Those hoping to get a glimpse behind the veil that has so far shrouded private equity firms’ drive to acquire fixed annuity businesses will get their chance fairly soon. The Iowa Insurance Commissioner has scheduled a July 17 hearing on the pending acquisition of Des Moines, Iowa-based Aviva USA by Apollo Global Management LLC-backed Athene Holding Ltd.
Since last year, private equity-backed insurers have been involved in the purchase of a number of annuity businesses, most predominately fixed annuity lines. Those deals have caught the eye of regulators and the industry alike. Most notably, Ben Lawsky, superintendent of the New York State Department of Financial Services, has spoken out about the possible negative repercussions that could arise from private equity firms owning annuity companies as well as the use of captives. In a similar vein, the NAIC has established a new subgroup to examine the role of hedge funds and private equity outfits in the annuity business.
Meanwhile, competing insurers and other industry observers have raised concerns that these private equity firms make riskier investments than a traditional insurer and by doing so, they put policyholders at risk.
The Iowa hearing notice suggests that those issues will be reviewed. Specifically, the department states that it will explore that “the financial condition of any acquiring party will not jeopardize the financial stability of the insurer, or prejudice the interest of its policyholders.”
Further, the hearing intends to assess whether “the plans or proposals which the acquiring party has to liquidate the insurer, sell its assets or consolidate or merge it with any person, or to make any other material change in its business or corporate structure of management, are unfair or unreasonable to policyholders of the insurer and are not contrary to the public interest.”
That statement could be taken as a direct reference to private equity’s propensity to make quick flips of their holdings, something many believe is antithetical to an insurance product like annuities. Yet many on the private equity side counter that they are, indeed, long-term holders of annuity companies.
In Iowa, both sides will have their say in two weeks.