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ATHENE HOLDING LTD – 10-Q – Management’s Discussion and Analysis of Financial Condition and Results of Operations – InsuranceNewsNet

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Index to Management's Discussion and Analysis of Financial Condition and Results
                                 of Operations

              Overview                                              61

              Industry Trends and Competition                       63

              Key Operating and Non-GAAP Measures                   67

              Results of Operations                                 70

              Investment Portfolio                                  75

              Non-GAAP Measure Reconciliations                      94

              Liquidity and Capital Resources                       98

              Critical Accounting Estimates and Judgments          103




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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

Overview

We are a leading financial services company specializing in retirement services
that issues, reinsures and acquires retirement savings products designed for the
increasing number of individuals and institutions seeking to fund retirement
needs. We generate attractive financial results for our policyholders and
shareholders by combining our two core competencies of (1) sourcing long-term,
generally illiquid liabilities and (2) investing in a high-quality investment
portfolio, which takes advantage of the illiquid nature of our liabilities. Our
steady and significant base of earnings generates capital that we
opportunistically invest across our business to source attractively-priced
liabilities and capitalize on opportunities. Effective January 1, 2022, as a
result of the closing of the merger involving us and Apollo, Apollo Global
Management, Inc. (NYSE: APO) became the beneficial owner of 100% of our Class A
common shares and controls all of the voting power to elect members to our board
of directors.

We have established a significant base of earnings and, as of June 30, 2022,
have an expected annual net investment spread, which measures our investment
performance plus strategic capital management fees less the total cost of our
liabilities, of 1-2% over the 8.6 year weighted-average life of our net reserve
liabilities. The weighted-average life includes deferred annuities, pension
group annuities, funding agreements, payout annuities and other products.

Our total assets have grown to $234.3 billion as of June 30, 2022. For the six
months ended June 30, 2022 and the year ended December 31, 2021, we generated an
annualized net investment spread of 1.59% and 1.94%, respectively.

The following table presents the inflows generated from our organic and
inorganic channels:

                                             Successor                   Predecessor               Successor                    Predecessor
                                            Three months
                                               ended
                                              June 30,               Three months ended        Six months ended               Six months ended
(In millions)                                   2022                    June 30, 2021            June 30, 2022                 June 30, 2021
Retail                                      $   3,748                $          1,749          $        6,613                $         3,506
Flow reinsurance                                1,038                             279                   2,039                            578
Funding agreements1                             1,755                           4,074                   7,451                          7,300
Pension group annuities                         5,508                           1,474                   7,502                          4,367
Gross organic inflows                          12,049                           7,576                  23,605                         15,751
Gross inorganic inflows                             -                               -                       -                              -
Total gross inflows                            12,049                           7,576                  23,605                         15,751
Gross outflows2                                (4,925)                         (4,635)                 (9,808)                        (8,757)
Net flows                                   $   7,124                $          2,941          $       13,797                $         6,994

Inflows attributable to Athene              $   8,889                $          5,895          $       18,222                $        12,600
Inflows attributable to ACRA noncontrolling
interest                                        3,160                           1,681                   5,383                          3,151
Total gross inflows                         $  12,049                $          7,576          $       23,605                $        15,751

Outflows attributable to Athene             $  (4,062)               $         (3,941)         $       (8,134)               $        (7,422)
Outflows attributable to ACRA
noncontrolling interest                          (863)                           (694)                 (1,674)                        (1,335)
Total gross outflows2                       $  (4,925)               $         (4,635)         $       (9,808)               $        (8,757)

1 Funding agreements are comprised of funding agreements issued under our FABN and FABR programs, funding agreements issued to the FHLB and
long-term repurchase agreements. 2 Gross outflows consist of full and partial policyholder withdrawals on deferred annuities, death benefits,
pension group annuity benefit payments, payments on payout annuities and funding agreement maturities.



Our organic channels, including retail, flow reinsurance and institutional
products, provided gross inflows of $23.6 billion and $15.8 billion for the six
months ended June 30, 2022 and 2021, respectively, which were underwritten to
attractive, above target returns. Gross organic inflows increased $7.9 billion,
or 50% from the prior year, reflecting the strength of our multi-channel
distribution platform and our ability to quickly pivot into optimal and
profitable channels as opportunities arise. Withdrawals on our deferred
annuities, maturities of our funding agreements, payments on payout annuities
and pension group annuity payments (collectively, gross outflows), in the
aggregate were $9.8 billion and $8.8 billion for the six months ended June 30,
2022 and 2021, respectively. The increase in gross outflows was primarily driven
by the maturity of funding agreement issuances in 2022. We believe that our
credit profile, our current product offerings and product design capabilities as
well as our growing reputation as both a seasoned funding agreement issuer and a
reliable pension group annuity counterparty will continue to enable us to grow
our existing organic channels and allow us to source additional volumes of
profitably underwritten liabilities in various market environments. We plan to
continue to grow organically by expanding each of our retail, flow reinsurance
and institutional distribution channels. We believe that we have the right
people, infrastructure, scale and capital discipline to position us for
continued growth.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

Within our retail channel, we had fixed annuity sales of $6.6 billion and $3.5
billion for the six months ended June 30, 2022 and 2021, respectively. The
increase in our retail channel was driven by the strong performance of our
indexed annuity and MYGA products across our bank, independent marketing
organization (IMO) and broker-dealer channels, exhibiting strong sales execution
as interest rates have risen in the current year, and our expansion into large
financial institutions. We have maintained our disciplined approach to pricing,
including with respect to targeted underwritten returns. We aim to continue to
grow our retail channel by deepening our relationships with our approximately 53
IMOs; approximately 72,000 independent agents; and our growing network of 18
banks and 122 regional broker-dealers. Our strong financial position and
diverse, capital efficient products allow us to be dependable partners with
IMOs, banks and broker-dealers as well as consistently write new business. We
expect our retail channel to continue to benefit from our credit profile and
recent product launches. We believe this should support growth in sales at our
desired cost of funds through increased volumes via current IMOs, while also
allowing us to continue to expand our bank and broker-dealer channels.
Additionally, we continue to focus on hiring and training a specialized sales
force and creating products to capture new potential distribution opportunities.

In our flow reinsurance channel, we target reinsurance business consistent with
our preferred liability characteristics and, as such, flow reinsurance provides
another opportunistic channel for us to source liabilities with attractive
crediting rates. We generated inflows through our flow reinsurance channel of
$2.0 billion and $578 million for the six months ended June 30, 2022 and 2021,
respectively. The increase in our flow reinsurance channel from prior year was
driven by strong volumes from our new Japanese partner added during the second
half of 2021 as well as volumes from existing partnerships as rising rates have
led to more favorable pricing. We expect that our credit profile and our
reputation as a solutions provider will help us continue to source additional
reinsurance partners, which will further diversify our flow reinsurance channel.

Within our institutional channel, we generated inflows of $15.0 billion and
$11.7 billion for the six months ended June 30, 2022 and 2021, respectively. The
increase in our institutional channel was driven by higher pension group annuity
and funding agreement inflows. During the six months ended June 30, 2022, we
closed five pension group annuity transactions and issued annuity contracts in
the aggregate principal amount of $7.5 billion, compared to $4.4 billion during
the six months ended June 30, 2021. Since entering the pension group annuity
channel in 2017, we have closed 38 deals involving more than 410,000 plan
participants resulting in the issuance or reinsurance of group annuities of
$37.7 billion to date. We issued funding agreements in the aggregate principal
amount of $7.5 billion and $7.3 billion for the six months ended June 30, 2022
and 2021, respectively, which included nine FABN issuances in four different
currencies for the first half of the year. Funding agreements are comprised of
funding agreements issued under our FABN and FABR programs, funding agreements
issued to the FHLB and repurchase agreements with maturities exceeding one year
at issuance, with inflows in the aggregate principal amount of $4.3 billion,
$1.0 billion, $495 million and $1.6 billion, respectively, for the six months
ended June 30, 2022 and issuances outstanding of $23.0 billion, $2.0 billion,
$3.0 billion and $2.2 billion, respectively, as of June 30, 2022. We expect to
grow our institutional channel by continuing to engage in pension group annuity
transactions and programmatic issuances of funding agreements.

Our inorganic channel has contributed significantly to our growth through both
acquisitions and block reinsurance transactions. We believe our internal
transactions team, with support from Apollo, has an industry-leading ability to
source, underwrite and expeditiously close transactions. With support from
Apollo, we are a solutions provider with a proven track record of closing
transactions, which we believe makes us the ideal partner to insurance companies
seeking to restructure their business. We expect that our inorganic channel will
continue to be an important source of profitable growth in the future.

Executing our growth strategy requires that we have sufficient capital available
to deploy. We believe that we have significant capital available to us to
support our growth aspirations. As of June 30, 2022, we estimate that we have
approximately $6.6 billion in capital available to deploy, consisting of
approximately $3.2 billion in excess capital, $2.8 billion in untapped debt
capacity (assuming a peer average adjusted debt to capitalization ratio of 25%)
and $0.6 billion in available undrawn capital at ACRA, subject, in the case of
debt capacity, to favorable market conditions and general availability.

In order to support our growth strategies and capital deployment opportunities,
we established ACRA as a long-duration, on-demand capital vehicle. We own 36.55%
of the economic interests in ACRA, with the remaining 63.45% of the economic
interests being owned by ADIP, a series of funds managed by an affiliate of
Apollo. ACRA participates in certain transactions by drawing a portion of the
required capital for such transactions from third-party investors equal to
ADIP's proportionate economic interest in ACRA. This shareholder-friendly,
strategic capital solution allows us the flexibility to simultaneously deploy
capital across multiple accretive avenues, while maintaining a strong financial
position.

Merger with Apollo

On January 1, 2022, we completed our merger with AGM and are now a direct wholly
owned subsidiary of AGM. The total consideration for the transaction was $13.1
billion. The consideration was calculated based on historical AGM's December 31,
2021 closing share price multiplied by the AGM common shares issued in the share
exchange, as well as the fair value of stock-based compensation awards replaced,
fair value of warrants converted to AGM common shares and other equity
consideration, and effective settlement of pre-existing relationships and other
consideration.

At the closing of the merger with AGM, each issued and outstanding AHL Class A
common share (other than shares held by Apollo, the AOG or the respective direct
or indirect wholly owned subsidiaries of Athene or the AOG) was converted
automatically into 1.149 shares of AGM common shares with cash paid in lieu of
any fractional AGM common shares. In connection with the merger, AGM issued to
AHL Class A common shareholders 158.2 million AGM common shares in exchange for
137.6 million AHL Class A common shares that were issued and outstanding as of
the acquisition date, exclusive of the 54.6 million shares previously held by
Apollo immediately before the acquisition date.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations


AAA Investment

On April 1, 2022, we contributed certain of our alternative investments to AAA
in exchange for limited partnership interests in AAA. Apollo established AAA for
the purpose of providing a single vehicle through which we and third-party
investors can participate in a portfolio of alternative investments.
Additionally, we believe AAA enhances Apollo's ability to increase alternative
AUM by raising capital from third parties, which will allow Athene to achieve
greater scale and diversification for alternatives. Third-party investors began
to invest in AAA on July 1, 2022.


Industry Trends and Competition

Market Conditions

As a leading financial services company specializing in retirement services, we
are affected by numerous factors, including the condition of global financial
markets and the economy. Price fluctuations within equity, credit, commodity and
foreign exchange markets, as well as interest rates, which may be volatile and
mixed across geographies, can significantly impact the performance of our
business including but not limited to the valuation of investments and related
income we may recognize.

We carefully monitor economic and market conditions that could potentially give
rise to global market volatility and affect our business operations, investment
portfolio and derivatives, which includes global inflation. We have seen US
inflation continue to rise during the second quarter of 2022. The US Bureau of
Labor Statistics reported the annual US inflation rate increased to 9.1% as of
June 30, 2022, compared to 8.5% as of March 31, 2022 and continues to be the
highest rate since the 1980s. The increase in US inflation rate has been driven
by various factors, including the armed conflict between Ukraine and Russia,
supply chain disruptions, consumer demand, tight labor markets, historically low
albeit rising mortgage interest rates, a severely distorted supply/demand
housing imbalance, and residential vacancy rates. During the second quarter of
2022, the US Federal Reserve (Federal Reserve) followed through with its
commitment to take action to lessen inflation transpiring widely through the US
economy, resulting in considerable market volatility. The Federal Reserve voted
to increase the federal funds rate during the second quarter of 2022. Further,
the increasing yield disparity globally drove the strength of the US dollar,
with the US dollar achieving near parity to the Euro in the last weeks of the
second quarter.

Adverse economic conditions may result from domestic and global economic and
political developments, including plateauing or decreasing economic growth and
business activity, civil unrest, geopolitical tensions or military action, such
as the armed conflict between Ukraine and Russia and corresponding sanctions
imposed by the US and other countries, and new or evolving legal and regulatory
requirements on business investment, hiring, migration, labor supply and global
supply chains.

Equity markets dropped in the second quarter of 2022 as recession concerns grew,
and credit markets faced similar underperformance. The Bureau of Economic
Analysis reported real GDP decreased at an annual rate of 0.9% in the second
quarter of 2022. As it appears likely that negative GDP growth has existed for
more than a quarter thus far, one technical definition for a recession appears
to have been met. However, the US unemployment rate remained unchanged at 3.6%
as of June 30, 2022, as reported by the US Bureau of Labor Statistics, and low
unemployment poses an unusual situation for a recession. As of July 2022, the
International Monetary Fund estimated the US will expand by 2.3% in 2022 and
1.0% in 2023. The price of crude oil appreciated by 5.5% during the quarter,
after appreciating by 33.3% the first quarter of 2022, in large part due to
constrained supply due to the ongoing conflict between Ukraine and Russia, and
is expected to remain elevated in the foreseeable future.

Interest Rate Environment

Rates have already moved meaningfully higher than most predictions for 2022,
although the end of the second quarter found the ten-year US Treasury within the
2.80% - 3.20% range. Given the Federal Reserve's continued focus on curbing
inflation and the recessionary concerns discussed previously, it is difficult to
predict rates in the short term.

Our investment portfolio consists predominantly of fixed maturity investments.
See - Investment Portfolio. If prevailing interest rates were to rise, we
believe the yield on our new investment purchases may also rise and our
investment income from floating rate investments would increase, while the value
of our existing investments may decline. If prevailing interest rates were to
decline, it is likely that the yield on our new investment purchases may decline
and our investment income from floating rate investments would decrease, while
the value of our existing investments may increase.

We address interest rate risk through managing the duration of the liabilities
we source with assets we acquire through ALM modeling. As part of our investment
strategy, we purchase floating rate investments, which we expect would perform
well in a rising interest rate environment, as we are currently experiencing,
and which we expect would underperform in a declining rate environment. As of
June 30, 2022, our net invested asset portfolio includes $38.9 billion of
floating rate investments, or 21% of our net invested assets, and our net
reserve liabilities include $14.3 billion of floating rate liabilities at
notional, or 8% of our net invested assets, translating to $24.6 billion of net
floating rate assets, or 13% of our net invested assets.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

If prevailing interest rates were to rise, we believe our products would be more
attractive to consumers and our sales would likely increase. If prevailing
interest rates were to decline, it is likely that our products would be less
attractive to consumers and our sales would likely decrease. In periods of
prolonged low interest rates, the net investment spread may be negatively
impacted by reduced investment income to the extent that we are unable to
adequately reduce policyholder crediting rates due to policyholder guarantees in
the form of minimum crediting rates or otherwise due to market conditions. As of
June 30, 2022, most of our products were deferred annuities with 20% of our FIAs
at the minimum guarantees and 35% of our fixed rate annuities at the minimum
crediting rates. As of June 30, 2022, minimum guarantees on all of our deferred
annuities, including those with crediting rates already at their minimum
guarantees, were, on average, greater than 115 basis points below the crediting
rates on such deferred annuities, allowing us room to reduce rates before
reaching the minimum guarantees. Our remaining liabilities are associated with
immediate annuities, pension group annuity obligations, funding agreements and
life contracts for which we have little to no discretionary ability to change
the rates of interest payable to the respective policyholder or institution. A
significant majority of our deferred annuity products have crediting rates that
we may reset annually upon renewal, following the expiration of the current
guaranteed period. While we have the contractual ability to lower these
crediting rates to the guaranteed minimum levels, our willingness to do so may
be limited by competitive pressures.

See Part I-Item 3. Quantitative and Qualitative Disclosures About Market Risks
to this report and Part II-Item 7A. Quantitative and Qualitative Disclosures
About Market Risks in our 2021 Annual Report, which includes a discussion
regarding interest rate and other significant risks and our strategies for
managing these risks.

Discontinuation of certain IBORs (including LIBOR)

On December 31, 2021, (1) most LIBOR settings (i.e., 24 out of 35, including
1-week and 2-month US Dollar (USD) LIBOR as well as all other non-USD LIBOR
settings) ceased to be published and (2) a few of the most widely used GBP and
JPY LIBOR settings (i.e., 1-, 3- and 6- month GBP and JPY LIBOR settings) were
deemed permanently unrepresentative, but will continue to be published on a
synthetic basis, for a limited time period for the purpose of all legacy
contracts (except for cleared derivatives). The remaining USD LIBOR settings
(i.e., 1-, 3-, 6- and 12-month USD LIBOR settings) will continue to be
published, subject to limitations on use, and cease or become unrepresentative
on June 30, 2023. Without the intervention of the UK Financial Conduct Authority
using enhanced powers provided by the UK Government to compel continued panel
bank contribution by the IBA, the LIBOR administrator, LIBOR will cease
publication after June 30, 2023. Similar developments have occurred with respect
to other IBORs.

As a result of the expected discontinuation of certain IBORs, including LIBOR,
regulators and market participants in various jurisdictions have been working to
identify alternative reference rates that are compliant with the International
Organization of Securities Commission's standards for transaction-based
benchmarks. In the U.S., the Alternative Reference Rates Committee (ARRC), a
group of market and official sector participants, identified the Secured
Overnight Financing Rate (SOFR) as its recommended alternative benchmark rate.
Other alternative reference rates have been recommended in other jurisdictions
(e.g., in the United Kingdom, the alternative benchmark rate for GBP LIBOR is
the Sterling Overnight Interbank Average Rate).

The discontinuation of IBORs could have a significant impact on the financial
markets and represents a material uncertainty to our business. In particular, to
manage the uncertainty surrounding the discontinuation of LIBOR, we have
established a LIBOR transition team and a transition plan. We have created an
Executive Steering Committee composed of senior executives to coordinate and
oversee the execution of our plan.

It is difficult to predict the full impact of the transition away from LIBOR on
our contracts whose value is tied to LIBOR. The value or profitability of these
contracts may be adversely affected.

As of June 30, 2022, we had contracts tied to LIBOR in the notional amounts set
forth in the table below:

                                                                                     Extending Beyond
(In millions)                                                Total Exposure           June 30, 2023
Investments                                                $        32,966          $        28,932
Product Liabilities                                                 10,696                    3,878
Derivatives Hedging Product Liabilities                             15,317                    6,898
Other Derivatives                                                    3,552                    3,552
Other Contracts                                                      1,663                    1,113
Total notional of contracts tied to LIBOR                  $        64,194          $        44,373



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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

Investments

As of June 30, 2022, our investments tied to LIBOR were in the following asset
classes:

(In millions)                        Total Exposure       Extending Beyond June 30, 2023
Multi-lateral Arrangements
Corporates                          $           793      $                           625
RMBS                                          2,897                                2,835
CMBS                                            635                                  483
CLO                                          14,899                               14,687
ABS                                           5,725                                5,291
Bank Loans                                    1,341                                1,198
Total Multi-lateral Arrangements             26,290                               25,119
Bi-lateral Arrangements
CML                                           6,551                                3,688
RML                                             125                                  125
Total Bi-lateral Arrangements                 6,676                                3,813
Total investments tied to LIBOR     $        32,966      $                  

28,932



Of the total notional value of investment-related contracts tied to LIBOR
extending beyond June 30, 2023, $25.1 billion, or 86.8%, relate to multi-lateral
arrangements. These arrangements are typically characterized by a large, diverse
set of unrelated holders, the majority or all of whom must consent to amendments
to the terms of the underlying investment instrument. Generally, when the
amendments concern a material term such as the determination of interest,
consent must be unanimous. Given the collective action issues inherent in such
structures, such consent is typically impracticable and beyond our control. The
existence and character of fallback provisions affected by the discontinuation
of LIBOR vary widely from instrument to instrument. Many of our legacy contracts
may not contemplate the permanent discontinuation of LIBOR and upon LIBOR's
discontinuation may result in the conversion of the instrument from a floating-
to a fixed-rate instrument or may involve a significant degree of uncertainty as
to the method of determining interest. To the extent that such legacy
arrangements do not contemplate the permanent discontinuation of LIBOR, we would
most likely look to some broad-based solution, such as the New York or US
federal LIBOR transition law, to rectify such deficiency. To the extent that
such a solution is ineffective, for example as a result of being ruled
unconstitutional, we would likely be required to undertake a re-evaluation of
affected investments, which might result in the disposition of individual
positions. To the extent that individual positions are retained, we may incur
adverse financial consequences, including any mark-to-market impacts resulting
from those investments that convert from a floating to a fixed rate. To the
extent that the fallback rates ultimately used to determine interest payable on
structured securities do not align with the fallback rates used to determine
interest payable on the underlying assets, economic losses could be sustained on
the overall structure.

The remaining notional value of investment-related contracts tied to LIBOR
extending beyond June 30, 2023 of $3.8 billion, or 13.2%, relates to bi-lateral
arrangements that are capable of being amended through negotiation with the
relevant counterparty.

As our investment manager, Apollo maintains the documentation associated with
the assets in our investment portfolio. We are therefore dependent upon Apollo
for the successful completion of our LIBOR transition efforts relating to our
investment portfolio. See Part I-Item 1A. Risk Factors-Risks Relating to Our
Business Operations-Uncertainty relating to the LIBOR Calculation process and
the phasing out of LIBOR after a future date may adversely affect the value of
our investment portfolio, our ability to achieve our hedging objectives and our
ability to issue funding agreements bearing a floating rate of interest included
in our 2021 Annual Report. Apollo's failure to fulfill its responsibilities
could have an adverse impact on our results of operations and ability to timely
report accurate financial information.

