Athene Holding Ltd.ATH has agreed to acquire Foundation Home Loans (“FHL”). The transaction is subject to regulatory conditions, including the consent of the Financial Conduct Authority.
FHL, based in Berkshire, is a specialty mortgage lender. It offers a range of Buy-to-Rent mortgages as well as residential mortgages. FHL had £ 3 billion in owner-occupied and rented mortgages on its books as of June 2021.
The deal will be administered by Athene’s strategic asset management partner Global management of Apollo, Inc. APO. Athene and Apollo have been in a partnership since 2009, under which Apollo currently owns 34% of Athene’s capital. Recently, Athene signed an agreement to merge with Apollo Global Management in an $ 11 billion equity deal, which is expected to be finalized in January 2022.
The investment in FHL will allow Apollo and Athene to leverage FHL’s expertise in providing high quality residential mortgages. The transaction will provide Athene with better investment opportunities in high quality yielding assets.
The agreement will allow Athene and Apollo to add direct sourcing asset sourcing capabilities to Athene’s alpha-generating investment portfolio. In addition, the transaction is expected to provide high quality assets to Athene’s residential mortgage and structured securities portfolio.
Athene is showing impressive inorganic growth, driven by multiple buyouts and bulk reinsurance deals with multiple companies. Recently, Athene and Apollo Global agreed to purchase a 15% stake in Challenger Limited. This marks Athene’s entry into the Australian market. The acquisitions of Liberty Life Insurance Corporation, Investors Insurance Corporation, Presidential Life Corporation, Aviva USA Delta Lloyd Deutschland AG (DLD) have helped Athene improve its product offerings and increase the scalability of its business.
The company expects its inorganic growth channel to continue to be an important long-term driver. The company has also undertaken a number of block reinsurance transactions, which involve partnering with life insurance and annuity companies to sell their underperforming businesses or limit their exposure to certain products. As a well-capitalized reinsurer, we believe that such transactions reflect Athene’s deep expertise in the pension services industry.
As far as FHL is concerned, the transaction with Athene will extend and strengthen its presence in the UK buy and hire market.
Shares of Athene have risen 94.5% in the past year compared to the industry’s 10.6% growth. A persistent focus on organic and inorganic channels, a strategic relationship with Apollo, as well as effective capital deployment measures should help it maintain momentum. Athene currently wears a Zacks Rank # 3 (Hold). You can see the full list of Zacks # 1 Rank (Strong Buy) stocks today here.
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Other acquisitions in the insurance sector
There have been a multitude of consolidationsc in the insurance industry in recent times, given its significant availability of capital. Horace Mann Society of Educators HMN has agreed to purchase Madison National Life Insurance Company to strengthen its presence in the education market. State Automobile Financial Corporation STFC has agreed to merge with Liberty Mutual Holding Company
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