UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)



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

For the fiscal year ended September 30, ~~2016~~2017



¨	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: 001-36227

FIDELITY & GUARANTY LIFE

(Exact name of registrant as specified in its charter)



Delaware	46-3489149
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
Two Ruan Center 601 Locust Street, 14th Floor Des Moines, Iowa	50309
(Address of principal executive offices)	(Zip Code)

(800) 445-6758

(Registrant’s telephone number, including area code)

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

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



Title of each class:		Name of each exchange on which registered:
Common stock, par value $.01 per share		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ or No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ or No x

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) 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

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

Large Accelerated Filer ¨ Accelerated Filer x 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

As of March 31, ~~2016~~2017, the aggregate market value of the registrant’s common stock held by non-affiliates was approximately $~~293~~312 (based on the closing sale price of the registrant’s common stock as reported on the NYSE $2627.2480).

The number of shares of common stock outstanding as of November 1613, ~~2016~~2017 was 58,~~954~~999,~~049~~028.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information required by Part III of this document is incorporated by reference herein to specific portions of the registrant’s definitive proxy statement to be delivered to stockholders in connection with the 2017 Annual Meeting of StockholdersNone.

FIDELITY & GUARANTY LIFE

ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

		Page
	PART I
Item 1.	Business	6
Item 1A.	Risk Factors	25
Item 1B.	Unresolved Staff Comments	47
Item 2.	Properties	47
Item 3.	Legal Proceedings	47
Item 4.	Mine Safety Disclosures	47
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	48
Item 6.	Selected Financial Data	50
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	51
	Introduction	51
	Critical Accounting Policies and Estimates	54
	Results of Operations	63
	Recent Accounting Pronouncements	63
	Investment Portfolio	72
	Results of Operations	64
	Liquidity and Capital Resources	82
	Investment Portfolio	73
	Recent Accounting Pronouncements	62
	Liquidity and Capital Resources	83
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	8889
Item 8.	Financial Statements and Supplementary Data	9394
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	9394
Item 9A.	Controls and Procedures	9394
Item 9B.	Other Information	9496
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	9597
Item 11.	Executive Compensation	95105
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	95128
Item 13.	Certain Relationships and Related Transactions, and Director Independence	96131
Item 14.	Principal Accounting Fees and Services	96133
	PART IV
Item 15.	Exhibits, Financial Statements and Schedules	97135
	Exhibit Index	98136
	Signatures	101
Item 16.	Form 10-K Summary	138
	Signatures	139
	Index to Consolidated Financial Statements	F-1

Table of Contents

PART I

Unless the context otherwise indicates or requires, the terms “we”, “our”, “us”, “FGL”, and the “Company”, as used in this Form 10-K filing, refer to Fidelity & Guaranty Life (formerly, Harbinger F&G, LLC) and its subsidiaries and the term “FGLH” refers to Fidelity & Guaranty Life’s direct subsidiary Fidelity & Guaranty Life Holdings, Inc. FGL primarily operates through FGLH’s subsidiary, Fidelity & Guaranty Life Insurance Company (“FGL Insurance”), which is domiciled in Iowa. Our fiscal year ends on September 30 of each year.

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

Special Note Regarding Forward-Looking Statements

This annual 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” (Part I, Item 1A of this Form 10-K). Factors that could cause actual results to differ from those reflected in forward-looking statements relating to our operations and business include:


•	the ability to satisfy the closing conditions, including regulatory approvals, contained in the Merger Agreement


•	the impact on the stock price, business, financial condition and results of operations if the proposed merger is not consummated or not consummated timely;


•	the impact of the operating restrictions in the Merger Agreement and their impact on FGL;


•	litigation arising from the proposed merger;

•

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 impact of the Department of Labor "fiduciary" rule, finalized in April 2016, on the Company, its products, distribution and business model;


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


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


•	the accuracy of management’s assumptions and estimates;


•	the accuracy of our assumptions regarding the fair value and future performance of our investments;


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


•	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;

Table of Contents


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


•	our ability to defend ourselves against or respond to, potential litigation, enforcement investigations or increased regulatory scrutiny;


•	the impact of potential litigation, including class action litigation;


•	the impact of our reinsurers failing to meet or timely meet their assumed obligations, increasing their rates, or becoming subject to adverse developments that could materially adversely impact their ability to provide reinsurance to us at consistent and economical terms;


•	restrictions on our ability to use captive reinsurers and the impact of the anticipated implementation of principle-based reserving


•	the impact of interest rate fluctuations and withdrawal demands in excess of our assumptions;


•	the impact of market and credit risks;


•	equity market volatility;


•	credit market volatility or disruption;


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


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


•	potential adverse tax consequences if we generate passive income in excess of operating expenses;


•	the performance of third parties including third party administrators, independent distributors, underwriters, actuarial consultants and other service providers;


•	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;


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


•	our ability to protect our intellectual property;


•	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 maintain competitive policy expense costs;


•	adverse consequences if the independent contractor status of our insurance marketing organizations ("IMOs") is successfully challenged;


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


•	the inability of our subsidiaries and affiliates to generate sufficient cash to service all of their obligations;

• conflicts of interest between HRG Group Inc. or its affiliates, including Front Street Re (Cayman) Ltd. (“FSRCI”);

• the impact of non-performance of loans originated by Salus Capital Partners, LLC ("Salus");


•	our subsidiaries’ ability to pay dividends 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; and


•	the other factors discussed in “Risk Factors”, of (Part I, Item 1A of this 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.

Item 1. Business

Overview

Our Company

OnAs ~~November~~previously 8disclosed, ~~2015~~on April 17, 2017, FGL ~~entered~~terminated ~~into~~its an Agreement and Plan of Merger (as amended, the “Anbang Merger Agreement” ~~and the merger contemplated thereby, the “Merger”~~), bywith ~~and among FGL,~~ Anbang Insurance Group Co., Ltd., ~~a joint-stock insurance company established in the People’s Republic of China (“Anbang”), AB Infinity Holding, Inc., a Delaware corporation~~ and aits ~~wholly-owned subsidiary of Anbang (“AB Infinity”), and AB Merger Sub, Inc~~affiliates., As a ~~Delaware~~result ~~corporation and a newly formed, wholly-owned subsidiary~~ of ABthe ~~Infinity (“Merger Sub”)~~termination, ~~which~~FGL ~~was~~has ~~amended~~no onremaining ~~November~~obligations 3,under ~~2016, to extend~~ the ~~outside~~Anbang ~~termination date for the completion of the~~ Merger ~~from November 7, 2016 to February 8, 2017~~Agreement.

~~Pursuant~~ On toMay ~~the~~24, ~~Merger Agreement~~2017, atFGL ~~the~~entered ~~effective~~into ~~time~~an ofAgreement ~~the Merger, each issued~~ and ~~outstanding~~Plan ~~share~~ of ~~FGL~~Merger ~~common~~(the ~~stock~~“Merger ~~will~~Agreement”), beby ~~canceled~~ and ~~converted~~among ~~automatically~~CF ~~into~~Corporation, ~~the~~a ~~right~~Cayman toIslands ~~receive~~exempted ~~$26.80~~company in(“CF ~~cash~~Corp”), ~~without~~FGL ~~interest,~~US ~~other~~Holdings ~~than~~Inc., ~~any~~a ~~shares~~Delaware ofcorporation ~~common~~and ~~stock~~a wholly-owned byindirect ~~FGL~~subsidiary asof ~~treasury~~CF ~~stock~~Corp ~~or otherwise or owned by Anbang~~(“Parent”), ABFGL ~~Infinity or~~ Merger Sub ~~(which~~Inc., ~~will~~a beDelaware ~~canceled~~corporation and noa ~~payment~~wholly-owned ~~will~~direct besubsidiary ~~made~~of ~~with~~Parent ~~respect~~(“Merger ~~thereto~~Sub”), ~~shares~~and ofFGL. Subject ~~common stock granted pursuant~~ to ~~FGL’s~~the ~~employee~~terms ~~equity award plan~~ and ~~those~~conditions ~~shares~~ of ~~common~~the ~~stock~~Merger ~~with~~Agreement, ~~respect~~at tothe ~~which~~time ~~appraisal~~of ~~rights~~the ~~under~~closing ~~Delaware~~of ~~law~~the ~~are~~transactions ~~properly~~contemplated ~~exercised~~by ~~and~~the ~~not withdrawn. The~~ Merger Agreement, ~~permits~~Merger ~~FGL~~Sub towill ~~pay~~merge ~~out~~with aand ~~regular~~into ~~quarterly~~FGL ~~cash~~(the ~~dividend~~"Merger") onwith ~~its~~FGL ~~Common~~continuing ~~Stock~~as ~~prior to~~ the ~~closing~~surviving ofentity, ~~the~~which ~~transaction~~will inbecome an ~~amount not in excess of $0.065 per share~~, ~~per~~wholly-owned ~~quarter~~indirect ~~(the~~subsidiary ~~per share amount~~ of ~~FGL’s~~CF ~~most recently declared quarterly dividend)~~Corp.

AtPursuant ~~the~~to ~~effective time of~~ the Merger Agreement, ~~each~~at ~~(i)~~the ~~option~~effective totime ~~purchase shares~~ of ~~common~~the ~~stock~~Merger (athe ~~“Company~~"Effective ~~Stock Option”~~Time"), ~~and~~each ~~(ii)~~issued ~~restricted~~and outstanding share of common stock, inof ~~each~~FGL ~~case~~(the ~~whether~~"Common ~~vested~~Stock") ~~or unvested,~~ will ~~become~~be ~~fully~~cancelled ~~vested~~ and ~~automatically~~ converted automatically into the right to receive a$31.10 in cash, ~~payment~~without ~~equal~~interest to (the ~~product~~“Merger ~~of (1~~Consideration”), ~~the~~other ~~number~~than ofany shares ~~subject~~of toCommon ~~the~~Stock ~~award~~owned ~~(for~~by ~~RSUs,~~FGL ~~determined~~as attreasury ~~the~~stock ~~target~~or ~~performance~~otherwise ~~level)~~or ~~multiplied~~owned by ~~(2)~~CF ~~the~~Corp, Parent or Merger ~~Consideration~~Sub (~~less~~which ~~the~~will ~~exercise~~be ~~price~~cancelled ~~per~~and ~~share~~no inpayment ~~the~~will ~~case~~be ofmade ~~Company~~with ~~Stock~~respect ~~Options~~thereto)~~. In addition~~, atshares ~~the~~of ~~effective~~Common ~~time~~Stock ofgranted ~~the~~pursuant ~~Merger,~~to ~~each~~the ~~stock~~Company ~~option~~Equity Plan (~~“FGLH~~as ~~Stock~~defined ~~Option”)~~in ~~and~~the ~~restricted~~Merger ~~stock~~Agreement) ~~unit~~and ~~relating~~those to shares of ~~Fidelity~~Common &Stock ~~Guaranty~~with ~~Life~~respect ~~Holdings,~~to ~~Inc.,~~which aappraisal ~~subsidiary~~rights ofunder ~~FGL~~Delaware ~~(“FGLH”),~~law ~~whether~~are ~~vested~~properly orexercised ~~unvested, will become fully vested~~ and ~~automatically~~not ~~converted~~withdrawn. ~~into~~The ~~the~~Merger ~~right~~Agreement topermits ~~receive~~FGL ~~a cash payment equal~~ to ~~the~~pay ~~product~~out ofa ~~(A)~~regular ~~the~~quarterly ~~number~~cash ofdividend ~~shares~~on ofits ~~FGLH~~Common ~~stock~~Stock ~~subject~~prior to the ~~award~~closing ~~multiplied~~of ~~by (B)$152.44 (less~~ the ~~exercise~~transaction ~~price~~ in ~~the~~an ~~case~~amount ofnot ~~such FGLH Stock Options), and each dividend equivalent held~~ in ~~respect~~excess of a$0.065 ~~share~~per ~~of FGLH stock (a “DER”)~~share, ~~whether~~per ~~vested~~quarter ~~or unvested, will become fully vested and automatically converted into~~ (the ~~right~~per toshare ~~receive a cash payment equal to the~~ amount ~~accrued~~of ~~with~~FGL’s ~~respect~~most torecently ~~such~~declared ~~DER~~quarterly dividend).

OnAt ~~November~~the 8,Effective ~~2015~~Time, FSeach ~~Holdco~~(i) IIoption ~~Ltd.,~~to purchase shares of Common Stock (a ~~wholly~~“Company Stock Option”), (ii) restricted share of Common Stock and (iii) performance-~~owned~~based ~~subsidiary~~restricted stock unit relating to shares of ~~HRG~~Common ~~Group~~Stock (an “RSU”), ~~Inc.~~in ~~and~~each ~~direct~~case ~~holder~~whether ofvested 47or unvested,~~000,000~~ ~~shares~~will ofbecome ~~FGL’s~~fully ~~common~~vested ~~stock~~and ~~representing~~automatically ~~approximately~~converted ~~81%~~into the right to receive a cash payment equal to the product of (1) the ~~outstanding~~number of shares ofsubject ~~FGL’s~~to ~~common~~the ~~stock~~award (for RSUs, ~~delivered~~determined aat ~~written~~the ~~consent~~target ~~adopting~~performance level) multiplied by (2) the Merger Consideration (less the exercise price per share in the case of Company Stock Options). In addition, ~~authorizing~~at the Effective Time, ~~accepting~~each stock option (“FGLH Stock Option”) and ~~approving~~restricted instock ~~all~~unit ~~respects~~relating ~~the~~to ~~Merger~~shares ~~Agreement~~of FGLH, whether vested or unvested, will become fully vested and automatically converted into the ~~transactions~~right ~~contemplated~~to ~~thereby,~~receive ~~including~~a cash payment equal to the ~~Merger.~~product ~~The~~of ~~adoption~~(A) the number of shares of FGLH stock subject to the ~~Merger~~award ~~Agreement~~multiplied by ~~FGL’s~~(B) ~~stockholders~~$176.32 ~~required~~(less the ~~affirmative~~exercise ~~vote~~price orin ~~written~~the ~~consent~~case of ~~holders~~such ofFGLH atStock ~~least~~Options), and each dividend equivalent held in respect of a ~~majority~~share of FGLH stock (a “DER”), whether vested or unvested, will become fully vested and automatically converted into the ~~outstanding~~right ~~shares~~to ofreceive ~~FGL’s~~a ~~common~~cash ~~stock~~payment equal to the amount accrued with respect to such DER.

~~Pursuant~~Following toexecution of the Merger Agreement, ~~the~~FS ~~consummation~~Holdco ofII ~~the Merger is subject to satisfaction or waiver of certain closing conditions~~Ltd., ~~including,~~a ~~among~~corporation ~~others:~~organized ~~(i)~~under ~~an information statement with respect to~~ the ~~Merger~~laws ~~having been filed cleared by the SEC and having been sent to stockholders~~ of ~~FGL (in accordance with Regulation 14C under~~ the ~~Securities~~Cayman ~~Exchange~~Islands ~~Act of 1934, as amended~~ (~~the~~ “~~Exchange~~FS ~~Act~~Holdco”)), atwhich ~~least~~is ~~twenty~~a ~~(20)~~wholly ~~days~~owned ~~prior~~subsidiary toof ~~the~~HRG ~~closing~~Group, ~~on March 29~~Inc., ~~2016, FGL filed~~ a ~~definitive~~Delaware ~~information~~corporation ~~statement with the SEC;~~ (ii“HRG”), ~~the~~holding ~~absence~~a majority of ~~any~~the ~~law or order enacted,~~ issued ~~or enforced that is in effect~~ and ~~that~~outstanding ~~makes~~shares ~~the consummation~~ of ~~the~~Common ~~Merger illegal~~Stock, ~~prevents,~~executed ~~prohibits,~~and ~~restrains~~delivered orto ~~enjoins~~FGL ~~the~~a ~~consummation~~written ofconsent (the ~~Merger; and (iii~~“Consent”), ~~obtaining~~approving ~~the~~and ~~requisite~~adopting ~~approvals from~~ the ~~Iowa~~Merger ~~Insurance~~Agreement ~~Division, New York Department of Financial Services, Vermont Department of Financial Regulation, China Insurance Regulatory Commission~~ and the ~~Committee~~transactions oncontemplated ~~Foreign Investment in the United States. On November 25~~thereby, ~~2015,~~including ~~FGL obtained~~ the ~~requisite approval for the~~ Merger ~~from the Vermont Department of Financial Regulation~~. OnAs ~~March~~a ~~14,~~result ~~2016, FGL received notification from CFIUS that it had concluded all action under Section 721~~ of the ~~Defense~~execution ~~Production~~and ~~Act~~delivery of ~~1950,~~the ~~as amended~~Consent, ~~and determined that there are no unresolved national security concerns with respect to~~ the ~~Merger. The~~holders ~~parties~~of ~~are~~at ~~not~~least ~~required to file~~ a ~~notification~~majority of the ~~Merger~~outstanding ~~under~~shares ~~the Hart-Scott Rodino Antitrust Improvements Act~~ of ~~1976,~~FGL’s ascommon ~~amended,~~stock ~~due~~have toadopted anand ~~available~~approved ~~exemption.The~~the Merger Agreement ~~does not contain any financing condition or contingency~~.

Pursuant to the Merger Agreement, the consummation of the Merger is subject to the satisfaction or waiver of certain closing conditions, the following of which have been met: (i) on June 16, 2017, the Federal Trade Commission granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (ii) on August 8, 2017, CF Corp held an extraordinary general meeting in lieu of an annual general meeting of shareholders, at which CF Corp’s shareholders approved, among other items, all of the proposals relating to the Merger Agreement and the Merger; (iii) on August 14, 2017, FGL filed with the SEC and mailed to its stockholders a definitive information statement in connection with the Merger; (iv) on August 24, 2017, the Vermont Department of Financial Regulation granted its required regulatory approval relating to the Merger; and (v) on November 8, 2017, the New York Department of Financial Services granted its required regulatory approval relating to the Merger. On November 7, 2017, the Iowa Insurance Division held a public

~~The~~hearing ~~Merger Agreement includes customary representations, warranties and covenants of FGL, Anbang, AB Infinity and Merger Sub. Among other things, FGL and its subsidiaries are required~~ to ~~conduct~~consider ~~their~~whether ~~respective businesses and operations in~~ the ~~ordinary~~proposed ~~course~~acquisition of ~~business~~control ~~until the Merger is consummated. Pursuant to the Merger Agreement, Anbang has agreed to cause the full and complete performance by AB Infinity~~ of ~~all~~Fidelity of& ~~its~~Guaranty ~~obligations~~Life ~~pursuant~~Insurance toCompany ~~the~~complies ~~terms~~with of the ~~Merger~~standards ~~Agreement~~set ~~and~~forth inunder ~~the~~applicable ~~event~~Iowa ABinsurance Infinity does not fulfill all of its obligations pursuant to the terms of the Merger Agreement, Anbang will unconditionally and irrevocably perform such unperformed obligations of AB Infinity pursuant to the terms of the Merger Agreementlaws.

~~The~~Pursuant to the Merger Agreement, ~~contains~~the ~~certain~~consummation ~~provisions~~of ~~giving~~the ~~each~~Merger ofis ABsubject ~~Infinity~~to ~~and~~satisfaction ~~FGL~~or ~~rights~~waiver toof ~~terminate~~certain ~~the~~additional ~~Merger~~closing ~~Agreement~~conditions, ~~under~~including ~~certain~~the ~~circumstances.~~receipt ~~Upon~~of ~~termination~~regulatory ofapprovals from the ~~Merger~~Iowa ~~Agreement~~Insurance Division, ~~under~~and ~~specified~~the ~~circumstances~~absence of any law or order enacted, ~~FGL~~issued ~~may~~or beenforced ~~required~~that tois ~~pay~~in aeffect ~~termination~~and ~~fee~~that toprevents ABor ~~Infinity~~prohibits the consummation of ~~$51~~the ~~million~~Merger.

~~FGL~~The ~~and~~Merger ~~Anbang~~Agreement ~~are~~includes ~~committed~~customary torepresentations, ~~securing~~warranties ~~the~~and ~~remaining~~covenants ~~regulatory~~of ~~approvals~~FGL, ~~and~~CF ~~seek~~Corp, toParent ~~close~~and ~~the~~ Merger asSub. ~~expeditiously~~Among asother ~~possible~~things, ~~however,~~FGL ~~the~~and ~~closing~~its ofsubsidiaries ~~the~~are ~~Merger~~required ~~and~~to ~~the~~conduct ~~timing~~their ~~thereof~~respective isbusinesses ~~subject~~and tooperations in the ~~regulatory~~ordinary ~~review~~course ~~and~~of ~~approval~~business ~~process,~~until ~~none~~the ofMerger ~~which~~is ~~can be assured~~consummated.

The ~~foregoing description of the~~ Merger Agreement ~~and~~contains ~~the~~certain ~~transactions~~provisions ~~contemplated~~giving ~~thereby~~each ~~does~~of ~~not~~CF ~~purport to be complete and should be read concurrently with the other related disclosure in this report~~Corp, ~~and~~Parent ~~is subject to~~ and ~~qualified~~FGL byrights ~~in its entirety by reference~~ to ~~the~~terminate ~~text of~~ the Merger Agreement ~~filed~~under ~~with~~certain ~~the SEC~~circumstances. ~~FGL~~Upon ~~has~~termination ~~filed~~of ~~with~~ the ~~SEC and mailed to its stockholders a definitive information statement. in connection with the~~ Merger. ~~The~~Agreement, ~~information~~under ~~statement~~specified ~~and~~circumstances, ~~other relevant materials contain important information about~~ FGL, ~~Anbang,~~may ~~the~~be ~~Merger~~required ~~and~~to ~~related~~pay ~~matters. These~~a ~~documents~~termination ~~are~~fee ~~available~~to atCF noCorp ~~charge~~in onan ~~the~~aggregate ~~SEC’s~~amount ~~website~~of ~~at www~~$50.~~sec.gov. In addition, documents are also available for free from FGL by contacting FGL’s investor relations department at [email protected].~~

~~For~~FGL ~~over 50 years, our Company has been helping middle-income Americans prepare for retirement~~ and ~~unexpected~~CF ~~loss~~Corp ofare ~~life.~~committed ~~Our~~to ~~focus~~securing on the ~~middle-income~~remaining ~~market~~regulatory ~~gives~~approvals usand ~~access~~seek to ~~significant,~~close ~~underserved~~the ~~market~~Merger ~~niches~~as ~~and~~expeditiously ~~drives~~as ~~our product development. As of September 30~~possible, ~~2016~~however, ~~we had approximately 700,000 policyholders counting on~~ the ~~safety~~closing ~~and protection features~~ of ~~our~~the ~~fixed~~Merger ~~annuity~~ and ~~life~~the ~~insurance~~timing ~~products,~~thereof ~~and~~is wesubject ~~constantly seek~~ to ~~innovate~~the ~~our~~regulatory ~~products~~review toand ~~meet~~approval ~~their~~process, ~~evolving~~none ~~needs. We offer our products through a network~~ of ~~approximately~~which ~~200~~can ~~independent~~be ~~IMOs that in turn represent an estimated 35,000 independent agents~~assured.

~~Through~~The ~~the~~foregoing ~~efforts~~description of ~~our~~the ~~267~~Merger ~~employees,~~Agreement ~~who are primarily located in Baltimore, MD~~ and ~~Des~~the ~~Moines,~~transactions ~~IA,~~contemplated wethereby ~~offer~~does ~~various~~not ~~types~~purport ofto ~~fixed~~be ~~annuities~~complete and ~~life~~should ~~insurance~~be ~~products.~~read ~~Fixed~~concurrently ~~annuities~~with ~~represent~~the aother ~~retirement~~related ~~and~~disclosure ~~savings~~in ~~tool~~this ~~which~~report, ~~our~~and ~~customers~~is ~~rely~~subject onto ~~for principal protection~~ and ~~predictable~~qualified ~~income~~by ~~streams.~~in Inits ~~addition,~~entirety ~~our~~by ~~life~~reference ~~insurance products provide our customers with a complementary product that allows them~~ to ~~build~~the ontext ~~their savings and assign payment~~ of athe ~~death~~Merger ~~benefit~~Agreement tofiled awith ~~designated beneficiary upon~~ the ~~policyholder’s death~~SEC. ~~Currently,~~FGL ~~our~~has ~~most~~filed ~~popular~~with ~~products~~the ~~are~~SEC ~~fixed~~and ~~indexed~~mailed ~~annuities (“FIAs”) that tie contractual returns~~ to ~~specific~~its ~~market~~stockholders ~~indices, such as~~ the ~~Standard~~definitive &information ~~Poor's Ratings Services ("S&P") 500 Index~~statement. The ~~benefit~~definitive ofinformation ~~FIAs~~statement toand ~~our~~other ~~customers~~relevant ismaterials tocontain ~~provide~~important ainformation ~~portion~~about ofFGL, ~~the~~CF ~~gains of an underlying market index~~Corp, ~~while providing principal protection. We believe this mix of “some upside but limited downside” fills~~ the ~~need~~Merger ~~for~~and ~~middle-income~~related ~~Americans~~matters. ~~who~~These ~~must~~documents ~~save~~are ~~for~~available ~~retirement~~at ~~but~~no ~~who~~charge ~~want~~on ~~to limit~~ the ~~risk~~SEC’s ofwebsite ~~decline~~at ~~in their savings~~www.sec.gov. In addition ~~to FIAs~~, wedocuments are also ~~sell~~available ~~indexed~~for ~~universal~~free ~~life~~from ~~policies~~FGL ~~(“IULs”)~~by ~~and~~contacting ~~other~~FGL’s ~~fixed~~investor ~~annuities.~~relations department at [email protected].

InFor ~~Fiscal~~over ~~2016~~50 years, ~~FIAs generated approximately 71% of~~ our ~~total~~Company ~~sales~~has ~~and~~been ~~the~~helping ~~remaining~~middle-income ~~29%~~Americans ofprepare ~~sales~~for ~~was~~retirement ~~primarily~~and ~~generated~~unexpected ~~from~~loss ~~fixed~~of ~~annuity~~life. ~~sales~~Our ~~during~~focus on the ~~year.~~middle-income Wemarket ~~invest~~gives ~~the~~us ~~annuity~~access ~~premiums~~to insignificant, ~~fixed~~underserved ~~income~~market ~~securities~~niches and ~~options~~drives ~~that hedge~~ our ~~risk,~~product ~~predominantly~~development. ~~using~~As ~~call~~of ~~options~~September 30, on2017, ~~the~~we ~~S&P~~had ~~500~~approximately ~~Index~~700,000 ~~and~~policyholders ~~pass~~counting ~~through~~on the ~~market~~safety ~~index~~and ~~returns~~protection tofeatures of our ~~policyholders.~~fixed ~~The~~annuity ~~majority~~and oflife ~~our~~insurance products, ~~contain~~and ~~provisions~~we ~~that~~constantly ~~permit~~seek us to ~~annually~~innovate ~~adjust~~our ~~the~~products ~~formula~~to bymeet ~~which~~their ~~index~~evolving ~~credits~~needs. ~~are~~We ~~provided~~offer inour ~~response~~products tothrough ~~changing~~a ~~market~~network ~~conditions.~~of Inapproximately ~~addition,~~200 ~~our~~independent ~~annuity~~IMOs ~~contracts~~that ~~generally~~in ~~either~~turn ~~cannot~~represent bean ~~surrendered~~estimated or37,000 ~~include~~independent ~~surrender charges that discourage early redemptions~~agents.

Through the efforts of our 299 employees, who are primarily located in Baltimore, MD and Des Moines, IA, we offer various types of fixed annuities and life insurance products. Fixed annuities represent a retirement and savings tool which our customers rely on for principal protection and predictable income streams. In addition, our life insurance products provide our customers with a complementary product that allows them to build on their savings and assign payment of a death benefit to a designated beneficiary upon the policyholder’s death. Currently, our most popular products are fixed indexed annuities (“FIAs”) that tie contractual returns to specific market indices, such as the Standard & Poor's Ratings Services ("S&P") 500 Index. The benefit of FIAs to our customers is to provide a portion of the gains of an underlying market index, while providing principal protection. We believe this mix of “some upside but limited downside” fills the need for middle-income Americans who must save for retirement but who want to limit the risk of decline in their savings. In addition to FIAs, we also sell indexed universal life policies (“IULs”) and other fixed annuities.

In Fiscal 2017, FIAs generated approximately 72% of our total sales and the remaining 28% of sales was primarily generated from fixed annuity sales during the year. We invest the annuity premiums primarily in fixed income securities and options that hedge our risk, predominantly using call options on the S&P 500 Index, and replicate the market index returns to our policyholders. The majority of our products contain provisions that permit us to annually adjust the formula by which index credits are provided in response to changing market conditions. In addition, our annuity contracts generally either cannot be surrendered or include surrender charges that discourage early redemptions.

Our Strategy

We will seek to grow our business by pursuing a set of strategies aimed at delivering sustainable and profitable growth for shareholders; including:

• Protect Sales in Our Existing Market. We believe the demand for retirement and principal protection products in the IMO market will continue even under the Department of Labor "fiduciary" rule standards. Our focus will be on reconfiguring products and capabilities and partnering with the IMOs to successfully compete in the heightened regulatory environment.

standards. Our focus will be on reconfiguring products and capabilities and partnering with the IMOs to successfully compete in the heightened regulatory environment.


•	Strengthen the Foundation. We will execute foundational initiatives that strengthen the business and provide a platform for sustainable growth.


•	Enhance the FGL Experience. Building off the foundational initiatives, we will create a more engaging, customer-focused experience through accelerating the use of digital and improving the ease of doing business for our IMO partners and customers.


•	Leverage Product Capabilities for Additional Distribution. Capitalize on our manufacturing expertise and distribution partnerships to expand product reach.


•	Bottom-line, Profit-oriented Objectives. We focus on initiatives that we expect will deliver target profits and avoid markets and products when industry pricing makes it difficult to achieve targeted profit margins.

Competition

Our ability to compete is dependent upon many factors which include, among other things, our ability to develop competitive and profitable products, our ability to maintain stable relationships with our contracted IMOs, our ability to maintain low unit costs and our maintenance of adequate financial strength ratings from rating agencies. Principal competitive factors for FIAs are initial crediting rates, reputation for renewal crediting action, product features, brand recognition, customer service, cost, distribution capabilities and financial strength ratings of the provider. Competition may affect, among other matters, both business growth and the pricing of our products and services. Principal competitive factors for IULs are based on service and distribution channel relationships, price, brand recognition, financial strength ratings of our insurance subsidiaries and financial stability.

For detailed information about revenues, operating income and total assets of our Company, see Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements beginning on page F-1 in this report.

Products

Our experience designing and developing annuities and life insurance products will allow us to continue to introduce innovative products and solutions designed to meet customers’ changing needs. We work hand-in-hand with our distributors to devise the most suitable product solutions for the ever-changing market. We believe that, on a practical basis, we have a unique understanding of the safety, accumulation, protection, and income needs of middle-income Americans.

Annuity Products

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 pays principal and earnings in equal payments over some period of time.

Deferred Annuities

FIAs. Our FIAs allow contract owners the possibility of earning interest based on the performance of a specified market index, predominantly the S&P 500 Index, without risk to principal. The contracts include a provision for a minimum guaranteed surrender value calculated in accordance with applicable law. A market index tracks the performance of a specific group of stocks representing a particular segment of the market, or in some cases an entire market. For example, the S&P 500 Composite Stock Price Index is an index of 500 stocks intended to be representative of a broad segment of the market. All FIA products allow policyholders to allocate funds once a year among several different crediting strategies, including one or more index-based strategies and a traditional fixed rate strategy. High surrender charges apply for early withdrawal, typically for seven to fourteen years after purchase.

~~The value~~ to ~~the~~be ~~contractholder~~representative of ana ~~FIA~~broad ~~contract~~segment isof ~~equal to~~ the ~~sum~~market. ofAll ~~deposits~~FIA ~~paid,~~products ~~premium~~allow ~~bonuses~~policyholders ~~(described below), index credits, up~~ to aallocate ~~cap~~funds ~~and~~once a ~~participation~~year ~~rate~~among ~~based~~several ondifferent ~~the~~crediting ~~annual appreciation (based in certain situations on annual point-to-point~~strategies, ~~monthly~~including ~~point-to-point~~one or ~~monthly~~more ~~average~~index-based ~~calculations)~~strategies inand a ~~recognized~~traditional ~~market~~fixed ~~index~~rate ~~less any fees for riders~~strategy. ~~Caps~~High ~~generally~~surrender ~~range~~charges ~~from~~apply 3%for toearly ~~6% when measured annually and 1% to 3% when measured monthly~~withdrawal, ~~and~~typically ~~participation rates generally range from 30% to 100% of the performance of the applicable market index. The cap can be reset annually. Certain riders allow~~ for aseven ~~contractholder~~ to ~~increase~~fourteen ~~their~~years ~~cap~~after ~~for a set fee~~purchase. ~~As this fee is fixed, the contractholder may lose principal if the index credits received do not exceed the amount of such fee.~~

~~Approximately~~The ~~88%~~value ofto the ~~FIA~~contractholder ~~sales~~of ~~for~~an ~~Fiscal~~FIA ~~2016~~contract ~~involved~~is ~~“premium~~equal ~~bonuses”~~to orthe ~~vesting~~sum ~~bonuses.~~of ~~For~~deposits paid, premium bonuses (described below), weindex ~~increased~~credits, up to a cap and a participation rate based on the ~~initial~~annual ~~annuity~~appreciation ~~deposit~~(based byin certain situations on annual point-to-point, monthly point-to-point or monthly average calculations) in a ~~specified~~recognized ~~premium~~market ~~bonus~~index ofless any fees for riders. Caps generally range from 2% to 36% ~~and~~when ameasured ~~vesting~~annually ~~bonus~~and of 1% to 93%. ~~The~~when ~~vesting~~measured ~~bonuses~~monthly, ~~are~~and ~~earned~~participation ~~over~~rates ~~time,~~generally ~~which~~range ~~increases~~from ~~the~~30% ~~account~~to ~~value~~100% ~~when~~of the ~~bonus~~performance isof ~~settled~~the applicable market index. WeThe ~~made~~cap ~~compensating~~and ~~adjustments~~participation inrate ~~the~~can ~~commission~~be ~~paid~~reset annually. Certain riders allow for a contractholder to ~~the~~increase ~~agent~~their orcap for a set fee. As this fee is fixed, the ~~surrender~~contractholder ~~charges~~may onlose principal if the ~~policy~~index tocredits ~~offset~~received do not exceed the ~~premium~~amount ~~bonus~~of such fee.

AsApproximately ~~of September 30, 2016, 82~~88% of ~~our~~the FIA ~~contracts~~sales ~~were~~for ~~issued~~Fiscal ~~with~~2017 ainvolved ~~guaranteed~~“premium ~~minimum~~bonuses” ~~withdrawal~~or ~~benefit~~vesting ~~(“GMWB”) rider~~bonuses. ~~With~~For ~~this~~premium ~~rider~~bonuses, awe ~~contract~~increased ~~owner~~the ~~can~~initial ~~elect~~annuity todeposit ~~receive~~by ~~guaranteed~~a ~~payments~~specified ~~for~~premium ~~life~~bonus ~~from~~of ~~the~~2% ~~FIA contract without requiring the owner~~ to ~~annuitize the FIA contract value~~4%. The ~~amount~~vesting ofbonuses, ~~the~~which ~~living~~range ~~income~~from ~~benefit~~1% ~~available~~to is9%, ~~determined~~are byearned ~~the~~over ~~growth~~time inand increase the ~~policy's~~account ~~benefit base~~ value aswhen ~~defined in~~ the ~~FIA~~bonus ~~contract~~is ~~rider~~settled. ~~Typically~~We ~~this~~made ~~accumulates~~compensating ~~for~~adjustments 10in ~~years~~the ~~based~~commission onpaid ~~a guaranteed rate of 3%~~ to ~~7%. Guaranteed withdrawal payments may be stopped and restarted at~~ the ~~election~~agent ofor the ~~contract~~surrender ~~owner.~~charges ~~Some~~on of the ~~FIA~~policy ~~contract~~to ~~riders~~offset ~~that~~the wepremium ~~offer include an additional death benefit or an increase in benefit amounts under chronic health conditions~~bonus. ~~Rider fees range from 0.4% to 1%.~~

As of September 30, ~~2016~~2017, 86% of our FIA contracts were issued with a guaranteed minimum withdrawal benefit (“GMWB”) rider. With this rider, a contract owner can elect to receive guaranteed payments for life from the ~~distribution~~FIA ofcontract without requiring the owner to annuitize the FIA ~~account~~contract ~~values~~value. The amount of the living income benefit available is determined by ~~cap~~the growth in the policy's benefit base value as defined in the FIA contract rider. Typically this accumulates for 10 years based on a guaranteed rate of 3% to 7%. Guaranteed withdrawal payments may be stopped and byrestarted ~~strategy~~at ~~was~~the aselection ~~follows:~~ of the contract owner. Some of the FIA contract riders that we offer include an additional death benefit or an increase in benefit amounts under chronic health conditions. Rider fees range from 0% to 1%.

Cap rate	0% to 3%		3% to 5%		> 5%		Total
1 year gain trigger	$	294	$	262	$	33	$	589
1-2 year monthly average	413		808		194		1,415
1-3 year monthly point-to-point	3,911		159		—		4,070
1-3 year annual point-to-point	1,089		1,819		353		3,261
3 year step forward	—		24		127		151
Total	$	5,707	$	3,072	$	707	$	9,486

As of September 30, 2017, the distribution of the FIA account values by cap rate and by strategy was as follows:

Fixed Rate Annuities. Fixed rate annuities include annual reset and multi-year rate guaranteed policies. Fixed rate annual reset annuities issued by us have an annual interest rate (the “crediting rate”) that is guaranteed for the first policy year. After the first policy year, we have the discretionary ability to change the crediting rate once annually to any rate at or above a guaranteed minimum rate. Fixed rate multi-year guaranteed annuities are similar to fixed rate annual reset annuities except that the initial crediting rate is guaranteed for a specified number of years before it may be changed at our discretion. For Fiscal 2016, we sold $94 in fixed rate annual reset annuities and $536 of fixed rate multi-year guaranteed annuities. As of September 30, 2016, crediting rates on outstanding (i) single-year guaranteed annuities generally ranged from 2% to 6% and (ii) multi-year guaranteed annuities ranged from 1% to 6%. The average crediting rate on all outstanding fixed rate annuities at September 30, 2016, was 3%.



