Fitch Maintains Fidelity & Guaranty Life on Rating Watch Evolving

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has maintained the ratings of Fidelity & Guaranty Life and subsidiaries (collectively referred to as F&G Life) on Rating Watch Evolving. The affected ratings include the 'BBB' Insurer Financial Strength (IFS) ratings for the life insurance subsidiaries, Fidelity & Guaranty Life Insurance Co. and Fidelity & Guaranty Life Insurance Co. of New York, the 'BB' Issuer Default Rating (IDR) assigned to Fidelity & Guaranty Life Holdings, Inc., and the 'BB-' senior unsecured note rating.

KEY RATING DRIVERS

F&G Life's ratings were placed on Rating Watch Evolving on Nov. 9, 2015, following the announcement that the company had agreed to be acquired by China-based Anbang Insurance Group Co., Ltd. (Anbang) in an all-cash transaction valued at approximately $1.58 billion. Progress towards the transaction close is generally proceeding as planned and is expected to close in the third quarter 2016 subject to regulatory approvals and satisfaction of other customary closing conditions.

The Rating Watch Evolving status reflects the uncertain impact of the proposed change in ownership on F&G Life's ratings. Fitch's review of the transaction will focus on the impact on F&G Life's standalone credit profile, the strategic fit of F&G Life within the Anbang organization, and Anbang's ability and willingness to provide financial support to F&G Life. Resolution of the Rating Watch status will be dependent on completion of the deal, though the direction of the Rating Watch could change in advance of the close based on Fitch's ongoing review of the transaction.

The purchase of F&G Life by Anbang reflects a broader strategic initiative by Anbang to expand its life insurance business internationally. The proposed acquisition of F&G Life represents Anbang's first entry into the U.S. insurance market.

The deal removes uncertainty over the future ownership of F&G Life following the parent company HRG's announcement in April 2015 that it will be exploring strategic alternatives for F&G Life, which may include a sale of all or part of its approximately 80% ownership interest.

F&G Life's recent financial performance and balance sheet fundamentals remain in line with rating expectations. New Department of Labor (DOL) rules are expected to negatively impact the sale of fixed indexed annuities (FIAs) in qualified markets. While Fitch does not see this as an immediate rating issue, the new DOL rules may cause changes in operating strategies that could impact F&G Life's risk profile and ratings longer term.

RATING SENSITIVITIES

F&G Life's ratings could be downgraded if the transaction is completed as planned and Fitch believes the proposed transaction negatively impacts F&G Life's credit profile.

Conversely, F&G Life's ratings could be upgraded if the transaction is completed as planned and Fitch believes the proposed transaction positively impacts F&G Life's credit profile.

Fitch maintains the following ratings on Rating Watch Evolving:

Fidelity & Guaranty Life Insurance Co.

Fidelity & Guaranty Life Insurance Co. of New York

--IFS rating 'BBB'.

Fidelity & Guaranty Life Holdings, Inc.

--Long-Term IDR 'BB';

--Senior unsecured note due April 2021 'BB-'.

Additional information is available on www.fitchratings.com

Applicable Criteria

Insurance Rating Methodology (pub. 16 Sep 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=871172

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1004245

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Fitch Ratings

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Source: Fitch Ratings