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Item 1A. Risk Factors

2022-02-25 compared with 2021-03-01 · 180 added, 211 removed, 199 unchanged (66% of the section changed)

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Any of the risks described herein could result in a significant or material adverse effe ct on our results of operations or financial condition.

Risk Factors Related to COVID-19, Climate Change and Other Catastrophic Events

Our business could be materially and adversely affected by the occurrence of a catastrophe, including natural or man-made disasters.

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:

• the outbreak of a pandemic disease, like the novel coronavirus COVID-19, 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;

• the occurrence of any pandemic disease, natural disaster, terrorist attack or any other catastrophic event that results in our workforce being unable to be physically located at one of our facilities could result in lengthy interruptions in our service;

• we could experience long-term interruptions in our service and 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.

Additionally, unanticipated problems with our disaster recovery systems could further impede our ability to conduct business, particularly if those problems affect our computer-based data processing, transmission, storage and retrieval systems and destroy valuable data;

• we manage our financial exposure for losses in our title insurance business and in our F&G business with third-party reinsurance.

Catastrophic events could adversely affect the cost and availability of that reinsurance;

• the value of our investment portfolio may decrease if the securities in which we invest are negatively impacted by climate change, pandemic diseases, severe weather conditions and other catastrophic events.

For example, in the second and third quarters of 2020 we experienced decreases in commercial volumes and commercial fee-per-file as a result of the outbreak of COVID-19.

We also experienced a decrease in the number of opened residential purchase orders and increased volatility in our investment portfolio early in the pandemic.

Risk Factors Related to Our Acquisition of F&G

Although we expect our acquisition of F&G will result in cost savings and other benefits to us, we may not realize those benefits because of integration difficulties and other challenges.

The success of our acquisition of F&G will depend in large part on the success of the management of the combined company in integrating the operations, strategies, technologies and personnel of the two companies following the completion of the merger.

We may fail to realize some or all of the anticipated benefits of the merger if the integration process takes longer than expected or is more costly than expected.

Our failure to meet the challenges involved in successfully integrating the operations of F&G or to otherwise realize any of the anticipated benefits of the merger, including additional cost savings could impair our operations.

In addition, we anticipate that the overall integration of F&G will be a time-consuming and expensive process that, without proper planning and effective and timely implementation, could significantly disrupt our business.

Potential difficulties we may encounter in the integration process include the following:

• the integration of management teams, strategies, technologies and operations;

• the disruption of ongoing businesses and distraction of their respective management teams from ongoing business concerns;

• the retention of and possible decrease in business from the existing clients of both companies;

• the creation of uniform standards, controls, procedures, policies and information systems;

• the reduction of the costs associated with each company's operations;

• the optimization of information technology platforms and administrative infrastructures;

• the integration of corporate cultures and maintenance of employee morale;

• the retention of key employees;

• the possibility of faulty assumptions underlying expectations regarding the integration process;

• potential unknown liabilities, expenses or delays associated with the mergers.

The anticipated cost savings and other benefits assume a successful integration and are based on projections, which are inherently uncertain, and other assumptions.

Even if integration is successful, anticipated cost savings and other benefits may not be achieved.

The market price of our common stock may decline in the future as a result of the acquisition of F&G.

The market price of our common stock may decline in the future as a result of the merger for a number of reasons, including:

• the unsuccessful integration of F&G (including for the reasons set forth in the preceding risk factor);

• the failure to achieve the perceived benefits of the merger, including financial results, synergies, cost savings, innovation and operational efficiencies, as rapidly as or to the extent anticipated by financial or industry analysts.

Additionally, general fluctuations in stock markets could have a material adverse effect on the market for, or liquidity of, the FNF common stock, regardless of the actual operating performance of FNF and F&G.

The acquisition of F&G may not be accretive and may cause dilution to our earnings per share, which may negatively affect the market price of our common stock.

We currently anticipate that the acquisition of F&G will be accretive to earnings per share (on an adjusted net earnings basis) during the first full calendar year after the merger.

See "Non-GAAP Financial Measures" for further discussion of F&G earnings.

This expectation is based on preliminary estimates which may materially change.

We could also encounter additional transaction-related costs or other factors such as the failure to realize all of the benefits anticipated in the merger.

All of these factors could cause dilution to our earnings per share or decrease or delay the expected accretive effect of the merger and cause a decrease in the market price of our common stock.

Our future results will suffer if the combined company does not effectively manage its expanded operations following the acquisition of F&G.

The size of the business of the combined company has increased significantly.

