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American Equity (AEL) Q1 Earnings Top Estimates, Increase Y/Y

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American Equity Investment Life Holding Company (AEL - Free Report) reported first-quarter 2023 adjusted net earnings of $1.47 per share, which beat the Zacks Consensus Estimate by 27.8% and our estimate of $1.02. The bottom line, however, increased 34.8% on a year-over-year basis.

American Equity witnessed higher annuity product charges and increased investment spread, offset by lower premiums and net investment income.

Operational Update  

Operating total revenues were $644.4 million, up 0.9% year over year on the back of higher annuity product charges and other revenues.

Premiums and other considerations decreased 58.9% year over year to $4.1 million. The figure was lower than our estimate of $11.2 million.

Annuity product charges increased 19.6% year over year to $62.6 million. The figure was higher than our estimate of $51.7 million.

Net investment income decreased 1.1% on a year-over-year basis to $561 million. This decrease reflects a decline in average investments due to $3.8 billion of invested assets transferred as a result of an in-force reinsurance transaction with 26North Re. It was offset by improved investment yields resulting from attractive new money rates, the effect of higher short-term rates on floating rate portfolios and the increase in portfolio allocation to privately sourced assets to 24.2%. The figure was higher than our estimate of $496.1 million.

Total expenses were $854 million versus a benefit of $716.6 million a year ago due to higher amortization of deferred sales inducements, interest expense on notes and loans payable, interest expense on subordinated debentures and other operating costs and expenses. The investment spread was 2.67%, up from 2.51% in the year-ago quarter.

Financial Update

Cash and cash equivalents were $2.8 billion as of Mar 31, 2023, which increased 44.7% from 2022-end. Total investments were about $51.4 billion, which increased 0.2% from 2022-end.

Notes payable totaled $790 million, down 0.2% from 2022-end.

Book value per common share, excluding accumulated other comprehensive income (AOCI), was $63.56, down 0.09% from 2022-end.

Total debt/total capitalization was 13.5%, improving 90 basis points (bps) from 2022-end.

Operating return on equity, excluding average AOCI and the average net impact of fair value accounting for fixed index annuities, was 13%.

Zacks Rank

American Equity currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Life Insurers

Reinsurance Group of America, Incorporated (RGA - Free Report) reported first-quarter 2023 adjusted operating earnings of $5.16 per share, which beat the Zacks Consensus Estimate by 53%. The bottom line, however, increased 23.4% from the year-ago quarter. Net foreign currency fluctuations had an adverse effect of 18 cents per share on adjusted operating income year over year. Reinsurance Group's operating revenues of $4.3 billion beat the Zacks Consensus Estimate by 2.4%. The top line also improved 6.7% year over year, driven by higher net premiums and investment income and net of related expenses.

Net premiums of $3.4 billion rose 7.3% year over year. Investment income and net of related expenses increased 5.6% from the prior-year quarter to $856 million. The average investment yield was down 58 bps to 4.71% due to lower variable investment income, partially offset by higher yields. Total benefits and expenses at Reinsurance Group increased 6.8% year over year to $3.9 billion on higher claims and other policy benefits, interest credited, other operating expenses, interest expense and collateral finance and securitization expense.

Voya Financial (VOYA - Free Report) reported first-quarter 2023 adjusted operating earnings of $1.69 per share, which missed the Zacks Consensus Estimate by 1.7%. The bottom line, however, increased 15% year over year. Our estimate was $1.71 per share. Adjusted operating revenues amounted to $261 billion, which decreased 4.4% year over year. The top line also missed the Zacks Consensus Estimate by 9.4%. Our estimate was $274.1 million.

Net investment income declined 13.9% year over year to $545 million. Our estimate was $2,519.2 million. Meanwhile, fee income of $464 million increased 7.2% year over year. Our estimate was $410.8 million. Premiums totaled $685 million, up 12.7% from the year-ago quarter. Our estimate was $836.2 million. Total benefits and expenses were $1.7 billion, up 22.4% from the year-ago quarter. Our estimate was $1.3 billion. As of Mar 31, 2023, VOYA’s assets under management, assets under administration and advisement totaled $771.2 million.

Brighthouse Financial Inc. (BHF - Free Report) reported a first-quarter 2023 adjusted net income of $2.86 per share, which missed the Zacks Consensus Estimate by 9.2%. The bottom line dropped 46% year over year. Total operating revenues of $2 billion decreased 11.2% year over year due to lower universal life and investment-type product policy fees and net investment income. The top line missed the consensus mark by 4.1%.

Premiums of $197 million increased 18.7% year over year. Adjusted net investment income was $1.1 billion in the quarter under review, down 5.2% year over year, due to a lower alternative investment income, partially offset by asset growth. The investment income yield was 3.8%.

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