Athene Holdings Ltd. has reported a significant 180% increase in net income in the second-quarter of 2019 to $720 million, driven by favourable changes in the fair value of reinsurance assets on the back of a decline in Treasury rates.
Athene, a provider of retirement savings products, saw its Q2 2019 net income rise on the same period in 2018, while the firm’s adjusted operating income also increased year-on-year, from $288 million to $370 million in Q2 2019.
The increase in operating income helped the firm record a higher net income, and was mostly the result of higher investment income of $417 million, compared with an investment loss of $74 million a year earlier. Athene notes that the substantial growth in net investment income was driven by strong alternative investment income and invested asset growth.
Jim Belardi, Chief Executive Officer (CEO) of Athene, said: “In the second quarter, strong investment returns drove near-record earnings as our business generated an adjusted operating ROE of 19% in Retirement Services. Our adjusted book value of nearly $50 per share continues to accrete in line with our superior long-term track record of 17% compound annual growth.”
During the second-quarter of 2019, the company generated organic deposits of $4 billion, up 50% on the same period in 2018, and which was driven by strong results across all channels.
By unit, and Athene’s Retail unit generated $1.9 billion of new deposits, which is down 6% on the same period in 2018, which the firm attributes to its disciplined approach to pricing in a declining interest rate environment.
Flow reinsurance generated $1.1 billion of new deposits in Q2 2019, which is up by a significant 138% on the same period in 2018, and which Athene says is a result of new reinsurance relationships established in the second-half of last year.
Athene’s Institutional segment generated $1 billion of new deposits in the quarter, which includes $706 million of new deposits from one pension risk transfer deal, and $299 million of new deposits from one funding agreement.
Athene’s Q2 performance by segment shows that at $376 million, adjusted operating income in Retirement Services more than offset a $6 million loss in Corporate & Other. Retirement Services recorded an adjusted operating ROE of 18.9% in the quarter, which the firm attributes to its strong investment performance in the quarter when compared with the second-quarter of 2018.
Earlier this year, the company announced a strategic capital solution known as Athene Co-Invest Reinsurance Affiliate (ACRA). Through July 2019, Athene has revealed that the investment fund managed by Apollo that will help fund ACRA, Apollo/Athene Dedicated Investment Program (ADIP), has raised almost $1.5 billion of capital commitments.
“As we have consistently stated, we will deploy capital opportunistically across organic and inorganic growth initiatives, share repurchases, and bolstering for ratings upgrades, as we seek the highest risk-adjusted returns for our shareholders. In the current environment, it’s clear the market is improperly discounting our growing earnings power, which led us to repurchase $376 million of our shares in the second quarter at an average price of less than 90% of adjusted book value per share and high-teens returns.
“Following another increase in our repurchase capacity, our Board has now authorized nearly $1 billion in the past eight months. Given the attractive levels at which we’re executing, we believe this method of capital deployment is very accretive to shareholders,” said Belardi.