FNF Reports Second Quarter 2022 Financial Results
Jacksonville, Fla. – (August 2, 2022) - Fidelity National Financial, Inc. (NYSE:FNF) (the Company), a leading provider of title insurance and transaction services to the real estate and mortgage industries and a leading provider of insurance solutions serving retail annuity and life customers and institutional clients through FNF’s wholly-owned subsidiary, F&G, today reported financial results for the second quarter ended June 30, 2022.
Net earnings attributable to common shareholders for the second quarter of $382 million, or $1.37 per diluted share (per share), compared to $552 million, or $1.92 per share, for the second quarter of 2021. Net earnings attributable to common shareholders for the second quarter of 2022 includes $80 million of net unfavorable mark-to-market effects and $68 million of other unfavorable items; all of which are excluded from adjusted net earnings attributable to common shareholders.
Adjusted net earnings attributable to common shareholders (adjusted net earnings) for the second quarter of $530 million, or $1.90 per share, compared to $593 million, or $2.06 per share, for the second quarter of 2021. The decrease from the prior year quarter was primarily a result of Title’s decline in refinance volume, representing trough level activity versus the record levels set in the prior year period; partially offset by higher average fee per file, steady volume of commercial orders closed and higher earnings from F&G. F&G’s adjusted net earnings for the second quarter of 2022 were $128 million, including $36 million of net favorable items primarily as a result of actuarial assumption updates, compared to $92 million, including $22 million of net favorable items, for the second quarter of 2021.
Company Highlights
•Solid Title Revenue: For the Title segment, total revenue of $2.6 billion, compared with $3.0 billion in total revenue in the second quarter of 2021. Total revenue, excluding recognized gains and losses, of $2.8 billion, compared with $3.0 billion in the second quarter of 2021
•Growth strategy drives strong sales for F&G: Total sales of $3.1 billion for the second quarter, a 15% increase over second quarter 2021 and a 19% increase over first quarter 2022; reflects successful execution of F&G’s diversified growth strategy and a disciplined approach to pricing
•Partial spin-off of F&G remains on track: Pursuant to the previously announced transaction to distribute 15% ownership of F&G to FNF shareholders on a pro rata basis, F&G has filed its confidential Form 10 registration statement with the U.S. Securities and Exchange Commission for the partial spin-off. The filing represents a significant milestone in the transaction process, which remains on track to close early in the fourth quarter of 2022, subject to customary approvals. As expected, the Company executed on the conversion of the $400 million intercompany term loan into F&G equity during the second quarter
•Ample deployable capital supports shareholder value: FNF has repurchased 4.3 million shares for $172 million, at an average price of $39.76 per share, in the second quarter and paid common dividends at $0.44 per share for $122 million. FNF ended the second quarter with $1.6 billion in cash and short-term liquid investments at the holding company
William P. Foley, II, commented, “As we continue to navigate the market volatility due to rising interest rates and the ongoing economic uncertainty, we are proud of our second quarter results where we delivered total revenue of $2.6 billion, reflecting a moderation from the record setting mortgage market activity experienced in the year ago second quarter. Our Title business performed well and reflects management’s execution and flexible operating model designed to rapidly adapt to changing market conditions. F&G delivered near record sales in the second quarter, as investors sought safe haven investments given the sharp increase in market volatility, which generated growth in assets under management to $40.3 billion at June 30, 2022. F&G’s performance in the current market
environment continues to support our acquisition thesis given their countercyclical business model which benefits from higher interest rates and provides a balance to our business as Title revenues begin to contract given higher mortgage rates.”
Mr. Foley concluded, “Looking forward, we remain optimistic that the F&G partial spin-off is on track for the fourth quarter of this year and, once completed, will highlight the value creation that has occurred at F&G over the last two years. This planned transaction represents the Board’s and management’s commitment to delivering value to our shareholders. Our capital allocation strategy is another lever that we utilize to provide a steady stream of capital to our shareholders through our quarterly dividend while maintaining our share repurchase program as we deploy our strong free cash flow. During the quarter, we accelerated our buyback activity having repurchased $172 million of stock as compared to $134 million in the first quarter. Year to date, we have repurchased $306 million of stock while returning $245 million through our quarterly dividend.”
Summary Financial Results
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| (In millions, except per share data) | Three Months Ended | Year to Date |
| June 30, 2022 | | June 30, 2021 | 2022 | | 2021 |
| Total revenue | $ | 2,631 | | | $ | 3,854 | | $ | 5,796 | | | $ | 6,954 | |
| F&G total sales1 | $ | 3,073 | | | $ | 2,667 | | $ | 5,662 | | | $ | 4,321 | |
F&G assets under management1 | $ | 40,322 | | | $ | 31,760 | | $ | 40,322 | | | $ | 31,760 | |
| Total assets | $ | 61,230 | | | $ | 54,520 | | $ | 61,230 | | | $ | 54,520 | |
| Adjusted pre-tax title margin | 18.9 | % | | 22.7 | % | 18.0 | % | | 21.4 | % |
| Net earnings attributable to common shareholders | $ | 382 | | | $ | 552 | | $ | 779 | | | $ | 1,157 | |
| Net earnings per share attributable to common shareholders | $ | 1.37 | | | $ | 1.92 | | $ | 2.77 | | | $ | 4.00 | |
Adjusted net earnings1 | $ | 530 | | | $ | 593 | | $ | 918 | | | $ | 1,048 | |
Adjusted net earnings per share1 | $ | 1.90 | | | $ | 2.06 | | $ | 3.27 | | | $ | 3.63 | |
| Total common shares outstanding | 277 | | | 286 | | 277 | | | 286 | |
Segment Financial Results
Title
This segment consists of the operations of the Company’s title insurance underwriters and related businesses, which provide core title insurance and escrow and other title-related services including loan sub-servicing, valuations, default services, and home warranty products.
Second Quarter 2022 Highlights
Mike Nolan, Chief Executive Officer, said, “Our Title business produced a strong performance in the second quarter, despite the housing market experiencing headwinds from higher mortgage rates which has impacted residential refinance and purchase volumes. We are pleased with our adjusted pre-tax title earnings of $529 million and adjusted pre-tax title margin of 18.9% during the second quarter as we continue to benefit from strength in the commercial market combined with stability in the purchase market, both as compared to the first quarter of 2022, while our refinance volumes appear to be bottoming. Though the economic outlook and near-term market trends are uncertain, we will continue to manage the business the way we have through prior cycles, effectively managing margin by adjusting expenses to align with trends in opened and closed order volumes. We will also be opportunistic and use market dislocation to continue expanding our business through attractive acquisitions and recruiting of established and experienced producers.”
