What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-25 compared with 2021-03-01 · 472 added, 351 removed, 803 unchanged (51% of the section changed)

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For a description of our business, including descriptions of segments, see the discussion under Business in Item 1 of Part I of this Annual Report, which is incorporated by reference into this Item 7 of Part II of this Annual Report.

Recent Developments

Acquisition of F&G

On June 1, 2020, we completed the acquisition of F&G for approximately $2.7 billion pursuant to the Agreement and Plan of Merger, dated February 7, 2020, as amended (the "Merger Agreement").

For additional information on our acquisition of F&G refer to Note B Acquisitions.

Business Trends and Conditions

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• the strength of the United States economy, including employment levels.

While we cannot predict the severity and duration of the negative impacts related to the outbreak of COVID-19, the most recent forecast of the MBA, as of February 19, 2021, estimated (actual for fiscal year 2019) the size of the U.S.

While we cannot predict the severity and duration of the impacts related to COVID-19, the most recent forecast of the MBA, as of January 21, 2022, estimated (actual for fiscal year 2020) the size of the U.S.

residential mortgage originations market as shown in the following table for 2020 - 2024 in its "Mortgage Finance Forecast" (in trillions):

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mortgage originations forecast $ 2.5 $ 2.5 $ 2.6 $ 4.0 $ 4.1

As of January 20, 2021, the MBA expects residential purchase transactions to steadily increase in 2021 and beyond from 2020 levels.

Additionally the MBA expects residential refinance transactions to steadily decrease in 2021 and beyond as interest rates are expected to rise.

As of January 21, 2022, the MBA expects residential purchase transactions to steadily increase through 2023 before leveling out in 2024.

Additionally, the MBA expects residential refinance transactions to steadily decrease in 2022 and 2023 before leveling out in 2024 as interest rates are expected to rise.

The MBA expects overall mortgage originations to decrease in 2022 and thereafter.

On March 11, 2020, the World Health Organization declared that the novel coronavirus or COVID-19 “can be characterized as a pandemic,” which is defined as a worldwide spread of a new disease for which most people do not have immunity.

In recent years, total originations have been reflective of a strong residential real estate market driven by increasing home prices and low mortgage interest rates.

Mortgage rates rose consistently between 2016 and the beginning of 2019.

Concerns over a slowing global economy and the impact of a prolonged trade war resulted in interest rate cuts in the second half of 2019, which significantly increased refinance transactions and slightly increased purchase transactions when compared to 2018.

In the beginning of 2020, refinance and purchase transactions remained strong until the outbreak of COVID-19.

On March 15, 2020, the Federal Reserve took emergency action and reduced its benchmark interest rate by a full percentage point to nearly zero.

Through the year ended December 31, 2020, mortgage interest rates continued to decline to below 3.0%.

Concerns over a slowing global economy and the impact of a prolonged trade war, now combined with the worldwide COVID-19 pandemic, have resulted in significant uncertainty in the economic outlook.

However, existing-home sales climbed month-over-month and year-over-year between September 2020 and December 2020, showing strong signs of a market turnaround after three consecutive months of sales declines caused primarily by the ongoing pandemic, according to the National Association of Realtors.

Following this emergency action, average interest rates for a 30-year fixed rate mortgages fell throughout the remainder of 2020, bottoming out at 2.65% on January 7, 2021.

The outbreak of COVID-19 resulted in significant uncertainty in the economic outlook in the second quarter of 2020, and as a result real estate activity decreased significantly as consumers moved to the sidelines to assess the ongoing impact of COVID-19.

However, real estate activity began to rebound in June 2020, with increases in purchase activity and a surge in refinance transactions as a result of historically low interest rates.

Residential purchase and refinance activity remained strong in 2021.

However, with the surge in residential refinance transactions in 2020, residential refinance transactions began to slow in 2021 as the population of eligible refinance candidates declined.

Interest rates on a 30-year, fixed rate mortgage averaged 3.1% in 2021, up from 2.8% in 2020.

Despite the recent increase in interest rates and fluctuation in existing-home sales, the market is still outperforming pre-pandemic levels.

Other economic indicators used to measure the health of the U.S.

economy, including the unemployment rate and consumer confidence, indicated that the U.S was on strong footing prior to the outbreak of COVID-19.

economy, including the unemployment rate and consumer confidence, indicated that the United States was on strong footing prior to the outbreak of COVID-19.

However, the impact of COVID-19 reduced the outlook related to these economic indicators in March 2020.

According to the U.S.

Department of Labor's Bureau of Labor, the unemployment rate was at a historically low 3.5% in February 2020 but as of December 31, 2020, the unemployment rate had risen to 6.7%.

Additionally, the Conference Board's monthly Consumer Confidence Index remained at high levels through February 2020 before falling as a result of the COVID-19 outbreak.

As of December 31, 2020, the Consumer Confidence Index had fallen by 33% from its February 2020 highs.

In 2019, total originations were reflective of a strong residential real estate market driven by increasing home prices and low mortgage interest rates.

Concerns over a slowing global economy and the impact of a prolonged trade war resulted in interest rate cuts in the second half of the year, which significantly increased refinance transactions and slightly increased purchase transactions when compared to 2018.

Additionally, existing home sales increased in each quarter of 2019.

Average interest rates on 30-year fixed rate mortgages, averaged 4.4% in the first quarter of 2019 but subsequently decreased in the following three quarters to an average of 3.7% in the fourth quarter of 2019.

Department of Labor's Bureau of Labor, the unemployment rate was at a historically low 3.5% in February 2020 but subsequently fluctuated dramatically before reaching 6.7% in December 2020.

In 2021, the unemployment rate fell to 3.9% in December of 2021.

Additionally, the Conference Board's monthly Consumer Confidence Index remained at high levels through

February 2020 before falling as a result of the COVID-19 outbreak.

Consumer confidence has since rebounded, reaching its peak in June 2021 before decreasing in the third quarter of 2021 due to concerns over inflation.

Consumer confidence remained flat in the fourth quarter of 2021.

Because commercial real estate transactions tend to be generally driven by supply and demand for commercial space and occupancy rates in a particular area rather than by interest rate fluctuations, we believe that our commercial real estate title insurance business is less dependent on the industry cycles discussed above than our residential real estate title business.

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Lower corporate and individual tax rates and corporate tax-deductibility of capital expenditures have provided increased capacity and incentive for investments in commercial real estate.

In recent years, we have experienced strong demand in commercial real estate markets and from 2015 through 2019, we experienced historically high volumes and fee-per-file in our commercial business.

In 2020, we have experienced decreases in commercial volumes and commercial fee-per-file as a result of the outbreak of COVID-19.

While COVID-19 will likely have an impact on the timing and volume of commercial real estate transactions in the short term as the logistics of transactions evolve and some buyers move to the sidelines until the pandemic is resolved, we believe that refinance activity will likely remain elevated in response to the recent Federal rate cuts.

We cannot be certain how the outbreak of COVID-19 and the steps taken to attempt to mitigate its spread will impact our future results of operations.

In recent years prior to the COVID-19 pandemic, we experienced strong demand in commercial real estate markets.

In 2020, we experienced decreases in commercial volumes and commercial fee-per-file as a result of the outbreak of COVID-19.

Commercial volumes and commercial fee-per-file recovered in the second half of 2020 and remained elevated throughout 2021.

We continually monitor mortgage origination trends and believe that, based on our ability to produce industry leading operating margins through all economic cycles, we are well positioned to adjust our operations for adverse changes in real estate activity and to take advantage of increased volume when demand increases.

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The fourth quarter is typically strong due to the desire of commercial entities to complete transactions by year-end.

Seasonality in 2020 deviated from historical patterns due to COVID-19.

Seasonality in 2020 and 2021 deviated from historical patterns due to COVID-19.

We have noted short-term fluctuations through recent years in resale and refinance transactions as a result of changes in interest rates.

Geographic Operations.

Our direct title operations are divided into approximately 180 profit centers.

Our direct title operations are divided into approximat ely 180 profi t centers.

Each profit center processes title insurance transactions within its geographical area, which is usually identified by a county, a group of counties forming a region, or a state, depending on the management structure in that part of the country.

We also transact title insurance business through a network of approximately 5,400 agents, primarily in those areas in which agents are the more prevalent title insurance provider.

We also transact title insurance business through a network of approxima tely 5,400 age nts, primarily in those areas in which agents are the more prevalent title insurance provider.

Substantially all of our revenues are generated in the United States.

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Florida 799 9.3 540 8.6 492 9.2

Pennsylvania 439 5.1 303 4.8 252 4.7

Illinois 436 5.1 312 5.0 273 5.1

New York 262 4.2 311 5.8 310 6.3

All others 4,516 52.9 3,407 54.1 2,827 52.9

Totals $ 8,553 100.0 % $ 6,298 100.0 % $ 5,342 100.0 %

We acquired F&G on June 1, 2020.

The following factors represent some of the key trends and uncertainties that have influenced the development of our F&G segment and its historical financial performance, and we believe these key trends and uncertainties will continue to influence the business and financial performance of our F&G segment in the future.

COVID-19 Pandemic

While continuously evolving, the COVID-19 pandemic has caused significant economic and financial turmoil in the U.S.

and around the world, and has fueled concerns that it will lead to a global recession.

These conditions may continue or worsen in the near term.

At this time, it is not possible to estimate the longer term-effects the COVID-19 pandemic could have on our F&G segment or our consolidated financial statements.

Increased economic uncertainty and increased unemployment resulting from the economic impacts of the spread of COVID-19 may result in F&G policyholders seeking sources of liquidity and withdrawing at rates greater than was previously expected.

If policyholder lapse and surrender rates significantly exceed expectations, it could have an adverse effect on our F&G segment's, financial condition, results of operations, liquidity and cash flows.

Such events or conditions could also have an adverse effect on its sales of new policies.

F&G is monitoring the impact of COVID-19 on its investment portfolio and the potential for ratings changes caused by the sudden slowdown of economic activity.

The extent to which the COVID-19 pandemic impacts our F&G segment's, results of operations, financial condition, liquidity or prospects will depend on future developments which cannot be predicted.

While still evolving, the COVID-19 pandemic has already caused significant economic and financial turmoil in the U.S.

and around the world.

At this time, it is still not possible to estimate the longer term-effects the COVID-19 pandemic could have on our F&G segment or our consolidated financial statements.

Increased economic uncertainty and increased unemployment that could potentially result from the spread of COVID-19 and its variants may result in F&G policyholders seeking sources of liquidity and withdrawing at rates greater than was previously expected.

Additionally, adverse events or conditions resulting from COVID-19 could also have a negative effect on its sales of new policies and could result in more volatility from the impact of mortality experience.

As of December 31, 2021, F&G's investment portfolio has recovered from earlier volatility and F&G has not seen a sustained elevated level of adverse policyholder experience from the impact of COVID-19 on the overall business.

The full extent to which the COVID-19 pandemic impacts our F&G segment's financial condition, results of operations, liquidity or prospects will depend on future developments which cannot be predicted at this time.

Market Conditions

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Interest Rate Environment

Some of our products include guaranteed minimum crediting rates, most notably our fixed rate annuities.

As of December 31, 2020, the Company's reserves, net of reinsurance, and average crediting rate on our fixed rate annuities were $4.0 billion and 3%, respectively.

Some of our F&G products include guaranteed minimum crediting rates, most notably our fixed rate annuities.

As of December 31, 2021, our reserves, net of reinsurance, and average crediting rate on our fixed rate annuities were $5.0 billion and 3%, respectively.

We are required to pay the guaranteed minimum crediting rates even if earnings on our investment portfolio decline, which would negatively impact earnings.

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We believe that the aging of the U.S.

population will increase the demand for our products.

population will increase the demand for our FIA and IUL products.

As the “baby boomer” generation prepares for retirement, we believe that demand for retirement savings, growth, and income products will grow.

The impact of this growth may be offset to some extent by asset outflows as an increasing percentage of the population begins withdrawing assets to convert their savings into income.

Industry Factors and Trends Affecting Our Results of Operations

Demographics and macroeconomic factors are increasing the demand for our FIA and IUL products.

Over 10,000 people will turn 65 each day in the United States over the next 15 years, and according to the U.S.

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population over the age of 65 is expected to grow from 17% in 2021 to 21% in 2035.

The impact of this growth may be offset to some extent by asset outflows as an increasing percentage of the population begins withdrawing assets to convert their savings into income.

Industry Factors and Trends Affecting Our Results of Operations

We operate in the sector of the insurance industry that focuses on the needs of middle-income Americans.

The underserved middle-income market represents a major growth opportunity for the Company.

As a tool for addressing the unmet need for retirement planning, we believe that many middle-income Americans have grown to appreciate the “sleep at night protection” that annuities such as our FIA products afford.

The underserved middle-income market represents a major growth opportunity for us.

As a tool for addressing the unmet need for retirement planning, we believe that many middle-income Americans have grown to appreciate the financial certainty that we believe annuities such as our FIA products afford.

Accordingly, the FIA market grew from nearly $12 billion of sales in 2002 to $58 billion of sales in 2020.

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and subtracting actual paid claims, resulting in an amount that management then compares to the range of reasonable estimates provided by the actuarial calculation.

We recorded our loss provision rate at 4.5% for the year ended December 31, 2020.

Our average loss provision rate was 4.5% for the years ended December 31, 2020, 2019 and 2018.

We recorded our loss provision rate at 4.5% for the years ended December 31, 2021, 2020 and 2019.

Of such annual loss provision rates, 4.5%, for each of the years ended December 31, 2021, 2020 and 2019, respectively, related to losses on policies written in the current year, and the remainder, if any related to developments on prior year policies.

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If actual claims loss development varies from what is currently expected and is not offset by other factors, it is possible that our recorded reserves may fall outside a reasonable range of our actuaries' central estimate, which may require additional reserve adjustments in future periods.

An appr oximate $63 million increase (decrease) in our annualized provision for title claim losses would occur if our loss provision rate were 1% higher (lower), based on 2020 title premiums of $6,298 million.

