)
|
|
9
|
|
|
—
|
|
|
9
|
|
||||
Total
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
22
|
|
|
$
|
28
|
|
|
June 30, 2017
|
|
September 30, 2016
|
||||||||||
|
Gross Carrying Value
|
|
% of Total
|
|
Gross Carrying Value
|
|
% of Total
|
||||||
Property Type:
|
|
|
|
|
|
|
|
||||||
Funeral Home
|
$
|
1
|
|
|
—
|
%
|
|
$
|
1
|
|
|
—
|
%
|
Hotel
|
23
|
|
|
4
|
%
|
|
23
|
|
|
4
|
%
|
||
Industrial - General
|
46
|
|
|
8
|
%
|
|
58
|
|
|
10
|
%
|
||
Industrial - Warehouse
|
38
|
|
|
7
|
%
|
|
64
|
|
|
11
|
%
|
||
Multifamily
|
69
|
|
|
13
|
%
|
|
70
|
|
|
11
|
%
|
||
Office
|
157
|
|
|
29
|
%
|
|
160
|
|
|
27
|
%
|
||
Retail
|
217
|
|
|
39
|
%
|
|
220
|
|
|
37
|
%
|
||
Total commercial mortgage loans, gross of valuation allowance
|
$
|
551
|
|
|
100
|
%
|
|
$
|
596
|
|
|
100
|
%
|
Allowance for loan loss
|
(1
|
)
|
|
|
|
(1
|
)
|
|
|
||||
Total commercial mortgage loans
|
$
|
550
|
|
|
|
|
$
|
595
|
|
|
|
||
|
|
|
|
|
|
|
|
||||||
U.S. Region:
|
|
|
|
|
|
|
|
||||||
East North Central
|
$
|
108
|
|
|
20
|
%
|
|
$
|
137
|
|
|
23
|
%
|
East South Central
|
20
|
|
|
4
|
%
|
|
21
|
|
|
4
|
%
|
||
Middle Atlantic
|
85
|
|
|
15
|
%
|
|
97
|
|
|
16
|
%
|
||
Mountain
|
67
|
|
|
12
|
%
|
|
67
|
|
|
12
|
%
|
||
New England
|
14
|
|
|
3
|
%
|
|
14
|
|
|
2
|
%
|
||
Pacific
|
135
|
|
|
24
|
%
|
|
136
|
|
|
23
|
%
|
||
South Atlantic
|
66
|
|
|
12
|
%
|
|
67
|
|
|
11
|
%
|
||
West North Central
|
14
|
|
|
3
|
%
|
|
14
|
|
|
2
|
%
|
||
West South Central
|
42
|
|
|
7
|
%
|
|
43
|
|
|
7
|
%
|
||
Total commercial mortgage loans, gross of valuation allowance
|
$
|
551
|
|
|
100
|
%
|
|
$
|
596
|
|
|
100
|
%
|
Allowance for loan loss
|
(1
|
)
|
|
|
|
(1
|
)
|
|
|
||||
Total commercial mortgage loans
|
$
|
550
|
|
|
|
|
$
|
595
|
|
|
|
|
Debt Service Coverage Ratios
|
|
Total Amount
|
|
% of Total
|
|
Estimated Fair Value
|
|
% of Total
|
||||||||||||||||||||
|
>1.25
|
|
1.00 - 1.25
|
|
< 1.00
|
|
N/A(a)
|
|
|
|
|
||||||||||||||||||
June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
LTV Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Less than 50%
|
$
|
183
|
|
|
$
|
—
|
|
|
$
|
18
|
|
|
$
|
1
|
|
|
$
|
202
|
|
|
37
|
%
|
|
$
|
201
|
|
|
36
|
%
|
50% to 60%
|
256
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
256
|
|
|
46
|
%
|
|
257
|
|
|
47
|
%
|
||||||
60% to 75%
|
86
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
93
|
|
|
17
|
%
|
|
93
|
|
|
17
|
%
|
||||||
Commercial mortgage loans
|
$
|
525
|
|
|
$
|
7
|
|
|
$
|
18
|
|
|
$
|
1
|
|
|
$
|
551
|
|
|
100
|
%
|
|
$
|
551
|
|
|
100
|
%
|
September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
LTV Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Less than 50%
|
$
|
158
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
177
|
|
|
29
|
%
|
|
$
|
181
|
|
|
29
|
%
|
50% to 60%
|
189
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
189
|
|
|
32
|
%
|
|
194
|
|
|
32
|
%
|
||||||
60% to 75%
|
230
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
230
|
|
|
39
|
%
|
|
239
|
|
|
39
|
%
|
||||||
Commercial mortgage loans
|
$
|
577
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
596
|
|
|
100
|
%
|
|
$
|
614
|
|
|
100
|
%
|
|
June 30, 2017
|
|
September 30, 2016
|
||||
Gross balance commercial mortgage loans
|
$
|
551
|
|
|
$
|
596
|
|
Allowance for loan loss
|
(1
|
)
|
|
(1
|
)
|
||
Net balance commercial mortgage loans
|
$
|
550
|
|
|
$
|
595
|
|
|
June 30, 2017
|
|
September 30, 2016
|
||||
Current to 30 days
|
$
|
551
|
|
|
$
|
596
|
|
Past due
|
—
|
|
|
—
|
|
||
Total carrying value
|
$
|
551
|
|
|
$
|
596
|
|
|
Three months ended
|
|
Nine months ended
|
||||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||||||
Fixed maturity securities, available-for-sale
|
$
|
242
|
|
|
$
|
223
|
|
|
$
|
706
|
|
|
$
|
644
|
|
Equity securities, available-for-sale
|
11
|
|
|
7
|
|
|
31
|
|
|
23
|
|
||||
Commercial mortgage loans
|
6
|
|
|
6
|
|
|
18
|
|
|
18
|
|
||||
Related party loans
|
—
|
|
|
1
|
|
|
—
|
|
|
3
|
|
||||
Invested cash and short-term investments
|
2
|
|
|
1
|
|
|
2
|
|
|
3
|
|
||||
Other investments
|
2
|
|
|
3
|
|
|
4
|
|
|
8
|
|
||||
Gross investment income
|
263
|
|
|
241
|
|
|
761
|
|
|
699
|
|
||||
Investment expense
|
(6
|
)
|
|
(5
|
)
|
|
(17
|
)
|
|
(14
|
)
|
||||
Net investment income
|
$
|
257
|
|
|
$
|
236
|
|
|
$
|
744
|
|
|
$
|
685
|
|
|
Three months ended
|
|
Nine months ended
|
||||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||||||
Net realized (losses) gains on fixed maturity available-for-sale securities
|
$
|
(8
|
)
|
|
$
|
4
|
|
|
$
|
(23
|
)
|
|
$
|
6
|
|
Realized gains (losses) on equity securities
|
—
|
|
|
1
|
|
|
—
|
|
|
2
|
|
||||
Change in fair value of other derivatives and embedded derivatives
|
1
|
|
|
(2
|
)
|
|
2
|
|
|
(1
|
)
|
||||
Realized gains (losses) on other invested assets
|
1
|
|
|
(10
|
)
|
|
(2
|
)
|
|
(13
|
)
|
||||
Net realized (losses) gains on available-for-sale securities
|
(6
|
)
|
|
(7
|
)
|
|
(23
|
)
|
|
(6
|
)
|
||||
Realized gains (losses) on certain derivative instruments
|
73
|
|
|
(32
|
)
|
|
149
|
|
|
(86
|
)
|
||||
Unrealized gains on certain derivative instruments
|
9
|
|
|
48
|
|
|
81
|
|
|
112
|
|
||||
Change in fair value of reinsurance related embedded derivative
|
(9
|
)
|
|
(37
|
)
|
|
(8
|
)
|
|
(27
|
)
|
||||
Realized gains (losses) on hedging derivatives and reinsurance-related embedded derivatives
|
73
|
|
|
(21
|
)
|
|
222
|
|
|
(1
|
)
|
||||
Net investment gains (losses)
|
$
|
67
|
|
|
$
|
(28
|
)
|
|
$
|
199
|
|
|
$
|
(7
|
)
|
|
June 30, 2017
|
|
September 30, 2016
|
||||
Assets:
|
|
|
|
||||
Derivative investments:
|
|
|
|
||||
Call options
|
$
|
361
|
|
|
$
|
276
|
|
Futures contracts
|
—
|
|
|
—
|
|
||
Other invested assets:
|
|
|
|
||||
Other derivatives and embedded derivatives
|
15
|
|
|
13
|
|
||
Other assets:
|
|
|
|
||||
Reinsurance related embedded derivative
|
111
|
|
|
119
|
|
||
|
$
|
487
|
|
|
$
|
408
|
|
Liabilities:
|
|
|
|
||||
Contractholder funds:
|
|
|
|
||||
FIA embedded derivative
|
$
|
2,442
|
|
|
$
|
2,383
|
|
Funds withheld for reinsurance liabilities:
|
|
|
|
||||
Call options payable to FSRCI
|
13
|
|
|
11
|
|
||
|
$
|
2,455
|
|
|
$
|
2,394
|
|
|
Three months ended
|
|
Nine months ended
|
||||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Net investment gains (losses):
|
|
|
|
|
|
|
|
||||||||
Call options
|
$
|
81
|
|
|
$
|
14
|
|
|
$
|
225
|
|
|
$
|
21
|
|
Futures contracts
|
1
|
|
|
2
|
|
|
5
|
|
|
5
|
|
||||
Other derivatives and embedded derivatives
|
1
|
|
|
(2
|
)
|
|
2
|
|
|
(1
|
)
|
||||
Reinsurance related embedded derivative
|
(9
|
)
|
|
(37
|
)
|
|
(8
|
)
|
|
(27
|
)
|
||||
|
$
|
74
|
|
|
$
|
(23
|
)
|
|
$
|
224
|
|
|
$
|
(2
|
)
|
Benefits and other changes in policy reserves
|
|
|
|
|
|
|
|
||||||||
FIA embedded derivatives
|
$
|
80
|
|
|
$
|
77
|
|
|
$
|
59
|
|
|
$
|
176
|
|
|
|
|
|
June 30, 2017
|
|
September 30, 2016
|
||||||||||||||||||||||||||||
Counterparty
|
|
Credit Rating
(Fitch/Moody's/S&P) (a)
|
|
Notional
Amount |
|
Fair Value
|
|
Collateral
|
|
Net Credit Risk
|
|
Notional
Amount
|
|
Fair Value
|
|
Collateral
|
|
Net Credit Risk
|
||||||||||||||||
Merrill Lynch
|
|
A/*/A+
|
|
$
|
3,993
|
|
|
$
|
149
|
|
|
$
|
109
|
|
|
$
|
40
|
|
|
$
|
2,302
|
|
|
$
|
55
|
|
|
$
|
10
|
|
|
$
|
45
|
|
Deutsche Bank
|
|
A/A3/A-
|
|
510
|
|
|
17
|
|
|
18
|
|
|
(1
|
)
|
|
1,620
|
|
|
46
|
|
|
12
|
|
|
34
|
|
||||||||
Morgan Stanley
|
|
*/A1/A+
|
|
1,676
|
|
|
66
|
|
|
72
|
|
|
(6
|
)
|
|
2,952
|
|
|
87
|
|
|
58
|
|
|
29
|
|
||||||||
Barclay's Bank
|
|
A/A1/A-
|
|
1,608
|
|
|
48
|
|
|
6
|
|
|
42
|
|
|
1,389
|
|
|
39
|
|
|
—
|
|
|
39
|
|
||||||||
Canadian Imperial Bank of Commerce
|
|
AA-/*/A+
|
|
2,523
|
|
|
81
|
|
|
81
|
|
|
—
|
|
|
1,623
|
|
|
49
|
|
|
48
|
|
|
1
|
|
||||||||
Total
|
|
|
|
$
|
10,310
|
|
|
$
|
361
|
|
|
$
|
286
|
|
|
$
|
75
|
|
|
$
|
9,886
|
|
|
$
|
276
|
|
|
$
|
128
|
|
|
$
|
148
|
|
|
June 30, 2017
|
||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Fair Value
|
|
Carrying Amount
|
||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
799
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
799
|
|
|
$
|
799
|
|
Fixed maturity securities, available-for-sale:
|
|
|
|
|
|
|
|
|
|
||||||||||
Asset-backed securities
|
—
|
|
|
2,584
|
|
|
219
|
|
|
2,803
|
|
|
2,803
|
|
|||||
Commercial mortgage-backed securities
|
—
|
|
|
866
|
|
|
84
|
|
|
950
|
|
|
950
|
|
|||||
Corporates
|
—
|
|
|
11,402
|
|
|
1,073
|
|
|
12,475
|
|
|
12,475
|
|
|||||
Hybrids
|
—
|
|
|
1,421
|
|
|
10
|
|
|
1,431
|
|
|
1,431
|
|
|||||
Municipals
|
—
|
|
|
1,688
|
|
|
38
|
|
|
1,726
|
|
|
1,726
|
|
|||||
Residential mortgage-backed securities
|
—
|
|
|
1,294
|
|
|
—
|
|
|
1,294
|
|
|
1,294
|
|
|||||
U.S. Government
|
54
|
|
|
33
|
|
|
—
|
|
|
87
|
|
|
87
|
|
|||||
Equity securities, available-for-sale
|
10
|
|
|
720
|
|
|
1
|
|
|
731
|
|
|
731
|
|
|||||
Derivative financial instruments
|
—
|
|
|
361
|
|
|
—
|
|
|
361
|
|
|
361
|
|
|||||
Reinsurance related embedded derivative, included in other assets
|
—
|
|
|
111
|
|
|
—
|
|
|
111
|
|
|
111
|
|
|||||
Other invested assets
|
—
|
|
|
—
|
|
|
15
|
|
|
15
|
|
|
15
|
|
|||||
Total financial assets at fair value
|
$
|
863
|
|
|
$
|
20,480
|
|
|
$
|
1,440
|
|
|
$
|
22,783
|
|
|
$
|
22,783
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivatives:
|
|
|
|
|
|
|
|
|
|
||||||||||
FIA embedded derivatives, included in contractholder funds
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,442
|
|
|
$
|
2,442
|
|
|
$
|
2,442
|
|
Call options payable for FSRCI, included in funds withheld for reinsurance liabilities
|
—
|
|
|
13
|
|
|
—
|
|
|
13
|
|
|
13
|
|
|||||
Total financial liabilities at fair value
|
$
|
—
|
|
|
$
|
13
|
|
|
$
|
2,442
|
|
|
$
|
2,455
|
|
|
$
|
2,455
|
|
|
September 30, 2016
|
||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Fair Value
|
|
Carrying Amount
|
||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
864
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
864
|
|
|
$
|
864
|
|
Fixed maturity securities, available-for-sale:
|
|
|
|
|
|
|
|
|
|
||||||||||
Asset-backed securities
|
—
|
|
|
2,327
|
|
|
172
|
|
|
2,499
|
|
|
2,499
|
|
|||||
Commercial mortgage-backed securities
|
—
|
|
|
785
|
|
|
79
|
|
|
864
|
|
|
864
|
|
|||||
Corporates
|
—
|
|
|
10,219
|
|
|
1,121
|
|
|
11,340
|
|
|
11,340
|
|
|||||
Hybrids
|
—
|
|
|
1,386
|
|
|
—
|
|
|
1,386
|
|
|
1,386
|
|
|||||
Municipals
|
—
|
|
|
1,676
|
|
|
41
|
|
|
1,717
|
|
|
1,717
|
|
|||||
Residential mortgage-backed securities
|
—
|
|
|
1,362
|
|
|
—
|
|
|
1,362
|
|
|
1,362
|
|
|||||
U.S. Government
|
61
|
|
|
182
|
|
|
—
|
|
|
243
|
|
|
243
|
|
|||||
Equity securities, available-for-sale
|
22
|
|
|
617
|
|
|
3
|
|
|
642
|
|
|
642
|
|
|||||
Derivative financial instruments
|
—
|
|
|
276
|
|
|
—
|
|
|
276
|
|
|
276
|
|
|||||
Reinsurance related embedded derivative, included in other assets
|
—
|
|
|
119
|
|
|
—
|
|
|
119
|
|
|
119
|
|
|||||
Other invested assets
|
—
|
|
|
—
|
|
|
34
|
|
|
34
|
|
|
34
|
|
|||||
Total financial assets at fair value
|
$
|
947
|
|
|
$
|
18,949
|
|
|
$
|
1,450
|
|
|
$
|
21,346
|
|
|
$
|
21,346
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivatives:
|
|
|
|
|
|
|
|
|
|
||||||||||
FIA embedded derivatives, included in contractholder funds
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,383
|
|
|
$
|
2,383
|
|
|
$
|
2,383
|
|
Call options payable for FSRCI, included in funds withheld for reinsurance liabilities
