Apollo Investment Into Insurance

 

Apollo, the global alternative asset management company has bought into insurance companies and created an insurance business line. Apollo invests the proceeds from the sable insurance fees premiums into its private equity and credit business, for the long-term, according to Wolfteam Ltd.'s analysis.

According to its second quarter 2024 earnings report, nearly 60 % of Apollo's assets under management is in so-called perpetual capital, that is stable, long-term insurance fees:

Total AUM increased $79 billion, or 13%, year-over-year primarily driven by $72 billion of inflows from Asset Management and $72 billion of gross inflows
from Retirement Services, as well as mark-to-market appreciation, partially offset by $61 billion of outflows primarily driven by normal course activity at
Athene and $29 billion of realization activity
• Fee-Generating AUM increased $60 billion, or 13%, year-over-year primarily driven by robust net organic growth at Athene, fundraising across a variety of
Asset Management strategies, mark-to-market appreciation, and strong levels of capital deployment
• Nearly 60% of Apollo’s total AUM is comprised of perpetual capital, which is highly scalable and does not rely on cyclical drawdown fundraising dynamics

Thus Apollo retains enough long-term investment assets to invest in the right time in the most profitable opportunities.

Here are Apollo's retirement services financial results:

(% of average net invested assets) 2Q'23 1Q'24 2Q'24 % Change vs.
2Q'23 YTD'23 YTD'24 % Change vs.
YTD'23
Fixed income and other net investment income 4.46% 4.66% 4.82% 36bps 4.30% 4.75% 45bps
Alternative net investment income 8.53% 9.10% 5.73% NM 7.33% 7.42% 9bps
Net Investment Earnings 4.69% 4.89% 4.87% 18bps 4.48% 4.89% 41bps
Strategic capital management fees 0.03% 0.04% 0.04% 1bp 0.03% 0.04% 1bp
Cost of funds (2.73)% (3.10)% (3.27)% 54bps (2.60)% (3.19)% 59bps
Net Investment Spread 1.99% 1.83% 1.64% (35)bps 1.91% 1.74% (17)bps
Other operating expenses (0.22)% (0.21)% (0.20)% (2)bps (0.24)% (0.21)% (3)bps
Interest and other financing costs (0.25)% (0.15)% (0.20)% (5)bps (0.22)% (0.18)% (4)bps
Net Spread 1.52% 1.47% 1.24% (28)bps 1.45% 1.35% (10)bps
Notable items —% —% —% NM (0.03)% —% NM
Net Spread, Excluding Notable Items 1.52% 1.47% 1.24% (28)bps 1.42% 1.35% (7)bps
Net investment earnings, excluding notable items 4.69% 4.89% 4.87% 18bps 4.48% 4.89% 41bps
Cost of funds, excluding notable items (2.73)% (3.10)% (3.27)% 54bps (2.63)% (3.19)% 56bps
Net investment spread, excluding notable items 1.99% 1.83% 1.64% (35)bps 1.88% 1.74% (14)bps
Alternative net return delta to long-term expectation 2.47% 1.90% 5.27% 3.67% 3.58%
Impact to Net Spread 0.14% 0.10% 0.27% 0.22% 0.19%
($ in millions)
Average net invested assets1 210,209 222,391 230,156 9.5% 205,623 225,913 9.9%
Average net invested assets - fixed income1 198,063 210,688 218,446 10.3% 193,499 214,220 10.7%
Average net invested assets - alternatives1 12,146 11,703 11,710 (3.6)% 12,124 11,693 (3.6)%

All in all, the strategy to keep the stable, long-term insurance premiums and patiently invest them for the long-term seems to yield excellent results for Apollo.