1
00:00:02,720 --> 00:00:10,159
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Life insurance was not

2
00:00:10,200 --> 00:00:13,320
Speaker 1: a very exciting business before the financial crisis.

3
00:00:14,000 --> 00:00:18,479
Speaker 2: Alex Rajbondari covers the US insurance sector for Bloomberg. He

4
00:00:18,600 --> 00:00:21,960
Speaker 2: says that for a long time, life insurance was considered

5
00:00:22,000 --> 00:00:26,000
Speaker 2: one of the dullest corners of the financial world, dependable,

6
00:00:26,520 --> 00:00:31,720
Speaker 2: no frills, low drama. But after the financial crisis, that

7
00:00:31,840 --> 00:00:35,320
Speaker 2: all changed because that's when a new group of players

8
00:00:35,360 --> 00:00:37,680
Speaker 2: started taking an interest in the industry.

9
00:00:38,000 --> 00:00:40,199
Speaker 1: As soon as private equity got involved. I mean at

10
00:00:40,200 --> 00:00:41,920
Speaker 1: wool Street, a lot of people are working on this

11
00:00:42,040 --> 00:00:43,839
Speaker 1: and there's a lot of money flowing in.

12
00:00:44,120 --> 00:00:47,720
Speaker 2: Private equity isn't known for being low drama. They use

13
00:00:47,800 --> 00:00:51,159
Speaker 2: their pools of capital to take riskier bets on alternative

14
00:00:51,200 --> 00:00:55,360
Speaker 2: assets in the hopes of getting larger returns. And when

15
00:00:55,400 --> 00:00:58,200
Speaker 2: private equity firms started buying up life insurers in the

16
00:00:58,200 --> 00:01:00,920
Speaker 2: wake of the market crash, they had a plan to

17
00:01:01,040 --> 00:01:07,679
Speaker 2: transform the entities from sleepy financial backstops into money making machines. Today,

18
00:01:07,880 --> 00:01:11,440
Speaker 2: the subsidiaries of private equity firms manage billions of dollars

19
00:01:11,520 --> 00:01:14,920
Speaker 2: worth of life insurance policies and annuities and are able

20
00:01:14,959 --> 00:01:19,479
Speaker 2: to invest premiums and retirement savings into opaque markets.

21
00:01:19,959 --> 00:01:23,800
Speaker 1: The National Association of Insurance Commissioners estimates there's one hundred

22
00:01:23,840 --> 00:01:27,080
Speaker 1: and thirty nine insurers in the country that are owned

23
00:01:27,080 --> 00:01:30,200
Speaker 1: by private equity. Most of them, the vast majority of them,

24
00:01:30,640 --> 00:01:35,959
Speaker 1: are life insurers. That represents seven hundred billion in assets

25
00:01:36,520 --> 00:01:39,960
Speaker 1: just for the US. It's a fraction of the entire industry,

26
00:01:40,200 --> 00:01:42,400
Speaker 1: but it's definitely a significant one.

27
00:01:42,520 --> 00:01:45,840
Speaker 3: You can imagine people who have been in retirement, some

28
00:01:46,040 --> 00:01:49,360
Speaker 3: for decades, are sort of wondering what does this mean

29
00:01:49,480 --> 00:01:50,600
Speaker 3: and trying to find out.

30
00:01:51,160 --> 00:01:56,280
Speaker 2: That's Tom Schoenberg, who covers financial regulation for Bloomberg. As

31
00:01:56,320 --> 00:01:59,360
Speaker 2: he and Alex track private equity's growing influence in the

32
00:01:59,360 --> 00:02:02,760
Speaker 2: life insurance industry, they too have been trying to find

33
00:02:02,760 --> 00:02:07,680
Speaker 2: out what their strategy means for policy holders, retirees, and

34
00:02:07,960 --> 00:02:09,079
Speaker 2: the economy at large.

35
00:02:10,480 --> 00:02:14,480
Speaker 3: This kind of strategy adopted by most large insurers has

36
00:02:14,560 --> 00:02:17,720
Speaker 3: yet to be road tested in crisis. So I would

37
00:02:17,760 --> 00:02:20,480
Speaker 3: borrow sort of a phrase from back then, has this

38
00:02:20,560 --> 00:02:21,720
Speaker 3: now become too big to fail?

