Apollo Global Management Inc

Previous wording

The following discussion should be read in conjunction with Apollo Global Management, Inc.’s condensed consolidated financial statements and the related notes within this quarterly report. This discussion contains forward-looking statements that are subject to known and unknown risks and uncertainties. Actual results and the timing of events may differ significantly from those expressed or implied in such forward-looking statements due to a number of factors, including those included in the section entitled “Item 1A. Risk Factors” in the 2023 Annual Report and “Item 1A. Risk Factors” in this quarterly report. The highlights listed below have had significant effects on many items within our condensed consolidated financial statements and affect the comparison of the current period’s activity with those of prior periods. Target returns included in this report are presented gross and do not account for fees, expenses and taxes, which will reduce returns. Target returns are neither guarantees nor predictions or projections of future performance. There can be no assurance that target returns will be achieved or that Apollo will be successful in implementing the applicable strategy. Actual gross and net returns for funds managed by Apollo, and individual investors participating directly or indirectly in funds managed by Apollo, may vary significantly from the target returns set forth herein.

Current wording

The following discussion should be read in conjunction with Apollo Global Management, Inc.’s condensed consolidated financial statements and the related notes within this quarterly report. This discussion contains forward-looking statements that are subject to known and unknown risks and uncertainties. Actual results and the timing of events may differ significantly from those expressed or implied in such forward-looking statements due to a number of factors, including those included in the section entitled “Item 1A. Risk Factors” in the 2023 Annual Report and “Item 1A. Risk Factors” in this quarterly report. The highlights listed below have had significant effects on many items within our condensed consolidated financial statements and affect the comparison of the current period’s activity with those of prior periods.

Previous wording

Founded in 1990, Apollo is a high-growth, global alternative asset manager and a retirement services provider. Apollo conducts its business primarily in the United States through the following three reportable segments: Asset Management, Retirement Services and Principal Investing. These business segments are differentiated based on the investment services they provide as well as varying investing strategies. As of June 30, 2024, Apollo had a team of 5,009 employees, including 2,034 employees of Athene.

Current wording

Founded in 1990, Apollo is a high-growth, global alternative asset manager and a retirement services provider. Apollo conducts its business primarily in the United States through the following three reportable segments: Asset Management, Retirement Services and Principal Investing. These business segments are differentiated based on the investment services they provide as well as varying investing strategies. As of September 30, 2024, Apollo had a team of 5,053 employees, including 1,978 employees of Athene.

Previous wording

Our Asset Management segment focuses on three investing strategies: yield, hybrid and equity. We have a flexible mandate in many of the funds we manage which enables the funds to invest opportunistically across a company’s capital structure. We raise, invest and manage funds, accounts and other vehicles on behalf of some of the world’s most prominent pension, endowment and sovereign wealth funds and insurance companies, as well as other institutional and individual investors. As of June 30, 2024, we had total AUM of $696 billion.

Current wording

Our Asset Management segment focuses on two investing strategies: credit and equity. We have a flexible mandate in many of the funds we manage which enables the funds to invest opportunistically across a company’s capital structure. We raise, invest and manage funds, accounts and other vehicles on behalf of some of the world’s most prominent pension, endowment and sovereign wealth funds and insurance companies, as well as other institutional and individual investors. As of September 30, 2024, we had total AUM of $733 billion.

Previous wording

The yield, hybrid and equity investing strategies of our Asset Management segment reflect the range of investment capabilities across our platform based on relative risk and return. As an asset manager, we earn fees for providing investment management services and expertise to our client base. The amount of fees charged for managing these assets depends on the underlying investment strategy, liquidity profile, and, ultimately, our ability to generate returns for our clients. We also earn capital solutions fees as part of our growing capital solutions business and as part of monitoring and deployment activity alongside our sizeable private equity franchise. After expenses, we call the resulting earnings stream “Fee Related Earnings” or “FRE”, which represents the primary performance measure for the Asset Management segment.

Current wording

During the third quarter ended September 30, 2024, we updated our Asset Management strategies to credit and equity, from the previously reported yield, hybrid and equity, which, we believe, better reflects our Asset Management investment strategies. The credit and equity investing strategies of our Asset Management segment reflect the range of investment capabilities across our platform, from investment grade to private equity. As an asset manager, we earn fees for providing investment management services and expertise to our client base. The amount of fees charged for managing these assets depends on the underlying investment strategy, liquidity profile, and, ultimately, our ability to generate returns for our clients. We also earn capital solutions fees as part of our growing capital solutions business and as part of monitoring and deployment activity alongside our sizeable private equity franchise. After expenses, we call the resulting earnings stream “Fee Related Earnings” or “FRE”, which represents the primary performance measure for the Asset Management segment.

