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What changed in F&G Annuities & Life, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of F&G Annuities & Life, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+806 added−648 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-27)

Top changes in F&G Annuities & Life, Inc.'s 2023 10-K

806 paragraphs added · 648 removed · 499 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

189 edited+153 added−34 removed127 unchanged
Biggest changeThis includes: • Sensors on restroom equipment to limit excess water flow • Recycling bins at each workspace • Installation of motion sensors to reduce electricity use • Flexible work from home arrangements which reduce commute time and paper usage Being the Best Place to Work: F&G is committed to providing employees with the opportunities and flexibility they need to succeed, as well as ensuring a culture of belonging and inclusion by: • Providing competitive benefits offerings to meet diverse employee needs including more flexible PTO, an Employee Assistance Program and a wellness reimbursement • Supporting employee growth through learning programs, tuition reimbursement, and manager and leadership training 32 Table of Contents • Increasing the percentage of women and people of color in leadership roles; F&G’s executive team is now comprised of 40% female leadership • Driving diversity and inclusion in the workplace and beyond through partnerships including: ◦ The International Association of Black Actuaries and The Organization of Latino Actuaries where F&G employees are members and serve as a network for potential new hires ◦ Women Lead Change, an organization dedicated to the development, advancement and promotion of women, their organizations, and impact to the economy and future workforce ◦ Capitol City Pride, brings together members of Iowa’s LGBTQ+ community, allies and businesses and honored F&G as the 2021 Corporate Partner of the Year • Enabling our employee-led Employee Resource Groups work in creating awareness and support around important topics such as mental health awareness with guidance from a Diversity, Equity and Inclusion (“DEI”) Advisory Council • Ranking as a Top Workplaces company for 5 consecutive years according to the Des Moines Register Top Workplace Survey Being a Responsible & Award-Winning Community Partner: F&G believes people are not in a position to turn their aspirations into reality if their most essential needs are not satisfied.
Biggest changeF&G is committed to providing employees with the opportunities and flexibility they need to succeed, as well as ensuring a culture of belonging and inclusion by: • Providing well rounded benefits that support employees diverse needs such as, domestic partner medical coverage, gender dysphoria services, $50k lifetime maximum for infertility services ($35k is United Health Care standard), travel & lodging reimbursement for services rendered out-of-state due to state law, Employee Assistance Program including 6 free counseling sessions per person per incident per year, in addition to other emotional health solutions, $10k in adoption assistance benefit, parental leave benefits, flexible PTO and wellness reimbursements. • Supporting employee training, developing and educating through LinkedIn learning with a wide array of topics (e.g., Using Gender inclusive language, Fueling your Company Culture, Inclusive Leadership, Unconscious Bias, etc.), tuition reimbursement, and manager and leadership training. • Hosting educational and developmental events such as, a Mental Awareness and Racial Equity Master Class, a Mental Health panel, and a panel on Neurodiversity. • Growing the share of people of color in leadership roles (VP+) from 2022 to 2023; F&G’s management committee (C-suite) is comprised of 40% female leadership. • Recognized for several Cultural Excellence Awards in 2022 and 2023 through Energage, for excellence in 1) Compensation and Benefits, 2) Leadership, 3) Work-Life Flexibility, 4) Innovation, 5) Appreciation, and 6) Employee Wellbeing. 40 Diversity and inclusion Specific diversity and inclusion programs and organizations supported by F&G include: • The International Association of Black Actuaries and The Organization of Latino Actuaries, both of which F&G employees are members of and serve as a network for potential new hires. • Women Lead Change, an organization dedicated to the development, advancement and promotion of women, their organizations, and impact on the economy and future workforce. • Capitol City Pride, which brings together members of Iowa’s LGBTQ+ community, allies and businesses. • Enabling our employee-led Council’s work in creating awareness and support around important topics such as mental health awareness, including the launch of ERGs.
Thereafter the BMA keeps its analysis of relative risk within individual institutions under review on an ongoing basis, including through the scrutiny of audited financial statements, and, as appropriate, meeting with senior management during onsite visits. The Insurance Act imposes on Bermuda insurance companies solvency and liquidity standards, as well as auditing and reporting requirements.
Thereafter the BMA keeps its analysis of relative risk within individual institutions under review on an ongoing basis, including through the scrutiny of audited financial statements, and, as appropriate, meeting with senior management during onsite visits. The Bermuda Insurance Act imposes solvency and liquidity standards on Bermuda insurance companies, as well as auditing and reporting requirements.
Certain significant aspects of the Bermuda insurance regulatory framework are set forth below. Minimum Solvency Margin. The Insurance Act provides that the value of the assets of an insurer must exceed the value of its liabilities by an amount greater than its prescribed minimum solvency margin.
Certain significant aspects of the Bermuda insurance regulatory framework are set forth below. Minimum Solvency Margin. The Bermuda Insurance Act provides that the value of the assets of an insurer must exceed the value of its liabilities by an amount greater than its prescribed minimum solvency margin.
Furthermore, as a Class E insurer, F&G Life Re must not declare or pay a dividend in any financial year which would exceed 25% of its total capital and statutory surplus, as set out in its previous year’s financial statements, unless at least seven days before payment of such dividend F&G Life Re files with the BMA an affidavit signed by at least two directors of F&G Life Re and its principal representative under the Insurance Act stating that, in the opinion of those signing, declaration of such dividend has not caused the insurer to fail to meet its relevant margins.
Furthermore, as a Class E insurer, F&G Life Re must not declare or pay a dividend in any financial year which would exceed 25% of its total capital and statutory surplus, as set out in its previous year’s financial statements, unless at least seven days before payment of such dividend F&G Life Re files with the BMA an affidavit signed by at least two directors of F&G Life Re and its principal representative under the Bermuda Insurance Act stating that, in the opinion of those signing, declaration of such dividend has not caused the insurer to fail to meet its relevant margins.
Any person who is deemed to acquire control over F&G, FNF, FGL US Holdings, CF Bermuda, FGLH, FGL Insurance, FGL NY Insurance, Raven Re or certain of their affiliates including any person who acquires 10% or more of our or FNF’s voting securities of FGL Insurance, FGL NY Insurance or certain of their affiliates, without the prior approval of the insurance regulators of Iowa and New York, will be in violation of those states’ laws and may be subject to injunctive action requiring the disposition or seizure of those securities by the relevant insurance regulator or prohibiting the voting of those securities and to other actions determined by the relevant insurance regulator.
Any person who is deemed to acquire control over F&G, FNF, FGL US Holdings, CF Bermuda, FGLH, FGL Insurance, FGL NY Insurance, Raven Re, Corbeau Re or certain of their affiliates including any person who acquires 10% or more of our or FNF’s voting securities of FGL Insurance, FGL NY Insurance or certain of their affiliates, without the prior approval of the insurance regulators of Iowa and New York, will be in violation of those states’ laws and may be subject to injunctive action requiring the disposition or seizure of those securities by the relevant insurance regulator or prohibiting the voting of those securities and to other actions determined by the relevant insurance regulator.
Any particular regulator’s interpretation of a legal or accounting issue may change over time to FGL Insurance’s, FGL NY Insurance’s and Raven Re’s detriment, or changes to the overall legal or market environment, even absent any change of interpretation by a particular regulator, may cause FGL Insurance, FGL NY Insurance and Raven Re to change their views regarding the actions they need to take from a legal risk management perspective, which could necessitate changes to FGL Insurance’s, FGL NY Insurance’s or and Raven Re’s practices that may, in some cases, limit their ability to grow and improve profitability.
Any particular regulator’s interpretation of a legal or accounting issue may change over time to FGL Insurance’s, FGL NY Insurance’s, Raven Re’s or Corbeau Re’s detriment, or changes to the overall legal or market environment, even absent any change of interpretation by a particular regulator, may cause FGL Insurance, FGL NY Insurance, Raven Re and Corbeau Re to change their views regarding the actions they need to take from a legal risk management perspective, which could necessitate changes to FGL Insurance’s, FGL NY Insurance’s, Raven Re’s or Corbeau Re’s practices that may, in some cases, limit their ability to grow and improve profitability.
The minimum solvency margin that must be maintained by a Class E insurer is the greater of: (i) $8,000,000; (ii) 2% of first $500,000,000 of assets plus 1.5% of assets above $500,000,000; and (iii) 25% of that insurer’s enhanced capital requirement (“ECR”). An insurer may file an application under the Insurance Act to waive the aforementioned requirements.
The minimum solvency margin that must be maintained by a Class E insurer is the greater of: (i) $8,000,000; (ii) 2% of first $500,000,000 of assets plus 1.5% of assets above $500,000,000; and (iii) 25% of that insurer’s enhanced capital requirement (“ECR”). An insurer may file an application under the Bermuda Insurance Act to waive the aforementioned requirements.
While BIS is primarily responsible for security selection, F&G makes all investment strategy decisions and sets risk parameters. All major decisions need to be reviewed and approved by the F&G Investment Committee, and new investment asset classes go through an internal risk assessment process ‘RAP’ at F&G to ensure the investments are suitable for an insurance company balance sheet.
While BIS is primarily responsible for security selection, F&G makes all investment strategy decisions and sets risk parameters. All major decisions need to be reviewed and approved by the F&G Investment Committee, and new investment asset classes go through an internal risk assessment process at F&G to ensure the investments are suitable for an insurance company balance sheet.
Furthermore, to enable the BMA to better assess the quality of the insurer’s capital resources, a Class E insurer is required to disclose the makeup of its capital in accordance with its 3-tiered capital system. An insurer may file an application under the Insurance Act to have the aforementioned ECR requirements waived. Restrictions on Dividends and Distributions.
Furthermore, to enable the BMA to better assess the quality of the insurer’s capital resources, a Class E insurer is required to disclose the makeup of its capital in accordance with its 3-tiered capital system. An insurer may file an application under the Bermuda Insurance Act to have the aforementioned ECR requirements waived. Restrictions on Dividends and Distributions.
Together, this business line has generated $2.3 billion in sales for F&G in 2021, its year of inception of FABN, and $1.4 billion in sales for the year ended December 31, 2022. • We also offer PRT solutions to a $40 billion (of $2 trillion total defined benefit plan assets) market.
Together, this business line has generated $2.3 billion in sales for F&G in 2021, its year of inception of FABN, $1.4 billion in sales for the year ended December 31, 2022, and $1.3 billion in sales for the year ended December 31, 2023. • We also offer PRT solutions to a $40 billion (of $2 trillion total defined benefit plan assets) market.
FGL Insurance, FGL NY Insurance and Raven Re prepare statutory financial statements in accordance with accounting practices and procedures prescribed or permitted by these departments. The NAIC has approved a series of statutory accounting principles and various model regulations that have been adopted, in some cases with certain modifications, by all state insurance departments.
FGL Insurance, FGL NY Insurance, Raven Re and Corbeau Re prepare statutory financial statements in accordance with accounting practices and procedures prescribed or permitted by these departments. The NAIC has approved a series of statutory accounting principles and various model regulations that have been adopted, in some cases with certain modifications, by all state insurance departments.
Regulation of F&G U.S. Regulatory Overview FGL Insurance, FGL NY Insurance and Raven Re are subject to comprehensive regulation and supervision in their domiciles, Iowa, New York and Vermont, respectively, and in each state in which they do business. FGL Insurance does business throughout the United States and Puerto Rico, except for New York.
Regulation of F&G U.S. Regulatory Overview FGL Insurance, FGL NY Insurance, Raven Re and Corbeau Re are subject to comprehensive regulation and supervision in their domiciles, Iowa, New York, Vermont and Vermont, respectively, and in each state in which they do business. FGL Insurance does business throughout the United States and Puerto Rico, except for New York.
Our most significant risks are governed through holding company governance committees and overall by the enterprise risk management committee. Our most significant risks such as credit risk, liquidity risk, and policyholder behavior associated with interest rate risk have established risk limits associated with our risk appetite statements. These include investment limits by asset class, ratings and issuer.
Our most significant risks are governed through holding company governance committees and overall by the Enterprise Risk Management Committee (“ERMC”). Our most significant risks such as credit risk, liquidity risk, and policyholder behavior associated with interest rate risk have established risk limits associated with our risk appetite statements. These include investment limits by asset class, ratings and issuer.
As of the most recent annual statutory financial statements filed with insurance regulators, the RBC ratios for FGL Insurance and FGL NY Insurance each exceeded the minimum RBC requirements. It is desirable to maintain an RBC ratio in excess of the minimum requirements in order to maintain or improve financial strength ratings. FGL Insurance’s estimated U.S.
As of the most recent annual statutory financial statements 28 filed with insurance regulators, the RBC ratios for FGL Insurance and FGL NY Insurance each exceeded the minimum RBC requirements. It is desirable to maintain an RBC ratio in excess of the minimum requirements in order to maintain or improve financial strength ratings. FGL Insurance’s estimated U.S.
FGL Insurance, FGL NY Insurance and Raven Re have filed all of the required opinions with the insurance departments in the states in which they do business. Credit for Reinsurance Regulation States regulate the extent to which insurers are permitted to take credit on their financial statements for the financial obligations that the insurers cede to reinsurers.
FGL Insurance, FGL NY Insurance, Raven Re and Corbeau Re have filed all of the required opinions with the insurance departments in the states in which they do business. Credit for Reinsurance Regulation States regulate the extent to which insurers are permitted to take credit on their financial statements for the financial obligations that the insurers cede to reinsurers.
Regulation of Investments FGL Insurance, FGL NY Insurance and Raven Re are subject to state laws and regulations that require diversification of their investment portfolios and limit the amount of investments in certain asset categories, such as below investment grade fixed income securities, equity, real estate, other equity investments and derivatives.
Regulation of Investments FGL Insurance, FGL NY Insurance, Raven Re and Corbeau Re are subject to state laws and regulations that require diversification of their investment portfolios and limit the amount of investments in certain asset categories, such as below investment grade fixed income securities, equity, real estate, other equity investments and derivatives.
All FIA products allow policyholders to allocate funds once a year among several different crediting strategies, including one or more index-based strategies and a traditional fixed rate strategy. High surrender charges apply for early withdrawal, typically for seven to fourteen years after purchase.
All FIA products allow policyholders to allocate funds once a year among several different crediting strategies, including one or more index-based strategies and a traditional fixed rate strategy. Surrender charges apply for early withdrawal, typically for seven to fourteen years after purchase.
Caps (a maximum rate that may be credited) generally range from 1% to 5% when measured annually and 1% to 3% when measured monthly, spreads (a credited rate determined by deducting a specific rate from the index return) generally range from —% to 3% when measured annually, and participation rates (a credited rate equal to a percentage of index return) generally range from 100% to 180% of the performance of the applicable market index.
Caps (a maximum rate that may be credited) generally range from 1% to 5% when measured annually and 1% to 3% when measured monthly, spreads (a credited rate determined by deducting a specific rate from the index return) generally range from 0% to 3% when measured annually, and participation rates (a credited rate equal to a percentage of index return) generally range from 100% to 180% of the performance of the applicable market index.
Because our subsidiaries can terminate an investment management agreement at any time upon 30 days' notice, it is possible that such a termination by one of our subsidiaries could cause us to be in breach of our obligations under the side letter.
Because our subsidiaries can terminate an investment management agreement at any time upon 30 days' notice, it is possible that such a termination by one of our subsidiaries could cause us to be in breach of our obligations 22 under the side letter.
Financial Regulation State insurance laws and regulations require FGL Insurance, FGL NY Insurance and Raven Re to file reports, including financial statements, with state insurance departments in each state in which they do business, and their operations and accounts are subject to examination by those departments at any time.
Financial Regulation State insurance laws and regulations require FGL Insurance, FGL NY Insurance, Raven Re and Corbeau Re to file reports, including financial statements, with state insurance departments in each state in which they do business, and their operations and accounts are subject to examination by those departments at any time.
In each transaction FGL Insurance and/or FGL NY Insurance issues a group annuity contract to discharge pension plan liabilities from a pension plan sponsor, either through a separate account or through a general account guarantee. Certificate holders covered under a group annuity contract have a guaranteed benefit from the insurance company.
In each transaction FGL Insurance and/or FGL NY Insurance issues a group annuity contract to discharge pension plan liabilities from a pension plan sponsor, either through a separate account or through a general account 17 guarantee. Certificate holders covered under a group annuity contract have a guaranteed benefit from the insurance company.
Under most states’ statutes, including those of Iowa and New York, acquiring 10% or more of the voting stock of an insurance company or its parent company is presumptively considered a change of control, although such presumption may be rebutted.
Under most states’ statutes, including those of Iowa and New York, acquiring 10% or more of the voting stock of an insurance company or its parent company is presumptively 30 considered a change of control, although such presumption may be rebutted.
The registration of an applicant as an insurer is subject to the insurer complying with the terms of its registration and such other conditions as the BMA may impose at any time. In addition, the Insurance Act requires BMA approval of increases in control or dispositions of control of an insurance company.
The registration of an applicant as an insurer is subject to the insurer complying with the terms of its registration and such other conditions as the BMA may impose at any time. In addition, the Bermuda Insurance Act requires BMA approval of increases in control or dispositions of control of an insurance company.
In addition to the requirements under the Companies Act (as discussed below), the Insurance Act limits the maximum amount of annual dividends and distributions that may be paid or distributed by F&G Life Re without prior regulatory approval.
In addition to the requirements under the Bermuda Companies Act (as discussed below), the Bermuda Insurance Act limits the maximum amount of annual dividends and distributions that may be paid or distributed by F&G Life Re without prior regulatory approval.
Generally, rating agencies base their financial strength ratings upon information furnished to them by the insurer and upon their own investigations, studies and assumptions. Financial strength ratings are based upon factors of concern to policyholders, agents and intermediaries and are not directed toward the protection of investors.
Generally, rating agencies base their financial strength ratings upon information furnished to them by the insurer and upon their own investigations, studies and assumptions. Financial 24 strength ratings are based upon factors of concern to policyholders, agents and intermediaries and are not directed toward the protection of investors.
This surrender charge initially ranges from 8% to 15% of the contract value for FIAs and is 9% of the contract value for fixed rate annuities and generally decreases by approximately one to two percentage points per year during the penalty period.
This surrender charge initially ranges from 9% to 15% of the contract value for FIAs and is 9% of the contract value for fixed rate annuities and generally decreases by approximately one to two percentage points per year during the penalty period.
In addition, the insurance laws of Iowa and New York permit a determination of control in circumstances where the thresholds for the presumption of control have not been crossed. Similar laws apply to a direct or indirect change of ownership of Raven Re.
In addition, the insurance laws of Iowa and New York permit a determination of control in circumstances where the thresholds for the presumption of control have not been crossed. Similar laws apply to a direct or indirect change of ownership of Raven Re and Corbeau Re.
State insurance authorities have broad administrative powers over FGL Insurance and FGL NY Insurance with respect to all aspects of the insurance business, including: • licensing to transact business; • licensing agents; • prescribing which assets and liabilities are to be considered in determining statutory surplus; • regulating premium rates for certain insurance products; • approving policy forms and certain related materials; • requiring insurers and agents to act in the best interests of consumers when making recommendations to purchase annuities, or to determine whether a reasonable basis exists as to the suitability of such investments for consumers; • regulating unfair trade and claims practices; • establishing reserve requirements and solvency standards; • regulating the amount of dividends that may be paid in any year by insurance companies; • regulating the availability of reinsurance or other substitute financing solutions, the terms thereof and the ability of an insurer to take credit on its financial statements for insurance ceded to reinsurers or other substitute financing solutions; 23 Table of Contents • fixing maximum interest rates on life insurance policy loans and minimum accumulation or surrender values; and • regulating the type, amounts, and valuations of investments permitted, transactions with affiliates and other matters.
State insurance authorities have broad administrative powers over FGL Insurance and FGL NY Insurance with respect to all aspects of the insurance business, including: • licensing to transact business; • licensing agents; • prescribing which assets and liabilities are to be considered in determining statutory surplus; • regulating premium rates for certain insurance products; • approving policy forms and certain related materials; • requiring insurers and agents to act in the best interests of consumers when making recommendations to purchase annuities, or to determine whether a reasonable basis exists as to the suitability of such investments for consumers; • regulating unfair trade and claims practices; • establishing reserve requirements and solvency standards; 26 • regulating the amount of dividends that may be paid in any year by insurance companies; • regulating the availability of reinsurance or other substitute financing solutions, the terms thereof and the ability of an insurer to take credit on its financial statements for insurance ceded to reinsurers or other substitute financing solutions; • fixing maximum interest rates on life insurance policy loans and minimum accumulation or surrender values; and • regulating the type, amounts, and valuations of investments permitted, transactions with affiliates and other matters.
Under the laws regulating credit for reinsurance issued by such unlicensed or unaccredited reinsurers, the permissible means of securing such liabilities are (i) the establishment of a trust account by the reinsurer to hold certain qualifying assets in a qualified U.S. financial institution, such as a member of the Federal Reserve, with the ceding insurer as the exclusive beneficiary of such trust account with the unconditional right to demand, without notice to the reinsurer, that the trustee pay over to it the assets in the trust account equal to the liabilities owed by the reinsurer; (ii) the posting of an unconditional and irrevocable letter of credit by a qualified U.S. financial institution in favor of the ceding company allowing the ceding company to draw upon the letter of credit up to the amount of the unpaid liabilities of the reinsurer and (iii) a “funds withheld” arrangement by which the ceding company 26 Table of Contents withholds transfer to the reinsurer of the assets, which support the liabilities to be owed by the reinsurer, with the ceding insurer retaining title to and exclusive control over such assets.
Under the laws regulating credit for reinsurance issued by such unlicensed or unaccredited reinsurers, the permissible means of securing such liabilities are (i) the establishment of a trust account by the reinsurer to hold certain qualifying assets in a qualified U.S. financial institution, such as a member of the Federal Reserve, with the ceding insurer as the exclusive beneficiary of such trust account with the unconditional right to demand, without notice to the reinsurer, that the trustee pay over to it the assets in the trust account equal to the liabilities owed by the reinsurer; (ii) the posting of an unconditional and irrevocable letter of credit by a qualified U.S. financial institution in favor of the ceding company allowing the ceding company to draw upon the letter of credit up to the amount of the unpaid liabilities of the reinsurer and (iii) a “funds withheld” arrangement by which the ceding company withholds transfer to the reinsurer of the assets, which support the liabilities to be owed by the reinsurer, with the ceding insurer retaining title to and exclusive control over such assets.
The BMA is required by the Insurance Act to determine whether the applicant is a fit and proper body to be engaged in the insurance business and, in particular, whether it has, or has available to it, adequate knowledge and expertise.
The BMA is required by the Bermuda Insurance Act to determine whether the applicant is a fit and proper body to be engaged in the insurance business and, in particular, whether it has, or has available to it, adequate knowledge and expertise.
Our competitive asset management advantage through Blackstone allows us to have very competitive offerings in our spread lending products as well as in the PRT market, while still meeting our internal pricing targets. • In addition to our funding agreement business with the Federal Home Loan Bank of Atlanta, (“FHLB”), we now offer the proven ability to originate Funding Agreement Backed Notes (“FABN”), a $140 billion market.
Our competitive asset management advantage through Blackstone allows us to have very competitive offerings in our spread lending products as well as in the PRT market, while still meeting our internal pricing targets. • In addition to our funding agreement business with the Federal Home Loan Bank of Atlanta, (“FHLB”), we now offer the proven ability to originate Funding Agreement Backed Notes (“FABN”), a $176 billion market.
We outsource the following functions to third-party service providers: • new business administration (data entry and policy issue only); • service of existing policies; • underwriting administration of life insurance applications; • life reinsurance administration; • call centers; • information technology development and maintenance; • investment accounting and custody; and • co-located data centers and hosting of financial systems.
We outsource the following functions to third-party service providers: • new business administration (data entry and policy issue only); • service of existing policies; • underwriting administration of life insurance applications; • call centers; • information technology development and maintenance; • certain investment accounting and custody; and • co-located data centers and hosting of financial systems.
See “—Bermuda Regulatory Overview — ECR and Bermuda Solvency Capital Requirements” for a discussion of Bermuda regulatory requirements that impact F&G Life Re.
See “ Bermuda Regulatory Overview — ECR and Bermuda Solvency Capital Requirements ” for a discussion of Bermuda regulatory requirements that impact F&G Life Re.
The respective appointed actuaries for FGL Insurance, FGL NY Insurance and Raven Re must each submit an opinion on an annual basis that their respective reserves, when considered in light of the respective assets FGL Insurance, FGL NY Insurance and Raven Re hold with respect to those reserves, make adequate provision for the contractual obligations and related expenses of FGL Insurance, FGL NY Insurance and Raven Re.
The respective appointed actuaries for FGL Insurance, FGL NY Insurance, Raven Re and Corbeau Re must each submit an opinion on an annual basis that their respective reserves, when 29 considered in light of the respective assets FGL Insurance, FGL NY Insurance, Raven Re and Corbeau Re hold with respect to those reserves, make adequate provision for the contractual obligations and related expenses of FGL Insurance, FGL NY Insurance, Raven Re and Corbeau Re.
We have previously sold single premium immediate annuities (or “SPIAs”), which provide a series of periodic payments for a fixed period of time or for the life of the policyholder, according to the policyholder’s choice at the time of issue. The amounts, frequency and length of time of the payments are fixed at the outset of the annuity contract.
We have previously sold single premium immediate annuities (“SPIA”), which provide a series of periodic payments for a fixed period of time or for the life of the policyholder, according to the policyholder’s choice at the time of issue. The amounts, frequency and length of time of the payments are fixed at the outset of the annuity contract.
The average surrender charge was 7% for our FIAs and 7% for our fixed rate annuities as of December 31, 2022. A market value adjustment (“MVA”) will also apply in most states to any withdrawal that incurs a surrender charge, subject to certain exceptions.
The average surrender charge was 7% for our FIAs and 7% for our fixed rate annuities as of December 31, 2023. A market value adjustment (“MVA”) will also apply in most states to any withdrawal that incurs a surrender charge, subject to certain exceptions.
Insurance Regulatory Information System Tests The NAIC has developed a set of financial relationships or tests known as the Insurance Regulatory Information System ("IRIS") to assist state regulators in monitoring the financial condition of U.S. insurance companies and identifying companies that require special attention or action by insurance regulatory authorities.
Insurance Regulatory Information System Tests The NAIC has developed a set of financial relationships or tests known as the Insurance Regulatory Information System (“IRIS”) to assist state regulators in monitoring the financial condition of U.S. insurance companies and identifying companies that require special attention or action by insurance regulatory authorities.
The Companies Act also limits F&G Life Re’s ability to pay dividends and make distributions to its shareholders.
The Bermuda Companies Act also limits F&G Life Re’s ability to pay dividends and make distributions to its shareholders.
Any payment of dividends by FGL Insurance is subject to the regulatory restrictions described above and the approval of such payment by the board of directors of FGL Insurance, which must consider various factors, including general economic and business conditions, tax considerations, FGL Insurance’s strategic plans, financial results and condition, FGL Insurance’s expansion plans, any contractual, legal or regulatory restrictions on the 24 Table of Contents payment of dividends and its effect on RBC and such other factors the board of directors of FGL Insurance considers relevant.
Any payment of dividends by FGL Insurance is subject to the regulatory restrictions described above and the approval of such payment by the board of directors of FGL Insurance, which must consider various factors, including general economic and business conditions, tax considerations, FGL Insurance’s strategic plans, financial results and condition, FGL Insurance’s expansion plans, any contractual, legal or regulatory restrictions on the payment of dividends and its effect on RBC and such other factors the board of directors of FGL Insurance considers relevant.
Based on the fair value of our derivatives as of December 31, 2022, we hold no net short positions against a counterparty; therefore, there is currently no potential exposure for us to post collateral.
Based on the fair value of our derivatives as of December 31, 2023, we hold no net short positions against a counterparty; therefore, there is currently no potential exposure for us to post collateral.
If FIAs were to be treated as securities, federal and state securities laws would require additional registration and licensing of these products and the agents selling them, and FGL Insurance and FGL NY Insurance would be required to seek additional marketing relationships for these 28 Table of Contents products, any of which could impose significant restrictions on its ability to conduct operations as currently operated.
If FIAs were to be treated as securities, federal and state securities laws would require additional registration and licensing of these products and the agents selling them, and FGL Insurance and FGL NY Insurance would be required to seek additional marketing relationships for these products, any of which could impose significant restrictions on its ability to conduct operations as currently operated.
A ratio falling outside the prescribed “usual range” is not considered a failing result. Rather, unusual values are viewed as part of the regulatory early monitoring system. In many cases, it is not unusual for financially sound companies to have one 25 Table of Contents or more ratios that fall outside the usual range.
A ratio falling outside the prescribed “usual range” is not considered a failing result. Rather, unusual values are viewed as part of the regulatory early monitoring system. In many cases, it is not unusual for financially sound companies to have one or more ratios that fall outside the usual range.
SPIAs are often purchased by persons at or near retirement age who desire a steady stream of payments over a future period of years. Existing policyholders may elect to surrender their contract and use the proceeds to purchase a supplementary contract which functions as a SPIA. 14 Table of Contents Life Insurance.
SPIAs are often purchased by persons at or near retirement age who desire a steady stream of payments over a future period of years. Existing policyholders may elect to surrender their contract and use the proceeds to purchase a supplementary contract which functions as a SPIA. Life Insurance.
F&G Life Re is not permitted to declare or pay a dividend, or make a distribution out of its contributed surplus, if it is, or would after the payment be, unable to pay its liabilities as they become due or if the realizable value of its assets would be less than its liabilities. 31 Table of Contents Reduction of Capital.
F&G Life Re is not permitted to declare or pay a dividend, or make a distribution out of its contributed surplus, if it is, or would after the payment be, unable to pay its liabilities as they become due or if the realizable value of its assets would be less than its liabilities. Reduction of Capital.
FGL Insurance may only pay dividends out of statutory earned surplus. In 2022, FGL Insurance did not pay extraordinary dividends to FGLH. FGL Insurance’s maximum ordinary dividend capacity for 2023 is $0.
FGL Insurance may only pay dividends out of statutory earned surplus. In 2023, FGL Insurance did not pay extraordinary dividends to FGLH. FGL Insurance’s maximum ordinary dividend capacity for 2024 is $0.
The options and futures contracts are marked to fair value with the change in fair value included as a component of “Recognized gains and losses, net” in our Consolidated Statements of Earnings.
The options and futures contracts are marked to fair value with the change in fair value included as a component of “Recognized gains and (losses), net” in our Consolidated Statements of Operations.
We use reinsurance to diversify risks and earnings, to manage loss exposures, to enhance our capital position, and to 15 Table of Contents manage new business volume. The effects of certain reinsurance agreements are not accounted for as reinsurance as they do not reinsure insurance contracts or they do not transfer the risks of the reinsured policies.
We use reinsurance to diversify risks and earnings, to manage loss exposures, to enhance our capital position, and to manage new business volume. The effects of certain reinsurance agreements are not accounted for as reinsurance as they do not reinsure insurance contracts, or they do not transfer the risks of the reinsured policies.
See also “ Risk Factors—Risks Relating to Our Business—We rely on our investment management or advisory agreements with BIS and other investment managers and sub-managers for the management of portions of certain of our life insurance companies’ investment portfolios.” The initial term of the side letter expires in 2027 and will automatically renew for successive one-year terms unless F&G terminates the side letter.
See also “ Risk Factors—Risks Relating to Our Business—We rely on our investment management or advisory agreements with BIS and other investment managers and sub-managers for the management of portions of certain of our life insurance companies’ investment portfolios.” The initial term of the side letter expires in 2029 and will automatically renew for successive two-year terms unless F&G terminates the side letter.
MYGAs are similar to fixed rate annual reset annuities except that the initial crediting rate is guaranteed for a specified number of years before it may be changed at our discretion. As of December 31, 2022, crediting rates on outstanding (i) single-year guaranteed annuities generally ranged from 2% to 6% and (ii) MYGA ranged from 1% to 6%.
MYGAs are similar to fixed rate annual reset annuities except that the initial crediting rate is guaranteed for a specified number of years before it may be changed at our discretion. As of December 31, 2023, crediting rates on outstanding (i) single-year guaranteed annuities generally ranged from 1% to 6% and (ii) MYGA ranged from 1% to 5%.
Typically, this accumulates for 10 years based on a guaranteed rate of 3% to 8%. 13 Table of Contents Guaranteed withdrawal payments may be stopped and restarted at the election of the contract owner. Some of the FIA contract riders that we offer include an additional death benefit or an increase in benefit amounts under chronic health conditions.
Typically, this accumulates for 10 years based on a guaranteed rate of 3% to 8%. Guaranteed withdrawal payments may be stopped and restarted at the election of the contract owner. Some of the FIA contract riders that we offer include an additional death benefit or an increase in benefit amounts under chronic 15 health conditions.
As this fee is fixed, the contract holder may lose principal if the index credits received do not exceed the amount of such fee. Approximately 30% of the FIA sales for the year ended December 31, 2022, involved “premium bonuses” or vesting bonuses. Premium bonuses increase the initial annuity deposit by a specified rate of 2%.
As this fee is fixed, the contract holder may lose principal if the index credits received do not exceed the amount of such fee. Approximately 39% of the FIA sales for the year ended December 31, 2023, involved “premium bonuses” or vesting bonuses. Premium bonuses increase the initial annuity deposit by a specified rate of 2%.
We entered the PRT solutions business by building a team of experienced professionals, then working with brokers and institutional consultants for distribution. As of December 31, 2022, we had completed PRT transactions that represented pension obligations of $2.5 billion. Reinsurance philosophy/arrangements. Our insurance subsidiaries cede insurance to other insurance companies.
We entered the PRT solutions business by building a team of experienced professionals, then working with brokers and institutional consultants for distribution. As of December 31, 2023, we had completed PRT transactions that represented pension obligations of $4.5 billion. Reinsurance philosophy/arrangements. Our insurance subsidiaries cede insurance to other insurance companies.
Our Approach to Environmental, Social, and Governance (“ESG”) F&G’s solutions inherently provide a social good, and that sentiment of service also provides the foundation for F&G’s culture and guides business operations as well as interactions within our communities.
Our Approach to Environmental, Social, and Governance (“ESG”) F&G’s products and services inherently provide a social good, and that sentiment of service also provides the foundation for F&G’s culture and guides business operations as well as interactions within our communities.
Financial strength ratings and credit ratings are important factors affecting public confidence in an insurer and its competitive position in marketing products. As of the date of this Annual Report, A.M. Best, Fitch, Moody’s, and S&P had issued credit ratings, financial strength ratings and/or outlook statements regarding us, as listed below.
Financial strength ratings and credit ratings are important factors affecting public confidence in an insurer and its competitive position in marketing products. As of the date of this Annual Report on Form 10-K, A.M. Best, Fitch, Moody’s, and S&P had issued credit ratings, financial strength ratings and/or outlook statements regarding us, as listed below.
While the degree to which ratings adjustments will affect sales and persistency is unknown, we believe if our ratings were to be negatively adjusted for any reason, we could experience a material decline in the sales of our products and the persistency of our existing business. See “ Risk Factors ” in this Annual Report.
While the degree to which ratings adjustments will affect sales and persistency is unknown, we believe if our ratings were to be negatively adjusted for any reason, we could experience a material decline in the sales of our products and the persistency of our existing business. See “ Risk Factors ” in this Annual Report on Form 10-K.
Our invested assets comprise what we believe to be a highly rated and well diversified portfolio. As of December 31, 2022, 94% of our fixed maturity securities were rated under criteria of the National Association of Insurance Commissioners (the “NAIC”) as NAIC 1 or NAIC 2, the two highest credit rating designations of the NAIC.
Our invested assets comprise what we believe to be a highly rated and well diversified portfolio. As of December 31, 2023, 95% of our fixed maturity securities were rated under criteria of the National Association of Insurance Commissioners (the “NAIC”) as NAIC 1 or NAIC 2, the two highest credit rating designations of the NAIC.
For a discussion of the five distinct channels, see “ We Play in Large and Growing Markets” and “ Our Retail Distribution Channels” within this section of the Annual Report. We believe the strength of our balance sheet provides confidence to our policyholders and business partners and positions us for continued growth.
For a discussion of the five distinct channels, see “ We Play in Large and Growing Markets” and “ Our Retail Distribution Channels” within this section of the Annual Report on Form 10-K. We believe the strength of our balance sheet provides confidence to our policyholders and business partners and positions us for continued growth.
We made compensating adjustments in the commission paid to the agent or the surrender charges on the policy to offset the premium bonus. Approximately 37% of our FIA contracts were issued with a guaranteed minimum withdrawal benefit (“GMWB”) rider for the year ended December 31, 2022.
We made compensating adjustments in the commission paid to the agent or the surrender charges on the policy to offset the premium bonus. Approximately 48% of our FIA contracts were issued with a guaranteed minimum withdrawal benefit (“GMWB”) rider for the year ended December 31, 2023.
In 2020, F&G launched a set of fixed rate annuity and FIA products to banks and broker dealers, and gained selling agreements with some of the largest banks and broker dealers in the United States. We offer our products through a network of approximately 20 banks and broker dealers, representing approximately 9,000 financial advisers.
In 2020, F&G launched a set of fixed rate annuity and FIA products to banks and broker dealers and gained selling agreements with some of the largest banks and broker dealers in the United States. We offer our products through a network of approximately 21 banks and broker dealers, representing approximately 10,000 financial advisers.
Pursuant to the agreed upon terms, Wilton Reassurance Company (“Wilton Re”) purchased through a 100% quota share reinsurance agreement certain FGL Insurance life insurance policies that are subject to redundant reserves, reported on a statutory basis, under Regulation XXX and Guideline AXXX, as well as another block of FGL Insurance’s in-force traditional, universal life and IUL insurance policies.
Pursuant to the agreed upon terms, Wilton Re purchased through a 100% quota share reinsurance agreement certain FGL Insurance life insurance policies that are subject to redundant reserves, reported on a statutory basis, under Regulation XXX and Guideline AXXX, as well as another block of FGL Insurance’s in-force traditional, universal life and IUL insurance policies.
If the insurance subsidiaries held net short positions against a counterparty, and the subsidiaries’ financial strength ratings were below the levels required in the ISDA agreement with the counterparty, the counterparty would 22 Table of Contents demand immediate further collateralization, which could negatively impact overall liquidity.
If the insurance subsidiaries held net short positions against a counterparty, and the subsidiaries’ financial strength ratings were below the levels required in the ISDA agreement with the counterparty, the counterparty would demand immediate further collateralization, which could negatively impact overall liquidity.
Our mission is to help people turn their aspirations into reality and, as of December 31, 2022, F&G has approximately 623,000 policyholders who count on the safety and protection our fixed annuity and life insurance products provide.
Our mission is to help people turn their aspirations into reality and, as of December 31, 2023, F&G has approximately 677,000 policyholders who count on the safety and protection our fixed annuity and life insurance products provide.
An immediate annuity is a type of contract that begins 12 Table of Contents making specified payments within one annuity period (e.g., one month or one year) and typically pays principal and earnings in equal payments over some period of time. Deferred Annuities – FIAs .
An immediate annuity is a type of contract that begins making specified payments within one annuity period (e.g., one month or one year) and typically pays principal and earnings in equal payments over some period of time. 14 Deferred Annuities – FIAs .
In addition to the financial strength ratings, rating agencies use an “outlook statement” to indicate a medium- or long-term trend that, if continued, may lead to a rating change. A positive outlook indicates a rating may be raised 21 Table of Contents and a negative outlook indicates a rating may be lowered.
In addition to the financial strength ratings, rating agencies use an “outlook statement” to indicate a medium- or long-term trend that, if continued, may lead to a rating change. A positive outlook indicates a rating may be raised and a negative outlook indicates a rating may be lowered.
In December 2020, the DOL issued its final version of an investment advice rule replacing the previous “Fiduciary Rule” that had been challenged by industry participants and vacated in March 2018 by the United States Fifth Circuit Court of Appeals.
In December 2020, the Department of Labor (“DOL”) issued its final version of an investment advice rule replacing the previous “Fiduciary Rule” that had been challenged by industry participants and vacated in March 2018 by the United States Fifth Circuit Court of Appeals.
The information posted on our website is not incorporated into this document. The SEC maintains a website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that site is www.sec.gov. 33 Table of Contents
The information posted on our website is not incorporated into this document. The SEC maintains a website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that site is www.sec.gov. 44
F&G’s deep and experienced management team has successfully diversified products and channels in recent years and demonstrated our ability to deliver consistent top line growth, increase assets under management and generate steady spreads and ROA, excluding short-term mark-to-market effects, across varying market cycles.
F&G’s deep and experienced management team has successfully diversified products and channels in recent years and demonstrated our ability to deliver consistent top line growth, increase assets under management and generate steady spreads and ROA, excluding short-term mark-to-market effects, across varying market cycles. • Driving margin expansion and improved returns.
We continue to invest in our life insurance business, focusing our approach to meet the needs of the underserved middle market which we reach largely through Network Marketing Groups (“NMGs”). The middle market segment was the largest in 2019, at 37% of households.
We continue to invest in our life insurance business, focusing our approach to meet the needs of the underserved middle market which we reach largely through Network Marketing Groups (“NMGs”). The middle market segment was the largest in 2022, at 46% of households.
Please refer to Note C Investments in the Consolidated Financial Statements and the “ Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investment Portfolio” in this Annual Report for additional information about our investment portfolio.
Please refer to Note C - Investments in the Consolidated Financial Statements and the “ Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investment Portfolio” in this Annual Report on Form 10-K for additional information about our investment portfolio.
We offer fixed annuities and life insurance products through a network of approximately 20 leading banks and broker dealers and approximately 271 Independent Marketing Organizations (“IMOs”) that provide back-office support for thousands of independent insurance agents. • Winning in high-growth markets. The U.S. retirement and middle markets are growing, and we are both well-established and well-positioned for continued growth.
We offer fixed annuities and life insurance products through a network of approximately 21 leading banks and broker dealers and approximately 280 Independent Marketing Organizations (“IMO”) that provide back-office support for thousands of independent insurance agents. • Winning in high-growth markets. The U.S. retirement and middle markets are growing, and we are both well-established and well-positioned for continued growth.
Prior to June 1, 2027, we and FNF may only terminate the side letter for cause.
Prior to June 1, 2029, we and FNF may only terminate the side letter for cause.
The new investment advice rule reinstates the five-part test for determining whether a person is considered a fiduciary for purposes of ERISA and the Code and sets forth a new PTE referred to as PTE 2020-02.
The new investment advice rule reinstates the five-part test for determining whether a person is considered a fiduciary for purposes of ERISA and the Code and sets forth a new prohibited transaction exemption (“PTE”) referred to as PTE 2020-02.
If we provide any such notice, the termination would not become effective for two years from the date of termination given in the notice, during which time BIS may seek to cure the events giving arise to the termination notice.
If we provide any such notice, the termination would not become effective for one year from the date of termination given in the notice, during which time BIS may seek to cure the events giving arise to the termination notice.
As such, we partner with a select number of financial institution intermediaries who have expertise in the channel and maintain the appropriate field wholesaling forces to be successful in this channel. In 2022, the top 5 firms represented 87% of channel sales. Bank and broker dealers represented 44% of annuity sales for the year ended December 31, 2022.
As such, we partner with a select number of financial institution intermediaries who have expertise in the channel and maintain the appropriate field wholesaling forces to be successful in this channel. In 2023, the top 5 firms represented 78% of channel sales. Bank and broker dealers represented 51% of annuity sales for the year ended December 31, 2023.