1 See definition of non-GAAP measures below
•Total revenue of $2.6 billion, compared with $3.0 billion in total revenue in the second quarter of 2021
•Total revenue, excluding recognized gains and losses, of $2.8 billion, a 7% decrease compared with the second quarter of 2021
◦Direct title premiums of $859 million, a 5% decrease from second quarter of 2021
◦Agency title premiums of $1.2 billion, a 4% decrease from second quarter of 2021
◦Commercial revenue of $436 million, a 26% increase from second quarter of 2021
•Purchase orders opened decreased 12% on a daily basis and purchase orders closed decreased 11% on a daily basis from the second quarter of 2021
•Refinance orders opened decreased 67% on a daily basis and refinance orders closed decreased 68% on a daily basis from second quarter of 2021
•Commercial orders opened decreased 7% and commercial orders closed decreased 6% from second quarter of 2021
•Total fee per file of $3,557 for the second quarter, a 46% increase over second quarter of 2021
Second Quarter 2022 Financial Results
•Pre-tax title margin of 10.5% and industry leading adjusted pre-tax title margin of 18.9% for the second quarter of 2022, compared to 21.5% and 22.7%, respectively, in the second quarter of 2021
•Pre-tax earnings from continuing operations in Title for the second quarter of $267 million, compared with $644 million for the second quarter of 2021
•Adjusted pre-tax earnings in Title for the second quarter of $529 million compared with $688 million for the second quarter of 2021. The decrease from the prior year quarter was primarily a result of the considerable decline in refinance volume representing trough level activity versus the record levels set in the prior year period; partially offset by higher average fee per file and steady volume of commercial orders closed
F&G
This segment consists of operations of FNF’s wholly-owned subsidiary F&G, a leading provider of insurance solutions serving retail annuity and life customers and funding agreement and pension risk transfer institutional clients.
Second Quarter 2022
Chris Blunt, President and Chief Executive Officer of F&G, commented, “F&G had a terrific quarter, demonstrated by our top line and bottom line results. We generated total gross sales of $3.1 billion which, in turn, drove our assets under management to $40.3 billion. In the retail channels, we generated a record $2.2 billion of sales, up 34% from the prior year quarter. Our retail sales volumes reflect expanding relationships with new and existing distribution partners, traction from a comprehensive product portfolio that meets a broad range of consumer needs and increased demand given higher interest rates. Momentum continues in our institutional channels as we issued nearly $0.9 billion in funding agreements, even amidst a challenging rate environment for that space. On the bottom line, we delivered adjusted net earnings of $128 million, including $36 million of favorable notable items, which comprised 24% of FNF’s consolidated adjusted net earnings.”
Regarding the recently announced transaction to distribute 15% ownership of F&G to FNF shareholders, Mr. Blunt said, “We are making progress toward a targeted closing early in the fourth quarter of 2022. Overall, we are well positioned for future growth opportunities and view the transition to being a publicly traded company as a vote of confidence for our business.”
•Total gross sales of $3.1 billion for the second quarter, an increase of 15% over the second quarter 2021 and an increase of 19% over first quarter 2022; reflects successful execution of F&G’s diversified growth strategy and a disciplined approach to pricing
•Record Retail sales of $2.2 billion for the second quarter, a 34% increase over second quarter of 2021 and 53% increase over first quarter 2022 as sales resumed our planned growth trajectory, following moderated volume in first quarter from an inflection point in pricing actions taken in response to the macro environment
•Institutional sales of approximately $0.9 billion funding agreement issuances, compared to $1.0 billion funding agreement issuances for the second quarter 2021
•Average assets under management (AAUM) of $39.3 billion for the second quarter, an increase of 29% from $30.4 billion in the second quarter 2021, driven by net new business asset flows. Ending assets under management were $40.3 billion as of June 30, 2022
•Net earnings attributable to common shareholders for F&G of $230 million for the second quarter, compared to $82 million for the second quarter of 2021
•Adjusted net earnings for F&G of $128 million for the second quarter, compared to $92 million for the second quarter of 2021. Adjusted net earnings excluding notable items were $92 million in the second quarter, an increase of $22 million or 31% compared to $70 million in the prior year quarter, primarily driven by growth in assets under management
◦Net favorable items in second quarter of 2022 were $36 million, primarily as a result of actuarial assumption updates; we have updated assumptions for our fixed indexed annuity guaranteed minimum withdrawal benefits, based on utilization experience relative to our more conservative assumptions, as well as our net earned rate assumptions which we will continue to monitor in response to significant changes in the macro environment
◦Net favorable items in second quarter of 2021 were $22 million, primarily as a result of favorable CLO redemptions
Conference Call
We will host a call with investors and analysts to discuss FNF’s second quarter 2022 results on Wednesday, August 3, 2022, beginning at 11:00 a.m. Eastern Time. A live webcast of the conference call will be available on the Events and Multimedia page of the FNF Investor Relations website at fnf.com. The conference call replay will be available via webcast through the FNF Investor Relations website at fnf.com. The telephone replay will be available from 2:00 p.m. Eastern Time on August 3, 2022, through August 10, 2022, by dialing 1-844-512-2921 (USA) or 1-412-317-6671 (International). The access code will be 13730096. An expanded quarterly financial supplement providing F&G segment results is available on the FNF Investor Relations website.
About Fidelity National Financial, Inc.
Fidelity National Financial, Inc. (NYSE: FNF) is a leading provider of title insurance and transaction services to the real estate and mortgage industries. FNF is the nation’s largest title insurance company through its title insurance underwriters - Fidelity National Title, Chicago Title, Commonwealth Land Title, Alamo Title and National Title of New York - that collectively issue more title insurance policies than any other title company in the United States. More information about FNF can be found at fnf.com.
About F&G
F&G is part of the FNF family of companies. F&G is committed to helping Americans turn their aspirations into reality. F&G is a leading provider of insurance solutions serving retail annuity and life customers and institutional clients and is headquartered in Des Moines, Iowa. For more information, please visit fglife.com.
