UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2018~~2019



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-37779

FGL HOLDINGS

(Exact name of registrant as specified in its charter)



Cayman Islands		98-1354810
(State or other jurisdiction of incorporation or organization)	4th Floor Boundary Hall, Cricket Square ~~4th Floor~~ Grand Cayman, Cayman Islands KY1-1102	(I.R.S. Employer Identification No.)
	(Address of principal executive offices, including zip code)

(800) 445-6758

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x or No ¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ ~~232.405)~~232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x or No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large Accelerated Filer	x	Accelerated Filer	¨
Non-accelerated Filer	¨	~~(Do not check if a smaller reporting company)~~
Smaller reporting Company	¨
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ or No x

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Ordinary shares, par value $.0001 per share	FG	New York Stock Exchange
Warrants to purchase ordinary shares	FG WS	New York Stock Exchange

As of ~~May 7, 2018,~~April 30, 2019, there were ~~214,370,000~~221,660,974 ordinary shares, $.0001 par value, issued and outstanding.

FGL HOLDINGS

TABLE OF CONTENTS



	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:	-2
Condensed Consolidated Balance Sheets as ifof March 31, ~~2018(unaudited)~~2019 (unaudited) and December 31, ~~2017~~2018	-2
Condensed Consolidated Statements of Operations (unaudited)	-3
Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)	-4
Condensed Consolidated Statements of Changes in Shareholders' Equity (unaudited)	-5
Condensed Consolidated Statements of Cash Flows (unaudited)	-6
Notes to Unaudited Condensed Consolidated Financial Statements	-7
(1) Basis of Presentation	-7
(2) Significant Accounting Policies and Practices	-9-7
(3) Significant Risks and Uncertainties	~~-12~~-11
(4) Investments	~~-14~~-13
(5) Derivative Financial Instruments	-22
(6) Fair Value of Financial Instruments	-26
(7) ~~Intangible Assets~~Intangibles	~~-36~~-38
(8) Debt	~~-37~~-39
(9) Equity	~~-37~~-40
(10) Stock Compensation	~~-38~~-41
(11) Income Taxes	~~-38~~-43
(12) Commitments and Contingencies	~~-39~~-44
(13) Reinsurance	~~-41~~-46
(14) Related Party Transactions	~~-42~~-47
(15) Earnings Per Share	~~-43~~-48
(16) Insurance Subsidiary Financial Information and Regulatory Matters	~~-43~~
~~(17) Subsequent Events~~	~~-44~~-48
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	~~-45~~-50
Item 3. Quantitative and Qualitative Disclosures about Market Risk	~~-70~~-74
Item 4. Controls and Procedures	~~-75~~-79

PART II. OTHER INFORMATION
Item 1. Legal Proceedings	~~-76~~-81
Item 1A. Risk Factors	~~-76~~-81
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	~~-77~~-81
Item 3. Defaults Upon Senior Securities	~~-77~~-81
Item 4. Mine Safety Disclosures	~~-77~~-81
Item 5. Other Information	~~-78~~-81
Item 6. Exhibits	~~-79~~-82
Signatures	~~-79~~-82

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

FGL HOLDINGS

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share data)


	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018
	(Unaudited)						(Unaudited)
ASSETS
Investments:
Fixed maturity securities, available-for-sale, at fair value (amortized cost: March 31, 2018 - $21,738; December 31, 2017 - $21,475)	$	21,366		$	21,590
Equity securities, at fair value (amortized cost: March 31, 2018 - $780; December 31, 2017 - $764)	769			761
Fixed maturity securities, available-for-sale, at fair value (amortized cost: March 31, 2019 - $21,908; December 31, 2018 - $22,219)							$	21,605		$	21,109
Equity securities, at fair value (cost: March 31, 2019 - $1,226; December 31, 2018 - $1,526)							1,171			1,382
Derivative investments	293			492			305			97
Short term investments	—			25
Commercial mortgage loans	528			548
Mortgage loans							674			667
Other invested assets	276			188			755			662
Total investments	23,232			23,604			24,510			23,917
Cash and cash equivalents	1,157			1,215			1,357			571
Accrued investment income	240			211			238			216
Funds withheld for reinsurance receivables, at fair value	748			756			837			757
Reinsurance recoverable	2,495			2,494			3,113			3,190
Intangibles, net	954			856			1,421			1,359
Deferred tax assets, net	258			176			283			343
Goodwill	476			476			467			467
Other assets	105			141			220			125
Total assets	$	29,665		$	29,929		$	32,446		$	30,945

LIABILITIES AND SHAREHOLDERS' EQUITY

Contractholder funds	$	22,083		$	21,844		$	23,881		$	23,387
Future policy benefits, including $712 and $728 at fair value at March 31, 2018 and December 31, 2017, respectively	4,711			4,751
Future policy benefits, including $797 and $725 at fair value at March 31, 2019 and December 31, 2018, respectively							4,677			4,641
Funds withheld for reinsurance liabilities							653			722
Liability for policy and contract claims	70			78			70			64
Debt	307			307			541			541
Revolving credit facility	135			105
Other liabilities	717			892			873			700
Total liabilities	28,023			27,977			30,695			30,055

Commitments and contingencies ("Note 12")

Shareholders' equity:
Preferred stock ($.0001 par value, 100,000,000 shares authorized, 377,417 and 375,000 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively)	—			—
Common stock ($.0001 par value, 800,000,000 shares authorized, 214,370,000 issued and outstanding at March 31, 2018 and December 31, 2017, respectively)	—			—
Preferred stock ($.0001 par value, 100,000,000 shares authorized, 406,510 and 399,033 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively)							—			—
Common stock ($.0001 par value, 800,000,000 shares authorized, 221,660,974 and 221,660,974 issued and outstanding at March 31, 2019 and December 31, 2018, respectively)							—			—
Additional paid-in capital	2,039			2,037			2,007			1,998
(Accumulated deficit) Retained earnings	(119		)	(160		)
Accumulated other comprehensive (loss) income	(278		)	75
Retained earnings (Accumulated deficit)							(6		)	(167		)
Accumulated other comprehensive income (loss)							(216		)	(937		)
Treasury stock, at cost (4,328,077 shares at March 31, 2019; 600,000 shares at December 31, 2018)							(34		)	(4		)
Total shareholders' equity	1,642			1,952			1,751			890
Total liabilities and shareholders' equity	$	29,665		$	29,929		$	32,446		$	30,945

See accompanying notes to unaudited condensed consolidated financial statements.

FGL HOLDINGS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share data)



	Three months ended
	March 31, 2018			March 31, 2017			Three months ended
				Predecessor			March 31, 2019			March 31, 2018
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenues:
Premiums	$	18		$	3		$	16		$	18
Net investment income	263			247			289			263
Net investment (losses) gains	(191		)	81
Net investment gains (losses)							240			(191		)
Insurance and investment product fees and other	41			44			55			48
Total revenues	131			375			600			138
Benefits and expenses:
Benefits and other changes in policy reserves	(18		)	268			339			(39		)
Acquisition and operating expenses, net of deferrals	40			33			44			40
Amortization of intangibles	16			33			29			27
Total benefits and expenses	38			334			412			28
Operating income	93			41			188			110
Interest expense	(6		)	(6		)	(8		)	(6		)
Income before income taxes	87			35
Income (loss) before income taxes							180			104
Income tax expense	(35		)	(13		)	(9		)	(39		)
Net income	$	52		$	22
Less preferred stock dividend	7			—
Net income available to common shareholders	$	45		$	22
Net income per common share
Net income (loss)							$	171		$	65
Less Preferred stock dividend							8			7
Net income (loss) available to common shareholders							$	163		$	58

Net income (loss) per common share:
Basic	$	0.21		$	0.38		$	0.74		$	0.27
Diluted	$	0.21		$	0.38		$	0.74		$	0.27
Weighted average common shares used in computing net income per common share:
Basic	214,370,000			58,326,396			219,645,679			214,370,000
Diluted	214,370,000			58,382,130			219,681,528			214,370,000

Cash dividend per common share	$	—		$	0.065		$	0.01		$	—


Supplemental disclosures
Total other-than-temporary impairments	$	(2	)	$	(21	)	$	(2	)	$	(2	)
Portion of other-than-temporary impairments included in other comprehensive income	—			—			—			—
Net other-than-temporary impairments	(2		)	(21		)	(2		)	(2		)
(Losses) gains on derivatives and embedded derivatives	(145		)	99
Other investment (losses) gains	(44		)	3
Gains (losses) on derivatives and embedded derivatives							164			(145		)
Other investment gains (losses)							78			(44		)
Total net investment gains (losses)	$	(191	)	$	81		$	240		$	(191	)

See accompanying notes to unaudited condensed consolidated financial statements.

FGL HOLDINGS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions)

Three months ended
March 31, 2018 March 31, 2017
Predecessor
(Unaudited) (Unaudited)
Net income $ 52
$ 22

Other comprehensive income (loss):
Unrealized investment gains/losses:
Change in unrealized investment gains/losses before reclassification adjustment (526 ) 298
Net reclassification adjustment for gains/losses included in net income 40
18
Changes in unrealized investment gains/losses after reclassification adjustment (486 ) 316
Adjustments to intangible assets 37
(101 )
Changes in deferred income tax asset/liability 92
(77 )
Net change in unrealized gains/losses on investments (357 ) 138
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 (loss) income for the period (357 ) 138
Comprehensive (loss) income, net of tax $ (305 ) $ 160



	Three months ended
	March 31, 2019				March 31, 2018
	(Unaudited)				(Unaudited)
Net income (loss)	$	171			$	65

Other comprehensive income (loss):
Net change in unrealized gains/losses on investments	724				(359		)
				��
Change in reinsurance liabilities held at fair value resulting from a change in the instrument-specific credit risk	(3		)		2

Net changes to derive comprehensive income (loss) for the period	721				(357		)
Comprehensive income (loss), net of tax	$	892			$	(292	)

See accompanying notes to unaudited condensed consolidated financial statements.

FGL HOLDINGS

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited) (In millions)

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 —
—
2
(7 ) —
(5 )
Net income —
—
—
52
—
52
Unrealized investment gains (losses), net —
—
—
—
(357 ) (357 )
Cumulative effect of changes in accounting principles —
—
—
(4 ) 4
—
Balance, March 31, 2018 $ —
$ —
$ 2,039
$ (119 ) $ (278 ) $ 1,642



	Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Shareholders' Equity
Balance, December 31, 2018	$	—	$	—	$	1,998	$	(167	)	$	(937	)	$	(4	)	$	890
Treasury shares purchased	—		—		—		—			—			(30		)	(30		)
Dividends
Preferred stock (paid in kind)	—		—		8		(8		)	—			—			—
Common stock ($0.01/share)	—		—		—		(2		)	—			—			(2		)
Net income (loss)	—		—		—		171			—			—			171
Unrealized investment gains (losses), net	—		—		—		—			724			—			724
Change in reinsurance liabilities held at fair value resulting from a change in the instrument-specific credit risk	—		—		—		—			(3		)	—			(3		)
Stock-based compensation	—		—		1		—			—			—			1
Balance, March 31, 2019	$	—	$	—	$	2,007	$	(6	)	$	(216	)	$	(34	)	$	1,751



	Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Treasury Stock		Total Shareholders' Equity
Balance, December 31, 2017	$	—	$	—	$	2,037	$	(149	)	$	75		$	—	$	1,963
Dividends
Preferred stock (paid in kind)	—		—		2		(7		)	—			—		(5		)
Net income (loss)	—		—		—		65			—			—		65
Unrealized investment gains (losses), net	—		—		—		—			(359		)	—		(359		)
Change in reinsurance liabilities held at fair value resulting from a change in the instrument-specific credit risk	—		—		—		—			2			—		2
Cumulative effect of changes in accounting principles	—		—		—		(4		)	4			—		—
Balance, March 31, 2018	$	—	$	—	$	2,039	$	(95	)	$	(278	)	$	—	$	1,666

See accompanying notes to unaudited condensed consolidated financial statements.

FGL HOLDINGS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)


	Three months ended
	March 31, 2018			March 31, 2017			Three months ended
				Predecessor			March 31, 2019			March 31, 2018
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net income	$	52		$	22
Adjustments to reconcile net income to net cash provided by operating activities:
Net income (loss)							$	171		$	65
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock based compensation	—			1			1			—
Amortization	15			(7		)	4			15
Deferred income taxes	9			(95		)	5			12
Interest credited/index credits to contractholder account balances	(13		)	243			308			(30		)
Net recognized (gains) losses on investments and derivatives	191			(81		)
Net recognized losses (gains) on investments and derivatives							(240		)	191
Charges assessed to contractholders for mortality and administration	(38		)	(32		)	(32		)	(38		)
Deferred policy acquisition costs, net of related amortization	(60		)	(57		)
Intangibles, net							(90		)	(55		)
Changes in operating assets and liabilities:
Reinsurance recoverable	(8		)	(4		)	(16		)	(8		)
Future policy benefits	(40		)	(18		)	36			(40		)
Funds withheld from reinsurers	(12		)	(15		)
Funds withheld for reinsurers							(129		)	(12		)
Collateral (returned) posted	(145		)	17			141			(145		)
Other assets and other liabilities	15			86			(63		)	10
Net cash (used in) provided by operating activities	(34		)	60
Net cash provided by (used in) operating activities							96			(35		)
Cash flows from investing activities:
Proceeds from available-for-sale investments sold, matured or repaid	3,286			594			962			3,286
Proceeds from derivatives instruments and other invested assets	143			138			44			143
Proceeds from commercial mortgage loans	20			3
Proceeds from mortgage loans							4			20
Cost of available-for-sale investments	(3,699		)	(786		)	(421		)	(3,699		)
Costs of derivatives instruments and other invested assets	(94		)	(127		)	(172		)	(94		)
Costs of mortgage loans							(12		)	—
Capital expenditures	(3		)	(4		)	(1		)	(3		)
Contingent purchase price payment	(30		)	—			—			(30		)
Net cash (used in) investing activities	(377		)	(182		)
Net cash provided by (used in) investing activities							404			(377		)
Cash flows from financing activities:
Treasury stock							(30		)	—
Draw on revolving credit facility	30			5			—			30
Dividends paid	—			(4		)	(2		)	—
Contractholder account deposits	959			795			1,225			959
Contractholder account withdrawals	(636		)	(419		)	(907		)	(635		)
Net cash provided by financing activities	353			377
Net cash provided by (used in) financing activities							286			354
Change in cash & cash equivalents	(58		)	255			786			(58		)
Cash & cash equivalents, beginning of period	1,215			632			571			1,215
Cash & cash equivalents, end of period	$	1,157		$	887		$	1,357		$	1,157

Supplemental disclosures of cash flow information:
Interest paid	$	2		$	1		$	—		$	2
Income taxes (refunded) paid	$	(30	)	$	—		$	(1	)	$	(30	)
Deferred sales inducements	$	26		$	5		$	35		$	26

See accompanying notes to unaudited condensed consolidated financial statements.

FGL HOLDINGS

NOTES TO UNAUDITED CONDENSED ~~UNAUDITED~~ CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (In millions)

(1) Basis of Presentation

FGL Holdings (the “Company”~~, formerly known as CF Corporation (NASDAQ: CFCO) (“CF Corp”) and its~~

~~related entities (“CF Entities”)~~), a Cayman Islands exempted company, ~~was originally~~markets products through its wholly-owned insurance subsidiaries, Fidelity & Guaranty Life Insurance Company (“FGL Insurance”) and Fidelity & Guaranty Life Insurance Company of New York (“FGL NY Insurance”), which together are licensed in all fifty states and the District of Columbia.

F&G Reinsurance Ltd (“F&G Re”), an exempted company incorporated in Bermuda with limited liability, provides a platform for non-affiliated international business. Front Street Re Cayman Ltd (“FSRC”), an exempted company incorporated in the Cayman Islands with limited liability, has a license to carry on ~~February 26, 2016~~business as a Special Purpose Acquisition Company (“SPAC”). CF Corp formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or more target businesses. Prioran Unrestricted Class “B” Insurer that permits FSRC 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, a Delaware corporation ("FGL")~~conduct offshore direct and ~~its subsidiaries, pursuant to the Agreement~~reinsurance business. F&G Re and ~~Plan of Merger, dated as of May 24, 2017 (the “FGL Merger Agreement”). The transactions contemplated by the FGL Merger Agreement are~~FSRC (together herein referred to ~~herein~~ as the ~~“Business Combination.”~~

~~Pursuant to the FGL Merger Agreement, except for shares specified in the FGL Merger Agreement, each issued and outstanding share of common stock~~“F&G Reinsurance Companies”), are indirect wholly owned subsidiaries of FGL ~~was automatically canceled~~Holdings and ~~converted into the right~~parties to receive $31.10 in cash, without interest and less any required withholding taxes (the “Merger Consideration”). Accordingly, CF Corp acquired FGL for a total of approximately $2 billion in cash, plus the assumption of $405 of existing debt.

In addition to the Business Combination, on November 30, 2017, CF Entities bought all of the issued and outstanding shares of Front Street Re Cayman Ltd. (“FSRC”) and Front Street Re Ltd. (“FSR”, and, together with FSRC, the “FSR Companies”) from Front Street Re (Delaware) Ltd. (“FSRD”), a direct wholly owned subsidiary of HRG Group, Inc. (“HRG”; NYSE: HRG), pursuant to the Share Purchase Agreement, for cash consideration of $65, subject to certain adjustments.

As a result of the Business Combination, for accounting purposes, FGL Holdings is the acquirer and FGL is the acquired party and accounting predecessor. Our financial statement presentation includes the financial statements of FGL and its subsidiaries as “Predecessor” for the periods prior to the completion of the Business Combination and FGL Holdings, including the consolidation 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 United States of America, any State of the United States, the District of Columbia or any territory thereof (and in the case of the Company, Bermuda 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.

On December 1, 2017, upon completion of the acquisitions, FGL Holdings began trading ordinary shares and warrants on the New York Stock Exchange ("NYSE") under the symbols “FG” and “FG WS,” respectively. For additional info related to the Business Combination please refer to “Item 1. Business" to FGL Holdings' Annual Report on Form 10-K, for the period ended December 31, 2017 (“2017 Form 10-K”).reinsurance transactions.

The accompanying unaudited condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and with the instructions for the Securities and Exchange Commission (“SEC”) Quarterly Report on Form 10-Q, including Article 10 of Regulation S-X, for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. Therefore, the information contained in the Notes to Consolidated Financial Statements included in the Company's ~~2017~~2018 Form 10-K, should be read in connection with the reading of these interim unaudited condensed consolidated financial statements. ~~Dollar amounts in the accompanying sections are presented in millions, unless otherwise noted.~~

The Company markets products through its wholly-owned insurance subsidiaries, Fidelity & Guaranty Life Insurance Company (“FGL Insurance”) and Fidelity & Guaranty Life Insurance Company of New York (“FGL NY Insurance”), which together are licensed in all fifty states and the District of Columbia.

In the opinion of management, these statements include all normal recurring adjustments necessary for a fair presentation of the Company’s results. Operating results for the three months ended March 31, ~~2018,~~2019, are not

necessarily indicative of the results that may be expected for the full year ending December 31, ~~2018.~~2019. Amounts reclassified out of other comprehensive income are reflected in net investment gains in the unaudited Condensed Consolidated Statements of Operations.

Dollar amounts in the accompanying sections are presented in millions, unless otherwise noted.

(2) Significant Accounting Policies and Practices

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and all other entities in which the Company has a controlling financial interest and any variable interest entities ("VIEs") in which we are the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation.

We are involved in certain entities that are considered VIEs as defined under GAAP. Our involvement with VIEs is primarily to invest in assets that allow us to gain exposure to a broadly diversified portfolio of asset classes. A VIE is an entity that does not have sufficient equity to finance its own activities without additional financial support or where investors lack certain characteristics of a controlling financial interest. We assess our relationships to determine if we have the ability to direct the activities, or otherwise exert control, to evaluate if we are the primary beneficiary of the VIE. If we determine we are the primary beneficiary of a VIE, we consolidate the assets and liabilities of the VIE in our unaudited condensed consolidated financial statements. The Company has determined that we are not the primary beneficiary of a VIE as of March 31, ~~2018.~~2019. See "Note 4. Investments" to the Company’s unaudited condensed consolidated financial statements for additional information on the Company’s investments in unconsolidated VIEs.

Reclassifications and Retrospective Adjustments

The Company identified immaterial errors, as described below, during the period ended September 30, 2018. Management has reviewed the impact of these errors on prior periods in accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” (SAB 99) and determined none of these were material to the prior periods impacted.

Effective December 1, 2017, the Company measured the identifiable assets acquired and liabilities assumed from the Business Combination at acquisition-date fair value in accordance with ASC 805. This required significant model changes for the re-bifurcation of the host contract and embedded derivative components of the fixed income annuity ("FIA") liability. During the quarter ended September 30, 2018, the Company identified an immaterial error resulting from the model code used in the calculation of the FIA embedded derivative liability. In issuing the September 30, 2018 Form 10-Q, the Company recorded immaterial corrections to the Consolidated Statement of Operations for the three months ended March 31, 2018 by decreasing the benefits and other changes in policy reserves by $21, as well as increasing the amortization of intangibles by $4, and income tax expense by $4.

Certain prior year amounts have been reclassified or combined to conform to the current year presentation. These reclassifications and combinations had no effect on previously reported results of operations.

Adoption of New Accounting Pronouncements

~~Revenue from Contracts with Customers~~Premium Amortization on Purchased Callable Debt Securities

In ~~May 2014,~~March 2017, the ~~Financial Accounting Standards Board (FASB)~~FASB issued new guidance on ~~revenue recognition~~the amortization of callable securities (ASU ~~2014-09,~~2017-08, ~~Revenue from Contracts~~Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities), effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The ASU requires premiums paid on purchased debt securities with ~~Customers~~an explicit call option to be amortized to the earliest call date, as opposed to the maturity date (as under current GAAP). The updated guidance is applicable to instruments that are callable based on explicit, non-contingent call features that are callable at fixed prices on preset dates. The amendments in this update should be applied using the modified retrospective method through a cumulative effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company adopted this new accounting guidance effective January 1, 2019, as required, and it had an immaterial impact on its unaudited condensed consolidated financial statements.

Amendments to Lease Accounting

In February 2016, the FASB issued amended guidance (ASU 2016-02, Leases (Topic ~~606)~~842)), effective for fiscal years beginning after December 15, ~~2016 and~~2018, including interim periods within those fiscal years. ~~In August 2015,~~Notable amendments in this update will:

require entities to recognize the ~~FASB issued ASU 2015-14,~~ ~~Revenue~~rights and obligations resulting from ~~Contracts~~all leases or lease components of contracts, including operating leases, as lease assets and lease liabilities, with ~~Customers (Topic 606) - Deferral~~an exception allowed for leases with a term of 12 months or less

create a distinction between finance leases and operating leases, with classification criteria substantially similar to that for distinguishing between capital leases and operating leases under previous guidance

not retain the ~~Effective Date, which defers~~accounting model for leveraged leases under previous guidance for leases that commence after the effective date of ASU ~~2014-09 by one year.~~ 2016-02

provide additional guidance on separating the lease components from the nonlease components of a contract

require qualitative disclosures along with specific quantitative disclosures to provide information regarding the amount, timing, and uncertainty of cash flows arising from leases

include modifications to align lessor accounting with the changes to lessee accounting, as well as changes to the requirements of recognizing a transaction as a sale and leaseback transaction, however, these changes will have no impact on the Company's current lease arrangements

The ~~FASB also issued the following ASUs which clarify the guidance in ASU 2014-09:~~

•~~ASU 2016-08 - Revenue from Contracts with Customers (Topic 606) - Principal versus Agent Considerations (Reporting Revenue Gross versus Net) issued in March 2016~~

•~~ASU 2016-10 - Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations and Licensing issued in April 2016~~

•~~ASU 2016-11 - Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815) - Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant~~amendments are required to ~~Staff Announcements~~be applied at the ~~March 3, 2016 EITF Meeting issued in May 2016~~

•~~ASU 2016-12 - Revenue from Contracts with Customers (Topic 606) - Narrow-Scope Improvements and Practical Expedients issued in May 2016~~

~~The guidance in ASU 2014-09 and~~beginning of the earliest period presented using a modified retrospective approach (including several optional practical expedients related ~~ASUs supersedes~~to leases commenced before the ~~revenue recognition requirements in Topic 605,~~ ~~Revenue Recognition, and most industry-specific guidance unless the contracts are within the scope of other standards (for example, financial instruments, insurance contracts or lease contracts)~~effective date). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance establishes a five-step process to achieveCompany has adopted this ~~core principle.~~

~~The Company adopted these standards~~standard effective January 1, ~~2018. The adoption of these standards has~~2019, as required, and it had an ~~insignificant~~immaterial impact on its unaudited condensed consolidated financial ~~statements as~~statements.

Future Accounting Pronouncements

Accounting pronouncements that will impact the Company in future periods have been disclosed in the Company’s ~~primary sources~~2018 Form 10-K. There have not been any additional accounting pronouncements issued during the quarter ended March 31, 2019 that are expected to impact the Company. The following two pronouncements were discussed in our 2018 Form 10-K but have been included below so as to provide an update on the Company’s status of ~~revenue, insurance contracts and financial instruments, are excluded from the scope of these standards.~~adoption.

~~Statement of Cash Flows Classification of Certain Cash Receipts and Cash Payments~~New Credit Loss Standard

In ~~August~~June 2016, the FASB issued new guidance (ASU ~~2016-15,~~2016-13, ~~Statement~~Financial Instruments - Credit Losses (Topic 326), Measurement of ~~Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments)~~Credit Losses on Financial Instruments), effective for fiscal years beginning after December 15, ~~2017~~2019 and interim periods within those fiscal years. Notable amendments in this update will change the ~~classification~~accounting for impairment of most financial assets and certain ~~cash receipts and cash payments in the Statement of Cash Flows~~other instruments in the following ways:

~~cash payments for debt prepayment or debt extinguishment costs~~financial assets (or a group of financial assets) measured at amortized cost will be ~~classified~~required to be presented at the net amount expected to be collected, with an allowance for credit losses deducted from the amortized cost basis, resulting in a net carrying value that reflects the amount the entity expects to collect on the financial asset at purchase

credit losses relating to AFS fixed maturity securities will be recorded through an allowance for credit losses, rather than reductions in the amortized cost of the securities. The allowance methodology recognizes that value may be realized either through collection of contractual cash flows or through the sale of the security. Therefore, the amount of the allowance for credit losses will be limited to the amount by which fair value is below amortized cost because the classification as available for sale is premised on an investment strategy that recognizes that the investment could be sold at fair value, if cash ~~outflows for financing activities~~

collection would result in the realization of an amount less than fair value

the ~~settlement~~income statement will reflect the measurement of ~~zero-coupon debt instruments~~expected credit losses for newly recognized financial assets as well as the expected increases or ~~other debt instruments with coupon interest rates~~decreases (including the reversal of previously recognized losses) of expected credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount

disclosures will be required to include information around how the credit loss allowance was developed, further details on information currently disclosed about credit quality of financing receivables and net investments in leases, and a rollforward of the allowance for credit losses for AFS fixed maturity securities as well as an aging analysis for securities that are insignificant in relation to the effective interest rate of the borrowing should be classified as follows: the portion of the cash payment attributable to the accreted interest related to the debt discount as cash outflows for operating activities, and the portion of the cash payment attributable to the principal as cash outflows for financing activities

~~a reporting entity must make an accounting 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)

in the absence of specific 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 use 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 flows for the item will determine the classification.past due

The amendments in this ASU ~~were~~may be early adopted byduring any interim or annual period beginning after December 15, 2018, however the Company ~~effective January 1, 2018, as required.~~has elected not to. The Company has ~~elected to use~~identified the ~~nature of distribution approach to classify distributions received from equity method investees. The amendments~~material asset classes impacted by the new guidance and is in the ~~update should~~process of assessing the accounting, reporting and/or process changes that will be ~~applied using~~required to comply with the new guidance. The Company has developed a ~~retrospective transition method~~project plan to ~~each period presented (except where impracticable to apply retrospectively; those specific amendments would be applied prospectively as of the earliest date practicable). The~~complete our adoption of this new standard, ~~had an insignificant~~and is evaluating the impact of the new guidance on ~~the Company's Condensed Consolidated Statements of Cash Flows.~~its consolidated financial statements.

~~Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory~~Long-Duration Contracts

In ~~October 2016,~~August 2018, the FASB issued new guidance (ASU ~~2016-16,~~2018-12, ~~Income Taxes~~Financial Services-Insurance (Topic ~~740)~~944), ~~Intra-Entity Transfers of Assets Other Than Inventory)~~Targeted Improvements to the Accounting for Long-Duration Contracts), effective for fiscal years beginning after December 15, ~~2017~~2020 including interim periods within those fiscal years. Under this update:

~~an entity should recognize current~~assumptions used to measure cash flows for traditional and ~~deferred income taxes for an intra-entity transfer of an asset other than inventory~~limited-payment contracts must be reviewed at least annually with the ~~time of the transfer~~

the entity will no longer delay recognition of the income tax consequences of these types of intra-entity asset transfers until the asset has been sold to an outside party, as is practiced under current guidance

The amendments in this ASU were adopted by the Company effective January 1, 2018, as required. The Company does not have any intra-entity asset transfers, therefore this new accounting guidance is not expected to impact the Company's consolidated financial statements.

~~Presentation of Changes in Restricted Cash on the Cash Flow Statement~~

~~In November 2016, the FASB issued amended guidance regarding the presentation~~effect of changes in ~~restricted cash on the cash flow statement (ASU 2016-18,~~ ~~Statement of Cash Flows (Topic 230), Restricted Cash), effective for fiscal years beginning after December 15, 2017 and interim periods within~~ those ~~fiscal years. The ASU requires amounts generally described as changes~~assumptions being recognized in ~~restricted cash and restricted cash equivalents to be included with cash and cash equivalents on~~ the statement of ~~cash flows. The amendments~~operations

the discount rate applied to measure the liability for future policy benefits and limited-payment contracts must be updated at each reporting date with the effect of changes in ~~this ASU were adopted effective January 1, 2018, as required. The adoption of this guidance had an insignificant impact on~~ the ~~Company's Condensed Consolidated Statements of Cash Flows.~~rate being recognized in other comprehensive income

~~Scope of Modification Accounting for Stock Compensation~~

~~In May 2017, the FASB issued new guidance on the scope of modification accounting for stock compensation (ASU 2017-09,~~ ~~Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting)~~, effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. ASU 2017-09 may be early adopted. The ASU provides guidance on which changes to the terms or conditions of a share-based payment award would require an entity to apply modification accounting in ~~Topic 718, Stock Compensation~~. Under the new guidance, an entity would account for the effects of a modification unless the fair value of the modified award is the same as the fair value of the original award, the vesting conditions of the modified award are the same as the vesting conditions of the original award, and the classification of the modified award (equity instrument or liability instrument) is the same as the classification of the original award, all immediately before the original award is modified. The amendments in this update should be applied prospectively to an award modified on or after the adoption date. The Company adopted the amendments in this ASU effective January 1, 2018 as required. The adoption of this guidance did not have an impact on the Company's condensed consolidated financial statements.

