Athene Holding Ltd. · NYSE:ATH/PA
Athene — Investor Presentation (April 2023)
31 slides from Athene's investor presentation, Apr 27, 2023
Slide 1: Perspectives on Commercial Real Estate April 2023
Perspectives on Commercial Real Estate April 2023
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”). Unless the context requires otherwise, references in this presentation to “Apollo," "AGM" and "AGM HoldCo" refer to Apollo Global Management, Inc
Slide 3: Industry Considerations
Industry Considerations
Slide 4: Commercial Real Estate Always Has Been an Integral Asset Class for Insurers
Commercial Real Estate Always Has Been an Integral Asset Class for Insurers Source: SNL Financial. 1. Percentage of total general account assets for all statutory entities, as of December 31, 2022. 4 • CRE has been a widely-held asset class across the insurance landscape for decades • CRE is well-su
Slide 5: Capital Requirements and Return Potential Drive Behavior
Capital Requirements and Return Potential Drive Behavior 1. Refers to NAIC required capital levels at an illustrative 100% Risk-Based Capital (RBC) level. 2. Commercial Mortgage Loans assume CM2 under NAIC. 3. Commercial real estate equity assumes Schedule A direct real estate at low LTVs. 5 • The N
Slide 6: Not All CRE is Created Equal – Today It's Better to Own Debt, Not Equity
Not All CRE is Created Equal – Today It’s Better to Own Debt, Not Equity 6 Debt • 1st Lien / Senior • Mezzanine Equity Higher Risk Lower Risk Capital Structure Subsector Industrial Multifamily Hotel Retail Office CRE
Slide 7: When CRE 'Cap Rates' Rise, Equity is Impaired Before Debt
When CRE ‘Cap Rates’ Rise, Equity is Impaired Before Debt Note: Capitalization rates (‘cap rates’) reflect the rate of return investors can expect to earn on CRE investments (Cap Rate = Net Operating Income / Property Value). Can also be thought of as the inverse of valuation multiples. Illustration
Slide 8: Athene Has De Minimis Exposure to CRE Equity
0.2% 0.5% 0.7% 2.7% 1.0% 0.1% Insurer 1 Insurer 2 Insurer 3 Insurer 4 Average ATH 0.1% 0.4% 0.5% 1.0% 1.2% Athene Variable Annuity Fixed Annuity AA / A+ Diversified Life Athene Has De Minimis Exposure to CRE Equity Note: CRE equity includes affiliated and unaffiliated real estate assets held by U.S.
Slide 9: Debt is Well Protected Even With No Net Operating Income Growth
Debt is Well Protected Even With No Net Operating Income Growth 9 0% Net Operating Income (NOI) Growth Annually for 3 Years 5% NOI Growth Annually for 3 Years 10% NOI Growth Annually for 3 Years Impairments Across Various Cap Rate Expansion Scenarios Cap Rate: 5.0% Debt (0 to 60% LTV) Equity (40% -
Slide 10: Net Operating Income Growth Varies Significantly by Subsector
Net Operating Income Growth Varies Significantly by Subsector 10 80 90 100 110 120 130 140 150 160 170 Dec-2022 Dec-2023 Dec-2024 Dec-2025 Dec-2026 Dec-2027 Industrial Hotel Multifamily Retail Office 3Y (from Dec. 2022) 5Y (from Dec. 2022) Source: GreenStreet. Note: GreenStreet forecasts NOI growth
Slide 11: Each Commercial Real Estate Subsector Has Different Risk Profiles…
Each Commercial Real Estate Subsector Has Different Risk Profiles… 1. As of December 31, 2022; Morgan Stanley Research, BEA, Haver Analytics. Multifamily includes manufactured homes, healthcare included in industrial. 11 Demand Occupancy NOI Growth Asset Values % of CRE Market1 HOTEL 8% INDUSTRIAL 2
Slide 12: …And Specialty Property Types Can Provide Differentiated Risk / Reward
…And Specialty Property Types Can Provide Differentiated Risk / Reward 12 Traditional Property Types Specialty Property Types Industrial Manufactured Housing RetailOffice Life Sciences Student HousingNet Lease Self-StorageData Center Cold Storage HealthcareGamingCell Tower HotelMultifamily
Slide 13: Loan Sizing Historically Restricted by LTV; Refinancing Will Require Equity Injection
Loan Sizing Historically Has Been Restricted by LTV, and in a Higher Interest Rate Environment, Refinancing will Require Substantial Equity Injection Limiting factor is highlighted in table above. 1 Assumes loan is fixed rate. Loan-to-Value (‘LTV’) is the amount of debt financing a lender will provi
Slide 14: Real Estate Debt Also Benefits From Significant Protection Via Loan Structure
Credit enhancement from equity Amortization Structural protections that trap cash to support debt in periods of stress Reserves set from cash flow to cover building operating costs Real Estate Debt Also Benefits From Significant Protection Via Loan Structure 14
Slide 15: Athene's CRE Portfolio
Athene’s CRE Portfolio
Slide 16: Key Takeaways
Key Takeaways Note: Metrics as of December 31, 2022. 16 GENERATING ATTRACTIVE RETURNS WITH LOW HISTORICAL LOSSES Athene’s CML portfolio only has 2 bps of annualized losses over the last decade vs. 7 bps for peers3 POST-COVID ORIENTATION 56% of the CML portfolio was originated after the onset of the
Slide 17: Athene's CRE Investments Are Virtually All Debt…
