Steve Eisman Flags Apollo’s Athene Unit for $40B Credit Build and Liability Shift
Steve Eisman warns Apollo Global’s Athene insurance arm increased affiliated investments from $10 billion to $40 billion in five years while shifting billions of liabilities to underfunded offshore reinsurance subsidiaries. Athene’s $37.9 billion in short-term deposit contracts creates a duration mismatch that could trigger liquidity strains upon heavy redemptions.
1. Eisman’s Warning of Private Credit Risks
Steve Eisman, known for predicting the 2008 mortgage crisis, described captive insurance divisions of asset managers like Apollo Global Management as a “slow brewing scandal” due to private credit exposure within their insurance units. He highlighted the potential for systemic risk if these units face redemption pressures.
2. Growth of Athene’s Investments and Liabilities
Apollo’s Athene insurance arm saw affiliated investments grow from roughly $10 billion to $40 billion over five years, with short-term deposit-type contracts now totaling $37.9 billion. These products create a maturity mismatch between its liquid private credit assets and its liabilities.
3. Offshore Reinsurance and Underfunding
Insurers have shifted billions in liabilities to offshore reinsurance subsidiaries in jurisdictions such as Bermuda, Barbados and the Cayman Islands, where filings are minimal. Forensic analysis suggests these entities are underfunded, backing multibillion-dollar exposures with limited real assets.
4. Private Credit Redemptions and Market Impact
Investor sentiment in private credit is deteriorating as firms like Blue Owl and Blackstone face record redemptions, and Apollo’s MidCap Financial fund recently slashed its dividend. Apollo Global’s stock is down 30% year-to-date, reflecting growing market concerns.