Episode 13 with Bill Wheeler, President at Athene Holdings – Mergers, Acquisitions and Strategic Partnerships

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Beyond the Challenge is a podcast where executives in the insurance and financial services industry share their insights and experiences. Host Kevin and Sandy Dougherty talk with today’s top business leaders about what keeps them up at night and the biggest opportunity organizations can capitalize on today. We encourage you to listen, share, and subscribe to our program.

Kevin and Sandy Dougherty each have over 20 years of experience in insurance and financial services, corporate leadership, and executive search. They’re the owners of Global Corporate Solutions and Global Corporate Leaders. Global Corporate Solutions partners with organizations to gain efficiencies and contain costs. Global Corporate Leaders partners with organizations to enhance and evaluate talent.

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Welcome to Beyond the Challenges. Here are your hosts, Kevin and Sandy.

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Sandy: Today, we are talking with Bill Wheeler, President, Athene Holdings, about the trends, challenges, and opportunities he sees for the insurance industry. Bill, can you tell us a little bit about yourself and how you got into the insurance industry?

Bill: Yeah, I’d be happy to. By the way, thanks for having me on. It’s nice to talk to both of you. I don’t know if anybody gets into the insurance business on purpose. It’s always a bit of an accident. When I got out of business school, I joined an investment bank on Wall Street and one of the very first projects I worked on was the demutualization of The Equitable back in the early 90s. You know, The Equitable got into trouble with real estate issues and their investment portfolio and we ended up demutualizing the company and bringing in as a significant investor and it was a great tutorial about how life insurers worked and I eventually worked on a lot more demutualizations and other insurance company deals and then, eventually, MetLife hired me as their treasurer to help them with their demutualization and IPO and I ended up having a long career there and then came to Athene about six years ago and a lot of people, when I left banking to join a mutual insurance company, people thought it was maybe not the wisest thing to do and I think, in hindsight, most of them who followed my career think it worked out okay and they kind of wish they had done it too because banking has gotten a lot more difficult and so many others have kind of followed my steps, left banking and worked in management in the life insurance industry.

Kevin: Bill, all sectors face challenges but in the insurance industry, the list seems especially long. Many carriers seem to be struggling to stay relevant while others are embracing new technology, mergers and acquisitions, and strategic partnerships.

Sandy: Bill, what do you see is the main barrier to innovation for insurance companies?

Bill: I think it’s the nature of the business a little bit. It’s very mature and a lot of the business isn’t growing and so, to invest in new innovation or to make the effort to explore a new area, you know, there needs to be a payback and it needs to be an important priority and if you just don’t see the growth and if all you’re gonna be able to do is maybe take market share from somebody else, it’s hard to justify. So, I think a lot of the industry has stagnated a little bit but those tend to be the areas where there’s not much growth, you know? In the growth areas, I think the innovation has been pretty good.

Sandy: How difficult is it to change a traditional company into an insurer of the future?

Bill: I guess it’s pretty hard. There aren’t many good examples, right? Of companies that have done it, but there are some and I think there will be more because, you know, the low interest rate environment has really kind of forced management teams and boards to say, you know, “We’re gonna have to do things differently and we’re going to have to evolve and change and change our business model,” and so I think they’re more willing to be proactive and companies that have done it well, you know, and I think of recently, a company like Voya, have been rewarded by the marketplace for evolving and positioning themselves for growth in the future.

Kevin: How has Athene changed their investment strategy based upon the current low interest rate environment?

Bill: Well, I wouldn’t say it’s changed because I think it’s always been this way. You know, Athene’s a relatively young company so we have invested in, with our partner, Apollo, our own investment platform. So, for instance, you know, we have a middle market lender called MidCap. We have an aircraft leasing business. Until very recently, we had a residential mortgage origination business that we controlled and those organizations supplied us with investment product and it was private. It’s very, very hard to do well if all you’re gonna do is buy public corporate bonds, you know, the public fixed income markets, and so, you know, we have focused on direct origination as a way to generate additional yield and the sacrifices, you’re usually giving up some level of liquidity but the life insurance industry can do that. They don’t have to have everything on their balance sheet liquid every day because their liabilities are pretty sticky. So, Athene has probably embraced this as much as anybody in the industry in terms of pursuing niche alpha strategies which, you know, will generate higher yields.

Kevin: What is Athene doing to stay relevant in the current insurance landscape?

Bill: You know, Athene five years ago was pretty much just an originator of indexed annuities, fixed indexed annuities, and did some reinsurance of indexed annuities. They were good at it and there were several strengths the company had and what we’ve done is we’ve taken those strengths and applied them to other markets. So, now, we’re the leading pension risk transfer company, which is pension and payouts, you know, it’s just like — it’s really just a group payout annuity. It’s the same sort of liability but a different market. We’ve also expanded internationally. You know, we’re doing reinsurance deals in the UK and in Japan, you know, which also have very big annuity markets and so the idea is to take what we’re really good at and leverage it in as many different markets as possible.

Sandy: Great. What is your opinion about the future of insurance regulation and compliance as you see it today?

Bill: Well, it’s probably not gonna get better. I don’t think we can count on it getting easier. Recently — I sit on the board of a company which does a lot of business in Europe called Athora and Athora has to implement something called IFRS 17 which is a new accounting pronouncement for European insurers and, you know, the estimate to comply with that for the industry is about 20 billion and they think bigger companies, it will cost them $200 million apiece to just comply with the new accounting reg and everybody involved sort of thinks this is a good idea, which is kind of amazing to me. So, that’s the attitude of the regulators is we are going to continue — and the accounting standards boards and all that, we’re gonna continue to tell you what to do no matter how much it costs, no matter how impractical it might seem. So, that’s tough. I think also, on the flip side, you know, something like the best-interests situation that the Biden administration seems to be reviving, you know, the industry had kind of prepared itself to adopt that anyway, you know, before Trump got elected and so I think having to go back and do it again, I mean, I think of our own situation, I don’t think we feel like it’s gonna be that big a deal to adopt but some of these regulations seem to be not very practical but sometimes I think they’re gonna be good for consumers and I think that’s a positive. So, it’s a mixed bag. And, you know, the industry is very engaged with the regulatory community and trying to push back, trying to get the regulators to the right answer, but it’s difficult.

Sandy: Thank you. What type of strategic partnerships do you see working best for the carriers?

Bill: I think insurance companies that need specialized investment expertise, somebody who manages a particular asset class well so they can get some of that alpha investment performance, I think that’s important. I think, too, you’re seeing more insurance carriers team up with reinsurers who kind of give them capital relief or help them manage their capital more efficiently, I think those are working well, by and large, so that insurance companies can, you know, focus more on what they do well or on the outward facing side of the business. Partnerships with regard to distribution can be difficult. The distribution source, if that’s a bank or, you know, some kind of broker dealer, for example, they tend to extract a big pound of flesh. Insurance carriers love to have sales and they want more sales and they’re willing to pay a lot for ’em and sometimes they think these distribution partners have figured out what’s the exact point at which I can leverage, take out as much of the economics as possible and still get the deal done. So, I just think you have to be thoughtful about how you pick your partners.

Kevin: Have you seen a trend of more M&A activities from the carriers? And if so, why? 

Bill: Definitely. There’s definitely an uptick in M&A, you know, not huge deals but there’s certainly a lot of activity and whether it’s technically a merger and acquisition or it’s just a big piece of block reinsurance, we’re seeing a lot of carriers becoming more proactive about managing their balance sheets and getting rid of legacy business that isn’t very profitable, especially in today’s current interest rate environment and so there’s a lot more activity as the industry is basically going through this grand restructuring. And, by the way, that’s not only happening in the US, it’s happening in Europe, it’s going to probably happen in Japan and for much of the same reasons, you know? Low interest rates and a relatively difficult regulatory environment.

Kevin: Bill, do you see outsourcing becoming more prevalent or are carriers keeping more in house?

Bill: I think most carriers are outsourcing more all the time and it makes sense because I think they try to figure out where in any given business process is the value being added and what’s really just a commodity. You know, by outsourcing, you’re generally working with a partner that has more expertise than you do, probably has greater scale, is much more willing to reinvest in their business in this, you know, technology or activity because that’s their business than the insurance carrier is so we use outsourcing quite a bit, not for everything, but we generally think it makes the most sense in many situations and I think the rest of the industry is doing that as well.

Kevin: What do you see is the biggest opportunity for the insurance industry over the next three to five years?

Bill: You know, Kevin, I think it’s gotta be continuing to pursue the retirement market and figuring out how you’re going to participate as a company in that. It’s where the growth is, you know? It’s where the margins are and so if you’re not in the retirement market someway, somehow, I think things are gonna be difficult. You know, I think a lot of people think, “Oh, it’s gotta be technology driven,” and, look, there isn’t much evidence yet that consumers are willing to buy a lot of life insurance. I’m really talking more about the life insurance industry now online. You know, people keep dabbling in it and I think there is some growth but it’s still not very significant. So, certainly, for the next three to five years, what I would call the near term, it’s all about repositioning your company and then also, you know, to deal with the current tough environment and also how do you play the retirement growth story?

Kevin: What is the best decision you made that had a positive impact on your career?

Bill: I think leaving banking. Honestly, when I did, I was sort of — I had just been promoted to managing director and I had kind of decided I didn’t wanna do this the rest of my life, I wanted to try managing, I wanted to try running a business, and so, again, people thought that was a little goofy to do, but, in hindsight, I think it turned out to be a very good decision and I think others who have done it have I think also been generally happy. I don’t see too many people go running back to banking. I would also just say, it’s — you have to be proactive about managing your career. That sounds obvious but a lot of times people don’t do that and they should more than maybe they are.

Sandy: What advice would you give to somebody looking to get into the financial services or insurance industry?

Bill: You know, I think the natural thing to say is go someplace that’s either mid-sized or smaller organization and you’ll get much more hands-on experience and you’ll probably learn more and there’s definitely a lot of truth to that. But there’s also a benefit to doing the opposite, which is going to someplace big where there’s a lot of training programs, where working for a big company that everybody’s heard of and getting trained there, it probably sets yourself up for what’s next. I would tell people, sure, go work for the biggest company in the industry, learn what that’s like, get as much out it as you can but then be prepared to go. Be prepared to leave, because it will probably be more difficult to move up the ladder there. In the long run, you’re gonna probably have a lot more opportunity, both career wise and, frankly, financially, you know, to work in smaller organizations where you can advance but don’t be worried about working for a big corporation at the beginning but, in the long run, you’re probably not gonna wanna stay there.

Sandy: Bill, thank you for your time today. It’s been great to hear your insights on how carriers can stay relevant and the opportunities you see for the industry in the next few years.

Bill: Well, thanks very much for having me. It was nice to talk to you both.

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