|
—
|
|
|
11
|
|
|
—
|
|
|
11
|
|
|
11
|
|
|||||
Total financial liabilities at fair value
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
2,383
|
|
|
$
|
2,394
|
|
|
$
|
2,394
|
|
|
|
Fair Value at
|
|
Valuation
|
|
|
|
Range (Weighted average)
|
||
|
|
June 30, 2017
|
|
Technique
|
|
Unobservable Input(s)
|
|
June 30, 2017
|
||
Assets
|
|
|
|
|
|
|
|
|
||
Asset-backed securities
|
|
$
|
218
|
|
|
Broker-quoted
|
|
Offered quotes
|
|
90.00% - 102.50%
(99.78%) |
Asset-backed securities
|
|
1
|
|
|
Matrix pricing
|
|
Quoted prices
|
|
100.04% - 100.04%
(100.04%) |
|
Commercial mortgage-backed securities
|
|
80
|
|
|
Broker-quoted
|
|
Offered quotes
|
|
99.50% - 123.63%
(113.44%) |
|
Commercial mortgage-backed securities
|
|
4
|
|
|
Matrix pricing
|
|
Quoted prices
|
|
100.22% - 100.22%
(100.22%) |
|
Corporates
|
|
821
|
|
|
Broker-quoted
|
|
Offered quotes
|
|
59.00% - 111.40%
(100.45%) |
|
Corporates
|
|
252
|
|
|
Matrix pricing
|
|
Quoted prices
|
|
94.32% - 116.95%
(104.02%) |
|
Hybrids
|
|
10
|
|
|
Broker-quoted
|
|
Offered quotes
|
|
97.12% - 97.12%
(97.12%) |
|
Municipals
|
|
38
|
|
|
Broker-quoted
|
|
Offered quotes
|
|
112.76% - 112.76%
(112.76%) |
|
Equity securities available-for-sale (Salus preferred equity)
|
|
1
|
|
|
Income-approach
|
|
Yield
|
|
0.70% - 3.10%
|
|
|
|
|
|
|
|
Discount rate
|
|
7.00% - 9.00%
|
||
|
|
|
|
|
|
Salus CLO Equity
|
|
2.00%
|
||
Other invested assets:
|
|
|
|
|
|
|
|
|
||
Available-for-sale embedded derivative
|
|
15
|
|
|
Black-Scholes model
|
|
Market value of AnchorPath fund
|
|
100.00%
|
|
Total
|
|
$
|
1,440
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
||
Derivatives:
|
|
|
|
|
|
|
|
|
||
FIA embedded derivatives, included in contractholder funds
|
|
$
|
2,442
|
|
|
Discounted cash flow
|
|
Market value of option
|
|
0.00% - 25.79%
(3.21%) |
|
|
|
|
|
|
SWAP rates (discount rates)
|
|
2.05% - 2.38%
(2.22%) |
||
|
|
|
|
|
|
Mortality multiplier
|
|
80.00% - 80.00%
(80.00%) |
||
|
|
|
|
|
|
Surrender rates
|
|
0.50% - 75.00%
(9.91%) |
||
|
|
|
|
|
|
Non-performance spread
|
|
0.25% - 0.25%
(0.25%) |
||
|
|
|
|
|
|
Future option budget
|
|
1.13% - 5.57%
(2.90%) |
||
Total liabilities at fair value
|
|
$
|
2,442
|
|
|
|
|
|
|
|
|
|
|
Fair Value at
|
|
Valuation
|
|
Unobservable
|
|
Range (Weighted average)
|
||
|
|
September 30, 2016
|
|
Technique
|
|
Input(s)
|
|
September 30, 2016
|
||
Assets
|
|
|
|
|
|
|
|
|
||
Asset-backed securities
|
|
$
|
144
|
|
|
Broker-quoted
|
|
Offered quotes
|
|
97.54% - 101.55%
(99.66%) |
Asset-backed securities
|
|
9
|
|
|
Matrix Pricing
|
|
Quoted prices
|
|
98.75%
|
|
Asset-backed securities (Salus CLO equity tranche)
|
|
19
|
|
|
Third-Party Valuation
|
|
Offered quotes
|
|
28.37%
|
|
|
|
|
|
|
|
Discount rate
|
|
15.00%
|
||
|
|
|
|
|
|
RSH recovery
|
|
5.50%
|
||
|
|
|
|
|
|
Other loan recoveries
|
|
0.00% - 100.00%
|
||
Commercial mortgage-backed securities
|
|
75
|
|
|
Broker-quoted
|
|
Offered quotes
|
|
104.31% - 122.19%
(114.10%) |
|
Commercial mortgage-backed securities
|
|
4
|
|
|
Matrix pricing
|
|
Quoted prices
|
|
98.41% - 98.41%
(98.41%) |
|
Corporates
|
|
920
|
|
|
Broker-quoted
|
|
Offered quotes
|
|
50.00% - 118.33%
(103.37%) |
|
Corporates
|
|
201
|
|
|
Matrix pricing
|
|
Quoted prices
|
|
99.00% - 150.23%
(107.65%) |
|
Municipals
|
|
41
|
|
|
Broker-quoted
|
|
Offered quotes
|
|
119.04% - 119.04%
(119.04%) |
|
Equity securities available-for-sale (Salus preferred equity)
|
|
3
|
|
|
Market-approach
|
|
Yield
|
|
11.00%
|
|
|
|
|
|
|
|
RSH recovery
|
|
5.50%
|
||
|
|
|
|
|
|
Discount rate
|
|
15.00%
|
||
|
|
|
|
|
|
Salus CLO equity
|
|
28.37%
|
||
Other invested assets:
|
|
|
|
|
|
|
|
|
||
Available-for-sale embedded derivative
|
|
13
|
|
|
Black-Scholes Model
|
|
Market value of AnchorPath fund
|
|
100.00%
|
|
Loan participations - Other
|
|
2
|
|
|
Market Pricing
|
|
Offered quotes
|
|
100.00%
|
|
Loan participations - JSN Jewellery Inc.
|
|
17
|
|
|
Liquidation value – 52.5% recovery estimate
|
|
Recovery estimate (wind-down costs)
|
|
49.93% - 56.67%
(52.50%) |
|
Loan participation - RadioShack (RSH) Corporation
|
|
2
|
|
|
Liquidation value – 5% recovery estimate
|
|
Recovery estimate (wind-down costs)
|
|
1.36% - 14.28%
|
|
Total
|
|
$
|
1,450
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
||
Derivatives:
|
|
|
|
|
|
|
|
|
||
FIA embedded derivatives, included in contractholder funds
|
|
$
|
2,383
|
|
|
Discounted cash flow
|
|
Market value of option
|
|
0.00% - 26.64%
(2.55%) |
|
|
|
|
|
|
SWAP rates (discount rates)
|
|
1.18% - 1.46%
(1.31%) |
||
|
|
|
|
|
|
Mortality multiplier
|
|
80.00% - 80.00%
(80.00%) |
||
|
|
|
|
|
|
Surrender rates
|
|
0.50% - 75.00%
(9.59%) |
||
|
|
|
|
|
|
Non-performance spread
|
|
0.25% - 0.25%
(0.25%) |
||
|
|
|
|
|
|
Future option budget
|
|
1.15% - 5.57%
(2.91%) |
||
Total liabilities at fair value
|
|
$
|
2,383
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2017
|
||||||||||||||||||||||||||||||
|
Balance at Beginning
of Period
|
|
Total Gains (Losses)
|
|
Purchases
|
|
Sales
|
|
Settlements
|
|
Net transfer In (Out) of
Level 3 (a)
|
|
Balance at End of
Period
|
||||||||||||||||||
|
|
Included in
Earnings
|
|
Included in
AOCI
|
|
|
|
|
|
||||||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Fixed maturity securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Asset-backed securities
|
$
|
184
|
|
|
$
|
(1
|
)
|
|
$
|
2
|
|
|
$
|
67
|
|
|
$
|
—
|
|
|
$
|
(8
|
)
|
|
$
|
(25
|
)
|
|
$
|
219
|
|
Commercial mortgage-backed securities
|
78
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
6
|
|
|
84
|
|
||||||||
Corporates
|
1,106
|
|
|
—
|
|
|
7
|
|
|
5
|
|
|
—
|
|
|
(6
|
)
|
|
(39
|
)
|
|
1,073
|
|
||||||||
Hybrids
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
||||||||
Municipals
|
38
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
38
|
|
||||||||
Equity securities available-for-sale
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||||
Other invested assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Available-for-sale embedded derivative
|
14
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15
|
|
||||||||
Loan participations
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
||||||||
Total assets at Level 3 fair value
|
$
|
1,431
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
72
|
|
|
$
|
—
|
|
|
$
|
(16
|
)
|
|
$
|
(58
|
)
|
|
$
|
1,440
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
FIA embedded derivatives, included in contractholder funds
|
$
|
2,362
|
|
|
$
|
80
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,442
|
|
Total liabilities at Level 3 fair value
|
$
|
2,362
|
|
|
$
|
80
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended June 30, 2017
|
||||||||||||||||||||||||||||||
|
Balance at Beginning
of Period |
|
Total Gains (Losses)
|
|
Purchases
|
|
Sales
|
|
Settlements
|
|
Net transfer In (Out) of
Level 3 (a) |
|
Balance at End of
Period |
||||||||||||||||||
|
|
Included in
Earnings |
|
Included in
AOCI |
|
|
|
|
|
||||||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Fixed maturity securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Asset-backed securities
|
$
|
172
|
|
|
$
|
(2
|
)
|
|
$
|
2
|
|
|
$
|
130
|
|
|
$
|
—
|
|
|
$
|
(24
|
)
|
|
$
|
(59
|
)
|
|
$
|
219
|
|
Commercial mortgage-backed securities
|
79
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
(1
|
)
|
|
(2
|
)
|
|
84
|
|
||||||||
Corporates
|
1,121
|
|
|
(1
|
)
|
|
(29
|
)
|
|
116
|
|
|
(5
|
)
|
|
(87
|
)
|
|
(42
|
)
|
|
1,073
|
|
||||||||
Hybrids
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
||||||||
Municipals
|
41
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
38
|
|
||||||||
Equity securities available-for-sale
|
3
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||||
Other invested assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Available-for-sale embedded derivative
|
13
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15
|
|
||||||||
Loan participations
|
21
|
|
|
(2
|
)
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(20
|
)
|
|
—
|
|
|
—
|
|
||||||||
Total assets at Level 3 fair value
|
$
|
1,450
|
|
|
$
|
(5
|
)
|
|
$
|
(28
|
)
|
|
$
|
264
|
|
|
$
|
(5
|
)
|
|
$
|
(133
|
)
|
|
$
|
(103
|
)
|
|
$
|
1,440
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
FIA embedded derivatives, included in contractholder funds
|
$
|
2,383
|
|
|
$
|
59
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,442
|
|
Total liabilities at Level 3 fair value
|
$
|
2,383
|
|
|
$
|
59
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2016
|
||||||||||||||||||||||||||||||
|
Balance at Beginning
of Period |
|
Total Gains (Losses)
|
|
Purchases
|
|
Sales
|
|
Settlements
|
|
Net transfer In (Out) of
Level 3 (a) |
|
Balance at End of
Period |
||||||||||||||||||
|
|
Included in
Earnings |
|
Included in
AOCI |
|
|
|
|
|
||||||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Fixed maturity securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Asset-backed securities
|
$
|
75
|
|
|
$
|
(4
|
)
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
(41
|
)
|
|
$
|
30
|
|
Commercial mortgage-backed securities
|
139
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(52
|
)
|
|
87
|
|
||||||||
Corporates
|
1,006
|
|
|
—
|
|
|
19
|
|
|
19
|
|
|
—
|
|
|
(4
|
)
|
|
20
|
|
|
1,060
|
|
||||||||
Hybrids
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
||||||||
Municipals
|
39
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41
|
|
||||||||
Equity securities available-for-sale
|
11
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
||||||||
Other invested assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Available-for-sale embedded derivative
|
11
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
||||||||
Loan participations
|
88
|
|
|
(4
|
)
|
|
5
|
|
|
16
|
|
|
—
|
|
|
(57
|
)
|
|
—
|
|
|
48
|
|
||||||||
Total assets at Level 3 fair value
|
$
|
1,369
|
|
|
$
|
(7
|
)
|
|
$
|
27
|
|
|
$
|
35
|
|
|
$
|
—
|
|
|
$
|
(63
|
)
|
|
$
|
(69
|
)
|
|
$
|
1,292
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
FIA embedded derivatives, included in contractholder funds
|
$
|
2,248
|
|
|
$
|
77
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,325
|
|
Total liabilities at Level 3 fair value
|
$
|
2,248
|
|
|
$
|
77
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended June 30, 2016
|
||||||||||||||||||||||||||||||
|
Balance at Beginning
of Period |
|
Total Gains (Losses)
|
|
Purchases
|
|
Sales
|
|
Settlements
|
|
Net transfer In (Out) of
Level 3 (a) |
|
Balance at End of
Period |
||||||||||||||||||
|
|
Included in
Earnings |
|
Included in
AOCI |
|
|
|
|
|
||||||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Fixed maturity securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Asset-backed securities
|
$
|
38
|
|
|
$
|
(9
|
)
|
|
$
|
1
|
|
|
$
|
41
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
(40
|
)
|
|
$
|
30
|
|
Commercial mortgage-backed securities
|
144
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
(56
|
)
|
|
87
|
|
||||||||
Corporates
|
964
|
|
|
—
|
|
|
32
|
|
|
82
|
|
|
—
|
|
|
(23
|
)
|
|
5
|
|
|
1,060
|
|
||||||||
Hybrids
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
||||||||
Municipals
|
39
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41
|
|
||||||||
Equity securities available-for-sale
|
11
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
