FNF Summer 2021 Investor Presentation
Transcript of FNF Summer 2021 Investor Presentation
Investor UpdateWinter 2021
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This presentation may contain forward-looking statements that involve a number of risks and uncertainties. Statements that are
not historical facts, including statements regarding our expectations, hopes, intentions or strategies regarding the future are
forward-looking statements. Forward-looking statements are based on management's beliefs, as well as assumptions made by,
and information currently available to, management. Because such statements are based on expectations as to future financial
and operating results and are not statements of fact, actual results may differ materially from those projected. We undertake no
obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The
risks and uncertainties which forward-looking statements are subject to include, but are not limited to: changes in general
economic, business and political conditions, including changes in the financial markets; weakness or adverse changes in the level
of real estate activity, which may be caused by, among other things, high or increasing interest rates, a limited supply of mortgage
funding or a weak U. S. economy; our potential inability to find suitable acquisition candidates, acquisitions in lines of business
that will not necessarily be limited to our traditional areas of focus, or difficulties in integrating acquisitions; our dependence on
distributions from our title insurance underwriters as a main source of cash flow; significant competition that our operating
subsidiaries face; compliance with extensive government regulation of our operating subsidiaries; and other risks detailed in the
“Statement Regarding Forward-Looking Information,” “Risk Factors” and other sections of the Company’s Form 10-K and other
filings with the Securities and Exchange Commission.
Disclaimer
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Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for financial accounting.
GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions and in the preparation
of financial statements. In addition to reporting financial results in accordance with GAAP, this presentation includes non-GAAP financial
measures, which the Company believes are useful to help investors better understand its financial performance, competitive position and
prospects for the future. These non-GAAP measures include, adjusted net earnings per share, adjusted pre-tax title earnings, adjusted pre-
tax title earnings as a percentage of adjusted title revenue (adjusted pre-tax title margin), adjusted net earnings attributable to common
shareholders (adjusted net earnings), net investment spread, assets under management (AUM), average assets under management (AAUM)
and sales. Management believes these non-GAAP financial measures may be useful in certain instances to provide additional meaningful
comparisons between current results and results in prior operating periods. Our non-GAAP measures may not be comparable to similarly
titled measures of other organizations because other organizations may not calculate such non-GAAP measures in the same manner as we
do. The presentation of this financial information is not intended to be considered in isolation of or as a substitute for, or superior to, the
financial information prepared and presented in accordance with GAAP. By disclosing these non-GAAP financial measures, FNF believes it
offers investors a greater understanding of, and an enhanced level of transparency into, the means by which the Company’s management
operates the Company. Any non-GAAP measures should be considered in context with the GAAP financial presentation and should not be
considered in isolation or as a substitute for GAAP net earnings, net earnings attributable to common shareholders, net earnings per share,
or any other measures derived in accordance with GAAP as measures of operating performance or liquidity. Further, FNF's non-GAAP
measures may be calculated differently from similarly titled measures of other companies. Reconciliations of these non-GAAP financial
measures to the most directly comparable GAAP measures are provided herein.
Non-GAAP Financial Measures
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FNF Overview
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$15.6B Total Revenue1 | 33% Title Market Share | 1,300 Direct Title Offices | >28,000 Employees
Fortune Ranked 288 (NYSE: FNF)2 | $14.8B Market Capitalization2
Source: ALTA Title Market Share and Wink’s Annuity Sales & Report, as reported for YTD 3Q21 1Reflects Total Revenue for FY20212As of 12/31/2021
Strong track record of technology innovation, market share growth, best in class margins & shareholder value creation
Industry Leading Insurance Solutions Company
FNF® is the leading provider of title insurance and settlement services to the real estate and mortgage industries
Various mortgage and real estate services companies that provide solutions that complement our title insurance business
Industry leading smart title automation, closing, title, and escrow systems, digital mortgage solutions, real estate marketing and CRM software, and the first end-to-end real estate experience platform
F&G is a leading provider of insurance solutions serving retail annuity & life customers and institutional clients
• FNF holds #1 market share in the title insurance industry; #1 or #2 share in 43 states
• F&G is a Top 5 fixed indexed annuity writer in the industry; well-positioned with diversified growth strategy
Annuities & Life Insurance
Real Estate Technology
Mortgage & Real Estate
Services
Title Insurance
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Compelling Investment Case for FNF
Strategically Positioned for Long-Term Growth
Disciplined and Profitable Growth
Sustainable Competitive Advantages
Strong Capitalization Supports Growth
Focus on Shareholder Value Creation
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Sustainable competitive advantages strategically position FNF for long-term growth
Title Segment Well-Positioned For Growth
FNF is the nationwide market leader in attractive
and growing sector
Our mission is to advance, expand, and
protect the experience of property ownership
Solid long-term fundamentals for U.S.
residential and commercial real estate markets
Demographic trends provide tailwind from growing working
age population
Strategically Positioned For Long-Term Growth
Sustainable CompetitiveAdvantages
#1 market leader provides scale advantage
Proven “Go-to-Market” approach
Technology driven innovation, growth, and productivity
One of the largest & deepest real estate data networks
Industry leading margins & disciplined operating focus
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Old Republic
6%Stewart Title
11%
Others
15%
First American
25%
Fidelity
National
Financial
43%
FNF consistently holds top market share in residential purchase, refinance, and commercial markets
Title: #1 Market Leader Provides Scale Advantage
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Stewart Title
9%
Old
Republic
15%
Others
20%First
American
23%
Fidelity
National
Financial
33%
Total
AgentStewart Title
9%
Old
Republic
20%
First
American
22%
Others
22%
Fidelity
National
Financial
27%
$19B
$12B
Direct
$7B
Source: ALTA Market Share – YTD 3Q21 Market Share
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FNF holds #1 or #2 share in 43 states … potential to expand market share
Title: Overall Market Share By State
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FNF Market Share
#1
(26)
#2
(17)
#3
(5)
#4+
(2)
10%
47%
31% MD
42% DE
31% NJ
16% CT37%
23%46% RI25% MA
21% NH
13% VT 28%
23%
24%36%
30%
45%
40%
28%
38%28%
45%
26%
41%
28%
59%
26%
38%
58%
30%
20%
20%
31%
33%
27%
21%
20%
21%
33%
32%
25%
12%
11%
27%
41%
22%
43%
48%
40%
FNF market share of 43%
FNF market share of 23%
FNF market share of 28%
FNF market share of 31%
FNF market share of 37%
Source: ALTA Market Share – YTD 3Q21 Market Share
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Nationwide footprint with dominant local market share
• Unique national and local, multi-brand strategy drives market share, profitability, and preserves value of acquisitions
• Core title business complemented by ancillary real-estate related businesses
• Scale and volume drive revenue, reduce costs and create competitive advantage
Title: Proven “Go-to-Market” Approach
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Title Automation Technology & Deep
Real Estate Data
Title, Settlement and Digital Mortgage
Solutions
Agent Marketing, CRM, and
Transaction Mgt
End-to-End Real Estate Experience
Platform
Used by hundreds of thousands of real estate agents and
millions of consumers
Leading technology solution provider to
industry title agents and centralized platform
Over 17 million automated title
decisions1
Now covering 93% of residential direct
operations for Start inHere and 50% of
operations for the Track inHere mobile app for
real estate agents
Significant investments in acquiring, developing, and enhancing technology for ourselves and our customers
Title: Technology Driven Innovation, Growth & Efficiency
1Since 2003
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FNF’s scale provides data to evaluate trends and respond to fluctuations in opened and closed orders
Title: Disciplined Operating Strategy
• Continuously monitor operating metrics
• Opened and closed order counts, headcount, efficiency metrics
• React quickly, utilize the “order lag” to our advantage
• Slow to add headcount when volumes improve; aggressively reduce headcount as order volumes decline
• Management compensation heavily weighted to variable incentives; bonus and commissions are a large part of compensation
• “Normalized” adjusted pre-tax title margin of 15% - 20%
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$2.0$1.8
$1.3
$1.7
$2.1
$1.8$1.7
$2.3
$4.1 $4.0
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
$5.6 $5.9 $5.6$6.4
$7.0 $7.2 $7.2
$8.3
$9.4
$11.5
14.1% 13.7%12.5%
14.3% 14.7% 14.5% 14.8%16.3%
19.6% 21.7%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$2
$4
$6
$8
$10
$12
$14
FNF Title Revenue FNF Adjusted Pre-Tax Title Margin
FNF Title Revenue ($B) | Margin %
Refinance
Purchase
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Industry Mortgage Originations ($Trillions)
MBA 30-Year Mortgage Rate
3.7% 4.0% 4.2% 3.9% 3.6% 3.9% 4.8% 3.7% 2.8% 3.1%1
