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, with an adjusted operating ROE of 15.3%.
• Adjusted Book Value: Increased to $71.50 per share, reflecting a compound growth rate of 17% per year since inception.
• Organic Inflows: Achieved a record $12 billion in the third quarter, totaling $27.7 billion year-to-date, with net annualized growth rates of 8% for Q3 and 7% year-to-date.
• Fixed NIER: Reported at 3.49%, slightly below prior guidance, driven by a decline in bond call income and higher cash balances.

2. Strategic Updates and Business Highlights

• Athene is on track for its best annual profits ever, with strong performance across its retail, pension group annuities, and funding agreement channels.
• The company has maintained leading market shares in key segments, bolstered by a favorable competitive landscape in the MYGA market.
• Significant transactions included a landmark $4.9 billion pension risk transfer deal with Lockheed Martin and the acquisition of Foundation Home Loans in the UK.
• The company emphasized its strong relationship with Apollo, which is expected to enhance growth and investment opportunities post-merger.

3. Forward Guidance and Outlook

• Athene anticipates total organic inflows to approach $35 billion for 2021, exceeding previous estimates.
• The company expects a strong fourth quarter driven by a robust pipeline, particularly in retail inflows.
• Adjusted operating income for Q4 is projected to be around $2.57 per share, with a fixed NIER of approximately 3.5%.
• The tax rate for the full year is now expected to be in the mid-single-digit range, lower than prior expectations.

4. Bad News, Challenges, or Points of Concern

• The fixed NIER declined by 26 basis points sequentially, attributed to nonrecurring benefits and lower bond call income.
• Increased cash balances are creating a near-term drag on fixed NIER, although these inflows are expected to yield positive returns over time.
• The competitive landscape remains challenging, particularly in the pension risk transfer market, although Athene maintains a strong position.
• Concerns regarding potential impacts from the NAIC's scrutiny of private equity-owned insurance companies were acknowledged, although management expressed confidence in their transparency and regulatory compliance.

5. Notable Q&A Insights

• Asia Growth Opportunities: Management highlighted potential for growth in Asia, particularly in Japan, with expectations for more flow relationships and block transactions due to changing capital rules.
• LDTI Impact: The new accounting standard (LDTI) is expected to have a negligible impact on Athene’s excess capital and adjusted operating income, but it may catalyze M&A activity in the industry.
• Pension Risk Transfer Market: The market is expected to remain strong, with potential for larger transactions as companies seek to divest pension liabilities.
• Credit Environment: Management remains vigilant regarding credit risks, particularly in sectors like casual dining and leisure, but reported no significant concerns in their portfolio.

Overall, Athene's Q3 2021 results reflect strong growth and strategic positioning, with a focus on maintaining momentum as it approaches its merger with Apollo.