||||||||
Available-for-sale embedded derivative
|
10
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
||||||||
Loan participations
|
119
|
|
|
(7
|
)
|
|
9
|
|
|
50
|
|
|
—
|
|
|
(123
|
)
|
|
—
|
|
|
48
|
|
||||||||
Total assets at Level 3 fair value
|
$
|
1,325
|
|
|
$
|
(14
|
)
|
|
$
|
45
|
|
|
$
|
173
|
|
|
$
|
—
|
|
|
$
|
(150
|
)
|
|
$
|
(87
|
)
|
|
$
|
1,292
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
FIA embedded derivatives, included in contractholder funds
|
$
|
2,149
|
|
|
$
|
176
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,325
|
|
Total liabilities at Level 3 fair value
|
$
|
2,149
|
|
|
$
|
176
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Estimated Fair Value
|
|
Carrying Amount
|
||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial mortgage loans
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
551
|
|
|
$
|
551
|
|
|
$
|
550
|
|
Policy loans, included in other invested assets
|
—
|
|
|
—
|
|
|
14
|
|
|
14
|
|
|
16
|
|
|||||
Related party loans
|
—
|
|
|
—
|
|
|
71
|
|
|
71
|
|
|
71
|
|
|||||
Total
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
636
|
|
|
$
|
636
|
|
|
$
|
637
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||||
Investment contracts, included in contractholder funds
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15,939
|
|
|
$
|
15,939
|
|
|
$
|
17,900
|
|
Debt
|
—
|
|
|
309
|
|
|
105
|
|
|
414
|
|
|
405
|
|
|||||
Total
|
$
|
—
|
|
|
$
|
309
|
|
|
$
|
16,044
|
|
|
$
|
16,353
|
|
|
$
|
18,305
|
|
|
September 30, 2016
|
||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Estimated Fair Value
|
|
Carrying Amount
|
||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial mortgage loans
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
614
|
|
|
$
|
614
|
|
|
$
|
595
|
|
Policy loans, included in other invested assets
|
—
|
|
|
—
|
|
|
13
|
|
|
13
|
|
|
14
|
|
|||||
Related party loans
|
—
|
|
|
—
|
|
|
71
|
|
|
71
|
|
|
71
|
|
|||||
Total
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
698
|
|
|
$
|
698
|
|
|
$
|
680
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||||
Investment contracts, included in contractholder funds
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,884
|
|
|
$
|
14,884
|
|
|
$
|
16,868
|
|
Debt
|
—
|
|
|
300
|
|
|
100
|
|
|
400
|
|
|
400
|
|
|||||
Total
|
$
|
—
|
|
|
$
|
300
|
|
|
$
|
14,984
|
|
|
$
|
15,284
|
|
|
$
|
17,268
|
|
|
Carrying Value After Measurement
|
||||||
|
June 30, 2017
|
|
September 30, 2016
|
||||
Equity securities available-for-sale
|
$
|
43
|
|
|
$
|
41
|
|
Limited partnership investment, included in other invested assets
|
$
|
145
|
|
|
$
|
12
|
|
|
|
VOBA
|
|
DAC
|
|
Total
|
||||||
Balance at September 30, 2016
|
|
$
|
19
|
|
|
$
|
1,007
|
|
|
$
|
1,026
|
|
Deferrals
|
|
—
|
|
|
267
|
|
|
267
|
|
|||
Adjustments:
|
|
|
|
|
|
|
||||||
Unlocking
|
|
13
|
|
|
(10
|
)
|
|
3
|
|
|||
Interest
|
|
8
|
|
|
34
|
|
|
42
|
|
|||
Amortization
|
|
(54
|
)
|
|
(198
|
)
|
|
(252
|
)
|
|||
Adjustment for unrealized investment (gains)
|
|
14
|
|
|
(3
|
)
|
|
11
|
|
|||
Balance at June 30, 2017
|
|
$
|
—
|
|
|
$
|
1,097
|
|
|
$
|
1,097
|
|
|
|
|
|
|
|
|
||||||
Accumulated amortization
|
|
$
|
429
|
|
|
|
|
|
|
|
VOBA
|
|
DAC
|
|
Total
|
||||||
Balance at September 30, 2015
|
|
$
|
187
|
|
|
$
|
801
|
|
|
$
|
988
|
|
Deferrals
|
|
—
|
|
|
258
|
|
|
258
|
|
|||
Adjustments:
|
|
|
|
|
|
|
||||||
Unlocking
|
|
12
|
|
|
(1
|
)
|
|
11
|
|
|||
Interest
|
|
8
|
|
|
25
|
|
|
33
|
|
|||
Amortization
|
|
(33
|
)
|
|
(45
|
)
|
|
(78
|
)
|
|||
Adjustment for unrealized investment (gains)
|
|
(136
|
)
|
|
(28
|
)
|
|
(164
|
)
|
|||
Balance at June 30, 2016
|
|
$
|
38
|
|
|
$
|
1,010
|
|
|
$
|
1,048
|
|
|
|
|
|
|
|
|
||||||
Accumulated amortization
|
|
$
|
404
|
|
|
|
|
|
|
|
June 30, 2017
|
|
September 30, 2016
|
||||
Debt
|
|
$
|
300
|
|
|
$
|
300
|
|
Revolving credit facility
|
|
105
|
|
|
100
|
|
|
|
Three months ended
|
|
Nine months ended
|
||||||||||||||||||||||||||||
|
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||||||||||||||||||||||
|
|
Interest Expense
|
|
Amortization
|
|
Interest Expense
|
|
Amortization
|
|
Interest Expense
|
|
Amortization
|
|
Interest Expense
|
|
Amortization
|
||||||||||||||||
Debt
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
14
|
|
|
$
|
—
|
|
|
$
|
14
|
|
|
$
|
2
|
|
Revolving credit facility
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
|
Shares
|
|
Total Cost
|
|||
Shares purchased pursuant to the repurchase program
|
|
500
|
|
|
$
|
11
|
|
Shares acquired to satisfy employee income tax withholding pursuant to the Company's stock compensation plan
|
|
12
|
|
|
—
|
|
|
Total shares of common stock at completion of repurchase program as of June 30, 2015
|
|
512
|
|
|
11
|
|
|
Shares acquired to satisfy employee income tax withholding pursuant to the Company's stock compensation plan during the three months ended December 31, 2015
|
|
22
|
|
|
1
|
|
|
Shares acquired to satisfy employee income tax withholding pursuant to the Company's stock compensation plan during the three months ended March 31, 2016
|
|
3
|
|
|
—
|
|
|
Shares acquired to satisfy employee income tax withholding pursuant to the Company's stock compensation plan during the three months ended December 31, 2016
|
|
28
|
|
|
1
|
|
|
Shares acquired to satisfy employee income tax withholding pursuant to the Company's stock compensation plan during the three months ended March 31, 2017
|
|
4
|
|
|
$
|
—
|
|
Total shares of common stock repurchased as of June 30, 2017
|
|
569
|
|
|
$
|
13
|
|
Date Declared
|
|
Date Paid
|
|
Date Shareholders of record
|
|
Shareholders of record (in thousands)
|
|
Cash Dividend declared (per share)
|
|
Total cash paid
|
November 12, 2015
|
|
December 14, 2015
|
|
November 30, 2015
|
|
58,144
|
|
$0.065
|
|
$4
|
February 2, 2016
|
|
March 7, 2016
|
|
February 22, 2016
|
|
58,210
|
|
$0.065
|
|
$4
|
April 28, 2016
|
|
May 30, 2016
|
|
May 16, 2016
|
|
58,211
|
|
$0.065
|
|
$4
|
November 10, 2016
|
|
December 12, 2016
|
|
November 28, 2016
|
|
58,245
|
|
$0.065
|
|
$4
|
February 2, 2017
|
|
March 6, 2017
|
|
February 21, 2017
|
|
58,308
|
|
$0.065
|
|
$4
|
May 1, 2017
|
|
June 5, 2017
|
|
May 22, 2017
|
|
58,315
|
|
$0.065
|
|
$4
|
|
|
Three months ended
|
|
Nine months ended
|
||||||||||||
|
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||||||
FGL Plans
|
|
|
|
|
|
|
|
|
||||||||
Restricted shares
|
|
—
|
|
|
1
|
|
|
1
|
|
|
2
|
|
||||
Performance restricted stock units
|
|
2
|
|
|
2
|
|
|
2
|
|
|
5
|
|
||||
|
|
2
|
|
|
3
|
|
|
3
|
|
|
7
|
|
||||
FGLH Plans
|
|
|
|
|
|
|
|
|
||||||||
Stock Incentive Plan - stock options
|
|
—
|
|
|
(1
|
)
|
|
1
|
|
|
—
|
|
||||
Amended and Restated Stock Incentive Plan - stock options
|
|
1
|
|
|
—
|
|
|
2
|
|
|
1
|
|
||||
Amended and Restated Stock Incentive Plan - restricted stock units
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
||||
|
|
1
|
|
|
(2
|
)
|
|
3
|
|
|
1
|
|
||||
Total stock compensation expense
|
|
3
|
|
|
1
|
|
|
6
|
|
|
8
|
|
||||
Related tax benefit
|
|
1
|
|
|
—
|
|
|
2
|
|
|
3
|
|
||||
Net stock compensation expense
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
4
|
|
|
$
|
5
|
|
|
|
Unrecognized Compensation
Expense |
|
Weighted Average Recognition
Period in Years |
||
FGL Plans
|
|
|
|
|
||
Stock options
|
|
$
|
—
|
|
|
2
|
Restricted shares
|
|
1
|
|
|
2
|
|
Performance restricted stock units
|
|
17
|
|
|
2
|
|
Total unrecognized stock compensation expense
|
|
$
|
18
|
|
|
2
|
Stock Option Awards
|
|
Options
|
|
Weighted Average
Exercise Price
|
|||
Stock options outstanding at September 30, 2016
|
|
346
|
|
|
$
|
22.40
|
|
Granted
|
|
47
|
|
|
23.35
|
|
|
Exercised
|
|
(15
|
)
|
|
18.53
|
|
|
Forfeited or expired
|
|
(14
|
)
|
|
20.91
|
|
|
Stock options outstanding at June 30, 2017
|
|
364
|
|
|
22.74
|
|
|
Exercisable at June 30, 2017
|
|
203
|
|
|
21.21
|
|
|
Vested or projected to vest at June 30, 2017
|
|
364
|
|
|
22.74
|
|
Weighted average fair value per options granted
|
$2.57
|
Risk-free interest rate
|
1.11%
|
Assumed dividend yield
|
1.12%
|
Expected option term
|
2.0 years
|
Volatility
|
20.00%
|
Restricted Stock Awards
|
|
Shares
|
|
Weighted Average Grant
Date Fair Value
|
|||
Nonvested restricted shares outstanding at September 30, 2016
|
|
154
|
|
|
$
|
22.91
|
|
Granted
|
|
29
|
|
|
23.35
|
|
|
Vested
|
|
(90
|
)
|
|
21.85
|
|
|
Forfeited
|
|
(5
|
)
|
|
22.73
|
|
|
Nonvested restricted shares outstanding at June 30, 2017
|
|
88
|
|
|
24.14
|
|
Performance Restricted Stock Units (PRSUs)
|
|
Shares
|
|
Weighted Average Grant
Date Fair Value |
|||
PRSUs outstanding at September 30, 2016
|
|
—
|
|
|
$
|
—
|
|
Granted
|
|
498
|
|
|
27.43
|
|
|
Vested
|
|
(11
|
)
|
|
17.82
|
|
|
Forfeited or expired
|
|
—
|
|
|
—
|
|
|
PRSUs outstanding at June 30, 2017
|
|
487
|
|
|
27.65
|
|
|
|
FGLH
|
|||||
Stock Option Awards
|
|
Options
|
|
Weighted Average
Exercise Price
|
|||
Stock options outstanding at September 30, 2016
|
|
82
|
|
|
$
|
44.82
|
|
Granted
|
|
—
|
|
|
—
|
|
|
Exercised
|
|
(11
|
)
|
|
46.51
|
|
|
Forfeited or expired
|
|
—
|
|
|
—
|
|
|
Stock options outstanding at June 30, 2017
|
|
71
|
|
|
44.57
|
|
|
Vested and exercisable at June 30, 2017
|
|
71
|
|
|
44.57
|
|
Asset Type
|
June 30, 2017
|
||
Other invested assets
|
$
|
122
|
|
Equity securities, available-for-sale
|
33
|
|
|
Other assets
|
25
|
|
|
Total
|
$
|
180
|
|
|
Three months ended
|
|
Nine months ended
|
||||||||||||||||||||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||||||||||||||||||||||
|
Net Premiums Earned
|
|
Net Benefits Incurred
|
|
Net Premiums Earned
|
|
Net Benefits Incurred
|
|
Net Premiums Earned
|
|
Net Benefits Incurred
|
|
Net Premiums Earned
|
|
Net Benefits Incurred
|
||||||||||||||||
Direct
|
$
|
59
|
|
|
$
|
296
|
|
|
$
|
69
|
|
|
$
|
281
|
|
|
$
|
175
|
|
|
$
|
708
|
|
|
$
|
196
|
|
|
$
|
789
|
|
Assumed
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||||
Ceded
|
(47
|
)
|
|
(61
|
)
|
|
(48
|
)
|
|
(65
|
)
|
|
(149
|
)
|
|
(185
|
)
|
|
(144
|
)
|
|
(205
|
)
|
||||||||
Net
|
$
|
12
|
|
|
$
|
235
|
|
|
$
|
21
|
|
|
$
|
216
|
|
|
$
|
26
|
|
|
$
|
523
|
|
|
$
|
52
|
|
|
$
|
585
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
Revenues:
|
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||||||
Premiums
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
2
|
|
Net investment income
|
|
12
|
|
|
15
|
|
|
35
|
|
|
47
|
|
||||
Net investment gains (losses)
|
|
7
|
|
|
(3
|
)
|
|
10
|
|
|
(10
|
)
|
||||
Insurance and investment product fees
|
|
1
|
|
|
1
|
|
|
2
|
|
|
3
|
|
||||
Total revenues
|
|
20
|
|
|
14
|
|
|
48
|
|
|
42
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Benefits and expenses:
|
|
|
|
|
|
|
|
|
||||||||
Benefits and other changes in policy reserves
|
|
(11
|
)
|
|
(12
|
)
|
|
(27
|
)
|
|
(36
|
)
|
||||
Acquisition & operating expenses, net of deferrals
|
|
(1
|
)
|
|
(1
|
)
|
|
(3
|
)
|
|
(3
|
)
|
||||
Total benefits and expenses
|
|
(12
|
)
|
|
(13
|
)
|
|
(30
|
)
|
|
(39
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Operating income
|
|
$
|
8
|
|
|
$
|
1
|
|
|
$
|
18
|
|
|
$
|
3
|
|
|
|
|
|
June 30, 2017
|
|||||||
Type
|
|
Balance Sheet Classification
|
|
Asset carrying value
|
|
Accrued Investment Income
|
|
Total carrying value
|
|||
Fortress Investment Group CLOs
|
|
Fixed maturities, available-for-sale
|
|
174
|
|
|
2
|
|
|
176
|
|
Spectrum Brands, Inc.
