Athene Chief No Time Fuse on Aviva Deal

October 4, 2013

By Linda Koco

Now that Athene Holding Ltd. has completed its $1.55 billion purchase of Aviva USA, the company is setting its sights on being a leader in the fixed annuity business.

That's the word from Athene's Grant Kvalheim, who is president of the Pembroke, Bermuda, holding company.

In a phone interview, Kvalheim repeatedly stressed that Athene plans to continue selling fixed annuities, both indexed and traditional, and that this will be done without a "time-fuse."

The time-fuse comment came in reference to the notion that, because of Athene's private equity connection, Athene might not stay in the annuity marketplace for very long — that there will be a short fuse on Athene's intentions to hold the company.

Kvalheim said he has been meeting with both distribution and employees, to reassure them that a time-fuse in not in the cards.

The worry

The worry stems from the nature of Athene's corporate structure. Athene Holding Ltd. is owned by several institutional investors, including majority owner AP Alternative Assets, which is a closed-end, publicly traded permanent capital vehicle managed by Apollo Global Management. Apollo is an alternative investment manager and private equity firm based in New York.

Ever since Athene announced plans to buy Aviva USA, agents have been wondering about the impact this ownership structure could have on their business and on their policyholder-customers.

Those concerns arise from a commonly-held view that most private equity-owned firms tend to use a short-term business model that involves selling their acquisitions within a few years of purchase.

Agents and state insurance regulators both view a short-term business model as ill-suited to the long-term nature of the insurance business. Athene underwent scrutiny on just that point from regulators in both Iowa and New York before it received approval to buy Aviva USA. Both states approved the deal subject to conditions — or, as New York put it, subject to Apollo's agreement to meet "heightened policyholder protections."

Hence, Kvalheim's message that Athene intends to become a leading carrier in the fixed annuity business. In the interview, he made that point several times, in several ways.

This is commitment

Athene is committed to selling through and independent agents and the independent distribution system, Kvalheim said. And by independent, he said he means totally independent.

In fact, he said, on the same day that Athene concluded its purchase of Aviva USA, Athene also sold the two independent marketing organizations (IMOs) that had previously been 100 percent owned by Aviva USA. These IMOs are Creative Marketing International, and Insurance Agency Marketing Services. (Note: Aviva USA had a minority stake in one other IMO but Athene is reportedly in the process selling that one as well.)

Athene will continue to do business with those and other IMOs, he indicated, but "we are not going to own distribution... We think the IMOs should be independent."

He said the company believes that makes a strong statement about its commitment to the independent system.

In addition, he said, Athene has permanent equity capital invested in the company, with plans to go public in the future.

Athene entered the fixed annuity business about 4 1/2 years ago through its Athene Annuity & Life Insurance subsidiary. That company has been the fastest growing annuity writer so far this year, he said, "so we had a lot of momentum" even before completing the Aviva deal.

The company wants to continue that momentum. "We have no other lines of business," he said.

The integration

The company is still working out details of the integration. For the coming year, the carrier will concentrate on integrating Aviva's business into Athene's. The goal will be "harmonization" in various areas, including distribution agreements, so as to have the "same rules of the road," Kvalheim said.

It's taking a "one team, one dream" approach.

The company president doesn't envision introducing any new annuity products in the next 12 months. Instead, sales will focus on selling existing fixed annuities from the Athene side of its business as well as the Aviva side — products that he said still have "significant room for growth."

What will happen with former Aviva agents? The company wants and expects to see vibrancy. "But we will review performance," he indicated, adding that it want the agents to be "writing premium."

The deal included acquisition of Aviva USA Corp. and its subsidiaries — Aviva Life and Annuity Co., and New York-domiciled Aviva Life and Annuity Company of New York.

Athene USA is now the new name of Aviva USA. Athene USA is parent of Athene's operations in the United States; its headquarters are in the West Des Moines, Iowa, headquarters building of the former Aviva USA.

With Aviva's annuity business included, Athene now has approximately $60 billion in assets, according to a company statement. That makes it one of the largest fixed annuity companies in the United States, the company said.

Separate deal

Separately, Athene said it completed its previously announced sale of Aviva USA's life insurance operations to Presidential Life Insurance Company-USA. Presidential is a wholly owned subsidiary of Commonwealth Annuity and Life Insurance and part of the Global Atlantic Financial Group, a multiline insurance and reinsurance company based in Hamilton, Bermuda.

Global Atlantic made acquisition news of its own last week, when it announced that it had entered a definitive agreement to acquire Forethought Financial Group, a U.S.-based life and annuity carrier based in Houston. Last year, Forethought purchased the individual annuity new business capabilities of Hartford Financial.

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