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Section 1: 8-K (8-K)

Document


 
 
 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
 
 
 
 
 
 
Washington, D.C. 20549
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FORM 8-K
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CURRENT REPORT
 
 
 
 
 
 
 
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
 
 
Date of report (Date of earliest event reported): October 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ATHENE HOLDING LTD.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bermuda
001-37963
98-0630022
 
 
(State or other jurisdiction of
(Commission
(I.R.S. Employer
 
 
incorporation or organization)
file number)
Identification Number)
 
 
 
 
 
 
 
 
96 Pitts Bay Road
Pembroke, HM08, Bermuda
(Address of principal executive offices and zip code)
 
 
 
 
 
 
 
(441) 279-8400
(Registrant’s telephone number, including area code)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
 
 
 
 
 
 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
 
 
 
 
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
 
 
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
 
 
 
 
 
 
 
Emerging growth company o
 
 
 
 
 
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o






Item 2.02        Results of Operations and Financial Condition

On October 31, 2018, Athene Holding Ltd. (the “Company”) issued a press release to announce its financial results for the third quarter 2018. A copy of the press release containing this information is furnished as Exhibit 99.1 hereto and is incorporated by reference in this Item 2.02. The Company's financial supplement for the third quarter 2018 is furnished as Exhibit 99.2 hereto and is incorporated by reference in this Item 2.02.

The foregoing information, including the Exhibits referenced in this Item 2.02, is being furnished pursuant to this Item 2.02 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.


Item 9.01
Financial Statements and Exhibits
 
 
(d)
Exhibits
 
 
99.1
Press release of Athene Holding Ltd., dated October 31, 2018 (furnished and not filed).
 
 
99.2
Quarterly Financial Supplement for Athene Holding Ltd. for the third quarter of 2018 (furnished and not filed).








Exhibit No.
Description
99.1
 
 
99.2






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
ATHENE HOLDING LTD.
 
 
 
Date:
October 31, 2018
/s/ Martin P. Klein
 
 
Martin P. Klein
 
 
Executive Vice President and Chief Financial Officer
 
 
 



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit

395577180_athenelogoa15.jpg
ATHENE HOLDING LTD. REPORTS THIRD QUARTER 2018 RESULTS
PEMBROKE, Bermuda – October 31, 2018 – Athene Holding Ltd. ("Athene") (NYSE: ATH), a leading provider of retirement savings products, today announced financial results for the third quarter 2018.
Net income for the third quarter 2018 was $640 million, or $3.23 per diluted Class A share ("diluted share"), compared to net income for the third quarter 2017 of $274 million, or $1.39 per diluted share.
Adjusted operating income1 for the third quarter 2018 was $381 million, or $1.95 per adjusted operating share, compared to adjusted operating income for the third quarter 2017 of $231 million, or $1.18 per adjusted operating share.
Highlights
ROE of 29.1%, Retirement Services adjusted operating ROE of 23.6%, and Consolidated adjusted operating ROE of 17.5% for the quarter ended September 30, 2018
Book value per share of $45.97, an increase of 7% and 4% for the quarter-over-quarter and year-over-year periods ended September 30, 2018, respectively
Adjusted book value per share of $45.94, an increase of 8% and 23% for the quarter-over-quarter and year-over-year periods ended September 30, 2018, respectively
Organic deposits of $3.3 billion and $8.0 billion for the quarter and nine months ended September 30, 2018, respectively
Ranked #2 carrier in fixed indexed annuity ("FIA") sales for the two years ended June 30, 20182 
Estimated ALRe RBC of 513%3 and estimated U.S. RBC of 446%, as of September 30, 2018
On August 16, 2018, S&P Global Ratings ("S&P") upgraded the financial strength of Athene's operating companies to 'A' from 'A-'
"Our record third quarter financial results reflect our continued focus on delivering superior value," said Jim Belardi, CEO of Athene.  “We are extraordinarily well positioned with a multi-channel distribution platform that provides sustainable and opportunistic growth at very attractive ROEs.  With a current portfolio of more than $100 billion, ongoing organic growth capabilities, and identifiable inorganic opportunities in excess of $100 billion, we have an abundance of opportunity in front of us. Importantly, we remain patient and disciplined in our approach to building shareholder value, which has resulted in a 23% year-over-year increase in adjusted book value to approximately $46 per share.” 
Mr. Belardi continued, "In recognition of our superior financial performance, market leadership, capital growth, and improved business diversification, S&P upgraded the financial strength ratings of Athene’s operating companies to 'A' on August 16, 2018. This ratings upgrade will accelerate the strong momentum of our business, and we look forward to establishing new partnerships and engaging as a financial solutions provider to a broader market.”


1 This news release references certain Non-GAAP measures. See Non-GAAP Measures for additional discussion.
2 Rankings as of June 30, 2018 per LIMRA.
3 ALRe RBC ratio is used in evaluating our capital position and the amount of capital needed to support our Retirement Services segment, and is calculated by applying the NAIC RBC factors in effect as of September 30, 2018 to the statutory financial statements of ALRe and its non-U.S. reinsurance subsidiary, on an aggregate basis.





Third Quarter Results
Net income for the third quarter was $640 million, an increase of $366 million, or 134%, from the prior year, driven by higher adjusted operating income of $150 million and a favorable change in net FIA derivatives. The favorable change in FIA derivatives compared to the prior year was driven by our annual unlocking of assumptions, favorable equity market performance and an increase in discount rates. This was partially offset by an unfavorable impact from assumed reinsurance embedded derivatives due to growth in the reinsurance block from the Voya transaction and an increase in U.S. Treasury rates.
Our annual unlocking of assumptions resulted in an increase in pre-tax income of $178 million, compared to a decrease of $33 million in 2017. Unlocking in the current quarter was driven by a $191 million increase in pre-tax income primarily related to FIA embedded derivatives, partially offset by a decrease of $13 million in adjusted operating income attributable to higher other liability costs.
Adjusted operating income for the third quarter was $381 million, an increase of $150 million, or 65%, from the prior year. Adjusted operating income, excluding notable items, was $358 million, an increase of $122 million, or 52%, from the prior year, driven by higher investment income. The increase in investment income was driven by invested asset growth, reflecting the reinsured Voya assets and strong organic deposits, and increased floating rate investment income. Partially offsetting this was a higher cost of crediting driven by block growth, including the reinsured Voya liabilities, and higher option costs; as well as higher other liability costs due to block growth.
Our annual unlocking of assumptions resulted in an increase in other liability costs of $13 million, attributable to DAC, DSI and VOBA amortization and rider reserves. In 2017 our annual unlocking of assumptions resulted in a increase in other liability costs of $20 million.
For the quarter ended September 30, 2018, we recognized a $40 million tax benefit resulting from the reversal of taxes accrued during the first six months of 2018. This benefit was triggered by a revised full year estimated tax provision driven by the implementation of additional reinsurance arrangements, common in the insurance industry, which reduced our overall tax rate from that which had been previously reflected in our results. The timing of this implementation, which is retroactive to January 1, is consistent with our previous disclosures.
Deposit Highlights
Athene generated organic deposits of $3.3 billion during the third quarter, an increase of 16% compared to the prior year. Year-to-date organic deposits of $8.0 billion were slightly higher than the prior year.
Retail Sales: Athene generated a record $2.2 billion of new deposits in the third quarter, up 65% from the prior year, driven by the introduction of new products and expansion in the Financial Institutions channel. Year-to-date new deposits were $5.5 billion, an increase of $1.5 billion from the prior year period.
Flow Reinsurance: In the third quarter, Athene generated $610 million of new deposits, up 221% from the prior year, driven by the addition of new counterparties. Year-to-date deposits were $1.3 billion, an increase of $717 million from the prior year period.
Institutional: In the third quarter, Athene generated $476 million of new deposits from two pension risk transfer transactions. Year-to-date institutional deposits were $1.2 billion, a decrease of $2.1 billion from the prior year period. Subsequent to quarter end, Athene closed its fifth pension risk transfer transaction in 2018 for approximately $800 million.



