Apollo Global Management’s latest private equity investment in insurance gives it a Bermuda-based reinsurer.
In yet another example of private equity’s appetite for insurance entities, Apollo Global Management has agreed to buy Bermuda-based Aspen Insurance Holdings for $2.6 billion. The purchase price for the insurance and reinsurance company works out to $42.75 a share, which is about 7% higher than the day before the deal was announced.
The all-cash acquisition is expected to close in the first half of next year. By adding Aspen to its holdings, Apollo will own Aspen Capital Markets, an insurance-linked securities and collateralized reinsurance platform, and the management team of collateralized reinsurance entity Peregrine Re. Such specialities are familiar ground for Apollo, which owns the majority of life and annuity reinsurance company Athene Holding.
Looking to Sell
Aspen had reportedly sought a buyer since the beginning of this year. In the second quarter, the insurer reported a loss of $15 million. Due to hurricanes in Puerto Rico and along the Gulf Coast, wildfires in California, and earthquakes in Mexico, Aspen was hit by losses in three of the past four quarters.
Meanwhile, Apollo has been on the prowl for insurance deals, particularly in the life and annuity space. Its affiliate, Athene, acquired fixed annuity provider Aviva USA in 2013. Earlier this year, Athene grabbed the annuity business lines of Voya Financial.
Once the latest deal closes, Aspen will become a private entity. Despite its recent struggles, Aspen will elevate Apollo’s insurance and reinsurance underwriting expertise through its global reach. Apollo will decide how much risk it wants to hand over to capital market investors — and how much it wishes to retain.
What’s Next for Aspen
Backed by Apollo’s capital, Aspen can now explore opportunities to grow its revenues as insurers battle massive market changes involving digital channels for insurance and commoditization of certain lines. “Under the ownership of the Apollo Funds, Aspen will have additional scale and access to Apollo’s investment and strategic guidance, which will help us to accelerate our strategy and take Aspen to the next level,” Aspen’s Group CEO Chris O’Kane said in a prepared statement.
As of June 30, Apollo’s management portfolio of private equity, credit, and real estate funds totaled $270 billion. Aspen currently holds $12.9 billion in assets.
Private Equity Moves into Insurance
Apollo’s planned purchase of Aspen is far from the only example of a private equity outfit investing in an insurance company. In the spring, hedge fund Elliott Management partnered with Wand Partners, a private equity firm focused on insurance, to acquire life insurer Prosperity Life Insurance Group for a reported $500 million.
In June, Cornell Capital completed its $2.05-billion purchase of Talcott Resolution, which handles the runoff life and annuity business of The Hartford. Just about the same time the Apollo-Aspen deal was made public, Bain Capital agreed to acquire U.K. insurer esure for $1.55 billion.
Even private equity heavyweights like Blackstone, which bought Fidelity & Guaranty Life last year for $1.84 billion, have shown sustained interest in investing in insurance — drawn primarily by the steady income stream provided by premiums. For industry professionals watching these deals, this trend may not let up anytime soon.