Fidelity & Guaranty Life Insurance moving HQ to Des Moines
November 8, 2013 by Victor Epstein
Fidelity & Guaranty Life Insurance Company announced Friday that it intends to move its headquarters from Baltimore to downtown Des Moines and legally relocate to Iowa to take advantage of its lower cost of living, business-friendly regulatory climate and ready supply of insurance professionals.
The mid-sized annuities and life insurance company already has a temporary location in the Hub Tower and expects to employ 50 people locally within three years, according to corporate spokesman Paul Tyler. It currently has 180 employees, with 150 of those in Baltimore and 30 in Lincoln, Neb.
“This is great news for Iowa and for Des Moines,” said Jay Byers, chief executive officer of the Greater Des Moines Partnership. “Fidelity and Guaranty Life’s (move) adds to central Iowa’s strength as an international financial services and insurance powerhouse, and further builds our case for being the best place to build a business, a career and a future.”
Fidelity & Guaranty specializes in the kind of fixed, indexed annuities that are also sold by West Des Moines-based American Equity Life, EquiTrust, and Apollo Global Management’s Athene insurance arm – formerly known as Aviva USA. It also sells life insurance.
The Des Moines region is a hub for annuities, which are popular with retirees because they typically offer fixed monthly payments after an initial period of investment.
“We believe Des Moines will be an ideal location for Fidelity & Guaranty Life to grow and pursue its business goals into the future,” Lee Launer, chief executive officer of Fidelity & Guaranty, said in a statement. “Iowa is attractive to us because it has a deep insurance talent pool, a sophisticated regulatory approach to indexed products, and strong business climate. It also has a good quality of life for those of our employees who are based in Iowa.”
Fidelity & Guaranty’s parent company is the New York City-based Harbinger Capital Partners hedge fund, which is controlled by financier Phil Falcone. He was banned from the financial industry for five years under a deal with federal regulators in August after admitting to improperly borrowing more than $100 million from the fund and giving preferential treatment to some clients.
Hedge funds and private equity funds have been buying insurance operations at a steep discount in recent years as the prevailing low interest rate environment has made those businesses less profitable. The insurance arm of Apollo Gobal Management, a New York–based private equity fund, outbid Harbinger and Guggenheim Partners for Aviva USA in December. It closed the $2.6 billion deal last month. Guggenheim Partners, a Chicago-based private equity fund, bought EquiTrust Life Insurance from West Des Moines-based FBL Financial Group for $471 million in December of 2012.
The purchases have drawn special attention from insurance regulators in New York and Iowa. They’ve imposed additional rules on the hedge funds and private equity firms in response to concerns within the insurance industry that their higher appetite for risk and shorter investment horizon could put policyholders in greater jeopardy.
Private equity firms play a key role in the business community because they don’t just invest in struggling companies, they buy enough of them to gain management control. Often, this means taking the distressed companies private afterward to reshape their business model and redeploy their resources. However, the sector’s also drawn criticism in recent years for cutting wages and jobs, and for backing businesses like red-light cameras, payday lending and for-profit colleges.
Tyler indicated that plans are already underway for an initial public offering by Fidelity & Guaranty (FGL). Apollo expects to hold an IPO for Athene by Nov. 30, 2015.
“The Division is pleased that Fidelity and Guaranty Life is re-domiciling to the State of Iowa,” said Iowa Insurance Commissioner Nick Gerhart. “The company committed to hiring 50 people over the next three years and will be located in downtown Des Moines. Des Moines has a deep talent pool of individuals with experience in the life insurance products the company offers.”
Tyler said that Fidelity & Guaranty received no incentives from the state to make the move in term of tax breaks and the like. It began operating under Iowa insurance regulations at midnight.
The company intends to maintain its existing offices in Baltimore and Lincoln, but channel its future growth to Des Moines.
“After much consideration, we believe that relocating our headquarters to Iowa will better position FGL to accelerate its growth plans across the middle market,” Fidelity & Guaranty Chairman Phil Gass said in a statement. “Serving our current and future policyholders and supporting the needs of our distribution partners remains our top priority.”