Cap rate	0% to 3%		3% to 5%		> 5%		Total
1 year gain trigger	$	443	$	206	$	40	$	689
1-2 year monthly average	613		735		123		1,471
1-3 year monthly point-to-point	4,414		87		—		4,501
1-3 year annual point-to-point	1,560		1,647		362		3,569
3 year step forward	—		27		119		146
Total	$	7,030	$	2,702	$	644	$	10,376

Fixed Rate Annuities. Fixed rate annuities include annual reset and multi-year rate guaranteed policies. Fixed rate annual reset annuities issued by us have an annual interest rate (the “crediting rate”) that is guaranteed for the first policy year. After the first policy year, we have the discretionary ability to change the crediting rate once annually to any rate at or above a guaranteed minimum rate. Fixed rate multi-year guaranteed annuities are similar to fixed rate annual reset annuities except that the initial crediting rate is guaranteed for a specified number of years before it may be changed at our discretion. For Fiscal 2017, we sold $546 of fixed rate multi-year guaranteed annuities. As of September 30, ~~2016~~2017, ~~the~~crediting ~~distribution~~rates ofon ~~the~~outstanding ~~fixed~~(i) single-year ~~rate~~guaranteed ~~annuity~~annuities ~~account~~generally ~~values~~ranged byfrom 2% to 6% and (ii) multi-year guaranteed annuities ranged from 1% to 6%. The average crediting rate ~~was~~on asall ~~follows:~~ outstanding fixed rate annuities at September 30, 2017, was 3%.

Crediting rate		1% to 2%				2% to 3%				3% to 4%				4% to 5%				5% to 6%
Account value		$	43			$	196			$	2,764			$	435			$	48

As of September 30, 2017, the distribution of the fixed rate annuity account values by crediting rate was as follows:



Crediting rate	1% to 2%		2% to 3%		3% to 4%		4% to 5%		5% to 6%		Total
Account value	$	39	$	176	$	3,213	$	373	$	42	$	3,843

As of September 30, ~~2016~~2017, the multi-year guaranteed annuities expiring guaranty account values, net of reinsurance by year were as follows:

	Multi-Year Rate Guaranteed Annuities
Duration by Year:	Account Value
Duration by Fiscal Year:	Account Value
2017	$	644
2018	$	298
2018	270
2019	767
2019	769
2020	220
2020	202
2021	572
2021	570
2022	996
Thereafter	8191
Total	$	2,~~536~~944

Withdrawal Options for Deferred Annuities. After the first year following the issuance of a FIA deferred annuity policy, holders of deferred annuities are typically permitted penalty-free withdrawals up to 10% of the prior year’s value, subject to certain limitations. Withdrawals in excess of allowable penalty-free amounts are assessed a surrender charge if such withdrawals are made during the penalty period of the deferred annuity policy. The penalty period typically ranges from seven to fourteen years for FIAs and three to ten years for fixed rate annuities. This surrender charge initially ranges from 0% to 15% of the contract value for FIAs and 0% to 1312% of the contract value for fixed rate annuities and generally decreases by approximately one to two percentage points per year during the penalty period. The average surrender charge is 8% for our FIAs and 6% for our fixed rate annuities as of September 30, ~~2016~~2017.

The following table summarizes our deferred annuity account values and surrender charge protection as of September 30, ~~2016~~2017:

	Fixed and Fixed Index Annuities Account Value		Percent of Total		Weighted Average Surrender Charge
SURRENDER CHARGE EXPIRATION BY YEAR
Out of surrender charge	$	2,~~394~~605	16	%	—	%
2016	203		1	%	3	%
2017	197		1	%	5	%
2017-2018	2,441		16	%	5	%
2018 - 2019	2,194		13	%	5	%
2019-2020	1,769		12	%	7	%
2020 - 2021	1,912		11	%	7	%
2021-2022	1,964		13	%	8	%
2022 - 2023	2,181		13	%	8	%
Thereafter	67,~~479~~730		4246	%	11	%
Total	$	1516,~~250~~819	100	%

The policyholder may elect to take the proceeds of the surrender either in a single payment or in a series of payments over the life of the policyholder or for a fixed number of years (or a combination of these payment options). In addition to the foregoing withdrawal rights, policyholders may also elect to have additional withdrawal rights by purchasing a GMWB. These riders provide a GMWB, regardless of index performance, for the life of the contract. However, the benefit may vary based on performance.

Immediate Annuities

We also sell single premium immediate annuities (or “SPIAs”), which provide a series of periodic payments for a fixed period of time or for the life of the policyholder, according to the policyholder’s choice at the time of issue. The amounts, frequency and length of time of the payments are fixed at the outset of the annuity contract. SPIAs are often purchased by persons at or near retirement age who desire a steady stream of payments over a future period of years.

The following table presents the deposits (also known as “sales”) on annuity policies issued by us for the fiscal years ended September 30, ~~2016~~2017, ~~2015~~2016, and ~~2014~~2015 as well as reserves required by ~~accounting~~U.S. ~~principles~~ generally accepted inaccounting ~~the~~principles ~~United States of America~~ (“U.S. GAAP Reserves”) as of September 30, ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015:

September 30, 2016

September 30, 2015

September 30, 2014

September 30, 2017

September 30, 2016

September 30, 2015

Deposits onAnnuityPolicies

U.S.GAAPReserves

Deposits onAnnuityPolicies

U.S.GAAPReserves

Deposits onAnnuityPolicies

U.S.GAAPReserves

Products

Fixed indexed annuities

1,~~861~~893

1314,~~148~~237

21,~~185~~861

1213,~~094~~148

12,~~451~~185

1012,~~767~~094

Fixed rate annuities

~~539~~557

3,~~566~~910

~~211~~539

3,~~249~~566

~~708~~211

3,~~192~~249

Single premium immediate annuities

2815

2,~~917~~845

1628

2,~~956~~917

1016

32,~~202~~956

Total

2,~~428~~465

1920,~~631~~992

2,~~412~~428

1819,~~299~~631

2,~~169~~412

1718,~~161~~299

Life Insurance

We currently offer IUL insurance policies and have previously sold term and whole life insurance products. Holders of universal life insurance policies earn returns on their policies which are credited to the policyholder’s cash value account. The insurer periodically deducts its expenses and the cost of life insurance protection from the cash value account. The balance of the cash value account is credited interest at a fixed rate or returns based on the performance of a market index, or both, at the option of the policyholder, using a method similar to that described above for FIAs.

Almost all of the life insurance policies in force, except for the return of premium benefits on term life insurance products, are subject to an arrangement with Wilton Reassurance Company (“Wilton Re”). See “Reinsurance-Wilton Re Transaction” on page 1716.

As of September 30, ~~2016~~2017, the distribution of the retained IUL account values by cap rate and by strategy was as follows:

Cap rate	2.5%-5.0%		5.0-7.5%		7.5%-10.0%		10.0-12.5%		12.5+		Total
1 year annual point-to-point, Gold Index	$	—	$	—	$	—	$	—	$	2331	$	2331
1 year monthly point-to-point, S&P Index	3231		—		—		—		—		3231
1 year annual point-to-point with 100% par rate, S&P Index	1312		76		2635		~~104~~116		7197		~~221~~266
1 year annual point-to-point with 140% par rate, S&P Index	32		34		1517		—		—		2123
Total	$	4845	$	10	$	4152	$	~~104~~116	$	94128	$	~~297~~351

Distribution

The sale of our products typically occurs as part of a four-party, three stage sales process between FGL Insurance, an IMO, the agent and the customer. FGL Insurance designs, manufactures, issues, and services the product. The IMOs will usually sign contracts with multiple insurance carriers to provide their agents with a broad and competitive product portfolio. The IMO will discuss product options over the phone with agents about to meet with clients. The IMO staff will also provide assistance to the agent during the selling and application process. The agent may get customer leads from the IMOs. The agent will conduct a fact find and present suitable product choices to the customers. We monitor each distribution partner for pricing metrics, mortality, persistency, as well as market conduct and suitability.

Within this business model, we offer our products through a network of approximately 200 IMOs, representing approximately 3537,000 agents, and identify our most important IMOs - - those who we believe ~~either~~ have ~~shown or have~~ the ~~potential to show the~~ ability to generate significant production for the Company - as “Power Partners”. We currently have 32 Power Partners, comprised of 21 annuity IMOs and 11 life insurance IMOs. During Fiscal ~~2016~~2017, these Power Partners accounted for approximately 95% of our annual sales volume. We believe that our relationships with these IMOs are strong. The average tenure of the top ten Power Partners is approximately 14 years.

relationships with these IMOs are strong. The average tenure of the top ten Power Partners is approximately 14 years.

Our Power Partners play an important role in the development of our products. Over the last ten years, the majority of our best-selling products have been developed with our Power Partners. We intend to continue to have the Power Partners play an important role in the development of our products in the future, which we believe provides us with integral feedback throughout the development process and assists us with competing for “shelf space” of new design launches.

The top five states for the distribution of FGL Insurance’s products in ~~2016~~2017 were California, ~~Texas~~Florida, ~~Florida~~Texas, ~~New~~Michigan ~~Jersey~~ and ~~Michigan~~New Jersey, which together accounted for 4543% of FGL Insurance’s premiums.

Investments

We embrace a long-term conservative investment philosophy, investing nearly all the insurance premiums we receive in a wide range of fixed income interest-bearing securities.

Our internal asset management team manages the bulk of the investment portfolio,. ~~and~~For ~~with respect to~~ certain asset classes, we utilize experienced third party companies, including our affiliates. As of September 30, ~~2016~~2017, 7180% of our $1921 billion fixed maturity investment portfolio was managed by our employees, with the 2920% balance managed by third parties. Our investment strategy is designed to (i) achieve strong absolute returns, (ii) provide consistent yield and investment income, and (iii) preserve capital. We base all of our decisions on fundamental, bottom-up research, coupled with a top-down view that respects the cyclicality of certain asset classes.

In addition to active management of assets, our Investments department is also responsible for defining portfolio strategy, managing our asset/liability profile and hedging our product guarantees.

The types of assets in which we may invest are influenced by various state laws, which prescribe qualified investment assets applicable to insurance companies. Additionally, we define risk tolerance across a wide range of factors, including credit risk, liquidity risk, concentration (issuer and sector) risk, and caps on specific asset classes, which in turn establish conservative risk thresholds.

Our investment portfolio consists of high quality fixed maturities, including publicly issued and privately issued corporate bonds, municipal and other government bonds, asset-backed securities ("ABS"), residential mortgage-backed securities ("RMBS"), commercial mortgage-backed securities ("CMBS") and commercial mortgage loans ("CMLs"). We also maintain holdings in floating rate, and less rate-sensitive investments, including senior tranches of collateralized loan obligations (“CLOs”), non-agency RMBS, and various types of ABS. It is our expectation that our investment portfolio will broaden in scope and diversity to include other asset classes held by life and annuity insurance writers. We also have a small amount of equity holdings through our funding arrangement with the Federal Home Loan Bank of Atlanta.

Portfolio Activity

Over the last year, we continued to work with our internal asset management team and third party asset managers to broaden the portfolio’s exposure to include United States dollar ("USD") denominated emerging market bonds, highly rated preferred stocks and hybrids, and structured securities including ABS.

As a result of these portfolio repositionings, we currently maintain:

• a well matched asset/liability profile (asset duration, including cash and cash equivalents, of 6.5278 years vs. liability duration of 6.8076 years); and

• a large exposure to less rate-sensitive assets (1918% of invested assets).

For further discussion of portfolio activity, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Investment Portfolio”.

Derivatives

Our FIA contracts permit the holder to elect to receive a return based on an interest rate or the performance of a market index, most typically based on the S&P 500 Index. 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 the index credits due to policyholders under the FIA contracts based upon policyholders' contract elections. The majority of all such call options are one-year options purchased to match the funding requirements underlying the FIA contracts. On the anniversary dates of the FIA contracts, the market

policyholders' contract elections. The majority of all such call options are one-year options purchased to match the funding requirements underlying the FIA contracts. On the respective anniversary dates of the applicable FIA contracts, the market index used to compute the annual index credit under the ~~applicable~~ FIA contract is reset. At such time, we purchase new one-, two-, three-, or five-year call options to fund the next index credit. We manage the cost 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 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 related 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.

Outsourcing

We outsource the following functions to third-party service providers:

• new business administration (date entry and policy issue only);


•	service of existing policies;


•	underwriting administration of life insurance applications;


•	call centers;


•	information technology development and maintenance;


•	investment accounting and custody; and


•	hosting of financial systems.

We closely manage our outsourcing partners and integrate their services into our operations. We believe that outsourcing such functions allows us to focus capital and FGL employees on our core business operations and perform differentiating functions, such as investment, actuarial, product development and risk management functions. In addition, we believe an outsourcing model provides predictable pricing, service levels and volume capabilities and allows us to benefit from technological developments that enhance our customer self-service and sales processes.

We outsource our new business and existing policy administration for annuity and life products to Transaction Applications Group, Inc. Under this arrangement, Transaction Applications Group, Inc. manages ~~all~~most of our call center and processing requirements. Our current agreement expires on ~~March~~December 31, ~~2017~~2021. Additionally, in August 2017, we partnered with Concentrix to administer a portion of our annuity new business processing and the servicing of these issued annuity contracts (administration and call center activities).

We have partnered with CRL-Plus (“CRL-Plus”) to implement our life insurance underwriting policies. Under the terms of the arrangement, CRL-Plus has assigned FGL a dedicated team of underwriters with ~~Fellow~~appropriate ~~Life~~professional ~~Management~~designations ~~Institute~~and ~~designations~~experience. Underwriting guidelines for each product are established by our Chief Underwriter in collaboration with our actuarial department. Our Chief Underwriter and actuarial department work closely with the applicable reinsurance company to establish or change guidelines. Adherence to underwriting guidelines is managed at a case level through ~~daily~~monthly underwriting audits conducted by our Chief Underwriter as well as the CRL-Plus lead underwriter. ~~Every three years~~Periodically, underwriting audits are conducted by our reinsurers. Our current agreement with CRL-Plus ~~expires~~is inreviewed ~~December 2016~~annually. We believe that we have a good relationship with our principal outsource service providers.

Ratings

Our access to funding and our related cost of borrowing, the attractiveness of certain of our products to customers and requirements for derivatives collateral posting are affected by our credit ratings and insurance financial strength ratings, which are periodically reviewed by the rating agencies. Financial strength ratings and credit ratings are important factors affecting public confidence in an insurer and its competitive position in marketing products.

As of September 30, ~~2016~~2017, A.M. Best Company ("A.M. Best"), Fitch Ratings ("Fitch"), Moody’s Investors Service ("Moody's") and S&P Global Ratings ("S&P") issued financial strength credit and/or ratings and outlook statements regarding FGLH and its wholly -owned insurance subsidiaries, FGL Insurance and Fidelity & Guaranty Life Insurance Company of New York (“FGL NY Insurance”), as listed below. Credit ratings represent the opinions of rating agencies regarding an entity’s ability to repay its indebtedness. Financial strength ratings represent the

opinions of rating agencies regarding the ability of an insurance company to meet its financial obligations under an insurance policy and generally involve quantitative and qualitative evaluations by rating agencies of a company’s financial condition and operating performance. Generally, rating agencies base their financial strength ratings upon information furnished to them by the insurer and upon their own investigations, studies and assumptions. Financial strength ratings are based upon factors of concern to policyholders, agents and intermediaries and are not directed toward the protection of investors. Credit and financial strength ratings are not recommendations to buy, sell or hold securities and they may be revised or revoked at any time at the sole discretion of the rating organization.

Following the announcement of the proposed Merger on November 9, 2015, the rating organizations have undertaken a review of our debt ratings and our insurance company subsidiaries’ financial strength ratings. The rating organizations may take various actions, positive or negative. Such actions are beyond FGL's control and FGL cannot predict what these actions may be and the timing thereof.

	A.M. Best	Fitch	Moody's	S&P
Company
Fidelity & Guaranty Life Insurance Company
Financial Strength Rating	B++ (5 of 16)	BBB (9 of 21)	Baa3 (10 of 21)	BBB- (10 of 22)
Outlook	Under Review With Developing Implications	Stable	Positive	CreditWatch Developing
Fidelity & Guaranty Life Insurance Company of New York
Financial Strength Rating	B++ (5 of 16)	BBB (9 of 21)	Not Rated	BBB- (10 of 22)
Outlook	Under Review With Developing Implications	Stable	Not Rated	CreditWatch Developing
Fidelity & Guaranty Life Holdings, Inc.
Senior Unsecured Notes	bb+ (11 of 22)	BB- (13 of 21)	Ba3 (13 of 21)	BB- (13 of 22)
Issuer Credit / Default Rating	bb+ (11 of 22)	BB (12 of 21)	Not Rated	BB- (13 of 22)
Outlook	Under Review With Developing Implications	Positive	Positive	CreditWatch Developing
*Reflects current ratings and outlooks as of date of filing

In addition to the financial strength ratings, rating agencies use an “outlook statement” to indicate a medium or long term trend which, if continued, may lead to a rating change. A positive outlook indicates a rating may be raised and a negative outlook indicates a rating may be lowered. A stable outlook is assigned when ratings are not likely to be changed. A developing outlook is assigned when a rating may be raised, lowered, or affirmed. Outlooks should not be confused with expected stability of the issuer’s financial or economic performance. A rating may have a "stable" outlook to indicate that the rating is not expected to change, but a "stable" outlook does not preclude a rating agency from changing a rating at any time without notice.

Following the announcement of the CF Corp Merger Agreement on May 24, 2017, the rating organizations have undertaken a review of our debt ratings and our insurance company subsidiaries’ financial strength ratings. The rating organizations may take various actions, positive or negative. Such actions are beyond FGL's control and FGL cannot predict what these actions may be and the timing thereof.



	A.M. Best	Fitch	Moody's	S&P
Company
Fidelity & Guaranty Life Insurance Company
Financial Strength Rating	B++ (5 of 16)	BBB (9 of 21)	Baa2 (9 of 21)	BBB- (10 of 22)
Outlook	Under Review With Developing Implications	Stable	Stable	CreditWatch Positive
Fidelity & Guaranty Life Insurance Company of New York
Financial Strength Rating	B++ (5 of 16)	BBB (9 of 21)	Not Rated	BBB- (10 of 22)
Outlook	Under Review With Developing Implications	Stable	Not Rated	CreditWatch Positive
Fidelity & Guaranty Life Holdings, Inc.
Senior Unsecured Notes	bb+ (11 of 22)	BB- (13 of 21)	Ba2 (12 of 21)	BB- (13 of 22)
Issuer Credit / Default Rating	bb+ (11 of 22)	BB (12 of 21)	Not Rated	BB- (13 of 22)
Outlook	Under Review With Developing Implications	Rating Watch Positive	Stable	CreditWatch Positive
*Reflects current ratings and outlooks as of date of filing

A.M. Best, Fitch, Moody’s and S&P review their ratings of insurance companies from time to time. There can be no assurance that any particular rating will continue for any given period of time or that it will not be changed or withdrawn entirely if, in their judgment, circumstances so warrant. While the degree to which ratings adjustments will affect sales and persistency is unknown, we believe if our ratings were to be negatively adjusted for any reason, we could experience a material decline in the sales of our products and the persistency of our existing business. See “Item 1A. Risk Factors”.

Potential Impact of a Ratings Downgrade

Under some International Swaps and Derivatives Association, Inc. ("ISDA") agreements, we have 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 contracts between the parties, at which time any amounts payable by us or the counterparty would be dependent on the market value of the underlying derivative contracts.

Our current rating allows multiple counterparties the right to terminate ISDA agreements, at which time the counterparty would unwind existing positions for fair market value. No ISDA agreements have been terminated, although the counterparties have reserved the right to terminate the ISDA agreements at any time. As of September 30, ~~2016~~2017, the amount due to the Company at risk for ISDA agreements which could be terminated based upon our current ratings was $~~276~~413, which equals the fair value to us of the open over-the-counter call option positions. The fair value of the call options can never decrease below zero. See "Item 7A. Quantitative and Qualitative Disclosures about Market Risk-Credit Risk and Counterparty Risk”.

In certain transactions, we and the counterparty have entered into a collateral support agreement requiring either party to post collateral when the net exposures exceed predetermined thresholds. These thresholds vary by counterparty and credit rating, however are generally zero. As of September 30, ~~2016~~2017 and ~~2015~~2016, $~~128~~381 and $7128, respectively, of collateral was posted by our counterparties. Accordingly, the maximum amount of loss due to credit risk that we would incur if parties to the call options failed completely to perform according to the terms of the contracts was $~~148~~32 and $74148 at September 30, ~~2016~~2017 and ~~2015~~2016, respectively.

If the insurance subsidiaries held net short positions against a counterparty, and the subsidiaries’ financial strength ratings were below the levels required in the ISDA agreement with the counterparty, the counterparty would demand immediate further collateralization which could negatively impact overall liquidity. Based on the market value of our derivatives as of September 30, ~~2016~~2017 and ~~2015~~2016, we hold no net short positions against a counterparty; therefore, there is currently no potential exposure for us to post collateral.

A downgrade of the financial strength rating of one of our principal insurance subsidiaries could affect our competitive position in the insurance industry and make it more difficult for us to market our products, as potential customers may select companies with higher financial strength ratings. A downgrade of the financial strength rating could also impact the Company's borrowing costs.

Risk Management

Risk management is a critical part of our business. We seek to assess risk to our business through a formalized process involving (i) identifying short-term and long-term strategic and operational objectives, (ii) development of risk appetite statements that establish what the company is willing to accept in terms of risks to achieving its goals and objectives, (iii) identifying the levers that control the risk appetite of the company, (iv) establishing the overall limits of risk acceptable for a given risk driver, (v) establishing operational risk limits that are aligned with the tolerances, (vi) assigning risk limit quantification and mitigation responsibilities to individual team members within functional groups, (vii) analyzing the potential qualitative and quantitative impact of individual risks, including but not limited to stress and scenario testing covering over 8 economic and insurance related risks, (viii) mitigating risks by appropriate actions and (ix) identifying, documenting and communicating key business risks in a timely fashion.

The responsibility for monitoring, evaluating and responding to risk is assigned first to our management and employees, second to those occupying specialist functions, such as legal compliance and risk teams, and third to those occupying supervisory functions, such as internal audit and the board of directors.

In compliance with the Risk Management and Own Risk and Solvency Assessment Model Act (ORSA), FGL Insurance submitted an ORSA report to the state regulators in November ~~2015~~2017 to provide risk management transparency and insight in the financial strength and long-term sustainability of the Companies.

Reinsurance

FGL both cedes reinsurance and assumes reinsurance from other insurance companies. We use reinsurance ~~both~~ to diversify risks, ~~and~~ manage loss exposures~~. For instance~~, ~~we have sought reinsurance coverage in order~~ to ~~limit our exposure to mortality losses and~~ enhance our capital position~~. The portion of risks exceeding our retention limit is reinsured with other insurers. The use of reinsurance permits us to write policies in excess of amounts we would typically seek to retain~~, and ~~also~~ to ~~write~~manage ~~a larger volume of~~ new business. volume.

In instances where we are the ceding company, we pay a premium to a reinsurer in exchange for the reinsurer assuming a portion of our liabilities under the policies we issued and collect expense allowances in return for our administration of the ceded policies. Use of reinsurance does not discharge our liability as the ceding company because we remain directly liable to our policyholders and are required to pay the full amount of our policy obligations in the event that our reinsurers fail to satisfy their obligations. We collect reimbursement from our reinsurers when we pay claims on policies that are reinsured. In instances where we assume reinsurance from another insurance company, we accept, in exchange for a reinsurance premium, a portion of the liabilities of the other insurance company under the policies that the ceding company has issued to its policyholders.

ofWe monitor the ~~liabilities~~credit ofrisk related to the ~~other~~ability ~~insurance~~of ~~company~~our reinsurers to honor their obligations under ~~the~~various ~~policies~~agreements. ~~that~~To minimize the ~~ceding~~risk ~~company~~of ~~has~~credit ~~issued~~loss on such contracts, we generally diversify our exposures among many reinsurers and limit the amount of exposure to ~~its~~each ~~policyholders~~based on financial strength ratings, which are reviewed at least quarterly. We are able to further manage risk via funds withheld arrangements.

We monitor the credit risk related to the ability of our reinsurers to honor their obligations under various agreements. To minimize the risk of credit loss on such contracts, we generally diversify our exposures among many reinsurers and limit the amount of exposure to each based on financial strength ratings, which are reviewed at least quarterly.

See “Item 1A. Risk Factors” for further discussion of reinsurance credit risk.

Wilton Re Transaction

On January 26, 2011, FGL entered into an agreement (the “Commitment Agreement”) with Wilton Re U.S. Holdings, Inc. (“Wilton”), pursuant to which Wilton agreed to cause Wilton Re, its wholly -owned subsidiary, to enter into certain coinsurance arrangements with FGL Insurance following the closing of the FGLH Acquisition. Pursuant to the Commitment Agreement, Wilton Re has reinsured a 100% quota share of certain of FGL Insurance’s policies that are subject to redundant reserves under Regulation XXX and Guideline AXXX, as well as another block of FGL Insurance’s in-force traditional, and IUL insurance policies.

Wilton Re’s reinsurance of such FGL Insurance policies has not extinguished FGL Insurance’s liability with respect to such business because FGL Insurance remains directly liable to policyholders and is required to pay the full amount of its policy obligations in the event that Wilton Re fails to satisfy its obligations with respect to the reinsured business.

The Front Street Reinsurance Transactions

On December 31, 2012, following regulatory approval, FGL Insurance entered into a coinsurance agreement (the “Cayman Reinsurance Agreement”) with FSRCI, at the time, an indirectly wholly -owned subsidiary of FGL. Pursuant to the Cayman Reinsurance Agreement, FSRCI reinsured a 10% quota share percentage of certain FGL Insurance annuity liabilities of approximately $1 billion and the funds withheld assets are $1 billion. Under the terms of the agreement, FSRCI paid an initial ceding allowance of $15 which was determined to be fair and reasonable according to an independent third-party actuarial firm. The coinsurance agreement is on a funds withheld basis, meaning that funds are withheld by FGL Insurance from the coinsurance premium owed to FSRCI as collateral for FSRCI’s payment obligations. Accordingly, the collateral assets remain under the ultimate ownership of FGL Insurance. ~~The effects of this transaction were eliminated in our consolidated financial statements for the period January 1, 2013 through August 9, 2013.~~ See "Note 13. Reinsurance" to our audited Consolidated Financial Statements. As of September 30, ~~2016~~2017, ceded reserves are $1 billion.

Effective September 17, 2014, FGL Insurance entered into a second reinsurance treaty with FSRCI whereby FGL Insurance ceded 30% of any new business of its multi-year guaranteed annuity ("MYGA") block of business on a funds withheld basis. This treaty was subsequently terminated as to new business effective April 30, 2015, but will remain in effect for policies ceded to FSRCI with an effective date between September 17, 2014 and April 30, 2015. ~~Accordingly, policies issued with an effective date of May 1, 2015 and later will not be ceded to FSRCI.~~

Hannover Reinsurance Transaction

Effective January 1, 2017, the Company entered into a reinsurance agreement with Hannover Re, a third party reinsurer, to reinsure an inforce block of its FIA and fixed deferred annuity contracts with Guaranteed Minimum Withdraw Benefit (“GMWB”) and Guaranteed Minimum Death Benefit (“GMDB”) secondary guarantees. In accordance with the terms of this agreement, the Company cedes 70% net retention of secondary guarantee payments in excess of account value for GMWB and GMDB guarantees. Effective July 1, 2017, the Company extended this agreement to include new business issued during 2017.

Reserve Facilities

Life insurance companies operating in the United States must calculate required reserves for life and annuity policies based on statutory principles. These methodologies are governed by “Regulation XXX” (applicable to term life insurance policies), “Guideline AXXX” (applicable to universal life insurance policies with secondary guarantees) and the Commissioners Annuity Reserve Valuation Method, known as “CARVM” (applicable to annuities). Under Regulation XXX, Guideline AXXX and CARVM, insurers are required to establish statutory reserves for such policies that exceed economic reserves. The industry has reduced or eliminated redundancies thereby increasing capital using a variety of techniques including reserve facilities.

The CARVM Facility. On October 5, 2012, FGL Insurance entered into a yearly renewable term indemnity reinsurance agreement with Raven Reinsurance Company ("Raven Re"), a wholly -owned subsidiary of FGL Insurance (the “Raven Reinsurance Agreement”), pursuant to which FGL Insurance ceded a 100% quota share of its CARVM liability for annuity benefits where surrender charges are waived. To collateralize its obligations under the Raven Reinsurance Agreement, Raven Re entered into a reimbursement agreement with Nomura Bank International plc (“NBI”), an affiliate of Nomura Securities International, Inc., and FGL (the “Reimbursement Agreement”) whereby a subsidiary of NBI issued trust notes and NBI issued a $295 letter of credit that, in each

Insurance (the “Raven Reinsurance Agreement”), pursuant to which FGL Insurance ceded a 100% quota share of its CARVM liability for annuity benefits where surrender charges are waived. To collateralize its obligations under the Raven Reinsurance Agreement, Raven Re entered into a reimbursement agreement with Nomura Bank International plc (“NBI”), an affiliate of Nomura Securities International, Inc., and FGL (the “Reimbursement Agreement”) whereby a subsidiary of NBI issued trust notes and NBI issued a $295 letter of credit that, in each case, were deposited into a reinsurance trust as collateral for Raven Re’s obligations under the Raven Reinsurance Agreement (the “NBI Facility”). Pursuant to the NBI Facility, FGL Insurance takes full credit on its statutory financial statements for the CARVM reserve ceded to Raven Re. The letter of credit facility automatically reduces each calendar quarter by $6. As of September 30, ~~2016~~2017, there was $~~201~~115 available under the letter of credit facility. ~~The NBI Facility will terminate on September 30, 2017, although the facility may terminate earlier, in accordance with the terms of the Reimbursement Agreement.~~ Under the terms of the Reimbursement Agreement, in the event the letter of credit is drawn upon, Raven Re is required to repay the amounts utilized, and FGLH is obligated to repay the amounts utilized if Raven Re fails to make the required reimbursement. FGLH also is required to make capital contributions to Raven Re in the event that Raven Re’s statutory capital and surplus falls below certain defined levels. As of December 31, ~~2015~~2016, Raven Re’s statutory capital and surplus was $2824 in excess of the minimum level required under the Reimbursement Agreement.

Effective April, 1 2017, FGL Insurance and Raven Re amended the reinsurance treaty and related trust and letter of credit agreements to extend the term of the letter of credit which would have matured on September 30, 2017. The amendments added additional in-force business to the reinsurance treaty (fixed indexed annuities without a guaranteed minimum withdrawal benefit rider and multi-year guarantee annuities (“MYGA”) issued between January 1, 2011 and December 31, 2016). No initial ceding commission was paid or received by FGL Insurance or Raven Re in connection with the cession of additional in-force business. No assets were transferred to or from FGL Insurance or Raven Re in connection with the cession of additional in-force business. The amendments extended the letter of credit for an additional five year period and reduced the face amount of the letter of credit at April 1, 2017 from $183 to $115. The facility may terminate earlier in accordance with the Reimbursement Agreement.

See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk-Credit Risk and Counterparty Risk”.

Regulation

Overview

FGL Insurance, FGL NY Insurance and Raven Re are subject to comprehensive regulation and supervision in their domiciles, Iowa, New York and Vermont, respectively, and in each state in which they do business. FGL Insurance does business throughout the United States, except for New York. FGL NY Insurance only does business in New York. Raven Re is a special purpose captive reinsurance company that only provides reinsurance to FGL Insurance under the CARVM Treaty. Following its redomestication to Iowa, FGL Insurance’s principal insurance regulatory authority is the IID. State insurance departments throughout the United States also monitor FGL Insurance’s insurance operations as a licensed insurer. The New York State Department of Financial Services (“NYDFS”) regulates the operations of FGL NY Insurance, which is domiciled and licensed in New York. The purpose of these regulations is primarily to protect policyholders and beneficiaries and not general creditors and shareholders of those insurers. Many of the laws and regulations to which FGL Insurance and FGL NY Insurance are subject are regularly re-examined and existing or future laws and regulations may become more restrictive or otherwise adversely affect their operations.

Generally, insurance products underwritten by and rates used by FGL Insurance and FGL NY Insurance must be approved by the insurance regulators in each state in which they are sold. Those products are also substantially affected by federal and state tax laws. For example, changes in tax law could reduce or eliminate the tax-deferred accumulation of earnings on the deposits paid by the holders of annuities and life insurance products, which could make such products less attractive to potential purchasers. A shift away from life insurance and annuity products could reduce FGL Insurance’s and FGL NY Insurance’s income from the sale of such products, as well as the assets upon which FGL Insurance and FGL NY Insurance earn investment income. In addition, insurance products may also be subject to the Employee Retirement Income Security Act of 1974 ("ERISA").

State insurance authorities have broad administrative powers over FGL Insurance and FGL NY Insurance with respect to all aspects of the insurance business including:


•	licensing to transact business;


•	licensing agents;


•	prescribing which assets and liabilities are to be considered in determining statutory surplus;


•	regulating premium rates for certain insurance products;


•	approving policy forms and certain related materials;


•	determining whether a reasonable basis exists as to the suitability of the annuity purchase recommendations producers make;


•	regulating unfair trade and claims practices;


•	establishing reserve requirements and solvency standards;


•	regulating the amount of dividends that may be paid in any year;


•	regulating the availability of reinsurance or other substitute financing solutions, the terms thereof and the ability of an insurer to take credit on its financial statements for insurance ceded to reinsurers or other substitute financing solutions;


•


•	fixing maximum interest rates on life insurance policy loans and minimum accumulation or surrender values; and


•	regulating the type, amounts, and valuations of investments permitted, transactions with affiliates, and other matters.

Financial Regulation

State insurance laws and regulations require FGL Insurance, FGL NY Insurance and Raven Re to file reports, including financial statements, with state insurance departments in each state in which they do business, and their operations and accounts are subject to examination by those departments at any time. FGL Insurance, FGL NY Insurance and Raven Re prepare statutory financial statements in accordance with accounting practices and procedures prescribed or permitted by these departments.

The National Association of Insurance Commissioners ("NAIC") has approved a series of statutory accounting principles and various model regulations that have been adopted, in some cases with certain modifications, by all state insurance departments. These statutory principles are subject to ongoing change and modification. For instance, the NAIC adopted, effective with the annual reporting period ending December 31, 2010, revisions to the Annual Financial Reporting Model Regulation (or the Model Audit Rule) related to auditor independence, corporate governance and internal control over financial reporting. These revisions require that insurance companies, such as FGL Insurance and FGL NY Insurance, file reports with state insurance departments regarding their assessments of internal control over financial reporting. Moreover, compliance with any particular regulator’s interpretation of a legal or accounting issue may not result in compliance with another regulator’s interpretation of the same issue, particularly when compliance is judged in hindsight. Any particular regulator’s interpretation of a legal or accounting issue may change over time to FGL Insurance’s or FGL NY Insurance’s detriment, or changes to the overall legal or market environment, even absent any change of interpretation by a particular regulator, may cause FGL Insurance and FGL NY Insurance to change their views regarding the actions they need to take from a legal risk management perspective, which could necessitate changes to FGL Insurance’s or FGL NY Insurance’s practices that may, in some cases, limit their ability to grow and improve profitability.

State insurance departments conduct periodic examinations of the books and records, financial reporting, policy and rate filings, market conduct and business practices of insurance companies domiciled in their states, generally once every three to five years. Examinations are generally carried out in cooperation with the insurance departments of other states under guidelines promulgated by the NAIC. State insurance departments also have the authority to conduct examinations of non-domiciliary insurers that are licensed in their states. The Maryland Insurance Administration (“MIA”) completed a routine financial examination of FGL Insurance for the three-year period ended December 31, 2012, and found no material deficiencies and proposed no adjustments to the financial statements as filed. The NYDFS completed a routine financial examination of FGL NY for the three-year period ended December 31, 2009, and found no material deficiencies and proposed no adjustments to the financial statements as filed. The NYDFS is in the process of completing a routine financial examination of FGL NY Insurance for the three-year periods ended December 31, 2012.

Additionally, the Vermont Department of Financial Regulation has completed a routine financial examination of Raven Re for the period from April 7, 2011 (commencement of business) through December 31, 2012. It found no material deficiencies and proposed no adjustments to the financial statements as filed. 18

The Vermont Department of Financial Regulation has completed a routine financial examination of Raven Re for the period from April 7, 2011 (commencement of business) through December 31, 2012. It found no material deficiencies and proposed no adjustments to the financial statements as filed.

Going forward, FGL Insurance will be subject to financial and market conduct examinations by the IID, the primary regulatory authority for Iowa domestic life insurance companies.

Dividend and Other Distribution Payment Limitations

The Iowa insurance law and the New York insurance law regulate the amount of dividends that may be paid in any year by FGL Insurance and FGL NY Insurance, respectively. Each year, FGL Insurance and FGL NY Insurance may pay a certain limited amount of ordinary dividends or other distributions without being required to obtain the prior consent of the Iowa Insurance Commissioner (“Iowa Commissioner”) or the NYDFS, respectively. However, to pay any dividends or distributions (including the payment of any dividends or distributions for which prior consent is not required), FGL Insurance and FGL NY Insurance must provide advance written notice to the Iowa Commissioner or the NYDFS, respectively.

Pursuant to Iowa insurance law, ordinary dividends are payments, together with all other such payments within the preceding twelve months, that do not exceed the greater of (i) 10% of FGL Insurance’s statutory surplus as regards policyholders as of December 31 of the preceding year; or (ii) the net gain from operations of FGL Insurance (excluding realized capital gains) for the 12-month period ending December 31 of the preceding year.

as regards policyholders as of December 31 of the preceding year; or (ii) the net gain from operations of FGL Insurance (excluding realized capital gains) for the 12-month period ending December 31 of the preceding year.

