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Section 1: DEF 14A (DEF 14A)

DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

(Amendment No.    )

 

 

Filed by the Registrant:  ☒                    Filed by a Party other than the Registrant:  ☐

Check the appropriate box:

 

   Preliminary Proxy Statement
   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
   Definitive Proxy Statement
   Definitive Additional Materials
   Soliciting Material Pursuant to §240.14a-12

ATHENE HOLDING LTD.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)   

Title of each class of securities to which transaction applies:

 

     

  (2)   

Aggregate number of securities to which transaction applies:

 

     

  (3)   

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

  (4)   

Proposed maximum aggregate value of transaction:

 

     

  (5)   

Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)   

Amount Previously Paid:

 

     

  (2)   

Form, Schedule or Registration Statement No.:

 

     

  (3)   

Filing Party:

 

     

  (4)   

Date Filed:

 

     

 

 

 


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ATHENE HOLDING LTD.

Chesney House, 96 Pitts Bay Road,

Pembroke, HM08, Bermuda

NOTICE OF 2019 ANNUAL GENERAL MEETING OF SHAREHOLDERS

OF ATHENE HOLDING LTD.

 

 

Hamilton, Bermuda

April 22, 2019

Dear Shareholder:

Notice is hereby given that the annual general meeting of the holders of Class A and Class B common shares (the “Shareholders”) of Athene Holding Ltd. (“AHL” and together with its consolidated subsidiaries, the “Company,” “our,” “us,” or “we”) is to be held at The Langham Hotel, 1c Portland Place, Regent Street, London, W1B 1JA, United Kingdom on June 4, 2019 at 8:30 a.m. Greenwich Mean Time for the following purposes:

 

  1.

to elect the directors of Athene Holding Ltd. named in the accompanying proxy statement;

 

  2.

to authorize the election of the directors of Athene Life Re Ltd. (“ALRe”) named in the accompanying proxy statement;

 

  3.

to authorize the election of the directors of Athene Bermuda Employee Company Ltd. named in the accompanying proxy statement;

 

  4.

to authorize the election of the directors of Athene IP Holding Ltd. named in the accompanying proxy statement;

 

  5.

to authorize the election of the directors of Athene IP Development Ltd. named in the accompanying proxy statement;

 

  6.

to appoint PricewaterhouseCoopers LLP (“PwC”), an independent registered accounting firm, as the Company’s independent auditor to serve until the close of the Company’s next annual general meeting in 2020;

 

  7.

to refer the determination of the remuneration of PwC to the audit committee of the board of directors of the Company;

 

  8.

to vote on a non-binding advisory resolution to approve the compensation paid to the Company’s named executive officers (“Say on Pay”);

 

  9.

to approve the Twelfth Amended and Restated Bye-laws of the Company; and

 

  10.

to approve the Company’s 2019 Share Incentive Plan.

The board of directors recommends a vote FOR each of Items 1 through 10. The Company will also present the Company’s audited consolidated financial statements for the year ended December 31, 2018 at the annual general meeting pursuant to the Bermuda Companies Act 1981, as amended, and Bye-law 78 of the Company’s Eleventh Amended and Restated Bye-laws (the “Bye-laws”).

Only Shareholders of record, as shown by the Register of Shareholders and the records of Computershare and the Company at the close of business on April 5, 2019 (the “Record Date”) are entitled to receive notice and only those Shareholders as of the Record Date able to affirmatively make certain representations contained in the accompanying proxy card are entitled to vote at the annual general meeting. CERTAIN HOLDERS OF THE COMPANY’S CLASS A COMMON SHARES MAY NOT BE ENTITLED TO VOTE OR MAY HAVE THEIR VOTING RIGHTS LIMITED OR OTHERWISE ADJUSTED IN ACCORDANCE WITH THE BYE-LAWS AND AS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT. IN ACCORDANCE WITH THE BYE-LAWS, THE BOARD OF DIRECTORS RETAINS THE


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AUTHORITY, IN ITS SOLE AND ABSOLUTE DISCRETION, TO DETERMINE WHETHER A HOLDER’S SHARES CARRY NO VOTING RIGHTS, REDUCED VOTING RIGHTS OR ADJUSTED VOTING RIGHTS. PLEASE SEE “IMPORTANT VOTING INFORMATION” IN THE ACCOMPANYING PROXY STATEMENT FOR A DESCRIPTION OF THE VOTING RIGHTS APPLICABLE TO HOLDERS OF CLASS A AND CLASS B COMMON SHARES, TO THE EXTENT THEY ARE ENTITLED TO VOTE.

The proxy statement and accompanying materials are first being made available to Shareholders on or about April 25, 2019.

Under Bermuda law, if an item set out in this Notice is no longer applicable at the time of the meeting, the Chairman of the meeting may decide not to put such resolution to a vote at the meeting.

YOU MAY COMPLETE YOUR PROXY BY INTERNET OR MAIL AS SET FORTH ON THE ENCLOSED PROXY CARD, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. PROXIES SUBMITTED BY THE INTERNET MUST BE RECEIVED BY 9:00 A.M., ATLANTIC DAYLIGHT TIME, ON JUNE 3, 2019. YOU MAY ALSO ATTEND THE MEETING AND VOTE IN PERSON. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT. YOUR SHARES WILL BE VOTED PURSUANT TO THE INSTRUCTIONS CONTAINED IN YOUR COMPLETED PROXY. IF YOU RETURN A SIGNED PROXY CARD AND NO INSTRUCTIONS ARE GIVEN, YOUR SHARES WILL BE VOTED “FOR” ITEMS 6 THROUGH 10.

Important Notice Regarding the Availability of Proxy Materials for the Annual General Meeting to be Held on June 4, 2019: the proxy statement for Shareholders is also available at www.investorvote.com/ATH.

 

By order of the board of directors,
/s/ Natasha Scotland Courcy
Natasha Scotland Courcy
Corporate Secretary


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TABLE OF CONTENTS

   PAGE  
IMPORTANT INFORMATION ABOUT THE ANNUAL GENERAL MEETING AND PROXY PROCEDURES      1  

IMPORTANT VOTING INFORMATION

     3  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

     7  

CORPORATE GOVERNANCE

     12  

MANAGEMENT

     22  

COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS

     29  
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS      49  

PROPOSAL 1:

     63  

ELECTION OF DIRECTORS OF THE COMPANY

     63  

PROPOSAL 2:

     63  

AUTHORIZATION OF THE ELECTION OF DIRECTORS OF ATHENE LIFE RE LTD. AT THE 2019 ANNUAL GENERAL MEETING OF ATHENE LIFE RE LTD.

     63  

PROPOSAL 3:

     63  

AUTHORIZATION OF THE ELECTION OF DIRECTORS OF ATHENE BERMUDA EMPLOYEE COMPANY LTD. AT THE 2019 ANNUAL GENERAL MEETING OF ATHENE BERMUDA EMPLOYEE COMPANY LTD.

     63  

PROPOSAL 4:

     64  

AUTHORIZATION OF THE ELECTION OF DIRECTORS OF ATHENE IP HOLDING LTD. AT THE 2019 ANNUAL GENERAL MEETING OF ATHENE IP HOLDING LTD.

     64  

PROPOSAL 5:

     65  

AUTHORIZATION OF THE ELECTION OF DIRECTORS OF ATHENE IP DEVELOPMENT LTD. AT THE 2019 ANNUAL GENERAL MEETING OF ATHENE IP DEVELOPMENT LTD.

     65  

PROPOSAL 6:

     65  

APPOINTMENT OF INDEPENDENT AUDITOR

     65  

PROPOSAL 7:

     65  

REMUNERATION OF INDEPENDENT AUDITOR

     65  

PROPOSAL 8:

     66  

SAY ON PAY VOTE

     66  

PROPOSAL 9:

     66  

APPROVAL OF TWELFTH AMENDED AND RESTATED BYE-LAWS OF THE COMPANY

     66  

PROPOSAL 10:

     68  

APPROVAL OF THE COMPANY’S 2019 SHARE INCENTIVE PLAN

     68  

ADDITIONAL INFORMATION AND MATTERS

     77  


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ATHENE HOLDING LTD.

PROXY STATEMENT

FOR

THE ANNUAL GENERAL MEETING OF HOLDERS OF CLASS A AND CLASS B COMMON SHARES

TO BE HELD ON JUNE 4, 2019

 

 

IMPORTANT INFORMATION ABOUT THE ANNUAL GENERAL MEETING

AND PROXY PROCEDURES

The accompanying proxy is solicited by the board of directors of Athene Holding Ltd. (“AHL” and together with its consolidated subsidiaries, the “Company,” “our,” “us,” or “we”) to be voted at the annual general meeting (“Annual General Meeting”) of holders of the Company’s Class A and Class B common shares (the “Shareholders” and the “Shares,” respectively) to be held at The Langham Hotel, 1c Portland Place, Regent Street, London, W1B 1JA, United Kingdom on June 4, 2019 at 8:30 a.m. Greenwich Mean Time, and any adjournments thereof. This proxy statement and the accompanying materials are first being made available to Shareholders on or about April 25, 2019.

The Purpose of the Annual General Meeting

At the Annual General Meeting, the Shareholders will vote in person or by proxy on the following matters as set forth in the notice of the meeting:

 

  1.

to elect the directors of Athene Holding Ltd. named in this proxy statement;

 

  2.

to authorize the election of the directors of Athene Life Re Ltd. (“ALRe”) named in this proxy statement;

 

  3.

to authorize the election of the directors of Athene Bermuda Employee Company Ltd. named in this proxy statement;

 

  4.

to authorize the election of the directors of Athene IP Holding Ltd. named in this proxy statement;

 

  5.

to authorize the election of the directors of Athene IP Development Ltd. named in this proxy statement;

 

  6.

to appoint PricewaterhouseCoopers LLP (“PwC”), an independent registered accounting firm, as the Company’s independent auditor to serve until the close of the Company’s next annual general meeting in 2020;

 

  7.

to refer the determination of the remuneration of PwC to the audit committee of the board of directors of the Company;

 

  8.

to vote on a non-binding advisory resolution to approve the compensation paid to the Company’s named executive officers (“Say on Pay”);

 

  9.

to approve the Twelfth Amended and Restated Bye-laws of the Company; and

 

  10.

to approve the Company’s 2019 Share Incentive Plan.

Presentation of Financial Statements

In accordance with the Bermuda Companies Act 1981, as amended, and Bye-law 78 of the Company’s Eleventh Amended and Restated Bye-laws (the “Bye-laws”), the Company’s audited consolidated financial statements for the year ended December 31, 2018 prepared in accordance with accounting principles generally accepted in the United States will be presented at the Annual General Meeting and will be made available not

 

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later than five (5) business days prior to the Annual General Meeting. The board of directors of the Company has approved these financial statements. There is no requirement under Bermuda law that these financial statements be approved by Shareholders, and no such approval will be sought at the Annual General Meeting.

Shareholders Entitled to Vote at the Annual General Meeting

Shareholders of record as of the close of business on April 5, 2019 (the “Record Date”) that are eligible to vote will be entitled to vote at the Annual General Meeting. As of the Record Date, there were 161,698,498 outstanding Class A common shares and 25,433,465 outstanding Class B common shares. Each Class A common share or Class B common share entitles the holder of record thereof to vote at the Annual General Meeting, subject to certain adjustments and limitations, including those set forth in the Company’s Bye-laws and as described herein under “IMPORTANT VOTING INFORMATION—Adjustments to Voting Rights of Class A Common Shares” and “—Voting Rights of Class B Common Shares.” CERTAIN HOLDERS OF THE COMPANY’S CLASS A COMMON SHARES MAY NOT BE ENTITLED TO VOTE IN ACCORDANCE WITH THE BYE-LAWS AND AS DESCRIBED HEREIN. IN ACCORDANCE WITH THE BYE-LAWS, THE BOARD OF DIRECTORS RETAINS THE AUTHORITY, IN ITS SOLE AND ABSOLUTE DISCRETION, TO DETERMINE WHETHER A HOLDER’S SHARES CARRY NO VOTING RIGHTS, REDUCED VOTING RIGHTS OR ADJUSTED VOTING RIGHTS. See “IMPORTANT VOTING INFORMATION—Adjustments to Voting Rights of Class A Common Shares.

 

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IMPORTANT VOTING INFORMATION

Voting Procedures; Quorum

You can ensure that your Shares are properly voted at the meeting by completing, signing, dating and returning the enclosed proxy card to Proxy Services, c/o Computershare Investor Services, P.O. Box 505008, Louisville, KY 40233-9814. Shareholders may also complete their proxy via the internet in accordance with the instructions on your proxy card. Proxies submitted by the internet must be received by 9:00 a.m., Atlantic Daylight Time, on June 3, 2019.

A Shareholder has the right to appoint another person (who need not be a Shareholder) to represent the Shareholder at the Annual General Meeting by completing an alternative form of proxy which can be obtained from the Corporate Secretary or by notifying the Inspectors of Election. See “—Inspectors of Election” below. Every Shareholder entitled to vote has the right to do so either in person or by one or more persons authorized by a written proxy executed by such Shareholder and filed with the Corporate Secretary. Any proxy duly executed will continue in full force and effect unless revoked by the person executing it in writing or by the filing of a subsequent proxy. See “—Revocation of Proxies” below.

A Shareholder of record can vote their Shares at the Annual General Meeting by attending the meeting and completing a ballot or by proxy in one of two ways: (1) by dating, signing and completing the proxy card and returning it in accordance with the instructions provided on the proxy card; or (2) electronically via the internet as described in the proxy card. Proxy cards must be either returned by mail or electronically by 9:00 a.m. Atlantic Daylight Time on June 3, 2019.

Each of Items 1 through 7, 9 and 10 to be voted upon at the Annual General Meeting requires the affirmative vote of a majority of the total voting power attributable to all shares of the Company cast at the Annual General Meeting, in each case provided there is a quorum (consisting of Shareholders present in person or by proxy entitled to cast a majority of the total votes attributable to all shares of the Company issued and outstanding). Shares owned by Shareholders electing to abstain from voting with respect to any proposal and “broker non-votes” will be counted towards the presence of a quorum but, other than with respect to Item 10, will not be considered votes cast with respect to matters to be voted upon at the Annual General Meeting. Therefore, assuming a quorum is achieved, other than with respect to Item 10, abstentions and “broker non-votes” will have no effect on the outcome of the matters to be voted upon at the Annual General Meeting. With respect to Item 10, abstentions will be considered a vote against Item 10. A “broker non-vote” occurs when a nominee, such as a broker, holding Shares in “street name” for a beneficial owner, does not vote on a particular proposal because that nominee does not have discretionary voting power with respect to a proposal and has not received instructions from the beneficial owner. A Shareholder of Shares held in “street name” that would like to instruct their broker how to vote their Shares should follow the directions provided by their broker.

Item 8 to be voted upon at the Annual General Meeting is an advisory vote, and the result will not be binding. However, our compensation committee will consider the outcome of the vote with respect to Item 8 when evaluating the effectiveness of our compensation principles and in connection with its compensation decisions. With respect to Item 8, shares owned by Shareholders electing to abstain from voting and “broker non-votes” will be counted towards the presence of a quorum but will not be considered votes cast. Therefore, assuming a quorum is achieved, abstentions and “broker non-votes” will have no effect on the outcome of Item 8.

If you hold your Shares through a broker, bank or other financial institution, in order for your vote to be counted on any matter, you must provide specific voting instructions to your broker, bank or financial institution by following your broker, bank or financial institution’s instructions for completing and returning the proxy card to your broker, bank or financial institution or following your broker, bank or financial institution’s instructions to vote your Shares via the Internet. Voting deadlines vary by institution. Please check with your broker, bank or other financial institution for its voting cut-off date for the Annual General Meeting.

 

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Revocation of Proxies

Any Shareholder giving a proxy has the power to revoke it prior to its exercise by: (1) giving notice of such revocation in writing to the Corporate Secretary of the Company at Athene Holding Ltd., Chesney House, 96 Pitts Bay Road, Pembroke, HM08, Bermuda; (2) by attending and voting in person at the Annual General Meeting; or (3) by executing a subsequent proxy, provided that any such action is taken in sufficient time to permit the necessary examination and tabulation of the subsequent proxy or revocation before the votes are taken. Sending in a signed proxy will not affect your right to attend the meeting and vote. If a Shareholder attends the meeting and votes in person, any previously submitted proxy will be considered revoked. If a Shareholder holds their Shares in “street name” by a broker and has directed its broker to vote its Shares, such Shareholder should instruct its broker to change its vote or obtain a proxy to vote its Shares if such Shareholder wishes to cast its vote in person at the Annual General Meeting.

Adjustments to Voting Rights of Class A Common Shares

The Bye-laws generally provide that Shareholders are entitled to vote, on a non-cumulative basis, at all annual general and special meetings of Shareholders with respect to matters on which Class A common shares are eligible to vote. The Class A common shares collectively represent 55% of the total voting power of all of the Shares, subject to certain voting restrictions and adjustments described below. This allocation of 55% of the total voting power to the Class A common shares applies regardless of the number of Class A common shares that may be issued and outstanding.

In general, the Bye-laws provide that the board of directors may determine that certain shares shall carry no voting rights or shall have reduced voting rights to the extent that it reasonably determines that it is necessary to do so to avoid any adverse tax consequences to the Company or, upon the request of certain Shareholders, to avoid adverse regulatory consequences to such Shareholder. In addition, the board of directors has the authority under the Bye-laws to request information from any Shareholder for the purpose of determining whether a Shareholder’s voting rights are to be adjusted pursuant to the Bye-laws. IF A SHAREHOLDER FAILS TO RESPOND TO ANY REQUEST FOR INFORMATION OR SUBMITS INCOMPLETE OR INACCURATE INFORMATION IN RESPONSE TO A REQUEST BY THE COMPANY, THE BOARD OF DIRECTORS, IN ITS SOLE AND ABSOLUTE DISCRETION, MAY REDUCE OR ELIMINATE THE SHAREHOLDER’S VOTING RIGHTS.

The Bye-laws also include several specific restrictions and adjustments to the voting power of the Class A common shares. If a holder is subject to the restrictions described below, their Class A common shares may be deemed to be non-voting or the voting power attributable to such Class A common shares may be reduced or otherwise adjusted. Such restrictions depend on the identity and characteristics of the holder of the shares as of the Record Date; for example, Class A common shares that are deemed non-voting for the 2019 Annual General Meeting may be entitled to vote at a later meeting of Shareholders as a result of a subsequent transfer to a different holder. The specific Class A common share voting restrictions are as follows:

 

   

Class A common shares shall be deemed non-voting if the Shareholder (or any person related to the Shareholder within the meaning of Section 953(c) of the Internal Revenue Code (the “Code”) or to whom the ownership of such Shareholder’s shares is attributed under Section 958 of the Code, each, a “Tax-Attributed Affiliate”) (1) owns, directly indirectly or constructively, Class B common shares, (2) owns, directly, indirectly or constructively, an equity interest in Apollo Global Management, LLC (“AGM” and together with its affiliates, “Apollo”) or AP Alternative Assets, L.P. (“AAA”) or (3) is a member of the Apollo Group (defined below) at which time any member of the Apollo Group holds Class B common shares.

 

   

The voting power of those Class A common shares that are entitled to vote shall be adjusted so that no Shareholder or Tax-Attributed Affiliate (other than a member of the Apollo Group, defined below) holds more than 9.9% of the total voting power of common shares. “Apollo Group” means, (A) AGM,

 

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(B) AAA Guarantor—Athene, L.P., (C) any investment fund or other collective investment vehicle whose general partner or managing member is owned, directly or indirectly, by AGM or by one or more of AGM’s subsidiaries, (D) BRH Holdings GP, Ltd. and its shareholders, (E) any executive officer of AGM whom AGM designates, in a written notice delivered to the Company, as a member of the Apollo Group for purposes of the Bye-laws (which designation shall continue in effect until such designee ceases to be an executive officer of AGM) and (F) any affiliate of a person described in clauses (A), (B), (C), (D) or (E) above; provided, none of the Company or its subsidiaries, nor any person employed by the Company, its subsidiaries or Athene Asset Management LLC (“AAM”), shall be deemed to be a member of the Apollo Group. For avoidance of doubt, any person managed by AGM or one or more of AGM’s subsidiaries pursuant to a managed account agreement (or similar arrangement) without AGM or by one or more of AGM’s subsidiaries controlling such person as a general partner or managing member shall not be part of the Apollo Group.

 

   

The aggregate votes conferred by the shares held by employees of the Company and its subsidiaries, employees of AAM and employees of the Apollo Group may constitute collectively no more than 3% of the total voting power of the Company.

The amount of any reduction in voting power that occurs by operation of the adjustments described above will generally be allocated proportionately among all other Class A common shares entitled to vote. If such reallocation in turn triggers one of the adjustments described above, the adjustments will be reapplied serially until additional adjustments are not necessary.

THE ACCOMPANYING PROXY CARD CONTAINS REQUIRED REPRESENTATIONS IN ORDER TO DETERMINE WHETHER YOUR CLASS A COMMON SHARES ARE SUBJECT TO THE ADJUSTMENTS DESCRIBED ABOVE. A FAILURE TO COMPLETE THESE REQUIRED REPRESENTATIONS MAY RENDER YOUR SHARES INELIGIBLE FOR VOTING.

Restrictions on Holding Class A Common Shares

The Bye-laws also contain certain restrictions on holders of Class A common shares. Bye-law 5.1 provides that no Shareholder (including certain affiliates and related persons) may:

 

   

acquire any interests in AAA or AGM;

 

   

knowingly permit itself (or, to its actual knowledge, any direct or indirect beneficial owner of itself) to be (directly or indirectly) insured or reinsured by any subsidiary of the Company or any ceding company specified in Schedules 1 and 2 to this proxy statement, if such Shareholder is a “United States shareholder” of the Company within the meaning of Section 953(c) of the Code;

 

   

knowingly permit itself (or to its actual knowledge, any direct or indirect beneficial owner of itself) to own (directly, indirectly or constructively under Section 958 of the Code) stock of the Company possessing more than 50% of the total voting power or total value of the Company; or

 

   

make any investment or enter into a transaction that, to the actual knowledge of such Shareholder at the time such person becomes bound to make the investment or enter into the transaction, would cause such person to own (directly, indirectly or constructively within the meaning of Section 958 of the Code) stock of the Company possessing more than 50% of the total voting power or total value of the Company.

Voting Rights of Class B Common Shares

The Class B common shares represent, in aggregate, 45% of the total voting power of the Shares, subject to certain adjustments that are described below and in our Bye-laws. Generally, only members of the Apollo Group may own Class B common shares.

 

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The Bye-laws provide that the voting power of the Class B common shares shall be allocated on a pro rata basis among all holders of Class B common shares, provided that if certain conditions are met (described in detail in Bye-Law 4.2(b)(iii) and defined therein as a “Class B Adjustment Condition”) then the voting power of Class B common shares shall be adjusted as follows:

 

  (1)

First, the voting power of the Class B common shares directly held by the Shareholder(s) (i) with the highest Relative Class B Ownership Percentage (as defined in the Bye-laws) as of such time and (ii) whose Class B common shares have voting power as of such time (the “Adjustment Shareholder(s)”) that are attributable to the Smallest Class B 9.9% U.S. Person (as defined in the Bye-laws) shall be reduced (but not below zero (0)) until the Class B Adjustment Condition is no longer met or such Smallest Class B 9.9% U.S. Person is no longer a Class B 9.9% U.S. Person (taking into account any reallocation of voting power pursuant to clause (2) below), whichever requires the smallest reduction in voting power;

 

  (2)

Second, the aggregate voting power reduced in clause (1) above shall be reallocated pro rata among the Class B common shares (other than any Transferred Class B Common Shares, as defined in the Bye-laws) directly held by all other Shareholders;

 

  (3)

Third, the adjustments described in clause (1) above and the reallocation described in clause (2) above shall be reapplied serially to the next Smallest Class B 9.9% U.S. Person until the Class B Adjustment Condition is no longer met; and

 

  (4)

Any excess voting power that cannot be reallocated pursuant to clauses (1), (2) and (3) above shall be transferred pursuant to the Bye-laws, and thereafter clause (3) above shall not apply.

Pursuant to the Bye-laws, the pro rata reallocation of voting power of the Class B common shares provided for above shall not be permitted to the extent such reallocation would cause (i) a U.S. Person to become a Class B 9.9% U.S. Person (determined after such reallocation) or (ii) the Voting Ratio (as defined below) with respect to any Class B Common Share to be greater than fifteen (15). Any voting power that cannot be reallocated on a pro rata basis among all of the Class B common shares (other than any Transferred Class B Common Shares) directly held by all other Shareholders due to the reallocation discussed above shall nonetheless be reallocated to such shares to the maximum extent possible without violating the limitations described herein. “Voting Ratio” means, with respect to any share in the Company, a fraction (i) the numerator of which is the percentage of the total voting power represented by such share and (ii) the denominator of which is a fraction (expressed as a percentage) (a) the numerator of which is the value of that share and (b) the denominator of which is the total value of all outstanding shares in the Company.

If after providing for the reduction of voting power as set forth herein, clause (1) of the Class B Adjustment Condition continues to be met, the total voting power of the Class B common shares shall be reduced (and the total voting power of the Class A common shares shall be correspondingly increased) until such Class B Adjustment Condition is no longer met, unless all Affected Class B Shareholders (as defined in the Bye-laws) agree otherwise.

Inspectors of Election

Computershare Trust Company, N.A., P.O. Box 505000, Louisville, KY 40233-5000, United States of America, has been appointed as Inspectors of Election for the Annual General Meeting. Representatives of Computershare will be available during the Annual General Meeting to facilitate the voting of ballots and determine the results of the vote.

Availability of Proxy Materials

Proxy materials for the Annual General Meeting, including the Notice of 2019 Annual General Meeting and this proxy statement are available online for viewing and downloading at: www.investorvote.com/ATH.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

Principal Shareholders

The following table sets forth information as of March 1, 2019 regarding the beneficial ownership of our Class A common shares and our Class B common shares by (1) each person or group who is known by us to own beneficially more than 5% of our outstanding Class A common shares or our Class B common shares (including any securities convertible or exchangeable within 60 days into Class A common shares or Class B common shares, as applicable), (2) each of our named executive officers (“NEOs”), (3) each of our directors and (4) all of our current executive officers and directors as a group.

Beneficial ownership for the purposes of the following table is determined in accordance with the rules and regulations of the SEC. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting thereof, or to dispose or direct the disposition thereof or has the right to acquire such powers within 60 days. Our Class B common shares are convertible into Class A common shares at any time at the option of the holder, with prior notice to the Company, on a one-for-one basis. Accordingly, for the purposes of this table each holder of Class B common shares is deemed to be the beneficial owner of an equal number of Class A common shares (in addition to any other Class A common shares beneficially owned by such holder), which is reflected in the table entitled “Amount and Nature of Beneficial Ownership” under the columns “Number of Shares” and “Percent” for the Class A common shares. In addition, the voting power of our shareholders may be restricted or adjusted as described in “IMPORTANT VOTING INFORMATION” above. Additionally, in some cases, certain Class A common shares may be deemed non-voting. See “IMPORTANT VOTING INFORMATION—Adjustments to Voting Rights of Class A Common Shares.” See “—Voting Power” for an illustration of the voting power of certain shareholders who beneficially own more than 5% of our Class A common shares and Class B common shares. Such illustration includes shareholders who may own non-voting Class A common shares who, to our knowledge, beneficially own more than 5% of our outstanding Class A common shares and Class B common shares.

 

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To our knowledge, each person named in the table below has sole voting and investment power with respect to all of the Class A common shares, Class B common shares and Class M common shares convertible into Class A common shares within 60 days shown as beneficially owned by such person, except as otherwise set forth in the notes to the table and pursuant to applicable community property laws. Unless otherwise indicated in the table or footnotes below, the address for each officer and director listed in the table is c/o Athene Holding Ltd., Chesney House, First Floor, 96 Pitts Bay Road, Pembroke, HM08, Bermuda.

