Form: 8-K

Current report filing

November 5, 2019

Documents



q3qfscover.jpg



Table of Contents
athenelogoa29.jpg
 
 
 
 
 
 
 
 
 
 
 
 
 





Financial Highlights
Unaudited (in millions, except percentages and per share data)
athenelogoa29.jpg
 
 
Quarterly Trends
 
Δ
 
Year-to-Date
 
Δ
 
3Q’18
 
4Q’18
 
1Q’19
 
2Q’19
 
3Q’19
 
Q/Q
 
Y/Y
 
2018
 
2019
 
Y/Y
SELECTED INCOME STATEMENT DATA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) available to AHL common shareholders
$
623

 
$
(104
)
 
$
708

 
$
720

 
$
276

 
(62
)%
 
(56
)%
 
$
1,157

 
$
1,704

 
47
 %
Adjusted operating income available to common shareholders
371

 
240

 
287

 
370

 
243

 
(34
)%
 
(35
)%
 
900

 
900

 
—
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FINANCIAL RATIOS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Return on assets (ROA)
2.14
%
 
(0.34
)%
 
2.19
%
 
2.12
%
 
0.78
%
 
(134)bps

 
(136)bps

 
1.44
%
 
1.68
%
 
24bps

Adjusted operating ROA
1.49
%
 
0.88
 %
 
1.02
%
 
1.28
%
 
0.82
%
 
(46)bps

 
(67)bps

 
1.37
%
 
1.04
%
 
(33)bps

Net investment spread – Retirement Services
1.78
%
 
1.43
 %
 
1.36
%
 
1.68
%
 
1.13
%
 
(55)bps

 
(65)bps

 
1.82
%
 
1.38
%
 
(44)bps

Return on equity (ROE)
28.6
%
 
(4.8
)%
 
30.8
%
 
25.6
%
 
8.5
%
 
NM

 
NM

 
17.0
%
 
20.8
%
 
380bps

Adjusted operating ROE
17.2
%
 
10.8
 %
 
12.8
%
 
16.2
%
 
10.6
%
 
NM

 
NM

 
14.5
%
 
13.3
%
 
(120)bps

Adjusted operating ROE – Retirement Services
23.2
%
 
16.0
 %
 
14.4
%
 
18.9
%
 
13.5
%
 
NM

 
NM

 
19.7
%
 
16.0
%
 
(370)bps

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EARNINGS AND BOOK VALUE PER COMMON SHARE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per common share – basic1
$
3.16

 
$
(0.53
)
 
$
3.65

 
$
3.76

 
$
1.50

 
(60
)%
 
(53
)%
 
$
5.86

 
$
8.97

 
53
 %
Earnings per common share – diluted class A2
3.15

 
(0.53
)
 
3.64

 
3.75

 
1.50

 
(60
)%
 
(52
)%
 
5.85

 
8.95

 
53
 %
Adjusted operating earnings per common share3
1.90

 
1.23

 
1.50

 
1.95

 
1.34

 
(31
)%
 
(29
)%
 
4.59

 
4.79

 
4
 %
Book value per common share
45.51

 
42.45

 
52.12

 
66.69

 
74.20

 
11
 %
 
63
 %
 
45.51

 
74.20

 
63
 %
Adjusted book value per common share3
45.53

 
45.59

 
47.30

 
49.50

 
50.74

 
3
 %
 
11
 %
 
45.53

 
50.74

 
11
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SELECTED BALANCE SHEET DATA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
118,250

 
$
125,505

 
$
132,857

 
$
138,980

 
$
144,202

 
4
 %
 
22
 %
 
$
118,250

 
$
144,202

 
22
 %
Invested assets
100,596

 
111,034

 
113,771

 
116,671

 
121,140

 
4
 %
 
20
 %
 
100,596

 
121,140

 
20
 %
Total liabilities
109,272

 
117,229

 
122,740

 
126,615

 
130,657

 
3
 %
 
20
 %
 
109,272

 
130,657

 
20
 %
Reserve liabilities
98,553

 
107,732

 
111,791

 
114,680

 
118,825

 
4
 %
 
21
 %
 
98,553

 
118,825

 
21
 %
Debt
991

 
991

 
991

 
991

 
992

 
—
 %
 
—
 %
 
991

 
992

 
—
 %
Total shareholders’ equity
8,978

 
8,276

 
10,117

 
12,365

 
13,545

 
10
 %
 
51
 %
 
8,978

 
13,545

 
51
 %
Adjusted common shareholders’ equity
8,976

 
8,823

 
9,102

 
9,127

 
9,204

 
1
 %
 
3
 %
 
8,976

 
9,204

 
3
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DEPOSITS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail
$
2,200

 
$
2,018

 
$
1,816

 
$
1,909

 
$
1,921

 
1
 %
 
(13
)%
 
$
5,524

 
$
5,646

 
2
 %
Flow reinsurance
610

 
1,136

 
1,020

 
1,125

 
609

 
(46
)%
 
—
 %
 
1,287

 
2,754

 
114
 %
Funding agreements
—

 
225

 
—

 
299

 
503

 
68
 %
 
100
 %
 
425

 
802

 
89
 %
Pension risk transfer
476

 
1,785

 
1,923

 
706

 
2,604

 
269
 %
 
NM

 
796

 
5,233

 
NM

Total organic deposits
3,286

 
5,164

 
4,759

 
4,039

 
5,637

 
40
 %
 
72
 %
 
8,032

 
14,435

 
80
 %
Inorganic deposits
—

 
7,878

 
—

 
—

 
—

 
—
 %
 
—
 %
 
19,104

 
—

 
(100
)%
Total deposits
$
3,286

 
$
13,042

 
$
4,759

 
$
4,039

 
$
5,637

 
40
 %
 
72
 %
 
$
27,136

 
$
14,435

 
(47
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: “NM” represents changes that are not meaningful. Please refer to Notes to the Financial Supplement section and the Non-GAAP Measure Reconciliations for discussion on adjusted operating income available to common shareholders, adjusted operating ROE, adjusted operating ROA, net investment spread, adjusted book value per common share, invested assets, reserve liabilities, and adjusted common shareholders’ equity. 1 Basic earnings per common share, including basic weighted average common shares outstanding, includes all classes eligible to participate in dividends for each period presented. 2 Diluted earnings per common share on a GAAP basis for Class A common shares, including diluted Class A weighted average common shares outstanding, includes the dilutive impacts, if any, of Class B common shares, Class M common shares and any other stock-based awards. 3 Represents Class A common shares outstanding or weighted average common shares outstanding assuming 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, Class M common shares and any other stock-based awards, but excluding any awards for which the exercise or conversion price exceeds the market value of our Class A common shares on the applicable measurement date.

3


Condensed Consolidated Statements of Income (GAAP view)
Unaudited (in millions, except percentages)
athenelogoa29.jpg
 
 
Quarterly Trends
 
Δ
 
Year-to-Date
 
Δ
 
3Q’18
 
4Q’18
 
1Q’19
 
2Q’19
 
3Q’19
 
Q/Q
 
Y/Y
 
2018
 
2019
 
Y/Y
REVENUE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
$
526

 
$
1,833

 
$
1,966

 
$
733

 
$
2,605

 
255
 %
 
NM

 
$
1,535

 
$
5,304

 
246
 %
Product charges
119

 
128

 
125

 
132

 
135

 
2
 %
 
13
 %
 
321

 
392

 
22
 %
Net investment income
1,070

 
1,121

 
1,066

 
1,161

 
1,070

 
(8
)%
 
—
 %
 
2,883

 
3,297

 
14
 %
Investment related gains (losses)
816

 
(1,902
)
 
1,772

 
1,316

 
688

 
(48
)%
 
(16
)%
 
578

 
3,776

 
NM

Other-than-temporary impairment investment losses
 
 
 
 
 
 
 
 
 
 


 


 
 
 
 
 
 
Other-than-temporary impairment losses
(7
)
 
(14
)
 
(2
)
 
(7
)
 
(34
)
 
NM

 
NM

 
(10
)
 
(43
)
 
NM

Other-than-temporary impairment losses reclassified to (from) other comprehensive income
4

 
2

 
1

 
1

 
9

 
NM

 
125
 %
 
4

 
11

 
175
 %
Net other-than-temporary impairment losses
(3
)

(12
)

(1
)

(6
)

(25
)
 
NM

 
NM

 
(6
)
 
(32
)
 
NM

Other revenues
10

 
4

 
12

 
9

 
6

 
(33
)%
 
(40
)%
 
22

 
27

 
23
 %
Revenues related to consolidated variable interest entities
 
 
 
 
 
 
 
 
 
 


 


 
 
 
 
 


Net investment income
15

 
17

 
16

 
21

 
20

 
(5
)%
 
33
 %
 
39

 
57

 
46
 %
Investment related gains (losses)
23

 
(35
)
 
5

 
3

 
2

 
(33
)%
 
(91
)%
 
17

 
10

 
(41
)%
Total revenues
$
2,576

 
$
1,154

 
$
4,961

 
$
3,369

 
$
4,501

 
34
 %
 
75
 %
 
$
5,389

 
$
12,831

 
138
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BENEFITS AND EXPENSES
 
 
 
 
 
 
 
 
 
 


 


 
 
 
 
 


Interest sensitive contract benefits
$
742

 
$
(825
)
 
$
1,516

 
$
1,094

 
$
801

 
(27
)%
 
8
 %
 
$
1,115

 
$
3,411

 
206
 %
Amortization of deferred sales inducements
23

 
(12
)
 
5

 
13

 
20

 
54
 %
 
(13
)%
 
66

 
38

 
(42
)%
Future policy and other policy benefits
928

 
1,994

 
2,295

 
1,057

 
2,872

 
172
 %
 
209
 %
 
2,193

 
6,224

 
184
 %
Amortization of deferred acquisition costs and value of business acquired
36

 
(33
)
 
231

 
261

 
323

 
24
 %
 
NM

 
207

 
815

 
294
 %
Dividends to policyholders
10

 
5

 
9

 
9

 
12

 
33
 %
 
20
 %
 
32

 
30

 
(6
)%
Policy and other operating expenses
158

 
172

 
165

 
185

 
194

 
5
 %
 
23
 %
 
454

 
544

 
20
 %
Total benefits and expenses
1,897

 
1,301

 
4,221

 
2,619

 
4,222

 
61
 %
 
123
 %
 
4,067

 
11,062

 
172
 %
Income (loss) before income taxes
679

 
(147
)
 
740

 
750

 
279

 
(63
)%
 
(59
)%
 
1,322


1,769

 
34
 %
Income tax expense (benefit)
56

 
(43
)
 
32

 
30

 
(14
)
 
(147
)%
 
(125
)%
 
165

 
48

 
(71
)%
Net income (loss)
623

 
(104
)
 
708

 
720

 
293

 
(59
)%
 
(53
)%
 
1,157

 
1,721

 
49
 %
Less: Preferred stock dividends
—

 
—

 
—

 
—

 
17

 
100
 %
 
100
 %
 
—

 
17

 
100
 %
Net income (loss) available to Athene Holding Ltd. common shareholders
$
623

 
$
(104
)
 
$
708

 
$
720

 
$
276

 
(62
)%
 
(56
)%
 
$
1,157

 
$
1,704

 
47
 %


4


Segment Results of Operations (Management view)
Unaudited (in millions, except percentages and per share data)
athenelogoa29.jpg
 
 
Quarterly Trends
 
Δ
 
Year-to-Date
 
Δ
 
3Q’18
 
4Q’18
 
1Q’19
 
2Q’19
 
3Q’19
 
Q/Q
 
Y/Y
 
2018
 
2019
 
Y/Y
CONSOLIDATED
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income and other investment income
$
1,036

 
$
1,142

 
$
1,154

 
$
1,175

 
$
1,168

 
(1
)%
 
13
 %
 
$
2,755

 
$
3,497

 
27
 %
Alternative investment income
90

 
62

 
49

 
170

 
124

 
(27
)%
 
38
 %
 
273

 
343

 
26
 %
Net investment earnings
1,126

 
1,204

 
1,203

 
1,345

 
1,292

 
(4
)%
 
15
 %
 
3,028

 
3,840

 
27
 %
Cost of crediting
(453
)
 
(516
)
 
(535
)
 
(547
)
 
(576
)
 
(5
)%
 
(27
)%
 
(1,143
)
 
(1,658
)
 
(45
)%
Other liability costs1
(221
)
 
(332
)
 
(260
)
 
(295
)
 
(358
)
 
(21
)%
 
(62
)%
 
(649
)
 
(913
)
 
(41
)%
Cost of funds
(674
)
 
(848
)
 
(795
)
 
(842
)
 
(934
)
 
(11
)%
 
(39
)%
 
(1,792
)
 
(2,571
)
 
(43
)%
Operating expenses
(78
)
 
(82
)
 
(82
)
 
(87
)
 
(79
)
 
9
 %
 
(1
)%
 
(221
)
 
(248
)
 
(12
)%
Interest expense
(13
)
 
(12
)
 
(13
)
 
(12
)
 
(12
)
 
—
 %
 
8
 %
 
(37
)
 
(37
)
 
—
 %
Pre-tax adjusted operating income
361

 
262

 
313

 
404

 
267

 
(34
)%
 
(26
)%
 
978

 
984

 
1
 %
Income tax (expense) benefit – operating
10

 
(22
)
 
(26
)
 
(34
)
 
(7
)
 
79
 %
 
(170
)%
 
(78
)
 
(67
)
 
14
 %
Adjusted operating income
371

 
240

 
287

 
370

 
260

 
(30
)%
 
(30
)%
 
900

 
917

 
2
 %
Preferred stock dividends
—

 
—

 
—

 
—

 
(17
)
 
(100
)%
 
(100
)%
 
—

 
(17
)
 
(100
)%
Adjusted operating income available to common shareholders
$
371

 
$
240

 
$
287

 
$
370

 
$
243

 
(34
)%
 
(35
)%
 
$
900

 
$
900

 
—
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted operating earnings per common share
$
1.90

 
$
1.23

 
$
1.50

 
$
1.95

 
$
1.34

 
(31
)%
 
(29
)%
 
$
4.59

 
$
4.79

 
4
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RETIREMENT SERVICES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income and other investment income
$
1,021

 
$
1,132

 
$
1,151

 
$
1,170

 
$
1,159

 
(1
)%
 
14
 %
 
$
2,693

 
$
3,480

 
29
 %
Alternative investment income
87

 
99

 
20

 
151

 
105

 
(30
)%
 
21
 %
 
264

 
276

 
5
 %
Net investment earnings
1,108

 
1,231

 
1,171

 
1,321

 
1,264

 
(4
)%
 
14
 %
 
2,957

 
3,756

 
27
 %
Cost of crediting
(453
)
 