Our future success depends, in part, upon our ability to manage this expanded business, which may pose substantial challenges for management, including challenges related to the management and monitoring of new operations, including new international operations, and associated increased costs and complexity.

There can be no assurances that we will be successful or that we will realize the expected operating efficiencies, cost savings, revenue enhancements and other benefits currently anticipated from the merger.

We have substantial indebtedness following the acquisition of F&G and our credit ratings or the credit ratings of our subsidiaries may be different from what we currently expect.

We incurred indebtedness in order to provide funds to pay a portion of the cash portion of the merger consideration and other costs and expenses incurred in connection with the merger.

As a result, following completion of the merger, we have substantial indebtedness and our credit ratings or the credit ratings of our subsidiaries may be different from what we currently expect.

This substantial indebtedness may adversely affect our business, financial condition and operating results, including:

• making it more difficult to satisfy our debt service obligations;

• requiring a substantial portion of cash flows from operations for debt service payments, thereby reducing the availability of cash flow to fund working capital, capital expenditures, acquisitions, and other general corporate purposes;

• limiting our ability to obtain additional financing to fund our working capital requirements, capital expenditures, acquisitions, investments, debt service obligations and other general operating requirements;

• limiting our flexibility in planning for, or reacting to, changes in business and, consequently, negatively affecting our competitive position;

• restricting us from making strategic acquisitions or taking advantage of favorable business opportunities;

• negatively impacting our existing credit ratings, including resulting in a downgrade or negative outlook;

• placing us at a relative competitive disadvantage compared our competitors that have less debt;

• limiting flexibility to plan for, or react to, changes in the businesses and industries in which we operate, which may adversely affect our operating results and ability to meet our debt service obligations;

• increasing our vulnerability to adverse general economic and industry conditions;

• limiting our ability to refinance its indebtedness or increasing the cost of such indebtedness.

In addition, covenants in the debt instruments governing this indebtedness may limit how we conduct our business following the merger.

If we incur additional indebtedness in the future, the risks related to our substantial indebtedness may intensify.

Lawsuits relating to the F&G acquisition could be filed against us and could adversely impact our business, financial condition and operating results.

Litigation is common in connection with acquisitions of public companies, regardless of any merits related to the claims.

The outcome of the lawsuits that could be filed against us related to the F&G acquisition are uncertain, and we may not be successful in defending against these claims.

While we will defend against these lawsuits, the costs of the defense and other effects of litigation could have an adverse effect on our business, financial condition and operating results.

Risk Factors Relating to the Geographic Concentrations of our Businesses

Because we are dependent upon California and Texas for approximately 15.2% and 12.3% and of our title insurance premiums, respectively, our business may be adversely affected by regulatory conditions in California and/or Texas.

Risk Factors Relating to Our Business

We have recorded goodwill as a result of prior acquisitions, and an economic downturn could cause these balances to become impaired, requiring write-downs that would reduce our operating income.

Goodwill aggregated approximatel y $4,539 million, or 7.5% of our total assets, as of December 31, 2021.

Current accounting rules require that goodwill be assessed for impairment at least annually or whenever changes in circumstances indicate that the carrying amount may not be recoverable from estimated future cash flows.

Factors that may be considered a change in circumstance indicating the carrying value of our intangible assets, including goodwill, may not be recoverable include, but are not limited to, significant underperformance relative to historical or projected future operating results, a significant decline in our stock price and market capitalization, and negative industry or economic trends.

For the years ended December 31, 2021, 2020 and 2019, no goodwill impairment charge was recorded.

However, if there is an economic downturn 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.

We will continue to monitor our market capitalization and the impact of the economy to determine if there is an impairment of goodwill in future periods.

Our substantial indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from meeting our obligations under our indebtedness.

As of December 31, 2021, our outstanding debt was $3,096 million.

Our high degree of leverage could have important consequences, including the following:

(i) a substantial portion of our cash flow from operations is dedicated to the payment of principal and interest on indebtedness, thereby reducing the funds available for operations, future business opportunities and capital expenditures;

(ii) our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate purposes in the future may be limited;

(iii) we may be unable to adjust rapidly to changing market conditions;

(iv) the debt service requirements of our other indebtedness could make it more difficult for us to satisfy our financial obligations;

and (v) we may be vulnerable in a downturn in general economic conditions or in our business and we may be unable to carry out activities that are important to our growth.

Our ability to make scheduled payments of the principal of, or to pay interest on, or to refinance indebtedness depends on and is subject to our financial and operating performance, which in turn is affected by general and regional economic, financial, competitive, business and other factors beyond our control.

