Falcone Reinsurer to Take on $160 Million of Annuities

Front Street Re, the reinsurer controlled by Philip Falcone’s Harbinger Group Inc., is expanding in annuities with its first transaction that doesn’t involve an affiliated company.

Front Street is taking on $160 million of the retirement contracts from Bankers Life Insurance Co., according to a statement today from New York-based Harbinger Group. The transaction is retroactive to Nov. 30 and has been approved by Florida’s insurance regulator, according to the statement.

Harbinger Group is betting on insurance after Falcone purchased Old Mutual Plc’s U.S. life and annuity unit in 2011. The deals add to funds that Harbinger Group can manage. Investors such as Apollo Global Management LLC and Guggenheim Partners LLC have also acquired U.S. insurers as some companies burned in the financial crisis scaled back from the business.

“This treaty is another important step for Front Street Re in its growth as a provider of customized reinsurance solutions to the life insurance and fixed annuity industry,” Phil Gass, managing director of Harbinger Group, said in the statement. “We see significant additional opportunities for Front Street Re to support the life insurance and fixed annuity industry.”

Harbinger Group also controls insurer Fidelity & Guaranty Life and Spectrum Brands Holdings Inc., which makes Rayovac batteries and George Foreman grills. Fidelity & Guaranty had $1.4 billion of reinsurance recoverable with Bermuda-based Front Street as of Sept. 30, according to a regulatory filing.

Fidelity & Guaranty raised $165.8 million in an initial public offering of a 17 percent stake last week. The shares rallied 10 percent from the IPO price of $17. Harbinger Group gained 1.7 percent today to $11.28 at 4:15 p.m. in New York.

Falcone, Launer

Falcone, 51, is focused on running Harbinger Group after reaching a settlement with the U.S. Securities and Exchange Commission that bars him from the hedge-fund industry. He’s also been prohibited from being an officer or director of Fidelity & Guaranty, which is run by former MetLife Inc. executive Lee Launer.

Funds tied to the deal with Bankers Life will be managed according to policies set by that company, according to today’s statement. Front Street, run by Chief Executive Officer John Tweedie, plans to invest in a barbell strategy that includes high-quality assets and distressed credit funds, according to its website.

Bankers Life, based in St. Petersburg, Florida, offers deferred and immediate annuities. The insurer is an affiliate of Bankers Financial Corp., which is run by CEO John Strong.

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