August 5, 2021 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2021

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

Commission File Number: 001-37963

ATHENE HOLDING LTD.

(Exact name of registrant as specified in its charter)

Bermuda

98-0630022

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification Number)

Second Floor, Washington House

16 Church Street

Hamilton, HM 11, Bermuda

(441) 279-8400

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Class A common shares, par value $0.001 per share

ATH

New York Stock Exchange

Depositary Shares, each representing a 1/1,000th interest in a

6.35% Fixed-to-Floating Rate Perpetual Non-Cumulative Preference Share, Series A

ATHPrA

New York Stock Exchange

Depositary Shares, each representing a 1/1,000th interest in a

5.625% Fixed-Rate Perpetual Non-Cumulative Preference Share, Series B

ATHPrB

New York Stock Exchange

Depositary Shares, each representing a 1/1,000th interest in a

6.375% Fixed-Rate Reset Perpetual Non-Cumulative Preference Share, Series C

ATHPrC

New York Stock Exchange

Depositary Shares, each representing a 1/1,000th interest in a

4.875% Fixed-Rate Perpetual Non-Cumulative Preference Share, Series D

ATHPrD

New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

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

Large accelerated filer

☑

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

As of July 30, 2021, 191,970,001 of our Class A common shares were outstanding.

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PART I—FINANCIAL INFORMATION


Item 1.	Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	60
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	108
Item 4.	Controls and Procedures	109

PART II—OTHER INFORMATION


Item 1.	Legal Proceedings	110
Item 1A.	Risk Factors	110
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	113



Exhibit Index		114
Signatures		115

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

Forward-Looking Statements

Certain statements in this report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “seek,” “assume,” “believe,” “may,” “will,” “should,” “could,” “would,” “likely” and other words and terms of similar meaning, including the negative of these or similar words and terms, in connection with any discussion of the timing or nature of future operating or financial performance or other events. However, not all forward-looking statements contain these identifying words. Forward-looking statements appear in a number of places throughout and give our current expectations and projections relating to our business, financial condition, results of operations, plans, strategies, objectives, future performance and other matters.

We caution you that forward-looking statements are not guarantees of future performance and that our actual consolidated financial condition, results of operations, liquidity, cash flows and performance may differ materially from that made in or suggested by the forward-looking statements contained in this report. A number of important factors could cause actual results or conditions to differ materially from those contained or implied by the forward-looking statements, including the risks discussed in Part II–Item 1A. Risk Factors included in this report and Part I–Item 1A. Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, 2020 (2020 Annual Report). Factors that could cause actual results or conditions to differ from those reflected in the forward-looking statements contained in this report include:

•the accuracy of management’s assumptions and estimates;

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

•interest rate and/or foreign currency fluctuations;

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

•major public health issues, and specifically the pandemic caused by the effects of the spread of the Coronavirus Disease of 2019 (COVID-19);

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

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

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

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

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

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

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

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

•the discontinuation of London Inter-bank Offered Rate (LIBOR);

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

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

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

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

•the termination by Apollo Global Management, Inc. (AGM) or any of its subsidiaries (collectively, AGM together with its subsidiaries, Apollo) of its investment management agreements with us and limitations on our ability to terminate such arrangements;

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

•the delay or failure to complete or realize the expected benefits from the proposed merger with AGM;

•the accuracy of our estimates regarding the future performance of our investment portfolio;

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

•potential changes to laws or regulations affecting, among other things, group supervision and/or group capital requirements, entity-level regulatory capital standards, transactions with our affiliates, the ability of our subsidiaries to make dividend payments or distributions to AHL, acquisitions by or of us, minimum capitalization and statutory reserve requirements for insurance companies and fiduciary obligations on parties who distribute our products;

•the failure to obtain or maintain licenses and/or other regulatory approvals as required for the operation of our insurance subsidiaries;

•increases in our tax liability resulting from the Base Erosion and Anti-Abuse Tax (BEAT);

•AHL or any of its non-United States (US) subsidiaries becoming subject to US federal income taxation;

•adverse changes in US tax law;

•changes in our ability to pay dividends or make distributions;

•the failure to achieve the economic benefits expected to be derived from the Athene Co-Invest Reinsurance Affiliate 1A Ltd. (together with its subsidiaries, ACRA) capital raise or future ACRA capital raises;

•the failure of third-party ACRA investors to fund their capital commitment obligations; and

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•other risks and factors listed in Part II–Item 1A. Risk Factors included in this report, Part I—Item 1A. Risk Factors included in our 2020 Annual Report and those discussed elsewhere in this report and in our 2020 Annual Report.

We caution you that the important factors referenced above may not be exhaustive. In light of these risks, you should not place undue reliance upon any forward-looking statements contained in this report. Unless an earlier date is specified, the forward-looking statements included in this report are made only as of the date that this report was filed with the US Securities and Exchange Commission (SEC). We undertake no obligation, except as may be required by law, to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise. Comparisons of results for current and any prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data.

GLOSSARY OF SELECTED TERMS

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

Entities


Term or Acronym						Definition
A-A Mortgage						A-A Mortgage Opportunities, L.P.
AADE						Athene Annuity & Life Assurance Company
AAIA						Athene Annuity and Life Company
AARe						Athene Annuity Re Ltd., a Bermuda reinsurance subsidiary
ACRA						Athene Co-Invest Reinsurance Affiliate 1A Ltd., together with its subsidiaries
ADIP						Apollo/Athene Dedicated Investment Program
AGM						Apollo Global Management, Inc.
AHL						Athene Holding Ltd.
ALRe						Athene Life Re Ltd., a Bermuda reinsurance subsidiary
ALReI						Athene Life Re International Ltd., a Bermuda reinsurance subsidiary
AmeriHome						AmeriHome Mortgage Company, LLC
AOG						Apollo Operating Group
Apollo						Apollo Global Management, Inc., together with its subsidiaries
Apollo Group						(1) AGM, (2) AAA Guarantor – Athene, L.P. (3) any investment fund or other collective investment vehicle whose general partner or managing member is owned, directly or indirectly, by AGM or one or more of AGM’s subsidiaries, (4) BRH Holdings GP, Ltd. and its shareholders, (5) any executive officer or employee of AGM or AGM’s subsidiaries (6) any shareholder that has granted to AGM or any of its affiliates a valid proxy with respect to all of such shareholder’s Class A common shares pursuant to our bye-laws and (7) any affiliate of any of the foregoing (except that AHL or its subsidiaries are not members of the Apollo Group)
AUSA						Athene USA Corporation
Athora						Athora Holding Ltd.
BMA						Bermuda Monetary Authority
ISG						Apollo Insurance Solutions Group LP, formerly known as Athene Asset Management LLC
Jackson						Jackson National Life Insurance Company
LIMRA						Life Insurance and Market Research Association
MidCap						MidCap FinCo Designated Activity Company
NAIC						National Association of Insurance Commissioners
NYSDFS						New York State Department of Financial Services
RLI						ReliaStar Life Insurance Company
Treasury						United States Department of the Treasury
VIAC						Venerable Insurance and Annuity Company, formerly Voya Insurance and Annuity Company
Venerable						Venerable Holdings, Inc., together with its subsidiaries

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Certain Terms & Acronyms


Term or Acronym						Definition
ABS						Asset-backed securities
ACL						Authorized control level RBC as defined by the model created by the National Association of Insurance Commissioners
ALM						Asset liability management
ALRe RBC						The risk-based capital ratio using ALRe’s Bermuda capital and applying NAIC risk-based capital factors to the statutory financial statements of ALRe and ALRe’s non-US reinsurance subsidiaries on an aggregate basis. Adjustments are made to (i) exclude US subsidiaries which are included within our US RBC Ratio, (ii) exclude our interests in the AOG units and other non-insurance subsidiary holding companies from our capital base and (iii) limit RBC concentration charges such that when they are applied to determine target capital, the charges do not exceed 100% of the asset’s carrying value.
Alternative investments						Alternative investments, including investment funds, CLO equity positions and certain other debt instruments considered to be equity-like
Base of earnings						Earnings generated from our results of operations and the underlying profitability drivers of our business

Bermuda capital						The capital of Athene’s non-US reinsurance subsidiaries calculated under US statutory accounting principles, including that for policyholder reserve liabilities which are subjected to US cash flow testing requirements, but (i) excluding certain items that do not exist under our applicable Bermuda requirements, such as interest maintenance reserves and (ii) including certain Bermuda statutory accounting differences, such as marking to market of inception date investment gains or losses relating to reinsurance transactions. Bermuda capital may from time to time materially differ from the calculation of statutory capital under US statutory accounting principles primarily due to the foregoing differences.
Block reinsurance						A transaction in which the ceding company cedes all or a portion of a block of previously issued annuity contracts through a reinsurance agreement
BSCR						Bermuda Solvency Capital Requirement
CAL						Company action level risk-based capital as defined by the model created by the National Association of Insurance Commissioners
CLO						Collateralized loan obligation
CMBS						Commercial mortgage-backed securities
CML						Commercial mortgage loans
Cost of crediting						The interest credited to the policyholders on our fixed annuities, including, with respect to our fixed indexed annuities, option costs, as well as institutional costs related to institutional products, presented on an annualized basis for interim periods
Cost of funds						Cost of funds includes liability costs related to cost of crediting on both deferred annuities and institutional products, as well as other liability costs. Cost of funds is computed as the total liability costs divided by the average net invested assets for the relevant period. Presented on an annualized basis for interim periods.
DAC						Deferred acquisition costs
Deferred annuities						Fixed indexed annuities, annual reset annuities, multi-year guaranteed annuities and registered index-linked annuities
DSI						Deferred sales inducement
Excess capital						Capital in excess of the level management believes is needed to support our current operating strategy
FIA						Fixed indexed annuity, which is an insurance contract that earns interest at a crediting rate based on a specified index on a tax-deferred basis
Fixed annuities						FIAs together with fixed rate annuities
Fixed rate annuity						An insurance contract that offers tax-deferred growth and the opportunity to produce a guaranteed stream of retirement income for the lifetime of its policyholder
Flow reinsurance						A transaction in which the ceding company cedes a portion of newly issued policies to the reinsurer
GAAP						Accounting principles generally accepted in the United States of America
GLWB						Guaranteed lifetime withdrawal benefit
GMDB						Guaranteed minimum death benefit
Gross invested assets						The sum of (a) total investments on the consolidated balance sheet with available-for-sale securities at amortized cost, excluding derivatives, (b) cash and cash equivalents and restricted cash, (c) investments in related parties, (d) accrued investment income, (e) consolidated variable interest entities’ assets, liabilities and noncontrolling interest and (f) policy loans ceded (which offset the direct policy loans in total investments). Gross invested assets includes investments supporting assumed funds withheld and modco agreements and excludes assets associated with funds withheld liabilities related to business exited through reinsurance agreements and derivative collateral (offsetting the related cash positions). Gross invested assets includes the entire investment balance attributable to ACRA as ACRA is 100% consolidated

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Term or Acronym						Definition
IMA						Investment management agreement
IMO						Independent marketing organization
Investment margin on deferred annuities						Investment margin applies to deferred annuities and is the excess of our net investment earned rate over the cost of crediting to our policyholders, presented on an annualized basis for interim periods
Liability outflows						The aggregate of withdrawals on our deferred annuities, maturities of our funding agreements, payments on payout annuities, and pension risk benefit payments

MMS						Minimum margin of solvency
Modco						Modified coinsurance
MVA						Market value adjustment
MYGA						Multi-year guaranteed annuity
Net invested assets						The sum of (a) total investments on the consolidated balance sheet with available-for-sale securities at amortized cost, excluding derivatives, (b) cash and cash equivalents and restricted cash, (c) investments in related parties, (d) accrued investment income, (e) consolidated variable interest entities’ assets, liabilities and noncontrolling interest and (f) policy loans ceded (which offset the direct policy loans in total investments). Net invested assets includes investments supporting assumed funds withheld and modco agreements and excludes assets associated with funds withheld liabilities related to business exited through reinsurance agreements and derivative collateral (offsetting the related cash positions). Net invested assets includes our economic ownership of ACRA investments but does not include the investments associated with the noncontrolling interest
Net investment earned rate						Income from our net invested assets divided by the average net invested assets for the relevant period, presented on an annualized basis for interim periods
Net investment spread						Net investment spread measures our investment performance less the total cost of our liabilities, presented on an annualized basis for interim periods
Net reserve liabilities						The sum of (a) interest sensitive contract liabilities, (b) future policy benefits, (c) dividends payable to policyholders, and (d) other policy claims and benefits, offset by reinsurance recoverable, excluding policy loans ceded. Net reserve liabilities also includes the reserves related to assumed modco agreements in order to appropriately match the costs incurred in the consolidated statements of income with the liabilities. 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. Net reserve liabilities is net of the reserve liabilities attributable to the ACRA noncontrolling interest
Other liability costs						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, as well as offsets for premiums, product charges and other revenues
Payout annuities						Annuities with a current cash payment component, which consist primarily of single premium immediate annuities, supplemental contracts and structured settlements
Policy loan						A loan to a policyholder under the terms of, and which is secured by, a policyholder’s policy
PRT						Pension risk transfer
RBC						Risk-based capital
Rider reserves						Guaranteed lifetime withdrawal benefits and guaranteed minimum death benefits reserves
RMBS						Residential mortgage-backed securities
RML						Residential mortgage loan
Sales						All money paid into an individual annuity, including money paid into new contracts with initial purchase occurring in the specified period and existing contracts with initial purchase occurring prior to the specified period (excluding internal transfers)
SPIA						Single premium immediate annuity
Surplus assets						Assets in excess of policyholder obligations, determined in accordance with the applicable domiciliary jurisdiction’s statutory accounting principles
TAC						Total adjusted capital as defined by the model created by the NAIC
US RBC Ratio						The CAL RBC ratio for AADE, our parent US insurance company
VIE						Variable interest entity
VOBA						Value of business acquired

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Item 1. Financial Statements

Index to Condensed Consolidated Financial Statements (unaudited)




Condensed Consolidated Balance Sheets (unaudited)		8

Condensed Consolidated Statements of Income (Loss) (unaudited)		10

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

Condensed Consolidated Statements of Equity (unaudited)		12

Condensed Consolidated Statements of Cash Flows (unaudited)		14

Notes to Condensed Consolidated Financial Statements (unaudited)		16

	Note 1. Business, Basis of Presentation and Significant Accounting Policies	16

	Note 2. Investments	18

	Note 3. Derivative Instruments	30

	Note 4. Variable Interest Entities	33

	Note 5. Fair Value	34

	Note 6. Deferred Acquisition Costs, Deferred Sales Inducements and Value of Business Acquired	49

	Note 7. Debt	49

	Note 8. Equity	50

	Note 9. Earnings Per Share	51



	Note 10. Related Parties	52

	Note 11. Commitments and Contingencies	56

	Note 12. Segment Information	57

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ATHENE HOLDING LTD.

