Athene Holding Ltd

Previous wording

We have established a significant base of earnings and, as of June 30, 2024, have an expected annual net investment spread, which measures our investment performance plus strategic capital management fees less the total cost of our liabilities, of 1–2% over the estimated 8.1 year weighted-average life of our net reserve liabilities. The weighted-average life includes deferred annuities, pension group annuities, funding agreements, payout annuities, life insurance contracts and other products.

Current wording

We have established a significant base of earnings and, as of September 30, 2024, have an expected annual net investment spread, which measures our investment performance plus strategic capital management fees less the total cost of our liabilities, of 1–2% over the estimated 8.4 year weighted-average life of our net reserve liabilities. The weighted-average life includes deferred annuities, pension group annuities, funding agreements, payout annuities, life insurance contracts and other products.

Previous wording

Our total assets have grown to $332.6 billion as of June 30, 2024. For the six months ended June 30, 2024, we generated an annualized net investment spread of 1.74%.

Current wording

Our total assets have grown to $355.0 billion as of September 30, 2024. For the nine months ended September 30, 2024, we generated an annualized net investment spread of 1.76%.

Previous wording

Our organic channels, including retail, flow reinsurance and institutional products, provided gross inflows of $36.8 billion and $30.6 billion for the six months ended June 30, 2024 and 2023, respectively, which were underwritten to attractive returns. Gross organic inflows increased $6.1 billion, or 20% from the prior year, reflecting the strength of our multi-channel distribution platform and our ability to quickly pivot into optimal and profitable channels as opportunities arise. Withdrawals on our deferred annuities, death benefits, pension group annuity benefit payments, payments on payout annuities, funding agreement repurchases and maturities and block reinsurance outflows (collectively, gross outflows), in the aggregate were $18.2 billion and $16.0 billion for the six months ended June 30, 2024 and 2023, respectively. The increase in gross outflows, which was within our range of expectations, was primarily related to an increase in funding agreement maturities in 2024 compared to 2023 as well as an increase in annuity policies which have reached the end of the surrender charge period in a higher rate environment, partially offset by a decrease in outflows related to policies underlying certain reinsurance blocks compared to 2023. We believe that our credit profile, current product offerings and product design capabilities, as well as our growing reputation as both a seasoned funding agreement issuer and a reliable pension group annuity counterparty, will continue to enable us to grow our existing organic channels and source additional volumes of profitably underwritten liabilities in various market environments. We intend to continue to grow organically by expanding each of our retail, flow reinsurance and institutional distribution channels. We believe that we have the right people, infrastructure, scale and capital discipline to position us for continued growth.

Current wording

Our organic channels, including retail, flow reinsurance and institutional products, provided gross inflows of $56.8 billion and $43.6 billion for the nine months ended September 30, 2024 and 2023, respectively, which were underwritten to attractive returns. Gross organic inflows increased $13.2 billion, or 30% from the prior year, reflecting the strength of our multi-channel distribution platform and our ability to quickly pivot into optimal and profitable channels as opportunities arise. Withdrawals on our deferred annuities, death benefits, pension group annuity benefit payments, payments on payout annuities, payments related to interest, maturities and repurchases of funding agreements and block reinsurance outflows (collectively, gross outflows), in the aggregate were $26.3 billion and $26.8 billion for the nine months ended September 30, 2024 and 2023, respectively. The decrease in gross outflows of $419 million was primarily driven by the VIAC recapture transaction in the third quarter of 2023 as well as a decrease in outflows related to policies underlying certain reinsurance blocks compared to 2023, partially offset by an increase in funding agreement maturities in 2024 and an increase in annuity policies which have reached the end of the surrender charge periods in a higher rate environment. We believe that our credit profile, current product offerings and product design capabilities, as well as our growing reputation as both a seasoned funding agreement issuer and a reliable pension group annuity counterparty, will continue to enable us to grow our existing organic channels and source additional volumes of profitably underwritten liabilities in various market environments. We intend to continue to grow organically by expanding each of our retail, flow reinsurance and institutional distribution channels. We believe that we have the right people, infrastructure, scale and capital discipline to position us for continued growth.

