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  • Athene Holding Ltd. Reports Third Quarter 2020 Results

    November 4, 2020 by Athene Holding, Ltd.

    PEMBROKE, Bermuda–(BUSINESS WIRE)–Athene Holding Ltd. (“Athene”) (NYSE: ATH), a leading provider of retirement savings products, announced today financial results for the third quarter 2020.

    “Amid fragile economic conditions and historically low interest rates, our third quarter results demonstrate the continued resilience of Athene’s business and our ability to drive robust, highly profitable growth in any environment,” said Jim Belardi, CEO of Athene. “Following consecutive quarters of record organic growth above target returns, we are on pace to exceed $50 billion of total organic and inorganic volumes in 2020, marking our best year of growth ever. While others have been forced to pull back in the current environment, Athene continues to serve as a source of strength for policyholders and business partners. Our numerous competitive advantages, highlighted by our very strong capitalization, enable our business to continue to thrive. The successful execution of our strategy year-to-date has laid the foundation to significantly increase earnings and drive compelling shareholder value in 2021 and beyond.”

    Third Quarter 2020 Financial Results

    Net income available to AHL common shareholders for the third quarter 2020 was $622 million, or $3.16 per diluted Class A common share (“diluted share”), compared to $276 million, or $1.50 per diluted share for the third quarter 2019. The increase from the prior year quarter was driven by higher adjusted operating income, favorable changes in the fair value of reinsurance assets due to tightening credit spreads, and favorable changes in the net fair value of fixed indexed annuity (“FIA”) derivatives primarily due to unlocking, favorable equity market performance, and a lower discount rate resulting from declining interest rates.

    Adjusted operating income available to common shareholders for the third quarter 2020 was $302 million, or $1.53 per adjusted operating common share, compared to $243 million, or $1.34 per adjusted operating common share for the third quarter 2019. The increase from the prior year quarter was primarily driven by stronger investment income from alternatives, more than half of which are valued on a lagged basis and benefited from capital markets appreciation in the second quarter of 2020 being reflected in the current period.

    Adjusted operating income available to common shareholders excluding notables and AOG for the third quarter 2020 was $356 million, or $2.10 per adjusted operating common share, compared to $305 million, or $1.67 per adjusted operating common share for the third quarter 2019. The increase from the prior year quarter was primarily driven by the aforementioned strength of investment income from alternatives.

    Continued Strong Capital Position

    • Book value per common share of $83.39 for the period ended September 30, 2020, an increase of 12% year-over-year. Adjusted book value per common share of $53.61, an increase of 6% year-over-year.
    • Total deployable capital of $7.6 billion, including excess equity capital of $3.2 billion, $2.6 billion of untapped debt capacity1, and $1.8 billion of available undrawn third-party commitments to ACRA.
    • Total cash and cash equivalents of $7.5 billion, and a liquid bond portfolio of approximately $51 billion.2
    • Available liquidity of $10.9 billion3 as of September 30, 2020, including $3.4 billion undrawn credit facilities.
    • ALRe RBC of 449%4 and U.S. RBC of 436% as of September 30, 2020.

    1 Untapped debt capacity assumes capacity of 25% debt to capitalization and is subject to general availability and market conditions. Untapped debt capacity has not been adjusted for the $500 million of senior notes issued on October 8, 2020. 2 As of September 30, 2020. Includes $49.1 billion of public corporates ($17 billion held in reinsurance portfolios which are available to fund the benefits for the associated obligations but are restricted from other uses), and $2.1 billion of municipal, political subdivisions, and U.S. and foreign government bonds. 3 Includes cash and cash equivalents, undrawn revolver of $1.25 billion, undrawn committed repurchase facility of $1 billion and undrawn FHLB capacity of $1 billion as of September 30, 2020. 4 ALRe RBC ratio is used to evaluate our capital position and the amount of capital needed to support our Retirement Services segment and is calculated by applying NAIC RBC factors to the statutory financial statements of AHL’s non-U.S. reinsurance subsidiaries on an aggregate basis with certain adjustments made by management as described in glossary of Form 10-Q.

    Selected Results

       
         

     

     

    As of and for the three months ended
    September 30,

    (In millions, except percentages and per share data)

     

    2019

     

    2020

    Book value per common share

     

    $

    74.20

     

     

    $

    83.39

     

    Adjusted book value per common share

     

    $

    50.74

     

     

    $

    53.61

     

    Common shares outstanding

     

    182.5

     

     

    191.2

     

    Adjusted operating common shares outstanding1

     

    181.4

     

     

    196.3

     

    Return on equity (ROE)

     

    8.5

    %

     

    16.2

    %

    Adjusted operating ROE

     

    10.6

    %

     

    11.7

    %

    Adjusted operating ROE ex notables and AOG

     

    13.3

    %

     

    16.3

    %

    Adjusted operating ROE – Retirement Services

     

    13.5

    %

     

    20.2

    %

    Return on assets (ROA)

     

    0.78

    %

     

    1.33

    %

    Adjusted operating ROA

     

    0.82

    %

     

    0.86

    %

    Adjusted operating ROA ex notables and AOG

     

    1.03

    %

     

    1.03

    %

    Net investment spread – Retirement Services

     

    1.13

    %

     

    1.41

    %

    Investments, including related parties

     

    $

    127,101

     

     

    $

    170,205

     

    Net invested assets

     

    $

    121,140

     

     

    $

    142,835

     

    Debt to capital ratio

     

    6.8

    %

     

    8.5

    %

    Adjusted debt to capital ratio

     

    8.7

    %

     

    10.8

    %

    Total AHL shareholders’ equity

     

    $

    13,545

     

     

    $

    15,943

     

    Adjusted AHL common shareholders’ equity

     

    $

    9,204

     

     

    $

    10,522

     

    Gross organic deposits

     

    $

    5,637

     

     

    $

    7,401

     

    Gross inorganic deposits

     

     

     

     

    Gross deposits

     

    5,637

     

     

    7,401

     

    Deposits attributable to ACRA noncontrolling interest

     

     

     

     

    Net deposits

     

    $

    5,637

     

     

    $

    7,401

     

    1 Adjusted operating common shares outstanding assumes conversion or settlement of all outstanding items that are able to be converted to or settled in Class A common shares, including the impacts of Class B common shares outstanding on a one-for-one basis, the impacts of all Class M common shares outstanding net of the conversion price and any other stock-based awards outstanding, but excluding any awards for which the exercise or conversion price exceeds the market value of Class A common shares on the applicable measurement date. Effective February 28, 2020, all Class B common shares were converted into Class A common shares and all Class M common shares were converted into warrants and Class A common shares. Our Class B common shares were economically equivalent to Class A common shares and were convertible to Class A common shares on a one-for-one basis at any time. Our Class M common shares were in the legal form of shares but economically functioned as options as they were convertible into Class A common shares after vesting and settlement of the conversion price. We believe this non-GAAP measure is an appropriate economic representation of our share counts for use in an economic view of book value metrics.