Condensed Consolidated Balance Sheets (Unaudited)


(In millions)	June 30, 2021		December 31, 2020
Assets
Investments
Available-for-sale securities, at fair value (amortized cost: 2021 – $87,340 and 2020 – $76,100; allowance for credit losses: 2021 – $107 and 2020 – $103)	$	92,838	$	82,853
Trading securities, at fair value	2,065		2,093
Equity securities (portion at fair value: 2021 – $398 and 2020 – $330)	600		532
Mortgage loans (allowance for credit losses: 2021 – $221 and 2020 – $232; portion at fair value: 2021 – $18 and 2020 – $19; consolidated variable interest entities: 2021 – $1,829 and 2020 – $1,880)	17,390		15,264
Investment funds (portion at fair value: 2021 – $496 and 2020 – $161; consolidated variable interest entities: 2021 – $348 and 2020 – $0)	1,159		803
Policy loans	329		369
Funds withheld at interest (portion at fair value: 2021 – $1,373 and 2020 – $1,944)	45,428		48,612
Derivative assets	4,151		3,523
Short-term investments, at fair value	101		222
Other investments (allowance for credit losses: 2021 – $0 and 2020 – $3; portion at fair value: 2021 – $105 and 2020 – $105)	1,680		572
Total investments	165,741		154,843
Cash and cash equivalents	8,057		7,704
Restricted cash	669		738
Investments in related parties
Available-for-sale securities, at fair value (amortized cost: 2021 – $6,991 and 2020 – $6,444; allowance for credit losses: 2021 – $2 and 2020 – $1)	7,047		6,520
Trading securities, at fair value	1,740		1,529
Equity securities, at fair value	115		72
Mortgage loans (allowance for credit losses: 2021 – $8 and 2020 – $14)	819		674
Investment funds (portion at fair value: 2021 – $2,616 and 2020 – $2,119; consolidated variable interest entities: 2021 – $68 and 2020 – $0)	6,324		5,284
Funds withheld at interest (portion at fair value: 2021 – $752 and 2020 – $862)	12,576		13,030

Other investments (allowance for credit losses: 2021 – $0 and 2020 – $4)	147		469
Accrued investment income (related party: 2021 – $58 and 2020 – $38)	1,010		905
Reinsurance recoverable (portion at fair value: 2021 – $1,946 and 2020 – $2,100)	4,627		4,848
Deferred acquisition costs, deferred sales inducements and value of business acquired	4,964		4,906
Other assets (consolidated variable interest entities: 2021 – $25 and 2020 – $1)	1,713		1,249
Total assets	$	215,549	$	202,771

(Continued)

See accompanying notes to the unaudited condensed consolidated financial statements

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ATHENE HOLDING LTD.

Condensed Consolidated Balance Sheets (Unaudited)


(In millions, except per share data)	June 30, 2021		December 31, 2020
Liabilities and Equity
Liabilities
Interest sensitive contract liabilities (related party: 2021 – $13,537 and 2020 – $14,150; portion at fair value: 2021 – $14,823 and 2020 – $14,181)	$	150,337	$	144,566
Future policy benefits (related party: 2021 – $1,750 and 2020 – $1,610; portion at fair value: 2021 – $2,294 and 2020 – $2,376)	33,293		29,258
Other policy claims and benefits	118		130
Dividends payable to policyholders	110		110

Long-term debt	2,468		1,976
Derivative liabilities	214		298
Payables for collateral on derivatives and securities to repurchase	4,488		3,801
Funds withheld liability (portion at fair value: 2021 – $49 and 2020 – $59)	437		452
Other liabilities (related party: 2021 – $105 and 2020 – $112; consolidated variable interest entities: 2021 – $243 and 2020 – $134)	2,413		2,040
Total liabilities	193,878		182,631
Commitments and Contingencies (Note 11)
Equity
Preferred stock
Series A – par value $1 per share; $863 aggregate liquidation preference; authorized, issued and outstanding: 2021 and 2020 – 0.0 shares	—		—
Series B – par value $1 per share; $345 aggregate liquidation preference; authorized, issued and outstanding: 2021 and 2020 – 0.0 shares	—		—
Series C – par value $1 per share; $600 aggregate liquidation preference; authorized, issued and outstanding: 2021 and 2020 – 0.0 shares	—		—
Series D – par value $1 per share; $575 aggregate liquidation preference; authorized, issued and outstanding: 2021 and 2020 – 0.0 shares	—		—
Common stock
Class A – par value $0.001 per share; authorized: 2021 and 2020 – 425.0 shares; issued and outstanding: 2021 – 191.9 and 2020 – 191.5 shares	—		—
Additional paid-in capital	6,640		6,613
Retained earnings	10,029		8,073
Accumulated other comprehensive income (related party: 2021 – $60 and 2020 – $59)	3,337		3,971
Total Athene Holding Ltd. shareholders’ equity	20,006		18,657
Noncontrolling interests	1,665		1,483
Total equity	21,671		20,140
Total liabilities and equity	$	215,549	$	202,771

(Concluded)

See accompanying notes to the unaudited condensed consolidated financial statements

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ATHENE HOLDING LTD.

Condensed Consolidated Statements of Income (Loss) (Unaudited)


	Three months ended June 30,				Six months ended June 30,
(In millions, except per share data)	2021		2020		2021		2020
Revenues
Premiums (related party of $78 and $94 for the three months ended and $157 and $163 for the six months ended June 30, 2021 and 2020, respectively)	$	1,598	$	355	$	4,609	$	1,495
Product charges (related party of $12 and $12 for the three months ended and $23 and $28 for the six months ended June 30, 2021 and 2020, respectively)	157		141		307		281
Net investment income (related party investment income of $860 and $490 for the three months ended and $1,456 and $276 for the six months ended June 30, 2021 and 2020, respectively; consolidated variable interest entities of $21 and $16 for the three months ended and $56 and $16 for the six months ended June 30, 2021 and 2020, respectively; and related party investment expense of $140 and $123 for the three months ended and $284 and $251 for the six months ended June 30, 2021 and 2020, respectively)	2,038		1,336		3,742		2,081
Investment related gains (losses) (related party of $280 and $761 for the three months ended and $141 and $130 for the six months ended June 30, 2021 and 2020, respectively; and consolidated variable interest entities of $18 and $(7) for the three months ended and $(48) and $(6) for the six months ended June 30, 2021 and 2020, respectively)	2,610		2,548		2,122		(1,024)
Other revenues (related party of $15 and $0 for the three months ended and $15 and $0 for the six months ended June 30, 2021 and 2020, respectively)	20		18		34		16
Total revenues	6,423		4,398		10,814		2,849
Benefits and expenses
Interest sensitive contract benefits (related party of $135 and $197 for the three months ended and $211 and $100 for the six months ended June 30, 2021 and 2020, respectively)	1,979		2,076		2,373		757
Amortization of deferred sales inducements	22		(21)		106		(11)
Future policy and other policy benefits (related party of $111 and $142 for the three months ended and $200 and $192 for the six months ended June 30, 2021 and 2020, respectively)	1,950		674		5,267		2,030
Amortization of deferred acquisition costs and value of business acquired	230		361		394		(52)
Dividends to policyholders	10		9		20		20
Policy and other operating expenses (related party of $12 and $11 for the three months ended and $24 and $27 for the six months ended June 30, 2021 and 2020, respectively)	242		218		525		406
Total benefits and expenses	4,433		3,317		8,685		3,150
Income (loss) before income taxes	1,990		1,081		2,129		(301)
Income tax expense (benefit)	184		150		246		(16)
Net income (loss)	1,806		931		1,883		(285)
Less: Net income (loss) attributable to noncontrolling interests	389		88		(148)		(81)
Net income (loss) attributable to Athene Holding Ltd. shareholders	1,417		843		2,031		(204)
Less: Preferred stock dividends	35		19		71		37
Net income (loss) available to Athene Holding Ltd. common shareholders	$	1,382	$	824	$	1,960	$	(241)

Earnings (loss) per share
Basic – Class A	$	7.21	$	4.25	$	10.24	$	(0.64)
Basic – Classes B, M-1, M-2, M-3 and M-4	N/A		N/A		N/A		(3.87)
Diluted – Class A	6.97		4.19		9.92		(0.64)
Diluted – Classes B, M-1, M-2, M-3 and M-4	N/A		N/A		N/A		(3.87)

N/A – Not applicable. See Note 9 – Earnings Per Share.

See accompanying notes to the unaudited condensed consolidated financial statements

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ATHENE HOLDING LTD.

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


	Three months ended June 30,				Six months ended June 30,
(In millions)	2021		2020		2021		2020
Net income (loss)	$	1,806	$	931	$	1,883	$	(285)
Other comprehensive income (loss), before tax
Unrealized investment gains (losses) on available-for-sale securities, net of offsets	1,692		4,506		(899)		(333)
Unrealized gains (losses) on hedging instruments	92		(83)		61		318
Foreign currency translation and other adjustments	1		(10)		1		(1)
Other comprehensive income (loss), before tax	1,785		4,413		(837)		(16)
Income tax expense (benefit) related to other comprehensive income (loss)	345		805		(151)		8
Other comprehensive income (loss)	1,440		3,608		(686)		(24)
Comprehensive income (loss)	3,246		4,539		1,197		(309)
Less: Comprehensive income (loss) attributable to noncontrolling interests	513		338		(200)		(14)
Comprehensive income (loss) attributable to Athene Holding Ltd. shareholders	$	2,733	$	4,201	$	1,397	$	(295)

See accompanying notes to the unaudited condensed consolidated financial statements

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ATHENE HOLDING LTD.

Condensed Consolidated Statements of Equity (Unaudited)


	Three months ended
(In millions)	Preferred stock		Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)		Total Athene Holding Ltd. shareholders’ equity		Noncontrolling interests		Total equity
Balance at March 31, 2021	$	—	$	—	$	6,623	$	8,647	$	2,021	$	17,291	$	1,045	$	18,336
Net income	—		—		—		1,417		—		1,417		389		1,806
Other comprehensive income	—		—		—		—		1,316		1,316		124		1,440

Issuance of common shares, net of expenses	—		—		6		—		—		6		—		6
Stock-based compensation	—		—		11		—		—		11		—		11

Preferred stock dividends	—		—		—		(35)		—		(35)		—		(35)
Contributions from noncontrolling interests	—		—		—		—		—		—		85		85

Other changes in equity of noncontrolling interests	—		—		—		—		—		—		22		22
Balance at June 30, 2021	$	—	$	—	$	6,640	$	10,029	$	3,337	$	20,006	$	1,665	$	21,671

Balance at March 31, 2020	$	—	$	—	$	5,501	$	5,613	$	(1,174)	$	9,940	$	590	$	10,530

Net income	—		—		—		843		—		843		88		931
Other comprehensive income	—		—		—		—		3,358		3,358		250		3,608
Issuance of preferred shares, net of expenses	—		—		583		—		—		583		—		583

Stock-based compensation	—		—		6		—		—		6		—		6

Preferred stock dividends	—		—		—		(19)		—		(19)		—		(19)



Balance at June 30, 2020	$	—	$	—	$	6,090	$	6,437	$	2,184	$	14,711	$	928	$	15,639

See accompanying notes to the unaudited condensed consolidated financial statements

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ATHENE HOLDING LTD.

