First quarter reports on annuity sales will start rolling out soon. As usual, annuity wonks will pore over every single figure. But probably no results will get more scrutiny than the ones from Athene USA, the big jewel in the crown of a holding company the industry had not even heard of five years ago.
Athene USA is the West Des Moines, Iowa, carrier formed last year when Athene Holding Ltd. of Bermuda completed its storied acquisition of fixed index annuity (FIA) heavyweight Aviva USA. The holding company has since combined that business in with the fixed annuity business of three other U.S. operating subsidiaries, now boasts $61 billion in management assets, projects retail fixed annuity assets approaching $3 billion annually, and writes through about 20,000 producers.
The company’s creation has been a whale of a tale, with regulators challenging the holding company’s ties to private equity, the holding company agreeing to certain conditions, FIA sales at the target company falling as negotiations dragged on, employees losing jobs or quitting, new hires coming on board, and a smaller subsidiary — Athene Annuity & Life (Athene A&L) — ultimately swallowing a carrier (Aviva USA) that was nearly three times its size according to A.M. Best. The new company, Athene USA, finally won its foothold — and a big foothold at that — in U.S. insurance company lore on Oct. 2.
All this year, industry people have been buzzing about how the now-combined company is faring. On the threshold of publication of first quarter results, InsuranceNewsNet offers some highlights.
The buzz starts with sales. The company’s main product line is FIAs. However, its FIA sales were down at year-end 2013. According to sales numbers from Wink, Inc., a Pleasant Hill, Iowa indexed product analyst, Athene USA ranked in fifth place on FIA sales of more than $2.7 billion at year end. By comparison, in 2012, when Aviva USA and Athene A&L were still separate entities, Wink reported that Aviva USA was in second place on FIA sales of $4 billion, and Athene A&L was in 24th place on FIA sales of $134 million.
Athene leaders themselves appear to have anticipated the 2013 numbers. In discussing organic growth projections in a December FAQ that was released before the year had ended, the company noted that, with the acquisition of Aviva USA, “initial estimated run-rate retail volumes” for Athene to be “$2bn to $3bn annually (depending on market and rate conditions).” That $2 billion to $3 billion would be on sales of FIAs and other fixed annuity products.
AN FIA sales decline was not entirely unexpected, because many acquired companies initially see sales slump during periods of ownership transition. The Athene negotiations for Aviva went on for more than nine months, and that injected a lot of uncertainty into distribution.
But now that Athene USA is a done deal, the industry chatter is all about what will happen to Athene sales, especially its FIA sales? Hence, the anticipation over first quarter results.
In March 2014, the company gave a clue. Athene Holding was projecting annualized retail sales for fixed annuities (FIAs and others) at $3 billion. And in a March 18 document, the company noted that first quarter 2014 retail sales were “continuing momentum” as of that date.
The rating issue
While the clock ticks, the executives are talking about plans for growth … and their financial strength rating from A.M. Best. As the executives see it, the two are linked.
Here’s the backstory: The day after the holding company closed its deal on Aviva USA, Best cut the financial strength rating on the Aviva piece of the business to B++ (good) from Aviva’s former rating of A- (excellent). At the same time, Best affirmed the financial strength rating of B++ on Athene A&L (the carrier that technically swallowed Aviva USA) as well as on the other Athene annuity affiliates.