A private equity firm that is acquiring Aviva’s annuity business has agreed to comply with heightened capital standards in connection with the acquisition.
The acquisition is being made by Athene Holdings, which is controlled by private equity firm Apollo. The decision of Apollo Global Management LLC (Apollo) to accept the heightened consumer protection was announced by Benjamin Lawsky, superintendent of the New York State Department of Financial Services (NYDFS).
In an investment note prompted by the agreement, Sterne Agee & Leach analysts in New York said Thursday that Athene’s pact with New York state regulators regarding its acquisition of Aviva USA was in line “with our expectations,” and “clears one of the few remaining hurdles before the closing of the transaction,” said analysts Jason Weyeneth and Alex Levine.
They also said the Aviva acquisition should add at least $250 million of annual pre-tax earnings to Athene’s parent, Apollo. The analysts said Athene’s acquisition of Aviva USA is a “key driver” to their belief that Apollo 2014 earnings will be more than 20 percent above the consensus for all analysts which cover Apollo.
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At the end of 2012, Des Moines-based Aviva was ranked as the third largest underwriter of fixed-rate annuities in the U.S. at $4.1 billion, according to LIMRA.
Athene agreed to acquire Aviva’s PLC’s U.S. insurance business late last year for $1.8 billion, and Lawsky’s approval is seen as one of the last steps necessary to sealing the deal.
The compliance requirements are consistent with those mandated by Lawsky as part of his approval last month of Guggenheim Partners LLC’s acquisition of Sun Life Insurance and Annuity Company of New York.
The protections include heightened capital standards; the establishment of a separate, additional “backstop” trust account dedicated to further safeguarding policyholder claims; enhanced regulatory scrutiny of investments, operations, dividends and reinsurance; and other strengthened disclosure and transparency requirements.