Global Atlantic Targets Life & Annuity Business
July 15, 2014 by Linda Koco
Global Atlantic Financial Group has agreed to sell Ariel Re, its Bermuda-based property-casualty reinsurance company, to BTG Pactual, a Brazilian multinational investment banking firm.
Assuming the deal receives regulatory approval, Global Atlantic will be free to focus more on growing its life and annuity business. That will likely be welcome news for life and annuity professionals who are always on the lookout for markets, particularly markets that stay put in the topsy-turvy world of post-recession insurance.
Going forward, the company said in a news release announcing the deal, Global Atlantic “will concentrate its strategic focus on growing its life and annuity business” via a “diversified mix of insurance and reinsurance.”
The focus on focus
The development comes on the heels of Conning’s recent findings that today’s successful life and annuity companies tend to have a strong focus on consistent product mix. Where Global Atlantic is concerned, the natural question to ask is what will be the nature of the focus that the company will provide?
A relevant factor is that Global Atlantic is now an independent company. Its founding parent, Goldman Sachs, spun off Global Atlantic just last year. Typically, companies in post-spinoff mode tend to amp up their products, and competitiveness, if they intend to be serious players in their markets. Is that what will happen here?
What is known is that the Bermuda-based company has been moving toward life and annuity focus for a while.
For instance, in January, Global Atlantic acquired Forethought Financial Group, an annuity and pre-need insurance company.
Just a few months earlier, in October 2013, the Bermuda company completed its acquisition of the Aviva USA life insurance business from Athene USA. (This deal was done in tandem with Athene Holding Ltd.’s October acquisition of Aviva USA, since renamed Athene USA.).
The company announced its intentions to do these deals earlier last year.
Then in May, Global Atlantic announced its newly acquired life business was launching under the name of Accordia Life, headquartered in Des Moines, Iowa. The company said its product offerings will include indexed universal life, universal life and term insurance.
The availability of the indexed life products will be of certain interest to independent life insurance producers. Aviva, the forerunner to Accordia, ranked as the eighth largest seller of U.S. indexed life products in first quarter 2014, according to Wink Inc. Now that this business is in the hands of Accordia, industry watchers have been wondering whether Accordia and its Atlantic Global parent would stay or leave that market.
Probably there should be no question on this point, since industrywide indexed life sales have been teeming and new carriers are angling to enter the market. According to first quarter 2014 sales estimates from LIMRA, indexed universal life now represents 39 percent of universal life sales, and the product’s share of total individual life premium is now 14 percent, up from 8 percent in 2007. This is not the type of market that carriers typically exit.
Shedding the property-casualty business reinforces the message of Global Atlantic’s intention to focus on life and annuity business. The company had entered the property-casualty business in 2006 through its Arrow companies in Bermuda, according to the company website. In 2008, it launched its syndicate at Lloyd’s of London. Ariel Re is the brand under which this business has been marketed. Now, the Ariel Re business will go over to BTG Pactual, which intends to make this the “cornerstone” of its international reinsurance venture.
The pedigree
Life and annuity industry veterans like to know the pedigree of the firms with which they are dealing. This particular firm was created from several predecessors that were, in their day, “names” well known to industry professionals.
In 2005, Global Atlantic acquired its first U.S. life and annuity insurer, Commonwealth Annuity and Life Insurance. Its forebear was Allmerica Financial, a high-profile life and annuity business of The Hanover Group. At the time, Global Atlantic was a one-year-old subsidiary of Goldman, an investment company of global repute. Today, its Commonwealth Re subsidiary provides international reinsurance.
Forethought started out in 1985 as Forethought Financial Services, a pre-need and trust company owned by Hillenbrand Industries. It became an independent company in 2004 when it was acquired by New York investment firm Delvin Group. In 2013, Forethought acquired the annuity capabilities of The Hartford, a one-time market leader in variable annuities.
As for Accordia, its roots go back to policies written by Central Life Assurance and American Mutual, two life companies that merged in 1994 to become AmerUs Life Insurance, a mutual insurer. In 2000, this company demutualized and became AmerUs Life Group. Then, eight years later, in 2008, Aviva plc purchased AmerUs and renamed the U.S. operation Aviva USA, a major player especially in the in the fixed index annuity market. Last year’s purchase of Aviva USA by Athene Holding and the associated spinoff of that carrier’s life business is what brought the Aviva USA life business into the arms of Global Atlantic.
Global Atlantic’s former ties to Goldman are important for more than name-dropping. The fact that Goldman spun off Global Atlantic as an independent company last year has created a type of “fresh-start environment” where the Global Atlantic leadership needs to redefine strategy and, yes, promote its unique focus.
