by John Darer CLU ChFC CSSC RSP CLTC
The New York Department of Financial Services (DFS) agreed to bless Athene Holding Ltd.'s pending $1.55 billion acquisition of UK insurer Aviva PLC's U.S. operations after a series of negotiations with Athene Annuity and Apollo representatives, the agency said August 14, 2013. Athene is largely funded through an Apollo affiliate, and the Apollo manages money for the insurance company.
Apollo and Athene agreed to a set of new rules not typically required of insurers, the agency said. They include heightened capital standards to protect against potential losses and tougher disclosure requirements.
Recently, New York DFS has highlighted a spike in private equity firms and other investment companies moving into the annuity business. This trend raised concerns since such firms typically have a more short-term oriented business model than traditional insurers, and the annuity business is focused on ensuring long-term security for policyholders
As part of the new set of rules, New York Department of Financial Services wanted higher capital standards because they serve as a buffer to absorb unexpected losses. Athene Life Insurance Company of New York agreed to capital levels of not less than 450 percent and a separate backstop account with $35 million to top off those funds if they fall below a certain level. The New York regulator will also scrutinize Athene's operations, dividends, investment strategies and potential reinsurance transactions. If Athene pursues a so-called material change in its operations, it will need written approval from the New York agency first. Athene will also now have to file quarterly reports detailing its capital position.
Link to New York DFS statement on the Athene acquisition of Aviva New York dated August 14, 2013.
Aviva and Structured Settlement Annuities
A substantial amount of structured settlement annuity business has been placed with Aviva life companies and their predecessors until Aviva ceased writing new structured settlement annuity business at the end of 2008. The company has roots going back 300 years. Through a series of mergers and renamings the following compnanies wrote structured settlement annuity business and current structured settlement annuitants may be receiving payments from Aviva that originally had structured settlements paid from the following life insurance companies.
- CU Life Insurance Company
- CU Life Insurance Company of New York
- CGU Life Insurance Company
- CGU Life Insurance Coompany of New York
- Aviva Life Insurance Company
- Aviva Life Insurance Company of New York
The following qualified assignment companies applied to
- CGU Annuity Service Corporation (later Aviva Assignment Corporation)
- CGNU London Annuity Service Corporation (later Aviva London Assignment Corporation)The obligations of certain structured settlements funded with CU Life annuities were backed by a surety bond issued by Commerical Union Insurance Company.
The obligations of certain obligations assigned to Aviva London Assignment Corp had a Capital Management Agreement (CMA) with Aviva UK based affiliate, CGU International Insurance. As stated therein the agreement ensures that Aviva London Assignment will have the funds necessary to satisfy all Structured Settlement obligation to make funds available to Aviva London Assignment Corp is absolute, unconditional and continuing.
What is the impact of the Athene acquistion of Aviva on the structured settlement portfolio?
I telephoned Aviva customer service on August 22, 2013 and the response, as I expected, was that what is in the contracts will be honored. I specifically asked about the surety bonds and the Capital Maintenance Agreement obligations with those structured settlements where periodic payment obligations were assigned to Aviva London Assignment Corporation and was informed that these would still apply.
Structured settlement annuitants who wish to confirm for themselves or who have any concerns whatsoever, should contact their structured settlement consultant or Aviva directly at their toll-free number, which is 888-285-4332
Postscript: About 15 months following the publication of this post, in October 2014, the issue of the CMA was learned to not be as described by Aviva, after learning of an occurrence that seemed inconsistent with what the Aviva customer service rep said in 2013. An annuitant from Hawaii contacted me and after dealing with some unfortunate obfuscation, we learned in a written letter from Athene, that "the CMA was terminated according to its terms", seemingly quite the opposite of what was in Aviva's marketing materials. John Griffiths became the lead plaintiff in a successful class action lawsuit against Aviva and Athene in Athene ended up providing annuitants a CMA and certain annuitants received a modest financial recovery. It was a needless episode for the insurers and underscored the importance to be vigilant when insurers transition, or runoff their product lines.
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Who is Athene Annuity?
Athene annuity is the number two provider of fixed indexed annuties in the United States when the Aviva deal closes.
The roots to Athene Annuity go back to 1905, when Liberty Life Insurance Company was started by one "Hipp" guy, Here is a helpful timeline from the Athene website. The company, which previously acquired former structured settlement annuity issuer Presidential Life Insurance Company, offers some innovative retirement annuity products. At the time of publication Athene Annuity held a B++ (good) rating from A.M. Best and a BBB+(Good) from Fitch ratings.