10-Q: Apollo's Q2 2025 Net Income Drops Amid Market Swings

Apollo Global Management reports a significant decline in Q2 2025 net income despite growth in asset management and retirement services segment earnings, influenced by investment-related losses and foreign exchange impacts.

Summary

• Net income attributable to Apollo Global Management, Inc. common stockholders decreased by 26.9% to $605 million for the three months ended June 30, 2025, from $828 million in the prior year period.
• For the six months ended June 30, 2025, net income attributable to common stockholders decreased by 54.1% to $1,023 million from $2,231 million in the prior year period.
• Total revenues increased by 13.2% to $6,814 million for the three months ended June 30, 2025, but decreased by 5.3% to $12,362 million for the six months ended June 30, 2025.
• Asset Management segment's Fee Related Earnings (FRE) increased by 21.5% to $627 million for the three months and 21.3% to $1,186 million for the six months ended June 30, 2025, driven by higher management fees and capital solutions fees.
• Retirement Services segment's Spread Related Earnings (SRE) increased by 15.6% to $821 million for the three months and 6.4% to $1,625 million for the six months ended June 30, 2025, primarily due to growth in net investment earnings.
• Principal Investing Income (PII) increased by 42.4% to $47 million for the three months and 13.0% to $61 million for the six months ended June 30, 2025, driven by higher realized performance fees.
• Total Assets Under Management (AUM) reached $839.6 billion as of June 30, 2025, an increase of 6.9% from March 31, 2025, and 11.8% from December 31, 2024.
• Net investment spread for Retirement Services decreased by 6 basis points to 1.58% for the three months and 12 basis points to 1.62% for the six months ended June 30, 2025, primarily due to higher cost of funds.
• An impairment loss of $257 million on an equity investment was recognized during the three months ended June 30, 2025, due to an observable transaction price below carrying amount.

Sentiment

Score: 6

Explanation: While net income declined significantly due to specific investment losses and market volatility impacts on certain segments, the core Fee Related Earnings (FRE) and Spread Related Earnings (SRE) showed healthy growth, and Assets Under Management (AUM) continued to expand. The underlying business operations appear strong, but overall profitability was impacted by non-operating items and market conditions.

Positives

• Fee Related Earnings (FRE) for the Asset Management segment increased by 21.5% ($111 million) to $627 million for the three months ended June 30, 2025, and by 21.3% ($208 million) to $1,186 million for the six months ended June 30, 2025.
• Spread Related Earnings (SRE) for the Retirement Services segment increased by 15.6% ($111 million) to $821 million for the three months ended June 30, 2025, and by 6.4% ($98 million) to $1,625 million for the six months ended June 30, 2025.
• Principal Investing Income (PII) increased by 42.4% ($14 million) to $47 million for the three months ended June 30, 2025, and by 13.0% ($7 million) to $61 million for the six months ended June 30, 2025, driven by higher realized performance fees.
• Total Assets Under Management (AUM) grew significantly to $839.6 billion as of June 30, 2025, an increase of $54.4 billion (6.9%) from March 31, 2025, and $88.6 billion (11.8%) from December 31, 2024.
• Net flows contributed $44.2 billion to AUM growth in the three months ended June 30, 2025, with $35.7 billion from the credit strategy and $8.4 billion from the equity strategy.
• Net investment income for Retirement Services increased by $972 million (25.6%) to $4.8 billion for the three months and $1.7 billion (23.5%) to $9.1 billion for the six months ended June 30, 2025, driven by AUM growth and higher rates.
• Successful deployment of capital in alternative investments, with higher returns from origination platforms (e.g., Wheels, Aqua Finance, Apterra) and retirement services platforms (e.g., Venerable).
• The company maintains a strong capital position, with a U.S. RBC ratio of 419%, Bermuda RBC ratio of 450%, and consolidated RBC ratio of 430% as of December 31, 2024.
• The company has significant dry powder of $72 billion as of June 30, 2025, available for investment or reinvestment.

