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American Equity (AEL) Q3 Earnings Lag Estimates, Revenues Top

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American Equity Investment Life Holding Company (AEL - Free Report) reported third-quarter 2020 adjusted net earnings of 99 cents per share, which missed the Zacks Consensus Estimate by 8.3%. The bottom line decreased 39.4% on a year-over-year basis.

The quarter witnessed lower investment spread income and an increase in the liability for future policy benefits to be paid for lifetime income benefit riders, partially offset by a decline in deferred acquisition cost and deferred sales inducement amortization.

Operational Update

Operating total revenues were $543 million, up 0.2% year over year. The top line beat the Zacks Consensus Estimate by 0.7%.

Premiums and other considerations more than doubled. Annuity product charges decreased 2.2% while net investment income declined about 8%, all on a year-over-year basis.

Gross annuity sales of $574 million decreased 53% year over year. Sequentially, Annuity sales increased driven by increased multi-year fixed rate annuity sales at Eagle Life. Gross sales at American Equity Life decreased 8% while at Eagle Life it surged 75% year over year

Total benefits were $53 million, compared with expenses of $592.4 million in the year ago quarter.

Investment spread was 2.44%, down from 2.75% in the year-ago quarter.

Policyholder funds under management of $53 billion at quarter end were down 0.2% from second quarter end.

American Equity Investment Life Holding Company Price, Consensus and EPS Surprise

Financial Update

Cash and cash equivalents were $2.7 billion as on Sep 30, 2020, compared with $2.3 billion as on Dec 31, 2019. Total investments were about $57 billion, up 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 $35.97, up 31.6% from 2019 end.

Total debt/total capitalization was 12.6% at third-quarter end, improving 1080 basis points.

Operating return on equity excluding average AOCI was 4.3%.

Estimated risk-based capital ratio was 382%, excluding approximately $300 million of excess cash at the holding company.

Zacks Rank

American Equity currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Of the insurance industry players that have reported third-quarter results so far, The Progressive Corporation (PGR - Free Report) , The Travelers Companies (TRV - Free Report) and RLI Corp. (RLI - Free Report) beat the respective Zacks Consensus Estimate for earnings.

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