Title: Operating PerformanceFNF has a long history of generating strong margins across varying market cycles
1MBA Mortgage Finance Forecast January 22, 2022
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14.1% 13.7%12.5%
14.3% 14.7% 14.5% 14.8%16.3%
19.6%
21.7%
7.7% 8.1%7.0%
8.3%9.1% 9.3%
10.0%
11.5%12.3%
13.5%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
FNF Competitor Average
FNF has achieved adjusted pre-tax title margin of 15-20%, well above the competitor average
• FNF margins in future market peaks and troughs expected to be higher relative to historic averages in comparable market conditions
• Powered by scale and decades of automation, innovation, and productivity improvements
• Sustained by competitive advantages and disciplined operating strategy
Title: Competitive Advantages Drive Leading Margin
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F&G is a nationwide market leader for insurance solutions to retail annuity and life customers and institutional clients
F&G Segment Well-Positioned For Growth
F&G is a Top 5 fixed indexed annuity writer in the industry; well-positioned
with diversified growth strategy
Our mission is to help people turn their
aspirations into reality
Solid long-term fundamentals for U.S. life
and annuity markets
Demographic trends provide tailwind from growing retirement
age population
Strategically Positioned For Long-Term Growth
Sustainable CompetitiveAdvantages
Successfully diversifying products and channels
Long track record of consistently managing net
investment spread
Blackstone asset origination capabilities and expertise
Demonstrated track record of strong and profitable growth
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F&G multi-channel distribution and Blackstone investment partnership provide significant competitive advantage
• Transformed from previously ‘monoline’ business into well-diversified and leading provider in Retail and Institutional markets
• Record sales doubled in 2021 vs. prior year
• Sales growth driven by ongoing agent channel growth, bank and broker dealer expansion and institutional markets launch
• Ending assets under management at $36.5B, driven by net new business flows
F&G: Successfully Diversifying Products & Channels
4.3 6.1
0.5
3.5
$4.8
$9.6
Full Year 2020 Full Year 2021
+100% YoY
+42% YoY
+600% YoY
AUM $28.6B $36.5B +28% YoY
Sales Growth ($B)
Institutional & Other
Retail
290300 298
241
277
300
333
2015 2016 2017 2018 2019 2020 2021
0 bps
50 bps
100 bps
150 bps
200 bps
250 bps
300 bps
350 bps
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
• Despite volatility in interest rates, F&G has a long track record of consistently managing core spread
• Partnership with Blackstone enhances investment yield while maintaining credit quality and broadening asset diversification
• Profitable, stable inforce book; 89% of annuity reserves are surrender charge protected
• Assets and liability cash flows well matched
FIA Net Spread vs. 10-Year UST Yield
Net Investment Spread for Fixed Indexed Annuity (FIA) FIA Spread10-Year UST
* *
F&G: Long Track Record of Consistent Spread
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F&G generates earnings and future cash flow independent of interest rate impacts and is well-positioned for growth
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$9.6B
Retail Annuity Sales
$6.1BFull Year 2021
Institutional Sales
$3.5BFull Year 2021
Total Sales
Full Year 2021
Driven by expanding bank, broker dealer and agent partners
From funding agreements and pension risk transfer launch
Demonstrated track record of strong spread and profitable growth
“Spread model” generates consistent and increasing earnings driven by asset growth
F&G: Strong & Profitable Growth
Return on Assets
113 bpsFull Year 2021
Adjusted Net Earnings
$361MFull Year 2021
Average Assets Under Mgmt
$31.9BFull Year 2021
Ending Assets Under Mgmt
$36.5BFull Year 2021
7.7 7.6 8.5 10.8
15.6
2017 2018 2019 2020 2021
Total Revenue ($B)
Title F&G Corporate
634 750 940 1,526
2,268
2017 2018 2019 2020 2021
Adjusted Net Earnings ($M)
Title F&G Corporate