In recent calendar years, FGL Insurance has had the dividend capacity and paid dividends to us as set forth in this table:

	2016		2015		2014		2013		2012
	2017		2016		2015		2014		2013
FGL Insurance Ordinary Dividend Capacity	$	124	$	121	$	124	$	106	$	85
FGL Insurance ordinary dividend capacity	$	132	$	124	$	121	$	124	$	106
FGL Insurance Ordinary Dividends Paid	—		—		—		40		40
FGL Insurance ordinary dividends paid	25		—		—		—		40

Any payment of dividends by FGL Insurance is subject to the regulatory restrictions described above and the approval of such payment by the board of directors of FGL Insurance, which must consider various factors, including general economic and business conditions, tax considerations, FGL Insurance’s strategic plans, financial results and condition, FGL Insurance’s expansion plans, any contractual, legal or regulatory restrictions on the payment of dividends and its effect on RBC and such other factors the board of directors of FGL Insurance considers relevant. For example, payments of dividends could reduce FGL Insurance’s RBC and financial condition and lead to a reduction in FGL Insurance’s financial strength rating. See “Item 1A. Risk Factors-Risks Relating to Our Business-A financial strength ratings downgrade, potential downgrade, or any other negative action by a rating agency could make our products less attractive and increase our cost of capital, and thereby adversely affect our financial condition and results of operations”.

FGL NY Insurance has historically not paid dividends. In 2012, FGL NY Insurance paid a $4 dividend to FGL Insurance after a determination that, as a result of capital contributions by FGL Insurance, FGL NY Insurance was overcapitalized.

Surplus and Capital

FGL Insurance and FGL NY Insurance are subject to the supervision of the regulators in states where they are licensed to transact business. Regulators have discretionary authority in connection with the continuing licensing of these entities to limit or prohibit sales to policyholders if, in their judgment, the regulators determine that such entities have not maintained the minimum surplus or capital or that the further transaction of business will be hazardous to policyholders.

Risk-Based Capital

In order to enhance the regulation of insurers’ solvency, the NAIC adopted a model law to implement RBC requirements for life, health and property and casualty insurance companies. All states have adopted the NAIC’s model law or a substantially similar law. RBC is used to evaluate the adequacy of capital and surplus maintained by an insurance company in relation to risks associated with: (i) asset risk, (ii) insurance risk, (iii) interest rate risk, and (iv) business risk. In general, RBC is calculated by applying factors to various asset, premium and reserve items, taking into account the risk characteristics of the insurer. Within a given risk category, these factors are higher for those items with greater underlying risk and lower for items with lower underlying risk. The RBC formula is used as an early warning regulatory tool to identify possible inadequately capitalized insurers for purposes of initiating regulatory action, and not as a means to rank insurers generally. Insurers that have less statutory capital than the RBC calculation requires are considered to have inadequate capital and are subject to varying degrees of regulatory action depending upon the level of capital inadequacy. As of the most recent annual statutory financial statements filed with insurance regulators, the RBC ratios for FGL Insurance and FGL NY Insurance each exceeded the minimum RBC requirements.

19It is desirable to maintain an RBC ratio in excess of the minimum requirements in order to maintain or improve our financial strength ratings. Our historical RBC ratios for FGL Insurance are presented in the table below. See “Item 1A. Risk Factors-Risks Relating to Our Business-A financial strength ratings downgrade, potential downgrade, or any other negative action by a rating agency could make our product offerings less attractive and increase our cost of capital, and thereby adversely affect our financial condition and results of operations”.

Nevertheless, it may be desirable to maintain an RBC ratio in excess of the minimum requirements in order to maintain or improve our financial strength ratings. Our historical RBC ratios are presented in the table below. See “Item 1A. Risk Factors-Risks Relating to Our Business-A financial strength ratings downgrade, potential downgrade, or any other negative action by a rating agency could make our product offerings less attractive and increase our cost of capital, and thereby adversely affect our financial condition and results of operations”.



	RBC Ratio
As of:
December 31, 2016	412	%
December 31, 2015	401	%
December 31, 2014	388	%
December 31, 2013	423	%
December 31, 2012	406	%

	RBC Ratio
As of:
December 31, 2015	401	%
December 31, 2014	388	%
December 31, 2013	423	%
December 31, 2012	406	%

Insurance Regulatory Information System Tests

The NAIC has developed a set of financial relationships or tests known as the Insurance Regulatory Information System ("IRIS") to assist state regulators in monitoring the financial condition of U.S. insurance companies and identifying companies that require special attention or action by insurance regulatory authorities. A ratio falling outside the prescribed “usual range” is not considered a failing result. Rather, unusual values are viewed as part of the regulatory early monitoring system. In many cases, it is not unusual for financially sound companies to have one or more ratios that fall outside the usual range. Insurance companies generally submit data annually to the NAIC, which in turn analyzes the data using prescribed financial data ratios, each with defined “usual ranges”. Generally, regulators will begin to investigate or monitor an insurance company if its ratios fall outside the usual ranges for four or more of the ratios. IRIS consists of a statistical phase and an analytical phase whereby financial examiners review insurers’ annual statements and financial ratios. The statistical phase consists of 12 key financial ratios based on year-end data that are generated from the NAIC database annually; each ratio has a “usual range” of results. As of December 31, ~~2015~~2016, FGL Insurance, had one ratio outside the usual range. FGL NY Insurance and Raven Re each had two ratios outside the usual range. The ~~FGL Insurance and Raven Re's~~ IRIS ratio for change in ~~premiums~~reserving ~~was~~for ~~outside~~both ~~the usual range.~~ FGL Insurance and FGL NY Insurance's was outside the usual range. The IRIS ratio for change in ~~reserving~~premium for both FGL NY Insurance and Raven Re was outside the usual range. In addition, ~~FGL NY Insurance and~~ Raven Re’s IRIS ratio for adequacy of investment income also fell outside of the usual range.

In all instances in prior years, regulators have been satisfied upon follow-up that no regulatory action was required. FGL Insurance, FGL NY Insurance and Raven Re are not currently subject to regulatory restrictions based on these ratios.

Insurance Reserves

State insurance laws require insurers to analyze the adequacy of reserves. The respective appointed actuaries for FGL Insurance, FGL NY Insurance and Raven Re must each submit an opinion on an annual basis that their respective reserves, when considered in light of the respective assets FGL Insurance, FGL NY Insurance and Raven Re hold with respect to those reserves, make adequate provision for the contractual obligations and related expenses of FGL Insurance, FGL NY Insurance and Raven Re. FGL Insurance, FGL NY Insurance and Raven Re have filed all of the required opinions with the insurance departments in the states in which they do business.

Credit for Reinsurance Regulation

~~credit up to the amount~~ of ~~the~~FGL unpaid liabilities of the reinsurer and (iii) a “funds withheld” arrangement by which the ceding company withholds transfer to the reinsurer of the reserves which support the liabilities to be owed by the reinsurerInsurance, ~~with~~FGL ~~the~~NY ~~ceding~~Insurance ~~insurer retaining title to~~ and ~~exclusive~~Raven ~~control over such reserves~~Re. In addition, on January 1, 2014, the NAIC Model Credit for Reinsurance Act became effective in Iowa, which adds the concept of “certified reinsurer”, whereby a ceding insurer may take financial statement credit for reinsurance provided by an unaccredited and unlicensed reinsurer which has been certified by the Iowa Commissioner. The Iowa Commissioner certifies reinsurers based on several factors, including their financial strength ratings, and imposes collateral requirements based on such factors. FGL Insurance, ~~and~~ FGL NY Insurance ~~are subject to such credit for reinsurance rules in Iowa~~ and ~~New~~Raven ~~York,~~Re ~~respectively,~~have ~~insofar~~filed asall ~~they~~of ~~enter~~the ~~into~~required ~~any~~opinions ~~reinsurance contracts~~ with ~~reinsurers~~the ~~which~~insurance ~~are~~departments ~~neither~~in ~~licensed~~the ~~nor~~states ~~accredited~~ in ~~Iowa~~which ~~and~~they ~~New~~do ~~York, respectively~~business.

Credit for Reinsurance Regulation

States regulate the extent to which insurers are permitted to take credit on their financial statements for the financial obligations that the insurers cede to reinsurers. Where an insurer cedes obligations to a reinsurer which is neither licensed nor accredited by the state insurance department, the ceding insurer is not permitted to take such financial statement credit unless the unlicensed or unaccredited reinsurer secures the liabilities it will owe under the reinsurance contract. Under the laws regulating credit for reinsurance issued by such unlicensed or unaccredited reinsurers, the permissible means of securing such liabilities are (i) the establishment of a trust account by the reinsurer to hold certain qualifying assets in a qualified U.S. financial institution, such as a member of the Federal Reserve, with the ceding insurer as the exclusive beneficiary of such trust account with the unconditional right to demand, without notice to the reinsurer, that the trustee pay over to it the assets in the trust account equal to the liabilities owed by the reinsurer; (ii) the posting of an unconditional and irrevocable letter of credit by a qualified U.S. financial institution in favor of the ceding company allowing the ceding company to draw upon the letter of credit up to the amount of the unpaid liabilities of the reinsurer and (iii) a “funds withheld” arrangement by which the ceding company withholds transfer to the reinsurer of the reserves which support the liabilities to be owed by the reinsurer, with the ceding insurer retaining title to and exclusive control over such reserves. In addition, on January 1, 2014, the NAIC Model Credit for Reinsurance Act became effective in Iowa, which adds the concept of “certified reinsurer”, whereby a ceding insurer may take financial statement credit for reinsurance provided by an unaccredited and unlicensed reinsurer which has been certified by the Iowa Commissioner. The Iowa Commissioner certifies reinsurers based on several factors, including their financial strength ratings, and imposes collateral requirements based on such factors. FGL Insurance and FGL NY Insurance are subject to such credit for reinsurance rules in Iowa and New York, respectively, insofar as they enter into any reinsurance contracts with reinsurers which are neither licensed nor accredited in Iowa and New York, respectively.

Insurance Holding Company Regulation

As the parent company of FGL Insurance and the indirect parent company of FGL NY Insurance, we and entities affiliated for purposes of insurance regulation are subject to the insurance holding company laws in Iowa and New York. These laws generally require each insurance company directly or indirectly owned by the holding company to register with the insurance department in the insurance company’s state of domicile and to furnish annually financial and other information about the operations of companies within the holding company system. Generally, all transactions between insurers and affiliates within the holding company system are subject to regulation and must be fair and reasonable, and may require prior notice and approval or non-disapproval by its domiciliary insurance regulator.

Most states, including Iowa and New York, have insurance laws that require regulatory approval of a direct or indirect change of control of an insurer or an insurer’s holding company. Such laws prevent any person from acquiring control, directly or indirectly, of HRG, FGL, FGLH, FGL Insurance or FGL NY Insurance unless that person has filed a statement with specified information with the insurance regulators and has obtained their prior approval. In addition, investors deemed to have a direct or indirect controlling interest are required to make regulatory filings and respond to regulatory inquiries. Under most states’ statutes, including those of Iowa and New York, acquiring 10% or more of the voting stock of an insurance company or its parent company is presumptively considered a change of control, although such presumption may be rebutted. Accordingly, any person who acquires 10% or more of our voting securities or that of HRG, FGL, FGLH, FGL Insurance or FGL NY Insurance without the prior approval of the insurance regulators of Iowa and New York will be in violation of those states’ laws and may be subject to injunctive action requiring the disposition or seizure of those securities by the relevant insurance regulator or prohibiting the voting of those securities and to other actions determined by the relevant insurance regulator.

Insurance Guaranty Association Assessments

Each state has insurance guaranty association laws under which insurers doing business in the state may be assessed by state insurance guaranty associations for certain obligations of insolvent insurance companies to policyholders and claimants. Typically, states assess each member insurer in an amount related to the member insurer’s proportionate share of the business written by all member insurers in the state. Although no prediction can be made as to the amount and timing of any future assessments under these laws, FGL Insurance and FGL NY ~~Insurance have established reserves that they believe are adequate for assessments relating to insurance companies that are currently subject to insolvency proceedings.~~

Market Conduct Regulation

State insurance laws and regulations include numerous provisions governing the marketplace activities of insurers, including provisions governing the form and content of disclosure to consumers, illustrations, advertising, sales and complaint process practices. State regulatory authorities generally enforce these provisions through periodic market conduct examinations. In addition, FGL Insurance and FGL NY Insurance must file, and in many jurisdictions and for some lines of business obtain regulatory approval for, rates and forms relating to the insurance written in the jurisdictions in which they operate. FGL Insurance is currently the subject of seven ongoing market conduct examinations in various states. Market conduct examinations can result in monetary fines or remediation and generally require FGL Insurance to devote significant resources to the management of such examinations. FGL Insurance does not believe that any of the current market conduct examinations it is subject to will result in any fines or remediation orders that will be material to its business.

Insurance have established reserves that they believe are adequate for assessments relating to insurance companies that are currently subject to insolvency proceedings.

Market Conduct Regulation

State insurance laws and regulations include numerous provisions governing the marketplace activities of insurers, including provisions governing the form and content of disclosure to consumers, illustrations, advertising, sales and complaint process practices. State regulatory authorities generally enforce these provisions through periodic market conduct examinations. In addition, FGL Insurance and FGL NY Insurance must file, and in many jurisdictions and for some lines of business obtain regulatory approval for, rates and forms relating to the insurance written in the jurisdictions in which they operate. FGL Insurance is currently the subject of four ongoing market conduct examinations in various states. Market conduct examinations can result in monetary fines or remediation and generally require FGL Insurance to devote significant resources to the management of such examinations. FGL Insurance does not believe that any of the current market conduct examinations it is subject to will result in any fines or remediation orders that will be material to its business.

Regulation of Investments

FGL Insurance and FGL NY Insurance are subject to state laws and regulations that require diversification of their investment portfolios and limit the amount of investments in certain asset categories, such as below investment grade fixed income securities, equity, real estate, other equity investments and derivatives. Failure to comply with these laws and regulations would cause investments exceeding regulatory limitations to be treated as either non-admitted assets for purposes of measuring surplus or as not qualified as an asset held for reserve purposes and, in some instances, would require divestiture or replacement of such non-qualifying investments. We believe that the investment portfolios of FGL Insurance and FGL NY Insurance as of September 30, ~~2016~~2017 complied in all material respects with such regulations.

Privacy Regulation

Our operations are subject to certain federal and state laws and regulations that require financial institutions and other businesses to protect the security and confidentiality of personal information, including health-related and customer information, and to notify customers and other individuals about their policies and practices relating to their collection and disclosure of health-related and customer information and their practices relating to protecting the security and confidentiality of such information. These laws and regulations require notice to affected individuals, law enforcement agencies, regulators and others if there is a breach of the security of certain personal information, including social security numbers, and require holders of certain personal information to protect the security of the data. Our operations are also subject to certain federal regulations that require financial institutions and creditors to implement effective programs to detect, prevent, and mitigate identity theft. In addition, our ability to make telemarketing calls and to send unsolicited e-mail or fax messages to consumers and customers and our uses of certain personal information, including consumer report information, are regulated. Federal and state governments and regulatory bodies may be expected to consider additional or more detailed regulation regarding these subjects and the privacy and security of personal information.

FIAs

In recent years, the U.S. Securities and Exchange Commission ("SEC") and state securities regulators have questioned whether FIAs, such as those sold by us, should be treated as securities under the federal and state securities laws rather than as insurance products exempted from such laws. Treatment of these products as securities would require additional registration and licensing of these products and the agents selling them, as well as cause us to seek additional marketing relationships for these products, any of which may impose significant restrictions on our ability to conduct operations as currently operated. Under the Dodd-Frank Act, annuities that meet specific requirements, including requirements relating to certain state suitability rules, are specifically exempted from being treated as securities by the SEC. We expect that the types of FIAs FGL Insurance and FGL NY Insurance sell will meet these requirements and therefore are exempt from being treated as securities by the SEC and state securities regulators. However, there can be no assurance that federal or state securities laws or state insurance laws and regulations will not be amended or interpreted to impose further requirements on FIAs.

The Dodd-Frank Act

The Dodd-Frank Act makes sweeping changes to the regulation of financial services entities, products and markets. Certain provisions of the Dodd-Frank Act are or may become applicable to us, our competitors or those entities with which we do business, including, but not limited to:


•	the establishment of federal regulatory authority over derivatives;


•	the establishment of consolidated federal regulation and resolution authority over systemically important financial services firms;


•	the establishment of the Federal Insurance Office;


•	changes to the regulation of broker dealers and investment advisors;


•	changes to the regulation of reinsurance;


•	changes to regulations affecting the rights of shareholders;


•	the imposition of additional regulation over credit rating agencies;


•


•	the imposition of concentration limits on financial institutions that restrict the amount of credit that may be extended to a single person or entity; and


•	the clearing of derivative contracts.

22Numerous provisions of the Dodd-Frank Act require the adoption of implementing rules or regulations, some of which have been implemented. In addition, the Dodd-Frank Act mandates multiple studies, which could result in additional legislation or regulation applicable to the insurance industry, us, our competitors or those entities with which we do business. Legislative or regulatory requirements imposed by or promulgated in connection with the Dodd-Frank Act may impact us in many ways, including, but not limited to:

Numerous provisions of the Dodd-Frank Act require the adoption of implementing rules or regulations. In addition, the Dodd-Frank Act mandates multiple studies, which could result in additional legislation or regulation applicable to the insurance industry, us, our competitors or those entities with which we do business. Legislative or regulatory requirements imposed by or promulgated in connection with the Dodd-Frank Act may impact us in many ways, including, but not limited to:


•	placing us at a competitive disadvantage relative to our competition or other financial services entities;


•	changing the competitive landscape of the financial services sector or the insurance industry;


•	making it more expensive for us to conduct our business;


•	requiring the reallocation of significant company resources to government affairs;


•	increasing our legal and compliance related activities and the costs associated therewith; or


•	otherwise having a material adverse effect on the overall business climate as well as our financial condition and results of operations.

Until various studies are completed and final regulations are promulgated pursuant to the Dodd-Frank Act, the full impact of the Dodd-Frank Act on investments, investment activities and insurance and annuity products of FGL Insurance and FGL NY Insurance remains unclear.

ERISA

We may offer certain insurance and annuity products to employee benefit plans governed by ERISA and/or the Code, including group annuity contracts designated to fund tax-qualified retirement plans. ERISA and the Code provide (among other requirements) standards of conduct for employee benefit plan fiduciaries, including investment managers and investment advisers with respect to the assets of such plans, and holds fiduciaries liable if they fail to satisfy fiduciary standards of conduct.

In April 2016, the Department of Labor ~~released~~(“DOL”) ~~its~~issued ~~final~~the “fiduciary” rule which could have a material impact on the Company, its products, distribution, and business model. The ~~final~~ rule ~~treats~~provides that persons who ~~provide~~render investment advice for a fee or other compensation with respect to ~~assets of~~ an employer plan or individual retirement account ("IRA") asare fiduciaries of that plan or IRA. The ~~Significantly, the~~ rule expands the definition of fiduciary under ERISA to apply to ~~persons, including~~ insurance agents, who advise and sell products to IRA owners. As a ~~practical matter~~result, ~~this means~~ commissioned insurance agents selling the Company’s IRA products must qualify for a prohibited transaction exemption, ~~which~~either ~~requires~~ the ~~agent~~newly ~~and~~introduced ~~financial~~Best ~~institution~~Interest toContract ~~meet~~Exemption ~~various~~(BICE) ~~conditions~~or ~~including~~amended ~~that~~PTE an84-24. When ~~annuity~~fully ~~sale be in the "best interest" of the client without regard for the agent’s~~implemented, ~~financial~~BICE ~~institution’s~~would orapply ~~other~~to ~~party’s~~fixed ~~financial~~indexed orannuities ~~other interests,~~ and ~~that~~amended ~~any~~PTE ~~compensation~~84-24 ~~paid~~would apply to ~~the~~fixed ~~agent~~rate ~~and financial institution be reasonable~~annuities. The ~~final~~ rule ~~is effective June 2016~~ and ~~generally~~exemptions ~~applicable~~have inbeen ~~April 2017. The rule has generated considerable controversy and is~~ the subject of ~~industry~~much ~~efforts~~controversy ~~to block implementation both in Congress~~ and ~~through~~various ~~court~~ actions. ~~The~~have ~~success~~been ortaken ~~failure~~by ofDOL ~~these~~to ~~efforts~~delay ~~cannot~~and bereconsider ~~predicted.~~aspects ~~Assuming~~of the rule isand ~~not~~exemptions. The ~~blocked, the precise impact of the~~ rule ontook ~~the~~effect ~~financial~~June ~~services~~2016 ~~industry more generally,~~ and ~~the~~was ~~impact~~scheduled onto ~~the~~become ~~Company~~applicable ~~and its business~~ in ~~particular,~~April is2017 ~~difficult~~but ~~to assess because~~ the ~~rule~~“applicability isdate" ~~new~~was ~~and~~delayed ~~still~~by ~~being~~DOL ~~studied.~~for ~~While~~60 wedays ~~continue~~from toApril ~~analyze the regulation~~10, we2017 ~~believe it could have an adverse effect on sales of annuity products~~ to ~~IRA~~June ~~owners~~9, ~~particularly in the independent agent distribution channel~~2017. DOL Aalso ~~significant~~acted ~~portion of our annuity sales are~~ to ~~IRAs.~~delay ~~Compliance~~many ~~with~~aspects of the prohibited transaction ~~exemptions~~exemption ~~would~~requirements ~~likely~~during ~~require~~a ~~additional~~transition ~~supervision~~period offrom ~~agents,~~June ~~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.~~

9, 2017 to January 1, 2018 provided the agent (and if applicable, financial institution) comply with “impartial conduct standards.” The impartial conduct standards essentially require the sale to be in the “best interest” of the client, misleading statements not be made, and compensation be reasonable. More recently, DOL has proposed extending the transition period to July 1, 2019 which at the present time is still under consideration. Industry continues its efforts to overturn the rule in court actions and Congress continues to consider related legislation but the success or failure of these efforts cannot be predicted. Assuming the rule is not overturned and the requirements 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 our 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. FGL Insurance will continue to monitor developments closely and believes it is prepared to execute implementation plans as necessary to meet the rule and exemption requirements on the requisite applicability dates.

Employees

As of September 30, ~~2016~~2017, we had ~~approximately~~299 ~~267~~ employees. We believe that we have a good relationship with our employees.

FGL Available Information

FGL’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are made available, free of charge, on or through the “Investor Relations” portion of our Internet website https://home.fglife.com. The public may read and copy any materials that the Company has filed with the SEC at the SEC's Public Reference Room located at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 800-SEC-0330. Reports filed with or furnished to the SEC will also be available as soon as reasonably practicable after they are filed with or furnished to the SEC and are available over the Internet at the SEC's website at http://www.sec.gov.

Reports filed with or furnished to the SEC will also be available as soon as reasonably practicable after they are filed with or furnished to the SEC and are available over the Internet at the SEC's website at http://www.sec.gov.

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Item 1A. Risk Factors

In addition to the other information set forth in this Annual Report on Form 10-K, you should carefully consider the following factors which could have a material adverse effect on our business, financial condition, results of operations or stock price. The risks below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also adversely affect our business, financial condition.

Risk factors related to the proposed merger with ~~Anbang~~CF Corporation are as follows:

The Merger is subject to various closing conditions, including regulatory approvals~~, no assurance can be provided that such conditions will be satisfied and when, or if, the closing of the Merger will occur~~.

OnAs ~~November~~described 8,in ~~2015,~~"Item ~~FGL entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among FGL, Anbang Insurance Group Co~~1., ~~Ltd., a joint~~Business-~~stock~~Overview-Our ~~insurance company established in the People’s Republic of China (“Anbang”)~~Company," ABon ~~Infinity~~May ~~Holding~~24, ~~Inc.~~2017, aFGL ~~Delaware~~entered ~~corporation~~into ~~and~~ a ~~wholly-owned~~Merger ~~subsidiary~~Agreement ofby ~~Anbang (“Parent”),~~ and ABamong ~~Merger~~CF ~~Sub, Inc~~Corp., aParent ~~Delaware corporation~~ and ~~a newly formed, wholly-owned subsidiary of Parent (“~~Merger Sub”). ~~Completion~~Subject ~~of the Merger is subject~~ to ~~various closing conditions, including, but not limited to, (1)~~ the ~~information~~terms ~~statement to be filed by FGL with the SEC in connection with the Merger shall have been cleared by the SEC~~ and ~~shall~~conditions ~~have been sent to stockholders~~ of ~~FGL (in accordance with Regulation 14C under~~ the ~~Exchange~~Merger ~~Act~~Agreement, at ~~least 20 days prior to~~ the ~~closing),~~Effective ~~(2) the absence of any law or order enacted~~Time, ~~issued or enforced that is in effect and that makes the consummation of the~~ Merger ~~illegal,~~Sub ~~prevents,~~will ~~prohibits,~~merge ~~restrains~~with ~~or enjoins the consummation of the Merger~~ and ~~(3) obtaining~~into the ~~requisite approvals from the Iowa Insurance Division~~Company, New York Department of Financial Services, Vermont Department of Financial Regulation, China Insurance Regulatory Commission and the Committee on Foreign Investment in the United States. A number of the closing conditions are outside of our control and we cannot predict with ~~certainty whether all of~~ the ~~required~~Company ~~closing~~continuing ~~conditions will be satisfied or waived or if other uncertainties may arise. In addition, regulators could impose additional requirements or obligations~~ as ~~conditions~~the ~~for~~surviving ~~their approvals~~entity, which ~~may be burdensome. No assurance can be provided that the various closing conditions~~ will bebecome ~~satisfied,~~an ~~the necessary waivers or approvals will be obtained in a timely fashion or at all~~indirect, inwholly-owned ~~which~~subsidiary ~~case~~of ~~the~~CF ~~Merger would be prevented or delayed~~Corp. InThe ~~addition,~~Merger nois ~~assurance~~subject ~~can~~to ~~be provided that we will not lose the benefit of previously satisfied~~ closing conditions ~~and waivers or approvals~~, ~~in which case we may be required to again seek to satisfy closing conditions and waivers or approvals~~including, ~~which~~among ~~we may not be able to obtain in a timely fashion or at all~~others, ~~in which case~~ the ~~Merger~~receipt ~~would~~of beregulatory ~~prevented~~approval orfrom ~~delayed. For~~the ~~further~~Iowa ~~information~~Insurance ~~regarding these approvals, please see "Item 1~~Division. ~~Business - Our Company".~~

~~Failure~~A tonumber ~~timely~~of ~~complete~~the closing conditions are outside of our control and we cannot predict with certainty whether all of the ~~Merger~~required closing conditions will be satisfied or waived or if other uncertainties may arise. In addition, regulators could ~~adversely~~impose ~~impact~~additional requirements or obligations as conditions for their approvals, which may be burdensome. Despite our ~~stock~~best ~~price~~efforts, ~~business~~we may not be able to satisfy the various closing conditions or obtain the necessary waivers or approvals in a timely fashion or at all, ~~financial~~in ~~condition~~which ~~and~~case ~~results~~the ofMerger ~~operations~~would be prevented or delayed.

AFailure ~~failure~~ to ~~complete~~timely ~~the Merger or to~~ complete the ~~FGL~~ Merger ~~on a timely basis, none of which can be assured,~~ could ~~result~~adversely inimpact ~~negative publicity and cause the price of~~ our ~~common~~ stock ~~to decline, in particular because our current stock~~ price ~~reflects a market assumption that the Merger will occur. As a result of the pending Merger~~, ~~trading in our stock has increased substantially. If the Merger is not consummated~~business, orfinancial ~~timing~~condition ~~thereof~~and isresults ~~further delayed, the investment goals~~ of ~~our stockholders may be materially different than those of our stockholders on a pre-Merger announcement basis~~operations. In addition, we will remain liable for significant transaction costs that will be payable even if the Merger is not completed and could also be required to pay a termination fee to Anbang in specific circumstances.

~~The~~A ~~pending~~failure to complete the Merger on a timely basis or at all could result in negative publicity and ~~operating~~cause ~~restrictions~~the ~~contained~~price of our common stock to decline, in particular because our current stock price reflects a market assumption that the Merger will occur. In addition, as a result of the announcement of the Merger Agreement, ~~could~~trading ~~adversely~~in ~~affect~~our stock has increased substantially. If the Merger is not consummated, the investment goals of our ~~business~~stockholders may be materially different than those of our stockholders on a pre-Merger announcement basis. In addition, we will remain liable for significant transaction costs that will be payable even if the Merger is not completed and ~~operations~~could also be required to pay a termination fee to CF Corp in specific circumstances.

The ~~proposed~~pending Merger and ~~certain interim~~ operating ~~covenants~~restrictions ~~that~~contained ~~govern~~in the ~~conduct of our business during the pendency of the~~ Merger ~~could~~Agreement ~~cause disruptions to the Company’s business and business relationships, which~~ could have an adverse impact on the Company’s results of operations, liquidity and financial condition. For example, the Company may be limited or restricted from taking certain actions, the attention of the Company’s management may be directed to Merger-related considerations, the Company’s current and prospective employees may experience uncertainty about their future roles with the Company, which may adversely affect our ~~ability to retain and hire key personnel, and parties with which the Company has~~ business ~~relationships, including customers, potential customers~~ and ~~distributors, may experience uncertainty as to the future of such relationships and seek~~ operations.

The proposed Merger and certain interim operating covenants that govern the conduct of our business during the pendency of the Merger could cause disruptions to the Company’s business and business relationships, which could have an adverse impact on the Company’s results of operations, liquidity and financial condition. For example, the attention of the Company’s management may be directed to Merger-related considerations, the Company’s current and prospective employees may experience uncertainty about their future roles with the Company, which may adversely affect our ability to retain and hire key personnel, and parties with which the Company has business relationships, including customers, potential customers and distributors, may experience uncertainty as to the future of such relationships and seek alternative relationships or seek to alter their present business relationships with us in a manner that negatively impacts the Company.

Shareholder litigation against the Company, our directors and/or CF Corp could delay or prevent the Merger and cause us to incur significant costs and expenses.

Transactions such as the Merger are often subject to lawsuits by shareholders. Conditions to the closing of the Merger include that no law or order shall have been enacted, issued or enforced and in effect, that would prevent or prohibit consummation of the Merger. We cannot provide assurance as to the outcome of any potential lawsuits, including the costs associated with defending the claims or any other liabilities that may be incurred in connection with the litigation or settlement of lawsuits.

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alternative relationships or seek to alter their present business relationships with us in a manner that negatively impacts the Company.

Shareholder litigation against the Company, our directors and/or Anbang could delay or prevent the Merger and cause us to incur significant costs and expenses

Transactions such as the Merger are often subject to lawsuits by shareholders. Conditions to the closing of the Merger require that no law or order must have been enacted, issued or enforced and in effect, that would make the consummation of the Merger illegal, prevent, prohibit, restrain or enjoin the consummation of the Merger. We cannot provide assurance as to the outcome of any potential lawsuits, including the costs associated with defending the claims or any other liabilities that may be incurred in connection with the litigation or settlement of lawsuits.

Risks Relating to Our Business

Our business is highly regulated and subject to numerous legal restrictions and regulations.

State Regulation

Our business is subject to government regulation in each of the states in which we conduct business and is concerned primarily with the protection of policyholders and other customers rather than shareholders. Such regulation is vested in state agencies having broad administrative and discretionary, authority with respect to many aspects of our business, which may include, among other things, premium rates and increases thereto, underwriting practices, reserve requirements, marketing practices, advertising, privacy, policy forms, reinsurance reserve requirements, acquisitions, mergers and capital adequacy~~, and is concerned primarily with the protection of policyholders and other customers rather than shareholders~~. At any given time, we and our insurance subsidiaries may be the subject of a number of ongoing financial or market conduct, audits or inquiries. From time to time, regulators raise issues during such examinations or audits that could, ~~if determined adversely,~~ have a material impact on our business.

We have received inquiries from a number of state regulatory authorities regarding our use of the U.S. Social Security Administration’s Death Master File (“Death Master File”) and compliance with state claims practices regulations and unclaimed property or escheatment laws. The NYDFS issued a letter and subsequent regulation requiring life insurers doing business in New York to use the Death Master File or similar databases to determine if benefits were payable under life insurance policies, annuities and retained asset accounts. Other states have enacted laws which will impose requirements on insurers to periodically compare their in-force life insurance policies and annuities against the Death Master File or similar databases, investigate any identified potential matches to confirm the death of the insured and determine whether benefits are due and attempt to locate the beneficiaries of any benefits that are due or, if no beneficiary can be located, escheat the benefit to the state as unclaimed property. We have received notice of escheatment audits from several states. We have filed suit in federal and state court to challenge the audit policies of the California controller and the applicability of California’s unclaimed property laws to FGL generally. It is possible that these requirements will result in additional payments to beneficiaries, additional escheatment of funds deemed abandoned under state laws or administrative penalties and expenses. While we believe that we have established sufficient reserves with respect to these matters, it is possible that third parties could dispute these amounts and additional payments or additional unreported claims or liabilities could be required or identified given the ongoing regulatory developments, the effects of which could be significant and could have a material adverse effect on our results of operations in any one period.

State insurance departments conduct periodic examinations of the books and records, financial reporting, policy and rate filings, market conduct and business practices of insurance companies domiciled in their states, generally once every three to five years. The regulator in FGL Insurance’s previous state of domicile, the MIA, completed a routine financial examination of FGL Insurance for the three-year period ended December 31, 2012. The NYDFS completed a routine financial examination of FGL NY Insurance for the three-year periods ended December 31, 2009 and is completing its exam for the period ending December 31, 2012,. ~~and~~The ~~the~~ Vermont Department of Financial Regulation completed a routine financial examination of Raven Re for the period from April 7, 2011 (commencement of business) through December 31, 2012. FGL Insurance is currently the subject of ~~seven~~four ongoing market conduct examinations or inquiries in various states. While FGL Insurance does not believe that any of the current market conduct examinations it is subject to will result in any fines or remediation orders that will be material to its business, market conduct examinations can result in monetary fines or remediation and generally require FGL Insurance to devote significant resources to the management of such examinations. As a result of its re-domestication to Iowa, FGL Insurance became subject to financial and market conduct examinations by the IID, the primary regulatory authority for Iowa domestic life insurance companies.

NAIC

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toUnder ~~Iowa~~insurance guaranty fund laws in most states, ~~FGL~~insurance ~~Insurance~~companies ~~became~~doing ~~subject~~business therein can be assessed up to ~~financial~~prescribed ~~and~~limits ~~market~~for ~~conduct~~policyholder ~~examinations~~losses incurred by insolvent companies. We cannot predict the ~~IID~~amount or timing of any such future assessments. There is an additional risk that any particular regulator’s interpretation of a legal or accounting issue may change over time to our detriment, or that changes to the ~~primary~~overall ~~regulatory~~legal ~~authority~~or ~~for~~market ~~Iowa~~environment, ~~domestic~~even ~~life~~absent ~~insurance~~any ~~companies~~change of interpretation by a particular regulator, may cause us to change our views regarding the actions we need to take from a legal risk management perspective, which could necessitate changes to our practices that may, in some cases, limit our ability to grow and improve profitability.

Some of the NAIC pronouncements, particularly as they affect accounting issues, take effect automatically in the various states without affirmative action by the states. Statutes, regulations and interpretations may be applied with retroactive impact, particularly in areas such as accounting and reserve requirements. Also, regulatory actions with prospective impact can potentially have a significant impact on our current product offerings. The NAIC continues to work to reform state regulation in various areas, including comprehensive reforms relating to life insurance reserves. On June 10, 2016, the NAIC formally approved principle-based reserving for life insurance products with secondary guarantees, with an effective date January 1, 2017. A three year transition period is available which delays application of the new guidance until January 1, 2020. Additionally, various statutory accounting guidance is being evaluated, including investment value of insurance subsidiaries.

Although our business is subject to regulation in each state in which we conduct business, in many instances the state regulatory models emanate from the NAIC. State insurance regulators and the NAIC regularly re-examine existing laws and regulations applicable to insurance companies and their products. Changes in these laws and regulations, or interpretations thereof, are often made for the benefit of the consumer and at the expense of the insurer and, thus, could have a material adverse effect on our business, operations and financial condition. We are also subject to the risk that compliance with any particular regulator’s interpretation of a legal or accounting issue may not result in compliance with another regulator’s interpretation of the same issue, particularly when compliance is judged in hindsight. Under insurance guaranty fund laws in most states, insurance companies doing business therein can be assessed up to prescribed limits for policyholder losses incurred by insolvent companies. We cannot predict the amount or timing of any such future assessments. There is an additional risk that any particular regulator’s interpretation of a legal or accounting issue may change over time to our detriment, or that changes to the overall legal or market environment, even absent any change of interpretation by a particular regulator, may cause us to change our views regarding the actions we need to take from a legal risk management perspective, which could necessitate changes to our practices that may, in some cases, limit our ability to grow and improve profitability.

Some of the NAIC pronouncements, particularly as they affect accounting issues, take effect automatically in the various states without affirmative action by the states. Statutes, regulations and interpretations may be applied with retroactive impact, particularly in areas such as accounting and reserve requirements. Also, regulatory actions with prospective impact can potentially have a significant impact on currently sold products. The NAIC continues to work to reform state regulation in various areas, including comprehensive reforms relating to life insurance reserves. On June 10, 2016, the NAIC formally approved principle-based reserving for life insurance products with secondary guarantees, with an effective date January 1, 2017. Additionally, various statutory accounting guidance is being evaluated, including investment value of insurance subsidiaries.

