Apollo to cut 10% of the Aviva USA workforce
September 4, 2013 by Victor Epstein
The private equity firm purchasing West Des Moines-based Aviva USA sent a letter to their future staffers today, outlining their intention to trim about 10 percent of the insurer’s workforce.
The letter from Jim Belardi, chief executive officer of Apollo Global Management’s Athene insurance arm, indicated 154 positions will be eliminated at Aviva USA – including 90 in the Des Moines area – once the deal to acquire it closes Oct. 1. The insurer has a national workforce of about 1,500 people, according to the letter provided to the Register.
Apollo is paying $1.8 billion for the business – a price-tag that includes $1.55 billion in cash and the assumption of $257 million of debt from Aviva’s London-based parent company.
“Of the 154 positions that are slated to be eliminated, 90 are in the Des Moines area,” the letter reads. “Official notification of job eliminations will not be provided until after the acquisition closes, but we want to give those impacted as much notice as possible. This is an unfortunate situation for a small percentage of our staff, but the jobs being eliminated will become unnecessary.”
The combined company will be known as Athene USA and will move its operational headquarters into Aviva USA’s existing headquarters facility in West Des Moines once the deal is done. Athene President Grant Kvalheim declined to comment on the contents of the letter.
Aviva USA is a key economic engine for the Des Moines region, which is a major hub for the U.S. insurance industry. The industry accounts for 20 percent of the Des Moines area’s $221 billion economy and employs 24,100 workers.
The layoff letter provides further clarity to the headcount adjustments that Athene plans to make. It indicated that most of the 154 layoffs will fall in the areas of Aviva USA that have the most employees: operations, sales and distribution, and information technology.
The letter reminded Aviva employees that Apollo has reached a deal to sell their life insurance business to Global Atlantic, which is expected to impact an undisclosed number of workers.
The Register also has learned that Belardi’s April estimate of 50 layoffs at Aviva Investors, which manages investments for Aviva USA, may have been too high.
“We will be among the largest issuers of fixed annuities in the U.S. and we will be well placed to take advantage of this industry position, the extensive and long-standing relationships with our distribution partners and our competitive and attractive product offerings,” the letter says. “We will continue to invest in and grow our retail annuity business (and) we anticipate having more employees in our annuity business in West Des Moines by the end of 2014 than we do now.”
The deal could boost Apollo’s assets by about 49 percent to more than $170 billion and establish Athene USA as the second-largest issuer of fixed annuities in the U.S.
Annuities are an investment vehicle favored by retirees because most of them give off a steady stream of income after an initial investment period. The payouts can continue for decades.
The Aviva USA purchase represents the fourth acquisition for Athene. Belardi indicated in a July 11 interview with the Register that he expects to remain in acquisition mode after it’s consummated.
Iowa Insurance Commissioner Nick Gerhart approved the deal on Aug. 15 after a lengthy review. However, he also insisted on a series of conditions to protect policyholders from the riskier investment strategies that private equity firms are known for. They include the use of a more conservative actuarial standard, higher policy reserves, and state approval of all transfers of capital from the insurance business to other Apollo business entities.
Private equity firms have been purchasing annuity companies at a discount in recent years as a prolonged climate of low interest rates has made them less profitable. In January, Guggenheim Partners paid $471 million to FBL Financial Group Inc. of West Des Moines for its EquiTrust annuities business.
http://www.desmoinesregister.com/videonetwork/2549507950001/Athene-CEO-Jim-Belardi