Previous wording

Within our retail channel, we had fixed annuity sales of $18.6 billion and $15.4 billion for the six months ended June 30, 2024 and 2023, respectively. The increase in our retail channel was driven by record sales of our fixed indexed annuity (FIA) products as well as robust multi-year guaranteed annuity (MYGA) sales compared to 2023. Overall sales were strong across our bank, independent marketing organization (IMO) and broker-dealer channels, exhibiting strong sales execution, the current rate environment and our continued expansion into large financial institutions. We have maintained our disciplined approach to pricing and our targeted underwritten returns. We aim to continue to grow our retail channel by deepening our relationships with our approximately 38 IMOs and with our growing network of 19 banks and 148 broker-dealers, collectively representing approximately 134,000 independent agents. Our strong financial position and diverse, capital-efficient products allow us to be dependable partners with IMOs, banks and broker-dealers as well as to consistently write new business. We expect our retail channel to continue to benefit from our credit profile, product launches and continuous product enhancements as we look to capture new potential distribution opportunities. We believe this can support sales growth at our targeted returns from increased volumes via existing IMO relationships and allow continued expansion of our bank and broker-dealer channels.

Current wording

Within our retail channel, we had fixed annuity sales of $27.8 billion and $21.9 billion for the nine months ended September 30, 2024 and 2023, respectively. The increase in our retail channel was driven by record sales of our fixed indexed annuity (FIA) products as well as increased multi-year guaranteed annuity (MYGA) sales compared to 2023. Overall sales were strong across our bank, independent marketing organization (IMO) and broker-dealer channels, exhibiting strong sales execution, the current rate environment, growing product offerings and our continued expansion into large financial institutions. We have maintained our disciplined approach to pricing and our targeted underwritten returns. We aim to continue to grow our retail channel by deepening our relationships with our approximately 38 IMOs and with our growing network of 18 banks and 149 broker-dealers, collectively representing approximately 139,000 independent agents. Our strong financial position and diverse, capital-efficient products allow us to be dependable partners with IMOs, banks and broker-dealers as well as to consistently write new business. We expect our retail channel to continue to benefit from our credit profile, product launches and continuous product enhancements as we look to capture new potential distribution opportunities. We believe this can support sales growth at our targeted returns from increased volumes via existing IMO relationships and allow continued expansion of our bank and broker-dealer channels.

Previous wording

Within our flow reinsurance channel, we target reinsurance business consistent with our preferred liability characteristics, which provides us another opportunistic channel to source liabilities with attractive crediting rates. We generated inflows through our flow reinsurance channel of $3.6 billion and $4.6 billion for the six months ended June 30, 2024 and 2023, respectively. The decrease in our flow reinsurance channel from 2023 was primarily driven by increased competitiveness in the Japanese market and client repositioning in the US. We expect that our credit profile and our reputation as a solutions provider will help us continue to source additional reinsurance partners, which will further diversify our flow reinsurance channel.

Current wording

Within our flow reinsurance channel, we target reinsurance business consistent with our preferred liability characteristics, which provides us another opportunistic channel to source liabilities with attractive crediting rates. We generated inflows through our flow reinsurance channel of $4.5 billion and $7.7 billion for the nine months ended September 30, 2024 and 2023, respectively. The decrease in our flow reinsurance channel from 2023 was primarily driven by continued increased competitive dynamics in the current year. We expect that our credit profile and our reputation as a solutions provider will help us continue to source additional reinsurance partners, which will further diversify our flow reinsurance channel.