    Selected Results

       
         

     

     

    Three months ended

     

     

    September 30,

    (In millions, except per share data)

     

    2019

     

    2020

    Net income available to AHL common shareholders

     

    $

    276

     

     

     

    $

    622

     

     

    Non-operating adjustments

     

     

     

     

    Investment gains, net of offsets

     

    166

     

     

     

    346

     

     

    Change in fair values of derivatives and embedded derivatives – FIAs, net of offsets

     

    (117

    )

     

     

    72

     

     

    Integration, restructuring and other non-operating expenses

     

    (34

    )

     

     

     

     

    Stock compensation expense

     

    (3

    )

     

     

    (1

    )

     

    Income tax (expense) benefit – non-operating

     

    21

     

     

     

    (97

    )

     

    Less: Total non-operating adjustments

     

    33

     

     

     

    320

     

     

    Adjusted operating income available to common shareholders

     

    $

    243

     

     

     

    $

    302

     

     

    Adjusted operating income (loss) available to common shareholders by segment

     

     

     

     

    Retirement Services

     

    $

    256

     

     

     

    $

    361

     

     

    Corporate and Other

     

    (13

    )

     

     

    (59

    )

     

    Adjusted operating income available to common shareholders

     

    $

    243

     

     

     

    $

    302

     

     

    Earnings per common share – basic Class A

     

    $

    1.50

     

     

     

    $

    3.22

     

     

    Earnings per common share – diluted Class A1

     

    $

    1.50

     

     

     

    $

    3.16

     

     

    Adjusted operating earnings per common share2

     

    $

    1.34

     

     

     

    $

    1.53

     

     

    Weighted average common shares outstanding – basic Class A

     

    151.6

     

     

     

    193.1

     

     

    Weighted average common shares outstanding – diluted Class A1

     

    152.0

     

     

     

    197.1

     

     

    Weighted average common shares outstanding – adjusted operating2

     

    182.3

     

     

     

    197.1

     

     

    Weighted average common shares outstanding – adjusted operating excluding Apollo3

     

    182.3

     

     

     

    169.1

     

     

         

     

     

    Three months ended

     

     

    September 30,

    (In millions)  

    2019

     

    2020

    Notable items

     

     

     

     

    Retirement Services adjusted operating income available to common shareholders

     

    $

    256

     

     

     

    $

    361

     

     

    Non-recurring adjustment on derivative collateral

     

     

     

     

    (25

    )

     

    Actuarial experience and market impacts

     

    18

     

     

     

     

     

    Unlocking

     

    48

     

     

     

    (6

    )

     

    Tax impact of notable items

     

    (4

    )

     

     

    4

     

     

    Retirement Services notable items

     

    62

     

     

     

    (27

    )

     

    Retirement Services adjusted operating income available to common shareholders excluding notable items

     

    318

     

     

     

    334

     

     

    Corporate and Other adjusted operating loss available to common shareholders

     

    (13

    )

     

     

    (59

    )

     

    Consolidated adjusted operating income available to common shareholders excluding notable items

     

    $

    305

     

     

     

    $

    275

     

     

    Adjusted operating earnings per common share excluding notables2

     

    $

    1.67

     

     

     

    $

    1.40

     

     

    1 Diluted earnings per common share on a GAAP basis for Class A common shares, including diluted Class A weighted average common shares outstanding, includes the dilutive impacts, if any, of Class B common shares, Class M common shares and any other stock-based awards. There were no dilutive securities for the quarter. Diluted earnings per common share on a GAAP basis for Class A common shares are based on allocated net income available to AHL common shareholders of $622 million (100% of net income available to AHL common shareholders) and $227 million (82% of net income available to AHL common shareholders) for the three months ended September 30, 2020 and 2019, respectively.

    2 Weighted average common shares outstanding – adjusted operating assumes conversion or settlement of all outstanding items that are able to be converted to or settled in Class A common shares, including the impacts of Class B common shares on a one-for-one basis, the impacts of all Class M common shares net of the conversion price and any other stock-based awards, but excluding any awards for which the exercise or conversion price exceeds the market value of Class A common shares on the applicable measurement date. Effective February 28, 2020, all Class B common shares were converted into Class A common shares and all Class M common shares were converted into warrants and Class A common shares. Our Class B common shares were economically equivalent to Class A common shares and could have been converted to Class A common shares on a one-for-one basis at any time. Our Class M common shares were in the legal form of shares but economically functioned as options as they were convertible into Class A common shares after vesting and settlement of the conversion price. In calculating Class A diluted earnings per common share on a GAAP basis, we are required to apply sequencing rules to determine the dilutive impacts, if any, of our Class B common shares, Class M common shares and any other stock-based awards. To the extent our Class B common shares, Class M common shares and/or any other stock-based awards were not dilutive they were excluded. We believe this non-GAAP measure is an appropriate economic representation of our share counts for use in an economic view of adjusted operating earnings per common share.

    3 Weighted average common shares outstanding – adjusted operating excluding Apollo is adjusted to exclude the Athene shares issued in exchange for the AOG units as part of the Apollo transaction, but does not include an adjustment for the shares issued in exchange for $350 million cash.

    Deposit Highlights

    In the third quarter 2020, Athene generated gross organic deposits of $7.4 billion – a record for the second consecutive quarter, and an increase of 31% year-over-year and 7% quarter-over-quarter. Record organic deposit activity reflected continued strength across the retail, flow reinsurance, and funding agreement1 channels. Importantly, organic deposits were underwritten to strong returns despite the historically low interest rate environment, reflecting the ability to invest in a wider-than-normal spread environment coupled with low funding costs.

    Retail: In the third quarter 2020, Athene generated record new retail deposits of $2.5 billion, an increase of 28% year-over-year and, 38% quarter-over-quarter. Sequentially improving volume was driven by strong sales through bank and broker-dealer intermediaries, including record fixed indexed annuity sales in the bank channel driven by new and existing distribution partners. Athene remains a leader in the FIA market, serving as a source of strength for policyholders in committing capital to new policy issuance amid fragile economic conditions.

    Flow Reinsurance: In the third quarter 2020, Athene generated record quarterly flow reinsurance deposits of $2.3 billion, an increase of 280% year-over-year and 2% quarter-over-quarter. The increase from the prior year was driven by strong volumes from existing partners that sought to utilize Athene’s competitive advantages. As a leader in the flow reinsurance market, Athene remains committed to serving as a source of strength for its reinsurance counterparties in support of their new policy issuance.

    Institutional: In the third quarter 2020, Athene generated a near record $2.6 billion of funding agreement activity1 underwritten to very strong returns. Funding agreement activity was highlighted by funding agreement issuances across three distinct currencies, as well as two secured funding agreements. While no pension risk transfer transactions were executed in the third quarter 2020, three transactions totaling $1.6 billion have closed to date in the fourth quarter 2020.

    1 Funding agreements are comprised of funding agreements issued under our FABN and FABR programs, funding agreements issued to the FHLB and long-term repurchase agreements.

    Segment Results

    Retirement Services

    For the third quarter 2020, adjusted operating income available to common shareholders in Retirement Services was $361 million, an increase of $105 million, or 41%, from the third quarter 2019, resulting in an adjusted operating ROE of 20.2%. Excluding notable items, adjusted operating income available to common shareholders in Retirement Services was $334 million, resulting in an adjusted operating ROE of 18.7%.