As defined by the IID, a funding agreement is an agreement for an insurer to accept and accumulate funds and to make one or more payments at future dates in amounts that are not based on mortality or morbidity contingencies of the person to whom the funding agreement is issued.
Funding Agreements. As defined by the Iowa Insurance Division (“IID”), a funding agreement is an agreement for an insurer to accept and accumulate funds and to make one or more payments at future dates in amounts that are not based on mortality or morbidity contingencies of the person to whom the funding agreement is issued.
These upgrades, valued by our distribution partners, positioned us to quickly expand our business in our existing channels and gain access to new markets. Gross sales increased from $4.5 billion for the full year 2020 to $11.3 billion in 2022 and did so profitably.
These upgrades, valued by our distribution partners, positioned us to quickly expand our business in our existing channels and gain access to new markets. Gross sales increased from $4.5 billion for the full year 2020 to $13.2 billion in 2023 and did so profitably.
We also maintain holdings in floating rate, and less rate-sensitive investments, including senior tranches of CLOs, non-agency RMBS, and various types of ABS. It is our expectation that our investment portfolio will broaden in scope and diversity to include other asset classes held by life and annuity insurance writers.
We also maintain holdings in floating rate, and less rate-sensitive investments, including collateralized loan obligations (“CLO”), non-agency RMBS, and various types of ABS. It is our expectation that our investment portfolio will broaden in scope and diversity to include other asset classes held by life and annuity insurance writers.
See "Risk Factors—Risks Relating to Our Business—A financial strength ratings downgrade, potential downgrade, or any other negative action by a rating agency could increase our cost of capital, making it challenging to grow our business, and could hinder our ability to participate in certain market segments, thereby adversely affecting our results of operations and our financial condition” in this Information Statement.
See "Risk Factors—Risks Relating to Our Business—A financial strength ratings downgrade, potential downgrade, or any other negative action by a rating agency could increase our cost of capital, making it challenging to grow our business, and could hinder our ability to participate in certain market segments, thereby adversely affecting our results of operations and our financial condition” in this Annual Report on Form 10-K.
This has allowed us to build deep and lasting relationships with both the NMGs and the agents. Since 2018, largely due to our NMG strategy, F&G’s IUL sales growth has far outpaced the industry, with a three-year combined annual growth rate of 46% compared to the industry’s 3.4%.
This has allowed us to build deep and lasting relationships with both the NMGs and the agents. Since 2019, largely due to our NMG strategy, F&G’s IUL sales growth has far outpaced the industry, with a three-year combined annual growth rate of 49.5% compared to the industry’s 4.9%.
MVB Management, LLC, (“MVB Management”), an entity that is 50% owned by affiliates of William Foley, the Chairman of FNF and a director of F&G, receives a participation fee from BIS in connection with assets of F&G and its subsidiaries that are managed by BIS. BIS also receives services from MVB Management.
MVB Management, LLC, (“MVB Management”), an entity that is 50% owned by BilCar, LLC (an affiliate of William Foley, the Executive Chairman and a director of the Company) (“BilCar”), receives a participation fee from BIS in connection with assets of F&G and its subsidiaries that are managed by BIS. BIS also receives services from MVB Management.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, at the expiration of the initial term of the side letter in 2027, or at the end of any renewal term, we may, with prior notice, terminate the side letter for (i) unsatisfactory long-term performance by BIS that is materially detrimental to one of our subsidiaries or (ii) unfair and excessive fees charged by BIS compared to those that would be charged by a comparable asset manager (taking into account the experience, education and qualification of BIS’s personnel, the scale and scope of the services being provided by BIS, and the composition of the managed investment portfolio and comparable investment guidelines).
Biggest changeIn addition, at the expiration of the initial term of the side letter in 2029, or at the end of any renewal term, we may, with prior notice, terminate the side letter for unsatisfactory long-term performance by BIS based on underperformance.
The risk factors generally have been separated into the following 6 groups: risks related to our business; risks related to economic conditions and market conditions; risks related to legal, regulatory and tax; risks relating to our indebtedness and financing; risks related to the separation and distribution and our status as a subsidiary of FNF; and risks related to our common stock.
The risk factors generally have been separated into the following 6 groups: risks related to our business; risks related to economic conditions and market conditions; legal, regulatory and tax risks; risks relating to our indebtedness and financing; risks related to the separation and distribution and our status as a subsidiary of FNF; and risks related to our common stock.
Prior to 2022, interest rates had been at or near historical low levels over the the preceding several years. A prolonged period of low rates exposes us to the risk of not achieving returns sufficient to meet our earnings targets and/or our contractual obligations.
Prior to 2022, interest rates had been at or near historical low levels over the preceding several years. A prolonged period of low rates exposes us to the risk of not achieving returns sufficient to meet our earnings targets and/or our contractual obligations.
In connection with the separation, F&G also entered into various ancillary agreements to effect the separation and provide a framework for its relationship with FNF after the separation and distribution, such as a corporate services agreement (the “Corporate Services Agreement”), a reverse corporate services agreement (the “Reverse Corporate Services Agreement”), a tax sharing agreement (the “Tax Sharing Agreement”) and other agreements entered into in connection therewith (collectively with the Separation and Distribution Agreement, the “Transaction Agreements”).
In connection with the separation, F&G also entered into various ancillary agreements to effect the separation and provide a framework for its relationship with FNF after the separation and distribution, such as a corporate services agreement (the “Corporate Services Agreement”), a reverse corporate services agreement (the “Reverse Corporate Services Agreement”), a tax sharing agreement (the “Tax Sharing Agreement”) and other agreements entered into in connection therewith (collectively with a Separation and Distribution Agreement, the “Transaction Agreements”).
RBC ratios may increase or decrease depending on a variety of factors, most of which are outside of the control of each of our insurance subsidiaries, including, but not limited to, the following: • the amount of statutory income or losses generated by such insurance subsidiary (which itself is sensitive to equity market and credit market conditions); • the amount of additional capital such insurance subsidiary must hold to support business growth and changes to the RBC calculation methodologies; • changes in statutory accounting or reserve requirements applicable to such insurance subsidiary; • such insurance subsidiary’s ability to access capital markets to provide reserve relief; • changes in equity market levels, interest rates, and market volatility; • the value of certain fixed-income and equity securities in such insurance subsidiary’s investment portfolio; • changes in the credit ratings of investments held in such insurance subsidiary’s portfolio; and • the value of certain derivative instruments.
RBC ratios may increase or decrease depending on a variety of factors, most of which are outside of the control of each of our insurance subsidiaries, including, but not limited to, the following: • the amount of statutory income or losses generated by such insurance subsidiary (which itself is sensitive to equity market and credit market conditions); 60 • the amount of additional capital such insurance subsidiary must hold to support business growth and changes to the RBC calculation methodologies; • changes in statutory accounting or reserve requirements applicable to such insurance subsidiary; • such insurance subsidiary’s ability to access capital markets to provide reserve relief; • changes in equity market levels, interest rates, and market volatility; • the value of certain fixed-income and equity securities in such insurance subsidiary’s investment portfolio; • changes in the credit ratings of investments held in such insurance subsidiary’s portfolio; and • the value of certain derivative instruments.
These provisions include: • rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings; • permitting our Board to issue preferred stock without shareholder approval; • granting to the Board, and not the shareholders, the sole power to set the number of directors; • the initial division of our Board into three classes of directors, with each class serving a staggered term; 53 • a provision that directors serving on a classified Board may be removed by shareholders only for cause; • authorizing vacancies on our Board to be filled only by a vote of the majority of the directors then in office and specifically denying our shareholders the right to fill vacancies in the Board; and • limiting shareholder action by written consent.
These provisions include: • rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings; • permitting our Board to issue preferred stock without shareholder approval; • granting to the Board, and not the shareholders, the sole power to set the number of directors; • the initial division of our Board into three classes of directors, with each class serving a staggered term; • a provision that directors serving on a classified Board may be removed by shareholders only for cause; • authorizing vacancies on our Board to be filled only by a vote of the majority of the directors then in office and specifically denying our shareholders the right to fill vacancies in the Board; and • limiting shareholder action by written consent.
These provisions include, for 48 example, raising the age for required minimum distributions from IRAs from 72 to 73 (age 74 after 2032); additional exceptions to the 10% penalty tax for distributions before age 59-1/2; reduction of the penalty for failures to take a required distribution amount; directions to the SEC for new registration forms for registered index linked annuities; and directions to the DOL to revisit fiduciary standards relating to choosing an annuity provider in pension risk transfer transactions.
These provisions include, for example, raising the age for required minimum distributions from IRAs from 72 to 73 (age 74 after 2032); additional exceptions to the 10% penalty tax for distributions before age 59-1/2; reduction of the penalty for failures to take a required distribution amount; directions to the SEC for new registration forms for registered index linked annuities; and directions to the DOL to revisit fiduciary standards relating to choosing an annuity provider in pension risk transfer transactions.
Fixed maturities, equity securities and derivatives represent the majority of total cash and invested assets reported at fair value on our balance sheet. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price).
Fixed maturities, equity securities and derivatives represent the majority of total cash and invested assets reported at fair value on our balance sheet. Fair value is defined as the price that would be received to sell an asset or 46 paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price).
See “— Risks Related to our Business—A financial strength ratings downgrade, potential downgrade, or any other negative action by a rating agency could increase our cost of capital, making it challenging to grow the business, and could hinder our ability to participate in certain market segments, thereby adversely affect our financial condition and results of operations ” for a discussion of risks relating to our financial strength ratings.
See “— Risks Related to our Business—A financial strength ratings downgrade, potential downgrade, or any other negative action by a rating agency could increase our cost of capital, making it challenging to grow the business, and could hinder our ability to participate in certain market segments, thereby 58 adversely affect our financial condition and results of operations ” for a discussion of risks relating to our financial strength ratings.
Sometimes these take the form of civil investigative demands or subpoenas. We cooperate with all such inquiries and we have responded to or are 50 currently responding to inquiries from multiple governmental agencies. Various governmental entities are studying the insurance product, market, pricing, and business practices, and potential regulatory and legislative changes, which may materially affect our business and operations.
Sometimes these take the form of civil investigative demands or subpoenas. We cooperate with all such inquiries, and we have responded to or are currently responding to inquiries from multiple governmental agencies. Various governmental entities are studying the insurance product, market, pricing, and business practices, and potential regulatory and legislative changes, which may materially affect our business and operations.
To support long-term capital requirements, we may need to increase or maintain statutory capital and surplus of our insurance subsidiaries through financings which could include debt, equity, financing arrangements or other surplus relief transactions. On June 24, 2022, FNF capitalized $400 million of intercompany indebtedness into common stock of F&G.
To support long-term capital requirements, we may need to increase or maintain statutory capital and surplus of our insurance subsidiaries through financing which could include debt, equity, financing arrangements or other surplus relief transactions. On June 24, 2022, FNF capitalized $400 million of intercompany indebtedness into common stock of F&G.
The new investment advice rule reinstates the five-part test for determining whether a person is considered a fiduciary for purposes of the Employee Retirement Income Security Act of 1974 (“ERISA”) and the Internal Revenue Code of 1986, as amended (the “Code”), and sets forth a new exemption, referred to as 47 prohibited transaction class exemption (“PTE”) 2020-02.
The new investment advice rule reinstates the five-part test for determining whether a person is considered a fiduciary for purposes of the Employee Retirement Income Security Act of 1974 (“ERISA”) and the Internal Revenue Code of 1986, as amended (the “Code”), and sets forth a new exemption, referred to as prohibited transaction class exemption (“PTE”) 2020-02.
For example, federal income taxation on any increases in non-qualified annuity contract values (i.e., the “inside build-up”) is deferred until it is received by the policyholder. Non-qualified 49 annuities are annuities that are not sold to a qualified retirement plan or are in the form of a qualified contract such as an IRA.
For example, federal income taxation on any increases in non-qualified annuity contract values (i.e., the “inside build-up”) is deferred until it is received by the policyholder. Non-qualified annuities are annuities that are not sold to a qualified retirement plan or are in the form of a qualified contract such as an IRA.
However, if there is an adverse event affecting the value of our reporting unit in the future, the carrying amount of our goodwill may no longer be recoverable, and we may be required to record an impairment charge, which would have a negative impact on our results of operations and financial condition.
However, if there is an adverse event affecting the value of our reporting unit in the future, the carrying amount of our goodwill may no longer be 47 recoverable, and we may be required to record an impairment charge, which would have a negative impact on our results of operations and financial condition.
In an economic downturn characterized by higher unemployment, lower family income, negative investor sentiment and lower consumer spending, the demand for our insurance products could be adversely affected. Under such conditions, we may also experience an elevated incidence of policy lapses, policy loans, withdrawals and surrenders.
In an 53 economic downturn characterized by higher unemployment, lower family income, negative investor sentiment and lower consumer spending, the demand for our insurance products could be adversely affected. Under such conditions, we may also experience an elevated incidence of policy lapses, policy loans, withdrawals and surrenders.
In addition, such events could result in overall macroeconomic volatility or specifically a decrease or halt in economic activity in large geographic areas, adversely affecting the marketing or administration of our business within such geographic areas or the general economic 45 climate, which in turn could have an adverse effect on our business, results of operations and financial condition.
In addition, such events could result in overall macroeconomic volatility or specifically a decrease or halt in economic activity in large geographic areas, adversely affecting the marketing or administration of our business within such geographic areas or the general economic climate, which in turn could have an adverse effect on our business, results of operations and financial condition.
In addition, the NAIC continues to consider the nature of the relationships between insurance companies and their investment advisors and investment managers, and more broadly the impact of private equity within the 41 insurance industry. We are continuing to monitor the development of any proposals that could have a material impact on the contractual relationships between us and BIS.
In addition, the NAIC continues to consider the nature of the relationships between insurance companies and their investment advisors and investment managers, and more broadly the impact of private equity within the insurance industry. We are continuing to monitor the development of any proposals that could have a material impact on the contractual relationships between us and BIS.
If legislation were enacted to eliminate the tax deferral for annuities or life insurance policies, such a change would have a material adverse effect on our ability to sell non-qualified annuities or life insurance policies. Changes in tax law may increase our future tax liabilities and related compliance costs.
If legislation were enacted to eliminate the tax deferral for annuities or life insurance policies, such a change would have a material adverse effect on our ability to sell non-qualified annuities or life insurance policies. 61 Changes in tax law may increase our future tax liabilities and related compliance costs.
In addition, we conduct various quantitative credit screens on the investment portfolio to create a credit watchlist. The credit watchlist investments are then further analyzed by our portfolio manager for likelihood of loss of contractual principal and interest. Our portfolio managers also maintain a credit spotlight for investments that do not meet the quantitative screens.
In addition, we conduct various quantitative credit screens on the investment portfolio to create a credit watchlist. The credit watchlist investments are then further analyzed by our portfolio managers for likelihood of loss of contractual principal and interest. Our portfolio managers also maintain a credit spotlight for investments that do not meet the quantitative screens.
These entities depend in large part on their ability to attract and retain key people, including senior executives, finance professionals and information technology professionals. Intense competition exists for key 40 employees with demonstrated ability, and our investment managers may be unable to hire or retain such employees.
These entities depend in large part on their ability to attract and retain key people, including senior executives, finance professionals and information technology professionals. Intense competition exists for key employees with demonstrated ability, and our investment managers may be unable to hire or retain such employees.
As a result, FNF is able to control the election of our directors, determine our corporate and management policies and determine, without the consent of our other shareholders, the outcome of any corporate transaction or other matter submitted to our shareholders for approval, 52 including potential mergers or acquisitions, asset sales and other significant corporate transactions.
As a result, FNF is able to control the election of our directors, determine our corporate and management policies and determine, without the consent of our other shareholders, the outcome of any corporate transaction or other matter submitted to our shareholders for approval, including potential mergers or acquisitions, asset sales and other significant corporate transactions.
Although BIS has consented to the engagement of other investment managers in the past, BIS has no obligation to do so in the future. Each of our subsidiaries that is party to an IMA with BIS may terminate such agreement upon 30 days’ notice. BIS may also terminate any IMA upon 30 days’ notice.
Although BIS has consented to the engagement of other investment managers in the past, BIS has no obligation to do so in the future. 52 Each of our subsidiaries that is party to an IMA with BIS may terminate such agreement upon 30 days’ notice. BIS may also terminate any IMA upon 30 days’ notice.
In addition, because our activities are relatively concentrated in a small number of lines of business, any change in law or regulation 46 affecting one of those lines of business could have a disproportionate impact on us as compared to other more diversified insurance companies.
In addition, because our activities are relatively concentrated in a small number of lines of business, any change in law or regulation affecting one of those lines of business could have a disproportionate impact on us as compared to other more diversified insurance companies.
These regulations may limit or curtail our activities, including activities that might be profitable, and changes to existing regulations may affect our ability to continue to offer our existing products and services, or new products and services we may wish to offer in the future. Our reinsurance subsidiary, F&G Life Re Ltd.
These regulations may limit or curtail 59 our activities, including activities that might be profitable, and changes to existing regulations may affect our ability to continue to offer our existing products and services, or new products and services we may wish to offer in the future. Our reinsurance subsidiary, F&G Life Re Ltd.
The Transaction Agreements determine the allocation of assets, rights and liabilities between the companies following the separation and distribution and include indemnifications related to liabilities and obligations. The Corporate Services Agreement provides for the performance of certain services by FNF for the 54 benefit of us for a limited period of time after the separation and distribution.
The Transaction Agreements determine the allocation of assets, rights and liabilities between the companies following the separation and distribution and include indemnifications related to liabilities and obligations. The Corporate Services Agreement provides for the performance of certain services by FNF for the benefit of us for a limited period of time after the separation and distribution.
This statutory presumption of control may be rebutted by a showing that control does not exist in fact. State insurance regulators, however, may find that “control” exists in circumstances in 55 which a person owns or controls less than 10% of the voting securities.
This statutory presumption of control may be rebutted by a showing that control does not exist in fact. State insurance regulators, however, may find that “control” exists in circumstances in which a person owns or controls less than 10% of the voting securities.
We are also unable to predict whether a sufficient number of buyers would be in the market at that time. We cannot guarantee the timing, amount or payment of dividends on our common stock in the future. We expect to pay regular quarterly dividends in the future.
We are also unable to predict whether a sufficient number of buyers would be in the market at that time. 69 We cannot guarantee the timing, amount or payment of dividends on our common stock in the future. We expect to pay regular quarterly dividends in the future.
Our failure to comply with the restrictive covenants in existing or future debt instruments could result in an event of default, which, if not cured or waived, could result in our being required to repay outstanding indebtedness before their due date.
However, our failure to comply with the restrictive covenants in existing or future debt instruments could result in an event of default, which, if not cured or waived, could result in our being required to repay outstanding indebtedness before their due date.
We may not be able to increase the sales of other 38 products at the same pace, or at all, to the extent there is a decrease in sales of our products that made up the majority of our sales in historical periods.
We may not be able to increase the sales of other products at the same pace, or at all, to the extent there is a decrease in sales of our products that made up the majority of our sales in historical periods.
We cannot predict the size of future sales of shares of our common stock in the open market following the distribution or the effect, if any, that such future sales, 57 or the perception that such sales may occur, would have on the market price of our common stock.
We cannot predict the size of future sales of shares of our common stock in the open market following the distribution or the effect, if any, that such future sales, or the perception that such sales may occur, would have on the market price of our common stock.
If such events were to occur, we may face unexpectedly high levels of claim payments to policyholders. • FHLB collateral: we issue funding agreements to the FHLB for which eligible securities collateral is posted.
If such events were to occur, we may face unexpectedly high levels of claim payments to policyholders. 56 • FHLB collateral: we issue funding agreements to the FHLB for which eligible securities collateral is posted.
New interpretations of existing laws and the passage of new legislation may harm our ability to sell new policies, increase our claim exposure on policies we issued previously and adversely affect our profitability and financial strength.
New interpretations of existing laws and the passage of new legislation may 57 harm our ability to sell new policies, increase our claim exposure on policies we issued previously and adversely affect our profitability and financial strength.
Downgrades, unfavorable changes in rating methodology or other negative action by a rating agency could have a material adverse effect on us in many ways, including the following: • adversely affecting relationships with distributors, independent marketing organizations (“IMOs”) and sales agents, which could result in reduction of sales; • increasing the number or amount of policy lapses or surrenders and withdrawals of funds; • requiring a reduction in prices for our subsidiaries’ insurance products and services in order to remain competitive; • excluding us from participating in the PRT business or FABN issuances; • adversely affecting our ability to obtain reinsurance at a reasonable price, on reasonable terms or at all; 35 • requiring us to collateralize reserves, balances or obligations under certain reinsurance agreements.
Downgrades, unfavorable changes in rating methodology or other negative action by a rating agency could have a material adverse effect on us in many ways, including the following: • adversely affecting relationships with distributors, independent marketing organizations (“IMO”) and sales agents, which could result in reduction of sales; • increasing the number or amount of policy lapses or surrenders and withdrawals of funds; • requiring a reduction in prices for our subsidiaries’ insurance products and services in order to remain competitive; • excluding us from participating in the PRT business or FABN issuances; • adversely affecting our ability to obtain reinsurance at a reasonable price, on reasonable terms or at all; • requiring us to collateralize reserves, balances or obligations under certain reinsurance agreements.
Other significant changes may occur in our cost structure, management, financing and business operations as a result of operating as a company separate from FNF.
Other changes may occur in our cost structure, management, financing and business operations as a result of operating as a company separate from FNF.
However, high inflation rates are a headwind for consumers, and efforts by the Federal Reserve to stem inflation could induce a recession which would have an adverse impact on consumers and potentially increase delinquencies to a higher level than what is assumed in our underwriting.
