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American Equity (AEL) Up 1.4% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for American Equity Investment (AEL - Free Report) . Shares have added about 1.4% in that time frame, underperforming 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 Rise Y/Y

American Equity reported second-quarter 2020 adjusted net earnings of $1.01 per share, which missed the Zacks Consensus Estimate of $1.15. The bottom line decreased 7.3% on a year-over-year basis.

Net loss came in at $2.76 per share against earnings of 20 cents in the year-ago quarter. The decline was attributed to tightening of American Equity's own credit spread with improving market conditions; thereby reducing the discount rate used for policyholder liabilities.

Operational Update

Total revenues were $919.9 million, up 30.2% year over year.

Premiums and other considerations more than doubled. Annuity product charges increased 1.5% while net investment income declined 4.7%, all on a year-over-year basis.

Annuity sales of $559 million decreased 63% year over year. Sequentially, gross sales at American Equity Life and Eagle Life declined 18% and 34%, respectively

Total benefits and expenses were $1.2 billion, up 80.9% year over year.

Investment spread was 2.39%, down from 2.63% in the year-ago quarter.

Policyholder funds under management of $53.1 billion at quarter end were down 0.4% from first quarter end.

Financial Update

Cash and cash equivalents were $2.4 billion as on Jun 30, 2020, compared with $2.3 billion as on Dec 31, 2019. Total investments were $55.8 billion, down 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 $28.85, down 1.6% from 2019 end.

Total debt / total capitalization was 14.7% at second quarter end, improving 300 basis points.

Operating return on equity excluding average AOCI was 23.8%.

Pro forma estimated risk-based capital ratio was 389%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined 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.


American Equity has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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