FORM
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
CF Corporation
| Cayman Islands | ||||
(State or other jurisdiction of incorporation or organization) | Boundary Hall, Cricket Square 4th Floor Grand Cayman, Cayman Islands | (I.R.S. Employer Identification No.) | ||
| (Address of principal executive offices, including zip code) | ||||
1701 Village Center Circle, Las Vegas, Nevada 89134
Registrant’s telephone number, including area code: 702-323-7331
code)
| Large | Accelerated | ¨ | |
| Non-accelerated | ¨ | (Do not check if a smaller reporting company) | |
| Smaller reporting | ¨ | ||
| Emerging growth company | ¨ | ||
CF CORPORATION
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2017
Presentation 2018. Amounts reclassified out of other comprehensive income are reflected in net investment gains in the unaudited Condensed Consolidated Statements of Operations. some extent by surrender charge protection provided by the Company’s products. hedging assets. The Company market approach include third-party pricing services, independent broker quotations, or pricing matrices. The liabilities under contracts that involve significant mortality or morbidity risks, as these liabilities fall within the definition of insurance contracts that are exceptions from financial instruments that require disclosures of fair value. unit price. Typically, if a security has been rated by an NRSRO, the SVO utilizes that rating and assigns an NAIC designation based upon the following system: revolver was $0. system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. vacated DOL rule.I.I: FINANCIAL INFORMATION (Unaudited) September 30, 2017 December 31,2016 (unaudited) Assets Current assets: Cash and cash equivalents $ 479,025 $ 1,016,157 Prepaid expenses and other current assets 5,386,594 96,381 Total current assets 5,865,619 1,112,538 Investments and cash equivalents held in Trust Account 693,802,061 690,887,027 Total Assets $ 699,667,680 $ 691,999,565 Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued expenses $ 20,294,491 $ 491,765 Accounts payable - related party 160,000 70,000 Accrued commitment fee 5,312,500 70,000 Due to related parties 975,733 225,733 Total current liabilities 26,742,724 857,498 Accrued legal and printer costs - 995,634 Deferred underwriting commissions and placement agent fees 44,550,000 44,550,000 Total Liabilities 71,292,724 46,403,132 Commitments Class A ordinary shares subject to possible redemption, $0.0001 par value; 62,337,495 and 64,066,643 shares at September 30, 2017 and December 31, 2016, respectively 623,374,950 640,666,430 Shareholders' Equity: Preferred shares, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding at September 30, 2017 and December 31, 2016 - - Class A ordinary shares, $0.0001 par value; 400,000,000 shares authorized; 6,662,505 and 4,933,357 issued and outstanding (excluding 62,337,495 and 64,066,643 shares subject to possible redemption) at September 30, 2017 and December 31, 2016, respectively 666 493 Class B ordinary shares, $0.0001 par value; 50,000,000 shares authorized; 15,000,000 shares issued and outstanding at September 30, 2017 and December 31, 2016 1,500 1,500 Additional paid-in capital 22,569,539 5,278,232 Accumulated deficit (17,571,699 ) (280,222 ) Total Shareholders' Equity 5,000,006 5,000,003 Total Liabilities and Shareholders' Equity $ 699,667,680 $ 692,069,565 The June 30,
2018December 31,
2017 (Unaudited) ASSETS Investments: Fixed maturity securities, available-for-sale, at fair value (amortized cost: June 30, 2018 - $21,061; December 31, 2017 - $20,847) $ 20,326 $ 20,963 Equity securities, at fair value (cost: June 30, 2018 - $1,378; December 31, 2017 - $1,392) 1,344 1,388 Derivative investments 312 492 Short term investments — 25 Commercial mortgage loans 525 548 Other invested assets 353 188 Total investments 22,860 23,604 Cash and cash equivalents 1,710 1,215 Accrued investment income 215 211 Funds withheld for reinsurance receivables, at fair value 769 756 Reinsurance recoverable 2,476 2,494 Intangibles, net 1,084 856 Deferred tax assets, net 286 176 Goodwill 476 476 Other assets 154 141 Total assets $ 30,030 $ 29,929 LIABILITIES AND SHAREHOLDERS' EQUITY Contractholder funds $ 22,574 $ 21,844 Future policy benefits, including $737 and $728 at fair value at June 30, 2018 and December 31, 2017, respectively 4,710 4,751 Liability for policy and contract claims 74 78 Debt 540 307 Revolving credit facility — 105 Other liabilities 794 892 Total liabilities 28,692 27,977 Commitments and contingencies ("Note 12") Shareholders' equity: Preferred stock ($.0001 par value, 100,000,000 shares authorized, 384,489 and 375,000 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively) — — Common stock ($.0001 par value, 800,000,000 shares authorized, 214,370,000 issued and outstanding at June 30, 2018 and December 31, 2017, respectively) — — Additional paid-in capital 2,047 2,037 Retained earnings (Accumulated deficit) (106 ) (160 ) Accumulated other comprehensive income (loss) (603 ) 75 Total shareholders' equity 1,338 1,952 Total liabilities and shareholders' equity $ 30,030 $ 29,929 unaudited notes are an integral part of theseto unaudited condensed consolidated financial statements.1(Unaudited) For the period from For the Three Months Ended September 30, For the Nine Months Ended February 26, 2016 (inception) 2017 2016 September 30, 2017 through September 30, 2016 General and administrative expenses $ 828,436 $ 289,524 $ 20,206,511 $ 972,232 Loss from operations (828,436 ) (289,524 ) (20,206,511 ) (972,232 ) Interest income 1,445,792 427,153 2,915,034 451,838 Net income (loss) $ 617,356 $ 137,629 $ (17,291,477 ) $ (520,394 ) Weighted average shares outstanding(1) Basic(2) 21,723,569 19,970,987 20,541,255 17,971,321 Diluted 84,000,000 84,000,000 20,541,255 17,971,321 Net earnings (loss) per share Basic $ 0.03 $ 0.01 $ (0.84 ) $ (0.03 ) Diluted $ 0.01 $ 0.00 $ (0.84 ) $ (0.03 ) (1) Share amounts have been retroactively restated Three Months Ended Six months ended June 30, 2018 June 30, 2017 June 30,
2018 June 30,
2017 Predecessor Predecessor (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues: Premiums $ 15 $ 12 $ 33 $ 15 Net investment income 282 257 545 504 Net investment gains (losses) (2 ) 67 (193 ) 148 Insurance and investment product fees and other 45 44 93 88 Total revenues 340 380 478 755 Benefits and expenses: Benefits and other changes in policy reserves 249 235 231 503 Acquisition and operating expenses, net of deferrals 46 40 86 73 Amortization of intangibles 10 51 33 84 Total benefits and expenses 305 326 350 660 Operating income 35 54 128 95 Interest expense (7 ) (6 ) (13 ) (12 ) Income before income taxes 28 48 115 83 Income tax expense (8 ) (16 ) (43 ) (29 ) Net income $ 20 $ 32 $ 72 $ 54 Less preferred stock dividend 7 — 14 — Net income available to common shareholders $ 13 $ 32 $ 58 $ 54 Net income per common share Basic $ 0.06 $ 0.54 $ 0.27 $ 0.92 Diluted $ 0.06 $ 0.54 $ 0.27 $ 0.92 Weighted average common shares used in computing net income per common share: Basic 214,370,000 58,335,216 214,370,000 58,330,848 Diluted 214,379,114 58,444,618 214,376,439 58,413,852 Cash dividend per common share $ — $ 0.065 $ — $ 0.130 Supplemental disclosures Total other-than-temporary impairments $ — $ — $ (2 ) $ (21 ) Portion of other-than-temporary impairments included in other comprehensive income — — — — Net other-than-temporary impairments — — (2 ) (21 ) Gains (losses) on derivatives and embedded derivatives 44 74 (101 ) 173 Other investment gains (losses) (46 ) (7 ) (90 ) (4 ) Total net investment gains (losses) $ (2 ) $ 67 $ (193 ) $ 148 reflect the share capitalization of approximately 4.217 shares for each outstanding Class B ordinary share on April 21, 2016.(2) This number excludes an aggregate of up to 62,337,495 and 64,042,626 shares subject to possible redemption at September 30, 2017 and 2016, respectively.The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements.2 Three months ended Six months ended June 30, 2018 June 30, 2017 June 30,
2018 June 30,
2017 Predecessor Predecessor Predecessor (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net income $ 20 $ 32 $ 72 $ 54 Other comprehensive income (loss): Unrealized investment gains/losses: Change in unrealized investment gains/losses before reclassification adjustment (385 ) 374 (911 ) 672 Net reclassification adjustment for gains/losses included in net income 21 7 61 24 Changes in unrealized investment gains/losses after reclassification adjustment (364 ) 381 (850 ) 696 Adjustments to intangible assets and unearned revenue 14 (113 ) 52 (214 ) Changes in deferred income tax asset/liability 25 (92 ) 116 (168 ) Net change in unrealized gains/losses on investments (325 ) 176 (682 ) 314 Non-credit related other-than-temporary impairment: Changes in non-credit related other than-temporary impairment — — — — Net non-credit related other-than-temporary impairment — — — — Net changes to derive comprehensive income (loss) for the period (325 ) 176 (682 ) 314 Comprehensive income (loss), net of tax $ (305 ) $ 208 $ (610 ) $ 368 Preferred Stock Common Stock Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Total Shareholders' Equity Balance, December 31, 2017 — — 2,037 (160 ) 75 1,952 Dividends — — 9 (14 ) — (5 ) Net income — — — 72 — 72 Unrealized investment gains (losses), net — — — — (682 ) (682 ) Cumulative effect of changes in accounting principles — — — (4 ) 4 — Stock-based compensation — — 1 — — 1 Balance, June 30, 2018 $ — $ — $ 2,047 $ (106 ) $ (603 ) $ 1,338 (Unaudited) For the period from For the Nine Months Ended February 26, 2016 (inception) September 30, 2017 through September 30, 2016 Cash Flows from Operating Activities Net loss $ (17,291,477 ) $ (520,394 ) Adjustments to reconcile net loss to net cash used in operating activities: Formation expenses paid by Sponsor - 5,000 Interest earned on investments and cash equivalents held in Trust Account (2,915,034 ) (451,838 ) Changes in operating assets and liabilities: Prepaid expenses 22,287 (89,459 ) Accounts payable and accrued expenses 19,802,726 614,654 Accounts payable - related party 90,000 40,000 Accrued legal and printer costs (995,634 ) 826,556 Net cash provided by (used in) operating activities (1,287,132 ) 424,519 Cash Flows from Investing Activities Principal deposited in Trust Account - (690,000,000 ) Net cash used in investing activities - (690,000,000 ) Cash Flows from Financing Activities Proceeds received from loans to related parties 750,000 225,733 Proceeds received from issuance of Class B ordinary shares to Anchor Investors - 7,251 Proceeds received from initial public offering, net of offering costs - 674,684,405 Proceeds from private placement - 15,800,000 Net cash provided by financing activities 750,000 690,717,389 Net increase (decrease) in cash and cash equivalents (537,132 ) 1,141,908 Cash and cash equivalents - beginning of the period 1,016,157 - Cash and cash equivalents - ending of the period $ 479,025 $ 1,141,908 Supplemental disclosure of noncash investing and financing activities: Change in value of Class A ordinary shares subject to possible redemption $ (17,291,480 ) $ 640,426,260 Accrued commitment fee $ 5,312,500 $ - Formation and offering costs paid by Sponsor in exchange for founder shares $ - $ 25,000 Deferred underwriting commissions in connection with the initial public offering $ - $ 24,150,000 Deferred placement agent fees in connection with the forward purchase agreement $ - $ 20,400,000 The Six months ended June 30,
2018 June 30,
2017 Predecessor (Unaudited) (Unaudited) Cash flows from operating activities: Net income $ 72 $ 54 Adjustments to reconcile net income to net cash provided by operating activities: Stock based compensation 1 3 Amortization 23 (15 ) Deferred income taxes 6 (90 ) Interest credited/index credits to contractholder account balances 207 439 Net recognized losses (gains) on investments and derivatives 193 (148 ) Charges assessed to contractholders for mortality and administration (56 ) (67 ) Deferred policy acquisition costs, net of related amortization (153 ) (83 ) Gain on extinguishment of debt (2 ) — Changes in operating assets and liabilities: Reinsurance recoverable 1 — Future policy benefits (41 ) (30 ) Funds withheld from reinsurers (47 ) (50 ) Collateral (returned) posted (133 ) 19 Other assets and other liabilities 16 (8 ) Net cash provided by (used in) operating activities 87 24 Cash flows from investing activities: Proceeds from available-for-sale investments sold, matured or repaid 4,870 1,457 Proceeds from derivatives instruments and other invested assets 282 269 Proceeds from commercial mortgage loans 22 32 Cost of available-for-sale investments (5,183 ) (1,885 ) Costs of derivatives instruments and other invested assets (273 ) (237 ) Capital expenditures (7 ) (7 ) Contingent purchase price payment (57 ) — Net cash provided by (used in) investing activities (346 ) (371 ) Cash flows from financing activities: Common stock issued under employee plans — 1 Debt issuance costs (7 ) — Proceeds from issuance of new debt 547 — Retirement and paydown on debt and revolving credit facility (440 ) — Draw on revolving credit facility 30 5 Dividends paid — (8 ) Contractholder account deposits 2,128 1,574 Contractholder account withdrawals (1,504 ) (1,058 ) Net cash provided by (used in) financing activities 754 514 Change in cash & cash equivalents 495 167 Cash & cash equivalents, beginning of period 1,215 864 Cash & cash equivalents, end of period $ 1,710 $ 1,031 Supplemental disclosures of cash flow information: Interest paid $ 14 $ 12 Income taxes (refunded) paid $ 20 $ 114 Deferred sales inducements $ 60 $ 10 unaudited notes are an integral part of theseto unaudited condensed consolidated financial statements.3CF CORPORATIONNotes to Condensed Financial StatementsSeptember 30, 2017(Unaudited)Note 1 - DescriptionOrganization and Business Operations(the “Company”(NASDAQ: CFCO) (“CF Corp”) isand itsblank checkCayman Islands exempted company, was originally incorporated in the Cayman Islands on February 26, 2016. The2016 as a Special Purpose Acquisition Company was(“SPAC”). CF Corp formed for the purpose of effecting a merger, sharecapital stock exchange, asset acquisition, sharestock purchase, reorganization, or other similar business combination with one or more businesses (“Business Combination”target businesses. Prior to November 30, 2017, CF Corp. was a shell company with no operations. On November 30, 2017, CF Corp. consummated the acquisition of Fidelity & Guaranty Life ("FGL"), a Delaware corporation, and its subsidiaries, pursuant to the Agreement and Plan of Merger, dated as of May 24, 2017 (the “FGL Merger Agreement”). AlthoughThe transactions contemplated by the Company is not limitedFGL Merger Agreement are referred to herein as the “Business Combination.”particular industry or geographic region for purposestotal of consummating aapproximately $2 billion in cash, plus the assumption of $405 of existing debt.the Company intends to focus on the financial, technology and services industries in the United States or globally.On April 21, 2016, the Company effected a share capitalization of approximately 4.217 shares for each outstanding Class B ordinary share, resulting in an aggregate of 15,000,000 Class B ordinary shares outstanding (“founder shares”). All share amounts presented in the unaudited condensed financial statements herein have been retroactively restated to reflect the share capitalization.All activity from February 26, 2016 (Date of Inception) through SeptemberNovember 30, 2017, relates to the Company’s formation, initial public offering (“initial public offering”), forward purchase agreements (as defined below), and, since the closing of the initial public offering, the search for a Business Combination described below. The Company is an early stage and emerging growth company and, as such, the Company is subject toCF Entities bought all of the risks associatedissued and outstanding shares of Front Street Re Cayman Ltd. (“FSRC”) and Front Street Re Ltd. (“FSR”, and, together with early stage and emerging growth companies.In April 2016,FSRC, the Company entered into forward purchase agreements (the “forward purchase agreements”“FSR Companies”) from Front Street Re (Delaware) Ltd. (“FSRD”), a direct wholly owned subsidiary of HRG Group, Inc. (“HRG”; NYSE: HRG), pursuant to which the Anchor Investors (as defined below) agreedShare Purchase Agreement, for cash consideration of $65, subject to purchase an aggregate of 51,000,000 Class A ordinary shares (“forward purchase shares”), plus one redeemable warrant (“forward purchase warrant(s)”) for every three forward purchase shares purchased (or an aggregate of 19,083,333 redeemable warrants) for $10.00 per Class A ordinary share, for an aggregate purchase price of $510 million, incertain adjustments.private placement to occur concurrently with the closing of the Business Combination. In connection with the forward purchase agreements, the Company agreed to compensate the placement agents an aggregate amount of up to $20.675 million, including deferred placement agent fees of $20.4 million and reimbursement of legal fees of $275,000, payable upon the consummationresult of the Business Combination, (Note 6). Asfor accounting purposes, FGL Holdings is the placement agents already performed services related toacquirer and FGL is the forward purchase agreementsacquired party and accounting predecessor. Our financial statement presentation includes the closingfinancial statements of a Business Combination was deemed probable by the management, the Company accrued a deferred placement agent feeFGL and reimbursement of legal fees in the accompanying condensed balance sheet.The registration statementits subsidiaries as “Predecessor” for the initial public offering was declared effective on May 19, 2016. The Company consummated the initial public offering of 60,000,000 units (“units” and, with respectperiods prior to the Class A ordinary shares included in the units, the “public shares”) for $10.00 per unit on May 25, 2016, generating gross proceeds of $600 million and, in connection therewith, incurring offering costs of approximately $34.5 million, including $33 million of underwriting commissions in connection with the initial public offering. Each unit consists of one Class A ordinary share, $0.0001 par value per share, and one-half of one redeemable warrant. Each whole warrant entitles the holder thereof to purchase one Class A ordinary share at a purchase price of $11.50 per share, subject to adjustment, terms and limitations (“Public Warrant(s)”). The Company paid $12 million of underwriting commissions upon the closing of the initial public offering and deferred $21 million of underwriting commissions until the consummation of its initial Business Combination (Note 3).Simultaneously with the closing of the initial public offering, the Company consummated the private placement (“Initial Private Placement”) of 14,000,000 warrants (“Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant with the Company’s Sponsor, CF Capital Growth, LLC (the “Sponsor”), generating gross proceeds of $14 million (Note 4).On June 29, 2016, the Company consummated the closing of the sale of 9,000,000 additional units pursuant to the exercise in full of the underwriter’s over-allotment option (“Over-allotment”), generating additional gross proceeds of $90 million. In connection therewith, the Company paid additional offering costs of $1.8 million in underwriting commissions and deferred $3.15 million of underwriting commissions until the completion of the Company’s initial Business Combination. Simultaneously with the consummation of the Over-allotment, the Company consummated a private placement of an additional 1,800,000 Private Placement Warrants to the Sponsor (together with the Initial Private Placement, the “Private Placement”), generating gross proceeds of $1.8 million.4CF CORPORATIONNotes to Condensed Financial StatementsSeptember 30, 2017(Unaudited)Upon the closing of the initial public offering, the Over-allotment, and the Private Placement, $690 million ($10.00 per unit) from the net proceeds thereof was placed in a U.S.-based trust account at J.P. Morgan Chase Bank, N.A, maintained by Continental Stock Transfer & Trust Company, acting as trustee (“Trust Account”), and is invested in a money market fund selected by the Company until the earlier of: (i) the completion of a Business Combination and (ii)FGL Holdings, including the distributionconsolidation of FGL and its subsidiaries and FSR Companies, as "Successor" for periods from and after the Closing Date. FGL Holdings was determined to be the Successor company as it is the surviving company organized and existing under the laws of the funds heldUnited States of America, any State of the United States, the District of Columbia or any territory thereof (and in the Trust Account as described below.At September 30, 2017,case of the Company, has approximately $479,000 in cash held outsideBermuda or the Cayman Islands). Prior to the acquisition, FGL Holdings reported under a fiscal year end of December 31, and the Predecessor companies reported under a fiscal year end of September 30. Subsequent to the acquisition, the Successor reports under a fiscal year end of December 31.Trust Account. The Company’s management has broad discretion with respect to the specific application of the net proceeds of its initial public offering, the Over-allotment,acquisitions, FGL Holdings began trading ordinary shares and the Private Placement, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The Company’s initial Business Combination must be with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on income earnedwarrants on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment companyNew York Stock Exchange ("NYSE") under the Investment Company Act 1940, as amended, or the Investment Company Act.The Company will provide the holders of its public shares (“public shareholders”) with the opportunitysymbols “FG” and “FG WS,” respectively. For additional info related to redeem all or a portion of their public shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. please refer to “Item 1. Business" within FGL Holdings' Annual Report on Form 10-K, for the period ended December 31, 2017 (“2017 Form 10-K”).decision as to whetheraccompanying unaudited condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and with the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made byinstructions for the Company, solely in its discretion. The public shareholders will be entitled to redeem their public shares for a pro rata portion of the amount then in the Trust Account (initially estimated to be $10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). As of September 30, 2017, the Company had approximately $694 million in its Trust Account. If a shareholder vote is not required by the law and the Company does not decide to hold a shareholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Memorandum and Articles of Association (the “charter”), conduct redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”), and file tender offer documents with the SEC prior to completing a Business Combination. If, however, shareholder approval Quarterly Report on Form 10-Q, including Article 10 of the proposed Business Combination is required by law, or the Company decides to obtain shareholder approval for business reasons, the Company will offer to redeem the public shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each public shareholder may elect to redeem their public shares irrespective of whether they vote for or against the proposed Business Combination. The per-share amount to be distributed to public shareholders who redeem their public shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination.Notwithstanding the foregoing, the Company’s charter provides that a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 20% or more of the public shares without the prior consent of the Company.If the Company is unable to complete a Business Combination by May 25, 2018 (the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter, redeem 100% of the outstanding public shares which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the Company’s board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case to its obligations to provide for claims of creditors and the requirements of applicable law.In connection with the redemption of 100% of the Company’s outstanding public shares if the Company fails to complete a Business Combination prior to the expiration of the Combination Period, each public shareholder will receive a full pro rata portion of the amount then in the Trust Account, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay the Company’s taxes payable (less taxes payable and up to $100,000 of interest to pay dissolution expenses).5CF CORPORATIONNotes to Condensed Financial StatementsSeptember 30, 2017(Unaudited)The Company’s Sponsor, officers and directors (the “initial shareholders”) and Anchor Investors have agreed to waive their liquidation rights with respect to the founder shares if the Company fails to complete a Business Combination within the Combination Period and the initial shareholders have also agreed to such waiver with respect to any public shares they may hold. However, if the initial shareholders acquire public shares in or after the initial public offering, they will be entitled to liquidating distributions from the Trust Account with respect to such public shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Company’s public shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.00 per share. In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by third parties, such as a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into an acquisition agreement, reduce the amount of funds in the Trust Account below $10.00 per share. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (other than the Company’s independent auditors), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account. The Sponsor will not be required to indemnify the Trust Account with respect to any claims by a third party who executed such waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of the initial public offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In addition, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims.On May 24, 2017, the Company entered into the Agreement and Plan of Merger (the “Merger Agreement”) with FGL US Holdings Inc., a Delaware corporation and wholly owned indirect subsidiary of the Company (“Parent”), FGL Merger Sub Inc., a Delaware corporation and wholly owned direct subsidiary of Parent (“Merger Sub”), and Fidelity & Guaranty Life, a Delaware corporation (“FGL”), pursuant to which, subject to the satisfaction or waiver of certain conditions set forth therein, Merger Sub will merge with and into FGL, with FGL surviving the merger as a wholly owned indirect subsidiary of the Company (collectively with the other transactions contemplated by the Merger Agreement, the “FGL Business Combination”) (Note 8).On August 8, 2017, the Company held an extraordinary general meeting in lieu of annual general meeting of shareholders, at which the Company’s shareholders approved the FGL Business Combination. No shareholders elected to have their shares redeemed in connection with the FGL Business Combination.Going ConcernThe accompanying unaudited condensed financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As of September 30, 2017, the Company had approximately $479,000 in its operating bank account and working capital deficit of approximately $20.9 million.In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company will repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans will be repaid only out of funds held outside the Trust Account. In the event that the Company does not complete a Business Combination, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account may be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans will either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant. Any such warrants would have identical terms as the Private Placement Warrants. In July 2017, the Sponsor loaned an aggregate of $750,000 of Working Capital Loans to the Company.6CF CORPORATIONNotes to Condensed Financial StatementsSeptember 30, 2017(Unaudited)Based on the foregoing, the Company may have insufficient funds available to operate its business through the earlier of consummation of a Business Combination or May 25, 2018. Following the initial Business Combination, if cash on hand is insufficient, the Company may need to obtain additional financing in order to meet its obligations. The Company cannot be certain that additional funding will be available on acceptable terms, or at all. The Company’s plans to raise capital or to consummate the initial Business Combination may not be successful. These matters, among others, raise substantial doubt about the Company’s ability to continue as a going concern.The accompanying unaudited condensed financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.Note 2 - Significant Accounting PoliciesBasis of PresentationThe accompanying unaudited condensed financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”)Regulation S-X, for interim financial information and pursuant to rules and regulations of the SEC.information. Accordingly, they do not include all of the information and footnotesnotes required by U.S. GAAP. GAAP for complete financial statements. Therefore, the information contained in the Notes to Consolidated Financial Statements included in the Company's 2017 Form 10-K, should be read in connection with the reading of these interim unaudited condensed consolidated financial statements.