If we are unable to generate sufficient cash flow to service our debt or to fund our other liquidity needs, we will need to restructure or refinance all or a portion of our debt, which could cause us to default on our obligations and impair our liquidity.

Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more stringent covenants that could further restrict our business operations.

We from time to time may increase the amount of our indebtedness, modify the terms of our financing arrangements, issue dividends, make capital expenditures and take other actions that may substantially increase our leverage.

The pattern of amortizing our DAC, DSI, and VOBA balances relies on assumptions and estimates made by management.

Changes in these assumptions and estimates could impact our results of operations and financial condition.

Amortization of our deferred acquisition costs ("DAC"), deferred sales inducements ("DSI") and value of business acquired ("VOBA") balances depends on the actual and expected profits generated by the respective lines of business that incurred the expenses.

Expected profits are dependent on assumptions regarding a number of factors including investment returns, benefit payments, expenses, mortality, and policy lapse.

Due to the uncertainty associated with establishing these assumptions, we cannot, with precision, determine the exact pattern of profit emergence.

As a result, amortization of these balances will vary from period to period.

Any difference in actual experience versus expected results could require us to, among other things, accelerate the amortization of DAC, DSI and VOBA that would reduce profitability for such lines of business in the current period.

For additional informati on, see Item 7 of Part II of this Annual Report, under Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates.

We may face losses if our actual experience differs significantly from our reserving assumptions.

Our profitability depends significantly upon the extent to which our actual experience is consistent with the assumptions used in setting rates for our products and establishing liabilities for future life insurance, annuity, and PRT policy benefits and

However, due to the nature of the underlying risks and the high degree of uncertainty associated with the determination of the liabilities for unpaid policy benefits and claims, we cannot determine precisely the amounts we will ultimately pay to settle these liabilities.

As a result, we may experience volatility in our profitability and our reserves from period to period.

To the extent that actual experience is less favorable than our underlying assumptions, we could be required to increase our liabilities, which may reduce our profitability and impact our financial strength.

We have minimal experience to date on policyholder behavior for our GMWB products that we began issuing in 2008.

If emerging experience deviates from our assumptions on GMWB utilization, it could have a significant effect on our reserve levels and related results of operations.

Based on experience on GMWB utilization, which continues to emerge, we updated our GMWB utilization assumption during 2019, with a favorable impact on reserves.

We will continue to monitor the GMWB utilization assumption and update our best estimate as applicable.

See Item 7 of Part II of this Annual Report, under.

Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates.

Our management has historically sought to grow through acquisitions, both in our current lines of business as well as in lines of business outside of our traditional areas of focus or geographic areas.

This expansion of our business subjects us to associated risks, such as risks and uncertainties associated with new companies, the diversion of management’s attention and lack of experience in operating unrelated businesses, and may affect our credit and ability to repay our debt.

Our management has historically sought to grow through acquisitions, both in our current lines of business, as well as lines of business that are not directly tied to or synergistic with our current operations.

Accordingly, we have in the past acquired, and may in the future acquire, businesses in industries or geographic areas with which management is less familiar than we are with our current businesses.

These activities involve risks that could adversely affect our operating results, due to uncertainties involved with new companies, diversion of management’s attention and lack of substantial experience in operating such businesses.

There can be no guarantee that we will not enter into transactions or make acquisitions that will cause us to incur additional debt, increase our exposure to market and other risks and cause our credit or financial strength ratings to decline.

We are a holding company and depend on distributions from our subsidiaries for cash.

We are a holding company whose primary assets are the securities of our operating subsidiaries.

Our ability to pay interest on our outstanding debt and our other obligations and to pay dividends is dependent on the ability of our subsidiaries to pay dividends or make other distributions or payments to us.

If our operating subsidiaries are not able to pay dividends to us, we may not be able to meet our obligations or pay dividends on our common stock.

Our title insurance subsidiaries must comply with state laws, which require them to maintain minimum amounts of working capital, surplus and reserves, and place restrictions on the amount of dividends that they can distribute to us.

Compliance with these laws will limit the amounts our regulated subsidiaries can dividend to us.

During 2022 , our title insurers may pay dividends or make distributions to us of approximatel y $831 million;

however, insurance regulators have the authority to prohibit the payment of ordinary dividends or other payments by our title insurers to us if they determine that such payment could be adverse to our policyholders.

Our F&G subsidiaries are also subject to state laws with respect to the payment of dividends.

The Iowa insurance law and the New York insurance law regulate the amount of dividends that may be paid in any year by FGL Insurance and FGL NY Insurance, respectively.

