Apollo stands behind alts as profit miss provokes concerns
Apollo Global Management Inc. executives sought to allay investor concerns about the performance of alternative investments held at its Athene annuities business after that unit weighed on earnings in the second quarter.
Athene’s profit dropped 11% to $710 million, driven by a decline in income from alts. That resulted from under-performance of certain equity investments in other insurance companies held by Athene, including Catalina, a property and casualty insurer that will be wound down because the business is less attractive, Chief Executive Officer Marc Rowan said Thursday in a conference call with analysts.
“The vast majority of the alts portfolio is doing exactly what it’s supposed to do, and you’re watching lumpiness in some of the strategic stakes,” he said, noting that Catalina is the only such holding that’s not performing. “It’s a relatively small stake and it is in the process of transitioning its business.”
Shares of New York-based Apollo slid 3.5% to $120.88 at 11:02 a.m. in New York, paring their advance this year to 30%.
Interest rate hedging costs and the roll-off of higher annuities contracts issued in recent years also weighed on Athene during the three months ended June 30, and that trend is expected to continue in the current quarter, Rowan said. The firm expects mid-single-digit earnings growth for Athene this year and a return to double-digit growth next year, he said.
Adjusted net income was $1.01 billion, little changed from a year earlier, Apollo said in a statement. That equated to $1.64 a share, falling short of the $1.75 average estimate of analysts surveyed by Bloomberg.
Apollo executives struck an optimistic tone on private equity, noting that the firm announced multiple acquisitions in
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