Product Liabilities and Associated Hedging Instruments

As of June 30, 2022, we had product liabilities with a notional value of
approximately $10.7 billion for which LIBOR is a component in the determination
of interest credited, of which we expect $3.9 billion to have a current
crediting term that extends beyond June 30, 2023. For purposes of evaluating our
exposure to LIBOR, we only consider our exposure to the current crediting term,
which is typically one to two years. Upon renewal of the crediting term, we have
the ability to migrate policyholders into new strategies not involving LIBOR.
Generally, there are two categories of indices that use LIBOR in the
determination of interest credited, "excess return" indices (return of index in
excess of LIBOR) and indices that use LIBOR as a means to control volatility.
The indices to which these products are tied are primarily proprietary indices
for which key inputs are determined by the index sponsor. The index sponsor
generally has the right to unilaterally change the reference rate upon the
discontinuation of LIBOR. As a result, we do not anticipate any administrative
concerns in connection with the transition from LIBOR to a replacement rate with
respect to these products.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

As of June 30, 2022, we held derivatives with a notional value of approximately
$15.3 billion to hedge our exposure to these product liabilities, of which we
expect $6.9 billion to extend beyond June 30, 2023. Included within this
category are $4.9 billion of Eurodollar futures, of which we expect $3.2 billion
to extend beyond June 30, 2023. Exchange traded products, such as Eurodollar
futures, will follow the CME Group Inc.'s approach regarding the discontinuation
of LIBOR. The remaining derivatives in this category are primarily purchased to
hedge the current crediting period. We will be required to purchase new
derivatives in future periods to hedge future crediting periods associated with
the related existing product liabilities, which will expose us to potential
basis mismatch to the extent that the reference rate for the product liability
is not the same as the reference rate for the derivative instrument. These
derivatives are entered into pursuant to an ISDA Master Agreement and will
transition to SOFR in accordance with the process described below under the
caption Other Derivatives.

Other Derivatives

Our other derivative contracts tied to LIBOR are generally entered into pursuant
to an ISDA Master Agreement. ISDA published the ISDA 2020 IBOR Fallbacks
Protocol (Protocol) and released Supplement 70 to the 2006 ISDA Definitions
(Supplement) on October 23, 2020. The Protocol and Supplement include
appropriate fallbacks that contemplate the permanent discontinuation of LIBOR
and certain other IBORs. In January 2021, we joined industry peers by adhering
to the Protocol and terms of the Supplement, each of which became effective on
January 25, 2021. With respect to future transactions, we anticipate adoption of
the 2021 ISDA Interest Rate Definitions. To the extent that the fallbacks
incorporated into our other derivative contracts result in the use of a
replacement rate that differs from that employed in the contract being hedged,
we may experience basis mismatch. The Protocol contains templates for possible
bilateral amendments to legacy contracts for situations in which the fallbacks
contemplated by the Protocol give rise to potential basis risk. We intend to
evaluate whether and the extent to which we are subject to such basis risk, as
well as the possibility of using the available templates to mitigate such risk.

Other Contracts and Other Sources of Exposure

The "Other Contracts" category is comprised of our LIBOR-based floating rate
funding agreements, fixed-to-float Series A preference shares, and our credit
agreement, if any amounts were to be outstanding, all of which contemplate the
permanent discontinuation of LIBOR. These agreements are tied to LIBOR in a
manner that is not expected to have a significant impact upon LIBOR's
discontinuation or have fallback provisions in place that provide for the
determination of interest after the discontinuation of LIBOR. In addition to the
other contracts for which we have quantified our exposure, we are party to
contracts that are tied to LIBOR based upon the occurrence of some remote
contingency, such as the accrual of penalty interest, or for which LIBOR is
otherwise not a material term of the contract. These contracts do not lend
themselves to quantification and are lower in priority in our LIBOR remediation
efforts. Finally, LIBOR is used as a component in our internal derivative
valuation models. We are in the process of transitioning the benchmark yield
curve in such models from LIBOR to SOFR and we expect to complete the transition
prior to the discontinuation of LIBOR. Such transition may affect the valuation
of our derivative instruments.

We can provide no assurance that we will be successful at fully implementing our
plan prior to the discontinuation of LIBOR. Completion of certain components of
our plan are contingent upon market developments and are therefore not fully
within our control. To the extent management effort and attention is focused on
other matters, the timely completion of our plan could become more difficult.
Failure to fully implement our plan prior to the discontinuation of LIBOR may
have a material adverse effect on our business, financial position, results of
operations and cash flows and on our ability to timely report accurate financial
information.

Demographics

Over the next four decades, the retirement-age population is expected to
experience unprecedented growth. Technological advances and improvements in
healthcare are projected to continue to contribute to increasing average life
expectancy, and aging individuals must be prepared to fund retirement periods
that will last longer than ever before. Further, many working households in the
United States do not have adequate retirement savings. As a tool for addressing
the unmet need for retirement planning, we believe that many Americans have
begun to look to tax-efficient savings products with low-risk or guaranteed
return features and potential equity market upside. Our tax-efficient savings
products are well positioned to meet this increasing customer demand.

Competition

We operate in highly competitive markets. We face a variety of large and small
industry participants, including diversified financial institutions, insurance
and reinsurance companies and private equity firms. These companies compete in
one form or another for the growing pool of retirement assets driven by a number
of external factors such as the continued aging of the population and the
reduction in safety nets provided by governments and private employers. In the
markets in which we operate, scale and the ability to provide value-added
services and build long-term relationships are important factors to compete
effectively. We believe that our leading presence in the retirement market,
diverse range of capabilities and broad distribution network uniquely position
us to effectively serve consumers' increasing demand for retirement solutions,
particularly in the FIA market.

According to LIMRA, total fixed annuity market sales in the United States were
$35.2 billion for the three months ended March 31, 2022, a 13.5% increase from
the same time period in 2021, as a rise in interest rates spurred continued
growth in the US annuity market. In the total fixed annuity market, for the
three months ended March 31, 2022 (the most recent period for which specific
market share data is available), we were the fourth largest company based on
sales of $2.6 billion, translating to a 7.5% market share. For the three months
ended March 31, 2021, our market share was 5.4% with sales of $1.7 billion.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

According to LIMRA, total fixed-indexed annuity market sales in the United
States were $16.3 billion for the three months ended March 31, 2022, a 20.7%
increase from the same time period in 2021. For the three months ended March 31,
2022 (the most recent period for which specific market share data is available),
we were the largest provider of FIAs based on sales of $2.2 billion, and our
market share for the same period was 13.7%. For the three months ended March 31,
2021, we were the largest provider of FIAs based on sales of $1.6 billion,
translating to a 12.1% market share.

According to LIMRA, total registered indexed linked annuity (RILA) market sales
in the United States were $9.6 billion for the three months ended March 31,
2022, a 6.0% increase from the same time period in 2021. For the three months
ended March 31, 2022 (the most recent period for which specific market share
data is available), we were the ninth largest provider of RILAs based on sales
of $235 million, and our market share for the same period was 2.4%. For the
three months ended March 31, 2021, we were the tenth largest provider of RILAs
based on sales of $78 million, translating to a 0.9% market share. We believe
RILAs represent a significant growth opportunity for Athene.


Key Operating and Non-GAAP Measures

In addition to our results presented in accordance with GAAP, we present certain
financial information that includes non-GAAP measures. Management believes the
use of these non-GAAP measures, together with the relevant GAAP measures,
provides information that may enhance an investor's understanding of our results
of operations and the underlying profitability drivers of our business. The
majority of these non-GAAP measures are intended to remove from the results of
operations the impact of market volatility (other than with respect to
alternative investments) as well as integration, restructuring and certain other
expenses which are not part of our underlying profitability drivers, as such
items fluctuate from period to period in a manner inconsistent with these
drivers. These measures should be considered supplementary to our results in
accordance with GAAP and should not be viewed as a substitute for the
corresponding GAAP measures.

Spread Related Earnings (SRE)

Spread related earnings is a pre-tax non-GAAP measure used to evaluate our
financial performance excluding market volatility and expenses related to
integration, restructuring, stock compensation and other expenses. Our spread
related earnings equals net income (loss) available to AHL common shareholder
adjusted to eliminate the impact of the following:

•Investment Gains (Losses), Net of Offsets-Consists of the realized gains and
losses on the sale of AFS securities, the change in fair value of reinsurance
assets, unrealized gains and losses, changes in the credit loss allowance, and
other investment gains and losses. Unrealized, allowances and other investment
gains and losses are comprised of the fair value adjustments of trading
securities (other than CLOs) and mortgage loans, investments held under the fair
value option and our investment in Apollo, derivative gains and losses not
hedging FIA index credits, and the change in credit loss allowances recognized
in operations net of the change in AmerUs Closed Block fair value reserve
related to the corresponding change in fair value of investments. Investment
gains and losses are net of offsets related to DAC and DSI amortization and
changes to guaranteed lifetime withdrawal benefit (GLWB) and guaranteed minimum
death benefit (GMDB) reserves (together, GLWB and GMDB reserves represent rider
reserves) as well as the market value adjustments (MVA) associated with
surrenders or terminations of contracts.

•Change in Fair Values of Derivatives and Embedded Derivatives - FIAs, Net of
Offsets-Consists of impacts related to the fair value accounting for derivatives
hedging the FIA index credits and the related embedded derivative liability
fluctuations from period to period. The index reserve is measured at fair value
for the current period and all periods beyond the current policyholder index
term. However, the FIA hedging derivatives are purchased to hedge only the
current index period. Upon policyholder renewal at the end of the period, new
FIA hedging derivatives are purchased to align with the new term. The difference
in duration between the FIA hedging derivatives and the index credit reserves
creates a timing difference in earnings. This timing difference of the FIA
hedging derivatives and index credit reserves is included as a non-operating
adjustment, net of offsets related to DAC and DSI amortization and changes to
rider reserves.

We primarily hedge with options that align with the index terms of our FIA
products (typically 1-2 years). On an economic basis, we believe this is
suitable because policyholder accounts are credited with index performance at
the end of each index term. However, because the term of an embedded derivative
in an FIA contract is longer-dated, there is a duration mismatch which may lead
to mismatches for accounting purposes.


•Integration, Restructuring, and Other Non-operating Expenses-Consists of
restructuring and integration expenses related to acquisitions and block
reinsurance costs as well as certain other expenses, which are not predictable
or related to our underlying profitability drivers.

•Stock Compensation Expense-Consists of stock compensation expenses associated
with our share incentive plans, including long-term incentive expenses, which
are not related to our underlying profitability drivers and fluctuate from time
to time due to the structure of our plans.

•Income Tax (Expense) Benefit -Consists of the income tax effect of all income
statement adjustments, including our Apollo investment, and is computed by
applying the appropriate jurisdiction's tax rate to all adjustments subject to
income tax.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations


We consider these adjustments to be meaningful adjustments to net income (loss)
available to AHL common shareholder for the reasons discussed in greater detail
above. Accordingly, we believe using a measure which excludes the impact of
these items is useful in analyzing our business performance and the trends in
our results of operations. Together with net income (loss) available to AHL
common shareholder, we believe spread related earnings provides a meaningful
financial metric that helps investors understand our underlying results and
profitability. Spread related earnings should not be used as a substitute for
net income (loss) available to AHL common shareholder.

Adjusted Debt to Capital Ratio

Adjusted debt to capital ratio is a non-GAAP measure used to evaluate our
capital structure excluding the impacts of AOCI and the cumulative changes in
fair value of funds withheld and modco reinsurance assets as well as mortgage
loan assets, net of DAC, DSI, rider reserve and tax offsets. Adjusted debt to
capital ratio is calculated as total long-term and short-term debt at notional
value divided by adjusted capitalization. Adjusted capitalization includes our
adjusted AHL common shareholder's equity, preferred stock and the notional value
of our debt. Adjusted AHL common shareholder's equity is calculated as the
ending AHL shareholders' equity excluding AOCI, the cumulative changes in fair
value of funds withheld and modco reinsurance assets and mortgage loan assets as
well as preferred stock. These adjustments fluctuate period to period in a
manner inconsistent with our underlying profitability drivers as the majority of
such fluctuation is related to the market volatility of the unrealized gains and
losses associated with our AFS securities. Except with respect to reinvestment
activity relating to acquired blocks of businesses, we typically buy and hold
AFS investments to maturity throughout the duration of market fluctuations,
therefore, the period-over-period impacts in unrealized gains and losses are not
necessarily indicative of current operating fundamentals or future performance.
Accordingly, we believe using measures which exclude AOCI and the cumulative
changes in fair value of funds withheld and modco reinsurance assets as well as
mortgage loan assets are useful in analyzing trends in our operating results.
Adjusted debt to capital ratio should not be used as a substitute for the debt
to capital ratio. However, we believe the adjustments to shareholders' equity
are significant to gaining an understanding of our capitalization, debt
utilization and debt capacity.

Net Investment Spread and Other Operating Expenses

Net investment spread is a key measure of profitability. Net investment spread
measures our investment performance plus our strategic capital management fees
from ACRA, less our total cost of funds. Net investment earned rate is a key
measure of our investment performance while cost of funds is a key measure of
the cost of our policyholder benefits and liabilities.

Net investment earned rate is a non-GAAP measure we use to evaluate the
performance of our net invested assets that does not correspond to GAAP net
investment income. Net investment earned rate is computed as the income from our
net invested assets divided by the average net invested assets, for the relevant
period. To enhance the ability to analyze these measures across periods, interim
periods are annualized. The adjustments to net investment income to arrive at
our net investment earned rate add (a) alternative investment gains and losses,
(b) gains and losses related to trading securities for CLOs, (c) net VIE impacts
(revenues, expenses and noncontrolling interest), (d) forward points gains and
losses on foreign exchange derivative hedges and (e) the change in fair value of
reinsurance assets, and removes the proportionate share of the ACRA net
investment income associated with the ACRA noncontrolling interest. We include
the income and assets supporting our change in fair value of reinsurance assets
by evaluating the underlying investments of the funds withheld at interest
receivables and we include the net investment income from those underlying
investments which does not correspond to the GAAP presentation of change in fair
value of reinsurance assets. We exclude the income and assets supporting
business that we have exited through ceded reinsurance including funds withheld
agreements. We believe the adjustments for reinsurance provide a net investment
earned rate on the assets for which we have economic exposure.

Cost of funds includes liability costs related to cost of crediting on both
deferred annuities and institutional products as well as other liability costs,
but does not include the proportionate share of the ACRA cost of funds
associated with the noncontrolling interest. Cost of crediting on deferred
annuities is the interest credited to the policyholders on our fixed strategies
as well as the option costs on the indexed annuity strategies. With respect to
FIAs, the cost of providing index credits includes the expenses incurred to fund
the annual index credits, and where applicable, minimum guaranteed interest
credited. Cost of crediting on institutional products is comprised of (i)
pension group annuity costs, including interest credited, benefit payments and
other reserve changes, net of premiums received when issued, and (ii) funding
agreement costs, including the interest payments and other reserve changes.
Other liability costs include DAC, DSI and VOBA amortization, change in rider
reserves, the cost of liabilities on products other than deferred annuities and
institutional products, premiums, product charges and other revenues. Cost of
funds is computed as the total liability costs divided by the average net
invested assets, for the relevant period. To enhance the ability to analyze
these measures across periods, interim periods are annualized. We believe a
measure like cost of funds is useful in analyzing the trends of our core
business operations and profitability. While we believe cost of funds is a
meaningful financial metric and enhances our understanding of the underlying
profitability drivers of our business, it should not be used as a substitute for
total benefits and expenses presented under GAAP.

Net investment earned rate, cost of funds, and net investment spread are
non-GAAP measures we use to evaluate the profitability of our business. We
believe these metrics are useful in analyzing the trends of our business
operations, profitability and pricing discipline. While we believe each of these
metrics are meaningful financial metrics and enhance our understanding of the
underlying profitability drivers of our business, they should not be used as a
substitute for net investment income or total benefits and expenses presented
under GAAP.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

Other operating expenses excludes integration, restructuring and other
non-operating expenses, stock compensation and long-term incentive plan
expenses, interest expense and policy acquisition expenses. We believe a measure
like other operating expenses is useful in analyzing the trends of our core
business operations and profitability. While we believe other operating expenses
is a meaningful financial metric and enhances our understanding of the
underlying profitability drivers of our business, it should not be used as a
substitute for policy and other operating expenses presented under GAAP.

Net Invested Assets

In managing our business, we analyze net invested assets, which does not
correspond to total investments, including investments in related parties, as
disclosed in our consolidated financial statements and notes thereto. Net
invested assets represents the investments that directly back our net reserve
liabilities as well as surplus assets. Net invested assets is used in the
computation of net investment earned rate, which allows us to analyze the
profitability of our investment portfolio. Net invested assets includes (a)
total investments on the consolidated balance sheets with AFS securities at cost
or amortized cost, excluding derivatives, (b) cash and cash equivalents and
restricted cash, (c) investments in related parties, (d) accrued investment
income, (e) VIE assets, liabilities and noncontrolling interest adjustments, (f)
net investment payables and receivables, (g) policy loans ceded (which offset
the direct policy loans in total investments) and (h) an allowance for credit
losses. Net invested assets also excludes assets associated with funds withheld
liabilities related to business exited through reinsurance agreements and
derivative collateral (offsetting the related cash positions). We include the
underlying investments supporting our assumed funds withheld and modco
agreements in our net invested assets calculation in order to match the assets
with the income received. We believe the adjustments for reinsurance provide a
view of the assets for which we have economic exposure. Net invested assets
includes our proportionate share of ACRA investments, based on our economic
ownership, but does not include the proportionate share of investments
associated with the noncontrolling interest. Net invested assets also includes
our investment in Apollo for prior periods. Our net invested assets are averaged
over the number of quarters in the relevant period to compute our net investment
earned rate for such period. While we believe net invested assets is a
meaningful financial metric and enhances our understanding of the underlying
drivers of our investment portfolio, it should not be used as a substitute for
total investments, including related parties, presented under GAAP.

Net Reserve Liabilities

In managing our business, we also analyze net reserve liabilities, which does
not correspond to total liabilities as disclosed in our consolidated financial
statements and notes thereto. Net reserve liabilities represent our policyholder
liability obligations net of reinsurance and is used to analyze the costs of our
liabilities. Net reserve liabilities include (a) interest sensitive contract
liabilities, (b) future policy benefits, (c) dividends payable to policyholders,
and (d) other policy claims and benefits, offset by reinsurance recoverable,
excluding policy loans ceded. Net reserve liabilities include our proportionate
share of ACRA reserve liabilities, based on our economic ownership, but do not
include the proportionate share of reserve liabilities associated with the
noncontrolling interest. Net reserve liabilities is net of the ceded liabilities
to third-party reinsurers as the costs of the liabilities are passed to such
reinsurers and, therefore, we have no net economic exposure to such liabilities,
assuming our reinsurance counterparties perform under our agreements. The
majority of our ceded reinsurance is a result of reinsuring large blocks of life
business following acquisitions. For such transactions, GAAP requires the ceded
liabilities and related reinsurance recoverables to continue to be recorded in
our consolidated financial statements despite the transfer of economic risk to
the counterparty in connection with the reinsurance transaction. While we
believe net reserve liabilities is a meaningful financial metric and enhances
our understanding of the underlying profitability drivers of our business, it
should not be used as a substitute for total liabilities presented under GAAP.

Sales

Sales statistics do not correspond to revenues under GAAP but are used as
relevant measures to understand our business performance as it relates to
inflows generated during a specific period of time. Our sales statistics include
inflows for fixed rate annuities and FIAs and align with the LIMRA definition of
all money paid into an individual annuity, including money paid into new
contracts with initial purchase occurring in the specified period and existing
contracts with initial purchase occurring prior to the specified period
(excluding internal transfers). While we believe sales is a meaningful metric
and enhances our understanding of our business performance, it should not be
used as a substitute for premiums presented under GAAP.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

Results of Operations

We completed our merger with AGM on January 1, 2022 and have elected pushdown
accounting in which we used AGM's basis of accounting that reflects the fair
market value of our assets and liabilities as of the date of the merger. The
resulting change in the value of our assets and liabilities limits the
comparability of our financial results for the Predecessor and Successor
periods.

The following summarizes the consolidated results of operations for two periods,
Predecessor and Successor, which relate to the period preceding and period
succeeding our merger with AGM, respectively.

                                              Successor                   Predecessor               Successor                    Predecessor
                                             Three months
                                                ended
                                               June 30,               Three months ended        Six months ended               Six months ended
(In millions)                                    2022                    June 30, 2021            June 30, 2022                 June 30, 2021
Revenues                                     $   1,795                $          6,423          $        1,526                $        10,814
Benefits and expenses                            5,471                           4,433                   7,975                          8,685
Income (loss) before income taxes               (3,676)                          1,990                  (6,449)                         2,129
Income tax expense (benefit)                      (484)                            184                    (891)                           246
Net income (loss)                               (3,192)                          1,806                  (5,558)                         1,883
Less: Net income (loss) attributable to
noncontrolling interests                        (1,072)                            389                  (1,955)                          (148)
Net income (loss) attributable to Athene
Holding Ltd.                                    (2,120)                          1,417                  (3,603)                         2,031
Less: Preferred stock dividends                     35                              35                      70                             71
Net income (loss) available to AHL common
shareholder                                  $  (2,155)               $          1,382          $       (3,673)               $         1,960


Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30,
2021

In this section, references to 2022 refer to the three months ended June 30,
2022
and references to 2021 refer to the three months ended June 30, 2021.

Net Income (Loss) Available to AHL Common Shareholder

Net income (loss) available to AHL common shareholder decreased by $3.5 billion,
or 256%, to $(2.2) billion in 2022 from $1.4 billion in 2021. The decrease in
net income (loss) available to AHL common shareholder was driven by a $4.6
billion decrease in revenues and a $1.0 billion increase in benefits and
expenses, partially offset by a $1.5 billion decrease in noncontrolling
interests and a $668 million decrease in income tax expense.

