Athene Holding Upgraded On Zero Debt And Bullish Growth Forecast

Athene Holding Ltd ATH has zero debt, $2.1 billion in cash and growth opportunities, according to Credit Suisse.

Research analyst John Nadel upgraded the insurance holding company from Neutral to Outperform and raised the firm’s price target from $55 to $66.

“We see the probability increasing that the company will seize upon block acquisition opportunities to accelerate balance sheet and EPS growth, deploying sizable excess capital to drive [return on equity] higher,” Nadel said in a Monday note (check out Nadel's track record).

Athene Group was also upgraded from “A-” to “A” by the credit rating agency A.M. Best on April 13, according to Credit Suisse.

Athene announced its initial public offering on Nov. 28, 2016 and began trading on the NYSE on Dec. 9. The company’s annuity retail division is based in West Des Moines, Iowa, and its holding company is based in Bermuda.

Pathways For Growth

Athene can grow both organically and through M&A, Nadel said. Credit Suisse estimates that Athene has the capacity to issue between $1.7 billion and $1.9 billion in debt.

“Despite [U.S. Department of Labor]-driven pressure on [fixed income annuity] sales industrywide in recent quarters, ATH has demonstrated its ability to pivot toward institutional products with over $1 billion of [funding agreement-backed note] issuance,” Nadel said.

FABNs — “highly predictable liabilities with no surrender option prior to maturity” — were invented by Athene CEO James R. Belardi when he was at the former SunAmerica Life Insurance Co., the analyst said.

The Impact Of Federal Regulations

The Department Of Labor’s fiduciary rule took effect June 9 and requires any broker who is giving advice on retirement savings to put their client’s interest first, according to Forbes.

The rules mean that Athene will no longer be able to pay agents based on their productivity, Nadel said.

“Net-net, while the risk from the [Department of Labor] rule and its inclusion of [fixed-income annuities] under the [best-interest contract exemption] certainly exists, we do not believe it to be as significant a threat to Athene’s annuity sales as it does to several peers in the industry with differing distribution and marketing strategies.”

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