May 4, 2018 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)



UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

OR

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


			001-37963
(Commission file number)

ATHENE HOLDING LTD.
(Exact name of registrant as specified in its charter)

	Bermuda				98-0630022
	(State or other jurisdiction of				(I.R.S. Employer
	incorporation or organization)				Identification Number)

96 Pitts Bay Road
Pembroke, HM08, Bermuda
(441) 279-8400
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer x			Accelerated filer ¨
	Non-accelerated filer ¨ (Do not check if a smaller reporting company)			Smaller reporting company ¨
				Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

		The number of shares of each class of our common stock outstanding is set forth in the table below, as of April 16, 2018:

		Class A common shares	164,709,405	Class M-2 common shares	851,103
		Class B common shares	25,483,250	Class M-3 common shares	1,006,110
		Class M-1 common shares	3,388,890	Class M-4 common shares	4,376,946

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION



Item 1.	Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	51
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	87
Item 4.	Controls and Procedures	87

PART II—OTHER INFORMATION



Item 1.	Legal Proceedings	88
Item 1A.	Risk Factors	88
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	94
Item 3.	Defaults Upon Senior Securities	94
Item 4.	Mine Safety Disclosures	94
Item 5.	Other Information	94
Exhibit Index		95
Signatures		95

Table of Contents

As used in this Form 10-Q, unless the context otherwise indicates, any reference to “Athene,” “our Company,” “the Company,” “us,” “we” and “our” refer to Athene Holding Ltd. together with its consolidated subsidiaries and any reference to “AHL” refers to Athene Holding Ltd. only.

Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q (report), other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results and the assumptions upon which those statements are based, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act).

You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “seek,” “assume,” “believe,” “may,” “will,” “should,” “could,” “would,” “likely” and other words and terms of similar meaning, including the negative of these or similar words and terms, in connection with any discussion of the timing or nature of future operating or financial performance or other events. However, not all forward-looking statements contain these identifying words. Forward-looking statements appear in a number of places throughout and give our current expectations and projections relating to our financial condition, results of operations, plans, strategies, objectives, future performance, business and other matters.

We caution you that forward-looking statements are not guarantees of future performance and that our actual consolidated results of operations, financial condition and liquidity may differ materially from those made in or suggested by the forward-looking statements contained in this report. There can be no assurance that actual developments will be those anticipated by us. In addition, even if our consolidated results of operations, financial condition and liquidity are consistent with the forward-looking statements contained in this report, those results or developments may not be indicative of results or developments in subsequent periods. A number of important factors could cause actual results or conditions to differ materially from those contained or implied by the forward-looking statements, including the risks discussed in Part II–Item 1A. Risk Factors included in this report and Part I–Item 1A. Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, 2017 (2017 Annual Report). Factors that could cause actual results or conditions to differ from those reflected in the forward-looking statements contained in this report include:


•	the accuracy of management’s assumptions and estimates;


•	variability in the amount of statutory capital that our insurance and reinsurance subsidiaries have or are required to hold;


•	interest rate fluctuations;


•	our potential need for additional capital in the future and the potential unavailability of such capital to us on favorable terms or at all;


•	changes in relationships with important parties in our product distribution network;


•	the activities of our competitors and our ability to grow our retail business in a highly competitive environment;


•	the impact of general economic conditions on our ability to sell our products and the fair value of our investments;


•	our ability to successfully acquire new companies or businesses and/or integrate such acquisitions into our existing framework;


•	downgrades, potential downgrades or other negative actions by rating agencies;


•	our dependence on key executives and inability to attract qualified personnel, or the potential loss of Bermudian personnel as a result of Bermuda employment restrictions;


•	market and credit risks that could diminish the value of our investments;


•	foreign currency fluctuations;


•	the impact of changes to the creditworthiness of our reinsurance and derivative counterparties;


•	changes in consumer perception regarding the desirability of annuities as retirement savings products;


•	potential litigation (including class action litigation), enforcement investigations or regulatory scrutiny against us and our subsidiaries, which we may be required to defend against or respond to;


•	the impact of new accounting rules or changes to existing accounting rules on our business;


•	interruption or other operational failures in telecommunication and information technology and other operating systems, as well as our ability to maintain the security of those systems;


•	the termination by Athene Asset Management LLC (AAM) of its investment management agreements with us and limitations on our ability to terminate such arrangements;


•	AAM’s dependence on key executives and inability to attract qualified personnel;


•	increased regulation or scrutiny of alternative investment advisers and certain trading methods;


•	potential changes to regulations affecting, among other things, transactions with our affiliates, the ability of our subsidiaries to make dividend payments or distributions to us, acquisitions by or of us, minimum capitalization and statutory reserve requirements for insurance companies and fiduciary obligations on parties who distribute our products;


•	suspension or revocation of our subsidiaries’ insurance and reinsurance licenses;


•	increases in our tax liability resulting from the Base Erosion and Anti-Abuse Tax (BEAT) or unnecessary, inefficient, ineffective or counterproductive efforts undertaken to mitigate the cost of the BEAT;


•	improper interpretation or application of Public Law no. 115-97, the Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018 (Tax Act) or subsequent changes to, clarifications of or guidance under the Tax Act that is counter to our interpretation and has retroactive effect;


•	Athene Holding Ltd. (AHL) or its non-U.S. subsidiaries becoming subject to U.S. federal income taxation;


•	adverse changes in U.S. tax law;

Table of Contents


•	our being subject to U.S. withholding tax under the Foreign Account Tax Compliance Act (FATCA);


•	our potential inability to pay dividends or distributions; and


•	other risks and factors listed under Part II—Item 1A. Risk Factors included in this report, Part I—Item 1A. Risk Factors included

in our 2017 Annual Report and elsewhere in this report and in our 2017 Annual Report.

We caution you that the important factors referenced above may not be exhaustive. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect or anticipate. In light of these risks, you should not place undue reliance upon any forward-looking statements contained in this report. The forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation, except as may be required by law, to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise. Comparisons of results for current and any prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data.