(516
)
 
(535
)
 
(547
)
 
(576
)
 
(5
)%
 
(27
)%
 
(1,143
)
 
(1,658
)
 
(45
)%
Other liability costs1
(221
)
 
(332
)
 
(260
)
 
(295
)
 
(358
)
 
(21
)%
 
(62
)%
 
(649
)
 
(913
)
 
(41
)%
Cost of funds
(674
)
 
(848
)
 
(795
)
 
(842
)
 
(934
)
 
(11
)%
 
(39
)%
 
(1,792
)
 
(2,571
)
 
(43
)%
Operating expenses
(63
)
 
(65
)
 
(62
)
 
(68
)
 
(67
)
 
1
 %
 
(6
)%
 
(177
)
 
(197
)
 
(11
)%
Interest expense
(2
)
 
—

 
(2
)
 
(1
)
 
—

 
100
 %
 
100
 %
 
(5
)
 
(3
)
 
40
 %
Pre-tax adjusted operating income
369

 
318

 
312

 
410

 
263

 
(36
)%
 
(29
)%
 
983

 
985

 
—
 %
Income tax (expense) benefit – operating
10

 
(22
)
 
(26
)
 
(34
)
 
(7
)
 
79
 %
 
(170
)%
 
(78
)
 
(67
)
 
14
 %
Adjusted operating income available to common shareholders
$
379

 
$
296

 
$
286

 
$
376

 
$
256

 
(32
)%
 
(32
)%
 
$
905

 
$
918

 
1
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CORPORATE & OTHER
Fixed income and other investment income
$
15

 
$
10

 
$
3

 
$
5

 
$
9

 
80
 %
 
(40
)%
 
$
62

 
$
17

 
(73
)%
Alternative investment income
3

 
(37
)
 
29

 
19

 
19

 
—
 %
 
NM

 
9

 
67

 
NM

Net investment earnings
18

 
(27
)
 
32

 
24

 
28

 
17
 %
 
56
 %
 
71

 
84

 
18
 %
Operating expenses
(15
)
 
(17
)
 
(20
)
 
(19
)
 
(12
)
 
37
 %
 
20
 %
 
(44
)
 
(51
)
 
(16
)%
Interest expense
(11
)
 
(12
)
 
(11
)
 
(11
)
 
(12
)
 
(9
)%
 
(9
)%
 
(32
)
 
(34
)
 
(6
)%
Pre-tax adjusted operating income (loss)
(8
)
 
(56
)
 
1

 
(6
)
 
4

 
167
 %
 
150
 %
 
(5
)
 
(1
)
 
80
 %
Income tax (expense) benefit – operating
—

 
—

 
—

 
—

 
—

 
—
 %
 
—
 %
 
—

 
—

 
—
 %
Adjusted operating income (loss)
(8
)
 
(56
)
 
1

 
(6
)
 
4

 
167
 %
 
150
 %
 
(5
)
 
(1
)
 
80
 %
Preferred stock dividends
—

 
—

 
—

 
—

 
(17
)
 
(100
)%
 
(100
)%
 
—

 
(17
)
 
(100
)%
Adjusted operating income (loss) available to common shareholders
$
(8
)
 
$
(56
)
 
$
1

 
$
(6
)
 
$
(13
)
 
(117
)%
 
(63
)%
 
$
(5
)
 
$
(18
)
 
(260
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: Please refer to Notes to the Financial Supplement section and the Non-GAAP Measure Reconciliations for discussion on adjusted operating income available to common shareholders and adjusted operating earnings per common share. 1 Other liability costs primarily includes DAC, DSI and VOBA amortization and rider reserve changes for all products, the cost of liabilities on products other than deferred annuities and institutional costs including offsets for premiums, product charges and other revenues.

5


Reconciliation of Earnings Measures
Unaudited (in millions, except percentages and per share data)
athenelogoa29.jpg
 
 
Quarterly Trends
 
Δ
 
Year-to-Date
 
Δ
 
3Q’18
 
4Q’18
 
1Q’19
 
2Q’19
 
3Q’19
 
Q/Q
 
Y/Y
 
2018
 
2019
 
Y/Y
RECONCILIATION OF NET INCOME (LOSS) AVAILABLE TO ATHENE HOLDING LTD. COMMON SHAREHOLDERS TO ADJUSTED OPERATING INCOME AVAILABLE TO COMMON SHAREHOLDERS
Net income (loss) available to Athene Holding Ltd. common shareholders
$
623

 
$
(104
)
 
$
708

 
$
720

 
$
276

 
(62
)%
 
(56
)%
 
$
1,157

 
$
1,704

 
47
 %
Non-operating adjustments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains (losses) on sale of AFS securities
5

 
(20
)
 
12

 
41

 
46

 
12
 %
 
NM

 
33

 
99

 
200
 %
Unrealized, impairments and other investment gains (losses)
6

 
(40
)
 
29

 
10

 
(31
)
 
NM

 
NM

 
22

 
8

 
(64
)%
Change in fair value of reinsurance assets
(95
)
 
(100
)
 
616

 
570

 
314

 
(45
)%
 
NM

 
(302
)
 
1,500

 
NM

Offsets to investment gains (losses)
31

 
46

 
(199
)
 
(204
)
 
(163
)
 
20
 %
 
NM

 
87

 
(566
)
 
NM

Investment gains (losses), net of offsets
(53
)
 
(114
)
 
458

 
417

 
166

 
(60
)%
 
NM

 
(160
)
 
1,041

 
NM

Change in fair values of derivatives and embedded derivatives – FIAs, net of offsets
376

 
(288
)
 
(27
)
 
(57
)
 
(117
)
 
(105
)%
 
(131
)%
 
530

 
(201
)
 
(138
)%
Integration, restructuring and other non-operating expenses
(2
)
 
(4
)
 
(1
)
 
(11
)
 
(34
)
 
(209
)%
 
NM

 
(18
)
 
(46
)
 
(156
)%
Stock compensation expense
(3
)
 
(3
)
 
(3
)
 
(3
)
 
(3
)
 
—
 %
 
—
 %
 
(8
)
 
(9
)
 
(13
)%
Income tax (expense) benefit – non-operating
(66
)
 
65

 
(6
)
 
4

 
21

 
NM

 
132
 %
 
(87
)
 
19

 
122
 %
Less: Total non-operating adjustments
252

 
(344
)
 
421

 
350

 
33

 
(91
)%
 
(87
)%
 
257

 
804

 
213
 %
Adjusted operating income available to common shareholders
$
371

 
$
240

 
$
287

 
$
370

 
$
243

 
(34
)%
 
(35
)%
 
$
900

 
$
900

 
—
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RECONCILIATION OF BASIC EARNINGS PER CLASS A COMMON SHARES TO ADJUSTED OPERATING EARNINGS PER COMMON SHARE
Basic earnings per share – Class A common shares
$
3.16

 
$
(0.53
)
 
$
3.65

 
$
3.76

 
$
1.50

 
(60
)%
 
(53
)%
 
$
5.86

 
$
8.97

 
53
 %
Non-operating adjustments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains (losses) on sale of AFS securities
0.02

 
(0.11
)
 
0.06

 
0.21

 
0.25

 
19
 %
 
NM

 
0.17

 
0.52

 
206
 %
Unrealized, impairments and other investment gains (losses)
0.03

 
(0.20
)
 
0.16

 
0.05

 
(0.17
)
 
NM

 
NM

 
0.11

 
0.04

 
(64
)%
Change in fair value of reinsurance assets
(0.49
)
 
(0.51
)
 
3.20

 
3.01

 
1.72

 
(43
)%
 
NM

 
(1.54
)
 
7.97

 
NM

Offsets to investment gains (losses)
0.15

 
0.23

 
(1.04
)
 
(1.07
)
 
(0.89
)
 
17
 %
 
NM

 
0.45

 
(3.01
)
 
NM

Investment gains (losses), net of offsets
(0.29
)
 
(0.59
)
 
2.38

 
2.20

 
0.91

 
(59
)%
 
NM

 
(0.81
)
 
5.52

 
NM

Change in fair values of derivatives and embedded derivatives – FIAs, net of offsets
1.91

 
(1.47
)
 
(0.14
)
 
(0.30
)
 
(0.65
)
 
(117
)%
 
(134
)%
 
2.71

 
(1.07
)
 
(139
)%
Integration, restructuring and other non-operating expenses
(0.02
)
 
(0.02
)
 
(0.01
)
 
(0.06
)
 
(0.18
)
 
(200
)%
 
NM

 
(0.10
)
 
(0.24
)
 
(140
)%
Stock compensation expense
(0.01
)
 
(0.01
)
 
(0.01
)
 
(0.02
)
 
(0.02
)
 
—
 %
 
(100
)%
 
(0.04
)
 
(0.05
)
 
(25
)%
Income tax (expense) benefit – non-operating
(0.34
)
 
0.33

 
(0.03
)
 
0.02

 
0.12

 
NM

 
135
 %
 
(0.44
)
 
0.10

 
123
 %
Less: Total non-operating adjustments
1.25

 
(1.76
)
 
2.19

 
1.84

 
0.18

 
(90
)%
 
(86
)%
 
1.32

 
4.26

 
223
 %
Effect of items convertible to or settled in Class A common shares
0.01

 
—

 
(0.04
)
 
(0.03
)
 
(0.02
)
 
33
 %
 
(300
)%
 
(0.05
)
 
(0.08
)
 
(60
)%
Adjusted operating earnings per common share
$
1.90

 
$
1.23

 
$
1.50

 
$
1.95

 
$
1.34

 
(31
)%
 
(29
)%
 
$
4.59

 
$
4.79

 
4
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: Please refer to Notes to the Financial Supplement section for discussion on adjusted operating income available to common shareholders.

6


Retirement Services Segment Highlights
Unaudited (in millions, except percentages)
athenelogoa29.jpg
 
 
Quarterly Trends
 
Δ
 
Year-to-Date
 
Δ
 
3Q’18
 
4Q’18
 
1Q’19
 
2Q’19
 
3Q’19
 
Q/Q
 
Y/Y
 
2018
 
2019
 
Y/Y
NET INVESTMENT SPREAD – RETIREMENT SERVICES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net investment earned rate
4.55
%
 
4.57
%
 
4.21
%
 
4.63
%
 
4.31
%
 
(32)bps

 
(24)bps

 
4.63
%
 
4.38
%
 
(25)bps

Cost of crediting
1.86
%
 
1.91
%
 
1.92
%
 
1.92
%
 
1.96
%
 
4bps

 
10bps

 
1.79
%
 
1.93
%
 
14bps

Other liability costs
0.91
%
 
1.23
%
 
0.93
%
 
1.03
%
 
1.22
%
 
19bps

 
31bps

 
1.02
%
 
1.07
%
 
5bps

Cost of funds
2.77
%
 
3.14
%
 
2.85
%
 
2.95
%
 
3.18
%
 
23bps

 
41bps

 
2.81
%
 
3.00
%
 
19bps

Net investment spread
1.78
%
 
1.43
%
 
1.36
%
 
1.68
%
 
1.13
%
 
(55)bps

 
(65)bps

 
1.82
%
 
1.38
%
 
(44)bps

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average invested assets
$
97,500

 
$
107,939

 
$
111,443

 
$
114,059

 
$
117,338

 
3
 %
 
20
 %
 
$
85,163

 
$
114,391

 
34
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
COST OF CREDITING – RETIREMENT SERVICES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FIA option costs
$
235

 
$
261

 
$
265

 
$
265

 
$
265

 
—
 %
 
13
 %
 
$
576

 
$
795

 
38
 %
Fixed interest credited to policyholders
160

 
182

 
179

 
183

 
188

 
3
 %
 
18
 %
 
412

 
550

 
33
 %
Cost of crediting on deferred annuities
395

 
443

 
444

 
448

 
453

 
1
 %
 
15
 %
 
988

 
1,345

 
36
 %
Average account value on deferred annuities
79,673

 
88,874

 
89,809

 
90,675

 
91,467

 
1
 %
 
15
 %
 
68,421

 
90,638

 
32
 %
Cost of crediting on deferred annuities rate
1.98
%
 
2.00
%
 
1.98
%
 
1.98
%
 
1.98
%
 
0bps

 
0bps

 
1.93
%
 
1.98
%
 
5bps

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of crediting on institutional products
$
58

 
$
73

 
$
91

 
$
99

 
$
123

 
24
 %
 
112
 %
 
$
155

 
$
313

 
102
 %
Average institutional reserve liabilities
6,608

 
7,827

 
9,809

 
10,470

 
13,320

 
27
 %
 
102
 %
 
6,301

 
11,200

 
78
 %
Cost of crediting on institutional products rate
3.54
%
 
3.74
%
 
3.69
%
 
3.76
%
 
3.68
%
 
(8)bps

 
14bps

 
3.29
%
 
3.71
%
 
42bps

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of crediting
$
453

 
$
516

 
$
535

 
$
547

 
$
576

 
5
 %
 
27
 %
 
$
1,143

 
$
1,658

 
45
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OTHER LIABILITY COSTS – RETIREMENT SERVICES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Change in rider reserve
$
248

 
$
173

 
$
154

 
$
138

 
$
114

 
(17
)%
 
(54
)%
 
$
442

 
$
406

 
(8
)%
DAC, DSI and VOBA amortization
(44
)
 
130

 
91

 
125

 
226

 
81
 %
 
NM

 
142

 
442

 
211
 %
Other1
17

 
29

 
15

 
32

 
18

 
(44
)%
 
6
 %
 
65

 
65

 
—
 %
Other liability costs
$
221

 
$
332

 
$
260

 
$
295

 
$
358

 
21
 %
 
62
 %
 
$
649

 
$
913

 
41
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
INVESTMENT MARGIN ON DEFERRED ANNUITIES – RETIREMENT SERVICES
Net investment earned rate
4.55
%
 
4.57
%
 
4.21
%
 
4.63
%
 
4.31
%
 
(32)bps

 
(24)bps

 
4.63
%
 
4.38
%
 
(25)bps

Cost of crediting on deferred annuities
1.98
%
 
2.00
%
 
1.98
%
 
1.98
%
 
1.98
%
 
0bps

 
0bps

 
1.93
%
 
1.98
%
 
5bps

Investment margin on deferred annuities
2.57
%
 
2.57
%
 
2.23
%
 
2.65
%
 
2.33
%
 
(32)bps

 
(24)bps

 
2.70
%
 
2.40
%
 
(30)bps

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: Please refer to Notes to the Financial Supplement section and the Non-GAAP Reconciliations for discussion on net investment spread, investment margin on deferred annuities, net investment earned rate, cost of crediting on deferred annuities and other liability costs. 1 Other primarily includes payout annuities, policy maintenance costs, reinsurance expense allowances, excise taxes and non-deferred acquisition costs, net of product charges.



