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Here's Why You Should Stay Invested in American Equity (AEL)
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American Equity Investment Life Holding’s focus on expansion into new verticals, the increasing popularity of index products in the market, solid balance sheet and effective capital deployment make it worth retaining in one’s portfolio.
AEL has a decent track record of beating earnings estimates in two of the last four quarters, while missing in other two, the average being 5.26%.
Zacks Rank & Price Performance
AEL currently carries a Zacks Rank #3 (Hold). Year to date, the stock has lost 27.5% against the industry’s increase of 1.2%.
Image Source: Zacks Investment Research
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.
Style Score
American Equity has a VGM Score of A. This style score helps identify stocks with the most attractive value, best growth, and most promising momentum.
Optimistic Growth Projections
The Zacks Consensus Estimate for AEL’s 2023 earnings is pegged at $4.96 per share, indicating a 35.2% increase from the year-ago reported figure. The consensus estimate for 2024 earnings is pegged at $5.76, indicating a 16.1% increase from the year-ago reported figure.
Growth Drivers
The Fed raised rates seven times in 2022 and once this year so far to weather inflation. At its December meeting, Fed predicted to take the interest rate to 5.1% in 2023 to combat its expected 3.1% inflation. Life insurers are direct beneficiaries of an improving interest rate environment. The majority of American Equity’s income is derived from its investment spread. Thus, AEL is poised to benefit from an improving interest rate environment.
Per the U.S. Census Bureau, Americans aged 65 and older will represent 20% of the total population by 2030. With a compelling portfolio of fixed index and fixed rate annuity products guaranteeing principal protection, competitive rates of credited interest, tax-deferred growth, guaranteed lifetime income and alternative payout options, AEL is poised to benefit from this demography.
This leader in the development and sale of fixed index and fixed rate annuity products is expanding into middle-market credit, real estate, infrastructure debt and agricultural loans. This should fuel fixed index annuity product sales.
The execution of the AEL 2.0 strategy remains on track. AEL expects around one-third of the new business flow to convert into the return on asset business through growth in reinsured liabilities. Thus, the insurer believes its mix of fee revenues will support a higher-return business profile.
Effective Capital Deployment
AEL has been strengthening its balance sheet by improving its cash balance and leverage ratio. Banking on operational strength, AEL has hiked dividends each year since 2003 when it went public. Its dividend increased at a 20-year CAGR (2003-2022) of 19.6%. Also, in November 2022, AEL’s board approved a $400 million share buyback program in tandem with the AEL 2.0 strategy and has $569 million remaining under authorization.
Stocks to Consider
Some better-ranked stocks from the insurance industry are Brighthouse Financial (BHF - Free Report) , Primerica (PRI - Free Report) and Voya Financial (VOYA - Free Report) .
Brighthouse Financial’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters, the average beat being 2.07%. BHF sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BHF’s 2023 and 2024 earnings per share indicates year-over-year increases of 29.4% and 12.6%, respectively. In a year, shares dropped 4.1%.
Primerica’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters while missed in the other two. PRI sports Zacks Rank #1. In a year, shares rallied 27.3%.
The Zacks Consensus Estimate for PRI’s 2023 and 2024 earnings per share indicates year-over-year increases of 18.3% and 8.9%, respectively.
Voya Financial’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average earnings surprise being 38.68%. VOYA carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for VOYA’s 2023 and 2024 earnings per share indicates year-over-year increases of 6.1% and 14%, respectively. In a year, shares gained 4.6%.
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Here's Why You Should Stay Invested in American Equity (AEL)
American Equity Investment Life Holding’s focus on expansion into new verticals, the increasing popularity of index products in the market, solid balance sheet and effective capital deployment make it worth retaining in one’s portfolio.
AEL has a decent track record of beating earnings estimates in two of the last four quarters, while missing in other two, the average being 5.26%.
Zacks Rank & Price Performance
AEL currently carries a Zacks Rank #3 (Hold). Year to date, the stock has lost 27.5% against the industry’s increase of 1.2%.
Image Source: Zacks Investment Research
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.
Style Score
American Equity has a VGM Score of A. This style score helps identify stocks with the most attractive value, best growth, and most promising momentum.
Optimistic Growth Projections
The Zacks Consensus Estimate for AEL’s 2023 earnings is pegged at $4.96 per share, indicating a 35.2% increase from the year-ago reported figure. The consensus estimate for 2024 earnings is pegged at $5.76, indicating a 16.1% increase from the year-ago reported figure.
Growth Drivers
The Fed raised rates seven times in 2022 and once this year so far to weather inflation. At its December meeting, Fed predicted to take the interest rate to 5.1% in 2023 to combat its expected 3.1% inflation. Life insurers are direct beneficiaries of an improving interest rate environment. The majority of American Equity’s income is derived from its investment spread. Thus, AEL is poised to benefit from an improving interest rate environment.
Per the U.S. Census Bureau, Americans aged 65 and older will represent 20% of the total population by 2030. With a compelling portfolio of fixed index and fixed rate annuity products guaranteeing principal protection, competitive rates of credited interest, tax-deferred growth, guaranteed lifetime income and alternative payout options, AEL is poised to benefit from this demography.
This leader in the development and sale of fixed index and fixed rate annuity products is expanding into middle-market credit, real estate, infrastructure debt and agricultural loans. This should fuel fixed index annuity product sales.
The execution of the AEL 2.0 strategy remains on track. AEL expects around one-third of the new business flow to convert into the return on asset business through growth in reinsured liabilities. Thus, the insurer believes its mix of fee revenues will support a higher-return business profile.
Effective Capital Deployment
AEL has been strengthening its balance sheet by improving its cash balance and leverage ratio. Banking on operational strength, AEL has hiked dividends each year since 2003 when it went public. Its dividend increased at a 20-year CAGR (2003-2022) of 19.6%. Also, in November 2022, AEL’s board approved a $400 million share buyback program in tandem with the AEL 2.0 strategy and has $569 million remaining under authorization.
Stocks to Consider
Some better-ranked stocks from the insurance industry are Brighthouse Financial (BHF - Free Report) , Primerica (PRI - Free Report) and Voya Financial (VOYA - Free Report) .
Brighthouse Financial’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters, the average beat being 2.07%. BHF sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BHF’s 2023 and 2024 earnings per share indicates year-over-year increases of 29.4% and 12.6%, respectively. In a year, shares dropped 4.1%.
Primerica’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters while missed in the other two. PRI sports Zacks Rank #1. In a year, shares rallied 27.3%.
The Zacks Consensus Estimate for PRI’s 2023 and 2024 earnings per share indicates year-over-year increases of 18.3% and 8.9%, respectively.
Voya Financial’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average earnings surprise being 38.68%. VOYA carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for VOYA’s 2023 and 2024 earnings per share indicates year-over-year increases of 6.1% and 14%, respectively. In a year, shares gained 4.6%.