Athene Holding has entered into an agreement with Voya Financial to reinsure about $19 billion of fixed and fixed indexed annuity liabilities.
Prior to the closing of the transaction which is set for the second or third quarter of 2018, Athene will evaluate a range of potential debt financing alternatives, which the firm believes could provide an attractive option in the current low rate environment.
Jim Belardi, Chief Executive Officer (CEO) of Athene, said; “we are excited to enter into this agreement with Voya, which is highly strategic for Athene. The large block of fixed annuities we will be reinsuring are products Athene understands well, and they present a meaningful asset redeployment opportunity.
“Amid a historically tight credit spread environment, we expect this transaction to achieve our mid-teens return target, leaving us well-positioned for incremental value creation in a more favourable credit spread environment or through enhanced asset management.”
Belardi also said that the transaction is a “compelling example” of how Athene’s relationship with private equity investor owner Apollo allows it to deliver creative solutions to the insurance industry.
Athene was advised on financial and legal matters for the transaction by Barclays and Sidley Austin LLP.
On the back of the annuities agreement, Athene has secured rights to reinsure liabilities that will be created from the subsequent annuitisation of some of Venerable’s variable annuities to fixed payout annuities which is estimated to total approximately $8 billion over the life of the block.
This will ensure a significant flow of future liabilities for Athene on an annual basis.
The transaction could also provide Athene with the opportunity to meaningfully increase organic distribution through leveraging Voya’s existing annuity distribution relationships.
In addition, a consortium of investors, led by affiliates of Apollo Global Management, Crestview Partners and Reverence Capital Partners, has agreed to purchase Voya Insurance and Annuity Company, including its Closed Block Variable Annuity segment, and create a newly formed standalone entity Venerable Holdings, that will administer the fixed and variable annuity blocks.
Athene will make a $75 million minority equity investment in Venerable to be held as an alternative investment.
Houlihan Lokey is serving as financial advisor and Latham & Watkins LLP is serving as legal advisor to the special committee of independent directors of the board of directors of Athene in connection with the transaction.