7


Condensed Consolidated Balance Sheets
Unaudited (in millions, except percentages)
athenelogoa29.jpg
 
 
December 31, 2018
 
September 30, 2019
 
Δ
ASSETS
 
 
 
 
 
Investments
 
 
 
 
 
Available-for-sale securities, at fair value
$
59,265

 
$
70,903

 
20
 %
Trading securities, at fair value
1,949

 
2,411

 
24
 %
Equity securities, at fair value
216

 
359

 
66
 %
Mortgage loans, net of allowances
10,340

 
13,465

 
30
 %
Investment funds
703

 
712

 
1
 %
Policy loans
488

 
466

 
(5
)%
Funds withheld at interest
15,023

 
15,280

 
2
 %
Derivative assets
1,043

 
2,386

 
129
 %
Short-term investments, at fair value
191

 
571

 
199
 %
Other investments
122

 
130

 
7
 %
Total investments
89,340

 
106,683

 
19
 %
Cash and cash equivalents
2,911

 
3,833

 
32
 %
Restricted cash
492

 
199

 
(60
)%
Investments in related parties
 
 
 
 


Available-for-sale securities, at fair value
1,437

 
2,368

 
65
 %
Trading securities, at fair value
249

 
306

 
23
 %
Equity securities, at fair value
120

 
381

 
218
 %
Mortgage loans
291

 
653

 
124
 %
Investment funds
2,232

 
2,763

 
24
 %
Funds withheld at interest
13,577

 
13,560

 
—
 %
Other investments
386

 
387

 
—
 %
Accrued investment income
682

 
781

 
15
 %
Reinsurance recoverable
5,534

 
5,697

 
3
 %
Deferred acquisition costs, deferred sales inducements and value of business acquired
5,907

 
4,960

 
(16
)%
Other assets
1,635

 
970

 
(41
)%
Assets of consolidated variable interest entities
 
 
 
 
 
Investments
 
 
 
 
 
Trading securities, at fair value
35

 
19

 
(46
)%
Equity securities, at fair value – related party
50

 
6

 
(88
)%
Investment funds
624

 
619

 
(1
)%
Cash and cash equivalents
2

 
3

 
50
 %
Other assets
1

 
14

 
NM

Total assets
$
125,505

 
$
144,202

 
15
 %

8


Condensed Consolidated Balance Sheets, continued
Unaudited (in millions, except percentages)
athenelogoa29.jpg
 
 
December 31, 2018
 
September 30, 2019
 
Δ
LIABILITIES
 
 
 
 
 
Interest sensitive contract liabilities
$
96,610

 
$
101,666

 
5
 %
Future policy benefits
16,704

 
22,909

 
37
 %
Other policy claims and benefits
142

 
129

 
(9
)%
Dividends payable to policyholders
118

 
115

 
(3
)%
Long-term debt
991

 
992

 
—
 %
Derivative liabilities
85

 
46

 
(46
)%
Payables for collateral on derivatives
969

 
2,323

 
140
 %
Funds withheld liability
721

 
768

 
7
 %
Other liabilities
888

 
1,708

 
92
 %
Liabilities of consolidated variable interest entities
1

 
1

 
—
 %
Total liabilities
$
117,229

 
$
130,657

 
11
 %
 
 
 
 
 
 
EQUITY
 
 
 
 
 
Preferred stock
$
—

 
$
—

 
—
 %
Common stock
—

 
—

 
—
 %
Additional paid-in-capital
3,462

 
4,435

 
28
 %
Retained earnings
5,286

 
6,668

 
26
 %
Accumulated other comprehensive income (loss)
(472
)
 
2,442

 
NM

Total shareholders’ equity
8,276

 
13,545

 
64
 %
Total liabilities and equity
$
125,505

 
$
144,202

 
15
 %

9


Investments (GAAP view)
Unaudited (in millions, except percentages)
athenelogoa29.jpg
 
 
December 31, 2018
 
September 30, 2019
 
Carrying Value
 
Percent of Total
 
Carrying Value
 
Percent of Total
INVESTMENTS AND INVESTMENTS IN RELATED PARTIES SUMMARY
 
 
 
 
 
 
 
Investments
 
 
 
 
 
 
 
Available-for-sale securities, at fair value
 
 
 
 
 
 
 
U.S. government and agencies
$
57

 
0.1
%
 
$
37

 
0.0
%
U.S. state, municipal and political subdivisions
1,293

 
1.2
%
 
1,492

 
1.2
%
Foreign governments
161

 
0.1
%
 
328

 
0.3
%
Corporate
37,097

 
34.4
%
 
47,045

 
37.0
%
CLO
5,361

 
5.0
%
 
6,871

 
5.4
%
ABS
4,920

 
4.6
%
 
5,111

 
4.0
%
CMBS
2,357

 
2.2
%
 
2,765

 
2.2
%
RMBS
8,019

 
7.5
%
 
7,254

 
5.7
%
Total available-for-sale securities, at fair value
59,265

 
55.1
%
 
70,903

 
55.8
%
Trading securities, at fair value
1,949

 
1.8
%
 
2,411

 
1.9
%
Equity securities, at fair value
216

 
0.2
%
 
359

 
0.3
%
Mortgage loans, net of allowances
10,340

 
9.6
%
 
13,465

 
10.6
%
Investment funds
703

 
0.6
%
 
712

 
0.5
%
Policy loans
488

 
0.4
%
 
466

 
0.4
%
Funds withheld at interest
15,023

 
14.0
%
 
15,280

 
12.0
%
Derivative assets
1,043

 
1.0
%
 
2,386

 
1.9
%
Short-term investments, at fair value
191

 
0.2
%
 
571

 
0.4
%
Other investments
122

 
0.1
%
 
130

 
0.1
%
Total investments
89,340

 
83.0
%
 
106,683

 
83.9
%
Investment in related parties
 
 
 
 
 
 
 
Available-for-sale securities, at fair value
1,437

 
1.3
%
 
2,368

 
1.9
%
Trading securities, at fair value
249

 
0.2
%
 
306

 
0.2
%
Equity securities, at fair value
120

 
0.1
%
 
381

 
0.3
%
Mortgage loans
291

 
0.3
%
 
653

 
0.5
%
Investment funds
2,232

 
2.1
%
 
2,763

 
2.2
%
Funds withheld at interest
13,577

 
12.6
%
 
13,560

 
10.7
%
Other investments
386

 
0.4
%
 
387

 
0.3
%
Total investments in related parties
18,292

 
17.0
%
 
20,418

 
16.1
%
Total investments including related parties
$
107,632

 
100.0
%
 
$
127,101

 
100.0
%


10


Invested Assets (Management view)
Unaudited (in millions, except percentages)
athenelogoa29.jpg
 
 
December 31, 2018
 
September 30, 2019
 
Invested Asset Value1
 
Percent of Total
 
Invested Asset Value1
 
Percent of Total
INVESTED ASSETS
 
 
 
 
 
 
 
Corporate
$
55,772

 
50.2
%
 
$
59,310

 
49.0
%
CLO
8,275

 
7.5
%
 
10,234

 
8.4
%
Credit
64,047

 
57.7
%
 
69,544

 
57.4
%
RMBS
9,814

 
8.9
%
 
8,537

 
7.0
%
Mortgage loans
14,423

 
13.0
%
 
18,514

 
15.3
%
CMBS
3,018

 
2.7
%
 
3,383

 
2.8
%
Real estate
27,255

 
24.6
%
 
30,434

 
25.1
%
ABS
7,706

 
6.9
%
 
8,935

 
7.4
%
Alternative investments
4,492

 
4.1
%
 
5,522

 
4.6
%
State, municipal, political subdivisions and foreign government
2,122

 
1.9
%
 
2,267

 
1.9
%
Equity securities
467

 
0.4
%
 
515

 
0.4
%
Short-term investments
765

 
0.7
%
 
623

 
0.5
%
U.S. government and agencies
134

 
0.1
%
 
53

 
0.0
%
Other investments
15,686

 
14.1
%
 
17,915

 
14.8
%
Cash and equivalents
2,881

 
2.6
%
 
2,041

 
1.7
%
Policy loans and other
1,165

 
1.0
%
 
1,206

 
1.0
%
Total invested assets
$
111,034

 
100.0
%
 
$
121,140

 
100.0
%
 
 
 
 
 
 
 
 
1 Please refer to Notes to the Financial Supplement for discussion on invested assets including alternative investments and Non-GAAP Measure Reconciliations for the reconciliation of investments including related parties to invested assets.



11


Investment Funds (GAAP view)
Unaudited (in millions, except percentages)
athenelogoa29.jpg
 
 
December 31, 2018
 
September 30, 2019
 
Carrying Value
 
Percent of Total
 
Carrying Value
 
Percent of Total
INVESTMENT FUNDS INCLUDING RELATED PARTIES1
 
 
 
 
 
 
 
Investment funds
 
 
 
 
 
 
 
Real estate
$
215

 
6.0
%
 
$
254

 
6.2
%
Credit funds
172

 
4.8
%
 
161

 
3.9
%
Private equity
253

 
7.1
%
 
231

 
5.7
%
Real assets
56

 
1.6
%
 
65

 
1.6
%
Natural resources
4

 
0.1
%
 
1

 
0.0
%
Other
3

 
0.1
%
 
—

 
—
%
Total investment funds
703

 
19.7
%
 
712

 
17.4
%
Investment funds – related parties
 
 
 
 
 
 
 
Differentiated investments
 
 
 
 
 
 
 
AmeriHome
463

 
13.0
%
 
469

 
11.5
%
Catalina
233

 
6.5
%
 
270

 
6.6
%
Athora
105

 
3.0
%
 
127

 
3.1
%
Venerable
92

 
2.6
%
 
94

 
2.3
%
Other
196

 
5.5
%
 
218

 
5.3
%
Total differentiated investments
1,089

 
30.6
%
 
1,178

 
28.8
%
Real estate
497

 
14.0
%
 
721

 
17.6
%
Credit funds
316

 
8.9
%
 
378

 
9.2
%
Private equity
18

 
0.5
%
 
69

 
1.7
%
Real assets
145

 
4.1
%
 
155

 
3.8
%
Natural resources
104

 
2.9
%
 
162

 
4.0
%
Public equities
63

 
1.8
%
 
100

 
2.4
%
Total investment funds – related parties
2,232

 
62.8
%
 
2,763

 
67.5
%
Investment funds – assets of consolidated VIEs
 
 
 
 
 
 
 
MidCap
553

 
15.5
%
 
556

 
13.6
%
Real estate
30

 
0.8
%
 
44

 
1.1
%
Real assets
41

 
1.2
%
 
19

 
0.4
%
Total investment funds – assets of consolidated VIEs
624

 
17.5
%
 
619

 
15.1
%
Total investment funds including related parties and funds owned by consolidated VIEs
$
3,559

 
100.0
%
 
$
4,094

 
100.0
%
 
 
 
 
 
 
 
 
1 Investment funds, including related parties and investment funds of consolidated VIE’s, is the GAAP measure which does not include investments that we view as alternative investments. Alternative investments include CLO equity tranche securities that are included in trading securities in the GAAP view, a nonredeemable preferred stock viewed as an alternative investment for management view but included in equity securities for GAAP view, investment funds included in our funds withheld at interest reinsurance portfolios, net assets of VIEs other than investment funds as well as royalties and other investments. Please refer to Notes to the Financial Supplement section for discussion on invested assets including alternative investments and the Non-GAAP Measure Reconciliations section for the reconciliation of investment funds to alternative investments.





12


Alternative Investments (Management view)
Unaudited (in millions, except percentages)
athenelogoa29.jpg
 
 
December 31, 2018
 
September 30, 2019
 
Invested Asset Value1
 
Percent of Total
 
Invested Asset Value1
 
Percent of Total
ALTERNATIVE INVESTMENTS
 
 
 
 
 
 
 
Retirement Services
 
 
 
 
 
 
 
Differentiated investments
 
 
 
 
 
 
 
AmeriHome
$
568

 
12.6
%
 
$
574

 
10.4
%
MidCap
553

 
12.3
%
 
556

 
10.1
%
Catalina
232

 
5.2
%
 
270

 
4.9
%
Venerable
92

 
2.1
%
 
94

 
1.7
%
Other
229

 
5.1
%
 
210

 
3.8
%
Total differentiated investments
1,674

 
37.3
%
 
1,704

 
30.9
%
Real estate
1,015

 
22.6
%
 
1,311

 
23.7
%
Credit
537

 
11.9
%
 
1,118

 
20.3
%
Private equity
279

 
6.2
%
 
326

 
5.9
%
Real assets
276

 
6.2
%
 
311

 
5.6
%
Natural resources
55

 
1.2
%
 
62

 
1.1
%
Other
4

 
0.1
%
 
47

 
0.9
%
Total Retirement Services
3,840

 
85.5
%
 
4,879

 
88.4
%
Corporate & Other
 
 
 
 
 
 
 
Athora
130

 
2.9
%
 
138

 
2.5
%
Credit
203

 
4.5
%
 
138

 
2.5
%
Natural resources
213

 
4.8
%
 
266

 
4.8
%
Public equities2
100

 
2.2
%
 
101

 
1.8
%
Other
6

 
0.1
%
 
—

 
—
%
Total Corporate & Other
652

 
14.5
%
 
643

 
11.6
%
Total alternative investments1
$
4,492

 
100.0
%
 
$
5,522

 
100.0
%
 
 
 
 
 
 
 
 
1 Alternative investments does not correspond to the total investment funds, including related parties and VIEs, on our condensed consolidated balance sheets. Alternative investments adjusts the GAAP presentation to include CLO equity tranche securities that are included in trading securities in the GAAP view, a nonredeemable preferred stock viewed as an alternative investment for management view but included in equity securities for GAAP view, investment funds included in our funds withheld at interest reinsurance portfolios, net assets of VIEs other than investment funds, as well as royalties and other investments. Please refer to Notes to the Financial Supplement section for discussion on invested assets including alternative investments and the Non-GAAP Measure Reconciliations section for the reconciliation of investment funds, including related parties and VIEs to alternative investments.
2 Public Equities include: OneMain Financial (OMF) - 2.8 million and 2.8 million of shares, respectively, as of September 30, 2019 and December 31, 2018; Caesars Entertainment (Ticker: CZR) - 0.0 million and 5.5 million of shares as of September 30, 2019 and December 31, 2018.