Compliance with these state regulations will limit the amounts that FGL Insurance and FGL NY Insurance may dividend to us.

Any dividends in excess of a threshold amount are subject to advance state notice or approval.

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.

Further, depending on business and regulatory conditions, we may in the future need to retain cash in our underwriters or even contribute cash to one or more of them in order to maintain their ratings or their statutory capital position.

Such a requirement could be the result of investment losses, reserve charges, adverse operating conditions in the current economic environment or changes in interpretation of statutory accounting requirements by regulators.

Our business could be interrupted or compromised if we experience difficulties arising from outsourcing relationships.

If we do not maintain an effective outsourcing strategy or third-party providers do not perform as contracted, we may experience operational difficulties, increased costs and a loss of business that could have a material adverse effect on our results of operations.

If there is a delay in our third-party providers’ introduction of our new products or if our third-party providers are unable to service our customers appropriately, we may experience a loss of business that could have a material adverse effect on our results of operations.

In addition, our reliance on third-party service providers that we do not control does not relieve us of our responsibilities and requirements.

Any failure or negligence by such third-party service providers in carrying out their

contractual duties may result in us becoming subjected to liability to parties who are harmed and ensuing litigation.

Any litigation relating to such matters could be costly, expensive and time-consuming, and the outcome of any such litigation may be uncertain.

Moreover, any adverse publicity arising from such litigation, even if the litigation is not successful, could adversely affect our reputation and sales of our products.

See section titled "Outsourcing” in Item 1.

Business for functions we outsource to third-party service providers.

If we are unable to attract and retain national marketing organizations and independent agents, sales of our products may be reduced.

Within our F&G operating segment, 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.

Such marketers and agents may promote products offered by other life insurance companies that offer a larger variety of products than we do.

If we are unable to attract and retain a sufficient number of marketers and agents to sell our products, our ability to compete and our revenues would suffer.

Failure of our enterprise-wide risk management processes could result in unexpected monetary losses, damage to our reputation, additional costs or impairment of our ability to conduct business effectively.

As a large insurance entity and a publicly traded company, we have always had risk management functions, policies and procedures throughout our operations and management.

These functions include but are not limited to departments dedicated to enterprise risk management and information technology risk management, information security, business continuity, lender strategy and development, and vendor risk management.

These policies and procedures have evolved over the years as we continually reassess our processes both internally and to comply with changes in the regulatory environment.

Due to limitations inherent in any internal process, if our risk management processes prove unsuccessful at identifying and responding to risks, we could incur unexpected monetary losses, damage to our reputation, additional costs or impairment of our ability to conduct business effectively.

If we experience changes in the rate or severity of title insurance claims, it may be necessary for us to record additional charges to our claim loss reserve.

This may result in lower net earnings and the potential for earnings volatility.

By their nature, claims are often complex, vary greatly in dollar amounts and are affected by economic and market conditions and the legal environment existing at the time of settlement of the claims.

Estimating future title loss payments is difficult because of the complex nature of title claims, the long periods of time over which claims are paid, significantly varying dollar amounts of individual claims and other factors.

From time to time, we experience large losses or an overall worsening of our loss payment experience in regard to the frequency or severity of claims that require us to record additional charges to our claims loss reserve.

There are currently pending several large claims, which we believe can be defended successfully without material loss payments.

However, if unanticipated material payments are required to settle these claims, it could result in or contribute to additional charges to our claim loss reserves.

These loss events are unpredictable and adversely affect our earnings.

At each quarter end, our recorded reserve for claim losses is initially the result of taking the prior recorded reserve for claim losses, adding the current provision to that balance and subtracting actual paid claims from that balance, resulting in an amount that management then compares to our actuary's central estimate provided in the actuarial calculation.

Due to the uncertainty and judgment used by both management and our actuary, our ultimate liability may be greater or less than our current reserves and/or our actuary’s calculation.

If the recorded amount is within a reasonable range of the actuary’s central estimate, but not at the central estimate, management assesses other factors in order to determine our best estimate.

These factors, which are both qualitative and quantitative, can change from period to period and include items such as current trends in the real estate industry (which management can assess, but for which there is a time lag in the development of the data used by our actuary), any adjustments from the actuarial estimates needed for the effects of unusually large or small claims, improvements in our claims management processes, and other cost saving measures.

Depending upon our assessment of these factors, we may or may not adjust the recorded reserve.

If the recorded amount is not within a reasonable range of the actuary’s central estimate, we would record a charge or credit and reassess the provision rate on a go forward basis.

If the rating agencies downgrade our insurance companies, our results of operations and competitive position in the title insurance industry may suffer.

