Fitch Ratings has affirmed the 'A-' Long-Term Issuer Default Rating (IDR) assigned to Athene Holding Ltd. (Athene) and affirmed the 'A+' Insurer Financial Strength (IFS) rating assigned to Athene's insurance operating subsidiaries.

The Rating Outlook for Athene and its subsidiaries is Stable.

The rating affirmations reflect Athene's strong company profile, very strong financial performance, strong capitalization and strong asset/liability management. Somewhat offsetting these strengths are the company's exposure to volatility in asset prices and movements in interest rates. The rating also continues to reflect Fitch's view that the merger with Apollo Global Management (AGM), which closed in early 2022, is broadly neutral from a credit perspective.

Key Rating Drivers

Company Profile: Fitch Ratings' view of Athene's company profile has been bolstered in recent years through organic and inorganic growth across multiple products and geographies, while maintaining its leading market positions in its core markets. Further, Athene benefits from material competitive advantages as a result of its significant operating scale. While the company remains focused on spread based liabilities, Fitch views Athene as having favorable diversification relative to more modest annuity peers.

Very Strong Earnings: Athene's earnings declined modestly in 2022 as a result of lower alternative asset returns, but have improved through the first six months of 2023 as a result of improving investment returns and continued growth in core product lines. The company's earnings are primarily driven by interest margins on spread-based products, and Fitch expects that higher interest rates will benefit earnings over the long run, although a further rapid rise in interest rates, or a severely depressed economic environment, could add near-term volatility.

Strong Capitalization: Fitch considers Athene's overall risk-adjusted capitalization to be strong, and its capital position remained in the 'Very Strong' category of Fitch's Prism capital model based on YE 2022 data. Additional nonrisk-adjusted measures are also expected to remain above rating expectations. Athene maintains modest financial leverage relative to peers and Fitch calculated Athene's financial leverage to be 15% as of YE 2022.

Investment Portfolio: Athene's investment portfolio is somewhat more exposed to market volatility than the broader life industry, although the portfolio continues to perform well, with minimal reported impairments. Fitch continues to take a cautious view of Athene's position in lower-quality commercial mortgage loans and structured assets as those asset classes may generate impairments or material unrealized losses in a stressed environment. However, Athene has a high level of expertise in managing those assets and is unlikely to be a forced seller.

Asset/Liability and Liquidity Management: Athene's assets and liabilities are well matched on a duration basis, helping to offset the company's above-average exposure to movements in interest rates. Athene remains exposed to interest rate spikes, which may expose the company to higher than anticipated policy surrenders. Further, Athene remains exposed to dislocations in markets, given its investment portfolio composition. Additionally, Fitch views the company as having a strong liquidity position with sufficient sources of contingent capital.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating action/upgrade:

Further positive rating actions are unlikely over the near term absent a material change in Fitch's view of Athene's company profile.

Further rating sensitivities that could lead to a positive rating action over the long term include:

Maintaining a PRISM model score in the upper half of the 'Very Strong' category;

Strong investment performance as evidenced by relatively minimal credit impairments and ability of the company to absorb price volatility stemming from its illiquid holdings;

GAAP based fixed-charge coverage maintained above 10x;

GAAP based operating ROE above 12%.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Prism score below 'Very Strong';

Large acquisitions that are either outside of Athene's historical risk preference and expertise or add materially to the company's operating or financial leverage;

Deterioration in asset performance as evidenced by increased impairments or increased price volatility leading to realized losses in a stressed market environment;

Deterioration in Athene's operating performance, resulting in a ROE below 9%;

GAAP based fixed-charge coverage below 8.0x.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.

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