American Equity Investment (AEL) Tops Q1 EPS by 5c, Revenues Beat

American Equity Investment (NYSE: AEL) reported Q1 EPS of $0.97, $0.05 better than the analyst estimate of $0.92. Revenue for the quarter came in at $1 billion versus the consensus estimate of $628.23 million.

Company Highlights

• First quarter 2019 net loss of $30.0 million or $0.33 per diluted common share
• First quarter 2019 non-GAAP operating income1 of $89.4 million or $0.97 per diluted common share
• First quarter 2019 annuity sales of $1.2 billion
• Policyholder funds under management of $51.6 billion
• First quarter 2019 investment spread of 2.58%
• Estimated risk-based capital ratio of 352% compared to 360% at December 31, 2018

Commenting on sales, John Matovina, Chairman and Chief Executive Officer, said: "We delivered sequential and year-over-year increases in FIA sales in American Equity Life's independent agent channel. Sales have been on an upswing for the last three quarters and the momentum has carried over to the second quarter. The expansion of our investment program into non-traditional asset classes has enabled us to compete more effectively in our markets. In the first quarter, combined sales for AssetShield and the Choice series, our accumulation products in the independent agent channel, accounted for 41% of sales compared to 38% of sales in the fourth quarter. In the guaranteed lifetime income space, the IncomeShield series, which was the second best-selling guaranteed lifetime income product in the independent agent channel in the fourth quarter of 2018, accounted for 39% of our FIA sales in the first quarter."

Commenting on the market environment and the outlook for FIA sales, Matovina added: "The market in each of our distribution channels continues to be challenging. However, we remain pleased with our competitive positioning for both accumulation and guaranteed lifetime income products. Reflecting the decline in available investment yields during the quarter, we lowered participation rates on S&P 500 annual point-to-point strategies at both American Equity Life and Eagle Life in mid-April. However, our business activity remains strong as a number of major competitors have made similar reductions."

Matovina continued: "In the bank and broker-dealer channels, the large bank we referenced last quarter has become Eagle Life's third largest distribution relationship. At current run rates, we have seven accounts capable of producing sales of $50 million or higher this year compared to four such accounts in 2018. Year to date sales at these four accounts are up 15%. Eagle Life's sales are also benefiting from the expansion of our employee wholesalers. Eagle Life now has ten employee wholesalers, up from four at the end of the year. Our intent is to use our employee wholesalers to target accounts that do not use third party wholesalers and to complement our third party wholesalers when possible. Our employee wholesalers are now working with five meaningful accounts."

For earnings history and earnings-related data on American Equity Investment (AEL) click here.

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