GLOSSARY OF SELECTED TERMS

Unless otherwise indicated in this report, the following terms have the meanings set forth below:

Entities



Term or Acronym		Definition
A-A Mortgage		A-A Mortgage Opportunities, LP
AAA		AP Alternative Assets, L.P.
AAA Investor		AAA Guarantor – Athene, L.P.
AADE		Athene Annuity & Life Assurance Company
AAIA		Athene Annuity and Life Company
AAM		Athene Asset Management LLC
AGER		AGER Bermuda Holding Ltd., now known as Athora Holding Ltd. and formerly a consolidated subsidiary
AHL		Athene Holding Ltd.
ALIC		Athene Life Insurance Company
ALR		ALR Aircraft Investment Ireland Limited
ALRe		Athene Life Re Ltd.
AmeriHome		AmeriHome Mortgage Company, LLC
Apollo		Apollo Global Management, LLC
Apollo Group		(1) Apollo, (2) the AAA Investor, (3) any investment fund or other collective investment vehicle whose general partner or managing member is owned, directly or indirectly, by Apollo or one or more of Apollo’s subsidiaries, (4) BRH Holdings GP, Ltd. and its shareholders and (5) any affiliate of any of the foregoing (except that AHL and its subsidiaries and employees of AHL, its subsidiaries or AAM are not members of the Apollo Group)
Athene USA		Athene USA Corporation
Athora		Athora Holding Ltd., formerly known as AGER Bermuda Holding Ltd. and formerly a consolidated subsidiary
CoInvest Other		AAA Investments (Other), L.P.
CoInvest VI		AAA Investments (Co-Invest VI), L.P.
CoInvest VII		AAA Investments (Co-Invest VII), L.P.
DOL		United States Department of Labor
MidCap		MidCap FinCo Limited
NAIC		National Association of Insurance Commissioners
NCL LLC		NCL Athene, LLC
NYSDFS		New York State Department of Financial Services
Sprint		Apollo Asia Sprint Co-Investment Fund, L.P.
Voya		Voya Financial, Inc.
VIAC		Voya Insurance and Annuity Company
Venerable		Venerable Holdings, Inc.

Table of Contents

Certain Terms & Acronyms



Term or Acronym		Definition
ABS		Asset-backed securities
ACL		Authorized control level RBC as defined by the model created by the National Association of Insurance Commissioners
ALM		Asset liability management
ALRe RBC		The risk-based capital ratio of ALRe, when applying the NAIC risk-based capital factors
AUM		Assets under management
Alternative investments		Alternative investments, including investment funds, CLO equity positions and certain other debt instruments considered to be equity-like
Base of earnings		Earnings generated from our results of operations and the underlying profitability drivers of our business
BEAT		Base Erosion and Anti-Abuse Tax
Bermuda capital		The capital of ALRe calculated under U.S. statutory accounting principles, including that for policyholder reserve liabilities which are subjected to U.S. cash flow testing requirements, but excluding certain items that do not exist under our applicable Bermuda requirements, such as interest maintenance reserves
Block reinsurance		A transaction in which the ceding company cedes all or a portion of a block of previously issued annuity contracts through a reinsurance agreement
BMA		Bermuda Monetary Authority
BSCR		Bermuda Solvency Capital Requirement
CAL		Company action level RBC as defined by the model created by the National Association of Insurance Commissioners
Capital ratio		Ratios calculated (1) with respect to our U.S. insurance subsidiaries, by reference to RBC, (2) with respect to ALRe, by reference to BSCR, and (3) with respect to our former German Group Companies, by reference to SCR
CLO		Collateralized loan obligation
CMBS		Commercial mortgage-backed securities
Cost of crediting		The interest credited to the policyholders on our fixed annuities, including, with respect to our fixed indexed annuities, option costs, presented on an annualized basis for interim periods
DAC		Deferred acquisition costs
Deferred annuities		Fixed indexed annuities, annual reset annuities and multi-year guaranteed annuities
DSI		Deferred sales inducement
Excess capital		Capital in excess of the level management believes is needed to support our current operating strategy
FIA		Fixed indexed annuity, which is an insurance contract that earns interest at a crediting rate based on a specified index on a tax-deferred basis
Fixed annuities		FIAs together with fixed rate annuities
Fixed rate annuity		An insurance contract that offers tax-deferred growth and the opportunity to produce a guaranteed stream of retirement income for the lifetime of its policyholder
Flow reinsurance		A transaction in which the ceding company cedes a portion of newly issued policies to the reinsurer
GAAP		Accounting principles generally accepted in the United States of America
GLWB		Guaranteed lifetime withdrawal benefit
GMDB		Guaranteed minimum death benefit
IMA		Investment management agreement
IMO		Independent marketing organization
Invested assets		The sum of (a) total investments on the consolidated balance sheet with AFS securities at amortized cost, excluding derivatives, (b) cash and cash equivalents and restricted cash, (c) investments in related parties, (d) accrued investment income, (e) consolidated variable interest entities’ assets, liabilities and noncontrolling interest and (f) policy loans ceded (which offset the direct policy loans in total investments). Invested assets includes investments supporting assumed funds withheld and modco agreements and excludes assets associated with funds withheld liabilities related to business exited through reinsurance agreements and derivative collateral (offsetting the related cash positions)
Investment margin		Investment margin applies to deferred annuities and is the excess of our net investment earned rate over the cost of crediting to our policyholders, presented on an annualized basis for interim periods
Liability outflows		The aggregate of withdrawals on our deferred annuities, maturities of our funding agreements, payments on payout annuities and pension risk benefit payments
LIMRA		Life Insurance and Market Research Association

