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Athene (ATH), Apollo to Buy Majority Interest in Aqua Finance

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·3-min read
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  • APO-PA
  • BRO
  • AJG

Athene Holdings ATH and Apollo Global Management APO have agreed to buy a majority interest in Aqua Finance for $1 billion from Blackstone Tactical Opportunities. Pending the fulfillment of closing conditions, the transaction is expected to see the light of day in the first half of 2022.

Blackstone will continue to have a minority interest in Aqua Finance. Apollo will manage the investment on behalf of Athene.

Wisconsin-based Aqua Finance is a fast-growing consumer lending platform, originating and servicing consumer loans primarily for home improvement and water treatment. Aqua Finance has doubled its annual loan originations since 2018 when Blackstone first invested in the company. Aqua Finance estimates originations to reach $2 billion in 2021.

The addition of Aqua Finance will boost Apollo’s $80 billion annual run-rate of asset origination across commercial and consumer lending platforms. Per Jim Belardi, chief executive officer of Athene, “Aqua Finance is an exciting opportunity for Athene to invest in a leading consumer finance platform, to provide capital and expertise to continue to grow the business, and to execute on our strategy with Apollo to invest in high-quality origination platforms.”

Athene and Apollo have shared a partnership since the former was established in 2009. Apollo currently holds 34% stake in Athene. The strategic partnership helps Athene access APO’s portfolio origination platform that provides ATH assets with better spreads. The recent acquisition is thus a strategic fit for Athene.

Athene boasts an impressive inorganic growth, which has been driven by several buyouts and block reinsurance transactions with several companies. This Zacks Rank #2 (Buy) insurer expects that its inorganic growth channel will continue to be an important driver in the future.

Given the insurance industry’s adequate capital level, players like Arthur J. Gallagher & Co. AJG and Brown and Brown Inc. BRO are pursuing strategic mergers and acquisitions.

Recently, Arthur J. Gallagher & Co. acquired Real Estate Insurance Solutions to consolidate its real estate portfolio. Arthur J. Gallagher boasts an impressive inorganic story. AJG’s merger and acquisition pipeline is quite strong with about $400 million revenues associated with nearly 50 term sheets either agreed upon or being prepared. The insurance broker estimates more than $2.5 billion for mergers and acquisitions consisting of $1 billion in cash, about $650 million of net cash generation in the second half of 2021, and $600 million to $700 million of borrowing capacity.

Brown and Brown acquired Heacock Insurance to boost its presence in central Florida. Brown & Brown intends to make consistent investments in boosting organic growth and margin expansion. BRO’s solid earnings have allowed it to expand its capabilities, with the buyouts extending its geographic footprint.

Shares of Athene have gained 95.3% year to date compared with the industry’s 1.6% increase. A higher level of sales, strategic investments, and sufficient liquidity should help shares retain the momentum.

Zacks Investment Research
Zacks Investment Research

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Shares of Apollo, Arthur J. Gallagher and Brown and Brown have gained 49.7%, 33.2% and 38%, respectively, year to date.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

Brown & Brown, Inc. (BRO) : Free Stock Analysis Report

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Athene Holding Ltd. (ATH) : Free Stock Analysis Report

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