10q10k10q10k.net

What changed in Athene Holding Ltd.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Athene Holding Ltd.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+1141 added−1166 removedSource: 10-K (2024-02-27) vs 10-K (2023-03-01)

Top changes in Athene Holding Ltd.'s 2023 10-K

1141 paragraphs added · 1166 removed · 761 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

195 edited+83 added−174 removed274 unchanged
Biggest changeBusiness The EU GDPR imposes onerous and comprehensive privacy, data protection, and data security obligations onto controllers and processors, including, as applicable: (i) contractual privacy, data protection, and data security commitments, including the requirement to implement appropriate technical and organizational measures to safeguard personal data processed; (ii) establishing means for individuals to exercise their data protection rights (e.g., the right to erasure of personal data); (iii) limitations on retention and the amount of personal data processed; (iv) additional requirements pertaining to sensitive information (such as health data); (v) data breach notification requirements to supervisory authorities without undue delay (and no later than 72 hours where feasible) and/or concerned individuals; (vi) enhanced requirements for obtaining valid consent from data subjects; (vii) obligations to consider data protection as any new products or services are developed; and (viii) the provisions of more detailed privacy notices for clinical trial subjects and investigators.
Biggest changeThe GDPR imposes onerous and comprehensive privacy, data protection, and data security obligations on controllers and provides certain rights for data subjects, including, among others: (i) accountability and transparency requirements, which require controllers to demonstrate and record compliance with the GDPR and to provide more detailed information to data subjects regarding processing of their personal data; (ii) specific requirements for obtaining valid consent; (iii) obligations to consider data protection when any new products or services are developed and designed to limit the amount of personal data processed; (iv) obligations to comply with data protection rights of data subjects including a right of access to and rectification of, personal data, a right of restriction of processing or to object to processing of personal data and a right to ask for a copy of personal data to be provided to a third party in a useable format and a right of erasure of their personal data in certain circumstances; and (v) an obligation to report personal data breaches to: (A) the data supervisory authority without undue delay (and no later than 72 hours after discovering the personal data breach, where feasible); and (B) affected data subjects, where the personal data breach is likely to result in a high risk to their rights and freedoms. 35 Table of Contents Item 1.
In 2021, the NYSDFS issued final Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change (Guidance), which sets out the NYSDFS’ expectations that all New York insurers begin integrating the consideration of the financial risks from climate change into their governance frameworks, business strategies, risk management processes and scenario analysis, and developing their approach to climate-related financial disclosure.
Business In 2021, the NYSDFS issued final Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change (Guidance), which sets out the NYSDFS’ expectations that all New York insurers begin integrating the consideration of the financial risks from climate change into their governance frameworks, business strategies, risk management processes and scenario analysis, and developing their approach to climate-related financial disclosure.
Broker-dealers Our securities operations, principally conducted by our limited purpose SEC-registered broker-dealer, Athene Securities, LLC, are subject to federal and state securities and related laws, and are regulated principally by the SEC, state securities authorities and the Financial Industry Regulatory Authority (FINRA). Athene Securities, LLC does not hold customer funds or safekeep customer securities.
Broker-dealers Our securities operations, principally conducted by our limited purpose SEC-registered broker-dealer, Athene Securities, LLC (Athene Securities), are subject to federal and state securities and related laws, and are regulated principally by the SEC, state securities authorities and the Financial Industry Regulatory Authority (FINRA). Athene Securities does not hold customer funds or safekeep customer securities.
If we are unable to accomplish such actions, NRSROs may view this as a reason for a ratings downgrade. If we are unable to accomplish such actions, NRSROs may view this as a reason for a ratings downgrade.
If we are unable to accomplish such actions, NRSROs may view this as a reason for a ratings downgrade.
Risk Relating to Market and Credit Risk Our investments are subject to market and credit risks that could diminish their value and these risks could be greater during periods of extreme volatility or disruption in the financial and credit markets, which could adversely impact our business, financial condition, results of operations, liquidity and cash flows.
Risks Relating to Market and Credit Risk Our investments are subject to market and credit risks that could diminish their value and these risks could be greater during periods of extreme volatility or disruption in the financial and credit markets, which could adversely impact our business, financial condition, results of operations, liquidity and cash flows.
Belardi’s involvement as a member of our board of directors and management team, as an officer and director AGM, and as an officer of ISG and director of ISG’s general partner may lead to a conflict of interest.
Belardi’s involvement as a member of our board of directors and management team, as an officer and director of AGM, and as an officer of ISG and director of ISG’s general partner may lead to a conflict of interest.
In addition, US federal, state, local and non-US income tax rules are constantly under review by persons involved in the legislative process, the IRS, the US Department of the Treasury, and non-US legislative and regulatory bodies, which frequently results in revised interpretations of established concepts, statutory changes, revisions to regulations and other modifications and interpretations.
In addition, US federal, state, local and non-US income tax rules are constantly under review by persons involved in the legislative process, the IRS, the US Department of the Treasury, and state, local and non-US legislative and regulatory bodies, which frequently results in revised interpretations of established concepts, statutory changes, revisions to regulations and other modifications and interpretations.
Certain of our reinsurance agreements require our US subsidiaries (including non-US subsidiaries that have elected to be subject to US federal income taxation) to pay or accrue substantial amounts to certain of our non-US reinsurance subsidiaries that would be characterized as “base erosion payments” with respect to which there are “base erosion tax benefits.” These and any other “base erosion payments” may cause us to be subject to the BEAT.
Certain of our reinsurance agreements require our US subsidiaries (including any non-US subsidiaries that have elected to be subject to US federal income taxation) to pay or accrue substantial amounts to certain of our non-US reinsurance subsidiaries that would be characterized as “base erosion payments” with respect to which there are “base erosion tax benefits.” These and any other “base erosion payments” may cause us to be subject to the BEAT.
Pillar Two will, broadly, consist of two interlocking domestic rules (together the Global Anti-Base Erosion Rules (GloBE Rules)): (1) an Income Inclusion Rule (IIR), which imposes top-up tax on a parent entity in respect of the low-taxed income of a constituent entity; and (2) an Undertaxed Payment Rule, which denies deductions or requires an equivalent adjustment to the extent the low-taxed income of a constituent entity is not subject to tax under an IIR.
Pillar Two will, broadly, consist of two interlocking domestic rules (together the Global Anti-Base Erosion Rules (GloBE Rules)): (1) an Income Inclusion Rule (IIR), which imposes top-up tax on a parent entity in respect of the low-taxed income of a constituent entity; and (2) an Undertaxed Payment Rule (UTPR), which denies deductions or requires an equivalent adjustment to the extent the low-taxed income of a constituent entity is not subject to tax under an IIR.
We will continue to monitor developments in UK regulation to seek to cause the UK Resident Companies and ALReI to comply with UK law and regulation at all times; however, there can be no assurance that the UK regulatory authorities will not interpret the application of the relevant rules in a manner that differs from our interpretation and challenge the existing or future arrangements.
We will continue to monitor developments in UK regulation to seek to cause the UK tax resident companies and ALReI to comply with UK law and regulation at all times; however, there can be no assurance that the UK regulatory authorities will not interpret the application of the relevant rules in a manner that differs from our interpretation and challenge the existing or future arrangements.
Business The NAIC has adopted the Suitability in Annuity Transactions Model Regulation (SAT), which places responsibilities upon insurers with respect to the suitability of annuity sales, including responsibilities for training agents. Many states, including Athene Domiciliary States, have already enacted laws and/or regulations based on SAT, thus imposing suitability standards with respect to sales of FIAs.
The NAIC has adopted the Suitability in Annuity Transactions Model Regulation (SAT), which places responsibilities upon insurers with respect to the suitability of annuity sales, including responsibilities for training agents. Many states, including Athene Domiciliary States, have already enacted laws and/or regulations based on SAT, thus imposing suitability standards with respect to sales of FIAs.
Certain provisions of the Dodd-Frank Act are or may become applicable or relevant to us, our competitors or those entities with which we do business, including, but not limited to: the establishment of a comprehensive federal regulatory regime with respect to derivatives – see Item 1, Business-Regulation-Regulation of OTC Derivatives for further information; the establishment of consolidated federal regulation and resolution authority over SIFIs and/or systemically important financial activities; the establishment of the Federal Insurance Office; changes to the regulation of broker-dealers and investment advisors; changes to the regulation of reinsurance; changes to regulations affecting the rights of shareholders; the imposition of additional regulation over credit rating agencies; and the imposition of concentration limits on financial institutions that restrict the amount of credit that may be extended to a single person or entity.
Certain provisions of the Dodd-Frank Act are or may become applicable or relevant to us, our competitors or those entities with which we do business, including, but not limited to: the establishment of a comprehensive federal regulatory regime with respect to derivatives – see Item 1, Business–Regulation–Regulation of OTC Derivatives for further information; the establishment of consolidated federal regulation and resolution authority over SIFIs and/or systemically important financial activities; the establishment of the Federal Insurance Office; changes to the regulation of broker-dealers and investment advisors; changes to the regulation of reinsurance; changes to regulations affecting the rights of stockholders; the imposition of additional regulation over credit rating agencies; and the imposition of concentration limits on financial institutions that restrict the amount of credit that may be extended to a single person or entity.
Risk Relating to Liquidity and Regulatory Capital As a financial services company, we are exposed to liquidity risk, which is the risk that we are unable to meet near-term obligations as they come due. Liquidity risk is a manifestation of events that are driven by other risk types (e.g. market, policyholder behavior, operational).
Risks Relating to Liquidity and Regulatory Capital As a financial services company, we are exposed to liquidity risk, which is the risk that we are unable to meet near-term obligations as they come due. Liquidity risk is a manifestation of events that are driven by other risk types (e.g. market, policyholder behavior, operational).
AHL is a holding company with limited operations of its own. As a consequence, AHL’s ability to pay dividends on its securities and to make timely payments on its debt obligations will depend on the ability of its subsidiaries to make distributions or other payments to it, which may be restricted by law.
As a consequence, AHL’s ability to pay dividends on its securities and to make timely payments on its debt obligations will depend on the ability of its subsidiaries to make distributions or other payments to it, which may be restricted by law. AHL is a holding company with limited business operations of its own.
Athene Securities, LLC continues to receive concessions on those variable annuity contracts. Athene Securities, LLC also provides supervisory oversight to Athene employees who are registered representatives. Athene Securities, LLC and employees or personnel registered with Athene Securities, LLC are subject to the Exchange Act and to regulation and examination by the SEC, FINRA and state securities commissioners.
Athene Securities continues to receive concessions on those variable annuity contracts. Athene Securities also provides supervisory oversight to Athene employees who are registered representatives. Athene Securities and employees or personnel registered with Athene Securities are subject to the Exchange Act and to regulation and examination by the SEC, FINRA and state securities commissioners.
Similarly, in the event of the impairment or insolvency of one of our US insurance subsidiaries, the applicable Commissioner will be authorized and directed to commence delinquency proceedings for the purpose of liquidating, rehabilitating, reorganizing or conserving the applicable US insurance subsidiary pursuant to applicable state insurance laws and regulations.
Business Similarly, in the event of the impairment or insolvency of one of our US insurance subsidiaries, the applicable Commissioner will be authorized and directed to commence delinquency proceedings for the purpose of liquidating, rehabilitating, reorganizing or conserving the applicable US insurance subsidiary pursuant to applicable state insurance laws and regulations.
Risk Factors Many of our competitors are large and well-established and some have greater breadth of distribution; offer a broader range of products, services or features; assume a greater level of risk; or have higher financial strength, claims-paying or credit ratings than we do.
Many of our competitors are large and well-established and some have greater breadth of distribution; offer a broader range of products, services or features; assume a greater level of risk; or have higher financial strength, claims-paying or credit ratings than we do.
Compliance with CRS and other similar regimes could result in increased administrative and compliance costs and could subject our investment entities to increased non-US withholding taxes. We and certain of our non-US subsidiaries may be subject to US federal income taxation in an amount greater than expected.
Compliance with CRS and other similar regimes could result in increased administrative and compliance costs and could subject our investment entities to increased non-US withholding taxes. Certain of our non-US subsidiaries may be subject to US federal income taxation in an amount greater than expected.
Bermuda insurance statutes and regulations and policies of the BMA require that our Bermuda reinsurance subsidiaries, among other things, maintain a minimum level of capital and surplus; satisfy solvency standards; restrict dividends, distributions and reductions of capital; obtain prior approval or provide notification to the BMA, as the case may be, of ownership, transfer and disposition of shareholder controller shares; maintain a head office and have certain officers resident in Bermuda; appoint and maintain a principal representative in Bermuda; and provide for the performance of certain periodic examinations of itself and its financial condition.
Bermuda insurance statutes and regulations and policies of the BMA require that our Bermuda reinsurance subsidiaries, among other things, maintain a minimum level of capital and surplus; satisfy solvency standards; restrict dividends, distributions and reductions of capital; obtain prior approval or provide notification to the BMA, as the case may be, of ownership, transfer and disposition of stockholder controller shares; maintain a head office and have certain officers resident in Bermuda; appoint and maintain a principal representative in Bermuda; and provide for the performance of certain periodic examinations of itself and its financial condition.
However, there can be no assurances that AHL and our UK Resident Companies will continue to qualify for treaty benefits or satisfy all of the requirements for the tax exemptions and reductions they intend to claim.
However, there can be no assurances that our UK Resident Companies will continue to qualify for treaty benefits or satisfy all of the requirements for the tax exemptions and reductions they intend to claim.
However, there is considerable uncertainty as to whether a foreign corporation is engaged in a trade or business (or has a permanent establishment) in the US, as the law is unclear and the determination is highly factual and must be made annually, and therefore there can be no assurance that the IRS will not successfully contend that a Non-US Company that does not intend to be treated as engaged in a trade or business (or as having a permanent establishment) in the US does, in fact, so engage (or have such a permanent establishment).
However, there is considerable uncertainty as to whether a foreign corporation is engaged in a trade or business (or has a permanent establishment) in the US, as the law is unclear and the determination is highly factual and must be made annually, and therefore there can be no assurance that the IRS will not successfully contend that a Non-US Subsidiary that does not intend to be treated as engaged in a trade or business (or as having a permanent establishment) in the US does, in fact, so engage (or have such a permanent establishment).
Belardi, our Chief Executive Officer, also serves as a member of the board of directors and the executive officer of AGM and as Chief Executive Officer of ISG and receives compensation from ISG for services he provides. Mr.
Belardi, our Chief Executive Officer, also serves as a member of the board of directors and an executive officer of AGM and as Chief Executive Officer of ISG and receives compensation from ISG for services he provides. Mr.
Risk Factors In addition, we expect the worldwide demographic trend of population aging will cause policymakers to continue to focus on the framework of US and non-US retirement systems, which may drive additional changes regarding the manner in which individuals plan for and fund their retirement, the extent of government involvement in retirement savings and funding, the regulation of retirement products and services and the oversight of industry participants.
In addition, we expect the worldwide demographic trend of population aging will cause policymakers to continue to focus on the framework of US and non-US retirement systems, which may drive additional changes regarding the manner in which individuals plan for and fund their retirement, the extent of government involvement in retirement savings and funding, the regulation of retirement products and services and the oversight of industry participants.
For example, investment figures cited represent our net invested assets, which include assets held by cedants that correspond to liabilities ceded to us, but does not include amounts attributable to our noncontrolling interest in ACRA. In the context discussed, we believe that these metrics provide the most comprehensive view of our risk exposures. See Item 7.
For example, investment figures cited represent our net invested assets, which include assets held by cedants that correspond to liabilities ceded to us, but does not include amounts attributable to our noncontrolling interests in ACRA. In the context discussed, we believe that these metrics provide the most comprehensive view of our risk exposures. See Item 7.
Our US insurance subsidiaries are subject to state regulations that provide for MCR based on RBC formulas for life insurance companies relating to insurance, business, asset, interest rate and certain other risks. Similarly, our Bermuda reinsurance subsidiaries are subject to MCR imposed by the BMA through the BMA’s ECR and MMS. 49 Table of Contents Item 1A.
Our US insurance subsidiaries are subject to state regulations that provide for MCR based on RBC formulas for life insurance companies relating to insurance, business, asset, interest rate and certain other risks. Similarly, our Bermuda reinsurance subsidiaries are subject to MCR imposed by the BMA through the BMA’s ECR and MMS. 46 Table of Contents Item 1A.
Additionally, past or future misconduct by agents that distribute our subsidiaries’ products or employees of our vendors could result in violations of law by us, regulatory sanctions and/or serious reputational or financial harm and the precautions we take to prevent and detect this activity may not be effective in all cases.
Risk Factors Additionally, past or future misconduct by agents that distribute our subsidiaries’ products or employees of our vendors could result in violations of law by us, regulatory sanctions and/or serious reputational or financial harm and the precautions we take to prevent and detect this activity may not be effective in all cases.
We have made investments in collective investment vehicles managed by Apollo affiliates, including seed investments in new investment vehicles or investment strategies offered by Apollo which have limited track records, as well as junior and subordinated tranches of structured investment vehicles which may assist Apollo in meeting certain regulatory requirements applicable to Apollo as the sponsor of such vehicles.
Risk Factors We have made investments in collective investment vehicles managed by Apollo affiliates, including seed investments in new investment vehicles or investment strategies offered by Apollo which have limited track records, as well as junior and subordinated tranches of structured investment vehicles which may assist Apollo in meeting certain regulatory requirements applicable to Apollo as the sponsor of such vehicles.
Under certain stressed market scenarios, unrealized losses on our investment portfolio could lead to material reductions in its carrying value. Under some extreme scenarios, total shareholders’ equity could be severely impacted prior to any potential market recovery. See Item 7A. Quantitative and Qualitative Disclosures About Market Risks .
Under certain stressed market scenarios, unrealized losses on our investment portfolio could lead to material reductions in its carrying value. Under some extreme scenarios, total stockholders’ equity could be severely impacted prior to any potential market recovery. See Item 7A. Quantitative and Qualitative Disclosures About Market Risks .
Under the Bermuda Insurance Act, shareholder controller ownership is defined as follows: Actual Shareholder Controller Voting Power Defined Shareholder Controller Voting Power 10% or more but less than 20% 10% 20% or more but less than 33% 20% 33% or more but less than 50% 33% 50% or more 50% Where the shares of a registered insurer, or the shares of its parent company, are traded on a recognized stock exchange, and such shareholder becomes a 10%, 20%, 33%, or 50% shareholder controller of the insurer, that shareholder shall, within 45 days, notify the BMA in writing that such shareholder has become, or as a result of a disposition ceased to be, a controller of any such category.
Business Under the Bermuda Insurance Act, stockholder controller ownership is defined as follows: Actual Stockholder Controller Voting Power Defined Stockholder Controller Voting Power 10% or more but less than 20% 10% 20% or more but less than 33% 20% 33% or more but less than 50% 33% 50% or more 50% Where the shares of a registered insurer, or the shares of its parent company, are traded on a recognized stock exchange, and such stockholder becomes a 10%, 20%, 33%, or 50% stockholder controller of the insurer, that stockholder shall, within 45 days, notify the BMA in writing that such stockholder has become, or as a result of a disposition ceased to be, a controller of any such category.
A liquidity shortfall may arise in the event of insufficient funding sources or an immediate and significant need for cash or collateral. In addition, it is possible that expected liquidity sources, such as our credit agreements, may be unavailable or inadequate to satisfy the liquidity demands described below.
A liquidity shortfall may arise in the event of insufficient funding sources or an immediate and significant need for cash or collateral. In addition, it is possible that expected liquidity sources, such as our credit facilities, may be unavailable or inadequate to satisfy the liquidity demands described below.
Corrective actions may include limiting our subsidiaries’ ability to write additional business, increased regulatory supervision, or seizure or liquidation of the subsidiary’s business, each of which could materially and adversely affect our business, financial condition, results of operations, cash flows and prospects. 50 Table of Contents Item 1A.
Corrective actions may include limiting our subsidiaries’ ability to write additional business, increased regulatory supervision, or seizure or liquidation of the subsidiary’s business, each of which could materially and adversely affect our business, financial condition, results of operations, cash flows and prospects. 47 Table of Contents Item 1A.
Business As a registered broker-dealer and member of various self-regulatory organizations, Athene Securities, LLC is subject to the SEC’s net capital rule, which specifies the minimum level of net capital a broker-dealer is required to maintain and requires a minimum part of its assets to be kept in relatively liquid form.
As a registered broker-dealer and member of various self-regulatory organizations, Athene Securities is subject to the SEC’s net capital rule, which specifies the minimum level of net capital a broker-dealer is required to maintain and requires a minimum part of its assets to be kept in relatively liquid form.
Risk Factors A significant portion of our net invested assets is invested in real estate-related assets. Any significant decline in the value of real estate generally or the occurrence of any of the risks described elsewhere in this report with respect to our real estate-related investments could materially and adversely affect our financial condition and results of operations.
A significant portion of our net invested assets is invested in real estate-related assets. Any significant decline in the value of real estate generally or the occurrence of any of the risks described elsewhere in this report with respect to our real estate-related investments could materially and adversely affect our financial condition and results of operations.
For these purposes, a “controller” includes (1) the managing director of the registered insurer or its parent company, (2) the chief executive of the registered insurer or of its parent company, (3) a shareholder controller, and (4) any person in accordance with whose directions or instructions the directors of the registered insurer or its parent company are accustomed to act.
For these purposes, a “controller” includes (1) the managing director of the registered insurer or its parent company, (2) the chief executive of the registered insurer or of its parent company, (3) a stockholder controller, and (4) any person in accordance with whose directions or instructions the directors of the registered insurer or its parent company are accustomed to act.
We rely on our investment management agreements with Apollo for the management of our investment portfolio. Apollo may terminate these arrangements at any time, and there are limitations on our ability to terminate investment management agreements covering assets backing reserves and surplus in ACRA, which may adversely affect our investment results.
Risk Factors We rely on our investment management agreements with Apollo for the management of our investment portfolio. Apollo may terminate these arrangements at any time, and there are limitations on our ability to terminate investment management agreements covering assets backing reserves and surplus in ACRA, which may adversely affect our investment results.
In connection with the final regulatory action, the DOL issued a prohibited transaction class exemption that would allow fiduciaries to receive compensation in connection with providing investment advice, including advice about rollovers, that would otherwise be prohibited as a result of their fiduciary relationship to the ERISA Plan.
In connection with the final regulatory action, the DOL issued a prohibited transaction class exemption that allows fiduciaries to receive compensation in connection with providing investment advice, including advice about rollovers, that would otherwise be prohibited as a result of their fiduciary relationship to the ERISA Plan.
We may also incur significant losses on hedging transactions. 45 Table of Contents Item 1A. Risk Factors • Financial Statements – The preparation of our consolidated financial statements requires management to make various estimates and assumptions that affect the amounts reported therein.
We may also incur significant losses on hedging transactions. 42 Table of Contents Item 1A. Risk Factors • Financial Statements – The preparation of our consolidated financial statements requires management to make various estimates and assumptions that affect the amounts reported therein.
The applicable provisions of ERISA and the US Internal Revenue Code of 1986, as amended (Internal Revenue Code) are subject to enforcement by the DOL, the Internal Revenue Service (IRS) and the US Pension Benefit Guaranty Corporation. Severe penalties are imposed for breach of duties under ERISA.
The applicable provisions of ERISA and the US Internal Revenue Code of 1986, as amended (Internal Revenue Code) are subject to enforcement by the DOL, the Internal Revenue Service (IRS) and the US Pension Benefit Guaranty Corporation. Severe penalties are imposed for breach of duty under ERISA.
Furthermore, the historical returns of our investments managed by Apollo are not directly linked to our ability to declare and pay dividends on our preferred shares, which is affected by various factors, one of which is the value of our investment portfolio.
Furthermore, the historical returns of our investments managed by Apollo are not directly linked to our ability to declare and pay dividends on our preferred stock, which is affected by various factors, one of which is the value of our investment portfolio.
In addition, licensing regulations differ as to products and jurisdictions and may be subject to interpretation as to whether certain licenses are required with respect to the manner in which we may sell or service some of our products in certain jurisdictions.
Risk Factors In addition, licensing regulations differ as to products and jurisdictions and may be subject to interpretation as to whether certain licenses are required with respect to the manner in which we may sell or service some of our products in certain jurisdictions.
Specifically, our bye-laws require that the conflicts committee (in accordance with its charter and procedures) approve certain material transactions by and between us and Apollo or its affiliates, including entering into material agreements or the imposition of any new fee or increase in the rate at which fees are charged to us, subject to certain exceptions. See Item 13.
Specifically, our bylaws require that the conflicts committee (in accordance with its charter and procedures) approve certain material transactions by and between us and Apollo or its affiliates, including entering into material agreements or the imposition of any new fee or increase in the rate at which fees are charged to us, subject to certain exceptions. See Item 13.
Reports filed with or furnished to the SEC will also be available as soon as reasonably practicable after they are filed with or furnished to the SEC and are available at the SEC’s website at www.sec.gov. 44 Table of Contents Item 1A.
Reports filed with or furnished to the SEC will also be available as soon as reasonably practicable after they are filed with or furnished to the SEC and are available at the SEC’s website at www.sec.gov. 41 Table of Contents Item 1A.
Risk Factors In addition, we or certain of our subsidiaries are currently (or have been recently) under tax audit in various jurisdictions, and these jurisdictions or any others where we conduct business may assess additional tax against us.
In addition, we or certain of our subsidiaries are currently (or have been recently) under tax audit in various jurisdictions, and these jurisdictions or any others where we conduct business may assess additional tax against us.
AHL, and certain of its subsidiaries, are UK tax resident companies but do not have the UK regulatory licenses required to write or carry out insurance business in the UK. Accordingly, their business does not involve transactions with UK domiciled clients and we believe that their operations and governance arrangements are otherwise undertaken to comply with UK regulatory requirements.
