For Apollo’s New CEO, Insurance Is In—Racy Buyouts, Not So Much

Apollo Global Management made its name scoring double-digit returns on debt-laden buyouts. Under new CEO Marc Rowan, the firm’s future will become increasingly about finding ways to eke out a few percentage points more than corporate and government bonds pay.

The shift reflects Apollo’s evolution from a leveraged-buyout shop to a credit-investing powerhouse catering primarily to insurance companies looking to park reams of cash from selling retirement-savings products known as fixed annuities.

For Apollo, that has meant building platforms that churn out an expanding array of investment products designed to be relatively low-risk. Those products include loans to big or midsize businesses, asset-backed securities, aircraft finance and residential mortgages, whose returns need only exceed by slim margins what the insurance companies pay out to policyholders.

Apollo’s skill at developing alternatives to the plain-vanilla bonds that insurance companies have traditionally relied on, at a time of ultralow interest rates, has helped assets in its credit business more than triple over the past five years to upward of $320 billion. The business now accounts for more than 70% of the firm’s roughly $455 billion in total assets.

The firm doubled down on the effort with a deal in March to buy the 65% of insurer Athene Holding Ltd. that it doesn’t already own. The move, which will turn Apollo’s biggest source of assets into a wholly owned division, came just after Mr. Rowan was named chief executive. A co-founder of the firm, he was the architect of the insurance strategy, helping build Athene in the aftermath of the financial crisis.

Source: Wall Street Journal

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