Apollo: Aviva deal boosted fee income $46.6M
February 8, 2014 by Victor Epstein
Private equity firm acquired W.D.M. insurer Aviva USA Oct. 2
Apollo Global Management, the New York City-based private equity firm, reported Friday that it generated an additional $46.6 million in fees in 2013, primarily due to monitoring fees related to buying Aviva USA in West Des Moines.
Apollo’s insurance arm, which is called Athene Holding, completed the acquisition of Aviva USA on Oct. 2 for $2.6 billion and renamed the West Des Moines-based insurer Athene USA. The data on advisory and transaction fees was part of Apollo’s earnings report for the fourth quarter and all of 2013.
The fee report is meaningful to Iowa because critics of the deal have warned state regulators that Apollo not only profits from the purchase and sale of companies like Aviva USA, but also drains their assets through excessive management and advisory fees.
Jim Baker of the UNITE HERE Union said Apollo locks the companies into long-term contracts for those services, which continue after their sale, during his appearance in July at a hearing on the pending acquisition by the Iowa Insurance Division.
Apollo expects to hold an initial public offering for Athene by Nov. 30, 2015, when it will be spun off as a publicly traded company.
Apollo President Marc Spilker said Friday that the Aviva deal added $44 billion of fee-paying assets to Apollo’s credit segment, according to a transcript of the company’s analyst conference call from SeekingAlpha.com. Another company official indicated Apollo gets about $4 million in annual fees from Athene for each $1 billion of assets it manages.
The Aviva USA deal lifted Athene’s assets to about $60 billion.
“Our 2013 financial results highlight a positive dynamic that we discussed previously, which is the growing earnings contribution from our management business to Apollo’s overall earnings profile,” Spilker said during the analyst call. “Although Athene may be the most visible driver of this evolution, it’s just one example of how we are leveraging our integrated platform and scale to create value for our investors.”
An Athene official declined Friday to disclose exactly how much the insurer is paying Apollo in fees.
However, the Apollo earning report said its annual revenue from advisory and transaction fees grew by 31 percent to $196.6 million in 2013 “primarily due to monitoring fees related to Athene.” Fourth quarter revenue from those fees increased 47 percent on a year-over-year basis, or $17.7 million, to $55.2 million “due to increased monitoring fees related to Athene.”
Apollo Chief Financial Officer Martin Kelly also credited Athene with supporting the growth of its management fees by $67 million in the fourth quarter. The private equity firm also indicated that it received a a $44 million monitoring fee from Athene in the fourth quarter — nearly double the amount before the Aviva deal was consummated.
“The percentage of Athene-related assets invested in Apollo-managed assets was approximately 15 percent as of Dec. 31,” Kelly said, noting that the ratio is expected to increase gradually over time.
Baker told Iowa insurance regulators in July that UNITE HERE represents 20,000 employees at the Caesars Entertainment casino company, which Apollo acquired in 2008. The private equity and investment firm subsequently drained more than $340 million in transaction, asset management, advisory and monitoring fees from Caesars, he said.
Apollo provides asset allocation and related services to Athene, which is legally headquartered in Bermuda and maintains an operational headquarters in West Des Moines.
Shares of Apollo, which trades under the APO symbol, fell 5 cents Friday to $31.73 each. The stock is up 12 cents so far this year. Apollo shares closed at $14.64 each the day before the pending deal was first announced the morning of Dec. 21, 2012.