Why Is American Equity (AEL) Up 1.1% Since Last Earnings Report?
A month has gone by since the last earnings report for American Equity Investment (AEL). Shares have added about 1.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is American Equity due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
American Equity Q2 Earnings Miss, Revenues Fall Y/Y
American Equity Investment 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.
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%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
Currently, American Equity has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, American Equity has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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
American Equity Investment Life Holding Company (AEL) : Free Stock Analysis Report