|
|
Fixed maturities, available for sale
|
|
2
|
|
|
—
|
|
|
2
|
|
Salus preferred equity (a)
|
|
Equity securities, available-for-sale
|
|
1
|
|
|
—
|
|
|
1
|
|
HGI energy loan (b)
|
|
Related party loans
|
|
71
|
|
|
—
|
|
|
71
|
|
|
|
|
|
September 30, 2016
|
||||||||||
Type
|
|
Balance Sheet Classification
|
|
Asset carrying value
|
|
Accrued Investment Income
|
|
Total carrying value
|
||||||
Salus CLOs
|
|
Fixed maturities, available for sale
|
|
$
|
19
|
|
|
$
|
—
|
|
|
$
|
19
|
|
Fortress Investment Group CLOs
|
|
Fixed maturities, available for sale
|
|
225
|
|
|
2
|
|
|
227
|
|
|||
Salus preferred equity(a)
|
|
Equity securities, available for sale
|
|
3
|
|
|
—
|
|
|
3
|
|
|||
Salus participations (b)
|
|
Other invested assets
|
|
21
|
|
|
—
|
|
|
21
|
|
|||
HGI energy loan (c)
|
|
Related party loans
|
|
71
|
|
|
—
|
|
|
71
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
||||||||||||
|
|
|
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||||||
Type
|
|
Investment Income Classification
|
|
Net investment income
|
|
Net investment income
|
|
Net investment income
|
|
Net investment income
|
||||||||
Salus CLOs
|
|
Fixed maturities
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
7
|
|
Fortress Investment Group CLOs
|
|
Fixed maturities
|
|
3
|
|
|
2
|
|
|
8
|
|
|
6
|
|
||||
Salus participations
|
|
Other invested assets
|
|
—
|
|
|
1
|
|
|
—
|
|
|
4
|
|
||||
EIC Participations
|
|
Other invested assets
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||
HGI energy loan
|
|
Related party loans
|
|
—
|
|
|
1
|
|
|
—
|
|
|
3
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
||||||||||||
|
|
|
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||||||
Type
|
|
Investment Income Classification
|
|
Net realized gains (losses)
|
|
Net realized gains (losses)
|
|
Net realized gains (losses)
|
|
Net realized gains (losses)
|
||||||||
Salus CLOs (a)
|
|
Fixed maturities
|
|
$
|
(1
|
)
|
|
$
|
(4
|
)
|
|
$
|
(2
|
)
|
|
$
|
(9
|
)
|
Salus participations (b)
|
|
Other invested assets
|
|
1
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
||||
Salus preferred equity (c)
|
|
Other invested assets
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
|
Three months ended
|
|
Nine months ended
|
||||||||
|
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||
CorAmerica Capital, LLC
|
|
—
|
|
|
1
|
|
|
1
|
|
|
2
|
|
|
Three months ended
|
|
Nine months ended
|
||||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||||||
Net income attributable to common shares - basic
|
$
|
32
|
|
|
$
|
10
|
|
|
$
|
162
|
|
|
$
|
67
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding - basic
|
58,335
|
|
|
58,310
|
|
|
58,314
|
|
|
58,279
|
|
||||
Dilutive effect of unvested restricted stock & PRSU
|
37
|
|
|
319
|
|
|
39
|
|
|
293
|
|
||||
Dilutive effect of stock options
|
73
|
|
|
27
|
|
|
38
|
|
|
27
|
|
||||
Weighted-average shares outstanding - diluted
|
58,445
|
|
|
58,656
|
|
|
58,391
|
|
|
58,599
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net income per common share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.54
|
|
|
$
|
0.16
|
|
|
$
|
2.78
|
|
|
$
|
1.14
|
|
Diluted
|
$
|
0.54
|
|
|
$
|
0.16
|
|
|
$
|
2.77
|
|
|
$
|
1.14
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
the ability to satisfy the closing conditions, including regulatory approvals, contained in the Merger agreement;
|
•
|
the impact on the stock price, business, financial condition and results of operations if the proposed merger is not consummated or not consummated timely;
|
•
|
the impact of the operating restrictions in the Merger Agreement and their impact on FGL;
|
•
|
litigation arising from the proposed merger;
|
•
|
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 (including dividends or payments on surplus notes those subsidiaries issue to us);
|
•
|
the impact of the Department of Labor "fiduciary" rule, finalized in April 2016, on the Company, its products, distribution and business model;
|
•
|
the impact on our business of new accounting rules or changes to existing accounting rules;
|
•
|
the impact of restrictions in FGL’s debt instruments on its ability to operate its business, finance its capital needs or pursue or expand its business strategies;
|
•
|
the accuracy of management’s assumptions and estimates;
|
•
|
the accuracy of our assumptions regarding the fair value and future performance of our investments;
|
•
|
our ability and our insurance subsidiaries’ ability to maintain or improve financial strength ratings;
|
•
|
our potential need and our insurance subsidiaries’ potential need for additional capital to maintain our and their financial strength and credit ratings and meet other requirements and obligations;
|
•
|
the continued availability of capital required for our insurance subsidiaries to grow;
|
•
|
our ability to defend ourselves against or respond to, potential litigation, enforcement investigations or increased regulatory scrutiny;
|
•
|
the impact of potential litigation, including class action litigation;
|
•
|
the impact of our reinsurers failing to meet or timely meet their assumed obligations, increasing their rates, or becoming subject to adverse developments that could materially adversely impact their ability to provide reinsurance to us at consistent and economical terms;
|
•
|
restrictions on our ability to use captive reinsurers and the impact of the anticipated implementation of principle-based reserving
|
•
|
the impact of interest rate fluctuations and withdrawal demands in excess of our assumptions;
|
•
|
the impact of market and credit risks;
|
•
|
equity market volatility;
|
•
|
credit market volatility or disruption;
|
•
|
changes in the federal income tax laws and regulations which may affect the relative income tax advantages of our products;
|
•
|
increases in our valuation allowance against our deferred tax assets, and restrictions on our ability to fully utilize such assets;
|
•
|
potential adverse tax consequences if we generate passive income in excess of operating expenses;
|
•
|
the performance of third parties including third party administrators, independent distributors, underwriters, actuarial consultants and other service providers;
|
•
|
the loss of key personnel;
|
•
|
interruption or other operational failures in telecommunication, information technology and other operational systems, or a failure to maintain the security, integrity, confidentiality or privacy of sensitive data residing on such systems;
|
•
|
our exposure to unidentified or unanticipated risk not adequately addressed by our risk management policies and procedures;
|
•
|
general economic conditions and other factors, including prevailing interest and unemployment rate levels and stock and credit market performance;
|
•
|
our ability to protect our intellectual property;
|
•
|
the impact on our business of natural and man-made catastrophes, pandemics, and malicious and terrorist acts;
|
•
|
our ability to compete in a highly competitive industry;
|
•
|
our ability to maintain competitive policy expense costs;
|
•
|
adverse consequences if the independent contractor status of our insurance marketing organizations ("IMOs") is successfully challenged;
|
•
|
our ability to attract and retain national marketing organizations and independent agents;
|
•
|
the inability of our subsidiaries and affiliates to generate sufficient cash to service all of their obligations;
|
•
|
conflicts of interest between HRG Group Inc. or its affiliates, including Front Street Re (Cayman) Ltd. (“FSRCI”);
|
•
|
the impact of non-performance of loans originated by Salus Capital Partners, LLC ("Salus");
|
•
|
our subsidiaries’ ability to pay dividends to us;
|
•
|
the ability to maintain or obtain approval of Iowa Insurance Division ("IID") and other regulatory authorities as required for our operations and those of our insurance subsidiaries; and
|
•
|
the other factors discussed in “Risk Factors” of our
2016
Form 10-K.
