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August 22, 2018
Joseph D. Austin
Chief Executive Officer
Federal Life Group, Inc.
3750 West Deerfield Road
Riverwoods, IL 60015
Re: Federal Life Group, Inc.
Draft Registration Statement on Form S-1
Submitted July 24, 2018
CIK No. 0001743886
Dear Mr. Austin:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so we may
better
understand your disclosure.
Please respond to this letter by providing the requested information and
either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe our comments apply to your facts and circumstances
or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments
and your
amended draft registration statement or filed registration statement, we may
have additional
comments.
Draft Registration Statement on Form S-1
Cover Page
1. We note that Insurance Capital Group, LLC (ICG), has agreed to purchase
at least the
number of shares as would cause at least the minimum number of shares to
be sold, and
therefore it is guaranteed that you will meet the minimum in this
offering and the offering
will close, provided you meet the other conditions of the offering.
Please clearly state this
fact on your cover page and elsewhere throughout the registration
statement that you
discuss the minimum amount of the offering, the standby stock purchase
agreement, and
the release of funds from escrow Your disclosure should make clear to
investors that the
Joseph D. Austin
FirstName LastNameJoseph D. Austin
Federal Life Group, Inc.
Comapany NameFederal Life Group, Inc.
August 22, 2018
August 22, 2018 Page 2
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FirstName LastName
level of sales in the offering will not impact the closing of the
offering because of ICG's
commitment to purchase the minimum. Please also disclose here and in a
risk factor that
the sale of sufficient shares to meet the minimum does not indicate
that sales have been
made to investors who have no financial or other interest in the
offering, and that the sale
of the specified minimum should not be viewed as an indication of the
merits of the
offering.
2. Please tell us whether you are registering your issuance of the shares
to ICG, whether
pursuant to the Standby Stock Purchase Agreement, the exchangeable
note, or otherwise,
on this registration statement, or if such issuance is a private
placement that you will
conduct separate from the subscription and community offerings. We may
have additional
comments after reviewing your response.
3. Please clearly disclose here and elsewhere as appropriate, including
in the chart on page
6, the anticipated ownership of ICG following completion of the
offering and the
conversion, including, to the extent accurate, that ICG will own a
majority interest. In
addition, we note your disclosure on pages 91-92 that the number of
shares sold will not
exceed 4,600,000 unless there are insufficient shares remaining to
permit IGC to purchase
2,800,000 shares. Please tell us whether ICG is guaranteed to own a
minimum of
2,800,000 shares and whether the maximum amount of the offering may be
increased to
the extent there are insufficient shares available for ICG. If so,
please clearly disclose this
fact and indicate the maximum number of shares you would issue in this
situation. Please
also reconcile this with your disclosure on page 8 that ICG intends to
purchase
approximately 2,800,000 shares in the community offering if such
shares are available.
4. Given that ICG will purchase a minimum of 2,800,000 shares, please
tell us why the
offering minimum and maximum, as described under "Offering Summary"
assume that
ICG purchases 2,700,000 shares.
5. We note your disclosure that the plan of conversion is subject to the
approval of the
Illinois Department of Insurance, and your disclosure on page 87 that
you have received
all consents and approvals of the Department and any other regulatory
body or agency
necessary to consummate the transactions contemplated by the standby
stock purchase
agreement. Please tell us why you do not list the approval of the
Illinois Department of
Insurance and the approval of ICG's standby stock purchase agreement
as conditions to
completion of the offering, both here and elsewhere throughout the
document. Please also
clearly state throughout the registration statement that your
agreement with ICG is subject
to approval of the Illinois Department of Insurance, including
approval of the ability of
ICG to purchase in excess of 5% of the converted stock company.
6. Please disclose that aggregate purchases by directors and officers and
specific strategic
investors cannot exceed 700,000 shares.
Joseph D. Austin
FirstName LastNameJoseph D. Austin
Federal Life Group, Inc.
Comapany NameFederal Life Group, Inc.
August 22, 2018
August 22, 2018 Page 3
Page 3
FirstName LastName
7. Please disclose that your management and the standby purchaser are
likely to seek to
delist from trading in the NASDAQ stock market and highlight the
substantial limitation
on liquidity for shareholders.
8. Please provide us with your analysis as to how the agreement by ICG to
purchase the
minimum offering amount is in compliance with Exchange Act Rule 10b-9.
In your
analysis, please also address the loan agreement which you have
structured as an
exchangeable note such that any outstanding principal balance will
convert into shares of
common stock that will count toward the minimum amount needed to
complete the
offering.
Prospectus Summary, page 1
9. Please include a materially complete description of the business of
ICG, including its date
of formation, operating history, controlling members or management,
and current business
operations. Please ensure your description explains why you believe
that you will benefit
from the standby purchaser's knowledge and experience in the life
insurance industry and
that its resources may help you develop your distribution strategy and
grow your business
in the middle market.
10. Please add a materially complete discussion of the control position
held by ICG following
completion of the offering and the conversion, including the expected
percentage of stock
ownership, ICG's board designees, its agreement to vote for all board
designees of the
company and for any proposal presented at any meeting of the company,
the entitlement
to preemptive rights, a description of ICG's ability to control
corporate actions of the
company, as described on page 90, and restrictions on use of the net
proceeds of the
offering. Please also clearly state the conflicts of interest of
between ICG and purchasers
in the offering. Please include similar disclosure in your related
risk factor on page 25.
