November 17, 2025 • 19 mins
Apollo Global Management reinvented how pensions could be managed and paid out — by taking them over and moving the risks offshore. Other firms have followed suit and ushered hundreds of billions of dollars in American retirement savings into accounts that retirees and economists say are exposed to higher risk.
On today’s Big Take podcast, host Sarah Holder sits down with Bloomberg reporters Alex Rajbhandari and Tom Schoenberg, who investigated this phenomenon and explain what it means for the people whose nest eggs ended up on private equity’s opaque balance sheets.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. Life insurance was not
a very exciting business before the financial crisis.
Speaker 2 (00:14):
Alex Rajbondari covers the US insurance sector for Bloomberg. He
says that for a long time, life insurance was considered
one of the dullest corners of the financial world, dependable,
no frills, low drama. But after the financial crisis, that
all changed because that's when a new group of players
(00:35):
started taking an interest in the industry.
Speaker 1 (00:38):
As soon as private equity got involved. I mean at
wool Street, a lot of people are working on this
and there's a lot of money flowing in.
Speaker 2 (00:44):
Private equity isn't known for being low drama. They use
their pools of capital to take riskier bets on alternative
assets in the hopes of getting larger returns. And when
private equity firms started buying up life insurers in the
wake of the market crash, they had a plan to
transform the entities from sleepy financial backstops into money making machines. Today,
(01:07):
the subsidiaries of private equity firms manage billions of dollars
worth of life insurance policies and annuities and are able
to invest premiums and retirement savings into opaque markets.
Speaker 1 (01:19):
The National Association of Insurance Commissioners estimates there's one hundred
and thirty nine insurers in the country that are owned
by private equity. Most of them, the vast majority of them,
are life insurers. That represents seven hundred billion in assets
just for the US. It's a fraction of the entire industry,
(01:40):
but it's definitely a significant one.
Speaker 3 (01:42):
You can imagine people who have been in retirement, some
for decades, are sort of wondering what does this mean
and trying to find out.
Speaker 2 (01:51):
That's Tom Schoenberg, who covers financial regulation for Bloomberg. As
he and Alex track private equity's growing influence in the
life insurance industry, they too have been trying to find
out what their strategy means for policy holders, retirees, and
the economy at large.
Speaker 3 (02:10):
This kind of strategy adopted by most large insurers has
yet to be road tested in crisis. So I would
borrow sort of a phrase from back then, has this
now become too big to fail?
Speaker 2 (02:25):
I'm Sarah Holder, and this is the big take from
Bloomberg News today. On the show, how private equity came
to control a growing share of life insurance and retirement plans,
and why the industry's complex strategy could expose America's retirees
to new risks. Back in August, Bloomberg's Tom Schoenberg took
(02:50):
a trip to Brackenridge, Pennsylvania.
Speaker 3 (02:53):
Kind of northeast of Pittsburgh. You know, it's a Stickell
mill town. The mills called Allegheny Technologies. That's the company.
They own a number of different mess I mean, they've
produced everything from cannon balls for the Revolutionary War, produced
steel for the Chrysler building or for the Ford Model
a car.
Speaker 2 (03:11):
There he met retirees like Bill Shane, who spent thirty
eight years at Alleghany Technologies before retiring in two thousand
and five.
Speaker 4 (03:19):
I'm seventy six years old with lots of medical problems.
I'm not going out and get any physical job anymore.
I can't do that. Pension is very important to everybody
that works in the plant.
Speaker 2 (03:31):
Until a couple of years ago, Shane and his other
former Alleghany Technologies steel worker colleagues got their pensions directly
from the company.
Speaker 3 (03:41):
Depending upon when they retired, they were set with a
specific amount of money that they'd receive every month. If
they had an issue, an yet problems, spouse dies and
they need to access benefits, they call their former employer.
Speaker 2 (03:56):
And so what changed.
Speaker 3 (03:57):
It was about two years ago in the employees started
getting notifications in the mail that Alleghany was no longer
going to be in charge of their pensions, that it's
now going to be handled by company named Athene. You know,
most of these workers, they had no idea who Athene
was what it was.