13


Funds Withheld at Interest (GAAP view)
Unaudited (in millions, except percentages)
athenelogoa29.jpg
 
 
December 31, 2018
 
September 30, 2019
 
Carrying Value
 
Percent of Total
 
Carrying Value
 
Percent of Total
FUNDS WITHHELD AT INTEREST INCLUDING RELATED PARTIES
 
 
 
 
 
 
 
Fixed maturity securities
 
 
 
 
 
 
 
U.S. government and agencies
$
77

 
0.3
 %
 
$
17

 
0.1
 %
U.S. state, municipal and political subdivisions
563

 
2.0
 %
 
488

 
1.7
 %
Foreign governments
145

 
0.5
 %
 
179

 
0.6
 %
Corporate
16,267

 
56.9
 %
 
15,143

 
52.5
 %
CLO
1,990

 
7.0
 %
 
2,470

 
8.6
 %
ABS
1,601

 
5.6
 %
 
2,142

 
7.4
 %
CMBS
575

 
2.0
 %
 
749

 
2.6
 %
RMBS
1,876

 
6.6
 %
 
1,619

 
5.6
 %
Total fixed maturity securities
23,094

 
80.9
 %
 
22,807

 
79.1
 %
Equity securities
66

 
0.2
 %
 
230

 
0.8
 %
Mortgage loans
3,815

 
13.3
 %
 
4,508

 
15.6
 %
Investment funds
660

 
2.3
 %
 
745

 
2.6
 %
Derivative assets
77

 
0.3
 %
 
188

 
0.6
 %
Short-term investments
641

 
2.2
 %
 
107

 
0.4
 %
Cash and cash equivalents
455

 
1.6
 %
 
405

 
1.4
 %
Other assets and liabilities
(208
)
 
(0.8
)%
 
(150
)
 
(0.5
)%
Total funds withheld at interest including related parties1
$
28,600

 
100.0
 %
 
$
28,840

 
100.0
 %
 
 
 
 
 
 
 
 
1 Funds withheld at interest represents a receivable for amounts contractually withheld by ceding companies in accordance with modco and funds withheld reinsurance agreements in which we act as the reinsurer. In managing our business we utilize invested assets, where we adjust the presentation for funds withheld and modco transactions to include or exclude the underlying investments based upon the contractual transfer of economic exposure to such underlying investments.


14


Net Investment Earned Rates (NIER)
Unaudited (In millions, except percentages)
athenelogoa29.jpg
 
 
Quarterly Trends
 
Δ
 
Year-to-Date
 
Δ
 
3Q’18
 
4Q’18
 
1Q’19
 
2Q’19
 
3Q’19
 
Q/Q
 
Y/Y
 
2018
 
2019
 
Y/Y
NIER – CONSOLIDATED
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income and other investments
4.33
%
 
4.35
 %
 
4.28
%
 
4.26
%
 
4.11
%
 
(15)bps

 
(22)bps

 
4.38
%
 
4.21
%
 
(17)bps

Alternative investments
9.13
%
 
5.81
 %
 
4.36
%
 
14.13
%
 
9.26
%
 
(487)bps

 
13bps

 
9.57
%
 
9.30
%
 
(27)bps

Total net investment earned rate
4.52
%
 
4.40
 %
 
4.28
%
 
4.67
%
 
4.35
%
 
(32)bps

 
(17)bps

 
4.61
%
 
4.43
%
 
(18)bps

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NIER SUMMARY – RETIREMENT SERVICES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income and other investments
4.33
%
 
4.35
 %
 
4.28
%
 
4.26
%
 
4.11
%
 
(15)bps

 
(22)bps

 
4.38
%
 
4.21
%
 
(17)bps

Alternative investments
10.65
%
 
11.00
 %
 
2.13
%
 
14.46
%
 
8.90
%
 
(556)bps

 
(175)bps

 
11.30
%
 
8.63
%
 
(267)bps

Total net investment earned rate
4.55
%
 
4.57
 %
 
4.21
%
 
4.63
%
 
4.31
%
 
(32)bps

 
(24)bps

 
4.63
%
 
4.38
%
 
(25)bps

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income and other investment income
$
1,021

 
$
1,132

 
$
1,151

 
$
1,170

 
$
1,159

 
(1
)%
 
14
 %
 
$
2,693

 
$
3,480

 
29
 %
Alternatives investment income
87

 
99

 
20

 
151

 
105

 
(30
)%
 
21
 %
 
264

 
276

 
5
 %
Total net investment earnings
$
1,108

 
$
1,231

 
$
1,171

 
$
1,321

 
$
1,264

 
(4
)%
 
14
 %
 
$
2,957

 
$
3,756

 
27
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income and other investments
$
94,227

 
$
104,342

 
$
107,641

 
$
109,888

 
$
112,611

 
2
 %
 
20
 %
 
$
82,050

 
$
110,126

 
34
 %
Alternatives investments
3,273

 
3,597

 
3,802

 
4,171

 
4,727

 
13
 %
 
44
 %
 
3,113

 
4,265

 
37
 %
Total average invested assets
$
97,500

 
$
107,939

 
$
111,443

 
$
114,059

 
$
117,338

 
3
 %
 
20
 %
 
$
85,163


$
114,391

 
34
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NIER SUMMARY – CORPORATE & OTHER
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income and other investments
4.33
%
 
4.34
 %
 
4.28
%
 
4.26
%
 
4.12
%
 
(14)bps

 
(21)bps

 
4.68
%
 
3.99
%
 
(69)bps

Alternative investments
1.81
%
 
(22.46
)%
 
17.66
%
 
11.96
%
 
11.95
%
 
(1)bps

 
1,014bps

 
1.74
%
 
13.79
%
 
1,205bps

Total net investment earned rate
3.51
%
 
(7.57
)%
 
13.19
%
 
8.39
%
 
7.28
%
 
(111)bps

 
377bps

 
3.86
%
 
8.92
%
 
506bps

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income and other investment income
$
15

 
$
10

 
$
3

 
$
5

 
$
9

 
80
 %
 
(40
)%
 
$
62

 
$
17

 
(73
)%
Alternatives investment income
3

 
(37
)
 
29

 
19

 
19

 
—
 %
 
NM

 
9

 
67

 
NM

Total net investment earnings
$
18

 
$
(27
)
 
$
32

 
$
24

 
$
28

 
17
 %
 
56
 %
 
$
71

 
$
84

 
18
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income and other investments
$
1,422

 
$
824

 
$
320

 
$
539

 
$
935

 
73
 %
 
(34
)%
 
$
1,785

 
$
627

 
(65
)%
Alternatives investments
681

 
660

 
639

 
623

 
632

 
1
 %
 
(7
)%
 
688

 
635

 
(8
)%
Total average invested assets
$
2,103

 
$
1,484

 
$
959

 
$
1,162

 
$
1,567

 
35
 %
 
(25
)%
 
$
2,473

 
$
1,262

 
(49
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: Please refer to Notes to the Financial Supplement section and the Non-GAAP Measure Reconciliations for discussion on net investment earned rate. The investment results above are presented net of investment management fees.



15


Net Investment Earned Rates (NIER), continued
Unaudited (in millions, except percentages)
athenelogoa29.jpg
 
Quarterly Trends
 
Δ
 
Year-to-Date
 
Δ
 
3Q’18
 
4Q’18
 
1Q’19
 
2Q’191
 
3Q’19
 
Q/Q
 
Y/Y
 
2018
 
2019
 
Y/Y
NIER BY ASSET CLASS
Corporate securities
3.88
%
 
3.99
%
 
3.93
%
 
4.12
%
 
3.94
%
 
(18)bps
 
6bps
 
3.93
%
 
3.99
%
 
6bps
Structured securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RMBS
6.04
%
 
6.03
%
 
6.03
%
 
5.07
%
 
4.39
%
 
(68)bps
 
(165)bps
 
5.78
%
 
5.21
%
 
(57)bps
CLO
4.95
%
 
4.69
%
 
4.76
%
 
4.73
%
 
4.57
%
 
(16)bps
 
(38)bps
 
5.03
%
 
4.69
%
 
(34)bps
ABS
4.59
%
 
4.55
%
 
3.95
%
 
4.34
%
 
4.14
%
 
(20)bps
 
(45)bps
 
4.58
%
 
4.15
%
 
(43)bps
CMBS
4.24
%
 
4.18
%
 
4.16
%
 
3.93
%
 
3.96
%
 
3bps
 
(28)bps
 
4.33
%
 
4.02
%
 
(31)bps
Total structured securities
5.19
%
 
5.07
%
 
4.90
%
 
4.64
%
 
4.33
%
 
(31)bps
 
(86)bps
 
5.15
%
 
4.63
%
 
(52)bps
State, municipal, political subdivisions and U.S. and foreign government
4.02
%
 
4.19
%
 
4.27
%
 
3.80
%
 
3.88
%
 
8bps
 
(14)bps
 
4.40
%
 
4.00
%
 
(40)bps
Mortgage loans
4.97
%
 
4.99
%
 
4.91
%
 
4.54
%
 
4.66
%
 
12bps
 
(31)bps
 
5.24
%
 
4.67
%
 
(57)bps
Alternative investments
9.13
%
 
5.81
%
 
4.36
%
 
14.13
%
 
9.26
%
 
(487)bps
 
13bps
 
9.57
%
 
9.30
%
 
(27)bps
Other U.S. and Bermuda invested assets
2.55
%
 
2.45
%
 
2.70
%
 
2.84
%
 
2.94
%
 
10bps
 
39bps
 
2.31
%
 
2.85
%
 
54bps
Consolidated net investment earned rate
4.52
%
 
4.40
%
 
4.28
%
 
4.67
%
 
4.35
%
 
(32)bps
 
(17)bps
 
4.61
%
 
4.43
%
 
(18)bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: Please refer to Notes to the Financial Supplement section and the Non-GAAP Measure Reconciliations for discussion on net investment earned rate. The investment results above are presented net of investment management fees. 1 In the second quarter of 2019, we implemented a new management fee structure which changed the allocation of fees by asset class. Although the implementation of the new management fee structure had impacts on the allocation of fees by asset class, on a consolidated basis the impact was immaterial.


16


Credit Quality of Securities
Unaudited (in millions, except percentages)
athenelogoa29.jpg
 
 
December 31, 2018
 
September 30, 2019
CREDIT QUALITY OF AFS SECURITIES (GAAP VIEW)
Fair Value
 
Percent of Total
 
Fair Value
 
Percent of Total
NAIC designation
 
 
 
 
 
 
 
1
$
31,311

 
51.6
%
 
$
37,451

 
51.1
%
2
25,871

 
42.6
%
 
32,125

 
43.8
%
Total investment grade
57,182

 
94.2
%
 
69,576

 
94.9
%
3
2,746

 
4.5
%
 
2,845

 
3.9
%
4
533

 
0.9
%
 
709

 
1.0
%
5
232

 
0.4
%
 
124

 
0.2
%
6
9

 
0.0
%
 
17

 
0.0
%
Total below investment grade
3,520

 
5.8
%
 
3,695

 
5.1
%
Total AFS securities including related parties
$
60,702

 
100.0
%
 
$
73,271

 
100.0
%
 
 
 
 
 
 
 
 
NRSRO designation
 
 
 
 
 
 
 
AAA/AA/A
$
19,690

 
32.4
%
 
$
26,726

 
36.5
%
BBB
23,326

 
38.4
%
 
28,818

 
39.3
%
Non-rated1
9,624

 
15.9
%
 
9,898

 
13.5
%
Total investment grade2
52,640

 
86.7
%
 
65,442

 
89.3
%
BB
2,670

 
4.4
%
 
3,126

 
4.3
%
B
875

 
1.4
%
 
887

 
1.2
%
CCC
2,340

 
3.9
%
 
2,083

 
2.8
%
CC and lower
1,296

 
2.1
%
 
1,171

 
1.6
%
Non-rated1
881

 
1.5
%
 
562

 
0.8
%
Total below investment grade
8,062

 
13.3
%
 
7,829

 
10.7
%
Total AFS securities including related parties
$
60,702

 
100.0
%
 
$
73,271

 
100.0
%
 
 
 
 
 
 
 
 
 
Invested Asset Value3
 
% NAIC 1 or 2
 
Invested Asset Value3
 
% NAIC 1 or 2
SUMMARY OF NAIC 1 & 2 DESIGNATIONS BY ASSET CLASS (MANAGEMENT VIEW)
 
 
 
 
 
 
 
Corporate securities
$
52,496

 
93.8
%
 
$
55,512

 
93.6
%
RMBS
9,410

 
96.0
%
 
8,161

 
95.6
%
CLO
7,823

 
94.5
%
 
10,061

 
98.3
%
ABS
7,146

 
92.8
%
 
8,160

 
91.3
%
CMBS
2,797

 
92.7
%
 
3,253

 
96.2
%
Total structured securities
27,176

 
94.3
%
 
29,635

 
95.3
%
State, municipal, political subdivisions and U.S. and foreign government
2,233

 
99.0
%
 
2,302

 
99.2
%
Short-term investments
775

 
100.0
%
 
593

 
95.2
%
Total NAIC 1 & 2 Designations
$
82,680

 
 
 
$
88,042

 
 
 
 
 
 
 
 
 
 
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 loan-backed and structured securities, the NAIC designation methodology differs in significant respects from the NRSRO rating methodology. 2 We view the NAIC designation methodology as the most appropriate way to view our AFS portfolio when evaluating credit risk since a large portion of our holdings were purchased at a significant discount to par. With respect to loan-backed and structured securities, the NAIC designation methodology differs in significant respects from the NRSRO rating methodology. NRSRO ratings methodology is focused on the likelihood of recovery of all contractual payments, including principal at par regardless of entry price, while the NAIC designation methodology considers our investment at amortized cost, and the likelihood of recovery of that book value as opposed to the likelihood of the recovery of all contractual payments. 3 Please refer to Notes to the Financial Supplement section for discussion on invested assets and Non-GAAP Measure Reconciliations section for the reconciliation of total investments including related parties to invested assets.