Ratings have always been an important factor in establishing the competitive position of insurance companies.

Our title insurance subsidiaries are rated by S&P, Moody’s, and Demotech.

Our F&G insurance subsidiaries are rated by A.M.

Best, Fitch, Moody's, and S&P.

Ratings reflect the opinion of a rating agency with regard to an insurance company’s or insurance holding company’s financial strength, operating performance and ability to meet its obligations to policyholders and are not evaluations directed to investors.

Our ratings are subject to continued periodic review by rating agencies and the continued

retention of those ratings cannot be assured.

If our ratings are reduced from their current levels by those entities, our results of operations could be adversely affected.

If our claim loss prevention procedures fail, we could incur significant claim losses.

In the ordinary course of our title insurance business, we assume risks related to insuring clear title to residential and commercial properties.

We have established procedures to mitigate the risk of loss from title claims, including extensive underwriting and risk assessment procedures.

We also mitigate the risk of large claim losses by reinsuring risks with other insurers under excess of loss and case-by-case (“facultative”) reinsurance agreements.

Reinsurance agreements generally provide that the reinsurer is liable for loss and loss adjustment expense payments exceeding the amount retained by the ceding company.

However, the ceding company remains primarily liable to the insured whether or not the reinsurer is able to meet its contractual obligations.

If inherent limitations cause our claim loss risk mitigation procedures to fail, we could incur substantial losses having an adverse effect on our results of operations or financial condition.

Our use of independent agents for a significant amount of our title insurance policies could adversely impact the frequency and severity of title claims.

In our agency operations, an independent agent performs the search and examination function or the agent may purchase a search product from us.

In either case, the agent is responsible for ensuring that the search and examination is completed.

The agent thus retains the majority of the title premium collected, with the balance remitted to the title underwriter for bearing the risk of loss in the event that a claim is made under the title insurance policy.

Our relationship with each agent is governed by an agency agreement defining how the agent issues a title insurance policy on our behalf.

The agency agreement also sets forth the agent’s liability to us for policy losses attributable to the agent’s errors.

For each agent with whom we enter into an agency agreement, financial and loss experience records are maintained.

Periodic audits of our agents are also conducted and the number of agents with whom we transact business is strategically managed in an effort to reduce future expenses and manage risks.

Despite efforts to monitor the independent agents with which we transact business, there is no guarantee that an agent will comply with their contractual obligations to us.

Furthermore, we cannot be certain that, due to changes in the regulatory environment and litigation trends, we will not be held liable for errors and omissions by agents.

Accordingly, our use of independent agents could adversely impact the frequency and severity of title claims.

Risk Factors Relating to the Geographic Concentrations of our Business Segments

Because we are dependent upon California and Texas for approximately 14.6% and 13.0% and of our title insurance premiums, respectively, our Title segment may be adversely affected by regulatory conditions in California and/or Texas.

Californi a and Texas are the two largest sources of revenue for our Title segment.

In 2021, California-based premiums accounted for approximately 30.0% of premiums earned by our direct operations and 1.0% of our agency premium revenues, while Texas-based premiums accounted for 17.4% of premiums earned by our direct operations and 9.2% of o ur agency premium revenues.

In the aggregate, California and Texas accounted for approximately 15.2% and 12.3%, respectively, of our total title insurance premiums for 2020.

In the aggregate, California and Texas accounted for approximat ely 14.6% and 13.0%, respe ctively, of our total title insurance premiums for 2021.

A significant part of our revenues and profitability are therefore subject to our operations in California and Texas and to the prevailing regulatory conditions in these states.

Adverse regulatory developments in California and Texas, which could include reductions in the maximum rates permitted to be charged, inadequate rate increases or more fundamental changes in the design or implementation of the California and Texas title insurance regulatory framework, could have a material adverse effect on our results of operations and financial condition.

Concentration in certain states for the distribution of our life insurance and annuity products may subject us to losses attributable to economic downturns or catastrophes in those states.

Our top five states for the distribution of our life insurance and annuity products are California, Texas, Florida, New Jersey and Arizona.

Any adverse economic developments or catastrophes in these states could have an adverse impact on our business.

Concentration in certain states for the distribution of our life insurance and annuity products in our F&G segment may subject us to losses attributable to economic downturns or catastrophes in those states.

Our top five states for the distribution of our life insurance and annuity products in our F&G segment are California, Florida, Texas, New Jersey and Ohio.

Any adverse economic developments or catastrophes in these states could have an adverse impact on our F&G segment.

