Form: 8-K

Current report filing

August 5, 2020



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Table of Contents
athenelogoa45.jpg
 
 
 
 
 
 
 
 
 
 
 
 
 






Financial Highlights
Unaudited (in millions, except percentages and per share data)
athenelogoa45.jpg
 
 
Quarterly Trends
 
Δ
 
Year-to-Date
 
Δ
 
2Q’19
 
3Q’19
 
4Q’19
 
1Q’20
 
2Q’20
 
Q/Q
 
Y/Y
 
2019
 
2020
 
Y/Y
SELECTED INCOME STATEMENT DATA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) available to AHL common shareholders
$
720

 
$
276

 
$
432

 
$
(1,065
)
 
$
824

 
NM

 
14
 %
 
$
1,428

 
$
(241
)
 
NM

Adjusted operating income (loss) available to common shareholders
370

 
243

 
389

 
(108
)
 
490

 
NM

 
32
 %
 
657

 
382

 
(42
)%
Adjusted operating income available to common shareholders excluding notables and AOG
370

 
305

 
346

 
174

 
98

 
(44
)%
 
(74
)%
 
657

 
274

 
(58
)%
FINANCIAL RATIOS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Return on assets (ROA)
2.12
%
 
0.78
%
 
1.19
%
 
(2.95
)%
 
2.03
%
 
NM

 
(9)bps

 
2.16
%
 
(0.31
)%
 
NM

Adjusted operating ROA
1.28
%
 
0.82
%
 
1.34
%
 
(0.36
)%
 
1.54
%
 
NM

 
26bps

 
1.15
%
 
0.62
 %
 
(53)bps

Adjusted operating ROA, excluding notables and AOG
1.28
%
 
1.03
%
 
1.19
%
 
0.59
 %
 
0.31
%
 
(28)bps

 
(97)bps

 
1.15
%
 
0.45
 %
 
(70)bps

Net investment spread – Retirement Services
1.68
%
 
1.13
%
 
1.84
%
 
1.03
 %
 
0.96
%
 
(7)bps

 
(72)bps

 
1.52
%
 
1.00
 %
 
(52)bps

Return on equity (ROE)
25.6
%
 
8.5
%
 
12.8
%
 
(36.5
)%
 
26.8
%
 
NM

 
120bps

 
27.7
%
 
(3.4
)%
 
NM

Adjusted operating ROE
16.2
%
 
10.6
%
 
16.7
%
 
(4.4
)%
 
19.4
%
 
NM

 
NM

 
14.6
%
 
7.8
 %
 
NM

Adjusted operating ROE, excluding notables and AOG
16.2
%
 
13.3
%
 
14.9
%
 
7.6
 %
 
4.5
%
 
NM

 
NM

 
14.6
%
 
6.1
 %
 
NM

Adjusted operating ROE – Retirement Services
18.9
%
 
13.5
%
 
21.6
%
 
10.6
 %
 
11.1
%
 
50bps

 
NM

 
17.1
%
 
11.4
 %
 
NM

EARNINGS AND BOOK VALUE PER COMMON SHARE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) per common share – basic class A
$
3.76

 
$
1.50

 
$
2.43

 
$
(5.81
)
 
$
4.25

 
NM

 
13
 %
 
$
7.43

 
$
(0.64
)
 
NM

Earnings (loss) per common share – diluted class A1
3.75

 
1.50

 
2.42

 
(5.81
)
 
4.19

 
NM

 
12
 %
 
7.41

 
(0.64
)
 
NM

Adjusted operating earnings (loss) per common share2
1.95

 
1.34

 
2.21

 
(0.60
)
 
2.49

 
NM

 
28
 %
 
3.45

 
2.01

 
(42
)%
Adjusted operating earnings per common share excluding notables and AOG
1.95

 
1.67

 
1.97

 
1.00

 
0.58

 
(42
)%
 
(70
)%
 
3.45

 
1.60

 
(54
)%
Book value per common share
66.69

 
74.20

 
76.21

 
51.28

 
75.87

 
48
 %
 
14
 %
 
66.69

 
75.87

 
14
 %
Adjusted book value per common share2
49.50

 
50.74

 
54.02

 
51.07

 
51.15

 
 %
 
3
 %
 
49.50

 
51.15

 
3
 %
SELECTED BALANCE SHEET DATA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
138,980

 
$
144,202

 
$
146,875

 
$
142,179

 
$
183,241

 
29
 %
 
32
 %
 
$
138,980

 
$
183,241

 
32
 %
Gross invested assets
116,671


121,140


124,563


128,263


161,965


26
 %

39
 %

116,671


161,965


39
 %
Invested assets – ACRA noncontrolling interests




(7,077
)

(7,063
)

(24,696
)

NM


NM




(24,696
)

NM

Net invested assets
116,671

 
121,140

 
117,486

 
121,200

 
137,269

 
13
 %
 
18
 %
 
116,671

 
137,269

 
18
 %
Total liabilities
126,615

 
130,657

 
132,734

 
131,649

 
167,602

 
27
 %
 
32
 %
 
126,615

 
167,602

 
32
 %
Net reserve liabilities
114,680

 
118,825

 
114,652

 
114,273

 
131,333

 
15
 %
 
15
 %
 
114,680

 
131,333

 
15
 %
Debt
991

 
992

 
1,467

 
1,386

 
1,486

 
7
 %
 
50
 %
 
991

 
1,486

 
50
 %
Total AHL shareholders’ equity
12,365

 
13,545

 
13,391

 
9,940

 
14,711

 
48
 %
 
19
 %
 
12,365

 
14,711

 
19
 %
Adjusted AHL common shareholders’ equity
9,127

 
9,204

 
9,445

 
10,097

 
10,157

 
1
 %
 
11
 %
 
9,127

 
10,157

 
11
 %
DEPOSITS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail
$
1,909

 
$
1,921

 
$
1,136

 
$
1,246

 
$
1,791

 
44
 %
 
(6
)%
 
$
3,725

 
$
3,037

 
(18
)%
Flow reinsurance
1,125

 
609

 
1,196

 
861

 
2,265

 
163
 %
 
101
 %
 
2,145

 
3,126

 
46
 %
Funding agreements3
299

 
503

 
499

 
823

 
2,636

 
220
 %
 
NM

 
299

 
3,459

 
NM

Pension risk transfer
706

 
2,604

 
809

 
1,017

 
229

 
(77
)%
 
(68
)%
 
2,629

 
1,246

 
(53
)%
Gross organic deposits
4,039

 
5,637

 
3,640

 
3,947

 
6,921

 
75
 %
 
71
 %
 
8,798

 
10,868

 
24
 %
Gross inorganic deposits

 

 

 

 
28,792

 
NM

 
NM

 

 
28,792

 
NM

Gross deposits
4,039

 
5,637

 
3,640

 
3,947

 
35,713

 
NM

 
NM

 
8,798

 
39,660

 
NM

Deposits attributable to ACRA noncontrolling interest4

 

 
(544
)
 

 
(18,268
)
 
NM

 
NM

 

 
(18,268
)
 
NM

Net deposits
$
4,039

 
$
5,637

 
$
3,096

 
$
3,947

 
$
17,445

 
NM

 
NM

 
$
8,798

 
$
21,392

 
143
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 of non-GAAP metrics. 1 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. 2 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 Funding agreements are comprised of our funding agreement backed note program, Federal Home Loan Bank secured funding agreements and long-term repurchase agreements. 4 Deposits attributable to ACRA noncontrolling interest in 4Q’19 were related to pension risk transfer activity. ACRA noncontrolling interest reserve liabilities at inception on October 1, 2019 were $6.1 billion.

3



Condensed Consolidated Statements of Income (GAAP view)
Unaudited (in millions, except percentages)
athenelogoa45.jpg
 
 
Quarterly Trends
 
Δ
 
Year-to-Date
 
Δ
 
2Q’19
 
3Q’19
 
4Q’19
 
1Q’20
 
2Q’20
 
Q/Q
 
Y/Y
 
2019
 
2020
 
Y/Y
REVENUE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
$
787

 
$
2,688

 
$
907

 
$
1,140

 
$
355

 
(69
)%
 
(55
)%
 
$
2,787

 
$
1,495

 
(46
)%
Product charges
132

 
135

 
132

 
140

 
141

 
1
 %
 
7
 %
 
257

 
281

 
9
 %
Net investment income
1,182

 
1,090

 
1,242

 
745

 
1,336

 
79
 %
 
13
 %
 
2,264

 
2,081

 
(8
)%
Investment related gains (losses)
1,313

 
665

 
965

 
(3,572
)
 
2,548

 
NM

 
94
 %
 
3,089

 
(1,024
)
 
NM

Other revenues
9

 
6

 
10

 
(2
)
 
18

 
NM

 
100
 %
 
21

 
16

 
(24
)%
Total revenues
$
3,423

 
$
4,584

 
$
3,256

 
$
(1,549
)
 
$
4,398

 
NM

 
28
 %
 
$
8,418

 
$
2,849

 
(66
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BENEFITS AND EXPENSES
 
 
 
 
 
 
 
 
 
 


 


 
 
 
 
 


Interest sensitive contract benefits
$
1,094

 
$
801

 
$
1,146

 
$
(1,319
)
 
$
2,076

 
NM

 
90
 %
 
$
2,610

 
$
757

 
(71
)%
Amortization of deferred sales inducements
13

 
20

 
36

 
10

 
(21
)
 
NM

 
NM

 
18

 
(11
)
 
NM

Future policy and other policy benefits
1,111

 
2,955

 
1,192

 
1,356

 
674

 
(50
)%
 
(39
)%
 
3,440

 
2,030

 
(41
)%
Amortization of deferred acquisition costs and value of business acquired
261

 
323

 
143

 
(413
)
 
361

 
NM

 
38
 %
 
492

 
(52
)
 
NM

Dividends to policyholders
9

 
12

 
6

 
11

 
9

 
(18
)%
 
 %
 
18

 
20

 
11
 %
Policy and other operating expenses
185

 
194

 
200

 
188

 
218

 
16
 %
 
18
 %
 
350

 
406

 
16
 %
Total benefits and expenses
2,673

 
4,305

 
2,723

 
(167
)
 
3,317

 
NM

 
24
 %
 
6,928

 
3,150

 
(55
)%
Income (loss) before income taxes
750

 
279

 
533

 
(1,382
)
 
1,081

 
NM

 
44
 %
 
1,490


(301
)
 
NM

Income tax expense (benefit)
30

 
(14
)
 
69

 
(166
)
 
150

 
NM

 
NM

 
62

 
(16
)
 
NM

Net income (loss)
720

 
293

 
464

 
(1,216
)
 
931

 
NM

 
29
 %
 
1,428

 
(285
)
 
NM

Less: Net income (loss) attributable to noncontrolling interests

 

 
13

 
(169
)
 
88

 
NM

 
NM

 

 
(81
)
 
NM

Net income (loss) attributable to Athene Holding Ltd. shareholders
720

 
293

 
451

 
(1,047
)
 
843

 
NM

 
17
 %
 
1,428

 
(204
)
 
NM

Less: Preferred stock dividends

 
17

 
19

 
18

 
19

 
6
 %
 
NM

 

 
37

 
NM

Net income (loss) available to Athene Holding Ltd. common shareholders
$
720

 
$
276

 
$
432

 
$
(1,065
)
 
$
824

 
NM

 
14
 %
 
$
1,428

 
$
(241
)
 
NM



4



Segment Results of Operations (Management view)
Unaudited (in millions, except percentages and per share data)
athenelogoa45.jpg
 
 
Quarterly Trends
 
Δ
 
Year-to-Date
 
Δ
 
2Q’19
 
3Q’19
 
4Q’19
 
1Q’20
 
2Q’20
 
Q/Q
 
Y/Y
 
2019
 
2020
 
Y/Y
CONSOLIDATED
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income and other investment income
$
1,175

 
$
1,168

 
$
1,185

 
$
1,188

 
$
1,140

 
(4
)%
 
(3
)%
 
$
2,329

 
$
2,328

 
 %
Alternative investment income (loss)
170

 
124

 
154

 
(37
)
 
(100
)
 
NM

 
NM

 
219

 
(137
)
 
NM

Net investment earnings
1,345

 
1,292

 
1,339

 
1,151

 
1,040

 
(10
)%
 
(23
)%
 
2,548

 
2,191

 
(14
)%
Cost of crediting
(547
)
 
(576
)
 
(521
)
 
(540
)
 
(560
)
 
(4
)%
 
(2
)%
 
(1,082
)
 
(1,100
)
 
(2
)%
Other liability costs1
(295
)
 
(358
)
 
(259
)
 
(342
)
 
(215
)
 
37
 %
 
27
 %
 
(555
)
 
(557
)
 
 %
Cost of funds
(842
)
 
(934
)
 
(780
)
 
(882
)
 
(775
)
 
12
 %
 
8
 %
 
(1,637
)
 
(1,657
)
 
(1
)%
Operating expenses
(87
)
 
(79
)
 
(86
)
 
(79
)
 
(88
)
 
(11
)%
 
(1
)%
 
(169
)
 
(167
)
 
1
 %
Interest expense
(12
)
 
(12
)
 
(17
)
 
(19
)
 
(28
)
 
(47
)%
 
NM

 
(25
)
 
(47
)
 
(88
)%
Management fees from ACRA

 

 
2

 
2

 
3

 
50
 %
 
NM

 

 
5

 
NM

Pre-tax adjusted operating income
404

 
267

 
458

 
173

 
152

 
(12
)%
 
(62
)%
 
717

 
325

 
(55
)%
Income tax expense – operating2
(34
)
 
(7
)
 
(50
)
 
(24
)
 
(15
)
 
38
 %
 
56
 %
 
(60
)
 
(39
)
 
35
 %
Adjusted operating income
370

 
260

 
408

 
149

 
137

 
(8
)%
 
(63
)%
 
657

 
286

 
(56
)%
Preferred stock dividends

 
(17
)
 
(19
)
 
(18
)
 
(19
)
 
(6
)%
 
NM

 

 
(37
)
 
NM

Adjusted operating income available to common shareholders excluding Apollo
370

 
243

 
389

 
131

 
118

 
(10
)%
 
(68
)%
 
657

 
249

 
(62
)%
Change in fair value of Apollo investment, net of tax3

 

 

 
(239
)
 
372

 
NM

 
NM

 

