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American Equity (AEL) Q3 Earnings Lag Estimates, Revenues Top

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American Equity Investment Life Holding Company AEL reported third-quarter 2020 adjusted net earnings of 99 cents per share, which missed the Zacks Consensus Estimate by 8.3%. The bottom line decreased 39.4% on a year-over-year basis.

The quarter witnessed lower investment spread income and an increase in the liability for future policy benefits to be paid for lifetime income benefit riders, partially offset by a decline in deferred acquisition cost and deferred sales inducement amortization.

Operational Update

Operating total revenues were $543 million, up 0.2% year over year. The top line beat the Zacks Consensus Estimate by 0.7%.

Premiums and other considerations more than doubled. Annuity product charges decreased 2.2% while net investment income declined about 8%, all on a year-over-year basis.

Gross annuity sales of $574 million decreased 53% year over year. Sequentially, Annuity sales increased driven by increased multi-year fixed rate annuity sales at Eagle Life. Gross sales at American Equity Life decreased 8% while at Eagle Life it surged 75% year over year

Total benefits were $53 million, compared with expenses of $592.4 million in the year ago quarter.

Investment spread was 2.44%, down from 2.75% in the year-ago quarter.

Policyholder funds under management of $53 billion at quarter end were down 0.2% from second quarter end.

American Equity Investment Life Holding Company Price, Consensus and EPS Surprise

American Equity Investment Life Holding Company Price, Consensus and EPS Surprise
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

Financial Update

Cash and cash equivalents were $2.7 billion as on Sep 30, 2020, compared with $2.3 billion as on Dec 31, 2019. Total investments were about $57 billion, up from $56.9 billion at 2019 end.

Note payable totaled $495.4 million, slightly up from $495.1 million at 2019 end.

Book value per common share excluding AOCI was $35.97, up 31.6% from 2019 end.

Total debt/total capitalization was 12.6% at third-quarter end, improving 1080 basis points.

Operating return on equity excluding average AOCI was 4.3%.

Estimated risk-based capital ratio was 382%, excluding approximately $300 million of excess cash at the holding company.

Zacks Rank

American Equity currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Of the insurance industry players that have reported third-quarter results so far, The Progressive Corporation PGR, The Travelers Companies TRV and RLI Corp. RLI beat the respective Zacks Consensus Estimate for earnings.

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