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Apollo agrees to policyholder protections in Athene-Aviva deal

By Karen Freifeld

NEW YORK (Reuters) - Apollo Global Management has agreed to "enhanced" safeguards for policyholders as part of Athene Holding Ltd's planned purchase of the New York subsidiary of Aviva USA, New York's financial regulator said on Wednesday.

Athene Holding, a retirement savings provider, is funded by an affiliate of Apollo Global Management, an alternative investment manager.

The new policyholder protections include higher capital standards, greater disclosure and enhanced regulatory scrutiny, the superintendent of New York's Department of Financial Services said in a statement.

The safeguards are meant to address the emerging trend of private equity firms entering the annuity business, whose shorter-term business model than traditional insurers raises concerns, said Benjamin Lawsky, the New York superintendent.

Athene Holding plans a $1.55 billion purchase of the U.S. annuity business of Britain's Aviva Plc, whose U.S. operations are headquartered in Iowa.

Aviva's New York-based unit, which needs Lawsky's approval, represents less than 3 percent of Aviva's U.S. operations.

The Iowa's insurance division will decide later this week whether to approve Athene's acquisition of Aviva USA, Iowa insurance spokesman Tom Alger said. The state held a hearing on the transaction last month.

The New York regulator insisted on enhanced policyholder protections to approve the acquisition of Aviva Life and Annuity Company of New York, which is necessary for the overall deal to move forward, according to a person familiar with the matter.

New York wanted higher capital standards because they serve as a buffer to absorb unexpected losses. Aviva New York agreed to capital levels of not less than 450 percent and a separate backstop account with $35 million.

"Athene is pleased to establish these enhanced policyholder protection agreements," the company's chief executive, Jim Belardi, said in a statement.

Athene's acquisition of Aviva USA is expected to close early in the fourth quarter, according to the statement.

Apollo is the second major firm to agree to New York's model. Guggenheim Partners last month agreed to similar protections as part of its planned purchase of Sun Life Insurance and Annuity Company.

"When it comes to these sorts of deals, we need to ensure we are putting retirees who depend on these annuities first," Lawsky said in the statement.

Retirees and other long-term investors typically buy annuities that guarantee minimum monthly payments.

(Reporting By Karen Freifeld; Additional reporting by Greg Roumeliotis; Editing by Leslie Adler)

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