 
133

 
NM

Adjusted operating income (loss) available to common shareholders
$
370

 
$
243

 
$
389

 
$
(108
)
 
$
490

 
NM

 
32
 %
 
$
657

 
$
382

 
(42
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted operating earnings (loss) per common share
$
1.95

 
$
1.34

 
$
2.21

 
$
(0.60
)
 
$
2.49

 
NM

 
28
 %
 
$
3.45

 
$
2.01

 
(42
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RETIREMENT SERVICES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income and other investment income
$
1,170

 
$
1,159

 
$
1,172

 
$
1,177

 
$
1,132

 
(4
)%
 
(3
)%
 
$
2,321

 
$
2,309

 
(1
)%
Alternative investment income (loss)
151

 
105

 
134

 
7

 
(57
)
 
NM

 
NM

 
171

 
(50
)
 
NM

Net investment earnings
1,321

 
1,264

 
1,306

 
1,184

 
1,075

 
(9
)%
 
(19
)%
 
2,492

 
2,259

 
(9
)%
Cost of crediting
(547
)
 
(576
)
 
(521
)
 
(540
)
 
(560
)
 
(4
)%
 
(2
)%
 
(1,082
)
 
(1,100
)
 
(2
)%
Other liability costs1
(295
)
 
(358
)
 
(259
)
 
(342
)
 
(215
)
 
37
 %
 
27
 %
 
(555
)
 
(557
)
 
 %
Cost of funds
(842
)
 
(934
)
 
(780
)
 
(882
)
 
(775
)
 
12
 %
 
8
 %
 
(1,637
)
 
(1,657
)
 
(1
)%
Operating expenses
(68
)
 
(67
)
 
(69
)
 
(68
)
 
(71
)
 
(4
)%
 
(4
)%
 
(130
)
 
(139
)
 
(7
)%
Interest expense
(1
)
 

 
(5
)
 
(8
)
 
(9
)
 
(13
)%
 
NM

 
(3
)
 
(17
)
 
NM

Management fees from ACRA

 

 
2

 
2

 
3

 
50
 %
 
NM

 

 
5

 
NM

Pre-tax adjusted operating income
410

 
263

 
454

 
228

 
223

 
(2
)%
 
(46
)%
 
722

 
451

 
(38
)%
Income tax expense – operating
(34
)
 
(7
)
 
(50
)
 
(24
)
 
(15
)
 
38
 %
 
56
 %
 
(60
)
 
(39
)
 
35
 %
Adjusted operating income available to common shareholders
$
376

 
$
256

 
$
404

 
$
204

 
$
208

 
2
 %
 
(45
)%
 
$
662

 
$
412

 
(38
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CORPORATE & OTHER
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income and other investment income
$
5

 
$
9

 
$
13

 
$
11

 
$
8

 
(27
)%
 
60
 %
 
$
8

 
$
19

 
138
 %
Alternative investment income (loss)
19

 
19

 
20

 
(44
)
 
(43
)
 
2
 %
 
NM

 
48

 
(87
)
 
NM

Net investment earnings (loss)
24

 
28

 
33

 
(33
)
 
(35
)
 
(6
)%
 
NM

 
56

 
(68
)
 
NM

Operating expenses
(19
)
 
(12
)
 
(17
)
 
(11
)
 
(17
)
 
(55
)%
 
11
 %
 
(39
)
 
(28
)
 
28
 %
Interest expense
(11
)
 
(12
)
 
(12
)
 
(11
)
 
(19
)
 
(73
)%
 
(73
)%
 
(22
)
 
(30
)
 
(36
)%
Adjusted operating income (loss)
(6
)
 
4

 
4

 
(55
)
 
(71
)
 
(29
)%
 
NM

 
(5
)
 
(126
)
 
NM

Preferred stock dividends

 
(17
)
 
(19
)
 
(18
)
 
(19
)
 
(6
)%
 
NM

 

 
(37
)
 
NM

Adjusted operating loss available to common shareholders excluding Apollo
(6
)
 
(13
)
 
(15
)
 
(73
)
 
(90
)
 
(23
)%
 
NM

 
(5
)
 
(163
)
 
NM

Change in fair value of Apollo investment, net of tax3

 

 

 
(239
)
 
372

 
NM

 
NM

 

 
133

 
NM

Adjusted operating income (loss) available to common shareholders
$
(6
)
 
$
(13
)
 
$
(15
)
 
$
(312
)
 
$
282

 
NM

 
NM

 
$
(5
)
 
$
(30
)
 
NM

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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. 2 Income tax expense - operating excludes the income tax expense/benefit on the earnings from our investment in Apollo. 3 Change in fair value of Apollo investment, net of tax, including both the change in our investment in Apollo and the tax expense or benefit associated with the income or loss.

5



Reconciliation of Earnings Measures
Unaudited (in millions, except percentages and per share data)
athenelogoa45.jpg
 
 
Quarterly Trends
 
Δ
 
Year-to-Date
 
Δ
 
2Q’19
 
3Q’19
 
4Q’19
 
1Q’20
 
2Q’20
 
Q/Q
 
Y/Y
 
2019
 
2020
 
Y/Y
RECONCILIATION OF NET INCOME (LOSS) AVAILABLE TO ATHENE HOLDING LTD. COMMON SHAREHOLDERS TO ADJUSTED OPERATING INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
Net income (loss) available to Athene Holding Ltd. common shareholders
$
720

 
$
276

 
$
432

 
$
(1,065
)
 
$
824

 
NM

 
14
 %
 
$
1,428

 
$
(241
)
 
NM

Non-operating adjustments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains (losses) on sale of AFS securities
41

 
46

 
26

 
12

 
(11
)
 
NM

 
NM

 
53

 
1

 
(98
)%
Unrealized, allowances and other investment gains (losses)
10

 
(31
)
 
(12
)
 
(369
)
 
52

 
NM

 
NM

 
39

 
(317
)
 
NM

Change in fair value of reinsurance assets
570

 
314

 
(89
)
 
(1,277
)
 
1,113

 
NM

 
95
 %
 
1,186

 
(164
)
 
NM

Offsets to investment gains (losses)
(204
)
 
(163
)
 
28

 
495

 
(379
)
 
NM

 
(86
)%
 
(403
)
 
116

 
NM

Investment gains (losses), net of offsets
417

 
166

 
(47
)
 
(1,139
)
 
775

 
NM

 
86
 %
 
875

 
(364
)
 
NM

Change in fair values of derivatives and embedded derivatives – FIAs, net of offsets
(57
)
 
(117
)
 
136

 
65

 
(405
)
 
NM

 
NM

 
(84
)
 
(340
)
 
NM

Integration, restructuring and other non-operating expenses
(11
)
 
(34
)
 
(24
)
 
(4
)
 
(9
)
 
NM

 
18
 %
 
(12
)
 
(13
)
 
(8
)%
Stock compensation expense
(3
)
 
(3
)
 
(3
)
 
(10
)
 

 
NM

 
NM

 
(6
)
 
(10
)
 
(67
)%
Income tax (expense) benefit – non-operating
4

 
21

 
(19
)
 
131

 
(27
)
 
NM

 
NM

 
(2
)
 
104

 
NM

Less: Total non-operating adjustments
350

 
33

 
43

 
(957
)
 
334

 
NM

 
(5
)%
 
771

 
(623
)
 
NM

Adjusted operating income (loss) available to common shareholders
$
370

 
$
243

 
$
389

 
$
(108
)
 
$
490

 
NM

 
32
 %
 
$
657

 
$
382

 
(42
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RECONCILIATION OF BASIC EARNINGS (LOSS) PER CLASS A COMMON SHARES TO ADJUSTED OPERATING EARNINGS (LOSS) PER COMMON SHARE
Basic earnings (loss) per share – Class A common shares
$
3.76

 
$
1.50

 
$
2.43

 
$
(5.81
)
 
$
4.25

 
NM

 
13
 %
 
$
7.43

 
$
(0.64
)
 
NM

Non-operating adjustments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains (losses) on sale of AFS securities
0.21

 
0.25

 
0.15

 
0.07

 
(0.06
)
 
NM

 
NM

 
0.28

 

 
NM

Unrealized, allowances and other investment gains (losses)
0.05

 
(0.17
)
 
(0.07
)
 
(2.03
)
 
0.26

 
NM

 
NM

 
0.21

 
(1.67
)
 
NM

Change in fair value of reinsurance assets
3.01

 
1.72

 
(0.50
)
 
(7.04
)
 
5.66

 
NM

 
88
 %
 
6.24

 
(0.86
)
 
NM

Offsets to investment gains (losses)
(1.07
)
 
(0.89
)
 
0.16

 
2.73

 
(1.93
)
 
NM

 
(80
)%
 
(2.12
)
 
0.61

 
NM

Investment gains (losses), net of offsets
2.20

 
0.91

 
(0.26
)
 
(6.27
)
 
3.93

 
NM

 
79
 %
 
4.61

 
(1.92
)
 
NM

Change in fair values of derivatives and embedded derivatives – FIAs, net of offsets
(0.30
)
 
(0.65
)
 
0.77

 
0.36

 
(2.06
)
 
NM

 
NM

 
(0.44
)
 
(1.79
)
 
NM

Integration, restructuring and other non-operating expenses
(0.06
)
 
(0.18
)
 
(0.13
)
 
(0.03
)
 
(0.04
)
 
(33
)%
 
33
 %
 
(0.06
)
 
(0.06
)
 
 %
Stock compensation expense
(0.02
)
 
(0.02
)
 
(0.02
)
 
(0.05
)
 

 
NM

 
NM

 
(0.03
)
 
(0.05
)
 
(67
)%
Income tax (expense) benefit – non-operating
0.02

 
0.12

 
(0.11
)
 
0.72

 
(0.14
)
 
NM

 
NM

 
(0.01
)
 
0.55

 
NM

Less: Total non-operating adjustments
1.84

 
0.18

 
0.25

 
(5.27
)
 
1.69

 
NM

 
(8
)%
 
4.07

 
(3.27
)
 
NM

Effect of items convertible to or settled in Class A common shares
(0.03
)
 
(0.02
)
 
(0.03
)
 
0.06

 
0.07

 
17
 %
 
NM

 
(0.09
)
 
0.62

 
NM

Adjusted operating earnings (loss) per common share
$
1.95

 
$
1.34

 
$
2.21

 
$
(0.60
)
 
$
2.49

 
NM

 
28
 %
 
$
3.45

 
$
2.01

 
(42
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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)
athenelogoa45.jpg
 
 
Quarterly Trends
 
Δ
 
Year-to-Date
 
Δ
 
2Q’19
 
3Q’19
 
4Q’19
 
1Q’20
 
2Q’20
 
Q/Q
 
Y/Y
 
2019
 
2020
 
Y/Y
NET INVESTMENT SPREAD – RETIREMENT SERVICES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net investment earned rate
4.63
%
 
4.31
%
 
4.57
%
 
4.04
%
 
3.44
%
 
(60)bps

 
NM

 
4.42
%
 
3.73
%
 
(69)bps

Cost of crediting
1.92
%
 
1.96
%
 
1.83
%
 
1.84
%
 
1.79
%
 
(5)bps

 
(13)bps

 
1.92
%
 
1.81
%
 
(11)bps

Other liability costs
1.03
%
 
1.22
%
 
0.90
%
 
1.17
%
 
0.69
%
 
(48)bps

 
(34)bps

 
0.98
%
 
0.92
%
 
(6)bps

Cost of funds
2.95
%
 
3.18
%
 
2.73
%
 
3.01
%
 
2.48
%
 
(53)bps

 
(47)bps

 
2.90
%
 
2.73
%
 
(17)bps

Net investment spread
1.68
%
 
1.13
%
 
1.84
%
 
1.03
%
 
0.96
%
 
(7)bps

 
(72)bps

 
1.52
%
 
1.00
%
 
(52)bps

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average net invested assets
$
114,059

 
$
117,338

 
$
114,149

 
$
117,295

 
$
124,943

 
7
 %
 
10
 %
 
$
112,711

 
$
121,213

 
8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
COST OF CREDITING – RETIREMENT SERVICES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FIA option costs
$
265

 
$
265

 
$
252

 
$
248

 
$
252

 
2
 %
 
(5
)%
 
$
530

 
$
500

 
(6
)%
Fixed interest credited to policyholders
183

 
188

 
177

 
174

 
199

 
14
 %
 
9
 %
 
362

 
373

 
3
 %
Cost of crediting on deferred annuities
448

 
453

 
429

 
422

 
451

 
7
 %
 
1
 %
 
892

 
873

 
(2
)%
Average account value on deferred annuities
90,675

 
91,467

 
87,660

 
88,119

 
92,814

 
5
 %
 
2
 %
 
90,261

 
90,654

 
 %
Cost of crediting on deferred annuities rate
1.98
%
 
1.98
%
 
1.95
%
 
1.91
%
 
1.94
%
 
3bps

 
(4)bps

 
1.98
%
 
1.92
%
 
(6)bps

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of crediting on institutional products
$
99

 
$
123

 
$
92

 
$
118

 
$
109

 
(8
)%
 
10
 %
 
$
190

 
$
227

 
19
 %
Average institutional reserve liabilities
10,470

 
13,320

 
12,931

 
14,250

 
15,233

 
7
 %
 
45
 %
 
10,140

 
14,742

 
45
 %
Cost of crediting on institutional products rate
3.76
%
 
3.68
%
 
2.85
%
 
3.31
%
 
2.87
%
 
(44)bps

 
(89)bps

 
3.73
%
 
3.08
%
 
(65)bps

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of crediting
$
547

 
$
576

 
$
521

 
$
540

 
$
560

 
4
 %
 
2
 %
 
$
1,082

 
$
1,100

 
2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OTHER LIABILITY COSTS – RETIREMENT SERVICES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Change in rider reserve
$
138

 
$
114

 
$
124

 
$
183

 
$
128

 
(30
)%
 
(7
)%
 
$
292

 
$
311

 
7
 %
DAC, DSI and VOBA amortization
125

 
226

 
131

 
127

 
84

 
(34
)%
 
(33
)%
 
216

 
211

 
(2
)%
Other1
32

 
18

 
4

 
32

 
3

 
(91
)%
 
(91
)%
 
47

 
35

 
(26
)%
Other liability costs
$
295

 
$
358

 
$
259

 
$
342

 
$
215

 
(37
)%
 
(27
)%
 
$
555

 
$
557

 
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
INVESTMENT MARGIN ON DEFERRED ANNUITIES – RETIREMENT SERVICES
Net investment earned rate
4.63
%
 