Certain of our subsidiaries are UK tax resident companies but do not have the UK regulatory licenses required to write or carry out insurance business in the UK. Accordingly, their business does not involve transactions with UK domiciled clients and we believe that their operations and governance arrangements are otherwise undertaken to comply with UK regulatory requirements.
Risk Factors Financial markets have been subject to inflationary pressures, and continued rising inflation may adversely impact our business and results of operations. Financial markets have been subject to inflationary pressures, and we cannot predict the extent to which rising inflation may be transitory.
Financial markets have been subject to inflationary pressures, and continued rising inflation may adversely impact our business and results of operations. Financial markets have been subject to inflationary pressures, and we cannot predict the extent to which rising inflation may be transitory.
For example, the concentration of voting power held by the Apollo Group, the significant representation on our board of directors by individuals who are employees of the Apollo Group, or the limitations on our ability to terminate IMAs with Apollo covering assets backing reserves and surplus in ACRA could delay, defer or prevent a change of control of us or impede a merger, takeover or other business combination which a preferred shareholder may otherwise view favorably.
For example, the concentration of voting power held by AGM, the significant representation on our board of directors by individuals who are employees of AGM, or the limitations on our ability to terminate IMAs with Apollo covering assets backing reserves and surplus in ACRA could delay, defer or prevent a change of control of us or impede a merger, takeover or other business combination which a preferred stockholder may otherwise view favorably.
Heightened standards of sales conduct as a result of the implementation of SAT, including state adoption of a revised SAT version that includes a best interest concept, or the adoption of other similar proposed rules or regulations could also increase the compliance and regulatory burdens on our representatives, and could lead to increased litigation and regulatory risks, changes to our business model, a decrease in the number of our securities-licensed representatives and a reduction in the products we offer to our clients, any of which could have a material adverse effect on our business, financial condition and results of operations. 59 Table of Contents Item 1A.
Heightened standards of sales conduct as a result of the implementation of SAT, including state adoption of a revised SAT version that includes a best interest concept, or the adoption of other similar proposed rules or regulations could also increase the compliance and regulatory burdens on our representatives, and could lead to increased litigation and regulatory risks, changes to our business model, a decrease in the number of our securities-licensed representatives and a reduction in the products we offer to our clients, any of which could have a material adverse effect on our business, financial condition and results of operations.
Interruption or other operational failures in telecommunications, information technology and other operational systems or a failure to maintain the security, integrity, confidentiality or privacy of sensitive data residing on those systems, including as a result of human error, could have a material adverse effect on our business.
Interruption or other operational failures in telecommunications, information technology and other operational systems, including as a result of threat actors attacking those systems, or a failure to maintain the security, integrity, confidentiality or privacy of sensitive data residing on those systems, including as a result of human error, could have a material adverse effect on our business.
Risk Factors Our investments in assets linked to real estate are also subject to loss in the event of catastrophic events, such as earthquakes, hurricanes, floods, tornadoes and fires.
Our investments in assets linked to real estate are also subject to loss in the event of catastrophic events, such as earthquakes, hurricanes, floods, tornadoes and fires.
The Dodd-Frank Act made sweeping changes to the regulation of financial services entities, products and markets. Historically, the federal government had not directly regulated the insurance business.
Risk Factors The Dodd-Frank Act made sweeping changes to the regulation of financial services entities, products and markets. Historically, the federal government had not directly regulated the insurance business.
Risk Factors Risks Relating to Insurance and Other Regulatory Matters Our industry is highly regulated and we are subject to significant legal restrictions and these restrictions may have a material adverse effect on our business, financial condition, results of operations, liquidity, cash flows and prospects.
Risks Relating to Insurance and Other Regulatory Matters Our industry is highly regulated and we are subject to significant legal restrictions and obligations, and these restrictions and obligations may have a material adverse effect on our business, financial condition, results of operations, liquidity, cash flows and prospects.
Our growth strategy includes acquisitions and block reinsurance transactions, and our ability to consummate these transactions on economically advantageous terms acceptable to us in the future is unknown.
Risk Factors Our growth strategy includes acquisitions and block reinsurance transactions, and our ability to consummate these transactions on economically advantageous terms acceptable to us in the future is unknown.
The transition risks that could impact our company and our investment portfolio include those risks related to the impact of US and foreign climate- and ESG-related legislation and regulation, as well as risks arising from climate-related business trends. Moreover, our investments are subject to risks stemming from the physical impacts of climate change.
The transition risks that could impact our company and our investment portfolio include those risks related to the impact of US and foreign climate- and environmental, social and governance (ESG)-related legislation and regulation, as well as risks arising from climate-related business trends. Moreover, our investments are subject to risks stemming from the physical impacts of climate change.
Legal Proceedings and Note 15 – Commitments and Contingencies to the consolidated financial statements for certain matters to which we are a party. Even if we ultimately prevail in any litigation or receive positive results from investigations, we could incur material legal costs or our reputation could be materially adversely affected. 65 Table of Contents Item 1B.
Legal Proceedings and Note 17 – Commitments and Contingencies to the consolidated financial statements for certain matters to which we are a party. Even if we ultimately prevail in any litigation or receive positive results from investigations, we could incur material legal costs or our reputation could be materially adversely affected. 61 Table of Contents Item 1B.
See Item 1. Business–Regulation–Regulation of an Insurance Group for further discussion. While we cannot predict the exact nature, timing or scope of possible governmental initiatives, there may be increased regulatory intervention in the insurance and financial services industry in the future.
Business–Regulation–Regulation of an Insurance Group for further discussion. While we cannot predict the exact nature, timing or scope of possible governmental initiatives, there may be increased regulatory intervention in the insurance and financial services industry in the future.
Several aspects of the model GloBE Rules, including whether some or all of our business and the companies in which we invest may fall within the scope of the exclusions therefrom, currently remain unclear or uncertain notwithstanding existing commentary and draft legislation.
Several aspects of the model GloBE Rules, including whether some or all of our business and the companies in which we invest may fall within the scope of the exclusions therefrom, currently remain unclear or uncertain notwithstanding existing commentary and guidance.
Regulatory developments, including the NAIC’s adoption of amendments to its Insurance Holding Company System Regulatory Act and Model Regulation requiring, subject to certain exceptions, the filing of a confidential annual group capital calculation (and likely the results of an annual liquidity stress test) with the Iowa Insurance Division, the lead state insurance regulator of our US insurance subsidiaries, may increase the amount of capital that we are required to hold and could result in us being subject to increased regulatory requirements.
Regulatory developments, including the NAIC’s adoption of amendments to its Insurance Holding Company System Regulatory Act and Model Regulation requiring, subject to certain exceptions, the filing of a confidential annual group capital calculation and an annual liquidity stress test with the IID, the lead state insurance regulator of our US insurance subsidiaries, may increase the amount of capital that we are required to hold and could result in us being subject to increased regulatory requirements.
We are highly dependent on automated and information technology systems to record and process our internal transactions and transactions involving our customers, as well as to calculate reserves, value our investment portfolio and complete certain other components of our financial statements.
We are highly dependent on automated and information technology systems to record and process our internal transactions and transactions involving our customers, as well as to calculate reserves, perform actuarial analyses, value our investment portfolio and complete certain other components of our financial statements.
If any of these TPAs or their employees are found to have made material misrepresentations to our policyholders, violated applicable insurance, privacy or other laws and regulations or otherwise engaged in misconduct, we could be held liable for their actions and be subject to regulatory scrutiny, which could adversely affect our reputation, business prospects, financial condition, results of operations and cash flows.
If any of these TPAs or their employees are found to have made material misrepresentations to our policyholders, violated applicable insurance, privacy or other laws and regulations or otherwise engaged in misconduct, we could be held liable for their actions and be subject to regulatory scrutiny, which could adversely affect our reputation, business prospects, financial condition, results of operations and cash flows. 44 Table of Contents Item 1A.
As a result, the Apollo Group could exercise significant influence and control over corporate matters for the foreseeable future, including approval of significant corporate transactions, appointment of members of our management, approval of the termination of our investment management agreements (IMA) and determination of our corporate policies.
As a result, AGM could exercise significant influence and control over corporate matters for the foreseeable future, including approval of significant corporate transactions, appointment of members of our management, approval of the termination of our investment management agreements (IMA) and determination of our corporate policies.
Some of the factors influencing these requirements, particularly factors such as changes in equity market levels, the value of certain derivative instruments that do not receive hedge accounting, the value and credit ratings of certain fixed-income and equity securities in our investment portfolio, interest rate changes, changes to the applicable RBC formulas and the interpretation of the NAIC’s instructions with respect to RBC calculation methodologies, are out of our control.
Some of the factors influencing these requirements, particularly factors such as changes in equity market levels, the value of certain derivative instruments that do not receive hedge accounting, the value and credit ratings of certain fixed-income and equity securities in our investment portfolio, interest rate changes, changes to the applicable RBC formulas and the interpretation of the NAIC’s instructions with respect to RBC calculation methodologies, are out of our control. 55 Table of Contents Item 1A.
Risk Factors Our Bermuda reinsurance subsidiaries, as Bermuda domiciled insurers, are also required to maintain licenses. Each of our Bermuda reinsurance subsidiaries is licensed as a reinsurer in Bermuda.
Our Bermuda reinsurance subsidiaries, as Bermuda domiciled insurers, are also required to maintain licenses. Each of our Bermuda reinsurance subsidiaries is licensed as a reinsurer in Bermuda.
Environmental Regulation Our investment in a limited partnership which is in the business of originating RMLs, as well as our direct investment in any residential or other mortgage loans, may expose us to various environmental and other regulation.
Environmental Regulation Our investment in a limited partnership which is in the business of originating residential mortgage loans (RML), as well as our direct investment in any residential or other mortgage loans, may expose us to various environmental and other regulations.
Economic volatility or any further macroeconomic, regulatory or other changes having an adverse impact on the financial services industry more broadly, could have a material and adverse effect on our business, financial condition, results of operations and cash flows. 52 Table of Contents Item 1A.
Economic volatility or any further macroeconomic, regulatory or other 49 Table of Contents Item 1A. Risk Factors changes having an adverse impact on the financial services industry more broadly, could have a material and adverse effect on our business, financial condition, results of operations and cash flows.
The permission of the BMA is required, pursuant to the provisions of the Exchange Control Act 1972 and related regulations, for all issuances and transfers of shares (which includes the Class A common shares) of Bermuda companies to or from a non-resident of Bermuda for exchange control purposes, other than in cases where the BMA has granted a general permission.
The permission of the BMA is required, pursuant to the provisions of the Exchange Control Act 1972 and related regulations, for all issuances and transfers of shares of Bermuda companies to or from a non-resident of Bermuda for exchange control purposes, other than in cases where the BMA has granted a general permission.
The SEC and other governmental agencies and self-regulatory organizations, as well as state securities commissions in the United States, have the power to conduct administrative proceedings that can result in censure, penalties and fines, disgorgement of profits, restitution to customers, cease-and-desist orders or suspension, termination or limitation of the activities of the regulated entity or its employees. 40 Table of Contents Item 1.
The SEC and other governmental agencies and self-regulatory organizations, as well as state securities commissions in the United States, have the power to conduct administrative proceedings that can result in censure, penalties and fines, disgorgement of profits, restitution to customers, cease-and-desist orders or suspension, termination or limitation of the activities of the regulated entity or its employees.
ACRA System IMA Termination Rights Our bye-laws provide that, with respect to IMAs covering assets backing reserves and surplus in ACRA, whether from internal reinsurance, third party reinsurance, or inorganic transactions (ACRA System IMAs), among us or any of our subsidiaries, on the one hand, and ISG, or another member of the Apollo Group (as defined in our bye-laws) on the other hand, we may not, and will cause our subsidiaries not to, terminate any ACRA System IMA, other than on June 4, 2023 or any two year anniversary of such date (each such date, an IMA Termination Election Date) and any termination on an IMA Termination Election Date requires (1) the approval of two-thirds of our Independent Directors (as defined in our bye-laws) and (2) prior written notice to the applicable Apollo subsidiary of such termination at least 30 days, but not more than 90 days, prior to an IMA Termination Election Date.
ACRA System IMA Termination Rights The Fee Agreement provides that, with respect to IMAs covering assets backing reserves and surplus in ACRA, whether from internal reinsurance, third party reinsurance, or inorganic transactions (ACRA System IMAs), among us or any of our subsidiaries, on the one hand, and ISG, or another member of the Apollo Group (as defined in our certificate of incorporation) on the other hand, we may not, and will cause our subsidiaries not to, terminate any ACRA System IMA, other than on June 4, 2023 or any two year anniversary of such date (each such date, an IMA Termination Election Date) and any termination on an IMA Termination Election Date requires (1) the approval of two-thirds of our Independent Directors (as defined in our bylaws) and (2) prior written notice to ISG or the applicable Apollo subsidiary of such termination at least 30 days, but not more than 90 days, prior to an IMA Termination Election Date.
Furthermore, certain members of our board of directors also serve on the board of directors of AGM or ISG or are employees of Apollo or its affiliates, which could also lead to potential conflicts of interest. See Item 13. Certain Relationships and Related Transactions, and Director Independence .
Furthermore, certain members of our board of directors also serve on the board of directors of AGM or ISG or are employees of Apollo or its affiliates, which could also lead to potential conflicts of interest. See Item 13. Certain Relationships and Related Transactions, and Director Independence . 53 Table of Contents Item 1A.
The Bermuda Minister of Finance, under the Exempted Undertakings Tax Protection Act 1966 of Bermuda, as amended, has given us assurance that if any legislation is enacted in Bermuda that would impose tax computed on profits or income, or computed on any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, then the imposition of any such tax will not be applicable to us or any of our operations, shares, debentures or other obligations until March 31, 2035, except insofar as such tax applies to persons ordinarily resident in Bermuda or to any taxes payable by us in respect of real property owned or leased by us in Bermuda.
The Bermuda Minister of Finance, under the Exempted Undertakings Tax Protection Act 1966 of Bermuda, as amended, has issued Tax Assurance Certificates to our Bermuda subsidiaries assuring such entities that if any legislation is enacted in Bermuda that would impose tax computed on profits or income, or computed on any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, then the imposition of any such tax will not be applicable to such entities or any of their operations, shares, debentures or other obligations until March 31, 2035, except insofar as such tax applies to persons ordinarily resident in Bermuda or to any taxes payable in respect of real property owned or leased by such entities in Bermuda.
The Cyber Risk Code prescribes the duties, requirements, standards, procedures and principles which all insurers, insurance managers and insurance intermediaries (agents, brokers and insurance market place providers) registered under the Bermuda Insurance Act must comply.
The Cyber Risk Code prescribes the duties, requirements, standards, procedures and principles which all insurers, insurance managers and insurance intermediaries (agents, brokers and insurance marketplace providers) registered under the Bermuda Insurance Act must comply.
Failure to comply with the requirements of the Cyber Risk Code will be taken into account by the BMA in determining whether a registrant is conducting its business in a sound and prudent manner as prescribed by the Bermuda Insurance Act and may result in the BMA exercising its powers of intervention and investigation (see below).
Failure to comply with the requirements of the Cyber Risk Code will be taken into account by the BMA in determining whether a registrant is conducting its business in a sound and prudent manner as prescribed by the Bermuda Insurance Act and may result in the BMA exercising its powers of intervention and investigation (see below). 36 Table of Contents Item 1.
Undertaking initiatives to address ESG practices, including those related to human capital management such as talent attraction and development, DEI and employee health and safety, could increase our cost of doing business and actual or perceived failure to adequately address ESG expectations of our various stakeholders could lead to a tarnished reputation and loss of customers. 54 Table of Contents Item 1A.
Undertaking initiatives to address ESG practices, including those related to human capital management such as talent attraction and development, DEI and employee health and safety, could increase our cost of doing business and actual or perceived failure to adequately address ESG expectations of our various stakeholders could lead to a tarnished reputation and loss of customers.
The failure of any one of these systems at Apollo for any reason, or errors made by its employees or agents, could cause significant interruptions to its operations, which could adversely affect our internal control over financial reporting or have a material adverse effect on our business, financial condition and results of operations.
The failure of any one of these systems at Apollo for any reason, or errors made by its employees or agents, could cause significant interruptions to its operations, which could adversely affect our internal control over financial reporting or have a material adverse effect on our business, financial condition and results of operations. 54 Table of Contents Item 1A.
Risks Relating to Our Relationship with Apollo There are potential conflicts of interests between Apollo, our corporate parent, and the holders of our preferred shares. The Apollo Group is the beneficial owner of 100% of our common shares and controls all of the voting power to elect members to our board of directors.
Risks Relating to Our Relationship with Apollo There are potential conflicts of interests between Apollo, our corporate parent, and the holders of our preferred stock. AGM is the beneficial owner of 100% of our common stock and controls all of the voting power to elect members to our board of directors.
The SEC did not indicate an intent to preempt state regulation in this area, and some of the state proposals would allow for a private right of action. As a result of these changes, it may become more costly to provide our products and services in the states subject to these rules. 41 Table of Contents Item 1.
The SEC did not indicate an intent to preempt state regulation in this area, and some of the state proposals would allow for a private right of action. As a result of these changes, it may become more costly to provide our products and services in the states subject to these rules.
Of our total AFS securities, including related parties, as of December 31, 2022, 11% were invested in CLOs of Cayman Islands issuers (for which the underlying assets are largely loans to US issuers) and 25% were invested in other non-US issuers.
Of our total AFS securities, including related parties, as of December 31, 2023, 10% were invested in CLOs of Cayman Islands issuers (for which the underlying assets are largely loans to US issuers) and 25% were invested in other non-US issuers.
There is no assurance that our insurance subsidiaries would be able to obtain the relevant licenses and the subsidiaries’ inability to do so may impair our competitive position and reduce our growth prospects, causing our financial position, results of operations and cash flows to fall below our current expectations. 58 Table of Contents Item 1A.
There is no assurance that our insurance subsidiaries would be able to obtain the relevant licenses and the subsidiaries’ inability to do so may impair our competitive position and reduce our growth prospects, causing our financial position, results of operations and cash flows to fall below our current expectations.
Notwithstanding the foregoing, our board of directors may only terminate an ACRA System IMA on an IMA Termination Election Date for “AHL Cause” as defined in our bye-laws and pursuant to the provisions set forth therein.
Notwithstanding the foregoing, our board of directors may only terminate an ACRA System IMA on an IMA Termination Election Date for “AHL Cause” as defined in the Fee Agreement and pursuant to the provisions set forth therein.
In addition, certain of our subsidiaries treated as resident in the UK for UK tax purposes (UK Resident Companies) expect to qualify for the benefits of the UK Treaty by reason of being subsidiaries of AGM or by reason of satisfying an ownership and base erosion test.
Certain of our subsidiaries treated as resident in the UK for UK tax purposes (UK Resident Companies) expect to qualify for the benefits of the income tax treaty between the US and the UK (UK Treaty) by reason of being subsidiaries of AGM or by reason of satisfying an ownership and base erosion test.
Business Notification of Material Changes All registered insurers are required to give notice to the BMA of their intention to effect a material change within the meaning of the Bermuda Insurance Act.
Notification of Material Changes All registered insurers are required to give notice to the BMA of their intention to affect a material change within the meaning of the Bermuda Insurance Act.

… 372 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

201 edited+129 added−39 removed187 unchanged
Biggest changeOur structure is also subject to ongoing future potential legislative, judicial or administrative change and differing interpretations, possibly on a retroactive basis. • Changes in non-US tax law could adversely affect our ability to raise funds from certain investors. • We and certain of our non-US subsidiaries may be subject to US federal income taxation in an amount greater than expected. • The Base Erosion and Anti-Abuse Tax (BEAT) may significantly increase our tax liability. • Changes in US tax law might adversely affect demand for our products. • US persons who own our shares may be subject to US federal income taxation at ordinary income rates on our undistributed earnings and profits. • US persons who own our shares may be subject to US federal income taxation at ordinary income rates on a disproportionate share of our undistributed earnings and profits attributable to RPII. • US persons who own our shares may be subject to adverse tax consequences if AHL is considered a passive foreign investment company for US federal income tax purposes. • US tax-exempt organizations that own our shares may recognize unrelated business taxable income. • There is US income tax risk associated with reinsurance between US insurance companies and their Bermuda affiliates. • We are subject to the risk that Bermuda tax laws may change and that they may become subject to new Bermuda taxes following the expiration of a current exemption after 2035. • Holders of our securities may have difficulty effecting service of process on us or enforcing judgments against us in the United States. • Our choice of forum provisions in our bye-laws may limit your ability to bring suits against us or our directors and officers. • US persons who own our securities may have more difficulty in protecting their interests than US persons who are securityholders of a US corporation. • AHL is a holding company with limited operations of its own.
Biggest changeOur structure is also subject to ongoing future potential legislative, judicial or administrative change and differing interpretations, possibly on a retroactive basis. • Changes in non-US tax law could adversely affect our ability to raise funds from certain investors. • Certain of our non-US subsidiaries may be subject to US federal income taxation in an amount greater than expected. • AHL may be subject to UK taxation by reason of its historic UK tax residency or as a result of ceasing to be a UK tax resident. • The Base Erosion and Anti-Abuse Tax (BEAT) may significantly increase our tax liability. • Changes in US tax law might adversely affect demand for our products. • There is US income tax risk associated with reinsurance between US insurance companies and their Bermuda affiliates. • The recently enacted Bermuda corporate income tax, or other changes in Bermuda tax laws, may negatively affect our earnings and results from operations. • AHL is a holding company with limited operations of its own.
Similar to our retail channel, we do not seek to achieve volume growth at the expense of profitability and therefore tend to respond more rapidly to adjust our pricing for changes in asset yields than do many of our peers.
Similar to our retail channel, we do not seek to achieve volume growth at the expense of profitability and therefore tend to respond more rapidly to adjust our pricing for changes in asset yields than many of our peers.
Business Apollo sources assets for our investment portfolio based upon the unique characteristics of our business, including desired asset allocation and risk tolerance, and with regard to the ever-changing macroeconomic environment in which we operate.
Apollo sources assets for our investment portfolio based upon the unique characteristics of our business, including desired asset allocation and risk tolerance, and with regard to the ever-changing macroeconomic environment in which we operate.
These direct origination strategies include investments sourced by (1) affiliated platforms that originate loans to third parties and in which we gain exposure directly to the loan or indirectly through our ownership of the origination platform and/or securitizations of assets originated by the origination platform, and (2) Apollo’s extensive network of direct relationships with predominantly investment-grade counterparties.
These direct origination strategies include investments sourced by (1) affiliated platforms that originate loans to third parties and in which we gain exposure directly to the loan or indirectly through our ownership of the origination platform and/or securitizations of assets originated by the origination platform, and (2) Apollo’s extensive network of direct relationships with predominantly investment-grade counterparties.
The continued registration of an insurer is subject to the insurer complying with the terms of its registration and such other conditions as the BMA may impose from time to time. The Bermuda Insurance Act also grants to the BMA powers to supervise, investigate and intervene in the affairs of insurers.
The continued registration of an insurer is subject to the insurer complying with the terms of its registration and such other conditions as the BMA may impose from time to time. The Bermuda Insurance Act also grants the BMA powers to supervise, investigate and intervene in the affairs of insurers.
Business Holding company system regulations currently in effect in New York require prospective acquirers of New York domiciled insurers to provide detailed disclosure with respect to intended changes to the business operations of the insurer, and expressly authorize the NYSDFS to impose additional conditions on such acquisitions.
Holding company system regulations currently in effect in New York require prospective acquirers of New York domiciled insurers to provide detailed disclosure with respect to intended changes to the business operations of the insurer, and expressly authorize the NYSDFS to impose additional conditions on such acquisitions.
Classification of Insurers The Bermuda Insurance Act distinguishes between insurers carrying on long-term business, insurers carrying on special purpose business and insurers carrying on general business.
Business Classification of Insurers The Bermuda Insurance Act distinguishes between insurers carrying on long-term business, insurers carrying on special purpose business and insurers carrying on general business.
Business Credit for Coinsurance Ceded by a US Cedant The ability of a ceding insurer to take reserve credit for the business ceded to reinsurers through coinsurance is a significant component of reinsurance regulation and is often a determining factor in establishing a reinsurance relationship.
Credit for Coinsurance Ceded by a US Cedant The ability of a ceding insurer to take reserve credit for the business ceded to reinsurers through coinsurance is a significant component of reinsurance regulation and is often a determining factor in establishing a reinsurance relationship.
MidCap primarily originates and invests in commercial and industrial loans, including senior secured corporate loans, working capital loans collateralized mainly by accounts receivable and inventory, senior secured loans collateralized by portfolios of commercial and consumer loans and related products and secured loans to highly capitalized pharmaceutical and medical device companies, and commercial real estate loans, including multifamily independent-living properties, assisted living, skilled nursing and medical office properties, warehouse, office building, hotel and other commercial use properties and multifamily properties.
MidCap Financial primarily originates and invests in commercial and industrial loans, including senior secured corporate loans, working capital loans collateralized mainly by accounts receivable and inventory, senior secured loans collateralized by portfolios of commercial and consumer loans and related products, secured loans to highly capitalized pharmaceutical and medical device companies, and commercial real estate loans, including multifamily independent-living properties, assisted living, skilled nursing and medical office properties, warehouse, office building, hotel and other commercial use properties and multifamily properties.
We have the ability to design tailored solutions that meet the needs of our pension group annuity counterparties, which includes a range of blue-chip clients such as J.C. Penney Corporation, Inc. and Lockheed Martin Corporation, among others, and a number of whom are repeat clients. Acquisitions and Block Reinsurance Acquisitions are a complementary source of growth for our business.
We have the ability to design tailored solutions that meet the needs of our pension group annuity counterparties, which includes a range of blue-chip clients such as J.C. Penney Corporation, Inc. and Lockheed Martin Corporation, among others, and a number of repeat clients. Acquisitions and Block Reinsurance Acquisitions are a complementary source of growth for our business.
