Life and annuity insurer American Equity (AEL) has reported Q4 2022 net loss available to common stockholders of $29.4m in Q4 2022, compared to a net income of $82.2m, for Q4 of 2021.
AEL also announced it had ceded $352m of flow reinsurance to Brookfield Re and $4.3bn of GAAP reserves, including $3.8bn of account value, in a new strategic partnership with 26North Re increasing “fee-like” revenues and growing account value subject to recurring fees to $9.6bn.
Meanwhile, Non-GAAP operating income available to common stockholders for Q4 of 2022 was $67.9m, slightly lower than the $75.8m reported in the same quarter of 2021.
Private asset deployment momentum continued with approximately $1.4bn sourced in the quarter bringing total portfolio allocation to 22%.
Net investment income increased $25m from the comparable quarter of 2021 reflecting an increase in the average yield on investments resulting from the benefit of higher short-term interest rates on AEL’s floating rate portfolio, lower cash balances, and the increase in allocation to privately sourced assets.
AEL’s President and CEO, Anant Bhalla, commented, “The fourth quarter caps a year of outstanding achievements as we continue to execute our AEL 2.0 strategy.
“During the year, we originated $5 billion of privately sourced assets, driving total allocation to 22% of our investment portfolio – generating value for shareholders and policyholders without taking additional risk.
“Aggregate adjusted investment spread for the year increased 59 basis points as we reinvested excess cash, invested in privately sourced assets, and benefited from our allocation to floating rate assets, all while proactively reducing the portfolio’s credit risk exposure in anticipation of potentially amplifying macro-economic uncertainty.
Bhalla continued, “We also revamped our pricing procedures creating the ability to quickly re-price product as markets change, entered into an important, long-term reinsurance relationship with 26North Re helping to drive reinsurance assets subject to fees to nearly $10 billion, and made a number of foundational operational changes to facilitate the efficient sales growth we foresee as the AEL 2.0 flywheel continues to gain speed.
“While fourth quarter results reflect lower-than-expected investment returns on mark-to-market assets, impacting overall portfolio yield by 9 basis points, our strong execution on our AEL 2.0 strategy over the last year, as well as the sales momentum we are seeing through the first six weeks of 2023, only increase our confidence in our continued delivery of superior shareholder value this year and over the long term.”
In December last year, AEL confirmed that its Board of Directors had reviewed and rejected an unsolicited, non-binding proposal from Prosperity Group Holdings LP, and its principal shareholder, Elliott Investment Management L.P., to acquire it in an all-cash transaction at $45.00 per share.
Prosperity later released a statement affirming that it remains interested in the acquisition, despite the rejection of the takeover bid. Prosperity also sent AEL a subsequent letter reaffirming its interest, which AEL dismissed as offering “the same price and economic terms.”
However, Prosperity says that it had been prepared to improve its offer following due diligence with “an even more attractive premium.”
