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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): February 25, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 February 25, 2019, Athene Holding Ltd. (the “Company”) issued a press release to announce its financial results for the fourth 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 fourth 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
 
 
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:
February 25, 2019
/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



396866322_athenelogoa16.jpg
ATHENE HOLDING LTD. REPORTS
FOURTH QUARTER AND FULL YEAR 2018 RESULTS
PEMBROKE, Bermuda – February 25, 2019 – Athene Holding Ltd. ("Athene") (NYSE: ATH), a leading provider of retirement savings products, today announced financial results for the fourth quarter and full year 2018.
Net loss for the fourth quarter 2018 was $104 million, or $(0.53) per diluted Class A share ("diluted share"), compared to net income for the fourth quarter 2017 of $439 million, or $2.22 per diluted share. The loss was driven by unfavorable changes in reinsurance embedded derivatives due to credit spread widening, as well as unfavorable changes in fixed indexed annuity derivatives due to equity market depreciation. Net income for the full year 2018 was $1.05 billion, or $5.32 per diluted share, compared to net income for the full year 2017 of $1.36 billion, or $6.91 per diluted share.
Adjusted operating income1 for the fourth quarter 2018 was $240 million, or $1.23 per adjusted operating share, compared to adjusted operating income for the fourth quarter 2017 of $313 million, or $1.60 per adjusted operating share. The decrease from the prior year quarter was primarily driven by higher other liability costs resulting from equity market depreciation. Adjusted operating income for the full year 2018 was $1.14 billion, or $5.82 per adjusted operating share, compared to adjusted operating income for the full year 2017 of $1.06 billion, or $5.39 per adjusted operating share.

Highlights
ROE of 12.1%, Retirement Services adjusted operating ROE of 18.4%, and Consolidated adjusted operating ROE of 13.9% for the full year ended December 31, 2018
Book value per share of $42.45, a decrease of 9% for the year-over-year period ended December 31, 2018
Adjusted book value per share of $45.59, an increase of 19% for the year-over-year period ended December 31, 2018
Closed previously announced block reinsurance transaction with Lincoln Financial Group totaling $7.9 billion of liabilities, effective October 1, 2018
Total Deposits of $13.0 billion and $40.2 billion for the quarter and year ended December 31, 2018, respectively
Organic deposits of $5.2 billion and $13.2 billion for the quarter and year ended December 31, 2018, respectively
Inorganic deposits of $7.9 billion and $27.0 billion for the quarter and year ended December 31, 2018, respectively
Ranked #2 carrier in fixed indexed annuity ("FIA") sales for the two years ended September 30, 20182 
ALRe RBC of 405%3 and U.S. RBC of 421%, as of December 31, 2018
Repurchased $147 million of common stock from December 10, 2018 through February 22, 2019

"In 2018, we continued our disciplined strategy of capital stewardship and opportunistic deployment,” said Jim Belardi, CEO of Athene. “We grew invested assets by more than 45%4, marking 2018 as a year of acceleration for Athene. Our multi-channel distribution model generated record organic growth of more than $13 billion, and this was complemented by closing two inorganic transactions in a calendar year for the first time in our history, totaling an additional $27 billion. Importantly, we underwrote this new business to the same high return standards we have historically."

Mr. Belardi continued, “We see an abundance of opportunity in front of us and we will continue to judiciously allocate capital in order to build long-term shareholder value. In the current environment, it’s clear the market has not properly valued the growing earnings power of our business, so we commenced opportunistic share repurchases totaling $147 million. Since these repurchases were executed at an average share price in line with our initial public offering price more than two years ago, when the size and earnings profile of Athene was significantly less than it is today, we believe this method of capital deployment will prove very accretive. As we look ahead to


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2019, we will continue to benchmark all potential uses of capital — including share repurchases, bolstering for ratings upgrades, growth initiatives, and asset trades — against the risk return profile they present for our shareholders.”

1 This news release references certain Non-GAAP measures. See Non-GAAP Measures for additional discussion.
2 Ranking as of September 30, 2018 per LIMRA data.
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 December 31, 2018 to the statutory financial statements of ALRe and its non-U.S. reinsurance subsidiary, on an aggregate basis.
4 Total invested assets, excluding Germany.
 
