Testimony of Jim Baker, UNITE HERE, before the Insurance Commissioner of the State of Iowa

Transcription

1 July 17, 2013 Testimony of Jim Baker, UNITE HERE, before the Insurance Commissioner of the State of Iowa In the matter of application of Apollo Global Management LLC, Leon Black, Joshua Harris, and Marc Rowan for the approval of a plan to acquire control of Aviva Life and Annuity Company, Aviva of Iowa, Inc., Aviva Re Iowa II, Inc, and Aviva Re Iowa III, Inc. Commissioner Gerhart, my name is Jim Baker, Research Coordinator for UNITE HERE, the North American hospitality union. Our 275,000 members work primarily in the hotel, gaming, food service and laundry industries. UNITE HERE monitors developments in private equity and pension security and we are a frequent participant in public forums regarding financial solvency and financial policy, including from time to time providing testimony at NAIC proceedings on matters we believe are of interest to our members. We are also an active member of Americans for Financial Reform, a nonprofit coalition of more than 250 civil rights, consumer, labor, and investor groups formed in the wake of the 2008 financial crisis to advocate for common sense financial reforms. We appreciate this opportunity to provide testimony about the application by Apollo Global Management and its key principals to purchase Aviva USA, and we respectfully request that our written testimony be made part of the record. The transaction being contemplated today is part of a larger trend of private equity companies acquiring blocks of fixed annuity contracts as a relatively cheap and stable source of financing for their operations. The applicantʼs insurance holding company, Athene Holdings, has made a string of such purchases since its inception in If the Aviva USA acquisition is consummated, Athene Holdings will become the second largest underwriter of fixed annuities in the US, with total assets in excess of $60 billion. Given the complexity of insurance accounting and reporting, consumers typically rely on financial advisors and ratings agencies when deciding from which company to purchase an annuity. Unlike more liquid savings vehicles like mutual funds, annuity contracts often have steep surrender penalties. At yearend 2012, Athene 1 reported that 68% of its liabilities were subject to surrender charges. 2 Because of this inability to quickly liquidate a contract, annuity owners are like sitting ducks when a company undergoes a merger or other significant transformation. The only line of defense policyholders have against radical changes in the risk profile of the assets underlying their annuities is state insurance commissioners who must approve transactions such as the one that is the subject of todayʼs hearing. 1 Athene means Athene Holdings or any of its subsidiaries. 2 Athene Holding, Presentation to AAA Investors on Athene, May 6, 2013, p. 4.

2 Recently, there has been news and controversy about private equity firms acquiring annuity companies that might give policyholders cause for concern. Most notably, Benjamin Lawsky, superintendent of the New York Department of Financial Services, raised serious concerns in an April speech, questioning whether the model of aggressive risk-taking and high leverage that typifies most private equity firms is a natural fit for the insurance business, where a failure can put policyholders at significant risk; and wondered whether the 3 to 5 year investment horizons typical of most private equity firms may result in an incentive to increase investment risk and leverage in order to boost short-term returns. 3 And in May, the Wall Street Journal reported that Mr. Lawsky had subpoenaed several alternative investment managers, including Apollo 4, seeking, among other things, information on the asset quality of investments backing annuity reserves. Shortly thereafter, the NAIC established a new working group to examine the role of hedge funds and private equity firms in the annuity business. Meanwhile, the Federal Advisory Committee on Insurance at Treasury's Federal Insurance Office (FIO) is reportedly also working on a white paper on this topic. 5 Moodyʼs Investor Services called the New York DFS investigation credit positive, and added that private equity buyers of insurance annuity companies have a somewhat bigger appetite compared with others in the industry for high yield and/or alternative investments. Moodyʼs also warned that reinsurance arrangements involving affiliates of the private equity owners may tolerate a significantly higher level of high-risk assets and that private equity buyers may be motivated by financial rather than strategic considerations, are often focused on an intermediate-term exit and may seek to extract dividends from the life insurer and employ more aggressive capital management. 6 Is this the case with Apollo/Athene? We believe this is a critical question and one that unfortunately cannot be answered simply by relying on the public portions of the materials submitted by the applicant with its Form A. Apollo has requested, and the Commissioner has apparently granted, permission to keep its business plan confidential, making it difficult for policyholders or the public to evaluate the possible ramifications of the proposed transaction. However, Atheneʼs record of activity since its inception appears to follow the model that Mr. Lawsky and Moodyʼs has warned us about. Atheneʼs actions reveal a strategy that relies substantially on rapid growth, increasing the risk profile of the assets underlying the annuity contracts, increasing leverage, and lowering capital as a percentage of invested assets. 3 Remarks of New York Superintendent of Financial Services Benjamin M. Lawsky at the 22nd Annual Hyman P. Minsky Conference on the State of the U.S. and World Economies in New York City, April 18, Apollo means Apollo Global Management, its general partners, or any of its subsidiaries. 5 LifeHealthPro, NAIC to form new PE/hedge fund annuity committee, June 7, Moodyʼs Credit Outlook, 23 May 2013, pp

