Athene dominates annuity sales, but Apollo execs have even bigger plans

Athene Annuity and Life is far and away the No. 1 seller of annuities, but its parent company is far from satisfied with those monster numbers.

Apollo Global Management executives talked about the potential for a lot more from Athene today during a conference call with Wall Street Analysts on Apollo's successful fourth-quarter earnings report.

"Athene had record inflows of $66 billion," Apollo CEO Marc Rowan said. "Even in inflows Athene is not a near-term profit maximizer. This was an opportunity to really shape the kind of business and the kind of distribution that Athene unwanted, and we would expect to exceed this number in terms of organic originations for Athene moving into 2024."

Apollo reported strong numbers across the board. The New York City-based firm reported total revenues of $11.05 billion in Q4, compared to $4.84 billion in the year-ago quarter. Within its retirement services segment, premiums soared to $3.59 billion, up from $869 million in Q4 2022, and net investment income came in at $3.35 billion, up from $2.48 billion.

Asset management revenues rose 10% to $444 million and assets under management were up 19% to $651 billion. Adjusted net income rose to $1.18 billion, compared to $903 million a year ago.

Athene the king

Athene sold more than $22 billion in annuities in the third quarter, according to LIMRA's Fact Tank. Most of those sales were of short-duration fixed annuities up to seven years. Rowan made extended remarks on the potential for Apollo, and others, to offer products with lifetime income, but said it will require a new sales paradigm where firms are able to hedge against both investment and longevity risk.

"The Holy Grail of this business, in my opinion, is both simplification, and a much simpler promise of guaranteed lifetime income," Rowan explained. "Currently, an annuity has firms taking one significant risk, and that's investment risk. When you move to guaranteed lifetime income, you're taking both investment risk and longevity risk."

The cost of hedging longevity risk in the market is cost prohibitive within the confines of distribution of annuities in the dominant sales channels, Rowan explained.

"But in a fiduciary sale, one is that is not through a channel that is commission payable, one could in fact offer guaranteed lifetime income and have the cost of a longevity hedge borne by a commission," he added. "I think you will see a number of firms in our industry trial that this year."

If successful, it will "open a different market," Rowan said. "A market that is potentially very large and very attractive that provides long-term capital, but leaves us as an industry participant focused on the risk we want to take, which is investment risk, rather than being in a longevity risk business."

Aging population creates opportunity

The number of Americans ages 65 and older is projected to increase from 58 million in 2022 to 82 million by 2050 (a 47% increase), according to the Census Bureau, and the 65-and-older age group’s share of the total population is projected to rise from 17% to 23%.

"The retirement savings crisis in the U.S. is particularly acute," Rowan said. "And I believe there is a substantial role for firms such as ours to play in buffeting investors savings and allowing us to provide them guaranteed lifetime income."

Rowan described Apollo as "a relatively small entity" in the overall asset management landscape, but surrounded by "four massive markets": fixed income replacement, high-net worth, rotation out of active management, and the retirement market.

Rowan spoke last May of long-range plans to push further into the high-net-worth retirement services market with its alternative investment platforms.

"Each of those markets offers us the opportunity to double our firm over a number of years," Rowan said Thursday. "We just have to make sure that we are well positioned. We make the investments today and accept that the tailwinds that powered us in 2023 are not the same as the tailwinds that are likely to power us going forward."

InsuranceNewsNet 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.