Fitch Assigns Initial 'A-' IFS Ratings to Athene Subsidiaries; Outlook Stable

CHICAGO--()--Fitch Ratings has assigned initial 'A-' Insurer Financial Strength (IFS) ratings to Athene Annuity and Life Company (Athene Iowa), an Iowa-domiciled insurer; Athene Annuity & Life Assurance Company of New York (Athene New York), a New York-domiciled insurer; and Athene Life Re Ltd. (Athene Life Re), a Bermuda-domiciled reinsurer.

At the same time, Fitch has assigned a long-term Issuer Default Rating (IDR) of 'BBB' to Athene Holding Ltd. (AHL), a privately held Bermuda-domiciled insurance holding company.

The Rating Outlook is Stable.

KEY RATING DRIVERS

Athene Annuity & Life Assurance Company (Athene Delaware) and Athene Life Re are subsidiaries of AHL. Athene Iowa and Athene New York are subsidiaries of Athene Delaware. Under Fitch's insurance rating methodology, Athene Delaware, Athene Iowa, Athene New York and Athene Life Re are considered core affiliates of AHL and therefore are assigned the same ratings. Their status as core subsidiaries reflects common branding, management and resources. AHL uses affiliated reinsurance and currently cedes 80% of its onshore annuity business and 100% of its onshore funding agreement business to Athene Life Re.

The IFS ratings assigned to Athene Iowa, Athene New York and Athene Life Re are equivalent to the existing IFS rating of Athene Delaware. On May 11, 2015 Fitch upgraded the IFS rating of Athene Delaware to 'A-' from 'BBB+' with a Stable Outlook.

On May 12, 2015 Fitch published 'Insurance Notching Criteria: Exposure Draft of Proposed Methodology Changes'. Under Fitch's proposed new notching criteria, which is subject to a market consultation period prior to becoming final, Bermuda is considered a 'Group Solvency' regulatory environment and the U.S. is considered a 'Ring Fencing' regulatory environment.

In assigning an IDR rating to AHL, Fitch has used a 'Ring Fencing' assumption. Fitch believes that while the bulk of the capital and earnings resides in Bermuda, most of the group's business emanates from the U.S., and thus Fitch believes group operations and cash flows are still potentially heavily influenced by U.S. regulation. As such, Fitch has applied standard notching applicable to a 'Ring Fencing' regulatory environment and assigned a long-term IDR rating of 'BBB' to AHL, which is two notches below the IFS rating of 'A-'.

Under Fitch's procedures, the proposed notching criteria are used for new ratings assigned during the consultation period.

RATING SENSITIVITIES

While Fitch does not expect an upgrade in the near to intermediate term, key rating triggers that could result in a rating upgrade longer term include:

--Additional seasoning of the company's acquired in-force book of business and demonstrated profitability of new sales;
--Strong, consistent operating performance as measured by an operating ROE of 15% or higher;
--Maintenance of operating leverage on a consolidated GAAP basis of 11x or less.

The key rating triggers that could result in a ratings downgrade include:

--Large acquisitions that are either outside of AHL's historical risk preference and expertise or add significantly to the company's operating or financial leverage;
--Deterioration in operating performance, resulting in AHL's run-rate operating losses for four consecutive quarters;
--An increase in operating leverage on a consolidated GAAP basis to over 20x;
--Significant changes in asset allocation, which may include an increase in limited partnership exposure to over 15% or a large increase in BIG exposure.

Notching under both the current and proposed notching criteria would allow for a two-notch difference between the insurance subsidiaries' IFS ratings and the holding company IDR rating. Thus, AHL's IDR would be expected to remain the same whether or not the proposed notching criteria is made final.

Fitch has assigned the following ratings with a Stable Outlook:

Athene Holding Ltd.
--Long-term IDR at 'BBB'.

Athene Annuity and Life Company
Athene Annuity & Life Assurance Company of New York
Athene Life Re Ltd.
--IFS at 'A-'.

Fitch currently rates:
Athene Annuity & Life Assurance Company
--IFS at 'A-'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:
--'Insurance Rating Methodology' (Sept. 4, 2014);
--'Insurance Notching Criteria: Exposure Draft of Proposed Methodology Changes' (May 12, 2015).

Applicable Criteria and Related Research:
Insurance Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=756650
Exposure Draft: Insurance Notching Criteria (Proposed Methodology Changes)
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=865576

Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=984622
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Contacts

Fitch Ratings
Primary Analyst
Tana M. Higman
Director
+1-312-368-3122
Fitch Ratings Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Bradley S. Ellis, CFA
Director
+1-312-368-2089
or
Committee Chairperson
Douglas M. Pawlowski, CFA
Senior Director
+1-312-368-2054
or
Media Relations
Alyssa Castelli, New York, +1 212-908-0540
alyssa.castelli@fitchratings.com
Elizabeth Fogerty, New York, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Tana M. Higman
Director
+1-312-368-3122
Fitch Ratings Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Bradley S. Ellis, CFA
Director
+1-312-368-2089
or
Committee Chairperson
Douglas M. Pawlowski, CFA
Senior Director
+1-312-368-2054
or
Media Relations
Alyssa Castelli, New York, +1 212-908-0540
alyssa.castelli@fitchratings.com
Elizabeth Fogerty, New York, +1 212-908-0526
elizabeth.fogerty@fitchratings.com