Use of Non-GAAP Financial Information
Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for financial accounting. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions and in the preparation of financial statements. In addition to reporting financial results in accordance with GAAP, this earnings release 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. These non-GAAP measures include adjusted net earnings per share, adjusted pre-tax title earnings, adjusted pre-tax title earnings as a percentage of adjusted title revenue (adjusted pre-tax title margin), adjusted net earnings attributable to common shareholders (adjusted net earnings), net investment spread, assets under management (AUM), average assets under management (AAUM) and sales.
Management believes these non-GAAP financial measures may be useful in certain instances to provide additional meaningful comparisons between current results and results in prior operating periods. Our non-GAAP measures may not be comparable to similarly titled measures of other organizations because other organizations may not calculate such non-GAAP measures in the same manner as we do.
The presentation of this financial information is not intended to be considered in isolation of or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. By disclosing these non-GAAP financial measures, FNF believes it offers investors a greater understanding of, and an enhanced level of transparency into, the means by which the Company’s management operates the Company.
Any non-GAAP measures should be considered in context with the GAAP financial presentation and should not be considered in isolation or as a substitute for GAAP net earnings, net earnings attributable to common shareholders, net earnings per share, or any other measures derived in accordance with GAAP as measures of operating performance or liquidity. Further, FNF's non-GAAP measures may be calculated differently from similarly titled measures of other companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are provided below.
Forward-Looking Statements and Risk Factors
This press release contains forward-looking statements that involve a number of risks and uncertainties. Statements that are not historical facts, including statements regarding our expectations, hopes, intentions or strategies regarding the future are forward-looking statements. Forward-looking statements are based on management's beliefs, as well as assumptions made by, and information currently available to, management. Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The risks and uncertainties which forward-looking statements are subject to include, but are not limited to: the potential impact of the consummation of the F&G transaction on relationships, including with employees, suppliers, customers and competitors; changes in general economic, business, political and COVID-19 conditions, including changes in the financial markets; weakness or adverse changes in the level of real estate activity, which may be caused by, among other things, high or increasing interest rates, a limited supply of mortgage funding or a weak U. S. economy; our potential inability to find suitable acquisition candidates; our dependence on distributions from our title insurance underwriters as a main source of cash flow; significant competition that F&G and our operating subsidiaries face; compliance with extensive government regulation of our operating subsidiaries; and other risks detailed in the “Statement Regarding Forward-Looking Information,” “Risk Factors” and other sections of FNF's Form 10-K and other filings with the Securities and Exchange Commission (SEC).
FNF-E
SOURCE: Fidelity National Financial, Inc.; FGL Holdings
CONTACT:
Lisa Foxworthy-Parker
SVP of Investor & External Relations
Investors@fnf.com
515.330.3307
FIDELITY NATIONAL FINANCIAL, INC.
SECOND QUARTER SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Consolidated | | Title | | F&G | | Corporate and Other |
| Three Months Ended | | | | |
| June 30, 2022 | | | | |
| Direct title premiums | | $ | 859 | | | $ | 859 | | | $ | — | | | $ | — | |
| Agency title premiums | | 1,203 | | | 1,203 | | | — | | | — | |
| Escrow, title related and other fees | | 782 | | | 706 | | | 68 | | | 8 | |
| Total title and escrow | | 2,844 | | | 2,768 | | | 68 | | | 8 | |
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| Interest and investment income | | 463 | | | 35 | | | 425 | | | 3 | |
| Recognized gains and losses, net | | (676) | | | (249) | | | (426) | | | (1) | |
| Total revenue | | 2,631 | | | 2,554 | | | 67 | | | 10 | |
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| Personnel costs | | 839 | | | 821 | | | 34 | | | (16) | |
| Agent commissions | | 930 | | | 930 | | | — | | | — | |
| Other operating expenses | | 457 | | | 409 | | | 31 | | | 17 | |
| Benefits & other policy reserve changes | | (418) | | | — | | | (418) | | | — | |
| Depreciation and amortization | | 161 | | | 34 | | | 121 | | | 6 | |
| Provision for title claim losses | | 93 | | | 93 | | | — | | | — | |
| Interest expense | | 31 | | | — | | | 9 | | | 22 | |
| Total expenses | | 2,093 | | | 2,287 | | | (223) | | | 29 | |
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| Pre-tax earnings (loss) from continuing operations | | $ | 538 | | | $ | 267 | | | $ | 290 | | | $ | (19) | |
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| Income tax expense (benefit) | | 164 | | | 111 | | | 60 | | | (7) | |
| Earnings (loss) from equity investments | | 14 | | | 14 | | | — | | | — | |
| Earnings (loss) from discontinued operations, net of tax | | — | | | — | | | — | | | — | |
| Non-controlling interests | | 6 | | | 6 | | | — | | | — | |
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| Net earnings (loss) attributable to common shareholders | | $ | 382 | | | $ | 164 | | | $ | 230 | | | $ | (12) | |
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| EPS from continuing operations attributable to common shareholders - basic | | $ | 1.37 | | | | | | | |
| EPS from discontinued operations attributable to common shareholders - basic | | — | | | | | | | |
| EPS attributable to common shareholders - basic | | $ | 1.37 | | | | | | | |
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| EPS from continuing operations attributable to common shareholders - diluted | | $ | 1.37 | | | | | | | |
| EPS from discontinued operations attributable to common shareholders - diluted | | — | | | | | | | |
| EPS attributable to common shareholders - diluted | | $ | 1.37 | | | | | | | |
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| Weighted average shares - basic | | 278 | | | | | | | |
| Weighted average shares - diluted | | 279 | | | | | | | |
FIDELITY NATIONAL FINANCIAL, INC.
