Athene Eyes Further Expansion, Preps For IPO

Athene Holding, a top seller of fixed indexed annuities, has spent seven years cobbling together life insurance companies in the U.S. and abroad. Now company officials say the time is right for Athene to do some serious expansion in the retirement services marketplace

The company filed for an initial public offering last month. The nation’s aging population, higher projected demand for tax efficient savings products and rising interest rates remain key to Athene's future growth, Athene officials said.

A date and a price for the IPO have not been announced, but the size of the offering is estimated to be for as much as $1 billion, according to Renaissance Capital’s IPO Center.

Athene, which is backed by the private equity firm Apollo Global Management, plans to list on the New York Stock Exchange and trade under the symbol ATH.

Athene was founded in 2009 in Bermuda by James Belardi, former president of SunAmerica Life, and Chip Gillis, former head of Bear Stearns’ Insurance Solutions Group, who saw an opportunity to buy liabilities at good prices.

Many companies were in a rush to exit the retirement market as they could no longer honor guarantees to contract holders. As interest rates dropped, Athene was only too happy to step in and buy those liabilities.

The company, which sells annuities in the U.S. through Athene USA, has steadily climbed annuity league tables ever since.

In the first quarter, the company sold $663.4 million worth of fixed annuities, the bulk of which were fixed indexed annuities (FIA), according to LIMRA Secure Retirement Institute. Athene Annuity & Life Assurance was the No. 8 seller of FIAs in the first quarter.

The past five years have been busy ones for Athene Holding as the company has bought, on average, one company a year. These acquisitions fueled Athene's growth from startup to a company with $79.4 billion in assets at the end of last year.

In October, the company bought the German life insurance and retirement planning unit of Dutch insurer Delta Lloyd.

Preceding that sale, Athene in October 2013 bought Iowa-based Aviva USA, the U.S. annuity business of Aviva PLC, a British multinational company.

In December 2012, Athene bought New York-based Presidential Life Insurance. In July 2011, Athene bought Investor Insurance in Delaware and merged it with Liberty Life Insurance of South Carolina, which Athene had bought in April of that year.

With the company’s core building blocks in place, Athene says it will concentrate in issuing, reinsuring and acquiring retirement savings products through the retail annuity distribution, reinsurance, funding agreements, and mergers and acquisitions.

Belardi and senior managers had planned to file for an IPO last year. However, they withdrew the plans to fix first quarter 2015 results to account for reserves and taxes in connection with the purchase of Aviva’s U.S. life and annuity business.

Upward Outlook Revisions

With the accounting fixes now behind it, Standard & Poor’s, Fitch and A.M. Best last year upgraded Athene’s financial strength ratings. On May 18, A.M. Best upgraded Athene’s outlook to positive from stable.

A.M. Best cited the insurer’s strong capitalization, robust profitability and solid retail sales growth as reasons for the upgrade. More rating actions could come if the company manages to diversify its product line.

In addition, Athene executives appear skilled at growing the company from within and hunting down new sources of capital from institutional investors to pay for operating expenses, A.M. Best analysts also said.

In seven years, Athene and its subsidiaries grew to a company with more than $79 billion in assets, the company reports.

“Positive rating actions could occur if the company diversified its product offerings into more creditworthy product lines, resulting in sales growth in products other than fixed indexed annuities,” A.M. Best analysts said.

Athene executives said they intend to do exactly that.

During an investor presentation last month, Athene said the company will expand retail sales by forging new relationships with independent insurance marketing organizations, or IMOs, small to midsize banks, regional broker/dealers and other financial institutions.

Athene will deepen the relationships it already has with its 72 IMOs, and 22,300 independent agents. The company also will enter into new relationships with IMOs with which it does not have business agreements to develop exclusive products, Athene said in a government filing.

In April, the company launched what it said was its biggest retail product initiative since the company was founded. The launch included a new multiyear guaranteed annuity, or MYGA, a new income annuity product and changes to an accumulation product.

Athene Holdings reported 2015 net income of $563 million, an increase of 20 percent over the year-ago period.

In the fourth quarter, operating income from the company’s retirement services segment jumped 37 percent to $280 million compared with the year-ago period, the company also said.

Growth Plans Helped by Demographics, Regulation

Raising capital in the public markets through an IPO will be key to the company’s future growth as the U.S. retirement-age population records unprecedented growth.

By 2030, the number of Americans age 65 and older will reach 74.1 million people, an increase of 85 percent over 2010. Many older Americans do not have adequate retirement savings.

“Demand for fixed rate annuities and FIAs will likely be bolstered by this gap resulting from the growing need for guaranteed income streams and the expanding retirement population’s insufficient savings base,” Athene said in a filing.

Athene also believes more consumers and advisors are looking to tax-advantaged savings products with exposure to the stock market. This is because such products — FIAs, for example — offer retirement investors better returns than they could get if they kept their money in the bank or invested in a federally-insured banking product.

If interest rates rise, as they eventually will, Athene expects still more demand for FIAs, which hit a record $53 billion in sales last year.

The retirement services segment will continue to change in light of new rules issued by the Department of Labor.

Coming changes in the fiduciary obligations of carriers and distributors of retirement products is expected to disrupt large portions of the retirement services market. This development could provide Athene with more growth opportunities — and competition too — as other companies merge or decide to leave the market, the company said.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].