ATHS — Athene Holding Ltd. 7.250% Fixe

Athene Holding (ATHS) Q1 2021 Earnings Call Summary

1. Key Financial Results and Metrics:

• GAAP Net Income: $578 million, or $2.94 per diluted share.
• Adjusted Operating Income: Record $748 million, or $3.80 per share; adjusted operating income excluding notable items was $759 million, or $3.86 per share.
• Adjusted Return on Equity (ROE): 26%.
• Gross Organic Inflows: $8.2 billion, marking the second highest quarterly total ever.
• Adjusted Book Value: Nearly $63 per share, reflecting a 16% annual growth since inception.
• Net Investment Income (NIER): Fixed income NIER at 3.57%, with expectations to stabilize around 3.6% moving forward.

2. Strategic Updates and Business Highlights:

• Athene announced a merger with Apollo, which is expected to enhance growth potential and operational synergies.
• Strong performance in alternative investments, with an annualized net return of 39%, driven by significant gains from investments in Venerable, AmeriHome, and MidCap.
• Retail inflows grew by 41% year-over-year, primarily from fixed indexed annuities (FIAs), which accounted for over 90% of retail inflows.
• The company is actively reducing its cash balance, ending Q1 with $2.5 billion, and is redeploying the inherited Jackson portfolio to align with Athene’s investment strategy.

3. Forward Guidance and Outlook:

• Athene anticipates continued healthy organic growth in 2021, particularly in the pension risk transfer (PRT) market, which is expected to be a record year.
• The company expects to complete the redeployment of the Jackson portfolio by mid-2021, potentially increasing gross yield by an additional 50 basis points.
• The tax rate is expected to rise post-merger; however, the company is exploring strategies to mitigate the impact on returns.

4. Bad News, Challenges, or Points of Concern:

• The competitive landscape for MYGA products is becoming increasingly aggressive, with some competitors underwriting at breakeven or negative returns.
• The broader PRT market experienced a relatively light first quarter, although there is optimism for improved activity later in the year.
• The company expressed caution regarding the sustainability of aggressive pricing in the MYGA market, indicating potential challenges ahead.

5. Notable Q&A Insights:

• Management highlighted that approximately 40-45% of Apollo shares are considered required capital, with excess capital estimated at over $700 million.
• There is optimism regarding the inorganic growth pipeline, with expectations for several sizable opportunities in the market.
• Concerns were raised about increased competition from private equity players in the PRT market, but management remains confident in Athene's competitive position.
• The company is open to exploring broader M&A opportunities beyond fixed annuities, contingent on achieving appropriate return expectations.

Overall, Athene reported strong financial performance in Q1 2021, driven by effective asset management and strategic growth initiatives, while navigating competitive pressures and preparing for a merger with Apollo.