In Apollo’s 2021 Investor Day, it outlined a goal for $150B in inorganic insurance transactions over the next five years. This week marks the first transaction since the event, rending the goal ~12% complete.
A few days ago Apollo’s European insurance affiliate, Athora, announced its first transaction of the year. It is roughly a €20B transaction that will push Athora’s assets north of €100B. Furthermore, my insurance guru indicated a key difference between US and EU insurance regimes as it comes to M&A:
Athora / Apollo indicated details that are in-line with the above as part of the plan for the transaction:
Subject to closing, Athora Germany will have €24 billion of AuA and 1.1 million customers, helping it to achieve economies of scale in Europe’s second largest life insurance market.
Prior to closing of the transaction, AXA Germany will transfer the portfolio and its associated balance sheet to a well-capitalised company which will be acquired by Athora Germany and integrated under the Athora brand. Athora Germany and AXA Germany will also sign extensive service agreements for the five-year transition period during which the portfolio will gradually migrate to Athora. As part of the transaction, AXA IM will continue to provide certain asset management services to Athora Germany, notably investment grade debt, until 2028.
Athora Press Release
Going forward, one may reasonably expect that the European M&A cadence to continue with some measure of regularity. According to Rowan:
In terms of what’s going to happen in Europe this year, I believe it will be an incredibly active year. All indications tell me that there will be sizable blocks of business that change hands. The pickup in rates, in some ways, is actually helpful in reducing the embedded loss of a lot of these historic books of business to the legacy companies. So in short, I thought ’21 was very active, but I expect ’22 to be even more active on a go-forward basis.
APO Q4-2021 Earnings Call
And more recently, Jim Zelter indicated:
So for us, we’ve tended to focus on the larger, more complicated M&A opportunities. Those are out there. They’re going to happen in the second half of 2022, no doubt. So from our mind, while it’s been a while, while we’ve digested a few things, I think we’re — certainly feel like there’s a robust M&A pipeline.
MS US Financials Conference
As an investor, the main takeaway here is the company is executing on its plan and validating its competitive advantages in the global inorganic space within the life insurance.
Disclosure: We own shares of APO, this is not investment advice. Do your own work.