According to Financial Times News, Apollo Global just posted some surprisingly strong numbers that should calm investors worried about falling interest rates. The investment giant reported $871 million in spread profits from its Athene insurance unit last quarter – the highest figure in two years. Overall profits hit $1.7 billion, and they originated a staggering $75 billion in new loans. Basically, Apollo’s private credit engine is humming along despite everyone freaking out about tighter credit spreads.
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The Insurance Alchemy Behind Apollo’s Success
Here’s what most people miss about Apollo’s strategy. They’re not just another private equity shop anymore. When CEO Marc Rowan engineered the Athene merger, he created this beautiful machine that takes “sleepy” insurance premiums from fixed annuities and deploys them into higher-yielding private loans. It’s financial alchemy – matching long-term liabilities with even longer-term, higher-return assets.
But there’s a catch, right? About half of Apollo’s earnings now come from these spreads between what they earn on loans and what they owe policyholders. That makes them way more sensitive to interest rate moves than rivals like Blackstone or Ares. And we’ve seen the stock suffer this year – down 25% while competitors held up better.
Winning the Volume Game
So how did they pull off these numbers when everyone expected rate fears to crush them? Volume. Pure, massive, overwhelming volume. Apollo originated $273 billion in loans over the past 12 months – that’s 40% more than last year’s pace. They’re lending to everyone from Intel to EDF, basically competing head-to-head with banks like Citigroup.
The thing is, when you’re originating $75 billion in new loans in a single quarter, you can afford some compression in your spreads. Lower-yielding loans replacing pandemic-era higher-yielders? No problem – just make it up in volume. They’ve essentially become a shadow banking powerhouse operating outside all those pesky banking regulations.
The Hedging Bet That Paid Off
Look, Apollo isn’t stupid about their interest rate exposure. They hedged $9 billion of it back in late summer, which probably saved their quarter. And they’re still pulling in $82 billion in new assets, including $23 billion from Athene’s retail annuity sales. That inflow helped fee-based earnings jump 22% and pushed assets under management past $900 billion.
Now the question is whether this is sustainable. Can they keep this lending machine fed with enough insurance premiums? And what happens when rates really do fall substantially? For now though, Apollo’s showing that their insurance-powered model can withstand the pressure better than skeptics thought. They’re basically proving that in private credit, sometimes the best defense is a massive, overwhelming offense.