39
00:02:25,200 --> 00:02:27,480
Speaker 2: I'm Sarah Holder, and this is the big take from

40
00:02:27,520 --> 00:02:31,400
Speaker 2: Bloomberg News today. On the show, how private equity came

41
00:02:31,440 --> 00:02:35,120
Speaker 2: to control a growing share of life insurance and retirement plans,

42
00:02:35,680 --> 00:02:40,600
Speaker 2: and why the industry's complex strategy could expose America's retirees

43
00:02:40,840 --> 00:02:50,280
Speaker 2: to new risks. Back in August, Bloomberg's Tom Schoenberg took

44
00:02:50,280 --> 00:02:53,480
Speaker 2: a trip to Brackenridge, Pennsylvania.

45
00:02:53,120 --> 00:02:55,320
Speaker 3: Kind of northeast of Pittsburgh. You know, it's a Stickell

46
00:02:55,360 --> 00:02:58,960
Speaker 3: mill town. The mills called Allegheny Technologies. That's the company.

47
00:02:58,960 --> 00:03:01,440
Speaker 3: They own a number of different mess I mean, they've

48
00:03:01,480 --> 00:03:06,760
Speaker 3: produced everything from cannon balls for the Revolutionary War, produced

49
00:03:06,760 --> 00:03:09,640
Speaker 3: steel for the Chrysler building or for the Ford Model

50
00:03:09,680 --> 00:03:10,440
Speaker 3: a car.

51
00:03:11,000 --> 00:03:15,000
Speaker 2: There he met retirees like Bill Shane, who spent thirty

52
00:03:15,000 --> 00:03:18,760
Speaker 2: eight years at Alleghany Technologies before retiring in two thousand

53
00:03:18,760 --> 00:03:19,079
Speaker 2: and five.

54
00:03:19,560 --> 00:03:22,520
Speaker 4: I'm seventy six years old with lots of medical problems.

55
00:03:22,600 --> 00:03:26,560
Speaker 4: I'm not going out and get any physical job anymore.

56
00:03:26,639 --> 00:03:30,360
Speaker 4: I can't do that. Pension is very important to everybody

57
00:03:30,400 --> 00:03:31,520
Speaker 4: that works in the plant.

58
00:03:31,919 --> 00:03:34,600
Speaker 2: Until a couple of years ago, Shane and his other

59
00:03:34,840 --> 00:03:39,720
Speaker 2: former Alleghany Technologies steel worker colleagues got their pensions directly

60
00:03:39,760 --> 00:03:40,560
Speaker 2: from the company.

61
00:03:41,000 --> 00:03:44,640
Speaker 3: Depending upon when they retired, they were set with a

62
00:03:44,680 --> 00:03:48,520
Speaker 3: specific amount of money that they'd receive every month. If

63
00:03:48,560 --> 00:03:52,520
Speaker 3: they had an issue, an yet problems, spouse dies and

64
00:03:52,640 --> 00:03:55,920
Speaker 3: they need to access benefits, they call their former employer.

65
00:03:56,200 --> 00:03:57,440
Speaker 2: And so what changed.

66
00:03:57,880 --> 00:04:00,640
Speaker 3: It was about two years ago in the employees started

67
00:04:00,640 --> 00:04:03,960
Speaker 3: getting notifications in the mail that Alleghany was no longer

68
00:04:04,000 --> 00:04:06,040
Speaker 3: going to be in charge of their pensions, that it's

69
00:04:06,080 --> 00:04:09,360
Speaker 3: now going to be handled by company named Athene. You know,

70
00:04:09,400 --> 00:04:11,960
Speaker 3: most of these workers, they had no idea who Athene

71
00:04:12,040 --> 00:04:12,840
Speaker 3: was what it was.

72
00:04:14,600 --> 00:04:18,760
Speaker 2: Athene is a life insurance arm of Apollo Global Management,

73
00:04:19,200 --> 00:04:24,000
Speaker 2: a giant in alternative asset management, including private equity. When

74
00:04:24,040 --> 00:04:27,880
Speaker 2: Alleghany Technologies turned over its pension fund to Athene, the

75
00:04:27,920 --> 00:04:32,400
Speaker 2: employee's monthly pension payouts from their former employer became monthly

76
00:04:32,560 --> 00:04:37,760
Speaker 2: annuity payments from Athene. That rattled workers like Shane.

77
00:04:38,279 --> 00:04:41,159
Speaker 4: How do you just throw something out there to someone

78
00:04:41,200 --> 00:04:43,960
Speaker 4: who we're sending you a pension at a new How

79
00:04:43,960 --> 00:04:45,760
Speaker 4: do you even know what annuity was?