4.31
%
 
4.57
%
 
4.04
%
 
3.44
%
 
(60)bps

 
NM

 
4.42
%
 
3.73
%
 
(69)bps

Cost of crediting on deferred annuities
1.98
%
 
1.98
%
 
1.95
%
 
1.91
%
 
1.94
%
 
3bps

 
(4)bps

 
1.98
%
 
1.92
%
 
(6)bps

Investment margin on deferred annuities
2.65
%
 
2.33
%
 
2.62
%
 
2.13
%
 
1.50
%
 
(63)bps

 
NM

 
2.44
%
 
1.81
%
 
(63)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. 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)
athenelogoa45.jpg
 
 
December 31, 2019
 
June 30, 2020
 
Δ
ASSETS
 
 
 
 
 
Investments
 
 
 
 
 
Available-for-sale securities, at fair value
$
71,374

 
$
74,735

 
5
 %
Trading securities, at fair value
2,070

 
2,075

 
 %
Equity securities, at fair value
247

 
237

 
(4
)%
Mortgage loans, net of allowances
14,306

 
15,203

 
6
 %
Investment funds
750

 
682

 
(9
)%
Policy loans
417

 
393

 
(6
)%
Funds withheld at interest
15,181

 
42,269

 
178
 %
Derivative assets
2,888

 
2,379

 
(18
)%
Short-term investments
596

 
364

 
(39
)%
Other investments, net of allowances
158

 
359

 
127
 %
Total investments
107,987

 
138,696

 
28
 %
Cash and cash equivalents
4,240

 
6,240

 
47
 %
Restricted cash
402

 
1,281

 
219
 %
Investments in related parties
 
 
 
 


Available-for-sale securities, at fair value
3,804

 
4,070

 
7
 %
Trading securities, at fair value
785

 
872

 
11
 %
Equity securities, at fair value
64

 
52

 
(19
)%
Mortgage loans, net of allowances
653

 
626

 
(4
)%
Investment funds
3,550

 
5,278

 
49
 %
Funds withheld at interest
13,220

 
12,971

 
(2
)%
Other investments, net of allowances
487

 
474

 
(3
)%
Accrued investment income
807

 
836

 
4
 %
Reinsurance recoverable
4,863

 
5,310

 
9
 %
Deferred acquisition costs, deferred sales inducements and value of business acquired
5,008

 
5,468

 
9
 %
Other assets
1,005

 
1,067

 
6
 %
Total assets
$
146,875

 
$
183,241

 
25
 %

8



Condensed Consolidated Balance Sheets, continued
Unaudited (in millions, except percentages)
athenelogoa45.jpg
 
 
December 31, 2019
 
June 30, 2020
 
Δ
LIABILITIES
 
 
 
 
 
Interest sensitive contract liabilities
$
102,745

 
$
135,537

 
32
 %
Future policy benefits
23,330

 
24,596

 
5
 %
Other policy claims and benefits
138

 
124

 
(10
)%
Dividends payable to policyholders
113

 
112

 
(1
)%
Short-term debt
475

 

 
NM

Long-term debt
992

 
1,486

 
50
 %
Derivative liabilities
97

 
118

 
22
 %
Payables for collateral on derivatives and securities to repurchase
3,255

 
3,716

 
14
 %
Funds withheld liability
408

 
427

 
5
 %
Other liabilities
1,181

 
1,486

 
26
 %
Total liabilities
132,734

 
167,602

 
26
 %
 
 
 
 
 
 
EQUITY
 
 
 
 
 
Preferred stock

 

 
NM

Common stock

 

 
NM

Additional paid-in-capital
4,171

 
6,090

 
46
 %
Retained earnings
6,939

 
6,437

 
(7
)%
Accumulated other comprehensive income
2,281

 
2,184

 
(4
)%
Total Athene Holding Ltd. shareholders’ equity
13,391

 
14,711

 
10
 %
Noncontrolling interests
750

 
928

 
24
 %
Total equity
14,141

 
15,639

 
11
 %
Total liabilities and equity
$
146,875

 
$
183,241

 
25
 %

9



Investments (GAAP view)
Unaudited (in millions, except percentages)
athenelogoa45.jpg
 
 
December 31, 2019
 
June 30, 2020
 
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
$
36

 
%
 
$
74

 
%
U.S. state, municipal and political subdivisions
1,541

 
1.2
%
 
943

 
0.6
%
Foreign governments
327

 
0.3
%
 
337

 
0.2
%
Corporate
47,228

 
36.2
%
 
51,199

 
31.4
%
CLO
7,349

 
5.6
%
 
7,952

 
4.9
%
ABS
5,118

 
3.9
%
 
4,773

 
2.9
%
CMBS
2,400

 
1.8
%
 
2,297

 
1.4
%
RMBS
7,375

 
5.7
%
 
7,160

 
4.4
%
Total available-for-sale securities, at fair value
71,374

 
54.7
%
 
74,735

 
45.8
%
Trading securities, at fair value
2,070

 
1.6
%
 
2,075

 
1.3
%
Equity securities, at fair value
247

 
0.2
%
 
237

 
0.1
%
Mortgage loans, net of allowances
14,306

 
11.0
%
 
15,203

 
9.4
%
Investment funds
750

 
0.6
%
 
682

 
0.4
%
Policy loans
417

 
0.3
%
 
393

 
0.2
%
Funds withheld at interest
15,181

 
11.6
%
 
42,269

 
25.9
%
Derivative assets
2,888

 
2.2
%
 
2,379

 
1.5
%
Short-term investments
596

 
0.5
%
 
364

 
0.2
%
Other investments
158

 
0.1
%
 
359

 
0.2
%
Total investments
107,987

 
82.8
%
 
138,696

 
85.0
%
Investments in related parties
 
 
 
 
 
 
 
Available-for-sale securities, at fair value
 
 
 
 
 
 
 
Corporate
19

 
%
 
20

 
%
CLO
936

 
0.7
%
 
1,239

 
0.8
%
ABS
2,849

 
2.2
%
 
2,811

 
1.7
%
Total available-for-sale securities, at fair value
3,804

 
2.9
%
 
4,070

 
2.5
%
Trading securities, at fair value
785

 
0.6
%
 
872

 
0.5
%
Equity securities, at fair value
64

 
%
 
52

 
%
Mortgage loans
653

 
0.5
%
 
626

 
0.4
%
Investment funds
3,550

 
2.7
%
 
5,278

 
3.3
%
Funds withheld at interest
13,220

 
10.1
%
 
12,971

 
8.0
%
Other investments
487

 
0.4
%
 
474

 
0.3
%
Total investments in related parties
22,563

 
17.2
%
 
24,343

 
15.0
%
Total investments including related parties
$
130,550

 
100.0
%
 
$
163,039

 
100.0
%


10



Net Invested Assets (Management view)
Unaudited (in millions, except percentages)
athenelogoa45.jpg
 
 
December 31, 2019
 
June 30, 2020
 
Invested Asset Value1
 
Percent of Total
 
Invested Asset Value1
 
Percent of Total
NET INVESTED ASSETS
 
 
 
 
 
 
 
Corporate
$
55,077

 
46.9
%
 
$
63,171

 
46.0
%
CLO
10,223

 
8.7
%
 
11,984

 
8.7
%
Credit
65,300

 
55.6
%
 
75,155

 
54.7
%
RMBS
8,394

 
7.1
%
 
8,665

 
6.3
%
CML
14,038

 
12.0
%
 
15,664

 
11.4
%
RML
4,490

 
3.8
%
 
4,755

 
3.5
%
CMBS
2,930

 
2.5
%
 
3,417

 
2.5
%
Real estate
29,852

 
25.4
%
 
32,501

 
23.7
%
ABS
10,317

 
8.8
%
 
10,507

 
7.6
%
Alternative investments
5,586

 
4.8
%
 
6,082

 
4.4
%
State, municipal, political subdivisions and foreign government
2,260

 
1.9
%
 
1,750

 
1.3
%
Equity securities
365

 
0.3
%
 
392

 
0.3
%
Short-term investments
624

 
0.5
%
 
699

 
0.5
%
U.S. government and agencies
49

 
%
 
85

 
0.1
%
Other investments
19,201

 
16.3
%
 
19,515

 
14.2
%
Cash and equivalents
1,958

 
1.7
%
 
7,541

 
5.5
%
Policy loans and other
1,175

 
1.0
%
 
1,244

 
0.9
%
Net invested assets excluding investment in Apollo
117,486

 
100.0
%
 
135,956

 
99.0
%
Investment in Apollo

 
%
 
1,313

 
1.0
%
Net invested assets
$
117,486

 
100.0
%
 
$
137,269

 
100.0
%
 
 
 
 
 
 
 
 
1 Net invested assets includes our economic ownership of ACRA investments but does not include the investments associated with the noncontrolling interest. Please refer to Notes to the Financial Supplement for discussion on net invested assets including net alternative investments and Non-GAAP Measure Reconciliations for the reconciliation of investments including related parties to net invested assets.



11



Investment Funds (GAAP view)
Unaudited (in millions, except percentages)
athenelogoa45.jpg
 
 
December 31, 2019
 
June 30, 2020
 
Carrying Value
 
Percent of Total
 
Carrying Value
 
Percent of Total
INVESTMENT FUNDS INCLUDING RELATED PARTIES1
 
 
 
 
 
 
 
Investment funds
 
 
 
 
 
 
 
Real estate
$
277

 
6.4
%
 
$
274

 
4.6
%
Credit funds
153

 
3.6
%
 
115

 
1.9
%
Private equity
236

 
5.5
%
 
232

 
3.9
%
Real assets
83

 
2.0
%
 
61

 
1.0
%
Natural resources
1

 
%
 

 
%
Total investment funds
750

 
17.5
%
 
682

 
11.4
%
Investment funds – related parties
 
 
 
 
 
 
 
Differentiated investments
 
 
 
 
 
 
 
MidCap
547

 
12.7
%
 
517

 
8.7
%
AmeriHome
487

 
11.3
%
 
594

 
10.0
%
Catalina
271

 
6.3
%
 
295

 
4.9
%
Athora
132

 
3.1
%
 
497

 
8.3
%
Venerable
99

 
2.3
%
 
118

 
2.0
%
Other
222

 
5.2
%
 
246

 
4.1
%
Total differentiated investments
1,758

 
40.9
%
 
2,267

 
38.0
%
Real estate
853

 
19.8
%
 
709

 
11.9
%
Credit funds
370

 
8.6
%
 
363

 
6.1
%
Private equity
105

 
2.4
%
 
255

 
4.3
%
Real assets
182

 
4.2
%
 
233

 
3.9
%
Natural resources
163

 
3.8
%
 
95

 
1.6
%
Public equities
119

 
2.8
%
 
43

 
0.8
%
Investment in Apollo

 
%
 
1,313

 
22.0
%
Total investment funds – related parties
3,550

 
82.5
%
 
5,278

 
88.6
%
Total investment funds including related parties
$
4,300

 
100.0
%
 
$
5,960

 
100.0
%
 
 
 
 
 
 
 
 
Note: The investment funds balances include the entire investment fund balance attributable to ACRA as ACRA is 100% consolidated. 1 Investment funds, including related parties, 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, royalties and other investments. Please refer to Notes to the Financial Supplement section for discussion on net invested assets including net alternative investments and the Non-GAAP Measure Reconciliations section for the reconciliation of investment funds, including related parties, to net alternative investments.





12



Net Alternative Investments (Management view)
Unaudited (in millions, except percentages)
athenelogoa45.jpg
 
 
December 31, 2019
 
June 30, 2020
 
Invested Asset Value1
 
Percent of Total
 
Invested Asset Value1
 
Percent of Total
NET ALTERNATIVE INVESTMENTS
 
 
 
 
 
 
 
Retirement Services
 
 
 
 
 
 
 
Differentiated investments
 
 
 
 
 
 
 
AmeriHome
$
595

 
10.7
%
 
$
730

 
12.0
%
MidCap
547

 
9.8
%
 
594

 
9.8
%
Catalina
271

 
4.9
%
 
295

 
4.9
%
Venerable
99

 
1.8
%
 
118

 
1.9
%
Other
208

 
3.7
%
 
309

 
5.1
%
Total differentiated investments
1,720

 
30.9
%
 
2,046

 
33.7
%
Real estate
1,430

 
25.6
%
 
1,260

 
20.7
%
Credit
968

 
17.3
%
 
911

 
15.0
%
Private equity
378

 
6.8
%
 
550

 
9.0
%
Real assets
349

 
6.2
%
 
411

 
6.8
%
Natural resources
51

 
0.9
%
 
45

 
0.7
%
Other
58

 
1.0
%
 

 
%
Total Retirement Services
4,954

 
88.7
%
 
5,223

 
85.9
%
Corporate & Other
 
 
 
 
 
 
 
Athora
140

 
2.5
%
 
501

 
8.2
%
Credit
128

 
2.3
%
 
89

 
1.5
%
Natural resources
245

 
4.4
%
 
226

 
3.7
%
Public equities2
119

 
2.1
%
 
43

 
0.7
%
Total Corporate & Other
632

 
11.3
%
 
859

 
14.1
%
Net alternative investments1
$
5,586

 
100.0
%
 
$
6,082

 
100.0
%
 
 
 
 
 
 
 
 
Note: Net invested assets includes our economic ownership of ACRA investments but does not include the investments associated with the noncontrolling interest.
1 Net alternative investments does not correspond to the total investment funds, including related parties, on our condensed consolidated balance sheets. Net 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, royalties and other investments. Please refer to Notes to the Financial Supplement section for discussion on net invested assets including net alternative investments and the Non-GAAP Measure Reconciliations section for the reconciliation of investment funds, including related parties, to net alternative investments.
2 Public Equities include: OneMain Financial (OMF) - 2.8 million of shares as of June 30, 2020 and December 31, 2019.