Speaker 2 (04:14):
Athene is a life insurance arm of Apollo Global Management,
a giant in alternative asset management, including private equity. When
Alleghany Technologies turned over its pension fund to Athene, the
employee's monthly pension payouts from their former employer became monthly
annuity payments from Athene. That rattled workers like Shane.
Speaker 4 (04:38):
How do you just throw something out there to someone
who we're sending you a pension at a new How
do you even know what annuity was?
Speaker 2 (04:46):
Quite frankly, annuities are a different way of saving for retirement.
A person or a company buys an annuity by giving
a big chunk of money to an insurance company. The
insurer invests that money and the people who hold the
annuities get a predictable payout over time. In all, Athene
has converted more than fifty billion dollars worth of pension
(05:08):
funds into annuities, including one and a half billion dollars
worth of Allegheny Technologies pensions. Those workers' retirement savings are
added to a giant pot of money that's managed by
a theme. It's a model that Bloomberg's Alex Rojbondari says
has become the industry standard.
Speaker 1 (05:27):
Apollo is the first one to have really done it
in the US. Is basically using Athene and its capital
money that policyholders put in the company for their safety
in the future, use that to invest in products that
are originated by Apollo.
Speaker 2 (05:46):
Those products can be asset backed securities, they can be
loans to companies that Apollo owns, or other investment vehicles
tied to private credit.
Speaker 1 (05:55):
Those products yield more, so the narrative behind this is
that allows THEEN to be more profitable. What worries people
and pensioneers is that the THEENE has a tendency to
invest in private products that yield more, and those products
(06:15):
there's a lot of question marks around them today.
Speaker 2 (06:18):
Great, I mean you hear that private equity investments are
higher risk, but they're also higher reward potentially. I'm wondering
how private equity management of these retirement savings affect people's
monthly payments. Like if a private equity firm or Life
Mature manages the pension fund really really well, do pensioners
(06:39):
share in the profits.
Speaker 1 (06:41):
No, they don't, so the techs are supposed to remain
the same. The difference is in the backstop if a
pension fund or an insurance company fails. When a pension
fund fails, there is a federal fund that takes over
the payments to policyholders.
Speaker 2 (07:00):
Insurance, on the other hand, is regulated on a state
by state basis, which means the annuities they issue are
too so each state.
Speaker 1 (07:08):
As their own rules as to how insolvency is dealt with,
and there's usually what we call the guarantee Association that
will take over the policies, but there's a limit to that.
It's typically two hundred and fifty thousand dollars for a policy.
Speaker 2 (07:25):
So in other words, these retirees are not benefiting from
the potential of higher rewards, and in some cases they're
not protected from the potential of higher risks correct.
Speaker 3 (07:36):
Essentially, when a pension moves from a company to an ensure,
it's called a pension risk transfer. It takes those pensions
out of a federally protected system and sort of puts
it into markets which are overseen predominantly by the states
and state regulatory systems.
Speaker 2 (07:56):
And that's what concerns people like the former Allegheny Technologies
steal work Bill Shane Well worries me is.
Speaker 4 (08:02):
In the state of the economy and the affairs that
are going on or in the country now that if
this company goes under, I'm screwed.
Speaker 2 (08:10):
Life insurance companies typically hedge their own risks and by extension,
the risks of policyholders by buying something called reinsurance.
Speaker 1 (08:20):
Reinsurance in plain terms, is insurance for insurers. So a
company that's taking risk for its policy holders will decide
to shift some of that risk to another company.
Speaker 2 (08:33):
But in this case, Athene's reinsure is also owned by Athene.
Speaker 1 (08:38):
What Athene did is set up that reinsurre in Bermuda.
Bermuda is a worldwide marketplace for reinsurance. The idea and
the narrative for Athene is that they go there to
seek third party capital to take on that risk. And
that's true. The marketplace is so big in Bermuda, even
if it's a very tiny island in the middle of
(09:00):
the Atlantic Ocean, there is a lot of capital flowing
in to take that risk in that place. The problem
is Bermuda regulations are a bit softer than the ones
in the US. There's less visibility into what insurance companies
in Bermuda do with their assets. There's less granularity around investments.