Relatedly, in the US, the NAIC has promulgated amendments to the NAIC Model Insurance Holding Company System Regulatory Act, adopted by all of the Athene Domiciliary States, that address “group-wide” supervision of IAIGs to allow state insurance regulators in the US to be a group-wide supervisors for US-based IAIGs and acknowledge another regulatory official acting as the group-wide supervisor of an IAIG.
Relatedly, in the US, the NAIC has promulgated amendments to the NAIC Model Insurance Holding Company System Regulatory Act, adopted by all of the Athene Domiciliary States, that address “group-wide” supervision of IAIGs to allow state insurance regulators in the US to be group-wide supervisors for US-based IAIGs and acknowledge another regulatory official acting as the group-wide supervisor of an IAIG.
Employing these direct origination strategies comports well with our investment philosophy of earning incremental spread by taking liquidity and complexity risk, rather than taking excessive credit risk. As part of our direct origination strategy, we may invest in two types of equity investments. First, we make strategic investments in the equity of asset origination platforms themselves.
Employing these direct origination strategies comports well with our investment philosophy of earning incremental spread by taking measured liquidity and complexity risk, rather than taking excessive credit risk. As part of our direct origination strategy, we may invest in two types of equity investments. First, we make strategic investments in the equity of asset origination platforms themselves.
The rates, forms, terms and conditions of our US insurance subsidiaries’ reinsurance agreements with unaffiliated third parties generally are not directly subject to regulation by any state insurance department in the United States. This contrasts with primary insurance where, as discussed above, the policy forms and premium rates are generally regulated by state insurance departments.
Business The rates, forms, terms and conditions of our US insurance subsidiaries’ reinsurance agreements with unaffiliated third parties generally are not directly subject to regulation by any state insurance department in the United States. This contrasts with primary insurance where, as discussed above, the policy forms and premium rates are generally regulated by state insurance departments.
ALRe Athene Life Re Ltd., a Bermuda reinsurance subsidiary ALReI Athene Life Re International Ltd., a Bermuda reinsurance subsidiary Apollo Apollo Global Management, Inc., together with its subsidiaries (other than us or our subsidiaries) Apollo Group (1) AGM and AGM’s subsidiaries, including AAM, (2) any investment fund or other collective investment vehicle whose general partner or managing member is owned, directly or indirectly, by clause (1), (3) BRH Holdings GP, Ltd. and each of its shareholders, (4) any executive officer or employee of AGM or AGM’s subsidiaries, and (5) any affiliate of a person described in clauses (1), (2), (3) or (4) above; provided none of AHL or its subsidiaries (other than ACRA HoldCo and ACRA HoldCo’s subsidiaries) will be deemed to be a member of the Apollo Group AUSA Athene USA Corporation Athora Athora Holding Ltd.
ALRe Athene Life Re Ltd., a Bermuda reinsurance subsidiary ALReI Athene Life Re International Ltd., a Bermuda reinsurance subsidiary Apollo Apollo Global Management, Inc., together with its subsidiaries (other than us or our subsidiaries) Apollo Group (1) AGM and its subsidiaries, including AAM, (2) any investment fund or other collective investment vehicle whose general partner or managing member is owned, directly or indirectly, by clause (1), (3) BRH Holdings GP, Ltd. and each of its shareholders, (4) any executive officer or employee of AGM or AGM’s subsidiaries, and (5) any affiliate of a person described in clauses (1), (2), (3) or (4) above; provided none of AHL or its subsidiaries (other than ACRA) will be deemed to be a member of the Apollo Group AUSA Athene USA Corporation Athora Athora Holding Ltd.
Financial strength and credit ratings directly affect our ability to access funding and the related cost of borrowing, the attractiveness of certain of our products to customers, our attractiveness as a reinsurer to potential ceding companies and requirements for collateral posting on derivatives collateral. These ratings are periodically reviewed by the rating agencies.
Financial strength and credit ratings directly affect our ability to access funding and the related cost of borrowing, the attractiveness of certain products of ours to customers, our attractiveness as a reinsurer to potential ceding companies and the requirements for collateral posting on our derivatives. These ratings are periodically reviewed by the rating agencies.
S&P’s issuer credit rating is a forward-looking opinion about an obligor’s overall creditworthiness. This opinion focuses on the obligor’s capacity and willingness to meet its financial commitments as they come due. Long-term issuer credit ratings focus on the obligor’s capacity and willingness over the long-term to meet all of its financial commitments, both long- and short-term, as they come due.
S&P’s issuer credit rating is a forward-looking opinion about an obligor’s overall creditworthiness. This opinion focuses on the obligor’s capacity and willingness to meet its financial commitments as they come due. Long-term issuer credit ratings focus on the obligor’s capacity and willingness to meet all of its financial commitments, both long- and short-term, as they come due.
Business Fixed Rate Annuities – Fixed rate annuities include annual reset annuities and multi-year guarantee annuities (MYGA). Unlike FIAs, fixed rate annuities earn interest at a set rate (or declared crediting rate), rather than a rate that may vary based on an index. Fixed rate annual reset annuities have a crediting rate that is typically guaranteed for one year.
Fixed Rate Annuities – Fixed rate annuities include annual reset annuities and multi-year guarantee annuities (MYGA). Unlike FIAs, fixed rate annuities earn interest at a set rate (or declared crediting rate), rather than at a rate that may vary based on an index. Fixed rate annual reset annuities have a crediting rate that is typically guaranteed for one year.
Business Policy and Contract Reserve Adequacy Analysis The Athene Domiciliary States and other states have adopted laws with respect to policy and contract reserve sufficiency. Under applicable insurance laws, our US insurance subsidiaries are each required to annually conduct an analysis of the adequacy of all life insurance and annuity statutory reserves.
Policy and Contract Reserve Adequacy Analysis The Athene Domiciliary States and other states have adopted laws with respect to policy and contract reserve sufficiency. Under applicable insurance laws, our US insurance subsidiaries are each required to annually conduct an analysis of the adequacy of all life insurance and annuity statutory reserves.
The Bermuda Insurance Act provides the BMA with powers to set standards on public disclosure. Using this power, the BMA requires all commercial insurers and insurance groups, subject to certain exceptions, to prepare and publish a Financial Condition Report on their website.
Business The Bermuda Insurance Act provides the BMA with powers to set standards on public disclosure. Using this power, the BMA requires all commercial insurers and insurance groups, subject to certain exceptions, to prepare and publish a Financial Condition Report on their website.
State insurance authorities have broad administrative powers over our US insurance subsidiaries with respect to all aspects of their insurance business including: (1) licensing to transact business; (2) licensing of producers who sell our products; (3) prescribing which assets and liabilities are to be considered in determining statutory surplus; (4) regulating premium rates for certain insurance products; (5) approving policy forms and certain related materials; (6) determining whether a reasonable basis exists as to the suitability of the annuity purchase recommendations producers make and, in certain states, that such recommendations are in the best interest of the consumer; (7) regulating unfair trade and claims practices; (8) establishing reserve requirements, solvency standards and minimum capital requirements (MCR); (9) regulating the amount of dividends that may be paid in any year; (10) regulating the availability of reinsurance, the terms thereof and the ability of an insurer to take credit on its financial statements for insurance ceded to reinsurers; (11) fixing maximum interest rates on life insurance policy loans, minimum crediting rates on accumulation products and minimum allowable surrender values; (12) regulating the type, amounts and valuations of investments permitted; (13) setting parameters for transactions with affiliates; and (14) regulating other matters.
State insurance authorities have broad administrative powers over our US insurance subsidiaries with respect to all aspects of their insurance business including: (1) licensing to transact business; (2) licensing of producers who sell our products; (3) prescribing which assets and liabilities are to be considered in determining statutory surplus; (4) regulating premium rates for certain insurance products; (5) approving policy forms and certain related materials; (6) determining whether a reasonable basis exists as to the suitability of the annuity purchase recommendations producers make and, in certain states, that such recommendations are in the best interest of the consumer; (7) regulating unfair trade and claims practices; (8) establishing reserve requirements, solvency standards and minimum capital requirements (MCR); (9) regulating the amount of dividends that may be paid in any year; (10) regulating the availability of reinsurance, the terms thereof and the ability of an insurer to take credit on its financial statements for insurance ceded to reinsurers; (11) fixing maximum interest rates on life insurance policy loans, minimum crediting rates on accumulation products and minimum allowable surrender values; (12) regulating the type, amounts and valuations of investments permitted; (13) setting parameters for transactions with affiliates; and (14) regulating other matters. 23 Table of Contents Item 1.
The ICS is still being finalized by the IAIS, with a planned adoption date of November 2024. Assuming IAIS members vote to adopt the ICS, the IAIS will encourage jurisdictions to implement the ICS as a prescribed capital requirement (PCR) beginning in 2025.
The ICS is still being finalized by the IAIS, with a planned adoption date of November 2024. Assuming IAIS members vote to adopt the ICS, the IAIS will encourage jurisdictions to implement the ICS as a prescribed capital requirement beginning in 2025.
We also established a secured FABR program in which a special-purpose, unaffiliated entity enters into repurchase agreements with a bank and the proceeds of the repurchase agreements are used by the special-purpose entity to purchase funding agreements from us.
We also established a secured FABR program in which a special-purpose, unaffiliated entity enters into a repurchase agreement with a bank and the proceeds of the repurchase agreement are used by the special-purpose entity to purchase funding agreements from us.
Net reserve liabilities is net of the ceded liabilities to third-party reinsurers as the costs of the liabilities are passed to such reinsurers and therefore we have no net economic exposure to such liabilities, assuming our reinsurance counterparties perform under our agreements.
Net reserve liabilities are net of the ceded liabilities to third-party reinsurers as the costs of the liabilities are passed to such reinsurers and, therefore, we have no net economic exposure to such liabilities, assuming our reinsurance counterparties perform under our agreements.
However, our conservative underwriting process makes use of a wealth of reliable pre- and post-selection participant data, including mortality experience data, particularly for mid to large size transactions, to mitigate this risk. Funding Agreements We issue funding agreements opportunistically to institutional investors at attractive risk-adjusted funding costs. Funding agreements are negotiated privately between an investor and an insurance company.
However, our conservative underwriting process makes use of a wealth of reliable pre- and post-selection participant data, including mortality experience data, particularly for mid- to large-sized transactions, to mitigate this risk. Funding Agreements We issue funding agreements opportunistically to institutional investors at attractive risk-adjusted funding costs. Funding agreements are negotiated privately between an investor and an insurance company.
Block reinsurance A transaction in which the ceding company cedes all or a portion of a block of previously issued annuity contracts through a reinsurance agreement BSCR Bermuda Solvency Capital Requirement CAL Company action level risk-based capital as defined by the model created by the National Association of Insurance Commissioners CLO Collateralized loan obligation CMBS Commercial mortgage-backed securities CML Commercial mortgage loans Consolidated RBC The consolidated risk-based capital ratio of our non-US reinsurance and US insurance subsidiaries calculated by applying NAIC risk-based capital factors to the statutory financial statements on an aggregate basis, including interests in other non-insurance subsidiary holding companies; with an adjustment in Bermuda and non-insurance holding companies to limit RBC concentration charges such that when they are applied to determine target capital, the charges do not exceed 100% of the asset’s carrying value.
Block reinsurance A transaction in which the ceding company cedes all or a portion of a block of previously issued annuity contracts through a reinsurance agreement BSCR Bermuda Solvency Capital Requirement CAL Company action level risk-based capital as defined by the model created by the NAIC CLO Collateralized loan obligation CMBS Commercial mortgage-backed securities CML Commercial mortgage loan Consolidated RBC The consolidated risk-based capital ratio of our non-US reinsurance and US insurance subsidiaries calculated by applying NAIC risk-based capital factors to the statutory financial statements on an aggregate basis, including interests in other non-insurance subsidiary holding companies; with an adjustment in Bermuda and non-insurance holding companies to limit RBC concentration charges such that when they are applied to determine target capital, the charges do not exceed 100% of the asset’s carrying value.
Competition We operate in highly competitive markets. We face a variety of large and small industry participants, including diversified financial institutions and insurance and reinsurance companies.
Business Competition We operate in highly competitive markets. We face a variety of large and small industry participants, including diversified financial institutions and insurance and reinsurance companies.
Our performance-based compensation strategy is designed to recognize and reward employees for their contribution to our success, and we strive to provide strong, equitable incentives for performance.
Business Our performance-based compensation strategy is designed to recognize and reward employees for their contribution to our success, and we strive to provide strong, equitable incentives for performance.
Generally, under these laws, transactions between our US insurance subsidiaries and their affiliates, including any reinsurance transactions and affiliated investments, must be fair and reasonable and, if material or included within a specified category, require prior notice and approval or non-disapproval by the insurance department of each applicable Athene Domiciliary State.
Business under these laws, transactions between our US insurance subsidiaries and their affiliates, including any reinsurance transactions and affiliated investments, must be fair and reasonable and, if material or included within a specified category, require prior notice and approval or non-disapproval by the insurance department of each applicable Athene Domiciliary State.
In order for ceding companies of our Bermuda reinsurance subsidiaries to receive statutory reserve or RBC credit for the reinsurance provided, reinsurance transactions are typically structured in one of three ways: (1) funds withheld, where, although the applicable Bermuda reinsurance subsidiary recognizes the insurance reserve liabilities, the assets to secure such liabilities are held and maintained by the applicable ceding company, (2) modco, where both the insurance reserves and assets supporting the reserves are retained by the applicable ceding company or (3) coinsurance, where the respective Bermuda reinsurance subsidiary’s obligation to the applicable ceding company in connection with reinsurance transactions is secured by assets held in trust for the benefit of the applicable ceding company, which may be reduced or eliminated to the extent that the applicable Bermuda reinsurance subsidiary is approved as a certified reinsurer or reciprocal jurisdiction reinsurer in the cedant’s domiciliary state as discussed in more detail in the following section. 29 Table of Contents Item 1.
In order for ceding companies of our Bermuda reinsurance subsidiaries to receive statutory reserve or RBC credit for the reinsurance provided, reinsurance transactions are typically structured in one of three ways: (1) funds withheld, where, although the applicable Bermuda reinsurance subsidiary recognizes the insurance reserve liabilities, the assets to secure such liabilities are held and maintained by the applicable ceding company, (2) modco, where both the insurance reserves and assets supporting the reserves are retained by the applicable ceding company or (3) coinsurance, where the respective Bermuda reinsurance subsidiary’s obligation to the applicable ceding company in connection with reinsurance transactions is secured by assets held in trust for the benefit of the applicable ceding company, which may be reduced or eliminated to the extent that the applicable Bermuda reinsurance subsidiary is approved as a certified reinsurer or reciprocal jurisdiction reinsurer in the cedant’s domiciliary state as discussed in more detail in the following section.
Our investment philosophy is to invest a portion of our assets in securities that earn an incremental yield by taking measured liquidity and complexity risk and capitalizing on our long-dated, persistent liability profile to prudently achieve higher net investment earned rates, rather than assuming incremental credit risk.
Our investment philosophy is to invest a portion of our assets in securities that earn an incremental yield by taking measured liquidity and complexity risk and capitalize on our long-dated, persistent liability profile to prudently achieve higher net investment earned rates, rather than assuming incremental credit risk.
Rather than increase our allocation to higher risk securities to increase yield, we and Apollo pursue the direct origination of high-quality, predominantly senior secured assets, which we believe possess greater alpha-generating qualities than securities that would otherwise be readily available in public markets.
Rather than increase our allocation to higher risk securities to increase yield, we pursue the direct origination of high-quality, predominantly senior secured assets, which we believe possess greater alpha-generating qualities than securities that would otherwise be readily available in public markets.
We believe we have a good relationship with our principal outsource service providers. Ratings As of December 31, 2022, each of our significant insurance subsidiaries is rated “A+”, “A1” or “A” by the four rating agencies that evaluate the financial strength of such subsidiaries.
We believe we have a good relationship with our principal outsource service providers. Ratings As of December 31, 2023, each of our significant insurance subsidiaries is rated “A+”, “A1” or “A” by the four rating agencies that evaluate the financial strength of such subsidiaries.
Our products are customized for each of the retail channels through which we distribute, including IMOs, banks and independent broker dealers, and represent innovative solutions that meet the needs of policyholders in each of these channels. We continue to release updated or new products to meet the evolving needs of policyholders.
Our products are customized for each of the retail channels through which we distribute, including independent marketing organizations (IMOs), banks, and independent broker dealers, and represent innovative solutions that meet the needs of policyholders in each of these channels. We continue to release updated or new products to meet the evolving needs of policyholders.
Our DEI efforts are led by our Senior Vice President, Diversity, Equity and Inclusion, who reports to our Executive Vice President of Human Resources, with additional reporting responsibilities to the Legal & Regulatory Committee of our board of directors, the committee charged with oversight of our DEI efforts and our corporate and social responsibility efforts more broadly.
Our DEI efforts are led by our Senior Vice President, Diversity, Equity and Inclusion, who reports to our Executive Vice President and Chief Human Resources Officer, with additional reporting responsibilities to the legal and regulatory committee of our board of directors, the committee charged with oversight of our DEI efforts and our corporate and social responsibility efforts more broadly.
Cost of funds Cost of funds includes liability costs related to cost of crediting on both deferred annuities, including, with respect to our fixed indexed annuities, option costs, and institutional costs related to institutional products, as well as other liability costs, but does not include the proportionate share of the ACRA cost of funds associated with the noncontrolling interest.
Cost of funds Cost of funds includes liability costs related to cost of crediting on both deferred annuities, including, with respect to our fixed indexed annuities, option costs, and institutional costs related to institutional products, as well as other liability costs, but does not include the proportionate share of the ACRA cost of funds associated with the noncontrolling interests.
In addition, if ACRA fails to satisfy minimum aggregate capital requirements, ALRe has the right to recapture or assign to another of our subsidiaries a portion of the business retroceded to ACRA (and/or any of its insurance or reinsurance subsidiaries) to the extent necessary to cure such failure.
In addition, if the applicable ACRA entity fails to satisfy minimum aggregate capital requirements, ALRe has the right to recapture or assign to another of our subsidiaries a portion of the business retroceded to such ACRA entity (and/or any of its insurance or reinsurance subsidiaries) to the extent necessary to cure such failure.
The BMA is required by the Bermuda Insurance Act to determine whether an applicant is a fit and proper body to be engaged in the insurance business and, in particular, whether it has, or has available to it, adequate knowledge and expertise to operate an insurance business. See – Regulation of an Insurer’s Shareholders below.
The BMA is required by the Bermuda Insurance Act to determine whether an applicant is a fit and proper body to be engaged in the insurance business and, in particular, whether it has, or has available to it, adequate knowledge and expertise to operate an insurance business. See – Regulation of an Insurer’s Stockholders below.
TAC and RBC are calculated annually by insurers, as of December 31 of each year. As of December 31, 2022, each of our US insurance subsidiaries’ TAC was significantly in excess of the levels that would prompt regulatory action under the laws of the Athene Domiciliary States.
TAC and RBC are calculated annually by insurers, as of December 31 of each year. As of December 31, 2023, each of our US insurance subsidiaries’ TAC was significantly in excess of the levels that would prompt regulatory action under the laws of the Athene Domiciliary States.
We believe we have established ourselves as a trusted pension group annuity solutions provider and expect that our experience in crafting customized pension group annuity solutions and our improving credit profile will enable us to continue to source and execute pension group annuity transactions.
We believe we have established ourselves as a trusted and market-leading pension group annuity solutions provider and expect that our experience in crafting customized pension group annuity solutions and our improving credit profile will enable us to continue to source and execute pension group annuity transactions.
Comparisons of results for current and any prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data. 4 Table of Contents Risk Factor Summary Our business faces significant risks. In addition to the summary below, you should carefully review Item 1A. Risk Factors.
Comparisons of results for current and any prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data. Risk Factor Summary Our business faces significant risks. In addition to the summary below, you should carefully review Item 1A. Risk Factors.
The Wrap Fee is expected to be approximately 15 basis points per year, based on a scale which increases from 10 to 16 basis points as the portion of the reserves economically attributed to ADIP increases.
The Wrap Fee is expected to be approximately 15 basis points per year, based on a scale which increases from 10 to 16 basis points as the portion of the reserves economically attributed to the applicable ADIP fund increases.
Best’s Long-Term ICR are expressed with a “+” (plus) or “-“ (minus). 2 S&P’s insurer financial strength rating is a forward-looking opinion about the financial security characteristics of an insurance organization with respect to its ability to pay under its insurance policies and contracts in accordance with their terms.
Best’s long-term issuer credit rating are expressed with a plus “+” or a minus “-”. 2 S&P’s insurer financial strength rating is a forward-looking opinion about the financial security characteristics of an insurance organization with respect to its ability to pay under its insurance policies and contracts in accordance with their terms.
All states, the District of Columbia and Puerto Rico have adopted the NAIC'’s 2019 revisions to the Credit for Reinsurance Model Law to allow a ceding insurer to take credit for reinsurance ceded to a qualifying unauthorized reinsurer without collateral if the reinsurer satisfies certain conditions, including being domiciled in a reciprocal jurisdiction.
All states, the District of Columbia and Puerto Rico have adopted the NAIC’s 2019 revisions to the Credit for Reinsurance Model Law (NAIC 2019) to allow a ceding insurer to take credit for reinsurance ceded to a qualifying unauthorized reinsurer without collateral if the reinsurer satisfies certain conditions, including being domiciled in a reciprocal jurisdiction.
Our investment philosophy is to invest a portion of our assets in securities that earn an incremental yield by taking measured liquidity and complexity risk and capitalize on our long-dated funding profile to prudently achieve higher net investment earned rates, rather than assuming incremental credit risk.
Our investment philosophy is to invest a portion of our assets in securities that earn an incremental yield by taking measured liquidity and complexity risk and capitalize on our long-dated, persistent liability profile to prudently achieve higher net investment earned rates, rather than assuming incremental credit risk.
In general, we target returns for alternative investments of 10% or higher on an internal rate of return basis over the expected lives of such investments. Our asset portfolio is managed within the limits and constraints set forth in our Investment and Credit Risk Policy.
In general, we target returns for alternative investments of 10% or higher on an internal rate of return basis over the expected lives of such investments. Our investment portfolio is managed within the limits and protocols set forth in our Investment and Credit Risk Policy.
Internal Reinsurance Subject to quota shares generally ranging from 80% to 100%, substantially all of the existing deposits held and new deposits generated by our US insurance subsidiaries are reinsured to our Bermuda reinsurance subsidiaries. We maintain the same reserving standards for our Bermuda reinsurance subsidiaries as we do for our US insurance subsidiaries.
Reinsurance Internal Ceded Reinsurance Subject to quota shares generally ranging from 80% to 100%, substantially all of the existing deposits held and new deposits generated by our US insurance subsidiaries are reinsured to our Bermuda reinsurance subsidiaries. We maintain the same reserving principles for our Bermuda reinsurance subsidiaries as we do for our US insurance subsidiaries.
The factors that make an investment in our business speculative or risky include: • Our business, financial condition, results of operations, liquidity and cash flows depend on the accuracy of our management’s assumptions and estimates, and we could experience significant gains or losses if these assumptions and estimates differ significantly from actual results. • We are subject to risks associated with public health crises, such as pandemics and epidemics, including the COVID-19 pandemic which has caused severe disruptions in the US and global economy and could continue to impact our business, financial condition and results of operations. • Interruption or other operational failures in telecommunications, information technology and other operational systems or a failure to maintain the security, integrity, confidentiality or privacy of sensitive data residing on those systems, including as a result of human error, could have a material adverse effect on our business. • A financial strength rating downgrade, potential downgrade or any other negative action by a rating agency could make our product offerings less attractive, inhibit our ability to acquire future business through acquisitions or reinsurance and increase our cost of capital, which could have a material adverse effect on our business. • We rely significantly on third parties for various services, and we may be held responsible for obligations that arise from the acts or omissions of third parties under their respective agreements with us. • Changes to the method of determining the LIBOR or the selection of a replacement for LIBOR may affect the value of investments held by or due to us and could affect our results of operations and financial results. • We are subject to significant operating and financial restrictions imposed by our credit agreements, liquidity facility, and certain letters of credit, and we are also subject to certain operating restrictions imposed by the indenture to which we are a party. • We operate in a highly competitive industry that includes a number of competitors, which could limit our ability to achieve our growth strategies and could materially and adversely affect our business, financial condition, results of operations, cash flows and prospects. • If we are unable to attract and retain IMOs, agents, banks and broker-dealers, sales of our products may be adversely affected. • Our growth strategy includes acquisitions and block reinsurance transactions, and our ability to consummate these transactions on economically advantageous terms acceptable to us in the future is unknown. • As a financial services company, we are exposed to liquidity risk, which is the risk that we are unable to meet near-term obligations as they come due. • The amount of statutory capital that our insurance and reinsurance subsidiaries have, or that they are required to hold, can vary significantly from time to time and is sensitive to a number of factors outside of our control. • Repurchase agreement programs subject us to potential liquidity and other risks. • Our investments are subject to market and credit risks that could diminish their value and these risks could be greater during periods of extreme volatility or disruption in the financial and credit markets, which could adversely impact our business, financial condition, results of operations, liquidity and cash flows. • Interest rate fluctuations could adversely affect our business, financial condition, results of operations, liquidity and cash flows. • We are subject to the credit risk of our counterparties, including ceding companies, reinsurers, plan sponsors and derivative counterparties. • Our investment portfolio may be subject to concentration risk, particularly with respect to single issuers, including Athora, among others; industries, including financial services; and asset classes, including real estate. • Many of our invested assets are relatively illiquid and we may fail to realize profits from these assets for a considerable period of time, or lose some or all of the principal amount we invest in these assets if we are required to sell our invested assets at a loss at inopportune times. • Our investments linked to real estate are subject to credit risk, market risk, servicing risk, loss from catastrophic events and other risks, which could diminish the value that we obtain from such investments. • Our investment portfolio may include investments in securities of issuers based outside the US, including emerging markets, which may be riskier than securities of US issuers. • While we seek to hedge foreign currency risks, foreign currency fluctuations may reduce our net income and our capital levels, adversely affecting our financial condition. • Climate change and regulatory and other efforts to reduce climate change, as well as environmental, social and governance requirements could adversely affect our business. • Financial markets have been subject to inflationary pressures, and continued rising inflation may adversely impact our business and results of operations. • There are potential conflicts of interests between Apollo, our corporate parent, and the holders of our preferred shares. • We rely on our investment management agreements with Apollo for the management of our investment portfolio.