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Selected Results
 
As of and for the three months ended September 30,
(In millions, except percentages and per share data)
2018
 
2017
Organic deposits
$
3,286

 
$
2,827

Investments, including related parties
101,384

 
81,183

Invested assets
100,620

 
78,804

Debt to capital ratio1
9.9
%
 
%
Adjusted debt to capital ratio1
9.9
%
 
%
Book value per share
$
45.97

 
$
44.16

Adjusted book value per share2
$
45.94

 
$
37.27

Common shares outstanding3
197.3

 
196.3

Adjusted operating common shares outstanding4
197.2

 
197.0

Total shareholders' equity
$
9,069

 
$
8,669

Adjusted shareholders' equity
9,057

 
7,343

ROE
29.1
%
 
13.0
%
Adjusted ROE
31.4
%
 
14.6
%
Adjusted operating ROE
17.5
%
 
12.8
%
 
 
 
 
Retirement Services
 
 
 
  Adjusted operating income
$
389

 
$
244

  Adjusted operating ROE
23.6
%
 
19.1
%
  Investment margin on deferred annuities
2.57
%
 
2.76
%
1 In January 2018, we issued $1.0 billion of senior unsecured debt.
2 Adjusted book value per share is calculated as ending adjusted shareholders' equity divided by adjusted operating common shares outstanding.
3 Represents common shares outstanding for all classes eligible to participate in dividends for each period presented. Utilized for the book value per share calculation.
4 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. Our Class B common shares are economically equivalent to Class A common shares and can be converted to Class A common shares on a one-for-one basis at any time. Our Class M common shares are in the legal form of shares but economically function as options as they are convertible into Class A 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.


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Three months ended September 30,
(In millions, except per share data)
2018
 
2017
Net income
$
640

 
$
274

Non-operating adjustments
 
 
 
Investment gains (losses), net of offsets
(48
)
 
25

Change in fair values of derivatives and embedded derivatives – FIAs, net of offsets
380

 
46

Integration, restructuring and other non-operating expenses
(2
)
 
(14
)
Stock compensation expense
(3
)
 
(7
)
Income tax (expense) benefit - non-operating
(68
)
 
(7
)
Less: Total non-operating adjustments
259

 
43

Adjusted operating income
$
381

 
$
231

 
 
 
 
Adjusted operating income by segment
 
 
 
Retirement Services
$
389

 
$
244

Corporate and Other
(8
)
 
(13
)
Adjusted operating income
$
381

 
$
231

 
 
 
 
Earnings per share – basic1
$
3.24

 
$
1.40

Earnings per share – diluted Class A2
$
3.23

 
$
1.39

Adjusted operating earnings per share3
$
1.95

 
$
1.18

Weighted average shares outstanding – basic1
197.3

 
196.3

Weighted average shares outstanding – diluted Class A2
165.1

 
119.9

Weighted average shares outstanding – adjusted operating3
196.1

 
196.0


 
Three months ended September 30,
(In millions)
2018
 
2017
Notable items
 
 
 
Retirement Services adjusted operating income
$
389

 
$
244

Rider reserve and DAC equity market performance
(38
)
 
(20
)
Out of period actuarial adjustments

 
(13
)
Unlocking
13

 
20

Tax impact of notable items
2

 
1

Retirement Services notable items
(23
)
 
(12
)
Retirement Services adjusted operating income excluding notable items
366

 
232

 
 
 
 
Corporate and Other adjusted operating income
(8
)
 
(13
)
Germany adjusted operating loss, net of tax

 
17

Corporate and Other adjusted operating income excluding notable items
(8
)
 
4

Adjusted operating income excluding notable items
$
358

 
$
236


1 Basic earnings per share, including basic weighted average shares outstanding includes all classes eligible to participate in dividends for each period presented.  
2 Diluted earnings per share on a GAAP basis for Class A common shares, including diluted Class A weighted average shares outstanding, includes the dilutive impacts, if any, of Class B common shares, Class M common shares and any other stock-based awards. Such dilutive securities totaled 529,382 weighted average shares for the quarter. Diluted earnings per share on a GAAP basis for Class A common shares are based on allocated net income of $534 million (83% of net income) and $167 million (61% of net income) for the three months ended September 30, 2018 and 2017, respectively.
3 Weighted average 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. Our Class B common shares are economically equivalent to Class A common shares and can be converted to Class A common shares on a one-for-one basis at any time. Our Class M common shares are in the legal form of shares but economically function as options as they are convertible into Class A 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 are not dilutive they are 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 share.


4



Segment Results
Retirement Services
In the third quarter, Retirement Services adjusted operating income was $389 million, an increase of $145 million, or 59%, from the prior year. Adjusted operating income, excluding notable items, was $366 million, an increase of $134 million, or 58% from the prior year, resulting in an adjusted operating ROE of 22.2%. The increase was driven by growth in investment income of $297 million resulting from invested asset growth, reflecting the reinsured Voya assets and strong organic deposits; increased floating rate investment income of $25 million; and strong alternative investment performance. Partially offsetting this was a higher cost of crediting driven by block growth, including the reinsured Voya liabilities, and higher option costs.
Notable items in the current quarter included $38 million of favorable rider reserves and DAC amortization primarily due to strong equity market outperformance partially offset by $13 million of unfavorable unlocking. In the prior year quarter, notable items included a $20 million benefit from equity market outperformance, $13 million of favorable out of period actuarial adjustments and $20 million of unfavorable unlocking.
Investment margin on deferred annuities was 2.57%, a decrease of 19 basis points from the prior year.
The net investment earned rate was 4.55%, a decrease of 9 basis points from the prior year, driven by lower returns on the reinsured Voya assets, partially offset by increased floating rate investment income. Alternative investments returned 10.65%, compared to 9.79% in prior year, reflecting strong performance from both MidCap and AmeriHome.
Cost of crediting was 1.98%, an increase of 10 basis points compared to the prior year, primarily driven by a higher crediting rate on the reinsured Voya liabilities as well as higher option costs.
Corporate and Other
In the third quarter, Corporate and Other had an adjusted operating loss of $8 million driven by a decline in the market value of a public equity investment in one of our funds. In the prior year quarter, there was a loss of $13 million driven by a $17 million loss in our previously consolidated German subsidiary.
Conference Call Information
This press release and the third quarter 2018 financial supplement will be posted to the Company’s website at ir.athene.com.
Athene will conduct a conference call on Thursday, November 1, 2018 at 10:00 a.m. ET to discuss third quarter 2018 results. Additionally, the company will post an earnings presentation deck on the ir.athene.com website prior to the call on November 1, 2018.
Live conference call: Toll-free at 1-888-317-6003 (domestic) or 1-412-317-6061 (international)
Participant entry number: 5197108
Replay available through November 15, 2018 at 1-877-344-7529 (domestic) or 1-412-317-0088 (international)
Replay access code: 10124937
Live and archived webcast available at ir.athene.com

Investor Relations Contact:
Media Contact:
Noah Gunn
Karen Lynn
+1 441-279-8534
+1 441-279-8460
+1 646-768-7309
+1 515-342-3910
ngunn@athene.com
klynn@athene.com


5




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 and fixed indexed annuity products;
Reinsurance arrangements with third-party annuity providers; and
Institutional products, such as funding agreements and group annuity contracts related to pension risk transfers.

Athene had total assets of $118.2 billion as of September 30, 2018. 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 www.athene.com.
Non-GAAP Measures
In addition to our results presented in accordance with GAAP, our results of operations include certain non-GAAP measures commonly used in our industry. 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 or likely to re-occur in the foreseeable future, 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 GAAP measures. See Non-GAAP Measure Reconciliations for the appropriate reconciliations to the GAAP measures.

Adjusted operating income 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 equals net income 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 for the reasons discussed in greater detail above. Accordingly, we believe using a measure which excludes the impact of these items is effective in analyzing the trends in our results of operations. Together with net income, we believe adjusted operating income, provides a meaningful financial metric that helps investors understand our underlying results and profitability. Adjusted operating income should not be used as a substitute for net income.

Adjusted ROE, adjusted operating ROE and adjusted net income are non-GAAP measures used to evaluate our financial performance excluding the impacts of AOCI and funds withheld and modco reinsurance unrealized gains and losses, in each case net of DAC, DSI, rider reserve and tax offsets. Adjusted ROE is calculated as adjusted net income, divided by average adjusted shareholders’ equity. Adjusted shareholders’ equity is calculated as the ending shareholders’ equity excluding AOCI and funds withheld and modco reinsurance unrealized gains and losses. Adjusted operating ROE is calculated as the adjusted operating income, divided by average adjusted shareholders’ equity. Adjusted net income is calculated as net income excluding funds withheld and modco reinsurance unrealized gains and losses, net of DAC, DSI, rider reserve and tax offsets. These adjustments fluctuate period to


6



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. Once we have reinvested 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 adjusted operating fundamentals or future performance. Accordingly, we believe using measures which exclude AOCI and funds withheld and modco reinsurance unrealized gains and losses are useful in analyzing trends in our operating results. To enhance the ability to analyze these measures across periods, interim periods are annualized. Adjusted ROE, adjusted operating ROE and adjusted net income should not be used as a substitute for ROE and net income. However, we believe the adjustments to equity are significant to gaining an understanding of our overall results of operations.

Adjusted operating earnings per share, weighted average shares outstanding – adjusted operating and adjusted book value per 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 represents an economic view of our share counts and provides a simplified and consistent view of our outstanding shares. Adjusted operating earnings per share is calculated as the adjusted operating income, over the weighted average shares outstanding – adjusted operating. Adjusted book value per share is calculated as the adjusted shareholders’ equity divided by the adjusted operating common shares outstanding. Our Class B common shares are economically equivalent to Class A common shares and can be converted to Class A common shares on a one-for-one basis at any time. Our Class M common shares are in the legal form of shares but economically function as options as they are convertible into Class A shares after vesting and payment 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 are not dilutive they are excluded. Weighted average 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 per share, weighted average shares outstanding – adjusted operating and adjusted book value per share should not be used as a substitute for basic earnings per share – Class A common shares, basic weighted average shares outstanding – Class A or book value per 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 financial condition excluding the impacts of AOCI and funds withheld and modco reinsurance unrealized gains and losses, net of DAC, DSI, rider reserve and tax offsets. Adjusted debt to capital ratio is calculated as total debt excluding consolidated VIEs divided by adjusted 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 shareholders’ equity are significant to gaining an understanding of our capitalization, debt utilization, and debt capacity.

Investment margin is a key measurement of the financial health of our Retirement Services core deferred annuities. Investment margin on our deferred annuities is generated from the excess of our net investment earned rate over the cost of crediting to our policyholders. Net investment earned rate is a key measure of investment returns and cost of crediting is a key measure of the policyholder benefits on our deferred annuities. We believe measures like net investment earned rate, cost of crediting and investment margin on deferred annuities are effective in analyzing the trends of our core business operations, profitability and pricing discipline. While we believe net investment earned rate, cost of crediting and investment margin on deferred annuities 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 and interest sensitive contract benefits presented under GAAP.

Net investment earned rate is a non-GAAP measure we use to evaluate the performance of our invested assets that does not correspond to GAAP net investment income. Net investment earned rate is computed as the income from our invested assets divided by the average invested assets 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 alternative investment gains and losses, gains


7



and losses related to trading securities for CLOs, net VIE impacts (revenues, expenses and noncontrolling interest) and the change in reinsurance embedded derivatives. We include the income and assets supporting our assumed reinsurance 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 reinsurance embedded derivatives. 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 crediting 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. The interest credited on fixed strategies and option costs on indexed annuity strategies are divided by the average account value of our deferred annuities. Our average account values are averaged over the number of quarters in the relevant period to obtain our 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, rider reserves, institutional costs, the cost of liabilities on products other than deferred annuities, premiums, product charges and other revenues. Along with our cost of crediting, other liability costs give a view of the total costs of our liabilities. We believe a measure like other liability costs is effective 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.

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 effective 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 invested assets, which do not correspond to total investments, including investments in related parties, as disclosed in our consolidated financial statements and notes thereto. Invested assets represent the investments that directly back our policyholder liabilities as well as surplus assets. Invested assets is used in the computation of net investment earned rate, which allows us to analyze the profitability of our investment portfolio. 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) the consolidated VIE assets, liabilities and noncontrolling interest, (f) net investment payables and receivables and (g) policy loans ceded (which offset the direct policy loans in total investments). 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 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. Our invested assets are averaged over the number of quarters in the relevant period to compute our net investment earned rate for such period.

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).


