Fidelity & Guaranty: Des Moines area ideal for growth
January 12, 2014 by Victor Epstein
Insurer shifts headquarters from Baltimore, opens new office
Leland Launer, chief executive officer of the Des Moines area’s newest insurance company, can summarize his decision to move its headquarters from Baltimore in a single sentence:
“Right now, there are more actuaries walking around in the Jordan Creek mall than there are in the whole state of Maryland,” Launer said Thursday morning just hours before formally opening the new office of Fidelity & Guaranty Life Insurance Co. in downtown Des Moines.
Launer said the company’s future growth will be funneled through Des Moines, which is home to several insurers and annuity providers that employ actuaries and other financial professionals. More than 200 insurance companies are based in Iowa, according to the Iowa Insurance Division.
The concentration of insurance businesses in the Des Moines area has boosted insurance employment past the 24,000 mark. It has also created a kind of critical mass that allows industry specialists, such as attorneys specializing in insurance, to socialize and collaborate with professional peers, Launer said.
“We want to be branded as an Iowa insurance company because it’s a good brand for an insurance company,” he said in an interview with the Register.
Fidelity & Guaranty, which trades under the FGL stock symbol, has 20 open positions now in Des Moines, where its new office is located in Two Ruan Center, at 601 Locust St. The insurer expects to employ 50 people locally within three years.
FGL has already made four hires, Launer said, and accepted two transfers from its offices in Baltimore, Md., and Lincoln, Neb. It had 180 employees in November, with 150 of those in Baltimore and 30 in Lincoln. Launer said FGL plans to keep its existing offices and the workers employed in them.
Des Moines is a hotbed for a fixed indexed annuities industry that had $17 billion in sales in the first half of this year, according to the Wink Inc. insurance research firm in Pleasant Hill. FGL ranked 10th in the nation during that time period with $494 million in sales and a market share of 2.9 percent.
FGL’s decision to move its legal headquarters to Des Moines — called “redomiciling” within the industry — illustrates the competitive edge that has helped turn the area into one of the nation’s leading insurance hubs during the past 20 years, according to Iowa Insurance Commissioner Nick Gerhart. The industry accounted for about $8 billion of the Des Moines area’s $39 billion economy in 2010, according to the U.S. Bureau of Economic Analysis.
“This is a clear demonstration of the number of talented Iowans that work in the insurance and financial services space,” Gerhart said. “Their CEO, Leland Launer, has stated repeatedly that the No. 1 reason they’re moving their headquarters is to access our deep talent pool of insurance professionals.”
Iowa has extensive educational offerings for those interested in the insurance industry, with Drake University in Des Moines and the University of Iowa in Iowa City both offering actuarial science programs. The U of I also offers a finance degree with a specialization in insurance.
Actuaries are math and data whizzes who assess and price coverage risk for insurers. They’re responsible for figuring out how likely events are to occur for the companies that insure the rest of us against everything from a confused motorist driving backward into a swimming pool to a tornado touching down on Wall Street.
“Every time we went to hire an actuary — and we were the largest insurance company in Maryland — we were most likely importing people from other states,” Launer said. “It’s easier to find them in the Des Moines area because you have an abundance of them, and this business is all about finding qualified people.”
FGL’s parent company is the New York City-based Harbinger Group, which is controlled by financier Phil Falcone’s hedge fund. He was banned from the financial industry for five years under a deal with federal regulators in August.
Financial firms that derive a significant portion of their earnings from hedge funds and private equity funds have been buying insurance operations at a steep discount in recent years, as low interest rates have made those businesses less profitable and new capital requirements have prompted some European insurance providers to jettison their U.S. operations.
London-based Old Mutual Plc sold its U.S. life and annuity business to Harbinger for $350 million in 2011. London-based Aviva Plc followed a similar route in October when it sold its U.S. insurance business, based in West Des Moines and known as Aviva USA, to Apollo Global Partners for $2.6 billion. The New York City-based private equity firm combined Aviva USA with its other U.S. insurance operations and renamed them Athene USA. Athene USA is based in West Des Moines.
Shares of FGL rose 19 cents to close at $18.89 each Thursday. The stock is up $1.89 since it opened at $17 for its initial public offering Dec. 13.
Fidelity & Guaranty Life moves to Des Moines: Fidelity & Guaranty Life CEO Lee Launer talks about the company’s move to Des Moines: www.desmoinesregister.com/videonetwork/3032421445001/Fidelity-Guaranty-Life-moves-to-Des-Moines