13



Funds Withheld at Interest (GAAP view)
Unaudited (in millions, except percentages)
athenelogoa45.jpg
 
 
December 31, 2019
 
June 30, 2020
 
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
$
15

 
0.1
 %
 
$
15

 
 %
U.S. state, municipal and political subdivisions
482

 
1.7
 %
 
346

 
0.6
 %
Foreign governments
143

 
0.5
 %
 
182

 
0.3
 %
Corporate
14,590

 
51.4
 %
 
30,405

 
55.1
 %
CLO
2,586

 
9.1
 %
 
3,405

 
6.2
 %
ABS
2,510

 
8.8
 %
 
2,781

 
5.0
 %
CMBS
756

 
2.7
 %
 
2,157

 
3.9
 %
RMBS
1,482

 
5.2
 %
 
2,095

 
3.8
 %
Total fixed maturity securities
22,564

 
79.5
 %
 
41,386

 
74.9
 %
Equity securities
74

 
0.3
 %
 
68

 
0.1
 %
Mortgage loans
4,357

 
15.3
 %
 
5,966

 
10.8
 %
Investment funds
807

 
2.8
 %
 
916

 
1.7
 %
Derivative assets
224

 
0.8
 %
 
161

 
0.3
 %
Short-term investments
157

 
0.6
 %
 
1,012

 
1.8
 %
Cash and cash equivalents
239

 
0.8
 %
 
6,736

 
12.2
 %
Other assets and liabilities
(21
)
 
(0.1
)%
 
(1,005
)
 
(1.8
)%
Total funds withheld at interest including related parties1
$
28,401

 
100.0
 %
 
$
55,240

 
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



Segment Net Investment Earned Rates (NIER)
Unaudited (In millions, except percentages)
athenelogoa45.jpg
 
 
Quarterly Trends
 
Δ
 
Year-to-Date
 
Δ
 
2Q’19
 
3Q’19
 
4Q’19
 
1Q’20
 
2Q’20
 
Q/Q
 
Y/Y
 
2019
 
2020
 
Y/Y
NIER – CONSOLIDATED
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income and other investments
4.26
%
 
4.11
%
 
4.29
%
 
4.20
 %
 
3.78
 %
 
(42)bps

 
(48)bps

 
4.27
%
 
3.97
 %
 
(30)bps

Alternative investments
14.13
%
 
9.26
%
 
11.15
%
 
(2.58
)%
 
(6.75
)%
 
NM

 
NM

 
9.28
%
 
(4.70
)%
 
NM

Total net investment earned rate
4.67
%
 
4.35
%
 
4.62
%
 
3.87
 %
 
3.29
 %
 
(58)bps

 
NM

 
4.48
%
 
3.56
 %
 
(92)bps

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NIER SUMMARY – RETIREMENT SERVICES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income and other investments
4.26
%
 
4.11
%
 
4.29
%
 
4.20
 %
 
3.78
 %
 
(42)bps

 
(48)bps

 
4.27
%
 
3.98
 %
 
(29)bps

Alternative investments
14.46
%
 
8.90
%
 
10.94
%
 
0.56
 %
 
(4.38
)%
 
NM

 
NM

 
8.42
%
 
(1.95
)%
 
NM

Total net investment earned rate
4.63
%
 
4.31
%
 
4.57
%
 
4.04
 %
 
3.44
 %
 
(60)bps

 
NM

 
4.42
%
 
3.73
 %
 
(69)bps

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income and other investment income
$
1,170

 
$
1,159

 
$
1,172

 
$
1,177

 
$
1,132

 
(4
)%
 
(3
)%
 
$
2,321

 
$
2,309

 
(1
)%
Alternatives investment income
151

 
105

 
134

 
7

 
(57
)
 
NM

 
NM

 
171

 
(50
)
 
NM

Total net investment earnings
$
1,321

 
$
1,264

 
$
1,306

 
$
1,184

 
$
1,075

 
(9
)%
 
(19
)%
 
$
2,492

 
$
2,259

 
(9
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income and other investments
$
109,888

 
$
112,611

 
$
109,250

 
$
112,205

 
$
119,720

 
7
 %
 
9
 %
 
$
108,651

 
$
116,080

 
7
 %
Alternatives investments
4,171

 
4,727

 
4,899

 
5,090

 
5,223

 
3
 %
 
25
 %
 
4,060

 
5,133

 
26
 %
Total average net invested assets
$
114,059

 
$
117,338

 
$
114,149

 
$
117,295

 
$
124,943

 
7
 %
 
10
 %
 
$
112,711


$
121,213

 
8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NIER SUMMARY – CORPORATE & OTHER
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income and other investments
4.26
%
 
4.12
%
 
4.29
%
 
4.18
 %
 
3.78
 %
 
(40)bps

 
(48)bps

 
3.81
%
 
3.67
 %
 
(14)bps

Alternative investments
11.96
%
 
11.95
%
 
12.82
%
 
(29.33
)%
 
(24.20
)%
 
NM

 
NM

 
14.80
%
 
(25.34
)%
 
NM

Total net investment earned rate
8.39
%
 
7.28
%
 
7.16
%
 
(8.14
)%
 
(8.91
)%
 
(77)bps

 
NM

 
10.05
%
 
(7.94
)%
 
NM

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income and other investment income
$
5

 
$
9

 
$
13

 
$
11

 
$
8

 
(27
)%
 
60
 %
 
$
8

 
$
19

 
138
 %
Alternatives investment income
19

 
19

 
20

 
(44
)
 
(43
)
 
2
 %
 
NM

 
48

 
(87
)
 
NM

Total net investment earnings
$
24

 
$
28

 
$
33

 
$
(33
)
 
$
(35
)
 
(6
)%
 
NM

 
$
56

 
$
(68
)
 
NM

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed income and other investments
$
539

 
$
935

 
$
1,218

 
$
1,027

 
$
856

 
(17
)%
 
59
 %
 
$
481

 
$
1,027

 
114
 %
Alternatives investments
623

 
632

 
619

 
597

 
711

 
19
 %
 
14
 %
 
632

 
685

 
8
 %
Total average net invested assets ex. Apollo investment
$
1,162

 
$
1,567

 
$
1,837

 
$
1,624

 
$
1,567

 
(4
)%
 
35
 %
 
$
1,113

 
$
1,712

 
54
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: Please refer to Notes to the Financial Supplement section and the Non-GAAP Measure Reconciliations for discussion on net investment earned rate and net invested assets. The investment results above are presented net of investment management fees as well as the proportionate share of income/(loss) and investments associated with the ACRA noncontrolling interest. Consolidated and Corporate & Other average net invested assets exclude the assets related to our investment in Apollo when used in the calculation of our net investment earned rate.




15



NIERs by Asset Class and Apollo Investment
Unaudited (in millions, except percentages)
athenelogoa45.jpg
 
Quarterly Trends
 
Δ
 
Year-to-Date
 
Δ
 
2Q’191
 
3Q’19
 
4Q’19
 
1Q’20
 
2Q’20
 
Q/Q
 
Y/Y
 
2019
 
2020
 
Y/Y
NIER BY ASSET CLASS
Corporate securities
4.12
%
 
3.94
%
 
4.15
%
 
4.02
 %
 
3.80
 %
 
(22)bps
 
(32)bps
 
4.02
%
 
3.89
 %
 
(13)bps
Structured securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RMBS
5.07
%
 
4.39
%
 
5.03
%
 
5.53
 %
 
4.61
 %
 
(92)bps
 
(46)bps
 
5.56
%
 
5.04
 %
 
(52)bps
CLO
4.73
%
 
4.57
%
 
4.45
%
 
4.38
 %
 
3.74
 %
 
(64)bps
 
(99)bps
 
4.86
%
 
4.05
 %
 
(81)bps
ABS
4.34
%
 
4.14
%
 
3.88
%
 
4.48
 %
 
3.85
 %
 
(63)bps
 
(49)bps
 
4.16
%
 
4.16
 %
 
0bps
CMBS
3.93
%
 
3.96
%
 
5.27
%
 
4.23
 %
 
4.39
 %
 
16bps
 
46bps
 
4.03
%
 
4.31
 %
 
28bps
Total structured securities
4.64
%
 
4.33
%
 
4.52
%
 
4.69
 %
 
4.05
 %
 
(64)bps
 
(59)bps
 
4.80
%
 
4.36
 %
 
(44)bps
State, municipal, political subdivisions and U.S. and foreign government
3.80
%
 
3.88
%
 
4.07
%
 
4.80
 %
 
3.38
 %
 
NM
 
(42)bps
 
4.03
%
 
3.93
 %
 
(10)bps
Mortgage loans
4.54
%
 
4.66
%
 
4.58
%
 
4.36
 %
 
4.29
 %
 
(7)bps
 
(25)bps
 
4.72
%
 
4.32
 %
 
(40)bps
Alternative investments
14.13
%
 
9.26
%
 
11.15
%
 
(2.58
)%
 
(6.75
)%
 
NM
 
NM
 
9.28
%
 
(4.70
)%
 
NM
Other U.S. and Bermuda net invested assets
2.84
%
 
2.94
%
 
3.33
%
 
2.32
 %
 
1.17
 %
 
NM
 
NM
 
2.67
%
 
1.71
 %
 
(96)bps
Consolidated net investment earned rate
4.67
%
 
4.35
%
 
4.62
%
 
3.87
 %
 
3.29
 %
 
(58)bps
 
NM
 
4.48
%
 
3.56
 %
 
(92)bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
APOLLO INVESTMENT DETAILS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Change in fair value of Apollo investment
$

 
$

 
$

 
$
(297
)
 
$
481

 
NM
 
NM
 
$

 
$
184

 
NM
Income tax (expense) benefit on Apollo investment

 

 

 
58

 
(109
)
 
NM
 
NM
 

 
(51
)
 
NM
Change in fair value of Apollo investment, net of tax
$

 
$

 
$

 
$
(239
)
 
$
372

 
NM
 
NM
 
$

 
$
133

 
NM
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Return on Apollo investment, net of tax
%
 
%
 
%
 
(224.9
)%
 
137.7
 %
 
NM
 
NM
 
%
 
36.9
 %
 
NM
Change in fair value of Apollo investment impact on adjusted operating EPS2
$

 
$

 
$

 
$
(1.36
)
 
$
1.79

 
NM
 
NM
 
$

 
$
0.56

 
NM
Adjusted operating EPS, excluding AOG
$
1.95

 
$
1.34

 
$
2.21

 
$
0.76

 
$
0.70

 
NM
 
NM
 
$
3.45

 
$
1.45

 
NM
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 as well as the proportionate share of income/(loss) and investments associated with the ACRA noncontrolling interest. 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. 2 The impact of the Apollo investment on adjusted operating EPS includes removing the income/(loss) on the investment, net of tax, as well as the Athene shares issued in exchange for the AOG units. It does not include an adjustment for the shares issued in exchange for $350 million. For Q1 2020, the calculation also includes the dilution of other stock compensation plans as a result of the exclusion of the loss on the Apollo investment creating adjusted operating income available to common shareholders instead of a loss.


16



Credit Quality of Securities
Unaudited (in millions, except percentages)
athenelogoa45.jpg
 
 
December 31, 2019
 
June 30, 2020
CREDIT QUALITY OF AFS SECURITIES (GAAP VIEW)
Fair Value
 
Percent of Total
 
Fair Value
 
Percent of Total
NAIC designation
 
 
 
 
 
 
 
1
$
38,667

 
51.4
%
 
$
39,700

 
50.4
%
2
32,336

 
43.0
%
 
34,124

 
43.3
%
Total investment grade
71,003

 
94.4
%
 
73,824

 
93.7
%
3
3,300

 
4.4
%
 
3,916

 
5.0
%
4
740

 
1.0
%
 
827

 
1.0
%
5
94

 
0.1
%
 
149

 
0.2
%
6
41

 
0.1
%
 
89

 
0.1
%
Total below investment grade
4,175

 
5.6
%
 
4,981

 
6.3
%
Total AFS securities including related parties
$
75,178

 
100.0
%
 
$
78,805

 
100.0
%
 
 
 
 
 
 
 
 
NRSRO designation
 
 
 
 
 
 
 
AAA/AA/A
$
28,299

 
37.7
%
 
$
30,238

 
38.4
%
BBB
29,032

 
38.6
%
 
28,443

 
36.1
%
Non-rated1
10,014

 
13.3
%
 
11,142

 
14.2
%
Total investment grade2
67,345

 
89.6
%
 
69,823

 
88.7
%
BB
3,403

 
4.5
%
 
4,347

 
5.5
%
B
813

 
1.1
%
 
1,042

 
1.3
%
CCC
1,981

 
2.6
%
 
1,845

 
2.3
%
CC and lower
1,076

 
1.4
%
 
1,080

 
1.4
%
Non-rated1
560

 
0.8
%
 
668

 
0.8
%
Total below investment grade
7,833

 
10.4
%
 
8,982

 
11.3
%
Total AFS securities including related parties
$
75,178

 
100.0
%
 
$
78,805

 
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
$
51,175

 
92.9
%
 
$
57,907

 
91.7
%
RMBS
8,001

 
95.3
%
 
8,227

 
95.0
%
CLO
10,053

 
98.3
%
 
11,860

 
99.0
%
ABS
9,476

 
91.8
%
 
9,587

 
91.2
%
CMBS
2,634

 
89.9
%
 
3,094

 
90.5
%
Total structured securities
30,164

 
94.7
%
 
32,768

 
94.8
%
State, municipal, political subdivisions and U.S. and foreign government
2,291

 
99.2
%
 
1,832

 
99.8
%
Short-term investments
597

 
95.5
%
 
658

 
94.1
%
Total NAIC 1 & 2 Designations
$
84,227

 
 
 
$
93,165

 
 
 
 
 
 
 
 
 
 
1 Securities denoted as non-rated by the NRSRO were classified as investment or non-investment grade according to the security’s respective NAIC designation. With respect to modeled LBaSS, the NAIC designation methodology differs in significant respects from the NRSRO ratings 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 net invested assets and Non-GAAP Measure Reconciliations section for the reconciliation of total investments including related parties to net invested assets.