(09:21):
The filings are much shorter than the ones in the US.
This doesn't mean that they don't have to disclose anything
to their regulator, and the regulator in Bermuda is overseeing everything,
but outside of servers, including policyholders and retirees, have less
of a view over that. And what people are worried
about is because we don't know so much about how
(09:42):
it's invested in Bermuda. We don't really know how the
backstop is going to play and be effective in the
event of a crisis or a downturn.
Speaker 2 (09:51):
What does it mean when Athene and Apollo have their
own essentially in house re ensure.
Speaker 1 (09:58):
That's a great question, and in indeed, usually you go
to a third party company to kind of spread risks
to other players and get it off your balance sheet.
And what Athene does is get it off its US
balance sheet, but it remains into the Athene group, and
that's getting a lot of people worried.
Speaker 2 (10:15):
We're not talking about anything illegal here, and Alex pointed
out that Athene has a regulatory ratio that's above four
hundred percent. That's a measure of how much capital and
insurer has to weather storms, and Athene's ratio is twice
the level that would trigger more regulatory scrutiny. An Athene
spokesperson told Bloomberg that quote, Athene's top priority is policyholder
(10:38):
protection and we are highly secure, transparent, and well capitalized
with thirty four billion dollars of regulatory capital. The company
says it maintains the same benefit reserves for its Bermuda
reinsurance subsidiaries as it does for its US subsidiaries. But
Alex says that what's raising concerns is not just Athene's
(10:59):
balance sheet, but the playbook it's created for other companies.
Speaker 1 (11:04):
What Athene does, other insurans have been doing it throughout
the country, and that increases risks in the system. According
to many insurance experts, there's like a lot of private
equity owned insurers that are doing the same strategies, and
sometimes they're not going to Bermuda, they're going to the
Canon Islands, which is a bit less transparent. There are
other players doing the same thing but pushing the envelope
(11:27):
on other points, and that's what gets a lot of
people worried about the industry in general.
Speaker 2 (11:33):
We get into those industry wide concerns where regulators stand
on this, and how the retired Allegheny steel workers are
trying to undo the Athene deal. After the break, the
(11:56):
financial crisis created the perfect conditions for private equity giants
to get into the life insurance business. Battered pe firms
needed more ways to bring in cash, and insurance providers
had tanking stocks and thin portfolios, making them cheap investments.
That's when Apollo set up a theme its own ensure
(12:18):
that could buy up other providers. Now over fifteen years later,
at a time when borrowing has become more expensive, Bloomberg's
alex Rajabondari says, the private equity industry is cash strapped again,
and that makes life insurance investments attractive.
Speaker 1 (12:35):
As the wave of boomers to laid boomers that are
reaching the edge of retirement and seeking security for retirement.
We're speaking of four hundred billion dollars put into annuities
every year.
Speaker 2 (12:48):
But as private equity gets more entrenched in the life
insurance industry and other firms continue to use Apollo's strategy
as their guide, the risks aren't just hypothetical. Alex talked
to one woman, Jenny Napo, whose family had a two
million dollar life insurance policy with a company called PHL
Variable Insurance Company. They'd paid their premiums for seventeen years,
(13:13):
but then the private equity firm that owned PHL unraveled,
in part because the insurer was making more payouts than
it projected it would have to. Regulators found the company
and its reinsurers faced a shortfall of more than two
billion dollars and told it to reduce payouts, and that
had consequences for policyholders. After Napo's husband died last year,
(13:37):
she didn't receive the two million dollars she expected. Instead,
she got three hundred thousand dollars.
Speaker 1 (13:44):
She doesn't know she's ever going to get more. The
regulator in Connecticut has taken over the administration of the
company and is basically limiting the payouts that the company
can make to policy holders to shield the balance sheet
of the company in his financial sending.