An approximate $86 million increase (decrease) in our annualized provision for title claim losses would occur if our loss provision rate were 1% higher (lower), based on 2021 title premiums of $8,553 million.

A 10% increase (decrease) in our reserve for title claim losses, as of December 31, 2021, would result in an increase (decrease) in our provision for title claim losses of approximately $188 million.

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We make estimates of expected full and partial surrenders of our fixed annuity products.

Our surrender rate experience in the period ended December 31, 2020 on the fixed annuity products averaged 4%, which is within our assumed ranges.

Our surrender rate experience in the twelve months ended December 31, 2021 and the seven month period ended December 31, 2020 on the fixed annuity products averaged 7% and 4%, respectively, which is within our assumed ranges.

Management’s best estimate of surrender behavior incorporates actual experience over the entire period, as we believe that, over the duration of the policies, we will experience the full range of policyholder behavior and market conditions.

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Changes in or deviations from the assumptions used can significantly affect our reserve levels and related results of operations.

At issue, and at each subsequent valuation, we determine the present value of the cost of the GMWB rider benefits and certain GMDB riders in excess of benefits that are funded by the account value.

At issue, and at each subsequent valuation, we determine the present value of the cost of the Guaranteed Minimum Withdrawaal Benefit ("GMWB") rider benefits and certain Guaranteed Minimum Death Benefit ("GMDB") riders in excess of benefits that are funded by the account value.

We also calculate the present value of total expected policy assessments, including investment margins, if applicable.

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We began issuing our GMWB products in 2008, and future experience could lead to significant changes in our assumptions.

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

If emerging experience deviates from our

assumptions on GMWB utilizations, such deviations could have a significant effect on our reserve levels and related results of operations.

Our aggregate reserves for contractholder funds, future policy benefits and product guarantees on a direct and net basis as of December 31, 2021 are summarized as follows:

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Traditional life 1,823 (805) 1,018

Funding agreement backed notes ("FABN") 1,904 — 1,904

Pension risk transfer ("PRT") 1,153 — 1,153

Total $ 40,257 $ (3,610) $ 36,647

Certain FIA and UL products contain an embedded derivative;

Fixed indexed annuities ("FIA") and indexed universal life ("IUL") products contain an embedded derivative;

a feature that permits the holder to elect an interest rate return or an equity-index linked component, where interest credited to the contract is linked to the performance of various equity indices.

The FIA embedded derivative is valued at fair value and included in the liability for contractholder funds in our Consolidated Balance Sheets with changes in fair value included as a component of Benefits and other changes in policy reserves in our Consolidated Statements of Earnings.

The FIA/ IUL embedded derivatives are valued at fair value and included in the liability for contractholder funds in our Consolidated Balance Sheets with changes in fair value included as a component of Benefits and other changes in policy reserves in our Consolidated Statements of Earnings.

Valuation of Fixed Maturity, Preferred and Equity Securities, and Derivatives and Reinsurance Recoverable.

Our fixed maturity securities have been designated as available-for-sale and are carried at fair value, net of allowance for expected credit losses, with unrealized gains and losses included in accumulated other comprehensive income (loss) ("AOCI"), net of associated adjustments for deferred acquisition costs ("DAC"), value of business acquired ("VOBA"), deferred sales inducements ("DSI"), unearned revenue ("UREV"), SOP 03-1 reserves, and deferred income taxes.

Our equity securities are carried at fair value with unrealized gains and losses included in net income (loss).

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The fair value of futures contracts at the balance sheet date represents the cumulative unsettled variation margin (open trade equity net of cash settlements).

The fair values of the embedded derivatives in our FIA contracts are derived using market value of options, use of current and budgeted option cost, swap rates, mortality rates, surrender rates, partial withdrawals, and non-performance spread and are classified as Level 3.

The discount rate used to determine the fair value of our FIA embedded derivative liabilities includes an adjustment to reflect the risk that these obligations will not be fulfilled (“non-performance risk”).

For the period ended December 31, 2020, our non-performance risk adjustment was based on the expected loss due to default in debt obligations for similarly rated financial companies.

The fair values of the embedded derivatives in our FIA and IUL contracts are derived using market value of options, use of current and budgeted option cost, swap rates, mortality rates, surrender rates, partial withdrawals, and non-performance spread and are classified as Level 3.

The discount rate used to determine the fair value of our FIA/ IUL embedded derivative liabilities includes an adjustment to reflect the risk that these obligations will not be fulfilled (“non-performance risk”).

For the period ended December 31, 2021, our non-performance risk adjustment was based on the expected loss due to default in debt obligations for

similarly rated financial companies.

See Note D Fair Value of Financial Instruments and Note F Derivative Financial Instruments to our Consolidated Financial Statements included in Item 8 of Part II of this Annual Report.

As discussed in Note P Reinsurance of our Consolidated Financial Statements included in Item 8 of Part II of this Report, FGL Insurance entered into a reinsurance agreement with Kubera effective December 31, 2018, to cede certain multi-year guaranteed annuities ("MYGA") and deferred annuity statutory reserve on a coinsurance funds withheld basis, net of applicable existing reinsurance.

Fair value movements in the funds withheld balances associated with this arrangement create an obligation for FGL Insurance to pay Kubera at a later date, which results in an embedded derivative.

This embedded derivative is

considered a total return swap with contractual returns that are attributable to the assets and liabilities associated with this reinsurance arrangement.

The fair value of the total return swap is based on the change in fair value of the underlying assets held in the funds withheld portfolio.

As discussed in Note O Reinsurance of our Consolidated Financial Statements included in Item 8 of Part II of this Report, F&G entered into a reinsurance agreement with Kubera Insurance (SAC) Ltd.

("Kubera") effective December 31, 2018, to cede certain multi-year guaranteed annuities ("MYGA") and deferred annuity GAAP and statutory reserves on a coinsurance funds withheld basis, net of applicable existing reinsurance.

Effective October 31, 2021, this agreement was novated from Kubera to Somerset.

Additionally, F&G entered into a reinsurance agreement with Aspida Re effective January 1, 2021, to cede a quota share of certain deferred annuity business on a funds withheld basis.

Fair value movements in the funds withheld balances associated with these arrangements create an obligation for F&G to pay Somerset and Aspida Re at a later date, which results in embedded derivatives.

These embedded derivatives are considered total return swaps with contractual returns that are attributable to the assets and liabilities associated with the reinsurance arrangements.

The fair value of the total return swaps are based on the change in fair value of the underlying assets held in the funds withheld portfolio.

Investment results for the assets that support the coinsurance with funds withheld reinsurance arrangement, including gains and losses from sales, are passed directly to the reinsurer pursuant to contractual terms of the reinsurance arrangement.

The reinsurance related embedded derivative is reported in Accounts payable and accrued liabilities on the Consolidated Balance Sheets and the related gains or losses are reported in Recognized gains and losses, net on the Consolidated Statements of Earnings.

The reinsurance related embedded derivatives are reported in Accounts payable and accrued liabilities on the Consolidated Balance Sheets and the related gains or losses are reported in Recognized gains and losses, net on the Consolidated Statements of Earnings.

We categorize our fixed maturity securities, preferred securities, equity securities and derivatives into a three-level hierarchy based on the priority of the inputs to the valuation technique.

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If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

The following table presents the fair value of fixed maturity securities and equity securities by pricing source and hierarchy level as of December 31, 2020.

The following table presents the fair value of fixed maturity securities and equity securities by pricing source and hierarchy level as of December 31, 2021 and 2020.

As of December 31, 2021

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% of Total 6 % 78 % 16 % 100 %

As of December 31, 2020

(Dollars in millions)

Quoted Prices in

Active Markets for

Identical Assets

(Level 1) Significant

Observable Inputs

(Level 2) Significant

(Level 3) Total

Fixed maturity securities available-for-sale and equity securities:

Prices via third party pricing services $ 1,823 $ 24,883 $ 1,167 $ 27,873

Priced via independent broker quotations — — 2,095 2,095

Priced via other methods — — 5 5

Total $ 1,823 $ 24,883 $ 3,267 $ 29,973

% of Total 6 % 83 % 11 % 100 %

We have made acquisitions that have resulted in a significant amount of goodwill.

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We completed annual goodwill impairment analyses in the fourth quarter of each period presented using a September 30 measurement date .

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

For the years ended December 31, 2021, 2020 and 2019, we determined there were no events or circumstances that indicated that the carrying value exceeded the fair value.

As of December 31, 2020, we have determined that our title segment goodwill has a fair value, which substantially exceeds its carrying value.

On June 1, 2020 we acquired our F&G segment, resulting in additional goodwill of $1,751 million.

VOBA, DAC and DSI

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We use a combination of actual and industry experience when setting and updating our policyholder behavior assumptions.

We perform sensitivity analyses to assess the impact that certain assumptions have on DAC, DSI and VOBA.

The following table presents the estimated instantaneous net impact to income before income taxes of various assumption changes on our DAC, DSI and VOBA.

We perform sensitivity analyses to assess the impact that certain assumptions have on DAC, DSI, VOBA.

The following table presents the estimated instantaneous net impact to income before income taxes of various assumption changes on our

DAC, DSI, and VOBA.

The effects, increase or (decrease), presented are not representative of the aggregate impacts that could result if a combination of such changes to interest rates and other assumptions occurred.

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Higher assumed interest rates or lower assumed annuity surrender rates tend to increase the balances of DAC, DSI and VOBA, thus increasing income before income taxes.

Other Intangible Assets

We have other intangible assets, not including goodwill, VOBA, DAC or DSI that consist primarily of customer relationships and contracts, the value of distribution network acquired ("VODA"), trademarks and tradenames, state licenses and computer software, which are generally recorded in connection with acquisitions at their fair value.

Intangible assets with estimable lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

In general, customer relationships are amortized over their estimated useful lives, generally ten years, using an accelerated method, which takes into consideration expected customer attrition rates.

Contractual relationships are generally amortized over their contractual life.

VODA is an intangible asset that represents the value of an existing distribution network and is amortized using the sum of years digits method.

Trademarks and tradenames are generally amortized over ten years.

Capitalized software includes the fair value of software acquired in business combinations, purchased software and capitalized software development costs.

Purchased software is recorded at cost and amortized using the straight-line method over its estimated useful life.

Software acquired in business combinations is recorded at its fair value and amortized using straight-line or accelerated methods over its estimated useful life, ranging from five to ten years.

For internal-use computer software products, internal and external costs incurred during the preliminary project stage are expensed as they are incurred.

Internal and external costs incurred during the application development stage are capitalized and amortized on a product by product basis commencing on the date the software is ready for its intended use.

We do not capitalize any costs once the software is ready for its intended use.

We recorded no impairment expense to other intangible assets during the years ended December 31, 2020 and 2019.

We recorded $3 million in impairment expense to other intangible assets during the year ended December 31, 2018 .

The impairment in 2018 primarily relates to an acquired customer relationship asset in our Title segment.

Accounting for Income Taxes

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The outcome of these final determinations could have a material effect on our income tax provision, net income or cash flows in the period that determination is made.

Refer to Note V Income Taxes to our Consolidated Financial Statements in Item 8 of Part II of this Annual Report for details.

Refer to Note T Income Taxes to our Consolidated Financial Statements in Item 8 of Part II of this Annual Report for details.

Results of Operations

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Total revenues 15,643 10,778 8,469

Benefits and other changes in policy reserves 866 — —

Personnel costs 3,528 2,951 2,696

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Other operating expenses 1,929 1,759 1,681

Benefits and other changes in policy reserves 2,138 866 —

Depreciation and amortization 645 296 178

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Net earnings from continuing operations $ 2,434 $ 1,477 $ 1,076

Total revenues increased by $2,309 million in 2020 compared to 2019, primarily attributable to increases in both direct and agency premiums, increases in escrow title-related and other fees and increases in interest and investment income and recognized gains on our investment holdings.

Total revenue in 2019 increased $875 million compared to 2018, primarily attributable to increases in both our direct and agency premiums, increases in interest and investment income, and non-cash valuation gains on our equity and preferred investment holdings, partially offset by a decrease in escrow, title-related and other fees.

Total revenues increased by $4,865 million in 2021 compared to 2020, primarily attributable to increases in both direct and agency premiums, increases in escrow title-related and other fees and increases in interest and investment income, partially offset by a decrease in recognized gains on our investment holdings.

Total revenue in 2020 increased $2,309 million compared to 2019, primarily attributable to increases in both direct and agency premiums, increases in escrow title-related and other fees and increases in interest and investment income and recognized gains on our investment holdings.

See Note L Revenue Recognition to our Consolidated Financial Statements included in Item 8 of Part II of this Annual Report for a breakout of our consolidated revenues.

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Interest and investment income was $1,961 million, $900 million, and $225 million for the years ended December 31, 2021, 2020, and 2019, respectively.

The increase in 2020 as compared to 2019 is primarily attributable to the addition of our F&G segment, partially offset by decreased interest income from lower average balances of cash and cash equivalents and short term investments, and lower investment yields as a result of declining interest rates year-over-year.

The increase in 2019 as compared to 2018 is primarily attributable to increased fixed maturity interest income due to an increased average fixed maturity portfolio balance, increased interest income from our tax-deferred property exchange business, and

increased interest income from a higher average balance of cash and cash equivalents and short term investments portfolio balance compared to the prior year, partially offset by lower investment yields as a result of declining interest rates year-over-year.

The effective return on average invested assets, excluding realized gains and losses, was 4.1%, 5.5%, and 5.1% for the years ended December 31, 2020, 2019, and 2018, respectively.

The increase in 2021 as compared to 2020 is primarily attributable to a full year of activity in our F&G segment.

The increase in 2020 as compared to 2019 is primarily attributable to the addition of our F&G segment, partially offset by decreased interest income from lower average balances and of cash and cash equivalents and short term investments, and lower investment yields as a result of declining interest rates year-over-year.

