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Athene (ATH) Q4 Earnings Beat Estimates, Revenues Up Y/Y

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Athene Holding Ltd.’s ATH fourth-quarter 2018 net operating income of $1.23 per share beat the Zacks Consensus Estimate by a cent. The bottom line, however, declined 23.1% year over year attributable to higher other liability costs resulting from equity market depreciation.

Including one-time items, net loss was 53 cents per share against income of $2.22 per share in the year-ago quarter.

Behind the Headlines

Premium revenues were $1.8 billion, down 6.6% year over year.

The company’s operating revenues of $3.1 billion grew 6.2% from the year-ago quarter. This top-line improvement was driven by higher product charges and net investment income.

Total benefits and expenses dropped 61.6% year over year to $1.3 billion.

Organic deposits were $5.2 billion, up 47% year over year. While in Retail, new deposits of $2 billion improved 57%, driven by the introduction of new products and expansion in the Financial Institutions channel, in Flow Reinsurance, new deposits of $1 billion surged 272% driven by the addition of new counterparties. Institutional new deposits of $2 billion consists of $1.8 billion from three pension risk transfer transactions and $225 million from two funding agreements.

Full-Year Highlights

Net operating income of $5.82 per share missed the Zacks Consensus Estimate of $5.86 but increased nearly 8% from 2017.

Operating revenues of $7.8 billion grew 28.4% from 2018.

Organic deposits of $13.2 billion increased 15% from 2017.

Segment Update

Retirement Services

Adjusted operating income was $296 million, up 3%, year over year. The upside was attributable to growth in investment income stemming from invested asset growth, reflecting the reinsured Voya and Lincoln assets, strong organic deposits, higher floating rate investment income and solid alternative investment performance.

The net investment earned rate was 4.57%, in line with the prior-year quarter. Higher floating rate investment income was offset by lower yields on the reinsured Voya and Lincoln assets.

Cost of crediting was 2%, an increase of 13 basis points year over year, primarily driven by higher option costs as well as higher crediting rates on reinsured Voya and Lincoln liabilities.

Corporate and Other

Adjusted operating loss was $56 million against income of $26 million earned in the year-ago quarter. The loss was attributable to lower alternative investment income related to the unrealized mark-to-market decline of two public equity investments.

Financial Update

Cash and cash equivalents (including restricted cash) was $3.4 billion at Dec 31, 2018, down 31.8% year over year. Long-term debt was $991 million at 2018 end.

Adjusted shareholders’ equity as of Dec 31, 2018 increased 16.6% year over year to $8.8 billion.

Adjusted book value per share of $45.59 increased 19% year over year.

Adjusted debt to capital ratio was 10.1% as of Dec 31, 2018.

Operating return on equity was 13.9% in 2018, down 120 basis points year over year.

Invested assets increased more than 45% in 2018 to $111 billion.

Share Repurchase Update

In the fourth quarter of 2018, Athene repurchased 2.5 million shares for a total cost of $100 million.

Year to date, the company has bought back $47 million worth of shares.

Zacks Rank

Athene currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Among other insurance industry players who have reported fourth-quarter earnings so far, the bottom line of Aflac Incorporated AFL and Reinsurance Group of America Inc. RGA beat the respective Zacks Consensus Estimate. However, Unum Group UNM lagged estimates in the fourth quarter.

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