Athene holding company shifts to US from Bermuda

Fitch Ratings has downgraded Bermuda-based life re/insurance holding company Athene’s preferred shares to BBB- from BBB after the company announced it plans to move its domicile to Delaware.

The move, announced by the company on December 12, was expected to be completed by December 31 and is not expected to adversely affect the operation of its Bermuda insurance subsidiaries or its tax profile. 

Fitch said Athene’s rating, its senior unsecured notes and its insurance operating affiliates were unaffected by the rating action.

But the ratings agency said Athene’s performance risk has increased because the US regulatory environment is classified as following a ring-fencing approach. In the event of severe stress, the Bermuda Monetary Authority was likely to restrict the movement of capital to the US parent from its  Bermuda re/insurers. 

“Relative to Fitch's previous view of non-performance, and consistent with the belief that deferral features are unlikely to be trigged except in times of severe stress, we believe non-performance risk more closely resembles that of a traditional ring-fenced environment as in our view Bermuda is now more likely to impose additional restrictions on the movement of capital to an offshore holding company in a severe stress environment,” the agency said. 

At the same time, Athene has moved to reassure Bermuda residents that the move does not constitute a weakening of its commitment to the island. 

The move to Delaware is as a result of the merger two years ago between Athene and Apollo, creating the combined entity Apollo Global Management, Inc, a high-growth alternative asset manager with asset management and retirement services capabilities, a spokeswoman for the company told the Bermuda Royal Gazette. 

“Athene is a full US taxpayer,“ the spokeswoman said, ”so it just made sense to redomesticate to Delaware, versus staying in Bermuda. But it has no impact at all on the Bermuda operations.“

A statement from the company said it does not expect the redomestication to adversely impact the operations of its Bermuda insurance subsidiaries or the Company’s corporate tax profile or capital position. 

No shareholder action is required in connection with the Redomestication, and all shareholders’ existing economic rights under the terms of the securities they hold will remain the same.

Under the move, the company said it will be subject to US federal income tax and will not be considered a passive foreign investment company or controlled foreign corporation. 

“Following the redomestication, non-US holders of outstanding series of preference shares or the outstanding series of the Company’s senior notes generally will be subject to a 30% withholding tax or a lower treaty rate on the amount of any dividends or interest payable to them, unless an exception applies. 

Fitch said further positive rating actions were unlikely over the near term “absent a material change in Fitch's view of Athene's company profile”.