SECOND QUARTER SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Consolidated | | Title | | F&G | | Corporate and Other |
| Three Months Ended | | | | |
| June 30, 2022 | | | | |
| Net earnings (loss) attributable to common shareholders | | $ | 382 | | | $ | 164 | | | $ | 230 | | | $ | (12) | |
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| Earnings from discontinued operations, net of tax | | — | | | — | | | — | | | — | |
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| Net earnings (loss) from continuing operations attributable to common shareholders | | $ | 382 | | | $ | 164 | | | $ | 230 | | | $ | (12) | |
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| Pre-tax earnings (loss) from continuing operations | | $ | 538 | | | $ | 267 | | | $ | 290 | | | $ | (19) | |
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| Non-GAAP Adjustments | | | | | | | | |
| Recognized (gains) and losses, net | | 271 | | | 249 | | | 21 | | | 1 | |
| Indexed product related derivatives | | (159) | | | — | | | (159) | | | — | |
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| Purchase price amortization | | 21 | | | 13 | | | 5 | | | 3 | |
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| Transaction costs | | (5) | | | — | | | 4 | | | (9) | |
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| Adjusted pre-tax earnings (loss) | | $ | 666 | | | $ | 529 | | | $ | 161 | | | $ | (24) | |
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| Total non-GAAP, pre-tax adjustments | | $ | 128 | | | $ | 262 | | | $ | (129) | | | $ | (5) | |
| Income taxes on non-GAAP adjustments | | (35) | | | (63) | | | 27 | | | 1 | |
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| Deferred tax asset valuation allowance | | 55 | | | 55 | | | — | | | — | |
| Total non-GAAP adjustments | | $ | 148 | | | $ | 254 | | | $ | (102) | | | $ | (4) | |
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| Adjusted net earnings (loss) from continuing operations attributable to common shareholders | | $ | 530 | | | $ | 418 | | | $ | 128 | | | $ | (16) | |
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| Adjusted EPS from continuing operations attributable to common shareholders - diluted | | $ | 1.90 | | | | | | | |
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FIDELITY NATIONAL FINANCIAL, INC.
SECOND QUARTER SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited)
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| | Consolidated | | Title | | F&G | | Corporate and Other |
| Three Months Ended | | | | |
| June 30, 2021 | | | | |
| Direct title premiums | | $ | 904 | | | $ | 904 | | | $ | — | | | $ | — | |
| Agency title premiums | | 1,256 | | | 1,256 | | | — | | | — | |
| Escrow, title related and other fees | | 948 | | | 839 | | | 62 | | | 47 | |
| Total title and escrow | | 3,108 | | | 2,999 | | | 62 | | | 47 | |
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| Interest and investment income | | 514 | | | 27 | | | 487 | | | — | |
| Recognized gains and losses, net | | 232 | | | (30) | | | 253 | | | 9 | |
| Total revenue | | 3,854 | | | 2,996 | | | 802 | | | 56 | |
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| Personnel costs | | 890 | | | 826 | | | 32 | | | 32 | |
| Agent commissions | | 970 | | | 970 | | | — | | | — | |
| Other operating expenses | | 476 | | | 425 | | | 26 | | | 25 | |
| Benefits & other policy reserve changes | | 575 | | | — | | | 575 | | | — | |
| Depreciation and amortization | | 105 | | | 34 | | | 65 | | | 6 | |
| Provision for title claim losses | | 97 | | | 97 | | | — | | | — | |
| Interest expense | | 28 | | | — | | | 7 | | | 21 | |
| Total expenses | | 3,141 | | | 2,352 | | | 705 | | | 84 | |
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| Pre-tax earnings (loss) | | $ | 713 | | | $ | 644 | | | $ | 97 | | | $ | (28) | |
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| Income tax expense (benefit) | | 176 | | | 160 | | | 21 | | | (5) | |
| Earnings from equity investments | | 14 | | | 14 | | | — | | | — | |
| Earnings (loss) from discontinued operations, net of tax | | 6 | | | — | | | 6 | | | — | |
| Non-controlling interests | | 5 | | | 5 | | | — | | | — | |
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| Net earnings (loss) attributable to common shareholders | | $ | 552 | | | $ | 493 | | | $ | 82 | | | $ | (23) | |
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| EPS from continuing operations attributable to common shareholders - basic | | $ | 1.91 | | | | | | | |
| EPS from discontinued operations attributable to common shareholders - basic | | $ | 0.02 | | | | | | | |
| EPS attributable to common shareholders - basic | | $ | 1.93 | | | | | | | |
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| EPS from continuing operations attributable to common shareholders - diluted | | $ | 1.90 | | | | | | | |
| EPS from discontinued operations attributable to common shareholders - diluted | | $ | 0.02 | | | | | | | |
| EPS attributable to common shareholders - diluted | | $ | 1.92 | | | | | | | |
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| Weighted average shares - basic | | 286 | | | | | | | |
| Weighted average shares - diluted | | 288 | | | | | | | |
FIDELITY NATIONAL FINANCIAL, INC.
SECOND QUARTER SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Consolidated | | Title | | F&G | | Corporate and Other |
| Three Months Ended | | | | |
| June 30, 2021 | | | | |
| Net earnings (loss) attributable to common shareholders | | $ | 552 | | | $ | 493 | | | $ | 82 | | | $ | (23) | |
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| Earnings from discontinued operations, net of tax | | $ | 6 | | | $ | — | | | $ | 6 | | | $ | — | |
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| Net earnings (loss) from continuing operations, attributable to common shareholders | | $ | 546 | | | $ | 493 | | | $ | 76 | | | $ | (23) | |
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| Pre-tax earnings (loss) from continuing operations | | 713 | | | 644 | | | 97 | | | (28) | |
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| Non-GAAP Adjustments | | | | | | | | |
| Recognized (gains) and losses, net | | (42) | | | 30 | | | (63) | | | (9) | |
| Indexed product related derivatives | | 75 | | | — | | | 75 | | | — | |
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| Purchase price amortization | | 24 | | | 14 | | | 6 | | 4 | |
| Transaction costs | | 4 | | | — | | | 2 | | 2 | |
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| Adjusted pre-tax earnings (loss) | | $ | 774 | | | $ | 688 | | | $ | 117 | | | $ | (31) | |
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| Total non-GAAP, pre-tax adjustments | | $ | 61 | | | $ | 44 | | | $ | 20 | | | $ | (3) | |
| Income taxes on non-GAAP adjustments | | (13) | | | (10) | | | (4) | | | 1 | |
| Non-controlling interest on non-GAAP adjustments | | (1) | | | — | | | — | | | (1) | |
| Total non-GAAP adjustments | | $ | 47 | | | $ | 34 | | | $ | 16 | | | $ | (3) | |
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| Adjusted net earnings attributable to common shareholders | | $ | 593 | | | $ | 527 | | | $ | 92 | | | $ | (26) | |
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| Adjusted EPS attributable to common shareholders - diluted | | $ | 2.06 | | | | | | | |
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FIDELITY NATIONAL FINANCIAL, INC.