|
|
|
Annuity Sales
|
|
IUL Sales
|
||||||||||||
(dollars in millions)
|
|
Fiscal 2017
|
|
Fiscal 2016
|
|
Fiscal 2017
|
|
Fiscal 2016
|
||||||||
First fiscal quarter
|
|
$
|
648
|
|
|
$
|
489
|
|
|
$
|
17
|
|
|
$
|
13
|
|
Second fiscal quarter
|
|
732
|
|
|
601
|
|
|
14
|
|
|
11
|
|
||||
Third fiscal quarter
|
|
582
|
|
|
832
|
|
|
9
|
|
|
15
|
|
||||
Total
|
|
$
|
1,962
|
|
|
$
|
1,922
|
|
|
$
|
40
|
|
|
$
|
39
|
|
|
Fiscal Quarter
|
|
|
|
Fiscal Nine Months
|
|
|
||||||||||||||||
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Premiums
|
$
|
12
|
|
|
$
|
21
|
|
|
$
|
(9
|
)
|
|
$
|
26
|
|
|
$
|
52
|
|
|
$
|
(26
|
)
|
Net investment income
|
257
|
|
|
236
|
|
|
21
|
|
|
744
|
|
|
685
|
|
|
59
|
|
||||||
Net investment gains (losses)
|
67
|
|
|
(28
|
)
|
|
95
|
|
|
199
|
|
|
(7
|
)
|
|
206
|
|
||||||
Insurance and investment product fees and other
|
44
|
|
|
32
|
|
|
12
|
|
|
126
|
|
|
93
|
|
|
33
|
|
||||||
Total revenues
|
380
|
|
|
261
|
|
|
119
|
|
|
1,095
|
|
|
823
|
|
|
272
|
|
||||||
Benefits and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Benefits and other changes in policy reserves
|
235
|
|
|
216
|
|
|
19
|
|
|
523
|
|
|
585
|
|
|
(62
|
)
|
||||||
Acquisition and operating expenses, net of deferrals
|
40
|
|
|
28
|
|
|
12
|
|
|
101
|
|
|
83
|
|
|
18
|
|
||||||
Amortization of intangibles
|
51
|
|
|
(4
|
)
|
|
55
|
|
|
207
|
|
|
34
|
|
|
173
|
|
||||||
Total benefits and expenses
|
326
|
|
|
240
|
|
|
86
|
|
|
831
|
|
|
702
|
|
|
129
|
|
||||||
Operating income
|
54
|
|
|
21
|
|
|
33
|
|
|
264
|
|
|
121
|
|
|
143
|
|
||||||
Interest expense
|
(6
|
)
|
|
(5
|
)
|
|
(1
|
)
|
|
(18
|
)
|
|
(17
|
)
|
|
(1
|
)
|
||||||
Income before income taxes
|
48
|
|
|
16
|
|
|
32
|
|
|
246
|
|
|
104
|
|
|
142
|
|
||||||
Income tax expense
|
(16
|
)
|
|
(6
|
)
|
|
(10
|
)
|
|
(84
|
)
|
|
(37
|
)
|
|
(47
|
)
|
||||||
Net income
|
$
|
32
|
|
|
$
|
10
|
|
|
$
|
22
|
|
|
$
|
162
|
|
|
$
|
67
|
|
|
$
|
95
|
|
|
Fiscal Quarter
|
|
|
|
Fiscal Nine Months
|
|
|
||||||||||||||||
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
||||||||||||
Fixed maturity securities, available-for-sale
|
$
|
242
|
|
|
$
|
223
|
|
|
$
|
19
|
|
|
$
|
706
|
|
|
$
|
644
|
|
|
$
|
62
|
|
Equity securities, available-for-sale
|
11
|
|
|
7
|
|
|
4
|
|
|
31
|
|
|
23
|
|
|
8
|
|
||||||
Commercial mortgage loans, related party loans, invested cash, short term investments, and other investments
|
10
|
|
|
11
|
|
|
(1
|
)
|
|
24
|
|
|
32
|
|
|
(8
|
)
|
||||||
Gross investment income
|
263
|
|
|
241
|
|
|
22
|
|
|
761
|
|
|
699
|
|
|
62
|
|
||||||
Investment expense
|
(6
|
)
|
|
(5
|
)
|
|
(1
|
)
|
|
(17
|
)
|
|
(14
|
)
|
|
(3
|
)
|
||||||
Net investment income
|
$
|
257
|
|
|
$
|
236
|
|
|
$
|
21
|
|
|
$
|
744
|
|
|
$
|
685
|
|
|
$
|
59
|
|
|
Fiscal Quarter
|
|
|
|
Fiscal Nine Months
|
|
|
||||||||||||||||
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
||||||||||||
Yield on AAUM (at amortized cost)
|
5.01
|
%
|
|
5.01
|
%
|
|
—
|
%
|
|
4.92
|
%
|
|
4.93
|
%
|
|
(0.01
|
)%
|
||||||
Less: Interest credited and option cost
|
(2.47
|
)%
|
|
(2.60
|
)%
|
|
0.13
|
%
|
|
(2.51
|
)%
|
|
(2.66
|
)%
|
|
0.15
|
%
|
||||||
Net investment spread
|
2.54
|
%
|
|
2.41
|
%
|
|
0.13
|
%
|
|
2.41
|
%
|
|
2.27
|
%
|
|
0.14
|
%
|
||||||
AAUM
|
$
|
20,569
|
|
|
$
|
18,854
|
|
|
$
|
1,715
|
|
|
$
|
20,153
|
|
|
$
|
18,523
|
|
|
$
|
1,630
|
|
•
|
The
increase
in net investment income of
$21
, or
9%
, from the
Fiscal 2016 Quarter
to the
Fiscal 2017 Quarter
was due to an
increase
in AAUM (volume).
|
•
|
The
increase
in net investment income of
$59
, or
9%
, from the
Fiscal 2016 Nine Months
to the
Fiscal 2017 Nine Months
was primarily due an
increase
AAUM (volume) period over period.
|
•
|
The
increase
in AAUM of
$1.7 billion
or
9%
from the
Fiscal 2016 Quarter
to the
Fiscal 2017 Quarter
and
$1.6 billion
or
9%
from the
Fiscal 2016 Nine Months
to the
Fiscal 2017 Nine Months
was primarily due to new business sales over the past year, and stable in-force retention trends.
|
|
Fiscal Quarter
|
|
|
|
Fiscal Nine Months
|
|
|
||||||||||||||||
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
||||||||||||
Net realized (losses) on available-for-sale securities
|
$
|
(6
|
)
|
|
$
|
(7
|
)
|
|
$
|
1
|
|
|
$
|
(23
|
)
|
|
$
|
(6
|
)
|
|
$
|
(17
|
)
|
Realized and unrealized gains on certain derivative instruments
|
82
|
|
|
16
|
|
|
66
|
|
|
230
|
|
|
26
|
|
|
204
|
|
||||||
Change in fair value of reinsurance related embedded derivative
|
(9
|
)
|
|
(37
|
)
|
|
28
|
|
|
(8
|
)
|
|
(27
|
)
|
|
19
|
|
||||||
Net investment gains (losses)
|
$
|
67
|
|
|
$
|
(28
|
)
|
|
$
|
95
|
|
|
$
|
199
|
|
|
$
|
(7
|
)
|
|
$
|
206
|
|
•
|
Net realized and unrealized gains on certain derivative instruments
increased
$66
from the
Fiscal 2016 Quarter
to the
Fiscal 2017 Quarter
. See the table below for primary drivers of this decrease.
|
•
|
The fair value of the reinsurance related embedded derivative
decrease
d
$9
during the
Fiscal 2017 Quarter
compared to a decrease of
$37
during the
Fiscal 2016 Quarter
, for a period over period
increase
of
$28
. Specifically, the current quarter
decrease
of
$9
was due to a corresponding increase in fair value of the underlying FSRCI funds withheld ("FWH") portfolio; primarily resulting from lower treasury rates and credit spread tightening within corporate spreads. Comparatively, the fair value of the FSRCI FWH portfolio increased
$37
during the
Fiscal 2016 Quarter
primarily resulting from appreciation in energy and commodities sector assets (including energy and metals) which underperformed in the first half of 2016 but rebounded during the prior year quarter along with overall capital market improvements.
|
•
|
The increase in net investment losses on available-for-sale securities of
$17
from the
Fiscal 2016 Nine Months
to the
Fiscal 2017 Nine Months
was the result of a decrease in net trading gains during the current year compared to the prior year, partially offset by a year over year decrease in impairments. The
$23
of realized loss on available-for-sale securities during the
Fiscal 2017 Nine Months
include $1 of net trading losses and
$22
of impairment losses related to corporates, other invested assets and asset backed securities, comprised primarily of
$20
credit-related impairment loss on debt securities related to investments in First National Bank Holding Co. Comparatively, the $6 of net realized losses on available-for-sale securities for the
Fiscal 2016 Nine Months
include $28 of impairments related to corporate bonds and asset-backed-securities, partially offset by $22 of net trading gains primarily related to the redemption and sale of corporate bonds. Refer to "Note 4. Investments" of our unaudited Condensed Consolidated Financial Statements for additional details.
|
•
|
Net realized and unrealized gains on certain derivative instruments increased
$204
from the
Fiscal 2016 Nine Months
to the
Fiscal 2017 Nine Months
. See table below for primary drivers of these increases.
|
|
Fiscal Quarter
|
|
|
|
Fiscal Nine Months
|
|
|
||||||||||||||||
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
||||||||||||
Call options:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gains (losses) on option expiration
|
$
|
72
|
|
|
$
|
(36
|
)
|
|
$
|
108
|
|
|
$
|
144
|
|
|
$
|
(88
|
)
|
|
$
|
232
|
|
Change in unrealized gains
|
9
|
|
|
50
|
|
|
(41
|
)
|
|
81
|
|
|
109
|
|
|
(28
|
)
|
||||||
Futures contracts:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gains (losses) on futures contracts expiration
|
1
|
|
|
4
|
|
|
(3
|
)
|
|
5
|
|
|
2
|
|
|
3
|
|
||||||
Change in unrealized gains/losses
|
—
|
|
|
(2
|
)
|
|
2
|
|
|
—
|
|
|
3
|
|
|
(3
|
)
|
||||||
Total net change in fair value
|
$
|
82
|
|
|
$
|
16
|
|
|
$
|
66
|
|
|
$
|
230
|
|
|
$
|
26
|
|
|
$
|
204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Change in S&P 500 Index during the period
|
3
|
%
|
|
2
|
%
|
|
1
|
%
|
|
12
|
%
|
|
9
|
%
|
|
3
|
%
|
•
|
Realized gains and losses on certain derivative instruments are directly correlated to the performances 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. Additionally, the fair value of call options are primarily driven by the underlying performance of the S&P 500 index relative to the S&P index on the policyholder buy dates during each respective year.
|
•
|
The
increase
in certain derivative instruments from the
Fiscal 2016 Quarter
to the
Fiscal 2017 Quarter
and from the
Fiscal 2016 Nine Months
to the
Fiscal 2017 Nine Months
was primarily due to the change in net realized and unrealized gains/losses on call options and future contracts during the respective quarters, as well as timing of option purchases and expirations. The S&P 500 Index increased
3%
and
2%
during the
Fiscal 2017 Quarter
and
Fiscal 2016 Quarter
, respectively, and increased
12%
and
9%
during the
Fiscal 2017 Nine Months
and
Fiscal 2016 Nine Months
, respectively (the percentages noted are a fiscal period over period comparison of the growth of the S&P 500 Index only and do not reflect the change for each option buy date).
|
•
|
Actual amounts credited to contractholder fund balances may differ from the index appreciation due to contractual features in the FIA contracts (caps, spreads and participation rates) which allow the Company to manage the cost of the options purchased to fund the annual index credits.
|
•
|
The credits for the
Fiscal 2017 Quarter
and the
Fiscal 2016 Quarter
were based on comparing the S&P 500 Index on each issue date in these respective periods to the same issue date in the respective prior year periods. Favorable volatility at different points in these periods caused an increase in crediting rates in the point-to-point, monthly point-to-point and monthly average strategies due to higher equity returns in the
Fiscal 2017 Quarter
.
|
•
|
The credits for the
Fiscal 2017 Nine Months
and the
Fiscal 2016 Nine Months
were based on comparing the S&P 500 Index on each issue date in these respective periods to the same issue date in the respective prior year periods. Unfavorable volatility at different points in these periods caused an decline in crediting rates for the 3 year high water mark strategy in the
Fiscal 2017 Nine Months
.
|
|
Fiscal Quarter
|
|
|
|
Fiscal Nine Months
|
|
|
||||||||||||||||
Insurance and investment product fees and other:
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
||||||||||||
Surrender charges
|
$
|
9
|
|
|
$
|
5
|
|
|
$
|
4
|
|
|
$
|
25
|
|
|
$
|
15
|
|
|
$
|
10
|
|
Cost of insurance fees and other income
|
35
|
|
|
27
|
|
|
8
|
|
|
101
|
|
|
78
|
|
|
23
|
|
||||||
Total insurance and investment product fees and other
|
$
|
44
|
|
|
$
|
32
|
|
|
$
|
12
|
|
|
$
|
126
|
|
|
$
|
93
|
|
|
$
|
33
|
|
•
|
Insurance and investment product fees and other consists primarily of the cost of insurance, policy rider fees 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
$12
increase in total insurance and investment product fees and other in the
Fiscal 2017 Quarter
compared to the
Fiscal 2016 Quarter
and the
$33
increase in the
Fiscal 2017 Nine Months
compared to the
Fiscal 2016 Nine Months
was primarily due to increases in rider fees on FIA policies as well as increases in cost of insurance ("COI") charges on IUL policies over the past year. Specifically, guaranteed minimum withdrawal benefit ("GMWB") rider fees increased by
$5
and
$12
in the
Fiscal 2017 Quarter
compared to the
Fiscal 2016 Quarter
and the
Fiscal 2017 Nine Months
compared to the
Fiscal 2016 Nine Months
, respectively. This growth is a result of growth in benefit base, which is partially offset by a corresponding increase in income rider reserves (included in Benefits and other changes in policy reserves). GMWB rider fees are based on the policyholder's benefit base and are collected at the end of the policy year. Thus, FIA sales and growth of benefit base in Fiscal 2016 resulted in higher fee income due to policyholder anniversary dates in the current quarter. The COI charges on IUL policies also increased
$3
and
$10
quarter over quarter and year over year, respectively, due to continued growth in life sales over the past year.
|
•
|
The period over period increase in surrender charges of
$4
in the
Fiscal 2017 Quarter
compared to the
Fiscal 2016 Quarter
and the increase of
$10
in the
Fiscal 2017 Nine Months
compared to the
Fiscal 2016 Nine Months
was primarily due to surrender charges from policyholder lapses during their respective surrender charge periods. These surrender charges protect the Company from premature withdrawals. The lower interest rate environment in prior years resulted in lower than expected surrenders, relative to the current interest rate environment thus resulting in higher surrender charge experience period over period.
|
|
Fiscal Quarter
|
|
|
|
Fiscal Nine Months
|
|
|
||||||||||||||||
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
||||||||||||
FIA market value option liability change
|
$
|
17
|
|
|
$
|
53
|
|
|
$
|
(36
|
)
|
|
$
|
92
|
|
|
$
|
120
|
|
|
$
|
(28
|
)
|
FIA present value future credits & guarantee liability change
|
(16
|
)
|
|
43
|
|
|
(59
|
)
|
|
(177
|
)
|
|
97
|
|
|
(274
|
)
|
||||||
Index credits, interest credited & bonuses
|
182
|
|
|
65
|
|
|
117
|
|
|
475
|
|
|
213
|
|
|
262
|
|
||||||
Annuity Payments
|
37
|
|
|
41
|
|
|
(4
|
)
|
|
115
|
|
|
124
|
|
|
(9
|
)
|
||||||
Other policy benefits and reserve movements
|
15
|
|
|
14
|
|
|
1
|
|
|
18
|
|
|
31
|
|
|
(13
|
)
|
||||||
Total benefits and other changes in policy reserves
|
$
|
235
|
|
|
$
|
216
|
|
|
$
|
19
|
|
|
$
|
523
|
|
|
$
|
585
|
|
|
$
|
(62
|
)
|
•
|
The FIA market value option liability change
increased
$17
during the
Fiscal 2017 Quarter
compared to a
$53
increase
during the
Fiscal 2016 Quarter
and was driven by the corresponding change in fair value of FIA options during the respective periods. In general, a decrease or increase in market value of derivative assets hedging FIA index credits will result in a corresponding decrease or increase in the market value option liability, respectively. See table above for summary and discussion of net unrealized gains (losses) on certain derivative instruments.