Implications of Being an Emerging Growth Company , page 4
11. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to
do so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
Our Companies, page 5
12. Please disclose that Federal Life Group, Inc. is a newly created
Pennsylvania corporation
organized to be the stock holding company for Federal Life Mutual
following the mutual-
to-stock conversion.
Joseph D. Austin
FirstName LastNameJoseph D. Austin
Federal Life Group, Inc.
Comapany NameFederal Life Group, Inc.
August 22, 2018
August 22, 2018 Page 4
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FirstName LastName
Our Structure Following the Conversion, page 6
13. Please revise the structure to indicate the percentage that will be
held by officers and
directors of Federal Life Mutual and the percentage that will be held
by employees of
Federal Life Mutual.
Use of Proceeds, page 30
14. We note your disclosure that a large portion of your net proceeds will
be used for general
corporate purposes. Please note that pursuant to the requirements of
Item 504 of
Regulation S-K, where a registrant has no current specific plan for
the proceeds, or a
significant portion thereof, the registrant shall so state and discuss
the principal reasons
for the offering. Please revise this section accordingly.
Unaudited Pro Forma Financial Information, page 33
15. Please represent to us that if your Plan of Conversion changes to
include a closed block
that you will revise your pro forma footnotes to include a description
of the closed block
and the other footnote disclosures outlined in ASC 944-805-50-2
through 50-3 on a pro
forma basis for the assets and liabilities you anticipate assigning to
the closed block. In
addition, in such a case please revise your Management's Discussion
and Analysis to
discuss the impact of this known contingency on your future results of
operations,
financial condition and liquidity.
Management's Discussion and Analysis
Critical Accounting Policies, page 43
16. You state on pages 45-47 that deferred policy acquisition costs,
future policy benefit
reserves, and income taxes require significant/considerable judgment
and have inherent
uncertainty. Please disclose how accurate your estimates have been in
the past and
whether they are reasonably likely to change in the future.
Marketing Arrangement, page 96
17. We note your disclosure that you will pay a commission of 2% in the
subscription and
community offerings, and 6.5% in any syndicated community offering.
Please tell us how
your community offering differs from your syndicated community
offering. Please also
reconcile this with your disclosure elsewhere that the 6.5% commission
applies only to
shares sold to the standby purchaser.
Federal Income Tax Considerations, page 103
18. Please tell us why you do not address tax consequences of U.S. persons
that purchase
shares of common stock in the subscription offering or in the
community offering.
Joseph D. Austin
FirstName LastNameJoseph D. Austin
Federal Life Group, Inc.
Comapany NameFederal Life Group, Inc.
August 22, 2018
August 22, 2018 Page 5
Page 5
FirstName LastName
Management, page 107
19. Please disclose when Mr. Popoli and Mr. Huff founded ICG.
Notes to the Financial Statements
6. Fair Value of Financial Instruments
Fixed maturity and equity securities, page F-19
20. You state that the fair values were determined by an independent
pricing service and are
downloaded from Clearwater Analytics. It is not clear what valuation
technique and
inputs you used. Please disclose for each "class" of fixed maturity
securities, the
valuation technique(s) and inputs used in your fair value measurement
for Level 2 and
Level 3 instruments pursuant to ASC 820-10-50-2bbb. Also please
clarify in the filing
how you validated the fair values received from the independent
pricing service.
19. Policyholder's Equity- Statutory Capital and Surplus, page F-29
21. Please provide the following disclosures:
Disclose the amounts of restricted net assets as of December 31,
2017 or otherwise
disclose how your current disclosure complies with the objective in
Rule 4-08(e)(3)(ii)
of Regulation S-X and ASC 944-505-50-1c.
Provide the disclosures required under ASC 944-505-50-2 through
50-6, as applicable.
Signatures, page II-4
22. We note that your officers and directors signed the registration
statement on May 24,
2018, but the registration statement was not submitted until July 24,
2018. When you
make your first public filing and for all amendments thereafter,
please make sure that the
signatories sign on the most recent practicable date to the date of
the filing.
Exhibits
23. Please file execution versions with conformed signatures of Exhibits
4.2, 10.5 and 10.7.
Please also include the conformed signatures for Federal Life
Insurance Company in
Exhibit 10.4 and the signature pages with conformed signatures for the
executives who are
party to each of the executive agreements in Exhibits 10.5 - 10.7.
24. Please file your escrow agreement as an exhibit to the registration
statement.
General
25. Please provide us proofs of all graphics, visual, or photographic
information you will
provide in the printed prospectus prior to its use, for example in a
preliminary prospectus.
Please note that we may have comments regarding this material.
Joseph D. Austin
Federal Life Group, Inc.
August 22, 2018
Page 6
You may contact Mary Mast at 202-551-3613 or Mark Brunhofer at
202-551-3638 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Ada D. Sarmento at 202-551-3798 or Erin Jaskot at 202-551-3442 with any
other
questions.
Sincerely,
FirstName LastNameJoseph D. Austin
Division of Corporation
Finance
Comapany NameFederal Life Group, Inc.
Office of Healthcare &
Insurance
August 22, 2018 Page 6
cc: Wesley R. Kelso, Esq.
FirstName LastName