Athene plans big expansion after $1.1bn IPO

Athene, the pensions provider, is to embark on aggressive expansion plans after successfully pulling off a $1.1bn flotation in New York — the third largest for a US company this year.

“We expect to be hitting on both organic and inorganic [expansion],” Athene’s chief executive James Belardi said on Friday, adding that the private equity-backed group has about $2.5bn of “dry powder” to use.

Formed in 2009 to capitalise on problems in the pension market after the financial crisis, Athene has joined the ranks of the 10 largest providers of “fixed annuities” in the US in less than a decade.

It made a series of acquisitions as other operators struggled, including purchasing the US operations of the UK insurer Aviva.

Athene now plans to expand “as aggressively, or more,” according to Mr Belardi, who is a cancer survivor and former Olympic trial swimmer.

In the biggest initial public offering of shares by a financial company this year, Athene was valued at $7.4bn. Funds raised were shared among existing shareholders, led by Apollo Global Management, which manages money for Athene.

Investors who bought in to the initial public offering also made money — they were sitting on an immediate paper profit on Friday, as shares jumped 9 per cent in the first few minutes of trading.

After being priced at $40 apiece late on Thursday, Athene shares were changing hands at $43.56 at the New York open and traded as high as $44.62.

Annuity providers have come under pressure in recent years as ultra-low interest rates have made it harder for companies to generate the investment returns needed to meet their pension commitments. Several insurers have quit the market.

Mr Belardi said he saw this trend as an opportunity.

“A lot of the major insurance companies have said they need to restructure their balance sheet,” he said. “Some of the things on the balance sheets are things we want.”

He added that Athene was also eyeing expansion into new lines of business, such as pension risk-transfer deals.

In its IPO, the company sold 27m shares — more than originally planned, indicating strong demand.

This was achieved despite questions from investors about the relationship between Apollo and Athene, and the fees that the annuity provider pays the investment group to manage its asset portfolio.

Bermuda-based Athene also achieved a higher stock market valuation than several of its peers in the life insurance sector. Athene’s listing price valued the business at a premium of about 5 per cent to its book value. By contrast, the S&P 500 life and health insurance index trades at a 4 per cent discount to its book value.

Even after the Athene float, however, 2016 looks likely to be one of the quietest for IPOs since 2003, according to Dealogic data. Bankers and fund managers have blamed a range of factors, from economic and political uncertainty to overly optimistic pricing.

Twenty-two banks and other financial institutions advised on Athene float. They were led by Goldman Sachs, Barclays, Citigroup and Wells Fargo Securities.