Newswires
Athene Holding Ltd. (AHL) is a subsidiary of Apollo Global Management, Inc. (AGM).The financial statements and exhibits included in this financial supplement should be read in conjunction with AHL's reports and other filings with the US Securities and Exchange Commission , including its reports on Form 10-K, Form 10-Q and Form 8-K. This financial supplement does not constitute an offer to sell, or the solicitation of an offer to buy, any security of AHL, and nothing in this financial supplement shall in any way be relied on in connection with investment decisions. Each recipient of the information contained in this financial supplement is responsible for making its own independent assessment of the business, financial condition, prospects, status and affairs of AHL.
Consolidated Financial Statements – Form 8-K
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Table of Contents
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FINANCIAL RESULTS
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ASSETS
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LIABILITIES
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ADDITIONAL INFORMATION
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Important Notice
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The information included in this financial supplement is unaudited and intended for informational purposes only.
AHL adopted the US GAAP accounting standard related to Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI) as of January 1, 2023 , which required AHL to apply the new standard retrospectively back to January 1, 2022 , the date of AHL's merger with AGM. The financial metrics and disclosures in this supplement have been retrospectively adjusted in accordance with the requirements of the adoption guidance of LDTI. Approximately 20% of Athene's total US GAAP liabilities as of January 1, 2022 were impacted by these changes. The new standard covers four key areas:
•In measuring the liabilities for future policy benefits, which include pension group annuities and other payout annuities, the discount rate is required to be an upper-medium grade fixed income (i.e., single A) instrument yield, which is updated at each reporting date, with the resulting change in liabilities recognized in other comprehensive income. In addition, AHL is now required to update cash flow assumptions for these liabilities at least annually, with that remeasurement recognized in net income (loss).
•Guaranteed benefit riders attached to annuity products must now be categorized as market risk benefits and remeasured at fair value each reporting period. The change in fair value of the market risk benefits related to capital market inputs is recognized in net income (loss), excluding the portion attributable to changes in instrument-specific credit risk, which is recognized in other comprehensive income.
•The amortization of deferred acquisition costs and other balances has been simplified. Balances that were historically amortized in proportion to premiums, gross profits, or gross margins are now amortized on a constant level basis over the expected term of the contracts.
•Significant additional disclosures are required quarterly for the liabilities for future policy benefits, policyholder account balances, market risk benefits, separate account liabilities and deferred acquisition costs, and will be provided in the AHL Form 10-Q for the three months ended March 31, 2023 .
Please refer to the discussion of Key Operating and Non-GAAP Measures herein for additional information on items that are excluded from AHL's non-GAAP measure of spread related earnings, which has been retrospectively adjusted in accordance with the requirements of the adoption guidance of LDTI. Please see Note 1 to the consolidated financial statements included in AHL's Form 10-K for the year ended December 31, 2022 for more information on LDTI.
Summary Impact of LDTI on Select Financial Metrics:
| 1Q'22 | 2Q'22 | 3Q'22 | 4Q'22 | 2022 | ||||||||||||||||
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Unaudited (in millions, except percentages)
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LDTI Impact | As Adjusted | LDTI Impact | As Adjusted | LDTI Impact | As Adjusted | LDTI Impact | As Adjusted |
LDTI Impact1
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As Adjusted | ||||||||||
| Net income (loss) available to AHL common shareholder | $ | 468 | $ | (1,050) | $ | 415 | $ | (1,740) | $ | 314 | $ | (622) | $ | 55 | $ | 361 | $ | 1,252 | $ | (3,051) |
| Spread related earnings | $ | 4 | $ | 674 | $ | 13 | $ | 455 | $ | 64 | $ | 640 | $ | 61 | $ | 697 | $ | 142 | $ | 2,466 |
| Net spread | 0.01 | % | 1.49 | % | 0.02 | % | 0.97 | % | 0.13 | % | 1.33 | % | 0.12 | % | 1.42 | % | 0.08 | % | 1.31 | % |
| Spread related earnings - normalized | $ | 35 | $ | 523 | $ | 39 | $ | 574 | $ | 84 | $ | 680 | $ | 62 | $ | 746 | $ | 220 | $ | 2,549 |
| Net spread - normalized | 0.08 | % | 1.16 | % | 0.08 | % | 1.23 | % | 0.17 | % | 1.41 | % | 0.12 | % | 1.52 | % | 0.12 | % | 1.35 | % |
| Adjusted AHL common shareholder's equity | $ | 594 | $ | 15,524 | $ | 1,007 | $ | 15,589 | $ | 1,380 | $ | 16,428 | $ | 1,443 | $ | 16,653 | $ | 1,443 | $ | 16,653 |
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1 AHL's 2022 LDTI impacts to spread related earnings (and net spread) consist of the following: (1) favorable change in market risk benefits of
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Please note that recast 2022 AHL financial results to reflect the adoption of LDTI will result in the recast of certain related financial metrics for AGM. Updated consolidated GAAP Net Income and Adjusted Net Income, among other metrics, for 2022 will be available with the forthcoming release of AGM's first quarter 2023 financial results on May 9, 2023 . AHL undertakes no obligation to update or correct the information in this financial supplement. AHL makes no representation or warranty, express or implied, with respect to the fairness, correctness, accuracy, reasonableness or completeness of any of the information contained in this financial supplement. AHL does not accept any liability whatsoever for any direct, indirect or consequential losses (in contract, tort or otherwise) arising from the use of this financial supplement or its contents or any reliance on the information contained herein.
This financial supplement includes certain non-GAAP measures, including net investment earnings, cost of funds, other operating expenses, spread related earnings, net investment spread, net spread, adjusted debt-to-capital ratio, net invested assets and net reserve liabilities. Management believes the use of these non-GAAP measures (which are defined and discussed in greater detail and reconciled elsewhere in this financial supplement), together with the relevant GAAP measures, provides information that may enhance an investor's understanding of AHL's results of operations and the underlying profitability drivers of AHL's business. These measures should be considered supplementary to AHL's results in accordance with US GAAP and should not be viewed as a substitute for the corresponding US GAAP measures.
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Financial Highlights
Unaudited (in millions, except percentages)
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| Quarterly Trends | Year-to-Date | |||||||||
| 1Q'22 | 2Q'22 | 3Q'22 | 4Q'22 | 2022 | ||||||
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SELECTED INCOME STATEMENT DATA
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| GAAP | ||||||||||
| Net income (loss) available to AHL common shareholder | $ | (1,050) | $ | (1,740) | $ | (622) | $ | 361 | $ | (3,051) |
| Retuon assets (ROA) | (1.72) | % | (2.92) | % | (1.07) | % | 0.60 | % | (1.27) | % |
| NON-GAAP | ||||||||||
| Spread related earnings | $ | 674 | $ | 455 | $ | 640 | $ | 697 | $ | 2,466 |
| Net spread | 1.49 | % | 0.97 | % | 1.33 | % | 1.42 | % | 1.31 | % |
| Net investment spread | 1.87 | % | 1.34 | % | 1.73 | % | 1.85 | % | 1.71 | % |
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Spread related earnings - normalized1
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$ | 523 | $ | 574 | $ | 680 | $ | 746 | $ | 2,549 |
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Net spread - normalized1
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1.16 | % | 1.23 | % | 1.41 | % | 1.52 | % | 1.35 | % |
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Net investment spread - normalized1
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1.54 | % | 1.60 | % | 1.81 | % | 1.95 | % | 1.75 | % |
| SELECTED BALANCE SHEET DATA | ||||||||||
| GAAP | ||||||||||
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Total assets
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$ | 244,673 | $ | 232,420 | $ | 234,554 | $ | 243,931 | $ | 243,931 |
| 4,150 | 4,155 | 4,062 | 4,058 | 4,058 | ||||||
| Total liabilities | 227,380 | 222,662 | 227,917 | 233,382 | 233,382 | |||||
| Debt | 3,287 | 3,279 | 3,271 | 3,658 | 3,658 | |||||
| Total AHL shareholders' equity | 13,973 | 8,697 | 5,133 | 7,158 | 7,158 | |||||
| Debt-to-capital ratio | 19.0 | % | 27.4 | % | 38.9 | % | 33.8 | % | 33.8 | % |
| NON-GAAP | ||||||||||
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Gross invested assets
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$ | 221,720 | $ | 229,545 | $ | 236,720 | $ | 238,310 | $ | 238,310 |
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Invested assets - ACRA noncontrolling interests
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(37,449) | (40,240) | (41,563) | (41,859) | (41,859) | |||||
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Net invested assets
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184,271 | 189,305 | 195,157 | 196,451 | 196,451 | |||||
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Net reserve liabilities
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169,750 | 170,703 | 173,539 | 175,970 | 175,970 | |||||
| Notional debt | 3,000 | 3,000 | 3,000 | 3,400 | 3,400 | |||||
| Adjusted AHL common shareholder's equity | 15,524 | 15,589 | 16,428 | 16,653 | 16,653 | |||||
| Adjusted debt-to-capital ratio | 14.2 | % | 14.1 | % | 13.6 | % | 14.7 | % | 14.7 | % |
| INFLOWS DATA | ||||||||||
| Gross organic inflows | $ | 11,556 | $ | 12,049 | $ | 12,955 | $ | 11,290 | $ | 47,850 |
| Gross inorganic inflows | - | - | - | - | - | |||||
| Total gross inflows | $ | 11,556 | $ | 12,049 | $ | 12,955 | $ | 11,290 | $ | 47,850 |
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Note: Please refer to Notes to the Financial Supplement section and the Non-GAAP Measure Reconciliations for discussion of non-GAAP metrics. 1 Spread related earnings - normalized, net spread - normalized and net investment spread - normalized reflect adjustments to exclude notable items and normalize alternative income to an 11% long-term return.
