The announcement on Oct. 2 that Athene Holding Ltd. (Athene) had closed its acquisition of Aviva USA corp. resulting in the newly formed Athene USA was not a surprise to anyone. The deal had been closely monitored by the press, industry analysts and regulators with most concluding that the acquisition, announced Dec. 21, 2012, would take close to a year to complete, though it only took nine months.
Athene, who has made four acquisitions within the past two years, knew the mechanics behind such a deal and anticipated finalization happening around this time. The rather complex transaction, which drew in regulators from NY, Delaware and Iowa, was taking place while Athene was simultaneously selling Aviva USA’s life insurance arm to Global Atlantic Financial Group.
Overall, the deal played out as expected although the purchase price, originally set at $1.55 billion, closed $800 million higher. According to Aviva plc., the higher price was due to the repayment of a $290 million dollar loan coupled with estimated earnings and other improvements in statutory surplus between June and September of this year.
The end result is Athene USA, operating with the 11 largest sellers of fixed annuities in the U.S. now under its wing and roughly $60 billion in assets, is one of the largest fixed annuities companies in the U.S. National Underwriter Life & Health recently spoke with Grant Kvalheim, president Athene Holding, about the acquisition, private equity companies in the annuity arena, the future for Athene USA and the overall state of the industry.
Kvalheim, who has a background in international investment banking and came to Athene in January of 2011 after serving as co-president of Barclays Capital, wound up in the industry after fostering a 25-year personal and client relationship with founder James Belardi. His individual experience culled from a career straddling regulators in both the U.S. and Europe gives him a unique vantage point regarding regulation in both areas and what the two can learn from one another. “I think there is an effort to harmonize regulatory regimes around the globe, although I think that effort still has a long way to go,” Kvalheim said. Harmonization in the U.S. still has significant hurdles between state and national jurisdictions — something he believes will take some time.
The state-by-state regulatory environment in the U.S. is something Athene has been intimately acquainted with over the last year. Athene Holding is owned by several institutional investors, the largest of them being AP Alternative Assets L.P., a closed-end publicly-traded permanent capital vehicle managed by Apollo Global Management, LLC, an alternative investment manager.
There has been much speculation regarding the intentions of private equity firms purchasing distressed annuity firms for their indexed annuity products. Some analysts contend that the long-term dedication required for the business is an odd fit for private equity firms, known to chase after short-term returns.