PEMBROKE, Bermuda – May 7, 2019 – Athene Holding Ltd. ("Athene") (NYSE: ATH), a leading provider of retirement savings products, today announced financial results for the first quarter 2019.

Net income for the first quarter 2019 was $708 million, or $3.64 per diluted Class A share ("diluted share"), compared to net income for the first quarter 2018 of $277 million, or $1.40 per diluted share. The increase from the prior year quarter was driven by favorable changes in the fair value of reinsurance assets¹ related to the decrease in Treasury rates.

Adjusted operating income² for the first quarter 2019 was $287 million, or $1.50 per adjusted operating share, compared to adjusted operating income for the first quarter 2018 of $241 million, or $1.23 per adjusted operating share. The increase from the prior year quarter was primarily driven by higher investment income related to invested asset growth.

2 This news release references certain Non-GAAP measures. See Non-GAAP Measures for additional discussion.

3 ALRe RBC ratio is used in evaluating our capital position and the amount of capital needed to support our Retirement Services segment, and is calculated by applying the NAIC RBC factors in effect as of December 31, 2018 to the statutory financial statements of ALRe and its non-U.S. reinsurance subsidiary, on an aggregate basis.

First Quarter 2019 Results

Net income for the first quarter 2019 was $708 million, an increase of $431 million, or 156%, from the first quarter 2018. The increase over the prior year quarter was driven by favorable changes in the fair value of reinsurance assets, partially offset by an unfavorable change in FIA derivatives. The change in the fair value of reinsurance assets resulted from a decrease in Treasury rates and tighter credit spreads, while the unfavorable change in FIA derivatives resulted from a change in discount rates, partially offset by equity market appreciation.

Adjusted operating income for the first quarter 2019 was $287 million, an increase of $46 million, or 19%, from the first quarter 2018, driven by higher investment income, stable cost of funds, and increased operating leverage. The increase in investment income over the prior year quarter was driven by invested asset growth and increased floating rate investment income, partially offset by lower alternative investment income due to the lagged impact of wider credit spreads in the fourth quarter 2018.

For the first quarter 2019, Athene generated organic deposits of $4.8 billion, an increase of 131% compared to the first quarter 2018, driven by broad-based strength across channels. Notably, the liabilities supporting these deposits were underwritten to the same return standards as previously generated business. 

Retail: In the first quarter 2019, Athene generated $1.8 billion of new deposits, up 41% from the prior year quarter, driven by the introduction of new products and growth in the Financial Institutions channel, both of which have expanded our market share.

Flow Reinsurance: In the first quarter 2019, Athene generated $1.1 billion of new deposits, up 400% from the prior year quarter, driven by new business partnerships formed in the second half of 2018.

Institutional: In the first quarter 2019, Athene generated $1.9 billion of new deposits from two pension risk transfer transactions.

Selected Results

2 Adjusted operating common shares outstanding assumes conversion or settlement of all outstanding items that are able to be converted to or settled in Class A common shares, including the impacts of Class B common shares outstanding on a one-for-one basis, the impacts of all Class M common shares outstanding net of the conversion price and any other stock-based awards outstanding, but excluding any awards for which the exercise or conversion price exceeds the market value of Class A common shares on the applicable measurement date. Our Class B common shares are economically equivalent to Class A common shares and can be converted to Class A common shares on a one-for-one basis at any time. Our Class M common shares are in the legal form of shares but economically function as options as they are convertible into Class A shares after vesting and settlement of the conversion price. We believe this non-GAAP measure is an appropriate economic representation of our share counts for use in an economic view of book value metrics.

1 Basic earnings per share, including basic weighted average shares outstanding includes all classes eligible to participate in dividends for each period presented.  

2 Diluted earnings per share on a GAAP basis for Class A common shares, including diluted Class A weighted average shares outstanding, includes the dilutive impacts, if any, of Class B common shares, Class M common shares and any other stock-based awards. Such dilutive securities totaled 441,061 weighted average shares for the quarter. Diluted earnings per share on a GAAP basis for Class A common shares are based on allocated net income of $589 million (83% of net income) and $209 million (75% of net income) for the three months ended March 31, 2019 and 2018, respectively.

