According to Financial Times News, Apollo Global just posted some surprisingly strong numbers that basically tell a “don’t worry about us” story to nervous investors. The firm reported $1.7 billion in overall profits, with $871 million coming specifically from spread profits at its Athene insurance unit – that’s the highest quarterly figure they’ve seen in two years. Despite concerns about how falling interest rates might hurt their private credit business, Apollo originated a staggering $75 billion in new loans last quarter alone. Over the past 12 months, they’ve lent $273 billion to corporate borrowers worldwide, which represents a 40% increase from their lending pace just a year ago.
What Investors Were Worried About
Here’s the thing – Apollo’s stock has been getting hammered this year, down about 25% while rivals like Blackstone and Ares have been performing better. The concern was simple: when Apollo merged with Athene, it transformed from a pure asset manager into this hybrid beast where half its earnings now come from insurance spread profits rather than just management fees. And spread profits are super sensitive to interest rates. When rates fall, those spreads get squeezed. Apollo even had to walk back its own guidance – they’d promised 10% annual growth in spread earnings but are now telling shareholders to expect just 5%. Basically, the high-yielding pandemic-era loans are maturing and being replaced with lower-yielding debt.
How They Pulled It Off
So how did they still crush earnings expectations? Volume. Pure, massive, overwhelming volume. Apollo is lending like there’s no tomorrow – $273 billion in corporate loans over the past year puts them in competition with banking giants like Citigroup. They’re making multibillion-dollar loans to companies including Intel and EDF, becoming this massive financial intermediary operating outside the traditional banking system. And all that lending activity is being funded by insurance premiums pouring into Athene – $23 billion in net new money last quarter alone, split between retail annuities and funding agreements. It’s a virtuous cycle: more insurance money means more lending capacity, which generates more spread income.
What This Means For Everyone Else
For corporate borrowers, this is huge. Companies that might have traditionally gone to banks for financing now have Apollo as an alternative source of massive capital. But here’s the question: is this sustainable? Apollo has hedged $9 billion of interest rate exposure to protect against falling yields, and they’re sticking to their long-term targets. Their assets under management just crossed $900 billion, and fee-based earnings jumped 22%. The market seems to be saying that private credit firms owning insurance operations creates this powerful engine that can weather rate fluctuations better than expected. For traditional banks? They’ve got another serious competitor to worry about.
