ATHS — Athene Holding Ltd. 7.250% Fixe

Summary of Athene Holdings (ATHS) Q4 2019 Earnings Call

1. Key Financial Results and Metrics

• Adjusted Operating Income: Record $389 million, or $2.21 per diluted share, with an adjusted operating ROE of 16.7%.
• GAAP Net Income: $432 million, or $2.42 per diluted share.
• Adjusted Book Value: Increased 18% year-over-year to $54 per share.
• Consolidated Net Investment Earned Rate (NIER): 4.62%, up from 4.35% in Q3.
• Total Cost of Funds: 2.73%, down 45 basis points from the prior quarter.
• Excess Capital: Approximately $2 billion at year-end.

2. Strategic Updates and Business Highlights

• Record Organic Deposits: $18 billion in 2019, a 37% increase from 2018, driven by strong performance in pension risk transfer (PRT) and flow reinsurance channels.
• Pension Risk Transfer: Closed $6 billion in transactions, more than doubling 2018 volumes, including the first UK PRT transaction.
• Funding Agreements: Issued $1.3 billion in 2019, with a strong outlook for 2020, including plans for non-US dollar denominated deals.
• Share Repurchases: Over $900 million allocated for buybacks, with $300 million in Q4 alone.
• ACRA Development: Closed the sale of 67% of ACRA, generating $575 million in capital and positioning for future growth.

3. Forward Guidance and Outlook

• 2020 Expectations:
  • Anticipate organic deposit volumes similar to 2018 levels.
  • Fixed income NIER expected to normalize, with alternative returns projected at 10-11%.
  • Adjusted return on assets forecasted at 110-120 basis points.
  • Continued share repurchase activity anticipated, contingent on market conditions.

4. Bad News, Challenges, or Points of Concern

• Retail Sales Pressure: Retail sales declined due to low interest rates and competitive pricing, with expectations for continued pressure in the near term.
• Market Volatility: Potential for fluctuations in investment income due to changing interest rates, particularly affecting floating rate securities.
• Competition: Increased competition in the retail annuity market, particularly impacting MYGA sales.
• M&A Environment: While the pipeline remains active, the timing and execution of potential transactions could be uncertain.

5. Notable Q&A Insights

• Credit Quality: Management expressed confidence in their portfolio's credit quality, noting low impairments (3 basis points for the year) despite challenges in the energy sector.
• Retail Sales Outlook: Management expects improvement in retail sales driven by recent pricing adjustments and macroeconomic conditions.
• M&A Strategy: The company is positioned to pursue large transactions due to limited competition in that space, while also considering mid-sized deals.
• Capital Generation: Expected to generate approximately $2 billion in earnings from in-force business in 2020, with a net increase in excess capital anticipated.

This summary encapsulates the key financial metrics, strategic initiatives, forward guidance, challenges, and insights from the Q&A session, providing a comprehensive overview of Athene Holdings' performance and outlook for Q4 2019.