Athene Holding Ltd

Results of Operations

The following summarizes the condensed consolidated results of operations:

Three Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023

In this section, references to 2024 refer to the three months ended June 30, 2024 and references to 2023 refer to the three months ended June 30, 2023.

Net Income Available to Athene Holding Ltd. Common Stockholder

Net income available to Athene Holding Ltd. common stockholder increased by $187 million, or 47%, to $583 million in 2024 from $396 million in 2023. The increase in net income available to Athene Holding Ltd. common stockholder was driven by an $8.4 billion decrease in benefits and expenses, partially offset by an $8.0 billion decrease in revenues, a $183 million increase in net income attributable to noncontrolling interests and a $28 million increase in income tax expense.

Revenues

Revenues decreased by $8.0 billion to $4.7 billion in 2024 from $12.7 billion in 2023. The decrease was primarily driven by a decrease in premiums and a decrease in investment related gains (losses), partially offset by an increase in net investment income and an increase in VIE investment related gains (losses).

Premiums decreased by $8.4 billion to $673 million in 2024 from$9.0 billion in 2023, primarily driven by an$8.4 billion decrease in pension group annuity premiums compared to 2023.

Investment related gains (losses) decreased by $500 million to $(134) million in 2024 from $366 million in 2023, primarily due to the change in fair value of FIA hedging derivatives, partially offset by changes in the fair value of mortgage loans and reinsurance assets. The change in fair value of FIA hedging derivatives decreased $948 million, primarily driven by less favorable performance of the equity indices upon which our call options are based. The largest percentage of our call options are based on the S&P 500 index, which increased 3.9% in 2024, compared to an increase of 8.3% in 2023. The change in fair value of mortgage loans increased $359 million and the change in fair value of reinsurance assets increased $150 million, primarily driven by a smaller increase in US Treasury rates in 2024 compared to 2023.

Net investment income increased by $792 million to $3.5 billionin 2024 from $2.7 billion in 2023, primarily driven by significant growth in our investment portfolio attributed to strong net flows during the previous twelve months, higher rates on new deployment related to the higher interest rate environment and higher floating rate income. These increases were partially offset by higher investment management fees driven by the significant growth in our investment portfolio.

VIE investment related gains (losses) increased by $13 million to $306 million in 2024 from$293 million in 2023, primarily driven by unrealized gains on assets held by AAA and a favorable change in the fair value of mortgage loans held in VIEs related to a smaller increase in US Treasury rates in 2024 compared to 2023, partially offset by an unfavorable change in the fair value of certain investment funds held within our consolidated VIEs.

Benefits and Expenses

Benefits and expenses decreased by $8.4 billion to $3.6 billion in 2024 from $12.1 billion in 2023. The decrease was primarily driven by a decrease in future policy and other policy benefits and a decrease in interest sensitive contract benefits, partially offset by an increase in market risk benefits remeasurement (gains) losses.

Future policy and other policy benefits decreased by$8.4 billion to $1.1 billion in 2024 from $9.5 billion in 2023, primarily driven byan$8.4 billion decrease in pension group annuity obligations compared to 2023.

Interest sensitive contract benefits decreased by $188 million to $1.8 billion in 2024 from $2.0 billion in 2023, primarily driven by a decrease in the change in our fixed indexed annuity reserves, partially offset by an increase in rates on deferred annuity and funding agreement issuances, as well as increased costs on floating rate funding agreements, driven by higher US Treasury rates, and significant growth in our deferred annuity and funding agreement blocks of business. The change in our fixed indexed annuity reserves includes the impact from changes in the fair value of FIA embedded derivatives. The decrease in the change in fair value of FIA embedded derivatives of $1.2 billion was primarily due to the performance of the equity indices to which our FIA policies are linked. The largest percentage of our FIA policies are linked to the S&P 500 index, which increased 3.9% in 2024, compared to an increase of 8.3% in 2023. The change in fair value of FIA embedded derivatives was also driven by the favorable impact of rates on policyholder projected benefitsand afavorable change in discount rates used in our embedded derivative calculations as 2024 experienced a larger increase in discount rates compared to 2023.

Market risk benefits remeasurement (gains) losses increased by $55 million to $(16) million in 2024 from $(71) million in 2023. The lower gains in 2024 were primarily driven by an unfavorable change in the fair value of market risk benefits. The change in fair value of market risk benefits was$35 million unfavorable related to less favorable equity market performance compared to 2023.

Income Tax Expense

Income tax expense increased by $28 million to$161 million in 2024 from $133 million in 2023, primarily driven by the increase in net investment income and favorable changes in the fair value of mortgage loans and reinsurance assets, partially offset by additional policyholder and other reserve liability costs. Our effective tax rate in thesecond quarter of 2024 was 16% compared to 21% in 2023. The income tax expense was calculated by applying the 21% US statutory rate to the income of our US and foreign subsidiaries, net of noncontrolling interests.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests increased by $183 million to $237 million in 2024 from $54 million in 2023, primarily due to the favorable change in fair value of reinsurance assets related to a smaller increase in US Treasury rates in 2024 compared to 2023, income attributable to the ACRA 2 noncontrolling interest, which was established in the third quarter of 2023, and a higher allocation of income to the AAA noncontrolling interest due to the continued increase in the noncontrolling interest ownership of AAA.

Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023

In this section, references to 2024 refer to the six months ended June 30, 2024 and references to 2023 refer to the six months ended June 30, 2023.

Net Income Available to Athene Holding Ltd. Common Stockholder

Net income available to Athene Holding Ltd. common stockholder increased by $613 million, or 55%, to $1.7 billion in 2024 from $1.1 billion in 2023. The increase in net income available to Athene Holding Ltd. common stockholder was driven by a $7.2 billion decrease in benefits and expenses, partially offset by a $6.4 billion decrease in revenues, a $172 million increase in income tax expense and an $11 million increase in net income attributable to noncontrolling interests.

Revenues

Revenues decreased by $6.4 billion to $10.4 billion in 2024 from $16.7 billion in 2023. The decrease was primarily driven by a decrease in premiums, partially offset by an increase in net investment income, an increase in VIE investment related gains (losses) and an increase in investment related gains (losses).

Premiums decreased by $8.4 billion to $774 million in 2024 from $9.1 billion in 2023, primarily driven by an $8.5 billion decrease in pension group annuity premiums compared to 2023, partially offset by an increase in life premiums attributable to a block reinsurance transaction completed in the fourth quarter of 2023.

Net investment income increased by $1.7 billion to $6.8 billionin 2024 from $5.1 billion in 2023, primarily driven by significant growth in our investment portfolio attributed to strong net flows during the previous twelve months, higher rates on new deployment related to the higher interest rate environment and higher floating rate income. These increases were partially offset by higher investment management fees driven by the significant growth in our investment portfolio.

VIE investment related gains (losses) increased by $146 million to $640 million in 2024 from $494 million in 2023, primarily driven by unrealized gains on assets held by AAA, partially offset by an unfavorable change in the fair value of mortgage loans held in VIEs related to a larger increase in US Treasury rates in 2024 compared to 2023 and an unfavorable change in fair value of certain investment funds held within our consolidated VIEs.

Investment related gains (losses) increased by $112 million to $1.5 billion in 2024 from $1.4 billion in 2023, primarily due to the change in fair value of FIA hedging derivatives, favorable net foreign exchange impacts and a favorable change in the provision for credit losses, partially offset by an unfavorable change in the fair value of reinsurance assets and mortgage loans. The change in fair value of FIA hedging derivatives increased $392 million, primarily driven by the favorable performance of the equity indices upon which our call options are based, with the 2024 impact amplified by the strong growth in our FIA block of business over the previous twelve months. The largest percentage of our call options are based on the S&P 500 index, which increased 14.5% in 2024, compared to an increase of 15.9% in 2023. The favorable net foreign exchange impacts were primarily related to the strengthening of the US dollar against foreign currencies in comparison to 2023 and the continued growth in foreign denominated business. The favorable change in the provision for credit losses of $77 million was primarily driven by intent-to-sell impairments in 2023 related to the timing of the recapture of certain business by VIAC and impacts from the Silicon Valley Bank failure, partially offset by an increase in the allowance for credit losses in 2024 primarily related to CMBS and corporate securities. The change in fair value of reinsurance assets decreased $528 million and the change in fair value of mortgage loans decreased $167 million, primarily driven by a larger increase in US Treasury rates in 2024 compared to 2023.

Benefits and Expenses

Benefits and expenses decreased by $7.2 billion to $7.6 billion in 2024 from $14.7 billion in 2023. The decrease was primarily driven by a decrease in future policy and other policy benefits and a decrease in market risk benefits remeasurement (gains) losses, partially offset by an increase in interest sensitive contract benefits.

Future policy and other policy benefits decreased by $8.3 billion to $1.6 billion in 2024 from $10.0 billion in 2023, primarily driven by an $8.5 billion decrease in pension group annuity obligations, partially offset by a$185 million increase in accrued interest. The increase in accrued interest was primarily attributable to a larger outstanding balance in 2024 compared to 2023.

Market risk benefits remeasurement (gains) losses decreased by $445 million to $(170) million in 2024 from $275 million in 2023. The gains in 2024 compared to losses in 2023 were primarily driven by a favorable change in the fair value of market risk benefits. The change in fair value of market risk benefits was $457 million favorable compared to 2023 due to a larger increase in the risk-free discount rate across the curve, which is used in the fair value measurement of the liability for market risk benefits.

Interest sensitive contract benefits increased by $1.4 billion to $4.7 billion in 2024 from $3.3 billion in 2023, primarily driven by an increase in rates on deferred annuity and funding agreement issuances, as well as increased costs on floating rate funding agreements, driven by higher US Treasury rates, and significant growth in our deferred annuity and funding agreement blocks of business, partially offset by a decrease in the change in our fixed indexed annuity reserves. The change in our fixed indexed annuity reserves includes the impact from changes in the fair value of FIA embedded derivatives. The decrease in the change in fair value of FIA embedded derivatives of $533 million was primarily due to the performance of the equity indices to which our FIA policies are linked. The largest percentage of our FIA policies are linked to the S&P 500 index, which increased 14.5% in 2024, compared to an increase of 15.9% in 2023. The change in fair value of FIA embedded derivatives was also driven by the favorable change in discount rates used in our embedded derivative calculations as 2024 experienced an increase in discount rates compared to a decrease in 2023.

Income Tax Expense

Income tax expense increased by $172 million to $468 million in 2024 from $296 million in 2023, primarily driven by the increase in net investment income, the favorable change in net FIA embedded derivatives and the change in the fair value of market risk benefits, partially offset by additional policyholder and other reserve liability costs and the unfavorable change in fair value of reinsurance assets and mortgage loans. Our effective tax rate in 2024 was 17% compared to 15% in 2023. The income tax expense was calculated by applying the 21% US statutory rate to the income of our US and foreign subsidiaries, net of noncontrolling interests.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests increased by $11 million to $520 million in 2024 from $509 million in 2023, primarily due to the income attributable to the ACRA 2 noncontrolling interest, which was established in the third quarter of 2023, and a higher allocation of income to the AAA noncontrolling interest due to the continued increase in the noncontrolling interest ownership of AAA, largely offset by the unfavorable change in fair value of reinsurance assets related to a larger increase in US Treasury rates in 2024 compared to 2023.

Summary of Non-GAAP Earnings

The following summarizes our spread related earnings:

Three Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023

In this section, references to 2024 refer to the three months ended June 30, 2024 and references to 2023 refer to the three months ended June 30, 2023.

Spread Related Earnings

SRE decreased by $87 million, or 11%, to $712 million in 2024 from $799 million in 2023. The decrease in SRE was primarily driven by higher cost of funds, partially offset by higher net investment earnings, lower interest and other financing costs and higher strategic capital management fees.

Cost of funds increased $443 million, primarily driven by growth in and higher rates on new deferred annuity issuances, growth in and higher rates on new institutional business, including the additional costs of swapping to or issuing funding agreements as floating rate to mitigate SRE sensitivity to floating rate assets, and an increase in business mix to institutional business at higher crediting rates. These increases were partially offset by an increase in costs attributable to the ACRA noncontrolling interests following the sale of a 50% interest in ACRA 2 to ADIP II effective July 1, 2023 and the subsequent increase in the ADIP II ownership of ACRA 2 to 60% effective December 31, 2023.

Net investment earnings increased $336 million, primarily driven by $19.9 billion of growth in our average net invested assets, higher rates on new deployment related to the higher interest rate environment and higher floating rate income, partially offset by lower alternative net investment income and an increase in income attributable to the ACRA noncontrolling interests following the sale of a 50% interest in ACRA 2 to ADIP II effective July 1, 2023 and the subsequent increase in the ADIP II ownership of ACRA 2 to 60% effective December 31, 2023. The lower alternative investment income compared to 2023 was primarily driven by our investment in MidCap Financial which experienced outsized performance in 2023, lower returns on our investment in Catalina, continued inflationary pressures impacting the valuation of Athora, lower returns from our investment in Redding Ridge attributable to strong CLO performance in 2023 and unfavorable performance from Challenger Life Company Limited (Challenger) related to a share price decrease in 2024 compared to an increase in 2023. These impacts were partially offset by higher returns from our investment in Wheels related to a valuation increase in 2024.

Interest and other financing costs decreased $10 million related to lower interest expense resulting from a decrease in short-term repurchase agreements outstanding in 2024 compared to 2023, partially offset by interest expense related to our debt issuances in the fourth quarter of 2023 and the first quarter of 2024.

Strategic capital management fees increased $8 million due to additional fees received from ADIP II as a result of the sale of a 50% interest in ACRA 2 to ADIP II effective July 1, 2023 and the subsequent increase in the ADIP II ownership of ACRA 2 to 60% effective December 31, 2023.

Net investment spread decreased 35 basis points to 1.64% in 2024 from 1.99% in 2023, primarily driven by higher cost of funds, partially offset by a higher net investment earned rate.

Cost of funds increased 54 basis points to 3.27% in 2024 from 2.73% in 2023, primarily driven by higher rates on new deferred annuity issuances, higher rates on new institutional business, including the additional costs of swapping to or issuing funding agreements as floating rate to mitigate SRE sensitivity to floating rate assets, and an increase in business mix to institutional business at higher crediting rates. These increases were partially offset by an increase in costs attributable to the ACRA noncontrolling interests following the sale of a 50% interest in ACRA 2 to ADIP II effective July 1, 2023 and the subsequent increase in the ADIP II ownership of ACRA 2 to 60% effective December 31, 2023.

Net investment earned rate increased 18 basis points to 4.87% in 2024 from 4.69% in 2023, primarily due to higher returns in our fixed income portfolio, partially offset by lower returns in our alternative investment portfolio andan increase in income attributable to the ACRA noncontrolling interests following the sale of a 50% interest in ACRA 2 to ADIP II effective July 1, 2023 and the subsequent increase in the ADIP II ownership of ACRA 2 to 60% effective December 31, 2023. Fixed income and other net investment earned rate was 4.83% in 2024, an increase from 4.46% in 2023, primarily driven byhigher rates on new deployment related to the higher interest rate environment and higher floating rate income. Alternative net investment earned rate was 5.73% in 2024, a decrease from 8.53% in 2023, primarily driven byour investment in MidCap Financial which experienced outsized performance in 2023, lower returns on our investment in Catalina, continued inflationary pressures impacting the valuation of Athora, lower returns from our investment in Redding Ridge attributable to strong CLO performance in 2023 and unfavorable performance from Challenger related to a share price decrease in 2024 compared to an increase in 2023. These impacts were partially offset by higher returns from our investment in Wheels related to a valuation increase in 2024.

Adjustments to Net Income Available to Athene Holding Ltd. Common Stockholder

The adjustments tonet income available to Athene Holding Ltd. common stockholder are comprised of investment gains (losses), net of offsets; non-operating change in insurance liabilities and related derivatives; inte gration, restructuring and other non-operating expenses; stock compensation expense and the non-operating income tax expense related to these adjustments. The increase in adjustments tonet income available to Athene Holding Ltd. common stockholder in 2024 compared to 2023 was primarily driven by an increase in investment gains (losses), net of offsets, partially offset by a decrease in non-operating change in insurance liabilities and related derivatives.

Investment gains (losses), net of offsets, increased $439 million, primarily due to the changes in fair value of mortgage loans and reinsurance assets. The favorable changes in fair value of mortgage loans of $341 million and reinsurance assets of $121 million were primarily driven by a smaller increase in US Treasury rates in 2024 compared to 2023.

Non-operating change in insurance liabilities and related derivatives decreased $101 million, primarily due to the decrease in net FIA derivatives and the decrease in the change in fair value of market risk benefits. The $80 million unfavorable change in net FIA derivatives was primarily due to the performance of the equity indices to which our FIA policies are linked. The largest percentage of our FIA policies are linked to the S&P 500 index, which increased 3.9% in 2024, compared to an increase of 8.3% in 2023. This was partially offset by the favorable impact of rates on policyholder projected benefits and the favorable change in discount rates used in our embedded derivative calculations as 2024 experienced a larger increase in discount rates compared to 2023. The $66 million unfavorable change in fair value of market risk benefits was primarily driven by unfavorable equity market performance compared to 2023.

Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023

In this section, references to 2024 refer to the six months ended June 30, 2024 and references to 2023 refer to the six months ended June 30, 2023.

Spread Related Earnings

SRE increased by $42 million, or 3%, to $1.5 billion in 2024 from $1.5 billion in 2023. The increase in SRE was primarily driven by higher net investment earnings, lower interest and other financing costs and higher strategic capital management fees, partially offset by higher cost of funds.

Net investment earnings increased $914 million, primarily driven by $20.3 billion of growth in our average net invested assets, higher rates on new deployment related to the higher interest rate environment and higher floating rate income, partially offset by slightly lower alternative net investment income and an increase in income attributable to the ACRA noncontrolling interests following the sale of a 50% interest in ACRA 2 to ADIP II effective July 1, 2023 and the subsequent increase in the ADIP II ownership of ACRA 2 to 60% effective December 31, 2023. The slightly lower alternative investment income compared to 2023 was primarily driven by our investment in MidCap Financial which experienced outsized performance in 2023, continued inflationary pressures impacting the valuation of Athora and lower returns on our investment in Catalina. These impacts were largely offset by higher returns from our investment in Wheels related to a valuation increase in 2024 and favorable performance from Challenger related to a share price increase in 2024 compared to a decrease in 2023.

Cost of funds increased $931 million, primarily driven by growth in and higher rates on new deferred annuity issuances, growth in and higher rates on new institutional business, including the additional costs of swapping to or issuing funding agreements as floating rate to mitigate SRE sensitivity to floating rate assets, and an increase in business mix to institutional business at higher crediting rates. These increases were partially offset by an increase in costs attributable to the ACRA noncontrolling interests following the sale of a 50% interest in ACRA 2 to ADIP II effective July 1, 2023 and the subsequent increase in the ADIP II ownership of ACRA 2 to 60% effective December 31, 2023.

Interest and other financing costs decreased $28 million related to lower interest expense resulting from a decrease in short-term repurchase agreements outstanding in 2024 compared to 2023, partially offset by interest expense related to our debt issuances in the fourth quarter of 2023 and the first quarter of 2024.

Strategic capital management fees increased $19 million due to additional fees received from ADIP II as a result of the sale of a 50% interest in ACRA 2 to ADIP II effective July 1, 2023 and the subsequent increase in the ADIP II ownership of ACRA 2 to 60% effective December 31, 2023.

