Baltimore insurer plans to relocate to Des Moines
November 4, 2013 by Victor Epstein
Fidelity & Guaranty looks to hire 50 people locally in 3 years.
The Des Moines area’s status as a national insurance hub got a lift Friday with the news that Baltimore-based Fidelity & Guaranty Life Insurance Co. has legally moved to Iowa and intends to move its headquarters here.
Fidelity & Guaranty specializes in the kind of fixed indexed annuities sold by West Des Moines-based American Equity Life and Apollo Global Management’s Athene insurance arm, formerly Aviva USA. It also sells life insurance.
The Des Moines region is a hotbed for the fixed indexed annuities industry, which had $17 billion in sales in the first half of this year, according to the Wink Inc. insurance research firm in Pleasant Hill. Fidelity & Guaranty ranked 10th in the nation during that time period with $494 million in sales and a market share of 2.9 percent.
Fidelity & Guaranty already has a temporary location in the Hub Tower in downtown Des Moines and expects to employ at least 50 people locally within three years, corporate spokesman Paul Tyler said. The mid-sized annuities and life insurance company now has 180 employees, with 150 of those in Baltimore and 30 in Lincoln, Neb.
Tyler said the company intends to keep those offices and staff members, but channel its future growth to Des Moines.
“Iowa is attractive to us because it has a deep insurance talent pool, a sophisticated regulatory approach to indexed products, and strong business climate,” Lee Launer, chief executive officer of Fidelity & Guaranty, said in a statement. “It also has a good quality of life for those of our employees who are based in Iowa.”
The insurance industry employs about 24,000 people in the Des Moines region. It contributed $8 billion to the $39 billion local economy in 2010, according to the U.S. Bureau of Economic Analysis. There are 212 insurance companies based in Iowa, according to the Iowa Insurance Division.
“This is great news for Iowa and for Des Moines,” said Jay Byers, chief executive officer of the Greater Des Moines Partnership. “Fidelity and Guaranty Life’s (move) adds to central Iowa’s strength as an international financial services and insurance powerhouse, and further builds our case for being the best place to build a business, a career and a future.”
Drake University and the University of Iowa both offer actuarial science programs, which train the professionals who assess and price policy risk for insurers.
Fidelity & Guaranty’s presence here also bodes well for insurance professionals idled by Aviva USA since May 1, when it employed 1,800 people. At least 43 percent of them have either left or been told their jobs are being eliminated during the past six months.
“This is a great thing for the Des Moines insurance community,” said Sheryl Moore, president and CEO of Moore Market Intelligence, publisher of the Wink sales report. “Hopefully, some of the staffers who have been laid off at Aviva USA will find work at F and G.”
Tyler indicated that Fidelity Guaranty executives were aware of that pool of insurance professionals. “There’s a lot of good talent in the area and we respect what the people have done at Aviva the last 10 or 15 years,” he said.
Tyler noted that Fidelity & Guaranty received no incentives from the state to make the move.
“After much consideration, we believe that relocating our headquarters to Iowa will better position FGL to accelerate its growth plans across the (middle class) market,” Fidelity & Guaranty Chairman Phil Gass said in a statement.
Fidelity & Guaranty’s parent company is the New York City-based Harbinger Capital Partners hedge fund, which is controlled by financier Phil Falcone. He was banned from the financial industry for five years under a deal with federal regulators in August after admitting to improperly borrowing more than $100 million from the fund and giving preferential treatment to some clients.
Hedge funds and private equity funds have been buying insurance operations at a steep discount in recent years as low interest rates have made those businesses less profitable. The insurance arm of Apollo Global Management, a New York-based private equity fund, outbid Harbinger and Guggenheim Partners for Aviva USA in December. It closed the $2.6 billion deal last month. Guggenheim Partners, a Chicago-based private equity fund, bought EquiTrust Life Insurance from West Des Moines-based FBL Financial Group for $471 million in December of 2012.
The purchases have drawn special attention from insurance regulators in New York and Iowa. They’ve imposed additional rules on the hedge funds and private equity firms in response to concerns within the insurance industry that their higher appetite for risk and shorter investment horizon could put policyholders in greater jeopardy.
“The Division is pleased that Fidelity and Guaranty Life is re-domiciling to the state of Iowa,” said Iowa Insurance Commissioner Nick Gerhart.
Tyler indicated that plans are already underway for an initial public offering of shares by Fidelity & Guaranty. Apollo expects to hold an IPO for Athene by Nov. 30, 2015.
Those companies would join publicly traded insurers based in Iowa, including Principal Financial Group, FBL Financial, American Equity Investment Life and EMC Insurance Group.
Fidelity & Guaranty Life
EMPLOYEES: 180. PARENT COMPANY: Harbinger Capital Partners. OPERATING INCOME FOR HARBINGER INSURANCE SEGMENT: $78.5 million from April 1 to June 30.* ASSETS: $17.4 billion as of June 30. ANNUITY SALES: $270.8 million from April 1 to June 30. OFFICES: Baltimore, Md.; Lincoln, Neb.; and Des Moines. *Includes both Fidelity & Guaranty Life and Front Street Re Ltd. Source: Fidelity & Guaranty Life.
What are fixed indexed annuities?
The investments are popular with retirees because they typically offer fixed monthly payments after an initial period of investment. The interest paid is based on one or more of the major stock indexes, such as the S&P 500 stock index.
