Apollo Global Management, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Unaudited U.S. GAAP results. Apollo operates asset management, retirement services through Athene, and principal investing. Athene has been consolidated since January 1, 2022; comparisons therefore reflect the combined businesses in both periods.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Total revenue | $13.702bn | $2.286bn | $19.003bn | $3.148bn |
| Net income (loss) attributable to common stockholders | $599m | $(1.637)bn | $1.609bn | $(2.038)bn |
| Diluted EPS | $1.00 | $(2.82) | $2.67 | $(3.52) |
| Segment Income (non-GAAP) | $1.261bn | $816m | $2.354bn | $1.987bn |
| Adjusted Net Income (non-GAAP) | $1.010bn | $576m | $1.855bn | $1.493bn |
Quarterly revenue and GAAP earnings comparisons were dominated by Athene’s insurance activity, including premiums and investment-related fair-value changes; consolidated revenue and margin are not readily comparable measures of underlying operating performance. Q2 retirement-services revenue was $12.916bn, including $366m of investment-related gains, versus a $5.745bn investment-related loss in Q2 2022.
Segments and operating metrics
- Asset Management: Fee Related Earnings (FRE, non-GAAP) rose 30% to $442m in Q2 and 29% to $839m for the half year, supported by higher management and capital-solutions fees. Apollo reported $617.1bn of AUM, $461.8bn of fee-generating AUM, and $56bn of dry powder at quarter-end. Six-month AUM growth included a substantial contribution from Atlas.
- Retirement Services: Spread Related Earnings (SRE, non-GAAP) increased 76% to $799m in Q2 and 32% to $1.487bn for the half year. The Q2 net investment spread was 1.99%, versus 1.34%; six-month spread was 1.91%, versus 1.61%. Higher investment income and asset growth were partly offset by rising funding costs. Six-month alternative investment earned rate declined to 7.33% from 11.39%.
- Principal Investing: Principal Investing Income (PII, non-GAAP) was $20m in Q2, unchanged, and $28m for the half year versus $207m. The prior-year half included realized gains from transfers of investments to Athene/AAA; management also noted that market volatility had delayed monetizations.
Cash, debt and liquidity
- Six-month operating cash flow was $4.622bn, compared with $(20)m in 2022; investing cash flow was $(17.508)bn and financing cash flow was $16.537bn. Cash, restricted cash and cash held at consolidated VIEs increased $3.656bn to $14.784bn. These consolidated cash-flow figures include funds and VIEs.
- Management reported $12.1bn of unrestricted cash and cash equivalents, $0.2bn of U.S. Treasury securities, and $4.9bn of available capacity under credit and liquidity facilities at June 30. Athene’s credit and liquidity facilities were undrawn at quarter-end.
- Total debt was $6.454bn: $2.812bn in asset management and $3.642bn in retirement services. Total assets were $281.984bn and total equity was $17.042bn.
- Athene’s available-for-sale securities had $128.559bn fair value against $146.211bn amortized cost, including $17.697bn gross unrealized losses. The company said losses primarily reflected interest-rate movements and securities were generally expected to be held until recovery.
Outlook, risks and unusual items
- No specific earnings or revenue guidance is provided. Management believes current liquidity and expected cash generation will cover anticipated expenses and working-capital needs for at least 12 months.
- Management cited market volatility, inflation and interest-rate uncertainty, regional-bank stress, and commercial-real-estate liquidity and valuation concerns—especially office property—as relevant risks. Higher rates may support new investment income and annuity demand but can reduce existing asset values and increase policyholder funding costs.
- Effective July 1, 2023, Venerable recaptured $2.7bn of reserves; Apollo expected to recognize a $550m–$590m GAAP gain in Q3. A $104m asset impairment was recorded in Q2 due to the planned transfer of supporting assets and was expected to be more than offset by the settlement gain.
- Athene subsidiaries issued assurance letters supporting Atlas’s $3.3bn deferred purchase obligation; the related guarantee liability’s fair value was described as immaterial. Athene also had $20.6bn of investment commitments, primarily to investment funds.
- Performance allocations are exposed to reversal if underlying investments decline; up to approximately $4.9bn of cumulative recognized performance-allocation revenue could be reversed if existing investments became worthless, which management considered remote. Litigation matters include appealed or ongoing claims; Apollo said it could not reasonably estimate potential losses for certain cases. An SEC information request concerns record-retention compliance for electronic communications.
- Apollo adopted long-duration insurance accounting (LDTI) in 2023, retrospectively adjusting 2022 comparisons. Management reported disclosure controls effective and no material changes to internal control over financial reporting in the quarter.
Investor verification priorities
- Separate recurring segment earnings from volatile insurance marks, and review the non-GAAP reconciliations and LDTI-adjusted comparatives.
- Assess Athene’s credit quality, commercial-real-estate exposures, unrealized AFS losses, liquidity resources and sensitivity to rates and equity markets.
- Verify the drivers and durability of AUM and fee-generating AUM growth, including Atlas-related flows, fundraising, redemptions and fee bases.
- Review the Venerable recapture gain and Q2 impairment, Atlas assurance-letter exposure, investment commitments, and performance-fee clawback or reversal risks.
- Check current facility availability, insurance-subsidiary distribution constraints, debt maturities, and the status of litigation and the SEC record-retention inquiry.