American Equity Investment Life pany(AEL) - 2025 Q2 - Quarterly Results

Financial Summary The company reported a GAAP net income of $141 million for Q2 2025, a significant recovery from a loss in Q1 2025 but a 42% decrease year-over-year. Distributable operating earnings, a non-GAAP measure, were $311 million, down 21% sequentially but up 23% year-over-year. Total assets and equity showed steady growth, increasing 7% and 10% year-over-year, respectively, to $126.3 billion and $10.2 billion | Metric | Q2 2025 | Q1 2025 | Q2 2024 | QoQ Change | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | | GAAP net income (loss) | $141M | ($236M) | $244M | 160% | -42% | | Distributable operating earnings | $311M | $392M | $253M | -21% | 23% | | Total assets | $126,345M | $123,434M | $118,618M | 2% | 7% | | Total equity | $10,217M | $10,045M | $9,257M | 2% | 10% | - Year-to-date 2025 GAAP net income was a loss of $95 million, a 127% decline from a $357 million profit in the same period of 2024[3] - Year-to-date 2025 distributable operating earnings grew 56% to $703 million compared to $452 million in the prior year period[3] GAAP Financial Statements The company's GAAP financials for Q2 2025 show total assets reaching $126.3 billion and total equity $10.2 billion, with revenues of $2.19 billion and a net income of $141 million, driven by strong net investment income despite lower premiums GAAP Balance Sheet As of June 30, 2025, total assets reached $126.3 billion, a 4% increase year-to-date, primarily driven by a 5% growth in total investments. Total liabilities grew in line with assets to $116.1 billion, while total equity increased by 2% to $10.2 billion, supported by a 95% rise in accumulated other comprehensive income | Balance Sheet Item | June 30, 2025 | Dec 31, 2024 | YTD Change | | :--- | :--- | :--- | :--- | | Total Investments | $84,848M | $80,755M | 5% | | Total Assets | $126,345M | $121,221M | 4% | | Total Liabilities | $116,128M | $111,193M | 4% | | Total Equity | $10,217M | $10,028M | 2% | - Key drivers of asset growth year-to-date include a 16% increase in 'Other invested assets' and a 3% rise in 'Available-for-sale fixed maturity securities'[6] - Accumulated other comprehensive income (AOCI) increased significantly by 95% year-to-date, from $340 million to $664 million[6] GAAP Income Statement For Q2 2025, the company reported total revenues of $2.19 billion and a net income of $141 million attributable to common stockholders. Net investment income was a key strength, growing 26% year-over-year to $1.16 billion. This was offset by a 25% YoY decline in premium revenues | Income Statement Item | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Premiums | $752M | $1,005M | -25% | | Net investment income | $1,160M | $924M | 26% | | Total revenue | $2,186M | $2,115M | 3% | | Total benefits and expenses | $1,994M | $2,157M | -8% | | Net income (common stockholders) | $141M | $244M | -42% | - Year-to-date net investment income grew 77% to $2.44 billion compared to $1.37 billion in the prior year period[7] - Q1 2025 results included a non-recurring $19 million impact related to the redemption of Series A preferred stock, which negatively affected net income for that quarter[7] Non-GAAP Reconciliations Non-GAAP measures for Q2 2025 show distributable operating earnings of $311 million and total adjusted common stockholders' equity of $9.97 billion, reflecting core performance and a stable equity base Distributable Operating Earnings Reconciliation Distributable operating earnings (DOE) for Q2 2025 were $311 million, reconciled from a GAAP net income of $141 million by adjusting for investment gains/losses and mark-to-market impacts. The Annuity segment was the primary contributor with $372 million in pre-tax DOE. Year-to-date DOE reached $703 million, a 56% increase from the prior year | Reconciliation Item | Q2 2025 | | :--- | :--- | | Net income (loss) | $141M | | Net investment gains (losses) | $121M | | Mark-to-market on insurance contracts | $36M | | Other adjustments | $13M | | Distributable operating earnings | $311M | | Pre-Tax DOE by Segment | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Annuity | $372M | $291M | 28% | | Property & Casualty (P&C) | ($4M) | ($10M) | 60% | | Life | $40M | $56M | -29% | Adjusted Equity Reconciliation Total adjusted common stockholders' equity reached $9.97 billion at the end of Q2 2025, up 3% from Q1 2025 and 23% year-over-year. This non-GAAP measure adjusts total equity by removing items such as non-controlling interests, preferred stock, AOCI, and the impact of mark-to-market on derivatives and insurance contracts to provide a view of core equity | Equity Reconciliation | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total equity | $10,217M | $9,257M | 10% | | Less: Non-controlling interests & Preferred stock | ($723M) | ($872M) | 17% | | Total common stockholders' equity | $9,494M | $8,385M | 13% | | Less: AOCI | ($664M) | ($445M) | -49% | | Add: Mark-to-market impact | $1,135M | $180M | 531% | | Total adjusted common stockholders' equity | $9,965M | $8,120M | 23% | Investment Portfolio The $84.8 billion investment portfolio is primarily fixed income with high credit quality, including a diversified $8.8 billion commercial mortgage loan portfolio with conservative LTVs Invested Assets Overview As of June 30, 2025, total investments stood at $84.8 billion. The portfolio is heavily weighted towards fixed income, with corporate debt securities ($32.9 billion) being the largest single category. Other significant holdings include mortgage loans ($11.2 billion) and private loans ($8.1 billion) | Investment Category | Carrying Value (June 30, 2025) | | :--- | :--- | | Corporate debt securities | $32,948M | | Mortgage loans on real estate | $11,191M | | Private loans | $8,053M | | Real estate and partnerships | $5,944M | | Collateralized debt securities | $4,728M | | Total Investments | $84,848M | Credit Quality of Investments The investment portfolio maintains a high credit quality profile. Of the assets with an NAIC designation, 54% of the total portfolio value is rated NAIC 1 or 2. Corporate debt securities, the largest asset class, are predominantly investment grade, with 97% rated NAIC 1 or 2 - 55% of total investments have an NAIC designation. Of these, the vast majority are high quality, with 31% of total investments rated NAIC 1 and 23% rated NAIC 2[15] | Corporate Debt NAIC Designation | % of Corporate Debt (June 30, 2025) | | :--- | :--- | | 1 | 48% | | 2 | 49% | | 3 | 2% | | 4 and below | 1% | - Over 95% of available-for-sale fixed maturity securities in U.S. treasury, government, state, and foreign government categories are rated NAIC 1 or 2[18] Mortgage Loans The commercial mortgage loan portfolio totaled $8.8 billion as of June 30, 2025. The portfolio is diversified by property type, with the largest exposures in Apartment (25%), Industrial (19%), and Retail (16%). The portfolio maintains a conservative risk profile with an average Loan-to-Value (LTV) of 49% and a median credit rating of CM2 | Property Type | % of Portfolio (June 30, 2025) | | :--- | :--- | | Apartment | 25% | | Industrial | 19% | | Retail | 16% | | Office | 15% | | Hotel | 12% | | Other | 13% | - Non-performing commercial mortgage loans remained low at 1% of the total portfolio value[19] - The portfolio's average Loan-to-Value (LTV) ratio is 49%, with 67% of loans having an LTV of 60% or less, indicating a strong collateral position[22][24] Ratings and Capitalization The company maintains strong 'A' financial strength ratings for its insurance subsidiaries and investment-grade credit ratings for the parent, supported by a robust $12.4 billion capitalization with a 76% equity base Financial Strength and Credit Ratings The company's key insurance subsidiaries maintain strong financial strength ratings, with major entities rated 'A' by AM Best, S&P, and Fitch. The parent holding company, American National Group Inc., holds investment-grade credit ratings of BBB from S&P and BBB+ from Fitch | Company | AM Best | S&P | Fitch | | :--- | :--- | :--- | :--- | | American Equity Life Insurance Co. | A | A | A | | American National Insurance Co. | A | A | A | | Eagle Life Insurance Co. | A | A | A | - The parent holding company, American National Group Inc., has credit ratings of BBB from S&P and BBB+ from Fitch[25] Capitalization As of June 30, 2025, the company's total capitalization (excluding AOCI and NCI) was $12.4 billion. The capital structure is composed of 24% long-term borrowings ($2.95 billion) and 76% equity ($9.42 billion), reflecting a strong equity base | Capital Component | Amount | % of Total Capitalization | | :--- | :--- | :--- | | Total Long Term Borrowings | $2,953M | 24% | | Total Equity (Excl. AOCI & NCI) | $9,418M | 76% | | Total Capitalization (Excl. AOCI & NCI) | $12,371M | 100% | Annuity Business Analysis The annuity business reported a $370 million net investment spread and $4.3 billion in sales, primarily from Fixed Index products, with $77.9 billion in account value largely protected by surrender charges Annuity Investment Spread The total net investment spread for the annuity business was $370 million in Q2 2025, a 27% increase year-over-year. For the twelve months ended June 30, 2025, the yield on net invested assets was 6.0% against an aggregate cost of funds of 4.1%, resulting in a healthy net investment spread of 1.9% | Metric (Q2 2025) | Amount | | :--- | :--- | | Non-GAAP net investment income | $1,238M | | Cost of funds | $868M | | Total net investment spread | $370M | - For the twelve months ended June 30, 2025, the net investment spread was 1.9%, derived from a 6.0% yield on assets and a 4.1% cost of funds[30] Reconciliation to Annuity Cost of Funds The total annuity cost of funds for Q2 2025 was calculated at $868 million. This non-GAAP measure is derived by adjusting total GAAP benefits and expenses ($1,994 million) for items such as premiums, product charges, and fair value changes in derivatives to isolate the costs specifically associated with the annuity business - Total annuity cost of funds, a non-GAAP measure, was $868 million in Q2 2025, reconciled from $1,994 million in US GAAP benefits and expenses[32] Annuity Sales Total gross annuity sales reached $4.3 billion in Q2 2025, a 30% increase year-over-year, driven by strong retail sales. Fixed Index annuity sales were particularly robust, growing 69% YoY to $2.5 billion and accounting for nearly 60% of total sales | Annuity Sales (Q2 2025) | Amount | YoY Change | | :--- | :--- | :--- | | Retail | | | | Fixed Index | $2,513M | 69% | | Fixed Rate | $1,029M | -32% | | Institutional | $662M | 142% | | Total Gross Annuity Sales | $4,284M | 30% | - Year-to-date total gross annuity sales were up 67% to $8.1 billion, with Fixed Index sales up 164% to $4.3 billion[34] Surrender Charge Exposure As of Q2 2025, the total annuity account value was $77.9 billion. A significant portion of this value is protected by surrender charges, with a weighted average of approximately 6 years remaining in the protected period. Only $10.1 billion (13%) of the account value has no remaining surrender charge, indicating a stable liability base | Years of Surrender Charge Remaining | Account Value (Q2 2025) | | :--- | :--- | | No surrender charge | $10,081M | | 0 to < 3 years | $13,021M | | 3 to < 6 years | $15,485M | | 6 to < 9 years | $27,157M | | 9 or greater | $12,159M | | Total | $77,903M | - The weighted average remaining surrender charge period is approximately 6 years, which contributes to the stability of the company's liabilities[37] Disclosures This section provides legal disclaimers regarding the document's informational nature and defines key non-GAAP financial measures used to present core operating performance Legal Notice This section contains standard legal disclaimers, stating that the document is for informational purposes only, is not an offer to sell securities, and should not be relied upon for investment decisions. It also notes that past performance is not indicative of future results - The document is for informational purposes only and does not constitute an offer to sell or a solicitation to buy any securities[38][40] - The information is provided as of the report date, and the company does not guarantee its accuracy or completeness and assumes no responsibility for independent verification[42] Non-GAAP Financial Disclosures This section defines the non-GAAP financial measures used in the report, such as Distributable Operating Earnings (DOE), Total Adjusted Common Stockholders' Equity, Non-GAAP Net Investment Income, and Annuity Cost of Funds. Management believes these measures provide a better understanding of the company's core operating performance by excluding certain volatile or non-recurring items - Distributable Operating Earnings (DOE) is defined as net income adjusted for items like depreciation, certain deferred taxes, transaction costs, and specific investment and insurance reserve gains/losses to reflect core operating performance[45] - Total Adjusted Common Stockholders' Equity excludes the impact of AOCI and mark-to-market gains/losses on derivatives and insurance contracts to provide a more stable view of equity[47] - Annuity Cost of Funds is a non-GAAP measure that isolates liability costs related to the annuity business, including interest crediting, option costs, amortization, and operating expenses net of product revenues[49]