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26 Jan 2018
New York, January 26, 2018 -- Moody's Investors Service has assigned a Ba3 issuer rating to FGL
Holdings (formerly CF Corporation) as well as a Ba2 issuer rating to CF
Bermuda Holdings Limited (CF Bermuda) and a Baa2 insurance financial strength
(IFS) rating to F&G Re Ltd (F&G Re) with a stable outlook.
Additionally, Moody's affirmed the Ba2 senior unsecured debt
rating of Fidelity & Guaranty Life Holdings, Inc. (FGLH),
a wholly-owned subsidiary of FGL US Holdings (unrated) and the
Baa2 IFS rating of FGLH's primary operating company, Fidelity &
Guaranty Life Insurance Company (FGLIC). The outlook on all entities
is stable. Please see below for a complete list of rating actions.
RATINGS RATIONALE
The assignment of the ratings follows the completion of FGL Holdings'
previously announced merger transaction under which CF Corporation (now
FGL Holdings) acquired Fidelity & Guaranty Life.
The Baa2 IFS rating of F&G Re reflects Moody's view that F&G
Re and FGLIC are treated as one analytical unit due to F&G Re primarily
reinsuring business from FGLIC. If F&G Re's strategy changes
relative to Moody's expectations, it may no longer be rated the
same as FGLIC. Additionally, CF Bermuda's Ba2 issuer
rating is the standard three notches from the Baa2 IFS rating of the insurance
operating entities. The Ba3 issuer rating of FGL Holdings is one
notch lower than the Ba2 issuer rating of CF Bermuda reflecting structural
subordination.
The rating agency expects FGL to maintain financial leverage below 25%
prospectively as well as appropriate capital levels. The rating
agency stated that it will evaluate FGL Holdings' efforts to accelerate
growth to ensure that the company's actions remain in line with the current
ratings. In addition, Moody's expects the new tax law will
make it less beneficial to cede directly sold business from its US operations
to F&G Re, its Bermuda affiliate.
FGLIC's credit profile reflects the company's growing market position,
especially in the fixed indexed annuity (FIA) space, as well as
its good profitability, and higher investment yield from portfolio
repositioning efforts. FGLIC has been able to balance the healthy
growth of its FIA business while expanding its footprint in the indexed
universal life (IUL) insurance market.
The rating agency noted that these strengths are offset by the concentration
of FGLIC's sales in FIAs, along with the associated hedging and
asset liability management challenges. FGLIC's sales are likely
to continue to be highly concentrated in annuity products in the near-term.
Additionally, the company's primary distribution channel is via
independent marketing organizations (IMOs) which could be impacted by
the Department of Labor's new fiduciary rules, notwithstanding the
potential for alterations or rescission.
RATING DRIVERS
According to Moody's, the following could lead to an upgrade of
FGLH's and FGLIC's ratings: 1) sustained statutory return on capital
exceeding 6%; and 2) more balanced growth in profitably priced
new FIA business and life insurance. Conversely, the following
factors could result in a downgrade of FGLH's and FGLIC's ratings:
1) increased investment risk from more aggressive asset allocations;
2) adjusted financial leverage above 25%; 3) sustained statutory
return on capital less than 6%; 4) significant use of reinsurance
to finance growth; or 5) more aggressive capital actions or the consolidated
NAIC RBC ratio (company action level) declining below 400%.
The following ratings were assigned with stable outlooks:
FGL Holdings -- issuer rating at Ba3;
CF Bermuda Holdings Limited -- issuer rating at Ba2;
F&G Re Ltd -- insurance financial strength rating at Baa2.
The following ratings were affirmed with stable outlooks:
Fidelity & Guaranty Life Insurance Company -- insurance
financial strength rating at Baa2;
Fidelity & Guaranty Life Holdings, Inc. --
senior unsecured debt rating at Ba2.
FGLH is an insurance holding company headquartered in Des Moines,
Iowa. As of September 30, 2017, FGLH reported total
assets of about $29 billion and shareholders' equity of approximately
$2.2 billion.
The principal methodology used in these ratings was Global Life Insurers
published in April 2016. Please see the Rating Methodologies page
on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
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or category/class of debt or pursuant to a program for which the ratings
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rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
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if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Shachar Gonen
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Marc R. Pinto, CFA
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
No Related Data.
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