80
00:04:46,600 --> 00:04:51,200
Speaker 2: Quite frankly, annuities are a different way of saving for retirement.

81
00:04:51,920 --> 00:04:55,240
Speaker 2: A person or a company buys an annuity by giving

82
00:04:55,279 --> 00:04:58,000
Speaker 2: a big chunk of money to an insurance company. The

83
00:04:58,120 --> 00:05:00,880
Speaker 2: insurer invests that money and the people who hold the

84
00:05:00,880 --> 00:05:05,320
Speaker 2: annuities get a predictable payout over time. In all, Athene

85
00:05:05,320 --> 00:05:08,360
Speaker 2: has converted more than fifty billion dollars worth of pension

86
00:05:08,400 --> 00:05:11,800
Speaker 2: funds into annuities, including one and a half billion dollars

87
00:05:11,839 --> 00:05:16,920
Speaker 2: worth of Allegheny Technologies pensions. Those workers' retirement savings are

88
00:05:16,960 --> 00:05:19,680
Speaker 2: added to a giant pot of money that's managed by

89
00:05:19,680 --> 00:05:24,160
Speaker 2: a theme. It's a model that Bloomberg's Alex Rojbondari says

90
00:05:24,560 --> 00:05:26,440
Speaker 2: has become the industry standard.

91
00:05:27,760 --> 00:05:29,680
Speaker 1: Apollo is the first one to have really done it

92
00:05:29,720 --> 00:05:34,440
Speaker 1: in the US. Is basically using Athene and its capital

93
00:05:34,520 --> 00:05:39,000
Speaker 1: money that policyholders put in the company for their safety

94
00:05:39,000 --> 00:05:44,280
Speaker 1: in the future, use that to invest in products that

95
00:05:44,360 --> 00:05:46,080
Speaker 1: are originated by Apollo.

96
00:05:46,760 --> 00:05:49,919
Speaker 2: Those products can be asset backed securities, they can be

97
00:05:50,000 --> 00:05:53,719
Speaker 2: loans to companies that Apollo owns, or other investment vehicles

98
00:05:53,839 --> 00:05:55,000
Speaker 2: tied to private credit.

99
00:05:55,480 --> 00:06:00,200
Speaker 1: Those products yield more, so the narrative behind this is

100
00:06:01,000 --> 00:06:06,440
Speaker 1: that allows THEEN to be more profitable. What worries people

101
00:06:06,520 --> 00:06:11,080
Speaker 1: and pensioneers is that the THEENE has a tendency to

102
00:06:11,120 --> 00:06:15,320
Speaker 1: invest in private products that yield more, and those products

103
00:06:15,560 --> 00:06:18,400
Speaker 1: there's a lot of question marks around them today.

104
00:06:18,720 --> 00:06:21,279
Speaker 2: Great, I mean you hear that private equity investments are

105
00:06:21,720 --> 00:06:26,840
Speaker 2: higher risk, but they're also higher reward potentially. I'm wondering

106
00:06:26,880 --> 00:06:31,479
Speaker 2: how private equity management of these retirement savings affect people's

107
00:06:31,520 --> 00:06:34,760
Speaker 2: monthly payments. Like if a private equity firm or Life

108
00:06:34,800 --> 00:06:38,920
Speaker 2: Mature manages the pension fund really really well, do pensioners

109
00:06:39,000 --> 00:06:40,360
Speaker 2: share in the profits.

110
00:06:41,520 --> 00:06:44,200
Speaker 1: No, they don't, so the techs are supposed to remain

111
00:06:44,279 --> 00:06:48,719
Speaker 1: the same. The difference is in the backstop if a

112
00:06:48,800 --> 00:06:52,600
Speaker 1: pension fund or an insurance company fails. When a pension

113
00:06:52,640 --> 00:06:56,400
Speaker 1: fund fails, there is a federal fund that takes over

114
00:06:56,440 --> 00:06:58,560
Speaker 1: the payments to policyholders.

115
00:07:00,000 --> 00:07:02,760
Speaker 2: Insurance, on the other hand, is regulated on a state

116
00:07:02,800 --> 00:07:06,320
Speaker 2: by state basis, which means the annuities they issue are

117
00:07:06,400 --> 00:07:08,400
Speaker 2: too so each state.

