The company, a subsidiary of Athene Holding Ltd. ($87 billion in total assets), will shortly be selling its products through small and regional banks, and larger institutions too, eventually via third-party marketing firms (TPMs), and also directly, CEO Grant Kvalheim told us in early January.

Until now, Athene USA (formerly Aviva USA) has distributed exclusively through independent marketing organizations, or IMOs; it has relationships with as many as 30,000 independent insurance agents through those IMOs.

Why banks, and why now?

“Why not?” answers Kvalheim, adding that banks and broker/dealers are doing more and more FIA business these days. 

“Banks are more important today, and they have access to customers to whom we normally don’t have access,” Kvalheim adds. Financial institutions like commercial banks and credit unions have big retail networks, “and they have gotten better and better at selling products other than bank products.”

Athene USA was the third largest manufacturer of fixed indexed annuities (sometimes called equity-indexed annuities) over the first nine months of 2016. The company only manufactures FIAs and multi-year guaranteed annuities (MYGAs). Athene Holding acquired Aviva USA in 2013 from the UK’s Aviva plc.

Does Athene USA’s CEO think it will be difficult to find a place on the shelvesof bank broker/dealers? It will be a challenge, he admits, but the way you compete in any channel is to present consumers with a proposition that makes sense; this includes service, reliability, and support. Athene has the means to deliver its products electronically, too, which is important in the bank channel (but not critical in the IMO channel), Kvalheim adds.

In other words, “We can’t just show up and say, ‘We’re here,’” he says—even if Athene USA is the nation’s third largest FIA manufacturer.

The company has an A-minus [financial strength] rating across three major rating agencies (A.M. Best, S&P, and Fitch). “We have no debt,” adds Kvalheim. A recent IPO for parent Athene Holding raised $1.1 billion, and Athene Holding is now listed on the New York Stock Exchange. 

Nevertheless, many larger banks require a rating of at least an A from their annuity suppliers, so Athene USA will begin working with smaller and regional banks. There are talks with larger banks too, however, because Kvalheim anticipates a rating upgrade in the not-distant future. “Our long-term plan is to be everywhere”—banks large and small, as well as non-bank-affiliated broker/dealers.

With regard to working with banks directly, or through TPMs, Athene will take a mixed approach, initially. Indeed, Kvalheim is “agnostic” on the issue of TPMs. If a bank says it wants to use a TPM, Athene would say, “Fine, who do you prefer.” Athene would be happy to work with that TPM. In the long run, however, the company expects to be working directly with most banks. (He quickly adds that the company would be fair to its loyal TPMs; it wouldn’t just toss them aside.)

We asked Kvalheim about the possible impact of the Department of Labor’s (DOL) fiduciary rule on the bank annuity business. (This magazine interview took place on the day Rep. Joe Wilson, R-S.C., introduced a bill in the House to delay implementation of the DOL rule by two years.) Kvalheim answered that Athene had “no choice” but to act as if the rule would be implemented on April 10, 2017, as scheduled. 

Moreover, “no one quarrels” with the idea of acting in a client’s best interest, he says. “We’ve always had suitability on steroids” when it comes to the distribution of the company’s products. The problem is that it is not always clear what a client’s “best interest” means from a regulatory standpoint, and DOL has not chosen to spell it out. The department seems inclined to let the courts decide what is actually meant by that critical phrase, he suggests.

In any event, Athene USA has no plans to build a fee-based annuity, a course that some other annuity underwriters have taken (e.g., Jackson National, Pacific Life), Kvalheim added. There is no demand for it from Athene’s distributors; not a single bank that Athene representatives spoke with recently even mentioned it, nor implied that, “We’d let you on our platform—if only you had a fee-based product,” he recounts.

Kvalheim doesn’t see the future as 100 percent fee-based, either; there will always be a place for commission-based products in his view. Athene sells its FIAs to middle-market clients. Fee-based clients are usually wealthier (“That’s not who buys our products,” Kvalheim says). The typical ticket for the company’s FIA is $100,000. A $1 million fixed-indexed annuity sale “is unusual for us,” he says. 

That said, Kvalheim thought (in January) there was a good chance that implementation of the DOL fiduciary duty rule would be delayed for two years, and then take hold after some modifications in 2019. (Andrew Puzder, a critic of tighter regulation, had just been nominated as labor secretary by President-elect Donald Trump.)