Apollo-Backed Athene Invests $8.4 Billion in Year at 6.76% Yield

Athene Holding Ltd., the insurer tied to Apollo Global Management LLC, added $8.4 billion of investments over 12 months at an average yield of 6.76 percent as the company pursues mortgage-related wagers.

Net investment income for the quarter ended June 30 was “in line” with results from the prior three months, when the figure was $579 million, Athene said in a letter posted today on the website of Apollo Alternative Assets.

Athene has targeted securities backed by commercial and residential mortgages since taking over a U.S. life and annuity business from Aviva Plc last October. The insurer has also been shifting into collateralized loan obligations to improve yields as the Federal Reserve keeps interest rates near record lows.

“The company’s investments continue to perform well,” Athene Chief Financial Officer Brenda Cushing said in the letter, dated Oct. 19. “Our portfolio continues to be well-diversified and high quality.”

Athene has been scaling back from investment-grade corporate bonds. Debt from the most creditworthy companies yields about 3 percent, according to Bank of America Merrill Lynch index data.

Cushing said that Athene hired Tom Daula as chief risk officer this month and also added Rich Burness as global head of tax as the insurer seeks to improve financial reporting amid plans for an eventual public offering. Daula previously managed risk at Morgan Stanley and worked at UBS AG’s investment bank. Burness had been a senior partner at Deloitte LLP, Athene said.

‘Material Weakness’

Athene has delayed the reporting of some financial data as it works to fix a “tax-related material weakness” in accounting tied to the Aviva deal, Cushing wrote in the letter to investors. AP Alternative Assets LP, which is managed by Apollo Alternative Assets, is Athene’s largest shareholder, and plans to report its own third-quarter results Oct. 30, according to today’s statement.

“We plan to add or improve software to support the work of our tax reporting area,” she wrote. “And we are in the middle of a comprehensive review of our processes for timely preparation of support for our tax accounting positions.”

Athene has also focused on integrating recently purchased businesses and the shift of more than 200 jobs to its West Des Moines, Iowa, operational headquarters from other U.S. locations. The company has completed the relocation from a Delaware office, and plans to close a location in Kansas around the end of this year, Cushing wrote.

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