The factors that make an investment in our business speculative or risky include: • Our business, financial condition, results of operations, liquidity and cash flows depend on the accuracy of our management’s assumptions and estimates, and we could experience significant gains or losses if these assumptions and estimates differ significantly from actual results. • Interruption or other operational failures in telecommunications, information technology and other operational systems, including as a result of threat actors attacking those systems, or a failure to maintain the security, integrity, confidentiality or privacy of sensitive data residing on those systems, including as a result of human error, could have a material adverse effect on our business. • A financial strength rating downgrade, potential downgrade or any other negative action by a rating agency could make our product offerings less attractive, inhibit our ability to acquire future business through acquisitions or reinsurance and increase our cost of capital, which could have a material adverse effect on our business. • We rely significantly on third parties for various services, and we may be held responsible for obligations that arise from the acts or omissions of third parties under their respective agreements with us. • We are subject to significant operating and financial restrictions imposed by our credit agreements and certain letters of credit, and we are also subject to certain operating restrictions imposed by the indenture to which we are a party. • We operate in a highly competitive industry that includes a number of competitors, which could limit our ability to achieve our growth strategies and could materially and adversely affect our business, financial condition, results of operations, cash flows and prospects. • If we are unable to attract and retain IMOs, banks and broker-dealers, sales of certain of our products may be adversely affected. • Our growth strategy includes acquisitions and block reinsurance transactions, and our ability to consummate these transactions on economically advantageous terms acceptable to us in the future is unknown. • We are subject to risks associated with pandemics, epidemics, disease outbreaks and other public health crises, such as the COVID-19 pandemic, which could impact our business, financial condition and results of operations in the future. • As a financial services company, we are exposed to liquidity risk, which is the risk that we are unable to meet near-term obligations as they come due. • The amount of statutory capital that our insurance and reinsurance subsidiaries have, or that they are required to hold, can vary significantly from time to time and is sensitive to a number of factors outside of our control. • Repurchase agreement programs subject us to potential liquidity and other risks. • Our investments are subject to market and credit risks that could diminish their value and these risks could be greater during periods of extreme volatility or disruption in the financial and credit markets, which could adversely impact our business, financial condition, results of operations, liquidity and cash flows. • Interest rate fluctuations could adversely affect our business, financial condition, results of operations, liquidity and cash flows. • We are subject to the credit risk of our counterparties, including ceding companies, reinsurers, plan sponsors and derivative counterparties. • Our investment portfolio may be subject to concentration risk, particularly with respect to single issuers, including Athora, among others; industries, including financial services; and asset classes, including real estate. • Many of our invested assets are relatively illiquid and we may fail to realize profits from these assets for a considerable period of time, or lose some or all of the principal amount we invest in these assets if we are required to sell our invested assets at a loss at inopportune times. • Our investments linked to real estate are subject to credit risk, market risk, servicing risk, loss from catastrophic events and other risks, which could diminish the value that we obtain from such investments. • Our investment portfolio may include investments in securities of issuers based outside the US, including emerging markets, which may be riskier than securities of US issuers. • While we seek to hedge foreign currency risks, foreign currency fluctuations may reduce our net income and our capital levels, adversely affecting our financial condition. • Climate change and regulatory and other efforts to reduce climate change, as well as environmental, social and governance requirements could adversely affect our business. • Financial markets have been subject to inflationary pressures, and continued rising inflation may adversely impact our business and results of operations. 4 Table of Contents • There are potential conflicts of interests between Apollo, our corporate parent, and the holders of our preferred stock. • We rely on our investment management agreements with Apollo for the management of our investment portfolio.
We also offer funding agreements, including those issued to institutions and to special-purpose unaffiliated trusts in connection with our funding agreement backed notes (FABN) and secured funding agreement backed repurchase agreement (FABR) programs. Post-merger with Apollo, we are creating products that capitalize on the capabilities of both Apollo and Athene and will facilitate Apollo’s distribution to high net worth individuals.
We also offer funding agreements, including those issued to institutions and to special-purpose unaffiliated trusts in connection with our funding agreement backed notes (FABN) and secured funding agreement backed repurchase agreement (FABR) programs. In addition, we are creating products that capitalize on the capabilities of both Apollo and Athene and will facilitate Apollo’s distribution of these products to high-net-worth individuals.
We believe that this capital will be instrumental to executing our growth strategy. See –Capital for additional information regarding ACRA. 12 Table of Contents Item 1. Business • Allocate Assets during Market Dislocations. As we have done successfully in the past, we plan to capitalize on future market dislocations to opportunistically reposition our portfolio to capture incremental yield.
We believe this capital will continue to be instrumental to executing our growth strategy. See –Capital for additional information regarding ACRA. 11 Table of Contents Item 1. Business • Allocate Assets during Market Dislocations. As we have done successfully in the past, we plan to capitalize on future market dislocations to opportunistically reposition our portfolio to capture incremental yield.
NAIC The National Association of Insurance Commissioners (NAIC) is an organization, the mandate of which is to benefit state insurance regulatory authorities and consumers by promulgating model insurance laws and regulations for adoption by the states. The NAIC also provides standardized insurance industry accounting and reporting guidance through the NAIC Accounting Manual.
NAIC The NAIC is an organization, the mandate of which is to benefit state insurance regulatory authorities and consumers by promulgating model insurance laws and regulations for adoption by the states. The NAIC also provides standardized insurance industry accounting and reporting guidance through the NAIC Accounting Manual.
In addition to potential enhancements to technical provisions and computation of BSCR, the BMA is seeking to strengthen supervisory cooperation and exchange of information and increased publication of regulatory information to further develop good governance and risk management practices, transparency, and market discipline. 33 Table of Contents
In addition to potential enhancements to technical provisions and computation of the BSCR, the BMA is seeking to strengthen supervisory cooperation and exchange of information and increased publication of regulatory information to further develop good governance and risk management practices, transparency, and market discipline.
We also maintain holdings in less interest rate-sensitive investments, including collateralized loan obligations (CLO), commercial mortgage loans (CML), residential mortgage loans (RML), non-agency residential mortgage-backed securities (RMBS) and various types of structured products, consistent with our strategy of pursuing incremental yield by assuming liquidity risk and complexity risk, rather than assuming incremental credit risk.
We also maintain holdings in less interest rate-sensitive investments, including collateralized loan obligations (CLO), non-agency residential mortgage-backed securities (RMBS) and various types of structured products, consistent with our strategy of pursuing incremental yield by assuming liquidity and complexity risk, rather than assuming incremental credit risk.
Annuities Fixed Indexed Annuities – FIAs are the majority of our net reserve liabilities. FIAs are a type of insurance contract in which the policyholder makes one or more premium deposits which earn interest, on a tax deferred basis, at a crediting rate based on a specified market index, subject to a specified cap, spread or participation rate.
Annuities Fixed Indexed Annuities – FIAs are the largest percentage of our net reserve liabilities. FIAs are a type of insurance contract in which the policyholder makes one or more premium deposits that earn interest, on a tax deferred basis, at a crediting rate based on a specified market index, subject to a specified cap, spread or participation rate.
We generate income on FIA products by earning an investment spread, based on the difference between (1) income earned on the investments supporting the liabilities and (2) the cost of funds, including fixed interest credited to customers, option costs, the cost of providing guarantees (net of rider fees), policy issuance and maintenance costs, and commission costs. 14 Table of Contents Item 1.
We generate income on FIA products by earning an investment spread, based on the difference between (1) income earned on the investments supporting the liabilities and (2) the cost of funds, including fixed interest credited to customers, option costs, the cost of providing guarantees (net of rider fees), policy issuance and maintenance costs and commission costs.
Risk Factors–Risks Relating to Our Business Operations–A financial strength rating downgrade, potential downgrade or any other negative action by a rating agency could make our product offerings less attractive, inhibit our ability to acquire future business through acquisitions or reinsurance and increase our cost of capital, which could have a material adverse effect on our business for further discussion about risks associated with financial strength ratings.
Risk Factors–Risks Relating to Our Business Operations–A financial strength rating downgrade, potential downgrade or any other negative action by a rating agency could make our product offerings less attractive, inhibit our ability to acquire future business through acquisitions or reinsurance and increase our cost of capital, which could have a material adverse effect on our business for further discussion about risks associated with financial strength ratings. 21 Table of Contents Item 1.
In general, (a) on or about the 10th anniversary of the effective date of any Participating Transaction (other than a flow reinsurance transaction) or (b) on or about the 10th anniversary of the date on which reinsurance is terminated as to new business under any Participating Transaction that is a flow reinsurance transaction (which would occur no later than the end of the commitment period), ALRe or its applicable affiliate has the right (Commutation Right) to terminate ACRA’s participation in such Participating Transaction based on a book value pricing mechanism and subject to ADIP’s ability to reject the commutation if a minimum return with respect to such Participating Transaction is not achieved.
In general, (a) on or about the 10th anniversary of the effective date of any Participating Transaction (other than a flow reinsurance transaction) or (b) on or about the 10th anniversary of the date on which reinsurance is terminated as to new business under any Participating Transaction that is a flow reinsurance transaction (which would occur no later than the end of the commitment period), ALRe or its applicable affiliate has the right (Commutation Right) to terminate the applicable ACRA entity’s participation in such Participating Transaction based on a book value pricing mechanism and subject to the ability of the applicable ADIP fund to reject the commutation if a minimum return with respect to such Participating Transaction is not achieved.
We work with advisors, brokers and consultants to source pension group annuity transactions and design solutions that meet the needs of prospective pension group annuity counterparties, which are focused on medium- and large-sized deals involving retirees and/or deferred participants that are structured as either a buyout or a buy-in transaction.
We work with advisors, brokers and consultants to source pension group annuity transactions and design solutions that meet the needs of prospective pension group annuity counterparties and their participants, with a focus on medium- and large-sized deals involving retirees and/or deferred participants that are structured as either a buyout or a buy-in transaction.
For an SPI to satisfy its MMS requirements, the value of the SPI’s special purpose business assets must exceed its special purpose business liabilities by at least BD$1.00. The BMA has embedded an economic balance sheet (EBS) framework as part of the BSCR that forms the basis for an insurer’s ECR.
For an SPI to satisfy its MMS requirements, the value of the SPI’s special purpose business assets must exceed its special purpose business liabilities by at least BD$1.00. 29 Table of Contents Item 1. Business The BMA has embedded an economic balance sheet (EBS) framework as part of the BSCR that forms the basis for an insurer’s ECR.
We file the ORSA Report with the IID as our lead state regulator and concurrently provide the ORSA Report to the Delaware Department of Insurance (DDI) and the New York State Department of Financial Services (NYSDFS). We also submit the ORSA Report to the BMA.
We file the ORSA Report with the IID as our lead state regulator and concurrently provide the ORSA Report to the Delaware Department of Insurance (DE DOI) and the New York State Department of Financial Services (NYSDFS). We also submit the ORSA Report to the BMA.
SPIs are also required to file with the BMA a statutory financial return which includes, among other matters, the US GAAP financial statements, a cover sheet, a statement of control and changes of control, a solvency certificate, an annual statutory declaration, an own-risk assessment, alternative capital arrangements report, cyber risk management report and compliance with sanctions report.
SPIs are also required to file with the BMA a statutory financial return which includes, among other matters, the US GAAP financial statements, a cover sheet, a statement of control and changes of control, a solvency certificate, an annual statutory declaration, an own-risk assessment, alternative capital arrangements report, cyber risk management report and compliance with sanctions report. 28 Table of Contents Item 1.
As in the retail channel, we do not pursue flow volume growth at the expense of profitability and, therefore, we tend to respond rapidly to adjust pricing for changes in asset yields.
As in the retail channel, we do not pursue flow volume growth at the expense of profitability and will respond rapidly to adjust pricing for changes in asset yields.
In connection with each transaction in which ACRA elects to participate (each, a Participating Transaction), ACRA will generally pay ALRe a fee (Wrap Fee) on the reserves of the assumed or acquired business.
In connection with each transaction in which an ACRA entity elects to participate (each, a Participating Transaction), such ACRA entity will generally pay ALRe a fee (Wrap Fee) on the reserves of the assumed or acquired business.
If ALRe does not exercise the Commutation Right with respect to a Participating Transaction, then ACRA’s obligation to pay the Wrap Fee in connection with such Participating Transaction will terminate, and, subject to certain exceptions (and the applicable terms and conditions of the Amended and Restated Framework Agreement and related transaction documents), ALRe will be required to pay ACRA a fee calculated in the same manner as the Wrap Fee.
If ALRe does not exercise the Commutation Right with respect to a Participating Transaction, then the applicable ACRA entity’s obligation to pay the Wrap Fee in connection with such Participating Transaction will terminate, and, subject to certain exceptions (and the applicable terms and conditions of the applicable ACRA Framework Agreement and related transaction documents), ALRe will be required to pay such ACRA entity a fee calculated in the same manner as the Wrap Fee.
As of December 31, 2022, the CAL RBC ratio of AADE (US RBC ratio) was 387%. The calculation of RBC requires certain judgments to be made, and, accordingly, our US insurance subsidiaries’ current RBC may be greater or less than the RBC calculated as of any date of determination.
As of December 31, 2023, the CAL RBC ratio of AADE (US RBC ratio) was 392%. The calculation of RBC requires certain judgments to be made, and, accordingly, our US insurance subsidiaries’ current RBC may be greater or less than the RBC calculated as of any date of determination.
As of December 31, 2022, crediting rates on outstanding annual reset annuities ranged from 0.5% to 6.0% and crediting rates on outstanding MYGAs ranged from 0.25% to 5.55%. Registered Index-Linked Annuities – RILAs are similar to FIAs in offering the policyholder the opportunity for tax-deferred growth based in part on the performance of a market index.
As of December 31, 2023, crediting rates on outstanding annual reset annuities ranged from 0.5% to 6.0% and crediting rates on outstanding MYGAs ranged from 0.25% to 6.20%. Registered Index-Linked Annuities (RILA) – RILAs are similar to FIAs in offering the policyholder the opportunity for tax-deferred growth based in part on the performance of a market index.
Our differentiated investment strategy benefits from our relationship with Apollo, which provides a full suite of services for our investment portfolio, including direct investment management, asset allocation, merger and acquisition asset diligence and certain operational support services, including investment compliance, tax, legal and risk management support.
Our differentiated investment strategy benefits from our relationship with Apollo, which provides a full suite of services for our investment portfolio, including direct investment management, asset allocation, mergers and acquisitions asset diligence and certain operational support services, including investment compliance, tax, legal and risk management support.
Six of our fourteen directors are employees of or consultants to Apollo, including our Chairman, Chief Executive Officer and Chief Investment Officer, who is also a member of the board of directors and an executive officer of Apollo and the Chief Executive Officer of Apollo Insurance Solutions Group LP (ISG), our investment manager and a subsidiary of AGM.
Five of our twelve directors are employees of or consultants to Apollo, including our Chairman, Chief Executive Officer and Chief Investment Officer, who is also a member of the board of directors and an executive officer of Apollo, and the Chief Executive Officer of Apollo Insurance Solutions Group LP (ISG), our investment manager and a subsidiary of AGM.
These laws generally require an insurance holding company and insurers that are members of such holding company system to register with their US insurance regulators and to file certain reports with those authorities, including information concerning their capital structure, ownership, financial condition, certain intercompany transactions and general business operations.
These laws generally require an insurance holding company and insurers that are members of such holding company system to register with their US insurance regulators and to file certain reports with those authorities, including information concerning their capital structure, ownership, financial condition, certain intercompany transactions and general business operations. Generally, 25 Table of Contents Item 1.
A “+” or a “-” may be appended to a rating to denote relative status within major rating categories. 4 Moody’s Investors Service, Inc. (Moody’s) provides credit ratings that are publicly available serving the public debt capital markets. Moody’s insurance financial strength ratings range from “Aaa (highest quality)” to “C (lowest)”.
A plus “+” or a minus “-” may be appended to a rating to denote relative status within major rating categories. 4 Moody’s provides credit ratings that are publicly available serving the public debt capital markets. Moody’s insurance financial strength ratings range from “Aaa (highest quality)” to “C (lowest)”.
Business Overview We are a leading financial services company that specializes in issuing, reinsuring and acquiring retirement savings products designed for the increasing number of individuals and institutions seeking to fund retirement needs.
Business Overview We are a leading financial services company that specializes in issuing, reinsuring and acquiring retirement savings products designed for the increasing number of individuals and institutions seeking to fund retirement needs. Apollo Global Management, Inc.
Also, regulatory actions with prospective impact can potentially have a significant impact on products that we currently sell. The NAIC continues to work to reform state regulation in various areas, including reporting requirements for investment transactions with related parties that may not be considered “affiliates” under the Holding Company Model Law.
Also, regulatory actions with prospective impact can potentially have a significant impact on products that we currently sell. The NAIC continues to work to reform state regulation in various areas, including reporting requirements for investment transactions with related parties that may not be considered “affiliates” under the Holding Company Model Law. 26 Table of Contents Item 1.
Our diverse Fixed Indexed Annuity (FIA) product offerings are complemented by a number of innovative custom indices that allow our customers to gain access to sophisticated strategies that are designed for better performance within our products. During 2022, approximately 70% of sales went to custom indices that are only available through our products.
Our diverse Fixed Indexed Annuity (FIA) product offerings are complemented by a number of innovative custom indices, which allow our customers to gain access to sophisticated strategies that are designed for better performance within our products. During 2023, approximately 64% of sales went to custom indices that are only available through our products.
Our Bermuda reinsurance subsidiaries are eligible to apply to any state for a determination that they have satisfied the conditions specified in the 2019 revisions and, to the extent any such determinations are made, will not be required by law on a prospective basis to post collateral with respect to reinsurance entered into amended or renewed after the effective date of the 2019 revisions and ceded by insurers domiciled in such states.
Our Bermuda reinsurance subsidiaries are eligible to apply to any state for a determination that they have satisfied the conditions specified in NAIC 2019 and, to the extent any such determinations are made, will not be required by law on a prospective basis to post collateral, as a condition to the cedant receiving credit for reinsurance, with respect to reinsurance entered into amended or renewed after the effective date of NAIC 2019 and ceded by insurers domiciled in such states.
ALRe has been approved as a certified reinsurer in Delaware, Maine, Massachusetts, Michigan, Ohio, Tennessee and Vermont and is therefore eligible, based on its current ratings, to post reduced collateral equal to 20% of the statutory reserves ceded under new coinsurance agreements by insurers domiciled in those states.
ALRe has been approved as a certified reinsurer in Delaware (its lead state), and for passport applications in Iowa, Maine, Massachusetts, Michigan, Ohio, Tennessee, and Vermont and is therefore eligible, based on its current ratings, to post reduced collateral equal to 20% of the statutory reserves ceded under new coinsurance agreements by insurers domiciled in those states.
A “+” or “-“ indicates relative standing within a rating category. 3 Fitch’s insurer financial strength ratings provide an assessment of the financial strength of an insurance organization. The insurer financial strength rating is assigned to the insurance company’s policyholder obligations, including assumed reinsurance obligations and contractholder obligations, such as guaranteed investment contracts.
A plus “+” or a minus “-” indicates relative standing within a rating category. 3 Fitch’s insurer financial strength ratings provide an assessment of the financial strength of an insurance organization. The insurer financial strength rating is assigned to the insurance company’s policyholder obligations, including assumed reinsurance obligations and contract holder obligations, such as guaranteed investment contracts.
If market conditions or risks inherent in a product or transaction create return profiles that are not acceptable to us, we generally will not sacrifice our profitability merely to facilitate growth. 16 Table of Contents Item 1. Business Retail We have built a scalable platform that allows us to originate and rapidly grow our business in deferred annuity products.
If market conditions or risks inherent in a product or transaction create return profiles that are not acceptable to us, we generally will not sacrifice our profitability merely to facilitate growth. Retail We have built a scalable platform that allows us to originate and rapidly grow our business in deferred annuity products.
Apollo may terminate these arrangements at any time, and there are limitations on our ability to terminate investment management agreements covering assets backing reserves and surplus in ACRA, which may adversely affect our investment results. 5 Table of Contents • Interruption or other operational failures in telecommunications, information technology and other operational systems at Apollo or a failure to maintain the security, integrity, confidentiality or privacy of sensitive data residing on Apollo’s systems, including as a result of human error, could have a material adverse effect on our business. • The historical investment portfolio performance of Apollo should not be considered as indicative of the future results of our investment portfolio, or our future results or our ability to declare and pay dividends on our preferred shares. • The returns that we expect to achieve on our investment portfolio may not be realized. • Our industry is highly regulated and we are subject to significant legal restrictions and these restrictions may have a material adverse effect on our business, financial condition, results of operations, liquidity, cash flows and prospects. • Our failure to obtain or maintain licenses and/or other regulatory approvals as required for the operations of our insurance subsidiaries may have a material adverse effect on our business, financial condition, results of operations, liquidity, cash flows and prospects. • Changes in the laws and regulations governing the insurance industry or otherwise applicable to our business, may have a material adverse effect on our business, financial condition, results of operations, liquidity, cash flows and prospects. • We are evaluating a number of structural options affecting AHL, one or more of which could affect the US federal income tax considerations relating to the ownership and disposition of our shares. • Our structure involves complex provisions of tax law for which no clear precedent or authority may be available.
Apollo may terminate these arrangements at any time, and there are limitations on our ability to terminate investment management agreements covering assets backing reserves and surplus in ACRA, which may adversely affect our investment results. • Interruption or other operational failures in telecommunications, information technology and other operational systems at Apollo or a failure to maintain the security, integrity, confidentiality or privacy of sensitive data residing on Apollo’s systems, including as a result of human error, could have a material adverse effect on our business. • The historical investment portfolio performance of Apollo should not be considered as indicative of the future results of our investment portfolio, or our future results or our ability to declare and pay dividends on our preferred stock. • The returns that we expect to achieve on our investment portfolio may not be realized. • Our industry is highly regulated and we are subject to significant legal restrictions and obligations, and these restrictions and obligations may have a material adverse effect on our business, financial condition, results of operations, liquidity, cash flows and prospects. • Our failure to obtain or maintain licenses and/or other regulatory approvals as required for the operations of our insurance subsidiaries may have a material adverse effect on our business, financial condition, results of operations, liquidity, cash flows and prospects. • Changes in the laws and regulations governing the insurance industry or otherwise applicable to our business, may have a material adverse effect on our business, financial condition, results of operations, liquidity, cash flows and prospects. • The Redomicile may adversely affect the US federal income tax relating to the ownership of our shares by non-US holders. • Our structure involves complex provisions of tax law for which no clear precedent or authority may be available.
These reserves are required by state insurance regulatory authorities to be established as liabilities on a life insurer’s statutory financial statements and may also be included in the liabilities assumed by our US insurance subsidiaries pursuant to their reinsurance agreements with US-based life insurer ceding companies. 30 Table of Contents Item 1.
These reserves are required by state insurance regulatory authorities to be established as liabilities on a life insurer’s statutory financial statements and may also be included in the liabilities assumed by our US insurance subsidiaries pursuant to their reinsurance agreements with US-based life insurer ceding companies.
Supplemental contracts are typically created upon the conversion of a death claim or the annuitization of a deferred annuity. Structured settlements generally relate to legal settlements. 15 Table of Contents Item 1. Business Group Annuities Group annuities issued in connection with pension group annuity transactions usually involve a single premium group annuity contract issued to discharge certain pension plan liabilities.
Supplemental contracts are typically created upon the conversion of a death claim or the annuitization of a deferred annuity. Structured settlements generally relate to legal settlements. Group Annuities Group annuities issued in connection with pension group annuity transactions usually involve a single premium group annuity contract issued to discharge certain pension plan liabilities.
A rating may have a stable outlook to indicate that the rating is not expected to change, but a stable outlook does not preclude a rating agency from changing a rating at any time without notice. 23 Table of Contents Item 1. Business A.M. Best, S&P, Fitch and Moody’s review their ratings of insurance companies from time to time.
A rating may have a stable outlook to indicate that the rating is not expected to change, but a stable outlook does not preclude a rating agency from changing a rating at any time without notice. A.M. Best, S&P, Fitch and Moody’s review their ratings of insurance companies from time to time.

… 289 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 2. Properties We own our headquarters for US operations, which is located in West Des Moines, IA and we lease our head office for Bermuda operations, which is located in Hamilton, Bermuda. We believe that for the foreseeable future our West Des Moines, Bermuda and other properties will be sufficient for us to conduct our current operations.
