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American Equity Investment Life pany(AEL) - 2024 Q4 - Annual Report
AELAmerican Equity Investment Life pany(AEL)2025-03-31 17:48

Financial Performance - For the year ended December 31, 2024, total net premiums reached 5.5billion,anincreaseof5.5 billion, an increase of 2.0 billion from 3.5billionin2023,primarilydrivenbygrowthinthePensionRiskTransfer(PRT)business[259].−TheCompanyreporteddistributableoperatingearningsof3.5 billion in 2023, primarily driven by growth in the Pension Risk Transfer (PRT) business [259]. - The Company reported distributable operating earnings of 1.418 billion for 2024, compared to 617millionin2023,reflectingasignificantincreaseinprofitability[255].−Grossannuitysalesfor2024totaled617 million in 2023, reflecting a significant increase in profitability [255]. - Gross annuity sales for 2024 totaled 13.6 billion, up 8.2billionfrom8.2 billion from 5.4 billion in 2023, largely due to the addition of fixed index annuity deposits and increased PRT sales [264]. - Net income attributable to common stockholders was 696millionfor2024,comparedto696 million for 2024, compared to 392 million in 2023, indicating a strong growth trajectory [255]. - For the year ended December 31, 2024, net income increased to 729million,upfrom729 million, up from 392 million in 2023, primarily due to higher net premiums from a U.K. pension risk transfer deal [269]. - Net premiums and other policy revenue reached 6.2billionin2024,comparedto6.2 billion in 2024, compared to 3.9 billion in 2023, reflecting a 2.3billionincreasedrivenbygrowthinthePRTbusiness[270].BusinessSegments−ThePRTbusinesscontributedsignificantlytotheincreaseinnetpremiums,with2.3 billion increase driven by growth in the PRT business [270]. Business Segments - The PRT business contributed significantly to the increase in net premiums, with 3.148 billion reported in 2024 compared to 1.008billionin2023[258].−ThetotalnetpremiumsfortheAnnuitiessegmentincreasedby1.008 billion in 2023 [258]. - The total net premiums for the Annuities segment increased by 2.1 billion in 2024, driven by the growth in the PRT business [259]. - The Company’s entrance into the PRT market in 2023 was a key factor in the overall increase in net premiums and gross annuity sales [260]. Assets and Investments - The Company’s total assets as of December 31, 2024, were 121.221billion,asubstantialincreasefrom121.221 billion, a substantial increase from 35.885 billion in 2023 [255]. - Total assets increased by 85.3billionduringtheyearto85.3 billion during the year to 121.2 billion, primarily due to the acquisition of 81.2billionofassetsfromAmericanEquity[301].−Totalinvestmentsincreasedby81.2 billion of assets from American Equity [301]. - Total investments increased by 52.5 billion from December 31, 2023 to December 31, 2024, mainly due to the acquisition of 43.0billionofinvestmentsfromAmericanEquity[302].−Futurepolicybenefitsandpolicyholders′accountbalancesincreasedby43.0 billion of investments from American Equity [302]. - Future policy benefits and policyholders' account balances increased by 69.0 billion from December 31, 2023 to December 31, 2024, primarily due to the acquisition of American Equity [311]. - Market risk benefits increased by 3.6billionfromDecember31,2023toDecember31,2024,primarilyduetotheacquisitionofAmericanEquity[312].−Goodwillincreasedby3.6 billion from December 31, 2023 to December 31, 2024, primarily due to the acquisition of American Equity [312]. - Goodwill increased by 662 million during 2024 as a result of the acquisition of American Equity [310]. - Other liabilities increased by 3.7billionfromDecember31,2023toDecember31,2024,primarilyduetotheacquisitionofAmericanEquity[315].CashFlowandLiquidity−AsofDecember31,2024,thecompany′stotalliquiditywas3.7 billion from December 31, 2023 to December 31, 2024, primarily due to the acquisition of American Equity [315]. Cash Flow and Liquidity - As of December 31, 2024, the company's total liquidity was 45.2 billion, a significant increase from 14.2billionin2023[317].−Cashandcashequivalentsroseto14.2 billion in 2023 [317]. - Cash and cash equivalents rose to 11.3 billion in 2024 from 3.2billionin2023,reflectinganetchangeof3.2 billion in 2023, reflecting a net change of 8.1 billion during the period [318]. - The company generated 2.5billionincashfromoperatingactivitiesin2024,upfrom2.5 billion in cash from operating activities in 2024, up from 1.2 billion in 2023, primarily due to higher investment income [319]. - Investing activities resulted in a net inflow of 2.5billionin2024,comparedtoanetdeploymentof2.5 billion in 2024, compared to a net deployment of 1.3 billion in 2023, driven by the acquisition of American Equity [321]. - Financing activities yielded a net cash inflow of 3.1billionin2024,anincreasefrom3.1 billion in 2024, an increase from 1.9 billion in 2023, largely due to net payments received on policyholders' account deposits [323]. - The company had 881millioninundrawncreditfacilitiesavailableasofDecember31,2024,enhancingitsliquidityposition[316].ExpensesandLiabilities−Policyholderbenefitsandclaimsincurredincreasedby881 million in undrawn credit facilities available as of December 31, 2024, enhancing its liquidity position [316]. Expenses and Liabilities - Policyholder benefits and claims incurred increased by 2.1 billion to 5.4billionin2024,mainlyduetogrowthinthePRTbusinessandhighercatastropheclaims[273].−Interestsensitivecontractbenefitsincreasedby5.4 billion in 2024, mainly due to growth in the PRT business and higher catastrophe claims [273]. - Interest sensitive contract benefits increased by 1.3 billion to 1.7billionin2024,drivenbygrowthinthein−forceblockofannuitiesfollowingtheacquisitionofAmericanEquity[274].−Operatingexpensesroseto1.7 billion in 2024, driven by growth in the in-force block of annuities following the acquisition of American Equity [274]. - Operating expenses rose to 880 million in 2024, up from 601millionin2023,primarilyduetotransactionexpensesrelatedtotheacquisitionofAmericanEquity[278].−Interestexpenseonborrowingsincreasedby601 million in 2023, primarily due to transaction expenses related to the acquisition of American Equity [278]. - Interest expense on borrowings increased by 66 million to 165millionin2024,drivenbynewborrowingsassociatedwiththeacquisitionofAmericanEquity[279].−Amortizationofdeferredpolicyacquisitioncostsincreasedto165 million in 2024, driven by new borrowings associated with the acquisition of American Equity [279]. - Amortization of deferred policy acquisition costs increased to 939 million in 2024, compared to $525 million in 2023, due to the growth of the annuities business and the acquisition of American Equity [275]. Risk Management - The company manages interest rate risk through asset liability management (ALM), matching the durations of the investment portfolio to insurance liabilities [364]. - The company manages credit risk by establishing concentration limits by counterparty, credit rating, and asset class, while regularly monitoring the financial condition of counterparties [371][372]. - Insurance risk is managed through the purchase of reinsurance for certain amounts of risk underwritten across Annuities, P&C, and Life Insurance segments [374]. - Operational risk is mitigated through internal control processes, including a risk register and independent internal audit reviews, alongside measures to prevent fraud [376]. Market Conditions - The company is affected by global economic conditions, including interest rates and consumer spending, which impact the demand for financial and insurance products [360]. - Insurers are facing financial market volatility, with public market valuations compressed and capital needs growing, leading to a focus on diversifying investment portfolios to include alternative and private credit assets [366]. - Many insurers are shifting towards less asset-intensive insurance products to free up capital, particularly in response to the capital-intensive nature of life and annuity liabilities [366]. - The reinsurance market is providing opportunities for under-capitalized companies, especially those writing annuity products, to raise or free up capital amid higher hedging costs and regulatory changes [366].