Condensed Consolidated Statements of Equity (Unaudited)


	Six months ended
(In millions)	Preferred stock		Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)		Total Athene Holding Ltd. shareholders’ equity		Noncontrolling interests		Total equity
Balance at December 31, 2020	$	—	$	—	$	6,613	$	8,073	$	3,971	$	18,657	$	1,483	$	20,140

Net income (loss)	—		—		—		2,031		—		2,031		(148)		1,883
Other comprehensive loss	—		—		—		—		(634)		(634)		(52)		(686)

Issuance of common shares, net of expenses	—		—		7		—		—		7		—		7
Stock-based compensation	—		—		20		—		—		20		—		20
Retirement or repurchase of shares	—		—		—		(4)		—		(4)		—		(4)
Preferred stock dividends	—		—		—		(71)		—		(71)		—		(71)
Contributions from noncontrolling interests	—		—		—		—		—		—		320		320

Other changes in equity of noncontrolling interests	—		—		—		—		—		—		62		62
Balance at June 30, 2021	$	—	$	—	$	6,640	$	10,029	$	3,337	$	20,006	$	1,665	$	21,671

Balance at December 31, 2019	$	—	$	—	$	4,171	$	6,939	$	2,281	$	13,391	$	750	$	14,141
Adoption of accounting standards	—		—		—		(117)		(6)		(123)		(2)		(125)
Net loss	—		—		—		(204)		—		(204)		(81)		(285)
Other comprehensive income (loss)	—		—		—		—		(91)		(91)		67		(24)
Issuance of preferred shares, net of expenses	—		—		583		—		—		583		—		583
Issuance of common shares, net of expenses	—		—		1,509		—		—		1,509		—		1,509
Stock-based compensation	—		—		11		—		—		11		—		11
Retirement or repurchase of shares	—		—		(184)		(144)		—		(328)		—		(328)
Preferred stock dividends	—		—		—		(37)		—		(37)		—		(37)
Contributions from noncontrolling interests	—		—		—		—		—		—		240		240
Distributions to noncontrolling interests	—		—		—		—		—		—		(46)		(46)
Balance at June 30, 2020	$	—	$	—	$	6,090	$	6,437	$	2,184	$	14,711	$	928	$	15,639

See accompanying notes to the unaudited condensed consolidated financial statements

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ATHENE HOLDING LTD.

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Six months ended June 30,
(In millions)	2021		2020
Cash flows from operating activities
Net income (loss)	$	1,883	$	(285)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of deferred acquisition costs and value of business acquired	394		(52)
Amortization of deferred sales inducements	106		(11)
Accretion of net investment premiums, discounts and other	(118)		(91)

Net investment (income) loss (related party: 2021 – $(933) and 2020 – $(12); consolidated variable interest entities: 2021 – $(15), 2020 – $(5))	(966)		(1)
Net recognized (gains) losses on investments and derivatives (related party: 2021 – $(159) and 2020 – $75; consolidated variable interest entities: 2021 – $48 and 2020 – $7)	(1,908)		1,214
Policy acquisition costs deferred	(287)		(281)
Changes in operating assets and liabilities:
Accrued investment income (related party: 2021 – $(20) and 2020 – $(26))	(105)		(29)
Interest sensitive contract liabilities (related party: 2021 – $188 and 2020 – $102)	1,788		611
Future policy benefits, other policy claims and benefits, dividends payable to policyholders and reinsurance recoverable (related party: 2021 – $141 and 2020 – $140)	1,547		39
Funds withheld assets and liabilities (related party: 2021 – $(187) and 2020 – $(325))	(102)		375
Other assets and liabilities	266		(87)
Net cash provided by operating activities	2,498		1,402


Cash flows from investing activities
Sales, maturities and repayments of:
Available-for-sale securities (related party: 2021 – $881 and 2020 – $209)	9,018		6,425
Trading securities (related party: 2021 – $83 and 2020 – $31)	127		85
Equity securities	42		3
Mortgage loans	1,363		1,136
Investment funds (related party: 2021 – $892 and 2020 – $241; consolidated variable interest entities: 2021 – $2 and 2020 – $20)	946		313
Derivative instruments and other invested assets (related party: 2021 – $330 and 2020 – $0)	2,566		765
Short-term investments (related party: 2021 – $98 and 2020 – $28)	400		650
Purchases of:
Available-for-sale securities (related party: 2021 – $(1,626) and 2020 – $(611))	(17,987)		(9,624)
Trading securities (related party: 2021 – $(230) and 2020 – $(150))	(318)		(152)
Equity securities (related party: 2021 – $(46) and 2020 – $(3))	(123)		(16)
Mortgage loans (related party: 2021 – $(148) and 2020 – $0)	(3,596)		(2,317)
Investment funds (related party: 2021 – $(923) and 2020 – $(807); consolidated variable interest entities: 2021 – $(124) million and 2020 – $0 million)	(1,056)		(831)
Derivative instruments and other invested assets	(2,247)		(1,034)
Short-term investments (related party: 2021 – $(100) and 2020 – $(28))	(278)		(412)


Other investing activities, net	(129)		273
Net cash used in investing activities	(11,272)		(4,736)
			(Continued)
See accompanying notes to the unaudited condensed consolidated financial statements

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ATHENE HOLDING LTD.

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Six months ended June 30,
(In millions)	2021		2020
Cash flows from financing activities
Issuance of common stock	$	7	$	350

Repayment of short-term debt	—		(75)
Proceeds from long-term debt	497		499

Deposits on investment-type policies and contracts (related party: 2021 – $44 and 2020 – $39)	11,120		8,398
Withdrawals on investment-type policies and contracts (related party: 2021 – $(200) and 2020 – $(210))	(3,476)		(3,871)
Payments for coinsurance agreements on investment-type contracts, net	—		(11)
Capital contributions from noncontrolling interests	320		240
Capital distributions to noncontrolling interests	—		(46)
Net change in cash collateral posted for derivative transactions and securities to repurchase	687		461
Issuance of preferred stock, net of expenses	—		583
Preferred stock dividends	(71)		(37)
Repurchase of common stock	(4)		(328)
Other financing activities, net	(22)		71
Net cash provided by financing activities	9,058		6,234
Effect of exchange rate changes on cash and cash equivalents	—		(21)
Net increase in cash and cash equivalents	284		2,879
Cash and cash equivalents at beginning of year1	8,442		4,642
Cash and cash equivalents at end of period1	$	8,726	$	7,521

Supplementary information
Non-cash transactions
Deposits on investment-type policies and contracts through reinsurance agreements (related party: 2021 – $177 and 2020 – $156)	$	449	$	28,077
Withdrawals on investment-type policies and contracts through reinsurance agreements (related party: 2021 – $819 and 2020 – $730)	4,101		1,895
Investments received from settlements on reinsurance agreements	74		53


Investments received from pension risk transfer premiums	2,765		829





Related party investments received in exchange for the issuance of Class A common shares	—		1,147
Assets contributed to consolidated VIEs	169		—

1 Includes cash and cash equivalents and restricted cash.

(Concluded)

See accompanying notes to the unaudited condensed consolidated financial statements

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Business, Basis of Presentation and Significant Accounting Policies

Athene Holding Ltd. (AHL), a Bermuda exempted company, together with its subsidiaries (collectively, Athene, we, our, us, or the Company), is a leading financial services company specializing in retirement services that issues, reinsures and acquires retirement savings products in the United States (US) and internationally.

We conduct business primarily through the following consolidated subsidiaries:

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

•Athene USA Corporation, an Iowa corporation (together with its subsidiaries, AUSA).

In addition, we consolidate certain variable interest entities (VIEs) for which we have determined we are the primary beneficiary. See Note 4 – Variable Interest Entities for further information on VIEs.

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

For entities that are consolidated, but not wholly owned, we allocate a portion of the income or loss and corresponding equity to the owners other than us. We include the aggregate of the income or loss and corresponding equity that is not owned by us in noncontrolling interests in the consolidated financial statements.

The condensed consolidated balance sheet as of December 31, 2020 has been derived from the audited financial statements, but does not include all of the information and footnotes required by GAAP for complete financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020. The preparation of financial statements requires the use of management estimates. Actual results may differ from estimates used in preparing the condensed consolidated financial statements.

Merger—On March 8, 2021, we entered into an Agreement and Plan of Merger (Merger Agreement), by and among the Company, Apollo Global Management, Inc., a Delaware corporation (AGM), Tango Holdings, Inc., a Delaware corporation and a direct wholly owned subsidiary of AGM (HoldCo), Blue Merger Sub, Ltd., a Bermuda exempted company and a direct wholly owned subsidiary of HoldCo (AHL Merger Sub), and Green Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of HoldCo (AGM Merger Sub). The Company and AGM have agreed, subject to the terms and conditions of the Merger Agreement, to effect an all-stock merger transaction to combine our respective businesses by: (1) AGM merging with AGM Merger Sub, with AGM surviving such merger as a direct wholly owned subsidiary of HoldCo (AGM Merger), (2) the Company merging with AHL Merger Sub, with the Company surviving such merger as a direct wholly owned subsidiary of HoldCo (AHL Merger and, together with the AGM Merger, Mergers), and (3) as of the effective time of the Mergers, changing the name of HoldCo to be Apollo Global Management, Inc. At the effective time of the Mergers, each AHL Class A common share, subject to certain exceptions, will be converted automatically into the right to receive 1.149 shares of HoldCo common stock. The Mergers are expected to close in January 2022, subject to shareholder and regulatory approvals and other customary closing conditions.

Adopted Accounting Pronouncements

Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs (ASU 2020-08)

The amendments in this update clarify that callable debt securities should be reevaluated each reporting period to determine if the amortized cost exceeds the amount repayable by the issuer at the next earliest call date and, if so, the excess should be amortized to the next call date. We adopted this update January 1, 2021 on a prospective basis for existing or newly purchased callable debt securities. The adoption of this update did not have a material effect on our condensed consolidated financial statements.

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (ASU 2020-01)

The amendments in this update are related to certain equity securities without a readily determinable fair value that apply measurement alternative to measure based on cost, minus impairment, if any, adjusted for any observable price changes in orderly transactions of identical or similar investments of the same issuer. The amendment clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative immediately before applying or upon discontinuing the equity method. The amendment further clarifies that for the purpose of applying accounting for certain forward contracts or purchased options, an entity should not consider whether the underlying securities would be accounted for under the equity method or the fair value option upon settlement or exercise. We adopted this update on a prospective basis effective January 1, 2021. This update did not have a material effect on our condensed consolidated financial statements.

Income Taxes – Simplifying the Accounting for Income Taxes (ASU 2019-12)

The amendments in this update simplify the accounting for income taxes by eliminating certain exceptions to the tax accounting guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities related to foreign investment ownership changes. It also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill and allocating consolidated income taxes to separate financial statements of entities not subject to income tax. We adopted this update January 1, 2021 and applied certain aspects of the update retrospectively while other aspects were applied on a modified retrospective basis. The adoption of this update did not have a material effect on our condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

Insurance – Targeted Improvements to the Accounting for Long-Duration Contracts (ASU 2020-11, ASU 2019-09, ASU 2018-12)

These updates amend four key areas pertaining to the accounting and disclosures for long-duration insurance and investment contracts.

•The update requires cash flow assumptions used to measure the liability for future policy benefits to be updated at least annually and no longer allows a provision for adverse deviation. The remeasurement of the liability associated with the update of assumptions is required to be recognized in net income. Loss recognition testing is eliminated for traditional and limited-payment contracts. The update also requires the discount rate used in measuring the liability to be an upper-medium grade fixed-income instrument yield, which is to be updated at each reporting date. The change in liability due to changes in the discount rate is to be recognized in other comprehensive income.

•The update simplifies the amortization of deferred acquisition costs and other balances amortized in proportion to premiums, gross profits, or gross margins, requiring such balances to be amortized on a constant level basis over the expected term of the contracts. Deferred costs are required to be written off for unexpected contract terminations but are not subject to impairment testing.

•The update requires certain contract features meeting the definition of market risk benefits to be measured at fair value. Among the features included in this definition are guaranteed lifetime withdrawal benefit (GLWB) and guaranteed minimum death benefit (GMDB) riders attached to our annuity products. The change in fair value of the market risk benefits is to be recognized in net income, excluding the portion attributable to changes in instrument-specific credit risk which is recognized in other comprehensive income.

•The update also introduces disclosure requirements around the liability for future policy benefits, policyholder account balances, market risk benefits, separate account liabilities, and deferred acquisition costs. This includes disaggregated rollforwards of these balances and information about significant inputs, judgments, assumptions and methods used in their measurement.

We are required to adopt these updates on January 1, 2023. Certain provisions of the update are required to be adopted on a fully retrospective basis, while others may be adopted on a modified retrospective basis. Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements.

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

2. Investments

AFS Securities—Our AFS investment portfolio includes bonds, collateralized loan obligations (CLO), asset-backed securities (ABS), commercial mortgage-backed securities (CMBS), residential mortgage-backed securities (RMBS) and redeemable preferred stock. Our AFS investment portfolio includes related party investments that are primarily comprised of investments over which Apollo can exercise significant influence. These investments are presented as investments in related parties on the condensed consolidated balance sheets and are separately disclosed below.