However, high inflation rates have been a headwind for consumers, and efforts by the Federal Reserve to stem inflation could induce a recession which would have an adverse impact on consumers and potentially increase delinquencies to a higher level than what is assumed in our underwriting.
In addition, our investments could be adversely affected as a result of deteriorating financial and business conditions affecting the issuers of the securities in our investment portfolio. As of December 31, 2022 current economic conditions, including high inflation rates, have not adversely affected our business, results of operations and financial condition.
In addition, our investments could be adversely affected as a result of deteriorating financial and business conditions affecting the issuers of the securities in our investment portfolio. As of December 31, 2023, current economic conditions, including high inflation rates, have not adversely affected our business, results of operations and financial condition.
As of December 31, 2022, current economic conditions, including higher interest rates, have not adversely affected our business, results of operations and financial condition. However, we cannot predict if it will impact our business, results of operations and financial condition in the future for the forgoing reasons.
As of December 31, 2023, current economic conditions, including higher interest rates, have not adversely affected our business, results of operations and financial condition. However, we cannot predict if it will impact our business, results of operations and financial condition in the future for the forgoing reasons.
Many factors could cause the market price of our common stock to rise and fall, including the following: • our business profile and market capitalization may not fit the investment objectives of current shareholders, causing a shift in our investor base, and our common stock may not be included in some indices causing certain holders to sell their common stock; • our announcements or our competitors’ announcements regarding new products or services, significant contracts, acquisitions or strategic investments; 56 • fluctuations in our quarterly or annual financial results or the quarterly or annual financial results of companies perceived to be similar to us; • the failure of securities analysts to cover our common stock; • actual or anticipated fluctuations in our operating results; • changes in earnings estimates or recommendations by securities analysts or our ability to meet those estimates; • the operating and stock price performance of other comparable companies; • investors’ general perception of us and our industry; • changes to the regulatory and legal environment under which we operate; • changes in general economic and market conditions; • changes in industry conditions; • changes in regulatory and other dynamics; and • the other factors described in this “ Risk Factors ” section and elsewhere in this Annual Report.
Many factors could cause the market price of our common stock to rise and fall, including the following: • our business profile and market capitalization may not fit the investment objectives of current shareholders, causing a shift in our investor base, and our common stock may not be included in some indices causing certain holders to sell their common stock; • our announcements or our competitors’ announcements regarding new products or services, significant contracts, acquisitions or strategic investments; • fluctuations in our quarterly or annual financial results or the quarterly or annual financial results of companies perceived to be similar to us; • the failure of securities analysts to cover our common stock; 68 • actual or anticipated fluctuations in our operating results; • changes in earnings estimates or recommendations by securities analysts or our ability to meet those estimates; • the operating and stock price performance of other comparable companies; • investors’ general perception of us and our industry; • changes to the regulatory and legal environment under which we operate; • changes in general economic and market conditions; • changes in industry conditions; • changes in regulatory and other dynamics; and • the other factors described in this “ Risk Factors ” section and elsewhere in this Annual Report on Form 10-K.
Accordingly, the historical financial information for periods prior to the separation and distribution included in this Annual Report does not necessarily reflect the financial condition, results of operations or cash flows that we would have achieved as a separate, publicly traded company during the periods presented, or those that we will achieve in the future, including: • The ongoing cost of capital for our business may be higher than our access to FNF’s cost of capital prior to the separation and distribution. • Our historical financial information for periods prior the separation and distribution does not reflect the debt or the associated interest expense that we have incurred in connection with the separation and distribution or expect to incur in the future.
Accordingly, the historical financial information for periods prior to the separation and distribution included in this Annual Report on Form 10-K does not necessarily reflect the financial condition, results of operations or cash flows that we would have achieved as a separate, publicly traded company during the periods presented, or those that we will achieve in the future, including: • The ongoing cost of capital for our business may be higher than our access to FNF’s cost of capital prior to the separation and distribution. • Our historical financial information for periods prior the separation and distribution does not reflect the debt or the associated interest expense that we have incurred in connection with the separation and distribution or expect to incur in the future.
Please refer to “ Business-Regulation of F&G ” included in this Annual Report for additional details on the impact of regulations on our business. Our business is subject to government regulation in each of the jurisdictions in which we conduct business and regulators have broad administrative and discretionary authority over our business and business practices.
Please refer to “ Business-Regulation of F&G ” included in this Annual Report on Form 10-K for additional details on the impact of regulations on our business. Our business is subject to government regulation in each of the jurisdictions in which we conduct business and regulators have broad administrative and discretionary authority over our business and business practices.
In addition, regulators may change their interpretation or application of existing laws and regulations, including, for example, broadening the scope of carriers that must contribute towards long-term care insolvencies. Our regulation in the United States is influenced by the NAIC, which continues to consider reforms including relating to cybersecurity regulations, best interest standards, RBC and life insurance reserves.
In addition, regulators may change their interpretation or application of existing laws and regulations, including, for example, broadening the scope of carriers that must contribute towards long-term care insolvencies. Our business in the United States is regulated by the NAIC, which continues to consider reforms including relating to cybersecurity regulations, best interest standards, RBC and life insurance reserves.
Any adverse economic developments or catastrophes in these states could have an adverse impact on our business. Concentration in one or more of our products (for example, FIAs) may subject us to greater volatility of sales if such products experienced a significant decrease in sales.
Any adverse economic developments or catastrophes in these states could have an adverse impact on our business. Concentration in one or more of our products may subject us to greater volatility of sales if such products experienced a significant decrease in sales.
However, we and FNF have agreed in the omnibus termination side letter to cause our insurance company subsidiaries to engage BIS as an investment manager. The initial term of this side letter expires on June 1, 2027 and contains an automatic renewal provision which provides for successive one year terms thereafter.
However, we and FNF have agreed in the omnibus termination side letter to cause our insurance company subsidiaries to engage BIS as an investment manager. The initial term of this side letter expires on June 1, 2029, and contains an automatic renewal provision which provides for successive two-year terms thereafter.
Item 1A. Risk Factors You should carefully consider the following risks and other information in this Annual Report in evaluating F&G and our common stock. The occurrence of any of the following risks could materially and adversely affect our business, financial condition, prospects, results of operations and cash flows.
Item 1A. Risk Factors You should carefully consider the following risks and other information in this Annual Report on Form 10-K in evaluating F&G and our common stock. The occurrence of any of the following risks could materially and adversely affect our business, financial condition, prospects, results of operations and cash flows.
For further discussion on litigation and regulatory investigation risk, see Note F Commitments and Contingencies to the Consolidated Financial Statements included in this Annual Report. From time to time we receive inquiries and requests for information from state insurance departments, attorneys general and other regulatory agencies about various matters relating to our business.
For further discussion on litigation and regulatory investigation risk, see Note N - Commitments and Contingencies to the Consolidated Financial Statements included in this Annual Report on Form 10-K. From time to time, we receive inquiries and requests for information from state insurance departments, attorneys general and other regulatory agencies about various matters relating to our business.
For additional information about the past financial performance of our business and the basis of presentation of the Consolidated Financial Statements and summary historical financial information of our business, see “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” and the historical financial statements and accompanying notes included elsewhere in this Annual Report.
For additional information about the past financial performance of our business and the basis of presentation of the Consolidated Financial Statements and summary historical financial information of our business, see “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” and the historical financial statements and accompanying notes included elsewhere in this Annual Report on Form 10-K.
Prior to June 1, 2027, we and FNF may only terminate the side letter for cause.
Prior to June 1, 2029, we and FNF may only terminate the side letter for cause.
We must attract and retain our network of IMOs and independent agents to sell our products. Insurance companies compete vigorously for productive agents. We compete with other life insurance companies for marketers and agents primarily on the basis of our financial position, support services, compensation and product features.
We must attract and retain our network of IMOs and independent agents to sell our products. Insurance companies compete vigorously for productive agents. We compete with private equity investments as well as other life insurance companies for marketers and agents primarily on the basis of our financial position, support services, compensation and product features.
Current and emerging developments relating to market conduct standards for the financial industry emerging from the DOL’s implementation of the “fiduciary rule” may over time materially affect our business.
Current and emerging developments relating to market conduct standards for the financial industry emerging from the Department of Labor’s (“DOL”) implementation of the “fiduciary rule” may over time materially affect our business.
Several of our derivative counterparty International Swap and Derivative Association (“ISDA”) agreements contain additional termination event triggers based on a downgrade of FGL Insurance. These triggers would give these counterparties the option to terminate our options, which could lead to losses if occurring at an inopportune time.
Several of our derivative counterparty ISDA agreements contain additional termination event triggers based on a downgrade of FGL Insurance. These triggers would give these counterparties the option to terminate our options, which could lead to losses if occurring at an inopportune time.
Concentration in certain states for the distribution of our products may subject us to losses attributable to economic downturns or catastrophes in those states. For the year ended December 31, 2022 our top five states for the distribution of our products were Florida, California, Texas, Pennsylvania and New Jersey, which together accounted for 37% of our premiums.
Concentration in certain states for the distribution of our products may subject us to losses attributable to economic downturns or catastrophes in those states. For the year ended December 31, 2023, our top five states for the distribution of our products were Florida, California, Pennsylvania, Ohio and Texas, which together accounted for 38.5% of our premiums.
Periods of significant and sustained downturns in equity markets or increased equity volatility could result in an increase in the valuation of the future policy benefit or policyholder account balance liabilities associated with such products, resulting in a reduction in our revenues and net income. We are exposed to liquidity risk as a result of our other risks.
Periods of significant and sustained downturns in equity markets or increased equity volatility could result in an increase in the valuation of the MRBs or contractholder funds liabilities associated with such products, resulting in a reduction in our revenues and net income. We are exposed to liquidity risk as a result of our other risks.
However, these provisions will apply even if the offer may be considered beneficial by some shareholders and the provisions could delay or prevent an acquisition that our Board determines is not in the best interests of us and our shareholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.
However, these provisions will apply even if the offer may be considered beneficial by some shareholders and the provisions could delay or prevent an acquisition that our Board determines is not in the best interests of us and our shareholders.
(“F&G Life Re”), is registered in Bermuda under the Bermuda Insurance Act of 1978 (the “Insurance Act”) and is subject to the rules and regulations promulgated thereunder.
(“F&G Life Re”), is registered in Bermuda under the Bermuda Insurance Act 1978, as amended, (the “Bermuda Insurance Act”) and is subject to the rules and regulations promulgated thereunder.
If we provide any such notice, the termination would not become effective for two years, during which time BIS may seek to cure the events giving arise to our termination right.
If we provide any such notice, the termination will not become effective for one year, during which time BIS may seek to cure the events giving arise to our termination right.
Higher interest rates have decreased the fair value of our investment security portfolio as of December 31, 2022, primarily our fixed maturity securities, resulting in our AOCI being a loss of $2.8 billion compared to income of $0.7 billion as of December 31, 2021.
Higher interest rates have decreased the fair value of our investment security portfolio, primarily our fixed maturity securities, as of December 31, 2023, and December 31, 2022, resulting in our AOCI being a loss of $2.0 billion and $2.8 billion, respectively.
We rely on our investment management or advisory agreements with BIS and other investment managers and sub-managers for the management of portions of certain of our life insurance companies’ investment portfolios. Our insurance company subsidiaries are parties to IMAs with BIS and other investment managers and sub-managers.
We rely on our investment management advisory agreements (“IMA”) with Blackstone ISG-I Advisors LLC (“BIS”) and other investment managers and sub-managers for the management of portions of certain of our life insurance companies’ investment portfolios. Our insurance company subsidiaries are parties to IMAs with BIS and other investment managers and sub-managers.
Any dividends in excess of a threshold amount are subject to advance state notice or approval. 51 The maximum dividend permitted by law is not necessarily indicative of an insurer’s actual ability to pay dividends, which may be constrained by business and regulatory considerations, such as the impact of dividends on surplus, which could affect an insurer’s ratings or competitive position, the amount of premiums that can be written and the ability to pay future dividends.
The maximum dividend permitted by law is not necessarily indicative of an insurer’s actual ability to pay dividends, which may be constrained by business and regulatory considerations, such as the impact of dividends on surplus, which could affect an insurer’s ratings or competitive position, the amount of premiums that can be written and the ability to pay future dividends.
Conflicts of interest could also arise with respect to business opportunities that could be advantageous to FNF, and they may pursue acquisition opportunities in the future that may be complementary to our business. As a result, those acquisition opportunities may not be available to us.
Conflicts of interest could also arise with respect to business opportunities that could be advantageous to FNF, and they may pursue acquisition opportunities in the future that may be complementary to our business.
In some states, juries, judges and arbitrators have substantial discretion in awarding punitive and non-economic compensatory damages, which creates the potential for unpredictable material adverse judgments or awards in any given lawsuit or arbitration. Arbitration awards are subject to very limited appellate review. In addition, in some class action and other lawsuits, financial services companies have made material settlement payments.
In some states, juries, judges and arbitrators have substantial discretion in awarding punitive and non-economic compensatory damages, which creates the potential for unpredictable material adverse judgments 62 or awards in any given lawsuit or arbitration. Arbitration awards are subject to very limited appellate review.
Any catastrophic event, such as pandemic diseases, terrorist attacks, floods, severe storms or hurricanes or computer cyber-terrorism, could have a material and adverse effect on our business in several respects: • any such event could have a material adverse effect on our liquidity, financial condition and the operating results of our insurance business due to its impact on the economy and financial markets; • our workforce being unable to be physically located at one of our facilities could result in lengthy interruptions in our ability to perform or deliver our services; • we could experience long-term interruptions in the services provided by our significant vendors due to the effects of catastrophic events, including but not limited to government mandates to self-quarantine, work remotely and prolonged travel restrictions; • some of our operational systems are not fully redundant, and our disaster recovery and business continuity planning cannot account for all eventualities.
Any catastrophic event, such as pandemic diseases, terrorist attacks, floods, severe storms or hurricanes or computer cyber-terrorism, could have a material and adverse effect on our business in several respects: • any such event could have a material adverse effect on our liquidity, financial condition and the operating results of our insurance business due to its impact on the economy and financial markets; • we could experience long-term interruptions in the services provided by our significant vendors due to the effects of catastrophic events; • some of our operational systems are not fully redundant, and our disaster recovery and business continuity planning cannot account for all eventualities.
If we do not have agreements with other providers for these services once certain Transaction Agreements expire or terminate, we may not be able to operate our business effectively, which may have a material adverse effect on our business, financial condition or operating results.
If we do not have agreements with other providers for these services once certain Transaction Agreements expire or terminate, we may not be able to operate our business effectively, which may have a material adverse effect on our business, financial condition or operating results. 66 In connection with the separation and distribution, FNF has agreed to indemnify us for certain liabilities, and we have agreed to indemnify FNF for certain liabilities.
We will continue to monitor the GMWB utilization assumption and update our best estimate as applicable. Our valuation of investments and the determinations of the amounts of allowances and impairments taken on our investments may include methodologies, estimates and assumptions which are subject to differing interpretations and, if changed, could materially adversely affect our results of operations and financial condition.
Our valuation of investments and the determinations of the amounts of allowances and impairments taken on our investments may include methodologies, estimates and assumptions which are subject to differing interpretations and, if changed, could materially adversely affect our results of operations and financial condition.
We do not believe the departure of any particular individual would cause a material adverse effect on our operations; however, the unexpected loss of several key employees could have a material adverse effect on our operations due to the loss of their skills, knowledge of our business, and their years of industry experience as well as the potential difficulty of promptly finding qualified replacement employees. 39 Our risk management policies and procedures may not capture unidentified or unanticipated risk, which could negatively affect our business or result in losses.
We do not believe the departure of any particular individual would cause a material adverse effect on our operations; however, the unexpected loss of several key employees could have a 49 material adverse effect on our operations due to the loss of their skills, knowledge of our business, and their years of industry experience as well as the potential difficulty of promptly finding qualified replacement employees.
As a result of these covenants and restrictions, we are, and will be, limited in how we conduct our business, and we may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness we may incur could include additional or different restrictive covenants.
As a result of these restrictions, covenants and limitations, we may be limited in how we conduct our business, and we may be unable to raise additional debt or equity financing to compete effectively or take advantage of new business opportunities.
As a result of these relationships, the interests of FNF may not coincide with our interests or the interests of the other holders of our common stock.
As a result, those acquisition opportunities may not be available to us. 64 As a result of these relationships, the interests of FNF may not coincide with our interests or the interests of the other holders of our common stock.
The value of our mortgage-backed securities and our commercial and residential mortgage loan investments depends in part on the financial condition of the borrowers and tenants for the properties underlying those investments, as well as general and specific economic trends affecting the overall default rate.
Additionally, market price valuations may not accurately reflect the underlying expected cash flows of securities within our investment portfolio. 54 The value of our mortgage-backed securities and our commercial and residential mortgage loan investments depends in part on the financial condition of the borrowers and tenants for the properties underlying those investments, as well as general and specific economic trends affecting the overall default rate.
At December 31, 2022, we had outstanding (i) $550 million of borrowings under an unsecured revolving credit agreement with Bank of America, N.A., as administrative agent, the lenders (“the Lenders”) and guarantors party thereto and the other parties thereto (the “Credit Agreement”) and (ii) $550 million aggregate principal amount of 5.50% senior notes due 2025 (the “5.50% F&G Notes”).
At December 31, 2023, we had outstanding (i) $345 million in aggregate principal of our 7.95% Senior Notes due 2053 (the “7.95% F&G Notes”), (ii) $500 million in aggregate principal of our 7.40% Senior Notes due 2028 (the “7.40% F&G Notes”), (iii) $365 million of borrowings under an unsecured revolving credit agreement with Bank of America, N.A., as administrative agent, the lenders ( the “Lenders”) and guarantors party there-to and the other parties there-to (the “Credit Agreement”) and (iv) $550 million in aggregate principal of our 5.50% Senior Notes due 2025 (the “5.50% F&G Notes”).
Lower interest rates may also result in decreased sales of certain insurance products, negatively impacting our profitability from new business. 43 During periods of increasing interest rates, we may offer higher crediting rates on interest-sensitive products, such as universal life insurance and fixed annuities, and we may increase crediting rates on in-force products to keep these products competitive.
During periods of increasing interest rates, we may offer higher crediting rates on interest-sensitive products, such as universal life insurance and fixed annuities, and we may increase crediting rates on in-force products to keep these products competitive.
FNF’s indemnification of us may not be sufficient to hold us harmless from the full amount of all liabilities that will be allocated to us, and FNF may not be able to satisfy its indemnification obligations in the future.
If we are required to pay under these indemnities to FNF, our financial results could be negatively impacted. FNF’s indemnification of us may not be sufficient to hold us harmless from the full amount of all liabilities that will be allocated to us, and FNF may not be able to satisfy its indemnification obligations in the future.
The SEC, other regulators and self-regulatory organizations and exchanges are authorized to take extraordinary actions in the event of market emergencies. Due to our reliance on these relationships in particular to manage a significant portion of our investment portfolio, any regulatory action or enforcement against BIS could have an adverse effect on our financial condition.
Due to our reliance on these relationships in particular to manage a significant portion of our investment portfolio, any regulatory action or enforcement against BIS could have an adverse effect on our financial condition.
See also “— Interest rate fluctuations could adversely affect our business, financial condition, liquidity and results of operations .” Legal, Regulatory and Tax Risks Our business is highly regulated and subject to numerous legal restrictions and regulations. Our insurance businesses are subject to extensive regulation by state insurance authorities in each state in which they operate.
The possible macroeconomic effects of such events could also adversely affect our asset portfolio. Legal, Regulatory and Tax Risks Our business is highly regulated and subject to numerous legal restrictions and regulations. Our insurance businesses are subject to extensive regulation by state insurance authorities in each state in which they operate.
We may not be able to protect our intellectual property and may be subject to infringement claims. We rely on a combination of contractual rights and copyright, trademark and trade secret laws to establish and protect our intellectual property.
In addition, in some class action and other lawsuits, financial services companies have made material settlement payments. We may not be able to protect our intellectual property and may be subject to infringement claims. We rely on a combination of contractual rights and copyright, trademark and trade secret laws to establish and protect our intellectual property.
The regulatory environment for investment managers is evolving, and changes in the regulation of investment managers may adversely affect the ability of BIS to effect transactions that utilize leverage or pursue their strategies in managing our investment portfolio. In addition, the securities and futures markets are subject to comprehensive statutes, regulations and margin requirements.
The regulatory environment for investment managers is evolving, and changes in the regulation of investment managers may adversely affect the ability of BIS to effect transactions that utilize leverage or pursue their strategies in managing our investment portfolio. BIS, in conjunction with its investment managers, continuously monitors the ongoing regulatory conversations.
In addition, it is possible that expected liquidity sources, such as our minimum cash buffers, funding agreements through the FHLB or other credit facilities, may be unavailable or inadequate to satisfy the liquidity demands described below. 44 We have the following sources of liquidity exposure and associated drivers that trigger material liquidity demand.
A liquidity shortfall may arise in the event of insufficient funding sources or an immediate and significant need for cash or collateral. In addition, it is possible that expected liquidity sources, such as our minimum cash buffers, funding agreements through the FHLB or other credit facilities, may be unavailable or inadequate to satisfy the liquidity demands described below.
The remote work environment puts greater demands on our technological systems, puts us at greater risk of cybersecurity incidents and adds complexity to our programs that are designed to protect private data.
In addition, a significant number of our employees continue to work from home and we believe this will continue into 2024 and future years. The remote work environment puts greater demands on our technological systems, puts us at greater risk of cybersecurity incidents and adds complexity to our programs that are designed to protect private data.
In the event of a withdrawal or downgrade of our S&P issuer credit rating to BB or lower, we are required to fund a note issued by a reinsurance counterparty up to $300 million. As of December 31, 2022, the amount funded under the note agreement was insignificant; and • requiring us to collateralize balances or obligations under derivatives agreements.