Federal Regulation

In April 2016, the ~~Department of Labor (“~~DOL”) ~~released~~issued ~~its~~the ~~final~~ “fiduciary” rule which could have a material impact on the Company, its products, distribution, and business model. The ~~final~~ rule ~~treats~~provides that persons who ~~provide~~render investment advice for a fee or other compensation with respect to ~~assets of~~ an employer plan or ~~individual retirement account ("~~IRA") asare fiduciaries of that plan or IRA. ~~Significantly,~~The ~~the~~ rule expands the definition of fiduciary under ERISA to apply to ~~persons, including~~ insurance agents, who advise and sell products to IRA owners. As a ~~practical matter~~result, ~~this means~~ commissioned insurance agents selling the Company’s IRA products must qualify for a prohibited transaction exemption, ~~which~~either ~~requires~~ the ~~agent~~newly introduced BICE or amended PTE 84-24. When fully implemented, BICE would apply to fixed indexed annuities and ~~financial~~amended ~~institution~~PTE 84-24 would apply to ~~meet~~fixed rate annuities. The rule and exemptions have been the subject of much controversy and various ~~conditions~~actions ~~including~~have ~~that~~been antaken ~~annuity~~by ~~sale~~DOL beto indelay ~~the~~and ~~"best~~reconsider ~~interest"~~aspects of the ~~client~~rule ~~without~~and ~~regard~~exemptions. The ~~for~~rule took effect June 2016 and was scheduled to become applicable in April 2017 but the ~~agent’s,~~“applicability ~~financial~~date" ~~institution’s~~was ordelayed ~~other~~by ~~party’s~~DOL ~~financial~~for or60 ~~other~~days ~~interests~~from April 10, ~~and~~2017 ~~that~~to ~~any~~June ~~compensation~~9, ~~paid~~2017. DOL also acted to delay many aspects of the prohibited transaction exemption requirements during a transition period from June 9, 2017 to January 1, 2018 provided the agent (and if applicable, financial institution) becomply ~~reasonable~~with “impartial conduct standards.” The ~~final~~impartial ~~rule~~conduct isstandards ~~effective~~essentially ~~June~~require ~~2016~~the ~~and~~sale ~~generally~~to ~~applicable~~be in ~~April~~the ~~2017~~“best interest” of the client, misleading statements not be made, and compensation be reasonable. ~~The~~More ~~rule~~recently, DOL has ~~generated~~proposed ~~considerable~~extending ~~controversy~~the ~~and~~transition isperiod to July 1, 2019 which at the ~~subject~~present oftime ~~industry~~is still under consideration. Industry continues its efforts to ~~block~~overturn ~~implementation~~the ~~both~~rule in ~~Congress~~court actions and ~~through~~Congress ~~court~~continues ~~actions. The~~to consider related legislation but the success or failure of these efforts cannot be predicted. Assuming the rule is not ~~blocked,~~overturned and the ~~precise~~requirements ~~impact~~ of the ~~rule~~exemptions were to be implemented fully, the impact on the financial services industry ~~more~~ generally, and ~~the impact~~ on the Company and its business in particular, is difficult to assess ~~because the rule is new and still being studied~~. ~~While~~We ~~we continue to analyze the regulation, 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 our 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. FGL Insurance will continue to monitor developments closely and believes it is prepared to execute implementation plans as necessary to meet the rule and exemption requirements on the requisite applicability dates.

Other Regulation

Other types of regulation that could affect us include insurance company investment laws and regulations, state adopted statutory accounting principles, antitrust laws, minimum solvency requirements, federal privacy laws, insurable interest laws and federal anti-money laundering and anti-terrorism laws.

Compliance with applicable laws and regulations is time-consuming and personnel-intensive, and changes in laws and regulations may materially increase the cost of compliance and other expenses of doing business. There are a number of risks that may arise where applicable regulations may be unclear, subject to multiple interpretations or under development or where regulations may conflict with one another, where regulators revise their previous guidance or courts overturn previous rulings, which could result in our failure to meet applicable standards. Regulators and other authorities have the power to bring administrative or judicial proceedings against us, which

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~~or under development or where regulations may conflict with one another, where regulators revise their previous guidance or courts overturn previous rulings, which~~ could result ~~in our failure to meet applicable standards. Regulators and other authorities have the power to bring administrative or judicial proceedings against us~~, ~~which could result,~~ among other things, in suspension or revocation of our licenses, cease and desist orders, fines, civil penalties, criminal penalties or other disciplinary action, which could materially harm our results of operations and financial condition. If we fail to address, or appear to fail to address, appropriately any of these matters, our reputation could be harmed and we could be subject to additional legal risk, which could increase the size and number of claims and damages asserted against us or subject us to enforcement actions, fines and penalties. See “Business-Regulation” for further discussion of the impact of regulations on our business.

We cannot predict what form any future changes in these or other areas of regulation affecting the insurance industry might take or what effect, if any, such proposals might have on us if enacted into law. In addition, because our activities are relatively concentrated in a small number of lines of business, any change in law or regulation affecting one of those lines of business could have a disproportionate impact on us as compared to other more diversified insurance companies.

Accounting rules, changes to accounting rules, or the grant of permitted accounting practices to competitors could negatively impact us.

We are required to comply with U.S. GAAP. A number of organizations are instrumental in the development and interpretation of U.S. GAAP, such as the SEC, the Financial Accounting Standards Board (“FASB”) and the American Institute of Certified Public Accountants. U.S. GAAP is subject to constant review by these organizations and others in an effort to address emerging accounting ~~rules~~issues and ~~issue~~to ~~interpretative~~interpret existing accounting guidance ~~on a continual basis~~. We cannot assure you that future changes to U.S. GAAP will not have a negative impact on us. U.S. GAAP includes the requirement to carry certain assets and liabilities at fair value. These fair values are sensitive to various factors including, but not limited to, interest rate movements, credit spreads, and various other factors. Because of this, changes in these fair values may cause increased levels of volatility in our consolidated financial statements.

InOur ~~addition, our~~ insurance subsidiaries are required to comply with statutory accounting principles (“SAP”). SAP and in particular actuarial reserving methodology are subject to constant review by the NAIC and its task forces and committees as well as state insurance departments in an effort to address emerging issues and otherwise improve financial reporting. Various proposals are currently, or have previously been, pending before committees and task forces of the NAIC, some of which, if enacted, would negatively affect our insurance subsidiaries. The NAIC is also currently working to reform state regulation in various areas, including comprehensive reforms relating to life insurance reserves and the accounting for such reserves. We cannot predict whether or in what form reforms will be enacted and, if so, whether the enacted reforms will positively or negatively affect us. In addition, the NAIC Accounting Practices and Procedures manual provides that state insurance departments may permit insurance companies domiciled therein to depart from SAP by granting them permitted accounting practices. We cannot predict whether or when the insurance departments of the states of domicile of our competitors may permit them to utilize advantageous accounting practices that depart from SAP, the use of which is not permitted by the insurance departments of the states of domicile of us and our insurance subsidiaries. With respect to regulations and guidelines, states sometimes defer to the interpretation of the insurance department of the state of domicile. Neither the action of the domiciliary state nor action of the NAIC is binding on a state. Accordingly, a state could choose to follow a different interpretation. We can give no assurance that future changes to SAP or components of SAP or the grant of permitted accounting practices to its competitors will not have a negative impact on us.

The agreements and instruments governing our debt contain significant operating and financial restrictions, which may prevent us from capitalizing on business opportunities.

The indenture governing the 6.375% senior notes due 2021 (the “Senior Notes”) issued by FGLH and the three-year $150 unsecured revolving credit facility (the “Credit Agreement”); each contains various restrictive covenants which limit, among other things, FGLH’s ability to:


•	incur additional indebtedness;


•	pay dividends or certain other distributions on its capital stock other than as allowed under the indenture and the Credit Agreement;


•	make certain investments or other restricted payments;


•	engage in transactions with stockholders or affiliates;

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•	sell certain assets or merge with or into other companies;


•	change our accounting policies;


•	enter into restrictive agreements;

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•	guarantee indebtedness; and


•	create liens.

In addition, if FGL or FGLH undergoes a “change of control” as defined in the indenture, each holder of Senior Notes will have the right to require us to repurchase their Senior Notes at a price equal to 101% of the principal amount and any accrued but unpaid interest.

As a result of these restrictions and their effect on us, we may be limited in how we conduct our business and we may be unable to raise additional debt financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness we or our subsidiaries may incur could include more restrictive covenants.

For detailed information about restrictions governing our debt, see Part II, Item 7. "Debt" in this report.

Our results of operations and financial condition depend on the accuracy of a broad range of assumptions and estimates made by our management.

We make certain assumptions and estimates regarding mortality, persistency, expenses, interest rates, tax liability, business mix, frequency of claims, contingent liabilities, investment performance, derivative costs and other factors related to our business and anticipated results. We rely on these assumptions and estimates to determine the amounts of deferred acquisition cost (“DAC”) and value of business acquired (“VOBA”), policy liabilities and accruals, future earnings and various components of our consolidated balance ~~sheet~~sheets and income statements. These assumptions are also used in making decisions crucial to the operation of our business, including the pricing of products and expense structures related to products. The calculations we use to estimate various components of our balance sheet and consolidated statement of operations are necessarily complex and involve analyzing and interpreting large quantities of data. The assumptions and estimates required for these calculations involve judgment and by their nature are imprecise and subject to changes and revisions over time. These assumptions and estimates incorporate many factors, none of which can be predicted with certainty. To the extent our actual experience and changes in estimates differ from original estimates and assumptions, our business, Consolidated Statement of Operations and financial condition may be materially adversely affected. Accordingly, our results may be adversely affected by changes resulting from implementing more sophisticated administrative systems and procedures that facilitate the calculation of more precise estimates.

We have minimal experience to date on policyholder behavior for our GMWB products which we began issuing in 2008; as a result, future experience could lead to significant changes in our assumptions. If emerging experience deviates from our assumptions on GMWB utilization, it could have a significant effect on our reserve levels and related results of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates”.

Our financial condition and results of operations could be adversely impacted if our assumptions regarding the fair value and future performance of our investments differ from actual experience.

We make assumptions regarding the fair value and expected future performance of our investments. It is possible that actual values will differ from our assumptions. Such events could result in a material change in the value of our investments, business, operations and financial condition.

For example, expectations that our investments in RMBS and CMBS will continue to perform in accordance with their contractual terms are based on assumptions a market participant would use in determining the current fair value and considering the performance of the underlying assets. We have non-agency RMBS holdings of $1 billion as of September 30, ~~2016~~2017. It is possible that the collateral underlying these investments will not meet performance expectations and the lower performance levels may lead to adverse changes in the cash flows on our holdings of these types of securities. This could lead to potential future other-than-temporary impairments ("OTTI") within our portfolio of these securities. In addition, expectations that our investments in corporate securities or debt obligations will continue to perform in accordance with their contractual terms are based on evidence gathered through our normal credit surveillance process. It is possible that issuers of corporate securities in which we have invested will perform worse than current expectations. Such events may lead us to recognize potential future OTTI within our portfolio of corporate securities. We recorded OTTI charges of approximately $22 and $44 for the fiscal years ended September 30, 2017 and 2016, respectively. It is also possible that unanticipated events would lead us to dispose of certain of those holdings and recognize the effects of any market movements in our financial statements.

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invested will perform worse than current expectations. Such events may lead us to recognize potential future OTTI within our portfolio of corporate securities. We recorded OTTI charges of approximately $44 and $82 for the fiscal years ended September 30, 2016 and 2015, respectively. It is also possible that unanticipated events would lead us to dispose of certain of those holdings and recognize the effects of any market movements in our financial statements.

A financial strength ratings downgrade, potential downgrade, or any other negative action by a rating agency, could make our product offerings less attractive and increase our cost of capital, and thereby adversely affect our financial condition and results of operations.

Various nationally recognized rating agencies review the financial performance and condition of insurers, including our insurance subsidiaries, and publish their financial strength ratings as indicators of an insurer’s ability to meet policyholder and contractholder obligations. These ratings are important to maintaining public confidence in our products, our ability to market our products and our competitive position. Any downgrade or other negative action by a rating agency with respect to the financial strength ratings of our insurance subsidiaries could have a materially adverse effect on us in many ways, including the following:


•	adversely affecting relationships with distributors, IMOs and sales agents, which could result in reduction of sales;


•	increasing the number or amount of policy lapses or surrenders and withdrawals of funds;


•	requiring a reduction in prices for our insurance products and services in order to remain competitive;


•	adversely affecting our ability to obtain reinsurance at a reasonable price, on reasonable terms or at all; and


•	requiring us to collateralize reserves, balances or obligations under reinsurance and derivatives agreements.

Rating agencies assign ratings based upon several factors. While most of these factors relate to the rated company, some factors relate to the views of the rating agency, general economic conditions and circumstances outside the rated company’s control. In addition, rating agencies use various proprietary models and formulas to assess the strength of a rated company, and from time to time rating agencies have, inaltered their ~~discretion, altered the~~ models and may do so in the future in ways that negatively impact the financial strength ratings of our insurance subsidiaries and make it more difficult to maintain or obtain comparable ratings going forward. As rating agencies continue to evaluate the financial services industry, it is possible that rating agencies will heighten the level of scrutiny that they apply to financial institutions, increase the frequency and scope of their credit reviews, request additional information from the companies that they rate and potentially adjust upward the capital and other requirements employed in the rating agency models for maintenance of certain ratings levels. It is possible that the outcome of any such review of us would have additional adverse ratings consequences, which could have a material adverse effect on our results of operations, financial condition and liquidity. We may need to take actions in response to changing standards or capital requirements set by any of the rating agencies which could cause our business and operations to suffer. If the financial strength ratings of our insurance subsidiaries are downgraded, we anticipate that our sales of new policies will be adversely impacted and that we could experience substantial surrenders of existing policies. In order to improve or maintain their financial strength ratings, our insurance subsidiaries may limit the amount of dividends that they would otherwise pay to us. In that regard, we may, among other things, implement business strategies to improve the RBC ratio of our insurance subsidiaries to a level anticipated by the rating agencies to maintain or improve our current rating. If we are unable to achieve this level, we may limit dividend payments from FGL Insurance to the extent necessary. We cannot guarantee these measures will be successful, and if FGL Insurance fails to maintain such a target RBC ratio, its financial strength rating could suffer. We cannot predict what actions rating agencies may take in the future, and failure to improve or maintain current financial strength ratings could adversely affect our financial condition and results of operations.

Following the announcement of the ~~proposed~~CF Corp Merger Agreement on May 24, 2017, the rating organizations have undertaken a review of our debt ratings and our insurance company subsidiaries’ financial strength ratings. The rating organizations may take various actions, positive or negative. Such actions are beyond FGL's control and FGL cannot predict what these actions may be and the timing thereof.

We are required to maintain minimum ratings as a matter of routine practice under our over-the-counter derivative agreements on forms promulgated by the ISDA. Under some ISDA agreements, we have 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 contracts between the parties, at which time any amounts payable by us or the counterparty would be dependent on the market value of the underlying derivative contracts. Our current rating allows multiple counterparties the right to terminate ISDA agreements. As of September 30, 2017, the amount at risk for ISDA agreements which could be terminated based upon our current ratings was $413, which equals the fair value to us of the open over-the-counter call option positions. The fair value of the call options can never decrease below zero. No ISDA agreements have been terminated, although the counterparties have

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agreement the right to terminate the open derivative contracts between the parties, at which time any amounts payable by us or the counterparty would be dependent on the market value of the underlying derivative contracts. Our current rating allows multiple counterparties the right to terminate ISDA agreements. As of September 30, 2016, the amount at risk for ISDA agreements which could be terminated based upon our current ratings was $276, which equals the fair value to us of the open over-the-counter call option positions. The fair value of the call options can never decrease below zero. No ISDA agreements have been terminated, although the counterparties have reserved the right to terminate the ISDA agreements at any time. In certain transactions, we and the counterparty have entered into a collateral support agreement requiring either party to post collateral when the net exposures exceed predetermined thresholds. These thresholds vary by counterparty and credit rating but are generally zero. As of September 30, ~~2016~~2017 and ~~2015~~2016, $~~128~~381 and $7128, respectively, of collateral was posted by our counterparties. Accordingly, the maximum amount of loss due to credit risk that we would incur if parties to the call options failed completely to perform according to the terms of the contracts was $~~148~~32 and $74148 at September 30, ~~2016~~2017 and ~~2015~~2016, respectively.

Additionally, under certain insurance reserve financing arrangements, if FGLH were to take certain actions without the counterparties consent, and such actions resulted in a specified financial strength ratings downgrade, FGLH would be in default.

See “Item 7A. Quantitative and Qualitative Disclosures about Market Risk-Credit Risk and Counterparty Risk”.

The amount of statutory capital that our insurance subsidiaries have and the amount of statutory capital that they must hold to maintain their financial strength ratings and meet other requirements can vary significantly from time to time due to a number of factors outside of our control.

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

In any particular year, statutory surplus amounts and RBC ratios may increase or decrease depending on a variety of factors, most of which are outside of our control, including, but not limited to, the following:


•	the amount of statutory income or losses generated by our insurance subsidiaries (which itself is sensitive to equity market and credit market conditions);


•	the amount of additional capital our insurance subsidiaries must hold to support business growth;


•	changes in reserve requirements applicable to our insurance subsidiaries;


•	our ability to access capital markets to provide reserve relief;


•	changes in equity market levels;


•	the value of certain fixed-income and equity securities in our investment portfolio;


•	changes in the credit ratings of investments held in our portfolio;


•	the value of certain derivative instruments;


•	changes in interest rates;


•


•	credit market volatility;


•	changes in consumer behavior; and


•	changes to the RBC formulas and interpretation of the NAIC instructions with respect to RBC calculation methodologies.

The financial strength ratings of our insurance subsidiaries are significantly influenced by their statutory surplus amounts and capital adequacy ratios. Rating agencies may also implement changes to their internal models, which differ from the RBC capital model, that have the effect of increasing or decreasing the amount of statutory capital our insurance subsidiaries must hold in order to maintain their current ratings. In addition, rating agencies may downgrade the investments held in our portfolio, which could result in a reduction of our capital and surplus and our RBC ratio.

In extreme equity market declines, the amount of additional statutory reserves our insurance subsidiaries are required to hold for fixed indexed products may decrease at a rate less than the rate of change of the market value of the invested assets. This mismatch could result in a reduction of the capital, surplus or RBC ratio of our insurance subsidiaries. To the extent that an insurance subsidiary’s RBC ratios are deemed to be insufficient, we may take actions either to increase the capitalization of the insurer or to reduce the capitalization requirements. If we are unable to take such actions, the rating agencies may view this as a reason for a ratings downgrade.

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~~may~~While ~~seek~~the toamount ~~take~~of ~~actions~~statutory ~~either~~reserves tois ~~increase~~not ~~the~~directly ~~capitalization~~affected ofby ~~the~~changes ~~insurer~~in ormarket tointerest ~~reduce~~rates, ~~the~~additional ~~capitalization~~statutory ~~requirements.~~reserves Ifmay webe ~~are~~required ~~unable~~as tothe ~~accomplish~~result ~~such~~of ~~actions~~an asset adequacy analysis, ~~the~~and ~~rating~~this ~~agencies~~analysis ~~may~~of ~~view~~cash ~~this~~flow astesting ais ~~reason~~altered ~~for~~by arising ~~ratings~~or ~~downgrade~~falling interest rates and widening credit spreads.

While the amount of statutory reserves is not directly affected by changes in interest rates, additional statutory reserves may be required as the result of an asset adequacy analysis, and this analysis of cash flow testing is altered by rising or falling interest rates and widening credit spreads.

The failure of any of our insurance subsidiaries to meet its applicable RBC requirements or minimum capital and surplus requirements could subject it to further examination or corrective action imposed by insurance regulators, including limitations on its ability to write additional business, supervision by regulators or seizure or liquidation. Any corrective action imposed could have a material adverse effect on our business, results of operations and financial condition. A decline in RBC ratios also limits the ability of an insurance subsidiary to make dividends or distributions to us and could be a factor in causing rating agencies to downgrade the insurer’s financial strength ratings, which could have a material adverse effect on our business, results of operations and financial condition.

Our insurance subsidiaries’ ability to grow depends in large part upon the continued availability of capital.

Our insurance subsidiaries’ long-term strategic capital requirements will depend on many factors, including their accumulated statutory earnings and the relationship between their statutory capital and surplus and various elements of required capital. To support ~~their~~ long-term capital requirements, we and our insurance subsidiaries may need to increase or maintain ~~their~~ statutory capital and surplus through financings, which could include debt, equity, financing arrangements or other surplus relief transactions. Adverse market conditions have affected and continue to affect the availability and cost of capital from external sources. We are not obligated, ~~and~~ may choose not, or may not be ~~unable,~~able to provide financing or make ~~any~~ capital ~~contribution~~contributions to our insurance subsidiaries. Consequently, financings, if available at all, may be available only on terms that are not favorable to us or our insurance subsidiaries. If our insurance subsidiaries cannot maintain adequate capital, they may be required to limit growth in sales of new policies, and such action could materially adversely affect our business, operations and financial condition.

We and HRG may be the target of future litigation, law enforcement investigations or increased regulatory scrutiny.

The financial services industry, including the insurance sector, is sometimes the target of law enforcement and regulatory investigations or other actions resulting from such investigations. Resulting publicity about any such investigation or action may generate inquiries or investigations into or litigation against other financial services companies, even those who do not engage in the business lines or practices at issue in the original action. Responding to these inquiries, investigations and lawsuits, regardless of the ultimate outcome of the proceeding, is time-consuming and expensive and can divert the time and effort of our management from its business.

Future legislation or regulation or governmental views on business practices in the financial services industry may result in our altering our practices in ways that could adversely affect our business and results of operations. It is impossible to predict the outcome of such investigations or actions, whether they will expand into other areas not yet contemplated, whether they will result in changes in regulation, whether activities currently thought to be lawful will be characterized as unlawful, or the impact, if any, of such scrutiny on the financial services and insurance industry or on us. Adverse publicity, governmental scrutiny, pending or future investigations by regulators or law enforcement agencies and/or legal proceedings involving us or our affiliates can also have a negative impact on our reputation and on the morale and performance of employees, and on business retention and new sales, which could adversely affect our business and results of operations.

Financial services companies are frequently the targets of litigation, including class action litigation, which could result in substantial judgments.

We, like other financial services companies, are involved in litigation and arbitration in the ordinary course of business. Although we do not believe that the outcome of any such litigation or arbitration will have a material adverse effect on our financial condition, it is possible our results of operations and cash flows could be materially affected by an unfavorable outcome. More generally, we operate in an industry in which various practices are subject to scrutiny and potential litigation, including class actions. In addition, we sell our products through IMOs, whose activities may be difficult to monitor. Civil jury verdicts have been returned against insurers and other financial services companies involving sales, underwriting practices, product design, product disclosure, administration, denial or delay of benefits, charging excessive or impermissible fees, recommending unsuitable products to customers, breaching fiduciary or other duties to customers, refund or claims practices, alleged agent misconduct, failure to properly supervise representatives, relationships with agents or other persons with whom the insurer does business, payment of sales or other contingent commissions and other matters. Such lawsuits can result in substantial judgments that are disproportionate to the actual damages, including material amounts of

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whose activities may be difficult to monitor. Civil jury verdicts have been returned against insurers and other financial services companies involving sales, underwriting practices, product design, product disclosure, administration, denial or delay of benefits, charging excessive or impermissible fees, recommending unsuitable products to customers, breaching fiduciary or other duties to customers, refund or claims practices, alleged agent misconduct, failure to properly supervise representatives, relationships with agents or other persons with whom the insurer does business, payment of sales or other contingent commissions and other matters. Such lawsuits can result in substantial judgments that are disproportionate to the actual damages, including material amounts of punitive non-economic compensatory damages. In some states, juries, judges and arbitrators have substantial discretion in awarding punitive and non-economic compensatory damages, which creates the potential for unpredictable material adverse judgments or awards in any given lawsuit or arbitration. Arbitration awards are subject to very limited appellate review. In addition, in some class action and other lawsuits, financial services companies have made material settlement payments.

Our reinsurers, including Wilton Re and FSRCI, could fail to meet assumed obligations, increase their rates, or become subject to adverse developments that could materially adversely affect our business, financial condition and results of operations.

Our insurance subsidiaries cede material amounts of insurance and transfer related assets and certain liabilities to other insurance companies through reinsurance. For example, a material amount of reinsured liabilities are concentrated with Wilton Re and FSRCI. As of September 30, ~~2016~~2017, the amount recoverable from Wilton Re and FSRCI was $1,~~523~~535 and $1,~~120~~016, respectively. As of September 30, 2017, the reserves ceded to Wilton Re and FSRCI were $1,477 and $1,016, respectively. Given our significant concentration of reinsurance with Wilton Re, if Wilton Re fails to perform its obligations under the various reinsurance treaties, such failure could have a material impact on our financial position. See “Business- Reinsurance-Wilton Re Transaction”. However, notwithstanding the transfer of related assets and certain liabilities, we remain liable with respect to ceded insurance should any reinsurer fail to meet the obligations assumed. Accordingly, we bear credit risk with respect to our reinsurers. The failure, insolvency, inability or unwillingness of any reinsurer to pay under the terms of reinsurance agreements with us could materially adversely affect our business, financial condition and results of operations. To mitigate the counterparty risk for the FSRCI transaction, the assets are held on FGL Insurance's balance sheet and are used as collateral in the event of a failure. For Wilton Re, A+ rated from Fitch, we monitor the credit rating. During 2014 Wilton Re announced their purchase by Canadian Pension Plan Investment Board, ("CCIB"), an AAA rated organization. With the capital resources of CCIB behind Wilton Re, we believe the counterparty risk is low. See “Business- Reinsurance-Wilton Re Transaction”.

Our ability to compete is dependent on the availability of reinsurance or other substitute financing solutions, both of which could involve the use of reinsurance affiliates referred to generally as “captives”. Premium rates charged by us are based, in part, on the assumption that reinsurance will be available at a certain cost. Under certain reinsurance agreements, the reinsurer may increase the rate it charges us for the reinsurance. Therefore, if the cost of reinsurance were to increase, if reinsurance were to become unavailable on commercially reasonable terms or at all, if alternatives to reinsurance were not available to us, if the use of captives were materially restricted through regulation, including certain general proposals currently under consideration by the NAIC, our business, financial condition and results of operations could be materially adversely affected.

The credit for reinsurance taken by our insurance subsidiaries under offshore reinsurance agreements is, under certain conditions, dependent upon the offshore reinsurer’s ability to obtain and provide sufficient qualifying assets in a qualifying trust or qualifying letters of credit issued by qualifying lending banks. The cost of letters of credit, when available, continues to be very expensive in the current economic environment. Loss of reserve credit by an insurance subsidiary would require it to establish additional reserves and would result in a decrease in the level of its capital, which could have a material adverse effect on our profitability, results of operations and financial condition.

of letters of credit, when available, continues to be very expensive in the current economic environment. Loss of reserve credit by an insurance subsidiary would require it to establish additional reserves and would result in a decrease in the level of its capital, which could have a material adverse effect on our profitability, results of operations and financial condition.

In recent years, access to reinsurance has become more costly for members of the insurance industry, including us. In addition, the number of life reinsurers has decreased as the reinsurance industry has consolidated. The decreased number of participants in the life reinsurance market resulted in increased concentration of risk for insurers, including us. If the reinsurance market further contracts, our ability to continue to offer our products on terms favorable to us could be negatively impacted, resulting in adverse consequences to our business, operations and financial condition.

In addition, reinsurers are facing many challenges regarding illiquid credit or capital markets, investment downgrades, rating agency downgrades, deterioration of general economic conditions and other factors negatively impacting the financial services industry generally. If such events cause a reinsurer to fail to meet its obligations, our business, financial condition and results of operations could be materially adversely affected.

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impacting the financial services industry generally. If such events cause a reinsurer to fail to meet its obligations, our business, financial condition and results of operations could be materially adversely affected.

Restrictions on our ability to use captive reinsurers could adversely impact our competitive position and results of operations.

The NAIC and state insurance regulators continue to review life insurance companies’ use of affiliated captive reinsurers or off-shore entities. On June 4, 2014, Rector & Associates, a consulting firm commissioned by the NAIC, presented a revised report (the “Rector Report”) to the Principle-Based Reserving Implementation Task Force of the NAIC which proposes a new regulatory framework for captives assuming term life insurance (“XXX”) or universal life insurance with secondary guarantees (“AXXX”) business, and recommends, among other things, placing limitations on the types of assets that may be used to finance reserves associated with XXX and AXXX business and making an individual state’s adoption of the new regulations contemplated by the report an NAIC accreditation standard. On August 17, 2014, the NAIC Executive (EX) Committee adopted the regulatory framework proposed by the Rector Report, including recommendations to have various NAIC technical subgroups propose regulations and guidelines to implement the new framework. These technical working groups are in various stages of developing and proposing regulations and guidelines. On October 9, 2014, the NAIC’s Principle-Based Reserving Implementation Task Force voted to expose for comment a new Actuarial Guideline (AG48) designed to implement many of the recommendations in the Rector Report related to the amount of assets that may be supported by different asset classes in connection with certain transactions involving captive reinsurance companies. AG48 was adopted effective January 1, 2015 and did not materially impact the Company’s financial statements or actuarial opinion.

If state insurance regulators restrict the use of captive reinsurers or if we otherwise are unable to continue to use captive reinsurers in the future, our ability to write certain products, to manage the associated risks and to deploy capital efficiently, could be adversely affected, or we may need to increase prices on those products, which could adversely impact our competitive position and our results of operations.

Interest rate fluctuations and withdrawal demands in excess of our assumptions could negatively affect our business, financial condition and results of operations.

We offer certain products that allow policyholders to withdraw their funds under defined circumstances. In order to meet such funding obligations, we manage our liabilities and configure our investment portfolios so as to provide and maintain sufficient liquidity to support expected withdrawal demands and contract benefits and maturities. However, in order to provide necessary long-term returns, a certain portion of our assets are relatively illiquid. There can be no assurance that withdrawal demands will match our estimation of withdrawal demands, however in an effort to mitigate this risk we assess surrender charges on withdrawals in excess of allowable penalty-free amounts that occur prior to surrender expiration. As interest rates increase, we are exposed to the risk of financial disintermediation through a potential increase in the number of withdrawals. Disintermediation risk refers to the risk that policyholders may surrender their contracts in a rising interest rate environment, requiring us to liquidate assets in an unrealized loss position. If we experience unexpected withdrawal activity, whether as a result of interest rate movements, financial strength downgrades or otherwise, we could exhaust our liquid assets and be forced to liquidate other less liquid assets, possibly at a loss or on other unfavorable terms, which could have a material adverse effect on our business, financial condition and results of operations. Additionally, we may experience spread compression, and a loss of anticipated earnings, if credited interest rates are increased on renewing contracts in an effort to decrease or manage withdrawal activity.

Interest rates are subject to volatility and fluctuations. For the past several years, interest rates have trended downwards to historically low levels. In order to meet our policy and contractual obligations, we must earn a sufficient return on our invested assets. A prolonged period of historically low rates or significant changes in interest rates could expose us to the risk of not achieving sufficient return on our invested assets by not achieving anticipated interest earnings, or of not earning anticipated spreads between the interest rate earned on investments and the credited interest rates paid on outstanding policies and contracts. Additionally, a prolonged period of low interest rates in the future may lengthen liability maturity, thus increasing the need for a re-investment of assets at yields that are below the amounts required to support guarantee features of our contracts. Both rising and declining interest rates can negatively affect our interest earnings and spread income (the difference between the returns we earn on our investments and the amounts we must credit to policyholders and contractholders). While we develop and maintain asset liability management (“ALM”) programs and procedures designed to mitigate the effect on interest earnings and spread income in rising or falling interest rate environments, no assurance can be given that changes in interest rates will not materially adversely affect our business, financial condition and results of operations.

Our expectation for future interest earnings and spread income is an important component in amortization of DAC and VOBA and significantly lower interest earnings or spreads may cause us to accelerate amortization,

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thereby reducing net income in the affected reporting period. An extended period of declining interest rates or a prolonged period of low interest rates may also cause us to change our long-term view of the interest rates that we can earn on our investments. Such a change in our view would cause us to change the long-term interest rate that we assume in our calculation of insurance assets and liabilities under U.S. GAAP. This revision would result in increased reserves and other unfavorable consequences. In addition, while the amount of statutory reserves is not directly affected by changes in market interest rates, additional statutory reserves may be required as the result of an asset adequacy analysis, which is altered by rising or falling interest rates and widening credit spreads.

Additionally, our ALM programs and procedures incorporate assumptions about the relationship between short-term and long-term interest rates and relationships between risk-adjusted and risk-free interest rates, market liquidity and other factors. The effectiveness of our ALM programs and procedures may be negatively affected whenever actual results differ from these assumptions.

Changes in interest rates may also affect the attractiveness of certain of our products. For example, lower interest rates may result in decreased sales of certain of our insurance and investment products. However, during periods of declining interest rates, certain life insurance and annuity products may be relatively more attractive investments to consumers, resulting in increased premium payments on products with flexible premium features, repayment of policy loans and increased persistency or a higher percentage of insurance policies remaining in force from year to year during a period when our investments carry lower returns. As a result, we could become unable to earn our desired level of spread income.

During periods of increasing market interest rates, we may offer higher crediting rates on interest-sensitive products, such as universal life insurance and fixed annuities, and we may increase crediting rates on in-force products to keep these products competitive. Increases in crediting rates, as well as surrenders and withdrawals, could have a material adverse effect on our business, financial condition and results of operations. In addition, if long-term interest rates rise dramatically within a six- to twelve-month time period, certain of our products may be exposed to disintermediation risk. Higher interest rates may increase the cost of debt and other obligations having floating rate or rate reset provisions and may result in lower sales of other products. A rise in interest rates, in the absence of other countervailing changes, will increase the gross unrealized loss position of our investment portfolio which will decrease our accumulated other comprehensive income and shareholders’ equity. Our gross unrealized loss on our available for sale ("AFS") portfolio was $~~269~~139 as of September 30, ~~2016~~2017 compared to $~~498~~269 as of September 30, ~~2015~~2016.

Our investments are subject to market and credit risks. These risks could be heightened during periods of extreme volatility or disruption in financial and credit markets.

Our invested assets and derivative financial instruments are subject to risks of credit defaults and changes in market values. Periods of extreme volatility or disruption in the financial and credit markets could increase these risks. Underlying factors relating to volatility affecting the financial and credit markets could have a material adverse impact on our results of operations or financial condition.

The value of our mortgage-backed investments depends in part on the financial condition of the borrowers and tenants for the properties underlying those investments, as well as general and specific economic trends affecting the overall default rate. We are also subject to the risk that cash flows resulting from the payments on pools of mortgages that serve as collateral underlying the mortgage-backed securities we own may differ from our expectations in timing or size. Cash flow variability arising from an unexpected acceleration in mortgage prepayment behavior can be significant, and could cause a decline in the estimated fair value of certain “interest-only” securities within our mortgage-backed securities portfolio. Any event reducing the estimated fair value of these securities, other than on a temporary basis, could have an adverse effect on our business, results of operations and financial condition.

Significant continued financial and credit market volatility, changes in interest rates, credit spreads, credit defaults, real estate values, market illiquidity, declines in equity prices, acts of corporate malfeasance, ratings downgrades of the issuers or guarantors of these investments and declines in general economic conditions, either alone or in combination, could have a material adverse impact on our results of operations, financial condition or cash flows through realized losses, OTTI, changes in unrealized loss positions and increased demands on capital. As of September 30, ~~2016~~2017 and ~~2015~~2016, we had gross unrealized losses on our AFS portfolio of $~~269~~139 and $~~498~~269, respectively. In addition, our investment portfolio is concentrated in certain industries. As of September 30, ~~2016~~2017 and ~~2015~~2016, our most significant investment in one industry was our investment securities in the banking industry

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with a fair value of $2,~~448~~827 and $12,~~979~~448, or 12% and 1012%, respectively, of the invested assets portfolio. Our holdings in this industry include investments in 97115 and 8397 different issuers as of September 30, ~~2016~~2017 and ~~2015~~2016, respectively, with the top ten investments accounting for 3430% and 3934% of the total holdings in this industry as of September 30, ~~2016~~2017 and ~~2015~~2016, respectively. In addition, market volatility can make it difficult for us to value certain of our assets, especially if trading becomes less frequent. Valuations may include assumptions or estimates that may have significant period-to-period changes that could have an adverse impact on our results of operations or financial condition.

We are exposed to credit loss in the event of non-performance by our counterparties on call options. We seek to reduce the risk associated with such agreements by purchasing such options from large, well-established financial institutions, but there can be no assurance that we will not suffer losses in the event of counterparty non-performance. As of September 30, ~~2016~~2017 and ~~2015~~2016, $~~128~~381 and $7128, respectively, of collateral was posted by our counterparties. Accordingly, the maximum amount of loss due to credit risk that we would incur if parties to the call options failed completely to perform according to the terms of the contracts was $~~148~~32 and $74148 at September 30, ~~2016~~2017 and ~~2015~~2016, respectively. See "Note 5. Derivative Financial Instruments" to our audited Consolidated Financial Statements for further discussion of credit risk.

Equity market volatility could negatively impact our business.

Equity market volatility can negatively affect our revenues and profitability in various ways, particularly as a result of guaranteed minimum withdrawal or surrender benefits in our products. 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 or increased equity volatility could result in an increase in the valuation of the future policy benefit or policyholder account balance liabilities associated with such products, resulting in a reduction in our revenues and net income. The rate of amortization of DAC and VOBA ~~costs~~ relating to FIA products and the cost of providing guaranteed minimum withdrawal or surrender benefits could also increase if equity market performance is worse than assumed, hence materially and adversely impacting our results of operations and financial condition.

Credit market volatility or disruption could adversely impact our financial condition or results of operations.

Significant volatility or disruption in credit markets could have a material adverse effect on our business, financial condition and results of operations. Changes in interest rates and credit spreads could cause market price and cash flow variability in the fixed income instruments in our investment portfolio. Significant volatility and lack of liquidity in the credit markets could cause issuers of the fixed-income securities in our investment portfolio to default on either principal or interest payments on these securities. Additionally, market price valuations may not accurately reflect the underlying expected cash flows of securities within our investment portfolio.

Changes in federal or state tax laws may affect sales of our products and profitability.

The annuity and life insurance products that we market generally provide the policyholder with certain federal income or state tax advantages. For example, federal income taxation on any increases in non-qualified annuity contract values (i.e., the “inside build-up”) is deferred until it is received by the policyholder. Non-qualified annuities are annuities that are not sold to a qualified retirement plan. With other savings investments, such as certificates of deposit and taxable bonds, the increase in value is generally taxed each year as it is realized. Additionally, life insurance death benefits are generally exempt from income tax.

From time to time, various tax law changes have been proposed that could have an adverse effect on our business, including the elimination of all or a portion of the income tax advantages described above for annuities and life insurance. Additionally, insurance products, including the tax favorable features of these products, generally must be approved by the insurance regulators in each state in which they are sold. This review could delay the introduction of new products or impact the features that provide for tax advantages and make such products less attractive to potential purchasers. If legislation were enacted to eliminate the tax deferral for annuities, such a change would have a material adverse effect on our ability to sell non-qualified annuities.