The following table represents the amortized cost, allowance for credit losses, gross unrealized gains and losses and fair value of our AFS investments by asset type:


	June 30, 2021
(In millions)	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
AFS securities
US government and agencies	$	347	$	—	$	2	$	(15)	$	334
US state, municipal and political subdivisions	871		—		146		(1)		1,016
Foreign governments	393		—		26		(3)		416
Corporate	58,832		(5)		5,179		(332)		63,674
CLO	13,162		(3)		108		(84)		13,183
ABS	5,180		(10)		185		(56)		5,299
CMBS	2,420		(6)		94		(54)		2,454
RMBS	6,135		(83)		423		(13)		6,462
Total AFS securities	87,340		(107)		6,163		(558)		92,838
AFS securities – related party
Corporate	168		—		9		—		177
CLO	2,032		(2)		16		(7)		2,039
ABS	4,791		—		76		(36)		4,831
Total AFS securities – related party	6,991		(2)		101		(43)		7,047
Total AFS securities including related party	$	94,331	$	(109)	$	6,264	$	(601)	$	99,885


	December 31, 2020
(In millions)	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
AFS securities
US government and agencies	$	349	$	—	$	3	$	(1)	$	351
US state, municipal and political subdivisions	864		—		169		—		1,033
Foreign governments	330		—		38		—		368
Corporate	51,934		(6)		6,368		(116)		58,180
CLO	9,631		(1)		145		(206)		9,569
ABS	4,259		(6)		140		(123)		4,270
CMBS	2,165		(10)		85		(71)		2,169
RMBS	6,568		(80)		447		(22)		6,913
Total AFS securities	76,100		(103)		7,395		(539)		82,853
AFS securities – related party
Corporate	213		—		2		—		215
CLO	1,511		(1)		23		(13)		1,520
ABS	4,720		—		95		(30)		4,785
Total AFS securities – related party	6,444		(1)		120		(43)		6,520
Total AFS securities including related party	$	82,544	$	(104)	$	7,515	$	(582)	$	89,373

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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


	June 30, 2021
(In millions)	Amortized Cost		Fair Value
AFS securities
Due in one year or less	$	947	$	961
Due after one year through five years	9,550		10,063
Due after five years through ten years	16,789		17,724
Due after ten years	33,157		36,692
CLO, ABS, CMBS and RMBS	26,897		27,398
Total AFS securities	87,340		92,838
AFS securities – related party

Due after one year through five years	18		19
Due after five years through ten years	150		158

CLO and ABS	6,823		6,870
Total AFS securities – related party	6,991		7,047
Total AFS securities including related party	$	94,331	$	99,885

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

Unrealized Losses on AFS Securities—The following summarizes the fair value and gross unrealized losses for AFS securities, including related party, for which an allowance for credit losses has not been recorded, aggregated by asset type and length of time the fair value has remained below amortized cost:


	June 30, 2021
	Less than 12 months				12 months or more				Total
(In millions)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
AFS securities
US government and agencies	$	243	$	(15)	$	—	$	—	$	243	$	(15)
US state, municipal and political subdivisions	55		(1)		3		—		58		(1)
Foreign governments	45		(3)		1		—		46		(3)
Corporate	10,055		(260)		507		(33)		10,562		(293)
CLO	3,553		(12)		2,590		(57)		6,143		(69)
ABS	584		(13)		275		(24)		859		(37)
CMBS	352		(11)		149		(13)		501		(24)
RMBS	202		(3)		363		(5)		565		(8)
Total AFS securities	15,089		(318)		3,888		(132)		18,977		(450)
AFS securities – related party

CLO	525		—		184		(3)		709		(3)
ABS	2,037		(35)		14		—		2,051		(35)
Total AFS securities – related party	2,562		(35)		198		(3)		2,760		(38)
Total AFS securities including related party	$	17,651	$	(353)	$	4,086	$	(135)	$	21,737	$	(488)

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)


	December 31, 2020
	Less than 12 months				12 months or more				Total
(In millions)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
AFS securities
US government and agencies	$	31	$	(1)	$	—	$	—	$	31	$	(1)
US state, municipal and political subdivisions	9		—		6		—		15		—
Foreign governments	2		—		—		—		2		—
Corporate	2,218		(66)		248		(24)		2,466		(90)
CLO	1,649		(33)		3,179		(167)		4,828		(200)
ABS	1,169		(73)		84		(18)		1,253		(91)
CMBS	710		(37)		48		(13)		758		(50)
RMBS	548		(11)		37		(2)		585		(13)
Total AFS securities	6,336		(221)		3,602		(224)		9,938		(445)
AFS securities – related party
CLO	336		(3)		232		(10)		568		(13)
ABS	1,012		(30)		—		—		1,012		(30)
Total AFS securities – related party	1,348		(33)		232		(10)		1,580		(43)
Total AFS securities including related party	$	7,684	$	(254)	$	3,834	$	(234)	$	11,518	$	(488)

The following summarizes the number of AFS securities that were in an unrealized loss position, including related party, for which an allowance for credit losses has not been recorded:


	June 30, 2021
	Unrealized loss position	Unrealized loss position 12 months or more
AFS securities	2,597	439
AFS securities – related party	45	9

The unrealized losses on AFS securities can primarily be attributed to changes in market interest rates since acquisition. We did not recognize the unrealized losses in income as we intend to hold these securities and it is not more likely than not we will be required to sell a security before the recovery of its amortized cost.

Allowance for Credit Losses—The following table summarizes the activity in the allowance for credit losses for AFS securities, including Purchase Credit Deteriorated (PCD) securities, by asset type:


	Three months ended June 30, 2021
			Additions				Reductions
(In millions)	Beginning balance		Initial credit losses		Initial credit losses on PCD securities		Securities sold during the period		Additions (reductions) to previously impaired securities		Ending Balance
AFS securities



Corporate	$	8	$	1	$	—	$	—	$	(4)	$	5
CLO	—		3		—		—		—		3
ABS	11		—		—		—		(1)		10
CMBS	14		—		—		—		(8)		6
RMBS	78		—		4		(3)		4		83
Total AFS securities	111		4		4		(3)		(9)		107

AFS securities – related party, CLO	—		2		—		—		—		2


Total AFS securities including related party	$	111	$	6	$	4	$	(3)	$	(9)	$	109

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)


	Three months ended June 30, 2020
			Additions				Reductions
(In millions)	Beginning balance		Initial credit losses		Initial credit losses on PCD securities		Securities sold during the period		Additions (reductions) to previously impaired securities		Ending Balance
AFS securities



Corporate	$	15	$	16	$	—	$	—	$	—	$	31
CLO	—		1		—		—		—		1
ABS	5		—		—		—		(3)		2
CMBS	4		5		—		—		1		10
RMBS	54		13		60		(1)		3		129
Total AFS securities	78		35		60		(1)		1		173

AFS securities – related party, CLO	—		1		—		—		1		2


Total AFS securities including related party	$	78	$	36	$	60	$	(1)	$	2	$	175


	Six months ended June 30, 2021
			Additions				Reductions
(In millions)	Beginning balance		Initial credit losses		Initial credit losses on PCD securities		Securities sold during the period		Additions (reductions) to previously impaired securities		Ending Balance
AFS securities



Corporate	$	6	$	3	$	—	$	(2)	$	(2)	$	5
CLO	1		3		—		—		(1)		3
ABS	6		5		—		—		(1)		10
CMBS	10		2		—		—		(6)		6
RMBS	80		—		6		(6)		3		83
Total AFS securities	103		13		6		(8)		(7)		107

AFS securities – related party, CLO	1		2		—		(1)		—		2


Total AFS securities including related party	$	104	$	15	$	6	$	(9)	$	(7)	$	109


	Six months ended June 30, 2020
			Additions				Reductions
(In millions)	Beginning balance		Initial credit losses		Initial credit losses on PCD securities		Securities sold during the period		Additions (reductions) to previously impaired securities		Ending Balance
AFS securities



Corporate	$	—	$	31	$	—	$	—	$	—	$	31
CLO	—		1		—		—		—		1
ABS	—		5		—		—		(3)		2
CMBS	—		9		—		—		1		10
RMBS	17		48		61		(2)		5		129
Total AFS securities	17		94		61		(2)		3		173

AFS securities – related party, CLO	—		1		—		—		1		2


Total AFS securities including related party	$	17	$	95	$	61	$	(2)	$	4	$	175

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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


	Three months ended June 30,				Six months ended June 30,
(In millions)	2021		2020		2021		2020
AFS securities	$	939	$	790	$	1,799	$	1,627
Trading securities	60		42		123		90
Equity securities	3		2		7		6
Mortgage loans	203		175		395		361
Investment funds	708		372		1,171		94
Funds withheld at interest	172		43		378		84
Other	95		38		159		75
Investment revenue	2,180		1,462		4,032		2,337
Investment expenses	(142)		(126)		(290)		(256)
Net investment income	$	2,038	$	1,336	$	3,742	$	2,081

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


	Three months ended June 30,				Six months ended June 30,
(In millions)	2021		2020		2021		2020
AFS securities
Gross realized gains on investment activity	$	208	$	68	$	281	$	232
Gross realized losses on investment activity	(171)		(66)		(314)		(200)
Net realized investment gains (losses) on AFS securities	37		2		(33)		32
Net recognized investment gains (losses) on trading securities	61		191		(8)		(32)
Net recognized investment gains (losses) on equity securities	8		30		25		(20)
Derivative gains (losses)	2,484		2,330		2,046		(689)
Provision for credit losses	20		(5)		12		(289)
Other gains (losses)	—		—		80		(26)
Investment related gains (losses)	$	2,610	$	2,548	$	2,122	$	(1,024)

Proceeds from sales of AFS securities were $2,006 million and $1,778 million for the three months ended June 30, 2021 and 2020, respectively, and $2,898 million and $3,585 million for the six months ended June 30, 2021 and 2020, respectively.

The following table summarizes the change in unrealized gains (losses) on trading and equity securities we held as of the respective period end:


	Three months ended June 30,				Six months ended June 30,
(In millions)	2021		2020		2021		2020
Trading securities	$	66	$	135	$	(55)	$	62
Trading securities – related party	(4)		66		54		(43)
Equity securities	18		17		27		(20)
Equity securities – related party	(5)		—		1		—

Purchased Financial Assets with Credit Deterioration—The following table summarizes our PCD investment purchases with the following amounts at the time of purchase:


	Three months ended June 30, 2021				Six months ended June 30, 2021
(In millions)	Fixed maturity securities		Mortgage loans		Fixed maturity securities		Mortgage loans
Purchase price	$	10	$	—	$	16	$	335
Allowance for credit losses at acquisition	4		—		6		6
Discount (premiums) attributable to other factors	3		—		1		(26)
Par value	$	17	$	—	$	23	$	315

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Repurchase Agreements—The following table summarizes the maturities of our repurchase agreements:


	June 30, 2021
	Remaining Contractual Maturity
(In millions)	Overnight and continuous		Less than 30 days		30-90 days		91 days to 1 year		Greater than 1 year		Total
Payables for repurchase agreements1	$	—	$	—	$	—	$	—	$	598	$	598

1 Included in payables for collateral on derivatives and securities to repurchase on the condensed consolidated balance sheets.


	December 31, 2020
	Remaining Contractual Maturity
(In millions)	Overnight and continuous		Less than 30 days		30-90 days		91 days to 1 year		Greater than 1 year		Total
Payables for repurchase agreements1	$	—	$	—	$	—	$	—	$	598	$	598

1 Included in payables for collateral on derivatives and securities to repurchase on the condensed consolidated balance sheets.

The following table summarizes the securities pledged as collateral for repurchase agreements:


	June 30, 2021				December 31, 2020
(In millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value




AFS securities – Corporate	$	567	$	628	$	559	$	644

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


(In millions)	June 30, 2021		December 31, 2020
Commercial mortgage loans	$	13,244	$	11,383
Commercial mortgage loans under development	308		232
Total commercial mortgage loans	13,552		11,615
Allowance for credit losses on commercial mortgage loans	(165)		(167)
Commercial mortgage loans, net of allowances	13,387		11,448
Residential mortgage loans	4,886		4,569
Allowance for credit losses on residential mortgage loans	(64)		(79)
Residential mortgage loans, net of allowances	4,822		4,490
Mortgage loans, net of allowances	$	18,209	$	15,938

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

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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


	June 30, 2021				December 31, 2020
(In millions, except for percentages)	Net Carrying Value		Percentage of Total		Net Carrying Value		Percentage of Total
Property type
Office building	$	4,125	30.8	%	$	3,589	31.4	%
Retail	2,125		15.9	%	2,083		18.2	%
Apartment	2,710		20.2	%	2,441		21.3	%
Hotels	1,392		10.4	%	1,294		11.3	%
Industrial	1,956		14.6	%	1,362		11.9	%
Other commercial	1,079		8.1	%	679		5.9	%
Total commercial mortgage loans	$	13,387	100.0	%	$	11,448	100.0	%

US Region
East North Central	$	1,360	10.2	%	$	1,209	10.5	%
East South Central	422		3.2	%	402		3.5	%
Middle Atlantic	3,222		24.1	%	3,069		26.8	%
Mountain	465		3.5	%	487		4.2	%
New England	366		2.7	%	350		3.1	%
Pacific	3,129		23.3	%	2,746		24.0	%
South Atlantic	1,957		14.5	%	1,773		15.5	%
West North Central	128		1.0	%	145		1.3	%
West South Central	656		4.9	%	640		5.6	%
Total US Region	11,705		87.4	%	10,821		94.5	%
International Region
United Kingdom	827		6.2	%	—		—	%
Other International1	855		6.4	%	627		5.5	%
Total International Region	1,682		12.6	%	627		5.5	%
Total commercial mortgage loans	$	13,387	100.0	%	$	11,448	100.0	%

1 Represents all other countries, with each individual country comprising less than 5% of the portfolio.

Our residential mortgage loan portfolio includes first lien residential mortgage loans collateralized by properties in various geographic locations and is summarized by proportion of the portfolio in the following table:


	June 30, 2021		December 31, 2020
US States
California	23.7	%	24.8	%
Florida	11.9	%	13.3	%
New York	6.3	%	6.2	%
Other1	43.0	%	41.1	%
Total US residential mortgage loan percentage	84.9	%	85.4	%
International
Ireland	11.0	%	12.9	%
Other2	4.1	%	1.7	%
Total International residential mortgage loan percentage	15.1	%	14.6	%
Total residential mortgage loan percentage	100.0	%	100.0	%

1 Represents all other states, with each individual state comprising less than 5% of the portfolio.
2 Represents all other countries, with each individual country comprising less than 5% of the portfolio.