    The increase in adjusted operating income available to common shareholders over the prior year quarter was primarily driven by higher net investment income from alternatives. Approximately 60% of Athene’s alternative investments are valued on a lagged basis and benefited from capital markets appreciation in the second quarter of 2020 being reflected in the current period. In addition, Athene’s single largest alternative investment, AmeriHome, generated particularly strong investment income primarily due to strong operating performance.

    The net investment spread, which measures net investment earnings less cost of funds, was 1.41% of average net invested assets for the third quarter 2020, an increase of 28 basis points from the third quarter 2019. The increase from the prior year quarter was primarily driven by a lower cost of funds partially offset by a modestly lower net investment earned rate (NIER).

    The NIER was 4.22% for the third quarter 2020, compared to 4.31% in the prior year quarter. The annualized return on fixed income and other investments during the third quarter 2020 was 3.70%, compared to 4.11% in the prior year quarter, a decline of 41 basis points primarily driven by lower income from floating rate investments resulting from declining interest rates, elevated levels of cash and liquidity amid recent market volatility, and the onboarding of a lower yielding portfolio from Jackson, partially offset by a non-recurring adjustment on derivative collateral. Excluding the non-recurring benefit, the forward net investment earned rate on fixed income and other investments is expected to benefit from investing excess portfolio cash and liquidity, as well as executing the ongoing redeployment of the Jackson portfolio. The net annualized return on alternative investments during the third quarter 2020 was 17.24% compared to 8.90% in the prior year quarter, primarily due to the lagged effect from rebounding markets in the second quarter 2020 impacting approximately 60% of the alternatives portfolio as well as strong performance from Athene’s largest alternative investment, AmeriHome.

    Cost of funds, which is comprised of the total cost of crediting on deferred annuities and institutional products as well as other liability costs, was 2.81% for the third quarter 2020, a decrease of 37 basis points from the third quarter 2019, driven by lower crediting rates and other liability costs.

    Total cost of crediting was 1.87% for the third quarter 2020, a decrease of 9 basis points from the prior year quarter, driven by lower crediting rates for the institutional business. The cost of crediting on institutional business was 2.95%, a decrease of 73 basis points from the prior year quarter. The year-over-year decline was driven by an increasing mix of new issue funding agreements at lower rates, declining rates on floating-rate funding agreements, as well as favorable mortality developments within pension risk transfer obligations. The cost of crediting on deferred annuities was 1.98%, in line with the prior year quarter, as the onboarding of the reinsured Jackson block with a higher initial crediting rate offset favorable crediting rate actions on in-force renewals and lower crediting rates on new deferred annuity issuance amid a declining interest rate environment.

    Other liability costs were 0.94% for the third quarter 2020, a decrease of 28 basis points from the prior year quarter, primarily due to favorable changes in unlocking and equity market performance relative to the prior year quarter, partially offset by an increase in gross profits impacting rider reserves and DAC amortization. Other liability costs also benefited from the onboarding of the reinsured Jackson block, which carries a more favorable level of other liability costs.

    Corporate & Other

    In the third quarter 2020, the adjusted operating loss available to common shareholders was $59 million in Corporate & Other, an increase of $46 million from an adjusted operating loss available to common shareholders of $13 million in the third quarter 2019. The increase in adjusted operating loss available to common shareholders from the prior year quarter was primarily driven by depreciation in Athene’s investment in the Apollo Operating Group (“AOG”) as well as greater preferred stock dividends and higher interest expense, partially offset by higher net investment income from alternatives.

    The change in fair value of Athene’s AOG investment, net of tax, resulted in an $81 million loss, or $0.73 per common share in the quarter, primarily reflecting an 8% decrease in the common stock price of Apollo Global Management (NYSE: APO).

    Share Repurchase Activity

    In the third quarter 2020, Athene repurchased 2.7 million shares of its common stock for $97 million under previously announced share repurchase programs. During this period, shares were purchased at an average cost of $35.64 per share and an average price-to-adjusted book value multiple of 0.70x. As of September 30, 2020, remaining share repurchase authorization totaled $224 million.

    Conference Call Information

    Athene will host a conference call today, Tuesday, November 3, 2020, at 10:00 a.m. ET. During the call, members of Athene’s senior management team will review Athene’s financial results for the third quarter ended September 30, 2020. This press release, the third quarter 2020 earnings presentation, and quarterly financial supplement are posted to Athene’s website at ir.athene.com.

    • Live conference call: Toll-free at (866) 901-0811 (domestic) or (346) 354-0810 (international)
    • Conference call replay available through November 17, 2020 at (800) 585-8367 (domestic) or (404) 537-3406 (international)
    • Conference ID number: 2572045
    • Live and archived webcast available at ir.athene.com

    About Athene Holding Ltd.

    Athene, through its subsidiaries, is a leading retirement services company that issues, reinsures and acquires retirement savings products designed for the increasing number of individuals and institutions seeking to fund retirement needs. The products offered by Athene include:

    • Retail fixed, fixed indexed and index-linked annuity products;
    • Reinsurance arrangements with third-party annuity providers; and
    • Institutional products, such as funding agreements and the assumption of pension risk transfer obligations.

    Athene had total assets of $191.1 billion as of September 30, 2020. Athene’s principal subsidiaries include Athene Annuity & Life Assurance Company, a Delaware-domiciled insurance company, Athene Annuity and Life Company, an Iowa-domiciled insurance company, Athene Annuity & Life Assurance Company of New York, a New York-domiciled insurance company and Athene Life Re Ltd., a Bermuda-domiciled reinsurer.

    Further information about our companies can be found at athene.com.

    Non-GAAP Measures

    In addition to our results presented in accordance with GAAP, we present certain financial information that includes non-GAAP measures. Management believes the use of these non-GAAP measures, together with the relevant GAAP measures, provides information that may enhance an investor’s understanding of our results of operations and the underlying profitability drivers of our business. The majority of these non-GAAP measures are intended to remove from the results of operations the impact of market volatility (other than with respect to alternative investments) as well as integration, restructuring and certain other expenses which are not part of our underlying profitability drivers, as such items fluctuate from period to period in a manner inconsistent with these drivers. These measures should be considered supplementary to our results in accordance with GAAP and should not be viewed as a substitute for the corresponding GAAP measures.

    Adjusted operating income (loss) available to common shareholders is a non-GAAP measure used to evaluate our financial performance excluding market volatility and expenses related to integration, restructuring, stock compensation and other expenses. Our adjusted operating income (loss) available to common shareholders equals net income (loss) available to AHL common shareholders adjusted to eliminate the impact of the following (collectively, the non-operating adjustments):

    • Investment Gains (Losses), Net of Offsets
    • Change in Fair Values of Derivatives and Embedded Derivatives – FIAs, Net of Offsets
    • Integration, Restructuring and Other Non-Operating Expenses
    • Stock Compensation Expense
    • Bargain Purchase Gain
    • Income Tax (Expense) Benefit – Non-Operating

    We consider these non-operating adjustments to be meaningful adjustments to net income (loss) available to AHL common shareholders for the reasons discussed in greater detail above. Accordingly, we believe using a measure which excludes the impact of these items is useful in analyzing our business performance and the trends in our results of operations. Together with net income (loss) available to AHL common shareholders, we believe adjusted operating income (loss) available to common shareholders provides a meaningful financial metric that helps investors understand our underlying results and profitability. Adjusted operating income (loss) available to common shareholders should not be used as a substitute for net income (loss) available to AHL common shareholders.