We may be required to increase our valuation allowance against our deferred tax assets, and may face restrictions on our ability to fully utilize such assets which could materially adversely affect our capital position, business, operations and financial condition.

Deferred tax assets refer to assets that are attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets in essence represent future savings of taxes that would otherwise be paid in cash. The realization of the deferred tax assets is dependent

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upon the generation of sufficient future taxable income, including capital gains. If it is determined that the deferred tax assets cannot be realized, a deferred tax valuation allowance must be established, with a corresponding charge to net income.

Based on our current assessment of future taxable income, including available tax planning opportunities, we anticipate that it is more likely than not that we will generate sufficient taxable income to realize all of our deferred tax assets as to which we do not have a valuation allowance. If future events differ from our current forecasts, the valuation allowance may need to be increased from the current amount, which could have a material adverse effect on our capital position, business, operations and financial condition.

We may be subject to an additional tax as a personal holding company on future undistributed personal holding company income if we generate passive income in excess of operating expenses (subject to certain exclusions relating to our life insurance subsidiaries).

Section 541 of the Code subjects a corporation (not including a life insurance corporation) that is a “personal holding company” (“PHC”) to a 20% tax on “undistributed personal holding company income” in addition to a corporation’s normal income tax. A corporation (not including a life insurance corporation) is also generally is considered to be a PHC if (i) at least 60% of its adjusted ordinary gross income (excluding dividends paid by any non-consolidated life insurance subsidiary) is PHC Income (defined below) and (ii) more than 50% in value of its outstanding stock is owned, directly or indirectly, by five or fewer individuals (including, for this purpose, certain organizations and trusts) at any time during the last half of the taxable year. Personal holding company income (“PHC Income”) is comprised primarily of passive investment income (but does not include non-passive income such as insurance premiums or dividends paid by any non-consolidated life insurance subsidiary) plus, under certain circumstances, personal service income.

So long as individuals and their affiliates hold (directly or by attribution) more than 50% in value of our outstanding common stock, including through ownership of the outstanding common stock of HRG at any time during any future tax year, it is possible that we will be a PHC if at least 60% of our adjusted ordinary gross income consists of PHC Income (taking into account the rules and exclusions discussed above). In the past, we have not incurred the PHC tax. However, there can be no assurance that we will not be subject to this tax in the future, which, in turn, may materially and adversely impact our financial position, results of operations, cash flows and liquidity.

Our business model depends on the performance of various third parties, including independent distributors, underwriters, actuarial consultants and other service providers.

We rely significantly on various third parties to provide services for our business operations. As such, our results may be affected by the performance of those other parties. For example, we are dependent upon independent distribution channels to sell our products, third parties to perform policy administration and underwriting functions, and independent consultants to perform actuarial analyses and to manage certain of our assets. Additionally, our operations are dependent on various service providers and on various technologies, some of which are provided or maintained by certain key outsourcing partners and other parties.

Many of our products and services are complex and are sold through third-party intermediaries. In particular, our insurance businesses are reliant on these intermediaries to describe and explain their products to potential customers. The intentional or unintentional misrepresentation of our products and services in advertising materials or other external communications, or inappropriate activities by our personnel or an intermediary, could adversely affect our reputation and business prospects, as well as lead to potential regulatory actions or litigation.

The third parties upon which we depend may default on their obligations to us due to bankruptcy, insolvency, lack of liquidity, adverse economic conditions, operational failure, fraud, loss of key personnel, or other reasons. Such defaults could have a material adverse effect on our financial condition and results of operations. In addition, certain of these other parties may act, or be deemed to act, on behalf of us or represent us in various capacities. Consequently, we may be held responsible for obligations that arise from the acts or omissions of these other parties.

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

In addition to services provided by third-party asset managers and actuarial consultants, we outsource the following functions to third-party service providers, and expect to continue to do so in the future: (i) new business administration, (ii) hosting of financial systems, (iii) servicing of existing policies, (iv) information technology development and maintenance, (v) call centers and (vi) underwriting administration of life insurance applications. If we do not maintain an effective outsourcing strategy or third-party providers do not perform as contracted, we may experience operational difficulties, increased costs and a loss of business that could have a material adverse effect on our results of operations. In addition, our reliance on third-party service providers that we do not control does not relieve us of our responsibilities and requirements. Any failure or negligence by such third-party service providers in carrying out their contractual duties may result in us becoming subjected to liability to parties who are harmed and ensuing litigation. Any litigation relating to such matters could be costly, expensive and time-consuming, and the outcome of any such litigation may be uncertain.

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

The loss of key personnel could negatively affect our financial results and impair our ability to implement our business strategy.

Our success depends in large part on our ability to attract and retain key people. Intense competition exists for key employees with demonstrated ability, and we may be unable to hire or retain such employees. Our key employees include investment professionals, such as portfolio managers, sales and distribution professionals, actuarial and finance professionals and information technology professionals. While we do not believe that the departure of any particular individual would cause a material adverse effect on our operations, the unexpected loss of several of our senior management, portfolio managers or other key employees could have a material adverse effect on our operations due to the loss of their skills, knowledge of our business, and their years of industry experience as well as the potential difficulty of promptly finding qualified replacement employees. We also rely upon the knowledge and experience of employees involved in functions that require technical expertise in order to provide for sound operational controls for our overall enterprise, including the accurate and timely preparation of required regulatory filings and U.S. GAAP and statutory financial statements and operation of internal controls. A loss of such employees could adversely impact our ability to execute key operational functions and could adversely affect our operational controls, including internal controls over financial reporting.

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, including as a result of human error, could harm our business.

We are highly dependent on automated and information technology systems to record and process our internal transactions and transactions involving our customers, as well as to calculate reserves, value-invested assets and complete certain other components of our U.S. GAAP and statutory financial statements. We could experience a failure of one of these systems, our employees or agents could fail to monitor and implement enhancements or other modifications to a system in a timely and effective manner, or our employees or agents could fail to complete all necessary data reconciliation or other conversion controls when implementing a new software system or implementing modifications to an existing system. Despite the implementation of security and back-up measures, our information technology systems may be vulnerable to physical or electronic intrusions, viruses or other attacks, programming errors and similar disruptions. We may also be subject to disruptions of any of these systems arising from events that are wholly or partially beyond our control (for example, natural disasters, acts of terrorism, epidemics, computer viruses and electrical/telecommunications outages). All of these risks are also applicable where we rely on outside vendors, including NTT Data (formerly "Dell"), to provide services to us and our customers. The failure of any one of these systems for any reason, or errors made by our employees or agents, could in each case cause significant interruptions to our operations, which could harm our reputation, adversely affect our internal control over financial reporting, or have a material adverse effect on our business, results of operations and financial condition.

We retain confidential information in our information technology systems and those of our business partners, and we rely on industry standard commercial technologies to maintain the security of those systems. Despite our implementation of network security measures, our servers could be subject to physical and electronic break-ins, ~~and similar disruptions from unauthorized tampering with our computer systems. While we perform annual~~

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and similar disruptions from unauthorized tampering with our computer systems. While we perform annual penetration tests and have adopted a number of measures to protect the security of customer and company data and have not experienced a successful cyber-attack, there is no guaranty that such an attack will not occur or be successful in the future. Anyone who is able to circumvent our security measures and penetrate our information technology systems could access, view, misappropriate, alter, or delete information in the systems, including personally identifiable customer information and proprietary business information. Information security risks also exist with respect to the use of portable electronic devices, such as laptops, which are particularly vulnerable to loss and theft. In addition, an increasing number of jurisdictions require that customers be notified if a security breach results in the disclosure of personally identifiable customer information. Any compromise of the security of our information technology systems that results in inappropriate access, use or disclosure of personally identifiable customer information could damage our reputation in the marketplace, deter purchases of our products, subject us to heightened regulatory scrutiny or significant civil and criminal liability and require us to incur significant technical, legal and other expenses.

In the event of a disaster such as a natural catastrophe, an industrial accident, a blackout, a computer virus, a terrorist attack or war, our information technology systems may be inaccessible to our employees, customers, or business partners for an extended period of time. Even if our employees are able to report to work, they may be unable to perform their duties for an extended period of time if our data or systems are disabled or destroyed. Any such occurrence could materially adversely affect our business, operations and financial condition.

Our risk management policies and procedures could leave us exposed to unidentified or unanticipated risk, which could negatively affect our business or result in losses.

We have developed risk management policies and procedures and expect to continue to enhance these in the future. Nonetheless, our policies and procedures to identify, monitor, and manage both internal and external risks may not effectively mitigate these risks or predict future exposures, which could be different or significantly greater than expected. These identified risks may not be the only risks facing us. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may adversely affect our business, financial condition or operating results. For example, we hedge our FIA index credits with a combination of static and dynamic strategies, which can result in earnings volatility. In addition, our 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.

Difficult conditions in the economy generally could adversely affect our business, operations and financial condition.

A general economic slowdown could adversely affect us in the form of changes in consumer behavior and pressure on our investment portfolios. Concerns over the Federal Reserve’s stimulus plan, the slow economic recovery, the level of U.S. national debt, the global economic concerns and financial sector issues, sluggish job growth and wage stagnation, the availability and cost of credit, the U.S. housing market, inflation levels, and geopolitical issues have contributed to increased volatility and diminished expectations for the economy and the markets. Even under relatively favorable economic and market conditions, demand for our products, as well as our investment returns, are sensitive to fixed income, equity, real estate and other fluctuations and overall economic and political conditions. Our top five states for the distribution of our products are California, Texas, Florida, New Jersey and Michigan, and, as a result, any adverse economic developments in these states could have an adverse impact on our business. As a result of these and other concerns, consumer behavior could change, potentially resulting in decreased demand for our products and elevated levels of policy lapses, policy loans, withdrawals and surrenders. In addition, our investments, including investments in mortgage-backed securities, could be adversely affected as a result of deteriorating financial and business conditions affecting the issuers of the securities in our investment portfolio.

We may not be able to protect our intellectual property and may be subject to infringement claims.

We rely on a combination of contractual rights and copyright, trademark and trade secret laws to establish and protect our intellectual property. Although we use a broad range of measures to protect our intellectual property rights, third parties may infringe or misappropriate our intellectual property. We may have to litigate to enforce and protect our copyrights, trademarks, trade secrets and know-how or to determine their scope, validity or enforceability, which represents a diversion of resources that may be significant in amount and may not prove successful. The loss of intellectual property protection or the inability to secure or enforce the protection of our intellectual property assets could adversely impact our business and its ability to compete effectively.

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~~of copyright, trademark, trade secret or license usage rights~~successful. ~~Any~~The ~~such~~loss ~~claims~~of ~~and~~intellectual ~~any~~property ~~resulting~~protection ~~litigation could result in significant expense and liability for damages~~ or wethe ~~could~~inability ~~be enjoined from providing certain products or services~~ to ~~our~~secure ~~customers~~ or ~~utilizing~~enforce ~~and~~the ~~benefiting~~protection ~~from~~of ~~certain~~our ~~methods,~~intellectual ~~processes,~~property ~~copyrights,~~assets ~~trademarks, trade secrets or licenses, or alternatively, we~~ could beadversely ~~required~~impact ~~to enter into costly licensing arrangements with third parties, all of which could have a material adverse effect on~~ our business, ~~results~~and ofits ~~operations~~ability ~~and~~to ~~financial~~compete ~~condition~~effectively.

We also may be subject to costly litigation in the event that another party alleges our operations or activities infringe upon that party’s intellectual property rights. We may also be subject to claims by third parties for breach of copyright, trademark, trade secret or license usage rights. Any such claims and any resulting litigation could result in significant expense and liability for damages or we could be enjoined from providing certain products or services to our customers or utilizing and benefiting from certain methods, processes, copyrights, trademarks, trade secrets or licenses, or alternatively, we could be required to enter into costly licensing arrangements with third parties, all of which could have a material adverse effect on our business, results of operations and financial condition.

We are exposed to the risks of natural and man-made catastrophes, pandemics and malicious and terrorist acts that could materially adversely affect our business, financial condition and results of operations.

Natural and man-made catastrophes, pandemics and malicious and terrorist acts present risks that could materially adversely affect our results of operations. A natural or man-made catastrophe, pandemic or malicious or terrorist act could materially adversely affect the mortality or morbidity experience of our business or our reinsurers. ~~Such events could adversely affect the mortality and morbidity experience of our business.~~ Claims arising from such events could have a material adverse effect on our business, operations and financial condition, either directly or as a result of their effect on our reinsurers or other counterparties. Such events could also have an adverse effect on lapses and surrenders of existing policies, as well as sales of new policies. While we have taken steps to identify and manage these risks, such risks cannot be predicted with certainty, nor fully protected against even if anticipated. In addition, such events could result in overall macroeconomic volatility or specifically a decrease or halt in economic activity in large geographic areas, adversely affecting the marketing or administration of our business within such geographic areas or the general economic climate, which in turn could have an adverse effect on our business, operations and financial condition. The possible macroeconomic effects of such events could also adversely affect our asset portfolio.

We operate in a highly competitive industry, which could limit our ability to gain or maintain our position in the industry and could materially adversely affect our business, financial condition and results of operations.

We operate in a highly competitive industry. We encounter significant competition in all of our product lines from other insurance companies, many of which have greater financial resources and higher financial strength ratings than us and which may have a greater market share, offer a broader range of products, services or features, assume a greater level of risk, have lower operating or financing costs, or have different profitability expectations than us. Competition could result in, among other things, lower sales or higher lapses of existing products.

Our annuity products compete with fixed indexed, fixed rate and variable annuities sold by other insurance companies and also with mutual fund products, traditional bank investments and other retirement funding alternatives offered by asset managers, banks and broker-dealers. Our insurance products compete with those of other insurance companies, financial intermediaries and other institutions based on a number of factors, including premium rates, policy terms and conditions, service provided to distribution channels and policyholders, ratings by rating agencies, reputation and commission structures.

Consolidation in the insurance industry and in distribution channels may result in increasing competitive pressures on us. Larger, potentially more efficient organizations may emerge from such consolidation. In addition, some mutual insurance companies have converted to stock ownership, which gives them greater access to capital markets and greater ability to compete. The ability of banks to increase their securities-related business or to affiliate with insurance companies may materially and adversely affect sales of all of our products by substantially increasing the number and financial strength of potential competitors. Consolidation and expansion among banks, insurance companies and other financial services companies with which we do business could also have an adverse effect on our business, operations and financial condition if they demand more favorable terms than we previously offered or if they elect not to continue to do business with us following consolidation or expansion.

Our ability to compete is dependent upon, among other things, our ability to develop competitive and profitable products, our ability to maintain low unit costs, and our maintenance of adequate financial strength ratings from rating agencies. Our ability to compete is also dependent upon, among other things, our ability to attract and retain distribution channels to market our products, the competition for which is vigorous. We compete for marketers and agents primarily on the basis of our financial position, support services, compensation and product features. Such marketers and agents may promote products offered by other life insurance companies that may offer a larger variety of products than we do. Our competitiveness for such marketers and agents also depends upon the long-term relationships we develop with them. If we are unable to attract and retain sufficient marketers and agents to sell our products, our ability to compete and our revenues will suffer.

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product features. Such marketers and agents may promote products offered by other life insurance companies that may offer a larger variety of products than we do. Our competitiveness for such marketers and agents also depends upon the long-term relationships we develop with them. If we are unable to attract and retain sufficient marketers and agents to sell our products, our ability to compete and our revenues will suffer.

Our ability to maintain competitive policy expense costs is dependent upon the level of new sales and persistency of existing business.

Our ability to maintain competitive policy expense costs is dependent upon a number of factors, such as the level of new sales, persistency of existing business and expense management. A decrease in sales or persistency without a corresponding reduction in expenses may result in higher policy expense costs.

In addition, lower persistency may result in higher or more rapid amortization of ~~VOBA~~DAC ~~costs~~and VOBA, which would result in higher unit costs and lower reported earnings. Although many of our products contain surrender charges, such charges decrease over time and may not be sufficient to cover the unamortized DAC and VOBA costs with respect to the insurance policy or annuity contract being surrendered. Refer to the deferred annuity account values and surrender charge protection disclosure included within "Item 1. Business, Fixed Rate Annuities."

There may be adverse consequences if the independent contractor status of our IMOs is successfully challenged.

We sell our products through a network of approximately 200 IMOs representing approximately 3537,000 independent agents and managing general agents. We currently treat these IMOs as independent contractors who own their own businesses. However, the tests governing the determination of whether an individual is considered to be an independent contractor or an employee are typically fact sensitive and vary from jurisdiction to jurisdiction. Laws and regulations that govern the status of the IMOs are subject to change or interpretation by various authorities. If a federal, state or local authority or court enacts legislation or adopts regulations or adopts an interpretation that changes the manner in which employees and independent contractors are classified or makes any adverse determination with respect to some or all of our independent contractors, we could incur significant costs in complying with such laws, regulations or interpretations, including, in respect of tax withholding, social security payments and recordkeeping, or we could be held liable for the actions of such independent contractors or may be required to modify our business model, any of which could have a material adverse effect on our business, financial condition and results of operations. In addition, there is the risk that we may be subject to significant monetary liabilities arising from fines or judgments as a result of any such actual or alleged non-compliance with federal, state or local tax or employment laws. Further, if it were determined that our IMOs should be treated as employees, we could possibly incur additional liabilities with respect to any applicable employee benefit plan.

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

We must attract and retain our network of IMOs and independent agents to sell our products. Insurance companies compete vigorously for productive agents. We compete with other life insurance companies for marketers and agents primarily on the basis of our financial position, support services, compensation and product features. Such marketers and agents may promote products offered by other life insurance companies that may offer a larger variety of products than we do. Our competitiveness for such marketers and agents also depends upon the long-term relationships we develop with them. Our most important IMOs (those who are able to meet certain production targets) are referred to as “Power Partners”. We currently have 32 Power Partners that accounted for approximately 95% of our Fiscal ~~2016~~2017 sales volume. There can be no guaranty that such relationships will continue in the future. If we are unable to attract and retain a sufficient number of marketers and agents to sell our products, our ability to compete and our revenues would suffer.

Our subsidiaries may not be able to generate sufficient cash to service all of their obligations and may be forced to take other actions to satisfy their obligations, which may not be successful.

Our subsidiaries’ ability to make scheduled payments on or to refinance their debt obligations, including the Senior Notes, depends on their financial condition and operating performance, which in turn are subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond their control. Our subsidiaries may not be able to maintain a level of cash flows from operating activities sufficient to permit them to pay the principal, premium, if any, and interest on indebtedness.

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If our subsidiaries’ cash flows and capital resources are insufficient to fund our subsidiaries’ obligations, we could face substantial liquidity problems and may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance indebtedness. Our ability to restructure or refinance our subsidiaries’ debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our subsidiaries’ debt could be at higher interest rates and may require compliance with more onerous covenants, which could further restrict our business operations. The terms of existing and future debt instruments may restrict us from adopting some of these alternatives. In addition, any failure to make payments on outstanding obligations on a timely basis would likely result in a reduction of our ratings, which could harm our ability to conduct our business and to incur additional indebtedness. In the face of such substantial liquidity problems, we may be required to dispose of material assets or operations to meet our obligations. We may not be able to consummate those dispositions and these proceeds may not be adequate to meet any obligations then due.

We have entered into business transactions with unaffiliated third-party borrowers through Salus and would be adversely affected if third-party borrowers were unable to meet their obligations.

We maintain exposure to senior secured asset-based loans to unaffiliated third-party borrowers through loans originated by Salus, a company indirectly owned by HRG. FGL Insurance has not participated in any new originations to asset-based loans through Salus since October 2014, and this portfolio has been winding down as exposures mature and borrowers refinance. As of September 30, 2016, $21 of such loans were outstanding. We currently estimate that this portfolio will be largely paid down by the end of calendar year 2017.

We are a holding company with no operations of our own. As a consequence, our ability to pay dividends on our stock will depend on the ability of our subsidiaries to pay dividends to us, which may be restricted by law.

We are a holding company with limited business operations of our own. Our primary subsidiaries are insurance subsidiaries that own substantially all of our assets and conduct substantially all of our operations. Accordingly, our payment of dividends is dependent, to a significant extent, on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend or otherwise. Our subsidiaries may not be able to, or may not be permitted to, make distributions to enable us to meet our obligations and pay dividends. Each subsidiary is a distinct legal entity and legal and contractual restrictions may also limit our ability to obtain cash from our subsidiaries.

Our insurance subsidiaries are subject to various statutory and regulatory restrictions and the ability of our insurance subsidiaries to pay dividends is limited by applicable insurance laws and regulations. See “Business-Regulation-Dividend and Other Distribution Payment Limitations”. The Iowa insurance law and the New York insurance law regulate the amount of dividends that may be paid in any year by FGL Insurance and FGL NY Insurance, respectively. This could limit both our ability to receive cash flow from our direct wholly -owned subsidiary, FGLH, FGLH’s ability to receive cash flow from its direct wholly -owned subsidiary, FGL Insurance, and FGL Insurance’s ability to receive cash flow from its direct wholly -owned subsidiary, FGL NY Insurance.

Each year FGL Insurance may pay a certain limited amount of ordinary dividends or other distributions without being required to obtain the prior consent of the Iowa Commissioner. FGL Insurance is required to provide advance written notice to the Iowa Commissioner of its intention to pay dividends that are deemed ordinary dividends and to request approval to pay dividends that are deemed extraordinary dividends. Pursuant to Iowa insurance law, ordinary dividends are payments, together with all other such payments within the preceding twelve months, that do not exceed the greater of (i) 10% of FGL Insurance’s statutory surplus as regards policyholders as of December 31 of the preceding year; or (ii) the net gain from operations of FGL Insurance (excluding realized capital gains) for the 12-month period ending December 31 of the preceding year. Dividends may only be paid out of statutory earned surplus.

Dividends in excess of FGL Insurance’s ordinary dividend capacity are referred to as extraordinary and require prior approval of the Iowa Commissioner. In deciding whether to approve a request to pay an extraordinary dividend, Iowa insurance law requires the Iowa Commissioner to consider the effect of the dividend payment on FGL Insurance’s surplus and financial condition generally and whether the payment of the dividend will cause FGL Insurance to fail to meet its required RBC ratio. In addition, Delaware law may impose requirements that may restrict our ability to pay dividends to holders of our common stock. FGL Insurance has not paid out extraordinary dividends since 2008, and in the future FGL Insurance may be required to request approval to pay an extraordinary dividend and there is no guarantee such a request would be approved by the Iowa Commissioner.

It is possible that in the future, our insurance subsidiaries may be unable to pay dividends or distributions to us in an amount sufficient to meet our obligations or to pay dividends due to a lack of sufficient statutory net gain from operations, a diminishing statutory policyholders surplus, changes to the Iowa or New York insurance laws or regulations or for some other reason. Further, the covenants in the agreement governing the existing indebtedness of FGLH significantly restrict its ability to pay dividends, which further limits our ability to obtain cash or other assets from our subsidiaries. If our subsidiaries cannot pay sufficient dividends or distributions to us in the future, we would be unable to meet our obligations or to pay dividends. This would negatively affect our business and financial condition as well as the trading price of our common stock.

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in the future, we would be unable to meet our obligations or to pay dividends. This would negatively affect our business and financial condition as well as the trading price of our common stock.

Risks Relating to Our Common Stock

The market price of our common stock may be volatile and could decline.

The market price of our common stock may fluctuate significantly in response to various factors, some of which are beyond our control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Form 10-K, the factors that could affect our stock price are:


•	industry or general market conditions;


•	domestic and international political and economic factors unrelated to our performance;


•	actual or anticipated fluctuations in our quarterly operating results;


•	changes in or failure to meet publicly disclosed expectations as to our future financial performance;


•	changes in securities analysts’ estimates of our financial performance or lack of research and reports by industry analysts;


•	action by institutional shareholders or other large shareholders, such as HRG, including sales of large blocks of common stock;


•	speculation in the press or investment community;


•	changes in investor perception of us and our industry;


•	changes in market valuations or earnings of similar companies;


•	announcements by us or our competitors of significant products, contracts, acquisitions or strategic partnerships;


•	changes in our capital structure, such as future sales of our common stock or other securities;


•	changes in applicable laws, rules or regulations, regulatory actions affecting us and other dynamics; and


•	additions or departures of key personnel.

The stock markets have experienced extreme volatility inover ~~recent~~time ~~years~~ that has been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. In the past, following periods of volatility in the market price of a company’s securities, class action litigation has often been instituted against such company. Any litigation of this type brought against us could result in substantial costs and a diversion of our management’s attention and resources, which would harm our business, operating results and financial condition.

Future sales of a substantial number of shares by existing shareholders could cause our stock price to decline.

Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could cause the market price of our common stock to decline. As of September 30, ~~2016~~2017, we have 58,~~956~~933 thousand outstanding shares of common stock. The 9,750 thousand shares sold pursuant to the Company’s initial public offering ("IPO") on December 13, 2013, as well as the additional 1,463 thousand options granted to the underwriters that was subsequently exercised, became immediately tradable without restriction under the Securities Act unless held by “affiliates”, as that term is defined in Rule 144 under the Securities Act of 1933, as amended (“Securities Act”). The remaining 47,~~000~~720 thousand shares of common stock outstanding are restricted securities within the meaning of Rule 144 under the Securities Act, but will be eligible for resale subject to applicable volume, means of sale, holding period and other limitations of Rule 144. We also have entered into a registration rights agreement with HRG pursuant to which HRG is able to require us to register shares it holds for resale. We have filed and intend to file registration statements under the Securities Act to register the shares of common stock to be issued under our 2013 Stock Incentive Plan, as amended (the “Omnibus Plan”) and, as a result, all shares of common stock acquired upon exercise of stock options and vesting of unvested restricted shares granted under the Omnibus Plan will also be freely tradable under the Securities Act, unless purchased by our affiliates. A total of 2,838 thousand shares of common stock are reserved for issuance under the Omnibus Plan. At September 30, ~~2016~~2017, ~~1,159~~603 thousand shares remain available for future issuance under the Omnibus Plan.

In the future, we may issue additional shares of common stock or other equity or fixed maturity securities convertible into common stock in connection with a financing, acquisition, and litigation settlement or employee arrangement or otherwise. Any of these issuances could result in substantial dilution to our existing shareholders and could cause the trading price of our common stock to decline.

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arrangement or otherwise. Any of these issuances could result in substantial dilution to our existing shareholders and could cause the trading price of our common stock to decline.

If securities or industry analysts do not publish research or publish misleading or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. We are currently covered by one or more securities analysts, but there is no guarantee such coverage will continue. If one or more of the analysts covering our stock downgrades our stock or publishes misleading or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price or trading volume to decline.

Under our amended and restated certificate of incorporation, HRG and its affiliates, including in some circumstances, any of our directors and officers who is also a director, officer, employee, member or partner of HRG and its affiliates, have no obligation to offer us corporate opportunities.

The policies relating to corporate opportunities and transactions with HRG are set forth in our amended and restated certificate of incorporation, address potential conflicts of interest between us, on the one hand, and HRG and its affiliates on the other hand. Our certificate of incorporation provides that HRG and its affiliates, including in some circumstances, any of our directors and officers who is also a director, officer, employee, member or partner of HRG and its affiliates, will not have any obligation to present to us, and HRG may separately pursue, or present to other of its subsidiaries, corporate opportunities of which they become aware, even if those opportunities are ones that we would have pursued if granted the opportunity. This includes FSRCI, which may, for example, be interested in pursuing acquisitions of blocks of business or insurance companies that we may also be interested in pursuing. By becoming one of our shareholders, holders of our common stock will be deemed to have notice of and have consented to these provisions of our certificate of incorporation. Although these provisions are designed to resolve conflicts between us and HRG and our respective affiliates fairly, conflicts may not be so resolved.

Future offerings of debt or equity securities that rank senior to our common stock may adversely affect the market price of our common stock.

If, in the future, we decide to issue debt or equity securities that rank senior to our common stock, it is likely that such securities will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock and may result in dilution of the percentage ownership of the holders of our common stock. We and, indirectly, our shareholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our common stock will bear the risk of our future offerings reducing the market price of our common stock and diluting the value of their stock holdings in us.

Fulfilling our obligations incident to being a public company, including with respect to the requirements of and related rules under the Sarbanes-Oxley Act of 2002, is expensive and time-consuming, and any delays or difficulties in satisfying these obligations could have a material adverse effect on our future results of operations and our stock price.

Prior to our IPO in December 2013, we operated as a private company, or as a subsidiary of a public company, and were not subject to the same financial and other reporting and corporate governance requirements as a public company. Since the IPO, we became required to file annual, quarterly and other reports with the SEC. We are required to prepare and timely file financial statements that comply with SEC reporting requirements. We are also subject to other reporting and corporate governance requirements under the listing standards of the New York Stock Exchange (“NYSE”) and the Sarbanes-Oxley Act of 2002, which impose significant compliance costs and obligations upon us. The changes necessitated by being a public company require a significant commitment of additional resources and management oversight which increases our operating costs. These changes also continue to place significant additional demands on our finance and accounting staff, which may not have prior public company experience or experience working for a newly public company, and on our financial accounting and information systems. We have hired and in the future may hire additional accounting and financial staff with public company reporting experience and technical accounting knowledge. Other expenses associated with being a public company include increases in auditing, accounting and legal fees and expenses, investor relations expenses,

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~~company include increases in auditing, accounting and legal fees and expenses, investor relations expenses,~~ increased directors’ fees and director and officer liability insurance costs, registrar and transfer agent fees and listing fees, as well as other expenses. As a public company, we are required, among other things, to:


•	prepare and file periodic reports, and distribute other shareholder communications, in compliance with the federal securities laws and NYSE listing standards;


•	define and expand the roles and the duties of our board of directors and its committees;


•	institute more comprehensive compliance, investor relations and internal audit functions; and


•	evaluate and maintain our system of internal control over financial reporting, and report on management’s assessment thereof, in compliance with rules and regulations of the SEC and the Public Company Accounting Oversight Board.

In particular, the Sarbanes-Oxley Act of 2002 requires us to document and test the effectiveness of our internal control over financial reporting in accordance with an established internal control framework, and to report on our conclusions as to the effectiveness of our internal controls. In addition, we are required under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to maintain disclosure controls and procedures and internal control over financial reporting. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. As described in “Part II - Item 9A. Controls and Procedures,” we identified and, as of September 30, 2017, remediated a material weakness in our internal controls. With remediation, the Company's management was able to conclude that its internal control over financial reporting was effective as of September 30, 2017. If we are unable to conclude that we have effective internal control over financial reporting, investors could lose confidence in the reliability of our financial statements. This could result in a decrease in the value of our common stock. Failure to comply with the Sarbanes-Oxley Act of 2002 could potentially subject us to sanctions or investigations by the SEC, NYSE, or other regulatory authorities.

In 1992, The Committee of Sponsoring Organization of the Treadway Commission ("COSO") developed an integrated framework for the design and evaluation of organization internal controls over financial reporting. Public companies have used the framework to evaluate and document the effectiveness of the internal control systems. In May of 2013, the COSO Board adopted an updated framework which will supersede the COSO 1992 framework for year ends after December 15, 2014. The revised framework is designed to address global, more complex and technology driven companies, creates greater transparency for investors and helps to meet more regulatory oversight. As a September 30th filer, we implemented the revised framework for Fiscal Year 2015.

Even if HRG sells sufficient common stock in the future so that it is no longer our majority shareholder, anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change in control of our company and may affect the trading price of our common stock.

Our certificate of incorporation and by-laws include a number of provisions that may discourage, delay or prevent a change in our management or control over us that shareholders may consider favorable in the event that HRG sells sufficient stock in the future so that it is no longer our majority shareholder. For example, our amended and restated certificate of incorporation and amended and restated by-laws:


•	authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a takeover attempt;


•	establish a classified board of directors, as a result of which our board of directors will be divided into three classes, with members of each class serving staggered three-year terms, which prevents shareholders from electing an entirely new board of directors at an annual meeting;


•	limit the ability of shareholders to remove directors;


•


•	provide that vacancies on our board of directors, including vacancies resulting from an enlargement of our board of directors, may be filled only by a majority vote of directors then in office;


•	prohibit shareholders from calling special meetings of shareholders if HRG ceases to own at least 50% of the outstanding shares of our common stock;


•	prohibit shareholder action by written consent, thereby requiring all actions to be taken at a meeting of the shareholders, if HRG ceases to own at least 50% of the outstanding shares of our common stock;


•	establish advance notice requirements for nominations of candidates for election as directors or to bring other business before an annual meeting of our shareholders; and

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•	require the approval of holders of at least 66 2/3% of the outstanding shares of our common stock to amend our amended and restated by-laws and certain provisions of our amended and restated certificate of incorporation if HRG ceases to own at least 50% of the outstanding shares of our common stock.

These provisions may prevent our shareholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if the provisions are viewed as discouraging takeover attempts in the future.

Our certificate of incorporation and by-laws may also make it difficult for shareholders to replace or remove our management. These provisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the best interests of our shareholders.

Many states, including the jurisdictions where our principal insurance subsidiaries FGL Insurance and FGL NY Insurance are organized (Iowa and New York, respectively), have insurance laws and regulations that require advance approval by state agencies of any direct or indirect change in control of an insurance company that is domiciled in or, in some cases, has such substantial business that it is deemed to be commercially domiciled in that state. Therefore, any person seeking to acquire a controlling interest in us would face regulatory obstacles which may delay, deter or prevent an acquisition that shareholders might consider in their best interests.

We are a “controlled company” within the meaning of the NYSE listing standards and, as a result, we qualify for, and rely on, exemptions from certain corporate governance requirements. Our stockholders do not have the same protections afforded to shareholders of companies that are subject to such requirements.

HRG directly or indirectly holds more than 50% of our common stock, so we qualify as a “controlled company” within the meaning of the corporate governance rules of the NYSE. Under these rules, a company may elect not to comply with certain corporate governance requirements, including:


•	the requirement that a majority of the board of directors consist of independent directors;


•	the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;


•	the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and


•	the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees.

We utilize certain of these exemptions and intend to continue to do so. As a result, we do not have a majority of independent directors, and our compensation committee and nominating and corporate governance committee do not consist entirely of independent directors, however, such board committees do perform annual performance evaluations even though they are not required to do so by NYSE listing standards.

Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us.

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed to us or our shareholders by any of our directors, officers, employees or agents, (iii) any action asserting a claim against us arising under the General Corporation Law of the State of Delaware (“DGCL”) or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine. By becoming a shareholder in our company, holders of our common stock will be deemed to have notice of and have consented to the provisions of our amended and restated certificate of incorporation related to choice of forum. The choice of forum provision in our amended and restated certificate of incorporation may limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us.

Our Principal Shareholder’s interests may conflict with yours.

HRG beneficially owns (directly or indirectly) approximately 80% of the outstanding shares of our common stock. As a result, HRG is in a position to exercise significant influence over all matters requiring shareholder

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approval for the foreseeable future, including decisions regarding extraordinary business transactions, fundamental corporate transactions, appointment of members of our management, election of directors and our corporate and management policies.

In the event that HRG reduces its beneficial ownership below 50% of our outstanding common stock, it will likely still be able to assert significant influence over our board of directors and certain corporate actions. HRG has the ability to designate for nomination for election at least a majority of our directors as long as HRG owns at least 50% of our common stock.

HRG’s interests may differ from your interests, and certain actions HRG takes as our controlling shareholder or as a significant shareholder may not be favorable to you. For example, the concentration of ownership held by HRG could delay, defer or prevent a change of control of us or impede a merger, takeover or other business combination which another shareholder may otherwise view favorably. Other potential conflicts could arise, for example, over matters such as our dividend policy or transactions that we may engage in, from time to time, with other business owned by HRG Group, such as Salus and/or FSRCI.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We lease our headquarters at 601 Locust Street, Des Moines, Iowa, and sublease properties in Baltimore, Maryland and Lincoln, Nebraska for legal, claims and processing needs. Such leases expire December 2020, May 2021 and January ~~2017~~2022, respectively. We believe our existing facilities are suitable and adequate for our present purposes. As of January 2018, we believe that our Des Moines, Iowa, and Baltimore, Maryland, properties will be sufficient for us to conduct our operations and are planning to exit our lease in Lincoln, Nebraska on December 31, 2017.

Item 3. Legal Proceedings

See "Note 12. Commitments and Contingencies" to our audited Consolidated Financial Statements.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is listed on the NYSE and trades under the symbol “FGL.” The high and low sales prices for our common stock for each quarterly period for the last two years are shown in the following table.

	High		Low
Year ended September 30, 2017
First Quarter	$	24.25	$	21.10
Second Quarter	27.95		23.45
Third Quarter	31.30		27.15
Fourth Quarter	31.38		30.95
Year ended September 30, 2016
First Quarter	$	27.87	$	24.01
Second Quarter	26.55		23.99
Third Quarter	26.49		22.17
Fourth Quarter	24.30		21.42
Year ended September 30, 2015
First Quarter	$	26.59	$	20.12
Second Quarter	24.85		20.50
Third Quarter	24.24		20.53
Fourth Quarter	27.41		23.01

As of October 1, ~~2016~~2017, there were approximately 8567 holders of record of our common stock. This number does not include the stockholders for whom shares are held in a “nominee” or “street” name. In the years ended September 30, ~~2016~~2017 and ~~2015~~2016, we paid total cash dividends of $0.26 and $0.26, respectively, per share, on our common stock. Fiscal ~~2016~~2017 dividends were paid to shareholders during December ~~2015~~2016, March ~~2016~~2017, ~~May~~June ~~2016~~2017 and ~~September~~August ~~2016~~2017. Fiscal ~~2015~~2016 dividends were paid to shareholders during December ~~2014~~2015, March ~~2015~~2016, ~~June~~May ~~2015~~2016 and ~~August~~September ~~2015~~2016. We intend to continue to pay cash dividends on such shares so long as we have sufficient capital and/or future earnings to do so, while retaining most of our future earnings, if any, for use in our operations and the expansion of our business. Further determination as to dividend policy will be made by our board of directors, based on our future earnings, capital requirements, financial condition, future prospects and any other factors our board of directors may deem relevant.

Stock Performance Graph

The information contained in this Stock Performance Graph section shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.

