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Athene Global offers attractive relative value in Secured Life Insurance sector

| September 11, 2020

This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors.

Athene Global (ATH) ‘25s offer the most spread relative to the rest of the secured (A or better) life insurance cohort, and the ’25s represent the steepest part of the curve. Recent affirmations from a rating agency reflect the company’s improved competitive position in its core market, the stability of its financial profile and capital adequacy.

Issue details

ATH 2.5% 01/14/25 @ +135/5-year; G+138; 1.615% yield; $103.69

Issuer: Athene Global Funding; Secured, FA-backed, GIC

CUSIP: 04685A2L4
Amount outstanding: $625 million
Secured rating: A/A

Parent senior rating: BBB+/BBB+

144A Private Placement

Exhibit 1. Life Insurance – senior secured (FA-backed/GIC), single-A or better ratings

Source: Bloomberg

  • These notes are Guaranteed Investment Contract (GIC) backed, which are secured by a Funding Agreement (FA) that puts bondholders on equal footing with insurance policyholders. This is reflected in the A/A secured ratings, which are in-line with the senior Financial Strength Rating of the insurance operating companies.
  • S&P recently affirmed ATH’s insurance financial strength ratings of the operating subsidiaries at A and the parent unsecured rating at BBB+, and assigned a Stable Outlook to the credit. The rating action reflects ATH’s improved competitive position in its core markets, stable financial profile and capital adequacy. The company recently announced an agreement to acquire $27 billion of fixed rate and fixed index annuity liabilities from Jackson Life via reinsurance. S&P views the deal as a positive to help enhance ATH’s scale and improve its competitive standing in the block acquisition/reinsurance business.
  • ATH is a Bermuda-based life insurance company, and is among the national leaders in the fixed index annuity market. Over the past several years, the company has been diversifying operations and expanding its presence in flow reinsurance and pension risk transfer businesses. As of 2Q20, the Company had over $138 billion in total assets and $160 billion in total policy reserves. The company is 35% owned by Apollo Global Management (APO: A-/A), which lends a degree of implicit financial support, as well as some key strategic operating relationships.
  • ATH has been active in the public debt markets in 2020. The company has conducted 6 debt launches in the USD public market since November of last year, plus a preferred launch back in June. The debt launches have been used to purchase funding agreements, and help term out its maturity profile and shore up its near-term liquidity. ATH has just under $3 billion in maturities over the next two years, with a $1.25 billion credit facility fully available through 2024.
  • ATH is very well capitalized with AA capital adequacy ratings at the rating agencies.  The Company had $1.7 billion in capital and surplus at the life insurance operating companies as of 2Q20. The statutory risk-based capital ratio was 864% as year-end 2019.

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