Harbinger Insurer Invests as Portfolio ‘Working Harder’

Fidelity & Guaranty Life added $1.1 billion of investments in its most recent quarter at an average yield of 4.92 percent as the insurer controlled by Philip Falcone’s Harbinger Group Inc. works to improve returns.

The moves helped push the average yield on the investment portfolio to 4.78 percent in the three months ended Sept. 30, from 4.58 percent a year earlier, the company said in a statement yesterday.

The insurer has been shifting to some longer-duration holdings and increasing bets on assets such as mortgage-backed securities since its initial public offering late last year. Holdings of non-agency residential MBS climbed to $2.01 billion as of Sept. 30 from $1.37 billion a year earlier, according to a regulatory filing.

“At the time of the IPO, our intention was to get the portfolio working harder,” Chief Financial Officer Dennis Vigneau said on a conference call today. “We’ve done just that.”

Insurers tied to private-equity and hedge-fund investors have been adjusting their portfolios to counter near-record low yields on government debt and investment-grade corporate bonds. Athene Holding Ltd., the insurer tied to Apollo Global Management LLC, added $8.4 billion of investments over 12 months at an average yield of 6.76 percent as the company pursues mortgage-related wagers, the company said last month.

Sellers of retirement products such as indexed annuities benefit from the spread between what they pay clients and the returns that the companies generate on investments.

“We expect spreads to remain healthy in the near term, helped by a pickup in investment income given recent portfolio repositioning,” Jimmy Bhullar, an analyst at JPMorgan Chase & Co., said in a note to investors today. “ On the other hand, we are concerned that sustained low rates could suppress annuity sales and margins over time.”

Commercial Mortgages

Fidelity & Guaranty slipped 1.1 percent to $23.74 at 4:02 p.m. in New York, narrowing its gain for the year to 25 percent. Harbinger Group, which owns a majority stake, fell 0.8 percent, and is up almost 10 percent since Dec. 31.

The insurer’s portfolio of available-for-sale securities was valued at $17.4 billion as of Sept. 30. Holdings of commercial mortgage backed securities climbed 40 percent over 12 months to $636.9 million.

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