Athene Holdings (ATHS) Q3 2021 Earnings Call Summary

1Key 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:: 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.

Investment Purchases:: Nearly $17 billion, with a yield on fixed income purchases 55 basis points higher than the BBB corporate bond index.

2Strategic Updates and Business Highlights

Athene is positioned as a leading player in various channels, including retail, pension group annuities, and funding agreements.

Achieved a significant $4.9 billion pension risk transfer deal with Lockheed Martin, marking the largest transaction to date.

Continued focus on alternative investments, achieving an annualized net return of 16% in Q3.

Announced acquisitions to enhance asset sourcing capabilities, including Foundation Home Loans and a majority stake in Newfi.

Strong ratings upgrades from Standard & Poor's and a positive outlook from Fitch, reflecting improved balance sheet quality.

3Forward Guidance and Outlook

Anticipated total organic inflows for 2021 are expected to approach $35 billion, exceeding prior estimates.

Confidence in achieving record retail inflows in Q4 due to a robust pipeline and favorable pricing trends.

Expectation of a fixed net investment earnings rate (NIER) of approximately 3.5% in Q4.

Projected annualized NIER for alternatives in Q4 to be around 11% to 12%.

4Bad News, Challenges, or Points of Concern

Decline in Fixed NIER:: Experienced a drop to 3.49%, attributed to lower bond call income and higher cash balances, which may create near-term pressure on earnings.

Market Risks:: Concerns regarding potential impacts from the Chinese property market and broader economic conditions, although no immediate impairments were reported.

Competitive Pressures:: The market for pension risk transfer is becoming increasingly competitive, with larger players entering the space.

5Notable Q&A Insights

Growth Opportunities in Asia:: Athene sees significant potential in Asia, particularly in Japan, for both flow and block transactions due to changing capital rules and low interest rates.

Impact of LDTI:: The new accounting standard (LDTI) is expected to have a negligible impact on Athene's excess equity capital and adjusted operating income, but may create M&A opportunities as other companies face challenges.

Pension Risk Transfer Market:: The market is expected to remain strong, with a potential for larger transactions as companies seek to divest well-funded pension plans.

Regulatory Scrutiny:: Increased scrutiny from regulators regarding affiliated transactions in private equity-owned insurance companies may benefit Athene by raising industry standards. Overall, Athene's Q3 2021 results reflect strong operational performance and strategic positioning, with a positive outlook despite some challenges in the broader market environment.