Fidelity & Guaranty Lands Two Big Guns

Opportune time

Infusion of this seasoned talent comes at an opportune time, considering that the company has a lot going on. Within the last 11 months, for example, FGL:

• Completed its initial public offering (IPO) in December, raising $165.8 million. The carrier remains 80 percent owned by Harbinger Group (HGI) and operates as a public company.
• Held a ribbon cutting ceremony in January for its new headquarters in Des Moines, marking its departure from Baltimore.
• Debuted a new FIA in March. Called Performance Pro, the annuity offers several interest crediting options, including a five-year spread option that’s tied to a volatility controlled index. It also offers a 10 percent vesting premium bonus and a guaranteed minimum withdrawal benefit (GMWB) feature.
• Struck a three-year $150 million unsecured revolving credit facility agreement in August with seven participating banks as lenders.
• Reported substantial growth in indexed product sales.
• Launched another new FIA In September. Called Income and WealthBuilder, this one offers five interest crediting options and two surrender schedule options (7-year and 10-year).
• Also in September, the company’s board authorized repurchase of up to 500,000 shares of its common stock over the next 12 months. 

Given their previous experiences, Littlefield and Benson will likely feel right at home when addressing such activities and developments.

Strengthened perception

Their presence at the company may help in another area as well. That is in strengthening the perception that FGL is run by insurance professionals and managed as an insurance company. This area became an issue in 2011, when a private equity subsidiary of HGI bought the company — then called OM Financial Life — from Old Mutual.

The buyer promptly transferred ownership to HGI, which is a diversified holding company, not a private equity firm, and the carrier took back its old name, Fidelity & Guaranty Life Insurance Co.

However, the carrier’s brief brush with being owned by the private equity subsidiary of HGI was enough to put it in the public spotlight. At the time, several private equity firms had either cut or proposed deals to buy life and annuity carriers. Critics were worried that the transactions could be risky, due to key differences in business models between private equity and insurance companies.

So HGI found itself in the position of explaining that it is not a private equity firm and that it manages the companies it owns for the long term. 

FGL’s transfer to HGI’s ownership helped reinforce that message, since that meant the insurer was a unit of a holding company as are many other insurance companies. So did the IPO, which made FGL a public company and ushered in quarterly reporting and other disclosure activities required of public companies.

Now, with the new appointments, FGL may get some more distance from that old private equity association. This could happen if onlookers interpret their deep insurance expertise as a sign that they will use an insurance business model, not a private equity model, in guiding the company.

Launer, the CEO, made a point of mentioning the experience issue in the news announcement: "I'm extremely pleased to welcome Chris Littlefield and Jim Benson to FGL – two highly seasoned insurance executives, who further deepen the capabilities of both our leadership team and our board of directors as FGL enters its next phase of growth,” he said.

Not incidentally, Launer is himself a seasoned insurance executive. Before becoming president and CEO of FGL in 2011, he had held several executive leadership positions through 28 years with MetLife.

Linda Koco, MBA, is a contributing editor to AnnuityNews, specializing in life insurance, annuities and income planning. Linda may be reached at [email protected].

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Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at [email protected].