# Apollo assures investors deposit flight won’t spill over to Athene Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-03-30 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Apollo Assures Investors: No Annuity Run Risk Amid Banking Crisis Meta Description: Learn why Apollo's reinsurance business, Athene, is not facing the risk of a run on annuities despite recent market turbulence and how their funding model URL: https://financedigest.com/apollo-assures-investors-deposit-flight-wont-spill-over-to-athenehtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-03-30t100637z1lynxmpej2t0cvrtroptp4apollo-global-results-1736814224346-compressed.jpg) By Chibuike Oguh (Reuters) – Apollo Global Management Inc has been telling investors and analysts in the last few days that its reinsurance business Athene does not face the risk of a run on its annuities akin to how deposits fled some U.S. [regional banks](https://www.financedigest.com/danich-local-and-regional-banks-launch-mobile-wallet-powered-by-nets-new-hce-and-tokenisation-platform.html "DANICH LOCAL AND REGIONAL BANKS LAUNCH MOBILE WALLET POWERED BY NET’S NEW HCE AND TOKENISATION PLATFORM"). Apollo shares have lost 15% of their value since the [banking crisis](https://www.financedigest.com/how-the-2023-banking-crisis-unfolded.html "How the 2023 banking crisis unfolded") started on March 8, a greater drop than experienced by major peers Blackstone Inc, KKR & Co Inc and Carlyle Group Inc. Graphic: Apollo’s shares lag peers – https://www.reuters.com/graphics/APOLLOGLOBAL-ATHENE/dwvkdkmykpm/chart.png In a quarterly update to shareholders published on March 13, Apollo outlined how Athene’s [funding model is different than a bank’s](https://www.financedigest.com/bank-funding-for-renewables-stagnates-vs-oil-and-gas-report.html "Bank funding for renewables stagnates vs oil and gas – report"). Most of the annuities that Athene provides cannot be surrendered by their holders, it said, and Apollo called its [balance sheet](https://www.financedigest.com/decoding-balance-sheets-analyzing-assets-liabilities-and-equity.html "Decoding Balance Sheets: Analyzing Assets, Liabilities, and Equity") a “fortress” that can withstand withdrawals from those who have the right to pull their money. Annuities are [financial products purchased for a lump sum or through installments in exchange for a fixed stream of payments](https://www.financedigest.com/the-future-of-payments-biometrics-within-the-financial-ecosystem.html "The Future of Payments: Biometrics Within the Financial Ecosystem") over time. They are typically [offered by insurance](https://www.financedigest.com/aon-data-empowers-unica-to-offer-flood-insurance-for-5-2bn-canadian-peril.html "Aon data empowers Unica to offer flood insurance for .2bn Canadian peril") firms. Apollo, one of the world’s biggest [private equity](https://www.financedigest.com/4-trends-that-will-have-a-major-impact-on-private-equity-in-2021.html "4 Trends that will have a major impact on private equity in 2021") firms, helped launch Athene in 2009 and has used the capital raised from the annuities offered to earn lucrative fees and grow its assets beyond its traditional funds. In the wake of the [banking crisis](https://www.financedigest.com/bank-shares-rise-after-credit-suisse-rescue-eases-crisis.html "Bank shares rise after Credit Suisse rescue eases crisis"), however, Apollo has been fielding questions from analysts and investors about Athene’s funding model. “Now that we are seeing runs on select U.S. regional banks, we’re also starting to see some [investors voice those same concerns about insurance firms](https://www.financedigest.com/investors-warn-big-consumer-firms-over-price-hikes-as-competitors-gain.html "Investors warn big consumer firms over price hikes as competitors gain"). What’s going on in regional [banks is like a wakeup call,” said BMO Capital](https://www.financedigest.com/austrian-regulator-orders-system-relevant-banks-to-up-capital-buffers.html "Austrian regulator orders system-relevant banks to up capital buffers") Markets analyst Rufus Hone. Following a meeting with Apollo executives, Hone wrote in a note last week that he does not anticipate a spike in withdrawals from Athene’s annuity holders and that Athene’s funding base was stable. An Apollo spokesperson said Athene had ample cash and liquidity and that its issuance of new annuity policies “meaningfully” exceeded the policies that matured and other withdrawals. Apollo said in its March 13 presentation to [investors that it had seen inflows of $8.8 billion](https://www.financedigest.com/uk-investors-add-1-2-billion-to-equity-funds-in-march-calastone.html "UK investors add .2 billion to equity funds in March – Calastone") to Athene from the start of the year