Fidelity & Guaranty Life CFO: Company Committed to Staying ‘Largely an Outsourced Shop’
May 30, 2014 by Fran Matso Lysiak
WEST DES MOINES, Iowa – Fidelity & Guaranty Life is “largely an outsourced shop and we’ll stay that way,” according to its chief financial officer.
The company has about 180 active employees, and “is building a local team here in Des Moines,” said Dennis Vigneau, the company’s senior vice president and CFO, who spoke at the 2014 Des Moines Insurance Conference. The remaining employees are largely in Baltimore, with some employees in Lincoln, Neb., he said.
The company may bring that up to 200 employees over the next year but “we are largely sort of a flexible outsourced model,” Vigneau said. The vast majority of customer service is outsourced and certain outsourced third-party managers are used on the portfolio side, he said.
The largest composition of what’s done in house is the management team, finance, product pricing and some administrative and information technology staff, with each function managing its outsourced partners very proactively, Vigneau said.
“The model works,” Vigneau said, noting it gives the company great flexibility to add new business. “As market dynamics change, up or down, we don’t have to be sitting there saddled with a bunch of fixed costs. It’s really worked well for us.”
In December, Fidelity & Guaranty Life launched its initial public offering of common stock, and the new publicly traded life insurance company’s shares starting trading on the New York Stock Exchange under the ticker symbol “FGL.” Earlier that month, Fidelity & Guaranty Life, a unit of Harbinger Group Inc., said the IPO’s price was expected to be between $17 and $19 a share, and was expected to raise nearly $200 million.
As to any plan for raising dividends or share buybacks, Vigneau said the company just went public in December, and is currently paying six and a half cents per share per quarter, “a modest dividend,” said Vigneau noting that will likely grow over time. “We will look at it at least on an annual basis.”
Share buyback is “not really a priority for us,” Vigneau said.
Twenty percent of Fidelity & Guaranty Life is in public hands and 80% is owned by its parent, Harbinger Group Inc., said Raj Krishnan, chief investment officer and executive vice president, adding he can’t comment on what Harbinger Group may want to do.
However, “they’ve been a great owner of this business from the get-go,” in terms of providing capital or advice and some knowledge around the asset portfolio, Krishnan said
Fidelity & Guaranty was acquired by Harbinger Group in April 2011. Fidelity & Guaranty previously represented the U.S. life and annuity operations of the U.K.-based Old Mutual plc, and was formerly known as OM Financial Life.
Fidelity & Guaranty Life Insurance Co. currently has a Best’s Financial Strength Rating of B++ (Good)
Shares of Fidelity & Guaranty (NYSE: FGL) were trading the afternoon of May 29 at $21.54, up 0.14% from the previous close.
(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)