118
00:07:08,520 --> 00:07:11,880
Speaker 1: As their own rules as to how insolvency is dealt with,

119
00:07:12,840 --> 00:07:17,280
Speaker 1: and there's usually what we call the guarantee Association that

120
00:07:17,360 --> 00:07:20,800
Speaker 1: will take over the policies, but there's a limit to that.

121
00:07:21,040 --> 00:07:24,880
Speaker 1: It's typically two hundred and fifty thousand dollars for a policy.

122
00:07:25,520 --> 00:07:29,080
Speaker 2: So in other words, these retirees are not benefiting from

123
00:07:29,280 --> 00:07:32,520
Speaker 2: the potential of higher rewards, and in some cases they're

124
00:07:32,560 --> 00:07:36,160
Speaker 2: not protected from the potential of higher risks correct.

125
00:07:36,320 --> 00:07:41,160
Speaker 3: Essentially, when a pension moves from a company to an ensure,

126
00:07:41,880 --> 00:07:46,360
Speaker 3: it's called a pension risk transfer. It takes those pensions

127
00:07:46,400 --> 00:07:50,040
Speaker 3: out of a federally protected system and sort of puts

128
00:07:50,120 --> 00:07:54,080
Speaker 3: it into markets which are overseen predominantly by the states

129
00:07:54,200 --> 00:07:55,960
Speaker 3: and state regulatory systems.

130
00:07:56,160 --> 00:07:59,440
Speaker 2: And that's what concerns people like the former Allegheny Technologies

131
00:07:59,480 --> 00:08:02,320
Speaker 2: steal work Bill Shane Well worries me is.

132
00:08:02,360 --> 00:08:04,720
Speaker 4: In the state of the economy and the affairs that

133
00:08:04,760 --> 00:08:07,000
Speaker 4: are going on or in the country now that if

134
00:08:07,000 --> 00:08:10,240
Speaker 4: this company goes under, I'm screwed.

135
00:08:10,680 --> 00:08:15,200
Speaker 2: Life insurance companies typically hedge their own risks and by extension,

136
00:08:15,280 --> 00:08:19,520
Speaker 2: the risks of policyholders by buying something called reinsurance.

137
00:08:20,120 --> 00:08:25,160
Speaker 1: Reinsurance in plain terms, is insurance for insurers. So a

138
00:08:25,240 --> 00:08:28,960
Speaker 1: company that's taking risk for its policy holders will decide

139
00:08:29,000 --> 00:08:31,600
Speaker 1: to shift some of that risk to another company.

140
00:08:33,040 --> 00:08:38,000
Speaker 2: But in this case, Athene's reinsure is also owned by Athene.

141
00:08:38,559 --> 00:08:42,040
Speaker 1: What Athene did is set up that reinsurre in Bermuda.

142
00:08:42,200 --> 00:08:48,200
Speaker 1: Bermuda is a worldwide marketplace for reinsurance. The idea and

143
00:08:48,280 --> 00:08:51,680
Speaker 1: the narrative for Athene is that they go there to

144
00:08:51,880 --> 00:08:55,080
Speaker 1: seek third party capital to take on that risk. And

145
00:08:55,120 --> 00:08:58,280
Speaker 1: that's true. The marketplace is so big in Bermuda, even

146
00:08:58,320 --> 00:08:59,920
Speaker 1: if it's a very tiny island in the middle of

147
00:09:00,080 --> 00:09:03,360
Speaker 1: the Atlantic Ocean, there is a lot of capital flowing

148
00:09:03,400 --> 00:09:06,840
Speaker 1: in to take that risk in that place. The problem

149
00:09:06,960 --> 00:09:11,040
Speaker 1: is Bermuda regulations are a bit softer than the ones

150
00:09:11,080 --> 00:09:16,400
Speaker 1: in the US. There's less visibility into what insurance companies

151
00:09:16,400 --> 00:09:21,200
Speaker 1: in Bermuda do with their assets. There's less granularity around investments.

152
00:09:21,840 --> 00:09:25,240
Speaker 1: The filings are much shorter than the ones in the US.