Fourth Quarter 2018 Results
Net loss for the fourth quarter 2018 was $104 million, a decrease of $543 million from the fourth quarter 2017, driven by unfavorable changes in reinsurance embedded derivatives and the change in FIA derivatives. Reinsurance embedded derivatives were negatively impacted by credit spread widening in the underlying assets. The change in reinsurance embedded derivatives reflects the change in fair value of assets backing reinsured liabilities and is included in GAAP net income, while the change in fair value of assets backing directly written liabilities is reflected in all other comprehensive income. The unfavorable change in FIA derivatives compared to the prior year quarter was driven by equity market depreciation.
Adjusted operating income for the fourth quarter 2018 was $240 million, a decrease of $73 million, or 23%, from the fourth quarter 2017. Adjusted operating income, excluding notable items, was $293 million, an increase of $61 million, or 26%, from the prior year quarter, driven by higher investment income. The increase in investment income was driven by invested asset growth, reflecting the reinsured Voya and Lincoln assets and strong organic deposits, and increased floating rate investment income. Partially offsetting this increase was a higher cost of crediting driven by block growth, including the reinsured Voya and Lincoln liabilities, and higher hedging costs from increased option costs; as well as higher other liability costs due to block growth.
Full Year 2018 Results
Net income for the full year 2018 was $1.05 billion, a decrease of $305 million, or 22%, from the full year 2017. The decrease was driven primarily by unfavorable reinsurance embedded derivatives due to credit spread widening.
Adjusted operating income for the full year 2018 was $1.14 billion, an increase of $85 million, or 8%, over the prior year. Adjusted operating income, excluding notable items, was $1.17 billion, an increase of $254 million, or 28%, from the prior year, driven by higher spread income and lower expense ratios as a result of growth in the business. The increase in spread income was primarily due to invested asset growth, increased floating rate investment income, and higher alternative investment income. Partially offsetting this increase was higher other liability costs due to growth in the block and equity market depreciation primarily in the fourth quarter of 2018.
Deposit Highlights
For the fourth quarter 2018, Athene generated organic deposits of $5.2 billion, an increase of 47% compared to the fourth quarter 2017. For the full year 2018, organic deposits were $13.2 billion, an increase of 15% compared to the full year 2017. The liabilities supporting these deposits were underwritten to the same return standards as previously generated business. 
Retail: Athene generated $2.0 billion of new deposits in the fourth quarter 2018, up 57% from the prior year quarter, driven by the introduction of new products and expansion in the Financial Institutions channel. For the full year 2018, new deposits were $7.5 billion, an increase of $2.2 billion from the prior year.
Flow Reinsurance: In the fourth quarter 2018, Athene generated $1.1 billion of new deposits, up 272% from the prior year quarter, driven by the addition of new counterparties. For the full year 2018, deposits were $2.4 billion, an increase of $1.5 billion from the prior year.
Institutional: In the fourth quarter 2018, Athene generated $2.0 billion of new deposits from three pension risk transfer transactions totaling $1.8 billion and two funding agreements totaling $225 million. For the full year 2018,


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institutional deposits were $3.2 billion, comprised of $2.6 billion of pension risk transfer and $650 million of funding agreements.
Selected Results
 
As of and for the three months ended December 31,
 
As of and for the twelve months ended December 31,
(In millions, except percentages and per share data)
2018
 
2017
 
2018
 
2017
Organic deposits
$
5,164

 
$
3,513

 
$
13,196

 
$
11,481

Inorganic deposits
7,878

 

 
26,982

 

Total deposits
13,042

 
3,513

 
40,178

 
11,481

Investments, including related parties
107,632

 
84,379

 
107,632

 
84,379

Invested assets
111,034

 
82,298

 
111,034

 
82,298

Debt to capital ratio1
10.7
 %
 
%
 
10.7
%
 
%
Adjusted debt to capital ratio1
10.1
 %
 
%
 
10.1
%
 
%
Book value per share
$
42.45

 
$
46.60

 
$
42.45

 
$
46.60

Adjusted book value per share2
$
45.59

 
$
38.43

 
$
45.59

 
$
38.43

Common shares outstanding3
195.0

 
196.9

 
195.0

 
196.9

Adjusted operating common shares outstanding4
193.5

 
196.9

 
193.5

 
196.9

Total shareholders' equity
$
8,276

 
$
9,176

 
$
8,276

 
$
9,176

Adjusted shareholders' equity
8,823

 
7,566

 
8,823

 
7,566

ROE
(4.8
)%
 
19.7
%
 
12.1
%
 
16.9
%
Adjusted ROE
(2.7
)%
 
23.7
%
 
15.7
%
 
18.0
%
Adjusted operating ROE
10.8
 %
 
16.8
%
 
13.9
%
 
15.1
%
 
 
 
 
 
 
 
 
Retirement Services
 
 
 
 
 
 
 
  Adjusted operating income
$
296

 
$
287

 
$
1,201

 
$
1,038

  Adjusted operating ROE
16.0
 %
 
22.1
%
 
18.4
%
 
21.5
%
  Investment margin on deferred annuities
2.57
 %
 
2.70
%
 
2.65
%
 
2.82
%
Note: Prior period financial results have been revised to reflect immaterial adjustments. For further information, please refer to Financial Statement Revisions.
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 December 31,
 
Years ended December 31,
(In millions, except per share data)
2018
 
2017
 
2018
 
2017
Net income
$
(104
)
 
$
439

 
$
1,053

 
$
1,358

Non-operating adjustments
 
 
 
 
 
 
 
Investment gains (losses), net of offsets
(114
)
 
59

 
(274
)
 
199

Change in fair values of derivatives and embedded derivatives – FIAs, net of offsets
(288
)
 
105

 
242

 
230

Integration, restructuring and other non-operating expenses
(4
)
 
(34
)
 
(22
)
 
(68
)
Stock compensation expense
(3
)
 
(3
)
 
(11
)
 
(33
)
Income tax (expense) benefit – non-operating
65

 
(1
)
 
(22
)
 
(25
)
Less: Total non-operating adjustments
(344
)
 
126

 
(87
)
 