Revenues

Revenues decreased by $4.6 billion to $1.8 billion in 2022 from $6.4 billion in
2021. The decrease was driven by a decrease in investment related gains and
(losses) and a decrease in net investment income, partially offset by an
increase in premiums.

Investment related gains and (losses) decreased by $8.4 billion to $(5.8)
billion in 2022 from $2.6 billion in 2021, primarily due to the changes in the
fair value of reinsurance assets, FIA hedging derivatives, mortgage loans,
trading and equity securities, realized losses on AFS securities and an increase
in the provision for credit losses, partially offset by foreign exchange gains
on derivatives. The change in fair value of reinsurance assets decreased
$4.1 billion primarily driven by the change in the value of the underlying
assets mainly related to credit spread widening compared to credit spread
tightening in the prior year and an increase in US Treasury rates compared to a
decrease in the prior year. The change in fair value of FIA hedging derivatives
decreased $2.7 billion primarily driven by the unfavorable performance of the
indices upon which our call options are based. The majority of our call options
are based on the S&P 500 index which decreased 16.4% in 2022, compared to an
increase of 8.2% in 2021. The $1.1 billion unfavorable change in mortgage loans
was primarily due to credit spread widening and an increase in US Treasury rates
in the current year as well as unfavorable foreign exchange impacts.
Additionally, at the beginning of the year, and in conjunction with our merger
with Apollo, we elected the fair value option on our mortgage loans, while in
prior periods they were stated at unpaid principal, adjusted for any unamortized
premium or discount, net of an allowance for credit losses. The unfavorable
changes in realized gains and losses on AFS securities of $652 million and fair
value of trading and equity securities of $501 million were primarily due to
credit spread widening compared to credit spread tightening in the prior year,
an increase in US Treasury rates compared to a decrease in prior year and
unfavorable economics. The unfavorable change in the provision for credit losses
of $174 million was primarily driven by unfavorable economics, including higher
allowances on CLO and ABS securities due to credit spread widening, impacts from
the conflict between Russia and Ukraine and exposure to China's real estate
market. The increase in foreign exchange gains on derivatives reflects
additional business denominated in foreign currencies and the strengthening of
the US dollar in the current quarter.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

Net investment income decreased by $291 million to $1.7 billion in 2022 from
$2.0 billion in 2021, primarily driven by the prior year favorable change in the
fair value of our investment in Apollo of $472 million, which was distributed to
AGM following the merger, less favorable alternative investment performance and
lower new money rates throughout 2021. As a result of purchase accounting, the
book value of our investment portfolio was marked up to fair value resulting in
an adverse impact to our net investment income. These decreases were partially
offset by growth in our investment portfolio attributed to strong inflows during
the previous twelve months and higher floating rate income related to higher
short-term interest rates.

Premiums increased by $4.0 billion to $5.6 billion in 2022 from $1.6 billion in
2021, driven by higher pension group annuity premiums compared to the prior
year.

Benefits and Expenses

Benefits and expenses increased by $1.0 billion to $5.5 billion in 2022 from
$4.4 billion in 2021. The increase was driven by an increase in future policy
and other policy benefits and an increase in policy and other operating
expenses, partially offset by a decrease in interest sensitive contract benefits
and a decrease in DAC, DSI and VOBA amortization.

Future policy and other policy benefits increased by $3.7 billion to $5.6
billion in 2022 from $2.0 billion in 2021, primarily attributable to higher
pension group annuity obligations, partially offset by a decrease in the change
in rider reserves, a decrease in the change in the AmerUs Closed Block fair
value liability and higher negative VOBA amortization resulting from purchase
accounting. The favorable change in rider reserves of $214 million was primarily
driven by the unfavorable change in reinsurance assets. The change in the AmerUs
Closed Block fair value liability was primarily due to unrealized losses on the
underlying investments, credit spreads widening and an increase in US Treasury
rates.

Policy and other operating expenses increased by $106 million to $358 million in
2022 from $252 million in 2021, primarily driven by significant growth in the
business and the amortization of newly established intangible assets as a result
of the merger.

Interest sensitive contract benefits decreased by $2.6 billion to $(621) million
in 2022 from $2.0 billion in 2021 primarily driven by a decrease in the change
in FIA fair value embedded derivatives of $2.7 billion and higher negative VOBA
amortization resulting from purchase accounting, partially offset by growth in
the block of business. As a result of purchase accounting, we marked our reserve
liabilities to fair value resulting in a favorable impact to our interest
sensitive contract benefits. The change in the FIA fair value embedded
derivatives was primarily due to the performance of the equity indices to which
our FIA policies are linked, primarily the S&P 500 index, which experienced a
decrease of 16.4% in 2022, compared to an increase of 8.2% in 2021, as well as
the favorable change in discount rates, partially offset by unfavorable
economics impacting policyholder projected benefits.

DAC, DSI and VOBA amortization decreased by $127 million to $125 million in 2022
from $252 million in 2021, primarily due to the unfavorable changes in
investment related gains and losses as a result of an unfavorable change in fair
value of reinsurance assets as well as impacts from purchase accounting
reflecting the removal of historical DAC and DSI, partially offset by the
establishment of a new VOBA asset.

Taxes

Income tax expense (benefit) decreased by $668 million to $(484) million in 2022
from $184 million in 2021. The income tax benefit for 2022 was calculated by
applying the 21% US statutory rate to the loss of our US and foreign
subsidiaries (net of noncontrolling interests), and was primarily driven by the
unfavorable changes in fair value of reinsurance assets and mortgage loans.

Our effective tax rate in the second quarter of 2022 was a benefit of 13%
compared to an expense of 9% in 2021. The effective tax rate in 2022 was due to
the change in fair value of reinsurance assets and mortgage loans subject to
tax. Our effective tax rate in 2021 was dependent upon the relationship of
income or loss subject to tax compared to the consolidated income or loss before
income taxes.

Noncontrolling Interests

Noncontrolling interests decreased by $1.5 billion to $(1.1) billion in 2022
from $389 million in 2021, primarily due to the unfavorable change in fair value
of reinsurance assets as a result of additional unrealized losses within
reinsurance investment portfolios.

Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021

In this section, references to 2022 refer to the six months ended June 30, 2022
and references to 2021 refer to the six months ended June 30, 2021.

Net Income (Loss) Available to AHL Common Shareholder

Net income (loss) available to AHL common shareholder decreased by $5.6 billion,
or 287%, to $(3.7) billion in 2022 from $2.0 billion in 2021. The decrease in
net income (loss) available to AHL common shareholder was driven by a $9.3
billion decrease in revenues, partially offset by a $1.8 billion decrease in
noncontrolling interests, a $1.1 billion decrease in income tax expense and a
$710 million decrease in benefits and expenses.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

Revenues

Revenues decreased by $9.3 billion to $1.5 billion in 2022 from $10.8 billion in
2021. The decrease was driven by a decrease in investment related gains and
losses and a decrease in net investment income, partially offset by an increase
in premiums.

Investment related gains and losses decreased by $12.1 billion to $(10.0)
billion in 2022 from $2.2 billion in 2021, primarily due to the changes in fair
value of reinsurance assets, FIA hedging derivatives, mortgage loans, trading
and equity securities, realized losses on AFS securities and an increase in the
provision for credit losses, partially offset by foreign exchange gains on
derivatives. The change in fair value of reinsurance assets decreased $5.5
billion primarily driven by the change in the value of the underlying assets
mainly related to credit spread widening compared to credit spread tightening in
the prior year and a larger increase in US Treasury rates in the current year.
The change in fair value of FIA hedging derivatives decreased $4.0 billion
primarily driven by the unfavorable performance of the indices upon which our
call options are based. The majority of our call options are based on the S&P
500 index which decreased 20.6% in 2022, compared to an increase of 14.4% in
2021. The $1.9 billion unfavorable change in mortgage loans was primarily due to
credit spread widening and an increase in US Treasury rates in the current year
as well as unfavorable foreign exchange impacts. Additionally, at the beginning
of the year, and in conjunction with our merger with Apollo, we elected the fair
value option on our mortgage loans, while in prior periods they were stated at
unpaid principal, adjusted for any unamortized premium or discount, net of an
allowance for credit losses. The unfavorable changes in realized gains and
losses on AFS securities of $889 million and fair value of trading and equity
securities of $633 million were primarily due to credit spread widening compared
to credit spread tightening in the prior year, a larger increase in US Treasury
rates in the current year and unfavorable economics. The unfavorable change in
the provision for credit losses of $424 million was primarily driven by
unfavorable economics, including impacts from the conflict between Russia and
Ukraine, exposure to China's real estate market and higher allowances on CLO and
ABS securities due to credit spread widening. The increase in foreign exchange
gains on derivatives reflects additional business denominated in foreign
currencies and the strengthening of the US dollar during the period.

Net investment income decreased by $277 million to $3.4 billion in 2022 from
$3.7 billion in 2021, primarily driven by the favorable prior year change in
fair value of our investment in Apollo of $414 million, which as distributed to
AGM following the merger, less favorable alternative investment performance and
lower new money rates throughout 2021. As a result of purchase accounting, the
book value of our investment portfolio was marked up to fair value resulting in
an adverse impact to our net investment income. These decreases were partially
offset by growth in our investment portfolio attributed to strong inflows during
the previous twelve months and higher floating rate income related to higher
short-term interest rates.

Premiums increased by $3.1 billion to $7.7 billion in 2022 from $4.6 billion in
2021, driven by higher pension group annuity premiums compared to the prior
year.

Benefits and Expenses

Benefits and expenses decreased by $710 million to $8.0 billion in 2022 from
$8.7 billion in 2021. The decrease was driven by a decrease in interest
sensitive contract benefits and a decrease in DAC, DSI and VOBA amortization.
These decreases were offset by an increase in future policy and other policy
benefits and an increase in policy and other operating expenses.

Interest sensitive contract benefits decreased by $3.0 billion to $(662) million
in 2022 from $2.4 billion in 2021, primarily driven by a decrease in the change
in FIA fair value embedded derivatives of $3.3 billion and higher negative VOBA
amortization resulting from purchase accounting, partially offset by growth in
the block of business. As a result of purchase accounting, we marked our reserve
liabilities to fair value resulting in a favorable impact to our interest
sensitive contract benefits. The change in the FIA fair value embedded
derivatives was primarily due to the performance of the equity indices to which
our FIA policies are linked, primarily the S&P 500 index, which experienced a
decrease of 20.6% in 2022, compared to an increase of 14.4% in 2021, as well as
the favorable change in discount rates, partially offset by unfavorable
economics impacting policyholder projected benefits.

DAC, DSI and VOBA amortization decreased by $250 million to $250 million in 2022
from $500 million in 2021, primarily due to the unfavorable change in net FIA
derivatives as a result of the unfavorable equity market performance as well as
impacts from purchase accounting reflecting the removal of historical DAC and
DSI, partially offset by the establishment of a new VOBA asset.

Future policy and other policy benefits increased by $2.4 billion to $7.7
billion in 2022 from $5.3 billion in 2021, primarily attributable to higher
pension group annuity obligations, partially offset by a decrease in the change
in rider reserves, a decrease in the change in the AmerUs Closed Block fair
value liability and higher negative VOBA amortization resulting from purchase
accounting. The favorable change in rider reserves of $498 million was primarily
driven by the unfavorable change in reinsurance assets and net FIA derivatives.
The change in the AmerUs Closed Block fair value liability was primarily due to
unrealized losses on the underlying investments reflecting credit spreads
widening and an increase in US Treasury rates.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

Policy and other operating expenses increased by $148 million to $693 million in
2022 from $545 million in 2021, primarily driven by significant growth in the
business and the amortization of newly established intangible assets as a result
of the merger, partially offset by the costs incurred in the prior year related
to our merger with Apollo.

Taxes

Income tax (benefit) expense decreased by $1.1 billion to $(891) million in 2022
from $246 million in 2021. The income tax benefit for 2022 was calculated by
applying the 21% US statutory rate to the loss of our US and foreign
subsidiaries (net of noncontrolling interests), and was primarily driven by the
unfavorable changes in fair value of reinsurance assets and mortgage loans.

Our effective tax rate in 2022 was a benefit of 14% compared to an expense of
12% in 2021. The effective tax rate in 2022 was due to the change in fair value
of reinsurance assets and mortgage loans subject to tax. Our effective tax rate
in 2021 was dependent upon the relationship of income or loss subject to tax
compared to the consolidated income or loss before income taxes.

Noncontrolling Interests

Noncontrolling interests decreased by $1.8 billion to $2.0 billion in 2022 from
$148 million in 2021, primarily due to the unfavorable change in fair value of
reinsurance assets as a result of more unrealized losses within reinsurance
investment portfolios.


Summary of Non-GAAP Earnings

The following summarizes our spread related earnings:

                                               Successor                      Predecessor               Successor                    Predecessor
                                           Three months ended             Three months ended        Six months ended               Six months ended
(In millions)                                June 30, 2022                   June 30, 2021            June 30, 2022                 June 30, 2021
Fixed income and other investment income,
net                                        $         1,302                $          1,395          $        2,509                $         2,681
Alternative investment income                          186                             331                     634                          1,043
Net investment earnings                              1,488                           1,726                   3,143                          3,724
Strategic capital management fees                       13                               8                      25                             17
Cost of funds                                         (886)                           (925)                 (1,712)                        (1,935)
Net investment spread                                  615                             809                   1,456                          1,806
Other operating expenses                              (109)                            (85)                   (218)                          (175)
Interest and other financing costs                     (64)                            (62)                   (126)                          (124)
Spread related earnings                    $           442                $            662          $        1,112                $         1,507


Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30,
2021

Spread Related Earnings

SRE decreased by $220 million, or 33%, to $442 million in 2022 from $662 million
in 2021. The decrease in SRE was driven by lower net investment earnings,
partially offset by lower cost of funds. Net investment earnings decreased $238
million primarily driven by unfavorable purchase accounting adjustments, less
favorable alternative investment performance compared to prior year, lower new
money rates throughout 2021 and prior year early redemptions of two loans,
partially offset by $30.0 billion of growth in our average net invested assets
and higher floating rate income. Cost of funds were $39 million lower primarily
driven by favorable purchase accounting adjustments, actuarial experience and an
adjustment to exclude changes in the value of corporate-owned life insurance
from SRE, partially offset by growth in the block of business, an unfavorable
change in market impacts, an increase in rates on recent funding agreement
issuances and pension group annuity transactions and higher rates on existing
floating rate funding agreements.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Net Investment Spread
                                                                  Successor                         Predecessor
                                                             Three months ended                 Three months ended
                                                                June 30, 2022                      June 30, 2021
Fixed income and other investment earned rate                             2.97  %                             3.75  %
Alternative investment earned rate                                        6.38  %                            16.73  %
Net investment earned rate                                                3.19  %                             4.40  %
Strategic capital management fees                                         0.03  %                             0.02  %
Cost of funds                                                             1.90  %                             2.36  %
Net investment spread                                                     1.32  %                             2.06  %



Net investment spread decreased 74 basis points to 1.32% in 2022 from 2.06% in
2021. Our net investment earned rate was 3.19% in 2022, a decrease from 4.40% in
2021, primarily due to less favorable performance in our alternative investment
portfolio compared to prior year as well as lower returns in our fixed and other
investment portfolio. Alternative net investment earned rate was 6.38% in 2022,
a decrease from 16.73% in 2021, primarily driven by unfavorable economics and
the alternative outperformance in the prior year, partially offset by strong
real estate and yield fund returns. The prior year outperformance was mainly due
to higher Venerable returns attributed to a valuation increase driven by a
reinsurance agreement with Equitable Financial Life Insurance Company as well as
strong returns on natural resources, credit funds and private equity funds due
to favorable economics. Fixed and other net investment earned rate was 2.97% in
2022, a decrease from 3.75% in 2021, primarily driven by unfavorable purchase
accounting impacts, lower new money rates throughout 2021 and prior year early
redemptions of two loans, partially offset by favorable floating rate income.

Cost of funds decreased by 46 basis points to 1.90% in 2022, from 2.36% in 2021,
primarily driven by favorable purchase accounting impacts, actuarial experience
and an adjustment to exclude changes in the value of corporate-owned life
insurance from SRE, partially offset by the unfavorable change in market
impacts, higher cost of crediting rates on recent funding agreement issuances
and pension group annuity transactions and higher rates on existing floating
rate funding agreements.

Adjustments to Net Income (Loss) Available to Athene Holding Ltd. Common
Shareholder

Adjustments to net income (loss) available to AHL common shareholder are
comprised of investment gains (losses), net of offsets, change in fair value of
derivatives and embedded derivatives - FIAs, net of offsets, integration,
restructuring and other non-operating expenses and stock compensation expense.
The decrease in adjustments to net income (loss) available to AHL common
shareholder compared to 2021 was primarily driven by the change in investment
related gains and losses and the net change in FIA derivatives. Investment
related gains and losses, net of offsets were unfavorable $3.7 billion primarily
due to the change in fair value of reinsurance assets, the change in fair value
of mortgage loan assets, the prior year favorable change in the fair value of
our investment in Apollo of $472 million, which was distributed to AGM following
the merger, and the change in the provision for credit losses. The unfavorable
changes in fair value of reinsurance assets of $2.2 billion and mortgage loans
were primarily due to credit spread widening compared to credit spread
tightening in the prior year and an increase in US Treasury rates compared to a
decrease in the prior year. Additionally, at the beginning of the year, and in
conjunction with our merger with Apollo, we elected the fair value option on our
mortgage loans, while in prior periods they were stated at unpaid principal,
adjusted for any unamortized premium or discount, net of an allowance for credit
losses. The unfavorable change in the provision for credit losses of $147
million (net of noncontrolling interests) was primarily driven by unfavorable
economics, including higher allowances on CLO and ABS securities due to credit
spread widening, impacts from the conflict between Russia and Ukraine and
exposure to China's real estate market. Net FIA derivatives were unfavorable
$313 million primarily due to unfavorable performance of the equity indices to
which our FIA policies are linked, primarily the S&P 500 index, which
experienced a decrease of 16.4% in 2022, compared to an increase of 8.2% in
2021, as well as unfavorable economics impacting policyholder projected
benefits, partially offset by the favorable change in discount rates.

Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021

Spread Related Earnings

SRE decreased by $395 million, or 26%, to $1.1 billion in 2022 from $1.5 billion
in 2021. The decrease in SRE was driven by lower net investment earnings,
partially offset by lower cost of funds. Net investment earnings decreased $581
million primarily driven by less favorable alternative investment performance
compared to prior year, unfavorable purchase accounting adjustments, lower new
money rates throughout 2021 and the prior year early redemptions of two loans,
partially offset by $29.9 billion of growth in our average net invested assets
and higher floating rate income. Cost of funds were $223 million lower primarily
driven by favorable purchase accounting adjustments and actuarial experience,
partially offset by growth in the block of business and an unfavorable change in
market impacts.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Net Investment Spread
                                                                  Successor                         Predecessor
                                                              Six months ended                   Six months ended
                                                                June 30, 2022                      June 30, 2021
Fixed income and other investment earned rate                             2.90  %                             3.66  %
Alternative investment earned rate                                       11.39  %                            27.67  %
Net investment earned rate                                                3.42  %                             4.83  %
Strategic capital management fees                                         0.03  %                             0.02  %
Cost of funds                                                             1.86  %                             2.51  %
Net investment spread                                                     1.59  %                             2.34  %



Net investment spread decreased 75 basis points to 1.59% in 2022 from 2.34% in
2021. Our net investment earned rate was 3.42% in 2022, a decrease from 4.83% in
2021, primarily due to less favorable performance in our alternative investment
portfolio compared to prior year as well as lower returns in our fixed and other
investment portfolio. Alternative net investment earned rate was 11.39% in 2022,
a decrease from 27.67% in 2021, primarily driven by significant outperformance
in the prior year, partially offset by strong real estate returns and a higher
Athora return in the current year. The prior year outperformance was mainly due
to a higher return on AmeriHome Mortgage Company, LLC (AmeriHome) related to a
valuation increase resulting from the eventual sale in the second quarter of
2021 and higher Venerable returns attributed to a valuation increase driven by a
reinsurance agreement with Equitable Financial Life Insurance Company. Fixed and
other net investment earned rate was 2.90% in 2022, a decrease from 3.66% in
2021, primarily driven by unfavorable purchase accounting impacts, lower new
money rates throughout 2021 and the prior year early redemptions of two loans,
partially offset by favorable floating rate income.

Cost of funds decreased by 65 basis points to 1.86% in 2022, from 2.51% in 2021,
primarily driven by favorable purchase accounting impacts and actuarial
experience, partially offset by an unfavorable change in market impacts.

Adjustments to Net Income (Loss) Available to Athene Holding Ltd. Common
Shareholder

The decrease in adjustments to net income (loss) available to AHL common
shareholder compared to 2021 was primarily driven by the change in investment
related gains and losses and the net change in FIA derivatives. Investment
related gains and losses, net of offsets were unfavorable $5.5 billion primarily
due to the change in fair value of reinsurance assets, the change in fair value
of mortgage loan assets, the prior year favorable change in the fair value of
our investment in Apollo of $414 million, which was distributed to AGM following
the merger, the change in the provision for credit losses and realized losses on
the sale of AFS securities related to unfavorable economics in the current
period. The change in fair value of reinsurance assets was unfavorable $3.0
billion primarily due to credit spread widening compared to credit spread
tightening in the prior year. The unfavorable change in mortgage loans was
primarily due to credit spread widening compared to credit spread tightening in
the prior year and an increase in US Treasury rates in the current year.
Additionally, at the beginning of the year, and in conjunction with our merger
with Apollo, we elected the fair value option on our mortgage loans, while in
prior periods they were stated at unpaid principal, adjusted for any unamortized
premium or discount, net of an allowance for credit losses. The unfavorable
change in the provision for credit losses of $323 million (net of noncontrolling
interests) was primarily driven by unfavorable economics, including impacts from
the conflict between Russia and Ukraine, exposure to China's real estate market
and higher allowances on CLO and ABS securities due to credit spread widening.
Net FIA derivatives were unfavorable $882 million primarily due to the
unfavorable performance of the equity indices to which our FIA policies are
linked, primarily the S&P 500 index, which experienced a decrease of 20.6% in
2022, compared to an increase of 14.4% in 2021, as well as unfavorable economics
impacting the policyholder projected benefits, partially offset by the change in
discount rates.