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Condensed Consolidated Statements of Income (Loss) (GAAP view)
Unaudited (in millions)
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| Quarterly Trends | Year-to-Date | |||||||||
| 1Q'22 | 2Q'22 | 3Q'22 | 4Q'22 | 2022 | ||||||
| REVENUES | ||||||||||
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Premiums
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$ | 2,110 | $ | 5,614 | $ | 3,045 | $ | 869 | $ | 11,638 |
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Product charges
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166 | 175 | 184 | 193 | 718 | |||||
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Net investment income
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1,683 | 1,726 | 1,843 | 2,319 | 7,571 | |||||
| Investment related gains (losses) | (4,212) | (5,751) | (2,848) | 105 | (12,706) | |||||
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Other revenues
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(3) | (9) | (26) | 10 | (28) | |||||
| Revenues of consolidated variable interest entities | ||||||||||
| Net investment income | 17 | 30 | 33 | 31 | 111 | |||||
| Investment related gains (losses) | (42) | 22 | 79 | 260 | 319 | |||||
| Total revenues | (281) | 1,807 | 2,310 | 3,787 | 7,623 | |||||
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BENEFITS AND EXPENSES
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Interest sensitive contract benefits
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(99) | (653) | 171 | 1,119 | 538 | |||||
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Future policy and other policy benefits
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2,184 | 5,776 | 3,270 | 1,235 | 12,465 | |||||
| Market risk benefits remeasurement (gains) losses | (622) | (609) | (458) | 32 | (1,657) | |||||
| Amortization of deferred acquisition costs, deferred sales inducements and value of business acquired | 98 | 108 | 112 | 126 | 444 | |||||
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Policy and other operating expenses
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338 | 357 | 388 | 412 | 1,495 | |||||
| Total benefits and expenses | 1,899 | 4,979 | 3,483 | 2,924 | 13,285 | |||||
| Income (loss) before income taxes | (2,180) | (3,172) | (1,173) | 863 | (5,662) | |||||
| Income tax expense (benefit) | (284) | (378) | (121) | 137 | (646) | |||||
| Net income (loss) | (1,896) | (2,794) | (1,052) | 726 | (5,016) | |||||
| Less: Net income (loss) attributable to noncontrolling interests | (881) | (1,089) | (465) | 329 | (2,106) | |||||
| Net income (loss) attributable to |
(1,015) | (1,705) | (587) | 397 | (2,910) | |||||
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Less: Preferred stock dividends
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35 | 35 | 35 | 36 | 141 | |||||
| Net income (loss) available to |
$ | (1,050) | $ | (1,740) | $ | (622) | $ | 361 | $ | (3,051) |
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Spread Related Earnings (Management view)
Unaudited (in millions, except percentages)
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| Quarterly Trends | Year-to-Date | |||||||||
| 1Q'22 | 2Q'22 | 3Q'22 | 4Q'22 | 2022 | ||||||
| SPREAD RELATED EARNINGS | ||||||||||
| Fixed income and other investment income | $ | 1,207 | $ | 1,302 | $ | 1,471 | $ | 1,727 | $ | 5,707 |
| Alternative investment income | 448 | 186 | 250 | 322 | 1,206 | |||||
| Net investment earnings | 1,655 | 1,488 | 1,721 | 2,049 | 6,913 | |||||
| Strategic capital management fees | 12 | 13 | 14 | 14 | 53 | |||||
| Cost of funds | (822) | (873) | (902) | (1,158) | (3,755) | |||||
| Net investment spread | 845 | 628 | 833 | 905 | 3,211 | |||||
| Other operating expenses | (109) | (109) | (120) | (128) | (466) | |||||
| Interest and other financing costs | (62) | (64) | (73) | (80) | (279) | |||||
| Spread related earnings | $ | 674 | $ | 455 | $ | 640 | $ | 697 | $ | 2,466 |
| Fixed income and other investment income | 2.83 | % | 2.97 | % | 3.27 | % | 3.76 | % | 3.22 | % |
| Alternative investment income | 16.61 | % | 6.38 | % | 8.26 | % | 10.55 | % | 10.42 | % |
| Net investment earnings | 3.65 | % | 3.19 | % | 3.58 | % | 4.19 | % | 3.66 | % |
| Strategic capital management fees | 0.03 | % | 0.03 | % | 0.03 | % | 0.03 | % | 0.03 | % |
| Cost of funds | (1.81) | % | (1.88) | % | (1.88) | % | (2.37) | % | (1.98) | % |
| Net investment spread | 1.87 | % | 1.34 | % | 1.73 | % | 1.85 | % | 1.71 | % |
| Other operating expenses | (0.24) | % | (0.23) | % | (0.25) | % | (0.26) | % | (0.25) | % |
| Interest and other financing costs | (0.14) | % | (0.14) | % | (0.15) | % | (0.17) | % | (0.15) | % |
| Spread related earnings | 1.49 | % | 0.97 | % | 1.33 | % | 1.42 | % | 1.31 | % |
| Average net invested assets - fixed income | $ | 170,616 | $ | 175,115 | $ | 180,143 | $ | 183,597 | $ | 177,178 |
| Average net invested assets - alternatives | 10,782 | 11,673 | 12,088 | 12,207 | 11,564 | |||||
| Average net invested assets | $ | 181,398 | $ | 186,788 | $ | 192,231 | $ | 195,804 | $ | 188,742 |
| Please refer to Notes to the Financial Supplement section and the Non-GAAP Measure Reconciliations for discussion on spread related earnings. |
6
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Reconciliation of Earnings Measures
Unaudited (in millions)
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| Quarterly Trends | Year-to-Date | |||||||||
| 1Q'22 | 2Q'22 | 3Q'22 | 4Q'22 | 2022 | ||||||
| RECONCILIATION OF NET INCOME (LOSS) AVAILABLE TO ATHENE HOLDING LTD. COMMON SHAREHOLDER TO SPREAD RELATED EARNINGS | ||||||||||
| Net income (loss) available to |
$ | (1,050) | $ | (1,740) | $ | (622) | $ | 361 | $ | (3,051) |
| Preferred stock dividends | 35 | 35 | 35 | 36 | 141 | |||||
| Net income (loss) attributable to noncontrolling interests | (881) | (1,089) | (465) | 329 | (2,106) | |||||
| Net income (loss) | (1,896) | (2,794) | (1,052) | 726 | (5,016) | |||||
| Income tax expense (benefit) | (284) | (378) | (121) | 137 | (646) | |||||
| Income (loss) before income taxes | (2,180) | (3,172) | (1,173) | 863 | (5,662) | |||||
| Realized losses on sale of AFS securities | (64) | (39) | (41) | (32) | (176) | |||||
| Unrealized, allowances and other investment losses | (879) | (1,195) | (671) | (442) | (3,187) | |||||
| Change in fair value of reinsurance assets | (1,657) | (1,612) | (1,146) | 331 | (4,084) | |||||
| Offsets to investment gains (losses) | (3) | 5 | 5 | 6 | 13 | |||||
| Investment gains (losses), net of offsets | (2,603) | (2,841) | (1,853) | (137) | (7,434) | |||||
| Change in fair values of derivatives and embedded derivatives - FIAs | (37) | (367) | 90 | (24) | (338) | |||||
| Non-operating change in funding agreements | - | - | (80) | (26) | (106) | |||||
| Change in fair value of market risk benefits | 688 | 665 | 511 | 30 | 1,894 | |||||
| Non-operating change in liability for future policy benefits | (2) | (8) | (3) | (4) | (17) | |||||
| Non-operating change in insurance liabilities and related derivatives | 649 | 290 | 518 | (24) | 1,433 | |||||
| Integration, restructuring and other non-operating expenses | (34) | (33) | (37) | (29) | (133) | |||||
| Stock compensation expense | (12) | (13) | (15) | (16) | (56) | |||||
| Preferred stock dividends | 35 | 35 | 35 | 36 | 141 | |||||
| Noncontrolling interests - pre-tax income (loss) and VIE adjustments | (889) | (1,065) | (461) | 336 | (2,079) | |||||
| Less: Total adjustments to income (loss) before income taxes | (2,854) | (3,627) | (1,813) | 166 | (8,128) | |||||
| Spread related earnings | $ | 674 | $ | 455 | $ | 640 | $ | 697 | $ | 2,466 |
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Note: Please refer to Notes to the Financial Supplement section for discussion on spread related earnings.
