Athene Holding Ltd. · NYSE:ATH/PA
Athene — Investor Presentation (October 2021)
54 slides from Athene's investor presentation, Oct 19, 2021
Slide 1: Athene Balance Sheet Tutorial: Asset Portfolio Risk & Stress Considerations
Exhibit 99.1 Athene Balance Sheet Tutorial: Asset Portfolio Risk & Stress Considerations October 2021Exhibit 99.1 Athene Balance Sheet Tutorial: Asset Portfolio Risk & Stress Considerations October 2021
Slide 2: Disclaimer
Disclaimer This presentation does not constitute an offer to sell, or the solicitation of an offer to buy, any security of Athene Holding Ltd. (“Athene”). Certain information contained herein and certain oral statements made in reference thereto may be “forward-looking” in nature. These statements i
Slide 3: What Happened Since Our Last Asset Risk Update
What Happened Since Our Last Asset Risk Update 3What Happened Since Our Last Asset Risk Update 3
Slide 4: Athene Was Built Off a Stable Base
Athene Was Built Off a Stable Base Strategic Transaction Upgraded to ‘A’ Apollo-Athene Merger ADIP 2020 Upgrade to ‘A+’ 2019 Rated ‘A-’ IPO 2018 Founding 2016 2014 2013 2009 Platforms Notes: Financial services companies depicted above are examples of current or former investments by Apollo or portfo
Slide 5: Athene Is Extremely Well Capitalized with $4.0bn of Excess Equity Capital
Athene Is Extremely Well Capitalized with $4.0bn of Excess Equity Capital Extremely Well Capitalized… …With Access to Ample Liquidity 3 $4.0bn 2 Excess Equity A+ or A Rated Capital 5 $4.3bn Cash on Hand $8.3bn $18.3bn Deployable Regulatory 4 1 Capital Capital 6 $6.7bn Available Liquidity $56bn Liqui
Slide 6: Athene Holds More Excess Capital Than the Industry
Athene’s Holds More Excess Capital Than the Industry 1 2 3 Statutory Capital to Reserves Adjusted Debt to Capital Credit Losses 5 Year Average 2020 13.0% 25.1% 15 bps 12 bps 12 bps 9 bps 13.5% 9.6% 5 Year Average 2020 Industry AA-/A+ Rated Athene AA-/A+ Rated Athene Industry Athene Athene Average Av
Slide 7: Athene Held Substantial Excess Capital Going into COVID
Athene Held Substantial Excess Capital Going into COVID… Athene Has Always Held Excess Capital… …In Anticipation of a Market Dislocation Like COVID 2018 Investor Day 90% 10% 9% 80% 8% 70% 7% Q1 ‘20 60% Earnings 6% 50% 5% 40% March ‘20 4% Asset Stress 30% 3% 20% 2% 10% 1% 0% 0% Jan-18 Jul-18 Jan-19 J
Slide 8: And Its Asset Portfolio Performed Extremely Well
… And Its Asset Portfolio Performed Extremely Well… 1 • Only 12bps of asset impairments in 2020 vs. 15bps for the broader life insurance industry • Strong capital position with $4.0bn of excess equity capital at 2Q’21, net of $0.7bn of capital impact from downgrades in 2020 • Liabilities remained st
Slide 9: Allowing Athene to Go on the Offense
… Allowing Athene to Go on the Offense $28 bn Record organic growth at very profitable returns in excess of targets, ü 2020 Record Gross 1 gaining market share and ending as #1 in all target markets Organic Inflows $29 bn Strong inorganic growth at attractive returns, executing largest ü Jackson rei
Slide 10: Athene's Success Was Recognized - S&P Upgraded to 'A+'
Athene’s Success Was Recognized - S&P Upgraded to ‘A+’ Rating Agency FSR Rating / Outlook Commentary “During the height of the COVID-19 pandemic and the related economic crisis, Athene continued to grow its businesses while maintaining capital strength ‘A+’ S&P Global ‘A+’ at the “AA” level per our
Slide 11: Athene Continues To Build Off a Strong Base
Athene Continues To Build Off a Strong Base 1 Total Invested Assets in the Context of S&P Financial Strength Ratings ($ in bn) MetLife $600 $300 Prudential $250 AIG L&R $200 Athene Lincoln $150 Aflac Principal Global Atlantic $100 American Equity Ameriprise Voya $50 F&G Life $0 A- A+ AA- Note: Athen
