ATH-PE — 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 ROE: 15.3%.
• Adjusted Book Value: Increased to $71.50 per share, reflecting a 17% compound growth rate since inception.
• Organic Inflows: Achieved a record $12 billion in Q3, surpassing total inflows for all of 2020, with year-to-date inflows at $27.7 billion.
• Annualized Organic Growth Rate: 8% for Q3 and 7% year-to-date.
• Fixed NIER: Reported at 3.49%, slightly below prior guidance due to various factors including cash drag.
• Alternative Investments Performance: Annualized net return of 16% in Q3, with expectations of 11-12% in Q4.

2. Strategic Updates and Business Highlights

• Record Inflows: Strong performance across all channels, particularly in pension group annuities, which saw inflows of $6.6 billion, including a landmark $4.9 billion transaction with Lockheed Martin.
• Acquisitions: Notable acquisitions include Foundation Home Loans and a majority stake in Newfi, enhancing Athene's asset sourcing capabilities.
• Market Position: Maintained leading market share in retail, funding agreements, and pension group annuities, with a strong pipeline for future growth.
• Merger with Apollo: Anticipated completion in January, viewed as a strategic imperative to unlock shareholder value.

3. Forward Guidance and Outlook

• Q4 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.
• Tax Rate: Projected to be in the mid-single-digit range for the full year, lower than prior expectations.
• Cost of Crediting: Expected to be approximately 173 basis points for the full year, slightly better than previous guidance.

4. Challenges and Points of Concern

• Declining Fixed NIER: Experienced a decline in fixed NIER due to cash drag and lower bond call income.
• Market Environment: Concerns about competitive pressures in the MYGA market and potential impacts from ongoing scrutiny of PE-owned insurance companies by regulators.
• Credit Environment: Monitoring potential risks in sectors such as casual dining, hotels, and leisure, though no significant impairments 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, driven by changing capital rules and low interest rates.
• Impact of LDTI: Minimal expected impact on Athene's business model from the new accounting standard, but could lead to increased M&A activity in the industry as companies reassess their balance sheets.
• Pension Risk Transfer Market: Strong growth potential with estimates of $35 billion in transactions for the year, with Athene positioned as a market leader.
• Credit Environment Concerns: Jim Belardi noted proactive measures to manage portfolio risks, with a shrinking watch list and no overriding concerns currently.

Overall, Athene reported strong financial performance and strategic positioning heading into its merger with Apollo, while also navigating challenges in the current market environment.