The following graph shows a comparison from December 13, 2013 (the date our common stock commenced trading on the NYSE) through September 30, ~~2016~~2017 of the cumulative total return for our common stock, the Standard & Poor's 500 Stock Index (S&P 500 Index) and the S&P 500 Life & Health Insurance Index. The graph assumes that $100 was invested at the market close on December 13, 2013 in common stock of Fidelity & Guaranty Life, the S&P 500 Index and the S&P 500 Life & Health Insurance Index and assumes reinvestments of dividends. The stock price performance of the following graph is not necessarily indicative of future stock price performance.

Item 6. Selected Financial Data

We have prepared the following selected financial data as of and for the years ended September 30, 2017, 2016, 2015, 2014, ~~2013,~~ and ~~2012~~2013.

	Fidelity & Guaranty Life
	Year Ended September 30,
(In millions, except share data)	~~2016~~2017		~~2015~~2016		~~2014~~2015		~~2013~~2014		~~2012~~2013
SUMMARY OF OPERATIONS
Total operating revenues	$	1,~~139~~530	$	~~961~~1,139	$	~~1,191~~961	$	1,~~347~~191	$	1,~~222~~347
Total benefits and expenses	~~964~~1,173		~~755~~964		~~979~~755		~~827~~979		~~1,062~~827
Net income	$	97223	$	~~118~~97	$	~~163~~118	$	~~348~~163	$	~~344~~348
PER SHARE DATA (a)
Net income per common share - basic	$	13.6783	$	21.0367	$	2.9103	$	72.4091	7.3240
Net income per common share - diluted	13.6683		21.0266		2.9002		72.4090		7.3240
Cash dividends declared per common share (b)	0.26		0.26		10.1126		1.9911		01.8599
Common shares outstanding	5958.09		5859.90		58.49		4758.04		47.0
BALANCE SHEET DATA
Total investments	$	2123,~~025~~072	$	1921,~~094~~025	$	1819,~~802~~094	$	1618,~~223~~802	$	16,~~557~~223
Total assets	2728,~~035~~965		2427,~~925~~035		24,~~153~~925		2224,~~403~~153		2022,~~990~~403
Debt	400		300		300		300		—
Total debt	405		400		300		300		300
Total liabilities	2526,~~101~~718		2325,~~423~~101		2223,~~494~~423		2122,~~264~~494		1921,~~700~~264
Total equity	12,~~934~~247		1,~~502~~934		1,~~659~~502		1,~~139~~659		1,~~291~~139
Total equity excluding AOCI	1,~~495~~704		1,~~414~~495		1,~~310~~414		1,~~026~~310		~~856~~1,026
Book value per share	3238.8013		2532.5180		2825.3951		2428.2339		2724.4623
Book value per share, excluding AOCI (c)	$	2528.3692	$	2425.0236	$	2224.4102	$	2122.8241	1821.2282

(a) Common shares outstanding and per share amounts give retroactive effect to our statutory conversion on August 26, 2013 and the 4,700-for-1 stock split of our shares of common stock effected on November 26, 2013.

(b) On August 9, 2013, we distributed our ownership interests in the parent company of FSRCI to HRG. As a result, FSRCI’s results are not included in our results for any period after Fiscal 2013. ~~See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” for further details on FSRCI results.~~

(c) Book value per share excluding AOCI (a non-GAAP financial measure) is based on stockholders’ equity excluding the effect of AOCI and is calculated as total stockholders' equity excluding AOCI divided by the total number of shares of common stock outstanding. Since AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale investments, we believe these non-GAAP financial measures provide useful supplemental information.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Fidelity & Guaranty Life Inc. (“FGL,” “we,” “us,” “our” and, collectively with its subsidiaries, the “Company”) should be read in conjunction with “Item 6. Selected Financial Data,” and our accompanying consolidated financial statements and related notes (the “Consolidated Financial Statements”) referred to in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K (the “Form 10-K”). Certain statements we make under this Item 7 constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. See “Forward-Looking Statements” at the beginning of Part I of this Form 10-K. You should consider our forward-looking statements in light of our Consolidated Financial Statements, related notes, and other financial information appearing elsewhere in this Form 10-K and our other filings with the Securities and Exchange Commission (the “SEC”).

All references to Fiscal ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015 refer to fiscal periods ended September 30, ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015, respectively.

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 life insurance provides wealth protection and transfer opportunities through indexed universal life products. Life and annuity products are primarily distributed through Independent Marketing Organizations ("IMOs") and independent insurance agents.

In setting the features and pricing 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 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 mortality rates, morbidity rates, 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 September 30, ~~2016~~2017, the Company's reserves, net of reinsurance, and average crediting rate on our fixed rate annuities were $34 billion and 3%, respectively. We are required to pay these 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.

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See “Item 7A. 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") products, for which demand is large and growing: over 10,000 people will turn 65 each day in the United States over the next 15 years. 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 FGL. 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 $5358 billion of sales in ~~2015~~2016. 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 ~~2015~~2016.

Competition

Our insurance subsidiaries operate in highly competitive markets. We face a variety of large and small industry participants. These companies compete for the growing pool of retirement assets driven by a number of factors, such as the continued aging of the U.S. population and the reduction in financial safety nets provided by governments and corporations. In many segments, product differentiation is difficult as product development and life cycles have shortened.

Annuity and Life Sales

Sales of annuities and IULs by quarter were as follows:

	Annuity Sales						IUL Sales
(dollars in millions)	Fiscal ~~2016~~2017		Fiscal ~~2015~~2016		Fiscal ~~2014~~2015		Fiscal ~~2016~~2017		Fiscal ~~2015~~2016		Fiscal ~~2014~~2015
First Fiscal Quarter	$	~~489~~648	$	~~903~~489	$	~~540~~903	$	1317	$	713	$	57
Second Fiscal Quarter	~~601~~732		~~610~~601		~~728~~610		1114		711		57
Third Fiscal Quarter	~~832~~582		~~519~~832		~~392~~519		159		1015		610
Fourth Fiscal Quarter	~~603~~588		~~434~~603		~~501~~434		176		1117		511
Total	$	2,~~525~~550	$	2,~~466~~525	$	2,~~161~~466	$	5646	$	3556	$	2135

Key Components of Our Historical Results of Operations

Under 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”) and value of business acquired (“VOBA”), other operating costs and expenses, and income taxes.

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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 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 ~~annual~~ index credits, and where applicable, minimum guaranteed interest credited. 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"), 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 our investment portfolios to maximize returns and minimize risks on our AUM such as interest rate changes and defaults or impairment of investments, and 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 pre- and post-DAC and VOBA as well as pre- and post-tax to measure our profitability in terms of growth and improved earnings.

Adjusted Operating Income ("AOI")

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. Reconciliations of such measures to the most comparable GAAP measures are included herein.

AOI is a non-GAAP economic measure we use to evaluate financial performance each period. AOI is calculated by adjusting net income to eliminate (i) the impact of net investment gains 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 changes in the interest rates used to discount the FIA embedded derivative liability, (iii) the effect of change in fair value of the reinsurance related embedded derivative, and (iv) the effect of class action litigation reserves, if any. All adjustments to AOI are net of the corresponding VOBA and DAC impact. The income tax impact related to these adjustments is measured using an effective tax rate of 35%, as appropriate.

While these adjustments are an integral part of the overall performance of FGL, market conditions impacting these items can overshadow the underlying performance of the business. Accordingly, we believe using a measure which excludes their impact is effective 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.

~~AUM~~Together iswith ~~the~~net ~~sum~~income ofwe ~~(i)~~believe ~~total~~AOI ~~invested~~provides ~~assets~~a atmeaningful ~~amortized~~financial ~~cost,~~metric ~~excluding~~that ~~derivatives;~~helps ~~and~~investors ~~including~~understand ~~(ii)~~our ~~related~~underlying ~~party~~results ~~loans~~ and ~~investments and (iii) cash and cash equivalents~~profitability. ~~AAUM is the sum of AUM at the end of each month in the period divided by the number of months in the period.~~

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Together with net income we believe AOI provides a meaningful financial metric that helps investors understand our underlying results and profitability.

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 and VOBA amortization. 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. The impact of the change in risk-free interest rates has been removed from net income in calculating AOI. Additionally the effect of change in the fair value of the reinsurance related embedded derivative has been removed from net income in calculating AOI.

AUM is the sum of (i) total invested assets at amortized cost, excluding derivatives; and including (ii) related party loans and investments and (iii) cash and cash equivalents. AAUM is the sum of AUM at the end of each month in the period divided by the number of months in the period.

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 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

General

The preparation of financial statements in conformity with GAAP requires usmanagement to make estimates and ~~assumptions~~judgements that affect the reported amounts of certain assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical estimates and assumptions are evaluated on an ongoing basis based on historical developments, market conditions, industry trends and other information that is reasonable under the circumstances. There can be no assurance that actual results will conform to estimates and assumptions and that reported results of operations will not be materially affected by the need to make future accounting adjustments to reflect changes in these estimates and assumptions from time to time.

We have identified the following accounting policies, judgments and estimates as critical in that they involve a higher degree of judgment and are subject to a significant degree of variability: valuation of available-for sale ("AFS") securities and derivatives, evaluation of OTTI, amortization of DAC and VOBA, reserves for future policy benefits and product guarantees, recognition of deferred income tax assets and related valuation allowances, estimates of loss contingencies and recognition of stock compensation expense.

In developing these accounting estimates and policies, we make subjective and complex judgments that are inherently uncertain and subject to material changes as facts and circumstances develop. Although variability is inherent in these estimates, we believe the amounts provided are appropriate based upon the facts available upon preparation of our audited consolidated financial statements. We continually update and assess the facts and ~~circumstances regarding all of these critical accounting matters and other significant accounting matters affecting estimates in our financial statements.~~

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circumstances regarding all of these critical accounting matters and other significant accounting matters affecting estimates in our financial statements.

The above critical accounting estimates are also described in "Note 2. Significant Accounting Policies and Practices" to our audited Consolidated Financial Statements.

Valuation of AFS Securities and Derivatives

Our fixed maturity and equity securities classified as AFS are reported at fair value, with unrealized gains and losses included within accumulated other comprehensive income (loss) ("AOCI"), net of associated impact on intangibles adjustments and deferred income taxes. Unrealized gains and losses represent the difference between the cost or amortized cost basis and the fair value of these investments. We measure the fair value of our AFS securities based on assumptions used by market participants, which may include inherent risk and restrictions on the sale or use of an asset. The estimate of fair value is the price that would be received to sell an asset in an orderly transaction between market participants (“exit price”) in the principal market, or the most advantageous market in the absence of a principal market, for that asset or liability. We utilize independent pricing services in estimating the fair values of AFS securities. The independent pricing services incorporate a variety of observable market data in their valuation techniques, including: reported trading prices, benchmark yields, broker-dealer quotes, benchmark securities, bids and offers, credit ratings, relative credit information and other reference data.

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We categorize our AFS securities into a three-level hierarchy based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument. The following table presents the fair value of fixed maturity and equity securities, AFS, by pricing source and hierarchy level as of September 30, ~~2016~~2017 and ~~2015~~2016.



	As of September 30, 2017
(dollars in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total
Fixed maturity securities and equity securities available-for-sale:
Prices via third party pricing services	$	85		$	20,366		$	—		$	20,451
Priced via independent broker quotations	—			—			1,140			1,140
Priced via other methods	—			—			293			293
Total	$	85		$	20,366		$	1,433		$	21,884
Available-for-sale embedded derivative:
Priced via other methods	—			—			16			16
Total	$	85		$	20,366		$	1,449		$	21,900
% of Total	—		%	93		%	7		%	100		%



	As of September 30, 2016
(dollars in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total
Fixed maturity securities and equity securities available-for-sale:
Prices via third party pricing services	$	83		$	18,554		$	—		$	18,637
Priced via independent broker quotations	—			—			1,199			1,199
Priced via other methods	—			—			258			258
Total	$	83		$	18,554		$	1,457		$	20,094
Available-for-sale embedded derivative:
Priced via other methods	—			—			13			13
Salus participations, included in other invested assets:
Priced via other methods	—			—			21			21
Total	$	83		$	18,554		$	1,491		$	20,128
% of Total	—		%	92		%	8		%	100		%

	As of September 30, 2015
(dollars in millions)	Quoted Prices inActive Markets forIdentical Assets(Level 1)			SignificantObservable Inputs(Level 2)			SignificantUnobservableInputs(Level 3)			Total
Fixed maturity securities and equity securities available-for-sale:
Prices via third party pricing services	$	86		$	17,061		$	—		$	17,147
Priced via independent broker quotations	—			—			1,119			1,119
Priced via other methods	—			—			100			100
Total	$	86		$	17,061		$	1,219		$	18,366
Available-for-sale embedded derivative:
Priced via other methods	—			—			10			10
Salus and Energy & Infrastructure Capital ("EIC") participations, included in other invested assets:
Priced via other methods	—			—			119			119
Total	$	86		$	17,061		$	1,348		$	18,495
% of Total	—		%	93		%	7		%	100		%

Management’s assessment of all available data when determining fair value of the AFS securities is necessary to appropriately apply fair value accounting. The independent pricing services also take into account perceived market movements and sector news, as well as a security’s terms and conditions, including any features specific to that issue that may influence risk and marketability. Depending on the security, the priority of the use of observable market inputs may change as some observable market inputs may not be relevant or additional inputs may be necessary. We generally obtain one value from our primary external pricing service. In situations where a price is not available from the independent pricing service, we may obtain broker quotes or prices from additional parties recognized to be market participants. We believe the broker quotes are prices at which trades could be executed based on historical trades executed at broker-quoted or slightly higher prices. When quoted prices in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies, including discounted cash flows, matrix pricing, or other similar techniques. For further discussion on the valuation

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~~or slightly higher prices. When quoted prices in active markets are not available, the determination~~ of ~~estimated fair value is based on market standard valuation methodologies, including discounted cash flows, matrix pricing, or other similar techniques. For further discussion on the valuation of~~ Salus participations, see "Note 6. Fair Value of Financial Instruments" to our audited Consolidated Financial Statements.

We validate external valuations at least quarterly through a combination of procedures that include the evaluation of methodologies used by the pricing services, comparisons to valuations from other independent pricing services, analytical reviews and performance analysis of the prices against trends, and maintenance of a securities watch list. See "Note 4. Investments" and "Note 6. Fair Value of Financial Instruments" to our audited Consolidated Financial Statements for a more complete discussion.

Our FIA contracts permit the holder to elect to receive a credit based on an interest rate or the performance of a market index. We hedge certain portions of our exposure to equity market risk by entering into derivative transactions. In doing so, we purchase derivatives consisting of a combination of call options and futures contracts on the equity indices underlying the applicable policy. These derivatives are used to fund the index credits due to contractholders under the FIA contracts. The call options are one-, two- and three-year call options, purchased to match a majority of the funding requirements underlying the FIA contracts, with the balance of the equity exposure hedged using futures contracts. On the respective anniversary dates of the applicable FIA contracts, the market index used to compute the annual index credit under the applicable FIA contract is reset. At such time, we purchase new one-, two-, three-, or five-year call options to fund the next index credit. We attempt to manage the cost of these purchases through the terms of the FIA contracts, which permit changes to caps or participation rates, subject to certain guaranteed minimums that must be maintained. We are exposed to credit loss in the event of non-performance by our counterparties on the call options. We attempt to reduce the credit risk associated with such agreements by purchasing such options from large, well-established financial institutions as well as holding collateral when individual counterparty exposures exceed certain thresholds.

All of our derivative instruments are recognized as either assets or liabilities at fair value in our Consolidated Balance Sheets. The change in fair value of our derivative assets is recognized in our Consolidated Statements of Operations within “Net investment gains (losses)”.

Certain FIA products contain an embedded derivative; a feature that permits the holder to elect an interest rate return or an equity-index linked component, where interest credited to the contract is linked to the performance of various equity indices. The FIA embedded derivative is valued at fair value and included in the liability for contractholder funds in our Consolidated Balance Sheets with changes in fair value included as a component of “Benefits and other changes in policy reserves” in our Consolidated Statements of Operations.

The fair value of derivative assets and liabilities is based upon valuation pricing models and represents what we would expect to receive or pay at the balance sheet date if we canceled the options, entered into offsetting positions, or exercised the options. The fair value of futures contracts at the balance sheet date represents the cumulative unsettled variation margin (open trade equity net of cash settlements). Fair values for these instruments are determined internally using a conventional model and market observable inputs, including interest rates, yield curve volatilities and other factors. Credit risk related to the counterparty is considered when estimating the fair values of these derivatives. However, we are largely protected by collateral arrangements with counterparties when individual counterparty exposures exceed certain thresholds. The fair values of the embedded derivatives in our FIA contracts are derived using market value of options, swap rates, mortality rates, surrender rates and non-performance spread and are classified as Level 3. See "Note 5. Derivative Financial Instruments" and "Note 6. Fair Value of Financial Instruments" to our audited Consolidated Financial Statements for a more complete discussion. The discount rate used to determine the fair value of our FIA embedded derivative liabilities includes an adjustment to reflect the risk that these obligations will not be fulfilled (“non-performance risk”). For Fiscal ~~2016~~2017, our non-performance risk adjustment was based on the expected loss due to default in debt obligations for similarly rated financial companies. See "Note 5. Derivative Financial Instruments" and "Note 6. Fair Value of Financial Instruments", to our audited Consolidated Financial Statements for a more complete discussion.

FGL Insurance has a modified coinsurance arrangement with Front Street Re (Cayman) Ltd. ("FSRCI"), meaning that funds are withheld by FGL Insurance. This arrangement creates an obligation for FGL Insurance to pay FSRCI at a later date, which results in an embedded derivative. This embedded derivative is considered a total return swap with contractual returns that are attributable to the assets and liabilities associated with this reinsurance arrangement. The fair value of the total return swap is based on the change in fair value of the underlying assets held in the funds withheld portfolio. Investment results for the assets that support the coinsurance with funds withheld reinsurance arrangement, including gains and losses from sales, are passed directly to the reinsurer pursuant to contractual terms of the reinsurance arrangement. The reinsurance related embedded derivative is reported in “Other assets” if in a net gain position, or "Other liabilities", if in a net loss position, on the Consolidated

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~~liabilities", if in a net loss position, on the Consolidated~~ Balance Sheets and the related gains or losses are reported in “Net investment gains” on the Consolidated Statements of Operations.

Evaluation of OTTI

We have a policy and process in place to evaluate securities in our investment portfolio quarterly to assess whether there has been an OTTI. This evaluation process entails considerable judgment and estimation and involves monitoring market events and other items that could impact issuers. The evaluation includes, but is not limited to, such factors as: ~~the length of time and the extent to which the fair value has been less than cost or amortized cost;~~ whether the issuer is current on all payments and all contractual payments have been made as agreed; the remaining payment terms and the financial condition and near term prospects of the issuer; the lack of ability to refinance due to liquidity problems in the credit market; the fair value of any underlying collateral; the existence of any credit protection available; the intent to sell and whether it is more likely than not we would be required to sell prior to recovery for fixed maturity securities; the assessment in the case of equity securities including perpetual preferred stocks with credit deterioration that the security cannot recover to cost in a reasonable period of time; the intent and ability to retain equity securities for a period of time sufficient to allow for recovery; consideration of rating agency actions; and changes in estimated cash flows of residential mortgage-backed securities ("RMBS") and asset-backed securities ("ABS"). An extended and severe unrealized loss position on an AFS fixed income security may not have any impact on: (a) the ability of the issuer to service all scheduled interest and principal payments and (b) the evaluation of recoverability of all contractual cash flows or the ability to recover an amount at least equal to its amortized cost based on the present value of the expected future cash flows to be collected. When assessing our intent to sell a security or if it is more likely than not we will be required to sell a security before recovery of its amortized cost basis, we evaluate facts and circumstances such as, but not limited to, sales of investments to meet cash flow or capital needs

We determine whether OTTI losses should be recognized for fixed maturity and equity securities by assessing all facts and circumstances surrounding each security. Where the decline in market value of fixed maturity securities is attributable to changes in market interest rates or to factors such as market volatility, liquidity and spread widening, and we anticipate recovery of all contractual or expected cash flows, we do not consider these investments to be OTTI. For equity securities, we recognize an OTTI in the period in which we do not have the intent and ability to hold the securities until recovery of cost or we determine that the security will not recover to book value within a reasonable period of time. We determine what constitutes a reasonable period of time on a security-by-security basis by considering all the evidence available, including the magnitude of any unrealized loss and its duration. Impairment analysis of the investment portfolio involves considerable judgment, is subject to considerable variability, is established using management’s best estimate and is revised as additional information becomes available. As such, changes in or deviations from the assumptions used in such analysis can have a significant effect on the results of operations. During the twelve months ended September 30, ~~2015~~2017 we recognized credit-related impairment losses of $~~59,000,000~~20 on available-for-sale ~~fixed~~debt ~~maturity~~ securities, ~~available-for-sale equity securities and other invested assets, net of reinsurance,~~ related to ~~direct and indirect~~ investments in First ~~RadioShack~~National ~~Corporation~~Bank ~~("RSH")~~Holding ~~and~~Co. The ~~other loans because the~~ Company concluded the decline in the fair value of these investments was other than temporary. See “OTTI and Watch List,” "Note 2. Significant Accounting Policies and Practices" and "Note 4. Investments" to our audited Consolidated Financial Statements for a more complete discussion.

We also have a policy and process in place to evaluate mortgage loans held in our investment portfolio to assess whether any of the loans are impaired. Mortgage loans on real estate are all commercial mortgage loans ("CMLs"). Mortgage loans are evaluated by the Company’s investment professionals, including an appraisal of loan-specific credit quality, property characteristics and market trends. Loan performance is continuously monitored on a loan-specific basis throughout the year. The Company’s review includes submitted appraisals, operating statements, rent revenues and annual inspection reports, among other items. This review evaluates whether the properties are performing at a consistent and acceptable level to secure the debt. If a mortgage loan is determined to be impaired (i.e. when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement), the carrying value of the mortgage loan is reduced to the lower of either the present value of expected cash flows from the loan, discounted on the loan’s original purchase yield, or the fair value of the collateral. For those mortgages 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. We also establish a valuation allowance for estimated probable credit losses for pools of loans with similar risk characteristics where a property specific or market specific risk has not been identified.

DAC and VOBA

Acquisition costs that are incremental, direct costs of contract acquisition, as well as certain costs that are directly related to successful acquisition activities are capitalized as DAC. DAC consists principally of commissions and certain

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Acquisition costs that are incremental, direct costs of ~~policy~~successful ~~issuance~~contract ~~that~~acquisition are ~~directly~~capitalized ~~related~~as toDAC. ~~the~~DAC ~~successful~~consists ~~acquisition~~principally of ~~new business~~commissions. Indirect or unsuccessful acquisition costs, maintenance, product development and overhead expenses are charged to expense as incurred.

VOBA is an intangible asset that reflects the estimated fair value of in-force contracts in a life insurance company acquisition less the amount recorded as insurance contract liabilities. It represents the portion of the purchase price that is allocated to the value of the rights to receive future cash flows from the business in force at the acquisition date.

DAC and VOBA are subject to loss recognition testing on a quarterly basis or when an event occurs that may warrant loss recognition.

For annuity products and IUL, DAC and VOBA are being amortized generally in proportion to estimated gross profits from net investment spread margins, surrender charges and other product fees, policy benefits, maintenance expenses, mortality net of reinsurance ceded and expense margins, and recognized gain (loss) on investments. Current and future period gross profits for FIA contracts also include the impact of amounts recorded for the change in fair value of derivatives and the change in fair value of embedded derivatives. At each valuation date, the most recent quarter’s estimated gross profits are updated with actual gross profits and the assumptions underlying future estimated gross profits are evaluated for continued reasonableness. If the update of assumptions causes estimated gross profits to increase, DAC and VOBA amortization will decrease, resulting in lower amortization expense in the period. The opposite result occurs when the assumption update causes estimated gross profits to decrease. Current period amortization is adjusted retrospectively through an unlocking process when estimates of current or future gross profits (including the impact of recognized investment gains and losses) to be realized from a group of products are revised. Our estimates of future gross profits are based on actuarial assumptions related to the underlying policies’ terms, lives of the policies, duration of contract, yield on investments supporting the liabilities and level of expenses necessary to maintain the polices over their entire lives. Revisions are made based on historical results and our best estimates of future experience. Estimated future gross profits vary based on a number of ~~sources~~factors, including net investment spread margins, surrender charge income, policy persistency, policy administrative expenses and recognized gains and losses on investments including credit related OTTI losses. Estimated future gross profits are sensitive to changes in interest rates, which are the most significant component of gross profits.

Changes in assumptions can have a significant impact on DAC and VOBA, amortization rates and results of operations. Assumptions are management’s best estimate of future outcomes. Several assumptions are considered significant and require significant judgment in the estimation of gross profits and are listed below. We periodically review these assumptions against actual experience and update our assumptions based on additional information that becomes available.

Assumptions related to interest rate spreads and credit losses also impact estimated gross profits for all applicable products with credited rates. These assumptions are based on the current investment portfolio yields and credit quality, estimated future crediting rates, capital markets, and estimates of future interest rates and defaults.

Other significant assumptions include estimated policyholder behavior assumptions, such as surrender, lapse, and annuitization rates. We use a combination of actual and industry experience when setting and updating our policyholder behavior assumptions, which require considerable judgment.

We perform sensitivity analyses to assess the impact that certain assumptions have on DAC and VOBA. The following table presents the estimated instantaneous net impact to income before income taxes of various assumption changes on our DAC and VOBA. The effects, increase or (decrease), presented are not representative of the aggregate impacts that could result if a combination of such changes to interest rates and other assumptions occurred.

(dollars in millions)	As of September 30, ~~2016~~2017
A change to the long-term interest rate assumption of -50 basis points	$	(5671	)
A change to the long-term interest rate assumption of +50 basis points	4861
An assumed 10% increase in surrender rate	(46		)

Assumptions regarding shifts in market factors may be overly simplistic and not indicative of actual market behavior in stress scenarios.

Lower assumed interest rates or higher assumed annuity surrender rates tend to decrease the balances of DAC and VOBA, thus decreasing income before income taxes.

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

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Lower assumed interest rates or higher assumed annuity surrender rates tend to decrease the balances of DAC and VOBA, thus decreasing income before income taxes.

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

See "Note 2. Significant Accounting Policies and Practices", "Note 3. Significant Risks and Uncertainties" and "Note 7. Intangibles" to our audited Consolidated Financial Statements for a more complete discussion.

Reserves for Future Policy Benefits and Product Guarantees

The determination of future policy benefit reserves is dependent on actuarial assumptions. The principal assumptions used to establish liabilities for future policy benefits are based on our experience. These assumptions are established at issue of the contract and include mortality, morbidity, contract full and partial surrenders, investment returns, annuitization rates and expenses. The assumptions used require considerable judgment. We review overall policyholder experience at least annually and update these assumptions when deemed necessary based on additional information that becomes available. For traditional life and immediate annuity products, assumptions used in the reserve calculation can only be changed if the reserve is deemed to be insufficient. For all other insurance products, changes in assumptions will be used to calculate reserves. These changes in assumptions will also incorporate changes in risk free rates and option market values. Changes in, or deviations from, the assumptions previously used can significantly affect our reserve levels and related results of operations.

Mortality is the incidence of death amongst policyholders triggering the payment of underlying insurance coverage by the insurer. In addition, mortality also refers to the ceasing of payments on life-contingent annuities due to the death of the annuitant. We utilize a combination of actual and industry experience when setting our mortality assumptions.

A surrender rate is the percentage of account value surrendered by the policyholder. A lapse rate is the percentage of account value canceled by us due to nonpayment of premiums. We make estimates of expected full and partial surrenders of our fixed annuity products. Our surrender rate experience in Fiscal ~~2016~~2017 on the fixed annuity products averaged 5%, which is within our assumed ranges. Management’s best estimate of surrender behavior incorporates actual experience over the entire period, as we believe that, over the duration of the policies, we will experience the full range of policyholder behavior and market conditions. If actual surrender rates are significantly different from those assumed, such differences could have a significant effect on our reserve levels and related results of operations.

The assumptions used to establish the liabilities for our product guarantees require considerable judgment and are established as management’s best estimate of future outcomes. We periodically review these assumptions and, if necessary, update them based on additional information that becomes available. Changes in or deviations from the assumptions used can significantly affect our reserve levels and related results of operations.

At issue, and at each subsequent valuation, we determine the present value of the cost of the guaranteed minimum withdrawal benefit ("GMWB") rider benefits in excess of benefits that are funded by the account value. We also calculate the expected value of the future rider charges for providing for these benefits. We accumulate a reserve equal to the portion of these fees that would be required to fund the future benefits less benefits paid to date. In making these projections, a number of assumptions are made and we update these assumptions as experience emerges when required. We have minimal experience to date on policyholder behavior for our GMWB products which we began issuing in 2008; as a result, future experience could lead to significant changes in our assumptions. If emerging experience deviates from our assumptions on GMWB utilizations, such deviations could have a significant effect on our reserve levels and related results of operations.

Our aggregate reserves for contractholder funds, future policy benefits and product guarantees on a direct and net basis as of September 30, 2016 are summarized as follows:

(dollars in millions)	Direct		ReinsuranceRecoverable			Net
Fixed indexed annuities	$	13,148	$	(650	)	$	12,498
Fixed rate annuities	3,566		(330		)	3,236
Immediate annuities	2,917		(337		)	2,580
Universal life	1,399		(1,061		)	338
Traditional life	1,688		(1,086		)	602
Total	$	22,718	$	(3,464	)	$	19,254

See "Note 2. Significant Account Policies and Practices" to our audited Consolidated Financial Statements for a more complete discussion.

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Our aggregate reserves for contractholder funds, future policy benefits and product guarantees on a direct and net basis as of September 30, 2017 are summarized as follows:



(dollars in millions)	Direct		Reinsurance Recoverable			Net

Fixed indexed annuities	$	14,237	$	(580	)	$	13,657
Fixed rate annuities	3,910		(308		)	3,602
Immediate annuities	2,845		(317		)	2,528
Universal life	1,485		(1,073		)	412
Traditional life	1,727		(1,097		)	630
Total	$	24,204	$	(3,375	)	$	20,829

See "Note 2. Significant Account Policies and Practices" to our audited Consolidated Financial Statements for a more complete discussion.

Deferred Income Tax Assets and Related Valuation Allowance

Accounting Standards Codification section 740, Income Taxes (ASC 740), provides that deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards. A valuation allowance is recorded if, based on the weight of available evidence, it is more likely than not that a portion of or all deferred tax assets are not more-likely-than-not realizable. Assessing the need for, and the amount of, a valuation allowance for deferred tax assets requires management’s judgment, considering all available positive and negative evidence as to the relizability of deferred tax assets.

Future realization of deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character (i.e., ordinary income or capital gain) in either the carryback or carry-forward period under tax law. The four sources of taxable income that may be considered in determining whether a valuation allowance is required are:


•	Future reversals of existing taxable temporary differences (i.e., offset of gross deferred tax assets against gross deferred tax liabilities);


•	Taxable income in prior carryback years, if carryback is permitted under tax law;


•	Tax planning strategies; and


•	Future taxable income exclusive of reversing temporary differences and carry-forwards.

At each reporting date, management considers new evidence, both positive and negative, that could impact management’s judgment regarding the future realization of deferred tax assets. As of September 30, ~~2016~~2017, management gathered the following positive and negative evidence concerning the future realization of deferred tax assets:

Positive Evidence:

• As of September 30, ~~2016~~2017, we were in a cumulative income position based on pre-tax income over the prior 12 quarters;


•	We are projecting significant pre-tax GAAP income from continuing operations;


•	We have projected that the reversal of taxable temporary timing differences will unwind in the 20-year projection period;


•	We have a history of utilizing all significant tax attributes before they expire; and


•	Our inventory of IRC Section 382 limited attributes has been significantly reduced over the past couple years.

Negative Evidence:


•	§382 limited carry-forwards reduce our ability to utilize tax attributes in future years; and


•	Brief carryback/carry-forward period for capital losses.

Based on management’s evaluation of the above positive and negative evidence, management concluded that a valuation allowance continued to be necessary for some of the Company’s DTAs at September 30, 2016. The Company maintains a full valuation allowance for the DTAs of the non-life insurance companies. It also maintains a valuation allowance against all of the capital losses of the life insurance companies. During the year ended September 30, 2016, the Company recorded a release of part of the capital loss valuation allowance of $74 because some of those losses were utilized under the annual §382 limit. It also recorded net increases to the valuation allowance on the non-life insurance companies of $5, for a net increase of $69 to valuation allowances in the current year.

Loss Contingencies

Loss contingencies are recorded as liabilities when it is probable that a loss has been incurred and the amount of such loss can be reasonably estimated. The outcome of existing litigation and pending or potential examinations by various taxing or regulatory authorities are examples of situations evaluated as loss contingencies. Estimating the probability and magnitude of losses is often dependent upon management’s judgment of potential actions by third parties and regulators.

The establishment of litigation and regulatory reserves requires judgments concerning the ultimate outcome of pending claims against us and our subsidiaries. In applying their judgment, management utilizes opinions and estimates obtained from outside counsel to apply the appropriate accounting for contingencies. Accordingly, estimated amounts relating to certain claims have met the criteria for the recognition of a liability. Other claims for which a liability has not been recognized are reviewed on an ongoing basis in accordance with accounting guidance. A liability is recognized for all associated legal costs as incurred. Liabilities for litigation settlements, regulatory matters, legal fees and changes in

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~~these~~Based ~~estimated~~on ~~amounts~~management’s ~~are~~evaluation ~~not~~of ~~expected~~the toabove ~~have~~positive and negative evidence, management concluded that a ~~material~~valuation ~~adverse~~allowance ~~effect~~continued onto ~~our~~be ~~financial~~necessary ~~position~~for some of the Company’s DTAs at September 30, ~~although~~2017. The itCompany ismaintains ~~possible~~a ~~that~~full valuation allowance for the ~~results~~DTAs of ~~operations~~the ~~and~~non-life ~~cash~~insurance ~~flows~~companies. It ~~could~~also bemaintains ~~materially~~a ~~affected~~valuation byallowance anagainst ~~unfavorable~~all ~~outcome~~of the capital losses of the life insurance companies. For the year ended September 30, 2017, the Company recorded net valuation allowance release of $1 related to FGL’s non-life companies.

IfLoss the actual cost of settling these matters, whether resulting from adverse judgments or otherwise, differs from the reserves totaling $1 that we have accrued as of September 30, 2016, that difference will be reflected in our results of operations when the matter is resolved or when our estimate of the cost changes. See further discussion in "Note 12. Commitments and Contingencies" ~~to our audited Consolidated Financial Statements.~~

If the actual cost of settling these matters, whether resulting from adverse judgments or otherwise, differs from the reserves totaling $1 that we have accrued as of September 30, 2017, that difference will be reflected in our results of operations when the matter is resolved or when our estimate of the cost changes. See further discussion in "Note 12. Commitments and Contingencies" to our audited Consolidated Financial Statements.

Stock Compensation

Stock compensation includes plans sponsored by FGLH, FGL’s principal subsidiary, and FGL. The plans sponsored by FGLH include stock options, restricted stock units and dividend equivalent plans. All of the equity awards under the FGLH plan are settled in cash upon exercise and are included within Other Liabilities within our consolidated financial statements. The liability for these plans is valued at fair value each reporting period, and changes in fair value of the liability impact our net income (loss). Therefore, changes in the valuation assumptions of the equity awards can create volatility to our net income (loss). The primary basis for the valuation of the equity awards is the price of FGLH stock.

The plans sponsored by FGL include stock options, restricted stock, unrestricted stock and performance restricted stock units (“PRSUs”). ~~All~~ ofThe ~~the~~ stock option, restricted stock, and unrestricted stock awards under the FGL plan are settled in equity issuance upon exercise, with the exception of our PRSUs. The fair value of the stock awards is determined as of the date the awards are approved and communicated to the recipient and is recognized as expense over the performance or service period, which generally corresponds to the vesting period. Determining the fair value of stock options at the grant date requires judgment, including estimates for the average risk-free interest rate, expected volatility, and expected dividend yield. In fourth quarter 2016, we decided to settle our ~~Performance Restricted Stock Units (“~~PRSUs”) in cash upon vesting and, therefore, reclassified these awards from equity to Other Liabilities. The liability for the PRSUs was valued at fair value upon reclassification which resulted in the recognition of additional compensation cost of $3. ~~The~~A total of 634 thousand PRSUs became fully vested as of September 30, 2016 with ~~payment~~a ~~anticipated~~total tocash bepayment of $15 made in November 2016 based on the fair value of the award at the time of settlement., ~~For~~which ~~our~~was ~~Performance~~$23.30 ~~Restricted~~per ~~Stock~~PRSU. ~~Units~~For ("our PRSUs"), the attainment of performance targets is a key judgment. If the attainment of performance targets differ significantly from actual, stock-based compensation expense could be affected, which could have a material effect on our consolidated results of operations in a particular quarterly or annual period. The PRSUs granted in 2017 can only be settled in cash and, therefore, are classified as a liability plan as well, with the settlement value classified as a liability in "Other liabilities" on the Consolidated Balance Sheets. See "Note 10. Stock Compensation" to our Consolidated Financial Statements for more information on our stock compensation plans.

Recent Accounting Pronouncements

Please refer to "Note 2. Significant Accounting Policies and Practices" to the Company’s Consolidated Financial Statements for disclosure of recent accounting pronouncements.

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Recent Accounting Pronouncements

Please refer to "Note 2. Significant Accounting Policies and Practices" to our audited Consolidated Financial Statements for disclosure of recent accounting pronouncements.

