Anil Vazirani Scottsdale Investment Advisor shares Why Life Insurers Fly into the ‘Bermuda Triangle’
Private equity firms have steadily acquired U.S. life insurers and blocks of fixed annuity business and moved the blocks offshore to free up capital. This worries some people.
Yesterday’s second quarter earnings conference call with senior executives of Athene Holding offered a window into the most significant trend in the life insurance industry over the past five years: the development of an asset management model that feeds on blocks of fixed annuity contracts.
Athene, financed by the private-equity (PE) firm Apollo Operating Group (Apollo), helped pioneer a trend that started after the Great Financial Crisis. The trend has been tantamount to turning what we knew as the “life insurance” industry into something new: the “liability origination platform” business, as a recent study by Conning described it.
In short, private equity firms are buying (mostly) fixed annuity assets from large life insurers and, by using offshore captive reinsurers, freeing up capital that they can redeploy into riskier, higher-yielding assets like collateralized loan obligations (CLOs) and commercial real estate-backed securities assets (CMBS).
The trend was trailblazed by Athene, which was created in 2013 when Apollo bought Aviva Life (assets of $56 billion) and renamed it. In 2016, Athene went public in a $1.08 billion IPO. In 2018 it added annuity assets from Voya and Lincoln Financial. This year it acquired, via a reinsurance deal, $26 billion worth of Jackson National Life fixed-rate and fixed index annuities (FIAs).
“Major life insurance groups continue to reduce their exposure to legacy in-force business and to release trapped capital and resources,” said the chairman of Resolution Re last December, when he announced his firm’s still-pending acquisition-and-reinsurance deal with Voya Financial, including the transfer of assets worth an estimated $20 billion.
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Referenced link: https://retirementincomejournal.com/article/why-life-insurers-fly-into-the-bermuda-triangle/
Anil Vazirani is president of Secured Financial Solutions, independent insurance advisor investment advisor rep with a fiduciary obligation and in the financial services industry since 1994. A+ rating with the Better Business Bureau for over a decade and a half, members in good standing with the National Association of Insurance and Financial Advisors.
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