17



Credit Quality of Net Invested Assets (Management view)
Unaudited (In millions, except percentages)
 
athenelogoa45.jpg
 
 
December 31, 2019
 
June 30, 2020
 
 
December 31, 2019
 
June 30, 2020
 
Invested Asset Value1
 
% of Total
 
Invested Asset Value1
 
% of Total
 
 
Invested Asset Value1
 
% of Total
 
Invested Asset Value1
 
% of Total
CREDIT QUALITY OF NET INVESTED ASSETS
 
 
 
 
 
 
 
CREDIT QUALITY OF NET INVESTED ASSETS
 
 
 
 
 
 
NAIC designation
 
 
 
 
 
 
 
 
NRSRO designation
 
 
 
 
 
 
 
1
$
45,836

 
51.0
%
 
$
50,029

 
49.9
%
 
AAA/AA/A
$
33,918

 
37.7
%
 
$
38,256

 
38.1
%
2
38,391

 
42.7
%
 
43,136

 
43.0
%
 
BBB
33,902

 
37.7
%
 
36,108

 
36.0
%
Non-rated3

 
%
 

 
%
 
Non-rated3
12,448

 
13.9
%
 
14,700

 
14.7
%
Total investment grade
84,227

 
93.7
%
 
93,165

 
92.9
%
 
Total investment grade
80,268

 
89.3
%
 
89,064

 
88.8
%
3
4,056

 
4.5
%
 
5,015

 
5.0
%
 
BB
3,984

 
4.4
%
 
4,923

 
4.9
%
4
1,246

 
1.4
%
 
1,427

 
1.4
%
 
B
1,300

 
1.5
%
 
1,719

 
1.7
%
5
289

 
0.3
%
 
549

 
0.6
%
 
CCC
2,177

 
2.4
%
 
2,181

 
2.2
%
6
56

 
0.1
%
 
122

 
0.1
%
 
CC and lower
1,138

 
1.3
%
 
1,223

 
1.2
%
Non-rated3

 
%
 

 
%
 
Non-rated3
1,007

 
1.1
%
 
1,168

 
1.2
%
Total below investment grade
5,647

 
6.3
%
 
7,113

 
7.1
%
 
Total below investment grade
9,606

 
10.7
%
 
11,214

 
11.2
%
Total NAIC designated assets2
89,874

 
100.0
%
 
100,278

 
100.0
%
 
Total NRSRO designated assets2
89,874

 
100.0
%
 
100,278

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets without NAIC designation
 
 
 
 
 
 
 
 
Assets without NRSRO designation
 
 

 
 
 
 
Commercial mortgage loans
 
 
 
 
 
 
 
 
Commercial mortgage loans
 
 


 
 
 
 
CM1
4,102

 
29.2
%
 
4,295

 
27.4
%
 
CM1
4,102

 
29.2
%
 
4,295

 
27.4
%
CM2
6,050

 
43.1
%
 
7,253

 
46.3
%
 
CM2
6,050

 
43.1
%
 
7,253

 
46.3
%
CM3
3,481

 
24.8
%
 
3,746

 
23.9
%
 
CM3
3,481

 
24.8
%
 
3,746

 
23.9
%
CM4
365

 
2.6
%
 
370

 
2.4
%
 
CM4
365

 
2.6
%
 
370

 
2.4
%
CM5
40

 
0.3
%
 

 
%
 
CM5
40

 
0.3
%
 

 
%
CM6

 
%
 

 
%
 
CM6

 
%
 

 
%
CM7

 
%
 

 
%
 
CM7

 
%
 

 
%
Total CMLs
14,038

 
100.0
%
 
15,664

 
100.0
%
 
Total CMLs
14,038

 
100.0
%
 
15,664

 
100.0
%
Residential mortgage loans
 
 
 
 
 
 
 
 
Residential mortgage loans
 
 


 
 
 
 
In good standing
4,423

 
98.5
%
 
4,624

 
97.3
%
 
In good standing
4,423

 
98.5
%
 
4,624

 
97.3
%
90 days late
34

 
0.8
%
 
87

 
1.8
%
 
90 days late
34

 
0.8
%
 
87

 
1.8
%
In foreclosure
33

 
0.7
%
 
44

 
0.9
%
 
In foreclosure
33

 
0.7
%
 
44

 
0.9
%
Total RMLs
4,490

 
100.0
%
 
4,755

 
100.0
%
 
Total RMLs
4,490

 
100.0
%
 
4,755

 
100.0
%
Alternative investments
5,586

 


 
6,082

 
 
 
Alternative investments
5,586

 


 
6,082

 
 
Investment in Apollo

 
 
 
1,313

 
 
 
Investment in Apollo

 
 
 
1,313

 
 
Cash and equivalents
1,958

 


 
7,541

 
 
 
Cash and equivalents
1,958

 


 
7,541

 
 
Equity securities
365

 
 
 
392

 
 
 
Equity securities
365

 
 
 
392

 
 
Other4
1,175

 


 
1,244

 
 
 
Other4
1,175

 


 
1,244

 
 
Net invested assets
$
117,486

 


 
$
137,269

 
 
 
Net invested assets
$
117,486

 


 
$
137,269

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 Please refer to Notes to the Financial Supplement section for discussion on net invested assets and Non-GAAP Measure Reconciliations section for the reconciliation of total investments, including related parties, to net 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 modeled LBaSS, the NAIC designation methodology differs in significant respects from the NRSRO ratings methodology. 4 Other includes policy loans, accrued interest, and other net invested assets.






18



Credit Quality of Net Invested Assets – RMBS, CLOs, ABS (Management view)
Unaudited (In millions, except percentages)
athenelogoa45.jpg
 
 
December 31, 2019
 
June 30, 2020
 
 
December 31, 2019
 
June 30, 2020
 
Invested Asset Value1
 
% of Total
 
Invested Asset Value1
 
% of Total
 
 
Invested Asset Value1
 
% of Total
 
Invested Asset Value1
 
% of Total
CREDIT QUALITY OF RMBS – NAIC DESIGNATION
 
 
 
 
 
CREDIT QUALITY OF RMBS – NRSRO DESIGNATION
1
$
7,610

 
90.7
%
 
$
7,933

 
91.6
%
 
AAA/AA/A
$
1,068

 
12.7
%
 
$
1,286

 
14.8
%
2
391

 
4.6
%
 
294

 
3.4
%
 
BBB
717

 
8.5
%
 
592

 
6.8
%
Non-rated2

 
%
 

 
%
 
Non-rated2
2,702

 
32.2
%
 
2,826

 
32.6
%
Total investment grade
8,001

 
95.3
%
 
8,227

 
95.0
%
 
Total investment grade
4,487

 
53.4
%
 
4,704

 
54.2
%
3
311

 
3.7
%
 
283

 
3.2
%
 
BB
288

 
3.4
%
 
279

 
3.3
%
4
58

 
0.7
%
 
43

 
0.5
%
 
B
251

 
3.0
%
 
294

 
3.4
%
5
10

 
0.1
%
 
51

 
0.6
%
 
CCC
2,061

 
24.6
%
 
2,011

 
23.2
%
6
14

 
0.2
%
 
61

 
0.7
%
 
CC and lower
1,134

 
13.5
%
 
1,223

 
14.1
%
Non-rated2

 
%
 

 
%
 
Non-rated2
173

 
2.1
%
 
154

 
1.8
%
Total below investment grade
393

 
4.7
%
 
438

 
5.0
%
 
Total below investment grade
3,907

 
46.6
%
 
3,961

 
45.8
%
RMBS net invested assets
$
8,394

 
100.0
%
 
$
8,665

 
100.0
%
 
RMBS net invested assets
$
8,394

 
100.0
%
 
$
8,665

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CREDIT QUALITY OF CLOs – NAIC DESIGNATION
 
 
 
 
 
CREDIT QUALITY OF CLOs – NRSRO DESIGNATION
1
$
5,796

 
56.7
%
 
$
7,312

 
61.0
%
 
AAA/AA/A
$
5,796

 
56.7
%
 
$
7,312

 
61.0
%
2
4,257

 
41.6
%
 
4,548

 
38.0
%
 
BBB
4,257

 
41.6
%
 
4,548

 
38.0
%
Non-rated2

 
%
 

 
%
 
Non-rated2

 
%
 

 
%
Total investment grade
10,053

 
98.3
%
 
11,860

 
99.0
%
 
Total investment grade
10,053

 
98.3
%
 
11,860

 
99.0
%
3
141

 
1.4
%
 
115

 
0.9
%
 
BB
141

 
1.4
%
 
115

 
0.9
%
4
22

 
0.2
%
 
9

 
0.1
%
 
B
22

 
0.2
%
 
9

 
0.1
%
5
7

 
0.1
%
 

 
%
 
CCC
7

 
0.1
%
 

 
%
6

 
%
 

 
%
 
CC and lower

 
%
 

 
%
Total below investment grade
170

 
1.7
%
 
124

 
1.0
%
 
Total below investment grade
170

 
1.7
%
 
124

 
1.0
%
CLOs net invested assets
$
10,223

 
100.0
%
 
$
11,984

 
100.0
%
 
CLOs net invested assets
$
10,223

 
100.0
%
 
$
11,984

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CREDIT QUALITY OF ABS – NAIC DESIGNATION
 
 
 
 
 
CREDIT QUALITY OF ABS – NRSRO DESIGNATION
1
$
6,518

 
63.1
%
 
$
6,573

 
62.6
%
 
AAA/AA/A
$
5,297

 
51.3
%
 
$
5,219

 
49.7
%
2
2,958

 
28.7
%
 
3,014

 
28.6
%
 
BBB
2,268

 
22.0
%
 
2,230

 
21.2
%
Non-rated2

 
%
 

 
%
 
Non-rated2
1,911

 
18.5
%
 
2,050

 
19.5
%
Total investment grade
9,476

 
91.8
%
 
9,587

 
91.2
%
 
Total investment grade
9,476

 
91.8
%
 
9,499

 
90.4
%
3
565

 
5.5
%
 
596

 
5.7
%
 
BB
545

 
5.3
%
 
608

 
5.8
%
4
126

 
1.2
%
 
191

 
1.8
%
 
B
126

 
1.2
%
 
199

 
1.9
%
5
150

 
1.5
%
 
133

 
1.3
%
 
CCC
6

 
0.1
%
 
14

 
0.1
%
6

 
%
 

 
%
 
CC and lower

 
%
 

 
%
Non-rated2

 
%
 

 
%
 
Non-rated2
164

 
1.6
%
 
187

 
1.8
%
Total below investment grade
841

 
8.2
%
 
920

 
8.8
%
 
Total below investment grade
841

 
8.2
%
 
1,008

 
9.6
%
ABS net invested assets
$
10,317

 
100.0
%
 
$
10,507

 
100.0
%
 
ABS net invested assets
$
10,317

 
100.0
%
 
$
10,507

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

19




Net Reserve Liabilities & Rollforwards
Unaudited (in millions, except percentages)
athenelogoa45.jpg
 
 
December 31, 2019
 
June 30, 2020
 
Dollars
 
Percent of Total
 
Dollars
 
Percent of Total
NET RESERVE LIABILITIES
 
 
 
 
 
 
 
Fixed indexed annuities
$
73,346

 
64.0
%
 
$
78,556

 
59.8
%
Fixed rate annuities
19,481

 
17.0
%
 
27,243

 
20.8
%
Total deferred annuities
92,827

 
81.0
%
 
105,799

 
80.6
%
Pension risk transfer annuities
8,230

 
7.2
%
 
9,379

 
7.1
%
Payout annuities
6,383

 
5.6
%
 
6,609

 
5.0
%
Funding agreements1
5,107

 
4.4
%
 
7,724

 
5.9
%
Life and other
2,105

 
1.8
%
 
1,822

 
1.4
%
Total net reserve liabilities
$
114,652

 
100.0
%
 
$
131,333

 
100.0
%
 
Quarterly Trends
 
Δ
 
Year-to-Date
 
Δ
 
2Q’19
 
3Q’19
 
4Q’19
 
1Q’20
 
2Q’20
 
Q/Q
 
Y/Y
 
2019
 
2020
 
Y/Y
NET RESERVE LIABILITY ROLLFORWARD
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net reserve liabilities – beginning
$
111,791


$
114,680


$
118,825


$
114,652


$
114,273


 %

2
 %

$
107,732


$
114,652


6
 %
Gross deposits2
4,153

 
5,759

 
3,735

 
4,084

 
7,031


72
 %
 
69
 %
 
9,013

 
11,115

 
23
 %
Acquisition and block reinsurance3

 

 

 

 
28,792

 
NM

 
NM

 

 
28,792

 
NM

Deposits attributable to ACRA noncontrolling interest

 

 
(544
)
 

 
(18,288
)

NM

 
NM

 

 
(18,288
)
 
NM

Net deposits
4,153


5,759


3,191


4,084


17,535


NM


NM


9,013


21,619


140
 %
Net withdrawals
(2,907
)

(2,807
)

(2,497
)

(2,740
)

(3,282
)

(20
)%

(13
)%

(5,687
)

(6,022
)

(6
)%
Sale of ACRA noncontrolling interest to ADIP and ownership changes4

 

 
(6,141
)
 

 
335

 
NM

 
NM

 

 
335

 
NM

Other reserve changes
1,643


1,193


1,274


(1,723
)

2,472


NM


50
 %

3,622


749


(79
)%
Net reserve liabilities – ending
$
114,680


$
118,825


$
114,652


$
114,273


$
131,333


15
 %

15
 %

$
114,680


$
131,333


15
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ACRA NONCONTROLLING INTEREST RESERVE LIABILITY ROLLFORWARD5
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reserve liabilities – beginning
$


$


$


$
6,574


$
6,322


(4
)%

NM


$


$
6,574


NM

Deposits




544




20


NM


NM




20


NM

Acquisition and block reinsurance3

 

 

 

 
18,268

 
NM

 
NM

 

 
18,268

 
NM

Withdrawals




(169
)

(197
)

(317
)

(61
)%

NM




(514
)

NM

Sale of ACRA noncontrolling interest to ADIP and ownership changes4

 

 
6,141

 

 
(335
)
 
NM

 
NM

 

 
(335
)
 
NM

Other reserve changes




58


(55
)

136


NM


NM




81


NM

Reserve liabilities – ending
$


$


$
6,574


$
6,322


$
24,094


281
 %

NM


$


$
24,094


NM

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: Please refer to Notes to the Financial Supplement section and the Non-GAAP Measure Reconciliations for discussion on net reserve liabilities. Net reserve liabilities include our economic ownership of ACRA investments but do not include the reserve liabilities associated with the noncontrolling interest.  1 Funding agreements are comprised of our funding agreement backed note program, Federal Home Loan Bank secured funding agreements and long-term repurchase agreements. 2 Gross 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, annuitizations and foreign currency translation adjustments between the transaction date of large transactions and the translation period. Gross deposits include all deposits sourced by Athene, including all of the deposits reinsured to ACRA. 3 Acquisitions and block reinsurance transactions includes the reserve liabilities acquired in our inorganic channel at inception. Effective June 1, 2020, we entered into an agreement with Jackson National Life pursuant to which we agreed to reinsure a block of fixed and fixed indexed annuities on a funds withheld coinsurance basis providing $28.8 billion of gross deposits. 4 ACRA noncontrolling interest reserve liabilities at inception on October 1, 2019 were $6.1 billion. Effective April 1, 2020, ALRe purchased 14,000 newly issued shares in ACRA increasing our ownership from 33% to 36.55% of the economic interests. 5 The ACRA reserve liability rollforward is a rollforward of the GAAP reserve liabilities associated with the noncontrolling interest.