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Results of Operations

(All amounts presented in millions unless otherwise noted)

The following tables set forth the consolidated results of operations and compare the amount of the change between the fiscal periods:

	Fiscal Year									Increase / (Decrease)
	2016			2015			2014			2016 compared to 2015			2015 compared to 2014
	2017			2016			2015			2017 compared to 2016			2016 compared to 2015
Revenues:
Premiums	$	7042		$	5870		$	5658		$	12(28	)	$	212
Net investment income	~~923~~1,005			~~851~~923			~~760~~851			7282			9172
Net investment gains (losses)	19316			~~(37~~19		)	~~307~~(37		)	56297			~~(344~~56		)
Insurance and investment product fees and other	~~127~~167			89127			6889			3840			2138
Total revenues	1,~~139~~530			~~961~~1,139			~~1,191~~961			~~178~~391			~~(230~~178		)
Benefits and expenses:
Benefits and other changes in policy reserves	~~791~~843			~~578~~791			~~788~~578			~~213~~52			~~(210~~213		)
Acquisition and operating expenses, net of deferrals	~~119~~137			~~113~~119			~~102~~113			618			116
Amortization of intangibles	54193			6454			8964			~~(10~~139		)	(2510		)
Total benefits and expenses	~~964~~1,173			~~755~~964			~~979~~755			209			~~(224~~209		)
Operating income	~~175~~357			~~206~~175			~~212~~206			~~(31~~182		)	(631		)
Interest expense	(2224		)	(2422		)	(2324		)	(2		)	(12		)
Income before income taxes	~~153~~333			~~182~~153			~~189~~182			~~(29~~180		)	(729		)
Income tax expense	56(110		)	64(56		)	26(64		)	(854		)	388
Net income	$	97223		$	~~118~~97		$	~~163~~118		$	~~(21~~126	)	$	(4521	)

Annuity sales during Fiscal ~~2016~~2017 and Fiscal ~~2015~~2016 were $2,~~525~~550 and $2,~~466~~525, respectively, including FIA sales of $1,~~832~~868 and $21,~~179~~832, respectively. ~~As expected,~~ FIA sales ~~were down from the near record level achieved~~ in the ~~prior~~current year asreflect wecontinued ~~have~~strong ~~intentionally~~and ~~moderated~~productive ~~volume~~partnerships towith ~~sustain~~our aIMO's. ~~disciplined~~Fiscal ~~approach~~2017 ~~for new business profitability~~ and ~~capital management. Sales of multi-year guarantee annuities ("MYGA") were $536 in~~ Fiscal 2016 asreflect ~~compared~~a to $~~287~~136 inand ~~Fiscal 2015. During third quarter of Fiscal 2016, we entered into a~~ $157 funding agreement, respectively, with Federal Home Loan Bank ("FHLB"), under an investment spread strategy. ~~This~~These funding ~~agreement~~agreements isare reflected as an institutional spread based product. Sales of multi-year guarantee annuities ("MYGA") were $546 in Fiscal 2017 as compared to $536 in Fiscal 2016. We view MYGA volume and funding agreements as opportunistic and therefore these volumes will fluctuate from period to period. Indexed universal life sales during Fiscal ~~2016~~ 2017 and Fiscal ~~2015~~2016 were $5646 and $3556, respectively. The ~~strong~~decline ~~growth~~ in ~~the~~IUL ~~current~~sales ~~period~~during ~~reflects~~Fiscal ~~the~~2017 ~~Company's~~reflects ~~ongoing~~our ~~efforts~~focus toon ~~steadily~~quality ~~grow~~of ~~indexed~~new ~~universal~~business ~~life~~and ~~sales~~pricing ~~through~~discipline ~~its~~to ~~network~~achieve ofprofitability ~~core~~and ~~middle-market~~capital ~~focused IMO's~~targets.

Annuity sales during Fiscal ~~2015~~2016 and Fiscal ~~2014~~2015 were $2,~~466~~525 and $2,~~161~~466, respectively, including $21,~~179~~832 and $12,~~452~~179, respectively,. ofAs expected, FIA sales were down from the near record level achieved in the prior year as we have intentionally moderated volume to sustain a disciplined approach for new business profitability and capital management. Sales ~~The~~of ~~increase~~MYGA were $536 in ~~FIA~~Fiscal ~~sales~~2016 ~~period~~as ~~over~~compared ~~period~~to ~~was~~$287 ~~the~~in ~~result~~Fiscal 2015. During third quarter of ~~long-tenured~~Fiscal ~~relationships~~2016, we entered into a $157 funding agreement with ~~our~~FHLB, ~~IMO's~~under an investment spread strategy. ~~Several~~This ~~new~~funding ~~products~~agreement ~~introduced~~is inreflected ~~2014~~as toan ~~expand~~institutional ~~our~~spread based product. ~~suite~~We ~~also~~view ~~contributed~~MYGA volume and funding agreements as opportunistic and therefore these volumes will fluctuate from period to ~~the~~period. ~~growth~~Indexed ofuniversal ~~FIA~~life sales induring Fiscal 2016 and Fiscal 2015 were $56 and $35, respectively. ~~MYGA~~The ~~production~~strong ~~decreased~~growth in ~~Fiscal~~the ~~2015~~current asperiod reflects the ~~interest~~Company's ~~rate~~ongoing ~~environment~~efforts ~~for~~to ~~these~~steadily ~~opportunistic~~grow ~~sales~~indexed ~~was~~universal ~~more~~life ~~attractive~~sales ~~for~~through ~~both~~its usnetwork ~~and~~of ~~the~~core middle-market infocused ~~Fiscal 2014~~IMO's.

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.

Premiums increased $12, or 21%, from Fiscal 2015 to Fiscal 2016 primarily due to an increase in life-contingent immediate annuity premiums resulting from an increase in deferred annuity policies reaching their required annuitization period during Fiscal 2016.64

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Premiums ~~increased~~decreased $228, or 440%, from Fiscal ~~2014~~2016 to Fiscal ~~2015~~2017 primarily due to anthe ~~increase~~retroactive reinstatement of a reinsurance treaty with a third party reinsurer during Fiscal 2017 with a partial offset in benefits and other changes in policy reserves. Also contributing to the decrease was higher life-contingent immediate annuity premiums ~~partially~~during ~~offset~~Fiscal by2016, ~~lower~~resulting ~~traditional~~from ~~life~~an ~~premium~~increase ~~from~~in adeferred ~~declining~~annuity ~~block~~policies ofreaching ~~business.~~the required annuitization period.

Net investment income

Below is a summary of the major components included in net investment income for Fiscal ~~2016~~2017, Fiscal ~~2015~~2016, and Fiscal ~~2014~~2015:

	Fiscal Year									Increase / (Decrease)
	2016			2015			2014			2016 compared to 2015			2015 compared to 2014
	2017			2016			2015			2017 compared to 2016			2016 compared to 2015
Fixed maturity securities, available-for-sale	$	~~869~~953		$	~~799~~869		$	~~723~~799		$	7084		$	7670
Equity securities, available-for-sale	3241			3332			2333			(19		)	10(1		)
Commercial mortgage loans, related party loans, invested cash, short term investments, and other investments	4033			3940			3039			1(7		)	91
Gross investment income	~~941~~1,027			~~871~~941			~~776~~871			7086			9570
Investment expense	(1822		)	(2018		)	(1620		)	2(4		)	(42		)
Net investment income	$	~~923~~1,005		$	~~851~~923		$	~~760~~851		$	7282		$	9172

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

	Fiscal Year									Increase / (Decrease)
	2016			2015			2014			2016 compared to 2015			2015 compared to 2014
	2017			2016			2015			2017 compared to 2016			2016 compared to 2015
Yield on AAUM (at amortized cost)	4.9295		%	4.8092		%	4.6480		%	0.1203		%	0.1612		%
Less: Interest credited and option cost	(2.6553		)%	(2.8365		)%	(2.9483		)%	0.1812		%	0.1118		%
Net investment spread	2.2742		%	12.9727		%	1.7097		%	0.3015		%	0.2730		%
AAUM	$	1820,~~738~~324		$	1718,~~722~~738		$	1617,~~354~~722		$	1,~~016~~586		$	1,~~368~~016

• The increase in net investment income ("NII") of $7282, or 89%, from Fiscal ~~2015~~2016 to Fiscal ~~2016~~2017 was primarily due ~~increases~~an increase in AAUM (volume) ~~and earned yields (rate)~~. The volume ~~and~~increase ~~rate increases~~ period over period resulted in net investment income growth of $~~49 and $23~~78, ~~respectively.~~with ~~The increase in earned yields was primarily due to higher overall portfolio yields from repositioning activities completed over~~ the ~~past~~remaining ~~year~~$4 asdriven ~~well~~by as an increase in ~~income~~earned ~~from~~yields ~~tender offer consideration and bond prepayment income~~(rate).


•	The increase in AAUM of $2 billion or 8% from Fiscal 2016 to Fiscal 2017 was primarily due to new business sales over the past year and stable in-force retention trends.

•

The increase in net investment income of $72, or 8%, from Fiscal 2015 to Fiscal 2016 was primarily due to increases in AAUM (volume) and earned yields (rate). The volume and rate increases period over period resulted in net investment income growth of $49 and $23, respectively. The increase in earned yields was primarily due to higher overall portfolio yields from repositioning activities completed over the past year as well as an increase in income from tender offer consideration and bond prepayment income.


•	The increase in AAUM of $1 billion or 6% from Fiscal 2015 to Fiscal 2016 was primarily due to annuity sales and FHLB institutional spread based sales over the past year and stable in force retention trends.

• The increase in net investment income of $91, or 12%, from Fiscal 2014 to Fiscal 2015 was primarily due to higher AAUM (volume) and higher earned yields (rate), driven by higher overall portfolio yields from repositioning activities completed.65

• The increase in AAUM of $1 billion or 8% from Fiscal 2014 to Fiscal 2015 was primarily driven by FIA sales growth over the year and stable in force retention trends.

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Net investment gains (losses)

Below is a summary of the major components included in net investment gains (losses) for Fiscal ~~2016~~2017, Fiscal ~~2015~~2016, and Fiscal ~~2014~~2015:

	Fiscal Year									Increase / (Decrease)
	2016			2015			2014			2016 compared to 2015			2015 compared to 2014
	2017			2016			2015			2017 compared to 2016			2016 compared to 2015
Net realized (losses) gains on available-for-sale securities	$	(1416	)	$	(2214	)	$	~~103~~(22	)	$	8(2	)	$	~~(125~~8	)
Realized and unrealized gains (losses) on certain derivative instruments	82348			~~(107~~82		)	~~246~~(107		)	~~189~~266			~~(353~~189		)
Change in fair value of reinsurance related embedded derivative	(4916		)	92(49		)	~~(42~~92		)	~~(141~~33		)	~~134~~(141		)
Net investment gains (losses)	$	19316		$	~~(37~~19	)	$	~~307~~(37	)	$	56297		$	~~(344~~56	)

Fiscal 2017 compared to Fiscal 2016

•

The increase in net investment losses on available-for-sale securities of $2 from Fiscal 2016 to Fiscal 2017 was primarily due to a decrease in trading gains year over year. Fiscal 2017 net realized losses on available-for-sale securities of $16 include $6 of net trading gains and $22 of impairment losses, primarily related to available-for-sale debt securities related to investments in First National Bank Holding Co. Comparatively, Fiscal 2016 net realized losses on available-for-sale securities of $14 include $22 of net trading gains, $8 on recovery of the RadioShack loan participation previously impaired in 2015, and $44 of impairment losses, primarily related to loan participations and Salus CLO. Refer to impairment disclosures in "Note 4. Investments" to our audited Consolidated Financial Statements for additional details.


•	Net realized and unrealized gains on certain derivative instruments increased $266 from Fiscal 2016 to Fiscal 2017. See the table below for primary drivers of this increase.

•

Partially offsetting the increase in net investment gains on available-for-sale securities and derivative instruments from Fiscal 2016 to Fiscal 2017 was a $33 period over period increase in fair value of reinsurance related embedded derivative, which is based on the change in fair value of the underlying assets held in the funds withheld ("FWH") portfolio. Specifically, the reinsurance related embedded derivative decreased $16 during Fiscal 2017 resulting from an increase in the net unrealized gain position of the FSRCI FWH portfolio during the year, primarily due to improvements in the commodities and high yield bonds and emerging market securities, offset by higher Treasury yields in response to Federal Reserve interest rate increases. Comparatively, the reinsurance related embedded derivative increased $49 in the Fiscal 2016 resulting from an increase in the net unrealized gain position of the FSRCI FWH portfolio during the year, primarily due to generally positive capital market and commodities price movements during the current year.

Fiscal 2016 compared to Fiscal 2015

• The increase in net investment gains on available-for-sale securities of $8 from Fiscal 2015 to Fiscal 2016 was primarily due a decrease in impairments year over year, partially offset by a decrease in net realized gains, as Fiscal 2015 reflected trading gains from our tax planning strategy initiated in 2014. Fiscal 2016 net realized losses on available-for-sale securities includes $44 of net impairments, primarily related to loan participations and Salus CLO. Comparatively, Fiscal 2015 net realized losses on available-for-sale securities includes of $82 of net impairments primarily related to direct and indirect investments in RadioShack Corporation ("RSH"), which filed for bankruptcy in February 2015, as well as Salus CLO Equity investment. Refer to impairment disclosures in "Note 4. Investments" ofto our audited Consolidated Financial Statements for additional details.


•	Net realized and unrealized gains on certain derivative instruments increased $189 from Fiscal 2015 to Fiscal 2016. See the table below for primary drivers of this increase.

• Partially offsetting the ~~increase~~decrease in net investment gains on available-for-sale securities and derivative instruments from Fiscal 2015 to Fiscal 2016 was a $141 period over period decrease in fair value of reinsurance related embedded derivative, which is based on the change in fair value of the underlying assets held in the funds withheld ("FWH") portfolio. Specifically, the reinsurance related embedded derivative decreased $49 during Fiscal 2016 resulting from an increase in the net unrealized gain position of the FSRCI FWH portfolio during the year, primarily due to generally positive capital market and commodities price movements during the current year. Comparatively, the reinsurance related embedded derivative increased $92 in the Fiscal 2015 as a result of a decrease in fair value of the FWH portfolio primarily due to an increase in credit spreads during a period characterized by increased volatility in the capital markets. The impact of reinsurance related embedded derivative gains (losses) is largely offset in stockholders’ equity as the change in the net unrealized gains (losses) on the FSRCI FWH portfolio is included in AOCI.

~~Fiscal 2015 compared to Fiscal 2014~~66

• The decrease in net investment gains of $344 from Fiscal 2014 to Fiscal 2015 was primarily due to a decline in net realized and unrealized gains on certain derivative instruments. See table below for primary drivers of this decline. Also contributing to the year over year decrease were net credit impairment losses of $82 during Fiscal 2015 primarily related to direct and indirect investments in RSH. Comparatively, Fiscal 2014 included net realized gains of $103 primarily related to our tax planning strategy which resulted in the sale of net unrealized built-in gain ("NUBIG") assets sufficient to generate gains to allow for the utilization of capital loss carry forwards.

• Partially offsetting the decrease in net investment gains on available-for-sale securities and derivative instruments from Fiscal 2014 to Fiscal 2015 was a $134 increase in fair value of reinsurance related embedded derivative. Specifically, the reinsurance related embedded derivative increased $92 during Fiscal 2015 (see above for driver of increase). Comparatively, the reinsurance related embedded derivative decreased $42 in Fiscal 2014 due to a decrease in U.S. Treasury rates during the year and a corresponding increase in the fair value of the FSRCI FWH portfolio.

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Weof ~~utilize~~the aFSRCI ~~combination~~FWH ofportfolio ~~static~~during ~~(call~~the ~~options)~~year, primarily due to generally positive capital market and ~~dynamic~~commodities ~~(long~~price ~~futures~~movements ~~contracts)~~during ~~instruments~~the current year. Comparatively, the reinsurance related embedded derivative decreased $92 in ~~our~~Fiscal ~~hedging~~2015 ~~strategy.~~as Aa ~~substantial~~result ~~portion~~of a decrease in fair value of the ~~call~~FWH ~~options~~portfolio ~~and~~primarily ~~futures~~due ~~contracts~~to ~~are~~an ~~based~~increase ~~upon~~in ~~the~~credit ~~S&P~~spreads ~~500~~during ~~Index~~a ~~with~~period characterized by increased volatility in the ~~remainder~~capital ~~based~~markets. ~~upon~~The ~~other~~impact of reinsurance related embedded derivative gains (losses) is largely offset in stockholders’ equity ~~and~~as ~~bond~~the ~~market~~change ~~indices~~in the net unrealized gains (losses) on the FSRCI FWH portfolio is included in AOCI.

~~The~~We ~~components~~utilize a combination of ~~the~~static ~~realized~~(call options) and ~~unrealized~~dynamic ~~gains~~(long onfutures ~~certain~~contracts) ~~derivative~~ instruments ~~hedging~~in our ~~indexed~~hedging ~~annuity~~strategy. ~~products~~A substantial portion of the call options and futures contracts are asbased ~~follows:~~upon the S&P 500 Index with the remainder based upon other equity, bond and gold market indices.

	Fiscal Year									Increase / (Decrease)
	2016			2015			2014			2016 compared to 2015			2015 compared to 2014
Call Options:
(Losses) gains on option expiration	$	(89	)	$	114		$	183		$	(203	)	$	(69	)
Change in unrealized gains (losses)	163			(214		)	37			377			(251		)
Futures contracts:
Gains (losses) on futures contracts expiration	5			(6		)	26			11			(32		)
Change in unrealized gains (losses)	3			(1		)	—			4			(1		)
Total net change in fair value	$	82		$	(107	)	$	246		$	189		$	(353	)
Change in S&P 500 Index during the period	13		%	(3		)%	17		%

The components of the realized and unrealized gains on certain derivative instruments hedging our indexed annuity and universal life products are as follows:



	Fiscal Year									Increase / (Decrease)
	2017			2016			2015			2017 compared to 2016			2016 compared to 2015
Call Options:
Gains (losses) on option expiration	$	212		$	(89	)	$	114		$	301		$	(203	)
Change in unrealized gains (losses)	126			163			(214		)	(37		)	377
Futures contracts:
Gains (losses) on futures contracts expiration	7			5			(6		)	2			11
Change in unrealized gains (losses)	3			3			(1		)	—			4
Total net change in fair value	$	348		$	82		$	(107	)	$	266		$	189

Change in S&P 500 Index during the period	16		%	13		%	(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 relative to the S&P index on the policyholder buy dates during each respective year.

• The ~~increase~~increases in certain derivative instruments from Fiscal ~~2015~~2016 to Fiscal ~~2016~~2017 and ~~decrease~~ from Fiscal ~~2014~~2015 to Fiscal ~~2015~~2016 ~~was~~were primarily due to the change in net realized and unrealized gains/(losses) on call options and future contracts during the respective years as well as timing of option purchases and expirations. The S&P 500 Index increased 1316% during Fiscal ~~2016~~2017, ~~decreased~~increased 313% during Fiscal ~~2015~~2016, and ~~increased~~decreased 173% during Fiscal ~~2014~~2015 (the percentages noted are a fiscal period over period comparison of the growth of the S&P 500 Index only and do not reflect the change for each option buy date).

The average index credits to policyholders were as follows:

	Fiscal Year						Increase / (Decrease)
	2016		2015		2014		2016 compared to 2015		2015 compared to 2014
	2017		2016		2015		2017 compared to 2016		2016 compared to 2015
Average Crediting Rate	14	%	41	%	64	%	(3	)%	(23	)%
S&P 500 Index:
Point-to-point strategy	14	%	41	%	54	%	(3	)%	(13	)%
Monthly average strategy	13	%	41	%	54	%	(32	)%	(13	)%
Monthly point-to-point strategy	—4	%	3—	%	73	%	(34	)%	(43	)%
3 year high water mark	1613	%	2416	%	2224	%	(83	)%	2(8	)%

• ~~The~~Actual ~~credits~~amounts ~~for~~credited ~~Fiscal~~to ~~2016,~~contractholder ~~Fiscal~~fund ~~2015~~balances ~~and~~may ~~Fiscal~~differ ~~2014~~from ~~were based on comparing~~ the ~~S&P~~index ~~500~~appreciation ~~Index~~due ~~on each issue date in these respective periods~~ to ~~the~~contractual ~~same~~features ~~issue date~~ in the ~~respective~~FIA ~~prior~~contracts ~~year~~(caps, ~~periods.~~spreads ~~The~~and ~~volatility~~participation atrates) ~~different~~which ~~points~~allow inthe ~~these~~Company ~~periods~~to ~~created~~manage athe ~~decline~~cost inof ~~crediting rates for~~ the ~~point-to-point,~~options ~~monthly~~purchased ~~average, and monthly point-~~to~~-point~~ ~~strategies~~fund inthe ~~Fiscal~~annual ~~2016,~~index ~~Fiscal 2015 and Fiscal 2014~~credits.

• Actual amounts credited to contractholder fund balances may differ from the index appreciation due to contractual features in the FIA contracts (caps, spreads, participation rates and asset fees) which allow us to manage the cost of the options purchased to fund the annual index credits.67

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•

The credits for Fiscal 2017, Fiscal 2016 and Fiscal 2015 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 volatility at different points in these periods caused an increase in crediting rates in the point-to-point, monthly point-to-point strategies due to higher equity returns in Fiscal 2017 and Fiscal 2015. Unfavorable volatility caused a decline in crediting rates due to lower equity returns in Fiscal 2016.

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 Fiscal ~~2016~~2017, Fiscal ~~2015~~2016, and Fiscal ~~2014~~2015:

	Fiscal Year						Increase / (Decrease)
Insurance and investment product fees and other:	~~2016~~2017		~~2015~~2016		~~2014~~2015		~~2016~~2017 compared to ~~2015~~2016		~~2015~~2016 compared to ~~2014~~2015
Surrender charges	$	2234	$	1922	$	2119	$	312	$	(23	)
Cost of insurance fees and other income	~~105~~133		70105		4770		3528		2335
Total insurance and investment product fees and other	$	~~127~~167	$	89127	$	6889	$	3840	$	2138


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

• The $3840 and $2138 increases in total insurance and investment product fees and other in Fiscal ~~2015~~2017 and Fiscal 2016, respectively, were primarily due to increases in rider fees on FIA policies ~~and~~as well as increases in cost of insurance ("COI") charges on IUL policies over the past year. Specifically, guaranteed minimum withdrawal benefit ("GMWB") rider fees increased $1118 from Fiscal ~~2014~~2015 to Fiscal ~~2015~~2016 and $1816 from Fiscal ~~2015~~2016 toand Fiscal ~~2016~~2017. asThis growth is a result of ~~steady~~growth ~~FIA~~in ~~sales~~benefit ~~over the past two years~~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 at the end of the policy year. ~~Thus, FIA sales and growth of benefit base in Fiscal 2015 and 2016 resulted in higher fee income due to policyholder anniversary dates in both periods.~~ The COI charges on IUL policies also increased $1015 and $1512 during Fiscal ~~2015~~2016 and Fiscal ~~2016~~2017, respectively, due to continued growth in the life ~~sales~~business over the past two years.

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 Fiscal ~~2016~~2017, Fiscal ~~2015~~2016, and Fiscal ~~2014~~2015:

	Fiscal Year									Increase / (Decrease)
	2016			2015			2014			2016 compared to 2015			2015 compared to 2014
	2017			2016			2015			2017 compared to 2016			2016 compared to 2015
FIA market value option liability change	$	~~174~~151		$	~~(219~~174	)	$	57(219	)	$	~~393~~(23	)	$	~~(276~~393	)
FIA present value future credits & guarantee liability change	96(145		)	~~101~~96			~~(20~~101		)	(5241		)	~~121~~(5		)
Index credits, interest credited & bonuses	~~316~~649			~~524~~316			~~596~~524			~~(208~~333		)	(72208		)
Annuity payments	~~164~~152			~~176~~164			~~188~~176			(12		)	(12		)
Other policy benefits and reserve movements	4136			(441		)	(334		)	45(5		)	2945
Total benefits and other changes in policy reserves	$	~~791~~843		$	~~578~~791		$	~~788~~578		$	~~213~~52		$	~~(210~~213	)

• The FIA market value option liability ~~change~~ increased $~~174~~151 during Fiscal ~~2016~~2017, ~~decreased~~increased $~~219~~174 during Fiscal ~~2015~~2016 and ~~increased~~decreased $57219 during Fiscal ~~2014~~2015, respectively. The ~~increase~~decrease of $~~393~~23 from Fiscal ~~2015~~2016 to Fiscal ~~2016~~2017 and ~~decrease~~increase of $~~276~~393 from Fiscal ~~2014~~2015 to Fiscal ~~2015~~2016 was driven by the corresponding change in fair value of FIA options during the respective periods. In general, a decrease or increase in market value of derivative assets hedging FIA index credits will result in a corresponding decrease or increase in the market value option liability, respectively. See table in the net investment gains/losses discussion above for summary and discussion of net unrealized gains (losses) on certain derivative instruments.

• The FIA present value of future credits and guarantee liability increased $96 and $101 during Fiscal 2016 and Fiscal 2015, respectively, and decreased $20 during Fiscal 2014. The decrease in longer duration risk free rates year over year increased reserves by $97 and $83 during Fiscal 2016 and Fiscal 2015, respectively. Additionally, the reserve increase for Fiscal 2016 and 2015 included increases of $22 and $18, respectively, related to annual surrender assumption update which impacted the FIA embedded derivative reserve68

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~~calculation.~~• ~~Comparatively~~The FIA present value of future credits and guarantee liability decreased $145, inand increased $96 and $101 during Fiscal ~~2014~~2017, Fiscal 2016, and Fiscal 2015, respectively. The change in longer duration risk free rates ~~increased~~year ~~resulting~~over inyear adecreased reserves by $13167, ~~decrease~~increased inreserves by $97, and increased reserves by $83 during Fiscal 2017, Fiscal 2016, Fiscal 2015 and respectively. Additionally, the reserve increase for Fiscal 2017, Fiscal 2016, and Fiscal 2015 included increases of $33, $22, and $18 respectively, related to annual surrender assumption update ~~resulted~~which inimpacted anthe ~~additional~~FIA ~~reserve~~embedded ~~decrease~~derivative ofreserve $4calculation.

• Index credits, interest credited & bonuses ~~decreased~~increased $~~208~~333 from Fiscal ~~2015~~2016 to Fiscal ~~2016~~2017 and decreased $72208 from Fiscal ~~2014~~2015 to Fiscal ~~2015~~2016. The year over year ~~decreases~~fluctuations from Fiscal ~~2015~~2016 to Fiscal ~~2016~~2017 and Fiscal ~~2014~~2015 to Fiscal ~~2015~~2016 were primarily due to ~~lower~~changes in the amount of index credits on FIA policies reflecting the ~~unfavorable~~fluctuation in performance of the S&P 500 Index relative to the S&P 500 Index level on the policyholder buy dates and related ~~decrease~~changes in in realized gains from options and futures which fund FIA index credits. Fixed interest credits remained in line with historical experience in Fiscal ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015.

• Other policy benefits and reserve movements ~~increased~~decreased $455 from Fiscal ~~2015~~2016 to Fiscal ~~2016~~2017 and $2945 from Fiscal ~~2014~~2015 to Fiscal ~~2015~~2016. The ~~increase~~decrease from Fiscal ~~2015~~2016 to Fiscal ~~2016~~2017 was primarily due to ana ~~increase~~decrease in ~~GMWB reserves in the current year due to continued growth in FIA policies with the rider, as well as an increase in~~ life contingent immediate annuity reserves due to increased annuitizations during Fiscal 2016. The reserve increase from Fiscal ~~2014~~2015 to Fiscal ~~2015~~2016 was ~~primarily~~ due to ~~unfavorable~~an ~~mortality~~increase ~~experience~~in onGMWB ~~life~~reserves ~~contingent~~in ~~immediate~~the ~~annuity~~current ~~policies~~year ~~during~~due ~~Fiscal~~to ~~2015.~~continued ~~Upon~~growth ain ~~death,~~FIA wepolicies ~~release~~with the ~~reserve~~rider, ~~established~~as ~~for~~well ~~the~~as ~~expected~~an ~~remaining~~increase ~~benefits~~in ~~which~~life ~~are~~contingent ~~based~~immediate onannuity ~~assumptions~~reserves ~~for~~due ~~mortality among other things. We experience favorable or unfavorable reserve changes~~ to ~~the~~increased ~~extent~~annuitizations ~~the~~during ~~actual~~Fiscal ~~deaths in the period are higher or lower than expected~~2016.

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 Fiscal ~~2016~~2017, Fiscal ~~2015~~2016, and Fiscal ~~2014~~2015:

	Fiscal Year									Increase / (Decrease)
Acquisition and operating expenses, net of deferrals:	~~2016~~2017			~~2015~~2016			~~2014~~2015			~~2016~~2017 compared to ~~2015~~2016			~~2015~~2016 compared to ~~2014~~2015
General expenses	$	~~107~~120		$	~~106~~107		$	~~100~~106		$	113		$	61
Acquisition expenses	~~325~~310			~~298~~325			~~219~~298			27(15		)	7927
Deferred acquisition costs	(~~313~~293		)	(~~291~~313		)	(~~217~~291		)	~~(22~~20		)	(7422		)
Total acquisition and operating expenses, net of deferrals	$	~~119~~137		$	~~113~~119		$	~~102~~113		$	618		$	116

• The increase in ~~Acquisition~~acquisition and operating expenses, net of deferrals, during Fiscal ~~2016~~2017 compared to Fiscal ~~2015~~2016 reflects an increase in general expenses related to employee headcount growth, ~~nearly~~as ~~offset~~well byas ~~lower long term incentive plan costs year over year. Gross acquisition expenses~~ increased ~~$27~~merger ~~from~~transaction ~~Fiscal~~cost ~~2016 compared to Fiscal 2015 due to higher commissions driven by increased MYGA~~ and ~~IUL~~LTIP ~~sales~~expense. ~~This increase was partially offset by a corresponding increase in deferrals of $22.~~

• ~~Acquisition~~Gross ~~and~~acquisition ~~operating~~ expenses, ~~net~~decreased of$15 ~~deferrals~~from ~~increased during~~ Fiscal ~~2015~~2017 compared to Fiscal ~~2014~~2016 asdue ato ~~result~~lower ofcommissions ~~higher~~driven ~~general~~by ~~expenses~~lower ~~associated with our strategic review and legacy incentive compensation plans as well as higher non-deferred acquisition expenses primarily due to FIA and~~ IUL sales ~~growth~~in ~~year~~Fiscal ~~over year~~2017.

68• The increase in acquisition and operating expenses, net of deferrals, during Fiscal 2016 compared to Fiscal 2015 reflects an increase in general expenses related to employee headcount growth, nearly offset by lower long term incentive plan costs year over year. Gross acquisition expenses increased $27 from Fiscal 2016 compared to Fiscal 2015 due to higher commissions driven by increased MYGA and IUL sales. This increase was partially offset by a corresponding increase in deferrals of $22.

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Amortization of intangibles

Below is a summary of the major components included in amortization of intangibles for Fiscal ~~2016~~2017, Fiscal ~~2015~~2016, and Fiscal ~~2014~~2015:

	Fiscal Year									Increase / (Decrease)
Amortization of intangibles related to:	~~2016~~2017			~~2015~~2016			~~2014~~2015			~~2016~~2017 compared to ~~2015~~2016			~~2015~~2016 compared to ~~2014~~2015
Unlocking	$	(2730	)	$	(2327	)	$	(2523	)	$	(43	)	$	2(4	)
Interest	(4557		)	(3445		)	(2934		)	(1112		)	(511		)
Amortization	~~126~~280			~~121~~126			~~143~~121			5154			~~(22~~5		)
Total amortization of intangibles	$	54193		$	6454		$	8964		$	~~(10~~139	)	$	(2510	)

• Amortization of intangibles is based on historical, current and future expected gross margins (pre-tax operating income before amortization). Fiscal ~~2016~~2017 results included $2730 of favorable unlocking, primarily from equity market fluctuations and aforementioned annual surrender assumption updates. Comparatively, ~~net VOBA and DAC amortization expense during~~ Fiscal ~~2015~~2016 results included $2327 of favorable unlocking ~~primarily due to annual assumption updates~~. The year over year increase in amortization of $5154 was primarily due to higher actual gross profits ("AGPs") on the DAC lines of business (LOBs), excluding the impact of the reinsurance related embedded derivative. The year over year increase in AGPs during ~~2016~~2017 was primarily driven by an increase in net investment ~~income~~gains, ~~(see~~ net investment income ~~discussion~~(see ~~above) and lower~~ net ~~losses~~investment ongains ~~available~~and ~~for sale securities (see~~ net investment ~~gain/(loss)~~income ~~discussion~~discussions above), ~~partially~~and ~~offset by~~ an increase in ~~FIA~~the ~~reserves~~risk ~~due~~free torate ~~market~~which ~~movements~~served into ~~risk~~decrease ~~free~~reserves ~~rates~~ (see benefit and reserve discussion above). Interest increased year-over-year due to continued growth of our in force book of business.

• Fiscal ~~2015~~2016 results included favorable unlocking and amortization adjustments of $2327 primarily ~~related~~from toequity ~~annual~~market ~~assumption~~fluctuations ~~updates~~and ~~made~~aforementioned ~~during~~annual ~~the~~assumption ~~fourth quarter~~updates. Also contributing to the year over year ~~decrease~~increase was lower overall gross margins in Fiscal ~~2015~~2016 primarily due to ~~the~~higher ~~year~~actual ~~over~~gross ~~year~~profits ~~decrease~~("AGPs") inon ~~net~~the ~~investment~~DAC ~~gains~~lines of business (~~losses~~LOBs), excluding the impact of the reinsurance related embedded derivative,. asThe ~~discussed~~year ~~above.~~over ~~Partially~~year ~~offsetting~~increase ~~these~~in ~~decreases~~AGPs during 2016 was aprimarily ~~year~~driven ~~over~~by ~~year~~an increase in ~~amortization~~net ~~resulting~~investment ~~from~~income a(see ~~reinsurance~~net ~~related~~investment ~~embedded~~income ~~derivative~~discussion above) and lower net losses on available for sale securities (see net investment gain/(loss) ofdiscussion ~~$92~~above), partially offset by an increase in ~~Fiscal~~FIA ~~2015~~reserves ~~compared~~due to amarket ~~loss~~movements in risk free rates (see benefit and reserve discussion above). Interest increased year-over-year due to continued growth of ~~$42~~our in ~~Fiscal~~force ~~2014~~book of business.

Other items affecting net income

Interest expense

~~Interest expense for Fiscal 2016 was $22 compared to expense of $24 for Fiscal 2015.~~ The interest expense ~~reflects~~and interest incurred on the $300 of outstanding 6.375% senior notes (the "Senior Notes") issued by FGLH in March 2013. The outstanding Senior Notes pay interest semi-annually at a coupon rate of 6.375%. The year over year decrease from Fiscal 2015 to Fiscal 2016 was due to the amortization of ~~capitalized~~ debt issuance costs ~~related to the Senior Notes which were fully amortized in March~~ of the ~~current~~Company's ~~year.~~debt ~~Interest expense~~ for Fiscal ~~2015 was $24~~2017, ~~compared~~2016 toand ~~$23~~2015, ~~for~~respectively, ~~Fiscal~~were ~~2014.~~as follows:

Income tax expense



	Fiscal Year						Increase / (Decrease)
Interest expense and amortization related to:	2017		2016		2015		2017 compared to 2016			2016 compared to 2015
Debt	$	19	$	21	$	23	$	(2	)	$	(2	)
Revolving credit facility	5		1		1		4			—
Total interest expense	24		22		24		2			(2		)

• ~~Below~~Fiscal is2017 ainterest ~~summary~~expense included interest incurred on the $105 revolving credit facility outstanding on which the company drew $100 during the fourth fiscal quarter of 2016 and $5 during the ~~major~~second ~~components~~fiscal ~~included~~quarter of 2017. The increase in ~~Income~~interest ~~tax~~on ~~expense~~the ~~(benefit)~~revolving ~~for~~credit ~~Fiscal~~facility ~~2016,~~was ~~Fiscal~~partially ~~2015,~~offset ~~and~~by ~~Fiscal~~a ~~2014:~~decrease in amortization of capitalized debt issuance costs related to the $300 of outstanding 6.375% senior notes (the "Senior Notes") issued by FGLH in March 2013.

69• Fiscal 2016 interest expense decreased $2 compared to Fiscal 2015 due to the amortization of capitalized debt issuance costs related to the Senior Notes which were fully amortized in March of 2016.

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	Fiscal Year									Increase / (Decrease)
	2016			2015			2014			2016 compared to 2015			2015 compared to 2014
Income before taxes	$	153		$	182		$	189		$	(29	)	$	(7	)
Income tax before valuation allowance	125			63			66			62			(3		)
Change in valuation allowance	(69		)	1			(40		)	(70		)	41
Income tax	$	56		$	64		$	26		$	(8	)	$	38
Effective rate	37		%	35		%	14		%	2		%	21		%

Income tax expense

• ~~Income~~Below ~~tax~~is ~~expense~~a ~~for~~summary ~~Fiscal 2016 was $56, net~~ of athe ~~valuation~~major ~~allowance~~components ~~release~~included ofin ~~$69,~~Income ~~compared to income~~ tax expense of(benefit) ~~$64~~ for Fiscal ~~2015~~2017, ~~inclusive of valuation allowance expense of $1. The decrease in income tax expense of $8 from~~ Fiscal ~~2015 to Fiscal~~ 2016 was primarily due to a decrease in pre-tax income of $29 year over year. The valuation allowance release for Fiscal 2016 is related to the removal of the valuation allowance against life company capital loss deferred tax assets that expired and were written off in the first quarter of 2016, and ~~therefore~~Fiscal ~~had~~2015: ~~no net impact to the overall tax expense.~~

• Income tax expense for Fiscal 2015 was $64, inclusive of valuation allowance expense of $1, compared to income tax expense of $26 for Fiscal 2014, net of a valuation allowance release of $40. The increase in income tax expense of $38 from Fiscal 2014 to Fiscal 2015 was primarily due to a valuation allowance release in Fiscal 2014 related to the adoption of a tax planning strategy. See below for additional details.



