Apollo and Dai-ichi relationships no challenge for Challenger

Challenger chief executive Nick Hamilton. Picture: Britta Campion

Challenger boss Nick Hamilton says the company has a “terrific relationship” with its private equity shareholder Apollo Global Management, despite its moves to sell shares, and it had helped the business.

Apollo was earlier considered a potential buyer of the $5bn Challenger, which is Australia’s largest annuities provider.

But it reduced its holding from 20.1 per cent to 9.9 per cent, selling a $420m stake in September at $6.51 per share after buying in at $6 a share in 2021.

Speaking at the Macquarie Australia Conference in Sydney, Mr Hamilton said the decision was based on a move to reallocate capital back to the United States.

“They have helped us with a whole lot of thinking with other things,” he said, describing the relationship as “terrific” and adding that its Athene business was about two to three years of Challenger in terms of where it wanted to be from an operating and investment perspective.

“Their priorities have changed.”

Apollo in September reduced its holding to 9.9 per cent from 20.1 per cent in a deal worth about $420m, making Japan’s MS&AD Challenger’s largest shareholder once again with about 15 per cent.

But since that time, MS&AD has been a seller, offloading its 15.1 per cent interest at $8.46 per share or $884m to rival Dai-ichi, which many now suspect will eventually bid to buy Challenger.

Dai-ichi owns Australia’s TAL life insurance business and could also snap up the remaining shares in Challenger held by private equity firm Apollo.

Dai-ichi is the second-largest insurer in Japan behind Nippon Life, and it is eager to gain market share.

Mr Hamilton did not comment on whether the Japanese financial giant could be interested in a buyout on the sidelines of the conference.

The $720m investment by Apollo in 2021 was understood to be a decision made by global annuities provider Athene, which Apollo was buying at the time, and some say the holding opened up conflicts when it came to debt transactions, determining whether they were carried out through Apollo, Challenger or Athene.

Mr Hamilton said Challenger continued to have a positive working relationship with MS&AD’s life insurance subsidiary Wel.

It had an existing relationship with TAL and the pair were assessing what they could do together in the year ahead in a similar way to MSP.

For MSP, it provided reinsurance and backing its annuities, working as an investment management partner and managing its properties in Japan.

Shares on Thursday closed up 9c to $7.21.