8



Safe Harbor for Forward-Looking Statements
This press release contains, and certain oral statements made by our 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,” or “continues” or similar expressions. Factors that could cause actual results, events and developments to differ include, without limitation:  the accuracy of our assumptions and estimates; our ability to maintain or improve financial strength ratings; our ability to manage our business in a highly regulated industry; regulatory changes or actions; the impact of our reinsurers failing to meet their assumed obligations; the impact of interest rate fluctuations; changes in the federal income tax laws and regulations; the implementation and the accuracy of our interpretation of the Tax Cuts and Jobs Act, which was enacted on December 22, 2017, and made key changes to the U.S. tax law; 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; our ability to protect our 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 our operations; and other factors discussed from time to time in Athene's filings with the SEC, including our annual report on Form 10-K for the year ended December 31, 2017, and our quarterly report on Form 10-Q for the quarterly period ended June 30, 2018, 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. We do 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.
# # #


9



Athene Holding Ltd.
Condensed Consolidated Balance Sheets (unaudited)
 
September 30,
 
December 31,
(In millions)
2018
 
2017
Assets
 
 
 
Investments
 
 
 
Fixed maturity securities, at fair value
 
 
 
Available-for-sale securities
$
59,882

 
$
61,012

Trading securities
1,977

 
2,196

Equity securities, at fair value
292

 
790

Mortgage loans, net of allowances
8,982

 
6,233

Investment funds
692

 
699

Policy loans
512

 
530

Funds withheld at interest
7,841

 
7,085

Derivative assets
2,515

 
2,551

Real estate

 
624

Short-term investments, at fair value
234

 
201

Other investments
114

 
133

Total investments
83,041

 
82,054

Cash and cash equivalents
3,723

 
4,888

Restricted cash
218

 
105

Investments in related parties
 
 
 
Fixed maturity securities, at fair value
 
 
 
Available-for-sale securities
1,243

 
406

Trading securities
259

 
307

Mortgage loans
389

 

Investment funds
2,093

 
1,310

Funds withheld at interest
13,963

 

Short-term investments, at fair value
10

 
52

Other investments
386

 
238

Accrued investment income
686

 
652

Reinsurance recoverable
5,201

 
4,972

Deferred acquisition costs, deferred sales inducements and value of business acquired
4,972

 
2,930

Other assets
1,187

 
969

Assets of consolidated variable interest entities
 
 
 
Investments
 
 
 
Fixed maturity securities, trading, at fair value – related party
48

 
48

Equity securities, at fair value – related party
176

 
240

Investment funds
605

 
571

Cash and cash equivalents
2

 
4

Other assets
2

 
1

Total assets
$
118,204

 
$
99,747

(Continued)



10



Athene Holding Ltd.
Condensed Consolidated Balance Sheets (unaudited)
 
September 30,
 
December 31,
(In millions)
2018
 
2017
Liabilities and Equity
 
 
 
Liabilities
 
 
 
Interest sensitive contract liabilities
$
88,903

 
$
67,708

Future policy benefits
14,771

 
17,507

Other policy claims and benefits
140

 
211

Dividends payable to policyholders
120

 
1,025

Long-term debt
991

 

Derivative liabilities
124

 
134

Payables for collateral on derivatives
2,315

 
2,323

Funds withheld liability
389

 
407

Other liabilities
1,380

 
1,222

Liabilities of consolidated variable interest entities
2

 
2

Total liabilities
109,135

 
90,539

Equity
 
 
 
Common stock

 

Additional paid-in capital
3,499

 
3,472

Retained earnings
5,527

 
4,321

Accumulated other comprehensive income
43

 
1,415

Total shareholders' equity
9,069

 
9,208

Total liabilities and equity
$
118,204

 
$
99,747

(Concluded)


11



Athene Holding Ltd.
Condensed Consolidated Statements of Income (unaudited)
 
Three months ended September 30,
(In millions)
2018
 
2017
Revenue
 
 
 
Premiums
$
531

 
$
72

Product charges
119

 
86

Net investment income
1,070

 
820

Investment related gains (losses)
823

 
473

OTTI investment losses
 
 
 
OTTI losses
(7
)
 
(11
)
OTTI losses reclassified to (from) OCI
4

 
(2
)
Net OTTI losses
(3
)
 
(13
)
Other revenues
10

 
8

Revenues of consolidated variable interest entities
 
 
 
Net investment income
15

 
10

Investment related gains (losses)
23

 
17

Total revenues
2,588

 
1,473

Benefits and Expenses
 
 
 
Interest sensitive contract benefits
741

 
621

Amortization of DSI
23

 
13

Future policy and other policy benefits
920

 
259

Amortization of DAC and VOBA
30

 
80

Dividends to policyholders
10

 
48

Policy and other operating expenses
158

 
158

Total benefits and expenses
1,882

 
1,179

Income before income taxes
706

 
294

Income tax expense (benefit)
66

 
20

Net income
$
640

 
$
274




12



Non-GAAP Measure Reconciliations

The reconciliation of net income to adjusted operating income excluding notable items is as follows:

 
Three months ended September 30,
(In millions)
2018
 
2017
Net income
$
640

 
$
274

Less: Total non-operating adjustments
259

 
43

Adjusted operating income
381

 
231

Notable Items
(23
)
 
5

Adjusted operating income excluding notable items
$
358

 
$
236

 
 
 
 
Retirement Services adjusted operating income
$
389

 
$
244

Rider reserve and DAC equity market performance
(38
)
 
(20
)
Out of period actuarial adjustments

 
(13
)
Unlocking
13

 
20

Tax impact of notable items
2

 
1

Retirement Services notable items
(23
)
 
(12
)
Retirement Services adjusted operating income excluding notable items
366

 
232

 
 
 
 
Corporate and Other adjusted operating income
(8
)
 
(13
)
Germany adjusted operating loss, net of tax

 
17

Corporate and Other adjusted operating income excluding notable items
(8
)
 
4

Adjusted operating income excluding notable items
$
358

 
$
236


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

 
Three months ended September 30,
 
2018
 
2017
Basic earnings per share – Class A common shares
$
3.24

 
$
1.40

Non-operating adjustments
 
 
 
Investment gains (losses), net of offsets
(0.27
)
 
0.13

Change in fair values of derivatives and embedded derivatives – FIAs, net of offsets
1.93

 
0.23

Integration, restructuring and other non-operating expenses
(0.02
)
 
(0.07
)
Stock compensation expense
(0.01
)
 
(0.04
)
Income tax (expense) benefit – non-operating
(0.35
)
 
(0.03
)
Less: Total non-operating adjustments
1.28

 
0.22

Less: Effect of items convertible to or settled in Class A common shares
0.01

 

Adjusted operating earnings per share
$
1.95

 
$
1.18




13




The reconciliation of basic weighted average Class A shares to weighted average shares outstanding – adjusted operating, is as follows:
 
Three months ended September 30,
(In millions)
2018
 
2017
Basic weighted average shares outstanding – Class A
164.5

 
119.5

Conversion of Class B shares to Class A shares
25.5

 
69.9

Conversion of Class M shares to Class A shares
5.6

 
6.1

Effect of other stock compensation plans
0.5

 
0.5

Weighted average shares outstanding – adjusted operating
196.1

 
196.0


The reconciliation of shareholders’ equity to adjusted shareholders’ equity included in adjusted book value per share, adjusted debt to capital ratio, adjusted ROE and adjusted operating ROE is as follows:
 
