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Why You Should Stay Invested in American Equity (AEL) Stock

·4 min read

American Equity Investment Life Holding AEL is well-poised for growth, driven by a compelling product portfolio, increasing popularity of index products in the market, focus on expansion into new verticals, solid balance sheet, effective capital deployment and favorable growth estimates. These factors cumulatively make American Equity stock worth retaining in one’s portfolio.

Zacks Rank & Price Performance

American Equity currently carries a Zacks Rank #3 (Hold). Year to date, the stock has gained 6.5% against the industry’s decline of 8.2%.

Zacks Investment Research
Zacks Investment Research


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Return on Equity

AEL generated an average operating return on equity of 15% over the past years. The life insurer targets ROE between 11% and 14% over the next few years and above 15% on average over the long term.

Optimistic Growth Projections

The Zacks Consensus Estimate for American Equity’s 2022 earnings is pegged at $3.94, indicating an increase of 1% from the year-ago reported figure on 9.6% higher revenues of $2.2 billion. The consensus mark for 2023 earnings stands at $5.03, suggesting growth of 27.7% year over year on 2.7% higher revenues of $2.3 billion.

Business Tailwinds

Per the U.S. Census Bureau, Americans aged 65 and older will represent 20% of the total population by 2030 from 13% in 2010. With fixed index and fixed rate annuity products guarantying principal protection, competitive rates of credited interest, tax-deferred growth, guaranteed lifetime income and alternative payout options, American Equity is poised to benefit from this demography.

This leader in the development and sale of fixed index and fixed rate annuity products expects to grow fixed index annuity product sales beyond $6 billion in 2022.

This apart, the premier fixed index annuity producer in the independent agent channel remains focused on expanding into middle market credit, real estate, infrastructure debt, and agricultural loans.

American Equity Investment believes its mix of fee revenues would support a higher-return business profile.

American Equity has been working diligently toward executing its AEL 2.0 strategy. AEL expects around one-third of new business flow to convert into ROA business through growth in reinsured liabilities.

Banking on operational excellence, AEL has been strengthening its balance sheet with improving cash balance and leverage ratio.

Effective Capital Deployment

AEL has hiked dividends each year since 2003 when it went public, increasing at a 19-year CAGR (2012-2021) of 42.8% and targets $700 million worth share buyback in 2022.

Earnings Surprise History

American Equity has a decent track record of beating earnings estimates in two of the last four quarters while missing in the other two quarters, with the average beat being 42.60%.

Stocks to Consider

Some better-ranked insurers include W.R. Berkley Corporation WRB, HCI Group, Inc. HCI and Ryan Specialty Group Holdings, Inc. RYAN. While W.R. Berkley and HCI Group carry a Zacks Rank #1 (Strong Buy), Ryan Specialty Group carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

W.R. Berkley’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 27.76%. In the past year, W.R. Berkley's stock has increased 41.5%.

The Zacks Consensus Estimate for WRB’s 2022 and 2023 earnings has moved 6.3% and 6.2% north, respectively, in the past 60 days.

The Zacks Consensus Estimate for HCI Group’s 2022 and 2023 earnings has moved 33.3% and 40% north, respectively, in the past 30 days. In the past year, HCI Group stock has lost 21.2%.

The Zacks Consensus Estimate for 2022 and 2023 earnings per share indicates year-over-year increases of 700% and 75%, respectively.

The Zacks Consensus Estimate for RYAN’s 2022 and 2023 earnings has moved 3.4% and 4.3% north in the past 30 days.

Ryan Specialty delivered a four-quarter average earnings surprise of 19.7%. In the past year, RYAN stock has gained 41.3%.


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W.R. Berkley Corporation (WRB) : Free Stock Analysis Report
 
American Equity Investment Life Holding Company (AEL) : Free Stock Analysis Report
 
HCI Group, Inc. (HCI) : Free Stock Analysis Report
 
Ryan Specialty Holdings Inc. (RYAN) : Free Stock Analysis Report
 
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