737 943 1,121 1,460 2,220
2017 2018 2019 2020 2021
Net Cash From Operations ($M)
(ex F&G)
$2.28 $2.70 $3.39 $5.34
$7.90
2017 2018 2019 2020 2021
Adjusted Net Earnings Per Share
(Diluted)
20% CAGR
32% CAGR 36% CAGR
38% CAGR
FNF’s Disciplined and Profitable Growth Annual
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Five year market leading track record capped off with record 2021 results
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• FNF’s capital allocation priorities are focused on deploying capital to best maximize shareholder value through both continued investment in our business and return of capital to shareholders
Investing for Growth
Reinvest in the Business
Capital and other investments to support the growth strategy and maintain adequate capital buffer
Net Cash from Operations
Return to Shareholders
Strategically Aligned M&A
Preserve financial capacity for real-estate-related, title agencies, and/or technology acquisitions
Continue to Grow the Dividend
Targeted increases to common dividend over time
Net Share Repurchases
Return excess cash to shareholders over time through repurchase of shares
Maintain Efficient Capital Structure | Long-term Debt-to-Capitalization Target at ~25%
Strong Capitalization Supports GrowthBalancing financial flexibility and efficient capital structure
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- 21
85
244
461
2017 2018 2019 2020 2021
Share Repurchases ($M)$800M Cumulative
• In 4Q21, completed $500M program authorized in late 2020
• Share repurchases are dependent on capital levels, alternative uses of capital and market conditions
Dividends
per share$1.02 $1.20 $1.26 $1.35 $1.56
• FNF’s current $500M annual dividend viewed as sustainable
• Dividend is reviewed quarterly and expected to increase over time, subject to cash flows, alternative uses of capital and market conditions
278 328 344
389 446
2017 2018 2019 2020 2021
Common Dividends ($M)$1.8B Cumulative
Solid balance sheet with financial flexibility to continue strategic investments and return capital to shareholders
Dividends and Share Repurchases
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Financial Overview4Q21 and Full Year 2021 Result
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($M) - except per share data Quarterly Full Year
Period ended December 31 4Q21 4Q20 2021 2020
Total revenue $4,797 $3,770 $15,643 $10,778
F&G total sales $2,195 $1,459 $9,592 $4,837
Total assets $60,690 $50,455 $60,690 $50,455
Adjusted pre-tax title margin 22.4% 22.7% 21.7% 19.6%
Net earnings $533 $801 $2,422 $1,427
Net earnings per diluted share $1.87 $2.73 $8.44 $4.99
Adjusted Net Earnings $616 $588 $2,268 $1,526
Adjusted Net Earnings per share $2.16 $2.01 $7.90 $5.34
4Q21 and Full Year 2021 Highlight (comparisons to PY)
• Strong total revenue of $4.8B in 4Q21; growth in total revenue,
excluding recognized gains and losses, of 43% in 4Q21 as
residential and commercial revenue more than offset ongoing
contraction in refinance volumes and F&G pension risk transfer
transactions boosted premiums
• Robust F&G sales growth of 50% to $2.2B in 4Q21, driven by
expansion in new channels; record sales of $9.6B in 2021 double
the prior year and boosted ending assets under management to
$36.5B at year-end 2021
• Industry leading full year adjusted pre-tax title margin of 21.7%
• Strong profitability with adjusted net earnings increase of 5% to
$616M in 4Q21 and 49% to $2.3B in 2021
• Strong balance sheet with financial flexibility with over $900
million of capital returned to shareholders through common
dividends and share repurchases in 2021 and $1.5 billion in
holding company cash & short-term investments at year-end 2021
Fourth Quarter Financial HighlightsRobust mortgage market demand driving top line performance, together with strong F&G growth, generated strong profitability
3.8 3.1 3.9 3.9 4.8
10.8
15.6
4Q20 1Q21 2Q21 3Q21 4Q21 FY20 FY21
Total Revenue ($B)
Title F&G Corporate
588 455 593 604 616
1,526
2,268
4Q20 1Q21 2Q21 3Q21 4Q21 FY20 FY21
Adjusted Net Earnings ($M)
Title F&G Corporate
512 472 573 550 625
1,460
2,220
4Q20 1Q21 2Q21 3Q21 4Q21 FY20 FY21