Biggest changeItem 2. Properties We own our corporate headquarters located at 7700 Mills Civic Pkwy, West Des Moines, Iowa. We lease our head office for Bermuda operations in Hamilton, Bermuda. We consider these facilities and other properties to be suitable and adequate for the management and operation of our business.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed5 unchanged
Biggest changeFor a description of certain legal proceedings affecting us, see Note 15 – Commitments and Contingencies – Litigation, Claims and Assessments to the consolidated financial statements. Item 4. Mine Safety Disclosures Not applicable. 66 Table of Contents PART II
Biggest changeDescriptions of certain legal proceedings affecting us, if any, are included in Note 17 – Commitments and Contingencies to the consolidated financial statements. Item 4. Mine Safety Disclosures Not applicable. 63 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 4. Mine Safety Disclosures 66 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 67 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 68 Item 7A. Quantitative and Qualitative Disclosures About Market Risks 121 Item 8. Financial Statements 125
Biggest changeItem 4. Mine Safety Disclosures 63 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 64 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 65 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 113 Item 8. Financial Statements 117

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

195 edited+72 added−147 removed32 unchanged
Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations The following table presents the carrying values of our total investments including related parties and VIEs: Successor Predecessor December 31, 2022 December 31, 2021 (In millions, except percentages) Carrying Value Percent of Total Carrying Value Percent of Total AFS securities, at fair value $ 102,404 48.3 % $ 100,159 47.1 % Trading securities, at fair value 1,595 0.8 % 2,056 1.0 % Equity securities 1,487 0.7 % 1,170 0.5 % Mortgage loans 27,454 12.9 % 20,748 9.8 % Investment funds 79 — % 1,178 0.6 % Policy loans 347 0.2 % 312 0.1 % Funds withheld at interest 32,880 15.5 % 43,907 20.7 % Derivative assets 3,309 1.6 % 4,387 2.1 % Short-term investments 2,160 1.0 % 139 0.1 % Other investments 773 0.4 % 1,473 0.7 % Total investments 172,488 81.4 % 175,529 82.7 % Investments in related parties AFS securities, at fair value 9,821 4.6 % 10,402 4.9 % Trading securities, at fair value 878 0.4 % 1,781 0.8 % Equity securities, at fair value 279 0.1 % 284 0.1 % Mortgage loans 1,302 0.6 % 1,360 0.6 % Investment funds 1,569 0.7 % 7,391 3.5 % Funds withheld at interest 9,808 4.6 % 12,207 5.7 % Other investments 303 0.2 % 222 0.1 % Total related party investments 23,960 11.2 % 33,647 15.7 % Total investments including related parties 196,448 92.6 % 209,176 98.4 % Investments owned by consolidated VIEs Trading securities, at fair value 1,063 0.5 % — — % Mortgage loans 2,055 1.0 % 2,040 1.0 % Investment funds, at fair value 12,480 5.9 % 1,297 0.6 % Other investments, at fair value 101 — % — — % Total investments owned by consolidated VIEs 15,699 7.4 % 3,337 1.6 % Total investments including related parties and VIEs $ 212,147 100.0 % $ 212,513 100.0 % The decrease in our total investments, including related parties and VIEs, as of December 31, 2022 of $366 million compared to December 31, 2021 was primarily driven by unrealized losses on AFS securities in the year ended December 31, 2022 of $18.2 billion, unrealized losses within our funds withheld portfolio, the distribution of our $2.1 billion investment in Apollo to AGM following the merger and a decrease in the change in fair value of mortgage loan assets and trading securities primarily due to an increase in US Treasury rates and credit spread widening in the current year.
Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations The following table presents the carrying values of our total investments including related parties and VIEs: December 31, 2023 December 31, 2022 (In millions, except percentages) Carrying Value Percent of Total Carrying Value Percent of Total AFS securities, at fair value $ 134,338 51.8 % $ 102,404 48.3 % Trading securities, at fair value 1,706 0.7 % 1,595 0.8 % Equity securities 1,293 0.5 % 1,487 0.7 % Mortgage loans, at fair value 44,115 17.0 % 27,454 12.9 % Investment funds 109 0.1 % 79 — % Policy loans 334 0.1 % 347 0.2 % Funds withheld at interest 24,359 9.4 % 32,880 15.5 % Derivative assets 5,298 2.1 % 3,309 1.6 % Short-term investments 341 0.1 % 2,160 1.0 % Other investments 1,206 0.5 % 773 0.4 % Total investments 213,099 82.3 % 172,488 81.4 % Investments in related parties AFS securities, at fair value 14,009 5.4 % 9,821 4.6 % Trading securities, at fair value 838 0.3 % 878 0.4 % Equity securities, at fair value 318 0.1 % 279 0.1 % Mortgage loans, at fair value 1,281 0.5 % 1,302 0.6 % Investment funds 1,632 0.6 % 1,569 0.7 % Funds withheld at interest 6,474 2.5 % 9,808 4.6 % Short-term investments 947 0.4 % — — % Other investments, at fair value 343 0.1 % 303 0.2 % Total related party investments 25,842 9.9 % 23,960 11.2 % Total investments including related parties 238,941 92.2 % 196,448 92.6 % Investments of consolidated VIEs Trading securities, at fair value 2,136 0.8 % 1,063 0.5 % Mortgage loans, at fair value 2,173 0.8 % 2,055 1.0 % Investment funds, at fair value 15,927 6.2 % 12,480 5.9 % Other investments, at fair value 103 — % 101 — % Total investments of consolidated VIEs 20,339 7.8 % 15,699 7.4 % Total investments, including related parties and consolidated VIEs $ 259,280 100.0 % $ 212,147 100.0 % The increase in our total investments, including related parties and VIEs, as of December 31, 2023 of $47.1 billion compared to December 31, 2022 was primarily driven by growth from gross organic and inorganic inflows of $65.6 billion in excess of gross liability outflows of $33.9 billion, unrealized gains on AFS securities during the year ended December 31, 2023 of $5.3 billion resulting from credit spread tightening and a decrease in US Treasury rates in 2023, the reinvestment of earnings, an increase in VIE investments primarily related to contributions from third-party investors into AAA and the consolidation of additional VIEs, and an increase in derivative assets primarily related to the impact of favorable equity market performance on our call options in 2023.
At the closing of the merger with AGM, each issued and outstanding AHL Class A common share (other than shares held by Apollo, the AOG or the respective direct or indirect wholly owned subsidiaries of Athene or the AOG) was converted automatically into 1.149 shares of AGM common shares with cash paid in lieu of any fractional AGM common shares.
At the closing of the merger, each issued and outstanding AHL Class A common share (other than shares held by Apollo, the AOG or the respective direct or indirect wholly owned subsidiaries of Athene or the AOG) was converted automatically into 1.149 shares of AGM common shares with cash paid in lieu of any fractional AGM common shares.
Our relationship with Apollo allows us to take advantage of our generally persistent liability profile by identifying investment opportunities with an emphasis on earning incremental yield by taking liquidity and complexity risk rather than assuming incremental credit risk. Apollo’s investment team and credit portfolio managers utilize their deep experience to assist us in sourcing and underwriting complex asset classes.
Our relationship with Apollo allows us to take advantage of our generally persistent liability profile by identifying investment opportunities with an emphasis on earning incremental yield by taking measured liquidity and complexity risk rather than assuming incremental credit risk. Apollo’s investment team and credit portfolio managers utilize their deep experience to assist us in sourcing and underwriting complex asset classes.
We believe that our credit profile, current product offerings and product design capabilities as well as our growing reputation as both a seasoned funding agreement issuer and a reliable pension group annuity counterparty will continue to enable us to grow our existing organic channels and allow us to source additional volumes of profitably underwritten liabilities in various market environments.
We believe that our credit profile, current product offerings and product design capabilities as well as our growing reputation as both a seasoned funding agreement issuer and a reliable pension group annuity counterparty will continue to enable us to grow our existing organic channels and source additional volumes of profitably underwritten liabilities in various market environments.
In addition to our fixed income portfolio, we opportunistically allocate approximately 5% – 6% of our portfolio to alternative investments where we primarily focus on fixed income-like, cash flow-based investments. Net investment income on the consolidated statements of income (loss) included management fees under our investment management arrangements with Apollo.
In addition to our fixed income portfolio, we opportunistically allocate approximately 5% of our portfolio to alternative investments where we primarily focus on fixed income-like, cash flow-based investments. Net investment income on the consolidated statements of income (loss) included management fees under our investment management arrangements with Apollo.
We also set credit risk limits for exposure to a single issuer that vary based on the issuer’s ratings. Our strategic investments are also governed by our Strategic Investment Risk Policy which provides for special governance and risk management procedures for these transactions.
We also set credit risk limits for exposure to a single issuer, which vary based on the issuer’s ratings. Our strategic investments are also governed by our Strategic Investment Risk Policy which provides for special governance and risk management procedures for these transactions.
We have a strong preference for assets that have some or all of the following characteristics, among others: (1) investments that constitute a direct investment or an investment in a fund with a high degree of co-investment; (2) investments with credit- or debt-like characteristics (for example, a stipulated maturity and par value), or alternatively, investments with reduced volatility when compared to pure equity; or (3) investments that we believe have less downside risk.
We have a strong preference for alternative investments that have some or all of the following characteristics, among others: (1) investments that constitute a direct investment or an investment in a fund with a high degree of co-investment; (2) investments with credit- or debt-like characteristics (for example, a stipulated maturity and par value), or alternatively, investments with reduced volatility when compared to pure equity; or (3) investments that we believe have less downside risk.
Cost of funds is computed as the total liability costs divided by the average net invested assets, for the relevant period. To enhance the ability to analyze these measures across periods, interim periods are annualized. We believe a measure like cost of funds is useful in analyzing the trends of our core business operations and profitability.
Cost of funds is computed as the total liability costs divided by the average net invested assets for the relevant period. To enhance the ability to analyze these measures across periods, interim periods are annualized. We believe a measure like cost of funds is useful in analyzing the trends of our core business operations, profitability and pricing discipline.
Apollo manages our asset portfolio within the limits and constraints set forth in our Investment and Credit Risk Policy. Under this policy, we set limits on investments in our portfolio by asset class, such as corporate bonds, emerging markets securities, municipal bonds, non-agency RMBS, CMBS, CLOs, commercial mortgage whole loans and mezzanine loans and investment funds.
Apollo manages our asset portfolio within the limits and protocols set forth in our Investment and Credit Risk Policy. Under this policy, we set limits on investments in our portfolio by asset class, such as corporate bonds, emerging markets securities, municipal bonds, non-agency RMBS, CMBS, CLOs, commercial mortgage whole loans and mezzanine loans and investment funds.
We consider these adjustments to be meaningful adjustments to net income (loss) available to AHL common shareholder for the reasons discussed in greater detail above. Accordingly, we believe using a measure which excludes the impact of these items is useful in analyzing our business performance and the trends in our results of operations.
We consider these adjustments to be meaningful adjustments to net income (loss) available to AHL common stockholder for the reasons discussed in greater detail above. Accordingly, we believe using a measure which excludes the impact of these items is useful in analyzing our business performance and the trends in our results of operations.
We hold derivatives for economic hedging purposes to reduce our exposure to the cash flow variability of assets and liabilities, equity market risk, interest rate risk, credit risk and foreign exchange risk. Our primary use of derivative instruments relates to providing the income needed to fund the annual indexed credits on our FIA products.
We hold derivatives for economic hedging purposes to reduce our exposure to the cash flow variability of assets and liabilities, equity market risk, interest rate risk, credit risk and foreign exchange risk. Our primary use of derivative instruments relates to providing the income needed to fund the annual index credits on our FIA products.
Net Reserve Liabilities In managing our business, we also analyze net reserve liabilities, which does not correspond to total liabilities as disclosed in our consolidated financial statements and notes thereto. Net reserve liabilities represent our policyholder liability obligations net of reinsurance and is used to analyze the costs of our liabilities.
Net Reserve Liabilities In managing our business, we also analyze net reserve liabilities, which does not correspond to total liabilities as disclosed in our consolidated financial statements and notes thereto. Net reserve liabilities represent our policyholder liability obligations net of reinsurance and are used to analyze the costs of our liabilities.
Substantially all of our investment portfolio is managed by Apollo, which provides a full suite of services for our investment portfolio, including direct investment management, asset allocation, mergers and acquisition asset diligence and certain operational support services, including investment compliance, tax, legal and risk management support.
Substantially all of our investment portfolio is managed by Apollo, which provides a full suite of services for our investment portfolio, including direct investment management, asset allocation, mergers and acquisitions asset diligence and certain operational support services, including investment compliance, tax, legal and risk management support.
The investment strategies utilized by our investment manager focuses primarily on a buy and hold asset allocation strategy that may be adjusted periodically in response to changing market conditions and the nature of our liability profile.
The investment strategies utilized by our investment manager focus primarily on a buy and hold asset allocation strategy that may be adjusted periodically in response to changing market conditions and the nature of our liability profile.
Cost of funds includes liability costs related to cost of crediting on both deferred annuities and institutional products as well as other liability costs, but does not include the proportionate share of the ACRA cost of funds associated with the noncontrolling interest.
Cost of funds includes liability costs related to cost of crediting on both deferred annuities and institutional products as well as other liability costs, but does not include the proportionate share of the ACRA cost of funds associated with the noncontrolling interests.
Technological advances and improvements in healthcare are projected to continue to contribute to increasing average life expectancy, and aging individuals must be prepared to fund retirement periods that will last longer than ever before. Further, many working households in the United States do not have adequate retirement savings.
Technological advances and improvements in healthcare are projected to continue to contribute to increasing average life expectancy, and aging individuals must be prepared to fund retirement periods that will last longer than ever before. Further, many working households in the US do not have adequate retirement savings.
Of these, approximately $14.8 billion, or 7.6% of our net invested assets were structured securities for which Apollo or an affiliated direct origination platform was the manager of the underlying securitization vehicle, but the underlying collateral, borrower or other credit party is generally unaffiliated with us.
Of these, approximately $16.8 billion, or 7.7% of our net invested assets, were structured securities for which Apollo or an affiliated direct origination platform was the manager of the underlying securitization vehicle, but the underlying collateral, borrower or other credit party is generally unaffiliated with us.
Net reserve liabilities include (a) interest sensitive contract liabilities, (b) future policy benefits, (c) long-term repurchase obligations, (d) dividends payable to policyholders and (e) other policy claims and benefits, offset by reinsurance recoverable, excluding policy loans ceded.
Net reserve liabilities include (a) interest sensitive contract liabilities, (b) future policy benefits, (c) net market risk benefits, (d) long-term repurchase obligations, (e) dividends payable to policyholders and (f) other policy claims and benefits, offset by reinsurance recoverable, excluding policy loans ceded.
Net reserve liabilities include our proportionate share of ACRA reserve liabilities, based on our economic ownership, but do not include the proportionate share of reserve liabilities associated with the noncontrolling interest.
Net reserve liabilities include our proportionate share of ACRA reserve liabilities, based on our economic ownership, but do not include the proportionate share of reserve liabilities associated with the noncontrolling interests.
To support our growth strategies and capital deployment opportunities, we established ACRA as a long-duration, on-demand capital vehicle. We own 36.55% of the economic interests in ACRA, with the remaining 63.45% of the economic interests being owned by ADIP, a series of funds managed by an affiliate of Apollo.
To support our growth strategies and capital deployment opportunities, we established ACRA 1 as a long-duration, on-demand capital vehicle. We own 36.55% of the economic interests in ACRA 1, with the remaining 63.45% of the economic interests being owned by ADIP I, a series of funds managed by Apollo.
We expect that our credit profile and our reputation as a solutions provider will help us continue to source additional reinsurance partners, which will further diversify our flow reinsurance channel. Within our institutional channel, we generated inflows of $21.3 billion, $25.7 billion and $13.7 billion for the years ended December 31, 2022, 2021 and 2020, respectively.
We expect that our credit profile and our reputation as a solutions provider will help us continue to source additional reinsurance partners, which will further diversify our flow reinsurance channel. Within our institutional channel, we generated inflows of $17.6 billion, $21.3 billion and $25.7 billion for the years ended December 31, 2023, 2022 and 2021, respectively.
As of December 31, 2022, minimum guarantees on all of our deferred annuities, including those with crediting rates already at their minimum guarantees, were, on average, greater than 150 basis points below the crediting rates on such deferred annuities, allowing us room to reduce rates before reaching the minimum guarantees.
As of December 31, 2023, minimum guarantees on all of our deferred annuities, including those with crediting rates already at their minimum guarantees, were, on average, greater than 200 basis points below the crediting rates on such deferred annuities, allowing us room to reduce rates before reaching the minimum guarantees.
Industry Trends and Competition Economic and Market Conditions As a leading financial services company specializing in retirement services, we are affected by numerous factors, including the condition of global financial markets and the economy.
Industry Trends and Competition Economic and Market Conditions As a leading financial services company specializing in retirement services, we are affected by the condition of global financial markets and the economy.
The total amounts we incurred, directly and indirectly, from Apollo and its affiliates were $1.1 billion, $936 million, and $716 million, respectively, for the years ended December 31, 2022, 2021 and 2020.
The total amounts we incurred, directly and indirectly, from Apollo and its affiliates were $1.1 billion, $1.1 billion, and $936 million, respectively, for the years ended December 31, 2023, 2022 and 2021.
We have established a significant base of earnings and, as of December 31, 2022, have an expected annual net investment spread, which measures our investment performance plus strategic capital management fees less the total cost of our liabilities, of 1–2% over the 8.6 year weighted-average life of our net reserve liabilities.
We have established a significant base of earnings and, as of December 31, 2023, have an expected annual net investment spread, which measures our investment performance plus strategic capital management fees less the total cost of our liabilities, of 1–2% over the estimated 8.5 year weighted-average life of our net reserve liabilities.
Net invested assets includes (a) total investments on the consolidated balance sheet with AFS securities at cost or amortized cost, excluding derivatives, (b) cash and cash equivalents and restricted cash, (c) investments in related parties, (d) accrued investment income, (e) VIE and VOE assets, liabilities and noncontrolling interest adjustments, (f) net investment payables and receivables, (g) policy loans ceded (which offset the direct policy loans in total investments) and (h) an adjustment for the allowance for credit losses.
Net invested assets include (a) total investments on the consolidated balance sheets, with AFS securities, trading securities and mortgage loans at cost or amortized cost, excluding derivatives, (b) cash and cash equivalents and restricted cash, (c) investments in related parties, (d) accrued investment income, (e) VIE assets, liabilities and noncontrolling interest adjustments, (f) net investment payables and receivables, (g) policy loans ceded (which offset the direct policy loans in total investments) and (h) an adjustment for the allowance for credit losses.
Our spread related earnings equals net income (loss) available to AHL common shareholder adjusted to eliminate the impact of the following: • Investment Gains (Losses), Net of Offsets— Consists of the realized gains and losses on the sale of AFS securities, the change in fair value of reinsurance assets, unrealized gains and losses, changes in the credit loss allowance, and other investment gains and losses.
Our spread related earnings equals net income (loss) available to AHL common stockholder adjusted to eliminate the impact of the following: • Investment Gains (Losses), Net of Offsets— Consists of the realized gains and losses on the sale of AFS securities, the change in fair value of reinsurance assets, unrealized gains and losses, changes in the provision for credit losses and other investment gains and losses.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information, Shareholders, Dividends, and Securities Authorized for Issuance under Equity Compensation Plans Not applicable. Recent Sales of Unregistered Securities and Issuer Purchases of Securities None. 67 Table of Contents Item 7.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information, Stockholders, Dividends, and Securities Authorized for Issuance under Equity Compensation Plans Not applicable. Recent Sales of Unregistered Securities and Issuer Purchases of Securities None. 64 Table of Contents Item 7.
These adjustments fluctuate period to period in a manner inconsistent with our underlying profitability drivers as the majority of such fluctuation is related to the market volatility of the unrealized gains and losses associated with our AFS securities.
These adjustments fluctuate period to period in a manner inconsistent with our underlying profitability drivers as the majority of such fluctuation is related to the market volatility of the unrealized gains and losses associated with our AFS securities, reinsurance assets and mortgage loans.
Our net invested assets, which are those that directly back our net reserve liabilities as well as surplus assets, were $196.5 billion and $175.3 billion as of December 31, 2022 and 2021, respectively. Apollo’s knowledge of our funding structure and regulatory requirements allows it to design customized strategies and investments for our portfolio.
Our net invested assets, which are those that directly back our net reserve liabilities as well as surplus assets, were $217.4 billion and $196.5 billion as of December 31, 2023 and 2022, respectively. Apollo’s knowledge of our funding structure and regulatory requirements allows it to design customized strategies and investments for our portfolio.
As part of our investment strategy, we purchase floating rate investments, which we expect would perform well in a rising interest rate environment, as experienced in the current year, and which we expect would underperform in a declining rate environment.
As part of our investment strategy, we purchase floating rate investments, which we expect would perform well in a rising interest rate environment and which we expect would underperform in a declining rate environment.
As of December 31, 2022, most of our products were deferred annuities with 19% of our FIAs at the minimum guarantees and 27% of our fixed rate annuities at the minimum crediting rates.
As of December 31, 2023, most of our products were deferred annuities with 17% of our FIAs at the minimum guarantees and 19% of our fixed rate annuities at the minimum crediting rates.
Our effective tax rate in 2021 was an expense of 9% compared to an expense of 13% in 2020. Our effective tax rate was dependent upon the relationship of income or loss subject to tax compared to consolidated income or loss before income taxes.
Our effective tax rate in 2021 was 9%. Our effective tax rate was dependent upon the relationship of income or loss subject to tax compared to consolidated income or loss before income taxes.
Adverse economic conditions may result from domestic and global economic and political developments, including plateauing or decreasing economic growth and business activity, civil unrest, geopolitical tensions or military action, such as the armed conflict between Ukraine and Russia and corresponding sanctions imposed by the United States and other countries, and new or evolving legal and regulatory requirements on business investment, hiring, migration, labor supply and global supply chains. 71 Table of Contents Item 7.
Adverse economic conditions may result from domestic and global economic and political developments, including plateauing or decreasing economic growth and business activity, civil unrest, geopolitical tensions or military action, such as the armed conflicts in the Middle East and between Ukraine and Russia, and corresponding sanctions imposed on Russia by the US and other countries, and new or evolving legal and regulatory requirements on business investment, hiring, migration, labor supply and global supply chains. 68 Table of Contents Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations We completed our merger with AGM on January 1, 2022 and have elected pushdown accounting in which we used AGM’s basis of accounting that reflects the fair market value of our assets and liabilities as of the date of the merger.
Results of Operations We completed our merger with AGM on January 1, 2022 and elected pushdown accounting in which we used AGM’s basis of accounting that reflects the fair market value of our assets and liabilities as of the date of the merger.
Withdrawals on our deferred annuities, repurchases and maturities of our funding agreements, payments on payout annuities, pension group annuity payments and ceded reinsurance (collectively, gross outflows), in the aggregate were $27.9 billion, $17.5 billion and $13.7 billion for the years ended December 31, 2022, 2021 and 2020, respectively.
Withdrawals on our deferred annuities, benefit payments, repurchases and maturities of our funding agreements, payments on payout annuities, pension group annuity payments and reinsurance outflows (collectively, gross outflows), in the aggregate were $33.9 billion, $27.9 billion and $17.5 billion for the years ended December 31, 2023, 2022 and 2021, respectively.
We believe sales is a meaningful metric that enhances our understanding of our business performance and is not the same as premiums presented in our consolidated statements of income (loss). 78 Table of Contents Item 7.
We believe sales is a meaningful metric that enhances our understanding of our business performance and is not the same as premiums presented in our consolidated statements of income (loss).
These measures should be considered supplementary to our results in accordance with US GAAP and should not be viewed as a substitute for the corresponding US GAAP measures. See Non-GAAP Measure Reconciliations for the appropriate reconciliations to the most directly comparable US GAAP measures.
These measures should be considered supplementary to our results in accordance with US GAAP and should not be viewed as a substitute for the corresponding US GAAP measures. See Non-GAAP Measure Reconciliations for the appropriate reconciliations to the most directly comparable US GAAP measures. 70 Table of Contents Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Our organic channels, including retail, flow reinsurance and institutional products, provided gross inflows of $47.9 billion, $37.0 billion and $27.5 billion for the years ended December 31, 2022, 2021 and 2020, respectively, which were underwritten to attractive, above target returns.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Our organic channels, including retail, flow reinsurance and institutional products, provided gross inflows of $63.4 billion, $47.9 billion and $37.0 billion for the years ended December 31, 2023, 2022 and 2021, respectively, which were underwritten to attractive returns.
Such amounts include (1) fees associated with investment management agreements, which exclude sub-advisory fees paid to ISG for the benefit of third-party sub-advisors but include fees charged by Apollo to third-party cedants with respect to assets supporting obligations reinsured to us (such fees directly reduce the settlement payments that we receive from the third-party cedant and, as such, we, as beneficiaries of the services performed, indirectly pay such fees), (2) fees associated with fund investments (including those fund investments held by AAA), which include management fees, carried interest (including unrealized but accrued carried interest fees) and other fees on Apollo-managed funds and our other alternative investments and (3) other fees resulting from shared services, advisory and other agreements with Apollo or its affiliates; net of fees incurred directly and indirectly attributable to ACRA, based upon the economic ownership of the noncontrolling interest in ACRA.
Such amounts include (1) fees associated with investment management agreements (excluding sub-advisory fees paid to ISG for the benefit of third-party sub-advisors), which include fees charged by Apollo to third-party cedants with respect to assets supporting obligations reinsured to us but exclude fees charged by Apollo to third-party reinsurers supporting ceded obligations, (2) fees associated with fund investments (including those fund investments held by AAA), which include management fees, carried interest (including unrealized but accrued carried interest fees) and other fees on Apollo-managed funds and our other alternative investments and (3) other fees resulting from shared services, advisory and other agreements with Apollo or its affiliates; net of fees incurred directly and indirectly attributable to ACRA, based upon the economic ownership of the noncontrolling interests in ACRA.
Within our retail channel, we had fixed annuity sales of $20.4 billion, $8.8 billion and $7.8 billion for the years ended December 31, 2022, 2021 and 2020, respectively.
Within our retail channel, we had fixed annuity sales of $35.3 billion, $20.4 billion and $8.8 billion for the years ended December 31, 2023, 2022 and 2021, respectively.