Previous wording

Yield is our largest asset management strategy with $521 billion of AUM as of June 30, 2024. Our yield strategy focuses on generating excess returns through high-quality credit underwriting and origination. Beyond participation in the traditional issuance and secondary credit markets, through our origination platforms and corporate solutions capabilities we seek to originate attractive and safe-yielding assets for the investors in the funds we manage. Within our yield strategy, we target 4% to 10% returns for our clients. Since inception, the total return yield fund has generated a 6% gross ROE and a 5% net ROE annualized through June 30, 2024.

Current wording

Credit is our largest asset management strategy with $598 billion of AUM as of September 30, 2024. Our credit strategy spans third-party strategies and Apollo’s retirement services business across four main investment pillars: direct origination, asset-backed, multi credit and opportunistic credit. Our credit strategy provides flexible, scaled and diverse capital solutions across the entire credit risk-return spectrum, with a focus on generating excess returns through high-quality credit underwriting and origination. Beyond participation in the traditional issuance and secondary credit markets, through our origination platforms and corporate solutions capabilities we seek to originate attractive and safe-yielding assets for the investors in the funds we manage.

Previous wording

Our equity strategy manages $105 billion of AUM as of June 30, 2024. Our equity strategy emphasizes flexibility, complexity, and purchase price discipline to drive opportunistic-like returns for our clients throughout market cycles. Apollo’s equity team has experience across sectors, industries, and geographies in both private equity and real estate equity. Our control equity transactions are principally buyouts, corporate carveouts and distressed investments, while the real estate funds we manage generally transact in single asset, portfolio and platform acquisitions. Within our equity strategy, we target returns above 15% in the funds we manage. We have consistently produced attractive long-term investment returns in the traditional private equity funds we manage, generating a 39% gross IRR and a 24% net IRR on a compound annual basis from inception through June 30, 2024.

Current wording

Our equity strategy managed $135 billion of AUM as of September 30, 2024. Across our equity strategy, we maintain our focus on creative structuring and sourcing while working with the management teams of our Apollo-managed funds’ portfolio companies to help transform and grow their businesses. Our flexible mandate and purchase price discipline allow us to embrace complexity and seek attractive outcomes for our stakeholders. Apollo’s equity team has experience across sectors, industries, and geographies spanning its private equity, hybrid value, secondaries equity, AAA, real estate equity, impact investing platform, infrastructure and clean transition equity strategies. We have consistently produced attractive long-term investment returns in the traditional private equity funds we manage, generating a 39% gross IRR and a 24% net IRR on a compound annual basis from inception through September 30, 2024.

Previous wording

Our asset management and retirement services businesses are affected by the condition of global financial markets and the economy. Price fluctuations within equity, credit, commodity, foreign exchange markets, as well as interest rates and global inflation, which may be volatile and mixed across geographies, can significantly impact the performance of our business, including, but not limited to, the valuation of investments, including those of the funds we manage, and related income we may recognize.

Current wording

Our asset management and retirement services businesses are affected by the condition of global financial markets and the economy. Price fluctuations within equity, credit, commodity, and foreign exchange markets, as well as interest rates and global inflation, which may be volatile and mixed across geographies, can significantly impact the performance of our business, including, but not limited to, the valuation of investments, including those of the funds we manage, and related income we may recognize.

Previous wording

We carefully monitor economic and market conditions that could potentially give rise to global market volatility and affect our business operations, investment portfolios and derivatives, which includes global inflation. U.S. inflation eased in 2024 but the Consumer Price Index remains above the U.S. Federal Reserve’s 2% target. The U.S. Bureau of Labor Statistics reported that the annual U.S. inflation rate decreased modestly to 3.0% as of June 30, 2024, compared to 3.5% as of March 31, 2024. The U.S. Federal Reserve finished the quarter with a benchmark interest rate target range of 5.25% to 5.50%, unchanged from its July 2023 meeting.

Current wording

We carefully monitor economic and market conditions that could potentially give rise to global market volatility and affect our business operations, investment portfolios and derivatives, which includes global inflation. U.S. inflation eased in 2024 but the Consumer Price Index remains above the U.S. Federal Reserve’s 2% target. The U.S. Bureau of Labor Statistics reported that the annual U.S. inflation rate decreased modestly to 2.4% as of September 30, 2024, compared to 3.0% as of June 30, 2024. The U.S. Federal Reserve finished the quarter with a benchmark interest rate target range of 4.75% to 5.00%, marking the first significant cut in rates since the pandemic.

