OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” of the key life/health subsidiaries of Fidelity & Guaranty Life Holdings, Inc. (FGLH) (Delaware). These subsidiaries are referred to collectively as Fidelity & Guaranty Life Group. In addition, AM Best has affirmed the Long-Term ICR of “bbb-” and the Long-Term Issue Credit Rating (Long-Term IR) of “bbb-” of FGLH. The outlook of these Credit Ratings (ratings) is stable. (See below for a company listing and details of the Long-Term IR.)
The ratings reflect Fidelity & Guaranty Life Group’s balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
Fidelity & Guaranty Life Group continues to maintain a strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), despite a decline in the absolute level of capital in recent periods due to planned return of capital to the holding company for normal course liquidity needs, as well as merger-related transaction costs. Additionally, the group maintains more-than-adequate liquidity with strong operating cash flows and additional borrowing capacity through the Federal Home Loan Bank. Fidelity & Guaranty Life Group also benefits from the financial resources of its new parent, Fidelity National Financial, Inc., which also guarantees its senior notes. Overall premiums have increased noticeably in recent periods. The group has added significant new distribution relationships over the past year, which should foster additional sales.
Partially offsetting these factors are the fluctuations in Fidelity & Guaranty Life Group’s statutory operating results over the past five years due to reinsurance transactions and other one-time events. However, interest rate spreads have remained favorable due to improving investment yields despite the low interest rate environment. The group has been repositioning its investment portfolio into higher-yielding assets while prudently managing annuity crediting rates. AM Best notes that the group maintains a concentration in structured securities, which comprise approximately one-third of the general account investment portfolio. Partially mitigating this concern is that the investment portfolio is well-managed with good diversity by sector with just moderate exposure to industries heavily impacted by the pandemic. As of Sept. 30, the portfolio’s net unrealized gain position grew to $1.2 billion, increasing by approximately $600 million in the third quarter. While the group may experience some increase in credit impairments, AM Best believes Fidelity & Guaranty Life Group is well-suited to manage through the pandemic.
The FSR of A- (Excellent) and the Long-Term ICRs of “a-” have been affirmed with stable outlooks for the following key life/health subsidiaries of Fidelity & Guaranty Life Holdings, Inc.:
- Fidelity & Guaranty Life Insurance Company
- Fidelity & Guaranty Life Insurance Company of New York
The following Long-Term IR has been affirmed with a stable outlook:
-- “bbb-” on $550 million 5.5% senior unsecured notes, due 2025
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