|
•
|
The FIA present value of future credits and guarantee liability change
decreased
$16
during the
Fiscal 2017 Quarter
compared to a
$43
increase
during the
Fiscal 2016 Quarter
. The quarter over quarter decrease was primarily due to an increase in long durations risk free rates, which resulted in a corresponding decrease in reserves of
$10
during the period compared to a decrease in longer duration risk free rates during the
Fiscal 2016 Quarter
, which resulted in a corresponding increase in reserves of
$53
during the prior year quarter.
|
•
|
Index credits, interest credited & bonuses were
$182
during the
Fiscal 2017 Quarter
compared to
$65
during the
Fiscal 2016 Quarter
. The quarter over quarter
increase
of
$117
was primarily due to higher index credits on FIA policies reflecting the favorable performance of the S&P 500 Index relative to the S&P 500 Index level on the policyholder buy dates and related increase in proceeds which fund FIA index credits. Fixed interest credits remained in line with historical experience during the Fiscal 2017 and 2016 Quarters.
|
•
|
The FIA market value option liability change
increased
$92
during the
Fiscal 2017 Nine Months
compared to a
$120
increase
during the
Fiscal 2016 Nine Months
and was driven by the corresponding change in fair value of FIA options during the respective periods. In general, a decrease or increase in market value of derivative assets hedging FIA index credits will result in a corresponding decrease or increase in the market value option liability, respectively. See table above for summary and discussion of net unrealized gains (losses) on certain derivative instruments.
|
•
|
The FIA present value of future credits and guarantee liability change
decreased
$177
during the
Fiscal 2017 Nine Months
compared to a
$97
increase
during the
Fiscal 2016 Nine Months
. An increase in longer duration risk free rates during the
Fiscal 2017 Nine Months
decreased reserves by
$179
compared to a decrease in longer duration risk free rates during the
Fiscal 2016 Nine Months
and corresponding increase in reserves of
$113
.
|
•
|
Index credits, interest credited & bonuses were
$475
during the
Fiscal 2017 Nine Months
compared to
$213
during the
Fiscal 2016 Nine Months
. The period over period
increase
of
$262
was primarily due to higher index
|
|
Fiscal Quarter
|
|
|
|
Fiscal Nine Months
|
|
|
||||||||||||||||
Acquisition and operating expenses, net of deferrals:
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
||||||||||||
General expenses
|
$
|
35
|
|
|
$
|
26
|
|
|
$
|
9
|
|
|
$
|
90
|
|
|
$
|
77
|
|
|
$
|
13
|
|
Acquisition expenses
|
72
|
|
|
88
|
|
|
(16
|
)
|
|
245
|
|
|
236
|
|
|
9
|
|
||||||
Deferred acquisition costs
|
(67
|
)
|
|
(86
|
)
|
|
19
|
|
|
(234
|
)
|
|
(230
|
)
|
|
(4
|
)
|
||||||
Total acquisition and operating expenses, net of deferrals
|
$
|
40
|
|
|
$
|
28
|
|
|
$
|
12
|
|
|
$
|
101
|
|
|
$
|
83
|
|
|
$
|
18
|
|
•
|
General expenses increased
$9
in the
Fiscal 2017 Quarter
compared to the
Fiscal 2016 Quarter
, primarily due to an increase in merger transaction costs of $6 and stock compensation expense of $3 related to legacy incentive compensation plans during the current quarter compared to the prior quarter.
|
•
|
General expenses increased
$13
in the
Fiscal 2017 Nine Months
compared to the
Fiscal 2016 Nine Months
, primarily driven by $5 increase in expenses due to planned headcount growth and an increase in merger transaction costs and stock compensation expense related to legacy incentive compensation plans of $6 period over period.
|
•
|
Gross acquisition expenses decreased
$16
in the
Fiscal 2017 Quarter
compared to the
Fiscal 2016 Quarter
and increased
$9
in the
Fiscal 2017 Nine Months
compared to the
Fiscal 2016 Nine Months
. The decrease in the
Fiscal 2017 Quarter
is due to lower commissions driven by a decrease in annuity sales. The increase in the
Fiscal 2016 Nine Months
is due to higher commissions driven by increased FIA sales, primarily during the first and second fiscal quarters. These fluctuations were partially offset by a corresponding increase and decrease in deferred acquisition costs of
$19
and
$4
in the current fiscal quarter and nine months, respectively.
|
|
Fiscal Quarter
|
|
|
|
Fiscal Nine Months
|
|
|
||||||||||||||||
Amortization of intangibles related to:
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
||||||||||||
Unlocking
|
$
|
—
|
|
|
$
|
(3
|
)
|
|
$
|
3
|
|
|
$
|
(3
|
)
|
|
$
|
(11
|
)
|
|
$
|
8
|
|
Interest
|
(14
|
)
|
|
(10
|
)
|
|
(4
|
)
|
|
(42
|
)
|
|
(33
|
)
|
|
(9
|
)
|
||||||
Amortization
|
65
|
|
|
9
|
|
|
56
|
|
|
252
|
|
|
78
|
|
|
174
|
|
||||||
Total amortization of intangibles
|
$
|
51
|
|
|
$
|
(4
|
)
|
|
$
|
55
|
|
|
$
|
207
|
|
|
$
|
34
|
|
|
$
|
173
|
|
•
|
Amortization of intangibles is based on historical, current and future expected gross margins (pre-tax operating income before amortization and overhead expenses). The
increase
in total net amortization during the Fiscal Quarter and
Fiscal Nine Months
of
$55
and
$173
, respectively, was primarily due to higher actual gross profits ("AGPs") on the DAC lines of business (LOBs), excluding the impact of the reinsurance related embedded derivative.
|
•
|
The quarter over quarter increase in AGPs was primarily driven by the current quarter favorable reserve impact of risk free rates compared to the unfavorable impact in the
Fiscal 2016 Quarter
, as well as an increase in net investment income as discussed above. The year over year increase in AGPs was primarily driven by a decrease
|
|
|
Fiscal Quarter
|
|
|
|
Fiscal Nine Months
|
|
|
||||||||||||||||
Interest expense and amortization related to:
|
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
||||||||||||
Debt
|
|
$
|
5
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
14
|
|
|
$
|
16
|
|
|
$
|
(2
|
)
|
Revolving credit facility
|
|
1
|
|
|
—
|
|
|
1
|
|
|
4
|
|
|
1
|
|
|
3
|
|
||||||
Total interest expense
|
|
6
|
|
|
5
|
|
|
1
|
|
|
18
|
|
|
17
|
|
|
1
|
|
•
|
The
Fiscal 2017 Quarter
and
Fiscal 2017 Nine Months
includes interest incurred on the
$105
revolving credit facility outstanding on which the Company drew
$100
during the fourth fiscal quarter of 2016 and
$5
during the second fiscal quarter of 2017.
|
•
|
The year over year increase was offset by a decrease in amortization of capitalized debt issuance costs related to the Senior Notes during the
Fiscal 2017 Nine Months
as these costs fully amortized in March of 2016.
|
|
Fiscal Quarter
|
|
|
|
Fiscal Nine Months
|
|
|
||||||||||||||||
|
2017
|
|
2016
|
|
Increase (Decrease)
|
|
2017
|
|
2016
|
|
Increase (Decrease)
|
||||||||||||
Income before taxes
|
$
|
48
|
|
|
$
|
16
|
|
|
$
|
32
|
|
|
$
|
246
|
|
|
$
|
104
|
|
|
$
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income tax before valuation allowance
|
16
|
|
|
5
|
|
|
11
|
|
|
84
|
|
|
108
|
|
|
(24
|
)
|
||||||
Change in valuation allowance
|
—
|
|
|
1
|
|
|
$
|
(1
|
)
|
|
—
|
|
|
(71
|
)
|
|
71
|
|
|||||
Income tax
|
$
|
16
|
|
|
$
|
6
|
|
|
$
|
10
|
|
|
$
|
84
|
|
|
$
|
37
|
|
|
$
|
47
|
|
Effective Rate
|
33
|
%
|
|
38
|
%
|
|
|
|
34
|
%
|
|
36
|
%
|
|
|
•
|
Income tax expense for the
Fiscal 2017 Quarter
was
$16
,
inclusive of a valuation allowance expense of $0,
compared to income tax expense of
$6
for the
Fiscal 2016 Quarter
, inclusive of a valuation allowance expense of
$1
. The
increase
in income tax expense of
$10
quarter over quarter was primarily due to an
increase
in the
Fiscal 2017 Quarter
's pre-tax income of
$32
compared to the
Fiscal 2016 Quarter
.
|
•
|
Income tax expense for the Fiscal 2017 nine month period was
$84
, inclusive of a valuation allowance expense of $0. Income tax expense for the Fiscal 2016 nine month period was
$37
, net of a valuation allowance release of
$71
. The valuation allowance release for the Fiscal 2016 period was related to the removal of valuation allowance against life company capital loss deferred tax assets that expired and were written off, and therefore had no net impact to overall tax expense. The
increase
in tax expense period over period was primarily due to an
increase
in the Fiscal 2017 period's pre-tax income of
$142
compared to the Fiscal 2016 period.
|
|
Fiscal Quarter
|
|
|
|
Fiscal Nine Months
|
|
|
||||||||||||||||
Reconciliation from Net income to AOI:
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
||||||||||||
Net income
|
$
|
32
|
|
|
$
|
10
|
|
|
$
|
22
|
|
|
$
|
162
|
|
|
$
|
67
|
|
|
$
|
95
|
|
Adjustments to arrive at AOI:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Effect of investment losses (gains), net of offsets
|
4
|
|
|
5
|
|
|
(1
|
)
|
|
18
|
|
|
4
|
|
|
14
|
|
||||||
Effect of change in FIA embedded derivative discount rate, net of offsets
|
(4
|
)
|
|
28
|
|
|
(32
|
)
|
|
(98
|
)
|
|
61
|
|
|
(159
|
)
|
||||||
Effect of change in fair value of reinsurance related embedded derivative, net of offsets
|
8
|
|
|
26
|
|
|
(18
|
)
|
|
6
|
|
|
20
|
|
|
(14
|
)
|
||||||
Tax impact of adjusting items
|
(3
|
)
|
|
(21
|
)
|
|
18
|
|
|
26
|
|
|
(30
|
)
|
|
56
|
|
||||||
AOI
|
$
|
37
|
|
|
$
|
48
|
|
|
$
|
(11
|
)
|
|
$
|
114
|
|
|
$
|
122
|
|
|
$
|
(8
|
)
|
•
|
AOI decreased
$11
from
$48
in the
Fiscal 2016 Quarter
to
$37
in the
Fiscal 2017 Quarter
. The
Fiscal 2017 Quarter
includes approximately $6 of expenses related to merger transaction costs and the Company's legacy incentive compensation plan partially offset by $2 of net favorable actual to expected mortality within the single premium immediate annuity (“SPIA”) product line. Comparatively, the
Fiscal 2016 Quarter
included $4 of favorable performance within the SPIA product line and other annuity reserve movements as well as $7 of net favorable adjustments related to lower DAC amortization, primarily due to equity market fluctuations, and $2 of favorable net investment income from participating in tender offers and bond prepayment income.
|
•
|
AOI decreased
$8
from
$122
in the
Fiscal 2016 Nine Months
to
$114
in the
Fiscal 2017 Nine Months
. The current year results included expenses of $9 related to the merger transaction costs and the Company's legacy incentive compensation plan as well as $3 of unfavorable DAC amortization, primarily due to equity market fluctuations; partially offset by $7 of net favorable actual to expected mortality within the SPIA product line and $2 of favorable bond prepayment income. Comparatively, the
Fiscal 2016 Nine Months
included $12 of net favorable adjustments related to lower DAC amortization, primarily due to equity market fluctuations; $7 of net favorable performance in the SPIA product line and other reserve movements and $5 of favorable net investment income from participating in tender offers and bond prepayment income; partially offset by expenses of $4 related to merger transaction costs.