(consisting of normal accruals) considerednecessary for a fair presentation have been included.of the Company’s results. Operating results for the three and ninesix months ended SeptemberJune 30, 20172018, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2017.EquivalentsThe Company considers all short-term investmentsPaymentsoriginal maturityaccounting policy election to classify distributions received from equity method investees using either:◦ the cumulative earnings approach, which considers distributions received as returns on the investment and are classified as cash inflows from operating activities (with an exception when cumulative distributions received less distributions received in prior periods that were classified as returns of investment exceeds cumulative equity in earnings, in which case the current period distribution up to this excess amount will be considered a return of investment and classified as cash inflows from investing activities); or ◦ the nature of the distribution approach, which classifies distributions received based on the nature of the activity or activities of the investee that generated the distribution (would be considered either a return on investment and classified as cash inflows from operating activities or a return of investment and classified as cash inflows from investing activities) three monthsspecific GAAP guidance, an entity should classify cash receipts and payments that have aspects of more than one class of cash flows by determining and appropriately classifying each separately identifiable source or less when purchaseduse within the cash receipts and cash payments on the basis of the underlying cash flows. If cash receipts and payments have aspects of more than one class of cash flows and cannot be separated by source or use, the activity that is likely to be the predominant source or use of cash equivalents.Investments and Cash Equivalents Heldflows for the item will determine the classification.the Trust AccountThe amounts held in the Trust Account represent substantially all of the proceeds of the initial public offering and Private Placement and are classified as restricted assets since such amounts can only be usedthis ASU were adopted by the Company effective January 1, 2018, as required. The Company has elected to use the nature of distribution approach to classify distributions received from equity method investees. The amendments in connectionthe update should be applied using a retrospective transition method to each period presented (except where impracticable to apply retrospectively; those specific amendments would be applied prospectively as of the earliest date practicable). The adoption of this standard had an insignificant impact on the Company's Condensed Consolidated Statements of Cash Flows.consummationfair value option for financial instrumentsBusiness Combination. cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, and the amendments related to equity securities without readily determinable fair values should be applied prospectively to equity investments that exist as of the date of adoption. The Company adopted ASUs 2016-01, 2018-03, and 2018-04 effective January 1, 2018, with a cumulative-effect adjustment to decrease retained earnings and increase AOCI by $4.SeptemberJune 30, 2018 and December 31, 2017, therethe Company’s most significant investment in one industry, excluding United States ("U.S.") Government securities, was approximately $3.8 million of interest income heldits investment securities in the Trust Account available to be released tobanking industry with a fair value of $2,381 or 10% and $2,851 or 12%, respectively, of the Company to pay its income tax obligations, if any.Concentrationinvested assets portfolio and an amortized cost of Credit RiskFinancial instruments that potentially subject$2,477 and $2,850, respectively. As of June 30, 2018, the Company to concentrationCompany’s holdings in this industry include investments in 111 different issuers with the top ten investments accounting for 31% of credit risk consistthe total holdings in this industry. As of cash accounts in a financial institution, which at times may exceed the Federal depository insurance coverage of $250,000. At SeptemberJune 30, 2018 and December 31, 2017, the Company had not experienced lossesno investments in issuers that exceeded 10% of shareholders' equity. The Company's largest concentration in any single issuer as of June 30, 2018 and December 31, 2017 was these accountsthe Company’s results of operations, financial condition and management believesliquidity. The Company expects to continue to face challenges and uncertainties that could adversely affect its results of operations and financial condition. The Company 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.not exposedmitigated to significant risks on such accounts.Ordinary Shares Subject to Possible Redemptionaccountshas a significant concentration of reinsurance with Wilton Reassurance Company (“Wilton Re”), a third-party reinsurer, that could have a material impact on the Company’s financial position in the event that Wilton Re fails to perform their obligations under the various reinsurance treaties. Wilton Re is a wholly-owned subsidiary of Canada Pension Plan Investment Board ("CPPIB"). CPPIB has an AAA issuer credit rating from Standard & Poor's Ratings Services ("S&P") as of June 30, 2018. As of June 30, 2018, the net amount recoverable from Wilton Re was $1,558. The Company monitors the financial condition of Wilton Re and other individual reinsurers to attempt to reduce the risk of default by such reinsurers. The Company also monitorsits ordinary shares subjectdeferred acquisition costs ("DAC"), value of business acquired ("VOBA"), deferred sales inducements ("DSI"), unearned revenue ("UREV"), and deferred income taxes. The Company's equity securities investments are carried at fair value with unrealized gains and losses included in net income. The Company’s consolidated investments at June 30, 2018 and December 31, 2017 are summarized as follows: June 30, 2018 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Carrying Value Available-for sale securities Asset-backed securities $ 3,158 $ 7 $ (21 ) $ 3,144 $ 3,144 Commercial mortgage-backed securities 1,257 2 (18 ) 1,241 1,241 Corporates 12,467 12 (639 ) 11,840 11,840 Hybrids 956 1 (40 ) 917 917 Municipals 1,562 4 (33 ) 1,533 1,533 Residential mortgage-backed securities 1,356 10 (11 ) 1,355 1,355 U.S. Government 141 — (1 ) 140 140 Foreign Governments 164 — (8 ) 156 156 Total available-for-sale securities 21,061 36 (771 ) 20,326 20,326 Equity securities 1,378 2 (36 ) 1,344 1,344 Derivative investments 334 34 (56 ) 312 312 Commercial mortgage loans 525 — — 522 525 Other invested assets 353 — — 349 353 Total investments $ 23,651 $ 72 $ (863 ) $ 22,853 $ 22,860 December 31, 2017 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Carrying Value Available-for sale securities Asset-backed securities $ 3,061 $ 7 $ (3 ) $ 3,065 $ 3,065 Commercial mortgage-backed securities 956 1 (1 ) 956 956 Corporates 12,467 122 (19 ) 12,570 12,570 Equities 1,392 3 (7 ) 1,388 1,388 Hybrids 1,066 4 (3 ) 1,067 1,067 Municipals 1,736 12 (1 ) 1,747 1,747 Residential mortgage-backed securities 1,279 1 (3 ) 1,277 1,277 U.S. Government 84 — — 84 84 Foreign Governments 198 — (1 ) 197 197 Total available-for-sale securities 22,239 150 (38 ) 22,351 22,351 Derivative investments 459 36 (3 ) 492 492 Short term investments 25 — — 25 25 Commercial mortgage loans 548 — — 549 548 Other invested assets 188 — — 186 188 Total investments $ 23,459 $ 186 $ (41 ) $ 23,603 $ 23,604 possible redemptionzero effective November 30, 2017 as a result of the Business Combination and application of acquisition accounting which requires assets and liabilities acquired to be measured at fair value as of the date of the acquisition. Included in AOCI were cumulative gross unrealized gains of $0 and gross unrealized losses of $0 related to the non-credit portion of other-than-temporary-impairments ("OTTI") on non-agency residential mortgage backed securities ("RMBS") for both June 30, 2018 and December 31, 2017.guidanceCompany's FHLB agreements, the investments supporting the funding agreement liabilities are pledged as collateral to secure the FHLB funding agreement liabilities. The collateral investments had a fair value of $908 and $715 at June 30, 2018 and December 31, 2017, respectively. June 30, 2018 Amortized Cost Fair Value Corporates, Non-structured Hybrids, Municipal and Government securities: Due in one year or less $ 170 $ 170 Due after one year through five years 1,071 1,055 Due after five years through ten years 2,545 2,466 Due after ten years 11,184 10,586 Subtotal 14,970 14,277 Other securities which provide for periodic payments: Asset-backed securities 3,158 3,144 Commercial mortgage-backed securities 1,257 1,241 Structured hybrids 320 309 Residential mortgage-backed securities 1,356 1,355 Subtotal 6,091 6,049 Total fixed maturity available-for-sale securities $ 21,061 $ 20,326 Standards Codification (“ASC”) Topic 480 “Distinguishing LiabilitiesPolicies and Practices" to the Company’s 2017 Form 10-K.Equity.” Ordinary shares subjectwidely accepted third-party data sources or internal estimates. In addition to mandatory redemption (if any) are classifiedinterest rate and prepayment assumptions, cash flow estimates also include other assumptions regarding the underlying collateral including default rates and recoveries, which vary based on the asset type and geographic location, as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are eitherwell as the vintage year of the security. For structured securities, the payment priority within the controltranche structure is also considered. For all other fixed maturity securities, cash flow estimates are driven by assumptions regarding probability of default and estimates regarding timing and amount of recoveries associated with a default. If the net present value is less than the amortized cost of the holder or subject to redemption uponinvestment, an OTTI is recognized.occurrenceresults of uncertain events not solely within the Company’s control) are classifiedour process for evaluating available-for-sale securities in unrealized loss positions for OTTI as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet.7CF CORPORATIONNotes to Condensed Financial StatementsSeptember 30, 2017(Unaudited)Althoughdiscussed above, the Company diddetermined that the unrealized losses as of June 30, 2018 increased due to higher interest rates during the quarter coupled with an increase in the spreads over Treasuries required by investors for corporate and municipal bonds. Based on an assessment of all securities in the portfolio in unrealizedspecify a maximum redemption threshold, its charter provides that in no event will it redeem its public sharesother-than-temporarily impaired as of June 30, 2018. June 30, 2018 Less than 12 months 12 months or longer Total Fair Value Fair Value Fair Value Available-for-sale securities Asset-backed securities $ 2,182 $ (21 ) $ — $ — $ 2,182 $ (21 ) Commercial mortgage-backed securities 908 (18 ) — — 908 (18 ) Corporates 11,104 (639 ) — — 11,104 (639 ) Hybrids 830 (40 ) — — 830 (40 ) Municipals 1,273 (33 ) — — 1,273 (33 ) Residential mortgage-backed securities 841 (11 ) — — 841 (11 ) U.S. Government 140 (1 ) — — 140 (1 ) Foreign Government 149 (8 ) — — 149 (8 ) Total available-for-sale securities $ 17,427 $ (771 ) $ — $ — $ 17,427 $ (771 ) Total number of available-for-sale securities in an unrealized loss position less than twelve months 2,055 Total number of available-for-sale securities in an unrealized loss position twelve months or longer 0 Total number of available-for-sale securities in an unrealized loss position 2,055 December 31, 2017 Less than 12 months 12 months or longer Total Fair Value Fair Value Fair Value Available-for-sale securities Asset-backed securities $ 1,944 $ (3 ) $ — $ — $ 1,944 $ (3 ) Commercial mortgage-backed securities 478 (1 ) — — 478 (1 ) Corporates 3,814 (19 ) — — 3,814 (19 ) Equities 798 (7 ) — — 798 (7 ) Hybrids 266 (3 ) — — 266 (3 ) Municipals 285 (1 ) — — 285 (1 ) Residential mortgage-backed securities 939 (3 ) — — 939 (3 ) U.S. Government 74 — — — 74 — Foreign Government 140 (1 ) — — 140 (1 ) Total available-for-sale securities $ 8,738 $ (38 ) $ — $ — $ 8,738 $ (38 ) Total number of available-for-sale securities in an unrealized loss position less than twelve months 1,224 Total number of available-for-sale securities in an unrealized loss position twelve months or longer 0 Total number of available-for-sale securities in an unrealized loss position 1,224 amount that would cause its net tangible assets (shareholders' equity)unrealized loss position were primarily concentrated in investment grade, corporate debt and hybrid instruments. be less than $5,000,001. The Company recognizes changes in redemption value immediately as they occur and will adjust the carrying value of all investments, respectively.security to equalbeginning and ending balances of the redemptioncredit loss portion of OTTI on fixed maturity available-for-sale securities held by the Company for the three and six months ended June 30, 2018 and 2017 (Predecessor), for which a portion of the OTTI was recognized in AOCI: Three months ended June 30, Six months ended June 30, 2018 2017 2018 2017 Predecessor Predecessor Beginning balance $ — $ 3 $ — $ 3 Increases attributable to credit losses on securities: OTTI was previously recognized — — — — OTTI was not previously recognized — — — — Ending balance $ — $ 3 $ — $ 3 atof the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares shall be affected by charges against additional paid-in capital. Accordingly,investments at September 30, 2017 and December 31, 2016, 62,337,495 and 64,066,643 Class A ordinary shares were classified outside of permanent equity at their redemption value, respectively.Offering CostsOffering costs consisting principally of legal, accounting, underwriting commissions and other costs incurred through the balance sheet date and non-credit losses in relation to fixed maturity securities and other invested assets held by the Company for the three and six months ended June 30, 2018 and 2017 (Predecessor): Three months ended June 30, Six months ended June 30, 2018 2017 2018 2017 Predecessor Predecessor Credit impairment losses in operations $ — $ — $ (2 ) $ (21 ) Change-of-intent losses in operations — — — — Amortized cost — 13 — 13 Fair value — 13 — 13 Non-credit losses in other comprehensive income for investments which experienced OTTI — — — — Three months ended June 30, Six months ended June 30, 2018 2017 2018 2017 Predecessor Predecessor OTTI Recognized in Net Income (Loss) Asset-backed securities $ — $ (1 ) $ — $ (1 ) Corporates — — (2 ) (20 ) Other invested assets — 1 — — Total $ — $ — $ (2 ) $ (21 ) June 30, 2018 December 31, 2017 Gross Carrying Value % of Total Gross Carrying Value % of Total Property Type: Hotel 22 4 % 22 4 % Industrial - General 45 9 % 46 9 % Industrial - Warehouse 21 4 % 38 6 % Multifamily 69 13 % 70 13 % Office 156 30 % 158 29 % Retail 212 40 % 214 39 % Total commercial mortgage loans, gross of valuation allowance $ 525 100 % $ 548 100 % Allowance for loan loss — — — % Total commercial mortgage loans $ 525 100 % $ 548 100 % U.S. Region: East North Central $ 111 21 % $ 108 20 % East South Central 20 4 % 20 4 % Middle Atlantic 85 16 % 85 15 % Mountain 66 13 % 67 12 % New England 14 3 % 14 3 % Pacific 133 25 % 135 25 % South Atlantic 58 11 % 65 12 % West North Central 13 2 % 13 2 % West South Central 25 5 % 41 7 % Total commercial mortgage loans, gross of valuation allowance $ 525 100 % $ 548 100 % Allowance for loan loss — — — % Total commercial mortgage loans $ 525 100 % $ 548 100 % Debt-Service Coverage Ratios Total Amount % of Total Estimated Fair Value % of Total >1.25 1.00 - 1.25 <1.00 N/A(a) June 30, 2018 LTV Ratios: Less than 50% $ 274 $ — $ — $ — $ 274 52 % $ 272 52 % 50% to 60% 233 6 — — 239 46 % 238 46 % 60% to 75% 12 — — — 12 2 % 12 2 % Commercial mortgage loans $ 519 $ 6 $ — $ — $ 525 100 % $ 522 100 % December 31, 2017 LTV Ratios: Less than 50% $ 293 $ — $ — $ — $ 293 54 % $ 294 54 % 50% to 60% 236 7 — — 243 44 % 243 44 % 60% to 75% 12 — — — 12 2 % 12 2 % Commercial mortgage loans $ 541 $ 7 $ — $ — $ 548 100 % $ 549 100 % June 30, 2018 December 31, 2017 Gross balance commercial mortgage loans $ 525 $ 548 Allowance for loan loss — — Net balance commercial mortgage loans $ 525 $ 548 June 30, 2018 December 31, 2017 Current to 30 days $ 525 $ 548 Past due — — Total carrying value $ 525 $ 548 directly related toclassified as troubled debt restructurings ("TDRs") are individually evaluated and measured for impairment. As of June 30, 2018 and December 31, 2017, our CML portfolio had no impairments, modifications or TDR.initial public offering totaled approximately $39.5 million, inclusiveaccompanying Condensed Consolidated Statements of $24.15 millionOperations were as follows: Three months ended June 30, Six months ended June 30, 2018 2017 2018 2017 Predecessor Predecessor Fixed maturity securities, available-for-sale $ 248 $ 242 $ 490 $ 478 Equity securities 26 11 36 21 Commercial mortgage loans 5 6 12 12 Invested cash and short-term investments 4 2 7 2 Other investments 15 2 26 3 Gross investment income 298 263 571 516 Investment expense (16 ) (6 ) (26 ) (12 ) Net investment income $ 282 $ 257 $ 545 $ 504 Three months ended June 30, Six months ended June 30, 2018 2017 2018 2017 Predecessor Predecessor Net realized losses on fixed maturity available-for-sale securities $ (23 ) $ (8 ) $ (60 ) $ (25 ) Realized losses on equity securities (23 ) — (29 ) — Change in fair value of other derivatives and embedded derivatives — 1 — 2 Realized gains (losses) on other invested assets — 1 (3 ) — Hedging derivatives and reinsurance-related embedded derivatives: Realized gains (losses) on certain derivative instruments (15 ) 73 (4 ) 148 Unrealized gains (losses) on certain derivative instruments 72 9 (63 ) 43 Change in fair value of reinsurance related embedded derivatives (a) (13 ) (9 ) (34 ) (20 ) Realized gains (losses) on hedging derivatives and reinsurance-related embedded derivatives 44 73 (101 ) 171 Net investment gains (losses) $ (2 ) $ 67 $ (193 ) $ 148 deferred underwriting commissions in connection with the initial public offering. Offering costs were charged to shareholders’ equity upon the completion of the initial public offering.In addition, an aggregate of approximately $20.4 million in deferred placement agent fees incurred through the balance sheet date that are directly related to the forward purchase agreements were also charged to shareholders’ equity upon the issuance of Class B ordinary shares to the Anchor Investors.Net Income (Loss) per ShareNet income (loss) per share is computed by dividing net loss by the weighted-average number of ordinary shares outstanding during the period. An aggregate of 62,337,495 and 64,042,626 shares of Class A ordinary shares subject to possible redemption at September 30, 2017 and 2016, respectively, have been excluded from the calculation of basic and diluted loss per ordinary share for all periods presented with the exception of the diluted three months September 30, 2017 and 2016 since such shares, if redeemed, only participate in their pro rata share of the trust earnings. The Company has not considered the effect of the warrants sold in the initial public offering (including the consummation of the Over-allotment) and Private Placement to purchase an aggregate of 50,300,000 Class A ordinary shares in the calculation of diluted loss per share, since their inclusion would be anti-dilutive.Fair Value MeasurementsFair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:·Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;·Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and·Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.ASC 820, Fair Value Measurement and Disclosures, requires all entities to disclose the fair value of financial instruments, both assetsreinsurance related embedded derivatives in the successor period is due to FSRC unaffiliated third party business and liabilities for which itthe predecessor periods activity is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of September 30, 2017 and December 31, 2016, the recorded values of cash and cash equivalents, prepaid expenses, accounts payable, and accrued expenses approximate the fair values due to the short-term nature of the instruments.
FGL and FSRC reinsurance treaty.8CF CORPORATIONNotes to Condensed Financial StatementsSeptember 30, 2017(Unaudited)Income Taxes Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period of the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at September 30, 2017. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s unaudited condensed financial statements. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.Recent Accounting PronouncementsManagement does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.Note 3 - Initial Public OfferingOn May 25, 2016, the Company consummated the sale of 60,000,000 units at a price of $10.00 per unit in the initial public offering. On June 29, 2016, the Company consummated the sale of 9,000,000 additional units pursuant to the exercise in full of the Over-allotment. Each unit consists of one public share and one-half of one Public Warrant. No fractional Public Warrants will be issued upon separation of the units and only whole Public Warrants will trade.The Company incurred approximately $39.5 million of offering costs in connection with the initial public offering, inclusive of $24.15 million of deferred underwriting commissions payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completes a Business Combination. The underwriters are not entitled to any interest accrued on the deferred discount.Note 4 - Private PlacementConcurrently with the closing of the initial public offering and the Over-allotment, the Sponsor purchased an aggregate of 15,800,000 Private Placement Warrants at $1.00 per Private Placement Warrant, generating gross proceeds of $15.8 million in the aggregate. Each Private Placement Warrant is exercisable to purchase one Class A ordinary share for $11.50 per share. A portion of the proceeds from the sale of fixed-maturity available for-sale-securities and the Private Placement Warrants was addedgross gains and losses associated with those transactions were as follows: Three months ended June 30, Six months ended June 30, 2018 2017 2018 2017 Predecessor Predecessor Proceeds $ 870 $ 169 $ 3,648 $ 432 Gross gains — 6 8 14 Gross losses (22 ) (11 ) (65 ) (13 ) Three months ended Six months ended June 30, 2018 June 30, 2018 Net gains (losses) recognized during the period on equity securities $ (23 ) $ (29 ) Less: Net gains (losses) recognized during the period on equity securities sold during the period (3 ) (2 ) Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date $ (20 ) $ (27 ) proceeds fromthree and six months ended June 30, 2018, respectively.initial public offeringCompany’s financial statements. VIEs do not have sufficient equity to be heldfinance their own activities without additional financial support and certain of its investors lack certain characteristics of a controlling financial interest. These VIEs are not consolidated in the Trust Account. IfCompany’s financial statements for the following reasons: 1) FGL Insurance either does not control or does not have any voting rights or notice rights; 2) the Company does not complete a Business Combination withinhave any rights to remove the Combination Period, the Private Placement Warrants will expire worthless.9CF CORPORATIONNotes to Condensed Financial StatementsSeptember 30, 2017(Unaudited)Note 5 - Related Party TransactionsFounder SharesOn March 2, 2016,investment manager; and 3) the Company issuedwas not involved in the design of the investment. These characteristics indicate that FGL Insurance lacks the ability to direct the activities, or otherwise exert control, of the VIEs and is not considered the primary beneficiary of them. aggregateunaffiliated private business development company ("BDC"). The BDC invests in secured and unsecured fixed maturity and equity securities of 15,000,000 founder sharesmiddle market companies in the United States. Due to the Sponsor in exchange for a capital contribution of $25,000. On April 19, 2016, the Sponsor surrendered 3,750,000 founder shares to the Company for no consideration, which the Company cancelled. The Company then issued 3,750,000 founder shares to the Anchor Investors (as defined below) for an aggregate price of approximately $7,000 in connection with the forward purchase agreements. The Sponsor and the Anchor Investors currently own 11,250,000 and 3,750,000 founder shares, respectively. The founder shares will automatically convert into Class A ordinary shares in connection with the consummation of a Business Combination at a ratio such that the number of Class A ordinary shares issuable upon conversion of all founder shares will equal, in the aggregate, on an as-converted basis, 20%voting structure of the sum of (i) the total number of Class A ordinary shares outstanding upon completion of the initial public offering (including the Over-allotment), plus (ii) the sum of (a) the total number of Class A ordinary shares issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination (including forward purchase shares, but not forward purchase warrants), excluding any Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, or to be issued, to any seller in the initial Business Combination and any Private Placement Warrants issued to the Sponsor upon conversion of Working Capital Loans, minus (b) the number of public shares redeemed by public shareholders in connection with the initial Business Combination.The Sponsor, Chinh E. Chu and William P. Foley, II have agreed not to transfer, assign or sell any of their founder shares until the earliest of (a) one year after the completion of the initial Business Combination with respect 50% of their founder shares, (b) two years after the completion of the initial Business Combination with respect to the remaining 50% of their founder shares, and (c) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction, after an initial Business Combination that results in all of the Company’s shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property. The Anchor Investors have agreed not to transfer, assign or sell any of their founder shares until the earlier to occur of: (i) one year after the completion of the initial Business Combination or (ii) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction after the initial Business Combination that results in all of the Company’s shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property (except to certain permitted transferees). Any permitted transferees will be subject to the same restrictions and other agreements of the initial shareholders or Anchor Investors, as applicable, with respect to any founder shares. Notwithstanding the foregoing, if the closing price of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, the founder shares held by investors other than the Sponsor, Chinh E. Chu and William P. Foley, II will be released from the lock-up.Private Placement WarrantsOn May 25, 2016 and June 29, 2016, the Sponsor purchased from the Company an aggregate of 15,800,000 Private Placement Warrants as described in Note 4. Each Private Placement Warrant entitles the holder to purchase one Class A ordinary share at $11.50 per share. The Private Placement Warrants (including the Class A ordinary shares issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30 days after the completion of the initial Business Combination, and they will be non-redeemable so long as they are held by the Sponsor or its permitted transferees. If the Private Placement Warrants are held by someone other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. Otherwise, the Private Placement Warrants have terms and provisions that are identical to those of the Public Warrants and have no net cash settlement provisions.If the Company does not complete a Business Combination, then the proceeds of the sale of the Private Placement Warrants will be part of the liquidating distribution to the public shareholders and the Private Placement Warrants will expire worthless.Forward Purchase AgreementsOn April 19, 2016, the Company entered into forward purchase agreements pursuant to which certain investors (“Anchor Investors”) (including two affiliates of the Sponsor) agreed to purchase an aggregate of 51,000,000 Class A ordinary shares plus an aggregate of 19,083,333 redeemable warrants (one redeemable warrant for every three forward purchase shares purchased) at $10.00 per Class A ordinary share for an aggregate purchase price of $510 million, in a private placement to occur concurrentlyhave voting power. The initial capital call occurred June 30, 2015, with the closingremaining commitment expected to fund June 2019. The Company has funded $42 as of an initial Business Combination. In connection with these agreements,June 30, 2018.Company issued an aggregate of 3,750,000 founder sharesequity method and are included in “Other invested assets” on the Company’s consolidated balance sheet. The Company's maximum exposure to such investors. The founder shares issued to such investors are subject to similar contractual conditions and restrictions as the founder shares issued to the Sponsor. The Anchor Investors will have redemption rightsloss with respect to any public shares they own but have waived redemption rights with respectthese investments is limited to their founder shares. The forward purchase agreements also provide that the investors are entitled to a right of first offer with respectinvestment carrying amounts reported in the Company's consolidated balance sheet in addition to any proposed salerequired unfunded commitments. As of June 30, 2018, the Company's maximum exposure to loss was $218 in recorded carrying value and $655 in unfunded commitments. June 30, 2018 December 31, 2017 Assets: Derivative investments: Call options $ 294 $ 477 Futures contracts 1 — FSRC derivative contracts 17 15 Other invested assets: Other derivatives and embedded derivatives 16 17 $ 328 $ 509 Liabilities: Contractholder funds: FIA embedded derivative $ 2,491 $ 2,387 Other liabilities: Preferred shares reimbursement feature embedded derivative 24 23 $ 2,515 $ 2,410 Three months ended June 30, Six months ended June 30, 2018 2017 2018 2017 Predecessor Predecessor Revenues: Net investment gains (losses): Call options $ 51 $ 81 $ (69 ) $ 186 Futures contracts 2 1 — 5 FSRC derivative contracts 4 — 2 — Other derivatives and embedded derivatives — 1 — 2 Reinsurance related embedded derivatives (a) (13 ) (9 ) (34 ) (20 ) Total net investment gains (losses) $ 44 $ 74 $ (101 ) $ 173 Benefits and other changes in policy reserves: FIA embedded derivatives $ 158 $ 80 $ 104 $ 192 Acquisition and operating expenses, net of deferrals: Preferred shares reimbursement feature embedded derivative (b) $ — $ — $ (1 ) $ — equity or equity-linked securities bypayment at maturity based on the Company for capital raising purposes in connection with the closingvalue of an initial Business Combination (other than sharesembedded derivative in AnchorPath Dedicated Return Fund (the "AnchorPath Fund") of $11 which was based on the actual return of the fund. At June 30, 2018, the fair value of the fund-linked note and warrants pursuant to forward purchase agreements)embedded derivative were $25 and registration rights with respect to$16, respectively. At maturity of the shares, warrants and Class A ordinary shares underlyingfund-linked note, FGL Insurance will receive the forward purchase warrants.10CF CORPORATIONNotes to Condensed Financial StatementsSeptember 30, 2017(Unaudited)On April 22, 2016,$35 face value of the Company entered into an agreement in connection withnote plus the forward purchase agreements described above, pursuant to which Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Credit Suisse Securities (USA) LLC agreed to act as placement agents (the “Placement Agents”)value of the embedded derivative in the related private placement. In connection therewith,AnchorPath Fund. The additional payment at maturity is an embedded derivative reported in "Other invested assets", while the Placement Agents are entitled to placement agent feeshost is an available-for-sale security reported in an aggregate amount of: (i) up to 3.5% of the aggregate proceeds received from the forward purchase shares (or $17.85 million), contingently payable at the consummation of an initial Business Combination, (ii) an additional placement agent fee of 0.5% of the aggregate proceeds received from the sales of the forward purchase agreements (or $2.55 million) at the Company’s sole discretion as determined at the time of the consummation of an initial Business Combination, and (iii) reimbursement of reasonable legal counsel fees and expenses up to an aggregate amount of $275,000, which will be paid upon the earlier of the consummation of an initial Business Combination and December 1, 2017.Due to Related PartiesThe Company’s Sponsor and other related parties have loaned the Company an aggregate amount of $225,733 to be used for the payment of costs related to the initial public offering. These borrowings are non-interest bearing, unsecured and due on demand. "Fixed maturities, available-for-sale".not yet repaid this amount as of September 30, 2017.In orderFIA Contracts that permit the holder to finance transaction costs in connection with a Business Combination, the Sponsorelect an interest rate return or an affiliateequity index linked component, where interest credited to the contracts is linked to the performance of various equity indices, primarily the S&P 500 Index. This feature represents an embedded derivative under GAAP. The FIA embedded derivative is valued at fair value and included in the liability for contractholder funds in the accompanying Condensed Consolidated Balance Sheets with changes in fair value included as a component of “Benefits and other changes in policy reserves” in the Condensed Consolidated Statements of Operations. See a description of the Sponsor, or certainfair value methodology used in "Note 6. Fair Value of Financial Instruments".Company’s officersunderlying policies. On the respective anniversary dates of the index policies, the index used to compute the interest credit is reset and directors may, but are not obligated to, loan the Company Working Capital Loans. In July 2017,purchases new one, two, three, or five year call options to fund the Sponsor loaned an aggregatenext index credit. The Company manages the cost of $750,000 to the Company. If the Company completes a Business Combination, the Company will repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans will be repaid only out of funds held outside the Trust Account. In the event that the Company does not complete a Business Combination, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account may be used to repay the Working Capital Loans. Except for the foregoing,these purchases through the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respectits FIA contracts, which permit the Company to such loans.change caps, spreads or participation rates, subject to guaranteed minimums, on each contract’s anniversary date. The Working Capital Loans will either be repaid upon consummation of a Business Combination, without interest, or, atchange in the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrantsfair value of the post Business Combination entity at a price of $1.00 per warrant. Any such warrants would have identical terms ascall options and futures contracts is generally designed to offset the Private Placement Warrants.Administrative Service FeeThe Company has agreed, commencing on May 25, 2016 through the earlierportion of the Company’s consummation of a Business Combination and liquidation, to pay an affiliatechange in the fair value of the SponsorFIA embedded derivative related to index performance. The call options and futures contracts are marked to fair value with the change in fair value included as a monthly feecomponent of $10,000 for office space, and secretarial and administrative services.“Net investment gains (losses).” The Company recorded $30,000 and $0change in expense for the three months ended September 30, 2017 and 2016, respectively, and recorded $90,000 and $40,000 in expense for the nine months ended September 30, 2017 and for the period from February 26, 2016 (Date of Inception) through September 30, 2016, respectively.Note 6 - Commitments & ContingenciesRegistration RightsThe Sponsor is entitled to registration rights pursuant to a registration rights agreement entered into on May 19, 2016 with respect to the founder shares and Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the conversionfair value of the founder shares,call options and futures contracts includes the exercise of the Private Placement Warrantsgains and warrants that may be issued upon conversion of Working Capital Loans). The Sponsor may make up to three demands, excluding short form demands, that the Company register such securities. In addition, the Sponsor has “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.11CF CORPORATIONNotes to Condensed Financial StatementsSeptember 30, 2017(Unaudited)Pursuant to the forward purchase agreements described below, the Company agreed to file within 30 days after the closing of the Business Combination a registration statement for a secondary offering of the forward purchase shares and the forward purchase warrants (and underlying Class A ordinary shares) and to maintain the effectiveness of such registration statement until the earliest of (A) the date on which the Anchor Investors cease to hold the securities covered thereby, (B) the date all of the securities covered thereby can be sold publicly without restriction or limitation under Rule 144 under the Securities Act and (C) the second anniversary of the date of effectiveness of such registration statement, subject to certain conditions and limitations set forth in the forward purchase agreements.Underwriting AgreementThe Company granted the underwriters a 45-day option to purchase up to 9,000,000 additional units to cover over-allotmentslosses recognized at the initial public offering price less the underwriting discounts and commissions. The underwriters fully exercised the Over-allotment on June 29, 2016, generating additional gross proceeds of $90 million.The Company paid $0.20 per unit, or $13.8 million in the aggregate, to the underwriters, upon the closing of the initial public offering. $0.35 per unit, or $24.15 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.Note 7 - Shareholders’ EquityClass A ordinary shares - The Company is authorized to issue 400,000,000 Class A ordinary shares with a par value of $0.0001 per share. Holders of the Company’s Class A ordinary shares are entitled to one vote for each share. At September 30, 2017 and December 31, 2016, there were 69,000,000 Class A ordinary shares issued and outstanding, including 62,337,495 and 64,066,643 shares of Class A ordinary shares subject to possible redemption, respectively.Class B ordinary shares (founder shares) - The Company is authorized to issue 50,000,000 Class B ordinary shares with a par value of $0.0001 per share. Holders of the Company’s Class B ordinary shares are entitled to one vote for each share. The founder shares will automatically convert into Class A ordinary shares on the first business day following the consummation of the initial Business Combination. The ratio at which founder shares will convert into Class A ordinary shares will be such that the number of Class A ordinary shares issuable upon conversion of all founder shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of (i) the total number of Class A ordinary shares outstanding upon the completion of the initial public offering (including the Over-allotment), plus (ii) the sum of (a) the total number of Class A ordinary shares issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination (including forward purchase shares, but not forward purchase warrants), excluding any Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, or to be issued, to any seller in the initial Business Combination and any Private Placement Warrants issued to the Sponsor upon conversion of Working Capital Loans, minus (b) the number of public shares redeemed by public shareholders in connection with the initial Business Combination.As of September 30, 2017 and December 31, 2016, the Company had 15,000,000 founder shares issued and outstanding.Holders of Class A ordinary shares and Class B ordinary shares will vote together as a single class on all matters submitted to a vote of shareholders except as required by law, except that prior to a Business Combination, only holders of Class B ordinary shares have the right to elect the Company’s directors.Preferred shares - The Company is authorized to issue 1,000,000 preferred shares with a par value of $0.0001 per share. At September 30, 2017 and December 31, 2016, there were no preferred shares issued or outstanding.12CF CORPORATIONNotes to Condensed Financial StatementsSeptember 30, 2017(Unaudited)Warrants - The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) May 26, 2017; provided in each case that the Company has an effective registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A ordinary shares issuable upon exercise of the Public Warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Public Warrantsinstrument term or upon early termination and the changes in accordance withfair value of open positions.provisionsCompany’s risk tolerance. The Company’s FIA hedging strategy economically hedges the equity returns and exposes the Company to the risk that unhedged market exposures result in divergence between changes in the fair value of the warrant agreement. If a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by the sixtieth (60th) day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.The Private Placement Warrants are identical to the Public Warrants underlying the units sold in the initial public offering, except that the Private Placement Warrantsliabilities and the Class A ordinary shares issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the Sponsor or its permitted transferees. If the Private Placement Warrants are held by someone other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.may calluses a variety of techniques, including direct estimation of market sensitivities and value-at-risk to monitor this risk daily. The Company intends to continue to adjust the Public Warrants for:·in whole and not in part;·at a price of $0.01 per warrant;·upon a minimum of 30 days prior written notice of redemption; and·if, and only if, the last reported sales price of the ordinary shares equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a cashless basis. In no event will the Company be required to net cash settle its warrants. If the Company is unable to complete a Business Combination within the Combination Periodhedging strategy as market conditions and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.Note 8 - Merger AgreementMerger ConsiderationPursuant to the Merger Agreement, at the time of closing (the “Effective Time”), each issued and outstanding share of FGL common stock, par value $0.01 per share (the “FGL Common Stock”), immediately prior to the Effective Time (other than any shares of FGL Common Stock owned by FGL as treasury stock or by any FGL subsidiary or owned by the Company, Parent, Merger Sub or any other subsidiary of the Company, which will be cancelled and no payment will be made with respect thereto), and shares granted pursuant to FGL’s equity plan, will be cancelled and converted automatically into the right to receive $31.10 in cash, without interest (the “Merger Consideration”). The Merger Agreement permits FGL to pay out a regular quarterly cash dividend on FGL Common Stock prior to the closing of the transaction (the “Closing”) in an amount not in excess of $0.065 per share, per quarter (the per share amount of FGL’s most recently declared quarterly dividend).
risk tolerance change.13CF CORPORATIONNotes to Condensed Financial StatementsSeptember 30, 2017(Unaudited)At the Effective Time, each (i) option to purchase shares of FGL Common Stock, (ii) restricted share of FGL Common Stock and (iii) performance-based restricted stock unit relating to shares of FGL Common Stock, in each case, whether vested or unvested, will become fully vested and automatically converted into the right to receive a cash payment equal to the product of (1) the number of shares subject to the award (for restricted stock units, determined at the target performance level), multiplied by (2) the Merger Consideration (less the exercise price per share in the case of stock options). Each stock option and restricted stock unit relating to shares of Fidelity & Guaranty Life Holdings, Inc., a subsidiary of FGL (“FGLH”), whether vested or unvested, will become fully vested and automatically converted into the right to receive a cash payment equal to the product of (A) the number of shares of FGLH stock subject to the award, multiplied by (B) $176.32 (less the exercise price in the case of such stock options), and each dividend equivalent held in respect of a share of FGLH stock (a “DER”), whether vested or unvested, will become fully vested and automatically converted into the right to receive a cash payment equal to the amount accrued with respect to such DER.During the three and nine months ended Septemberincurred approximately $14.2 million in expenses related to the merger with FGL.Representations, Warranties and CovenantsThe Merger Agreement contains customary representations, warranties and covenants by the Company, Parent, Merger Sub and FGL.Conditions to ClosingConsummation of the FGL Business Combination is subject to satisfaction or waiver of customary closing conditions, including, among others, approval by the Company’s shareholders of the Merger Agreement and the issuance of the Company’s ordinary shares in connection with the FGL Business Combination, approval by FGL’s stockholders and delivery at least twenty (20) days prior to the Closing of an information statement to be filed with (and cleared by) the SEC.Following the execution of the Merger Agreement, FS Holdco II Ltd. (“FS Holdco”), a wholly owned subsidiary of HRG Group, Inc. (“HRG”) and FGL’s majority stockholder, executed and delivered to FGL and the Company an irrevocable written consent approving and adopting the Merger Agreement and the transactions contemplated thereby. As a result, the holders of a majority of the outstanding shares of FGL Common Stock have adopted and approved the Merger Agreement.TerminationThe Merger Agreement contains customary termination rights, including, among others, (i) by mutual written consent of the Company and FGL, (ii) by the Company or FGL if the FGL Business Combination is prohibited by law, (iii) by the Company or FGL if the Company does not obtain approval of its shareholders and (iv) by the Company or FGL if the FGL Business Combination is not consummated prior to January 24, 2018, subject to extension under certain circumstances. Upon termination of the Merger Agreement under specified circumstances, FGL may be required to pay a termination fee to the Company in an aggregate amount of $50,000,000.In addition, Blackstone Tactical Opportunities Fund II L.P. (“BTO Fund”), certain affiliated funds of GSO Capital Partners LP (“GSO”) and Fidelity National Financial, Inc. (“FNF”) have executed limited guaranties in favor of FGL to guarantee, in the event of the termination of the Merger Agreement as a result of the Company’s, Parent’s or Merger Sub’s intentional and material breach or fraud, the payment of a portion of any damages determined in a final judgment by a court or governmental authority or pursuant to a settlement by written agreement of the parties to the Merger Agreement, up to a specified portion of the total transaction value.Equity Commitment LettersIn connection with the Merger Agreement, the Company obtained the following equity commitment letters for the purpose of funding the FGL Business Combination consideration and related transactions and paying the costs and expenses incurred in connection therewith (the “Equity Commitment Letters”):14CF CORPORATIONNotes to Condensed Financial StatementsSeptember 30, 2017(Unaudited)BTO Fund Equity Commitment LetterPursuant to equity commitment letters (the “BTO Fund Equity Commitment Letters”) from BTO Fund, dated as of May 24, 2017, BTO Fund has committed, on the terms and subject to the conditions set forth therein, at the Closing, to purchase, or cause the purchase of, equity of the Company for an aggregate cash purchase price of $225 million (the “BTO Fund Commitment”). BTO Fund is an investment fund under common control with CFS Holdings (Cayman) L.P. (“CFS”), a shareholder of the Company and a party to the forward purchase agreements.The obligation of BTO Fund to fund the BTO Fund Commitment will terminate automatically and immediately upon the earliest to occur of (a) the Closing, (b) the termination of the Merger Agreement and (c) FGL or any of its affiliates or representatives asserting any claim against BTO Fund in connection with the Merger Agreement or the Share Purchase Agreement (as defined below), as applicable, or any of the transactions contemplated by the BTO Fund Equity Commitment Letters or the Merger Agreement or Share Purchase Agreement, as applicable, subject to certain exceptions.FNF Equity Commitment LettersPursuant to equity commitment letters (the “FNF Equity Commitment Letters”) from FNF, dated as of May 24, 2017, FNF has committed, on the terms and subject to the conditions set forth therein, at the Closing, to purchase, or cause the purchase of, equity of the Company for an aggregate cash purchase price equal to (x) $235 million plus (y) up to an aggregate of $195 million to offset any redemptions of the Company’s ordinary shares in connection with the shareholder vote to approve the FGL Business Combination on or after the date of the FNF Equity Commitment Letters and prior to the Closing (the “FNF Commitment”). The Company’s Co-Executive Chairman, William P. Foley, II, is also the non-executive Chairman of the Board of FNF.The obligation of FNF to fund the FNF Commitment will terminate automatically and immediately upon the earliest to occur of (a) the Closing (upon funding), (b) the termination of the Merger Agreement and (c) FGL or any of its affiliates or representatives asserting any claim against FNF in connection with the Merger Agreement or the Share Purchase Agreement, as applicable, or any of the transactions contemplated by the FNF Equity Commitment Letters or the Merger Agreement or Share Purchase Agreement, as applicable, subject to certain exceptions.GSO Equity Commitment LettersPursuant to equity commitment letters (the “GSO Equity Commitment Letters”) from GSO, dated as of May 24, 2017, GSO has committed, on the terms and subject to the conditions set forth therein, to purchase, or cause the purchase of, preferred shares of the Company for an aggregate cash purchase price equal to (x) $275 million plus (y) up to an aggregate of $465 million to offset any redemptions of the Company’s ordinary shares in connection with the shareholder vote to approve the FGL Business Combination on or after the date of the GSO Equity Commitment Letters and prior to the Closing (the “GSO Commitment”).The obligation of GSO to fund the GSO Commitment will terminate automatically and immediately upon the earliest to occur of (a) the Closing (upon funding), (b) the termination of the Merger Agreement and (c) FGL or any of its affiliates or representatives asserting any claim against GSO in connection with the Merger Agreement or the Share Purchase Agreement, as applicable, or any of the transactions contemplated by the GSO Equity Commitment Letters or the Merger Agreement or Share Purchase Agreement, as applicable, subject to certain exceptions.Forward Purchase Backstop Equity Commitment LettersPursuant to equity commitment letters (the “Forward Purchase Backstop Equity Commitment Letters”) from BTO Fund and FNF, dated as of May 24, 2017, (i) BTO Fund has committed, on the terms and subject to the conditions set forth therein, at the Closing, to purchase, or cause the purchase of, equity of the Company for an aggregate cash purchase price equal to one-third (1/3) of the aggregate amount, if any, not funded by one or more purchasers under the forward purchase agreements at or prior to the closing pursuant to the forward purchase agreements (the “FPA Shortfall”), up to an aggregate amount of $100 million, and (ii) FNF has committed, on the terms and subject to the conditions set forth therein, at the Closing, to purchase, or cause the purchase of, equity of the Company for an aggregate cash purchase price equal to two-thirds (2/3) of the FPA Shortfall, up to an aggregate amount of $200 million (the “Forward Purchase Backstop Commitments”).15CF CORPORATIONNotes to Condensed Financial StatementsSeptember 30, 2017(Unaudited)In exchange for providing the Forward Purchase Backstop Commitments, promptly following the closing, the Company will pay to BTO Fund or its designated affiliate the amount of $1.5 million and to FNF the amount of $3.0 million, with such amounts payable whether or not any portion of the Forward Purchase Backstop Commitment is ultimately required to be funded. BTO Fund and FNF have agreed to forego receiving such fees in light of the additional commitments of the Anchor Investors to purchase 20,000,000 ordinary shares in connection with the rights of first offer set forth in the forward purchase agreements.The obligation of the parties to the Forward Purchase Backstop Equity Commitment Letters (the “Forward Purchase Backstop Parties”) to fund the Forward Purchase Backstop Commitments will terminate automatically and immediately upon the earliest to occur of (a) the Closing (upon funding), (b) the termination of the Merger Agreement in accordance with its terms and (c) FGL or any of its affiliates or representatives asserting any claim against any Forward Purchase Backstop Party in connection with the Merger Agreement or Share Purchase Agreement, as applicable, or any of the transactions contemplated by the Forward Purchase Backstop Equity Commitment Letters or the Merger Agreement or Share Purchase Agreement, as applicable, subject to certain exceptions.The Equity Commitment Letters include an aggregate of $57 million in commitments that relate to the Company’s purchase of the Acquired Companies (as defined below) pursuant to the Share Purchase Agreement , of which $23 million would be used to offset a portion of net redemptions, if any, by public shareholders of the Company in connection with the shareholder vote to approve the FGL Business Combination and $9 million would be used to fund any FPS Shortfall.Investor AgreementOn October 6, 2017, the Company entered into a second amended and restated investor agreement (the “Investor Agreement”) with BTO Fund, GSO and FNF (collectively, “the Investor Agreement Parties”), which amended and restated the amended and restated investor agreement, dated as of June 6, 2017, pursuant to which the Company agreed that, without the Investor Agreement Parties’ prior written consent, the Company would not amend, modify, grant any waiver under or seek to terminate any of the transaction agreements relating to the FGL Business Combination, or take any action concerning settlements, stipulations or judgments relating to government authorities or make any regulatory filings contemplated by the Merger Agreement, subject in each case to certain exceptions and qualifications.Pursuant to the Investor Agreement, the terms of the equity to be issued pursuant to the Equity Commitment Letters will be as follows:·With respect to the BTO Fund Commitment under the BTO Fund Equity Commitment Letters, BTO Fund will purchase ordinary shares. BTO Fund will receive one ordinary share in exchange for each $10.00 funded pursuant to its equity commitment letters.·With respect to the FNF Commitment described in the FNF Equity Commitment Letters, FNF will purchase (i) $135 million of newly issued ordinary shares for $10.00 per share and (ii) $100 million, plus additional amounts, if any, pursuant to FNF’s commitment to offset redemptions of public shares in connection with the FGL Business Combination, of preferred shares of the Company on the terms set forth in the Investor Agreement and warrants of the Company on the terms as set forth in the FNF Fee Letter (as defined below). The terms of the preferred shares to be issued to FNF set forth in the Investor Agreement are identical to those set forth in the GSO Side Letter described below. FNF will also have the right, provided that FNF has first requested the Company to remarket the preferred shares, commencing 10 years after the issuance of the preferred shares, to convert such shares into a number of ordinary shares of the Company as determined by dividing (i) the aggregate par value (including dividends paid in kind and unpaid accrued dividends) of the preferred shares that FNF wishes to convert by (ii) the higher of (a) a 5% discount to the 30-day volume weighted average price (“VWAP”) of the ordinary shares following the conversion notice, and (b) the then-current Floor Price. The “Floor Price” will be $8.00 per share during the 11th year post-funding, $7.00 per share during the 12th year post-funding, and $6.00 during the 13th year post-funding and thereafter.