Magic Johnson moves Iowa insurer to Illinois
January 21, 2014 by Victor Epstein
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It’s not every day that Iowa loses an insurance company to another state, especially one with a higher premium tax rate, but EquiTrust announced Tuesday that it’s leaving the Des Moines area for Illinois and creating more than 200 jobs there.
Illinois Gov. Pat Quinn announced the relocation along with Basketball Hall of Fame member Earvin “Magic” Johnson – the insurer’s new controlling shareholder.
“I’m excited,” said Johnson, whose investment in the company was also announced for the first time Tuesday. “This is the first time in a long time that I can be excited in Chicago, because Michael (Jordan) used to beat me here.”
Johnson has worked closely in the past with the New York City and Chicago-based Guggenheim Partners private equity firm, which purchased EquiTrust from West Des Moines-based FBL Financial Group for $471 million. The EquiTrust annuities business remained in the area after its sale to Guggenheim in January 2012 with about 100 employees.
Johnson and Guggenheim also acquired the Los Angeles Dodgers baseball team in 2012.
“EquiTrust is an Illinois company – we’ve been here about four months,” said EquiTrust Chief Executive Officer Jeff Lange. “We will be growing to over 1,000 jobs, beginning with 200.”
The Des Moines area insurance hub is used to being on the winning side of the financial equation when an insurer relocates, as it was when Fidelity & Guaranty moved its headquarters from Baltimore to Des Moines in November. This time, Illinois is the winner.
Iowa’s 1 percent rate for its insurance premium tax is among the lowest in the nation. The Illinois rate is 1.5 percent.
The neighboring states are frequent competitors for economic development projects, such as the $1.8 billion Orascom Construction fertilizer project in southeast Iowa. Gov. Terry Branstad vigorously defended Iowa Insurance Commissioner Nick Gerhart when he learned that the EquiTrust move wasn’t just a paper relocation, as was initially believed after it happened in August.
“We have a great insurance commissioner and we just had two insurance companies redomicle to Iowa,” Branstad said in a reference to Fidelity & Guaranty and to the announcement Tuesday that Symetra Financial Insurance Company had filed an application to move its legal headquarters to Iowa from Washington State. Iowa is home to more than 200 insurance companies.
The Des Moines area insurance hub employs more than 24,000 insurance professionals and serves as the headquarters for a list of top firms that runs the gamut from Principal Financial Group to American Equity Investment Life. It’s a hotbed for the insurance fixed annuities business, whose products are popular with retirees because they offer a steady return after an initial period of investment.
EquiTrust and Guggenheim officials did not respond to a request for information on the future of the company’s Iowa jobs.
EquiTrust has received attention during the past year for the rapid gains its made in market share prior to the relocation decision. Its share of the indexed annuity sector jumped to 5.88 percent in the second quarter of 2012 from 2.27 percent a year earlier. Its market share dropped to 4.96 percent the first quarter after the move – which is called “redomiciling” within the industry – to $10.1 billion, according to the Wink Inc. insurance research firm in Pleasant Hill.
“We have a very high standard when we review new insurance products,” Gerhart said Tuesday after the job creation announcement in Illinois. “We try to balance the need for innovation with the
need to protect consumers.”
Insurance expert Fred Hubbell said state insurance commissioners rarely allow an insurer to redomicle without securing something for their state in exchange, like a promise of job creation.
Cedar Rapids native Mark Walter is the CEO of Guggenheim Partners and its $180 billion financial empire.
“We’re very happy to be able to move this business here,” he said.
Wink’s note: Interview comments may have been taken out of context by the articles author(s). Wink’s media team may be reached at support@winkintel.com
