December 21, 2017 / 5:46 PM / 2 years ago

Fitch Affirms Athene's Ratings; Outlook Stable

(The following statement was released by the rating agency) CHICAGO, December 21 (Fitch) Fitch Ratings has affirmed the 'A-' (Strong) Insurer Financial Strength (IFS) ratings of Athene Annuity & Life Assurance Company, Athene Annuity and Life Company, Athene Annuity & Life Assurance Company of New York, and Athene Life Re Ltd. (collectively referred to as Athene). Fitch has also affirmed the Long-Term Issuer Default Rating (IDR) of Athene Holding Ltd. at 'BBB'. The Rating Outlook is Stable. A complete list of rating actions is provided at the end of this release. Today's rating action follows the announcement that Athene has agreed to reinsure approximately $19 billion of fixed annuity reserves from Voya Insurance and Annuity Company (VIAC) related to the acquisition of VIAC by a group of investors led by Apollo Global Management, LLC. Athene will also make a minority equity investment of approximately $75 million in Venerable Holdings, Inc., a newly formed standalone entity that will administer the business held within VIAC. Fitch takes a favorable view of the profile and performance of VIAC's fixed annuity block and considers Athene's agreement to reinsure the fixed annuities to be in line with the company's strategy and expertise. KEY RATING DRIVERS The affirmation of Athene's ratings reflects the company's continued very strong financial performance and earnings, very strong capital position, and market leadership position in the fixed annuity market. The ratings also reflect the company's still relatively narrow product profile and somewhat aggressive investment portfolio. Fitch believes that there has been good improvement in Athene's business profile over the past six months driven by progress in business diversification and regulatory developments around the Department of Labor's (DOL) fiduciary rule. Athene has successfully entered the pension risk transfer market through the completion of its first four buyout agreements totalling approximately $2.25 billion of pension liabilities. Fitch expects the company to continue to grow from this foundation. In addition, on Nov. 27, 2017, the DOL announced an extension to July 1, 2019 of the transition period for the Fiduciary Rule's Best Interest Contract Exemption and the Principal Transactions Exemption, and of the applicability of certain amendments to Prohibited Transaction Exemption 84-24. Fitch believes that there is a strong likelihood that the final rule and/or related prohibited transaction exemptions will be revised, potentially reducing the associated adverse sales impact and litigation risk to FIA writers. Fitch views Athene's financial performance and earnings as very strong. Earnings have benefited from the company's strong investment results, limited exposure to legacy annuity business with high rate guarantees, and favorable tax position. Athene makes extensive use of affiliated offshore reinsurance, which impacts company tax liability positively. Fitch expects federal tax reform will have a modest negative impact on the company's earnings over time. Over the long term, Athene expects to earn a net investment spread of 2%-3% on the difference between its investment return on assets and its cost of funds on its deferred annuity liabilities. The company has thus far met this expectation and reported an investment margin of 2.77% for full-year 2016 and 2.86% in the first nine months of 2017. Fitch views Athene's capital position as very strong. The company attained a Prism score of 'Very Strong' based on Dec. 31, 2016 data for its U.S.-domiciled subsidiaries and Athene Life Re Ltd., its Bermuda-domiciled reinsurance company. Athene targets an RBC ratio of at least 400% across the organization. At Dec. 31, 2016, Athene's RBC ratio for the U.S. domiciled subsidiaries was 478%. Athene uses affiliated reinsurance and currently cedes 80% of its annuity business and 100% of its funding agreement business to Athene Life Re. At Dec. 31, 2016, Athene Life Re reported Bermuda statutory capital of $6.1 billion, well in excess of regulatory requirements. As a result of the October 2013 acquisition of the U.S. annuity and life operations of Aviva PLC (Aviva USA), Athene is now among the top-five largest issuers of fixed annuities in the U.S. and was the third-largest writer of fixed-indexed annuities in 2016. Although Athene continues to make progress in diversifying its revenue into institutional funding business and now the pension risk transfer business, the company's business profile continues to lack the business diversification benefits of companies who offer a broader array of mortality-based or fee-based products. Fitch believes that profitable growth in the company's pension risk transfer business could have a positive impact on Athene's credit profile. Fitch views Athene's investment portfolio as somewhat aggressive relative to traditional life insurance companies. The company has an above-average exposure to structured securities, particularly non-agency RMBS that the company acquired beginning in 2009 at a steep discount. Although Fitch takes a cautious view of Athene's overweight position in structured securities, which generated significant losses for the industry over the past decade, we believe the company has a high level of expertise in managing such asset classes, and consider the relative quality of the portfolio to be strong. Athene was formed in 2008 and has grown quickly primarily through acquisitions but has also developed a strong competitive retail operation complemented by its large flow reinsurance business. In December 2016, the company completed its IPO through which certain shareholders of the company sold approximately 31 million of the company's 189 million of outstanding voting common shares. The company received no proceeds from the IPO. While Athene's operating history is relatively short, it is led by a team with extensive industry experience in managing net investment-spread businesses within life insurance companies. Fitch believes that additions over the past couple of years at the company's senior executive level have strengthened the overall profile of the management team and reduced key-person risk. RATING SENSITIVITIES Key rating sensitivities that could result in a rating upgrade include: --Further improvement in business profile driven by continued progress on diversification and clarity around implementation of new Department of Labor rules governing the sale of fixed-indexed annuities; --Maintenance of current capitalization metrics, including a Prism score of 'Very Strong'; --Maintain current level of operating performance. Key rating sensitivities that could result in a ratings downgrade include: --Large acquisitions that are either outside of Athene's historical risk preference and expertise or add significantly to the company's operating or financial leverage; --Significant changes in asset allocation, which may include an increase in limited partnership exposure to over 15% or a large increase in below investment-grade exposure; --Deterioration in Athene's operating performance, resulting in an ROE below 9%; --Prism score below 'Very Strong'. FULL LIST OF RATING ACTIONS Fitch has affirmed the following ratings with a Stable Outlook : Athene Holding Ltd. --Long-Term IDR at 'BBB'. Athene Annuity & Life Assurance Company Athene Annuity and Life Company Athene Annuity & Life Assurance Company of New York Athene Life Re Ltd. --IFS at 'A-'. Athene Global Funding --Medium-term note program at 'A-'. Contact: Primary Analyst Bradley S. Ellis, CFA Director +1-312-368-2089 Fitch Ratings, Inc. 70 W. Madison Street Chicago, IL 60602 Secondary Analyst Douglas L. Meyer, CFA Managing Director +1-312-368-2061 Committee Chairperson Brian C. Schneider, CPA Senior Director +1-312-606-2321 Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email: Additional information is available on Applicable Criteria Insurance Rating Criteria (pub. 30 Nov 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001 Fitch Ratings, Inc. is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (the "NRSRO"). While certain of the NRSRO’s credit rating subsidiaries are listed on Item 3 of Form NRSRO and as such are authorized to issue credit ratings on behalf of the NRSRO (see here), other credit rating subsidiaries are not listed on Form NRSRO (the "non-NRSROs") and therefore credit ratings issued by those subsidiaries are not issued on behalf of the NRSRO. However, non-NRSRO personnel may participate in determining credit ratings issued by or on behalf of the NRSRO.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below