3 Weighted average shares outstanding – adjusted operating assumes conversion or settlement of all outstanding items that are able to be converted to or settled in Class A common shares, including the impacts of Class B common shares on a one-for-one basis, the impacts of all Class M common shares net of the conversion price and any other stock-based awards, but excluding any awards for which the exercise or conversion price exceeds the market value of Class A common shares on the applicable measurement date. Our Class B common shares are economically equivalent to Class A common shares and can be converted to Class A common shares on a one-for-one basis at any time. Our Class M common shares are in the legal form of shares but economically function as options as they are convertible into Class A shares after vesting and settlement of the conversion price. In calculating Class A diluted earnings per share on a GAAP basis, we are required to apply sequencing rules to determine the dilutive impacts, if any, of our Class B common shares, Class M common shares and any other stock-based awards. To the extent our Class B common shares, Class M common shares and/or any other stock-based awards are not dilutive they are excluded. We believe this non-GAAP measure is an appropriate economic representation of our share counts for use in an economic view of adjusted operating earnings per share.

For the first quarter 2019, Retirement Services adjusted operating income was $286 million, an increase of $47 million, or 20%, from the first quarter 2018, resulting in an adjusted operating ROE of 14.4%. The increase in adjusted operating income over the prior year quarter was primarily driven by higher investment income, stable cost of funds, and increasing operating leverage. Notably, investment income increased by $305 million over the prior year quarter primarily due to invested asset growth.

The net investment spread, which measures net investment earnings less cost of funds, was 1.36% of average invested assets for the first quarter 2019, a decrease of 43 basis points from the first quarter 2018. The decrease from the prior year quarter was driven by lower net investment earned rates attributed to lower alternative investment performance as well as lower returns on the Voya and Lincoln assets.

The net investment earned rate ("NIER") was 4.21% for the first quarter 2019, a decrease of 42 basis points from the prior year quarter, reflecting lower alternative investment returns, which were negatively impacted by the lag effect of weak equity markets and wider credit spreads in the fourth quarter 2018 on nearly two-thirds of the portfolio. The annualized return on alternative investments during the first quarter 2019 was 2.13%, compared to 12.34% in the prior year quarter. Invested asset purchases increased by $800 million, or 11%, to $7.9 billion with meaningfully higher yields compared to the prior year quarter.

Cost of funds, which is comprised of the total cost of crediting on deferred annuities and institutional products as well as other liability costs, was 2.85% for the first quarter 2019, an increase of 1 basis point from the first quarter 2018. Total cost of crediting was 1.92% for the first quarter 2019, an increase of 20 basis points from prior year

quarter, driven by higher option costs for deferred annuities, higher crediting rates for the onboarded Voya and Lincoln blocks, and the increase in institutional deposits within the overall business mix. Cost of crediting on deferred annuities was 1.98% and the cost of crediting on institutional business was 3.69%. Beginning in the first quarter 2019, institutional costs, previously recognized within other liability costs, were moved to cost of crediting; all prior periods were recast to reflect this change. As such, other liability costs were 0.93% for the first quarter 2019, a decrease of 19 basis points from the prior year quarter primarily due to equity market appreciation, partially offset by growth in the block.

In the first quarter 2019, Corporate & Other adjusted operating income was $1 million, in line with the first quarter 2018.

Athene's Board of Directors has increased the share repurchase authorization to $350 million, effective immediately.

Athene had total assets of $132.9 billion as of March 31, 2019. Athene's principal subsidiaries include Athene Annuity & Life Assurance Company, a Delaware-domiciled insurance company, Athene Annuity and Life Company, an Iowa-domiciled insurance company, Athene Annuity & Life Assurance Company of New York, a New York-domiciled insurance company and Athene Life Re Ltd., a Bermuda-domiciled reinsurer.

Further information about our companies can be found at www.athene.com.

In addition to our results presented in accordance with GAAP, we present certain financial information that includes non-GAAP measures. Management believes the use of these non-GAAP measures, together with the relevant GAAP measures, provides information that may enhance an investor’s understanding of our results of operations and the underlying profitability drivers of our business. The majority of these non-GAAP measures are intended to remove from the results of operations the impact of market volatility (other than with respect to alternative investments) as well as integration, restructuring and certain other expenses which are not part of our underlying profitability drivers, as such items fluctuate from period to period in a manner inconsistent with these drivers. These measures should be considered supplementary to our results in accordance with GAAP and should not be viewed as a substitute for the corresponding GAAP measures. See Non-GAAP Measure Reconciliations for the appropriate reconciliations to the corresponding GAAP measures.

period. To enhance the ability to analyze these measures across periods, interim periods are annualized. While we believe each of these metrics are meaningful financial metrics and enhance our understanding of the underlying profitability drivers of our business, they should not be used as a substitute for ROA presented under GAAP.