Previous wording

Within our institutional channel, we generated inflows of $14.6 billion and $10.7 billion for the six months ended June 30, 2024 and 2023, respectively. The increase in our institutional channel was driven by higher funding agreement inflows, partially offset by lower pension group annuity inflows. We issued funding agreements in the aggregate principal amount of $14.0 billion and $1.6 billion for the six months ended June 30, 2024 and 2023, respectively. The increase in our funding agreement channel from the prior year was driven by strong inflows related to a resurgence in public FABN issuance in 2024 amid more favorable market conditions as well as an increase in FHLB and secured and other funding agreement issuances. Funding agreement inflows for the six months ended June 30, 2024 consisted of $6.7 billion of FABN issuances, $1.9 billion of secured and other funding agreement issuances, $5.4 billion of FHLB issuances and no long-term repurchase agreement issuances. As of June 30, 2024, we had funding agreements outstanding of $21.0 billion under our FABN program, $8.5 billion of secured and other funding agreements,$11.9 billion with the FHLB and $2.7 billion of long-term repurchase agreements. We issued group annuity contracts in the aggregate principal amount of $577 million and $9.1 billion during the six months ended June 30, 2024 and 2023, respectively. The decrease in our pension group annuity channel was primarily related to closing a $7.6 billion transaction, our largest single pension group annuity transaction to date, in the second quarter of 2023. The pension group annuity channel was also impacted by the competitive market environment, along with other factors, in 2024. Since entering the pension group annuity market in 2017, we have closed 48 deals resulting in the issuance or reinsurance of group annuities of $52.3 billion with more than 550,000 plan participants as of June 30, 2024. We expect to grow our institutional channel by continuing to engage in pension group annuity transactions and programmatic issuances of funding agreements.

Current wording

Within our institutional channel, we generated inflows of $24.5 billion and $14.0 billion for the nine months ended September 30, 2024 and 2023, respectively. The increase in our institutional channel was driven by higher funding agreement inflows, partially offset by lower pension group annuity inflows. We issued funding agreements in the aggregate principal amount of $23.6 billion and $4.9 billion for the nine months ended September 30, 2024 and 2023, respectively. The increase in our funding agreement channel from the prior year was driven by record inflows related to a resurgence in FABN issuance, as well as an increase in secured and other funding agreement and FHLB issuances, in 2024 amid more favorable market conditions. Funding agreement inflows for the nine months ended September 30, 2024 consisted of $9.2 billion of FABN issuances, $7.6 billion of secured and other funding agreement issuances, $6.8 billion of FHLB issuances and no long-term repurchase agreement issuances. As of September 30, 2024, we had funding agreements outstanding of $23.0 billion under our FABN program, $14.1 billion of secured and other funding agreements, $13.0 billion with the FHLB and $2.7 billion of long-term repurchase agreements. We issued group annuity contracts in the aggregate principal amount of $871 million and $9.1 billion during the nine months ended September 30, 2024 and 2023, respectively. The decrease in our pension group annuity channel was primarily related to closing a $7.6 billion transaction, our largest single pension group annuity transaction to date, in the second quarter of 2023. The pension group annuity channel was also impacted by the competitive market environment, along with other factors, in 2024. Since entering the pension group annuity market in 2017, we have closed 49 deals resulting in the issuance or reinsurance of group annuities of $52.6 billion with more than 555,000 plan participants as of September 30, 2024. We expect to grow our institutional channel by continuing to engage in pension group annuity transactions and programmatic issuances of funding agreements.

Previous wording

To further support our growth and capital deployment opportunities following the deployment of capital by ACRA 1, we funded ACRA 2 in December 2022 as another long-duration, on-demand capital vehicle. Effective July 1, 2023, ALRe sold 50% of its non-voting, economic interests in ACRA 2 to ADIP II for $640 million, while maintaining all of ACRA 2’s voting interests. Effective December 31, 2023, ACRA 2 repurchased a portion of its shares held by ALRe, which increased ADIP II’s ownership of economic interests in ACRA 2 to 60%, with ALRe owning the remaining 40% of the economic interests. ACRA 2 participates in certain transactions by drawing a portion of the required capital for such transactions from third-party investors equal to ADIP II’s proportionate economic interest in ACRA 2.

