ATH-PB — Athene Holding Ltd.

Summary of Athene Holdings Q3 2021 Earnings Call

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 Return on Equity (ROE): 15.3%.
• Adjusted Book Value: Increased to $71.50 per share, reflecting a compound growth rate of 17% since inception.
• Total Organic Inflows: $12 billion in Q3, bringing year-to-date inflows to $27.7 billion, with expectations to approach $35 billion for the year.
• Annualized Net Investment Return (NIER): 126 basis points for Q3, with alternatives portfolio achieving 16.3% return.

2. Strategic Updates and Business Highlights

• Achieved record organic inflows, surpassing total inflows for all of 2020.
• Strong performance in retail and pension group annuities, with notable transactions including a $4.9 billion deal with Lockheed Martin.
• Continued focus on alternative investments, with a differentiated strategy emphasizing defensive orientations.
• Announced acquisitions of Foundation Home Loans and a majority stake in Newfi, enhancing asset origination capabilities.
• Positive ratings outlook from agencies, with S&P upgrading and Fitch revising outlook to positive.

3. Forward Guidance and Outlook

• Expectation of a record fourth quarter for retail inflows driven by strong pipeline and favorable pricing trends.
• Anticipate annualized NIER for alternatives to be 11-12% in Q4, aligning with long-term averages.
• Project fixed NIER to be approximately 3.5% in Q4, with a stable cost of crediting around 173 basis points for the year.
• Confidence in exceeding revised estimates for total organic inflows for 2021.

4. Bad News, Challenges, or Points of Concern

• Decline in fixed NIER from previous quarters attributed to cash inflows and lower bond call income.
• Increased cash balances creating near-term drag on fixed NIER due to low interest rate environment.
• Competitive pressures in the MYGA market, although recent rate increases have improved product positioning.
• Potential risks from the evolving regulatory landscape regarding private equity-owned insurance companies, which may increase scrutiny and operational demands.

5. Notable Q&A Insights

• Discussion on growth opportunities in Asia, particularly in Japan, with expectations for increased flow and block transactions.
• Insights on the impact of the upcoming merger with Apollo, including changes to tax rates and accounting under LDTI, which are expected to be manageable for Athene.
• Commentary on the competitive landscape for block transactions, with a disciplined approach to pricing and a focus on maintaining strong returns.
• Acknowledgment of the frothy market for pension risk transfers, with expectations for continued growth in this segment.

Overall, Athene reported strong financial performance in Q3 2021, driven by record inflows and strategic acquisitions, while also navigating challenges related to interest rates and competitive pressures. The outlook remains positive with expectations for continued growth and profitability.