    Adjusted operating ROA is a non-GAAP measure used to evaluate our financial performance and profitability. Adjusted operating ROA is computed using our adjusted operating income (loss) available to common shareholders divided by average net invested assets for the relevant period. To enhance the ability to analyze these measures across periods, interim periods are annualized. While we believe each of these metrics are meaningful financial metrics and enhance our understanding of the underlying profitability drivers of our business, they should not be used as a substitute for ROA presented under GAAP.

    Adjusted operating ROE is a non-GAAP measure used to evaluate our financial performance excluding the impacts of AOCI and the cumulative change in fair value of funds withheld and modco reinsurance assets, net of DAC, DSI, rider reserve and tax offsets. Adjusted AHL common shareholders’ equity is calculated as the ending AHL shareholders’ equity excluding AOCI, the cumulative change in fair value of funds withheld and modco reinsurance assets and preferred stock. Adjusted operating ROE is calculated as the adjusted operating income (loss) available to common shareholders, divided by average adjusted AHL common shareholders’ equity. These adjustments fluctuate period to period in a manner inconsistent with our underlying profitability drivers as the majority of such fluctuation is related to the market volatility of the unrealized gains and losses associated with our AFS securities. Except with respect to reinvestment activity relating to acquired blocks of businesses, we typically buy and hold AFS investments to maturity throughout the duration of market fluctuations, therefore, the period-over-period impacts in unrealized gains and losses are not necessarily indicative of current operating fundamentals or future performance. Accordingly, we believe using measures which exclude AOCI and the cumulative change in fair value of funds withheld and modco reinsurance assets are useful in analyzing trends in our operating results. To enhance the ability to analyze these measures across periods, interim periods are annualized. Adjusted operating ROE should not be used as a substitute for ROE. However, we believe the adjustments to net income (loss) available to AHL common shareholders equity are significant to gaining an understanding of our overall financial performance.

    Adjusted operating earnings (loss) per common share, weighted average common shares outstanding – adjusted operating and adjusted book value per common share are non-GAAP measures used to evaluate our financial performance and financial condition. The non-GAAP measures adjust the number of shares included in the corresponding GAAP measures to reflect the conversion or settlement of all shares and other stock-based awards outstanding. We believe using these measures represent an economic view of our share counts and provide a simplified and consistent view of our outstanding shares. Adjusted operating earnings (loss) per common share is calculated as the adjusted operating income (loss) available to common shareholders, over the weighted average common shares outstanding – adjusted operating. Adjusted book value per common share is calculated as the adjusted AHL common shareholders’ equity divided by the adjusted operating common shares outstanding. Effective February 28, 2020, all Class B common shares were converted into Class A common shares and all Class M common shares were converted into warrants and Class A common shares. Our Class B common shares were economically equivalent to Class A common shares and could have been converted to Class A common shares on a one-for-one basis at any time. Our Class M common shares were in the legal form of shares but economically functioned as options as they were convertible into Class A common shares after vesting and settlement of the conversion price. In calculating Class A diluted earnings per share on a GAAP basis, we are required to apply sequencing rules to determine the dilutive impacts, if any, of our Class B common shares, Class M common shares and any other stock-based awards. To the extent our Class B common shares, Class M common shares and/or any other stock-based awards were not dilutive, after considering the dilutive effects of the more dilutive securities in the sequence, they were excluded. Weighted average common shares outstanding – adjusted operating and adjusted operating common shares outstanding assume conversion or settlement of all outstanding items that are able to be converted to or settled in Class A common shares, including the impacts of Class B common shares on a one-for-one basis, the impacts of all Class M common shares net of the conversion price and any other stock-based awards, but excluding any awards for which the exercise or conversion price exceeds the market value of our Class A common shares on the applicable measurement date. For certain historical periods, Class M shares were not included due to issuance restrictions which were contingent upon our IPO. Adjusted operating earnings (loss) per common share, weighted average common shares outstanding – adjusted operating and adjusted book value per common share should not be used as a substitute for basic earnings (loss) per share – Class A common shares, basic weighted average common shares outstanding – Class A or book value per common share. However, we believe the adjustments to the shares and equity are significant to gaining an understanding of our overall results of operations and financial condition.

    Adjusted debt to capital ratio is a non-GAAP measure used to evaluate our capital structure excluding the impacts of AOCI and the cumulative change in fair value of funds withheld and modco reinsurance assets, net of DAC, DSI, rider reserve and tax offsets. Adjusted debt to capital ratio is calculated as total debt divided by adjusted AHL shareholders’ equity. Adjusted debt to capital ratio should not be used as a substitute for the debt to capital ratio. However, we believe the adjustments to total debt and shareholders’ equity are significant to gaining an understanding of our capitalization, debt utilization and debt capacity.

    Net investment spread is a key measurement of the profitability of our Retirement Services segment. Net investment spread measures our investment performance less the total cost of our liabilities. Net investment earned rate is a key measure of our investment performance, while cost of funds is a key measure of the cost of our policyholder benefits and liabilities. Investment margin on our deferred annuities measures our investment performance less the cost of crediting for our deferred annuities, which make up a significant portion of our net reserve liabilities.

