Athene Holding Ltd. annual report, FY2023

Athene Holding Ltd. 2023 Form 10-K Summary

Business context and reporting period

Athene issues, reinsures and acquires retirement savings products, primarily fixed indexed annuities, fixed-rate annuities, pension group annuities and funding agreements. Apollo Global Management owns 100% of Athene’s common stock and manages substantially all of its investment portfolio. The filing covers the fiscal year ended December 31, 2023. The company completed its redomiciliation from Bermuda to Delaware on December 31, 2023.

Comparability with 2022 is affected by the January 1, 2022 Apollo merger, pushdown accounting and the retrospective adoption of long-duration targeted improvements (LDTI). The filing presents 2023 and 2022 as Successor periods and 2021 as a Predecessor period.

Financial performance and key metrics

Metric	2023	2022	Change
Total revenues	$28.2 billion	$7.6 billion	Up $20.6 billion
Income before taxes	$4.6 billion	$(5.7) billion	Improved $10.3 billion
Net income	$5.8 billion	$(5.0) billion	Improved $10.8 billion
Net income available to common stockholder	$4.5 billion	$(3.1) billion	Improved $7.5 billion
Spread related earnings	$3.1 billion	$2.5 billion	Up 26%
Net investment income	$11.1 billion	$7.6 billion	Up $3.6 billion
Operating cash flow	$5.0 billion	$6.3 billion	Down $1.3 billion
Total assets	$300.6 billion	$243.9 billion	Up $56.6 billion

The 2023 tax benefit was $1.2 billion, including a one-time $1.8 billion benefit from deferred tax assets associated with Bermuda’s newly enacted corporate income tax. Management stated that the benefit reduced the reported effective tax rate and may not represent recurring earnings.

Net investment spread increased to 1.93% from 1.71%. Net investment earned rate increased to 4.61% from 3.66%, while cost of funds increased to 2.71% from 1.98%. Alternative investment earned rate declined to 7.22% from 10.42%, partially offsetting stronger fixed-income performance.

Growth, balance sheet and capital

Gross organic inflows were $63.4 billion, up 33% from $47.9 billion in 2022. Total gross inflows, including $2.2 billion of inorganic inflows, were $65.6 billion.
Gross outflows were $33.9 billion, producing net flows of $31.8 billion. Outflows included a $2.7 billion reserve recapture by Venerable Insurance and Annuity Company.
Gross premiums and deposits, net of ceded business, were $66.7 billion, compared with $48.7 billion in 2022. Fixed-rate annuity sales increased materially to $34.6 billion from $15.3 billion.
Net reserve liabilities increased to $199.3 billion from $176.0 billion. Indexed annuities represented 42.4% of net reserve liabilities and fixed-rate annuities represented 26.7%.
Net invested assets increased to $217.4 billion from $196.5 billion. Approximately 96.5% of available-for-sale securities were investment grade under NAIC designations 1 or 2.
U.S. RBC ratio was 392%, Bermuda BSCR ratio was 291%, and consolidated RBC ratio was 412% at year-end. Management stated that statutory capital was significantly above regulatory action levels.
Estimated deployable capital was approximately $8.0 billion, comprising $2.6 billion of excess equity capital, $3.8 billion of estimated untapped debt capacity and $1.6 billion of available undrawn ACRA capital.

Debt, liquidity and cash flow

Total debt was $4.2 billion at year-end, with a debt-to-capital ratio of 23.3% and an adjusted debt-to-capital ratio of 14.5%. The company issued $600 million of 5.875% senior unsecured notes due 2034 during 2023.

Athene had no borrowings outstanding under its $1.25 billion credit facility or $2.6 billion liquidity facility at year-end. It also had access to $2.0 billion of committed repurchase facilities and estimated available FHLB borrowing capacity of approximately $10.2 billion, subject to collateral and other limitations. Common dividends paid to Apollo totaled $937 million in 2023.

Investing activities used $43.7 billion of cash, primarily for investment purchases, while financing activities provided $44.8 billion. Cash and cash equivalents, including restricted cash and consolidated VIE cash, increased by $6.1 billion.

Material changes, outlook and unusual items

Athene completed its first Japanese block reinsurance transaction, assuming a block of whole life policies effective October 1, 2023, with mortality risk retroceded to Swiss Re.
The company completed the redomiciliation to Delaware, making AHL a U.S.-domiciled corporation and U.S. taxpayer. Non-U.S. holders may face U.S. withholding tax on dividends, generally at 30% absent a lower treaty rate.
Interest rates, credit spreads and equity markets materially affected reported results. The S&P 500 increased 24.2% in 2023, contributing to favorable FIA hedging results, while lower Treasury rates affected market risk benefit and other fair-value measurements.
The company recognized a $555 million gain from the Venerable recapture agreement and $104 million of intent-to-sell impairments on assets transferred in connection with that recapture.
Management expects continued growth in retail, flow reinsurance, institutional and inorganic channels, with particular emphasis on international expansion and Asia. Management generally targets mid-teen returns on organic capital deployment and mid-teen or higher returns on inorganic opportunities.
The company expects Bermuda’s 15% corporate income tax, generally effective January 1, 2025 for in-scope multinational groups, to create additional tax complexity and potentially affect future earnings, although management expects deferred tax assets to mitigate much of the near-term cash tax impact.

Principal risks and contingencies

Interest-rate, credit-spread, equity-market, foreign-currency and real-estate risks can affect investment values, reserves, liquidity and earnings.
Many assets are relatively illiquid, while policyholder withdrawals, collateral calls, repurchase agreements and reinsurance obligations can create significant cash demands.
Results depend heavily on actuarial assumptions for mortality, longevity, lapses, surrender activity, rider utilization, discount rates and investment returns.
Athene has significant exposure to Apollo through investment management, affiliated investments, related-party transactions and ACRA structures. Apollo-related fees were $987 million in 2023, and total direct and indirect amounts incurred with Apollo and affiliates were approximately $1.1 billion.
At year-end, the company had $21.2 billion of investment commitments, $1.3 billion of undrawn letters of credit and a guarantee structure supporting up to $3.3 billion of deferred purchase-price obligations associated with the Atlas transaction.
Regulatory, tax, cybersecurity, litigation, counterparty, rating-agency and competitive risks could materially affect future operations. Management reported no cybersecurity risks that had materially affected the company as of February 1, 2024.
The company is subject to ordinary-course litigation and regulatory inquiries. Management did not expect current matters to have a material effect, but acknowledged that litigation outcomes are inherently uncertain.

Investor verification checklist

Reconcile statutory capital, RBC and BSCR measures with the reported capital available for deployment and assess sensitivity to market stress.
Separate recurring spread related earnings from market-sensitive gains, the Bermuda tax benefit and the Venerable recapture gain.
Review the sustainability of the 1.93% net investment spread as funding costs and policyholder crediting rates rise or fall.
Evaluate exposure to commercial real estate, mortgage loans, CLOs, private placements, related parties and Level 3 assets.
Review Apollo fee arrangements, affiliated investments, conflicts-committee approvals and the limitations on terminating ACRA-related investment management agreements.
Assess liquidity under higher surrender activity, collateral calls, repurchase maturities and restricted-asset requirements.
Confirm the future tax effects of the Delaware redomicile, Bermuda corporate income tax and Pillar Two implementation.