Athene Holding Ltd. 7.250% Fixe Q3 FY2020 earnings call

Key Managerial Messages

• Jim Belardi highlighted the company's strategic progress, resilient investment spread model, and strong capital position with ~$14.5 billion of regulatory capital. Emphasized organic and inorganic growth, including the $29 billion Jackson National transaction in June.
• Bill Wheeler discussed strong organic growth in retail, flow reinsurance, and institutional business. Retail deposits were robust, flow reinsurance had record volumes, and institutional business saw activity in multiple currencies. Mentioned potential for inorganic opportunities and ~$7.6 billion of deployable capital.
• Marty Klein provided financial results, noting GAAP net income of $622 million and adjusted operating income. Discussed fixed income NIER trends, alternatives performance, cost of crediting, other liability costs, G&A expense ratio, and tax rate expectations. Outlined plans to reduce cash balance and deploy capital into various uses.

Retail deposits in the third quarter totaled $2.5 billion, representing a nearly 28% year-over-year increase and 38% sequential growth. Flow reinsurance saw record quarterly deposits of $2.3 billion, more than three-fold higher than the prior year. Institutional business generated $2.6 billion from funding agreements. Alternative investments currently comprise 5% of the portfolio, with strong performance including a more than 10% appreciation over the past two quarters for the alternatives portfolio.

• Expect operating income excluding Apollo stake to exceed $8 per share in 2021.
• Plan to deploy capital into organic growth, inorganic opportunities, ratings upgrades, and share repurchases.
• Expect to return cash level to ~$2 billion in the coming weeks, increasing annualized investment income by ~$135 million.

• Potential credit losses from the current economic environment.
• Competitive pressures impacting flow reinsurance volumes.
• Uncertainty regarding regulatory changes, such as a potential renewed DOL fiduciary standard.

Q: Ryan Krueger with KBW asked about the 2021 ROA outlook.

A: Marty Klein responded that the company is on track for 2021 ROA similar to 2019, noting lower cost of funds and tax rate normalization.

Q: Erik Bass with Autonomous Research inquired about the competitive landscape and flow reinsurance barriers.

A: Bill Wheeler discussed barriers like capital, ratings, and track record, noting volumes may moderate due to primary carriers' performance.

Q: Tom Gallagher of Evercore asked about the AEL situation and capital deployment.

A: Bill Wheeler stated the company is moving on from AEL's different path and mentioned potential for various sized capital deployment deals.

Q: Andrew Kligerman with Credit Suisse asked about NIER and Jackson portfolio redeployment.

A: Jim Belardi and Marty Klein discussed NIER levels and ongoing redeployment of the Jackson portfolio with upside potential.

Q: Humphrey Lee with Dowling & Partners clarified earnings outlook excluding Apollo.

A: Marty Klein confirmed it excludes Apollo associated shares.

Q: John Barnidge with Piper Sandler asked about UK and Japan funding agreements.

A: Bill Wheeler discussed growth potential in UK and Japan funding agreements, with hopes for $2 billion and $500 million+ volumes respectively.

Q: Suneet Kamath with Citi asked about incremental investments and differentiation.

A: Marty Klein explained the $14 billion incremental investments, differentiation in private vs. public corporates, and Apollo's role in sourcing alpha-generating assets.

Q: Jimmy Bhullar with JPMorgan asked about buybacks and potential DOL fiduciary rule change.

A: Jim Belardi and Bill Wheeler discussed buyback priority and lack of concern over renewed DOL fiduciary rule.

Q: Elyse Greenspan with Wells Fargo asked about retail deposits and 2021 earnings.

A: Bill Wheeler and Marty Klein discussed retail deposit trends and $8 per share earnings outlook excluding inorganic deals.

Q: Mark Hughes with Truist asked about IMO channel disruption and product innovation.

A: Bill Wheeler discussed IMO channel disruption and ongoing product innovation driving market share gains.

Q: Mike Ward with UBS asked about credit world outlook.

A: Jim Belardi discussed potential credit migration, downgrades, and continued focus on defensive industries in credit allocation.