    • Net investment earned rate is a non-GAAP measure we use to evaluate the performance of our net invested assets that does not correspond to GAAP net investment income. Net investment earned rate is computed as the income from our net invested assets divided by the average net invested assets, excluding the impacts of our investment in Apollo, for the relevant period. To enhance the ability to analyze these measures across periods, interim periods are annualized. The adjustments to arrive at our net investment earned rate add (a) alternative investment gains and losses, (b) gains and losses related to trading securities for CLOs, (c) net VIE impacts (revenues, expenses and noncontrolling interest), (d) forward points gains and losses on foreign exchange derivative hedges and (e) the change in fair value of reinsurance assets, and removes the proportionate share of the ACRA net investment income associated with the ACRA noncontrolling interest as well as the gain or loss on our investment in Apollo. We include the income and assets supporting our change in fair value of reinsurance assets by evaluating the underlying investments of the funds withheld at interest receivables and we include the net investment income from those underlying investments which does not correspond to the GAAP presentation of change in fair value of reinsurance assets. We exclude the income and assets supporting business that we have exited through ceded reinsurance including funds withheld agreements. We believe the adjustments for reinsurance provide a net investment earned rate on the assets for which we have economic exposure.
    • Cost of funds includes liability costs related to cost of crediting on both deferred annuities and institutional products as well as other liability costs, but does not include the proportionate share of the ACRA cost of funds associated with the noncontrolling interest. Cost of funds is computed as the total liability costs divided by the average net invested assets, excluding our investment in Apollo, for the relevant period. To enhance the ability to analyze these measures across periods, interim periods are annualized.
      • Cost of crediting includes the costs for both deferred annuities and institutional products. Cost of crediting on deferred annuities is the interest credited to the policyholders on our fixed strategies as well as the option costs on the indexed annuity strategies. With respect to FIAs, the cost of providing index credits includes the expenses incurred to fund the annual index credits, and where applicable, minimum guaranteed interest credited. Cost of crediting on institutional products is comprised of PRT costs including interest credited, benefit payments and other reserve changes, net of premiums received when issued, as well as funding agreement costs including the interest payments and other reserve changes. Cost of crediting is computed as the cost of crediting for deferred annuities and institutional products divided by the average net invested assets, excluding the investment in Apollo, for the relevant periods. Cost of crediting on deferred annuities is computed as the net interest credited on fixed strategies and option costs on indexed annuity strategies divided by the average net account value of our deferred annuities. Cost of crediting on institutional products is computed as the PRT and funding agreement costs divided by the average net institutional reserve liabilities. Our average net invested assets, excluding our investment in Apollo, net account values and net institutional reserve liabilities are averaged over the number of quarters in the relevant period to obtain our associated cost of crediting for such period. To enhance the ability to analyze these measures across periods, interim periods are annualized.
      • Other liability costs include DAC, DSI and VOBA amortization, change in rider reserves, the cost of liabilities on products other than deferred annuities and institutional products, excise taxes, premiums, product charges and other revenues. We believe a measure like other liability costs is useful in analyzing the trends of our core business operations and profitability. While we believe other liability costs is a meaningful financial metric and enhances our understanding of the underlying profitability drivers of our business, it should not be used as a substitute for total benefits and expenses presented under GAAP.

    Net investment earned rate, cost of funds, net investment spread and investment margin on deferred annuities are non-GAAP measures we use to evaluate the profitability of our business. We believe these metrics are useful in analyzing the trends of our business operations, profitability and pricing discipline. While we believe each of these metrics are meaningful financial metrics and enhance our understanding of the underlying profitability drivers of our business, they should not be used as a substitute for net investment income, interest sensitive contract benefits or total benefits and expenses presented under GAAP.

    Operating expenses excludes integration, restructuring and other non-operating expenses, stock compensation expense, interest expense and policy acquisition expenses. We believe a measure like operating expenses is useful in analyzing the trends of our core business operations and profitability. While we believe operating expenses is a meaningful financial metric and enhances our understanding of the underlying profitability drivers of our business, it should not be used as a substitute for policy and other operating expenses presented under GAAP.

    In managing our business, we analyze net invested assets, which does not correspond to total investments, including investments in related parties, as disclosed in our consolidated financial statements and notes thereto. Net invested assets represents the investments that directly back our net reserve liabilities as well as surplus assets. Net invested assets, excluding our investment in Apollo, is used in the computation of net investment earned rate, which allows us to analyze the profitability of our investment portfolio. Net invested assets includes (a) total investments on the consolidated balance sheets with AFS securities at cost or amortized cost, excluding derivatives, (b) cash and cash equivalents and restricted cash, (c) investments in related parties, (d) accrued investment income, (e) VIE assets, liabilities and noncontrolling interest adjustments, (f) net investment payables and receivables, (g) policy loans ceded (which offset the direct policy loans in total investments) and (h) an allowance for credit losses. Net invested assets also excludes assets associated with funds withheld liabilities related to business exited through reinsurance agreements and derivative collateral (offsetting the related cash positions). We include the underlying investments supporting our assumed funds withheld and modco agreements in our net invested assets calculation in order to match the assets with the income received. We believe the adjustments for reinsurance provide a view of the assets for which we have economic exposure. Net invested assets includes our proportionate share of ACRA investments, based on our economic ownership, but does not include the proportionate share of investments associated with the noncontrolling interest. Net invested assets also includes our investment in Apollo. Our net invested assets, excluding our investment in Apollo, are averaged over the number of quarters in the relevant period to compute our net investment earned rate for such period. While we believe net invested assets is a meaningful financial metric and enhances our understanding of the underlying drivers of our investment portfolio, it should not be used as a substitute for total investments, including related parties, presented under GAAP.

    Sales statistics do not correspond to revenues under GAAP but are used as relevant measures to understand our business performance as it relates to deposits generated during a specific period of time. Our sales statistics include deposits for fixed rate annuities and FIAs and align with the LIMRA definition of all money paid into an individual annuity, including money paid into new contracts with initial purchase occurring in the specified period and existing contracts with initial purchase occurring prior to the specified period (excluding internal transfers). While we believe sales is a meaningful metric and enhances our understanding of our business performance, it should not be used as a substitute for premiums presented under GAAP.

    Safe Harbor for Forward-Looking Statements

    This press release contains, and certain oral statements made by Athene’s representatives from time to time may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are subject to risks and uncertainties that could cause actual results, events and developments to differ materially from those set forth in, or implied by, such statements. These statements are based on the beliefs and assumptions of Athene’s management and the management of Athene’s subsidiaries. Generally, forward-looking statements include actions, events, results, strategies and expectations and are often identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “plans,” “seeks,” “estimates,” “projects,” “may,” “will,” “could,” “might,” “should,” or “continues” or similar expressions. Forward-looking statements within this press release include, but are not limited to, statements regarding future financial performance. Factors that could cause actual results, events and developments to differ include, without limitation: the accuracy of Athene’s assumptions and estimates; Athene’s ability to maintain or improve financial strength ratings; Athene’s ability to manage its business in a highly regulated industry; regulatory changes or actions; the impact of Athene’s reinsurers failing to meet their assumed obligations; the impact of interest rate fluctuations; changes in the federal income tax laws and regulations; the accuracy of Athene’s interpretation of the Tax Cuts and Jobs Act; litigation (including class action litigation), enforcement investigations or regulatory scrutiny; the performance of third parties; the loss of key personnel; telecommunication, information technology and other operational systems failures; the continued availability of capital; new accounting rules or changes to existing accounting rules; general economic conditions; Athene’s ability to protect its intellectual property; the ability to maintain or obtain approval of the Delaware Department of Insurance, the Iowa Insurance Division and other regulatory authorities as required for Athene’s operations; the 2020 presidential and congressional elections in the U.S. resulting in changes in the U.S. political environment that are unfavorable to Athene; and other factors discussed from time to time in Athene’s filings with the SEC, including its annual report on Form 10-K for the year ended December 31, 2019, its quarterly report on Form 10-Q for the quarterly period ended June 30, 2020 and its other SEC filings, which can be found at the SEC’s website www.sec.gov.

    All forward-looking statements described herein are qualified by these cautionary statements and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized. Athene does not undertake any obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.

    Athene Holding Ltd.