·With respect to the GSO Commitment under the GSO Equity Commitment Letters, GSO will purchase preferred shares and be issued warrants of the Company on the terms set forth in the GSO Side Letter (as defined below).·In the event that public shareholders redeem their public shares in connection with the FGL Business Combination, a certain portion of the GSO Commitment and the FNF Commitment, as described in their respective equity commitment letters, shall be allocated pro rata based on their aggregate commitments thereunder. ·With respect to the Forward Purchase Backstop Equity Commitment Letters, each of FNF and BTO Fund will purchase ordinary shares and one-third (1/3) of one detachable warrant (with such warrants having the same terms as the forward purchase warrants). BTO Fund will receive one ordinary share and one-third (1/3) of a warrant in exchange for each $10.00 funded pursuant to the Forward Purchase Backstop Equity Commitment Letters. In addition, FNF and BTO Fund will together purchase ordinary shares equal to the number of ordinary shares that the purchasers under the forward purchase agreements who fail to fund, if any, would have acquired pursuant to the forward purchase agreements in connection with the FGL Business Combination (including pursuant to the conversion of founder shares into ordinary shares). FNF will purchase two-thirds (2/3) of such ordinary shares, if any, and BTO will purchase one-third (1/3) of such ordinary shares, if any.16CF CORPORATIONNotes to Condensed Financial StatementsSeptember 30, 2017(Unaudited)The Investor Agreement further provides that the Investor Agreement Parties will receive registration rights on customary terms with respect to the ordinary shares,275,000 Series A cumulative preferred shares and warrants (and100,000 Series B cumulative preferred shares (together the ordinary shares underlying such warrants) issued pursuant to“Preferred Shares”). The Preferred Shares do not have a maturity date and are non-callable for the Equity Commitment Letters.GSO Side LetterOn May 24, 2017,first five years.entered into a side letter agreement, as amended on October 6, 2017, with GSO (the “GSO Side Letter”), which provides that the terms of the preferred shares to be issued to GSO will include: a dividend rate of 7.5% per annum (subject to increase in the period beginning 10 years after issuance based on the then-current LIBOR rate), payable quarterly in cash or additional preferred shares of the Company, at the Company’s option; five year call protection; and the right of holders thereof to request the Company to re-market the preferred shares commencing in the sixth year following issuance, subject to the terms and conditions specified therein. In addition, GSO will also have the right, commencing 10 years after the issuance of the preferred shares, provided that GSO has first requested the Companycustomary blackout provisions) to remarket the Preferred Shares on their existing terms. If the remarketing is successful and the original holders elect to sell their preferred shares as described below, to convert such shares into a number of ordinary shares ofat the Company as determined by dividing (i) the aggregate par value (including dividends paid in kindremarketed price and unpaid accrued dividends) of the preferred shares that GSO wishes to convert by (ii) the higher of (a) a 5% discount to the 30-day VWAP of the ordinary shares following the conversion notice, and (b) the then-current Floor Price. From the fifth anniversary of the funding date, upon GSO’s request, the Company is required (subject to customary black-out provisions) to re-market the preferred equity its existing terms. To the extent market conditions make such re-marketing impracticable, the Company may temporarily delay such re-marketing provided that the preferred equity is re-marketed within six months of the date of GSO’ initial request. To the extent it is unlikely that remarketing the preferred shares on the then existing terms will receive a valuation by a prospective purchaser of par or greater than par, the Company may, upon GSO’s request, modify the terms of the preferred shares to improve the sale of such shares with the intention of preserving rating agency equity credit. If the proceeds from any sales resulting from such marketingsale are less than the outstanding balance of the applicable shares (including dividends paid in kind and accumulated but unpaid dividends), the Company will be required to reimburse the sellers, up to a maximum of 10% of the par value of the originally issued preferred shares (including dividends paid in kind and accumulated but unpaid accrued dividends), the Company will reimburse GSO up to a maximum of 10% of par (including paid in kind and unpaid accrued dividends) for actual losses incurred by GSO upon the sale of its preferred shares under the terms of the remarketing mechanism, with such amount payable either in cash, ordinary shares, or any combination thereof, at the Company's option (the “Reimbursement Feature”). The Reimbursement Feature represents an embedded derivative that is not clearly and closely related to the preferred stock host and must be bifurcated. The Reimbursement Feature liability is held at fair value within “Other liabilities” in the accompanying Condensed Consolidated Balance Sheets using a Black Derman Toy model incorporating among other things the paid in kind dividend coupon rate and the Company’s call option. IfChanges in fair value ofchoosesis exposed to deliver ordinary shares to GSO,credit loss in the numberevent of such sharesnon-performance by its counterparties on the call options and reflects assumptions regarding this non-performance risk in the fair value of the call options. The non-performance risk is the net counterparty exposure based on the fair value of the open contracts less collateral held. The Company maintains a policy of requiring all derivative contracts to be delivered will be determinedgoverned by dividing (i)an International Swaps and Derivatives Association (“ISDA”) Master Agreement.amount of actual lossesCompany’s exposure to be paid to GSO by (ii)credit loss on the higher of (a) an 8% discount to the 30-day VWAP of the ordinary shares following the remarketing period, and (b) $6.00.The terms of the preferred equity are expected to include customary covenants for senior preferred equity, including limitations on debt incurrence, equity issuances and payments of dividends, and covenants requiring compliance with a set of financial covenants, affirmative covenants and negative covenants that mirror those containedcall options it holds is presented in the following table: June 30, 2018 Counterparty Notional
Amount Fair Value Collateral Net Credit Risk Merrill Lynch A+/*/A+ $ 3,037 $ 80 $ 38 $ 42 Deutsche Bank A-/A3/BBB+ 1,548 39 40 (1 ) Morgan Stanley */A1/A+ 1,666 36 38 (2 ) Barclay's Bank A*+/A2/A 1,745 67 50 17 Canadian Imperial Bank of Commerce AA-/Aa3/A+ 2,728 73 73 — Wells Fargo A+/A2/A- 567 16 16 — Total $ 11,291 $ 311 $ 255 $ 56 December 31, 2017 Counterparty Credit Rating
(Fitch/Moody's/S&P) (a) Notional
Amount Fair Value Collateral Net Credit Risk Merrill Lynch A/*/A+ $ 2,780 $ 150 $ 118 $ 32 Deutsche Bank A-/A3/A- 1,345 51 55 (4 ) Morgan Stanley */A1/A+ 1,555 92 101 (9 ) Barclay's Bank A*+/A1/A 2,090 103 95 8 Canadian Imperial Bank of Commerce AA-/Aa3/A+ 2,807 96 98 (2 ) Total $ 10,577 $ 492 $ 467 $ 25 facility documentation in effectratings that were not available.the funding date. The preferred equity will rank senior in priority to all other existing and future equity securities of the Company with respect to distribution rights and liquidation preference. In addition, holders of preferred equity are expected to have board observation and customary registration rights with respect to such shares.Pursuant to the GSO Side Letter, for the period from the date of the GSO Side Letter until the earlier of (a) the mutual agreement by the parties thereto not to execute definitive documentation relating to the GSO Commitment, (b) the date of Closing (the “Closing Date”), and (c) the first anniversary of the GSO Side Letter, the Company agreed (i) not to, directly or indirectly solicit, participate in any negotiations or discussion with or provide or afford access to information to any third party with respect to, or otherwise effect, facilitate, encourage or accept any offers for the purchase or provision of the preferred equity to be issued to GSO pursuant to the GSO Commitment Letters (the “GSO Preferred Equity”) or any alternative equity or debt financing arrangements, in each case, to be put in place in connection with the FGL Business Combination in replacement of the GSO Preferred Equity or any portion thereof (other than pursuant to the Equity Commitment Letters, forward purchase agreements or the debt commitment letter), and (ii) if the FGL Business Combination is not consummated and the Company pursues an alternative transaction with FGL within the period ending on the first anniversary of the GSO Side Letter, and another financing source or institution proposes to provide financing in connection with such alternative transaction, the Company will provide GSO a reasonable opportunity to provide such financing in lieu of any other financing source or institution on equivalent terms.17CF CORPORATIONNotes to Condensed Financial StatementsSeptember 30, 2017(Unaudited)Amendment Fees As consideration for amending and restating the Investor Agreement on October 6, 2017 to better align the terms of the preferred shares with the requirements of the rating agencies, the Company agreed to pay $1.1 million to FNF or one or moreroutine practice as part of its designees at the Closing. As consideration for entering into the amendment to the GSO Side Letterover-the-counter derivative agreements on October 6, 2017 to better align the terms of the preferred shares with the requirements of the rating agencies, the Company agreed to pay $2.9 million to GSO or to one or more of its designees at the Closing.GSO Fee LetterAs consideration for the GSO Commitment (including the backstop commitment) and theISDA forms. Under some ISDA agreements, of GSO under the GSO Commitment Letters, limited guaranty and the GSO Side Letter, the Company also entered into a fee letter agreement with GSO, dated May 24, 2017 (the “GSO Fee Letter”), pursuant to which the Company has agreed to paymaintain certain financial strength ratings. A downgrade below these levels provides the counterparty under the agreement the right to GSOterminate the following feesopen option contracts between the parties, at Closing:·the original issue discount of $5.5 million in respect of the preferred shares issued to GSO (the “GSO OID”);·a commitment fee of $6.975 million (the “GSO Commitment Fee”);·penny warrants convertible, in the aggregate, for 3.3% of the Company’s ordinary shares (on a fully diluted basis) (the “GSO Investment Warrants”); and·if, and to the extent, any amount of the preferred equity under GSO’s backstop commitment is funded (the “GSO Backstop Equity”), then (x) a funding fee of 0.5% of the amount of the GSO Backstop Equity that is funded (together with the GSO OID and the GSO Commitment Fee, the “GSO Closing Payments”), and (y) penny warrants attached to the GSO Backstop Equity that are convertible, in the aggregate, for the result of (1) the proportion of the GSO Backstop Equity that is funded, and (2) 3.5% of the Company’s ordinary shares (on a fully diluted basis) (together with the GSO Investment Warrants, the “GSO Warrants”).The GSO Closing Payments willwhich time any amounts payable by the Company or the counterparty would be paid as a reductiondependent on the market value of the purchase price payable by GSO forunderlying option contracts. The Company's current rating doesn't allow any counterparty the preferred equity underright to terminate ISDA agreements. In certain transactions, the GSO Commitment Letters. The Company has also agreed to pay or reimburse GSO for fees and expenses of counsel in connection with GSO’s anticipated purchase of the preferred equity.18CF CORPORATIONNotes to Condensed Financial StatementsSeptember 30, 2017(Unaudited)FNF Fee LetterAs consideration for the FNF Commitment (including the backstop commitment) and the agreements of FNF under the FNF Commitment Letters and limited guaranty, the Company alsocounterparty have entered into a fee lettercollateral support agreement requiring either party to post collateral when the net exposures exceed pre-determined thresholds. For all counterparties, except one, this threshold is set to zero. As of June 30, 2018 and December 31, 2017, counterparties posted $255 and $467 of collateral, respectively, of which $217 and $349 is included in "Cash and cash equivalents" with FNF (the “FNF Fee Letter”), dated May 24,an associated payable for this collateral included in "Other liabilities" on the Condensed Consolidated Balance Sheets. The remaining $38 and $118 of non-cash collateral was held by a third-party custodian and may not be sold or re-pledged, except in the event of default, and, therefore, is not included in the Company's Condensed Consolidated Balance Sheets at June 30, 2018 and December 31, 2017 respectively. This collateral generally consists of U.S. treasury bonds and mortgage-backed securities. Accordingly, the maximum amount of loss due to credit risk that the Company would incur if parties to the call options failed completely to perform according to the terms of the contracts was $56 and $25 at June 30, 2018 and December 31, 2017, respectively. June 30, 2018 Level 1 Level 2 Level 3 Fair Value Carrying Amount Assets Cash and cash equivalents $ 1,710 $ — $ — $ 1,710 $ 1,710 Fixed maturity securities, available-for-sale: Asset-backed securities — 2,814 330 3,144 3,144 Commercial mortgage-backed securities — 1,181 60 1,241 1,241 Corporates — 10,650 1,190 11,840 11,840 Hybrids 247 660 10 917 917 Municipals — 1,496 37 1,533 1,533 Residential mortgage-backed securities — 1,113 242 1,355 1,355 U.S. Government 113 27 — 140 140 Foreign Governments — 140 16 156 156 Equity securities 494 804 3 1,301 1,301 Derivative investments 1 311 — 312 312 Other invested assets — — 67 67 67 Funds withheld for reinsurance receivables, at fair value 84 662 6 752 752 Total financial assets at fair value $ 2,649 $ 19,858 $ 1,961 $ 24,468 $ 24,468 Liabilities Derivatives: FIA embedded derivatives, included in contractholder funds — — 2,491 2,491 2,491 Preferred shares reimbursement feature embedded derivative — — 24 24 24 Fair value of future policy benefits (FSRC) — — 737 737 737 Total financial liabilities at fair value $ — $ — $ 3,252 $ 3,252 $ 3,252 December 31, 2017 Level 1 Level 2 Level 3 Fair Value Carrying Amount Assets Cash and cash equivalents $ 1,215 $ — $ — $ 1,215 $ 1,215 Fixed maturity securities, available-for-sale: Asset-backed securities — 2,653 412 3,065 3,065 Commercial mortgage-backed securities — 907 49 956 956 Corporates — 11,401 1,169 12,570 12,570 Hybrids 253 804 10 1,067 1,067 Municipals — 1,709 38 1,747 1,747 Residential mortgage-backed securities — 1,211 66 1,277 1,277 U.S. Government 52 32 — 84 84 Foreign Governments — 180 17 197 197 Equity securities 404 937 3 1,344 1,344 Derivative investments — 492 — 492 492 Short term investments 25 — — 25 25 Other invested assets — — 17 17 17 Funds withheld for reinsurance receivables, at fair value 88 648 4 740 740 Total financial assets at fair value $ 2,037 $ 20,974 $ 1,785 $ 24,796 $ 24,796 Liabilities Derivatives: FIA embedded derivatives, included in contractholder funds $ — $ — $ 2,387 $ 2,387 $ 2,387 Preferred shares reimbursement feature embedded derivative — — 23 23 23 Fair value of future policy benefits (FSRC) — — 728 728 728 Total financial liabilities at fair value $ — $ — $ 3,138 $ 3,138 $ 3,138 has agreedmeasures the fair value of its securities based on assumptions used by market participants in pricing the security. The most appropriate valuation methodology is selected based on the specific characteristics of the fixed maturity or equity security, and the Company will then consistently apply the valuation methodology to paymeasure the security’s fair value. The Company's fair value measurement is based on a market approach, which utilizes prices and other relevant information generated by market transactions involving identical or comparable securities. Sources of inputs to FNF the following fees at Closing:·the original issue discount of $2.0 million in respect of the preferred shares issued to FNF (the “FNF OID”)·a commitment fee of $2.925 million (the “FNF Commitment Fee”);·penny warrants convertible, in the aggregate, for 1.2% of the Company’s ordinary shares (on a fully diluted basis) (the “FNF Investment Warrants”); and·if, and to the extent, any amount of the preferred equity under FNF’s backstop commitment is funded (the “FNF Backstop Equity”), (x) a funding fee of 0.5% of the amount of the FNF Backstop Equity that is funded (together with the FNF OID and the FNF Commitment Fee, the “FNF Closing Payments”), and (y) penny warrants attached to the FNF Backstop Equity that are convertible, in the aggregate, for the result of (1) the proportion of the FNF Backstop Equity that is funded, and (2) 1.5% of the Company’s ordinary shares (on a fully diluted basis) (together with the FNF Investment Warrants, the “FNF Warrants”).FNF Closing PaymentsCompany uses observable and unobservable inputs in its valuation methodologies. Observable inputs include benchmark yields, reported trades, broker-dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data. In addition, market indicators and industry and economic events are monitored and further market data will be paid as a reductionacquired when certain thresholds are met.purchaseinputs described above may not be applicable. The significant unobservable input used in the fair value measurement of equity securities for which the market approach valuation technique is employed is yields for comparable securities. Increases or decreases in the yields would result in lower or higher, respectively, fair value measurements. For broker-quoted only securities, quotes from market makers or broker-dealers are obtained from sources recognized to be market participants. Management believes the broker quotes are prices at which trades could be executed based on historical trades executed at broker-quoted or slightly higher prices. The Company also has an equity investment in a private business development company which is not traded on an exchange or valued by other sources such as analytics or brokers. The Company based the fair value of this investment on an estimated net asset value provided by the investee. Management did not make any adjustments to this valuation.payable by FNFof zero since FGL Insurance will not be required to make any additional payments at maturity of the fund-linked note in order to receive the net asset value of the AnchorPath fund on the maturity date. A Black-Scholes model determines the net asset value of the AnchorPath fund as the fair value of the call option regardless of the values used for the preferred equity underother inputs to the FNF Equity Commitment Letters.option pricing model. The net asset value of the AnchorPath fund is provided by the fund manager at the end of each calendar month and represents the value an investor would receive if it withdrew its investment on the balance sheet date. Therefore, the key unobservable input used in the Black-Scholes model is the value of the AnchorPath fund. As the value of the AnchorPath fund increases or decreases, the fair value of the embedded derivative will increase or decrease. Fair Value at Valuation Technique Unobservable Input(s) Range (Weighted average) June 30, 2018 June 30, 2018 Assets Asset-backed securities $ 324 Broker-quoted Offered quotes 96.98% - 102.50%
(99.70%)Asset-backed securities 6 Third-Party Valuation Offered quotes 0.00% - 100.00%
(11.64%)Commercial mortgage-backed securities 35 Broker-quoted Offered quotes 80.13% - 104.14%
(94.04%)Commercial mortgage-backed securities 25 Matrix Pricing Quoted prices 117.80% - 117.80%
(117.80%)Corporates 679 Broker-quoted Offered quotes 72.06% - 105.50%
(97.79%)Corporates 511 Matrix Pricing Quoted prices 93.94% - 111.19%
(99.73%)Hybrids 10 Matrix Pricing Quoted prices 95.86% - 95.86%
(95.86%)Municipals 37 Broker-quoted Offered quotes 110.60% - 110.60%
(110.60%)Residential mortgage-backed securities 63 Broker-quoted Offered quotes 92.28% - 101.38%
(98.23%)Residential mortgage-backed securities 179 Matrix Pricing Quoted prices 100.00% - 101.71%
(101.14%)Foreign Governments 16 Broker-quoted Offered quotes 102.38% - 104.09%
(102.91%)Equity securities (Salus preferred equity) 3 Income-Approach Yield 6.29% Other invested assets: Available-for-sale embedded derivative (AnchorPath) 17 Black Scholes model Market value of AnchorPath fund 100.00% Affiliated Bank Loans 50 Yield-method Blended rates 7.00% - 9.00% Funds withheld for reinsurance receivables at fair value 5 Matrix pricing Calculated prices 100.00% Funds withheld for reinsurance receivables at fair value 1 Loan recovery value Recovery rate 26.00% Total $ 1,961 Liabilities Future policy benefits (FSRC) $ 737 Discounted cash flow Non-Performance risk spread 0.32% - 0.64%
(0.43%) Risk margin to reflect uncertainty 0.50% - 0.62%
(0.54%)Derivatives: FIA embedded derivatives included in contractholder funds 2,491 Discounted cash flow Market value of option 0.00% - 31.67%
(2.61%) SWAP rates 2.89% - 2.93%
(2.90%) Mortality multiplier 80.00% - 80.00%
(80.00%) Surrender rates 0.50% - 75.00%
(6.03%) Partial withdrawals 1.00% - 2.50%
(2.00%) Non-performance spread 0.25% - 0.25%
(0.25%) Option cost 0.10% - 17.33%
(2.10%)Preferred shares reimbursement feature embedded derivative 24 Black Derman Toy model Credit Spread 4.74% Yield Volatility 20.00% Total liabilities at fair value $ 3,252 Fair Value at Range (Weighted average) December 31, 2017 Valuation Technique Unobservable Input(s) December 31, 2017 Assets Asset-backed securities $ 412 Broker-quoted Offered quotes 98.00% - 102.56%
(100.27%)Commercial mortgage-backed securities 49 Broker-quoted Offered quotes 99.50% - 122.78%
(114.09%)Corporates 763 Broker-quoted Offered quotes 73.55% - 109.63% (99.66%) Corporates 406 Matrix Pricing Quoted prices 67.72% - 115.04%
(103.72%)Hybrids 10 Broker-quoted Offered quotes 96.89% - 96.89%
(96.89%)Municipals 38 Broker-quoted Offered quotes 111.84% - 111.84%
(111.84%)Residential mortgage-backed securities 66 Broker-quoted Offered quotes 93.25% - 102.25%
(100.11%)Foreign Governments 17 Broker-quotes Offered quotes 104.16% - 106.28%
(104.82%)Equity securities available-for-sale (Salus preferred equity) 3 Income-Approach Yield 5.00% Other invested assets: Available-for-sale embedded derivative (AnchorPath) 17 Black Scholes model Market value of AnchorPath fund 100.00% Funds withheld for reinsurance receivables at fair value 3 Matrix pricing Calculated prices 100.00% Funds withheld for reinsurance receivables at fair value 1 Loan recovery value Recovery rate 26.00% Total $ 1,785 Liabilities Future policy benefits (FSRC) $ 728 Discounted cash flow Non-Performance risk spread 0.27% Risk margin to reflect uncertainty 0.54% Derivatives: FIA embedded derivatives, included in contractholder funds 2,387 Discounted cash flow Market value of option 0.00% - 29.93%
(4.11%) SWAP rates 2.24% - 2.40%
(2.31%) Mortality multiplier 80.00% - 80.00%
(80.00%) Surrender rates 0.50% - 75.00%
(6.13%) Partial withdrawals 2.00% - 3.50%
(2.75%) Non-performance spread 0.25% - 0.25%
(0.25%) Option cost 0.06% - 17.33%
(1.99%)Preferred shares reimbursement feature embedded derivative $ 23 Black Derman Toy model Credit Spread 4.13% Yield Volatility 20% Total liabilities at fair value $ 3,138 Three months ended June 30, 2018 Balance at Beginning
of Period Total Gains (Losses) Purchases Sales Settlements Net transfer In (Out) of
Level 3 (a) Balance at End of
Period Included in
Earnings Included in
AOCI Assets Fixed maturity securities available-for-sale: Asset-backed securities $ 301 $ — $ — $ 152 $ — $ (1 ) $ (122 ) $ 330 Commercial mortgage-backed securities 42 — (1 ) 12 — — 7 60 Corporates 1,216 — (8 ) 99 — (69 ) (48 ) 1,190 Hybrids 10 — — — — — — 10 Municipals 37 — — — — — — 37 Residential mortgage-backed securities 65 — 2 179 — (4 ) — 242 Foreign Governments 16 — — — — — — 16 Equity securities 4 — (1 ) — — — — 3 Other invested assets: Available-for-sale embedded derivative 17 — — — — — — 17 Affiliated Bank Loans — — — 50 — — — 50 Funds withheld for reinsurance receivables at fair value 6 — — — — — — 6 Total assets at Level 3 fair value $ 1,714 $ — $ (8 ) $ 492 $ — $ (74 ) $ (163 ) $ 1,961 Liabilities FIA embedded derivatives, included in contractholder funds $ 2,333 $ 158 $ — $ — $ — $ — $ — $ 2,491 Future policy benefits (FSRC) 712 1 — — — 24 — 737 Preferred shares reimbursement feature embedded derivative 24 — — — — — — 24 Total liabilities at Level 3 fair value $ 3,069 $ 159 $ — $ — $ — $ 24 $ — $ 3,252 Three months ended June 30, 2017 Predecessor Balance at Beginning
of Period Total Gains (Losses) Purchases Sales Settlements Net transfer In (Out) of
Level 3 (a) Balance at End of
Period Included in
Earnings Included in
AOCI Assets Fixed maturity securities available-for-sale: Asset-backed securities $ 170 $ (1 ) $ 1 $ 67 $ — $ (8 ) $ (25 ) $ 204 Commercial mortgage-backed securities 78 — 1 — — (1 ) 6 84 Corporates 1,090 — 6 5 — (6 ) (39 ) 1,056 Hybrids 10 — — — — — — 10 Municipals 38 — — — — — — 38 Residential mortgage-backed securities 14 — 1 — — — — 15 Foreign Governments 16 — 1 — — — — 17 Equity securities available-for-sale 1 — — — — — — 1 Other invested assets: Available-for-sale embedded derivative 14 1 — — — — — 15 Loan participations — — 1 — — (1 ) — — Total assets at Level 3 fair value $ 1,431 $ — $ 11 $ 72 $ — $ (16 ) $ (58 ) $ 1,440 Liabilities FIA embedded derivatives, included in contractholder funds $ 2,362 $ 80 $ — $ — $ — $ — $ — $ 2,442 Total liabilities at Level 3 fair value $ 2,362 $ 80 $ — $ — $ — $ — $ — $ 2,442 Six months ended June 30, 2018 Balance at Beginning
of Period Total Gains (Losses) Purchases Sales Settlements Net transfer In (Out) of
Level 3 (a) Balance at End of
Period Included in
Earnings Included in
AOCI Assets Fixed maturity securities available-for-sale: Asset-backed securities $ 412 $ — $ (2 ) $ 180 $ — $ (7 ) $ (253 ) $ 330 Commercial mortgage-backed securities 49 — (2 ) 12 — (6 ) 7 60 Corporates 1,169 — (28 ) 199 — (102 ) (48 ) 1,190 Hybrids 10 — — — — — — 10 Municipals 38 — (1 ) — — — — 37 Residential mortgage-backed securities 66 — 2 179 — (5 ) — 242 Foreign Governments 17 (1 ) — — — — — 16 Equity securities 3 1 (1 ) — — — — 3 Other invested assets: Available-for-sale embedded derivative 17 — — — — — — 17 Affiliated Bank Loans — — — 50 — — — 50 Funds withheld for reinsurance receivables at fair value 4 — — 2 — — — 6 Total assets at Level 3 fair value $ 1,785 $ — $ (32 ) $ 622 $ — $ (120 ) $ (294 ) $ 1,961 Liabilities FIA embedded derivatives, included in contractholder funds $ 2,387 $ 104 $ — $ — $ — $ — $ — $ 2,491 Future policy benefits (FSRC) 728 (19 ) — — — 28 — 737 Preferred shares reimbursement feature embedded derivative 23 1 — — — — — 24 Total liabilities at Level 3 fair value $ 3,138 $ 86 $ — $ — $ — $ 28 $ — $ 3,252 Six months ended June 30, 2017 Predecessor Balance at Beginning
of Period Total Gains (Losses) Purchases Sales Settlements Net transfer In (Out) of
Level 3 (a) Balance at End of
Period Included in
Earnings Included in