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Net Flows & Outflows Attributable to Athene by Type
Unaudited (in millions, except percentages)
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| Quarterly Trends | Year-to-Date | |||||||||
| 1Q'22 | 2Q'22 | 3Q'22 | 4Q'22 | 2022 | ||||||
| NET FLOWS | ||||||||||
| Retail | $ | 2,865 | $ | 3,748 | $ | 6,132 | $ | 7,662 | $ | 20,407 |
| Flow reinsurance | 1,001 | 1,038 | 2,291 | 1,856 | 6,186 | |||||
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Funding agreements1
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5,696 | 1,755 | 1,588 | 1,000 | 10,039 | |||||
| Pension group annuities | 1,994 | 5,508 | 2,944 | 772 | 11,218 | |||||
| Gross organic inflows | 11,556 | 12,049 | 12,955 | 11,290 | 47,850 | |||||
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Gross inorganic inflows2
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- | - | - | - | - | |||||
| Total gross inflows | 11,556 | 12,049 | 12,955 | 11,290 | 47,850 | |||||
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Gross outflows3
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(4,883) | (4,925) | (7,000) | (11,064) | (27,872) | |||||
| Net flows | $ | 6,673 | $ | 7,124 | $ | 5,955 | $ | 226 | $ | 19,978 |
| Inflows attributable to Athene | $ | 9,333 | $ | 8,889 | $ | 11,000 | $ | 10,022 | $ | 39,244 |
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Inflows attributable to ADIP4
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2,223 | 3,160 | 1,955 | 1,268 | 8,606 | |||||
| Total gross inflows | $ | 11,556 | $ | 12,049 | $ | 12,955 | $ | 11,290 | $ | 47,850 |
| Outflows attributable to Athene | $ | (4,072) | $ | (4,062) | $ | (5,803) | $ | (9,787) | $ | (23,724) |
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Outflows attributable to ADIP4
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(811) | (863) | (1,197) | (1,277) | (4,148) | |||||
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Total gross outflows3
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$ | (4,883) | $ | (4,925) | $ | (7,000) | $ | (11,064) | $ | (27,872) |
| OUTFLOWS ATTRIBUTABLE TO ATHENE BY TYPE | ||||||||||
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Maturity-driven, contractual based outflows5
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$ | (1,100) | $ | (757) | $ | (2,398) | $ | (653) | $ | (4,908) |
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Policyholder-driven withdrawals6
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(2,972) | (3,305) | (3,405) | (4,272) | (13,954) | |||||
| Core outflows | (4,072) | (4,062) | (5,803) | (4,925) | (18,862) | |||||
| Strategic reinsurance transaction | - | - | - | (4,862) | (4,862) | |||||
| Outflows attributable to Athene | $ | (4,072) | $ | (4,062) | $ | (5,803) | $ | (9,787) | $ | (23,724) |
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Annualized rate7
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Maturity-driven, contractual based outflows5
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(2.4) | % | (1.6) | % | (5.0) | % | (1.4) | % | (2.6) | % |
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Policyholder-driven withdrawals6
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(6.6) | % | (7.1) | % | (7.1) | % | (8.7) | % | (7.4) | % |
| Core outflows | (9.0) | % | (8.7) | % | (12.1) | % | (10.1) | % | (10.0) | % |
| Strategic reinsurance transaction | - | % | - | % | - | % | (9.9) | % | (2.6) | % |
| Outflows attributable to Athene | (9.0) | % | (8.7) | % | (12.1) | % | (20.0) | % | (12.6) | % |
| 1 Funding agreements are comprised of funding agreements issued under our funding agreement backed notes (FABN) and funding agreement backed repurchase agreements (FABR) programs, funding agreements issued to the |
8
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Condensed Consolidated Balance Sheet
Unaudited (in millions)
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ASSETS
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Investments
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Available-for-sale securities, at fair value
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$ | 102,404 |
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Trading securities, at fair value
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1,595 | |
| Equity securities | 1,487 | |
| Mortgage loans, at fair value | 27,454 | |
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Investment funds
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79 | |
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Policy loans
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347 | |
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Funds withheld at interest
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32,880 | |
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Derivative assets
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3,309 | |
| Short-term investments | 2,160 | |
| Other investments | 773 | |
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Total investments
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172,488 | |
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Cash and cash equivalents
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7,779 | |
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Restricted cash
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628 | |
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Investments in related parties
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Available-for-sale securities, at fair value
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9,821 | |
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Trading securities, at fair value
|
878 | |
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Equity securities, at fair value
|
279 | |
| Mortgage loans, at fair value | 1,302 | |
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Investment funds
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1,569 | |
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Funds withheld at interest
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9,808 | |
| Other investments | 303 | |
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Accrued investment income
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1,328 | |
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Reinsurance recoverable
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4,358 | |
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Deferred acquisition costs, deferred sales inducements and value of business acquired
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4,466 | |
| 4,058 | ||
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Other assets
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8,693 | |
| Assets of consolidated variable interest entities | ||
| Investments | ||
| Trading securities, at fair value | 1,063 | |
| Mortgage loans, at fair value | 2,055 | |
| Investment funds, at fair value | 12,480 | |
| Other investments, at fair value | 101 | |
| Cash and cash equivalents | 362 | |
| Other assets | 112 | |
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Total assets
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$ | 243,931 |
9
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Condensed Consolidated Balance Sheet, continued
Unaudited (in millions)
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LIABILITIES
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Interest sensitive contract liabilities
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$ | 173,616 |
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Future policy benefits
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42,110 | |
| Market risk benefits | 2,970 | |
| Debt | 3,658 | |
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Derivative liabilities
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1,646 | |
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Payables for collateral on derivatives and securities to repurchase
|
6,707 | |
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Other liabilities
|
1,860 | |
| Liabilities of consolidated variable interest entities | 815 | |
| Total liabilities | 233,382 | |
| EQUITY | ||
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Preferred stock
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- | |
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Common stock
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- | |
| Additional paid-in capital | 18,119 | |
| Retained deficit | (3,640) | |
| Accumulated other comprehensive loss | (7,321) | |
| 7,158 | ||
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Noncontrolling interests
|
3,391 | |
| Total equity | 10,549 | |
| Total liabilities and equity | $ | 243,931 |
10
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Net Invested Assets (Management view) & Agency Ratings
Unaudited (in millions, except percentages)
|
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Invested Asset Value1
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Percent of Total | |||
| NET INVESTED ASSETS | ||||
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Corporate
|
$ | 80,800 | 41.1 | % |
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CLO
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19,881 | 10.1 | % | |
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Credit
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100,681 | 51.2 | % | |
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CML
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23,750 | 12.1 | % | |
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RML
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11,147 | 5.7 | % | |
| RMBS | 7,363 | 3.7 | % | |
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CMBS
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4,495 | 2.3 | % | |
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Real estate
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46,755 | 23.8 | % | |
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ABS
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20,680 | 10.5 | % | |
|
Alternative investments
|
12,079 | 6.1 | % | |
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State, municipal, political subdivisions and foreign government
|
2,715 | 1.4 | % | |
|
Equity securities
|
1,737 | 0.9 | % | |
|
Short-term investments
|
1,930 | 1.0 | % | |
|
|
2,691 | 1.4 | % | |
|
Other investments
|
41,832 | 21.3 | % | |
| Cash and equivalents | 5,481 | 2.8 | % | |
| Policy loans and other | 1,702 | 0.9 | % | |
| Net invested assets | $ | 196,451 | 100.0 | % |
| Fitch | ||||
| FINANCIAL STRENGTH RATINGS | ||||
|
|
A | A+ | A+ | A1 |
|
|
A | A+ | A+ | A1 |
|
|
A | A+ | A+ | A1 |
| A | NR | NR | NR | |
| A | A+ | A+ | A1 | |
| A | A+ | A+ | A1 | |
| A | A+ | A+ | A1 | |
| Athene Co-Invest Reinsurance Affiliate 1A Ltd. and |
A | A+ | A+ | A1 |
| A | A+ | A+ | A1 | |
|
CREDIT RATINGS
|
||||
| bbb+ | A- | A- | NR | |
| Senior notes | bbb+ | A- | BBB+ | Baa1 |
|
1 Please refer to Notes to the Financial Supplement section for discussion on net invested assets including net alternative investments and Non-GAAP Measure Reconciliations for the reconciliation of investments, including related parties, to net invested assets. Net invested assets includes our economic ownership of ACRA investments but does not include the investments associated with the noncontrolling interest.