Risk Factors Relating to Government Regulation of the Insurance Industry

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In addition, federal and state statutes establish specific guidelines and procedures that debt collectors must follow when collecting consumer accounts.

LoanCare’s failure to

comply with any of these laws, should the states take an opposing interpretation, could have an adverse effect on LoanCare in the event and to the extent that they apply to some or all of its servicing activities.

LoanCare’s failure to comply with any of these laws, should the states take an opposing interpretation, could have an adverse effect on LoanCare in the event and to the extent that they apply to some or all of its servicing activities.

State regulation of the rates we charge for title insurance could adversely affect our results of operations.

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We are also subject to the risk that compliance with any particular regulator’s interpretation of a legal or accounting issue may not result in compliance with another regulator’s interpretation of the same issue, particularly when compliance is judged in hindsight.

Regulators and other authorities have the power to bring administrative or judicial proceedings against us, which could result in, among other things, suspension or revocation of our licenses, cease and desist orders, fines, civil penalties, criminal penalties or other disciplinary action, which could materially harm our results of operations and financial condition.

Regulators and other authorities have the power to bring administrative or judicial

proceedings against us, which could result in, among other things, suspension or revocation of our licenses, cease and desist orders, fines, civil penalties, criminal penalties or other disciplinary action, which could materially harm our results of operations and financial condition.

We cannot predict what form any future changes in these or other areas of regulation affecting the insurance industry might take or what effect, if any, such proposals might have on us if enacted into law.

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Statutes, regulations and interpretations may be applied with retroactive impact, particularly in areas such as accounting and reserve requirements.

The NAIC continues

to work to reform state regulation in various areas, including comprehensive reforms relating to cyber security regulations, best interest standards, RBC and life insurance reserves.

On June 10, 2016, the NAIC formally approved principle-based reserving for life insurance products with secondary guarantees, with an effective date of January 1, 2017.

Effective October 2019, we began replacing our life insurance product portfolio to comply with the new 2017 CSO mortality requirement as well as the principle-based reserve (PBR) requirement.

As of January 1, 2020 all life insurance policies sold by F&G are PBR compliant.

The NAIC continues to work to reform state regulation in various areas, including comprehensive reforms relating to cyber security regulations, best interest standards, RBC and life insurance reserves.

Our insurance subsidiaries are subject to minimum capitalization requirements based on RBC formulas for life insurance companies that establish capital requirements relating to insurance, business, asset, interest rate and certain other risks.

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“Fiduciary” Rule Proposals

Although the DOL fiduciary rule has been vacated in total, similar rules proposed by state officials or the SEC may have an adverse effect on sales of annuity products to IRA owners particularly in the independent agent distribution channel.

Compliance with such rules may require additional supervision of agents, cause changes to compensation practices and product offerings, and increase litigation risk, all of which could have adverse impact our business, results of operations and/or financial condition.

Management will continue to monitor for potential action by state officials or the SEC to implement rules similar to the vacated DOL rule.

The DOL investment advice rule leaves in place PTE 84-24 which is a longstanding class exemption providing prohibited transaction relief for insurance agents selling annuity products provided certain disclosures are made to the plan fiduciary, which is the policyholder in the case of an IRA, and certain other conditions are met.

Among other things, these disclosures include the agent’s relationship to the insurer and commissions received in connection with the annuity sale.

F&G, along with FGL NY Insurance, designed and launched a compliance program in January 2022 requiring all agents selling IRA products to submit an acknowledgment with each IRA application indicating the agent has satisfied PTE 84-24 requirements on a precautionary basis in case the agent acted or is found to have acted as a fiduciary.

Meanwhile the DOL has publicly announced its intention to consider future rulemaking that would revoke or modify PTE 84-24.

Management believes these current and emerging developments relating to market conduct standards for the financial services industry may over time materially affect the way in which our agents do business, the role of IMOs, sale of IRA products including IRA-to-IRA and employer plan rollovers, how the company supervises its distribution force, compensation practices, and liability exposure and costs.

In addition to implementing the compliance procedures described above, management is monitoring further developments closely and will be working with IMOs and distributors to adapt to these evolving regulatory requirements and risks.

Bermuda and Cayman Islands Regulation

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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.

In particular, our reinsurance subsidiaries, F&G Life Re and F&G Re, are registered in Bermuda under the Bermuda Insurance Act and subject to the rules and regulations promulgated thereunder.

Our reinsurance subsidiary, F&G Life Re, is registered in Bermuda under the Bermuda Insurance Act and subject to the rules and regulations promulgated thereunder.