~~Amendments to Recognition and Measurement of Financial Assets and Financial Liabilities~~

~~In March 2018, February 2018 and January 2016, the FASB issued amended guidance on the measurement of financial assets and financial liabilities (ASU 2018-04, Investments-Debt Securities (Topic 320) and Regulated Operations (Topic 980) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and~~

~~SEC Release No. 33-9273;~~ ~~ASU 2018-03,~~ ~~Technical Corrections and Improvements to Financial Instruments-Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities;~~ ~~and ASU 2016-01,~~ ~~Financial Instruments- Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities,~~ ~~respectively), effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Notable amendments in these updates:~~

~~require all equity securities (other than equity investments accounted for under the equity method of accounting or requiring the consolidation of the investee) to~~market risk benefits associated with deposit contracts must be measured at fair value, with ~~changes in fair value recognized through net income. Equity securities that do not have readily determinable fair values may be measured at cost minus impairment~~

~~require qualitative assessment for impairment~~the effect of ~~equity investments without readily determinable fair values at each reporting period and, if~~ the ~~qualitative assessment indicates that impairment exists, to measure the investment at fair value~~

eliminate the requirement to disclose the methods and significant assumptions used to estimate fair value (which is currently required to be disclosed, for financial instruments measured at amortized cost on the balance sheet)

~~require an entity to present separately in other comprehensive income the portion of the total~~ change in the fair value ~~of a liability resulting from~~attributable to a change in the instrument-specific credit risk ~~when~~being recognized in other comprehensive income

deferred acquisition costs are required to be amortized in proportion to premiums, gross profits, or gross margins and those balances must be amortized on a constant level basis over the ~~entity has elected~~expected term of the related contracts

deferred acquisition costs must be written off for unexpected contract terminations

disaggregated rollforwards of beginning to ~~measure~~ending balances of the liability ~~at fair value~~for future policy benefits, policyholder account balances, market risk benefits, separate account liabilities and deferred acquisition costs, as well as information about significant inputs, judgments, assumptions, and methods used in ~~accordance with the fair value option for financial instruments~~measurement are required to be disclosed

The amendments in ~~these ASUs should~~this ASU may be ~~applied by means of a cumulative-effect adjustment to the balance sheet~~early adopted as of the beginning of an annual reporting period for which financial statements have not yet been issued, including interim financial statements. The Company does not currently expect to early adopt this standard. The Company has identified specific areas that will be impacted by the ~~fiscal year~~new guidance and is in the process of ~~adoption, and~~assessing the ~~amendments related~~accounting, reporting and/or process changes that will be required to ~~equity securities without readily determinable fair values should be applied prospectively to equity investments that exist~~comply as well as the impact 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.~~

~~Future Accounting Pronouncements~~

Accounting pronouncements that will impact the Company in future periods have been disclosed in the Company's 2017 Form 10-K. There have not been any additional accounting pronouncements expected to impact the Company.new guidance on its consolidated financial statements.

(3) Significant Risks and Uncertainties

Federal Regulation

In April 2016, the Department of Labor (“DOL”) issued the “fiduciary” rule which could have had a material impact on the Company, its products, distribution, and business model. The rule ~~provides~~provided that persons who render investment advice for a fee or other compensation with respect to an employer plan or individual retirement account ("IRA") are fiduciaries of that plan or ~~IRA. The rule expands~~IRA and would have expanded the definition of fiduciary under ERISA to apply to commissioned insurance agents who ~~advise and~~ sell ~~products to IRA owners. As a result, commissioned insurance agents selling~~ the Company’s IRA ~~products must qualify~~products. On June 21, 2018, the United States Court of Appeals for ~~a prohibited transaction exemption, either~~ the ~~newly introduced Best Interest Contract Exemption ("BICE") or amended PTE 84-24. The~~Fifth Circuit formally vacated the DOL fiduciary rule ~~took effect June 2016 but~~in total when it issued its mandate following the ~~“applicability date" was delayed by DOL to June 9, 2017. DOL also acted to delay many aspects~~court’s decision on March 15, 2018, in U.S. Chamber of ~~the prohibited transaction exemption requirements during a transition period which has been extended to July 1, 2019. If the requirements~~Commerce v. U.S. Department of the exemptions were to be implemented fully, the impact on the financial services industry generally and on the Company and its business in particular is difficult to assess. We believe, however, it could have an adverse effect on sales of annuity products to IRA owners particularly in the independent agent distribution channel. A significant portion of the Company's annuity sales are to IRAs. Compliance with the prohibited transaction exemptions when fully phased in would likely require additional supervision of agents, cause changes to compensation practices and product offerings, and increase litigation risk, all of which could adversely impact our business, results of operations and/or financial condition.Labor, 885 F.3d 360 (5th Cir. 2018). Management will continue to monitor ~~developments closely, including~~for potential action by state officials or the SEC to implement rules similar to the vacated DOL Rule by state officials or the Securities and Exchange Commission and believes it is prepared to execute implementation plans as necessary to meet the rule and exemption requirements on the requisite applicability dates.rule.

Use of Estimates and Assumptions

The preparation of the Company's unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions used.

Concentrations of Financial Instruments

As of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company’s most significant investment in one industry, excluding United States ("U.S.") Government securities, was its investment securities in the ~~banking~~Banking industry with a fair value of ~~$2,484~~$2,348 or ~~11%~~10% and ~~$2,851~~$2,491 or ~~12%~~10%, respectively, of the invested assets portfolio and an amortized cost of ~~$2,537~~$2,416 and ~~$2,850,~~$2,691, respectively. As of March 31, ~~2018,~~2019, the Company’s holdings in this industry include investments in ~~110~~107 different issuers with the top ten investments accounting for ~~31%~~35% of the total holdings in this industry. As of March 31, ~~2018 and December 31, 2017,~~2019 the Company had no investments in issuers that exceeded 10% of shareholders' equity. As of December 31, 2018, the Company had 16 investments in issuers that exceeded 10% of shareholders' equity, with a total fair value of $1,634 or 7% of the invested assets portfolio: JP Morgan Chase & Co, Metropolitan Transportation Authority (NY), AT&T Inc, HSBC Holdings, Wells Fargo & Company, General Motors Co, Nationwide Mutual Insurance Company, Goldman Sachs Group Inc, United Mexican States, Energy Transfer Partners, Prudential Financial Inc, Citigroup Inc, HP Enterprise Co, Viacom Inc, Kinder Morgan Energy Partners, and Fuel Trust. The Company's largest concentration in any single issuer as of March 31, ~~2018~~2019 and December 31, ~~2017~~2018 was AT&T ~~Inc.~~and ~~Wells Fargo~~JP Morgan Chase & ~~Company~~,Co, respectively, with a total fair value of ~~$127~~$124 or 1% and ~~$155~~$115 or 1% of the invested assets portfolio, respectively.

Concentrations of Financial and Capital Markets Risk

The Company is exposed to financial and capital markets risk, including changes in interest rates and credit spreads which can have an adverse effect on the Company’s results of operations, financial condition and liquidity. 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.

The Company’s exposure to such financial and capital markets risk relates primarily to the market price and cash flow variability associated with changes in interest rates. A rise in interest rates, in the absence of other countervailing changes, will increase the net unrealized loss position of the Company’s investment portfolio and, if long-term interest rates rise dramatically within a six to twelve month time period, certain of the Company’s products may be exposed to disintermediation risk. Disintermediation risk refers to the risk that policyholders surrender their contracts in a rising interest rate environment, requiring the Company to liquidate assets in an unrealized loss position. Management believes this risk is mitigated to some extent by surrender charge protection provided by the Company’s products.

Concentration of Reinsurance Risk

The Company has a significant concentration of reinsurance risk with third party reinsurers, Wilton Reassurance Company (“Wilton Re”)~~, a third-party reinsurer,~~ and Kubera Insurance (SAC) Ltd. acting in respect of Annuity Reinsurance Cell A1 ("Kubera") that could have a material impact on the Company’s financial position in the event that Wilton

Re ~~fails~~or Kubera fail 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 March 31, ~~2018.~~2019. Kubera is not rated, however, management has attempted to mitigate the risk of non-performance through the funds withheld arrangement. As of March 31, ~~2018,~~2019, the net amount recoverable from Wilton Re was ~~$1,572.~~$1,541 and the net amount recoverable from Kubera was $681. The Company monitors both the financial condition of ~~Wilton Re~~individual reinsurers and ~~other individual~~risk concentration arising from similar activities and economic characteristics of reinsurers to attempt to reduce the risk of default by such reinsurers. ~~The Company also monitors concentration risk arising from similar economic characteristics of reinsurers.~~ Wilton Re isand Kubera are current on all amounts due as of March 31, ~~2018.~~2019.

On March 6, 2019, Scottish Re (U.S.), Inc. (“SRUS”), a Delaware domestic life and health reinsurer of FGL Insurance, was ordered into receivership for purposes rehabilitation. As of March 31, 2019, the net amount recoverable from SRUS was $47. The financial exposure related to these ceded reserves are substantially mitigated via a reinsurance agreement whereby Wilton Re assumes treaty non-performance including credit risk for this business.

(4) Investments

The Company’s fixed maturity securities investments have been designated as available-for-sale and are carried at fair value with unrealized gains and losses included in AOCI, net of associated adjustments for deferred 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 March 31, ~~2018~~2019 and December 31, ~~2017~~2018 are summarized as follows:

March 31, 2018
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Carrying Value
Available-for sale securities
Asset-backed securities $ 3,062
$ 6
$ (16 ) $ 3,052
$ 3,052
Commercial mortgage-backed securities 938
1
(15 ) 924
924
Corporates 13,379
22
(317 ) 13,084
13,084
Hybrids 1,230
4
(30 ) 1,204
1,204
Municipals 1,733
4
(27 ) 1,710
1,710
Residential mortgage-backed securities 1,235
5
(8 ) 1,232
1,232
U.S. Government 161
—
(1 ) 160
160
Total available-for-sale securities 21,738
42
(414 ) 21,366
21,366
Equities 780
2
(13 ) 769
769
Derivative investments 389
6
(102 ) 293
293
Commercial mortgage loans 528
—
—
526
528
Other invested assets 276
—
—
272
276
Total investments $ 23,711
$ 50
$ (529 ) $ 23,226
$ 23,232


	December 31, 2017											March 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Carrying Value		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	$	5,033	$	23	$	(82	)	$	4,974	$	4,974
Commercial mortgage-backed securities	956		1		(1		)	956		956		2,596		60		(9		)	2,647		2,647
Corporates	12,914		122		(21		)	13,015		13,015		10,886		60		(356		)	10,590		10,590
Equities	764		1		(4		)	761		761
Hybrids	1,445		6		(5		)	1,446		1,446		988		6		(33		)	961		961
Municipals	1,736		12		(1		)	1,747		1,747		1,211		16		(10		)	1,217		1,217
Residential mortgage-backed securities	1,279		1		(3		)	1,277		1,277		1,000		27		(5		)	1,022		1,022
U.S. Government	84		—		—			84		84		56		—		—			56		56
Foreign Governments												138		2		(2		)	138		138
Total available-for-sale securities	22,239		150		(38		)	22,351		22,351		21,908		194		(497		)	21,605		21,605
Equity securities												1,226		3		(58		)	1,171		1,171
Derivative investments	459		36		(3		)	492		492		318		74		(87		)	305		305
Short term investments	25		—		—			25		25
Commercial mortgage loans	548		—		—			549		548		479		—		—			485		479
Residential mortgage loans												195		—		—			199		195
Other invested assets	188		—		—			186		188		759		—		(4		)	744		755
Total investments	$	23,459	$	186	$	(41	)	$	23,603	$	23,604	$	24,885	$	271	$	(646	)	$	24,509	$	24,510

~~The unrealized gains and losses were reset to zero effective November 30, 2017 as a result of the Business Combination and application of acquisition accounting.~~



	December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Carrying Value
Available-for sale securities
Asset-backed securities	$	4,954	$	15	$	(137	)	$	4,832	$	4,832
Commercial mortgage-backed securities	2,568		9		(40		)	2,537		2,537
Corporates	11,213		16		(848		)	10,381		10,381
Hybrids	992		—		(91		)	901		901
Municipals	1,216		3		(32		)	1,187		1,187
Residential mortgage-backed securities	1,027		12		(8		)	1,031		1,031
U.S. Government	120		—		(1		)	119		119
Foreign Governments	129		—		(8		)	121		121
Total available-for-sale securities	22,219		55		(1,165		)	21,109		21,109
Equity securities	1,526		1		(145		)	1,382		1,382
Derivative investments	330		2		(235		)	97		97
Commercial mortgage loans	482		—		—			483		482
Residential mortgage loans	185		—		—			187		185
Other invested assets	662		—		—			651		662
Total investments	$	25,404	$	58	$	(1,545	)	$	23,909	$	23,917

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") atfor both March 31, ~~2018~~2019 and ~~gross unrealized gains of $0 and gross unrealized losses of $0 related to the non-credit portion of OTTI on non-agency RMBS at~~ December 31, ~~2017.~~

2018.

Securities held on deposit with various state regulatory authorities had a fair value of ~~$20,138~~$16,135 and ~~$20,301~~$19,930 at March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. Under Iowa regulations, insurance companies are required to hold securities on deposit in an amount no less than the ~~Company's~~ legal ~~reserve as prescribed by Iowa regulations.~~reserve.

At March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company held no material investments that were non-income producing for a period greater than twelve ~~months with fair values of $0 and $0, respectively.~~months.

In accordance with the Company's FHLB agreements, the investments supporting the funding agreement liabilities are pledged as collateral to secure the FHLB funding agreement ~~liabilities.~~liabilities and are not available to the Company for general purposes. The collateral investments had a fair value of ~~$927~~$1,186 and ~~$715~~$1,401 at March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

The amortized cost and fair value of fixed maturity available-for-sale securities by contractual maturities, as applicable, are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or pre-pay obligations.


	March 31, 2018				March 31, 2019
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Corporates, Non-structured Hybrids, Municipal and U.S. Government securities:
Corporates, Non-structured Hybrids, Municipal and Government securities:
Due in one year or less	$	188	$	188	$	160	$	160
Due after one year through five years	1,176		1,166		758		749
Due after five years through ten years	2,543		2,488		2,080		2,059
Due after ten years	11,917		11,654		10,281		9,994
Subtotal	15,824		15,496		13,279		12,962
Other securities which provide for periodic payments:
Asset-backed securities	3,062		3,052		5,033		4,974
Commercial mortgage-backed securities	938		924		2,596		2,647
Structured hybrids	679		662
Residential mortgage-backed securities	1,235		1,232		1,000		1,022
Subtotal	5,914		5,870		8,629		8,643
Total fixed maturity available-for-sale securities	$	21,738	$	21,366	$	21,908	$	21,605

The Company's available-for-sale securities with unrealized losses are reviewed for potential OTTI. For factors considered in evaluating whether a decline in value is other-than-temporary, please refer to “Note 2. Significant Accounting Policies and Practices" to the Company’s ~~2017~~2018 Form 10-K.

The Company analyzes its ability to recover the amortized cost by comparing the net present value of cash flows expected to be collected with the amortized cost of the security. Additionally, the Company considers other factors, including, but not limited to: whether the issuer is currently meeting its financial obligations and its ability to continue to meet these obligations, its existing cash available, and its access to additional available capital. For mortgage-backed and asset-backed securities, cash flow estimates consider the payment terms of the underlying assets backing a particular security, including interest rate and prepayment assumptions, based on data from widely accepted third-party data sources or internal estimates. In addition to interest 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 well as the vintage year of the security. For structured securities, the payment priority within the tranche 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 investment, an OTTI is recognized.

Based on the results of our process for evaluating available-for-sale securities in unrealized loss positions for OTTI, as discussed above, the Company determined ~~that~~ the unrealized losses as of March 31, ~~2018 increased~~2019 decreased due to ~~higher~~lower interest rates during the first quarter ~~coupled~~in conjunction with ~~an increase in the~~tighter credit spreads over Treasuries required by investors for corporate and municipal bonds. Based on an assessment of all securities in the portfolio in unrealized loss positions, the Company determined that the unrealized losses on the securities presented in the table below were not other-than-temporarily impaired as of March 31, 2018.Treasuries.

The fair value and gross unrealized losses of available-for-sale securities, aggregated by investment category and duration of fair value below amortized cost, were as follows:


	March 31, 2018														March 31, 2019
	Less than 12 months					12 months or longer				Total					Less than 12 months					12 months or longer					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Available-for-sale securities
Asset-backed securities	$	2,297	$	(16	)	$	—	$	—	$	2,297	$	(16	)	$	2,696	$	(63	)	$	886	$	(19	)	$	3,582	$	(82	)
Commercial mortgage-backed securities	815		(15		)	—		—		815		(15		)	243		(4		)	250		(5		)	493		(9		)
Corporates	11,588		(317		)	—		—		11,588		(317		)	684		(15		)	7,227		(341		)	7,911		(356		)
Hybrids	1,017		(30		)	—		—		1,017		(30		)	333		(14		)	343		(19		)	676		(33		)
Municipals	1,482		(27		)	—		—		1,482		(27		)	45		—			482		(10		)	527		(10		)
Residential mortgage-backed securities	926		(8		)	—		—		926		(8		)	41		(1		)	238		(4		)	279		(5		)
U.S. Government	161		(1		)	—		—		161		(1		)	—		—			50		—			50		—
Foreign Government															—		—			81		(2		)	81		(2		)
Total available-for-sale securities	$	18,286	$	(414	)	$	—	$	—	$	18,286	$	(414	)	$	4,042	$	(97	)	$	9,557	$	(400	)	$	13,599	$	(497	)
Total number of available-for-sale securities in an unrealized loss position less than twelve months												2,054															468
Total number of available-for-sale securities in an unrealized loss position twelve months or longer												0															1164
Total number of available-for-sale securities in an unrealized loss position												2,054															1,632


	December 31, 2017														December 31, 2018
	Less than 12 months					12 months or longer				Total					Less than 12 months					12 months or longer					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Available-for-sale securities
Asset-backed securities	$	1,944	$	(3	)	$	—	$	—	$	1,944	$	(3	)	$	2,924	$	(116	)	$	643	$	(21	)	$	3,567	$	(137	)
Commercial mortgage-backed securities	478		(1		)	—		—		478		(1		)	1,466		(34		)	262		(6		)	1,728		(40		)
Corporates	4,098		(21		)	—		—		4,098		(21		)	8,016		(772		)	1,465		(76		)	9,481		(848		)
Equities	436		(4		)	—		—		436		(4		)
Hybrids	484		(5		)	—		—		484		(5		)	858		(90		)	7		(1		)	865		(91		)
Municipals	285		(1		)	—		—		285		(1		)	850		(27		)	172		(5		)	1,022		(32		)
Residential mortgage-backed securities	939		(3		)	—		—		939		(3		)	139		(3		)	190		(5		)	329		(8		)
U.S. Government	74		—			—		—		74		—			69		—			50		(1		)	119		(1		)
Foreign Government															47		(3		)	68		(5		)	115		(8		)
Total available-for-sale securities	$	8,738	$	(38	)	$	—	$	—	$	8,738	$	(38	)	$	14,369	$	(1,045	)	$	2,857	$	(120	)	$	17,226	$	(1,165	)
Total number of available-for-sale securities in an unrealized loss position less than twelve months												1,224															1,551
Total number of available-for-sale securities in an unrealized loss position twelve months or longer												0															556
Total number of available-for-sale securities in an unrealized loss position												1,224															2,107

At March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, securities in an unrealized loss position were primarily concentrated in ~~investment grade,~~ corporate ~~debt and hybrid instruments.~~debt.

At March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, securities with a fair value of $4$40 and ~~$10,~~$132, respectively, had an unrealized loss greater than 20% of amortized cost (excluding U.S. Government and U.S. Government sponsored agency securities), which were insignificant to the carrying value of all investments, respectively.

The following table provides a reconciliation of the beginning and ending balances of the credit loss portion of OTTI on fixed maturity available-for-sale securities held by the Company for the three months ended March 31, ~~2018~~2019 and ~~2017 (Predecessor),~~2018, for which a portion of the OTTI was recognized in AOCI:

Three months ended
March 31, 2018 March 31, 2017
Predecessor
Beginning balance $ —
$ 3
Increases attributable to credit losses on securities:
OTTI was previously recognized —
—
OTTI was not previously recognized —
—
Ending balance $ —
$ 3



	Three months ended
	March 31, 2019		March 31, 2018
Beginning balance	$	—	$	—
Increases attributable to credit losses on securities:
OTTI was previously recognized	—		—
OTTI was not previously recognized	—		—
Ending balance	$	—	$	—

The following table breaks out the credit impairment loss type, the associated amortized cost and fair value of the investments at 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 months ended March 31, ~~2018~~2019 and ~~2017 (Predecessor):~~2018:


	Three months ended
	March 31, 2018			March 31, 2017			Three months ended
				Predecessor			March 31, 2019			March 31, 2018
Credit impairment losses in operations	$	(2	)	$	(21	)	$	(2	)	$	(2	)
Change-of-intent losses in operations	—			—			—			—
Amortized cost	—			7			1			—
Fair value	—			6			1			—
Non-credit losses in other comprehensive income for investments which experienced OTTI	—			—			—			—

Details of OTTI that were recognized in "Net income (loss)" and included in net realized gains on securities were as follows:

Three months ended
March 31, 2018 March 31, 2017
Predecessor
OTTI Recognized in Net Income (Loss)
Corporates $ (2 ) $ (20 )
Other invested assets —
(1 )
Total $ (2 ) $ (21 )

~~The portion of OTTI recognized in AOCI is disclosed in the Condensed Consolidated Statements of Comprehensive Income (Loss).~~



	Three months ended
	March 31, 2019			March 31, 2018
Corporates	(2		)	(2		)
Total	$	(2	)	$	(2	)

Mortgage Loans

The Company's mortgage loans are collateralized by commercial and residential properties.

Commercial Mortgage Loans

Commercial mortgage loans ("CMLs") represented approximately 2% ~~and 2%~~ of the Company’s total investments as of March 31, ~~2018~~2019 and December 31, ~~2017, respectively.~~2018. The Company primarily ~~makes~~invests in mortgage loans on income producing properties including hotels, industrial properties, retail buildings, multifamily properties and office buildings. The Company diversifies its CML portfolio by geographic region and property type to attempt to reduce concentration risk. The Company continuously evaluates CMLs based on relevant current information to ensure properties are performing at a consistent and acceptable level to secure the related debt. The distribution of CMLs, gross of valuation allowances, by property type and geographic region is reflected in the following tables:


	March 31, 2018				December 31, 2017				March 31, 2019				December 31, 2018
	Gross Carrying Value		% of Total		Gross Carrying Value		% of Total		Gross Carrying Value		% of Total		Gross Carrying Value		% of Total
Property Type:
Funeral Home	$	—	—	%	$	—	—	%
Hotel	22		4	%	22		4	%	21		4	%	21		4	%
Industrial - General	45		9	%	46		9	%	37		8	%	37		8	%
Industrial - Warehouse	21		4	%	38		6	%	20		4	%	20		4	%
Multifamily	70		13	%	70		13	%	55		11	%	56		12	%
Office	157		30	%	158		29	%	146		31	%	147		30	%
Retail	213		40	%	214		39	%	200		42	%	201		42	%
Total commercial mortgage loans, gross of valuation allowance	$	528	100	%	$	548	100	%	$	479	100	%	$	482	100	%
Allowance for loan loss	—				—				—				—
Total commercial mortgage loans	$	528			$	548			$	479			$	482

U.S. Region:
East North Central	$	112	21	%	$	108	20	%	$	97	20	%	$	98	20	%
East South Central	20		4	%	20		4	%	19		4	%	19		4	%
Middle Atlantic	85		16	%	85		15	%	78		16	%	79		17	%
Mountain	66		13	%	67		12	%	65		14	%	65		13	%
New England	14		3	%	14		3	%	10		2	%	10		2	%
Pacific	134		25	%	135		25	%	115		24	%	116		24	%
South Atlantic	58		11	%	65		12	%	57		12	%	57		12	%
West North Central	13		2	%	13		2	%	13		3	%	13		3	%
West South Central	26		5	%	41		7	%	25		5	%	25		5	%
Total commercial mortgage loans, gross of valuation allowance	$	528	100	%	$	548	100	%	$	479	100	%	$	482	100	%
Allowance for loan loss	—				—				—				—
Total commercial mortgage loans	$	528			$	548			$	479			$	482

All of the Company's investments in CMLs had a loan-to-value ("LTV") ratio of less than 75% at March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, as measured at inception of the loans unless otherwise updated. As of March 31, ~~2018,~~2019, all CMLs are current and have not experienced credit or other events which would require the recording of an impairment loss.

LTV and DSC ratios are measures commonly used to assess the risk and quality of mortgage loans. The LTV ratio is expressed as a percentage of the amount of the loan relative to the value of the underlying property. A LTV ratio in excess of 100% indicates the unpaid loan amount exceeds the underlying collateral. The DSC ratio, based upon the most recently received financial statements, is expressed as a percentage of the amount of a property’s net income to its debt service payments. A DSC ratio of less than 1.00 indicates that a property’s operations do not generate sufficient income to cover debt payments. We normalize our DSC ratios to a 25-year amortization period for purposes of our general loan allowance evaluation.

The following table presents the recorded investment in CMLs by LTV and DSC ratio categories and estimated fair value by the indicated loan-to-value ratios at March 31, ~~2018~~2019 and December 31, ~~2017~~2018:


	Debt-Service Coverage Ratios								Total Amount			% of Total		Estimated Fair Value			% of Total		Debt-Service Coverage Ratios						Total Amount			% of Total			Estimated Fair Value			% of Total
	>1.25		1.00 - 1.25		<1.00		N/A(a)				>1.25			Estimated Fair Value		1.00 - 1.25									Total Amount			% of Total			Estimated Fair Value			% of Total
March 31, 2018									Total Amount
March 31, 2019
LTV Ratios:												% of Total
Less than 50%	$	275	$	—	$	—	$	—	$	275		52	%	$	274		% of Total	52	%	$	299		$	6		$	305		64	%		$	309		64	%
50% to 60%	234		7		—		—		241			46	%	240			46	%	163			—			163			34	%		165			34	%
60% to 75%	12		—		—		—		12			2	%	12			2	%	11			—			11			2	%		11			2	%
Commercial mortgage loans	$	521	$	7	$	—	$	—	$	528		100	%	$	526		100	%	$	473		$	6		$	479		100	%		$	485		100	%


December 31, 2017
December 31, 2018
LTV Ratios:
Less than 50%	$	293	$	—	$	—	$	—	$	293		54	%	$	294		54	%	$	296		$	6		$	302		63	%		$	302		63	%
50% to 60%	236		7		—		—		243			44	%	243			44	%	169			—			169			35	%		170			35	%
60% to 75%	12		—		—		—		12			2	%	12			2	%	11			—			11			2	%		11			2	%
Commercial mortgage loans	$	541	$	7	$	—	$	—	$	548		100	%	$	549		100	%	$	476		$	6		$	482		100	%		$	483		100	%

(a) N/A - Current DSC ratio not available.

The Company establishes a general mortgage loan allowance based upon the underlying risk and quality of the mortgage loan portfolio using DSC ratio and LTV ratio. ~~A higher LTV ratio will result in a higher allowance. A higher DSC ratio will result in a lower allowance. The Company believes that the DSC ratio is an indicator of default risk on loans.~~ The Company believes that the LTV ratio is an indicator of the principal recovery risk for loans that default.

March 31, 2018 December 31, 2017
Gross balance commercial mortgage loans $ 528
$ 548
Allowance for loan loss —
—
Net balance commercial mortgage loans $ 528
$ 548
A higher LTV ratio will result in a higher allowance. The Company believes that the DSC ratio is an indicator of default risk on loans. A higher DSC ratio will result in a lower allowance.

The Company recognizes a mortgage loan as delinquent when payments on the loan are greater than 30 days past due. At March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company had no CMLs that were delinquent in principal or interest payments. ~~The following provides the current and past due composition of our CMLs:~~

March 31, 2018 December 31, 2017
Current to 30 days $ 528
$ 548
Past due —
—
Total carrying value $ 528
$ 548

Mortgage loan workouts, refinances or restructures that are classified as troubled debt restructurings ~~(TDR)~~("TDRs") are individually evaluated and measured for impairment. As of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, our CML portfolio had no impairments, modifications or ~~TDR.~~TDRs.

Residential Mortgage Loans

Residential mortgage loans ("RMLs") represented approximately 1% of the Company’s total investments as of March 31, 2019 and December 31, 2018. The Company's residential mortgage loans are closed end, amortizing loans. 100% of the properties are located in the United States. The Company diversifies its RML portfolio by state to attempt to reduce concentration risk. The distribution of RMLs by state with highest-to-lowest concentration are reflected in the following tables:



	March 31, 2019
US State:	Unpaid Principal Balance		% of Total
Illinois	$	29	15	%
Florida	25		13	%
South Carolina	24		13	%
All Other States (a)	112		59	%
Total mortgage loans	$	190	100	%

(a) The individual concentration of each state is less than 9% as of March 31, 2019.



	December 31, 2018
US State:	Unpaid Principal Balance		% of Total
Florida	$	25	14	%
Illinois	24		13	%
New Jersey	17		9	%
All Other States (a)	114		64	%
Total mortgage loans	$	180	100	%

(a) The individual concentration of each state is less than 9% as of December 31, 2018.

Residential mortgage loans have a primary credit quality indicator of either a performing or nonperforming loan. The Company defines non-performing residential mortgage loans as those that are 90 or more days past due and/or in nonaccrual status which is assessed monthly. The credit quality of RMLs as at March 31, 2019 and December 31, 2018, respectively, was as follows:



	March 31, 2019				December 31, 2018
Performance indicators:	Carrying Value		% of Total		Carrying Value		% of Total
Performing	$	195	100	%	$	185	100	%
Non-performing	—		—	%	—		—	%
Total residential mortgage loans, gross of valuation allowance	$	195	100	%	$	185	100	%
Allowance for loan loss	—		—	%	—		—	%
Total residential mortgage loans	$	195	100	%	$	185	100	%

Net Investment Income

The major sources of “Net investment income” on the accompanying unaudited Condensed Consolidated Statements of Operations were as follows:


	Three months ended
	March 31, 2018			March 31, 2017			Three months ended
				Predecessor			March 31, 2019			March 31, 2018
Fixed maturity securities, available-for-sale	$	242		$	236		$	265		$	242
Equity securities	10			10			21			10
Commercial mortgage loans	7			6
Mortgage loans							7			7
Invested cash and short-term investments	3			—			3			3
Funds withheld							8			7
Limited partnerships							8			3
Other investments	11			1			5			1
Gross investment income	273			253			317			273
Investment expense	(10		)	(6		)	(28		)	(10		)
Net investment income	$	263		$	247		$	289		$	263

Net Investment Gains (Losses)

Details underlying “Net investment gains (losses)” reported on the accompanying unaudited Condensed Consolidated Statements of Operations were as follows:

Three months ended
March 31, 2018 March 31, 2017
Predecessor
Net realized losses on fixed maturity available-for-sale securities $ (37 ) $ (17 )
Realized losses on equity securities (6 ) —
Change in fair value of other derivatives and embedded derivatives —
1
Realized losses on other invested assets (3 ) (1 )
Hedging derivatives and reinsurance-related embedded derivatives:

Realized gains on certain derivative instruments 11
75
Unrealized gains (losses) on certain derivative instruments (135 ) 34
Change in fair value of reinsurance related embedded derivatives (21 ) (11 )
Realized gains (losses) on hedging derivatives and reinsurance-related embedded derivatives (145 ) 98
Net investment gains (losses) $ (191 ) $ 81



	Three months ended
	March 31, 2019			March 31, 2018
Net realized gains (losses) on fixed maturity available-for-sale securities	$	(3	)	$	(37	)
Net realized/unrealized gains (losses) on equity securities	78			(6		)
Realized gains (losses) on other invested assets	1			(3		)
Derivatives and embedded derivatives:
Realized gains (losses) on certain derivative instruments	(26		)	11
Unrealized gains (losses) on certain derivative instruments	190			(135		)
Change in fair value of reinsurance related embedded derivatives (a)	(3		)	(21		)
Change in fair value of other derivatives and embedded derivatives	3			—
Realized gains (losses) on derivatives and embedded derivatives	164			(145		)
Net investment gains (losses)	$	240		$	(191	)

(a) Change in fair value of reinsurance related embedded derivatives is due to F&G Re and FSRC unaffiliated third party business.

