Photo credit: <a href = "http://www.freedigitalphotos.net/images/view_photog.php?photogid=3062">David Castillo Dominici</a>

Reaction from Friday’s announcement that Athene Annuity & Life Assurance Co. intends to acquire Presidential Life Corp. has filtered in and the reviews are far from positive. Three law firms have undertaken investigations of the proposed sale, and Fitch Ratings may downgrade Athene’s rating.

On Friday, the two firms announced the $415-million, all-cash deal based on per share price of $14. That figure represents a premium of approximately 38% over the $10.14 common stock price of Presidential Life the day before the acquisition was announced and 40% over the average closing price for the five trading days prior to July 12.

Bernstein Liebhard LLP of New York City said in a statement that it is investigating whether Presidential’s board of directors breached its fiduciary duty to shareholders by agreeing to its takeover by Athene. The investigation is “focused on the potential unfairness of the price to Presidential Life shareholders and the process by which the Presidential Life board of directors considered and approved the transaction.”

Similarly, Brodsky & Smith, LLC of Bala Cynwyd, Pa. issued a statement Friday outlining its intention to look into any fiduciary improprieties in regards to the deal. “The offer price is substantially below the reported book value of the company. As a result, the transaction may have undervalued Presidential Life, resulting in harm to the Presidential Life shareholders,” stated the law firm.

Another Pennsylvania-based law firm, Ryan & Maniskas, LLP of Wayne, Pa., today said that it was also investigating the proposed transaction for violations of fiduciary duty.

Shareholders Foundation, Inc. of San Diego made a similar announcement. It pointed out that Presidential Life “has performed well for its investors in the past,” noting that its annual revenue rose from $225.79 million in 2008 to $267.44 million in 2011 and its net loss of $6.34 million in 2008 was turned into net income of $38.94 million in 2011.

Therefore, the organization said its inquiry will focus on whether the deal is fair to shareholders. “Specifically, the investigation focuses on whether the Presidential Life’s board of directors undertook an adequate sales process, adequately shopped the company before entering into the transaction, maximized shareholder value by negotiating the best price, and acted in the shareholders’ best interests in connection with the proposed sale,” said Shareholders Foundation in a statement.

A spokesperson for Presidential Life said the company had no comment on the investigations.

A spokesperson for Athene emailed this statment to LifeHealthPro.com: “We have made an attractive offer. The decision to accept it rests with Presidential’s shareholders.”

Further, Fitch Ratings on Saturday said it had placed the BBB+ Insurer Financial Strength rating of Athene Annuity & Life Assurance Co. on Rating Watch Negative.

Tana Higman, Chicago-based director at Fitch, said in an interview that the agency undertook the ratings review to more thoroughly appraise Presidential and have more conversations with Athene management regarding its strategic plans for this business. She noted that this deal comes on the heels of three large transactions completed by Athene in 2011, including its acquisitions of Investors Insurance Corp. and Liberty Life Insurance Co. “Given the rapid pace of their transactions, we just needed greater clarity about the integration of these business,” Higman said.

Higman said that most life insurance companies are currently trading below book value “as was the case with Presidential Life. Although they paid a premium over the market value, it’s still below the book value of the company.”

She attributed that disconnect to the low interest rate environment and the book of fixed annuities the company writes, which is impacted by low interest rates.

Fitch said that a return to a stable outlook would occur if Presidential presents run-rate profitability and capitalization commensurate with the current rating level; maintenance of risk-based capital (RBC) above 350% and broad, sustained profitability and diversification in reinsured business.

A downgrade would be triggered if RBC slips below 300% and there is deterioration in the performance of reinsured blocks, resulting in run-rate operating losses for four consecutive quarters.

Higman said that by the end of the year, Fitch will either affirm Athene’s rating or downgrade it by a notch.

The Athene spokesperson said the company was “disappointed” by Fitch’s decision to put its rating on negative watch

“Athene has fully integrated its prior acquisitions of Investors Insurance Corp. and Liberty Life Insurance Company (now Athene Annuity) and is well positioned to integrate Presidential at this time,” he wrote. “Acquiring Presidential, a New York company with $3 billion of similar liabilities, is consistent with our strategy to grow our retail and reinsurance businesses and is an integral part of our plans for growth in the fixed annuity marketplace.”

Presidential Life, which sells fixed annuities, life, accident and health insurance products, is a Delaware corporation with headquarters in Nyack, N.Y. The deal awaits approval from majority shareholders and the New York State Department of Financial Services.

Among Athene’s principal companies are: Athene Annuity & Life Assurance Co., a Delaware-domiciled stock life insurance company focused on retail fixed annuity sales and reinsurance; Athene Life Re Ltd., a Bermuda-based reinsurer focused on the retirement services market, and Athene Life Insurance Co., an Indiana-domiciled stock life insurance company focused on the institutional funding agreement market.