Speaker 2 (14:01):
The Connecticut Insurance Department, in a statement to Bloomberg, said
that its decision to initiate rehabilitation proceedings was quote grounded
in how to best maximize phl's assets and equitably administer
its business for the benefit of all policy holders. They
said they recognized the burdens it placed on policy holders
and that they were committed to rehabilitating the company. NASA
(14:24):
Financial Group, which previously owned PHL, told Bloomberg, we remain
committed to supporting the Connecticut Insurance Department in its efforts
to serve PHL policy holders. Golden Gate Capital, the private
equity owner of PHL, declined to comment. The potential for
this sort of scenario has concerned regulators for years. During
(14:45):
the Biden administration, regulators at the Financial Stability Oversight Council
and the Labor Department were actively talking about this kind
of risk.
Speaker 3 (14:54):
They heard from everybody, including a theme, and eventually said,
and this was just about it. Little morning a year
ago said we have a lot of concerns about these arrangements,
these relationships. The lack of transparency in certain spites, but
we're not going to do anything at the moment in
this space. We're going to sort of go with the
current sort of rules that we have.
Speaker 2 (15:14):
In other words, the Biden administration was concerned but didn't
take action, and now the Trump administration wants fewer regulations.
If anything. There's legislation in Congress to disband the Federal
Insurance Regulator and seed oversight to the states, and Trump
signed an executive order making it easier for Americans four
(15:34):
oh one ks to include alternative investments, including private assets. Meanwhile,
even as more Americans could see their life savings pulled
into the universe of private equity capital management, the Alleghany
mill workers are trying to undo the deal that impacted them.
They want to get their money out of a theme.
(15:57):
They've been holding meetings at an old union hall a
block from the mill where they used to work, to
share their concerns and organize.
Speaker 4 (16:11):
Company.
Speaker 3 (16:16):
They are suing their former company, Allegheny Technologies.
Speaker 2 (16:31):
They're referring to a requirement from the Labor Department that
when companies move pensions to an annuity provider, they have
to pick the safest available annuity provider.
Speaker 3 (16:41):
What they're alleging in their lawsuit is that Athene was
not the best annuity provider that could have been selected.
Speaker 2 (16:48):
In a statement to Bloomberg, Athene said, quote, these are
baseless complaints instigated by class action attorneys who are attempting
to enrich themselves at the expense of retirees. Alleghany, now
known as ATI, said in a statement that when it
sought to hand off its pension obligations, it hired an
outside advisor that selected a Theene declined to comment on
(17:09):
the lawsuit filed by former employees. Athene statement went on
to say that converting the pensions into annuities was a
win win quote. By moving pension management to Athene, ATI
met its obligations to retirees and made our pension contributions
and expenses more predictable. Tom, what's next for the Alleghany
(17:31):
steel workers? Where do things stand with the lawsuit?
Speaker 3 (17:34):
They had a hearing in court and that magistrate ruled
in favor of Alleghany, so against them, essentially saying that
you know that she was recommending that their lawsuit be
dismissed because they couldn't actually show that they've been harmed.
The checks keep coming, so the kind of the judge
overseeing this case is going to make a decision in
(17:54):
the next you know, next month or so. There's been
mixed rulings here, others like one bar by pension holders
from Lockheed, very similar case, same lawyers. A judge found
in Maryland federal judge that that case can move forward
and that's on appeal right now. So what's really what
we're seeing here is I think these things are going
(18:15):
to continue to be litigated.
Speaker 2 (18:18):
So far, the pe industry hasn't had a major stress
test since two thousand and eight, and that's influencing how
the risk is perceived and how these cases could play out.
Speaker 3 (18:29):
So we're really looking to see whether or not these
investments in private markets, in private credit, asset backed securities,
holateralized debt obligations, if something goes bad in one place,
whether it's going to have sort of a domino effect
throughout not just the insurance system, but the overall the
larger financial markets.
Speaker 2 (18:56):
This is the Big Take from Bloomberg News. I'm Sarah Holder.
To get more from the Big Take and unlimited access
to all of Bloomberg dot com, subscribe today at bloomberg
dot com slash podcast offer. If you like this episode,
make sure to follow and review The Big Take wherever
you listen to podcasts. It helps people find the show.
Thanks for listening. We'll be back tomorrow
Bloomberg Audio Studios, podcasts, radio news. Life insurance was not
a very exciting business before the financial crisis.
Speaker 2 (00:14):
Alex Rajbondari covers the US insurance sector for Bloomberg. He
says that for a long time, life insurance was considered
one of the dullest corners of the financial world, dependable,
no frills, low drama. But after the financial crisis, that
all changed because that's when a new group of players
(00:35):
started taking an interest in the industry.
Speaker 1 (00:38):
As soon as private equity got involved. I mean at
wool Street, a lot of people are working on this
and there's a lot of money flowing in.
Speaker 2 (00:44):
Private equity isn't known for being low drama. They use
their pools of capital to take riskier bets on alternative
assets in the hopes of getting larger returns. And when
private equity firms started buying up life insurers in the
wake of the market crash, they had a plan to
transform the entities from sleepy financial backstops into money making machines. Today,
(01:07):
the subsidiaries of private equity firms manage billions of dollars
worth of life insurance policies and annuities and are able
to invest premiums and retirement savings into opaque markets.
Speaker 1 (01:19):
The National Association of Insurance Commissioners estimates there's one hundred
and thirty nine insurers in the country that are owned
by private equity. Most of them, the vast majority of them,
are life insurers. That represents seven hundred billion in assets
just for the US. It's a fraction of the entire industry,
(01:40):
but it's definitely a significant one.
Speaker 3 (01:42):
You can imagine people who have been in retirement, some
for decades, are sort of wondering what does this mean
and trying to find out.
Speaker 2 (01:51):
That's Tom Schoenberg, who covers financial regulation for Bloomberg. As
he and Alex track private equity's growing influence in the
life insurance industry, they too have been trying to find
out what their strategy means for policy holders, retirees, and
the economy at large.
Speaker 3 (02:10):
This kind of strategy adopted by most large insurers has
yet to be road tested in crisis. So I would
borrow sort of a phrase from back then, has this
now become too big to fail?
Speaker 2 (02:25):
I'm Sarah Holder, and this is the big take from
Bloomberg News today. On the show, how private equity came
to control a growing share of life insurance and retirement plans,
and why the industry's complex strategy could expose America's retirees
to new risks. Back in August, Bloomberg's Tom Schoenberg took
(02:50):
a trip to Brackenridge, Pennsylvania.
Speaker 3 (02:53):
Kind of northeast of Pittsburgh. You know, it's a Stickell
mill town. The mills called Allegheny Technologies. That's the company.
They own a number of different mess I mean, they've
produced everything from cannon balls for the Revolutionary War, produced
steel for the Chrysler building or for the Ford Model
a car.
Speaker 2 (03:11):
There he met retirees like Bill Shane, who spent thirty
eight years at Alleghany Technologies before retiring in two thousand
and five.
Speaker 4 (03:19):
I'm seventy six years old with lots of medical problems.
I'm not going out and get any physical job anymore.
I can't do that. Pension is very important to everybody
that works in the plant.
Speaker 2 (03:31):
Until a couple of years ago, Shane and his other
former Alleghany Technologies steel worker colleagues got their pensions directly
from the company.
Speaker 3 (03:41):
Depending upon when they retired, they were set with a
specific amount of money that they'd receive every month. If
they had an issue, an yet problems, spouse dies and
they need to access benefits, they call their former employer.
Speaker 2 (03:56):
And so what changed.
Speaker 3 (03:57):
It was about two years ago in the employees started
getting notifications in the mail that Alleghany was no longer
going to be in charge of their pensions, that it's
now going to be handled by company named Athene. You know,
most of these workers, they had no idea who Athene
was what it was.
Speaker 2 (04:14):
Athene is a life insurance arm of Apollo Global Management,
a giant in alternative asset management, including private equity. When
Alleghany Technologies turned over its pension fund to Athene, the
employee's monthly pension payouts from their former employer became monthly
annuity payments from Athene. That rattled workers like Shane.
