Athene Holding Seeks to Raise $500 Million
January 21, 2014 by Fran Lysiak
PEMBROKE, Bermuda – Athene Holding Ltd., which acquired Aviva USA last year, said it plans to raise about $500 million in a private placement to “accredited investors” as the private equity-backed company may be gearing up to make more annuity acquisitions.
Athene will require minimum investments of at least $5 million U.S. dollars but reserves the right to accept a lower amount on a case-by-case basis, it said in a statement.
Athene Holding is owned by several institutional investors, with its largest shareholder being AP Alternative Assets, which is managed by Apollo Global Management, a private equity firm (Best’s News Service, Nov. 21, 2013). The insurance companies of Athene Holdings sell retail fixed and indexed annuities and offer co-insurance and reinsurance arrangements with third-party life insurance and annuity companies.
A document from Apollo Alternative Assets last month states Athene will seek to acquire annuity liabilities through any or all of these channels as long as acquisitions “meet the appropriate return targets:” retail issuance through the now combined Athene and Aviva platforms; institutional issuance through third-party reinsurance and funding agreements and/or acquisitions of companies or blocks of business through reinsurance.
“Athene currently believes that opportunities exist to achieve adequate returns in all of these channels, and Athene would likely fund these opportunities by raising pre-IPO equity, potentially in the near-term,” the document states. Jim Belardi is chief executive officer of Athene.
Athene Holding said that prospective investors will be required to execute a confidentiality agreement that will impose certain trading restrictions in the shares of AP Alternative Assets and Apollo Global.
A spokesperson for Athene declined to comment beyond the statement.
Over the past few years, private equity firms have been acquiring fixed annuity companies, including indexed, as well as indexed life insurance companies, tapping into what they view as a potentially lucrative financial opportunity in this retirement savings and income market.
The U.K.-based Aviva plc, back in December 2012, agreed to sell Iowa-based Aviva USA Corp. to Athene Holding for $1.8 billion (Best’s News Service, Dec. 21, 2012). And in October, Athene Holding completed the acquisition for about $1.55 billion. Aviva USA is now known as Athene USA, parent of Athene’s U.S. operations. The deal included Aviva Life and Annuity Co. and Aviva Life and Annuity Company of New York (Best’s News Service, Nov. 21, 2013).
In last year’s third quarter Aviva USA ranked fifth in U.S. sales of indexed annuities, at $518.2 million, according to Wink Inc. (Best’s News Service, Nov. 21, 2013).
Also in December 2012, Canada’s Sun Life Financial agreed to sell its domestic U.S. annuity business and some life insurance business for about $1.35 billion to a company of Guggenheim, another private equity firm (Best’s News Service, Dec. 17, 2012).
These deals, however, have come with their share of regulatory scrutiny.
Last summer, Apollo Global agreed to the New York Department of Financial Services’s new policyholder protections as part of its affiliate Athene Holding’s then-planned buy of Aviva Life and Annuity of New York. The pact with New York made them the second company to agree to the safeguards, Superintendent Benjamin Lawsky said in a statement (Best’s News Service, Aug. 15, 2013)
The department sought the extra protections because it highlighted a spike in private equity firms and other investment companies moving into the annuity business, a worrisome trend because those firms have business models that are more oriented for the short-term than traditional insurers.
Guggenheim Partners agreed to a similar set of protections last June as part of its then-plan to buy Sun Life Insurance and Annuity Company of New York. New York’s review of private investors as owners of annuity businesses delayed Sun Life Financial’s closing on the sale of its U.S. annuities business and some life insurance businesses. That deal was completed on July 31 (Best’s News Service, Aug. 15, 2o13).
Other subsidiaries of Athene include Athene Annuity & Life Assurance Co., Athene Annuity & Life Assurance Company of New York and Athene Life Re Ltd., a Bermuda-domiciled reinsurer
Meanwhile, Fidelity & Guaranty Life, a unit of Harbinger Group Inc., last month launched its initial public offering of common stock, and the new publicly traded life insurance company’s shares starting trading on the New York Stock Exchange. Earlier, Fidelity & Guaranty Life said the IPO was expected to raise nearly $200 million. Harbinger Capital Partners, another private equity firm and hedge fund, owns a 39% stake in Harbinger Group (Best’s News Service, Dec. 6, 2013).
Athene Annuity & Life Assurance Co. currently has a Best’s Financial Strength Rating of B++ (Good).
(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)