Previous wording

Equity market performance was strong during the second quarter of 2024. In the U.S., the S&P 500 Index increased by 3.9% during the quarter following an increase of 10.2% in the first quarter of 2024. However, global equity markets decreased during the quarter, with the MSCI All Country World ex USA Index decreasing by 0.4%, following an increase of 5.7% in the first quarter of 2024.

Current wording

Equity market performance was strong during the third quarter of 2024. In the U.S., the S&P 500 Index increased by 5.5% during the quarter following an increase of 3.9% in the second quarter of 2024. Global equity markets increased during the quarter, with the MSCI All Country World ex USA Index increasing by 7.8%, following a decrease of 0.4% in the second quarter of 2024.

Previous wording

Conditions in the credit markets also have a significant impact on our business. Credit markets were positive in the second quarter of 2024, with the BofAML HY Master II Index increasing by 1.1%, while the S&P/LSTA Leveraged Loan Index increased by 2.1%.

Current wording

Conditions in the credit markets also have a significant impact on our business. Credit markets were positive in the third quarter of 2024, with the BofAML HY Master II Index increasing by 5.3%, while the S&P/LSTA Leveraged Loan Index increased by 1.9%.

Previous wording

In terms of economic conditions in the U.S., the Bureau of Economic Analysis reported real GDP increased at an annual rate of 2.8% in the second quarter of 2024, following an increase of 1.4% in the first quarter of 2024. As of July 2024, the International Monetary Fund estimated that the U.S. economy will expand by 2.6% in 2024 and 1.9% in 2025. The U.S. Bureau of Labor Statistics reported that the U.S. unemployment rate increased to 4.1% as of June 30, 2024.

Current wording

In terms of economic conditions in the U.S., the Bureau of Economic Analysis reported real GDP increased at an annual rate of 2.8% in the third quarter of 2024, following an increase of 3.0% in the second quarter of 2024. As of October 2024, the International Monetary Fund estimated that the U.S. economy will expand by 2.8% in 2024 and 2.2% in 2025. The U.S. Bureau of Labor Statistics reported that the U.S. unemployment rate remained at 4.1% as of September 30, 2024.

Previous wording

Foreign exchange rates can materially impact the valuations of our investments and those of the funds we manage that are denominated in currencies other than the U.S. dollar. The U.S. dollar strengthened in the second quarter of 2024 compared to the euro. Relative to the U.S. dollar, the euro depreciated 0.7% during the second quarter of 2024, after depreciating 2.3% in the first quarter of 2024, while the British pound appreciated 0.2% during the second quarter of 2024, after depreciating 0.8% in the first quarter of 2024. Oil finished the second quarter of 2024 down 2.0% from the first quarter of 2024.

Current wording

Foreign exchange rates can materially impact the valuations of our investments and those of the funds we manage that are denominated in currencies other than the U.S. dollar. The U.S. dollar weakened in the third quarter of 2024 compared to the euro and the British pound. Relative to the U.S. dollar, the euro appreciated 3.9% during the third quarter of 2024, after depreciating 0.7% in the second quarter of 2024, while the British pound appreciated 5.8% during the third quarter of 2024, after appreciating 0.2% in the second quarter of 2024. Oil finished the third quarter of 2024 down 16.4% from the second quarter of 2024.

Previous wording

Rates increased during the second quarter of 2024, with the U.S. 10-year Treasury yield at 4.36%, compared to 4.20% at the end of the first quarter of 2024. The U.S. 2-year and 10-year Treasury yield curves remain inverted.

Current wording

Rates decreased during the third quarter of 2024, with the U.S. 10-year Treasury yield at 3.81%, compared to 4.36% at the end of the second quarter of 2024, primarily due to the U.S. Federal Reserve’s decision to lower the benchmark interest rate target range by 50 basis points at its September meeting.

Previous wording

Athene addresses interest rate risk through managing the duration of the liabilities it sources with assets it acquires through asset liability management (“ALM”) modeling. As part of its investment strategy, Athene purchases floating rate investments, which are expected to perform well in a rising interest rate environment and are expected to underperform in a declining rate environment. Athene manages its interest rate risk in a declining rate environment through hedging activity or the issuance of additional floating rate liabilities in order to lower its overall net floating rate position. As of June 30, 2024, Athene’s net invested asset portfolio included $45.5 billion of floating rate investments, or 20% of its net invested assets, and its net reserve liabilities included $30.3 billion of floating rate liabilities at notional, or 13% of its net invested assets, resulting in $15.2 billion of net floating rate assets, or 7% of its net invested assets.

Current wording

Athene addresses interest rate risk through managing the duration of the liabilities it sources with assets it acquires through asset liability management (“ALM”) modeling. As part of its investment strategy, Athene purchases floating rate investments, which are expected to perform well in a rising interest rate environment and are expected to underperform in a declining rate environment. Athene manages its interest rate risk in a declining rate environment through hedging activity or the issuance of additional floating rate liabilities to lower its overall net floating rate position. As of September 30, 2024, Athene’s net invested asset portfolio included $49.8 billion of floating rate investments, or 21% of its net invested assets, and its net reserve liabilities included $35.0 billion of floating rate liabilities at notional, or 15% of its net invested assets, resulting in $14.8 billion of net floating rate assets, or 6% of its net invested assets.

Previous wording

As of June 30, 2024, approximately 41% of the value of the investments of the funds we manage, on a gross basis, was determined using market-based valuation methods (i.e., reliance on broker or listed exchange quotes) and the remaining 59% was determined primarily by comparable company and industry multiples or discounted cash flow models. See “Item 1A. Risk Factors—Risks Relating to Our Asset Management Business—The performance of the funds we manage, and our performance, may be adversely affected by the financial performance of portfolio companies of the funds we manage and the industries in which the funds we manage invest”in the 2023 Annual Report for discussion regarding certain industry-specific risks that could affect the fair value of certain of the portfolio company investments of the funds we manage.

Current wording

As of September 30, 2024, approximately 39% of the value of the investments of the funds we manage, on a gross basis, was determined using market-based valuation methods (i.e., reliance on broker or listed exchange quotes) and the remaining 61% was determined primarily by comparable company and industry multiples or discounted cash flow models. See “Item 1A. Risk Factors—Risks Relating to Our Asset Management Business—The performance of the funds we manage, and our performance, may be adversely affected by the financial performance of portfolio companies of the funds we manage and the industries in which the funds we manage invest”in the 2023 Annual Report for discussion regarding certain industry-specific risks that could affect the fair value of certain of the portfolio company investments of the funds we manage.

Previous wording

In certain funds we manage, generally in our equity strategy, the Company does not earn performance fees until the investors have achieved cumulative investment returns on invested capital (including management fees and expenses) in excess of an 8% hurdle rate. Additionally, certain of the yield and hybrid funds we manage have various performance fee rates and hurdle rates. Certain of the yield and hybrid funds we manage allocate performance fees to the general partner in a similar manner as the equity funds. In certain funds we manage, as long as the investors achieve their priority returns, there is a catch-up formula whereby the Company earns a priority return for a portion of the return until the Company’s performance fees equate to its performance fee rate for that fund; thereafter, the Company participates in returns from the fund at the performance fee rate. Performance fees, categorized as performance allocations, are subject to reversal to the extent that the performance fees distributed exceed the amount due to the general partner based on a fund’s cumulative investment returns. The Company recognizes potential repayment of previously received performance fees as a general partner obligation representing all amounts previously distributed to the general partner that would need to be repaid to the Apollo funds if these funds were to be liquidated based on the current fair value of the underlying fund’s investments as of the reporting date. The actual general partner obligation, however, would not become payable or realized until the end of a fund’s life or as otherwise set forth in the respective limited partnership agreement of the fund.

Current wording

In certain funds we manage, generally in our equity strategy, the Company does not earn performance fees until the investors have achieved cumulative investment returns on invested capital (including management fees and expenses) in excess of an 8% hurdle rate. Additionally, certain of the credit funds we manage have various performance fee rates and hurdle rates. Certain of the credit funds we manage allocate performance fees to the general partner in a similar manner as the equity funds. In certain funds we manage, as long as the investors achieve their priority returns, there is a catch-up formula whereby the Company earns a priority return for a portion of the return until the Company’s performance fees equate to its performance fee rate for that fund; thereafter, the Company participates in returns from the fund at the performance fee rate. Performance fees, categorized as performance allocations, are subject to reversal to the extent that the performance fees distributed exceed the amount due to the general partner based on a fund’s cumulative investment returns. The Company recognizes potential repayment of previously received performance fees as a general partner obligation representing all amounts previously distributed to the general partner that would need to be repaid to the Apollo funds if these funds were to be liquidated based on the current fair value of the underlying fund’s investments as of the reporting date. The actual general partner obligation, however, would not become payable or realized until the end of a fund’s life or as otherwise set forth in the respective limited partnership agreement of the fund.

Previous wording

Investment related gains (losses) primarily consist of (i) realized gains and losses on sales of investments, (ii) unrealized gains or losses relating to identified risks within AFS securities in fair value hedging relationships, (iii) gains and losses on trading securities, (iv) gains and losses on equity securities, (v) changes in the fair value of the embedded derivatives and derivatives not designated as a hedge, (vi) changes in the fair value of mortgage loan assets and (vii) allowance for expected credit losses recorded through the provision for credit losses.

