A.M. Best Co. has affirmed the financial strength rating of B++ (Good) and issuer credit ratings of "bbb+" of Fidelity & Guaranty Life Insurance Company (Baltimore, MD) and its wholly owned subsidiary, Fidelity & Guaranty Life Insurance Company of New York (Purchase, NY) (together known as FGL). On April 6, 2011, FGL was acquired by Harbinger Group Inc (HGI) (NYSE: HRG), a diversified holding company that is majority owned by funds associated with Harbinger Capital Partners LLC (Harbinger). The outlook for all ratings is stable.
The rating affirmations reflect FGL’s favorable operating performance in recent periods, continued progress in de-risking its investment portfolio, the successful refinancing of its Regulation XXX and Guideline AXXX reserves, and more recently, its emergence as one of the fixed indexed annuity sales market leaders. Additionally, FGL’s adequate risk-adjusted capitalization has been supported by a consistent earnings performance.
A.M. Best also notes the substantial progress that has been made in de-risking FGL's investment portfolio while also shortening the duration and strengthening its asset liability management profile. With the improvement in asset quality, the market value of FGL's investment portfolio has increased to the point where it was in a net unrealized gain position of $939 million as of June 30, 2012.
Partially offsetting these positive rating factors are the challenges FGL faces in the persistently low interest rate environment, its increased reliance on fixed indexed annuity sales growth and the weaker credit profile of its new ownership. A.M. Best notes that HGI's business model employs significant financial leverage to meet its business objectives and relies on dividend payments from FGL to help cover its debt service. Given its level of indebtedness, A.M. Best believes that HGI's ability to provide capital to FGL during periods of financial stress is limited. A.M. Best also expects FGL's organic capital growth to be flat to slightly negative for the foreseeable future as the company's statutory earnings will likely be offset by dividend payments to HGI in support of its debt service obligations.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV