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American Equity Investment Life Holding Company (AEL - Snapshot Report) reported its third-quarter 2013 operating net income of 80 cents per share, which significantly surpassed the Zacks Consensus Estimate of 45 cents by 77.8%. The results also surged substantially from the prior-year quarter number of 34 cents per share.

Top-line improvement combined with reduced expenses fueled bottom-line growth for American Equity in the reported quarter.

Including net realized investment losses of 1 cent per share, changes in fair value of derivatives and embedded derivatives of 3 cents per share and extinguishment of debt of 1 cent per share, American Equity reported net income of 75 cents per share, rebounding successfully from net loss of 13 cents per share in the prior-year quarter.

Operational Updates

Total revenues of American Equity amounted to $572.9 million during the quarter, up 13.7% year over year. The top line improved on the back of higher annuity product charges as well as higher net investment income, partially offset by higher net realized losses on investments.

American Equity’s annuity sales were $1.05 billion, declining 7.1% year over year.

Investment spread of American Equity improved 18 basis points year over year to 2.8%.

Total benefits and expenses for the company declined 5.6% year over year to $487.1 million in the reported quarter. The improvement was primarily due to lower interest expense on subordinate debentures as well as lower other operating costs and expenses.

Financial Update

Total invested assets of American Equity as of Sep 30, 2013 was $29.8 billion.

As of Sep 30, estimated risk-based capital (RBC) ratio stayed above the target at 333% compared to 332% at 2012-end.

Notes Update

In the third quarter American Equity issued 6.625% $400 million senior notes due 2021. Of the proceeds, $15 million will be deployed to pay back the entire outstanding amount under its revolving credit facility. Another $128 million was used to pay the cash considerations to holders of the two issues of American Equity’s convertible notes who agreed to the company’s exchange offers to retire those notes. American Equity intends to utilize the rest of the net proceeds to repurchase $214 million of its currently outstanding principal amount of convertible notes.

Performances of Other Insurers

Genworth Financial Inc. (GNW - Analyst Report) reported third-quarter 2013 net operating income of 24 cents per share. The results fell short of the Zacks Consensus Estimate by 4 cents but were a couple of cents above the year-ago level.

Lincoln National Corporation (LNC - Analyst Report) reported third-quarter 2013 operating earnings of $1.34 per share. The results surpassed the Zacks Consensus Estimate of $1.23 and breezed past the prior-year quarter’s earnings of $1.27 a share.

Protective Life Corp. (PL - Analyst Report) reported third-quarter 2013 net operating earnings of 98 cents per share, a penny ahead of the Zacks Consensus Estimate of 97 cents per share. Earnings also surged 29% year over year.

Zacks Rank

American Equity presently carries a Zacks Rank #3 (Hold).

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