|
11
|
Net Alternative Investments (Management view)
Unaudited (in millions, except percentages)
|
||||
|
Invested Asset Value1
|
Percent of Total | |||
| NET ALTERNATIVE INVESTMENTS | ||||
| Strategic origination platforms | ||||
| Wheels Donlen | $ | 662 | 5.5 | % |
| 624 | 5.2 | % | ||
| NNN Lease | 579 | 4.8 | % | |
| 604 | 5.0 | % | ||
| Foundation Home Loans | 302 | 2.5 | % | |
| PK AirFinance | 251 | 2.1 | % | |
| Aqua Finance | 267 | 2.2 | % | |
| Other | 308 | 2.5 | % | |
| Total strategic origination platforms | 3,597 | 29.8 | % | |
| Strategic retirement services platforms | ||||
| 1,012 | 8.4 | % | ||
| Catalina | 417 | 3.4 | % | |
| FWD | 400 | 3.3 | % | |
| Challenger | 294 | 2.4 | % | |
| Venerable | 241 | 2.0 | % | |
| Other | 20 | 0.2 | % | |
| Total strategic retirement services platforms | 2,384 | 19.7 | % | |
| Apollo and other fund investments | ||||
| Equity | ||||
| Real estate | 1,212 | 10.0 | % | |
| Traditional private equity | 947 | 7.8 | % | |
| Other | 189 | 1.6 | % | |
| Total equity | 2,348 | 19.4 | % | |
| Hybrid | ||||
| Real estate | 1,289 | 10.7 | % | |
| Other | 1,315 | 10.9 | % | |
| Total hybrid | 2,604 | 21.6 | % | |
| Yield | 885 | 7.3 | % | |
| Total Apollo and other fund investments | 5,837 | 48.3 | % | |
| Other | 261 | 2.2 | % | |
|
Net alternative investments2
|
$ | 12,079 | 100.0 | % |
| 1 Please refer to Notes to the Financial Supplement for discussion on net invested assets including net alternative investments and Non-GAAP Measure Reconciliations for the reconciliations of investments, including related parties, to net invested assets and investment funds, including related parties and VIEs, to net alternative investments. Net invested assets includes our economic ownership of ACRA investments but does not include the investments associated with the noncontrolling interest. 2 Net alternative investments does not correspond to total investment funds, including related parties and VIEs, on our condensed consolidated balance sheets. Net alternative investments adjusts the GAAP presentation to include CLO and ABS equity tranche securities that are included in trading securities in the GAAP view, a nonredeemable preferred stock viewed as an alternative investment for management view but included in equity securities for GAAP view, investment funds included in our funds withheld at interest and modco reinsurance portfolios, royalties and other investments. |
12
|
Credit Quality of Securities
Unaudited (in millions, except percentages)
|
||||
|
CREDIT QUALITY OF AFS SECURITIES (GAAP VIEW)
|
Fair Value | Percent of Total | ||
|
NAIC designation
|
||||
| 1 |
$ | 58,470 | 52.1 | % |
| 2 A-C | 49,067 | 43.7 | % | |
|
Total investment grade
|
107,537 | 95.8 | % | |
| 3 A-C | 3,302 | 3.0 | % | |
| 4 A-C | 925 | 0.8 | % | |
| 5 A-C | 190 | 0.2 | % | |
| 6 | 271 | 0.2 | % | |
|
Total below investment grade
|
4,688 | 4.2 | % | |
|
Total AFS securities including related parties
|
$ | 112,225 | 100.0 | % |
|
NRSRO designation
|
||||
|
|
$ | 51,926 | 46.3 | % |
|
BBB
|
44,783 | 39.9 | % | |
|
Non-rated1
|
8,985 | 8.0 | % | |
|
Total investment grade2
|
105,694 | 94.2 | % | |
|
BB
|
3,176 | 2.8 | % | |
|
B
|
749 | 0.7 | % | |
|
CCC
|
1,055 | 0.9 | % | |
|
CC and lower
|
584 | 0.5 | % | |
|
Non-rated1
|
967 | 0.9 | % | |
|
Total below investment grade
|
6,531 | 5.8 | % | |
|
Total AFS securities including related parties
|
$ | 112,225 | 100.0 | % |
|
1 Securities denoted as non-rated by the NRSRO were classified as investment or non-investment grade according to the security's respective NAIC designation. With respect to modeled LBaSS, the NAIC designation methodology differs in significant respects from the NRSRO ratings methodology. 2 We view the NAIC designation methodology as the most appropriate way to view our AFS portfolio when evaluating credit risk since a large portion of our holdings were purchased at a significant discount to par. With respect to loan-backed and structured securities, the NAIC designation methodology differs in significant respects from the NRSRO rating methodology. NRSRO ratings methodology is focused on the likelihood of recovery of all contractual payments, including principal at par regardless of entry price, while the NAIC designation methodology considers our investment at amortized cost, and the likelihood of recovery of that book value as opposed to the likelihood of the recovery of all contractual payments.
|
13
|
Credit Quality of Net Invested Assets (Management view)
Unaudited (In millions, except percentages)
|
|||||||||
|
Invested Asset Value1
|
% of Total |
Invested Asset Value1
|
% of Total | ||||||
|
CREDIT QUALITY OF NET INVESTED ASSETS
|
CREDIT QUALITY OF NET INVESTED ASSETS
|
||||||||
|
NAIC designation
|
NRSRO designation
|
||||||||
| 1 |
$ | 71,471 | 50.8 | % |
|
$ | 60,869 | 43.3 | % |
| 2 A-C | 62,115 | 44.2 | % |
BBB
|
56,029 | 39.9 | % | ||
| Non-rated | 506 | 0.4 | % |
Non-rated2
|
14,686 | 10.5 | % | ||
|
Total investment grade
|
134,092 | 95.4 | % |
Total investment grade
|
131,584 | 93.7 | % | ||
| 3 A-C | 4,471 | 3.2 | % |
BB
|
4,217 | 3.0 | % | ||
| 4 A-C | 1,259 | 0.9 | % |
B
|
990 | 0.7 | % | ||
| 5 A-C | 407 | 0.3 | % |
CCC
|
1,431 | 1.0 | % | ||
| 6 | 326 | 0.2 | % |
CC and lower
|
906 | 0.6 | % | ||
| Non-rated | - | - | % |
Non-rated2
|
1,427 | 1.0 | % | ||
|
Total below investment grade
|
6,463 | 4.6 | % |
Total below investment grade
|
8,971 | 6.3 | % | ||
|
Total NAIC designated assets3
|
140,555 | 100.0 | % |
Total NRSRO designated assets3
|
140,555 | 100.0 | % | ||
|
Assets without NAIC designation
|
Assets without NRSRO designation
|
||||||||
|
Commercial mortgage loans
|
Commercial mortgage loans
|
||||||||
|
CM1
|
3,998 | 16.8 | % |
CM1
|
3,998 | 16.8 | % | ||
|
CM2
|
14,008 | 59.0 | % |
CM2
|
14,008 | 59.0 | % | ||
|
CM3
|
5,216 | 22.0 | % |
CM3
|
5,216 | 22.0 | % | ||
|
CM4
|
447 | 1.9 | % |
CM4
|
447 | 1.9 | % | ||
|
CM5
|
81 | 0.3 | % |
CM5
|
81 | 0.3 | % | ||
|
CM6
|
- | - | % |
CM6
|
- | - | % | ||
|
CM7
|
- | - | % |
CM7
|
- | - | % | ||
|
Total CMLs
|
23,750 | 100.0 | % |
Total CMLs
|
23,750 | 100.0 | % | ||
|
Residential mortgage loans
|
Residential mortgage loans
|
||||||||
|
In good standing
|
10,636 | 95.4 | % |
In good standing
|
10,636 | 95.4 | % | ||
|
90 days late
|
422 | 3.8 | % |
90 days late
|
422 | 3.8 | % | ||
|
In foreclosure
|
89 | 0.8 | % |
In foreclosure
|
89 | 0.8 | % | ||
|
Total RMLs
|
11,147 | 100.0 | % |
Total RMLs
|
11,147 | 100.0 | % | ||
|
Alternative investments
|
12,079 |
Alternative investments
|
12,079 | ||||||
| Cash and equivalents | 5,481 | Cash and equivalents | 5,481 | ||||||
|
Equity securities
|
1,737 |
Equity securities
|
1,737 | ||||||
|
Other4
|
1,702 |
Other4
|
1,702 | ||||||
|
Net invested assets
|
$ | 196,451 |
Net invested assets
|
$ | 196,451 | ||||
|
1 Please refer to Notes to the Financial Supplement section for discussion on net invested assets and Non-GAAP Measure Reconciliations section for the reconciliation of total investments, including related parties, to net invested assets. 2 Securities denoted as non-rated by the NRSRO were classified as investment or non-investment grade according to the security's respective NAIC designation. With respect to modeled LBaSS, the NAIC designation methodology differs in significant respects from the NRSRO ratings methodology. 3 NAIC and NRSRO designations include corporates, CLO, RMBS, CMBS, ABS, state, municipal, political subdivisions and foreign government securities, short-term investments and
|
14
|
Credit Quality of Net Invested Assets - RMBS, CLOs, ABS (Management view)
Unaudited (In millions, except percentages)
|
|||||||||
|
Invested Asset Value1
|
% of Total |
Invested Asset Value1
|
% of Total | ||||||
| CREDIT QUALITY OF RMBS - NAIC DESIGNATION | CREDIT QUALITY OF RMBS - NRSRO DESIGNATION | ||||||||
| 1 |
$ | 6,125 | 83.2 | % | $ | 2,026 | 27.5 | % | |
| 2 A-C | 347 | 4.7 | % | BBB | 735 | 10.0 | % | ||
| Non-rated | - | - | % |
Non-rated2
|
1,647 | 22.4 | % | ||
| Total investment grade | 6,472 | 87.9 | % | Total investment grade | 4,408 | 59.9 | % | ||
| 3 A-C | 455 | 6.2 | % | BB | 140 | 1.9 | % | ||
| 4 A-C | 309 | 4.2 | % | B | 141 | 1.9 | % | ||
| 5 A-C | 102 | 1.4 | % | CCC | 1,333 | 18.1 | % | ||
| 6 | 25 | 0.3 | % | CC and lower | 834 | 11.3 | % | ||
| Non-rated | - | - | % |
Non-rated2
|
507 | 6.9 | % | ||
| Total below investment grade | 891 | 12.1 | % | Total below investment grade | 2,955 | 40.1 | % | ||
| RMBS net invested assets | $ | 7,363 | 100.0 | % | RMBS net invested assets | $ | 7,363 | 100.0 | % |
| CREDIT QUALITY OF CLOs - NAIC DESIGNATION | CREDIT QUALITY OF CLOs - NRSRO DESIGNATION | ||||||||
| 1 |
$ | 12,455 | 62.7 | % | $ | 12,455 | 62.7 | % | |
| 2 A-C | 7,278 | 36.6 | % | BBB | 7,278 | 36.6 | % | ||
| Non-rated | - | - | % |
Non-rated2
|
- | - | % | ||
| Total investment grade | 19,733 | 99.3 | % | Total investment grade | 19,733 | 99.3 | % | ||
| 3 A-C | 128 | 0.6 | % | BB | 128 | 0.6 | % | ||
| 4 A-C | 20 | 0.1 | % | B | 20 | 0.1 | % | ||
| 5 A-C | - | - | % | CCC | - | - | % | ||
| 6 | - | - | % | CC and lower | - | - | % | ||
| Non-rated | - | - | % |
Non-rated2
|
- | - | % | ||
| Total below investment grade | 148 | 0.7 | % | Total below investment grade | 148 | 0.7 | % | ||
| CLO net invested assets | $ | 19,881 | 100.0 | % | CLO net invested assets | $ | 19,881 | 100.0 | % |
| CREDIT QUALITY OF ABS - NAIC DESIGNATION | CREDIT QUALITY OF ABS - NRSRO DESIGNATION | ||||||||
| 1 |
$ | 12,261 | 59.3 | % | $ | 11,780 | 57.0 | % | |
| 2 A-C | 7,301 | 35.3 | % | BBB | 7,248 | 35.0 | % | ||
| Non-rated | - | - | % |
Non-rated2
|
535 | 2.6 | % | ||
| Total investment grade | 19,562 | 94.6 | % | Total investment grade | 19,563 | 94.6 | % | ||
| 3 A-C | 710 | 3.4 | % | BB | 709 | 3.4 | % | ||
| 4 A-C | 229 | 1.1 | % | B | 229 | 1.1 | % | ||
| 5 A-C | 157 | 0.8 | % | CCC | 33 | 0.2 | % | ||
| 6 | 22 | 0.1 | % | CC and lower | 22 | 0.1 | % | ||
| Non-rated | - | - | % |
Non-rated2
|
124 | 0.6 | % | ||
| Total below investment grade | 1,118 | 5.4 | % | Total below investment grade | 1,117 | 5.4 | % | ||
| ABS net invested assets | $ | 20,680 | 100.0 | % | ABS net invested assets | $ | 20,680 | 100.0 | % |
|
1 Please refer to Notes to the Financial Supplement section for discussion on net invested assets and Non-GAAP Measure Reconciliations section for the reconciliation of total investments, including related parties, to net invested assets. 2 Securities denoted as non-rated by the NRSRO were classified as investment or non-investment grade according to the security's respective NAIC designation. With respect to modeled LBaSS, the NAIC designation methodology differs in significant respects from the NRSRO ratings methodology.
|
15
|
Net Reserve Liabilities & Rollforwards
Unaudited (in millions, except percentages)
|
||||
| Dollars | Percent of Total | |||
| NET RESERVE LIABILITIES | ||||
| Indexed annuities | $ | 85,163 | 48.4 | % |
|
Fixed rate annuities
|
39,553 | 22.5 | % | |
|
Total deferred annuities
|
124,716 | 70.9 | % | |
| Pension group annuities | 20,614 | 11.7 | % | |
|
Payout annuities
|
7,589 | 4.3 | % | |
|
Funding agreements1
|
21,538 | 12.2 | % | |
|
Life and other
|
1,513 | 0.9 | % | |
|
Total net reserve liabilities
|
$ | 175,970 | 100.0 | % |
| Quarterly Trends | Year-to-Date | |||||||||
| 1Q'22 | 2Q'22 | 3Q'22 | 4Q'22 | 2022 | ||||||
| NET RESERVE LIABILITY ROLLFORWARD | ||||||||||
| Net reserve liabilities - beginning | $ | 168,323 | $ | 169,750 | $ | 170,703 | $ | 173,539 | $ | 168,323 |
|
Gross inflows2
|
11,817 | 12,214 | 13,161 | 11,511 | 48,703 | |||||
| Inflows attributable to ACRA noncontrolling interest | (2,271) | (3,184) | (1,993) | (1,305) | (8,753) | |||||
| Net inflows | 9,546 | 9,030 | 11,168 | 10,206 | 39,950 | |||||
|
Net withdrawals
|
(4,072) | (4,062) | (5,803) | (4,925) | (18,862) | |||||
| Strategic reinsurance outflows | - | - | - | (4,862) | (4,862) | |||||
|
Other reserve changes
|
(4,047) | (4,015) | (2,529) | 2,012 | (8,579) | |||||
|
Net reserve liabilities - ending
|
$ | 169,750 | $ | 170,703 | $ | 173,539 | $ | 175,970 | $ | 175,970 |
| ACRA NONCONTROLLING INTEREST RESERVE LIABILITY ROLLFORWARD | ||||||||||
| Reserve liabilities - beginning | $ | 33,537 | $ | 34,036 | $ | 35,522 | $ | 35,463 | $ | 33,537 |
| Inflows | 2,271 | 3,184 | 1,993 | 1,305 | 8,753 | |||||
|
Withdrawals
|
(811) | (863) | (1,197) | (1,277) | (4,148) | |||||
|
Other reserve changes
|
(961) | (835) | (855) | 490 | (2,161) | |||||
|
Reserve liabilities - ending
|
$ | 34,036 | $ | 35,522 | $ | 35,463 | $ | 35,981 | $ | 35,981 |
| Note: Please refer to Notes to the Financial Supplement section and the Non-GAAP Measure Reconciliations for discussion on net reserve liabilities. Net reserve liabilities include our economic ownership of ACRA reserve liabilities but do not include the reserve liabilities associated with the noncontrolling interest. 1 Funding agreements are comprised of funding agreements issued under our FABN and FABR programs, funding agreements issued to the FHLB and long-term repurchase agreements. 2 Gross inflows equal inflows from our retail, flow reinsurance and institutional channels as well as inflows for life and products other than deferred annuities or our institutional products, renewal inflows on older blocks of business, annuitizations and foreign currency translation adjustments on large transactions between the transaction date and the translation period. Gross inflows include all inflows sourced by Athene, including all of the inflows reinsured to ACRA. |
16
|
Deferred Annuity Liability Characteristics
Unaudited (in millions, except percentages)
|
||||||||
| Surrender charge (gross) | Percent of total | Surrender charge (net of MVA) | Percent of total | |||||
|
SURRENDER CHARGE PERCENTAGES ON DEFERRED ANNUITIES NET ACCOUNT VALUE
|
||||||||
|
No Surrender Charge
|
$ | 28,643 | 23.8 | % | $ | 28,643 | 23.8 | % |
|
0.0% <>2.0%
|
1,765 | 1.5 | % | 1,404 | 1.2 | % | ||
|
2.0% <>4.0%
|
5,906 | 4.9 | % | 3,780 | 3.1 | % | ||
|
4.0% <>6.0%
|
12,483 | 10.3 | % | 9,236 | 7.7 | % | ||
| 6.0% or greater | 71,696 | 59.5 | % | 77,430 | 64.2 | % | ||
| $ | 120,493 | 100.0 | % | $ | 120,493 | 100.0 | % | |
| Surrender charge (gross) | MVA benefit | Surrender charge (net) | ||||||
|
Aggregate surrender charge protection
|
5.8 | % | 2.0 | % | 7.8 | % |
| Deferred annuities | Percent of total | Average surrender charge (gross) | ||||
|
YEARS OF SURRENDER CHARGE REMAINING ON DEFERRED ANNUITIES NET ACCOUNT VALUE
|
||||||
|
No Surrender Charge
|
$ | 28,643 | 23.8 | % | - | % |
|
Less than 2
|
20,600 | 17.1 | % | 5.2 | % | |
|
2 to less than 4
|
20,947 | 17.4 | % | 6.7 | % | |
|
4 to less than 6
|
22,700 | 18.8 | % | 7.5 | % | |
|
6 to less than 8
|
12,486 | 10.4 | % | 8.8 | % | |
|
8 to less than 10
|
11,687 | 9.7 | % | 9.9 | % | |
|
10 or greater
|
3,430 | 2.8 | % | 15.3 | % | |
| $ | 120,493 | 100.0 | % |
17
|
Notes to the Financial Supplement
|
KEY OPERATING AND NON-GAAP MEASURES
In addition to our results presented in accordance with accounting principles generally accepted in the United States of America (US GAAP), we present certain financial information that includes non-GAAP measures. Management believes the use of these non-GAAP measures, together with the relevant US GAAP measures, provides information that may enhance an investor's understanding of our results of operations and the underlying profitability drivers of our business. The majority of these non-GAAP measures are intended to remove from the results of operations the impact of market volatility (other than with respect to alternative investments) as well as integration, restructuring and certain other expenses which are not part of our underlying profitability drivers, as such items fluctuate from period to period in a manner inconsistent with these drivers. These measures should be considered supplementary to our results in accordance with US GAAP and should not be viewed as a substitute for the corresponding US GAAP measures.
SPREAD RELATED EARNINGS (SRE) AND NET SPREAD
Spread related earnings is a pre-tax non-GAAP measure used to evaluate our financial performance excluding market volatility and expenses related to integration, restructuring, stock compensation and other expenses. Our spread related earnings equals net income (loss) available to AHL common shareholder adjusted to eliminate the impact of the following:
•Investment Gains (Losses), Net of Offsets-Consists of the realized gains and losses on the sale of AFS securities, the change in fair value of reinsurance assets, unrealized gains and losses, changes in the credit loss allowance, and other investment gains and losses. Unrealized, allowances and other investment gains and losses are comprised of the fair value adjustments of trading securities (other than CLOs) and mortgage loans, investments held under the fair value option and our investment in Apollo, derivative gains and losses not hedging FIA index credits, and the change in credit loss allowances recognized in operations net of the change in AmerUs Closed Block fair value reserve related to the corresponding change in fair value of investments. Investment gains and losses are net of offsets related to the market value adjustments (MVA) associated with surrenders or terminations of contracts.
•Non-operating Change in Insurance Liabilities and Related Derivatives
•Change in Fair Values of Derivatives and Embedded Derivatives - FIAs-Consists of impacts related to the fair value accounting for derivatives hedging the FIA index credits and the related embedded derivative liability fluctuations from period to period. The index reserve is measured at fair value for the current period and all periods beyond the current policyholder index term. However, the FIA hedging derivatives are purchased to hedge only the current index period. Upon policyholder renewal at the end of the period, new FIA hedging derivatives are purchased to align with the new term. The difference in duration between the FIA hedging derivatives and the index credit reserves creates a timing difference in earnings. This timing difference of the FIA hedging derivatives and index credit reserves is included as a non-operating adjustment. We primarily hedge with options that align with the index terms of our FIA products (typically 1-2 years). On an economic basis, we believe this is suitable because policyholder accounts are credited with index performance at the end of each index term. However, because the term of an embedded derivative in an FIA contract is longer-dated, there is a duration mismatch which may lead to mismatches for accounting purposes.
•Non-operating Change in Funding Agreements-Consists of timing differences caused by changes to interest rates on variable funding agreements and funding agreement backed notes and the associated reserve accretion patterns of those contracts. Further included are adjustments for gains associated with our repurchases of funding agreement backed notes.
•Change in Fair Value of Market Risk Benefits-Consists primarily of volatility in capital market inputs used in the measurement at fair value of our market risk benefits, including certain impacts from changes in interest rates, equity returns and implied equity volatilities.
•Non-operating Change in Liability for Future Policy Benefits-Consists of the non-economic loss incurred at issuance for certain pension group annuities and other payout annuities with life contingencies when valuation interest rates prescribed by US GAAP are lower than the net investment earned rates, adjusted for profit, assumed in pricing. For such contracts with non-economic US GAAP losses, the SRE reserve accretes interest using an imputed discount rate that produces zero gain or loss at issuance.
•Integration, Restructuring, and Other Non-operating Expenses-Consists of restructuring and integration expenses related to acquisitions and block reinsurance costs as well as certain other expenses, which are not predictable or related to our underlying profitability drivers.
•Stock Compensation Expense-Consists of stock compensation expenses associated with our share incentive plans, including long-term incentive expenses, which are not related to our underlying profitability drivers and fluctuate from time to time due to the structure of our plans.
•Income Tax (Expense) Benefit-Consists of the income tax effect of all income statement adjustments, including our Apollo investment, and is computed by applying the appropriate jurisdiction's tax rate to all adjustments subject to income tax.
We consider these adjustments to be meaningful adjustments to net income (loss) available to AHL common shareholder for the reasons discussed in greater detail above. Accordingly, we believe using a measure which excludes the impact of these items is useful in analyzing our business performance and the trends in our results of operations. Together with net income (loss) available to AHL common shareholder, we believe spread related earnings provides a meaningful financial metric that helps investors understand our underlying results and profitability. Spread related earnings should not be used as a substitute for net income (loss) available to AHL common shareholder.
Net spread is a non-GAAP measure used to evaluate our financial performance and profitability. Net spread is computed using our spread related earnings divided by average net invested assets for the relevant period. To enhance the ability to analyze this measure across periods, interim periods are annualized. While we believe this metric is a meaningful financial metric and enhances our understanding of the underlying profitability drivers of our business, it should not be used as a substitute for ROA presented under GAAP.
ADJUSTED DEBT TO CAPITAL RATIO
Adjusted debt to capital ratio is a non-GAAP measure used to evaluate our capital structure excluding the impacts of AOCI and the cumulative changes in fair value of funds withheld and modco reinsurance assets as well as mortgage loan assets, net of tax. Adjusted debt to capital ratio is calculated as total debt at notional value divided by adjusted capitalization. Adjusted capitalization includes our adjusted AHL common shareholder's equity, preferred stock and the notional value of our debt. Adjusted AHL common shareholder's equity is calculated as the ending AHL shareholders' equity excluding AOCI, the cumulative changes in fair value of funds withheld and modco reinsurance assets and mortgage loan assets as well as preferred stock. These adjustments fluctuate period to period in a manner inconsistent with our underlying profitability drivers as the majority of such fluctuation is related to the market volatility of the unrealized gains and losses associated with our AFS securities. Except with respect to reinvestment activity relating to acquired blocks of businesses, we typically buy and hold AFS investments to maturity throughout the duration of market fluctuations, therefore, the period-over-period impacts in unrealized gains and losses are not necessarily indicative of current operating fundamentals or future performance. Adjusted debt to capital ratio should not be used as a substitute for the debt to capital ratio. However, we believe the adjustments to shareholders' equity are significant to gaining an understanding of our capitalization, debt utilization and debt capacity.
18
|
Notes to the Financial Supplement, continued
|
NET INVESTMENT SPREAD AND OTHER OPERATING EXPENSES
Net investment spread is a key measure of profitability. Net investment spread measures our investment performance plus our strategic capital management fees, less our total cost of funds. Net investment earned rate is a key measure of our investment performance while cost of funds is a key measure of the cost of our policyholder benefits and liabilities. Strategic capital management fees consist of management fees received by us for business managed for others, primarily the non-controlling interest portion of Athene's business ceded to ACRA.
•Net investment earned rate is a non-GAAP measure we use to evaluate the performance of our net invested assets that does not correspond to US GAAP net investment income. Net investment earned rate is computed as the income from our net invested assets divided by the average net invested assets, for the relevant period. To enhance the ability to analyze these measures across periods, interim periods are annualized. The adjustments to net investment income to arrive at our net investment earned rate add (a) alternative investment gains and losses, (b) gains and losses related to trading securities for CLOs, (c) net VIE impacts (revenues, expenses and noncontrolling interest), (d) forward points gains and losses on foreign exchange derivative hedges and (e) the change in fair value of reinsurance assets, and removes the proportionate share of the ACRA net investment income associated with the ACRA noncontrolling interest as well as the gain or loss on our investment in Apollo. We include the income and assets supporting our change in fair value of reinsurance assets by evaluating the underlying investments of the funds withheld at interest receivables and we include the net investment income from those underlying investments which does not correspond to the US GAAP presentation of change in fair value of reinsurance assets. We exclude the income and assets supporting business that we have exited through ceded reinsurance including funds withheld agreements. We believe the adjustments for reinsurance provide a net investment earned rate on the assets for which we have economic exposure.
•Cost of funds includes liability costs related to cost of crediting on both deferred annuities and institutional products as well as other liability costs, but does not include the proportionate share of the ACRA cost of funds associated with the noncontrolling interest. Cost of crediting on deferred annuities is the interest credited to the policyholders on our fixed strategies as well as the option costs on the indexed annuity strategies. With respect to FIAs, the cost of providing index credits includes the expenses incurred to fund the annual index credits, and where applicable, minimum guaranteed interest credited. Cost of crediting on institutional products is comprised of (1) pension group annuity costs, including interest credited, benefit payments and other reserve changes, net of premiums received when issued, and (2) funding agreement costs, including the interest payments and other reserve changes. Other liability costs include DAC, DSI and VOBA amortization, certain market risk benefit costs, the cost of liabilities on products other than deferred annuities and institutional products, premiums and certain product charges and other revenues. We exclude the costs related to business that we have exited through ceded reinsurance transactions. Cost of funds is computed as the total liability costs divided by the average net invested assets, for the relevant period. To enhance the ability to analyze these measures across periods, interim periods are annualized. We believe a measure like cost of funds is useful in analyzing the trends of our core business operations and profitability. While we believe cost of funds is a meaningful financial metric and enhances our understanding of the underlying profitability drivers of our business, it should not be used as a substitute for total benefits and expenses presented under US GAAP.
•Net investment earned rate, cost of funds, and net investment spread are non-GAAP measures we use to evaluate the profitability of our business. We believe these metrics are useful in analyzing the trends of our business operations, profitability and pricing discipline. While we believe each of these metrics are meaningful financial metrics and enhance our understanding of the underlying profitability drivers of our business, they should not be used as a substitute for net investment income or total benefits and expenses presented under US GAAP.
•Other operating expenses excludes integration, restructuring and other non-operating expenses, stock compensation and long-term incentive plan expenses, interest expense and policy acquisition expenses. We believe a measure like other operating expenses is useful in analyzing the trends of our core business operations and profitability. While we believe other operating expenses is a meaningful financial metric and enhances our understanding of the underlying profitability drivers of our business, it should not be used as a substitute for policy and other operating expenses presented under US GAAP.
NET INVESTED ASSETS
In managing our business, we analyze net invested assets, which does not correspond to total investments, including investments in related parties, as disclosed in our consolidated financial statements and notes thereto. Net invested assets represent the investments that directly back our net reserve liabilities as well as surplus assets. Net invested assets is used in the computation of net investment earned rate, which allows us to analyze the profitability of our investment portfolio. Net invested assets includes (a) total investments on the consolidated balance sheet with AFS securities at cost or amortized cost, excluding derivatives, (b) cash and cash equivalents and restricted cash, (c) investments in related parties, (d) accrued investment income, (e) VIE and VOE assets, liabilities and noncontrolling interest adjustments, (f) net investment payables and receivables, (g) policy loans ceded (which offset the direct policy loans in total investments) and (h) an adjustment for the allowance for credit losses. Net invested assets also excludes assets associated with funds withheld liabilities related to business exited through reinsurance agreements and derivative collateral (offsetting the related cash positions). We include the underlying investments supporting our assumed funds withheld and modco agreements in our net invested assets calculation in order to match the assets with the income received. We believe the adjustments for reinsurance provide a view of the assets for which we have economic exposure. Net invested assets includes our proportionate share of ACRA investments, based on our economic ownership, but does not include the proportionate share of investments associated with the noncontrolling interest. Our net invested assets are averaged over the number of quarters in the relevant period to compute our net investment earned rate for such period. While we believe net invested assets is a meaningful financial metric and enhances our understanding of the underlying drivers of our investment portfolio, it should not be used as a substitute for total investments, including related parties, presented under US GAAP.
NET RESERVE LIABILITIES
In managing our business, we also analyze net reserve liabilities, which does not correspond to total liabilities as disclosed in our consolidated financial statements and notes thereto. Net reserve liabilities represent our policyholder liability obligations net of reinsurance and is used to analyze the costs of our liabilities. Net reserve liabilities include (a) interest sensitive contract liabilities, (b) future policy benefits, (c) net market risk benefits, (d) long-term repurchase obligations, (e) dividends payable to policyholders and (f) other policy claims and benefits, offset by reinsurance recoverable, excluding policy loans ceded. Net reserve liabilities include our proportionate share of ACRA reserve liabilities, based on our economic ownership, but do not include the proportionate share of reserve liabilities associated with the noncontrolling interest. Net reserve liabilities is net of the ceded liabilities to third-party reinsurers as the costs of the liabilities are passed to such reinsurers and, therefore, we have no net economic exposure to such liabilities, assuming our reinsurance counterparties perform under our agreements. The majority of our ceded reinsurance is a result of reinsuring large blocks of life business following acquisitions. For such transactions, US GAAP requires the ceded liabilities and related reinsurance recoverables to continue to be recorded in our consolidated financial statements despite the transfer of economic risk to the counterparty in connection with the reinsurance transaction. While we believe net reserve liabilities is a meaningful financial metric and enhances our understanding of the underlying profitability drivers of our business, it should not be used as a substitute for total liabilities presented under US GAAP.
SALES
Sales statistics do not correspond to revenues under US GAAP but are used as relevant measures to understand our business performance as it relates to inflows generated during a specific period of time. Our sales statistics include inflows for fixed rate annuities and FIAs and align with the LIMRA definition of all money paid into an individual annuity, including money paid into new contracts with initial purchase occurring in the specified period and existing contracts with initial purchase occurring prior to the specified period (excluding internal transfers). We believe sales is a meaningful metric that enhances our understanding of our business performance and is not the same as premiums presented in our condensed consolidated statements of income (loss).
19
|
Non-GAAP Reconciliations
Unaudited (in millions, except percentages)
|
||||||||
| Quarterly Trends | ||||||||
| 1Q'22 | 2Q'22 | 3Q'22 | 4Q'22 | |||||
| RECONCILIATION OF TOTAL AHL SHAREHOLDERS' EQUITY TO TOTAL ADJUSTED AHL COMMON SHAREHOLDER'S EQUITY | ||||||||
| Total AHL shareholders' equity | $ | 13,973 | $ | 8,697 | $ | 5,133 | $ | 7,158 |
| Less: Preferred stock | 2,667 | 2,667 | 2,667 | 3,154 | ||||
| Total AHL common shareholder's equity | 11,306 | 6,030 | 2,466 | 4,004 | ||||
| Less: Accumulated other comprehensive loss | (2,318) | (5,698) | (8,473) | (7,321) | ||||
| Less: Accumulated change in fair value of reinsurance assets | (1,271) | (2,521) | (3,394) | (3,127) | ||||
| Less: Accumulated change in fair value of mortgage loan assets | (629) | (1,340) | (2,095) | (2,201) | ||||
| Total adjusted AHL common shareholder's equity | $ | 15,524 | $ | 15,589 | $ | 16,428 | $ | 16,653 |
| RECONCILIATION OF DEBT TO CAPITAL RATIO TO ADJUSTED DEBT TO CAPITAL RATIO | ||||||||
| Total debt | $ | 3,287 | $ | 3,279 | $ | 3,271 | $ | 3,658 |
| Less: Adjustment to arrive at notional debt | 287 | 279 | 271 | 258 | ||||
| Notional debt | $ | 3,000 | $ | 3,000 | $ | 3,000 | $ | 3,400 |
| Total debt | $ | 3,287 | $ | 3,279 | $ | 3,271 | $ | 3,658 |
| Total AHL shareholders' equity | 13,973 | 8,697 | 5,133 | 7,158 | ||||
| Total capitalization | 17,260 | 11,976 | 8,404 | 10,816 | ||||
| Less: Accumulated other comprehensive loss | (2,318) | (5,698) | (8,473) | (7,321) | ||||
| Less: Accumulated change in fair value of reinsurance assets | (1,271) | (2,521) | (3,394) | (3,127) | ||||
| Less: Accumulated change in fair value of mortgage loan assets | (629) | (1,340) | (2,095) | (2,201) | ||||
| Less: Adjustment to arrive at notional debt | 287 | 279 | 271 | 258 | ||||
| Total adjusted capitalization | $ | 21,191 | $ | 21,256 | $ | 22,095 | $ | 23,207 |
| Debt to capital ratio | 19.0 | % | 27.4 | % | 38.9 | % | 33.8 | % |
| Accumulated other comprehensive loss | (2.0) | % | (7.3) | % | (14.7) | % | (10.5) | % |
| Accumulated change in fair value of reinsurance assets | (1.1) | % | (3.2) | % | (5.9) | % | (4.5) | % |
| Accumulated change in fair value of mortgage loan assets | (0.6) | % | (1.7) | % | (3.7) | % | (3.2) | % |
| Adjustment to arrive at notional debt | (1.1) | % | (1.1) | % | (1.0) | % | (0.9) | % |
| Adjusted debt to capital ratio | 14.2 | % | 14.1 | % | 13.6 | % | 14.7 | % |
20
|
Non-GAAP Reconciliations
Unaudited (in millions, except percentages)
|
||||||||||
| Quarterly Trends | Year-to-Date | |||||||||
| 1Q'22 | 2Q'22 | 3Q'22 | 4Q'22 | 2022 | ||||||
| RECONCILIATION OF NET INCOME (LOSS) AVAILABLE TO AHL COMMON SHAREHOLDER TO NORMALIZED SPREAD RELATED EARNINGS | ||||||||||
| Net income (loss) available to |
$ | (1,050) | $ | (1,740) | $ | (622) | $ | 361 | $ | (3,051) |
| Preferred stock dividends | 35 | 35 | 35 | 36 | 141 | |||||
| Net income (loss) attributable to noncontrolling interests | (881) | (1,089) | (465) | 329 | (2,106) | |||||
| Net income (loss) | (1,896) | (2,794) | (1,052) | 726 | (5,016) | |||||
| Income tax expense (benefit) | (284) | (378) | (121) | 137 | (646) | |||||
| Income (loss) before income taxes | (2,180) | (3,172) | (1,173) | 863 | (5,662) | |||||
| Less: Total adjustments to income (loss) before income taxes | (2,854) | (3,627) | (1,813) | 166 | (8,128) | |||||
| Spread related earnings | 674 | 455 | 640 | 697 | 2,466 | |||||
| Normalization of alternative investment income to 11% | (151) | 135 | 82 | 14 | 80 | |||||
| Other notable items | - | (16) | (42) | 35 | 3 | |||||