Slide 12: Athene's Investment Philosophy
Athene’s Investment Philosophy 12Athene’s Investment Philosophy 12
Slide 13: Apollo Provides Athene Differentiated Investment Capabilities
Apollo Provides Athene Differentiated Investment Capabilities Leading Retirement Services franchise Leading credit manager Needs tens of billions of dollars of ~570 investment professionals new investable ideas per year ~200 people dedicated to Has straightforward and persistent Athene / Athora liab
Slide 14: Athene is Focused on Principal Protection
Athene is Focused on Principal Protection Athene’s Balance Sheet Paradigm ü Balance sheet subject to a “book value” versus “market value” framework - One exception is Alternatives, which are Persistent marked-to-market (~40% real-time and Liabilities ~60% lagged 1-3 months) “Plain Vanilla” High Qual
Slide 15: Athene Captures Illiquidity Premia Appropriate for Long-Dated Liabilities
Athene Captures Illiquidity Premia Appropriate for Long-Dated, Predictable Liabilities 8.8 year 74% 5.7% 25% weighted average life of of deferred annuities are average surrender charge of Athene’s liabilities 2 3 1 protected by surrender charges on Athene’s deferred annuities are non-surrenderable A
Slide 16: Athene Targets Incremental Returns Without Incremental Credit Risk
Athene Targets Incremental Returns Without Incremental Credit Risk • ~94% of Athene’s portfolio is invested in primarily investment grade fixed and floating rate assets • Target asset classes which bring illiquidity or structuring complexity premium, not incremental credit risk • Focus on directly o
Slide 17: Direct Origination Platforms Drive Symbiotic Growth
Direct Origination Platforms Drive Symbiotic Growth 1 Platforms Have Originated over $14 billion of Assets For Athene Select Assets + Demand Origination Platforms Insurance Platforms (Middle Market Loans] Expand Yield Grow Origination Insurance Capabilities Platforms (Residential Mortgages) (Fleet F
Slide 18: Athene Benefits from Apollo Direct Origination Platforms
Athene Benefits from Apollo Direct Origination Platforms • Assets directly originated by platforms typically exhibit differentiated risk-return characteristics, including: ü Generate top of the capital structure senior-secured assets with superior credit attributes to comparable corporates ü Control
Slide 19: Apollo / Athene Take an Active Approach to Asset Risk Management
Apollo / Athene Take an Active Approach to Asset Risk Management 2015 2Q’21 <BBB <BBB 2% 20% 1 BBB 35% AAA/AA/A 33% Positioned CLO Portfolio into AAA/AA/A ~80% ~98% 63% Investment Investment ~98% Investment Grade Tranches Grade Grade BBB 47% • Proactively reduced regional mall exposure beginning in
Slide 20: Risk Management Overview
Risk Management Overview 20Risk Management Overview 20
Slide 21: Risk Management is Embedded in Everything We Do
Risk Management is Embedded in Everything We Do Manage Athene’s Risks So That It Can Grow Profitably Across Various Markets • Robust risk management framework and procedures • Risk appetite is to avoid ratings downgrades in a typical “recession” scenario, and maintain investment grade ratings in a “
Slide 22: Multiple Layers of Risk Oversight
Multiple Layers of Risk Oversight • Fundamental analysis for underwriting, selection, and monitoring of individual assets Apollo’s • Risk modelling, identification, and mitigation at the asset class level (formal quarterly risk reports) Portfolio Managers Apollo’s • Manages aggregate risks including
Slide 23: Overview of the Stress Methodology
Overview of the Stress Methodology • Risk appetite is to avoid ratings downgrades in a typical ‘recession’ scenario, and maintain investment grade ratings in a ‘deep recession’ scenario more severe than 2008/2009 • Defined scenario stresses based on severe economic scenarios over a one to two year p
Slide 24: Stress Assumptions in Historical Context
Stress Assumptions in Historical Context Athene Assumptions Sample Historical Recession Data Baseline Deep 1 Recession Recession 1990 2001 2008 Euro 2016 COVID 2020 Scenario Scenario 10 Yr US Down 60% Down 83% 2 Treasury Up 4% Down 21% Down 43% Down 84% Down 68% (e.g. ~70bps) (e.g. ~120bps) Yield Ab
Slide 25: Athene's Stress Test Results Muted by One Year of Earnings
Athene’s Stress Test Results Muted by One Year of Earnings Compares to $4bn of Excess Equity Capital Recession Scenario Deep Recession Scenario Q2’21 Portfolio % of Net % of Net $bn Impact $bn Impact Allocation Invested Assets Invested Assets ($bn) Corporate & Gov’t Losses 47% ($0.4) (0.5%) ($0.7) (
Slide 26: Detail on Impact on Excess Equity Capital from Stress & Downgrades
Detail on Impact on Excess Equity Capital from Stress & Downgrades Every Asset Downgraded ($bn) Recession Scenario Deep Recession Scenario 1 One NRSRO Notch Corporate & Gov’t ($0.7) ($1.1) ($0.3) Structured Assets (CLO / ABS) ($0.5) ($0.9) ($0.1) Commercial Mortgages (CML / CMBS) ($0.1) ($0.2) ($0.1
Slide 27: Multiple Available Management Actions in Stress
Multiple Available Management Actions in Stress Illustrative Action Actionability Capital Benefit ~$2.8bn Issue Senior Unsecured Debt (to 25% Debt to Cap) Capital ~$0.4bn Issue Preferred (to 15% Pref to Cap) Markets ~$1.8bn Draw Revolver 1 ($1.75bn revolver) ~$0.2bn Reduce Share Buybacks (current au
Slide 28: Select Asset Class Deep Dives
Select Asset Class Deep Dives 28Select Asset Class Deep Dives 28
Slide 29: Differentiated Investment Portfolio Capabilities Drive Returns
Differentiated Investment Portfolio Capabilities Drive Returns Dedicated Deep Dives on Each Asset Class Follow 3% Cash & Equivalents 2% 2% 1 CMBS Other 5 5% Alternatives 4 9% ABS $56 billion of assets with a high degree of liquidity of $160.8 48% which $16bn are public 8% Corporate & corporates rate
Slide 30: Commercial Mortgage Loan (CML) Portfolio Overview
1 Commercial Mortgage Loan (CML) Portfolio Overview $19 billion of Net Invested Assets, 12% of Athene’s Asset Portfolio Key Portfolio Stats Portfolio Geography Texas Other Florida 5% <1% Portfolio construction guided by late cycle of CRE last few years 5% Northeast High quality sponsors with deep po
Slide 31: CML Performance Through COVID
1 CML Performance Through COVID Summary Case Study: Nashville Mixed-Use Project • CML portfolio delinquencies have remained low: ü <1% CML portfolio delinquent throughout COVID ü ~99.9% CML positions paid current through 6/30 • Proactive asset management efforts: ü Negotiate consensual short-term fo
Slide 32: CML Performance in Stress
1 CML Performance in Stress Athene’s Conservative Weighted Average CML LTV of ~55% could Withstand Worse than 2008 / 2009 2 Commercial Property Price Index of CRE Sector ü Predominately senior positions in the capital stack Exceeded pre-crisis – ~81% of the CML portfolio consists of senior positions
Slide 33: Collateralized Loan Obligation (CLO) Portfolio Overview
Collateralized Loan Obligation (CLO) Portfolio Overview 2 $17 Billion of Net Invested Assets, 11% of Athene’s Asset Portfolio • Athene’s CLO portfolio is 98% investment grade and 99% of the underlying loans are senior secured first lien • Given superior credit underwriting and risk selection, the we
Slide 34: Why are CLOs Attractive?
2 Why are CLOs Attractive? • CLOs allow investors to access a diversified portfolio of senior secured loans with significant credit enhancement and additional structural protections relative to corporate bonds ‒ The underlying loans are typically first lien, senior secured, and rated BB or B ‒ Becau
Slide 35: Athene's CLO Portfolio Has Significant Credit Enhancement
2 Athene’s CLO Portfolio Has Significant Credit Enhancement to Withstand Default Rates Far in Excess of Historical Events • Athene regularly stresses its asset portfolio and would expect no principal impairments on its CLO debt portfolio in a “Recession” 1 scenario which utilizes more punitive stres
Slide 36: CLOs Year over Year: What We Said and What Happened
2 CLOs Year over Year: “What We Said” and “What Happened” 1 • In August 2020, we published a deep dive on our CLO portfolio and its performance in stress (see here) • During the market volatility in Q2 2020, CLO markets spreads rose materially. However, Athene’s long-term, persistent liabilities sup
Slide 37: CLO Portfolio: Well Diversified Underlying Assets
2 CLO Portfolio: Well Diversified Underlying Assets Top Industry Exposures Underlying Athene’s CLO Portfolio 2Q 2020 2Q 2021 2Q 2021 No. Name Portfolio Portfolio Cumulative Healthcare & Pharmaceuticals 1 13% 12% 12% ü Resilient top High Tech 2 10% 10% 23% exposures, with Services: Business 3 8% 7% 3
Slide 38: Residential Mortgage Loans and RMBS Portfolio Overview
3 Residential Mortgage Loans (RML) and Residential Mortgage-Backed Securities (RMBS) Portfolio Overview $13 Billion of Net Invested Assets, 8% of Athene’s Asset Portfolio Key Portfolio Facts Portfolio By Type RML 93% 93% 42% 15-25% 51% of RMBS of RMLs RMBS RMBS Purchase Average LTV designated “in go
Slide 39: Residential Mortgage: Performance in Stress
3 Residential Mortgage: Performance in Stress 1 Illustrative Loss Scenarios (bps) Home Prices vs. Today (5%) (10%) (15%) (20%) (25%) 7.7% 0.31% 0.41% 0.56% 0.81% 1.24% Unemployment 9.7% 0.37% 0.48% 0.65% 0.92% 1.36% Rate 11.7% 0.42% 0.55% 0.72% 1.01% 1.46% 1 Illustrative Loss Scenarios ($mm) Home Pr
Slide 40: ABS Portfolio Overview
4 ABS Portfolio Overview $14.5 billion of Net Invested Assets, 9% of Athene’s Asset Portfolio • Incudes many directly-originated and high-grade alpha assets that typically exhibit differentiated risk-return characteristics • Diversified by industry, sponsor, and transaction • Target overcollateraliz
Slide 41: ABS Case Study: P.K. AirFinance
4 ABS Case Study: P.K. AirFinance • In December 2019, Athene acquired the PK AirFinance $3.2bn portfolio of aircraft loans from General Electric (“GE”) – Transaction also provided Athene a forward flow of attractive assets with superior spread (+100bps) and loss track record (10bps avg. annual losse
Slide 42: ABS Case Study Continued: PK Air vs. Aircraft Leasing
4 ABS Case Study Continued: PK Air vs. Aircraft Leasing • PK AirFinance is a lender to airlines and lessors who utilize this financing to buy aircraft outright • Traditional aircraft ABS are utilized by lessors who are in the business of directly acquiring physical aircraft, leasing those aircraft o
Slide 43: Alternative Investment Strategy is Differentiated
5 Alternative Investment Strategy is Differentiated $7.8 Billion of Net Invested Assets, 5% of Athene’s Asset Portfolio • Focused on alternatives that offer downside protection and avoid binary outcomes – Provide strong current income over time, with the potential to create significant value upon ex
Slide 44: Athene's Alternatives Have Demonstrated Downside Protection
5 Athene’s Alternatives Have Demonstrated Downside Protection and Experienced Less Volatility Annualized Returns Since Athene’s IPO 80% Avg. Annual Returns Std Dev Sharpe Ratio Athene Alts 11% 9.1% 1.1 52% S&P 500 16% 34.5% 0.4 47% 39% 34% 34% 33% 29% 24% 23% 22% 19% 20% 17% 16% 15% 14% 14% 13% 13%
Slide 45: Athene is Well Positioned To Go On The Offense in the Next Dislocation
Athene is Well Positioned To Go On The Offense in the Next Dislocation • Athene is extremely well capitalized with $4.0bn of excess equity capital and ample access to liquidity • Capture asset outperformance through illiquidity premia appropriate for long-dated, predictable liabilities o Does not se
Slide 46: Appendix: Additional Disclosure & Non-GAAP Reconciliations
Appendix: Additional Disclosure & Non-GAAP Reconciliations 46Appendix: Additional Disclosure & Non-GAAP Reconciliations 46
Slide 47: Net Invested Assets
Net Invested Assets From Q2 2021 Financial Supplement Unaudited (in millions, except percentages) (Management View) 1. Please refer to Notes to the Financial Supplement for discussion on net invested assets including net alternative investments and Non-GAAP Measure Reconciliations for the reconcilia
Slide 48: Credit Quality
Credit Quality From Q2 2021 Financial Supplement Unaudited (in millions, except percentages) 1. Securities denoted as non-rated by the NRSRO were classified as investment or non-investment grade according to the security’s respective NAIC designation. With respect to modeled LBaSS, the NAIC designat
Slide 49: Credit Quality
Credit Quality From Q2 2021 Financial Supplement Unaudited (in millions, except percentages) 1. Please refer to Notes to the Financial Supplement section for discussion on net invested assets and Non-GAAP Measure Reconciliations section for the reconciliation of total investments, including related
Slide 50: Structured Product Credit Quality
Structured Product Credit Quality From Q2 2021 Financial Supplement Unaudited (in millions, except percentages) 1. Please refer to Notes to the Financial Supplement section for discussion on net invested assets and Non-GAAP Measure Reconciliations section for the reconciliation of total investments,
Slide 51: Non-GAAP Measures and Definitions
Non-GAAP Measures and Definitions Key Operating and Non-GAAP Measures In addition to our results presented in accordance with GAAP, we present certain financial information that includes non-GAAP measures. Management believes the use of these non-GAAP measures, together with the relevant GAAP measur
Slide 52: Non-GAAP Measures and Definitions
Non-GAAP Measures and Definitions Adjusted Operating Income (Loss) Available to Common Shareholders Continued Adjusted Operating ROE Adjusted operating ROE is a non-GAAP measure used to evaluate our financial performance excluding the impacts of AOCI and the cumulative change in fair value of funds
Slide 53: Non-GAAP Measure Reconciliations
Non-GAAP Measure Reconciliations RECONCILIATION OF NET INCOME AVAILABLE TO AHL COMMON SHAREHOLDERS TO ADJUSTED OPERATING INCOME AVAILABLE TO COMMON SHAREHOLDERS Net income available to AHL common shareholders $ 1,446 Non-operating adjustments: Investment gains (losses), net of offsets 508 Change in
Slide 54: Non-GAAP Measure Reconciliations
Non-GAAP Measure Reconciliations RECONCILIATION OF DEBT TO CAPITAL RATIO TO ADJUSTED DEBT TO CAPITAL RATIO Total debt $ 2,468 Total AHL shareholders' equity 20,006 Total capitalization 22,474 Less: Accumulated other comprehensive income (loss) (AOCI) 3,337 Less: Accumulated change in fair value of r
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