17


Credit Quality of Invested Assets (Management view)
Unaudited (In millions, except percentages)
 
athenelogoa29.jpg
 
 
December 31, 2018
 
September 30, 2019
 
 
December 31, 2018
 
September 30, 2019
 
Inv. Asset Value1
 
% of Total
 
Inv. Asset Value1
 
% of Total
 
 
Inv. Asset Value1
 
% of Total
 
Inv. Asset Value1
 
% of Total
CREDIT QUALITY OF INVESTED ASSETS
 
 
 
 
 
 
 
CREDIT QUALITY OF INVESTED ASSETS
 
 
 
 
 
 
NAIC designation
 
 
 
 
 
 
 
 
NRSRO designation
 
 
 
 
 
 
 
1
$
45,287

 
51.7
%
 
$
46,916

 
50.2
%
 
AAA/AA/A
$
30,630

 
35.0
%
 
$
34,080

 
36.5
%
2
37,393

 
42.7
%
 
41,126

 
44.1
%
 
BBB
33,289

 
38.0
%
 
36,347

 
38.9
%
Non-rated3
—

 
—
%
 
—

 
—
%
 
Non-rated3
13,522

 
15.4
%
 
13,040

 
14.0
%
Total investment grade
82,680

 
94.4
%
 
88,042

 
94.3
%
 
Total investment grade
77,441

 
88.4
%
 
83,467

 
89.4
%
3
3,659

 
4.2
%
 
3,818

 
4.1
%
 
BB
3,587

 
4.1
%
 
3,934

 
4.2
%
4
930

 
1.1
%
 
1,133

 
1.2
%
 
B
1,316

 
1.5
%
 
1,365

 
1.5
%
5
315

 
0.3
%
 
315

 
0.4
%
 
CCC
2,610

 
3.0
%
 
2,317

 
2.5
%
6
22

 
0.0
%
 
34

 
0.0
%
 
CC and lower
1,412

 
1.6
%
 
1,251

 
1.3
%
Non-rated3
—

 
—
%
 
—

 
—
%
 
Non-rated3
1,240

 
1.4
%
 
1,008

 
1.1
%
Total below investment grade
4,926

 
5.6
%
 
5,300

 
5.7
%
 
Total below investment grade
10,165

 
11.6
%
 
9,875

 
10.6
%
Total NAIC designated assets2
87,606

 
100.0
%
 
93,342

 
100.0
%
 
Total NRSRO designated assets2
87,606

 
100.0
%
 
93,342

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets without NAIC designation
 
 
 
 
 
 
 
Assets without NRSRO designation
 

 
 
 
 
Commercial mortgage loans
 
 
 
 
 
 
 
 
Commercial mortgage loans
 
 


 
 
 
 
CM1
4,276

 
39.3
%
 
4,061

 
29.1
%
 
CM1
4,276

 
39.3
%
 
4,061

 
29.1
%
CM2
4,184

 
38.4
%
 
5,844

 
41.8
%
 
CM2
4,184

 
38.4
%
 
5,844

 
41.8
%
CM3
1,894

 
17.4
%
 
3,633

 
26.0
%
 
CM3
1,894

 
17.4
%
 
3,633

 
26.0
%
CM4
393

 
3.6
%
 
393

 
2.8
%
 
CM4
393

 
3.6
%
 
393

 
2.8
%
CM5
138

 
1.3
%
 
40

 
0.3
%
 
CM5
138

 
1.3
%
 
40

 
0.3
%
CM6
—

 
—
%
 
—

 
—
%
 
CM6
—

 
—
%
 
—

 
—
%
CM7
—

 
—
%
 
—

 
—
%
 
CM7
—

 
—
%
 
—

 
—
%
Total CMLs
10,885

 
100.0
%
 
13,971

 
100.0
%
 
Total CMLs
10,885

 
100.0
%
 
13,971

 
100.0
%
Residential mortgage loans
 
 
 
 
 
 
 
 
Residential mortgage loans
 
 


 
 
 
 
In good standing
3,490

 
98.7
%
 
4,479

 
98.6
%
 
In good standing
3,490

 
98.7
%
 
4,479

 
98.6
%
90 days late
33

 
0.9
%
 
34

 
0.7
%
 
90 days late
33

 
0.9
%
 
34

 
0.7
%
In foreclosure
15

 
0.4
%
 
30

 
0.7
%
 
In foreclosure
15

 
0.4
%
 
30

 
0.7
%
Total RMLs
3,538

 
100.0
%
 
4,543

 
100.0
%
 
Total RMLs
3,538

 
100.0
%
 
4,543

 
100.0
%
Alternative investments
4,492

 


 
5,522

 
 
 
Alternative investments
4,492

 


 
5,522

 
 
Cash and equivalents
2,881

 


 
2,041

 
 
 
Cash and equivalents
2,881

 


 
2,041

 
 
Equity securities
467

 
 
 
515

 
 
 
Equity securities
467

 
 
 
515

 
 
Other4
1,165

 


 
1,206

 
 
 
Other4
1,165

 


 
1,206

 
 
Total invested assets
$
111,034

 


 
$
121,140

 
 
 
Total invested assets
$
111,034

 


 
$
121,140

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 Please refer to Notes to the Financial Supplement section for discussion on invested assets and Non-GAAP Measure Reconciliations section for the reconciliation of total investments including related parties to invested assets. 2 NAIC and NRSRO designations include corporates, CLO, RMBS, CMBS, ABS, state, municipal, political subdivisions and foreign government securities, short-term investments and U.S. government and agencies securities. 3 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 loan-backed and structured securities, the NAIC designation methodology differs in significant respects from the NRSRO rating methodology. 4 Other includes policy loans, accrued interest, and other invested assets.


18


Credit Quality of Invested Assets – RMBS, CLOs, ABS (Management view)
Unaudited (In millions, except percentages)
athenelogoa29.jpg
 
 
December 31, 2018
 
September 30, 2019
 
 
December 31, 2018
 
September 30, 2019
 
Inv. Asset Value1
 
% of Total
 
Inv. Asset Value1
 
% of Total
 
 
Inv. Asset Value1
 
% of Total
 
Inv. Asset Value1
 
% of Total
CREDIT QUALITY OF RMBS – NAIC DESIGNATION
 
 
 
 
 
CREDIT QUALITY OF RMBS – NRSRO DESIGNATION
1
$
9,097

 
92.8
%
 
$
7,813

 
91.5
%
 
AAA/AA/A
$
1,129

 
11.5
%
 
$
829

 
9.7
%
2
313

 
3.2
%
 
348

 
4.1
%
 
BBB
314

 
3.2
%
 
442

 
5.2
%
Non-rated2
—

 
—
%
 
—

 
—
%
 
Non-rated2
3,337

 
34.0
%
 
2,983

 
34.9
%
Total investment grade
9,410

 
96.0
%
 
8,161

 
95.6
%
 
Total investment grade
4,780

 
48.7
%
 
4,254

 
49.8
%
3
248

 
2.5
%
 
190

 
2.2
%
 
BB
507

 
5.1
%
 
343

 
4.0
%
4
112

 
1.1
%
 
146

 
1.7
%
 
B
372

 
3.8
%
 
295

 
3.5
%
5
28

 
0.3
%
 
24

 
0.3
%
 
CCC
2,521

 
25.7
%
 
2,221

 
26.0
%
6
16

 
0.1
%
 
16

 
0.2
%
 
CC and lower
1,410

 
14.4
%
 
1,236

 
14.5
%
Non-rated2
—

 
—
%
 
—

 
—
%
 
Non-rated2
224

 
2.3
%
 
188

 
2.2
%
Total below investment grade
404

 
4.0
%
 
376

 
4.4
%
 
Total below investment grade
5,034

 
51.3
%
 
4,283

 
50.2
%
Total invested assets RMBS
$
9,814

 
100.0
%
 
$
8,537

 
100.0
%
 
Total invested assets RMBS
$
9,814

 
100.0
%
 
$
8,537

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CREDIT QUALITY OF CLOs – NAIC DESIGNATION
 
 
 
 
 
CREDIT QUALITY OF CLOs – NRSRO DESIGNATION
1
$
4,666

 
56.4
%
 
$
5,761

 
56.3
%
 
AAA/AA/A
$
4,530

 
54.7
%
 
$
5,695

 
55.7
%
2
3,157

 
38.1
%
 
4,300

 
42.0
%
 
BBB
3,555

 
43.0
%
 
4,312

 
42.1
%
Non-rated2
—

 
—
%
 
—

 
—
%
 
Non-rated2
—

 
—
%
 
54

 
0.5
%
Total investment grade
7,823

 
94.5
%
 
10,061

 
98.3
%
 
Total investment grade
8,085

 
97.7
%
 
10,061

 
98.3
%
3
423

 
5.1
%
 
144

 
1.4
%
 
BB
161

 
1.9
%
 
144

 
1.4
%
4
22

 
0.3
%
 
22

 
0.2
%
 
B
29

 
0.4
%
 
22

 
0.2
%
5
7

 
0.1
%
 
7

 
0.1
%
 
CCC
—

 
—
%
 
7

 
0.1
%
6
—

 
—
%
 
—

 
—
%
 
CC and lower
—

 
—
%
 
—

 
—
%
Total below investment grade
452

 
5.5
%
 
173

 
1.7
%
 
Total below investment grade
190

 
2.3
%
 
173

 
1.7
%
Total invested assets CLOs
$
8,275

 
100.0
%
 
$
10,234

 
100.0
%
 
Total invested assets CLOs
$
8,275

 
100.0
%
 
$
10,234

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CREDIT QUALITY OF ABS – NAIC DESIGNATION
 
 
 
 
 
CREDIT QUALITY OF ABS – NRSRO DESIGNATION
1
$
4,720

 
61.3
%
 
$
5,280

 
59.1
%
 
AAA/AA/A
$
3,319

 
43.1
%
 
$
4,265

 
47.7
%
2
2,426

 
31.5
%
 
2,880

 
32.2
%
 
BBB
1,948

 
25.3
%
 
2,165

 
24.2
%
Non-rated2
—

 
—
%
 
—

 
—
%
 
Non-rated2
1,661

 
21.5
%
 
1,729

 
19.4
%
Total investment grade
7,146

 
92.8
%
 
8,160

 
91.3
%
 
Total investment grade
6,928

 
89.9
%
 
8,159

 
91.3
%
3
369

 
4.8
%
 
499

 
5.6
%
 
BB
436

 
5.7
%
 
475

 
5.3
%
4
43

 
0.5
%
 
133

 
1.5
%
 
B
89

 
1.1
%
 
102

 
1.2
%
5
148

 
1.9
%
 
143

 
1.6
%
 
CCC
—

 
—
%
 
—

 
—
%
6
—

 
—
%
 
—

 
—
%
 
CC and lower
—

 
—
%
 
—

 
—
%
Non-rated2
—

 
—
%
 
—

 
—
%
 
Non-rated2
253

 
3.3
%
 
199

 
2.2
%
Total below investment grade
560

 
7.2
%
 
775

 
8.7
%
 
Total below investment grade
778

 
10.1
%
 
776

 
8.7
%
Total invested assets ABS
$
7,706

 
100.0
%
 
$
8,935

 
100.0
%
 
Total invested assets ABS
$
7,706

 
100.0
%
 
$
8,935

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 Please refer to Notes to the Financial Supplement section for discussion on invested assets and Non-GAAP Measure Reconciliations section for the reconciliation of total investments including related parties to invested assets. 2 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 loan-backed and structured securities, the NAIC designation methodology differs in significant respects from the NRSRO rating methodology.

19



Reserve Liabilities & Rollforwards
Unaudited (in millions, except percentages)
athenelogoa29.jpg
 
 
December 31, 2018
 
September 30, 2019
 
Dollars
 
Percent of Total
 
Dollars
 
Percent of Total
RESERVE LIABILITIES
 
 
 
 
 
 
 
Fixed indexed annuities
$
73,224

 
68.0
%
 
$
77,065

 
64.8
%
Fixed rate annuities
17,802

 
16.5
%
 
18,960

 
16.0
%
Total deferred annuities
91,026

 
84.5
%
 
96,025

 
80.8
%
Pension risk transfer annuities
4,710

 
4.4
%
 
9,755

 
8.2
%
Payout annuities
6,009

 
5.6
%
 
6,217

 
5.2
%
Funding agreements
3,826

 
3.5
%
 
4,616

 
3.9
%
Life and other
2,161

 
2.0
%
 
2,212

 
1.9
%
Total reserve liabilities
$
107,732

 
100.0
%
 
$
118,825

 
100.0
%
 
Quarterly Trends
 
Δ
 
Year-to-Date
 
Δ
 
3Q’18
 
4Q’18
 
1Q’19
 
2Q’19
 
3Q’19
 
Q/Q
 
Y/Y
 
2018
 
2019
 
Y/Y
RESERVE LIABILITY ROLLFORWARD
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reserve liabilities – beginning
$
96,248

 
$
98,553

 
$
107,732

 
$
111,791

 
$
114,680

 
3
 %
 
19
 %
 
$
75,447

 
$
107,732

 
43
 %
Deposits1
3,407

 
5,269

 
4,860

 
4,153

 
5,759

 
39
 %
 
69
 %
 
8,336

 
14,772

 
77
 %
Acquisition and block reinsurance2
—

 
7,878

 
—

 
—

 
—

 
—
 %
 
—
 %
 
19,104

 
—

 
(100
)%
Withdrawals
(2,167
)
 
(3,125
)
 
(2,780
)
 
(2,907
)
 
(2,807
)
 
3
 %
 
(30
)%
 
(5,734
)
 
(8,494
)
 
(48
)%
Other reserve changes
1,065

 
(843
)
 
1,979

 
1,643

 
1,193

 
(27
)%
 
12
 %
 
1,400

 
4,815

 
244
 %
Reserve liabilities – ending
$
98,553

 
$
107,732

 
$
111,791

 
$
114,680

 
$
118,825

 
4
 %
 
21
 %
 
$
98,553

 
$
118,825

 
21
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DEFERRED ANNUITY ACCOUNT VALUE ROLLFORWARD3
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Account value – beginning
$
78,848