3 The asset mix at Athene Annuity & Life Assurance has changed dramatically between 2010 and 2012, with a sell-off of government bonds and agency-backed residential mortgage securities, and a corresponding increase in non-agency residential mortgage-backed securities, collateralized loan obligations (CLOs), commercial mortgage backed securities (CMBS), and private equity limited partnership interests.. On March 31, 2011, just weeks before its sale to Athene was final, Liberty Life Insurance of South Carolina reported total assets of $5.1 billion, 78% of which were in corporate bonds. Eighty-six percent of that bond portfolio was classified as NAIC 1, the safest classification. Less than a half percent (.4%) of Libertyʼs total assets were other assets listed on schedule BA. In a 2013 Bloomberg article, former Liberty investment manager Pete Dodd described Libertyʼs portfolio as squeaky clean. A little more than two years after Dodd was laid off and Athene took over managing the investments, the unitʼs holdings include securities backed by subprime mortgages, time-share vacation homes and a railroad in Kazakhstan, according to the Bloomberg article. Says Dodd: When you look at the business model these guys [Athene] use, where theyʼre substantially increasing the risk in the bond portfolio, sooner or later, in my opinion, that has to come home to roost. All the upside would go to Athene if it worked out. And the downside would go to the annuity holders if it didnʼt. 7 Indeed, an analysis of Liberty/Atheneʼs changing asset portfolio mix between 2010 and 2012 seems to support Doddʼs assertion that the insurer, since its purchase by Apollo, has been increasing the risk profile of its assets (see Exhibit 1). At yearend 2010, a few months before Libertyʼs sale to Athene, the insurer had an asset mix that was fairly typical for the industry, with one exception: Liberty had 22.5% of its assets in Agency-backed mortgage securities which was more than twice the industry average of 9.3%. But in two other higher-risk categories non-agency mortgage-backed securities and alternative investments (aka Schedule BA Assets, ) Libertyʼs portfolio was fairly typical. Libertyʼs non-agency mortgage-backed securities were 12% of its total portfolio, compared to an industry average of 11.1%. And Libertyʼs Schedule BA assets which include private equity partnership interests, CLOs, and other so-called alternative assets - were only 0.4% of total assets compared to 2.1% for the life industry as a whole. But almost immediately after the sale to Apollo, the asset mix began to change. The insurer sold off almost all of its government bonds and agency-backed mortgage securities and began buying non- 7 Bloomberg, Apollo-to Goldman Embracing Insurers Spurs State Concerns, April 22,

4 agency mortgage-backed securities (both residential and commercial) and alternative ( Schedule BA assets. By yearend 2012, the insurerʼs non-agency RMBS and CMBS had shot up to 31.3% of total assets, and Schedule BA assets were now 10.2% of total assets. A substantial amount of those Schedule BA holdings were CLOs or limited partnership interests in private equity or real estate funds sponsored by Apollo Global Management or its affiliates (see Exhibit 2). The 2012 asset mix of the insurer formally known as Liberty Life looks very similar to the asset mix reported by the companyʼs parent, Athene Holdings (see Exhibit 3). At yearend 2012, Athene Holdings reported that 14.9% of its assets were non-agency residential mortgage-backed securities (RMBS), 10.1% were collateralized loan obligations (CLOs), 8.4% were commercial mortgage backed securities (CMBS) and 5.5% were alternative investments, mostly partnership interests in private equity and real estate funds sponsored by Apollo affiliates. 8 These asset classes figured prominently in the recent financial crisis and attendant failures or rescues of numerous financial institutions. Indeed, Athene is well aware of these risks. Athene Holdings has told investors that a key part of its strategy and philosophy is to capture excess spread and generate investment alpha through opportunistic portfolio allocation and by taking complexity and illiquidity risk, instead of credit risk. 9 In December 2012, Moodyʼs Investor Service downgraded Aviva Life and Annuity in part because of the expectation that the business and financial profile of the company will weaken under Atheneʼs ownership, compared to the companyʼs current credit profile as a subsidiary of Aviva. Moodyʼs also expects that Aviva Lifeʼs capitalization and investment portfolio will be managed more aggressively than under Aviva PLC. 10 Athene/Apollo employs a complex structure, including an offshore captive reinsurer, which has the effect of artificially inflating its risk-based capital ratio, while lowering its actual capital as a percentage of invested assets, and thereby increasing its leverage. In its May 2013 presentation to investors, Athene Holdings reported that the company is targeting a 7% to 10% capital to reserves ratio, which translates into leverage of 10x to 14x. The company also revealed that it viewed its current capital ratio of 15% as substantial current excess capital. Even at that excess ratio, it should be pointed out, Athene reported a not-too-shabby return on equity of 30%. Perhaps to 8 Athene Holding, Presentation to AAA Investors on Athene, May 6, 2013, p. 11. And, Athene Annuity & Life Assurance Company, Schedule BA Part 2, for year ending December 31, Athene Holding, Presentation to AAA Investors on Athene, May 6, 2013, p Moodyʼs press release, Moodyʼs downgrades Aviva Life and Annuity Companyʼs IFS rating to Baa2 on sale announcement, December 21,