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Loan Valuation Allowance—The allowances for our mortgage loan portfolio and other loans is summarized as follows:


	Three months ended June 30, 2021			Three months ended June 30, 2020
(In millions)		Commercial Mortgage		Residential Mortgage		Other Investments		Total		Commercial Mortgage		Residential Mortgage		Other Investments		Total
Beginning balance		$	172	$	78	$	2	$	252	$	343	$	81	$	12	$	436

Provision (reversal) for expected credit losses		(7)		(13)		(2)		(22)		(49)		5		8		(36)

Loans charged-off		—		(1)		—		(1)		—		(1)		—		(1)

Ending balance		$	165	$	64	$	—	$	229	$	294	$	85	$	20	$	399


	Six months ended June 30, 2021								Six months ended June 30, 2020
(In millions)	Commercial Mortgage		Residential Mortgage		Other Investments		Total		Commercial Mortgage		Residential Mortgage		Other Investments		Total
Beginning balance	$	167	$	79	$	7	$	253	$	10	$	1	$	—	$	11
Adoption of accounting standard	—		—		—		—		167		43		11		221
Provision (reversal) for expected credit losses	(2)		(20)		(7)		(29)		117		42		9		168
Initial credit losses on PCD loans	—		6		—		6		—		—		—		—
Loans charged-off	—		(1)		—		(1)		—		(1)		—		(1)

Ending balance	$	165	$	64	$	—	$	229	$	294	$	85	$	20	$	399

Commercial mortgage loans – Our allowance model for commercial mortgage loans is based on the characteristics of the loans in our portfolio, historical economic data and loss information, and current and forecasted economic conditions. Key loan characteristics affecting the estimate include, among others: time to maturity, delinquency status, loan-to-value ratios, debt service coverage ratios, etc. Key macroeconomic variables include unemployment rates, London Inter-bank Offered Rate (LIBOR), commercial real estate price index, and market liquidity score. Management reviews and approves forecasted macroeconomic variables, along with the reasonable and supportable forecast period and mean reversion technique. Management also evaluates assumptions from independent third parties and these assumptions have a high degree of subjectivity. The mean reversion technique varies by macroeconomic variable and may vary by geographic location. As of June 30, 2021, our reasonable and supportable forecast period was one year, after which, we revert to the 20-year or greater historical average over one year.

Residential mortgage loans – Our allowance model for residential mortgage loans is based on the characteristics of the loans in our portfolio, historical economic data and loss information, and current and forecasted economic conditions. Key loan characteristics affecting the estimate include, among others: time to maturity, delinquency status, original credit scores and loan-to-value ratios. Key macroeconomic variables include unemployment rates and the housing price index. Management reviews and approves forecasted macroeconomic variables, along with the reasonable and supportable forecast period and mean reversion technique. Management also evaluates assumptions from independent third parties and these assumptions have a high degree of subjectivity. The mean reversion technique varies by macroeconomic variable and may vary by geographic location. As of June 30, 2021, our reasonable and supportable forecast period was one year, after which, we revert to the 30-year or greater historical average over a period of up to one year and then continue at those averages through the contractual life of the loan.

Other investments – The allowance model for the loans included in other investments and related party other investments derives an estimate based on historical loss data available for similarly rated unsecured corporate debt obligations, while also incorporating management’s expectations around prepayment. See Note 10 – Related Parties for further information on the related party loans.

Credit Quality Indicators

Residential mortgage loans – The underwriting process for our residential mortgage loans includes an evaluation of relevant credit information including past loan performance, credit scores, loan-to-value and other relevant information. Subsequent to purchase or origination, we closely monitor economic conditions and loan performance to manage and evaluate our exposure to credit risk in our residential mortgage loan portfolio. The primary credit quality indicator monitored for residential mortgage loans is loan performance. Nonperforming residential mortgage loans are 90 days or more past due and/or are in non-accrual status.

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following represents our residential loan portfolio by origination year and performance status:


	June 30, 2021
(In millions)	2021		2020		2019		2018		2017		Prior		Total
Current (less than 30 days past due)	$	848	$	855	$	753	$	1,265	$	415	$	112	$	4,248
30 to 59 days past due	26		28		28		18		15		7		122
60 to 89 days past due	30		65		17		6		6		2		126
90 days or more past due1	181		27		92		33		38		19		390
Total residential mortgages	$	1,085	$	975	$	890	$	1,322	$	474	$	140	$	4,886

1 Includes $179 million of residential mortgage loans that are guaranteed by US government-sponsored agencies.
	December 31, 2020
(In millions)	2020		2019		2018		2017		2016		Prior		Total
Current (less than 30 days past due)	$	955	$	942	$	1,730	$	485	$	141	$	6	$	4,259
30 to 59 days past due	68		16		34		26		8		1		153
60 to 89 days past due	15		7		16		9		3		—		50
90 days or more past due	3		26		22		43		12		1		107
Total residential mortgages	$	1,041	$	991	$	1,802	$	563	$	164	$	8	$	4,569

The following represents our residential loan portfolio in non-accrual status:


(In millions)	June 30, 2021		December 31, 2020
Beginning amortized cost of residential mortgage loans in non-accrual status	$	107	$	67
Ending amortized cost of residential mortgage loans in non-accrual status1	390		107
Amortized cost of residential mortgage loans in non-accrual status without a related allowance for credit losses1	262		13

1 Includes $179 million and $0 million of residential mortgage loans that are guaranteed by US government-sponsored agencies as of June 30, 2021 and December 31, 2020, respectively.

During the three months ended June 30, 2021 and 2020, we recognized $2 million and $0 million, respectively, and during the six months ended June 30, 2021 and 2020, we recognized $4 million and $1 million, respectively, of interest income on residential mortgage loans in non-accrual status.

Commercial mortgage loans – The following represents our commercial mortgage loan portfolio by origination year and loan performance status:


	June 30, 2021
(In millions)	2021		2020		2019		2018		2017		Prior		Total
Current (less than 30 days past due)	$	2,155	$	1,961	$	4,284	$	2,681	$	1,022	$	1,384	$	13,487

60 to 89 days past due	—		—		—		40		—		—		40
90 days or more past due	—		—		—		—		25		—		25
Total commercial mortgages	$	2,155	$	1,961	$	4,284	$	2,721	$	1,047	$	1,384	$	13,552

	December 31, 2020
(In millions)	2020		2019		2018		2017		2016		Prior		Total
Current (less than 30 days past due)	$	1,913	$	4,400	$	2,617	$	987	$	130	$	1,452	$	11,499
30 to 59 days past due	—		20		45		25		—		5		95

90 days or more past due	—		—		—		—		—		21		21
Total commercial mortgages	$	1,913	$	4,420	$	2,662	$	1,012	$	130	$	1,478	$	11,615

As of June 30, 2021 and December 31, 2020, we had $25 million and $0 million, respectively, of commercial mortgage loans that were 90 days or more past due and still accruing interest.

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following represents our commercial mortgage loan portfolio in non-accrual status:


(In millions)	June 30, 2021		December 31, 2020
Beginning amortized cost of commercial mortgage loans in non-accrual status	$	38	$	—
Ending amortized cost of commercial mortgage loans in non-accrual status	37		38
Amortized cost of commercial mortgage loans in non-accrual status without a related allowance for credit losses	—		—

During the three and six months ended June 30, 2021 and 2020, no interest income was recognized on commercial mortgage loans in non-accrual status.

Loan-to-value and debt service coverage ratios are measures we use to assess the risk and quality of commercial mortgage loans other than those under development. Loans under development are not evaluated using these ratios as the properties underlying these loans are generally not yet income-producing and the value of the underlying property significantly fluctuates based on the progress of construction. Therefore, the risk and quality of loans under development are evaluated based on the aging and geographical distribution of such loans as shown above.

The loan-to-value ratio is expressed as a percentage of the amount of the loan relative to the value of the underlying property. A loan-to-value ratio in excess of 100% indicates the unpaid loan amount exceeds the value of the underlying collateral. Loan-to-value information is updated annually as part of the re-underwriting process supporting the National Association of Insurance Commissioners (NAIC) risk-based capital rating criteria. The following represents the loan-to-value ratio of the commercial mortgage loan portfolio, excluding those under development, by origination year:


	June 30, 2021
(In millions)	2021		2020		2019		2018		2017		Prior		Total
Less than 50%	$	199	$	462	$	617	$	223	$	150	$	1,032	$	2,683
50% to 59%	697		298		1,335		718		347		184		3,579
60% to 69%	901		611		1,938		1,305		449		115		5,319
70% to 79%	280		492		365		372		101		16		1,626

100% or greater	—		—		—		—		—		37		37
Commercial mortgage loans	$	2,077	$	1,863	$	4,255	$	2,618	$	1,047	$	1,384	$	13,244

	December 31, 2020
(In millions)	2020		2019		2018		2017		2016		Prior		Total
Less than 50%	$	431	$	600	$	201	$	152	$	44	$	1,153	$	2,581
50% to 59%	315		1,320		765		300		40		147		2,887
60% to 69%	583		1,988		1,222		440		46		106		4,385
70% to 79%	478		485		375		95		—		13		1,446
80% to 99%	—		—		—		25		—		21		46
100% or greater	—		—		—		—		—		38		38
Commercial mortgage loans	$	1,807	$	4,393	$	2,563	$	1,012	$	130	$	1,478	$	11,383

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The debt service coverage ratio is expressed as a percentage of a property’s net operating income to its debt service payments. A debt service ratio of less than 1.0 indicates a property’s operations do not generate enough income to cover debt payments. Debt service coverage ratios are updated as more recent financial statements become available, at least annually or as frequently as quarterly in some cases. The following represents the debt service coverage ratio of the commercial mortgage loan portfolio, excluding those under development, by origination year:


	June 30, 2021
(In millions)	2021		2020		2019		2018		2017		Prior		Total
Greater than 1.20x	$	1,523	$	1,147	$	2,546	$	2,126	$	797	$	1,259	$	9,398
1.00x – 1.20x	554		546		954		135		30		105		2,324
Less than 1.00x	—		170		755		357		220		20		1,522
Commercial mortgage loans	$	2,077	$	1,863	$	4,255	$	2,618	$	1,047	$	1,384	$	13,244

	December 31, 2020
(In millions)	2020		2019		2018		2017		2016		Prior		Total
Greater than 1.20x	$	1,274	$	2,964	$	2,440	$	846	$	129	$	1,369	$	9,022
1.00x – 1.20x	533		1,122		36		70		1		101		1,863
Less than 1.00x	—		307		87		96		—		8		498
Commercial mortgage loans	$	1,807	$	4,393	$	2,563	$	1,012	$	130	$	1,478	$	11,383

Investment Funds—Our investment fund portfolio consists of funds that employ various strategies and include investments in real estate, real assets, credit, equity and natural resources. Investment funds can meet the definition of VIEs, which are discussed further in Note 4 – Variable Interest Entities. Our investment funds do not specify timing of distributions on the funds’ underlying assets.

The following summarizes our investment funds, including related party:


	June 30, 2021				December 31, 2020
(In millions, except for percentages)	Carrying value		Percent of total		Carrying value		Percent of total
Investment funds
Real estate	$	510	44.0	%	$	348	43.3	%
Credit funds	96		8.3	%	107		13.3	%
Private equity	281		24.2	%	267		33.3	%
Real assets	272		23.5	%	81		10.1	%


Total investment funds	1,159		100.0	%	803		100.0	%
Investment funds – related parties
Differentiated investments

A-A Mortgage Opportunities, L.P. (A-A Mortgage)1	77		1.2	%	444		8.4	%
Catalina Holdings Ltd. (Catalina)	348		5.5	%	334		6.3	%
Athora Holding Ltd. (Athora)1	723		11.4	%	709		13.4	%
Venerable Holdings, Inc. (Venerable)1	329		5.2	%	123		2.3	%
Other	346		5.5	%	279		5.3	%
Total differentiated investments	1,823		28.8	%	1,889		35.7	%
Real estate	1,269		20.1	%	828		15.7	%
Credit funds	417		6.6	%	375		7.1	%
Private equity	531		8.4	%	473		8.9	%
Real assets	344		5.4	%	172		3.3	%
Natural resources	122		1.9	%	113		2.1	%
Public equities	88		1.4	%	110		2.1	%
Investment in Apollo1	1,730		27.4	%	1,324		25.1	%
Total investment funds – related parties	6,324		100.0	%	5,284		100.0	%
Total investment funds including related party	$	7,483			$	6,087

1 Our Venerable investment is in its parent company, VA Capital Company LLC (VA Capital). See further discussion on this investment and our investments in Apollo, Athora and A-A Mortgage in Note 10 – Related Parties.