 
$
80,499

 
$
89,435

 
$
90,184

 
$
91,165

 
1
 %
 
16
 %
 
$
58,539

 
$
89,435

 
53
 %
Deposits1
2,783

 
3,110

 
2,800

 
2,976

 
2,483

 
(17
)%
 
(11
)%
 
6,828

 
8,259

 
21
 %
Acquisition and block reinsurance2
—

 
7,815

 
—

 
—

 
—

 
—
 %
 
—
 %
 
17,721

 
—

 
(100
)%
Premium and interest bonuses
77

 
68

 
58

 
68

 
55

 
(19
)%
 
(29
)%
 
197

 
181

 
(8
)%
Fixed and index credits to policyholders
754

 
559

 
423

 
591

 
560

 
(5
)%
 
(26
)%
 
2,085

 
1,574

 
(25
)%
Surrenders and benefits paid
(1,867
)
 
(2,513
)
 
(2,431
)
 
(2,548
)
 
(2,382
)
 
7
 %
 
(28
)%
 
(4,616
)
 
(7,361
)
 
(59
)%
Fee and product charges
(96
)
 
(103
)
 
(101
)
 
(106
)
 
(113
)
 
(7
)%
 
(18
)%
 
(255
)
 
(320
)
 
(25
)%
Account value – ending
$
80,499

 
$
89,435

 
$
90,184

 
$
91,165

 
$
91,768

 
1
 %
 
14
 %
 
$
80,499

 
$
91,768

 
14
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
INSTITUTIONAL RESERVE LIABILITY ROLLFORWARD (PENSION RISK TRANSFER AND FUNDING AGREEMENTS)
 
 
 
 
 
 
 
 
 
 
Reserve liabilities – beginning
$
6,426

 
$
6,862

 
$
8,536

 
$
10,404

 
$
11,354

 
9
 %
 
77
 %
 
$
6,038

 
$
8,536

 
41
 %
Deposits
472

 
2,010

 
1,922

 
1,008

 
3,106

 
208
 %
 
NM

 
1,222

 
6,036

 
NM

Withdrawals
(93
)
 
(405
)
 
(143
)
 
(158
)
 
(205
)
 
(30
)%
 
(120
)%
 
(541
)
 
(506
)
 
6
 %
Other reserve changes
57

 
69

 
89

 
100

 
116

 
16
 %
 
104
 %
 
143

 
305

 
113
 %
Reserve liabilities – ending
$
6,862

 
$
8,536

 
$
10,404

 
$
11,354

 
$
14,371

 
27
 %
 
109
 %
 
$
6,862

 
$
14,371

 
109
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: Please refer to Notes to the Financial Supplement section and the Non-GAAP Measure Reconciliations for discussion on reserve liabilities. 1 Deposits equal deposits from our retail, flow reinsurance and institutional channels as well as premiums and deposits for life and products other than deferred annuities or our institutional products, renewal deposits on older blocks of business and annuitizations. 2 Acquisition and block reinsurance includes total reserves at inception. Q4 2018 includes Lincoln block reinsurance, while the year-to-date includes Voya block reinsurance in Q2 2018 as well. 3 The account value rollforwards on deferred annuities include our fixed rate and fixed indexed annuities and are net of ceded reinsurance activity.

20


Deferred Annuity Liability Characteristics
Unaudited (in millions, except percentages)
athenelogoa29.jpg
 
 
Surrender charge (gross)
 
Percent of total
 
Surrender charge
(net of MVA)
 
Percent of total
SURRENDER CHARGE PERCENTAGES ON DEFERRED ANNUITIES ACCOUNT VALUE
 
 
 
 
 
 
 
No Surrender Charge
$
20,728

 
22.6
%
 
$
20,728

 
22.6
%
0.0% < 2.0%
888

 
1.0
%
 
2,692

 
2.9
%
2.0% < 4.0%
3,418

 
3.7
%
 
7,644

 
8.3
%
4.0% < 6.0%
8,885

 
9.7
%
 
15,161

 
16.5
%
6.0% or greater
57,849

 
63.0
%
 
45,543

 
49.7
%
 
$
91,768

 
100.0
%
 
$
91,768

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
Surrender charge (gross)
 
MVA benefit
 
Surrender charge (net)
Aggregate surrender charge protection
 
 
6.2
%
 
(0.6
)%
 
5.6
%
 
Deferred annuities
 
Percent of total
 
Average surrender charge (gross)
YEARS OF SURRENDER CHARGE REMAINING ON DEFERRED ANNUITIES ACCOUNT VALUE
 
 
 
 
 
No Surrender Charge
$
20,728

 
22.6
%
 
—
%
Less than 2
15,988

 
17.4
%
 
5.2
%
2 to less than 4
17,051

 
18.6
%
 
6.7
%
4 to less than 6
12,409

 
13.5
%
 
8.2
%
6 to less than 8
10,680

 
11.6
%
 
9.5
%
8 to less than 10
11,188

 
12.2
%
 
10.4
%
10 or greater
3,724

 
4.1
%
 
14.2
%
 
$
91,768

 
100.0
%
 
 
 
At minimum guarantees
 
Total account value
 
Percent of total account value at minimum guarantees
MINIMUM GUARANTEES ON DEFERRED ANNUITIES
 
 
 
 
 
Fixed indexed annuities
$
16,447

 
$
73,092

 
23
%
Fixed rate annuities
7,642

 
18,676

 
41
%
Total deferred annuities
$
24,089

 
$
91,768

 
26
%
 
 
 
 
 
 
 
 
 
 
 
September 30, 2019
Distance to guarantees1
 
 
 
 
100 – 110

 
 
 
 
 
 
1 The distance to guarantee reflects the average distance in option costs between the current and guaranteed rates for indexed strategies and between current and guaranteed fixed rates for fixed strategies. The option costs used reflects an estimate of option cost in the market.
 
December 31, 2018
 
September 30, 2019
 
Δ
DEFERRED ANNUITY RIDER RESERVE SUMMARY
 
 
 
 
 
Rider reserve
$
3,025

 
$
3,989

 
32
%
Account value with rider reserves
36,445

 
37,366

 
3
%
Rider reserve as a percentage of account value with rider reserves
8.3
%
 
10.7
%
 
240bps


21


Capitalization & Regulatory Capital Ratios
Unaudited (in millions, except percentages)
athenelogoa29.jpg
 
 
Quarterly Trends
 
Δ
 
3Q’18
 
4Q’18
 
1Q’19
 
2Q’19
 
3Q’19
 
Q/Q
 
Y/Y
CAPITALIZATION
 
 
 
 
 
 
 
 
 
 
 
 
 
Total debt
$
991

 
$
991

 
$
991

 
$
991

 
$
992

 
—
 %
 
—
 %
Total shareholders’ equity
8,978

 
8,276

 
10,117

 
12,365

 
13,545

 
10
 %
 
51
 %
Total capitalization
9,969

 
9,267

 
11,108

 
13,356

 
14,537

 
9
 %
 
46
 %
Less: Accumulated other comprehensive income (loss) (AOCI)
33

 
(472
)
 
706

 
1,760

 
2,442

 
39
 %
 
NM

Less: Accumulated change in fair value of reinsurance assets
(31
)
 
(75
)
 
309

 
639

 
727

 
14
 %
 
NM

Total adjusted capitalization
$
9,967

 
$
9,814

 
$
10,093

 
$
10,957

 
$
11,368

 
4
 %
 
14
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
 
Total shareholders’ equity
$
8,978

 
$
8,276

 
$
10,117

 
$
12,365

 
$
13,545

 
10
 %
 
51
 %
Less: Preferred stock
—

 
—

 
—

 
839

 
1,172

 
40
 %
 
100
 %
Total common shareholders’ equity
8,978

 
8,276

 
10,117

 
11,526

 
12,373

 
7
 %
 
38
 %
Less: AOCI
33

 
(472
)
 
706

 
1,760

 
2,442

 
39
 %
 
NM

Less: Accumulated change in fair value of reinsurance assets
(31
)
 
(75
)
 
309

 
639

 
727

 
14
 %
 
NM

Total adjusted common shareholders’ equity
$
8,976

 
$
8,823

 
$
9,102

 
$
9,127

 
$
9,204

 
1
 %
 
3
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EQUITY BY SEGMENT
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services
$
7,024

 
$
7,807

 
$
8,201

 
$
7,704

 
$
7,494

 
(3
)%
 
7
 %
Corporate and Other
1,952

 
1,016

 
901

 
1,423

 
1,710

 
20
 %
 
(12
)%
Total adjusted common shareholders’ equity
$
8,976

 
$
8,823

 
$
9,102

 
$
9,127

 
$
9,204

 
1
 %
 
3
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FINANCIAL LEVERAGE
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt to capital ratio
9.9
%
 
10.7
 %
 
8.9
%
 
7.4
%
 
6.8
%
 
(60)bps

 
(310)bps

AOCI
0.0
%
 
(0.5
)%
 
0.6
%
 
1.2
%
 
1.5
%
 
30bps

 
150bps

Accumulated change in fair value of reinsurance assets
0.0
%
 
(0.1
)%
 
0.3
%
 
0.4
%
 
0.4
%
 
0bps

 
40bps

Adjusted debt to capital ratio
9.9
%
 
10.1
 %
 
9.8
%
 
9.0
%
 
8.7
%
 
(30)bps

 
(120)bps

 
December 31, 2017
 
December 31, 2018
 
Δ
REGULATORY CAPITAL RATIOS
 
 
 
 
 
U.S. RBC ratio – Athene Annuity & Life Assurance Company
490
%
 
421
%
 
(6,900)bps
BSCR – Athene Life Re Ltd.
354
%
 
340
%
 
(1,400)bps
Athene Life Re Ltd. RBC ratio1
562
%
 
405
%
 
(15,700)bps
 
 
 
 
 
 
1 ALRe RBC ratio, which is used in evaluating our capital position and the amount of capital needed to support our segment, is calculated by applying the NAIC RBC factors.




22


Financial Strength, Credit Ratings & Share Data
Unaudited (in millions, except percentages)
athenelogoa29.jpg
 
A.M. Best
 
Standard & Poor’s
 
Fitch
FINANCIAL STRENGTH RATINGS
 
 
 
 
 
Athene Annuity & Life Assurance Company
A
 
A
 
A
Athene Annuity and Life Company
A
 
A
 
A
Athene Annuity & Life Assurance Company of New York
A
 
A
 
A
Athene Life Insurance Company of New York
A
 
Not Rated
 
Not Rated
Athene Life Re Ltd.
A
 
A
 
A
 
 
 
 
 
 
CREDIT RATINGS
 
 
 
 
 
Athene Holding Ltd.
bbb
 
BBB+
 
BBB+
Senior notes
bbb
 
BBB+
 
BBB

 
Quarterly Trends
 
Δ
 
Year-to-Date
 
Δ
 
3Q’18
 
4Q’18
 
1Q’19
 
2Q’19
 
3Q’19
 
Q/Q
 
Y/Y
 
2018
 
2019
 
Y/Y
SHARE DATA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding – basic1
197.3

 
197.1

 
194.0

 
191.2

 
184.3

 
(4
)%
 
(7
)%
 
197.2

 
189.9

 
(4
)%
Weighted average shares outstanding – diluted – Class A common shares2
165.1

 
164.2

 
161.7

 
158.8

 
152.0

 
(4
)%
 
(8
)%
 
159.8

 
157.6

 
(1
)%
Weighted average common shares outstanding – adjusted operating3
196.1

 
195.5

 
192.2

 
189.4

 
182.3

 
(4
)%
 
(7
)%
 
196.0

 
188.1

 
(4
)%
Common shares outstanding4
197.3

 
195.0

 
194.1

 
185.4

 
182.5

 
(2
)%
 
(8
)%
 
197.3

 
182.5

 
(8
)%
Adjusted operating common shares outstanding3
197.2

 
193.5

 
192.4

 
184.4

 
181.4

 
(2
)%
 
(8
)%
 
197.2

 
181.4

 
(8
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 Basic earnings per common share, including basic weighted average common shares outstanding, includes all classes eligible to participate in dividends for each period presented. 2 Diluted earnings per common share on a GAAP basis for Class A common shares, including diluted Class A weighted average common shares outstanding, includes the dilutive impacts, if any, of Class B common shares, Class M common shares and any other stock-based awards. 3 Represents Class A common shares outstanding or weighted average common shares outstanding assuming 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, Class M common shares and any other stock-based awards, but excluding any awards for which the exercise or conversion price exceeds the market value of our Class A common shares on the applicable measurement date. 4 Represents common shares vested and outstanding for all classes eligible to participate in dividends for each period presented.


23
                                        

Notes to the Financial Supplement
athenelogoa29.jpg
KEY OPERATING AND NON-GAAP MEASURES
In addition to our results presented in accordance with GAAP, we present certain financial information that includes non-GAAP measures. Management believes the use of these non-GAAP measures, together with the relevant GAAP measures, provides information that may enhance an investor’s understanding of our results of operations and the underlying profitability drivers of our business. The majority of these non-GAAP measures are intended to remove from the results of operations the impact of market volatility (other than with respect to alternative investments) as well as integration, restructuring and certain other expenses which are not part of our underlying profitability drivers, as such items fluctuate from period to period in a manner inconsistent with these drivers. These measures should be considered supplementary to our results in accordance with GAAP and should not be viewed as a substitute for the corresponding GAAP measures. See Non-GAAP Measure Reconciliations for the appropriate reconciliations to the corresponding GAAP measures.

