ATHS — Athene Holding Ltd. 7.250% Fixe

Summary of Athene Holding's Q3 2020 Earnings Call

1. Key Financial Results and Metrics

• GAAP Net Income: $622 million, or $3.16 per diluted share.
• Adjusted Operating Income: $302 million, or $1.53 per share (excluding notable items).
• Adjusted Operating ROE: 19% for the Retirement Services segment.
• Investment Purchases: Record $14 billion in investments at a yield premium of 60 basis points above the BBB corporate bond index.
• Organic Growth: Generated record deposits of $7.4 billion, with total organic and inorganic growth exceeding $50 billion for the year.

2. Strategic Updates and Business Highlights

• Athene emphasized its strong capital position with approximately $14.5 billion in regulatory capital and a clean balance sheet.
• The company executed a $29 billion transaction with Jackson National, aligning with its strategy to act as a solutions provider in the insurance industry.
• Athene's alternative investments performed well, appreciating over 10% in the last two quarters.
• The firm is focused on redeploying the Jackson portfolio, having reinvested over $10 billion, raising the yield by approximately 90 basis points.

3. Forward Guidance and Outlook

• Athene expects to maintain a fixed net investment earned rate (NIER) around 3.6% for Q4 2020, with potential for slight increases as cash levels normalize.
• The company anticipates exceeding $20 billion in organic volume for 2020, with a target of operating income exceeding $8 per share in 2021, excluding the impact of Apollo shares.
• The firm plans to reduce its cash balance from $6.5 billion to approximately $2 billion, which could increase annualized investment income by about $135 million.

4. Bad News, Challenges, or Points of Concern

• The company noted potential risks associated with credit migration and downgrades in 2021, although it has experienced minimal impairments and downgrades year-to-date.
• The competitive landscape in flow reinsurance is evolving with new entrants, but Athene believes its strong capital and track record will mitigate risks.
• The IMO channel remains disrupted due to the pandemic, impacting sales, though Athene has gained market share relative to competitors.

5. Notable Q&A Insights

• Management expressed confidence in achieving 2021 earnings targets, despite pressures on fixed income NIER due to low interest rates.
• The competitive landscape for flow reinsurance was discussed, with management noting that while new competitors have emerged, Athene's established relationships and capital position provide a competitive advantage.
• There was a discussion regarding the potential impact of a new DOL fiduciary standard under a Democratic administration, with management indicating they are not overly concerned about significant changes.
• The company is actively exploring additional inorganic growth opportunities, with a robust pipeline for potential transactions.

Overall, Athene demonstrated strong financial performance in Q3 2020, with strategic initiatives aimed at maintaining growth and profitability despite external challenges and competitive pressures.