YTD SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | Consolidated | | Title | | F&G | | Corporate and Other |
| Six Months Ended | | | | |
| June 30, 2022 | | | | |
| Direct title premiums | | $ | 1,626 | | | $ | 1,626 | | | $ | — | | | $ | — | |
| Agency title premiums | | 2,302 | | | 2,302 | | | — | | | — | |
| Escrow, title related and other fees | | 2,072 | | | 1,371 | | | 662 | | | 39 | |
| Total title and escrow | | 6,000 | | | 5,299 | | | 662 | | | 39 | |
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| Interest and investment income | | 941 | | | 62 | | | 876 | | | 3 | |
| Recognized gains and losses, net | | (1,145) | | | (424) | | | (723) | | | 2 | |
| Total revenue | | 5,796 | | | 4,937 | | | 815 | | | 44 | |
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| Personnel costs | | 1,662 | | | 1,597 | | | 64 | | | 1 | |
| Agent commissions | | 1,774 | | | 1,774 | | | — | | | — | |
| Other operating expenses | | 899 | | | 806 | | | 49 | | | 44 | |
| Benefits & other policy reserve changes | | (210) | | | — | | | (210) | | | — | |
| Depreciation and amortization | | 343 | | | 67 | | | 264 | | | 12 | |
| Provision for title claim losses | | 177 | | | 177 | | | — | | | — | |
| Interest expense | | 61 | | | — | | | 17 | | | 44 | |
| Total expenses | | 4,706 | | | 4,421 | | | 184 | | | 101 | |
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| Pre-tax earnings (loss) from continuing operations | | $ | 1,090 | | | $ | 516 | | | $ | 631 | | | $ | (57) | |
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| Income tax expense (benefit) | | 319 | | | 168 | | | 165 | | | (14) | |
| Earnings (loss) from equity investments | | 16 | | | 16 | | | — | | | — | |
| Earnings from discontinued operations, net of tax | | — | | | — | | | — | | | — | |
| Non-controlling interests | | 8 | | | 9 | | | — | | | (1) | |
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| Net earnings (loss) attributable to common shareholders | | $ | 779 | | | $ | 355 | | | $ | 466 | | | $ | (42) | |
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| EPS from continuing operations attributable to common shareholders - basic | | $ | 2.79 | | | | | | | |
| EPS from discontinued operations attributable to common shareholders - basic | | — | | | | | | | |
| EPS attributable to common shareholders - basic | | $ | 2.79 | | | | | | | |
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| EPS from continuing operations attributable to common shareholders - diluted | | $ | 2.77 | | | | | | | |
| EPS from discontinued operations attributable to common shareholders - diluted | | — | | | | | | | |
| EPS attributable to common shareholders - diluted | | $ | 2.77 | | | | | | | |
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| Weighted average shares - basic | | 279 | | | | | | | |
| Weighted average shares - diluted | | 281 | | | | | | | |
FIDELITY NATIONAL FINANCIAL, INC.
YTD SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | Consolidated | | Title | | F&G | | Corporate and Other |
| Six Months Ended | | | | |
| June 30, 2022 | | | | |
| Net earnings (loss) attributable to common shareholders | | $ | 779 | | | $ | 355 | | | $ | 466 | | | $ | (42) | |
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| Earnings from discontinued operations, net of tax | | — | | | — | | | — | | | — | |
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| Net earnings (loss) from continuing operations attributable to common shareholders | | $ | 779 | | | $ | 355 | | | $ | 466 | | | $ | (42) | |
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| Pre-tax earnings (loss) from continuing operations | | $ | 1,090 | | | $ | 516 | | | $ | 631 | | | $ | (57) | |
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| Non-GAAP Adjustments | | | | | | | | |
| Recognized (gains) and losses, net | | 410 | | | 424 | | | (12) | | | (2) | |
| Indexed product related derivatives | | (327) | | | — | | | (327) | | | — | |
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| Purchase price amortization | | 44 | | | 26 | | | 11 | | | 7 | |
| Transaction costs | | (3) | | | — | | | 4 | | | (7) | |
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| Adjusted pre-tax earnings (loss) | | $ | 1,214 | | | $ | 966 | | | $ | 307 | | | $ | (59) | |
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| Total non-GAAP, pre-tax adjustments | | $ | 124 | | | $ | 450 | | | $ | (324) | | | $ | (2) | |
| Income taxes on non-GAAP adjustments | | (40) | | | (108) | | | 68 | | | — | |
| Deferred tax asset valuation allowance | | 55 | | | 55 | | | — | | | — | |
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| Total non-GAAP adjustments | | $ | 139 | | | $ | 397 | | | $ | (256) | | | $ | (2) | |
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| Adjusted net earnings (loss) from continuing operations attributable to common shareholders | | $ | 918 | | | $ | 752 | | | $ | 210 | | | $ | (44) | |
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| Adjusted EPS from continuing operations attributable to common shareholders - diluted | | $ | 3.27 | | | | | | | |
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FIDELITY NATIONAL FINANCIAL, INC.
YTD SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | F&G | | |
| Six Months Ended | | Consolidated | | Title | | | Corporate and Other |
| June 30, 2021 | | | | |
| Direct title premiums | | $ | 1,650 | | | $ | 1,650 | | | $ | — | | | $ | — | |
| Agency title premiums | | 2,314 | | | 2,314 | | | — | | | — | |
| Escrow, title related and other fees | | 1,799 | | | 1,584 | | | 126 | | | 89 | |
| Total title and escrow | | 5,763 | | | 5,548 | | | 126 | | | 89 | |
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| Interest and investment income | | 916 | | | 56 | | | 860 | | | — | |
| Recognized gains and losses, net | | 275 | | | (89) | | | 355 | | | 9 | |
| Total revenue | | 6,954 | | | 5,515 | | | 1,341 | | | 98 | |
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| Personnel costs | | 1,702 | | | 1,580 | | | 61 | | | 61 | |
| Agent commissions | | 1,777 | | | 1,777 | | | — | | | — | |
| Other operating expenses | | 934 | | | 830 | | | 54 | | | 50 | |
| Benefits & other policy reserve changes | | 549 | | | — | | | 549 | | | — | |
| Depreciation and amortization | | 288 | | | 67 | | | 209 | | | 12 | |
| Provision for title claim losses | | 178 | | | 178 | | | — | | | — | |
| Interest expense | | 56 | | | — | | | 15 | | | 41 | |
| Total expenses | | 5,484 | | | 4,432 | | | 888 | | | 164 | |
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| Pre-tax earnings (loss) from continuing operations | | $ | 1,470 | | | $ | 1,083 | | | $ | 453 | | | $ | (66) | |
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| Income tax expense (benefit) | | 342 | | | 263 | | | 93 | | | (14) | |
| Earnings from equity investments | | 27 | | | 22 | | | — | | | 5 | |
| Earnings (loss) from discontinued operations, net of tax | | 11 | | | — | | | 11 | | | — | |
| Non-controlling interests | | 9 | | | 9 | | | — | | | — | |
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| Net earnings (loss) attributable to common shareholders | | $ | 1,157 | | | $ | 833 | | | $ | 371 | | | $ | (47) | |
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| EPS from continuing operations attributable to common shareholders - basic | | $ | 3.99 | | | | | | | |
| EPS from discontinued operations attributable to common shareholders - basic | | $ | 0.04 | | | | | | | |
| EPS attributable to common shareholders - basic | | $ | 4.03 | | | | | | | |
| EPS from continuing operations attributable to common shareholders - diluted | | $ | 3.96 | | | | | | | |
| EPS from discontinued operations attributable to common shareholders - diluted | | $ | 0.04 | | | | | | | |
| EPS attributable to common shareholders - diluted | | $ | 4.00 | | | | | | | |
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| Weighted average shares - basic | | 287 | | | | | | | |
| Weighted average shares - diluted | | 289 | | | | | | | |
FIDELITY NATIONAL FINANCIAL, INC.