ADJUSTED OPERATING INCOME AVAILABLE TO COMMON SHAREHOLDERS AND ADJUSTED OPERATING RETURN ON ASSETS (ROA)
Adjusted operating income available to common shareholders is a non-GAAP measure used to evaluate our financial performance excluding market volatility and expenses related to integration, restructuring, stock compensation and other expenses. Our adjusted operating income available to common shareholders equals net income available to AHL common shareholders adjusted to eliminate the impact of the following (collectively, the “non-operating adjustments”):
•
Investment Gains (Losses), Net of Offsets—Investment gains (losses), net of offsets, consist of the realized gains and losses on the sale of AFS securities, the change in fair value of reinsurance assets, unrealized gains and losses, impairments, and other investment gains and losses. Unrealized, impairments and other investment gains and losses are comprised of the fair value adjustments of trading securities (other than CLOs) and investments held under the fair value option, derivative gains and losses not hedging FIA index credits, and the net other-than-temporary impairment (OTTI) impacts recognized in operations net of the change in AmerUs Closed Block fair value reserve related to the corresponding change in fair value of investments and the change in unit-linked reserves related to the corresponding trading securities. Investment gains and losses are net of offsets related to DAC, DSI, and VOBA amortization and changes to guaranteed lifetime withdrawal benefit (GLWB) and guaranteed minimum death benefit (GMDB) reserves (together, GLWB and GMDB reserves represent rider reserves) as well as the MVAs associated with surrenders or terminations of contracts.
•
Change in Fair Values of Derivatives and Embedded Derivatives – FIAs, Net of Offsets—Impacts related to the fair value accounting for derivatives hedging the FIA index credits and the related embedded derivative liability fluctuations from period to period. The index reserve is measured at fair value for the current period and all periods beyond the current policyholder index term. However, the FIA hedging derivatives are purchased to hedge only the current index period. Upon policyholder renewal at the end of the period, new FIA hedging derivatives are purchased to align with the new term. The difference in duration between the FIA hedging derivatives and the index credit reserves creates a timing difference in earnings. This timing difference of the FIA hedging derivatives and index credit reserves is included as a non-operating adjustment, net of offsets related to DAC, DSI, and VOBA amortization and changes to rider reserves. We primarily hedge with options that align with the index terms of our FIA products (typically 1–2 years). From an economic basis, we believe this is suitable because policyholder accounts are credited with index performance at the end of each index term. However, because the “value of an embedded derivative” in an FIA contract is longer-dated, there is a duration mismatch which may lead to mismatches for accounting purposes.
•
Integration, Restructuring, and Other Non-operating Expenses—Integration, restructuring, and other non-operating expenses consist of restructuring and integration expenses related to acquisitions and block reinsurance costs as well as certain other expenses which are not predictable or related to our underlying profitability drivers.
•
Stock Compensation Expense—Stock compensation expenses associated with our share incentive plans, excluding our long-term incentive plan, are not related to our underlying profitability drivers and fluctuate from time to time due to the structure of our plans.
•
Bargain Purchase Gain—Bargain purchase gains associated with acquisitions are adjustments to net income available to AHL common shareholders as they are not related to our underlying profitability drivers.
•
Income Tax (Expense) Benefit – Non-operating—The non-operating income tax expense represents the income tax effect of non-operating adjustments and is computed by applying the appropriate jurisdiction’s tax rate to the non-operating adjustments that are subject to income tax.
We consider these non-operating adjustments to be meaningful adjustments to net income available to AHL common shareholders for the reasons discussed in greater detail above. Accordingly, we believe using a measure which excludes the impact of these items is useful in analyzing our business performance and the trends in our results of operations. Together with net income available to AHL common shareholders, we believe adjusted operating income available to common shareholders provides a meaningful financial metric that helps investors understand our underlying results and profitability. Adjusted operating income available to common shareholders should not be used as a substitute for net income available to AHL common shareholders.

Adjusted operating ROA is a non-GAAP measure used to evaluate our financial performance and profitability. Adjusted operating ROA is computed using our adjusted operating income available to common shareholders divided by average invested assets for the relevant 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
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 common shareholders’ equity is calculated as the ending shareholders’ equity excluding AOCI, the cumulative change in fair value of funds withheld and modco reinsurance assets and preferred stock. Adjusted operating ROE is calculated as the adjusted operating income available to common shareholders, divided by average adjusted common 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.

ADJUSTED OPERATING EARNINGS PER COMMON SHARE, WEIGHTED AVERAGE COMMON SHARES OUTSTANDING – ADJUSTED OPERATING, AND ADJUSTED BOOK VALUE PER COMMON SHARE
Adjusted operating earnings per common share, weighted average common shares outstanding – adjusted operating and adjusted book value per common share are non-GAAP measures used to evaluate our financial performance and financial condition. The non-GAAP measures adjust the number of shares included in the corresponding GAAP measures to reflect the conversion or settlement of all shares and other stock-based awards outstanding. We believe using these measures represents an economic view of our share counts and provides a simplified and consistent view of our outstanding shares. Adjusted operating earnings per common share is calculated as the adjusted operating income available to common shareholders, over the weighted average common shares outstanding – adjusted operating. Adjusted book value per common share is calculated as the adjusted common shareholders’ equity divided by the adjusted operating common shares outstanding. Our Class B common shares are economically equivalent to Class A common shares and can be converted to Class A common shares on a one-for-one basis at any time. Our Class M common shares are in the legal form of shares but economically function as options as they are convertible into Class A shares after vesting and payment of the conversion price. In calculating Class A diluted earnings per share on a GAAP basis, we are required to apply sequencing rules to determine the dilutive impacts, if any, of our Class B common shares, Class M common shares and any other stock-based awards. To the extent our Class B common shares, Class M common shares and/or any other stock-based awards are not dilutive, after considering the dilutive effects of the more dilutive securities in the sequence, they are excluded. Weighted average common shares outstanding – adjusted operating and adjusted operating common shares outstanding assume conversion or settlement of all outstanding items that are able to be converted to or settled in Class A common shares, including the impacts of Class B common shares on a one-for-one basis, the impacts of all Class M common shares net of the conversion price and any other stock-based awards, but excluding any awards for which the exercise or conversion price exceeds the market value of our Class A common shares on the applicable measurement date. For certain historical periods, Class M shares were not included due to issuance restrictions which were contingent upon our IPO. Adjusted operating earnings per common share, weighted average common shares outstanding – adjusted operating and adjusted book value per common share should not be used as a substitute for basic earnings per share – Class A common shares, basic weighted average common shares outstanding – Class A or book value per common share. However, we believe the adjustments to the shares and equity are significant to gaining an understanding of our overall results of operations and financial condition.



24
                                        

Notes to the Financial Supplement
athenelogoa29.jpg
ADJUSTED DEBT TO CAPITAL RATIO
Adjusted debt to capital ratio is a non-GAAP measure used to evaluate our capital structure excluding the impacts of AOCI and the cumulative change in fair value of funds withheld and modco reinsurance assets, net of DAC, DSI, rider reserve and tax offsets. Adjusted debt to capital ratio is calculated as total debt excluding consolidated variable interest entities (VIEs) divided by adjusted shareholders’ equity. Adjusted debt to capital ratio should not be used as a substitute for the debt to capital ratio. However, we believe the adjustments to total debt and shareholders’ equity are significant to gaining an understanding of our capitalization, debt utilization and debt capacity.

RETIREMENT SERVICES NET INVESTMENT SPREAD, INVESTMENT MARGIN ON DEFERRED ANNUITIES, AND OPERATING EXPENSES
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 is a non-GAAP measure we use to evaluate the performance of our invested assets that does not correspond to GAAP net investment income. Net investment earned rate is computed as the income from our invested assets divided by the average invested assets for the relevant period. To enhance the ability to analyze these measures across periods, interim periods are annualized. The adjustments to arrive at our net investment earned rate add alternative investment gains and losses, gains and losses related to trading securities for CLOs, net VIE impacts (revenues, expenses and noncontrolling interest) and the change in fair value of reinsurance assets. We include the income and assets supporting our change in fair value of reinsurance assets by evaluating the underlying investments of the funds withheld at interest receivables and we include the net investment income from those underlying investments which does not correspond to the GAAP presentation of change in fair value of reinsurance assets. We exclude the income and assets supporting business that we have exited through ceded reinsurance including funds withheld agreements. We believe the adjustments for reinsurance provide a net investment earned rate on the assets for which we have economic exposure.
•
Cost of funds includes liability costs related to cost of crediting on both deferred annuities and institutional products as well as other liability costs. Cost of funds is computed as the total liability costs divided by the average invested assets for the relevant period. To enhance the ability to analyze these measures across periods, interim periods are annualized.
◦
Cost of crediting includes the costs for both deferred annuities and institutional products. Cost of crediting on deferred annuities is the interest credited to the policyholders on our fixed strategies as well as the option costs on the indexed annuity strategies. With respect to FIAs, the cost of providing index credits includes the expenses incurred to fund the annual index credits, and where applicable, minimum guaranteed interest credited. Cost of crediting on institutional products is comprised of PRT costs including interest credited, benefit payments and other reserve changes, net of premiums received when issued, as well as funding agreement costs including the interest payments and other reserve changes. Cost of crediting is computed as the cost of crediting for deferred annuities and institutional products divided by the average invested assets for the relevant periods. Cost of crediting on deferred annuities is computed as the interest credited on fixed strategies and option costs on indexed annuity strategies divided by the average account value of our deferred annuities. Cost of crediting on institutional products is computed as the PRT and funding agreement costs divided by the average institutional reserve liabilities. Our average invested assets, account values and institutional reserve liabilities are averaged over the number of quarters in the relevant period to obtain our associated cost of crediting for such period. To enhance the ability to analyze these measures across periods, interim periods are annualized.
◦
Other liability costs include DAC, DSI and VOBA amortization, change in rider reserves, the cost of liabilities on products other than deferred annuities and institutional products, excise taxes, premiums, product charges and other revenues. We believe a measure like other liability costs is useful in analyzing the trends of our core business operations and profitability. While we believe other liability costs is a meaningful financial metric and enhances our understanding of the underlying profitability drivers of our business, it should not be used as a substitute for total benefits and expenses presented under GAAP.
•
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.

INVESTED ASSETS
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.

RESERVE LIABILITIES
In managing our business we also analyze reserve liabilities, which does not correspond to total liabilities as disclosed in our consolidated financial statements and notes thereto. Reserve liabilities represents our policyholder liability obligations net of reinsurance and is used to analyze the costs of our liabilities. Reserve liabilities includes (a) the 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 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. The majority of our ceded reinsurance is a result of reinsuring large blocks of life business following acquisitions. For such transactions, GAAP requires the ceded liabilities and related reinsurance recoverables to continue to be recorded in our consolidated financial statements despite the transfer of economic risk to the counterparty in connection with the reinsurance transaction.

SALES
Sales statistics do not correspond to revenues under GAAP but are used as relevant measures to understand our business performance as it relates to deposits generated during a specific period of time. Our sales statistics include deposits for fixed rate annuities and FIAs and align with the LIMRA definition of all money paid into an individual annuity, including money paid into new contracts with initial purchase occurring in the specified period and existing contracts with initial purchase occurring prior to the specified period (excluding internal transfers).



25


Non-GAAP Reconciliations
Unaudited (in millions, except per share data)
athenelogoa29.jpg
 
 
Quarterly Trends
 
Year-to-Date
 
3Q’18
 
4Q’18
 
1Q’19
 
2Q’19
 
3Q’19
 
2018
 
2019
RECONCILIATION OF BOOK VALUE PER COMMON SHARE TO ADJUSTED BOOK VALUE PER COMMON SHARE
Book value per common share
$
45.51

 
$
42.45

 
$
52.12

 
$
66.69

 
$
74.20

 
 
 
 
Preferred stock
—

 
—

 
—

 
(4.53
)
 
(6.42
)
 
 
 
 
AOCI
(0.17
)
 
2.42

 
(3.64
)
 
(9.49
)
 
(13.38
)
 
 
 
 
Accumulated change in fair value of reinsurance assets
0.16

 
0.39

 
(1.59
)
 
(3.45
)
 
(3.98
)
 
 
 
 
Effect of items convertible to or settled in Class A common shares
0.03

 
0.33

 
0.41

 
0.28

 
0.32

 
 
 
 
Adjusted book value per common share
$
45.53

 
$
45.59

 
$
47.30

 
$
49.50

 
$
50.74

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RECONCILIATION OF AVERAGE SHAREHOLDERS’ EQUITY TO AVERAGE ADJUSTED COMMON SHAREHOLDERS’ EQUITY
Average shareholders’ equity
$
8,720

 
$
8,627

 
$
9,197

 
$
11,241

 
$
12,955

 
$
9,077

 
$
10,911

Less: Average preferred stock
—

 
—

 
—

 
420

 
1,006

 
—

 
586

Less: Average AOCI
90

 
(220
)
 
117

 
1,233

 
2,101

 
741

 
985

Less: Average accumulated change in fair value of reinsurance assets
(10
)
 
(53
)
 
117

 
474

 
683

 
65

 
326

Average adjusted common shareholders’ equity
$
8,640

 
$
8,900

 
$
8,963

 
$
9,114

 
$
9,165

 
$
8,271

 
$
9,014

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services
$
6,537

 
$
7,416

 
$
8,004

 
$
7,952

 
$
7,598

 
$
6,130

 
$
7,651

Corporate and Other
2,103

 
1,484

 
959

 
1,162

 
1,567

 
2,141

 
1,363

Average adjusted common shareholders’ equity
$
8,640

 
$
8,900

 
$
8,963

 
$
9,114

 
$
9,165

 
$
8,271

 
$
9,014

 
 
 
 
 
 
 
 
 
 
 
 
 
 
RECONCILIATION OF BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING – CLASS A TO WEIGHTED AVERAGE COMMON SHARES OUTSTANDING – ADJUSTED OPERATING
Basic weighted average common shares outstanding – Class A
164.5

 
164.2

 
161.3

 
158.5

 
151.6

 
159.3

 
157.2

Conversion of Class B shares to Class A shares
25.5

 
25.5

 
25.4

 
25.4

 
25.4

 
30.6

 
25.4

Conversion of Class M shares to Class A shares
5.6

 
5.2

 
5.1

 
5.1

 
4.9

 
5.6

 
5.1

Effect of other stock compensation plans
0.5

 
0.6

 
0.4

 
0.4

 
0.4

 
0.5

 
0.4

Weighted average common shares outstanding – adjusted operating
196.1

 
195.5

 
192.2

 
189.4

 
182.3

 
196.0

 
188.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
RECONCILIATION OF CLASS A COMMON SHARES OUTSTANDING TO ADJUSTED OPERATING COMMON SHARES OUTSTANDING
Class A common shares outstanding
164.6

 
162.2

 
161.3

 
152.6

 
149.8

 
 
 
 
Conversion of Class B common shares to Class A common shares
25.5

 
25.4

 
25.4

 
25.4

 
25.4

 
 
 
 
Conversion of Class M common shares to Class A common shares
6.0

 
4.9

 
5.0

 
5.3

 
5.1

 
 
 
 
Effect of other stock compensation plans
1.1

 
1.0

 
0.7

 
1.1

 
1.1

 
 
 
 
Adjusted operating common shares outstanding
197.2

 
193.5

 
192.4

 
184.4

 
181.4

 
 
 
 




26


Non-GAAP Reconciliations
Unaudited (in millions, except percentages)
 
 
athenelogoa29.jpg
 
 
Quarterly Trends
 
Year-to-Date
 
3Q’18
 
4Q’18
 
1Q’19
 
2Q’19
 
3Q’19
 
2018
 
2019
RECONCILIATION OF NET INVESTMENT INCOME TO NET INVESTMENT EARNINGS
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP net investment income
$
1,070