Current wording

Investment related gains (losses) primarily consist of (i) realized gains and losses on sales of investments, (ii) unrealized gains or losses relating to identified risks within AFS securities in fair value hedging relationships, (iii) gains and losses on trading securities, (iv) gains and losses on equity securities, (v) changes in the fair value of the embedded derivatives and derivatives not designated as a hedge, (vi) changes in the fair value of mortgage loan assets and (vii) changes in the provision for credit losses.

Previous wording

Below is a discussion of our condensed consolidated statements of operations for the three and six months ended June 30, 2024 and 2023. For additional analysis of the factors that affected our results at the segment level, see “—Segment Analysis” below:

Current wording

Below is a discussion of our condensed consolidated statements of operations for the three and nine months ended September 30, 2024 and 2023. For additional analysis of the factors that affected our results at the segment level, see “—Segment Analysis” below:

Previous wording

Significant drivers for performance allocations in 2024 were performance allocations primarily earned from Fund IX, Fund X, HVF II, Credit Strategies and Redding Ridge Holdings of $158 million, $108 million, $65 million, $45 million and $35 million, respectively.

Current wording

Significant drivers for performance allocations in 2024 were performance allocations primarily earned from Fund IX, HVF II, Credit Strategies, Redding Ridge Holdings, Fund X and Freedom Parent Holdings of $74 million, $49 million, $47 million, $31 million, $28 million and $21 million, respectively, partially offset by performance allocation losses from Fund VIII of $103 million.

Previous wording

The performance allocations earned from Fund IX in 2024 were primarily driven by appreciation and realization of the fund’s investments in the (i) manufacturing and industrial and (ii) leisure sectors and the fund’s distressed investments.

Current wording

The performance allocations earned from Fund IX in 2024 were primarily driven by appreciation and realization of the fund’s investments in the (i) manufacturing and industrial and (ii) consumer services sectors, and the fund’s distressed investments.

Previous wording

The performance allocations earned from Credit Strategies in 2024 were primarily driven by the net income generated by the fund’s investments.

Current wording

The performance allocations earned from Credit Strategies in 2024 were driven by the net income generated by the fund’s investments.

Previous wording

The performance allocations earned from Redding Ridge Holdings in 2024 were primarily driven by existing and new CLO issuances, CLO contract acquisitions, new consulting contracts and accumulation of warehouse assets.

Current wording

The performance allocations earned from Redding Ridge Holdings in 2024 were primarily driven by existing and new CLO issuances, CLO contract acquisitions, new consulting contracts and the accumulation of warehouse assets.

Previous wording

The performance allocations earned from Fund X in 2024 were primarily driven by appreciation and realization of the fund’s distressed investments and investments in the (i) manufacturing and industrial and (ii) consumer and retail sectors.

Current wording

The performance allocations earned from Fund X in 2024 were primarily driven by the appreciation and realization of the fund’s investments in the (i) manufacturing and industrial and (ii) consumer and retail sectors, and the fund’s distressed investments.

Previous wording

Advisory and transaction fees increased by $97 million to $267 million in 2024 from $170 million in 2023. Advisory and transaction fees reflect growth across the broader debt origination ecosystem, including a record quarter of high-grade corporate solutions activity. Advisory and transaction fees were primarily attributable to fees earned from companies in the (i) media, telecom and technology and (ii) business services sectors.

Current wording

Advisory and transaction fees increased by $24 million to $181 million in 2024 from $157 million in 2023. Advisory and transaction fees were primarily attributable to fees earned from companies in the (i) business services, (ii) consumer and retail, (iii) financial services and (iv) media, telecom and technology sectors.

Previous wording

Total compensation and benefits were $604 million in 2024, an increase of $88 million from $516 million in 2023, primarily due to an increase in profit sharing expense of $38 million, resulting from the corresponding higher investment income in 2024. In any period, the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance allocations in the period. Additionally, there was an increase in salary, bonus and benefits of $34 million, primarily stemming from growth in revenues and increased headcount in 2024.

Current wording

Total compensation and benefits were $605 million in 2024, an increase of $48 million from $557 million in 2023, primarily due to increases in salary, bonus and benefits and profit sharing expense of $37 million and $16 million, respectively. The increase in salary, bonus and benefits of $37 million was primarily driven by growth in revenues and increased headcount in 2024. The increase in profit sharing expense was primarily driven by the performance fees included within investment income in 2024. In any period, the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance allocations in the period.