Current wording

To further support our growth and capital deployment opportunities following the deployment of capital by ACRA 1, we funded ACRA 2 in December 2022 as another long-duration, on-demand capital vehicle. Effective July 1, 2023, ALRe sold 50% of its non-voting, economic interests in ACRA 2 to ADIP II for $640 million. Effective December 31, 2023, ACRA 2 repurchased a portion of its shares held by ALRe, which increased ADIP II’s ownership of economic interests in ACRA 2 to 60%, with ALRe owning the remaining 40% of the economic interests. Effective October 1, 2024, ACRA 2 repurchased a portion of its shares held by ALRe, which increased ADIP II’s ownership of economic interests in ACRA 2 to 63%, with ALRe owning the remaining 37% of the economic interests. ALRe holds all of ACRA 2’s voting interests. ACRA 2 participates in certain transactions by drawing a portion of the required capital for such transactions from third-party investors equal to ADIP II’s proportionate economic interest in ACRA 2.

Previous wording

Executing our growth strategy requires that we have sufficient capital available to deploy. We believe that we have significant capital available to support our growth aspirations. As of June 30, 2024, we estimate that we had approximately $10.1 billion in capital available to deploy, consisting of approximately $3.0 billion in excess equity capital, $3.3 billion in untapped leverage capacity (assuming an adjusted leverage ratio of not more than 30%, subject to maintaining a sufficient level of capital required to maintain our desired financial strength ratings from rating agencies), and $3.8 billion in available undrawn capital at ACRA.

Current wording

Executing our growth strategy requires that we have sufficient capital available to deploy. We believe that we have significant capital available to support our growth aspirations. As of September 30, 2024, we estimate that we had approximately $8.4 billion in capital available to deploy, consisting of approximately $2.0 billion in excess equity capital, $2.9 billion in untapped leverage capacity (assuming an adjusted leverage ratio of not more than 30%, subject to maintaining a sufficient level of capital required to maintain our desired financial strength ratings from rating agencies), and $3.5 billion in available undrawn capital at ACRA.

Previous wording

We carefully monitor economic and market conditions that could potentially give rise to global market volatility and affect our business operations, investment portfolios and derivatives, which includes global inflation. US inflation eased in 2024 but the Consumer Price Index remains above the US Federal Reserve’s 2% target. The US Bureau of Labor Statistics reported that the annual US inflation rate decreased modestly to 3.0% as of June 30, 2024, compared to 3.5% as of March 31, 2024. The US Federal Reserve finished the quarter with a benchmark interest rate target range of 5.25% to 5.50%, unchanged from its July 2023 meeting.

Current wording

We carefully monitor economic and market conditions that could potentially give rise to global market volatility and affect our business operations, investment portfolios and derivatives, which includes global inflation. US inflation has continued to ease in 2024 with the US Bureau of Labor Statistics reporting the annual US inflation rate decreased to 2.4% as of September 30, 2024, compared to 3.0% as of June 30, 2024. As a result of the continued decline in US inflation, in September 2024, the US Federal Reserve lowered the benchmark interest rate target range to 4.75% to 5.00% from a target range of 5.25% to 5.50%, marking the first cut in rates since the pandemic.

Previous wording

Equity market performance was strong during the second quarter of 2024. In the US, the S&P 500 Index increased by 3.9% during the second quarter, following an increase of 10.2% in the first quarter of 2024. In terms of economic conditions in the US, the Bureau of Economic Analysis reported real GDP increased at an annual rate of 2.8% in the second quarter of 2024, following an increase of 1.4% in the first quarter of 2024. As of July 2024, the International Monetary Fund estimated that the US economy will expand by 2.6% in 2024 and 1.9% in 2025. The US Bureau of Labor Statistics reported that the US unemployment rate increased to 4.1% as of June 30, 2024, compared to 3.8% as of March 31, 2024. Oil finished the second quarter of 2024 down 2.0% from the first quarter of 2024.

Current wording

Equity market performance was strong during the third quarter of 2024. In the US, the S&P 500 Index increased by 5.5% during the quarter, following an increase of 3.9% in the second quarter of 2024. In terms of economic conditions in the US, the Bureau of Economic Analysis reported real GDP increased at an annual rate of 2.8% in the third quarter of 2024, following an increase of 3.0% in the second quarter of 2024. As of October 2024, the International Monetary Fund estimated that the US economy will expand by 2.8% in 2024 and 2.2% in 2025. The US Bureau of Labor Statistics reported that the US unemployment rate remained at 4.1% as of September 30, 2024. Oil finished the third quarter of 2024 down 16.4% from the second quarter of 2024.