5 explain such returns, Athene lauded its asset management skill and its experience in the nuances of insurance regulatory regimes and its ability to structure efficient portfolios to optimize regulatory capital. 11 According to A.M. Best, Athene Annuity cedes a 75% quota share of its in-force block of annuities and all new business to Apolloʼs reinsurance subsidiary - Athene Life Re (Bermuda) -- retaining only 25% of the liabilities on its own books. Typically, when insurers enter transactions of this nature, they are able to inflate their reported regulatory risk-based capital ratios, since the reinsured portion of liabilities is considered a risk transfer, but the assets underlying those ceded contracts remain on the ceding companyʼs books. 12 As of 3/31/2013, AA&LAC reported $8.8 billion in aggregate life contract reserves, of which $7.1 billion, or 81%, was subject to a co-insurance agreement with Athene Re (the Modco reserve. ) 13 According to AM Best, Atheneʼs absolute capital dropped in 2011 relative to invested assets due to the reinsurance agreement with Athene Life Re, which is accounted for on a Modco basis keeping the assets on Athene Annuityʼs books with the liability and asset risk transferred to Athene Life Re. 14 This type of risk transfer using captive reinsurers isnot uncommon. A recent report by the New York State Department of Financial Services, calls this type of transaction shadow insurance. In a typical shadow insurance transaction, an insurance company creates a captive insurance subsidiary, which is essentially a shell company owned by the insurerʼs parent. The company then reinsures a block of existing policy claims through the shell company and diverts the reserves that it had previously set aside to pay policyholders to other purposes, since the reserve and collateral requirements for the captive shell company are typically lower. Sometimes the parent company even effectively pays a commission to itself from the shell company when the transaction is complete. This financial alchemy, however, does not actually transfer the risk for those insurance policies because, in many instances, the parent company is ultimately still on the hook for paying claims if the shell companyʼs weaker reserves are exhausted ( a parental guarantee ). That means that when the time finally comes for a policyholder to collect promised benefits after years of paying premiums (such as when there is a death in their family), there is a smaller reserve buffer 11 Athene Holding, Presentation to AAA Investors on Athene, May 6, 2013, pp Bestʼs Rating Report, Athene Annuity & Life Assurance Company, June 8, 2012, p.2. And Shining a Light on Shadow Insurance, New York State Department of Financial Services, June 2013, pp Quarterly Statement, as of March 31, 2013, of Athene Annuity & Life Assurance Company, p. Q Bestʼs Rating Report, Athene Annuity & Life Assurance Company, June 8, 2012, p.2. 5

