Athene execs seek to reassure Wall Street after profit decline

Athene Life & Annuity is proof that making Wall Street happy involves more than just strong sales data. Not even industry leading annuity sales data kept Athene from lagging earnings in the second quarter.

Athene’s profit dropped 11% to $710 million, due in part to a decline in income from alternative investments. During its earnings call last week, Apollo Global Management CEO Marc Rowan discussed the under-performance of certain equity investments in other insurance companies held by Athene.

The companies include Catalina, a property and casualty insurer that will be wound down because the business is less attractive, Rowan said.

Apollo took full control of Athene in early 2022. Since then, Athene dominated LIMRA’s quarterly annuity sales charts, rolling up $9.7 billion worth of first-quarter sales, double the sales of all but a handful of annuity sellers.

'Very energized'

Athene’s executive team met with Wall Street analysts Thursday to discuss the profit miss and the company plans moving forward. Athene Holding CEO Jim Belardi co-founded Athene in 2009 and stressed the positive potential for growth going forward.

“We continue to be fueled by the notion that we are here to help deliver investment certainty to investors preparing for and living in retirement,” he said. “We are very energized about the opportunity to help solve the retirement savings crisis, and I've never been more optimistic about a business than I am today.”

Apollo expects mid-single-digit earnings growth for Athene this year and a return to double-digit growth next year, Rowan said last week. Since then, Apollo shares lost about 18%.

Grant Kvalheim, CEO and president of Athene USA, highlighted the insurer’s continued dominance over the annuity market.

“In the second quarter, Athene, once again generated strong organic growth, reflecting continued demand for our savings products among individuals and institutions,” he said. “With organic inflows setting a new year-to-date record, we are confident in our ability to achieve $70 billion for the full year.”

Fixed indexed annuity sales of $7.5 billion for the first half are up 53% over 2023, Kvalheim said. Registered indexed-linked annuity sales are up 36% for the first half.

LIMRA ranks Athene No. 1 in fixed indexed annuity and multi-year guaranteed annuity sales, with market shares of approximately 15% and 11%, respectively, Kvalheim noted. Likewise, the insurer is the No. 1 distributor of annuities in both the independent and bank channels.

“It's important to emphasize the vast opportunity in the retail market,” Kvalheim said. “As the number one seller of fixed annuities, our overall share is just 12%.”

At the end of the first quarter, Athene launched annuity products on the Morgan Stanley platform.

“In June, Athene was the largest annuity distributor by volume on their platform,” Kvalheim said. “Adding incremental product to this platform and others is a priority. We continue to plan for several additional institutional launches in the second half of 2024.”

Interest rate changes

Several analysts questioned how Athene will fare if the Federal Reserve hikes interest rates next month as expected. Most analysts don’t expect the Fed to cut its benchmark rate more than 0.5 percentage points initially, NBC News reported.

“The short answer on sensitivity of retail sales to interest rates is we don't know. We haven't lived through this,” Kvalheim said. He added that indexed annuities are historically immune to rate changes. Of the products Athene sells, MYGAs are likely to be most affected by a rate change, Kvalheim said.

“But there is an element here where I think whatever the base level is of MYGAs will be significantly higher than in the low-rate environment,” Kvalheim explained, “because people have now invested in a tax-deferred instrument. As those policies mature, people that service those customers will be looking to either roll them into another MYGA or into an FIA product.”

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.