Previous wording

Interest expense was $104 million in 2024, an increase of $42 million from $62 million in 2023. The increase in 2024 was primarily driven by higher interest expense from debt issued in 2024 and the second half of 2023.

Current wording

Interest expense was $55 million in 2024, an increase of $19 million from $36 million in 2023. The increase in 2024 was primarily driven by higher interest expense from debt issued in the second quarter of 2024 and the fourth quarter of 2023.

Previous wording

Retirement Services revenues were $11.0 billion in 2024, a decrease of $6.2 billion from $17.2 billion in 2023. The decrease was primarily driven by a decrease in premiums, partially offset by an increase in net investment income, an increase in revenues of consolidated VIEs and an increase in investment related gains (losses).

Current wording

Retirement Services revenues were $6.9 billion in 2024, an increase of $5.2 billion from $1.7 billion in 2023. The increase was primarily driven by an increase in investment related gains (losses), an increase in net investment income, an increase in premiums and an increase in revenues of consolidated VIEs, partially offset by a decrease in other revenues.

Previous wording

Investment related gains (losses) were $(134) million in 2024, a decrease of $500 million from $366 million in 2023, primarily due to the change in fair value of FIA hedging derivatives, partially offset by changes in the fair value of mortgage loans and reinsurance assets. The change in fair value of FIA hedging derivatives decreased $948 million, primarily driven by less favorable performance of the equity indices upon which Athene’s call options are based. The largest percentage of Athene’s call options are based on the S&P 500 index, which increased 3.9% in 2024, compared to an increase of 8.3% in 2023. The change in fair value of mortgage loans increased $359 million and the change in fair value of reinsurance assets increased $150 million, primarily driven by a smaller increase in U.S. Treasury rates in 2024 compared to 2023.

Current wording

Investment related gains (losses) were $1.5 billion in 2024, an increase of $4.2 billion from $(2.6) billion in 2023, primarily due to the favorable change in fair value of mortgage loans, FIA hedging derivatives, reinsurance assets and trading securities, partially offset by unfavorable net foreign exchange impacts. The change in fair value of mortgage loans increased $1.7 billion, the change in fair value of reinsurance assets increased$1.5 billion and the change in fair value of trading securities increased $144 million, primarily driven by a decrease in U.S. Treasury rates in 2024 compared to an increase in 2023. The change in fair value of FIA hedging derivatives increased$1.6 billion, primarily driven by favorable performance of the equity indices upon which Athene’s call options are based. The largest percentage of Athene’s call options are based on the S&P 500 index, which increased 5.5% in 2024, compared to a decrease of 3.6% in 2023. The unfavorable net foreign exchange impacts were primarily related to the weakening of the U.S. dollar against foreign currencies in 2024 compared to 2023.

Previous wording

Net investment income was $3.8 billion in 2024, an increase of $856 million from $2.9 billion in 2023, primarily driven by significant growth in Athene’s investment portfolio attributed to strong net flows during the previous twelve months, higher rates on new deployment related to the higher interest rate environment and higher floating rate income.

Current wording

Net investment income was $4.1 billion in 2024, an increase of $935 million from $3.2 billion in 2023, primarily driven by significant growth in Athene’s investment portfolio attributable to strong net flows during the previous twelve months and higher rates on new deployment in comparison to Athene’s existing portfolio related to the higher interest rate environment.

Previous wording

Revenues of consolidated VIEs were $366 million in 2024, an increase of $19 million from $347 million in 2023, primarily driven by unrealized gains on assets held by AAA and a favorable change in the fair value of mortgage loans held in VIEs related to a smaller increase in U.S. Treasury rates in 2024 compared to 2023, partially offset by an unfavorable change in the fair value of certain investment funds held within Athene’s consolidated VIEs.

Current wording

Revenues of consolidated VIEs were $552 million in 2024, an increase of $234 million from $318 million in 2023, primarily driven by unrealized gains on assets held by AAA and a favorable change in the fair value of mortgage loans held in VIEs related to a decrease in U.S. Treasury rates in 2024 compared to an increase in 2023.

Previous wording

Interest sensitive contract benefits were $4.7 billionin 2024, an increase of $1.4 billion from $3.3 billion in 2023, primarily driven by an increase in rates on deferred annuity and funding agreement issuances, as well as increased costs on floating rate funding agreements, driven by higher U.S. Treasury rates, and significant growth in Athene’s deferred annuity and funding agreement blocks of business, partially offset by a decrease in the change in Athene’s fixed indexed annuity reserves. The change in Athene’s fixed indexed annuity reserves includes the impact from changes in the fair value of FIA embedded derivatives. The decrease in the change in fair value of FIA embedded derivatives of $533 million was primarily due to the performance of the equity indices to which Athene’s FIA policies are linked. The largest percentage of Athene’s FIA policies are linked to the S&P 500 index, which increased 14.5% in 2024, compared to an increase of 15.9% in 2023. The change in fair value of FIA embedded derivatives was also driven by the favorable change in discount rates used in Athene’s embedded derivative calculations as 2024 experienced an increase in discount rates compared to a decrease in 2023.

