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Athene (ATH) Stock Up 95.4% in a Year: What's Driving It?

·4 min read

Shares of Athene Holding, Ltd. ATH have gained 95.4% in a year, outperforming the industry's increase of 2.4%. The Zacks S&P 500 composite has increased 26.1% in the said time frame. With a market capitalization of $15.9 billion, the average volume of shares traded in the last three months was 1.1 million.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

The rally was primarily driven by a higher premium from flow reinsurance, higher pension group annuity premiums and strategic investments.

The life insurer has a decent earnings surprise history. Its bottom-line beat estimates in each of the last four quarters, the average being 46.12%.

Athene’s return on equity was 14.3% in the trailing 12-month period, higher than the industry average of 11.4%. This indicates its efficiency in utilizing its shareholders’ funds.

Athene has a favorable VGM Score of B. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.

Will the Bull Run Continue?

Banking on higher pension group annuity premiums, a compelling portfolio of capital-efficient products, higher premiums from flow reinsurance and higher investment-related gains, Athene’s top line is expected to improve in the long term.

The company expects total organic inflows to be about $35 billion in 2021.
Athene boasts a leading market share in the retail, funding agreement, and pension group annuity channels.

Solid growth in average net invested assets is expected to boost Athene’s Retirement Services segment.

Athene witnessed the fifth consecutive quarter of strong performance across its portfolio of alternative investments, with an annualized net investment earned rate (NIER) of 16.3% in the third quarter, well above its earlier expectations. ATH continues to benefit from strong returns within natural resources, private credit and real estate investments. In the fourth quarter, Athene expects fixed NIER to be around 3.5% and annualized Alts NIER to be around 11% to 12%, which is closer to the longer-term average.

Athene boasts an impressive inorganic growth, which has been driven by several buyouts and block reinsurance transactions. Athene and Apollo Global Management APO have executed successful acquisitions since 2009 as both share a partnership, under which Apollo currently holds a 34% stake in Athene. ATH has agreed to merge with Apollo and the deal is expected to close in January 2022.

In November 2021, Athene and Apollo agreed to buy a majority interest in Aqua Finance for $1 billion from Blackstone Tactical Opportunities. With this deal, ATH will invest in a leading consumer finance platform.

The acquisition of Petros PACE Finance, LLC, when completed, will likely complement Athene’s portfolio of diversified origination platforms.

Athene remains extremely well-capitalized with $3.6 billion of on-balance sheet excess equity capital.

Substantial total deployable capital of $8 billion, which includes $1.3 billion of available undrawn third-party capital in a strategic sidecar, makes Athene well poised for growth.

Athene currently carries a Zacks Rank #2 (Buy) and has a Value Score of B that reflects attractive valuation. The stock remains undervalued at the current level. Athene currently has a trailing 12-month price to book value ratio of 0.71, lower than the industry average of 1.25.

Back-tested results show that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best opportunities in the value investing space.

Other Stocks to Consider

Some other top-ranked players in the insurance industry include Kinsale Capital KNSL and Brighthouse Financial, Inc. BHF. While Kinsale Capital sports a Zacks Rank #1, Brighthouse Financial carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Brighthouse Financial’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 67.61%. In the past year, BHF has gained 45.8%.

The Zacks Consensus Estimate for Brighthouse Financial’s 2021 and 2022 earnings has moved 14% and 0.6% north, respectively, in the past 60 days.

Kinsale Capital’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 37.63%. In the past year, KNSL has gained 6.7%.

The Zacks Consensus Estimate for Kinsale Capital’s 2021 and 2022 earnings has moved 15.2% and 11.7% north, respectively, in the past 60 days.


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