The proceeds from the sale of fixed-maturity available for-sale-securities and the gross gains and losses associated with those transactions were as follows:

Three months ended
March 31, 2018 March 31, 2017
Predecessor
Proceeds $ 2,778
$ 263
Gross gains 8
8
Gross losses (43 ) (2 )

~~In accordance with the Company's adoption of ASU 2016-01, for the three months ended March 31, 2018 the Company had the following realized and unrealized gains and losses on equity securities:~~

Three months ended
March 31, 2018
Net gains (losses) recognized during the period on equity securities $ (6 )
Less: Net gains (losses) recognized during the period on equity securities sold during the period 1
Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date $ (7 )

The Company's adoption of ASU 2016-01 with respect to gains and losses on equity securities had a $(7) million impact on pre-tax net income, or $0.03 per common share, for the three months ended March 31, 2018.



	Three months ended
	March 31, 2019			March 31, 2018
Proceeds	$	474		$	2,778
Gross gains	5			8
Gross losses	(10		)	(43		)

Unconsolidated Variable Interest Entities

FGL Insurance owns investments in VIEs that are not consolidated within the Company’s financial statements. VIEs do not have sufficient equity to finance 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 Company’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 have any substantive rights to remove the investment manager; and 3) the Company was 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.

The Company previously executed a commitment of $75 to purchase common shares in an unaffiliated private business development company ("BDC"). The BDC invests in secured and unsecured fixed maturity and equity securities of middle market companies in the United States. Due to the voting structure of the transaction, the Company does not have voting power. The initial capital call occurred June 30, 2015, with the remaining commitment expected to fund June 2019. The Company has funded ~~$42~~$54 as of March 31, ~~2018.~~2019.

The Company invests in various limited partnerships as a passive investor. These investments are in corporate credit and real estate debt strategies that have a current income bias. Limited partnership interests are accounted for under the equity method and are included in “Other invested assets” on the Company’s consolidated balance sheet. The Company's maximum exposure to loss with respect to these investments is limited to the investment carrying amounts reported in the Company's consolidated balance sheet in addition to any required unfunded commitments. As of March 31, ~~2018,~~2019, the Company's maximum exposure to loss was ~~$191~~$595 in recorded carrying value and ~~$160~~$1,093 in unfunded commitments.

(5) Derivative Financial Instruments

The carrying amounts of derivative instruments, including derivative instruments embedded in FIA contracts, is as follows:


	March 31, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Assets:
Derivative investments:
Call options	$	278	$	477	$	304	$	97
Futures contracts	2		—		1		—
FSRC derivative contracts	13		15
Other invested assets:
Other derivatives and embedded derivatives	17		17		17		14
	$	310	$	509	$	322	$	111


Liabilities:
Contractholder funds:
FIA embedded derivative	$	2,333	$	2,387	$	2,720	$	2,476
Other liabilities:
Preferred shares reimbursement feature embedded derivative	24		23		27		29
	$	2,357	$	2,410	$	2,747	$	2,505

The change in fair value of derivative instruments included in the accompanying unaudited Condensed Consolidated Statements of Operations is as follows:

Three months ended
March 31, 2018 March 31, 2017
Predecessor
Revenues:
Net investment (losses) gains:
Call options $ (120 ) $ 105
Futures contracts (2 ) 4
FSRC derivative contracts (2 ) —
Other derivatives and embedded derivatives —
1
Reinsurance related embedded derivatives (21 ) (11 )
Total net investment (losses) gains: $ (145 ) $ 99

Benefits and other changes in policy reserves:
FIA embedded derivatives $ (54 ) $ 112

Acquisition and operating expenses, net of deferrals:
Preferred shares reimbursement feature embedded derivative (a) (1 ) —

~~(a) Only applicable to Successor periods.~~



	Three months ended
	March 31, 2019			March 31, 2018
Revenues:
Net investment gains (losses):
Call options	$	154		$	(122	)
Futures contracts	8			(2		)
Foreign currency forward	2			—
Other derivatives and embedded derivatives	3			—
Reinsurance related embedded derivatives	(3		)	(21		)
Total net investment gains (losses)	$	164		$	(145	)

Benefits and other changes in policy reserves:
FIA embedded derivatives	$	244		$	(98	)

Acquisition and operating expenses, net of deferrals:
Preferred shares reimbursement feature embedded derivative	$	2		$	(1	)

Additional Disclosures

Other Derivatives and Embedded Derivatives

~~On June 16, 2014, FGL Insurance invested in~~The Company holds a $35 fund-linked note issued by Nomura International Funding Pte. Ltd. The note provides for an additional payment at maturity based on the value of an embedded derivative in AnchorPath Dedicated Return Fund (the "AnchorPath Fund") of $11 which was based on the actual return of the fund. At March 31, 2019, the fair value of the fund-linked note and embedded derivative were $27 and $17, respectively. At December 31, 2018, the fair value of the fund-linked note and embedded derivative were ~~$25~~$26 and ~~$17,~~$14, respectively. At maturity of the fund-linked note, FGL Insurance will receive the $35 face value of the note plus the value of the embedded derivative in the AnchorPath Fund. The additional payment at maturity is an embedded derivative reported in "Other invested assets", while the host is an available-for-sale security reported in "Fixed maturities, available-for-sale".

Fixed Index Annuity ("FIA") ~~Contracts~~Embedded Derivative and Call Options and Futures

The Company has FIA Contracts that permit the holder to elect an interest rate return or an equity 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 unaudited Condensed Consolidated Statements of Operations. See a description of the fair value methodology used in "Note 6. Fair Value of Financial Instruments".

The Company purchases derivatives consisting of a combination of call options and futures contracts on the applicable market indices to fund the index credits due to FIA contractholders. The call options are one, two, three, and five year options purchased to match the funding requirements of the underlying policies. On the respective anniversary dates of the index policies, the index used to compute the interest credit is reset and the Company purchases new one, two, three, or five year call options to fund the next index credit. The Company manages the cost of these purchases through the terms of its FIA contracts, which permit the Company to change caps, spreads or participation rates, subject to guaranteed minimums, on each contract’s anniversary date. The change in the fair value of the call options and futures contracts is generally designed to offset the portion of the change in the fair value of the FIA 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 component of “Net investment gains (losses).” The change in fair value of the call options and futures contracts includes the gains and losses recognized at the expiration of the instrument term or upon early termination and the changes in fair value of open positions.

Other market exposures are hedged periodically depending on market conditions and the Company’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 liabilities and the hedging assets. The Company uses 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 hedging strategy as market conditions and the Company’s risk tolerance change.

Preferred Equity Remarketing Reimbursement Embedded Derivative Liability

On November 30, 2017 the Company issued 275,000 Series A cumulative preferred shares and 100,000 Series B cumulative preferred shares (together the “Preferred Shares”). The Preferred Shares do not have a maturity date and are non-callable for the first five years.From and after November 30, 2022, the original holders of the Preferred Shares may request and thus require, the Company (subject to customary 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 at the remarketed price and proceeds from such sale 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 dividends) 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. Changes in fair value of

this derivative are recognized within “Acquisition and operating expenses, net of deferrals” in the accompanying unaudited Condensed Consolidated Statements of Operations.

Credit Risk

The Company is exposed to credit loss in the event of non-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 governed by an International Swaps and Derivatives Association (“ISDA”) Master Agreement.

Information regarding the Company’s exposure to credit loss on the call options it holds is presented in the following table:


		March 31, 2018								December 31, 2017										March 31, 2019
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			Credit Rating (Fitch/Moody's/S&P) (a)	Notional Amount		Fair Value		Collateral		Net Credit Risk
Merrill Lynch	A/*/A+	$	2,636	$	68	$	24	$	44	$	2,780	$	150	$	118	$	32		A+/*/A+	$	3,496	$	70	$	25	$	45
Deutsche Bank	A-/A3/A-	1,634		40		40		—		1,345		51		55		(4		)	A-/A3/BBB+	1,151		14		14		—
Morgan Stanley	*/A1/A+	1,640		39		37		2		1,555		92		101		(9		)	*/A1/A+	1,657		25		24		1
Barclay's Bank	A*+/A2/A	1,933		61		49		12		2,090		103		95		8			A+/A2/A	2,752		79		61		18
Canadian Imperial Bank of Commerce	AA-/Aa3/A+	3,074		83		78		5		2,807		96		98		(2		)	*/Aa2/A+	1,430		41		29		12
Wells Fargo																			A+/A2/A-	2,034		58		56		2
Goldman Sachs																			A/A3/BBB+	1,030		17		16		1
Total		$	10,917	$	291	$	228	$	63	$	10,577	$	492	$	467	$	25			$	13,550	$	304	$	225	$	79



		December 31, 2018
Counterparty	Credit Rating (Fitch/Moody's/S&P) (a)	Notional Amount		Fair Value		Collateral		Net Credit Risk
Merrill Lynch	A+/*/A+	$	3,952	$	25	$	—	$	25
Deutsche Bank	A-/A3/BBB+	1,327		5		6		(1		)
Morgan Stanley	*/A1/A+	1,648		9		6		3
Barclay's Bank	A+/A2/A	2,205		27		20		7
Canadian Imperial Bank of Commerce	*/Aa2/A+	1,716		11		8		3
Wells Fargo	A+/A2/A-	1,635		17		16		1
Goldman Sachs	A/A3/BBB+	647		3		3		—
Total		$	13,130	$	97	$	59	$	38

(a) An * represents credit ratings that were not available.

Collateral Agreements

The Company is required to maintain minimum ratings as a matter of routine practice as part of its over-the-counter derivative agreements on ISDA forms. Under some ISDA agreements, the Company has agreed to maintain certain financial strength ratings. A downgrade below these levels provides the counterparty under the agreement the right to terminate the open ~~derivative~~option contracts between the parties, at which time any amounts payable by the Company or the counterparty would be dependent on the market value of the underlying ~~derivative~~option contracts. The ~~Company’s~~Company's current rating ~~allows multiple counterparties~~doesn't allow any counterparty the right to terminate ISDA agreements. ~~No ISDA agreements have been terminated, although the counterparties have reserved the right to terminate the ISDA agreements at any time.~~ In certain transactions, the Company and the counterparty have entered into a collateral support agreement requiring either party to post collateral when the net exposures exceed pre-determined thresholds. ~~These thresholds vary by counterparty and credit rating.~~For all counterparties, except one, this threshold is set to zero. As of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, counterparties posted ~~$228~~$225 and ~~$467~~$59 of collateral, respectively, of which ~~$204~~$200 and ~~$349~~$59 is included in "Cash and cash equivalents" with an associated payable for this collateral included in "Other liabilities" on the Condensed Consolidated Balance Sheets. The remaining ~~$24~~$25 and ~~$118~~$0 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 March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, 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 ~~$63~~$79 and ~~$25~~$38 at March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

The Company is required to pay counterparties the effective federal funds rate each day for cash collateral posted to FGL for daily mark to market margin changes. ~~In June 2017, the~~The Company ~~began reinvesting~~reinvests derivative cash collateral to reduce the interest cost. Cash collateral is invested in short term Treasury securities and A1/P1 commercial paper which are included in "Cash and cash equivalents" in the accompanying Condensed Consolidated Balance Sheets.

The Company held ~~1,364~~774 and ~~1,754~~664 futures contracts at March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. The fair value of the futures contracts represents the cumulative unsettled variation margin (open trade equity, net of cash settlements). The Company provides cash collateral to the counterparties for the initial and variation margin on the futures contracts which is included in "Cash and cash equivalents" in the accompanying Condensed

Consolidated Balance Sheets. The amount of cash collateral held by the counterparties for such contracts was $7$4 and $8$3 at March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

~~Reinsurance Related Embedded Derivatives (Predecessor)~~

FGL Insurance has a coinsurance arrangement with FSRC, meaning that funds are withheld by FGL Insurance as the legal owner, but the credit risk is borne by FSRC. This arrangement created an obligation for FGL Insurance to pay FSRC at a later date, which resulted in an embedded derivative. This embedded derivative was considered a total return swap with contractual returns that were attributable to the assets and liabilities associated with this reinsurance arrangement. The fair value of the total return swap was based on the change in fair value of the underlying assets held in the funds withheld portfolio. Investment results for the assets that support the coinsurance with funds withheld reinsurance arrangement, including gains and losses from sales, were passed directly to the reinsurer pursuant to contractual terms of the reinsurance arrangement. The reinsurance related embedded derivative was reported in “Other assets”, if in a net gain position, or "Other liabilities", if in a net loss position, on the Predecessor's Condensed Consolidated Balance Sheets and the related gains or losses were reported in “Net investment gains” on the Predecessor's Condensed Consolidated Statements of Operations. Due to the acquisition of FSRC, the reinsurance related embedded derivative is eliminated in consolidation in the Successor periods.

~~Call option payable to FSRC (Predecessor)~~

Under the terms of the coinsurance arrangement with FSRC, FGL Insurance is required to pay FSRC a portion of the net cost of equity option purchases and the proceeds from expirations related to the equity options which hedged the index credit feature of the reinsured FIA contracts. Accordingly, the payable to FSRC was reflected in "Funds withheld for reinsurance liabilities" as of the balance sheet date with changes in fair value reflected within the “Net investment gains (losses)” in Predecessor's Condensed Consolidated Statements of Operations. Due to the acquisition of FSRC, the call option payable to FSRC is eliminated in consolidation in the Successor periods.

(6) Fair Value of Financial Instruments

The Company’s measurement of fair value is based on assumptions used by market participants in pricing the asset or liability, which may include inherent risk, restrictions on the sale or use of an asset, or non-performance risk, which may include the Company’s own credit risk. The Company’s estimate of an exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability (“exit price”) in the principal market, or the most advantageous market for that asset ofor liability in the absence of a principal market as opposed to the price that would be paid to acquire the asset or ~~receive~~assume a liability (“entry price”). The Company categorizes financial instruments carried at fair value into a three-level fair value hierarchy, based on the priority of inputs to the respective valuation technique. The three-level hierarchy for fair value measurement is defined as follows:

Level 1 - Values are unadjusted quoted prices for identical assets and liabilities in active markets accessible at the measurement date.

Level 2 - Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are observable or can be corroborated by market data for the term of the instrument. Such inputs include market interest rates and volatilities, spreads, and yield curves.

Level 3 - Certain inputs are unobservable (supported by little or no market activity) and significant to the fair value measurement. Unobservable inputs reflect the Company’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date based on the best information available in the circumstances.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the ~~lower~~lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.

When a determination is made to classify an asset or liability within Level 3 of the fair value hierarchy, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement. Because certain securities trade in less liquid or illiquid markets with limited or no pricing information, the determination of fair value for these securities is inherently more difficult. ~~However,~~In addition to the unobservable inputs, Level 3 fair value investments may include ~~in addition to the unobservable or Level 3 inputs,~~ observable components, which are components that are actively quoted or can be validated to market-based sources.

The carrying amounts and estimated fair values of the Company’s financial instruments for which the disclosure of fair values is required, including financial assets and liabilities measured and carried at fair value on a recurring basis, with the exception of investment contracts, related party loans, portions of other invested assets and debt which are disclosed later within this footnote, was summarized according to the hierarchy previously described, as follows:


	March 31, 2018										March 31, 2019
	Level 1		Level 2		Level 3		Fair Value		Carrying Amount		Level 1		Level 2		Level 3		Fair Value		Carrying Amount
Assets
Cash and cash equivalents	$	1,157	$	—	$	—	$	1,157	$	1,157	$	1,357	$	—	$	—	$	1,357	$	1,357
Fixed maturity securities, available-for-sale:
Asset-backed securities	—		2,751		301		3,052		3,052		—		4,466		508		4,974		4,974
Commercial mortgage-backed securities	—		882		42		924		924		—		2,579		68		2,647		2,647
Corporates	—		11,852		1,232		13,084		13,084		—		9,381		1,209		10,590		10,590
Hybrids	266		928		10		1,204		1,204		277		674		10		961		961
Municipals	—		1,673		37		1,710		1,710		—		1,179		38		1,217		1,217
Residential mortgage-backed securities	—		1,167		65		1,232		1,232		—		403		619		1,022		1,022
U.S. Government	134		26		—		160		160		51		5		—		56		56
Foreign Governments											—		122		16		138		138
Equity securities	457		265		4		726		726		441		657		20		1,118		1,118
Derivative financial instruments	2		291		—		293		293
Reinsurance related embedded derivative, included in other assets	—		—		—		—		—
Short term investments	—		—		—		—		—
Derivative investments											1		304		—		305		305
Other invested assets	—		—		17		17		17		—		—		41		41		41
Funds withheld for reinsurance receivables, at fair value	82		660		6		748		748		161		664		7		832		832
Total financial assets at fair value	$	2,098	$	20,495	$	1,714	$	24,307	$	24,307	$	2,288	$	20,434	$	2,536	$	25,258	$	25,258
Liabilities
Derivatives:
FIA embedded derivatives, included in contractholder funds	—		—		2,333		2,333		2,333		—		—		2,720		2,720		2,720
Fair value of future policy benefits (FSRC)	—		—		712		712		712
Preferred shares reimbursement feature embedded derivative	—		—		24		24		24		—		—		27		27		27
Fair value of future policy benefits											—		—		797		797		797
Total financial liabilities at fair value	$	—	$	—	$	3,069	$	3,069	$	3,069	$	—	$	—	$	3,544	$	3,544	$	3,544


	December 31, 2017										December 31, 2018
	Level 1		Level 2		Level 3		Fair Value		Carrying Amount		Level 1		Level 2		Level 3		Fair Value		Carrying Amount
Assets
Cash and cash equivalents	$	1,215	$	—	$	—	$	1,215	$	1,215	$	571	$	—	$	—	$	571	$	571
Fixed maturity securities, available-for-sale:
Asset-backed securities	—		2,653		412		3,065		3,065		—		4,388		444		4,832		4,832
Commercial mortgage-backed securities	—		907		49		956		956		—		2,470		67		2,537		2,537
Corporates	—		11,829		1,186		13,015		13,015		—		9,150		1,231		10,381		10,381
Hybrids	253		1,183		10		1,446		1,446		265		626		10		901		901
Municipals	—		1,709		38		1,747		1,747		—		1,150		37		1,187		1,187
Residential mortgage-backed securities	—		1,211		66		1,277		1,277		—		417		614		1,031		1,031
U.S. Government	52		32		—		84		84		114		5		—		119		119
Equity securities, available-for-sale	404		310		3		717		717
Derivative financial instruments	—		492		—		492		492
Short term investments	25		—		—		25		25
Foreign Governments											—		105		16		121		121
Equity securities											454		874		4		1,332		1,332
Derivative investments											—		97		—		97		97
Other invested assets	—		—		17		17		17		—		—		39		39		39
Funds withheld for reinsurance receivables, at fair value	88		648		4		740		740		169		576		4		749		749
Total financial assets at fair value	$	2,037	$	20,974	$	1,785	$	24,796	$	24,796	$	1,573	$	19,858	$	2,466	$	23,897	$	23,897
Liabilities
Derivatives:
FIA embedded derivatives, included in contractholder funds	$	—	$	—	$	2,387	$	2,387	$	2,387	$	—	$	—	$	2,476	$	2,476	$	2,476
Fair value of future policy benefits (FSRC)	—		—		728		728		728
Preferred shares reimbursement feature embedded derivative	—		—		23		23		23		—		—		29		29		29
Fair value of future policy benefits											—		—		725		725		725
Total financial liabilities at fair value	$	—	$	—	$	3,138	$	3,138	$	3,138	$	—	$	—	$	3,230	$	3,230	$	3,230

Valuation Methodologies

Fixed Maturity Securities & Equity Securities

The Company measures 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 measure 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 the market approach include third-party pricing services, independent broker quotations, or pricing matrices. The Company 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 acquired when certain thresholds are met.

For certain security types, additional inputs may be used, or some of the inputs 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~~yield for comparable securities. Increases ~~(decreases)~~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.

The fair value of the Company's investment in mutual funds is based on the net asset value published by the respective mutual fund and represents the value the Company would have received if it withdrew its investment on the balance sheet date.

The Company did not adjust prices received from third parties as of March 31, ~~2018~~2019 or December 31, ~~2017.~~2018. However, the Company does analyze the third-party valuation methodologies and ~~its~~ related inputs to perform assessments to determine the appropriate level within the fair value hierarchy.

Derivative Financial Instruments

The fair value of call option assets is based upon valuation pricing models, which represents what the Company would expect to receive or pay at the balance sheet date if it canceled the options, entered into offsetting positions, or exercised the options. Fair values for these instruments are determined internally, based on valuation pricing models which use market-observable inputs, including interest rates, yield curve volatilities, and other factors.

The fair value of futures contracts represents the cumulative unsettled variation margin (open trade equity, net of cash settlements) which represents what the Company would expect to receive or pay at the balance sheet date if it canceled the futures contract or entered into offsetting positions. These contracts are classified as Level 1.

The fair value measurement of the FIA embedded derivatives included in contractholder funds is determined through a combination of market observable information and significant unobservable inputs. The market observable inputs are the market value of option and interest swap rates. The significant unobservable inputs are the mortality multiplier, surrender rates, non-performance spread and option costs. The mortality multiplier at March 31, ~~2018~~2019 and December 31, ~~2017~~2018 was applied to the Annuity 2000 mortality tables. Significant increases ~~(decreases)~~or decreases in the market value of an option in isolation would result in a higher or lower, respectively, fair value measurement. Significant increases ~~(decreases)~~or decreases in interest swap rates, mortality multiplier, surrender rates, or non-performance spread in isolation would result in a lower ~~(higher)~~or higher fair value ~~measurement.~~measurement, respectively. Generally, a change in any one unobservable input would not directly result in a change in any other unobservable input. Changes in unrealized losses (gains), net in the Company’s FIA embedded derivatives are included in "Benefits and other changes in policy reserves" in the Condensed Consolidated Statements of Operations.

The fair value of the Reimbursement Feature ~~embedded derivative~~ is determined using a Black Derman Toy model, incorporating the paid in kind dividend coupon, the Company's redemption option and the preferred shareholder's remarketing feature. The remarketing feature allows the shareholder to put the preferred shares to the Company for a value of par after five years and, if after a successful remarketing event the ~~value would be otherwise~~amount is less than 90% ~~par. There were $1~~par, up to a maximum of ~~changes in fair~~10% of liquidation price defined. Fair value ~~are recognized~~of this derivative decreased $2 during the three months ended March 31, ~~2018~~2019, due to changes in the credit spread.

Other Invested Assets

Fair value of the AnchorPath embedded derivative is based on an unobservable input, the net asset value of the AnchorPath fund at the balance sheet date. The embedded derivative is similar to a call option on the net asset value of the AnchorPath fund with a strike price of 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. ~~Therefore, the~~A Black-Scholes model ~~returns~~determines the net asset value of the AnchorPath fund as the fair value of the call option regardless of the values used for the other inputs to the 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.

FSRC and F&G Re Funds Withheld for Reinsurance Receivables and Future Policy Benefits

FSRC and F&G Re elected to apply the Fair Value Option to account for its funds withheld receivables and future policy benefits liability related to its assumed reinsurance. FSRC and F&G Re measures the fair value of the Funds Withheld for Reinsurance Receivables based on the fair values of the securities in the underlying funds withheld portfolio held by the cedant. FSRC ~~uses~~and F&G Re use a discounted cash flows approach to measure the fair value of the Future Policy Benefits Reserve. The cash flows associated with future policy premiums and benefits are generated using best estimate assumptions (plus a risk margin, where applicable) and are consistent with market prices, where available. Risk margins are typically applied to non-observable, non-hedgeable market inputs such as long term volatility, mortality, morbidity, lapse, etc.

The significant unobservable inputs used in the fair value measurement of the FSRC and F&G Re future policy benefit liability are undiscounted cash flows, non-performance risk spread and risk margin to reflect uncertainty. ~~Significant increases (decreases)~~Undiscounted cash flows used in our March 31, 2019 discounted cash flow model equaled $1,152.

Increases or decreases in non-performance risk spread and risk margin to reflect uncertainty would result in a lower ~~(higher)~~or higher fair value ~~measurement.~~measurement, respectively.

Quantitative information regarding significant unobservable inputs used for recurring Level 3 fair value measurements of financial instruments carried at fair value as of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, are as follows:


	Fair Value at				Range (Weighted average)	Fair Value at		Valuation Technique		Unobservable Input(s)		Range (Weighted average)
	March 31, 2018		Valuation Technique	Unobservable Input(s)	March 31, 2018	March 31, 2019				Unobservable Input(s)	March 31, 2019
Assets
Asset-backed securities						$	489	Valuation Technique	Broker-quoted		Offered quotes		97.50% - 105.17% (100.84%)
Asset-backed securities	$	301	Broker-quoted	Offered quotes	97.50% - 102.75% (99.96%)	19		Third-Party Valuation		Offered quotes		0.00% - 98.30% (28.44%)
Commercial mortgage-backed securities	17		Broker-quoted	Offered quotes	100.00% - 105.99% (105.64%)	43		Broker-quoted		Offered quotes		81.01% - 100.14% (87.90%)
Commercial mortgage-backed securities	25		Matrix Pricing	Quoted prices	120.74% - 120.74% (120.74%)	25		Matrix Pricing		Quoted prices		121.01% - 121.01% (121.01%)
Corporates	686		Broker-quoted	Offered quotes	72.70% - 105.99% (98.19%)	731		Broker-quoted		Offered quotes		54.00% - 107.83% (99.49%)
Corporates	546		Matrix Pricing	Quoted prices	68.36% - 112.21% (100.95%)	478		Matrix Pricing		Quoted prices		95.94% - 117.55% (101.67%)
Hybrids	10		Broker-quoted	Offered quotes	94.85% - 94.85% (94.85%)	10		Matrix Pricing		Quoted prices		98.84% - 98.84% (98.84%)
Municipals	37		Broker-quoted	Offered quotes	110.91% - 110.91% (110.91%)	38		Broker-quoted		Offered quotes		114.61% - 114.61% (114.61%)
Residential mortgage-backed securities	65		Broker-quoted	Offered quotes	91.86% - 101.38% (98.47%)	619		Broker-quoted		Offered quotes		92.52% - 103.81% (103.34%)
Foreign governments						16		Broker-quoted		Offered quotes		101.38% - 103.55% (102.06%)
Equity securities						16		Broker-quoted		Offered quotes		100.00%
Equity securities (Salus preferred equity)	4		Income-Approach	Yield	6.40%	4		Income-Approach		Yield		7.18%
Other invested assets:
Other Invested Assets:
Available-for-sale embedded derivative (AnchorPath)	17		Black scholes model	Market value of AnchorPath fund	100.00%	16		Black Scholes model		Market value of AnchorPath fund		100.00%
Credit Linked Note						25		Broker-quoted		Offered quotes		100.00%
Funds withheld for reinsurance receivables at fair value	5		Matrix pricing	Calculated prices	100.00%	6		Matrix pricing		Quoted prices		100.00%
Funds withheld for reinsurance receivables at fair value	1		Loan recovery value	Recovery rate	26.00%	1		Loan recovery value		Recovery rate		14.00%
Total	$	1,714				$	2,536
Liabilities
Future policy benefits (FSRC)	$	712	Discounted cash flow	Non-Performance risk spread	0.30%
Derivatives:
FIA embedded derivatives included in contractholder funds	2,333		Discounted Cash Flow	Risk margin to reflect uncertainty	0.61%
Future policy benefits						$	797	Discounted cash flow		Market value of option		0.88% - 6.95% (1.90%)
				Market value of option	0.00% - 29.52% (2.63%)					Mortality multiplier		90.00% - 100.00% (100.00%)
				SWAP rates	2.71% - 2.79% (2.73%)					Surrender rates		0.65% - 40.00% (4.63%)
				Mortality multiplier	80.00% - 80.00% (80.00%)					Partial withdrawals		0.00% - 2.50% (0.93%)
				Surrender rates	0.50% - 75.00% (6.04%)					Non-performance spread		0.00% - 0.10% (0.03%)
				Partial withdrawals	1.00% - 2.50% (2.00%)					Option cost		1.14% - 4.58% (1.72%)
				Non-performance spread	0.25% - 0.25% (0.25%)					Risk margin to reflect uncertainty		0.35% - 0.62% (0.44%)
				Option cost	0.10% - 17.33% (2.05%)					Morbidity risk margin		0.00% - 2.00% (0.17%)
Preferred shares reimbursement feature embedded derivative	24		Black Derman Toy model	Credit Spread	4.58%
Derivatives:
FIA embedded derivatives included in contractholder funds						2,720		Discounted cash flow		Market value of option		0.00% - 32.37% (2.23%)
				Yield Volatility	20.00%					SWAP rates		2.29% - 2.41% (2.34%)
Total liabilities at fair value	$	3,069

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 780
Broker-quoted Offered quotes 73.55% - 109.63%
(99.77%)
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%)
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



				Mortality multiplier	80.00% - 80.00% (80.00%)
				Surrender rates	0.50% - 75.00% (5.86%)
				Partial withdrawals	1.00% - 2.50% (2.00%)
				Non-performance spread	0.25% - 0.25% (0.25%)
				Option cost	0.18% - 16.61% (2.16%)
Preferred shares reimbursement feature embedded derivative	27		Black Derman Toy model	Credit Spread	4.50%
				Yield Volatility	20.00%
Total liabilities at fair value	$	3,544



	Fair Value at		Valuation Technique	Unobservable Input(s)	Range (Weighted average)
	December 31, 2018		Valuation Technique	Unobservable Input(s)	December 31, 2018
Assets
Asset-backed securities	$	405	Broker-quoted	Offered quotes	97.00% - 102.00% (99.77%)
Asset-backed securities	24		Matrix Pricing	Quoted prices	96.07% - 96.07% (96.07%)
Asset-backed securities	15		Third-Party Valuation	Offered quotes	0.00% - 99.29% (23.05%)
Commercial mortgage-backed securities	43		Broker-quoted	Offered quotes	77.12% - 100.08% (85.46%)
Commercial mortgage-backed securities	24		Matrix Pricing	Quoted prices	117.72% - 117.72% (117.72%)
Corporates	577		Broker-quoted	Offered quotes	74.63% - 104.62% (97.80%)
Corporates	654		Matrix Pricing	Quoted prices	91.74% - 113.25% (98.86%)
Hybrids	10		Matrix Pricing	Quoted prices	96.60% - 96.60% (96.60%)
Municipals	37		Broker-quoted	Offered quotes	111.23% - 111.23% (111.23%)
Residential mortgage-backed securities	614		Broker-quoted	Offered quotes	89.80% - 100.99% (100.73%)
Foreign governments	16		Broker-quoted	Offered quotes	98.38% - 99.01% (98.58%)
Equity securities (Salus preferred equity)	4		Income-Approach	Yield	7.15%
Other Invested Assets:
Available-for-sale embedded derivative (AnchorPath)	14		Black Scholes model	Market value of AnchorPath fund	100.00%
Credit Linked Note	25		Broker-quoted	Offered quotes	100.00%
Funds withheld for reinsurance receivables, at fair value	4		Matrix pricing	Calculated prices	100.00%
Total	$	2,466
Liabilities
Future policy benefits	$	725	Discounted cash flow	Non-Performance risk spread	0.00% - 0.22% (0.18%)
				Risk margin to reflect uncertainty	0.35% - 0.71% (0.68%)
Derivatives:
FIA embedded derivatives included in contractholder funds	2,476		Discounted cash flow	Market value of option	0.00% - 31.06% (0.94%)
				SWAP rates	2.57% - 2.71% (2.63%)
				Mortality multiplier	80.00% - 80.00% (80.00%)
				Surrender rates	0.50% - 75.00% (5.90%)
				Partial withdrawals	1.00% - 2.50% (2.00%)
				Non-performance spread	0.25% - 0.25% (0.25%)
				Option cost	0.11% - 16.61% (2.18%)
Preferred shares reimbursement feature embedded derivative	29		Black Derman Toy model	Credit Spread	5.14%
				Yield Volatility	20.00%
Total liabilities at fair value	$	3,230

Changes in unrealized losses (gains), net in the Company’s FIA embedded derivatives are included in "Benefits and other changes in policy reserves" in the unaudited Condensed Consolidated Statements of Operations.

