Apollo Deepens Its Reach: Inside the Athora-PIC Acquisition
On July 3, Athora Holdings and Pension Insurance Corporation (PIC)
have entered into a definitive agreement for Athora to acquire PIC for approximately £5.7 billion. Upon completion, PIC will become Athora’s UK insurance business, operating under the Pension Insurance Corporation (PIC) and Penguin brands.
This piece of info was on all major financial news sites, but many Apollo shareholders may have missed it completely or underestimated its significance. Neither Athora nor PIC is a household name. Apollo is not even mentioned, but this is likely the most important acquisition for the alt manager since its merger with Athene on January 1, 2022. In this post, I will explain what makes this acquisition so important and how it’s aligned with the company’s strategy. It is worth unpacking Apollo’s quiet yet relentless push.
Apollo’s life insurance subsidiary, Athene, issues fixed annuities but plays at least three important roles. First, it produces spread-related earnings (“SRE”), i.e., the difference between what the company generates from its investments and what is being paid to annuity holders. Second, Athene’s balance sheet provides assets under management (“AUM”) and related management fees for Apollo’s investment arm. The fees contribute to Apollo’s fee-related earnings (“FRE”). These roles are clear to everybody who follows Apollo. It is the third role that may be less obvious.
Apollo has mastered multiple ways to use Athene to spur AUM growth far beyond the latter’s balance sheet in the most efficient way. Athene’s ratio of assets to equity is about 12:1. For every $1 invested in Athene, Apollo receives $12 addition to its AUM. It’s nearly impossible for an outsider to pinpoint the exact fee rate Apollo earns on Athene’s assets, given the multiple layers of fees, tiered structures, and varying asset types involved. I conservatively estimate the effective fee rate at around 0.3%, which aligns with the widely accepted range of 0.3% to 0.4%.
These fees are recurring, as Athene’s assets are designed to be permanent—maturing annuities are continuously replaced by new ones. At ~0.3% rate and 12:1 assets-to-equity ratio, $1 invested in Athene generates $0.3%*12 ~ $0.036 in fees alone (not counting SRE!). Assuming 50% FRE margin and 20% tax, it translates into $0.036*50%*80% ~ $0.014 in FRE. Since FRE is valued by the market at 25x at least, each $1 invested in Athene generates $0.36 in value from FRE alone on the Apollo side! (On the Athene side, $1 invested will add at least $1 in value, but we are focused only on fees here.) If you measure returns in terms of value added to the stock, you can think of it as 36% return on equity.
Last year, Athene earned about $3.2B in pretax SRE. Of those, Athene transferred back to Apollo approximately $640M for tax payments and $750M in dividends. Athene retained the remaining ~$1.8B, which would allow incremental growth of 12*1.8 ~ $22B in assets with corresponding growth in SRE and FRE.
Our calculations are approximate. Still, Athene’s assets grew by $21 billion in 2024—from $196 billion to $217 billion—closely matching our estimate. While Athene’s internal machinery is complex, it now runs smoothly as a well-rehearsed routine. The key question is whether Apollo can further enhance Athene’s capital efficiency to generate more fees without increasing the fee rate.