Earnings

‘Everything worked’: Apollo touts a 16% increase in AUM during Q3

Apollo Global Management continues to benefit from adding Athene to its portfolio.

By John Hilton

Commitment to the high-net-worth market drove Apollo Global Management to a massive increase in assets under management during the third quarter.

The firm’s assets under management ballooned to $733 billion, a 16% increase over the year-ago quarter. It is part of a “play to win” strategy that includes ambitious targets like average annual 20% fee-related earnings growth.

“We laid out ambitious targets, but they’re targets the management team and I are fully behind and believe we can meet,” CEO Marc Rowan said on a Tuesday call with Wall Street analysts. “The third quarter was a solid start in that direction. In short, everything worked. The team made all of us look good.”

Rowan revealed how Apollo rewarded the team: “We will open the frozen yogurt bar today,” he said. “It's one of the tools we joked about on investor day, but it's part of the culture of Apollo.”

Athene Life & Annuity is a big piece of the Apollo Management portfolio. The insurer is the leading seller of annuities with nearly $19 billion in second-quarter sales, according to LIMRA. It is the most recently available company sales data.

Rowan said Athene achieved “another $20 billion organic growth quarter” in Q3. During the investor day event, Apollo executives talked about in-plan annuities as a growth area. There is potential to grow over the next five years from about $700 billion in assets under management to about $1.5 trillion, Apollo leaders have said.

Rowan picked up on that concept Tuesday. Athene may need to rethink it’s offerings in order to meet the market need, he said.

Athene has “done an incredible job. They took a startup and they turned it into the largest organic originator of retirement products in the U.S., and I believe in the world,” Rowan said.

But what they have done is just do a better job at moving a traditional product set without much updating, he added.

“The notion of simplification and getting to guaranteed lifetime income, I believe to be the North Star for where we would like to go,” Rowan explained. “This notion of rethinking the product set, I believe to be the single biggest opportunity in front of us, and that is what is baked into our five-year plan over the next few years. Should we get access to 401(k) through broad-based reform or regulatory change or regulatory encouragement, I believe that would be upside, not just for us, but for the entire industry.”

Additional takeaways

Rowan frequently offers grandiose themes during the quarterly calls with analysts. During Tuesday’s call, he talked up Australia’s superannuation program. Dating to 1992 legislation, Australia’s superannuation program is a savings system for retirement.

Similar to a 401(k), it involves money earned by an employee being placed into an investment fund. Employers make compulsory payments to these funds at a proportion of their employee's wages. From July 2024, the mandatory minimum "guarantee" contribution is 11.5%, rising to 12% from 2025.

Including private assets along with traditional asset in “a blend,” Rowan said, is enabling Australians to have much better financial outcomes for retirement.

“We're talking about 40% to 60% better outcomes,” he added. “Over time, I believe people will see the light, and we will eventually have the inclusion of private assets in what would be traditionally public-only portfolios.”

Management Commentary

“Our strong third-quarter results reflect broad-based momentum across the platform. We are building a next-generation financial services business uniquely positioned to win across massive market opportunities, and we are excited to execute on the attractive growth plan unveiled at our recent Investor Day.”

CEO Marc Rowan

Financial Overview

Total Revenue: $7.7 billion ($2.6 billion in Q3 2023)

Net Income: $787 million ($660 million in Q3 2023)

Earnings Per Share: $1.81 ($1.59 in Q3 2023)

Share repurchases: 4 million shares at a cost of $426 million

Dividend declared: $0.4625 per share

Stock price movement: Up nearly 9% to $162.21 Wednesday morning

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.