Negatives

• Net income attributable to common stockholders decreased significantly by 26.9% for the three months ended June 30, 2025, and 54.1% for the six months ended June 30, 2025.
• Total revenues for the six months ended June 30, 2025, decreased by $696 million (5.3%) compared to the prior year period.
• Asset Management's net gains (losses) from investment activities decreased by $247 million for the three months and $304 million for the six months ended June 30, 2025, primarily due to a $257 million impairment loss on an equity investment and depreciation in Global Business Travel Group, Inc.
• Retirement Services' investment related gains (losses) were negative $(5) million for the three months and $(833) million for the six months ended June 30, 2025, a significant decrease from positive results in the prior year, driven by unfavorable net foreign exchange impacts and less favorable performance of FIA hedging derivatives.
• Premiums in Retirement Services decreased significantly by $566 million (84.1%) for the three months and $540 million (69.8%) for the six months ended June 30, 2025, primarily due to a decrease in pension group annuity premiums.
• Net investment spread for Retirement Services decreased by 6 basis points for the three months and 12 basis points for the six months ended June 30, 2025, primarily due to higher cost of funds.
• Market risk benefits remeasurement (gains) losses shifted to a loss of $111 million for the three months and $274 million for the six months ended June 30, 2025, primarily due to unfavorable changes in risk-free discount rates and less favorable equity market performance.
• Increased compensation and benefits, general, administrative, and other expenses were observed in the Asset Management segment.

Risks

• Market volatility, including price fluctuations in equity, credit, commodity, and foreign exchange markets, as well as interest rates and global inflation, can significantly impact investment valuations and business performance.
• Adverse economic conditions, such as plateauing or decreasing economic growth, changes to U.S. and foreign tariff policies, civil unrest, geopolitical tensions (e.g., Ukraine/Russia, Middle East conflicts), and new regulatory requirements, pose downside risks.
• U.S. inflation remains elevated at 2.7% as of June 30, 2025, which can impact business operations and investment portfolios.
• Interest rate fluctuations can affect the yield on new investments, the value of existing investments, and the profitability of Athene's products, as its ability to adjust policyholder crediting rates may be limited by competitive pressures and guarantees.
• Valuation uncertainty exists for illiquid investments, where significant judgment and estimation are involved, and actual realized values could differ materially from estimated fair values.
• Performance allocations are subject to reversal in the event of future losses, and the general partner may be obligated to repay previously distributed performance fees.
• Ongoing uncertainty regarding tax reforms, including Pillar Two and the One Big Beautiful Bill Act (OBBBA), could affect financial statements, particularly concerning Bermuda's corporate income tax regime and its applicability to ACRA.
• The company is party to various legal actions, including a class action related to PlayAGS stock offerings and a shareholder derivative complaint challenging payments related to the Up-C structure elimination, with no reasonable estimate of possible loss at this time.
• Liquidity risk for the retirement services business relates to the ability to sell assets without incurring significant costs and to meet policyholder demands, which is managed through asset-liability management (ALM) modeling and access to credit facilities.
• Credit risk exposes the company to potential losses from counterparty nonperformance on derivative financial instruments.

Future Outlook

The company expects to continue funding asset management operations through management and performance fees. For retirement services, the investment portfolio is structured for strong liquidity and timely payment of policy benefits. Long-term liquidity requirements are expected to be met by AUM growth, positive investment performance, and growth in the retirement services investment portfolio. The company is actively monitoring economic and market conditions, including inflation, interest rates, and geopolitical events, which could impact future performance. New accounting pronouncements (ASU 2023-09, ASU 2024-03, ASU 2025-03, ASU 2025-04) are being evaluated for future impact. The acquisition of Bridge Investment Group Holdings Inc. is expected to close in Q3 2025. The conditional commitment to invest in Athora for its UK insurer acquisition is subject to closing conditions and an anticipated capital raise by Athora. The Special Litigation Committee is expected to complete its investigation by October 7, 2025.

Management Comments

• We believe the Company's current liquidity position, together with the cash generated from revenues will be sufficient to meet the Company's anticipated expenses and other working capital needs for at least the next 12 months.
• We believe these investments may translate into greater compounded annual growth of Fee Related Earnings.
• We have consistently produced attractive long-term investment returns in the traditional private equity funds we manage, generating a 39% gross IRR and a 24% net IRR on a compound annual basis from inception through June 30, 2025.
• We believe the direct exposure of investment portfolios of the funds we manage to Russia and Ukraine is insignificant.
• We believe the business environment remains generally accommodative to raise larger successor funds, launch new products, and pursue attractive strategic growth opportunities.
• We believe Athene's products would be more attractive to consumers and its sales would likely increase [if prevailing interest rates were to rise].
• We believe Athene's insurance subsidiaries have sufficient statutory capital and surplus, combined with additional capital available to be provided by AHL, to meet their financial strength ratings objectives.
• Management views the possibility of all of the investments becoming worthless as remote.