AOCI Assets Fixed maturity securities available-for-sale: Asset-backed securities $ 197 $ (1 ) $ 3 $ 66 $ — $ (17 ) $ (44 ) $ 204 Commercial mortgage-backed securities 85 — 2 — — (1 ) (2 ) 84 Corporates 1,062 — 11 65 — (39 ) (43 ) 1,056 Hybrids 10 — — — — — — 10 Municipals 37 — 1 — — — — 38 Residential mortgage-backed securities — — 1 — — — 14 15 Foreign Governments 16 — 1 — — — — 17 Equity securities available-for-sale 1 — — — — — — 1 Other invested assets: Available-for-sale embedded derivative 13 2 — — — — — 15 Loan participations 6 (1 ) 1 — — (6 ) — — Total assets at Level 3 fair value $ 1,427 $ — $ 20 $ 131 $ — $ (63 ) $ (75 ) $ 1,440 Liabilities FIA embedded derivatives, included in contractholder funds $ 2,250 $ 192 $ — $ — $ — $ — $ — $ 2,442 Total liabilities at Level 3 fair value $ 2,250 $ 192 $ — $ — $ — $ — $ — $ 2,442 also agreed to pay or reimburse FNF for fees and expenses of counsel in connection with FNF’s anticipated purchasenot, estimated the fair value of the preferred equity. Commitment Letter June 30, 2018 Level 1 Level 2 Level 3 Total Estimated Fair Value Carrying Amount Assets FHLB common stock, included in other invested assets $ — $ 49 $ — $ 49 $ 49 Commercial mortgage loans — — 522 522 525 Policy loans, included in other invested assets — — 15 15 19 Funds withheld for reinsurance receivables, at fair value — — 17 17 17 Total $ — $ 49 $ 554 $ 603 $ 610 Liabilities Investment contracts, included in contractholder funds $ — $ — $ 17,408 $ 17,408 $ 20,083 Debt — 537 — 537 540 Total $ — $ 537 $ 17,408 $ 17,945 $ 20,623 December 31, 2017 Level 1 Level 2 Level 3 Total Estimated Fair Value Carrying Amount Assets Commercial mortgage loans $ — $ — $ 549 $ 549 $ 548 Policy loans, included in other invested assets — — 15 15 17 Funds withheld for reinsurance receivables, at fair value — — 16 16 16 Total $ — $ — $ 580 $ 580 $ 581 Liabilities Investment contracts, included in contractholder funds $ — $ — $ 16,659 $ 16,659 $ 19,457 Debt — 307 105 412 412 Total $ — $ 307 $ 16,764 $ 17,071 $ 19,869 Carrying Value After Measurement June 30, 2018 December 31, 2017 Equity securities $ 43 $ 44 Limited partnership investment, included in other invested assets 218 154 Transfers Between Fair Value Levels Level 1 Level 2 Level 3 In Out In Out In Out Three months ended June 30, 2018 Asset-backed securities $ — $ — $ 122 $ — $ — $ 122 Commercial mortgage-backed securities — — 1 8 8 1 Corporates — — 51 3 3 51 Hybrids 5 — — 5 — — Equity securities available-for-sale 25 — — 25 — — Total transfers $ 30 $ — $ 174 $ 41 $ 11 $ 174 Predecessor Three months ended June 30, 2017 Asset-backed securities $ — $ — $ 25 $ — $ — $ 25 Commercial mortgage-backed securities — — — 6 6 — Corporates — — 40 1 1 40 Total transfers $ — $ — $ 65 $ 7 $ 7 $ 65 Six months ended June 30, 2018 Asset-backed securities $ — $ — $ 253 $ — $ — $ 253 Commercial mortgage-backed securities — — 1 8 8 1 Corporates — — 51 3 3 51 Hybrids 20 — — 20 — — Equity securities available-for-sale 25 — — 25 — — Total transfers $ 45 $ — $ 305 $ 56 $ 11 $ 305 Predecessor Six months ended June 30, 2017 Asset-backed securities $ — $ — $ 80 $ 36 $ 36 $ 80 Commercial mortgage-backed securities — — 8 6 6 8 Corporates — — 44 1 1 44 RMBS — — — 14 14 — Total transfers $ — $ — $ 132 $ 57 $ 57 $ 132 VOBA DAC DSI Total Balance at December 31, 2017 $ 827 $ 19 $ 10 $ 856 Deferrals — 134 60 194 Amortization (40 ) (2 ) (3 ) (45 ) Interest 10 1 — 11 Unlocking 1 — — 1 Adjustment for net unrealized investment (gains) losses 61 3 3 67 Balance at June 30, 2018 $ 859 $ 155 $ 70 $ 1,084 Predecessor VOBA DAC DSI Total Balance at December 31, 2016 $ 118 $ 1,024 $ 86 $ 1,228 Deferrals — 145 22 167 Unlocking 7 (1 ) (3 ) 3 Interest 6 21 2 29 Amortization (23 ) (83 ) (10 ) (116 ) Adjustment for net unrealized investment (gains) losses (108 ) (106 ) — (214 ) Balance at June 30, 2017 $ — $ 1,000 $ 97 $ 1,097 Estimated Amortization Expense Fiscal Year 2018 31 2019 76 2020 85 2021 81 2022 73 Thereafter 468 June 30, 2018 Cost Accumulated amortization Net Weighted Average Useful Life (Years) Trade names 16 1 15 10 Carrying amount Weighted Average Useful Life (Years) State insurance licenses $ 6 Indefinite Trade marks / trade names 15 10 Total $ 21 May 24, 2017, Parent, an indirect wholly ownedApril 20, 2018, Fidelity & Guaranty Life Holdings, Inc. ("FGLH"), a subsidiary of the Company, entered intocompleted a commitment letter with Royal Bankdebt offering of Canada (“RBC”) and RBC Capital Markets, LLC (the “Debt Commitment Letter”), pursuant to which RBC committed to make available to Parent and a co-borrower to be determined by Parent and BTO Fund (collectively with its affiliates and Parent,$550 aggregate principal amount of 5.50% senior notes due 2025, issued at 99.5% for proceeds of $547. The Company used the “Debt Sponsors”) in accordance with the termsnet proceeds of the Debt Commitment Letter, on the Closing Date,offering (i) to the extent the specified borrowers do not receive $425 millionrepay $135 of gross proceeds from the issuance of senior unsecured notes on the Closing Date, $425 million of senior unsecured increasing rate loans (“Bridge Loans”) for the purpose of, among other things, repaying and terminating the existing indebtedness of FGLH, a wholly owned subsidiary of FGL,borrowings under its revolving credit facility and senior unsecured notes indenture. related expenses and (ii) to redeem in full and satisfy and discharge all of the outstanding $300 aggregate principal amount of FGLH's outstanding 6.375% Senior Notes due 2021. The Company expects to use the remaining proceeds of the offering for general corporate purposes, which may include additional capital contributions to the Company's insurance subsidiaries. This exchange of debt instruments constituted an extinguishment. As a result, the Company recognized a $2 gain on the extinguishment of the 6.375% Senior Notes. June 30, 2018 December 31, 2017 Debt $ 550 $ 307 Revolving credit facility — 105 Three months ended Six months ended June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017 Predecessor Predecessor Interest Expense Amortization Interest Expense Amortization Interest Expense Amortization Interest Expense Amortization Debt 8 — 5 — 13 — 9 — Revolving credit facility 1 — 1 — 2 — 2 1 Gain on extinguishment of debt (2 ) — — — (2 ) — — — Date Declared Date Paid Date Shareholders of record Shareholders of record (in thousands) Cash Dividend declared (per share) Total cash paid February 2, 2017 March 6, 2017 February 21, 2017 58,308 $0.065 $4 May 1, 2017 June 5, 2017 May 22, 2017 58,315 $0.065 $4 Type of Preferred Share Date Declared Date Paid Date Shareholders of record Shares outstanding at date of record (in thousands) Method of Payment Total cash paid Total shares paid in kind (in thousands) Series A Preferred Shares March 29, 2018 April 1, 2018 March 15, 2018 277 Paid in kind $— 5 Series B Preferred Shares March 29, 2018 April 1, 2018 March 15, 2018 101 Paid in kind $— 1 Series A Preferred Shares June 29, 2018 July 1, 2018 June 15, 2018 282 Paid in kind $— 5 Series B Preferred Shares June 29, 2018 July 1, 2018 June 15, 2018 102 Paid in kind $— 2 Vesting mechanism Vest Dates Number of options subject to these vesting conditions Service Each March 15 from 2019 through 2023; subject to continued service 3,937 Service and return on equity performance March 15 2020, 2021 and 2022 subject to continued service and targeted return on equity 4,949 Service and stock price performance Each March 15 from 2019 through 2023; subject to continued service and target stock price goals being achieved 4,949 Stock Option Awards Options Stock options outstanding at December 31, 2017 — $ — Granted 13,835 10.00 Exercised — — Forfeited or expired — — Stock options outstanding at June 30, 2018 13,835 10.00 Exercisable at June 30, 2018 — — Vested or projected to vest at June 30, 2018 13,835 10.00 extentoptions granted with service and return on equity performance vesting conditions, we used a Black Scholes valuation model. To value the options granted with stock price market performance vesting conditions, we used a Monte Carlo simulation. The following inputs and assumptions were used in the determination of the grant date fair values for each. Black-Scholes Model Monte Carlo Model Serviced based ROE Performance based Stock Price Performance based Source of input/ assumption Weighted average fair value per options granted $2.2 $2.35 $1.77 N/A Risk-free interest rate 2.95% 2.98% 3.02% US Treasury Curve Assumed dividend yield —% —% —% Internal projection Expected option term 5.5 years 6.0 years N/A Internal model Contractual term N/A N/A 7.0 years N/A Volatility 25.00% 25.00% 25.72% Predecessor and peer group experience Early exercise multiple N/A N/A 2.8x Hull White model Cost of equity N/A N/A 10.50% Capital asset pricing model - 20 year risk free rate Restricted Stock Awards Shares Nonvested restricted shares outstanding at December 31, 2017 — $ — Granted 112 10.01 Vested — — Forfeited — — Nonvested restricted shares outstanding at June 30, 2018 112 10.01 Phantom units Shares Phantom units outstanding at December 31, 2017 — $ — Granted 367 8.96 Vested — — Forfeited or expired — — Phantom units outstanding at June 30, 2018 367 8.96 Three months ended Six months ended June 30, 2018 June 30, 2018 FGL Incentive Plan Stock options $ 1 $ 1 Restricted shares — — 1 1 Management Incentive Plan Phantom units — — — — Total stock compensation expense 1 1 Related tax benefit — — Net stock compensation expense $ 1 $ 1 Unrecognized Compensation
Expense Weighted Average Recognition
Period in YearsFGL Incentive Plan Stock options $ 28 4 Restricted shares 1 1 29 Management Incentive Plan Phantom units 3 3 3 Total unrecognized stock compensation expense $ 32 4 Debt Sponsorstax is applied without regard to deduction or Parent electoffset under a typical ModCo reinsurance agreement (i.e. a “Gross application”). Without clarifying guidance from Regulatory authorities in regards to not repay and terminate such existing indebtednessallowing for a “Net application” in the calculation of FGLH on or priorBEAT, the CompanyClosing Date, then the commitments of RBC in respectbeginning of the Bridge LoansTax calendar year. The current period financial statements reflect an assumed 953(d) election with regard to F&G Re Ltd. As a result of the election, which would occur in the event that clarifying language allowing a "net application" is not determined, an opening balance sheet deferred tax liability was set up resulting in a discrete expense being recorded in the first quarter of 2018. The provision for income taxes represents federal income taxes. The effective tax rate for the three and six months ended June 30, 2018 was 29% and 37%, respectively. The effective tax rate for the three and six months ended June 30, 2017 was 33% and 35%, respectively. The effective tax rate on pre-tax income for the current six months ended June 30, 2018 differs from the U.S Federal statutory rate for 2018 of 21% primarily due to the impact of F&G Re Ltd. making an election to be a US taxpayer. As a result of the election, an opening balance sheet deferred tax liability was set up resulting in a discrete expense being recorded in the first quarter. The effective tax rate on pre-tax income for the current three months ended June 30, 2018 differs from the U.S. Federal statutory rate for 2018 of 21% primarily due to the negative impact of losses in zero tax jurisdictions and a valuation allowance placed against a portion of the income tax benefit associated with unrealized losses recorded in the income statement. The effective tax rate on pre-tax income for the three months ended June 30, 2017 differed from the U.S Federal statutory rate for 2017 of 35% primarily due to the impact of favorable permanent adjustments.reducedupdated in accordance with instruction outlined in the standard and within the measurement period, which is not to extend beyond one year from the enactment date. The only provisional amount utilized in the preparation of the Company’s financial statements was tax reserves. As of the reporting date, the Company has not yet been able to update its reserving system for the impact of the TCJA. A reasonable estimate, prepared by the Company's Actuarial department, was calculated at December 31, 2017 and refined in the current period. The refinement had no impact on the Company’s ETR as the book\tax difference on tax reserves is a timing difference. No other provisions of the U.S. tax reform had a significant impact on our 2018 income tax provisions. June 30, 2018 Asset Type Other invested assets $ 655 Equity securities 33 Fixed maturity securities, available-for-sale 45 Other assets 10 Total $ 743 Three months ended Six months ended June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017 Predecessor Predecessor Net Premiums Earned Net Benefits Incurred Net Premiums Earned Net Benefits Incurred Net Premiums Earned Net Benefits Incurred Net Premiums Earned Net Benefits Incurred Direct 58 308 59 296 118 370 118 639 Assumed — (5 ) — — — (26 ) — — Ceded (43 ) (54 ) (47 ) (61 ) (85 ) (113 ) (103 ) (136 ) Net 15 249 12 235 33 231 15 503 Debt Commitment Letter.As considerationrecapture period from 8 to 12 years. FGL Insurance incurred risk charge fees of $3, and $5 during the three and six months ended June 30, 2018, respectively, in relation to this reinsurance agreement.debt commitment,three and six months ended June 30, 2018, respectively.is requiredon December 1, 2017. The Company paid $23 to make a commitment fee equal to 1.25%BISGA upon the close of the amountmerger for services rendered related to the transaction and BISGA will forego approximately 30% of the Bridge Loans (or approximately $5.3 million), whether or not any Bridge Loans are made. first thirteen months’ management fee to which it is entitled under the investment management agreement. As of June 30, 2018, the Company has a net liability of $9 for the services consumed under this investment management agreement, partially offset by fees received and expense reimbursements from BISGA.recognized this fee asholds certain fixed income security interests, limited partnerships and bank loans issued by portfolio companies that are affiliates of Blackstone Tactical Opportunities, an affiliate of Blackstone Tactical Opportunities LR Associates-B (Cayman) Ltd. (the “Blackstone Fixed Income Securities”) both on a prepaiddirect and other currentindirect basis. Indirect investments include an investment made in an affiliates’ asset backed fund while direct investments are an investment in affiliates' equity or debt securities. As of June 30, 2018 and a corresponding liability in the accompanying Balance Sheet as of September 30, 2017.The Bridge Loans will accrue interest at a rate of LIBOR plus 5.25% for the first three months following the Closing Date. Thereafter, the interest rate will increase by 0.50% every three months up to an amount agreed between Parent and RBC. The Bridge Loans will mature on the first anniversary of the Closing Date (the “Maturity Date”). On the Maturity Date, any Bridge Loan that has not been previously repaid in full will be automatically converted into a senior unsecured term loan that is due on the date that is eight years after the Closing Date.On MayDecember 31, 2017, Parent, RBC, RBC Capital Markets, LLC, Bank of America, N.A. (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated entered into an amended and restated Debt Commitment Letter, pursuant to which Bank of America became an Initial Lender (as defined in the Debt Commitment Letter) and has agreed to provide 50% of the Bridge Loans.19CF CORPORATIONNotes to Condensed Financial StatementsSeptember 30, 2017(Unaudited)Amendments to Forward Purchase AgreementsOn May 24, 2017, the Company entered into amendments (the “FPA Amendments”)held $298 and $188 in affiliated investments, respectively. For the three months ended June 30, 2018 the Company made investment trades in affiliated investments. In addition, as of June 30, 2018, the Company had commitments to invest in 8 other affiliated investments. The unfunded commitments relating to these affiliated investments at June 30, 2018 is $503.forward purchase agreements to which itFGL Insurance and BilCar, LLC, CC Capital Management, LLC and CFS (the “Amendment Parties”) are parties, pursuant to which the Amendment Parties agreed, among other things, to add FGL as a third party beneficiary of such forward purchase agreements, to prohibit assignments and amendments of such forward purchase agreements without FGL’s consent and to entitle FGL to specific performance of such forward purchase agreements. Furthermore, the FPA Amendment to the forward purchaseFSRC reinsurance agreement with CFS provides that CFS shall not be excused from its obligation to purchase the Forward Purchase Securities (as definedreported in the forward purchase agreements)unaudited Condensed Consolidated Statement of Operations for the three and six months ended ended June 30, 2018 as such amounts are eliminated on consolidation.connection withthousands): Three months ended Six months ended June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017 Predecessor Predecessor Net Income $ 20 $ 32 $ 72 $ 54 Less Preferred stock dividend 7 — 14 — Net income available to common shares 13 32 58 54 Weighted-average common shares outstanding - basic 214,370 58,335 214,370 58,331 Dilutive effect of unvested restricted stock & PRSU 9 37 6 29 Dilutive effect of stock options — 73 — 54 Weighted-average shares outstanding - diluted 214,379 58,445 214,376 58,414 Net income per common share: Basic $ 0.06 $ 0.54 $ 0.27 $ 0.92 Diluted $ 0.06 $ 0.54 $ 0.27 $ 0.92 FGL Business Combination withoutweighted average thereof reflects the consentactual number of FGL.FSRD Share Purchase AgreementOn May 24,the Successor and Predecessor shares of common stock outstanding, excluding unvested restricted stock and shares held in treasury.Companyincremental effect related to certain outstanding stock options and Parent entered into a share purchase agreement (the “Share Purchase Agreement”) with HRG, Front Street Re (Delaware) Ltd. (“FSRD”), a Delaware corporation and a wholly owned indirect subsidiaryrestricted shares due to their anti-dilutive effect. The number of HRG, Front Street Re (Cayman) Ltd., an exempted company incorporatedweighted average equivalent shares excluded in the Cayman Islands with limited liability (“Front Street Cayman”),Predecessor three and Front Street Re Ltd., an exempted company incorporated in Bermuda with limited liability (together with Front Street Cayman, the “Acquired Companies”), pursuant to which, subject to thesix months ended June 30, 2017 are 0 thousand and 1 thousand shares. and conditions set forth therein, Parent has agreed to purchase from FSRD all of the issuedPRSUs granted in 2017 by the Predecessor required cash settlement upon vesting as opposed to common equity settlement. As a result, these awards were liability classified and outstanding shareswere excluded from EPS calculations.Acquired Companies. The purchase price will be $65 million, subject to customary adjustments for transaction expenses. The definitive documentation contains customary representations, warranties and indemnification obligations. HRG has further agreed to reduce the purchase price, and to indemnify Parent, for dividends and other value transfers by the Acquired Companies to HRG and its affiliates from December 31, 2016 through the Closing. The Closing of the transaction is subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals, NAICconsummationGAAP basis financial statements for comparable items.the FGL Business Combination. As noted above, in connection therewith, the Company entered into equity commitment letters with BTO Fund, GSO and FNF and a forward purchase agreement backstop letter agreement with BTO Fund and FNF for an aggregate amount of $57 million, $23 million of which would be used to offset a portion of net redemptions, if any, by public shareholders of the Company in connection with the shareholder vote to approve the FGL Business Combination and $9 million of which would be used to fund any FPA Shortfall.In addition, on May 24, 2017, the Company, HRG, FS Holdco and Parent agreed that FS Holdco may, at its option, cause Parent and FS Holdco to make a joint election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, with respect to the FGL Business Combination and the deemed stock purchases of FGL’s subsidiaries. Such an election is only applicable to HRG and could haveRaven Re reflects the effect of reducingpermitted practices Raven Re received to treat the available amount of taxable gain taken into accounta letter of credit as an admitted asset which increased Raven Re’s statutory capital and surplus by HRG in connection with the FGL Business Combination. In the event FS Holdco elects to make such an election, it will be required to pay Parent $30 million, plus the amount, if any, by which FGL’s$110 and its subsidiaries’ incremental current tax costs that are attributable to such election exceed $6 million, and Parent will be required to pay FS Holdco the amount, if any, by which FGL’s and its subsidiaries’ incremental current tax savings that are attributable to such election exceed $6 million.ROFO OfferingOn$110 at June 21, 2017, the Company entered into equity purchase agreements (the “Purchase Agreements”) with certain accredited investors (the “Equity Purchasers”) in connection with the rights of first offer under the forward purchase agreements. Pursuant to the Purchase Agreements, the Equity Purchasers agreed to purchase, on the terms and subject to the conditions specified therein, an aggregate of 20,000,000 Class A ordinary shares of the Company for a purchase price of $10.00 per share, immediately prior to the Closing. At the Company’s option, such shares may be purchased from the Company in a private placement and/or from the Company’s shareholders who have validly requested for their shares to be redeemed in connection with the FGL Business Combination. Certain of the Equity Purchasers, including Keith W. Abell, Richard N. Massey and James A. Quella, each of whom is an independent director of the Company, are also party to the forward purchase agreements. In connection with the Purchase Agreements, the Company has agreed to pay advisory fees of an aggregate of $8.0 million to certain financial advisors at the Closing.Note 9 - Fair Value MeasurementsThe following table presents information about the Company’s assets that are measured on a recurring basis as of September 30, 20172018 and December 31, 20162017, respectively.indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.20CF CORPORATIONNotes to Condensed Financial StatementsSeptembersurplus by $4 and $5 at June 30, 2017(Unaudited)September 30, 2017 Quoted Prices Significant Other Significant Other in Active Markets Observable Inputs Unobservable Inputs Description (Level 1) (Level 2) (Level 3) Investments and cash equivalents held in Trust Account $ 693,802,061 $ - $ - December 31, 2016 Quoted Prices Significant Other Significant Other in Active Markets Observable Inputs Unobservable Inputs Description (Level 1) (Level 2) (Level 3) Investments and cash equivalents held in Trust Account $ 690,887,027 $ - $ - Approximately $148,000 and $30,000 of the balance in the Trust Account was held in cash as of September 30, 20172018 and December 31, 2016,2017, respectively.
Without such permitted statutory accounting practices Raven Re’s statutory capital and (deficit) surplus would be $(11) and $(18) as of June 30, 2018 and December 31, 2017, respectively, and its risk-based capital would fall below the minimum regulatory requirements. The letter of credit facility is collateralized by NAIC 1 rated debt securities. If the permitted practice was revoked, the letter of credit could be replaced by the collateral assets with Nomura’s consent. FGL Insurance’s statutory carrying value of Raven Re at June 30, 2018 and December 31, 2017 was $103 and $97, respectively.21Operations.References to the “Company,” “our,” “us” or “we” refer to CF Corporation. The following discussion and analysisOperationsCompany’s financial conditionforward-looking statements can be identified by the use of terms such as “believes”, “expects”, “may”, “will”, “should”, “could”, “seeks”, “intends”, “plans”, “estimates”, “anticipates” or other comparable terms. However, not all forward-looking statements contain these identifying words. These forward-looking statements include all matters that are not related to present facts or current conditions or that are not historical facts. They appear in a number of places throughout this report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our consolidated results of operations, should be read in conjunction with the unaudited condensed financial statementscondition, liquidity, prospects and growth strategies and the notes thereto contained elsewhereindustries in this report. Certain information contained in the discussionwhich we operate and analysis set forth below includes forward-lookingincluding, without limitation, statements that involve risks and uncertainties.Cautionary Note Regarding Forward-Looking StatementsThis Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements onrelating to our current expectations and projections about future events. These forward-lookingperformance.aboutregarding our valuation of investments and the determinations of the amounts of allowances and impairments;may cause our actual future results levels of activity, performance or achievements tomay be materially different from expectations. All forward-looking statements made in this report are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this report and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data.levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identifyoperations for the three and six months ended June 30, 2018 and 2017 and where appropriate, factors that may affect future financial performance. This analysis should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and notes thereto appearing elsewhere in this Form 10-Q and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of FGL Holdings (“FGL Holdings,” “we,” “us,” “our” and, collectively with its subsidiaries, the “Company”), which was included with our audited consolidated financial statements for the year ended December 31, 2017 included within the Company’s 2017 Form 10-K. Certain statements we make under this Item 2 constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. See "Special Note Regarding Forward-Looking Statements" in this report. You should consider our forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” orin light of our unaudited condensed consolidated financial statements, related notes, and other financial information appearing elsewhere in this report, and our filings with the negativeSEC, including our 2017 Form 10-K, which can be found at the SEC website, www.sec.gov.such terms or other similar expressions. Factors that might cause or contribute to suchPresentationdiscrepancy include, but are not limited to, those described in our other SEC filings.OverviewWe are a blank check company incorporated on February 26, 2016 as a Cayman Islands exempted company and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar Business Combination with one or more businesses. We intend to effectuate our initial Business Combination using cash from the proceedsresult of the initial public offering and the Private Placement of the Private Placement Warrants, our shares, debt or a combination of cash, equity and debt.In April 2016, we entered into forward purchase agreements pursuant to which Anchor Investors agreed to purchase an aggregate of 51,000,000 Class A ordinary shares, plus an aggregate of 19,083,333 redeemable warrants (one redeemable warrant for every three forward purchase shares purchased) for $10.00 per Class A ordinary share, or an aggregate purchase price of $510 million, in a private placement to occur concurrently with the closing of the Business Combination. In connection with the forward purchase agreements, we agreed to compensate the placement agents an aggregate amount of up to $20.675 million, including deferred placement agent fees of $20.4 million and reimbursement of legal fees of $275,000, payable upon the consummationcompletion of the Business Combination oron November 30, 2017, our Condensed Consolidated Financial Statements included elsewhere in the Quarterly Report are presented: (i) as of June 30, 2018 and December 1,31, 2017 ; (ii) for the three and six months ended June 30, 2018 and the Predecessor three and six months ended June 30, 2017.On May 25, 2016, In this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we consummateddiscuss the initial public offeringthree and six months ended June 30, 2018 results compared to the Predecessor three and six months ended June 30, 2017 results. We believe this discussion provides helpful information with respect to performance of 60,000,000 units at $10.00 per unit generating gross proceedsour business during those respective periods. Our financial statement presentation includes the financial statements of $600 millionFGL and incurring offering costs of approximately $34.5 million, inclusive of $33.0 million of underwriting commissions in connection withits subsidiaries as “Predecessor” for the initial public offering. We paid $12 million of underwriting commissions uponperiods prior to the closing of the initial public offering and deferred $21 million of underwriting commissions until the consummationcompletion of the Business Combination.Simultaneously with the closing of the initial public offering, we consummated the Private Placement of 14,000,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant with the Sponsor, generating gross proceeds of $14 million.On June 29, 2016, we consummated the sale of 9,000,000 additional units upon receiving notice of the underwriter’s election to fully exercise the Over-allotment, generating additional gross proceeds of $90 million and, in connection therewith, we incurred additional offering costs of $1.8 million in underwriting commissions. Simultaneously with the exercise of the Over-allotment, we consummated the Private Placement of an additional 1,800,000 Private Placement Warrants to the Sponsor, generating gross proceeds of $1.8 million. Additional underwriting commissions of $3.15 million were deferred until the completion of our initial Business Combination.Upon the closing of the initial public offering, the Over-allotment, and the Private Placement, $690.0 million ($10.00 per unit) from the net proceeds thereof was placed in the Trust Account, and was invested in a money market fund selected by the Company until the earlier of: (i) the completion of a Business Combination and (ii) our failure to consummate a Business Combination by May 25, 2018. In order to protectFGL Holdings, including the amounts held in the Trust Account, the Sponsor has agreed to indemnify the Trust Account if and to the extent any claims by third parties, such as a vendor for services rendered or products sold to us, or a prospective target business with which we have entered into an acquisition agreement, reduce the amount of funds in the Trust Account below $10.00 per share. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriter of the initial public offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims.22Our management has broad discretion with respect to the specific application of the net proceeds of the initial public offering, the Over-allotment, and the Private Placement, although substantially all of the net proceeds are intended to be applied toward consummating a Business Combination.On May 24, 2017, the Company entered into the Merger Agreement with Parent, Merger Sub and FGL, pursuant to which, subject to the satisfaction or waiver of certain conditions set forth therein, Merger Sub will merge with and into FGL, with FGL surviving the merger as a wholly owned indirect subsidiary of the Company. The Company will pay $31.10, in cash, without interest, for each outstanding share of common stockconsolidation of FGL (subject to certain exceptions), plus additional specified amounts in cashand its subsidiaries and FSR Companies, as "Successor" for outstanding equity incentives, for an aggregate purchase price of approximately $1.84 billion, plus approximately $405 million of existing FGL debt which will be assumed or refinanced.FGL provides itsperiods from and after the Closing Date.itsour insurance subsidiaries - Fidelity & Guaranty Life Insurance Company (“FGLIC”("FGL Insurance") and Fidelity & Guaranty Life Insurance Company of New York. FGL’sYork ("FGL NY Insurance"). Our customers range across a variety of age groups and are concentrated in the middle-income market. FGL’sOur fixed indexed annuities (“FIAs”) provide for pre-retirement wealth accumulation and post-retirement income management. FGL’sOur universal life insurance providesproducts ("IUL") provide wealth protection and transfer opportunities through indexed universal life products.opportunities. Life and annuity products are primarily distributed through independent marketing organizationsIndependent Marketing Organizations ("IMOs") and independent insurance agents.FGL Business Combinationfollowing factors represent some of the key trends and uncertainties that have influenced the development of our business and our historical financial performance and that we believe will continue to influence our business and financial performance in the future.be consummatedgrow from 15% in 2015 to 20% in 2030.fourth quarter of 2017, subject to receipt of required regulatory approvals and satisfactionsector of the other closing conditions specifiedinsurance 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. Accordingly, the FIA market grew from nearly $12 billion of sales in 2002 to $54 billion of sales in 2017. Additionally, this market demand has positively impacted the Merger Agreement. On August 8, 2017, the Company held an extraordinary general meeting in lieuIUL market as it has expanded from $100 million of annual general meetingpremiums in 2002 to $2 billion of shareholders, at whichannual premiums in 2017.Company’s shareholders approved the FGL Business Combination. No shareholders elected to have their shares redeemed in connection with the FGL Business Combination.Critical Accounting PoliciesOrdinary Shares Subject to Possible RedemptionWe accountproduction 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 our ordinary shares subject to possible redemptionany financial measure determined in accordance with GAAP. For GAAP purposes annuity and IUL sales are recorded as deposit liabilities (i.e. contract holder funds). Management believes that presentation of sales as measured for management purposes enhances the guidanceunderstanding of our business and helps depict longer term trends that may not be apparent in ASC Topic 480 “Distinguishing Liabilitiesthe results of operations due to the timing of sales and revenue recognition.Sales of annuities and IULs by fiscal quarters for the quarters ended March 31 and June 30 were as follows: Annuity Sales IUL Sales 2018 2017 2018 2017 First Quarter $ 778 $ 732 $ 6 $ 14 Second Quarter 769 582 7 9 Total $ 1,547 $ 1,314 $ 13 $ 23 Equity.” Ordinary sharescontractholder funds, and net realized gains (losses) on investments. 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 cost of providing index credits to the policyholder), amortization of deferred acquisition cost (“DAC”), deferred sales inducements (“DSI”), and value of business acquired (“VOBA”), other operating costs and expenses, and income taxes.mandatory redemption (if any)certain guaranteed minimums that must be maintained. The call options and futures contracts are classifiedmarked to fair value with the change in fair value included as a liability instrumentcomponent 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.value. Conditionally redeemable ordinary shares (including ordinary shares that features redemption rights that are either withinvalue; (v) the controlnet payable/receivable for the purchase/sale of investments and (iv) cash and cash equivalents, excluding derivative collateral, at the beginning of the holder or subjectperiod and the end of each month in the period, divided by the total number of months in the period plus one. Management considers this to redemption uponbe a useful measure internally and to investors and analysts when assessing the occurrencerate of uncertain events not solely withinreturn on assets available for reinvestment.control) are classifiedunaudited Condensed Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosures regarding contingencies and commitments. Actual results could differ from these estimates. During the six months ended June 30, 2018, the Company did not make any material changes in its critical accounting policies as temporary equity. At all other times, ordinary shares are classifiedpreviously disclosed in Management’s Discussion and Analysis in the Company’s 2017 Form 10-K as shareholders’ equity. Our ordinary shares feature certain redemption rights that are consideredfiled with the SEC.be outside"Note 2. Significant Accounting Policies and Practices" to our unaudited consolidated financial statements for disclosure of recent accounting pronouncements. Three Months Ended Six Months Ended June 30,
2018 June 30,
2017 June 30,
2018 June 30,
2017 Increase/
(Decrease) Predecessor Predecessor Revenues: Premiums $ 15 $ 12 $ 3 $ 33 $ 15 $ 18 Net investment income 282 257 25 545 504 41 Net investment gains (losses) (2 ) 67 (69 ) (193 ) 148 (341 ) Insurance and investment product fees and other 45 44 1 93 88 5 Total revenues 340 380 (40 ) 478 755 (277 ) Benefits and expenses: Benefits and other changes in policy reserves 249 235 14 231 503 (272 ) Acquisition and operating expenses, net of deferrals 46 40 6 86 73 13 Amortization of intangibles 10 51 (41 ) 33 84 (51 ) Total benefits and expenses 305 326 (21 ) 350 660 (310 ) Operating income 35 54 (19 ) 128 95 33 Interest expense (7 ) (6 ) (1 ) (13 ) (12 ) (1 ) Income before income taxes 28 48 (20 ) 115 83 �� 32 Income tax expense (8 ) (16 ) 8 (43 ) (29 ) (14 ) Net income $ 20 $ 32 $ (12 ) $ 72 $ 54 18 Less preferred stock dividend 7 — 7 14 — 14 Net income available to common shareholders $ 13 $ 32 $ (19 ) $ 58 $ 54 $ 4 controldistribution partners, primarily Independent Marketing Organizations. Sales of MYGA were $220 in the quarter ended June 30, 2018 and subject to occurrence$127 in the Predecessor quarter ended June 30, 2017. Sales of uncertain future events. Accordingly, ordinary shares subject to possible redemptionMYGA were $362 in the six months ended June 30, 2018 and $285 in the Predecessor six months ended June 30, 2017. There were no funding agreements in the three months ended June 30, 2018 or the Predecessor three months ended June 30, 2017. The six months ended June 30, 2018 reflects a $200 funding agreement with Federal Home Loan Bank, under an investment spread strategy, while the Predecessor six months ended June 30, 2017 reflects a $136 funding agreement with Federal Home Loan Bank. These funding agreements are presented as temporary equity, outsidean institutional spread based products and we view this volume as subject to fluctuation period to period. Indexed universal life sales during the quarter ended June 30, 2018 and the Predecessor quarter ended June 30, 2017 were $7 and $9, respectively. Indexed universal life sales during the six months ended June 30, 2018 and the Predecessor six months ended June 30, 2017 were $13 and $23, respectively. The decline in IUL sales during the quarter and six months ended June 30, 2018 reflects our focus on quality of new business and pricing discipline to achieve profitability and capital targets.shareholders’major components included in net investment income ("NII") for the quarter ended June 30, 2018, the Predecessor quarter ended June 30, 2017, the six months ended June 30, 2018 and the Predecessor six months ended June 30, 2017: Three Months Ended Six Months Ended June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017 Increase/
(Decrease) Predecessor Predecessor Fixed maturity securities, available-for-sale $ 248 $ 242 $ 6 $ 490 $ 478 $ 12 Equity securities 26 11 15 36 21 15 Commercial mortgage loans, invested cash, short term investments, and other investments 24 10 14 45 17 28 Gross investment income 298 263 35 571 516 55 Investment expense (16 ) (6 ) (10 ) (26 ) (12 ) (14 ) Net investment income $ 282 $ 257 $ 25 $ 545 $ 504 $ 41 Three Months Ended Six Months Ended June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017 Increase/
(Decrease) Predecessor Predecessor Yield on AAUM (at amortized cost) 4.42 % 5.01 % (0.59 )% 4.32 % 4.95 % (0.63 )% Less: Interest credited and option cost (2.34 )% (2.47 )% 0.13 % (2.34 )% (2.48 )% 0.14 % Net investment spread 2.08 % 2.54 % (0.46 )% 1.98 % 2.47 % (0.49 )% AAUM $ 25,491 $ 20,569 $ 4,922 $ 25,224 $ 20,365 $ 4,859 Three Months Ended Six Months Ended June 30, 2018 June 30, 2017 June 30,
2018 June 30,
2017 Increase/
(Decrease) Predecessor Predecessor Net realized gains (losses) on fixed maturity available-for-sale securities, equity securities and other invested assets $ (46 ) $ (7 ) $ (39 ) $ (92 ) $ (23 ) $ (69 ) Net realized and unrealized gains (losses) on hedging derivatives and reinsurance-related embedded derivatives 57 82 (25 ) (67 ) 191 (258 ) Change in fair value of reinsurance related embedded derivatives (13 ) (9 ) (4 ) (34 ) (20 ) (14 ) Net investment gains (losses) $ (2 ) $ 67 $ (69 ) $ (193 ) $ 148 $ (341 ) sectionsecurities reflecting the post adoption impact of our balance sheet.Although we did not specifyASU 2016-01 and $0 of impairment losses.maximum redemption threshold, our charter provides thatplanned portfolio re-positioning strategy following the completion of the merger, $29 change in no event will we redeem our public sharesthe unrealized losses on equity securities reflecting the post adoption impact of ASU 2016-01 and $2 of impairment losses. In the Predecessor six months ended June 30, 2017 net realized losses on available-for-sale securities of $23, inclusive of $21 of impairments related to corporates, other invested assets and asset backed securities, comprised primarily of $20 credit-related impairment losses on available-for-sale debt securities related to investments in an amount that would cause our net tangible assets (shareholder’ equity) to be less than $5,000,001. We recognize changesFirst National Bank Holding Co.redemption value immediately as they occur and will adjust the carryingfair value of the securityunderlying assets held in the funds withheld ("FWH") portfolio. The majority of the movement in the value of this derivative was driven by the Predecessor's coinsurance agreement with FSRC. As part of the Business Combination, FSRC is now a subsidiary of the Company which eliminated the impact of this component of net investment gains (losses) for the three and six months June 30, 2018. In the current period the change in fair value of the underlying assets held in FWH portfolio relates to equalFSRC's unaffiliated reinsurance agreements.redemptioncall options and futures contracts are based upon the S&P 500 Index with the remainder based upon other equity, bond and gold market indices. Three Months Ended Six Months Ended June 30, 2018 June 30, 2017 June 30,
2018 June 30,
2017 Increase/
(Decrease) Predecessor Predecessor Call Options: Gains (losses) on option expiration $ (13 ) $ 72 $ (85 ) $ (9 ) $ 144 $ (153 ) Change in unrealized gains (losses) 64 9 55 (60 ) 42 (102 ) Change in unrealized gain (loss) (FSRC) 4 — $ 4 $ 2 $ — $ 2 Futures contracts: Gains (losses) on futures contracts expiration (2 ) 1 (3 ) 5 4 1 Change in unrealized gains (losses) 4 — 4 (5 ) 1 (6 ) Total net change in fair value $ 57 $ 82 $ (25 ) $ (67 ) $ 191 $ (258 ) Change in S&P 500 Index during the period 3 % 3 % — % 2 % 8 % (6 )% Three Months Ended Six Months Ended June 30, 2018 June 30, 2017 Increase/
(Decrease) June 30,
2018 June 30,
2017 Increase/
(Decrease) Predecessor Predecessor Average Crediting Rate 4 % 5 % (1 )% 4 % 4 % — % S&P 500 Index: Point-to-point strategy 4 % 4 % — % 4 % 4 % — % Monthly average strategy 4 % 4 % — % 4 % 3 % 1 % Monthly point-to-point strategy 3 % 6 % (3 )% 5 % 5 % — % 3 year high water mark 14 % 13 % 1 % 11 % 12 % (1 )% Three Months Ended Six Months Ended June 30, 2018 June 30, 2017 Increase/
(Decrease) June 30,
2018 June 30,
2017 Increase/
(Decrease) Predecessor Predecessor Insurance and investment product fees and other: Surrender charges $ 12 $ 9 $ 3 $ 26 $ 18 $ 8 Cost of insurance fees and other income 33 35 (2 ) 67 70 (3 ) Total insurance and investment product fees and other $ 45 $ 44 $ 1 $ 93 $ 88 $ 5 each reporting period. Increases or decreasesthe policy year. Three Months Ended Six Months Ended June 30, 2018 June 30, 2017 Increase/
(Decrease) June 30,
2018 June 30,
2017 Increase/
(Decrease) Predecessor Predecessor FIA FAS 133 impact 29 1 28 (213 ) 51 (264 ) Index credits, interest credited & bonuses 170 182 (12 ) 377 363 14 Annuity payments 38 37 1 76 75 1 Other policy benefits and reserve movements (12 ) 15 (27 ) (18 ) 14 (32 ) Change in fair value of reserve liabilities held at fair value 24 — 24 9 9 Total benefits and other changes in policy reserves $ 249 $ 235 $ 14 $ 231 $ 503 $ (272 ) carrying amount of redeemable ordinary shares shall be affected by charges against additional paid-in capital. Accordingly, at SeptemberPredecessor quarter ended June 30, 2017, 62,337,495 Class A ordinary sharesrespectively, and were classified outsidedriven by the changes in the equity markets and risk free rates during the current quarter. The favorable movement in equity markets resulted in a $62 increase in the FAS 133 liability during Q2 2018 as compared to $17 increase during Q2 2017. The rise in risk free rates reduced the FAS 133 reserves by approximately $27 during Q2 2018 as compared to $10 for the corresponding period in 2017. The change in equity market also impacts the market value of permanent equity at their redemption value.Recent Accounting PronouncementsManagement does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effectthe derivative assets hedging our FIA policies. See table in the net investment gains/losses discussion above for summary and discussion of net unrealized gains (losses) on certain derivative instruments.accompanying unaudited condensed financial statements.
policyholder buy dates and related increases in proceeds from options and futures which fund FIA index credits.23ResultsOperationsWe have not generated any revenuesreserve liabilities held at fair value increased date, and we will not be generating any operating revenues until the closing and completion of our initial Business Combination. Our entire activity from inception to SeptemberNovember 30, 2017 relatesacquisition of FSR.our formation, consummation$55 increase during the corresponding period in 2017. The rise in risk free rates reduced the FAS 133 reserves by approximately $124 during the six months ended June 30, 2018 as compared to $12 for the corresponding period in 2017. The change in equity market also impacts the market value of the initial public offering,derivative assets hedging our FIA policies. See table in the forward purchase agreements,net investment gains/losses discussion above for summary and sincediscussion of net unrealized gains (losses) on certain derivative instruments.closingsix months ended June 30, 2018 and the Predecessor six months ended June 30, 2017, respectively. The period over period increase of $14 was primarily due to high index credits on FIA policies reflecting the favorable performance of the initial public offering, the search for a Business Combination candidate. Going forward, we expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses. We expect our expenses to increase substantially after this period.For the three months ended September 30, 2017, we had net income of approximately $617,000, which was derived from interest income from our Trust Account of approximately $1.4 million, and offset mostly by costs relatedS&P 500 Index relative to the merger with Fidelity & Guaranty Life, a Delaware corporation (“FGL”).ForS&P 500 Index level on the three months ended September 30, 2016, we had net income of approximately $138,000,policyholder buy dates and related increases in proceeds from options and futures which consisted solely of operating expenses of approximately $290,000 and offset by interest income from our Trust Account of $427,000.For the nine months ended September 30, 2017, we had net losses of approximately $17.3 million, which consisted approximately $15.2 million in costs related to the merger with FGLfund FIA index credits.approximately $5.0 million,deferrals Three Months Ended Six Months Ended June 30, 2018 June 30, 2017 Increase/
(Decrease) June 30,
2018 June 30,
2017 Increase/
(Decrease) Predecessor Predecessor Acquisition and operating expenses, net of deferrals: General expenses $ 37 $ 35 $ 2 $ 72 $ 65 $ 7 Acquisition expenses 94 72 22 148 153 (5 ) Deferred acquisition costs (85 ) (67 ) (18 ) (134 ) (145 ) 11 Total acquisition and operating expenses, net of deferrals $ 46 $ 40 $ 6 $ 86 $ 73 $ 13 Three Months Ended Six Months Ended June 30, 2018 June 30, 2017 Increase/
(Decrease) June 30,
2018 June 30,
2017 Increase/
(Decrease)Amortization of intangibles related to: Predecessor Predecessor Unlocking $ (1 ) $ — $ (1 ) $ (1 ) $ (3 ) $ 2 Interest (6 ) (14 ) 8 (11 ) (29 ) 18 Amortization 17 65 (48 ) 45 116 (71 ) Total amortization of intangibles $ 10 $ 51 $ (41 ) $ 33 $ 84 $ (51 ) income fromperiod-over-period due to continued growth in our Trust Accountin force book of approximately $2.9 million.Forbusiness.period from February 26, 2016 (inception) to SeptemberCompany's debt for the quarter ended June 30, 2016, we had net losses of approximately $520,000, which consisted solely of operating expenses of approximately $972,000 and offset by interest income from our Trust Account of $452,000.Liquidity and Capital ResourcesAs indicated in2018, the accompanying unaudited condensed financial statements, at SeptemberPredecessor quarter ended June 30, 2017, we had approximately $479,000 in our operating bank account, approximately $694 million in cashthe six months ended June 30, 2018 and cash equivalents held in the Trust Account, interest income of approximately $3.8 million available from the Company’s investments in the Trust Account to pay for our income tax obligations, if any, and working capital deficit of approximately $20.9 million.Through SeptemberPredecessor June 30, 2017, our liquidity needs also have been satisfied through receipt of a $25,000 capital contribution from the Sponsor in exchange2017: Three Months Ended Six Months Ended June 30, 2018 June 30, 2017 Increase/
(Decrease) June 30,
2018 June 30,
2017 Increase/
(Decrease)Interest expense and amortization related to: Predecessor Predecessor Debt $ 8 $ 5 $ 3 $ 13 $ 9 $ 4 Revolving credit facility 1 1 — 2 3 (1 ) Gain on extinguishment of debt (2 ) — (2 ) (2 ) — (2 ) Total interest expense 7 6 1 13 12 3 issuancequarter ended June 30, 2018 and $6 for the Predecessor quarter ended March 31, 2017, and reflects interest incurred on the debt and revolving credit facility for those periods. On April 20, 2018, the Company completed a debt offering of $550 aggregate principal amount of 5.50% senior notes due 2025. The Company used the founder shares to the Sponsor, $225,733 in loans from the Sponsor, and the proceeds not held in the Trust Account resulted from the consummation of the Private Placement.In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of our officers and directors may, but are not obligated to, loan us Working Capital Loans. In July 2017, the Sponsor loaned an aggregate of $750,000 of Working Capital Loans to us. If we complete a Business Combination, we would repay the Working Capital Loans out of thenet proceeds of the Trust Account released to us. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, we may use a portion of proceeds held outside the Trust Accountoffering (i) to repay $135 of borrowings under its revolving credit facility and related expenses and (ii) to redeem in full and satisfy and discharge all of the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans, other thanoutstanding $300 aggregate principal amount of FGLH's outstanding 6.375% Senior Notes due 2021. The current period reflects the interest expense incurred on such proceeds that may be releasedthe 5.50% senior notes due 2025 . Refer to pay"Note 8. Debt" of our unaudited Condensed Consolidated Financial Statements for additional details.obligations. Exceptexpenseforegoing,quarter ended June 30, 2018, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, atPredecessor quarter ended June 30, 2017, the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant. Such warrants would be identical to the Private Placement Warrants.Based on the foregoing, we believe that we will have insufficient funds available to operate our business through the earlier of consummation of a Business Combination or May 25, 2018. Following the initial Business Combination, if cash on hand is insufficient, the Company may need to obtain additional financing in order to meet its obligations. We cannot be certain that additional funding will be available on acceptable terms, or at all. Our plans to raise capital or to consummate the initial Business Combination may not be successful. These matters, among others, raise substantial doubt about our ability to continue as a going concern.The accompanying financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.24Related Party TransactionsFounder SharesOn March 2, 2016, we issued an aggregate of 15,000,000 founder shares to the Sponsor in exchange for a capital contribution of $25,000. On April 19, 2016, the Sponsor surrendered 3,750,000 founder shares to us for no consideration, which we cancelled. We then issued 3,750,000 founder shares to the Anchor Investors for an aggregate price of approximately $7,000 in connection with the forward purchase agreements. The Sponsorsix months ended June 30, 2018 and the Anchor Investors currently own 11,250,000 and 3,750,000 founder shares, respectively. The founder shares will automatically convert into Class A ordinary shares in connection with the consummation of a Business Combination at a ratio such that the number of Class A ordinary shares issuable upon conversion of all founder shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of (i) the total number of Class A ordinary shares outstanding upon completion of the initial public offering (including the Over-allotment), plus (ii) the sum of (a) the total number of Class A ordinary shares issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by us in connection with or in relation to the consummation of the initial Business Combination (including forward purchase shares, but not forward purchase warrants), excluding any Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, or to be issued, to any seller in the initial Business Combination and any Private Placement Warrants issued to the Sponsor upon conversion of Working Capital Loans, minus (b) the number of public shares redeemed by public shareholders in connection with the initial Business Combination.The Sponsor, Chinh E. Chu and William P. Foley, II have agreed not to transfer, assign or sell any of their founder shares until the earliest of (a) one year after the completion of the initial Business Combination with respect to 50% of their founder shares, (b) two years after the completion of the initial Business Combination with respect to the remaining 50% of their founder shares, and (c) the date on which we complete a liquidation, merger, share exchange or other similar transaction after an initial Business Combination that results in all of our shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property. Subject to certain exceptions, the Anchor Investors have agreed not to transfer, assign or sell any of their founder shares until the earlier to occur of: (i) one year after the completion of the initial Business Combination or (ii) the date on which we complete a liquidation, merger, share exchange or other similar transaction after the initial Business Combination that results in all of our shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property. Any permitted transferees will be subject to the same restrictions and other agreements of the initial shareholders or Anchor Investors, as applicable, with respect to any founder shares. Notwithstanding the foregoing, if the closing price of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, the founder shares held by investors other than the Sponsor, Chinh E. Chu and William P. Foley, II will be released from the lock-up.Private Placement WarrantsOn May 25, 2016 andPredecessor June 29, 2016, the Sponsor purchased from us an aggregate of 15,800,000 Private Placement Warrants. Each Private Placement Warrant entitles the holder to purchase one Class A ordinary share at $11.50 per share. The Private Placement Warrants (including the Class A ordinary shares issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30, days after the completion of the initial Business Combination, and they will be non-redeemable so long as they are held by the initial purchasers of the Private Placement Warrants or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers of the Private Placement Warrants or their permitted transferees, the Private Placement Warrants will be redeemable by us and exercisable by such holders on the same basis as the Public Warrants. Otherwise, the Private Placement Warrants have terms and provisions that are identical to those of the Public Warrants and have no net cash settlement provisions.If we do not complete a Business Combination, then the proceeds of the sale of the Private Placement Warrants will be part of the liquidating distribution to the public shareholders and the Private Placement Warrants will expire worthless.Forward Purchase AgreementsOn April 19, 2016, we entered into forward purchase agreements pursuant to which the Anchor Investors (including two affiliates of the Sponsor) agreed to purchase an aggregate of 51,000,000 Class A ordinary shares plus an aggregate of 19,083,333 redeemable warrants (one redeemable warrant for every three forward purchase shares purchased) at $10.00 per Class A ordinary share for an aggregate purchase price of $510 million, in a private placement to occur concurrently with the closing of the Business Combination. In connection with these agreements, we issued an aggregate of 3,750,000 founder shares to such investors. The founder shares issued to such investors are subject to similar contractual conditions and restrictions as the founder shares issued to the Sponsor. The Anchor Investors will have redemption rights with respect to any public shares they own but have waived redemption rights with respect to their founder shares. The forward purchase agreements also provide that the investors are entitled to a right of first offer to with respect to any proposed sale of additional equity or equity-linked securities by us for capital raising purposes in connection with the closing of the Business Combination (other than shares and warrants pursuant to forward purchase agreements) and registration rights with respect to the shares, warrants and Class A ordinary shares underlying the forward purchase warrants.