Investment Portfolio
We had consolidated investments, including related parties and VIEs, of $198.6
billion and $212.5 billion as of June 30, 2022 and December 31, 2021,
respectively. Our investment strategy seeks to achieve sustainable risk-adjusted
returns through the disciplined management of our investment portfolio against
our long-duration liabilities, coupled with the diversification of risk. The
investment strategies utilized by our investment manager focuses primarily on a
buy and hold asset allocation strategy that may be adjusted periodically in
response to changing market conditions and the nature of our liability profile.
Substantially all of our investment portfolio is managed by Apollo, which
provides a full suite of services, including direct investment management, asset
allocation, mergers and acquisition asset diligence, and certain operational
support services, including investment compliance, tax, legal and risk
management support. Our relationship with Apollo allows us to take advantage of
our generally illiquid liability profile by identifying investment opportunities
with an emphasis on earning incremental yield by taking liquidity and complexity
risk rather than assuming solely credit risk. Apollo's investment team and
credit portfolio managers utilize their deep experience to assist us in sourcing
and underwriting complex asset classes. Apollo has selected a diverse array of
corporate bonds and more structured, but highly rated asset classes. We also
maintain holdings in floating rate and less rate-sensitive instruments,
including CLOs, non-agency RMBS and various types of structured products. In
addition to our fixed income portfolio, we opportunistically allocate
approximately 5%-6% of our portfolio to alternative investments where we
primarily focus on fixed income-like, cash flow-based investments.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

Net investment income on the condensed consolidated statements of income (loss)
included management fees under our investment management arrangements with
Apollo. We incurred management fees, inclusive of base and sub-allocation fees,
of $182 million and $140 million, respectively, during the three months ended
June 30, 2022 and 2021, and $368 million and $284 million, respectively, during
the six months ended June 30, 2022, and 2021. The total amounts we incurred,
directly and indirectly, from Apollo and its affiliates were $248 million, and
$222 million, respectively, for the three months ended June 30, 2022 and 2021,
and $548 million and $463 million, respectively, for the six months ended June
30, 2022, and 2021. Such amounts include (1) fees associated with investment
management agreements, which exclude sub-advisory fees paid to ISG for the
benefit of third-party sub-advisors but include fees charged by Apollo to
third-party cedants with respect to assets supporting obligations reinsured to
us (such fees directly reduce the settlement payments that we receive from the
third-party cedant and, as such, we, as beneficiaries of the services performed,
indirectly pay such fees), (2) fees associated with fund investments (including
those fund investments held by AAA), which include total management fees,
carried interest (including unrealized but accrued carried interest fees) and
other fees on Apollo-managed funds and our other alternative investments and (3)
other fees resulting from shared services, advisory and other agreements with
Apollo or its affiliates; net of fees incurred directly and indirectly
attributable to ACRA, based upon the economic ownership of the noncontrolling
interest in ACRA.

Our net invested assets, which are those that directly back our net reserve
liabilities as well as surplus assets, were $189.3 billion and $175.3 billion as
of June 30, 2022 and December 31, 2021, respectively. Apollo's knowledge of our
funding structure and regulatory requirements allows it to design customized
strategies and investments for our portfolio. Apollo manages our asset portfolio
within the limits and constraints set forth in our Investment and Credit Risk
Policy. Under this policy, we set limits on investments in our portfolio by
asset class, such as corporate bonds, emerging markets securities, municipal
bonds, non-agency RMBS, CMBS, CLOs, commercial mortgage whole loans and
mezzanine loans and investment funds. We also set credit risk limits for
exposure to a single issuer that vary based on the issuer's ratings. In
addition, our investment portfolio is constrained by its scenario-based capital
ratio limit and its stressed liquidity limit.

The following table presents the carrying values of our total investments
including related party and VIEs:

                                                              Successor                                           Predecessor
                                                            June 30, 2022                                      December 31, 2021
                                                Carrying Value           Percent of                   Carrying Value            Percent of
(In millions, except percentages)                                           Total                                                  Total
AFS securities, at fair value                  $       92,011                  46.3  %             $         100,159                  47.1  %
Trading securities, at fair value                       1,735                   0.9  %                         2,056                   1.0  %
Equity securities                                       1,508                   0.7  %                         1,170                   0.5  %
Mortgage loans                                         25,218                  12.7  %                        20,748                   9.8  %
Investment funds                                          133                   0.1  %                         1,178                   0.6  %
Policy loans                                              358                   0.2  %                           312                   0.1  %
Funds withheld at interest                             37,638                  19.0  %                        43,907                  20.7  %
Derivative assets                                       2,932                   1.5  %                         4,387                   2.1  %
Short-term investments                                    264                   0.1  %                           139                   0.1  %
Other investments                                         855                   0.4  %                         1,473                   0.7  %
Total investments                                     162,652                  81.9  %                       175,529                  82.7  %
Investments in related parties
AFS securities, at fair value                           8,955                   4.5  %                        10,402                   4.9  %
Trading securities, at fair value                         898                   0.4  %                         1,781                   0.8  %
Equity securities, at fair value                          163                   0.1  %                           284                   0.1  %
Mortgage loans                                          1,416                   0.7  %                         1,360                   0.6  %
Investment funds                                        1,538                   0.8  %                         7,391                   3.5  %
Funds withheld at interest                             10,675                   5.4  %                        12,207                   5.7  %

Other investments                                         272                   0.1  %                           222                   0.1  %
Total related party investments                        23,917                  12.0  %                        33,647                  15.7  %
Total investments including related party             186,569                  93.9  %                       209,176                  98.4  %
Investments owned by consolidated VIEs
Trading securities, at fair value                         386                   0.2  %                             -                     -  %
Mortgage loans                                          1,992                   1.0  %                         2,040                   1.0  %
Investment funds                                        9,494                   4.8  %                         1,297                   0.6  %
Other investments                                         111                   0.1  %                             -                     -  %
Total investments owned by consolidated VIEs           11,983                   6.1  %                         3,337                   1.6  %
Total investments including related party and
VIEs                                           $      198,552                 100.0  %             $         212,513                 100.0  %


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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations


The decrease in our total investments, including related party and VIEs, as of
June 30, 2022 of $14.0 billion compared to December 31, 2021 was primarily
driven by unrealized losses on AFS securities in the six months ended June 30,
2022 of $14.4 billion, unrealized losses within our funds withheld portfolio,
the distribution of our $2.1 billion investment in Apollo to AGM following the
merger, a decrease in the change in fair value of mortgage loan assets of $1.9
billion attributed to an increase in US Treasury rates and credit spread
widening and a decrease in equity securities and derivative assets related to
unfavorable economics. This was partially offset by growth from gross organic
inflows of $23.6 billion in excess of gross liability outflows of $9.8 billion
as well as an increase in investments from the consolidation of additional VIEs
in conjunction with our merger with Apollo.

Our investment portfolio consists largely of high quality fixed maturity
securities, loans and short-term investments, as well as additional
opportunistic holdings in investment funds and other instruments, including
equity holdings. Fixed maturity securities and loans include publicly issued
corporate bonds, government and other sovereign bonds, privately placed
corporate bonds and loans, mortgage loans, CMBS, RMBS, CLOs and ABS.

While the substantial majority of our investment portfolio has been allocated to
corporate bonds and structured credit products, a key component of our
investment strategy is the opportunistic acquisition of investment funds with
attractive risk and return profiles. Our investment fund portfolio consists of
funds that employ various strategies including real estate and other real asset
funds, credit funds and private equity funds. We have a strong preference for
assets that have some or all of the following characteristics, among others: (1)
investments that constitute a direct investment or an investment in a fund with
a high degree of co-investment; (2) investments with credit- or debt-like
characteristics (for example, a stipulated maturity and par value), or
alternatively, investments with reduced volatility when compared to pure equity;
or (3) investments that we believe have less downside risk.

We hold derivatives for economic hedging purposes to reduce our exposure to the
cash flow variability of assets and liabilities, equity market risk, interest
rate risk, credit risk and foreign exchange risk. Our primary use of derivative
instruments relates to providing the income needed to fund the annual indexed
credits on our FIA products. We primarily use fixed indexed options to
economically hedge index annuity products that guarantee the return of principal
to the policyholder and credit interest based on a percentage of the gain in a
specific market index.

With respect to derivative positions, we transact with highly rated
counterparties, and expect the counterparties to fulfill their obligations under
the contracts. We generally use industry standard agreements and annexes with
bilateral collateral provisions to further reduce counterparty credit exposure.

Related Party Investments

We hold investments in related party assets primarily comprised of AFS
securities, trading securities, investment funds and funds withheld at interest
reinsurance receivables which are primarily a result of investments over which
Apollo can exercise influence. As of June 30, 2022, these investments totaled
$33.2 billion, or 14.2% of our total assets. Related party AFS and trading
securities primarily consist of structured securities for which Apollo is the
manager of the underlying securitization vehicle and securities issued by Apollo
direct origination platforms including Wheels Donlen and MidCap Financial. In
each case, the underlying collateral, borrower or other credit party is
generally unaffiliated with us. Related party investment funds include strategic
investments in direct origination platforms and insurance companies and
investments in Apollo managed funds. The funds withheld at interest related
party amounts are primarily comprised of the Venerable reinsurance portfolios,
which are considered related party even though a significant majority of the
underlying assets within the investment portfolios do not have a related party
affiliation.

A summary of our related party investments reflecting the nature of the
affiliation is as follows:

                                                                Successor                                           Predecessor
                                                              June 30, 2022                                      December 31, 2021
                                                                           Percent of                                            Percent of
(In millions, except percentages)                 Carrying Value          Total Assets                 Carrying Value           Total Assets
Venerable funds withheld reinsurance portfolio   $       10,675                   4.6  %             $         12,207                   5.2  %
Securitizations of unaffiliated assets where
Apollo is manager                                         8,704                   3.7  %                        9,495                   4.0  %
Investments in Apollo funds                               9,081                   3.9  %                        3,785                   1.6  %
Strategic investments in Apollo direct
origination platforms                                     2,636                   1.1  %                        5,704                   2.4  %
Strategic investment in Apollo                                -                     -  %                        2,112                   0.9  %
Strategic investments in insurance companies              2,099                   0.9  %                        1,626                   0.7  %
Other                                                        16                     -  %                           17                     -  %
Total related party investments                  $       33,211                  14.2  %             $         34,946                  14.8  %



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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

As of June 30, 2022, a $10.7 billion funds withheld reinsurance asset with
Venerable was included in our GAAP related party assets. Venerable is a related
party due to our minority equity investment in its holding company's parent, VA
Capital. For GAAP, each funds withheld and modified coinsurance reinsurance
portfolio is treated as one asset rather than reporting the underlying
investments in the portfolio. For our non-GAAP measure of net invested assets,
we provide visibility into the underlying assets within these reinsurance
portfolios. The below table looks through to the underlying assets within our
reinsurance portfolios to determine the related party status. As of June 30,
2022, $26.5 billion, or 14.1% of our total net invested assets were related
party investments. Of these, approximately $11.8 billion, or 6.3% of our net
invested assets were structured securities for which Apollo or an affiliated
direct origination platform was the manager of the underlying securitization
vehicle, but the underlying collateral, borrower or other credit party is
generally unaffiliated with us. Related party investments in strategic
affiliated companies or Apollo funds represented $14.7 billion, or 7.8% of our
net invested assets.

A summary of our related party net invested assets reflecting the nature of the
affiliation is as follows:

                                                               Successor                                         Predecessor
                                                             June 30, 2022                                    December 31, 20211
                                                  Net Invested         Percent of Net                Net Invested           Percent of Net
(In millions, except percentages)                 Asset Value         Invested Assets                 Asset Value          Invested Assets
Securitizations of unaffiliated assets where
Apollo is manager                                $    11,850                    6.3  %             $       13,736                    7.8  %
Investments in Apollo funds                            9,223                    4.9  %                      3,802                    2.2  %
Strategic investments in Apollo direct
origination platforms                                  3,360                    1.8  %                      6,074                    3.5  %
Strategic investment in Apollo                             -                      -  %                      2,112                    1.2  %
Strategic investments in insurance companies           2,099                    1.1  %                      1,626                    0.9  %
Other                                                     16                      -  %                         17                      -  %
Total related party investments                  $    26,548                   14.1  %             $       27,367                   15.6  %

1 Prior year related party net invested asset values have been revised.

AFS Securities

We invest in AFS securities and attempt to source investments that match our
future cash flow needs. However, we may sell any of our investments in advance
of maturity to timely satisfy our liabilities as they become due or in order to
respond to a change in the credit profile or other characteristics of the
particular investment.

AFS securities are carried at fair value, less allowances for expected credit
losses, on our condensed consolidated balance sheets. Changes in fair value of
our AFS securities, net of related DAC and DSI amortization and the change in
rider reserves, are charged or credited to other comprehensive income, net of
tax. All changes in the allowance for expected credit losses, whether due to
passage of time, change in expected cash flows, or change in fair value are
recorded through credit loss expense within investment related gains (losses) on
the condensed consolidated statements of income (loss).

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

The distribution of our AFS securities, including related party, by type is as
follows:

                                                                                                    Successor
                                                                                                  June 30, 2022
                                                                   Allowance for                                    Unrealized                              Percent of

(In millions, except percentages) Amortized Cost Credit Losses Unrealized Gains

            Losses            Fair Value             Total
AFS securities
US government and agencies               $         3,277          $           -          $              1          $     (484)         $    2,794                 2.8  %
US state, municipal and political
subdivisions                                       1,209                      -                         -                (209)              1,000                 1.0  %
Foreign governments                                1,199                    (61)                        4                (246)                896                 0.9  %
Corporate                                         67,584                    (70)                       45             (11,341)             56,218                55.6  %
CLO                                               14,783                   (107)                        2              (1,193)             13,485                13.3  %
ABS                                               10,095                    (14)                        8                (542)              9,547                 9.5  %
CMBS                                               3,181                     (9)                       16                (284)              2,904                 2.9  %
RMBS                                               5,879                   (348)                        3                (367)              5,167                 5.1  %
Total AFS securities                             107,207                   (609)                       79             (14,666)             92,011                91.1  %
AFS securities - related party
Corporate                                          1,043                      -                         2                 (38)              1,007                 1.0  %
CLO                                                2,945                    (19)                        1                (248)              2,679                 2.7  %
ABS                                                5,441                     (1)                        1                (172)              5,269                 5.2  %
Total AFS securities - related party               9,429                    (20)                        4                (458)              8,955                 8.9  %
Total AFS securities including related
party                                    $       116,636          $        (629)         $             83          $  (15,124)         $  100,966               100.0  %


                                                                                                    Predecessor
                                                                                                 December 31, 2021
                                           Amortized Cost          Allowance for           Unrealized Gains           Unrealized           Fair Value          Percent of
(In millions, except percentages)                                  Credit Losses                                        Losses                                    Total
AFS securities
US government and agencies               $           231          $           -          $               2          $        (10)         $      223                 0.2  %
US state, municipal and political
subdivisions                                       1,081                      -                        134                    (2)              1,213                 1.1  %
Foreign governments                                1,110                      -                         35                   (17)              1,128                 1.0  %
Corporate                                         62,817                      -                      4,060                  (651)             66,226                59.9  %
CLO                                               13,793                      -                         44                  (185)             13,652                12.4  %
ABS                                                8,890                    (17)                       151                   (35)              8,989                 8.1  %
CMBS                                               2,764                     (3)                        56                   (59)              2,758                 2.5  %
RMBS                                               5,772                   (103)                       326                   (25)              5,970                 5.4  %
Total AFS securities                              96,458                   (123)                     4,808                  (984)            100,159                90.6  %
AFS securities - related party
Corporate                                            842                      -                         19                    (2)                859                 0.8  %
CLO                                                2,573                      -                          5                   (29)              2,549                 2.3  %
ABS                                                6,986                      -                         61                   (53)              6,994                 6.3  %
Total AFS securities - related party              10,401                      -                         85                   (84)             10,402                 9.4  %
Total AFS securities including related
party                                    $       106,859          $        (123)         $           4,893          $     (1,068)         $  110,561               100.0  %



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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

We maintain a diversified AFS portfolio of corporate fixed maturity securities
across industries and issuers, and a diversified portfolio of structured
securities. The composition of our AFS securities, including related parties, is
as follows:

                                                                 Successor                                          Predecessor
                                                               June 30, 2022                                     December 31, 2021
                                                     Fair Value            Percent of                     Fair Value              Percent of
(In millions, except percentages)                                             Total                                                  Total
Corporate
Industrial other1                                  $     20,899                  20.7  %             $          23,882                  21.6  %
Financial                                                18,003                  17.8  %                        21,537                  19.5  %
Utilities                                                11,823                  11.7  %                        14,290                  12.9  %
Communication                                             2,725                   2.7  %                         3,492                   3.2  %
Transportation                                            3,775                   3.7  %                         3,884                   3.5  %
Total corporate                                          57,225                  56.6  %                        67,085                  60.7  %
Other government-related securities
US state, municipal and political subdivisions            1,000                   1.0  %                         1,213                   1.1  %
Foreign governments                                         896                   0.9  %                         1,128                   1.0  %
US government and agencies                                2,794                   2.8  %                           223                   0.2  %
Total non-structured securities                          61,915                  61.3  %                        69,649                  63.0  %
Structured securities
CLO                                                      16,164                  16.0  %                        16,201                  14.7  %
ABS                                                      14,816                  14.7  %                        15,983                  14.4  %
CMBS                                                      2,904                   2.9  %                         2,758                   2.5  %
RMBS
Agency                                                       14                     -  %                            23                     -  %
Non-agency                                                5,153                   5.1  %                         5,947                   5.4  %
Total structured securities                              39,051                  38.7  %                        40,912                  37.0  %
Total AFS securities including related party       $    100,966                 100.0  %             $         110,561                 100.0  %

1 Includes securities within various industry segments including capital goods, basic industry, consumer cyclical, consumer non-cyclical,
industrial and technology.



The fair value of our AFS securities, including related parties, was $101.0
billion and $110.6 billion as of June 30, 2022 and December 31, 2021,
respectively. The decrease was mainly driven by unrealized losses on AFS
securities in the six months ended June 30, 2022 of $14.4 billion attributed to
an increase in US Treasury rates and credit spread widening, partially offset by
growth from organic inflows in excess of liability outflows.

The Securities Valuation Office (SVO) of the NAIC is responsible for the credit
quality assessment and valuation of securities owned by state regulated
insurance companies. Insurance companies report ownership of securities to the
SVO when such securities are eligible for filing on the relevant schedule of the
NAIC Financial Statement. The SVO conducts credit analysis on these securities
for the purpose of assigning an NAIC designation and/or unit price. Generally,
the process for assigning an NAIC designation varies based upon whether a
security is considered "filing exempt" (General Designation Process). Subject to
certain exceptions, a security is typically considered "filing exempt" if it has
been rated by a Nationally Recognized Statistical Rating Organization (NRSRO).
For securities that are not "filing exempt," insurance companies assign
temporary designations based upon a subjective evaluation of credit quality. The
insurance company generally must then submit the securities to the SVO within
120 days of acquisition to receive an NAIC designation. For securities
considered "filing exempt," the SVO utilizes the NRSRO rating and assigns an
NAIC designation based upon the following system:

                     NAIC designation       NRSRO equivalent rating
                          1 A-G                     AAA/AA/A
                          2 A-C                       BBB
                          3 A-C                        BB
                          4 A-C                        B
                          5 A-C                       CCC
                            6                     CC and lower



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An important exception to the General Designation Process occurs in the case of
certain loan-backed and structured securities (LBaSS). The NRSRO ratings
methodology is focused on the likelihood of recovery of all contractual
payments, including principal at par, regardless of an investor's carrying
value. In effect, the NRSRO rating assumes that the holder is the original
purchaser at par. In contrast, the SVO's LBaSS methodology is focused on
determining the risk associated with the recovery of the amortized cost of each
security. Because the NAIC's methodology explicitly considers amortized cost and
the likelihood of recovery of such amount, we view the NAIC's methodology as the
most appropriate means of evaluating the credit quality of our fixed maturity
portfolio since a large portion of our holdings were purchased and are carried
at significant discounts to par.

The SVO has developed a designation process and provides instruction on modeled
LBaSS. For modeled LBaSS, the process is specific to the non-agency RMBS and
CMBS asset classes. In order to establish ratings at the individual security
level, the SVO obtains loan-level analysis of each RMBS and CMBS using a
selected vendor's proprietary financial model. The SVO ensures that the vendor
has extensive internal quality-control processes in place and the SVO conducts
its own quality-control checks of the selected vendor's valuation process. The
SVO has retained the services of Blackrock, Inc. (Blackrock) to model non-agency
RMBS and CMBS owned by US insurers for all years presented herein. Blackrock
provides five prices (breakpoints), based on each US insurer's statutory book
value price, to utilize in determining the NAIC designation for each modeled
LBaSS.

The NAIC designation determines the associated level of risk-based capital that
an insurer is required to hold for all securities owned by the insurer. In
general, under the modeled LBaSS process, the larger the discount to par value
at the time of determination, the higher the NAIC designation the LBaSS will
have.

A summary of our AFS securities, including related parties, by NAIC designation
is as follows:

                                                               Successor                                                              Predecessor
                                                             June 30, 2022                                                         December 31, 2021
                                        Amortized Cost          Fair Value           Percent of                 Amortized Cost          Fair Value           Percent of
(In millions, except percentages)                                                      Total                                                                   Total
NAIC designation
1 A-G                                 $        58,226          $   50,906                 50.4  %             $        49,639          $   51,514                 46.6  %
2 A-C                                          53,190              45,525                 45.1  %                      51,587              53,398                 48.3  %
Total investment grade                        111,416              96,431                 95.5  %                     101,226             104,912                 94.9  %
3 A-C                                           3,806               3,373                  3.3  %                       4,199               4,247                  3.8  %
4 A-C                                             988                 873                  0.9  %                       1,113               1,100                  1.0  %
5 A-C                                              52                  46                  0.1  %                          94                  88                  0.1  %
6                                                 374                 243                  0.2  %                         227                 214                  0.2  %
Total below investment grade                    5,220               4,535                  4.5  %                       5,633               5,649                  5.1  %
Total AFS securities including
related party                         $       116,636          $  100,966                100.0  %             $       106,859          $  110,561                100.0  %


A significant majority of our AFS portfolio, 95.5% and 94.9% as of June 30, 2022
and December 31, 2021, respectively, was invested in assets considered
investment grade with an NAIC designation of 1 or 2.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

A summary of our AFS securities, including related parties, by NRSRO ratings is
set forth below:

                                                                   Successor                                           Predecessor
                                                                 June 30, 2022                                      December 31, 2021
                                                       Fair Value             Percent of                     Fair Value              Percent of
(In millions, except percentages)                                                Total                                                  Total
NRSRO rating agency designation
AAA/AA/A                                            $       44,391                  44.0  %             $          44,501                  40.2  %
BBB                                                         40,942                  40.5  %                        47,636                  43.1  %
Non-rated1                                                   9,353                   9.3  %                        10,754                   9.7  %
Total investment grade                                      94,686                  93.8  %                       102,891                  93.0  %
BB                                                           3,005                   3.0  %                         3,713                   3.4  %
B                                                              742                   0.7  %                           946                   0.9  %
CCC                                                          1,119                   1.1  %                         1,356                   1.2  %
CC and lower                                                   640                   0.6  %                           755                   0.7  %
Non-rated1                                                     774                   0.8  %                           900                   0.8  %
Total below investment grade                                 6,280                   6.2  %                         7,670                   7.0  %

Total AFS securities including related party $ 100,966

        100.0  %             $         110,561                 100.0  %

1 Securities denoted as non-rated by the NRSRO were classified as investment or non-investment grade according to the security’s respective NAIC
designation. With respect to modeled LBaSS, the NAIC designation methodology differs in significant respects from the NRSRO rating methodology.



Consistent with the NAIC Process and Procedures Manual, an NRSRO rating was
assigned based on the following criteria: (a) the equivalent S&P rating when the
security is rated by one NRSRO; (b) the equivalent S&P rating of the lowest
NRSRO when the security is rated by two NRSROs; and (c) the equivalent S&P
rating of the second lowest NRSRO when the security is rated by three or more
NRSROs. If the lowest two NRSRO ratings are equal, then such rating will be the
assigned rating. NRSRO ratings available for the periods presented were S&P,
Fitch, Moody's Investor Service, DBRS, and Kroll Bond Rating Agency, Inc.

The portion of our AFS portfolio that was considered below investment grade
based on NRSRO ratings was 6.2% and 7.0% as of June 30, 2022 and December 31,
2021, respectively. The primary driver of the difference in the percentage of
securities considered below investment grade by NRSRO as compared to the
securities considered below investment grade by the NAIC is the difference in
methodologies between the NRSRO and NAIC for RMBS due to investments acquired
and/or carried at a discount to par value, as discussed above.

As of June 30, 2022 and December 31, 2021, non-rated securities were comprised
of 86% and 73%, respectively, of corporate private placement securities for
which we have not sought individual ratings from an NRSRO, and 17% for each of
June 30, 2022 and December 31, 2021, of RMBS, many of which were acquired at a
significant discount to par. We rely on internal analysis and designations
assigned by the NAIC to evaluate the credit risk of our portfolio. As of each of
June 30, 2022 and December 31, 2021, 92% of the non-rated securities were
designated NAIC 1 or 2.

Asset-backed Securities - We invest in ABS which are securitized by pools of
assets such as consumer loans, automobile loans, student loans, insurance-linked
securities, operating cash flows of corporations and cash flows from various
types of business equipment. Our ABS holdings were $14.8 billion and $16.0
billion as of June 30, 2022 and December 31, 2021, respectively.
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of Operations

A summary of our ABS portfolio, including related parties, by NAIC designations
and NRSRO quality ratings is as follows:

                                                              Successor                                           Predecessor
                                                            June 30, 2022                                      December 31, 2021
                                                   Fair Value            Percent of                    Fair Value              Percent of
(In millions, except percentages)                                           Total                                                 Total
NAIC designation
1 A-G                                           $       8,255                  55.7  %             $          8,089                  50.6  %
2 A-C                                                   5,762                  38.9  %                        7,047                  44.1  %
Total investment grade                                 14,017                  94.6  %                       15,136                  94.7  %
3 A-C                                                     602                   4.1  %                          643                   4.0  %
4 A-C                                                     184                   1.2  %                          200                   1.3  %
5 A-C                                                       4                     -  %                            4                     -  %
6                                                           9                   0.1  %                            -                     -  %
Total below investment grade                              799                   5.4  %                          847                   5.3  %
Total AFS ABS including related party           $      14,816                 100.0  %             $         15,983                 100.0  %

NRSRO rating agency designation
AAA/AA/A                                        $       8,221                  55.5  %             $          7,892                  49.4  %
BBB                                                     5,749                  38.8  %                        6,975                  43.5  %
Non-rated                                                  47                   0.3  %                          232                   1.5  %
Total investment grade                                 14,017                  94.6  %                       15,099                  94.4  %
BB                                                        602                   4.1  %                          680                   4.3  %
B                                                         192                   1.3  %                          200                   1.3  %
CCC                                                         5                     -  %                            4                     -  %
CC and lower                                                -                     -  %                            -                     -  %
Non-rated                                                   -                     -  %                            -                     -  %
Total below investment grade                              799                   5.4  %                          884                   5.6  %
Total AFS ABS including related party           $      14,816                 100.0  %             $         15,983                 100.0  %



As of June 30, 2022 and December 31, 2021, a substantial majority of our AFS ABS
portfolio, 94.6% and 94.7%, respectively, was invested in assets considered to
be investment grade based upon application of the NAIC's methodology while 94.6%
and 94.4%, respectively, of securities were considered investment grade based on
NRSRO ratings. The decrease in our ABS portfolio was primarily driven by
unrealized losses due to an increase in US Treasury rates and credit spread
widening.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

Collateralized Loan Obligations – We also invest in CLOs which pay principal and
interest from cash flows received from underlying corporate loans. These
holdings were $16.2 billion as of each of June 30, 2022 and December 31, 2021.

A summary of our AFS CLO portfolio, including related parties, by NAIC
designations and NRSRO quality ratings is as follows:

                                                              Successor                                           Predecessor
                                                            June 30, 2022                                      December 31, 2021
                                                   Fair Value            Percent of                    Fair Value              Percent of
(In millions, except percentages)                                           Total                                                 Total
NAIC designation
1 A-G                                           $       9,920                  61.4  %             $          9,957                  61.5  %
2 A-C                                                   6,105                  37.8  %                        6,096                  37.6  %
Total investment grade                                 16,025                  99.2  %                       16,053                  99.1  %
3 A-C                                                     121                   0.7  %                          124                   0.8  %
4 A-C                                                      18                   0.1  %                           24                   0.1  %
5 A-C                                                       -                     -  %                            -                     -  %
6                                                           -                     -  %                            -                     -  %
Total below investment grade                              139                   0.8  %                          148                   0.9  %
Total AFS CLO including related party           $      16,164                 100.0  %             $         16,201                 100.0  %

NRSRO rating agency designation
AAA/AA/A                                        $       9,904                  61.3  %             $          9,943                  61.4  %
BBB                                                     6,052                  37.5  %                        6,101                  37.6  %
Non-rated                                                  72                   0.4  %                            -                     -  %
Total investment grade                                 16,028                  99.2  %                       16,044                  99.0  %
BB                                                        118                   0.7  %                          130                   0.8  %
B                                                          18                   0.1  %                           27                   0.2  %
CCC                                                         -                     -  %                            -                     -  %
CC and lower                                                -                     -  %                            -                     -  %
Non-rated                                                   -                     -  %                            -                     -  %
Total below investment grade                              136                   0.8  %                          157                   1.0  %
Total AFS CLO including related party           $      16,164                 100.0  %             $         16,201                 100.0  %



As of June 30, 2022 and December 31, 2021, 99.2% and 99.1% respectively, of our
AFS CLO portfolio was invested in assets considered to be investment grade based
upon application of the NAIC's methodology.

Commercial Mortgage-backed Securities - A portion of our AFS portfolio is
invested in CMBS. CMBS are constructed from pools of commercial mortgages. These
holdings were $2.9 billion and $2.8 billion as of June 30, 2022 and December 31,
2021, respectively. As of June 30, 2022 and December 31, 2021, our CMBS
portfolio included $2.3 billion (78% of the total) and $2.0 billion (74% of the
total), respectively, of securities that are considered investment grade based
on NAIC designations, while $2.3 billion (78% of the total) and $2.1 billion
(75% of the total), respectively, of securities were considered investment grade
based on NRSRO ratings.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations


Residential Mortgage-backed Securities - A portion of our AFS portfolio is
invested in RMBS, which are securities constructed from pools of residential
mortgages. These holdings were $5.2 billion and $6.0 billion as of June 30, 2022
and December 31, 2021, respectively.

A summary of our AFS RMBS portfolio by NAIC designations and NRSRO quality
ratings is as follows:

                                                            Successor                                        Predecessor
                                                          June 30, 2022                                   December 31, 2021
                                                Fair Value          Percent of                    Fair Value              Percent of
(In millions, except percentages)                                      Total                                                 Total
NAIC designation
1 A-G                                           $  4,458                  86.3  %             $          5,097                  85.4  %
2 A-C                                                288                   5.6  %                          331                   5.5  %
Total investment grade                             4,746                  91.9  %                        5,428                  90.9  %
3 A-C                                                268                   5.2  %                          327                   5.5  %
4 A-C                                                136                   2.6  %                          172                   2.9  %
5 A-C                                                 16                   0.3  %                           29                   0.5  %
6                                                      1                     -  %                           14                   0.2  %
Total below investment grade                         421                   8.1  %                          542                   9.1  %
Total AFS RMBS                                  $  5,167                 100.0  %             $          5,970                 100.0  %

NRSRO rating agency designation
AAA/AA/A                                        $  1,191                  23.1  %             $          1,110                  18.6  %
BBB                                                  388                   7.5  %                          522                   8.7  %
Non-rated1                                         1,452                  28.1  %                        1,648                  27.6  %
Total investment grade                             3,031                  58.7  %                        3,280                  54.9  %
BB                                                    87                   1.7  %                          184                   3.1  %
B                                                    120                   2.3  %                          193                   3.2  %
CCC                                                1,062                  20.5  %                        1,281                  21.5  %
CC and lower                                         623                  12.1  %                          733                  12.3  %
Non-rated1                                           244                   4.7  %                          299                   5.0  %
Total below investment grade                       2,136                  41.3  %                        2,690                  45.1  %
Total AFS RMBS                                  $  5,167                 100.0  %             $          5,970                 100.0  %

1 Securities denoted as non-rated by the NRSRO were classified as investment or non-investment grade according to the security’s
respective NAIC designations. The NAIC designation methodology differs in significant respects from the NRSRO rating methodology.



A significant majority of our RMBS portfolio, 91.9% and 90.9% as of June 30,
2022 and December 31, 2021, respectively, was invested in assets considered to
be investment grade based upon an application of the NAIC designations. The
NAIC's methodology with respect to RMBS gives explicit effect to the amortized
cost at which an insurance company carries each such investment. Because we
invested in RMBS after the stresses related to US housing had caused significant
downward pressure on prices of RMBS, we carry most of our investments in RMBS at
significant discounts to par value, which results in an investment grade NAIC
designation. In contrast, our understanding is that in setting ratings, NRSROs
focus on the likelihood of recovering all contractual payments including
principal at par value. As a result of a fundamental difference in approach, as
of June 30, 2022 and December 31, 2021, NRSRO characterized 58.7% and 54.9%,
respectively, of our RMBS portfolio as investment grade.

Unrealized Losses

Our investments in AFS securities, including related parties, are reported at
fair value with changes in fair value recorded in other comprehensive income.
Certain of our AFS securities, including related parties, have experienced
declines in fair value that we consider temporary in nature. These investments
are held to support our product liabilities, and we currently have the intent
and ability to hold these securities until recovery of the amortized cost basis
prior to sale or maturity. As of June 30, 2022, our AFS securities, including
related party, had a fair value of $101.0 billion, which was 13.4% below
amortized cost of $116.6 billion. As of December 31, 2021, our AFS securities,
including related party, had a fair value of $110.6 billion, which was 3.5%
above amortized cost of $106.9 billion. Our fair value of AFS securities as of
June 30, 2022 was below amortized cost as the investment portfolio was marked to
fair value on January 1, 2022 in conjunction with purchase accounting with
subsequent losses driven by the increase in US Treasury rates and credit spread
widening experienced in the current year.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

The following tables reflect the unrealized losses on the AFS portfolio,
including related party, for which an allowance for credit losses has not been
recorded, by NAIC designations:

                                                                                              Successor
                                                                                            June 30, 2022
                               Amortized Cost of           Gross             Fair Value of AFS          Fair Value to          Fair Value of         Gross Unrealized
                                AFS Securities           Unrealized           Securities with          Amortized Cost            Total AFS           Losses to Total
(In millions, except            with Unrealized            Losses             Unrealized Loss               Ratio               Securities            AFS Fair Value
percentages)                         Loss
NAIC designation
1 A-G                          $       51,860          $    (6,871)         $         44,989                    86.8  %       $     50,906                    (13.5) %
2 A-C                                  49,913               (7,501)                   42,412                    85.0  %             45,525                    (16.5) %
Total investment grade                101,773              (14,372)                   87,401                    85.9  %             96,431                    (14.9) %
3 A-C                                   3,300                 (386)                    2,914                    88.3  %              3,373                    (11.4) %
4 A-C                                     713                  (83)                      630                    88.4  %                873                     (9.5) %
5 A-C                                      46                   (6)                       40                    87.0  %                 46                    (13.0) %
6                                          28                   (5)                       23                    82.1  %                243                     (2.1) %
Total below investment grade            4,087                 (480)                    3,607                    88.3  %              4,535                    (10.6) %
Total                          $      105,860          $   (14,852)         $         91,008                    86.0  %       $    100,966                    (14.7) %



                                                                                               Predecessor
                                                                                            December 31, 2021
                                Amortized Cost of        Gross Unrealized        Fair Value of AFS          Fair Value to          Fair Value of         Gross Unrealized
(In millions, except           AFS Securities with            Losses              Securities with          Amortized Cost            Total AFS           Losses to Total
percentages)                     Unrealized Loss                                  Unrealized Loss               Ratio               Securities            AFS Fair Value
NAIC designation
1 A-G                          $         19,369          $        (338)         $         19,031                    98.3  %       $     51,514                     (0.7) %
2 A-C                                    20,849                   (475)                   20,374                    97.7  %             53,398                     (0.9) %
Total investment grade                   40,218                   (813)                   39,405                    98.0  %            104,912                     (0.8) %
3 A-C                                     1,494                    (82)                    1,412                    94.5  %              4,247                     (1.9) %
4 A-C                                       410                    (26)                      384                    93.7  %              1,100                     (2.4) %
5 A-C                                        41                     (6)                       35                    85.4  %                 88                     (6.8) %
6                                            61                    (14)                       47                    77.0  %                214                     (6.5) %
Total below investment grade              2,006                   (128)                    1,878                    93.6  %              5,649                     (2.3) %
Total                          $         42,224          $        (941)         $         41,283                    97.8  %       $    110,561                     (0.9) %



The gross unrealized losses on AFS securities, including related party, were
$14.9 billion and $941 million as of June 30, 2022 and December 31, 2021,
respectively. The increase in unrealized losses on AFS securities was driven by
the increase in US Treasury rates and credit spread widening experienced in the
current year.

As of June 30, 2022 and December 31, 2021, we held $6.0 billion and $7.4
billion, respectively, in energy sector fixed maturity securities, or 6% and 7%,
respectively, of the total fixed maturity securities, including related party.
The gross unrealized capital losses on these securities were $1.1 billion and
$35 million, or 7% and 4% of the total unrealized losses, respectively. The
increase in unrealized losses on energy sector fixed maturity securities was
primarily attributed to an increase in US Treasury rates and credit spread
widening.

Provision for Credit Losses

For our credit loss accounting policies and the assumptions used in the
allowances, see Note 1 – Business, Basis of Presentation and Significant
Accounting Policies and Note 3 – Investments to the condensed consolidated
financial statements, as well as Critical Accounting Estimates and Judgments in
this Item 2.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

As of June 30, 2022 and December 31, 2021, we held an allowance for credit
losses on AFS securities of $629 million and $123 million, respectively. During
the six months ended June 30, 2022, we recorded a change in provision for credit
losses on AFS securities of $318 million, of which $339 million had an income
statement impact and $(21) million related to PCD securities. The increase in
the allowance for credit losses on AFS securities was mainly due to unfavorable
economics, including impacts from the conflict between Russia and Ukraine,
exposure to China's real estate market and higher allowances on CLO and ABS
securities due to credit spread widening. During the six months ended June 30,
2021, we recorded a change in provision for credit losses on AFS securities of
$5 million of which all $5 million had an income statement impact. The
intent-to-sell impairments for the six months ended June 30, 2022 and 2021 were
$22 million and $3 million, respectively.

International Exposure

A portion of our AFS securities are invested in securities with international
exposure. As of both June 30, 2022 and December 31, 2021, 35% of the carrying
value of our AFS securities, including related parties, was comprised of
securities of issuers based outside of the United States and debt securities of
foreign governments. These securities are either denominated in US dollars or do
not expose us to significant foreign currency risk as a result of foreign
currency swap arrangements.

The following table presents our international exposure in our AFS portfolio,
including related parties, by country or region:

                                                        Successor                                                         Predecessor
                                                      June 30, 2022                                                    December 31, 2021
                                   Amortized           Fair Value           Percent of                Amortized           Fair Value           Percent of
(In millions, except percentages)     Cost                                    Total                      Cost                                    Total
Country of risk
Ireland                           $   4,964          $     4,097                 11.7  %             $   5,172          $     5,052                 13.0  %
Other Europe                          9,421                7,597                 21.7  %                 8,864                9,218                 23.7  %
Total Europe                         14,385               11,694                 33.4  %                14,036               14,270                 36.7  %
Non-US North America                 17,851               16,452                 47.0  %                17,218               17,387                 44.8  %
Australia & New Zealand               2,728                2,378                  6.8  %                 2,441                2,557                  6.6  %
Central & South America               1,621                1,380                  4.0  %                 1,347                1,346                  3.5  %
Africa & Middle East                  2,267                1,973                  5.6  %                 1,966                2,019                  5.2  %
Asia/Pacific                          1,481                1,107                  3.2  %                 1,256                1,262                  3.2  %

Total                             $  40,333          $    34,984                100.0  %             $  38,264          $    38,841                100.0  %



Approximately 97.0% and 96.7% of these securities are investment grade by NAIC
designation as of June 30, 2022 and December 31, 2021. As of June 30, 2022, 11%
of our AFS securities, including related parties, were invested in CLOs of
Cayman Islands issuers (included in Non-US North America) for which underlying
investments are largely loans to US issuers and 24% were invested in securities
of other non-US issuers.

The majority of our investments in Ireland are comprised of Euro denominated
CLOs, for which the SPV is domiciled in Ireland, but the underlying leveraged
loans involve borrowers from the broader European region.

As of June 30, 2022, we held Russian AFS securities of $31 million, including
related parties. Our investment managers analyze each holding for credit risk by
economic and other factors of each country and industry.

Trading Securities

Trading securities, including related parties, were $2.6 billion and $3.8
billion as of June 30, 2022 and December 31, 2021, respectively. Trading
securities are primarily comprised of AmerUs Closed Block securities for which
we have elected the fair value option valuation, CLO and ABS equity tranche
securities, structured securities with embedded derivatives, investments which
support various reinsurance arrangements and MidCap Financial profit
participating notes prior to the contribution of the notes to AAA during the
second quarter of 2022. The decrease in trading securities was primarily driven
by the contribution of our MidCap Financial profit participating notes and PK
AirFinance subordinated notes to AAA during the second quarter of 2022 as well
as losses caused by an increase in US Treasury rates and credit spread widening.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

Mortgage Loans

The following is a summary of our mortgage loan portfolio by collateral type,
including assets held by related parties and consolidated VIEs:

                                                       Successor                                          Predecessor
                                                     June 30, 2022                                     December 31, 2021
                                                                                              Net Carrying
(In millions, except percentages)          Fair Value         Percent of Total                   Value             Percent of Total
Property type
Office building                          $     5,148                    18.1  %             $       4,870                    20.1  %
Retail                                         1,929                     6.7  %                     2,022                     8.4  %
Apartment                                      6,068                    21.2  %                     4,626                    19.2  %
Hotels                                         1,730                     6.0  %                     1,727                     7.2  %
Industrial                                     2,459                     8.6  %                     2,336                     9.7  %
Other commercial1                              2,005                     7.0  %                     1,316                     5.4  %
Total net commercial mortgage loans           19,339                    67.6  %                    16,897                    70.0  %
Residential loans                              9,287                    32.4  %                     7,251                    30.0  %
Total mortgage loans, including related
parties and VIEs                         $    28,626                   100.0  %             $      24,148                   100.0  %

1 Other commercial loans include investments in nursing homes, other healthcare institutions, parking garages, storage facilities
and other commercial properties.



We invest a portion of our investment portfolio in mortgage loans, which are
generally comprised of high quality commercial first lien and mezzanine real
estate loans. Our mortgage loan holdings, including related parties and
consolidated VIEs, were $28.6 billion and $24.1 billion as of June 30, 2022 and
December 31, 2021, respectively. This included $1.8 billion and $1.9 billion of
mezzanine mortgage loans as of June 30, 2022 and December 31, 2021,
respectively. We have acquired mortgage loans through acquisitions and
reinsurance arrangements, as well as through an active program to invest in new
mortgage loans. We invest in CMLs on income producing properties including
hotels, apartments, retail and office buildings, and other commercial and
industrial properties. Our RML portfolio primarily consists of first lien RMLs
collateralized by properties located in the US. Loan-to-value ratios at the time
of loan approval are generally 75% or less.

