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Why Is American Equity (AEL) Up 3.6% Since Last Earnings Report?
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A month has gone by since the last earnings report for American Equity Investment . Shares have added about 3.6% 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 drivers.
American Equity Q1 Earnings Top Estimates, Increase Y/Y
American Equity Investment Life Holding Company 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 portfolio 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 loan 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 average net impact of fair value accounting for fixed index annuities, was 13%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 13.98% due to these changes.
VGM Scores
Currently, American Equity has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, American Equity has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
American Equity belongs to the Zacks Insurance - Life Insurance industry. Another stock from the same industry, Voya Financial (VOYA - Free Report) , has gained 1.4% over the past month. More than a month has passed since the company reported results for the quarter ended March 2023.
Voya reported revenues of $261 million in the last reported quarter, representing a year-over-year change of -1.9%. EPS of $1.69 for the same period compares with $1.47 a year ago.
Voya is expected to post earnings of $2.04 per share for the current quarter, representing a year-over-year change of +22.2%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.8%.
Voya has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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Why Is American Equity (AEL) Up 3.6% Since Last Earnings Report?
A month has gone by since the last earnings report for American Equity Investment . Shares have added about 3.6% 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 drivers.
American Equity Q1 Earnings Top Estimates, Increase Y/Y
American Equity Investment Life Holding Company 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 portfolio 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 loan 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 average net impact of fair value accounting for fixed index annuities, was 13%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 13.98% due to these changes.
VGM Scores
Currently, American Equity has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, American Equity has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
American Equity belongs to the Zacks Insurance - Life Insurance industry. Another stock from the same industry, Voya Financial (VOYA - Free Report) , has gained 1.4% over the past month. More than a month has passed since the company reported results for the quarter ended March 2023.
Voya reported revenues of $261 million in the last reported quarter, representing a year-over-year change of -1.9%. EPS of $1.69 for the same period compares with $1.47 a year ago.
Voya is expected to post earnings of $2.04 per share for the current quarter, representing a year-over-year change of +22.2%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.8%.
Voya has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.