|
|
|
June 30, 2017
|
|
September 30, 2016
|
||||||||||
|
|
Fair Value
|
|
Percent
|
|
Fair Value
|
|
Percent
|
||||||
|
|
|
|
|
|
|
|
|
||||||
Fixed maturity securities, available-for-sale:
|
|
|
|
|
|
|
|
|||||||
United States Government full faith and credit
|
$
|
87
|
|
|
—
|
%
|
|
$
|
243
|
|
|
1
|
%
|
|
United States Government sponsored entities
|
133
|
|
|
1
|
%
|
|
115
|
|
|
1
|
%
|
|||
United States municipalities, states and territories
|
1,726
|
|
|
8
|
%
|
|
1,717
|
|
|
8
|
%
|
|||
Corporate securities:
|
|
|
|
|
|
|
|
|||||||
Finance, insurance and real estate
|
5,723
|
|
|
25
|
%
|
|
5,463
|
|
|
26
|
%
|
|||
Manufacturing, construction and mining
|
1,009
|
|
|
5
|
%
|
|
863
|
|
|
4
|
%
|
|||
Utilities, energy and related sectors
|
2,046
|
|
|
9
|
%
|
|
1,881
|
|
|
9
|
%
|
|||
Wholesale/retail trade
|
1,398
|
|
|
6
|
%
|
|
1,277
|
|
|
6
|
%
|
|||
Services, media and other
|
2,299
|
|
|
10
|
%
|
|
1,856
|
|
|
9
|
%
|
|||
Hybrid securities
|
1,431
|
|
|
6
|
%
|
|
1,386
|
|
|
7
|
%
|
|||
Non-agency residential mortgage-backed securities
|
1,161
|
|
|
6
|
%
|
|
1,247
|
|
|
6
|
%
|
|||
Commercial mortgage-backed securities
|
950
|
|
|
4
|
%
|
|
864
|
|
|
4
|
%
|
|||
Asset-backed securities
|
2,803
|
|
|
13
|
%
|
|
2,499
|
|
|
12
|
%
|
|||
Total fixed maturity available-for-sale securities
|
20,766
|
|
|
93
|
%
|
|
19,411
|
|
|
93
|
%
|
|||
Equity securities (a)
|
774
|
|
|
3
|
%
|
|
683
|
|
|
3
|
%
|
|||
Commercial mortgage loans
|
551
|
|
|
2
|
%
|
|
614
|
|
|
3
|
%
|
|||
Other (primarily derivatives and loan participations)
|
535
|
|
|
2
|
%
|
|
334
|
|
|
1
|
%
|
|||
Total investments
|
$
|
22,626
|
|
|
100
|
%
|
|
$
|
21,042
|
|
|
100
|
%
|
|
|
June 30, 2017
|
|
September 30, 2016
|
||||||||||
Rating
|
|
Fair Value
|
|
Percent
|
|
Fair Value
|
|
Percent
|
||||||
AAA
|
|
$
|
1,643
|
|
|
8
|
%
|
|
$
|
1,509
|
|
|
8
|
%
|
AA
|
|
1,895
|
|
|
9
|
%
|
|
1,933
|
|
|
10
|
%
|
||
A
|
|
5,520
|
|
|
27
|
%
|
|
5,126
|
|
|
27
|
%
|
||
BBB
|
|
9,473
|
|
|
46
|
%
|
|
8,404
|
|
|
43
|
%
|
||
BB (a)
|
|
1,057
|
|
|
5
|
%
|
|
1,017
|
|
|
5
|
%
|
||
B and below (b)
|
|
1,178
|
|
|
5
|
%
|
|
1,422
|
|
|
7
|
%
|
||
Total
|
|
$
|
20,766
|
|
|
100
|
%
|
|
$
|
19,411
|
|
|
100
|
%
|
|
|
June 30, 2017
|
|
September 30, 2016
|
||||||||||
Rating
|
|
Fair Value
|
|
Percent
|
|
Fair Value
|
|
Percent
|
||||||
AAA
|
|
$
|
75
|
|
|
9
|
%
|
|
$
|
90
|
|
|
10
|
%
|
AA
|
|
33
|
|
|
4
|
%
|
|
58
|
|
|
7
|
%
|
||
A
|
|
101
|
|
|
12
|
%
|
|
84
|
|
|
10
|
%
|
||
BBB
|
|
245
|
|
|
30
|
%
|
|
247
|
|
|
28
|
%
|
||
BB
|
|
169
|
|
|
20
|
%
|
|
155
|
|
|
18
|
%
|
||
B and below
|
|
209
|
|
|
25
|
%
|
|
238
|
|
|
27
|
%
|
||
Total
|
|
$
|
832
|
|
|
100
|
%
|
|
$
|
872
|
|
|
100
|
%
|
NAIC Designation
|
|
NRSRO Equivalent Rating
|
1
|
|
AAA/AA/A
|
2
|
|
BBB
|
3
|
|
BB
|
4
|
|
B
|
5
|
|
CCC and lower
|
6
|
|
In or near default
|
|
|
June 30, 2017
|
|||||||||
NAIC Designation
|
|
Amortized Cost
|
|
Fair Value
|
|
Percent of Total Fair Value
|
|||||
1
|
|
$
|
10,204
|
|
|
$
|
10,753
|
|
|
52
|
%
|
2
|
|
8,356
|
|
|
8,758
|
|
|
42
|
%
|
||
3
|
|
1,033
|
|
|
1,047
|
|
|
5
|
%
|
||
4
|
|
145
|
|
|
141
|
|
|
1
|
%
|
||
5
|
|
105
|
|
|
65
|
|
|
—
|
%
|
||
6
|
|
2
|
|
|
2
|
|
|
—
|
%
|
||
Total
|
|
$
|
19,845
|
|
|
$
|
20,766
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|||||
|
|
September 30, 2016
|
|||||||||
NAIC Designation
|
|
Amortized Cost
|
|
Fair Value
|
|
Percent of Total Fair Value
|
|||||
1
|
|
$
|
10,052
|
|
|
$
|
10,678
|
|
|
55
|
%
|
2
|
|
7,209
|
|
|
7,534
|
|
|
39
|
%
|
||
3
|
|
885
|
|
|
866
|
|
|
5
|
%
|
||
4
|
|
277
|
|
|
255
|
|
|
1
|
%
|
||
5
|
|
94
|
|
|
75
|
|
|
—
|
%
|
||
6
|
|
4
|
|
|
3
|
|
|
—
|
%
|
||
Total
|
|
$
|
18,521
|
|
|
$
|
19,411
|
|
|
100
|
%
|
|
|
June 30, 2017
|
|||||||||
NAIC Designation
|
|
Amortized Cost
|
|
Fair Value
|
|
Percent of Total Fair Value
|
|||||
1
|
|
$
|
259
|
|
|
$
|
260
|
|
|
31
|
%
|
2
|
|
212
|
|
|
213
|
|
|
26
|
%
|
||
3
|
|
190
|
|
|
185
|
|
|
22
|
%
|
||
4
|
|
126
|
|
|
126
|
|
|
15
|
%
|
||
5
|
|
53
|
|
|
46
|
|
|
6
|
%
|
||
6
|
|
2
|
|
|
2
|
|
|
—
|
%
|
||
Total
|
|
$
|
842
|
|
|
$
|
832
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|||||
|
|
September 30, 2016
|
|||||||||
NAIC Designation
|
|
Amortized Cost
|
|
Fair Value
|
|
Percent of Total Fair Value
|
|||||
1
|
|
$
|
308
|
|
|
$
|
307
|
|
|
35
|
%
|
2
|
|
202
|
|
|
206
|
|
|
24
|
%
|
||
3
|
|
159
|
|
|
153
|
|
|
17
|
%
|
||
4
|
|
159
|
|
|
154
|
|
|
18
|
%
|
||
5
|
|
58
|
|
|
49
|
|
|
6
|
%
|
||
6
|
|
4
|
|
|
3
|
|
|
—
|
%
|
||
Total
|
|
$
|
890
|
|
|
$
|
872
|
|
|
100
|
%
|
|
|
June 30, 2017
|
|||||
Top 10 Industry Concentration
|
|
Fair Value
|
|
Percent of Total Fair Value
|
|||
Banking
|
|
$
|
2,699
|
|
|
13
|
%
|
ABS Collateralized Loan Obligation ("CLO")
|
|
2,133
|
|
|
10
|
%
|
|
Municipal
|
|
1,985
|
|
|
9
|
%
|
|
Life Insurance
|
|
1,394
|
|
|
6
|
%
|
|
Electric
|
|
1,125
|
|
|
5
|
%
|
|
Property and Casualty Insurance
|
|
1,005
|
|
|
5
|
%
|
|
Whole Loan Collateralized Mortgage Obligation ("CMO")
|
|
838
|
|
|
4
|
%
|
|
Other Financial Institutions
|
|
765
|
|
|
4
|
%
|
|
CMBS
|
|
763
|
|
|
3
|
%
|
|
ABS Other
|
|
656
|
|
|
3
|
%
|
|
Total
|
|
$
|
13,363
|
|
|
62
|
%
|
|
|
September 30, 2016
|
|||||
Top 10 Industry Concentration
|
|
Fair Value
|
|
Percent of Total Fair Value
|
|||
Banking
|
|
$
|
2,448
|
|
|
12
|
%
|
ABS CLO
|
|
2,084
|
|
|
10
|
%
|
|
Municipal
|
|
1,985
|
|
|
10
|
%
|
|
Life insurance
|
|
1,200
|
|
|
6
|
%
|
|
Electric
|
|
1,096
|
|
|
5
|
%
|
|
Property and casualty insurance
|
|
966
|
|
|
5
|
%
|
|
Whole loan CMO
|
|
909
|
|
|
5
|
%
|
|
Other financial institutions
|
|
825
|
|
|
4
|
%
|
|
CMBS
|
|
740
|
|
|
4
|
%
|
|
Pipelines
|
|
480
|
|
|
2
|
%
|
|
Total
|
|
$
|
12,733
|
|
|
63
|
%
|
|
|
June 30, 2017
|
|
September 30, 2016
|
||||||||||||
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
||||||||
Corporate, Non-structured Hybrids, Municipal and U.S. Government securities:
|
|
|
|
|
|
|
|
|
||||||||
Due in one year or less
|
|
$
|
325
|
|
|
$
|
327
|
|
|
$
|
261
|
|
|
$
|
263
|
|
Due after one year through five years
|
|
1,711
|
|
|
1,762
|
|
|
1,863
|
|
|
1,919
|
|
||||
Due after five years through ten years
|
|
3,254
|
|
|
3,393
|
|
|
3,233
|
|
|
3,407
|
|
||||
Due after ten years
|
|
8,871
|
|
|
9,468
|
|
|
7,710
|
|
|
8,346
|
|
||||
Subtotal
|
|
$
|
14,161
|
|
|
$
|
14,950
|
|
|
$
|
13,067
|
|
|
$
|
13,935
|
|
Other securities which provide for periodic payments:
|
|
|
|
|
|
|
|
|
||||||||
Asset-backed securities
|
|
$
|
2,777
|
|
|
$
|
2,803
|
|
|
$
|
2,528
|
|
|
$
|
2,499
|
|
Commercial mortgage-backed securities
|
|
950
|
|
|
950
|
|
|
850
|
|
|
864
|
|
||||
Structured hybrids
|
|
752
|
|
|
769
|
|
|
749
|
|
|
751
|
|
||||
Residential mortgage-backed securities
|
|
1,205
|
|
|
1,294
|
|
|
1,327
|
|
|
1,362
|
|
||||
Subtotal
|
|
$
|
5,684
|
|
|
$
|
5,816
|
|
|
$
|
5,454
|
|
|
$
|
5,476
|
|
Total fixed maturity available-for-sale securities
|
|
$
|
19,845
|
|
|
$
|
20,766
|
|
|
$
|
18,521
|
|
|
$
|
19,411
|
|
|
|
June 30, 2017
|
|
September 30, 2016
|
||||||||
NAIC Designation:
|
|
Fair Value
|
|
Percent of Total
|
|
Fair Value
|
|
Percent of Total
|
||||
1
|
|
958
|
|
|
98
|
%
|
|
1,026
|
|
|
99
|
%
|
2
|
|
13
|
|
|
1
|
%
|
|
2
|
|
|
—
|
%
|
3
|
|
8
|
|
|
1
|
%
|
|
4
|
|
|
—
|
%
|
4
|
|
—
|
|
|
—
|
%
|
|
7
|
|
|
1
|
%
|
5
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
6
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
Total
|
|
979
|
|
|
100
|
%
|
|
1,039
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
||||
NRSRO:
|
|
|
|
|
|
|
|
|
||||
AAA
|
|
17
|
|
|
2
|
%
|
|
13
|
|
|
1
|
%
|
AA
|
|
11
|
|
|
1
|
%
|
|
8
|
|
|
1
|
%
|
A
|
|
41
|
|
|
4
|
%
|
|
47
|
|
|
5
|
%
|
BBB
|
|
53
|
|
|
5
|
%
|
|
27
|
|
|
3
|
%
|
BB and below
|
|
857
|
|
|
88
|
%
|
|
944
|
|
|
90
|
%
|
Total
|
|
979
|
|
|
100
|
%
|
|
1,039
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
||||
Vintage:
|
|
|
|
|
|
|
|
|
||||
2007
|
|
208
|
|
|
21
|
%
|
|
210
|
|
|
20
|
%
|
2006
|
|
361
|
|
|
37
|
%
|
|
381
|
|
|
37
|
%
|
2005 and prior
|
|
410
|
|
|
42
|
%
|
|
448
|
|
|
43
|
%
|
Total
|
|
979
|
|
|
100
|
%
|
|
1,039
|
|
|
100
|
%
|
|
|
June 30, 2017
|
|
September 30, 2016
|
||||||||||
Asset Class
|
|
Fair Value
|
|
Percent
|
|
Fair Value
|
|
Percent
|
||||||
ABS CLO
|
|
$
|
2,133
|
|
|
76
|
%
|
|
$
|
2,084
|
|
|
83
|
%
|
ABS Auto
|
|
11
|
|
|
1
|
%
|
|
13
|
|
|
1
|
%
|
||
ABS Home Equity
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
||
ABS Credit Card
|
|
3
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
||
ABS Other
|
|
656
|
|
|
23
|
%
|
|
402
|
|
|
16
|
%
|
||
Total ABS
|
|
$
|
2,803
|
|
|
100
|
%
|
|
$
|
2,499
|
|
|
100
|
%
|
|
Debt Service Coverage Ratios
|
|
Total Amount
|
|
% of Total
|
|
Estimated Fair Value
|
|
% of Total
|
||||||||||||||||||||
|
>1.25
|
|
1.00 - 1.25
|
|
<1.00
|
|
N/A(a)
|
|
|
|
|
||||||||||||||||||
June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
LTV Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Less than 50%
|
$
|
183
|
|
|
$
|
—
|
|
|
$
|
18
|
|
|
$
|
1
|
|
|
$
|
202
|
|
|
37
|
%
|
|
$
|
201
|
|
|
36
|
%
|
50% to 60%
|
256
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
256
|
|
|
46
|
%
|
|
257
|
|
|
47
|
%
|
||||||
60% to 75%
|
86
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
93
|
|
|
17
|
%
|
|
93
|
|
|
17
|
%
|
||||||
Commercial mortgage loans
|
$
|
525
|
|
|
$
|
7
|
|
|
$
|
18
|
|
|
$
|
1
|
|
|
$
|
551
|
|
|
100
|
%
|
|
$
|
551
|
|
|
100
|
%
|
September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
LTV Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Less than 50%
|
$
|
158
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
177
|
|
|
29
|
%
|
|
$
|
181
|
|
|
29
|
%
|
50% to 60%
|
189
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
189
|
|
|
32
|
%
|
|
194
|
|
|
32
|
%
|
||||||
60% to 75%
|
230
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
230
|
|
|
39
|
%
|
|
239
|
|
|
39
|
%
|
||||||
Commercial mortgage loans
|
$
|
577
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