           

    Condensed Consolidated Balance Sheets (unaudited, in millions)

           

     

     

    December 31,

     

    September 30,

     

     

    2019

     

    2020

    Assets

     

     

     

     

    Investments

     

     

     

     

    Available-for-sale securities, at fair value

     

    $

    71,374

     

     

    $

    73,988

     

    Trading securities, at fair value

     

    2,070

     

     

    2,069

     

    Equity securities

     

    247

     

     

    697

     

    Mortgage loans, net of allowances

     

    14,306

     

     

    14,591

     

    Investment funds

     

    750

     

     

    723

     

    Policy loans

     

    417

     

     

    387

     

    Funds withheld at interest

     

    15,181

     

     

    48,593

     

    Derivative assets

     

    2,888

     

     

    2,771

     

    Short-term investments

     

    596

     

     

    165

     

    Other investments

     

    158

     

     

    949

     

    Total investments

     

    107,987

     

     

    144,933

     

    Cash and cash equivalents

     

    4,240

     

     

    7,548

     

    Restricted cash

     

    402

     

     

    1,226

     

    Investments in related parties

     

     

     

     

    Available-for-sale securities, at fair value

     

    3,804

     

     

    4,857

     

    Trading securities, at fair value

     

    785

     

     

    1,397

     

    Equity securities, at fair value

     

    64

     

     

    50

     

    Mortgage loans, net of allowances

     

    653

     

     

    640

     

    Investment funds

     

    3,550

     

     

    4,808

     

    Funds withheld at interest

     

    13,220

     

     

    13,053

     

    Other investments, net of allowances

     

    487

     

     

    467

     

    Accrued investment income

     

    807

     

     

    796

     

    Reinsurance recoverable

     

    4,863

     

     

    5,104

     

    Deferred acquisition costs, deferred sales inducements and value of business acquired

     

    5,008

     

     

    5,165

     

    Other assets

     

    1,005

     

     

    1,044

     

    Total assets

     

    $

    146,875

     

     

    $

    191,088

     

    Condensed Consolidated Balance Sheets (unaudited, in millions)

           
             

     

     

    December 31,

     

    September 30,

     

     

    2019

     

    2020

    Liabilities

     

     

     

     

    Interest sensitive contract liabilities

     

    $

    102,745

     

     

    $

    141,207

     

    Future policy benefits

     

    23,330

     

     

    24,823

     

    Other policy claims and benefits

     

    138

     

     

    118

     

    Dividends payable to policyholders

     

    113

     

     

    110

     

    Short-term debt

     

    475

     

     

     

    Long-term debt

     

    992

     

     

    1,487

     

    Derivative liabilities

     

    97

     

     

    147

     

    Payables for collateral on derivatives and securities to repurchase

     

    3,255

     

     

    3,742

     

    Funds withheld liability

     

    408

     

     

    440

     

    Other liabilities

     

    1,181

     

     

    1,897

     

    Total liabilities

     

    132,734

     

     

    173,971

     

     

     

     

     

     

    Equity

     

     

     

     

    Preferred stock

     

     

     

     

    Common stock

     

     

     

     

    Additional paid-in capital

     

    4,171

     

     

    6,045

     

    Retained earnings

     

    6,939

     

     

    7,010

     

    Accumulated other comprehensive income

     

    2,281

     

     

    2,888

     

    Total Athene Holding Ltd. shareholders’ equity

     

    13,391

     

     

    15,943

     

    Noncontrolling interests

     

    750

     

     

    1,174

     

    Total equity

     

    14,141

     

     

    17,117

     

    Total liabilities and equity

     

    $

    146,875

     

     

    $

    191,088

     

    Condensed Consolidated Statements of Income (unaudited, in millions)

       
         

     

     

    Three months ended

     

     

    September 30,

     

     

    2019

     

    2020

    Revenue

     

     

     

     

    Premiums

     

    $

    2,688

     

     

    $

    112

     

    Product charges

     

    135

     

     

    144

     

    Net investment income

     

    1,090

     

     

    1,209

     

    Investment related gains

     

    665

     

     

    1,797

     

    Other revenues

     

    6

     

     

    13

     

    Total revenues

     

    4,584

     

     

    3,275

     

    Benefits and Expenses

     

     

     

     

    Interest sensitive contract benefits

     

    801

     

     

    1,225

     

    Amortization of DSI

     

    20

     

     

    48

     

    Future policy and other policy benefits

     

    2,955

     

     

    439

     

    Amortization of DAC and VOBA

     

    323

     

     

    299

     

    Dividends to policyholders

     

    12

     

     

    9

     

    Policy and other operating expenses

     

    194

     

     

    231

     

    Total benefits and expenses

     

    4,305

     

     

    2,251

     

    Income before income taxes

     

    279

     

     

    1,024

     

    Income (expense) benefit

     

    (14)

     

     

    140

     

    Net income

     

    293

     

     

    884

     

    Less: Net income attributable to noncontrolling interests

     

     

     

    232

     

    Net income attributable to Athene Holding Ltd. shareholders

     

    293

     

     

    652

     

    Less: Preferred stock dividends

     

    17

     

     

    30

     

    Net income available to Athene Holding Ltd. common shareholders

     

    $

    276

     

     

    $

    622

     

    Non-GAAP Measure Reconciliations

    The reconciliation of net income available to Athene Holding Ltd. common shareholders to adjusted operating income available to common shareholders excluding notable items is as follows:

     

     

    Three months ended

     

     

    September 30,

    (In millions)

     

    2019

     

    2020

    Net income available to Athene Holding Ltd. common shareholders

     

    $

    276

     

     

    $

    622

     

    Less: Total non-operating adjustments

     

    33

     

     

    320

     

    Adjusted operating income available to common shareholders

     

    243

     

     

    302

     

    Notable items

     

    62

     

     

    (27

    )

    Adjusted operating income available to common shareholders excluding notable items

     

    $

    305

     

     

    $

    275

     

     

     

     

     

     

    Retirement Services adjusted operating income available to common shareholders

     

    $

    256

     

     

    $

    361

     

    Non-recurring adjustment on derivative collateral

     

     

     

    (25

    )

    Actuarial experience and market impacts

     

    18

     

     

     

    Unlocking

     

    48

     

     

    (6

    )

    Tax impact of notable items

     

    (4

    )

     

    4

     

    Retirement Services notable items

     

    62

     

     

    (27

    )

    Retirement Services adjusted operating income available to common shareholders excluding notable items

     

    318

     

     

    334

     

     

     

     

     

     

    Corporate and Other adjusted operating loss available to common shareholders

     

    (13

    )

     

    (59

    )

    Consolidated adjusted operating income available to common shareholders excluding notable items

     

    $

    305

     

     

    $

    275

     

    The reconciliation of basic earnings per Class A common share to adjusted operating earnings per common share is as follows:

     

     

    Three months ended

     

     

    September 30,

     

     

    2019

     

    2020

    Basic earnings per share – Class A common shares

     

    $

    1.50

     

     

    $

    3.22

     

    Non-operating adjustments

     

     

     

     

    Investment gains, net of offsets

     

    0.91

     

     

    1.74

     

    Change in fair values of derivatives and embedded derivatives – FIAs, net of offsets

     

    (0.65

    )

     

    0.37

     

    Integration, restructuring and other non-operating expenses

     

    (0.18

    )

     

     