September 30,
(In millions)
2018
 
2017
Total shareholders' equity
$
9,069

 
$
8,669

Less: AOCI
43

 
1,162

Less: Accumulated reinsurance unrealized gains and losses
(31
)
 
164

Total adjusted shareholders' equity
$
9,057

 
$
7,343

 
 
 
 
Retirement Services
$
7,105

 
$
5,207

Corporate and Other
1,952

 
2,136

Total adjusted shareholders' equity
$
9,057

 
$
7,343


The reconciliation of net income to adjusted net income included in adjusted ROE is as follows:
 
Three months ended September 30,
(In millions)
2018
 
2017
Net income
$
640

 
$
274

Reinsurance unrealized gains and losses
43

 
(12
)
Adjusted net income
$
683

 
$
262


The reconciliation of basic Class A shares outstanding to adjusted operating common shares outstanding is as follows:
 
September 30,
(In millions)
2018
 
2017
Class A common shares outstanding
164.6

 
119.9

Conversion of Class B shares to Class A shares
25.5

 
69.5

Conversion of Class M shares to Class A shares
6.0

 
6.7

Effect of other stock compensation plans
1.1

 
0.9

Adjusted operating common shares outstanding
197.2

 
197.0




14



The reconciliation of book value per share to adjusted book value per share is as follows:
 
September 30,
 
2018
 
2017
Book value per share
$
45.97

 
$
44.16

AOCI
(0.22
)
 
(5.92
)
Accumulated reinsurance unrealized gains and losses
0.16

 
(0.83
)
Effect of items convertible to or settled in Class A common shares
0.03

 
(0.14
)
Adjusted book value per share
$
45.94

 
$
37.27


The reconciliation of debt to capital ratio to adjusted debt to capital ratio is as follows:
 
September 30,
 
2018
 
2017
Total debt
$
991

 
$

Total shareholders' equity
9,069

 
8,669

Total capitalization
10,060

 
8,669

Less: AOCI
43

 
1,162

Less: Accumulated reinsurance unrealized gains and losses
(31
)
 
164

Total adjusted capitalization
$
10,048

 
$
7,343

 
 
 
 
Debt to capital ratio
9.9
 %
 
%
AOCI
 %
 
%
Accumulated reinsurance unrealized gains and losses
 %
 
%
Adjusted debt to capital ratio
9.9
 %
 
%

The reconciliation of net investment income to net investment earnings and earned rate is as follows:
 
Three months ended September 30,
 
2018
 
2017
(In millions)
Dollar
 
Rate
 
Dollar
 
Rate
GAAP net investment income
$
1,070

 
4.30
 %
 
$
820

 
4.23
 %
Reinsurance embedded derivative impacts
52

 
0.20
 %
 
40

 
0.20
 %
Net VIE earnings
39

 
0.16
 %
 
27

 
0.14
 %
Alternative income gain (loss)
(14
)
 
(0.06
)%
 
(4
)
 
(0.02
)%
Held for trading amortization
(21
)
 
(0.08
)%
 
(20
)
 
(0.10
)%
Total adjustments to arrive at net investment earnings/earned rate
56

 
0.22
 %
 
43

 
0.22
 %
Total net investment earnings/earned rate
$
1,126

 
4.52
 %
 
$
863

 
4.45
 %
 
 
 
 
 
 
 
 
Retirement Services
$
1,108

 
4.55
 %
 
$
811

 
4.64
 %
Corporate and Other
18

 
3.51
 %
 
52

 
2.72
 %
Total net investment earnings/earned rate
$
1,126

 
4.52
 %
 
$
863

 
4.45
 %
 
 
 
 
 
 
 
 
Retirement Services average invested assets
$
97,512

 
 
 
$
69,868

 
 
Corporate and Other average invested assets
2,103

 
 
 
7,673

 
 
Average invested assets
$
99,615

 
 
 
$
77,541

 
 



15



The reconciliation of interest sensitive contract benefits to Retirement Services' cost of crediting on deferred annuities, and the respective rates, is as follows:
 
Three months ended September 30,
 
2018
 
2017
(In millions)
Dollar
 
Rate
 
Dollar
 
Rate
GAAP interest sensitive contract benefits
$
741

 
3.72
 %
 
$
621

 
4.35
 %
Interest credited other than deferred annuities
(44
)
 
(0.22
)%
 
(41
)
 
(0.29
)%
FIA option costs
231

 
1.16
 %
 
154

 
1.08
 %
Product charges (strategy fees)
(25
)
 
(0.13
)%
 
(19
)
 
(0.13
)%
Reinsurance embedded derivative impacts
29

 
0.14
 %
 
9

 
0.06
 %
Change in fair values of embedded derivatives – FIAs
(545
)
 
(2.74
)%
 
(464
)
 
(3.25
)%
Negative VOBA amortization
5

 
0.03
 %
 
8

 
0.06
 %
Other changes in interest sensitive contract liabilities
3

 
0.02
 %
 

 
 %
Total adjustments to arrive at cost of crediting on deferred annuities
(346
)
 
(1.74
)%
 
(353
)
 
(2.47
)%
Retirement Services cost of crediting on deferred annuities
$
395

 
1.98
 %
 
$
268

 
1.88
 %
 
 
 
 
 
 
 
 
Average account value on deferred annuities
$
79,673

 
 
 
$
57,050

 
 

The reconciliation of benefits and expenses to other liability costs is as follows:
 
Three months ended September 30,
 
2018
 
2017
GAAP benefits and expenses
$
1,882

 
$
1,179

Premiums
(531
)
 
(72
)
Product charges
(119
)
 
(86
)
Other revenues
(10
)
 
(8
)
Cost of crediting
(135
)
 
(105
)
Change in fair value of embedded derivatives - FIA, net of offsets
(764
)
 
(496
)
DAC, DSI and VOBA amortization related to investment gains and losses
26

 
(16
)
Rider reserves
1

 
(4
)
Policy and other operating expenses, excluding policy acquisition expenses
(98
)
 
(101
)
AmerUs closed block fair value liability
8

 
(4
)
Other
1

 
(14
)
Total adjustments to arrive at other liability costs
(1,621
)
 
(906
)
Other liability costs
$
261

 
$
273

 
 
 
 
Retirement Services
$
261

 
$
228

Corporate and Other

 
45

Consolidated other liability costs
$
261

 
$
273

















16





The reconciliation of policy and other expenses to operating expenses is as follows:
 
Three months ended September 30,
 
2018
 
2017
Policy and other operating expenses
$
158

 
$
158

Interest expense
(15
)
 
(2
)
Policy acquisition expenses, net of deferrals
(60
)
 
(58
)
Integration, restructuring and other non-operating expenses
(2
)
 
(14
)
Stock compensation expenses
(3
)
 
(7
)
Total adjustments to arrive at operating expenses
(80
)
 
(81
)
Operating expenses
$
78

 
$
77

 
 
 
 
