Who Owns Your Life Insurance Policy? It Might Be a Private-Equity Firm

Americans own more than 160 million individual life insurance and annuity policies. A big, unexpected change is ahead for many of them.

The growing wave of deal activity is unsettling to some policyholders who had chosen well-established and often strategically conservative companies in the 262-year old U.S. life-insurance industry. In some cases, a key component of families’ financial planning suddenly is in the hands of newcomers, some known for investing in distressed companies and unusual securities. Moving to a new carrier isn’t always simple or affordable depending on their age or declining health.

The newcomers, which include private-equity, asset-management and other investment firms, often believe they are scooping up insurers on the cheap, or are attracted to the premiums paid by policyholders that they will be able to invest for fees. Some are acquiring entire insurance companies, and others are buying stakes in them. Policyholders who bought life insurance from Allstate Corp. unit

Allstate Life Insurance Co.

ALL 0.97%

, for instance, soon will rely on entities managed by

Blackstone Group Inc.

BX 3.86%

to pay their beneficiaries after they die.

The steep drop in interest rates since 2008 is a driving force behind the deal frenzy. It has led traditional insurers, which invest policyholders’ premiums and the capital backing up their obligations primarily in plain-vanilla bonds, to retreat from products most hurt by low rates. Many are unloading blocks of old policies and annuities. More deals are expected, as shareholders pressure publicly traded insurers to ditch businesses that drag down returns.

Many new owners think their expertise with less-common investments, such as privately placed corporate debt and asset-backed securities, will give them an edge over more cautious insurers. The new guard sometimes invests in unusual things—like the Los Angeles Dodgers baseball team. But their investments generally are only modestly riskier than traditional insurers’, and they on average hold more cash and have larger capital cushions as an offset, according to an analysis by ratings firm A.M. Best.

So far, more than two dozen investment firms own or control 50 U.S. life-insurance companies out of just over 400, according to Best’s data. The new owners’ insurers total more than $600 billion of assets, according to Best.

Principal Financial Group Inc.,

which has been in the life-insurance business for 142 years, is in the process of discontinuing sales of individual life products and certain types of annuities to U.S. consumers, and is looking for ways to potentially divest old blocks of business.

Hartford Financial Services Group Inc.

and Voya Financial Inc. have exited entirely insurance and annuity sales to individuals, including through divestitures.

MetLife Inc. spun off the bulk of its U.S. retail operations, and American International Group Inc. has a public offering of its life-insurance and retirement-services unit planned. AIG is selling a 9.9% stake in the unit to Blackstone, which will manage a portion of the assets. Last week,

Prudential Financial Inc.

said it reached a $1.5 billion pact to sell an annuities unit to Bermuda-based Fortitude Re, which is backed by investors including Carlyle Group.

The new guard includes affiliates of

Apollo Global Management Inc.

and KKR & Co. Ranks also include smaller firms that most ordinary Americans wouldn’t know.

“The restructuring in the insurance industry isn’t showing any sign of slowing down,” said

James Belardi,

chairman and chief executive of

Athene Holding Ltd.

, an insurer that Apollo helped launch in 2009.

Smaller investment firms with limited resources are increasingly seeking to do deals, say industry bankers, lawyers and consultants. Consumers may face more risk if these buyers replace financially strong parents, particularly if they aim to invest aggressively.

People who purchased life insurance from Allstate Life Insurance Co. will soon count on Blackstone Group to pay death benefits after they die.


José A. Alvarado Jr. for The Wall Street Journal

A lot is riding on state insurance departments. They must approve all deals to weed out inexperienced buyers who wouldn’t be able to weather tough times. They also have ordered extra consumer protections to approve transactions such as requiring the buyers to hold higher levels of capital than customary.

Some policyholders and annuity owners are alarmed when a company has handed off their business. Some hear about deals from headlines, and some from agents. Others find out when the new owner sends a letter announcing a name change.

“It is kind of like a hot-potato game, passing it from one person to the next,” said Charles Stafford, 76 years old, a California retiree whose Voya annuity was transferred to Venerable Holdings Inc., an entity created by a consortium led by affiliates of Apollo and two other investment firms. Athene holds a minority stake; Voya did so initially but recently sold its position.

A life insurance policy owned by Bert Hermelink, 75, a financial adviser in Aurora, Colo., is among 150,000 transferred in January to Resolution Life Group Holdings Ltd. The transaction involved a sale of part of Voya’s life-insurance business and reinsurance for the remainder, totaling 1.1 million policies.

Resolution Life, which is part of a British company, is paying claims and servicing the policies but isn’t selling new policies. Its acquisitions are via a Bermuda-based fund with $5 billion raised from a Japanese life insurer, a British pension plan and sovereign-wealth funds, among others.

“I am irritated,” Mr. Hermelink said, by being “jettisoned” by Voya to an entity he knows little about. “I’m not sure what Resolution is,” he said, which makes him uncomfortable given his six-figure policy is an important part of his and his wife’s financial plan.

