Athene execs unbothered by regulatory, interest rate headwinds

Athene Life and Annuity is not only the leading seller of annuities. It is also the leading cedent of life insurance and annuity contracts.

The insurer, which is owned by Apollo Global Management, ceded tens of billions of dollars of life insurance and annuity reserves. Much of that is held by Athene reinsurance companies domiciled in Bermuda.

Athene executives held a conference call Wednesday with Wall Street analysts. The first question focused on regulatory efforts to beef up the requirements for reinsurance participants. In particular, a National Association of Insurance Commissioners' task force is debating a proposal to tighten asset adequacy testing for life insurers entering reinsurance agreements.

Martin Klein, executive vice president and chief financial officer of Athene, said the insurer is not greatly concerned.

"We manage our reinsurance relationships as we do everything. We're really managing to a double A standard, the U.S. standard," Klein said "What is being promulgated at the moment is particularly detailed, but we think we'd be able to comply. But I also think this is very early stages, and is likely to change quite a bit."

Klein reminded analysts that Athene does cash flow testing on each of its legal entities every quarter, which is "very unprecedented for others in the financial services insurance industry."

In November, Athene executed its first block reinsurance transaction in Japan. The agreement with FWD Life Insurance calls for reinsurance of an in-force block of whole life insurance policies.

Big quarterly earnings

Athene earnings were released earlier this month with Apollo's quarterly report.

Apollo reported strong numbers across the board. The New York City-based firm reported total revenues of $11.05 billion in Q4, compared to $4.84 billion in the year-ago quarter. Within its retirement services segment, premiums soared to $3.59 billion, up from $869 million in Q4 2022, and net investment income came in at $3.35 billion, up from $2.48 billion.

Athene executives discussed its financial performance in more detail. Athene sold more than $22 billion in annuities in the third quarter, according to LIMRA's Fact Tank. Most of those sales were of short-duration fixed annuities up to seven years.

"Looking across the annuity market, the level of guarantees and upside opportunities for the average annuities are the highest they have been in 30 years," said CEO Jim Belardi. "These external influences, combined with the strategic progress we have made towards expanding distribution and delivering a tailored product suite resulted in record annual retail volumes."

Athene experience no unusual surrender activity beyond its projections, Klein said. With annuity rates climbing higher, some annuity sellers reported higher surrenders.

'We play to win'

Grant Kvalheim serves as CEO and president of Athene USA and president of Athene Holding. He adopted a wait-and-see with regard to speculation that the Federal Reserve will slash interest rates this year. Rising rates boosted the value of many annuity products.

"I don't think [fixed-indexed annuity] sales and [registered indexed-linked annuity] sales are so much a function of rates," he explained. "I think where it would impact sales is in fixed annuities and the [multi-year guaranteed annuities]. To what extent it's really hard to say."

Kvalheim touted Athene's lean operation. At less than 2,000 employees, the insurer has fewer employees than Aviva USA had when Athene acquired the former company in 2012, he said. At the time, Aviva did $3 billion in annuities and "a small amount" of life insurance, Kvalheim recalled, as opposed to the $66 billion of annuities Athene did last year.

"We play to win. We plan to win. We execute to win," Kvalheim said. "And then we're not self satisfied. And we set higher goals the following year."

InsuranceNewsNet Senior Editor John Hilton 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.

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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.