303

Adjusted operating income
$
240

 
$
313

 
$
1,140

 
$
1,055

 
 
 
 
 
 
 
 
Adjusted operating income by segment
 
 
 
 
 
 
 
Retirement Services
$
296

 
$
287

 
$
1,201

 
$
1,038

Corporate and Other
(56
)
 
26

 
(61
)
 
17

Adjusted operating income
$
240

 
$
313

 
$
1,140

 
$
1,055

 
 
 
 
 
 
 
 
Earnings per share – basic1
$
(0.53
)
 
$
2.23

 
$
5.34

 
$
6.95

Earnings per share – diluted Class A2
$
(0.53
)
 
$
2.22

 
$
5.32

 
$
6.91

Adjusted operating earnings per share3
$
1.23

 
$
1.60

 
$
5.82

 
$
5.39

Weighted average shares outstanding – basic1
197.1

 
196.7

 
197.1

 
195.3

Weighted average shares outstanding – diluted Class A2
164.2

 
126.4

 
161.1

 
111.0

Weighted average shares outstanding – adjusted operating3
195.5

 
196.1

 
195.9

 
195.9


 
Three months ended December 31,
 
Years ended December 31,
(In millions)
2018
 
2017
 
2018
 
2017
Notable items
 
 
 
 
 
 
 
Retirement Services adjusted operating income
$
296

 
$
287

 
$
1,201

 
$
1,038

Rider reserve and DAC equity market performance
58

 
(55
)
 
21

 
(152
)
Proceeds from bond previously written down

 

 

 
(14
)
Unlocking

 

 
13

 
20

Tax impact of notable items
(5
)
 
4

 
(3
)
 
10

Retirement Services notable items
53

 
(51
)
 
31

 
(136
)
Retirement Services adjusted operating income excluding notable items
349

 
236

 
1,232

 
902

 
 
 
 
 
 
 
 
Corporate and Other adjusted operating income (loss)
(56
)
 
26

 
(61
)
 
17

Germany adjusted operating loss, net of tax

 
(30
)
 

 
(2
)
Corporate and Other adjusted operating income (loss) excluding notable items
(56
)
 
(4
)
 
(61
)
 
15

Adjusted operating income excluding notable items
$
293

 
$
232

 
$
1,171

 
$
917


Note: Prior period financial results have been revised to reflect immaterial adjustments. For further information, please refer to Financial Statement Revisions.
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 0 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 $(87) million (84% of net income) and $281 million (64% of net income) for the three months ended December 31, 2018 and 2017, respectively. Diluted earnings per share on a GAAP basis for Class A common shares are based on allocated net income of $857 million (81% of net income) and $767 million (56% of net income) for the years ended December 31, 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.

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Segment Results
Retirement Services

Fourth Quarter 2018 Results
For the fourth quarter 2018, Retirement Services adjusted operating income was $296 million, an increase of $9 million, or 3%, from the fourth quarter 2017. Adjusted operating income, excluding notable items, was $349 million, an increase of $113 million, or 48%, from the prior year quarter, resulting in an adjusted operating ROE of 18.8%. The increase was primarily driven by growth in investment income of $402 million resulting from invested asset growth, reflecting the reinsured Voya and Lincoln assets and strong organic deposits; increased floating rate investment income of $28 million; and strong alternative investment performance. Partially offsetting this increase was a higher cost of crediting driven by block growth, including the reinsured Voya and Lincoln liabilities, and higher option costs.
Notable items for the fourth quarter 2018 included $58 million of unfavorable rider reserves and DAC amortization primarily due to equity market depreciation. In the fourth quarter 2017, notable items included a $55 million benefit from equity market outperformance.
Investment margin on deferred annuities was 2.57% for the fourth quarter 2018, a decrease of 13 basis points from the prior year quarter.
The net investment earned rate was 4.57% for the fourth quarter 2018, in line with the prior year quarter. The earned rate in the fourth quarter 2018 benefited from higher floating rate investment income, partially offset by lower yields on the reinsured Voya and Lincoln assets. Alternative investments returned 11.00% in the fourth quarter 2018, compared to 7.92% in the prior year quarter, reflecting strong performance primarily from both MidCap and AmeriHome.
Cost of crediting was 2.00% for the fourth quarter 2018, an increase of 13 basis points compared to the prior year quarter, primarily driven by higher option costs as well as higher crediting rates on the reinsured Voya and Lincoln liabilities.
Full Year 2018 Results
For the full year 2018, Retirement Services adjusted operating income was $1.2 billion, an increase of $163 million, or 16%, from the full year 2017. Retirement Services adjusted operating income, excluding notable items, was $1.2 billion, an increase of $330 million, or 37%, from the prior year quarter, resulting in an adjusted operating ROE of 18.8%. The increase was driven by higher net investment income, partially offset by an increase in cost of crediting and other liability costs.
In 2018, net investment income increased primarily due to invested asset growth, reflecting the reinsured Voya and Lincoln assets, strong organic deposits as well as increased floating rate investment income due to higher short-term interest rates. Cost of crediting increased due to block growth and higher option costs. Other liability costs were higher due to growth in the block, including the reinsured Voya and Lincoln liabilities and unfavorable equity market performance.
Investment margin on deferred annuities was 2.65% for the full year 2018, a decrease of 17 basis points from the prior year.
The net investment earned rate was 4.60% for the full year 2018, a decrease of 10 basis points from the prior year, primarily due to lower returns on the assets from the Voya and Lincoln transactions. The full year 2018 net investment earned rate reflects a 4.36% return for fixed income and other, and an 11.15% return for alternatives. Fixed income and other investment income benefited from $113 million of additional floating rate investment income. Alternative income was primarily driven by higher income from both MidCap and AmeriHome.
Cost of crediting was 1.95% for the full year 2018, an increase of 7 basis points compared to the prior year, as a result of higher option costs as well as higher crediting rates on the reinsured Voya and Lincoln liabilities.

