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American Equity Investment Life Holding Company AEL is well-poised for growth, driven by growth in the annuity business, strategic partnerships, higher average fees, and new businesses.
Estimates for 2021 have moved up nearly 16.5% in the past 60 days, reflecting investors’ optimism.
Earnings Surprise History
American Equity has a decent earnings surprise history. It beat estimates in one of the last four quarters and missed in the other three, with the average beat being 7.01%.
The company has a favorable VGM Score of B. VGM Score helps to identify stocks with the most attractive value, best growth, and the most promising momentum.
Zacks Rank & Price Performance
American Equity currently carries a Zacks Rank #3 (Hold). In the past year, the stock has rallied 32.8%, compared with the industry’s increase of 7%.
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Increase in fees assessed for lifetime income benefit riders, increase in average fees, and higher surrender charges continue to contribute to annuity product charges that are one of the important drivers of the company’s revenues.
Investment income is expected to improve on the back of growth in the annuity business, increases in average invested assets, and increases in average yield earned on average invested assets.
Active management of new businesses and renewal rates as well as opportunistic replacement of lower-yielding securities with higher-yielding securities will continue to benefit the investment spread in the long term. The insurer anticipates investments spread to rise to its expected levels.
American Equity’s top-line growth is expected to gain from higher premiums, increased annuity product charges as well as improved net investment income.
American Equity remains focused on making partnerships to free up capital to return to shareholders, redeploy capital into higher-yielding alpha generating assets, and raise third-party capital to provide risk capital to back a portion of existing liabilities and future sales of annuity products.
American Equity boasts a strong balance sheet with solid cash balance. It continues to hold cash in excess of target levels by $330 million. Further, debt to capital of 8.4% was better than the industry average of 10.2%, and improved 30 basis points from the level at 2020 end. A lesser debt burden relative to the industry is encouraging.
Robust cash flows enable American Equity to undertake shareholder-friendly moves. Its dividend payments have witnessed an eight-year (2012-2020) CAGR of 9.9%. American Equity has $236 million of share repurchase authorization remaining under the current plan approved by the board in October 2020.
Stocks to Consider
Some better-ranked players in the multi-line insurance industry are Brighthouse Financial, Inc. BHF, Voya Financial, Inc. VOYA, and Primerica, Inc. PRI, each carrying a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Brighthouse has a trailing four-quarter earnings surprise of 52.23%, on average.
Voya Financial’s earnings surpassed estimates in two of the last four quarters (missing the mark in the other two), the average beat being 9.13%.
Primerica’s bottom line surpassed estimates in three of the last four quarters (missing expectations in the remaining one), the average beat being 7.55%.
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American Equity Investment Life Holding Company (AEL) : Free Stock Analysis Report
Primerica, Inc. (PRI) : Free Stock Analysis Report
Voya Financial, Inc. (VOYA) : Free Stock Analysis Report
Brighthouse Financial, Inc. (BHF) : Free Stock Analysis Report
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