20




Net Reserve Liabilities & Rollforwards, continued
Unaudited (in millions, except percentages)
 
 
 
 
 
 
 
athenelogoa45.jpg
 

Quarterly Trends

Δ

Year-to-Date

Δ

2Q’19

3Q’19

4Q’19

1Q’20

2Q’20

Q/Q

Y/Y

2019

2020

Y/Y
NET DEFERRED ANNUITY ACCOUNT VALUE ROLLFORWARD1




















Net account value – beginning
$
90,184


$
91,165


$
91,768


$
88,000


$
88,238


 %

(2
)%

$
89,435


$
88,000


(2
)%
Gross deposits2
2,976


2,483


2,237


2,013


3,913


94
 %

31
 %

5,776


5,926


3
 %
Acquisition and block reinsurance3

 

 

 

 
27,404

 
NM

 
NM

 

 
27,404

 
NM

Deposits attributable to ACRA noncontrolling interest

 

 
4

 

 
(17,398
)

NM


NM



 
(17,398
)

NM

Net deposits
2,976

 
2,483

 
2,241

 
2,013

 
13,919


NM


NM


5,776

 
15,932


176
 %
Premium and interest bonuses
68


55


34


37


45


22
 %

(34
)%

126


82


(35
)%
Fixed and index credits to policyholders
591


560


611


589


443


(25
)%

(25
)%

1,014


1,032


2
 %
Surrenders and benefits paid
(2,548
)

(2,382
)

(2,091
)

(2,288
)

(2,054
)

10
 %

19
 %

(4,979
)

(4,342
)

13
 %
Sale of ACRA noncontrolling interest to ADIP and ownership changes4

 

 
(4,450
)
 

 
221

 
NM

 
NM

 

 
221

 
NM

Fee and product charges
(106
)

(113
)

(113
)

(113
)

(118
)

(4
)%

(11
)%

(207
)

(231
)

(12
)%
Net account value – ending
$
91,165


$
91,768


$
88,000


$
88,238


$
100,694


14
 %

10
 %

$
91,165


$
100,694


10
 %























NET INSTITUTIONAL RESERVE LIABILITY ROLLFORWARD (PENSION RISK TRANSFER AND FUNDING AGREEMENTS)













Net reserve liabilities – beginning
$
10,404


$
11,354


$
14,371


$
13,337


$
15,036


13
 %

45
 %

$
8,536


$
13,337


56
 %
Gross deposits2
1,008

 
3,106

 
1,314

 
1,840

 
2,865


56
 %

184
 %

2,930

 
4,705


61
 %
Deposits attributable to ACRA noncontrolling interest

 

 
(548
)
 

 


NM


NM



 


NM

Net deposits
1,008

 
3,106

 
766

 
1,840

 
2,865


56
 %

184
 %

2,930

 
4,705


61
 %
Net withdrawals
(158
)

(205
)

(204
)

(240
)

(1,024
)

NM


NM


(301
)

(1,264
)

NM

Sale of ACRA noncontrolling interest to ADIP and ownership changes4

 

 
(1,698
)
 

 
117

 
NM

 
NM

 

 
117

 
NM

Other reserve changes
100


116


102


99


109


10
 %

9
 %

189


208


10
 %
Net reserve liabilities – ending
$
11,354


$
14,371


$
13,337


$
15,036


$
17,103


14
 %

51
 %

$
11,354


$
17,103


51
 %




















Note: Please refer to Notes to the Financial Supplement section and the Non-GAAP Measure Reconciliations for discussion on net reserve liabilities. Net reserve liabilities include our economic ownership of ACRA reserve liabilities but do not include the reserve liabilities associated with the noncontrolling interest. 1 The account value rollforwards on deferred annuities include our fixed rate and fixed indexed annuities and are net of ceded reinsurance activity. 2 Gross 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, annuitizations and foreign currency translation adjustments between the transaction date of large transactions and the translation period. Gross deposits include all deposits sourced by Athene, including all of the deposits reinsured to ACRA. 3 Acquisitions and block reinsurance transactions includes the reserve liabilities acquired in our inorganic channel at inception. Effective June 1, 2020, we entered into an agreement with Jackson National Life pursuant to which we agreed to reinsure a block of fixed and fixed indexed annuities on a funds withheld coinsurance basis providing $28.8 billion of gross deposits. 4 ACRA noncontrolling interest reserve liabilities at inception on October 1, 2019 were $6.1 billion. Effective April 1, 2020, ALRe purchased 14,000 newly issued shares in ACRA increasing our ownership from 33% to 36.55% of the economic interests.

21



Deferred Annuity Liability Characteristics
Unaudited (in millions, except percentages)
athenelogoa45.jpg
 
 
Surrender charge (gross)
 
Percent of total
 
Surrender charge
(net of MVA)
 
Percent of total
SURRENDER CHARGE PERCENTAGES ON DEFERRED ANNUITIES NET ACCOUNT VALUE
 
 
 
 
 
 
 
No Surrender Charge
$
24,750

 
24.6
%
 
$
24,750

 
24.6
%
0.0% < 2.0%
1,056

 
1.0
%
 
10,546

 
10.5
%
2.0% < 4.0%
3,891

 
3.9
%
 
15,170

 
15.1
%
4.0% < 6.0%
11,011

 
10.9
%
 
18,261

 
18.1
%
6.0% or greater
59,986

 
59.6
%
 
31,967

 
31.7
%
 
$
100,694

 
100.0
%
 
$
100,694

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
Surrender charge (gross)
 
MVA benefit
 
Surrender charge (net)
Aggregate surrender charge protection
 
 
5.9
%
 
(2.1
)%
 
3.8
%
 
Deferred annuities
 
Percent of total
 
Average surrender charge (gross)
YEARS OF SURRENDER CHARGE REMAINING ON DEFERRED ANNUITIES NET ACCOUNT VALUE
 
 
 
 
 
No Surrender Charge
$
24,750

 
24.6
%
 
%
Less than 2
18,439

 
18.3
%
 
5.2
%
2 to less than 4
19,138

 
19.0
%
 
6.7
%
4 to less than 6
11,686

 
11.6
%
 
8.0
%
6 to less than 8
12,283

 
12.2
%
 
9.2
%
8 to less than 10
10,886

 
10.8
%
 
10.2
%
10 or greater
3,512

 
3.5
%
 
14.1
%
 
$
100,694

 
100.0
%
 
 
 
At minimum guarantees
 
Total account value
 
Percent of total account value at minimum guarantees
MINIMUM GUARANTEES ON DEFERRED ANNUITIES
 
 
 
 
 
Fixed indexed annuities
$
17,045

 
$
74,075

 
23
%
Fixed rate annuities
11,171

 
26,619

 
42
%
Total net deferred annuities
$
28,216

 
$
100,694

 
28
%
 
 
 
 
 
 
 
 
 
 
 
June 30, 2020
Distance to guarantees1
 
 
 
 
> 100

 
 
 
 
 
 
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, 2019
 
June 30, 2020
 
Δ
DEFERRED ANNUITY RIDER RESERVE SUMMARY
 
 
 
 
 
Net rider reserve
$
4,091

 
$
4,251

 
4
%
Net account value with rider reserves
37,377

 
37,807

 
1
%
Rider reserve as a percentage of account value with rider reserves
10.9
%
 
11.2
%
 
30bps


22



Capitalization & Regulatory Capital Ratios
Unaudited (in millions, except percentages)
athenelogoa45.jpg
 
 
Quarterly Trends
 
Δ
 
2Q’19
 
3Q’19
 
4Q’19
 
1Q’20
 
2Q’20
 
Q/Q
 
Y/Y
CAPITALIZATION
 
 
 
 
 
 
 
 
 
 
 
 
 
Total debt
$
991

 
$
992

 
$
1,467

 
$
1,386

 
$
1,486

 
7
 %
 
50
 %
Total AHL shareholders’ equity
12,365

 
13,545

 
13,391

 
9,940

 
14,711

 
48
 %
 
19
 %
Total capitalization
13,356

 
14,537

 
14,858

 
11,326

 
16,197

 
43
 %
 
21
 %
Less: Accumulated other comprehensive income (loss) (AOCI)
1,760

 
2,442

 
2,281

 
(1,174
)
 
2,184

 
NM

 
24
 %
Less: Accumulated change in fair value of reinsurance assets
639

 
727

 
493

 
(155
)
 
615

 
NM

 
(4
)%
Total adjusted capitalization
$
10,957

 
$
11,368

 
$
12,084

 
$
12,655

 
$
13,398

 
6
 %
 
22
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
 
Total AHL shareholders’ equity
$
12,365

 
$
13,545

 
$
13,391

 
$
9,940

 
$
14,711

 
48
 %
 
19
 %
Less: Preferred stock
839

 
1,172

 
1,172

 
1,172

 
1,755

 
50
 %
 
109
 %
Total AHL common shareholders’ equity
11,526

 
12,373

 
12,219

 
8,768

 
12,956

 
48
 %
 
12
 %
Less: AOCI
1,760

 
2,442

 
2,281

 
(1,174
)
 
2,184

 
NM

 
24
 %
Less: Accumulated change in fair value of reinsurance assets
639

 
727

 
493

 
(155
)
 
615

 
NM

 
(4
)%
Total adjusted AHL common shareholders’ equity
$
9,127

 
$
9,204

 
$
9,445

 
$
10,097

 
$
10,157

 
1
 %
 
11
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EQUITY BY SEGMENT
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services
$
7,704

 
$
7,494

 
$
7,443

 
$
8,002

 
$
6,957

 
(13
)%
 
(10
)%
Corporate and Other
1,423

 
1,710

 
2,002

 
2,095

 
3,200

 
53
 %
 
125
 %
Total adjusted AHL common shareholders’ equity
$
9,127

 
$
9,204

 
$
9,445

 
$
10,097

 
$
10,157

 
1
 %
 
11
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FINANCIAL LEVERAGE
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt to capital ratio
7.4
%
 
6.8
%
 
9.9
%
 
12.2
 %
 
9.2
%
 
NM

 
180bps

AOCI
1.2
%
 
1.5
%
 
1.8
%
 
(1.1
)%
 
1.5
%
 
NM

 
30bps

Accumulated change in fair value of reinsurance assets
0.4
%
 
0.4
%
 
0.4
%
 
(0.1
)%
 
0.4
%
 
NM

 
0bps

Adjusted debt to capital ratio
9.0
%
 
8.7
%
 
12.1
%
 
11.0
 %
 
11.1
%
 
10bps

 
210bps

 
December 31, 2018
 
December 31, 2019
 
Δ
REGULATORY CAPITAL RATIOS
 
 
 
 
 
U.S. RBC ratio – Athene Annuity & Life Assurance Company
421
%
 
429
%
 
NM
BSCR – Athene Life Re Ltd.
340
%
 
310
%
 
NM
Athene Life Re Ltd. RBC ratio1
405
%
 
443
%
 
NM
 
 
 
 
 
 
1 ALRe RBC ratio, which is used in evaluating our capital position and the amount of capital needed to support our Retirement Services segment, is calculated by applying the NAIC RBC factors to the statutory financial statements of AHL's non-U.S. reinsurance subsidiaries on an aggregate basis with certain adjustments made by management.




23



Financial Strength, Credit Ratings & Share Data
Unaudited (in millions, except percentages)
athenelogoa45.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
Athene Life Re International Ltd.
A
 
A
 
A
Athene Co-Invest Reinsurance Affiliate 1A Ltd. and Athene Co-Invest Reinsurance Affiliate 1B Ltd.
A
 
A
 
A
Athene Co-Invest Reinsurance Affiliate International Ltd.
A
 
A
 
A
 
 
 
 
 
 
CREDIT RATINGS
 
 
 
 
 
Athene Holding Ltd.
bbb
 
BBB+
 
BBB+
Senior notes
bbb
 
BBB+
 
BBB

 
Quarterly Trends
 
Δ
 
Year-to-Date
 
Δ
 
2Q’19
 
3Q’19
 
4Q’19
 
1Q’20
 
2Q’20
 
Q/Q
 
Y/Y
 
2019
 
2020
 
Y/Y
SHARE DATA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding – basic - Class A
158.5

 
151.6

 
144.5

 
161.4

 
193.9

 
20
 %
 
22
 %
 
159.4

 
177.6

 
11
 %
Weighted average common shares outstanding – diluted – Class A1
158.8

 
152.0

 
145.1

 
161.4

 
196.9

 
22
 %
 
24
 %
 
159.7

 
177.6

 
11
 %
Weighted average common shares outstanding – adjusted operating2
189.4

 
182.3

 
175.7

 
181.5

 
196.9

 
8
 %
 
4
 %
 
190.3

 
190.2

 
 %
Weighted average common shares outstanding - adjusted operating excluding Apollo3
189.4

 
182.3

 
175.7

 
173.3

 
168.9

 
(3
)%
 
(11
)%
 
190.3

 
171.5

 
(10
)%
Common shares outstanding4
185.4

 
182.5

 
175.7

 
193.9

 
193.9

 
 %
 
5
 %
 
185.4

 
193.9

 
5
 %
Adjusted operating common shares outstanding2
184.4

 
181.4

 
174.9

 
197.7

 
198.6

 
 %
 
8
 %
 
184.4

 
198.6

 
8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 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. 2 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 Weighted average common shares outstanding - adjusted operating excluding Apollo is adjusted to exclude the Athene shares issued in exchange for the AOG units as part of the Apollo transaction, but does not include an adjustment for the shares issued in exchange for $350 million cash. For Q1 2020, the calculation also includes the dilution of other stock compensation plans as a result of the exclusion of the loss on the AOG units creating adjusted operating income available to common shareholders instead of a loss. 4 Represents common shares vested and outstanding for all classes eligible to participate in dividends for each period presented.