153
00:09:25,679 --> 00:09:28,040
Speaker 1: This doesn't mean that they don't have to disclose anything

154
00:09:28,080 --> 00:09:32,400
Speaker 1: to their regulator, and the regulator in Bermuda is overseeing everything,

155
00:09:32,600 --> 00:09:36,680
Speaker 1: but outside of servers, including policyholders and retirees, have less

156
00:09:36,679 --> 00:09:39,880
Speaker 1: of a view over that. And what people are worried

157
00:09:39,880 --> 00:09:42,520
Speaker 1: about is because we don't know so much about how

158
00:09:42,520 --> 00:09:45,400
Speaker 1: it's invested in Bermuda. We don't really know how the

159
00:09:45,440 --> 00:09:49,240
Speaker 1: backstop is going to play and be effective in the

160
00:09:49,240 --> 00:09:51,200
Speaker 1: event of a crisis or a downturn.

161
00:09:51,640 --> 00:09:55,800
Speaker 2: What does it mean when Athene and Apollo have their

162
00:09:55,800 --> 00:09:58,000
Speaker 2: own essentially in house re ensure.

163
00:09:58,200 --> 00:10:01,520
Speaker 1: That's a great question, and in indeed, usually you go

164
00:10:01,600 --> 00:10:04,360
Speaker 1: to a third party company to kind of spread risks

165
00:10:04,360 --> 00:10:06,920
Speaker 1: to other players and get it off your balance sheet.

166
00:10:06,920 --> 00:10:09,000
Speaker 1: And what Athene does is get it off its US

167
00:10:09,040 --> 00:10:12,880
Speaker 1: balance sheet, but it remains into the Athene group, and

168
00:10:12,920 --> 00:10:14,439
Speaker 1: that's getting a lot of people worried.

169
00:10:15,200 --> 00:10:19,000
Speaker 2: We're not talking about anything illegal here, and Alex pointed

170
00:10:19,000 --> 00:10:22,080
Speaker 2: out that Athene has a regulatory ratio that's above four

171
00:10:22,160 --> 00:10:25,280
Speaker 2: hundred percent. That's a measure of how much capital and

172
00:10:25,360 --> 00:10:29,240
Speaker 2: insurer has to weather storms, and Athene's ratio is twice

173
00:10:29,280 --> 00:10:33,000
Speaker 2: the level that would trigger more regulatory scrutiny. An Athene

174
00:10:33,000 --> 00:10:38,160
Speaker 2: spokesperson told Bloomberg that quote, Athene's top priority is policyholder

175
00:10:38,200 --> 00:10:42,199
Speaker 2: protection and we are highly secure, transparent, and well capitalized

176
00:10:42,440 --> 00:10:46,720
Speaker 2: with thirty four billion dollars of regulatory capital. The company

177
00:10:46,760 --> 00:10:50,280
Speaker 2: says it maintains the same benefit reserves for its Bermuda

178
00:10:50,320 --> 00:10:55,440
Speaker 2: reinsurance subsidiaries as it does for its US subsidiaries. But

179
00:10:55,520 --> 00:10:59,200
Speaker 2: Alex says that what's raising concerns is not just Athene's

180
00:10:59,280 --> 00:11:03,079
Speaker 2: balance sheet, but the playbook it's created for other companies.

181
00:11:04,240 --> 00:11:07,240
Speaker 1: What Athene does, other insurans have been doing it throughout

182
00:11:07,280 --> 00:11:12,720
Speaker 1: the country, and that increases risks in the system. According

183
00:11:12,760 --> 00:11:15,880
Speaker 1: to many insurance experts, there's like a lot of private

184
00:11:15,880 --> 00:11:18,520
Speaker 1: equity owned insurers that are doing the same strategies, and

185
00:11:18,559 --> 00:11:20,520
Speaker 1: sometimes they're not going to Bermuda, they're going to the

186
00:11:20,520 --> 00:11:23,480
Speaker 1: Canon Islands, which is a bit less transparent. There are

187
00:11:23,559 --> 00:11:27,079
Speaker 1: other players doing the same thing but pushing the envelope

188
00:11:27,120 --> 00:11:29,640
Speaker 1: on other points, and that's what gets a lot of

189
00:11:29,640 --> 00:11:31,600
Speaker 1: people worried about the industry in general.

190
00:11:33,600 --> 00:11:37,360
Speaker 2: We get into those industry wide concerns where regulators stand

191
00:11:37,400 --> 00:11:40,640
Speaker 2: on this, and how the retired Allegheny steel workers are

192
00:11:40,640 --> 00:11:56,000
Speaker 2: trying to undo the Athene deal. After the break, the

193
00:11:56,040 --> 00:12:00,720
Speaker 2: financial crisis created the perfect conditions for private equity giants

194
00:12:01,040 --> 00:12:05,000
Speaker 2: to get into the life insurance business. Battered pe firms

195
00:12:05,080 --> 00:12:08,720
Speaker 2: needed more ways to bring in cash, and insurance providers

196
00:12:08,760 --> 00:12:13,360
Speaker 2: had tanking stocks and thin portfolios, making them cheap investments.

