American National Group Inc. (AEL)·Q1 2023 Earnings Summary

Executive Summary

• Q1 2023 showed strong operating performance despite a GAAP net loss: non-GAAP operating EPS was $1.47, up vs Q4’22 ($0.79) and Q3’22 ($1.29), driven by spread expansion, fee-like reinsurance revenues, and sales momentum .
• Investment spread expanded to 2.67% (vs 2.54% in Q4’22 and 2.73% in Q3’22), with average new purchases at 7.19% and private asset allocation rising to 24% .
• Total sales grew to $1.371B, with FIA sales up 23% sequentially to $964M, and MYGA sales stepping up to $404M backed by new flow reinsurance .
• Recurring fee revenue from reinsurance climbed to $22M (vs $21M in Q4’22, $11M in Q3’22) as ceded account value rose to $10.2B; AEL repurchased $253M of shares and cited $650M excess capital .
• No formal numerical guidance was issued; management emphasized vigilant balance sheet management and continued private asset sourcing at attractive risk-adjusted returns .

What Went Well and What Went Wrong

What Went Well

• Spread expansion with higher portfolio yields: investment spread rose to 2.67% and adjusted portfolio yield reached 4.48%, supported by floating-rate assets and privately sourced assets; $2.1B of purchases at 7.19% including ~$1.3B private assets at 7.89% .
• Sales momentum across channels: total sales $1.371B, FIA $964M (+23% QoQ); Eagle Life FIA sales through banks/broker-dealers rose 56.8% QoQ; MYGA sales $404M enabled by the February flow reinsurance agreement .
• Fee-like revenue scaling: ceded account value subject to fees reached $10.156B and recurring fee revenue was $22.363M in Q1, up from Q4’22 and Q3’22 .
  • CEO quote: “Strong new money yields enabled by our robust asset sourcing capabilities and reinsurance structures empowered the front-end of the Flywheel to sell nearly $1.4 billion of annuities.”

What Went Wrong

• GAAP net loss driven by fair value accounting effects: Q1’23 diluted EPS was -$2.00, including sizeable fair value impacts on embedded derivatives and market risk benefits (MRB) under LDTI .
• Below-expected mark-to-market returns reduced portfolio yield by 17 bps; net investment income fell by $10M (adjusted to operating) due to reduced average investments from prior in-force reinsurance and weaker mark-to-market partnership returns .
• MRB liability change was $8M worse than expected due to adverse experience, model true-ups, and lower amortization linked to rate moves; effective tax rate was elevated at 24.4% with a $6M 2022 true-up (~300 bps) .

Financial Results

Reported and Operating Results vs Prior Quarters

Segment/Product Sales Breakdown (Gross before coinsurance)

KPIs and Balance Metrics

Non-GAAP Reconciliations and Notables

Guidance Changes

No formal numerical guidance (revenue, EPS, margins, OpEx, OI&E, tax rate) was provided in Q1 2023 materials; management reiterated a qualitative outlook focused on prudent balance sheet management, opportunistic capital return, and continued private asset sourcing at attractive risk-adjusted returns .

Earnings Call Themes & Trends

Note: The Q1 2023 earnings call transcript exists but could not be retrieved due to a tool database inconsistency; themes below rely on press release/supplement context.

Management Commentary

• “Our strong first quarter results across all aspects of our Virtuous Flywheel reflect the power of AEL 2.0 as it gains momentum… empowered the front-end of the Flywheel to sell nearly $1.4 billion of annuities.” — Anant Bhalla, President & CEO
• “We opportunistically repurchased $253 million of shares in the first quarter while maintaining a fortress balance sheet… We remain confident in our ability to return capital to shareholders and selectively source private assets at very attractive risk-adjusted returns.” — Anant Bhalla
• Prior quarter framing: “Strong invested asset origination at attractive expected rates of return… investment asset purchases totaled $2.5 billion at an average rate of 6.81%, including ~$1.4 billion of private assets at 7.02%.” — Q4 2022 release

Q&A Highlights

The Q1 2023 earnings call transcript could not be retrieved due to a document database inconsistency; Q&A highlights are therefore unavailable from the transcript at this time.

Estimates Context

Wall Street consensus estimates via S&P Global were unavailable for AEL, so estimate comparisons (revenue/EPS beat/miss) could not be made at this time.

Key Takeaways for Investors

• Operating momentum intact: non-GAAP operating EPS $1.47, driven by spread expansion and fee-like reinsurance revenues, despite GAAP volatility under LDTI .
• Spread engine improving: investment spread rose to 2.67%, with average new money yields >7% and private allocation at ~24% supporting ROA and future spreads .
• Sales acceleration in both independent and bank/broker channels: Total $1.371B; FIA $964M; MYGA $404M under new flow reinsurance—suggests continued liability origination strength .
• Scalable fee revenue: ceded account value $10.156B and recurring fees $22.363M provide diversified earnings streams beyond spread income .
• Watch MRB and mark-to-market headwinds: Q1 saw lower mark-to-market returns (-17 bps) and MRB change above expectations; these create GAAP volatility even as operating results strengthen .
• Capital return supports valuation: $253M buybacks and $650M excess capital signal continued shareholder return potential and balance sheet capacity .
• Near-term trading: Narrative likely centers on spread expansion and sales momentum vs GAAP volatility from fair value accounting—focus on operating EPS and fee revenue growth .

Data Cross-References and Notes

• LDTI adoption affects comparability; prior-year figures restated where noted .
• Non-GAAP notable item in Q1: strategic incentive award ($9.566M after-tax; +$0.11 EPS) .
• Tax rate in Q1: 24.4% with ~$6M true-up adding ~300 bps .