Athene Holding Ltd. (NYSE:ATH) Q4 2018 Earnings Conference Call Transcript

Feb 26, 2019 • 10:00 am ET

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Athene Holding Ltd. (NYSE:ATH) Q4 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good morning. My name is Maria, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Athene Fourth Quarter and Full Year 2018 Earnings Conference Call and Webcast. All participant lines have been place in a listen-only mode to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.

I'll now turn the call over to Noah Gunn, Head of Global Investor Relations. Please go ahead.

Executive
Noah Gunn

Thanks, Maria, and welcome, again, everyone to our fourth quarter and full-year 2018 earnings call. Joining me this morning are Jim Belardi, Chairman and CEO; Bill Wheeler, President; and Marty Klein, our Chief Financial Officer.

As a reminder, this call may include forward-looking statements and projections, which do not guarantee future events or performance. We do not revise or update such statements to reflect new information, subsequent events or changes in strategy. Please refer to our most recent quarterly and annual reports and other SEC filings for a discussion of the factors that could cause actual results to differ materially from those expressed or implied. We'll be discussing certain non-GAAP measures on this call, which, we believe, are relevant in assessing the financial performance of the business. Reconciliations of these non-GAAP measures can be found in our earnings presentation and financial supplement, which is available at ir.athene.com.

And with that, I will now turn the call over to Jim Belardi.

Executive
James R. Belardi

Thanks, Noah, and good morning, everyone. I'm pleased to report that 2018 was an incredible year of acceleration for Athene. We deployed capital into two inorganic transactions, representing more than $25 billion of liabilities. While growth is helpful, in the aggregate, these transactions will produce mid-teens cash and cash unlevered returns on the capital redeployed, substantially increasing future earnings power.

2018 also fostered substantial growth on the organic side in our retail and flow businesses. Again, the growth itself in these channels is not as important as the returns we were able to generate which was almost equal to our inorganic activity on an unlevered basis.

For the year, every core operating category across our business performed well. Net investment earned rates, cost of funding, G&A and our net spread margin. The primary driver of GAAP year-over-year trends was volatility in public equity markets, both on two public equities in our asset portfolio and in our other liability costs. Specifically, there were several notable themes in the past year that drove our business forward. One, in 2018, we grew adjusted book value by 19% to $45.59 per share, exceeding the trailing five-year compound annual rate of 16%. Two, we posted a consolidated adjusted operating ROE of 14% for the full year, achieving our target of at least mid-teens returns despite the drag created by the significant fourth quarter market volatility and excess capital that was held for most of the year.

Three, we continue to generate our top-tier investment performance and yield generation. Our consolidated net investment earned rate