Athene Holding Ltd., the life and retirement reinsurance firm that is majority owned by investor and private equity specialists Apollo Global, has had the two entities of its Athene Co-Invest Reinsurance Affiliate (ACRA) sidecar vehicle rated by A.M. Best.
Athene has been steadily raising third-party capital commitments for the Athene Co-Invest Reinsurance Affiliate (ACRA) vehicle this year, taking capital commitments to nearly $1.5 billion this summer.
The structure will operate as a kind of investment fund, allowing third-party investors to participate alongside the insurer in private deals, thus providing sidecar like capacity to support the kind of large reinsurance transactions that Athene tends to enter into.
A.M. Best has assigned a Financial Strength Rating (FSR) of A (Excellent) and Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” to Athene Co-Invest Reinsurance Affiliate 1A Ltd. and its subsidiary, Athene Co-Invest Reinsurance Affiliate 1B Ltd.
The rating agency said that Athene Group’s own ratings are being extended to ACRA, because it has such a strategic role in the group’s business strategy.
A.M. Best noted that ACRA will operate like a sidecar for Athene, giving the life and retirement specialist access to on-demand third-party equity capital to support its new business growth.
Having access to this third-party capital source alongside its own balance-sheet will provide Athene with greater flexibility in executing new business transactions, which will of course also give it the chance to participate in even bigger deals.
ACRA is also expected to be accretive to Athene’s earnings due to the management fees earned, as opposed to the interest expense of taking on debt financing to fund deal activities.
By structuring something that will deliver the insurance and reinsurance linked returns that the third-party investors seek, while providing it with on-demand additional deal capacity and providing management fee income, ACRA is clearly accretive to Athene’s operating structure, offering flexible and efficient capital to support its growth.