[April 19, 2012]

Fitch Affirms Athene's IFS Rating at 'BBB+'; Outlook Stable

Fitch Ratings has affirmed the Insurer Financial Strength (IFS) rating of Athene Annuity & Life Assurance Company (Athene) at 'BBB+'. The Rating Outlook is Stable.

The rating rationale is based on the company's adequate risk-adjusted capitalization, moderately conservative investment portfolio and experienced management team. Offsetting these positives is the company's narrow focus on fixed annuities which expose the company to interest rate risk and results in above-average operating leverage. Additionally, Fitch believes Athene faces execution risk, as well as concentration and pricing risk until the number of reinsured blocks within the organization is expanded and seasoned.

Athene Holding Ltd. (AHL) completed three large transactions in 2011, including the purchase of Athene (formerly Liberty Life Insurance Company) from Royal Bank of Canada. Athene's wholly owned subsidiaries include Athene Life Insurance Company and Investors Insurance Corp. AHL also owns a Bermuda-domiciled reinsurer, Athene Life Re Ltd. Due to reinsurance contracts between the various legal entities, AHL is viewed by Fitch as a group.

Fitch will continue to monitor the company's operating results on these reinsured blocks of fixed annuity business in relation to management's initial assumptions. Fitch will also monitor the profitability of the company's retail annuity sales, which were re-launched in 2011, including the company's efforts to establish its brand name and re-engage its distribution partners. Fitch believes that while Athene's operating history is short, it is led by a team with extensive industry experience in managing net investment spread businesses.

Fitch views Athene's risk-based capitalization (RBC) s adequate. Favorably AHL has modest financial leverage and has no plans to introduce additional financial leverage in the near to intermediate term. The group's high total financing and commitments (TFC) ratio of 1.2 times (x) is due to leverage within a limited partnership interest in its investment portfolio.

Fitch believes Athene's exposure to credit risk within its investment portfolio is reasonable with below-investment-grade bonds at 5%. The company significantly reduced its exposure to commercial mortgage loans in 2011 and has no exposure to common and preferred stock or real estate. However, Fitch notes that the company has an above-average exposure to structured securities, in particular non-agency RMBS.

The key rating triggers that could result in an upgrade include:

--Sustained maintenance of RBC above 400%;

--Broad, sustained profitability and diversification in reinsured business.

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

--Decline in RBC below 300%;

--Deterioration in the performance of reinsured blocks, resulting in run-rate operating losses for four consecutive quarters.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

-- 'Insurance Rating Methodology' (Sept. 22, 2011).

Applicable Criteria and Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=651018

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