Deal sealed

State regulators from both Iowa and NY have approved the acquisition only after Athene agreed to comply with heightened capital standards, tightened restrictions and certain conditions connected with the acquisition. Notably, Athene voluntarily agreed to increase policy reserves by an additional $150 million.

Kvalheim feels their eager acceptance with all of the conditions is symbolic of their commitment to the business in the long-term. “There’s been a lot of talk, most of it misinformation. When people talk about private equity ownership, the implication is that it is money coming from a private equity fund that has a time fuse on it,” he said. “There is not a single dollar invested in Athene that has a time fuse on it or comes out of a fund with a time fuse on it. That’s always been the case in Athene’s history. The equity that is in Athene is permanent capital, the same way the equity in any other insurance company is permanent capital. We are in it for the long haul. The proof is in the pudding and if people want to doubt they can doubt but when you look at the industry over the last couple of years, nobody else but private equity has been stepping up to put capital in this industry, nobody.”

And the reason Athene is in the business at all is because they are confident in the long-term viability of the annuity industry. Kvalheim acknowledges challenges such as the low interest rate environment and the clouds of misconceptions that hang over industry but feels that Athene is positioned to overcome these hurdles. Athene’s discipline when pertaining to asset liability management has left them “not that fussed” about the low interest rate environment. “We try to run our business on a rate neutral basis,” he said. “I think we are quite different from others because we are willing to sacrifice a bit of current yield and hold a fairly high percentage of our portfolio in floating rate securities precisely because we don’t want to be in the interest rate forecasting business.”

Kvalheim does acknowledge, however, that it is hard to convince people to purchase a fixed product when interest rates are as low as they are and would welcome a somewhat higher interest rate environment. He also sees a durable opportunity for the industry in the shift from defined benefit plans and to annuity-type products. Athene has been monitoring the trend and listening to the conversations and is working to position itself to take advantage of it. “We would like to capture our share of the business,” he said.

Kvalheim feels the acquisition leaves Athene USA with a bright future. The scale, operating strengths and people that are a result of the deal gives them a strong platform from which to build. For the immediate future, the work being done will be the heavy lifting that accompanies putting businesses together and having them operate as one. He sees a complete transition into one new entity taking around one year to be fully realized. The focus is now is on integration and cohesion.

“This is a business we know well,” Kvalheim said. “There is a lot of capital leaving the industry. So, we see an opportunity to come in and become a factor in a business that a lot of people don’t like but, we like it.”