24

                                        

Notes to the Financial Supplement

athenelogoa45.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.

ADJUSTED OPERATING INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS AND ADJUSTED OPERATING RETURN ON ASSETS (ROA)
Adjusted operating income (loss) 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 (loss) available to common shareholders equals net income (loss) available to AHL common shareholders adjusted to eliminate the impact of the following (collectively, the non-operating adjustments):
Investment Gains (Losses), Net of Offsets—Consists of the realized gains and losses on the sale of AFS securities, the change in fair value of reinsurance assets, unrealized gains and losses, allowances, and other investment gains and losses. Unrealized, allowances 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 change in credit loss allowances 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—Consists of 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 term 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—Consists 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—Consists of stock compensation expenses associated with our share incentive plans, excluding our long-term incentive plan, which are not related to our underlying profitability drivers and fluctuate from time to time due to the structure of our plans.
Bargain Purchase Gain—Consists of adjustments to net income (loss) available to AHL common shareholders as they are not related to our underlying profitability drivers.
Income Tax (Expense) Benefit – Non-operating—Consists of 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 (loss) 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 (loss) available to AHL common shareholders, we believe adjusted operating income (loss) available to common shareholders provides a meaningful financial metric that helps investors understand our underlying results and profitability. Adjusted operating income (loss) available to common shareholders should not be used as a substitute for net income (loss) 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 (loss) available to common shareholders divided by average net 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, net of DAC, DSI, rider reserve and tax offsets. Adjusted AHL common shareholders’ equity is calculated as the ending AHL 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 (loss) available to common shareholders, divided by average adjusted AHL 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 net income (loss) available to AHL common shareholders and equity are significant to gaining an understanding of our overall financial performance.

ADJUSTED OPERATING EARNINGS (LOSS) PER COMMON SHARE, WEIGHTED AVERAGE COMMON SHARES OUTSTANDING – ADJUSTED OPERATING, AND ADJUSTED BOOK VALUE PER COMMON SHARE
Adjusted operating earnings (loss) 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 represent an economic view of our share counts and provide a simplified and consistent view of our outstanding shares. Adjusted operating earnings (loss) per common share is calculated as the adjusted operating income (loss) available to common shareholders, over the weighted average common shares outstanding – adjusted operating. Adjusted book value per common share is calculated as the adjusted AHL common shareholders’ equity divided by the adjusted operating common shares outstanding. Effective February 28, 2020, all Class B common shares were converted into Class A common shares and all Class M common shares were converted into warrants and Class A common shares. Our Class B common shares were economically equivalent to Class A common shares and could have been converted to Class A common shares on a one-for-one basis at any time. Our Class M common shares were in the legal form of shares but economically functioned as options as they were convertible into Class A common shares after vesting and settlement of the conversion price. In calculating Class A diluted earnings per share on a GAAP basis, we are required to apply sequencing rules to determine the dilutive impacts, if any, of our Class B common shares, Class M common shares and any other stock-based awards. To the extent our Class B common shares, Class M common shares and/or any other stock-based awards were not dilutive, after considering the dilutive effects of the more dilutive securities in the sequence, they were 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 (loss) 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 (loss) 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.



25

                                        

Notes to the Financial Supplement, continued

athenelogoa45.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 divided by adjusted AHL 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 profitability of our Retirement Services segment. 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 net reserve liabilities.
Net investment earned rate is a non-GAAP measure we use to evaluate the performance of our net invested assets that does not correspond to GAAP net investment income. Net investment earned rate is computed as the income from our net invested assets divided by the average net invested assets, excluding the impacts of our investment in Apollo, 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 (a) alternative investment gains and losses, (b) gains and losses related to trading securities for CLOs, (c) net VIE impacts (revenues, expenses and noncontrolling interest), (d) forward points gains and losses on foreign exchange derivative hedges and (e) the change in fair value of reinsurance assets, and removes the proportionate share of the ACRA net investment income associated with the ACRA noncontrolling interest as well as the gain or loss on our investment in Apollo. 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, but does not include the proportionate share of the ACRA cost of funds associated with the noncontrolling interest. Cost of funds is computed as the total liability costs divided by the average net invested assets, excluding our investment in Apollo, 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 net invested assets, excluding the investment in Apollo, for the relevant periods. Cost of crediting on deferred annuities is computed as the net interest credited on fixed strategies and option costs on indexed annuity strategies divided by the average net 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 net institutional reserve liabilities. Our average net invested assets, excluding our investment in Apollo, net account values and net 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.

NET INVESTED ASSETS
In managing our business, we analyze net invested assets, which does not correspond to total investments, including investments in related parties, as disclosed in our consolidated financial statements and notes thereto. Net invested assets represents the investments that directly back our net reserve liabilities as well as surplus assets. Net invested assets, excluding our investment in Apollo, is used in the computation of net investment earned rate, which allows us to analyze the profitability of our investment portfolio. Net 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) VIE assets, liabilities and noncontrolling interest adjustments, (f) net investment payables and receivables, (g) policy loans ceded (which offset the direct policy loans in total investments) and (h) an allowance for credit losses. Net 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 net 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. Net invested assets includes our proportionate share of ACRA investments, based on our economic ownership, but does not include the proportionate share of investments associated with the noncontrolling interest. Net invested assets also includes our investment in Apollo. Our net invested assets, excluding our investment in Apollo, are averaged over the number of quarters in the relevant period to compute our net investment earned rate for such period. While we believe net invested assets is a meaningful financial metric and enhances our understanding of the underlying drivers of our investment portfolio, it should not be used as a substitute for total investments, including related parties, presented under GAAP.

NET RESERVE LIABILITIES
In managing our business, we also analyze net reserve liabilities, which does not correspond to total liabilities as disclosed in our consolidated financial statements and notes thereto. Net reserve liabilities represent our policyholder liability obligations net of reinsurance and is used to analyze the costs of our liabilities. Net reserve liabilities include (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. Net reserve liabilities include our proportionate share of ACRA reserve liabilities, based on our economic ownership, but does not include the proportionate share of reserve liabilities associated with the noncontrolling interest. Net 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. While we believe net reserve liabilities 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 liabilities presented under GAAP.

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). While we believe sales is a meaningful metric and enhances our understanding of our business performance, it should not be used as a substitute for premiums presented under GAAP.


26



Non-GAAP Reconciliations
Unaudited (in millions, except per share data)
athenelogoa45.jpg
 
 
Quarterly Trends
 
Year-to-Date
 
2Q’19
 
3Q’19
 
4Q’19
 
1Q’20
 
2Q’20
 
2019
 
2020
RECONCILIATION OF BOOK VALUE PER COMMON SHARE TO ADJUSTED BOOK VALUE PER COMMON SHARE
Book value per common share
$
66.69

 
$
74.20

 
$
76.21

 
$
51.28

 
$
75.87

 
 
 
 
Preferred stock
(4.53
)
 
(6.42
)
 
(6.67
)
 
(6.04
)
 
(9.05
)
 
 
 
 
AOCI
(9.49
)
 
(13.38
)
 
(12.98
)
 
6.06

 
(11.26
)
 
 
 
 
Accumulated change in fair value of reinsurance assets
(3.45
)
 
(3.98
)
 
(2.80
)
 
0.80

 
(3.17
)
 
 
 
 
Effect of items convertible to or settled in Class A common shares
0.28

 
0.32

 
0.26

 
(1.03
)
 
(1.24
)
 
 
 
 
Adjusted book value per common share
$
49.50

 
$
50.74

 
$
54.02

 
$
51.07

 
$
51.15

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RECONCILIATION OF AVERAGE AHL SHAREHOLDERS’ EQUITY TO AVERAGE ADJUSTED AHL COMMON SHAREHOLDERS’ EQUITY
Average AHL shareholders’ equity
$
11,241

 
$
12,955

 
$
13,468

 
$
11,666

 
$
12,326

 
$
10,321

 
$
14,051

Less: Average preferred stock
420

 
1,006

 
1,172

 
1,172

 
1,464

 
420

 
1,464

Less: Average AOCI
1,233

 
2,101

 
2,362

 
554

 
505

 
644

 
2,233

Less: Average accumulated change in fair value of reinsurance assets
474

 
683

 
610

 
169

 
230

 
282

 
554

Average adjusted AHL common shareholders’ equity
$
9,114

 
$
9,165

 
$
9,324

 
$
9,771

 
$
10,127

 
$
8,975

 
$
9,800

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services
$
7,952

 
$
7,598

 
$
7,468

 
$
7,722

 
$
7,480

 
$
7,755

 
$
7,199

Corporate and Other
1,162

 
1,567

 
1,856

 
2,049

 
2,647

 
1,220

 
2,601

Average adjusted AHL common shareholders’ equity
$
9,114

 
$
9,165

 
$
9,324

 
$
9,771

 
$
10,127

 
$
8,975

 
$
9,800

 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
158.5

 
151.6

 
144.5

 
161.4

 
193.9

 
159.4

 
177.6

Conversion of Class B common shares to Class A common shares
25.4

 
25.4

 
25.4

 
16.9

 

 
25.4

 
8.5

Conversion of Class M common shares to Class A common shares
5.1

 
4.9

 
5.2

 
3.2

 

 
5.1

 
1.3

Effect of other stock compensation plans
0.4

 
0.4

 
0.6

 

 
3.0

 
0.4

 
2.8

Weighted average common shares outstanding – adjusted operating
189.4

 
182.3

 
175.7

 
181.5

 
196.9

 
190.3

 
190.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
RECONCILIATION OF CLASS A COMMON SHARES OUTSTANDING TO ADJUSTED OPERATING COMMON SHARES OUTSTANDING
Class A common shares outstanding
152.6

 
149.8

 
142.8

 
193.9

 
193.9

 
 
 
 
Conversion of Class B common shares to Class A common shares
25.4

 
25.4

 
25.4

 

 

 
 
 
 
Conversion of Class M common shares to Class A common shares
5.3

 
5.1

 
5.5

 

 

 
 
 
 
Effect of other stock compensation plans
1.1

 
1.1

 
1.2

 
3.8

 
4.7

 
 
 
 
Adjusted operating common shares outstanding
184.4

 
181.4

 
174.9

 
197.7

 
198.6

 
 
 
 













27



Non-GAAP Reconciliations
Unaudited (in millions, except percentages)
 
 
athenelogoa45.jpg
 
 
Quarterly Trends
 
Year-to-Date
 
2Q’19
 
3Q’19
 
4Q’19
 
1Q’20
 
2Q’20
 
2019
 
2020
RECONCILIATION OF NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS TO ADJUSTED OPERATING INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS EXCLUDING NOTABLES AND AOG
Net income (loss) available to Athene Holding Ltd. common shareholders
$
720

 
$
276

 
$
432

 
$
(1,065
)
 
$
824

 
$
1,428

 
$
(241
)
Less: Total non-operating adjustments
350

 
33

 
43

 
(957
)
 
334

 
771

 
(623
)
Adjusted operating income (loss) available to common shareholders
370

 
243

 
389

 
(108
)
 
490

 
657

 
382

Notable items

 
62

 
(43
)
 
43

 
(20
)
 

 
25

Adjusted operating income (loss) available to common shareholders excluding notable items
$
370

 
$
305

 
$
346

 
$
(65
)
 
$
470

 
$
657

 
$
407

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services adjusted operating income available to common shareholders
$
376

 
$
256

 
$
404

 
$
204

 
$
208

 
$
662

 
$
412

Rider reserve and DAC equity market performance

 
5

 
(25
)
 
50

 
(22
)
 

 
28

Actuarial updates

 

 
(22
)
 

 

 

 

Out of period actuarial adjustments

 
13

 

 

 

 

 

Unlocking

 
48

 

 

 

 

 

Tax impact of notable items

 
(4
)
 
4

 
(7
)
 
2

 

 
(3
)
Retirement Services notable items

 
62

 
(43
)
 
43

 
(20
)
 

 
25

Retirement Services adjusted operating income available to common shareholders excluding notable items
376

 
318

 
361

 
247

 
188

 
662

 
437

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate and Other adjusted operating income (loss) available to common shareholders
(6
)
 
(13
)
 
(15
)
 
(312
)
 
282

 
(5
)
 
(30
)
Adjusted operating income (loss) available to common shareholders excluding notable items
370

 
305

 
346

 
(65
)
 
470

 
657

 
407

Less: Change in fair value of Apollo investment, net of tax

 

 

 
(239
)
 
372

 

 
133

Adjusted operating income available to common shareholders excluding notables and AOG
$
370

 
$
305

 
$
346

 
$
174

 
$
98

 
$
657

 
$
274
















28



Non-GAAP Reconciliations
Unaudited (in millions, except percentages)
 
 
athenelogoa45.jpg
 
 
Quarterly Trends
 
Year-to-Date
 
2Q’19
 
3Q’19
 
4Q’19
 
1Q’20
 
2Q’20
 
2019
 
2020
RECONCILIATION OF NET INVESTMENT INCOME TO NET INVESTMENT EARNINGS
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP net investment income
$
1,182

 
$
1,090

 
$
1,242

 
$
745

 
$
1,336

 
$
2,264

 
$
2,081

Change in fair value of reinsurance assets
161

 
199

 
188

 
270

 
218

 
293

 
488

Alternative income gain (loss)
12

 
6

 
(12
)
 
(101
)
 
56

 
7

 
(45
)
ACRA noncontrolling interest

 

 
(61
)
 
(72
)
 
(81
)
 

 
(153
)
Apollo investment (income) loss

 

 

 
297

 
(481
)
 

 
(184
)
Held for trading amortization and other
(10
)
 
(3
)
 
(18
)
 
12

 
(8
)
 
(16
)
 
4

Total adjustments to arrive at net investment earnings
163

 
202

 
97

 
406

 
(296
)
 
284

 
110

Total net investment earnings
$
1,345

 
$
1,292

 
$
1,339

 
$
1,151

 
$
1,040

 
$
2,548

 
$
2,191

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services
$
1,321

 
$
1,264

 
$
1,306

 
$
1,184

 
$
1,075

 
$
2,492

 
$
2,259

Corporate and Other
24

 
28

 
33

 
(33
)
 
(35
)
 
56

 
(68
)
Total net investment earnings
$
1,345

 
$
1,292

 
$
1,339

 
$
1,151

 
$
1,040

 
$
2,548

 
$
2,191

 
 
 
 
 
 
 
 
 
 
 
 
 
 
