American Equity Reports Fourth Quarter and Full Year 2020 Results

Rhea-AI Summary

American Equity Investment Life Holding Company (NYSE: AEL) reported a fourth quarter 2020 net loss of $6.3 million, or $(0.07) per diluted share, down from a net income of $220.2 million, or $2.40 per diluted share, in the same quarter of 2019. For the year ended December 31, 2020, net income rose to $637.9 million from $246.1 million in 2019. However, non-GAAP operating income for Q4 2020 decreased to $71.7 million from $125.8 million in Q4 2019, primarily due to lower investment spread income and higher operating expenses. The investment spread dropped to 2.25% from 2.77% year-over-year.

Positive

• Full year 2020 net income increased to $637.9 million from $246.1 million in 2019.
• Despite Q4 loss, the company reported a strong annual performance.

Negative

• Q4 2020 net loss of $6.3 million compared to Q4 2019 net income of $220.2 million.
• Q4 non-GAAP operating income decreased significantly to $71.7 million from $125.8 million year-over-year.
• Investment spread decreased to 2.25% from 2.77% in Q4 2019.
• Operating expenses rose to $55 million from $39 million in Q4 2019.

American Equity Investment Life Holding Company (NYSE: AEL), a leading issuer of fixed index annuities (FIAs) today reported fourth quarter 2020 net loss available to common stockholders of $6.3 million, or $(0.07) per diluted common share, compared to net income available to common stockholders of $220.2 million, or $2.40 per diluted common share, for fourth quarter 2019. For the year ended December 31, 2020, net income available to common stockholders was $637.9 million, or $6.90 per diluted common share, compared to $246.1 million, or $2.68 per diluted common share, for the year ended December 31, 2019.

Non-GAAP operating income¹ available to common stockholders for the fourth quarter 2020 was $71.7 million, or $0.77 per diluted common share, compared to non-GAAP operating income¹ available to common stockholders of $125.8 million, or $1.37 per diluted common share, for fourth quarter 2019. For the year ended December 31, 2020, non-GAAP operating income¹ was $69.1 million, or $0.75 per diluted common share, compared to $548.2 million, or $5.97 per diluted common share, for the year ended December 31, 2019. For full year 2020, non-GAAP operating return¹ on average common stockholders' equity excluding average AOCI¹ was 2.3% based on reported results and 11.9% excluding the impact of notable items.

The year-over-year decreases in quarterly non-GAAP operating income¹ available to common stockholders and non-GAAP operating income¹ per share available to common stockholders were primarily attributable to lower investment spread income, an increase in other operating costs and expenses, and a greater increase in the liability for future policy benefits to be paid for lifetime income benefit riders, partially offset by a decline in deferred acquisition cost and deferred sales inducement amortization. Actual versus modeled actuarial and policyholder experience in the quarter had two offsetting impacts on results, positively affecting amortization of deferred acquisition and sales inducement costs by $16 million but adding to the increase in the liability for future policy benefits to be paid for lifetime income benefit riders by $16 million.

Other operating costs and expenses increased to $55 million from $43 million in the third quarter of 2020 and $39 million in the fourth quarter of 2019 in part reflecting advisory fees related to the unsolicited offer for the company in September.

INVESTMENT SPREAD DECREASES SEQUENTIALLY ON LOWER INVESTMENT YIELD.
American Equity’s investment spread was 2.25% for the fourth quarter of 2020 compared to 2.44% for the third quarter of 2020 and 2.77% for the fourth quarter of 2019. On a sequential basis, the average yield on invested assets decreased by 22 basis points while the cost of money fell by 3 basis points.

Average yield on invested assets was 3.88% in the fourth quarter of 2020 compared to 4.10% in the third quarter of 2020. The decrease in investment yield was primarily driven by retention of a higher level of liquidity in the investment portfolios of the life insurance companies. The average adjusted yield on invested assets excluding non-trendable items was 3.77% in the fourth quarter of 2020 compared to 4.00% in the third quarter of 2020.

The aggregate cost

FAQ

What was American Equity's net loss in Q4 2020?

American Equity reported a net loss of $6.3 million, or $(0.07) per diluted share, in Q4 2020.

How did AEL's net income change in 2020 compared to 2019?

Net income available to common stockholders for American Equity increased to $637.9 million in 2020 from $246.1 million in 2019.

What was the non-GAAP operating income for AEL in Q4 2020?

In Q4 2020, American Equity's non-GAAP operating income was $71.7 million, or $0.77 per diluted share.

How much did the investment spread decrease for AEL in Q4 2020?

The investment spread for American Equity decreased to 2.25% in Q4 2020 from 2.77% in Q4 2019.