Close
Updated:

Annuity Assets are Hot Commodities Among Investment Managers Private-Equity Groups, and Hedge Fund-Controlled Entities

According to the Wall Street Journal, Guggenheim Partners, Harbinger Capital Partners, and Apollo Global Management are just some of the money managers who have begun to acquire fixed annuities. These investments, which were sold by life insurance companies to conservative savers for decades, are now being seen by these newest buyers as a way to increase money under management. Many of these entities, which are controlled by private-equity groups, hedge funds, and other investment managers, believe that their investment savvy will allow them to discover profits where traditional insurance companies were unable to do so. Such acquisitions could provide a more stable income source.

For example, following its acquisition of a couple of midsize insurers this summer by its affiliates, Guggenheim, the $160 billion money manager. won credit-ratings upgrades. Meantime, Athene Annuity & Life, which said it would pay $415 million for Presidential Life Corp., will add about $3.5 billion in assets if Presidential shareholders approve the deal. As for Apollo Global Management, it is seeking to establish a retirement-savings company that is a market leader.

Some of these new annuity owners are offering products that come with terms that are now more generous for clients, while others want to make money off the business blocks they’ve acquired. The National Organization of Life & Health Insurance Guaranty Associations says that to get US consumers to buy annuities, firms have to set up state-based insurance units that are governed by the same risk-based-capital rules that other insurers have to follow.

A number of life insurers are still up for auction.

“This is a potential disaster for millions who bought annuities in the past,” Securities Attorney William Shepherd. “Most of those annuities were not good financial investments at the time because, despite what the investor was being told, the actual ‘internal rate of return’ to the investor was only 3.5% to 5.5%. Meanwhile, that investor could have earned a much higher return on other safe investments. Yet, as interest rates have plummeted, those same annuities have become good investments, while the insurance companies are losing money. Enter the money sharks! They first earn fees for creating insurance companies to take over those annuity contracts from the insurance companies. Then these sharks can gamble with the annuity reserves to make higher returns than these pay out. But it is ‘heads’ they win, ‘tails’ the annuity owners lose and end up with nothing. Note that these money sharks are also using the rating agencies to boost the allusion that the new insurance companies being created are safe. Sound familiar? Remember all those AAA rated mortgage derivatives that were really worthless?”

At Shepherd Smith Edwards and Kantas, LTD, LLP, Our securities fraud lawyers represent victims of annuity fraud throughout the US. Your initial case evaluation with our annuity fraud law firm is free.

Insurers Shed Annuity Assets, Wall Street Journal, October 17, 2012

More Blog Posts:
Texas Securities Fraud: District Court Says Houston-Based Private Equity Firm Can Proceed with Claim Over $10M Film Financing Investment, Stockbroker Fraud Blog, October 19, 2012

2nd Circuit Affirms Dismissal of $18.5M Auction-Rate Securities Lawsuit Against Merrill Lynch Filed by Anschutz Corp., Institutional Investor Securities Blog, August 23, 2012

Morgan Stanley Reports a Possible $1.7B in Mortgage-Backed Securities Losses, Institutional Investor Securities Blog, August 16, 2011

Contact Us
Live Chat