The following tables summarize changes to the Company’s financial instruments carried at fair value and classified within Level 3 of the fair value hierarchy for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively. This summary excludes any impact of amortization of VOBA and DAC. The gains and losses below may include changes in fair value due in part to observable inputs that are a component of the valuation methodology.


	Three months ended March 31, 2018																					Three months ended March 31, 2019
	Balance at Beginning of Period		Total Gains (Losses)						Purchases		Sales		Settlements				Net transfer In (Out) of Level 3 (a)			Balance at End of Period		Balance at Beginning of Period			Total Gains (Losses)					Purchases		Sales			Settlements			Net transfer In (Out) of Level 3 (a)			Balance at End of Period
	Balance at Beginning of Period		Included in Earnings			Included in AOCI					Sales		Settlements			Included in Earnings				Balance at End of Period		Balance at Beginning of Period		Included in AOCI						Purchases		Sales			Settlements			Net transfer In (Out) of Level 3 (a)			Balance at End of Period
Assets									Purchases
Fixed maturity securities available-for-sale:																	Net transfer In (Out) of Level 3 (a)
Asset-backed securities	$	412	$	—		$	(2	)	$	28	$	—	$	(6	)		$	(131	)	$	301	$	444		$	—		$	5	$	114	$	—		$	(31	)	$	(24	)	$	508
Commercial mortgage-backed securities	49		—			(1		)	—		—		(6		)		—			42		67			—			2		—		—			(1		)	—			68
Corporates	1,186		—			(20		)	100		—		(34		)		—			1,232		1,231			(1		)	24		—		(21		)	(35		)	11			1,209
Hybrids	10		—			—			—		—		—				—			10		10			—			—		—		—			—			—			10
Municipals	38		—			(1		)	—		—		—				—			37		37			—			1		—		—			—			—			38
Residential mortgage-backed securities	66		—			—			—		—		(1		)		—			65		614			—			16		7		—			(18		)	—			619
Foreign Governments																						16			—			—		—		—			—			—			16
Equity securities	3		1			—			—		—		—				—			4		4			—			1		—		—			—			15			20
Other invested assets:
Available-for-sale embedded derivative	17		—			—			—		—		—				—			17		14			2			—		—		—			—			—			16
Credit linked note																						25			—			—		—		—			—			—			25
Funds withheld for reinsurance receivables at fair value	4		—			—			2		—		—				—			6		4			—			—		5		—			—			(2		)	7
Total assets at Level 3 fair value	$	1,785	$	1		$	(24	)	$	130	$	—	$	(47	)		$	(131	)	$	1,714	$	2,466		$	1		$	49	$	126	$	(21	)	$	(85	)	$	—		$	2,536
Liabilities
FIA embedded derivatives, included in contractholder funds	$	2,387	$	(54	)	$	—		$	—	$	—	$	—			$	—		$	2,333	$	2,476		$	244		$	—	$	—	$	—		$	—		$	—		$	2,720
Future policy benefits (FSRC)	728		(20		)	—			—		—		4				—			712
Future policy benefits																						725			29			—		—		—			43			—			797
Preferred shares reimbursement feature embedded derivative	23		1			—			—		—		—				—			24		29			(2		)	—		—		—			—			—			27
Total liabilities at Level 3 fair value	$	3,138	$	(73	)	$	—		$	—	$	—	$	4			$	—		$	3,069	$	3,230		$	271		$	—	$	—	$	—		$	43		$	—		$	3,544

(a) The net transfers out of Level 3 during the three months ended March 31, 2019 were exclusively to Level 2.



	Three months ended March 31, 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
	Balance at Beginning of Period		Included in Earnings			Included in AOCI			Purchases		Sales		Settlements			Net transfer In (Out) of Level 3 (a)			Balance at End of Period
Assets
Fixed maturity securities available-for-sale:
Asset-backed securities	$	412	$	—		$	(2	)	$	28	$	—	$	(6	)	$	(131	)	$	301
Commercial mortgage-backed securities	49		—			(1		)	—		—		(6		)	—			42
Corporates	1,169		—			(20		)	100		—		(34		)	—			1,215
Hybrids	10		—			—			—		—		—			—			10
Municipals	38		—			(1		)	—		—		—			—			37
Residential mortgage-backed securities	66		—			—			—		—		(1		)	—			65
Foreign Governments	17		—			—			—		—		—			—			17
Equity securities	3		1			—			—		—		—			—			4
Other invested assets:
Available-for-sale embedded derivative	17		—			—			—		—		—			—			17
Funds withheld for reinsurance receivables, at fair value	4		—			—			2		—		—			—			6
Total assets at Level 3 fair value	$	1,785	$	1		$	(24	)	$	130	$	—	$	(47	)	$	(131	)	$	1,714
Liabilities
FIA embedded derivatives, included in contractholder funds	$	2,277	$	(98	)	$	—		$	—	$	—	$	—		$	—		$	2,179
Future policy benefits	728		(20		)	—			—		—		4			—			712
Preferred shares reimbursements feature embedded derivative	23		1			—			—		—		—			—			24
Total liabilities at Level 3 fair value	$	3,028	$	(117	)	$	—		$	—	$	—	$	4		$	—		$	2,915

(a) The net transfers out of Level 3 during the three months ended March 31, 2018 were exclusively to Level 2.

Three months ended March 31, 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
$ —
$ —
$ (9 ) $ (19 ) $ 170
Commercial mortgage-backed securities 85
—
1
—
—
—
(8 ) 78
Corporates 1,078
—
5
60
—
(33 ) (4 ) 1,106
Hybrids 10
—
—
—
—
—
—
10
Municipals 37
—
1
—
—
—
—
38
Residential mortgage-backed securities —
—
—
—
—
—
14
14
Equity securities available-for-sale 1
—
—
—
—
—
—
1
Other invested assets:
Available-for-sale embedded derivative 13
1
—
—
—
—
—
14
Loan participations 6
(1 ) —
—
—
(5 ) —
—
Total assets at Level 3 fair value $ 1,427
$ —
$ 8
$ 60
$ —
$ (47 ) $ (17 ) $ 1,431
Liabilities
FIA embedded derivatives, included in contractholder funds $ 2,250
$ 112
$ —
$ —
$ —
$ —
$ —
$ 2,362
Total liabilities at Level 3 fair value $ 2,250
$ 112
$ —
$ —
$ —
$ —
$ —
$ 2,362

~~(a) The net transfers out of Level 3 during the Predecessor three months ended March 31, 2017 were exclusively to Level 2.~~

Valuation Methodologies and Associated Inputs for Financial Instruments Not Carried at Fair Value

The following discussion outlines the methodologies and assumptions used to determine the fair value of our financial instruments not carried at fair value. Considerable judgment is required to develop these assumptions used to measure fair value. Accordingly, the estimates shown are not necessarily indicative of the amounts that would be realized in a one-time, current market exchange of all of our financial instruments.

~~Commercial~~ Mortgage Loans

The fair value of ~~commercial~~ mortgage loans is established using a discounted cash flow method based on credit rating, maturity and future income. This yield-based approach is sourced from our third-party vendor. The ratings for mortgages in good standing are based on property type, location, market conditions, occupancy, debt service coverage, loan-to-value, quality of tenancy, borrower, and payment record. In the event of an impairment, the carrying value is based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s market price, or the fair value of the collateral if the loan is collateral-dependent. The inputs used to measure the fair value of our ~~commercial~~ mortgage loans are classified as Level 3 within the fair value hierarchy.

Policy Loans (included within Other Invested Assets)

Fair values for policy loans are estimated from a discounted cash flow analysis, using interest rates currently being offered for loans with similar credit risk. Loans with similar characteristics are aggregated for purposes of the calculations.

Investment Contracts

Investment contracts include deferred annuities, FIAs, indexed universal life policies ("IULs") and immediate annuities. The fair value of deferred annuity, FIA, and IUL contracts is based on their cash surrender value (i.e. the cost the Company would incur to extinguish the liability) as these contracts are generally issued without an annuitization date. The fair value of immediate annuities contracts is derived by calculating a new fair value interest rate using the updated yield curve and treasury spreads as of the respective reporting date. At March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, this resulted in lower fair value reserves relative to the carrying value. The Company is not required to, and has not, estimated the fair value of 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.

Debt

The fair value of debt is based on quoted market prices. The inputs used to measure the fair value of our outstanding debt are classified as Level 2 within the fair value hierarchy. Our revolving credit facility debt is classified as Level 3 within the fair value hierarchy, and the estimated fair value reflects the carrying value as the revolver has no maturity date.

The following tables provide the carrying value and estimated fair value of our financial instruments that are carried on the Condensed Consolidated Balance Sheets at amounts other than fair value, summarized according to the fair value hierarchy previously described.


	March 31, 2018										March 31, 2019
	Level 1		Level 2		Level 3		Total Estimated Fair Value		Carrying Amount		Level 1		Level 2		Level 3		Total Estimated Fair Value		Carrying Amount
Assets
FHLB common stock, included in other invested assets	$	—	$	50	$	—	$	50	$	50
FHLB common stock											$	—	$	56	$	—	$	56	$	56
Commercial mortgage loans	—		—		526		526		528		—		—		485		485		479
Residential mortgage loans											—		—		199		199		195
Policy loans, included in other invested assets	—		—		14		14		18		—		—		12		12		23
Affiliated other invested assets											—		—		40		40		40
Funds withheld for reinsurance receivables, at fair value											—		—		5		5		5
Total	$	—	$	50	$	540	$	590	$	596	$	—	$	56	$	741	$	797	$	798

Liabilities
Investment contracts, included in contractholder funds	$	—	$	—	$	17,158	$	17,158	$	19,750	—		—		18,355		18,355		21,161
Debt	—		304		135		439		442		—		543		—		543		541
Total	$	—	$	304	$	17,293	$	17,597	$	20,192	$	—	$	543	$	18,355	$	18,898	$	21,702


	December 31, 2017										December 31, 2018
	Level 1		Level 2		Level 3		Total Estimated Fair Value		Carrying Amount		Level 1		Level 2		Level 3		Total Estimated Fair Value		Carrying Amount
Assets
FHLB common stock											$	—	$	52	$	—	$	52	$	52
Commercial mortgage loans	$	—	$	—	$	549	$	549	$	548	—		—		483		483		482
Residential mortgage loans											—		—		187		187		185
Policy loans, included in other invested assets	—		—		15		15		17		—		—		11		11		22
Affiliated other invested assets											—		—		39		39		39
Funds withheld for reinsurance receivables, at fair value	—		—		16		16		16		—		—		8		8		8
Total	$	—	$	—	$	580	$	580	$	581	$	—	$	52	$	728	$	780	$	788

Liabilities
Investment contracts, included in contractholder funds	$	—	$	—	$	16,659	$	16,659	$	19,457	$	—	$	—	$	18,358	$	18,358	$	20,911
Debt	—		307		105		412		412		—		520		—		520		541
Total	$	—	$	307	$	16,764	$	17,071	$	19,869	$	—	$	520	$	18,358	$	18,878	$	21,452

The following table includes assets that have not been classified in the fair value hierarchy as the fair value of these investments are measured using the net asset value per share practical expedient. For further discussion about this adoption see “Note 2. Significant Accounting ~~Policies”~~Policies and Practices” to the Company's ~~2017~~2018 Form 10-K.


	Carrying Value After Measurement				Carrying Value After Measurement
	March 31, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Equity securities	$	43	$	44	$	53	$	50
Limited partnership investment, included in other invested assets	191		154		595		510

For investments for which NAV is used as a practical expedient for fair value, the Company does not have any significant restrictions in their ability to liquidate their positions in these investments, other than obtaining

general partner approval, nor does the Company believe it is probable a price less than NAV would be received in the event of a liquidation.

The Company reviews the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and out of Level 3, or between other levels, at the beginning fair value for the reporting period in which the changes occur. The transfers into and out of Level 3 were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value.

The Company’s assessment resulted in gross transfers into and gross transfers out of certain fair value levels by asset class for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, are as follows:


	Transfers Between Fair Value Levels												Transfers Between Fair Value Levels
	Level 1				Level 2				Level 3				Level 1				Level 2				Level 3
	In		Out		In		Out		In		Out		In		Out		In		Out		In		Out
Three months ended March 31, 2019
Asset-backed securities													$	—	$	—	$	24	$	—	$	—	$	24
Corporates													—		—		—		11		11		—
Equity securities													5		17		2		5		15		—
Funds withheld for reinsurance receivables													—		—		2		—		—		2
Total transfers													$	5	$	17	$	28	$	16	$	26	$	26

Three months ended March 31, 2018
Asset-backed securities	$	—	$	—	$	131	$	—	$	—	$	131	$	—	$	—	$	131	$	—	$	—	$	131
Hybrids	15		—		—		15		—		—		15		—		—		15		—		—
Total transfers	$	15	$	—	$	131	$	15	$	—	$	131	$	15	$	—	$	131	$	15	$	—	$	131
Predecessor
Three months ended March 31, 2017
Asset-backed securities	$	—	$	—	$	54	$	35	$	35	$	54
Commercial mortgage-backed securities	—		—		8		—		—		8
Corporates	—		—		5		1		1		5
Residential mortgage-backed securities	—		—		—		14		14		—
Total transfers	$	—	$	—	$	67	$	50	$	50	$	67

(7) Intangibles ~~including deferred acquisition costs, deferred sales inducements and value of business acquired, net~~

~~FGL and FSR acquisitions~~

~~As part of the FGL acquisition, the following intangible assets (and the weighted average useful lives) were identified:~~

Carrying amount Weighted Average Useful Life (Years)
State insurance licenses $ 6
Indefinite
Trade marks / trade names 15
10
Total $ 21

~~Carrying amounts~~

A summary of the changes in the carrying amounts of the Company's VOBA, DAC and DSI intangible assets are as follows:



	VOBA			UREV			DSI			DAC			Total			VOBA			DAC			DSI			Total
Balance at December 31, 2017	$	827		$	—		$	10		$	19		$	856
Balance at December 31, 2018																$	866		$	344		$	149		$	1,359
Deferrals	—			(9		)	26			59			76			—			91			35			126
Amortization	(26		)	7			(1		)	(1		)	(21		)	(31		)	(3		)	(2		)	(36		)
Interest	5			—			—			—			5			4			2			1			7
Unlocking	—			—			—			—			—			—			—			—			—
Adjustment for net unrealized investment (gains) losses	38			(5		)	1			4			38			(35		)	—			—			(35		)
Balance at March 31, 2018	$	844		$	(7	)	$	36		$	81		$	954
Balance at March 31, 2019																$	804		$	434		$	183		$	1,421



Predecessor	VOBA			UREV		DSI			DAC			Total
Balance at December 31, 2016	$	118		$	—	$	86		$	1,024		$	1,228
															VOBA			DAC			DSI			Total
Balance at December 31, 2017															$	821		$	22		$	10		$	853
Deferrals	—			—		11			79			90			—			59			26			85
Amortization	(9		)	—		(5		)	(37		)	(51		)	(30		)	(1		)	(1		)	(32		)
Interest	3			—		1			11			15			5			—			—			5
Unlocking	4			—		(1		)	—			3			—			—			—			—
Adjustment for net unrealized investment (gains) losses	(107		)	—		—			6			(101		)	38			4			1			43
Balance at March 31, 2017	$	9		$	—	$	92		$	1,083		$	1,184
Balance at March 31, 2018															$	834		$	84		$	36		$	954

Amortization of VOBA, DAC, ~~DSI,~~ and ~~UREV~~DSI is based on the historical, current and future expected gross margins or profits recognized, including investment gains and losses. The interest accrual rate utilized to calculate the accretion of interest on VOBA ranged from 0.05% to 4.01%. The adjustment for unrealized net investment losses (gains) represents the amount of VOBA, DAC, ~~DSI,~~ and ~~UREV~~DSI that would have been amortized if such unrealized gains and losses had been recognized. This is referred to as the “shadow adjustments” as the additional amortization is reflected in AOCI rather than the unaudited Condensed Consolidated ~~Statement~~Statements of Operations. As of March 31, ~~2018,~~2019 and ~~March 31, 2017,~~2018, the VOBA balances included cumulative adjustments for net unrealized investment (gains) losses ~~(gains)~~ of $40 and $22, ~~and $(147),~~ respectively, ~~and~~ the DAC balances included cumulative adjustments for net unrealized investment (gains) losses of $5 and $0, respectively, and ~~$13, respectively. As of March 31, 2018,~~ the DSI balance included net unrealized investment (gains) losses of $2 and ~~the UREV balance included net unrealized investment gains of $(3).~~$2, respectively.

~~Definite Lived Intangible Assets~~

~~Amortizable intangible assets as of March 31, 2018 consist of the following:~~

March 31, 2018
Cost Accumulated amortization Net
Trade names 16 1 15

Estimated amortization expense for VOBA in future fiscal periods is as ~~follow:~~follows:


	Estimated Amortization Expense	Estimated Amortization Expense
Fiscal Year
2018	40
2019	79	48
2020	85	83
2021	81	89
2022	73	84
2023		75
Thereafter	464	385

The Company had an unearned revenue liability balance of $(39) as of March 31, 2019, including deferrals of $(9), amortization of $2, unlocking of $0, and adjustment for net unrealized investment gains (losses) of $9.

Definite and Indefinite Lived Intangible Assets

Amortizable intangible assets as of March 31, 2019 consist of the following:



	Cost		Accumulated amortization		Net carrying amount		Weighted average useful life (years)
Trade marks / trade names	$	16	$	2	$	14	10
State insurance licenses	6		N/A		6		Indefinite
Total					$	20

(8) Debt

The carrying amount of the Company's outstanding debt as of March 31, ~~2018~~2019 and December 31, ~~2017~~2018 is as follows:

March 31, 2018 December 31, 2017
Debt $ 307
$ 307
Revolving credit facility 135
105



	March 31, 2019		December 31, 2018
Debt	$	541	$	541

~~The $135~~As of March 31, 2019 and ~~$105~~December 31, 2018, the company had not drawn ~~balances~~ on the revolver, which would have carried interest rates equal to ~~4.63%~~5.25% and ~~4.17%~~5.27%, ~~as of March 31, 2018 and December 31, 2017, respectively.~~respectively, had we drawn on the revolver. As of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, the amount available to be drawn on the revolver was ~~$115 and $145, respectively.~~$250.

The interest expense and amortization of debt issuance costs ~~of the Company's debt~~ for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively, were as follows:


	Three months ended
	March 31, 2018		March 31, 2017		Three months ended
			Predecessor		March 31, 2019		March 31, 2018
	Interest Expense	Amortization	Interest Expense	Amortization	Interest Expense	Amortization	Interest Expense	Amortization
Debt	5	—	5	—	8	—	5	—
Revolving credit facility	1	—	1	—	—	—	1	—

(9) Equity

Share Repurchases ~~(Predecessor)~~

On December 19, 2018, the Company's Board of Directors authorized a share repurchase program of up to $150 of the Company's outstanding common stock. This program will expire on December 15, 2020, and may be modified at any time. Under the share repurchase program, the Company may repurchase shares from time to time in open market transactions or through privately negotiated transactions in accordance with applicable federal securities laws. Repurchases may also be made pursuant to a trading plan under Rule 10b5-1 of the Securities Exchange Act of 1934. The extent to which the Company ~~acquired 4~~repurchases its shares, and the timing of such purchases, will depend upon a variety of factors, including market conditions, regulatory requirements and other considerations, as determined by the Company.

During the three months ended March 31, 2019, the Company repurchased 3,728 thousand shares for a total cost of $0$30. As of March 31, 2019, the Company had repurchased a total of 4,328 thousand shares for a total cost of $34.

Dividends

The Company declared the following cash dividend to ~~satisfy employee income tax withholding pursuant to the Company’s stock compensation plan~~its common shareholders during the three months ended March 31, ~~2017.~~2019.

~~Dividends~~



Date Declared	Date Paid	Date Shareholders of record	Shareholders of record (in thousands)	Cash Dividend declared (per share)	Total cash paid
February 27, 2019	April 1, 2019	March 18, 2019	221,661	$0.01	$2

On May 7, 2019, the Company's Board of Directors declared a quarterly cash dividend of $0.01 per share. The dividend will be paid on June 10, 2019 to shareholders of record as of the close of business on May 28, 2019.

The Company did not declare a cash dividend to its common shareholders during the three months ended March 31, 2018.

The Company declared the following ~~cash~~ dividends to its ~~common~~preferred shareholders during the three months ended March 31, ~~2017:~~2019:

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

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, 2019

April 1, 2019

March 15, 2019

298

Paid in kind

$—

Series B Preferred Shares

March 29, 2019

April 1, 2019

March 15, 2019

108

Paid in kind

$—

The Company declared the following dividends to its preferred shareholders during the three months ended March 31, 2018:

Type of Preferred Share

Date Declared

Date Paid

Date Shareholders of record

Shareholders of record (in thousands)

Method of Payment

Total cash paid

Total shares paid in kind (in thousands)

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

$—

March 29, 2018

April 1, 2018

March 15, 2018

277

Paid in kind

$—

Series B Preferred Shares

March 29, 2018

April 1, 2018

March 15, 2018

101

Paid in kind

$—

March 29, 2018

April 1, 2018

March 15, 2018

101

Paid in kind

$—

(10) Stock Compensation

On August 8, 2017, the Company adopted a stock-based incentive plan (the ~~“Incentive~~“FGL Incentive Plan”) that permits the granting of awards in the form of qualified stock options, non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights, unrestricted stock, performance-based awards, dividend equivalents, cash awards and any combination of the foregoing. The Company’s Compensation Committee is authorized to grant up to 15,006 thousand equity awards under the Incentive Plan. NoAt March 31, 2019, 5,588 thousand equity awards ~~were granted under the~~are available for future issuance.

FGL Incentive Plan

On February 26, 2019 FGL granted 1,699 thousand stock options to a certain officer of the Company. The following table summarizes the vesting conditions for these options:



Vesting mechanism	Vest Dates	Number of options subject to these vesting conditions
Service	Each March 15 from 2020 through 2023; subject to continued service	485
Service and return on equity performance	March 15 2020, 2021 and 2022 subject to continued service and targeted return on equity	607
Service and stock price performance	Each March 15 from 2019 through 2023; subject to continued service and target stock price goals being achieved	607

The total fair value of the options granted on February 26, 2019 was $3. The fair value of the awards is expensed over the service period, which generally corresponds to the vesting period.

At March 31, 2019, the intrinsic value of stock options outstanding or expected to vest was $76. At March 31, 2019, the weighted average remaining contractual term of stock options outstanding, exercisable and vested or expected to vest was 7 years, 6 years and 7 years, respectively. At March 31, 2019 there were 485 options that were exercisable.

A summary of the Company’s outstanding stock options as of March 31, ~~2018.~~2019, and related activity during the three months ended March 31, 2019, is as follows (share amount in thousands):



Stock Option Awards	Options		Weighted Average Exercise Price
Stock options outstanding at December 31, 2018	13,007		$	9.68
Granted	1,699		10.00
Exercised	—		—
Forfeited or expired	(1,869	)	(10.00		)
Stock options outstanding at March 31, 2019	12,837		9.67
Exercisable at March 31, 2019	485		10.00
Vested or projected to vest at March 31, 2019	12,837		9.67

To value the options 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 of the February 26, 2019 grants 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	$1.68	$1.74	$1.26	N/A
Risk-free interest rate	2.48%	2.50%	2.54%	US Treasury Curve
Assumed dividend yield	0.49%	0.49%	0.49%	Internal projection
Expected option term	5.75 years	6.0 years	N/A	Internal model
Contractual term	N/A	N/A	7.0 years	N/A
Volatility	26.00%	26.00%	26.00%	Predecessor and peer group experience
Early exercise multiple	N/A	N/A	2.8	Hull White model
Cost of equity	N/A	N/A	10.50%	Capital asset pricing model - 20 year risk free rate

The Company granted 147 thousand restricted shares to directors in the three months ended March 31, 2019. These shares will vest on December 31, 2019. The total fair value of the restricted shares granted in the three months ended March 31, 2019 was $1.

A summary of the Company’s nonvested restricted shares outstanding as of March 31, 2019, and related activity during the three months ended, is as follows (share amount in thousands):



Restricted Stock Awards	Shares	Weighted Average Grant Date Fair Value
Restricted shares outstanding at December 31, 2018	—	$	—
Granted	147	6.82
Vested	—	—
Forfeited or expired	—	—
Vested or expected to vest at March 31, 2019	147	6.82

Management Incentive Plan

In the three months ended March 31, 2019, the Company granted 424 thousand phantom units to members of management under a management incentive plan (the "Management Incentive Plan"). The total fair value of the restricted shares granted in the three months ended March 31, 2019 was $4.

One half of the phantom units vest in three equal installments on each March 15^th from 2020 to 2022, subject to awardees continued service with the Company. The other half will begin vesting on March 15, 2021 and cliff vest on March 15, 2022 based on continued service and attainment of a performance metric: adjusted operating income return on equity.

At March 31, 2019, the liability for phantom units of $1 was based on the number of units granted, the elapsed portion of the service period and the fair value of the Company’s common stock on that date which was $7.87.

A summary of the Management Incentive Plan nonvested phantom units outstanding as of March 31, 2019, and related activity during the three months ended, is as follows (share amount in thousands):



Phantom units	Shares		Weighted Average Grant Date Fair Value
Phantom units outstanding at December 31, 2018	356		$	8.95
Granted	424		8.64
Vested	(59	)	10.00
Forfeited or expired	(10	)	8.96
Phantom units outstanding at March 31, 2019	711		9.19

The Company recognized total stock compensation expense related to the FGL Incentive Plan and Management Incentive Plan is as follows:



	Three months ended
	March 31, 2019
FGL Incentive Plan
Stock options	$	1
Restricted shares	—
	1
Management Incentive Plan
Phantom units	—
	—
Total stock compensation expense	1
Related tax benefit	—
Net stock compensation expense	$	1

The stock compensation expense is included in "Acquisition and operating expenses, net of deferrals" in the unaudited Condensed Consolidated Statements of Operations.

Total compensation expense related to the FGL Incentive Plan and Management Incentive Plan not yet recognized as of March 31, 2019 and the weighted-average period over which this expense will be recognized are as follows:



	Unrecognized Compensation Expense		Weighted Average Recognition Period in Years
FGL Incentive Plan
Stock options	$	18	3
Restricted shares	1		1
	19
Management Incentive Plan
Phantom units	3		3
	3
Total unrecognized stock compensation expense	$	22	3

(11) Income Taxes

The Company ~~(“FGL Holdings, Cayman”)~~ is a Cayman-domiciled corporation that has operations in Bermuda and the U.S. Neither the Cayman Islands nor Bermuda impose a corporate income tax. The Company’s U.S. non-life subsidiaries file a consolidated non-life U.S. Federal income tax return. For tax years prior to December 1, 2017, the non-life members were included in former parent company HRG’s consolidated U.S. Federal income tax return. The income tax liabilities of the Company as former members of the consolidated HRG return were calculated using the separate return method as prescribed in ASC 740. The Company’s US life insurance subsidiaries file a separate life consolidated U.S. Federal income tax return. The life insurance companies will be eligible to join in a consolidated filing with the U.S. non-life companies in 2022.

The Company’s Bermuda insurance subsidiary, F&G Re, is party to a ModCo reinsurance agreement with its US Life sister company, FGL Insurance. The Tax Cut and Jobs Act (“TCJA”) enacted in 2017, contained a Base-Erosion and Anti-Abuse Tax (“BEAT”). The BEAT provisions apply a minimum tax (5% in 2018) to certain reinsurance payments settled between FGL Insurance and F&G Re. Absent clarifying guidance, the current language in the Act suggests that the tax is applied without regard to deduction or offset under a typical Modco arrangement (i.e. a “Gross application”). Without clarifying guidance from Regulatory authorities in regards to allowing for a “Net application” in the calculation of BEAT, the Company will make an election under IRC Code Section 953(d) for the 2018 tax year, which will result in F&G Re Ltd being treated as if it were a US Tax Payer. The effect of the election would be retroactive to the beginning of the Tax calendar year. The current period financial statements reflect an assumed 953(d) election with regard to FG 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 for the quarter.

The provision for income taxes represents federal income taxes. The effective tax rate for the three months ended March 31, ~~2018~~2019 was ~~40%~~5%. The effective tax rate for the three months ended March 31, ~~2017~~2018 was ~~37%~~38%. The effective tax rate on pre-tax income for the current three ~~month~~months ended March 31, ~~2018~~2019 differs from the U.S Federal statutory rate for

2019 of 21% primarily due to two factors. First, in 2018, a partial valuation allowance was established against the US Life companies' unrealized loss deferred tax assets because there were not sufficient sources of income to recover those assets. During the first quarter of 2019, the unrealized loss position recovered enough that the valuation allowance was no longer needed and it was released. Secondly, the Company had substantial income in jurisdictions that do not impose an income tax. The effective tax rate on pre-tax income for the three months ended March 31, 2018 differed from the U.S. Federal statutory rate for 2018 of 21% primarily due to the impact of an intended tax election. During the first quarter of 2018, there was uncertainty surrounding the impact of the Base-Erosion and Anti-Abuse Tax ("BEAT") that was enacted as part of the Tax Cut and Jobs Act and how it would impact the reinsurance agreement between F&G Life Re ~~making an election to be a US taxpayer.~~and FGL Insurance. As a result of the uncertainty, F&G Life Re intended to make an election under IRC Code Section 953(d) for the 2018 tax year to be treated as if it were a US taxpayer for the year. As such, an opening balance sheet deferred tax liability was set up resulting in a discrete expense being recorded ~~for~~in the ~~quarter. The~~first quarter of 2018 that increased the first quarter effective ~~tax rate~~rate. Based on ~~pre-tax income for~~clarifying guidance, the ~~three months ended~~Company ultimately decided not to make that election in the fourth quarter of 2018.

As of March 31, ~~2017 differed from~~2019, the ~~U.S Federal statutory rate for 2017 of 35% primarily due to the~~Company had a partial valuation allowance ~~placed~~of $33 against ~~the income tax benefit of the Company’s non-life subsidiaries.~~

The Tax Cut and Jobs Act (“TCJA”) was enacted on December 22, 2017, and it amended many provisions of the Internal Revenue Code that effect on the Company. The SEC’s Staff Accounting Bulletin No. 118 (“SAB 118”) provides guidance on accounting for the effects of U.S. tax reform in circumstances in which an exact calculation cannot be made, but for which a reasonable estimate can be determined. As internal systems are updated and additional guidance becomes available, the estimate will be updated 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 Companies Actuarial department, was calculated at December 31, 2017 and refined as 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 2017 income tax provisions.