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Non-Consolidated Securities and Investment Funds

Fixed maturity securities – We invest in securitization entities as a debt holder or an investor in the residual interest of the securitization vehicle. These entities are deemed VIEs due to insufficient equity within the structure and lack of control by the equity investors over the activities that significantly impact the economics of the entity. In general, we are a debt investor within these entities and, as such, hold a variable interest; however, due to the debt holders’ lack of ability to control the decisions within the trust that significantly impact the entity, and the fact the debt holders are protected from losses due to the subordination of the equity tranche, the debt holders are not deemed the primary beneficiary. Securitization vehicles in which we hold the residual tranche are not consolidated because we do not unilaterally have substantive rights to remove the general partner, or when assessing related party interests, we are not under common control, as defined by GAAP, with the related party, nor are substantially all of the activities conducted on our behalf; therefore, we are not deemed the primary beneficiary. Debt investments and investments in the residual tranche of securitization entities are considered debt instruments and are held at fair value on the balance sheet and classified as AFS or trading.

Investment funds – Investment funds include non-fixed income, alternative investments in the form of limited partnerships or similar legal structures.

Equity securities – We invest in preferred equity securities issued by entities deemed to be VIEs due to insufficient equity within the structure.

Our risk of loss associated with our non-consolidated investments depends on the investment. Investment funds, equity securities and trading securities are limited to the carrying value plus unfunded commitments. AFS securities are limited to amortized cost plus unfunded commitments.

The following summarizes the carrying value and maximum loss exposure of these non-consolidated investments:


	June 30, 2021				December 31, 2020
(In millions)	Carrying Value		Maximum Loss Exposure		Carrying Value		Maximum Loss Exposure
Investment funds	$	1,159	$	1,794	$	803	$	1,265
Investment in related parties – investment funds	6,324		8,927		5,284		7,989
Investment in fixed maturity securities	27,808		27,307		23,325		23,027
Investment in related parties – fixed maturity securities	8,610		10,010		7,834		8,126
Investment in related parties – equity securities	115		115		72		72
Total non-consolidated investments	$	44,016	$	48,153	$	37,318	$	40,479

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

3. Derivative Instruments

We use a variety of derivative instruments to manage risks, primarily equity, interest rate, credit, foreign currency and market volatility. See Note 5 – Fair Value for information about the fair value hierarchy for derivatives.

The following table presents the notional amount and fair value of derivative instruments:


	June 30, 2021					December 31, 2020
	Notional Amount	Fair Value				Notional Amount	Fair Value
(In millions)		Assets		Liabilities			Assets		Liabilities
Derivatives designated as hedges
Foreign currency swaps	5,236	$	150	$	112	4,417	$	134	$	181
Foreign currency forwards	4,470	39		3		2,038	3		9
Foreign currency interest rate swaps	1,807	6		59		—	—		—
Foreign currency forwards on net investments	227	2		—		173	—		2
Total derivatives designated as hedges		197		174			137		192
Derivatives not designated as hedges
Equity options	54,975	3,718		20		53,666	3,209		22
Futures	35	52		—		24	58		2
Total return swaps	219	4		—		97	6		—
Foreign currency swaps	1,759	70		—		1,510	96		—
Interest rate swaps	492	29		3		803	—		34
Credit default swaps	10	—		4		10	—		4
Foreign currency forwards	4,296	81		13		3,595	17		44
Embedded derivatives
Funds withheld including related party		2,125		49			2,806		59
Interest sensitive contract liabilities		—		13,635			—		12,873
Total derivatives not designated as hedges		6,079		13,724			6,192		13,038
Total derivatives		$	6,276	$	13,898		$	6,329	$	13,230

Derivatives Designated as Hedges

Cash Flow Hedges – We use foreign currency swaps to convert foreign currency denominated cash flows of investments or liabilities to US dollars to reduce cash flow fluctuations due to changes in currency exchange rates. These swaps will expire by March 2052. The following is a summary of the gains (losses) related to cash flow hedges:


	Three months ended June 30,				Six months ended June 30,
(In millions)	2021		2020		2021		2020
Foreign currency swaps – Other comprehensive income	$	88	$	(83)	$	57	$	318
Foreign currency swaps – Investment related gains (losses)	27		—		27		—

There were no amounts deemed ineffective during the three and six months ended June 30, 2021 and 2020. As of June 30, 2021, no amounts are expected to be reclassified to income within the next 12 months.

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Fair Value Hedges – We use foreign currency forward contracts and foreign currency interest rate swaps that are designated and accounted for as fair value hedges. We use foreign currency forward contracts to hedge certain exposures to foreign currency risk. The price is agreed upon at the time of the contract and payment is made at a specified future date. We use foreign currency interest rate swaps to hedge certain exposures to foreign currency risk and interest rate risk relating to foreign currency denominated funding agreements.

The following represents the carrying amount and the cumulative fair value hedging adjustments included in the hedged assets or liabilities:


	June 30, 2021				December 31, 2020
(In millions)	Carrying amount of the hedged assets or liabilities1		Cumulative amount of fair value hedging gains (losses)		Carrying amount of the hedged assets or liabilities1		Cumulative amount of fair value hedging gains (losses)
AFS securities – Foreign currency forwards	$	3,684	$	25	$	1,932	$	117
Interest sensitive contract liabilities
Foreign currency forwards	84		5		65		(1)
Foreign currency interest rate swaps	1,802		42		—		—

1 The carrying amount disclosed for AFS securities is amortized cost.

The following is a summary of the gains (losses) related to the derivatives and related hedged items in fair value hedge relationships:


(In millions)	Derivatives		Hedged Items		Amount Excluded		Net
Three months ended June 30, 2021
Investment related gains (losses)
Foreign currency forwards	$	(13)	$	29	$	—	$	16
Foreign currency interest rate swaps	5		(9)		—		(4)
Interest sensitive contract benefits
Foreign currency interest rate swaps	5		(4)		—		1

Three months ended June 30, 2020
Investment related gains (losses) – Foreign currency forwards	$	(20)	$	17	$	—	$	(3)


(In millions)	Derivatives		Hedged Items		Amount Excluded		Net
Six months ended June 30, 2021
Investment related gains (losses)
Foreign currency forwards	$	205	$	(188)	$	—	$	17
Foreign currency interest rate swaps	(31)		32		—		1
Interest sensitive contract benefits
Foreign currency interest rate swaps	6		(5)		—		1

Six months ended June 30, 2020
Investment related gains (losses) – Foreign currency forwards	$	(8)	$	9	$	—	$	1

Foreign currency forward gains and losses excluded from the assessment of hedge effectiveness that were recognized in OCI were gains of $4 million and $0 million for the three months ended June 30, 2021 and 2020, respectively, and gains of $4 million and $0 million for the six months ended June 30, 2021 and 2020, respectively.

Net Investment Hedges – We use foreign currency forwards to hedge the foreign currency exchange rate risk of our investments in subsidiaries that have a reporting currency other than the US dollar. We assess hedge effectiveness based on the changes in forward rates. During the three months ended June 30, 2021 and 2020, these derivatives had losses of $0 million and $11 million, respectively. During the six months ended June 30, 2021 and 2020, these derivatives had losses of $2 million and gains of $2 million, respectively. These derivatives are included in foreign currency translation and other adjustments on the condensed consolidated statements of comprehensive income (loss). As of June 30, 2021 and December 31, 2020, the cumulative foreign currency translation recorded in accumulated other comprehensive income (AOCI) related to these net investment hedges were losses of $2 million and $0 million, respectively. During the three and six months ended June 30, 2021 and 2020, there were no amounts deemed ineffective.

Derivatives Not Designated as Hedges

Equity options – We use equity indexed options to economically hedge fixed indexed annuity products that guarantee the return of principal to the policyholder and credit interest based on a percentage of the gain in a specified market index, primarily the S&P 500. To hedge against adverse changes in equity indices, we enter into contracts to buy equity indexed options. The contracts are net settled in cash based on differentials in the indices at the time of exercise and the strike price.

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Futures – Futures contracts are purchased to hedge the growth in interest credited to the customer as a direct result of increases in the related indices. We enter into exchange-traded futures with regulated futures commission clearing brokers who are members of a trading exchange. Under exchange-traded futures contracts, we agree to purchase a specified number of contracts with other parties and to post variation margin on a daily basis in an amount equal to the difference in the daily fair values of those contracts.

Total return swaps – We purchase total rate of return swaps to gain exposure and benefit from a reference asset or index without ownership. Total rate of return swaps are contracts in which one party makes payments based on a set rate, either fixed or variable, while the other party makes payments based on the return of the underlying asset or index, which includes both the income it generates and any capital gains.

Interest rate swaps – We use interest rate swaps to reduce market risks from interest rate changes and to alter interest rate exposure arising from duration mismatches between assets and liabilities. With an interest rate swap, we agree with another party to exchange the difference between fixed-rate and floating-rate interest amounts tied to an agreed-upon notional principal amount at specified intervals.

Credit default swaps – Credit default swaps provide a measure of protection against the default of an issuer or allow us to gain credit exposure to an issuer or traded index. We use credit default swaps coupled with a bond to synthetically create the characteristics of a reference bond. These transactions have a lower cost and are generally more liquid relative to the cash market. We receive a periodic premium for these transactions as compensation for accepting credit risk.

Hedging credit risk involves buying protection for existing credit risk. The exposure resulting from the agreements, which is usually the notional amount, is equal to the maximum proceeds that must be paid by a counterparty for a defaulted security. If a credit event occurs on a reference entity, then a counterparty who sold protection is required to pay the buyer the trade notional amount less any recovery value of the security.

Embedded derivatives – We have embedded derivatives which are required to be separated from their host contracts and reported as derivatives. Host contracts include reinsurance agreements structured on a modified coinsurance (modco) or funds withheld basis and indexed annuity products.

The following is a summary of the gains (losses) related to derivatives not designated as hedges:


	Three months ended June 30,				Six months ended June 30,
(In millions)	2021		2020		2021		2020
Equity options	$	1,044	$	672	$	1,546	$	(909)
Futures	44		(3)		55		13
Swaps	5		55		36		(20)
Foreign currency forwards	(19)		(23)		(50)		44
Embedded derivatives on funds withheld	1,391		1,629		258		183
Amounts recognized in investment related gains (losses)	2,465		2,330		1,845		(689)
Embedded derivatives in indexed annuity products1	(1,183)		(1,534)		(848)		(357)
Total gains (losses) on derivatives not designated as hedges	$	1,282	$	796	$	997	$	(1,046)

1 Included in interest sensitive contract benefits on the condensed consolidated statements of income (loss).

Credit Risk—We may be exposed to credit-related losses in the event of counterparty nonperformance on derivative financial instruments. Generally, the current credit exposure of our derivative contracts is the fair value at the reporting date less any collateral received from the counterparty.

We manage credit risk related to over-the-counter derivatives by entering into transactions with creditworthy counterparties. Where possible, we maintain collateral arrangements and use master netting agreements that provide for a single net payment from one counterparty to another at each due date and upon termination. We have also established counterparty exposure limits, where possible, in order to evaluate if there is sufficient collateral to support the net exposure.

Collateral arrangements typically require the posting of collateral in connection with its derivative instruments. Collateral agreements often contain posting thresholds, some of which may vary depending on the posting party’s financial strength ratings. Additionally, a decrease in our financial strength rating to a specified level can result in settlement of the derivative position.

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The estimated fair value of our net derivative and other financial assets and liabilities after the application of master netting agreements and collateral were as follows:


			Gross amounts not offset on the condensed consolidated balance sheets
(In millions)	Gross amount recognized1		Financial instruments2		Collateral (received)/pledged		Net amount		Off-balance sheet securities collateral3		Net amount after securities collateral
June 30, 2021
Derivative assets	$	4,151	$	(176)	$	(3,890)	$	85	$	—	$	85
Derivative liabilities	(214)		176		33		(5)		—		(5)

December 31, 2020
Derivative assets	$	3,523	$	(165)	$	(3,196)	$	162	$	(46)	$	116
Derivative liabilities	(298)		165		144		11		—		11

1 The gross amounts of recognized derivative assets and derivative liabilities are reported on the condensed consolidated balance sheets. As of June 30, 2021 and December 31, 2020, amounts not subject to master netting or similar agreements were immaterial.
2 Represents amounts offsetting derivative assets and derivative liabilities that are subject to an enforceable master netting agreement or similar agreement that are not netted against the gross derivative assets or gross derivative liabilities for presentation on the condensed consolidated balance sheets.
3 For non-cash collateral received, we do not recognize the collateral on our balance sheet unless the obligor (transferor) has defaulted under the terms of the secured contract and is no longer entitled to redeem the pledged asset. Amounts do not include any excess of collateral pledged or received.