Table of Contents



Term or Acronym		Definition
MCR		Minimum capital requirements
MMS		Minimum margin of solvency
Modco		Modified coinsurance
MVA		Market value adjustment
MYGA		Multi-year guaranteed annuity
Net investment earned rate		Income from our invested assets divided by the average invested assets for the relevant period, presented on an annualized basis for interim periods
Other liability costs		Other liability costs include DAC, DSI and VOBA amortization and change in GLWB and GMDB reserves for all products, the cost of liabilities on products other than deferred annuities including offsets for premiums, product charges and other revenues
OTTI		Other-than-temporary impairment
Overall tax rate		Tax rate including corporate income taxes, the BEAT and excise taxes
Payout annuities		Annuities with a current cash payment component, which consist primarily of SPIAs, supplemental contracts and structured settlements
Policy loan		A loan to a policyholder under the terms of, and which is secured by, a policyholder’s policy
PRT		Pension risk transfer
RBC		Risk-based capital
Reserve liabilities		The sum of (a) interest sensitive contract liabilities, (b) future policy benefits, (c) dividends payable to policyholders, and (d) other policy claims and benefits, offset by reinsurance recoverable, excluding policy loans ceded. Reserve liabilities also includes the reserves related to assumed modco agreements in order to appropriately match the costs incurred in the consolidated statements of income with the liabilities. Reserve liabilities is net of the ceded liabilities to third-party reinsurers as the costs of the liabilities are passed to such reinsurers and therefore we have no net economic exposure to such liabilities, assuming our reinsurance counterparties perform under our agreements
Rider reserves		Guaranteed lifetime withdrawal benefits and guaranteed minimum death benefits reserves
RMBS		Residential mortgage-backed securities
RML		Residential mortgage loan
Sales		All money paid into an individual annuity, including money paid into new contracts with initial purchase occurring in the specified period and existing contracts with initial purchase occurring prior to the specified period (excluding internal transfers)
SPIA		Single premium immediate annuity
Surplus assets		Assets in excess of policyholder obligations, determined in accordance with the applicable domiciliary jurisdiction’s statutory accounting principles
TAC		Total adjusted capital as defined by the model created by the NAIC
U.S. RBC Ratio		The CAL RBC ratio for AADE, our parent U.S. insurance company
VIE		Variable interest entity
VOBA		Value of business acquired

Table of Contents

Item 1. Financial Statements

Index to Condensed Consolidated Financial Statements (unaudited)




Condensed Consolidated Balance Sheets (unaudited)		8

Condensed Consolidated Statements of Income (unaudited)		10

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)		11

Condensed Consolidated Statements of Equity (unaudited)		12

Condensed Consolidated Statements of Cash Flows (unaudited)		13

Notes to Condensed Consolidated Financial Statements (unaudited)		15

	Note 1. Business, Basis of Presentation and Significant Accounting Policies	15

	Note 2. Investments	17

	Note 3. Derivative Instruments	23

	Note 4. Variable Interest Entities	26

	Note 5. Fair Value	31

	Note 6. Deferred Acquisition Costs, Deferred Sales Inducements and Value of Business Acquired	42

	Note 7. Debt	42

	Note 8. Earnings Per Share	43

	Note 9. Accumulated Other Comprehensive Income	44

	Note 10. Income Taxes	44

	Note 11. Related Parties	45

	Note 12. Commitments and Contingencies	47

	Note 13. Segment Information	49

Table of Contents

ATHENE HOLDING LTD.

Condensed Consolidated Balance Sheets (Unaudited)



(In millions)	March 31, 2018		December 31, 2017
Assets
Investments
Fixed maturity securities, at fair value
Available-for-sale securities (amortized cost: 2018 – $57,371 and 2017 – $58,506)	$	58,575	$	61,012
Trading securities	2,088		2,196
Equity securities, at fair value	160		790
Mortgage loans, net of allowances (portion at fair value: 2018 – $41 and 2017 – $41)	6,139		6,233
Investment funds (portion at fair value: 2018 – $131 and 2017 – $145)	647		699
Policy loans	510		530
Funds withheld at interest (portion at fair value: 2018 – $207 and 2017 – $312)	7,093		7,085
Derivative assets	2,031		2,551
Real estate (portion held for sale: 2018 – $0 and 2017 – $32)	—		624
Short-term investments, at fair value (cost: 2018 – $235 and 2017 – $201)	235		201
Other investments (portion at fair value: 2018 – $39 and 2017 – $0)	113		133
Total investments	77,591		82,054
Cash and cash equivalents	2,735		4,888
Restricted cash	87		105
Investments in related parties
Fixed maturity securities, at fair value
Available-for-sale securities (amortized cost: 2018 – $501 and 2017 – $399)	505		406
Trading securities	305		307
Investment funds (portion at fair value: 2018 – $153 and 2017 – $30)	1,499		1,310
Short-term investments, at fair value (cost: 2018 – $123 and 2017 – $52)	123		52
Other investments	238		238
Accrued investment income (related party: 2018 – $12 and 2017 – $10)	620		652
Reinsurance recoverable (portion at fair value: 2018 – $1,713 and 2017 – $1,824)	4,834		4,972
Deferred acquisition costs, deferred sales inducements and value of business acquired	3,142		2,930
Other assets	1,067		969
Assets of consolidated variable interest entities
Investments
Fixed maturity securities, trading, at fair value – related party	47		48
Equity securities, at fair value – related party	177		240
Investment funds – related party (portion at fair value: 2018 – $554 and 2017 – $549)	582		571
Cash and cash equivalents	3		4
Other assets	2		1
Total assets	$	93,557	$	99,747

(Continued)

See accompanying notes to the unaudited condensed consolidated financial statements

Table of Contents

ATHENE HOLDING LTD.