For our non-GAAP measure of net invested assets, we provide visibility into the underlying assets within these reinsurance portfolios. The below table looks through to the underlying assets within our reinsurance portfolios to determine the related party status. As of December 31, 2022, $28.3 billion, or 14.4% of our total net invested assets were related party investments.
For our non-GAAP measure of net invested assets, we provide visibility into the underlying assets within these reinsurance portfolios. The below table looks through to the underlying assets within our reinsurance portfolios to determine the related party status. As of December 31, 2023, $28.7 billion, or 13.1% of our total net invested assets were related party investments.
The weighted-average life includes deferred annuities, pension group annuities, funding agreements, payout annuities and other products. Our total assets have grown to $246.0 billion as of December 31, 2022. For the year ended December 31, 2022, we generated a net investment spread of 1.63%.
The weighted-average life includes deferred annuities, pension group annuities, funding agreements, payout annuities and other products. Our total assets have grown to $300.6 billion as of December 31, 2023. For the year ended December 31, 2023, we generated a net investment spread of 1.93%.
The 2021 unlocking was driven by a decrease of $59 million in FIA embedded derivative liabilities and an increase of $107 million related to DAC, DSI, VOBA and rider reserves, compared to a decrease of $110 million in FIA embedded derivative liabilities and an increase of $34 million related to DAC, DSI, VOBA and rider reserves in 2020.
The 2021 unlocking was driven by an increase of $107 million related to DAC, DSI, VOBA and rider reserves, partially offset by a decrease of $59 million in FIA embedded derivative liabilities.
For the years ended December 31, 2022, 2021 and 2020, we incurred management fees, inclusive of base and sub-allocation fees, of $775 million, $592 million and $490 million, respectively.
For the years ended December 31, 2023, 2022 and 2021, we incurred management fees, inclusive of base, sub-allocation and performance fees, of $987 million, $775 million and $592 million, respectively.
Together with net income (loss) available to AHL common shareholder, we believe spread related earnings provides a meaningful financial metric that helps investors understand our underlying results and profitability. Spread related earnings should not be used as a substitute for net income (loss) available to AHL common shareholder.
Together with net income (loss) available to AHL common stockholder, we believe spread related earnings provides a meaningful financial metric that helps investors understand our underlying results and profitability. Spread related earnings should not be used as a substitute for net income (loss) available to AHL common stockholder. 71 Table of Contents Item 7.
Gross organic inflows for the year ended December 31, 2022 increased $10.8 billion, or 29%, reflecting the strength of our multi-channel distribution platform and our ability to quickly pivot into optimal and profitable channels as opportunities arise.
Gross organic inflows for the year ended December 31, 2023 increased $15.6 billion, or 33%, reflecting the strength of our multi-channel distribution platform and our ability to quickly pivot into optimal and profitable channels as opportunities arise.
In addition, our investment portfolio is constrained by its scenario-based capital ratio limit and its stressed liquidity limit. 85 Table of Contents Item 7.
In addition, our investment portfolio is constrained by its scenario-based capital ratio limits and its liquidity limits. 80 Table of Contents Item 7.
Spread Related Earnings (SRE) Spread related earnings is a pre-tax non-GAAP measure used to evaluate our financial performance excluding market volatility and expenses related to integration, restructuring, stock compensation and other expenses.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Spread Related Earnings (SRE) Spread related earnings is a pre-tax non-GAAP measure used to evaluate our financial performance excluding market volatility and expenses related to integration, restructuring, stock compensation and other expenses.
FIA embedded derivative unlocking, net of DAC, DSI, VOBA, rider reserve and noncontrolling interest offsets, was favorable $32 million in both 2021 and 2020. The 2021 unlocking was primarily driven by higher lapse rates on recently issued business, while the 2020 unlocking was primarily driven by lowering future option budgets.
The fair value of FIA embedded derivative unlocking, net of DAC, DSI, VOBA, rider reserve and noncontrolling interest offsets, was favorable $32 million in 2021 primarily driven by higher lapse rates on recently issued business.
Except with respect to reinvestment activity relating to acquired blocks of businesses, we typically buy and hold AFS investments to maturity throughout the duration of market fluctuations, therefore, the period-over-period impacts in unrealized gains and losses are not necessarily indicative of current operating fundamentals or future performance.
Except with respect to reinvestment activity relating to acquired blocks of businesses, we typically buy and hold investments to maturity throughout the duration of market fluctuations, therefore, the period-over-period impacts in unrealized gains and losses are not necessarily indicative of current operating fundamentals or future performance. Adjusted debt-to-capital ratio should not be used as a substitute for the debt-to-capital ratio.
Net investment earned rate is computed as the income from our net invested assets divided by the average net invested assets, for the relevant period. To enhance the ability to analyze these measures across periods, interim periods are annualized.
Net investment earned rate is a non-GAAP measure we use to evaluate the performance of our net invested assets. Net investment earned rate is computed as the income from our net invested assets divided by the average net invested assets, for the relevant period. To enhance the ability to analyze these measures across periods, interim periods are annualized.
Unrealized, allowances and other investment gains and losses are comprised of the fair value adjustments of trading securities (other than CLOs and ABS) and mortgage loans, investments held under the fair value option and our investment in Apollo, derivative gains and losses not hedging FIA index credits, and the change in credit loss allowances recognized in operations net of the change in AmerUs Closed Block fair value reserve related to the corresponding change in fair value of investments.
Unrealized, allowances and other investment gains and losses are comprised of the fair value adjustments of trading securities (other than certain equity tranche securities) and mortgage loans, investments held under the fair value option, derivative gains and losses not hedging FIA index credits, foreign exchange impacts and the change in provision for credit losses recognized in operations net of the change in AmerUs Closed Block fair value reserve related to the corresponding change in fair value of investments.
Adjusted AHL common shareholder’s equity is calculated as the ending AHL shareholders’ equity excluding AOCI, the cumulative changes in fair value of funds withheld and modco reinsurance assets and mortgage loan assets as well as preferred stock.
Adjusted capitalization includes our adjusted AHL common stockholder’s equity, preferred stock and the notional value of our debt. Adjusted AHL common stockholder’s equity is calculated as the ending AHL stockholders’ equity excluding AOCI, the cumulative changes in fair value of funds withheld and modco reinsurance assets and mortgage loan assets as well as preferred stock.
Cost of crediting on institutional products is comprised of (1) pension group annuity costs, including interest credited, benefit payments and other reserve changes, net of premiums received when issued, and (2) funding agreement costs, including the interest payments and other reserve changes.
Cost of crediting on institutional products is comprised of (1) pension group annuity costs, including interest credited, benefit payments and other reserve changes, net of premiums received when issued, and (2) funding agreement costs, including the interest payments and other reserve changes. Additionally, cost of crediting includes forward points gains and losses on foreign exchange derivative hedges.
Net invested assets also excludes assets associated with funds withheld liabilities related to business exited through reinsurance agreements and derivative collateral (offsetting the related cash positions). We include the underlying investments supporting our assumed funds withheld and modco agreements in our net invested assets calculation in order to match the assets with the income received.
Net invested assets exclude the derivative collateral offsetting the related cash positions. We include the underlying investments supporting our assumed funds withheld and modco agreements and exclude the underlying investments related to ceded reinsurance transactions in our net invested assets calculation in order to match the assets with the income received.
As of December 31, 2022, we estimate that we have approximately $5.2 billion in capital available to deploy, consisting of approximately $2.3 billion in excess equity capital, $2.7 billion in untapped debt capacity (assuming a peer average adjusted debt to capitalization ratio of 25%) and $0.2 billion in available undrawn capital at ACRA, subject, in the case of debt capacity, to market conditions and general availability.
As of December 31, 2023, we estimate that we had approximately $8.0 billion in capital available to deploy, consisting of approximately $2.6 billion in excess equity capital, $3.8 billion in untapped debt capacity (assuming a peer average adjusted debt-to-capitalization ratio of 25%, which is subject to general availability and market conditions), and $1.6 billion in available undrawn capital at ACRA.
Adjusted Debt to Capital Ratio Adjusted debt to capital ratio is a non-GAAP measure used to evaluate our capital structure excluding the impacts of AOCI and the cumulative changes in fair value of funds withheld and modco reinsurance assets as well as mortgage loan assets, net of DAC, DSI, rider reserve and tax offsets.
Adjusted Debt-to-Capital Ratio Adjusted debt-to-capital ratio is a non-GAAP measure used to evaluate our capital structure excluding the impacts of AOCI and the cumulative changes in fair value of funds withheld and modco reinsurance assets as well as mortgage loan assets, net of tax. Adjusted debt-to-capital ratio is calculated as total debt at notional value divided by adjusted capitalization.
The FIA fair value embedded derivatives unlocking in 2021 was $59 million favorable primarily due to higher lapse assumptions on recently issued business, while 2020 unlocking was $110 million favorable primarily due to lowering future option budgets.
The fair value of FIA embedded derivatives unlocking in 2021 was $59 million favorable primarily due to higher lapse assumptions on recently issued business.
We believe the adjustments for reinsurance provide a view of the assets for which we have economic exposure. Net invested assets includes our proportionate share of ACRA investments, based on our economic ownership, but does not include the proportionate share of investments associated with the noncontrolling interest. Net invested assets also includes our investment in Apollo for prior periods.
We believe the adjustments for reinsurance provide a view of the assets for which we have economic exposure. Net invested assets include our proportionate share of ACRA investments, based on our economic ownership, but do not include the proportionate share of investments associated with the noncontrolling interests.
The increase in our retail channel was driven by the strong performance of our indexed annuity and MYGA products across our bank, IMO and broker-dealer channels, exhibiting strong sales execution as interest rates rose in the current year, as well as our expansion into large financial institutions. We have maintained our disciplined approach to pricing and our targeted underwritten returns.
The increase in our retail channel was driven by record inflows related to the strong performance of our MYGA and FIA products across our bank, IMO and broker-dealer channels, exhibiting strong sales execution, the current rate environment and our continued expansion into large financial institutions. We have maintained our disciplined approach to pricing and our targeted underwritten returns.
In the total fixed annuity market, for the nine months ended September 30, 2022 (the most recent period for which specific market share data is available), we were the largest company based on sales of $12.3 billion, translating to an 8.6% market share.
In the total annuity market, for the nine months ended September 30, 2023 (the most recent period for which specific market share data is available), we were the largest provider of annuities based on sales of $22.0 billion, translating to an 8.2% market share.
The majority of these non-GAAP measures are intended to remove from the results of operations the impact of market volatility (other than with respect to alternative investments) as well as integration, restructuring and certain other expenses which are not part of our underlying profitability drivers, as such items fluctuate from period to period in a manner inconsistent with these drivers.
The majority of these non-GAAP measures are intended to remove from the results of operations the impact of market volatility (other than with respect to alternative investments), which consists of investment gains (losses), net of offsets and non-operating change in insurance liabilities and related derivatives, both defined below, as well as integration, restructuring, stock compensation and certain other expenses which are not part of our underlying profitability drivers, as such items fluctuate from period to period in a manner inconsistent with these drivers.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview 69 Industry Trends and Competition 71 Key Operating and Non-GAAP Measures 76 Results of Operations 79 Investment Portfolio 85 Non-GAAP Measure Reconciliations 104 Liquidity and Capital Resources 108 Critical Accounting Estimates and Judgments 115 68 Table of Contents Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview 66 Industry Trends and Competition 68 Key Operating and Non-GAAP Measures 70 Results of Operations 73 Investment Portfolio 80 Non-GAAP Measure Reconciliations 98 Liquidity and Capital Resources 102 Critical Accounting Estimates and Judgments 108 65 Table of Contents Item 7.
Net reserve liabilities is net of the ceded liabilities to third-party reinsurers as the costs of the liabilities are passed to such reinsurers and, therefore, we have no net economic exposure to such liabilities, assuming our reinsurance counterparties perform under our agreements. The majority of our ceded reinsurance is a result of reinsuring large blocks of life business following acquisitions.
Net reserve liabilities are net of the ceded liabilities to third-party reinsurers as the costs of the liabilities are passed to such reinsurers and, therefore, we have no net economic exposure to such liabilities, assuming our reinsurance counterparties perform under our agreements.
Adjustments to Net Income (Loss) Available to Athene Holding Ltd. Common Shareholder The decrease in adjustments to net income (loss) available to AHL common shareholder compared to 2021 was primarily driven by the change in investment related gains and losses and the non-operating change in insurance liabilities and related derivatives, net of offsets .
The increase in adjustments to net income (loss) available to Athene Holding Ltd. common stockholder in 2023 compared to 2022 was primarily driven by the increase in investment gains (losses), net of offsets, and an increase in the non-operating income tax benefit, partially offset by the decrease in non-operating change in insurance liabilities and related derivatives.
The decrease in our institutional channel was driven by lower pension group annuity and funding agreement inflows. During the year ended December 31, 2022, we closed 10 pension group annuity transactions. We issued group annuity contracts in the aggregate principal amount of $11.2 billion, $13.8 billion and $5.5 billion for the years ended December 31, 2022, 2021 and 2020, respectively.
The decrease in our institutional channel was driven by lower funding agreement and pension group annuity inflows. We issued funding agreements in the aggregate principal amount of $7.2 billion, $10.0 billion and $11.9 billion for the years ended December 31, 2023, 2022 and 2021, respectively.
According to LIMRA, total fixed annuity market sales in the United States were $143.3 billion for the nine months ended September 30, 2022, a 45.6% increase from the same time period in 2021, as a rise in interest rates spurred continued growth in the US annuity market.
According to LIMRA, total annuity market sales in the US were $269.6 billion for the nine months ended September 30, 2023, a 20.7% increase from the same time period in 2022, as higher interest rates spurred continued growth in the US annuity market.
Other liability costs include DAC, DSI and VOBA amortization, change in rider reserves, the cost of liabilities on products other than deferred annuities and institutional products, premiums, product charges and other revenues. We exclude the costs related to business that we have exited through ceded reinsurance transactions.
Other liability costs include DAC, DSI and VOBA amortization, certain market risk benefit costs, the cost of liabilities on products other than deferred annuities and institutional products, premiums and certain product charges and other revenues. We include the costs related to business added through assumed reinsurance transactions and exclude the costs on business related to ceded reinsurance transactions.
Key Operating and Non-GAAP Measures In addition to our results presented in accordance with accounting principles generally accepted in the United States of America (US GAAP), we present certain financial information that includes non-GAAP measures.
Key Operating and Non-GAAP Measures In addition to our results presented in accordance with US GAAP, we present certain financial information that includes non-GAAP measures.
For the nine months ended September 30, 2021, we were the ninth largest provider of RILAs based on sales of $354 million, translating to a 1.2% market share. We believe RILAs represent a significant growth opportunity for Athene. 75 Table of Contents Item 7.
For the nine months ended September 30, 2022, we were the twelfth largest provider of RILAs based on sales of $678 million, translating to a 2.2% market share. We believe RILAs represent a significant growth opportunity for Athene.
The adjustments to net investment income to arrive at our net investment earned rate add (a) alternative investment gains and losses, (b) gains and losses related to trading securities for CLOs, (c) net VIE impacts (revenues, expenses and noncontrolling interest), (d) forward points gains and losses on foreign exchange derivative hedges and (e) the change in fair value of reinsurance assets, and removes the proportionate share of the ACRA net investment income associated with the ACRA noncontrolling interest as well as the gain or loss on our investment in Apollo.
The adjustments to net investment income to arrive at our net investment earnings add (a) alternative investment gains and losses, (b) gains and losses related to certain equity securities, (c) net VIE impacts (revenues, expenses and noncontrolling interest), (d) forward points gains and losses on foreign exchange derivative hedges, (e) amortization of premium/discount on held-for-trading securities and (f) the change in fair value of reinsurance assets, and remove the proportionate share of the ACRA net investment income associated with the noncontrolling interests.
The FIA fair value embedded derivatives unlocking in 2022 was $41 million favorable primarily due to changes to projected interest crediting, partially offset by the impact of higher rates on future account values, while unlocking in 2021 was $59 million favorable primarily due to higher lapse assumptions on recently issued business.
The fair value of FIA embedded derivatives unlocking in 2023 was $20 million favorable primarily due to changes to projected interest crediting, partially offset by an increase in lapse and risk margin assumptions, while 2022 unlocking was $47 million favorable primarily due to changes to projected interest crediting, partially offset by the impact of higher rates on future account values.
The decrease was driven by a decrease in interest sensitive contract benefits, a decrease in future policy and other policy benefits and a decrease in DAC, DSI and VOBA amortization, partially offset by an increase in policy and other operating expenses.
The increase was driven by an increase in interest sensitive contract benefits, an increase in market risk benefits remeasurement (gains) losses, an increase in future policy and other policy benefits, an increase in policy and other operating expenses and an increase in DAC, DSI and VOBA amortization.
ACRA participates in certain transactions by drawing a portion of the required capital for such transactions from third-party investors equal to ADIP’s proportionate economic interest in ACRA. This shareholder-friendly, strategic capital solution allows us the flexibility to simultaneously deploy capital across multiple accretive avenues, while maintaining a strong financial position. Apollo Aligned Alternatives, L.P.
ACRA 2 participates in certain transactions by drawing a portion of the required capital for such transactions from third-party investors equal to ADIP II’s proportionate economic interest in ACRA 2. These stockholder-friendly, strategic capital solutions allow us the flexibility to simultaneously deploy capital across multiple accretive avenues, while maintaining a strong financial position.
Related Party Investments We hold investments in related party assets primarily comprised of AFS securities, trading securities, funds withheld at interest receivables, mortgage loans within our triple net lease investment and investment funds, which primarily include investments over which Apollo can exercise influence. As of December 31, 2022, these investments totaled $34.4 billion, or 13.9% of our total assets.
Related Party Investments We hold investments in related party assets primarily comprised of AFS securities, trading securities, funds withheld at interest receivables, mortgage loans within our triple net lease investment, short-term investments, and investment funds, which primarily include investments over which Apollo can exercise influence.
Investment gains and losses are net of offsets related to D AC and DSI amortization and changes to guaranteed lifetime withdrawal benefit (GLWB) and guaranteed minimum death benefit (GMDB) reserves (together, GLWB and GMDB reserves represent rider reserves) as well as the MVAs associated with surrenders or terminations of contracts. • Non-operating Change in Insurance Liabilities and Related Derivatives, Net of Offsets • Change in Fair Values of Derivatives and Embedded Derivatives – FIAs, Net of Offsets— Consists of impacts related to the fair value accounting for derivatives hedging the FIA index credits and the related embedded derivative liability fluctuations from period to period.
Investment gains and losses are net of offsets related to the MVAs associated with surrenders or terminations of contracts. • Non-operating Change in Insurance Liabilities and Related Derivatives • Change in Fair Values of Derivatives and Embedded Derivatives – FIAs— Consists of impacts related to the fair value accounting for derivatives hedging the FIA index credits and the related embedded derivative liability fluctuations from period to period.
The change in fair value of FIA hedging derivatives decreased $5.3 billion primarily driven by the unfavorable performance of the indices upon which our call options are based. The largest percentage of our call options are based on the S&P 500 index, which decreased 19.4% in 2022, compared to an increase of 26.9% in 2021.
The change in fair value of FIA hedging derivatives increased $4.4 billion, primarily driven by the favorable performance of the indices upon which our call options are based. The largest percentage of our call options are based on the S&P 500 index, which increased 24.2% in 2023, compared to a decrease of 19.4% in 2022.
Unlocking, net of noncontrolling interests, was favorable $6 million primarily related to the impact of higher rates on future account values, partially offset by changes to projected interest crediting, compared to unfavorable unlocking of $91 million in 2021 reflecting unfavorable lapse assumptions, partially offset by income rider experience.
Unlocking, net of the noncontrolling interests, in 2022 was favorable $3 million primarily related to the impact of higher rates on future account values, partially offset by changes to projected interest crediting.
Investment related gains (losses) decreased by $16.9 billion to $(12.7) billion in 2022 from $4.2 billion in 2021, primarily due to the changes in fair value of reinsurance assets, FIA hedging derivatives, mortgage loans, trading and equity securities, realized losses on AFS securities compared to realized gains in the prior year and an increase in the provision for credit losses, partially offset by foreign exchange derivative gains.
Investment related gains (losses) increased by $14.1 billion to $1.4 billion in 2023 from $(12.7) billion in 2022, primarily due to the changes in the fair value of reinsurance assets, FIA hedging derivatives, mortgage loans and trading and equity securities, as well as realized gains on AFS securities compared to realized losses in 2022, partially offset by foreign exchange losses on derivatives.

… 334 more changes not shown on this page.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

143 edited+91 added−42 removed84 unchanged
Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations The reconciliation of benefits and expenses to cost of funds is as follows: Successor Predecessor Year Ended December 31, 2022 Year Ended December 31, 2021 Year Ended December 31, 2020 (In millions, except percentages) Dollar Rate Dollar Rate Dollar Rate US GAAP benefits and expenses $ 14,853 7.87 % $ 22,134 13.83 % $ 12,558 9.46 % Premiums (11,638) (6.17) % (14,262) (8.91) % (5,963) (4.49) % Product charges (718) (0.38) % (621) (0.39) % (571) (0.43) % Other revenues 28 0.01 % (72) (0.04) % (36) (0.03) % FIA option costs 1,264 0.67 % 1,125 0.70 % 1,101 0.83 % Reinsurance impacts 17 0.01 % 49 0.03 % 57 0.04 % Non-operating change in insurance liabilities and embedded derivatives, net of offsets 938 0.50 % (2,989) (1.87) % (2,261) (1.70) % DAC and DSI amortization related to investment gains and losses 1 64 0.03 % 115 0.07 % (95) (0.07) % Rider reserves related to investment gains and losses 379 0.20 % (4) — % (10) (0.01) % Policy and other operating expenses, excluding policy acquisition expenses (1,110) (0.59) % (772) (0.48) % (533) (0.40) % AmerUs Closed Block fair value liability 291 0.15 % 57 0.04 % (104) (0.08) % ACRA noncontrolling interest (530) (0.28) % (759) (0.47) % (527) (0.40) % Other 59 0.04 % (8) (0.01) % (41) (0.03) % Total adjustments to arrive at cost of funds (10,956) (5.81) % (18,141) (11.33) % (8,983) (6.77) % Total cost of funds $ 3,897 2.06 % $ 3,993 2.50 % $ 3,575 2.69 % Average net invested assets $ 188,742 $ 160,019 $ 132,750 1 Periods prior to the merger include VOBA amortization related to investment gains and losses.
Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations The reconciliation of benefits and expenses to cost of funds is as follows: Successor Predecessor Year ended December 31, 2023 Year ended December 31, 2022 Year ended December 31, 2021 (In millions, except percentages) Dollar Rate Dollar Rate Dollar Rate US GAAP benefits and expenses $ 23,603 11.32 % $ 13,285 7.04 % $ 22,134 13.83 % Premiums (12,749) (6.12) % (11,638) (6.17) % (14,262) (8.91) % Product charges (848) (0.41) % (718) (0.38) % (621) (0.39) % Other revenues (150) (0.07) % 28 0.01 % (72) (0.04) % FIA option costs 1,512 0.73 % 1,264 0.67 % 1,125 0.70 % Reinsurance impacts (155) (0.07) % 17 0.01 % 49 0.03 % Non-operating change in insurance liabilities and embedded derivatives (2,930) (1.41) % 2,825 1.50 % (2,989) (1.87) % DAC, DSI and VOBA amortization related to investment gains and losses — — % — — % 115 0.07 % Rider reserves related to investment gains and losses — — % — — % (4) — % Policy and other operating expenses, excluding policy acquisition expenses (1,341) (0.64) % (1,110) (0.59) % (772) (0.48) % AmerUs Closed Block fair value liability (58) (0.03) % 291 0.15 % 57 0.04 % ACRA noncontrolling interests (1,587) (0.76) % (549) (0.29) % (759) (0.47) % Other 353 0.17 % 60 0.03 % (8) (0.01) % Total adjustments to arrive at cost of funds (17,953) (8.61) % (9,530) (5.06) % (18,141) (11.33) % Total cost of funds $ 5,650 2.71 % $ 3,755 1.98 % $ 3,993 2.50 % Average net invested assets $ 208,479 $ 188,742 $ 160,019 The reconciliation of policy and other operating expenses to other operating expenses is as follows: Successor Predecessor (In millions) Year ended December 31, 2023 Year ended December 31, 2022 Year ended December 31, 2021 US GAAP policy and other operating expenses $ 1,848 $ 1,495 $ 1,128 Interest expense (459) (227) (139) Policy acquisition expenses, net of deferrals (507) (385) (356) Integration, restructuring and other non-operating expenses (130) (133) (134) Stock compensation expenses (88) (56) (38) ACRA noncontrolling interests (143) (231) (93) Other (34) 3 (9) Total adjustments to arrive at other operating expenses (1,361) (1,029) (769) Other operating expenses $ 487 $ 466 $ 359 100 Table of Contents Item 7.
Net invested assets is utilized by management to evaluate our investment portfolio. Net invested assets is used in the computation of net investment earned rate, which allows us to analyze the profitability of our investment portfolio.
Net invested assets is utilized by management to evaluate our investment portfolio. Net invested assets is used in the computation of the net investment earned rate, which allows us to analyze the profitability of our investment portfolio.
From an economic basis we believe it is suitable to hedge with options that align with index terms of our indexed annuity products because policyholder accounts are credited with index performance at the end of each index term.
From an economic basis, we believe it is suitable to hedge with options that align with the index terms of our indexed annuity products because policyholder accounts are credited with index performance at the end of each index term.
Deferred tax assets are reduced by a valuation allowance when it is more likely than not that all or a portion of the deferred tax assets will not be realized. We test the value of deferred assets for realizability at the taxpaying-component level within each tax jurisdiction.