In the event of a withdrawal or downgrade of our S&P issuer credit rating to BB or lower, we are required to fund a note issued by a reinsurance counterparty up to $300 million.
We have no exposure to investments in Russia or Ukraine and de minimis investments in peripheral countries in the region. If the conflict and it’s inflationary impact on energy costs and other goods leads to a wider recession in Europe, our investments in those countries could suffer losses, which could have a negative impact on our financial results.
While we have no exposure to investments in Russia or Ukraine, we have de minimis exposure in Israel and the surrounding regions. If the conflicts and their inflationary impact leads to a wider recession or other restrictive actions by the United States and/or other countries, our investments could suffer losses, which could have a negative impact on our financial results.
Our investments are subject to market risks that could be heightened during periods of extreme volatility or disruption in financial and credit markets. Our invested assets and derivative financial instruments are subject to risks of credit defaults and changes in market values. Periods of extreme volatility or disruption in the financial and credit markets could increase these 42 risks.
Our invested assets and derivative financial instruments are subject to risks of credit defaults and changes in market values. Periods of extreme volatility or disruption in the financial and credit markets could increase these risks. Changes in interest rates and credit spreads could cause market price and cash flow variability in the fixed income instruments in our investment portfolio.
The European Commission in 2016 granted Bermuda’s commercial insurers full equivalency in all areas of Solvency II for an indefinite period of time. Our reinsurance subsidiary, F&G Cayman Re, is a licensed Class D insurer in the Cayman Islands and a wholly owned direct subsidiary of ours, is licensed by the CIMA and is subject to supervision by CIMA.
Our reinsurance subsidiary, F&G Cayman Re, is a licensed Class D insurer in the Cayman Islands and a wholly owned direct subsidiary of ours, is licensed by the CIMA and is subject to supervision by CIMA.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings See discussion of legal proceedings in Note F Commitment and Contingencies to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report, which is incorporated by reference into this Item 3 of Part I. Item 4. Mine Safety Disclosures Not applicable. 58 Part II
Biggest changeItem 3. Legal Proceedings See discussion of legal proceedings in Note N - Commitment and Contingencies to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K, which is incorporated by reference into this Item 3 of Part I. Item 4. Mine Safety Disclosures Not applicable. 72 Part II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 58 Part II 59 Item 5. Market for Registrant’s Common Equity, Related S hare holder Matters and Issuer Purchases of Equity Securities 59 Item 6. Reserved 59 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 60 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 92 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 72 Part II 73 Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 73 Item 6. Reserved 74 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 75 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 107 Item 8.
Removed
Audited Financial Statements 101 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures 174 Item 9A. Controls and Procedures 175 Item 9B. Other Information 175 Item 9C. Disclosure Regarding Foreign Jurisdiction that Prevent Inspections 176 Part III 177

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividends on Ordinary Shares On December 8, 2022, F&G announced that its Board of Directors declared an inaugural quarterly cash dividend of $0.20 per share of common stock pursuant to the previously announced dividend program in which the Company intends to pay quarterly cash dividends on its common stock at an initial aggregate amount of approximately $100 million per year.
Biggest changeDuring the year ended December 31, 2023, we declared dividends on our common stock of $0.20 to $0.21 per share. On December 8, 2022, we announced that our Board of Directors declared an inaugural quarterly cash dividend of $0.20 per share of common stock pursuant to the previously announced dividend program.
Effective December 1, 2022, F&G commenced “regular-way” trading of its common stock on the New York Stock Exchange (“NYSE”) under the symbol “FG”. FNF retains control of F&G through an approximate 85% equity ownership stake and will continue to trade on the NYSE under the symbol “FNF”.
Effective December 1, 2022, F&G commenced “regular-way” trading of its common stock on the New York Stock Exchange (“NYSE”) under the symbol “FG”. FNF retains control of F&G through an approximate 85% equity ownership stake and continues to trade on the NYSE under the symbol “FNF”.
Refer to Note O Employee Benefit Plans to our Consolidated Financial Statements included in this Annual Report, which is incorporated by reference into this Item 5 of Part II, for further information on securities issued for employee stock compensation pursuant to our Omnibus Plan.
Refer to Note R - Employee Benefit Plans to our Consolidated Financial Statements included in this Annual Report on Form 10-K, which is incorporated by reference into this Item 5 of Part II, for further information on securities issued for employee stock compensation pursuant to our Omnibus Plan.
On January 31, 2023, the last reported sale price of our common stock on the NYSE was $21.46. We had approximately 6,267 shareholders of record of our Common Stock on January 31, 2023. This number does not include the stockholders for whom shares are held in a “nominee” or “street” name.
On January 31, 2024, the last reported sale price of our common stock on the NYSE was $44.84. We had approximately 6,432 shareholders of record of our Common Stock on January 31, 2024. This number does not include the stockholders for whom shares are held in a “nominee” or “street” name.
Going forward, starting next quarter, F&G expects to announce the record date and payment date for each dividend, subject to quarterly review and approval by its Board of Directors and any required regulatory approvals, following completion of the relevant fiscal quarter and with payment in the third month of each subsequent quarter, based on the Company’s view of the prevailing and prospective macroeconomic conditions, regulatory landscape and business performance.
We intend to announce the record date and payment date for each dividend, subject to quarterly review and approval by our Board of Directors and any required regulatory approvals, following completion of the relevant fiscal quarter and with payment in the third month of each subsequent quarter, based on our view of the prevailing and prospective macroeconomic conditions, regulatory landscape and business performance.
Information concerning securities authorized for issuance under our equity compensation plans will be included in Item 12 of Part III that will be filed within 120 days after the close of the fiscal year that is the subject of this Report on a Form 10-K/A.
Information concerning securities authorized for issuance under our equity compensation plans will be included in the definitive proxy statement for our Annual Meeting of Shareholders, which will be filed with the SEC within 120 days after the close of the fiscal year pursuant to Regulation 14A.
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The dividend was paid January 31, 2023, to stockholders of record as of January 17, 2023.
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Performance Graph The graph and the table below compare the cumulative total shareholder return on our common stock against the cumulative total return on the S&P 500 Index and S&P 500 Life and Health Insurance Index.
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The graph assumes a $100 initial investment on December 1, 2022 (the date that our common stock commenced regular way trading on the New York Stock Exchange) with dividends reinvested over the periods indicated.
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The stock performance in this graph is not necessarily indicative of future stock performance. *$100 invested on December 1, 2022 in stock or on November 30, 2022, in index, including reinvestment of dividends.
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Fiscal year ending December 31. 73 12/1/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 F&G Annuities and Life, Inc. $ 100.00 $ 104.60 $ 95.63 $ 132.00 $ 150.54 $ 247.92 S&P 500 100.00 94.24 101.30 110.16 106.55 119.01 S&P 500 Life & Health Insurance 100.00 94.94 81.17 84.91 91.45 99.35 Dividends on Ordinary Shares On February 14, 2024, our Board of Directors declared a quarterly cash dividend of $0.21 per share, payable on March 29, 2024, to F&G common shareholders of record as of March 15, 2024.
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Generally, no dividends will be declared or paid on F&G common stock and no common stock can be acquired by F&G unless all preferred dividends are declared and paid on the outstanding FNF Preferred Stock.
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On February 14, 2024, our Board of Directors also declared a quarterly cash dividend of $0.8976 per share on the FNF Preferred Stock for the period from January 12, 2024 to and excluding April 15, 2024, to be paid on April 15, 2024, to FNF Preferred Stock record holders as of April 1, 2024.
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Purchases of Equity Securities by the Issuer On March 21, 2023, F&G’s Board of Directors approved a new three-year stock repurchase program, effective March 21, 2023, under which the Company may repurchase up to $25 million of F&G common stock.
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On November 7, 2023, the Company announced that its Board of Directors increased the Company’s share repurchase authorization by $25 million to an aggregate of $50 million, which brings the total remaining authorization of F&G common stock that may yet to be purchased under the program at December 31, 2023 to approximately $32 million.
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The Company believes the share repurchase program is an efficient means of returning cash to shareholders when we consider the shares to be undervalued. Purchases may be made from time to time by the Company in the open market at prevailing market prices or through privately negotiated transactions or accelerated share repurchase transactions through November 6, 2026.
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All purchases are held as treasury stock. The extent to which the Company repurchases its shares, and the timing of such purchases, will depend upon a variety of factors, including market conditions, regulatory requirements and other considerations, as determined by the Company.
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The following table summarizes repurchases of equity securities by F&G during the three months ended December 31, 2023 : Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (b) 10/1/2023 - 10/31/2023 — $ — — $ 32 11/1/2023 - 11/30/2023 — — — 32 12/1/2023 - 12/31/2023 — — — 32 Total — $ — — $ 32 (a) On March 21, 2023 our Board of Directors approved the three year stock repurchase program, under which we may repurchase up to $25 million worth of F&G common stock.
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On November 7th, 2023 the repurchase program was amended to increase the aggregate repurchase authorization to $50 million. Purchases may be made through November 6, 2026. (b) As of the last day of the applicable month, in millions.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations The results of operations for the years ended December 31, 2022 and December 31, 2021, the period from June 1, 2020 to December 31, 2020 (following the June 1, 2020 acquisition by FNF), and the Predecessor results for the period from January 1, 2020 to May 31, 2020 were as follows (in millions): Year ended Period from June 1 to December 31, Period from January 1 to May 31, December 31, 2022 December 31, 2021 2020 2020 Predecessor Revenues: Life insurance premiums and other fees $ 1,695 $ 1,395 $ 138 $ 90 Interest and investment income 1,655 1,852 743 403 Recognized gains and (losses), net (1,010) 715 352 (338) Total revenues 2,340 3,962 1,233 155 Benefits and expenses: Benefits and other changes in policy reserves 1,125 2,138 866 298 Personnel costs 157 129 65 34 Other operating expenses 102 105 75 75 Depreciation and amortization 329 484 123 (51) Interest expense 29 29 18 13 Total benefits and expenses 1,742 2,885 1,147 369 Pre-tax earnings (loss) 598 1,077 86 (214) Income tax expense (benefit) 117 220 (75) (14) Net earnings (loss) from continuing operations $ 481 $ 857 $ 161 $ (200) Earnings from discontinued operations, net of tax — 8 (25) (114) Net earnings (loss) $ 481 $ 865 $ 136 $ (314) Less: Preferred stock dividend — — — 8 Net earnings (loss) attributable to common shareholders $ 481 $ 865 $ 136 $ (322) 71 The following table summarizes sales by product type of the Company, which are not affected by the acquisition, (in millions): Year ended December 31, 2022 December 31, 2021 December 31, 2020 Fixed indexed annuities ("FIA") $ 4,550 $ 4,310 $ 3,459 Fixed rate annuities ("MYGA") 3,744 1,738 776 Total annuity 8,294 6,048 4,235 Indexed universal life ("IUL") 127 87 50 Funding agreements ("FABN/FHLB") 1,443 2,310 200 Pension risk transfer ("PRT") 1,390 1,147 — Gross Sales $ 11,254 $ 9,592 $ 4,485 Sales attributable to flow reinsurance to third parties (2,248) (869) — Net Sales $ 9,006 $ 8,723 $ 4,485 • Total annuity sales increased during the years ended December 31, 2022 and December 31, 2021, reflecting F&G's productive and expanding retail distribution through independent agents, banks and broker dealers and pricing actions taken to align to the macro environment. • Funding agreements during the year ended December 31, 2022 were lower compared to the year ended December 31, 2021, and reflect market opportunity in the current rate environment.
Biggest changeManagement considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the level of return earned on AAUM. 85 Results of Operations The results of operations for the years ended December 31, 2023, 2022 and 2021 were as follows (in millions): Year ended December 31, 2023 December 31, 2022 December 31, 2021 Revenues: Life insurance premiums and other fees $ 2,413 $ 1,704 $ 1,407 Interest and investment income 2,211 1,655 1,852 Recognized gains and (losses), net (124) (1,010) 715 Total revenues 4,500 2,349 3,974 Benefits and expenses: Benefits and other changes in policy reserves 3,553 1,126 1,932 Market risk benefit (gains) losses 95 (182) (44) Depreciation and amortization 412 324 271 Personnel costs 232 157 129 Other operating expenses 146 102 105 Interest expense 97 29 29 Total benefits and expenses 4,535 1,556 2,422 Earnings (loss) before income taxes (35) 793 1,552 Income tax expense 23 158 320 Earnings (loss) from continuing operations $ (58) $ 635 $ 1,232 Earnings from discontinued operations, net of tax — — 8 Net earnings (loss) $ (58) $ 635 $ 1,240 The following table summarizes sales by product type (in millions) (see “ Non-GAAP Financial Measures” ): Year ended December 31, 2023 December 31, 2022 December 31, 2021 FIA $ 4,699 $ 4,550 $ 4,310 Fixed rate annuities ("MYGA") 5,066 3,744 1,738 Total annuity 9,765 8,294 6,048 IUL 156 127 87 Funding agreements 1,256 1,443 2,310 PRT 1,976 1,390 1,147 Gross Sales $ 13,153 $ 11,254 $ 9,592 Sales attributable to flow reinsurance to third parties (3,915) (2,248) (869) Net Sales $ 9,238 $ 9,006 $ 8,723 • Total annuity sales increased during the years ended December 31, 2023 and 2022, reflecting F&G's productive and expanding retail distribution through independent agents, banks and broker dealers, enhanced product features and pricing actions taken to align to the macro environment. • Funding agreements, reflecting FABN and FHLB agreements, were lower for the years ended December 31, 2023 and 2022, and are subject to fluctuation period to period based on economic conditions and the timing of entering the new agreements. • PRT sales increased during the years ended December 31, 2023 and 2022, reflecting the robust PRT market.
The average market value/book value of the investment category with the largest unrealized loss position was 84% for finance, insurance and real estate as of December 31, 2022. In the aggregate, finance, insurance and real estate represented 18% of the total unrealized loss position as of December 31, 2022.
The average market value/book value of the investment category with the largest unrealized loss position was 84% for finance, insurance and real estate as of December 31, 2022. In aggregate, finance, insurance and real estate represented 18% of the total unrealized loss position as of December 31, 2022.
Our short-term and long-term liquidity requirements are monitored regularly to ensure that we can meet our cash requirements. We forecast the needs of all of our subsidiaries and periodically review their short-term and long-term projected sources and uses of funds, as well as the asset, liability, investment and cash flow assumptions underlying such forecasts.
Our short-term and long-term liquidity requirements are monitored regularly to ensure that we can meet our cash requirements. We forecast the needs of all our subsidiaries and periodically review their short-term and long-term projected sources and uses of funds, as well as the asset, liability, investment and cash flow assumptions underlying such forecasts.
Our equity and preferred security investments may be subject to significant volatility. Currently prevailing accounting standards require us to record the change in fair value of 91 equity and preferred security investments held as of any given period end within earnings. Our results of operations in future periods are anticipated to be subject to such volatility. Off-Balance Sheet Arrangements.
Our preferred and equity security investments may be subject to significant volatility. Currently prevailing accounting standards require us to record the change in fair value of preferred and equity security investments held as of any given period end within earnings. Our results of operations in future periods are anticipated to be subject to such volatility. Off-Balance Sheet Arrangements.
We believe that all anticipated cash requirements for current operations will be met from internally generated funds, through cash dividends from subsidiaries, cash generated by investment securities, potential sales of non-strategic assets, potential issuances of additional debt or equity securities, and borrowings on the FNF Credit Facility.
We believe that all anticipated cash requirements for current operations will be met from internally generated funds, through cash dividends from subsidiaries, cash generated by investment securities, potential sales of non-strategic assets, potential issuances of additional debt or equity securities, and borrowings on the revolving credit facility or the FNF Credit Facility.
Similarly, we could also have poor operating results in a given period yet show net earnings (loss) that is materially greater, if during such period the fair value of the 69 derivative assets increased but the embedded derivative liability did not increase in the same proportion as the derivative assets.
Similarly, we could also have poor operating results in a given period yet show net earnings (loss) that is materially greater, if during such period the fair value of the derivative assets increased but the embedded derivative liability did not increase in the same proportion as the derivative assets.
Detailed analysis is performed for each security on the watch list to further assess the presence of credit impairment 87 loss indicators and, where present, calculate an allowance for expected credit loss or direct write-down of a security’s amortized cost.
Detailed analysis is performed for each security on the watch list to further assess the presence of credit impairment loss indicators and, where present, calculate an allowance for expected credit loss or direct write-down of a security’s amortized cost.
Non-GAAP Financial Measures In addition to reporting financial results in accordance with GAAP, this document includes non-GAAP financial measures, which the Company believes are useful to help investors better understand its financial performance, 68 competitive position and prospects for the future.
Non-GAAP Financial Measures In addition to reporting financial results in accordance with GAAP, this document includes non-GAAP financial measures, which the Company believes are useful to help investors better understand its financial performance, competitive position and prospects for the future.
A deferred annuity is a type of contract that accumulates value on a tax deferred basis and typically begins making specified periodic or lump sum payments a certain number of years after the contract has been issued.
A deferred annuity is a type of contract that accumulates value on a tax deferred basis and typically begins making specified periodic or lump 81 sum payments a certain number of years after the contract has been issued.
Average Assets Under Management (“AAUM”) AAUM is calculated as AUM at the beginning of the period and the end of each month in the period, divided by the total number of months in the period plus one.
Average Assets Under Management (“AAUM”) YTD AAUM is calculated as AUM at the beginning of the period and the end of each month in the period, divided by the total number of months in the period plus one.
See the table below for primary drivers of gains (losses) on certain derivatives. • The fair value of reinsurance related embedded derivative is based on the change in fair value of the underlying assets held in the funds withheld (“FWH”) portfolio. We utilize a combination of static (call options) and dynamic (long futures contracts) instruments in our hedging strategy.
See the table below for primary drivers of gains (losses) on certain derivatives. • The fair value of reinsurance related embedded derivative is based on the change in fair value of the underlying assets held in the funds withheld portfolio. We utilize a combination of static (call options) and dynamic (long futures contracts) instruments in our product hedging strategy.
Census Bureau, the proportion of the U.S. population over the age of 65 is expected to grow from 18% in 2022 to 21% in 2035. The impact of this growth may be offset to some extent by asset outflows as an increasing percentage of the population begins withdrawing assets to convert their savings into income.
Census Bureau, the proportion of the U.S. population over the age of 65 is expected to grow from 18% in 2023 to 21% in 2035. The impact of this growth may be offset to some extent by asset outflows as an increasing percentage of the population begins withdrawing assets to convert their savings into income.
Exposure to Sovereign Debt and Certain Other Exposures Our investment portfolio had an immaterial amount of direct exposure to European sovereign debt as of December 31, 2022 and December 31, 2021, respectively. We have no exposure to investments in Russia or Ukraine and de minimis investments in peripheral countries in the region.
Exposure to Sovereign Debt and Certain Other Exposures Our investment portfolio had an immaterial amount of direct exposure to European sovereign debt as of December 31, 2023 and 2022, respectively. We have no exposure to investments in Russia or Ukraine and de minimis investments in peripheral countries in the region.
Components of expenses for products accounted for as deposit liabilities are interest-sensitive and index product benefits (primarily interest credited to account balances or the hedging cost of providing index credits to the policyholder), amortization of VOBA, DAC and DSI, other operating costs and expenses, and income taxes.
Components of expenses for products accounted for as deposit liabilities are interest-sensitive and index product benefits (primarily interest credited to account balances or the hedging cost of providing index credits to the policyholder), amortization of VOBA, DAC and DSI, and other operating costs and expenses.
The FIA/IUL embedded derivatives are valued at fair value and included in the liability for Contractholder funds in our Consolidated Balance Sheets with changes in fair value included as a component of Benefits and other changes in policy reserves in our Consolidated Statements of Earnings.
The FIA/IUL embedded derivatives are valued at fair value and included in the liability for Contractholder funds in our Consolidated Balance Sheets with changes in fair value included as a component of Benefits and other changes in policy reserves in our Consolidated Statements of Operations.
The Credit Agreement imposes significant operating and financial restrictions, including financial covenants, and the Credit Agreement and the indenture governing the 5.50% F&G Notes limit, among other things, our and our subsidiaries’ ability to: • incur or assume additional indebtedness, including guarantees; • incur or assume liens; • engage in mergers or consolidations; • convey, transfer, lease or dispose of assets; • make certain investments; • enter into transactions with affiliates; • declare or make any dividend payments or distributions or repurchase capital stock or other equity interests; • change the nature of our business materially, • make changes in accounting treatment or reporting practices that affect the calculation of financial covenants, or change our fiscal year; and • enter into certain agreements that would restrict the ability of subsidiaries to make payments to us.
The Credit Agreement imposes significant operating and financial restrictions, including financial covenants, and the Credit Agreement and the indentures governing the 7.95% F&G Notes, the 7.40% F&G Notes, and the 5.50% F&G Notes limit, among other things, our and our subsidiaries’ ability to: • incur or assume additional indebtedness, including guarantees; • incur or assume liens; • engage in mergers or consolidations; • convey, transfer, lease or dispose of assets; • make certain investments; • enter into transactions with affiliates; • declare or make any dividend payments or distributions or repurchase capital stock or other equity interests; • change the nature of our business materially; • make changes in accounting treatment or reporting practices that affect the calculation of financial covenants, or change our fiscal year; and • enter into certain agreements that would restrict the ability of subsidiaries to make payments to us.
Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. December 31, 2022 December 31, 2021 Amortized Cost Fair Value Amortized Cost Fair Value Corporate, Non-structured Hybrids, Municipal and U.S.
Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. December 31, 2023 December 31, 2022 Amortized Cost Fair Value Amortized Cost Fair Value Corporate, Non-structured Hybrids, Municipal and U.S.