Recognized gains and losses, net totaled $334 million, $488 million, and $318 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Recognized gains and losses, net for the year ended December 31, 2021 are primarily attributable to realized gains on derivatives of $655 million, gains on sales of fixed maturity securities of $114 million and gains on sales of mortgages and other assets of $13 million, partially offset by losses on sales of equity and preferred securities of $19 million and non-cash net valuation losses on equity and preferred securities of $429 million.

Recognized gains and losses, net for the year ended December 31, 2020 are primarily attributable to non-cash valuation gains on equity and preferred security holdings of $208 million, realized gains on derivatives of $192 million, gains on sales of fixed maturity, preferred and equity securities of $148 million, losses on other assets of $25 million and losses on mortgage loans of $32 million.

Recognized gains and losses, net for the year ended December 31, 2019 are primarily attributable to non-cash valuation gains on equity and preferred security holdings of $316 million, non-cash valuation gains on other long-term investments of $11 million, gains on sales of equity securities of $10 million, partially offset by impairments of lease assets of $8 million, net realized losses of $5 million on sales and maturities of fixed maturity investment securities, and $7 million of other net realized losses.

Recognized gains and losses, net for the year ended December 31, 2018 are primarily attributable to non-cash valuation losses on equity and preferred security holdings of $95 million, losses on sales of equity securities of $21 million, and asset impairments of $7 million, partially offset by net realized gains of $3 million on sales and maturities of preferred and fixed maturity investment securities and $9 million of other realized gains.

See Note E Investments to our Consolidated Financial Statements included in Item 8 of Part II of this Annual Report for a breakout of our consolidated interest and investment income and realized gains and losses.

Our operating expenses consist primarily of Personnel costs;

Other operating expenses, which in our title business are incurred as orders are received and processed;

Other operating expenses, which in our Title segment are incurred as orders are received and processed;

Agent commissions, which are incurred as title agency revenue is recognized;

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Income tax expense as a percentage of earnings before income taxes was 23.1%, 18.0%, and 22.5% in the years ended December 31, 2021, 2020, and 2019 respectively.

The decrease in income tax expense as a percentage of earnings before taxes in 2020 when compared to 2019 is primarily attributable to valuation allowance releases and the tax status change recorded by F&G in 2020.

The increase in income tax expense as a percentage of earnings before taxes in 2019 when compared to 2018 is primarily attributable to the residual impacts of the Tax Cuts and Jobs Act in 2018.

The increase in income tax expense as a percentage of earnings before taxes in 2021 when compared to 2020 and the decrease in income tax expense as a percentage of earnings before taxes in 2020 as compared to 2019 is primarily attributable to valuation allowance releases and the tax status change recorded by F&G in 2020.

The following table presents the results of operations of our Title segment for the years indicated:

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Orders closed by direct title operations (in thousands) 2,169 2,052 1,448

Fee per file (in dollars) $ 2,067 $ 2,511 $ 2,585

Fee per file by direct title operations (in dollars) $ 2,467 $ 2,067 $ 2,511

Total revenues for the Title segment increased by $2,123 million, or 23%, in the year ended December 31, 2021 when compared to 2020.

Total revenues increased by $1,115 million or 14% in the year ended December 31, 2020 when compared to 2019.

The increase in the year ended December 31, 2021 as compared to 2020 is primarily attributable to increases in both our direct and agency premiums, and increases in escrow, title-related and other fees, partially offset by a decrease in interest and investment income, and an increase in non-cash valuation losses on our equity and preferred investment holdings.

The increase in the year ended December 31, 2020 as compared to 2019 is primarily attributable to increases in both our direct and agency premiums, and increases in escrow, title-related and other fees, partially offset by decreases in interest and investment income, and non-cash valuation gains on our equity and preferred investment holdings.

The increase in the year ended December 31, 2019 as compared to 2018 is primarily attributable to increases in both our direct and agency premiums, increases in escrow, title-related and other fees, increases in interest and investment income, and non-cash valuation gains on our equity and preferred investment holdings.

The following table presents the percentages of title insurance premiums generated by our direct and agency operations:

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Title premiums increased by 36% in the year ended December 31, 2021 as compared to 2020.

The increase is comprised of an increase in Title premiums from direct operations of $318 million, or 13%, and an increase in Title premiums from agency operations of $638 million, or 22%.

The increase is primarily attributable to an increase in Title premiums from direct operations of $872 million, or 32%, and an increase in Title premiums from agency operations of $1,383 million, or 38%.

Title premiums increased 18% in the year ended December 31, 2020 as compared to 2019.

The increase was a result of an increase in premiums from direct operations of $160 million, or 7%, and an increase in premiums from agency operations of $271 million, or 10%.

The increase was a result of an increase in Title premiums from direct operations of $318 million, or 13%, and an increase in Title premiums from agency operations of $638 million, or 22%.

The following table presents the percentages of opened and closed title insurance orders generated by purchase and refinance transactions by our direct operations:

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Title premiums from direct operations increased in the year ended December 31, 2021 as compared to 2020.

The increase is primarily attributable to an increase in total closed order volume, driven by an increase in refinance order volume, partially offset by a decline in total fee per file.

Title premiums from direct operations increased in 2019, primarily due to an increase in closed order volumes, partially offset by a decrease in the average fee per file.

The increase is primarily attributable to an increase in total closed order volume, driven by an increase in purchase order volume and an increase in fee per file, partially offset by a decline in refinance volume.

Ti tle premiums from direct operations increased in 2020 as compared to 2019, primarily due to an increase in total closed order volume, driven by an increase in refinance order volume, partially offset by a decline in total fee per file.

The residential refinance market has considerably lower fees per closed order than commercial or residential purchase transactions.

We experienced an increase in closed title insurance order volumes from purchase transactions and refinance transactions in the year ended December 31, 2020 as compared to 2019.

We experienced an increase in closed title insurance order volumes from purchase transactions and a decrease in closed order volume from refinance transactions in the year ended December 31, 2021 as compared to 2020.

Total closed order volumes were 2,169,000 in the year ended December 31, 2021 compared to 2,052,000 in the year ended December 31, 2020, an overall increase of 5.7%.

The increase in refinance transactions in the 2020 is primarily due to lower average interest rates when compared to 2019.

Closed order volumes were 1,448,000 in the year ended December 31, 2019 compared with 1,315,000 in the year ended December 31, 2018, an increase of 10.1%.

The increase in closed order volumes was primarily attributable to increased residential refinance activity as a result of lower mortgage interest rates in the year ended December 31, 2019 compared to 2018.

Total open ed title insurance order volumes increased in the year ended December 31, 2020, as compared to 2019.

Th e increase i n the year ended 2020 was attributable to increased opened title orders from purchase and refinance transactions.

The decrease in refinance transactions in 2021 is primarily attributable to the surge in residential refinance transactions in 2020 and the first half of 2021, resulting in a decline in the population of eligible refinance candidates in the second half of 2021.

Closed order volumes were 2,052,000 in the year ended December 31, 2020 compared with 1,448,000 in the year ended December 31, 2019, an overall increase of 41.7%.

The increase in refinance transactions in 2020 is primarily due to lower average interest rates when compared to 2019.

Total open ed title insurance order volume s decreased i n the year ended December 31, 2021, as compared to 2020.

The decrease in the year ended 2021 was attributable to decreased opened title orders from refinance transactions, partially offset by an increase in purchase transactions.

Total opened title insurance order volumes increased in the year ended December 31, 2020, as compared to 2019.

The increase in the year ended 2020 was attributable to increased opened title orders from purchase and refinance transactions.

The average fee per file in our direct operations was $2,467 in the year ended December 31, 2021, compared to $2,067 in the year ended December 31, 2020.

The decrease in average fee per file in 2020 as compared to 2019 refle cts an increased proportion of refinance transactions relative to total closed orders and a weaker commercial market compared to the corresponding prior year period.

The increase in average fee per file in 2021 as compared to 2020 reflects an increased proportion of purchase transactions relative to total closed orders and a stronger commercial market compared to 2020.

The fee per file tends to change as the mix of refinance and purchase transactions changes, because purchase transactions involve the issuance of both a lender’s policy and an owner’s policy, resulting in higher fees, whereas refinance transactions only require a lender’s policy, resulting in lower fees.

The average fee per file in our direct operations in the year ended December 31, 2019 was $2,511.

The decrease in the year ended 2019 as compared to 2018 reflects the increase in residential refinance activity in 2018, partially offset by an increase in the average fee per file in both commercial and residential purchase transactions.

Title premiums from agency operations increased $1,383 million, or 38%, in the year ended December 31, 2021 as compared to 2020, and increased $638 million, or 22%, in the year ended December 31, 2020 as compared to 2019.

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Escrow, title-related and other fees increased by $446 million, or 16%, in the year ended December 31, 2021 as compared to 2020, and increased by $393 million, or 16%, in the year ended December 31, 2020 as compared to 2019.

Escrow fees, which are more closely related to our direct operations, increased b y $271 million, or 30%, in the year ended December 31, 2020, as compared to 2019, and increased $72 million, or 9%, in the year ended December 31, 2019 as compared to 2018 .

The increases in the year ended December 31, 2020 as compared to 2019 is primarily due to stronger residential refinance revenue, which has relatively higher escrow fees than residential purchase and commercial transactions.

The increase in the year ended December 31, 2019 as compared to 2018 is primarily driven by the related increase in direct title premiums.

Othe r fees in the Title segment, excluding escrow fees, increased by $122 million, or 8%, in the year ended December 31, 2020 as compared to 2019,

and increased $113 million, or 8%, in the year ended December 31, 2019 compared to 2018.

The increase in Other fees in the year ended December 31, 2020 as compared to 2019 was primarily driven by an increase in revenue related to our ServiceLink business in addition to increases in various individually immaterial items.

The change in both escrow fees and other fees is directionally consistent with the change in title premiums from direct operations.

Escrow fees, which are more closely related to our direct operations, increased by $225 million, or 19%, in the year ended December 31, 2021, as compared to 2020, and increased $271 million, or 30%, in the year ended December 31, 2020 as compared to 2019.

The increases in the year ended December 31, 2021 as compared to 2020 are primarily due to the increase in closed order volume.

The increase in the year ended December 31, 2020 as compared to 2019 is primarily due to stronger residential refinance revenue, which has relatively higher escrow fees than residential purchase and commercial transactions.

Othe r fees in the Title segment, excluding escrow fees, increased b y $221 million, or 14%, in the year ended December 31, 2021 as compared to 2020, and increased $122 million, or 8%, in the year ended December 31, 2020 as compared to 2019.

The increase in Other fees in the year ended December 31, 2021 as compared to 2020, and the increase in Other fees in the year ended December 31, 2020 as compared to 2019 was primarily driven by an increase in revenues related to our ServiceLink business in addition to increases in various individually immaterial items.

T he change in both escrow fees and other fees is directionally consistent with the change in title premiums from direct operations in 2021 and 2020.

Interest and investment income levels are primarily a function of securities markets, interest rates and the amount of cash available for investment.

Interest and investment income decreased $51 million, or 25%, in the year ended December 31, 2020, as compared to 2019, and increased $32 million in the year ended December 31, 2019 as compared to 2018.

The decrease in the year ended December 31, 2020 as compared to 2019 was primarily driven by a decline in interest income related to the Company's tax-deferred property exchange business and a decline in interest on cash and short-term investments, due to a decline in short-term rates in 2020 as compared to 2019.

The increase in the year ended December 31, 2019 as compared to 2018 was primarily attributable to increased fixed maturity interest income due to an increased average fixed maturity portfolio balance, increased interest income from our tax-deferred property exchange business, and increased yield on our cash and cash equivalents and short term investments.

Recognized gains and losses, net, decreased $183 million in the year ended December 31, 2020 as compared to 2019, and increased $436 million in the year ended December 31, 2019 as compared to 2018.

The decrease in the year ended December 31, 2020 as compared to 2019, and the increase in the year ended December 31, 2019 as compared to 2018 are primarily attributable to fluctuations in non-cash valuation changes on our equity and preferred security holdings in addition to various other individually immaterial items.

Interest and investment income decreased $42 million, or 28%, in the year ended December 31, 2021, as compared to 2020, and decreased $51 million in the year ended December 31, 2020 as compared to 2019.

The decrease in the year ended December 31, 2021 as compared to 2020 was primarily attributable to decreased average fixed maturity portfolio balances, decreased dividends on preferred and common stocks and a decline in interest on cash and short-term investments.

The decrease in the year ended December 31, 2020 as compared to 2019 w as primarily driven by a decline in interest income related to the Company's tax-deferred property exchange business and a decline in interest on cash and short-term investments, due to a decline in short-term rates in 2020 as compared to 2019.

Recognized net losses were $393 million in the year ended December 31, 2021.

Recognized net gains were $143 million and $326 million in the years ended December 31, 2020 and 2019, respectively.

The variability in recognized gains and losses, net is primarily attributable to fluctuations in non-cash valuation changes on our equity and preferred security holdings in addition to various other individually immaterial items .

Personnel costs include base salaries, commissions, benefits, stock-based compensation and bonuses paid to employees, and are one of our most significant operating expenses.

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The claim loss provision for title insurance was $385 million, $283 million, and $240 million for the years ended December 31, 2021, 2020, and 2019 respectively.

The provision reflects an average provision rate of 4.5% of title premiums in all periods.

The provision reflects a provision rate of 4.5% of title premiums in all periods.

We continually monitor and evaluate our loss provision level, actual claims paid, and the loss reserve position each quarter.

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Segment Overview

Through our wholly owned F&G subsidiary, which we acquired on June 1, 2020, we provide our principal life and annuity products through the insurance subsidiaries composing our F&G segment, FGL Insurance and FGL NY Insurance.

Through our wholly owned F&G subsidiary, which we acquired on June 1, 2020, we provide our principal annuity and life insurance products through the insurance subsidiaries composing our F&G segment, FGL Insurance and FGL NY Insurance.

Our customers range across a variety of age groups and are concentrated in the middle-income market.

Our FIAs provide for pre-retirement wealth accumulation and post-retirement income management.

Our IUL products provide wealth protection and transfer opportunities.

