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Athene Holding Ltd. (ATH-PA)·Q4 2024 Earnings Summary

Executive Summary

  • Athene’s Q4 2024 Retirement Services performance delivered Spread Related Earnings (SRE) of $841 million, up 12% year-over-year vs. $748 million in Q4 2023, with net spread at 1.37% (down 7 bps sequentially) as cost of funds rose; alternative net investment income improved to $269 million with a 9.25% annualized return .
  • Management prereleased preliminary Q4 alternative net investment income of ~$265 million (pre-tax) on January 2, 2025, which tracked closely to reported ~$269 million, offering early visibility into quarter quality .
  • Gross organic inflows were $14.2 billion in Q4, led by retail ($7.95B) and funding agreements ($5.17B); pension group annuities were light ($47M) in the quarter, consistent with commentary on competitive dynamics .
  • 2025 guidance: Assuming 11% alts returns, management expects Athene’s SRE to be approximately $2.5 billion, with rate-related headwinds consistent with Investor Day assumptions; net spread on new volumes exceeded 140 bps in 2024, supporting ongoing spread durability .
  • Catalysts: Apollo’s (Athene’s parent) S&P 500 addition (Dec) and a Q4 prerelease of alts returns, alongside continued preferred dividend declarations (Nov 19) and junior subordinated debenture financing (Oct 7) supporting capital strategy .

What Went Well and What Went Wrong

What Went Well

  • Strong year-over-year SRE growth and improved alternatives performance: SRE rose to $841 million and alts annualized return reached 9.25% (vs. 6.47% in Q4’23), helping offset higher cost of funds .
  • Robust capital formation with diversified channels: Q4 gross inflows were $14.2B, with retail ($7.95B) and funding agreements ($5.17B) driving the quarter; full-year gross inflows reached $71B, highlighting resilient demand for guaranteed income solutions .
  • Management confidence and strategic focus: “Athene is the largest in the industry, continues to have industry-leading market share and for the year, generated more than $70 billion of organic inflows” (Marc Rowan) .

What Went Wrong

  • Net spread compression sequentially: Net spread fell to 1.37% in Q4’24 from 1.44% in Q3’24, driven by higher cost of funds amid rate transitions and new business written in a higher-rate environment .
  • Pension group annuity activity muted: Only $47M of Q4 pension group annuity inflows versus $294M in Q3 and $577M in Q2, with management citing heightened competitive dynamics despite strong engagement .
  • Elevated cost of funds: Cost of funds rose to $2,116M (3.46% of average net invested assets), reflecting rate transitions and mix effects; however, gross income also increased, partially offsetting spread impact (CFO commentary) .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Fixed income & other net investment income ($MM)$2,340 $2,807 $2,912
Alternative net investment income ($MM)$190 $236 $269
Strategic capital management fees ($MM)$23 $27 $29
Cost of funds ($MM)$(1,594) $(1,983) $(2,116)
Net investment spread ($MM)$959 $1,087 $1,094
Other operating expenses ($MM)$(119) $(112) $(116)
Interest & other financing costs ($MM)$(92) $(118) $(137)
Spread Related Earnings (SRE) ($MM)$748 $855 $841
Net spread (%)1.41% 1.44% 1.37%
Alternative annualized return (%)6.47% 8.19% 9.25%
Average net invested assets ($MM)$212,761 $237,810 $244,796

Segment inflows by channel (gross):

Channel ($MM)Q2 2024Q3 2024Q4 2024
Retail$8,938 $9,209 $7,954
Flow reinsurance$1,210 $944 $1,029
Funding agreements$5,970 $9,570 $5,167
Pension group annuities$577 $294 $47
Total gross inflows$16,695 $20,017 $14,197
Gross outflows$(10,140) $(8,158) $(7,136)
Net flows$6,555 $11,859 $7,061

Key KPIs:

