10-K: Apollo Global Management Reports Strong 2024 Results, AUM Reaches \$751 Billion

Apollo Global Management's 2024 10-K filing reveals a year of significant growth, with assets under management reaching \$751 billion and strategic expansions across its asset management and retirement services segments.

Summary

• Apollo Global Management's 10-K filing for the fiscal year ended December 31, 2024, highlights the company's performance across its three main segments: Asset Management, Retirement Services, and Principal Investing.
• The Asset Management segment reported total AUM of \$751.0 billion as of December 31, 2024, with a focus on credit and equity investing strategies.
• The credit strategy, the largest within Asset Management, reached \$616.4 billion in AUM, spanning direct origination, asset-backed finance, opportunistic credit, and multi-credit.
• The equity strategy totaled \$134.7 billion in AUM, emphasizing creative structuring and sourcing across various sectors and geographies.
• Apollo's traditional private equity funds generated a 39% gross IRR and a 24% net IRR on a compound annual basis from inception through December 31, 2024.
• The Retirement Services segment, conducted through Athene, focuses on generating spread income by sourcing long-term liabilities and actively managing assets, with 1,983 employees as of December 31, 2024.
• Athene offers annuities and funding agreements, managing its interest rate risk through strategic asset allocation and hedging activities.
• Athene estimates it had approximately \$8.8 billion in deployable capital as of December 31, 2024, consisting of excess equity capital, untapped leverage capacity, and available undrawn capital at ACRA.
• The Principal Investing segment includes realized performance fee income, realized investment income, and allocable expenses, with earnings being more volatile due to the nature of performance fees.
• The document also outlines various risk factors, including macroeconomic conditions, competition, and regulatory changes, that could affect Apollo's business.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook, highlighting growth in AUM and strong performance in certain areas. However, it also acknowledges various risks and challenges, preventing a higher sentiment score.

Positives

• Apollo's AUM continues to grow, reaching \$751 billion.
• The company has a strong track record of investment returns in traditional private equity.
• Athene has a strong capital position and deployable capital.
• Athene maintains high financial strength ratings from rating agencies.
• Apollo is actively engaged with the management teams of portfolio companies to maximize the underlying value of the business.

Negatives

• A portion of Apollo's revenues, earnings, and cash flow is highly variable.
• The company faces intense competition in the asset management and retirement services markets.
• Apollo depends on certain key personnel, and the loss of their services could have a material adverse effect.
• The company is subject to risks associated with pandemics, epidemics, disease outbreaks and other public health crises, which could impact our business, financial condition and results of operations in the future.
• The company is subject to the credit risk of its counterparties, including ceding companies, reinsurers, plan sponsors, and derivative counterparties.

Risks

• Difficult political, market, or economic conditions may adversely affect Apollo's businesses.
• Climate change-related risks and regulatory efforts could negatively impact the company.
• The variability in Apollo's revenues, earnings, and cash flow may make it difficult to achieve steady earnings growth.
• The company may not be successful in expanding into new investment strategies, geographic markets, and businesses.
• Misconduct by employees, directors, or others affiliated with Apollo could harm the company's reputation and subject it to legal liability.
• Reliance on technology and information systems exposes Apollo to potential failures or interruptions.
• The company's dependence on management's assumptions and estimates could lead to significant gains or losses if actual results differ.
• Investments in illiquid assets may result in losses if Apollo is forced to sell them at inopportune times.
• Reliance on financing markets could be problematic if debt and equity markets become difficult to access.
• Artificial intelligence could increase competitive, operational, legal and regulatory risks to our businesses in ways that we cannot predict.
• The tax treatment of Apollo's structure is complex and subject to change.
• Apollo may be subject to U.S. federal income tax in amounts greater than expected.

Future Outlook

Apollo expects the business environment to remain generally accommodative to raise larger successor funds, launch new products, and pursue attractive strategic growth opportunities.

Management Comments

• A cornerstone of Athenes investment philosophy is that given the operating leverage inherent in its business, modest investment outperformance can translate to outsized return performance.
• Athene believes that its leading presence in the retirement services market, diverse range of capabilities and broad distribution network uniquely position it to effectively serve consumers increasing demand for retirement solutions.

Industry Context

Apollo operates in an intensely competitive industry, facing competition from investment management firms, private equity sponsors, insurance companies, and other financial institutions. The company's success depends on its ability to attract and retain qualified employees and adapt to evolving market conditions.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards or competitors regarding financial metrics.
• However, it mentions that Athene faces competition from traditional carriers and new entrants in the fixed annuity market.
• It also notes that Athene competes with other insurers in the reinsurance market based on factors such as financial strength, pricing, and service.

Corporate Governance

Legal Proceedings

• The document mentions several ongoing legal proceedings, including actions related to SkyTerra Communications, MPM Holdings, and PlayAGS Inc.
• It also notes that a settlement was reached with the SEC regarding compliance with record retention requirements, resulting in a civil monetary penalty of $8.5 million.

Related Party Transactions

• Apollo's asset management business, through ISG, provides asset management services to Athene with respect to assets in the Athene Accounts.
• Apollo, through ISGI, provides investment advisory services to certain portfolio companies of Apollo funds and Athora.
• Athene has reinsurance agreements with certain affiliates of Catalina Holdings (Bermuda) Ltd.
• Athene is a member of the Federal Home Loan Bank of Des Moines and has issued funding agreements to the FHLB in exchange for cash advances.
• Athene has an investment in Apollo Rose II (B) (Apollo Rose), which holds common and preferred equity interests in Catalina.
• Athene has investments in Skylign Aviation Holdings, LP (Skylign), a leading aviation finance group focused on aviation lending and leasing.
• Athene has a minority equity investment in VA Capital Company LLC (VA Capital), which is the parent of Venerable.

Stakeholder Impact

• Shareholders: The company's financial performance and strategic decisions directly impact shareholder value.
• Employees: Compensation, benefits, and career opportunities are affected by the company's performance and strategic direction.
• Customers: The availability and pricing of retirement services products are influenced by the company's financial strength and market conditions.
• Fund Investors: The performance of Apollo-managed funds impacts investor returns and the company's ability to raise capital.
• Policyholders: The company's ability to meet policyholder obligations is crucial for maintaining confidence in its retirement services products.

Next Steps

• Apollo intends to grow its businesses by increasing AUM in existing businesses and expanding into new investment strategies, platforms, geographic markets, businesses and distribution channels, including the retail channel.
• Athene may choose to retain additional capital above the level required by the rating agencies to support operating needs.
• Apollo will continue to monitor the situations in Russia, Ukraine and the Middle East and assess their impact on our business and the business and operations of the portfolio companies of the funds we manage.

Key Dates