~~The Company maintains a valuation allowance against the~~gross deferred tax assets of ~~its~~$316. The valuation allowance is an offset to the non-life ~~insurance company subsidiaries,~~companies deferred tax assets and FSRC ~~and the unrealized capital losses on F&G Re.~~deferred tax assets. The non-life insurance company subsidiaries have a history of losses and insufficient sources of future income that would allow for recognition of any of their deferred tax assets. FSRC is in a cumulative loss position and does not have a sufficient track record of earnings to recognize any portion of its deferred tax ~~assets. F&G Re does not have a source of capital gain income needed to recognize its unrealized loss deferred tax assets.~~

~~All other deferred tax~~ assets ~~are more likely than not to be realized based on expectations as to our future taxable income and considering all other available evidence, both positive and negative.~~

The valuation allowance is reviewed quarterly and will be maintained until there is sufficient positive evidence to support a release. At each reporting date, management considers new evidence, both positive and negative, that could impact the future realization of deferred tax assets. Management will consider a release of the valuation allowance once there is sufficient positive evidence that it is more likely than not that the deferred tax assets will be realized. Any release of the valuation allowance will be recorded as a tax benefit increasing net income or other comprehensive income.

~~As of March 31, 2018, the Company had a partial valuation allowance of $34 against its gross~~All other deferred tax assets ~~of $292. The valuation allowance is an offset to the non-life company deferred tax assets, FSRC deferred tax assets, and F&G Re deferred tax assets on unrealized capital losses that~~ are ~~considered~~ more likely than not to be ~~unrecoverable due~~realized based on expectations as to ~~insufficient sources of~~our future ~~income.~~taxable income and considering all other available evidence, both positive and negative.

(12) Commitments and Contingencies

Commitments


	March 31, 2018		March 31, 2019
Asset Type
Other invested assets	$	160	$	1,093
Equity securities	33		21
Fixed maturity securities, available-for-sale	110		39
Other assets	12		5
Total	$	315	$	1,158

As of March 31, 2019, the Company had unfunded commitments in affiliated investments which are included in the table above. See "Note 14. Related Party Transactions" for further information.

Lease Commitments

The Company leases office space under non-cancelable operating leases that expire in May 2021. Rent expense and minimum rental commitments under non-cancelable leases are immaterial.

Contingencies

Regulatory and Litigation Matters

The Company is involved in various pending or threatened legal proceedings, including purported class actions, arising in the ordinary course of business. In some instances, these proceedings include claims for unspecified or substantial punitive damages and similar types of relief in addition to amounts for alleged contractual liability or requests for equitable relief. In the opinion of the Company's management and in light of existing insurance and other potential indemnification, reinsurance and established accruals, such litigation is not expected to have a material adverse effect on the Company's financial position, although it is possible that the results of operations and cash flows could be materially affected by an unfavorable outcome in any one period.

The Company is assessed amounts by state guaranty funds to cover losses to policyholders of insolvent or rehabilitated insurance companies. Those mandatory assessments may be partially recovered through a reduction in future premium taxes in certain states. At March 31, ~~2018, FGL~~2019, the Company has accrued $2 for guaranty fund assessments that is expected to be offset by estimated future premium tax deductions of $2.

The Company has received inquiries from a number of state regulatory authorities regarding ~~its~~our use of the U.S. Social Security Administration’s Death Master File ~~(the "Death~~(“Death Master ~~File"~~File”) and compliance with state claims practices ~~regulation. Legislation requiring~~regulations and unclaimed property or escheatment laws. We have established procedures to periodically compare our in-force life insurance ~~companies to use~~and annuity policies against the Death Master File or similar databases; investigate any identified potential matches to ~~identify potential claims has been enacted in a number of states. As a result of these legislative and regulatory developments,~~confirm the Company uses the Death Master File and other publicly available databases to identify persons potentially entitled to benefits under life insurance policies, annuities and retained asset accounts. In addition, the Company has received audit and examination notices from several state agencies responsible for escheatment and unclaimed property regulation in those states and in some cases has challenged the audits including litigation against the Controller for the State of California which is subject to a stay and separate litigation against the Treasurer for the State of Illinois. The Company believes its current accrual will cover the reasonably estimated liability arising out of these developments, however costs that cannot be reasonably estimated asdeath of the ~~date~~insured; and determine whether benefits are due and attempt to locate the beneficiaries of ~~this filing are possible~~any benefits due or, if no beneficiary can be located, escheat the benefit to the state as ~~a result of ongoing regulatory developments and other future requirements related~~unclaimed property. We believe we have established sufficient reserves with respect to these ~~matters.~~matters; however, it is possible that third parties could dispute these amounts and additional payments or additional unreported claims or liabilities could be identified which could be significant and could have a material adverse effect on our results of operations.

On June 30, 2017, a putative class action complaint was filed against ~~the Company~~FGL Insurance, FGL, and FS Holdco II Ltd in the United States District Court for the District of Maryland, captioned Brokerage Insurance Partners v. Fidelity & Guaranty Life Insurance Company, Fidelity & Guaranty Life, FS Holdco II Ltd, and John Doe, No. 17-cv-1815. The complaint alleges that ~~the Company~~FGL Insurance breached the terms of its agency agreement with Brokerage Insurance Partners (“BIP”) and other agents by changing certain compensation terms. The complaint asserts, among other causes of action, breach of contract, defamation, tortious interference with contract, negligent misrepresentation, and violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”). The complaint seeks to certify a class composed of all persons who entered into an agreement with ~~the Company~~FGL Insurance to sell life insurance and who sold at least one life insurance policy between January 1, 2015 and January 1, 2017. The complaint seeks unspecified compensatory, consequential, and punitive damages in an amount not presently determinable, among other forms of relief.

On September 1, 2017, ~~the Company~~FGL Insurance filed a counterclaim against BIP and John and Jane Does 1-10, asserting, among other causes of action, breach of contract, fraud, civil conspiracy and violations of RICO. On September 22, 2017, Plaintiff filed an Amended Complaint, and on October 16, 2017, ~~the Company~~FGL Insurance filed an Amended Counterclaim against BIP, Agent Does 1-10, and Other Person Does 1-10. The parties also filed cross-Motions to Dismiss in ~~Part, which are~~Part.

On August 17, 2018, the Court in the BIP Litigation denied all pending ~~before~~Motions to Dismiss filed by all parties without prejudice, pending a decision as to whether the ~~Court.~~BIP Litigation will be consolidated into related litigation, captioned Fidelity & Guaranty Life Insurance Company v. Network Partners, et al., Case No. 17-cv-1508. On August 31, 2018, FGL Insurance filed its Answer to BIP’s Amended Complaint. Also on that date, FGL Insurance filed its Answer to Amended Complaint, Affirmative Defenses, and Counterclaim, Filed Pursuant to Fed. R. Civ. P. 12(a)(4)(A). As of March 31, 2019, BIP has not filed any paper or pleading in response to the Court’s August 17, 2018 Order or to FGL Insurance’s filing. BIP's response date has been adjourned to May 15, 2019.

As of the date of this report, the Company does not have sufficient information to determine whether it has exposure to any losses that would be either probable or reasonably estimable.

~~On July 5, 2013, Plaintiff Eddie L. Cressy filed a putative class Complaint captioned~~ ~~Cressy v. Fidelity Guaranty~~ ~~[sic]~~ ~~Life Insurance Company, et. al.~~ ~~in the~~Superior Court of California, County of Los Angeles (the "Court"), Case No. BC-514340. The Complaint was filed after the Plaintiff was unable to maintain an action in federal court. The Complaint asserted, ~~inter alia,~~ ~~that the Plaintiff and members of the putative class relied on Defendants’ advice in purchasing allegedly unsuitable equity-indexed insurance policies.~~

~~On January 2, 2015, the Court entered Final Judgment in~~ ~~Cressy~~, certifying the class for settlement purposes, and approving the class settlement reached on April 4, 2014. On August 10, 2015, the Company tendered $1 to the Settlement Administrator for a claim review fund. The Company implemented an interest enhancement feature for certain policies as part of the class settlement, which enhancement began on October 12, 2015. On October 24, 2016, the parties filed a Joint Motion to amend the January 2, 2015 Final Order and Judgment, to extend the deadline for settlement completion from October 24, 2016 to December 5, 2016. On December 5, 2016, Plaintiff Cressy filed a Notice of Filing Declaration of Settlement Administrator and Status of Completion of Settlement; the Declaration of Settlement Administrator included a certification by the Settlement Administrator that the Company had complied in all respects with the class settlement and that all eligible claims had been paid and the interest enhancement had been implemented pursuant to the terms of the class settlement. On March 24, 2017, the Court entered a Minute Order indicating that it was satisfied that the parties had fully and finally performed all of the terms of the settlement and recorded the matter as complete without the need for any further hearings.

During the Predecessor period from April 1, 2015 to June 30, 2015, the Company, HRG and OM Group (UK) Limited reached a global settlement that resolved all prior outstanding claims arising under the First Amended and Restated Stock Purchase Agreement, dated February 17, 2011 (the "F&G Stock Purchase Agreement") between FGL (previously, HFG) and OM Group (UK) Limited ("OMGUK"). As a part of the settlement, the Company received $4 to settle its outstanding claim that OMGUK was obligated to indemnify the Company for the costs to defend and the settlement of the actions brought by Plaintiff Cressy.

(13) Reinsurance

The Company reinsures portions of its policy risks with other insurance companies. The use of indemnity reinsurance does not discharge an insurer from liability on the insurance ceded. The insurer is required to pay in full the amount of its insurance liability regardless of whether it is entitled to or able to receive payment from the reinsurer. The portion of risks exceeding the Company's retention limit is reinsured. The Company primarily seeks reinsurance coverage in order to limit its exposure to mortality losses and enhance capital management. The Company follows reinsurance accounting when there is adequate risk transfer. Otherwise, the deposit method of accounting is followed. The Company also assumes policy risks from other insurance companies.

The effect of reinsurance on net premiums earned and net benefits incurred (benefits incurred and reserve changes) for the three months ended March 31, ~~2018,~~2019 and ~~the Predecessor three months ended March 31, 2017~~2018 were as follows:


	Three months ended
	March 31, 2018				March 31, 2017				Three months ended
					Predecessor				March 31, 2019				March 31, 2018
	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	60		62		59		343		57		372		60		41
Assumed	—		(21	)	—		—		—		20		—		(21	)
Ceded	(42	)	(59	)	(56	)	(75	)	(41	)	(53	)	(42	)	(59	)
Net	18		(18	)	3		268		16		339		18		(39	)

Amounts payable or recoverable for reinsurance on paid and unpaid claims are not subject to periodic or maximum limits. The Company did not write off any significant reinsurance balances during the three months ended March 31, ~~2018 or the Predecessor three months ended March 31, 2017.~~2019 and 2018. The Company did not commute any ceded reinsurance treaties during the three months ended March 31, ~~2018~~2019 or 2018.

No policies issued by the ~~Predecessor three months ended March 31, 2017.~~Company have been reinsured with any foreign company, which is controlled, either directly or indirectly, by a party not primarily engaged in the business of insurance.

The Company has not entered into any reinsurance agreements in which the reinsurer may unilaterally cancel any reinsurance for reasons other than non-payment of premiums or other similar credit issues.

Effective January 1, 2017, FGL Insurance entered into an indemnity reinsurance agreement with Hannover Re, a third party reinsurer, to reinsure an inforce block of its FIA and fixed deferred annuity contracts with GMWB and Guaranteed Minimum Death Benefit (“GMDB”) guarantees. In accordance with the terms of this agreement, FGL Insurance cedes a quota share percentage of the net retention of guarantee payments in excess of account value for GMWB and GMDB guarantees. The effects of this agreement are not accounted for as reinsurance as it does not satisfy the risk transfer requirements for GAAP, since it is not “reasonably possible” that the reinsurer may realize significant loss from assuming the insurance risk. ~~In accordance with the terms of this agreement, FGL Insurance cedes 70% net retention of guarantee payments in excess of account value for GMWB and GMDB guarantees.~~ Effective July 1, 2017, FGL Insurance extended this agreement to include new business issued during 2017. Effective January 1, 2018 FGL Insurance extended this agreement to include new

business issued during 2018, and extended the recapture period from 8 to 12 years. Effective January 1, 2019, FGL Insurance extended this agreement to include new business issued during 2019. FGL Insurance incurred risk charge fees of ~~$2 and $1~~$4 during the three months ended March 31, ~~2018, and the period from December 1, 2017 to December 31, 2017, respectively,~~2019, in relation to this reinsurance agreement.

~~No policies issued by the Company have been reinsured with any foreign company, which is controlled, either directly or indirectly, by a party not primarily engaged in the business of insurance.~~

~~The Company has not~~Effective December 31, 2018, FGL Insurance entered into ~~any~~a reinsurance ~~agreements in which~~agreement with Kubera to cede approximately $758 of certain MYGA and deferred annuity GAAP reserve on a coinsurance funds withheld basis, net of applicable existing reinsurance. In accordance with the terms of this agreement, FGL Insurance cedes a 40%, 45%, and 63% quota share percentage of these annuity plans for issue years 2013, 2001 through 2012, and 2000 and prior, respectively.

Effective December 31, 2018, FGL Insurance entered into a reinsurance agreement with Kubera to cede approximately $4 billion of certain FIA statutory reserve on a coinsurance funds withheld basis, net of applicable existing reinsurance. In accordance with the terms of this agreement, FGL Insurance cedes an 80% and 90% quota share percentage of these annuity plans for issue years 2013 through 2014, and 2007 and prior, respectively. The effects of this agreement are not accounted for as reinsurance as it does not satisfy the risk transfer requirements for GAAP, since it is not “reasonably possible” that the reinsurer may ~~unilaterally cancel any reinsurance for reasons other than non-payment of premiums or other similar credit issues.~~realize significant loss from assuming the insurance risk.

~~FSRC~~

F&G Reinsurance Companies

FSRC, an affiliate of FGL Insurance, has entered into various reinsurance agreements on a funds withheld basis, meaning that funds are withheld by the ceding company from the coinsurance premium owed to FSRC as collateral for FSRC's payment obligations. Accordingly, the collateral assets remain under the ultimate ownership of the ceding company. FSRC manages the assets supporting the reserves assumed in accordance with the internal investment policy of the ceding companies and applicable law. At March 31, 2019, FSRC had $286 of funds withheld receivables and $270 of insurance reserves related to these reinsurance treaties.

~~FSRC~~F&G Re, an affiliate of FGL Insurance, has ~~five~~entered into two reinsurance ~~treaties~~agreements on a funds withheld basis with unaffiliated parties. At March 31, ~~2018, FSRC~~2019, F&G Re had ~~$748~~$551 of funds withheld receivables and ~~$712~~$527 of insurance reserves related to these reinsurance treaties.

See a description of FSRC’s and F&G Re's accounting policy for its assumed reinsurance contracts in "Note 2. Significant Accounting Policies and Practices" within the Company's ~~2017~~2018 Form 10-K.

The Company adopted ASU 2016-01 effective January 1, 2018, which requires FSRC to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The adoption of this new accounting guidance had a $(2) million impact on pre-tax net income, or $0.01 per common share, for the three months ended March 31, 2018.

(14) Related Party Transactions

Affiliated Investments

The Company, and certain subsidiaries of the Company, entered into investment management agreements with Blackstone ISG-I Advisors LLC ("BISGA"), a wholly-owned subsidiary of The Blackstone Group LP ("Blackstone")~~, and certain subsidiaries of the Company~~ on December 1, 2017. ~~The Company paid $23 to BISGA upon the close of the merger for services rendered related~~Pursuant to the ~~transaction and BISGA will forego approximately 30%~~terms of ~~the first thirteen months’ management fee to which it is entitled under~~ the investment management ~~agreement.~~agreements, BISGA may delegate certain of its investment management services to sub-managers and any fees or other remuneration payable to such sub-managers is payable by the Company out of the assets managed by such sub-managers. BISGA has delegated certain investment management services to its affiliates, Blackstone Real Estate Special Situations Advisors L.L.C. (“BRESSA”) and GSO Capital Advisors II LLC (“GSO Capital Advisors II”), pursuant to sub-management agreements executed between BISGA and each of BRESSA and GSO Capital Advisors. As of March 31, 2019 and December 31, 2018, the Company has a net liability of $2$25 and $20, respectively, for the services consumed under ~~this~~the investment management ~~agreement,~~agreements and related sub-management agreements, partially offset by fees received and expense reimbursements from BISGA.

During the three months ended March 31, 2019, the Company received expense reimbursements from BISGA for the services consumed under these agreements. Fees received for these types of services are $2 for the three months ended March 31, 2019.

The Company holds 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.~~Ltd (the “Blackstone Fixed Income Securities”) both on a direct and indirect basis. Indirect investments include an investment made in an affiliates’ asset backed fund while direct investments ~~entail~~are an investment in ~~an affiliates~~affiliates' equity or debt securities. As of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company held ~~$186~~$1,549 and ~~$188~~$1,461 in affiliated investments, respectively, which includes foreign exchange unrealized loss of $(4) and $(2), respectively. ~~For~~As of March 31, 2019 and December 31, 2018, the Company had unfunded commitments relating to affiliated investments of $971 and $990, respectively.

The Company purchased $12 and $185 of residential loans from Finance of America Holdings LLC, a Blackstone affiliate, during the three months ended March 31, 2019 and on December 17, 2018, respectively.

On December 1, 2017, the Company ~~did not invest~~executed an agreement with Blackstone Tactical Opportunities Advisors LLC ("BTO Advisors") and Fidelity National Financial, Inc. ("FNF"), to provide the Company transactional and operational services and advice through December 31, 2018. The agreement was amended on November 2, 2018 to provide services through June 30, 2019. The Company will pay fees to BTO Advisors (or its designee(s)), and to FNF in consideration for such services in cash, ordinary shares or ~~sell any~~warrants exercisable for ordinary shares of ~~its affiliated investments.~~ the Company. As of March 31, 2019, no such services have been provided.

The Company paid-in-kind dividends on preferred shares held by GSO Capital Partners, an indirect wholly owned subsidiary of The Blackstone Group LP, of 6 thousand shares for the three months ended March 31, 2019.

The Company had no gross realized gains or realized impairment losses on related party investments during the three months ended March 31, 2019 and 2018.

~~The Company had $2 gross realized losses, net of impairment losses on related party investments during the Predecessor three months ended March 31, 2017.~~

~~FSRC (Predecessor)~~

FGL Insurance reinsures certain liabilities and obligations to FSRC. For the three months ended March 31, 2017 (Predecessor), FGL Insurance ceded $1 and $14 of premium revenue and benefits and other changes is policy reserves, respectively, to FSRC. There are no ceded operating results to FSRC for the three months ended March 31, 2018 as such amounts are eliminated on consolidation.

(15) Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (share amounts in thousands):


	Three months ended				Three months ended
	March 31, 2018		March 31, 2017		March 31, 2019		March 31, 2018
			Predecessor
Net Income	$	52	$	22
Net income (loss)					$	171	$	65
Less Preferred stock dividend	7		—		8		7
Net income available to common shares	45		22
Net income (loss) available to common shares					163		58

Weighted-average common shares outstanding - basic	214,370		58,326		219,646		214,370
Dilutive effect of unvested restricted stock & PRSU	—		20
Dilutive effect of stock options	—		36
Dilutive effect of unvested restricted stock					36		—
Weighted-average shares outstanding - diluted	214,370		58,382		219,682		214,370

Net income per common share:
Net income (loss) per common share:
Basic	$	0.21	$	0.38	$	0.74	$	0.27
Diluted	$	0.21	$	0.38	$	0.74	$	0.27

The number of shares of common stock outstanding used in calculating the weighted average thereof reflects the actual number of ~~the Successor and Predecessor~~FGL Holdings shares of common stock outstanding, excluding unvested restricted stock and shares held in treasury.

The calculation of diluted earnings per share for the three months ended March 31, ~~2018~~2019 excludes the incremental effect of 716 million weighted average common stock warrants outstanding due to their anti-dilutive effect. This calculation also excludes the potential dilutive effect of the 406 thousand preferred stock shares outstanding as of March 31, 2019 as the contingency that would allow for the preferred shares to be converted to common shares has not yet been met. The calculation of diluted earnings per share for the three months ended March 31, 2019 excludes the incremental effect related to certain outstanding stock options due to their anti-dilutive effect. The number of weighted average equivalent shares excluded is 1,737 thousand shares for the three months ended March 31, 2019.

The calculation of diluted earnings per share for the three months ended March 31, 2018 excludes the potential dilutive effective of the 377 thousand preferred stock shares outstanding as of March 31, 2018 as the contingency that would allow for the preferred shares to be converted to common shares has not yet been met.

The calculation of diluted earnings per share for the Predecessor three months ended March 31, 2017 excludes the incremental effect related to certain outstanding stock options and restricted shares due to their anti-dilutive effect. The number of weighted average equivalent shares excluded in the Predecessor three months ended March 31, 2017 are 4 thousand shares.

The settlement terms of the PRSUs 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 were excluded from EPS calculations.

(16) Insurance Subsidiary Financial Information and Regulatory Matters

The Company’s U.S. insurance subsidiaries file financial statements with state insurance regulatory authorities and the National Association of Insurance Commissioners (“NAIC”) that are prepared in accordance with Statutory Accounting Principles (“SAP”) prescribed or permitted by such authorities, which may vary materially from GAAP. Prescribed SAP includes the Accounting Practices and Procedures Manual of the NAIC as well as state laws, regulations and administrative rules. Permitted SAP encompasses all accounting practices not so prescribed. The principal differences between SAP financial statements and financial statements prepared in accordance with GAAP are that SAP financial statements do not reflect DAC, DSI and VOBA, some bond portfolios may be carried at amortized cost, assets and liabilities are presented net of reinsurance, contractholder liabilities are generally valued using more conservative assumptions and certain assets are non-admitted. Accordingly, SAP operating results and SAP capital and surplus may differ substantially from amounts reported in the GAAP basis financial statements for comparable items.

~~The FSR Companies (Cayman and Bermuda)~~FSRC (Cayman), F&G Re (Bermuda), and F&G Life Re (Bermuda) file financial statements with their respective regulators that are based on U.S. GAAP.

FGL Insurance applies Iowa-prescribed accounting practices that permit Iowa-domiciled insurers to report equity call options used to economically hedge FIA index credits at amortized cost for statutory accounting purposes and to calculate FIA statutory reserves such that index credit returns will be included in the reserve only after crediting to the annuity contract. This resulted in a $48 decrease and $30 increase to statutory capital and surplus at March 31, 2019 and December 31, 2018, respectively.

FGL Insurance’s statutory carrying value of Raven Re reflects the effect of permitted practices Raven Re received to treat the available amount of a letter of credit as an admitted asset which increased Raven Re’s statutory capital and surplus by ~~$110~~$100 and $110 at March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

Raven Re is also permitted to follow Iowa prescribed statutory accounting practice for its reserves on reinsurance assumed from FGL Insurance which increased Raven Re’s statutory capital and surplus by $3$1 and $5$0 at March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. Without such permitted statutory accounting practices Raven Re’s statutory capital and (deficit) surplus would be ~~$(13)~~$(4) and ~~$(18)~~$(16) as of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, 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 March 31, ~~2018~~2019 and December 31, ~~2017~~2018 was ~~$100~~$97 and ~~$97,~~$94, respectively.

On November 1, 2013, FGL Insurance re-domesticated from Maryland to Iowa. After re-domestication, FGL Insurance elected to apply Iowa-prescribed accounting practices that permit Iowa-domiciled insurers to report equity call options used to economically hedge FIA index credits at amortized cost for statutory accounting purposes and to calculate FIA statutory reserves such that index credit returns will be included in the reserve only after crediting to the annuity contract. This resulted in a $(32) and $54 (decrease)/increase to statutory capital and surplus at March 31, 2018 and December 31, 2017, respectively. The prescribed and permitted statutory accounting practices have no impact on the Company’s Consolidated Financial Statements which are prepared in accordance with GAAP.

As of March 31, ~~2017,~~2019, FGL NY Insurance did not follow any prescribed or permitted statutory accounting practices that differ from the NAIC's statutory accounting practices.

~~(17) Subsequent Events~~

~~On April 20, 2018,~~The prescribed and permitted statutory accounting practices have no impact on the Company completed a debt offering of $550 aggregate principal amount of 5.50% senior notes due 2025. The Company expects to use the net proceeds of the offering (i) to repay $135 of borrowings under its revolving credit facility and related expenses, (ii) to redeemCompany’s unaudited condensed consolidated financial statements which are prepared in full and satisfy and discharge all of the outstanding $300 aggregate principal amount of FGLH's outstanding 6.375% Senior Notes due 2021 and (iii) for general corporate purposes, which may include additional capital contributions to the Company's insurance subsidiaries.accordance with GAAP.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Special Note Regarding Forward-Looking Statements

This quarterly report includes forward-looking statements. Some of the forward-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, financial condition, liquidity, prospects and growth strategies and the industries in which we operate and including, without limitation, statements relating to our future performance.

Forward-looking statements are subject to known and unknown risks and uncertainties, many of which are beyond our control. We caution you that forward-looking statements are not guarantees of future performance and that our actual consolidated results of operations, financial condition and liquidity, and industry development may differ materially from those made in or suggested by the forward-looking statements contained in this report. In addition, even if our consolidated results of operations, financial condition and liquidity, and industry development are consistent with the forward-looking statements contained in this report, those results or developments may not be indicative of results or developments in subsequent periods. A number of important factors could cause actual results to differ materially from those contained in or implied by the forward-looking statements, including the risks and uncertainties discussed in “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 (“~~2017~~2018 Form 10-K”), which can be found at the U.S. Securities & Exchange Commission's ("SEC's") website, www.sec.gov. Factors that could cause actual results to differ from those reflected in forward-looking statements relating to our operations and business include:

general economic conditions and other factors, including prevailing interest and unemployment rate levels and stock and credit market performance;

concentration in certain states for distribution of our products;

the impact of interest rate fluctuations;

equity market volatility;

credit market volatility or disruption;

the impact of credit risk of our counterparties;

volatility or decline in the market price of our ordinary shares could impair our ability to raise necessary capital;

changes in our assumptions and estimates regarding the amortization of our deferred acquisition costs, deferred sales inducements and value of business acquired balances;

changes in our methodologies, estimates and assumptions regarding our valuation of investments and the determinations of the amounts of allowances and impairments;

changes in our valuation allowance against our deferred tax assets, and restrictions on our ability to fully utilize such assets;

the accuracy of management’s reserving assumptions;

regulatory changes or actions, including those relating to regulation of financial services affecting (among other things) underwriting of insurance products and regulation of the sale, underwriting and pricing of products and minimum capitalization and statutory reserve requirements for insurance companies, or the ability of our insurance subsidiaries to make cash distributions to us (including dividends or payments on surplus notes those subsidiaries issue to us);

the ability to maintain or obtain approval of Iowa Insurance Division ("IID") and other regulatory authorities as required for our operations and those of our insurance subsidiaries

the impact of the ~~Department of Labor fiduciary~~"fiduciary" rule ~~finalized in April 2016 but possibly subject to being vacated, and other fiduciary rule~~ proposals ~~by the SEC and NAIC~~ on the Company, its products, distribution and business model;

changes in the federal income tax laws and regulations which may affect the relative income tax advantages of our products;

changes in tax laws which affect us and/or our shareholders;

potential adverse tax consequences if we are treated as a passive foreign investment company;

the impact on our business of new accounting rules or changes to existing accounting rules;

our potential need and our insurance subsidiaries’ potential need for additional capital to maintain our and their financial strength and credit ratings and meet other requirements and obligations;

our ability to successfully acquire new companies or businesses and integrate such acquisitions into our existing framework;

the impact of potential litigation, including class action litigation;

our ability to protect our intellectual property;

our ability to maintain effective internal controls over financial reporting;

the impact of restrictions in the Company's debt instruments on its ability to operate its business, finance its capital needs or pursue or expand its business strategies;

our ability and our insurance subsidiaries’ ability to maintain or improve financial strength ratings;

the continued availability of capital required for our insurance subsidiaries to grow;

the performance of third parties including third party administrators, independent distributors, underwriters, actuarial consultants and other outsourcing relationships;

the loss of key personnel;

interruption or other operational failures in telecommunication, information technology and other operational systems, or a failure to maintain the security, integrity, confidentiality or privacy of sensitive data residing on such systems;

our exposure to unidentified or unanticipated risk not adequately addressed by our risk management policies and procedures;

the impact on our business of natural and man-made catastrophes, pandemics, and malicious and terrorist acts;

our ability to compete in a highly competitive industry;

our ability to attract and retain national marketing organizations and independent agents;

our subsidiaries’ ability to pay dividends to us; and

the other factors discussed in “Risk Factors” of our ~~2017~~2018 Form 10-K.

You should read this report completely and with the understanding that actual future results may 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.

Introduction

Management's discussion and analysis reviews our unaudited condensed consolidated financial position at March 31, ~~2018~~2019 (unaudited) and December 31, ~~2017,~~2018, and the unaudited consolidated results of operations for the three months ended March 31, ~~2018~~2019 and ~~2017~~2018 and where appropriate, factors that may affect future financial performance. This analysis should be read in conjunction with our unaudited ~~Condensed Consolidated Financial Statements~~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~~2018 included within the Company’s ~~2017~~2018 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 in light of our unaudited condensed consolidated financial statements, related notes, and other financial information appearing elsewhere in this report, and our filings with the SEC, including our ~~2017~~2018 Form 10-K, which can be found at the SEC website, www.sec.gov. ~~In this Quarterly Report on Form 10-Q we refer to the three months ended March 31, 2018 and 2017 as the "Fiscal 2018 Quarter" and the "Fiscal 2017 Quarter", respectively.~~

Basis of Presentation

~~As a result of the completion of the Business Combination on November 30, 2017, our Condensed Consolidated Financial Statements~~Our unaudited condensed consolidated financial statements included elsewhere in the Quarterly Report are presented: (i) as of March 31, ~~2018~~2019 and December 31, ~~2017 ;~~2018; and (ii) for the three months ended March 31, ~~2018~~2019 and ~~the Predecessor three months ended March 31, 2017.~~2018. In this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we discuss the three months ended March 31, ~~2018~~2019 results compared to the ~~Predecessor~~ three months ended March 31, ~~2017~~2018 results. We believe this discussion provides helpful information with respect to performance of our business during those respective periods.

Overview

We provide our principal life and annuity products through our insurance subsidiaries - Fidelity & Guaranty Life Insurance Company ("FGL Insurance") and Fidelity & Guaranty Life Insurance Company of New York ("FGL NY Insurance"). Our customers range across a variety of age groups and are concentrated in the middle-income market. Our fixed indexed annuities (“FIAs”) provide for pre-retirement wealth accumulation and post-retirement income management. Our universal life ~~insurance provides~~products ("IUL") provide wealth protection and transfer ~~opportunities through indexed universal life products.~~opportunities. Life and annuity products are primarily distributed through Independent Marketing Organizations ("IMOs") and independent insurance agents.

In setting the features and pricing of new FIA products relative to our targeted net margin, we take into account our expectations regarding (1) net investment spread, which is the difference between the net investment income we earn and the sum of the interest credited to policyholders and the cost of hedging our risk on the policies; (2) fees, including surrender charges and rider fees, partly offset by vesting bonuses that we pay our policyholders; and (3) a number of related expenses, including benefits and changes in reserves, acquisition costs, and general and administrative expenses.

Trends and Uncertainties

The following 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.

Market Conditions

Market volatility has affected and may continue to affect our business and financial performance in varying ways. Volatility can pressure sales and reduce demand as consumers hesitate to make financial decisions. To enhance the attractiveness and profitability of our products and services, we continually monitor the behavior of our customers, as evidenced by annuitization rates and lapse rates, which vary in response to changes in market conditions.