596
|
|
|
100
|
%
|
|
$
|
614
|
|
|
100
|
%
|
|
June 30, 2017
|
|||||||||||||
|
Number of securities
|
|
Amortized Cost
|
|
Unrealized Losses
|
|
Fair Value
|
|||||||
Fixed maturity securities, available for sale:
|
|
|
|
|
|
|
|
|||||||
United States Government full faith and credit
|
5
|
|
|
6
|
|
|
$
|
—
|
|
|
6
|
|
||
United States Government sponsored agencies
|
29
|
|
|
27
|
|
|
—
|
|
|
27
|
|
|||
United States municipalities, states and territories
|
33
|
|
|
225
|
|
|
(15
|
)
|
|
210
|
|
|||
Corporate securities:
|
|
|
|
|
|
|
|
|||||||
Finance, insurance and real estate
|
77
|
|
|
501
|
|
|
(11
|
)
|
|
490
|
|
|||
Manufacturing, construction and mining
|
31
|
|
|
259
|
|
|
(22
|
)
|
|
237
|
|
|||
Utilities, energy and related sectors
|
66
|
|
|
454
|
|
|
(43
|
)
|
|
411
|
|
|||
Wholesale/retail trade
|
59
|
|
|
262
|
|
|
(9
|
)
|
|
253
|
|
|||
Services, media and other
|
89
|
|
|
588
|
|
|
(31
|
)
|
|
557
|
|
|||
Hybrid securities
|
20
|
|
|
370
|
|
|
(17
|
)
|
|
353
|
|
|||
Non-agency residential mortgage-backed securities
|
66
|
|
|
216
|
|
|
(8
|
)
|
|
208
|
|
|||
Commercial mortgage-backed securities
|
61
|
|
|
388
|
|
|
(12
|
)
|
|
376
|
|
|||
Asset-backed securities
|
133
|
|
|
962
|
|
|
(7
|
)
|
|
955
|
|
|||
Total fixed maturity available-for-sale securities
|
669
|
|
|
4,258
|
|
|
(175
|
)
|
|
4,083
|
|
|||
Equity securities
|
12
|
|
|
112
|
|
|
(3
|
)
|
|
109
|
|
|||
Total
|
681
|
|
|
$
|
4,370
|
|
|
$
|
(178
|
)
|
|
$
|
4,192
|
|
|
September 30, 2016
|
|||||||||||||
|
Number of securities
|
|
Amortized Cost
|
|
Unrealized Losses
|
|
Fair Value
|
|||||||
Fixed maturity securities, available-for-sale:
|
|
|
|
|
|
|
|
|||||||
United States Government full faith and credit
|
2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
United States Government sponsored agencies
|
29
|
|
|
30
|
|
|
(1
|
)
|
|
29
|
|
|||
United States municipalities, states and territories
|
18
|
|
|
111
|
|
|
(4
|
)
|
|
107
|
|
|||
Corporate securities:
|
|
|
|
|
|
|
|
|||||||
Finance, insurance and real estate
|
56
|
|
|
349
|
|
|
(16
|
)
|
|
333
|
|
|||
Manufacturing, construction and mining
|
29
|
|
|
224
|
|
|
(31
|
)
|
|
193
|
|
|||
Utilities, energy and related sectors
|
72
|
|
|
444
|
|
|
(47
|
)
|
|
397
|
|
|||
Wholesale/retail trade
|
32
|
|
|
181
|
|
|
(7
|
)
|
|
174
|
|
|||
Services, media and other
|
60
|
|
|
378
|
|
|
(31
|
)
|
|
347
|
|
|||
Hybrid securities
|
29
|
|
|
500
|
|
|
(47
|
)
|
|
453
|
|
|||
Non-agency residential mortgage-backed securities
|
141
|
|
|
612
|
|
|
(27
|
)
|
|
585
|
|
|||
Commercial mortgage-backed securities
|
46
|
|
|
235
|
|
|
(9
|
)
|
|
226
|
|
|||
Asset-backed securities
|
211
|
|
|
1,765
|
|
|
(45
|
)
|
|
1,720
|
|
|||
Total fixed maturity available-for-sale securities
|
725
|
|
|
4,829
|
|
|
(265
|
)
|
|
4,564
|
|
|||
Equity securities
|
11
|
|
|
130
|
|
|
(4
|
)
|
|
126
|
|
|||
Total
|
736
|
|
|
$
|
4,959
|
|
|
$
|
(269
|
)
|
|
$
|
4,690
|
|
|
June 30, 2017
|
|
September 30, 2016
|
||||||||||||||||||||||||||
|
Number of securities
|
|
Amortized Cost
|
|
Fair Value
|
|
Gross Unrealized Losses
|
|
Number of securities
|
|
Amortized Cost
|
|
Fair Value
|
|
Gross Unrealized Losses
|
||||||||||||||
Investment grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Less than six months
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Six months or more and less than twelve months
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Twelve months or greater
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
125
|
|
|
96
|
|
|
(29
|
)
|
||||||
Total investment grade
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
125
|
|
|
96
|
|
|
(29
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Below investment grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Less than six months
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Six months or more and less than twelve months
|
3
|
|
|
19
|
|
|
14
|
|
|
(5
|
)
|
|
3
|
|
|
9
|
|
|
7
|
|
|
(2
|
)
|
||||||
Twelve months or greater
|
13
|
|
|
94
|
|
|
46
|
|
|
(48
|
)
|
|
23
|
|
|
142
|
|
|
80
|
|
|
(62
|
)
|
||||||
Total below investment grade
|
17
|
|
|
113
|
|
|
60
|
|
|
(53
|
)
|
|
26
|
|
|
151
|
|
|
87
|
|
|
(64
|
)
|
||||||
Total
|
17
|
|
|
$
|
113
|
|
|
$
|
60
|
|
|
$
|
(53
|
)
|
|
32
|
|
|
$
|
276
|
|
|
$
|
183
|
|
|
$
|
(93
|
)
|
•
|
whether the issuer is currently meeting its financial obligations
|
•
|
its ability to continue to meet these obligations
|
•
|
its existing cash available
|
•
|
its access to additional available capital
|
•
|
any expense management actions the issuer has taken; and
|
•
|
whether the issuer has the ability and willingness to sell non-core assets to generate liquidity
|
|
|
Fiscal Nine Months
|
|
|
||||||||
Cash provided by (used in):
|
|
2017
|
|
2016
|
|
Increase / (Decrease)
|
||||||
Operating activities
|
|
$
|
96
|
|
|
$
|
287
|
|
|
$
|
(191
|
)
|
Investing activities
|
|
(965
|
)
|
|
(912
|
)
|
|
(53
|
)
|
|||
Financing activities
|
|
804
|
|
|
842
|
|
|
(38
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
|
$
|
(65
|
)
|
|
$
|
217
|
|
|
$
|
(282
|
)
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
(dollars in millions)
|
|
|
|
|
|||
Duration
|
|
Amortized Cost
|
|
|
% of Total
|
||
0-4
|
|
$
|
7,732
|
|
|
38
|
%
|
5-9
|
|
6,114
|
|
|
30
|
%
|
|
10-14
|
|
4,971
|
|
|
24
|
%
|
|
15-20
|
|
1,594
|
|
|
8
|
%
|
|
Total
|
|
$
|
20,411
|
|
|
100
|
%
|
(dollars in millions)
|
June 30, 2017
|
|
September 30, 2016
|
|||||||||||||||||||||||||||||||
Counterparty
|
|
Credit Rating
(Fitch/Moody's/S&P) (a) |
|
Notional
Amount |
|
Fair Value
|
|
Collateral
|
|
Net Credit Risk
|
|
Notional
Amount |
|
Fair Value
|
|
Collateral
|
|
Net Credit Risk
|
||||||||||||||||
Merrill Lynch
|
|
A/*/A+
|
|
$
|
3,993
|
|
|
$
|
149
|
|
|
$
|
109
|
|
|
$
|
40
|
|
|
$
|
2,302
|
|
|
$
|
55
|
|
|
$
|
10
|
|
|
$
|
45
|
|
Deutsche Bank
|
|
A/A3/A-
|
|
510
|
|
|
17
|
|
|
18
|
|
|
(1
|
)
|
|
1,620
|
|
|
46
|
|
|
12
|
|
|
34
|
|
||||||||
Morgan Stanley
|
|
*/A1/A+
|
|
1,676
|
|
|
66
|
|
|
72
|
|
|
(6
|
)
|
|
2,952
|
|
|
87
|
|
|
58
|
|
|
29
|
|
||||||||
Barclay's Bank
|
|
A/A1/A-
|
|
1,608
|
|
|
48
|
|
|
6
|
|
|
42
|
|
|
1,389
|
|
|
39
|
|
|
—
|
|
|
39
|
|
||||||||
Canadian Imperial Bank of Commerce
|
|
AA-/*/A+
|
|
2,523
|
|
|
81
|
|
|
81
|
|
|
—
|
|
|
1,623
|
|
|
49
|
|
|
48
|
|
|
1
|
|
||||||||
Total
|
|
|
|
$
|
10,310
|
|
|
$
|
361
|
|
|
$
|
286
|
|
|
$
|
75
|
|
|
$
|
9,886
|
|
|
$
|
276
|
|
|
$
|
128
|
|
|
$
|
148
|
|
(in millions)
|
|
|
|
Financial Strength Rating
|
||||
Parent Company/Principal Reinsurers
|
|
Reinsurance Recoverable
|
|
AM Best
|
|
S&P
|
|
Moody's
|
Wilton Reinsurance
|
|
$1,536
|
|
A+
|
|
Not Rated
|
|
Not Rated
|
Front Street Re
|
|
1,037
|
|
Not Rated
|
|
Not Rated
|
|
Not Rated
|
Scottish Re
|
|
154
|
|
Not Rated
|
|
Not Rated
|
|
Not Rated
|
Security Life of Denver
|
|
143
|
|
A
|
|
A
|
|
A2
|
London Life
|
|
102
|
|
A
|
|
Not Rated
|
|
Not Rated
|
Item 4.
|
Controls and Procedures
|
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 5.
|
Other Information
|
Item 6.
|
Exhibits
|
Exhibit
No.
|
|
Description of Exhibits
|
|
|
|
2.1
|
|
Agreement and Plan of Merger, dated as of May 24, 2017, by and among CF Corporation, FGL U.S. Holdings, Inc., FGL Merger Sub Inc. and Fidelity & Guaranty Life (incorporated by reference to our Form 8-K, filed on May 24, 2017 (File No. 001-36227)).
|
2.2
|
|
Voting Agreement, dated as of May 24, 2017, by and among Fidelity & Guaranty Life, CF Capital Growth, LLC, Fidelity National Financial, Inc., CFS Holdings (Cayman), L.P., CC Capital Management, LLC, BilCar, LLC, Richard N. Massey and James A. Quella (incorporated by reference to our Form 8-K, filed on May 24, 2017 (File No. 001-36227)).
|
2.3 *
|
|
Amendment to Agreement and Plan of Merger, dated as of June 28, 2017, by and among CF Corporation, FGL U.S. Holdings, Inc., FGL Merger Sub Inc. and Fidelity & Guaranty Life
|
10.1
|
|
Second Amendment to Credit Agreement dated as of July 17, 2017 by and among Fidelity & Guaranty Life Holdings, Inc., each of the lenders from time to time party thereto and Royal Bank of Canada (incorporated by reference to our Form 8-K, filed on July 21, 2017 (File No. 001-36227)).
|
31.1 *
|
|
Certification of Chief Executive Officer, pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2 *
|
|
Certification of Chief Financial Officer, pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1 *
|
|
Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2 *
|
|
Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
101.INS *
|
|
XBRL Instance Document.
|
|
|
|
101.SCH *
|
|
XBRL Taxonomy Extension Schema.
|
|
|
|
101.CAL *
|
|
XBRL Taxonomy Extension Calculation Linkbase.
|
|
|
|
101.DEF *
|
|
XBRL Taxonomy Definition Linkbase.
|
|
|
|
101.LAB *
|
|
XBRL Taxonomy Extension Label Linkbase.
|
|
|
|
101.PRE *
|
|
XBRL Taxonomy Extension Presentation Linkbase.
|
*
|
Filed herewith
|
|
|
FIDELITY & GUARANTY LIFE (Registrant)
|
|
|
|
|
|
Dated:
|
August 2, 2017
|
By:
|
/s/ Dennis Vigneau
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
(on behalf of the Registrant and as Principal Financial Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q for the quarterly period ended
June 30, 2017
of Fidelity & Guaranty Life;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ CHRISTOPHER J. LITTLEFIELD
|
|
Christopher J. Littlefield
|
|
Chief Executive Officer
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q for the quarterly period ended
June 30, 2017
of Fidelity & Guaranty Life;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ DENNIS R. VIGNEAU
|
|
Dennis R. Vigneau
|
|
Executive Vice President and Chief Financial Officer
|
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ CHRISTOPHER J. LITTLEFIELD
|
|
Christopher J. Littlefield
|
|
Chief Executive Officer
|
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ DENNIS R. VIGNEAU
|
|
Dennis R. Vigneau
|
|
Executive Vice President and Chief Financial Officer
|
|