Speaker 4 (04:38):
How do you just throw something out there to someone
who we're sending you a pension at a new How
do you even know what annuity was?
Speaker 2 (04:46):
Quite frankly, annuities are a different way of saving for retirement.
A person or a company buys an annuity by giving
a big chunk of money to an insurance company. The
insurer invests that money and the people who hold the
annuities get a predictable payout over time. In all, Athene
has converted more than fifty billion dollars worth of pension
(05:08):
funds into annuities, including one and a half billion dollars
worth of Allegheny Technologies pensions. Those workers' retirement savings are
added to a giant pot of money that's managed by
a theme. It's a model that Bloomberg's Alex Rojbondari says
has become the industry standard.
Speaker 1 (05:27):
Apollo is the first one to have really done it
in the US. Is basically using Athene and its capital
money that policyholders put in the company for their safety
in the future, use that to invest in products that
are originated by Apollo.
Speaker 2 (05:46):
Those products can be asset backed securities, they can be
loans to companies that Apollo owns, or other investment vehicles
tied to private credit.
Speaker 1 (05:55):
Those products yield more, so the narrative behind this is
that allows THEEN to be more profitable. What worries people
and pensioneers is that the THEENE has a tendency to
invest in private products that yield more, and those products
(06:15):
there's a lot of question marks around them today.
Speaker 2 (06:18):
Great, I mean you hear that private equity investments are
higher risk, but they're also higher reward potentially. I'm wondering
how private equity management of these retirement savings affect people's
monthly payments. Like if a private equity firm or Life
Mature manages the pension fund really really well, do pensioners
(06:39):
share in the profits.
Speaker 1 (06:41):
No, they don't, so the techs are supposed to remain
the same. The difference is in the backstop if a
pension fund or an insurance company fails. When a pension
fund fails, there is a federal fund that takes over
the payments to policyholders.
Speaker 2 (07:00):
Insurance, on the other hand, is regulated on a state
by state basis, which means the annuities they issue are
too so each state.
Speaker 1 (07:08):
As their own rules as to how insolvency is dealt with,
and there's usually what we call the guarantee Association that
will take over the policies, but there's a limit to that.
It's typically two hundred and fifty thousand dollars for a policy.
Speaker 2 (07:25):
So in other words, these retirees are not benefiting from
the potential of higher rewards, and in some cases they're
not protected from the potential of higher risks correct.
Speaker 3 (07:36):
Essentially, when a pension moves from a company to an ensure,
it's called a pension risk transfer. It takes those pensions
out of a federally protected system and sort of puts
it into markets which are overseen predominantly by the states
and state regulatory systems.
Speaker 2 (07:56):
And that's what concerns people like the former Allegheny Technologies
steal work Bill Shane Well worries me is.
Speaker 4 (08:02):
In the state of the economy and the affairs that
are going on or in the country now that if
this company goes under, I'm screwed.
Speaker 2 (08:10):
Life insurance companies typically hedge their own risks and by extension,
the risks of policyholders by buying something called reinsurance.
Speaker 1 (08:20):
Reinsurance in plain terms, is insurance for insurers. So a
company that's taking risk for its policy holders will decide
to shift some of that risk to another company.
Speaker 2 (08:33):
But in this case, Athene's reinsure is also owned by Athene.
Speaker 1 (08:38):
What Athene did is set up that reinsurre in Bermuda.
Bermuda is a worldwide marketplace for reinsurance. The idea and
the narrative for Athene is that they go there to
seek third party capital to take on that risk. And
that's true. The marketplace is so big in Bermuda, even
if it's a very tiny island in the middle of
(09:00):
the Atlantic Ocean, there is a lot of capital flowing
in to take that risk in that place. The problem
is Bermuda regulations are a bit softer than the ones
in the US. There's less visibility into what insurance companies
in Bermuda do with their assets. There's less granularity around investments.
(09:21):
The filings are much shorter than the ones in the US.