Interest Rate Environment

Some of our products include guaranteed minimum crediting rates, most notably our fixed rate annuities. As of March 31, ~~2018,~~2019, the Company's reserves, net of reinsurance, and average crediting rate on our fixed rate annuities were $4 billion and 3%, respectively. We are required to pay the guaranteed minimum crediting rates even if earnings on our investment portfolio decline, which would negatively impact earnings. In addition, we expect more policyholders to hold policies with comparatively high guaranteed rates for a longer period in a low interest rate environment. Conversely, a rise in average yield on our investment portfolio would increase earnings if the average interest rate we pay on our products does not rise correspondingly. Similarly, we expect that policyholders would be less likely to hold policies with existing guarantees as interest rates rise and the relative value of other new business offerings are increased, which would negatively impact our earnings and cash flows.

See “Item 3. Quantitative and Qualitative Disclosures about Market Risk” for a more detailed discussion of interest rate risk.

Aging of the U.S. Population

We believe that the aging of the U.S. population will increase the demand for our products. As the “baby boomer” generation prepares for retirement, we believe that demand for retirement savings, growth, and income products will grow. The impact of this growth may be offset to some extent by asset outflows as an increasing percentage of the population begins withdrawing assets to convert their savings into income.

Industry Factors and Trends Affecting Our Results of Operations

Demographics and macroeconomic factors are increasing the demand for our FIA and ~~indexed universal life ("IUL")~~IUL products, for which demand is large and ~~growing: over~~growing. Over 10,000 people will turn 65 each day in the United States over the next 15 ~~years. According~~years, and according to the U.S. Census Bureau, the proportion of the U.S. population over the age of 65 is expected to grow from 15% in 2015 to 20% in 2030.

We operate in the sector of the insurance industry that focuses on the needs of middle-income Americans. The underserved middle-income market represents a major growth opportunity for the Company. As a tool for addressing the unmet need for retirement planning, we believe that many middle-income Americans have grown to appreciate the “sleep at night protection” that annuities such as our FIA products afford. Accordingly, the FIA market grew from nearly $12 billion of sales in 2002 to $5468 billion of sales in ~~2017.~~2018. Additionally, this market demand has positively impacted the IUL market as it has expanded from $100 million of annual premiums in 2002 to $2 billion of annual premiums in ~~2017.~~2018.

Competition

Please refer to ~~"Part I-Item~~section titled "Competition" in Part I Item 1. ~~Business-Competition"~~Business in our ~~2017~~2018 Form 10-K for discussion on our competition.

Annuity and Life Sales

We regularly monitor and report the production volume metric titled “Sales”. Sales are not derived from any specific GAAP income statement accounts or line items and should not be viewed as a substitute for any financial measure determined in accordance with GAAP. Annuity and IUL sales are recorded as deposit liabilities (i.e. contractholder funds) within the Company's unaudited condensed consolidated financial statements in accordance with GAAP. Management believes that presentation of sales, as measured for management purposes, enhances the understanding of our business and helps depict longer term trends that may not be apparent in the results of operations due to the timing of sales and revenue recognition. Sales of annuities and IULs ~~by fiscal quarters~~ for the ~~quarters~~quarter ended March 31 were as follows:


	Annuity Sales				IUL Sales				Annuity Sales				IUL Sales
(dollars in millions)	2018		2017		2018		2017		2019		2018		2019		2018
First Quarter	$	778	$	732	$	6	$	14	$	1,053	$	778	$	8	$	6

Key Components of Our Historical Results of Operations

Under U.S. GAAP, premium collections for fixed indexed annuities, fixed rate annuities, and immediate annuities without life contingency are reported in the financial statements as deposit liabilities (i.e., contractholder funds) instead of as sales or revenues. Similarly, cash payments to customers are reported as decreases in the liability for contractholder funds and not as expenses. Sources of revenues for products accounted for as deposit liabilities are net investment income, surrender and other charges deducted from contractholder 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.

Through our insurance subsidiaries, we issue a broad portfolio of deferred annuities (fixed indexed and fixed rate annuities) and immediate annuities. A deferred annuity is a type of contract that accumulates value on a tax deferred basis and typically begins making specified periodic or lump sum payments a certain number of years after the contract has been issued. An immediate annuity is a type of contract that begins making specified payments within one annuity period (e.g., one month or one year) and typically makes payments of principal and interest earnings over a period of time.

The Company hedges certain portions of its exposure to product related equity market risk by entering into derivative transactions. We purchase derivatives consisting predominantly of call options and, to a lesser degree, futures contracts on the equity indices underlying the applicable policy. These derivatives are used to ~~fund~~offset the statutory reserve impact of the index credits due to policyholders under the FIA contracts. The majority of all such call options are one-year options purchased to match the funding requirements underlying the FIA contracts. We attempt to manage the cost of these purchases through the terms of our FIA contracts, which permit us to change

caps, spread, or participation rates, subject to certain guaranteed minimums that must be maintained. ~~The change in the fair value of the call options and futures contracts is generally designed to offset the equity market related change in the fair value of the FIA contract’s reserve liability.~~ The call options and futures contracts are marked to fair value with the change in fair value included as a component of net investment gains (losses). The change in fair value of the call options and futures contracts includes the gains and losses recognized at the expiration of the instruments’ terms or upon early termination and the changes in fair value of open positions.

Earnings from products accounted for as deposit liabilities are primarily generated from the excess of net investment income earned over the sum of interest credited to policyholders and the cost of hedging our risk on FIA policies, known as the net investment spread. With respect to FIAs, the cost of hedging our risk includes the expenses incurred to fund the index ~~credits, and where applicable, minimum guaranteed interest credited.~~credits. Proceeds received upon expiration or early termination of call options purchased to fund annual index credits are recorded

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

Our profitability depends in large part upon the amount of assets under management (“AUM”), the net investment spreads earned on our ~~average assets under management ("AAUM"),~~AUM, our ability to manage our operating expenses and the costs of acquiring new business (principally commissions to agents and bonuses credited to policyholders). As we grow AUM, earnings generally increase. AUM increases when cash inflows, which include sales, exceed cash outflows. Managing net investment spreads involves the ability to ~~manage~~maximize returns on our ~~investment portfolios to maximize returns~~AUM and minimize risks ~~on our AUM~~ such as interest rate changes and defaults or impairment of ~~investments, and~~investments. It also includes our ability to manage interest rates credited to policyholders and costs of the options and futures purchased to fund the annual index credits on the FIAs or IULs. We analyze returns on ~~AAUM~~average assets under management ("AAUM") pre- and post-DAC, DSI and VOBA as well as pre- and post-tax to measure our profitability in terms of growth and improved earnings.

~~Adjusted Operating Income ("AOI")~~Non-GAAP Financial Measures

Management believes that certain non-GAAP financial measures may be useful in certain instances to provide additional meaningful comparisons between current results and results in prior operating periods. Our non-GAAP measures may not be comparable to similarly titled measures of other organizations because other organizations may not calculate such non-GAAP measures in the same manner as we do. Reconciliations of such measures to the most comparable GAAP measures are included herein.

~~AOI~~Adjusted Operating Income ("AOI") is a non-GAAP economic measure we use to evaluate financial performance each period. AOI is calculated by adjusting net income (loss) to ~~eliminate~~ eliminate:

(i) the impact of net investment gains/losses, including other than temporary impairment ("OTTI") losses recognized in operations, but excluding gains and losses on derivatives hedging our indexed annuity policies,

(ii) the ~~effect of~~impacts related to changes in the fair values of FIA related derivatives and embedded derivatives, net of hedging cost, and the fair value accounting impacts of assumed reinsurance by our international subsidiaries,

(iii) the tax effect of affiliated reinsurance embedded derivative,

(iv) the effect of change in fair value of the reinsurance related embedded derivative,

(v) the effect of integration, merger related & other non-operating items, ~~(v)~~

(vi) impact of extinguishment of debt, and ~~(vi)~~

(vii) net impact from Tax Cuts and Jobs Act.

Adjustments to AOI are net of the corresponding impact on amortization of intangibles, as appropriate. The income tax impact related to these adjustments is measured using an effective tax rate, ~~of 21%,~~ as ~~appropriate.~~appropriate by tax jurisdiction. While these adjustments are an integral part of the overall performance of the Company, market conditions and/or the ~~non-recurring or~~ non-operating nature of these items can overshadow the underlying performance of the core business. Accordingly, Management considers this to be a useful measure internally and to investors and analysts in analyzing the trends of our operations. ~~Our non-GAAP measures may not be comparable to similarly titled measures of other organizations because other organizations may not calculate such non-GAAP measures in the same manner as we do.~~

~~Together with net income, we believe AOI provides a meaningful financial metric that helps investors understand our underlying results and profitability.~~ Beginning with the quarter ended ~~March~~December 31, 2018, the Company updated its AOI definition to remove the ~~residual impacts~~incremental change due to the impact of the fair value accounting election for international subsidiaries. Management believes this revision will enhance the understanding of our business as the Company executes its growth strategy through international third party assumed business and is more relevant to investors as the impact of fair value accounting ~~on its FIA products, including gains and losses on derivatives hedging those policies. Management believes~~election can create an increases/decreases in the ~~revised measure enhances~~ assumed liabilities that does not match

the ~~understanding~~increase/decrease of the ~~business post-merger and is more useful and relevant to investors~~corresponding assets. This change will be applied on a prospective basis as ~~compared to~~ the previous definition which eliminated only the effects of changes in the interest rates used to discount the FIA embedded derivative. Periods shown prior to March 31, 2018 have not been adjusted to reflect the new definition.Company executes its growth strategy through international third party assumed reinsurance.

AOI should not be used as a substitute for net income. However, we believe the adjustments made to net income in order to derive AOI provide an understanding of our overall results of operations. For example, we could have strong operating results in a given period, yet report net income that is materially less, if during such period the fair value of our derivative assets hedging the FIA index credit obligations decreased due to general equity market conditions but the embedded derivative liability related to the index credit obligation did not decrease in the same proportion as the derivative assets because of non-equity market factors such as interest rate movements. Similarly, we could also have poor operating results in a given period yet show net income that is materially greater, if during such period the fair value of the derivative assets increases but the embedded derivative liability did not increase in the same proportion as the derivative assets. We hedge our FIA index credits with a combination of static and dynamic strategies, which can result in earnings volatility, the effects of which are generally likely to reverse over time. Our management and board of directors review AOI and net income as part of their examination of our overall financial results. However, these examples illustrate the significant impact derivative and embedded derivative movements can have on our net income. Accordingly, our management and board of directors perform a review and analysis of these items, as part of their review of our hedging results each period.

The adjustments to net income are net of ~~DAC, DSI, and VOBA amortization.~~intangibles amortization, as appropriate. Amounts attributable to the fair value accounting for derivatives hedging the FIA index credits and the related embedded derivative liability

fluctuate from period to period based upon changes in the fair values of call options purchased to fund the annual index credits for FIAs, changes in the interest rates used to discount the embedded derivative liability, and the fair value assumptions reflected in the embedded derivative liability. The accounting standards for fair value measurement require the discount rates used in the calculation of the embedded derivative liability to be based on risk-free interest ~~rates.~~rates as of the reporting date. The impact of the change in fair values of FIA-related derivatives, embedded derivatives and hedging costs has been removed from net income in calculating AOI.

AAUM is a non-GAAP measure we use to assess the rate of return on assets available for reinvestment. AAUM is calculated as the sum of (i) total invested assets at amortized cost, excluding derivatives; (ii) related party loans and investments; (iii) accrued investment income; (iv) funds withheld at fair value; (v) the net payable/receivable for the purchase/sale of investments and (iv) cash and cash equivalents, excluding derivative collateral, at the beginning of the period and the end of each month in the period, divided by the total number of months in the period plus one. Management considers this ~~non-GAAP financial measure~~ to be a useful measure internally and to investors and analysts when assessing the rate of return on assets available for reinvestment.

In addition, we regularly monitor and report the production volume metric titled “Sales”. Sales are not derived from any specific GAAP income statement accounts or line items and should not be viewed as a substitute for any financial measure determined in accordance with GAAP. 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 understanding of our business and helps depict longer term trends that may not be apparent in the results of operations due to the timing of sales and revenue recognition.

Critical Accounting Policies and Estimates

The preparation of the Company’s unaudited ~~Condensed Consolidated Financial Statements~~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 three months ended March 31, ~~2018,~~2019, the Company did not make any material changes in its critical accounting policies as previously disclosed in Management’s Discussion and Analysis in the Company’s ~~2017~~2018 Form 10-K as filed with the SEC.

Recent Accounting Pronouncements

Please refer to "Note 2. Significant Accounting Policies and Practices" to our unaudited condensed consolidated financial statements for disclosure of recent accounting pronouncements.

Results of Operations

(All amounts presented in millions unless otherwise noted)

The following ~~tables set~~table sets forth the consolidated results of operations for the ~~three months ended March 31, 2018 and the Predecessor three months ended March 31, 2017:~~periods presented:



	March 31, 2018			March 31, 2017			Increase/ (Decrease)			Three months ended
				Predecessor						March 31, 2019			March 31, 2018			Increase/ (Decrease)
Revenues:
Premiums	$	18		$	3		$	15		$	16		$	18		$	(2	)
Net investment income	263			247			16			289			263			26
Net investment (losses) gains	(191		)	81			(272		)
Net investment gains (losses)										240			(191		)	431
Insurance and investment product fees and other	41			44			(3		)	55			48			7
Total revenues	131			375			(244		)	600			138			462
Benefits and expenses:
Benefits and other changes in policy reserves	(18		)	268			(286		)	339			(39		)	378
Acquisition and operating expenses, net of deferrals	40			33			7			44			40			4
Amortization of intangibles	16			33			(17		)	29			27			2
Total benefits and expenses	38			334			(296		)	412			28			384
Operating income	93			41			52			188			110			78
Interest expense	(6		)	(6		)	—			(8		)	(6		)	(2		)
Income before income taxes	87			35			52
Income (loss) before income taxes										180			104			76
Income tax expense	(35		)	(13		)	(22		)	(9		)	(39		)	30
Net income	$	52		$	22		$	30
Less preferred stock dividend	7			—			7
Net income available to common shareholders	$	45		$	22		$	23
Net income (loss)										$	171		$	65		$	106
Less Preferred stock dividend										8			7			1
Net income (loss) available to common shareholders										$	163		$	58		$	105

~~Annuity~~The following table summarizes sales by product type for the periods presented:



	Three months ended
	March 31, 2019		March 31, 2018		Increase/ (Decrease)
Fixed index annuities ("FIA")	$	668	$	436	$	232
Fixed rate annuities ("MYGA")	280		142		138
Institutional spread based	105		200		(95		)
Total annuity	$	1,053	$	778	$	275

Index universal life ("IUL")	$	8	$	6	$	2

Flow reinsurance	$	60	$	33	$	27

FIA sales during the three months ended March 31, ~~2018~~2019 and ~~Predecessor quarter ended March 31, 2017 were $778 and $732, respectively, including FIA sales of $436 and $438, respectively. FIA sales during the Predecessor quarter ended March 31, 2017~~2018 reflect continued strong and productive collaboration with our distribution partners, primarily Independent Marketing ~~Organizations. The~~Organizations, as well as the overall growth of the FIA market.

MYGA volume and funding agreements are viewed as opportunistic and therefore these volumes will fluctuate from period to period.

Institutional spread based products in three months ended March 31, 2019 and 2018 ~~reflects a $200~~reflect funding ~~agreement~~agreements with Federal Home Loan Bank, under an investment ~~spread~~ strategy ~~while the Predecessor quarter ended March 31, 2017 reflects a $136 funding agreement with Federal Home Loan Bank. This funding agreement~~that is ~~reflected as an institutional spread based product and we view this volume as~~ subject to fluctuation period to period. ~~Sales of MYGA were $142~~

The increased flow reinsurance sales in the three months ended March 31, 2019 compared to 2018 ~~and $158 in~~reflect the Predecessor quarter ended March 31, 2017. Indexed universal life sales during the three months ended ended March 31, 2018 and the Predecessor quarter ended March 31, 2017 were $6 and $14, respectively. The decline in IUL sales during the three months ended ended March 31, 2018 reflects our focus on qualityon-boarding of a new ~~business and pricing discipline to achieve profitability and capital targets.~~flow reinsurance partner effective January 1, 2019.

Revenues

Premiums

Premiums primarily reflect insurance premiums for traditional life insurance products which are recognized as revenue when due from the policyholder. FGL Insurance has ceded the majority of its traditional life business to unaffiliated third party reinsurers. ~~The traditional life business is primarily related to the return of premium riders on traditional life contracts.~~ While the base contract has been reinsured, we continue to retain the return of premium rider. The traditional life insurance premiums are primarily related to the return of premium riders on traditional life contracts. The following table summarizes the change in premiums for the periods presented:



	Three months ended
	March 31, 2019		March 31, 2018		Increase/ (Decrease)
Traditional life insurance	$	8	$	9	$	(1	)
Life-contingent immediate annuity	8		9		(1		)
Premiums	$	16	$	18	$	(2	)

Premiums ~~were $18 and $3~~ for the ~~quarter~~three months ended March 31, ~~2018 and Predecessor quarter~~2019 reflects a decrease compared to the three months ended March 31, ~~2017, respectively. The primary drivers~~3018 primarily due to lower renewals and return of ~~these results were $9~~premium block maturing.

Immediate annuity premiums ~~earned on traditional life insurance products as well as $9 in life-contingent immediate annuity annuitizations during~~for the ~~quarter~~three months ended March 31,

~~2018, compared to $3 life-contingent immediate annuity annuitzations during the Predecessor quarter ended March 31, 2017.~~ 2019 reflects a decrease as a result of policyholder behavior for annuitizations.

Net investment income

Below is a summary of ~~the major components included in~~ net investment income ("NII") for the ~~quarter ended March 31, 2018 and the Predecessor quarter ended March 31, 2017:~~periods presented:



	March 31, 2018			March 31, 2017			Increase/ (Decrease)			Three months ended
				Predecessor						March 31, 2019			March 31, 2018			Increase/ (Decrease)
Fixed maturity securities, available-for-sale	$	242		$	236		$	6		$	265		$	242		$	23
Equity securities	10			10			—			21			10			11
Commercial mortgage loans, related party loans, invested cash, short term investments, and other investments	21			7			14
Mortgage loans										7			7			—
Invested cash and short-term investments										3			3			—
Funds withheld										8			7			1
Limited partnerships										8			3			5
Other investments										5			1			4
Gross investment income	273			253			20			317			273			44
Investment expense	(10		)	(6		)	(4		)	(28		)	(10		)	(18		)
Net investment income	$	263		$	247		$	16		$	289		$	263		$	26

Our net investment spread and AAUM for the period is summarized as follows (annualized):



	March 31, 2018			March 31, 2017			Increase/ (Decrease)			Three months ended
				Predecessor						March 31, 2019			March 31, 2018			Increase/ (Decrease)
Yield on AAUM (at amortized cost)	4.21		%	4.90		%	(0.69		)%	4.47		%	4.21		%	0.26		%
Less: Interest credited and option cost	(2.33		)%	(2.49		)%	0.16		%	(2.30		)%	(2.33		)%	0.03		%
Net investment spread	1.88		%	2.41		%	(0.53		)%	2.17		%	1.88		%	0.29		%
AAUM	$	24,967		$	20,162		$	4,805		$	25,862		$	24,967		$	895

The increases in AAUM from March 31, 2018 to March 31, 2019 were primarily influenced by $1.9 billion net new business asset flows, partially offset by a decrease as the result of FGL Insurance's reinsurance agreement with Kubera Insurance (SAC) Ltd. acting in respect of Annuity Reinsurance Cell A1 ("Kubera"), effective December 31, 2018.

The 10% increase in NII ~~of $263 and $247 for~~from the ~~quarter~~three months ended March 31, 2018 ~~and~~to the ~~Predecessor quarter~~three months ended March 31, ~~2017, respectively, were affected by AAUM (volume).~~

AAUM of $24,967 and $20,162 for the quarter ended March 31, 2018 and the Predecessor quarter ended March 31, 2017, respectively. The results were primarily influenced by the acquisition of the FSR Companies as well as by the effects of purchase accounting on the investments of FGL and sales.

~~The increase in NII of $16, or 6%, from the Predecessor quarter ended March 31, 2017 to the quarter ended March 31, 2018~~2019 was primarily due ~~an increase in AAUM (volume). The volume increase period over period resulted in net investment income~~to $19 from the portfolio reposition lift, $18 from invested asset growth, ~~of $59. This increase was~~and $15 lower premium amortization, partially offset by ~~$43 driven by a decline in earned yields (rate) as~~$18 of higher planned investment expense and $8 decrease related to the ~~result of purchase accounting impacts.~~

Kubera reinsurance cession.

Net investment gains (losses) ~~gains~~

Below is a summary of the major components included in net investment gains (losses) for the ~~quarter ended March 31, 2018 and the Predecessor quarter ended March 31, 2017:~~periods presented:


										Three months ended
	March 31, 2018			March 31, 2017			Increase/ (Decrease)			March 31, 2019			March 31, 2018			Increase/ (Decrease)
				Predecessor
Net realized gains (losses) on fixed maturity available-for-sale securities, equity securities and other invested assets	$	(46	)	$	(17	)	$	(29	)
Net realized and unrealized gains (losses) on hedging derivatives and reinsurance-related embedded derivatives	(124		)	109			(233		)
Net realized and unrealized gains (losses) on fixed maturity available-for-sale securities, equity securities and other invested assets										$	76		$	(46	)	$	122
Net realized and unrealized gains (losses) on certain derivatives instruments										164			(124		)	288
Change in fair value of reinsurance related embedded derivatives	(21		)	(11		)	(10		)	(3		)	(21		)	18
Change in fair value of other derivatives and embedded derivatives										3			—			3
Net investment gains (losses)	$	(191	)	$	81		$	(272	)	$	240		$	(191	)	$	431

For the ~~quarter~~three months ended March 31, ~~2018,~~2019, net realized ~~losses~~gains on available-for-sale securities, ~~of $46~~equity securities and other invested assets includes ~~$36 trading loss on the block trade completed in February 2018 as part of a planned portfolio re-positioning strategy following the completion of the merger, $7 change~~$77 in the unrealized ~~losses~~gains (losses) on equity securities, reflecting market movements during the ~~impact of adoption ASU 2016-01~~period, and $2 of ~~impairment losses. In the Predecessor quarter ended March 31, 2017 net realized losses on available-for-sale securities of $17, inclusive of $21 of impairments~~credit 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 First National Bank Holding Co. Refer to "Note 4. Investments" of our unaudited Condensed Consolidated Financial Statements for additional details.

Net realized and unrealized losses on certain derivatives were $124 for the quarter ended March 31, 2018 as compared to net realized and unrealized gains of $109 for the Predecessor quarter ended March 31, 2017. See the table below for primary drivers of these gains (losses).impairments.

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

See the table below for primary drivers of the movement in the value of this derivative was driven by the Predecessor's coinsurance agreement with FSR. As part of the Merger, FSRC is now part of the Company which eliminated the impact of this component of net investment gains (losses) ~~for the quarter ended March 31, 2018. In the current period the change in fair value of the underlying assets held in FWH portfolio relates to FSRC's unaffiliated reinsurance agreements.~~on certain derivatives.

We utilize a combination of static (call options) and dynamic (long futures contracts) instruments in our hedging strategy. A substantial portion of the call options and futures contracts are based upon the S&P 500 Index with the remainder based upon other equity, bond and gold market indices.

The components of the realized and unrealized gains (losses) on certain derivative instruments hedging our indexed annuity and universal life products are summarized in the table below for the ~~quarter ended March 31, 2018 and the Predecessor quarter ended March 31, 2017:~~periods presented:



	March 31, 2018			March 31, 2017			Increase/ (Decrease)			Three months ended
				Predecessor						March 31, 2019			March 31, 2018			Increase/ (Decrease)
Call Options:
Gains (losses) on option expiration	$	5		$	72		$	(67	)	$	(33	)	$	5		$	(38	)
Change in unrealized gains (losses)	(124		)	33			(157		)	188			(127		)	315
Change in unrealized (loss) gain (FSRC)	(3		)	—			$	(3	)
Futures contracts:
Gains (losses) on futures contracts expiration	6			3			3			7			6			1
Change in unrealized gains (losses)	(8		)	1			(9		)	2			(8		)	10
Total net change in fair value	$	(124	)	$	109		$	(233	)	$	164		$	(124	)	$	288

Change in S&P 500 Index during the period	(1		)%	6		%	(7		)%
Annual Point-to-Point Change in S&P 500 Index during the period										9		%	12		%	(3		)%

Realized gains and losses on certain derivative instruments are directly correlated to the performances of the indices upon which the call options and futures contracts are based and the value of the derivatives at the time of expiration compared to the value at the time of purchase. Additionally, the fair value of call options are primarily driven by the underlying performance of the S&P 500 ~~index~~Index during each respective year relative to the S&P ~~index~~Index on the policyholder buy ~~dates during each respective year.~~dates.

The net change in fair value of ~~certain derivative instruments~~the call options and futures contracts for the ~~quarter~~three months ended March 31, 2019 and 2018 ~~and the Predecessor quarter ended March 31, 2017 was~~were primarily driven by movements in the S&P 500 ~~Index.~~Index relative to the policyholder buy dates.

The average index credits to policyholders are as follows for the ~~quarter ended March 31, 2018 and the Predecessor quarter ended March 31, 2017:~~periods presented:



	March 31, 2018		March 31, 2017		Increase/ (Decrease)		Three months ended
			Predecessor				March 31, 2019		March 31, 2018		Increase/ (Decrease)
Average Crediting Rate	5	%	4	%	1	%	1	%	5	%	(4	)%
S&P 500 Index:
Point-to-point strategy	4	%	3	%	1	%	2	%	4	%	(2	)%
Monthly average strategy	4	%	3	%	1	%	1	%	4	%	(3	)%
Monthly point-to-point strategy	7	%	5	%	2	%	—	%	7	%	(7	)%
3 year high water mark	7	%	10	%	(3	)%	17	%	7	%	10	%

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

The credits for the ~~quarter~~three months ended March 31, ~~2018~~2019 and ~~the Predecessor quarter ended March 31, 2017~~2018 were based on comparing the S&P 500 Index on each issue date in these respective periods to the same issue date in the respective prior year periods. ~~Favorable index performance at different points in these periods caused an increase in crediting rates~~Due to volatility in the ~~point-to-point, monthly point-to-point strategies due to higher equity returns in~~S&P 500 Index, policyholders with anniversaries during the ~~quarter~~three months ended March 31, ~~2018 and the Predecessor quarter ended March 31, 2017.~~

2019, on average, received less credits.

Insurance and investment product fees and other

~~Below is a summary of the major components included in Insurance and investment product fees and other for the quarter ended March 31, 2018 and the Predecessor quarter ended March 31, 2017:~~

March 31, 2018 March 31, 2017
Increase/
(Decrease)
Predecessor
Insurance and investment product fees and other:
Surrender charges $ 14
$ 9
$ 5
Cost of insurance fees and other income 27
35
(8 )
Total insurance and investment product fees and other $ 41
$ 44
$ (3 )

Insurance and investment product fees and other consists primarily of the cost of insurance on IUL policies, policy rider fees primarily on FIA policies and surrender charges assessed against policy withdrawals in excess of the policyholder's allowable penalty-free amounts (up to 10% of the prior year's value, subject to certain limitations).

~~Total insurance~~ Below is a summary of the major components included in Insurance and investment product fees and other ~~was $41, and $44~~ for the ~~quarter ended March 31, 2018 and the Predecessor quarter ended March 31, 2017, respectively. These fees are primarily related to rider fees on FIA policies as well as cost~~periods presented:



	Three months ended
	March 31, 2019		March 31, 2018		Increase/ (Decrease)
Surrender charges	$	8	$	14	$	(6	)
Cost of insurance fees and other income	47		34		13
Total insurance and investment product fees and other	$	55	$	48	$	7

Cost of insurance ~~("COI") charges on IUL policies. Guaranteed minimum withdrawal benefit ("GMWB") rider~~ fees ~~were $21~~ and ~~$17 for~~other income increased year over year primarily as the ~~quarter ended March 31, 2018 and the Predecessor quarter ended March 31, 2017, respectively. This increase in fees is a~~ result of ~~growth in benefit base, which is partially offset by a corresponding increase in income rider reserves (included in Benefits and other changes in policy reserves). GMWB rider fees are based on~~ the ~~policyholder's benefit base and are collected~~amortization of the deferred reinsurance gain established at the ~~end~~inception of FGL Insurance's reinsurance agreement with Kubera, effective December 31, 2018.

Surrender charges were higher in the prior year quarter, primarily due to more universal life policy ~~year.~~surrenders.

Benefits and expenses

Benefits and other changes in policy reserves

Below is a summary of the major components included in Benefits and other changes in policy reserves for the ~~quarter ended March 31, 2018 and the Predecessor quarter ended March 31, 2017:~~periods presented:


										Three months ended
	March 31, 2018			March 31, 2017			Increase/ (Decrease)			March 31, 2019			March 31, 2018			Increase/ (Decrease)
				Predecessor
FIA FAS 133 impact	(242		)	50			(292		)
FIA embedded derivative impact										152			(263		)	415
Index credits, interest credited & bonuses	207			181			26			91			207			(116		)
Annuity payments	38			38			—			34			38			(4		)
Other policy benefits and reserve movements	(7		)	(1		)	(6		)	(6		)	(7		)	1
Change in fair value of reserve liabilities held at fair value	(14		)	—			(14		)	68			(14		)	82
Total benefits and other changes in policy reserves	$	(18	)	$	268		$	(286	)	$	339		$	(39	)	$	378

~~FIA FAS 133 Impact~~ - The FIA market value option liability ~~decreased $223 during the~~increased quarter ~~ended March 31, 2018 and increased $38 in the Predecessor~~over quarter, ~~ended March 31, 2017, respectively, and were~~ driven by the changes in the equity markets and risk free rates during the current ~~quarter.~~quarter, in conjunction with premium growth arising from the quarterly sales result. The ~~decline in equity markets resulted in a $149 reduction in the FAS 133 liability during Q1 2018 as compared to $38 increase during Q1 2017. The rise~~movements in risk free rates ~~reduced~~increased the FAS 133 reserves by approximately ~~$97~~$58 during ~~Q1 2018~~the three months ended March 31, 2019 as compared to $1an decrease of $97 for the corresponding period in ~~2017.~~2018, with the remaining impacts from changes in the equity markets. The change in equity market also impacts the market value of the 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.

~~Index~~The quarter over quarter decreases in index credits, interest credited & bonuses were ~~$207 and $181 for the quarter ended March 31, 2018 and the Predecessor quarter ended March 31, 2017, respectively. The quarter over quarter increase of $26 was~~ primarily due to ~~high~~lower index credits on FIA policies, reflecting market movement during the ~~favorable performance of the S&P 500~~respective periods.

~~Index relative to the S&P 500 Index level on the policyholder buy dates and related increases in proceeds from options and futures which fund FIA index credits.~~

The change in the fair value of reserve liabilities held at fair value ~~decreased~~ ~~$14~~ ~~for the quarter ended March 31, 2018. Reserves held at fair value~~ represents FSRC's and F&G Re's third-party ~~business and impacts the quarter ended March 31, 2018 due to the November 30, 2017 acquisition of FSR.~~

business.

