Fidelity & Guaranty Life, the insurer controlled by billionaire Philip Falcone’s Harbinger Group (HRG:US) Inc., filed to raise as much as $185 million by selling a 17.2 percent stake in an initial public offering.
The insurer is offering 9.75 million shares for $17 to $19 in a sale led by Credit Suisse Group AG, according to a regulatory filing today from the Baltimore-based insurer. At the top of the range, that values the company at $1.08 billion.
Falcone, 51, is focused on running Harbinger Group after reaching a settlement with the U.S. Securities and Exchange Commission in August that bars him from the hedge-fund industry. New York’s financial regulator prohibited Falcone from being an officer or director of the insurer for seven years, citing the SEC case.
The IPO fits Harbinger’s strategy to “buy at a low, get some of the appreciation and then sell off at a higher multiple,” Kevin Cassidy, an analyst at Moody’s Investors Service, said in an interview before today’s filing.
Falcone bought Fidelity & Guaranty from Old Mutual Plc for about $350 million in 2011. Apollo Global Management LLC and Guggenheim Partners LLC have also been acquiring life insurers, betting they can better manage the companies’ portfolios than prior owners.
Fidelity & Guaranty, run by former MetLife Inc. (MET:US) executive Lee Launer, sells retirement products known as fixed-indexed annuities, which offer payouts tied to stock market performance with a limited risk of losses. Profit at the company rose to $347.7 million in the 12 months ended Sept. 30, from $344.1 million a year earlier, as investment gains increased.
Life insurers have benefited this year as risking stock markets and higher bond yields limited liabilities on retirement products. ING U.S. Inc. has surged about 77 percent since its initial public offering in May.
New York Department of Financial Services Superintendent Benjamin Lawsky in October banned Falcone from being an officer or director of F&G for seven years, citing the SEC settlement, Falcone and employees of his hedge fund are also prohibited from involvement in F&G investment decisions.
Falcone agreed to the ban from the securities industry to settle SEC claims, including that he improperly borrowed money from his fund to pay personal taxes. Falcone is in the process of liquidating the assets managed by his hedge-fund firm, Harbinger Capital Partners LLC, which, along with affiliates, controls most of Harbinger Group’s stock (HRG:US).
Leucadia National Corp. (LUK:US) bought 18.6 million shares of Harbinger Group from Falcone’s funds in September for $8.50 apiece after the money manager agreed to meet redemption requests as part of the SEC deal. That made Leucadia the second-largest holder, with a stake of about 13 percent.
Harbinger Group shares (HRG:US) gained 0.5 percent today to $11.82 at 4:15 p.m. in New York, where the company is based. That compares with a close of $10.06 the day the Leucadia deal was announced.
Falcone is still listed as the insurer’s ultimate controlling person in the filings, and is the chief executive officer of Harbinger Group, which includes businesses from consumer products to energy extraction.
Harbinger controls Spectrum Brands Holdings Inc. (SPB:US), which makes Rayovac batteries and George Foreman grills. Holdings also include reinsurer FrontStreet Re and Salus Capital Partners, a middle-market lender,
“Being able to show the ability to extract cash from one of their portfolio companies, that’s the benefit” of the IPO, Brian Milligan, an analyst at Standard & Poor’s, said in an interview before the offering. “It improves the liquidity.”
JPMorgan Chase & Co. and Jefferies Group LLC are working with Credit Suisse on the offering. Jefferies is controlled by Leucadia. The shares will be listed on the New York Stock Exchange under the ticker FGL.
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