 

     Amount and Nature of Beneficial Ownership  
     Class A Common Shares
Beneficially Owned(1)
    Class B
Common Shares
Beneficially Owned
 
     Number of
Shares
     Percent(2)     Number of
Shares
     Percent  

Apollo Holders(3)(4)

     19,731,735        10.9     19,731,735        77.6

The Vanguard Group(5)

     13,495,263        8.4     —          —    

Wellington Management Group LLP(6)

     10,118,742        6.3     

BlackRock, Inc.(7)

     8,996,678        5.6     

California Public Employees Retirement System(8)

     8,652,105        5.4     

Executive Officers and Directors

          

James R. Belardi(9)

     5,353,074        3.2     —          —    

William J. Wheeler(10)

     1,824,185        1.1     —          —    

Grant Kvalheim(11)

     1,771,731        1.1     —          —    

Martin P. Klein(12)

     210,386        *       —          —    

John Rhodes(13)

     75,010        *       —          —    

Marc Rowan(14)

     1,681,075        1.0     1,681,075        6.6

Marc Beilinson(15)

     68,161        *       —          —    

Gernot Lohr(16)

     1,672,719        1.0     —          —    

Matthew R. Michelini(17)

     128,267        *       —          —    

Robert Borden(18)

     59,992        *       —          —    

Hope Taitz(19)

     63,852        *       —          —    

Lawrence J. Ruisi(20)

     55,760        *       —          —    

Dr. Manfred Puffer(21)

     10,249        *       —          —    

H. Carl McCall(22)

     15,383        *       —          —    

Brian Leach(23)

     15,363        *       —          —    

Arthur Wrubel(24)

     15,383        *       —          —    

Fehmi Zeko(25)

     2,142        *       —          —    

Mitra Hormozi(26)

     —          —         —          —    

Scott Kleinman(27)

     257,258        *       —          —    

All directors and executive officers as a group (20 persons)(28)

     14,603,091        8.7     1,681,075        6.6

 

*

Represents less than 1%.

(1)

Class M common shares are subject to time- or performance-based vesting and once vested are convertible into Class A common shares. The number of Class M common shares included in the table represents the number of Class M common shares that vest as of April 30, 2019, the date that is 60 days after March 1, 2019. We assume for purposes of the table that Class M common shares convert into Class A common shares on a one-for-one basis.

 

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(2)

The percentage of beneficial ownership of our Class A common shares is based on 161,389,532 Class A common shares outstanding as of March 1, 2019.

(3)

Consists of shares held of record by the following members of the Apollo Group (the “Apollo Holders”): 605,555 Class B common shares held of record by AAA Guarantor—Athene, L.P., 80,096 Class B common shares held of record by Apollo Palmetto Advisors, L.P., 17,350,643 Class B common shares held of record by Apollo Principal Holdings III, L.P., 43,327 Class B common shares held of record by AAA Associates, L.P., 1,569,625 Class B common shares held of record by AAA Holdings, L.P., one Class B common share held of record by Athene Asset Management LLC and 82,488 Class B common shares that have been granted to employees of Athene Asset Management LLC and are held of record by Apollo Management Holdings, L.P. as custodian. The percentage of beneficial ownership of the Class A common shares above assumes the conversion of all 19,731,735 Class B common shares held by the Apollo Holders as of March 1, 2019 into Class A common shares.

AAA Investments, L.P. is the general partner of AAA Guarantor—Athene, L.P. AAA Associates, L.P. is the general partner of AAA Investments, L.P. AAA MIP Limited is the general partner of AAA Associates, L.P. Apollo Alternative Assets, L.P. provides investment services to AAA Guarantor—Athene, L.P., AAA Investments, L.P., AAA Associates, L.P. and AAA MIP Limited. Apollo International Management, L.P. is the managing general partner of Apollo Alternative Assets, L.P. Apollo International Management GP, LLC is the general partner of Apollo International Management, L.P. AAA Holdings GP, Ltd. is the general partner of AAA Holdings, L.P.

Apollo Palmetto Management, LLC is the general partner of Apollo Palmetto Advisors, L.P. Apollo Principal Holdings IV, L.P. is the sole member of Apollo Palmetto Management, LLC. Apollo Principal Holdings IV GP, Ltd. is the general partner of Apollo Principal Holdings IV, L.P.

The sole member of Athene Asset Management LLC is AAM Holdings, L.P. The general partner of AAM Holdings, L.P. is AAM GP Ltd. The sole shareholder of AAM GP Ltd. is Apollo Life Asset Ltd. Apollo Capital Management, L.P. is the sole shareholder of Apollo Life Asset Ltd. The general partner of Apollo Capital Management, L.P is Apollo Capital Management GP, LLC. Apollo Management Holdings, L.P. is the sole member and manager of Apollo International Management GP, LLC and Apollo Capital Management GP, LLC, and the sole shareholder of AAA Holdings GP, Ltd. Apollo Management Holdings GP, LLC is the general partner of Apollo Management Holdings, L.P.

Apollo Principal Holdings III GP, Ltd. is the general partner of Apollo Principal Holdings III L.P.

Leon Black, Joshua Harris and Marc Rowan are executive officers and the managers or directors of Apollo Management Holdings GP, LLC, Apollo Principal Holdings III GP, Ltd. and Apollo Principal Holdings IV GP, Ltd. and as such may be deemed to have voting and dispositive control of the shares of Athene common shares that are held by the Apollo Holders.

 

(4)

The address of each of Apollo Principal Holdings III, L.P., Apollo Principal Holdings III GP, Ltd., Apollo Principal Holdings IV, L.P., Apollo Principal Holdings IV GP, Ltd., AAM GP Ltd., and Apollo Life Asset Ltd. is c/o Walkers Corporate Limited, Cayman Corporate Center, 27 Hospital Road, Georgetown, KY1-9008, Grand Cayman, Cayman Islands. The address of AAA Investments, L.P., Apollo Alternative Assets, L.P., and Apollo Palmetto Management, LLC is One Manhattanville Road, Suite 201, Purchase, New York 10577. The address of AAA Associates, L.P., AAA MIP Limited, AAA Holdings, L.P. and AAA Holdings GP Limited is Trafalgar Court, Les Banques, GY1 3QL, St. Peter Port, Guernsey, Channel Islands. The address of Athene Asset Management LLC and AAM Holdings, L.P. is 2121 Rosecrans Ave., Suite 5300, El Segundo, CA 90245. The address of each of Apollo Palmetto Advisors, L.P., AAA Guarantor—Athene, L.P., Apollo International Management, L.P., Apollo International Management GP, LLC, Apollo Capital Management, L.P., Apollo Capital Management GP, LLC, Apollo Management Holdings, L.P. and Apollo Management Holdings, GP, LLC, and Messrs. Black, Harris and Rowan is 9 West 57th Street, 43rd Floor, New York, New York 10019.

(5)

The number of shares listed for The Vanguard Group is based on the Schedule 13G filed by The Vanguard Group on February 11, 2019. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.

(6)

The number of shares listed for Wellington Management Group LLP is based on the Schedule 13G filed by Wellington Management Group LLP on February 12, 2019. The address of Wellington Management Group LLP is c/o Wellington Management Company LLP, 280 Congress Street, Boston, MA 02210.

(7)

The number of shares listed for BlackRock, Inc. is based on the Schedule 13G filed by BlackRock, Inc. on February 4, 2019. The address of BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055.

(8)

The number of shares listed for California Public Employees Retirement System is based on the Form 13F filed by California Public Employees Retirement System on February 8, 2019. The address of California Public Employees Retirement System is 400 Q Street, Suite 4800, Sacramento, CA 95811.

(9)

Consists of (1) 969,236 Class A common shares held of record by the James and Leslie Belardi Family Trust, (2) 1,750 Class A common shares held of record by the Belardi Family Irrevocable Trust, (3) options to acquire 194,922 Class A common shares vested as of April 30, 2019, (4) 1,741,661 Class M common shares held of record by the James and Leslie Belardi Family Trust vested as of April 30, 2019 which are convertible into Class A common shares, (5) 2,093,583 Class M common shares held of record by the Belardi 2018 GRAT vested as of April 30, 2019 which are convertible into Class A common shares and (6) 351,922 Class M common shares held of record by the Belardi Family Irrevocable Trust vested as of April 30, 2019 which are convertible into Class A common shares. Excludes 71,590 restricted Class A common shares, 37,129 Class A restricted stock units and options to acquire 66,279 Class A common shares which are unvested as of April 30, 2019. Mr. Belardi disclaims beneficial ownership of all common shares of Athene held by the Belardi Family Irrevocable Trust and the members of the Apollo Group.

(10)

Consists of (1) 386,763 Class A common shares, (2) options to acquire 104,089 Class A common shares vested as of April 30, 2019 and (3) 1,333,333 Class M common shares vested as of April 30, 2019 which are convertible into Class A common shares. Excludes 23,414

 

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  restricted Class A common shares, 22,279 Class A restricted stock units, options to acquire 39,768 Class A common shares and 1,166,667 Class M common shares which are unvested as of April 30, 2019.
(11)

Consists of (1) 1,584,672 Class A common shares, (2) options to acquire 58,984 Class A common shares vested as of April 30, 2019 and (3) 128,076 Class M common shares vested as of April 30, 2019 which are convertible into Class A common shares. Excludes 13,268 restricted Class A common shares, 12,625 Class A restricted stock units, options to acquire 22,536 Class A common shares and 205,333 Class M common shares which are unvested as of April 30, 2019.

(12)

Consists of (1) 77,168 Class A common shares, (2) options to acquire 58,673 Class A common shares vested as of April 30, 2019 and (3) 74,545 Class M common shares vested as of April 30, 2019 which are convertible into Class A common shares. Excludes 15,609 restricted Class A common shares, 14,853 Class A restricted stock units, options to acquire 26,513 Class A common shares and 121,333 Class M common shares which are unvested as of April 30, 2019.

(13)

Consists of (1) 5,907 Class A common shares, (2) options to acquire 15,906 Class A common shares vested as of April 30, 2019 and (3) 53,197 Class M common shares vested as of April 30, 2019 which are convertible into Class A common shares. Excludes 9,366 restricted Class A common shares, 8,912 Class A restricted stock units, options to acquire 15,908 Class A common shares and 106,667 Class M common shares which are unvested as of April 30, 2019.

(14)

Consists of Class B common shares held by entities directly or indirectly controlled by Mr. Rowan. The reported amount does not include, and Mr. Rowan disclaims beneficial ownership of, Class B common shares owned by the Apollo Holders, as well as AAA, which is a limited partner of AAA Investments, L.P. Mr. Rowan does not have the power to vote or dispose of any Athene common shares that may from time to time be held by AAA or the Apollo Holders and therefore is not deemed to beneficially own such shares.

(15)

Excludes 9,610 restricted Class A common shares which are unvested as of April 30, 2019.

(16)

Mr. Lohr disclaims beneficial ownership of all common shares of Athene held of record or beneficially owned by the Apollo Holders or any other member of the Apollo Group. In addition to his ownership of our Class A common shares, Mr. Lohr also owns interests in AAA, which is a limited partner of AAA Investments, L.P. Mr. Lohr does not have the power to vote or dispose of any Athene common shares that may be held from time to time by AAA and therefore is not deemed to beneficially own such shares. 1,103,589 Class A common shares owned by Mr. Lohr have been pledged as security to a financial institution.

(17)

Mr. Michelini disclaims beneficial ownership of all common shares of Athene held of record or beneficially owned by the Apollo Holders or any other member of the Apollo Group. Mr. Michelini owns interests in AAA, which is a limited partner of AAA Investments, L.P. Mr. Michelini does not have the power to vote or dispose of any Athene common shares that may be held from time to time by AAA and therefore is not deemed to beneficially own such shares.

(18)

Consists of (1) 37,147 Class A common shares held of record by PENSCO Trust Co. Custodian FBO Robert L. Borden IRA and (2) 22,845 Class A common shares held of record by Mr. Borden individually. Excludes 9,167 restricted Class A common shares which are unvested as of April 30, 2019.

(19)

Excludes 9,251 restricted Class A common shares which are unvested as of April 30, 2019.

(20)

Excludes 9,210 restricted Class A common shares which are unvested as of April 30, 2019.

(21)

Excludes 9,180 restricted Class A common shares which are unvested as of April 30, 2019.

(22)

Excludes 9,063 restricted Class A common shares which are unvested as of April 30, 2019.

(23)

Excludes 9,053 restricted Class A common shares which are unvested as of April 30, 2019.

(24)

Excludes 9,063 restricted Class A common shares which are unvested as of April 30, 2019.

(25)

Excludes 3,701 restricted Class A common shares which are unvested as of April 30, 2019.

(26)

Excludes 3,701 restricted Class A common shares which are unvested as of April 30, 2019.

(27)

Mr. Kleinman disclaims beneficial ownership of all common shares of Athene held of record or beneficially owned by the Apollo Holders or any other member of the Apollo Group. Mr. Kleinman owns interests in AAA, which is a limited partner of AAA Investments, L.P. Mr. Kleinman does not have the power to vote or dispose of any Athene common shares that may be held from time to time by AAA and therefore is not deemed to beneficially own such shares.

(28)

Totals include restricted common shares and options held by such individuals which have vested or will vest as of April 30, 2019.

Voting Power

The aggregate and respective voting power of our Class A common shares and Class B common shares is determined in accordance with our Bye-laws. The Class A common shares collectively represent 55% of the total voting power of our common shares and the Class B common shares represent, in aggregate, 45% of the total voting power of our common shares, each subject to certain adjustments, as described in “IMPORTANT VOTING INFORMATION” above.

The voting rights exercisable by Class A shareholders other than Apollo are limited so that certain persons or groups (other than the Apollo Group) (“Control Groups”) are deemed not to hold more than 9.9% of the total voting power conferred by our shares. The percentage reduction of votes that occurs by operation of the foregoing limitation will generally be reallocated proportionately among other Class A common shareholders who are not members of these groups so long as such reallocation does not cause a Control Group to hold more than 9.9% of the total voting power of our shares. In addition, certain Class A common shares may be deemed non-voting when owned by a shareholder if such shareholder (or certain of its affiliates) (1) owns, directly,

 

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indirectly or constructively, Class B common shares, (2) owns, directly, indirectly or constructively, an equity interest in AGM or AAA or (3) is a member of the Apollo Group at which time any member of the Apollo Group holds Class B common shares, subject to certain exceptions. See “IMPORTANT VOTING INFORMATION—Adjustments to Voting Rights of Class A Common Shares” above. As such, certain of our Class A common shareholders hold voting shares, but such shares are non-voting when being held by such holder due to these restrictions. If such holder sold any such shares to another holder that would not be subject to these restrictions, such Class A common shares would be voting shares.

Pursuant to our Bye-laws, the total voting power of Class A common shares held by members of our management and employees of the Apollo Group that are shareholders is limited to 3% of the total voting power of our common shares.

The following table sets forth the voting power as of March 1, 2019 of each person or group who is known by us to own beneficially more than 5% in voting power of our outstanding Class A common shares and Class B common shares (including any securities convertible or exchangeable within 60 days into Class A common shares or Class B common shares, as applicable).

 

     Number of Class A
Common Shares
Owned
     Number of Class B
Common Shares
Owned
     Number of Shares
Owned
     Percent of Total
Outstanding Class
A Common Shares
and Class B
Common Shares
Owned
    Total Voting Power
of Class A Common
Shares and Class B
Common Shares
Taken Together(1)
 

Apollo Holders

     —          19,731,735        19,731,735        10.6     34.9

 

(1)

The Class B common shares represent, in aggregate, 45% of the total voting power of our common shares, subject to certain adjustments. The Bye-laws provide that the voting power of the Class B common shares shall be allocated on a pro rata basis among all holders of Class B common shares, subject to certain adjustments. See “IMPORTANT VOTING INFORMATION—Voting Rights of Class B Common Shares” above. The voting power percentage set forth in the table does not take into account the impact of any such adjustments.

 

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CORPORATE GOVERNANCE

Corporate Governance

Our business and affairs are managed under the direction of our board of directors. Our board of directors currently consists of 15 members. Six of our directors are employees of or consultants to Apollo or its affiliates (including Mr. Belardi, our Chairman, Chief Executive Officer and Chief Investment Officer, who is also Chairman, Chief Executive Officer and Chief Investment Officer of AAM). We believe that it is appropriate, given Mr. Belardi’s in-depth knowledge of the Company and our business and industry and his ability to formulate and implement strategic initiatives, that the offices of Chief Executive Officer and Chairman have been vested in Mr. Belardi.

Under our Bye-laws, our board of directors may consist of not less than two and not more than 17 directors. Our board size is currently set at 15 members. If there is a vacancy on our board of directors due to the death, disability, disqualification, removal or resignation of a director, or there is an increase in the number of our directors or a failure to elect a director at a shareholder meeting, the board of directors may appoint any person as a member of the board of directors on an interim basis until the next annual general meeting provided that such person has been approved by a majority of the nominating and corporate governance committee. At the next annual general meeting, the newly appointed director will be put to a shareholder vote. Persons appointed by the board of directors to fill vacancies must be approved by a majority of the board of directors.

Director Independence

Our board of directors has undertaken a review of the independence of each director. Based on information provided by each director concerning his or her background, employment and affiliations, our board of directors has determined that Messrs. Beilinson, Borden, Leach, McCall, Ruisi, Wrubel, Zeko and Ms. Hormozi do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors meets the independence requirements of the NYSE listing rules. Consequently, a majority of our directors are independent directors. In making these determinations, our board of directors considered the current and prior relationships that each non-employee director and non-Apollo director has with our Company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our common shares by such director and any transactions involving them described under “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS” herein.

Ms. Taitz was a member of our audit committee and our nominating and corporate governance committee during a portion of 2018. Ms. Taitz resigned from these committees, effective February 24, 2018. Mr. Beilinson and Mr. Borden were appointed as a member of the nominating and corporate governance committee and the audit committee, respectively, on February 24, 2018. Ms. Taitz was appointed as a member of the risk committee on March 2, 2018.

Board Meetings and Committees; Attendance at Annual General Meeting

The board of directors held eight meetings in 2018 consisting of regularly scheduled, full agenda meetings and special, limited agenda meetings held on short notice, all of which were held outside of the U.S. in accordance with our operating guidelines. During 2018, the audit committee met nine times, the compensation committee met three times, the nominating and corporate governance committee met six times, the risk committee met four times, the executive committee did not meet and the conflicts committee met ten times. Each director attended at least 75% of his or her board and committee meetings other than Mr. Rowan and Mr. Lohr, each of whom attended 100% of all regularly scheduled meetings. Agenda items at special meetings of the board of directors held during 2018 included matters for which directors affiliated with Apollo were required to recuse themselves.

 

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One director of the Company attended the 2018 annual general meeting. As a public company, the Company encourages directors to use best efforts to attend all annual general meetings.

Classified Board of Directors

Our Bye-laws provide for our board of directors to be divided into three classes with members of each class serving staggered three-year terms. Only one class of directors will be elected at each annual general meeting of Shareholders, with directors in other classes continuing for the remainder of their respective three-year terms. Our current directors are divided among the three classes as follows:

 

   

our Class I directors are Messrs. Belardi, Michelini, Leach, Lohr and Rowan and their terms will expire at our annual general meeting to be held in 2019;

 

   

our Class II directors are Messrs. Wrubel, Ruisi, Zeko and Kleinman, and Ms. Taitz and, subject to the paragraph below regarding Mr. Kleinman, their terms will expire at our annual general meeting to be held in 2020; and

 

   

our Class III directors are Messrs. Borden, McCall and Beilinson and Dr. Puffer and Ms. Hormozi and, subject to the paragraph below regarding Ms. Hormozi, their terms will expire at our annual general meeting to be held in 2021.

Mr. Kleinman and Ms. Hormozi have been appointed to the board of directors subject to being nominated and elected by Shareholders at the Annual General Meeting. If elected at the Annual General Meeting, Mr. Kleinman will be a Class II director whose term will expire at our annual general meeting to be held in 2020 and Ms. Hormozi will be a Class III director whose term will expire at our annual general meeting to be held in 2021.

Our directors hold office until their successors have been elected and qualified or until the earlier of their death, resignation or removal. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.

The classification of our board of directors may have the effect of delaying or preventing changes of control of our Company.

Lead Independent Director

Ms. Taitz served as Lead Independent Director through February 24, 2018 when Mr. Beilinson was appointed as Lead Independent Director. In this role, the Lead Independent Director, among other things, presides at executive sessions of the independent directors, serves as liaison between the chairman and the independent directors, reviews board meeting schedules and agendas, reviews information sent to the board and is authorized to call meetings of the independent directors.

 

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Committees of the Board of Directors

Our board of directors has the authority to appoint committees to perform certain management and administration functions. Our board of directors has six standing committees: audit, compensation, nominating and corporate governance, conflicts, executive and risk. The table below shows the membership for each of the board of directors’ standing committees.

 

Audit Committee

 

Compensation

Committee

 

Conflicts Committee

Lawrence J. Ruisi (Chair)*

  Marc Beilinson (Chair)*   Marc Beilinson*

Brian Leach*

  H. Carl McCall*   Robert Borden*

Robert Borden*

  Arthur Wrubel*   Hope Taitz

Executive Committee

 

Nominating and Corporate

Governance Committee

 

Risk Committee

James R. Belardi

  Arthur Wrubel (Chair)*   Manfred Puffer (Chair)

Marc Rowan

  Marc Beilinson*   Robert Borden*

Matthew Michelini

  H. Carl McCall*       Matthew Michelini
    Lawrence J. Ruisi*
    Brian Leach*
    Hope Taitz

 

*

Independent director for purposes of the NYSE corporate governance listing requirements.

Audit Committee

The audit committee’s duties include, but are not limited to, assisting the board of directors with its oversight and monitoring responsibilities regarding:

 

   

the integrity of the Company’s consolidated financial statements and financial and accounting processes;

 

   

compliance with the audit, accounting and internal controls requirements by AHL and its subsidiaries;

 

   

the independent auditor’s qualifications, independence and performance;

 

   

related party transactions other than transactions between AHL and its subsidiaries and Apollo and its affiliates (other than AHL and its subsidiaries) and other related party transactions ancillary thereto that are required to be reviewed by the conflicts committee or by the disinterested directors on our board of directors as described under “—Conflicts Committee” below, or are expressly exempt from such review under our internal policies;

 

   

the performance of the Company’s internal control over financial reporting and its subsidiaries’ internal control over financial reporting (including monitoring and reporting by subsidiaries) and the function of the Company’s internal audit department;

 

   

the Company’s legal and regulatory compliance and ethical standards;

 

   

procedures to receive, retain and treat complaints regarding accounting, internal controls over financial reporting or auditing matters and to receive confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters; and

 

   

the review of the Company’s financial disclosure and public filings.

Our audit committee is currently comprised of Messrs. Leach, Ruisi and Borden. Mr. Ruisi is the chair of the audit committee.

The board of directors has determined that each of Messrs. Ruisi, Leach and Borden meet the independence requirements of the NYSE rules and the criteria for independence set forth in Rule 10A-3(b)(1) under the

 

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Exchange Act of 1934, as amended. The board of directors has determined that each member of our audit committee meets the requirements for financial literacy under the applicable rules and regulations of the SEC and the NYSE. The chair of our audit committee, Mr. Ruisi, is an independent director and an “audit committee financial expert” as that term is defined in the rules and regulations of the SEC. Our board of directors has approved a written charter under which the audit committee will operate. A copy of the charter of our audit committee is available on our principal corporate website at www.athene.com. Information contained on our website or connected thereto does not constitute a part of, and is not incorporated by reference into, this proxy statement.

Pre-Approval Policies and Procedures of the Audit Committee

The audit committee has adopted procedures for pre-approving all audit and permissible non-audit services provided by the Company’s independent auditor. The audit committee will, on an annual basis, review and pre-approve the audit, review, attestation and permitted non-audit services to be provided during the next audit cycle by the Company’s independent auditor. To the extent practicable, the audit committee will also review and approve a budget for such services. Services proposed to be provided by the independent auditor that have not been pre-approved during the annual review and the fees for such proposed services must be approved by the audit committee. All requests or applications for the independent auditor to provide services to the Company over certain thresholds shall be submitted to the audit committee or the Chairman thereof. The audit committee considered whether the provision of non-audit services performed by the Company’s independent auditor is compatible with maintaining the independent auditor’s independence during 2018. The audit committee concluded in 2018 that the provision of these services was compatible with the maintenance of the independent auditor’s independence in the performance of its auditing functions during 2018. All services were approved by the audit committee or were pre-approved under the audit committee’s pre-approval policy.

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

The following Report of the Audit Committee of the Board of Directors of the Company does not constitute soliciting material and should not be deemed filed or incorporated by reference into any future filings under the Securities Act of 1933, as amended, or the Securities Exchange Act, except to the extent the Company specifically incorporates this Report by reference.

The audit committee has reviewed and discussed the audited consolidated financial statements of the Company for the year ended December 31, 2018 with management and the independent auditors. The audit committee has discussed with the independent auditors the matters required to be discussed by Auditing Standard No. 1301, as adopted by the Public Company Accounting Oversight Board.

The audit committee has received the written disclosures and the letter from the independent auditors required by applicable requirements of the Public Company Accounting Oversight Board in Rule 3526 regarding the independent auditors’ communications with the audit committee concerning independence. The audit committee has discussed with the independent auditors the independent auditors’ independence. The independent auditors and the Company’s internal auditors had full access to the audit committee, including meetings without management present as needed.

Based on the audit committee’s review and discussions referred to above, the audit committee recommended to the board of directors that the Company’s audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

AUDIT COMMITTEE

Lawrence J. Ruisi, Chairman

Brian Leach

Robert Borden

 

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Compensation Committee

The purposes of the compensation committee are generally to:

 

   

review and approve annually corporate goals and objectives, including financial and other performance targets, relevant to Chief Executive Officer and executive officer compensation;

 

   

review and approve annually corporate goals and objectives, including financial and other performance targets, relevant to compensation paid to the other executive officers and key employees of the Company and its subsidiaries;

 

   

review, approve and, when necessary, make recommendations to the board of directors regarding the Company’s compensation plans for executive officers and key employees, including with respect to incentive compensation plans and share-based plans, policies and programs;

 

   

review and administer the Company’s share incentive plans and any other share-based plan and any incentive-based plan of the Company and its subsidiaries, including approving grants and/or awards of restricted stock, stock options and other forms of equity-based compensation under any such plans to executive officers, and, at its discretion, delegate authority to senior management to administer such plans for employees of the Company who are not executive officers and key employees;

 

   

review and approve, for the Chief Executive Officer and other executive officers of the Company, when and if appropriate, employment agreements, severance agreements, consulting agreements and change in control or termination agreements and any benefits or perquisites not broadly applicable to the employee population;

 

   

prepare the compensation committee report to be included in an annual report or proxy statement, as required by applicable SEC and NYSE rules;

 

   

review periodically the Company’s compensation plans, policies and programs to assess whether such policies encourage excessive or inappropriate risk-taking or earnings manipulation;

 

   

review the results of any advisory stockholder votes on executive compensation and consider whether to recommend adjustments to the Company’s executive compensation policies and practices as a result of such vote; and

 

   

monitor compliance with stock ownership guidelines for the Chief Executive Officer and other executive officers of the Company.

Our compensation committee is comprised of Messrs. Beilinson, McCall, and Wrubel. Mr. Beilinson is the chair of the compensation committee. The board of directors has determined that each of Messrs. Beilinson, McCall and Wrubel meet the independence requirements of the NYSE rules and therefore all members of the compensation committee are independent directors. Our board of directors has approved a written charter under which the compensation committee will operate. A copy of the charter of our compensation committee is available on our principal corporate website at www.athene.com. Information contained on our website or connected thereto does not constitute a part of, and is not incorporated by reference into, this proxy statement.

