When annuity provider Athene Holdings launched its initial public offering last week, it was fulfilling a long-term mission.
“We’ve always had this focus from the very beginning that we were going to be a public company,” said Grant Kvalheim, chief executive officer of Athene USA. “That helped us because it spoke to how we had to operate to public company standards even when were a small, private company. We knew everything we were doing was pointing toward today.”
The IPO was well received. The company initially planned to sell 23.75 million shares at between $38 and $42. The night before the offering, the company upsized it to 27 million shares and priced them at $40. When markets opened Friday, the first trade on Athene’s stock was at $43.56 and as of mid-day today, the stock was trading at $45.10.
At a total value of $1.08 billion, the offering was the third largest this year in the U.S.
Founded in mid-2009, Athene has grown through a series of four acquisitions, including Aviva USA, and expanded from a handful of employees to 1,100 today working out of the company’s headquarters in Des Moines, Iowa. Led by founders James Belardi and Chip Gillis, the company’s focus has been on organic growth and a careful management of its balance sheet. Kvalheim said the company has funded all of its acquisitions from equity and has never carried debt on its balance sheet.
Parent company Apollo Global Management has also been instrumental in Athene’s growth, serving as a strategic partner that helped the fledgling company gain credibility on Wall Street during its formative days and grow into a company that today has $80 billion in assets, $6 billion in capital and $800 million in operating income after taxes.
Athene ranks as the third-largest provider of fixed indexed annuities and seventh-largest provider of fixed annuities on LIMRA’s third-quarter ranking of U.S. annuity providers. “We’re really focused on that space,” said Kvalheim. “We’re all about serving the retirement income needs of our customers and we reach them primarily through our relationships with (independent marketing organizations) and more recently regional broker-dealers and banks.”
Athene’s stock (NYSE: ATH) received a warm welcome on the markets, trading above their opening price in initial trading. (Photo: iStock)
Reason for IPO
Athene will not receive proceeds from the offering, which will instead go to selling shareholders. Apollo did not offer shares during the offering and maintains its strategic interest in Athene along with 45 percent voting power.
Although it is not receiving any proceeds, Athene pursued the IPO because it wanted future access to the public equity markets for capital needs. The company currently has $1 billion in excess capital, said Kvalheim. The IPO also bolsters its credibility in the market, he said.
“The constituents we deal with — whether it’s regulators, ratings agencies, distribution partners or policy holders — get an added level of comfort from the additional financial disclosures and transparency that comes along with meeting the requirements of being a public company,” said Kvalheim.
The company’s operations are not likely to change in the wake of the IPO.
“We’ve been anticipating this day and expecting we would be a public company, so we’ve been running the company to public standards for a couple years now,” said Kvalheim. “We don’t have different goals and ambitions as a public company that we didn’t have as a private company.”
Athene managed to hit a sweet spot in the market for its IPO, following months of concern about how the Department of Labor’s fiduciary rule and low interest rates could affect the value of the deal.
“The election changes a fair amount of the commentary around that,” said Kvalheim. “When we were thinking about the timing for the IPO, there were a lot of questions around the DOL fiduciary rule before the election. I would say after the election, the consensus view is a high likelihood of at least a delay of implementation if not outright repeal and that became much less of an issue.
“Our roadshow kicked off [Nov. 28] and the stock market’s been basically up every day since, and financial stocks in particular have done very well,” continued Kvalheim. “Rising interest rates are also good for us and they’ve continued to tick up, so it would be hard to imagine better timing.”
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