Net investment spread decreased 17 basis points to 1.74% in 2024 from 1.91% in 2023, primarily driven by higher cost of funds, partially offset by a higher net investment earned rate.

Cost of funds increased by 59 basis points to 3.19% in 2024, from 2.60% in 2023, primarily driven by higher rates on new deferred annuity issuances, higher rates on new institutional business, including the additional costs of swapping to or issuing funding agreements as floating rate to mitigate SRE sensitivity to floating rate assets, and an increase in business mix to institutional business at higher crediting rates. These increases were partially offset by an increase in costs attributable to the ACRA noncontrolling interests following the sale of a 50% interest in ACRA 2 to ADIP II effective July 1, 2023 and the subsequent increase in the ADIP II ownership of ACRA 2 to 60% effective December 31, 2023.

Net investment earned rate increased 41 basis points to 4.89% in 2024 from 4.48% in 2023, primarily due to higher returns in our fixed income portfolio and slightly favorable performance in our alternative investment portfolio, partially offset by an increase in income attributable to the ACRA noncontrolling interests following the sale of a 50% interest in ACRA 2 to ADIP II effective July 1, 2023 and the subsequent increase in the ADIP II ownership of ACRA 2 to 60% effective December 31, 2023. Fixed income and other net investment earned rate was 4.75% in 2024, an increase from 4.31% in 2023, primarily driven byhigher rates on new deployment related to the higher interest rate environment and higher floating rate income. Alternative net investment earned rate was 7.42% in 2024, an increase from 7.33% in 2023, as slightly lower income was earned on average alternative net invested assets that decreased$431 million compared to 2023. The slightly lower alternative net investment income compared to 2023 was primarily driven by our investment in MidCap Financial which experienced outsized performance in 2023, continued inflationary pressures impacting the valuation of Athora and lower returns on our investment in Catalina. These impacts were largely offset by higher returns from our investment in Wheels related to a valuation increase in 2024 and favorable performance from Challenger related to a share price increase in 2024 compared to a decrease in 2023.

Adjustments to Net Income Available to Athene Holding Ltd. Common Stockholder

The increase in adjustments tonet income available to Athene Holding Ltd. common stockholder in 2024 compared to 2023 was primarily driven by theincrease in non-operating change in insurance liabilities and related derivatives and theincrease in investment gains (losses), net of offsets.

Non-operating change in insurance liabilities and related derivatives increased $707 million, primarily due to the increase in the change in fair value of market risk benefits and the increase in net FIA derivatives. The $406 million favorable change in fair value of market risk benefits was primarily driven by a larger increase in the risk-free discount rate across the curve, which is used in the fair value measurement of the liability for market risk benefits, compared to 2023. The $261 million favorable change in net FIA derivatives was primarily due to the favorable change in discount rates used in our embedded derivative calculations as 2024 experienced an increase in discount rates compared to a decrease in 2023. The change in net FIA derivatives was also driven by the performance of the equity indices to which our FIA policies are linked, with the 2024 impact amplified by the strong growth in our FIA block of business over the previous twelve months. The largest percentage of our FIA policies are linked to the S&P 500 index, which increased 14.5% in 2024, compared to an increase of 15.9% in 2023.

Investment gains (losses), net of offsets, increased $20 million, primarily due to favorable net foreign exchange impacts, lower realized losses on the sale of AFS securities compared to 2023 and a favorable change in the provision for credit losses, largely offset by an unfavorable change in the fair value of reinsurance assets and mortgage loans. The favorable net foreign exchange impacts were primarily related to the strengthening of the US dollar against foreign currencies in comparison to 2023 and the continued growth in foreign denominated business. The favorable change in the provision for credit losses of $96 million was primarily driven by intent-to-sell impairments in 2023 related to the timing of the recapture of certain business by VIAC and impacts from the Silicon Valley Bank failure, partially offset by an increase in the allowance for credit losses in 2024 primarily due to the commercial real estate market. The unfavorable changes in fair value of reinsurance assets of $271 million and mortgage loans of $134 million were primarily due to a larger increase in US Treasury rates compared to 2023.