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Apollo CEO Questions Other Private Equity Investors' Life Strategy

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What You Need to Know

  • Apollo has had a large stake in Athene and now owns it outright.
  • Athene is the company that made a $27 billion annuity reinsurance arrangement with Jackson and a $19 billion annuity reinsurance deal with Voya.
  • Rowan says the key to success is originating good investments.

Marc Rowan — the head of the investment company that controls Athene Holding, and who has helped finance many of the biggest life insurance and annuity sector deals over the past decade — suggested Friday that some other investment companies that are buying life and annuity issuers are on the wrong track.

Rowan is the CEO of Apollo Global Management.

Apollo has owned a 35% stake in Athene since 2009, and it recently completed an effort to acquire full control of Athene.

Athene is the company that made a $27 billion annuity reinsurance deal with Jackson and a $19 billion annuity reinsurance deal with Voya. It also has contributed to many other giant life and annuity deals, through, in some cases, backing other investment companies in the life and annuity sector, such as Venerable.

Apollo held a conference call to go over its earnings for the fourth quarter of 2021 with securities analysts. One analyst asked about any changes that might be coming in terms of “private equity ownership of life insurers,” or investment companies buying control of life and annuity issuers.

Rowan scoffed at the idea that investing in life and annuity issuers is an easy way for private equity firms to make money.

“What’s interesting is, this is a journey we’ve been on for 12-plus years,” Rowan said. “We have paid an immense amount of tuition. Others who are interested in following what we do will quickly find out that this is not a trade. This is a lifestyle.”

How to Invest in a Life Insurer

One key to investing in life insurers successfully is developing the infrastructure needed to operate within a heavily regulated sector, Rowan said.

Rowan said another key is understanding the nature of a life insurance company investment.

“Capital coming to the industry is generally a positive,” Rowan said. “Capital coming out of funds that have limited lives, for a long-term asset, is not generally viewed as a positive.”

Rowan also questioned strategies that hinge on the private equity owner managing a life insurer’s investment portfolio.

“New players coming to the business who understand that putting risk on insurance companies’ balance sheet through increased exposure to subordinated securities are going to find out that that is not really going to be accepted broadly across the industry,” Rowan said.

Rowan said the ideal is for investment companies to boost their investment returns by originating their own carefully created and managed investment assets, and to act as owners of those assets alongside the life insurers, or other investors.

“Capital as a general matter is plentiful,” Rowan said. “It is assets that offer appropriate risk rewards that are in short supply. So, therefore, we are incredibly focused on growing our capacity to originate assets that offer attractive risk rewards.”

One way Apollo is maximizing Athene’s value, without taking excessive credit or duration risk, is to invest some of its capital in companies that can originate high-quality assets, such as Aqua Finance, a consumer lender, and Petros PACE Finance, a company that finances clean energy real estate transactions, according to Jim Zelter, Apollo’s co-president.

Apollo streamed the conference call online and has posted a recording on its website.

Q4 Earnings

Apollo as a whole is reporting $613 million in net income for the fourth quarter of 2021 on $1.2 billion in revenue, compared with $1.1 billion in net income on $1.3 billion in revenue for the fourth quarter of 2020.

Pictured: Marc Rowan (Photo: Jonathan Alcorn/Bloomberg)


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