Harbinger Group has made still another foray into the annuity business. The publicly held company’s latest deal is an annuity reinsurance treaty closed with Bankers Life.
According to the treaty, Bankers Life will cede approximately $160 million of its annuity business to Front Street Re (Cayman) Ltd., a Harbinger subsidiary that focuses on life and fixed annuity reinsurance products.
Bankers Life is a St. Petersburg, Fla.-based subsidiary of Bankers Financial. It sells single premium deferred annuities, single premium immediate annuities and guaranteed fixed rate annuities.
According to a statement from Harbinger, the State of Florida Office of Insurance Regulation has approved the reinsurance agreement with Bankers Life, retroactive to Nov. 30. Front Street Re will manage the assets supporting carrier reserves, in accordance with Bankers Life’s internal investment policy.
Harbinger already owns Fidelity & Guaranty Life (FGL), a Baltimore, Md.-based carrier that sells fixed annuities, principally indexed annuities, as well as life insurance, through independent agents.
Harbinger bought FGL (then called Old Mutual) in 2011. The name change came shortly thereafter.
The reinsurance transaction with Bankers Life is not the first annuity reinsurance arrangement for Harbinger. In December 2012, the holding company announced that the Maryland Insurance Administration had approved a reinsurance treaty — involving annuities -- between FGL and Front Street.
Under that earlier treaty, FGL was to cede approximately 10 percent, or approximately $1.5 billion of liabilities, of its annuity business to Front Street before year-end 2012. HGI Asset Management, another subsidiary of Harbinger Group, was named to manage the assets supporting reserves.
The new deal won’t upset the national annuity cart. Bankers Life focuses mostly on the southeastern markets, and it involves reinsurance, not direct sales.
But for agents, the reinsurance pact is another sign of the shifting sands that agents have witnessed in the annuity industry since the last recession.
That a Harbinger subsidiary is involved will draw some buzz. Some will take it as a sign that the New York holding company is increasing its annuity footprint and wonder, “where this might go next?”
That is the same question agents have been asking about other changes in the business in recent times. Those changes include the entry of private equity buyers in the fixed annuity business, the product curtailments that carriers have made to cope with the low interest environment, and the capacity limits on the variable annuity side of the business, among many others.
Harbinger already has had a taste of high profile side of the annuity business. The company found itself caught up in this year’s non-stop controversy over whether private equity firms should be allowed to purchase fixed annuity companies, and if so, under what circumstances.
Harbinger Group is not a private equity company — it is a public holding company — but it has a private equity subsidiary called Harbinger Capital Partners. That private equity subsidiary participated in/helped facilitate the 2011 purchase of Old Mutual (now FGL) from Old Mutual Plc of London.
This involvement turned out to be brief in duration but long in impact.
Because of the subsidiary’s role in the transaction, insurance regulators in several states included the parent company, Harbinger Group, on their watch list for private equity/annuity company purchase activity. Regulators in New York even included Harbinger Group on its list of private equity firms the state subpoenaed in mid-year — a move designed to help New York learn more about private equity activity in the annuity marketplace.
Ever since, Harbinger Group has become a household name in annuity circles that have deals on their radar screen, whether private equity related or not.