Athene To Become Big In Indexed Annuities
Finally, the speculation about who will buy Aviva USA is over. Athene Holding Ltd., a Pembroke, Bermuda insurance holding company, says it has agreed to buy the big fixed indexed annuity carrier, Aviva USA.
The deal, which is expected to close in 2013, will make Athene the second largest seller of fixed indexed annuities in the U.S. That would put the insurance operation just one step away from its stated goal, which to become the leading U.S. fixed annuity company.
The purchase price is $1.55 billion. That’s substantially below Aviva USA’s book value last June, which was $3.8 billion, according to a November from Bloomberg which cited company officials. But it is above the $1 billion figure that outsiders were predicting would be the sale price.
The announcement brings to end months of conjecture over who would buy Aviva USA. The rumblings started soon after the carrier’s UK parent, AVIVA plc, announced in May that it would be selling off non-core assets. Aviva USA wasn’t named at the time, but observers soon concluded it was a distinct possibility.
Unnamed sources repeatedly floated the name of private equity firm Guggenheim Partners LLC as the probable buyer. But by the fall, market watchers also maybe’d the names of Apollo Global Management LLC and Harbinger Capital Partners.
As it turns out, those guessing that Apollo would win out came closest to being right. This is because the Athene deal has the “support” of Apollo. Specifically, the Bermuda investment manager says it has agreed to provide “up to $100 million of capital support to Athene to the extent such support is necessary.”
The acquisition announcement does not paint Apollo as the buyer. It says Athene Holdings is the buyer. However, the Apollo connection appears to be critical to the acquisition. Consider:
· Apollo says it has been providing asset allocation and related services to Athene and has been directly managing a portion of these assets and that it may do the same for a portion of Athene’s newly acquired Aviva assets, once the deal closes.
· When Athene Holding was formed in 2008, an affiliate of Apollo provided the company with “solutions related to tax efficient savings vehicles to support retiring baby boomers,” according to Athene.
· Apollo has a fixed annuity reinsurance business in Bermuda and is also reported to be a majority shareholder of Athene Annuity & Life, with administrative offices in Greeneville, S.C. In recent years Athene Annuity, acquired Royal Bank of Canada’s Liberty Life annuity book as well as Presidential Life.
These are some highlights of the transaction as provided by Athene Holding:
Athene will acquire Aviva plc’s U.S. annuity and life insurance operations. Those operations currently do business as Aviva USA. The issuing companies include Aviva Life and Annuity Company, West Des Moines, Iowa, and Aviva Life and Annuity Company of New York.
The Aviva USA business will merge into Athene Holding’s primary U.S. operating subsidiary. This subsidiary is Athene Annuity & Life Assurance Company, a Delaware-domiciled insurer in the retail fixed and indexed annuities and reinsurance business.
Aviva USA will be renamed Athene USA. It will become the parent for Athene’s U.S. operations, with headquarters in West Des Moines, Iowa. This is the city where Aviva USA has its headquarters now.
Athene says it recently received a $621 million capital infusion in anticipation of the transaction. The source of that infusion is not identified.
Following the transaction, Athene expects to have over $3.5 billion of combined statutory capital within its insurance company subsidiaries, the company says.