Athene Holding Ltd., the life and retirement reinsurance company majority owned by investor and private equity specialist Apollo Global, saw another healthy quarter of management fee income from its Athene Co-Invest Reinsurance Affiliate (ACRA) sidecar vehicle in Q4 2020.
Athene has reported another $8 million of management fees earned from the ACRA sidecar structures for the fourth-quarter of the year, which took its full-year 2020 ACRA management fee income to $22 million.
Management fees earned had been slightly higher in Q3 at $9 million, but the new run-rate over these two quarters provides more of an idea for how high the figure could be in 2021, even if Athene elects not to raise new capital for the ACRA reinsurance sidecar.
Athene had raised roughly $3.2 billion of third-party investor capital commitments for its ACRA reinsurance business and has since put some of the third-party capital contributed by the ACRA sidecar to work in a massive $27 billion fixed annuity block reinsurance transaction and investment in Jackson National Life Insurance Company, part of Prudential plc.
More of the capital has likely flowed to support other large block reinsurance or annuities type deals, but still Athene has reported that it had $1.7 billion of undrawn ACRA commitments as of the end of 2020, slightly down on $1.8 billion at the end of Q3 last year.
But, as we’ve explained before, for Apollo, the giant alternative investment manager, these transactions are as much about adding investment assets as assuming insurance or reinsurance risk.
So ACRA is contributing significantly in terms of adding reserves from transactions that Athene enters into, which translates into float like assets that can be used in Apollo’s strategies.
Athene last pegged its invested assets related to ACRA noncontrolling interests at almost $24.7 billion at the end of September 2020.
As of the end of December, that figure had risen further to $25.234 billion of ACRA related invested assets.
So, while only putting to work around half the capital raised by ACRA, Athene has still been able to generate a significant asset haul with the help of the vehicles third-party reinsurance capital investors, clearly demonstrating why the sidecar structure is an attractive one in this segment of the global insurance marketplace.
The income from management fees earned through ACRA is a nice boost to earnings, but the real value of the ACRA sidecar and Athene’s venture into third-party capital management using an ILS style vehicle is in the rapid build-up of additional assets under management thanks to the strategy.