 
$
1,121

 
$
1,066

 
$
1,161

 
$
1,070

 
$
2,883

 
$
3,297

Change in fair value of reinsurance assets
52

 
132

 
132

 
161

 
199

 
169

 
492

Net VIE earnings
39

 
(18
)
 
21

 
24

 
23

 
55

 
68

Alternative income gain (loss)
(14
)
 
(20
)
 
(5
)
 
12

 
6

 
(14
)
 
13

Held for trading amortization and other
(21
)
 
(11
)
 
(11
)
 
(13
)
 
(6
)
 
(65
)
 
(30
)
Total adjustments to arrive at net investment earnings
56

 
83

 
137

 
184

 
222

 
145

 
543

Total net investment earnings
$
1,126

 
$
1,204

 
$
1,203

 
$
1,345

 
$
1,292

 
$
3,028

 
$
3,840

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services
$
1,108

 
$
1,231

 
$
1,171

 
$
1,321

 
$
1,264

 
$
2,957

 
$
3,756

Corporate and Other
18

 
(27
)
 
32

 
24

 
28

 
71

 
84

Total net investment earnings
$
1,126

 
$
1,204

 
$
1,203

 
$
1,345

 
$
1,292

 
$
3,028

 
$
3,840

 
 
 
 
 
 
 
 
 
 
 
 
 
 
RECONCILIATION OF NET INVESTMENT INCOME RATE TO NET INVESTMENT EARNED RATE
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP net investment income rate
4.30
 %
 
4.10
 %
 
3.79
 %
 
4.03
 %
 
3.60
 %
 
4.39
 %
 
3.80
 %
Change in fair value of reinsurance assets
0.20
 %
 
0.48
 %
 
0.47
 %
 
0.56
 %
 
0.67
 %
 
0.26
 %
 
0.57
 %
Net VIE earnings
0.16
 %
 
(0.07
)%
 
0.08
 %
 
0.09
 %
 
0.08
 %
 
0.08
 %
 
0.08
 %
Alternative income gain (loss)
(0.06
)%
 
(0.07
)%
 
(0.02
)%
 
0.04
 %
 
0.02
 %
 
(0.02
)%
 
0.01
 %
Held for trading amortization and other
(0.08
)%
 
(0.04
)%
 
(0.04
)%
 
(0.05
)%
 
(0.02
)%
 
(0.10
)%
 
(0.03
)%
Total adjustments to arrive at net investment earned rate
0.22
 %
 
0.30
 %
 
0.49
 %
 
0.64
 %
 
0.75
 %
 
0.22
 %
 
0.63
 %
Consolidated net investment earned rate
4.52
 %
 
4.40
 %
 
4.28
 %
 
4.67
 %
 
4.35
 %
 
4.61
 %
 
4.43
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services
4.55
 %
 
4.57
 %
 
4.21
 %
 
4.63
 %
 
4.31
 %
 
4.63
 %
 
4.38
 %
Corporate and Other
3.51
 %
 
(7.57
)%
 
13.19
 %
 
8.39
 %
 
7.28
 %
 
3.86
 %
 
8.92
 %
Consolidated net investment earned rate
4.52
 %
 
4.40
 %
 
4.28
 %
 
4.67
 %
 
4.35
 %
 
4.61
 %
 
4.43
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services
$
97,500

 
$
107,939

 
$
111,443

 
$
114,059

 
$
117,338

 
$
85,163

 
$
114,391

Corporate and Other
2,103

 
1,484

 
959

 
1,162

 
1,567

 
2,473

 
1,262

Consolidated average invested assets
$
99,603

 
$
109,423

 
$
112,402

 
$
115,221

 
$
118,905

 
$
87,636

 
$
115,653










27


Non-GAAP Reconciliations
Unaudited (in millions, except percentages)
 
 
athenelogoa29.jpg
 
 
Quarterly Trends
 
Year-to-Date
 
3Q’18
 
4Q’18
 
1Q’19
 
2Q’19
 
3Q’19
 
2018
 
2019
RECONCILIATION OF INTEREST SENSITIVE CONTRACT BENEFITS TO COST OF CREDITING
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP interest sensitive contract benefits
$
742

 
$
(825
)
 
$
1,516

 
$
1,094

 
$
801

 
$
1,115

 
$
3,411

Interest credited other than deferred annuities and institutional products
14

 
35

 
55

 
50

 
63

 
30

 
168

FIA option costs
231

 
275

 
278

 
280

 
282

 
611

 
840

Product charges (strategy fees)
(25
)
 
(28
)
 
(28
)
 
(29
)
 
(31
)
 
(70
)
 
(88
)
Reinsurance embedded derivative impacts
29

 
14

 
15

 
14

 
14

 
35

 
43

Change in fair values of embedded derivatives – FIAs
(546
)
 
1,039

 
(1,311
)
 
(868
)
 
(560
)
 
(603
)
 
(2,739
)
Negative VOBA amortization
5

 
9

 
12

 
7

 
9

 
22

 
28

Other changes in interest sensitive contract liabilities
3

 
(3
)
 
(2
)
 
(1
)
 
(2
)
 
3

 
(5
)
Total adjustments to arrive at cost of crediting
(289
)
 
1,341

 
(981
)
 
(547
)
 
(225
)
 
28

 
(1,753
)
Retirement Services cost of crediting
$
453

 
$
516

 
$
535

 
$
547

 
$
576

 
$
1,143

 
$
1,658

 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP interest sensitive contract benefits
3.04
 %
 
(3.06
)%
 
5.44
 %
 
3.84
 %
 
2.73
 %
 
1.75
 %
 
3.98
 %
Interest credited other than deferred annuities and institutional products
0.06
 %
 
0.13
 %
 
0.20
 %
 
0.18
 %
 
0.21
 %
 
0.05
 %
 
0.19
 %
FIA option costs
0.95
 %
 
1.02
 %
 
1.00
 %
 
0.98
 %
 
0.96
 %
 
0.96
 %
 
0.98
 %
Product charges (strategy fees)
(0.10
)%
 
(0.10
)%
 
(0.10
)%
 
(0.10
)%
 
(0.10
)%
 
(0.11
)%
 
(0.10
)%
Reinsurance embedded derivative impacts
0.12
 %
 
0.05
 %
 
0.05
 %
 
0.05
 %
 
0.05
 %
 
0.05
 %
 
0.05
 %
Change in fair values of embedded derivatives – FIAs
(2.24
)%
 
3.85
 %
 
(4.70
)%
 
(3.05
)%
 
(1.91
)%
 
(0.94
)%
 
(3.19
)%
Negative VOBA amortization
0.02
 %
 
0.03
 %
 
0.04
 %
 
0.02
 %
 
0.03
 %
 
0.03
 %
 
0.03
 %
Other changes in interest sensitive contract liabilities
0.01
 %
 
(0.01
)%
 
(0.01
)%
 
0.00
 %
 
(0.01
)%
 
0.00
 %
 
(0.01
)%
Total adjustments to arrive at cost of crediting
(1.18
)%
 
4.97
 %
 
(3.52
)%
 
(1.92
)%
 
(0.77
)%
 
0.04
 %
 
(2.05
)%
Retirement Services cost of crediting
1.86
 %
 
1.91
 %
 
1.92
 %
 
1.92
 %
 
1.96
 %
 
1.79
 %
 
1.93
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services cost of crediting on deferred annuities
1.98
 %
 
2.00
 %
 
1.98
 %
 
1.98
 %
 
1.98
 %
 
1.93
 %
 
1.98
 %
Retirement Services cost of crediting on institutional products
3.54
 %
 
3.74
 %
 
3.69
 %
 
3.76
 %
 
3.68
 %
 
3.29
 %
 
3.71
 %
Retirement Services cost of crediting
1.86
 %
 
1.91
 %
 
1.92
 %
 
1.92
 %
 
1.96
 %
 
1.79
 %
 
1.93
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services average invested assets
$
97,500

 
$
107,939

 
$
111,443

 
$
114,059

 
$
117,338

 
$
85,163

 
$
114,391

Average account value on deferred annuities
79,673

 
88,874

 
89,809

 
90,675

 
91,467

 
68,421

 
90,638

Average institutional reserve liabilities
6,608

 
7,827

 
9,809

 
10,470

 
13,320

 
6,301

 
11,200


28


Non-GAAP Reconciliations
Unaudited (in millions)
 
 
athenelogoa29.jpg
 
 
Quarterly Trends
 
Year-to-Date
 
3Q’18
 
4Q’18
 
1Q’19
 
2Q’19
 
3Q’19
 
2018
 
2019
RECONCILIATION OF BENEFITS AND EXPENSES TO OTHER LIABILITY COSTS
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP benefits and expenses
$
1,897

 
$
1,301

 
$
4,221

 
$
2,619

 
$
4,222

 
$
4,067

 
$
11,062

Premiums
(526
)
 
(1,833
)
 
(1,966
)
 
(733
)
 
(2,605
)
 
(1,535
)
 
(5,304
)
Product charges
(119
)
 
(128
)
 
(125
)
 
(132
)
 
(135
)
 
(321
)
 
(392
)
Other revenues
(10
)
 
(4
)
 
(12
)
 
(9
)
 
(6
)
 
(22
)
 
(27
)
Cost of crediting
(193
)
 
(227
)
 
(242
)
 
(253
)
 
(280
)
 
(497
)
 
(775
)
Change in fair value of embedded derivatives - FIA, net of offsets
(768
)
 
1,266

 
(1,260
)
 
(817
)
 
(497
)
 
(939
)
 
(2,574
)
DAC, DSI and VOBA amortization related to investment gains and losses
28

 
36

 
(173
)
 
(181
)
 
(151
)
 
74

 
(505
)
Rider reserves
1

 
8

 
(28
)
 
(24
)
 
(9
)
 
8

 
(61
)
Policy and other operating expenses, excluding policy acquisition expenses
(98
)
 
(102
)
 
(103
)
 
(117
)
 
(130
)
 
(293
)
 
(350
)
AmerUs closed block fair value liability
8

 
14

 
(53
)
 
(59
)
 
(46
)
 
98

 
(158
)
Other
1

 
1

 
1

 
1

 
(5
)
 
9

 
(3
)
Total adjustments to arrive at other liability costs
(1,676
)
 
(969
)
 
(3,961
)
 
(2,324
)
 
(3,864
)
 
(3,418
)
 
(10,149
)
Other liability costs
$
221

 
$
332

 
$
260

 
$
295

 
$
358

 
$
649

 
$
913

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services
$
221

 
$
332

 
$
260

 
$
295

 
$
358

 
$
649

 
$
913

Corporate and Other
—

 
—

 
—

 
—

 
—

 
—

 
—

Consolidated other liability costs
$
221

 
$
332

 
$
260

 
$
295

 
$
358

 
$
649

 
$
913

 
 
 
 
 
 
 
 
 
 
 
 
 
 
RECONCILIATION OF POLICY AND OTHER OPERATING EXPENSES TO OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
 
 
 
 
Policy and other operating expenses
$
158

 
$
172

 
$
165

 
$
185

 
$
194

 
$
454

 
$
544

Interest expense
(15
)
 
(13
)
 
(17
)
 
(15
)
 
(15
)
 
(44
)
 
(47
)
Policy acquisition expenses, net of deferrals
(60
)
 
(70
)
 
(62
)
 
(69
)
 
(63
)
 
(163
)
 
(194
)
Integration, restructuring and other non-operating expenses
(2
)
 
(4
)
 
(1
)
 
(11
)
 
(34
)
 
(18
)
 
(46
)
Stock compensation expenses
(3
)
 
(3
)
 
(3
)
 
(3
)
 
(3
)
 
(8
)
 
(9
)
Total adjustments to arrive at operating expenses
(80
)
 
(90
)
 
(83
)
 
(98
)
 
(115
)
 
(233
)
 
(296
)
Operating expenses
$
78

 
$
82

 
$
82

 
$
87

 
$
79

 
$
221

 
$
248

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services
$
63

 
$
65

 
$
62

 
$
68

 
$
67

 
$
177

 
$
197

Corporate and Other
15

 
17

 
20

 
19

 
12

 
44

 
51

Consolidated operating expenses
$
78

 
$
82

 
$
82

 
$
87

 
$
79

 
$
221

 
$
248




29


Non-GAAP Reconciliations
Unaudited (in millions)
athenelogoa29.jpg
 
 
December 31, 2018
 
September 30, 2019
RECONCILIATION OF TOTAL INVESTMENTS INCLUDING RELATED PARTIES TO INVESTED ASSETS
 
 
 
Total investments including related parties
$
107,632

 
$
127,101

Derivative assets
(1,043
)
 
(2,386
)
Cash and cash equivalents (including restricted cash)
3,403

 
4,032

Accrued investment income
682

 
781

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

 
(1,698
)
VIE and VOE assets, liabilities and noncontrolling interest
718

 
669

Unrealized (gains) losses
808

 
(4,243
)
Ceded policy loans
(281
)
 
(277
)
Net investment receivables (payables)
(139
)
 
(516
)
Total adjustments to arrive at invested assets
3,402

 
(5,961
)
Total invested assets
$
111,034

 
$
121,140

 
 
 
 
RECONCILIATION OF INVESTMENT FUNDS INCLUDING RELATED PARTIES AND VIES TO ALTERNATIVE INVESTMENTS
 
 
 
Investment funds including related parties and VIEs
$
3,559

 
$
4,094

Nonredeemable preferred stock included in equity securities
—

 
506

CLO equities included in trading securities
125

 
101

Investment funds within funds withheld at interest
660

 
745

Royalties and other assets included in other investments
71

 
67

Net assets of the VIE, excluding investment funds
50

 
(2
)
Unrealized (gains) losses and other adjustments
27

 
11

Total adjustments to arrive at alternative investments
933

 
1,428

Alternative investments
$
4,492

 
$
5,522

 
 
 
 
RECONCILIATION OF TOTAL LIABILITIES TO RESERVE LIABILITIES
 
 
 
Total liabilities
$
117,229

 
$
130,657

Long-term debt
(991
)
 
(992
)
Derivative liabilities
(85
)
 
(46
)
Payables for collateral on derivatives
(969
)
 
(2,323
)
Funds withheld liability
(721
)
 
(768
)
Other liabilities
(888
)
 
(1,708
)
Liabilities of consolidated VIEs
(1
)
 
(1
)
Reinsurance ceded receivables
(5,534
)
 
(5,697
)
Policy loans ceded
(281
)
 
(277
)
Other
(27
)
 
(20
)
Total adjustments to arrive at reserve liabilities
(9,497
)
 
(11,832
)
Total reserve liabilities
$
107,732

 
$
118,825


30