6 available at the insurance company to ensure that the policyholder receives the benefits to which they are legally entitled. 15 According to Apolloʼs Form A, the company intends to continue its Modco co-insurance agreement with Athene Life Re, ceding to the captive reinsurer 80% of the annuity liabilities acquired from AVIVA USA, and will file a Form D seeking the Divisionʼs approval of the new Modco Agreement. 16 It is not clear from publically available documents what back-up financial arrangements may be in place to support the reinsurance transactions (i.e. whether Athene relies on back-up letters of credit from banks or other financial institutions, or whether there is some kind of parental guarantee in force.) The organization chart from the applicantʼs Form A shows that 100% of the stock of Athene Life Re of Bermuda is owned by Athene Holdings. The applicant's Form A further describes Athene Life Re as a wholly owned subsidiary of Athene Holdings. While it is unknown what assets Athene Life Re holds based on the public portions of the materials submitted by the applicant with its Form A, we believe these assets as well as overall organizational structure of Athene Holdings and Athene Life Re should be carefully scrutinize to determine to what extent the modco coinsurance agreements constitutes a risk transfer and whether any other financial backstop may be in place to protect policyholders. Atheneʼs regulated insurance subsidiaries make substantial payments to an Apollo-controlled company for asset management services. There are three layers of fees that Athene pays to affiliates of Apollo Global Management. In addition to the captive reinsurance transactions, and the ownership by AA&LAC of various Apollocontrolled real estate and private equity partnership interests, there is another set of related-party transactions we believe regulators should scrutinize.. All of Athene Holdingsʼ assets are managed by Athene Asset Management (AAM), which is in turn owned by Apollo Global Management and certain of Atheneʼs management team. 17 The insurance companies pay a quarterly fee to AAM for investment management services. 15 Shining a Light on Shadow Insurance, New York State Department of Financial Services, June 2013, p Application for Acquisition and Control of Aviva Life & Annuity Company by Apollo Global Management, Leon Black, Joshua Harris, and Marc Rowan; Form A Statement Regarding the Acquisition of Control of or Merger with a Domestic Insurer, dated as of June 25, 2013, and submitted to the Iowa Department of Insurance, p Athene Holding, Presentation to AAA Investors on Athene, May 6, 2013, p. 9. 6

7 It is not known how much the Athene insurance companies have paid in fees to AAM since the inception of both companies in 2009, but for the quarter ended 3/31/2013 alone, AAM received approximately $20 million in fees from Athene, 18 which on an asset base of $16.2 billion 19 amounts to.12% per quarter or.49% in a year. If that rate were to remain constant, Athene Holdings or its various subsidiaries, following the Aviva transaction, would be paying AAM $296 million in asset management fees per year. 20 In addition to those fees, AGM earns additional fees from Athene in the form of management fees for those assets that are invested directly in Apollo vehicles (approximately $6.5 billion of Atheneʼs reserves were invested in Apollo-controlled funds as of 3/31/2013) and advisory fees, which are currently paid to Apollo in the form of additional equity interests in Athene. AGMʼs Chief Financial Officer Martin Kelly told investors that the value of Athene equity interests that Apollo has received as of the end of the first quarter 2013 was also about $20 million. 21 Finally, AGM stands to earn a considerable amount of carried interest from its Athene investment. According to Mark Adam Spilker, AGMʼs President, the current plan for Athene is an eventual IPO. At the end of the first quarter 2013, the book value of AGMʼs unrealized carried interest in Athene was $111 million. Obviously, that value will rise dramatically if the Aviva deal is consummated, as it will more than triple the size of the company. 22 AA&LAC has not undergone a comprehensive regulatory examination since 2010, and that exam relied on yearend 2009 data, before the insurer (then known as Liberty Life Insurance Company) had been purchased by Athene Holdings. The insurer apparently has not undergone a comprehensive evaluation since it has come under the control of Apollo/Athene. According to AA&LACʼs quarterly statement for 3/31/2013, the most recent comprehensive exam by any state regulator was conducted by the South Carolina Department of Insurance in 2010, which relied on Liberty Insuranceʼs balance sheet data as of 12/31/ If the Aviva transaction is consummated, AA&LACʼs assets will have increased by more than 1500% since the date of its last exam. 18 Transcript of Apollo Global Management 1Q 2013 earnings call, May 6, Ibid., the $16.2 billion figure accounts for all of the Athene assets being managed by Athene asset management as of 3/31/ Based on an assumed $60 billion of assets post-aviva-transaction. 21 Transcript of Apollo Global Management 1Q 2013 earnings call, May 6, Ibid. 23 Athene Life & Annuity, Quarterly Statement for period ending 3/31/2013, p. Q08. 7

8 Questions Needing Answers Given this history of rapid growth, a changing asset-mix more heavily weighted towards riskier asset classes like non-agency RMBS and CMBS, CLOs and private equity partnerships, and a practice of making quarterly asset management payments to a non-regulated Apollo-controlled company, we believe it is imperative that the Commissioner conduct a thorough examination of the proposed acquisition. In particular, we encourage you to seek answers to the following critical questions: What is the appropriate level of capital needed to support the annuity contracts going forward? Is Atheneʼs stated target of 7-10% capital to reserve ratio and 10x to 14x leverage ratio appropriate? Is the $100 million in capital support so far pledged by Apollo Global Management 24 to support the Aviva acquisition sufficient? Is Atheneʼs modus operandi of reinsuring three quarters of its annuity reserves via an offshore captive appropriate and in the best interest of policyholders? What kind of financial support (e.g., back-up letters of credit, parental guarantees) are in place or will be in place to ensure that such transactions really do transfer the risk to third parties? If it is found that these transactions are primarily undertaken to reduce the companyʼs tax burden and/or to artificially inflate the insurerʼs reported RBC ratio, what types of restrictions or procedures can be put in place to protect policyholders from the increased risk and leverage this would represent? Will the assets backing the annuities have an appropriate risk profile? Is the strategy of taking on complexity and illiquidity risk compatible with the goal of managing assets over a long time horizon? Given the long-term duration of the liabilities, and the fact that most policyholders are subject to substantial surrender penalties, what can be done to ensure that Apollo and its principals take the long view and behave as long-term stewards of the retirement savings of tens of thousands of annuitants? Do Atheneʼs holdings of various Apollo-affiliated investments give rise to actual or potential conflicts of interest? Are the three layers of fees that Athene pays to Apollo negotiated at armʼs length, and are they in line with fees that could be obtained from third party asset managers? Will Apollo continue to earn fees 24 Apollo Global Management 10-Q, 5/7/2013, p

9 even after Atheneʼs planned IPO? Or are there advisory termination fees embedded in the contracts between Apollo and Athene which would result in a substantial amount of the IPO proceeds going to AGM rather than to Athene? Next steps Finally, we note the interest in the topic of private equity ownership of annuity companies by the New York Department of Insurance, the Federal Advisory Committee on Insurance, and a new NAIC working group. All of these inquiries are in their very early stages and therefore there is much we donʼt know about how these private equity players operate, whether their imperatives for returning capital to investors over relatively short time horizons (3 to 5 years) is compatible with the long-term stewardship of policyholder reserves, and what long-term measures may be needed to protect policyholders from potential risks. But in the meantime, the NAICʼs Financial Analysis Working Group (FAWG), chaired by Pennsylvaniaʼs Deputy Insurance Commissioner Steve Johnson, has put forward some very practical suggestions for how regulators can begin to deal with this phenomenon in the context of merger applications such as the one being considered today. 25 We would very much like to encourage you to consider implementing some or all of these proposals, especially the following: Obtaining pro forma results under specific stress scenarios; Requiring the acquirer to enter into a capital maintenance agreement supporting the net worth of the target operations; Requiring more information regarding cash flows and reserves as well as insurer reserve methodologies; Limiting the investment strategy used with respect to any assets held in trust to ensure they meet asset liability matching and any state insurance law requirements; 25 Willkie, Farr & Gallagher LLP, NAIC to Consider Private Equity Investments in Life and Annuity Insurers, client memorandum, May 20,

10 Ongoing (i.e., post-merger) financial analysis of the insurer and its affiliates, including annual targeted examinations to ensure that the insurerʼs investment strategy provides a prudent approach to investing policyholder funds. Ongoing stress tests A review of agreements with affiliates and non-affiliates related to fee agreements and reinsurance arrangements. Thank you for this opportunity to provide testimony on this important matter. We look forward to and will be closely following Commissioner Gerhartʼs review of the proposed transaction. 10

11 Exhibit 1 Life Industry 2010 Liberty Life YE2010 Athene YE2012 Corporate Bonds 43.6% 37.7% 39.8% US Government Bonds 18.7% 1.5% 0.1% Foreign Government Bonds 3.0% 0.0% 0.6% Agency RMBS 9.3% 22.5% 0.0% non- agency RMBS & CMBS 11.1% 12.0% 31.3% Schedule BA 2.1% 0.4% 10.2% Source: NAIC Capital Markets Report, "Analysis of Insurance Industry Investment Portfolio Asset Mixes" Aug & YE2010 Liberty Life Ins. Co. Annual Statement of Assets & YE2012 Athene Annuity & Life Assurance Annual Statement of Assets 11