Our Fixed Indexed Annuity ("FIA") products provide for pre-retirement wealth accumulation and post-retirement income management.

Our Indexed Universal Life Insurance ("IUL") products provide wealth protection and transfer opportunities.

Life and annuity products are primarily distributed through Independent Marketing Organizations ("IMOs") and independent insurance agents, and beginning in 2020, independent broker dealers and banks.

Additionally, we provide funding agreements and pension risk transfer ("PRT") solutions to various institutions through consultants and brokers.

In setting the features and pricing of new FIA products relative to our targeted net margin, we take into account our expectations regarding (1) net investment spread (see Non-GAAP Financial Measures section), which is the difference between the net investment income we earn and the sum of the interest credited to policyholders and the cost of hedging our risk on the policies;

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and (3) a number of related expenses, including benefits and changes in reserves, acquisition costs, and general and administrative expenses.

Annuity and Life Sales

We regularly monitor and report the production volume metric titled “Sales”.

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.

Annuity and IUL sales are recorded as deposit liabilities (i.e.

contractholder funds) within the Company's Consolidated Financial Statements included in Item 8 of Part II of this Annual Report in accordance with GAAP.

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.

Key Components of Our Historical Results of Operations

GAAP, premium collections for fixed indexed annuities, fixed rate annuities, and immediate annuities without life contingency are reported in the financial statements as deposit liabilities (i.e., contractholder funds) instead of as sales or revenues.

Through our insurance subsidiaries, we issue a broad portfolio of deferred annuities (fixed indexed and fixed rate annuities), indexed universal life insurance, immediate annuities, funding agreements and pension risk transfer solutions.

A deferred annuity is a type of contract that accumulates value on a tax deferred basis and typically begins making specified periodic or lump sum payments a certain number of years after the contract has been issued.

Indexed universal life insurance is a complementary type of contract that accumulates value in a cash value account and provides a payment to designated beneficiaries upon the policyholder’s death.

An immediate annuity is a type of contract that begins making specified payments within one annuity period (e.g., one month or one year) and typically makes payments of principal and interest earnings over a period of time.

GAAP, premium collections for fixed indexed annuities, fixed rate annuities, immediate annuities and PRT without life contingency, and deposits received for funding agreements are reported in the financial statements as deposit liabilities (i.e., contractholder funds) instead of as sales or revenues.

Similarly, cash payments to customers are reported as decreases in the liability for contractholder funds and not as expenses.

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Components of expenses for products accounted for as deposit liabilities are interest-sensitive and index product benefits (primarily interest credited to account balances or the hedging cost of providing index credits to the policyholder), amortization of DAC, DSI, and VOBA, other operating costs and expenses, and income taxes.

Through our insurance subsidiaries, we issue a broad portfolio of deferred annuities (fixed indexed and fixed rate annuities), indexed universal life insurance and immediate annuities.

F&G hedges certain portions of its exposure to product related equity market risk by entering into derivative transactions.

We purchase derivatives consisting predominantly of call options and, to a lesser degree, futures contracts on the equity indices underlying the applicable policy.

These derivatives are used to offset the statutory reserve impact of the index credits due to policyholders under the FIA contracts.

The majority of all such call options are one-year options purchased to match the funding requirements underlying the FIA contracts.

We attempt to manage the cost of these purchases through the terms of our FIA contracts, which permit us to change caps, spread, or participation rates on each policy's annual anniversary, subject to certain guaranteed minimums that must be maintained.

We purchase derivatives consisting predominantly of call options and, to a lesser degree, futures contracts (specifically for FIA contracts) on the equity indices underlying the applicable policy.

These derivatives are used to offset the statutory reserve impact of the index credits due to policyholders under the FIA and IUL contracts.

The majority of all such call options are one-year options purchased to match the funding requirements underlying the FIA/IUL contracts.

We attempt to manage the cost of these purchases through the terms of our FIA/IUL contracts, which permit us to change caps, spread, or participation rates on each policy's annual anniversary, subject to certain guaranteed minimums that must be maintained.

The call options and futures contracts are marked to fair value with the change in fair value included as a component of net investment gains (losses).

The change in fair value of the call options and futures contracts includes the gains and losses recognized at the expiration of the instruments’ terms or upon early termination and the changes in fair value of open positions.

Earnings from products accounted for as deposit liabilities are primarily generated from the excess of net investment income earned over the sum of interest credited to policyholders and the cost of hedging our risk on FIA policies, known as the net investment spread.

With respect to FIAs, the cost of hedging our risk includes the expenses incurred to fund the index credits.

Proceeds received upon expiration or early termination of call options purchased to fund annual index credits are

recorded as part of the change in fair value of derivatives, and are largely offset by an expense for index credits earned on annuity contractholder fund balances.

Our profitability depends in large part upon the amount of assets under management (“AUM”), the net investment spreads earned on our AUM, our ability to manage our operating expenses and the costs of acquiring new business (principally commissions to agents and bonuses credited to policyholders).

With respect to FIAs/IULs, the cost of hedging our risk includes the expenses incurred to fund the index credits.

Proceeds received upon expiration or early termination of call options purchased to fund annual index credits are recorded as part of the change in fair value of derivatives, and are largely offset by an expense for index credits earned on annuity contractholder fund balances.

Our profitability depends in large part upon the amount of assets under management (“AUM” - see Non-GAAP Financial Measures section), the net investment spreads earned on our AUM, our ability to manage our operating expenses and the costs of acquiring new business (principally commissions to agents and bonuses credited to policyholders).

As we grow AUM, earnings generally increase.

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Managing net investment spreads involves the ability to maximize returns on our AUM and minimize risks such as interest rate changes and defaults or impairment of investments.

It also includes our ability to manage interest rates credited to policyholders and costs of the options and futures purchased to fund the annual index credits on the FIAs or IULs.

It also includes our ability to manage interest rates credited to policyholders and costs of the options and futures purchased to fund the annual index credits on the FIA/IULs.

We analyze returns on average assets under management ("AAUM" - see Non-GAAP Financial Measures section) pre- and post-DAC, DSI and VOBA as well as pre- and post-tax to measure our profitability in terms of growth and improved earnings.

In June 2021, we established a funding agreement-backed notes program (the “FABN Program”), pursuant to which FGL Insurance may issue funding agreements to a special purpose statutory trust (the “Trust”) for spread lending purposes.

The maximum aggregate principal amount permitted to be outstanding at any one time under the FABN Program is currently $5.0 billion.

We also issue funding agreements through the Federal Home Loan Bank of Atlanta ("FHLB").

In July 2021, we entered the PRT market, pursuant to which FGL Insurance and FGL NY Insurance may issue group annuity contracts to discharge pension plan liabilities from a pension plan sponsor.

Life contingent pension risk transfer premiums are included in life insurance premiums and other fees below.

Non-GAAP Financial Measures

Management believes that certain non-GAAP financial measures may be useful in certain instances to provide additional meaningful comparisons between current results and results in prior operating periods.

In addition to reporting financial results in accordance with GAAP, this document includes non-GAAP financial measures, which the Company believes are useful to help investors better understand its financial performance, competitive position and prospects for the future.

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.

Reconciliations of such measures to the most comparable GAAP measures, if a comparable GAAP measure exists, are included herein.

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 to eliminate:

The presentation of this financial information is not intended to be considered in isolation of or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

By disclosing these non-GAAP financial measures, the Company believes it offers investors a greater understanding of, and an enhanced level of transparency into, the means by which the Company’s management operates the Company.

Any non-GAAP measures should be considered in context with the GAAP financial presentation and should not be considered in isolation or as a substitute for GAAP net earnings, net earnings attributable to common shareholders, or any other measures derived in accordance with GAAP as measures of operating performance or liquidity.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are provided within.

Adjusted net earnings attributable to common shareholders ("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 recognized in operations;

the impact of market volatility on the alternative asset portfolio;

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, and the fair value accounting impact of assumed reinsurance,

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, and

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) 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.

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The accounting standards for fair value measurement require the discount rates used in the calculation of the embedded derivative liability to be based on risk-free interest rates adjusted for our non-performance as of the reporting date.

The impact of the change in fair values of FIA-

related derivatives, embedded derivatives and hedging costs has been removed from net earnings (loss) in calculating adjusted net earnings.

AAUM is a non-GAAP measure we use to assess the rate of return on assets available for reinvestment.

AAUM is calculated as the sum of:

The impact of the change in fair values of FIA-related derivatives, embedded derivatives and hedging costs has been removed from net earnings (loss) in calculating adjusted net earnings.

AUM is a non-GAAP measure we use to assess the rate of return on assets available for reinvestment.

AUM is calculated as the sum of:

(i) total invested assets at amortized cost, excluding derivatives;

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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.

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 rate of return on assets available for reinvestment.

Yield on AAUM is calculated by dividing annualized net investment income by AAUM.

Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the level of return earned on AAUM.

Alternative investment yield adjustment is the current period yield impact of market volatility on the alternative investment portfolio.

Alternative investment yield adjustment is the current period yield impact of market volatility on the alternative investment portfolio that differ from management's expectation of returns over the life of these assets.

Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the level of return earned on AAUM.

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Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the level of return earned on AAUM.

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.

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.

Annuity, IUL and funding agreement 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.

PRT sales are recorded as premiums in revenues within the consolidated financial statements.

F&G Results of Operations

The following table presents the results of operations of our F&G segment for the period presented (in millions):

Period from June 1 to December 31, 2020

The results of operations of our F&G segment for the year ended December 31, 2021 and seven months ended December 31, 2020 (following our June 1, 2020 acquisition of F&G), were as follows:

Twelve months ended Seven months ended

December 31, 2021 December 31, 2020

(In millions)

Life insurance premiums and other fees (a) $ 1,395 $ 138

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Total expenses 2,885 1,147

Earnings from continuing operations, before income taxes 86

Federal income tax (expense) benefit 77

State income tax expense (2)

Net earnings from continuing operations $ 161

Loss from discontinued operations, net of tax (25)

Net earnings (loss) attributable to common shareholders $ 136

Earnings before income taxes 1,077 86

Income tax (expense) benefit (220) 75

Net earnings $ 857 $ 161

Earnings (loss) from discontinued operations, net of tax 8 (25)

Net earnings $ 865 $ 136

(a) Included within Escrow, title-related and other fees in Consolidated Statements of Earnings

The following table summarizes sales by product type of our F&G segment for the period presented (in millions):

Period from June 1 to December 31, 2020

Fixed index annuities ("FIA") $ 2,006

The following table summarizes sales by product type of our F&G segment, which are not affected by the June 1, 2020 Business Combination, and are comparable to prior period data:

Year ended December 31,

(In millions)

Fixed indexed annuities (FIA) $ 4,310 $ 3,459

Fixed rate annuities (MYGA) 1,738 776

Institutional spread based 100

Total annuity 6,048 4,235

Index universal life ("IUL") $ 31

Indexed universal life (IUL) 87 50

Funding agreements (FABN/FHLB) 2,310 200

Pension risk transfer (PRT) 1,147 —

Flow reinsurance — 352

• FIA sales were strong during the seven months ended December 31, 2020 and reflect disciplined pricing to achieve profit and capital targets.

• MYGA sales during the seven months ended December 31, 2020 were driven by the low interest rate environment.

• Institutional spread based products reflect funding agreements with Federal Home Loan Bank, under an investment strategy.

Total Sales $ 9,592 $ 4,837

• FIA and MYGA sales were strong during the year ended December 31, 2021 compared to the year ended December 31, 2020 and reflect F&G's productive and expanding retail distribution through independent agents, banks and broker dealers.

• Funding agreements and pension risk transfer sales during the year ended December 31, 2021 reflect F&G's expansion into institutional markets during 2021 and are subject to fluctuation period to period.

Life insurance premiums and other fees

Life insurance premiums and other fees primarily reflect insurance premiums for traditional life insurance products, which are recognized as revenue when due from the policyholder, as well as the cost of insurance on IUL policies, policy rider fees primarily on FIA policies and surrender charges assessed against policy withdrawals in excess of the policyholder's allowable penalty-free amounts (up to 10% of the prior year's value, subject to certain limitations).

The following table summarizes the Life insurance premiums and other fees, included within Escrow, title-related and other fees on the Consolidated Statements of Earnings for the period presented (in millions):

Period from June 1 to December 31, 2020

Traditional life insurance $ 13

Life-contingent immediate annuity 10

Life insurance premiums and other fees primarily reflect premiums on life-contingent pension risk transfers and traditional life insurance products, which are recognized as revenue when due from the policyholder, as well as the cost of insurance on IUL policies, policy rider fees primarily on FIA policies, and surrender charges assessed against policy withdrawals in excess of the policyholder's allowable penalty-free amounts (up to 10% of the prior year's value, subject to certain limitations).

The following table summarizes the Life insurance premiums and other fees, included within Escrow, title-related and other fees on the Consolidated Statements of Earnings (in millions), for the year ended December 31, 2021 and seven months ended December 31, 2020 (following our June 1 acquisition of F&G):

Year ended Seven months ended

December 31, 2021 December 31, 2020

(In millions)

Life-contingent pension risk transfer premiums $ 1,146 $ —

Traditional life insurance premiums 18 13

Life-contingent immediate annuity premiums 13 10

Surrender charges 33 13

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Life insurance premiums and other fees $ 1,395 $ 138

• Traditional life insurance premiums for the seven months ended December 31, 2020 are primarily related to the return of premium riders on traditional life contracts.

• Pension risk transfer premiums for the twelve months ended December 31, 2021 reflect new PRT deals for the period.

• Traditional life insurance premiums for the twelve months ended December 31, 2021, and seven months ended December 31, 2020 are related to the return of premium riders on traditional life contracts.

FGL Insurance has ceded the majority of its traditional life business to unaffiliated third party reinsurers.

While the base contract has been reinsured, we continue to retain the return of rider.

• Immediate annuity premiums for the seven months ended December 31, 2020 reflect policyholder behavior for annuitizations as well as FGL Insurance's reinsurance agreement with Kubera Insurance (SAC) Ltd.

• Cost of insurance fees and other income for the seven months ended December 31, 2020 primarily reflect GMWB rider fees of $72 million and COI charges on IUL policies of $49 million, partially offset by unearned revenue deferrals.

While the base contract has been reinsured, we continue to retain the return of premium rider.

• Immediate annuity premiums for the twelve months ended December 31, 2021 and seven months ended December 31, 2020 reflect policyholder behavior for annuitizations.

• Surrender charges for the twelve months ended December 31, 2021 and seven months ended December 31, 2020 reflect amounts assessed against policy withdrawals in excess of the policyholder's allowable penalty-free amounts.

• Cost of insurance fees and other income for the twelve months ended December 31, 2021 and seven months ended December 31, 2020 primarily reflects GMWB rider fees of $137 million and $72 million, respectively, and cost of insurance charges on IUL policies, net of unearned revenue deferrals, of $31 million and $22 million, respectively.

GMWB rider fees are based on the policyholder's benefit base and are collected at the end of the policy year.

Interest and investment income

Below is a summary of interest and investment income for the period presented (in millions):

Period from June 1 to December 31, 2020

Below is a summary of interest and investment income:

Year ended Seven months ended

December 31, 2021 December 31, 2020

(In millions)

Fixed maturity securities, available-for-sale $ 1,213 $ 643

1 unchanged sentence

Mortgage loans 131 50

Limited partnerships 589 76

Other investments 24 8

2 unchanged sentences

Interest and investment income $ 1,852 $ 743

Our net investment spread and AAUM for the period presented are summarized as follows (annualized) (dollars in millions):

Period from June 1 to December 31, 2020

Our net investment spread and AAUM are summarized as follows (annualized) (see Non-GAAP Financial Measures Section):

Year ended Seven months ended

December 31, 2021 December 31, 2020

(Dollars in millions)

Yield on AAUM (at amortized cost) 5.80 % 4.66 %

4 unchanged sentences

AAUM $ 31,938 $ 27,322

• AAUM for the seven months ended December 31, 2020 reflect net new business asset flows.

• The $743 million NII for the seven months ended December 31, 2020 was primarily driven by $643 million in fixed maturity securities, $84 million in other investments and $50 million in mortgage loans, partially offset by $(76) million in investment expenses.

• Net investment spread for the seven month period ended December 31, 2020 is in line with pre-merger historical trends.

• AAUM for the twelve months ended December 31, 2021 and seven months ended December 31, 2020 reflect new business asset flows.

• The $1,852 million NII for the twelve months ended December 31, 2021 was primarily driven by $1,213 million in fixed maturity securities, $589 million of interest and investment income related to our investments in limited partnerships, $24 million in other investments and $131 million in mortgage loans, partially offset by $163 million in investment expenses.

The $743 million NII for the seven months ended December 31, 2020 was primarily driven by $643 million in fixed maturity securities, $76 million of interest and investment income related to our investments in limited partnerships, and $50 million in mortgage loans, partially offset by $76 million in investment expenses.

• The alternative investment yield adjustment reflects the yield impact of market volatility on the alternative investment portfolio that differ from management's expectation of returns over the life of these assets.

Recognized gains and losses, net

Below is a summary of the major components included in recognized gains and losses, net for the period presented (in millions):

Period from June 1 to December 31, 2020

Net realized and unrealized gains on fixed maturity available-for-sale securities, equity securities and other invested assets $ 179

Below is a summary of the major components included in recognized gains and losses, net:

Year ended Seven months ended

December 31, 2021 December 31, 2020

(In millions)

Net realized and unrealized gains (losses) on fixed maturity available-for-sale securities, equity securities and other invested assets $ 58 $ 179

Change in allowance for expected credit losses 4 (19)

Net realized and unrealized gains on certain derivatives instruments 237

Net realized and unrealized gains (losses) on certain derivatives instruments 614 237

Change in fair value of reinsurance related embedded derivatives 34 (53)

Change in fair value of other derivatives and embedded derivatives 5 8

• For the seven months ended December 31, 2020, net realized gains on fixed maturity available-for-sale securities, equity securities and other invested assets is primarily the result of trading gains and mark-to-market movement on our equity securities.

• Allowance for expected credit losses increased during the period, primarily related to residential mortgage loans.

• The fair value of reinsurance related embedded derivative is based on the change in fair value of the underlying assets held in the funds withheld ("FWH") portfolio.

• For the seven months ended December 31, 2020, net realized and unrealized gains on certain derivative instruments primarily relates to the realized and unrealized losses on futures and options used to hedge FIA and IUL products.

Recognized gains and losses, net $ 715 $ 352

• For the year ended December 31, 2021 and seven months ended December 31, 2020, net realized and unrealized gains on fixed maturity available-for-sale securities, equity securities and other invested assets is primarily the result of realized gains on fixed maturity available-for-sale securities, partially offset and increased by mark-to-market movement on our equity securities, respectively.

• Allowance for expected credit losses during the year ended December 31, 2021 decreased primarily due to improved economic conditions for residential mortgage loans, partially offset by higher reserves for commercial mortgage loans.

As of the June 1, 2020 acquisition of F&G, due to purchase accounting adjustments, our expected credit loss reserve was valued at $0.

For the seven months ended December 31, 2020, the expected credit loss reserve increased primarily due to reserves established for residential mortgage loans.

• For the year ended December 31, 2021 and the seven months ended December 31, 2020, net realized and unrealized gains on certain derivative instruments primarily relates to the net realized and unrealized gains on options and futures used to hedge FIA and IUL products, including gains on option and futures expiration.

See the table below for primary drivers of gains (losses) on certain derivatives.

• The fair value of reinsurance related embedded derivative is based on the change in fair value of the underlying assets held in the funds withheld ("FWH") portfolio.

We utilize a combination of static (call options) and dynamic (long futures contracts) instruments in our hedging strategy.

A substantial portion of the call options and futures contracts are based upon the S&P 500 Index with the remainder based upon other equity, bond and gold market indices.

The components of the realized and unrealized gains (losses) on certain derivative instruments hedging our indexed annuity and universal life products are summarized in the table below for the period presented (dollars in millions):

Period from June 1 to December 31, 2020

The components of the realized and unrealized gains (losses) on certain derivative instruments hedging our indexed annuity and universal life products are summarized in the table below:

Year ended Seven months ended

December 31, 2021 December 31, 2020

(Dollars in millions)

Call Options:

Gains on option expiration $ 437 $ 62

Change in unrealized gains 167

Change in unrealized (losses) gains 160 167

Futures contracts:

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Foreign currency forward:

Losses on foreign currency forward (7)

Gains (losses) on foreign currency forward 9 (7)

Total net change in fair value $ 614 $ 237

Annual Point-to-Point Change in S&P 500 Index during the period 23 %

Point-to-Point Change in S&P 500 Index during twelve and seven month periods 27 % 23 %

• Realized gains and losses on certain derivative instruments are directly correlated to the performance of the indices upon which the call options and futures contracts are based and the value of the derivatives at the time of expiration compared to the value at the time of purchase.

Gains (losses) on option expiration reflect the movement during the seven months ended December 31, 2020 on options settled during the period.

• The change in unrealized gains and losses due to fair value of call options are primarily driven by the underlying performance of the S&P 500 Index during each respective year relative to the S&P 500 Index on the policyholder buy dates.

• The net change in fair value of the call options and futures contracts for the seven months ended December 31, 2020 was primarily driven by movements in the S&P 500 Index relative to the policyholder buy dates.

The average index credits to policyholders are as follows for the period presented:

Period from June 1 to December 31, 2020

Gains on option expiration reflect the movement during the twelve months ended December 31, 2021 and the seven months ended December 31, 2020, on options settled during the period.

• The change in unrealized gains (losses) due to fair value of call options is primarily driven by the underlying performance of the S&P 500 Index during each respective year relative to the S&P 500 Index on the policyholder buy dates.

• The net change in fair value of the call options and futures contracts was primarily driven by movements in the S&P 500 Index relative to the policyholder buy dates.

The average index credits to policyholders are as follows:

Year ended Seven months ended

December 31, 2021 December 31, 2020

Average Crediting Rate 5 % 3 %

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3 year high water mark 16 % 19 %

• Actual amounts credited to contractholder fund balances may differ from the index appreciation due to contractual features in the FIA contracts (caps, spreads and participation rates), which allow F&G to manage the cost of the options purchased to fund the annual index credits.

• The credits for the seven months ended December 31, 2020 were based on comparing the S&P 500 Index on each issue date in the period to the same issue date in the respective prior year periods.

Surrender charges were higher in the prior year periods, primarily due to a higher number of universal life policy surrenders.

• Actual amounts credited to contractholder fund balances may differ from the index appreciation due to contractual features in the FIA and certain IUL contracts (caps, spreads and participation rates), which allow F&G to manage the cost of the options purchased to fund the annual index credits.

• The credits for the periods presented were based on comparing the S&P 500 Index on each issue date in the period to the same issue date in the respective prior year periods.

Benefits and expenses

Benefits and other changes in policy reserves

Below is a summary of the major components included in Benefits and other changes in policy reserves for the period presented (in millions):

Period from June 1 to December 31, 2020

FIA embedded derivative impact $ 317

Below is a summary of the major components included in Benefits and other changes in policy reserves:

Year ended Seven months ended

December 31, 2021 December 31, 2020

(In millions)

FIA/ IUL market related liability movements $ (378) $ 317

Index credits, interest credited & bonuses 1,005 319

Annuity payments 574 74

Other policy benefits and reserve movements 156

PRT agreements 1,157 —

Other (220) 156

Total benefits and other changes in policy reserves $ 2,138 $ 866

• The FIA fair value option liability increased, driven by the changes in the equity markets, change in non-performance spread, and risk free rates during the period.

The change in non-performance spread increased the FIA embedded derivative liability by $205 million during the seven months ended December 31, 2020, partially offset by a $63 million decrease in the liability due to movement of risk-free rates in both periods.

The remaining change in the market value of the derivative assets hedging our FIA policies was driven by equity market impacts.

• The FIA/IUL market related liability movements during the twelve and seven months ended December 31, 2021 and December 31, 2020, respectively, are mainly driven by changes in the equity markets, non-performance spreads, and risk free rates during the periods.

Additionally, 2021 includes the system implementation and assumption review process impacts discussed below.

The change in risk free rates decreased the FIA market related liability by $145 million and $63 million during the twelve and seven months ended December 31, 2021 and 2020, respectively.

During the twelve and seven months ended December 31, 2021 and 2020, the change in non-performance spread decreased the FIA market related liability by $34 million and increased the FIA market related liability by $205 million, respectively.

The remaining change in market value of the market related liability movements was driven by equity market impacts.

See table in the net investment gains/losses discussion above for summary and discussion of net unrealized gains (losses) on certain derivative instruments.

• The index credits, interest credited & bonuses were primarily due to index credits on FIA policies.

• Annually, typically in the third quarter, we review assumptions associated with reserves for policy benefits and product guarantees.

In addition, during the third quarter of 2021, we implemented a new actuarial valuation system, and as a result, our third quarter 2021 assumption updates include model refinements and assumption updates resulting from the implementation.

The system implementation and assumption review process included refinements in the calculation of the fair value of the embedded derivative component of our fixed indexed annuities.

These changes, taken together, resulted in a decrease in contractholder funds and future policy reserves of $397 million.

• The index credits, interest credited and bonuses were primarily due to index credits on FIA policies.

Refer to average policyholder index discussion above for details on drivers.

• PRT agreements for the twelve months ended December 31, 2021 reflect new PRT deals for the period.

Personnel Costs and Other Operating Expenses

Below is a summary of Personnel Costs and Other Operating Expenses for the period presented (in millions):

Period from June 1 to December 31, 2020

Below is a summary of personnel costs and other operating expenses:

Year ended Seven months ended

December 31, 2021 December 31, 2020

(In millions)

Personnel costs $ 129 $ 65

1 unchanged sentence

Total personnel costs and other operating expenses $ 234 $ 140

• Personnel costs for the seven months ended December 31, 2020 primarily reflect employee-related expenses.

• Other operating expenses during the period reflect certain operating expenses other than personnel costs and non-deferred acquisition costs.

• Personnel costs for the twelve months ended December 31, 2021 and seven months ended December 31, 2020 primarily reflect employee-related expenses.

• Other operating expenses for the twelve months ended December 31, 2021 and seven months ended December 31, 2020 reflect certain operating expenses other than personnel costs and non-deferred acquisition costs.

Depreciation and amortization

Below is a summary of the major components included in depreciation and amortization for the period presented (in millions):

Period from June 1 to December 31, 2020

Below is a summary of the major components included in depreciation and amortization:

Year ended Seven months ended

December 31, 2021 December 31, 2020

(In millions)

Amortization of DAC, VOBA, and DSI $ 517 $ 131

3 unchanged sentences

Total depreciation and amortization $ 484 $ 123

• Amortization of DAC, VOBA, and DSI is based on current and future expected gross margins (pre-tax operating income before amortization).

The amortization for the seven months ended December 31, 2020 is the result of actual gross profits ("AGPs") in the period.

• Amortization of DAC, VOBA, and DSI is based on current and future expected gross margins (pre-tax operating income before amortization) and includes the system implementation discussed below.

The amortization for the year ended December 31, 2021 and the seven months ended December 31, 2020 is the result of actual gross profits ("AGPs") in the periods.

• Annually, typically in the third quarter, we review assumptions associated with the amortization of intangibles.

In addition, during the third quarter of 2021, we implemented a new actuarial valuations system and as a result, our third quarter 2021 assumption updates include model refinements and assumption updates resulting from the implementation.

The changes, taken together, increased amortization of intangibles by $136 million.