Acquisition and operating expenses, net of deferrals

Below is a summary of ~~the major components included in~~ acquisition and operating expenses, net of deferrals for the ~~quarter ended March 31, 2018 and the Predecessor quarter ended March 31, 2017:~~periods presented:


										Three months ended
	March 31, 2018			March 31, 2017			Increase/ (Decrease)			March 31, 2019			March 31, 2018			Increase/ (Decrease)
				Predecessor
Acquisition and operating expenses, net of deferrals:
General expenses	$	35		$	30		$	5		$	31		$	35		$	(4	)
Acquisition expenses	54			81			(27		)	103			54			49
Deferred acquisition costs	(49		)	(78		)	29			(90		)	(49		)	(41		)
Total acquisition and operating expenses, net of deferrals	$	40		$	33		$	7		$	44		$	40		$	4

The increase in acquisition and operating expenses, net of deferrals, during the quarter ended March 31, ~~2018~~2019 compared to the ~~Predecessor~~prior year quarter ended March 31, ~~2017~~2018 reflects ~~an increase~~higher commissions net of deferrals driven by higher sales, partially offset by a decrease in general expenses related to planned employee headcount growth as well as higher post-merger audit fees driven by additional post-merger year end activity. Gross acquisition expenses decreased $27 quarter over quarter due to lower commissions.the mark-to-market movement in the preferred equity remarketing reimbursement embedded derivative liability.

Amortization of intangibles

Below is a summary of the major components included in amortization of intangibles for the ~~quarter ended March 31, 2018 and the Predecessor quarter ended March 31, 2017:~~periods presented:


										Three months ended
	March 31, 2018			March 31, 2017			Increase/ (Decrease)			March 31, 2019			March 31, 2018			Increase/ (Decrease)
Amortization of intangibles related to:				Predecessor
Amortization										$	36		$	32		$	4
Interest										(7		)	(5		)	(2		)
Unlocking	$	—		$	(3	)	$	3		—			—			—
Interest	(5		)	(15		)	10
Amortization	21			51			(30		)
Total amortization of intangibles	$	16		$	33		$	(17	)	$	29		$	27		$	2

Amortization of intangibles is based on historical, current and future expected gross margins (pre-tax operating income before amortization). The quarter over quarter ~~decrease~~increase in total net amortization ~~of $17~~ was primarily due to ~~lower~~higher actual gross profits ("AGPs") ~~on the DAC and VOBA lines of business (LOBs)~~. AGPs were driven primarily by higher net investment ~~losses during~~gains, partially offset by higher change in reserves in the ~~quarter~~three months ended March 31, ~~2018~~2019 compared to ~~net investment gains in~~ the ~~Predecessor quarter~~three months ended March 31, ~~2017. This was partially offset by an increase in interest period-over-period due to continued growth in our in force book of business.~~

2018.

Other items affecting net income

Interest expense

~~The~~Below is a summary of the interest expense on our debt and revolving credit facility and amortization of debt issuance costs ~~of the Company's debt~~ for the ~~quarter~~periods presented:



	Three months ended
	March 31, 2019		March 31, 2018		Increase/ (Decrease)
Debt	$	8	$	5	$	3
Revolving credit facility	—		1		(1		)
Total interest expense	$	8	$	6	$	2

The three months ended March 31, ~~2018 and the Predecessor quarter ended March 31, 2017:~~

March 31, 2018 March 31, 2017
Increase/
(Decrease)
Interest expense and amortization related to: Predecessor
Debt $ 5
$ 5
$ —
Revolving credit facility 1
1
—
Total interest expense 6
6
—

~~Interest~~2019 reflects increased debt interest expense ~~was $6 for both the quarter ended March 31, 2018 and the Predecessor quarter ended March 31, 2017, and reflects interest~~ incurred on the ~~debt and revolving credit facility for those periods.~~$550 5.50% Senior Notes as compared to the historical $300 6.375% Senior Notes.

Income tax expense

Below is a summary of the major components included in ~~Income~~income tax expense ~~(benefit)~~ for the ~~quarter ended March 31, 2018 and the Predecessor quarter ended March 31, 2017:~~periods presented:



	March 31, 2018			March 31, 2017			Increase/ (Decrease)			Three months ended
				Predecessor						March 31, 2019			March 31, 2018			Increase/ (Decrease)
Income before taxes	$	87		$	35		$	52		$	180		$	104		$	76

Income tax before valuation allowance and tax law impact	30			13			17
Income tax before valuation allowance										30			34			(4		)
Change in valuation allowance	5			—			5			(21		)	5			(26		)
Income tax	$	35		$	13		$	22		$	9		$	39		$	(30	)
Effective rate	40		%	37		%	3		%	5		%	38		%	(33		)%

Income tax expense for the three months ended March 31, ~~2018~~2019 was ~~$35,~~$9, net of a valuation allowance release of $21, compared to income tax expense of $39 for the three months ended March 31, 2018, inclusive of a valuation allowance expense of ~~$5, compared to~~$5. The decrease in income tax expense of ~~$13~~$30 quarter over quarter was primarily due to the valuation allowance release on the partial recovery of the unrealized loss position for the ~~Predecessor~~US life companies, as well as higher international income in zero tax jurisdictions for the three months ended March 31, ~~2017, inclusive of~~2019. For the three months ended March 31, 2018 there was a ~~valuation allowance~~$15 expense ~~of $0. The increase in income tax expense of $22 quarter over quarter was due~~related to ~~an increase in the 2018 Quarter's pre-tax income of $52 compared~~F&G Life Re. For further details, refer to an expense of $15 to establish an opening tax balance sheet as a result of the election by F&G Re to be treated as a US taxpayer for the 2018 tax year. Those increases in expenses were partially offset by the lower U.S. Federal statutory tax rate of 21% in 2018 compared with 35% in 2017."Note 11. Income Taxes".

AOI

The table below shows the adjustments made to reconcile net income to our AOI for the ~~quarter ended March 31, 2018 and the Predecessor quarter ended March 31, 2017:~~periods presented:


										Three months ended
	March 31, 2018			March 31, 2017			Increase/ (Decrease)			March 31, 2019			March 31, 2018			Increase/ (Decrease)
Reconciliation from Net Income to AOI:				Predecessor
Net income	$	52		$	22		$	30
Net income (loss)										$	171		$	65		$	106
Adjustments to arrive at AOI:
Effect of investment losses (gains), net of offsets (a)	39			15			24			(70		)	39			(109		)
Effect of change in FIA embedded derivative discount rate, net of offsets (a) (b)	—			(2		)	2
Effect of changes in fair values of FIA related derivatives and embedded derivatives, net of hedging costs (a)	(46		)	—			(46		)
Effect of change in fair value of reinsurance related embedded derivative, net of offsets (a) (c)	—			8			(8		)
Impacts related to changes in the fair values of FIA related derivatives and embedded derivatives, net of hedging cost, and the fair value accounting impacts of assumed reinsurance by our international subsidiaries (a) (b)										(17		)	(63		)	46
Effect of change in fair value of reinsurance related embedded derivative, net of offsets (a)										19			—			19
Effects of integration, merger related & other non-operating items	8			2			6			(3		)	8			(11		)
Tax effect of affiliated reinsurance embedded derivative	15			—			15			—			15			(15		)
Tax impact of adjusting items	—			(7		)	7			(10		)	4			(14		)
AOI	$	68		$	38		$	30		$	90		$	68		$	22

(a) Amounts are net of offsets related to value of business acquired ("VOBA"), deferred acquisition cost ("DAC") ~~and~~, deferred sale inducement ("DSI") ~~amortization.~~, unearned revenue ("UREV") amortization and cost of reinsurance intangible, as applicable.

(b) ~~Adjustment is not applicable to~~The updated definition removes the fair value impacts of assumed reinsurance by our international subsidiaries for periods after September 30, 2018.

AOI increased $22 from $68 in the ~~quarter~~three months ended March 31, 2018 asto $90 for the ~~updated definition of AOI removes the impact of fair value accounting on FIA products.~~

~~(c) Adjustment is not applicable Business Combination as the reinsurance agreement and related activity are eliminated via consolidation for U.S. GAAP reporting.~~

~~AOI increased $30 from $38 in the Predecessor quarter~~three months ended March 31, ~~2017 to $68 in the quarter ended March 31, 2018.~~2019. The current quarter results included $8$14 net favorable actual to expected mortality within the single premium immediate annuity ("SPIA") product line, and $5 bond prepay income and other, ~~annuity reserve movements.~~partially offset by $2 project costs. Comparatively, the ~~Predecessor quarter~~three months ended March 31, ~~2017~~2018 AOI included ~~approximately $3 of net favorable adjustments related to~~$8 net favorable actual to expected mortality within the SPIA product ~~line; offset by $1 of expenses related to the Company's legacy incentive compensation plan as well as $3 of unfavorable DAC amortization, primarily due to equity market fluctuations.~~

line and other annuity reserve movements.

Investment Portfolio

(All dollar amounts presented in millions unless otherwise noted)

The types of assets in which we may invest are influenced by various state laws, which prescribe qualified investment assets applicable to insurance companies. Within the parameters of these laws, we invest in assets giving consideration to four primary investment objectives: (i) maintain robust absolute returns; (ii) provide reliable yield and investment income; (iii) preserve capital and (iv) provide liquidity to meet policyholder and other corporate obligations.

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

As of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, the fair value of our investment portfolio was approximately ~~$23~~$25 billion and $24 billion, respectively, and was divided among the following asset class and sectors:


		March 31, 2018				December 31, 2017				March 31, 2019				December 31, 2018
		Fair Value		Percent		Fair Value		Percent		Fair Value		Percent		Fair Value		Percent

Fixed maturity securities, available for sale:	Fixed maturity securities, available for sale:
United States Government full faith and credit	United States Government full faith and credit	$	160	1	%	$	84	1	%	$	56	—	%	$	119	—	%
United States Government sponsored entities	United States Government sponsored entities	118		1	%	122		1	%	104		—	%	106		—	%
United States municipalities, states and territories	United States municipalities, states and territories	1,710		7	%	1,747		7	%	1,217		5	%	1,187		5	%
Foreign Governments										138		1	%	121		1	%
Corporate securities:	Corporate securities:
Finance, insurance and real estate	Finance, insurance and real estate	5,118		22	%	5,930		25	%	4,003		16	%	4,113		17	%
Manufacturing, construction and mining	Manufacturing, construction and mining	1,011		4	%	996		4	%	619		3	%	574		2	%
Utilities, energy and related sectors	Utilities, energy and related sectors	2,522		11	%	2,278		10	%	2,322		9	%	2,281		10	%
Wholesale/retail trade	Wholesale/retail trade	1,584		7	%	1,457		6	%	1,431		6	%	1,376		6	%
Services, media and other	Services, media and other	2,849		12	%	2,354		10	%	2,215		9	%	2,037		9	%
Hybrid securities	Hybrid securities	1,204		5	%	1,446		6	%	961		4	%	901		4	%
Non-agency residential mortgage-backed securities	Non-agency residential mortgage-backed securities	1,114		5	%	1,155		5	%	918		4	%	925		4	%
Commercial mortgage-backed securities	Commercial mortgage-backed securities	924		4	%	956		4	%	2,647		11	%	2,537		10	%
Asset-backed securities	Asset-backed securities	3,052		13	%	3,065		13	%	4,974		20	%	4,832		20	%
Total fixed maturity available for sale securities	Total fixed maturity available for sale securities	21,366		92	%	21,590		92	%	21,605		88	%	21,109		88	%
Equity securities (a)	Equity securities (a)	769		4	%	761		3	%	1,171		5	%	1,382		6	%
Commercial mortgage loans	Commercial mortgage loans	526		2	%	549		2	%	485		2	%	483		2	%
Other (primarily derivatives, limited partnerships and FHLB common stock)		565		2	%	678		3	%
Residential mortgage loans										199		1	%	187		1	%
Other (primarily derivatives and limited partnerships)										1,049		4	%	748		3	%
Short term investments	Short term investments	—		—	%	25		—	%	—		—	%	—		—	%
Total investments	Total investments	$	23,226	100	%	$	23,603	100	%	$	24,509	100	%	$	23,909	100	%

(a) Includes investment grade non-redeemable preferred stocks ($~~647~~1,001 and ~~$587,~~$1,208, respectively) and Federal Home Loan Bank of Atlanta common stock ($42 for December 31, 2017). Federal Home Loan Bank of Atlanta common stock was reclassed on January 1, 2018 from "Equity securities" to "Other invested assets".

Insurance statutes regulate the type of investments that our life insurance subsidiaries are permitted to make and limit the amount of funds that may be used for any one type of investment. In light of these statutes and regulations, and our business and investment strategy, we generally seek to invest in (i) corporate securities rated investment grade by established nationally recognized statistical rating organizations (each, an “NRSRO”), (ii) U.S. Government and government-sponsored agency securities, or (iii) securities of comparable investment quality, if not rated.

As of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, our fixed maturity available-for-sale ("AFS") securities portfolio was approximately ~~$21~~$22 billion and ~~$22~~$21 billion, respectively. The following table summarizes the credit quality, by Nationally Recognized Statistical Ratings Organization ("NRSRO") rating, of our fixed income portfolio:


	March 31, 2018				December 31, 2017				March 31, 2019				December 31, 2018
Rating	Fair Value		Percent		Fair Value		Percent		Fair Value		Percent		Fair Value		Percent
AAA	$	1,838	9	%	$	1,784	8	%	$	741	3	%	$	627	3	%
AA	1,829		8	%	2,036		9	%	1,476		7	%	1,415		7	%
A	5,486		26	%	5,887		27	%	5,599		26	%	5,354		25	%
BBB	10,110		47	%	9,810		46	%	8,242		38	%	8,328		39	%
Not rated (c)									3,733		17	%	3,612		17	%
Total investment grade									19,791		91	%	19,336		91	%
BB (a)	1,091		5	%	994		5	%	1,311		6	%	1,307		6	%
B and below (b)	1,012		5	%	1,079		5	%	384		2	%	351		2	%
Not rated (c)									119		1	%	115		1	%
Total below investment grade									1,814		9	%	1,773		9	%
Total	$	21,366	100	%	$	21,590	100	%	$	21,605	100	%	$	21,109	100	%

(a) Includes ~~$50~~$16 and ~~$47~~$17 at March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, of non-agency residential mortgage-backed securities ("RMBS") that carry a National Association of Insurance Commissioners ("NAIC") 1 designation.

(b) Includes ~~$811~~$166 and ~~$853~~$175 at March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, of non-agency RMBS that carry a NAIC 1 designation.

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

The NAIC’s Securities Valuation Office ("SVO") is responsible for the day-to-day credit quality assessment and valuation of securities owned by state regulated insurance companies. Insurance companies report ownership of securities to the SVO when such securities are eligible for regulatory filings. The SVO conducts credit analysis on these securities for the purpose of assigning an NAIC designation or 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:



NAIC Designation		NRSRO Equivalent Rating
1		AAA/AA/A
2		BBB
3		BB
4		B
5		CCC and lower
6		In or near default

The NAIC has adopted revised designation methodologies for non-agency RMBS, including RMBS backed by subprime mortgage loans and for commercial mortgage-backed securities ("CMBS"). The NAIC’s objective with the revised designation methodologies for these structured securities was to increase accuracy in assessing expected losses and to use the improved assessment to determine a more appropriate capital requirement for such structured securities. The NAIC designations for structured securities, including subprime and Alternative A-paper ("Alt-A"), RMBS, are based upon a comparison of the bond’s amortized cost to the NAIC’s loss expectation for each security. Securities where modeling does not generate an expected loss in all scenarios are given the highest designation of NAIC 1. A large percentage of our RMBS securities carry a NAIC 1 designation while the NRSRO rating indicates below investment grade. The revised methodologies reduce regulatory reliance on rating agencies and allow for greater regulatory input into the assumptions used to estimate expected losses from such structured securities. In the tables below, we present the rating of structured securities based on ratings from the revised NAIC rating methodologies described above (which in some cases do not correspond to rating agency designations). All NAIC designations (e.g., NAIC 1-6) are based on the revised NAIC methodologies.

The tables below present our fixed maturity securities by NAIC designation as of March 31, ~~2018~~2019 and December 31, ~~2017:~~2018:


	March 31, 2018						March 31, 2019
NAIC Designation	Amortized Cost		Fair Value		Percent of Total Fair Value		Amortized Cost		Fair Value		Percent of Total Fair Value
1	$	10,509	$	10,342	48	%	$	11,302	$	11,297	52	%
2	9,767		9,589		45	%	9,240		8,998		42	%
3	1,277		1,254		6	%	1,066		1,017		5	%
4	142		138		1	%	191		183		1	%
5	43		43		—	%	73		72		—	%
6	—		—		—	%	36		38		—	%
Total	$	21,738	$	21,366	100	%	$	21,908	$	21,605	100	%

	December 31, 2017						December 31, 2018
NAIC Designation	Amortized Cost		Fair Value		Percent of Total Fair Value		Amortized Cost		Fair Value		Percent of Total Fair Value
1	$	11,153	$	11,217	52	%	$	11,245	$	10,928	52	%
2	9,032		9,086		42	%	9,677		9,003		43	%
3	1,088		1,089		5	%	1,064		967		4	%
4	136		136		1	%	155		139		1	%
5	65		61		—	%	71		65		—	%
6	1		1		—	%	7		7		—	%
Total	$	21,475	$	21,590	100	%	$	22,219	$	21,109	100	%

Investment Industry Concentration

The tables below present the top ten industry categories of our fixed maturity and equity securities and FHLB common stock, including the fair value and percent of total fixed maturity and equity securities and FHLB common stock fair value as of March 31, ~~2018~~2019 and December 31, ~~2017:~~2018:


	March 31, 2018				March 31, 2019
Top 10 Industry Concentration	Fair Value		Percent of Total Fair Value		Fair Value		Percent of Total Fair Value
ABS collateralized loan obligation ("CLO")					$	3,418	15	%
Banking	$	2,484	11	%	2,348		10	%
ABS collateralized loan obligation ("CLO")	1,918		9	%
Whole loan collateralized mortgage obligation ("CMO")					2,332		10	%
ABS Other					1,553		7	%
Life insurance					1,407		6	%
Municipal	1,887		9	%	1,216		5	%
Life insurance	1,391		6	%
ABS Other	1,127		5	%
Electric	998		4	%	952		4	%
Whole loan collateralized mortgage obligation ("CMO")	824		4	%
Technology	776		3	%
CMBS	728		3	%	870		4	%
Pipelines	705		3	%	820		4	%
Technology					571		3	%
Total	$	12,838	58	%	$	15,487	68	%


	December 31, 2017				December 31, 2018
Top 10 Industry Concentration	Fair Value		Percent of Total Fair Value		Fair Value		Percent of Total Fair Value
ABS collateralized loan obligation ("CLO")					$	3,283	15	%
Banking	$	2,851	13	%	2,491		11	%
ABS CLO	2,078		9	%
Whole loan collateralized mortgage obligation ("CMO")					2,234		10	%
ABS Other					1,545		7	%
Life insurance					1,376		6	%
Municipal	1,977		9	%	1,187		5	%
Life insurance	1,514		7	%
Electric	1,097		5	%	939		4	%
CMBS					874		4	%
Pipelines					812		4	%
Property and casualty insurance	1,006		5	%	542		2	%
ABS Other	980		4	%
Whole loan CMO	834		4	%
CMBS	791		3	%
Other financial institutions	781		3	%
Total	$	13,909	62	%	$	15,283	68	%

The amortized cost and fair value of fixed maturity AFS securities by contractual maturities as of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, as applicable, are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.


	March 31, 2018				December 31, 2017				March 31, 2019				December 31, 2018
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Corporate, Non-structured Hybrids, Municipal and U.S. Government securities:
Corporate, Non-structured Hybrids, Municipal and Government securities:
Due in one year or less	$	188	$	188	$	268	$	268	$	160	$	160	$	191	$	191
Due after one year through five years	1,176		1,166		2,087		2,086		758		749		817		794
Due after five years through ten years	2,543		2,488		3,127		3,126		2,080		2,059		2,219		2,137
Due after ten years	11,917		11,654		9,938		10,055		10,281		9,994		10,443		9,587
Subtotal	$	15,824	$	15,496	$	15,420	$	15,535	$	13,279	$	12,962	$	13,670	$	12,709
Other securities which provide for periodic payments:
Asset-backed securities	$	3,062	$	3,052	$	3,061	$	3,065	$	5,033	$	4,974	$	4,954	$	4,832
Commercial-mortgage-backed securities	938		924		956		956		2,596		2,647		2,568		2,537
Structured hybrids	679		662		759		757
Residential mortgage-backed securities	1,235		1,232		1,279		1,277		1,000		1,022		1,027		1,031
Subtotal	$	5,914	$	5,870	$	6,055	$	6,055	$	8,629	$	8,643	$	8,549	$	8,400
Total fixed maturity available-for-sale securities	$	21,738	$	21,366	$	21,475	$	21,590	$	21,908	$	21,605	$	22,219	$	21,109

Non-Agency RMBS Exposure

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

The fair value of our investments in subprime and Alt-A RMBS securities was ~~$255~~$100 and ~~$665~~$161 as of March 31, ~~2018,~~2019, respectively, and ~~$267~~$104 and ~~$689~~$163 as of December 31, ~~2017,~~2018, respectively.

The following tables summarize our exposure to subprime and Alt-A RMBS by credit quality using NAIC designations, NRSRO ratings and vintage year as of March 31, ~~2018~~2019 and December 31, ~~2017 :~~2018:


	March 31, 2018				December 31, 2017				March 31, 2019				December 31, 2018
NAIC Designation:	Fair Value		Percent of Total		Fair Value		Percent of Total		Fair Value		Percent of Total		Fair Value		Percent of Total
1	$	892	97	%	$	929	96	%	$	237	91	%	$	245	92	%
2	24		3	%	17		2	%	12		5	%	18		7	%
3	3		—	%	5		1	%	9		3	%	—		—	%
4	—		—	%	—		—	%	2		1	%	4		1	%
5	1		—	%	5		1	%	1		—	%	—		—	%
6	—		—	%	—		—	%	—		—	%	—		—	%
Total	$	920	100	%	$	956	100	%	$	261	100	%	$	267	100	%

NRSRO:
AAA	$	37	4	%	$	43	4	%	$	1	—	%	$	1	—	%
AA	11		1	%	11		1	%	10		4	%	11		4	%
A	49		5	%	36		4	%	24		9	%	25		9	%
BBB	53		6	%	67		7	%	8		3	%	8		3	%
Not rated - Above investment grade (a)									47		18	%	46		17	%
BB and below	770		84	%	799		84	%	171		66	%	176		66	%
Total	$	920	100	%	$	956	100	%	$	261	100	%	$	267	100	%

Vintage:
2017	$	12	1	%	$	12	1	%	$	12	5	%	$	12	4	%
2016	15		2	%	15		2	%	15		6	%	15		6	%
2007	191		21	%	199		21	%	50		19	%	51		19	%
2006	334		36	%	346		36	%	62		24	%	63		24	%
2005 and prior	368		40	%	384		40	%	122		46	%	126		47	%
Total	$	920	100	%	$	956	100	%	$	261	100	%	$	267	100	%

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

ABS Exposure

As of March 31, 2019 and December 31, 2018, our ABS exposure was largely composed of CLOs, which comprised ~~63%~~69% and 68%, respectively, of all ABS holdings. These exposures are generally senior tranches of CLOs which have leveraged loans as their underlying collateral. The remainder of our ABS exposure was largely diversified by underlying collateral and issuer type, including automobile and home equity receivables.

~~The following tables summarize our ABS exposure. The~~As of March 31, 2019, the non-CLO exposure represents ~~37%~~31% of total ABS assets, or ~~5% of total invested assets. As of March 31, 2018, the CLO and non-CLO positions were trading at a net unrealized loss position of $6 and $5, respectively.~~

~~The non-CLO exposure as of December 31, 2017 represented 32% of total ABS assets, or 4%~~6% of total invested assets ~~respectively. As of December 31, 2017~~and the CLO and non-CLO positions were trading at a net unrealized gain (loss) position of $3$(73) and ~~$0,~~$14, respectively. As of December 31, 2018, the non-CLO exposure represented 32% of total ABS assets, or 6% of total invested assets and the CLO and non-CLO positions were trading at a net unrealized gain (loss) position of $(128) and $6, respectively. The following table summarize our ABS exposure.


	March 31, 2018				December 31, 2017				March 31, 2019				December 31, 2018
Asset Class	Fair Value		Percent		Fair Value		Percent		Fair Value		Percent		Fair Value		Percent
ABS CLO	$	1,918	63	%	$	2,078	68	%	$	3,418	69	%	$	3,283	68	%
ABS auto	4		—	%	4		—	%	—		—	%	1		—	%
ABS credit card	3		—	%	3		—	%	3		—	%	3		—	%
ABS other	1,127		37	%	980		32	%	1,553		31	%	1,545		32	%
Total ABS	$	3,052	100	%	$	3,065	100	%	$	4,974	100	%	$	4,832	100	%

Commercial Mortgage Loans

We rate all CMLs to quantify the level of risk. We place those loans with higher risk on a watch list and closely monitor them for collateral deficiency or other credit events that may lead to a potential loss of principal and/or interest. If we determine the value of any CML to be impaired (i.e., when it is probable that we will be unable to collect on amounts due according to the contractual terms of the loan agreement), the carrying value of the CML is reduced to either the present value of expected cash flows from the loan, discounted at the loan’s effective interest rate, or fair value of the collateral. For those mortgage loans that are determined to require foreclosure, the carrying value is reduced to the fair value of the underlying collateral, net of estimated costs to obtain and sell at the point of foreclosure. The carrying value of the impaired loans is reduced by establishing a specific write-down recorded in "Net realized capital gains (losses)" in the unaudited Condensed Consolidated Statements of Operations.

Loan-to-value (“LTV”) and debt service coverage (“DSC”) ratios are utilized as part of the review process described above. ~~See "Note 4. Investments" to our condensed consolidated financial statements for additional information regarding our LTV and DSC CML balances.~~

As of March 31, ~~2018,~~2019, our mortgage loans on real estate portfolio had a weighted average DSC ratio of 2.3 times, and a weighted average LTV ratio of ~~48%~~46%. See "Note 4. Investments" to our unaudited condensed consolidated financial statements for additional information regarding our LTV and DSC ratios.

Unrealized Losses

The amortized cost and fair value of the fixed maturity securities and the equity securities that were in an unrealized loss position as of March 31, ~~2018~~2019 and December 31, ~~2017~~2018 were as follows:


	March 31, 2018								March 31, 2019
	Number of securities	Amortized Cost		Unrealized Losses			Fair Value		Number of securities		Amortized Cost		Unrealized Losses			Fair Value
Fixed maturity securities, available for sale:
United States Government full faith and credit	15	$	162	$	(1	)	$	161	$	7	$	50	$	—		$	50
United States Government sponsored agencies	70	85		(1		)	84		64		84		—			84
United States municipalities, states and territories	141	1,509		(27		)	1,482		49		537		(10		)	527
Foreign Governments									8		83		(2		)	81
Corporate securities:
Finance, insurance and real estate	360	4,668		(128		)	4,540		252		3,125		(107		)	3,018
Manufacturing, construction and mining	114	839		(23		)	816		76		543		(28		)	515
Utilities, energy and related sectors	215	2,309		(56		)	2,253		172		1,716		(71		)	1,645
Wholesale/retail trade	208	1,505		(44		)	1,461		181		1,281		(91		)	1,190
Services, media and other	282	2,584		(66		)	2,518		192		1,602		(59		)	1,543
Hybrid securities	57	1,047		(30		)	1,017		47		709		(33		)	676
Non-agency residential mortgage backed securities	195	849		(7		)	842		93		200		(5		)	195
Commercial mortgage backed securities	116	830		(15		)	815		67		502		(9		)	493
Asset backed securities	281	2,313		(16		)	2,297		424		3,664		(82		)	3,582
Total fixed maturity available for sale securities	2,054	18,700		(414		)	18,286		1,632		14,096		(497		)	13,599
Equity securities	51	642		(13		)	629		80		1,141		(58		)	1,083
Total	2,105	$	19,342	$	(427	)	$	18,915
Total investments									$	1,712	$	15,237	$	(555	)	$	14,682


	December 31, 2017								December 31, 2018
	Number of securities	Amortized Cost		Unrealized Losses			Fair Value		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	$	15	$	120	$	(1	)	$	119
United States Government sponsored agencies	54	58		(1		)	57		72		88		(2		)	86
United States municipalities, states and territories	46	286		(1		)	285		103		1,054		(32		)	1,022
Foreign Governments									16		123		(8		)	115
Corporate securities:
Finance, insurance and real estate	197	2,188		(8		)	2,180		300		3,721		(230		)	3,491
Manufacturing, construction and mining	50	290		(2		)	288		86		613		(57		)	556
Utilities, energy and related sectors	69	504		(6		)	498		237		2,347		(222		)	2,125
Wholesale/retail trade	116	623		(2		)	621		211		1,469		(144		)	1,325
Services, media and other	99	514		(3		)	511		266		2,179		(195		)	1,984
Hybrid securities	37	489		(5		)	484		67		956		(91		)	865
Non-agency residential mortgage backed securities	205	884		(2		)	882		110		249		(6		)	243
Commercial mortgage backed securities	64	479		(1		)	478		205		1,768		(40		)	1,728
Asset backed securities	236	1,947		(3		)	1,944		419		3,704		(137		)	3,567
Total fixed maturity available for sale securities	1,182	8,336		(34		)	8,302		2,107		18,391		(1,165		)	17,226
Equity securities	42	440		(4		)	436		95		1,523		(145		)	1,378
Total	1,224	$	8,776	$	(38	)	$	8,738
Total investments									$	2,202	$	19,914	$	(1,310	)	$	18,604

The gross unrealized loss position on the available-for-sale fixed and equity portfolio was $555 and $1,310 as of March 31, ~~2018~~2019 and December 31, ~~2017 was $427 and $38,~~2018, respectively. ~~The gross unrealized loss position increased $389 from December 31, 2017 to March 31, 2018.~~ Most components of the portfolio exhibited price ~~declines~~appreciation as interest rates ~~rose~~ and credit spreads ~~widened~~tightened during the ~~quarter.~~period. The total book value of all securities in an unrealized loss position was ~~$19,342~~$15,237 and ~~$8,776~~$19,914 as of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. The total book value of all securities in an unrealized loss position ~~increased 120%~~decreased 23% from December 31, ~~2017~~2018 to March 31, ~~2018.~~2019. The average market value/book value of corporate bonds in an unrealized loss position was ~~97%~~ 96%

and ~~99%~~92% as of March 31, ~~2018~~2019 and December 31,

~~2017,~~ 2018, respectively. In aggregate, corporate bonds represented ~~74%~~64% and ~~58%~~65% of the total unrealized loss position as of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

Our municipal bond exposure is a combination of general obligation bonds (fair value of ~~$331~~$227 and an amortized cost of ~~$335~~$226 as of March 31, ~~2018)~~2019) and special revenue bonds (fair value of ~~$1,379~~$990 and amortized cost of ~~$1,398~~$985 as of March 31, ~~2018)~~2019).

Across all municipal bonds, the largest issuer represented 7%10% of the category, less than 1% of the entire portfolio and is rated NAIC 1. Our focus within municipal bonds is on NAIC 1 rated instruments, and ~~93%~~92% of our municipal bond exposure is rated NAIC 1.