As discussed below, our insurance subsidiaries are restricted by state regulation and other laws in their ability to pay dividends and make distributions. 89 As of December 31, 2022, approximately $2.4 billion of our net assets were restricted from dividend payments without prior approval from the relevant departments of insurance.
As discussed below, our insurance subsidiaries are restricted by state regulation and other laws in their ability to pay dividends and make distributions. As of December 31, 2023, approximately $4.2 billion of our net assets were restricted from dividend payments without prior approval from the relevant departments of insurance.
Our profitability depends in large part upon the amount of AUM (see “— Non-GAAP Financial Measures ”), the excess of net investment income earned over the sum of interest credited to policyholders and the cost of hedging our risk on indexed product policies, earned on our average assets under management (“ AAUM ” — see “— Non-GAAP Financial Measures ”), our ability to manage our operating expenses and the costs of acquiring new business (principally commissions to agents and bonuses credited to policyholders).
Our profitability depends in large part upon the amount of assets under management (“AUM”) (see “— Non-GAAP Financial Measures ”), the excess of net investment income over the sum of interest credited to policyholders and the cost of hedging our risk on indexed product policies, earned on our average assets under management (“ AAUM ” — see “— Non-GAAP Financial Measures ”), our ability to manage our expenses and the costs of 82 acquiring new business (principally commissions to agents and bonuses credited to policyholders).
The outcome of these final determinations could have a material effect on our income tax provision, net income or cash flows in the period that determination is made. For the year ended December 31, 2022, changes in market conditions, including rising interest rates, resulted in deferred tax assets related to the net unrealized capital losses in the Company’s investment portfolio.
The outcome of these final determinations could have a material effect on our income tax provision, net income or cash flows in the period that determination is made. For the year ended December 31, 2023, changes in market conditions, including changing interest rates, resulted in deferred tax assets related to the net unrealized capital losses in the Company’s investment portfolio.
Similarly, cash payments to customers are reported as decreases in the liability for contractholder funds and not as expenses. Sources of revenues for products accounted for as deposit liabilities are net investment income, surrender, cost of insurance and other charges deducted from contractholder funds, and net realized gains (losses) on investments.
Similarly, cash payments to customers are reported as decreases in the liability for contractholder funds and not as expenses. Sources of revenues for products accounted for as deposit liabilities are net investment income, surrender charges, cost of insurance and other charges deducted from contractholder funds (i.e., amortization of URL), and net realized gains (losses) on investments.
As of December 31, 2022 and December 31, 2021, $219 million and $790 million, respectively, of collateral was posted by our counterparties as they did not meet the net exposure thresholds. Collateral requirements are monitored on a daily basis and incorporate changes in market values of both the derivatives contract as well as the collateral pledged.
As of December 31, 2023 and 2022, $775 million and $219 million, respectively, of collateral was posted by our counterparties as they did not meet the net exposure thresholds. Collateral requirements are monitored on a daily basis and incorporate changes in market values of both the derivatives contract as well as the collateral pledged.
Additionally, this market demand has positively impacted the IUL market as it has expanded from $100 million of annual premiums in 2002 to $2 billion of annual premiums in 2021. Critical Accounting Policies and Estimates The accounting estimates described below are those we consider critical in preparing our Consolidated Financial Statements.
Additionally, this market demand has positively impacted the IUL market as it has expanded from $100 million of annual premiums in 2002 to $3 billion of annual premiums in 2022. Critical Accounting Policies and Estimates The accounting estimates described below are those we consider critical in preparing our Consolidated Financial Statements.
Sales from these products are recorded as deposit liabilities (i.e., 70 contractholder funds) within our Consolidated Financial Statements in accordance with GAAP. Life contingent PRT sales are recorded as premiums in revenues within the consolidated financial statements.
Sales from these products are recorded as deposit liabilities (i.e., contractholder funds) within the Company's consolidated financial statements in accordance with GAAP. Life contingent PRT sales are recorded as premiums in revenues within the consolidated financial statements.
As the “baby boomer” generation prepares for retirement, we believe that demand for retirement savings, growth, and income products will grow. Over 10,000 people will turn 65 each day in the United States over the next 15 years, and according to the U.S.
As the Baby Boomer generation prepares for retirement, we believe that demand for retirement savings, growth, and income products will grow. Over 10,000 people will turn 65 each day in the United States over the next 15 years, and according to the U.S.
Our equity securities are carried at fair value with unrealized gains and losses included in net income (loss). Realized gains and losses on the sale of investments are determined on the basis of the cost of the specific investments sold and are credited or charged to income on a trade date basis.
Our equity securities are carried at fair value with unrealized gains and losses included in net income (loss). Realized gains and losses on the sale of investments are determined on the basis of first-in first-out cost basis and are credited or charged to income on a trade date basis.
The fair value of derivative assets and liabilities is based upon valuation pricing models and represents what we would expect to receive or pay at the balance sheet date if we canceled the options, entered into offsetting positions, or exercised the options.
The fair value of derivative assets and liabilities is based upon valuation pricing models or independent broker quotes and represents what we would expect to receive or pay at the balance sheet date if we canceled or exercised the derivative or entered into offsetting positions.
The fair values of the embedded derivatives in our FIA and IUL contracts are derived using market value of options, use of current and budgeted option cost, swap rates, mortality rates, surrender rates, partial withdrawals, and non-performance spread and are classified as Level 3.
The fair values of the embedded derivatives in our FIA and IUL contracts are derived using market value of options, use of current and budgeted option cost, swap rates, mortality rates, surrender rates, partial withdrawals, and non-performance spread.
The following table presents the fair value of fixed maturity securities and equity securities by pricing source, hierarchy level and net asset value (“NAV”) as of December 31, 2022, December 31, 2021 and December 31, 2020.
The following table presents the fair value of fixed maturity securities and equity securities by pricing source, hierarchy level and net asset value (“NAV”) as of December 31, 2023 and 2022.
The impact of the change in fair values of FIA-related derivatives, embedded derivatives and hedging costs has been removed from net earnings (loss) in calculating adjusted net earnings. Adjusted Return on Assets Adjusted return on assets is calculated by dividing annualized adjusted net earnings by year-to-date AAUM.
The impact of the change in fair values of these derivatives and hedging costs has been removed from net earnings (loss) in calculating adjusted net earnings. Adjusted Return on Assets Adjusted return on assets is calculated by dividing year-to-date annualized adjusted net earnings by year-to-date AAUM.
Gains (losses) on option expiration reflect the movement during each period on options settled during the respective period. • The change in unrealized gains (losses) due to fair value of call options is primarily driven by the underlying performance of the S&P 500 Index during each respective period relative to the S&P 500 Index on the policyholder buy dates. • The net change in fair value of the call options and futures contracts was primarily driven by movements in the S&P 500 Index relative to the policyholder buy dates. 75 The average index credits to policyholders are as follows: Year ended Period from June 1 to December 31, Period from January 1 to May 31, December 31, 2022 December 31, 2021 2020 2020 Predecessor Average Crediting Rate 1 % 5 % 3 % 2 % S&P 500 Index: Point-to-point strategy 1 % 4 % 5 % 2 % Monthly average strategy 2 % 3 % 2 % 3 % Monthly point-to-point strategy — % 7 % — % 1 % 3 year high water mark 13 % 16 % 19 % 14 % • Actual amounts credited to contractholder fund balances may differ from the index appreciation due to contractual features in the FIA contracts and certain IUL contracts (caps, spreads and participation rates), which allow us to manage the cost of the options purchased to fund the annual index credits. • The credits for the periods presented were based on comparing the S&P 500 Index on each issue date in the period to the same issue date in the respective prior year periods.
Gains (losses) on option expiration reflect the movement during each period on options settled during the respective period. • The change in unrealized gains (losses) due to fair value of call options is primarily driven by the underlying performance of the S&P 500 Index during each respective period relative to the S&P 500 Index on the policyholder buy dates. • The net change in fair value of the call options and futures contracts was primarily driven by movements in the S&P 500 Index relative to the policyholder buy dates. • The net change in fair value of the interest rate swaps was primarily driven by fluctuations in the interest rate index underlying the swap contracts. 89 The average index credits to policyholders are as follows: Year ended December 31, 2023 December 31, 2022 December 31, 2021 Average Crediting Rate 1 % 1 % 5 % S&P 500 Index: Point-to-point strategy 2 % 1 % 4 % Monthly average strategy 1 % 2 % 3 % Monthly point-to-point strategy — % — % 7 % 3 year high water mark 8 % 13 % 16 % • Actual amounts credited to contractholder fund balances may differ from the index appreciation due to contractual features in the FIA contracts and certain IUL contracts (caps, spreads and participation rates), which allow us to manage the cost of the options purchased to fund the annual index credits. • The credits for the periods presented were based on comparing the S&P 500 Index on each issue date in the period to the same issue date in the respective prior year periods.
See Note A Business and Summary of Significant Accounting Policies to our Consolidated Financial Statements included in this Annual Report for additional description of the significant accounting policies that have been followed in preparing our Consolidated Financial Statements.
See Note A - Business and Summary of Significant Accounting Policies to our Consolidated Financial Statements included in Part II - Item 8 of this Annual Report for additional description of the significant accounting policies that have been followed in preparing our Consolidated Financial Statements.
Return on assets is comprised of net investment income, less cost of funds, and less expenses (including operating expenses, interest expense and income taxes) consistent with our adjusted net earnings definition and related adjustments. Cost of funds includes liability costs related to cost of crediting on both deferred annuities and institutional products as well as other liability costs.
Return on assets is comprised of net investment income, less cost of funds, and less expenses (including operating expenses, interest expense and income taxes) consistent with our adjusted net earnings definition and related adjustments. Cost of funds includes liability costs related to cost of crediting as well as other liability costs.
We attempt to reduce this credit risk by purchasing such options from large, well-established financial institutions. We also hold cash and cash equivalents received from counterparties for call option collateral, as well as U.S. Government securities pledged as call option collateral, if our counterparty’s net exposures exceed pre-determined thresholds.
We attempt to reduce this credit risk by purchasing such derivative instruments from large, well-established financial institutions. We also hold cash and cash equivalents received from counterparties for derivative instrument collateral, as well as U.S. Government securities pledged as derivative instrument collateral, if our counterparty’s net exposures exceed pre-determined thresholds.
As of December 31, 2022 and December 31, 2021, we had assets with a fair value of approximately $3,387 million and $2,469 million, respectively, which collateralized the FHLB funding agreements. Assets pledged to the FHLB are included in fixed maturities, AFS, on our Consolidated Balance Sheets. Collateral-Derivative Contracts.
As of December 31, 2023 and 2022, we had assets with a fair value of approximately $4,345 million and $3,387 million, respectively, which collateralized the FHLB funding agreements. Assets pledged to the FHLB are included in fixed maturities, AFS, on our Consolidated Balance Sheets. Collateral-Derivative Contracts.
Please refer to “Item 1. Business” and Note L Insurance Subsidiary Financial Information and Regulatory Matters to the Consolidated Financial Statements, included in this Annual Report, for additional details on dividends from insurance subsidiaries, statutory capital and risk-based capital.
Please refer to “Item 1. Business” and Note O - Insurance Subsidiary Financial Information and Regulatory Matters to the Consolidated Financial Statements included in this Annual Report on Form 10-K, for additional details on dividends from insurance subsidiaries, statutory capital and risk-based capital.
As a tool for addressing the unmet need for retirement planning, we believe that many middle-income Americans have grown to appreciate the financial certainty that we believe annuities such as our FIA products afford. Accordingly, the FIA market grew from nearly $12 billion of sales in 2002 to $66 billion of sales in 2021.
As a tool for addressing the unmet need for retirement planning, we believe that many middle-income Americans have grown to appreciate the financial certainty that we believe annuities such as our FIA products afford. For example, the FIA market grew from nearly $12 billion of sales in 2002 to $79 billion of sales in 2022.
As of December 31, 2022 and December 31, 2021, our mortgage loans on real estate portfolio had a weighted average DSC ratio of 2.3 times and 2.4 times, respectively, and a weighted average LTV ratio of 57% and 56%, respectively. We consider a CML delinquent when a loan payment is greater than 30 days past due.
As of December 31, 2023 and 2022, our mortgage loans on real estate portfolio had a weighted average DSC ratio of 2.3 times and 2.3 times, respectively, and a weighted average LTV ratio of 55% and 57%, respectively. 98 We consider a CML delinquent when a loan payment is greater than 30 days past due.
Our analysis of these structured securities, which included cash flow testing, resulted in allowances for expected credit losses of $16 million and $8 million as of December 31, 2022 and December 31, 2021, respectively.
Our analysis of these structured securities, which included cash flow testing, resulted in allowances for expected credit losses of $35 million and $16 million as of December 31, 2023 and 2022, respectively.
Interest and Investment Income For discussion regarding our net investment income and net investment gains (losses) refer to Note C Investments to the Consolidated Financial Statements included in this Annual Report.
Interest and Investment Income For discussion regarding our net investment income and net investment gains (losses) refer to Note C - Investments to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
We also generate cash inflows from investing activities resulting from maturities and sales of invested assets and from financing activities including inflows on our investment-type products and proceeds from borrowing activities. Our operating activities provided cash of $3,171 million and $1,871 million for the years ended December 31, 2022 and December 31, 2021, respectively.
We also generate cash inflows from investing activities resulting from maturities and sales of invested assets and from financing activities including inflows on our investment-type products and proceeds from borrowing activities. Our operating activities provided cash of $5,834 million and $3,171 million for the years ended December 31, 2023 and 2022, respectively.
Our focus within municipal bonds is on NAIC 1 rated instruments, and 96% of our municipal bond exposure is rated NAIC 1 as of December 31, 2022. Mortgage Loans Commercial Mortgage Loans We diversify our commercial mortgage loans ("CMLs") portfolio by geographic region and property type to attempt to reduce concentration risk.
Our focus within municipal bonds is on NAIC 1 rated instruments, with 98% and 96% of our municipal bond exposure rated NAIC 1 as of December 31, 2023 and 2022, respectively. Mortgage Loans Commercial Mortgage Loans We diversify our commercial mortgage loans (“CMLs”) portfolio by geographic region and property type to attempt to reduce concentration risk.
AFS Securities For additional information regarding our AFS securities, including the amortized cost, gross unrealized gains (losses), and fair value as well as the amortized cost and fair value of fixed maturity AFS securities by contractual maturities, as of December 31, 2022 and December 31, 2021, refer to Note C Investments to the Consolidated Financial Statements included in this Annual Report.
AFS Securities For additional information regarding our AFS securities, including the amortized cost, gross unrealized gains (losses), and fair value as well as the amortized cost and fair value of fixed maturity AFS securities by contractual 101 maturities, as of December 31, 2023 and 2022, refer to Note C - Investments to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
Most components of the portfolio exhibited price depreciation caused by higher treasury rates and wider spreads. The total amortized cost of all securities in an unrealized loss position was $34,164 million and $11,968 million as of December 31, 2022 and December 31, 2021, respectively.
Most components of the portfolio exhibited price depreciation caused by higher treasury rates and wider spreads. The total amortized cost of all securities in an unrealized loss position was $29,741 million and $34,164 million as of December 31, 2023 and 2022, respectively.
The watch list excludes structured securities as we have separate processes to evaluate the credit quality on the structured securities. There were 64 and 36 structured securities with a fair value of $162 million and $45 million to which we had potential credit exposure as of December 31, 2022 and December 31, 2021, respectively.
The watch list excludes structured securities as we have separate processes to evaluate the credit quality on the structured securities. There were 101 and 64 structured securities with a fair value of $316 million and $162 million to which we had potential credit exposure as of December 31, 2023 and 2022, respectively.
For mortgage loans that are determined to require foreclosure, the carrying value is reduced to the fair value of the underlying collateral, net of estimated costs to obtain and sell at the point of foreclosure. At December 31, 2022 we had one CML that was delinquent in principal or interest payments and none in the process of foreclosure.
For mortgage loans that are determined to require foreclosure, the carrying value is reduced to the fair value of the underlying collateral, net of estimated costs to obtain and sell at the point of foreclosure. At December 31, 2023 and 2022, we had no CMLs that were delinquent in principal or interest payments and none in the process of foreclosure.
Concentrations of Financial Instruments For certain information regarding our concentrations of financial instruments, refer to Note C Investments to the Consolidated Financial Statements included in this Annual Report. Derivatives We are exposed to credit loss in the event of nonperformance by our counterparties on call options.
Concentrations of Financial Instruments For certain information regarding our concentrations of financial instruments, refer to Note C - Investments to the Consolidated Financial Statements included in this Annual Report on Form 10-K. Derivatives We are exposed to credit loss in the event of nonperformance by our counterparties on derivative instruments.
These changes, taken together, resulted in an increase in contractholder funds and future policy benefits of $97 million. During the third quarter of 2021, we implemented a new actuarial valuation system, and as a result, our third quarter 2021 assumption updates include model refinements and assumption updates resulting from the implementation.
These changes, taken together, resulted in an increase in contractholder funds and market risk benefits of approximately $99 million. • During the third quarter of 2021, we implemented a new actuarial valuation system, and as a result, our third quarter 2021 assumption updates include model refinements and assumption updates resulting from the implementation.
Across all municipal bonds, the largest issuer represented 6% and 7% of the category as of December 31, 2022 and December 31, 2021, respectively, less than 1% of the entire portfolio and is rated NAIC 1.
Across all municipal bonds, the largest issuer represented 5% and 6% of the category as of December 31, 2023 and 2022, respectively, with less than 1% of the entire portfolio and is rated NAIC 1.
Proceeds received upon expiration or early termination of call options purchased to fund annual index credits are recorded as part of the change in fair value of derivatives, and are largely offset by an expense for index credits earned on annuity contractholder fund balances.
With respect to FIAs/IULs, which includes the expenses incurred to fund the index credits. Proceeds received upon expiration or early termination of call options purchased to fund annual index credits are recorded as part of the change in fair value of derivatives and are largely offset by an expense for index credits earned on annuity contractholder fund balances.
We have unfunded investment commitments as of December 31, 2022 and December 31, 2021, based upon the timing of when investments are executed compared to when the actual investments are funded, as some investments require that funding occur over a period of months or years.
We have unfunded commitments as of December 31, 2023 based upon the timing of when investments and agreements are executed or signed compared to when the actual commitments are funded or closed. Some investments require that funding occur over a period of months or years.
Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing rate of return on assets available for reinvestment.
Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the rate of return on retained assets.
Amounts attributable to the fair value accounting for derivatives hedging the FIA and IUL index credits and the related embedded derivative liability fluctuate from period to period based upon changes in the fair values of call options purchased to fund the annual index credits, changes in the interest rates and non-performance credit spreads used to discount the embedded derivative liability, and the fair value assumptions reflected in the embedded derivative liability.
Amounts attributable to the fair value accounting for derivatives hedging the FIA and IUL index credits and the related embedded derivative liability fluctuate from period to period based upon changes in the derivative’s underlying index, changes in the interest rates and non-performance credit spreads used to discount the embedded derivative liability, and the fair value assumptions reflected in the embedded derivative liability.
In the tables below, we present the rating of structured securities based on ratings from the NAIC rating methodologies described above (which in some cases do not correspond to rating agency designations).
In the tables below, we present the rating of structured 95 securities based on ratings from the NAIC rating methodologies described above (which in some cases do not correspond to rating agency designations). All NAIC designations (e.g., NAIC 1-6) are based on the NAIC methodologies.
Since AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale investments, management considers this non-GAAP financial measure to provide useful supplemental information internally and to investors and analysts assessing the level of earned equity on total equity.
Since AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale investments, changes in instrument-specific credit risk for market risk benefits and discount rate assumption changes for the future policy benefits, management considers this non-GAAP financial measure to provide useful supplemental information internally and to investors and analysts assessing the level of earned equity on total equity.
The amortized cost and fair value of fixed maturity available for sale securities under watch list analysis and the number of months in a loss position with investment grade securities (NRSRO rating of BBB/Baa or higher) as of December 31, 2022 and December 31, 2021, were as follows (dollars in millions): December 31, 2022 Number of Securities Amortized Cost Fair Value Allowance for Credit Loss Gross Unrealized Losses Investment grade: Less than six months 6 $ 5 $ 3 $ — $ (2) Six months or more and less than twelve months 49 299 200 — (99) Twelve months or greater 76 969 634 — (335) Total investment grade 131 1,273 837 — (436) Below investment grade: Less than six months 1 32 13 15 (4) Six months or more and less than twelve months 12 124 94 — (30) Twelve months or greater 2 6 4 — (2) Total below investment grade 15 162 111 15 (36) Total 146 $ 1,435 $ 948 $ 15 $ (472) December 31, 2021 Number of Securities Amortized Cost Fair Value Allowance for Credit Loss Gross Unrealized Losses Investment grade: Less than six months 4 $ 82 $ 79 $ — $ (3) Six months or more and less than twelve months 2 34 32 — (2) Twelve months or greater — — — — — Total investment grade 6 116 111 — (5) Below investment grade: Less than six months — — — — — Six months or more and less than twelve months — — — — — Twelve months or greater 2 16 14 — (2) Total below investment grade 2 16 14 — (2) Total 8 $ 132 $ 125 $ — $ (7) Expected Credit Losses and Watch List We prepare a watch list to identify securities to evaluate for expected credit losses.
The amortized cost and fair value of fixed maturity available for sale securities under watch list analysis and the number of months in a loss position with investment grade securities (NRSRO rating of BBB/Baa or higher) as of December 31, 2023 and 2022, were as follows (dollars in millions): December 31, 2023 Number of Securities Amortized Cost Fair Value Allowance for Credit Loss Gross Unrealized Losses Investment grade: Less than six months 1 $ 15 $ 14 $ — $ (1) Six months or more and less than twelve months 1 54 44 — (10) Twelve months or greater 47 634 444 — (190) Total investment grade 49 703 502 — (201) Below investment grade: Less than six months — — — — — Six months or more and less than twelve months — — — — — Twelve months or greater 3 19 15 — (4) Total below investment grade 3 19 15 — (4) Total 52 $ 722 $ 517 $ — $ (205) 100 December 31, 2022 Number of Securities Amortized Cost Fair Value Allowance for Credit Loss Gross Unrealized Losses Investment grade: Less than six months 6 $ 5 $ 3 $ — $ (2) Six months or more and less than twelve months 49 299 200 — (99) Twelve months or greater 76 969 634 — (335) Total investment grade 131 1,273 837 — (436) Below investment grade: Less than six months 1 32 13 15 (4) Six months or more and less than twelve months 12 124 94 — (30) Twelve months or greater 2 6 4 — (2) Total below investment grade 15 162 111 15 (36) Total 146 $ 1,435 $ 948 $ 15 $ (472) Expected Credit Losses and Watch List We prepare a watch list to identify securities to evaluate for expected credit losses.
We continuously evaluate CMLs based on relevant current information to ensure properties are performing at a level to secure the related debt. LTV and DSC ratios are utilized to assess the risk and quality of CMLs.
We continuously evaluate CMLs based on relevant current information to ensure properties are performing at a level to secure the related debt. Loan-to-value (“LTV”) and debt service coverage (“DSC”) ratios are utilized to assess the risk and quality of CMLs.
Recognized gains and losses, net Below is a summary of the major components included in recognized gains and losses, net (in millions): Year ended Period from June 1 to December 31, Period from January 1 to May 31, December 31, 2022 December 31, 2021 2020 2020 Predecessor Net realized and unrealized (losses) gains on fixed maturity available-for-sale securities, equity securities and other invested assets $ (461) $ 57 $ 179 $ (121) Change in allowance for expected credit losses (34) 4 (19) (23) Net realized and unrealized (losses) gains on certain derivatives instruments (857) 615 237 (212) Change in fair value of reinsurance related embedded derivatives 352 34 (53) 19 Change in fair value of other derivatives and embedded derivatives (10) 5 8 (1) Recognized gains and (losses), net $ (1,010) $ 715 $ 352 $ (338) Recognized gains and losses are shown net of amounts attributable to certain funds withheld reinsurance agreements which is passed along to the reinsurer in accordance with the terms of these agreements.
Recognized gains and (losses), net Below is a summary of the major components included in recognized gains and losses, net (in millions): Year ended December 31, 2023 December 31, 2022 December 31, 2021 Net realized and unrealized (losses) gains on fixed maturity available-for-sale securities, equity securities and other invested assets $ (111) $ (461) $ 57 Change in allowance for expected credit losses (37) (34) 4 Net realized and unrealized (losses) gains on certain derivatives instruments 147 (857) 615 Change in fair value of reinsurance related embedded derivatives (128) 352 34 Change in fair value of other derivatives and embedded derivatives 5 (10) 5 Recognized gains and (losses), net $ (124) $ (1,010) $ 715 Recognized gains and losses are shown net of amounts attributable to certain funds withheld reinsurance agreements which is passed along to the reinsurer in accordance with the terms of these agreements.
Further, the estimated level of annual pre-tax income can cause the overall effective income tax rate to vary from period to period. We believe that our tax positions comply with applicable tax law and that we adequately provide for any known tax contingencies. We believe the estimates and assumptions used to support our evaluation of tax benefit realization are reasonable.
Further, the estimated level of annual pre-tax income can cause the overall effective income tax rate to vary from 80 period to period. We believe that our tax positions comply with applicable tax law and that we adequately provide for any known tax contingencies.
Similarly, we expect that policyholders would be less likely to hold policies with existing guarantees as interest rates rise and the relative value of other new business offerings are increased, which would negatively impact our earnings and cash flows.
Similarly, we expect that policyholders would be less likely to hold policies with existing guarantees as interest rates rise and the relative value of other new business offerings are increased, which would negatively impact our earnings and cash flows. See “ Quantitative and Qualitative Disclosure about Market Risk ” and “ Part I. Item 1A.
Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations for the years ended December 31, 2022 and December 31, 2021, the period from June 1, 2020 to December 31, 2020 (following the FNF Acquisition), and the “Predecessor” results for the period from January 1, 2020 to May 31, 2020 (prior to the FNF Acquisition) should be read together with, and is qualified in its entirety by reference to, our Consolidated Financial Statements and related notes included elsewhere in this Annual Report which have been prepared in accordance with GAAP.
Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations for the years ended December 31, 2023, December 31, 2022 and December 31, 2021 should be read together with, and is qualified in its entirety by reference to, our Consolidated Financial Statements and related notes included elsewhere in this Annual Report on Form 10-K which have been prepared in accordance with GAAP.
The funding agreements issued under the FABN Program are in addition to those issued to the FHLB. The PRT solutions business was launched by building an experienced team and then working with brokers and institutional consultants for distribution. These markets leverage our existing team's spread-based capabilities as well as our strategic partnership with Blackstone.
The PRT solutions business was launched by building an experienced team and then working with brokers and institutional consultants for distribution. These markets leverage our existing team's spread-based capabilities as well as our strategic partnership with Blackstone.
Interest and investment income attributable to these agreements, and thus excluded from the totals in the table above, was $109 million, $53 million, $21 million and $15 million, for the years ended December 31, 2022 and December 31, 2021, the period from June 1, 2020 to December 31, 2020 and the period from January 1, 2020 to May 31, 2020, respectively.
Interest and investment income attributable to these agreements, and thus excluded from the totals in the table above, was $339 million, $109 million and $53 million, for the years ended December 31, 2023, 2022 and 2021, respectively.
These changes, taken together, resulted in a decrease in contractholder funds and future policy reserves of $397 million. • Index credits, interest credited & bonuses for the year ended December 31, 2022 were lower compared to the year ended December 31, 2021 and primarily reflected lower index credits on FIA policies as a result of market movement during the respective periods.
These changes, taken together, resulted in a decrease in contractholder funds and future policy reserves of approximately $435 million. • Index credits, interest credited & bonuses for the year ended December 31, 2023 were higher compared to the year ended December 31, 2022, primarily reflecting higher index credits and interest credited on FIA and other policies as a result of market movement during the respective periods and higher interest credited associated with the growth in PRT agreements.
Adjusted net earnings should not be used as a substitute for net earnings (loss). However, we believe the adjustments made to net earnings (loss) in order to derive adjusted net earnings provide an understanding of our overall results of operations.
However, we believe the adjustments made to net earnings (loss) in order to derive adjusted net earnings provide an understanding of our overall results of operations.
As the value of a derivative asset declines (or increases), the collateral required to be posted by our counterparties would also decline (or increase). Likewise, when the value of a derivative liability declines (or increases), the collateral we are required to post to our counterparties would also decline (or increase). Cash Requirements.
As the value of a derivative asset declines (or increases), the collateral required to be posted by our counterparties would also decline (or increase).
AUM uses the following components: (i) total invested assets at amortized cost, excluding derivatives, net of reinsurance qualifying for risk transfer in accordance with GAAP; (ii) related party loans and investments; (iii) accrued investment income; (iv) the net payable/receivable for the purchase/sale of investments, and (v) cash and cash equivalents excluding derivative collateral at the end of the period Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the rate of return on assets available for reinvestment.
Assets Under Management (“AUM”) AUM is comprised of the following components and is reported net of reinsurance qualifying for risk transfer in accordance with GAAP: (i) total invested assets at amortized cost, excluding investments in unconsolidated affiliates and derivatives; (ii) investments in unconsolidated affiliates at carrying value; (iii) related party loans and investments; (iv) accrued investment income; (v) the net payable/receivable for the purchase/sale of investments; and (vi) cash and cash equivalents excluding derivative collateral at the end of the period. 84 Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the size of our investment portfolio that is retained.
As of December 31, 2021, the CLO and ABS positions were trading at a net unrealized gain position of $145 million and $37 million, respectively.
As of December 31, 2023, the CLO and ABS positions were trading at a net unrealized gain position of $65 million and a net unrealized loss of $344 million, respectively.
The primary cash inflows from financing activities are inflows on our investment-type products and proceeds from borrowing activities. The primary cash outflows from financing activities are withdrawals on our investment-type products and repayments of outstanding borrowings.
The primary cash outflows from financing activities are withdrawals on our investment-type products, repayments of outstanding borrowings, dividend payments and stock repurchases.
Cash provided by operations for the years ended December 31, 2022 and December 31, 2021 included approximately $1,300 million and $840 million of cash received for PRT transactions, respectively, included in the change in future policy benefits, reflecting our expansion into the PRT institutional market during 2021. Investing Cash Flows.
Cash provided by operations for the years ended December 31, 2023 and 2022 included approximately $1,300 million and $1,300 million of net cash received for PRT transactions, respectively, included in the change in future policy benefits. Investing Cash Flows.
The fair value of our investments in subprime and Alt-A RMBS securities was $40 million and $54 million as of December 31, 2022, respectively, and $52 million and $75 million as of December 31, 2021, respectively.
The fair value of our investments in subprime securities and Alt-A RMBS securities were $33 million and $49 million as of December 31, 2023, respectively, and $40 million and $54 million as of December 31, 2022, respectively.
This includes a further significant decline in value of assets incorporated into our tax planning strategies which could lead to an increase of our valuation allowance on deferred tax assets having an adverse effect on current and future results. Refer to Note N Income Taxes to our Consolidated Financial Statements included in this Annual Report for details.
This includes a further significant decline in value of assets incorporated into our tax planning strategies which could lead to an increase of our valuation allowance on deferred tax assets having an adverse effect on current and future results.
See Note B Fair Value of Financial Instruments and Note C Investments to our Consolidated Financial Statements included in this Annual Report.
See Note B - Fair Value of Financial Instruments and Note C - Investments to our Consolidated Financial Statements included in Part II - Item 8 of this Annual Report on Form 10-K.
Cash used in investing activities for the years ended December 31, 2022 and December 31, 2021 included purchases of fixed maturity securities and other investments associated with investing the cash received from FABN transactions, generating from financing cash flows and PRT transactions, generated from operating activities, reflecting our expansion into institutional markets during 2021, as well as cash received from borrowings generated from financing activities in both periods.
Cash used in investing activities for the years ended December 31, 2023 and 2022 included purchases of fixed maturity securities and other investments associated with investing the net cash received from our investment-type products, generated from financing cash flows and PRT transactions, generated from operating activities, as well as cash received from borrowings generated from financing activities in both periods. 104 Financing Cash Flows.
It also includes our ability to manage interest rates credited to policyholders and costs of the options and futures purchased to fund the annual index credits on the FIA/IULs. We analyze returns on AAUM, pre- and post-VOBA, DAC and DSI as well as pre- and post-tax to measure our profitability in terms of growth and improved earnings.
It also includes our ability to manage interest rates credited to policyholders and costs of the options and futures purchased to fund the annual index credits on the FIA/IULs. We analyze returns on AAUM to measure our profitability.
Interest and investment income Below is a summary of interest and investment income (in millions): Year ended Period from June 1 to December 31, Period from January 1 to May 31, December 31, 2022 December 31, 2021 2020 2020 Predecessor Fixed maturity securities, available-for-sale $ 1,431 $ 1,213 $ 643 $ 426 Equity securities 17 11 7 4 Preferred securities 49 47 35 16 Mortgage loans 186 131 50 36 Invested cash and short-term investments 33 7 — 4 Limited partnerships 110 589 75 (37) Other investments 20 17 8 5 Gross investment income 1,846 2,015 818 454 Investment expense (191) (163) (75) (51) Net investment income $ 1,655 $ 1,852 $ 743 $ 403 Interest and investment income is shown net of amounts attributable to certain funds withheld reinsurance agreements which is passed along to the reinsurer in accordance with the terms of these agreements.
Interest and investment income Below is a summary of interest and investment income (in millions): Year ended December 31, 2023 December 31, 2022 December 31, 2021 Fixed maturity securities, available-for-sale $ 1,843 $ 1,431 $ 1,213 Equity securities 20 17 11 Preferred securities 41 49 47 Mortgage loans 229 186 131 Invested cash and short-term investments 76 33 7 Limited partnerships 229 110 589 Other investments 27 20 17 Gross investment income 2,465 1,846 2,015 Investment expense (254) (191) (163) Interest and investment income $ 2,211 $ 1,655 $ 1,852 87 Interest and investment income is shown net of amounts attributable to certain funds withheld reinsurance agreements which is passed along to the reinsurer in accordance with the terms of these agreements.
Our investment portfolio is designed to contribute stable earnings, excluding short-term mark-to-market effects, and balance risk across diverse asset classes and is primarily invested in high quality fixed income securities. 80 As of December 31, 2022 and December 31, 2021, the fair value of our investment portfolio was approximately $41 billion and $39 billion, respectively, and was divided among the following asset classes and sectors (dollars in millions): December 31, 2022 December 31, 2021 Fair Value Percent Fair Value Percent Fixed maturity securities, available for sale: United States Government full faith and credit $ 32 — % $ 50 — % United States Government sponsored entities 42 — % 74 — % United States municipalities, states and territories 1,410 3 % 1,441 4 % Foreign Governments 148 — % 205 1 % Corporate securities: Finance, insurance and real estate 5,085 12 % 5,109 13 % Manufacturing, construction and mining 737 2 % 932 2 % Utilities, energy and related sectors 2,275 6 % 2,987 8 % Wholesale/retail trade 2,008 5 % 2,627 7 % Services, media and other 2,794 7 % 3,349 8 % Hybrid securities 705 2 % 881 2 % Non-agency residential mortgage-backed securities 1,479 4 % 648 2 % Commercial mortgage-backed securities 3,036 7 % 2,964 7 % Asset-backed securities 7,245 18 % 4,550 12 % Collateral loan obligations (“CLO”) 4,222 10 % 4,145 11 % Total fixed maturity available for sale securities $ 31,218 76 % $ 29,962 77 % Equity securities (a) 823 2 % 1,171 3 % Limited partnerships: Private equity 1,129 3 % 1,181 3 % Real assets 431 1 % 340 1 % Credit 867 2 % 829 2 % Limited partnerships $ 2,427 6 % $ 2,350 6 % Commercial mortgage loans 2,083 5 % 2,265 6 % Residential mortgage loans 1,892 5 % 1,549 4 % Other (primarily derivatives and company owned life insurance) 809 2 % 1,305 3 % Short term investments 1,556 4 % 373 1 % Total investments $ 40,808 100 % $ 38,975 100 % (a) Includes investment grade non-redeemable preferred stocks ($672 million and $928 million at December 31, 2022 and December 31, 2021, respectively).
Our investment portfolio is designed to contribute stable earnings, excluding short-term mark-to-market effects, and balance risk across diverse asset classes and is primarily invested in high quality fixed income securities. 94 As of December 31, 2023 and December 31, 2022, the fair value of our investment portfolio was approximately $52 billion and $41 billion, respectively, and was divided among the following asset classes and sectors (dollars in millions): December 31, 2023 December 31, 2022 Fair Value Percent Fair Value Percent Fixed maturity securities, available for sale: United States Government full faith and credit $ 261 1 % $ 32 — % United States Government sponsored entities 31 — % 42 — % United States municipalities, states and territories 1,567 3 % 1,410 3 % Foreign Governments 226 — % 148 — % Corporate securities: Finance, insurance and real estate 6,895 13 % 5,085 12 % Manufacturing, construction and mining 947 2 % 737 2 % Utilities, energy and related sectors 2,374 5 % 2,275 6 % Wholesale/retail trade 2,433 5 % 2,008 5 % Services, media and other 3,930 8 % 2,794 7 % Hybrid securities 618 1 % 705 2 % Non-agency residential mortgage-backed securities 2,393 5 % 1,479 4 % Commercial mortgage-backed securities 4,410 9 % 3,036 7 % Asset-backed securities 8,929 17 % 7,245 18 % Collateral loan obligations ("CLO") 5,405 10 % 4,222 10 % Total fixed maturity available for sale securities $ 40,419 79 % $ 31,218 76 % Equity securities (a) 606 1 % 823 2 % Limited partnerships: Private equity 1,277 2 % 1,129 3 % Real assets 463 1 % 431 1 % Credit 1,039 2 % 867 2 % Limited partnerships $ 2,779 5 % $ 2,427 6 % Commercial mortgage loans 2,253 4 % 2,083 5 % Residential mortgage loans 2,545 5 % 1,892 5 % Other (primarily derivatives and company owned life insurance) 1,697 3 % 809 2 % Short term investments 1,452 3 % 1,556 4 % Total investments $ 51,751 100 % $ 40,808 100 % (a) Includes investment grade non-redeemable preferred stocks ($428 million and $672 million at December 31, 2023 and 2022, respectively).
As of December 31, 2022 and December 31, 2021, approximately 91% and 94%, respectively, of the subprime and Alt-A RMBS exposures were rated NAIC 2 or higher. 84 ABS and CLO Exposures Our ABS exposures are largely diversified by underlying collateral and issuer type.
As of December 31, 2023 and 2022, approximately 95% and 91%, respectively, of the subprime and Alt-A RMBS exposures were rated NAIC 2 or higher. ABS and CLO Exposures Our ABS exposures are largely diversified by underlying collateral and issuer type. Our CLO exposures are generally senior tranches of CLOs which have leveraged loans as their underlying collateral.
At December 31, 2021, our watch list included seven securities in an unrealized loss position with an amortized cost of $132 million, allowance for expected credit losses of $0 million, unrealized losses of $7 million and a fair value of $125 million.
At December 31, 2023, our watch list included 52 securities in an unrealized loss position with an amortized cost of $722 million, no allowance for expected credit losses, unrealized losses of $205 million and a fair value of $517 million.
The components of the realized and unrealized gains (losses) on certain derivative instruments hedging our indexed annuity and universal life products are summarized in the table below (dollars in millions): Year ended Period from June 1 to December 31, Period from January 1 to May 31, December 31, 2022 December 31, 2021 2020 2020 Predecessor Call options: Realized (losses) gains $ (170) $ 437 $ 62 $ 7 Change in unrealized (losses) gains (692) 160 167 (228) Futures contracts: (Losses) gains on futures contracts expiration (6) 9 21 3 Change in unrealized gains (losses) (1) (1) (6) 5 Foreign currency forward: Gains on foreign currency forward 11 10 (7) 1 Total net change in fair value $ (858) $ 615 $ 237 $ (212) Year-to-Date Point-to-Point Change in S&P 500 Index during the periods (19) % 27 % 23 % (6) % • Realized gains and losses on certain derivative instruments are directly correlated to the performance of the indices upon which the call options and futures contracts are based and the value of the derivatives at the time of expiration compared to the value at the time of purchase.
The components of the realized and unrealized gains (losses) on certain derivative instruments hedging our indexed annuity, universal life products and floating rate investments are summarized in the table below (dollars in millions): Year ended December 31, 2023 December 31, 2022 December 31, 2021 Call options: Realized (losses) gains $ (216) $ (170) $ 437 Change in unrealized (losses) gains 308 (692) 160 Futures contracts: (Losses) gains on futures contracts expiration 7 (6) 9 Change in unrealized gains (losses) 2 (1) (1) Interest rate swaps 48 — — Foreign currency forward: Gains on foreign currency forward (2) 11 10 Total net change in fair value $ 147 $ (858) $ 615 Annual Point-to-Point Change in S&P 500 Index during the periods 24 % (19) % 27 % Secured Overnight Financing Rates 5.38 % 4.30 % 0.05 % • Realized gains and losses on certain derivative instruments are directly correlated to the performance of the indices upon which the call options and futures contracts are based and the value of the derivatives at the time of expiration compared to the value at the time of purchase.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

37 edited+10 added−11 removed44 unchanged
Biggest changeThe durations of the investment portfolio, excluding cash and cash equivalents, derivatives, policy loans, and common stocks as of December 31, 2022 and December 31, 2021, are summarized as follows: (Dollars in millions) December 31, 2022 Duration (years) Amortized Cost % of Total 0-4 $ 25,323 53 % 5-9 10,010 21 % 10-14 9,423 21 % 15-19 2,515 5 % 20-30 64 — % Total $ 47,335 100 % (Dollars in millions) December 31, 2021 Duration (years) Amortized Cost % of Total 0-4 $ 17,765 48 % 5-9 8,414 23 % 10-14 5,619 15 % 15-19 4,474 12 % 20-30 883 2 % Total $ 37,155 100 % 95 Equity Price Risk We are also exposed to equity price risk through certain insurance products.
Biggest changeThe durations of the investment portfolio, net of investments subject to reinsurance agreements and excluding cash and cash equivalents, derivatives, policy loans, and common stocks as of December 31, 2023 and December 31, 2022, are summarized as follows: (Dollars in millions) December 31, 2023 December 31, 2022 Duration (years) Amortized Cost % of Total Amortized Cost % of Total 0-4 $ 26,146 54 % $ 25,323 53 % 5-9 10,455 21 % 10,010 21 % 10-14 9,943 20 % 9,423 21 % 15-19 2,650 5 % 2,515 5 % 20-30 69 — % 64 — % Total $ 49,263 100 % $ 47,335 100 % Interest Rate Risk Interest rate risk is our primary market risk exposure.
Equity price risk is the risk that we will incur economic losses due to adverse changes in equity prices. In the past, our exposure to changes in equity prices primarily resulted from our holdings of equity securities.
Equity Price Risk Equity price risk is the risk that we will incur economic losses due to adverse changes in equity prices. In the past, our exposure to changes in equity prices primarily resulted from our holdings of equity securities.
The primary way we hedge FIA/ IUL equity exposure is to purchase over the counter equity index call options from broker-dealer derivative counterparties approved by F&G. The second way to hedge FIA equity exposure is by purchasing exchange traded equity index futures contracts.
