November 30, 2017 / 9:42 PM / a year ago

Fitch Affirms Fidelity & Guaranty Life's IFS at 'BBB'; Upgrades IDR and Senior Debt

(The following statement was released by the rating agency) NEW YORK, November 30 (Fitch) Fitch Ratings has affirmed the 'BBB' Insurer Financial Strength (IFS) ratings for Fidelity & Guaranty Life Insurance Company and Fidelity & Guaranty Life Insurance Company of New York (collectively F&G Life). Fitch has also upgraded the Issuer Default Rating (IDR) assigned to Fidelity & Guaranty Life Holdings, Inc., (FGLH) to 'BB+' and the senior unsecured note rating to 'BB' following completion of the acquisition. Fitch has assigned a Stable Outlook to all ratings. A complete list of rating actions follows at the end of this release. KEY RATING DRIVERS Today's rating action follows the company's announcement that it has successfully been acquired by a consortium made up primarily of the founders of CF Corporation (CF Corp.), a special purpose acquisition company, funds affiliated with Blackstone, and Fidelity National Financial in an all-cash transaction valued at approximately $1.8 billion. The upgrade of FGLH's IDR and senior unsecured debt ratings reflect the company's improved financial flexibility under new ownership. Previously, FGLH's ratings reflected non-standard (i.e., wider) notching from the IFS rating as a result of the rating and financial profile of its highly leveraged former parent, HRG Group Inc. (HRG; 'B' IDR). Given the absence of high leverage and more normalized financial flexibility of the company following completion of the transaction, FGLH's ratings were upgraded to reflect standard notching from the IFS ratings. Fitch's ratings for F&G Life continue to reflect the company's relatively narrow product focus and liability profile, strong balance sheet profile, and good operating performance. The ratings also consider the competitive and regulatory challenges tied to the company's strategic focus selling fixed indexed annuities (FIAs) through independent marketing organizations (IMOs), and macroeconomic challenges associated with low interest rates. Fitch believes that longer term, F&G Life's credit profile could improve based on the successful execution of the company's strategies to improve financial performance and investment results under new ownership. F&G Life's strong balance sheet profile reflects the company's strong statutory capitalization, moderate leverage, and good asset quality. The company's year-end 2016 RBC of 412% was strong for the rating category. F&G Life's PRISM capital model score is on the high end of 'Adequate', which is within expectations for its current rating category. F&G Life's financial performance and balance sheet fundamentals remain in line with rating expectations. Operating performance for fiscal year 2017 was good and results have been consistent over the past two years. Stable performance on the investment portfolio as well as the maintenance and widening of net investment spreads, from a combination of reducing crediting rates and asset mix repositioning, have supported overall profitability. Fitch expects the full implementation of the Department of Labor (DOL) fiduciary rule will have a negative impact on the sale of FIAs in qualified markets. While Fitch does not see this as an immediate rating issue, the DOL rules may cause changes in operating strategies that could impact F&G Life's risk profile and ratings longer-term. RATING SENSITIVITIES The following could result in an upgrade of F&G Life's ratings: --The company maintains operating ROEs above 10% on a consistent basis and consolidated RBC above 400%; --Prism capital model score remains on the high end of 'Adequate'; --Fixed charge coverage is at least 8x and financial leverage is below 25%. The following could result in a downgrade of F&G Life's ratings: --F&G Life's consolidated RBC ratio falling below 300% with operating leverage above 20x; --Consolidated financial leverage for F&G Life exceeding 35%; --Fixed charge coverage falling below 5x; --Operating ROE below 5% over four consecutive quarters. Fitch has affirmed the following ratings: Fidelity & Guaranty Life Insurance Company Fidelity & Guaranty Life Insurance Company of New York --IFS rating at 'BBB'. Fitch has upgraded the following ratings: Fidelity & Guaranty Life Holdings, Inc. --Long-term IDR upgraded to 'BB+' from 'BB'; --Senior unsecured note due April 2021 upgraded to 'BB' from 'BB-'. The Rating Outlook is Stable. Contact: Primary Analyst Nelson Ma, CFA Director +1-212-908-0273 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Secondary Analyst Douglas L. Meyer, CFA Managing Director +1-312-368-2061 Committee Chairperson Douglas Pawlowski, CFA Senior Director +1-312-368-2054 Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email: Additional information is available on Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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