Fitch Places Fidelity & Guaranty Life's Ratings on Rating Watch Evolving
KEY RATING DRIVERS
The rating action follows the announcement that Fidelity & Guaranty Life and its primary life insurance subsidiaries (collectively referred to as F&G Life) have agreed to be acquired by China-based Anbang Insurance Group Co., Ltd. (Anbang) in an all-cash transaction valued at approximately $1.58 billion. The transaction is expected to close in the second quarter 2016 subject to regulatory approvals and satisfaction of other customary closing conditions.
The Rating Watch Evolving status reflects the uncertain impact of the proposed change in ownership on F&G Life's ratings. Fitch's review of the transaction will focus on the impact on F&G Life's standalone credit profile, the strategic fit of F&G Life within the Anbang organization, and Anbang's ability and willingness to provide financial support to F&G Life. Resolution of the Rating Watch status will be dependent on completion of the deal, though the direction of the Rating Watch could change in advance of the close based on Fitch's ongoing review of the transaction.
The purchase of F&G Life by Anbang reflects a broader strategic initiative by Anbang to expand its life insurance business internationally. The proposed acquisition of F&G Life represents Anbang's first entry into the U.S. insurance market.
The deal removes uncertainty over the future ownership of F&G Life following the parent company HRG's announcement in April 2015 that it will be exploring strategic alternatives for F&G Life, which may include a sale of all or part of its approximately 80% ownership interest.
F&G Life's ratings could be downgraded if the transaction is completed as planned and Fitch believes the proposed transaction negatively impacts F&G Life's credit profile.
Conversely, F&G Life's ratings could be upgraded if the transaction is completed as planned and Fitch believes the proposed transaction positively impacts F&G Life's credit profile.
Fitch has placed the following ratings on Rating Watch Evolving:
Fidelity & Guaranty Life Insurance Co.
Fidelity & Guaranty Life Insurance Co. of New York
--IFS rating 'BBB'.
Fidelity & Guaranty Life Holdings, Inc.
--Long-term IDR 'BB';
--Senior unsecured note due April 2021 'BB-'.