This doesn't mean that they don't have to disclose anything
to their regulator, and the regulator in Bermuda is overseeing everything,
but outside of servers, including policyholders and retirees, have less
of a view over that. And what people are worried
about is because we don't know so much about how
(09:42):
it's invested in Bermuda. We don't really know how the
backstop is going to play and be effective in the
event of a crisis or a downturn.
Speaker 2 (09:51):
What does it mean when Athene and Apollo have their
own essentially in house re ensure.
Speaker 1 (09:58):
That's a great question, and in indeed, usually you go
to a third party company to kind of spread risks
to other players and get it off your balance sheet.
And what Athene does is get it off its US
balance sheet, but it remains into the Athene group, and
that's getting a lot of people worried.
Speaker 2 (10:15):
We're not talking about anything illegal here, and Alex pointed
out that Athene has a regulatory ratio that's above four
hundred percent. That's a measure of how much capital and
insurer has to weather storms, and Athene's ratio is twice
the level that would trigger more regulatory scrutiny. An Athene
spokesperson told Bloomberg that quote, Athene's top priority is policyholder
(10:38):
protection and we are highly secure, transparent, and well capitalized
with thirty four billion dollars of regulatory capital. The company
says it maintains the same benefit reserves for its Bermuda
reinsurance subsidiaries as it does for its US subsidiaries. But
Alex says that what's raising concerns is not just Athene's
(10:59):
balance sheet, but the playbook it's created for other companies.
Speaker 1 (11:04):
What Athene does, other insurans have been doing it throughout
the country, and that increases risks in the system. According
to many insurance experts, there's like a lot of private
equity owned insurers that are doing the same strategies, and
sometimes they're not going to Bermuda, they're going to the
Canon Islands, which is a bit less transparent. There are
other players doing the same thing but pushing the envelope
(11:27):
on other points, and that's what gets a lot of
people worried about the industry in general.
Speaker 2 (11:33):
We get into those industry wide concerns where regulators stand
on this, and how the retired Allegheny steel workers are
trying to undo the Athene deal. After the break, the
(11:56):
financial crisis created the perfect conditions for private equity giants
to get into the life insurance business. Battered pe firms
needed more ways to bring in cash, and insurance providers
had tanking stocks and thin portfolios, making them cheap investments.
That's when Apollo set up a theme its own ensure
(12:18):
that could buy up other providers. Now over fifteen years later,
at a time when borrowing has become more expensive, Bloomberg's
alex Rajabondari says, the private equity industry is cash strapped again,
and that makes life insurance investments attractive.
Speaker 1 (12:35):
As the wave of boomers to laid boomers that are
reaching the edge of retirement and seeking security for retirement.
We're speaking of four hundred billion dollars put into annuities
every year.
Speaker 2 (12:48):
But as private equity gets more entrenched in the life
insurance industry and other firms continue to use Apollo's strategy
as their guide, the risks aren't just hypothetical. Alex talked
to one woman, Jenny Napo, whose family had a two
million dollar life insurance policy with a company called PHL
Variable Insurance Company. They'd paid their premiums for seventeen years,
(13:13):
but then the private equity firm that owned PHL unraveled,
in part because the insurer was making more payouts than
it projected it would have to. Regulators found the company
and its reinsurers faced a shortfall of more than two
billion dollars and told it to reduce payouts, and that
had consequences for policyholders. After Napo's husband died last year,
(13:37):
she didn't receive the two million dollars she expected. Instead,
she got three hundred thousand dollars.
Speaker 1 (13:44):
She doesn't know she's ever going to get more. The
regulator in Connecticut has taken over the administration of the
company and is basically limiting the payouts that the company
can make to policy holders to shield the balance sheet
of the company in his financial sending.
