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Apollo Global Management Inc. — a company that has been pouring institutional investor cash into the life insurance and annuity sectors — wants one of its major clients, Athene Holding Ltd. — to attract more money from the funds that serve ordinary retail investors.

Apollo and Athene today announced a series of transactions that could help Athene break into the S&P 500 stock index and, possibly, get its stock into more mutual fund and exchange-traded fund (ETF) portfolios.

(Related: Apollo Seeks $5.5 Billion in Capital for Life-Related Deals)

Apollo is a publicly traded, New York-based investment company. Members of the public can buy its stock, but its best known for using cash from big institutional investors to invest in many different kinds of companies, including Great Wolf Resorts, Harrah’s Entertainment, the owner of Chuck E. Cheese’s, and life and annuity issuers.

Athene is a Pembroke, Bermuda-based insurer with stock that trades on the New York Stock Exchange under the symbol ATH. Athene now has about $139 billion in assets, and it has become a major issuer and reinsurer of life and annuity products. In the second quarter, Athene ranked 12th in the Secure Retirement Institute’s U.S. individual annuity sales rankings, with about $3.7 billion in new annuity sales.

The Apollo-Athene Relationship

Apollo now owns 17% of Athene and controls 45% of Athene’s voting power. It also owns a subsidiary that manages the assets that support Athene’s insurance and reinsurance obligations.

The companies have proposed a package of deals that could leave Apollo with both a 35% stake in Athene and 35% of Athene’s stockholders’ voting power, and Athene with about $350 million in cash.

Apollo could eventually end up buying enough additional Athene stock to own a 40% stake in Athene, the companies say.

Athene would have the capacity to spend $600 million on buying back its own stock.

The total value of the transactions would be $1.2 billion for Apollo and $1.55 billion for Athene.

The transaction makes sense because, even though Athene is already a large, publicly traded company, the company’s current ownership structure keeps it out of the S&P 500 stock index, according to a slidedeck Athene and Apollo prepared to explain the deal.

“Athene’s stock could benefit from a broader investor base,” Athene and Apollo said.

Today, the companies said, ETFs and passive, index-based mutual funds own only about 11% of Athene’s stock, and “long-only investors” and ordinary active mutual funds own only about 63% of Athene’s stock.

At comparable insurers in the S&P 500 Insurers index, passive funds own 22% of the stock, and long-only investors and ordinary mutual funds own 82% of the stock, the companies said.

If Athene were an S&P 500 company, too, it might end up with more passive investor shareholders and a more diverse shareholder base, and it might also get more attention from ordinary, active investors, Athene and Apollo said.

If Athene ends up with more retail investor money, and increased retail investor interest boosts the company’s share price, the company could buy other life insurers, reinsure big blocks of other life insurers’ life insurance policies and annuity contracts, and expand the life and annuity operations it already owns.

The companies noted that current Athene shareholders will get a chance to vote on the proposal.

Resources

Links to documents related to the new Apollo-Athene transactions are available here, and here.

— Read Athene Completes $19 Billion Voya Annuity Reinsurance Deal, on ThinkAdvisor.

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