The primary way we hedge FIA/ IUL equity exposure is to purchase over the counter equity index call options from broker-dealer derivative counterparties approved by F&G. The second way to hedge FIA/ IUL equity exposure is by purchasing exchange traded equity index futures contracts.
They also are the basis for internal risk management. We are also subject to cash flow stress testing pursuant to regulatory requirements. This analysis measures the effect of changes in interest rate assumptions on asset and liability cash flows. The analysis includes the effects of: i. The timing and amount of redemptions and prepayments in our asset portfolio; ii.
They also are the basis for internal risk management. 108 We are also subject to cash flow stress testing pursuant to regulatory requirements. This analysis measures the effect of changes in interest rate assumptions on asset and liability cash flows. The analysis includes the effects of: i. The timing and amount of redemptions and prepayments in our asset portfolio; ii.
We have the ability to adjust the rates credited, primarily caps and credit rates, on the majority of the annuity liabilities at least annually, subject to minimum guaranteed values. In addition, the 94 majority of the annuity products have surrender and withdrawal penalty provisions designed to encourage persistency and to help ensure targeted spreads are earned.
We have the ability to adjust the rates credited, primarily caps and credit rates, on the majority of the annuity liabilities at least annually, subject to minimum guaranteed values. In addition, the majority of the annuity products have surrender and withdrawal penalty provisions designed to encourage persistency and to help ensure targeted spreads are earned.
The Chief Risk Officer (“CRO”) heads our risk management process and reports directly to our Chief Executive Officer (“CEO”). Our Enterprise Risk Committee discusses and approves all risk policies and reviews and approves 93 risks associated with our activities. This includes volatility (affecting earnings and value), exposure (required capital and market risk) and insurance risks.
The Chief Risk Officer (“CRO”) heads our risk management process and reports directly to our Chief Executive Officer (“CEO”). Our Enterprise Risk Management Committee discusses and approves all risk policies and reviews and approves risks associated with our activities. This includes volatility (affecting earnings and value), exposure (required capital and market risk) and insurance risks.
Disintermediation risk refers to the risk that 99 policyholders surrender their contracts in a rising interest rate environment, requiring us to liquidate assets in an unrealized loss position.
Disintermediation risk refers to the risk that policyholders surrender their contracts in a rising interest rate environment, requiring us to liquidate assets in an unrealized loss position.
As part of our ALM program, we have made a significant effort to identify the assets appropriate to different product lines and ensure investing strategies match the profile of these liabilities. The ALM strategy is designed to align the expected cash flows from the investment portfolio with the expected liability cash flows.
Asset Liability Management (“ALM”) As part of our ALM program, we have made a significant effort to identify the assets appropriate to different product lines and ensure investing strategies match the profile of these liabilities. The ALM strategy is designed to align the expected cash flows from the investment portfolio with the expected liability cash flows.
To limit the impact that credit risk can have on earnings and capital adequacy levels, we have portfolio-level credit risk constraints in place. Limit compliance is monitored on a monthly basis. In connection with the use of call options, we are exposed to counterparty credit risk-the risk that a counterparty fails to perform under the terms of the derivative contract.
To limit the impact that credit risk can have on earnings and capital adequacy levels, we have portfolio-level credit risk constraints in place. Limit compliance is monitored on a monthly basis. In connection with the use of derivative instruments, we are exposed to counterparty credit risk-the risk that a counterparty fails to perform under the terms of the derivative contract.
We expect to continue to face these challenges and uncertainties that could adversely affect our results of operations and financial condition. . 100
We expect to continue to face these challenges and uncertainties that could adversely affect our results of operations and financial condition. . 114
Additionally, fair values of interest rate sensitive instruments may be affected by the creditworthiness of the issuer, prepayment options, relative values of alternative investments, the liquidity of the instrument and other general market conditions. We manage interest rate risk through a variety of measures. We monitor our interest rate risk and make investment decisions to manage the perceived risk.
Additionally, fair values of interest rate sensitive instruments may be affected by the creditworthiness of the issuer, prepayment options, relative values of alternative investments, the liquidity of the instrument and other general market conditions. We monitor our interest rate risk and make investment decisions to manage the perceived risk.
We are exposed to occasional cyclical economic downturns, during which impairment losses may be significantly higher than the long-term historical average. This is offset by years where it expects the actual impairment losses to be substantially lower than the long-term average.
Our credit risk materializes primarily as impairment losses. We are exposed to occasional cyclical economic downturns, during which impairment losses may be significantly higher than the long-term historical average. This is offset by years where it expects the actual impairment losses to be substantially lower than the long-term average.
We review the ratings of all the counterparties periodically. Collateral support documents are negotiated to further reduce the exposure when deemed necessary. See Note D Derivative Financial Instruments in the Consolidated Financial Statements included in this Annual Report for additional information regarding our exposure to credit loss.
We review the ratings of all the counterparties periodically. Collateral support documents are negotiated to further reduce the exposure when deemed necessary. See Note D - Derivative Financial Instruments in the Consolidated Financial Statements included in Part II - Item 8 of this Annual Report on Form 10-K for additional information regarding our exposure to credit loss.
Refer to Note B Fair Value of Financial Instruments to the Consolidated Financial Statements included in this Annual Report for additional details on how the carrying values of these investments are determined as of the balance sheet date.
Refer to Note B - Fair Value of Financial Instruments to the Consolidated Financial Statements included in Part II - Item 8 of this Annual Report on Form 10-K for additional details on how the carrying values of these investments are determined as of the balance sheet date.
Our derivative portfolio; iii. Death benefits and other claims payable under the terms of our insurance products; iv. Lapses and surrenders in our insurance products; v. Minimum interest guarantees in our insurance products; and vi. Book value guarantees in our insurance products. Interest Rate Risk Interest rate risk is our primary market risk exposure.
Our derivative portfolio; iii. Death benefits and other claims payable under the terms of our insurance products; iv. Lapses and surrenders in our insurance products; v. Minimum interest guarantees in our insurance products; and vi. Book value guarantees in our insurance products.
Refer to Note C Investments in the Consolidated Financial Statements included in this Annual Report for our underlying investment concentrations that exceed 10% of shareholders equity as of December 31, 2022 and December 31, 2021.
Refer to Note C - Investments in the Consolidated Financial Statements included in Part II - Item 8 of this Annual Report on Form 10-K for our underlying investment concentrations that exceed 10% of shareholders equity as of December 31, 2023 and December 31, 2022.
Enterprise Risk Management We place a high priority to risk management and risk control. As part of our effort to ensure measured risk taking, management has integrated risk management in our daily business activities and strategic planning.
We require placement of cash in financial institutions evaluated as highly creditworthy. 107 Enterprise Risk Management We place a high priority to risk management and risk control. As part of our effort to ensure measured risk taking, management has integrated risk management in our daily business activities and strategic planning.
Substantial and sustained increases or decreases in market interest rates can affect the profitability of the insurance products and the fair value of our investments, as the majority of our insurance liabilities are backed by fixed maturity securities. The profitability of most of our products depends on the spreads between interest yield on investments and rates credited on insurance liabilities.
Substantial and sustained increases or decreases in market interest rates can affect the profitability of the insurance products and the fair value of our investments, as the majority of our insurance liabilities are backed by fixed maturity securities. 109 Investments Increases and decreases in prevailing interest rates generally translate into decreases and increases in fair values of investments.
The results of the sensitivity analysis at December 31, 2022, December 31, 2021 and December 31, 2020, are as follows: Interest Rate Risk An increase in the levels of interest rates of 100 basis points, with all other variables held constant, would result in a decrease in the fair value of our fixed maturity securities and certain investments in preferred securities of $1.9 billion, $2.3 billion, and $1.3 billion at December 31, 2022, December 31, 2021 and December 31, 2020, respectively.
The results of the sensitivity analysis at December 31, 2023 is as follows: Interest Rate Risk An increase in the levels of interest rates of 100 basis points, with all other variables held constant, would result in a decrease in the fair value of our fixed maturity securities and certain investments in preferred securities of approximately $2.4 billion, a net decrease in the fair value of interest rate swaps of approximately $0.1 billion and a net decrease in the combined fair value of embedded derivatives and MRBs of approximately $0.5 bil lion at December 31, 2023 .
The financial instruments that are included in the sensitivity analysis with respect to interest rate risk include fixed maturity investments, preferred securities and notes payable. The financial instruments that are included in the sensitivity analysis with respect to equity price risk include marketable equity securities.
The financial instruments that are included in the sensitivity analysis with respect to equity price risk include marketable equity securities.
During periods of increasing interest rates, we may offer higher crediting rates on interest-sensitive products, such as IUL insurance and fixed annuities, and may increase crediting rates on in-force products to keep these products competitive. A rise in interest rates, in the absence of other countervailing changes, will result in a decline in the market value of our investment portfolio.
During periods of increasing interest rates, we may offer higher crediting rates on interest-sensitive products, such as IUL insurance and fixed annuities, and may increase crediting rates on in-force products to keep these products competitive.
Use of Estimates and Assumptions The preparation of our Consolidated Financial Statements included in this Annual Report in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
For further information on certain risk associated with our business, refer to Note N - Commitments and Contingencies in the Consolidated Financial Statements included in Part II - Item 8 of this Annual Report on Form 10-K. 113 Use of Estimates and Assumptions The preparation of our Consolidated Financial Statements included in this Annual Report on Form 10-K in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
We also generally limit selection of counterparties with which to do new transactions to those with an “A-” credit rating or above from at least one of the major rating agencies and/or that are appropriately collateralized and provide credit for reinsurance. When exceptions are made to that principle, we ensure that collateral is obtained to mitigate risk of loss.
We also generally limit selection of counterparties with which to do new transactions to those with an “A-” credit rating or above from at least one of the major rating agencies and/or that are appropriately collateralized and provide credit for reinsurance. In the normal course of business, certain reinsurance recoverables are subject to reviews by the reinsurers.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk In the normal course of business, we are routinely subject to a variety of risks, as described in “ Risk Factors ” included in this Annual Report. The risks related to our business also include certain market risks that may affect our debt and other financial instruments.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk In the normal course of business, we are routinely subject to a variety of risks, as described in “ Part I - Item 1A Risk Factors ” included in this Annual Report on Form 10-K.
The FIA/ IUL hedging strategy economically hedges the equity returns and exposes us to the risk that unhedged market exposures result in divergence between changes in the fair value of the liabilities and the hedging assets. We use a variety of techniques, including direct estimation of market sensitivities, to monitor this risk daily.
Other market exposures are hedged periodically depending on market conditions and our risk tolerance. The FIA/ IUL hedging strategy economically hedges the equity returns and exposes us to the risk that unhedged market exposures result in divergence between changes in the fair value of the liabilities and the hedging assets.
We are not aware of any material disputes arising from these reviews or other communications with the counterparties as of December 31, 2022 and December 31, 2021 , that would require an allowance for uncollectible amounts. For information on concentrations of reinsurance risk, refer to Note J Reinsurance in the Consolidated Financial Statements included in this Annual Report .
We are not aware of any material disputes arising from these reviews or other communications with the counterparties as of December 31, 2023 and December 31, 2022, that would require an increase to the allowance for credit losses.
See Note D Derivative Financial Instruments to the Consolidated Financial Statements included in this Annual Report for additional details on the derivatives portfolio. Fair value changes associated with these investments are intended to, but do not always, substantially offset the increase or decrease in the amounts added to policyholder account balances for indexed products.
Fair value changes associated with these investments are intended to, but do not always, substantially offset the increase or decrease in the amounts added to contractholder funds for indexed products.
For the year ended December 31, 2022 , the year ended December 31, 2021 and the period from June 1, 2020 to December 31, 2020, the annual index credits to policyholders on their anniversaries were $155 million, $628 million and $178 million, respectively.
For the years ended December 31, 2023 , December 31, 2022 and December 31, 2021, the annual index credits to policyholders on their anniversaries were $203 million, $155 million and $628 million, respectively. Proceeds received at expiration of options related to such credits were $212 million, $158 million and $702 million, respectively.
At present, we face the market risks associated with our marketable equity securities subject to equity price volatility and with interest rate movements on our fixed income investments. We regularly assess these market risks and have established policies and business practices designed to protect against the adverse effects of these exposures.
At present, we face the market risks associated with our marketable equity securities, liability for Contractholder Funds, and balances for MRBs which are subject to equity price volatility and with interest rate movements on our fixed income investments and liabilities for debt, FPBs, MRBs, and Contractholder Funds.
For example, a 92 100bps shift in interest rates will increase or decrease floating interest expense by approximatel y $11 million per year. At December 31, 2021, we had $977 million in long-term debt, $400 million of which accrued interest at a floating rate.
A 100 basis point shift in interest rates for our floating rate debt and funding agreements will increase or decrease floating expense by approximatel y $14 million and $11 million per year as of December 31, 2023 and December 31, 2022, respectively .
Our major source of credit risk arises predominantly in our insurance operations’ portfolios of debt and similar securities. The fair value of our fixed maturity portfolio totaled $31 billion, $30 billion and $25 billion at December 31, 2022, December 31, 2021 and December 31, 2020, respectively. Our credit risk materializes primarily as impairment losses.
Credit Risk and Counterparty Risk We are exposed to the risk that a counterparty will default on its contractual obligation resulting in financial loss. Our major source of credit risk arises predominantly in our insurance operations’ portfolios of debt and similar securities. The fair value of our fixed maturity portfolio totaled $40 billion at December 31, 2023 .
Equity Price Risk At December 31, 2022, a 10% decrease in market prices, with all other variables held constant, would result in an decrease in the fair value of our equity securities portfolio of $82 million, as compared with a decrease o f $117 million and $105 million at December 31, 2021 and December 31, 2020, respectively. 97 Credit Risk and Counterparty Risk We are exposed to the risk that a counterparty will default on its contractual obligation resulting in financial loss.
Our liquidity needs are managed using the surrender and withdrawal provisions of the annuity contracts and through other means. 112 Equity Price Risk At December 31, 2023, a 10% decrease in market prices, with all other variables held constant, would result in a net decrease in the fair value of our equity securities portfolio of $61 million, as compared with a decrease of $82 million at December 31, 2022 .
At December 31, 2022 , we had a short-term revolving credit facility with an aggregate principal amount of $550 million outstanding which bears interest at a floating rate. Accordingly, depending on the amounts drawn during 2022, fluctuations in market interest rates will have an impact on our resulting interest expense.
Accordingly, fluctuations in market interest rates on the funding agreements will be significantly offset by corresponding changes in investment income associated with our floating rate investments. Notes Payable At December 31, 2023 , we had a short-term revolving credit facility which bears interest at a floating rate.
For further information on certain risk associated with our business, refer to Note F Commitments and Contingencies in the Consolidated Financial Statements included in this Annual Report.
For information on concentrations of reinsurance risk, refer to Note E - Reinsurance in the Consolidated Financial Statements included in Part II - Item 8 of this Annual Report on Form 10-K.
Periods of significant and sustained downturns in equity markets, increased equity volatility or reduced interest rates could result in an increase in the valuation of the future policy benefit or policyholder account balance liabilities associated with such products, resulting in a reduction in our net earnings.
Periods of significant and sustained downturns in equity markets or increased equity volatility could result in an increase in the valuation of the MRB liabilities and decrease in the valuation of contractholder funds liabilities associated with such products. To economically hedge the equity returns on these products, we purchase derivatives to hedge the FIA and IUL equity exposures.
Furthermore, amounts realized in the sale of a particular security may be affected by the relative quantity of the security being sold. Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash equivalents and short-term investments. We require placement of cash in financial institutions evaluated as highly creditworthy.
Furthermore, amounts realized in the sale of a particular security may be affected by the relative quantity of the security being sold. 110 We are also exposed to equity price risk through certain insurance products.
We intend to continue to adjust the hedging strategy as market conditions and risk tolerance change. 96 Sensitivity Analysis For purposes of this Annual Report , we perform a sensitivity analysis to determine the effects that market risk exposures may have on the fair values of our debt and other financial instruments.
Sensitivity Analysis For purposes of this Annual Report on Form 10-K , we perform a sensitivity analysis to determine the effects that market risk exposures may have on various financial instruments. 111 The financial instruments that are included in the sensitivity analysis with respect to interest rate risk include fixed maturity investments, certain preferred securities, interest rate swaps, embedded derivatives, MRBs and floating rate notes payable and funding agreements.
Removed
On June 24, 2022, the following action previously approved by the F&G board of directors became effective: (i) an exchange agreement with FNF pursuant to which F&G transferred shares of its common stock to FNF in exchange for the $400 million FNF Promissory Note, after which the note was retired.
Added
The risks related to our business also include certain market risks that may affect our financial instruments and certain liabilities.
Removed
There was no gain or loss recorded with respect to the exchange agreement. Our fixed maturity investments, certain preferred securities and our floating rate debt are subject to an element of market risk from changes in interest rates. Increases and decreases in prevailing interest rates generally translate into decreases and increases in fair values of those instruments.
Added
We regularly assess these market risks and have established policies and business practices designed to protect against the adverse effects of these exposures. Additionally, financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash equivalents, derivatives and short-term investments.
Removed
At December 31, 2022 and December 31, 2021, we held $101 million and $143 million, respectively, in marketable equity securities (not including our investments in preferred securities of $722 million and $1,028 million, respectively, and our investments in unconsolidated affiliates of $2,427 million and $2,350 million, respectively).
Added
We manage interest rate risk through a variety of measures, including pay-float and receive-fixed interest rate swaps to reduce market risks from interest rate changes on our earnings associated with floating rate investments. Product Liabilities The profitability of most of our products depends on the spreads between interest yield on investments and rates credited on insurance liabilities.
Removed
The rate of amortization of intangibles related to FIA/ IUL products and the cost of providing GMWB could also increase if equity market performance is worse than assumed. To economically hedge the equity returns on these products, we purchase derivatives to hedge the FIA and IUL equity exposures.
Added
A rise in interest rates, in the absence of other countervailing changes, will result in a decline in the market value of our investment portfolio, partially offset by gains related to the fair value of MRBs. In addition, at December 31, 2023 we had floating rate funding agreements outstanding to match certain of our floating rate investments.
Removed
Proceeds received at expiration on options related to such credits were $158 million, $702 million and $185 million, respectively. Other market exposures are hedged periodically depending on market conditions and our risk tolerance.
Added
Accordingly, depending on the amounts outstanding during 2023, fluctuations in market interest rates will have an impact on our resulting interest expense. The impact to net earnings, however, will again be significantly offset by corresponding changes in investment income associated with our floating rate investments.
Removed
Our liquidity needs are managed using the surrender and withdrawal provisions of the annuity contracts and through other means.
Added
See Note D - Derivative Financial Instruments to the Consolidated Financial Statements included in Part II - Item 8 of this Annual Report on Form 10-K for additional details on the derivatives portfolio.
Removed
The following tables present our reinsurance recoverable balances and financial strength ratings for our five largest reinsurance recoverable balances as of December 31, 2022 and December 31, 2021 : December 31, 2022 (Dollars in millions) Financial Strength Rating Parent Company/Principal Reinsurers Reinsurance Recoverable AM Best S&P Fitch Moody's Aspida Life Re Ltd $ 3,121 A- Not Rated Not Rated Not Rated Wilton Re 1,231 A+ Not Rated A Not Rated Somerset Reinsurance Ltd 570 A- BBB+ Not Rated Not Rated London Life Reinsurance Co. 100 A+ Not Rated Not Rated Not Rated Security Life of Denver 93 Not Rated A- A- Baa1 98 December 31, 2021 (Dollars in millions) Financial Strength Rating Parent Company/Principal Reinsurers Reinsurance Recoverable AM Best S&P Fitch Moody's Wilton Re $ 1,269 A+ Not Rated A+ Not Rated Aspida Life Re Ltd 873 A- Not Rated BBB Not Rated Somerset Reinsurance Ltd 780 A- BBB+ Not Rated Not Rated Security Life of Denver 102 Not Rated A- A- Baa1 London Life Reinsurance Co. 102 A+ Not Rated Not Rated Not Rated In the normal course of business, certain reinsurance recoverables are subject to reviews by the reinsurers.
Added
We use a variety of techniques, including direct estimation of market sensitivities, to monitor this risk daily. We intend to continue to adjust the hedging strategy as market conditions and risk tolerance change.
Removed
Concentrations of Financial Instruments As of December 31, 2022 , our most significant investment in one industry, excluding United States and Foreign Government securities and structured securities, was our investment securities in the Banking industry with a fair value of $2,855 million or 7% of the invested assets portfolio and an amortized cost of $3,301 million.
Added
For comparison, a similar increase in the levels of interest rates of 100 basis points, with all other variables held constant, would have resulted in a decrease in the fair value of our fixed maturity securities and certain investments in preferred securities of approximately $1.9 billion and a net decrease in the combined fair value of embedded derivatives and MRBs of approximately $0.4 billion at December 31, 2022.
Removed
As of December 31, 2022 , our holdings in this industry include investments in 132 different issuers with the top ten investments accounting for 37% of the total holdings in this industry.
Added
As noted above, the impact to net earnings related to the interest rate swaps and floating rate notes payable and funding agreements will be significantly offset by corresponding changes in investment income associated with our floating rate investments.
Removed
As of December 31, 2021 , our most significant investment in one industry, excluding U.S. , Foreign Government securities and structured securities, was our investment securities in the Banking industry with a fair value of $2,919 million or 8% of the invested assets portfolio and an amortized cost of $2,854 million.
Added
Concentrations of Financial Instruments Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations - Investment Portfolio - Investment Concentrations included in Part II - Item 7 of this Annual Report on Form 10-K regarding the top ten investment concentrations of our fixed maturity and equity securities including the fair value and percent of total fixed maturity and equity securities fair value as of December 31, 2023 and December 31, 2022.
Removed
As of December 31, 2021 , our holdings in this industry include investments in 132 different issuers with the top ten investments accounting for 37% of the total holdings in this industry.

Other FG 10-K year-over-year comparisons