YTD SEGMENT INFORMATION
(In millions, except order information in thousands)
(Unaudited)
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| | Consolidated | | Title | | F&G | | Corporate and Other |
| Six Months Ended | | | | |
| June 30, 2021 | | | | |
| Net earnings (loss) attributable to common shareholders | | $ | 1,157 | | | $ | 833 | | | $ | 371 | | | $ | (47) | |
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| Earnings from discontinued operations, net of tax | | 11 | | | — | | | 11 | | | — | |
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| Net earnings (loss) from continuing operations attributable to common shareholders | | $ | 1,146 | | | $ | 833 | | | $ | 360 | | | $ | (47) | |
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| Pre-tax earnings (loss) from continuing operations | | 1,470 | | | 1,083 | | | 453 | | | (66) | |
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| Non-GAAP Adjustments | | | | | | | | |
| Recognized (gains) and losses, net | | (65) | | | 89 | | | (145) | | | (9) | |
| Indexed product related derivatives | | (110) | | | — | | | (110) | | | — | |
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| Purchase price amortization | | 49 | | | 28 | | | 13 | | 8 | |
| Transaction costs | | 10 | | | — | | | 4 | | 6 | |
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| Adjusted pre-tax earnings (loss) | | $ | 1,354 | | | $ | 1,200 | | | $ | 215 | | | $ | (61) | |
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| Total non-GAAP, pre-tax adjustments | | $ | (116) | | | $ | 117 | | | $ | (238) | | | $ | 5 | |
| Income taxes on non-GAAP adjustments | | 19 | | | (28) | | | 48 | | | (1) | |
| Non-controlling interest on non-GAAP adjustments | | (1) | | | — | | | — | | | (1) | |
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| Total non-GAAP adjustments | | $ | (98) | | | $ | 89 | | | $ | (190) | | | $ | 3 | |
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| Adjusted net earnings (loss) attributable to common shareholders | | $ | 1,048 | | | $ | 922 | | | $ | 170 | | | $ | (44) | |
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| Adjusted EPS attributable to common shareholders - diluted | | $ | 3.63 | | | | | | | |
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FIDELITY NATIONAL FINANCIAL, INC.
SUMMARY BALANCE SHEET INFORMATION
(In millions) | | | | | | | | | | | | | | | | | | | | |
| | | June 30,
2022 | | December 31,
2021 |
| | | (Unaudited) | | (Unaudited) |
| Cash and investment portfolio | | | $ | 45,399 | | | | $ | 47,135 | |
| Goodwill | | | 4,538 | | | | 4,539 | |
| Title plant | | | 400 | | | | 400 | |
| Total assets | | | 61,230 | | | | 60,690 | |
| Notes payable | | | 3,094 | | | | 3,096 | |
| Reserve for title claim losses | | | 1,843 | | | | 1,883 | |
| Secured trust deposits | | | 1,173 | | | | 934 | |
| Non-controlling interests | | | 43 | | | | 43 | |
| Total equity and non-controlling interests | | | 6,746 | | | | 9,457 | |
| Total equity attributable to common shareholders | | | 6,703 | | | | 9,414 | |
Non-GAAP Measures and Other Information
Title
The table below reconciles pre-tax title earnings to adjusted pre-tax title earnings.
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| Three Months Ended | | | Six Months Ended | | | |
| (Dollars in millions) | June 30, 2022 | June 30, 2021 | | | June 30, 2022 | June 30, 2021 | | | | |
| Pre-tax earnings | $ | 267 | | $ | 644 | | | | $ | 516 | | $ | 1,083 | | | | | |
| Non-GAAP adjustments before taxes | | | | | | | | | | |
| Recognized (gains) and losses, net | 249 | | 30 | | | | 424 | | 89 | | | | | |
| Purchase price amortization | 13 | | 14 | | | | 26 | | 28 | | | | | |
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| Total non-GAAP adjustments | 262 | | 44 | | | | 450 | | 117 | | | | | |
| Adjusted pre-tax earnings | $ | 529 | | $ | 688 | | | | $ | 966 | | $ | 1,200 | | | | | |
| Adjusted pre-tax margin | 18.9 | % | 22.7 | % | | | 18.0 | % | 21.4 | % | | | | |
FIDELITY NATIONAL FINANCIAL, INC.
QUARTERLY OPERATING STATISTICS
(Unaudited)
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| | Q2 2022 | | Q1 2022 | | Q4 2021 | | Q3 2021 | | Q2 2021 | | Q1 2021 | | Q4 2020 | | Q3 2020 |
| Quarterly Opened Orders ('000's except % data) |
| Total opened orders* | | 443 | | | 522 | | | 536 | | | 688 | | | 695 | | | 770 | | | 728 | | | 847 | |
| Total opened orders per day* | | 6.9 | | | 8.6 | | | 8.5 | | | 10.8 | | | 10.9 | | | 12.6 | | | 11.6 | | | 13.2 | |
| Purchase % of opened orders | | 75 | % | | 62 | % | | 53 | % | | 50 | % | | 53 | % | | 42 | % | | 38 | % | | 40 | % |
| Refinance % of opened orders | | 25 | % | | 38 | % | | 47 | % | | 50 | % | | 47 | % | | 58 | % | | 62 | % | | 60 | % |
| Total closed orders* | | 348 | | | 380 | | | 477 | | | 527 | | | 568 | | | 597 | | | 617 | | | 571 | |
| Total closed orders per day* | | 5.4 | | | 6.2 | | | 7.6 | | | 8.2 | | | 8.9 | | | 9.8 | | | 9.8 | | | 8.9 | |
| Purchase % of closed orders | | 71 | % | | 55 | % | | 51 | % | | 50 | % | | 47 | % | | 34 | % | | 38 | % | | 42 | % |
| Refinance % of closed orders | | 29 | % | | 45 | % | | 49 | % | | 50 | % | | 53 | % | | 66 | % | | 62 | % | | 58 | % |
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| Commercial (millions, except orders in '000's) |
| Total commercial revenue | | $ | 436 | | | $ | 374 | | | $ | 546 | | | $ | 366 | | | $ | 347 | | | $ | 257 | | | $ | 322 | | | $ | 216 | |
| Total commercial opened orders | | 64.2 | | | 66.1 | | | 64.5 | | | 66.8 | | | 69.4 | | | 62.2 | | | 57.0 | | | 58.1 | |
| Total commercial closed orders | | 39.7 | | | 37.4 | | | 46.1 | | | 40.1 | | | 42.3 | | | 34.8 | | | 39.5 | | | 30.6 | |
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| National commercial revenue | | $ | 220 | | | $ | 196 | | | $ | 313 | | | $ | 183 | | | $ | 176 | | | $ | 127 | | | $ | 177 | | | $ | 113 | |
| National commercial opened orders | | 26.7 | | | 27.5 | | | 26.0 | | | 27.7 | | | 27.4 | | | 23.4 | | | 21.4 | | | 21.7 | |
| National commercial closed orders | | 15.3 | | | 14.6 | | | 18.1 | | | 14.8 | | | 14.9 | | | 11.2 | | | 13.4 | | | 9.8 | |
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| Total Fee Per File |
| Fee per file | | $ | 3,557 | | | $ | 2,891 | | | $ | 3,023 | | | $ | 2,581 | | | $ | 2,444 | | | $ | 1,944 | | | $ | 2,116 | | | $ | 2,063 | |
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| Residential fee per file | | $ | 2,695 | | | $ | 2,188 | | | $ | 2,158 | | | $ | 2,097 | | | $ | 2,030 | | | $ | 1,644 | | | $ | 1,661 | | | $ | 1,803 | |
| Total commercial fee per file | | $ | 11,000 | | | $ | 10,000 | | | $ | 11,800 | | | $ | 9,100 | | | $ | 8,200 | | | $ | 7,400 | | | $ | 8,200 | | | $ | 7,100 | |
| National commercial fee per file | | $ | 14,400 | | | $ | 13,400 | | | $ | 17,300 | | | $ | 12,400 | | | $ | 11,800 | | | $ | 11,300 | | | $ | 13,200 | | | $ | 11,500 | |
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| Total Staffing |
| Total field operations employees | | 12,700 | | | 13,400 | | | 13,600 | | | 13,700 | | | 13,500 | | | 13,200 | | | 12,800 | | | 12,300 | |
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| Actual title claims paid ($ millions) | | $ | 55 | | | $ | 54 | | | $ | 62 | | | $ | 55 | | | $ | 56 | | | $ | 46 | | | $ | 54 | | | $ | 50 | |
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Title (continued)
FIDELITY NATIONAL FINANCIAL, INC.
MONTHLY TITLE ORDER STATISTICS
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| | | Direct Orders Opened * | | | Direct Orders Closed * |
| Month | | / (% Purchase) | | / (% Purchase) |
| April 2022 | | | 154,000 | 73% | | | 123,000 | 66% |
| May 2022 | | | 148,000 | 75% | | | 114,000 | 72% |
| June 2022 | | | 141,000 | 76% | | | 111,000 | 75% |
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| Second Quarter 2022 | | | 443,000 | 75% | | | 348,000 | 71% |
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| | | Direct Orders Opened * | | | Direct Orders Closed * |
| Month | | / (% Purchase) | | | / (% Purchase) |
| April 2021 | | | 236,000 | 52% | | | 200,000 | 43% |
| May 2021 | | | 223,000 | 52% | | | 176,000 | 48% |
| June 2021 | | | 236,000 | 54% | | | 192,000 | 50% |
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| Second Quarter 2021 | | | 695,000 | 53% | | | 568,000 | 47% |
| * Includes an immaterial number of non-purchase and non-refinance orders |
F&G
The table below reconciles net earnings attributable to common shareholders to adjusted net earnings attributable to common shareholders.
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| Three Months Ended | | | | | | | | | | | | Six Months Ended |
| June 30, 2022 | | June 30, 2021 | | | | | | | | | | | | June 30, 2022 | | June 30, 2021 | |
| (Dollars in millions) | | | | | | | | | | | | | | | | | | |
| Net earnings (loss) attributable to common shareholders | $ | 230 | | | $ | 82 | | | | | | | | | | | | | $ | 466 | | | $ | 371 | | |
| Less: Earnings (loss) from discontinued operations, net of tax | — | | | 6 | | | | | | | | | | | | | | | 11 | | |
| Net earnings (loss) from continuing operations attributable to common shareholders | $ | 230 | | | $ | 76 | | | | | | | | | | | | | $ | 466 | | | $ | 360 | | |
Non-GAAP adjustments(1,2): | | | | | | | | | | | | | | | | | | |
| Recognized (gains) and losses, net | 21 | | | (63) | | | | | | | | | | | | | (12) | | | (145) | | |
| Indexed product related derivatives | (159) | | | 75 | | | | | | | | | | | | | (327) | | | (110) | | |
| Purchase price amortization | 5 | | | 6 | | | | | | | | | | | | | 11 | | | 13 | | |
| Transaction costs | 4 | | | 2 | | | | | | | | | | | | | 4 | | | 4 | | |
| Income taxes on non-GAAP adjustments | 27 | | | (4) | | | | | | | | | | | | | 68 | | | 48 | | |
Adjusted net earnings attributable to common shareholders(1) | $ | 128 | | | $ | 92 | | | | | | | | | | | | | $ | 210 | | | $ | 170 | | |
Adjusted net earnings include $36 million and $20 million of net favorable items in the three and six months ended June 30, 2022, respectively, and $22 million and $34 million of net favorable items in the three and six months ended June 30, 2021, respectively.
