Proposed Federal Life ownership structure (Image: Federal Life)
Some individuals try to make money by fixing up and selling undervalued houses.
Some investment groups try to do the same with insurance companies.
Insurance Capital Group LLC (ICG), a New York-based player in the insurer reboot market, says it wants to help Federal Life Insurance Company of Riverwood, Illinois, increase its sales, improve its earnings and return to the variable annuity market.
ICG — a company with ties to the team that rebooted Shenandoah Life Insurance Company of Roanoke, Virginia — could get control of Federal Life through a stock offering with a total value of about $34 million to $45 million.
If ICG succeeds, and all goes according to plan, Federal Life could need help from independent agents with selling a new line of variable annuity products.
In some ways, the ICG/Federal Life deal resembles a number of other recent life insurer reboot efforts, such as the effort by Aquarian Investors Heritage Holding LLC to reboot Investors Heritage Life Insurance Company.
Here are nine more things for agents to know about the ICG/Federal Life deal.
1. Federal Life Insurance Company has been around since 1899.
Federal Life is small: It reported a net loss of $1.9 million for the first half of this year on just $23 million in revenue, and $254 in assets.
The company ended 2017 with about 26,000 life insurance policyholders and group certificate holders, and about 2,000 annuity holders.
But the company is almost 120 years old.
It offers a wide range of products aimed at middle-market consumers, including term life, whole life, university life, single-pay permanent life, life insurance products aimed at the final expense market, fixed annuities and indexed annuities.
2. Insurance Capital Group LLC has ties to Reserve Capital Group, which has ties to Black Diamond Capital Partners.
Jose Montemayor, a former Texas insurance commissioner, has been working with private investors at Black Diamond Capital Partners of Austin Texas, since 2005.
Black Diamond acquired Shenandoah Life, a failed life insurer, from receivers at the Virginia Bureau of Insurance in 2012.
Black Diamond used financing from Reservoir Capital Group to help Shenandoah Life recover from the effects of the Great Recession of 2007-2009.
The new owners created a new holding company, Prosperity Life Insurance Group LLC of Roanoke. Prosperity Life is now the parent of SBLI USA Life Insurance Company and S.USA Life Insurance Company Inc. as well as of Shenandoah Life.
Shenandoah Life is still in business. It reported $57 million in premium revenue in 2017, according to the Texas Department of Insurance. That's up from $45 million in 2015, according to an exam report posted by Virginia regulators.
Craig Huff, a founder and managing partner at ICG, is also a co-founder of Reservoir Capital, and he is still a co-chief executive officer at Reservoir Capital.
Matt Popoli, another ICG founder and managing partner, is a former Reservoir Capital partner and senior managing director.
The ICG director team also includes Montemayor and Anne Dowling.
Dowling was a top insurance regulator in Connecticut from 2011 through 2015, and the insurance director in Illinois from 2015 through 2017. She has served on the Prosperity Life board since May 2017.
Earlier in Dowling's career, she served as the chief investment officer at Connecticut Mutual Life Insurance Company, and as the head of strategy at MassMutual's U.S. insurance group.
3. Reservoir Capital and Black Diamond found a buyer for Prosperity Life.
Investment companies are like baseball card collectors: Even if they would like to hold something in their collection forever, they also like knowing they could get a high price if they ever chose to sell it.
In March, Reservoir Capital and Black Diamond arranged to sell Prosperity Life to a group that includes Paul Singer's Elliott Management Corp. for a price that was not disclosed.