In connection with the merger, we elected the fair value option on our mortgage
loan portfolio; therefore, we no longer have an allowance for credit losses for
commercial and residential loans. Interest income is accrued on the principal
amount of the loan based on the loan's contractual interest rate. Interest
income and prepayment fees are reported in net investment income on the
condensed consolidated statements of income (loss). Changes in the fair value of
the mortgage loan portfolio are reported in investment related gains (losses) on
the condensed consolidated statements of income (loss).

It is our policy to cease to accrue interest on loans that are over 90 days
delinquent. For loans less than 90 days delinquent, interest is accrued unless
it is determined that the accrued interest is not collectible. If a loan becomes
over 90 days delinquent, it is our general policy to initiate foreclosure
proceedings unless a workout arrangement to bring the loan current is in place.
As of June 30, 2022 and December 31, 2021, we had $677 million and $990 million,
respectively, of mortgage loans that were 90 days past due, of which $130
million and $54 million, respectively, were in the process of foreclosure. As of
June 30, 2022 and December 31, 2021, $338 million and $856 million of mortgage
loans that were 90 days past due were related to Government National Mortgage
Association (GNMA) early buyouts that are fully or partially guaranteed and are
accruing interest.

Investment Funds

Our investment funds investment strategy primarily focuses on funds with core
holdings of strategic origination and insurance platforms and equity, hybrid,
yield and other funds. Our investment funds generally meet the definition of a
VIE, and in certain cases these investment funds are consolidated in our
financial statements because we meet the criteria of the primary beneficiary.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

The following table illustrates our investment funds, including related parties
and consolidated VIEs:

                                                               Successor                                           Predecessor
                                                             June 30, 2022                                      December 31, 20211
                                                                          Percent of                                             Percent of
(In millions, except percentages)                Carrying Value              Total                     Carrying Value               Total
Investment funds

Equity                                          $           21                   0.2  %             $             410                   4.2  %
Hybrid                                                      93                   0.8  %                           667                   6.7  %
Yield                                                       19                   0.2  %                            99                   1.0  %
Other                                                        -                     -  %                             2                     -  %
Total investment funds                                     133                   1.2  %                         1,178                  11.9  %
Investment funds - related parties
Strategic origination platforms                            267                   2.4  %                         1,338                  13.6  %
Strategic insurance platforms                            1,092                   9.8  %                         1,440                  14.6  %
Apollo and other fund investments
Equity                                                     148                   1.3  %                         1,199                  12.1  %
Hybrid                                                       8                   0.1  %                           952                   9.6  %
Yield                                                        1                     -  %                           305                   3.1  %
Other2                                                      22                   0.2  %                         2,157                  21.9  %
Total investment funds - related parties                 1,538                  13.8  %                         7,391                  74.9  %
Investment funds owned by consolidated VIEs
Strategic origination platforms                          2,883                  25.8  %                           264                   2.7  %
Strategic insurance platforms                              554                   5.0  %                             -                     -  %
Apollo and other fund investments
Equity                                                   2,575                  23.1  %                           229                   2.3  %
Hybrid                                                   2,154                  19.3  %                            56                   0.6  %
Yield                                                    1,288                  11.5  %                           748                   7.6  %
Other                                                       40                   0.3  %                             -                     -  %
Total investment funds owned by consolidated
VIEs                                                     9,494                  85.0  %                         1,297                  13.2  %
Total investment funds, including related
parties and VIEs                                $       11,165                 100.0  %             $           9,866                 100.0  %

1 Certain reclassifications have been made to conform with current year presentation.
2 Includes our investment in Apollo held as of December 31, 2021.



Overall, the total investment funds, including related parties and consolidated
VIEs, were $11.2 billion and $9.9 billion, respectively, as of June 30, 2022 and
December 31, 2021. See Note 3 - Investments to the condensed consolidated
financial statements for further discussion regarding how we account for our
investment funds. Our investment fund portfolio is subject to a number of market
related risks including interest rate risk and equity market risk. Interest rate
risk represents the potential for changes in the investment fund's net asset
values resulting from changes in the general level of interest rates. Equity
market risk represents potential for changes in the investment fund's net asset
values resulting from changes in equity markets or from other external factors
which influence equity markets. These risks expose us to potential volatility in
our earnings period-over-period. We actively monitor our exposure to these
risks. The increase in investment funds, including related parties and
consolidated VIEs, was primarily driven by the consolidation of additional VIEs
in conjunction with our merger with Apollo, the deployment of organic inflows
and the increase in valuation of several funds, partially offset by the
distribution of our $2.1 billion investment in Apollo to AGM following the
merger.

Funds Withheld at Interest

Funds withheld at interest represent a receivable for amounts contractually
withheld by ceding companies in accordance with modco and funds withheld
reinsurance agreements in which we act as the reinsurer. Generally, assets equal
to statutory reserves are withheld and legally owned by the ceding company. We
hold funds withheld at interest receivables, including those held with VIAC,
Lincoln and Jackson. As of June 30, 2022, the majority of the ceding companies
holding the assets pursuant to such reinsurance agreements had a financial
strength rating of A or better (based on an A.M. Best scale).

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

The funds withheld at interest is comprised of the host contract and an embedded
derivative. We are subject to the investment performance on the withheld assets
with the total return directly impacting the host contract and the embedded
derivative. Interest accrues at a risk-free rate on the host receivable and is
recorded as net investment income in the condensed consolidated statements of
income (loss). The embedded derivative in our reinsurance agreements is similar
to a total return swap on the income generated by the underlying assets held by
the ceding companies. The change in the embedded derivative is recorded in
investment related gains (losses). Although we do not legally own the underlying
investments in the funds withheld at interest, in each instance the ceding
company has hired Apollo to manage the withheld assets in accordance with our
investment guidelines.

The following summarizes the underlying investment composition of the funds
withheld at interest, including related parties:

                                                               Successor                                           Predecessor
                                                             June 30, 2022                                      December 31, 2021
                                                                          Percent of                                            Percent of
(In millions, except percentages)                Carrying Value              Total                    Carrying Value               Total
Fixed maturity securities
US government and agencies                      $            -                     -  %             $             50                   0.1  %
US state, municipal and political subdivisions             289                   0.6  %                          338                   0.6  %
Foreign governments                                        422                   0.9  %                          553                   1.0  %
Corporate                                               22,201                  45.9  %                       26,143                  46.5  %
CLO                                                      4,338                   9.0  %                        5,322                   9.5  %
ABS                                                      6,825                  14.1  %                        7,951                  14.2  %
CMBS                                                     1,374                   2.8  %                        1,661                   3.0  %
RMBS                                                     1,383                   2.9  %                        1,586                   2.8  %
Equity securities                                          432                   0.9  %                          243                   0.4  %
Mortgage loans                                           8,801                  18.2  %                        9,437                  16.8  %
Investment funds                                         1,294                   2.7  %                        1,807                   3.2  %
Derivative assets                                          135                   0.3  %                          208                   0.4  %
Short-term investments                                     402                   0.8  %                           54                   0.1  %

Cash and cash equivalents                                  850                   1.8  %                        1,049                   1.9  %
Other assets and liabilities                              (433)                 (0.9) %                         (288)                 (0.5) %
Total funds withheld at interest including
related party                                   $       48,313                 100.0  %             $         56,114                 100.0  %



As of June 30, 2022 and December 31, 2021, we held $48.3 billion and $56.1
billion, respectively, of funds withheld at interest receivables, including
related party. Approximately 94.0% and 93.5% of the fixed maturity securities
within the funds withheld at interest are investment grade by NAIC designation
as of June 30, 2022 and December 31, 2021, respectively. The decrease in funds
withheld at interest, including related party, was primarily driven by
unrealized losses in the six months ended June 30, 2022 attributed to an
increase in US Treasury rates and credit spread widening as well as run-off of
the underlying blocks of business.

Derivative Instruments

We hold derivative instruments for economic hedging purposes to reduce our
exposure to cash flow variability of assets and liabilities, equity market risk,
interest rate risk, credit risk and foreign exchange risk. The types of
derivatives we may use include interest rate swaps, foreign currency swaps and
forward contracts, total return swaps, credit default swaps, variance swaps,
futures and equity options.

A discussion regarding our derivative instruments and how such instruments are
used to manage risk is included in Note 4 – Derivative Instruments to the
condensed consolidated financial statements.

As part of our risk management strategies, management continually evaluates our
derivative instrument holdings and the effectiveness of such holdings in
addressing risks identified in our operations.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

Net Invested Assets

The following summarizes our net invested assets:

                                                         Successor                                           Predecessor
                                                       June 30, 2022                                      December 31, 2021
                                           Net Invested         Percent of Total                Net Invested          Percent of Total
(In millions, except percentages)          Asset Value1                                         Asset Value1
Corporate                                 $     79,064                    41.8  %             $       75,163                    42.9  %
CLO                                             18,197                     9.6  %                     17,892                    10.2  %
Credit                                          97,261                    51.4  %                     93,055                    53.1  %
CML                                             24,070                    12.7  %                     21,438                    12.2  %
RML                                              9,327                     4.9  %                      7,116                     4.1  %
RMBS                                             6,871                     3.6  %                      6,969                     4.0  %
CMBS                                             3,729                     2.0  %                      3,440                     2.0  %
Real estate                                     43,997                    23.2  %                     38,963                    22.3  %
ABS                                             19,324                    10.2  %                     20,376                    11.6  %
Alternative investments                         11,841                     6.3  %                      9,873                     5.6  %
State, municipal, political subdivisions
and foreign government                           2,716                     1.4  %                      2,505                     1.4  %
Equity securities                                1,575                     0.8  %                        754                     0.4  %
Short-term investments                             559                     0.3  %                        111                     0.1  %
US government and agencies                       2,671                     1.4  %                        212                     0.1  %
Other investments                               38,686                    20.4  %                     33,831                    19.2  %
Cash and equivalents                             7,691                     4.1  %                      6,086                     3.5  %
Policy loans and other                           1,670                     0.9  %                      1,296                     0.7  %
Net invested assets excluding investment
in Apollo                                      189,305                   100.0  %                    173,231                    98.8  %
Investment in Apollo                                 -                       -  %                      2,112                     1.2  %
Net invested assets                       $    189,305                   100.0  %             $      175,343                   100.0  %

1 See Key Operating and Non-GAAP Measures for the definition of net invested assets.



Our net invested assets were $189.3 billion and $175.3 billion as of June 30,
2022 and December 31, 2021, respectively. Corporate securities included $23.7
billion of private placements, which represented 12.5% of our net invested
assets. The increase in net invested assets as of June 30, 2022 from
December 31, 2021 was primarily driven by growth from net organic inflows of
$18.2 billion in excess of net liability outflows of $8.1 billion, purchase
accounting adjustments resulting in an increase in book value as our investment
portfolio was marked up to fair value and an increase in valuation of several
alternative investments, partially offset by the distribution of our $2.1
billion investment in Apollo to AGM following the merger.

In managing our business, we utilize net invested assets as presented in the
above table. Net invested assets do not correspond to total investments,
including related parties, on our condensed consolidated balance sheets, as
discussed previously in Key Operating and Non-GAAP Measures. Net invested assets
represent the investments that directly back our net reserve liabilities and
surplus assets. We believe this view of our portfolio provides a view of the
assets for which we have economic exposure. We adjust the presentation for funds
withheld and modco transactions to include or exclude the underlying investments
based upon the contractual transfer of economic exposure to such underlying
investments. We also adjust for VIEs to show the net investment in the funds,
which are included in the alternative investments line above as well as adjust
for the allowance for credit losses. Net invested assets includes our
proportionate share of ACRA investments, based on our economic ownership, but
excludes the proportionate share of investments associated with the
noncontrolling interest.

Net invested assets is utilized by management to evaluate our investment
portfolio. Net invested assets is used in the computation of net investment
earned rate, which allows us to analyze the profitability of our investment
portfolio. Net invested assets is also used in our risk management processes for
asset purchases, product design and underwriting, stress scenarios, liquidity,
and ALM.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

Net Alternative Investments

The following summarizes our net alternative investments:

                                                         Successor                                           Predecessor
                                                       June 30, 2022                                     December 31, 20211
                                           Net Invested                                         Net Invested
(In millions, except percentages)           Asset Value         Percent of Total                 Asset Value          Percent of Total
Strategic origination platforms
MidCap Financial                          $        687                     5.8  %             $          666                     6.7  %
NNN Lease                                          733                     6.2  %                        637                     6.5  %
Wheels Donlen                                      723                     6.1  %                        590                     6.0  %
PK Air Finance                                     277                     2.3  %                        316                     3.2  %
Foundation Home Loans                              251                     2.2  %                          -                       -  %
Other                                              455                     3.8  %                        316                     3.2  %
Total strategic origination platforms            3,126                    26.4  %                      2,525                    25.6  %
Strategic retirement services platforms
Athora                                             885                     7.5  %                        743                     7.5  %
Catalina                                           437                     3.7  %                        442                     4.6  %
FWD                                                400                     3.4  %                        400                     4.1  %
Challenger                                         262                     2.2  %                        232                     2.3  %
Venerable                                          230                     1.9  %                        219                     2.2  %
Other                                               70                     0.6  %                        133                     1.3  %
Total strategic retirement services
platforms                                        2,284                    19.3  %                      2,169                    22.0  %
Apollo and other fund investments
Equity
Real estate                                      1,243                    10.5  %                      1,105                    11.2  %
Traditional private equity                       1,151                     9.7  %                        689                     7.0  %
Other                                              355                     3.0  %                        309                     3.1  %
Total equity                                     2,749                    23.2  %                      2,103                    21.3  %
Hybrid
Real estate                                      1,091                     9.2  %                        809                     8.2  %
Other                                            1,409                    11.9  %                      1,282                    13.0  %
Total hybrid                                     2,500                    21.1  %                      2,091                    21.2  %
Yield                                              901                     7.6  %                        773                     7.8  %
Total Apollo and other fund investments          6,150                    51.9  %                      4,967                    50.3  %
Other                                              281                     2.4  %                        212                     2.1  %
Net alternative investments               $     11,841                   100.0  %             $        9,873                   100.0  %

1 Certain reclassifications have been made to conform with current year presentation.



Net alternative investments were $11.8 billion and $9.9 billion as of June 30,
2022 and December 31, 2021, respectively, representing 6.3% and 5.6% of our net
invested assets portfolio as of June 30, 2022 and December 31, 2021,
respectively. The increase in net alternative investments was primarily driven
by deployment into alternative investments from growth in net organic inflows
over liability outflows and an increase in valuation of several alternative
investments.

Net alternative investments do not correspond to the total investment funds,
including related parties and consolidated VIEs, on our condensed consolidated
balance sheets. As discussed above in the net invested assets section, we adjust
the GAAP presentation for funds withheld, modco and VIEs. We include CLO and ABS
equity tranche securities in alternative investments due to their underlying
characteristics and equity-like features.

Through our relationship with Apollo, we have indirectly invested in companies
that meet the key characteristics we look for in net alternative investments.
Athora, our largest alternative investment, is a strategic investment.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

Athora

Athora is a specialized insurance and reinsurance group fully focused on the
European market. Athora's principal operational subsidiaries are Athora
Netherlands N.V. in the Netherlands, Athora Belgium SA in Belgium, Athora
Lebensversicherung AG in Germany, Athora Ireland plc in Ireland, and Athora Life
Re Ltd in Bermuda. Athora deploys capital and resources to further its mission
to build a stand-alone independent and integrated insurance and reinsurance
business. Athora's growth is achieved primarily through acquisitions, portfolio
transfers and reinsurance. Athora is building a European insurance brand and has
successfully acquired, integrated, and transformed four insurance companies:
Delta Lloyd Deutschland AG (2015), Aegon Ireland plc (2018), Generali Belgium SA
(2019) and VIVAT NV (2020).

Our alternative investment in Athora had a carrying value of $885 million and
$743 million as of June 30, 2022 and December 31, 2021, respectively. Our
investment in Athora represents our proportionate share of its net asset value,
which largely reflects any contributions to and distributions from Athora and
changes in its fair value. Athora returned a net investment earned rate of
20.75% and 14.34% for the three months ended June 30, 2022 and 2021,
respectively, and 21.34% and 9.39% for the six months ended June 30, 2022 and
2021, respectively. Alternative investment income from Athora was $45 million
and $25 million for the three months ended June 30, 2022 and 2021, respectively,
and $91 million and $33 million for the six months ended June 30, 2022 and 2021,
respectively. The increase in alternative investment income for both periods was
driven by an increase in average NAV as well as strong performance of the fund
in the current year.

Public Equity

We hold a public equity position in Jackson (ticker: JXN), previously held as a
private equity investment, after Jackson's former parent company, Prudential
plc, completed a dividend demerger transaction in September of 2021 which
resulted in Jackson becoming a publicly traded company. Although the net
invested asset value of this equity position is not significant, it has the
ability to create volatility in our condensed consolidated statements of income
(loss). As of June 30, 2022 and December 31, 2021, we held approximately 2.8
million and 3.4 million shares of Jackson, respectively, with a market value of
$70 million and $133 million, net of the ACRA noncontrolling interest,
respectively. Alternative investment income (loss) from Jackson was $(44)
million and $0 million for the three months ended June 30, 2022 and 2021,
respectively, and $(32) million and $0 million for the six months ended June 30,
2022 and 2021, respectively. The decrease for both periods was driven by the
decrease in Jackson's share price in the current year.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

Non-GAAP Measure Reconciliations

The reconciliation of net income (loss) available to AHL common shareholder to
spread related earnings, is as follows:

                                             Successor                   Predecessor               Successor                    Predecessor
                                            Three months
                                               ended
                                              June 30,               Three months ended        Six months ended               Six months ended
(In millions)                                   2022                    June 30, 2021            June 30, 2022                 June 30, 2021
Net income (loss) available to Athene
Holding Ltd. common shareholder             $  (2,155)               $          1,382          $       (3,673)               $         1,960
Preferred stock dividends                          35                              35                      70                             71
Net income (loss) attributable to
noncontrolling interest                        (1,072)                            389                  (1,955)                          (148)
Net income (loss)                              (3,192)                          1,806                  (5,558)                         1,883
Income tax expense (benefit)                     (484)                            184                    (891)                           246
Income (loss) before income taxes              (3,676)                          1,990                  (6,449)                         2,129
Realized gains (losses) on sale of AFS
securities                                        (39)                             57                    (103)                            76
Unrealized, allowances and other investment
gains (losses)1                                (1,203)                            504                  (2,074)                           579
Change in fair value of reinsurance assets     (1,612)                            554                  (3,269)                          (311)
Offsets to investment gains (losses)              172                            (126)                    303                             15
Investment gains (losses), net of offsets      (2,682)                            989                  (5,143)                           359
Change in fair values of derivatives and
embedded derivatives - FIAs, net of offsets      (381)                            (68)                   (462)                           420
Integration, restructuring and other
non-operating expenses                            (33)                            (11)                    (67)                           (56)
Stock compensation expense2                       (13)                            (11)                    (25)                           (19)
Preferred stock dividends                          35                              35                      70                             71
Noncontrolling interests - pre-tax income
(loss)                                         (1,044)                            394                  (1,934)                          (153)
Total adjustments to income (loss) before
income taxes                                   (4,118)                          1,328                  (7,561)                           622
Spread related earnings                     $     442                $            662          $        1,112                $         1,507

1 Unrealized, allowances and other investment gains (losses) was updated to include the change in fair value of Apollo investment for prior
periods. 2 Stock compensation expense was updated to include our long-term incentive plan expense.