KPIQ2 2024Q3 2024Q4 2024
Outflows attributable to Athene (annualized % of average net invested assets)15.0% 10.4% 9.3%
Alternative net return delta to long-term expectation (%)5.27% 2.81% 1.75%
Impact to net spread from alts delta (%)0.27% 0.13% 0.09%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Spread Related Earnings (SRE) ($B)FY 2025“Consistent with Investor Day assumptions” (embedded) ~$2.5B assuming 11% alts return Maintained (quantified)
Net spread on new business (bps)FY 2024 reference>140 bps achieved in 2024 Indicator for 2025 durability Informational (supports spread)
Rate headwinds assumptionSep 2024–Dec 20256 equivalent cuts assumed Headwinds consistent with prior assumption Maintained
Preferred dividends (Series A–E)Q4 2024Prior quarterly cadenceDeclared: $0.396875 (A), $0.3515625 (B), $0.3984375 (C), $0.3046875 (D), $0.484375 (E) per depositary share, payable Dec 30, 2024 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
Net spread drivers (rate impacts, hedging)Q2: Net spread fell to 1.24% on higher cost of funds, floater hedging costs; rate transitions noted Q4: Net spread 1.37%; cost of funds up; CFO notes higher gross income offset; floater book prudently reduced Stabilizing sequentially with mix management
Alternatives performanceQ2: 5.73% annualized; AAA +9% annualized; retirement services investments -4% annualized Q4: 9.25% annualized alt return; prelim prerelease $265M tracked reported $269M Improved
Capital formationQ2: Gross inflows $16.7B; held ADIP II final close ($6B) to support growth Q4: Gross inflows $14.2B; retail and FABNs strong; full-year inflows $71B Resilient with channel pivots
Pension group annuitiesQ2: Closed one; $577M inflows Q4: $47M; management cites competitive dynamics Softer activity in quarter
Regulatory/retirement solutions (DC access, CITs)Q2: Scaling wealth products, semi-liquid funds; infrastructure to support Q4: Emphasis on DC solutions via CITs and managed accounts; litigation/fee culture as barriers; push for net return focus Structurally positive narrative
Public/private convergenceQ2: Building semiliquid product set, wealth distribution Q4: BlackRock moves cited; open architecture partnerships via ACS; private assets in retirement solutions Accelerating industry alignment

Management Commentary

  • “Athene is the largest in the industry, continues to have industry-leading market share and for the year, generated more than $70 billion of organic inflows… we seek to earn excess returns” (Marc Rowan) .
  • “Assuming an alts return of 11%, we expect SRE to approximately $2.5 billion in 2025… key drivers will be Athene’s net organic growth, the net spread on that growth, the trajectory of interest rates and the returns on Athene’s alts portfolio” (Martin Kelly) .
  • “We reduced our floater book to a more prudent level… we are generally better off in a higher rate environment… the vast majority of our business is credit-oriented” (Marc Rowan) .
  • “The business remains extremely well positioned, and we expect we’ll be a leader in new product creation to serve the needs of this massive retirement population” (James Zelter) .

Q&A Highlights

  • Retirement solutions in DC plans: Path forward via CITs, managed accounts, and focus on net returns over fee optics; regulatory evolution would be a tailwind .
  • Origination mix and growth pillars: ATLAS SP expansion, lender finance against private credit collateral, and integrated direct lending capabilities across geographies .
  • Rate environment and positioning: Higher-for-longer rates referenced; duration matching and floater exposure reduced; credit-oriented model benefits from current backdrop .
  • Competitive landscape and cost of funds: Net spread viewed on a combined gross income vs. cost basis; management highlights operating efficiency, asset production scale, and funding access as durable advantages .
  • Insurance M&A capacity: Multiple pockets (Athene, Athora, Venerable) provide flexibility; capacity exists, but decisions remain economics-driven .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for Athene Holding Ltd. (standalone) for Q4 2024 were unavailable due to reporting through Apollo’s consolidated structure and Athene’s status as a subsidiary. We attempted retrieval and encountered a data limit error; no reliable Wall Street consensus was accessible for Athene standalone this quarter [GetEstimates error].
  • Management’s January 2 prerelease of alternative net investment income ($265M, pre-tax) provided early quarter transparency, aligning with the reported ~$269M .

Key Takeaways for Investors

  • Year-over-year improvement with sequential spread stabilization: SRE growth and higher alts returns underpin fundamentals, while net spread compression is being actively managed via mix, hedging, and channel pivots .
  • 2025 setup: SRE ~ $2.5B contingent on 11% alts returns; rate headwinds assumed per prior framework; new business underwritten spreads (>140 bps in 2024) support spread durability across volumes .
  • Inflows resilience: Retail and funding agreements continue to anchor formation; pension group annuities may remain episodic quarter-to-quarter given competitive dynamics .
  • Strategic edge: Efficiency, asset origination scale, and funding access (incl. FABN/FHLB) differentiate Athene vs. newer entrants; watch regulatory developments and DC-channel adoption of privates .
  • Capital and liquidity: Preferred dividends maintained; junior subordinated debentures issuance supports corporate flexibility; balance sheet scale and ratings remain supportive for growth .
  • Actionable: Position for improved alts returns and stable-to-better net spread; monitor quarterly channel shifts (retail vs. FABNs) and rate trajectory; track DC penetration milestones and any insurance M&A execution .
  • Parent-level catalysts: Apollo’s S&P 500 addition and ACS (Capital Solutions) distribution breadth enhance platform reach, indirectly supporting Athene’s asset origination and capital formation .

Citations:

  • Q4 2024 results and segment metrics:
  • Q4 prerelease (alts NII):
  • Channel inflows/outflows (Q2–Q4):
  • Outflow rates & alts delta impact:
  • Preferred dividends (Q4 2024):
  • Debentures financing (Oct 7, 2024):
  • Ratings & portfolio quality (Q3 supplement):
  • Management commentary (Q4 call transcript):