A month has gone by since the last earnings report for Athene Holding Ltd. (ATH - Free Report) . Shares have added about 4.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Athene Holding Ltd. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Athene’s Q2 Earnings Beat Estimates, Revenues Miss
Athene’s second-quarter 2020 adjusted operating income of $2.49 per share outpaced the Zacks Consensus Estimate by 31.1%. Moreover, the bottom line improved 27.7% year over year. The company’s results benefited from a rise in the fair value of the Apollo Operating Group ("AOG") investment. However, the bottom-line growth was partly offset by lower revenues and higher costs.
Behind the Headlines
Operating revenues of $1.04 billion missed the Zacks Consensus Estimate by 10.8%. Also, the top line declined 20.1% year over year due to reduced premiums. Nevertheless, decline in revenues have been partly offset by higher net investment income and product charges.
Premiums of $355 million declined 54.9% year over year in the second quarter, due to reduced pension risk transfer (PRT) premiums. Net investment income was $1.3 billion in the quarter under review, up 13% year over year. The upside can be attributed to unrealized gain from the company’s investment in Apollo partially negated by decline in floating rate income on account of current low interest rates.
Net invested assets of $137.3 billion as on Jun 30, 2020 improved 18% year over year, primarily due to organic and inorganic deposits growth.
Gross organic deposits totaled $6.9 billion in the quarter under review, surging 71% year over year primarily attributable to strong performance across its retail, flow reinsurance, and funding agreement channels. Also, closure of the block reinsurance transaction with Jackson National Life Insurance Company in June has generated $29 billion of gross inorganic deposits to Athene.
Total benefits and expenses of $3.3 billion increased 24.1% year over year in the quarter under review. The rise is primarily due to higher interest sensitive contract benefits, rise in amortization of DAC and VOBA, and policy and other operating expenses.
Quarterly Segmental Update
Retirement Services reported adjusted operating income of $208 million, down 45% year over year, reflecting reduced net investment earnings. Total revenues in this segment were $1.6 billion, down 29.3% year over year.
Corporate and Other generated adjusted operating income of $282 million, against the prior-year quarter’s operating loss of $6 million. The upside is primarily attributable to a rise in the fair value of the company’s AOG investment, partly offset by reduced income from alternative investments. Total revenues were $446 million at this segment, which skyrocketed 1758.3% year over year.
The company exited the second quarter with cash and cash equivalents of $6.2 billion, which improved 47.2% from the prior quarter. Total debt of $1.5 billion at the end of the quarter inched up 1.3% from the figure at 2019-end. Adjusted debt to capital ratio of 11.1 deteriorated 210 bps year over year.
Adjusted book value per share was $51.15 as of Jun 30, 2020, up 3.3% year over year. Athene exited the second quarter with excess capital of $3 billion and total deployable capital of $7.3 billion. Adjusted operating ROE of 19.4% expanded 320 basis points (bps) year over year. In the first half of 2020, net cash provided by operating activities of $1.4 billion declined 11.4% from the prior-year comparable period.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
Currently, Athene Holding Ltd. has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Athene Holding Ltd. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.