New York's top financial regulator is threatening to scuttle a proposed purchase of Aviva USA by Athene Holding Ltd. unless Athene agrees to follow new rules that don't apply to traditional insurers, The Wall Street Journal reported.
Athene, an insurer funded by an affiliate of Apollo Global Management LLC, in December announced its intent to purchase Aviva USA in a $1.55 billion transaction. Both the New York Department of Financial Services and the Iowa Insurance Division are now considering whether to grant regulatory approval for the deal, which would make Athene one of the largest U.S. annuity issuers.
The New York agency, headed by Benjamin Lawsky, is in discussions with Apollo about a raft of tougher disclosure and capital requirements as the regulator weighs whether to approve the deal, the Journal reported, citing people familiar with the talks. Lawsky's office in May subpoenaed Apollo and other investment firms that have become involved with fixed annuities through their relationships with insurers.
Iowa Insurance Commissioner Nick Gerhart is scheduled to convene a hearing on Wednesday in Des Moines to consider whether his division will approve the transaction. The division is expected to reach a decision within 30 days. Aviva USA employs approximately 1,400 people at its West Des Moines headquarters.
Gerhart's office has been in contact with the New York regulator about "conditions that each of us might think about requiring on the purchase," a spokesman for the Iowa Insurance Division said in an emailed statement to the Journal. However, any conditions New York imposes won't affect Iowa's review of the transaction or conditions it might decide on after its hearing, he said.
The new rules Lawsky has proposed include requiring Athene to hold more money to back up obligations to policyholders than is currently mandated. Lawsky also wants Apollo and Athene to agree to a backstop that would guarantee that money would be available to replenish Athene's coffers should it run into trouble, the Journal reported.
Additionally, the regulator wants Apollo to seek approval for any significant changes in investment strategies it pursues for Athene. Lawsky's agency also wants Apollo and Athene to make additional disclosures about their organizational structure, including which executives monitor investments and capital.
Athene CEO James Belardi told the Journal his company is "cooperating fully" with Lawsky's agency. Representatives for Apollo and Aviva declined to comment.