4. Variable Interest Entities

As of June 30, 2021, we consolidate the following VIEs:

•Hamlet Securitization Trust 2020-CRE1 (Hamlet)

•A-A SPN-9 (ASREII - ACRASP), L.P. and A-A SPN-9 (ASREII - ALRESP), L.P. (collectively, A-A SPN-9)

•A-A Offshore 2021-1 (Java), L.P. (Java)

•NNN AGP Opportunities Fund, L.P. and NNN AGP Opportunities Fund II, L.P. (collectively, NNN AGP Opportunities)

Hamlet was formed to securitize a portion of our commercial mortgage loan portfolio as CMBS securities held by AHL subsidiaries and third-party cedant portfolios. Securitization of these commercial mortgage loans allows retention of the full economics of these assets while being able to pledge these assets as collateral to the Federal Home Loan Bank (FHLB) under the funding agreement program. As of June 30, 2021 and December 31, 2020, Hamlet primarily held $1,812 million and $1,880 million, respectively, of commercial mortgage loans. As substantially all of the activities and economics of Hamlet are conducted on our behalf, we are the primary beneficiary and consolidate Hamlet and the assets are included in mortgage loans on the condensed consolidated balance sheets. Additionally, as Hamlet is in the form of a trust, the commercial mortgage loan assets are included in the pledged assets and funds in trust table in Note 11 – Commitments and Contingencies.

A-A SPN-9 is comprised of limited partnership entities that invest in an underlying investment fund. As of June 30, 2021, A-A SPN-9 primarily held $163 million of investment funds. We are the only limited partner in these entities and receive all of the economic benefits and losses, other than management fees and carried interest, as applicable, paid to the general partner in each entity which are Apollo affiliates and related parties. We do not have any direct voting rights as a limited partner at the A-A SPN-9 level, but we do have an ability to dissolve the underlying investment that results in dissolution of the entities. Therefore, as we have a unilateral ability to ultimately dissolve the entities and also own all of the economics in each of the entities, we are deemed to be the primary beneficiary of the VIEs.

Java is an investment fund. As of June 30, 2021, Java primarily held $185 million of investment funds and $17 million of other assets. We are both the general partner and the only limited partner in this investment fund and receive all of the economic benefits and losses. As the general partner, we hired an Apollo affiliate as the related party investment manager who receives management fees and service fees, as applicable. We hold both the power, as a general partner, and significant economics, as a limited partner, satisfying the primary beneficiary criteria.

NNN AGP Opportunities is an investment fund formed to purchase US-based net lease properties. As of June 30, 2021, NNN AGP Opportunities primarily held $68 million of related party investment funds. We are both the general partner and a limited partner of the fund. As the general partner, we hired an Apollo affiliate as the related party investment manager who receives management fees and service fees, as applicable. We hold both the power, as a general partner, and significant economics, as a limited partner, satisfying the primary beneficiary criteria.

No arrangement exists requiring us to provide additional funding in excess of our committed capital investment, liquidity, or the funding of losses or an increase to our loss exposure in excess of our investment in any of the consolidated VIEs.

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Notes to Condensed Consolidated Financial Statements (Unaudited)

5. Fair Value

Fair value is the price we would receive to sell an asset or pay to transfer a liability (exit price) in an orderly transaction between market participants. We determine fair value based on the following fair value hierarchy:

Level 1 – Unadjusted quoted prices for identical assets or liabilities in an active market.

Level 2 – Quoted prices for inactive markets or valuation techniques that require observable direct or indirect inputs for substantially the full term of the asset or liability. Level 2 inputs include the following:

•Quoted prices for similar assets or liabilities in active markets,

•Observable inputs other than quoted market prices, and

•Observable inputs derived principally from market data through correlation or other means.

Level 3 – Prices or valuation techniques with unobservable inputs significant to the overall fair value estimate. These valuations use critical assumptions not readily available to market participants. Level 3 valuations are based on market standard valuation methodologies, including discounted cash flows, matrix pricing or other similar techniques.

Net Asset Value (NAV) – Investment funds are typically measured using NAV as a practical expedient in determining fair value and are not classified in the fair value hierarchy. Our carrying value reflects our pro rata ownership percentage as indicated by NAV in the investment fund financial statements, which we may adjust if we determine NAV is not calculated consistent with investment company fair value principles. The underlying investments of the investment funds may have significant unobservable inputs, which may include but are not limited to, comparable multiples and weighted average cost of capital rates applied in valuation models or a discounted cash flow model.

The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the instrument’s fair value measurement.

We use a number of valuation sources to determine fair values. Valuation sources can include quoted market prices; third-party commercial pricing services; third-party brokers; industry-standard, vendor modeling software that uses market observable inputs; and other internal modeling techniques based on projected cash flows. We periodically review the assumptions and inputs of third-party commercial pricing services through internal valuation price variance reviews, comparisons to internal pricing models, back testing to recent trades, or monitoring trading volumes.

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following represents the hierarchy for our assets and liabilities measured at fair value on a recurring basis:


	June 30, 2021
(In millions)	Total		NAV		Level 1		Level 2		Level 3
Assets
AFS securities
US government and agencies	$	334	$	—	$	324	$	10	$	—
US state, municipal and political subdivisions	1,016		—		—		1,016		—
Foreign governments	416		—		—		414		2
Corporate	63,674		—		—		62,691		983
CLO	13,183		—		—		12,907		276
ABS	5,299		—		—		3,818		1,481
CMBS	2,454		—		—		2,403		51
RMBS	6,462		—		—		6,462		—
Total AFS securities	92,838		—		324		89,721		2,793
Trading securities
US government and agencies	6		—		3		3		—
US state, municipal and political subdivisions	105		—		—		105		—

Corporate	1,544		—		—		1,544		—
CLO	3		—		—		—		3
ABS	132		—		—		94		38
CMBS	90		—		—		88		2
RMBS	185		—		—		129		56
Total trading securities	2,065		—		3		1,963		99
Equity securities	398		—		76		300		22
Mortgage loans	18		—		—		—		18
Investment funds	496		130		—		—		366
Funds withheld at interest – embedded derivative	1,373		—		—		—		1,373
Derivative assets	4,151		—		52		4,099		—
Short-term investments	101		—		58		43		—
Other investments	105		—		—		105		—
Cash and cash equivalents	8,057		—		8,057		—		—
Restricted cash	669		—		669		—		—
Investments in related parties
AFS securities
Corporate	177		—		—		177		—
CLO	2,039		—		—		2,039		—
ABS	4,831		—		—		594		4,237
Total AFS securities – related party	7,047		—		—		2,810		4,237
Trading securities
CLO	60		—		—		30		30
ABS	1,680		—		—		—		1,680
Total trading securities – related party	1,740		—		—		30		1,710
Equity securities	115		—		—		—		115
Investment funds	2,616		95		—		—		2,521
Funds withheld at interest – embedded derivative	752		—		—		—		752

Reinsurance recoverable	1,946		—		—		—		1,946
Total assets measured at fair value	$	124,487	$	225	$	9,239	$	99,071	$	15,952

Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	13,635	$	—	$	—	$	—	$	13,635
Universal life benefits	1,188		—		—		—		1,188
Future policy benefits
AmerUs Life Insurance Company (AmerUs) Closed Block	1,551		—		—		—		1,551
Indianapolis Life Insurance Company (ILICO) Closed Block and life benefits	743		—		—		—		743
Derivative liabilities	214		—		—		210		4
Funds withheld liability – embedded derivative	49		—		—		49		—
Total liabilities measured at fair value	$	17,380	$	—	$	—	$	259	$	17,121

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Notes to Condensed Consolidated Financial Statements (Unaudited)


	December 31, 2020
(In millions)	Total		NAV		Level 1		Level 2		Level 3
Assets
AFS securities
US government and agencies	$	351	$	—	$	332	$	19	$	—
US state, municipal and political subdivisions	1,033		—		—		999		34
Foreign governments	368		—		—		366		2
Corporate	58,180		—		—		57,402		778
CLO	9,569		—		—		9,361		208
ABS	4,270		—		—		3,470		800
CMBS	2,169		—		—		2,126		43
RMBS	6,913		—		—		6,913		—
Total AFS securities	82,853		—		332		80,656		1,865
Trading securities
US government and agencies	6		—		3		3		—
US state, municipal and political subdivisions	106		—		—		106		—
Corporate	1,577		—		—		1,577		—
CLO	4		—		—		—		4
ABS	128		—		—		93		35
CMBS	52		—		—		52		—
RMBS	220		—		—		173		47
Total trading securities	2,093		—		3		2,004		86
Equity securities	330		—		57		262		11
Mortgage loans	19		—		—		—		19
Investment funds	161		144		—		—		17
Funds withheld at interest – embedded derivative	1,944		—		—		—		1,944
Derivative assets	3,523		—		58		3,465		—
Short-term investments	222		—		146		74		2
Other investments	105		—		—		105		—
Cash and cash equivalents	7,704		—		7,704		—		—
Restricted cash	738		—		738		—		—

Investments in related parties
AFS securities
Corporate	215		—		—		20		195
CLO	1,520		—		—		1,520		—
ABS	4,785		—		—		676		4,109
Total AFS securities – related party	6,520		—		—		2,216		4,304
Trading securities
CLO	54		—		—		4		50
ABS	1,475		—		—		—		1,475
Total trading securities – related party	1,529		—		—		4		1,525
Equity securities	72		—		—		—		72
Investment funds	2,119		86		—		—		2,033
Funds withheld at interest – embedded derivative	862		—		—		—		862

Reinsurance recoverable	2,100		—		—		—		2,100
Total assets measured at fair value	$	112,894	$	230	$	9,038	$	88,786	$	14,840
Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	12,873	$	—	$	—	$	—	$	12,873
Universal life benefits	1,308		—		—		—		1,308
Future policy benefits
AmerUs Closed Block	1,600		—		—		—		1,600
ILICO Closed Block and life benefits	776		—		—		—		776
Derivative liabilities	298		—		2		292		4
Funds withheld liability – embedded derivative	59		—		—		59		—
Total liabilities measured at fair value	$	16,914	$	—	$	2	$	351	$	16,561

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Fair Value Valuation Methods—We used the following valuation methods and assumptions to estimate fair value:

AFS and trading securities – We obtain the fair value for most marketable securities without an active market from several commercial pricing services. These are classified as Level 2 assets. The pricing services incorporate a variety of market observable information in their valuation techniques, including benchmark yields, trading activity, credit quality, issuer spreads, bids, offers and other reference data. This category typically includes US and non-US corporate bonds, US agency and government guaranteed securities, CLO, ABS, CMBS and RMBS.

We also have fixed maturity securities priced based on indicative broker quotes or by employing market accepted valuation models. For certain fixed maturity securities, the valuation model uses significant unobservable inputs and are included in Level 3 in our fair value hierarchy. Significant unobservable inputs used include: discount rates, issue specific credit adjustments, material non-public financial information, estimation of future earnings and cash flows, default rate assumptions, liquidity assumptions and indicative quotes from market makers. These inputs are usually considered unobservable, as not all market participants have access to this data.

We value privately placed fixed maturity securities based on the credit quality and duration of comparable marketable securities, which may be securities of another issuer with similar characteristics. In some instances, we use a matrix-based pricing model. These models consider the current level of risk-free interest rates, corporate spreads, credit quality of the issuer and cash flow characteristics of the security. We also consider additional factors such as net worth of the borrower, value of collateral, capital structure of the borrower, presence of guarantees and our evaluation of the borrower’s ability to compete in its relevant market. Privately placed fixed maturity securities are classified as Level 2 or 3.

Equity securities – Fair values of publicly traded equity securities are based on quoted market prices and classified as Level 1. Other equity securities, typically private equities or equity securities not traded on an exchange, we value based on other sources, such as commercial pricing services or brokers, and are classified as Level 2 or 3.

Mortgage loans – Mortgage loans for which we have elected the fair value option or those held for sale are carried at fair value. We estimate fair value on a monthly basis using discounted cash flow analysis and rates being offered for similar loans to borrowers with similar credit ratings. Loans with similar characteristics are aggregated for purposes of the calculations. The discounted cash flow model uses unobservable inputs, including estimates of discount rates and loan prepayments. Mortgage loans are classified as Level 3.

Investment funds – Certain investment funds for which we elected the fair value option are included in Level 3 and are priced based on market accepted valuation models. The valuation models use significant unobservable inputs, which include material non-public financial information, estimation of future distributable earnings and demographic assumptions. These inputs are usually considered unobservable, as not all market participants have access to this data.

Funds withheld at interest embedded derivative – We estimate the fair value of the embedded derivative based on the change in the fair value of the assets supporting the funds withheld payable under modco and funds withheld reinsurance agreements. As a result, the fair value of the embedded derivative is classified as Level 2 or 3 based on the valuation methods used for the assets held supporting the reinsurance agreements.

Derivatives – Derivative contracts can be exchange traded or over-the-counter. Exchange-traded derivatives typically fall within Level 1 of the fair value hierarchy depending on trading activity. Over-the-counter derivatives are valued using valuation models or an income approach using third-party broker valuations. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, prepayment rates and correlation of the inputs. We consider and incorporate counterparty credit risk in the valuation process through counterparty credit rating requirements and monitoring of overall exposure. We also evaluate and include our own nonperformance risk in valuing derivatives. The majority of our derivatives trade in liquid markets; therefore, we can verify model inputs and model selection does not involve significant management judgment. These are typically classified within Level 2 of the fair value hierarchy.