Mr. Hermelink said he can’t easily replace the policy, because health problems now make him unattractive as an applicant to another insurer. “I’m stuck, I can’t go anywhere,” he said.

Resolution and Voya say consumers can rest easy. “They recognize policyholders are paramount,” Voya Chairman and Chief Executive

Rodney Martin

Jr. said of Resolution’s management and the approximately 350 former Voya employees taken on. Resolution Life Vice Chairman W. Weldon Wilson said: “We have committed to maintain regulatory capital levels well above statutory requirements, we have committed to invest heavily in improving policyholder service, and all of our actions will be monitored by regulators.”

Resolution aims to use the Voya unit to expand in the U.S., with future acquisitions allowing it to gain scale and become highly efficient as it collects premiums from policyholders and provides customer support. Unlike many other deals where acquirers take over investment management, Voya, which has an asset-management unit, will keep that role.

Newcomers have gravitated in particular to indexed annuities, a product line they see as an extension of their investment expertise. Buyers turn over lump sums. The insurer invests the money with the goal of earning more than it must return in interest and principal. Interest is pegged to market benchmarks. Retirees are big buyers.

Many Americans appear comfortable buying policies from these new owners, who have grabbed 40% of market share for sales of indexed annuities, according to annuities consulting firm Moore Market Intelligence. One reason: The newcomers’ insurers tend to pay higher interest to customers than traditional ones, due to their higher-yielding investments, according to a June report by Best.

Transfer Begins

Many insurance executives trace the transformation of the industry to Athene’s Mr. Belardi, who in 2006 left as a senior executive at AIG to start an insurer.

A Stanford University and Olympics’ trials swimmer, he had worked for the late billionaire Eli Broad in the 1980s and 1990s, turning SunAmerica Inc. into a top seller of annuities. In 1999, AIG paid $18 billion for SunAmerica.

Mr. Belardi teamed with Frank “Chip” Gillis, a Wall Street investment banker who specialized in insurance, to replicate SunAmerica with twists: It would be based in Bermuda for tax efficiencies and use world-class investment management to outperform competitors in categories such as mortgage-backed securities while holding ample capital and taking other measures to protect policyholders.

In 2009 Messrs. Belardi and Gillis met with Apollo co-founder

Marc Rowan,

who listened enthusiastically to their pitch for money to help get their insurer up and running.

“These guys were smart, and what they said was logical,” Mr. Rowan recalls. Then largely a private-equity firm, Apollo started small, providing $16 million so the pair could scoop up fire-sale-priced bonds in postcrisis public debt markets, to back blocks of annuities.

By the end of 2012, with Apollo’s growing funding, Athene had acquired three annuity insurers, and struck an approximately $1.6 billion pact for $45 billion of U.S. annuity liabilities from British giant



Athene continued growing primarily through sales of annuities, and it went public in 2016. In March, it agreed that Apollo would buy the 65% of Athene that it doesn’t already own. Athene’s $215 billion in total assets as of June makes it a major U.S. insurer. It now competes in the elite product line of selling annuities to corporate pension plans, following ratings upgrades.

James Belardi, chairman and chief executive officer of Athene Holding Ltd. was previously a senior executive at American International Group Inc.


Michael Nagle/Bloomberg News

Meanwhile, driven by its work for Athene, Apollo evolved into a credit-investing powerhouse. Today, Apollo’s credit business represents about $330 billion of its $472 billion of total assets. Of that, it manages about $160 billion for Athene, held in such things as investment-grade commercial and mortgage-backed securities, privately placed business loans, and aircraft and other equipment financing.

In Athene’s early years, traditional insurers that ordinarily would have been acquirers were hoarding capital in the wake of the financial crisis. A handful of other investment firms also were buyers. Asset manager Guggenheim Partners LLC, for instance, was invited by Kansas regulators to rescue a troubled Topeka insurer with a capital infusion. The 2010 acquisition led to a few others.

Burden Shifts to Regulators

As deals proliferated in the industry with other investment firms, regulators began grappling with challenges they faced with newcomers. In 2013, New York’s Department of Financial Services sent subpoenas to a handful of acquirers, seeking emails, investor pitchbooks and other materials to see if the firms were doing anything to enrich themselves at consumers’ expense. The probe didn’t result in any enforcement actions.

The following year, a law firm working for a group of state insurance departments scrutinized $100 million in equity and hundreds of millions of dollars in loans by a handful of insurers that had helped a group, led by Guggenheim’s chief executive, buy the Los Angeles Dodgers for $2.15 billion, an unusual investment for an insurer.

Regulators concluded nothing was amiss.

Andrew Rosenfield,

president of Guggenheim Partners, said that the insurers’ Dodgers’ investments included substantial extra collateral to protect policyholders against anything going wrong and that the insurers were well-capitalized. “The investments were safe and sound when made and have performed with excellence,” Mr. Rosenfield said.