5



Corporate and Other

Fourth Quarter 2018 Results
In the fourth quarter 2018, Corporate and Other had an adjusted operating loss of $56 million primarily driven by lower alternative investment income related to the unrealized mark-to-market decline of two public equity investments. In the fourth quarter 2017, adjusted operating income was $26 million driven by $30 million of adjusted operating income in our previously consolidated German subsidiary.
Full Year 2018 Results
For the full year 2018, Corporate and Other had an adjusted operating loss of $61 million, as compared to adjusted operating income of $17 million for the full year 2017. The decrease was driven by lower alternative investment income related to public equity market depreciation and debt costs.
Share Repurchase Activity
From December 10, 2018 through February 22, 2019, Athene repurchased 3.7 million shares of its common stock for $147 million under a previously announced share repurchase program. During this period, shares were purchased at an average cost of $40.20 per share. This activity includes 2.5 million shares repurchased during the fourth quarter of 2018 for $100 million. 
Conference Call Information
Athene will host a conference call on Tuesday, February 26, 2019 at 10 a.m. ET. During the call, members of Athene's senior management team will review Athene's financial results for the fourth quarter and full year ended December 31, 2018. This press release and the fourth quarter and full year 2018 earnings presentation and financial supplement will be posted to Athene’s website at ir.athene.com.
Live conference call: Toll-free at 1-866-901-0811 (domestic) or 1-346-354-0810 (international)
Conference call replay available through March 13, 2019 at 1-800-585-8367 (domestic) or 1-404-537-3406 (international)
Conference ID number: 5463597
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
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 $125.5 billion as of December 31, 2018. Athene's principal subsidiaries include Athene Annuity & Life Assurance Company, a Delaware-domiciled insurance company, Athene Annuity and Life Company,

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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, 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. See Non-GAAP Measure Reconciliations for the appropriate reconciliations to the corresponding 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 useful in analyzing our business performance and 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 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 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 financial performance.

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

7



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, after considering the dilutive effects of the more dilutive securities in the sequence, 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 capital structure 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 Variable Interest Entities (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 total debt and 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 useful 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 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

8



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 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.

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 invested assets, which does not correspond to total investments, including investments in related parties, as disclosed in our consolidated financial statements and notes thereto. Invested assets represents the investments that directly back our reserve 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).

9



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 September 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.
Financial Statement Revisions 
As will further be described in the footnotes to our financial statements to be included in our next annual report on Form 10-K, certain account balances presented herein as of or for the periods ended prior to October 1, 2018 have been adjusted for immaterial corrections identified during the year ended December 31, 2018. The corrections identified impacted a non-operating item related to the completeness and accuracy of data used to calculate a key input in the determination of the value of the host contract within our fixed indexed annuity liabilities and other unrelated immaterial errors. We assessed the materiality of these errors individually and in the aggregate, and concluded these errors are not material to the previously reported consolidated financial statements as a whole. The details of the financial statement revisions can be found in the Appendix of the fourth quarter and full year earnings presentation available at ir.athene.com.
# # #

10



Athene Holding Ltd.
Condensed Consolidated Balance Sheets (unaudited)
 
December 31,
 
December 31,
(In millions)
2018
 
2017
Assets
 
 
 
Investments
 
 
 
Available-for-sale securities, at fair value
$
59,265

 
$
61,008

Trading securities, at fair value
1,949

 
2,183

Equity securities, at fair value
216

 
803

Mortgage loans, net of allowances
10,340

 
6,233

Investment funds
703

 
699

Policy loans
488

 
542

Funds withheld at interest
15,023

 
7,085

Derivative assets
1,043

 
2,551

Real estate

 
624

Short-term investments, at fair value
191

 
201

Other investments
122

 
133

Total investments
89,340

 
82,062

Cash and cash equivalents
2,911

 
4,888

Restricted cash
492

 
105

Investments in related parties
 
 
 
Available-for-sale securities, at fair value
1,437

 
410

Trading securities, at fair value
249

 
307

Equity securities, at fair value
120

 

Mortgage loans
291

 

Investment funds
2,232

 
1,310

Funds withheld at interest
13,577

 

Short-term investments, at fair value

 
52

Other investments
386

 
238

Accrued investment income
682

 
652

Reinsurance recoverable
5,534

 
5,332

Deferred acquisition costs, deferred sales inducements and value of business acquired
5,907

 
2,972

Other assets
1,635

 
969

Assets of consolidated variable interest entities
 
 
 
Investments
 
 
 
Trading securities, at fair value – related party
35

 
48

Equity securities, at fair value – related party
50

 
240

Investment funds
624

 
571

Cash and cash equivalents
2

 
4

Other assets
1

 
1

Total assets
$
125,505

 
$
100,161

(Continued)


11



Athene Holding Ltd.
Condensed Consolidated Balance Sheets (unaudited)
 
December 31,
 
December 31,
(In millions)
2018
 
2017
Liabilities and Equity
 
 
 
Liabilities
 
 
 
Interest sensitive contract liabilities
$
96,610

 
$
68,099

Future policy benefits
16,704

 
17,557

Other policy claims and benefits
142

 
211

Dividends payable to policyholders
118

 
1,025

Long-term debt
991

 

Derivative liabilities
85

 
134

Payables for collateral on derivatives
969

 
2,323

Funds withheld liability
721

 
407

Other liabilities
888

 
1,227

Liabilities of consolidated variable interest entities
1

 
2

Total liabilities
117,229

 
90,985

Equity
 
 
 
Common stock

 

Additional paid-in capital
3,462

 
3,472

Retained earnings
5,286

 
4,255

Accumulated other comprehensive income
(472
)
 
1,449

Total shareholders' equity
8,276

 
9,176

Total liabilities and equity
$
125,505

 
$
100,161

(Concluded)

12



Athene Holding Ltd.
Condensed Consolidated Statements of Income (unaudited)
 
Three months ended December 31,
 
Years ended December 31,
(In millions)
2018
 
2017
 
2018
 
2017
Revenue
 
 
 
 
 
 
 
Premiums
$
1,833

 
$
1,962

 
$
3,368

 
$
2,465

Product charges
128

 
88

 
449

 
340

Net investment income
1,121

 
842

 
4,004

 
3,269

Investment related gains (losses)
(1,902
)
 
957

 
(1,324
)
 
2,572

OTTI investment losses
 
 
 
 
 
 
 
OTTI losses
(14
)
 
(6
)
 
(24
)
 
(29
)
OTTI losses reclassified to (from) OCI
2

 
(2
)
 
6

 
(4
)
Net OTTI losses
(12
)
 
(8
)
 
(18
)
 
(33
)
Other revenues
4

 
13

 
26

 
37

Revenues of consolidated variable interest entities
 
 
 
 
 
 
 
Net investment income
17

 
12

 
56

 
42

Investment related gains (losses)
(35
)
 
6

 
(18
)
 
35

Total revenues
1,154

 
3,872

 
6,543

 
8,727

Benefits and Expenses
 
 
 
 
 
 
 
Interest sensitive contract benefits
(825
)
 
971

 
290

 
2,866

Amortization of DSI
(12
)
 
21

 
54

 
63

Future policy and other policy benefits
1,994

 
2,118

 
4,187

 
3,200

Amortization of DAC and VOBA
(33
)
 
93

 
174

 
344

Dividends to policyholders
5

 
(11
)
 
37

 
118

Policy and other operating expenses
172

 
193

 
625

 
672

Operating expenses of consolidated variable interest entities

 

 
1

 

Total benefits and expenses
1,301

 
3,385

 
5,368

 
7,263

Income (loss) before income taxes
(147
)
 
487

 
1,175

 
1,464

Income tax expense (benefit)
(43
)
 
48

 
122

 
106

Net income (loss)
$
(104
)
 
$
439

 
$
1,053

 
$
1,358



13



Non-GAAP Measure Reconciliations

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

 
Three months ended December 31,
 
Years ended December 31,
(In millions)
2018
 
2017
 
2018
 
2017
Net income (loss)
$
(104
)
 
$
439

 
$
1,053

 
$
1,358

Less: Total non-operating adjustments
(344
)
 
126

 
(87
)
 
303

Adjusted operating income
240

 
313

 
1,140

 
1,055

Notable Items
53

 
(81
)
 
31

 
(138
)
Adjusted operating income excluding notable items
$
293

 
$
232

 
$
1,171

 
$
917

 
 
 
 
 
 
 
 
Retirement Services adjusted operating income
$
296

 
$
287

 
$
1,201

 
$
1,038

Rider reserve and DAC equity market performance
58

 
(55
)
 
21

 
(152
)
Unlocking

 

 
13

 
20

Proceeds from bond previously written down

 

 

 
(14
)
Tax impact of notable items
(5
)
 
4

 
(3
)
 
10

Retirement Services notable items
53

 
(51
)
 
31

 
(136
)
Retirement Services adjusted operating income excluding notable items
349

 
236

 
1,232

 
902

 
 
 
 
 
 
 
 
Corporate and Other adjusted operating income (loss)
(56
)
 
26

 
(61
)
 
17

Germany adjusted operating loss, net of tax

 
(30
)
 

 
(2
)
Corporate and Other adjusted operating income (loss) excluding notable items
(56
)
 
(4
)
 
(61
)
 
15

Adjusted operating income excluding notable items
$
293

 
$
232

 
$
1,171

 
$
917


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

 
Three months ended December 31,
 
Years ended December 31,
 
2018
 
2017
 
2018
 
2017
Basic earnings per share – Class A common shares
$
(0.53
)
 
$
2.23

 
$
5.34

 
$
6.95

Non-operating adjustments
 
 
 
 
 
 
 
Investment gains (losses), net of offsets
(0.59
)
 
0.30

 
(1.40
)
 
1.02

Change in fair values of derivatives and embedded derivatives – FIAs, net of offsets
(1.47
)
 
0.54

 
1.24

 
1.17

Integration, restructuring and other non-operating expenses
(0.02
)
 
(0.18
)
 
(0.12
)
 
(0.35
)
Stock compensation expense
(0.01
)
 
(0.02
)
 
(0.05
)
 
(0.17
)
Income tax (expense) benefit – non-operating
0.33

 
(0.01
)
 
(0.11
)
 
(0.13
)
Less: Total non-operating adjustments
(1.76
)
 
0.63

 
(0.44
)
 
1.54

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

 

 
(0.04
)
 
0.02

Adjusted operating earnings per share
$
1.23

 
$
1.60

 
$
5.82

 
$
5.39



14




The reconciliation of basic weighted average Class A shares to weighted average shares outstanding – adjusted operating, is as follows:
 
Three months ended December 31,
 
Years ended December 31,
(In millions)
2018
 
2017
 
2018
 
2017
Basic weighted average shares outstanding – Class A
164.2

 
126.0

 
160.5

 
107.7

Conversion of Class B shares to Class A shares
25.5

 
63.5

 
29.3

 
81.6

Conversion of Class M shares to Class A shares
5.2

 
6.1

 
5.6

 
6.1

Effect of other stock compensation plans
0.6

 
0.5

 
0.5

 
0.5

Weighted average shares outstanding – adjusted operating
195.5

 
196.1

 
195.9

 
195.9


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:
 
December 31,
(In millions)
2018
 
2017
Total shareholders' equity
$
8,276

 
$
9,176

Less: AOCI
(472
)
 
1,449

Less: Accumulated reinsurance unrealized gains and losses
(75
)
 
161

Total adjusted shareholders' equity
$
8,823

 
$
7,566

 
 
 
 
Retirement Services
$
7,807

 
$
5,237

Corporate and Other
1,016

 
2,329

Total adjusted shareholders' equity
$
8,823

 
$
7,566


The reconciliation of average shareholders’ equity to average adjusted shareholders’ equity included in adjusted ROE and adjusted operating ROE is as follows:
 
Three months ended December 31,
 
Years ended December 31,
(In millions)
2018
 
2017
 
2018
 
2017
Average shareholders' equity
$
8,627

 
$
8,912

 
$
8,726

 
$
8,029

Less: Average AOCI
(220
)
 
1,316

 
489

 
908

Less: Average accumulated reinsurance unrealized gains and losses
(53
)
 
163

 
43

 
112

Average adjusted shareholders' equity
$
8,900

 
$
7,433

 
$
8,194

 
$
7,009

 
 
 
 
 
 
 
 
Retirement Services
$
7,416

 
$
5,200

 
$
6,522

 
$
4,823

Corporate and Other
1,484

 
2,233

 
1,672

 
2,186

Average adjusted shareholders' equity
$
8,900

 
$
7,433

 
$
8,194

 
$
7,009


The reconciliation of net income to adjusted net income included in adjusted ROE is as follows:
 
Three months ended December 31,
 
Years ended December 31,
(In millions)
2018
 
2017
 
2018
 
2017
Net income
$
(104
)
 
$
439

 
$
1,053

 
$
1,358

Reinsurance unrealized gains and losses
44

 
2

 
236

 
(98
)
Adjusted net income
$
(60
)
 
$
441

 
$
1,289

 
$
1,260



15



The reconciliation of basic Class A shares outstanding to adjusted operating common shares outstanding is as follows:
 
December 31,
(In millions)
2018
 
2017
Class A common shares outstanding
162.2

 
142.2

Conversion of Class B shares to Class A shares
25.4

 
47.4

Conversion of Class M shares to Class A shares
4.9

 
6.4

Effect of other stock compensation plans
1.0

 
0.9

Adjusted operating common shares outstanding
193.5

 
196.9


The reconciliation of book value per share to adjusted book value per share is as follows:
 
December 31,
 
2018
 
2017
Book value per share
$
42.45

 
$
46.60

AOCI
2.42

 
(7.36
)
Accumulated reinsurance unrealized gains and losses
0.39

 
(0.82
)
Effect of items convertible to or settled in Class A common shares
0.33

 
0.01

Adjusted book value per share
$
45.59

 
$
38.43


The reconciliation of debt to capital ratio to adjusted debt to capital ratio is as follows:
 
December 31,
 
2018
 
2017
Total debt
$
991

 
$

Total shareholders' equity
8,276

 
9,176

Total capitalization
9,267

 
9,176

Less: AOCI
(472
)
 
1,449

Less: Accumulated reinsurance unrealized gains and losses
(75
)
 
161

Total adjusted capitalization
$
9,814

 
$
7,566

 
 
 
 
Debt to capital ratio
10.7
 %
 
%
AOCI
(0.5
)%
 
%
Accumulated reinsurance unrealized gains and losses
(0.1
)%
 
%
Adjusted debt to capital ratio
10.1
 %
 
%


16



The reconciliation of net investment income to net investment earnings and earned rate is as follows:
 
Three months ended December 31,
 
Years ended December 31,
 
2018
 
2017
 
2018
 
2017
(In millions)
Dollar
 
Rate
 
Dollar
 
Rate
 
Dollar
 
Rate
 
Dollar
 
Rate
GAAP net investment income
$
1,121

 
4.10
 %
 
$
842

 
4.18
 %
 
$
4,004

 
4.30
 %
 
$
3,269

 
4.27
 %
Reinsurance embedded derivative impacts
132

 
0.48
 %
 
54

 
0.27
 %
 
301

 
0.32
 %
 
191

 
0.25
 %
Net VIE earnings
(18
)
 
(0.07
)%
 
18

 
0.09
 %
 
37

 
0.04
 %
 
77

 
0.10
 %
Alternative income gain (loss)
(20
)
 
(0.07
)%
 
(9
)
 
(0.04
)%
 
(34
)
 
(0.04
)%
 
(20
)
 
(0.03
)%
Held for trading amortization
(11
)
 
(0.04
)%
 
(44
)
 
(0.22
)%
 
(76
)
 
(0.08
)%
 
(94
)
 
(0.12
)%
Total adjustments to arrive at net investment earnings/earned rate
83

 
0.30
 %
 
19

 
0.10
 %
 
228

 
0.24
 %
 
154

 
0.20
 %
Total net investment earnings/earned rate
$
1,204

 
4.40
 %
 
$
861

 
4.28
 %
 
$
4,232

 
4.54
 %
 
$
3,423

 
4.47
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services
$
1,231

 
4.57
 %
 
$
829

 
4.57
 %
 
$
4,188

 
4.60
 %
 
$
3,241

 
4.70
 %
Corporate and Other
(27
)
 
(7.57
)%
 
32

 
1.61
 %
 
44

 
1.99
 %
 
182

 
2.42
 %
Total net investment earnings/earned rate
$
1,204

 
4.40
 %
 
$
861

 
4.28
 %
 
$
4,232

 
4.54
 %
 
$
3,423

 
4.47
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services average invested assets
$
107,939

 
 
 
$
72,587

 
 
 
$
90,995

 
 
 
$
69,014

 
 
Corporate and Other average invested assets
1,484

 
 
 
7,964

 
 
 
2,182

 
 
 
7,541

 
 
Average invested assets
$
109,423

 
 
 
$
80,551

 
 
 
$
93,177

 
 
 
$
76,555

 
 

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 December 31,
 
Years ended December 31,
 
2018
 
2017
 
2018
 
2017
(In millions)
Dollar
 
Rate
 
Dollar
 
Rate
 
Dollar
 
Rate
 
Dollar
 
Rate
GAAP interest sensitive contract benefits
$
(825
)
 
(3.71
)%
 
$
971

 
6.69
 %
 
$
290

 
0.40
 %
 
$
2,866

 
5.06
 %
Interest credited other than deferred annuities
(38
)
 
(0.17
)%
 
(35
)
 
(0.24
)%
 
(163
)
 
(0.22
)%
 
(125
)
 
(0.22
)%
FIA option costs
275

 
1.24
 %
 
159

 
1.09
 %
 
886

 
1.20
 %
 
607

 
1.07
 %
Product charges (strategy fees)
(28
)
 
(0.12
)%
 
(20
)
 
(0.14
)%
 
(98
)
 
(0.13
)%
 
(73
)
 
(0.13
)%
Reinsurance embedded derivative impacts
14

 
0.05
 %
 
10

 
0.07
 %
 
49

 
0.07
 %
 
37

 
0.07
 %
Change in fair values of embedded derivatives – FIAs
1,039

 
4.68
 %
 
(810
)
 
(5.58
)%
 
436

 
0.59
 %
 
(2,252
)
 
(3.98
)%
Negative VOBA amortization
9

 
0.04
 %
 
10

 
0.07
 %
 
31

 
0.04
 %
 
40

 
0.07
 %
Unit linked change in reserve

 
 %
 
(12
)
 
(0.08
)%
 

 
 %
 
(29
)
 
(0.05
)%
Other changes in interest sensitive contract liabilities
(3
)
 
(0.01
)%
 
(2
)
 
(0.01
)%
 

 
 %
 
(5
)
 
(0.01
)%
Total adjustments to arrive at cost of crediting on deferred annuities
1,268

 
5.71
 %
 
(700
)
 
(4.82
)%
 
1,141

 
1.55
 %
 
(1,800
)
 
(3.18
)%
Retirement Services cost of crediting on deferred annuities
$
443

 
2.00
 %
 
$
271

 
1.87
 %
 
$
1,431

 
1.95
 %
 
$
1,066

 
1.88
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average account value on deferred annuities
$
88,874

 
 
 
$
58,033

 
 
 
$
73,567

 
 
 
$
56,589

 
 







17



The reconciliation of benefits and expenses to other liability costs is as follows:
 
Three months ended December 31,
 
Years ended December 31,
 
2018
 
2017
 
2018
 
2017
GAAP benefits and expenses
$
1,301

 
$
3,385

 
$
5,368

 
$
7,263

Premiums
(1,833
)
 
(1,962
)
 
(3,368
)
 
(2,465
)
Product charges
(128
)
 
(88
)
 
(449
)
 
(340
)
Other revenues
(4
)
 
(13
)
 
(26
)
 
(37
)
Cost of crediting
(154
)
 
(102
)
 
(496
)
 
(423
)
Change in fair value of embedded derivatives - FIA, net of offsets
1,266

 
(873
)
 
327

 
(2,404
)
DAC, DSI and VOBA amortization related to investment gains and losses
36

 
(14
)
 
110

 
(65
)
Rider reserves
8

 
(7
)
 
16

 
(16
)
Policy and other operating expenses, excluding policy acquisition expenses
(102
)
 
(130
)
 
(394
)
 
(435
)
VIE operating expenses

 

 
(1
)
 

AmerUs closed block fair value liability
14

 
(19
)
 
112

 
(68
)
Policyholder dividends

 
(24
)
 

 
(84
)
Other
1

 
(12
)
 
10

 
(30
)
Total adjustments to arrive at other liability costs
(896
)
 
(3,244
)
 
(4,159
)
 
(6,367
)
Other liability costs
$
405

 
$
141

 
$
1,209

 
$
896

 
 
 
 
 
 
 
 
Retirement Services
$
405

 
$
177

 
$
1,209

 
$
839

Corporate and Other

 
(36
)
 

 
57

Consolidated other liability costs
$
405

 
$
141

 
$
1,209

 
$
896


The reconciliation of policy and other expenses to operating expenses is as follows:
 
Three months ended December 31,
 
Years ended December 31,
 
2018
 
2017
 
2018
 
2017
Policy and other operating expenses
$
172

 
$
193

 
$
625

 
$
672

Interest expense
(13
)
 
(6
)
 
(57
)
 
(16
)
Policy acquisition expenses, net of deferrals
(70
)
 
(63
)
 
(232
)
 
(237
)
Integration, restructuring and other non-operating expenses
(4
)
 
(34
)
 
(22
)
 
(68
)
Stock compensation expenses
(3
)
 
(3
)
 
(11
)
 
(33
)
Total adjustments to arrive at operating expenses
(90
)
 
(106
)
 
(322
)
 
(354
)
Operating expenses
$
82

 
$
87

 
$
303

 
$
318

 
 
 
 
 
 
 
 
Retirement Services
$
65

 
$
55

 
$
242

 
$
212

Corporate and Other
17

 
32

 
61

 
106

Consolidated operating expenses
$
82

 
$
87

 
$
303

 
$
318



18



The reconciliation of total investments, including related parties, to invested assets is as follows:
 
December 31,
(In millions)
2018
 
2017
Total investments, including related parties
$
107,632

 
$
84,379

Derivative assets
(1,043
)
 
(2,551
)
Cash and cash equivalents (including restricted cash)
3,403

 
4,993

Accrued investment income
682

 
652

Payables for collateral on derivatives
(969
)
 
(2,323
)
Reinsurance funds withheld and modified coinsurance
223

 
(579
)
VIE and VOE assets, liabilities and noncontrolling interest
718

 
862

Unrealized (gains) losses
808

 
(2,794
)
Ceded policy loans
(281
)
 
(308
)
Net investment receivables (payables)
(139
)
 
(33
)
Total adjustments to arrive at invested assets
3,402

 
(2,081
)
Total invested assets
$
111,034

 
$
82,298


19
(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit
396866322_financialsupplementcoverk.jpg



Athene Holding Ltd.
Financial Supplement—December 31, 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—December 31, 2018
Notes to the Financial Supplement

Financial Statement Revisions
As will further be described in the footnotes to our financial statements to be included in our next annual report on Form 10-K, certain account balances presented herein as of or for the periods ended prior to October 1, 2018 have been adjusted for immaterial corrections identified during the year ended December 31, 2018. The corrections identified impacted a non-operating item related to the completeness and accuracy of data used to calculate a key input in the determination of the value of the host contract within our fixed indexed annuity liabilities and other unrelated immaterial errors. We assessed the materiality of these errors individually and in the aggregate, and concluded these errors are not material to the previously reported consolidated financial statements as a whole.

Key Operating and 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. See Non-GAAP Measure Reconciliations for the appropriate reconciliations to the corresponding 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 other-than-temporary impairment (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 benefit (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 fluctuations 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 related to our underlying profitability drivers 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 related to our underlying profitability drivers 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 related to our underlying profitability drivers.


1

Table of Contents

Athene Holding Ltd.
Financial Supplement—December 31, 2018
Notes to the Financial Supplement

Income Tax (Expense) Benefit – Non-operating—The non-operating income tax expense represents the income tax effect of non-operating adjustments and is computed by applying the appropriate jurisdiction’s tax rate 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 useful in analyzing our business performance and 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

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. 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 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 financial performance.

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, after considering the dilutive effects of the more dilutive securities in the sequence, 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 capital structure 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 Variable Interest Entities (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 total debt and shareholders’ equity are significant to gaining an understanding of our capitalization, debt utilization, and debt capacity.