Current wording

Interest sensitive contract benefits were $2.6 billion in 2024, an increase of $2.3 billion from $333 million in 2023, primarily driven by an increase in the change in Athene’s fixed indexed annuity reserves, significant growth in its deferred annuity and funding agreement blocks of business, higher rates on new deferred annuity and funding agreement issuances in comparison to its existing blocks of business and an unfavorable change in unlocking. The change in Athene’s fixed indexed annuity reserves includes the impact from changes in the fair value of FIA embedded derivatives. The increase in the change in fair value of FIA embedded derivatives of$1.5 billion was primarily due to the performance of the equity indices to which Athene’s FIA policies are linked. The largest percentage of Athene’s FIA policies are linked to the S&P 500 index, which increased 5.5% in 2024, compared to a decrease of 3.6% in 2023. The change in fair value of FIA embedded derivatives was also driven by the unfavorable change in discount rates used in Athene’s embedded derivative calculations as 2024 experienced a decrease in discount rates compared to an increase in 2023. These impacts were partially offset by the favorable impact of rates on policyholder projected benefits. The fair value of FIA embedded derivatives unlocking in 2024 was $67 million unfavorable primarily due to changes to projected interest crediting, while 2023 unlocking was $20 million favorable primarily due to changes to projected interest crediting, partially offset by an increase in lapse and risk margin assumptions. The negative VOBA unlocking related to Athene’s interest sensitive contract liabilities in 2024 was $59 million favorable mainly due to updated economics and an increase in lapse assumptions, while 2023 unlocking was $74 million favorable mainly due to an increase in lapse assumptions.

Previous wording

Market risk benefits remeasurement (gains) losses were $(170) million in 2024, a decrease of $445 million from $275 million in 2023. The gains in 2024 compared to losses in 2023 were primarily driven by a favorable change in the fair value of market risk benefits. The change in fair value of market risk benefits was $457 million favorable compared to 2023 due to a larger increase in the risk-free discount rate across the curve, which is used in the fair value measurement of the liability for market risk benefits.

Current wording

Market risk benefits remeasurement (gains) losses were $524 million in 2024, an increase of $965 million from $(441) million in 2023. The losses in 2024 compared to gains in 2023 were primarily driven by an unfavorable change in the fair value of market risk benefits, partially offset by a favorable change in unlocking. The change in fair value of market risk benefits was $1.0 billion unfavorable compared to 2023 due to a decrease in the risk-free discount rate across the curve, which is used in the fair value measurement of the liability for market risk benefits. This impact was partially offset by a favorable change in fair value of market risk benefits of $69 million related to the favorable equity market performance compared to 2023. The market risk benefits unlocking in 2024 was $62 million unfavorable primarily due to an increase in the income rider utilization assumption increasing projected claims, partially offset by favorable changes in lapse and enhanced income utilization assumptions, while 2023 unlocking was $81 million unfavorable primarily due to an increase in the income rider utilization assumption increasing projected claims, partially offset by favorable changes in lapse and income rider restart assumptions.

Previous wording

The Company’s income tax provision totaled $261 million and $201 million in 2024 and 2023, respectively. The change to the provision was primarily related to the increase in pretax income subject to income tax. The provision for income taxes includes federal, state, local and foreign income taxes resulting in an effective income tax rate of 18.2% and 21.1% for 2024 and 2023, respectively. The most significant reconciling items between the U.S. federal statutory income tax rate and the effective income tax rate were due to the following: (i) foreign, state and local income taxes, including NYC UBT, (ii) income attributable to non-controlling interests and (iii) equity-based compensation net of the limiting provisions for executive compensation under IRC Section 162(m). During the fourth quarter of 2023, the Company experienced a decrease to its consolidated effective income tax rate due to the one-time deferred tax benefit resulting from the enactment of the Bermuda Corporate Income Tax (“CIT”). The Company does not expect a material increase to its consolidated effective tax rate or earnings and results of operations as a result of the utilization of the deferred tax assets, though the Company can provide no assurance that the impacts will not be material in future years (see note 10 to the condensed consolidated financial statements for further details regarding the Company’s income tax provision).