The BMA has sought regulatory equivalency, which enables Bermuda’s commercial insurers to transact business with the EU on a “level playing field.” In connection with its initial efforts to achieve equivalency under the European Union’s Directive (2009/138/EC) (“Solvency II”), the BMA implemented and imposed additional requirements on the companies it regulates.

The European Commission (the “EC”) granted Bermuda’s commercial insurers full equivalence in all areas of Solvency II for an indefinite period of time effective March 24, 2016, and applies from January 1, 2016.

The European Commission in 2016 granted Bermuda’s commercial insurers full equivalence in all areas of Solvency II for an indefinite period of time.

Our reinsurance subsidiary, F&G Cayman Re, is licensed in the Cayman Islands by the CIMA and is subject to supervision by CIMA and CIMA may at any time direct F&G Cayman Re, in relation to a policy, a line of business or the entire business, to cease or refrain from committing an act or pursing a course of conduct and to perform such acts as in the opinion of CIMA are necessary to remedy or ameliorate the situation.

Regulatory investigations of the insurance industry may lead to fines, settlements, new regulation or legal uncertainty, which could negatively affect our results of operations.

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We also utilize funds withheld reinsurance counterparty risk.

Under funds withheld arrangements, F&G retains possession and legal title to asset backing ceded liabilities.

Under funds withheld arrangements, F&G retains possession and legal title to assets backing ceded liabilities.

Our F&G insurance subsidiaries are also exposed to credit loss in the event of non-performance by our counterparties on call options.

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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 earnings (loss).

The rate of amortization of deferred acquisition costs ("DAC"), deferred sales inducements ("DSI") and value of business acquired ("VOBA") relating to FIA products could also increase if equity market performance is worse than assumed and have a materially adverse impact on our results of operations and financial condition.

The rate of amortization of DAC, DSI, and VOBA relating to FIA products could also increase if equity market performance is worse than assumed and have a materially adverse impact on our results of operations and financial condition.

Our investments are subject to market and credit risks.

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Additionally, market price valuations may not accurately reflect the underlying expected cash flows of securities within our investment portfolio.

Finally, market volatility could cause investment income fluctuations in regards to our alternative investments that may differ significantly from period to period.

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.

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Declines in the level of real estate activity or the average price of real estate sales are likely to adversely affect our title insurance revenues.

The Mortgage Bankers Association's ("MBA") Mortgage Finance Forecast as of February 19, 2021 calculates an approximately $3.7 trillion mortgage origination market for 2020, which would be an increase from 2019 resulting primarily from increased refinance activity.

However, the MBA predicts overall mortgage originations in 2020 and 2021 will decrease slightly when compared to 2019.

Our revenues in future periods will continue to be subject to these and other factors that are beyond our control and, as a result, are likely to fluctuate.

The Mortgage Bankers Association's ("MBA") Mortgage Finance Forecast as of January 21, 2022 calculates an approximately $4.0 trillion mortgage origination market for 2021, which would be an decrease from 2020 resulting primarily from decreased refinance activity.

The MBA predicts overall mortgage originations in 2022 and 2023 will also decrease when compared to 2021 as a result of decreases in refinance activity.

Ou r revenues in future periods will continue to be subject to these and other factors that are beyond our control and, as a result, are likely to fluctuate.

See discussion under 'Business Trends and Conditions' within Management's Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 of Part II of this Annual Report for further discussion of current market trends.

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Lower interest rates may also result in decreased sales of certain insurance products, negatively impacting our profitability from new business.

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, which are expected in 2022, 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.

We may be required to accept lower spread income (the difference between the returns we earn on our investments and the amounts we credit to contractholders) thus reducing our profitability, as returns on our portfolio of invested assets may not increase as quickly as current interest rates.

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We may experience spread income compression, and a loss of anticipated earnings, if credited interest rates are increased on renewing contracts in an effort to decrease or manage withdrawal activity.

Our expectation for future spread income is an important component in amortization of DAC, deferred sales inducements ("DSI"), and VOBA under U.S.

Our expectation for future spread income is an important component in amortization of DAC, DSI, and VOBA under U.S.

Significant reductions in spread income may cause us to accelerate DAC, DSI, and VOBA amortization.

In addition, certain statutory capital and reserve requirements are based on formulas or models that consider interest rates and a prolonged period of low

interest rates may increase the statutory capital we are required to hold as well as the amount of assets we must maintain to support statutory reserves.

In addition, certain statutory capital and reserve requirements are based on formulas or models that consider interest rates and a prolonged period of low interest rates may increase the statutory capital we are required to hold as well as the amount of assets we must maintain to support statutory reserves.