Retirement Services
$
63

 
$
51

Corporate and Other
15

 
26

Consolidated operating expenses
$
78

 
$
77


The reconciliation of total investments, including related parties, to invested assets is as follows:
 
September 30,
(In millions)
2018
 
2017
Total investments, including related parties
$
101,384

 
$
81,183

Derivative assets
(2,515
)
 
(1,982
)
Cash and cash equivalents (including restricted cash)
3,941

 
3,707

Accrued income
686

 
626

Derivative collateral
(2,315
)
 
(1,896
)
Reinsurance funds withheld and modified coinsurance
(123
)
 
(537
)
VIE and VOE assets, liabilities and noncontrolling interest
835

 
918

AFS unrealized (gain) loss
(186
)
 
(2,594
)
Ceded policy loans
(299
)
 
(325
)
Net investment receivables (payables)
(788
)
 
(296
)
Total adjustments to arrive at invested assets
(764
)
 
(2,379
)
Total invested assets
$
100,620

 
$
78,804



17
(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit
395577180_athfsq32018.jpg



Athene Holding Ltd.
Financial Supplement—September 30, 2018
Table of Contents



A.
Financial Highlights
 
 
 
 
 
 
 
 
 
 
B.
Product Summary  Retirement Services
 
 
 
 
 
 
 
C.
Consolidated Investment Summary
 
 
 
 
 
 
 
 
 
 
 
D.
Additional Information
 
 
 



Table of Contents

Athene Holding Ltd.
Financial Supplement—September 30, 2018
Note to the Financial Supplement

Key Operating and Non-GAAP Measures

In addition to our results presented in accordance with GAAP, our results of operations include certain non-GAAP measures commonly used in our industry. 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 or likely to re-occur in the foreseeable future, 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 GAAP measures. See Non-GAAP Measure Reconciliations for the appropriate reconciliations to the GAAP measures.

Adjusted Operating Income

Adjusted operating income 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 equals net income adjusted to eliminate the impact of the following (collectively, the “non-operating adjustments”):

Investment Gains (Losses), Net of Offsets—Investment gains (losses), net of offsets, consist of the realized gains and losses on the sale of AFS securities, the change in assumed modco and funds withheld reinsurance embedded derivatives, unrealized gains and losses, impairments, and other investment gains and losses. Unrealized, impairments and other investment gains and losses are comprised of the fair value adjustments of trading securities (other than CLOs) and investments held under the fair value option, derivative gains and losses not hedging FIA index credits, and the net OTTI impacts recognized in operations net of the change in AmerUs Closed Block fair value reserve related to the corresponding change in fair value of investments and the change in unit-linked reserves related to the corresponding trading securities. Investment gains and losses are net of offsets related to DAC, DSI, and VOBA amortization and changes to guaranteed lifetime withdrawal benefit (GLWB) and guaranteed minimum death benefits (GMDB) reserves (together, GLWB and GMDB reserves represent rider reserves) as well as the MVAs associated with surrenders or terminations of contracts.

Change in Fair Values of Derivatives and Embedded Derivatives – FIAs, Net of Offsets—Impacts related to the fair value accounting for derivatives hedging the FIA index credits and the related embedded derivative liability fluctuate from period to period. The index reserve is measured at fair value for the current period and all periods beyond the current policyholder index term. However, the FIA hedging derivatives are purchased to hedge only the current index period. Upon policyholder renewal at the end of the period, new FIA hedging derivatives are purchased to align with the new term. The difference in duration between the FIA hedging derivatives and the index credit reserves creates a timing difference in earnings. This timing difference of the FIA hedging derivatives and index credit reserves is included as a non-operating adjustment, net of offsets related to DAC, DSI, and VOBA amortization and changes to rider reserves.

We primarily hedge with options that align with the index terms of our FIA products (typically 1–2 years). From an economic basis, we believe this is suitable because policyholder accounts are credited with index performance at the end of each index term. However, because the “value of an embedded derivative” in an FIA contract is longer-dated, there is a duration mismatch which may lead to mismatches for accounting purposes.

Integration, Restructuring, and Other Non-operating Expenses—Integration, restructuring, and other non-operating expenses consist of restructuring and integration expenses related to acquisitions and block reinsurance costs as well as certain other expenses which are not part of our core operations or likely to re-occur in the foreseeable future.

Stock Compensation Expense—Stock compensation expenses associated with our share incentive plans, excluding our long term incentive plan, are not part of our core operating expenses and fluctuate from time to time due to the structure of our plans.

Bargain Purchase Gain—Bargain purchase gains associated with acquisitions are adjustments to net income as they are not consistent with our core operations.

Income Taxes (Expense) Benefit – Non-operating—The non-operating income tax expense is comprised of the appropriate jurisdiction’s tax rate applied to the non-operating adjustments that are subject to income tax.

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



1

Table of Contents

Athene Holding Ltd.
Financial Supplement—September 30, 2018
Note to the Financial Supplement

Adjusted ROE, Adjusted Operating ROE and Adjusted Net Income

Adjusted ROE, adjusted operating ROE and adjusted net income are non-GAAP measures used to evaluate our financial performance excluding the impacts of AOCI and funds withheld and modco reinsurance unrealized gains and losses, in each case net of DAC, DSI, rider reserve and tax offsets. Adjusted ROE is calculated as adjusted net income, divided by average adjusted shareholders’ equity. Adjusted shareholders’ equity is calculated as the ending shareholders’ equity excluding AOCI and funds withheld and modco reinsurance unrealized gains and losses. Adjusted operating ROE is calculated as the adjusted operating income, divided by average adjusted shareholders’ equity. Adjusted net income is calculated as net income excluding funds withheld and modco reinsurance unrealized gains and losses, net of DAC, DSI, rider reserve and tax offsets. 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. Once we have reinvested 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 adjusted operating fundamentals or future performance. Accordingly, we believe using measures which exclude AOCI and funds withheld and modco reinsurance unrealized gains and losses are useful in analyzing trends in our operating results. To enhance the ability to analyze these measures across periods, interim periods are annualized. Adjusted ROE, adjusted operating ROE and adjusted net income should not be used as a substitute for ROE and net income. However, we believe the adjustments to equity are significant to gaining an understanding of our overall results of operations.

Adjusted Operating Earnings Per Share, Weighted Average Shares Outstanding Adjusted Operating and Adjusted Book Value Per Share

Adjusted operating earnings per share, weighted average shares outstanding – adjusted operating and adjusted book value per 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 represents an economic view of our share counts and provides a simplified and consistent view of our outstanding shares. Adjusted operating earnings per share is calculated as the adjusted operating income, over the weighted average shares outstanding – adjusted operating. Adjusted book value per share is calculated as the adjusted shareholders’ equity divided by the adjusted operating common shares outstanding. Our Class B common shares are economically equivalent to Class A common shares and can be converted to Class A common shares on a one-for-one basis at any time. Our Class M common shares are in the legal form of shares but economically function as options as they are convertible into Class A shares after vesting and payment 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 are not dilutive they are excluded. Weighted average 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 per share, weighted average shares outstanding – adjusted operating and adjusted book value per share should not be used as a substitute for basic earnings per share – Class A common shares, basic weighted average shares outstanding – Class A or book value per 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

Adjusted debt to capital ratio is a non-GAAP measure used to evaluate our financial condition excluding the impacts of AOCI and funds withheld and modco reinsurance unrealized gains and losses, net of DAC, DSI, rider reserve and tax offsets. Adjusted debt to capital ratio is calculated as total debt excluding consolidated VIEs divided by adjusted 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 shareholders’ equity are significant to gaining an understanding of our capitalization, debt utilization, and debt capacity.

