ATH-PA — Athene Holding Ltd.

Athene Holdings Q3 2021 Earnings Call Summary

1. Key Financial Results and Metrics

• GAAP Net Income: $698 million, or $3.51 per diluted share.
• Adjusted Operating Income: $541 million, or $2.73 per share, excluding notable items.
• Adjusted Operating ROE: 15.3%.
• Adjusted Book Value: Increased to $71.50 per share, with a compound growth rate of 17% since inception.
• Total Organic Inflows: $12 billion for Q3, totaling $27.7 billion year-to-date, exceeding the previous year's total inflows.
• Annualized Net Investment Return (NIER): 126 basis points for Q3, with alternatives portfolio achieving an annualized NIER of 16.3%.

2. Strategic Updates and Business Highlights

• Record Organic Inflows: Achieved a new quarterly record in organic inflows, with strong contributions from retail, pension group annuities, and funding agreements.
• Market Position: Maintained leading market share in retail, funding agreements, and pension group annuity channels.
• Acquisitions: Announced acquisitions of Foundation Home Loans and a majority stake in Newfi, along with participation in the merger of Wheels and Donlen, enhancing asset origination capabilities.
• Ratings Upgrade: Received a positive outlook revision from Fitch and a ratings upgrade from S&P.
• Merger with Apollo: The pending merger is viewed as a strategic imperative to unlock shareholder value.

3. Forward Guidance and Outlook

• Fourth Quarter Expectations: Anticipate record retail inflows, driven by a robust pipeline and favorable pricing trends.
• Total Organic Inflows for 2021: Expected to approach $35 billion, exceeding previous estimates.
• Fixed NIER Guidance: Projected to be approximately 3.5% for Q4.
• Tax Rate: Expected to be in the mid-single-digit area for the full year, lower than prior estimates due to strong performance in alternatives.

4. Bad News, Challenges, or Points of Concern

• Declining Fixed NIER: Experienced a decline in fixed NIER to 3.49%, attributed to lower bond call income and higher cash balances.
• Market Environment: Concerns about competitive pressures and the potential impact of low interest rates on profitability.
• Regulatory Scrutiny: Increased scrutiny from regulators on affiliated transactions in the insurance sector could lead to more disclosure requirements.
• Credit Environment: Monitoring risks in casual dining, hotels, and leisure industries, although no significant impairments have been reported.

5. Notable Q&A Insights

• Growth Opportunities in Asia: Bill Wheeler highlighted potential for both flow and block transactions in Asia, particularly in Japan, as the market for indexed annuities is still developing.
• Pension Risk Transfer (PRT) Market: The PRT market is expected to remain strong, with potential for larger transactions as companies seek to divest pension liabilities.
• LDTI Impact: The new accounting standard (LDTI) is expected to have minimal impact on Athene's capital and earnings, but could lead to increased M&A activity as other companies face challenges with their balance sheets.
• Credit Concerns: Jim Belardi noted a proactive approach to managing credit risks, with a shrinking watch list in the portfolio, indicating strong underwriting practices.

Overall, Athene's Q3 2021 results demonstrate robust growth and strategic positioning ahead of its merger with Apollo, despite facing challenges from market conditions and regulatory scrutiny.