12 Exhibit 2 Athene, Presidential Life alternative assets acquired since June 2011 Date Purchased Partnership Seller Paid-in as of 12/31/12 Commitment for addtl Inv. Athene Annuity & Life Assurance (acquired by Apollo in April 2011) 6/6/11 Guggenheim Partners OPP Inv Grade SEC Fund LLC Guggenheim Investment Manager $20,000,000 8/1/11 Fund 2011 AR LP Apollo $76,135,832 8/1/ A4 CMBS Fund Ltd Apollo $14,735,003 9/12/11 ALM VI Apollo $25,707,238 12/1/11 Reservoir Capital Strategies Ptnrs Offshore Reservoir Capital Strategies Ptnrs $5,625,000 1/18/12 Fundamental Partners II Fundamental Partners $34,639,432 $15,180,000 1/26/12 2/27/12 London Prime Apartments Guensey Hldg Ltd AGRE Europe LLC, (Apollo) $6,988,268 Hedge Fund Seeding Strategy Offshore 2011 (Goldman Sachs) State Street Bank & Trust $11,847,359 $10,810,000 3/16/12 Financial Credit Investments Financial Credit Investments Advisors $28,226,928 $16,650,000 3/20/12 Parella Weinberg Partners Parella Weinberg Partners $24,223,074 $26,050,000 4/20/12 A-A Asia Private Credit FD LP Apollo APC Advisors $11,443,794 $55,716,129 5/15/12 AGRE US Real Estate Fund AGRE US Real Estate (Apollo) $22,146,250 $55,716,129 5/18/12 Apollo European Principal Fund II Apollo EPF Advisors $4,089,916 $45,880,000 6/27/12 ALM VI ALM 6 (Apollo) $19,539,000 7/11/12 Guggenheim Private Debt Fund Note Issuer Guggenheim Investment Management $12,605,046 $15,861,344 8/15/12 Apollo Natural Resources Apollo ANRP Advisors $12,207,366 $37,400,000 8/15/ CMBS-1 Fund LLC 2012 CMBS-1 Fund LLC (Apollo) $65,293,320 8/24/ CMBS-2 Fund 2012 CMBS-2 Fund (Apollo) $58,102,684 10/5/ CMBS-3 Fund 2012 CMBS-3 Fund (Apollo) $55,456,778 12

13 10/31/12 Fund 6 Co-Invest LP AAA Associates LP (Apollo) $97,123,099 10/31/12 Fund 7 Co-Invest LP AAA Associates LP (Apollo) $18,253,504 10/31/12 Other Co-Invest LP AAA Associates LP (Apollo) $63,756,299 11/19/13 ALM VIII Ltd ALM 8 (Apollo) $13,800,000 $27,600,000 12/6/12 ALM IX Ltd ALM 9 (Apollo) $6,900,000 $34,500,000 12/18/12 Eaton Vance CLO Ltd Undisclosed $11,000,000 12/20/12 Fortress MSR Opportunity Fund I A LP Fortress MSR Opportunity Fund I A LP $20,000,000 $20,000,000 12/21/12 Kirkwood III LLC Kirkwood III LLC $41,374,611 $11,760,000 12/28/12 BDCM Opportunity Fund II BDCM Opportunity Fund II $11,349,388 12/28/12 BDCM Opportunity Fund BDCM Opportunity Fund $2,647,776 12/28/12 Blackstone Comunications Partners LP Blackstone Communications Management Associates $5,060,071 12/28/12 12/28/12 MHR Institutional Partners II Fund LP MHR Institutional Advisors $7,765,470 MHR Institutional Partners III Fund LP MHR Institutional Advisors $7,019,167 12/28/12 Trilantic Capital Partners IV, LP 1/18/13 CAI Strategic Euro Real Estate 1/31/13 AGRE US Real Estate Fund REO 3/11/13 AA Euro Senior Debt Fund II Trilantic Capital Partners IV, LP $4,669,064 AGRE-E Legacy Management LLC (Apollo) $7,574,054 AGRE US Real Estate (Apollo) $34,285,752 Apollo European Senior Debt Advisors II (Apollo) $12,980,000 Source: Athene Schedule BA-Part 1 for years ending 12/31/2011 and 12/31/2012: And Schedule BA- Part 2 for 1Q $758,699,708 $373,123,602 13

14 Presidential Life of New York (acquired by Apollo in December 2012) 2/4/13 Guggenheim Partners Inv Grade Sec Fund Guggenheim Investment Management $50,000,000 2/27/13 Highbridge Loan Manage Highbridge CLO $1,764,019 3/12/13 Fundamental Partners II Fundamental Partners II Gp LP $12,210,499 3/26/12 MCF CLO Equity MCF CLO $26,103,000 Source: Presidential Life Schedule BA- Part 2 for 1Q2013 $90,077,518 14