Other items affecting net earnings

Income tax expense (benefit)

Below is a summary of the major components included in income tax expense (benefit) for the period presented (dollars in millions):

Period from June 1 to December 31, 2020

Income (loss) before taxes $ 86

Income tax benefit before valuation allowance (21)

Below is a summary of the major components included in income tax expense (benefit):

Year ended Seven months ended

December 31, 2021 December 31, 2020

(Dollars in millions)

Income before taxes $ 1,077 $ 86

Income tax expense before valuation allowance 234 (21)

Change in valuation allowance (14) (54)

Income tax expense (benefit) $ (75)

Federal income tax expense (benefit) $ 220 $ (75)

Effective rate 20 % (87) %

1 unchanged sentence

The income tax benefit was primarily driven by various valuation allowance releases as a result of merger activity, partially offset by taxes on income.

See "Note V - Income Taxes" for further information.

• See "Note T - Income Taxes " for further information.

Adjusted Net Earnings (See Non-GAAP Financial Measures section)

The table below shows the adjustments made to reconcile Net earnings from continuing operations attributable to common shareholders to Adjusted net earnings from continuing operations attributable to common shareholders for the period presented (in millions):

Period from June 1 to December 31, 2020

Net earnings from continuing operations attributable to common shareholders $ 161

The table below shows the adjustments made to reconcile net earnings to adjusted net earnings :

Year ended Seven months ended

December 31, 2021 December 31, 2020

(In millions)

Net earnings $ 857 $ 161

Non-GAAP adjustments:

Recognized gains and losses, net (45)

Recognized (gains), net (319) (45)

Indexed product related derivatives (52) 111

Purchase price amortization 26 16

Transaction costs and other nonrecurring items 21

Income tax benefit on non-GAAP adjustments (29)

Adjusted net earnings from continuing operations attributable to common shareholders $ 235

• Adjusted net earnings for the seven months ended December 31, 2020 primarily reflects net investment income for the period, partially offset by changes in benefits and other policy reserves and other expenses.

Adjusted net earnings includes $14 million of net favorable actual to expected mortality within the single premium immediate annuity ("SPIA") line of business and $72 million of other notable items primarily related to a favorable income tax benefit.

Transaction costs 5 21

Other non-recurring items (a) (284) —

Income taxes on non-GAAP adjustments 128 (29)

Adjusted net earnings $ 361 $ 235

(a) Reflects adjustments to benefits and other changes in policy reserves and depreciation and amortization resulting from the implementation of a new actuarial valuation system

• Adjusted net earnings for the twelve months ended December 31, 2021 primarily reflects net investment income for the period, partially offset by product costs and other expenses, and includes $31 million of net favorable mortality primarily driven by the single premium immediate annuity ("SPIA") line of business, partially offset by $(19) million net unfavorable mortality driven by the indexed universal life ("IUL") line of business, $8 million of favorable DAC unlocking and $46 million of other net favorable items, primarily net investment income related to CLO redemptions held at a discount to par.

• Adjusted net earnings for the seven months ended December 31, 2020 primarily reflects net investment income for the period, partially offset by product costs and other expenses, and includes $14 million of net favorable mortality driven by the SPIA line of business, and $72 million of other net favorable items, primarily related to a favorable income tax benefit.

Investment Portfolio

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Our investment portfolio is designed to contribute stable earnings and balance risk across diverse asset classes and is primarily invested in high quality fixed income securities.

As of December 31, 2020, the fair value of our investment portfolio was approximately $31 billion and was divided among the following asset class and sectors (dollars in millions):

December 31, 2020

Fair Value Percent

As of December 31, 2021 and December 31, 2020, the fair value of our investment portfolio was approximately $39 billion and $31 billion, respectively, and was divided among the following asset classes and sectors:

December 31, 2021 December 31, 2020

Fair Value Percent Fair Value Percent

(Dollars in millions)

Fixed maturity securities, available for sale:

13 unchanged sentences

Asset-backed securities 4,550 12 % 1,999 6 %

Collateral loan obligations ("CLO") 4,145 11 % 4,268 14 %

Total fixed maturity available for sale securities 29,962 77 % 25,499 81 %

Equity securities (a) 1,171 3 % 1,047 3 %

Alternative investments:

Private equity 1,181 3 % 614 2 %

Real assets 340 1 % 288 1 %

Credit 829 2 % 254 1 %

Commercial mortgage loans 2,265 6 % 926 3 %

Residential mortgage loans 1,549 4 % 1,123 4 %

Other (primarily derivatives and limited partnerships) 2,153 8 %

Other (primarily derivatives and company owned life insurance) 1,305 3 % 997 4 %

Short term investments 373 1 % 456 1 %

Total investments $ 38,975 100 % $ 31,204 100 %

(a) Includes investment grade non-redeemable preferred stocks ($853 million).

(a) Includes investment grade non-redeemable preferred stocks ($928 million and $853 million at December 31, 2021 and 2020, respectively).

Insurance statutes regulate the type of investments that our life insurance subsidiaries are permitted to make and limit the amount of funds that may be used for any one type of investment.

1 unchanged sentence

Government and government-sponsored agency securities, or (iii) securities of comparable investment quality, if not rated.

As of December 31, 2020, our fixed maturity available-for-sale ("AFS") securities portfolio was approximately $25 billion.

The following table summarizes the credit quality, by NRSRO rating, of our fixed income portfolio (dollars in millions):

December 31, 2020

Rating Fair Value Percent

As of December 31, 2021 and December 31, 2020, our fixed maturity available-for-sale ("AFS") securities portfolio was approximately $30 billion and $25 billion, respectively.

The following table summarizes the credit quality, by NRSRO rating, of our fixed income portfolio:

December 31, 2021 December 31, 2020

Fair Value Percent Fair Value Percent

Rating (Dollars in millions)

AAA $ 660 2 % $ 488 2 %

AA 2,181 7 % 1,590 6 %

A 7,667 26 % 7,040 28 %

BBB 10,462 35 % 9,669 38 %

1 unchanged sentence

Total investment grade 27,612 92 % 23,123 91 %

BB 1,372 5 % 1,493 6 %

B and below (a) 432 1 % 612 2 %

1 unchanged sentence

Total below investment grade 2,350 8 % 2,376 9 %

$ 25,499 100 %

(a) Includes $106 million of non-agency RMBS that carry a NAIC 1 designation.

Total $ 29,962 100 % $ 25,499 100 %

(a) Includes $68 million and $106 million at December 31, 2021 and December 31, 2020, respectively, of non-agency RMBS that carry a NAIC 1 designation.

(b) Securities denoted as not-rated by an NRSRO were classified as investment or non-investment grade according to the securities' respective NAIC designation.

6 unchanged sentences

6 In or near default

The NAIC has adopted revised designation methodologies for non-agency RMBS, including RMBS backed by subprime mortgage loans and for commercial mortgage-backed securities ("CMBS").

The NAIC’s objective with the revised designation methodologies for these structured securities was to increase accuracy in assessing expected losses and to use the improved assessment to determine a more appropriate capital requirement for such structured securities.

The NAIC designations for structured securities, including subprime and Alternative A-paper ("Alt-A") RMBS, are based upon a comparison of the bond’s amortized cost to the NAIC’s loss expectation for each security.

The NAIC uses designation methodologies for non-agency RMBS, including RMBS backed by subprime mortgage loans and for commercial mortgage-backed securities ("CMBS").

The NAIC’s objective with the designation methodologies for these structured securities is to increase accuracy in assessing expected losses and to use the improved assessment to determine a more appropriate capital requirement for such structured securities.

Prior to 2021, the NAIC designations for structured securities, including subprime and Alternative A-paper ("Alt-A") RMBS, were based upon a comparison of the bond’s amortized cost to the NAIC’s loss expectation for each security.

Securities where modeling does not generate an expected loss in all scenarios are given the highest designation of NAIC 1.

A number of our RMBS securities carry a NAIC 1 designation while the NRSRO rating indicates below investment grade.

In 2021, the NAIC eliminated the comparison of non-legacy (issued after 2012) bond's amortized cost to the NAIC's loss expectation and instead assigned a NAIC designation based on the loss expectation alone.

Several of our RMBS securities carry a NAIC 1 designation while the NRSRO rating indicates below investment grade.

The revised methodologies reduce regulatory reliance on rating agencies and allow for greater regulatory input into the assumptions used to estimate expected losses from such structured securities.

In the tables below, we present the rating of structured securities based on ratings from the revised NAIC rating methodologies described above (which in some cases do not correspond to rating agency designations).

All NAIC designations (e.g., NAIC 1-6) are based on the revised NAIC methodologies.

The table below presents our fixed maturity securities by NAIC designation as of December 31, 2020 (dollars in millions):

In the tables below, we present the rating of structured securities based on ratings from the NAIC rating methodologies described above (which in some cases do not correspond to rating agency designations).

All NAIC designations (e.g., NAIC 1-6) are based on the NAIC methodologies.

The table below presents our fixed maturity securities by NAIC designation as of December 31, 2021 and December 31, 2020 (dollars in millions):

December 31, 2021

4 unchanged sentences

4 567 669 2 %

Total $ 28,724 $ 29,962 100 %

December 31, 2020

NAIC Designation Amortized Cost Fair Value Percent of Total Fair Value

1 $ 11,696 $ 12,370 49 %

2 9,753 10,659 42 %

3 1,373 1,595 6 %

4 616 700 3 %

5 162 174 — %

Total $ 23,601 $ 25,499 100 %

Investment Industry Concentration

The tables below present the top ten industry categories of our fixed maturity and equity securities and FHLB common stock, including the fair value and percent of total fixed maturity and equity securities and FHLB common stock fair value as of December 31, 2020 (dollars in millions):

December 31, 2021

Top 10 Industry Concentration Fair Value Percent of Total Fair Value

ABS collateralized loan obligation ("CLO") $ 4,268 16 %

ABS Other $ 4,550 15 %

CLO securities 4,145 13 %

Banking 2,919 9 %

Whole loan collateralized mortgage obligation ("CMO") 2,622 8 %

Life insurance 1,795 6 %

Electric 1,701 6 %

Municipal 1,441 5 %

Healthcare 947 3 %

Technology 932 3 %

Other Financial Institution 760 2 %

Total $ 21,812 70 %

December 31, 2020

Top 10 Industry Concentration Fair Value Percent of Total Fair Value

CLO securities $ 4,268 16 %

Banking 2,592 10 %

Whole loan collateralized mortgage obligation ("CMO") 2,343 9 %

ABS other 1,873 7 %

4 unchanged sentences

Healthcare 658 2 %

$ 17,826 67 %

The amortized cost and fair value of fixed maturity AFS securities by contractual maturities as of December 31, 2020, are shown below.

Total $ 17,826 67 %

The amortized cost and fair value of fixed maturity AFS securities by contractual maturities as of December 31, 2021 and 2020, are shown below.

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.

December 31, 2020

(In millions) Amortized Cost Fair Value

December 31, 2021 December 31, 2020

Amortized Cost Fair Value Amortized Cost Fair Value

(In millions)

Corporate, Non-structured Hybrids, Municipal and Government securities:

6 unchanged sentences

Asset-backed securities $ 8,516 $ 8,695 $ 1,920 $ 1,999

CLO securities — — 4,021 4,268

Commercial-mortgage-backed securities 2,669 2,964 2,468 2,806

Structured hybrids 5 5 — —

Residential mortgage-backed securities 722 722 782 800

$ 9,191 $ 9,873

Subtotal $ 11,912 $ 12,386 $ 9,191 $ 9,873

Total fixed maturity available-for-sale securities $ 28,724 $ 29,962 $ 23,601 $ 25,499

1 unchanged sentence

Our investment in non-agency RMBS securities is predicated on the conservative and adequate cushion between purchase price and NAIC 1 rating, general lack of sensitivity to interest rates, positive convexity to prepayment rates and correlation between the price of the securities and the unfolding recovery of the housing market.

The fair value of our investments in subprime and Alt-A RMBS securities was $68 million and $94 million as of December 31, 2020.

The following tables summarizes our exposure to subprime and Alt-A RMBS by credit quality using NAIC designations, NRSRO ratings and vintage year as of December 31, 2020 (dollars in millions):

December 31, 2020

The fair value of our investments in subprime and Alt-A RMBS securities was $52 million and $75 million as of December 31, 2021, respectively, and $68 million and $94 million as of December 31, 2020, respectively.

The following tables summarize our exposure to subprime and Alt-A RMBS by credit quality using NAIC designations, NRSRO ratings and vintage year as of December 31, 2021 and December 31, 2020 (dollars in millions):

December 31, 2021 December 31, 2020

NAIC Designation:

Fair Value Percent of Total

Fair Value Percent of Total Fair Value Percent of Total

1 $ 116 91 % $ 153 94 %

2 4 3 % 1 1 %

3 2 2 % 2 1 %

4 1 1 % 3 2 %

5 4 3 % 3 2 %

6 — — % — — %

Total $ 127 100 % $ 162 100 %

AAA $ — — % $ 1 1 %

AA 15 12 % 4 2 %

A 5 4 % 17 10 %

BBB 12 9 % 17 10 %

Not rated - Above investment grade (a) 24 19 % 19 12 %

BB and below 71 56 % 104 65 %

Total $ 127 100 % $ 162 100 %

2007 31 24 % 37 23 %

2006 34 27 % 43 27 %

2005 and prior 62 49 % 82 50 %

Total $ 127 100 % $ 162 100 %

(a) Securities denoted as not-rated by an NRSRO were classified as investment or non-investment grade according to the securities' respective NAIC designation.

As of December 31, 2020, our ABS exposure was largely composed of CLOs, which comprised 68% of all ABS holdings.

These exposures are generally senior tranches of CLOs, which have leveraged loans as their underlying collateral.

The remainder of our ABS exposure was largely diversified by underlying collateral and issuer type, including automobile and home equity receivables.

As of December 31, 2020, the non-CLO exposure represents 32% of total ABS assets, or 6% of total invested assets and the CLO and non-CLO positions were trading at a net unrealized gain position of $247 million and $79 million, respectively.

The following table summarize our ABS exposure (dollars in millions):

December 31, 2020

Asset Class Fair Value Percent

ABS CLO $ 4,268 68 %

ABS auto 26 — %

ABS other 1,973 32 %

Total ABS $ 6,267 100 %

ABS and CLO Exposures

Our ABS exposures are largely diversified by underlying collateral and issuer type.