Previous wording

Foreign exchange rates can materially impact the valuations of our investments and liabilities that are denominated in currencies other than the US dollar. The US dollar strengthened in the second quarter of 2024 compared to the euro and Japanese yen. Relative to the US dollar, the euro depreciated 0.7% in the second quarter of 2024, after depreciating 2.3% in the first quarter of 2024. Relative to the US dollar, the Japanese yen depreciated 5.9% in the second quarter of 2024, after depreciating 6.9% in the first quarter of 2024. We generally undertake hedging activities to eliminate or mitigate foreign exchange currency risk.

Current wording

Foreign exchange rates can materially impact the valuations of our investments and liabilities that are denominated in currencies other than the US dollar. The US dollar weakened in the third quarter of 2024 compared to the euro and Japanese yen. Relative to the US dollar, the euro appreciated 3.9% in the third quarter of 2024, after depreciating 0.7% in the second quarter of 2024. Relative to the US dollar, the Japanese yenappreciated 11.9% in the third quarter of 2024, after depreciating 5.9% in the second quarter of 2024. We generally undertake hedging activities to mitigate foreign exchange currency risk.

Previous wording

We address interest rate risk through managing the duration of the liabilities we source with assets we acquire through asset liability management (ALM) modeling. As part of our investment strategy, we purchase floating rate investments, which we expect would perform well in a rising interest rate environment and which we expect would underperform in a declining rate environment. We manage our interest rate risk in a declining rate environment through hedging activity or the issuance of additional floating rate liabilities to lower our overall net floating rate position. As of June 30, 2024, our net invested asset portfolio included $45.5 billion of floating rate investments, or 20% of our net invested assets, and our net reserve liabilities included $30.3 billion of floating rate liabilities at notional, or 13% of our net invested assets, resulting in $15.2 billion of net floating rate assets, or 7% of our net invested assets.

Current wording

We address interest rate risk through managing the duration of the liabilities we source with assets we acquire through asset liability management (ALM) modeling. As part of our investment strategy, we purchase floating rate investments, which we expect would perform well in a rising interest rate environment and which we expect would underperform in a declining rate environment. We manage our interest rate risk in a declining rate environment through hedging activity or the issuance of additional floating rate liabilities to lower our overall net floating rate position. As of September 30, 2024, our net invested asset portfolio included $49.8 billion of floating rate investments, or 21% of our net invested assets, and our net reserve liabilities included $35.0 billion of floating rate liabilities at notional, or 15% of our net invested assets, resulting in $14.8 billion of net floating rate assets, or 6% of our net invested assets.

Previous wording

According to the Life Insurance and Market Research Association (LIMRA), total annuity market sales in the US were $106.7 billion for the three months ended March 31, 2024, a 13.4% increase from the same time period in 2023, as higher interest rates resulted in continued growth in the US annuity market. In the total annuity market, for the three months ended March 31, 2024 (the most recent period for which specific market share data is available), we were the largest provider of annuities based on sales of $9.7 billion, translating to a 9.1% market share. For the three months ended March 31, 2023, we were the largest provider of annuities based on sales of $8.6 billion, translating to a 9.2% market share.

Current wording

According to the Life Insurance and Market Research Association (LIMRA), total annuity market sales in the US were $216.6 billion for the six months ended June 30, 2024, a 19.6% increase from the same time period in 2023, as higher interest rates resulted in continued growth in the US annuity market. In the total annuity market, for the six months ended June 30, 2024 (the most recent period for which specific market share data is available), we were the largest provider of annuities based on sales of $18.7 billion, translating to an 8.6% market share. For the six months ended June 30, 2023, we were the largest provider of annuities based on sales of $15.5 billion, translating to an 8.5% market share.

Previous wording

According to LIMRA, total fixed annuity market sales in the US were $78.5 billion for the three months ended March 31, 2024, a 10.8% increase from the same time period in 2023. In the total fixed annuity market, for the three months ended March 31, 2024 (the most recent period for which specific market share data is available), we were the largest provider of fixed annuities based on sales of $9.4 billion, translating to a 12.0% market share. For the three months ended March 31, 2023, we were the largest provider of fixed annuities based on sales of $8.4 billion, translating to an 11.9% market share.

Current wording

According to LIMRA, total fixed annuity market sales in the US were $156.7 billion for the six months ended June 30, 2024, a 17.6% increase from the same time period in 2023. In the total fixed annuity market, for the six months ended June 30, 2024 (the most recent period for which specific market share data is available), we were the largest provider of fixed annuities based on sales of $18.2 billion, translating to an 11.6% market share. For the six months ended June 30, 2023, we were the largest provider of fixed annuities based on sales of $15.0 billion, translating to an 11.3% market share.

Previous wording

According to LIMRA, total fixed indexed annuity market sales in the US were $28.6 billion for the three months ended March 31, 2024, a 23.8% increase from the same time period in 2023. For the three months ended March 31, 2024 (the most recent period for which specific market share data is available), we were the largest provider of FIAs based on sales of $4.2 billion, translating to a 14.5% market share. For the three months ended March 31, 2023, we were the largest provider of FIAs based on sales of $2.5 billion, translating to a 10.8% market share.

Current wording

According to LIMRA, total fixed indexed annuity market sales in the US were $59.3 billion for the six months ended June 30, 2024, a 22.5% increase from the same time period in 2023. For the six months ended June 30, 2024 (the most recent period for which specific market share data is available), we were the largest provider of FIAs based on sales of $7.6 billion, translating to a 12.8% market share. For the six months ended June 30, 2023, we were the second largest provider of FIAs based on sales of $5.0 billion, translating to a 10.3% market share.

Previous wording

According to LIMRA, total registered indexed linked annuity (RILA) market sales in the US were $14.5 billion for the three months ended March 31, 2024, a 39.6% increase from the same time period in 2023. For the three months ended March 31, 2024 (the most recent period for which specific market share data is available), we were the tenth largest provider of RILAs based on sales of $291 million, translating to a 2.0% market share. For the three months ended March 31, 2023, we were the tenth largest provider of RILAs based on sales of $217 million, translating to a 2.1% market share. We believe RILAs represent a significant growth opportunity for Athene.

Current wording

According to LIMRA, total registered indexed linked annuity (RILA) market sales in the US were $30.8 billion for the six months ended June 30, 2024, a 41.7% increase from the same time period in 2023. For the six months ended June 30, 2024 (the most recent period for which specific market share data is available), we were the tenth largest provider of RILAs based on sales of $568 million, translating to a 1.8% market share. For the six months ended June 30, 2023, we were the eleventh largest provider of RILAs based on sales of $420 million, translating to a 1.9% market share. We believe RILAs represent a significant growth opportunity for Athene.

Previous wording

•Investment Gains (Losses), Net of Offsets—Consists of the realized gains and losses on the sale of AFS securities, the change in fair value of reinsurance assets, unrealized gains and losses, changes in the provision for credit losses and other investment gains and losses. Unrealized, allowances and other investment gains and losses are comprised of the fair value adjustments of trading securities (other than certain equity tranche securities) and mortgage loans, investments held under the fair value option, derivative gains and losses not hedging FIA index credits, foreign exchange impacts and the change in provision for credit losses recognized in operations net of the change in AmerUs Closed Block fair value reserve related to the corresponding change in fair value of investments. Investment gains and losses are net of offsets related to the market value adjustments (MVA) associated with surrenders or terminations of contracts.

Current wording

•Investment Gains (Losses), Net of Offsets—Consists of the realized gains and losses on the sale of AFS securities, the change in fair value of reinsurance assets, unrealized gains and losses, changes in the provision for credit losses and other investment gains and losses. Unrealized, allowances and other investment gains and losses are comprised of the fair value adjustments of trading securities (other than certain equity tranche securities) and mortgage loans, investments held under the fair value option, derivative gains and losses not hedging FIA index credits, all foreign exchange impacts and the change in provision for credit losses recognized in operations net of the change in AmerUs Closed Block fair value reserve related to the corresponding change in fair value of investments. Investment gains and losses are net of offsets related to the market value adjustments (MVA) associated with surrenders or terminations of contracts.

Previous wording

Other operating expenses excludes integration, restructuring and other non-operating expenses, stock compensation and long-term incentive plan expenses, interest expense, policy acquisition expenses, net of deferrals, and the proportionate share of the ACRA operating expenses associated with the noncontrolling interests. We believe a measure like other operating expenses is useful in analyzing the trends of our core business operations and profitability. While we believe other operating expenses is a meaningful financial metric and enhances our understanding of the underlying profitability drivers of our business, it should not be used as a substitute for policy and other operating expenses presented under US GAAP.

Current wording

Other operating expenses excludes interest expense, policy acquisition expenses, net of deferrals, integration, restructuring and other non-operating expenses, stock compensation and long-term incentive plan expenses and the proportionate share of the ACRA operating expenses associated with the noncontrolling interests. We believe a measure like other operating expenses is useful in analyzing the trends of our core business operations and profitability. While we believe other operating expenses is a meaningful financial metric and enhances our understanding of the underlying profitability drivers of our business, it should not be used as a substitute for policy and other operating expenses presented under US GAAP.

Previous wording

Adjusted senior debt-to-capital ratio is a non-GAAP measure used to evaluate our capital structure excluding the impacts of AOCI and the cumulative changes in fair value of funds withheld and modco reinsurance assets as well as mortgage loan assets, net of tax. Adjusted senior debt-to-capital ratio is calculated as senior debt at notional value divided by adjusted capitalization. Adjusted capitalization includes our adjusted AHL common stockholder’s equity, preferred stock and the notional value of our total debt. Adjusted AHL common stockholder’s equity is calculated as the ending AHL stockholders’ equity excluding AOCI, the cumulative changes in fair value of funds withheld and modco reinsurance assets and mortgage loan assets as well as preferred stock. These adjustments fluctuate period to period in a manner inconsistent with our underlying profitability drivers as the majority of such fluctuation is related to the market volatility of the unrealized gains and losses associated with our AFS securities, reinsurance assets and mortgage loans. Except with respect to reinvestment activity relating to acquired blocks of businesses, we typically buy and hold investments to maturity throughout the duration of market fluctuations, therefore, the period-over-period impacts in unrealized gains and losses are not necessarily indicative of current operating fundamentals or future performance.

Current wording

Adjusted senior debt-to-capital ratio is a non-GAAP measure used to evaluate our capital structure excluding the impacts of AOCI and the cumulative changes in fair value of funds withheld and modco reinsurance assets as well as mortgage loan assets, net of tax. Adjusted senior debt-to-capital ratio is calculated as senior debt at notional value divided by adjusted capitalization. Adjusted capitalization includes our adjusted AHL common stockholder’s equity, preferred stock and the notional value of our total debt. Adjusted AHL common stockholder’s equity is calculated as the ending AHL stockholders’ equity excluding AOCI, the cumulative changes in fair value of funds withheld and modco reinsurance assets and mortgage loan assets as well as preferred stock. These adjustments fluctuate period to period in a manner inconsistent with our underlying profitability drivers as the majority of such fluctuation is related to the market volatility of the unrealized gains and losses associated with our AFS securities, reinsurance assets and mortgage loans. Except with respect to reinvestment activity relating to acquired blocks of businesses, we typically buy and hold investments to maturity throughout the duration of market fluctuations, therefore, the period-over-period impacts in unrealized gains and losses are not necessarily indicative of current operating fundamentals or future performance. Adjusted senior debt-to-capital ratio should not be used as a substitute for the debt-to-capital ratio. However, we believe the adjustments to stockholders’ equity and debt are significant to gaining an understanding of our capitalization, debt utilization and debt capacity.