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Here's Why Athene (ATH) Stock is an Attractive Bet Right Now

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Athene Holding, Ltd. (ATH - Free Report) has been in investors' good books on the back of higher level of sales, growth in investment portfolio, strong capital position and effective capital deployment.

The stock has seen its estimates for 2020 and 2021 move up nearly 11.9% and 1.9%, respectively in the past 60 days, reflecting investor optimism.

Athene delivered an earnings surprise of 31.05% in the last-reported quarter.

Now let’s see what makes the stock an investors’ favorite.

This Zacks Rank #2 (Buy) life insurer continues to benefit from higher revenues driven by investment related gains and losses, increase in net investment income, higher premiums and higher product charges. Revenues increased at a four-year (2015-2019) CAGR of 57.9%. The Zacks Consensus Estimate for the company’s 2021 revenues is pegged at $5.8 billion, indicating a year-over-year increase of 16%. We believe higher pension risk transfer (PRT) premiums and increase in premiums from flow reinsurance, strong performance of the indices, higher level of sales, growth in investment portfolio and growth in the block of business are likely to drive revenues in the days ahead.

Strong revenues have been aiding margin expansion. In the second quarter, net margin expanded 80 basis points sequentially.

Moreover, net investment income continues to be another important driver of the company’s top line, which rose at a two-year CAGR (2017-2019) of 17.6%. Despite the current low interest rate environment, we believe growth in investment portfolio, strong increase in deposits over the prior 12 months, higher bond call income, mortgage prepayments as well as higher alternative investment income, and favorable alternative investment performance will continue to drive net investment income.

Athene is well-positioned for continued strength in the second half of 2020 with rebound in alternative investment returns, strong organic and inorganic growth tailwinds and substantial deployable capital.

By virtue of its strong capital position, Athene is well poised to meet debt obligations. It boasts a strong balance sheet with total deployable capital of more than $7 billion that can be used to support more than $85 billion of additional inorganic growth. Athene is navigating the current environment from a position of strength with $3 billion of on-balance sheet excess equity capital and has significant financial flexibility with $2.5 billion in untapped debt capacity. It exited the second quarter with total cash and cash equivalents of $6.2 billion, which is sufficient to cover the company’s debt obligations of $1.5 billion.

The company expects to deploy capital to continue generating strong organic growth, close additional inorganic opportunities, support ratings and drive upgrades over time and execute accretive share repurchases. At present, it has $321 million remaining on existing share repurchase authorization.

Athene has an impressive Value Score of B. Back-tested results show that stocks with a Value Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best opportunities in the value investing space.

However, shares of this life insurer have lost 23.2% in the past year compared with the industry’s decline of 17.2%.


 

Nevertheless, the Zacks Consensus Estimate for 2021 earnings is pegged at $7.97, indicating a year-over-year increase of 33.2%.

Other Stocks to Consider

Some other top-ranked stocks in the insurance industry include Donegal Group Incorporation (DGICA - Free Report) , Manulife Financial Corp (MFC - Free Report) and Sun Life Financial Inc (SLF - Free Report) . While Donegal Group sports a Zacks Rank #1 (Strong Buy), Manulife Financial and Sun Life Financial carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Donegal surpassed estimates in each of the last four quarters, the average being 86.44%.

Manulife Financial surpassed estimates in two of the last four quarters, the average being 6.79%.

Sun Life Financial surpassed estimates in each of the last four quarters, the average being 11.58%.

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