	Fiscal Year									Increase / (Decrease)
	2017			2016			2015			2017 compared to 2016			2016 compared to 2015
Income before taxes	$	333		$	153		$	182		$	180		$	(29	)

Income tax before valuation allowance	111			125			63			(14		)	62
Change in valuation allowance	(1		)	(69		)	1			68			(70		)
Income tax	$	110		$	56		$	64		$	54		$	(8	)
Effective rate	33		%	37		%	35		%	(4		)%	2		%

In• ~~assessing~~Income ~~the~~tax ~~recoverability~~expense offor ~~our~~Fiscal ~~deferred~~2017 ~~tax~~is ~~assets~~$110, wenet ~~regularly~~of ~~consider~~a ~~the~~valuation ~~guidance~~allowance ~~outlined~~release ~~within~~of ~~Accounting Standards Codification (“ASC”) Topic 740~~$1, ~~“Income~~compared ~~Taxes”.~~to ~~The~~income ~~guidance~~tax ~~requires~~expense ~~an assessment~~ of ~~both~~$56 ~~positive~~for ~~and~~Fiscal ~~negative~~2016, ~~evidence~~net ~~in determining the realizability~~ of ~~deferred~~a ~~tax assets. A~~ valuation allowance isrelease ~~required~~of ~~to reduce our deferred tax asset to an amount that is more likely than not to be realized~~$69. InThe ~~determining~~increase ~~the~~in ~~net~~income ~~deferred~~ tax ~~asset~~expense ~~and~~of ~~valuation~~$54 ~~allowance,~~from weFiscal ~~are~~2016 ~~required~~ to ~~make~~Fiscal ~~judgments~~2017 ~~and~~was ~~estimates~~primarily ~~related~~due to ~~projections~~an ofincrease ~~future~~in ~~profitability.~~pre-tax ~~These~~income ~~judgments include the following: the timing and extent~~ of ~~the~~$180 ~~utilization~~year ofover ~~net operating loss carry-forwards~~year, ~~the~~partially ~~reversals~~offset ofby ~~temporary~~an ~~differences,~~increase ~~and~~in ~~tax~~favorable ~~planning~~permanent ~~strategies.~~adjustments, Weincluding ~~have~~low ~~recorded~~income ahousing ~~partial valuation allowance of $51 against our gross deferred~~ tax ~~asset~~credits ofand ~~$648~~dividends asreceived ~~of September 30, 2016~~deduction.

We• ~~maintain~~Income tax expense for Fiscal 2016 was $56, net of a valuation allowance ~~against~~release ~~the~~of ~~deferred~~$69, compared to income tax ~~assets~~expense of ~~our~~$64 ~~non-life~~for ~~insurance~~Fiscal ~~company~~2015, ~~subsidiaries.~~inclusive ~~Our~~of ~~non-life~~a ~~insurance~~valuation ~~company~~allowance ~~subsidiaries~~expense ~~have~~of a$1. ~~history~~The ofdecrease ~~losses~~in ~~and~~income ~~insufficient~~tax ~~sources~~expense of ~~future~~$8 ~~income~~from inFiscal ~~order~~2015 to ~~recognize~~Fiscal ~~any~~2016 ~~portion~~was ofprimarily ~~their~~due ~~deferred~~to a decrease in pre-tax ~~assets~~income of $29 year over year. The ~~remaining~~valuation ~~unutilized~~allowance ~~capital~~release ~~loss~~for ~~carryforwards~~Fiscal of2016 ~~our~~is ~~life~~related ~~companies~~to ~~expired~~the onremoval ~~December~~of ~~31,~~the ~~2015.~~valuation ~~The~~allowance ~~deferred~~against ~~tax~~life ~~assets~~company ~~and~~capital ~~valuation~~loss ~~allowance~~deferred ~~associated~~tax ~~with~~assets ~~those~~that ~~carryforwards~~expired and were written off atin ~~December~~the ~~31,~~first ~~2015. As~~quarter of ~~September 30,~~ 2016, ~~there~~and istherefore had no ~~valuation~~net ~~allowance~~impact ~~placed~~to ~~against~~ the ~~deferred~~overall tax ~~assets of the life companies~~expense.

In assessing the recoverability of our deferred tax assets, we regularly consider the guidance outlined within Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes”. The guidance requires an assessment of both positive and negative evidence in determining the realizability of deferred tax assets. A valuation allowance is required to reduce our deferred tax asset to an amount that is more likely than not to be realized. In determining the net deferred tax asset and valuation allowance, we are required to make judgments and estimates related to projections of future profitability. These judgments include the following: the timing and extent of the utilization of net operating loss carry-forwards, the reversals of temporary differences, and tax planning strategies. We have recorded a partial valuation allowance of $49 against our gross deferred tax assets of $767 as of September 30, 2017.

We maintain a valuation allowance against the deferred tax assets of our non-life insurance company subsidiaries. Our non-life insurance company subsidiaries have a history of losses and insufficient sources of future income necessary to recognize any portion of their deferred tax assets. The remaining unutilized capital loss carryforwards of our life companies expired on December 31, 2015. The deferred tax assets and valuation allowance associated with those carryforwards were written off at December 31, 2015. As of September 30, 2017, there is no valuation allowance placed against the deferred tax assets of the life companies.

The valuation allowance is reviewed quarterly and will be maintained until there is sufficient positive evidence to support a release. At each reporting date, we consider new evidence, both positive and negative, that could impact the future realization of deferred tax assets. We 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.

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AOI

The table below shows the adjustments made to reconcile net income to our AOI:

	Fiscal Year									Increase / (Decrease)
Reconciliation from Net Income to AOI:	~~2016~~2017			~~2015~~2016			~~2014~~2015			~~2016~~2017 compared to ~~2015~~2016			~~2015~~2016 compared to ~~2014~~2015
Net income	$	97223		$	~~118~~97		$	~~163~~118		$	~~(21~~126	)	$	(4521	)
Adjustments to arrive at AOI:
Effect of investment losses (gains), net of offsets	913			139			~~(85~~13		)	(4		)	98(4		)
Effect of change in FIA embedded derivative discount rate, net of offsets	54(95		)	5654			856			(2149		)	48(2		)
Effect of change in fair value of reinsurance related embedded derivative, net of offsets	3711			~~(69~~37		)	34(69		)	~~106~~(26		)	~~(103~~106		)
Effects of class action litigation reserves, net of offsets	—			(1—		)	2(1		)	1—			(31		)
Tax impact of adjusting items	~~(35~~25		)	1(35		)	141			~~(36~~60		)	(1336		)
AOI	$	~~162~~177		$	~~118~~162		$	~~136~~118		$	4415		$	~~(18~~44	)

• AOI increased $4415 from $~~118~~162 to $~~162~~177 in Fiscal ~~2016~~2017. The current year results included approximately $18 net benefit from lower DAC amortization from unlocking and equity market fluctuations, and annual assumption review, $5 net favorable single premium immediate annuity ("SPIA") and other reserve adjustments, and $4 bond prepayment income and lower tax expense, partially offset by $11 higher expense related to the pending merger transaction and legacy incentive compensation plans. Comparatively, Fiscal 2016 AOI included approximately $17 of net favorable adjustments, related to lower DAC amortization and reserve changes, primarily due to equity market fluctuations and annual assumption updates; $7 of net favorable performance in the immediate annuity product line and other reserve movements; and $6 of bond prepayment income.; ~~Partially~~partially offsetting these favorable items ~~was~~were $4 of expenses related to merger transaction costs and $2 of stock compensation expense related to our Performance Restricted Stock Units which were reclassified from an equity plan to a liability plan in the fourth quarter of 2016 (refer to “Note 10 Stock Compensation” ofto our audited Consolidated Financial Statements for additional details). Comparatively, Fiscal 2015 AOI included approximately $16 of net favorable adjustments, primarily related to annual actuarial assumption review and prepayment income; partially offset by net unfavorable adjustments of approximately $14 primarily related to mortality experience on life contingent immediate annuity polices as well as legacy incentive compensation and strategic review related expenses.

• AOI ~~decreased~~increased $1844 from $~~136~~118 ~~for~~to $162 in Fiscal ~~2014~~2016. Fiscal 2016 AOI included approximately $17 of net favorable adjustments related to lower DAC amortization and reserve changes, primarily due to equity market fluctuations and annual assumption updates; $~~118~~7 of net favorable performance in ~~Fiscal~~the ~~2015~~immediate annuity product line and other reserve movements; and $6 of bond prepayment income. Partially offsetting these favorable items was $4 of expenses related to merger transaction costs and $2 of stock compensation expense related to our Performance Restricted Stock Units which were reclassified from an equity plan to a liability plan in the fourth quarter of 2016 (refer to “Note 10 Stock Compensation” to our audited Consolidated Financial Statements for additional details). Comparatively, Fiscal 2015 AOI included approximately $16 of net favorable adjustments, primarily related to annual actuarial assumption review and prepayment income; partially offset by net unfavorable adjustments of approximately $14 primarily related to mortality experience on life contingent immediate annuity polices as well as legacy incentive compensation and strategic review related expenses. ~~Comparatively, Fiscal 2014 included $46 of net favorable items primarily related to tax benefits.~~

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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 ~~both~~ September 30, ~~2016~~2017 and ~~2015~~2016, the fair value of our investment portfolio was approximately $2123 billion and $1921 billion, respectively, and was divided among the following asset class and sectors:

	September 30, 2016				September 30, 2015
	September 30, 2017				September 30, 2016
	Fair Value		Percent		Fair Value		Percent
Fixed maturity securities, available for sale:
United States Government full faith and credit	$	~~243~~107	1—	%	$	~~244~~243	1	%
United States Government sponsored entities	~~115~~128		1	%	~~137~~115		1	%
United States municipalities, states and territories	1,~~717~~726		8	%	1,~~608~~717		8	%
Corporate securities:
Finance, insurance and real estate	5,~~463~~806		2625	%	45,~~446~~463		2326	%
Manufacturing, construction and mining	~~863~~1,018		4	%	~~772~~863		4	%
Utilities, energy and related sectors	12,~~881~~202		910	%	1,~~849~~881		109	%
Wholesale/retail trade	1,~~277~~408		6	%	1,~~027~~277		56	%
Services, media and other	12,~~856~~296		910	%	1,~~436~~856		89	%
Hybrid securities	1,~~386~~465		76	%	1,~~214~~386		67	%
Non-agency residential mortgage backed securities	1,247		6	%	2,025		11	%
Non-agency residential mortgage-backed securities	1,135		5	%	1,247		6	%
Commercial mortgage backed securities	864		4	%	882		5	%
Commercial mortgage-backed securities	978		4	%	864		4	%
Asset backed securities	2,499		12	%	2,106		11	%
Asset-backed securities	2,885		13	%	2,499		12	%
Total fixed maturity available for sale securities	1921,~~411~~154		9392	%	1719,~~746~~411		93	%
Equity securities (a)	~~683~~773		3	%	~~620~~683		3	%
Commercial mortgage loans	~~614~~552		32	%	~~490~~614		3	%
Other (primarily derivatives and loan participations)	334		1	%	235		1	%
Other (primarily derivatives)	595		3	%	334		1	%
Total investments	$	2123,~~042~~074	100	%	$	1921,~~091~~042	100	%

(a) Includes investment grade non-redeemable preferred stocks ($~~577~~613 and $~~523~~577, respectively) and Federal Home Loan Bank of Atlanta common stock ($4043 and $3540, respectively).

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

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As of September 30, ~~2016~~2017 and ~~2015~~2016, our fixed maturity available-for-sale ("AFS") securities portfolio was approximately $1921 billion and $1819 billion, respectively. The following table summarizes the credit quality, by Nationally Recognized Statistical Ratings Organization ("NRSRO") rating, of our fixed income portfolio:

	September 30, 2016				September 30, 2015
	September 30, 2017				September 30, 2016
Rating	Fair Value		Percent		Fair Value		Percent
AAA	$	1,~~509~~624	8	%	$	1,~~633~~509	98	%
AA	1,~~933~~970		109	%	1,~~930~~933		1110	%
A	5,~~126~~762		27	%	45,~~141~~126		2327	%
BBB	89,~~404~~582		4345	%	78,~~242~~404		4143	%
BB (a)	1,~~017~~056		5	%	~~720~~1,017		45	%
B and below (b)	1,~~422~~160		76	%	21,~~080~~422		127	%
Total	$	1921,~~411~~154	100	%	$	1719,~~746~~411	100	%

(a) Includes $6740 and $6667 at September 30, ~~2016~~2017 and ~~2015~~2016, respectively, of non-agency residential mortgage-backed securities ("RMBS") that carry a National Association of Insurance Commissioners ("NAIC") 1 designation.

(b) Includes $~~1,047~~919 and $1,~~788~~047 at September 30, ~~2016~~2017 and ~~2015~~2016, respectively, of non-agency RMBS that carry a NAIC 1 designation.

As of ~~both~~ September 30, ~~2016~~2017 and ~~2015~~2016, included in our fixed maturity AFS securities portfolio are the collateral assets of the funds withheld coinsurance agreement with FSRCI of approximately $1 billion. The following table summarizes the credit quality, by NRSRO rating, of FSRCI fixed income portfolio:

	September 30, 2016				September 30, 2015
	September 30, 2017				September 30, 2016
Rating	Fair Value		Percent		Fair Value		Percent
AAA	$	9065	108	%	$	8890	910	%
AA	5835		74	%	6958		7	%
A	8490		1011	%	8784		910	%
BBB	~~247~~227		28	%	~~293~~247		3028	%
BB	~~155~~194		1824	%	~~168~~155		1718	%
B and below	~~238~~202		2725	%	~~273~~238		2827	%
Total	$	~~872~~813	100	%	$	~~978~~872	100	%

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

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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 September 30, ~~2016~~2017 and ~~2015~~2016:

	September 30, 2017
NAIC Designation	Amortized Cost		Fair Value		Percent of Total Fair Value
1	$	10,358	$	10,989	52	%
2	8,283		8,757		41	%
3	1,181		1,209		6	%
4	144		139		1	%
5	94		57		—	%
6	3		3		—	%
Total	$	20,063	$	21,154	100	%
	September 30, 2016
NAIC Designation	Amortized Cost		Fair Value		Percent of Total Fair Value
1	$	10,052	$	10,678	55	%
2	7,209		7,534		39	%
3	885		866		5	%
4	277		255		1	%
5	94		75		—	%
6	4		3		—	%
Total	$	18,521	$	19,411	100	%
	September 30, 2015
NAIC Designation	Amortized Cost		Fair Value		Percent of Total Fair Value
1	$	10,062	$	10,323	58	%
2	6,654		6,586		37	%
3	603		567		3	%
4	238		210		1	%
5	65		60		1	%
6	—		—		—	%
Total	$	17,622	$	17,746	100	%

The tables below present the collateral assets of the funds withheld coinsurance agreement with FSRCI which were included in our fixed maturity securities as of September 30, ~~2016~~2017 and ~~2015~~2016:

	September 30, 2017
NAIC Designation	Amortized Cost		Fair Value		Percent of Total Fair Value
1	$	238	$	238	29	%
2	202		204		25	%
3	207		206		25	%
4	126		126		16	%
5	42		37		5	%
6	3		2		—	%
Total	$	818	$	813	100	%
	September 30, 2016
NAIC Designation	Amortized Cost		Fair Value		Percent of Total Fair Value
1	$	308	$	307	35	%
2	202		206		24	%
3	159		153		17	%
4	159		154		18	%
5	58		49		6	%
6	4		3		—	%
Total	$	890	$	872	100	%
	September 30, 2015
NAIC Designation	Amortized Cost		Fair Value		Percent of Total Fair Value
1	$	356	$	352	36	%
2	282		250		26	%
3	170		158		16	%
4	205		188		19	%
5	34		30		3	%
6	—		—		—	%
Total	$	1,047	$	978	100	%

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Investment Industry Concentration

The tables below present the top ten industry categories of our AFS securities, including the fair value and percent of total AFS securities fair value as of September 30, ~~2016~~2017 and ~~2015~~2016:

	September 30, 2016
	September 30, 2017
Top 10 Industry Concentration	Fair Value		Percent of Total Fair Value
Banking	$	2,~~448~~827	1213	%
ABS collateralized loan obligation ("CLO")	2,~~084~~166		10	%
Municipal	1,~~985~~957		109	%
Life insurance	1,~~200~~409		6	%
Electric	1,~~096~~121		5	%
Property and casualty insurance	~~966~~1,000		5	%
Whole loan collateralized mortgage obligation ("CMO")	~~909~~836		54	%
Other financial institutions	~~825~~778		4	%
CMBS	~~740~~776		43	%
Pipelines	480		2	%
ABS other	712		3	%
Total	$	1213,~~733~~582	6362	%

	September 30, 2015
	September 30, 2016
Top 10 Industry Concentration	Fair Value		Percent of Total Fair Value
Banking	$	12,~~979~~448	1112	%
ABS CLO	12,~~811~~084		10	%
Municipal	1,~~796~~985		10	%
Whole loan CMO	1,431		8	%
Life insurance	1,200		6	%
Life insurance	959		5	%
Electric	1,096		5	%
CMBS	877		5	%
Property and casualty insurance	966		5	%
Electric	858		5	%
Whole loan CMO	909		5	%
Property and casualty insurance	798		4	%
Other financial institutions	825		4	%
Other financial institutions	694		4	%
CMBS	740		4	%
Pipelines	~~496~~480		32	%
Total	$	1112,~~699~~733	6563	%

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The amortized cost and fair value of fixed maturity AFS securities by contractual maturities as of September 30, ~~2016~~2017 and ~~2015~~2016, as applicable, are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.

September 30, 2016

September 30, 2015

September 30, 2017

September 30, 2016

Amortized Cost

Fair Value

Amortized Cost

Fair Value

Corporate, Non-structured Hybrids, Municipal and U.S. Government securities:

Due in one year or less

~~261~~342

~~263~~342

~~156~~261

~~158~~263

Due after one year through five years

1,~~863~~765

1,~~919~~825

1,~~801~~863

1,~~818~~919

Due after five years through ten years

3,~~233~~225

3,~~407~~377

23,~~947~~233

23,~~948~~407

Due after ten years

78,~~710~~987

89,~~346~~689

67,~~895~~710

68,~~993~~346

Subtotal

1314,~~067~~319

1315,~~935~~233

1113,~~799~~067

1113,~~917~~935

Other securities which provide for periodic payments:

Asset-backed securities

2,~~528~~852

2,~~499~~885

2,~~148~~528

2,~~106~~499

Commercial-mortgage-backed securities

~~850~~974

~~864~~978

~~878~~850

~~882~~864

Structured hybrids

~~749~~774

~~751~~795

~~698~~749

~~679~~751

Residential mortgage-backed securities

1,~~327~~144

1,~~362~~263

21,~~099~~327

21,~~162~~362

Subtotal

5,~~454~~744

5,~~476~~921

5,~~823~~454

5,~~829~~476

Total fixed maturity available-for-sale securities

1820,~~521~~063

1921,~~411~~154

1718,~~622~~521

1719,~~746~~411

Non-Agency RMBS Exposure

In late 2011 and 2012, following stabilization in the housing market, and a review of the loss severity methodology utilized by the NAIC, which took into account home price appreciation vectors, rather than NRSRO ratings criteria, we began to increase exposure to non-agency RMBS securities across the spectrum. These investment decisions were driven by rigorous analysis of the underlying collateral, as well as considerations of structural characteristics associated with these positions.

In all cases, we have been buyers of non-agency RMBS securities in the secondary market. We do not originate non-agency whole loans, regardless of underlying collateral.

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 $~~322~~279 and $~~717~~690 as of September 30, ~~2016~~2017, respectively, and $~~522~~322 and $1717,~~240,~~ respectively, as of September 30, ~~2015~~2016.

During the fiscal quarter ended June 30, 2015, wethe ~~learned~~Company ofreceived anotice ~~settlement~~ that we are entitled to receive a settlement as a result of our ownership of certain residential mortgage-backed securities that were issued by Countrywide Financial Corporation ("Countrywide"), an entity which was later acquired by Bank of America Corporation. An $18 cash settlement was received in the fiscal quarter ended June 30, 2016 for a majority of the Countrywide securities, and another $2 iswas expected to be paid in the ~~second~~third fiscal quarter of 2017; however, the two bonds involved are a part of ongoing litigation, and the settlement proceeds have been escrowed pending resolution of this process. The trustee and settlement administrator indicate timing of a resolution is unknown. Please refer to "Note 4. Investments" to our audited Consolidated Financial Statements for additional details.

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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 September 30, ~~2016~~2017 and September 30, ~~2015~~2016:

	September 30, 2016			September 30, 2015
	September 30, 2017			September 30, 2016
NAIC Designation:	Fair Value	Percent of Total		Fair Value	Percent of Total
1	~~1,026~~949	9998	%	1,~~747~~026	99	%
2	213	—1	%	152	1—	%
3	47	—1	%	—4	—	%
4	7—	1—	%	—7	—1	%
5	—	—	%	—	—	%
6	—	—	%	—	—	%
Total	~~1,039~~969	100	%	1,~~762~~039	100	%
NRSRO:
AAA	1316	12	%	3613	21	%
AA	811	1	%	108	1	%
A	4738	54	%	6647	45	%
BBB	2751	35	%	2227	13	%
BB and below	~~944~~853	9088	%	~~1,629~~944	9290	%
Total	~~1,039~~969	100	%	1,~~763~~039	100	%
Vintage:
2007	~~210~~206	2021	%	~~449~~210	2520	%
2006	~~381~~361	37	%	~~721~~381	4137	%
2005 and prior	~~448~~402	4342	%	~~593~~448	3443	%
Total	~~1,039~~969	100	%	1,~~763~~039	100	%

ABS Exposure

As of September 30, ~~2016~~2017, our asset-backed security ("ABS") exposure was largely composed of ~~NAIC 1 rated tranches of~~ CLOs, which comprised 8375% 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 non-CLO exposure represents 1725% of total ABS assets, or 23% of total invested assets. As of September 30, ~~2016~~2017, the CLO and non-CLO positions were trading at a net unrealized gain (loss) position of $2523 and $411, respectively.

The non-CLO exposure as of September 30, ~~2015~~2016 represented 1417% of total ABS assets, or 2%, of total invested assets. As of September 30, ~~2015~~2016, the CLO ~~positions were trading at a net unrealized loss position of $43~~ and non-CLO positions were trading at a net unrealized ~~gain~~loss position of $125 and $4, respectively.

	September 30, 2016				September 30, 2015
	September 30, 2017				September 30, 2016
Asset Class	Fair Value		Percent		Fair Value		Percent
ABS CLO	$	2,~~084~~166	8375	%	$	12,~~811~~084	8683	%
ABS auto	134		1—	%	1913		1	%
ABS home equity	—		—	%	7		—	%
ABS credit card	3		—	%	—		—	%
ABS other	~~402~~712		1625	%	~~269~~402		1316	%
Total ABS	$	2,~~499~~885	100	%	$	2,~~106~~499	100	%

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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 Consolidated Statements of Operations.

Loan-to-value (“LTV”) and debt service coverage (“DSC”) ratios are measures commonly used to assess the risk and quality of CMLs. The LTV ratio, calculated at time of origination, is expressed as a percentage of the amount of the loan relative to the value of the underlying property. An LTV ratio in excess of 100% indicates the unpaid loan amount exceeds the value of 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 (loss) to its debt service payments. A DSC ratio of less than 1.0 indicates that property’s operations do not generate sufficient income to cover debt payments. These ratios are utilized as part of the review process described above. We normalize our DSC ratios to a 25-year amortization period for purposes of our general loan allowance evaluation.

	Debt-Service Coverage Ratios						~~Total Amount~~		~~% of~~ Total Amount		~~Estimated Fair Value~~	% of Total		%Estimated ofFair ~~Total~~Value		% of Total
	>1.25		1.00 - 1.25		~~N/A(a)~~<1.00		N/A(a)
September 30, 2016
September 30, 2017
LTV Ratios:
Less than 50%	$	~~158~~222	$	18—	$	1—	$	~~177~~1	29$	%223	$	~~181~~41	%	29$	%226	41	%
50% to 60%	~~189~~232		—		—		~~189~~—		32232	%	~~194~~	42	%	32233	%	42	%
60% to 75%	~~230~~86		—7		—		~~230~~—		3993	%	~~239~~	17	%	3993	%	17	%
Commercial mortgage loans	$	~~577~~540	$	187	$	1—	$	~~596~~1	~~100~~$	%548	$	~~614~~100	%	~~100~~$	%552	100	%
September 30, 2015
September 30, 2016
LTV Ratios:
Less than 50%	$	~~115~~158	$	—18	$	11—	$	~~126~~1	25$	%177	$	~~125~~29	%	25$	%181	29	%
50% to 60%	~~161~~189		20—		—		~~181~~—		37189	%	~~180~~	32	%	37194	%	32	%
60% to 75%	~~185~~230		—		—		~~185~~—		38230	%	~~185~~	39	%	38239	%	39	%
Commercial mortgage loans	$	~~461~~577	$	2018	$	11—	$	~~492~~1	~~100~~$	%596	$	~~490~~100	%	~~100~~$	%614	100	%

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

As of September 30, ~~2016~~2017, our mortgage loans on real estate portfolio had a weighted average DSC ratio of 2.141 times, and a weighted average LTV ratio of 5551%.

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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 September 30, ~~2016~~2017 and ~~2015~~2016 were as follows:



	September 30, 2017
	Number of securities	Amortized Cost		Unrealized Losses			Fair Value
Fixed maturity securities, available for sale:
United States Government full faith and credit	7	$	26	$	—		$	26
United States Government sponsored agencies	27	29		(1		)	28
United States municipalities, states and territories	33	212		(10		)	202
Corporate securities:
Finance, insurance and real estate	76	465		(7		)	458
Manufacturing, construction and mining	24	227		(18		)	209
Utilities, energy and related sectors	59	379		(38		)	341
Wholesale/retail trade	53	238		(6		)	232
Services, media and other	79	512		(22		)	490
Hybrid securities	19	342		(16		)	326
Non-agency residential mortgage backed securities	38	102		(4		)	98
Commercial mortgage backed securities	64	395		(10		)	385
Asset backed securities	120	797		(5		)	792
Total fixed maturity available for sale securities	599	3,724		(137		)	3,587
Equity securities	12	47		(2		)	45
Total	611	$	3,771	$	(139	)	$	3,632



	September 30, 2016
	Number of securities	Amortized Cost		Unrealized Losses			Fair Value
Fixed maturity securities, available for sale:
United States Government full faith and credit	2	$	—	$	—		$	—
United States Government sponsored agencies	29	30		(1		)	29
United States municipalities, states and territories	18	111		(4		)	107
Corporate securities:
Finance, insurance and real estate	56	349		(16		)	333
Manufacturing, construction and mining	29	224		(31		)	193
Utilities, energy and related sectors	72	444		(47		)	397
Wholesale/retail trade	32	181		(7		)	174
Services, media and other	60	378		(31		)	347
Hybrid securities	29	500		(47		)	453
Non-agency residential mortgage backed securities	141	612		(27		)	585
Commercial mortgage backed securities	46	235		(9		)	226
Asset backed securities	211	1,765		(45		)	1,720
Total fixed maturity available for sale securities	725	4,829		(265		)	4,564
Equity securities	11	130		(4		)	126
Total	736	$	4,959	$	(269	)	$	4,690

	September 30, 2015
	Number of securities	Amortized Cost		Unrealized Losses			Fair Value
Fixed maturity securities, available for sale:
United States Government sponsored agencies	21	$	31	$	—		$	31
United States municipalities, states and territories	60	427		(15		)	412
Corporate securities:
Finance, insurance and real estate	129	1,136		(52		)	1,084
Manufacturing, construction and mining	77	588		(105		)	483
Utilities, energy and related sectors	151	997		(96		)	901
Wholesale/retail trade	94	399		(26		)	373
Services, media and other	126	904		(75		)	829
Hybrid securities	46	672		(42		)	630
Non-agency residential mortgage backed securities	135	712		(26		)	686
Commercial mortgage backed securities	50	405		(10		)	395
Asset backed securities	197	1,696		(47		)	1,649
Total fixed maturity available for sale securities	1086	7,967		(494		)	7,473
Equity securities	22	147		(4		)	143
Total	1,108	$	8,114	$	(498	)	$	7,616

The gross unrealized loss position on the available-for-sale fixed and equity portfolio as of September 30, 2017, was $139, an improvement of $130 from $269 as of September 30, 2016. Most components of the portfolio exhibited price improvement as LIBOR rates increased based on the Federal Reserve rate hikes which caused the value of floating rate securities, to increase, primarily related to non-agency residential mortgage-backed securities, asset-backed securities, and hybrid securities. This was aided by strong overall economic fundamentals that drove demand for riskier assets including high yield bonds and emerging market securities. The total book value of all securities in an unrealized loss position decreased by 24%, to $3,771 from $4,959, with the average market value/

The gross unrealized loss position on the available-for-sale fixed and equity portfolio as of September 30, 2016, was $269, an improvement of $229 from $498 as of September 30, 2015. Most components of the portfolio showed improvement as the combination of lower interest rates, improved commodity prices and thus, tighter credit spreads, contributed to higher bond prices. The total book value of all securities in an unrealized loss position was reduced by 39%, to $4,959 from $8,114, with the average market value/book value of this group showing modest improvement to 95% from 94%. In aggregate, corporate bonds represented 49% of the total unrealized loss position, down from 71% as of September 30, 2015.80

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~~Our~~book ~~municipal bond exposure is a combination of general obligation bonds (fair~~ value of ~~$336~~this ~~and~~group anshowing ~~amortized~~modest ~~cost~~improvement ofto ~~$292~~96% asfrom of95%. ~~September 30~~In aggregate, ~~2016)~~corporate ~~and special revenue~~ bonds ~~(fair~~represented ~~value~~65% of ~~$1,381~~the ~~and~~total ~~amortized~~unrealized ~~cost~~loss ~~of $1~~position,~~223~~ up from 49% as of September 30, 2016).

~~Across~~Our ~~all~~ municipal ~~bonds,~~bond ~~the~~exposure ~~largest~~is ~~issuer~~a ~~represented~~combination 7% of ~~the~~general ~~category,~~obligation ~~less~~bonds ~~than~~(fair 1%value of ~~the~~$336 ~~entire~~and ~~portfolio~~an ~~and~~amortized iscost ~~rated~~of ~~NAIC~~$300 1.as ~~Our~~of ~~focus~~September 30, ~~within~~2017) ~~municipal~~and ~~bonds~~special isrevenue onbonds ~~NAIC~~(fair 1value ~~rated~~of ~~instruments~~$1,390 and ~~97%~~amortized cost of ~~our~~$1,273 ~~municipal~~as ~~bond~~of ~~exposure~~September 30, ~~is rated NAIC 1~~2017).

~~The~~Across ~~amortized~~all ~~cost~~municipal ~~and~~bonds, ~~fair~~the ~~value~~largest ofissuer ~~fixed~~represented ~~maturity~~7% ~~securities~~of ~~and~~the ~~equity~~category, ~~securities~~less ~~(excluding U.S. Government and U.S. Government-sponsored agency securities) in an unrealized loss position greater~~ than 201% ~~and~~of the ~~number~~entire ofportfolio ~~months~~and inis anrated ~~unrealized~~NAIC ~~loss~~1. ~~position~~Our ~~with~~focus ~~fixed~~within ~~maturity~~municipal ~~investment~~bonds ~~grade~~is ~~securities~~on ~~(NRSRO~~NAIC ~~rating~~1 ofrated ~~BBB/Baa~~instruments, orand ~~higher)~~93% as of ~~September 30,~~our ~~2016~~municipal ~~and~~bond ~~2015,~~exposure ~~were~~is asrated ~~follows:~~NAIC 1.

	September 30, 2016								September 30, 2015
	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	—	$	—	$	—	$	—		35	$	279	$	200	$	(79	)
Six months or more and less than twelve months	—	—		—		—			2	31		18		(13		)
Twelve months or greater	6	125		96		(29		)	—	—		—		—
Total investment grade	6	125		96		(29		)	37	310		218		(92		)
Below investment grade:
Less than six months	—	—		—		—			29	126		84		(42		)
Six months or more and less than twelve months	3	9		7		(2		)	—	—		—		—
Twelve months or greater	23	142		80		(62		)	1	—		—		—
Total below investment grade	26	151		87		(64		)	30	126		84		(42		)
Total	32	$	276	$	183	$	(93	)	67	$	436	$	302	$	(134	)

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 September 30, 2017 and 2016, were as follows:



	September 30, 2017								September 30, 2016
	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	—	$	—	$	—	$	—		—	$	—	$	—	$	—
Six months or more and less than twelve months	—	—		—		—			—	—		—		—
Twelve months or greater	—	—		—		—			6	125		96		(29		)
Total investment grade	—	—		—		—			6	125		96		(29		)

Below investment grade:
Less than six months	—	—		—		—			—	—		—		—
Six months or more and less than twelve months	1	1		1		—			3	9		7		(2		)
Twelve months or greater	15	108		58		(50		)	23	142		80		(62		)
Total below investment grade	16	109		59		(50		)	26	151		87		(64		)
Total	16	$	109	$	59	$	(50	)	32	$	276	$	183	$	(93	)

OTTI and Watch List

WeAt ~~have~~September 30, a2017 ~~policy~~ and ~~process~~2016, inour ~~place~~watch tolist ~~identify~~included 18 and 35 securities, respectively, in ~~our~~an ~~investment~~unrealized ~~portfolio~~loss ~~each~~position ~~quarter~~with ~~for~~an ~~which~~amortized wecost ~~should~~of ~~recognize~~$109 ~~impairments~~and $276, unrealized losses of $50 and $93, and a fair value of $59 and $183, respectively. As part of the cash flow testing analysis, we evaluated each of these securities to assess the following:

At each balance sheet date, we identify invested assets which have characteristics that create uncertainty as to our future assessment of an OTTI (i.e. significant unrealized losses compared to amortized cost and industry trends). As part of this assessment, we review not only a change in current price relative to the asset's amortized cost, but also the issuer’s current credit rating and the probability of full recovery of principal based upon the issuer’s financial strength. Specifically, for corporate issues, we evaluate the financial stability and quality of asset coverage for the securities relative to the term to maturity for the issues we own. On a quarterly basis, we review structured securities for changes in default rates, loss severities and expected cash flows for the purpose of assessing potential OTTI and related credit losses to be recognized in operations. A security which has a 20% or greater change in market price relative to its amortized cost and a possibility of a loss of principal will be included on a list which is referred to as our watch list. At September 30, 2016 and 2015, our watch list included 35 and 70 securities, respectively, in an unrealized loss position with an amortized cost of $276 and $436, unrealized losses of $93 and $134, and a fair value of $183 and $302, 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

80Based on our analysis, these securities demonstrated that the September 30, 2017 and 2016 carrying values were fully recoverable.

There were 4 and 8 structured securities with a fair value of $0 and $6, respectively, on the watch list to which we had potential credit exposure as of September 30, 2017 and 2016. Our analysis of these structured securities, which included cash flow testing results, demonstrated the September 30, 2017 and 2016 values were fully recoverable.

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Based on our analysis, these securities demonstrated that the September 30, 2016 and 2015 carrying values were fully recoverable.

There were 8 and 5 structured securities with a fair value of $6 and $3, respectively, on the watch list to which we had potential credit exposure as of September 30, 2016 and 2015. Our analysis of these structured securities, which included cash flow testing results, demonstrated the September 30, 2016 and 2015 values were fully recoverable.The September 30, 2016 fair value of $6 includes OTTI of $0 taken on one of the structured securities with a fair value of $5 due to a perceived break in cash flows.

Exposure to Sovereign Debt

Our investment portfolio had no direct exposure to European sovereign debt as of September 30, ~~2016~~2017 and ~~2015~~2016.

As of September 30, ~~2016~~2017 and September 30, ~~2015~~2016, the Company also had no material exposure risk related to financial investments in Puerto Rico.

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 September 30, ~~2016~~2017, refer to "Note 4. Investments", to our audited 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 audited 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 audited 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. ~~See "Note 5. Derivative Financial Instruments" to our audited Consolidated Financial Statements for additional information regarding our derivatives and our exposure to credit loss on call options.~~

81In 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 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 Consolidated Balance Sheets.

See "Note 5. Derivative Financial Instruments" to our audited Consolidated Financial Statements for additional information regarding our derivatives and our exposure to credit loss on call options.

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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, ~~while~~however, sources of cash flows from investing activities also result from maturities and sales of invested assets. Our operating activities provided cash of $~~365~~237, $35365 and $~~174~~35 in ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015, 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. As a holding company with no operations of its own, FGL derives its cash primarily from its insurance subsidiaries and FGLH, a downstream holding company that provides additional sources of liquidity. Dividends from our insurance subsidiaries flow through FGLH to FGL.

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, including its common stock dividends, 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 between the fiscal periods ~~(dollars in millions)~~:

	Fiscal Year									Increase / (Decrease)
(dollars in millions)	Fiscal Year									Increase / (Decrease)
Cash provided by (used in):	~~2016~~2017			~~2015~~2016			~~2014~~2015			~~2016~~2017 compared to ~~2015~~2016			~~2015~~2016 compared to ~~2014~~2015
Operating activities	$	~~365~~237		$	35365		$	~~174~~35		$	~~330~~(128	)	$	~~(139~~330	)
Investing activities	(1,~~186~~217		)	(1,~~024~~186		)	(1,~~659~~024		)	(~~162~~31		)	~~635~~(162		)
Financing activities	1,~~183~~001			~~915~~1,183			~~857~~915			~~268~~(182		)	58268
Net increase (decrease) in cash & cash equivalents	$	362		$	(74	)	$	(628	)	$	436		$	554
Net increase (decrease) in cash and cash equivalents	$	21		$	362		$	(74	)	$	(341	)	$	436

Operating Activities

Cash provided by operating activities totaled $237 for Fiscal 2017 as compared to cash provided by operating activities of $365 for Fiscal 2016. The $128 decline was principally due to an increase of $107 in cash taxes paid primarily related to the reinsurance agreement the Company entered into with Hannover Re, effective January 1, 2017. Please refer to "Note 13. Reinsurance" to our audited Consolidated Financial Statements for additional details regarding this insurance treaty.

Cash provided by operating activities totaled $365 for Fiscal 2016 as compared to cash provided by operating activities of $35 for Fiscal 2015. The $330 improvement was principally due to an increase of $239 in cash and short-term collateral from our derivative counterparties, and a $79 increase of investment income receipts period over period.

Cash provided by operating activities totaled $35 for Fiscal 2015 as compared to cash provided by operating activities of $174 for Fiscal 2014. The $139 decline was principally due to an increase in policy acquisition costs of $79 resulting from an increase in product sales period over period and $192 decrease in cash and short-term collateral from our derivative counterparties, offset by an $80 increase of investment income receipts period over period.

Investing Activities

Cash used in investing activities was $1,~~186~~217 for Fiscal ~~2016~~2017, as compared to cash used in investing activities of $1,~~024~~186 for Fiscal ~~2015~~2016. The $~~162~~31 increase in cash used in investing activities is principally due to a $~~127~~34 increase

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in purchases of fixed maturity securities and other investments, net of c

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