Marc Rowan, co-founder and chief executive of Apollo Global Management Inc., listened to an early pitch that led the firm to provide funding that led to the formation of Athene Holding Ltd.


kevork djansezian/Reuters

State insurance departments vary in resources, but under standards developed at the National Association of Insurance Commissioners, all use a “risk-based capital” system to determine whether insurers have adequate capital to be in business. States can take control of insurers with inadequate capital.

Regulators use formulas to size up factors such as underwriting risk in the mix of products sold, and default risk of investments. Regulators, for instance, apply a capital “charge,” or capital to be held in the event of losses, tied to a bond’s credit rating. The lower the rating, the higher the charge.

Additional guardrails exist from financial strength or claims-paying-ability ratings. These are used by brokers and agents to help decide where clients should shop. In sizing up insurers, ratings firms take into consideration insurers’ investment choices and risk-management practices.

In its June report, A.M. Best concluded that insurers owned or sponsored by private-equity and other investment firms on average hold substantially more privately placed debt and asset-backed securities, such as collateralized loan obligations, and modestly more below-investment-grade debt, than the broader industry.

Privately placed debt typically offers higher returns than publicly traded bonds favored by most insurers, but isn’t as readily traded or transparent, and in a downturn could be difficult to unload.

But newcomers’ insurers on average have higher investment yields—4.62% compared with 4.01% at the end of 2020—and twice as much cash and higher risk-based capital, Best found.

When regulators vet deals, approval generally hinges on whether policyholders would be left in worse condition, NAIC officials said. This is measured in terms of the insurer’s financial condition or proposed changes in the business or management.

Regulators’ pivotal role was on display last year in Colorado as Resolution Life sought approval for its acquisition of Voya’s Denver-based unit.

Sixteen insurance brokers and two policyholders from across the country wrote protest letters, including Mr. Hermelink. The brokers, who had helped sell thousands of Voya policies, contended that Resolution had shown its true colors in a planned 2017 transaction that hadn’t gone through.

Resolution had agreed to sell an insurance unit it had acquired in 2014 to a conglomerate in North Carolina owned by entrepreneur

Greg Lindberg.

This was even though publicly available information showed that some insurers already owned by Mr. Lindberg had a high level of investment in other entities Mr. Lindberg controlled.

North Carolina’s insurance department originally allowed the extensive affiliated investments, which most states typically permit only in small quantities. The investment strategy “has proven not to be risky and the investments have increased in value and produced strong positive year over year results,” a spokesman for Mr. Lindberg said.

The sales agreement was terminated by the parties in 2018, as news was surfacing that Mr. Lindberg was under federal criminal investigation. He was convicted in 2020 of attempted bribery of a new North Carolina insurance commissioner, who was seeking to reduce the affiliated holdings, and is now in prison.

Resolution’s willingness to sell to Mr. Lindberg “shows how little concern goes into taking care of policyholders,” said Larry Rybka, chief executive of insurance brokerage ValMark Financial Group, who helped organize the brokers’ protest.

In 2019, a North Carolina judge placed four of Mr. Lindberg’s insurers, with 262,000 customers, under the commissioner’s control. State officials restricted withdrawals to 10% of owners’ annuity value, or a maximum of $15,000 unless they document hardship.

The officials are litigating with Mr. Lindberg over unwinding the affiliated investments. A spokesman for Mr. Lindberg said he wants “to find a productive resolution” so that policyholder restrictions are lifted.

A lawsuit filed by Mr. Lindberg against Dow Jones & Co., publisher of The Wall Street Journal, alleging defamation and other claims stemming from two Journal articles in 2019 is ongoing.

Resolution Life’s Mr. Wilson said his team “took appropriate and prudent steps to vet Mr. Lindberg.” Mr. Lindberg had committed to following insurance law in Nebraska, the unit’s home state, in investing, he and Mr. Lindberg’s spokesman said.

Colorado Insurance Commissioner Michael Conway didn’t find the Lindberg matter problematic enough to nix the Voya deal. The Resolution management team “has considerable industry experience,” he wrote in his order.

Still, he applied extra protections, including ordering Resolution, for four years, to maintain significantly higher capital than usual for traditional owners and setting high hurdles for it to withdraw dividends. He also ordered Resolution to file annual updates on deployment of a planned $100 million to improve customer service.

“The process worked here: We made sure we were listening to everybody who wanted to be heard,” Mr. Conway said. This included allowing lawyers working on behalf of the letter writers to ask questions of the acquirers’ witnesses at an online hearing. Their concerns about Resolution making good on all claims played into the special conditions, he said.

Regulators hired outside actuaries and reinsurance specialists to help analyze Resolution’s financial wherewithal and deal structure, at Resolution’s expense.

In 2019, Resolution sold the unit sought by Mr. Lindberg to Kuvare U.S. Holdings Inc., a company founded in 2015 with capital from several investment firms. It is Kuvare’s third life-insurance company acquisition.

Corrections & Amplifications
Voya Financial Inc. no longer holds a minority stake in Venerable Holdings Inc. An earlier version of this article incorrectly said that it did. (Corrected on Sept. 21)

Write to Leslie Scism at [email protected]

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