Deferred tax assets are reduced by a valuation allowance when it is more likely than not that all or a portion of the deferred tax assets will not be realized. We test the value of deferred tax assets for realizability at the taxpaying-component level within each tax jurisdiction.
Quantitative and Qualitative Disclosures About Market Risks Risk Management Framework The function of our risk management framework is to identify, assess and prioritize risks to ensure that both senior management and the board of directors understand and can manage our risk profile.
Quantitative and Qualitative Disclosures About Market Risk Risk Management Framework The function of our risk management framework is to identify, assess and prioritize risks to ensure that both senior management and the board of directors understand and can manage our risk profile.
A discount rate is used, which adjusts a market comparable base rate for securities with similar characteristics for credit spread, market illiquidity or other adjustments. The fair value of privately placed fixed maturity securities are based on the credit quality and duration of comparable marketable securities, which may be securities of another issuer with similar characteristics.
A discount rate is used, which adjusts a market comparable base rate for securities with similar characteristics for credit spread, market illiquidity or other adjustments. The fair value of privately placed fixed maturity securities is based on the credit quality and duration of comparable marketable securities, which may be securities of another issuer with similar characteristics.
During the year ended December 31, 2022, we recorded an increase in provision for credit losses on AFS securities of $148 million, of which $171 million had an income statement impact and $(23) million were related to PCD securities and other changes.
During the year ended December 31, 2022, we recorded an increase in provision for credit losses on AFS securities of $148 million, of which $171 million had an income statement impact and $(23) million related to PCD securities and other changes.
Under the Bermuda Insurance Act, each of our Bermuda insurance subsidiaries is prohibited from paying a dividend in an amount exceeding 25% of the prior year’s statutory capital and surplus, unless at least two members of the board of directors of the Bermuda insurance subsidiary and its principal representative in Bermuda sign and submit to the Bermuda Monetary Authority (BMA) an affidavit attesting that a dividend in excess of this amount would not cause the Bermuda insurance subsidiary to fail to meet its relevant margins.
Under the Bermuda Insurance Act, each of our Bermuda insurance subsidiaries is prohibited from paying a dividend in an amount exceeding 25% of the prior year’s statutory capital and surplus, unless at least two members of the board of directors of the Bermuda insurance subsidiary and its principal representative in Bermuda sign and submit to the BMA an affidavit attesting that a dividend in excess of this amount would not cause the Bermuda insurance subsidiary to fail to meet its relevant margins.
The benefit reserve is equal to the sum of the fair value of the embedded derivative and the host (or guaranteed) component of the contracts. The fair value of the embedded derivatives represents the present value of cash flows attributable to the indexed strategies.
The benefit reserve is equal to the sum of the fair value of the embedded derivative and the host (or guaranteed) component of the contracts. The fair value of the embedded derivative represents the present value of cash flows attributable to the indexed strategies.
The types of derivatives we may use include interest rate swaps, foreign currency swaps and forward contracts, total return swaps, credit default swaps, variance swaps, futures and equity options. A discussion regarding our derivative instruments and how such instruments are used to manage risk is included in Note 4 – Derivative Instruments to the consolidated financial statements.
The types of derivatives we may use include interest rate swaps, foreign currency swaps and forward contracts, total return swaps, credit default swaps, variance swaps, futures and equity options. A discussion regarding our derivative instruments and how such instruments are used to manage risk is included in Note 5 – Derivative Instruments to the consolidated financial statements.
Reset Date means December 30, 2027 and each date falling on the fifth anniversary of the preceding Reset Date. See Note 11 – Equity to the consolidated financial statements for further information on preferred stock. Unsecured Revolving Promissory Note Payable with AGM – AHL has an unsecured revolving promissory note with AGM which allows AHL to borrow funds from AGM.
Reset Date means December 30, 2027 and each date falling on the fifth anniversary of the preceding Reset Date. See Note 13 – Equity to the consolidated financial statements for further information on preferred stock. Unsecured Revolving Promissory Note Payable with AGM – AHL has an unsecured revolving promissory note with AGM which allows AHL to borrow funds from AGM.
Risk management strives to maximize the value of our existing business platform to shareholders, preserve our ability to realize business and market opportunities under stressed market conditions, and to withstand the impact of severely adverse events. The risk management framework includes a governance committee structure that supports accountability in current risk-based decision making and effective risk management.
Risk management strives to maximize the value of our existing business platform to stockholders, preserve our ability to realize business and market opportunities under stressed market conditions and withstand the impact of severely adverse events. The risk management framework includes a governance committee structure that supports accountability in current risk-based decision making and effective risk management.
Uses of cash include investment purchases, payments to policyholders for surrenders, withdrawals and payout benefits, interest and principal payments on funding agreements, payments to satisfy pension group annuity obligations, policy acquisition costs and general operating costs. Our policyholder obligations are generally long-term in nature.
Uses of cash include investment purchases, payments to policyholders for surrenders, withdrawals and payout benefits, interest and principal payments on funding agreements, payments to satisfy pension group annuity obligations, policy acquisition costs and general operating costs, and payment of cash dividends. Our policyholder obligations are generally long-term in nature.
We further seek to mitigate liquidity risk by maintaining access to alternative, external sources of liquidity as described below. Our liquidity risk management framework is codified in the company’s Liquidity Risk Policy that is reviewed and approved by our board of directors. 108 Table of Contents Item 7.
We further seek to mitigate liquidity risk by maintaining access to alternative, external sources of liquidity as described below. Our liquidity risk management framework is codified in the company’s Liquidity Risk Policy that is reviewed and approved by our board of directors. 102 Table of Contents Item 7.
See Note 3 – Investments to the consolidated financial statements for further discussion regarding how we account for our investment funds. Our investment fund portfolio is subject to a number of market-related risks including interest rate risk and equity market risk.
See Note 4 – Investments to the consolidated financial statements for further discussion regarding how we account for our investment funds. Our investment fund portfolio is subject to a number of market-related risks including interest rate risk and equity market risk.
Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amount of assets and liabilities and their respective tax basis using currently enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period during which the change is enacted.
Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amount of assets and liabilities and their respective tax bases using currently enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period during which the change is enacted.
Preferred Stock – The following summarizes our perpetual non-cumulative preferred stock issuances (in millions, except share, per share data and percentages): Issuance Fixed/Floating Rate Issue Date Optional Redemption Date 1 Shares Issued Par Value Per Share Liquidation Value Per Share Aggregate Net Proceeds Series A Fixed-to-Floating Rate 6.350% June 10, 2019 June 30, 2029 34,500 $1.00 $25,000 $839 Series B Fixed-Rate 5.625% September 19, 2019 September 30, 2024 13,800 $1.00 $25,000 $333 Series C Fixed-Rate Reset 6.375% June 11, 2020 Variable 2 24,000 $1.00 $25,000 $583 Series D Fixed-Rate 4.875% December 18, 2020 December 30, 2025 23,000 $1.00 $25,000 $557 Series E Fixed-Rate Reset 7.750% December 12, 2022 Variable 3 20,000 $1.00 $25,000 $487 1 We may redeem preferred stock anytime on or after the dates set forth in this column, subject to the terms of the applicable certificate of designations. 2 We may redeem during a period from and including June 30 of each year in which there is a Reset Date to and including such Reset Date.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Preferred Stock – The following summarizes our perpetual non-cumulative preferred stock issuances (in millions, except share, per share data and percentages): Issuance Fixed/Floating Rate Issue Date Optional Redemption Date 1 Shares Issued Par Value Per Share Liquidation Value Per Share Aggregate Net Proceeds Series A Fixed-to-Floating Rate 6.350% June 10, 2019 June 30, 2029 34,500 $1.00 $25,000 $839 Series B Fixed-Rate 5.625% September 19, 2019 September 30, 2024 13,800 $1.00 $25,000 $333 Series C Fixed-Rate Reset 6.375% June 11, 2020 Variable 2 24,000 $1.00 $25,000 $583 Series D Fixed-Rate 4.875% December 18, 2020 December 30, 2025 23,000 $1.00 $25,000 $557 Series E Fixed-Rate Reset 7.750% December 12, 2022 Variable 3 20,000 $1.00 $25,000 $487 1 We may redeem preferred stock anytime on or after the dates set forth in this column, subject to the terms of the applicable certificate of designations. 2 We may redeem during a period from and including June 30 of each year in which there is a Reset Date to and including such Reset Date.
If we are not the primary beneficiary, the general partner or another limited partner may consolidate the investment fund, and we record the investment as an equity method investment. See Note 5 – Variable Interest Entities to the consolidated financial statements.
If we are not the primary beneficiary, the general partner or another limited partner may consolidate the investment fund, and we record the investment as an equity method investment. See Note 6 – Variable Interest Entities to the consolidated financial statements.
The note has a borrowing capacity of $500 million and maturity date of December 13, 2025, or earlier at AGM’s request. There was no outstanding balance on the note payable as of December 31, 2022.
The note has a borrowing capacity of $500 million and maturity date of December 13, 2025, or earlier at AGM’s request. There was no outstanding balance on the note payable as of December 31, 2023.
We review and evaluate our tax positions quarterly to determine whether we have uncertain tax positions that require financial statement recognition. For more information regarding income taxes, see Note 12 – Income Taxes to the consolidated financial statements.
We review and evaluate our tax positions quarterly to determine whether we have uncertain tax positions that require financial statement recognition. For more information regarding income taxes, see Note 14 – Income Taxes to the consolidated financial statements.
Impact of Recent Accounting Pronouncements For a discussion of new accounting pronouncements affecting us, see Note 1 – Business, Basis of Presentation and Significant Accounting Policies to the consolidated financial statements. 120 Table of Contents Item 7A.
Impact of Recent Accounting Pronouncements For a discussion of new accounting pronouncements affecting us, see Note 1 – Business, Basis of Presentation and Significant Accounting Policies to the consolidated financial statements. 112 Table of Contents Item 7A.
Our investment funds generally meet the definition of a VIE, and in certain cases these investment funds are consolidated in our financial statements because we meet the criteria of the primary beneficiary. 98 Table of Contents Item 7.
Our investment funds generally meet the definition of a VIE, and in certain cases, these investment funds are consolidated in our financial statements because we meet the criteria of the primary beneficiary. 93 Table of Contents Item 7.
Concentration and portfolio limits are designed to ensure that exposure to default and impairment risk is sufficiently modest to not represent a solvency risk, even in severe economic conditions. 121 Table of Contents
Concentration and portfolio limits are designed to ensure that exposure to default and impairment risk is sufficiently modest to not represent a solvency risk, even in severe economic conditions. 113 Table of Contents
Provision for Credit Losses For our credit loss accounting policies and the assumptions used in the allowances, see Note 1 – Business, Basis of Presentation and Significant Accounting Policies and Note 3 – Investments to the consolidated financial statements.
Provision for Credit Losses For our credit loss accounting policies and the assumptions used in the allowances, see Note 1 – Business, Basis of Presentation and Significant Accounting Policies and Note 4 – Investments to the consolidated financial statements.
Net invested assets is also used in our risk management processes for asset purchases, product design and underwriting, stress scenarios, liquidity, and ALM. 101 Table of Contents Item 7.
Net invested assets is also used in our risk management processes for asset purchases, product design and underwriting, stress scenarios, liquidity and ALM. 96 Table of Contents Item 7.
As part of our risk management strategies, management continually evaluates our derivative instrument holdings and the effectiveness of such holdings in addressing risks identified in our operations. 100 Table of Contents Item 7.
As part of our risk management strategies, management continually evaluates our derivative instrument holdings and the effectiveness of such holdings in addressing risks identified in our operations. 95 Table of Contents Item 7.
Proceeds received from the sale of securities pursuant to these arrangements are generally invested in short-term investments, with the offsetting obligation to repurchase the security included within payables for collateral on derivatives and securities to repurchase on the consolidated balance sheets.
Proceeds received from the sale of securities pursuant to these arrangements are generally invested in short-term investments or maintained in cash, with the offsetting obligation to repurchase the security included within payables for collateral on derivatives and securities to repurchase on the consolidated balance sheets.
In addition, Atlas has entered into an investment management contract to manage certain assets on behalf of CS, providing for quarterly payments expected to total approximately $1.1 billion net to Atlas over 5 years. Finally, Atlas shall also benefit generally from the net spread earned on its assets in excess of its cost of financing.
In addition, Atlas has received an investment management contract to manage certain unrelated assets on behalf of CS, providing for quarterly payments expected to total approximately $1.1 billion net to Atlas over 5 years. Finally, Atlas shall also benefit generally from the net spread earned on its assets in excess of its cost of financing.
In connection with the merger, we elected the fair value option on our mortgage loan portfolio; therefore, we no longer have an allowance for credit losses for commercial and residential loans. Interest income is accrued on the principal amount of the loan based on the loan’s contractual interest rate.
At the beginning of 2022, in connection with our merger with Apollo, we elected the fair value option on our mortgage loan portfolio; therefore, we no longer have an allowance for credit losses for commercial and residential mortgage loans. Interest income is accrued on the principal amount of the loan based on the loan’s contractual interest rate.
In addition, as of December 31, 2022 and 2021, approximately 60% and 54%, respectively, of policies contained MVAs that may also have the effect of limiting early withdrawals if interest rates increase, but may encourage early withdrawals by effectively subsidizing a portion of surrender charges when interest rates decrease.
In addition, as of December 31, 2023 and 2022, approximately 64% and 60%, respectively, of policies contained MVAs that may also have the effect of limiting early withdrawals if interest rates increase but may encourage early withdrawals by effectively subsidizing a portion of surrender charges when interest rates decrease.
We track and update this assumption as experience emerges. Mortality assumptions are set at the product level and generally based on standard industry tables, adjusted for historical experience and a provision for mortality improvement.
We track and update this assumption as experience emerges. Mortality assumptions are set at the product level and are generally based on standard industry tables with adjustments for historical experience and a provision for mortality improvement.
Net alternative investments do not correspond to the total investment funds, including related parties and consolidated VIEs, on our consolidated balance sheets. As discussed above in the net invested assets section, we adjust the US GAAP presentation for funds withheld, modco and VIEs.
Net alternative investments do not correspond to the total investment funds, including related parties and consolidated VIEs, on our consolidated balance sheets. As previously discussed in the net invested assets section, we adjust the US GAAP presentation for funds withheld and modco reinsurance as well as VIEs.
Our alternative investment in Athora had a carrying value of $1.0 billion and $743 million as of December 31, 2022 and 2021, respectively. Our investment in Athora represents our proportionate share of its net asset value, which largely reflects any contributions to and distributions from Athora and changes in its fair value.
Our alternative investment in Athora had a carrying value of $1.1 billion and $1.0 billion as of December 31, 2023 and 2022, respectively. Our investment in Athora represents our proportionate share of its net asset value, which largely reflects any contributions to and distributions from Athora and changes in its fair value.
The increase (decrease) to the embedded derivatives on indexed annuity products from hypothetical changes in discount rates is summarized as follows: (In millions) December 31, 2022 +100 bps discount rate $ (299) –100 bps discount rate 331 However, these estimated effects do not take into account potential changes in other variables, such as equity price levels and market volatility, which can also contribute significantly to changes in carrying values.
The increase (decrease) to the embedded derivatives on indexed annuity products from hypothetical changes in discount rates is summarized as follows: (In millions) December 31, 2023 +100 bps discount rate $ (499) –100 bps discount rate 552 However, these estimated effects do not take into account potential changes in other variables, such as equity price levels and market volatility, which can also contribute significantly to changes in carrying values.
For a discussion of our investment funds for which we have elected the fair value option, see Note 6 – Fair Value to the consolidated financial statements. 115 Table of Contents Item 7.
For a discussion of our investment funds for which we have elected the fair value option, see Note 7 – Fair Value to the consolidated financial statements. 108 Table of Contents Item 7.
The consolidated RBC ratio is calculated by applying the NAIC RBC factors to the statutory financial statements of our non-US reinsurance and US reinsurance subsidiaries on an aggregate basis, including interests in other non-insurance subsidiary holding companies, with certain adjustments made by management to our Bermuda and non-insurance holding companies. See Glossary – Consolidated RBC for further information.
The consolidated RBC ratio is calculated by applying the NAIC RBC factors to the statutory financial statements of our non-US reinsurance and US reinsurance subsidiaries on an aggregate basis, including interests in other non-insurance subsidiary holding companies, with certain adjustments made by management to our Bermuda and non-insurance holding companies.
As of December 31, 2022 and 2021, $221 million and $856 million of mortgage loans that were 90 days past due were related to Government National Mortgage Association (GNMA) early buyouts that are fully or partially guaranteed and are accruing interest.
As of December 31, 2023 and 2022, $124 million and $221 million of mortgage loans that were 90 days past due were related to Government National Mortgage Association (GNMA) early buyouts that are fully or partially guaranteed and are accruing interest.
This included $1.7 billion and $1.9 billion of mezzanine mortgage loans as of December 31, 2022 and 2021, respectively. We have acquired mortgage loans through acquisitions and reinsurance arrangements, as well as through an active program to invest in new mortgage loans.
This included $1.4 billion and $1.7 billion of mezzanine mortgage loans as of December 31, 2023 and 2022, respectively. We have acquired mortgage loans through acquisitions and reinsurance arrangements, as well as through an active program to invest in new mortgage loans.
As of December 31, 2022 and 2021, the payables for repurchase agreements were $4.7 billion and $3.1 billion, respectively, while the fair value of securities and collateral held by counterparties backing the repurchase agreements was $5.0 billion and $3.2 billion, respectively.
As of December 31, 2023 and 2022, the payables for repurchase agreements were $3.9 billion and $4.7 billion, respectively, while the fair value of securities and collateral held by counterparties backing the repurchase agreements was $4.1 billion and $5.0 billion, respectively.
The primary cash outflows from financing activities are withdrawals on our investment-type policies, changes of cash collateral posted for derivative transactions, repayments of outstanding borrowings and payment of preferred and common stock dividends. Our financing activities provided cash flows totaling $26.5 billion, $19.6 billion and $14.5 billion for the years ended December 31, 2022, 2021 and 2020, respectively.
The primary cash outflows from financing activities are withdrawals on our investment-type policies and contracts, changes of cash collateral posted for derivative transactions, repayments of outstanding borrowings and payment of preferred and common stock dividends. Our financing activities provided cash flows totaling $44.8 billion, $26.5 billion and $19.6 billion for the years ended December 31, 2023, 2022 and 2021, respectively.
If the discount rates used to discount the indexed strategy cash flows were to fluctuate, there would be a resulting change in reserves for indexed annuities recorded through the consolidated statements of income (loss). As of December 31, 2022, we had embedded derivative liabilities classified as Level 3 in the fair value hierarchy of $5.8 billion.
If the discount rates used to discount the indexed strategy cash flows were to fluctuate, there would be a resulting change in reserves for indexed annuities recorded through the consolidated statements of income (loss). As of December 31, 2023, we had embedded derivative liabilities classified as Level 3 in the fair value hierarchy of $9.1 billion.
We include CLO and ABS equity tranche securities in alternative investments due to their underlying characteristics and equity-like features. 102 Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Through our relationship with Apollo, we have indirectly invested in companies that meet the key characteristics we look for in net alternative investments.
We include certain equity securities in alternative investments due to their underlying characteristics and equity-like features. 97 Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Through our relationship with Apollo, we have indirectly invested in companies that meet the key characteristics we look for in net alternative investments.
Cash flows from financing activities The primary cash inflows from financing activities are inflows on our investment-type policies and contracts, changes of cash collateral posted for derivative transactions, capital contributions, proceeds from the issuance of preferred stock and proceeds from borrowing activities.
Cash flows from financing activities The primary cash inflows from financing activities are inflows on our investment-type policies and contracts, changes of cash collateral posted for derivative transactions, capital contributions and proceeds from debt and preferred stock issuances.
We invest a portion of our investment portfolio in mortgage loans, which are generally comprised of high quality commercial first lien and mezzanine real estate loans. Our mortgage loan holdings, including related parties and consolidated VIEs, were $30.8 billion and $24.1 billion as of December 31, 2022 and 2021, respectively.
We invest a portion of our investment portfolio in mortgage loans, which are generally comprised of high quality commercial first lien and mezzanine real estate loans. Our mortgage loan holdings, including related parties and consolidated VIEs, were $47.6 billion and $30.8 billion as of December 31, 2023 and 2022, respectively.
We also adjust for VIEs to show the net investment in the funds, which are included in the alternative investments line above as well as adjusting for the allowance for credit losses. Net invested assets includes our proportionate share of ACRA investments, based on our economic ownership, but excludes the proportionate share of investments associated with the noncontrolling interest.
We also adjust for VIEs to show the net investment in the funds, which are included in the alternative investments line above as well as adjusting for the allowance for credit losses. Net invested assets include our proportionate share of ACRA investments, based on our economic ownership, but exclude the proportionate share of investments associated with the noncontrolling interests.
As of December 31, 2022, 11% of our AFS securities, including related parties, were invested in CLOs of Cayman Islands issuers (included in Non-US North America) for which underlying investments are largely loans to US issuers, and 25% were invested in securities of other non-US issuers.
As of December 31, 2023, 10% of our AFS securities, including related parties, were invested in CLOs of Cayman Islands issuers (included in Non-US North America) for which the underlying investments are largely loans to US issuers and 25% were invested in securities of other non-US issuers.
Finally, state insurance laws and regulations require that the statutory surplus of our insurance subsidiaries following any dividend or distribution must be reasonable in relation to their outstanding liabilities and adequate for the insurance subsidiaries’ financial needs. 112 Table of Contents Item 7.
Finally, state insurance laws and regulations require that the statutory surplus of our insurance subsidiaries following any dividend or distribution must be reasonable in relation to their outstanding liabilities and adequate for the insurance subsidiaries’ financial needs.
However, our ability to borrow under the facilities is constrained by the availability of assets that qualify as eligible collateral under the facilities and certain other limitations. Considering these limitations, as of December 31, 2022, we had the ability to draw up to an estimated $5.8 billion, inclusive of borrowings then outstanding.
However, our ability to borrow under the facilities is constrained by the availability of assets that qualify as eligible collateral under the facilities and certain other limitations. Considering these limitations, as of December 31, 2023, we had the ability to draw up to an estimated $10.2 billion, inclusive of borrowings then outstanding.
Assets included in modified coinsurance and funds withheld portfolios are available to fund the benefits for the associated obligations but are restricted from other uses. The carrying value of the underlying assets in these modified coinsurance and funds withheld portfolios that we consider liquid as of December 31, 2022 was $21.5 billion.
Assets included in modified coinsurance and funds withheld portfolios are available to fund the benefits for the associated obligations but are restricted from other uses. The carrying value of the underlying assets in these modified coinsurance and funds withheld portfolios that we consider liquid as of December 31, 2023 was $15.6 billion.
During the commitment period, we may sell and Societe Generale is required to purchase eligible investment grade corporate bonds pursuant to repurchase transactions at pre-agreed rates in exchange for an ongoing commitment fee for the facility. As of December 31, 2022, we had no outstanding payables under this facility. 109 Table of Contents Item 7.
During the commitment period, we may sell and Societe Generale is required to purchase eligible investment grade corporate bonds pursuant to repurchase transactions at pre-agreed rates in exchange for an ongoing commitment fee for the facility. As of December 31, 2023, we had no outstanding payables under this facility.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Estimates and Judgments The preparation of consolidated financial statements in conformity with US GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Critical Accounting Estimates and Judgments The preparation of consolidated financial statements in conformity with US GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Cash flows from investing activities The primary cash inflows from investing activities are the sales, maturities and repayments of investments. The primary cash outflows from investing activities are the purchases and acquisitions of new investments. Our investing activities used cash flows totaling $34.4 billion, $27.9 billion and $14.8 billion for the years ended December 31, 2022, 2021 and 2020, respectively.
Cash flows from investing activities The primary cash inflows from investing activities are the sales, maturities and repayments of investments. The primary cash outflows from investing activities are the purchases and acquisitions of new investments. Our investing activities used cash flows totaling $43.7 billion, $34.4 billion and $27.9 billion for the years ended December 31, 2023, 2022 and 2021, respectively.
As discussed in Note 13 – Statutory Requirements to the consolidated financial statements, a permitted practice of the state of Vermont allows the captive to include issued and outstanding letters of credit in the amount of $112 million and $117 million as of December 31, 2022 and 2021, respectively, as admitted assets in its statutory financial statements.
As discussed in Note 15 – Statutory Requirements to the consolidated financial statements, a permitted practice of the state of Vermont allows the captive to include issued and outstanding letters of credit in the amount of $96 million and $112 million as of December 31, 2023 and 2022, respectively, as admitted assets in its statutory financial statements.
Debt – The following summarizes our outstanding long-term senior notes (in millions, except percentages): Issuance Issue Date Maturity Date Interest Rate Principal Balance 2028 Senior Unsecured Notes January 12, 2018 January 12, 2028 4.125% $1,000 2030 Senior Unsecured Notes April 3, 2020 April 3, 2030 6.150% $500 2031 Senior Unsecured Notes October 8, 2020 January 15, 2031 3.500% $500 2051 Senior Unsecured Notes May 25, 2021 May 25, 2051 3.950% $500 2052 Senior Unsecured Notes December 13, 2021 May 15, 2052 3.450% $500 2033 Senior Unsecured Notes November 21, 2022 February 1, 2033 6.650% $400 See Note 10 – Debt to the consolidated financial statements for further information on debt.
Debt – The following summarizes our outstanding long-term senior notes (in millions, except percentages): Issuance Issue Date Maturity Date Interest Rate Principal Balance 2028 Senior Unsecured Notes January 12, 2018 January 12, 2028 4.125% $1,000 2030 Senior Unsecured Notes April 3, 2020 April 3, 2030 6.150% $500 2031 Senior Unsecured Notes October 8, 2020 January 15, 2031 3.500% $500 2051 Senior Unsecured Notes May 25, 2021 May 25, 2051 3.950% $500 2052 Senior Unsecured Notes December 13, 2021 May 15, 2052 3.450% $500 2033 Senior Unsecured Notes November 21, 2022 February 1, 2033 6.650% $400 2034 Senior Unsecured Notes December 12, 2023 January 15, 2034 5.875% $600 See Note 12 – Debt to the consolidated financial statements for further information on debt. 106 Table of Contents Item 7.