to March 10. [Outflows have been consistent with the quarterly average of around $5 billion](https://www.financedigest.com/french-asset-manager-amundi-posts-q3-outflows-of-13-billion.html "French asset manager Amundi posts Q3 outflows of billion"), a person familiar with the matter said. Athene’s [estimated liabilities stood at $184 billion](https://www.financedigest.com/electric-kick-scooter-market-is-projected-to-reach-6-5-billion-by-2031-and-estimated-to-grow-at-11-5-cagr-between-2021-and-2031.html "Electric Kick Scooter Market is Projected to Reach .5 billion by 2031, And estimated to grow at 11.5% CAGR between 2021 and 2031") as of March 10. About 82% of those annuities are not at risk of withdrawal by clients, either because their terms make them non-surrendable or financially onerous to surrender, or because the holders are [insurance firms](https://www.financedigest.com/aon-to-acquire-henderson-insurance-broking-group-leading-uk-insurance-broking-firm.html "Aon to acquire Henderson Insurance Broking Group, leading UK insurance broking firm") rather than individuals, according to the Apollo presentation. But annuities [worth about $33 billion](https://www.financedigest.com/why-a-quiet-revolution-in-the-cloud-is-worth-billions.html "Why A Quiet Revolution In The Cloud Is Worth Billions"), equivalent to 18% of Athene’s liabilities, are not protected by surrender charges, making them easier to be withdrawn by holders. Questions from investors and analysts to Apollo have focused on this subset of annuity policies that have a potentially [higher flight risk](https://www.financedigest.com/dollar-higher-on-risk-aversion-euro-revisits-parity.html "Dollar higher on risk aversion; euro revisits parity"). STICKY ASSETS Apollo in the presentation gave several reasons why annuity holders are less likely to withdraw their [money than bank](https://www.financedigest.com/marketmind-banks-are-leaking-money.html "Marketmind: Banks are leaking money") account holders, including that annuities are long-term investment products that are typically used for retirement and offer higher returns than traditional bank products. Apollo also said it had $73 billion in available liquidity as of March 10 to meet any potential spikes in demand for annuity withdrawals, [including a $56.9 billion fixed-income portfolio comprised mostly of publicly traded](https://www.financedigest.com/ing-toughens-oil-and-gas-policy-to-include-trade-finance-midstream.html "ING toughens oil and gas policy to include trade finance, midstream") investment-grade corporate bonds. Apollo would likely have to realize losses if it sold some of that portfolio given that the rise in interest [rates in the last few months has led to a general drop in the value of bonds](https://www.financedigest.com/stocks-bonds-extend-rally-on-hopes-rate-hikes-ease.html "Stocks, bonds extend rally on hopes rate hikes ease"), said Argus Research analyst Stephen Biggar. Other insurers that are major providers of annuities, including American Equity Investment Life Holding Co, have also seen a drop in their market capitalization in the wake of the [banking crisis](https://www.financedigest.com/britain-urges-banks-to-offer-mortgage-flexibility-in-cost-of-living-crisis.html "Britain urges banks to offer mortgage flexibility in cost-of-living crisis"). Wells Fargo analyst Finian O’Shea said he did not believe Athene’s [business was currently at risk because withdrawals from annuities remained](https://www.financedigest.com/iran-open-for-business-but-caution-remains-the-watchword.html "Iran: ‘open for business’ – but caution remains the watchword") limited. But he said the fallout from the Federal Reserve’s [push to raise interest rates](https://www.financedigest.com/powells-warning-on-higher-u-s-rates-pushes-dollar-to-3-mth-high.html "Powell’s warning on higher U.S. rates pushes dollar to 3-mth high") as well as the recent collapse of some U.S. regional [banks prompted some Apollo investors](https://www.financedigest.com/stocks-rise-after-bank-sale-fuels-investor-risk-appetite.html "Stocks rise after bank sale fuels investor risk appetite") to raise concerns about Athene’s balance sheet. “It’s not a right-now thing. [People are thinking](https://www.financedigest.com/55-of-people-who-regularly-play-sport-dont-think-being-verbally-abusive-to-another-player-makes-them-a-bad-sport.html "55% OF PEOPLE WHO REGULARLY PLAY SPORT DON’T THINK BEING VERBALLY ABUSIVE TO ANOTHER PLAYER MAKES THEM A BAD SPORT") about it for more down the road — if interest rates keep going up that Athene’s surrender levels on annuities could go up,” O’Shea said. (Reporting by Chibuike Oguh in New York; Editing by Greg Roumeliotis and Leslie Adler) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---