American Equity Investment Life pany(US:AEL)2025-03-31 17:48Financial Performance - For the year ended December 31, 2024, total net premiums reached $5.5 billion, an increase of $2.0 billion from $3.5 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 $617 million in 2023, reflecting a significant increase in profitability [255]. - Gross annuity sales for 2024 totaled $13.6 billion, up $8.2 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 $696 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 $729 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 $6.2 billion in 2024, compared to $3.9 billion in 2023, reflecting a $2.3 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 $1.008 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 $121.221 billion, a substantial increase from $35.885 billion in 2023 [255]. - Total assets increased by $85.3 billion during the year to $121.2 billion, primarily due to the acquisition of $81.2 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 $43.0 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 $3.6 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 $3.7 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 $14.2 billion in 2023 [317]. - Cash and cash equivalents rose to $11.3 billion in 2024 from $3.2 billion in 2023, reflecting a net change of $8.1 billion during the period [318]. - The company generated $2.5 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 $2.5 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 $3.1 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 $881 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 $5.4 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 $1.7 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 $601 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 $165 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].