Summary of Athene Holding Ltd. Q4 2018 Earnings Call

1Key Financial Results and Metrics

GAAP Net Loss: $104 million, or $0.53 per diluted share, primarily due to non-operating factors related to equity market volatility and investment losses.

Adjusted Operating Income: $240 million, or $1.23 per share; excluding notable items, it was $293 million, or $1.50 per share.

Adjusted Book Value: Grew 19% year-over-year to $45.59 per share.

Consolidated Adjusted Operating ROE: 14%, meeting the mid-teens target despite market volatility.

Net Investment Earned Rate: 4.54%, an increase from 2017, despite integrating lower-yielding reinsurance assets.

Total Deposits: Exceeded $40 billion in 2018, with a 46% year-over-year growth in total invested assets to $111 billion.

2Strategic Updates and Business Highlights

Athene completed two significant inorganic transactions totaling over $25 billion in liabilities, expected to yield mid-teens cash-on-cash returns.

Continued growth in both organic and inorganic channels, particularly in retail and flow businesses, with retail deposits reaching $7.5 billion (up 41% YoY).

Strong focus on maintaining underwriting discipline and pricing new business for mid-teens returns.

Strategic priorities for 2019 include enhancing profitable growth, pursuing rating upgrades, completing asset redeployment from Voya and Lincoln transactions, and opportunistic capital deployment.

3Forward Guidance and Outlook

Anticipated organic growth volumes in 2019 to meet or exceed 2018 levels, with an investment margin of 2% to 3%.

Expected operating earnings power to exceed $7 per share in 2019, representing over 20% growth compared to 2018.

Management expects to manage capital effectively, with approximately $1 billion of excess equity capital and over $2 billion of incremental debt capacity available.

4Bad News, Challenges, or Points of Concern

The GAAP net loss was attributed to significant market volatility, which impacted investment income and increased other liability costs.

Increased surrenders in the fourth quarter, with expectations of high single-digit to 10% decrements in existing in-force business for 2019.

The company noted potential volatility in net income due to GAAP accounting discrepancies between reinsurance and direct written business.

Market pressures and competitive dynamics in the funding agreement market may impact future growth and profitability.

5Notable Q&A Insights

Management indicated that while they expect to continue growing, they are raising their internal return targets, which may moderate growth rates.

There was discussion about the potential for future capital deployment strategies, including debt issuance and other funding mechanisms.

The outlook for organic deposits was cautiously optimistic, with expectations of continued strong performance in retail and flow reinsurance channels, although some fluctuations were anticipated.

The company is preparing for potential market dislocations that could provide attractive investment opportunities, emphasizing a patient and disciplined approach to capital allocation. Overall, Athene demonstrated strong operational performance in 2018, but faced challenges from market volatility and increased surrenders, which could impact future earnings. The management remains focused on strategic growth and capital efficiency moving forward.