Our CLO exposures are generally senior tranches of CLOs which have leveraged loans as their underlying collateral.

As of December 31, 2021, the CLO and ABS positions were trading at a net unrealized gain position of $145 million and $37 million, respectively.

As of December 31, 2020, the CLO and ABS positions were trading at a net unrealized gain position of $247 million and $79 million, respectively.

Municipal Bond Exposure

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For those mortgage loans that are determined to require foreclosure, the carrying value is reduced to the fair value of the underlying collateral, net of estimated costs to obtain and sell at the point of foreclosure.

The carrying value of the impaired loans is reduced by establishing a specific write-down recorded in Recognized gains and losses, net in the Consolidated Statements of Earnings.

The carrying value of the impaired loans is reduced by establishing a specific write-down recorded in Recognized gains and losses, net in the Consolidated Statements of Earnings included in Item 8 of Part II of this Annual Report.

LTV and DSC ratios are utilized as part of the review process described above.

3 unchanged sentences

F&G diversifies its RML portfolio by state to attempt to reduce concentration risk.

RML's have a primary credit quality indicator of either a performing or nonperforming loan.

F&G defines non-performing RML's as those that are 90 or more days past due and/or in nonaccrual status, which is assessed monthly.

RMLs have a primary credit quality indicator of either a performing or nonperforming loan.

F&G defines non-performing RMLs as those that are 90 or more days past due and/or in nonaccrual status, which is assessed monthly.

Unrealized Losses

The amortized cost and fair value of the fixed maturity securities and the equity securities that were in an unrealized loss position as of December 31, 2020, were as follows (in millions):

The amortized cost and fair value of the fixed maturity securities and the equity securities that were in an unrealized loss position as of December 31, 2021 and 2020, were as follows (in millions):

December 31, 2021

4 unchanged sentences

United States municipalities, states and territories 50 503 — (11) 492

Foreign Governments 28 27 — — 27

Corporate securities:

Finance, insurance and real estate 366 1,365 — (31) 1,334

Manufacturing, construction and mining 97 281 — (3) 278

Utilities, energy and related sectors 280 1,243 — (46) 1,197

8 unchanged sentences

Total investments 2,056 $ 11,968 $ (5) $ (249) $ 11,714

The gross unrealized loss position on the fixed maturity available-for-sale fixed and equity portfolio was $38 million as of December 31, 2020.

Most components of the portfolio exhibited price appreciation as credit spreads narrowed during the period, offset by increases in treasury rates.

The total amortized cost of all securities in an unrealized loss position was $1,601 million as of December 31, 2020.

December 31, 2020

Number of securities Amortized Cost Allowance for Expected Credit Losses Unrealized Losses Fair Value

Fixed maturity securities, available for sale:

United States Government full faith and credit 4 $ 5 $ — $ — $ 5

United States Government sponsored agencies 11 23 — — 23

United States municipalities, states and territories 14 117 — (2) 115

Foreign Governments — — — — —

Corporate securities:

Finance, insurance and real estate 21 347 — (3) 344

Utilities, energy and related sectors 12 185 — (3) 182

Wholesale/retail trade 11 86 — (1) 85

Services, media and other 13 221 — (7) 214

Hybrid securities 1 1 — — 1

Non-agency residential mortgage backed securities 29 32 (1) (1) 30

Commercial mortgage backed securities 19 51 — (3) 48

Asset backed securities 66 517 — (18) 499

Total fixed maturity available for sale securities 201 1,585 (1) (38) 1,546

Equity securities 1 16 — — 16

Total investments 202 $ 1,601 $ (1) $ (38) $ 1,562

The gross unrealized loss position on the fixed maturity available-for-sale fixed and equity portfolio was $249 million and $38 million as of December 31, 2021 and 2020, respectively.

Most components of the portfolio exhibited price depreciation as treasury rates increased, offset by narrower credit spreads.

The total amortized cost of all securities in an unrealized loss position was $11,968 million and $1,601 million as of December 31, 2021 and 2020, respectively.

The average market value/book value of the investment category with the largest unrealized loss position was 96% for Utilities, energy and related sectors as of December 31, 2021.

In the aggregate, Utilities, energy and related sectors represented 18% of the total unrealized loss position as of December 31, 2021.

The average market value/book value of the investment category with the largest unrealized loss position was 97% for Asset backed securities as of December 31, 2020.

In aggregate, Asset backed securities represented 47% of the total unrealized loss position as of December 31, 2020.

The amortized cost and fair value of fixed maturity available for sale securities under watch list analysis and the number of months in a loss position with investment grade securities (NRSRO rating of BBB/Baa or higher) as of December 31, 2020, were as follows (dollars in millions):

In the aggregate, Asset backed securities represented 47% of the total unrealized loss position as of December 31, 2020.

December 31, 2021

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Total 8 $ 132 $ 125 $ — $ (7)

December 31, 2020

Number of securities Amortized Cost Fair Value Allowance for Credit Loss Gross Unrealized Losses

Investment grade:

Less than six months 3 $ 102 $ 95 $ (6) $ (1)

Six months or more and less than twelve months — — — — —

Twelve months or greater — — — — —

Total investment grade 3 102 95 (6) (1)

Below investment grade:

Less than six months 1 — — — —

Six months or more and less than twelve months — — — — —

Twelve months or greater — — — — —

Total below investment grade 1 — — — —

Total 4 $ 102 $ 95 $ (6) $ (1)

Expected Credit Losses and Watch List

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Detailed analysis is performed for each security on the watch list to further assess the presence of credit impairment loss indicators and, where present, calculate an allowance for expected credit loss or direct write-down of a security’s amortized cost.

At December 31, 2021, our watch list included seven securities in an unrealized loss position with an amortized cost of $132 million, allowance for expected credit losses of $0 million, unrealized losses of $7 million and a fair value of $125 million.

At December 31, 2020, our watch list included four securities in an unrealized loss position with an amortized cost of $102 million, allowance for expected credit losses of $6 million, unrealized losses of $1 million and a fair value of $95 million.

The watch list excludes structured securities due to a revision of processes as a result of ASU 2016-13.

There were 36 structured securities with a fair value of $65 million to which we had potential credit exposure as of December 31, 2020.

Our analysis of these structured securities, which included cash flow testing, resulted in allowances for expected credit losses of $3 million as of December 31, 2020.

There were 36 structured securities to which we had a potential credit disclosure with a fair value of $45 million and $65 million as of December 31, 2021 and 2020, respectively.

Our analysis of these structured securities, which included cash flow testing, resulted in allowances for expected credit losses of $8 million and $3 million as of December 31, 2021 and 2020, respectively.

Exposure to Sovereign Debt

Our investment portfolio had no direct exposure to European sovereign debt as of December 31, 2020.

As of December 31, 2020, we also had no material exposure risk related to financial investments in Puerto Rico.

Our investment portfolio had no direct exposure to European sovereign debt as of December 31, 2021 and 2020.

As of December 31, 2021 and 2020, we also had no material exposure risk related to financial investments in Puerto Rico.

Interest and investment income

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AFS Securities

For additional information regarding our AFS securities, including the amortized cost, gross unrealized gains (losses), and fair value as well as the amortized cost and fair value of fixed maturity AFS securities by contractual maturities, as of December 31, 2020, refer to Note E to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report.

For additional information regarding our AFS securities, including the amortized cost, gross unrealized gains (losses), and fair value as well as the amortized cost and fair value of fixed maturity AFS securities by contractual maturities, as of December 31, 2021 and 2020, refer to Note E Investments to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report.

Concentrations of Financial Instruments

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Government securities pledged as call option collateral, if our counterparty’s net exposures exceed pre-determined thresholds.

The Company is required to pay counterparties the effective federal funds rate each day for cash collateral posted to F&G for daily mark to market margin changes.

We are required to pay counterparties the effective federal funds rate each day for cash collateral posted to F&G for daily mark to market margin changes.

We reduce the negative interest cost associated with cash collateral posted from counterparties under various ISDA agreements by reinvesting derivative cash collateral.

This program permits collateral cash received to be invested in short term Treasury securities, bank deposits and commercial paper rated A1/P1, which are included in Cash and cash equivalents in the accompanying Consolidated Balance Sheets.

See Note F to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report for additional information regarding our derivatives and our exposure to credit loss on call options.

See Note F Derivative Financial Instruments to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report for additional information regarding our derivatives and our exposure to credit loss on call options.

Corporate and Other

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The revenue in the Corporate and Other segment for all years represents revenue generated by our non-title real estate technology and brokerage subsidiaries as well as mark-to-market valuation changes on certain corporate deferred compensation plans.

Total revenues in the Corporate and Other segment decreased $39 million, or 19% in the year ended December 31, 2020 as compared 2019, and decreased $209 million, or 50%, in the year ended December 31, 2019 compared to 2018.

Total revenues in the Corporate and Other segment increased $13 million, or 8% in the year ended December 31, 2021 as compared to 2020, and decreased $39 million, or 19%, in the year ended December 31, 2020 as compared to 2019.

The increase in the year ended December 31, 2021 as compared to 2020 is primarily attributable to increased Recognized gains and losses, net of approximately $19 million, partially offset by decreased interest and investment income of $6 million associated with a year-over-year reduction in fixed-income investment holdings.

The decrease in the year ended December 31, 2020 as compared to 2019 is primarily attributable to valuation losses associated with our deferred compensation plan assets in 2020 and decreased interest and investment income of $17 million associated with a year-over-year reduction in cash holdings.

The decrease in the year ended December 31, 2019 as compared to 2018 is primarily attributable to the sale of a real estate brokerage subsidiary in the third quarter of 2018, partially offset by increased revenue associated with the valuation of deferred compensation assets.

Personnel costs in the Corporate and Other segment decreased $26 million, or 19% in the year ended December 31, 2020 as compared to 2019, and increased $40 million, or 43%, in the year ended December 31, 2019 compared to 2018.

Personnel costs in the Corporate and Other segment decreased $1 million, or 1% in the year ended December 31, 2021 as compared to 2020, and decreased $26 million, or 19%, in the year ended December 31, 2020 compared to 2019.

The decrease in the year ended December 31, 2020 as compared to 2019 is attributable to the aforementioned decrease in the valuation of deferred compensation plan assets compared to the corresponding period in 2019.

The increase in the year ended December 31, 2019 as compared to 2018 is primarily attributable to increased valuation of deferred compensation plan assets, increased costs resulting from growth of our real estate technology subsidiaries, and increased severance expense related to the departure of certain executives.

Other operating expenses in the Corporate and Other segment decreased $49 million, or 33%, in the year ended December 31, 2021 as compared to 2020, and decreased $24 million, or 14% in the year ended December 31, 2020 as compared to 2019.

The decrease in 2021 as compared to 2020 is primarily attributable to a decrease in F&G transaction costs of approximately $38 million and reduced real estate brokerage expenses of $24 million in 2021 related to previous divestitures, partially offset by growth in our real estate technology businesses.

The decrease in the year ended December 31, 2020 as compared to 2019 is primarily attributable to the reverse termination fee paid in 2019 related to the abandoned Stewart Information Services Corporation acquisition, partially offset by F&G acquisition costs in 2020

The decrease in the year ended December 31, 2019 as compared to 2018 is primarily attributable to the sale of a real estate brokerage subsidiary, which is partially offset by the aforementioned reverse termination fee related to the abandoned Stewart Information Services Corporation acquisition of $50 million.

Interest expense increased $14 million, or 20%, in the year ended December 31, 2021 as compared to 2020, and increased $24 million, or 51%, in the year ended December 31, 2020 as compared to 2019.

The increase in the year ended December 31, 2021 as compared to 2020 is primarily attributable to increased average debt outstanding in 2021 associated with issuance of our 3.20% Notes in September 2021 as well as having a full year outstanding of our 3.40% Notes and our 2.45% Notes issued in 2020.

The increase in the year ended December 31, 2020 as compared to 2019 is primarily attributable to increased average debt outstanding in 2020 associated with the Term Loan Credit Agreement, our 3.40% Notes and our 2.45% Notes.

The increase in the year ended December 31, 2019 as compared to 2018 is primarily attributable to interest associated with our 4.50% Notes issued in August 2018.

Liquidity and Capital Resources

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On February 16, 2022, our Board of Directors declared cash dividends of $0.44 per share, payable on March 31, 2022 , to FNF common shareholders of record as of March 17, 2022 .

On December 7, 2020 and January 25, 2021, certain of our wholly-owned subsidiaries entered into subscription agreements to purchase in the aggregate $650 million of common stock in two newly incorporated special purpose acquisition companies.

These special purpose acquisition companies are expected to consummate their respective initial business combinations in the first half of 2021.

For more information related to the subscription agreements, refer to Note A Basis of Financial Statements in Item 8 of Part II of this Annual Report.

There are no restrictions on our retained earnings regarding our ability to pay dividends to our shareholders, although there are limits on the ability of certain subsidiaries to pay dividends to us, as described below.

The declaration of any future dividends is at the discretion of our Board of Directors.

Additional uses of cash flow are expected to include acquisitions, stock repurchases and debt repayments.

Additional uses of cash flow are expected to include acquisitions, stock repurchases and debt repayments, including the repayment of $400 million in outstanding principal amount associated with our 5.50% Notes due in September 2022.

As of December 31, 2021, we had cash and cash equivalents of $4,360 million, short term investments of $491 million and available capacity under our Revolving Credit Facility of $800 million.

On April 22, 2020 we entered into the Term Loan Agreement, which provided for a $1.0 billion, 364 day delayed-draw, term loan.

On June 1, 2020, in connection with the completion of our F&G acquisition, we drew down the full $1.0 billion in principal to fund a portion of the acquisition.

On June 12, 2020 we completed our underwritten public offering of $650 million aggregate principal amount of our 3.40% Notes pursuant to our registration statement on Form S-3 (File No.

333-239002) and the related prospectus supplement.