197
00:12:14,200 --> 00:12:18,319
Speaker 2: That's when Apollo set up a theme its own ensure

198
00:12:18,600 --> 00:12:23,440
Speaker 2: that could buy up other providers. Now over fifteen years later,

199
00:12:23,800 --> 00:12:27,359
Speaker 2: at a time when borrowing has become more expensive, Bloomberg's

200
00:12:27,400 --> 00:12:31,880
Speaker 2: alex Rajabondari says, the private equity industry is cash strapped again,

201
00:12:32,559 --> 00:12:35,360
Speaker 2: and that makes life insurance investments attractive.

202
00:12:35,800 --> 00:12:39,439
Speaker 1: As the wave of boomers to laid boomers that are

203
00:12:39,520 --> 00:12:43,120
Speaker 1: reaching the edge of retirement and seeking security for retirement.

204
00:12:43,240 --> 00:12:47,640
Speaker 1: We're speaking of four hundred billion dollars put into annuities

205
00:12:47,679 --> 00:12:48,319
Speaker 1: every year.

206
00:12:48,720 --> 00:12:51,480
Speaker 2: But as private equity gets more entrenched in the life

207
00:12:51,520 --> 00:12:55,800
Speaker 2: insurance industry and other firms continue to use Apollo's strategy

208
00:12:55,840 --> 00:13:01,000
Speaker 2: as their guide, the risks aren't just hypothetical. Alex talked

209
00:13:01,040 --> 00:13:03,959
Speaker 2: to one woman, Jenny Napo, whose family had a two

210
00:13:04,080 --> 00:13:08,040
Speaker 2: million dollar life insurance policy with a company called PHL

211
00:13:08,240 --> 00:13:12,720
Speaker 2: Variable Insurance Company. They'd paid their premiums for seventeen years,

212
00:13:13,600 --> 00:13:17,559
Speaker 2: but then the private equity firm that owned PHL unraveled,

213
00:13:18,000 --> 00:13:20,720
Speaker 2: in part because the insurer was making more payouts than

214
00:13:20,720 --> 00:13:24,600
Speaker 2: it projected it would have to. Regulators found the company

215
00:13:24,640 --> 00:13:27,880
Speaker 2: and its reinsurers faced a shortfall of more than two

216
00:13:28,040 --> 00:13:32,000
Speaker 2: billion dollars and told it to reduce payouts, and that

217
00:13:32,080 --> 00:13:37,000
Speaker 2: had consequences for policyholders. After Napo's husband died last year,

218
00:13:37,559 --> 00:13:41,400
Speaker 2: she didn't receive the two million dollars she expected. Instead,

219
00:13:41,880 --> 00:13:44,160
Speaker 2: she got three hundred thousand dollars.

220
00:13:44,520 --> 00:13:47,240
Speaker 1: She doesn't know she's ever going to get more. The

221
00:13:47,720 --> 00:13:52,360
Speaker 1: regulator in Connecticut has taken over the administration of the

222
00:13:52,400 --> 00:13:56,400
Speaker 1: company and is basically limiting the payouts that the company

223
00:13:56,400 --> 00:13:59,760
Speaker 1: can make to policy holders to shield the balance sheet

224
00:13:59,800 --> 00:14:01,840
Speaker 1: of the company in his financial sending.

225
00:14:01,840 --> 00:14:05,280
Speaker 2: The Connecticut Insurance Department, in a statement to Bloomberg, said

226
00:14:05,280 --> 00:14:09,680
Speaker 2: that its decision to initiate rehabilitation proceedings was quote grounded

227
00:14:09,679 --> 00:14:13,760
Speaker 2: in how to best maximize phl's assets and equitably administer

228
00:14:13,840 --> 00:14:17,280
Speaker 2: its business for the benefit of all policy holders. They

229
00:14:17,280 --> 00:14:20,000
Speaker 2: said they recognized the burdens it placed on policy holders

230
00:14:20,320 --> 00:14:24,000
Speaker 2: and that they were committed to rehabilitating the company. NASA