Industry Context

The company operates within a global financial market influenced by inflation, interest rate fluctuations, and geopolitical tensions. It notes that institutional investors continue to allocate capital towards alternative investment managers, which is a favorable trend for its Asset Management segment. Its retirement services business, Athene, is positioned to capitalize on long-dated, persistent liabilities by sourcing assets with preferred risk and return characteristics, aiming for incremental yield by taking measured liquidity and complexity risk rather than incremental credit risk. The company's strategy of acquiring Bridge Investment Group Holdings Inc. and committing to invest in Athora's UK insurer acquisition reflects ongoing consolidation and expansion within the alternative asset management and insurance sectors.

Comparison to Industry Standards

• The filing states that Apollo's AUM calculation may differ from other investment managers and may not be directly comparable.
• The filing does not provide specific comparable companies, projects, or results for a detailed assessment against global benchmarks.

Corporate Governance

Legal Proceedings

• Harbinger Capital Partners II LP et al. v. Apollo Global Management LLC, et al.: Lawsuit alleging concealment of material defects in SkyTerra technology, seeking $1.9 billion in damages. The New York Supreme Court Appellate Division affirmed dismissal as time-barred on March 18, 2025. Plaintiffs' motion for re-argument or leave to appeal was denied on July 24, 2025. Apollo believes claims are without merit.
• Putative class action against PlayAGS Inc. et al.: Alleging misstatements/omissions in registration statements for secondary offerings. The case was dismissed with prejudice on February 13, 2024. The U.S. Court of Appeals affirmed dismissal on March 27, 2025. Plaintiffs' petition for rehearing en banc was denied on June 6, 2025. Apollo believes claims are without merit.
• Anguilla Social Security Board vs. Black et al.: Shareholder derivative complaint filed August 17, 2023, challenging $570 million payments to Former Managing Partners and Contributing Partners related to the Up-C structure elimination, alleging corporate waste and breach of fiduciary duties. Defendants' motion to dismiss was denied on September 20, 2024. Proceedings are stayed until October 7, 2025, for SLC investigation. No reasonable estimate of possible loss.
• Class action complaint against AGM regarding stockholders agreement: Filed March 14, 2024, alleging certain provisions of the stockholders agreement violate Delaware law. Motion to dismiss stayed pending resolution of an appeal in a related case (West Palm Beach Firefighters Pension Fund v. Moelis & Co.). Apollo believes claims are without merit.

Related Party Transactions

• Athora: Apollo provides investment advisory services to Athora. AAM and Athene have made conditional commitments to invest in Athora for its UK insurer acquisition (up to $2.0 billion from AAM, up to $2.5 billion from Athene). Athene holds investments in Athora ($1,487 million as of June 30, 2025) and funding agreements outstanding to Athora ($65 million).
• Atlas: Athene has an equity investment in Atlas through AAA and holds AFS securities issued by Atlas or its affiliates ($4.6 billion as of June 30, 2025). Athene has commitments to make additional investments in Atlas ($1.4 billion). Company subsidiaries issued assurance letters to CS guaranteeing Atlas's deferred purchase obligation ($2.5 billion).
• Catalina: Athene has a strategic modco reinsurance agreement with Catalina affiliates, with a liability of $235 million as of June 30, 2025, and a reinsurance recoverable balance of $5.3 billion.
• Skylign: Athene invests in Skylign indirectly through AAA and directly holds Skylign senior notes ($1.5 billion as of June 30, 2025). Athene has commitments to make additional investments in Skylign ($41 million).
• Venerable: Athene has a minority equity investment in VA Capital, parent of Venerable ($198 million as of June 30, 2025), and commitments to make additional investments ($169 million). Athene also has coinsurance and modco agreements with VIAC (Venerable subsidiary) and term loans receivable from Venerable ($339 million).
• Wheels: Athene invests in Wheels indirectly through AAA and directly holds AFS securities issued by Wheels ($1.0 billion as of June 30, 2025). Athene has commitments to make additional investments in Wheels ($32 million).
• Apollo/Athene Dedicated Investment Programs (ADIP): ACRA 1 and ACRA 2 are partially owned by ADIP I and ADIP II, respectively, funds managed by Apollo. Athene holds investments in ADIP ($236 million) and commitments to make additional investments ($328 million).
• Due from/to related parties: Includes unpaid management/advisory fees, reimbursable expenses, employee loans, and general partner obligations to return performance allocations.
• Tax Receivable Agreement (TRA): Provides for payment to Former Managing Partners and Contributing Partners of 85% of cash tax savings from tax basis increases.
• Indemnification: Apollo has agreed to indemnify Former Managing Partners and certain Contributing Partners for amounts paid under personal guarantees related to performance fee repayment obligations.
• Apollo Capital Markets Partnership: The company committed equity financing to this consolidated VIE, which has a $2.5 billion revolving credit facility (non-recourse to the company, but comfort letters provided).

Stakeholder Impact

• Shareholders: Impacted by the decline in net income, the ongoing share repurchase program, and dividend payments. Potential dilution from equity incentive plans and warrants. Outcomes of legal proceedings could affect shareholder value.
• Employees: Compensation includes fixed salary, bonuses, and profit sharing tied to performance fees. Equity-based awards (RSUs, restricted shares) are granted. The Asset Management segment saw increased headcount.
• Customers (Investors in Apollo Funds): Their returns are directly impacted by the performance of the funds managed by Apollo. Management fees and performance fees are charged.
• Customers (Athene Policyholders): Their ability to receive timely policy and contract benefits is supported by Athene's liquidity and investment strategies. Policyholder behavior, such as surrenders and withdrawals, affects Athene's liabilities.
• Creditors: Their interests are impacted by the company's debt obligations and its compliance with covenants under credit facilities.
• Regulatory Authorities: The company is subject to examination by tax authorities and regulatory bodies (SEC, BMA, NAIC). Compliance with new accounting standards and tax regimes (Pillar Two, OBBBA) is an ongoing focus.

Next Steps

• Expected closing of the Bridge Investment Group Holdings Inc. acquisition in Q3 2025.
• Anticipated capital raise by Athora between signing and closing of its UK insurer acquisition.
• Special Litigation Committee to complete its investigation by October 7, 2025.
• Remaining warrants exercisable for 2.5 million shares of common stock will become exercisable in Q1 2026.
• Mandatory conversion of Series A Mandatory Convertible Preferred Stock expected on July 31, 2026.
• Evaluation of the impact of the One Big Beautiful Bill Act (OBBBA) on consolidated financial statements.
• Evaluation of the impact of new FASB accounting standards (ASU 2023-09, ASU 2024-03, ASU 2025-03, ASU 2025-04) on consolidated financial statements.
• Continued monitoring of economic and market conditions, including inflation, interest rates, and geopolitical events.

Key Dates

Recommendation

While Apollo Global Management experienced a significant decline in net income for the quarter and six-month period due to an equity investment impairment and unfavorable market impacts on its Retirement Services segment's investment-related gains/losses, its core Fee Related Earnings (FRE) in Asset Management and Spread Related Earnings (SRE) in Retirement Services demonstrated healthy growth. Assets Under Management (AUM) also saw substantial increases. The company's strong capital position and strategic growth initiatives, such as the Bridge acquisition and Athora investment, indicate underlying business strength. However, ongoing legal proceedings and continued market volatility present uncertainties. A 'hold' recommendation is appropriate as the positive operational performance is currently offset by short-term financial headwinds and unresolved litigation, suggesting a wait-and-see approach for investors.

Keywords

Asset Management, Retirement Services, Alternative Investments, AUM, Fee Related Earnings, Spread Related Earnings, Principal Investing Income, Athene, SEC Filing, Financial Performance, Investment Income, Market Risk, Corporate Governance, Litigation, Capital Markets, Annuities, Insurance, Private Equity, Credit Funds, Hybrid Value, CLO, Mortgage Loans, Derivatives, Share Repurchase, Dividends, Tax Reform, Geopolitical Risk, Inflation, Interest Rates