The table below provides summary financial highlights.
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| Three Months Ended | | | Six Months Ended |
| (Dollars in millions) | June 30, 2022 | | June 30, 2021 | | | June 30, 2022 | | June 30, 2021 |
Average assets under management (AAUM)(1) | $ | 39,306 | | | $ | 30,423 | | | | $ | 38,351 | | | $ | 29,722 | |
Net investment spread - All products(1) | 2.62 | % | | 2.85 | % | | | 2.70 | % | | 2.65 | % |
| Net earnings (loss) from continuing operations attributable to common shareholders | $ | 230 | | | $ | 76 | | | | $ | 466 | | | $ | 360 | |
Adjusted net earnings attributable to common shareholders(1) | $ | 128 | | | $ | 92 | | | | $ | 210 | | | $ | 170 | |
Adjusted return on assets(1)(3) | 1.10 | % | | 1.14 | % | | | 1.10 | % | | 1.14 | % |
The table below provides a summary of sales highlights.
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| | | | Three Months Ended | | | Six Months Ended | | | | | | | | | | | | |
| (In millions) | | | | June 30, 2022 | | June 30, 2021 | | | June 30, 2022 | | June 30, 2021 | | | | | | | | | | | | | | |
Total annuity sales(1) | | | | $ | 2,201 | | | $ | 1,647 | | | | $ | 3,636 | | | $ | 3,161 | | | | | | | | | | | | | | | |
Indexed universal life sales(1) | | | | $ | 29 | | | $ | 20 | | | | $ | 56 | | | $ | 35 | | | | | | | | | | | |
Institutional sales(1)(4) | | | | $ | 843 | | | $ | 1,000 | | | | $ | 1,970 | | | $ | 1,125 | | | | | | | | | | | | | | | |
Total gross sales(1) | | | | $ | 3,073 | | | $ | 2,667 | | | | $ | 5,662 | | | $ | 4,321 | | | | | | | | | | | | | | | |
Footnotes:
1.Non-GAAP financial measure. See the Non-GAAP Measures section below for additional information.
2.Amounts are net of offsets related to value of business acquired (VOBA), deferred acquisition cost (DAC), deferred sale inducement (DSI) amortization, and unearned revenue (UREV) amortization, as applicable.
3.Adjusted return on assets is calculated on a year to date ("YTD") basis.
4.Institutional sales include funding agreements (FABN/FHLB) and pension risk transfer.
DEFINITIONS
The following represents the definitions of non-GAAP measures used by the Company.
Adjusted Net Earnings Attributable to Common Shareholders (Adjusted Net Earnings)
Adjusted net earnings is a non-GAAP economic measure we use to evaluate financial performance each period. Adjusted net earnings is calculated by adjusting net earnings (loss) from continuing operations attributable to common shareholders to eliminate:
i.Recognized (gains) and losses, net: the impact of net investment gains/losses, including changes in allowance for expected credit losses and other than temporary impairment ("OTTI") losses, recognized in operations; the impact of market volatility on the alternative asset portfolio that differ from management's expectation of returns over the life of these assets; and the effect of changes in fair value of the reinsurance related embedded derivative;
ii.Indexed product related derivatives: the impacts related to changes in the fair value, including both realized and unrealized gains and losses, of index product related derivatives and embedded derivatives, net of hedging cost;
iii.Purchase price amortization: the impacts related to the amortization of certain intangibles (internally developed software, trademarks and value of distribution asset (VODA)) recognized as a result of acquisition activities;
iv.Transaction costs: the impacts related to acquisition, integration and merger related items;
v.Certain income tax adjustments: the impacts related to unusual tax items that do not reflect our core operating performance such as the establishment or reversal of significant deferred tax asset valuation allowances in our Title and Corporate and Other segments; and
vi.Other "non-recurring", "infrequent" or "unusual items": Management excludes certain items determined to be “non-recurring”, “infrequent” or “unusual” from adjusted net earnings when incurred if it is determined these expenses are not a reflection of the core business and when the nature of the item is such that it is not reasonably likely to recur within two years and/or there was not a similar item in the preceding two years.
Adjustments to adjusted net earnings are net of the corresponding impact on amortization of intangibles, as appropriate. The income tax impact related to these adjustments is measured using an effective tax rate, as appropriate by tax jurisdiction. While these adjustments are an integral part of the overall performance of F&G, market conditions and/or the non-operating nature of these items can overshadow the underlying performance of the core business. Accordingly, management considers this to be a useful measure internally and to investors and analysts in analyzing the trends of our operations. Adjusted net earnings should not be used as a substitute for net earnings (loss). However, we believe the adjustments made to net earnings (loss) in order to derive adjusted net earnings provide an understanding of our overall results of operations.
Net Investment Spread
Net investment spread is the excess of net investment income, adjusted for market volatility on the alternative asset investment portfolio, earned over the sum of interest credited to policyholders and the cost of hedging our risk on indexed product policies. Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the performance of the Company’s invested assets against the level of investment return provided to policyholders, inclusive of hedging costs.
Assets Under Management (AUM)
AUM is calculated as the sum of:
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 beginning of the period and the end of each month in the period, divided by the total number of months in the period plus one.
Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the rate of return on assets available for reinvestment.
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.
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.
Adjusted Return on Assets
Adjusted Return on Assets is calculated by dividing annualized adjusted net earnings by year-to-date AAUM. Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing financial performance and profitability earned on AAUM.
Sales
Annuity, IUL, funding agreement and non-life contingent PRT sales are not derived from any specific GAAP income statement accounts or line items and should not be viewed as a substitute for any financial measure determined in accordance with GAAP. Sales from these products are recorded as deposit liabilities (i.e. contractholder funds) within the Company's consolidated financial statements in accordance with GAAP. Life contingent PRT sales are recorded as premiums in revenues within the consolidated financial statements. Management believes that presentation of sales, as measured for management purposes, enhances the understanding of our business and helps depict longer term trends that may not be apparent in the results of operations due to the timing of sales and revenue recognition.
