Athene Execs: Looking For Deals, But Out On American Equity

Athene Holding will not be further pursuing a deal with American Equity, company executives said today during the insurer's third-quarter earnings call.

Athene is in a deal-making mode, President Bill Wheeler said, but will be looking elsewhere. American Equity rejected a $3 billion takeover bid put forth earlier this month by MassMutual and Athene, and is instead going into business with Brookfield Asset Management.

"We made what we thought was a very attractive offer, and I don't think anybody would debate that, except maybe the AEL board," Wheeler said to a second set of questions on the topic. "That didn't sway them from the path they want to stay on, and so it just strikes me that it's prudent to move forward."

Athene Holding and Massachusetts Mutual Life Insurance offered $36 per share of common stock to acquire American Equity, an offer AEL CEO Anant Bhalla termed "significantly inadequate" during an AEL earnings call Friday.

Instead, Brookfield is making an initial purchase of a 9.9% interest at $37 per share promptly following required regulatory approval, and a second purchase of an incremental 10% interest, at the greater value of $37 per share or adjusted book value per share.

The sluggish economy and ultra-low interest rate environment makes it an "opportunistic time" for deals, Bhalla said. Athene plans to be in the game, executives stressed.

"Could be some smaller deals ... and yes, there is potential for even larger transactions," Wheeler said. "The reality is that the corporate development group is very busy. And I expect us to be active."

Big Seller

Athene offers retirement products and a reinsurance division. The insurer is one of the few to report revenue gains during the pandemic, reporting $2.5 billion in retail volume, a 28% increase over the third quarter 2019.

"As many competitors continue to be constrained by a challenging operating backdrop, or by the desire to conserve capital, Athene remains a source of strength in the marketplace, and we were awarded with profitable growth," Wheeler said.

"Industry [fixed index annuity] sales have moderated significantly year to date," Wheeler said, "but we remain well positioned through our numerous competitive advantages that are driving a much different result for us than others are experiencing.

"According to LIMRA, Athene placed first for fixed indexed annuity industry sales in the second quarter, and we believe our strong third-quarter result will place us in a similar position."

Overall, Athene reported net income of $622 million for the third quarter of 2020, partly due to favorable changes in the fair value of reinsurance assets owing to tightening credit spreads. That represents a substantial increase from the $276 million reported for the same period in 2019.

Athene stock rose about 8% during the day Tuesday. The insurer has been an aggressive player during 2020.

In June, Athene announced a deal with Jackson National to fully reinsure $27.6 billion of Jackson’s in-force book of fixed and fixed index annuity liabilities in exchange for approximately $1.25 billion in ceding commission.

No Election Impact

Being Election Day, Wheeler was asked about the potential for a change of administrations and Democrats taking enough power to revive the Obama-era fiduciary rule. Tossed out by a federal appeals court in 2018, the fiduciary rule attached a higher liability to the sale of annuities.

But Wheeler pointed to Regulation Best Interest enacted by the Securities and Exchange Commission, as well as the best interest model law sent to the states by the National Association of Insurance Commissioners as examples of how better rules have filled the void.

"I don't think there'll be a renewed push to kind of revisit that within the DOL," Wheeler said. "Even if there were, we feel like we would be able to deal with it, just like we were ready to deal with it the last time. So we're not very concerned about that."

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.