Condensed Consolidated Balance Sheets (Unaudited)



(In millions, except share and per share data)	March 31, 2018		December 31, 2017
Liabilities and Equity
Liabilities
Interest sensitive contract liabilities (portion at fair value: 2018 – $8,188 and 2017 – $8,929)	$	67,551	$	67,708
Future policy benefits (portion at fair value: 2018 – $2,305 and 2017 – $2,428)	13,059		17,507
Other policy claims and benefits	137		211
Dividends payable to policyholders	119		1,025
Long-term debt	992		—
Derivative liabilities	186		134
Payables for collateral on derivatives	1,145		2,323
Funds withheld liability (portion at fair value: 2018 – $11 and 2017 – $22)	395		407
Other liabilities (related party: 2018 – $89 and 2017 – $64)	1,277		1,222
Liabilities of consolidated variable interest entities	1		2
Total liabilities	84,862		90,539
Commitments and Contingencies (Note 12)
Equity
Common stock
Class A – par value $0.001 per share; authorized: 2018 and 2017 – 425,000,000 shares; issued and outstanding: 2018 – 164,722,131 and 2017 – 142,386,704 shares	—		—
Class B – par value $0.001 per share; convertible to Class A; authorized: 2018 and 2017 – 325,000,000 shares; issued and outstanding: 2018 – 25,483,250 and 2017 – 47,422,399 shares	—		—
Class M-1 – par value $0.001 per share; contingently convertible to Class A; authorized: 2018 and 2017 – 7,109,560 shares; issued and outstanding: 2018 – 3,388,890 and 2017 – 3,388,890 shares	—		—
Class M-2 – par value $0.001 per share; contingently convertible to Class A; authorized: 2018 and 2017 – 5,000,000 shares; issued and outstanding: 2018 – 851,103 and 2017 – 851,103 shares	—		—
Class M-3 – par value $0.001 per share; contingently convertible to Class A; authorized: 2018 and 2017 – 7,500,000 shares; issued and outstanding: 2018 – 1,006,110 and 2017 – 1,092,000 shares	—		—
Class M-4 – par value $0.001 per share; contingently convertible to Class A; authorized: 2018 and 2017 – 7,500,000 shares; issued and outstanding: 2018 – 4,398,646 and 2017 – 4,711,743 shares	—		—
Additional paid-in capital	3,485		3,472
Retained earnings	4,625		4,321
Accumulated other comprehensive income (related party: 2018 – $4 and 2017 – $48)	585		1,415
Total shareholders' equity	8,695		9,208
Total liabilities and equity	$	93,557	$	99,747

(Concluded)

See accompanying notes to the unaudited condensed consolidated financial statements

Table of Contents

ATHENE HOLDING LTD.

Condensed Consolidated Statements of Income (Unaudited)



	Three months ended March 31,
(In millions, except per share data)	2018			2017
Revenues
Premiums	$	278		$	52
Product charges	96			81
Net investment income (related party investment income: 2018 – $76 and 2017 – $56; and related party investment expense: 2018 – $83 and 2017 – $78)	855			786
Investment related gains (losses) (related party: 2018 – $17 and 2017 – $(11))	(236		)	682
Other-than-temporary impairment investment losses
Other-than-temporary impairment losses	(3		)	—
Other-than-temporary impairment losses reclassified to (from) other comprehensive income	—			(1		)
Net other-than-temporary impairment losses	(3		)	(1		)
Other revenues	6			8
Revenues of consolidated variable interest entities
Net investment income (related party: 2018 – $10 and 2017 – $10)	10			10
Investment related gains (losses) (related party: 2018 – $5 and 2017 – $1)	5			1
Total revenues	1,011			1,619
Benefits and expenses
Interest sensitive contract benefits	19			692
Amortization of deferred sales inducements	20			18
Future policy and other policy benefits	401			214
Amortization of deferred acquisition costs and value of business acquired	89			104
Dividends to policyholders	13			32
Policy and other operating expenses (related party: 2018 – $2 and 2017 – $4)	142			153
Total benefits and expenses	684			1,213
Income before income taxes	327			406
Income tax expense	59			22
Net income	$	268		$	384

Earnings per share
Basic – Classes A, B, M-1, M-2, M-3 and M-4¹	$	1.36		$	2.00
Diluted – Class A	1.36			1.92
Diluted – Class B	1.36			2.00
Diluted – Class M-1	1.36			2.00
Diluted – Class M-2	1.34			0.08
Diluted – Class M-3¹	1.33			N/A
Diluted – Class M-4¹	0.94			N/A

N/A – Not applicable
¹Basic and diluted earnings per share for class M-3 and M-4 were not applicable for the period ended March 31, 2017. See Note 8 – Earnings Per Share for further discussion.

See accompanying notes to the unaudited condensed consolidated financial statements

Table of Contents

ATHENE HOLDING LTD.

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)



	Three months ended March 31,
(In millions)	2018			2017
Net income	$	268		$	384
Other comprehensive income (loss), before tax
Unrealized investment gains (losses) on available-for-sale securities	(910		)	419
Noncredit component of other-than-temporary impairment losses on available-for-sale securities	—			1
Unrealized gains (losses) on hedging instruments	(56		)	(5		)
Pension adjustments	3			—
Foreign currency translation adjustments	(8		)	2
Other comprehensive income (loss), before tax	(971		)	417
Income tax expense (benefit) related to other comprehensive income	(183		)	111
Other comprehensive income (loss)	(788		)	306
Comprehensive income (loss)	$	(520	)	$	690

See accompanying notes to the unaudited condensed consolidated financial statements

Table of Contents

ATHENE HOLDING LTD.

Condensed Consolidated Statements of Equity (Unaudited)



(In millions)	Common stock		Additional paid-in capital		Retained earnings			Accumulated other comprehensive income			Total Athene Holding Ltd. shareholders' equity			Noncontrolling interest			Total equity
Balance at December 31, 2016	$	—	$	3,421	$	3,070		$	367		$	6,858		$	1		$	6,859
Net income	—		—		384			—			384			—			384
Other comprehensive income	—		—		—			306			306			—			306
Stock-based compensation	—		15		—			—			15			—			15
Retirement or repurchase of shares	—		—		(2		)	—			(2		)	—			(2		)
Other changes in equity of noncontrolling interests	—		—		—			—			—			(1		)	(1		)
Balance at March 31, 2017	$	—	$	3,436	$	3,452		$	673		$	7,561		$	—		$	7,561

Balance at December 31, 2017	$	—	$	3,472	$	4,321		$	1,415		$	9,208		$	—		$	9,208
Adoption of accounting standards¹	—		—		39			(42		)	(3		)	—			(3		)
Net income	—		—		268			—			268			—			268
Other comprehensive loss	—		—		—			(788		)	(788		)	—			(788		)
Issuance of shares, net of expenses	—		1		—			—			1			—			1
Stock-based compensation	—		12		—			—			12			—			12
Retirement or repurchase of shares	—		—		(3		)	—			(3		)	—			(3		)
Balance at March 31, 2018	$	—	$	3,485	$	4,625		$	585		$	8,695		$	—		$	8,695

¹See discussion of adoptions in Note 1 – Business, Basis of Presentation and Significant Accounting Policies.