2017:25On April 22, 2016, we entered into an agreement with Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Credit Suisse Securities (USA) LLC in connection with the forward purchase agreements described above, to act as placement agents (the “Placement Agents”) in the related private placement. In connection therewith, the Placement Agents are entitled to placement agent fees in an aggregate amount of: (i) up to 3.5% of the aggregate proceeds received from the forward purchase shares (or $17.85 million), contingently payable at the consummation of the an initial Business Combination, (ii) an additional placement agent fee of 0.5% of the aggregate proceeds received from the sales of the forward purchase agreements (or $2.55 million) at our sole discretion as determined at the time of the consummation of an initial Business Combination, and (iii) reimbursement of reasonable legal counsel fees and expenses up to an aggregate amount of $275,000, which will be paid upon the earlier of the consummation of an initial Business Combination and December 1, 2017.Rights of First Offer Purchase AgreementsOn June 21, 2017, the Company entered into the Purchase Agreements with certain accredited investors, including Keith W. Abell, Richard N. Massey and James A. Quella, each of whom is an independent director of the Company, in connection with the rights of first offer under the forward purchase agreements. Messrs. Abell, Massey and Quella have subscribed for an aggregate of 969,697 shares under the equity purchase agreements for a purchase price of $10.00 per share, to occur at the Closing. At the Company’s option, such shares may be purchased from the Company in a private placement and/or from public shareholders who have validly requested for their public shares to be redeemed in connection with the FGL Business Combination. In addition, these individuals will be entitled to receive an aggregate of $240,000, which represents their pro rata portion of the $4.95 million the Company agreed to pay to certain anchor investors in connection with the waivers provided under the rights of first offer under the forward purchase agreements.Due to Related PartiesThe Sponsor and other related parties have loaned us an aggregate amount of $225,733 to be used for the payment of costs related to the initial public offering. These borrowings are non-interest bearing, unsecured and due upon the closing of the initial public offering. We have not yet repaid this amount as of September 30, 2017.In July 2017, the Sponsor loaned an aggregate of $750,000 to us as a Working Capital Loan. The Working Capital Loans will either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant. Any such warrants would have identical terms as the Private Placement Warrants.Administrative Service FeeWe have agreed, commencing on May 25, 2016 through the earlier of our consummation of a Business Combination and liquidation, to pay an affiliate of the Sponsor a monthly fee of $10,000 for office space, and secretarial and administrative services. We recorded $30,000 and $0 in Three Months Ended Six Months Ended June 30, 2018 June 30, 2017 Increase/
(Decrease) June 30,
2018 June 30,
2017 Increase/
(Decrease) Predecessor Predecessor Income before taxes $ 28 $ 48 $ (20 ) $ 115 $ 83 $ 32 Income tax before valuation allowance 5 16 (11 ) 35 29 6 Change in valuation allowance 3 — 3 8 — 8 Income tax $ 8 $ 16 $ (8 ) $ 43 $ 29 $ 14 Effective rate 29 % 33 % (4 )% 37 % 35 % 2 % SeptemberJune 30, 2018 was $8, inclusive of a valuation allowance expense of $3, compared to income tax expense of $16 for the Predecessor three months ended June 30, 2017, and 2016 and $90,000 and $40,000inclusive of a valuation allowance expense of $0. The decrease in income tax expense of $8 quarter over quarter was primarily due to the lower U.S. Federal statutory tax rate of 21% in 2018 compared with 35% in 2017, partially offset by a valuation allowance expense of $3 in the 2018 quarter.ninesix months ended SeptemberJune 30, 2018 was $43, inclusive of a valuation allowance expense of $8, compared to income tax expense of $29 for the Predecessor six months ended June 30, 2017, and the period from February 26, 2016 (Dateinclusive of Inception) through September 30, 2016, respectively.Equity Commitment Letters and Related AgreementsIn connection with the FGL Business Combination and related transactions, the Company has entered into the following:·The BTO Fund Equity Commitment Letters, pursuant to which BTO Fund has committed to purchase ordinary shares of the Company at the Closing in a private placement for $10.00 per share, or an aggregate cash purchase price of $225 million. BTO Fund is an investment fund managed by an indirect subsidiary of The Blackstone Group L.P. (“Blackstone”). CFS, a shareholder of the Company and a party to one of the forward purchase agreements, is an investment vehicle owned by certain investment funds (including BTO Fund) managed by indirect subsidiaries of Blackstone.·The FNF Equity Commitment Letters, pursuant to which FNF has committed to purchase newly issued ordinary shares and preferred shares of the Company in a private placement for an aggregate cash purchase price equal to (x) $235 million plus (y) up to an aggregate of $195 million to offset redemptions of public shares, if any, in connection with the FGL Business Combination. The Company’s Co-Executive Chairman, William P. Foley, II, is also the non-executive Chairman of the Board of FNF. The Investor Agreement provides that FNF’s commitment to purchase equity of the Company will be allocated as follows: (i) $135 million to newly issued ordinary shares for $10.00 per share and (ii) $100 million, plus any amounts funded to backstop redemptions of public shares, to preferred shares. The preferred shares will not have a maturity date. The dividend rate of the preferred shares will be 7.5% per annum (subject to increase in the period beginning 10 years after issuance based on the then-current LIBOR rate), payable quarterly in cash or additional preferred shares of the Company, at the Company’s option. FNF and GSO will also have the right to convert their preferred shares into ordinary shares of the Company commencing 10 years after issuance as described herein. In addition, in exchange for the commitment with respect to preferred shares, FNF will be entitled to fees of (i) the original issue discount on the issuance of the preferred shares, equal to $2.0 million, plus (ii) $2.925 million, plus (iii) penny warrants that are exercisable, in the aggregate, for 1.2% of the Company’s issued and outstanding ordinary shares (on a fully diluted basis) plus (iv) if, and to the extent, any amount of the preferred shares are issued with respect to the backstop commitment, (x) a funding fee of 0.5% of the amount of the equity that is funded and (y) penny warrants that are exercisable, in the aggregate, for the product of (1) the proportion of such backstop equity that is funded, multiplied by (2) 1.5% of the Company’s issued and outstanding ordinary shares (on a fully diluted basis).26·The GSO Equity Commitment Letters, pursuant to which GSO, the credit platform of Blackstone, has committed to purchase, or cause the purchase of, newly issued preferred shares of the Company at the Closing for an aggregate cash purchase price equal to (x) $275 million plus (y) up to an aggregate of $465 million to offset redemptions of public shares, if any, in connection with the FGL Business Combination. In addition, in exchange for the commitment with respect to preferred shares, GSO will be entitled to fees of (i) the original issue discount on the issuance of the preferred shares, equal to $5.5 million, plus (ii) $6.975 million, plus (iii) penny warrants that are exercisable, in the aggregate, for 3.3% of the Company’s issued and outstanding ordinary shares (on a fully diluted basis) plus (iv) if, and to the extent, any amount of the preferred shares are issued with respect to the backstop commitment, (x) a funding fee of 0.5% of the amount of the equity that is funded and (y) penny warrants that are exercisable, in the aggregate, for the product of (1) the proportion of such backstop equity that is funded, multiplied by (2) 3.5% of the Company’s issued and outstanding ordinary shares (on a fully diluted basis).·The Forward Purchase Backstop Equity Commitment Letters, pursuant to which, on the terms and subject to the conditions set forth therein, (i) BTO Fund has committed to purchase, or cause the purchase of, newly issued ordinary shares of the Company at the Closing for an aggregate cash purchase price equal to one-third (1/3) of the FPA Shortfall, up to an aggregate amount of $100 million and (ii) FNF has committed to purchase, or cause the purchase of, newly issued ordinary shares of the Company at the Closing for an aggregate cash purchase price equal to two-thirds (2/3) of the FPA Shortfall, up to an aggregate amount of $200 million. Pursuant to the Forward Purchase Backstop Equity Commitment Letters and the Investor Agreement, FNF and BTO Fund will together purchase ordinary shares and warrants of the Company equal to the number of ordinary shares and warrants that the purchasers under the forward purchase agreements who fail to fund, if any, would have acquired pursuant to the forward purchase agreements in connection with the business combination (including pursuant to the conversion of founder shares previously issued to such purchasers into ordinary shares). In exchange for providing the Forward Purchase Backstop Commitments, the Company agreed to pay to BTO Fund or its designated affiliate the amount of $1.5 million and to FNF the amount of $3.0 million promptly following the Closing, with such amounts payable whether or not any portion of the Forward Purchase Backstop Commitment is ultimately required to be funded. BTO Fund and FNF have agreed to forego receiving such fees in light of the additional commitments of certain accredited investors to purchase 20,000,000 ordinary shares in connection with the rights of first offer set forth in the forward purchase agreements.Investor AgreementAs an inducement for eacha valuation allowance expense of BTO Fund, GSO and FNF to enter into certain limited guaranties in connection with the FGL Business Combination, the Company entered into the Investor Agreement with such Investor Agreement Parties, pursuant to which the Company agreed that, without the Investor Agreement Parties’ prior written consent, the Company would not amend, modify, grant any waiver under or seek to terminate any of the transaction agreements relating to the FGL Business Combination, or take any action concerning settlements, stipulations or judgments relating to government authorities or make any regulatory filings contemplated by the Merger Agreement, subject in each case to certain exceptions and qualifications.Pursuant to the Investor Agreement, the terms of the equity to be issued pursuant to the Equity Commitment Letters will be as follows:·With respect to the BTO Fund Commitment under the BTO Fund Equity Commitment Letters, BTO Fund will purchase ordinary shares. BTO Fund will receive one ordinary share in exchange for each $10.00 funded pursuant to its equity commitment letters.·With respect to the FNF Commitment described in the FNF Equity Commitment Letters, FNF will purchase (i) $135 million of newly issued ordinary shares for $10.00 per share and (ii) $100 million, plus additional amounts, if any, pursuant to FNF’s commitment to offset redemptions of public shares in connection with the FGL Business Combination, of preferred shares of the Company on the terms set forth in the Investor Agreement and warrants of the Company on the terms as set forth in the FNF Fee Letter.$0. The terms of the preferred shares to be issued to FNF set forth in the Investor Agreement are identical to those set forth in the GSO Side Letter described below. FNF will also have the right, provided that FNF has first requested the Company to remarket the preferred shares, commencing 10 years after the issuance of the preferred shares, to convert such shares into a number of ordinary shares of the Company as determined by dividing (i) the aggregate par value (including dividends paid in kind and unpaid accrued dividends) of the preferred shares that FNF wishes to convert by (ii) the higher of (a) a 5% discount to the 30-day VWAP of the ordinary shares following the conversion notice, and (b) the then-current Floor Price.·With respect to the GSO Commitment under the GSO Equity Commitment Letters, GSO will purchase preferred shares and be issued warrants of the Company on the terms set forth in the GSO Side Letter.·In the event that public shareholders redeem their public shares in connection with the business combination, a certain portion of the GSO Commitment and the FNF Commitment, as described in their respective equity commitment letters, shall be allocated pro rata based on their aggregate commitments thereunder.·With respect to the Forward Purchase Backstop Equity Commitment Letters, each of FNF and BTO Fund will purchase ordinary shares and one-third (1/3) of one detachable warrant (with such warrants having the same terms as the Forward Purchase Warrants). BTO Fund will receive one ordinary share and one-third (1/3) of a warrant in exchange for each $10.00 funded pursuant to the Forward Purchase Backstop Equity Commitment Letters. In addition, FNF and BTO Fund will together purchase ordinary shares equal to the number of ordinary shares that the purchasers under the forward purchase agreements who fail to fund, if any, would have acquired pursuant to the forward purchase agreements in connection with the FGL Business Combination (including pursuant to the conversion of founder shares into ordinary shares). FNF will purchase two-thirds (2/3) of such ordinary shares, if any, and BTO Fund will purchase one-third (1/3) of such ordinary shares, if any.27The Investor Agreement further provides that the Investor Agreement Parties will receive registration rights on customary terms with respect to the ordinary shares, preferred shares and warrants (and the ordinary shares underlying such warrants) issued pursuant to the Equity Commitment Letters.FNF Fee LetterAs consideration for the FNF Commitment (including the backstop commitment) and the agreements of FNF under the FNF Commitment Letters and limited guaranties, the Company also entered into the FNF Fee Letter, pursuant to which the Company has agreed to pay or issue to FNF the following at Closing:·the original issue discount of $2.0 million in respect of the preferred shares issued to FNF (the “FNF OID”)·a commitment fee of $2.925 million (the “FNF Commitment Fee”);·penny warrants convertible, in the aggregate, for 1.2% of our ordinary shares (on a fully diluted basis) (the “FNF Investment Warrants”); and·if, and to the extent, any amount of the preferred equity under FNF’s backstop commitment is funded (the “FNF Backstop Equity”), (x) a funding fee of 0.5% of the amount of the FNF Backstop Equity that is funded (together with the FNF OID and the FNF Commitment Fee, the “FNF Closing Payments”), and (y) penny warrants attached to the FNF Backstop Equity that are convertible, in the aggregate, for the result of (1) the proportion of the FNF Backstop Equity that is funded, and (2) 1.5% of our ordinary shares (on a fully diluted basis) (together with the FNF Investment Warrants, the “FNF Warrants”).The FNF Closing Payments will be paid as a reduction of the purchase price payable by FNF for the preferred shares under the FNF Equity Commitment Letters. The Company has also agreed to pay or reimburse FNF for fees and expenses of counsel in connection with FNF’s anticipated purchase of the preferred shares.GSO Side LetterThe Company entered into the GSO Side Letter, which provides that that the terms of the preferred shares to be issued to GSO will include: a dividend rate of 7.5% per annum (subject to increase in theincome tax expense of $14 period beginning 10 years after issuance based on the then-current LIBOR rate), payable quarterly in cash or additional preferred sharesover period was primarily due to an expense of the Company, at the Company’s option; five year call protection; and the right of holders thereof$15 to request the Company to re-market the preferred shares commencing in the sixth year following issuance, subject to the terms and conditions specified therein. In addition, GSO will also have the right, commencing 10 years after the issuance of the preferred shares, provided that GSO has first requested the Company to remarket the preferred shares as described below, to convert such shares into a number of ordinary shares of the Company as determined by dividing (i) the aggregate par value (including dividends paid in kind and unpaid accrued dividends) of the preferred shares that GSO wishes to convert by (ii) the higher of (a) a 5% discount to the 30-day VWAP of the ordinary shares following the conversion notice, and (b) the then-current Floor Price. From the fifth anniversary of the funding date, upon GSO’s request, the Company is required (subject to customary black-out provisions) to re-market the preferred equity its existing terms. To the extent market conditions make such re-marketing impracticable, the Company may temporarily delay such re-marketing provided that the preferred equity is re-marketed within six months of the date of GSO’ initial request. To the extent it is unlikely that remarketing the preferred shares on the then existing terms will receive a valuation by a prospective purchaser of par or greater than par, the Company may, upon GSO’s request, modify the terms of the preferred shares to improve the sale of such shares with the intention of preserving rating agency equity credit. If the proceeds from any sales resulting from such marketing are less than the outstandingestablish an opening tax balance of the applicable preferred shares (including dividends paid in kind and unpaid accrued dividends), the Company will reimburse GSO up to a maximum of 10% of par (including paid in kind and unpaid accrued dividends) for actual losses incurred by GSO upon the sale of its preferred shares under the terms of the remarketing mechanism, with such amount payable either in cash, ordinary shares, or any combination thereof, at the Company’s option. If the Company chooses to deliver ordinary shares to GSO, the number of such shares to be delivered will be determined by dividing (i) the amount of actual losses to be paid to GSO by (ii) the higher of (a) an 8% discount to the 30-day VWAP of the ordinary shares following the remarketing period, and (b) $6.00. The terms of the preferred equity are expected to include customary covenants for senior preferred equity, including limitations on debt incurrence, equity issuances and payments of dividends, and covenants requiring compliance with a set of financial covenants, affirmative covenants and negative covenants that mirror those contained in the credit facility documentation in effect as of the funding date. The preferred equity will rank senior in priority to all other existing and future equity securities of the Company with respect to distribution rights and liquidation preference. In addition, holders of preferred equity are expected to have board observation and customary registration rights with respect to such shares.28Pursuant to the GSO Side Letter, for the period from the date of the GSO Side Letter until the earlier of (a) the mutual agreement by the parties thereto not to execute definitive documentation relating to the GSO Commitment, (b) the Closing Date and (c) the first anniversary of the GSO Side Letter, the Company agreed (i) not to, directly or indirectly solicit, participate in any negotiations or discussion with or provide or afford access to information to any third party with respect to, or otherwise effect, facilitate, encourage or accept any offers for the purchase or provision of the GSO Preferred Shares or any alternative equity or debt financing arrangements, in each case, to be put in place in connection with the FGL Business Combination in replacement of the GSO Preferred Shares or any portion thereof (other than pursuant to the Equity Commitment Letters, forward purchase agreements or the debt commitment letter) and (ii) if the FGL Business Combination is not consummated and the Company pursues an alternative transaction with FGL within the period ending on the first anniversary of the GSO Side Letter, and another financing source or institution proposes to provide financing in connection with such alternative transaction, the Company will provide GSO a reasonable opportunity to provide such financing in lieu of any other financing source or institution on equivalent terms.Amendment FeesAs consideration for the amending and restating the Investor Agreement on October 6, 2017 to better align the terms of the preferred shares with the requirements of the rating agencies, we agreed to pay $1.1 million to FNF or one or more of its designees at the Closing. As consideration for entering into the amendment to the GSO Side Letter on October 6, 2017 to better align the terms of the preferred shares with the requirements of the rating agencies, we agreed to pay $2.9 million to GSO or to one or more of its designees at the Closing.GSO Fee LetterAs consideration for the GSO Commitment (including the backstop commitment) and the agreements of GSO under the GSO Commitment Letters, the limited guaranties and the GSO Side Letter, the Company also entered into the GSO Fee Letter, pursuant to which the Company agreed to pay or issue to GSO the following at Closing:29·the GSO OID of $5.5 million in respect of the preferred shares issued to GSO;·the GSO Commitment Fee of $6.975 million;·GSO Investment Warrants exercisable, in the aggregate, for 3.3% of the Company’s ordinary shares (on a fully diluted basis); and·if, and to the extent, any amount of the GSO Backstop Equity is funded, then (x) a funding fee of 0.5% of the amount of the GSO Backstop Equity that is funded (collectively with the GSO OID and the GSO Commitment Fee, the “GSO Closing Payments”) and (y) penny warrants that are exercisable, in the aggregate, for the product of (1) the proportion of the GSO Backstop Equity that is funded, multiplied by (2) 3.5% of the Company’s issued and outstanding ordinary shares (on a fully diluted basis).The GSO Closing Payments will be paid as a reduction of the purchase price payable by GSO for the preferred shares under the GSO Commitment Letters. The Company has also agreed to pay or reimburse GSO for fees and expenses of counsel in connection with GSO’s anticipated purchase of the preferred shares.Merger BTO Fund Limited GuarantyIn connection with the Merger Agreement, BTO Fund has agreed to provide a limited guaranty in favor of FGL (the “Merger BTO Fund Limited Guaranty”), pursuant to which, in the event (a) of the termination of the Merger Agreement in accordance with its terms and (b)(i) FGL has obtained a final, non-appealable order of damages owing by the Company, Parent or Merger Sub as a result of such party’s intentional and material breach of the Merger Agreement or fraud or (ii) there is a settlement (by written agreement of the parties to the Merger Agreement) resolving any action broughtsheet as a result of the Company’s, Parent’s or Merger Sub’s intentionalintended election by F&G Re to be treated as a US taxpayer, higher pre-tax earnings, and material breachvaluation allowance expense of $8, partially offset by the Merger Agreement or fraud, BTO Fund has guaranteedlower U.S. Federal statutory tax rate of 21% in 2018 compared with 35% in 2017. Three Months Ended Six Months Ended June 30, 2018 June 30, 2017 Increase/
(Decrease) June 30,
2018 June 30,
2017 Increase/
(Decrease)Reconciliation from Net Income to AOI: Predecessor Predecessor Net income $ 20 $ 32 $ (12 ) $ 72 $ 54 $ 18 Adjustments to arrive at AOI: Effect of investment losses (gains), net of offsets (a) 37 4 33 76 19 57 16 (4 ) 20 (30 ) (6 ) (24 ) Effect of change in fair value of reinsurance related embedded derivative, net of offsets (a) (c) — 8 (8 ) — 16 (16 ) Effects of integration, merger related & other non-operating items 3 5 (2 ) 11 7 4 Effects of extinguishment of debt (2 ) — (2 ) (2 ) — (2 ) Tax effect of affiliated reinsurance embedded derivative — — — 15 — 15 Tax impact of adjusting items (9 ) (3 ) (6 ) (9 ) (10 ) 1 AOI $ 65 $ 42 $ 23 $ 133 $ 80 $ 53 punctual payment when dueinvestment income; (iii) preserve capital and (iv) provide liquidity to meet policyholder and other corporate obligations.twenty percent (20%)June 30, 2018 and December 31, 2017, the fair value of our investment portfolio was approximately $23 billion and $24 billion, respectively, and was divided among the following asset class and sectors: June 30, 2018 December 31, 2017 Fair Value Percent Fair Value Percent Fixed maturity securities, available for sale: United States Government full faith and credit $ 140 1 % $ 84 1 % United States Government sponsored entities 113 — % 122 1 % United States municipalities, states and territories 1,533 7 % 1,747 7 % Foreign Governments 156 1 % 197 1 % Corporate securities: Finance, insurance and real estate 4,551 20 % 5,500 23 % Manufacturing, construction and mining 917 4 % 1,002 4 % Utilities, energy and related sectors 2,272 10 % 2,281 10 % Wholesale/retail trade 1,461 6 % 1,428 6 % Services, media and other 2,639 12 % 2,359 10 % Hybrid securities 917 4 % 1,067 4 % Non-agency residential mortgage-backed securities 1,242 5 % 1,155 5 % Commercial mortgage-backed securities 1,241 5 % 956 4 % Asset-backed securities 3,144 14 % 3,065 13 % Total fixed maturity available for sale securities 20,326 89 % 20,963 89 % Equity securities (a) 1,344 6 % 1,388 6 % Commercial mortgage loans 522 2 % 549 2 % Other (primarily derivatives, limited partnerships and FHLB common stock) 661 3 % 678 3 % Short term investments — — % 25 — % Total investments $ 22,853 100 % $ 23,603 100 % June 30, 2018 December 31, 2017 Rating Fair Value Percent Fair Value Percent AAA $ 2,061 10 % $ 1,784 8 % AA 1,657 8 % 2,036 10 % A 5,014 25 % 5,834 28 % BBB 9,466 46 % 9,256 44 % BB (a) 1,154 6 % 975 5 % B and below (b) 974 5 % 1,078 5 % Total $ 20,326 100 % $ 20,963 100 % Ordersecurities are eligible for regulatory filings. The SVO conducts credit analysis on these securities for the purpose of assigning an NAIC designation or settlement.NAIC Designation NRSRO Equivalent Rating 1 AAA/AA/A 2 BBB 3 BB 4 B 5 CCC and lower 6 In or near default June 30, 2018 NAIC Designation Amortized Cost Fair Value Percent of Total Fair Value 1 $ 10,417 $ 10,142 50 % 2 9,357 8,936 44 % 3 1,095 1,061 5 % 4 154 149 1 % 5 38 38 — % 6 — — — % Total $ 21,061 $ 20,326 100 % December 31, 2017 NAIC Designation Amortized Cost Fair Value Percent of Total Fair Value 1 $ 11,046 $ 11,109 53 % 2 8,563 8,619 41 % 3 1,036 1,037 5 % 4 136 136 1 % 5 65 61 — % 6 1 1 — % Total $ 20,847 $ 20,963 100 % June 30, 2018 Top 10 Industry Concentration Fair Value Percent of Total Fair Value Banking $ 2,381 11 % ABS collateralized loan obligation ("CLO") 1,868 9 % Municipal 1,701 8 % Life insurance 1,471 7 % Whole loan collateralized mortgage obligation ("CMO") 1,379 6 % ABS Other 1,269 6 % Electric 912 4 % Technology 727 3 % Pipelines 700 3 % CMBS 697 3 % Total $ 13,105 60 % December 31, 2017 Top 10 Industry Concentration Fair Value Percent of Total Fair Value Banking $ 2,851 13 % ABS CLO 2,078 9 % Municipal 1,977 9 % Life insurance 1,514 7 % Electric 1,097 5 % Property and casualty insurance 1,006 5 % ABS Other 980 4 % Whole loan CMO 834 4 % CMBS 791 3 % Other financial institutions 781 3 % Total $ 13,909 62 % June 30, 2018 December 31, 2017 Amortized Cost Fair Value Amortized Cost Fair Value Corporate, Non-structured Hybrids, Municipal and Government securities: Due in one year or less $ 170 $ 170 $ 268 $ 268 Due after one year through five years 1,071 1,055 2,087 2,086 Due after five years through ten years 2,545 2,466 3,127 3,126 Due after ten years 11,184 10,586 9,736 9,854 Subtotal $ 14,970 $ 14,277 $ 15,218 $ 15,334 Other securities which provide for periodic payments: Asset-backed securities $ 3,158 $ 3,144 $ 3,061 $ 3,065 Commercial-mortgage-backed securities 1,257 1,241 956 956 Structured hybrids 320 309 333 331 Residential mortgage-backed securities 1,356 1,355 1,279 1,277 Subtotal $ 6,091 $ 6,049 $ 5,629 $ 5,629 Total fixed maturity available-for-sale securities $ 21,061 $ 20,326 $ 20,847 $ 20,963 June 30, 2018 December 31, 2017 NAIC Designation: Fair Value Percent of Total Fair Value Percent of Total 1 $ 853 97 % $ 929 96 % 2 23 3 % 17 2 % 3 3 — % 5 1 % 4 — — % — — % 5 1 — % 5 1 % 6 — — % — — % Total $ 880 100 % $ 956 100 % NRSRO: AAA $ 28 3 % $ 43 4 % AA 11 1 % 11 1 % A 52 6 % 36 4 % BBB 45 5 % 67 7 % BB and below 744 85 % 799 84 % Total $ 880 100 % $ 956 100 % Vintage: 2017 $ 12 1 % $ 12 1 % 2016 15 2 % 15 2 % 2007 184 21 % 199 21 % 2006 322 37 % 346 36 % 2005 and prior 347 39 % 384 40 % Total $ 880 100 % $ 956 100 % June 30, 2018 December 31, 2017 Asset Class Fair Value Percent Fair Value Percent ABS CLO $ 1,868 59 % $ 2,078 68 % ABS auto 4 — % 4 — % ABS credit card 3 — % 3 — % ABS other 1,269 41 % 980 32 % Total ABS $ 3,144 100 % $ 3,065 100 % June 30, 2018 Number of securities Amortized Cost Unrealized Losses Fair Value Fixed maturity securities, available for sale: United States Government full faith and credit 15 $ 141 $ (1 ) $ 140 United States Government sponsored agencies 75 96 (2 ) 94 United States municipalities, states and territories 136 1,306 (33 ) 1,273 Foreign Governments 16 157 (8 ) 149 Corporate securities: Finance, insurance and real estate 339 4,313 (208 ) 4,105 Manufacturing, construction and mining 116 933 (52 ) 881 Utilities, energy and related sectors 230 2,350 (137 ) 2,213 Wholesale/retail trade 202 1,485 (91 ) 1,394 Services, media and other 293 2,662 (151 ) 2,511 Hybrid securities 57 870 (40 ) 830 Non-agency residential mortgage backed securities 182 756 (9 ) 747 Commercial mortgage backed securities 119 926 (18 ) 908 Asset backed securities 275 2,203 (21 ) 2,182 Total fixed maturity available for sale securities 2,055 18,198 (771 ) 17,427 Equity securities 75 1,211 (36 ) 1,175 Total 2,130 $ 19,409 $ (807 ) $ 18,602 December 31, 2017 Number of securities Amortized Cost Unrealized Losses Fair Value Fixed maturity securities, available for sale: United States Government full faith and credit 9 $ 74 $ — $ 74 United States Government sponsored agencies 54 58 (1 ) 57 United States municipalities, states and territories 46 286 (1 ) 285 Foreign Governments 9 141 (1 ) 140 Corporate securities: Finance, insurance and real estate 183 1,914 (5 ) 1,909 Manufacturing, construction and mining 50 290 (2 ) 288 Utilities, energy and related sectors 70 506 (6 ) 500 Wholesale/retail trade 115 610 (2 ) 608 Services, media and other 98 513 (4 ) 509 Hybrid securities 27 269 (3 ) 266 Non-agency residential mortgage backed securities 205 884 (2 ) 882 Commercial mortgage backed securities 64 479 (1 ) 478 Asset backed securities 236 1,947 (3 ) 1,944 Total fixed maturity available for sale securities 1,166 7,971 (31 ) 7,940 Equity securities 58 805 (7 ) 798 Total 1,224 $ 8,776 $ (38 ) $ 8,738 June 30, 2018 Number of securities Amortized Cost Fair Value Gross Unrealized Losses Investment grade: Less than six months — $ — $ — $ — Six months or more and less than twelve months — — — — Twelve months or greater — — — — Total investment grade — — — — Below investment grade: Less than six months 3 3 2 (1 ) Six months or more and less than twelve months — — — — Twelve months or greater — — — — Total below investment grade 3 3 2 (1 ) Total 3 $ 3 $ 2 $ (1 ) December 31, 2017 Number of securities Amortized Cost Fair Value Gross Unrealized Losses Investment grade: Less than six months — $ — $ — $ — Six months or more and less than twelve months — — — — Twelve months or greater — — — — Total investment grade — — — — Below investment grade: Less than six months 1 13 10 (3 ) Six months or more and less than twelve months — — — — Twelve months or greater — — — — Total below investment grade 1 13 10 (3 ) Total 1 $ 13 $ 10 $ (3 ) will BTO Fund’s aggregate liabilityof nonperformance by our counterparties on call options. We attempt to reduce this credit risk by purchasing such options from large, well-established financial institutions.Merger BTO Limited Guarantyeffective federal funds rate each day for cash collateral posted to FGL exceed (x) $217 million less (y) anyfor daily mark to market margin changes. The new program permits collateral cash received to be invested in short term Treasury securities and commercial paper rated A1/P1 which are included in "Cash and cash equivalents" in the accompanying Condensed Consolidated Balance Sheets.paidof cash from its normal operations to meet cash requirements with a prudent margin of safety. Our principal sources of cash flow from operating activities are insurance premiums, and fees and investment income, however, sources of cash flows from investing activities also result from maturities and sales of invested assets. Our operating activities provided (used) cash of$87 in the six months ended June 30, 2018 and $24 in the Predecessor six months ended June 30, 2017, respectively. When considering our liquidity and cash flow, it is important to distinguish between the needs of our insurance subsidiaries and the needs of the holding company, FGL Holdings. As a holding company with no operations of its own, FGL Holdings derives its cash primarily from its insurance subsidiaries and CF Bermuda Holdings Limited, a Bermuda exempted limited liability company and a wholly owned direct subsidiary of the Company ("CF Bermuda"), a downstream holding company that provides additional sources of liquidity. Dividends from our insurance subsidiaries flow through CF Bermuda to FGL Holdings.BTO Fundour counterparties would also decline (or increase). Likewise, when the value of a derivative liability declines (or increases), the collateral we are required to post to our counterparties would also decline (or increase).(dollars in millions) Six months ended June 30,