The assessment of whether an entity is a VIE and the determination of whether we should consolidate such VIE requires judgment by our management.
The assessment of whether an entity is a VIE and the determination of whether we should consolidate such VIE requires judgment.
This analysis considers all relevant economic interests including proportionate interests held through related parties. Additionally, evaluating an entity to determine whether it meets the characteristics of an investment company is qualitative in nature and may involve significant judgment. We have retained this specialized accounting for investment companies in consolidation. 119 Table of Contents Item 7.
This analysis considers all relevant economic interests, including proportionate interests held through related parties. Additionally, evaluating an entity to determine whether it meets the characteristics of an investment company under US GAAP is qualitative in nature and may involve significant judgment. We have retained this specialized accounting for investment companies in consolidation.
We believe this view of our portfolio provides a view of the assets for which we have economic exposure. We adjust the presentation for funds withheld and modco transactions to include or exclude the underlying investments based upon the contractual transfer of economic exposure to such underlying investments.
We believe this view of our portfolio provides a view of the assets for which we have economic exposure. We adjust the presentation for assumed and ceded reinsurance transactions to include or exclude the underlying investments based upon the contractual transfer of economic exposure to such underlying investments.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Use of Captives While our business strategy does not involve the use of captives, we ceded certain liabilities to a captive reinsurer that we acquired in connection with the Aviva USA acquisition. The captive reinsurer was formed in 2011 and is domiciled in the state of Vermont.
Use of Captives While our business strategy does not involve the use of captives, we ceded certain liabilities to a captive reinsurer that we acquired in connection with the Aviva USA acquisition. The captive reinsurer was formed in 2011 and is domiciled in the state of Vermont.
As of December 31, 2022, payables for repurchase agreements were comprised of $1.9 billion of short-term and $2.9 billion of long-term repurchase agreements. As of December 31, 2021, payables for repurchase agreements were comprised of $2.5 billion of short-term and $598 million of long-term repurchase agreements. We have a $1.0 billion committed repurchase facility with BNP Paribas.
As of December 31, 2023, payables for repurchase agreements were comprised of $686 million of short-term and $3.2 billion of long-term repurchase agreements. As of December 31, 2022, payables for repurchase agreements were comprised of $1.9 billion of short-term and $2.9 billion of long-term repurchase agreements. We have a $1.0 billion committed repurchase facility with BNP Paribas.
As of December 31, 2022 and 2021, we held an allowance for credit losses on AFS securities of $459 million and $123 million, respectively.
As of December 31, 2023 and 2022, we held an allowance for credit losses on AFS securities of $591 million and $459 million, respectively.
As of December 31, 2022 and 2021, approximately 76% and 74%, respectively, of our deferred annuity liabilities were subject to penalty upon surrender.
As of December 31, 2023 and 2022, approximately 79% and 76%, respectively, of our deferred annuity liabilities were subject to penalty upon surrender.
We hold funds withheld at interest receivables, including those held with VIAC, Lincoln and Jackson. As of December 31, 2022, the majority of the ceding companies holding the assets pursuant to such reinsurance agreements had a financial strength rating of A or better (based on an A.M. Best scale). 99 Table of Contents Item 7.
We hold funds withheld at interest receivables, including those held with Venerable, Lincoln and Jackson. As of December 31, 2023, the majority of the ceding companies holding the assets pursuant to such reinsurance agreements had a financial strength rating of A or better (based on an A.M. Best scale).
In general, liquid assets include cash and cash equivalents, highly rated corporate bonds, unaffiliated preferred stock and public common stock, all of which generally have liquid markets with a large number of buyers. The carrying value of these assets, excluding assets within modified coinsurance and funds withheld portfolios, as of December 31, 2022 was $94.5 billion.
In general, liquid assets include cash and cash equivalents, highly rated bonds, short-term investments, unaffiliated preferred stock and public common stock, all of which generally have liquid markets with a large number of buyers. The carrying value of these assets, excluding assets within modified coinsurance and funds withheld portfolios, as of December 31, 2023 was $123.9 billion.
The maximum FHLB indebtedness by a member is determined by the amount of collateral pledged and cannot exceed a specified percentage of the member’s total statutory assets dependent on the internal credit rating assigned to the member by the FHLB. As of December 31, 2022, the total maximum borrowing capacity under the FHLB facilities were limited to $52.4 billion.
The maximum FHLB indebtedness by a member is determined by the amount of collateral pledged and cannot exceed a specified percentage of the member’s total statutory assets dependent on the internal credit rating assigned to the member by the FHLB. As of December 31, 2023, our total maximum borrowing capacity under the FHLB facilities was limited to $43.1 billion.
As of December 31, 2022 and 2021, we had $474 million and $990 million, respectively, of mortgage loans that were 90 days past due, of which $99 million and $54 million, respectively, were in the process of foreclosure.
As of December 31, 2023 and 2022, we had $543 million and $474 million, respectively, of mortgage loans that were 90 days past due, of which $125 million and $99 million, respectively, were in the process of foreclosure.
Approximately 94.3% and 93.5% of the fixed maturity securities within the funds withheld at interest are investment grade by NAIC designation as of December 31, 2022 and 2021, respectively.
Approximately 95.0% and 94.3% of the fixed maturity securities within the funds withheld at interest are investment grade by NAIC designation as of December 31, 2023 and 2022, respectively.
Business management retains the primary responsibility for day-to-day management of risk. Risk Management The risk management team consists of eight teams: Business and Operational Risk, ALM, Regulatory and Risk Analytics, Derivative Governance & Risk Policy, Derivatives and Structured Solutions, Asset Risk Management, Strategic & Emerging Risk and Risk Operations & Change Management.
Risk Management The risk management team consists of eight teams: Business and Operational Risk, ALM, Regulatory and Risk Analytics, Derivative Governance & Risk Policy, Derivatives and Structured Solutions, Asset Risk Management, Strategic & Emerging Risk and Risk Operations & Change Management.
Subject to these limitations and prior notification to the appropriate regulatory agency, the US insurance subsidiaries are permitted to pay ordinary dividends based on calculations specified under insurance laws of the relevant state of domicile.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Subject to these limitations and prior notification to the appropriate regulatory agency, the US insurance subsidiaries are permitted to pay ordinary dividends based on calculations specified under insurance laws of the relevant state of domicile.
Shelf Registration – Under our Shelf Registration Statement, subject to market conditions, we have the ability to issue, in indeterminate amounts, debt securities, preference shares, depositary shares, Class A common shares, warrants and units.
Shelf Registration – Under our Shelf Registration Statement, subject to market conditions, we have the ability to issue, in indeterminate amounts, debt securities, preferred stock, depositary shares, warrants and units.
Management’s Discussion and Analysis of Financial Condition and Results of Operations The funds withheld at interest is comprised of the host contract and an embedded derivative. We are subject to the investment performance on the withheld assets with the total return directly impacting the host contract and the embedded derivative.
The funds withheld at interest is comprised of the host contract and an embedded derivative. We are subject to the investment performance on the withheld assets with the total return directly impacting the host contract and the embedded derivative.
When quoted prices in active markets are not available, fair value is based on market standard valuation techniques, giving priority to observable inputs. We obtain the fair value for most marketable bonds without an active market from several commercial pricing services.
Generally, these are liquid securities and the valuation does not require significant management judgment. When quoted prices in active markets are not available, fair value is based on market standard valuation techniques, giving priority to observable inputs. We obtain the fair value for most marketable bonds without an active market from several commercial pricing services.
Athora returned a net investment earned rate of 13.77%, 10.52% and 15.94% for the years ended December 31, 2022, 2021 and 2020, respectively. Alternative investment income from Athora was $125 million, $76 million and $66 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Athora returned a net investment earned rate of 5.38%, 13.77% and 10.52% for the years ended December 31, 2023, 2022 and 2021, respectively. Alternative investment income from Athora was $60 million, $125 million and $76 million for the years ended December 31, 2023, 2022 and 2021, respectively.
As of December 31, 2022 and 2021, 36% and 35%, respectively, of the carrying value of our AFS securities, including related parties, was comprised of securities of issuers based outside of the United States and debt securities of foreign governments.
As of December 31, 2023 and 2022, 34% and 36%, respectively, of the carrying value of our AFS securities, including related parties, was comprised of securities of issuers based outside of the US and debt securities of foreign governments.
Our operating activities generated cash flows totaling $6.3 billion, $10.3 billion and $4.2 billion for the years ended December 31, 2022, 2021 and 2020, respectively.
Our operating activities generated cash flows totaling $5.0 billion, $6.3 billion and $10.3 billion for the years ended December 31, 2023, 2022 and 2021, respectively.
We utilize a host of assessment tools to monitor and assess our risk profile, results of which are shared with senior management periodically at management level committees, such as the management risk committee (MRC) and the management investment and asset liability committee (MIALC), and with the board of directors quarterly.
We utilize a host of assessment tools to monitor and assess our risk profile, results of which are shared with senior management periodically at management level committees, such as the risk committee (RC) and the investment and asset liability committee (IALC), and with the board of directors quarterly. Business management retains the primary responsibility for day-to-day management of risk.
Any distributions above the amount permitted by statute in any twelve month period are considered to be extraordinary dividends, and require the approval of the appropriate regulator prior to payment. AHL does not currently plan on having the US subsidiaries pay any dividends to their parents. 111 Table of Contents Item 7.
Any distributions above the amount permitted by statute in any twelve-month period are considered to be extraordinary dividends, and require the approval of the appropriate regulator prior to payment. AHL does not currently plan on having the US subsidiaries pay any dividends to their parents. Dividends from subsidiaries are projected to be the primary source of AHL’s liquidity.
Our revolving Liquidity Facility also contains various standard covenants with which we must comply, including maintaining an ALRe minimum Consolidated Net Worth (as such term is defined in the Liquidity Facility) of no less than $9.3 billion and restrictions on our ability to incur debt and liens, in each case with certain exceptions.
Our Liquidity Facility also contains various standard covenants with which we must comply, including maintaining an ALRe minimum consolidated net worth of no less than $8.8 billion and restrictions on our ability to incur liens, with certain exceptions. Rates and terms are as defined in the Liquidity Facility.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Mortgage Loans The following is a summary of our mortgage loan portfolio by collateral type, including assets held by related parties and consolidated VIEs: Successor Predecessor December 31, 2022 December 31, 2021 (In millions, except percentages) Fair Value Percent of Total Net Carrying Value Percent of Total Property type Office building $ 4,651 15.1 % $ 4,870 20.1 % Retail 1,454 4.7 % 2,022 8.4 % Apartment 6,692 21.7 % 4,626 19.2 % Hotels 1,855 6.1 % 1,727 7.2 % Industrial 2,047 6.6 % 2,336 9.7 % Other commercial 1 3,409 11.1 % 1,316 5.4 % Total net commercial mortgage loans 20,108 65.3 % 16,897 70.0 % Residential loans 10,703 34.7 % 7,251 30.0 % Total mortgage loans, including related parties and VIEs $ 30,811 100.0 % $ 24,148 100.0 % 1 Other commercial loans include investments in nursing homes, other healthcare institutions, parking garages, storage facilities and other commercial properties.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Mortgage Loans The following is a summary of our mortgage loan portfolio by collateral type, including assets held by related parties and consolidated VIEs: December 31, 2023 December 31, 2022 (In millions, except percentages) Fair Value Percent of Total Fair Value Percent of Total Property type Apartment $ 9,591 20.2 % $ 6,692 21.7 % Office building 4,455 9.4 % 4,651 15.1 % Industrial 4,143 8.7 % 2,047 6.6 % Hotels 2,913 6.1 % 1,855 6.1 % Retail 2,158 4.5 % 1,454 4.7 % Other commercial 1 3,352 7.0 % 3,409 11.1 % Total commercial mortgage loans 26,612 55.9 % 20,108 65.3 % Residential loans 20,957 44.1 % 10,703 34.7 % Total mortgage loans, including related parties and consolidated VIEs $ 47,569 100.0 % $ 30,811 100.0 % 1 Other commercial loans include investments in nursing homes, other healthcare institutions, parking garages, storage facilities and other commercial properties.
As of December 31, 2022 and 2021, our consolidated statutory capital and surplus in the aggregate was $20.1 billion and $19.6 billion, respectively, and our consolidated RBC ratio was 416% and 433%, respectively.
As of December 31, 2023 and 2022, our consolidated statutory capital and surplus in the aggregate was $21.8 billion and $20.1 billion, respectively, and our consolidated RBC ratio was 412% and 416%, respectively.
During the year ended December 31, 2021, we recorded an increase in provision for credit losses on AFS securities of $19 million, of which $9 million had an income statement impact and $10 million were related to PCD securities and other changes.
During the year ended December 31, 2023, we recorded an increase in the allowance for credit losses on AFS securities of $132 million, of which $96 million had an income statement impact and $36 million related to PCD securities and other changes.

… 196 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

24 edited+5 added−3 removed23 unchanged
Biggest changeThe decline in the DAC, DSI, and VOBA amortization as of December 31, 2022, when compared to that as of December 31, 2021, is driven by the decline in the market value of the equity options. The financial instruments included in the sensitivity analysis are carried at fair value and changes in fair value are recognized in earnings.
Biggest changeThe increase in sensitivity to point-in-time pre-tax income from changes in the fair value of these financial instruments as of December 31, 2023, when compared to December 31, 2022, is primarily driven by equity market performance during the year, which has resulted in more equity exposure to public equity market price declines.
Item 7A. Quantitative and Qualitative Disclosures About Market Risks The investment teams within Apollo, which manage substantially all of our fixed income assets, focus on in-depth, bottom-up portfolio construction, and disciplined risk management.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk The investment teams within Apollo, which manage substantially all of our fixed income assets, focus on in-depth, bottom-up portfolio construction, and disciplined risk management.
In addition to credit-risk exposures from our investment portfolio, we are also exposed to credit risk from our counterparty exposures from our derivative hedging and reinsurance activities. Derivative counterparty risk is managed by trading on a collateralized basis with counterparties under International Swaps and Derivatives Association documents with a credit support annex having low or zero-dollar collateral thresholds.
In addition to credit-risk exposures from our investment portfolio, we are also exposed to credit risk from our counterparty exposures from our derivative hedging and reinsurance activities. Derivative counterparty risk is managed by trading on a collateralized basis with counterparties under International Swaps and Derivatives Association documents with a credit support annex having zero-dollar collateral thresholds.
See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Measure Reconciliations for the reconciliation of net income (loss) available to AHL common shareholder to spread related earnings. The impact of changing rates on these adjustments is likely to be significant.
See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Measure Reconciliations for the reconciliation of net income (loss) available to AHL common stockholder to spread related earnings. The impact of changing rates on these adjustments is likely to be significant.
The alternative investment portfolio is monitored to ensure diversification across asset classes and strategy, and the portfolio's performance under stress scenarios is evaluated routinely as part of management and board reviews. Since alternative investments are marked-to-market on the balance sheet, risk analyses focus on potential changes in market value across a variety of market stresses.
The alternative investment portfolio is monitored to ensure diversification across asset classes and strategy, and the portfolio's performance under stress scenarios is evaluated routinely as part of management and board reviews. Since alternative investments are marked-to-market on the consolidated balance sheets, risk analyses focus on potential changes in market value across a variety of market stresses.
The performance of our investment portfolio managed by Apollo is reviewed periodically by the management committees and board of directors. The management committees strive to improve returns to shareholders and protect policyholders, while dynamically managing the risk within our expectations.
The performance of our investment portfolio managed by Apollo is reviewed periodically by the management committees and board of directors. The management committees strive to improve returns to stockholders and protect policyholders, while dynamically managing the risk within our expectations.
We utilize reinsurance to mitigate risks that are inconsistent with our strategy or objectives. For example, we have reinsured much of the mortality risk we would otherwise have accumulated through our various acquisitions, allowing us to focus on our core annuity business. These reinsurance agreements expose us to the credit risk of our counterparties.
We utilize reinsurance to mitigate risks that are inconsistent with our strategy or objectives. For example, we have reinsured much of the mortality risk we would otherwise have accumulated through our various acquisitions and block reinsurance transactions, allowing us to focus on our core annuity business. These reinsurance agreements expose us to the credit risk of our counterparties.
We have established a set of exposure and stress limits to communicate our risk tolerance and to ensure adherence to those risk tolerance levels. Risk management personnel and the MRC and/or MIALC (together, management committees) are notified in the event that risk tolerance levels are exceeded.
We have established a set of exposure and stress limits to communicate our risk tolerance and to ensure adherence to those risk tolerance levels. Risk management personnel and the RC and/or IALC (together, management committees) are notified in the event that risk tolerance levels are exceeded.
The models used to estimate the impact of a 25 basis point change in market interest rates incorporate numerous assumptions, require significant estimates and assume an immediate change in interest rates without any discretionary management action to counteract such a change.
The models used to estimate the impact of changes in market interest rates incorporate numerous assumptions, require significant estimates and assume an immediate change in interest rates without any discretionary management action to counteract such a change.
We are unable to make forward-looking estimates regarding the impact on net income (loss) of changes in interest rates that persist for a period of time as a result of an inability to determine how such changes will affect certain of the items that we characterize as “adjustments to income (loss) before income taxes” in our reconciliation between net income (loss) available to AHL common shareholder and spread related earnings.
We are unable to make forward-looking estimates regarding the impact on net income (loss) of changes in interest rates that persist for a longer period of time, or changes in the shape of the yield curve over time, as a result of an inability to determine how such changes will affect certain of the items that we characterize as “adjustments to income (loss) before income taxes” in our reconciliation between net income (loss) available to AHL common stockholder and spread related earnings.
The financial instruments included in the sensitivity analysis are carried at fair value and changes in fair value are recognized in earnings. These financial instruments include derivative instruments, embedded derivatives and certain fixed maturity securities.
The financial instruments included in the sensitivity analysis are carried at fair value and changes in fair value are recognized in earnings. These financial instruments include derivative instruments, embedded derivatives, mortgage loans, certain fixed maturity securities and market risk benefits.
See above for a discussion regarding the estimated impact on net income (loss) of an immediate, parallel increase in interest rates of 25 basis points from levels as of December 31, 2022, which discussion encompasses the impact of such an increase on certain of the adjustment items.
See above for a discussion regarding the estimated impact on income (loss) before income taxes of an immediate, parallel increase in interest rates of 100 basis points from levels as of December 31, 2023, which discussion encompasses the impact of such an increase on certain of the adjustment items.
The sensitivity analysis excludes those financial instruments carried at fair value for which changes in fair value are recognized in equity, such as AFS fixed maturity securities. 123 Table of Contents Item 7A.
The sensitivity analysis excludes those financial instruments carried at fair value for which changes in fair value are recognized in equity, such as AFS fixed maturity securities.
Assuming all other factors are constant, if there was a decline in public equity market prices of 10% as of December 31, 2022, we estimate a net decrease to our pre-tax income from changes in the fair value of these financial instruments of $269 million.
Assuming all other factors are constant, if there was a decline in public equity market prices of 10% as of December 31, 2023, we estimate a net decrease to our point-in-time income (loss) before income taxes from changes in the fair value of these financial instruments of $538 million.
Quantitative and Qualitative Disclosures About Market Risks Assuming a 25 basis point increase in interest rates that persists for a 12-month period, the estimated impact to spread related earnings would be an increase of approximately $30 – $40 million, and a 25 basis point decrease would generally result in a similar decrease.
Quantitative and Qualitative Disclosures About Market Risk Assuming a parallel increase in interest rates of 25 basis points, the estimated impact to spread related earnings over a 12-month period related to market risk benefits would be an increase of approximately $20 – $40 million, and a parallel decrease in interest rates of 25 basis points would generally result in a similar decrease.
Quantitative and Qualitative Disclosures About Market Risks Our investment mandate in our alternative investment portfolio is inherently opportunistic. Each investment is examined and analyzed on its own merits to gain a full understanding of the risks present, and with a view toward determining likely return scenarios, including the ability to withstand stress in a downturn.
Each investment is examined and analyzed on its own merits to gain a full understanding of the risks present, and with a view toward determining likely return scenarios, including the ability to withstand stress in a downturn.
Assuming all other factors are constant, if there was an immediate parallel increase in interest rates of 25 basis points from levels as of December 31, 2022, we estimate a net decrease to our point-in-time pre-tax income from changes in the fair value of these financial instruments of $707 million.
Assuming all other factors are constant, if there was an immediate parallel increase in interest rates of 100 basis points from levels as of December 31, 2023, we estimate a net decrease to our point-in-time income (loss) before income taxes from changes in the fair value of these financial instruments of $2.5 billion, net of offsets.
Unique policy-level liability options are matched with static OTC options and residual risk arising from policyholder behavior and other trading constraints (for example minimum trade size) are managed dynamically by decomposing the risk of the portfolio (asset and liability positions) into market risk measures which are managed to pre-established risk limits.
Unique policy-level liability options are matched with static OTC options and residual risk arising from (1) policy holder behavior and other trading constraints (for example minimum trade size) and (2) the decision by the organization to enhance the value of the product offerings by dynamically managing a small portion of the exposure on custom indices, are managed dynamically by decomposing the risk of the portfolio (asset and liability positions) into market risk measures which are managed to pre-established risk limits.
Currency Risk We manage our currency risk to maintain minimal exposure to currency fluctuations. We attempt to hedge completely the currency risk arising in our investment portfolio, funding agreements or indexed annuity liabilities. In general, we match currency exposure of assets and liabilities.
Currency Risk We manage our currency risk to maintain minimal exposure to currency fluctuations. We attempt to hedge completely the currency risk arising on our balance sheet. In general, we match currency exposure of assets and liabilities.
As of December 31, 2021, we estimate that a decline in public equity market prices of 10% would cause a net decrease to our pre-tax income from changes in the fair value of these financial instruments of $392 million with an offsetting increase to our pre-tax income of $131 million from DAC, DSI and VOBA amortization and changes in rider reserves.
As of December 31, 2022, we estimate that a decline in public equity market prices of 10% would cause a net decrease to our point-in-time income (loss) before income taxes from changes in the fair value of these financial instruments of $312 million.
If there was a similar parallel increase in interest rates from levels as of December 31, 2021, we estimate a net decrease to our point-in-time pre-tax income from changes in the fair value of these financial instruments of $511 million with an offsetting increase to pre-tax income of $17 million from DAC, DSI and VOBA amortization and changes in rider reserves.
If there was a similar parallel increase in interest rates from levels as of December 31, 2022, we estimate a net decrease to our point-in-time income (loss) before income taxes from changes in the fair value of these financial instruments of $2.1 billion, net of offsets.
The increase in sensitivity to point-in-time pre-tax income from changes in the fair value of financial instruments in the estimated outcome as of December 31, 2022, when compared to December 31, 2021, was primarily due to the election of the fair value accounting option for our mortgage loan portfolio.
The increase in sensitivity to point-in-time pre-tax income from changes in the fair value of these financial instruments as of December 31, 2023, when compared to December 31, 2022, was primarily driven by the significant growth experienced in 2023.
Alternative investments are comprised of several categories, including at the most liquid end of the spectrum “liquid strategies,” (which is mostly exposure to publicly traded equities), followed by “yield,” “equity,” and “hybrid” strategies. Our alternatives portfolio also includes strategic equity investments in origination platforms, insurance platforms and others. 122 Table of Contents Item 7A.
Alternative investments are comprised of several categories, including at the most liquid end of the spectrum “liquid strategies”, (which is mostly exposure to publicly 114 Table of Contents Item 7A. Quantitative and Qualitative Disclosures About Market Risk traded equities), followed by “yield”, “equity” and “hybrid” strategies.
These financial instruments include public equity investments, derivative instruments and the FIA embedded derivative. 124 Table of Contents
The financial instruments included in the sensitivity analysis are carried at fair value and changes in fair value are recognized in earnings. These financial instruments include public equity investments, derivative instruments, market risk benefits and the FIA embedded derivative. 116 Table of Contents
Removed
The net change in fair value for these financial instruments would directly impact the current period gross profits and assessments used in the calculations of DAC and DSI amortization and changes to rider reserves, resulting in an offsetting increase to our pre-tax income of $23 million.
Added
Our alternatives portfolio also includes strategic equity investments in origination platforms, insurance platforms and others. Our investment mandate in our alternative investment portfolio is inherently opportunistic.
Removed
This is driven by a change in investment income from floating rate assets and liabilities, offset by DAC and DSI amortization and rider reserve change, all calculated without regard to future changes to assumptions.
Added
Assuming a 25 basis point increase in interest rates that persists for a 12-month period, the estimated impact to spread related earnings due to the change in net investment spread from floating rate assets and liabilities would be an increase of approximately $45 – $55 million, and a 25 basis point decrease would generally result in a similar decrease.
Removed
The net change in fair value for these financial instruments would directly impact the current period gross profits and assessments used in the calculations of DAC and DSI amortization and changes in rider reserves, resulting in an offsetting increase to our pre-tax income of $20 million.
Added
This is calculated without regard to future changes to assumptions. With the implementation of LDTI in accounting for long-duration insurance and investment contracts, changes in the fair value of market risk benefits due to current period movement in the interest rate curve used to discount the reserve are reflected in net income (loss) but excluded from spread related earnings.
Added
However, changes in interest rates that impact the cost of the projected GLWB and GMDB rider benefits, included within our market risk benefit reserve, are amortized within cost of funds in spread related earnings over the life of the business. 115 Table of Contents Item 7A.
Added
This is calculated without regard to future changes to assumptions.

Other ATHS 10-K year-over-year comparisons