The amortized cost and fair value of fixed maturity securities and equity securities (excluding U.S. Government and U.S. Government-sponsored agency securities) in an unrealized loss position greater than 20% and the number of months in an unrealized loss position with fixed maturity investment grade securities (NRSRO rating of BBB/Baa or higher) as of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, were as follows:


	March 31, 2018								March 31, 2019
	Number of securities	Amortized Cost		Fair Value		Gross Unrealized Losses			Number of securities	Amortized Cost		Fair Value		Gross Unrealized Losses
Investment grade:
Less than six months	—	$	—	$	—	$	—		1	$	5	$	4	$	(1	)
Six months or more and less than twelve months	—	—		—		—			1	3		2		(1		)
Twelve months or greater	—	—		—		—			3	35		27		(8		)
Total investment grade	—	—		—		—			5	43		33		(10		)

Below investment grade:
Less than six months	2	6		4		(2		)	2	1		1		—
Six months or more and less than twelve months	—	—		—		—			1	—		—		—
Twelve months or greater	—	—		—		—			3	8		6		(2		)
Total below investment grade	2	6		4		(2		)	6	9		7		(2		)
Total	2	$	6	$	4	$	(2	)	11	$	52	$	40	$	(12	)


	December 31, 2017								December 31, 2018
	Number of securities	Amortized Cost		Fair Value		Gross Unrealized Losses			Number of securities	Amortized Cost		Fair Value		Gross Unrealized Losses
Investment grade:
Less than six months	—	$	—	$	—	$	—		3	$	23	$	18	$	(5	)
Six months or more and less than twelve months	—	—		—		—			10	72		55		(17		)
Twelve months or greater	—	—		—		—			4	25		19		(6		)
Total investment grade	—	—		—		—			17	120		92		(28		)

Below investment grade:
Less than six months	1	13		10		(3		)	3	11		9		(2		)
Six months or more and less than twelve months	—	—		—		—			9	31		22		(9		)
Twelve months or greater	—	—		—		—			5	12		9		(3		)
Total below investment grade	1	13		10		(3		)	17	54		40		(14		)
Total	1	$	13	$	10	$	(3	)	34	$	174	$	132	$	(42	)

OTTI and Watch List

At March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, our watch list included 311 and 134 securities, respectively, in an unrealized loss position with an amortized cost of $6$52 and ~~$13,~~$174, unrealized losses of $2$12 and ~~$3,~~$42, and a fair value of $4$40 and ~~$10,~~$132, respectively. As part of the cash flow testing analysis, we evaluated each of these securities to assess the following:

•whether the issuer is currently meeting its financial obligations

•its ability to continue to meet these obligations

•its existing cash available

•its access to additional available capital

•any expense management actions the issuer has taken; and

•whether the issuer has the ability and willingness to sell non-core assets to generate liquidity

Based on our analysis, these securities demonstrated that the March 31, ~~2018~~2019 and December 31, ~~2017~~2018 carrying values were fully recoverable.

There were 13 and 04 structured securities with a fair value of $0$6 and $0$6 on the watch list to which we had potential credit exposure as of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. Our analysis of these structured securities, which included cash flow testing results, demonstrated the March 31, ~~2018~~2019 and December 31, ~~2017~~2018 values were fully recoverable.

Exposure to Sovereign Debt

Our investment portfolio had no direct exposure to European sovereign debt as of March 31, ~~2018,~~2019 and December 31, ~~2017.~~2018.

As of March 31, ~~2018~~2019 and December 31, ~~2017~~2018 the Company also had no material exposure risk related to financial investments in Puerto Rico.

Net Investment Income and Net Investment Gains (Losses)

For discussion regarding our net investment income and net investment gains (losses) refer to "Note 4. Investments" to our unaudited condensed consolidated financial statements.

Available-For-Sale Securities

For additional information regarding our AFS securities, including the amortized cost, gross unrealized gains (losses), and fair value ~~of AFS securities~~ as well as the amortized cost and fair value of fixed maturity AFS securities by contractual maturities, as of March 31, ~~2018,~~2019, refer to "Note 4. Investments", to our ~~condensed consolidated financial statements.~~

~~Net Investment Income and Net Investment Gains~~

~~For discussion regarding our net investment income and net investment gains refer to "Note 4. Investments" to our~~unaudited condensed consolidated financial statements.

Concentrations of Financial Instruments

For detail regarding our concentration of financial instruments refer to "Note 3. Significant Risks and Uncertainties" to our unaudited condensed consolidated financial statements.

Derivatives

We are exposed to credit loss in the event of nonperformance by our counterparties on call options. We attempt to reduce this credit risk by purchasing such options from large, well-established financial institutions.

We also hold cash and cash equivalents received from counterparties for call option collateral, as well as U.S. Government securities pledged as call option collateral, if our counterparty’s net exposures exceed pre-determined thresholds.

In June 2017, the Company began a program to reduce the negative interest cost associated with cash collateral posted from counterparties under various ISDA agreements by reinvesting derivative cash collateral. The Company is required to pay counterparties the effective federal funds rate each day for cash collateral posted to FGL for daily mark to market margin changes. The ~~new~~Company reduces the negative interest cost associated with cash collateral posted from counterparties under various ISDA agreements by reinvesting derivative cash collateral. This program permits collateral cash received to be invested in short term Treasury securities and commercial paper rated A1/P1 which are included in "Cash and cash equivalents" in the accompanying unaudited Condensed Consolidated Balance Sheets.

See "Note 5. Derivative Financial Instruments" to our unaudited condensed consolidated financial statements for additional information regarding our derivatives and our exposure to credit loss on call options.

Liquidity and Capital Resources

Liquidity and Cash Flow

Liquidity refers to the ability of an enterprise to generate adequate amounts of 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) ~~provided~~ cash of

~~$(34) and $60~~ $96 in the three months ended March 31, ~~2018,~~2019 and $(35) in the ~~Predecessor~~ three months ended March 31, ~~2017,~~2018, 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.

The sources of liquidity of the holding company are principally comprised of dividends from subsidiaries, bank lines of credit (at FGLH level) and the ability to raise long-term public financing under an SEC-filed registration statement or private placement offering. These sources of liquidity and cash flow support the general corporate needs of the holding company, interest and debt service, funding acquisitions and investment in core businesses.

Our cash flows associated with collateral received from and posted with counterparties change as the market value of the underlying derivative contract changes. As the value of a derivative asset declines (or increases), the collateral required to be posted by our 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).

Discussion of Consolidated Cash Flows

Presented below is a table that summarizes the cash provided or used in our activities and the amount of the respective increases or decreases in cash provided or used from those activities for the three months ended March 31, ~~2018, the Predecessor three months ended March 31, 2017:~~2019 and 2018:


(dollars in millions)	Three months ended						Three months ended
	March 31, 2018			March 31, 2017			March 31, 2019		March 31, 2018
Cash provided by (used in):				Predecessor
Operating activities	$	(34	)	$	60		$	96	$	(35	)
Investing activities	(377		)	(182		)	404		(377		)
Financing activities	353			377			286		354
Net increase (decrease) in cash and cash equivalents	$	(58	)	$	255		$	786	$	(58	)

Operating Activities

Cash provided by (used in) ~~and provided by~~ operating activities totaled ~~$(34)~~$96 and ~~$60~~$(35) for the three months ended March 31, ~~2018~~2019 and ~~the Predecessor three months ended March 31, 2017,~~2018, respectively, which were principally due to a ~~$162 decrease~~$286 increase in cash and short-term collateral from ~~our~~ derivative counterparties, partially offset by a ~~$30~~$41 increase in deferred acquisition costs and deferred sales inducements, and a $29 decrease in income tax ~~refund in the three months ended March 31, 2018.~~refunds received.

Investing Activities

Cash ~~used in~~provided by (used in) investing activities was ~~$377~~$404 and ~~$182~~$(377) for the three months ended March 31, 2019 and 2018, ~~and the Predecessor three months ended March 31, 2017,~~ respectively, ~~which were principally~~ due to the purchases of fixed maturity securities and other investments, ~~net of~~and the cash proceeds from sales, maturities and repayments.

Financing Activities

Cash provided by financing activities ~~were $353~~was $286 and ~~$377~~$354 for the Company in the three months ended March 31, ~~2018~~2019 and ~~the Predecessor three months ended March 31, 2017,~~2018, respectively, which were primarily related to the issuance of investment contracts and pending new production, including annuity and universal life insurance contracts, net of redemptions and benefit payments. ~~Additionally,~~

On April 20, 2018, the ~~Company made~~FGLH completed a ~~$30 draw~~debt offering of $550 aggregate principal amount of 5.50% senior notes due 2025 (the “5.50% Senior Notes”). Please refer to the Company's 2018 Form 10-K for further discussion.

The Indenture contains covenants that restrict the CF Bermuda’s and its restricted subsidiaries’ ability to, among other things, pay dividends on ~~the revolving credit facility during the three months ended March 31, 2018.~~or make other distributions in respect 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 affiliates.

Off-Balance Sheet Arrangements

Throughout our history, we have entered into indemnifications in the ordinary course of business with our customers, suppliers, service providers, business partners and in certain instances, when we sold businesses. Additionally, we have indemnified our directors and officers who are, or were, serving at our request in such capacities. Although the specific terms or number of such arrangements is not precisely known due to the extensive history of our past operations, costs incurred to settle claims related to these indemnifications have not been material to our financial statements. We have no reason to believe that future costs to settle claims related to our former operations will have a material impact on our financial position, results of operations or cash flows.

On November 30, 2017, FGLH and CF Bermuda, together as borrowers and each as a borrower, entered into the Credit 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 proceeds of the loans under the Credit Agreement for working capital, growth initiatives and general corporate purposes, as well as to pay fees, commissions and expenses incurred in connection with the Credit Agreement and the transactions contemplated thereby. Amounts borrowed under the Credit Agreement may be reborrowed until the maturity date or termination of commitments under the Credit Agreement. The borrowers may increase the maximum amount of availability under the Credit Agreement from time to time by up to an aggregate amount not to exceed $50, subject to certain conditions, including the consent of the lenders participating in each such increase. As of March 31, ~~2018,~~2019, the total drawn on the revolver was ~~$135.~~

~~On April 20,~~$0. Please refer to the Company's 2018 ~~the Company completed a debt offering of $550 aggregate principal amount of 5.50% senior notes due 2025. See "Note 17. Subsequent Events" to our condensed consolidated financial statements~~Form 10-K for ~~additional details.~~further discussion.

The Company has unfunded investment commitments as of March 31, ~~2018~~2019 based upon the timing of when investments are executed compared to when the actual investments are funded, as some investments require that funding occur over a period of months or years. ~~A summary of~~Please refer to "Note 4. Investments" and "Note 12. Commitments and Contingencies" to our unaudited condensed consolidated financial statements for additional details on unfunded ~~commitments by invested asset class are included below:~~

March 31, 2018
Asset Type
Other invested assets $ 160
Equity securities 33
Fixed maturity securities, available-for-sale 110
Other assets 12
Total $ 315
investment commitments.


Item 3.	Quantitative and Qualitative Disclosures about Market Risk

Market Risk Factors

Market risk is the risk of the loss of fair value resulting from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates, commodity prices and equity prices. Market risk is directly influenced by the volatility and liquidity in the markets in which the related underlying financial instruments are traded. We have significant holdings in financial instruments and are naturally exposed to a variety of market risks. We are primarily exposed to interest rate risk, credit risk and equity price risk and have some exposure to counterparty risk, which affect the fair value of financial instruments subject to market risk.

Enterprise Risk Management

For information about our enterprise risk management see "Part II - Item 7a7A. Quantitative and Qualitative Disclosures about Market Risk" included in our ~~2017~~2018 Form 10-K.

Interest Rate Risk

Interest rate risk is our primary market risk exposure. We define interest rate risk as the risk of an 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.

The profitability of most of our products depends on the spreads between interest yield on investments and rates credited on insurance liabilities. We have the ability to adjust the rates credited, primarily caps and credit rates, on the majority of the annuity liabilities at least annually, subject to minimum 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 conditions.

In order to meet our policy and contractual obligations, we must earn a sufficient return on our invested assets. Significant changes in interest rates exposes us to the risk of not earning the anticipated spreads between the interest rate earned on our investments and the credited 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 products.

During periods of increasing interest rates, we may offer higher crediting rates on interest-sensitive products, such as IUL insurance and fixed annuities, and we may increase crediting rates on in-force products to keep these products competitive. A rise in interest rates, in the absence of other countervailing changes, will result in a decline in the market value of our investment portfolio.

As part of our asset liability management (“ALM”) program, we have made a significant effort to identify the assets appropriate to different product lines and ensure investing strategies match the profile of these liabilities. Our ALM strategy is designed to align the expected cash flows from the investment portfolio with the expected liability cash flows. As such, a major component of our effort to manage interest rate risk has been to structure the investment portfolio with cash flow characteristics that are consistent with the cash flow characteristics of the insurance liabilities. We use actuarial models to simulate the cash flows expected from the existing business under various interest rate scenarios. These simulations enable us to measure the potential gain or loss in the fair 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 interest rates. When the durations of assets 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.

The duration of the investment portfolio, excluding cash and cash equivalents, derivatives, policy loans, and common stocks as of March 31, ~~2018,~~2019, is summarized as follows:


(dollars in millions)
(Dollars in millions)
Duration	Amortized Cost		% of Total		Amortized Cost		% of Total
0-4	$	7,401	32	%	$	8,975	37	%
5-9	6,325		27	%	7,074		29	%
10-14	7,005		30	%	6,693		27	%
15-19	2,527		11	%	1,801		7	%
20-25	43		—	%	32		—	%
Total	$	23,301	100	%	$	24,575	100	%

Credit Risk and Counterparty Risk

We are exposed to the risk that a counterparty will default on its contractual obligation resulting in financial loss. The major source of credit risk arises predominantly in our insurance operations’ portfolios of debt and similar securities. The fair value of our fixed maturity portfolio totaled ~~$21~~$22 billion and ~~$22~~$21 billion at March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. Our credit risk materializes primarily as impairment losses. We are exposed to occasional cyclical economic downturns, during which impairment losses may be significantly higher than the long-term historical average. This is offset by years where we expect the actual impairment losses to be substantially lower than the long-term average. Credit risk in the portfolio can also materialize as increased capital requirements as assets migrate into lower credit qualities over time. The effect of rating migration on our capital requirements is also dependent on the economic cycle and increased asset impairment levels may go hand in hand with increased asset related capital requirements.

We attempt to manage the risk of default and rating migration by applying disciplined credit evaluation and underwriting standards and limiting allocations to lower quality, higher risk investments. In addition, we diversify our exposure by issuer and country, using rating based issuer and country limits. We also set investment constraints that limit our exposure by industry segment. To limit the impact that credit risk can have on earnings and capital adequacy levels, we have portfolio-level credit risk constraints in place. Limit compliance is monitored on a monthly or, in some cases, daily basis.

In connection with the use of call options, we are exposed to counterparty credit risk-the risk that a counterparty fails to perform under the terms of the derivative contract. We have adopted a policy of only dealing with credit worthy counterparties and obtaining sufficient collateral where appropriate, as a means of attempting to mitigate the financial loss from defaults. The exposure and credit rating of the counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst ~~five~~ different approved counterparties to limit the concentration in one counterparty. Our policy allows for the purchase of derivative instruments from counterparties and/or clearinghouses that meet the required qualifications under the Iowa Code. The ~~internal credit department~~Company reviews the ratings of all the counterparties periodically. Collateral support documents are negotiated to further reduce the exposure when deemed necessary. See "Note 5. Derivative Financial Instruments" to our unaudited condensed consolidated financial statements for additional information regarding our exposure to credit loss.

~~Information regarding the Company's exposure to credit loss on the call options it holds is presented in the following table:~~

(dollars in millions) March 31, 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+ $ 2,636
$ 68
$ 24
$ 44
$ 2,780
$ 150
$ 118
$ 32
Deutsche Bank A-/A3/A- 1,634
40
40
—
1,345
51
55
(4 )
Morgan Stanley */A1/A+ 1,640
39
37
2
1,555
92
101
(9 )
Barclay's Bank A*+/A2/A 1,933
61
49
12
2,090
103
95
8
Canadian Imperial Bank of Commerce AA-/Aa3/A+ 3,074
83
78
5
2,807
96
98
(2 )
Total $ 10,917
$ 291
$ 228
$ 63
$ 10,577
$ 492
$ 467
$ 25

~~(a) An * represents credit ratings that were not available.~~

We also have credit risk related to the ability of reinsurance counterparties to honor their obligations to pay the contract amounts under various agreements. To minimize the risk of credit loss on such contracts, we diversify our exposures among many reinsurers and limit the amount of exposure to each based on credit rating. We also generally limit our selection of counterparties with which we do new transactions to those with an “A-” credit rating or above and/or that are appropriately collateralized and provide credit for reinsurance. When exceptions are made to that principle, we ensure that we obtain collateral to mitigate our risk of loss. The following table presents our reinsurance recoverable balances and financial strength ratings for our five largest reinsurance recoverable balances as of March 31, ~~2018:~~2019:



(Dollars in millions)		Financial Strength Rating
Parent Company/Principal Reinsurers	Reinsurance Recoverable	AM Best	S&P	Moody's
Wilton ~~Reinsurance~~Re	$~~1,572~~1,541	A+	Not Rated	Not Rated
~~Scottish Re~~Kubera Insurance (SAC) Ltd	~~183~~681	Not Rated	Not Rated	Not Rated
Security Life of Denver	~~168~~162	A	A	A2
~~London Life~~Hannover Re	~~112~~	A	~~Not Rated~~	~~Not Rated~~
~~Swiss Re Life and Health~~	~~105~~130	A+	AA-	~~Aa3~~Not Rated
London Life	108	A+	Not Rated	Not Rated

In the normal course of business, certain reinsurance recoverables are subject to reviews by the reinsurers. We are not aware of any material disputes arising from these reviews or other communications with the counterparties as of March 31, ~~2018~~2019 that would require an allowance for uncollectible amounts.

Through FSRC and F&G Re, the Company is exposed to insurance counterparty risk, which is the potential for FSRC and F&G Re to incur losses due to a client ~~retrocessionaire,~~ or partner becoming distressed or insolvent. This includes run-on-the-bank risk and collection risk. The run-on-the-bank risk is that a client’s in force block incurs substantial surrenders and/or lapses due to credit impairment, reputation damage or other market changes affecting the counterparty. Substantially higher than expected surrenders and/or lapses could result in inadequate in force business to recover cash paid out for acquisition costs. The collection risk for clients ~~and retrocessionaires~~ includes their inability to satisfy a reinsurance agreement because the right of offset is disallowed by the receivership court; the reinsurance contract is rejected by the receiver, resulting in a premature termination of the contract; and/or the security supporting the transaction becomes unavailable to ~~FSRC.~~ FSRC has not experienced a material default in connection with retrocession arrangements, nor has it experienced any material difficulty in collecting claims recoverable from retrocessionaires; however, no assurance can be given as to the future performance of such retrocessionaires or as to the recoverability of any such claims.and F&G Re.

FSRC isand F&G Re are exposed to the risk that a counterparty will default on its contractual obligation resulting in financial loss. The major source of credit risk arises predominantly in ~~FSRC’s~~FSRC and F&G Re’s funds withheld receivables portfolio that consists primarily of debt and equity securities. ~~FSRC’s~~FSRC and F&G Re’s credit risk materializes primarily as impairment losses. FSRC isand F&G Re are exposed to occasional cyclical economic downturns, during which impairment losses may be significantly

higher than the long-term historical average. This is offset by years where FSRC ~~expects~~and F&G Re expect the actual impairment losses to be substantially lower than the long-term average. Credit risk in the portfolio can also materialize as increased capital requirements as assets migrate into lower credit qualities over time. The effect of rating migration on ~~FSRC’s~~FSRC and F&G Re’s capital requirements is also dependent on the economic cycle and increased asset impairment levels may go hand in hand with increased asset related capital requirements.

FSRC ~~assumes~~and F&G Re assume reinsurance business from counterparties that seek to manage the risk of default and rating migration by applying credit evaluation and underwriting standards and limiting allocations to lower quality, higher risk investments. In addition, ~~FSRC’s~~FSRC and F&G Re’s reinsurance counterparties diversify their exposure by issuer and country, using rating based issuer and country limits and set investment constraints that limit its exposure by industry segment. To limit the impact that credit risk can have on earnings and capital adequacy levels, FSRC ~~has~~and F&G Re have portfolio-level credit risk constraints in place. Limit compliance is monitored on a daily or, in some cases, monthly basis.

Equity Price Risk

We are primarily exposed to equity price risk through certain insurance products, specifically those products with GMWB. We offer a variety of FIA contracts with crediting strategies linked to the performance of indices such as the S&P 500 Index, Dow Jones Industrials or the NASDAQ 100 Index. The estimated cost of providing GMWB incorporates various assumptions about the overall performance of equity markets over certain time periods. Periods of significant and sustained downturns in equity markets, increased equity volatility or reduced interest rates could result in an increase in the valuation of the future policy benefit or policyholder account balance liabilities associated with such products, resulting in a reduction in our net ~~income.~~income (loss). The rate of amortization of intangibles related to FIA products and the cost of providing GMWB could also increase if equity market performance is worse than assumed.

To economically hedge the equity returns on these products, we purchase derivatives to hedge the FIA equity exposure. The primary way we hedge FIA equity exposure is to purchase over the counter equity index call options from broker-dealer derivative counterparties approved by ~~our internal credit department.~~the Company. The second way to hedge FIA equity exposure is by purchasing exchange traded equity index futures contracts. Our hedging strategy enables us to reduce our overall hedging costs and achieve a high correlation of returns on the call options purchased relative to the index credits earned by the FIA contractholders. The majority of the call options are one-year options purchased to match the funding requirements underlying the FIA contracts. These hedge programs are limited to the current policy term of the FIA contracts, based on current participation rates. Future returns, which may be reflected in FIA contracts’ credited rates beyond the current policy term, are not hedged. We attempt to manage the costs of these purchases through the terms of our FIA contracts, which permit us to change caps or participation rates, subject to certain guaranteed minimums that must be maintained.

The derivatives are used to fund the FIA contract index credits and the cost of the call options purchased is treated as a component of spread earnings. While the FIA hedging program does not explicitly hedge GAAP income volatility, the FIA hedging program tends to mitigate a significant portion of the GAAP reserve changes associated with movements in the equity market and risk-free rates. This is due to the fact that a key component in the calculation of GAAP reserves is the market valuation of the current term embedded derivative. Due to the alignment of the embedded derivative reserve component with hedging of this same embedded derivative, there should be a reasonable match between changes in this component of the reserve and changes in the assets backing this component of the reserve. However, there may be an interim mismatch due to the fact that the hedges which are put in place are only intended to cover exposures expected to remain until the end of an indexing term. To the extent index credits earned by the contractholder exceed the proceeds from option expirations and futures income, we incur a raw hedging loss.

See "Note 5. Derivative Financial Instruments" to our unaudited condensed consolidated financial statements for additional details on the derivatives portfolio.

Fair value changes associated with these investments are intended to, but do not always, substantially offset the increase or decrease in the amounts added to policyholder account balances for index products. When index credits to policyholders exceed option proceeds received at expiration related to such credits, any shortfall is funded by our net investment spread earnings and futures income. For the three months ended March 31, ~~2018~~2019 and ~~the Predecessor three months ended March 31, 2017,~~2018, the annual index credits to policyholders on their anniversaries were ~~$131~~$24 and ~~$116,~~$131, respectively. Proceeds received at expiration on options related to such credits were $23 and $131, ~~and $115,~~ respectively.

Other market exposures are hedged periodically depending on market conditions and our risk tolerance. The FIA hedging strategy economically hedges the equity returns and exposes us to the risk that unhedged market exposures result in divergence between changes in the fair value of the liabilities and the hedging assets. We use a variety of techniques including direct estimation of market sensitivities and value-at-risk to monitor this risk daily. We intend to continue to adjust the hedging strategy as market conditions and risk tolerance change.

Sensitivity Analysis

The analysis below is hypothetical and should not be considered a projection of future risks. Earnings projections are before tax and non-controlling interest.

Interest Rate Risk

We assess interest rate exposures for financial assets, liabilities and derivatives using hypothetical test scenarios that assume either increasing or decreasing 100 basis point parallel shifts in the yield curve, reflecting changes in either credit spreads or risk-free rates.

If interest rates were to increase 100 basis points from levels at March 31, ~~2018,~~2019, the estimated fair value of our fixed maturity securities would decrease by approximately ~~$1,654.~~$1,530. The impact on shareholders’ equity of such decrease, net of income taxes (assumes a ~~35%~~21% tax rate) and intangibles adjustments, and the change in reinsurance related derivative would be a decrease of ~~$1,305~~$1,161 in AOCI and a decrease of ~~$1,261~~$1,121 in total shareholders’ equity. If interest rates were to decrease by 100 basis points from levels at March 31, ~~2018,~~2019, the estimated impact on the FIA embedded derivative liability of such a decrease would be an increase of ~~$237.~~$250.

The actuarial models used to estimate the impact of a one percentage point change in market interest rates incorporate numerous assumptions, require significant estimates and assume an immediate and parallel change in interest rates without any management of the investment portfolio in reaction to such change. Consequently, potential changes in value of financial instruments indicated by these simulations will likely be different from the actual changes experienced under given interest rate scenarios, and the differences may be material. Because we actively manage our investments and liabilities, the net exposure to interest rates can vary over time. However, any such decreases in the fair value of fixed maturity securities, unless related to credit concerns of the issuer requiring recognition of an OTTI, would generally be realized only if we were required to sell such securities at losses prior to their maturity to meet liquidity needs. Our liquidity needs are managed using the surrender and withdrawal provisions of the annuity contracts and through other means.

Equity Price Risk

Assuming all other factors are constant, we estimate that a decline in equity market prices of 10% would cause the market value of our equity investments to decrease by approximately ~~$77,~~$117, our call option investments to decrease by approximately ~~$17~~$14 based on equity positions and our FIA embedded derivative liability to decrease by approximately ~~$27~~$24 as of March 31, ~~2018. Because our equity investments are classified as AFS,~~2019. Due to the adoption of ASU 2016-01 in 2018, the 10% decline in market value of our equity securities would ~~not~~ affect current ~~earnings except to the extent that it reflects OTTI.~~earnings. These scenarios consider only the direct effect on fair value of declines in equity market levels and not changes in asset-based fees recognized as revenue, or changes in our estimates of total gross profits used as a basis for amortizing ~~DAC and VOBA.~~intangibles.


Item 4.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and participation of the Company’s management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the 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 period covered by this report. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that, as of March 31, ~~2018,~~2019, the Company’s disclosure controls and procedures were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Notwithstanding the foregoing, there can be no assurance that the Company’s disclosure controls and procedures will detect or uncover all failures of persons within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable, not absolute, assurance of achieving their control objectives.

Changes in Internal Control Over Financial Reporting

~~The design~~An evaluation was performed under the supervision of the Company's management, including the CEO and ~~implementation~~CFO, of whether any change in the Company's internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) ~~for the Company post-Business Combination has required and will continue to require significant time and resources from management and other personnel. During~~occurred during the quarter ended March 31, 2018, we were engaged in the process of the design and implementation of our internal control over financial reporting in a manner commensurate with the scale of our operations post-Business Combination.2019.

~~Except with respect to the activities described above,~~Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that no ~~significant changes~~change in the Company’s internal control over financial reporting occurred during the quarter ended March 31, ~~2018~~2019 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Limitations on the Effectiveness of Controls

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control 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.

PART II

Item 1. Legal Proceedings

See "Note 12. Commitments and Contingencies" to our unaudited condensed consolidated financial statements.

Item 1A. Risk Factors

A detailed discussion of our risk factors can be found in our ~~2017~~2018 Form 10-K, which can be found at the SEC's website www.sec.gov.

Our growth strategy includes selectively acquiring business through acquisitions of other insurance companies and reinsurance of insurance obligations written by unaffiliated insurance companies, and our ability There have been no material changes to ~~consummate these acquisitions on economically advantageous terms acceptable to us in~~ the ~~future is unknown.~~

We intend to grow our business in the future in part by acquisitions of other insurance companies and businesses, and through block reinsurance, which could materially increase the size of our business and could require additional capital, systems development and skilled personnel. Any such acquisitions could be funded through cash from operations, the issuance of equity of our Parent 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.

Moreover, we may experience challenges identifying, financing, consummating and integrating such acquisitions and block reinsurance transactions. Competition exists in the market for profitable blocks of business and such competition is likely to intensify as insurance businesses become more attractive targets.

~~It is also possible that merger and acquisition transactions will become less frequent, or be difficult to consummate due to financing or other~~risk factors ~~which could also make it more difficult for us to implement this aspect of our growth strategy. Our acquisition and block reinsurance transaction activities may also divert the~~

~~attention of our management from our business, which may have an adverse effect on our business and results of operations.~~

Occasionally we may acquire or seek to acquire an insurance company or business that writes businesses that are not core to our business. The ability of our management to transfer or source sufficient reasonably priced reinsurance for non-core businesses that we may acquire and want to dispose of may be limited. In the event that we were unable to find buyers or purchase adequate reinsurance, we would have to accept an increasedisclosed in our net risk exposures, revise our pricing to reflect higher reinsurance premiums, or otherwise modify our acquisitions and product offerings, each of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In furtherance of our strategy 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 reached, that any transactions would be consummated.2018 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~None.~~Purchases of Equity Securities by the Issuer

On December 19, 2018, the Company's board of directors authorized a share repurchase program of up to $150 of the Company's outstanding common stock. This program will expire on December 15, 2020, and may be modified at any time. Under the share repurchase program, the Company may repurchase shares from time to time in open market transactions or through privately negotiated transactions in accordance with applicable federal securities laws. Repurchases may also be made pursuant to a trading plan under Rule 10b5-1 of the Securities Exchange Act of 1934. The extent to which the Company repurchases its shares, and the timing of such purchases, will depend upon a variety of factors, including market conditions, regulatory requirements and other considerations, as determined by the Company.

The following table provides information about our repurchases of our ordinary shares during the quarter ended March 31, 2019.



	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs (1)
Period
January 1 to January 31, 2019	1,051,347	$	7.12	1,051,347	$	138
February 1 to February 28, 2019	20,652	7.49		20,652	138
March 1 to March 31, 2019	2,656,078	8.35		2,656,078	116
Total	3,728,077	$	8.00	3,728,077	$	116

(1) On December 19, 2018, the Company’s board of directors authorized and the Company announced a share repurchase program of up to $150 million of the Company’s outstanding ordinary shares. This repurchase program will expire on December 15, 2020, and may be modified at any time.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The following is a list of exhibits filed or incorporated by reference as a part of this ~~Annual~~Quarterly Report on Form ~~10-K.~~10-Q.



Exhibit No.		Description of Exhibits

10.1		Employment Agreement between FGL Holdings and Christopher Blunt, dated as of February 6, 2019 (incorporated by reference to Exhibit 10.69 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 1, 2019 (File No. 001-37779)).
31.1 *		Certification of Chief Executive Officer, pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 *		Certification of Chief Financial Officer, pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 *		Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 *		Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS *		XBRL Instance Document.
101.SCH *		XBRL Taxonomy Extension Schema.
101.CAL *		XBRL Taxonomy Extension Calculation Linkbase.
101.DEF *		XBRL Taxonomy Definition Linkbase.
101.LAB *		XBRL Taxonomy Extension Label Linkbase.
101.PRE *		XBRL Taxonomy Extension Presentation Linkbase.


*	Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		FGL HOLDINGS (Registrant)

Date:	May ~~9, 2018~~7, 2019	By:	/s/ Dennis R. Vigneau
			Chief Financial Officer
			(on behalf of the Registrant and as Principal Financial Officer)

~~-79~~-82



	March 31, 2018		December 31, 2017
Gross balance commercial mortgage loans	$	528	$	548
Allowance for loan loss	—		—
Net balance commercial mortgage loans	$	528	$	548



	March 31, 2018		December 31, 2017
Current to 30 days	$	528	$	548
Past due	—		—
Total carrying value	$	528	$	548



	Three months ended
	March 31, 2018
Net gains (losses) recognized during the period on equity securities	$	(6	)
Less: Net gains (losses) recognized during the period on equity securities sold during the period	1
Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date	$	(7	)