See accompanying notes to the unaudited condensed consolidated financial statements

Table of Contents

ATHENE HOLDING LTD.

Condensed Consolidated Statements of Cash Flows (Unaudited)



	Three months ended March 31,
(In millions)	2018			2017
Cash flows from operating activities
Net income	$	268		$	384
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred acquisition costs and value of business acquired	89			104
Amortization of deferred sales inducements	20			18
Accretion of net investment premiums, discounts, and other	(45		)	(54		)
Stock-based compensation	7			13
Net investment income (related party: 2018 – $(43) and 2017 – $(27))	(29		)	(30		)
Net recognized (gains) losses on investments and derivatives (related party: 2018 – $(24) and 2017 – $10)	209			(547		)
Policy acquisition costs deferred	(122		)	(105		)
Changes in operating assets and liabilities:
Accrued investment income	(27		)	(21		)
Interest sensitive contract liabilities	(201		)	655
Future policy benefits, other policy claims and benefits, dividends payable to policyholders and reinsurance recoverable	333			(18		)
Funds withheld assets and liabilities	(7		)	(91		)
Other assets and liabilities	84			121
Consolidated variable interest entities related:
Net recognized (gains) losses on investments and derivatives (related party: 2018 – $(6) and 2017 – $(1))	(6		)	(1		)
Other operating activities, net	—			1
Net cash provided by operating activities	573			429
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities
Available-for-sale securities (related party: 2018 – $57 and 2017 – $7)	3,017			2,688
Trading securities (related party: 2018 – $1 and 2017 – $14)	31			42
Equity securities (related party: 2018 – $0 and 2017 – $22)	2			170
Mortgage loans	396			281
Investment funds (related party: 2018 – $52 and 2017 – $23)	83			52
Derivative instruments and other invested assets	551			360
Short-term investments	103			95
Purchases of:
Fixed maturity securities
Available-for-sale securities (related party: 2018 – $(158) and 2017 – $(25))	(5,914		)	(4,274		)
Trading securities	(25		)	(17		)
Equity securities	(9		)	(211		)
Mortgage loans	(463		)	(265		)
Investment funds (related party: 2018 – $(182) and 2017 – $(71))	(213		)	(94		)
Derivative instruments and other invested assets	(224		)	(189		)
Real estate	—			(7		)
Short-term investments (related party: 2018 – $(72) and 2017 – $(20))	(209		)	(93		)
Consolidated variable interest entities related:
Sales, maturities, and repayments of investments (related party: 2018 – $59 and 2017 – $0)	59			—
Purchases of investments (related party: 2018 – $0 and 2017 – $(21))	—			(21		)
Deconsolidation of AGER Bermuda Holding Ltd. and its subsidiaries	(296		)	—
Cash settlement of derivatives	(2		)	(8		)
Other investing activities, net	229			363
Net cash used in investing activities	(2,884		)	(1,128		)
				(Continued)
See accompanying notes to the unaudited condensed consolidated financial statements

Table of Contents

ATHENE HOLDING LTD.

Condensed Consolidated Statements of Cash Flows (Unaudited)



	Three months ended March 31,
(In millions)	2018			2017
Cash flows from financing activities
Capital contributions	$	1		$	—
Proceeds from long-term debt	998			—
Deposits on investment-type policies and contracts	1,774			1,925
Withdrawals on investment-type policies and contracts	(1,474		)	(1,399		)
Payments for coinsurance agreements on investment-type contracts, net	(10		)	(10		)
Net change in cash collateral posted for derivative transactions	(1,178		)	298
Repurchase of common stock	(3		)	(2		)
Other financing activities, net	31			5
Net cash provided by financing activities	139			817
Effect of exchange rate changes on cash and cash equivalents	—			4
Net (decrease) increase in cash and cash equivalents	(2,172		)	122
Cash and cash equivalents at beginning of year¹	4,997			2,516
Cash and cash equivalents at end of period¹	$	2,825		$	2,638

Supplementary information
Non-cash transactions
Deposits on investment-type policies and contracts through reinsurance agreements	$	108		$	169
Withdrawals on investment-type policies and contracts through reinsurance agreements	91			182
Investments received from settlements on reinsurance agreements	—			24
Investment in Athora Holding Ltd. received upon deconsolidation	108			—

¹ Includes cash and cash equivalents, restricted cash, and cash and cash equivalents of consolidated variable interest entities.

(Concluded)

See accompanying notes to the unaudited condensed consolidated financial statements

Table of Contents

ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Business, Basis of Presentation and Significant Accounting Policies

Athene Holding Ltd. (AHL), a Bermuda exempted company, together with its subsidiaries (collectively, Athene, we, our, us, or the Company), is a leading retirement services company that issues, reinsures and acquires retirement savings products in all U.S. states and the District of Columbia.

We conduct business primarily through the following consolidated subsidiaries:


•	Our non-U.S. reinsurance subsidiaries, to which AHL’s other insurance subsidiaries and third party ceding companies directly and indirectly reinsure a portion of their liabilities, including Athene Life Re Ltd. (ALRe), a Bermuda exempted company; and


•	Athene USA Corporation, an Iowa corporation and its subsidiaries (Athene USA).

In addition, we consolidate certain variable interest entities (VIEs), for which we determined we are the primary beneficiary, as discussed in Note 4 – Variable Interest Entities.

Basis of Presentation—We have prepared the accompanying condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and the United States Securities and Exchange Commission’s rules and regulations for Form 10-Q and Article 10 of Regulation S-X. The accompanying condensed consolidated financial statements are unaudited and reflect all adjustments, consisting only of normal recurring items, considered necessary for fair statement of the periods presented. All significant intercompany accounts and transactions have been eliminated. Interim operating results are not necessarily indicative of the results expected for the entire year.