Net Cash From Operations ($M)
(ex F&G)
$2.01 $1.56 $2.06 $2.12 $2.16
$5.34
$7.90
4Q20 1Q21 2Q21 3Q21 4Q21 FY20 FY21
Adjusted Net Earnings Per Share
(Diluted)
Financial Trends Quarterly
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Rolling Five Quarters
Corporate
Bonds, 37%
Structured
(CLO, MBS,
ABS), 28%
Mortgages, 9%
Cash and
Short-term, 7%
Alternative
Assets, 6%
Equities, 6%
Other, 4%
Municipal
Bonds, 3%
Cash and Short-
term, 44%
Corporate
Bonds, 22%
Equities, 22%
Other, 10%
Municipal
Bonds, 1%
Structured (CLO,
MBS, ABS), 1%
Consolidated Investment Portfolio
F&G Investment Portfolio
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Corporate
Bonds, 40%
Structured (CLO,
MBS, ABS), 33%
Mortgages, 10%
Alternative
Assets, 7%
Municipal
Bonds, 4%
Equities, 3% Other, 3%
$43B
$36B
Investment Portfolio ex F&G
$7B
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As of December 31, 2021
Total Invested Assets Overview
Average credit quality: NAIC 1.59
Average credit quality: A2 (Moody’s or equivalent rating)
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Loss Ratio 4.6% 3.8% 2.8% 3.7% 3.1% 3.2% 3.4% 4.1% 3.9% 4.1%GAAP Premiums $3,261 $3,839 $4,151 $3,603 $4,230 $4,660 $4,849 $4,878 $5,263 $6,178
Estimated Policy Year CompletionUltimate Loss 2011 to 2020 ($ in millions)
$149 $146
$117 $135 $132
$149 $164
$199 $204
$254
87%84%
78%76%
68%55% 48%
40%
24%11%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Reserves and IBNR
Paid to Date
Rolling Historic Ten Years
Title Claims/Reserves
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Appendix
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Non-GAAP Measure ReconciliationsReconciliation from Net Earnings (Loss) Attributable to Common Shareholders to Adjusted Net Earnings (Loss)
$ millions, except per share data
December 31,
2020
March 31,
2021
June 30,
2021
September 30,
2021
December 31,
2021
December 31,
2020
December 31,
2021
Net earnings (loss) attributable to common shareholders $801 $605 $552 $732 $533 $1,427 $2,422
Earnings from discontinued operations, net of tax (2) 5 6 (3) - (25) 8
Net earnings (loss) from continuing operations attributable
to common shareholders 803 600 546 735 533 1,452 2,414
Pre-tax earnings (loss) from continuing operations 930 757 713 926 687 1,784 3,083
Non-GAAP Adjustments
Recognized (gains) and losses, net (367) (23) (42) 71 56 (181) 62
Indexed product related derivatives 54 (185) 75 26 32 111 (52)
Debt issuance costs - - - - - 5 -
Purchase price amortization 29 25 24 25 25 106 99
Transaction costs 5 6 4 3 - 68 13
Other adjustments - - - (284) - 1 (284)
Adjusted pre-tax earnings (loss) 651 580 774 767 800 1,894 2,921
Total non-GAAP, pre-tax adjustments (279) (177) 61 (159) 113 110 (162)
Income taxes on non-GAAP adjustments 64 32 (13) 28 (30) (29) 17
Non-controlling interest on non-GAAP adjustments - - (1) - - (7) (1)
Total non-GAAP adjustments (215) (145) 47 (131) 83 74 (146)
Adjusted net earnings (loss) from continuing operations
attributable to common shareholders $588 $455 $593 $604 $616 $1,526 $2,268
Adjusted EPS attributable to common shareholders - diluted $2.01 $1.56 $2.06 $2.12 $2.16 $5.34 $7.90
Three Months Ended Twelve Months Ended
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Non-GAAP Measure Reconciliations (Continued)Reconciliation from Pre-Tax Title Earnings to Adjusted Pre-Tax Title Earnings
$ millions
December 31,
2020
March 31,
2021
June 30,
2021
September 30,
2021
December 31,
2021
December 31,
2020
December 31,
2021
Pre-tax Title earnings $896 $439 $644 $486 $567 $1,878 $2,136
Non-GAAP Adjustments before taxes
Recognized (gains) and losses, net (290) 59 30 169 135 (143) 393
Purchase price amortization 18 14 14 14 15 73 57
Other adjustments - - - - - 1 -
Total non-GAAP, pre-tax adjustments (272) 73 44 183 150 (69) 450
Adjusted pre-tax Title earnings $624 $512 $688 $669 $717 $1,809 $2,586
Adjusted pre-tax Title margin 22.7% 19.9% 22.7% 21.7% 22.4% 19.6% 21.7%
Three Months Ended Twelve Months Ended
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DEFINITIONS
The following represents the definitions of non-GAAP measures used by the Company.