The net proceeds from the registered offering of the 3.40% Notes were approximately $642 million, after deducting underwriting discounts and commissions and offering expenses.

We used the net proceeds from the offering to repay $640 million of the outstanding principal amount under the Term Loan.

On July 31, 2020, we repaid an additional $100 million of the principal amount under the Term Loan Agreement.

On September 15, 2020, we completed our underwritten public offering of $600 million aggregate principal amount of our 2.45% Notes pursuant to our registration statement on Form S-3 (File No.

On September 17, 2021, we completed our underwritten public offering of $450 million aggregate principal amount of our 3.20% Notes due 2051, pursuant to our registration statement on Form S-3 (File No.

333-239002) and the related prospectus supplement.

The net proceeds from the registered offering of the 2.45% Notes were approximately $593 million, after deducting underwriting discounts and commissions and offering expenses.

We used a portion of the net proceeds from the 2.45% Notes offering, consisting of $260 million, to repay all of our outstanding indebtedness under the Term Loan.

On July 29, 2020, we purchased for $90 million the outstanding Class A units of ServiceLink held by its minority owners.

As of the purchase date ServiceLink is a wholly owned subsidiary of FNF.

On October 29, 2020, we entered into the Fifth Restated Credit Agreement for our Amended Revolving Credit Facility.

Among other changes, the Fifth Restated Credit Agreement amends the Fourth Restated Credit Agreement to extend the maturity date from April 27, 2022 to October 29, 2025.

Additionally, on October 29, 2020, we terminated the F&G Credit Agreement.

The net proceeds from the registered offering of the 3.20% Notes were approximately $443 million, after deducting underwriting discounts, commissions and offering expenses.

We plan to use the net proceeds from the offering for general corporate purposes.

For further information related to the 3.20% Notes, refer to Note G Notes Payable to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report.

We continually assess our capital allocation strategy, including decisions relating to the amount of our dividend, reducing debt, repurchasing our stock, investing in growth of our subsidiaries, making acquisitions and/or conserving cash.

We believe that all anticipated cash requirements for current operations will be met from internally generated funds, through cash dividends from subsidiaries, cash generated by investment securities, potential sales of non-strategic assets, potential issuances of additional debt or equity securities, and borrowings on our Amended Revolving Credit Facility.

Our short-term and long-term liquidity requirements are monitored regularly to ensure that we can meet our cash requirements.

We forecast the needs of all of our subsidiaries and periodically review their short-term and long-term projected sources and uses of funds, as well as the asset, liability, investment and cash flow assumptions underlying such forecasts.

Our insurance subsidiaries generate cash from premiums earned and their respective investment portfolios, and these funds are adequate to satisfy the payments of claims and other liabilities.

Due to the magnitude of our investment portfolio in relation to our title claim loss reserves, we do not specifically match durations of our investments to the cash outflows required to pay claims, but do manage outflows on a shorter time frame.

Our title insurance subsidiaries generate cash from premiums earned and their respective investment portfolios, and these funds are adequate to satisfy the payments of claims and other liabilities.

Due to the magnitude of our title segment investment portfolio in relation to our title claim loss reserves, we do not specifically match durations of our investments to the cash outflows required to pay claims, but do manage outflows on a shorter time frame.

Our two significant sources of internally generated funds are dividends and other payments from our subsidiaries.

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Our cash flows provided by operations for the years ended December 31, 2021, 2020, 2019 were $4,090 million, $1,578 million, and $1,121 million respectively.

The increase in cash provided by operating activities of $457 million in 2020 as compared to 2019 is primarily attributable to the increase in pre-tax earnings in 2020 and the addition of interest credited to contractholder account balances of $750 million in 2020, partially offset by deferred policy acquisition costs and deferred sales inducements of $266 million in 2020, charges assessed to contactholders for mortality and administration of $100 million in 2020, and the timing of receipts and payments of prepaid assets, payables, receivables and income taxes.

The increase in cash provided by operations of $178 million in 2019 as compared to 2018 is primarily attributable to the increase in pre-tax earnings in 2019 and the timing of receipts and payments of payables, partially offset by the timing of receipts and payments of prepaid assets, receivables and income taxes.

Included in net earnings in 2019 is the reverse termination fee paid in connection with the abandoned Stewart Information Services Corporation merger of $50 million.

The increase in cash provided by operating activities of $2,512 million in 2021 as compared to 2020 is primarily attributable to the increase in pre-tax earnings in 2021, non-cash valuation changes in equity, preferred and derivative securities of $821 million, increased cash inflows associated with the change in future policy benefits of $726 million, increased cash inflows associated with the change in funds withheld from reinsurers of $865 million, partially offset by gains on sales of investments and other assets of $668 million, increased cash outflows associated with increased deferred policy acquisition costs and deferred sales inducements of $409 million and the timing of

receipts and payments of prepaid assets, payables, receivables and income taxes.

The primary driver of the increased cash flows associated with the change in future policy benefits in 2021 as compared to 2020 was cash received for PRT transactions associated with our F&G business.

The increase in cash provided by operating activities of $457 million in 2020 as compared to 2019 is primarily attributable to the increase in pre-tax earnings in 2020 and the addition of interest credited to contractholder account balances of $750 million in 2020, partially offset by deferred policy acquisition costs and deferred sales inducements of $266 million in 2020, charges assessed to contractholders for mortality and administration of $100 million in 2020, and the timing of receipts and payments of prepaid assets, payables, receivables and income taxes.

Investing Cash Flows.

Our cash used in investing activities for the years ended December 31, 2020, 2019, and 2018 were $2,331 million, $520 million, $354 million respectively.

The increase in cash used in investing activities of $1,811 million in 2020 as compared to 2019 is primarily attributable to the net cash outflow of $1,076 million associated with the F&G acquisition, increased purchases of investment securities of $4.1 billion and additional investments in unconsolidated affiliates of $293 million , partially offset by increased sales, calls, and maturities of investment securities of $2,761 million, sales and maturities of short-term investments of $540 million and increased distributions from unconsolidated affiliates of $195 million.

Our cash used in investing activities for the years ended December 31, 2021, 2020, and 2019 were $7,449 million, $2,331 million, and $520 million respectively.

The increase in cash used in investing activities of $5,118 million in 2021 as compared to 2020 is primarily associated with increased purchases of investment securities of $11,055 million, increased investment in unconsolidated affiliates of $1,419 million, partially offset by increased proceeds from sales, calls and maturities of investment securities of $6,204 million, increased distributions from unconsolidated affiliates of $250 million and reduced cash outflows associated with acquisitions of $818 million.

The increase in cash used in investing activities of $1,811 million in 2020 as compared to 2019 is primarily attributable to the net cash outflow of $1,076 million associated with the F&G acquisition, increased purchases of investment securities of $4,092 million and additional investments in unconsolidated affiliates of $293 million, partially offset by increased sales, calls, and maturities of investment securities of $2,761 million, sales and maturities of short-term investments of $540 million and increased distributions from unconsolidated affiliates of $195 million.

The increased activity related to purchases, sales and calls of investment securities in the 2020 period is primarily associated with our F&G segment.

The increase in cash used in investing activities of $166 million in 2019 as compared to 2018 is primarily attributable to a decrease in net cash inflow from proceeds from calls and maturities of investment securities, partially offset by reduced purchases of investment securities.

Capital Expenditures.

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Our cash flows provided by (used in) financing activities for the year ended December 31, 2021, 2020, and 2019 were $5,000 million and $2,096 million, and $(482) million respectively.

The increase in cash provided by financing activities of $2,578 million as compared to 2019 is primarily attributable to cash inflows from the offerings of our 3.40% Notes of $648 million and 2.45% Notes of $593 million, and increased cash inflows from contractholder account deposits of $2,967 million, partially offset by increased cash outflows from contractholder withdrawals of $1,327 million, increased purchases of treasury stock of $150 million and the purchase of the outstanding Class A units of ServiceLink held by minority owners of $90 million.

The increase in cash provided by financing activities of $2,904 million in 2021 as compared to 2020 is primarily associated with increased cash inflows associated with the change in contractholder accounts of $3,595 million, increased cash inflows associated with the change in secured trust deposits of $304 million and reduced debt service payments of $1,000 million, partially offset by reduced debt offerings and borrowings of $1,797 million and increased purchases of treasury stock of $227 million.

The increase in cash provided by financing activities of $2,578 million in 2020 as compared to 2019 is primarily attributable to cash inflows from the offerings of our 3.40% Notes of $648 million and 2.45% Notes of $593 million, and increased cash inflows from contractholder account deposits of $2,967 million, partially offset by increased cash outflows from contractholder withdrawals of $1,327 million, increased purchases of treasury stock of $150 million and the purchase of the outstanding Class A units of ServiceLink held by minority owners of $90 million.

The increased activity in contractholder deposits and withdrawals in the 2020 period is associated with our F&G segment.

The increase in cash used in financing activities of $40 million in the 2019 as compared to 2018 is primarily attributable to increased purchases of treasury stock of $66 million, a decrease in the change in net borrowing activity of $72 million, a decrease in net change of secured trust deposits of $23 million, increased dividends paid of $16 million, and increased other financing activities of $25 million, partially offset by increased exercise of stock options of $20 million and the payment of the equity portion of debt conversions settled in cash of $142 million in the 2018 period.

Financing Arrangements.

For a description of our financing arrangements see Note G Notes Payable included in Item 8 of Part II of this Annual Report, which is incorporated by reference into this Item 7 of Part II.

Contractual Obligations.

Our long term contractual obligations generally include our loss reserves, our credit agreements and other debt facilities and operating lease payments on certain of our premises and equipment.

As of December 31, 2020 , our required annual payments relating to these contractual obligations were as follows:

Obligations - Contractual and Other.

As of December 31, 2021, our required annual payments relating to contractual and other obligations were as follows:

2022 2023 2024 2025 2026 Thereafter Total

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Annuity and universal life products 2,995 3,404 2,975 3,093 3,022 28,962 44,451

Pension risk transfer annuity payments 92 88 85 81 77 875 1,298

Funding agreements (FABN/FHLB) 308 506 855 375 750 649 3,443

Title claim loss estimated payments 210 210 220 179 121 943 1,883

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As of December 31, 2021 , we had title insurance reserves of $1,883 million.

The amounts and timing of these obligations are estimated and are not set contractually.

T he amounts and timing of these obligations are estimated and are not set contractually.

While we believe that historical loss payments are a reasonable source for projecting future claim payments, there is significant inherent uncertainty in this payment pattern estimate because of the potential impact of changes in:

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Employee Benefit Plans to our Consolidated Financial Statements included in Item 8 of Part II of this Annual Report for further information.

Capital Stock Transactions .

On July 17, 2018, our Board of Directors approved a new three-year stock repurchase program effective August 1, 2018 (the "2018 Repurchase Program") under which we may purchase up to 25 million shares of our FNF common stock through July 31, 2021.

Capital Stock Tran s actions .

On July 17, 2018, our Board of Directors approved a three-year stock repurchase program effective August 1, 2018 (the "2018 Repurchase Program") under which we may purchase up to 25 million shares of our FNF common stock through July 31, 2021.

On August 3, 2021, our Board of Directors approved the 2021 Repurchase Program under which we may purchase up to 25 million shares of our FNF common stock through July 31, 2024 .

We may make repurchases from time to time in the on market, in block purchases or in privately negotiated transactions, depending on market conditions and other factors.

We repurchased 10,180,000 shares of FNF common stock during the year ended December 31, 2021 for approximately $461 million, or an average of $45.22 per share.

Subsequent to December 31, 2020 and through market close on February 19, 2021, we repurchased a total of 400,000 shares for $16 million, or an average of $40.00 under this program.

Since the original commencement of the 2018 Repurchase Program, we repurchased a total of 10,630,000 FNF common shares for $366 million, or an average of $34.43 per share.

On October 28, 2020, we announced that we intend to purchase approximately $500 million of FNF common shares over the following 12 months, based on market conditions.

During the period from October 28, 2020 through January 7, 2021, we purchased 4,200,000 FNF common shares for approximately $155 million.

Subsequent to December 31, 2021 and through market close on February 23, 2022, we repurchased a total of 250,000 shares for $13 million, or an average of $52.60 under the 2021 Repurchase Program.

Since the original commencement of the 2021 Repurchase Program, we repurchased a total of 3,230,000 FNF common shares for an aggregate amount of $161 million, or an average of $49.90 per share.

Equity and Preferred Security Investments.

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FHLB Collateral.

We are currently a member of the Federal Home Loan Bank of Atlanta (“FHLB”) and are required to maintain a collateral deposit that backs any funding agreements issued.

We are currently a member of the FHLB and are required to maintain a collateral deposit that backs any funding agreements issued.

We use these funding agreements as part of a spread enhancement strategy.

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Our borrowing capacity under these credit facilities does not have an expiration date as long as we maintain a satisfactory level of creditworthiness based on the FHLB’s credit assessment.

As of December 31, 2020, we had $1,203 million in non-putable funding agreements included under contract owner account balances on our consolidated balance sheet.

As of December 31, 2020, we had assets with a fair value of approximately $1,471 million, which collateralized the FHLB funding agreements.

As of December 31, 2021 and 2020, we had $1,543 million and $1,203 million, respectively, in FHLB non-putable funding agreements included under contractholder funds on our consolidated balance sheet.

As of December 31, 2021 and 2020, we had assets with a fair value of approximately $2,420 million and $1,471 million, respectively, which collateralized the FHLB funding agreements.

Assets pledged to the FHLB are included in fixed maturities, AFS, on our consolidated balance sheets.

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The terms of the CSA call for us to pay interest on any cash received equal to the federal funds rate.

As of December 31, 2020, $491 million collateral was posted by our counterparties as they did not meet the net exposure thresholds.

As of December 31, 2021 and 2020, respectively, $790 million and $491 million of collateral was posted by our counterparties as they did not meet the net exposure thresholds.

Collateral requirements are monitored on a daily basis and incorporate changes in market values of both the derivatives contract as well as the collateral pledged.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis