28 unchanged sentences
The changes in fair values for interest rate risks are determined by estimating the present value of future cash flows using various models, primarily duration modeling.
−Removed: The changes in fair values for equity price risk are determined by comparing the market price of investments against their reported values as of the balance sheet date.
+Added: The changes in fair
+Added: values for equity price risk are determined by comparing the market price of investments against their reported values as of the balance sheet date.
Information provided by the sensitivity analysis does not necessarily represent the actual changes in fair value that we would incur under normal market conditions because, due to practical limitations, all variables other than the specific market risk factor are held constant.
7 unchanged sentences
therefore, all of our market risk sensitive instruments were entered into for purposes other than trading.
−Removed: The results of the sensitivity analysis at December 31, 2020 and December 31, 2019, are as follows:
+Added: The results of the sensitivity analysis at December 31, 2021 and 2020, are as follows:
Interest Rate Risk
−Removed: At December 31, 2020, an increase (decrease) in the levels of interest rates of 100 basis points, with all other variables held constant, would result in a (decrease) increase in the fair value of our fixed maturity securities and certain of our investments in preferred securities, which are tied to interest rates of $1.3 billion as compared with a (decrease) increase of $ 86 million at December 31, 2019.
+Added: At December 31, 2021, an increase (decrease) in the levels of interest rates of 100 basis points, with all other variables held constant, would result in a (decrease) increase in the fair value of our fixed maturity securities and certain of our investments in preferred securities, which are tied to interest rates of $2.3 billion as compared with a (decrease) increase of $1.3 billion at December 31, 2020.
The actuarial models used to estimate the impact of a one percentage point change in market interest rates incorporate numerous assumptions, require significant estimates and assume an immediate and parallel change in interest rates without any management of the investment portfolio in reaction to such change.
36 unchanged sentences
Equity Price Risk Related to our F&G Segment
−Removed: Our F&G segment is primarily exposed to equity price risk through certain insurance products, specifically those products with GMWB.
−Removed: F&G offers a variety of FIA contracts with crediting strategies linked to the performance of indices such as the S&P 500 Index, Dow Jones Industrials or the NASDAQ 100 Index.
−Removed: The estimated cost of providing GMWB incorporates various assumptions about the overall performance of equity markets over certain time periods.
+Added: Our F&G segment is exposed to equity price risk through certain insurance products.
+Added: F&G offers a variety of FIA/ IUL contracts with crediting strategies linked to the performance of indices such as the S&P 500 Index, Dow Jones Industrials or the NASDAQ 100 Index, and target volatility indices.
+Added: Additionally, the estimated cost of providing GMWB on FIA products incorporates various assumptions about the overall performance of equity markets over certain time periods.
Periods of significant and sustained downturns in equity markets, increased equity volatility or reduced interest rates could result in an increase in the valuation of the future policy benefit or policyholder account balance liabilities associated with such products, resulting in a reduction in F&G's net earnings.
−Removed: The rate of amortization of intangibles related to FIA products and the cost of providing GMWB could also increase if equity market performance is worse than assumed.
−Removed: To economically hedge the equity returns on these products, F&G purchases derivatives to hedge the FIA equity exposure.
−Removed: The primary way F&G hedges FIA equity exposure is to purchase over the counter equity index call options from broker-dealer derivative counterparties approved by F&G.
+Added: The rate of amortization of intangibles related to FIA/ IUL products and the cost of providing GMWB could also increase if equity market performance is worse than assumed.
+Added: To economically hedge the equity returns on these products, F&G purchases derivatives to hedge the FIA and IUL equity exposures.
+Added: The primary way F&G hedges FIA/ IUL equity exposure is to purchase over the counter equity index call options from broker-dealer derivative counterparties approved by F&G.
The second way to hedge FIA equity exposure is by purchasing exchange traded equity index futures contracts.
−Removed: This hedging strategy enables F&G to reduce the overall hedging costs and achieve a high correlation of returns on the call options purchased relative to the index credits earned by the FIA contractholders.
−Removed: The majority of the call options are one-year options purchased to match the funding requirements underlying the FIA contracts.
−Removed: These hedge programs are limited to the current policy term of the FIA contracts, based on current
−Removed: participation rates.
−Removed: Future returns, which may be reflected in FIA contracts’ credited rates beyond the current policy term, are not hedged.
−Removed: F&G attempts to manage the costs of these purchases through the terms of its FIA contracts, which permit F&G to change caps or participation rates, subject to certain guaranteed minimums that must be maintained.
−Removed: The derivatives are used to fund the FIA contract index credits and the cost of the call options purchased is treated as a component of spread earnings.
−Removed: While the FIA hedging program does not explicitly hedge GAAP income volatility, the FIA hedging program tends to mitigate a significant portion of the GAAP reserve changes associated with movements in the equity market and risk-free rates.
−Removed: This is due to the fact that a key component in the calculation of GAAP reserves is the market valuation of the current term embedded derivative.
+Added: This hedging strategy enables F&G to reduce the overall hedging costs and achieve a high correlation of returns on the call options purchased relative to the index credits earned by the FIA/ IUL contractholders.
+Added: The majority of the call options are one-year options purchased to match the funding requirements underlying the FIA/ IUL contracts.
+Added: These hedge programs are limited to the current policy term of the FIA/ IUL contracts.
+Added: Future returns, which may be reflected in FIA/ IUL contracts’ credited rates beyond the current policy term, are not hedged.
+Added: F&G attempts to manage the costs of these purchases through the terms of its FIA/ IUL contracts, which permit F&G to change cap, spread or participation rates, subject to certain guaranteed minimums that must be maintained.
+Added: The derivatives are used to fund the FIA/ IUL contract index credits and the cost of the call options purchased is treated as a component of spread earnings.
+Added: While the FIA/ IUL hedging program does not explicitly hedge GAAP income volatility, the FIA/ IUL hedging program tends to mitigate a significant portion of the GAAP reserve changes associated with movements in the equity market.
+Added: This is due to the fact that a key component in the calculation of GAAP reserves is the market valuation of
+Added: the current term embedded derivative.
Due to the alignment of the embedded derivative reserve component with hedging of this same embedded derivative, there should be a reasonable match between changes in this component of the reserve and changes in the assets backing this component of the reserve.
5 unchanged sentences
See "Non-GAAP Financial Measures" for further information.
−Removed: For the seven months ended December 31, 2020, the annual index credits to policyholders on their anniversaries was $178 million.
−Removed: Proceeds received at expiration on options related to such credits was $185 million.
+Added: For the year ended December 31, 2021 and the seven months ended December 31, 2020, the annual index credits to policyholders on their anniversaries were $628 million and $178 million, respectively.
+Added: Proceeds received at expiration on options related to such credits were $702 million and $185 million, respectively.
Other market exposures are hedged periodically depending on market conditions and our risk tolerance.
−Removed: The FIA hedging strategy economically hedges the equity returns and exposes us to the risk that unhedged market exposures result in divergence between changes in the fair value of the liabilities and the hedging assets.
−Removed: F&G uses a variety of techniques including direct estimation of market sensitivities and value-at-risk to monitor this risk daily.
+Added: The FIA/ IUL hedging strategy economically hedges the equity returns and exposes us to the risk that unhedged market exposures result in divergence between changes in the fair value of the liabilities and the hedging assets.
+Added: F&G uses a variety of techniques, including direct estimation of market sensitivities, to monitor this risk daily.
F&G intends to continue to adjust the hedging strategy as market conditions and risk tolerance change.
2 unchanged sentences
F&G's major source of credit risk arises predominantly in its insurance operations’ portfolios of debt and similar securities.
−Removed: The fair value of F&G's fixed maturity portfolio totaled $25 billion at December 31, 2020.
+Added: The fair value of F&G's fixed maturity portfolio totaled $30 billion and $25 billion at December 31, 2021 and 2020, respectively.
F&G's credit risk materializes primarily as impairment losses.
14 unchanged sentences
Collateral support documents are negotiated to further reduce the exposure when deemed necessary.
−Removed: See Note F in the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report for additional information regarding our exposure to credit loss.
+Added: See Note F Derivative Financial Instruments in the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report for additional information regarding our exposure to credit loss.
F&G also has credit risk related to the ability of reinsurance counterparties to honor their obligations to pay the contract amounts under various agreements.
5 unchanged sentences
Parent Company/Principal Reinsurers Reinsurance Recoverable AM Best S&P Fitch Moody's
−Removed: Wilton Re $1,481 A+ Not Rated A+ Not Rated
−Removed: Kubera Insurance (SAC) Ltd 810 Not Rated Not Rated Not Rated Not Rated
−Removed: Security Life of Denver 165 Not Rated A+ A A3
−Removed: Hannover Re 134 A+ AA- Not Rated Not Rated
−Removed: London Life 108 A+ Not Rated AA Not Rated
+Added: Wilton Reinsurance Company $1,269 A+ not rated A+ not rated
+Added: Aspida Re 873 A- not rated BBB not rated
+Added: Somerset 780 A- BBB+ not rated not rated
+Added: Security Life of Denver Insurance Company 102 not rated A- A- Baa1
+Added: London Life 102 A+ not rated not rated not rated
In the normal course of business, certain reinsurance recoverables are subject to reviews by the reinsurers.
We are not aware of any material disputes arising from these reviews or other communications with the counterparties as of December 31, 2021 that would require an allowance for uncollectible amounts.
−Removed: For information on concentrations of reinsurance risk, refer to Note P Reinsurance .
−Removed: For information on counter party risk associated with our title business, refer to Note H Commitments and Contingencies .
+Added: For information on concentrations of reinsurance risk, refer to Note O Reinsurance in the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report .
+Added: For information on counter party risk associated with our title business, refer to Note H Commitments and Contingencies in the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report .
Use of Estimates and Assumptions
4 unchanged sentences
As of December 31, 2021, F&G’s holdings in this industry include investments in 132 different issuers with the top ten investments accounting for 37% of the total holdings in this industry.
−Removed: As of December 31, 2020 F&G had one issuer, Blackstone Wave Asset Holdco, in which investments exceeded 10% of shareholders' equity.
−Removed: F&G's largest concentration in any single issuer as of December 31, 2020 was Blackstone Wave Asset Holdco with a total fair value of $507 million or 2% of the invested assets portfolio.
+Added: As of December 31, 2021, F&G had one issuer, Blackstone Wave Asset Holdco, in which investments exceeded 10% of shareholders' equity and was F&G's largest concentration in any single issuer with a total fair value of $870 million or 2% of the invested assets portfolio.
Blackstone Wave Asset Holdco is a special purpose vehicle that holds investments in numerous limited partnership investments.
5 unchanged sentences
Disintermediation risk refers to the risk that policyholders surrender their contracts in a rising interest rate environment, requiring F&G to liquidate assets in an unrealized loss position.
−Removed: F&G attempts to mitigate the risk, including changes in interest rates by investing in less rate-sensitive investments, including senior tranches of collateralized loan obligations, non-agency residential mortgage-backed securities, and various types of asset backed securities.
+Added: We attempt to mitigate the risk, including changes in interest rates by investing in less rate-sensitive investments, including senior tranches of collateralized loan obligations, non-agency residential mortgage-backed securities, and various types of asset backed securities.
Management believes this risk is also mitigated to some extent by surrender charge protection provided by F&G’s products.
−Removed: F&G expects to continue to face these challenges and uncertainties that could adversely affect its results of operations and financial condition.
+Added: We expect to continue to face these challenges and uncertainties that could adversely affect our results of operations and financial condition.
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.