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 withheld and modco reinsurance assets, in each case net of DAC, DSI, rider reserve and tax offsets. Adjusted shareholders’ equity is calculated as the ending shareholders’ equity excluding AOCI and the cumulative change in fair value of funds withheld and modco reinsurance assets. Adjusted operating ROE is calculated as the adjusted operating income, divided by average adjusted shareholders’ equity. These adjustments fluctuate period to period in a manner inconsistent with our underlying profitability drivers as the majority of such fluctuation is related to the market volatility of the unrealized gains and losses associated with our AFS securities. Except with respect to reinvestment activity relating to acquired blocks of businesses, we typically buy and hold AFS investments to maturity throughout the duration of market fluctuations, therefore, the period-over-period impacts in unrealized gains and losses are not necessarily indicative of current operating fundamentals or future performance. Accordingly, we believe using measures which exclude AOCI and the cumulative change in fair value of funds withheld and modco reinsurance assets are useful in analyzing trends in our operating results. To enhance the ability to analyze these measures across periods, interim periods are annualized. Adjusted operating ROE should not be used as a substitute for ROE. However, we believe the adjustments to equity are significant to gaining an understanding of our overall financial performance.

Net investment spread is a key measurement of the financial health of our Retirement Services profitability. Net investment spread measures our investment performance less the total cost of our liabilities. Net investment earned rate is a key measure of our investment performance, while cost of funds is a key measure of the cost of our policyholder benefits and liabilities. Investment margin on our deferred annuities measures our investment performance less the cost of crediting for our deferred annuities, which make up a significant portion of our reserve liabilities.

Net investment earned rate, cost of funds, net investment spread and investment margin on deferred annuities are non-GAAP measures we use to evaluate the profitability of our business. We believe these metrics are useful in analyzing the trends of our business operations, profitability and pricing discipline. While we believe each of these metrics are meaningful financial metrics and enhance our understanding of the underlying profitability drivers of our business, they should not be used as a substitute for net investment income, interest sensitive contract benefits or total benefits and expenses presented under GAAP.

Operating expenses excludes integration, restructuring and other non-operating expenses, stock compensation expense, interest expense and policy acquisition expenses. We believe a measure like operating expenses is useful in analyzing the trends of our core business operations and profitability. While we believe operating expenses is a meaningful financial metric and enhances our understanding of the underlying profitability drivers of our business, it should not be used as a substitute for policy and other operating expenses presented under GAAP.

In managing our business we analyze invested assets, which does not correspond to total investments, including investments in related parties, as disclosed in our consolidated financial statements and notes thereto. Invested assets represents the investments that directly back our reserve liabilities as well as surplus assets. Invested assets is used in the computation of net investment earned rate, which allows us to analyze the profitability of our investment portfolio. Invested assets includes (a) total investments on the consolidated balance sheets with AFS securities at cost or amortized cost, excluding derivatives, (b) cash and cash equivalents and restricted cash, (c) investments in related parties, (d) accrued investment income, (e) the consolidated VIE assets, liabilities and noncontrolling interest, (f) net investment payables and receivables and (g) policy loans ceded (which offset the direct policy loans in total investments). Invested assets also excludes assets associated with funds withheld liabilities related to business exited through reinsurance agreements and derivative collateral (offsetting the related cash positions). We include the underlying investments supporting our assumed funds withheld and modco agreements in our invested assets calculation in order to match the assets with the income received. We believe the adjustments for reinsurance provide a view of the assets for which we have economic exposure. Our invested assets are averaged over the number of quarters in the relevant period to compute our net investment earned rate for such period.

Condensed Consolidated Balance Sheets (unaudited, in millions)

Condensed Consolidated Balance Sheets (unaudited, in millions)

Condensed Consolidated Statements of Income (unaudited, in millions)

The reconciliation of shareholders’ equity to adjusted shareholders’ equity included in adjusted book value per share, adjusted debt to capital ratio, and adjusted operating ROE is as follows:

The reconciliation of average shareholders’ equity to average adjusted shareholders’ equity included in adjusted operating ROE is as follows:

The reconciliation of basic Class A shares outstanding to adjusted operating common shares outstanding is as follows: