Athene Holding Ltd. · NYSE:ATH/PA
Athene — Investor Day (September 2018)
151 slides from Athene's investor day presentation, Sep 20, 2018
Slide 1: Athene Investor Day September 20, 2018
Athene Investor Day September 20, 2018 Exhibit 99.1
Slide 2: Disclaimer
Disclaimer This presentation does not constitute an offer to sell, or the solicitation of an offer to buy, any security of Athene Holding Ltd. (“Athene”) or Athene Annuity and Life Company. Certain information contained herein and certain oral statements made in reference thereto may be “forward-loo
Slide 3: Welcome and Introduction
Welcome and Introduction Noah Gunn
Slide 4: Investor Day Agenda
Investor Day Agenda Welcome & Introduction Noah Gunn, Head of Investor Relations of Athene 8:00 – 8:05 AM Strategically Positioned for Long Term Growth Jim Belardi, Co-Founder, Chairman, CEO and CIO of Athene and Athene Asset Management 8:05 – 8:25 AM Navigating an Insurance Industry in Transition B
Slide 5: Investor Day Agenda (continued)
Investor Day Agenda (continued) Sourcing Attractively Priced Liabilities 10:20 – 10:50 AM Multi-Channel Distribution Model Built for Continued Organic Growth Grant Kvalheim, CEO of Athene USA and Bill Wheeler, President of Athene Disciplined and Value Generative Inorganic Strategy Bill Wheeler, Pres
Slide 6: Strategically Positioned for Long-Term Growth
Strategically Positioned for Long-Term Growth Jim Belardi
Slide 7: Opportunistic Focus Traces Back to Our Founding
Opportunistic Focus Traces Back to Our Founding Athene established a leading platform during a unique time in the financial markets Athene founded in mid-2009 - Source: Bloomberg Finance LP.
Slide 8: The Market Opportunity at Our Founding
The Market Opportunity at Our Founding Misunderstood assets, misunderstood liabilities, and poor capital management Assets Capital Liabilities U.S. Insurer Total Bond Impairments (2006-2010, $ in billions) Crisis-Era FA / VA Volumes ($ in billions) Peer Price to Book Multiple (2007-2009) Run for the
Slide 9: The Market Opportunity in Front of Us
The Market Opportunity in Front of Us Misunderstood assets, misunderstood liabilities, and poor capital management Assets Capital Liabilities Peer Dividends & Share Repurchases ($ in billions) No ability to earn spread No alpha in public markets No dynamic asset allocations $100+ billion Identifiabl
Slide 10: We Serve a Growing Retirement Population
We Serve a Growing Retirement Population We issue, reinsure, and acquire retirement savings products designed for the increasing number of individuals and institutions seeking to fund retirement needs Significant Growth Expected in Retirement Age Population U.S. Population Age 65+ 2000 2015 2030E 35
Slide 11: Athene is Different from Other Life Insurance Companies
Athene is Different from Other Life Insurance Companies Industry Athene’s Approach Outsourced asset managers focused only on beating an index No manager alignment No manager insurance expertise (asset-liability matching, risk, structuring, etc.) One manager for full ~$100bn portfolio Manager is larg
Slide 12: We Have A Highly Experienced Team
We Have A Highly Experienced Team Athene’s seasoned team is overseen by a diverse and sophisticated Board of Directors with experience in many substantive areas that affect its business Jim Belardi Co-founder, Chairman, CEO and CIO of Athene & Athene Asset Management Background: President of SunAmer
Slide 13: Our Strategy has Yielded Powerful Results to Date
Our Strategy has Yielded Powerful Results to Date Our goal is to create massive value, not incremental value ATH +17% Peers +4% CAGR Since 2009 Significant Growth in Adjusted Book Value Per Share1 Reflects Desire for Long-Term Accretion Note: Peer means include: AEL, AIG, LNC, MET, PFG and PRU. Sour
Slide 14: Straightforward & Scalable Net Investment Spread Model
Straightforward & Scalable Net Investment Spread Model Achieving mid-to-high teen adjusted operating ROE in Retirement Services 470 bps 188 bps 2 1 84 bps 2 40 bps 3 158 bps 4 Investment Margin of 282 bps1 Unique Investment Capabilities 1 Attractive ROE with Strong Earnings Growth Potential 4 Attrac
Slide 15: Creating Value on Both Sides of the Balance Sheet
Creating Value on Both Sides of the Balance Sheet Athene strives to do more across its businesses than typical insurance companies +40bps +40bps Better Fixed Income Performance (Net Investment Yield1) Superior Return (Return on Equity) Lower Platform Costs (Liability Costs, G&A, Taxes2) Differentiat
Slide 16: Partnership With Apollo Provides Strategic Advantages
Partnership With Apollo Provides Strategic Advantages Holistic relationship allows for long-term outperformance Portfolio Management Capital Markets Support M&A Sourcing Advisory & Operational Support Asset Origination & Structuring Differentiated Net Spread Differentiated Company ALM Management Tra
Slide 17: Multi-Channel Distribution Provides Competitive Advantage
Multi-Channel Distribution Provides Competitive Advantage Flow Reinsurance Retail Pension Risk Transfer (PRT) Acquisitions Block Reinsurance Mid-to-High Teens ROE Target Mid-Teens or Higher Target Returns Inorganic Channels Organic Channels Mid-Teens Target Returns Funding Agreements Ability to pivo
Slide 18: Strong Emphasis on Discipline and Profits
Strong Emphasis on Discipline and Profits Our strategy dictates that if we cannot find profitable growth, then we will not grow Demonstrating Discipline in Organic Channels Demonstrating Discipline in Inorganic Channels 2017: Pulled back from MYGA sales due to a convergence of factors including tigh
Slide 19: A History of Consistent Asset Differentiation
Levered CMBS A History of Consistent Asset Differentiation Opportunistic trades on the asset side drive alpha generation and widen spread 2009-2010 1H’16 1H’18–Present 2011–2014 2H’13 2H’12 2H’13–Present 2011–2013 2009-2015 TALF AAA CMBS Non-Agency RMBS AP Alternative Assets (AAA) MidCap AmeriHome I
Slide 20: The Future of Asset Differentiation
The Future of Asset Differentiation The Death of CUSIPs The Need to Build Direct Origination Safer structuring Better yield for better risk Bespoke origination More insulated from mark-to-market swings Passive Fund AUM (2009-2017) SME Lending Consumer Loans Aircraft Leasing Residential Mortgage Trip
Slide 21: Athene Has Taken Advantage of Industry Dislocation
Athene Has Taken Advantage of Industry Dislocation 1 Peer mean includes: AEL, AIG, PFG, PRU, VOYA, and LNC. 2 M&A acquisitions, excluding Delta Lloyd Deutschland. - Peer Price / Book Value1 Buy Cheap! More Expensive Plain Vanilla Liabilities Embrace Complexity We’ve bought well and put liabilities o
Slide 22: We See an Abundance of Opportunity
We See an Abundance of Opportunity Today’s excess capital position aligned with opportunistic approach, but is it enough? ~$100bn Organic channels will continue to be funded with earnings $2bn of Excess Capital + $2bn of Debt Capacity ~$4bn +$50bn +$50bn Today’s Inorganic Pipeline Capital is most sc
Slide 23: We Are Raising the Bar
We Are Raising the Bar Continue to drive significant growth in Book Value per Share (BVPS) Focus on highest return areas of organic business Seek opportunities to deploy capital inorganically at above average rates of return Continue to work with Apollo to source differentiated investment capabiliti
Slide 24: We Want to Leave You with Four Key Takeaways
We Want to Leave You with Four Key Takeaways Our growth is strong and our financial performance is superior Bottom Line: We are a differentiated financial services company poised for the “Fat Pitch” We create value on both sides of the balance sheet Our model allows us to grow sustainably across mul
Slide 25: Navigating an Industry in Transition
Navigating an Industry in Transition Bill Wheeler
Slide 26: Fixed Annuities are a Straightforward Business
Fixed Annuities are a Straightforward Business Investment Income Liability Costs Operating Costs ~$2.5tn shift from 2014-2017 Actively Managed Funds Passively Managed Funds Retreat from active management No alpha in public markets No dynamic asset allocations Mispriced guarantees High acquisition co
Slide 27: Challenges in Generating Asset Alpha
Challenges in Generating Asset Alpha Passive asset management has not been successful Typical Insurance Company Profile Yields on Corporates Note: Insurance companies include: AEL, AMP, BHF, FG, LNC, MET, PFG, PRU, RGA and VOYA. 1 3% ABS / CLO 3% CMBS 13% Mortgage Loans 3% Alternatives 3% Cash & Equ
Slide 28: Signs of Liability Mismanagement Loom
Signs of Liability Mismanagement Loom Market share and volume growth prioritized above all else, while riders used to push volume at the cost of underwriting vigor 2 The Casualties of Growth Over Profitability Variable Annuities Long-Term Care Structured Settlements Hedged for GAAP rather than econo
Slide 29: Actuarial Assumptions in the Life Insurance Industry
Actuarial Assumptions in the Life Insurance Industry Products with long shelf lives are subject to significant assumption risks Products Requiring Reserve Strengthening Key Assumptions Impacting FIAs with Riders Long term care Variable annuities with riders Secondary guaranteed universal life Substa
Slide 30: Cost Management is Difficult to Achieve at Scale
Cost Management is Difficult to Achieve at Scale 3 Source: Company filings and SNL Financial. 1 2017A. Peers include: AFL, LNC, MET, and PRU. Estimated based on publicly available information - MET expense is based on “Other” operating expenses and AFL is based on “Insurance and Other Operating Expe
Slide 31: When All Else Fails…Grow and Lever!
When All Else Fails…Grow and Lever! The industry has tried to mask underlying pressures though growth and leverage FA / FIA Industry Sales1 ($ in billions) Total Dividends and Repurchases2 ($ in billions) 1 Source: LIMRA Secure Retirement Institute, U.S. Individual Annuities Survey. 2 Source: SNL Fi
Slide 32: We're Entering New Territory
We’re Entering New Territory… Decade of financial repression followed by recent rise in interest rates The recent rise in rates has made divestures more palatable Fed Funds Rate Quantitative easing abates “Lost decade” to financial repression 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20
Slide 33: Insurance Company Divestures
…Resulting in Insurance Company Divestures With the recent rise in interest rates, insurance companies are now looking to shed non-core business lines and liabilities at unprecedented scale Spin-off of Brighthouse Financial Valued at c. $7.5 billion Sale of retirement income annuities c. $50 billion
Slide 34: Calling For Buyers…But Who?
Exiting businesses Cannot raise sufficient equity Legacy issues Regulatory complexities Lack expertise to solve for assets, liabilities and costs Inability to deploy at scale required Strong financial position, with significant available capital M&A sourcing and execution support from Apollo Solutio
Slide 35: Athene is Well Positioned to Navigate the Current Environment
Athene is Well Positioned to Navigate the Current Environment Scale of the opportunity will require prudent capital management Return on Equity Available Capital Size of the Opportunity AA Rated Peer Average2: 25.7% Stat Capital / Reserves vs. Peers1 1 Source: SNL Financial. As of March 31, 2018 for
Slide 36: Partnership With Apollo Provides Decisive Advantage
Partnership With Apollo Provides Decisive Advantage Apollo has played a critical advisory role in each of Athene’s inorganic transactions and believes there is continued opportunity for Athene to deploy capital 380+ investment professionals globally 100+ financial services specialists Structuring ex
Slide 37: Voya Transaction Case Study
A consortium of investors led by acquired Voya’s $35 billion closed block variable annuity business from Voya leading to the creation of A well capitalized new stand-alone private company. Concurrently, reinsured $19 billion of fixed and fixed indexed annuities from Voya Athene + Apollo = Leading So
Slide 38: Investment Philosophy Focused on Returns & Downside Protection
Investment Philosophy Focused on Returns & Downside Protection Jim Belardi
Slide 39: We're Focused on Return & Downside Protection
We’re Focused on Return & Downside Protection Investment Philosophy Target higher and sustainable risk-adjusted returns with opportunistic approach to liquidity and complexity risk Significant stress testing and robust risk management underpin focus on downside protection No need to stretch for yiel
Slide 40: Outperformance Over Time Drives ROE Accretion
Outperformance Over Time Drives ROE Accretion Athene’s Fixed Income Invested Asset Outperformance1…. …Drives Significant ROE Benefit Note: Peers include: AEL, AIG, FG, LNC, MET, PFG, PRU and VOYA. 1 2015-2017A. Athene favorable variance of net investment yields vs. peers. Data based on earned invest
Slide 41: Demonstrated Ability to Generate Alpha Across Market Environments
Investment Grade Corporate Bonds Build America Municipal Bonds TALF AAA CMBS Non-Agency RMBS Investment Grade CLO Liabilities ABS – Aircraft European Financials Focus Period 2009–2010 2009–2010 2009-2010 2009–2014 2010–2013 2013–2016 2016 Illustrative Yield 5.00% 5.25% 13.00% 5.50% 6.00% 5.00% 5.25%
Slide 42: Our Portfolio is Safer and Stronger Than Some Perceive
Our Portfolio is Safer and Stronger Than Some Perceive Overall Portfolio Risk Weighted Average C-1 Charge1 Sensitivity to the Credit Cycle Allocation to Alternatives High Quality Fixed Income Investments 3.4% Athene 3.2% Peers2 Athene does not have a materially higher exposure to “low” rated securit
Slide 43: Asset Management Platforms by Comparison
Asset Management Platforms by Comparison Athene benefits from an alpha-generating, high-touch customer experience Typical Insurance Company Athene’s Differentiated Asset Management Model Large Investment Manager 1 Large Investment Manager 3 Small Internal Asset Team Asset classes outsourced to large
Slide 44: We Have Differentiated Investment Capabilities
We Have Differentiated Investment Capabilities Differentiation driven by Athene’s strategic relationship with Apollo ~$100bn of invested assets Needs tens of billions of dollars of new investable ideas per year Has simple and persistent liabilities to invest against Needs dedicated and bespoke servi
Slide 45: AAM Features a Team of Seasoned Investment Professionals
AAM Features a Team of Seasoned Investment Professionals Athene benefits from a dedicated team of experienced investment professionals who tailor investments to our liability profile Jim Belardi Co-founder, Chairman, CEO and CIO of Athene & Athene Asset Management Background: President of SunAmerica
Slide 46: What Does the Path Forward Look Like?
What Does the Path Forward Look Like? With significant yield compression, continued profitable growth requires adaptation 6/30/20182 20091 -440bps -230bps -340bps -300bps 1 2009 estimates based on rates and spreads for illustrative purposes. 2 Approximation of gross market yields based on June 30, 2
Slide 47: Apollo is Dedicated to Growing with Athene
Apollo is Dedicated to Growing with Athene True differentiation is not easy at scale Asset Management Options for a Scaled and Growing Portfolio 1 Succumb to index investing 2 Outsource to several “active managers” and be a relative drop in the bucket 3 Invest in long-term capabilities to directly o
Slide 48: Direct Origination is Becoming Increasingly Important
Direct Origination is Becoming Increasingly Important A new paradigm exists and insurers must face reality that the asset management roadmap of the past 30 years no longer holds – transition from traditional fixed income to credit investing Traditional assets that are easily accessed are the most di
Slide 49: Athene Benefits From Apollo's Investment in Direct Origination
Athene Benefits From Apollo’s Investment in Direct Origination Apollo and AAM are continuously looking to source attractive assets for Athene Athene demands approximately $30 billion worth of new investible assets per year Scarcity of public market / CUSIP yield leads to need for sourcing directly o
Slide 50: Athene's Access to Direct Origination Will Grow
Athene’s Access to Direct Origination Will Grow MIDCAP AMERIHOME MERX TRIPLE-NET LEASE Existing Direct Origination Platforms Middle-market focused specialty finance company Directly originates diverse offering of senior secured loans with ~$15bn+ of commitments Lev loans, ABLs, RE, lender finance an
Slide 51: Further Aligning Incentives with Revised Fee Arrangement
1 Specific terms to be provided in public filings associated with fee agreement. 2 Excludes cash, treasuries, alternatives, and equities. Alternatives to be subject to the same fees as under the existing framework. 3 Sub-allocation fee levels represent a discount to “market” based on representative
Slide 52: Illustrative Revised Fee Arrangement Scenarios
Illustrative Revised Fee Arrangement Scenarios New construct provides greater alignment between asset differentiation and fees “Backbook” AUM up to 1/1/19 levels On-the-Margin Go-forward AUM (above 1/1/19 levels) Today’s Portfolio2 Today’s Portfolio Replicated2 Low Portfolio Differentiation High Por
Slide 53: Credit Cycle Positioning & the Search for Alpha
Credit Cycle Positioning & the Search for Alpha Jim Hassett
Slide 54: The World We're In: Credit Spreads
The World We’re In: Credit Spreads Liquid markets do not present an attractive risk-return for going down the credit spectrum Source: St. Louis Fed. Current Average Low BB vs. BBB 100 190 72 Credit Curves
Slide 55: The World We're In: Duration
The World We’re In: Duration Given the shape of the current yield curve, investors are not compensated for taking duration risk Prior periods have represented much more favorable opportunities to incur duration risk Credit Curves 1 Mo. 3 Mo. 6 Mo. 1 Yr. 2 Yr. 3 Yr. 5 Yr. 7 Yr. 10 Yr. 30 Yr. Source:
Slide 56: How We See The World
How We See The World Disciplined Process of Strategic Asset Allocation Develop Capital Markets Viewpoint Forward looking Fundamentally driven Establish fundamental attractiveness of each asset category Leverage deep Apollo capabilities Establish Current Portfolio Allocations Convert market viewpoint
Slide 57: Differentiation in the Portfolio Today
Differentiation in the Portfolio Today Differentiation through allocation, NOT through credit risk Average Life Insurance Portfolio3 Athene1 53% Corporate & Gov’t 62% Corporate & Gov’t 4% RMBS 11% RMBS 13% ABS / CLO 3% CMBS 3% CMBS 13% Mortgage Loans 3% Alternatives 3% Cash & Equivalents 2% Cash & E
Slide 58: Asset Class Case Study – RMBS
Asset Class Case Study – RMBS Significant first mover advantage Athene Portfolio % RMBS 2009-2010 9-10% book yield on RMBS portfolio 90%+ RMBS with NAIC 1 Designations Legacy RMBS Historical Prices Price: Prime ARM (RMBS) Price: AltA Hybrid ARM Floater (RMBS) Price: Option ARM Floater (RMBS)
Slide 59: Asset Class Case Study – CLOs
Asset Class Case Study – CLOs Source: Moody’s Data Report, July 2017. Yield Enhancement… …with a High Degree of Safety Avg. NAIC Designation 1.5 1.5 Principal Impairments Interest Impairments 2000-2004 11 0 2005-2008 15 0 2009-2012 26 0 2013-2016 0 0 Total CLO Market Impairments by Year 0.2% U.S. CL
Slide 60: Asset Class Case Study – CLOs (continued)
Asset Class Case Study – CLOs (continued) Asset allocation underpinned by active asset management style 1 Average quarterly market value. Tighter spreads with less positive credit fundamentals for BB CLO Market Environment: Less Attractive BB CLO market opportunity with strong risk-reward profile Ma
Slide 61: Asset Class Case Study – BBB Corporates
Asset Class Case Study – BBB Corporates 2013-2017 2017-Present Source: St. Louis Fed. BBB OAS Spreads Average from 2013-2017 BBB OAS Spreads Average from 2017-Present Bias toward BBB credits Wider spreads / positive fundamentals Idiosyncratic risks predominate: commodities, CBS, Kellogg, Campbell’s
Slide 62: Asset Sector Case Study: Energy
Asset Sector Case Study: Energy Athene Entered the 2015 / 2016 Downturn Well Positioned… … And Took Proactive Actions to Manage Exposure Differentiation on Upside AND Downside Integrated Independent Midstream Oilfield Services Refining Portfolio Has Shifted Towards Midstream 93% NAIC 1 or 2 At 6/30/
Slide 63: Different Approach to Alternative Investments
Different Approach to Alternative Investments Step 1: Is the Alt a good use of capital? Step 2: Optimize Is it cheap on a returns basis? Does the alt have greater than target returns without greater than target risk? OR Is it cheap on a risk-adjusted basis? Does the alt meet target returns with belo
Slide 64: Spectrum of Fixed Income-Like Alternative Investments
Spectrum of Fixed Income-Like Alternative Investments Athene’s allocation to alternatives targets opportunistic investments that offer attractive risk-rewards due to sector / market dislocations or structural changes Athene Average Alternative Return Strategic Inv. 31.6% MidCap AmeriHome Athora Redd
Slide 65: Athene's Alternative Investments are Different than Peers
Athene’s Alternative Investments are Different than Peers Note: Peers include: AEL, AIG, CNO, HIG, LNC, MET, PFG, PRU, RGA, TMK, UNM and VOYA. Source: Evercore ISI Research. Athene Alternative Allocation Peer Alternative Allocation 32% Strategic Investments 58% Private Equity 5% Hedge Fund 30% Real
Slide 66: Direct Origination Case Study: MidCap
Direct Origination Case Study: MidCap 1 Yields net of sub advisory fee and base AAM fee. Based on February 15, 2018 trade date. 2 Total losses net of recoveries do not include those related to the MGEC portfolio acquisition, which currently total ~$9.7 million. Includes MidCap team’s track record at
Slide 67: Direct Origination: Vision for the Future
Direct Origination: Vision for the Future Asset origination platforms present an opportunity Athene Is Targeting a Greater Concentration of Differentiated or Directly Originated Assets Today’s Origination Platforms MidCap AmeriHome Future Origination Platforms Infrastructure Commercial and Equipment
Slide 68: What Are Today's Opportunities?
What Are Today’s Opportunities? On-the-Margin Yields 4.25-4.75% 4.25-4.75% 4.5-5.0% 6.0-8.0% 5.75-6.75% On-the-Margin Corporates: 4.00% Yield 1.5 Avg. NAIC Average NAIC: 1.5 1.4 CM2 1.4 CM3 1 Note: As of June 30, 2018. All yields are gross of fees. 1 MidCap originated CLO. Direct origination provide
Slide 69: How We Are Positioning for the Future
How We Are Positioning for the Future Focus On Quality Create Capacity Be Patient Limit risk in the portfolio (94% NAIC 1 or 21) Defensive positioning due to lack of convexity & position in the credit cycle Prepare to capitalize on the next market opportunity Reserve below investment grade capacity
Slide 70: Liquidity & Risk Considerations Core to Underwriting
Liquidity & Risk Considerations Core to Underwriting Nancy De Liban
Slide 71: Credit Investors Not Fixed Income Allocators
Credit Investors Not Fixed Income Allocators AAM’s objective is to allocate among asset sectors based on portfolio constraints and economic risk-return characteristics Asset Class Allocation Framework Asset class underwritten on an economic risk / reward basis Allocate to cheap sectors often unfavor
Slide 72: Specific Asset Underwriting Process
Specific Asset Underwriting Process Significant amount of work prior to even considering an asset for Athene’s balance sheet AAM Does the Work Up Front Key Underwriting Steps 3-6 weeks of performance modeling Understanding downside and causes Performance correlation to economic cycle Incorporate str
Slide 73: Robust Infrastructure Enables More Granular Review
Robust Infrastructure Enables More Granular Review AAM has the ability to structure and underwrite complex assets which often require infrastructure or significant resources Technology is a Strategic Enabler AAM’s Infrastructure Provides a Strategic Underwriting Advantage For: Filters thousands of o
Slide 74: Models and Complexity
Models and Complexity AAM’s models are NOT a black box, but offer transparency – they are a “what if” tool Transparency Model Example FICO Observed Loss Distrib. 1 Distrib. 2 750-850 6.0 10% 50% 650-750 10.0 40% 0% 550-650 20.0 40% 0% 450-550 40.0 10% 50% Average FICO 650 650 Average Loss 16.6 23.0
Slide 75: Surveillance – Is Athene Getting Paid to Take / Hold Risk?
Surveillance – Is Athene Getting Paid to Take / Hold Risk? AAM’s proprietary models enable it to view the entire market in one snapshot Can reevaluate the risk / reward of specific CUSIPs and identify sell candidates Everyday is a buy / sell decision Non-Agency RMBS: Risk-Return Frontier Risk Above
Slide 76: Using Structure to Choose Preferred Risk Profile
Using Structure to Choose Preferred Risk Profile Optimize our position in the capital structure to mitigate downside risk Considerations to Reduce Downside Risk Equity Investment Comparison Amount of cash flow Subordination / credit enhancement Ability to target specific assets Cash on Cash Yield De
Slide 77: Strategic Sourcing Broadens the Asset Universe
Strategic Sourcing Broadens the Asset Universe Sourcing is a differentiator for AAM given transaction fee savings, reduced bid / offer spreads, and the ability to structure downside protection Sourcing Avenues Source directly: Athene / Apollo have broad relationships Join bank syndicates: banks synd
Slide 78: Hybrid CRE CLO – Case Study
Hybrid CRE CLO – Case Study Through direct sourcing and creative structuring obtained a higher yield with no additional risk Rating Spread LTV AAA L+90 0-50 AA L+115 50-60 A L+175 60-65 BBB L+250 65-70 Equity Subordination Structure & Sourcing Benefits Short-term investments are more predictable and
Slide 79: Marketplace Lenders – Case Study
Marketplace Lenders – Case Study Avoided a mis-priced risk / reward asset through a complete underwrite before investment decision Investment Idea Foresight is 20/20 Dislocated market spurred interest Originator indicated returns of ~7-10% Model Indication Determined risk / return profile was insuff
Slide 80: Investment Management Strategy Q&A
Investment Management Strategy Q&A
Slide 81: Multi-Channel Distribution Model Built for Continued Organic Growth
Multi-Channel Distribution Model Built for Continued Organic Growth Grant Kvalheim & Bill Wheeler
Slide 82: Our Approach to Liability Underwriting
Our Approach to Liability Underwriting (Organic & Inorganic) Opportunistically grow liabilities that generate desired levels of profitability Prioritize profit over volume and growth Focus on products with structural features that increase the stability of reserves Develop innovative products with s
Slide 83: The Key to Success is Appropriately Pricing Risk
The Key to Success is Appropriately Pricing Risk Higher Risk Requires a Lower Price Key Risk Considerations Duration Longer Shorter Persistency Sticky Liquid Volatility of Outcomes Narrow Wide Integration Risk Low High Utilize a risk-return continuum to evaluate levels of origination across each of
Slide 84: Across Our Business Lines Strict Focus on Pricing
Across Our Business Lines Strict Focus on Pricing Cost of Funds = Pricing Costs ÷ Cash Received = Pricing Cost of Funds1 Interest Credited Rider Costs Policy Expenses Overhead Strict risk return focus on cost of funds across all business levels Forecast cash cost of riders and benefits actual Athene
Slide 85: Liabilities Long-Dated, Persistent & Attractively Priced
Liabilities Long-Dated, Persistent & Attractively Priced Simple products with structural features that increase the stability of reserves Disciplined Underwriting Approach Diversified Liability Sourcing Target long-dated and illiquid liabilities which support an asset management strategy that capita
Slide 86: We're Maintaining Discipline Across Channels
We’re Maintaining Discipline Across Channels Opportunistically grow liabilities that generate Athene’s desired levels of profitability Organic Strategy Inorganic Strategy Mid-Teens or Higher Target Returns Mid-Teens Target Returns Retail Flow PRT Simple products that are stress-tested under signific
Slide 87: Multiple Distribution Channels a Competitive Advantage
Multiple Distribution Channels a Competitive Advantage Flexibility to respond to changing market conditions across channels to opportunistically grow liabilities that generate Athene’s desired levels of profitability $2.9bn $3.9bn $8.8bn $11.5bn $12-13bn Industry Leader Within Fixed Annuity Market #
Slide 88: Industry Leader in the Fixed Indexed Annuity Market
Industry Leader in the Fixed Indexed Annuity Market #2 issuer in the overall FIA market for last 2 years while meeting targeted returns Expanding Distribution Channels Expanding Product Suite Ability to quickly create new, innovative products that resonate with customers and get them to market quick
Slide 89: Managing New Retail Business Risk / Return Tradeoff
Managing New Retail Business Risk / Return Tradeoff Athene is highly disciplined in targeting liabilities with its preferred characteristics Accumulation Products Lower in risk because they have low policy guarantees and limited policyholder options Guaranteed Income Riders Higher in risk because th
Slide 90: Athene's Retail Product Characteristics
Athene’s Retail Product Characteristics Are Compelling Lower Risk Diversified product portfolio with focus on lower risk accumulation and participating income rider FIAs Only 31%1 of retail sales are full lifetime withdrawal benefits, well below industry levels 19%1 of retail deposits have guarantee
Slide 91: Strong Momentum From Channel and Product Expansion
Strong Momentum From Channel and Product Expansion Retail business is performing well as we continue to execute our strategic plan Strong pricing discipline on both new premium and in-force management 1 Great progress expanding Bank and IBD channel distribution 2 3 Tailwinds from ratings upgrades (A
Slide 92: Third Party Reinsurance Up Significantly YOY
Third Party Reinsurance Up Significantly YOY Athene Life Re is one of the largest annuity reinsurers Athene continues to expand our flow client relationships Won recent mandates from two well-known insurers for new flow reinsurance agreements 2018 volumes are on track to reach $1.5bn, almost double
Slide 93: Why Flow Reinsurance Will Continue Growing
Why Flow Reinsurance Will Continue Growing Illustrative Post-Tax ROE based on Quota Share Reinsurance to Athene1 Athene’s Value Proposition Efficient Bermuda advantage to enhance financial results Assists with managing capital and enhancing returns Share in asset management upside Athene provides a
Slide 94: Disciplined and Opportunistic Funding Agreement Issuer
$3bn Total FABN Issuance1 Disciplined and Opportunistic Funding Agreement Issuer 1 Since entering the FABN market in 2015. Low cost liability that provides cashflow stability as there is zero policy holder behavior risk Positive ratings momentum and demonstrated track record will further the program
Slide 95: Pension Risk Transfer
Bill Wheeler Pension Risk Transfer
Slide 96: The Pension Risk Transfer Market Represents a Large Opportunity
The Pension Risk Transfer Market Represents a Large Opportunity We are seeing ongoing momentum in de-risking activity, with increased activity extending beyond retiree only transactions to full plan terminations $3.2 trillion Outstanding Private Defined Benefit Plan Assets Retired Participants Termi
Slide 97: Industry Transaction Volumes are Increasing
Industry Transaction Volumes are Increasing U.S. Buyout Sales ($ in billions) $20-25 2nd half of year 1st half of year $8.4 $13.6 $13.7 $23.0 Improving macro-economic environment driving increased activity, including: market performance, tax reform, and PBGC increasing premiums Transactions have bee
Slide 98: Landscape Defined by Relatively Few Buyers
Athene actively competing Landscape Defined by Relatively Few Buyers and Mid-Large Size Transactions Competition Transaction Types There are about 15 insurers participating in the PRT market in any given year The majority of transactions are from Plan Sponsors executing lift-outs of retirees (partia
Slide 99: We Are Quickly Gaining Momentum in the PRT Market
We Are Quickly Gaining Momentum in the PRT Market Superior investment capabilities with a track record of delivering consistent and stable returns 1 Rankings as of December 31, 2017, per LIMRA. 8 Deals Closed $3.1bn Total Deposits #4 Ranking for New PRT Sales1 74k Covered Lives $400mm Average Deal S
Slide 100: Disciplined & Value Generative Inorganic Strategy
Disciplined & Value Generative Inorganic Strategy Bill Wheeler
Slide 101: Disciplined Approach Enables Us to Identify Best Opportunities
Disciplined Approach Enables Us to Identify Best Opportunities Whole Company Acquisitions Reinsurance Multi-party Transactions Complex Carve-outs Other Spread-based Liabilities “Vanilla” FA Blocks Fits Strategy Ability to scale assets / liabilities Leverage existing strengths Risk Profile Liabilitie
Slide 102: Inorganic Transactions Have Added More than $80 Billion of Assets
Execution of Inorganic Transactions have Added More than $80 Billion of Assets Acquired Assets $4.4bn $3.1bn $4.1bn $1.5bn $50.0bn $19.1bn $82.2bn 1 M&A transactions, which excludes the Voya and Transamerica block reinsurance. Average P/B Multiple1 of 0.6x 2009 Today
Slide 103: Athene's Transaction Playbook
Athene’s Transaction Playbook Creating value from many different actions 2009 Today Asset Yields Reserves Expenses
Slide 104: Advantage Voya Application
Advantage Voya Application Partnership with Apollo allows for comprehensive asset diligence Ability to redeploy portfolios to pick up asset yield 75-80 bps of projected redeployment yield pick-up Material incumbency advantage vs. new entrants ~$1bn of capital deployed into a large scale block of pro
Slide 105: Liability Growth Strategy Q&A
Liability Growth Strategy Q&A
Slide 106: Risk Management
Risk Management John Rhodes SYATHENE biiven to do more
Slide 107: Risk Management is Embedded in Everything We Do
Risk Management is Embedded in Everything We Do The goal of risk management is to manage Athene’s risks such that it can grow profitably across various markets Robust risk management framework and procedures Risk strategy, investment, ALM and liquidity compliance policies at the Board and Management
Slide 108: Robust Risk Management in Place to Monitor & Manage Key Risks
Robust Risk Management in Place to Monitor & Manage Key Risks Credit Spread Change Default Counterparty Liquidity Asset and Liability Cash Flow & Collateral Equity Fixed Indexed Annuity Exposure Interest Rate Economic / Solvency Policyholder Behavior Key Risks Risk Management Team Led by CRO, Report
Slide 109: Our Risk Framework is Integrated Across Governance
Our Risk Framework is Integrated Across Governance, Policies, Limits and Compliance Monitoring Management Risk Committee Scope is full range of company risks including credit, rates, business, equity, operational, etc. Management Investment Committee Approve investment limits, large asset transactio
Slide 110: Prescriptive Mitigation Activities Exist for Each Key Risk
Prescriptive Mitigation Activities Exist for Each Key Risk Mitigation Activity Interest Rate Duration and convexity limits, key-rate sensitivities Investing in longer dated fixed assets Pass Cash Flow Testing requirements across legal entities Credit Monitor daily investment activity Single name and
Slide 111: Risk Team Plays Key Role in Inorganic Transaction Diligence
Risk Team Plays Key Role in Inorganic Transaction Diligence Process Voya Block Reinsurance Case Study Review of Voya’s asset portfolio prior to transaction Review of planned asset redeployment post-transaction ALM, Capital & Liquidity Review of actuarial assumptions to calculate liabilities Comparis
Slide 112: Athene Liability Risk Profile is Very Manageable
Athene Liability Risk Profile is Very Manageable Economic View (Change in $ billions) Lapse Exposure % of Liabilities Lapses Up 25% Lapses Down 25% Neutral 6% - - Up 51% 0.3 (0.5) Down 43% (0.2) 0.3 Total Block 100% 0.1 (0.2) Mortality Exposure % of Liabilities Mortality Up 25% Mortality Down 25% Ne
Slide 113: Stress Testing Plays a Central Role in Supporting Our Risk Appetite
Stress Testing Plays a Central Role in Supporting Our Risk Appetite We present an illustrative recession scenario to stress test our portfolio Key Stress Test Assumptions Overview of Stress Testing Analysis Internally defined integrated scenario stresses (shocks to credit, equity and rates) based on
Slide 114: Our Recession Assumptions Are Within the Range of Past Market Experience
Our Recession Assumptions Are Within the Range of Past Market Experience Athene Recession Scenario Assumptions Historical Recession Experience 1991 2001 2008 10Y T (100bps) 35bps (100bps) (160bps) Spreads (BBB / HY) +140bps / +395bps +69 / NA +121bps / +423bps +371bps / +1093bps Equity Markets (25%)
Slide 115: We Apply Stress Assumptions to Our Portfolio & the Industry
We Apply Stress Assumptions to Our Portfolio & the Industry Primary areas of differentiation between portfolios is within Corporates and Structured investments Athene’s Portfolio1 Average Life Insurers’ Portfolio3 1 Invested assets as of June 30, 2018, including related parties. 2 “Other” includes R
Slide 116: Recession Stress Results are Very Manageable
Recession Stress Results are Very Manageable Portfolio reaction likely less than some perceive Recession Impacts on Earnings (in $ billions) 1 Year GAAP Operating Earnings (LTM-2Q’18) $1.1 Asset Class Best Estimate OTTI, Pre DAC / Tax Portfolio % Stress Test Methodology Corporates ($0.2) 47% Moody’s
Slide 117: Stress Results Bridge vs. Industry
Stress Results Bridge Illustrates Athene is Not Significantly More Impaired vs. Industry Stress differential equates to 16bps of OTTI Comparison of OTTI Pre-tax by Asset Class – Athene vs. Industry Portfolio 102bps 118bps Note: Results are peak to trough OTTI estimates, with no management actions as
Slide 118: Risk Management Summary
Risk Management Summary External validation of stress results Stress testing is central to ensuring risk appetite is understood and adhered to Comprehensive, mature governance and risk management framework Integrated risk management involvement in all aspects of business origination across all chann
Slide 119: Optimizing Profitability With an Efficient and Scalable Structure
Optimizing Profitability With an Efficient and Scalable Structure Marty Klein
Slide 120: Surpassing IPO Expectations as We Execute Our Strategy
Surpassing IPO Expectations as We Execute Our Strategy Achieving growth aspirations while delivering strong returns Actual Results 2017E 1H’18E 2017A 1H’18A Organic Deposits $9.5bn $4.5bn $11.5bn $4.7bn 13% Inorganic Deposits - $15.0bn - $19.1bn 27% Invested Assets2 - $90.9bn - $98.6bn 8% Retirement
Slide 121: Large and Growing Base of Earnings
Large and Growing Base of Earnings Executing on our growth strategy since the IPO Large in-force business with ~$100bn of invested assets Expect earnings to fund organic growth Expect annual 2-3% investment margin Invested asset growth of 50% since IPO1 Expanded our retail market share and FABN plat
Slide 122: Capitalizing on Growth Accelerators
Capitalizing on Growth Accelerators Upside Through Alternatives Ratings Upgrades Block Transactions Enhanced Results with Higher Interest Rates Since Athene’s IPO, the 10-year treasury yield has increased 38 bps1 Athene’s average Alternatives return2 11.9% RETURN Athene has continued to demonstrate
Slide 123: Unwavering Focus on Profitability
Unwavering Focus on Profitability Executing on our growth strategy and continuing to produce strong financial results 1 Excluding Germany business for historical periods. 2 Investment margin on deferred annuities for our Retirement Services segment. 3 End of period. Adjusted Op. Income1 ($ millions)
Slide 124: Efficient and Scalable Platform
Efficient and Scalable Platform Low cost and established platform will increase operating leverage and profit margins Operating Expenses as a % of Average Invested Assets Investment in IPO Readiness Investment in PRT & Retail expansion Voya deal closing 7/1, highlighting scale efficiencies Block gro
Slide 125: Strong and Profitable Growth Trajectory
Strong and Profitable Growth Trajectory Our multi-channel platform enables strong growth while achieving mid-teens returns Growth in Retirement Services Reserve Liabilities (2016-1H’18) 1 Other reserve changes primarily includes fixed and bonus interest credits, change in fair value of embedded deri
Slide 126: Strong Balance Sheet Supports Growth and Earnings
Strong Balance Sheet Supports Growth and Earnings Achieving ratings upgrades and holding excess capital are core to our strategy 1H’18 RBC Ratio1 Total Debt Capacity2 Balance Sheet Highlights Athene has one of the most pristine balance sheets in the industry Athene has modest leverage of 12% compare
Slide 127: Diligent Focus on Reserving Practices
Diligent Focus on Reserving Practices Best-in-class reserving processes viewed as a keystone for protecting shareholder value, with a current rider reserve of ~8% of the account value for business with riders Rider Reserve Reserve held for lifetime income and / or death benefits that are continued t
Slide 128: Understanding Asset Leverage vs. Asset Risk
Understanding Asset Leverage vs. Asset Risk No distinction in level of investment risk Asset leverage ratio would not distinguish the risk between a portfolio of 100% in NAIC 1 Corp Bonds and 100% in Alternatives RBC and Rating Agency models for C1 (credit) risk provide much improved distinctions in
Slide 129: Patient and Disciplined Stewards of Capital
Patient and Disciplined Stewards of Capital Consistent capital deployment at mid-teens returns (in billions) 2016 2017 1H’18 Organic Deposits $8.8 $11.5 $4.7 Achieving mid-teens returns ü ü ü Beginning Excess Capital ~$1.0 ~$1.5 ~$2.0 Block Earnings1 0.8 0.8 0.5 Block Runoff 0.6 0.7 0.2 Total Source
Slide 130: Outsized Value Creation Opportunity Through Inorganic Transactions
Outsized Value Creation Opportunity Through Inorganic Transactions Athene has demonstrated its ability to enhance the return profile of an inorganic target in order to achieve mid-teen returns Incremental Earnings Earnings on Required Capital Inorganic Illustration Acquisition target recognized 10-1
Slide 131: Illustration of Inorganic Transaction Impact on Earnings and ROEs
Illustration of Inorganic Transaction Impact on Earnings and ROEs $1 Billion of Capital Deployed Inorganic Illustration Potential Upside $1bn of capital deployed at a 15% statutory IRR Acquire or reinsure ~$12-13bn of spread liabilities and achieve ~100bps of annual net spread on invested assets $10
Slide 132: Strong Earnings Momentum in 2018 Expected to Continue
Strong Earnings Momentum in 2018 is Expected to Continue into 2019 and Beyond NIERs expected to continue upward trend driven by rising interest rates and redeployment of Voya assets Cost of crediting rate also expected to increase modestly as interest rates rise Other liability costs rate increases
Slide 133: Attractive ROE Production & Prudent Capital Management
Attractive ROE Production & Prudent Capital Management Drive Shareholder Value Jim Belardi
Slide 134: Attractive ROE Production and Prudent Capital Management
Attractive ROE Production and Prudent Capital Management Drive Shareholder Value 1 Average adjusted operating ROE from 2014-2017. 2 Adjusted book value per share CAGR since inception. CAGR growth includes the $1.3bn private placement, drawn in 2014 and 2015. Value added, opportunistic asset manageme
Slide 135: Our Results Are Superior
Our Results Are Superior… We have generated better ROEs, earnings growth, and book value growth More Attractive ROEs Stronger EPS Growth Superior BVPS Growth Note: Industry represents mean of AEL, AIG, LNC, MET, PFG, and PRU, as well as VOYA for ROE and EPS growth metrics only, per available data hi
Slide 136: A Tremendous Opportunity in Front of Us
…And We Have a Tremendous Opportunity in Front of Us Illustrative view of growth on only today’s capital base is compelling Mid-to-High Single Digit Organic Growth $4bn Levered 12-13x ~$100bn ~$50bn $50bn $200bn+
Slide 137: Athene's Value Proposition is Compelling
Athene’s Value Proposition is Compelling Growth and sustainability characteristics…at a value price Note: Data presented as of September 18, 2018. 1 Compound annual growth rate based on EPS for the FY2012-FY2017 period. 2 Compound annual growth rate based on adjusted BVPS for the FY2009-1H’18 period
Slide 138: Regression Analysis Suggests Differentiation Underappreciated
Regression Analysis Suggests Our Differentiation is Currently Underappreciated Consensus Athene 2019E ROE 14% Athene Implied P/BV 1.55x Current P/B 1.20x Current Discount 23% Note: Data presented as of September 19, 2018. Source: Company filings, Bloomberg Finance LP, and IBES consensus estimates.
Slide 139: Athene Shares Similarities with Other High Quality Financial Services Companies
Athene Shares Similarities with Other High Quality Financial Services Companies Long track record of solid results and above average organic growth Recognized for sustainability and predictability Best of class in its product category; sustainable and higher than average returns Has delivered very s
Slide 140: Alternative Comparables Suggest Meaningful Upside
Alternative Comparables Suggest Athene’s Valuation Has Meaningful Upside Earnings and book value multiples highlight disconnect The fundamental metrics of Athene’s business closely compare with other high quality financial services companies valued at significantly higher valuation multiples Note: P
Slide 141: We Want to Leave You with Four Key Takeaways
We Want to Leave You with Four Key Takeaways Bottom Line: We are a differentiated financial services company poised for the “Fat Pitch” We create value on both sides of the balance sheet We are disciplined and patient stewards of capital We have structural advantages and better capabilities 3 We are
Slide 142: Management Q&A Panel
Management QGA Panel SYATHENE biiven to do more
Slide 143: Athene closing slide
SVATHENE oriven to do more!
Slide 144: Non-GAAP Measures and Definitions
Non-GAAP Measures and Definitions Non-GAAP Measures: Adjusted operating income is a non-GAAP measure used to evaluate our financial performance excluding market volatility and expenses related to integration, restructuring, stock compensation, and other expenses. Our adjusted operating income equals
Slide 145: Non-GAAP Measure Reconciliations
Non-GAAP Measure Reconciliations Reconciliation of Class A shares to shares outstanding Reconciliation of basic weighted average Class A shares to weighted average shares outstanding - adjusted operating Reconciliation of basic earnings per Class A common shares to adjusted operating earnings per sh
Slide 146: Non-GAAP Measure Reconciliations
Non-GAAP Measure Reconciliations Reconciliation of Net income to adjusted operating income Reconciliation of basic weighted average Class A shares to weighted average shares outstanding - adjusted operating Reconciliation of Net income to adjusted operating income excluding notable items Reconciliat
Slide 147: Non-GAAP Measure Reconciliations
Non-GAAP Measure Reconciliations Reconciliation of shareholders’ equity to adjusted shareholders’ equity Reconciliation of basic weighted average Class A shares to weighted average shares outstanding - adjusted operating Reconciliation of total capitalization to total adjusted capitalization Reconci
Slide 148: Non-GAAP Measure Reconciliations
Non-GAAP Measure Reconciliations Reconciliation of GAAP net investment income to net investment earnings Reconciliation of basic weighted average Class A shares to weighted average shares outstanding - adjusted operating Reconciliation of GAAP net investment earned rate to net investment earned rate
Slide 149: Non-GAAP Measure Reconciliations
Non-GAAP Measure Reconciliations Reconciliation of GAAP interest sensitive contract benefits to Retirement Services’ cost of crediting on deferred annuities Reconciliation of basic weighted average Class A shares to weighted average shares outstanding - adjusted operating Reconciliation of GAAP inte
Slide 150: Non-GAAP Measure Reconciliations
Non-GAAP Measure Reconciliations Reconciliation of GAAP total investments, including related parties to total invested assets Reconciliation of basic weighted average Class A shares to weighted average shares outstanding - adjusted operating Reconciliation of GAAP investment funds, including related
Slide 151: Non-GAAP Measure Reconciliations
Non-GAAP Measure Reconciliations Reconciliation of GAAP total liabilities to reserve liabilities Reconciliation of basic weighted average Class A shares to weighted average shares outstanding - adjusted operating