Fidelity & Guaranty Life, a Unit of Private Equity Firm, Plans IPO of Up to $100 Million
August 29, 2013 by Best's News Service
BALTIMORE – Fidelity & Guaranty Life, a unit of private equity firm Harbinger Group Inc., has filed for an initial public offering of its common stock, with a proposed maximum total offering price of $100 million.
In a Form 8-K filed with the U.S. Securities and Exchange Commission, Harbinger Group said its subsidiary, Fidelity & Guaranty Life, filed a registration statement on Form S-1 with the SEC relating to the proposed IPO of its common common stock. All of the shares will be offered by Fidelity & Guaranty Life, and Harbinger Group isn’t a selling stockholder in the offering.
The start date of the proposed sale to the public will be “as soon as practicable,” Fidelity & Guaranty Life wrote in its S-1. On Aug. 26, Harbinger F&G LLC, a Delaware limited liability company, converted into a Delaware corporation under a statutory conversion and renamed itself Fidelity & Guaranty Life, the filing says.
Fidelity & Guaranty Life was acquired by Harbinger Group (NYSE: HRG) in April 2011 (Best’s News Service, Oct. 10, 2011 ). Fidelity & Guaranty previously represented the U.S. life and annuity operations of the U.K.-based Old Mutual plc and was formerly known as OM Financial Life.
“Since this acquisition, we have strengthened our financial profile and risk-based capital ratios, increased our market share, decreased the risk in our investment portfolio, including through better alignment of our asset and liability cash flows, and generated positive net earnings,” Fidelity & Guaranty Life said.
In the filing, the company says Harbinger Group acquired Fidelity & Guaranty Life Holdings Inc., a direct subsidiary of Fidelity & Guaranty Life, in April 2011. Fidelity & Guaranty Life mostly operates through Fidelity & Guaranty Life Holdings’ subsidiary, Fidelity & Guaranty Life Insurance Co., domiciled in Maryland, the filing says.
Private equity firms are increasingly tapping into what they view as a potentially lucrative financial opportunity in fixed annuities, including indexed, in the United States (Best’s News Service, Jan. 16, 2013)
“Our focus on the middle-income market gives us access to significant, underserved market niches and drives our product development,” Fidelity & Guaranty Life says. As of June 30, the company had about 700,000 policyholders in its fixed annuity and life insurance products. In fiscal year 2012, indexed annuities generated about 95% of its total sales. The company says it sells its products through about 200 independent insurance marketing organizations that in turn represent an estimated 19,000 independent agents.
In terms of sales, the company’s indexed annuity market share grew from 1.67% for the three-month period ended March 31, 2011, ranking it at 15th place among its competitors to 2.9% for the three-month period ended June 30 of this year, ranking it at 10th place among its competitors, Fidelity & Guaranty Life wrote.
In October, 2012, A.M. Best Co. noted the challenges FGL faces — the persistently low interest rate environment, its increased reliance on fixed indexed annuity sales growth and the weaker credit profile of its new ownership. A.M. Best noted that HGI’s business model employs significant financial leverage to meet its business objectives and relies on dividend payments from FGL to help cover its debt service. Given its level of indebtedness, A.M. Best believes that HGI’s ability to provide capital to FGL during periods of financial stress is limited (Best’s News Service, Oct. 26, 2012).
In March of this year, A.M. Best assigned an issuer credit rating of “bb+” to Fidelity & Guaranty Life Holdings Inc. and a debt rating of “bb+” to the recently announced $300 million 6.375% senior unsecured notes due 2021 to be issued by FGLH (Best’s News Service, March 26, 2013).
The offering of common stock will be made via a prospectus only, Harbinger’s filing said.
Fidelity & Guaranty Life Insurance Co. and Fidelity & Guaranty Life Ins Co of NY each currently has a Best’s Financial Strength Rating of B++ (Good).
(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)
Week: fran.lysiak@ambest.com) BN-NJ-01-16-2013 1110 ET #
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