A month has gone by since the last earnings report for American Equity Investment (AEL). Shares have added about 1% 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 Q4 Earnings Top Estimates, Rise Y/Y
American Equity Investment Life Holding Company reported fourth-quarter 2023 adjusted net earnings of $1.99 per share, which beat the Zacks Consensus Estimate by 15%. The bottom line increased 21.3% year over year.
The quarterly results reflected increased annuity product charges, improved investment income and other revenues, offset by lower premiums and higher expenses.
Operational Update
Operating total revenues were $703.7 million, up 14.3% year over year due to higher annuity product charges, net investment income and other revenues.
Premiums and other considerations decreased 11% year over year to $2.6 million. The figure was higher than our estimate of $2.2 million. Annuity product charges increased 57.2% year over year to $96.9 million. The figure was higher than our estimate of $62.3 million.
Net investment income rose 8.2% on a year-over-year basis to $582 million. The figure was higher than our estimate of $570.8 million.
Total expenses more than doubled year over year to $1.6 billion. The figure was higher than our estimate of $507.8 million. The investment spread was 2.64%, up from 2.54% in the year-ago quarter.
Financial Update
Cash and cash equivalents were $9.8 billion as of Dec 31, 2023, which surged fivefold from 2022-end. Total investments were $48.2 billion, which decreased 6% from 2022-end.
Notes and loan payable totaled $785.4 million, down 0.8% from 2022-end.
Book value per common share, excluding average accumulated other comprehensive income (AOCI), was $66.84, up 5% from 2022-end. Total debt/total capitalization was 12.8%, deteriorating 20 basis points from 2022-end.
Non-GAAP operating return on equity, excluding average AOCI and net impact of fair value accounting for fixed index annuities, was 18.7%.
Full-Year Highlights
Total operating revenues for 2023 were $2.7 billion, which increased 2.9% year over year. Adjusted earnings for 2023 were $7.50 per share, which surged 75.6% year over year. Net Investment income was $2.3 billion in 2023, which decreased 1.5% year over year.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, American Equity has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. 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, Sun Life (SLF), has gained 2.1% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
Sun Life reported revenues of $13.73 billion in the last reported quarter, representing a year-over-year change of +51.5%. EPS of $1.23 for the same period compares with $1.25 a year ago.
Sun Life is expected to post earnings of $1.20 per share for the current quarter, representing a year-over-year change of +7.1%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
Sun Life has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
