Retirement services products provider Athene has announced nearly $1bn of combined capital deployment via a block reinsurance transaction with Lincoln Financial Group and a new share repurchase authorization.


Image: Athene signs reinsurance agreement with Lincoln Financial Group worth $1bn. Photo: Courtesy of rawpixel/Unsplash

Block Reinsurance Transaction with Lincoln Financial Group

Athene’s subsidiary, Athene Life Re (ALRe), has entered into a reinsurance agreement with The Lincoln National Life Insurance (Lincoln), a subsidiary of Lincoln Financial Group.

Under the agreement, ALRe agreed to reinsure an 80% quota share of a $9.6bn in-force block of fixed deferred and fixed indexed annuities on a modified coinsurance basis.

In total, approximately $7.7bn of statutory reserves will be ceded to ALRe, supported by a diversified portfolio of assets. Lincoln will continue to service and administer the in-force policies within the block. In order to consummate the transaction, Athene has deployed approximately $700m of capital in aggregate, which includes capital to support the block and a ceding commission paid by ALRe.

The transaction was dated on 7 December, this year with an effective date of 1 October, this year. The transaction is expected to be accretive to the company’s 2019 adjusted operating income per share. At a later date, ALRe may elect to cede a minority share of the liabilities from this transaction to an affiliate.

Athene CEO Jim Belardi said: “Following the flow reinsurance treaty announced last year, we are pleased to deepen our partnership with Lincoln Financial Group through this block reinsurance transaction on business that is well understood by Athene.

“This is further evidence that Athene is well positioned and accepted as a solutions provider of choice because of our expertise, our strong capital position, and our ability to successfully close transactions that build long-term shareholder value.”

Athene is a leader in fixed annuity reinsurance. Through its subsidiary, ALRe, one of Bermuda’s largest annuity reinsurance companies, Athene has completed transactions with 23 third-party cedents since its inception.

Incorporated in 2009, ALRe’s core business is fixed annuity reinsurance, which helps third-party companies manage their business and improve their financial results. Wells Fargo served as exclusive financial advisor to Athene in this transaction.

New Share Repurchase Authorization

Athene has also announced that its board of directors has approved a new authorization for the repurchase of up to $250m of the company’s outstanding common stock.

Jim Belardi said: “This new share repurchase authorization is consistent with our flexible and opportunistic approach toward managing shareholder capital.

“We have a strong track record of delivering mid-to-high teens returns on equity, resulting in 17% compound annual growth in adjusted book value per share over the past nine years. We continually evaluate the various high return capital deployment options available across our organic and inorganic channels, as well as our balance sheet. We believe the current market valuation of our shares significantly undervalues the embedded earnings power and attractive growth opportunities of our business. Today’s announcement introducing an opportunistic share repurchase authorization represents a highly accretive capital deployment opportunity and reflects our board of directors’ continued confidence in our ability to generate compelling long-term value for shareholders.”

The share repurchase authorization allows the company to repurchase shares from time to time in large, opportunistic privately negotiated transactions. The authorization also provides flexibility for share repurchases through open market transactions, or other means that will allow for attractive and opportunistic execution within the guidelines approved by Athene’s board of directors.

The size and timing of these repurchases will depend on legal requirements, market and economic conditions, and other factors, and share repurchases may be exercised in varying sizes. The share repurchase authorization is intended to repurchase the company’s Class A common shares, and has no expiration date, but may be modified, suspended, or terminated at any time by the company’s board of directors.

Source: Company Press Release