AM Best Affirms Credit Ratings of Fidelity & Guaranty Life Holdings, Inc. and Its Life/Health Subsidiaries

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-” (Excellent) of Fidelity & Guaranty Life Insurance Company (Des Moines, IA) and Fidelity & Guaranty Life Insurance Company of New York, (New York, NY). These subsidiaries of Fidelity & Guaranty Life Holdings, Inc. are referred to collectively as Fidelity & Guaranty Life Group. In addition, AM Best has affirmed the Long-Term ICR of “bbb-” (Good) and the Long-Term Issue Credit Rating of “bbb-” (Good) on the $550 million senior unsecured notes, due 2025 of Fidelity & Guaranty Life Holdings, Inc. (FGLH) (Delaware). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Fidelity & Guaranty Life Group’s balance sheet strength, which AM Best assesses 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 significant increase in new annuity sales and a decline in capital surplus in 2020 due to merger-related transaction costs and negative mark-to-market impacts within its investment portfolio in the pandemic environment. Fidelity & Guaranty Life Group benefits from the financial resources and diversification benefits provided by Fidelity National Financial, Inc., which also guarantees the group’s senior notes. Additionally, the group maintains more than adequate liquidity with strong operating cash flows and additional borrowing capacity through the Federal Home Loan Bank.

AM Best notes that overall premiums have increased noticeably in recent periods with Fidelity & Guaranty Life Group reaching a top five market position within its core fixed indexed annuity segment. The group’s strong premium growth has been bolstered by the addition of significant new bank and broker dealer distribution relationships over the past year and noticeable growth within its index universal life insurance line of business. The group has also recently entered institutional markets, with funding agreement backed notes and pension risk transfer expected to generate a moderate level of new sales over the near-term.

While risk-adjusted capital remains strong, the group’s overall quality of capital is diminished by the significant increase in reinsurance leverage, the use of captive financial solutions, as well as the use of surplus notes. As Fidelity & Guaranty Life Group continues to grow at a rapid pace, AM Best believes there is an increased level of execution risk in accessing new capital to fund this growth and will continue to monitor the group’s ability to maintain the current level of risk-adjusted capitalization. The group has also experienced some volatility within its statutory net operating results due to reinsurance transactions, impacts from market volatility and other one-time events. However, interest rate spreads have remained favorable due to steady investment yields despite the low interest rate environment as the company repositioned its investment portfolio into higher yielding structured securities. AM Best expects overall statutory and GAAP operating results to improve over the near to medium term due to continued premium growth and the maintenance of adequate interest rate spreads within its core fixed annuity business.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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