Prudential plc has reached an agreement with Athene Holding Ltd under which its reinsurance unit, Athene Life Re Ltd, will invest $500 million in Prudential’s U.S. business (Jackson) in return for an 11.1% economic interest.
Additionally, Athene Life Re has fully reinsured a $27.6 billion in-force portfolio of Jackson’s US fixed and fixed indexed annuity liabilities in exchange for roughly $1.25 billion in ceding commission.
It’s expected that combined, the equity investment and reinsurance transactions will increase Jackson’s RBC cover ratio by roughly 80%.
“Today’s transactions with Athene, a leading franchise in the retirement services market, further strengthen our capital position and enhance our ability to grow. We value Athene’s investment in Jackson, which is aligned to our common goal of serving the growing population of American savers transitioning into and through retirement,” said Michael Falcon, Chairman and Chief Executive Officer (CEO) of Jackson.
Under the terms of the reinsurance arrangement, which is effective June 1st, Jackson is set to retain account administration and service of the annuity policies.
“We are delighted to be forging a new relationship with the team at Athene, given their deep expertise in the US annuity sector and long-term commitment to its development. This agreement is a key step forward in meeting our strategic objectives for Jackson,” said Mike Wells, Group CEO of Prudential.
Athene’s equity investment in Jackson is expected to close in July, and will take the form of a cash subscription for the issuance of new common equity in Brooke, the holding company containing Jackson.
As we discussed previously, Prudential continues to prepare for a minority IPO of its US business. Following the close of this transaction, Prudential’s US arm will have an anchor investor of Athene’s standing, bringing a long-term commitment to Jackson and its development.
Jim Belardi, CEO of Athene, said: “We are very pleased to announce this mutually beneficial transaction in coordination with Jackson and its parent, Prudential plc. As top annuity providers focused on serving the US retirement marketplace, we are excited to bring these two leading franchises together through a large-scale reinsurance transaction that includes a new investment in Jackson by Athene.”
Marc Rowan, Co-Founder and Senior Managing Director of Apollo Global Management, Athene’s largest shareholder, commented: “In support of our strategic partnership with Athene, we are delighted to help tailor a solution for, and work with, Jackson and Prudential plc on this significant transaction. Jackson has complementary distribution capabilities relative to Athene’s business, and it is the largest and highest-quality variable annuity platform in the marketplace.
“Through our significant investment and support of Athene, we look forward to working with leading insurance franchises like Jackson and Prudential plc to enable them to achieve their strategic objectives.”