The Setting Every Community Up for Retirement Enhancement Act of 2019 may impact our business and the markets in which we compete.

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116-94 (the “SECURE Act”), was signed into law on December 20, 2019 as part of the Further Consolidated Appropriations Act and went into effect in certain respects as early as January 1, 2020.

The SECURE Act contains provisions that may impact our F&G insurance subsidiaries, including:

elimination of the “stretch IRA” (funds from inherited IRAs must now be fully withdrawn by beneficiaries within 10 years of the account owner’s death and, as a result, IRAs may be less desirable to our customers, and our administrative system for handling distributions from IRAs invested in our annuity products may need to be updated to reflect the shortened distribution period for IRA beneficiaries);

The SECURE Act contains provisions that may impact our F&G insurance subsidiaries, including elimination of the “stretch IRA” (funds from inherited IRAs must now be fully withdrawn by beneficiaries within 10 years of the account owner’s death and, as a result, IRAs may be less desirable to our customers, and our administrative system for handling distributions from IRAs invested in our annuity products may need to be updated to reflect the shortened distribution period for IRA beneficiaries);

elimination of age limit for making traditional IRA contributions;

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creation of new employer protections for offering annuities, including a fiduciary safe harbor for employer retirement plan sponsors that wish to add in-plan annuity products (particularly impacting how we and our competitors may now sell annuity products to employers or provide certifications necessary to meet the SECURE Act fiduciary safe harbor requirements);

and lowering of barriers for offering multiple employer plans.

and lowering of

barriers for offering multiple employer plans.

The SECURE Act changes may also affect, to some extent, the length of time that IRA assets remain in our annuity products.

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See section titled “F&G - Regulation” in Item 1.

Risk Factors Relating to Our Business

We have recorded goodwill as a result of prior acquisitions, and an economic downturn could cause these balances to become impaired, requiring write-downs that would reduce our operating income.

Goodwill aggregated approximately $4,495 million, or 8.9% of our total assets, as of December 31, 2020.

In the year ended December 31, 2018 , we recorded $ 3 million of goodwill impairment related to a real estate brokerage subsidiary in our Corporate and other segment.

For the years ended December 31, 2020 and 2019, no goodwill impairment charge was recorded.

We will continue to monitor our market capitalization and the impact of the economy to determine if there is an impairment of goodwill in future periods.

The pattern of amortizing our DAC, DSI, and VOBA balances relies on assumptions and estimates made by management.

Changes in these assumptions and estimates could impact our results of operations and financial condition.

Amortization of our DAC, DSI and VOBA balances depends on the actual and expected profits generated by the respective lines of business that incurred the expenses.

Expected profits are dependent on assumptions regarding a number of factors including investment returns, benefit payments, expenses, mortality, and policy lapse.

Due to the uncertainty associated with establishing these assumptions, we cannot, with precision, determine the exact pattern of profit emergence.

As a result, amortization of these balances will vary from period to period.

We may face losses if our actual experience differs significantly from our reserving assumptions.

As a result, we may experience volatility in our profitability and our reserves from period to period.

extent that actual experience is less favorable than our underlying assumptions, we could be required to increase our liabilities, which may reduce our profitability and impact our financial strength.

We have minimal experience to date on policyholder behavior for our GMWB products that we began issuing in 2008.

If emerging experience deviates from our assumptions on GMWB utilization, it could have a significant effect on our reserve levels and related results of operations.

Based on experience on GMWB utilization, which continues to emerge, we updated our GMWB utilization assumption during 2019, with a favorable impact on reserves.

We will continue to monitor the GMWB utilization assumption and update our best estimate as applicable.

See Item 7 of Part II of this Annual Report, under.

Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates.

Accordingly, we have in the past acquired, and may in the future acquire, businesses in industries or geographic areas with which management is less familiar than we are with our current businesses.

We are a holding company and depend on distributions from our subsidiaries for cash.

We are a holding company whose primary assets are the securities of our operating subsidiaries.

If our operating subsidiaries are not able to pay dividends to us, we may not be able to meet our obligations or pay dividends on our common stock.

Compliance with these laws will limit the amounts our regulated subsidiaries can dividend to us.

During 2021 , our title insurers may pay dividends or make distributions to us of approximately $ 551 million;

Our business could be interrupted or compromised if we experience difficulties arising from outsourcing relationships.

In addition, our reliance on third-party service providers that we do not control does not relieve us of our responsibilities and requirements.

Any failure or negligence by such third-party service providers in carrying out their contractual duties may result in us becoming subjected to liability to parties who are harmed and ensuing litigation.