    Stock compensation expense

     

    (0.02

    )

     

     

    Income tax (expense) benefit – non-operating

     

    0.12

     

     

    (0.49

    )

    Less: Total non-operating adjustments

     

    0.18

     

     

    1.62

     

    Less: Effect of items convertible to or settled in Class A common shares

     

    (0.02

    )

     

    0.07

     

    Adjusted operating earnings per common share

     

    $

    1.34

     

     

    $

    1.53

     

    The reconciliation of basic weighted average Class A common shares to weighted average common shares outstanding – adjusted operating, is as follows:

     

     

    Three months ended

     

     

    September 30,

    (In millions)

     

    2019

     

    2020

    Basic weighted average common shares outstanding – Class A

     

    151.6

     

     

    193.1

     

    Conversion of Class B common shares to Class A common shares

     

    25.4

     

     

     

    Conversion of Class M common shares to Class A common shares

     

    4.9

     

     

     

    Effect of other stock compensation plans

     

    0.4

     

     

    4.0

     

    Weighted average common shares outstanding – adjusted operating

     

    182.3

     

     

    197.1

     

    The reconciliation of AHL shareholders’ equity to adjusted AHL common shareholders’ equity included in adjusted book value per common share, adjusted debt to capital ratio, and adjusted operating ROE is as follows:

     

     

    September 30,

    (In millions)

     

    2019

     

    2020

    Total AHL shareholders’ equity

     

    $

    13,545

     

     

    $

    15,943

     

    Less: Preferred stock

     

    1,172

     

     

    1,755

     

    Total AHL common shareholders’ equity

     

    12,373

     

     

    14,188

     

    Less: AOCI

     

    2,442

     

     

    2,888

     

    Less: Accumulated change in fair value of reinsurance assets

     

    727

     

     

    778

     

    Total adjusted AHL common shareholders’ equity

     

    $

    9,204

     

     

    $

    10,522

     

    Retirement Services

     

    $

    7,494

     

     

    $

    7,321

     

    Corporate and Other

     

    1,710

     

     

    3,201

     

    Total adjusted AHL common shareholders’ equity

     

    $

    9,204

     

     

    $

    10,522

     

    The reconciliation of average AHL shareholders’ equity to average adjusted AHL common shareholders’ equity included in adjusted operating ROE is as follows:

     

     

    Three months ended

     

     

    September 30,

    (In millions)

     

    2019

     

    2020

    Average AHL shareholders’ equity

     

    $

    12,955

     

     

    $

    15,327

     

    Less: Average preferred stock

     

    1,006

     

     

    1,755

     

    Less: Average AOCI

     

    2,101

     

     

    2,536

     

    Less: Average accumulated change in fair value of reinsurance assets

     

    683

     

     

    697

     

    Average adjusted AHL common shareholders’ equity

     

    $

    9,165

     

     

    $

    10,339

     

    Retirement Services

     

    $

    7,598

     

     

    $

    7,139

     

    Corporate and Other

     

    1,567

     

     

    3,200

     

    Average adjusted AHL common shareholders’ equity

     

    $

    9,165

     

     

    $

    10,339

     

    The reconciliation of basic Class A common shares outstanding to adjusted operating common shares outstanding is as follows:

     

     

    September 30,

    (In millions)

     

    2019

     

    2020

    Class A common shares outstanding

     

    149.8

     

     

    191.2

     

    Conversion of Class B common shares to Class A common shares

     

    25.4

     

     

     

    Conversion of Class M common shares to Class A common shares

     

    5.1

     

     

     

    Effect of other stock compensation plans

     

    1.1

     

     

    5.1

     

    Adjusted operating common shares outstanding

     

    181.4

     

     

    196.3

     

    The reconciliation of book value per common share to adjusted book value per common share is as follows:

     

     

    September 30,

     

     

    2019

     

    2020

    Book value per common share

     

    $

    74.20

     

     

    $

    83.39

     

    Preferred stock

     

    (6.42

    )

     

    (9.18

    )

    AOCI

     

    (13.38

    )

     

    (15.10

    )

    Accumulated change in fair value of reinsurance assets

     

    (3.98

    )

     

    (4.07

    )

    Effect of items convertible to or settled in Class A common shares

     

    0.32

     

     

    (1.43

    )

    Adjusted book value per common share

     

    $

    50.74

     

     

    $

    53.61

     

    The reconciliation of debt to capital ratio to adjusted debt to capital ratio is as follows:

     

     

    September 30,

    (In millions, except percentages)

     

    2019

     

    2020

    Total debt

     

    $

    992

     

     

    $

    1,487

     

    Total AHL shareholders’ equity

     

    13,545

     

     

    15,943

     

    Total capitalization

     

    14,537

     

     

    17,430

     

    Less: AOCI

     

    2,442

     

     

    2,888

     

    Less: Accumulated change in fair value of reinsurance assets

     

    727

     

     

    778

     

    Total adjusted capitalization

     

    $

    11,368

     

     

    $

    13,764

     

     

     

     

     

     

    Debt to capital ratio

     

    6.8

    %

     

    8.5

    %

    AOCI

     

    1.5

    %

     

    1.8

    %

    Accumulated change in fair value of reinsurance assets

     

    0.4

    %

     

    0.5

    %

    Adjusted debt to capital ratio

     

    8.7

    %

     

    10.8

    %

    The reconciliation of net investment income to net investment earnings and earned rate is as follows:

     

     

    Three months ended

     

     

    September 30,

     

     

    2019

     

    2020

    (In millions)

     

    Dollar

     

    Rate

     

    Dollar

     

    Rate

    GAAP net investment income

     

    $

    1,090

     

     

    3.67

    %

     

    $

    1,209

     

     

    3.48

    %

    Change in fair value of reinsurance assets

     

    199

     

     

    0.67

    %

     

    444

     

     

    1.28

    %

    Alternative income gain

     

    6

     

     

    0.02

    %

     

    23

     

     

    0.07

    %

    ACRA noncontrolling interest

     

     

     

    %

     

    (196)

     

     

    (0.56)

    %

    Apollo investment loss

     

     

     

    %

     

    101

     

     

    0.29

    %

    Held for trading amortization and other

     

    (3)

     

     

    (0.01)

    %

     

    (51)

     

     

    (0.15)

    %

    Total adjustments to arrive at net investment earnings/earned rate

     

    202

     

     

    0.68

    %

     

    321

     

     

    0.93

    %

    Total net investment earnings/earned rate

     

    $

    1,292

     

     

    4.35

    %

     

    $

    1,530

     

     

    4.41

    %

     

     

     

     

     

     

     

     

     

    Retirement Services

     

    $

    1,264

     

     

    4.31

    %

     

    $

    1,444

     

     

    4.22

    %

    Corporate and Other

     

    28

     

     

    7.28

    %

     

    86

     

     

    17.59

    %

    Total net investment earnings/earned rate

     

    $

    1,292

     

     

    4.35

    %

     

    $

    1,530

     

     

    4.41

    %

     

     

     

     

     

     

     

     

     

    Retirement Services

     

    $

    117,338

     

     

     

     