 

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REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

The compensation committee has reviewed and discussed “COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS” with executive management. Based on its review, the compensation committee recommended to the board of directors that “COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS” be included in this proxy statement and the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

COMPENSATION COMMITTEE

Marc A. Beilinson, Chairman

H. Carl McCall

Arthur Wrubel

Nominating and Corporate Governance Committee

The purposes of the nominating and corporate governance committee are to:

 

   

identify, evaluate and recommend individuals qualified to become members of our board of directors, consistent with criteria approved by our board of directors;

 

   

select, or recommend that our board of directors select, the director nominees to stand for election at each annual general meeting of shareholders of the Company or to fill vacancies on our board of directors;

 

   

develop and recommend to our board of directors a set of corporate governance guidelines applicable to the Company and its subsidiaries; and

 

   

oversee the annual performance evaluation of our board of directors and each of its committees.

The nominating and corporate governance committee recommends directors eligible to serve on the committees of our board of directors. The nominating and corporate governance committee also reviews and evaluates, in accordance with our Bye-laws, all shareholder director nominees. All shareholder director nominations must be made in accordance with the requirements of our Bye-laws, which specify the appropriate period of notice (as described below in “MORE INFORMATION—Shareholders’ Proposals and Director Nominees for the 2020 Annual General Meeting”) and enumerate certain required disclosures the shareholder must include with his or her notice of intent to the Company when making a director nomination.

In recommending directors and evaluating shareholder director nominees, the nominating and corporate governance committee as a general matter seeks to compose the Company’s board to be of effective size and composition with a diversity of backgrounds, skills and experiences. The nominating and corporate governance committee, considers several additional factors, including the potential directors’:

 

   

fitness and propriety for the position, including a high level of professional ethics, integrity, leadership values and the ability to exercise sound judgment;

 

   

useful qualifications, industry experience, technical expertise; education and other skills and expertise, as well as the interplay of those factors with the qualifications and experience of incumbent directors;

 

   

a willingness and ability to devote the time necessary to carry out the duties and responsibilities of board membership;

 

   

a desire to oversee that the operations and financial reporting are effected in an accurate and transparent manner and in compliance with applicable laws, rules and regulations; and

 

   

a dedication to the representation of the best interests of the Company and its shareholders.

Our nominating and corporate governance committee is comprised of Messrs. Wrubel, McCall, and Beilinson. Mr. Wrubel is the chair of the nominating and corporate governance committee. The board of

 

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directors has determined that each of Messrs. Wrubel, McCall, and Beilinson meet the independence requirements of the NYSE rules and therefore all members of our nominating and corporate governance committee are independent directors. A copy of the charter of our nominating and corporate governance committee is available on our principal corporate website at www.athene.com. Information contained on our website or connected thereto does not constitute a part of, and is not incorporated by reference into, this proxy statement.

Conflicts Committee

Because the Apollo Group has a significant voting interest in AHL, and because AHL and its subsidiaries have entered into, and will continue in the future to enter into, transactions with Apollo and its affiliates, our Bye-laws require us to maintain a conflicts committee designated by our board of directors, currently consisting of three directors of the Company who are not officers or employees of any member of the Apollo Group. The conflicts committee meets at least quarterly and consists of Messrs. Beilinson and Borden and Ms. Taitz. The conflicts committee reviews and approves material transactions by and between AHL and its subsidiaries, on the one hand, and members of the Apollo Group, on the other hand, including any modification or waiver of the IMAs (as defined herein) with AAM, subject to certain exceptions. The conflicts committee is also responsible for the review and approval of related party transactions that are incidental or ancillary to the foregoing transactions. For a description of the functions of the conflicts committee and such exceptions, see “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS—Related Party Transaction Policy.”

Executive Committee

The executive committee is responsible for facilitating the approval of certain actions that do not require consideration by the full board of directors or that are specifically delegated by the board of directors to the executive committee. The executive committee possesses and may exercise all powers of the board of directors in the management and direction of the Company’s business consistent with our Bye-laws, applicable law (including any applicable rule of any stock exchange or quotation system on which our common shares are then listed) and our operating guidelines, except that the executive committee shall not perform such functions that are expressly delegated to other committees of the board of directors. The executive committee does not have the power to:

 

   

declare dividends on or distributions of or in respect of shares of the Company;

 

   

issue shares or authorize or approve the issuance or sale, or contract for sale, of shares or determine the designation and relative rights, preferences and limitations of a series or class of shares unless specifically delegated by action of the board of directors to the executive committee or a subcommittee of the executive committee;

 

   

recommend to Shareholders any action that requires Shareholder approval;

 

   

recommend to Shareholders a dissolution or winding up of the Company or a revocation of a dissolution or winding up of the Company;

 

   

amend or repeal any provision of the memorandum of association or Bye-laws;

 

   

agree to the settlement of any litigation, dispute, investigation or other similar matter with respect to the Company that is not within the scope of authority previously delegated to the executive committee by the board of directors;

 

   

approve the sale or lease of real or personal property assets with a fair value greater than a threshold amount specifically delegated to the executive committee by the board of directors;

 

   

authorize mergers (other than a merger of any wholly-owned subsidiary with the Company), acquisitions, joint ventures, consolidations or dispositions of assets or any business of the Company or any investment in any business or Company by the Company with a fair value in excess of a threshold

 

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amount specifically delegated to the committee by the board of directors; or approve the sale, lease, exchange or encumbrance of any material asset of the Company that, in each case, is not within the scope of authority previously delegated to the executive committee by action of the board of directors; or

 

   

amend, alter or repeal, or take any action inconsistent with any resolution or action of the board of directors.

Our executive committee is comprised of Messrs. Belardi, Michelini and Rowan.

Risk Committee

The risk committee’s duties are to oversee the development and implementation of systems and processes designed to identify, manage and mitigate reasonably foreseeable material risks to the Company; assist our board of directors and our board committees in fulfilling their oversight responsibilities for the risk management function of the Company; approve the stress test assumption and limits utilized in our stress test scenario analyses and engage in such activities as it deems necessary or appropriate in connection with the foregoing. In assessing risk, the risk committee assesses the risk of the Company and its subsidiaries as a whole. The risk committee’s role is one of oversight. Management of the Company is responsible for developing and implementing the systems and processes designed to identify, manage and mitigate risk. Members of the risk committee are selected for their experience in managing risks in financial and/or insurance enterprises. Our risk committee meets quarterly and is comprised of Messrs. Borden, Leach, Michelini and Ruisi, Ms. Taitz and Dr. Puffer. Dr. Puffer is the chair of the risk committee.

Management Committees

An integral component of our corporate governance structure is our management committees. Management committees report to our senior officers, including our Chief Executive Officer, President, Chief Financial Officer, and Chief Risk Officer and to committees of our board of directors. Management committees are comprised of members of senior management and are designed to oversee business initiatives and to manage business risk and processes, with each committee focused on a discrete area of our business. The following is a description of certain of our management committees:

 

   

Management Executive Committee: oversees all of our strategic initiatives and our overall financial condition.

 

   

Management Risk Committee: oversees overall corporate risk, including credit risk, interest rate risk, equity risk, business risk, operational risk and other risks we confront. The committee reports to the board risk committee.

 

   

Operational Risk Committee: a subcommittee of the Management Risk Committee which oversees operational risk, including information security, disaster recovery, trading activities and operational management of our annuity portfolio.

 

   

Management Investment Committee: focuses on strategic decisions involving our investment portfolio, such as approving investment limits, new asset classes and our allocation strategy, reviewing large asset transactions as well as monitoring our credit risk and the management of our assets and liabilities. The committee reports to the board risk committee.

Compensation Committee Interlocks and Insider Participation

During the fiscal year ended December 31, 2018, Messrs. Wrubel, McCall and Beilinson each served on our compensation committee.

 

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None of our executive officers currently serves, or has served during the last completed fiscal year, as a member of the board of directors or compensation committee of any entity that has an executive officer serving as a member of our compensation committee or as a director on our board of directors.

Corporate Governance Guidelines and Code of Business Conduct and Ethics

We have adopted corporate governance guidelines and a code of business conduct and ethics that applies to all of our directors, officers and employees. These documents are available at www.athene.com. Information contained on our website or connected thereto does not constitute a part of, and is not incorporated by reference into, this proxy statement.

Communications with the Board of Directors

Shareholders and other interested parties may communicate with members of the board of directors (either individually or as a body) by addressing correspondence to that individual or body to Athene Holding Ltd., Chesney House, First Floor, 96 Pitts Bay Road, Pembroke, HM08, Bermuda.

Shareholders and other interested parties may specifically direct their communications to any of the independent directors, including the Committee Chairs and the Lead Independent Director, by addressing correspondence to that individual or body to Athene Holding Ltd., Chesney House, First Floor, 96 Pitts Bay Road, Pembroke, HM08, Bermuda.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act, requires our directors, officers and holders of more than 10% of our common shares to file reports with the SEC regarding their ownership and changes in ownership of our securities. Based upon our examination of the copies of Forms 3, 4, and 5, and amendments thereto furnished to us and the written representations of our directors, officers and 10% stockholders, we believe that, during fiscal 2018, our directors, officers and 10% stockholders complied with all Section 16(a) filing requirements.

Risk Management Oversight

The Company has implemented an enterprise-wide approach to risk management and has specifically established a risk committee of the board of directors charged with the oversight of the development and implementation of systems and processes designed to identify, manage and mitigate reasonably foreseeable material risks and with the duty to assist the board of directors and other board committees with fulfilling their oversight responsibilities for the Company’s risk management function.

As noted above in “Management Committees,” management committees oversee business initiatives and manage business risk and processes.

The audit committee assists the risk committee in its responsibility for oversight of risk management. In particular, the audit committee focuses on major financial risk exposures and the steps management has taken to monitor and control such risks, and discusses with our independent auditor the policies governing the process by which senior management and the various units of the Company assess and manage our financial risk exposure and operational/strategic risk. The compensation committee also assists the risk committee in overseeing risk management by reviewing the Company’s compensation plans, policies and programs to ensure that such plans, policies and programs do not encourage excessive or inappropriate risk-taking.

With respect to cybersecurity, we have developed a program, overseen by our Chief Information Security Officer and our Information Security, Risk, and Compliance group, that is designed to protect and preserve the confidentiality, integrity and continued availability of all information that we own or that is otherwise in our care.

 

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This program includes a cyber incident response plan that provides controls and procedures for timely and accurate reporting of any material cybersecurity incident. The audit committee and the risk committee meet periodically with our Chief Information Officer, Chief Information Security Officer and certain other members of senior management to review our information technology and cybersecurity risk profile and discuss our activities to manage those risks. Our Operational Risk Committee maintains a cybersecurity subcommittee, which provides regular updates that, together with updates provided by other subcommittees, form a basis for periodic reporting to the risk committee. These updates and updates to the audit committee include the results of exercises and response readiness assessments led by outside advisors who provide a third-party independent assessment of our technical program and our internal response preparedness.

 

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MANAGEMENT

Below is a list of the names and ages of our directors and executive officers and a description of the business experience of each of them.

 

Name

  

Age

  

Position

James R. Belardi

   62    Chairman of the Board, Chief Executive Officer, and Chief Investment Officer

William J. Wheeler

   57    President

Grant Kvalheim

  

62

   Executive Vice President—Athene, Chief Executive Officer and President—Athene USA

Martin P. Klein

   59    Executive Vice President and Chief Financial Officer

Frank L. Gillis

   67    Executive Vice President—Athene, Chief Executive Officer—ALRe

John M. Rhodes

   47    Executive Vice President and Chief Risk Officer

Marc Beilinson

   60    Director*

Robert L. Borden

   56    Director*

Mitra Hormozi†

   50    Director*

Scott Kleinman†

   46    Director

Brian Leach

   60    Director*

Gernot Lohr

   50    Director

H. Carl McCall

   83    Director*

Matthew R. Michelini

   37    Director

Dr. Manfred Puffer

   55    Director

Marc Rowan

   56    Director

Lawrence J. Ruisi

   70    Director*

Hope Schefler Taitz

   54    Director

Arthur Wrubel

   53    Director*

Fehmi Zeko

   60    Director*

 

*

Independent director for purposes of the NYSE corporate governance listing requirements.

Mr. Kleinman and Ms. Hormozi have been appointed subject to being nominated and elected by shareholders at the 2019 Annual General Meeting.

Executive Officers

James R. Belardi is our co-founder, and has served as our Chairman, Chief Executive Officer and Chief Investment Officer since May 2009. In addition, Mr. Belardi is the founder, Chairman, Chief Executive Officer and Chief Investment Officer of AAM, our investment manager. He is a member of our executive committee and AAM’s executive committee. Mr. Belardi is responsible for our overall strategic direction and management and the day-to-day management of our investment portfolio. Prior to founding our Company and AAM, Mr. Belardi was President of SunAmerica Life Insurance Company and was also Executive Vice President and Chief Investment Officer of AIG Retirement Services, Inc., where he had responsibility for an invested-asset portfolio of $250 billion. Mr. Belardi has a Bachelor of Arts degree in economics from Stanford University and a Master of Business Administration from the University of California, Los Angeles. He currently serves on the board of directors of AAM, Paulist Productions, where he chairs the investment committee, Aris Mortgage Holding Company LLC (“Aris Holdco”), which is the parent company of AmeriHome Mortgage Company, LLC (“AmeriHome”), and Southern California Aquatics. Mr. Belardi swam in the 1976 and 1980 Olympic Swimming Trials and is a nine-time Masters Swimming World Record Holder. Mr. Belardi was selected to serve on our board of directors as a result of his demonstrated track record in and deep knowledge of the financial services business, including having founded both our Company and AAM, and his extensive experience in the insurance industry.

William J. Wheeler has served as our President since September 2015. Together with Mr. Belardi, Mr. Wheeler is responsible for our overall strategic direction. In particular, Mr. Wheeler oversees all of our

 

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business units, which includes our retail and institutional operations, and also our corporate development and risk activities. Prior to joining our Company, Mr. Wheeler was President of the Americas group for MetLife Inc. (“MetLife”) where he oversaw the insurance and retirement business in the United States and Latin America. Previously, Mr. Wheeler had been Executive Vice President and Chief Financial Officer at MetLife. Prior to joining MetLife, Mr. Wheeler was an investment banker at Donaldson, Lufkin & Jenrette. Mr. Wheeler has an AB from Wabash College, where he is now a member of the board of trustees, and an MBA from Harvard Business School. He currently serves on the boards of Evercore Inc., Athora Holding Ltd., Venerable Holdings, Inc. and the American Council of Life Insurers.

Grant Kvalheim has served as the Chief Executive Officer of Athene USA Corporation since June 2015 and served as our President from January 2011 until September 2015, served as the Chief Financial Officer from January 2011 until April 2013 and served as a director from January 2012 until February 2014. Mr. Kvalheim is responsible for the oversight of our U.S. operating companies with a focus on our retail annuity channel, including growth initiatives and new product development. Prior to joining our Company, Mr. Kvalheim was a senior executive of Barclays Capital (“Barclays”) from early 2001 to the end of 2007, becoming Co-President in September 2005. During his time at Barclays he converted a European cash investment grade business into a leading global cash and derivatives business across both securitized and non-securitized credit products, and significantly expanded Barclays’ investment banking platform. Prior to joining Barclays, Mr. Kvalheim held senior executive positions in the investment banks of Deutsche Bank and Merrill Lynch. Mr. Kvalheim has a Bachelor of Arts degree in economics from Claremont McKenna College and a Master of Business Administration in finance from the University of Chicago. He currently serves on the board of directors of LIMRA, Mottahedeh & Co., Sol Health and United Way of Central Iowa.

Martin P. Klein has served as our Executive Vice President and Chief Financial Officer since November 2015. Mr. Klein also serves as a director of several of our insurance subsidiaries. Mr. Klein is responsible for overseeing our financial management, including our enterprise finance, tax, actuarial and internal audit functions. He also helps to develop and execute strategic operating decisions across our Company. Prior to joining our Company, Mr. Klein was employed by Genworth Financial, Inc. (“Genworth”) from May 2011 through October 2015, where he most recently served as Executive Vice President & Chief Financial Officer and, from May through December 2012, also served as Genworth’s Acting President & Chief Executive Officer. Prior to joining Genworth in 2011, Mr. Klein served as a Managing Director and Senior Relationship Manager of Barclays, after its acquisition of the U.S. operations of Lehman Brothers Holdings, Inc. (“Lehman Brothers”). Mr. Klein joined Lehman Brothers in 1998, where he served as a Managing Director and the head of the Insurance Solutions Group and the Pension Solutions Group. Prior to Lehman Brothers, Mr. Klein had been with Zurich Insurance Group from 1994 to 1998 and was a Managing Director of Zurich Investment Management. Prior to Zurich, Mr. Klein served in finance and actuarial roles in other insurance organizations. Mr. Klein currently serves on the boards of Aris Holdco and Athora Holding Ltd., as well as Caritas, a non-profit organization in Richmond, Virginia. Mr. Klein is a Fellow of the Society of Actuaries and a Chartered Financial Analyst. He received his Bachelor of Arts in mathematics and business administration from Hope College and a Master of Science in statistical and actuarial sciences from University of Iowa.

Frank L. Gillis is a co-founder of our Company and served on our board of directors from May 2009 to February 2014. Mr. Gillis has served as Chief Executive Officer of ALRe since June 2009 and serves as a director of ALRe. Mr. Gillis is responsible for our growth through our reinsurance channel and is responsible for the oversight of ALRe. Prior to founding our Company, Mr. Gillis was a Senior Managing Director at Bear Stearns & Co. Inc. (“Bear Stearns”) and was the head of the Bear Stearns Insurance Solutions Group. In this position, he led Bear Stearns’ entry into the funding agreement-backed note business and created the turn-key Premium Asset Trust Series. Prior to Bear Stearns, Mr. Gillis spent over three years at GenRe Financial Products providing ALM hedging solutions to U.S. life insurance companies. Mr. Gillis serves on the boards of Bermuda International Long Term Insurers and Reinsurers and the Association of Bermuda International Companies. Mr. Gillis has a Bachelor of Arts in English from the University of Richmond.

 

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John M. Rhodes has served as our Executive Vice President and Chief Risk Officer since August 2016. Mr. Rhodes is responsible for overseeing our enterprise risk management functions, as well as providing key support in connection with strategic operating decisions across our Company. Prior to joining our Company, Mr. Rhodes was the Chief Risk Officer of Allstate from November 2015 to June 2016. Prior to joining Allstate, Mr. Rhodes was the Chief Risk Officer of Lincoln Financial Group from July 2012 to October 2015. Prior to that he served as the Head of Equity Risk Management at Lincoln Financial Group from 2009 to 2012. Prior to joining Lincoln Financial Group, Mr. Rhodes was the Head of Hedging Operations and Performance Management at ING US Financial Services from 2006 to 2009. From 1999 to 2006, Mr. Rhodes served in a variety of roles at JPMorgan Chase and GE Capital focusing primarily on market risk and valuation. Mr. Rhodes also served in the U.S. Navy as a commissioned officer. Mr. Rhodes received a Bachelor of Science degree in Oceanography from the United States Naval Academy and a Master of Business Administration from New York University, Leonard Stern School of Business.

Directors

We believe our board of directors should be composed of a diverse group of individuals with sophistication and experience in many substantive areas that impact our business. We believe experience, qualifications and skills in the following areas are most important: insurance industry; accounting, finance and capital structure; strategic planning and leadership of complex organizations; legal/regulatory and government affairs; personnel management; and board practices of other major corporations. We believe that all of our current board members possess the professional and personal qualifications necessary for service on our board, and have highlighted particularly noteworthy attributes for each board member in the individual biographies below, or above in the case of our Chairman and Chief Executive Officer.

Marc Beilinson has served as a director of our Company since 2013, and is the lead independent director, the chair of our compensation committee and a member of our conflicts committee and nominating and corporate governance committee. Since August 2011, Mr. Beilinson has been the Managing Director of Beilinson Advisory Group, a financial restructuring and hospitality advisory group that specializes in assisting distressed companies. Most recently, Mr. Beilinson served as Chief Restructuring Officer of Newbury Common Associates LLC (and certain affiliates) from December 2016 to June 2017. Mr. Beilinson previously served as Chief Restructuring Officer of Fisker Automotive from November 2013 to August 2014 and as Chief Restructuring Officer and Chief Executive Officer of Eagle Hospitality Properties Trust, Inc. from August 2011 to December 2014 and Innkeepers USA Trust from November 2008 to March 2011. Mr. Beilinson oversaw the Chapter 11 reorganization of Innkeepers USA, Fisker Automotive and Newbury Common Associates in his interim management roles as the Chief Restructuring Officer of those companies. Mr. Beilinson currently serves on the boards of directors of MFG Assurance Company Limited and Monitronics, as well as the audit committee of MFG Assurance Company Limited. Mr. Beilinson has previously served on the boards of directors and audit committees of a number of public and privately held companies, including Westinghouse Electric, Caesars Acquisition Company, Wyndham International, Inc., Apollo Commercial Real Estate Finance, Inc. (“ARI”), Innkeepers USA Trust, Gastar Inc. and American Tire. Mr. Beilinson has a Bachelor of Arts in political science from the University of California, Los Angeles and a Juris Doctor from the University of California Davis Law School. Mr. Beilinson was selected to serve on our board of directors as a result of having over thirty years of service to the boards of both public and private companies, and his extensive knowledge of legal and compliance issues, including the Sarbanes-Oxley Act of 2002.

Robert L. Borden has served as a director of our Company and our Company’s subsidiary, ALRe, since 2010, and is a member of our risk, audit and conflicts committees. Mr. Borden has served as Managing Partner and Chief Investment Officer of Delegate Advisors, LLC since January 2012. From April 2006 to January 2012, Mr. Borden served as the Chief Executive Officer and Chief Investment Officer of the South Carolina Retirement System Investment Commission (“SCRSIC”), which is responsible for investing and managing all assets of the South Carolina Retirement Systems. Prior to his role at SCRSIC, Mr. Borden served as the Executive Director and Chief Investment Officer of the Louisiana State Employees Retirement System, where he was responsible for

 

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investment management, benefits administration, finance and operations. Mr. Borden has also served as Vice Chairman and Chairman of the Fund Evaluation Committee for the Louisiana Deferred Compensation Commission and as a member of the South Carolina Deferred Compensation Committee. Prior to that, Mr. Borden served as Treasurer and Senior Manager for Financial Services at the Texas Workers’ Compensation Insurance Fund after serving as VP of Treasury and Interest Rate Risk Manager at Franklin Federal Bancorp. Mr. Borden serves on the board of directors of Delegate Advisors, LLC, Apollo Senior Floating Rate Fund, Inc. and Apollo Tactical Income Fund Inc. Mr. Borden has a Bachelor of Business Administration with a major in finance from the University of Texas at Austin and received a Master of Science degree in finance from Louisiana State University. Mr. Borden holds both the Chartered Financial Analyst and Chartered Alternative Investment Analyst professional designations. Mr. Borden was selected to serve on our board of directors as a result of his extensive experience in leadership positions, and in particular, his experiences as Chief Executive Officer and Chief Investment Officer at several companies.

Mitra Hormozi has served as a director of our Company since December 2018. Ms. Hormozi is also a director of a number of our US subsidiaries. Ms. Hormozi is Executive Vice President and General Counsel of Revlon, Inc., where she is responsible for overseeing Revlon’s legal affairs worldwide. Ms. Hormozi has extensive experience in both the public and private sectors of the legal field. Prior to joining Revlon in April 2015, she was a litigation partner at two major law firms from 2011 to 2015 and served as Deputy Chief of Staff to then New York State Attorney General, Andrew Cuomo. She also served as an Assistant United States Attorney prosecuting high-profile complex racketeering cases in the Eastern District of New York. Currently, she sits on the Board of New York University School of Law’s Program on Corporate Compliance and Enforcement. Ms. Hormozi received a Bachelor of Arts in history from the University of Michigan and a Juris Doctor from the New York University School of Law. Ms. Hormozi was selected to serve on our board of directors as a result of her extensive legal counsel experience.

Scott Kleinman has served as a director of our Company since December 2018. Mr. Kleinman serves as Co-President of Apollo Global Management, LLC, sharing responsibility for all of Apollo’s revenue-generating and investing activities with a focus on Apollo’s equity and opportunistic business. Mr. Kleinman joined Apollo in 1996, and in 2009 he was named Lead Partner for Private Equity. Prior to joining Apollo, Mr. Kleinman was a member of the Investment Banking Division at Smith Barney Inc. Mr. Kleinman currently serves on the board of directors of Constellis Holdings and Momentive Performance Materials Holdings, Inc. In 2014, Mr. Kleinman founded the Kleinman Center for Energy Policy at the University of Pennsylvania. He also is a member of the Board of Overseers at the University of Pennsylvania School of Design. Mr. Kleinman received a Bachelor of Arts in Russian studies and a Bachelor of Science in finance from the University of Pennsylvania and the Wharton School of Business, respectively, graduating magna cum laude, Phi Beta Kappa. Mr. Kleinman was selected to serve on our board of directors as a result of his extensive experience in the financial services sector.

Brian Leach has served as a director of our Company since August 2016, and is a member of our risk and audit committees. From 2013 to 2015, Mr. Leach served as Head of Franchise Risk & Strategy at Citigroup with responsibility for managing all of Citibank’s global risk, audit, compliance and strategy. From 2008 to 2012, Mr. Leach served as the Chief Risk Officer of Citibank. In 2005, Mr. Leach, together with several former colleagues from Morgan Stanley, formed Old Lane and from 2005 to 2008, Mr. Leach served as Old Lane’s co-Chief Operating Officer and Chief Risk Officer. Prior to that, Mr. Leach worked his entire post-graduate career at Morgan Stanley encompassing running a successful proprietary trading business and culminating as the Risk Manager of the Institutional Securities Business reporting directly to its President. During his time with Morgan Stanley, Mr. Leach was seconded to Long-Term Capital Management (“LTCM”) for approximately one year. During that time, he was one of six managers selected by a consortium of 14 global financial institutions to manage the liquidation of LTCM. Mr. Leach serves on the Advisor Investment Committee of Mountain Capital. Mr. Leach has a Bachelor of Arts degree in economics from Brown University and a Master of Business Administration from Harvard Business School. Mr. Leach has been awarded Risk Manager of the Year on two separate occasions: the first by Risk Magazine for his work in restructuring the hedge fund LTCM and the second by the Global Association of Risk Professionals for his work in restructuring Citigroup after the global financial

 

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crisis. Mr. Leach was selected to serve on our board of directors as a result of his extensive experience in risk management.

Gernot Lohr has served as a director of our Company and our subsidiary, ALRe, since 2009. Mr. Lohr has served as a director of AAM, our investment manager, since 2009. Mr. Lohr is a Senior Partner and Global Head of the Financial Institutions Group at Apollo, which he joined in May 2007. Prior to joining Apollo, Mr. Lohr was a founding partner at Infinity Point LLC, Apollo’s joint venture partner for the financial services industry since 2005. Before that time, Mr. Lohr spent eight years in financial services investment banking at Goldman, Sachs & Co. in New York and also worked at McKinsey & Company and B. Metzler Corporate Finance in Frankfurt. Currently, Mr. Lohr serves on the board of directors of Athora Holding Ltd., Catalina Holdings, Oldenburgische Landesbank and Tranquilidade. Mr. Lohr has a joint Master’s Degree in economics and engineering from the University of Karlsruhe, Germany, and received a Master of Business Administration from the MIT Sloan School of Management. Mr. Lohr was selected to serve on our board of directors as a result of his extensive experience in the financial services sector.

H. Carl McCall has served as a director of our Company since August 2016, and is a member of our nominating and corporate governance and compensation committees. Since October 2011, Mr. McCall has served as the Chairman of the Board of Trustees of the State University of New York. From 2002 to 2015, Mr. McCall served as a board member or trustee of several organizations, including Ariel Investment, Tyco International, New Plan Realty Corporation and the New York Stock Exchange. Since 2004, Mr. McCall has served as a principal of Covenant Capital, LLC. From 1993 to 2002, Mr. McCall served as the Comptroller of the State of New York, a position in which he was the sole trustee of the second largest public pension fund in the United States. From 1991 to 1993, Mr. McCall served as the President of the New York City Board of Education. From 1986 to 1991, Mr. McCall served as Commissioner of the Port Authority of New York and New Jersey. From 1985 to 1993, Mr. McCall served as a Vice President of Citicorp, Inc. From 1980 to 1981, Mr. McCall served as an ambassador to the United Nations. From 1975 to 1980, Mr. McCall served as a state senator of New York. Mr. McCall received a Bachelor of Arts degree in government from Dartmouth College and a Masters of Arts from Andover Newton Theological Seminary. Mr. McCall was selected to serve on our board of directors as a result of his extensive leadership experience in various sectors, and his experience serving on the boards of a number of public and private companies.

Matthew R. Michelini has served as a director of our Company and certain of our subsidiaries since 2010, and is a member of our executive and risk committees. Mr. Michelini serves as a director of AAM, our investment manager. Mr. Michelini is a Partner at Apollo. He joined Apollo in July 2006. Prior to joining Apollo, Mr. Michelini was a member of the mergers and acquisitions group of Lazard Frères & Co. from 2004 to 2006. Mr. Michelini serves on the board of directors of Aleris Corporation, OneMain Holdings and Venerable Holdings, Inc. He has previously served on the boards of Metals USA Holdings (formerly NYSE listed under “MUSA”), Noranda Aluminum Holding Corporation (formerly NYSE listed under “NOR”) and Warrior Met Coal, Inc. At Apollo, Mr. Michelini has executed deals across the world including in North America, Europe, and Asia. Mr. Michelini graduated from Princeton University with a B.S. in mathematics and a Certificate in Finance and received his M.B.A. from Columbia University. Mr. Michelini was selected to serve on our board of directors as a result of his extensive experience in the financial services sector.

Dr. Manfred Puffer has served as a director of our Company since 2012, and is the chair of our risk committee. Dr. Puffer has served as a Senior Advisor to Apollo since October 2008. From 2006 to 2008, Dr. Puffer was a senior managing director in the Financial Institutions Group of Bear Stearns International, Head of Germany, Austria and Eastern Europe and a Member of the European Executive Committee. From 2002 to 2005, Dr. Puffer was a member of the managing board of WestLB AG and Head of the Investment Bank, Fixed Income, Equities and Structured Finance. Currently, Dr. Puffer is a member of the supervisory board of Infineon Technologies AG. Dr. Puffer holds a Ph.D. and a Master of Business Administration from the University of Vienna. Dr. Puffer was selected to serve on our board of directors as a result of his extensive experience in the financial services sector.

 

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Marc Rowan has served as a director of our Company since 2009, and is a member of our executive committee. Mr. Rowan has served as a director of AAM, our investment manager, since 2009. Mr. Rowan is a co-founder and Senior Managing Director of Apollo, a leading alternative asset manager focused on contrarian and value-oriented investments across private equity, credit-oriented capital markets and real estate. Mr. Rowan currently serves on the boards of directors of, among others, Apollo, Athora Holding Ltd. and VA Capital LLC. He has previously served on the boards of directors of, among others, the general partner of AAA, AMC Entertainment, Inc., Beats Music, CableCom Gmbh., Caesars Entertainment Corporation, Countrywide PLC, Culligan Water Technologies, Inc., Furniture Brands International, Mobile Satellite Ventures, National Cinemedia, Inc., National Financial Partners, Inc., New World Communications, Inc., New York City Police Foundation, Norwegian Cruise Lines, Quality Distribution, Inc., Samsonite Corporation, SkyTerra Communications, Inc., Unity Media SCA, Vail Resorts, Inc., Wyndham International, Inc. and RCS Capital Corporation. Mr. Rowan is a founding member and Chairman of Youth Renewal Fund, Chairman of the Board of Overseers of The Wharton School at the University of Pennsylvania, a member of the University of Pennsylvania’s Board of Trustees and a member of the board of Jerusalem U and several technology-oriented companies. Mr. Rowan graduated summa cum laude from the University of Pennsylvania’s Wharton School of Business with a Bachelor of Science and a Master of Business Administration in finance. Mr. Rowan was selected to serve on our board of directors as a result of his service on the boards of numerous public and private companies and his demonstrated track record of success and extensive experience in the financial services sector.

Lawrence J. Ruisi has served as a director of our Company since 2013, and is the chair of our audit committee and is a member of our risk committee. Mr. Ruisi is also a director of a number of our US subsidiaries. As an operating executive, Mr. Ruisi held various senior level positions in the entertainment business, including President & Chief Executive Officer of Loews Cineplex Entertainment Corporation, a movie theatre operator with 400 locations worldwide, and as Executive Vice President and Chief Financial Officer of Columbia Pictures Entertainment. As a non-executive, Mr. Ruisi served on numerous boards including Hughes Communications Inc., UST Inc., InnKeepers USA Trust, Wyndham International, Inc. and Adaptec, Inc. During his tenure on these boards, Mr. Ruisi was Chairman of various audit committees, named designated financial expert and served on both compensation and nominating and corporate governance committees. Mr. Ruisi was Chairman of the Independent Committee of the board of InnKeepers, which oversaw its restructuring, and was Chairman of Special Committees at both Wyndham and Adaptec. Mr. Ruisi began his career at Price Waterhouse & Co., where he was a Senior Manager. He is a Certified Public Accountant and received a Bachelor of Science degree in accounting and a Master of Business Administration in finance from St. John’s University. Mr. Ruisi is currently an adjunct professor of accounting at St. John’s University. Mr. Ruisi was selected to serve on our board of directors as a result of his extensive leadership experience in various sectors, his expertise in accounting and financial reporting matters and his experience serving on the boards of numerous public and private companies.

Hope Schefler Taitz has served as a director of our Company and our subsidiary, ALRe, since 2011, and is a member of our risk and conflicts committees. Ms. Taitz is also a director of a number of our US subsidiaries. Ms. Taitz has served as the CEO of ELY Capital since 2014. Now acting as an investor and advisor with expertise in media, technology and the consumer, she helps innovative enterprises grow through financial leadership and connections to established corporations. Ms. Taitz, a strong advocate of women on boards, currently serves on the board of MidCap Finco Holdings Limited, Greenlight Capital Re, Ltd. and Summit Hotel Properties, Inc. She has previously served on the boards of Apollo Residential Mortgage, Inc., Diamond International Resorts, Inc., as well as Lumenis Ltd. From 1995 to 2003, Ms. Taitz was Managing Partner of Catalyst Partners, L.P., a money management firm. From 1990 to 1992, Ms. Taitz was a Vice President at The Argosy Group (now part of the Canadian Imperial Bank of Commerce (NYSE: CM)) specializing in financial restructuring before becoming a Managing Director at Crystal Asset Management, from 1992 to 1995. From 1986 to 1990, Ms. Taitz was at Drexel Burnham Lambert, first as a mergers and acquisitions analyst and then as an associate in the leveraged buyout group. On the not for profit side, Ms. Taitz focuses on education and is an advocate for STEM. She is a founding executive member of YRF Darca, an emeritus board member of Pencils of Promise, a member of the undergraduate executive board of The Wharton School at the University of

 

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Pennsylvania and a member of the Center for Social Innovation. Ms. Taitz is a former board member of Girls Who Code and is now a board member of the New York City Foundation for Computer Science. Ms. Taitz graduated with honors from the University of Pennsylvania with a Bachelor of Arts degree in economics. Ms. Taitz was selected to serve on our board of directors as a result of her extensive experience in the financial services sector as well as her experience serving on the governance committees of other public companies.

Arthur Wrubel has served as a director of our Company since August 2016, and is the chair of our nominating and corporate governance and a member of our compensation committee. In 2001, Mr. Wrubel formed Wesley Capital Management, a long/short investment fund focused on real estate securities. Since its inception, Wesley Capital has been among the largest investment funds in the real estate securities sector. In 1993, Mr. Wrubel joined Dickstein & Co., a bankruptcy and event-driven investment fund as a partner. His focus was on real estate and asset backed securities. At Dickstein, Mr. Wrubel was involved in many high-profile real estate corporate restructurings including Olympia & York, Cadillac Fairview, Rockefeller Center Properties, Bramalea, and Trizec. Mr. Wrubel began his career in 1987 at JMB Realty Corporation, where he was an associate in the acquisitions group. Mr. Wrubel currently serves as a member of the Wharton Undergraduate Board at the University of Pennsylvania. Mr. Wrubel received a Bachelor of Science in economics from The Wharton School at the University of Pennsylvania. Mr. Wrubel was selected to serve on our board of directors as a result of his extensive experience in the financial services sector.

Fehmi Zeko has served as a director of our Company since March 2018. Mr. Zeko currently serves as CEO of Zeko Partners LLC and a Senior Advisor at both MC Credit Partners LP and CDX Advisors. From 2015 to March 2018, Mr. Zeko served as Vice Chairman, Global Technology, Media and Telecommunications Investment Banking Group at Bank of America Merrill Lynch. In this role he helped organize and execute the strategic plan to reposition the entire Technology, Media and Telecom franchise for large cap coverage globally. Prior to Bank of America, Mr. Zeko was Senior Managing Director, Group Head North America and Global Chairman, Telecom, Media, Entertainment and Technology (“TMET”) at Macquarie Capital, where he led the firm’s Global TMET Investment Banking and Principal Investing Practice. Prior to joining Macquarie Capital, Mr. Zeko was Vice Chairman and Co-Founder of the Foros Group, where he led the firm’s Media and Communication Advisory Practice. Prior to that, Mr. Zeko held senior investment banking positions at Deutsche Bank and Citigroup. He received his Bachelor of Business Administration and Master of Business Administration in Finance from Texas Christian University’s Neeley School of Business. Mr. Zeko was selected to serve on our board of directors as a result of his extensive financial and global experience.

 

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COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS

Compensation Discussion and Analysis

Introduction

Our NEOs, comprised of our principal executive and financial officers and the three highest paid executive officers other than our principal executive and financial officers, are James R. Belardi, Chairman, Chief Executive Officer and Chief Investment Officer; Martin P. Klein, Executive Vice President and Chief Financial Officer; William J. Wheeler, President; Grant Kvalheim, Executive Vice President, Athene and Chief Executive Officer and President, Athene USA Corporation; and John M. Rhodes, Executive Vice President and Chief Risk Officer.

Compensation Framework

Goals, Principles and Process

Our compensation committee believes that our executive compensation program should reward actions and behaviors that support policyholder protection, drive long-term and profitable revenue growth, and create sustainable shareholder value. The compensation committee has sought to foster these objectives through a compensation system that focuses on increasing our executives’ personal interest in our growth and success through performance-based annual incentive awards and ownership of our Class A common shares. We believe that these awards create a balanced focus on our short-term and long-term strategic and financial goals. Our executive compensation program is designed to:

 

   

attract, retain and motivate high-performing talent;

 

   

reward outstanding performance;

 

   

align executive compensation elements with both short-term and long-term company performance; and

 

   

align the interests of our executives with those of our stakeholders.

Our compensation committee has the responsibility for overseeing and approving the compensation of all of our executive officers. Our compensation committee also receives input from the compensation committee’s independent compensation consultant and recommendations from Mr. Belardi regarding the compensation arrangements for executive officers other than himself. None of our NEOs participated in the determination of their own compensation.

In 2018, our compensation committee conducted a review of the Company’s executive compensation program, with the assistance of the compensation committee’s independent compensation consultant, Willis Towers Watson. Willis Towers Watson provided input on the Company’s overall incentive design and a benchmarking analysis with respect to our executive officer compensation program. When setting 2018 NEO compensation, our compensation committee considered survey data from the 2017 Willis Towers Watson CDB Financial Services Executive Compensation Database, as well as compensation data from a group of peer companies (the “Peer Group”) to evaluate compensation arrangements against those of the Company. The companies in the Peer Group were selected based on one or more of the following characteristics: the companies are similar in size to the Company; the companies are industry competitors; or the companies are considered a source of talent. Even though some of the Peer Group companies have larger revenues and market capitalization than the Company, the compensation committee determined that each company was an appropriate peer based on such company being an industry competitor or a source of talent. The Peer Group used to evaluate 2018 compensation decisions consisted of the following nine publicly-traded insurance companies:

 

Aflac Incorporated

Lincoln National Corporation

Principal Financial Group, Inc.

  

Prudential Financial, Inc.

Reinsurance Group of America

Sun Life Financial Inc.

  

Torchmark Corporation

Unum Group

Voya Financial, Inc.

 

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While our compensation committee considers relevant market pay practices when setting executive compensation, it does not believe it appropriate to establish compensation levels based only on market practices. Our compensation committee believes that compensation decisions are complex and require a deliberate review of Company performance and peer compensation levels. The factors that influence the amount of compensation awarded include market competition for a particular position, an individual’s experience and past performance inside or outside the Company, compensation history, role and responsibilities within the Company, tenure with the Company and associated institutional knowledge, long-term potential with the Company, contributions derived from creative and innovative thinking and leadership, industry expertise, past and future performance objectives and the value of the position within the Company.

In addition to executive compensation consulting services, for which the Company paid $192,576 in the aggregate for 2018, Willis Towers Watson provided other services during 2018 for which the Company paid $3,890,842 in the aggregate. These other services consisted of (i) risk and financial services and (ii) benefits services.

The decision to engage Willis Towers Watson for the other services was made by management. Although the compensation committee did not approve such other services, the compensation committee assessed the independence of Willis Towers Watson pursuant to the SEC rules and the NYSE listing standards and concluded that Willis Towers Watson’s work did not raise any conflict of interest.

2018 Compensation Elements

Base Salary

Base salaries for our NEOs are determined annually, based on a number of factors, including the size, scope and impact of their role, the market value associated with their role, leadership skills, length of service, and individual performance and contributions.

Annual Incentive Awards

As further discussed below in “ —2018 Compensation Decisions,” we grant annual cash incentive awards to our NEOs based on the achievement of financial, operational and personal objectives. In general, these objectives are communicated to our NEOs at the beginning of the year, and the compensation committee determines the amount of the awards after the completion of the performance period. The annual incentive award payout for each NEO is subject to a personal performance modifier that allows for an adjustment in payout based on a holistic assessment of each NEO’s individual performance.

Equity and Long-Term Incentive Awards

In general, the Company’s equity and long-term incentive compensation program is designed to recognize the scope of an individual’s responsibilities, reward demonstrated performance and leadership, further align the interests of award recipients with those of the Company’s shareholders and retain award recipients through the vesting period. Important factors in determining the amount of grants awarded to each NEO include the size of past grant amounts, individual performance and expected future contributions to the Company.

Following our initial public offering, we began issuing annual long-term incentive awards to our executive officers, consisting of time-based stock options, time-based restricted share units (“RSUs”) and performance-based equity awards. The 2018 long-term incentive awards to executive officers were structured as 50% performance-based restricted share awards (“RSAs”) (based on target), 25% time-based RSUs and 25% time-based stock options, each by grant date value. The structure and annual amount of the awards are determined by the compensation committee with input from Willis Towers Watson. We use grants of stock options to focus our executives on delivering long-term value to shareholders because options have intrinsic value only to the extent

 

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that the price of our stock on the date of exercise exceeds the stock price on the grant date. We also use stock options to retain executives, since the stock options vest ratably over a three-year period, provided the recipient remains employed through the applicable vesting date. We believe that time-based RSUs further align the interests of our executives with those of our shareholders and also serve to retain executives, as these RSUs also vest ratably over a three-year period, provided the recipient remains employed through the applicable vesting date.

The performance-based RSAs included in our 2018 long-term incentive award program have a three-year performance period (2018-2020) and vest and are payable following the three-year performance period only if we achieve specified goals based on two equally weighted performance metrics: average annual adjusted return on equity and cumulative adjusted operating income for the three-year period. The target levels of these goals were designed to be reasonably achievable with strong management performance. These performance-based RSAs also serve to retain executives as they generally require the recipient to be continuously employed during the performance period.

Other Compensation Practices

Employment Agreements

We have entered into employment agreements with certain of our NEOs, as follows:

Belardi Agreement

As Mr. Belardi also serves as AAM’s Chairman, Chief Executive Officer and Chief Investment Officer, he has separate employment agreements with both the Company and with AAM. Under these agreements, Mr. Belardi is entitled to receive, among other benefits, a base salary and is eligible to receive an incentive award each fiscal year during the term of employment. For 2018, AAM and the compensation committee of AHL consulted with each other to determine Mr. Belardi’s total base salary, incentive award targets and actual incentive awards. Pursuant to an understanding between AHL and AAM, AHL has agreed that AHL is responsible for paying half of his base salary and incentive award, and AAM agreed to be responsible for paying the remaining amount. Either party, at its sole discretion, may pay its portion of the incentive award in the form of cash or equity. The target incentive award is 100% of Mr. Belardi’s base salary, but the actual incentive award is determined by our compensation committee and AAM’s compensation committee, based on non-alternative investment performance relative to the Barclays US Aggregate Bond Index, aggregate alternative investment net performance relative to the Company’s underwriting target, and other corporate performance targets established by the compensation committee. We report our portion of Mr. Belardi’s total annual salary and incentive award in our 2018 Summary Compensation Table. In addition, AAM retains discretion to pay other elements of compensation under the employment agreement with AAM or otherwise as it deems appropriate in its sole discretion.

Mr. Belardi’s employment agreement with us has a three-year initial term that expired on November 3, 2016 which automatically extends for subsequent one-year terms unless one party gives notice of non-renewal prior to expiration of the then current term. Pursuant to his employment agreement, severance is payable to Mr. Belardi in the event of a termination of employment by the Company without cause, by the Company by reason of non-renewal, by Mr. Belardi for good reason, or due to Mr. Belardi’s death or disability. Mr. Belardi is entitled to receive severance payments in an amount equal to the sum of his then-annual base salary and a pro rata incentive award for the year of termination based, in part, on the incentive award and annual salary paid to him in the year preceding his termination. In the event of involuntary termination other than due to death or disability, Mr. Belardi is entitled to receive an additional severance payment equal to his then-annual base salary multiplied by a bonus percentage, calculated based on the bonus paid to him in the year preceding his termination and divided by his annual base salary in the year preceding his termination. In the event of involuntary termination other than due to non-renewal by the Company, any outstanding and unvested time-based restricted shares that

 

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were scheduled to vest during the one-year period following the termination date will immediately vest, and a portion of each tranche of outstanding and unvested Class M performance-based restricted shares shall remain outstanding and eligible to vest pursuant to their terms for a period of 18 months following the termination date. As a condition to his receipt of the severance payments and benefits described above, Mr. Belardi must timely execute (and not revoke) a general release of claims against the Company and its affiliates. Mr. Belardi’s employment agreement with the Company also contains customary restrictive covenants, including confidentiality and nondisclosure covenants, a covenant not to compete with, or solicit customers of, the Company or AAM for 12 months following termination, and a covenant not to solicit employees of the Company or AAM for 24 months following termination.

Wheeler Agreement

Pursuant to his employment agreement, Mr. Wheeler is entitled to receive a minimum base salary of $1,250,000 and is eligible to receive an annual incentive award each fiscal year he is employed. The annual incentive award opportunity and payouts are determined by the compensation committee in its sole discretion, with payouts determined based on performance objectives (which may include corporate, financial, strategic, individual or other objectives) established by the compensation committee. His employment is at will and may be terminated by him or by the Company at any time by giving two months’ notice.

In addition to termination by Mr. Wheeler or the Company at any time by giving two months’ notice, the Company has the right, in its discretion, to terminate the agreement with a payment in lieu of notice. The Company may also terminate the agreement without notice or payment in lieu of notice if Mr. Wheeler is guilty of any gross default or misconduct, or any repeated misconduct after due warning, in connection with the Company or in the event of any serious or repeated breach or non-observance with any of the provisions in the agreement. The employment agreement contains customary restrictive covenants, including confidentiality and nondisclosure covenants and covenants not to solicit customers or employees of the Company or any affiliate of the Company for 12 months following termination.

Klein Agreement

Pursuant to his employment agreement, Mr. Klein is entitled to receive a minimum base salary of $550,000 and is eligible to receive an annual incentive award each fiscal year he is employed. The annual incentive award opportunity and payouts are determined by the compensation committee in its sole discretion, with payouts determined based on performance objectives (which may include corporate, financial, strategic, individual or other objectives) established by the compensation committee. His employment is at will and may be terminated by him or by the Company at any time by giving two months’ notice.

In addition to termination by Mr. Klein or the Company at any time by giving two months’ notice, the Company has the right, in its discretion, to terminate the agreement with a payment in lieu of notice. The Company may also terminate the agreement without notice or payment in lieu of notice if Mr. Klein is guilty of any gross default or misconduct, or any repeated misconduct after due warning, in connection with the Company or in the event of any serious or repeated breach or non-observance with any of the provisions in the agreement. The employment agreement contains customary restrictive covenants, including confidentiality and nondisclosure covenants and covenants not to solicit customers or employees of the Company or any affiliate of the Company for 12 months following termination.

Kvalheim Agreement

Pursuant to his employment agreement which terminated in accordance with its terms effective as of March 3, 2018, Mr. Kvalheim was entitled to receive a minimum base salary of $750,000 and was eligible to receive an incentive award each fiscal year he is employed. The annual incentive award opportunity and payouts were determined by the compensation committee in its sole discretion, with payouts determined based on

 

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performance objectives (which may include corporate, financial, strategic, individual or other objectives) established by the compensation committee.

Stock Ownership Guidelines

We require management at the Senior Vice President level and above, including our NEOs, to own significant amounts of our Class A common shares. The value of Class A common shares that must be held will be set at a multiple of the individual’s base salary. Covered executives will have five years from the adoption of the stock ownership guidelines or, if later, the appointment to a covered position to satisfy the applicable stock ownership guideline.

 

Position

   Multiple  

 

Chief Executive Officer/President

  

 

 

 

6X

 

 

Executive Vice President

     3X  

Senior Vice President

     2X  

Purchased and restricted Class A common shares, shares acquired upon the vesting of Class A RSUs, vested Class M common shares and vested stock options will count toward this requirement. Covered executives must retain at least 75% of all equity holdings in the Company until they meet their respective stock ownership requirements. As of the Record Date, each of our NEOs either met the applicable guideline or were projected to meet the guideline within the five-year period.

Anti-Hedging and Anti-Pledging Policies

Covered executives, including all of our executive officers, are not permitted to engage in any transactions that are designed to offset a decrease in the market value of our Class A common shares. Covered executives are not permitted to pledge their equity holdings in AHL without the permission of the Company. In addition, covered executives may not pledge their equity holdings in AHL as collateral if they are counting those holdings towards their respective stock ownership requirements.

Review of Compensation Policies and Practices Related to Risk Management

Effective risk management is central to our success, and compensation is carefully designed to be consistent with our risk management framework and controls. If the Company’s performance is obtained in a manner inconsistent with this framework or these controls, then the compensation committee has the discretion, with input from the risk committee, if necessary, to decrease or not award any bonuses to our NEOs and other executive officers. In addition, the performance objectives for our Chief Risk Officer and the other employees in our risk management function are based in part on the effectiveness of our risk management policies and procedures. We have determined that the risks arising from our compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

Consideration of Say On Pay Vote

As part of its ongoing review of the Company’s executive compensation program, the compensation committee considered the approval by approximately 99% of the votes cast for the Company’s “say on pay” vote at the Company’s 2018 Annual General Meeting of Shareholders. After considering the 2018 “say on pay” results, the compensation committee determined that the Company’s executive compensation objectives and compensation elements continued to be appropriate and did not make any specific changes to the Company’s executive compensation program in response to the 2018 “say on pay” vote.

2018 Compensation Decisions

Base Salary

Mr. Belardi’s base salary decreased from $925,000 in 2017 to $863,750 in 2018 to offset $61,250 in fees for estate planning services paid by the Company to ensure the orderly transition of Mr. Belardi’s shares. Mr. Klein’s

 

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base salary increased from $550,000 in 2017 to $625,000 in 2018 in recognition of Mr. Klein’s leadership in improving the Company’s public close process, consummating the Company’s senior notes offering and implementing solutions to realize efficiencies. Our other NEOs’ base salaries in 2018 remain unchanged from 2017 levels.

Annual Incentive Awards

Our NEOs’ annual incentive awards in 2018 were based on a combination of four overall corporate financial and operational goals, which comprised 50% of the award for Mr. Belardi and 75% of the award for our other NEOs, and individualized performance goals, which comprised 50% of the award for Mr. Belardi and 25% of the award for our other NEOs. We believe the targets were designed to be reasonably achievable with strong management performance and the coordinated, cross-functional focus and effort of the NEOs, and did not reflect unrealistic targets that may encourage excessive risk-taking. The targets for the corporate financial and operational measures were determined in relation to the Company’s internal business plan for the year. For 2018, the compensation committee established target incentive award opportunities of approximately 100%, 126%, 173%, 188% and 150% of base salary for Mr. Belardi, Mr. Wheeler, Mr. Kvalheim, Mr. Klein and Mr. Rhodes, respectively. The overall payout opportunity for incentive awards for our NEOs, other than Mr. Belardi, ranged from 0% to 200% of each participant’s target award opportunity, with a payout range of 0% to 170% for the corporate performance component of the incentive award. The overall payout opportunity for Mr. Belardi’s incentive award ranged from 0% to 140% of his target award opportunity, with a payout range of 0% to 170% for the corporate performance component of his incentive award. The corporate performance measurements, their respective weightings, 2018 performance and achievement with respect to these measurements, and payout level were as follows:

 

Objectives

   Weight    

Measurement

   Target      2018
Performance/
Achievement
     Payout  
Level
 

 

Overall profitability

     40  

Adjusted operating income

   $ 1.18B      $1.14B      85

Expense management

     20  

Expense targets

     —        Exceeded      109

Organic growth

     20  

Organic deposits(1)

   $ 12.5B      $13.0B      116

New business profitability

     20  

Underwritten IRR

     —        Exceeded      115

 

(1)

Organic deposits include retail IMO, retail financial institution, funding agreements, pension risk transfer and flow reinsurance.

Based on the Company’s 2018 performance with respect to these four objectives, the payout level was 102% of the corporate target opportunity. Total amounts of awards were also based on the assessment of individual performance factors, as discussed below.

Mr. Belardi

In addition to the four objectives above, which collectively comprised 50% of his award, Mr. Belardi’s annual incentive plan award in 2018 was based on two individualized performance objectives. The first objective, weighted at 25%, compared the Company’s non-alternative investment performance to the Barclays US Aggregate Bond Index over a three-year period. The second objective, also weighted at 25%, compared the Company’s alternative investment performance relative to a 50-50 blended index of the S&P 500 and the BofA Merrill Lynch US High Yield Index over a three-year period, subject to maintaining a minimum return on alternative investment performance since the inception of the Company.

For the objective based on the Company’s non-alternative investment performance, the committee compared the Company’s results of 4.96% for the three-year period ended December 31, 2018 (as calculated by AAM, based on information provided by the Company, and reviewed by the compensation committee) to 2.30% for the Barclays US Aggregate Bond Index for the same period and determined to pay out 100% of the award for this objective. For the objective based on the Company’s alternative investment performance, the committee

 

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compared the Company’s results of 8.86% for the three-year period ended December 31, 2018 (as calculated by AAM, based on information provided by the Company, and reviewed by the compensation committee) to 8.68% for the 50-50 blended index described above and determined to pay out 102% of the award for this objective.

Other NEOs

For purposes of determining the payout with respect to the portion of the bonus tied to individual performance for the other NEOs, our compensation committee assessed individual performance against the 2018 personal performance objectives established for each NEO at the beginning of 2018. These personal objectives were designed to generally align with the Company’s strategic and operating initiatives (both short-term and long-term) and included goals relating to execution on key strategic initiatives, leadership and team-related objectives and other objectives tied to the executives’ areas of responsibilities. The compensation committee reviews and approves the individual performance objectives (including the objectives’ relative weightings) for each of the other NEOs. In early 2019, the compensation committee evaluated the NEOs’ individual performance, with input from Mr. Belardi. Based on this evaluation, the compensation committee certified the achievement by each of the other NEOs of his individual performance objectives and assigned each NEO an individual performance payout percentage (potentially ranging from 0% to 200%), which is weighted 25% in the annual incentive payout formula. The payout amounts are reported under “Non-Equity Incentive Plan Compensation” in the 2018 Summary Compensation Table.

Equity and Long-Term Incentive Awards

The compensation committee determined the value of 2018 annual long-term incentive awards for the NEOs based on competitive market data, input from the committee’s compensation consultant, Willis Towers Watson, and our overall philosophy of aligning pay with performance. The total target value of these long-term incentive awards for each NEO was allocated among the awards as follows: approximately 25% of the target value in stock options, 25% of the target value in time-based RSUs, and 50% of the target value in performance-based RSAs. The target values of the 2018 long-term incentive awards granted to our NEOs are shown in the following table (the target values reported in this table may differ from the value reported in the compensation tables that follow because the value of equity awards reported in the compensation tables that follow are based on the grant date fair value determined in accordance with applicable accounting rules and, in the case of performance-based RSAs, the probable achievement of the underlying performance goal at the time of grant):

 

Named Executive Officer

   Time-Based
Stock Options
     Time-Based
RSUs
     Performance-
Based RSAs(1)
     Total         

 

James R. Belardi

   $ 625,000      $ 625,000      $ 1,250,000      $ 2,500,000     

William J. Wheeler

   $ 375,000      $ 375,000      $ 750,000      $ 1,500,000     

Grant Kvalheim

   $ 212,500      $ 212,500      $ 425,000      $ 850,000     

Martin P. Klein

   $ 250,000      $ 250,000      $ 500,000      $ 1,000,000     

John M. Rhodes

   $ 150,000      $ 150,000      $ 300,000      $ 600,000     

 

(1)

Performance-based RSAs were issued to the NEOs at maximum value, with shares to be forfeited if the maximum level of performance is not achieved. The numbers in this column represent the target value of the performance-based RSAs.

 

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2018 Summary Compensation

The following table contains 2018, 2017 and 2016 compensation information for our NEOs.

2018 Summary Compensation Table

 

Name and Principal Position

  Year     Salary     Stock Awards(1)     Option
Awards(2)
    Non-Equity
Incentive Plan
Compensation
    All Other
Compensation(3)
    Total

 

James R. Belardi (4)

 

 

2018

 

 

$

863,750

 

 

$

2,716,318

(5) 

 

$

625,002

 

 

$

(5)  

 

$

70,239

 

 

$

4,275,309

 

Chairman, Chief Executive Officer and Chief Investment Officer

    2017     $ 925,000     $ 2,522,695     $ 625,002     $     $ 712     $ 4,073,408  
   

 

2016

 

 

 

  $ 900,000     $ 2,216,047     $ 5,355,807     $     $ —       $ 8,471,854 (6) 

William J. Wheeler

    2018     $ 1,250,000     $ 1,066,406     $ 375,003     $ 1,700,000     $ 50,062     $ 4,441,472  

President

    2017     $ 1,250,000     $ 851,250     $ 375,003     $ 2,106,563     $ 65,473     $ 4,648,289  
   

 

2016

 

 

 

  $ 1,250,000     $ 750,023     $ 375,003     $ 1,575,000     $ 102,240     $ 4,052,266  

 

Grant Kvalheim

 

 

 

 

2018

 

 

 

 

$

 

750,000

 

 

 

 

$

 

604,307

 

 

 

 

$

 

212,505

 

 

 

 

$

 

1,460,000

 

 

 

 

$

 

147,627

 

 

 

 

$

 

3,174,439

 

 

Executive Vice President—Athene,
and Chief Executive Officer and President—Athene USA Corporation

 

   

2017

2016

 

 

  $

$

750,000

750,000

 

 

  $

$

482,377

425,054

 

 

  $

$

250,008

5,916,839

 

 

  $

$

1,738,750

1,420,250

 

 

  $

$

140,090

135,472

 

 

  $

$

3,323,721

8,647,615

 

(7) 

Martin P. Klein

    2018     $ 625,000     $ 710,912     $ 250,008     $ 1,116,300     $ 118,168     $ 2,820,388  

Executive Vice President and Chief Financial Officer

    2017     $ 550,000     $ 567,528     $ 250,008     $ 1,337,500     $ 109,670     $ 2,814,706  
   

 

2016

 

 

 

  $ 550,000     $ 375,012     $ 187,504     $ 1,000,000     $ 111,286     $ 2,223,802  

 

John M. Rhodes

 

 

 

 

2018

 

 

 

 

$

 

500,000

 

 

 

 

$

 

426,574

 

 

 

 

$

 

150,003

 

 

 

 

$

 

750,000

 

 

 

 

$

 

142,668

 

 

 

 

$

 

1,969,246

 

 

Executive Vice President and Chief Risk Officer

 

 

             

 

(1)

This column includes the grant date fair value of the performance-based RSAs and time-based RSUs granted to our NEOs in 2018. For the time-based RSUs, grant date fair value is calculated by multiplying the number of RSUs by the closing share price on the date of grant. For the performance-based RSAs, we have reported the grant date fair value assuming the probable outcome of satisfying the performance conditions. Assuming the probable outcome of performance conditions will be achieved, the grant date fair value of the 2018 performance-based RSAs would be as follows: $1,152,284; $691,376; $391,782; $460,908; and $276,562, for Messrs. Belardi, Wheeler, Kvalheim, Klein and Rhodes, respectively. Assuming the highest level of performance conditions will be achieved, the grant date fair value of the 2018 performance-based RSAs would be as follows: $1,875,055; $1,125,043; $637,527; $750,012; and $450,036, for Messrs. Belardi, Wheeler, Kvalheim, Klein and Rhodes, respectively.

(2)

This column represents the aggregate grant date fair value of stock options granted in 2018. With respect to the stock options, the Company measures the fair value of each stock option grant at the date of grant using a Black-Scholes option pricing model. For information on the valuation assumptions with respect to these awards, refer to note 12 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC.

(3)

For 2018, these amounts include the Company’s 401(k) matching payment of $14,000 for Messrs. Wheeler, Klein and Rhodes, and $13,500 for Mr. Kvalheim; housing allowances of $33,000 for Mr. Kvalheim, $55,094 (which includes a tax gross-up of $25,302) for Mr. Klein, and $56,844 (which includes a tax gross-up of $27,220) for Mr. Rhodes for their residences in Iowa; taxable amounts of $36,062, $101,127, $49,073 and $71,825 (which amounts include tax gross-ups of $23,293, $45,861, $22,537, and $33,872) for Messrs. Wheeler, Kvalheim, Klein, and Rhodes, respectively, for travel expenses from their principal residences to the Company’s office in Iowa; $8,989 for Mr. Belardi related to his use of the Company aircraft for personal purposes; and $61,250 in fees for estate planning services paid to an estate planning services provider by the Company to ensure the orderly transition of Mr. Belardi’s shares. Each of these amounts, other than the amounts related to personal use of the Company aircraft and amounts paid directly to an estate planning services provider, were valued on the basis of amounts paid directly to the NEO. The value of the personal use of the Company aircraft is calculated based on the incremental cost to the Company, including fuel costs, ground services, catering, crew travel expenses, and other miscellaneous variable costs. Fixed costs that do not change based on usage, such as pilot salaries and depreciation of the aircraft, are excluded.

(4)

Pursuant to an understanding between the Company and AAM, the Company and AAM have each agreed to pay 50% of Mr. Belardi’s annual salary and incentive plan award. The amounts reported for each period reflect only those amounts for which the Company is responsible. The fees for Mr. Belardi’s estate planning services that were paid by the Company are counted towards the amounts for which the Company is responsible.

(5)

In accordance with the terms of Mr. Belardi’s annual incentive award, Mr. Belardi received his annual incentive award of $939,000 for 2018 performance in the form of restricted Class A common shares. The restricted Class A common shares, which are included in the Stock Awards column, were awarded in 2018 as Mr. Belardi’s annual incentive opportunity but were granted in the form of restricted shares in 2019 following the conclusion of and determination of achievement for the 2018 performance period and vest ratably over a two-year period.

 

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Table of Contents
(6)

Amount includes an IPO-related award—the incremental grant date fair value of the 2016 modification to the performance-based Class M-1, M-2 and M-3 share agreements to vest all performance-based Class M-1, M-2 and M-3 shares before the IPO and to amend the conversion option for these classes.

(7)

Amount includes the following IPO-related awards: (1) the incremental grant date fair value of the 2016 modification to the performance-based Class M-1, M-2 and M-3 shares, and (2) a one-time grant of Class M-4 Prime common shares.

2018 Grants of Plan-Based Awards

The following table provides information about awards granted to the NEOs in 2018: (1) the grant date; (2) the threshold, target and maximum estimated future payouts under annual incentive plan awards; (3) the number of stock options, RSAs and RSUs granted to the NEOs under the Company’s 2016 Share Incentive Plan; (4) the exercise price of the stock options; and (5) the grant date fair value of the share and option awards, computed in accordance with applicable SEC rules.

2018 Grants of Plan-Based Awards Table

 

Name of Executive

  Grant
Date
    Estimated Future Payouts Under
Annual Incentive Plan Awards(1)
    Estimated Future
Payouts Under
Equity Incentive Plan
Awards: (2)
(#)
    All Other
Stock
Awards:
Number of
Shares or
Units(3)
(#)
    All Other
Option
Awards: Number
of Securities
Underlying
Options(4)
(#)
    Exercise
Price of
Option
Awards
($/Sh)
    Grant
Date Fair
Value of
Share and
Option
Awards(5)
  Threshold     Target     Maximum     Threshold     Target     Maximum  

James R. Belardi

 

 

2/27/18

 

                         

 

13,008

 

 

 

26,015

 

 

 

39,023

 

                         

$

1,152,284

 

 

 

2/27/18

 

                                                 

 

13,008

 

                 

$

625,034

 

 

 

2/27/18

 

                                                         

 

66,278

 

 

$

48.05

 

 

$

625,002

 

   

 

2/20/18

 

                         

 

(6)  

 

 

21,078

(6) 

 

 

(6) 

                         

$

939,000

(6) 

William J. Wheeler

 

 

2/27/18

 

                         

 

7,805

 

 

 

15,609

 

 

 

23,414

 

                         

$

691,376

 

 

 

2/27/18

 

                                                 

 

7,805

 

                 

$

375,030

 

 

 

2/27/18

 

                                                         

 

39,767

 

 

$

48.05

 

 

$

375,003

 

   

 

2/20/18

 

 

 

—  

 

 

$

1,575,000

 

 

$

3,150,000

 

                                                       

 

Grant Kvalheim

 

 

2/27/18

 

                         

 

4,423

 

 

 

8,845

 

 

 

13,268

 

                         

$

391,782

 

 

 

2/27/18

 

                                                 

 

4,423

 

                 

$

212,525

 

 

 

2/27/18

 

                                                         

 

22,535

 

 

$

48.05

 

 

$

212,505

 

   

 

2/20/18

 

 

 

—  

 

 

$

1,300,000

 

 

$

2,600,000

 

                                                       

Martin P. Klein

 

 

2/27/18

 

                         

 

5,203

 

 

 

10,406

 

 

 

15,609

 

                         

$

460,908

 

 

 

2/27/18

 

                                                 

 

5,203

 

                 

$

250,004

 

 

 

2/27/18

 

                                                         

 

26,512

 

 

$

48.05

 

 

$

250,008

 

   

 

2/20/18

 

 

 

—  

 

 

$

1,175,000

 

 

$

2,350,000

 

                                                       

 

John M . Rhodes

 

 

2/27/18

 

                         

 

3,122

 

 

 

6,244

 

 

 

9,366

 

                         

$

276,562

 

 

 

2/27/18

 

                                                 

 

3,122

 

                 

$

150,012

 

 

 

2/27/18

 

                                                         

 

15,907

 

 

$

48.05

 

 

$

150,003

 

   

 

2/20/18

 

 

 

—  

 

 

$

750,000

 

 

$

1,500,000

 

                                                       

 

(1)

The 2018 annual incentive awards for our NEOs other than Mr. Belardi were based on a combination of four overall corporate financial and operational goals, which comprised 75% of the award, as well as individualized performance goals, which comprised the other 25% of the award. The corporate performance component of the awards has a payout range between 0% and 170% of the corporate performance component. The overall payout range of the awards, including both the corporate performance component and the personal performance component of the award, is between 0% and 200% of the target amount.

(2)

All equity incentive plan awards reported in this column with a grant date of 2/27/18 represent performance-based RSAs. The performance-based RSAs cliff-vest after the 2018-2020 performance period provided the recipient is continuously employed during the period and are payable only if the Company achieves specified goals based on two equally weighted performance metrics: average annual adjusted return on equity and cumulative adjusted operating income, each for the three-year period.

(3)

The time-based RSUs vest ratably over three years provided the recipient remains employed through the applicable vesting date.

(4)

The stock options vest ratably over a three-year period provided the recipient remains employed through the applicable vesting date.

 

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Table of Contents
(5)

For valuation methodology, see notes 1 and 2 to the 2018 Summary Compensation Table.

(6)

The award to Mr. Belardi with a grant date of 2/20/18 represents a 2018 annual incentive award that is dollar-denominated but by its terms is payable in restricted Class A common shares, which vest ratably over a two-year period provided that Mr. Belardi remains employed through the applicable vesting date. Mr. Belardi’s annual incentive award was issued with a target value of $925,000 and was based on a combination of four overall corporate financial and operational goals, which comprised 50% of the award, as well as individualized performance goals, which comprised the other 50% of the award. The corporate performance component of the award has a payout range between 0% and 170% of the corporate performance component. The overall payout range of the award, including both the corporate performance component and the personal performance component of the award, is between 0% and 140% of the target amount. 21,078 restricted Class A common shares were issued to Mr. Belardi on 2/28/19 following the compensation committee’s determination of the payout amount of the annual incentive award, which represents the amount of the annual incentive award payout, $939,000, divided by the closing price of the Class A common shares on the date of issuance.

 

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Table of Contents

2018 Outstanding Equity Awards at Fiscal Year-End

The following table provides information on the holdings of the Company’s equity awards by the NEOs (as of December 31, 2018). This table includes vested Class M common shares, which are similar to vested, unexercised options; unvested Class A common shares; and unvested Class M time-based and performance-based common shares with vesting conditions that were not satisfied as of December 31, 2018. Each equity grant is shown separately for each NEO. The vesting schedule for each outstanding award is shown in the notes to this table.

2018 Outstanding Equity Awards at Fiscal Year-End Table

 

    Option Awards     Stock Awards  

Name of Executive

  Grant
Date
    Stock
Class or
Option Class
    Number of
Securities
Underlying
Unexercised
Options
(Exercisable)
    Number of
Securities
Underlying
Unexercised
Options
(Unexercisable)
    Option
Conversion
Price
    Option
Expiration
Date(1)
    Number of
Shares of
Stock or
Units of
Stock that
Have Not
Vested
    Market
Value of
Shares of
Stock or
Units of
Stock
That
Have Not
Vested(2)
    Number of
Unearned
Shares of
Stock or
Units of
Stock that
Have Not
Vested(6)
    Market
Value of
Unearned
Shares of
Stock or
Units of
Stock that
Have Not
Vested(2)
 

James R. Belardi(3)

 

 

7/15/09

 

 

 

M-1

 

 

 

2,346,155

 

         

$

10.00

 

 

 

—  

 

                               
 

 

10/15/12

 

 

 

M-2

 

 

 

841,011

 

         

$

10.78

 

 

 

—  

 

                               
 

 

4/28/14

 

 

 

M-3

 

 

 

1,000,000

 

         

$

13.46

 

 

 

—  

 

                               
 

 

2/3/16

 

 

 

RSA

 

                                 

 

6,986

(7) 

 

$

278,252

 

               
 

 

3/7/17

 

 

 

RSA

 

                                 

 

11,489

(8) 

 

$

457,607

(8) 

               
 

 

2/20/18

 

 

 

RSA

 

                                 

 

21,078

(9) 

 

$

 839,537

(9) 

               
 

 

6/6/16

 

 

 

Options
(2016)

 
 

 

 

85,763

 

 

 

42,882

 

 

$

33.95

 

 

 

6/6/2026

 

                               
 

 

3/21/17

 

 

 

Options
(2017)

 
 

 

 

22,092

 

 

 

44,186

 

 

$

51.25

 

 

 

3/21/2027

 

                               
 

 

2/27/18

 

 

 

Options
(2018)

 
 

         

 

66,278

 

 

$

48.05

 

 

 

2/27/2028

 

                               
 

 

6/6/16

 

 

 

RSU

(4)  

                                 

 

7,364

 

 

$

293,308

 

               
 

 

6/6/16

 

 

 

RSU

(5)  

                                                 

 

44,183

 

 

$

1,759,809

 

 

 

3/21/17

 

 

 

RSU

(4)  

                                 

 

8,131

 

 

$

323,858

 

               
 

 

3/21/17

 

 

 

RSU

(5)  

                                                 

 

24,391

 

 

$

971,494

 

 

 

2/27/18

 

 

 

RSU

(4)  

                                 

 

13,008

 

 

$

518,109

 

               
   

 

2/27/18

 

 

 

RSA

(10) 

                                                 

 

26,015

 

 

$

1,036,177

 

William J. Wheeler

 

 

10/1/15

 

 

 

M-4 Prime

 

 

 

1,333,333

 

 

 

1,166,667

 

 

$

27.83

 

 

 

10/1/2025

 

                               
 

 

6/6/16

 

 

 

Options
(2016)

 
 

 

 

42,882

 

 

 

21,441

 

 

$

33.95

 

 

 

6/6/2026

 

                               
 

 

3/21/17

 

 

 

Options
(2017)

 
 

 

 

13,255

 

 

 

26,512

 

 

$

51.25

 

 

 

3/21/2027

 

                               
 

 

2/27/18

 

 

 

Options
(2018)


 

         

 

39,767

 

 

$

48.05

 

 

 

2/27/2028

 

                               
 

 

6/6/16

 

 

 

RSU

(4)  

                                 

 

3,682

 

 

$

146,654

 

               
 

 

6/6/16

 

 

 

RSU

(5)  

                                                 

 

22,092

 

 

$

879,924

 

 

 

3/21/17

 

 

 

RSU

(4)  

                                 

 

4,879

 

 

$

194,331

 

               
 

 

3/21/17

 

 

 

RSU

(5)  

                                                 

 

14,635

 

 

$

582,912

 

 

 

2/27/18

 

 

 

RSU

(4)  

                                 

 

7,805

 

 

$

310,873

 

               
   

 

2/27/18

 

 

 

RSA

(10) 

                                                 

 

15,609

 

 

$

621,706

 

Grant Kvalheim

 

 

5/23/16

 

 

 

M-4 Prime

 

 

 

107,644

 

 

 

234,667

 

 

$

34.23

 

 

 

5/23/2026

 

                               
 

 

6/6/16

 

 

 

Options
(2016)


 

 

 

24,300

 

 

 

12,150

 

 

$

33.95

 

 

 

6/6/2026

 

                               
 

 

3/21/17

 

 

 

Options
(2017)


 

 

 

7,511

 

 

 

15,024

 

 

$

51.25

 

 

 

3/21/2027

 

                               
 

 

2/27/18

 

 

 

Options
(2018)


 

         

 

22,535

 

 

$

48.05

 

 

 

2/27/2028

 

                               
   

 

6/6/16

 

 

 

RSU

(4)  

                                 

 

2,087

 

 

$

83,125

 

               

 

39


Table of Contents
                Option Awards     Stock Awards  

Name of Executive

  Grant
Date
    Stock
Class or
Option Class
    Number of
Securities
Underlying
Unexercised
Options
(Exercisable)
    Number of
Securities
Underlying
Unexercised
Options
(Unexercisable)
    Option
Conversion
Price
    Option
Expiration
Date(1)
    Number of
Shares of
Stock and
Units that
Have Not
Vested
    Market
Value of
Shares or
Units of
Stock That
Have Not
Vested(2)
    Number of
Unearned
Shares and
Units of
Stock that
Have Not
Vested(6)
    Market
Value of
Unearned
Units of
Stock that
Have Not
Vested(2)
 
 

 

6/6/16

 

 

 

RSU

(5)  

                                                 

 

12,519

 

 

$

498,632

 

 

 

3/21/17

 

 

 

RSU

(4)  

                                 

 

2,765

 

 

$

110,130

 

               
 

 

3/21/17

 

 

 

RSU

(5)  

                                                 

 

8,293

 

 

$

330,310

 

 

 

2/27/18

 

 

 

RSU

(4)  

                                 

 

4,423

 

 

$

176,168

 

               
   

 

2/27/18

 

 

 

RSA

(10) 

                                                 

 

8,845

 

 

$

352,296

 

Martin P. Klein

 

 

11/15/15

 

 

 

M-4 Prime

 

 

 

74,545

 

 

 

121,333

 

 

$

27.83

 

 

 

11/15/2025

 

                               
 

 

6/6/16

 

 

 

Options
(2016)


 

 

 

21,441

 

 

 

10,721

 

 

$

33.95

 

 

 

6/6/2026

 

                               
 

 

3/21/17

 

 

 

Options
(2017)


 

 

 

8,837

 

 

 

17,675

 

 

$

51.25

 

 

 

3/21/2027

 

                               
 

 

2/27/18

 

 

 

Options
(2018)


 

         

 

26,512

 

 

$

48.05

 

 

 

2/27/2028

 

                               
 

 

6/6/16

 

 

 

RSU

(4)  

                                 

 

1,841

 

 

$

73,327

 

               
 

 

6/6/16

 

 

 

RSU

(5)  

                                                 

 

11,046

 

 

$

439,962

 

 

 

3/21/17

 

 

 

RSU

(4)  

                                 

 

3,253

 

 

$

129,567

 

               
 

 

3/21/17

 

 

 

RSU

(5)  

                                                 

 

9,757

 

 

$

388,621

 

 

 

2/27/18

 

 

 

RSU

(4)  

                                 

 

5,203

 

 

$

207,235

 

               
   

 

2/27/18

 

 

 

RSA

(10) 

                                                 

 

10,406

 

 

$

 414,471

 

John M. Rhodes

 

 

8/15/16

 

 

 

M-4 Prime

 

 

 

53,197

 

 

 

106,667

 

 

$

36.40

 

 

 

7/1/2026

 

                               
 

 

3/21/17

 

 

 

Options
(2017)


 

 

 

5,302

 

 

 

10,605

 

 

$

51.25

 

 

 

3/21/2027

 

                               
 

 

2/27/18

 

 

 

Options
(2018)


 

         

 

15,907

 

 

$

48.05

 

 

 

2/27/2028

 

                               
 

 

3/21/17

 

 

 

RSU

(4)  

                                 

 

1,952

 

 

$

77,748

 

               
 

 

3/21/17

 

 

 

RSU

(5)  

                                                 

 

5,854

 

 

$

233,165

 

 

 

2/27/18

 

 

 

RSU

(4)  

                                 

 

3,122

 

 

$

124,349

 

               
   

 

2/27/18

 

 

 

RSA

(10) 

                                                 

 

6,244

 

 

$

248,699

 

 

(1)

This column reports the expiration date for Class M common shares and stock options. Once vested, Class M common shares may remain outstanding until converted into Class A common shares. Class M-4 prime shares that do not vest by the tenth anniversary of the grant date will be forfeited to the Company. Class M time-based common shares vest ratably over a five-year period. Time-based stock options vest ratably over a three-year period.

(2)

As of December 31, 2018, the fair market value of a Class A common share was $39.83.

(3)

All outstanding equity awards for Mr. Belardi have been transferred to a trust, other than for value, for estate planning purposes.

(4)

This row shows the number of time-based RSUs, which vest ratably over a three-year period.

(5)

This row shows the number of performance-based RSUs, which cliff-vest after a three-year period, assuming performance conditions have been met.

(6)

The number of performance-based RSUs or RSAs that ultimately vest is based on actual performance during the three-year performance period. The number of performance-based RSUs or RSAs reflected in this column is based on the number of performance-based RSUs or RSAs that would vest assuming the target level of performance is achieved. Final payouts under the performance-based RSUs or RSAs will not be known until the respective performance period is completed.

(7)

This award to Mr. Belardi with a grant date of 2/3/16 represents a 2016 annual incentive award that is dollar-denominated but by its terms is payable in restricted Class A common shares which vest ratably over a two-year period provided that Mr. Belardi remains employed through the applicable vesting date.

(8)

The award to Mr. Belardi with a grant date of 3/7/17 represents a 2017 annual incentive award that is dollar-denominated but by its terms is payable in restricted Class A common shares which vest ratably over a two-year period provided that Mr. Belardi remains employed through the applicable vesting date. Mr. Belardi’s annual incentive award was issued with a target value of $925,000. The amount reported represents the number of restricted Class A common shares granted in 2018 after the committee’s determination of the achievement of the 2017 performance goals.

 

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Table of Contents
(9)

The award to Mr. Belardi with a grant date of 2/20/18, as disclosed in footnote 6 of the 2018 Grants of Plan-Based Awards Table, represents a 2018 annual incentive award that is dollar-denominated but by its terms is payable in restricted Class A common shares which vest ratably over a two-year period provided that Mr. Belardi remains employed through the applicable vesting date. Mr. Belardi’s annual incentive award was issued with a target value of $925,000. The amount reported represents the number of restricted Class A common shares granted in 2019 after the committee’s determination of the achievement of the 2018 performance goals.

(10)

This row shows the number of performance-based RSAs, which cliff-vest after a three-year period, assuming performance conditions have been met.

Class M Common Shares

In association with and following each of the four rounds of equity capital raise transactions prior to our initial public offering, we granted restricted Class M common shares to our officers and certain other employees to align their incentives with shareholders. Class M common shares are non-voting incentive compensation shares, convertible into Class A common shares upon vesting and the payment of the conversion price. In the tables in “Compensation of Executive Officers and Directors,” we report these equity share awards as options, rather than shares, because they economically represent a call option on Class A common shares with a strike price equal to the conversion price embedded in the Class M common shares. Unlike options, however, once the Class M common shares vest, they can remain outstanding in perpetuity, are not required to be converted into Class A common shares and are entitled to dividends. There are four outstanding classes of Class M common shares, Class M-1, Class M-2, Class M-3 and Class M-4.

Each grant of restricted Class M common shares is comprised of two tranches, one involving time-based vesting criteria and the other involving performance-based vesting criteria. In the time-based vesting tranche, the restricted shares generally vest ratably on each of the first five anniversaries of the date of grant and automatically in full upon our sale or a change in control. In some instances, the vesting inception date is tied to other events, such as the recipient’s date of hire or the closing of the equity round with which the Class M common shares are associated, which may be earlier than the actual grant date for the award.

In the performance-based vesting tranche, the restricted shares generally vest based on the achievement by our pre-initial public offering investors of specified internal rates of return (“IRR”) and on multiples of invested capital (“MOIC”) on their Class A common shares and Class B common shares purchased in the pre-initial public offering rounds of equity-raising. Class M performance-based shares generally vest based on achieving a combination of both the IRR and MOIC hurdles. Specifically, with the exception of the Class M-4 and Class M-4 Prime performance-based shares (as defined below), 25% of Class M performance-based shares vest based on the achievement of both a 15% IRR and a 2.0x MOIC (the “Vesting Floor”), and all Class M performance-based shares vest based on the achievement of both a 20% IRR and a 2.25x MOIC (the “Vesting Ceiling”). The achievement of hurdles between the Vesting Floor and the Vesting Ceiling results in vesting on an interpolated basis. If shareholder returns result in IRR being less than 15% or MOIC being less than 2.0x, then none of the Class M performance-based shares vest. Notwithstanding the above, with respect to the Class M-4 performance-based shares (other than Class M-4 Prime performance-based shares), until the Final Lock-Up End Date (as defined below), which was March 3, 2018, only the IRR hurdle applied.

From and after the initial public offering, Class M performance-based shares also may vest based on the trading price of the Class A common shares achieving the applicable IRR and MOIC hurdles on a “mark-to-market” basis (whether the trading price on defined dates relative to the purchase prices paid by the investors in the equity rounds result in the achievement of the IRR and MOIC hurdles for pre-initial public offering investors). Specifically, at the lock-up release dates corresponding to the (i) 7.5 month anniversary of the date of the initial public offering, one-third of the unvested Class M performance-based shares will be eligible for vesting and tested; (ii) 12 month anniversary of the date of the initial public offering, two-thirds of the unvested Class M performance-based shares will be eligible for vesting and tested; and (iii) 15 month anniversary of the date of the initial public offering (the “Final Lock-Up End Date”), and on a monthly basis thereafter, all of the unvested Class M performance-based shares will be eligible for vesting and tested. Class M-1 and M-2 performance-based shares have ten years from the date of grant to vest; Class M-3 performance-based shares

 

41


Table of Contents

have three years from the Final Lock-Up End Date to vest; and Class M-4 performance-based shares have four years from the Final Lock-Up End Date to vest.

When we recruited Messrs. Wheeler and Klein in the second half of 2015, recognizing the proximity of their hires to our initial public offering, we granted them Class M-4 common shares that are more heavily weighted in the performance-based tranche (now two-thirds of the Class M-4 Prime common shares rather than one-half) and have performance-based vesting conditions based on stock price targets, as opposed to IRR and MOIC hurdles (the “Class M-4 Prime” common shares). The Class M-4 Prime time-based shares vest ratably in equal installments on the first, second, third, fourth and fifth anniversaries of the grant date. One-half of the Class M-4 Prime performance-based shares vest when Class A common shares have attained a per share volume weighted average closing trading price of $50 or more during any 120-day period, or upon a sale or change in control in which Class A common shares are valued at $50 or more; and the other half vest when Class A common shares have attained a per share volume weighted average closing trading price of $70 or more during any 120-day period, or upon a sale or change in control in which Class A common shares are valued at $70 or more. Any unvested Class M-4 Prime performance-based shares that have not vested within ten years from the date of grant will be forfeited to the Company.

In September 2016, the compensation committee modified the outstanding Class M-1, M-2, and M-3 share agreements to vest all performance-based Class M-1, M-2 and M-3 shares, given that the vesting of the shares in the near future was probable in view of our IPO. The committee also amended the conversion option for these classes, which previously allowed conversion of vested shares only subsequent to an IPO. Under the modified conversion terms, with certain exceptions individuals were able to elect up to three options for all or any portion of their vested Class M shares, including conversion at a specified date prior to an IPO, on the date of an IPO, or ratably each month for six months after an IPO. The modifications affected 27 individuals, including some of our NEOs.

Based on the foregoing vesting criteria for the Class M-4 shares, 85.6% of the original Class M-4 performance-based shares had vested and 14.4% had been forfeited to the Company as of December 31, 2018 (other than any shares disposed to the Company to satisfy tax withholding requirements in connection with the vesting of Class M-4 shares).

Based on the foregoing vesting criteria for the Class M-4 Prime shares, one-half of the original Class M-4 Prime performance-based shares had vested as of December 31, 2018.

2018 Option Exercises and Stock Vested Table

The following table provides information for the NEOs on the number of Class A common shares acquired upon exercise of stock options and vesting of stock awards in 2018 and the value realized at such time.

2018 Option Exercises and Stock Vested Table

 

     Option Awards      Stock Awards(5)  

Name

   Number of Shares
Acquired on
Conversion (#)
     Value Realized on
Conversion ($)
     Number of Class A
Common Shares
Acquired on
Vesting (#)
    Value Realized on
Vesting ($)
 

 

James R. Belardi

     —          —          33,901 (1)    $ 1,753,021  

William J. Wheeler

     —          —          7,719 (2)    $ 399,149  

Grant Kvalheim

     —          —          26,968 (3)    $ 1,394,515  

Martin P. Klein

     —          —          3,467 (4)    $ 179,279  

John M. Rhodes

     —          —          975 (4)     $ 50,417  

 

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Table of Contents

 

(1)

Comprised of (1) RSUs and (2) three tranches of restricted Class A common shares granted as part of annual incentive awards: shares from the 2015 award vested, shares from the 2016 award and shares from the 2017 award, all of which vested on 1/1/18 with a market value of $51.71 per share.

(2)

Comprised of (1) RSUs and (2) restricted Class A common shares granted as part of the 2016 annual incentive awards, all of which vested on 1/1/18 with a market value of $51.71 per share.

(3)

Comprised of (1) RSUs and (2) two tranches of restricted Class A common shares granted as part of annual incentive awards: shares from the 2015 award and shares from the 2016 award, all of which vested on 1/1/18 with a market value of $51.71 per share.

(4)

Comprised of RSUs only, which vested on 1/1/18 with a market value of $51.71 per share.

(5)

Does not include vesting of Class M common shares, which remain outstanding until they are converted to Class A common shares by the executive. The number of Class M common shares acquired on vesting and the value realized on vesting of Class M common shares for each of the NEOs during 2018 is as follows: 29,333 shares and $422,369 for Mr. Kvalheim; 13,333 shares and $99,186 for Mr. Rhodes; 166,667 shares and $3,971,500 for Mr. Wheeler; and 17,333 shares and $306,956 for Mr. Klein.

2018 Potential Payments Upon Termination or Change-in-Control at Fiscal Year-End

The information below describes and quantifies certain compensation that would have become payable under existing plans and arrangements if the NEO’s employment had terminated on December 31, 2018. These benefits are in addition to benefits available generally to salaried employees, such as distributions under our 401(k) Plan, disability benefits and accrued vacation pay. Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any amounts actually paid or distributed may be different. Factors that could affect these amounts include the time during the year of any such event and the executive’s age.

Equity Awards

Class M time-based restricted shares issued under our 2014 and 2016 Share Incentive Plans will vest in full upon a sale of the Company or a change-in-control that occurs either prior to a participant’s termination of service or within six months following a participant’s termination of service without cause, by the participant for good reason or due to death or disability. Separate and apart from a sale or change-in-control, following a participant’s termination of service without cause, by the participant for good reason or due to death or disability, the Class M performance-based restricted shares that are outstanding and unvested shall remain outstanding and eligible to vest pursuant to their terms for a period of 18 months. If such performance-based restricted shares fail to vest during this 18-month period, they will be forfeited.

The equity awards, other than any Class M awards, issued to our NEOs under our 2014 and 2016 Share Incentive Plans starting in 2016, including time-based RSUs, performance-based RSUs, performance-based RSAs, time-based stock options and time-based Class A restricted shares, will vest in full upon a termination of service by the Company without cause or by the participant for good reason which occurs within 18 months following a change in control. In the case of performance-based RSUs and performance-based RSAs, the payout will be based on the target level of the award. In the event a participant’s termination of service results from the participant’s death or disability, each such equity award will vest in full. In addition, upon the retirement of a participant, performance-based RSUs and performance-based RSAs will vest on a pro rata basis in accordance with the time elapsed in the performance period.

Pursuant to Mr. Belardi’s employment agreement, in the event of involuntary termination of service other than due to non-renewal by the Company, all outstanding restricted shares that are held by Mr. Belardi that are subject to time-vesting and scheduled to vest during the one-year period following his termination shall immediately vest, and a portion of each tranche of outstanding and unvested Class M performance-based restricted shares, depending on when they were granted, shall remain outstanding and eligible to vest pursuant to their terms for a period of 18 months following the termination date. Under the terms of Mr. Belardi’s employment agreement, the value of the accelerated vesting of his restricted shares in accordance with the foregoing would equal $507,056 assuming a December 31, 2018 termination of employment.

 

43


Table of Contents

The following table provides the cumulative intrinsic value (that is, the value based upon our share price as of December 31, 2018 which was $39.83, less the conversion price of the award, if any) of all equity awards that would vest if (i) the NEO terminated employment as a result of voluntary retirement as of December 31, 2018, (ii) the NEO terminated employment as a result of death or disability as of December 31, 2018, (iii) the NEO was terminated without cause or terminated employment for good reason as of December 31, 2018, (iv) the NEO was terminated without cause or terminated employment for good reason within 18 months following a change-in-control of the Company as of December 31, 2018, or (v) there was a sale of the Company or change-in-control as of December 31, 2018 and which, with respect to Class M time-based restricted shares only, also includes if there was a sale of the Company or a change in control within six months after the NEO was terminated without cause, the NEO terminated employment for good reason, or the NEO terminated employment as a result of death or disability as of December 31, 2018 (each, a “Qualifying Termination”).

2018 Potential Equity Benefits upon Change in Control and Termination Table(1)

 

Name

   Retirement(2)      Death or
Disability(3)
     Termination by
the Company
Without Cause
or by the NEO
for Good
Reason(3)
     Termination by the
Company Without
Cause or by the NEO
for Good Reason within
18 months following a
Change in Control(3)
     Change in
Control(4)
 

 

James R. Belardi

   $ 2,925,567      $ 6,408,868      $ —        $ 6,408,868      $ —    

William J. Wheeler

   $ 1,579,392      $ 13,173,347      $ 10,000,000      $ 13,173,347      $ 6,000,000  

Grant Kvalheim

   $ 894,993      $ 2,619,607      $ 821,335      $ 2,619,607      $ 657,064  

Martin P. Klein

   $ 906,279      $ 2,963,459      $ 1,040,000      $ 2,963,459      $ 624,000  

John M Rhodes

   $ 279,792      $ 1,036,978      $ 228,668      $ 1,036,978      $ 182,932  

 

(1)

For purposes of this table only, all amounts reported in this table were calculated in accordance with the terms of applicable individual award agreements and do not take into account the potential treatment of certain equity awards under any employment agreement.

(2)

For purposes of this table only, the amounts reported in this column assume that the performance-based RSUs and performance-based RSAs vest at 100% of the target level of the award. Performance-based RSUs awarded under the 2014 Share Incentive Plan become vested by extrapolating performance as of the date of retirement through the end of the performance period by using financial information from the most recent calendar quarter preceding the date of retirement. Performance-based RSUs and performance-based RSAs awarded under the 2016 Share Incentive Plan become vested based on actual performance through the end of the performance period. Under both share incentive plans, the amount earned is prorated based on the number of days employed during the performance period.

(3)

As noted above, in the event of a Qualifying Termination, Class M performance-based restricted shares that are outstanding and unvested shall remain outstanding and eligible to vest pursuant to their terms for a period of 18 months. For purposes of this table only, the amounts reported in this column assume that 100% of the unvested Class M performance-based restricted shares that are eligible to vest do, in fact, vest over the 18 months following December 31, 2018.

(4)

The intrinsic value of Class M time-based restricted shares, which are included in the total amounts reported in this column, may result from a change-in-control that occurs either prior to an NEO’s termination of service or a change-in-control that occurs within six months following a Qualifying Termination.

Severance Benefits

Our NEOs would be eligible for benefits under the Athene USA Corporation Severance Pay Plan, which covers our U.S. full-time employees, if they are involuntarily terminated without cause, and provided they release the Company from any and all claims and, in some instances, agree to non-compete/non-solicit covenants. In general, eligible employees receive two weeks of their annual base salary for each completed year of service. The minimum benefits payable under this plan are four weeks of annual base salary; and the maximum benefits payable under this plan are 26 weeks of annual base salary. In the event that an NEO is notified by us that he is required to comply with a post-separation non-compete covenant for a period longer than the number of weeks of annual base salary to which the NEO is entitled based on his years of service, then the amount of the NEO’s severance benefit will be increased to an amount equal to annual base salary for the same number of weeks as the duration of the non-compete covenant. However, except for Mr. Belardi, in accordance with his employment agreement, in no event will an NEO receive more than two times his annual base salary

 

44


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received during the year immediately preceding the year of termination. In its sole discretion, the Company may determine to pay a pro-rated bonus to the involuntarily terminated executive, as approved by the compensation committee.

Our employees based in Bermuda are eligible for benefits under the Company’s Bermuda Severance Pay Plan, which are substantially similar to the benefits provided by the Athene USA Corporation Severance Pay Plan.

2018 Potential Pay Upon Termination Table

 

Name of Executive

  

Termination Scenario(1)

   Athene Severance Pay  

 

James R. Belardi

   Voluntary Separation      —    
   Involuntary Separation(2)    $ 3,133,000 (2) 
  

Termination For Cause

     —    

William J. Wheeler

   Voluntary Separation      —    
   Involuntary Separation    $ 1,250,000 (3) 
  

Termination For Cause

     —    

 

Grant Kvalheim

  

 

Voluntary Separation

  

 

 

 

—  

 

 

   Involuntary Separation    $ 750,000 (3) 
  

Termination For Cause

     —    

Martin P. Klein

   Voluntary Separation      —    
   Involuntary Separation    $ 625,000 (3) 
  

Termination For Cause

     —    

 

John M. Rhodes

  

 

Voluntary Separation

  

 

 

 

—  

 

 

   Involuntary Separation    $ 500,000 (3) 
  

Termination For Cause

     —    

 

(1)

Voluntary separation does not automatically trigger severance payments. For NEOs other than Mr. Belardi, voluntary separation triggers a severance payment only if the Company decides to enforce any non-compete provision, in which case the NEO would be entitled to an amount of severance benefits up to the amount set forth in the table above for the involuntary separation scenario. Involuntary separation provides for severance to coincide with a 12-month non-compete clause. Severance is not payable where an employee is terminated for cause.

(2)

The total amount reported here represents the Company’s portion of the severance payable to Mr. Belardi in the event of a termination of employment by the Company without cause, by the Company by reason of non-renewal, by Mr. Belardi for good reason, or due to Mr. Belardi’s death or disability, each of which is defined as an involuntary termination under Mr. Belardi’s employment agreement. In each of these scenarios, Mr. Belardi is entitled to receive severance payments in an amount equal to the sum of his then-annual base salary and a pro rata bonus for the year of termination based, in part, on the bonus and annual salary paid to him in the year preceding his termination. In the event of an involuntary termination other than due to death or disability, Mr. Belardi is entitled to receive an additional severance payment equal to his then-annual base salary multiplied by a bonus percentage, calculated based on the bonus paid to him in the year preceding his termination and divided by his annual base salary in the year preceding his termination. The amount reported here includes such additional severance payment, which would only be payable in the event of an involuntary termination other than due to death or disability. Mr. Belardi is also eligible to receive certain post-termination benefits under his employment agreement with AAM.

(3)

Severance does not include any pro-rata bonus payable at the discretion of the Company.

CEO Pay Ratio

We believe our CEO to median employee pay ratio is a reasonable estimate calculated in accordance with Item 402(u) of Regulation S-K and applicable SEC guidance. SEC rules for identifying the median employee and calculating the pay ratio allow companies to apply various methodologies and assumptions and, as result, the pay ratio reported by us may not be comparable to the pay ratio reported by other companies.

 

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We identified a new median employee for 2018 in light of changes to the Company’s employee population as a result of the work force increasing over 10% and the divestiture of our German operations. We identified the median employee by examining the total cash compensation for all employees, excluding our CEO, for the nine-month period from January 1, 2018 to September 30, 2018, who were employed by us as of October 1, 2018. We included all employees, whether employed on a full-time, part-time, or seasonal basis. In the U.S., we classified employees versus consultants based on the methodology we use for payroll purposes, which is itself based on IRS guidance. For non-US employees we classified them based on whether we are the employer of record. Employees on leave of absence were included in the employee headcount. In identifying the median employee, we used total cash compensation, consisting of base salary plus target level bonus or variable sales-related compensation, as the consistently applied compensation measure. We believe the use of total cash compensation as the consistently applied compensation measure is reasonable because cash compensation represents the principal form of compensation that we use as we do not widely distribute annual equity awards to employees.

We did not make any assumptions, adjustments, or estimates with respect to total cash compensation, except that for any employee as of October 1, 2018 who was employed by us for only a portion of the period from January 1, 2018 to September 30, 2018 we adjusted their compensation as if he/she was employed for the entire period. We applied a U.S. dollar exchange rate as of October 1, 2018 to any compensation paid in non-U.S. currency.

In accordance with Item 402(u) of Regulation S-K, after identifying the median employee, we calculated annual total compensation for such employee using the same methodology we use for our NEOs as set forth in the 2018 Summary Compensation Table.

Annual total compensation from the 2018 Summary Compensation Table uses a different measurement of compensation than what we used to identify the median employee. Among other things, the 2018 Summary Compensation Table includes in compensation the value of equity awards, including stock awards and option awards.

For 2018,

 

   

The median of the annual total compensation of all employees of the Company (other than Mr. Belardi) was $82,137.

 

   

Mr. Belardi’s annual total compensation, as reported in the Total column of the 2018 Summary Compensation Table, was $4,275,309.

 

   

Based on this information, the ratio of the annual total compensation of Mr. Belardi to the median of the annual total compensation of all employees is estimated to be 52 to 1.

Director Compensation

None of Mr. Belardi or any Apollo director, other than Dr. Puffer, who is not an employee of Apollo, but acts as a consultant to Apollo and its affiliates, receive any additional compensation for serving as directors. Each of our other directors received annual compensation of $240,000, of which $105,000 was paid in cash and $135,000 was paid in restricted Class A common shares that vest after a one-year period. No fees are paid specifically for attending board or committee meetings. In light of the workload and broad responsibilities of their positions, the lead director received an additional $35,000 in annual compensation, payable 50% in cash and 50% in restricted Class A common shares that vest after a one-year period; the audit committee chair received an additional $30,000 in annual cash compensation; the compensation committee chair and risk committee chair each received an additional $20,000 in annual cash compensation; and the nominating and corporate governance committee chair received an additional $15,000 in annual cash compensation. Audit committee members (other than the chair) received an additional $15,000 in annual cash compensation, and all other committee members (other than the chairs) received an additional $10,000 in annual cash compensation for service on a board committee. A member of a committee who is also the chair of that committee receives only the committee chair fee.

 

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In addition, Ms. Taitz and Mr. Ruisi both served as a director on the boards of several of our subsidiaries, for which they each received separate compensation. Mr. Borden also served as a director of ALRe, for which he received separate compensation.

Furthermore, Mr. Beilinson, Mr. Wrubel, Mr. Leach and Mr. McCall also served on special committees, for which they each received separate compensation. Messrs. Beilinson and Wrubel served on two special committees and Messrs. Leach and McCall served on one special committee. The board of directors forms special committees from time to time to evaluate and provide recommendations to the board on potential significant transactions, including transactions involving Apollo that are outside the ordinary responsibilities of the Conflicts Committee. Due to the extensive demands on special committee members as a result of the conflicts involved and the complexity of the underlying transactions, the board has approved certain fixed fees to compensate special committee members for their additional service to the Company.

The table below indicates the elements and total value of cash compensation and of equity awards granted to each eligible director for services performed in 2018.

2018 Director Compensation Table

 

Name

   Fees Earned or
Paid in Cash(1)
    Share Awards(2)      All Other
Compensation (3)
     Total      Total Excluding Special
Committee Fees
 

 

Marc Beilinson

   $ 258,372 (4)    $ 135,038      $ —        $ 393,410      $ 293,410  

Robert Borden

   $ 137,747     $ 135,038      $ 5,000      $ 277,785      $ 277,785  

Mitra Hormozi

   $ 7,704       —        $ —        $ 7,704      $ 7,704  

Brian Leach

   $ 179,997 (5)    $ 135,038      $ —        $ 315,035      $ 265,035  

H. Carl McCall

   $ 174,997 (5)    $ 135,038      $ —        $ 310,035      $ 260,035  

Manfred Puffer

   $ 124,997     $ 135,038      $ —        $ 260,035      $ 260,035  

Lawrence J. Ruisi

   $ 144,997     $ 135,038      $ 25,000      $ 305,035      $ 305,035  

Hope Taitz

   $ 135,150     $ 152,547      $ 30,000      $ 317,697      $ 317,697  

Arthur Wrubel

   $ 229,247 (4)    $ 135,038      $ —        $ 364,285      $ 264,285  

Fehmi Zeko

   $ 87,498     $ 112,541      $ —        $ 200,039      $ 200,039  

 

(1)

This column reflects the retainer and fees earned in 2018 for service on the board of directors and committees. Mr. Zeko joined our board of directors in March 2018 and Ms. Hormozi joined our board of directors in December 2018, and accordingly, their fees were prorated to reflect their respective periods of service on our board of directors in 2018.

(2)

This column includes the grant date fair value of the restricted Class A common shares granted to eligible directors in 2018, which has been calculated by multiplying the number of restricted common shares by the closing share price on the date of grant. As of December 31, 2018, the number of outstanding unvested equity awards held by each director is as follows: 13,728; 13,691; 13,144; 13,154; 13,722; 13,787; 14,235; 13,154 and 2,142 for Messrs. Beilinson, Borden, Leach, McCall, Puffer, Ruisi, Taitz, Wrubel and Zeko, respectively.

(3)

This column reflects fees earned in 2018 for serving as a director of a subsidiary/subsidiaries of the Company.

(4)

Includes $100,000 received for serving on two special board committees.

(5)

Includes $50,000 received for serving on a special board committee.

Director Stock Ownership Guidelines

We require all non-employee directors of the Company who are eligible to receive compensation for their service as a director of the Company to own Class A common shares with a value equal to three times the annual cash retainer amount for non-employee directors (excluding any retainer amount paid for service on a board committee or service as lead director). Covered directors will have five years from the initial adoption of the stock ownership guidelines to satisfy our share ownership requirement. Any new covered directors will have five years from joining the board to satisfy our share ownership requirement. As of the Record Date, each non-employee director complies with the stock ownership requirements or is projected to be in compliance with the stock ownership requirements after the applicable five-year period.

 

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Share Incentive Plan Information

The table below shows information regarding awards outstanding and shares of common stock available for issuance as of December 31, 2018 under the Company’s share incentive plans:

 

Plan Category

   Number of Securities to
Be Issued Upon
Exercise of Outstanding
Options, Warrants and
Rights(1)
     Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights(2)
     Number of Securities
Remaining Available
for Future Issuance Under
Share

Incentive Plans(3)
 

 

Share Incentive Plans Approved by Security Holders

     1,027,931      $ 49.62        5,989,876  

Share Incentive Plans Not Approved by Security Holders(4)

     9,979,254      $ 19.37        —    
  

 

 

    

 

 

    

 

 

 

Total

     11,007,185      $ 21.20        5,989,876  
  

 

 

    

 

 

    

 

 

 

 

(1)

Consists of Class A shares underlying options, time-based RSUs, performance-based RSUs and Class M common shares. Class M common shares, once vested, are convertible into Class A shares subject to payment of the conversion price. Performance-based RSUs are included at their target value. Class M common shares are included based on the assumption that 100% of such shares vest and are converted into Class A shares on a one-for-one basis.

(2)

Includes options, Class M common shares and the RSUs issued in conjunction with the Class M-4 common shares. Does not include other time-based RSUs or performance-based RSUs, as they do not have exercise prices.

(3)

Includes shares remaining available for issuance under the 2017 Employee Stock Purchase Plan and the 2016 Share Incentive Plan.

(4)

Includes securities pursuant to our 2009, 2012, and 2014 Share Incentive Plans.

 

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following is a description of certain relationships and transactions that have existed or that we have entered into with our directors, executive officers, or shareholders who are known to us to beneficially own more than five percent of our voting Class A common shares and Class B common shares and their immediate family members as well as certain other transactions.

Relationships and Related Party Transactions with Apollo or its Affiliates

We have a strategic relationship with Apollo. Apollo’s indirect subsidiary, AAM, serves as our investment manager. In addition to being our co-founder, Apollo assists us in identifying and capitalizing on acquisition opportunities that have been critical to our ability to significantly grow our business. Members of the Apollo Group are significant owners of our common shares and control 45% of the aggregate voting power of our equity securities, which may be subject to certain adjustments, as described in “IMPORTANT VOTING INFORMATION” above. James R. Belardi, our Chief Executive Officer and a member of our board of directors, is the Chief Executive Officer, Chief Investment Officer and a director of AAM, and is an employee of AAM. He receives remuneration from acting as Chief Executive Officer of AAM and owns a profits interest in AAM. Three of our other directors, Messrs. Lohr, Michelini, and Rowan, also serve as directors of AAM. Additionally, employees of Apollo and its affiliates serve on our board of directors. We expect our strategic relationship with Apollo to continue for the foreseeable future.

During 2018, Mr. Belardi owned a 5% profits interest in AAM (the “Interest”). Reflecting the increasing importance of sourcing differentiated assets to drive performance in today’s low-yield, low-spread environment, we expect that, subject to certain approvals, the Interest will be reset at 4% of profits plus an amount equal to 4.5% of the sub-advised revenues earned by Apollo (other than AAM). Under these arrangements, Mr. Belardi will retain the Interest only during employment; and if Mr. Belardi remains employed with AAM through December 31, 2023, then following his employment termination, he will be eligible to receive a one-time payment equal to a multiple of the annual amount historically earned through the Interest.

A description of certain relationships we have with Apollo and its affiliates and transactions that have existed or that we have entered into with Apollo and its affiliates are described below.

The following table summarizes the amounts we have incurred, directly and indirectly, from Apollo and its affiliates for the year ended December 31, 2018 (dollars in millions):

 

     Year ended December 31,
2018
 
     Amounts
Incurred
     % of
Average
Invested
Assets
 

IMAs—U.S. and Bermuda

   $ 290.1        0.31

Apollo Master Sub-Advisory Agreement(1)

     55.8        0.06

Apollo Fund Investments(2)

     75.3        0.08

AmeriHome

     11.1        0.01

Shared Services Agreement

     7.1        0.01

Commercial Mortgage Loan Servicing Agreement

     0.2        0.00

Out-of-Pocket Expenses

     5.4        0.01
  

 

 

    

 

 

 

Total amounts paid to Apollo

   $ 445.0        0.48
  

 

 

    

 

 

 

Average invested assets

   $ 93,177     

 

(1)

Excludes $2.3 million of sub-advisory fees paid to AAM for the benefit of third-party sub-advisors.

(2)

Includes total management, carried interest (including unrealized but accrued carried interest fees) and other fees, including those we hold as equity method investments.

 

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Investment Management Relationships

Substantially all of our invested assets are managed by AAM pursuant to our investment management agreements (“IMAs”) with AAM. AAM provides a full array of asset and portfolio management services to us. AAM has built a team of more than 100 investment and operations professionals, senior members of which have deep sector experience in the asset management industry and have overseen our investment portfolio since our founding. As a subsidiary of Apollo, AAM is fully integrated into the Apollo investment platform and provides the Company with access to Apollo’s investment expertise and fully-built infrastructure without the burden of incurring the development and maintenance costs of building an in-house investment asset manager with the capabilities of Apollo/AAM.

As of December 31, 2018, AAM’s investment professionals directly invested approximately 82% of the accounts owned by us or in accounts supporting reinsurance ceded to our subsidiaries by third-party issuers (the “Accounts”) in a number of asset classes, including investment grade corporate credit and RMBS. For the remainder of the invested assets in the Accounts, which is comprised of assets which often require additional sourcing and underwriting capabilities, AAM has chosen to mandate sub-advisors rather than building out in-house capabilities. In this regard, AAM is able to leverage its relationship with Apollo in a sub-advisory capacity, pursuant to which AAM has mandated Apollo to invest in asset classes in which Apollo has investment expertise and sourcing capabilities, such as high yield credit, commercial mortgage loans, CLOs, CMBS and certain ABS. All sub-advised assets are ultimately overseen by AAM to ensure they are appropriate for our business and consistent with our investment strategy. Having extensive knowledge of our corporate structure and business targets, AAM often creates or sources unique investment opportunities, such as our investments in MidCap FinCo Limited (“MidCap”) and AmeriHome, described under “—MidCap” and “—AmeriHome” below.

We have historically relied on AAM to efficiently reinvest large blocks of invested assets we have acquired. AAM’s investment professionals have developed an intimate knowledge of our liability profile, which is long-dated and predominantly surrender charge protected. This knowledge serves as the foundation of our asset management strategy by enabling us to take advantage of our generally illiquid liability profile and identify asset opportunities with an emphasis on earning incremental yield by taking liquidity risk and complexity risk, rather than assuming solely credit risk. Through AAM and Apollo, we are able to source, value and invest in these high-quality assets to drive and target greater investment returns. Additionally, AAM has grown as we have grown. In response to our rapid asset growth and other significant changes in our requirements, such as our strategy of pursuing ongoing retail product sales, AAM has added resources to directly manage our assets and has significantly increased the number and capabilities of its staff to service our growing investment portfolio.

As discussed in greater detail below, for services related to our investment assets for the year ended December 31, 2018, AAM earned an investment management fee of 0.40% per annum on all assets in the Accounts (subject to certain discounts and exceptions) up to $65,846 million (which amount represents the AUM managed by AAM on our behalf as of December 31, 2016) and 0.30% per annum on all asset in the Accounts (subject to certain discounts and exceptions) in excess of $65,846 million pursuant to the Sixth Amended and Restated Fee Agreement, effective June 1, 2018, between the Company and AAM (the “Fee Agreement”). Prior to January 1, 2017, AAM earned an investment management fee of 0.40% per annum on all assets in the Accounts (subject to certain discounts and exceptions). Affiliates of Apollo other than AAM earn additional fees for sub-advisory services rendered with respect to certain invested assets within the Accounts.

Although the investment management fee that AAM charges us is generally 0.40% per annum on all assets in the Accounts up to $65,846 million and 0.30% per annum on all assets in the Accounts in excess of $65,846 million, in order to support continued profitable growth for the Company, AAM discounts certain fees due by the Company. For the total dollar amount of all liabilities sourced through our organic distribution channels during 2016 in excess of $5.1 billion (subject to certain exceptions, “Excess Liabilities”), which otherwise would be subject to a fee of 0.40% per annum, AAM agreed to discount fees as follows:

 

   

During 2016, a discount of 0.40% per annum multiplied by such Excess Liabilities. The 2016 discount relating to such Excess Liabilities was intended to reasonably approximate a full discount of the AAM fee on the assets relating to such Excess Liabilities during the remainder of the 2016 calendar year.

 

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For 2017, a discount of 0.20% per annum multiplied by such Excess Liabilities, resulting in a reasonable approximation of a 0.20% fee on the assets relating to such Excess Liabilities during the 2017 calendar year.

 

   

For 2018 and thereafter, a discount of 0.075% per annum, resulting in a reasonable approximation of a 0.325% fee on the assets relating to such Excess Liabilities during the 2018 calendar year and thereafter.

Excess Liabilities are determined based on our actuarial projections at the time that such Excess Liabilities are written and will amortize on a quarterly basis according to our projections for purposes of determining the discount. For the year ended December 31, 2016, our organic channels provided deposits of $8.8 billion.

Affiliates of Apollo also earn additional fees paid by funds or other collective investment vehicles in which we are invested for management and other services provided by such affiliates of Apollo to such funds and investment vehicles. We believe that our relationships with AAM, Apollo and other Apollo affiliates have contributed to and will continue to contribute to our strong financial performance. For the year ended December 31, 2018, we generated net investment income of $4.0 billion. Net of the aforementioned fees, we achieved a consolidated net investment earned rate of 4.54% for the year ended December 31, 2018.

As further described in Proposal 9, AAM and AHL have agreed to enter into a new investment management fee structure. Subject to shareholder approval of Proposal 9, this new investment management fee structure will be retroactive to January 1, 2019 and will continue until otherwise amended.

IMAs—U.S. and Bermuda

As of December 31, 2018, AAM managed approximately $107.1 billion of assets in the Accounts. These assets are invested primarily in a diversified portfolio of fixed maturity and other securities. Approximately $88.4 billion of these assets, the majority of which are investment grade fixed income assets, are in accounts directly invested by AAM, while the remainder of our investment assets are primarily managed by AAM and Apollo through a sub-advisory arrangement between AAM and Apollo. As compensation for the enhanced and bespoke investment management services that AAM provides to us, under investment management agreements between AAM and us, for the year ended December 31, 2018 AAM received a gross fee of 0.40% per annum on all assets in the Accounts up to $65,846 million and 0.30% per annum on all assets in the Accounts in excess of $65,846 million, with certain limited exceptions. The gross fee is paid in part by the Accounts and in part by AHL pursuant to the Fee Agreement to the extent that any Account’s direct rate is less than the total fee amount.

Termination of Investment Management or Advisory Agreements with AAM

The investment management or advisory agreements between us and AAM have no stated term and may be terminated by either AAM, or AHL or the relevant subsidiary, as applicable, upon notice at any time. However, our Bye-laws provide that we may not, and will cause our subsidiaries not to, terminate any IMA or advisory agreement among us or any of our subsidiaries, on the one hand, and AAM, on the other hand, before any annual anniversary of October 31 (each such date, an “IMA Termination Election Date”) and any termination on an IMA Termination Election Date requires (i) the approval of two-thirds of our Independent Directors (as defined below) and (ii) written notice to AAM of such termination at least 30 days’ prior to an IMA Termination Election Date. If our Independent Directors make any such election to terminate and notice of such termination is delivered, the termination will be effective on the second anniversary of the applicable IMA Termination Election Date (the “IMA Termination Effective Date”). Notwithstanding the foregoing, the IMA Termination Amendment provides that, (A) except as set forth in (B) below, our Independent Directors may only elect to terminate an IMA or advisory agreement on an IMA Termination Election Date if two-thirds of our Independent Directors determine, in their sole discretion and acting in good faith, that either (i) there has been unsatisfactory long-term performance materially detrimental to us by AAM, or (ii) the fees being charged by AAM are unfair and excessive compared to a comparable asset manager (provided, that in either case such Independent Directors must deliver notice of any such determination to AAM, and AAM will have until the applicable IMA Termination Effective Date to address such concerns, and provided, further, that in the case of a determination that the fees being charged by AAM are unfair and excessive, AAM also has the right to lower its fees to match

 

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the fees of a comparable asset manager) and (B) upon the determination by two-thirds of our Independent Directors, we or our subsidiaries may also terminate an IMA or advisory agreement with AAM as a result of either (i) a material violation of law relating to AAM’s advisory business, or (ii) AAM’s gross negligence, willful misconduct or reckless disregard of AAM’s obligations under the relevant agreement, and in either case the delivery of at least 30 days’ prior written notice to AAM of such termination and such termination will be effective at the end of such 30-day period (the events described in the foregoing clauses (A) and (B) are referred to in more detail in our Bye-laws as “AHL Cause”). The IMA Termination Amendment provides that, for purposes of the IMA termination provisions of the Bye-laws (as amended pursuant to such proposed amendment), an “Independent Director” cannot be (x) an officer or employee of ours or any of our subsidiaries or (y) an officer or employee of (1) any member of the Apollo Group described in clauses (i) through (iv) of the definition of “Apollo Group” as set forth in our Bye-laws or (2) AGM or any of its subsidiaries (excluding any subsidiary that constitutes any portfolio company (or investment) of (A) an investment fund or other investment vehicle whose general partner, managing member or similar governing person is owned, directly or indirectly, by AGM or by one or more of its subsidiaries or (B) a managed account agreement (or similar arrangement) whereby AGM or one or more of its subsidiaries serves as general partner, managing member or in a similar governing position).

In addition, the boards of directors of AHL’s subsidiaries may terminate an investment management or advisory agreement with AAM with regards to the applicable subsidiary if such subsidiary’s board of directors determines that such termination is required in the exercise of its fiduciary duties. AAM may terminate such agreements at any time, which may adversely affect our investment results. See Item 1A. Risk Factors—Risks Relating to Our Investment Manager in our Annual Report on Form 10-K for the year ended December 31, 2018.

Apollo Master Sub-Advisory Agreement (“MSAA”) and Apollo Fund Investments

AAM and certain affiliates of Apollo entered into MSAAs for the benefit of our insurance subsidiaries whereby such Apollo affiliates sub-advise AAM with respect to a portion of the invested assets held in the Accounts. Sub-advisory mandates with Apollo generally relate to certain asset classes for which Apollo managers have investment expertise and for which AAM has determined that it is more appropriate to sub-advise rather than build out in-house capabilities to invest in these assets. Sub-advisory fees relating to the MSAA and any other sub-advisory arrangement are recharged by AAM to the Accounts and are in addition to the gross fee of 0.40% per annum paid to AAM under the IMAs. Currently, the MSAA, as amended, covers services rendered by Apollo-affiliated sub-advisors relating to the following asset classes, among others: bank loans, high yield debt, commercial mortgage loans, emerging market debt, convertible securities, mortgage- and asset-backed securities (including CLOs), oil and gas royalties and insurance-linked securities.

Under the MSAA, for the year ended December 31, 2018, Apollo earned 0.40% per annum on all assets in the Accounts explicitly sub-advised by Apollo up to $10 billion, 0.35% per annum on all assets in such accounts explicitly sub-advised by Apollo in excess of $10 billion up to $12.7 billion (the level of sub-advised assets in the Accounts at December 31, 2016), 0.40% per annum on all assets in such accounts explicitly sub-advised by Apollo in excess of $12.7 billion up to $16 billion and 0.35% per annum on all assets in such accounts explicitly sub-advised by Apollo in excess of $16 billion. This sub-advisory fee structure was adopted during 2017. Through December 31, 2016, Apollo earned 0.40% per annum on all assets sub-advised by Apollo up to $10 billion and 0.35% per annum on all assets sub-advised by Apollo in excess of $10 billion.

In certain instances, Apollo earns an incentive fee in its capacity as a sub-advisor of our invested assets. As of December 31, 2018, Apollo affiliates directly sub-advised AAM with respect to approximately $18.7 billion, constituting approximately 18% of the Accounts.

In addition to invested assets sub-advised by Apollo, from time to time, AAM also invests our assets in investment funds or other collective investment vehicles whose general partner, managing member, investment manager or collateral manager is owned, directly or indirectly, by Apollo or by one or more of Apollo’s

 

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subsidiaries (“Apollo fund investments”), and which comprised 79% of our alternative investment portfolio as of December 31, 2018. AAM’s alternative investment strategy is inherently opportunistic and subject to concentration limits on specific risks. We opportunistically allocate 5-10% of the assets in the Accounts to alternative investments. Individual alternative investments are selected based on the investment’s risk-reward profile, incremental effect on diversification and potential for attractive returns due to sector and/or market dislocations. There is a preference for alternative investments that have some or all of the following characteristics, among others: (1) investments that constitute a direct investment or an investment in a fund with a high degree of co-investment; (2) investments with credit- or debt-like characteristics (for example, a stipulated maturity and par value), or alternatively, investments with reduced volatility when compared to pure equity; or (3) investments that have less downside risk. As of December 31, 2018, 3.2% of our assets in the Accounts were invested in Apollo fund investments. Fees related to such invested assets varied from 0% per annum to 2.00% per annum with respect to management fees and 0% to 20% of profits for carried interest, subject in many cases to preferred return hurdles.

As of December 31, 2018, our Apollo sub-advised investments and Apollo fund investments consisted of the following (dollars in millions):

 

     December 31, 2018  
     Amount      % of Total  

Apollo sub-advised investments

     

AFS securities

     

Foreign governments

   $ 153        0.7

Corporate

     3,398        15.5

CLO

     5,703        25.9

ABS

     663        3.0

CMBS

     880        4.0

Trading securities

     

ABS

     87        0.4

Equity securities

     2        0.0

Mortgage loans

     3,507        16.0

Investment funds

     157        0.7

Funds withheld at interest

     4,126        18.7

Other investments

     70        0.3
  

 

 

    

 

 

 

Subtotal

   $ 18,746        85.2
  

 

 

    

 

 

 

Apollo fund investments

     

Credit funds

   $ 320        1.5

CLO equities, affiliated

     114        0.5

Mortgage and real assets

     777        3.5

Hedge funds

     98        0.4

Natural resources

     104        0.5

Private equity—AAA

     

Private equity—Public

     101        0.5

Private equity—MidCap

     552        2.5

Private equity—Other

     521        2.4

A-A Mortgage

     568        2.6

Other private equity

     84        0.4
  

 

 

    

 

 

 

Subtotal

   $ 3,239        14.8
  

 

 

    

 

 

 

Total

   $ 21,985        100.0
  

 

 

    

 

 

 

 

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As of December 31, 2018, 17.5% of our total investments, including related parties and consolidated VIEs, are comprised of securities, including investment funds, in which Apollo, or an Apollo affiliate, has significant influence or control over the issuer of a security or the sponsor of the investment fund. The following table summarizes our cash flow activity related to these investments for the period presented below (dollars in millions):

 

     Year ended
December 31, 2018
 

Sales, maturities, and repayments

   $ 935  

Purchases

     (2,795

For additional information regarding these investments, refer to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2018.

Certain members of our board of directors may directly receive carried interest or may receive a portion of the carried interest that Apollo receives from fund investments in which the Company is invested. Certain directors may invest in fund investments in which we have invested. Additionally, Mr. Belardi and Mr. Kvalheim also have interests in certain of these fund investments. Certain officers from time to time may invest in Apollo funds or co-investments.

As further described in Proposal 9, AAM and AHL have agreed to enter into a new investment management fee structure. Subject to shareholder approval of Proposal 9, this new investment management fee structure will be retroactive to January 1, 2019 and will continue until otherwise amended.

Third Party Sub-Advisory Agreements

In the limited instances in which AAM desires to invest in asset classes for which neither AAM nor Apollo possesses the investment expertise or sourcing abilities required to manage the assets, or in instances in which AAM makes the determination that it is more effective or efficient to do so, AAM mandates third-party sub-advisors to invest in such asset classes, and we reimburse AAM for fees paid to such sub-advisors. For the year ended December 31, 2018, we reimbursed $2.3 million of sub-advisory fees to AAM for the benefit of third party sub-advisors.

Reinsurance of Voya Financial, Inc. and Investment in VA Capital Company LLC and Debt Financing to Venerable Holdings, Inc.

In December 2017 a consortium of investors, led by affiliates of Apollo, and certain other investors including the Company, agreed to purchase Voya Insurance and Annuity Company (“VIAC”), including its closed block variable annuity segment, and create a newly formed standalone entity, Venerable Holdings, Inc. (“Venerable”), to be the holding company of VIAC. On June 1, 2018, we entered into reinsurance agreements with VIAC and ReliaStar Life Insurance Company (“RLI”), pursuant to which we reinsured a block of fixed and fixed indexed annuity liabilities from VIAC and RLI (the “FA Business Reinsurance Agreements”). The aggregate reserves of VIAC and RLI that are subject to the FA Business Reinsurance Agreements as of June 1, 2018 were approximately $19 billion. As consideration for the transactions contemplated by the FA Business Reinsurance Agreements, we paid to VIAC and RLI an aggregate ceding commission of approximately $396 million. VIAC was acquired by Venerable on June 1, 2018. Also on June 1, 2018, we made a $75 million minority equity investment in VA Capital Company LLC (“VA Capital”), the parent of Venerable, and we provided $150 million in debt financing to Venerable.

Certain of our directors and executive officers are co-investors with us in our minority equity investment in VA Capital and the term loan to Venerable made in connection with the Voya reinsurance transactions. Subsequent to the approval of the transaction, certain of our directors and executive officers were offered the

 

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opportunity to co-invest with us in debt issued by Venerable and equity issued by VA Capital. Specifically, Messrs. Belardi, Wheeler and Michelini each purchased a portion of the investment in equity in which we had invested through co-invest vehicles and a portion of the debt in which we had invested, in each case, directly from us. Mr. Belardi purchased $1,000,000 of equity and $1,000,000 of debt, Mr. Wheeler purchased $1,000,000 of equity and $1,000,000 of debt and Mr. Michelini purchased $250,000 of equity and $250,000 of debt. In each case, these directors and executive officers purchased the securities on the same terms and conditions, including price, as we did. We did not receive any separate fee or consideration from such transactions. Messrs. Wheeler and Michelini also serve on the board of directors of VA Capital.

Athora Holding Ltd. (formerly known as AGER Bermuda Holding Ltd.)

On April 14, 2017, in connection with a private offering, Athora Holding Ltd. (“Athora”) entered into subscription agreements with us, certain affiliates of AGM and a number of other third-party investors pursuant to which Athora secured commitments from such parties to purchase new common shares in Athora (the “Athora Offering”), subject to required regulatory approval and certain other customary closing conditions.

On November 28, 2017, the Athora board of directors approved resolutions authorizing the closing of the Athora Offering (the “Closing”) to occur on January 1, 2018 and approving a capital call from all of the Athora investors, excluding us. In connection with the Closing and the issuance of shares in respect of the capital call, each of which occurred on January 1, 2018, our equity interest in the Athora Group was exchanged for 9,000,000 common shares of Athora equity securities. As a result, our interest in Athora was reduced below 50% of the economic and voting interests in the Athora Group, such that we now hold the Athora Group as an investment rather than as consolidated subsidiaries. Prior to the Closing and issuance of shares in respect of the capital call, Athora was our wholly-owned subsidiary. Immediately after the Closing and issuance of shares in respect of the capital call, we held 10% of the aggregate voting power of and less than 50% of the economic interest in Athora’s equity securities.

In connection with the Closing, we entered into a Cooperation Agreement (the “Cooperation Agreement”), dated January 1, 2018, between us and Athora. Pursuant to the Cooperation Agreement, among other things, (i) we will have the right to reinsure approximately 20% of the spread business written or reinsured by any insurance or reinsurance company owned or acquired by Athora, (ii) Athora’s insurance subsidiaries will be required to purchase certain funding agreements and/or other spread instruments issued by our insurance subsidiaries, (iii) we will provide the Athora Group with a right of first refusal to pursue acquisition and reinsurance transactions in Europe (other than the United Kingdom) and (iv) the Athora Group will provide us with a right of first refusal to pursue acquisition and reinsurance transactions in North America and the United Kingdom. As of December 31, 2018, we had outstanding funding agreements in the aggregate principal amount of $166 million that had been issued to Athora prior to the Closing. We also have commitments to make additional equity investments in Athora of $307 million as of December 31, 2018.

During the fourth quarter of 2018, we entered into a coinsurance agreement with Athora Lebensversicherung AG (“ALV”), a subsidiary of Athora, to reinsure endowment contracts and annuities. We then retroceded these endowment contracts and annuities through a modco agreement to Athora Life Re Ltd. (“ARE”). We will earn a commission of 0.2% of reserves on the retrocession to ARE. In connection with this reinsurance transaction, we entered into an asset management agreement, between ALRe and Apollo Asset Management Europe LLP (“AAME”), pursuant to which AAME will manage certain ALRe assets that are backing the block ceded to us by ALV. AAME will earn a management fee of 0.175% per annum on such assets other than sovereign debt and cash or cash equivalents and 0.10% per annum on such assets constituting sovereign debt or cash or cash equivalents.

Two of our executive officers, William J. Wheeler and Martin P. Klein, as well as two of our directors, Marc Rowan and Gernot Lohr, currently serve on the board of Athora. One of our executive officers, Mr. Wheeler, and certain of our directors are investors in Athora.

 

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MidCap

We hold a significant investment in MidCap through AAA Investments (Co-Invest VII), L.P. (“CoInvest VII”), a consolidated investment fund managed by an affiliate of Apollo. In addition, one of our directors, Hope Taitz, currently serves on the board of MidCap. When we originally invested in MidCap Financial Holdings, LLC (“MidCap Financial”) in November 2013, MidCap Financial was a specialty finance company which primarily originated lending opportunities in the healthcare sector. With the assistance of Apollo, MidCap Financial entered new lending markets, raised substantial equity capital and restructured as MidCap in January 2015. MidCap represents a unique investment in an origination platform made available to us through our relationship with Apollo and, from time to time, provides us with access to assets for our investment portfolio. As of December 31, 2018, CoInvest VII owned 27% of the outstanding economic interests of MidCap valued at $552 million.

Additionally, we have made loans directly to MidCap Financial to which subsidiaries of MidCap succeeded as borrower. In connection with the acquisition of MidCap Financial by CoInvest VII in 2013, we entered into a subordinated debt facility with MidCap Financial with a principal amount of $245 million and a maturity date of July 2018. In connection with the restructuring of MidCap Financial into MidCap in January 2015, subsidiaries of MidCap Holdings succeeded as borrower under the subordinated debt facility, and the maturity date of the facility was extended to January 2022. In January 2016, the subordinated debt facility was amended and restated in connection with new loans made by third-party lenders. The loans under the amended and restated facility mature in January 2026 and earn interest at a rate of 9.0% per annum. For the year ended December 31, 2018, we earned income of $23 million in connection with the subordinated debt financing. The principal balance under the financing was $245 million as of December 31, 2018.

Additionally, we purchased $142 million in ABS and CLO securities issued by MidCap affiliates during the year ended December 31, 2018. From time to time, we have entered into participation arrangements with MidCap Holdings with respect to loans we purchase that were originated or otherwise sourced by MidCap Holdings. In January 2016, we purchased a pool of loans that were sourced by MidCap and contemporaneously sold subordinated participation interests in the loans to a subsidiary of MidCap receiving aggregate consideration of $24 million. As of December 31, 2018, no subordinated participation interest was due to MidCap under the subordinated participation agreement. In addition, from time to time, MidCap may originate or source loans that we purchase directly. As is customary practice for loan originators, MidCap may retain a percentage of the origination fees on the loans we purchase that are paid by the borrowers and may also act as agent for the lenders under the related loan agreements.

AmeriHome

We hold a significant investment in AmeriHome, a mortgage lender and mortgage servicer, through our investment in A-A Mortgage, an investment fund managed by AAM. AmeriHome originates assets that we may acquire that are consistent with our investment strategy. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Consolidated Investment Portfolio in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. Through December 31, 2018, we made equity investments of $349 million in A-A Mortgage. We have approximately 73% of the economic interests in A-A Mortgage, A-A Mortgage owns 100% of the equity interests in Aris Holdco (not including profits interests in Aris Holdco held by AmeriHome management), and Aris Holdco owns 100% of the equity interests in AmeriHome. In addition, two of our executive officers, James R. Belardi (also a director) and Martin P. Klein, as well as one of our other directors, Marc Rowan, currently serve on the board of Aris Holdco. In connection with our equity investment in A-A Mortgage, we agreed that Aris Holdco will pay AAM a management fee equal to 1.5% of Aris Holdco’s consolidated equity, in addition to the 10% carried interest that AAM receives subject to an 8% hurdle. This management fee is paid in respect of certain management and oversight services provided by AAM to A-A Mortgage and its subsidiaries. In connection with transaction advice that may be rendered by Apollo Global Securities, LLC (“AGS”) relating to certain strategic transactions that may be entered into by Aris

 

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Holdco and/or its subsidiaries, Aris Holdco has agreed, subject to certain limitations, to pay AGS transaction fees equal to 1% of the aggregate consideration in such transactions for which AGS provides advice. In addition, certain other investors in A-A Mortgage, including an Apollo-affiliated fund, as a condition to their commitments to invest in A-A Mortgage, required that the amounts paid by Aris Holdco to AAM in respect of the management fee and amounts paid to AGS in respect of transaction fees would be rebated to such investors.

Gross management fees incurred by Aris Holdco for services rendered by AAM for the year ended December 31, 2018, totaling $2.7 million, were rebated to other investors in A-A Mortgage. AAM also recognized approximately $8.1 million in unrealized incentive income for the year ended December 31, 2018.

In 2015, we entered into loan purchase and servicing agreements with AmeriHome. The agreements allow us to purchase certain RMLs which AmeriHome has originated or purchased from correspondent sellers and pooled for sale in the secondary market. AmeriHome retains the servicing rights to the sold loans and generally charges a fee of 25 basis points on the loans serviced. For the year ended December 31, 2018, we purchased $722 million of RMLs under this agreement. Additionally, we purchased ABS securities issued by AmeriHome affiliates in the amount of $122 million during the year ended December 31, 2018.

Previously, we had loans due from A-A Mortgage affiliates, of which the largest aggregate amount of principal outstanding during 2018 was $162 million. The loans were repaid in 2018 and we received $5.7 million in interest in connection with the loans. We also have commitments to make additional equity investments in A-A Mortgage of $125 million as of December 31, 2018.

Strategic Partnership

On October 24, 2018, we entered into an agreement pursuant to which we may invest up to $2.5 billion over three years in funds managed by Apollo entities (the “Strategic Partnership”). This arrangement is intended to permit us to invest across the Apollo alternatives platform into credit-oriented, strategic and other alternative investments in a manner and size that is consistent with our existing investment strategy. Fees for such investments payable by us to Apollo are designed to be more favorable to us than market rates, and consistent with our existing alternative investments, investments made under the Strategic Partnership require approval of AAM and remain subject to our existing governance processes, including approval by our conflicts committee, where applicable. During the fourth quarter of 2018, we invested $16 million under the Strategic Partnership.

Shared Service Agreements

We have entered into shared services agreements with AAM. Under these agreements, we and AAM make available to each other certain personnel and services. Expenses for such services are based on the amount of time spent on the affairs of the other party in addition to actual expenses incurred and cost reimbursements. These shared services agreements can be terminated for any reason upon thirty days’ notice. The shared services agreements can also be terminated immediately with respect to a specific party in the event of the insolvency by another party to the agreements, among other things.

Registration Rights Agreement

On April 4, 2014, we entered into the Registration Rights Agreement (as amended by amendments No. 1 and No. 2 thereto, dated October 6, 2015 and November 22, 2016, respectively) with our shareholders, including each shareholder that beneficially owns more than five percent of a voting class of our common shares. The Registration Rights Agreement, subject to the restrictions and limitations contained therein, sets forth the conditions under which our shareholders may demand or otherwise require us to register shares held by them and the conditions under which we may require certain shareholders to register shares held by them, in each case such registration to be effected pursuant to the Securities Act. Pursuant to the Registration Rights Agreement: (1) following our initial public offering and subject to certain holding restrictions, certain holders of five percent

 

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or greater of our common shares may request and thereby require us to use our reasonable best efforts to effect registration under the Securities Act; and (2) upon registration by us of any of our authorized but unissued Class A common shares or upon registration by us of any Other Shares (as defined in the Registration Rights Agreement), in each case, other than registration on Form S-4 or Form S-8, holders of Registrable Shares (as defined in the Registration Rights Agreement) may require us to include in such registration some or all of their Registrable Shares on the same terms and conditions as the securities otherwise being sold in such registration, subject to certain limitations and holding restrictions.

Investment Portfolio Trades with Affiliates

From time to time, AAM and/or Apollo execute cross trades which involve the purchase or sale of assets in a transaction between us, on the one hand, and a third party or an Apollo affiliated entity, in either case, to which Apollo or its affiliate acts in an investment advisor, general partner, managing member, collateral manager or other advisory or management capacity, on the other hand. In addition, from time to time, we may purchase or sell securities from or to related parties, other than through a cross trade transaction. We believe that these transactions are undertaken at market rates, and are executed based on third-party valuations where possible. For the year ended December 31, 2018, the aggregate value of such transactions where we acquired investments from related parties amounted to $96 million. For the year ended December 31, 2018, we sold $14 million of investments to related parties.

Commercial Mortgage Loan Servicing Agreements

We have entered into commercial mortgage loan servicing agreements with AAM. Pursuant to these agreements, we have engaged AAM to (1) assist with the origination of and provide servicing of, commercial loans owned by us or in which we participate, secured by mortgages, deeds of trust or documents of similar effect encumbering certain real property and commercial improvements thereon and (2) provide for management and sale of real estate owned properties.

Advisory Services Agreement

On August 23, 2016, we entered into an advisory services agreement (the “Advisory Services Agreement”) with Apollo Management Holdings, L.P. (“AMHLP”). Pursuant to the Advisory Services Agreement, AMHLP or certain other affiliates of Apollo may provide certain non-exclusive management, consulting, financial and other advisory services to us and our subsidiaries. Such services, which differ from those covered by AAM and its affiliates under our IMAs and sub-advisory agreements, involve advice and recommendations related to future acquisitions, capital market activities and strategic priorities (including growth). Apollo and its affiliates do not charge us or our subsidiaries for their services and may determine not to provide any services. Apollo and its affiliates have the right to request a fee for any service they provide; however, such a request is subject to prior approval by us or the applicable subsidiary. We are responsible for all reasonable third-party out-of-pocket expenses incurred by Apollo or its affiliates related to the services they offer and provide such entities indemnification against any loss or liability arising out of the Advisory Services Agreement. The Advisory Services Agreement is effective until December 31, 2025. Prior to entering into the Advisory Services Agreement, we reimbursed Apollo or its affiliates for certain out-of-pocket expenses they incurred in connection with rendering services to us. For the year ended December 31, 2018, we paid or reimbursed Apollo or its affiliates for approximately $5.4 million in out-of-pocket expenses pursuant to the Advisory Services Agreement.

Rackspace Global Services Agreement

In September 2018, we entered into a Global Services Agreement with Rackspace US, Inc. (“Rackspace”), an Apollo portfolio company, pursuant to which Rackspace provides us with certain information technology services. The term of the agreement is three years and we expect to pay Rackspace approximately $576,000 per year under the agreement. We did not pay Rackspace any amounts for the year ended December 31, 2018.

 

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Other Related Party Transactions and Relationships

We have entered into side letters with certain of our shareholders and have granted them certain rights pursuant to the respective side letters.

We entered into a side letter with AAA (the “AAA Side Letter”) in connection with our 2014 private placement. Pursuant to the AAA Side Letter, for so long as AAA holds any of our equity securities directly or indirectly, it shall have the right to have one representative present at all meetings of our board of directors (and committees thereof); provided that such representative shall not be entitled to vote at such meetings.

Other than as stated or summarized above, since the beginning of our fiscal year ended December 31, 2018, no director, executive officer or shareholder who is known to us to beneficially own more than five percent of our Class A common shares and Class B common shares, or any member of the immediate family of such director, executive officer or shareholder, had or will have a direct or indirect material interest in a transaction or series of transactions in which we are, or one of our subsidiaries is, a party and the amount involved exceeds $120,000.

Related Party Transaction Policy

We have established a related party transaction policy which provides procedures for the review of transactions in excess of $120,000 in any year between us and any covered person having a direct or indirect material interest with certain exceptions. Covered persons include any director, executive officer, director nominee, shareholders known to us to beneficially own 5% or more of our Class A common shares and Class B common shares or any immediate family members of the foregoing. Any such related party transactions shall require advance approval by a majority of our independent directors or by our conflicts committee to the extent that such transactions constitute Apollo Conflicts (as described below) or related party transactions incidental or ancillary thereto. To the extent that the related party transaction is other than either an Apollo Conflict or a related party transaction that is incidental or ancillary thereto, our audit committee charter provides that the audit committee has the authority to review and approve all such transactions.

Because the Apollo Group has a significant voting interest in AHL, and because AHL and its subsidiaries have entered into, and will continue in the future to enter into, transactions with Apollo and its affiliates, our Bye-laws require us to maintain a conflicts committee designated by our board of directors, consisting of directors who are not officers, general partners, directors, managers or employees of any member of the Apollo Group. The conflicts committee consists of Messrs. Beilinson and Borden and Ms. Taitz. The conflicts committee reviews and approves material transactions by and between AHL and its subsidiaries, on the one hand, and the Apollo Group, on the other hand, including any modification or waiver of the IMAs with AAM, subject to certain exceptions.

An “Apollo Conflict” is:

 

   

the entering into or material amendment of any material agreement by and between us and any member of the Apollo Group; or

 

   

the imposition of any new fee on or increase in the rate of fees charged to us or any of our subsidiaries by a member of the Apollo Group, or the provision for any additional expense reimbursement to or offset by a member of the Apollo Group to be borne by us or any of our subsidiaries, directly or indirectly, pursuant to any material agreement by and between us and any member of the Apollo Group (except to the extent that any such material agreement sets forth the actual amount or formula for calculating the amount of any new fee or increase in the rate at which such fee is charged and such material agreement has been approved or is exempt from approval under the conflicts committee charter).

 

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We require that any new (or amendments to any existing) transactions by and between us and any member of the Apollo Group be, prior to the time such transaction is entered into:

 

   

fair and reasonable, taking into account the totality of the relationships between the parties involved (including other transactions that may be or have been particularly favorable to us or any of our subsidiaries);

 

   

entered into on an arms-length basis;

 

   

approved by a majority of our disinterested directors;

 

   

approved by the holders of a majority of our issued and outstanding Class A common shares;

 

   

approved by the conflicts committee; or

 

   

approved by a committee consisting solely of two or more disinterested directors duly appointed by our board of directors to review such transaction instead of the conflicts committee, and provided that any such approval of a transaction by such committee complies with the Bye-Laws.

In connection with any matter submitted to the conflicts committee, materials are prepared by management summarizing the applicable conflict and recommending the proposed transaction. The conflicts committee reviews market comparison data (to the extent available) relating to the reasonableness of any proposed fees to be paid.

For operational and administrative ease, certain transactions that fall within the definition of an Apollo Conflict but do not pose a material risk to us need not be approved by the conflicts committee. As described below, these exceptions include specific thresholds under which we may engage Apollo or its affiliates in an investment management or advisory (or sub-management or sub-advisory) capacity without prior conflicts committee review or approval. The following transactions, among others, are expressly excluded from the definition of Apollo Conflict and do not require the consent or review of the conflicts committee:

 

   

(i) transactions, rights or agreements specifically contemplated by existing agreements between AHL and Athora, (ii) entering into new IMAs or MSAAs with members of the Apollo Group on terms similar to and not more economically favorable in the aggregate to the Apollo Group than those currently in effect (provided, that payment of additional total fees and/or expenses at the same or no greater fee and/or expense reimbursement rate shall not be deemed to be more economically favorable to the Apollo Group), (iii) amendments to the agreements described in (i) and (ii) above for the purpose of adding a subsidiary of AHL thereto, or (iv) any reinsurance transaction between Athora or any of its subsidiaries and AHL or any of its subsidiaries;

 

   

any (i) transfer of equity securities of AHL to or by any member of the Apollo Group, (ii) acquisition by any member of the Apollo Group of any newly issued equity securities that are offered to the public in a public offering, to substantially all of the holders of AHL’s common stock on a substantially pro-rata basis or at a price which is equal to or greater than the then-prevailing market price, (iii) issuance of securities to any employee or director of AHL or AAM (including allocating blocks of incentive securities to AAM for allocation by AAM to its employees and directors) pursuant to any stock incentive plan or similar equity based compensation plan approved by our board of directors;

 

   

the provision of any insurance related products by or to AHL or any of its subsidiaries to or by the Apollo Group; provided that the provision of such products is an ordinary course transaction entered into on an arms-length basis on terms no less favorable to AHL or its subsidiaries than could be contemporaneously obtained from or provided to an unaffiliated party;

 

   

any transactions, rights or agreements between AHL or any of its subsidiaries and any portfolio company of the Apollo Group that pertain to the ordinary course business of such portfolio company; provided, that any such transactions, rights or agreements (taken as a whole) are no less favorable to AHL or the applicable subsidiary than could be obtained from or provided to an unaffiliated party;

 

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an investment by AHL or any subsidiary thereof in an Apollo-sponsored vehicle; provided, that an officer of a member of the Apollo Group provides a written certificate to our board of directors that such investment provides AHL or its subsidiary, as applicable, with the same or better terms or a most favored nations clause (in all cases, taken as a whole with respect to such Apollo-sponsored vehicle and without consideration of any Designated Terms (as defined below)) as those applicable to other investors (excluding Designated Investors (as defined below)) in the same Apollo-sponsored vehicle who invested an amount in such vehicle equal to or less than that invested by AHL and its subsidiaries; and provided, further, that such investment represents no more than 25% of the outstanding or expected equity interests of such Apollo-sponsored vehicle (based on prior record related to the strategy), Designed Investor and Designated Terms shall have the meanings set forth for such terms or other similar terms in any customary side letter entered into by the applicable Apollo Group advisor or manager, Apollo-sponsored vehicle or other Apollo Group entity, on the one hand, and investors, other than AHL or a subsidiary thereof, who have invested in the same Apollo-sponsored vehicle, or entered into an investment management, sub-advisory or similar agreement with the Apollo Group for the same asset class, on the other hand;

 

   

a transaction that has been approved by a majority of our disinterested directors, provided that the disinterested directors are notified that such transaction would otherwise constitute an Apollo Conflict prior to such approval;

 

   

any modification, supplement, amendment or restatement of our Bye-laws that has been approved in accordance with our Bye-laws and applicable Bermuda law;

 

   

material amendments to contracts or transactions previously approved by the conflicts committee or a majority of our disinterested directors, or which are not required to be approved by either, so long as, in each case, such amendments either (i) are not materially adverse to AHL or any of its subsidiaries, or (ii) would not cause the relevant contract or transaction to require approval by the conflicts committee or a majority of our disinterested directors under our Bye-laws after giving effect to the relevant amendment;

 

   

the entry into any IMA with the Apollo Group or amending an MSAA currently in effect (or entering into a new MSAA), so long as (i) such agreement is on terms in the aggregate (including expense reimbursement and indemnities) no less favorable to AHL than customary market terms (excluding the fees charged under the IMA); and (ii) either (a) the rates on assets under management (“AUM”) under such agreement (including any carried interest or similar profit allocation, but, for the avoidance of doubt, excluding the fees charged under the IMA) do not exceed 50 basis points per annum for non-alternative assets; (b) the rates on AUM under such agreement (including any carried interest or similar profit allocation, but, for the avoidance of doubt, excluding the fees charged under the IMA) do not exceed 100 basis points per annum for alternative assets; or (c) an officer of a member of the Apollo Group provides a written certification to our board of directors that such agreement provides AHL or its subsidiary, as applicable, with the same or better terms or a most favored nations clause (in all cases, taken as a whole with respect to such agreement and without consideration of any Designated Terms) with respect to other investors (excluding Designated Investors) who have entered into an investment management agreement or sub-advisory or similar agreement with the Apollo Group for the same asset class and whose AUM with respect to such agreement and asset class are all equal or less than those subject to the agreement between AHL and the Apollo Group with respect to such asset class. In addition, investments in an Apollo-sponsored vehicle are not deemed Apollo Conflicts so long as such Apollo-sponsored vehicle charges fees in line with those discussed in (a) and (b) above;

 

   

allocations of costs or expenses between AHL or any of its subsidiaries and the Apollo Group not in excess of five basis points per annum, calculated on the total investible assets of AHL and its subsidiaries including accounts supporting reinsurance agreements for which AHL or a subsidiary thereof acts as reinsurer as of the effective date of such allocation (provided that any such allocation of costs or expenses may not be used to pay investment management fees);

 

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one or more investments by AHL or any subsidiary thereof in an Apollo-sponsored vehicle, including any upsize, renewal or extension of an existing investment, up to and including $250 million per investment (or series of related investments), provided that (i) any such investment is on terms, including with respect to fees, which a member of the Apollo Group certifies that it believes are in the aggregate no less favorable to AHL or a subsidiary thereof than terms a similarly situated but unaffiliated person would receive in an arm’s length transaction, (ii) the (a) management fees earned by the Apollo Group shall not exceed 2% of assets or commitment, as applicable, and (b) carried interest or performance fees earned by the Apollo Group for any such investment shall not exceed 20% of the profits, and (iii) any special fees or other fees earned by any member of the Apollo Group in connection with any such investment shall offset management fees (to the extent of management fees) or if such fees do not offset management fees, they shall be arm’s length or approved by the Apollo-sponsored vehicle’s limited partner advisory board; and

 

   

any other class of transactions, rights, fees or agreements determined by approval of the conflicts committee to not be an Apollo Conflict nor require approval of the conflicts committee.

Each strategy that is managed, advised or sub-advised for AHL or any of its subsidiaries by AAM or another member of the Apollo Group through a managed account and was previously subject to conflicts committee approval (other than the existing IMA or new IMAs previously approved) may be re-examined by the conflicts committee if such strategy underwent a material change in the amount of AUM in the immediately preceding 12 months.

Our conflicts committee or applicable disinterested directors have previously approved the existing transactions described above under “—Relationships and Related Party Transactions with Apollo or its Affiliates” that are required to be approved by the terms of our conflicts committee charter.

 

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PROPOSAL 1:

ELECTION OF DIRECTORS OF THE COMPANY

At the Annual General Meeting, seven directors are to be elected to hold office. Five Class I directors, Messrs. Belardi, Michelini, Leach, Lohr and Rowan, were recommended for nomination by our nominating and corporate governance committee and nominated for election by our board of directors and in accordance with the Company’s Bye-laws. If reelected, the Class I directors will hold office until the 2022 annual general meeting. Two directors, Mr. Kleinman and Ms. Hormozi, also recommended for nomination by our nominating and corporate governance committee, were appointed to the board of directors subject to being nominated and elected by the shareholders at the Annual General Meeting. If elected, Mr. Kleinman will be a Class II director and his term will expire at our annual general meeting to be held in 2020 and Ms. Hormozi will be a Class III director whose term will expire at our annual general meeting to be held in 2021. All of the nominees have consented to serve if elected, but if any becomes unavailable to serve, the persons named as proxies in the accompanying proxy card may exercise their discretion to vote for a substitute nominee.

The name, principal occupation and other biographical information concerning each nominee is set forth in the section above entitled “MANAGEMENT.”

The board of directors recommends that Shareholders vote FOR the proposal to elect all of the nominees named above.

PROPOSAL 2:

AUTHORIZATION OF THE ELECTION OF DIRECTORS OF ATHENE LIFE RE LTD. AT THE 2019

ANNUAL GENERAL MEETING OF ATHENE LIFE RE LTD.

Pursuant to the Bye-laws of the Company, with respect to any matter required to be submitted to a vote of the shareholders of any non-U.S. subsidiary, which includes Athene Life Re Ltd., we are required to submit a proposal relating to such matters to the Company’s Shareholders and vote all the shares of Athene Life Re Ltd. in accordance with and proportional to such vote of the Company’s Shareholders. Accordingly, the Company’s Shareholders are being asked to consider the following proposal.

The Company wishes to nominate and elect Messrs. Belardi, Borden, Gillis, Lohr and Wheeler and Ms. Taitz to be directors of Athene Life Re Ltd. to serve until the 2020 annual general meeting of the Company or such other period of time as permitted by Athene Life Re Ltd.’s constituent documents.

The name, principal occupation and other biographical information concerning each nominee is set forth in the section above entitled “MANAGEMENT.”

The board of directors recommends that Shareholders vote FOR the proposal to authorize the Company to elect the nominees named above.

PROPOSAL 3:

AUTHORIZATION OF THE ELECTION OF DIRECTORS OF ATHENE BERMUDA EMPLOYEE

COMPANY LTD. AT THE 2019 ANNUAL GENERAL MEETING OF ATHENE BERMUDA

EMPLOYEE COMPANY LTD.

Pursuant to the Bye-laws of the Company, with respect to any matter required to be submitted to a vote of the shareholders of any non-U.S. subsidiary, which includes Athene Bermuda Employee Company Ltd., we are

 

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required to submit a proposal relating to such matters to the Company’s Shareholders and vote all the shares of Athene Bermuda Employee Company Ltd. in accordance with and proportional to such vote of the Company’s Shareholders. Accordingly, the Company’s Shareholders are being asked to consider the following proposal.

The Company wishes to nominate and elect Messrs. Gillis and Wheeler and Mrs. Scotland Courcy to be directors of Athene Bermuda Employee Company Ltd. to serve until the 2020 annual general meeting of the Company or such other period of time as permitted by Athene Bermuda Employee Company Ltd.’s constituent documents.

Nominees

Natasha Scotland Courcy has over 15 years of experience as a corporate attorney, including 11 years in the reinsurance industry, and is SVP General Counsel of ALRe. Mrs. Scotland Courcy has been with our Company since 2012 and works with our business units to manage our reinsurance transactions including acquisitions, strategic transactions, reinsurance arrangements and alternative structures. Mrs. Scotland Courcy also supervises ALRe’s corporate policy program, governance policies and procedures, and provides reports to our board of directors periodically. Prior to joining our Company, Mrs. Scotland Courcy held legal counsel positions at other international companies where, amongst other things, she managed complex internal reorganization projects, merger and acquisition transactions, cat-bond transactions, and assisted in managing the legal operational requirements for global subsidiaries.

The name, principal occupation and other biographical information concerning each other nominee is set forth in the section above entitled “MANAGEMENT.”

The board of directors recommends that Shareholders vote FOR the proposal to authorize the Company

to elect the nominees named above.

PROPOSAL 4:

AUTHORIZATION OF THE ELECTION OF DIRECTORS OF ATHENE IP HOLDING LTD. AT THE

2019 ANNUAL GENERAL MEETING OF ATHENE IP HOLDING LTD.

Pursuant to the Bye-laws of the Company, with respect to any matter required to be submitted to a vote of the shareholders of any non-U.S. subsidiary, which includes Athene IP Holding Ltd., we are required to submit a proposal relating to such matters to the Company’s Shareholders and vote all the shares of Athene IP Holding Ltd. in accordance with and proportional to such vote of the Company’s Shareholders. Accordingly, the Company’s Shareholders are being asked to consider the following proposal.

The Company wishes to nominate and elect Messrs. Gillis and Wheeler and Mrs. Scotland Courcy to be directors of Athene IP Holding Ltd. to serve until the 2020 annual general meeting of the Company or such other period of time as permitted by Athene IP Holding Ltd.’s constituent documents.

The name, principal occupation and other biographical information concerning Mrs. Scotland Courcy is set forth in Proposal 3 hereto. The name, principal occupation and other biographical information concerning each other nominee is set forth in the section above entitled “MANAGEMENT.”

The board of directors recommends that Shareholders vote FOR the proposal to authorize the Company

to elect the nominees named above.

 

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PROPOSAL 5:

AUTHORIZATION OF THE ELECTION OF DIRECTORS OF ATHENE IP DEVELOPMENT LTD.

AT THE 2019 ANNUAL GENERAL MEETING OF ATHENE IP DEVELOPMENT LTD.

Pursuant to the Bye-laws of the Company, with respect to any matter required to be submitted to a vote of the shareholders of any non-U.S. subsidiary, which includes Athene IP Development Ltd., we are required to submit a proposal relating to such matters to the Company’s Shareholders and vote all the shares of Athene IP Development Ltd. in accordance with and proportional to such vote of the Company’s Shareholders. Accordingly, the Company’s Shareholders are being asked to consider the following proposal.

The Company wishes to nominate and elect Mr. Wheeler and Mrs. Scotland Courcy to be directors of Athene IP Development Ltd. to serve until the 2020 annual general meeting of the Company or such other period of time as permitted by Athene IP Development Ltd.’s constituent documents.

The name, principal occupation and other biographical information concerning Mrs. Scotland Courcy is set forth in Proposal 3 hereto. The name, principal occupation and other biographical information concerning Mr. Wheeler is set forth in the section above entitled “MANAGEMENT.”

The board of directors recommends that Shareholders vote FOR the proposal to authorize the Company

to elect the nominees named above.

PROPOSAL 6:

APPOINTMENT OF INDEPENDENT AUDITOR

The board of directors proposes that the shareholders appoint PricewaterhouseCoopers LLP (“PwC”) to serve as the independent registered public accounting firm of the Company (the “Independent Auditor”) until the close of the Company’s annual general meeting in 2020. PwC has been the Independent Auditor since December 8, 2015, the effective date of the change in the Company’s Independent Auditor from PricewaterhouseCoopers Ltd. to PwC, as approved by the audit committee.

A representative from PwC will be present at the Annual General Meeting and will have the opportunity to make a statement if he or she desires to do so and respond to appropriate questions from shareholders.

The board of directors recommends a vote FOR the proposal appointing PwC as the Company’s Independent Auditor to serve until the close of the Company’s next annual general meeting in 2020.

PROPOSAL 7:

REMUNERATION OF INDEPENDENT AUDITOR

Subject to the approval of this proposal, the audit committee will determine the remuneration of PwC as the Company’s Independent Auditor for the year ending December 31, 2019. In accordance with the Bermuda Companies Act 1981, as amended, the board of directors is submitting its referral to the audit committee of the determination of the remuneration of the Independent Auditor to the shareholders for approval.

The board of directors recommends that Shareholders vote FOR the proposal to refer the remuneration of PwC to the audit committee of the board of directors of the Company.

 

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PROPOSAL 8:

SAY ON PAY VOTE

As required by Section 14A of the Exchange Act, the below resolution gives shareholders the opportunity to cast an advisory vote on the compensation of our NEOs, as disclosed in this Proxy Statement. Consistent with our shareholders’ preference, we intend to submit an advisory vote on the compensation of our NEOs on an annual basis.

Accordingly, we are asking our Shareholders to vote on the following resolution:

RESOLVED, that the Shareholders approve the compensation of our named executive officers as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K.

As this is an advisory vote, the result will not be binding, although our compensation committee will consider the outcome of the vote when evaluating the effectiveness of our compensation principles and in connection with its compensation determinations.

It is expected that the next advisory vote on the compensation of our NEOs will occur at our 2020 annual general meeting.

The board of directors recommends that Shareholders vote FOR the resolution.

PROPOSAL 9:

APPROVAL OF TWELFTH AMENDED AND RESTATED BYE-LAWS OF THE COMPANY

The Board has unanimously approved, and is recommending that the Shareholders vote FOR the proposal to approve, the Twelfth Amended and Restated Bye-laws of the Company (the “Twelfth Amended and Restated Bye-laws”), in substitution for and to the exclusion of all existing Bye-laws of the Company. The text of the Bye-laws of the Company, as it is proposed to be amended and restated, is attached to this proxy statement as Annex A. If approved by the Shareholders, the Twelfth Amended and Restated Bye-laws will be effective immediately.

A summary of the material amendments to the Company’s existing Bye-laws that will be represented in the Twelfth Amended and Restated Bye-laws is set forth below. All references below to specific Bye-laws are with respect to the Twelfth Amended and Restated Bye-laws. All capitalized terms used below and not otherwise defined herein have the meanings ascribed to them under the Company’s existing Bye-laws.

IMA Termination Provisions

Subject to the approval by the Company’s shareholders at the Annual General Meeting of certain amendments to the Company’s Bye-laws contained in this proposal, the Company and Apollo have agreed to amend certain fee arrangements they have in place relating to investment management fees and sub-advisory fees that we pay to Apollo (the “Proposed Amended Fee Agreement”). The revised investment management arrangements contain the following key enhancements:

 

   

Lower base fee rate

Currently, we pay base investment management fees (the “Base Fee”) of 40 basis points on invested assets up to $66 billion, and 30 basis points on invested assets above $66 billion, subject to certain rebate agreements. Under the new arrangements, we would pay a Base Fee of 22.5 basis points per year on all of our invested assets up to the level as of January 1, 2019, and 15 basis points on all future

 

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invested assets above that level. This base fee covers a range of investment services that we receive from Apollo, including investment management, asset allocation, mergers and acquisition asset diligence and certain operational support services such as investment compliance, tax, legal and risk management support, among others.

 

   

Revision of sub-advisory fees and elimination of “one-size-fits all” approach to create greater alignment between asset differentiation and fees

Currently, certain assets in our portfolio are subject to only the Base Fee, while other assets in our portfolio are subject to the Base Fee and an additional sub-advisory fee of 35 or 40 basis points. Under the revised investment management arrangements, subject to certain limited exceptions, all assets in our portfolio will be subject to the Base Fee and a sub-allocation fee. Sub-allocation fees will be determined by a four-tiered rate structure as follows:

 

  (i)

0.065% of the market value of “core assets,” which include public investment grade corporate bonds, municipal securities, agency residential and commercial mortgage backed securities (“Agency RMBS/CMBS”), and obligations of agencies or government sponsored entities that are not expressly backed by the U.S. government;

 

  (ii)

0.13% of the market value of “core plus assets,” which include private investment grade corporate bonds, fixed rate first lien commercial mortgage loans (“CML”), and certain obligations issued or assumed by financial institutions (such institutions, “Financial Issuers”) and determined by Apollo to be “Tier 2 Capital” under Basel III, a set of recommendations for international banking regulations developed by the Bank for International Settlements;

 

  (iii)

0.375% of the market value of “yield assets,” which include non-agency residential mortgage backed securities, investment grade collateralized loan obligations (“CLO”), commercial mortgage backed securities and other asset-backed securities (other than Agency RMBS/CMBS), emerging market investments, below investment grade corporate bonds, certain subordinated debt obligations, hybrid securities and surplus notes issued or assumed by Financial Issuers, rated preferred equity, residential mortgage loans, bank loans, investment grade infrastructure debt, and floating rate CMLs on slightly transitional or stabilized traditional real estate;

 

  (iv)

0.70% of the market value of “high alpha assets,” which include subordinated CMLs, below investment grade CLOs, unrated preferred equity, debt obligations originated by MidCap, CMLs for redevelopment or construction loans or secured by non-traditional real estate, below investment grade infrastructure debt, certain loans originated directly by Apollo (other than MidCap loans) and made to borrowers by Apollo clients, and agency mortgage derivatives; and

 

  (v)

0.00% of the market value of cash, treasuries, equities and alternatives.

In the case of assets acquired after January 1, 2019, the sub-allocation fees are subject to a cap of 10% of the applicable asset’s gross book yield.

The Proposed Amended Fee Agreement is intended to provide for further alignment of interests between us and Apollo and facilitate our continued profitable growth. Assuming constant portfolio allocations, the near-term impact of the Proposed Amended Fee Agreement is anticipated to be immaterial. If invested asset allocations are more heavily weighted to assets with lower alpha-generating abilities than our current investment portfolio, our fees under the Proposed Amended Fee Agreement would be expected to decline relative to the existing fee agreement. Conversely, if a greater proportion of our investment portfolio is allocated to differentiated assets with higher alpha-generating abilities, our net investment earned rates would be expected to increase, and so would our fees relative to the existing fee agreement.

The amendments to the investment management fees and sub-advisory fees referred to herein are subject to the approval by our shareholders at the Annual General Meeting of certain amendments to our Bye-laws relating to the term and termination of the investment management agreements between us and Apollo. Upon such

 

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shareholder approval and the execution of the Proposed Amended Fee Agreement, the amendments to the investment management fees and sub-advisory fees referred to herein will be effective retroactive to January 1, 2019.

To incentivize Apollo to make long-term investments that enhance its ability to continue to provide us with differentiated asset management, we have proposed the changes to the IMA termination provisions in the existing Bye-laws set forth in the Twelfth Amended and Restated Bye-laws. Specifically, the Twelfth Amended and Restated Bye-laws, if adopted as our Bye-laws, will (1) provide for the IMA and each New IMA to have initial terms of four years, beginning on the date on which the Twelfth Amended and Restated Bye-laws are adopted as our Bye-laws (the “Adoption Date”), that extend automatically for successive two-year periods unless otherwise terminated (with any such termination being effective no earlier than two years after the end of the then existing term), and (2) reflect conforming amendments, including by amending the IMA Termination Election Date to be the fourth anniversary of the Adoption Date and each two-year anniversary of the Adoption Date. The Twelfth Amended and Restated Bye-laws, if adopted as our Bye-laws, will continue to permit us to terminate the IMA, or any New IMA, for cause.

Designated Chairperson at Board Meetings

The Twelfth Amended and Restated Bye-laws provide that the members of the Board present at a Board meeting may appoint a chairperson to preside over such Board meeting other than the Chairman of the Board.

Management Voting Power Cutback

Currently, the Bye-laws limit the aggregate voting power of Class A common shares held by our employees and employees of AAM and Apollo to 3% of our total voting power. Pursuant to the Twelfth Amended and Restated Bye-laws, the 3% voting power limit would continue to apply to Class A common shares held by employees of AAM and Apollo, but would no longer apply to Class A common shares held by our employees.

Voting of Subsidiary Shares