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Fitch Places Fidelity & Guaranty Life's Ratings on Rating Watch Evolving
April 18, 2017 / 2:08 PM / 7 months ago

Fitch Places Fidelity & Guaranty Life's Ratings on Rating Watch Evolving

(The following statement was released by the rating agency) NEW YORK, April 18 (Fitch) Fitch Ratings has placed the ratings assigned to Fidelity & Guaranty Life and its insurance subsidiaries (collectively referred to as F&G Life) on Rating Watch Evolving. This rating action also includes the removal from Rating Watch Positive status for the Issuer Default Rating (IDR) and senior unsecured note ratings of Fidelity & Guaranty Life Holdings, Inc. (FGLH) and the placement of these ratings also on Rating Watch Evolving. A complete list of rating actions follows at the end of this release. KEY RATING DRIVERS Today's rating action follows F&G Life's announcement that the acquisition agreement of the company by China-based Anbang Insurance Group Co., Ltd. (Anbang) was terminated on April 17, 2017. As previously disclosed in their Form 8-K filed on Feb. 9, 2017, F&G Life was permitted to solicit, respond to, and negotiate any competing offers but not to enter into a definitive agreement as long as the Anbang merger agreement remained in effect. The Rating Watch Evolving status reflects uncertainty over the future ownership of F&G Life and the uncertainty around the directional impact of the ownership on the ratings. F&G Life's current Insurer Financial Strength (IFS) ratings largely reflect the company's standalone credit profile at 'BBB' as a subsidiary of HRG Group Inc., while the IDR and senior unsecured note ratings of FGLH reflect the non-standard (i.e. wider) notching from the IFS rating as a result of the rating and financial profile of its highly leveraged parent, HRG Group Inc. (HRG; 'B' IDR). Fitch's ratings for F&G Life continue to reflect the company's relatively narrow product focus and liability profile, strong balance sheet profile, and improved operating performance. The ratings also consider the competitive and regulatory challenges tied to the company's strategic focus selling fixed indexed annuities (FIAs) through independent marketing organizations (IMOs), and macroeconomic challenges associated with low interest rates. F&G Life's recent financial performance and balance sheet fundamentals remain in line with rating expectations. RATING SENSITIVITIES Over the near term, once identified, the relative credit quality and financial profile of the potential buyer of F&G Life, as well as Fitch's view on the degree of financial support or financial strain the buyer would provide, has the largest positive or negative directional impact on the ratings of F&G Life. On a standalone basis, key rating triggers that could result in an upgrade of all F&G Life entities include: --F&G Life's consolidated RBC above 400%; --Financial leverage below 25%; --Operating GAAP ROE above 10% on a consistent basis; --Continued low credit-related investment losses. Key rating triggers that could result in a downgrade include: --F&G Life's consolidated RBC falls below 300% with operating leverage above 20x; --Consolidated financial leverage for F&G Life exceeds 35%; --Maximum statutory dividend coverage of F&G Life consolidated interest expense falls below 3x; --Operating ROE below 5% over four consecutive quarters. 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'. Fitch has removed the following ratings from Rating Watch Positive and placed them on Rating Watch Evolving: Fidelity & Guaranty Life Holdings, Inc. --Long-term IDR 'BB'; --Senior unsecured note due April 2021 'BB-'. Contact: Primary Analyst Nelson Ma, CFA Director +1-212-908-0273 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Secondary Analyst Douglas L. Meyer, CFA Managing Director +1-312-368-2061 Committee Chairperson Douglas Pawlowski, CFA Senior Director +1-312-368-2054 Media Relations: Hannah James, New York, Tel: + 1 646 582 4947, Email: Additional information is available on Applicable Criteria Insurance Rating Methodology (pub. 15 Sep 2016) here Additional Disclosures Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. 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Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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