American Equity (AEL) Up 1% Since Last Earnings Report: Can It Continue?

Core Viewpoint - American Equity Investment Life Holding Company reported strong fourth-quarter earnings, exceeding estimates, but the stock has underperformed the S&P 500 in the past month, raising questions about future performance leading up to the next earnings release [1][2]. Financial Performance - Adjusted net earnings for Q4 2023 were $1.99 per share, beating the Zacks Consensus Estimate by 15% and increasing 21.3% year over year [2]. - Total operating revenues for Q4 were $703.7 million, up 14.3% year over year, driven by higher annuity product charges and net investment income [3]. - Premiums and other considerations decreased 11% year over year to $2.6 million, while annuity product charges increased 57.2% year over year to $96.9 million [3]. - Net investment income rose 8.2% year over year to $582 million [3]. - Total expenses more than doubled year over year to $1.6 billion [3]. Financial Update - Cash and cash equivalents surged fivefold to $9.8 billion as of December 31, 2023, while total investments decreased 6% to $48.2 billion [4]. - Book value per common share increased 5% to $66.84, and total debt/total capitalization was 12.8%, deteriorating by 20 basis points from the end of 2022 [4]. - Non-GAAP operating return on equity was 18.7% [4]. Full-Year Highlights - Total operating revenues for 2023 were $2.7 billion, a 2.9% increase year over year, with adjusted earnings of $7.50 per share, surging 75.6% year over year [5]. - Net investment income for 2023 was $2.3 billion, a decrease of 1.5% year over year [5]. Market Position and Outlook - Estimates for American Equity have trended downward recently, with a Zacks Rank of 3 (Hold), indicating an expectation of in-line returns in the coming months [8]. - The company has a subpar Growth Score of D, a Momentum Score of C, and a Value Score of B, resulting in an aggregate VGM Score of C [6][7]. Industry Comparison - American Equity operates within the Zacks Insurance - Life Insurance industry, where competitor Sun Life reported revenues of $13.73 billion, a year-over-year increase of 51.5% [9]. - Sun Life's EPS for the last quarter was $1.23, with an expected earnings of $1.20 per share for the current quarter, reflecting a year-over-year change of 7.1% [9].