AM Best Reaffirms Fidelity & Guaranty Life Insurance Ratings

AM Best has reaffirmed Fidelity & Guaranty Life Insurance Company's robust credit ratings. The ratings group maintained the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of "a" for both Fidelity & Guaranty Life Insurance Company and its New York counterpart. These assessments emphasize the companies' inclusion in the larger Fidelity & Guaranty Life Group (FGL), with the parent company, Fidelity & Guaranty Life Holdings, Inc. (FGLH), retaining a Long-Term ICR of “bbb”, all issued with a stable outlook.

The ratings reflect FGL's solid balance sheet foundation, steady operational outcomes, and effective enterprise risk management strategies. The group boasts a strong risk-adjusted capital position, enhanced by Best's Capital Adequacy Ratio (BCAR), and robust liquidity supported by significant cash flows and strong annuity surrender protections. Fidelity National Financial, Inc.’s 70% ownership adds a layer of financial backing to the mix.

Focus on Strategic Growth and Risk Management

Despite its sound capital position, FGL faces challenges due to increased reinsurance leverage and the use of captive arrangements and surplus notes. However, reliance on highly rated reinsurers mitigates counterparty risk. With notable investments in private credit and mortgage assets, the group's stable credit performance history and Blackstone's investment expertise help buffer potential risks.

FGL is strategically transitioning towards a fee-centric business model, reducing its capital dependency. The company remains a leader in fixed-indexed annuities through independent agents and is progressively expanding its distribution through regional banks and broker-dealers. Additionally, FGL is advancing in institutional markets with pension risk transfer solutions and funding-agreement-backed notes. The indexed universal life insurance line continues to boost overall sales growth.

While the group's statutory net operating results have shown variability due to reinsurance transactions and specific events, revenue growth is supported by stable net investment income and rising fee income. AM Best projects that as FGL's operations scale, economies of scale will promote more consistent operating results, particularly by maintaining interest rate spreads within its annuities sector. FGL’s evolving enterprise risk management is honing its focus to minimize volatility and enhance strategic decision-making.