Athene earnings come up short in Q2 despite monster annuity sales

Main takeaway: Athene Life & Annuity came up short on earnings during the second quarter despite dominating the industry in annuity sales.

Apollo Global Management CEO Marc Rowan pointed to conservative hedging for the reduced earnings. Apollo opted to be conservative in factoring in potential interest rate cuts, Rowan explained to Wall Street analysts during a conference call Thursday morning.

Those rate cuts never materialized. In addition, the roll off of strong business also impacted Athene’s profitability, Rowan said.

“The roll off of this business and hedging essentially cost us growth for the quarter, and will cost us growth for Q3,” he explained. “We expect by Q4 the business to grow and to be back on trend.”

Rowan predicted “mid-single digits” growth for the year, with Athene returning to double-digit growth next year. Athene dominated LIMRA’s annuity sales charts in recent quarters, selling $9.7 billion in first-quarter sales, the most recently available numbers.

“For the [second] quarter, Athene hit every operating metric,” Rowan assured analysts. “New business volumes, underwritten returns, credit quality, expenses, surrenders [and] capital.”

Apollo reported a quarterly record in fee-related earnings of $516 million in the quarter, a 16.7% rise from the year-earlier period, for asset management and arranging financing for deals. That was offset by a 12.5% decline in spread-related earnings, a performance metric for its Athene business segment.

Additional takeaways

Apollo completed three transactions in recent weeks. The firm agreed to buy British parcel delivery company Evri for 2.7 billion pounds, or $3.47 billion. Apollo-managed funds acquired The Travel Corporation, a privately owned travel company with a storied history. The deal includes 18 of TTC's brands, such as tour operator Trafalgar, Uniworld Boutique River Cruises, and youth travel specialist Contiki.

Finally, Apollo reached a deal to acquire International Game Technology's (IGT.N), opens new tab gaming division alongside Everi Holdings, a gambling machines company, for a combined $6.3 billion.

Apollo also made a $700 million investment in Sony Music Group.

“The team is working around the clock,” Rowan said.

Management Commentary

“Essentially, what we have done is we have modernized existing products. The opportunity now exists for the entire next generation of products to serve retirees, whether they are in the traditional insurance sector, or they are in the vast pool of 401(k), which heretofore, has been off limits to most alternative assets providers."

– Marc Rowan

Financial Overview

Adjusted Net Income: $1.01 billion ($1.01 billion in Q2 2023)

Earnings Per Share (EPS): $1.64 ($1.70 in Q2 2023)

Assets Under Management: $696 billion ($617 billion in Q2 2023)

Fee-Related Income: $516 million ($442 million in Q2 2023)

Dividend: $46.25 per share

Segment Performance

Retirement Services:

Spread-Related Earnings: $710 million ($799 million in Q2 2023)

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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 john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.