Apollo’s Athene raises $1bn of $4bn target for ACRA insurance-linked fund

Athene Holding Ltd., the life and retirement reinsurance firm that is majority owned by Apollo, has raised $1 billion of third-party capital commitments for its new Athene Co-Invest Reinsurance Affiliate (ACRA) vehicle that will enable investors to participate alongside the insurer in private deals.

Private equity and alternative investment specialist Apollo Global Management, LLC has been in the market raising third-party capital for insurance-linked fund strategies designed to capitalise on the appetite of investors to access returns from the insurance and reinsurance market.

Athene Co-Invest Reinsurance Affiliate (ACRA) is one such vehicle, that is targeting a capital raise of $4 billion for the strategy that will enable third-party investors to participate in private deals alongside Apollo’s insurance and reinsurance company Athene.

In this way ACRA works a little like an ILS fund or sidecar for Athene, offering investors the chance to access insurance-linked returns from the firms deal-flow.

Athene said in its results this week that it is making good progress, with $1 billion of capital commitments secured and ready to deploy as and when deal-flow allows.

Athene describes the strategy as one which will provide it, “on-demand, third-party equity capital, enabling Athene to support a variety of business objectives.”

The company also acknowledged that the ACRA strategy and the third-party capital it provides will give it, “enhanced strategic flexibility” going forwards.

Jim Belardi, CEO of Athene, commented, “We are excited to announce the formation of a strategic, on-demand capital vehicle that will allow us to achieve a variety of business objectives simultaneously, and in a shareholder friendly manner.”

The latest results announcement further explains the ACRA strategy, “In order to support a growing number of capital deployment opportunities, including continuing profitable organic growth, acting as a solutions provider within the restructuring insurance industry, maintaining capital for opportunistic investment, repurchasing common shares at attractive returns, further strengthening the balance sheet, and pursuing ratings upgrades, Athene has established a long-duration, on-demand capital vehicle.”

ACRA, which is a wholly owned subsidiary of Athene, will participate in transactions by drawing two-thirds of the required capital for the deals from third-party investors, the company explained.

Managed to the same investment, risk, and capital standards as all other Athene subsidiaries, ACRA will look to be capitalised to the tune of $4 billion, with uncalled capital commitments already at $1 billion.

“This shareholder-friendly, strategic capital solution will allow Athene the flexibility to simultaneously deploy capital across multiple accretive avenues, while maintaining a strong balance sheet position. With this solution, Athene will be able to achieve various business objectives in a manner that is accretive to shareholders, minimizes the potential need for additional primary issuance in the future, and eliminates the impact undeployed on-balance sheet capital has on key financial measures, such as ROE,” Athene explained.

At its core, Apollo and Athene believe the opportunity set in their targeted areas of insurance and reinsurance are too large for their own capital on its own and hence bringing third-party investors into a vehicle to co-participate can enable more of their deal-flow to be executed on.

ACRA is intended to be fully integrated into the Athene model, as a core additional balance-sheet of capacity, providing on-demand capital to help fund any sizable legal entity, block reinsurance, pension risk transfer transactions, flow reinsurance transactions and certain funding agreements.

Of course there are fees to benefit from as well, no surprise given Apollo’s reputation as an effective asset gatherer. Athene will capture a wrap fee of ~15 bps from ACRA assets, which it says will deliver a ~350 basis point pick up in ROE on deals ceded to ACRA.

There is strong alignment in the vehicle as well and between it and Athene, with it expected to be core to future deal execution for the firm.

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