Annuity leader Athene’s sales drive 75% net income boost for Apollo in Q2

Apollo Global Management leveraged strong annuity sales from its Athene business to drive a 75% increase in year-over-year adjusted net income.

"These are truly exceptionally good times," said Marc Rowan, co-founder, CEO and director of Apollo, during a call with analysts today.

Apollo found a successful formula investing the capital brought in by annuities provider Athene Annuity & Life in mostly investment-grade debt products. The resulting spread-related earnings surged 76% to nearly $800 million.

Despite the good news, Rowan said Athene underperformed its potential in Q2.

"We thought we would do substantially more business this year than last year," he said. "Recall that last year was some $48 billion of organic inflows and we're now confirming and provided guidance that we will be north of $60 billion. I believe that we are leaving between $10 and $20 billion on the table."

First-quarter sales of $8.6 billion put Athene far and away in the No. 1 spot on LIMRA's total annuity sales rankings.

Athene has "the luxury of choosing the highest-quality business, the right business mix, the right profile of liabilities and the right net spreads," Rowan said. Multi-year guaranteed annuities is a business Athene shied away from, he added.

"Most of the business that was left on the table is what I call transactional," Rowan explained. "Transactional does not mean bad. It just means we elected to do other business versus transactional business and MYGAs are primarily transactional business. Anytime we want to add MYGAs, we can add MYGAs. We chose not to for the quarter, given that we were already doing $19 billion of organic inflows."

New relationships

Athene is still growing, Rowan reminded analysts. The insurer struck important deals with big banking distributors in recent years and has more coming, he said.

"We will add the largest or second-largest provider of annuities in this country at some point, I think this quarter, and that will not mature until a year from now," Rowan said. "And then we have two or three other very large providers coming on."

In the company's first-quarter call, Rowan spoke of a desire to draw high-net-worth investors into its alternative investment platforms.

Rowan also addressed the potential for interest rates to decline. Currently, the Fed interest rate is 5.25% to 5.5%. After sitting at 0% for more than a year during the COVID-19 pandemic, the Fed has steadily raised rates since March 2022, except for a brief pause in June of this year.

"I do think the overall market share for retail will be impacted by rates if in fact rates go down," Rowan said. "That doesn't mean negative or substantially negative, but it will on the margin be a negative force. Having said that our distribution is still building so quickly, that I doubt we will see any real decline in retail."

On the investment side, fee-related earnings climbed nearly 30% to a quarterly record of $442 million, Apollo reported. Executives cited a growth in management fees as the company acquired more assets, Reuters reported.

Income from asset sales came in at just $20 million as Apollo avoided cashing out its private equity investments amid the continued slump in deal-making activity.

Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.