Athene Holding Ltd., the annuity provider tied to Apollo Global Management LLC, filed for a sale of 23.8 million shares at $38 to $42 apiece in one of the biggest initial public offerings this year in the U.S.
At the high end of that range, the IPO would raise $997.5 million for selling holders and value the Bermuda-based company at about $7.8 billion, with about 186 million shares outstanding, Athene said Monday in a regulatory filing.
Chief Executive Officer Jim Belardi has been expanding Athene in the U.S. and abroad after Apollo helped start the company in 2009. It now has about $72 billion in invested assets. Last year, he hired William Wheeler, an executive at MetLife Inc., as president to help prepare for an IPO and fuel growth. Annuities offer a stream of income to policyholders, and Belardi’s firm seeks to take advantage of the projected growth in the retirement-age population over the next three decades, according to the filing.
“Technological advances and improvements in health care are projected to continue to contribute to increasing average life expectancy,” Athene said in the filing. Demand for annuities “will likely be bolstered by this gap resulting from the growing need for guaranteed income streams and the expanding retirement population’s insufficient savings base.”
Athene has grown to be among the largest sellers of fixed annuities in the U.S., ranking No. 7 in the first nine months of this year. The company had $3.8 billion of sales in that period, twice as much as a year earlier, according to data from Limra, an industry group.
The insurer profits when its investment returns on these funds exceeds what it promises to customers. The company has purchased structured securities and high-yield debt to boost returns.
The relationship has proven lucrative for Apollo, which charges fees to help manage the funds. The private equity firm will retain 45 percent of the voting power of Athene after the IPO, according to the filing.
At the upper end of the price range, Athene would be valued at about 10 percent above book value, a measure of assets minus liabilities, as of Sept. 30. It would be more than 40 percent higher than the metric at the end of 2015. Older and larger annuity sellers, such as Lincoln National Corp. and American Equity Investment Life Holding Co., trade below book value.
“We believe we have fewer legacy liability issues than our peers given that all of our retail and flow reinsurance liabilities were underwritten after the financial crisis,” Athene said in the filing. “The majority of the liabilities we acquired through our acquisitions and block reinsurance were acquired at a discount to book value.”
Apollo also generates money from Athene by taking incentive and other income from AP Alternative Assets LP, a $3 billion closed-end fund Apollo manages that’s Athene’s largest shareholder. AP’s sole interest is in Athene, and AP has climbed 82 percent from the time it started trading on Amsterdam’s stock exchange in 2006 through Friday.
AP rallied another 3.9 percent Monday. Apollo slipped about 2.9 percent.
Athene will not receive proceeds from the sale, according to the filing. Selling shareholders include a unit of the Ontario Teachers’ Pension Plan Board and the Teachers Retirement System of Texas. The shares could price Dec. 8, with trading beginning the next day, according to terms reviewed by Bloomberg.
Net income climbed to $437 million in the nine months through Sept. 30, compared with $320 million in the same period a year earlier according to the filing. Shares will be listed on the New York Stock Exchange under the ticker “ATH.”
Goldman Sachs Group Inc., Barclays Plc, Citigroup Inc. and Wells Fargo & Co. are leading the IPO.
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