Retirement Services Net Investment Earned Rate, Cost of Crediting, Investment Margin on Deferred Annuities, Other Liability Costs and Operating Expenses
    
Investment margin is a key measurement of the financial health of our Retirement Services core deferred annuities. Investment margin on our deferred annuities is generated from the excess of our net investment earned rate over the cost of crediting to our policyholders. Net investment earned rate is a key measure of investment returns and cost of crediting is a key measure of the policyholder benefits on our deferred annuities.


2

Table of Contents

Athene Holding Ltd.
Financial Supplement—September 30, 2018
Note to the Financial Supplement

Net investment earned rate is a non-GAAP measure we use to evaluate the performance of our invested assets that does not correspond to GAAP net investment income. Net investment earned rate is computed as the income from our invested assets divided by the average invested assets 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 alternative investment gains and losses, gains and losses related to trading securities for CLOs, net VIE impacts (revenues, expenses and noncontrolling interest) and the change in reinsurance embedded derivatives. We include the income and assets supporting our assumed reinsurance 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 reinsurance embedded derivatives. 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 crediting 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. The interest credited on fixed strategies and option costs on indexed annuity strategies are divided by the average account value of our deferred annuities. Our average account values are averaged over the number of quarters in the relevant period to obtain our cost of crediting for such period. To enhance the ability to analyze these measures across periods, interim periods are annualized.

Net investment earned rate, cost of crediting and investment margin on deferred annuities are non-GAAP measures we use to evaluate the profitability of our core deferred annuities business.We believe measures like net investment earned rate, cost of crediting and investment margin on deferred annuities are effective in analyzing the trends of our core business operations, profitability and pricing discipline. While we believe net investment earned rate, cost of crediting and investment margin on deferred annuities 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 and interest sensitive contract benefits presented under GAAP.

Other liability costs include DAC, DSI and VOBA amortization, rider reserves, institutional costs, the cost of liabilities on products other than deferred annuities, premiums, product charges and other revenues. Along with our cost of crediting, other liability costs give a view of the total costs of our liabilities. We believe a measure like other liability costs is effective 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.

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 effective 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.

Invested Assets

In managing our business we analyze invested assets, which do not correspond to total investments, including investments in related parties, as disclosed in our consolidated financial statements and notes thereto. Invested assets represent the investments that directly back our policyholder liabilities as well as surplus assets. Invested assets is used in the computation of net investment earned rate, which allows us to analyze the profitability of our investment portfolio. 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) the consolidated VIE assets, liabilities and noncontrolling interest, (f) net investment payables and receivables and (g) policy loans ceded (which offset the direct policy loans in total investments). 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 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. Our invested assets are averaged over the number of quarters in the relevant period to compute our net investment earned rate for such period.

Reserve Liabilities

In managing our business we also analyze reserve liabilities, which does not correspond to total liabilities as disclosed in our consolidated financial statements and notes thereto. Reserve liabilities represents our policyholder liability obligations net of reinsurance and is used to analyze the costs of our liabilities. Reserve liabilities includes (a) the interest sensitive contract liabilities, (b) future policy benefits, (c) dividends payable to policyholders, and (d) other policy claims and benefits, offset by reinsurance recoverable, excluding policy loans ceded. Reserve liabilities is net of the ceded liabilities to third-party reinsurers as the costs of the liabilities are passed to such reinsurers and therefore we have no net economic exposure to such liabilities, assuming our reinsurance counterparties perform under our agreements. The majority of our ceded reinsurance is a result of reinsuring large blocks of life business following acquisitions. For such transactions, GAAP requires the ceded liabilities and related reinsurance recoverables to continue to be recorded in our consolidated financial statements despite the transfer of economic risk to the counterparty in connection with the reinsurance transaction.


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Table of Contents

Athene Holding Ltd.
Financial Supplement—September 30, 2018
Note to the Financial Supplement

Sales

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).





4

Table of Contents
Athene Holding Ltd.
Financial Supplement—September 30, 2018
Financial Highlights
Unaudited (In millions, except percentages and per share data)







Year-to-date
 
 
2018
 
2017
2018
 
2017
 
 
Q3
 
Q2
 
Q1
 
Q4
 
Q3
 
 
 
 
Deposits
 
 
 
 
 
 
 
 
 
$
5,524

 
$
4,071

 
Retail sales
$
2,200

 
$
2,038

 
$
1,286

 
$
1,282

 
$
1,337

1,287

 
570

 
Flow reinsurance
610

 
473

 
204

 
305

 
190

425

 
3,000

 
Funding agreements

 
125

 
300

 

 
1,300

796

 
327

 
Pension risk transfer
476

 
54

 
266

 
1,926

 

8,032

 
7,968

 
Total organic deposits
3,286

 
2,690

 
2,056

 
3,513

 
2,827

19,104

 

 
Inorganic deposits

 
19,104

 

 

 

$
27,136

 
$
7,968

 
Total deposits
$
3,286

 
$
21,794

 
$
2,056

 
$
3,513

 
$
2,827

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated results of operations
 
 
 
 
 
 
 
 
 
$
1,172

 
$
984

 
Net income
$
640

 
$
264

 
$
268

 
$
464

 
$
274

908

 
777

 
Adjusted operating income
381

 
290

 
237

 
332

 
231

 
 
 
 
 
 
 
 
 
 
 
 
 
 
17.1
%
 
16.9
%
 
ROE
29.1
%
 
12.3
%
 
12.0
%
 
20.8
%
 
13.0
%
21.8
%
 
17.1
%
 
Adjusted ROE
31.4
%
 
17.5
%
 
16.5
%
 
24.9
%
 
14.6
%
14.5
%
 
15.0
%
 
Adjusted operating ROE
17.5
%
 
14.2
%
 
12.1
%
 
17.7
%
 
12.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services
 
 
 
 
 
 
 
 
 
$
913

 
$
786

 
Adjusted operating income
$
389

 
$
289

 
$
235

 
$
306

 
$
244

19.6
%
 
21.8
%
 
Adjusted operating ROE
23.6
%
 
19.8
%
 
17.3
%
 
23.3
%
 
19.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share
 
 
 
 
 
 
 
 
 
$
5.94

 
$
5.05

 
Basic1
$
3.24

 
$
1.34

 
$
1.36

 
$
2.36

 
$
1.40

$
5.92

 
$
5.00

 
Diluted – Class A2
$
3.23

 
$
1.33

 
$
1.36

 
$
2.35

 
$
1.39

$
4.63

 
$
3.97

 
Adjusted operating earnings per share3
$
1.95

 
$
1.48

 
$
1.21

 
$
1.69

 
$
1.18

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Book Value per share:
 