The reconciliation of total AHL shareholders’ equity to total adjusted AHL
common shareholder’s equity is as follows:

                                                                  Successor                      Predecessor
(In millions)                                                   June 30, 2022                 December 31, 2021
Total AHL shareholders' equity                                $        3,725                $           20,130
Less: Preferred stock                                                  2,667                             2,312
Total AHL common shareholder's equity                                  1,058                            17,818
Less: Accumulated other comprehensive income (loss)                   (9,787)                            2,430

Less: Accumulated change in fair value of reinsurance assets (2,464)

                              585

Less: Accumulated change in fair value of mortgage loan
assets

                                                                (1,273)                                -
Total adjusted AHL common shareholder's equity                $       14,582                $           14,803





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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

The reconciliation of debt to capital ratio to adjusted debt to capital ratio is
as follows:

                                                                   Successor                     Predecessor
(In millions, except percentages)                                June 30, 2022                December 31, 2021
Total debt                                                      $       3,279                $          2,964
Less: Adjustment to arrive at notional debt                               279                             (36)
Notional debt                                                   $       3,000                $          3,000

Total debt                                                      $       3,279                $          2,964
Total AHL shareholders' equity                                          3,725                          20,130
Total Capitalization                                                    7,004                          23,094
Less: Accumulated other comprehensive income (loss)                    (9,787)                          2,430

Less: Accumulated change in fair value of reinsurance assets (2,464)

                            585

Less: Accumulated change in fair value of mortgage loan assets (1,273)

                              -
Less: Adjustment to arrive at notional debt                               279                             (36)
Total adjusted capitalization                                   $      20,249                $         20,115

Debt to capital ratio                                                    46.8  %                         12.8  %
Accumulated other comprehensive income (loss)                           (22.3) %                          1.6  %
Accumulated change in fair value of reinsurance assets                   (5.6) %                          0.4  %
Accumulated change in fair value of mortgage loan assets                 (2.9) %                            -  %
Adjustment to arrive at notional debt                                    (1.2) %                          0.1  %
Adjusted debt to capital ratio                                           14.8  %                         14.9  %



The reconciliation of net investment income to net investment earnings and
earned rate is as follows:

                                                Successor                                       Predecessor                                Successor                                       Predecessor
                                    Three months ended June 30, 2022                 Three months ended June 30, 2021            Six months ended June 30, 2022                  Six months ended June 30, 2021
(In millions, except percentages)      Dollar                Rate                       Dollar                 Rate                Dollar               Rate                       Dollar                 Rate
GAAP net investment income         $      1,726                3.70  %             $        2,017                5.15  %       $     3,409                3.71  %             $        3,686                4.78  %
Change in fair value of
reinsurance assets                           50                0.11  %                        388                0.99  %               270                0.29  %                        754                0.98  %
VIE earnings adjustment                      91                0.19  %                         21                0.05  %               170                0.19  %                         58                0.08  %
Alternative gains (losses)                  (28)              (0.06) %                        (18)              (0.05) %               (10)              (0.01) %                         51                0.06  %
ACRA noncontrolling interest               (347)              (0.74) %                       (219)              (0.56) %              (652)              (0.71) %                       (417)              (0.54) %
Apollo investment gain                        -                   -  %                       (472)              (1.20) %               (33)              (0.04) %                       (447)              (0.58) %
Held for trading amortization and
other                                        (4)              (0.01) %                          9                0.02  %               (11)              (0.01) %                         39                0.05  %
Total adjustments to arrive at net
investment earnings/earned rate            (238)              (0.51) %                       (291)              (0.75) %              (266)              (0.29) %                         38                0.05  %
Total net investment
earnings/earned rate               $      1,488                3.19  %             $        1,726                4.40  %       $     3,143                3.42  %             $        3,724                4.83  %

Average net invested assets        $    186,788                                    $      156,753                              $   184,034                                    $      154,125



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of Operations

The reconciliation of GAAP benefits and expenses to cost of funds is as follows:
                                                  Successor                                        Predecessor                                Successor                                       Predecessor
                                       Three months ended June 30, 2022                 Three months ended June 30, 2021            Six months ended June 30, 2022                  Six months ended June 30, 2021
(In millions, except percentages)        Dollar                 Rate                       Dollar                 Rate                Dollar               Rate                       Dollar                 Rate
GAAP benefits and expenses           $      5,471                11.72  %             $        4,433               11.31  %       $     7,975                8.67  %             $        8,685               11.27  %
Premiums                                   (5,614)              (12.02) %                     (1,598)              (4.08) %            (7,724)              (8.39) %                     (4,609)              (5.98) %
Product charges                              (175)               (0.37) %                       (157)              (0.40) %              (341)              (0.37) %                       (307)              (0.40) %
Other revenues                                  9                 0.02  %                        (20)              (0.05) %                12                0.01  %                        (34)              (0.04) %
FIA option costs                              306                 0.65  %                        278                0.71  %               600                0.65  %                        557                0.72  %
Reinsurance embedded derivative
impacts                                        12                 0.03  %                         12                0.03  %                24                0.02  %                         26                0.03  %
Change in fair value of embedded
derivatives - FIA, net of offsets             903                 1.93  %                     (1,450)              (3.70) %             1,253                1.36  %                     (1,748)              (2.27) %
DAC and DSI amortization related to
investment gains and losses1                   26                 0.06  %                        (94)              (0.24) %                36                0.04  %                         45                0.06  %
Rider reserves related to investment
gains and losses                              141                 0.30  %                        (20)              (0.05) %               265                0.29  %                          1                   -  %
Policy and other operating expenses,
excluding policy acquisition
expenses                                     (260)               (0.56) %                       (168)              (0.43) %              (507)              (0.55) %                       (369)              (0.48) %

AmerUs closed block fair value
liability                                     114                 0.24  %                        (54)              (0.14) %               241                0.26  %                         39                0.05  %
ACRA noncontrolling interest                  (26)               (0.06) %                       (242)              (0.62) %              (113)              (0.12) %                       (349)              (0.45) %
Other                                         (21)               (0.04) %                          5                0.02  %                (9)              (0.01) %                         (2)                  -  %
Total adjustments to arrive at cost
of funds                                   (4,585)               (9.82) %                     (3,508)              (8.95) %            (6,263)              (6.81) %                     (6,750)              (8.76) %
Total cost of funds                  $        886                 1.90  %             $          925                2.36  %       $     1,712                1.86  %             $        1,935                2.51  %

Average net invested assets          $    186,788                                     $      156,753                              $   184,034                                    $      154,125

1 Periods prior to the merger include VOBA amortization related to investment gains and losses.



The reconciliation of policy and other operating expenses to other operating
expenses is as follows:

                                                Successor                      Predecessor                Successor                     Predecessor
                                            Three months ended              Three months ended        Six months ended                Six months ended
(In millions)                                 June 30, 2022                   June 30, 2021             June 30, 2022                  June 30, 2021
GAAP policy and other operating expenses    $           358                $             252          $          693                $             545
Interest expense                                        (41)                             (34)                    (74)                             (66)
Policy acquisition expenses, net of
deferrals                                               (98)                             (84)                   (186)                            (176)
Integration, restructuring and other
non-operating expenses                                  (33)                             (11)                    (67)                             (56)
Stock compensation expenses1                            (13)                             (11)                    (25)                             (19)
ACRA noncontrolling interest                            (59)                             (19)                   (110)                             (40)
Other changes in policy and other operating
expenses                                                 (5)                              (8)                    (13)                             (13)
Total adjustments to arrive at other
operating expenses                                     (249)                            (167)                   (475)                            (370)
Other operating expenses                    $           109                $              85          $          218                $             175

1 Stock compensation expense was updated to include our long-term incentive plan expense.



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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

The reconciliation of total investments, including related parties, to net
invested assets is as follows:

                                                                 Successor                      Predecessor
(In millions)                                                  June 30, 2022                 December 31, 2021
Total investments, including related parties                 $      186,569                $          209,176
Derivative assets                                                    (2,932)                           (4,387)
Cash and cash equivalents (including restricted cash)                11,925                            10,275
Accrued investment income                                             1,086                               962
Payables for collateral on derivatives                               (1,904)                           (3,934)
Reinsurance funds withheld and modified coinsurance                   5,449                            (1,035)

VIE and VOE assets, liabilities and noncontrolling interest 11,499

                             2,958
Unrealized (gains) losses                                            17,371                            (4,057)
Ceded policy loans                                                     (182)                             (169)
Net investment receivables (payables)                                    26                                75
Allowance for credit losses                                             638                               361
Total adjustments to arrive at gross invested assets                 42,976                             1,049
Gross invested assets                                               229,545                           210,225
ACRA noncontrolling interest                                        (40,240)                          (34,882)
Net invested assets                                          $      189,305                $          175,343



The reconciliation of total investment funds, including related parties and
VIEs, to net alternative investments within net invested assets is as follows:

                                                                   Successor                        Predecessor
(In millions)                                                    June 30, 2022                   December 31, 2021

Investment funds, including related parties and VIEs $ 11,165

                $            9,866
Equity securities1                                                          544                               872
CLO and ABS equities included in trading securities1                        288                             1,418
Investment in Apollo                                                          -                            (2,112)
Investment funds within funds withheld at interest                        1,294                             1,807
Royalties and other assets included in other investments                     46                                50
Net assets of the VIE, excluding investment funds                           203                              (772)
Unrealized (gains) losses and other adjustments                              60                                14
ACRA noncontrolling interest                                             (1,759)                           (1,270)
Total adjustments to arrive at alternative investments                      676                                 7
Net alternative investments                                   $          11,841                $            9,873

1 Prior period has been updated to reflect a reclassification between line items for comparability.



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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

The reconciliation of total liabilities to net reserve liabilities is as
follows:

                                                                 Successor                      Predecessor
(In millions)                                                  June 30, 2022                 December 31, 2021
Total liabilities                                            $      230,865                $          212,968

Debt                                                                 (3,279)                           (2,964)
Derivative liabilities                                               (1,223)                             (472)

Payables for collateral on derivatives and securities to
repurchase

                                                           (3,784)                           (6,446)
Other liabilities                                                    (2,640)                           (2,975)
Liabilities of consolidated VIEs                                       (408)                             (461)
Reinsurance ceded receivables                                        (4,437)                           (4,594)
Policy loans ceded                                                     (182)                             (169)
ACRA noncontrolling interest                                        (37,274)                          (32,933)
Other                                                                    (5)                               (3)
Total adjustments to arrive at net reserve liabilities              (53,232)                          (51,017)
Net reserve liabilities                                      $      177,633                $          161,951



Liquidity and Capital Resources

There are two forms of liquidity relevant to our business, funding liquidity and
balance sheet liquidity. Funding liquidity relates to the ability to fund
operations. Balance sheet liquidity relates to our ability to liquidate or
rebalance our balance sheet without incurring significant costs from fees,
bid-offer spreads, or market impact. We manage our liquidity position by
matching projected cash demands with adequate sources of cash and other liquid
assets. Our principal sources of liquidity, in the ordinary course of business,
are operating cash flows and holdings of cash, cash equivalents and other
readily marketable assets.

Our investment portfolio is structured to ensure a strong liquidity position
over time in order to permit timely payment of policy and contract benefits
without requiring asset sales at inopportune times or at depressed prices. In
general, liquid assets include cash and cash equivalents, highly rated corporate
bonds, unaffiliated preferred stock and unaffiliated public common stock, all of
which generally have liquid markets with a large number of buyers. The carrying
value of these assets, excluding assets within modified coinsurance and funds
withheld portfolios, as of June 30, 2022 was $85.8 billion. Assets included in
modified coinsurance and funds withheld portfolios are available to fund the
benefits for the associated obligations but are restricted from other uses. The
carrying value of the underlying assets in these modified coinsurance and funds
withheld portfolios that we consider liquid as of June 30, 2022 was $26.4
billion. Although our investment portfolio does contain assets that are
generally considered illiquid for liquidity monitoring purposes (primarily
mortgage loans, policy loans, real estate, investment funds, and affiliated
common stock), there is some ability to raise cash from these assets if needed.
In periods of economic downturn, such as the one brought about by the spread of
COVID-19, we may maintain higher cash balances than required to manage our
liquidity risk and to take advantage of market dislocations as they arise. We
have access to additional liquidity through our $1.25 billion credit facility,
which was undrawn as of June 30, 2022 and had a remaining term of more than two
years, subject to up to two one-year extensions. Additionally, we entered into a
revolving liquidity facility, with a current borrowing capacity of $2.5 billion,
in the third quarter of 2022, which has a 364-day term, subject to additional
364-day extensions. The liquidity facility will be used for liquidity and
working capital needs to meet short-term cash flow and investment timing
differences. We also have access to $2.0 billion of committed repurchase
facilities. Our registration statement on Form S-3 ASR (Shelf Registration
Statement) provides us access to the capital markets, subject to favorable
market conditions and other factors. We are also party to repurchase agreements
with several different financial institutions, pursuant to which we may obtain
short-term liquidity, to the extent available. In addition, through our
membership in the FHLB, we are eligible to borrow under variable rate short-term
federal funds arrangements to provide additional liquidity.

We proactively manage our liquidity position to meet cash needs while minimizing
adverse impacts on investment returns. We analyze our cash-flow liquidity over
the upcoming 12 months by modeling potential demands on liquidity under a
variety of scenarios, taking into account the provisions of our policies and
contracts in force, our cash flow position, and the volume of cash and readily
marketable securities in our portfolio.

Liquidity risk is monitored, managed and mitigated through a number of stress
tests and analyses to assess our ability to meet our cash flow requirements, as
well as the ability of our reinsurance and insurance subsidiaries to meet their
collateral obligations, under various stress scenarios. We further seek to
mitigate liquidity risk by maintaining access to alternative, external sources
of liquidity as described below.

Our liquidity risk management framework is codified in the company’s Liquidity
Risk Policy that is reviewed and approved by our board of directors.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

Insurance Subsidiaries’ Liquidity

Operations

The primary cash flow sources for our insurance subsidiaries include retirement
services product inflows (premiums), investment income, principal repayments on
our investments, net transfers from separate accounts and financial product
inflows. Uses of cash include investment purchases, payments to policyholders
for surrenders, withdrawals and payout benefits, interest and principal payments
on funding agreements, payments to satisfy pension group annuity obligations,
policy acquisition costs and general operating costs.

Our policyholder obligations are generally long-term in nature. However,
policyholders may elect to withdraw some, or all, of their account value during
the surrender charge period of an annuity contract. We include provisions within
our annuity policies, such as surrender charges and MVAs, which are intended to
protect us from early withdrawals. As of each of June 30, 2022 and December 31,
2021, approximately 74% of our deferred annuity liabilities were subject to
penalty upon surrender. In addition, as of June 30, 2022 and December 31, 2021,
approximately 53% and 54%, respectively, of policies contained MVAs that may
also have the effect of limiting early withdrawals if interest rates increase,
but may encourage early withdrawals by effectively subsidizing a portion of
surrender charges when interest rates decrease. Our funding agreements, group
annuities and payout annuities are generally non-surrenderable which accounts
for approximately 32% of our net reserve liabilities as of June 30, 2022.

Membership in Federal Home Loan Bank

Through our membership in the FHLB, we are eligible to borrow under variable
rate short-term federal funds arrangements to provide additional liquidity. The
borrowings must be secured by eligible collateral such as mortgage loans,
eligible CMBS or RMBS, government or agency securities and guaranteed loans. As
of June 30, 2022 and December 31, 2021, we had $0 million of outstanding
borrowings under these arrangements.

We have issued funding agreements to the FHLB. These funding agreements were
issued in an investment spread strategy, consistent with other investment spread
operations. As of June 30, 2022 and December 31, 2021, we had funding agreements
outstanding with the FHLB in the aggregate principal amount of $3.0 billion and
$2.8 billion, respectively.

The maximum FHLB indebtedness by a member is determined by the amount of
collateral pledged, and cannot exceed a specified percentage of the member's
total statutory assets dependent on the internal credit rating assigned to the
member by the FHLB. As of June 30, 2022, the total maximum borrowings under the
FHLB facilities were limited to $45.5 billion. However, our ability to borrow
under the facilities is constrained by the availability of assets that qualify
as eligible collateral under the facilities and certain other limitations.
Considering these limitations, we estimate that as of June 30, 2022 we had the
ability to draw up to a total of approximately $4.7 billion, inclusive of
borrowings then outstanding. This estimate is based on our internal analysis and
assumptions, and may not accurately measure collateral which is ultimately
acceptable to the FHLB.

Securities Repurchase Agreements

We engage in repurchase transactions whereby we sell fixed income securities to
third parties, primarily major brokerage firms or commercial banks, with a
concurrent agreement to repurchase such securities at a determined future date.
We require that, at all times during the term of the repurchase agreements, we
maintain sufficient cash or other liquid assets sufficient to allow us to fund
substantially all of the repurchase price. Proceeds received from the sale of
securities pursuant to these arrangements are generally invested in short-term
investments, with the offsetting obligation to repurchase the security included
within payables for collateral on derivatives and securities to repurchase on
the condensed consolidated balance sheets. As per the terms of the repurchase
agreements, we monitor the market value of the securities sold and may be
required to deliver additional collateral (which may be in the form of cash or
additional securities) to the extent that the value of the securities sold
decreases prior to the repurchase date.

As of June 30, 2022 and December 31, 2021, the payables for repurchase
agreements were $4.1 billion and $3.1 billion, respectively, while the fair
value of securities and collateral held by counterparties backing the repurchase
agreements was $4.2 billion and $3.2 billion, respectively. As of June 30, 2022,
payables for repurchase agreements were comprised of $1.9 billion of short-term
and $2.2 billion of long-term repurchase agreements. As of December 31, 2021,
payables for repurchase agreements were comprised of $2.5 billion of short-term
and $598 million of long-term repurchase agreements.

We have a $1.0 billion committed repurchase facility with BNP Paribas. The
facility has an initial commitment period of 12 months and automatically renews
for successive 12-month periods until terminated by either party. During the
commitment period, we may sell and BNP Paribas is required to purchase eligible
investment grade corporate bonds pursuant to repurchase transactions at
pre-agreed discounts in exchange for a commitment fee. As of June 30, 2022, we
had no outstanding payables under this facility.

We have a $1.0 billion committed repurchase facility with Societe Generale. The
facility has a commitment term of 5 years, however, either party may terminate
the facility upon 24-months' notice, in which case the facility will end upon
the earlier of (1) such designated termination date, or (2) July 26, 2026.
During the commitment period, we may sell and Societe Generale is required to
purchase eligible investment grade corporate bonds pursuant to repurchase
transactions at pre-agreed rates in exchange for an ongoing commitment fee for
the facility. As of June 30, 2022, we had no outstanding payables under this
facility.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations


Cash Flows

Our cash flows were as follows:

                                                                    Successor                  Predecessor
                                                                    Six months
                                                                      ended
                                                                     June 30,                Six months ended
(In millions)                                                          2022                   June 30, 2021
Net income (loss)                                                  $  (5,558)               $         1,883

Non-cash revenues and expenses                                        10,284                            615
Net cash provided by operating activities                              4,726                          2,498
Sales, maturities and repayments of investments                       19,642                         14,461
Purchases of investments                                             (31,700)                       (25,604)

Other investing activities                                               339                           (129)
Net cash used in investing activities                                (11,719)                       (11,272)
Inflows on investment-type policies and contracts                     13,925                         11,120
Withdrawals on investment-type policies and contracts                 (4,074)                        (3,476)
Other financing activities                                            (1,144)                         1,414
Net cash provided by financing activities                              8,707                          9,058
Effect of exchange rate changes on cash and cash equivalents             (20)                             -
Net increase in cash and cash equivalents1                         $   1,694                $           284

1 Includes cash and cash equivalents, restricted cash and cash and cash equivalents of consolidated variable
interest entities.

Cash flows from operating activities

The primary cash inflows from operating activities include net investment
income, annuity considerations and insurance premiums. The primary cash outflows
from operating activities are comprised of benefit payments and operating
expenses. Our operating activities generated cash flows totaling $4.7 billion
and $2.5 billion for the six months ended June 30, 2022 and 2021, respectively.
The increase in cash provided by operating activities was primarily driven by
higher cash received from pension group annuity transactions net of outflows.

Cash flows from investing activities

The primary cash inflows from investing activities are the sales, maturities and
repayments of investments. The primary cash outflows from investing activities
are the purchases and acquisitions of new investments. Our investing activities
used cash flows totaling $11.7 billion and $11.3 billion for the six months
ended June 30, 2022 and 2021, respectively. The increase in cash used in
investing activities was primarily attributable to an increase in purchases of
investments due to the deployment of significant cash inflows from organic
growth compared to prior year, largely offset by an increase in sales,
maturities and repayments of securities.

Cash flows from financing activities

The primary cash inflows from financing activities are inflows on our
investment-type policies, changes of cash collateral posted for derivative
transactions, capital contributions, proceeds from the issuance of preferred
stock and proceeds from borrowing activities. The primary cash outflows from
financing activities are withdrawals on our investment-type policies, changes of
cash collateral posted for derivative transactions, repayments of outstanding
borrowings and payment of preferred and common stock dividends. Our financing
activities provided cash flows totaling $8.7 billion and $9.1 billion for the
six months ended June 30, 2022 and 2021, respectively. The decrease in cash
provided by financing activities was primarily attributed to the change in the
collateral posted for derivative transactions reflecting unfavorable equity
market performance in the current year compared to favorable performance in the
prior year, the payment of the $750 million dividend to Apollo declared in 2021,
proceeds from the issuance of long-term debt in the prior year and the payment
of common stock dividends of $375 million for the six months ended June 30,
2022, partially offset by higher organic inflows from retail and flow
reinsurance net of withdrawals and net capital contributions from noncontrolling
interests.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

Material Cash Obligations

The following table summarizes estimated future cash obligations as of June 30,
2022:

                                                                    Payments Due by Period
                                                                                                                   2027 and
(In millions)                       Total                2022             2023-2024           2025-2026           thereafter
Interest sensitive contract
liabilities                     $   164,571          $   9,040          $   40,578          $   32,763          $    82,190
Future policy benefits               52,478                866               3,866               3,798               43,948

Debt1                                 4,731                 63                 253                 253                4,162
Securities to repurchase2             4,345              1,715                 314               1,173                1,143
Total                           $   226,125          $  11,684          $   45,011          $   37,987          $   131,443

1 The obligations for debt payments include contractual maturities of principal and estimated future interest payments based
on the terms of the debt agreements.
2 The obligations for securities for repurchase payments include contractual maturities of principal and estimated future
interest payments based on the terms of the agreements. Future interest payments on floating rate repurchase agreements were
calculated using the June 30, 2022 interest rate.


Holding Company Liquidity

Common Stock Dividends

We declared common stock cash dividends of $750 million on December 31, 2021
with a record date and payment date following the completion of our merger with
AGM. The dividend payable was included in related party other liabilities on the
consolidated balance sheets as of December 31, 2021. The dividend was paid on
January 4, 2022.

We declared common stock cash dividends of $187.5 million on June 30, 2022,
payable to the holder of AHL's Class A common shares with a record date of June
28, 2022 and payment date of June 30, 2022. We have paid $375 million in common
stock dividends for the six months ended June 30, 2022.

Dividends from Subsidiaries

AHL is a holding company whose primary liquidity needs include the cash-flow
requirements relating to its corporate activities, including its day-to-day
operations, debt servicing, preferred and common stock dividend payments and
strategic transactions, such as acquisitions. The primary source of AHL's cash
flow is dividends from its subsidiaries, which are expected to be adequate to
fund cash flow requirements based on current estimates of future obligations.

The ability of AHL's insurance subsidiaries to pay dividends is limited by
applicable laws and regulations of the jurisdictions where the subsidiaries are
domiciled, as well as agreements entered into with regulators. These laws and
regulations require, among other things, the insurance subsidiaries to maintain
minimum solvency requirements and limit the amount of dividends these
subsidiaries can pay.

Subject to these limitations and prior notification to the appropriate
regulatory agency, the US insurance subsidiaries are permitted to pay ordinary
dividends based on calculations specified under insurance laws of the relevant
state of domicile. Any distributions above the amount permitted by statute in
any twelve month period are considered to be extraordinary dividends, and
require the approval of the appropriate regulator prior to payment. AHL does not
currently plan on having the US subsidiaries pay any dividends to their parents.