Adjusted Net Earnings Attributable to Common Shareholders (Adjusted Net Earnings)
Adjusted net earnings attributable to common shareholders ("adjusted net earnings") is a non-GAAP economic measure we use to evaluate financial performance each period. Adjusted net earnings is calculated by adjusting net earnings (loss) from continuing operations attributable to common shareholders to eliminate:
i. Recognized (gains) and losses, net: the impact of net investment gains/losses, including changes in allowance for expected credit losses and other than temporary impairment ("OTTI") losses, recognized in operations; the impact of market volatility on the alternative asset portfolio that differ from management's expectation of returns over the life of these assets; and the effect of changes in fair value of the reinsurance related embedded derivative;
ii. Indexed product related derivatives: the impacts related to changes in the fair value, including both realized and unrealized gains and losses, of index product related derivatives and embedded derivatives, net of hedging cost;
iii. Purchase price amortization: the impacts related to the amortization of certain intangibles (internally developed software, trademarks and value of distribution asset (VODA)) recognized as a result of acquisition activities;
iv. Transaction costs: the impacts related to acquisition, integration and merger related items; and
v. Other "non-recurring", "infrequent" or "unusual items": Management excludes certain items determined to be “non-recurring”, “infrequent” or “unusual” from adjusted net earnings when incurred if it is determined these expenses are not a reflection of the core business and when the nature of the item is such that it is not reasonably likely to recur within two years and/or there was not a similar item in the preceding two years.
Adjustments to adjusted net earnings are net of the corresponding impact on amortization of intangibles, as appropriate. The income tax impact related to these adjustments is measured using an effective tax rate, as appropriate by tax jurisdiction. While these adjustments are an integral part of the overall performance of F&G, market conditions and/or the non-operating nature of these items can overshadow the underlying performance of the core business. Accordingly, management considers this to be a useful measure internally and to investors and analysts in analyzing the trends of our operations. Adjusted net earnings should not be used as a substitute for net earnings (loss). However, we believe the adjustments made to net earnings (loss) in order to derive adjusted net earnings provide an understanding of our overall results of operations.
Net Investment Spread
Net investment spread is the excess of net investment income, adjusted for market volatility on the alternative asset investment portfolio, earned over the sum of interest
credited to policyholders and the cost of hedging our risk on indexed product policies. Management considers this non-GAAP financial measure to be useful internally
and to investors and analysts when assessing the performance of the Company’s invested assets against the level of investment return provided to policyholders, inclusive
Non-GAAP Measures and Definitions
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Assets Under Management (AUM)
AUM is calculated as the sum of:
i. total invested assets at amortized cost, excluding derivatives;
ii. related party loans and investments;
iii. accrued investment income;
iv. the net payable/receivable for the purchase/sale of investments, and
v. cash and cash equivalents excluding derivative collateral at the beginning of the period and the end of each month in the period, divided by the total number of months in the period plus one.
Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the rate of return on assets available for reinvestment.
Average Assets Under Management (AAUM)
AAUM is calculated as AUM at the beginning of the period and the end of each month in the period, divided by the total number of months in the period plus one. Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the rate of return on assets available for reinvestment.
Adjusted Return on Assets
Adjusted Return on Assets is calculated by dividing annualized adjusted net earnings by year-to-date AAUM. Management considers this non-GAAP financial measure to
be useful internally and to investors and analysts when assessing financial performance and profitability earned on AAUM.
Sales
Annuity, IUL and funding agreement 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. Sales from these products are recorded as deposit liabilities (i.e. contractholder funds) within the Company's consolidated financial statements in accordance with GAAP. PRT sales are recorded as premiums in revenues within the consolidated financial statements. 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.
Non-GAAP Measures and Definitions (Continued)