Athene Holding Ltd. (NYSE:ATH) Q2 2019 Earnings Conference Call - Final Transcript

Aug 05, 2019 • 10:00 am ET

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Athene Holding Ltd. (NYSE:ATH) Q2 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions]

Executive
James R. Belardi

Thanks, Maria. Given the heighten level of call participation today, if we could just ask everyone to limit their questions to one on the first call-round and hop back in the queue if you think you have a follow-up.

Operator
Operator

And we'll take our first question from the line of Erik Bass of Autonomous Research.

Analyst
Erik Bass

Hi. Thank you. Marty, I just hoping you could go into a little bit more detail on your comments around how the recent moves that interest rates affect your outlook for both the fixed income, net investment earned rate and interest credited. And how much of a timing lag is there before changes in your renewal crediting rates start flowing through an offsetting in the earned rate pressures?

Executive
Martin P. Klein

Sure. So obviously our floaters depend on the level of interest rates, in the near term, mostly on LIBOR, most of the book of business is indexed off with one or three month LIBOR though there is roughly 15%, 20% of the book is indexed off with longer term things. Quarter-over-quarter, we saw roughly a couple of basis points of pressure maybe $6 million, so I could -- you can see all else being equal, maybe a couple of basis points of another drop over the next quarter or so.

As I said, I do expect that to be offset in our overall cost of funds. We have been continuing to on rate resets, drop rates, where we can, that's been offset by some higher hedging costs earlier in the year, but again, if rates stay low and volatility decently lower hedging costs will come down. So as I said, I expect in our cost of funds line, which isn't just interest credited, but also other liability costs including DAC amortization. I think that whatever decline we have in the fixed income side, expect will offset that, perhaps more so by what we see in the cost of funds.

Executive
William J. Wheeler

This is Bill, I might add to that -- just keep in mind -- roughly, we're a 100 basis points away from crediting minimums, in our in-force portfolio. So we have room if we need to move, and we do expect to make changes.

Executive
James R. Belardi

(Multiple Speakers) Credit on the annuity side is the rate reset Bill talk about. And then the hedging costs both in a low rate environment would be opportunities to take that down.

Analyst
Erik Bass

Got it. And not at a material lag in terms of timing?

Executive
James R. Belardi

It's -- not exactly one for one, but it is hedging cost for example you typically hedge we have most of our book is annual point to point, so only typically rebounds, less than a quarter, the book every quarter. So there is a bit of a lag there, but as I said, I expect for the rest of the year is that whatever decrease we have in fixed income expect will make that up on the cost of funds.

Analyst
Erik Bass

Got it. Thank you.

Operator
Operator

Our next question comes from the