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2012 Midyear Report

Forethought Financial Group, Inc.

LETTER FROM THE CHAIRMAN, PRESIDENT and CEO

To: All FFG Shareholders and Stakeholders

The rst hal o 2012 has been a very active time or 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 protable, diversied lie and

annuity business. This responsiveness to the market yielded signicant dividends as we

announced the acquisition o the individual annuity new business capabilities rom The

Hartord on April 26. This transaction provides Forethought the opportunity to enter the

variable annuity market, one o the largest product categories in nancial 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

nancial perspective, the addition o variable annuity products provides Forethought with a source o ee

income and high return products as well as excellent diversication benets to our existing products.

We anticipate closing the transaction in the ourth quarter and expect to be operational in 2013.

In addition, our existing businesses continue to expand in 2012. In act, each o our businessespreneed lie,

annuities, and nal expense liehave achieved signicant sales increases in the rst hal o 2012 compared

to the same period a year ago. Our preneed lie insurance achieved sales gains over prior year as a result o

developing new accounts and improving results with top tier producers, a solid perormance in this relatively

mature market. We continued to expand Forethoughts ootprint in the bank annuity channel ollowing our

2011 launch o SecureFore 7SM and ForecareSM Fixed Annuities. We are currently distributing products through

a network o high quality banks including Huntington, U.S. Bank, BBVA Compass, Regions, and KeyBank. Look

or this list to expand as we move through the balance o the year. For 2012, we project annuities to produce

over $1 billion o new premium, with over $600 million o that coming through the bank annuity channel, an

outstanding result by any measure.

Our senior market-ocused products, unique distribution platorms, and exible in-orce book o business

have enabled us to perorm at a high level despite historically low interest rates and market volatility.

Statutory premium increased 65% to $697 million or the six months ended June 30 and adjusted capital and

surplus totaled $486 million. GAAP operating income per ully diluted share increased 67% to $16.67 or the

six month period and GAAP book value per share ex AOCI, our most relevant measure o 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 afrmed our investment grade ratings and stable outlook during the rst hal o the

year. In addition, Forethought was once again recognized or the third consecutive year by Wards as one o

the top 50 highest perorming lie-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 hal o 2012 with solid momentum generated rom a strong rst hal perormance.

Our management team is energized by the prospects or 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 protability gains in all market conditions and through changing customer

preerences. I have never been more enthusiastic about the prospects or Forethought.

Thank you or your continued support as we build a company in which we can all be proud.Sincerely,

John A. GraChairman, President and CEO

2012 Forethough0812

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INVESTMENT

OVERVIEW

RESERVES BYPRODUCT TYPE

As o 6/30/2012

High Yield and other 5

Commercial Mortgages

Annuity $2,227,20

Life and Health $3,091,294

As o 6/30/2012 (dollars in 000s)

Forethoughts reserves are well

diversied by line o business,

with approximately $3.1 billion

associated with lie and health

insurance obligations, and over

$2.2 billion supporting our line

o deerred annuities.

Forethoughts investment strategy is

predicated upon principal protection

and providing stable, predictable

income or our policyholders and

shareholders. Thereore, Forethought

maintains a diversied, high quality

portolio with approximately 89.0%

invested in investment grade bonds,

5.3% in commercial mortgages, and

the remaining 5.7% in high yield

bonds, hedge unds, equities, real

estate and policy loans.

* As determined by the NAIC.

Investment GradeBonds* 89.0%

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2012 Forethough0812

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2012 Midyear ReportAs o 6/30/2012

FINANCIAL STRENGTH RATINGS

A.M. BEST RATINGForethought Lie Insurance Company(The ourth highest o sixteen ratings.)

STANDARD & POORS RATINGForethought Lie Insurance Company(The seventh highest o twenty-one ratings.)

Inormation on the most current rating is availableat www.standardandpoors.com or rom Standard& Poors at (212) 438-2400. Ratings are not aguarantee o an insurers nancial strength nora recommendation as to the insurer.

MOODYS RATINGForethought Lie Insurance Company(The seventh highest o twenty-one ratings.)

ALIRT SERVICE RANKINGForethought Lie Insurance Company

Forethought proudly subscribes to the ALIRTService, which reports on trends impactingthe nancial perormance o insurance companies.Inormation is available at www.alirtresearch.comor rom ALIRT Insurance Research at (860) 683-2070.

WARDS 50 RANKINGForethought Lie Insurance Company

A- (Strong)

A- (Excellent)

A3

20102012

Named as one o the nations top 50 highest-perorming lie-health insurance companiesin the prestigious Wards 50 annual list orthree consecutive years, 20102012. Rankinganalyzes ve-year nancial perormanceo more than 800 US-based lie-healthinsurance companies.

2012 2011 % Chg

Premium income $697,208 $423,739 65%

Total assets $5,932,106 $5,140,015 15%

Policyholder reserves $5,318,498 $4,586,312 16%

Capital and surplus $457,380 $447,541 2%

Statutory RiskBased Capital 496%*

*Forethought Life Insurance Company only.

KEY METRICSFINANCIAL HIGHLIGHTS

INCOME STATEMENT

Revenues Midyear 2012

Premium income $697,208

Net investment income and IMR amortization 157,168

Other 3,524

Total revenues $857,900

Benefts and expenses

Policyholder benets $699,366

Commissions 64,769

Insurance taxes, licenses and ees 3,533

General insurance expenses 32,227Other 5,360

Total benefts and expenses $805,255

Pretax operating income $52,645

Income tax expense (15,599)

Net gain rom operations 37,046

Net realized capital gains/(losses) (5,134)

Net income $31,912

BALANCE SHEET

Assets 6/30/2012

Cash and invested assets $5,806,044Premiums due and deerred 23,449

Accrued investment income 69,521

Current and deerred income taxes 31,876

Other assets 1,216

Total assets $5,932,106

Liabilities

Policyholder benets $5,318,498

Interest maintenance reserve 75,238

Asset valuation reserve 28,818

Other liabilities 52,172

Total liabilities $5,474,726

Capital and surplus 457,380

Total liabilities and surplus $5,932,106

Unaudited Combined Statutory Results(dollars in 000s) Midyear Midyear