Current wording

The Company’s income tax provision totaled $317 million and $243 million in 2024 and 2023, respectively. The change to the provision was primarily related to the increase in pretax income subject to income tax. The provision for income taxes includes federal, state, local and foreign income taxes resulting in an effective income tax rate of 15.2% and 27.5% for 2024 and 2023, respectively. The most significant reconciling items between the U.S. federal statutory income tax rate and the effective income tax rate were due to the following: (i) foreign, state and local income taxes, including NYC UBT, (ii) income attributable to non-controlling interests and (iii) equity-based compensation net of the limiting provisions for executive compensation under IRC Section 162(m). During the fourth quarter of 2023, the Company experienced a decrease to its consolidated effective income tax rate due to the one-time deferred tax benefit resulting from the enactment of the Bermuda Corporate Income Tax (“CIT”). The Company does not expect a material increase to its consolidated effective tax rate or earnings and results of operations as a result of the utilization of the deferred tax assets, though the Company can provide no assurance that the impacts will not be material in future years (see note 10 to the condensed consolidated financial statements for further details regarding the Company’s income tax provision).

Previous wording

Revenues were $2,089 million in 2024, an increase of $267 million from $1,822 million in 2023, primarily driven by an increase in advisory and transaction fees, net and investment income.

Current wording

Revenues were $3,011 million in 2024, an increase of $260 million from $2,751 million in 2023, primarily driven by an increase in advisory and transaction fees, net, incentive fees and management fees.

Previous wording

Advisory and transaction fees increased by $111 million to $436 million in 2024 from $325 million in 2023. Advisory and transaction fees earned during 2024 were primarily attributable to advisory and transaction fees earned from companies in the (i) media, telecom and technology, (ii) financial services, (iii) business services and (iv) manufacturing and industrial sectors.

Current wording

Advisory and transaction fees increased by $135 million to $617 million in 2024 from $482 million in 2023. Advisory and transaction fees earned during 2024 were primarily attributable to advisory and transaction fees earned from companies in the (i) media, telecom and technology, (ii) financial services and (iii) business services sectors.

Previous wording

Investment income increased $90 million in 2024 to $680 million compared to $590 million in 2023. The increase in investment income in 2024 was driven by an increase in performance allocations of $124 million, partially offset by a decrease in principal investment income of $34 million.

Current wording

Investment income moderated in 2024, increasing $28 million to $910 million compared to $882 million in 2023. The increase in investment income in 2024 was driven by an increase in performance allocations of $84 million, partially offset by a decrease in principal investment income of $56 million.

Previous wording

Significant drivers for performance allocations in 2024 were performance allocations primarily earned from HVF II, Fund IX, Fund X and Credit Strategies of $59 million, $53 million, $52 million and $22 million, respectively.

Current wording

Significant drivers for performance allocations in 2024 were performance allocations primarily earned from Fund IX, Fund X, HVF II, Credit Strategies, Redding Ridge Holdings and Freedom Parent Holdings of $232 million, $137 million, $114 million, $92 million, $66 million and $53 million, respectively, partially offset by performance allocation losses from Fund VIII of $117 million.

Previous wording

The performance allocations earned from Fund IX in 2024 were primarily driven by appreciation and realization of the fund’s investments in the leisure sector and in the fund’s distressed investments.

Current wording

The performance allocations earned from Fund IX in 2024 were primarily driven by appreciation of the fund’s investments in the (i) manufacturing and industrial and (ii) consumer services sectors, and the fund’s distressed investments.

Previous wording

The performance allocations earned from Fund X in 2024 were primarily driven by appreciation and realization of the fund’s distressed investments and investments in the (i) manufacturing and industrial and (ii) consumer and retail sectors. Moreover, the fund achieved its annualized hurdle rate in 2024.

Current wording

The performance allocations earned from Fund X in 2024 were primarily driven by the appreciation and realization of the fund’s investments in the (i) manufacturing and industrial and (ii) consumer and retail sectors, and the fund’s distressed investments. Moreover, the fund achieved its annualized hurdle rate in 2024.

Previous wording

The performance allocations earned from HVF II in 2024 were primarily driven by appreciation of the fund’s investments in private portfolio companies in the (i) consumer services, (ii) consumer and retail, and (iii) manufacturing and industrial sectors. Moreover, the fund achieved its annualized hurdle rate in 2024.

Current wording

The performance allocations earned from HVF II in 2024 were primarily driven by the appreciation of the fund’s investments in private portfolio companies in the (i) consumer and retail, (ii) consumer services and (iii) manufacturing and industrial sectors. HVF II also achieved its annualized hurdle rate in 2024.