231
00:14:24,120 --> 00:14:28,160
Speaker 2: Financial Group, which previously owned PHL, told Bloomberg, we remain

232
00:14:28,240 --> 00:14:31,560
Speaker 2: committed to supporting the Connecticut Insurance Department in its efforts

233
00:14:31,560 --> 00:14:35,680
Speaker 2: to serve PHL policy holders. Golden Gate Capital, the private

234
00:14:35,720 --> 00:14:41,360
Speaker 2: equity owner of PHL, declined to comment. The potential for

235
00:14:41,400 --> 00:14:45,600
Speaker 2: this sort of scenario has concerned regulators for years. During

236
00:14:45,640 --> 00:14:50,040
Speaker 2: the Biden administration, regulators at the Financial Stability Oversight Council

237
00:14:50,120 --> 00:14:53,400
Speaker 2: and the Labor Department were actively talking about this kind

238
00:14:53,400 --> 00:14:53,840
Speaker 2: of risk.

239
00:14:54,160 --> 00:14:57,800
Speaker 3: They heard from everybody, including a theme, and eventually said,

240
00:14:57,840 --> 00:14:59,640
Speaker 3: and this was just about it. Little morning a year

241
00:14:59,680 --> 00:15:04,120
Speaker 3: ago said we have a lot of concerns about these arrangements,

242
00:15:04,160 --> 00:15:07,840
Speaker 3: these relationships. The lack of transparency in certain spites, but

243
00:15:08,960 --> 00:15:10,720
Speaker 3: we're not going to do anything at the moment in

244
00:15:10,720 --> 00:15:12,600
Speaker 3: this space. We're going to sort of go with the

245
00:15:12,600 --> 00:15:14,120
Speaker 3: current sort of rules that we have.

246
00:15:14,720 --> 00:15:18,960
Speaker 2: In other words, the Biden administration was concerned but didn't

247
00:15:18,960 --> 00:15:23,840
Speaker 2: take action, and now the Trump administration wants fewer regulations.

248
00:15:23,880 --> 00:15:27,880
Speaker 2: If anything. There's legislation in Congress to disband the Federal

249
00:15:27,920 --> 00:15:31,680
Speaker 2: Insurance Regulator and seed oversight to the states, and Trump

250
00:15:31,760 --> 00:15:34,920
Speaker 2: signed an executive order making it easier for Americans four

251
00:15:34,920 --> 00:15:40,720
Speaker 2: oh one ks to include alternative investments, including private assets. Meanwhile,

252
00:15:40,960 --> 00:15:43,800
Speaker 2: even as more Americans could see their life savings pulled

253
00:15:43,800 --> 00:15:47,840
Speaker 2: into the universe of private equity capital management, the Alleghany

254
00:15:47,880 --> 00:15:52,000
Speaker 2: mill workers are trying to undo the deal that impacted them.

255
00:15:52,400 --> 00:15:54,640
Speaker 2: They want to get their money out of a theme.

256
00:15:57,840 --> 00:16:00,160
Speaker 2: They've been holding meetings at an old union hall a

257
00:16:00,160 --> 00:16:02,280
Speaker 2: block from the mill where they used to work, to

258
00:16:02,320 --> 00:16:04,760
Speaker 2: share their concerns and organize.

259
00:16:11,560 --> 00:16:11,920
Speaker 4: Company.

260
00:16:16,320 --> 00:16:20,800
Speaker 3: They are suing their former company, Allegheny Technologies.

261
00:16:31,960 --> 00:16:35,000
Speaker 2: They're referring to a requirement from the Labor Department that

262
00:16:35,080 --> 00:16:38,360
Speaker 2: when companies move pensions to an annuity provider, they have

263
00:16:38,440 --> 00:16:41,080
Speaker 2: to pick the safest available annuity provider.

264
00:16:41,240 --> 00:16:44,600
Speaker 3: What they're alleging in their lawsuit is that Athene was

265
00:16:44,680 --> 00:16:47,840
Speaker 3: not the best annuity provider that could have been selected.