 
 
 
 
 
 
 
 
$
45.97

 
$
44.16

 
Book value per share
$
45.97

 
$
43.10

 
$
44.09

 
$
46.76

 
$
44.16

$
45.94

 
$
37.27

 
Adjusted book value per share3
$
45.94

 
$
42.60

 
$
40.66

 
$
38.77

 
$
37.27

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance sheet items:
 
 
 
 
 
 
 
 
 
$
118,204

 
$
96,061

 
Total assets
$
118,204

 
$
114,755

 
$
93,557

 
$
99,747

 
$
96,061

101,384

 
81,183

 
Total investments, including related parties
101,384

 
98,669

 
80,261

 
84,367

 
81,183

100,620

 
78,804

 
Invested assets
100,620

 
98,609

 
78,723

 
82,298

 
78,804

109,135

 
87,392

 
Total liabilities
109,135

 
106,250

 
84,862

 
90,539

 
87,392

98,422

 
77,850

 
Reserve liabilities
98,422

 
96,140

 
75,746

 
81,183

 
77,850

9,069

 
8,669

 
Total shareholders’ equity
9,069

 
8,505

 
8,695

 
9,208

 
8,669

9,057

 
7,343

 
Adjusted shareholders’ equity
9,057

 
8,367

 
8,003

 
7,632

 
7,343

9.9
%
 
%
 
Debt to capital ratio
9.9
%
 
12.1
%
 
10.2
%
 
%
 
%
9.9
%
 
%
 
Adjusted debt to capital ratio
9.9
%
 
12.3
%
 
11.0
%
 
%
 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Share data:
 
 
 
 
 
 
 
 
 
197.2

 
194.9

 
Weighted average shares outstanding – basic1
197.3

 
197.3

 
197.1

 
196.7

 
196.3

159.8

 
104.8

 
Weighted average shares outstanding – diluted – Class A common shares2
165.1

 
164.8

 
149.0

 
126.4

 
119.9

196.0

 
195.8

 
Weighted average shares outstanding  adjusted operating3
196.1

 
195.1

 
196.0

 
196.1

 
196.0

197.3

 
196.3

 
Common shares outstanding4
197.3

 
197.3

 
197.2

 
196.9

 
196.3

197.2

 
197.0

 
Adjusted operating common shares outstanding3
197.2

 
196.4

 
196.8

 
196.9

 
197.0

* Please refer to Note to the Financial Supplement section and the Non-GAAP Measure Reconciliations for discussion on adjusted operating income, adjusted ROE, adjusted operating ROE, adjusted book value and adjusted debt to capital ratio.
1 Basic earnings per share, including basic weighted average shares outstanding, includes all classes eligible to participate in dividends for each period presented.
2 Diluted earnings per share on a GAAP basis for Class A common shares, including diluted Class A weighted average shares outstanding, includes the dilutive impacts, if any, of Class B common shares, Class M common shares and any other stock-based awards.
3 Represents Class A common shares outstanding or weighted average common shares outstanding assuming 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, Class M common shares 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.
4 Represents common shares outstanding for all classes eligible to participate in dividends for each period presented.

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Table of Contents
Athene Holding Ltd.
Financial Supplement—September 30, 2018
Capitalization and Equity
Unaudited (In millions, except percentages)


 
2018
 
2017
 
Q3
 
Q2
 
Q1
 
Q4
 
Q3
Capitalization
 
 
 
 
 
 
 
 
 
Total debt
$
991

 
$
1,174

 
$
992

 
$

 
$

Total shareholders’ equity
9,069

 
8,505

 
8,695

 
9,208

 
8,669

Total capitalization
10,060

 
9,679

 
9,687

 
9,208

 
8,669

Less: AOCI
43

 
126

 
585

 
1,415

 
1,162

Less: Accumulated reinsurance unrealized gains and losses
(31
)
 
12

 
107

 
161

 
164

Total adjusted capitalization
$
10,048

 
$
9,541

 
$
8,995

 
$
7,632

 
$
7,343

 
 
 
 
 
 
 
 
 
 
Total shareholders’ equity
$
9,069

 
$
8,505

 
$
8,695

 
$
9,208

 
$
8,669

Less: AOCI
43

 
126

 
585

 
1,415

 
1,162

Less: Accumulated reinsurance unrealized gains and losses
(31
)
 
12

 
107

 
161

 
164

Total adjusted shareholders’ equity
$
9,057

 
$
8,367

 
$
8,003

 
$
7,632

 
$
7,343

 
 
 
 
 
 
 
 
 
 
Retirement Services
$
7,105

 
$
6,114

 
$
5,552

 
$
5,304

 
$
5,207

Corporate and Other
1,952

 
2,253

 
2,451

 
2,328

 
2,136

Total adjusted shareholders’ equity
$
9,057

 
$
8,367

 
$
8,003

 
$
7,632

 
$
7,343

 
 
 
 
 
 
 
 
 
 
Debt to capital ratio
9.9
 %
 
12.1
%
 
10.2
%
 
%
 
%
AOCI
0.0
 %
 
0.2
%
 
0.7
%
 
%
 
%
Accumulated reinsurance unrealized gains and losses
0.0
 %
 
0.0
%
 
0.1
%
 
%
 
%
Adjusted debt to capital ratio1
9.9
 %
 
12.3
%
 
11.0
%
 
%
 
%

1 Total debt in Q2 2018 includes a short-term borrowing of $183 million that was repaid in Q3 2018.


6

Table of Contents
Athene Holding Ltd.
Financial Supplement—September 30, 2018
Condensed Consolidated Balance Sheets
Unaudited (In millions)

 
September 30, 2018
 
December 31, 2017
Assets
 
 
 
Investments
 
 
 
Fixed maturity securities, at fair value
 
 
 
Available-for-sale securities
$
59,882

 
$
61,012

Trading securities
1,977

 
2,196

Equity securities, at fair value
292

 
790

Mortgage loans, net of allowances
8,982

 
6,233

Investment funds
692

 
699

Policy loans
512

 
530

Funds withheld at interest
7,841

 
7,085

Derivative assets
2,515

 
2,551

Real estate

 
624

Short-term investments, at fair value
234

 
201

Other investments
114

 
133

Total investments
83,041

 
82,054

Cash and cash equivalents
3,723

 
4,888

Restricted cash
218

 
105

Investments in related parties
 
 
 
Fixed maturity securities, at fair value
 
 
 
Available-for-sale securities
1,243

 
406

Trading securities
259

 
307

Mortgage loans
389

 

Investment funds
2,093

 
1,310

Funds withheld at interest
13,963

 

Short-term investments, at fair value
10

 
52

Other investments
386

 
238

Accrued investment income
686

 
652

Reinsurance recoverable
5,201

 
4,972

Deferred acquisition costs, deferred sales inducements and value of business acquired
4,972

 
2,930

Other assets
1,187

 
969

Assets of consolidated variable interest entities