2018 June 30,
2017Cash provided by (used in): Predecessor Operating activities $ 87 $ 24 Investing activities (346 ) (371 ) Financing activities 754 514 Net increase (decrease) in cash and cash equivalents $ 495 $ 167 orderindenture, dated as of April 20, 2018 (the “Base Indenture”), among FGLH, the guarantors from time to time party thereto and Wells Fargo Bank, National Association, as trustee (the “Trustee”), and a supplemental indenture thereto (the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”). FGLH will pay interest on the 5.50% Senior Notes in cash on May 1 and November 1 of each year at a rate of 5.50% per annum. Interest on the 5.50% Senior Notes will accrue from and including April 20, 2018 and the first interest payment date is November 1, 2018. The 5.50% Senior Notes will mature on May 1, 2025. The 5.50% Senior Notes are fully and unconditionally guaranteed by FGLH’s direct parent, FGL US Holdings Inc., a Delaware corporation, FGL’s indirect parent, CF Bermuda, and certain existing and future wholly-owned domestic restricted subsidiaries of the CF Bermuda, other than its insurance subsidiaries.settlementmake other distributions in connectionrespect of equity interests or make other restricted payments, make certain investments, incur or guarantee additional indebtedness, create liens on certain assets to secure debt, sell certain assets, consummate certain mergers or consolidations or sell all or substantially all assets, or enter into transactions with BTO Fund’s information commitment letteraffiliates.Merger Agreement.Share Purchase BTO Fund Limited GuarantyIn connectionCredit Agreement with certain financial institutions party thereto, as lenders, and Royal Bank of Canada, as administrative agent and letter of credit issuer, which provides for a $250 senior unsecured revolving credit facility with a maturity of three years. The Credit Agreement provides a letter of credit sub-facility in a maximum amount of $20. The borrowers are permitted to use the Share Purchase Agreement, BTO Fund has agreed to provide a limited guaranty in favorproceeds of FSRDthe loans under the Share PurchaseCredit Agreement (the “Share Purchase BTO Fund Limited Guaranty”), pursuantfor working capital, growth initiatives and general corporate purposes, as well as to which, in the event (a) of the termination of the Share Purchase Agreement in accordance with its termspay fees, commissions and (b)(i) FSRD under the Share Purchase Agreement has obtained a final, non-appealable order of damages owing by the Company or Parent as a result of such party’s intentional and material breach of the Share Purchase Agreement or fraud or (ii) there is a settlement (by written agreement of the parties to the Share Purchase Agreement) resolving any action brought as a result of the Company’s or Parent’s intentional and material breach of the Share Purchase Agreement or fraud, BTO Fund has guaranteed the due and punctual payment when due of twenty percent (20%) of the amount of such order or settlement.In no event will BTO Fund’s aggregate liability under the Share Purchase BTO Fund Limited Guaranty to FSRD under the Share Purchase Agreement exceed (x) $8 million less (y) any amounts paid by BTO Fund pursuant to an order or settlement in connection with BTO Fund’s information commitment letter related to the Share Purchase Agreement.Merger FNF Limited GuarantyIn connection with the Merger Agreement, FNF has agreed to provide a limited guaranty in favor of FGL (the “Merger FNF Limited Guaranty”), pursuant to which, in the event (a) of the termination of the Merger Agreement in accordance with its terms and (b)(i) FGL has obtained a final, non-appealable order of damages owing by the Company, Parent or Merger Sub as a result of such party’s intentional and material breach of the Merger Agreement or fraud or (ii) there is a settlement (by written agreement of the parties to the Merger Agreement) resolving any action brought as a result of the Company’s, Parent’s or Merger Sub’s intentional and material breach of the Merger Agreement or fraud, FNF has guaranteed the due and punctual payment when due of 2.63% of the amount of such order or settlement.30In no event will FNF’s aggregate liability under the Merger FNF Limited Guaranty to FGL exceed (x) $48,300,000 less (y) any amounts paid by FNF pursuant to an order or settlementexpenses incurred in connection with the FNF’s information commitment letter related toCredit Agreement and the Merger Agreement.Share Purchase FNF Limited GuarantyIn connection with the Share Purchase Agreement, FNF has agreed to provide a limited guaranty in favor of FSRDtransactions contemplated thereby. Amounts borrowed under the Share PurchaseCredit Agreement (the “Share Purchase FNF Limited Guaranty”), pursuant to which, inmay be reborrowed until the event (a) of thematurity date or termination of the Share Purchase Agreement in accordance with its terms and (b)(i) the sellercommitments under the Share Purchase Agreement has obtained a final, non-appealable order of damages owing byCredit Agreement. The borrowers may increase the Company or Parent as a result of such party’s intentional and material breach of the Share Purchase Agreement or fraud or (ii) there is a settlement (by written agreement of the parties to the Merger Agreement) resolving any action brought as a result of the Company’s or Parent’s intentional and material breach of the Share Purchase Agreement or fraud, FNF has guaranteed the due and punctual payment when due of 2.63% of themaximum amount of such order or settlement.In no event will FNF’s aggregate liabilityavailability under the Share Purchase FNF Limited GuarantyCredit Agreement from time to FSRD under the Share Purchase Agreement exceed (x) $1,700,000 less (y) any amounts paidtime by FNF pursuantup to an Order or settlement in connection with the FNF’s information commitment letter related to the Share Purchase Agreement.Merger GSO Limited GuarantyIn connection with the Merger Agreement, certain GSO funds (the “GSO Guarantors”) have agreed to provide a limited guaranty in favor of FGL (the “Merger GSO Limited Guaranty”), pursuant to which, in the event (a) of the termination of the Merger Agreement in accordance with its terms and (b)(i) FGL has obtained a final, non-appealable order of damages owing by the Company, Parent or Merger Sub as a result of such party’s intentional and material breach of the Merger Agreement or fraud in an amount in excess of $1.085 billion or (ii) there is a settlement (by written agreement of the parties to the Merger Agreement) resolving any action brought as a result of the Company’s, Parent’s or Merger Sub’s intentional and material breach of the Merger Agreement or fraud in an amount in excess of $1.085 billion, each GSO Guarantor has guaranteed the due and punctual payment when due of its pro rata percentage (20% in the aggregate) of the amount by which the amount of such Order or settlement exceeds $1.085 billion.In no event will a GSO Guarantor’s aggregate liability under the Merger GSO Limited Guaranty to FGL exceed its pro rata percentage of 20% of $750 million.Share Purchase GSO Limited GuarantyIn connection with the Share Purchase Agreement, the GSO Guarantors have agreed to provide a limited guaranty in favor of FSRD under the Share Purchase Agreement (the “Share Purchase GSO Limited Guaranty”), pursuant to which, in the event (a) of the termination of the Share Purchase Agreement in accordance with its terms and (b)(i) the seller under the Share Purchase Agreement has obtained a final, non-appealable order of damages owing by the Company or Parent as a result of such party’s intentional and material breach of the Share Purchase Agreement or fraud in an amount in excess of $40 million or (ii) there is a settlement (by written agreement of the parties to the Share Purchase Agreement) resolving any action brought as a result of the Company or Parent’s intentional and material breach of the Share Purchase Agreement or fraud in an amount in excess of $40 million, each GSO Guarantor has guaranteed the due and punctual payment when due of its pro rata percentage (20% in the aggregate) of the amount by which the amount of such order or settlement exceeds $40 million.In no event will a GSO Guarantor’s aggregate liability under the Share Purchase GSO Limited Guaranty to the seller under the Share Purchase Agreement exceed its pro rata percentage of 20% of $25 million.Merger Fee Reimbursement LetterIn connection with the Merger Agreement, Chinh E. Chu and William P. Foley, II have agreed, on the terms and subject to the conditions described in a letter agreement with FGL dated May 24, 2017 (the “Merger Fee Reimbursement Letter”), in the event of the termination of the Merger Agreement in accordance with its terms, to jointly and severally promptly reimburse, or cause to be reimbursed, FGL for all of its reasonable out-of-pocket legal fees and expenses in connection with litigation giving rise to:31·a final, non-appealable order of damages owing by the Company, Parent or Merger Sub as a result of such parties’ intentional and material breach of the Merger Agreement or fraud; or·damages owing to FGL from a settlement (by written agreement of the parties to the Merger Agreement) resolving any action brought as a result of the Company’s, Parent’s or Merger Sub’s intentional and material breach of the Merger Agreement or fraud.Share Purchase Fee Reimbursement LetterIn connection with the Share Purchase Agreement, Messrs. Chu and Foley have agreed, on the terms and subject to the conditions described in a letter agreement with FSRD dated May 24, 2017 (the “Share Purchase Fee Reimbursement Letter”), in the event of the termination of the Share Purchase Agreement in accordance with its terms, to jointly and severally promptly reimburse, or cause to be reimbursed, FSRD for all of its reasonable out-of-pocket legal fees and expenses in connection with litigation giving rise to:·a final, non-appealable order of damages owing by the Company or Parent as a result of such parties’ intentional and material breach of the Share Purchase Agreement or fraud; or·damages owing to FSRD from a settlement (by written agreement of the parties to the Share Purchase Agreement) resolving any action brought as a result of the Company’s or Parent’s intentional and material breach of the Share Purchase Agreement or fraud.Investment Management AgreementSubject to regulatory approval, FGLIC will enter into an investment management agreement (the “Investment Management Agreement”) with an affiliate of Blackstone (the “Investment Manager”), pursuant to which the Investment Manager will manage a portion of the investment assets held by FGL’s general account (the assets in such account, including any assets held in the modified coinsurance account or other collateral arrangements established pursuant to a Modified Coinsurance Agreement between FGLIC and a reinsurance company to be organized under the laws of Bermuda, and together with all additions, substitutions and alterations thereto, are collectively referred to as the “FGL Account”) following the Closing. Under the Investment Management Agreement, it is expected that FGLIC will pay, from the assets of the FGL Account, the Investment Manager or its designee a management fee equal to 0.30% per annum of the Average Month-End Net Asset Value of the assets of the FGL Account being managed by the Investment Manager calculated and paid quarterly in arrears. The “Average Month-End Net Asset Value” is the average of the month-end net asset values of the FGL Account during the calendar quarter with adjustments for contributions to, or withdrawals from, the FGL Account during the quarter. FGLIC will also bear the cost of any fees of sub-managers engaged by the Investment Manager with the consent of FGLIC. In the event any sub-manager fees are paid by the Investment Manager with respect to the FGL Account, FGLIC will reimburse the Investment Manager, from the assets of the FGL Account, for such sub-manager fees.Sub-Advisory AgreementThe Investment Manager will appoint a newly-formed entity owned by affiliates of the Company’s Co-Executive Chairmen as sub-adviser (the “Sub-Adviser”) with respect to the FGL Account. The Investment Manager will pay the Sub-Adviser, pursuant to a subadvisory agreement, a subadvisory fee of approximately 15% of certain fees paid by FGLIC to the Investment Manager and its affiliates. FGLIC is not responsible for payment or reimbursement of the subadvisory fee to the Sub-Adviser, which is solely the obligation of the Investment Manager.Right of First Offer Purchase AgreementsOn June 21, 2017, the Company entered into the Purchase Agreements with certain accredited investors, including Keith W. Abell, Richard N. Massey and James A. Quella, each of whom is an independent director of the Company, in connection with the rights of first offer under the forward purchase agreements. Messrs. Abell, Massey and Quella have subscribed for an aggregate of 969,697 shares under the equity purchase agreements for a purchase price of $10.00 per share, to occur at the Closing. At the Company’s option, such shares may be purchased from the Company in a private placement and/or from public shareholders who have validly requested for their public shares to be redeemed in connection with the FGL Business Combination. In addition, these individuals will be entitled to receive an aggregate of $240,000, which represents their pro rata portion of the $4.95 million the Company agreed to pay to certain anchor investors in connection with the waivers provided under the rights of first offer under the forward purchase agreements.32Blackstone ServicesThe Company anticipates that it will engage one or more affiliates of Blackstone, at or following the Closing, to provide strategic planning and/or other services, including access to a group purchasing organization and other cost savings resources.Off-Balance Sheet ArrangementsAs of September 30, 2017, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.Contractual ObligationsWe do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities other than an administrative agreement to reimburse the Sponsor for office space, secretarial and administrative services provided to the Company in an amount not to exceed $10,000 per month. Upon completion of a Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees.The underwriters are entitled to deferred underwriting discounts and commissions of $24,150,000. The deferred underwriting discount will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes an initial Business Combination,$50, subject to certain conditions, including the termsconsent of the underwriting agreement. The underwriters are not entitled to any interest accruedlenders participating in each such increase. As of June 30, 2018, the total drawn on the deferred underwriting discount.JOBS ActJOBS Act contains provisionsCompany has unfunded investment commitments as of June 30, 2018 based upon the timing of when investments are executed compared to when the actual investments are funded, as some investments require that among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Actfunding occur over a period of months or years. A summary of unfunded commitments by invested asset class are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As such, our financial statements may not be comparable to companies that comply with public company effective dates.included below: June 30, 2018 Asset Type Other invested assets $ 655 Equity securities 33 Fixed maturity securities, available-for-sale 45 Other assets 10 Total $ 743 Item 3. Quantitative and Qualitative Disclosures about Market Risk Aboutabout Market Risk" included in our 2017 Form 10-K.AsSeptember 30, 2017, we were notan economic loss due to adverse changes in interest rates. This risk arises from our holdings in interest sensitive assets and liabilities, primarily as a result of investing life insurance premiums and fixed annuity deposits received in interest-sensitive assets and carrying these funds as interest-sensitive liabilities. Substantial and sustained increases or decreases in market interest rates can affect the profitability of the insurance products and the fair value of our investments, as the majority of our insurance liabilities are backed by fixed maturity securities.anyminimum guaranteed values. In addition, the majority of the annuity products have surrender and withdrawal penalty provisions designed to encourage persistency and to help ensure targeted spreads are earned. However, competitive factors, including the impact of the level of surrenders and withdrawals, may limit our ability to adjust or maintain crediting rates at the levels necessary to avoid a narrowing of spreads under certain market orconditions.risk. Followingearned on our investments and the consummationcredited interest rates paid on outstanding policies and contracts. Both rising and declining interest rates can negatively affect interest earnings, spread income and the attractiveness of certain of our Initial Public Offering,products.net proceedsabsence of other countervailing changes, will result in a decline in the market value of our Initial Public Offering, including amountsinvestment portfolio.Trust Account, were investedfair value of interest rate-sensitive financial instruments, to evaluate the adequacy of expected cash flows from assets to meet the expected cash requirements of the liabilities and to determine if it is necessary to lengthen or shorten the average life and duration of our investment portfolio. Duration measures the price sensitivity of a security to a small change in U.S. government treasury bills, notes or bonds with a maturityinterest rates. When the durations of 180 days or less or in certain money market funds that invest solely in US treasuries. Due to the short-term nature of these investments, we believe there will be no associated materialassets and liabilities are similar, exposure to interest rate risk is minimized because a change in the value of assets could be expected to be largely offset by a change in the value of liabilities.(dollars in millions) Duration Amortized Cost % of Total 0-4 $ 7,504 32 % 5-9 6,287 27 % 10-14 7,252 31 % 15-19 2,233 10 % 20-25 13 — % Total $ 23,289 100 % (dollars in millions) June 30, 2018 December 31, 2017 Counterparty Credit Rating
(Fitch/Moody's/S&P) (a) Notional
Amount Fair Value Collateral Net Credit Risk Notional
Amount Fair Value Collateral Net Credit Risk Merrill Lynch A+/*/A+ $ 3,037 $ 80 $ 38 $ 42 $ 2,780 $ 150 $ 118 $ 32 Deutsche Bank A-/A3/BBB+ 1,548 39 40 (1 ) 1,345 51 55 (4 ) Morgan Stanley */A1/A+ 1,666 36 38 (2 ) 1,555 92 101 (9 ) Barclay's Bank A*+/A2/A 1,745 67 50 17 2,090 103 95 8 Canadian Imperial Bank of Commerce AA-/Aa3/A+ 2,728 73 73 — 2,807 96 98 (2 ) Wells Fargo A+/A2/A- 567 16 16 — — — — — Total $ 11,291 $ 311 $ 255 $ 56 $ 10,577 $ 492 $ 467 $ 25 (in millions) Financial Strength Rating Parent Company/Principal Reinsurers Reinsurance Recoverable AM Best S&P Moody's Wilton Re. $1,558 A+ Not Rated Not Rated Scottish Re 184 Not Rated Not Rated Not Rated Security Life of Denver 169 A A A2 London Life 111 A Not Rated Not Rated Swiss Re Life and Health 105 A+ AA- Aa3 Item 4. Controls and ProceduresItem 4. Controls and Procedures Underwith the participation of ourthe Company’s management, including our principal executive officerthe Chief Executive Officer ("CEO") and principal financial and accounting officer, we conducted an evaluationChief Financial Officer ("CFO"), of the effectiveness of ourthe design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of the end of the fiscal quarter ended September 30, 2017, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer have concluded that during the period covered by this report, ourreport. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that, as of June 30, 2018, the Company’s disclosure controls and procedures were effective.Disclosure controls and procedures are designedeffective to ensure that information we are required to be disclosed by usdisclose in ourreports that we file or submit under the Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to ourthe Company’s management, including our principal executive officerthe Company’s CEO and principal financial officer or persons performing similar functions,CFO, as appropriate to allow timely decisions regarding required disclosure.33overOver Financial ReportingThere was no changethat occurredbased upon the framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013) (COSO 2013 Framework) during the fiscal quarterquarters ended March 31, 2018 and June 30, 2018 and the period ended December 31, 2017. See "Note 2. Significant Accounting Policies and Practices" to our unaudited condensed consolidated financial statements for additional information.2017 covered by this Quarterly Reportsecurities requiring analysis as to debt and equity classification under ASC 320, and will design a remediation plan to strengthen the control to support the completeness of our analysis.Form 10-Qthe Effectiveness of Controlshas materially affected, or is reasonably likely to materially affect, our internalthe objectives of the control over financial reporting. - OTHER INFORMATIONNone.Asdate of this Report, other than the below, thereSEC's website www.sec.gov. There have been no material changes to the risk factors disclosed in our Annual Report on2017 Form 10-K, filed withexcept for the SEC on March 17, 2017inclusion of the following risk factor regarding our growth strategy and the amendment and restatement of the risk factor regarding fiduciary rule proposals.definitive proxy statement filed withability to consummate these acquisitions on economically advantageous terms acceptable to us in the SEC on July 26, 2017. Such risk factors are incorporated hereinfuture is unknown.reference.Changes in U.S. tax law might adversely affect us or our shareholders.The tax treatmentacquisitions of non-U.S.other insurance companies and their U.S.businesses, and non-U.S. insurance subsidiaries has beenthrough block reinsurance, which could materially increase the subjectsize of Congressional discussionour business and legislative proposals. Legislative proposals relating tocould require additional capital, systems development and skilled personnel. Any such acquisitions could be funded through cash from operations, the tax treatmentissuance of non-U.S. companies have been introducedequity and/or the incurrence of additional indebtedness, which amount may be material, or a combination thereof. We actively monitor the market for merger and acquisition opportunities; however the timing, structure and size of any such acquisitions are uncertain and any such acquisitions could be material.pastmarket for profitable blocks of business and such competition is likely to intensify as insurance businesses become more attractive targets.if enacted, materially affect us. Bothalso make it more difficult for us to implement thisU.S. Congressattention of our management from our business, which may have an adverse effect on our business and President Trump’s administrationresults of operations.indicated a desire to reform the U.S. Internal Revenue Codeaccept an increase in our net risk exposures, revise our pricing to reflect higher reinsurance premiums, or otherwise modify our acquisitions and product offerings, each of 1986, as amended. In November, Chairman Brady (R-TX) of the House Committee on Ways and Means released proposed legislation entitled the Tax Cuts and Jobs Act of 2017 (the “Proposed Bill”). The Proposed Bill would, if enacted, reduce corporate tax rates to 20%, impose a 20% excise tax on payments made from U.S. corporations to foreign affiliates, and significantly accelerate taxable income and therefore cash tax expense by the imposition of other changes which would impact life insurance companies, among others. If enacted, the Proposed Bill could reduce the benefits we anticipate from lower tax rates as a non-U.S. company. In addition, the imposition of the proposed 20% excise tax and other components of the Proposed Bill could, if enacted, add significant expense and have a material adverse effect on our business, financial condition, results of operations.The Proposed Bill also includes proposals that could, if enacted, affect whether we or anyoperations and cash flows.non-U.S. subsidiariesstrategy of growth through acquisitions, we may review and conduct investigations of potential acquisitions or block reinsurance transactions, some of which may be material. When we believe a favorable opportunity exists, we may seek to enter into discussions with target companies or sellers regarding the possibility of such transactions. At any given time, we may be in discussions with one or more counterparties. There can be no assurance that any such negotiations will lead to definitive agreements, or if such agreements are treated asreached, that any transactions would be consummated.“passive foreign investment company” (“PFIC”) or a “controlled foreign corporation” (“CFC”). Whether or notresult, commissioned insurance agents selling the Proposed Bill is enacted, interpretations of U.S. federal income tax law, including those regarding whether a company is engaged in a trade or business (or has a permanent establishment) within the United States or is a PFIC, or whether U.S. persons areCompany’s IRA products would have been required to includequalify for a prohibited transaction exemption. Although the DOL rule has been vacated in their gross income “subpart F income”total, similar rules proposed by state officials or related person insurance income (RPII) of a CFC, are subject to change, possibly on a retroactive basis. Regulations regarding the application of the PFIC rules to insurance companiesSecurities and regarding RPII are only in proposed form. Whether or not the Proposed Bill is enacted, new regulations or pronouncements interpreting or clarifying the existing proposed regulationsExchange Commission may be forthcoming.It is possible that the Proposed Bill will be amended significantly before passage, that other legislative proposals could emerge in the future or that no tax legislation is enacted in the near future. Such amendments or future proposals could also have an adverse effect on sales of annuity products to IRA owners particularly in the independent agent distribution channel. Compliance with such rules may require additional supervision of agents, cause changes to compensation practices and product offerings, and increase litigation risk, all of which could have adversely impact on us. No prediction can be made asour business, results of operations and/or financial condition. Management will continue to whether any particular proposed legislation will be enacted or, if enacted, what the specific provisionsmonitor for potential action by state officials or the effective date of any such legislation would be, or whether it would have any effect on us. As such, we cannot assure you that future legislative, administrative or judicial developments will not result in an increase inSecurities and Exchange Commission to implement rules similar to the amount of U.S. tax payable by us or by an investor in our ordinary shares or reduce the attractiveness of our products. If any such developments occur, our business, financial condition and results of operation could be materially and adversely affected and could have a material and adverse effect on your investment in our ordinary shares. from Registered SecuritiesOn March 2, 2016, we issued an aggregate of 15,000,000 founder shares to the Sponsor in exchange for a capital contribution of $25,000, or approximately $0.002 per share. On April 19, 2016, the Sponsor surrendered 3,750,000 founder shares to the Company for no consideration. On April 19, 2016, the Company issued 3,750,000 founder shares to the Anchor Investors in connection with the forward purchase agreements. The Sponsor and the Anchor Investors (including two affiliates of the Sponsor) currently own 11,250,000 and 3,750,000 Class B ordinary shares, respectively. In addition, the Sponsor purchased an aggregate of 15,800,000 Private Placement Warrants, each exercisable to purchase one ordinary share at $11.50 per share, at a price of $1.00 per Private Placement Warrant, in a private placement that closed simultaneously with the closing of our initial public offering. Each Private Placement Warrant entitles the holder to purchase one ordinary share at $11.50 per share. The sales of the above securities by the Company were deemed to be exempt from registration under the Securities Act, in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.On May 25, 2016, the Company consummated the initial public offering of 60,000,000 units, with each unit consisting of one Class A ordinary share of the Company, par value $0.0001 per share, and one-half of one warrant to purchase one Class A Ordinary Share. Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith and Credit Suisse Securities (USA) LLC acted as joint book-runners for the offering. The units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $600,000,000. On June 29, 2017, the underwriters exercised in full option to purchase an additional 9,000,000 units to cover overallotments, generating gross proceeds of $90.0 million. Following the closing of the initial public offering and the Over-allotment, an aggregate of $690 million was placed in the Trust Account.The Company incurred approximately $39.5 million of offering costs in connection with the initial public offering, inclusive of $24.15 million of deferred underwriting commissions payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completes a Business Combination. There has been no material change in the planned use of proceeds from the initial public offering as described in our final prospectus dated May 19, 2016 which was filed with the SEC.None.None.34Exhibits.Exhibits Number Description of Exhibits 10.13.1 4.1 10.24.2 4.3 10.331.1 * Fee Letter, dated as of October 6, 2017, by and between CF Corporation and GSO Capital Partners LP.10.4Fee Letter, dated as of October 6, 2017, by and between CF Corporation and Fidelity National Financial, Inc.31.1 31.2 * 31.232.1 * 32.132.2 * 32.2101.INS * XBRL Instance DocumentDocument. 101.SCH * XBRL Taxonomy Extension Schema DocumentSchema. 101.CAL * XBRL Taxonomy Extension Calculation Linkbase DocumentLinkbase. 101.DEF * XBRL Taxonomy Extension Definition Linkbase DocumentLinkbase. 101.LAB * XBRL Taxonomy Extension Label Linkbase DocumentLinkbase. 101.PRE * XBRL Taxonomy Extension Presentation Linkbase Document35Linkbase. * Filed herewith registrantRegistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 14th day of November, 2017.authorized.CF CORPORATION By:/s/ Douglas B. NewtonFGL HOLDINGS (Registrant) Douglas B. NewtonDate: August 9, 2018 By: /s/ Dennis R. Vigneau Chief Financial Officer ( principal financial officer, principal accountingofficeron behalf of the Registrant and duly authorized officer)36as Principal Financial Officer)