RECONCILIATION OF NET INVESTMENT INCOME RATE TO NET INVESTMENT EARNED RATE
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP net investment income rate
4.10
 %
 
3.67
 %
 
4.28
 %
 
2.51
 %
 
4.22
 %
 
3.98
 %
 
3.39
 %
Change in fair value of reinsurance assets
0.56
 %
 
0.67
 %
 
0.65
 %
 
0.90
 %
 
0.69
 %
 
0.52
 %
 
0.79
 %
Alternative income gain (loss)
0.04
 %
 
0.02
 %
 
(0.04
)%
 
(0.34
)%
 
0.18
 %
 
0.01
 %
 
(0.08
)%
ACRA noncontrolling interest
 %
 
 %
 
(0.21
)%
 
(0.24
)%
 
(0.26
)%
 
 %
 
(0.25
)%
Apollo investment (income) loss
 %
 
 %
 
 %
 
1.00
 %
 
(1.52
)%
 
 %
 
(0.30
)%
Held for trading amortization and other
(0.03
)%
 
(0.01
)%
 
(0.06
)%
 
0.04
 %
 
(0.02
)%
 
(0.03
)%
 
0.01
 %
Total adjustments to arrive at net investment earned rate
0.57
 %
 
0.68
 %
 
0.34
 %
 
1.36
 %
 
(0.93
)%
 
0.50
 %
 
0.17
 %
Consolidated net investment earned rate
4.67
 %
 
4.35
 %
 
4.62
 %
 
3.87
 %
 
3.29
 %
 
4.48
 %
 
3.56
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services
4.63
 %
 
4.31
 %
 
4.57
 %
 
4.04
 %
 
3.44
 %
 
4.42
 %
 
3.73
 %
Corporate and Other
8.39
 %
 
7.28
 %
 
7.16
 %
 
(8.14
)%
 
(8.91
)%
 
10.05
 %
 
(7.94
)%
Consolidated net investment earned rate
4.67
 %
 
4.35
 %
 
4.62
 %
 
3.87
 %
 
3.29
 %
 
4.48
 %
 
3.56
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services
$
114,059

 
$
117,338

 
$
114,149

 
$
117,295

 
$
124,943

 
$
112,711

 
$
121,213

Corporate and Other ex. Apollo investment
1,162

 
1,567

 
1,837

 
1,624

 
1,567

 
1,113

 
1,712

Consolidated average net invested assets ex. Apollo investment
$
115,221

 
$
118,905

 
$
115,986

 
$
118,919

 
$
126,510

 
$
113,824

 
$
122,925










29



Non-GAAP Reconciliations
Unaudited (in millions, except percentages)
 
 
athenelogoa45.jpg
 
 
Quarterly Trends
 
Year-to-Date
 
2Q’19
 
3Q’19
 
4Q’19
 
1Q’20
 
2Q’20
 
2019
 
2020
RECONCILIATION OF INTEREST SENSITIVE CONTRACT BENEFITS TO COST OF CREDITING
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP interest sensitive contract benefits
$
1,094

 
$
801

 
$
1,146

 
$
(1,319
)
 
$
2,076

 
$
2,610

 
$
757

Interest credited other than deferred annuities and institutional products
50

 
63

 
64

 
63

 
75

 
105

 
138

FIA option costs
280

 
282

 
269

 
266

 
271

 
558

 
537

Product charges (strategy fees)
(29
)
 
(31
)
 
(31
)
 
(32
)
 
(34
)
 
(57
)
 
(66
)
Reinsurance embedded derivative impacts
14

 
14

 
14

 
14

 
15

 
29

 
29

Change in fair values of embedded derivatives – FIAs
(868
)
 
(560
)
 
(905
)
 
1,504

 
(1,734
)
 
(2,179
)
 
(230
)
Negative VOBA amortization
7

 
9

 
8

 
7

 
5

 
19

 
12

ACRA noncontrolling interest

 

 
(42
)
 
38

 
(113
)
 

 
(75
)
Other changes in interest sensitive contract liabilities
(1
)
 
(2
)
 
(2
)
 
(1
)
 
(1
)
 
(3
)
 
(2
)
Total adjustments to arrive at cost of crediting
(547
)
 
(225
)
 
(625
)
 
1,859

 
(1,516
)
 
(1,528
)
 
343

Retirement Services cost of crediting
$
547

 
$
576

 
$
521

 
$
540

 
$
560

 
$
1,082

 
$
1,100

 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP interest sensitive contract benefits
3.84
 %
 
2.73
 %
 
4.02
 %
 
(4.50
)%
 
6.65
 %
 
4.63
 %
 
1.25
 %
Interest credited other than deferred annuities and institutional products
0.18
 %
 
0.21
 %
 
0.23
 %
 
0.21
 %
 
0.24
 %
 
0.19
 %
 
0.22
 %
FIA option costs
0.98
 %
 
0.96
 %
 
0.94
 %
 
0.91
 %
 
0.86
 %
 
0.99
 %
 
0.88
 %
Product charges (strategy fees)
(0.10
)%
 
(0.10
)%
 
(0.11
)%
 
(0.11
)%
 
(0.11
)%
 
(0.10
)%
 
(0.11
)%
Reinsurance embedded derivative impacts
0.05
 %
 
0.05
 %
 
0.05
 %
 
0.05
 %
 
0.05
 %
 
0.05
 %
 
0.05
 %
Change in fair values of embedded derivatives – FIAs
(3.05
)%
 
(1.91
)%
 
(3.17
)%
 
5.13
 %
 
(5.55
)%
 
(3.86
)%
 
(0.38
)%
Negative VOBA amortization
0.02
 %
 
0.03
 %
 
0.03
 %
 
0.02
 %
 
0.02
 %
 
0.03
 %
 
0.02
 %
ACRA noncontrolling interest
 %
 
 %
 
(0.15
)%
 
0.13
 %
 
(0.37
)%
 
 %
 
(0.12
)%
Other changes in interest sensitive contract liabilities
 %
 
(0.01
)%
 
(0.01
)%
 
 %
 
 %
 
(0.01
)%
 
 %
Total adjustments to arrive at cost of crediting
(1.92
)%
 
(0.77
)%
 
(2.19
)%
 
6.34
 %
 
(4.86
)%
 
(2.71
)%
 
0.56
 %
Retirement Services cost of crediting
1.92
 %
 
1.96
 %
 
1.83
 %
 
1.84
 %
 
1.79
 %
 
1.92
 %
 
1.81
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services cost of crediting on deferred annuities
1.98
 %
 
1.98
 %
 
1.95
 %
 
1.91
 %
 
1.94
 %
 
1.98
 %
 
1.92
 %
Retirement Services cost of crediting on institutional products
3.76
 %
 
3.68
 %
 
2.85
 %
 
3.31
 %
 
2.87
 %
 
3.73
 %
 
3.08
 %
Retirement Services cost of crediting
1.92
 %
 
1.96
 %
 
1.83
 %
 
1.84
 %
 
1.79
 %
 
1.92
 %
 
1.81
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services average net invested assets
$
114,059

 
$
117,338

 
$
114,149

 
$
117,295

 
$
124,943

 
$
112,711

 
$
121,213

Average net account value on deferred annuities
90,675

 
91,467

 
87,660

 
88,119

 
92,814

 
90,261

 
90,654

Average institutional net reserve liabilities
10,470

 
13,320

 
12,931

 
14,250

 
15,233

 
10,140

 
14,742


30



Non-GAAP Reconciliations
Unaudited (in millions)
 
 
athenelogoa45.jpg
 
 
Quarterly Trends
 
Year-to-Date
 
2Q’19
 
3Q’19
 
4Q’19
 
1Q’20
 
2Q’20
 
2019
 
2020
RECONCILIATION OF BENEFITS AND EXPENSES TO OTHER LIABILITY COSTS
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP benefits and expenses
$
2,673

 
$
4,305

 
$
2,723

 
$
(167
)
 
$
3,317

 
$
6,928

 
$
3,150

Premiums
(787
)
 
(2,688
)
 
(907
)
 
(1,140
)
 
(355
)
 
(2,787
)
 
(1,495
)
Product charges
(132
)
 
(135
)
 
(132
)
 
(140
)
 
(141
)
 
(257
)
 
(281
)
Other revenues
(9
)
 
(6
)
 
(10
)
 
2

 
(18
)
 
(21
)
 
(16
)
Cost of crediting
(253
)
 
(280
)
 
(238
)
 
(259
)
 
(275
)
 
(495
)
 
(534
)
Change in fair value of embedded derivatives - FIA, net of offsets
(817
)
 
(497
)
 
(1,003
)
 
1,456

 
(1,445
)
 
(2,077
)
 
11

DAC, DSI and VOBA amortization related to investment gains and losses
(181
)
 
(151
)
 
28

 
425

 
(323
)
 
(354
)
 
102

Rider reserves
(24
)
 
(9
)
 
3

 
76

 
(46
)
 
(52
)
 
30

Policy and other operating expenses, excluding policy acquisition expenses
(117
)
 
(130
)
 
(138
)
 
(117
)
 
(145
)
 
(220
)
 
(262
)
AmerUs closed block fair value liability
(59
)
 
(46
)
 
6

 
45

 
(100
)
 
(112
)
 
(55
)
ACRA noncontrolling interest

 

 
(74
)
 
165

 
(241
)
 

 
(76
)
Other
1

 
(5
)
 
1

 
(4
)
 
(13
)
 
2

 
(17
)
Total adjustments to arrive at other liability costs
(2,378
)
 
(3,947
)
 
(2,464
)
 
509

 
(3,102
)
 
(6,373
)
 
(2,593
)
Other liability costs
$
295

 
$
358

 
$
259

 
$
342

 
$
215

 
$
555

 
$
557

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services
$
295

 
$
358

 
$
259

 
$
342

 
$
215

 
$
555

 
$
557

Corporate and Other

 

 

 

 

 

 

Consolidated other liability costs
$
295

 
$
358

 
$
259

 
$
342

 
$
215

 
$
555

 
$
557

 
 
 
 
 
 
 
 
 
 
 
 
 
 
RECONCILIATION OF POLICY AND OTHER OPERATING EXPENSES TO OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
 
 
 
 
Policy and other operating expenses
$
185

 
$
194

 
$
200

 
$
188

 
$
218

 
$
350

 
$
406

Interest expense
(15
)
 
(15
)
 
(20
)
 
(20
)
 
(29
)
 
(32
)
 
(49
)
Policy acquisition expenses, net of deferrals
(69
)
 
(63
)
 
(62
)
 
(71
)
 
(73
)
 
(131
)
 
(144
)
Integration, restructuring and other non-operating expenses
(11
)
 
(34
)
 
(24
)
 
(4
)
 
(9
)
 
(12
)
 
(13
)
Stock compensation expenses
(3
)
 
(3
)
 
(3
)
 
(10
)
 

 
(6
)
 
(10
)
ACRA noncontrolling interest

 

 
(5
)
 
(4
)
 
(19
)
 

 
(23
)
Total adjustments to arrive at operating expenses
(98
)
 
(115
)
 
(114
)
 
(109
)
 
(130
)
 
(181
)
 
(239
)
Operating expenses
$
87

 
$
79

 
$
86

 
$
79

 
$
88

 
$
169

 
$
167

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Services
$
68

 
$
67

 
$
69

 
$
68

 
$
71

 
$
130

 
$
139

Corporate and Other
19

 
12

 
17

 
11

 
17

 
39

 
28

Consolidated operating expenses
$
87

 
$
79

 
$
86

 
$
79

 
$
88

 
$
169

 
$
167











31



Non-GAAP Reconciliations
Unaudited (in millions)
athenelogoa45.jpg
 
 
December 31, 2019
 
June 30, 2020
RECONCILIATION OF TOTAL INVESTMENTS INCLUDING RELATED PARTIES TO NET INVESTED ASSETS
 
 
 
Total investments, including related parties
$
130,550

 
$
163,039

Derivative assets
(2,888
)
 
(2,379
)
Cash and cash equivalents (including restricted cash)
4,639

 
7,521

Accrued investment income
807

 
836

Payables for collateral on derivatives
(2,743
)
 
(2,117
)
Reinsurance funds withheld and modified coinsurance
(1,440
)
 
(203
)
VIE and VOE assets, liabilities and noncontrolling interest
25

 
(18
)
Unrealized (gains) losses
(4,095
)
 
(3,782
)
Ceded policy loans
(235
)
 
(225
)
Net investment receivables (payables)
(57
)
 
(1,281
)
Allowance for credit losses

 
574

Total adjustments to arrive at gross invested assets
(5,987
)
 
(1,074
)
Gross invested assets
124,563

 
161,965

ACRA noncontrolling interest
(7,077
)
 
(24,696
)
Net invested assets
$
117,486

 
$
137,269

 
 
 
 
RECONCILIATION OF INVESTMENT FUNDS INCLUDING RELATED PARTIES TO NET ALTERNATIVE INVESTMENTS
 
 
 
Investment funds, including related parties
$
4,300

 
$
5,960

Nonredeemable preferred stock included in equity securities
78

 

CLO and ABS equities included in trading securities
405

 
504

Investment in Apollo

 
(1,313
)
Investment funds within funds withheld at interest
807

 
916

Royalties and other assets included in other investments
67

 
85

Unrealized (gains) losses and other adjustments
8

 
8

ACRA noncontrolling interest
(79
)
 
(78
)
Total adjustments to arrive at net alternative investments
1,286

 
122

Net alternative investments
$
5,586

 
$
6,082

 
 
 
 
RECONCILIATION OF TOTAL LIABILITIES TO NET RESERVE LIABILITIES
 
 
 
Total liabilities
$
132,734

 
$
167,602

Short-term debt
(475
)
 

Long-term debt
(992
)
 
(1,486
)
Derivative liabilities
(97
)
 
(118
)
Payables for collateral on derivatives and securities to repurchase
(3,255
)
 
(3,118
)
Funds withheld liability
(408
)
 
(427
)
Other liabilities
(1,181
)
 
(1,486
)
Reinsurance ceded receivables
(4,863
)
 
(5,310
)
Policy loans ceded
(235
)
 
(225
)
ACRA noncontrolling interest
(6,574
)
 
(24,094
)
Other
(2
)
 
(5
)
Total adjustments to arrive at net reserve liabilities
(18,082
)
 
(36,269
)
Net reserve liabilities
$
114,652

 
$
131,333


32