Dividends from subsidiaries are projected to be the primary source of AHL's
liquidity. Under the Bermuda Insurance Act, each of our Bermuda insurance
subsidiaries is prohibited from paying a dividend in an amount exceeding 25% of
the prior year's statutory capital and surplus, unless at least two members of
the board of directors of the Bermuda insurance subsidiary and its principal
representative in Bermuda sign and submit to the Bermuda Monetary Authority
(BMA) an affidavit attesting that a dividend in excess of this amount would not
cause the Bermuda insurance subsidiary to fail to meet its relevant margins. In
certain instances, the Bermuda insurance subsidiary would also be required to
provide prior notice to the BMA in advance of the payment of dividends. In the
event that such an affidavit is submitted to the BMA in accordance with the
Bermuda Insurance Act, and further subject to the Bermuda insurance subsidiary
meeting its relevant margins, the Bermuda insurance subsidiary is permitted to
distribute up to the sum of 100% of statutory surplus and an amount less than
15% of its total statutory capital. Distributions in excess of this amount
require the approval of the BMA.

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of Operations

The maximum distribution permitted by law or contract is not necessarily
indicative of our actual ability to pay such distributions, which may be further
restricted by business and other considerations, such as the impact of such
distributions on surplus, which could affect our ratings or competitive position
and the amount of premiums that can be written. Specifically, the level of
capital needed to maintain desired financial strength ratings from rating
agencies, including S&P, A.M. Best, Fitch and Moody's, is of particular concern
when determining the amount of capital available for distributions. AHL believes
its insurance subsidiaries have sufficient statutory capital and surplus,
combined with additional capital available to be provided by AHL, to meet their
financial strength ratings objectives. Finally, state insurance laws and
regulations require that the statutory surplus of our insurance subsidiaries
following any dividend or distribution must be reasonable in relation to their
outstanding liabilities and adequate for the insurance subsidiaries' financial
needs.

Other Sources of Funding

We may seek to secure additional funding at the holding company level by means
other than dividends from subsidiaries, such as by drawing on our undrawn $1.25
billion credit facility, drawing on our undrawn $2.5 billion revolving liquidity
facility or by pursuing future issuances of debt or preference shares to
third-party investors. Certain other sources of liquidity potentially available
at the holding company level are discussed below. Our credit facility contains
various standard covenants with which we must comply, including maintaining a
Consolidated Debt to Capitalization Ratio (as such term is defined in the credit
facility) of not greater than 35% at the end of any quarter, maintaining a
minimum Consolidated Net Worth (as such term is defined in the credit facility)
of no less than $7.3 billion, and restrictions on our ability to incur debt and
liens, in each case with certain exceptions. Our revolving liquidity facility
also contains various standard covenants with which we must comply, including
maintaining an ALRe minimum Consolidated Net Worth (as such term is defined in
the revolving liquidity facility) of no less than $9.3 billion and restrictions
on our ability to incur debt and liens, in each case with certain exceptions.

Shelf Registration – Under our Shelf Registration Statement, subject to market
conditions, we have the ability to issue, in indeterminate amounts, debt
securities, preference shares, depositary shares, Class A common shares,
warrants and units.

Debt - The following summarizes our outstanding long-term senior notes (in
millions, except percentages):
Issuance                          Issue Date                    Maturity Date                  Interest Rate                 Principal Balance
2028 Senior
Unsecured Notes                January 12, 2018                      2028                          4.125%                          $1,000
2030 Senior
Unsecured Notes                  April 3, 2020                       2030                          6.150%                           $500
2031 Senior
Unsecured Notes                 October 8, 2020                      2031                          3.500%                           $500
2051 Senior
Unsecured Notes                  May 25, 2021                        2051                          3.950%                           $500
2052 Senior
Unsecured Notes                December 13, 2021                     2052                          3.450%                           $500


See Note 9 – Debt to the consolidated financial statements in our 2021 Annual
Report for further information on debt.

Preferred Stock – The following summarizes our perpetual non-cumulative
preferred stock issuances (in millions, except share, per share data and
percentages):
Issuance

                      Fixed/Floating                Rate                Issue Date                Optional Redemption Date1           Shares Issued           Par Value Per Share          Liquidation Value Per Share          Aggregate Net Proceeds
Series A                  Fixed-to-Floating Rate           6.350%              June 10, 2019                    June 30, 2029                    34,500                      $1.00                           $25,000                             $839
Series B                        Fixed-Rate                 5.625%           September 19, 2019               September 30, 2024                  13,800                      $1.00                           $25,000                             $333
Series C                     Fixed-Rate Reset              6.375%              June 11, 2020                      Variable2                      24,000                      $1.00                           $25,000                             $583
Series D                        Fixed-Rate                 4.875%            December 18, 2020                December 30, 2025                  23,000                      $1.00                           $25,000                             $557

1 We may redeem preferred stock anytime on or after the dates set forth in this column, subject to the terms of the applicable certificate of designations.
2 We may redeem during a period from and including June 30 of each year in which there is a Reset Date to and including such Reset Date. Reset Date means September 30, 2025 and each date falling on the fifth anniversary of the preceding Reset Date.

See Note 10 – Equity to the consolidated financial statements in our 2021 Annual
Report for further information on preferred stock.

Intercompany Note - AHL has an unsecured revolving note payable with ALRe, which
permits AHL to borrow up to $2 billion with a fixed interest rate of 2.29% and a
maturity date of December 15, 2028. As of June 30, 2022 and December 31, 2021,
the revolving note payable had an outstanding balance of $628 million and $158
million, respectively.

Capital

We believe that we have a strong capital position and that we are well
positioned to meet policyholder and other obligations. We measure capital
sufficiency using an internal capital model which reflects management's view on
the various risks inherent to our business, the amount of capital required to
support our core operating strategies and the amount of capital necessary to
maintain our current ratings in a recessionary environment. The amount of
capital required to support our core operating strategies is determined based
upon internal modeling and analysis of economic risk, as well as inputs from
rating agency capital models and consideration of both NAIC RBC and Bermuda
capital requirements. Capital in excess of this required amount is considered
excess equity capital, which is available to deploy.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations


As of December 31, 2021 and 2020, our US insurance companies' TAC, as defined by
the NAIC, was $3.0 billion and $2.7 billion, respectively, and our US RBC ratio
was 377% and 425%, respectively. The decrease was primarily driven by strong
growth in our organic channels, a recent NAIC update to C-1 factors, higher
unfunded commitments and the impairment of a COLI asset, partially offset by
higher total adjusted capital largely from capital contributions. Each US
domestic insurance subsidiary's state of domicile imposes minimum RBC
requirements that were developed by the NAIC. The formulas for determining the
amount of RBC specify various weighting factors that are applied to financial
balances or various levels of activity based on the perceived degree of risk.
Regulatory compliance is determined by a ratio of TAC to its authorized control
level RBC (ACL). Our TAC was significantly in excess of all regulatory standards
as of December 31, 2021 and 2020, respectively.

Bermuda statutory capital and surplus for our Bermuda insurance companies in
aggregate was $14.6 billion and $13.5 billion as of December 31, 2021 and 2020,
respectively. Our Bermuda insurance companies adhere to BMA regulatory capital
requirements to maintain statutory capital and surplus to meet the minimum
margin of solvency and maintain minimum economic balance sheet (EBS) capital and
surplus to meet the enhanced capital requirement. Under the EBS framework,
assets are recorded at market value and insurance reserves are determined by
reference to nine prescribed scenarios, with the scenario resulting in the
highest reserve balance being ultimately required to be selected. The Bermuda
group's EBS capital and surplus was $19.7 billion and $17.2 billion, resulting
in a BSCR ratio of 232% and 254% as of December 31, 2021 and 2020, respectively.
The decrease was primarily driven by strong growth in our organic channels and
the declared dividend. The Bermuda group's BSCR ratio includes the capital and
surplus of ALRe, AARe, ALReI and all of their subsidiaries, including AUSA and
its subsidiaries. An insurer must have a BSCR ratio of 100% or greater to be
considered solvent by the BMA. As of December 31, 2021 and 2020, our Bermuda
insurance companies held the appropriate capital to adhere to these regulatory
standards. As of December 31, 2021 and 2020, our Bermuda RBC was 410% and 460%,
respectively. The decrease was primarily driven by strong growth in our organic
channels, a recent NAIC update to C-1 factors and the declared dividend. The
Bermuda RBC ratio is calculated by applying the NAIC RBC factors to the
statutory financial statements of our non-US reinsurance subsidiaries on an
aggregate basis with certain adjustments made by management as described in the
glossary. We exclude our interests in the AOG units and other subsidiary holding
companies from our capital base for purposes of calculating Bermuda RBC, but do
reflect such interests within our capital analysis, net of risk charges.

ACRA - ACRA provides us with access to on-demand capital to support our growth
strategies and capital deployment opportunities. ACRA provides a capital source
to fund both our inorganic and organic channels, including pension group
annuity, funding agreement and retail channels. This shareholder-friendly,
strategic capital solution allows us the flexibility to simultaneously deploy
capital across multiple accretive avenues, while maintaining a strong financial
position.


Critical Accounting Estimates and Judgments

The preparation of consolidated financial statements in conformity with GAAP
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of any contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Amounts based on such
estimates involve numerous assumptions subject to varying and potentially
significant degrees of judgment and uncertainty, particularly related to the
future performance of the underlying business, and will likely change in the
future as additional information becomes available. Critical estimates and
assumptions are evaluated on an ongoing basis based on historical developments,
market conditions, industry trends and other information that is reasonable
under the circumstances. There can be no assurance that actual results will
conform to estimates and assumptions and that reported results of operations
will not be materially affected by the need to make future accounting
adjustments to reflect periodic changes in these estimates and assumptions.
Critical accounting estimates are impacted significantly by our methods,
judgments and assumptions used in the preparation of the consolidated financial
statements and should be read in conjunction with our significant accounting
policies described in Note 1 - Business, Basis of Presentation and Significant
Accounting Policies to the consolidated financial statements of our 2021 Annual
Report. The following summary of our critical accounting estimates is intended
to enhance one's ability to assess our financial condition and results of
operations and the potential volatility due to changes in estimate. Other than
as described in this Item 2, there have been no material changes to our critical
accounting estimates and judgments from those previously disclosed in our 2021
Annual Report. The following updates and supplements the critical accounting
estimates and judgments in our 2021 Annual Report.

Investments

We are responsible for the fair value measurement of certain investments
presented in our condensed consolidated financial statements. We perform regular
analysis and review of our valuation techniques, assumptions and inputs used in
determining fair value to evaluate if the valuation approaches are appropriate
and consistently applied, and the various assumptions are reasonable. We also
perform quantitative and qualitative analysis and review of the information and
prices received from commercial pricing services and broker-dealers, to verify
it represents a reasonable estimate of the fair value of each investment. In
addition, we use both internally-developed and commercially-available cash flow
models to analyze the reasonableness of fair values using credit spreads and
other market assumptions, where appropriate. For investment funds, we typically
recognize our investment, including those for which we have elected the fair
value option, based on net asset value information provided by the general
partner or related asset manager. For a discussion of our investment funds for
which we have elected the fair value option, see Note 6 - Fair Value to the
condensed consolidated financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

Valuation of Mortgage Loans

Effective January 1, 2022, we elected the fair value option on our mortgage loan
portfolio. We use independent commercial pricing services to value our mortgage
loans portfolio. Discounted cash flow analysis is performed through which the
loans' contractual cash flows are modeled and an appropriate discount rate is
determined to discount the cash flows to arrive at a present value. Financial
factors, credit factors, collateral characteristics and current market
conditions are all taken into consideration when performing the discounted cash
flow analysis. We perform vendor due diligence exercises annually to review
vendor processes, models and assumptions. Additionally, we review price
movements on a quarterly basis to ensure reasonableness.

Future Policy Benefits

The future policy benefit liabilities associated with long duration contracts
include term and whole-life products, accident and health, disability, and
deferred and immediate annuities with life contingencies. Liabilities for
non-participating long duration contracts are established using accepted
actuarial valuation methods which require us to make certain assumptions
regarding expenses, investment yields, mortality, morbidity, and persistency,
with a provision for adverse deviation, at the date of issue or acquisition. As
of June 30, 2022, the reserve investment yield assumptions for non-participating
contracts range from 2.3% to 5.4% and are specific to our expected earned rate
on the asset portfolio supporting the reserves. We base other key assumptions,
such as mortality and morbidity, on industry standard data adjusted to align
with actual company experience, if necessary. Premium deficiency tests are
performed periodically using current assumptions, without provisions for adverse
deviation, in order to test the appropriateness of the established reserves. If
the reserves using current assumptions are greater than the existing reserves,
the excess is recorded and the initial assumptions are revised.

Liabilities for Guaranteed Living Withdrawal Benefits and Guaranteed Minimum
Death Benefits

We issue and reinsure deferred annuity contracts which contain GLWB and GMDB
riders. We establish future policy benefits for GLWB and GMDB by estimating the
expected value of withdrawal and death benefits in excess of the projected
account balance. We recognize the excess proportionally over the accumulation
period based on total actual and expected assessments. The methods we use to
estimate the liabilities have assumptions about policyholder behavior, which
includes lapses, withdrawals and utilization of the benefit riders; mortality;
and market conditions affecting the account balance.

Projected policyholder lapse and withdrawal behavior assumptions are set in one
of two ways. For certain blocks of business, this behavior is a function of our
predictive analytics model which considers various observable inputs. For the
remaining blocks of business, these assumptions are set at the product level by
grouping individual policies sharing similar features and guarantees and
reviewed periodically against experience. Base lapse rates consider the level of
surrender charges and are dynamically adjusted based on the level of current
interest rates relative to the guaranteed rates and the amount by which any
rider guarantees are in a net positive position. Rider utilization assumptions
consider the number and timing of policyholders electing the riders. We track
and update this assumption as experience emerges. Mortality assumptions are set
at the product level and generally based on standard industry tables, adjusted
for historical experience and a provision for mortality improvement. Projected
guaranteed benefit amounts in excess of the underlying account balances are
considered over a range of scenarios in order to capture our exposure to the
guaranteed withdrawal and death benefits.

The assessments used to accrue liabilities are based on interest margins, rider
charges, surrender charges and realized gains (losses). As such, future reserve
changes can be sensitive to changes in investment results and the impacts of
shadow adjustments, which represent the impact of assuming unrealized gains
(losses) are realized in future periods. As of June 30, 2022, the GLWB and GMDB
liability balance, including the impacts of shadow adjustments, totaled $5.3
billion. The relative sensitivity of the GLWB and GMDB liability balance from
changes to these assumptions, including the impacts of shadow adjustments from
hypothetical changes in projected assessments, changes in the discount rate and
annual equity growth, has decreased following the business combination and
pushdown accounting election described in Note 2 - Business Combination. Using
factors consistent with those previously disclosed in our 2021 Annual Report,
changes to the GLWB and GMDB liability balance from these hypothetical changes
in assumptions are not significant.

Derivatives

Valuation of Embedded Derivatives on indexed annuities

We issue and reinsure products, primarily indexed annuity products, or purchase
investments that contain embedded derivatives. If we determine the embedded
derivative has economic characteristics not clearly and closely related to the
economic characteristics of the host contract, and a separate instrument with
the same terms would qualify as a derivative instrument, the embedded derivative
is bifurcated from the host contract and accounted for separately, unless the
fair value option is elected on the host contract.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

Indexed annuities and indexed universal life insurance contracts allow the
policyholder to elect a fixed interest rate return or an equity market component
for which interest credited is based on the performance of certain equity market
indices. The equity market option is an embedded derivative, similar to a call
option. The benefit reserve is equal to the sum of the fair value of the
embedded derivative and the host (or guaranteed) component of the contracts. The
fair value of the embedded derivatives represents the present value of cash
flows attributable to the indexed strategies. The embedded derivative cash flows
are based on assumptions for future policy growth, which include assumptions for
expected index credits on the next policy anniversary date, future equity option
costs, volatility, interest rates, and policyholder behavior. The embedded
derivative cash flows are discounted using a rate that reflects our own credit
rating. The host contract is established at contract inception as the initial
account value less the initial fair value of the embedded derivative and
accreted over the policy's life. Contracts acquired through a business
combination which contain an embedded derivative are re-bifurcated as of the
acquisition date.

In general, the change in the fair value of the embedded derivatives will not
directly correspond to the change in fair value of the hedging derivative
assets. The derivatives are intended to hedge the index credits expected to be
granted at the end of the current term. The options valued in the embedded
derivatives represent the rights of the policyholder to receive index credits
over the period indexed strategies are made available to the policyholder, which
is typically longer than the current term of the options. From an economic basis
we believe it is suitable to hedge with options that align with index terms of
our indexed annuity products because policyholder accounts are credited with
index performance at the end of each index term. However, because the value of
an embedded derivative in an indexed annuity contract is longer-dated, there is
a duration mismatch which may lead to differences in the recognition of income
and expense for accounting purposes.

A significant assumption in determining policy liabilities for indexed annuities
is the vector of rates used to discount indexed strategy cash flows. The change
in risk free rates is expected to drive most of the movement in the discount
rates between periods. Changes to credit spreads for a given credit rating as
well as any change to our credit rating requiring a revised level of
nonperformance risk would also be factors in the changes to the discount rate.
If the discount rates used to discount the indexed strategy cash flows were to
fluctuate, there would be a resulting change in reserves for indexed annuities
recorded through the condensed consolidated statements of income (loss).

As of June 30, 2022, we had embedded derivative liabilities classified as Level
3 in the fair value hierarchy of $5.5 billion. The increase (decrease) to the
embedded derivatives on FIA products from hypothetical changes in discount rates
is summarized as follows:

                     (In millions)               June 30, 2022
                     +100 bps discount rate     $         (300)
                     -100 bps discount rate                335



However, these estimated effects do not take into account potential changes in
other variables, such as equity price levels and market volatility, which can
also contribute significantly to changes in carrying values. Therefore, the
quantitative impact presented in the table above does not necessarily correspond
to the ultimate impact on the condensed consolidated financial statements. In
determining the ranges, we have considered current market conditions, as well as
the market level of discount rates that can reasonably be anticipated over the
near-term. For additional information regarding sensitivities to interest rate
risk and public equity risk, see Item 3 Quantitative and Qualitative Disclosures
About Market Risks.

Deferred Acquisition Costs, Deferred Sales Inducements, and Value of Business
Acquired

Costs related directly to the successful acquisition of new or renewal insurance
or investment contracts are deferred to the extent they are recoverable from
future premiums or gross profits. These costs consist of commissions and policy
issuance costs, as well as sales inducements credited to policyholder account
balances. We perform periodic tests, including at issuance, to determine if the
deferred costs are recoverable. If it is determined that the deferred costs are
not recoverable, we record a cumulative charge to the current period.

Deferred costs related to universal life-type policies and investment contracts
with significant revenue streams from sources other than investment of the
policyholder funds are amortized over the lives of the policies, based upon the
proportion of the present value of actual and expected deferred costs to the
present value of actual and expected gross profits to be earned over the life of
the policies. Gross profits include investment spread margins, surrender charge
income, policy administration, changes in the GLWB and GMDB reserves, and
realized gains (losses) on investments. Current period gross profits for indexed
annuities also include the change in fair value of both freestanding and
embedded derivatives.

Our estimates of expected gross profits and margins are based on assumptions
using accepted actuarial methods related to policyholder behavior, including
lapses and the utilization of benefit riders, mortality, yields on investments
supporting the liabilities, future interest credited amounts (including indexed
related credited amounts on fixed indexed annuity products), and other policy
changes as applicable, and the level of expenses necessary to maintain the
policies over their expected lives. Each reporting period, we update estimated
gross profits with actual gross profits as part of the amortization process. We
also periodically revise the key assumptions used in the amortization
calculation which results in revisions to the estimated future gross profits.
The effects of changes in assumptions are recorded as unlocking in the period in
which the changes are made.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

We establish VOBA for blocks of insurance contracts acquired through the
acquisition of insurance entities. The fair value of the liabilities purchased
is determined using market participant assumptions at the time of acquisition
and represents the amount an acquirer would expect to be compensated to assume
the contracts. We record the fair value of the liabilities assumed in two
components: reserves and VOBA. Reserves are established using our best estimate
assumptions, plus a provision for adverse deviation where applicable, as of the
business combination date. VOBA is the difference between the fair value of the
liabilities and the reserves. VOBA can be either positive or negative. Any
negative VOBA is recorded to the same financial statement line on the condensed
consolidated balance sheets as the associated reserves. Positive VOBA is
recorded in DAC, DSI and VOBA on the condensed consolidated balance sheets.

VOBA and negative VOBA are amortized in relation to applicable policyholder
liabilities. Significant assumptions which impact VOBA and negative VOBA
amortization are consistent with those which impact the measurement of
policyholder liabilities.

Estimated future gross profits vary based on a number of factors but are
typically most sensitive to changes in investment spread margins, which are the
most significant component of gross profits. If estimated gross profits for all
future years on business in force were to change, including the impacts of
shadow adjustments, there would be a resulting increase or decrease to the
balances of DAC and DSI recorded as an increase or decrease to amortization of
DAC and DSI on the condensed consolidated statements of income (loss) or AOCI.

Actual gross profits will depend on actual margins, including the changes in the
value of embedded derivatives. The most sensitive assumption in determining the
value of the embedded derivative is the vector of rates used to discount the
embedded derivative cash flows. If the discount rates used to discount the
embedded derivative cash flows were to change, there would be a resulting
increase or decrease to the balances of DAC and DSI recorded as an increase or
decrease in amortization of DAC and DSI on the condensed consolidated statements
of income (loss).

Following the business combination and application of pushdown accounting
described in Note 2 - Business Combination, Predecessor DAC and DSI balances
were eliminated. Successor DAC and DSI balances exhibit less sensitivity to
hypothetical changes in estimated future gross profits and changes in the
embedded derivative discount rate as they are relatively less material following
the business combination. VOBA balances no longer amortize based on estimated
gross profits, and accordingly, are not sensitive to changes to actual or
estimated gross profits.

Impact of Recent Accounting Pronouncements

For a discussion of new accounting pronouncements affecting us, see Note 1 –
Business, Basis of Presentation and Significant Accounting Policies to the
condensed consolidated financial statements.

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