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Forethought Financial Group, Inc.

2012 Midyear Report


LETTER FROM THE CHAIRMAN, PRESIDENT and CEO
To: All FFG Shareholders and Stakeholders
The first half of 2012 has been a very active time for Forethought as we continue to expand our capabilities and market reach. I have written in prior letters about Forethoughts agile approach to the market as we pursue profitable, diversified life and annuity business. This responsiveness to the market yielded significant dividends as we announced the acquisition of the individual annuity new business capabilities from The Hartford on April 26. This transaction provides Forethought the opportunity to enter the variable annuity market, one of the largest product categories in financial services, with a proven product, marketing, and sales organization. The acquisition will also expand Forethoughts distribution reach into the important broker-dealer channel. From a financial perspective, the addition of variable annuity products provides Forethought with a source of fee income and high return products as well as excellent diversification benefits to our existing products. We anticipate closing the transaction in the fourth quarter and expect to be operational in 2013. In addition, our existing businesses continue to expand in 2012. In fact, each of our businessespreneed life, annuities, and final expense lifehave achieved significant sales increases in the first half of 2012 compared to the same period a year ago. Our preneed life insurance achieved sales gains over prior year as a result of developing new accounts and improving results with top tier producers, a solid performance in this relatively mature market. We continued to expand Forethoughts footprint in the bank annuity channel following our 2011 launch of SecureFore 7SM and ForecareSM Fixed Annuities. We are currently distributing products through a network of high quality banks including Huntington, U.S. Bank, BBVA Compass, Regions, and KeyBank. Look for this list to expand as we move through the balance of the year. For 2012, we project annuities to produce over $1 billion of new premium, with over $600 million of that coming through the bank annuity channel, an outstanding result by any measure. Our senior market-focused products, unique distribution platforms, and flexible in-force book of business have enabled us to perform at a high level despite historically low interest rates and market volatility. Statutory premium increased 65% to $697 million for the six months ended June 30 and adjusted capital and surplus totaled $486 million. GAAP operating income per fully diluted share increased 67% to $16.67 for the six month period and GAAP book value per share ex AOCI, our most relevant measure of shareholder value as a private company, increased 12% over the last year to $338 per share at June 30. Outside constituents continue to recognize our success and accomplishments. Moodys and Standard & Poors ratings services affirmed our investment grade ratings and stable outlook during the first half of the year. In addition, Forethought was once again recognized for the third consecutive year by Wards as one of the top 50 highest performing life-health companies in the nation. We also subscribe to the ALIRT Insurance Research, which serves a valuable role in providing independent research to the bank and broker-dealer distribution channels. We enter the second half of 2012 with solid momentum generated from a strong first half performance. Our management team is energized by the prospects for our existing businesses and the new opportunities created by our recently announced acquisition. We are building a company that has the ability to generate solid new business growth and profitability gains in all market conditions and through changing customer preferences. I have never been more enthusiastic about the prospects for Forethought. Thank you for your continued support as we build a company in which we can all be proud. Sincerely,
Forethoughts reserves are well diversified by line of business, with approximately $3.1 billion associated with life and health insurance obligations, and over $2.2 billion supporting our line of deferred annuities.

INVESTMENT OVERVIEW
As of 6/30/2012
Investment Grade Bonds* 89.0% Commercial Mortgages 5.3%

High Yield and other 5.7%

Forethoughts investment strategy is predicated upon principal protection and providing stable, predictable income for our policyholders and shareholders. Therefore, Forethought maintains a diversified, high quality portfolio with approximately 89.0% invested in investment grade bonds, 5.3% in commercial mortgages, and the remaining 5.7% in high yield bonds, hedge funds, equities, real estate and policy loans. * As determined by the NAIC.

RESERVES BY PRODUCT TYPE


As of 6/30/2012 (dollars in 000s)
Life and Health $3,091,294 Annuity $2,227,204

John A. Graf Chairman, President and CEO

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2012 Midyear Report


As of 6/30/2012

Unaudited Combined Statutory Results (dollars in 000s) INCOME STATEMENT Revenues Midyear 2012 $697,208 157,168 3,524 $857,900 $699,366 64,769 3,533 32,227 5,360 $805,255 $52,645 (15,599) 37,046 (5,134) $31,912

FINANCIAL HIGHLIGHTS

KEY METRICS
Midyear 2012 Midyear 2011 % Chg

Premium income Total assets Capital and surplus Statutory Risk Based Capital

$697,208 $5,932,106 $457,380 496%*

$423,739 $5,140,015 $4,586,312 $447,541

65% 15% 16% 2%

Premium income Net investment income and IMR amortization Other Total revenues Benefits and expenses Policyholder benefits Commissions Insurance taxes, licenses and fees General insurance expenses Other Total benefits and expenses Pretax operating income Income tax expense Net gain from operations Net realized capital gains/(losses) Net income BALANCE SHEET Assets Cash and invested assets Premiums due and deferred Accrued investment income Current and deferred income taxes Other assets Total assets Liabilities Policyholder benefits Interest maintenance reserve Asset valuation reserve Other liabilities Total liabilities Capital and surplus Total liabilities and surplus

Policyholder reserves $5,318,498

*Forethought Life Insurance Company only.

FINANCIAL STRENGTH RATINGS


A.M. BEST RATING Forethought Life Insurance Company
(The fourth highest of sixteen ratings.)

A- (Excellent)

STANDARD & POORS RATING Forethought Life Insurance Company


(The seventh highest of twenty-one ratings.) Information on the most current rating is available at www.standardandpoors.com or from Standard & Poors at (212) 438-2400. Ratings are not a guarantee of an insurers financial strength nor a recommendation as to the insurer.

A- (Strong)

6/30/2012 $5,806,044 23,449 69,521 31,876 1,216 $5,932,106 $5,318,498 75,238 28,818 52,172 $5,474,726 457,380 $5,932,106

MOODYS RATING Forethought Life Insurance Company ALIRT SERVICE RANKING Forethought Life Insurance Company

A3

(The seventh highest of twenty-one ratings.)

Forethought proudly subscribes to the ALIRT Service, which reports on trends impacting the financial performance of insurance companies. Information is available at www.alirtresearch.com or from ALIRT Insurance Research at (860) 683-2070.

WARDS 50 RANKING Forethought Life Insurance Company


Named as one of the nations top 50 highestperforming life-health insurance companies in the prestigious Wards 50 annual list for three consecutive years, 20102012. Ranking analyzes five-year financial performance of more than 800 US-based life-health insurance companies.

20102012

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