266
00:16:48,080 --> 00:16:51,480
Speaker 2: In a statement to Bloomberg, Athene said, quote, these are

267
00:16:51,560 --> 00:16:55,280
Speaker 2: baseless complaints instigated by class action attorneys who are attempting

268
00:16:55,280 --> 00:17:00,240
Speaker 2: to enrich themselves at the expense of retirees. Alleghany, now

269
00:17:00,280 --> 00:17:02,920
Speaker 2: known as ATI, said in a statement that when it

270
00:17:03,040 --> 00:17:06,199
Speaker 2: sought to hand off its pension obligations, it hired an

271
00:17:06,240 --> 00:17:09,879
Speaker 2: outside advisor that selected a Theene declined to comment on

272
00:17:09,880 --> 00:17:14,040
Speaker 2: the lawsuit filed by former employees. Athene statement went on

273
00:17:14,080 --> 00:17:17,280
Speaker 2: to say that converting the pensions into annuities was a

274
00:17:17,280 --> 00:17:22,160
Speaker 2: win win quote. By moving pension management to Athene, ATI

275
00:17:22,400 --> 00:17:26,520
Speaker 2: met its obligations to retirees and made our pension contributions

276
00:17:26,520 --> 00:17:31,040
Speaker 2: and expenses more predictable. Tom, what's next for the Alleghany

277
00:17:31,080 --> 00:17:33,880
Speaker 2: steel workers? Where do things stand with the lawsuit?

278
00:17:34,040 --> 00:17:37,919
Speaker 3: They had a hearing in court and that magistrate ruled

279
00:17:38,080 --> 00:17:41,560
Speaker 3: in favor of Alleghany, so against them, essentially saying that

280
00:17:41,640 --> 00:17:45,480
Speaker 3: you know that she was recommending that their lawsuit be

281
00:17:45,520 --> 00:17:48,440
Speaker 3: dismissed because they couldn't actually show that they've been harmed.

282
00:17:48,440 --> 00:17:50,960
Speaker 3: The checks keep coming, so the kind of the judge

283
00:17:51,000 --> 00:17:54,080
Speaker 3: overseeing this case is going to make a decision in

284
00:17:54,119 --> 00:17:57,520
Speaker 3: the next you know, next month or so. There's been

285
00:17:57,560 --> 00:18:01,399
Speaker 3: mixed rulings here, others like one bar by pension holders

286
00:18:01,400 --> 00:18:07,000
Speaker 3: from Lockheed, very similar case, same lawyers. A judge found

287
00:18:07,000 --> 00:18:10,120
Speaker 3: in Maryland federal judge that that case can move forward

288
00:18:10,240 --> 00:18:12,760
Speaker 3: and that's on appeal right now. So what's really what

289
00:18:12,880 --> 00:18:15,439
Speaker 3: we're seeing here is I think these things are going

290
00:18:15,480 --> 00:18:17,360
Speaker 3: to continue to be litigated.

291
00:18:18,560 --> 00:18:22,080
Speaker 2: So far, the pe industry hasn't had a major stress

292
00:18:22,119 --> 00:18:25,480
Speaker 2: test since two thousand and eight, and that's influencing how

293
00:18:25,520 --> 00:18:29,560
Speaker 2: the risk is perceived and how these cases could play out.

294
00:18:29,720 --> 00:18:32,080
Speaker 3: So we're really looking to see whether or not these

295
00:18:32,119 --> 00:18:37,000
Speaker 3: investments in private markets, in private credit, asset backed securities,

296
00:18:37,000 --> 00:18:40,879
Speaker 3: holateralized debt obligations, if something goes bad in one place,

297
00:18:41,320 --> 00:18:43,840
Speaker 3: whether it's going to have sort of a domino effect

298
00:18:44,280 --> 00:18:48,320
Speaker 3: throughout not just the insurance system, but the overall the

299
00:18:48,400 --> 00:18:55,639
Speaker 3: larger financial markets.

300
00:18:56,840 --> 00:18:59,840
Speaker 2: This is the Big Take from Bloomberg News. I'm Sarah Holder.

301
00:19:00,480 --> 00:19:03,000
Speaker 2: To get more from the Big Take and unlimited access

302
00:19:03,080 --> 00:19:06,840
Speaker 2: to all of Bloomberg dot com, subscribe today at bloomberg

303
00:19:06,880 --> 00:19:10,640
Speaker 2: dot com slash podcast offer. If you like this episode,

304
00:19:10,800 --> 00:19:12,959
Speaker 2: make sure to follow and review The Big Take wherever

305
00:19:12,960 --> 00:19:15,600
Speaker 2: you listen to podcasts. It helps people find the show.

306
00:19:16,600 --> 00:19:18,800
Speaker 2: Thanks for listening. We'll be back tomorrow