American Equity (AEL) Q2 Earnings Miss, Revenues Fall Y/Y
American Equity Investment Life Holding Company AEL reported second-quarter 2023 adjusted net earnings of $1.62 per share, which missed the Zacks Consensus Estimate by 1.8%. The bottom line remained unchanged year over year.
The quarterly results reflected lower premiums and other considerations, as well as a decline in effective yield on the investment portfolio, offset by higher annuity product charges.
American Equity Investment Life Holding Company Price, Consensus and EPS Surprise
American Equity Investment Life Holding Company price-consensus-eps-surprise-chart | American Equity Investment Life Holding Company Quote
Operational Update
Operating total revenues were $633.5 million, down 4.1% year over year due to lower premiums and other considerations and net investment income.
Premiums and other considerations decreased 34.3% year over year to $2.5 million. The figure was lower than our estimate of $5.9 million. Annuity product charges increased 29% year over year to $71.6 million. The figure was higher than our estimate of $54 million.
Net investment income decreased 8.3% on a year-over-year basis to $542 million. The downside was due to a six-basis-points decline in effective yield on the investment portfolio, lower invested assets, and a decrease in cash and short-term investments at the holding company level.
Total expenses were $400.8 million against benefits of $853 million in the year-ago quarter due to higher amortization of deferred sales inducements, change in fair value of embedded derivatives, interest expense on notes and loan payable, and other operating costs and expenses. The figure was higher than our estimate of $336.5 million.
The investment spread was 2.57%, down from 2.64% in the year-ago quarter.
Financial Update
Cash and cash equivalents were $5 billion as of Jun 30, 2023, more than double from 2022-end. Total investments were $51.5 billion, which increased 0.3% from 2022-end.
Notes and loan payable totaled $788 million, down 0.4% from 2022-end.
Book value per common share, excluding AOCI, was $67.87, up 6.7% from 2022-end.
Total debt/total capitalization was 12.8%, deteriorating 20 basis points from 2022-end.
Operating return on equity average AOCI and the average net impact of fair value accounting for fixed index annuities was 12.1%.
Zacks Rank
American Equity currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Life Insurers
Voya Financial, Inc. VOYA reported second-quarter 2023 adjusted operating earnings of $2.31 per share, which beat the Zacks Consensus Estimate by 12.7%. The bottom line increased 38.3% year over year on strong net underwriting results. Adjusted operating revenues amounted to $347 billion, which increased 43.4% year over year. The top line also beat the Zacks Consensus Estimate by 8.8%.
Net investment income declined 6.2% year over year to $545 million. Meanwhile, fee income of $474 million increased 14.8% year over year. Premiums totaled $677 million, up 13.4% from the year-ago quarter. Total benefits and expenses were $1.6 billion, up 17.2% from the year-ago quarter. As of Jun 30, 2023, VOYA’s assets under management, and assets under administration and advisement totaled $789 million.
Lincoln National Corporation LNC reported second-quarter 2023 adjusted earnings of $2.02 per share, which outpaced the Zacks Consensus Estimate by 5.2%. However, the bottom line slipped 5.2% year over year. Adjusted operating revenues grew 5.7% year over year to $4,730 million. The top line beat the consensus mark by 2.8%. Total expenses plunged 48.8% year over year to $2,327 million in the quarter under review and remained below our estimate of $3,103.4 million due to the incidence of a significant MRB gain.
The Annuities segment recorded an operating income of $271 million, which decreased 8% year over year and missed the estimate by 6.3%. The metric suffered from reduced prepayment income and increased expenses. Operating income in the Retirement Plan Services segment came in at $47 million, which plunged 14.5% year over year and missed our estimate of $54.1 million due to a decline in prepayment income and an elevated expense level. The Life Insurance segment reported an operating income of $33 million in the quarter under review, falling 47.6% year over year, due to run-rate impact stemming from year-ago annual review of DAC and increased expenses.
Reinsurance Group of America, Incorporated RGA reported second-quarter 2023 adjusted operating earnings of $4.40 per share, which beat the Zacks Consensus Estimate by 6.7%. However, the bottom line decreased 5.7% from the year-ago quarter’s figure. Net foreign currency fluctuations had an adverse effect of 7 cents per share on adjusted operating income. RGA's operating revenues of $4.2 billion missed the Zacks Consensus Estimate by 1.5%. The top line, however, improved 3.2% year over year due to higher net premiums. Net premiums of $3.3 billion rose 3.3% year over year.
Investment income increased 13.6% from the prior-year quarter to $857 million. The average investment yield decreased to 4.42% in the second quarter from 4.63% in the prior-year period due to lower variable investment income, partially offset by higher yields. Total benefits and expenses at Reinsurance Group increased 3.6% year over year to $3.8 billion.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Lincoln National Corporation (LNC) : Free Stock Analysis Report
American Equity Investment Life Holding Company (AEL) : Free Stock Analysis Report
Reinsurance Group of America, Incorporated (RGA) : Free Stock Analysis Report
Voya Financial, Inc. (VOYA) : Free Stock Analysis Report
