Fitch Ratings has downgraded the Long-Term rating assigned to Athene Holding Ltd.’s outstanding Series A, B, C, D and E preferred share issuances to BBB-, citing the firm’s announcement that its board of directors have approved preliminary steps to re-domesticate from Bermuda to the state of Delaware.
According to Fitch, the re-domestication, which has an expected effective date of December 31, 2023, increases non-performance risk.
“The ‘BBB-‘ Long-Term Rating of Athene’s preferred shares reflects Fitch’s view that the regulatory environment of the U.S., which is assessed as being effective and classified as following a ring-fencing approach will apply following the expected close of the re-domestication,” the rating agency explained.
Fitch continued, “Accordingly, the ratings of the preferred shares are notched consistent with standard notching for ring-fenced environments as described in the Insurance Rating Criteria, and are rated two notches below Athene’s Long-Term Issuer Default Rating (IDR) based on ‘Poor’ recovery expectations, with one additional notch for ‘minimal’ non-performance risk.”
Fitch also observed that its view of non-performance risk is consistent with the baseline assumption for a ring-fenced regulatory environment, and follows a review of the relevant legal frameworks and the authority granted to both the U.S. group supervisor, and the Bermuda Monetary Authority’s to influence capital flows to Athene.
The rating agency added, “Relative to Fitch’s previous view of non-performance, and consistent with the belief that deferral features are unlikely to be trigged except in times of severe stress, we believe non-performance risk more closely resembles that of a traditional Ring-Fenced environment as in our view Bermuda is now more likely to impose additional restrictions on the movement of capital to an offshore holding company in a severe stress environment.”
Despite this downgrade, an Athene spokesperson recently told the Royal Gazette newspaper that the move is not expected to affect operations in Bermuda, such as the Athene life and annuity reinsurance business.
“Athene is a full US taxpayer,” the spokesperson said, “so it just made sense to redomesticate to Delaware, versus staying in Bermuda. But it has no impact at all on the Bermuda operations.”
In other company news, earlier this month, Athene confirmed plans to sell $600 million of 5.875% senior unsecured notes due 2034, the proceeds of which will be used to expand its insurance operation.