    $

    136,852

     

     

     

    Corporate and Other ex. Apollo investment

     

    1,567

     

     

     

     

    1,945

     

     

     

    Consolidated average net invested assets ex. Apollo investment

     

    $

    118,905

     

     

     

     

    $

    138,797

     

     

     

    The reconciliation of interest sensitive contract benefits to Retirement Services’ cost of crediting, and the respective rates, is as follows:

     

     

    Three months ended

     

     

    September 30,

     

     

    2019

     

    2020

    (In millions)

     

    Dollar

     

    Rate

     

    Dollar

     

    Rate

    GAAP interest sensitive contract benefits

     

    $

    801

     

     

    2.73

    %

     

    $

    1,225

     

     

    3.58

    %

    Interest credited other than deferred annuities and institutional products

     

    63

     

     

    0.21

    %

     

    73

     

     

    0.21

    %

    FIA option costs

     

    282

     

     

    0.96

    %

     

    284

     

     

    0.83

    %

    Product charges (strategy fees)

     

    (31

    )

     

    (0.10

    )%

     

    (34

    )

     

    (0.10

    )%

    Reinsurance embedded derivative impacts

     

    14

     

     

    0.05

    %

     

    14

     

     

    0.04

    %

    Change in fair values of embedded derivatives – FIAs

     

    (560

    )

     

    (1.91

    )%

     

    (779

    )

     

    (2.28

    )%

    Negative VOBA amortization

     

    9

     

     

    0.03

    %

     

    3

     

     

    0.01

    %

    ACRA noncontrolling interest

     

     

     

    %

     

    (151

    )

     

    (0.44

    )%

    Other changes in interest sensitive contract liabilities

     

    (2

    )

     

    (0.01

    )%

     

    5

     

     

    0.02

    %

    Total adjustments to arrive at cost of crediting

     

    (225

    )

     

    (0.77

    )%

     

    (585

    )

     

    (1.71

    )%

    Retirement Services cost of crediting

     

    $

    576

     

     

    1.96

    %

     

    $

    640

     

     

    1.87

    %

    Retirement Services cost of crediting on deferred annuities

     

    $

    453

     

     

    1.98

    %

     

    $

    506

     

     

    1.98

    %

    Retirement Services cost of crediting on institutional products

     

    123

     

     

    3.68

    %

     

    134

     

     

    2.95

    %

    Retirement Services cost of crediting

     

    $

    576

     

     

    1.96

    %

     

    $

    640

     

     

    1.87

    %

    Retirement Services average net invested assets

     

    $

    117,338

     

     

     

     

    $

    136,852

     

     

     

    Average net account value on deferred annuities

     

    91,467

     

     

     

     

    102,144

     

     

     

    Average institutional net reserve liabilities

     

    13,320

     

     

     

     

    18,162

     

     

     

    The reconciliation of benefits and expenses to other liability costs is as follows:

     

     

    Three months ended

     

     

    September 30,

    (In millions)

     

    2019

     

    2020

    GAAP benefits and expenses

     

    $

    4,305

     

     

    $

    2,251

     

    Premiums

     

    (2,688

    )

     

    (112

    )

    Product charges

     

    (135

    )

     

    (144

    )

    Other revenues

     

    (6

    )

     

    (13

    )

    Cost of crediting

     

    (280

    )

     

    (342

    )

    Change in fair value of embedded derivatives – FIA, net of offsets

     

    (497

    )

     

    (863

    )

    DAC, DSI and VOBA amortization related to investment gains and losses

     

    (151

    )

     

    (86

    )

    Rider reserves

     

    (9

    )

     

    (21

    )

    Policy and other operating expenses, excluding policy acquisition expenses

     

    (130

    )

     

    (132

    )

    AmerUs closed block fair value liability

     

    (46

    )

     

    (15

    )

    ACRA noncontrolling interest

     

     

     

    (193

    )

    Other changes in benefits and expenses

     

    (5

    )

     

    (10

    )

    Total adjustments to arrive at other liability costs

     

    (3,947

    )

     

    (1,931

    )

    Other liability costs

     

    $

    358

     

     

    $

    320

     

    Retirement Services

     

    $

    358

     

     

    $

    320

     

    Corporate and Other

     

     

     

     

    Consolidated other liability costs

     

    $

    358

     

     

    $

    320

     

    The reconciliation of policy and other expenses to operating expenses is as follows:

     

     

    Three months ended

     

     

    September 30,

    (In millions)

     

    2019

     

    2020

    Policy and other operating expenses

     

    $

    194

     

     

    $

    231

     

    Interest expense

     

    (15

    )

     

    (34

    )

    Policy acquisition expenses, net of deferrals

     

    (63

    )

     

    (99

    )

    Integration, restructuring and other non-operating expenses

     

    (34

    )

     

     

    Stock compensation expenses

     

    (3

    )

     

    (1

    )

    ACRA noncontrolling interest

     

     

     

    (16

    )

    Other changes in policy and other operating expenses

     

     

     

    (3

    )

    Total adjustments to arrive at operating expenses

     

    (115

    )

     

    (153

    )

    Operating expenses

     

    $

    79

     

     

    $

    78

     

    Retirement Services

     

    $

    67

     

     

    $

    63

     

    Corporate and Other

     

    12

     

     

    15

     

    Consolidated operating expenses

     

    $

    79

     

     

    $

    78

     

    The reconciliation of total investments, including related parties, to net invested assets is as follows:

     

     

    September 30,

    (In millions)

     

    2019

     

    2020

    Total investments, including related parties

     

    $

    127,101

     

     

    $

    170,205

     

    Derivative assets

     

    (2,386

    )

     

    (2,771

    )

    Cash and cash equivalents (including restricted cash)

     

    4,032

     

     

    8,774

     

    Accrued investment income

     

    781

     

     

    796

     

    Payables for collateral on derivatives

     

    (2,323

    )

     

    (2,644

    )

    Reinsurance funds withheld and modified coinsurance

     

    (1,698

    )

     

    (1,441

    )

    VIE and VOE assets, liabilities and noncontrolling interest

     

    669

     

     

    (130

    )

    Unrealized (gains) losses

     

    (4,243

    )

     

    (5,211

    )

    Ceded policy loans

     

    (277

    )

     

    (221

    )

    Net investment receivables (payables)

     

    (516

    )

     

    (705

    )

    Allowance for credit losses

     

     

     

    484

     

    Total adjustments to arrive at gross invested assets

     

    (5,961

    )

     

    (3,069

    )

    Gross invested assets

     

    121,140

     

     

    167,136

     

    ACRA noncontrolling interest

     

     

     

    (24,301

    )

    Net invested assets

     

    $

    121,140

     

     

    $

    142,835

     

     

    Contacts

    Investor Relations Contact:
    Noah Gunn
    +1 441-279-8534
    +1 646-768-7309
    ngunn@athene.com

    Media Contact:
    Karen Lynn
    +1 441-279-8460
    +1 515-342-3910
    klynn@athene.com

    Originally Posted at Business Wire on November 3, 2020 by Athene Holding, Ltd..

    Categories: Industry Articles
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