The Athene Holding, Ltd. 7.750% Fixed Rate-Reset, Series E, Non-Cumulative Perpetual Preferred (ATH-PE) has investment grade ratings (Moody’s Baa3, S&P BBB). The company’s senior unsecured debt is rated Baa1/BBB+. In the current environment, we are more comfortable with an issue of this insurance company than with issues of regional banks, which are very prominent in the preferred stock universe, writes Marty Fridson, editor of Forbes/Fridson Income Securities.
The issue is not immune from the risk of illiquidity that could cause its price to drop off temporarily if the economy and financial markets falter in 2024, but its dividends should not be in jeopardy of suspension. ATH-E’s dividends are qualified, meaning that they are taxed at a 15% or 20% rate, depending on the holder’s bracket.
We consider the issue suitable for low- to medium-risk taxable portfolios. Athene Holding Ltd. is a major specialty insurer, focusing on retirement services, with $237 billion in total assets. It has been owned by Apollo Global Management (Apollo) since January 1, 2022.
Athene issues, reinsures, and acquires savings products for individuals’ and institutions’ retirement needs. The company offers annuities backed by the financial strength of its Single-A-rated rated operating subsidiaries. Business operations are managed across multiple distribution channels, including Retail, Pension Group Annuities, Acquisitions and Block Reinsurance.
The company’s 7.750% fixed rate-reset preferred is redeemable on or after December 30, 2027 at par (25), plus declared and unpaid dividends. If the preferred is not called in its entirety, the dividend resets to the five-year US Treasury rate plus 3.962%.
Financial flexibility is solid, evidenced by low financial leverage and strong fixed charge coverage. This preferred is qualified, with dividends taxed at the 15%-20% rate. This security is suitable for low- to medium-risk taxable portfolios. The CUSIP is 04686J507.