The condensed consolidated balance sheet as of December 31, 2017 has been derived from the audited financial statements, but does not include all of the information and footnotes required by GAAP for complete financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included our Annual Report on Form 10-K for the year ended December 31, 2017. The preparation of financial statements requires the use of management estimates. Actual results may differ from estimates used in preparing the condensed consolidated financial statements.

Deconsolidation – AGER Bermuda Holding Ltd. and its subsidiaries, now known as Athora Holding Ltd. (Athora), was our consolidated subsidiary for the year ended December 31, 2017. In April 2017, in connection with a private offering, Athora entered into subscription agreements with AHL, certain affiliates of Apollo Global Management, LLC (AGM and, together with its subsidiaries, Apollo) and a number of other third-party investors pursuant to which Athora secured commitments from such parties to purchase new common shares in Athora (Athora Offering). In November 2017, the Athora board of directors approved resolutions authorizing the closing of the Athora Offering (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 Athora was exchanged for common shares of Athora. As a result, on January 1, 2018, we held 10% of the aggregate voting power of and less than 50% of the economic interest in Athora and, as such, it is thereafter held as a related party investment rather than a consolidated subsidiary. We did not recognize a material amount in the condensed consolidated statements of income upon deconsolidation in 2018.

Adopted Accounting Pronouncements

Revenue Recognition (ASU 2017-13, ASU 2016-20, ASU 2016-12, ASU 2016-11, ASU 2016-10, ASU 2016-08, ASU 2015-14 and ASU 2014-09)

These updates are based on the core principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. These updates replace all general and most industry-specific revenue recognition guidance, excluding insurance contracts, leases, financial instruments and guarantees, which have been scoped out of these updates. Since the guidance does not apply to revenue on contracts accounted for under the financial instruments or insurance contracts standards, only a portion of our revenues are impacted by this guidance. We adopted these updates on a modified retrospective basis effective January 1, 2018. The adoptions did not have a material effect on our consolidated financial statements.

Derivatives and Hedging – Targeted Improvements (ASU 2017-12)

The amendments in this update contain improvements to the financial reporting of hedging relationships that more closely reflect the economic results of an entity’s risk management activities in its financial statements. Additionally, the amendments in this update make certain targeted improvements to simplify the application of hedge accounting. We early adopted this update effective January 1, 2018, and the adoption did not have a material effect on our consolidated financial statements.

Gains and Losses from the Derecognition of Nonfinancial Assets (ASU 2017-05)

The amendments in this update clarify the scope of asset derecognition guidance and accounting for partial sales of nonfinancial assets. We adopted this update on a modified retrospective basis effective January 1, 2018. The adoption did not have a material effect on our consolidated financial statements.

Table of Contents

ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Statement of Cash Flows – Restricted Cash (ASU 2016-18)

This update requires amounts generally described as restricted cash or restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on the consolidated statements of cash flows. We adopted this update effective January 1, 2018, and have changed the presentation on the consolidated statements of cash flows as required by this update.

Income Taxes – Intra-Entity Transfers (ASU 2016-16)

This update requires the immediate recognition of current and deferred income tax effects of intra-entity transfers of assets, other than inventory. Prior to adoption, recognition of the income tax consequence was not recognized until the asset was sold to an outside party. We adopted this update effective January 1, 2018. Upon adoption, we recognized a cumulative-effect decrease to beginning retained earnings of $3 million.

Statement of Cash Flows (ASU 2016-15)

This update provides specific guidance to clarify how entities should classify certain cash receipts and cash payments on the statement of cash flows. The update also clarifies the application of the predominance principle when cash receipts and cash payments have aspects of more than one class of cash flows. We adopted this update effective January 1, 2018, and the adoption did not have a material effect on our consolidated financial statements.

Financial Instruments – Recognition and Measurement (ASU 2016-01)

This update changes the accounting for certain equity investments, the presentation of changes in the fair value of liabilities measured under the fair value option due to instrument-specific credit risk, and certain disclosures. For liabilities measured under the fair value option, changes in fair value attributable to instrument-specific credit risk will no longer affect net income, but will be recognized separately in other comprehensive income (OCI). Additionally, this update requires equity investments to be measured at fair value with subsequent changes recognized in net income, except for those accounted for under the equity method or requiring consolidation. Prior to the effective date of this update, changes in fair value related to available-for-sale (AFS) equity securities were recognized in OCI. We adopted this update effective January 1, 2018. Upon adoption, we recognized a cumulative-effect increase to beginning retained earnings of $42 million and a corresponding decrease to accumulated other comprehensive income (AOCI). Additionally, we combined the presentation of AFS and trading equity securities on the consolidated balance sheets for all periods presented.

Recently Issued Accounting Pronouncements

Leases (ASU 2018-1, ASU 2017-13 and ASU 2016-02)

These updates are intended to increase transparency and comparability for lease transactions. A lessee is required to recognize an asset and a liability for all lease arrangements longer than 12 months. Lessor accounting is largely unchanged. We will be required to adopt these updates on a modified retrospective basis effective January 1, 2019. Early adoption is permitted. We have reviewed our existing lease contracts and our implementation efforts are primarily focused on assessing the financial impact of these updates on our consolidated financial statements.

Intangibles – Simplifying the Test for Goodwill Impairment (ASU 2017-04)

The amendments in this update simplify the subsequent measurement of goodwill by eliminating the comparison of the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill to determine the goodwill impairment loss. With the adoption of this guidance, a goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of the goodwill allocated to that reporting unit. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. We will be required to adopt this update prospectively effective January 1, 2020. Early adoption is permitted. We do not expect the adoption of this update will have a material effect on our consolidated financial statements.

Financial Instruments – Credit Losses (ASU 2016-13)

This update is designed to reduce complexity by limiting the number of credit impairment models used for different assets. The model will result in accelerated credit loss recognition on assets held at amortized cost, which includes our commercial and residential mortgage investments. The identification of credit-deteriorated securities will include all assets that have experienced a more-than-insignificant deterioration in credit since origination. Additionally, any changes in the expected cash flows of credit-deteriorated securities will be recognized immediately in the income statement. AFS fixed maturity securities are not in scope of the new credit loss model, but will undergo targeted improvements to the current reporting model including the establishment of a valuation allowance for credit losses versus the current direct write down approach. We will be required to adopt this update effective January 1, 2020. Early adoption is permitted effective January 1, 2019. We are currently evaluating the impact of this guidance on our consolidated financial statements.

Table of Contents

ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

2. Investments

Available-for-sale Securities—The following table represents the amortized cost, gross unrealized gains and losses, fair value and other-than-temporary impairments (OTTI) in AOCI of our AFS investments by asset type. Our AFS investment portfolio includes direct investments in affiliates of Apollo Global Management, LLC (AGM and, together with its subsidiaries, Apollo) where Apollo can exercise significant influence over the affiliates. These investments are presented as investments in related parties on the condensed consolidated balance sheets, and are separately disclosed below.



	March 31, 2018
(In millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		OTTI in AOCI
Available-for-sale securities
U.S. government and agencies	$	25	$	—	$	—		$	25	$	—
U.S. state, municipal and political subdivisions	995		140		(3		)	1,132		—
Foreign governments	137		2		(3		)	136		—
Corporate	35,489		875		(497		)	35,867		1
CLO	5,617		36		(11		)	5,642		—
ABS	4,595		44		(32		)	4,607		1
CMBS	1,981		32		(34		)	1,979		1
RMBS	8,532		666		(11		)	9,187		10
Total AFS securities	57,371		1,795		(591		)	58,575		13
Available-for-sale securities – related party
CLO	456		4		—			460		—
ABS	45		—		—			45		—
Total AFS securities – related party	501		4		—			505		—
Total AFS securities, including related party	$	57,872	$	1,799	$	(591	)	$	59,080	$	13



	December 31, 2017
(In millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		OTTI in AOCI
Fixed maturity securities
U.S. government and agencies	$	63	$	1	$	(2	)	$	62	$	—
U.S. state, municipal and political subdivisions	996		171		(2		)	1,165		—
Foreign governments	2,575		116		(8		)	2,683		—
Corporate	35,173		1,658		(171		)	36,660		—
CLO	5,039		53		(8		)	5,084		—
ABS	3,945		53		(27		)	3,971		1
CMBS	1,994		48		(21		)	2,021		1
RMBS	8,721		652		(7		)	9,366		11
Total fixed maturity securities	58,506		2,752		(246		)	61,012		13
Equity securities¹	271		7		(1		)	277		—
Total AFS securities	58,777		2,759		(247		)	61,289		13
Available-for-sale securities – related party
CLO	353		7		—			360		—
ABS	46		—		—			46		—
Total AFS securities – related party	399		7		—			406		—
Total AFS securities, including related party	$	59,176	$	2,766	$	(247	)	$	61,695	$	13

¹ Included in equity securities on the condensed consolidated balance sheets.

Table of Contents

ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The amortized cost and fair value of fixed maturity AFS securities, including related party, are shown by contractual maturity below:



	March 31, 2018
(In millions)	Amortized Cost		Fair Value
Due in one year or less	$	1,041	$	1,042
Due after one year through five years	8,291		8,337
Due after five years through ten years	10,732		10,721
Due after ten years	16,582		17,060
CLO, ABS, CMBS and RMBS	20,725		21,415
Total AFS fixed maturity securities	57,371		58,575
Fixed maturity securities – related party, CLO and ABS	501		505
Total AFS fixed maturity securities, including related party	$	57,872	$	59,080

Actual maturities can differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Unrealized Losses on AFS Securities—The following summarizes the fair value and gross unrealized losses for AFS securities, including related party, aggregated by class of security and length of time the fair value has remained below amortized cost:



	March 31, 2018
	Less than 12 months					12 months or more					Total
(In millions)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Available-for-sale securities
U.S. government and agencies	$	23	$	—		$	—	$	—		$	23	$	—
U.S. state, municipal and political subdivisions	70		(1		)	46		(2		)	116		(3		)
Foreign governments	55		(2		)	20		(1		)	75		(3		)
Corporate	13,298		(296		)	2,630		(201		)	15,928		(497		)
CLO	1,508		(6		)	291		(5		)	1,799		(11		)
ABS	1,166		(13		)	541		(19		)	1,707		(32		)
CMBS	825		(19		)	168		(15		)	993		(34		)
RMBS	561		(8		)	138		(3		)	699		(11		)
Total AFS securities	17,506		(345		)	3,834		(246		)	21,340		(591		)
Available-for-sale securities – related party
CLO	10		—			—		—			10		—
ABS	41		—			—		—			41		—
Total AFS securities – related party	51		—			—		—			51		—
Total AFS securities, including related party	$	17,557	$	(345	)	$	3,834	$	(246	)	$	21,391	$	(591	)

Table of Contents

ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)



	December 31, 2017
	Less than 12 months					12 months or more					Total
(In millions)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed maturity securities
U.S. government and agencies	$	34	$	(1	)	$	9	$	(1	)	$	43	$	(2	)
U.S. state, municipal and political subdivisions	50		(1		)	39		(1		)	89		(2		)
Foreign governments	435		(6		)	76		(2		)	511		(8		)
Corporate	3,992		(49		)	2,457		(122		)	6,449		(171		)
CLO	414		(2		)	340		(6		)	754		(8		)
ABS	515		(5		)	549		(22		)	1,064		(27		)
CMBS	460		(8		)	179		(13		)	639		(21		)
RMBS	506		(3		)	210		(4		)	716		(7		)
Total fixed maturity securities	6,406		(75		)	3,859		(171		)	10,265		(246		)
Equity securities¹	134		(1		)	—		—			134		(1		)
Total AFS securities	6,540		(76		)	3,859		(171		)	10,399		(247		)
Available-for-sale securities – related party
CLO	29		—			—		—			29		—
ABS	42		—			—		—			42		—
Total AFS securities – related party	71		—			—		—			71		—
Total AFS securities, including related party	$	6,611	$	(76	)	$	3,859	$	(171	)	$	10,470	$	(247	)

¹ Included in equity securities on the condensed consolidated balance sheets.

As of March 31, 2018, we held 2,662 AFS securities that were in an unrealized loss position. Of this total, 467 were in an unrealized loss position 12 months or more. As of March 31, 2018, we held three related party AFS securities that were in an unrealized loss position. Of this total, none were in an unrealized loss position 12 months or more. The unrealized losses on AFS securities can primarily be attributed to changes in market interest rates since acquisition. We did not recognize the unrealized losses in income as we intend to hold these securities and it is not more likely than not we will be required to sell a security before the recovery of its amortized cost.

Other-Than-Temporary Impairments—For the three months ended March 31, 2018, we incurred $3 million of net OTTI, of which $2 million related to intent-to-sell impairments. These securities were impaired to fair value as of the impairment date. The remaining net OTTI of $1 million related to credit impairments where a portion was bifurcated in AOCI. Any credit loss impairments not bifurcated in AOCI are excluded from the rollforward below.

The following table represents a rollforward of the cumulative amounts recognized on the condensed consolidated statements of income for OTTI related to pre-tax credit loss impairments on AFS fixed maturity securities, for which a portion of the securities’ total OTTI was recognized in AOCI:



	Three months ended March 31,
(In millions)	2018			2017
Beginning balance	7			$	16
Initial impairments – credit loss OTTI recognized on securities not previously impaired	1			—
Additional impairments – credit loss OTTI recognized on securities previously impaired	—			—
Reduction in impairments from securities sold, matured or repaid	(1		)	—
Reduction for credit loss that no longer has a portion of the OTTI loss recognized in AOCI	—			—
Ending balance	$	7		$	16

Table of Contents

ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Net Investment Income—Net investment income by asset class consists of the following:



	Three months ended March 31,
(In millions)	2018			2017
Fixed maturity securities
AFS securities	$	668		$	620
Trading securities	44			50
Equity securities	2			3
Mortgage loans	91			85
Investment funds	65			55
Funds withheld at interest	46			36
Other	23			17
Investment revenue	939			866
Investment expenses	(84		)	(80		)
Net investment income	$	855		$	786

Investment Related Gains (Losses)—Investment related gains (losses) by asset class consists of the following:



	Three months ended March 31,
(In millions)	2018			2017
AFS securities
Gross realized gains on investment activity	$	21		$	28
Gross realized losses on investment activity	(6		)	(8		)
Net realized investment gains on AFS securities	15			20
Net realized investment losses on trading securities	(89		)	(14		)
Net realized investment gains on equity securities	1			18
Derivative gains (losses)	(184		)	654
Other gains	21			4
Investment related gains (losses)	$	(236	)	$	682

Proceeds from sales of AFS securities were $1,637 million and $1,531 million for the three months ended March 31, 2018 and 2017, respectively.

The following table summarizes the change in unrealized gains and losses on trading and equity securities, including related party, we still held as of the respective period end:



	Three months ended March 31,
(In millions)	2018			2017
Trading securities	$	(69	)	$	11
Trading securities – related party	(2		)	(12		)
Equity securities	—			15

Purchased Credit Impaired (PCI) Investments—The following table summarizes our PCI investments:



	March 31, 2018			December 31, 2017			March 31, 2018			December 31, 2017
(In millions)	Fixed maturity securities						Mortgage loans
Contractually required payments receivable	$	9,009		$	9,690		$	1,131		$	1,140
Less: Cash flows expected to be collected¹	(7,996		)	(8,188		)	(1,098		)	(1,090		)
Non-accretable difference	$	1,013		$	1,502		$	33		$	50

Cash flows expected to be collected¹	$	7,996		$	8,188		$	1,098		$	1,090
Less: Amortized cost	(6,084		)	(6,168		)	(807		)	(817		)
Accretable difference	$	1,912		$	2,020		$	291		$	273

Fair value	$	6,622		$	6,703		$	877		$	844
Outstanding balance	7,468			8,026			935			946

¹ Represents the undiscounted principal and interest cash flows expected.

Table of Contents

ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

During the period, we acquired PCI investments with the following amounts at the time of purchase:



	March 31, 2018
(In millions)	Fixed maturity securities		Mortgage loans
Contractually required payments receivable	$	215	$	—
Cash flows expected to be collected	197		—
Fair value	166		—

The following table summarizes the activity for the accretable yield on PCI investments:



	Three months ended March 31, 2018
(In millions)	Fixed maturity securities			Mortgage loans
Beginning balance at January 1	$	2,020		$	273
Purchases of PCI investments, net of sales	16			(2		)
Accretion	(100		)	(10		)
Net reclassification from (to) non-accretable difference	(24		)	30
Ending balance at March 31	$	1,912		$	291

Mortgage Loans—Mortgage loans, net of allowances, consists of the following:



(In millions)	March 31, 2018		December 31, 2017
Commercial mortgage loans	$	5,109	$	5,223
Commercial mortgage loans under development	24		24
Total commercial mortgage loans	5,133		5,247
Residential mortgage loans	1,006		986
Mortgage loans, net of allowances	$	6,139	$	6,233

We primarily invest in commercial mortgage loans on income producing properties including hotels, industrial properties and retail and office buildings. We diversify the commercial mortgage loan portfolio by geographic region and property type to reduce concentration risk. We evaluate mortgage loans based on relevant current information to confirm if properties are performing at a consistent and acceptable level to secure the related debt.

Table of Contents

ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The distribution of commercial mortgage loans, including those under development, net of valuation allowances, by property type and geographic region, is as follows:



	March 31, 2018				December 31, 2017
(In millions, except for percentages)	Net Carrying Value		Percentage of Total		Net Carrying Value		Percentage of Total
Property type
Office building	$	1,389	27.1	%	$	1,187	22.6	%
Retail	1,167		22.7	%	1,223		23.3	%
Hotels	935		18.2	%	928

Form: 10-Q

Documents