| Normalized spread related earnings | $ | 523 | $ | 574 | $ | 680 | $ | 746 | $ | 2,549 |
|
RECONCILIATION OF NET INVESTMENT INCOME TO NET INVESTMENT EARNINGS
|
||||||||||
| US GAAP net investment income | $ | 1,683 | $ | 1,726 | $ | 1,843 | $ | 2,319 | $ | 7,571 |
| Change in fair value of reinsurance assets | 220 | 50 | 11 | 52 | 333 | |||||
| VIE earnings and noncontrolling interest | 79 | 91 | 219 | 197 | 586 | |||||
| Alternative gains (losses) | 18 | (28) | 10 | 41 | 41 | |||||
| ACRA noncontrolling interest | (305) | (347) | (407) | (446) | (1,505) | |||||
| Reinsurance impacts | - | - | - | (41) | (41) | |||||
| Apollo investment gain | (33) | - | - | - | (33) | |||||
| Held for trading amortization and other | (7) | (4) | 45 | (73) | (39) | |||||
|
Total adjustments to arrive at net investment earnings
|
(28) | (238) | (122) | (270) | (658) | |||||
|
Total net investment earnings
|
$ | 1,655 | $ | 1,488 | $ | 1,721 | $ | 2,049 | $ | 6,913 |
|
RECONCILIATION OF NET INVESTMENT INCOME RATE TO NET INVESTMENT EARNED RATE
|
||||||||||
| US GAAP net investment income | 3.71 | % | 3.70 | % | 3.83 | % | 4.74 | % | 4.01 | % |
| Change in fair value of reinsurance assets | 0.49 | % | 0.11 | % | 0.02 | % | 0.11 | % | 0.18 | % |
| VIE earnings and noncontrolling interest | 0.17 | % | 0.19 | % | 0.46 | % | 0.40 | % | 0.31 | % |
| Alternative gains (losses) | 0.04 | % | (0.06) | % | 0.02 | % | 0.08 | % | 0.02 | % |
| ACRA noncontrolling interest | (0.67) | % | (0.74) | % | (0.85) | % | (0.91) | % | (0.80) | % |
| Reinsurance impacts | - | % | - | % | - | % | (0.08) | % | (0.02) | % |
| Apollo investment gain | (0.07) | % | - | % | - | % | - | % | (0.02) | % |
| Held for trading amortization and other | (0.02) | % | (0.01) | % | 0.10 | % | (0.15) | % | (0.02) | % |
|
Total adjustments to arrive at net investment earned rate
|
(0.06) | % | (0.51) | % | (0.25) | % | (0.55) | % | (0.35) | % |
| Net investment earned rate | 3.65 | % | 3.19 | % | 3.58 | % | 4.19 | % | 3.66 | % |
| Average net invested assets | $ | 181,398 | $ | 186,788 | $ | 192,231 | $ | 195,804 | $ | 188,742 |
21
|
Non-GAAP Reconciliations
Unaudited (in millions, except percentages)
|
||||||||||
| Quarterly Trends | Year-to-Date | |||||||||
| 1Q'22 | 2Q'22 | 3Q'22 | 4Q'22 | 2022 | ||||||
| RECONCILIATION OF BENEFITS AND EXPENSES TO COST OF FUNDS | ||||||||||
| US GAAP benefits and expenses | $ | 1,899 | $ | 4,979 | $ | 3,483 | $ | 2,924 | $ | 13,285 |
| Premiums | (2,110) | (5,614) | (3,045) | (869) | (11,638) | |||||
| Product charges | (166) | (175) | (184) | (193) | (718) | |||||
| Other revenues | 3 | 9 | 26 | (10) | 28 | |||||
| FIA option costs | 294 | 306 | 322 | 342 | 1,264 | |||||
| Reinsurance impacts | 12 | 12 | 12 | (19) | 17 | |||||
| Non-operating change in insurance liabilities and embedded derivatives | 1,080 | 1,574 | 652 | (481) | 2,825 | |||||
| Policy and other operating expenses, excluding policy acquisition expenses | (247) | (260) | (294) | (309) | (1,110) | |||||
| AmerUs Closed Block fair value liability | 127 | 114 | 77 | (27) | 291 | |||||
| ACRA noncontrolling interest | (81) | (53) | (157) | (258) | (549) | |||||
| Other | 11 | (19) | 10 | 58 | 60 | |||||
| Total adjustments to arrive at cost of funds | (1,077) | (4,106) | (2,581) | (1,766) | (9,530) | |||||
| Total cost of funds | $ | 822 | $ | 873 | $ | 902 | $ | 1,158 | $ | 3,755 |
| RECONCILIATION OF TOTAL BENEFITS AND EXPENSES RATE TO COST OF FUNDS RATE | ||||||||||
| US GAAP benefits and expenses | 4.19 | % | 10.66 | % | 7.25 | % | 5.97 | % | 7.04 | % |
| Premiums | (4.65) | % | (12.02) | % | (6.34) | % | (1.78) | % | (6.17) | % |
| Product charges | (0.37) | % | (0.37) | % | (0.38) | % | (0.39) | % | (0.38) | % |
| Other revenues | 0.01 | % | 0.02 | % | 0.06 | % | (0.02) | % | 0.01 | % |
| FIA option costs | 0.65 | % | 0.65 | % | 0.67 | % | 0.70 | % | 0.67 | % |
| Reinsurance impacts | 0.03 | % | 0.03 | % | 0.02 | % | (0.04) | % | 0.01 | % |
| Non-operating change in insurance liabilities and embedded derivatives | 2.38 | % | 3.38 | % | 1.36 | % | (0.98) | % | 1.50 | % |
| Policy and other operating expenses, excluding policy acquisition expenses | (0.55) | % | (0.56) | % | (0.61) | % | (0.63) | % | (0.59) | % |
| AmerUs Closed Block fair value liability | 0.28 | % | 0.24 | % | 0.16 | % | (0.05) | % | 0.15 | % |
| ACRA noncontrolling interest | (0.18) | % | (0.11) | % | (0.33) | % | (0.53) | % | (0.29) | % |
| Other | 0.02 | % | (0.04) | % | 0.02 | % | 0.12 | % | 0.03 | % |
| Total adjustments to arrive at cost of funds | (2.38) | % | (8.78) | % | (5.37) | % | (3.60) | % | (5.06) | % |
| Total cost of funds | 1.81 | % | 1.88 | % | 1.88 | % | 2.37 | % | 1.98 | % |
| Average net invested assets | $ | 181,398 | $ | 186,788 | $ | 192,231 | $ | 195,804 | $ | 188,742 |
22
|
Non-GAAP Reconciliations
Unaudited (in millions)
|
||||||||||
| Quarterly Trends | Year-to-Date | |||||||||
| 1Q'22 | 2Q'22 | 3Q'22 | 4Q'22 | 2022 | ||||||
| RECONCILIATION OF POLICY AND OTHER OPERATING EXPENSES TO OTHER OPERATING EXPENSES | ||||||||||
| US GAAP policy and other operating expenses | $ | 338 | $ | 357 | $ | 388 | $ | 412 | $ | 1,495 |
| Interest expense | (33) | (41) | (68) | (85) | (227) | |||||
| Policy acquisition expenses, net of deferrals | (91) | (97) | (94) | (103) | (385) | |||||
| Integration, restructuring and other non-operating expenses | (34) | (33) | (37) | (29) | (133) | |||||
| Stock compensation expenses | (12) | (13) | (15) | (16) | (56) | |||||
| ACRA noncontrolling interest | (51) | (59) | (73) | (48) | (231) | |||||
| Other changes in policy and other operating expenses | (8) | (5) | 19 | (3) | 3 | |||||
| Total adjustments to arrive at other operating expenses | (229) | (248) | (268) | (284) | (1,029) | |||||
| Other operating expenses | $ | 109 | $ | 109 | $ | 120 | $ | 128 | $ | 466 |
| RECONCILIATION OF TOTAL INVESTMENTS, INCLUDING RELATED PARTIES, TO NET INVESTED ASSETS | ||
| Total investments, including related parties | $ | 196,448 |
| Derivative assets | (3,309) | |
| Cash and cash equivalents (including restricted cash) | 8,407 | |
| Accrued investment income | 1,328 | |
| Net receivable (payable) for collateral on derivatives | (1,486) | |
| Reinsurance funds withheld and modified coinsurance | 1,423 | |
| VIE and VOE assets, liabilities and noncontrolling interest | 12,747 | |
| Unrealized (gains) losses | 22,284 | |
| Ceded policy loans | (179) | |
| Net investment receivables (payables) | 186 | |
| Allowance for credit losses | 471 | |
| Other investments | (10) | |
| Total adjustments to arrive at gross invested assets | 41,862 | |
| Gross invested assets | 238,310 | |
| ACRA noncontrolling interest | (41,859) | |
| Net invested assets | $ | 196,451 |
23
|
Non-GAAP Reconciliations
Unaudited (in millions)
|
||
| RECONCILIATION OF INVESTMENT FUNDS, INCLUDING RELATED PARTIES AND VIES, TO NET ALTERNATIVE INVESTMENTS | ||
| Investment funds, including related parties and VIEs | $ | 14,128 |
| Equity securities | 509 | |
| CLO and ABS equities included in trading securities | 225 | |
| Investment funds within funds withheld at interest | 1,126 | |
| Royalties | 15 | |
| Net assets of the VIE, excluding investment funds | (2,041) | |
| Unrealized (gains) losses | 44 | |
| ACRA noncontrolling interest | (1,836) | |
| Other assets | (91) | |
|
Total adjustments to arrive at net alternative investments
|
(2,049) | |
|
Net alternative investments
|
$ | 12,079 |
|
RECONCILIATION OF TOTAL LIABILITIES TO NET RESERVE LIABILITIES
|
||
| Total liabilities | $ | 233,382 |
| Debt | (3,658) | |
| Derivative liabilities | (1,646) | |
| Payables for collateral on derivatives and securities to repurchase | (3,841) | |
| Other liabilities | (1,635) | |
| Liabilities of consolidated VIEs | (815) | |
| Reinsurance impacts | (9,176) | |
| Policy loans ceded | (179) | |
| Market risk benefit asset | (481) | |
| ACRA noncontrolling interest | (35,981) | |
|
Total adjustments to arrive at net reserve liabilities
|
(57,412) | |
|
Net reserve liabilities
|
$ | 175,970 |
24
Attachments
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AM Best Affirms Credit Ratings of Motors Insurance Company Limited
San Bernardino County paid $1.1 million ransom to hacker of Sheriff's Department computers [San Bernardino County Sun, Calif.]
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