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The U.S. individual annuity now has a major new player: Fidelity National Financial Inc.

The Jacksonville, Florida-title insurer closed on FGL Holdings Monday. FGL is the George Town, Cayman Islands-based holding company that controls Fidelity & Guaranty Life Insurance Company (F&G), which has its main offices in Des Moines, Iowa.

F&G generated $3.6 billion in annuity revenue in 2019, and it ranked 25th in the United States in terms of U.S. annuity revenue market share, according to the National Association of Insurance Commissioners’ latest insurer market share report.

Resources

  • Documents related to the Fidelity National-Fidelity & Guaranty deal closing are available here.
  • An article about the Fidelity National-Fidelity & Guaranty deal is available here.

F&G ranked just below OneAmerica Financial Partners Group and AEGON’s Transamerica unit, which each generated about $4.1 billion in 2019 U.S. annuity revenue.

William Foley II, Fidelity National’s chairman, said when the companies announced the deal, in February, that Fidelity National hopes to use the strength of its balance sheet to help F&G expand sales of annuities through the broker-dealer and bank channels.

Foley today said, in a comment included with the deal completion announcement, that Fidelity National still has big hopes for Fidelity & Guaranty.

“The acquisition of F&G offers FNF entry to an industry that is counter-cyclical to FNF’s title insurance business,” Foley said in the comment. “FNF’s size, scale, and financial strength provides F&G with strategic advantages to grow and capitalize on incremental organic and inorganic growth opportunities.”

Foley said Fidelity National is excited about completing the acquisition ahead of schedule.

The Deal

The companies said when the deal was announced that Fidelity National would pay about $2.7 billion in cash and stock for FGL. The original deal completion deadline was Sept. 30.

That was before concerns about the COVID-19 pandemic put the stock market on a rollercoaster.

The companies now say Fidelity National ended up paying FGL shareholders about $1.8 billion in cash and 27 million shares of common stock.

Fidelity National reported a $61 million net loss for the first quarter on $1.6 billion in revenue. It ended the quarter with about $10 billion in assets.

The price of a share of Fidelity National common stock today closed at $32.60.

Life and Annuity Strategy

F&G has been writing non-variable indexed annuities, traditional fixed-rate annuities, immediate annuities, and indexed universal life insurance.

F&G and its parent have not yet talked about any specific product changes or strategies.

But Chris Blunt, the chief executive officer of F&G, also talked about F&G getting bigger.

“We believe that, under the ownership and guidance of FNF, we will be able to power growth in our core channels, jump start our expansion into new channels, and accelerate our path towards higher ratings,” Blunt said in a comment included in the deal completion announcement. “All of this will allow us to provide terrific career opportunities for our team members, and enable us to execute on our mission to help more people turn their aspirations into reality”

The Advisors

BofA Securities and Trasimene Capital Management were advisors to an FNF special committee, Weil, Gotshal & Manges LLP was the special committee’s legal advisor, and Willkie Farr & Gallagher LLP was Fidelity National’s legal advisor.

Credit Suisse was F&G’s financial advisor, and Skadden, Arps, Slate, Meagher & Flom LLP was F&G’s legal advisor.served as legal advisor to F&G. Houlihan Lokey was the financial advisor to an F&G special committee, and Kirkland & Ellis LLP was the committee’s legal advisor.

Fidelity National, F&G, and the companies’ financial and legal advisors completed the deal while many of the people involved with structuring the deal were having to work from home, due to the COVID-19 pandemic.

Deal documents do not talk about how the people who worked on the deal coped with the shelter-in-place rules, but FGL shareholders approved the deal last week via an entirely digital meeting.

Fidelity National says, in a registration statement related to the deal, that the outbreak of pandemic disease is one of the factors that could hurt its results.

“The occurrence of any pandemic disease, natural disaster, terrorist attack or any other catastrophic event that results in FNF’s workforce being unable to be physically located at one of FNF’s facilities could result in lengthy interruptions in FNF’s service,” the company warns.

“Some of FNF’s operational systems are not fully redundant, and FNF’s disaster recovery and business continuity planning cannot account for all eventualities,” Fidelity National says.

— Read Publicly Traded Life and Annuity Issuers Prepare to Talk About COVID-19 With Investorson ThinkAdvisor.

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