Well the big news this week is that Athene Annuity bought Aviva USA’s life and annuity division for $1.8 billion. After many months of rumors and guesses as to the potential suitor, I believe we are all glad to finally know who the winner was. Many had assumed Guggenheim would sweep in and buy them but perhaps they are finally out of acquisition money after buying Sun Life’s variable annuity division just a week ago. Regardless, it is a little scary for the insurance industry that so many of these annuity divisions are being bought up by hedge funds and private equity firms.
Moreover, many people are already started to ask about Athene Annuity and Apollo’s financial strength and what will happen to Aviva as the buyout transpires over the next 8 months. Currently, Aviva is an A-rated carrier and Athene is a B+ carrier. Yesterday, the day of the Aviva buyout announcement, Fitch rating agency announced that they were putting Athene Annuity’s BBB+ rating on a negative watch. Their worry is that with the acquisition of both Presidential Life (that they bought earlier this year) and Aviva, that they will have quite a bit of extra risk and capital constraints in the future. Although Fitch did not officially downgrade Athene, they have put them on the negative watch list for now. Stay tuned for more updates as we get them.