Good morning. Fortune senior correspondent Shawn Tully here.
Recently I spent time in the Manhattan offices of Apollo Global Management working on an in-depth look into CEO Marc Rowan’s ideas about where the investment world is heading. Nicknamed inside Apollo as “the professor,” Rowan, who is “slight of build and sporting an open-collared white shirt, describes his strategy with a kind of quiet, cartesian logic.” As I wrote for Fortune:
A booth in this buzzing venue happens to be the favorite meeting place for CEO Marc Rowan, and that’s where we’re speaking this morning. To get here, Rowan descends the interior staircase from the trading floor above, whereupon taking charge as the pandemic raged in early 2021, he settled in an interior, zero-views office to monitor the action up-close. Leon Black, Rowan’s co-founder and predecessor, had occupied a 42nd-floor suite, festooned with French antique handguns and museum-quality Impressionist paintings before resigning amid an explosive scandal revealing that he’d paid $158 million of his own funds for personal finance advice to late sex offender Jeffrey Epstein. But Rowan preferred his relatively spartan digs to Black’s sumptuous aerie.
I was particularly interested in examining Apollo’s business model, which has changed drastically since Black’s days of running a super-combative private equity shop, in part due to the fact that Rowan is something of an insurance whiz.
“While studying for my MBA at the Wharton School in the early 1980s,” Rowan recalls, “I was assigned a faculty advisor who turned out to be the head of the actuarial sciences department. At the time, I couldn’t think of anything more boring. But he encouraged me to learn about statistics and probabilities.” When Drexel Burnham, where Rowan worked under mentor Mike Milken, imploded in 1990, he, Black, and Josh Harris famously formed Apollo—and their first deal consisted of buying and rescuing a failed insurer called Executive Life. “It was as if I was the only kid in school who’d even cracked the book and could raise their hand and answer the question. Thanks to the actuarial studies, I knew more than anyone else about insurance risks,” he recalls. Rowan calls the challenge of repairing the Executive Life operations, subsequently sold at a big profit, “an amazing education.”
That success paved the way for insurer Athene, which Rowan helped form by devouring underwater books of business that others were dumping during the Great Financial Crisis. When Rowan became sole CEO, he quickly merged Athene with Apollo.
The union greatly changed the Apollo model. It’s now much closer to insurers such as Mass Mutual than to its previous peers, alt giants such as Blackstone and Carlyle. The Athene merger put a mountain of new capital, now totaling $258 billion, directly on its books, and piled well over $200 billion in annuity liabilities payable to policyholders on the opposite side of the ledger.
That’s led to bigger risks—but also raises the possibility of great rewards. You can read the full story—including how Rowan is deploying those juicy Athene profits into the burgeoning field of private debt, and how he believes that he’ll achieve $1 trillion AUM by 2026—in my story here. And pass this story along to any students in your lives struggling through statistics or actuarial sciences. Pay attention, and maybe someday they’ll have a trillion-dollar business in their sights, too.
Shawn Tully
Shawn.Tully@fortune.com
