ATHS — Athene Holding Ltd. 7.250% Fixe

Summary of Athene's Q2 2021 Earnings Call

1. Key Financial Results and Metrics:

• Adjusted Operating Income: Achieved a record $1 billion, or $5.04 per share.
• GAAP Net Income: Reported at $1.4 billion, or $6.97 per diluted share.
• Adjusted Book Value: Increased to over $67 per share, reflecting a 32% year-over-year growth and a compound annual growth rate of 17% since inception.
• Organic Inflows: Generated $7.6 billion in Q2, totaling $15.8 billion year-to-date, with annualized net organic growth of 5% for Q2.
• Cost of Funds: Expected fixed net investment earned rate (NIER) to be between 3.55% and 3.6% for the remainder of the year.

2. Strategic Updates and Business Highlights:

• Merger with Apollo: On track for completion in January 2022, expected to enhance Athene's growth and operational capabilities.
• Ratings Upgrade: Standard & Poor's upgraded Athene's financial strength rating to A+ from A, which is anticipated to improve product pricing and distribution.
• Investment Activity: Purchased over $14 billion in assets during Q2, focusing on structured securities, corporate bonds, and commercial/residential mortgage loans.
• Alternative Investments Performance: Achieved an annualized net return of approximately 17% in Q2, with a strong performance in natural resources and private credit.

3. Forward Guidance and Outlook:

• Total Organic Inflows: Revised expectation to meet or exceed $30 billion for 2021, up from a previous estimate of $25 billion.
• Retail Inflows: Anticipated to increase in the second half of the year, despite potential year-over-year comparisons skewed by strong MYGA volumes in 2020.
• Cost of Crediting: Expected to be around 175 basis points for the full year, influenced by growth in institutional channels.

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

• Market Conditions: Persistent low interest rates and tight credit spreads may create near-term pressure on fixed NIER.
• Flow Reinsurance Activity: Remains subdued, with fluctuations in appetite from counterparties affecting business volume.
• Competition in PRT Market: While Athene has gained market share, ongoing competitive pressures and the need for innovative solutions to complex pension liabilities remain challenges.

5. Notable Q&A Insights:

• Integration with Apollo Funds: There is potential for incorporating Apollo funds into Athene's retail products, but challenges exist in creating suitable hedges for indexed annuities.
• Competitive Dynamics in PRT Market: Athene's success attributed to strong investment performance, operational efficiencies, and a willingness to tackle complex pension solutions, positioning it as a preferred partner for plan sponsors.

Overall, Athene reported strong financial results and strategic progress, with a positive outlook for continued growth, although it faces challenges from market conditions and competitive dynamics.