9 Federal Life Insurance Company Reboot Facts, for Agents

4. The Federal Life deal could involve Mitt Romney’s old company.

Federal Life reported Monday, in a notice filed with the U.S. Securities and Exchange Commission (SEC), that ICG could get financing from Bain Capital LP or Bain Capital affiliates.

Bain Capital may be best known for being the investment co-founded by Mitt Romney.

Romney, who is now a U.S. senator representing Utah, and has been a governor and presidential candidate, helped start Bain Capital in 1984. He left the company in 2002.

Federal Life said in the new SEC notice that it might enter into an investment advisory agreement with Bain or a Bain affiliate.

5. The Federal Life deal could be complicated.

Before 2016, Federal Life was a policyholder-owned mutual.

In 2016, the company reorganized and adopted a mutual holding company structure. The formal name of the top-level company is Federal Life Mutual Holding Company.

The board of the mutual hold company adopted a demutualization plan in March, according to a Federal Life deal prospectus filed with the SEC Tuesday.

The plan calls for the mutual holding company to move to a stock company. After the conversion, Federal Life Mutual would become a wholly owned subsidiary of a stock company, Federal Life Group Inc.

Federal Life Group Inc. is a Pennsylvania corporation that has no current operations of its own.

In connection with that transaction, Federal Life is offering up to 4.6 million shares of stock through two separate offerings.

The company’s own life insurance policyholders and annuity holders had a chance to buy shares through a “subscription offering” that ended Tuesday.

Federal Life is now making any of the 4.6 million shares left over through a “community offering.”

• Employees of Federal Life and Federal Life subsidiaries can buy Federal Life stock through their 401(k) plan.
• “A limited number of persons identified by Federal Life Insurance Company as possible strategic partners” can then buy up to 700,000 of the community offering shares.
• ICG is on track to get the rest of the shares.

Federal Life is expecting ICG to end up with enough of the stock to control Federal Life.

The company expects its own executives and directors to come up with only about 9% of the stock.

6. Federal Life stock will probably not be listed on the Nasdaq Capital Market for very long.

Federal Life notes in the prospectus that its stock will trade on the Nasdaq Capital Market under the stock symbol FLF.

But the company emphasizes in the prospectus, repeatedly, that it will probably avoid SEC quarterly and annual reporting obligations by delisting its shares from the Nasdaq Capital Market listings.

Delisting could greatly reduce the market for Federal Life stock, the company says.

7. Federal Life might try to get its products rated.

Federal Life also notes, repeatedly, that one challenge it faces is that it has not had a rating from A.M. Best since 1993.

Federal Life “does not intend to seek a rating immediately after completion of the offering, but may seek a rating from a nationally recognized statistical rating organization in future years,” the company says in the prospectus. “The degree to which the lack of a rating has affected and will affect Federal Life’s sales and persistency is unknown.”

8. Federal Life has its eyes on the variable annuity market.

“We intend to introduce a variable annuity product to our group of annuity product offerings upon completion of the offering,” the company says in its prospectus. “Federal Life was a pioneer in the variable annuity market and introduced one of the first variable annuity products in 1975. The additional capital from the offering will provide the capital needed to support our growing index annuity business and allow us to re-enter the variable annuity market.”

9. Federal Life wants help with reaching seniors, retirement planning clients and people who speak Spanish.

Federal Life says it now distributes life and annuity products through about 1,000 independent agents.

“We intend to expand our distribution platform by entering into strategic partnerships with companies that can broaden our distribution channels,” the company says.

The company says that it also wants to expand direct sales to consumers, and that it seems the senior market, the retirement planning market and the Hispanic market as especially attractive target markets.

“Federal Life currently has a presence in the Hispanic market and maintains an entirely separate Spanish-language website that features content and themes unique to that target market,” the company says.

— Read United Prosperity Agrees to Acquire Shenandoah Life, on ThinkAdvisor.

— Connect with ThinkAdvisor Life/Health on LinkedIn and Twitter.