Speaker 2 (14:01):
The Connecticut Insurance Department, in a statement to Bloomberg, said
that its decision to initiate rehabilitation proceedings was quote grounded
in how to best maximize phl's assets and equitably administer
its business for the benefit of all policy holders. They
said they recognized the burdens it placed on policy holders
and that they were committed to rehabilitating the company. NASA
(14:24):
Financial Group, which previously owned PHL, told Bloomberg, we remain
committed to supporting the Connecticut Insurance Department in its efforts
to serve PHL policy holders. Golden Gate Capital, the private
equity owner of PHL, declined to comment. The potential for
this sort of scenario has concerned regulators for years. During
(14:45):
the Biden administration, regulators at the Financial Stability Oversight Council
and the Labor Department were actively talking about this kind
of risk.
Speaker 3 (14:54):
They heard from everybody, including a theme, and eventually said,
and this was just about it. Little morning a year
ago said we have a lot of concerns about these arrangements,
these relationships. The lack of transparency in certain spites, but
we're not going to do anything at the moment in
this space. We're going to sort of go with the
current sort of rules that we have.
Speaker 2 (15:14):
In other words, the Biden administration was concerned but didn't
take action, and now the Trump administration wants fewer regulations.
If anything. There's legislation in Congress to disband the Federal
Insurance Regulator and seed oversight to the states, and Trump
signed an executive order making it easier for Americans four
(15:34):
oh one ks to include alternative investments, including private assets. Meanwhile,
even as more Americans could see their life savings pulled
into the universe of private equity capital management, the Alleghany
mill workers are trying to undo the deal that impacted them.
They want to get their money out of a theme.
(15:57):
They've been holding meetings at an old union hall a
block from the mill where they used to work, to
share their concerns and organize.
Speaker 4 (16:11):
Company.
Speaker 3 (16:16):
They are suing their former company, Allegheny Technologies.
Speaker 2 (16:31):
They're referring to a requirement from the Labor Department that
when companies move pensions to an annuity provider, they have
to pick the safest available annuity provider.
Speaker 3 (16:41):
What they're alleging in their lawsuit is that Athene was
not the best annuity provider that could have been selected.
Speaker 2 (16:48):
In a statement to Bloomberg, Athene said, quote, these are
baseless complaints instigated by class action attorneys who are attempting
to enrich themselves at the expense of retirees. Alleghany, now
known as ATI, said in a statement that when it
sought to hand off its pension obligations, it hired an
outside advisor that selected a Theene declined to comment on
(17:09):
the lawsuit filed by former employees. Athene statement went on
to say that converting the pensions into annuities was a
win win quote. By moving pension management to Athene, ATI
met its obligations to retirees and made our pension contributions
and expenses more predictable. Tom, what's next for the Alleghany
(17:31):
steel workers? Where do things stand with the lawsuit?
Speaker 3 (17:34):
They had a hearing in court and that magistrate ruled
in favor of Alleghany, so against them, essentially saying that
you know that she was recommending that their lawsuit be
dismissed because they couldn't actually show that they've been harmed.
The checks keep coming, so the kind of the judge
overseeing this case is going to make a decision in
(17:54):
the next you know, next month or so. There's been
mixed rulings here, others like one bar by pension holders
from Lockheed, very similar case, same lawyers. A judge found
in Maryland federal judge that that case can move forward
and that's on appeal right now. So what's really what
we're seeing here is I think these things are going
(18:15):
to continue to be litigated.
Speaker 2 (18:18):
So far, the pe industry hasn't had a major stress
test since two thousand and eight, and that's influencing how
the risk is perceived and how these cases could play out.
Speaker 3 (18:29):
So we're really looking to see whether or not these
investments in private markets, in private credit, asset backed securities,
holateralized debt obligations, if something goes bad in one place,
whether it's going to have sort of a domino effect
throughout not just the insurance system, but the overall the
larger financial markets.
Speaker 2 (18:56):
This is the Big Take from Bloomberg News. I'm Sarah Holder.
To get more from the Big Take and unlimited access
to all of Bloomberg dot com, subscribe today at bloomberg
dot com slash podcast offer. If you like this episode,
make sure to follow and review The Big Take wherever
you listen to podcasts. It helps people find the show.
Thanks for listening. We'll be back tomorrow
Hosts And Creators
Sarah Holder
Saleha Mohsin
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