19/05/2021 - Athene Holding Ltd.: S&P Global Ratings Upgrades Financial Strength Ratings of Athene’s Operating Companies to ‘A+’

Research Update:

Athene Holding Ltd. Upgraded To 'A-', Outlook Is Positive; Operating Entities Upgraded To 'A+', Outlook Is Stable

May 18, 2021

Overview

• We are upgrading Athene to reflect its continued profitable growth throughout the COVID-19 pandemic, while maintaining its capital strength.
• We do not expect its upcoming merger with Apollo to significantly affect Athene's day-to-day operations.
• While we think Athene's nontraditional investment portfolio is risker than some peers', its capital buffers can absorb potential volatility.
• The stable outlook reflects our expectation that Athene will retain its competitive position in its core markets, maintain capital adequacy at 'AA' level, and keep growing profitably in its retail and reinsurance/acquisition businesses.

Rating Action

On May 18, 2021, S&P Global Ratings raised its financial strength and issuer credit ratings on Athene Holding Ltd.'s operating insurance entities (collectively, Athene) to 'A+' from 'A'. The outlook is stable. At the same time, we raised our rating on the holding company to 'A-' from 'BBB+'. The outlook on the holding company ratings is positive.

Rationale

In the past 12 months, during the height of the COVID-19 pandemic and the related economic crisis, Athene continued to grow its businesses while maintaining capital strength at the 'AA' level per our capital model. We noted Athene's expansion last summer, but we were also concerned about the overall macroeconomic conditions at the time and the potential impact on any life insurance company. While the pandemic is certainly not over, we do believe there is less uncertainty than last year, especially in the U.S. given the ongoing vaccine rollout and recent

S&P GLOBAL RATINGS360

May 18, 2021 1

© S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimer on the last page.

Research Update: Athene Holding Ltd. Upgraded To 'A-', Outlook Is Positive; Operating Entities Upgraded To 'A+', Outlook Is Stable

economic growth.

Our raising of Athene's financial strength and issuer credit ratings reflects the group's capital strength and balance-sheet growth. While the increased scale does not in and of itself affect our ratings, the combination of the company's profitable growth, strong earnings vis-à-vis peers, and capital position supports its credit quality.

Athene has expanded its liability profile and market share over the past few years. It was the top seller of fixed index annuities in 2020, and it expanded its funding-agreement-backed notes program, pension risk transfers, flow reinsurance, and block acquisitions. These expansions reflect the strength of Athene's business model and competitive advantage in its various spread-lending businesses. Athene has diverse geographies and sales channels, but its concentration in spread-based business lines leaves it less diversified than some peers that also sell longevity, mortality, morbidity, and/or fee-based products, and will likely limit its credit profile going forward.

We consider Athene's investment portfolio to be risker than some peers' because it has a larger allocation to structured finance securities than most life insurers do (26% as of March 31, 2021). We believe our capital model captures the asset risk of the investments, but even if losses exceed our stressed expectations, Athene's capital buffers will likely absorb a great deal of that additional volatility.

The upcoming merger with Apollo will create a group that will be roughly split equally between asset management and insurance, on an earnings basis. Successful execution of Athene's strategy calls for it to maintain and boost its capital; and the company operates under a regulatory regime that could limit distributions to the rest of the group in times of stress. These two limitations serve to insulate Athene, to a certain extent, from the potential needs of the rest of the group, and therefore, our rating on Athene at 'A+' is two notches higher than that of the rest of the group at 'A-'. Although the merger will better align the two companies, we see no material difference in the way Athene will be managed after the merger, which further strengthens our view that our ratings are not limited by the upcoming transaction.

Since Athene's holding company's debt and preferred shares rely on cashflow from its regulated subsidiaries, our rating on it is currently two notches lower, at 'A-'. This is the standard notching we apply for Bermuda-based insurance holding companies, reflecting the structural subordination between the holding company and its operating subsidiaries. Once the merger closes, we think it will add a significant source of unregulated cashflow that the group could use to service its debt and preferred shares, reducing reliance on dividends from the regulated insurance companies.

Outlook

The stable outlook on Athene's operating companies reflects our expectation that the company will retain its competitive position in its core markets, maintain capital adequacy at 'AA' level, and keep growing profitably in its retail and reinsurance/acquisition businesses.

The positive outlook on Athene's holding company matches the positive outlook on Apollo itself. We could raise the rating on the holding company by one notch if we upgrade Apollo to reflect the addition of Apollo's nonregulated cashflows and potential further support of the Athene's holding company's obligations and Athene's likely core status within the group.

S&P GLOBAL RATINGS360

May 18, 2021 2

© S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimer on the last page.

Research Update: Athene Holding Ltd. Upgraded To 'A-', Outlook Is Positive; Operating Entities Upgraded To 'A+', Outlook Is Stable

Downside scenario

We could lower the ratings in the next 12-24 months if: Athene's stand-alone business profile becomes significantly concentrated in retail annuities; it consistently reports weak earnings relative to peers; or capital adequacy materially worsens to below 'AA'. We could also lower the rating if Apollo's asset-management business weakens.

Upside scenario

It is unlikely that we will raise Athene's rating over the next two years, given its concentration in spread-based businesses.

Related Criteria

• Criteria | Insurance | General: Insurers Rating Methodology, July 1, 2019
• General Criteria: Hybrid Capital: Methodology And Assumptions, July 1, 2019
• General Criteria: Group Rating Methodology, July 1, 2019
• Criteria | Insurance | General: Methodology For Assessing Capital Charges For U.S. RMBS And CMBS Securities Held By Insurance Companies, Aug. 29, 2014
• Criteria | Insurance | General: Methodology For Assessing Capital Charges For Commercial Mortgage Loans Held By U.S. Insurance Companies, May 31, 2012
• Criteria | Insurance | General: Methodology For Calculating The Convexity Risk In U.S. Insurance Risk-Based Capital Model, April 27, 2011
• General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
• Criteria | Insurance | General: Refined Methodology And Assumptions For Analyzing Insurer Capital Adequacy Using The Risk-Based Insurance Capital Model, June 7, 2010

Ratings List

Upgraded

ToFrom

Athene Holding Ltd.

Issuer Credit Rating

Local Currency	A-/Positive/--	BBB+/Positive/--

S&P GLOBAL RATINGS360

May 18, 2021 3

© S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimer on the last page.

Research Update: Athene Holding Ltd. Upgraded To 'A-', Outlook Is Positive; Operating Entities Upgraded To 'A+', Outlook Is Stable

Upgraded

	To	From
ACRA
Athene Life Re Ltd.
Athene Life Re International Ltd.
Athene Annuity and Life Co.
Athene Annuity & Life Assurance Co. of New York
Athene Annuity & Life Assurance Co.
ACRA International
Issuer Credit Rating
Local Currency	A+/Stable/--	A/Stable/--
Financial Strength Rating
Local Currency	A+/Stable/--	A/Stable/--
Athene Holding Ltd.
Senior Unsecured	A-	BBB+
Preferred Stock	BBB	BBB-
Athene Global Funding
Senior Secured	A+	A

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.

S&P GLOBAL RATINGS360

May 18, 2021 4

© S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimer on the last page.

Copyright © 2021 by Standard & Poor's Financial Services LLC. All rights reserved.

No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P's opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.

S&P Global Ratings | Research | May 18, 2021

5