Athene’s CRE Investments Are Virtually All Debt… Note: Metrics based on GAAP net invested assets as of December 31, 2022. Variable Annuity Companies include JXN, LNC, BHF, and EQH. Diversified Life Insurers include MET, PRU and CRBG. Fixed Annuity Companies include AEL, Global Atlantic, FG, and CNO;
Slide 18: …Underwritten to Conservative LTVs Relative to the Industry
…Underwritten to Conservative LTVs Relative to the Industry Note: Data as of March 1, 2023. 1. Source: Real Capital Analytics. 18 Industry-Wide Average CRE Loan-to-Value by Year of Origination1 69% 65% 61% 62% 64% 64% 65% 66% 66% 64% 62% 62% 63% 60% 59% 57% 63% Avg. 2007 2008 2009 2010 2011 2012 201
Slide 19: Athene Has a Well-Constructed CML Portfolio
Athene Has a Well-Constructed CML Portfolio Note: Data presented on a net invested assets basis, excluding Athene’s non-controlling interest in ACRA. 1. DSCR is calculated based on interest rate cap. 2. LTV figures based on original appraised values at close or most recent appraisal. 3. Other includ
Slide 20: Portfolio Quality Improved Throughout COVID Pandemic
Portfolio Quality Improved Throughout COVID Pandemic Note: Data presented net of Athene’s non-controlling interest in ACRA. 20 27% 25% 2019 2022 22% 9% 2019 2022 $13B or 56% of Athene’s CMLs were originated after the onset of the COVID-19 pandemic % of Portfolio Designated CM 1 & 2 Retail Sector as
Slide 21: Athene's CMLs Have Been Very Resilient, With Losses Well Below Expectations
Athene’s CMLs Have Been Very Resilient, With Losses Well Below Underwriting Expectations and Industry Note: Data presented net of Athene’s non-controlling interest in ACRA. 1. Industry average includes BHF, CNO, CRBG, EQH, LNC, MET, PRU, VOYA. Source: Barclays. 2. Represents historical impairments b
Slide 22: Athene's CRE Portfolio Performs Well in Stress Testing
4Q’22 Portfolio Allocation BASELINE RECESSION SCENARIO DEEP RECESSION SCENARIO STAGFLATION SCENARIO Losses Impact ($B) Losses % of Net Invested Assets Losses Impact ($B) Losses % of Net Invested Assets Losses Impact ($B) Losses % of Net Invested Assets Corporate & Gov’t OTTI 44% ($0.3) (0.4%) ($0.7)
Slide 23: Like Corporate Bonds, Commercial Mortgage Loans Have a Ratings Framework
Like Corporate Bonds, Commercial Mortgage Loans Have a Ratings Framework 23 • ‘CM’ designations (1-7) are used by insurance companies to calculate risk-based capital (RBC) charges • Unlike corporate bond designations, which are based on NRSRO ratings, CM designations are formulaic and driven by LTV,
Slide 24: Highly Rated CML Portfolio; 'CM3' Designations Driven by Idiosyncratic Factors
Highly Rated CML Portfolio; ‘CM3’ Designations Driven by Idiosyncratic Factors Note: Data presented net of Athene’s non-controlling interest in ACRA. 1. Weighted average LTV figures based on original appraised values at close or most recent appraisal. 24 CM1 17% CM2 59% CM3 22% CM4 2% CM5 <1% • Most
Slide 25: Athene is Well Positioned to Capitalize on the Current Market Opportunity
Athene is Well Positioned to Capitalize on the Current Market Opportunity Note: Includes transactions closed to date and in closing. Coupons of fixed-rate deals in closing shown at locked rates (as applicable) or based on current UST and contractual coupon floors. 1. Data as of April 27, 2023. 2. Ex
Slide 26: Athene's CRE Office Investments
Athene’s CRE Office Investments
Slide 27: Athene's CML Office Investments are 100% Debt
Class A CBD 75% Class B CBD 11% Suburban 11% Medical Office 3% Owner Occupied <1% Athene’s CML Office Investments are 100% Debt Note: Data presented net of Athene’s non-controlling interest in ACRA. 1. DSCR is calculated based on interest rate cap. 2. LTV figures based on original appraised values a
Slide 28: Athene's Office CML Composition
Manhattan 22% Other New York 10% Los Angeles 19% California Ex. LA 18% South 12% UK/Europe 7% Midwest 4% West Ex. CA 4% Northeast Ex. NY 4% Athene’s Office CML Composition Note: Data presented net of Athene’s non-controlling interest in ACRA. 28 57% LTV Predominantly long-term leased to credit tenan
Slide 29: Athene is Not Overweight Investments in the Office Sector
Athene is Not Overweight Investments in the Office Sector Note: All metrics as of December 31, 2022. 1. Represents Office CMLs as a percentage of General Account Assets, calculated as GAAP invested assets plus cash. 29 4.6% 4.3% 3.8% 3.6% 3.0% 2.7% 1.7% Peer Avg. 3.5% MET PFG Global Atlantic CRBG At
Slide 30: Office Loan Volumes and Future Borrower Maturities
Office Loan Volumes and Future Borrower Maturities Note: Data presented net of Athene’s non-controlling interest in ACRA. 30 • ~50% of Athene’s current office portfolio was originated post-COVID, underwritten and structured with work-from-home trends and flight to quality office demand in mind • Lon
Slide 31: Non-GAAP Definitions & Reconciliations
Non-GAAP Definitions & Reconciliations 31 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 asse