Cash and cash equivalents, including restricted cash – The carrying amount for cash equals fair value. We estimate the fair value for cash equivalents based on quoted market prices. These assets are classified as Level 1.

Interest sensitive contract liabilities embedded derivative – Embedded derivatives related to interest sensitive contract liabilities with fixed indexed annuity products are classified as Level 3. The valuations include significant unobservable inputs associated with economic assumptions and actuarial assumptions for policyholder behavior.

AmerUs Closed Block – We elected the fair value option for the future policy benefits liability in the AmerUs Closed Block. Our valuation technique is to set the fair value of policyholder liabilities equal to the fair value of assets. There is an additional component which captures the fair value of the open block’s obligations to the closed block business. This component is the present value of the projected release of required capital and future earnings before income taxes on required capital supporting the AmerUs Closed Block, discounted at a rate which represents a market participant’s required rate of return, less the initial required capital. Unobservable inputs include estimates for these items. The AmerUs Closed Block policyholder liabilities and any corresponding reinsurance recoverable are classified as Level 3.

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

ILICO Closed Block – We elected the fair value option for the ILICO Closed Block. Our valuation technique is to set the fair value of policyholder liabilities equal to the fair value of assets. There is an additional component which captures the fair value of the open block’s obligations to the closed block business. This component uses the present value of future cash flows which include commissions, administrative expenses, reinsurance premiums and benefits, and an explicit cost of capital. The discount rate includes a margin to reflect the business and nonperformance risk. Unobservable inputs include estimates for these items. The ILICO Closed Block policyholder liabilities and corresponding reinsurance recoverable are classified as Level 3.

Universal life liabilities and other life benefits – We elected the fair value option for certain blocks of universal and other life business ceded to Global Atlantic. We use a present value of liability cash flows. Unobservable inputs include estimates of mortality, persistency, expenses, premium payments and a risk margin used in the discount rates that reflects the riskiness of the business. These universal life policyholder liabilities and corresponding reinsurance recoverable are classified as Level 3.

Fair Value Option—The following represents the gains (losses) recorded for instruments for which we have elected the fair value option, including related parties:


	Three months ended June 30,				Six months ended June 30,
(In millions)	2021		2020		2021		2020
Trading securities	$	61	$	191	$	(8)	$	(32)

Investment funds	495		466		435		166
Future policy benefits	(54)		(92)		49		(27)
Total gains (losses)	$	502	$	565	$	476	$	107

Gains and losses on trading securities are recorded in investment related gains (losses) on the condensed consolidated statements of income (loss). For fair value option mortgage loans, we record interest income in net investment income and subsequent changes in fair value in investment related gains (losses) on the condensed consolidated statements of income (loss). Gains and losses related to investment funds, including related party investment funds, are recorded in net investment income on the condensed consolidated statements of income (loss). We record the change in fair value of future policy benefits to future policy and other policy benefits on the condensed consolidated statements of income (loss).

The following summarizes information for fair value option mortgage loans:


(In millions)	June 30, 2021		December 31, 2020
Unpaid principal balance	$	16	$	17
Mark to fair value	2		2
Fair value	$	18	$	19

There were no fair value option mortgage loans 90 days or more past due as of June 30, 2021 and December 31, 2020.

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Level 3 Financial Instruments—The following are reconciliations for Level 3 assets and liabilities measured at fair value on a recurring basis. All transfers in and out of Level 3 are based on changes in the availability of pricing sources, as described in the valuation methods above.


	Three months ended June 30, 2021
			Total realized and unrealized gains (losses)
(In millions)	Beginning balance		Included in income		Included in OCI		Net purchases, issuances, sales and settlements		Net transfers in (out)		Ending balance		Total gains (losses) included in earnings1		Total gains (losses) included in OCI1
Assets
AFS securities

Foreign governments	$	2	$	—	$	—	$	—	$	—	$	2	$	—	$	—
Corporate	782		4		6		74		117		983		—		6
CLO	174		—		—		102		—		276		—		—
ABS	1,207		16		(5)		304		(41)		1,481		—		(5)
CMBS	48		1		—		2		—		51		—		1

Trading securities


CLO	—		—		—		3		—		3		—		—
ABS	35		—		—		—		3		38		—		—
CMBS	—		—		—		2		—		2		—		—
RMBS	59		(5)		—		—		2		56		(1)		—
Equity securities	14		8		—		—		—		22		7		—
Mortgage loans	18		—		—		—		—		18		—		—
Investment funds	171		13		—		182		—		366		13		—
Funds withheld at interest – embedded derivative	636		737		—		—		—		1,373		—		—

Investments in related parties
AFS securities
Corporate	201		—		—		—		(201)		—		—		—

ABS	4,131		5		2		99		—		4,237		—		2
Trading securities
CLO	44		(7)		—		—		(7)		30		(7)		—
ABS	1,641		8		—		31		—		1,680		7		—
Equity securities	114		(8)		—		9		—		115		(8)		—
Investment funds	1,970		483		—		68		—		2,521		483		—
Funds withheld at interest – embedded derivative	580		172		—		—		—		752		—		—

Reinsurance recoverable	1,880		66		—		—		—		1,946		—		—
Total Level 3 assets	$	13,707	$	1,493	$	3	$	876	$	(127)	$	15,952	$	494	$	4

Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	(12,473)	$	(1,183)	$	—	$	21	$	—	$	(13,635)	$	—	$	—
Universal life benefits	(1,108)		(80)		—		—		—		(1,188)		—		—
Future policy benefits
AmerUs Closed Block	(1,497)		(54)		—		—		—		(1,551)		—		—
ILICO Closed Block and life benefits	(757)		14		—		—		—		(743)		—		—
Derivative liabilities	(5)		1		—		—		—		(4)		1		—
Total Level 3 liabilities	$	(15,840)	$	(1,302)	$	—	$	21	$	—	$	(17,121)	$	1	$	—

1 Related to instruments held at end of period.

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)


	Three months ended June 30, 2020
			Total realized and unrealized gains (losses)
(In millions)	Beginning balance		Included in income		Included in OCI		Net purchases, issuances, sales and settlements		Net transfers in (out)		Ending balance		Total gains (losses) included in earnings1		Total gains (losses) included in OCI1
Assets
AFS securities
US state, municipal and political subdivisions	$	37	$	—	$	3	$	—	$	—	$	40	$	—	$	3

Corporate	1,233		—		41		(32)		(368)		874		—		41
CLO	122		—		2		39		(3)		160		—		2
ABS	917		1		9		(39)		(20)		868		—		10
CMBS	45		(5)		(1)		(4)		14		49		—		(1)
RMBS	42		—		2		1		(29)		16		—		—
Trading securities

Corporate	32		4		—		—		(30)		6		4		—
CLO	3		—		—		—		—		3		—		—
ABS	14		—		—		(14)		—		—		—		—
RMBS	70		2		—		—		(17)		55		7		—
Equity securities	7		(1)		—		—		—		6		(1)		—
Mortgage loans	26		—		—		(1)		—		25		(1)		—
Investment funds	21		(4)		—		—		—		17		(4)		—
Funds withheld at interest – embedded derivative	(374)		1,137		—		—		—		763		—		—
Short-term investments	67		—		(1)		53		(5)		114		—		—
Investments in related parties



AFS securities, ABS	1,887		4		169		1		—		2,061		—		169
Trading securities
CLO	32		5		—		—		8		45		4		—
ABS	676		74		—		74		—		824		74		—
Equity securities	49		4		—		(1)		—		52		4		—
Investment funds	979		470		—		361		—		1,810		470		—
Funds withheld at interest – embedded derivative	(15)		575		—		—		—		560		—		—

Reinsurance recoverable	2,115		(16)		—		—		—		2,099		—		—
Total Level 3 assets	$	7,985	$	2,250	$	224	$	438	$	(450)	$	10,447	$	557	$	224

Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	(9,089)	$	(1,534)	$	—	$	(517)	$	—	$	(11,140)	$	—	$	—
Universal life benefits	(1,322)		(1)		—		—		—		(1,323)		—		—
Future policy benefits
AmerUs Closed Block	(1,481)		(92)		—		—		—		(1,573)		—		—
ILICO Closed Block and life benefits	(778)		17		—		—		—		(761)		—		—
Derivative liabilities	(7)		2		—		—		—		(5)		2		—
Total Level 3 liabilities	$	(12,677)	$	(1,608)	$	—	$	(517)	$	—	$	(14,802)	$	2	$	—

1 Related to instruments held at end of period.

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)


	Six months ended June 30, 2021
			Total realized and unrealized gains (losses)
(In millions)	Beginning balance		Included in income		Included in OCI		Net purchases, issuances, sales and settlements		Net transfers in (out)		Ending balance		Total gains (losses) included in earnings1		Total gains (losses) included in OCI1
Assets
AFS securities
US state, municipal and political subdivisions	$	34	$	—	$	(1)	$	(1)	$	(32)	$	—	$	—	$	(1)
Foreign governments	2		—		—		—		—		2		—		—
Corporate	778		8		21		56		120		983		—		22
CLO	208		—		1		67		—		276		—		1
ABS	800		1		27		743		(90)		1,481		—		35
CMBS	43		—		5		3		—		51		—		4

Trading securities


CLO	4		—		—		(1)		—		3		—		—
ABS	35		—		—		—		3		38		—		—
CMBS	—		—		—		2		—		2		—		—
RMBS	47		(8)		—		—		17		56		(3)		—
Equity securities	11		11		—		—		—		22		11		—
Mortgage loans	19		—		—		(1)		—		18		—		—
Investment funds	17		16		—		224		109		366		16		—
Funds withheld at interest – embedded derivative	1,944		(571)		—		—		—		1,373		—		—
Short-term investments	2		—		—		—		(2)		—		—		—
Investments in related parties
AFS securities
Corporate	195		—		6		—		(201)		—		—		—

ABS	4,109		—		(25)		214		(61)		4,237		—		(25)
Trading securities
CLO	50		9		—		—		(29)		30		13		—
ABS	1,475		43		—		162		—		1,680		45		—
Equity securities	72		1		—		42		—		115		1		—
Investment funds	2,033		419		—		69		—		2,521		419		—
Funds withheld at interest – embedded derivative	862		(110)		—		—		—		752		—		—

Reinsurance recoverable	2,100		(154)		—		—		—		1,946		—		—
Total Level 3 assets	$	14,840	$	(335)	$	34	$	1,579	$	(166)	$	15,952	$	502	$	36

Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	(12,873)	$	(848)	$	—	$	86	$	—	$	(13,635)	$	—	$	—
Universal life benefits	(1,308)		120		—		—		—		(1,188)		—		—
Future policy benefits
AmerUs Closed Block	(1,600)		49		—		—		—		(1,551)		—		—
ILICO Closed Block and life benefits	(776)		33		—		—		—		(743)		—		—
Derivative liabilities	(4)		—		—		—		—		(4)		—		—
Total Level 3 liabilities	$	(16,561)	$	(646)	$	—	$	86	$	—	$	(17,121)	$	—	$	—

1 Related to instruments held at end of period.

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ATHENE HOLDING LTD.

Notes to Condensed Consolidated Financial Statements (Unaudited)


	Six months ended June 30, 2020
			Total realized and unrealized gains (losses)
(In millions)	Beginning balance		Included in income		Included in OCI		Net purchases, issuances, sales and settlements		Net transfers in (out)		Ending balance		Total gains (losses) included in earnings1		Total gains (losses) included in OCI1
Assets
AFS securities
US state, municipal and political subdivisions	$	40	$	—	$	—	$	—	$	—	$	40	$	—	$	—

Corporate	725		(4)		(8)		(10)		171		874		—		(8)
CLO	121		—		(4)		69		(26)		160		—		(4)
ABS	1,374		23		(102)		(246)		(181)		868		—		(101)
CMBS	46		(4)		(7)		(4)		18		49		—		(6)
RMBS	—		—		—		—		16		16		—		—
Trading securities

Corporate	—		—		—		—		6		6		—		—
CLO	6		(3)		—		—		—		3		(1)		—
ABS	16		—		—		(16)		—		—		—		—
RMBS	52		(1)		—		—		4		55		5		—
Equity securities	3		3		—		—		—		6		3		—
Mortgage loans	27		—		—		(2)		—		25		—		—
Investment funds	22		(5)		—		—		—		17		(5)		—
Funds withheld at interest – embedded derivative	801		(38)		—		—		—		763		—		—
Short-term investments	41		—		(1)		74		—		114		—		—
Investments in related parties


AFS securities, ABS	2,324		1		(53)		(49)		(162)		2,061		—		(53)
Trading securities
CLO	38		(17)		—		14		10		45		(23)		—
ABS	711		(27)		—		140		—		824		(27)		—
Equity securities	64		(6)		—		—		(6)		52		(6)		—
Investment funds	132		170		—		1,508		—		1,810		170		—
Funds withheld at interest – embedded derivative	594		(34)		—		—		—		560		—		—

Reinsurance recoverable	1,821		278		—		—		—		2,099		—		—

Form: 10-Q

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