Apollo Global Management ($77 billion AUM) recently sold its first life settlement portfolio valued at $1.5 billion in face value.
Planning for the Future
Proceeds from the sale of the 530 policy portfolio will be used to make payments giving capital to investors. All money is expected to be distributed by the end of the year.
According to reports, the gross return was 11%. This fell short of a projected 12%-14% internal rate of return.
In hopes of fostering growth, news of the intent to raise $5.5 billion for insurance-related fund strategies emerged in April. Apollo will permit private capital investors to contribute to transactions with Athene Holding Ltd., a life and retirement reinsurance firm primarily owned by Apollo.
This strategy will generate an opportunity for investors to reap returns through life, retirement, and reinsurance businesses while also helping Apollo reach their $4 billion capital goal.
Additionally, a pitchbook for Apollo’s Financial Credit Investment IV has been circulating to raise $1.5 billion for its newest fund, specifically targeting life settlements and private credit securities.
Projections Fall Short
FCI I also fell short of projections last year with goals for an 11% IRR for the second quarter, but only reached 10.5% by the end of the third quarter.
At the close of the first investment period of 2013, the first fund held 1,265 policies and 3.4 billion in face value. By the end of September, the portfolio held only 600 policies with $1.7 billion in face value and a 10.5% target net IRR.
Of the 1,265 policies in the first portfolio, 62 reported as lapsed, 469 reached maturity, and 134 sold. The LE estimates reportedly ranged from 57-59 months.
The New Zealand pension fund has been a consistent investor in Apollo’s funding, donating $55 million for the first fund in 2012 and up to $200 million in 2014 and 2017. According to a spokesperson for the fund, New Zealand had not invested in the fourth fund, although they had initially planned to during the first quarter of 2019.
The University of Michigan has also been a significant contributor to Apollo’s life settlement funds with $25 million invested in the second fund in 2014 and $50 million to the third fund in 2017. They have not invested in Apollo’s first or fourth funds.
Apollo’s alternative credit platform has more than $180 billion in assets and credit drawdown products that have historically focused on life settlement opportunities that Apollo can generate via transactions by its Athene and Athora insurance and reinsurance vehicles.
Apollo considers itself as the largest tertiary buyer in the industry with reports of more than 5,600 policies purchased, $19.7 billion in face amount, and $2.5 billion in death benefits in the first three funds.
In an annual report, Apollo reported that performance fees for two of its funds fell by $35.5 million last year after a drop in the valuation of funds and diminished gains.
Apollo has yet to officially comment on the official cause of the drop in valuations, but market experts speculate that the life expectancy extensions last year caused a split in portfolio sales.