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Athene (ATH) to Buy Minority Stake in Australia's Challenger

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  • ATH-PC
  • CGF.AX
  • APO-PA

Athene Holding Ltd. ATH along with Apollo Global Management APO has agreed to purchased 15% stake in Challenger Limited. This marks Athene’s entry in the Australian market. The Australian Prudential Regulation Authority is due to give approval for purchase of 3% stake.

Athene and Apollo had earlier acquired stakes in Challenger. When combined together, they are estimated to have minority economic interest of 18% for $540 million (A$720 million).

Australia-based Challenger is the distinguished platform for both annuities and investment management. It had A$21 billion of life investment assets and A$104 billion of total assets under management as of Mar 31, 2021.

The investment is a strategic fit to capitalize on Australia's sizable and growing retirement market. Athene CEO Jim Belardi stated, “Investing in Challenger represents an exciting opportunity for us to support a well-established platform within the Australian market, a geography we have been studying given the current economic conditions and compelling demographic fundamentals." To expand internationally, Athene has also pursued growth initiatives in the United Kingdom and Japan over the past two years.

This investment follows Athene's pending agreement to merge with Apollo. Athene and Apollo share a partnership since the former’s establishment in 2009, under which Apollo currently holds 34% stake in Athene. In March 2021, Athene agreed to merge with Apollo Global Management in an $11 billion all-stock deal to accelerate asset and liability origination, widen distribution channels and create a leading global solutions provider with solid capital base. Both the companies estimate the merger to be significantly accretive with combined earnings power.

Athene boasts an impressive inorganic growth, which has been driven by several buyouts and block reinsurance transactions with several companies. Liberty Life Insurance Corporation, Investors Insurance Corporation, Presidential Life Corporation, Aviva USA Delta Lloyd Deutschland AG (DLD), and Jackson National Life Insurance Company have helped Athene to improve product offerings and add to the scalability of its business as well.

Shares of Athene Holding have rallied 59.4% year to date, outperforming the industry's increase of 2%. Continued focus on organic and inorganic channels, strong relationship with Apollo and effective capital deployment measures will help shares retain the momentum.

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Given insurance industry’s adequate capital level, players are pursuing strategic mergers and acquisitions. Stewart Information Services Corporation STC has acquired Thomas Title & Escrow team and offices in Scottsdale, Houston and Dallas in its efforts to consolidate its presence in the commercial operations. Arthur J. Gallagher & Co. AJG recently acquired the remaining shares of Edelweiss Gallagher Insurance Brokers Limited from Edelweiss Financial Services Limited.

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Arthur J. Gallagher & Co. (AJG) : Free Stock Analysis Report

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