Executive Summary

Record quarter: non-GAAP operating income was $195.5M ($2.45 per diluted share), aided by $21.0M ($0.26) notable items; GAAP diluted EPS was $5.82 with net income to common of $465.2M .
Fixed index annuity (FIA) sales hit an all‑time high at $2.2B (+18% q/q; +203% y/y), with consolidated FIA deposits of $2.214B and “fee‑like” reinsured balances rising to $11.6B .
Investment spread improved to 2.73% (vs 2.57% in Q2), driven by higher average yield (4.69%) and despite higher cost of options (2.02%) and cost of money (1.96%) .
Guidance effectively raised: management now expects FY2023 FIA sales “over $7B” vs prior $5–6B; October sales exceeded $750M, underscoring momentum; merger with Brookfield Reinsurance expected to close H1 2024 (shareholder vote Nov 10) .

What Went Well and What Went Wrong

What Went Well

Record FIA sales with strength in income products ($1.4B, up 28% q/q) and channel breadth (Eagle Life banks/broker-dealers +67% q/q to $409M); consolidated FIA deposits reached $2.214B .
Spread and yield improved: adjusted investment spread rose to 2.68% (ex non‑trend items) vs 2.53% in Q2; average yield increased 27 bps q/q to 4.69% .
Strategic reinsurance flywheel: ceded $870M of flow reinsurance in Q3; reinsured account value grew to $11.6B; recurring fee revenue increased to $26.7M from $22.7M in Q2 .
CEO quote: “We have delivered on every aspect of our strategy flywheel…25% allocation to private assets…liquidity of $6.8B…target 30–40% private assets post‑merger…fee‑like annualized run‑rate earnings north of $100M” .

What Went Wrong

Higher lapses and option costs: surrender charge income rose to $46M (+$12M q/q) as lapses increased with higher rates; cost of options averaged 2.02% vs 1.93% in Q2 .
Mark‑to‑market private assets underperformed modeled returns by ~$10M (8 bps of yield) in Q3, modestly below assumptions used in the investment process .
Liquidity build incurred losses: total net realized losses of ~$45M were “almost entirely interest rate-related” as the company raised cash (now $6.8B) .
Outflows increased 8.7% q/q to nearly $1.4B (surrenders, withdrawals, etc.), while net deposits were $1.366B .

Financial Results

Headline metrics vs prior periods

Metric	Q3 2022	Q2 2023	Q3 2023
Total Revenues ($USD Millions)	$491.9	$851.6	$266.7
GAAP Net Income to Common ($USD Millions)	$434.0	$344.4	$465.2
GAAP Diluted EPS ($USD)	$4.90	$4.36	$5.82
Non‑GAAP Operating Income to Common ($USD Millions)	$(8.7)	$127.6	$195.5
Non‑GAAP Operating EPS ($USD)	$(0.10)	$1.62	$2.45
Net Investment Income ($USD Millions)	$609.7	$542.7	$586.6

Margin and spread drivers

Metric	Q3 2022	Q2 2023	Q3 2023
Average Yield on Invested Assets (%)	4.48	4.42	4.69
Aggregate Cost of Money (%)	1.75	1.85	1.96
Aggregate Investment Spread (%)	2.73	2.57	2.73

Sales and deposits (consolidated and by channel)

Metric	Q1 2023	Q2 2023	Q3 2023
Consolidated FIA Deposits ($USD Billions)	$0.964	$1.878	$2.214
AEL Life FIA ($USD Billions)	$0.736	$1.472	$1.715
Eagle Life FIA ($USD Billions)	$0.229	$0.406	$0.498
Coinsurance Ceded ($USD Billions)	$0.638	$0.826	$0.872
Net after Coinsurance ($USD Billions)	$0.733	$1.175	$1.366

Fee‑like reinsurance KPIs

Metric	Q1 2023	Q2 2023	Q3 2023
Account Value Subject to Recurring Fees ($USD Billions)	$10.156	$10.864	$11.593
Recurring Fee Revenue (non‑GAAP) ($USD Millions)	$22.363	$22.705	$26.732
Flow Reinsurance Ceded in Quarter ($USD Billions)	$0.634	$0.821	$0.870

Additional operating KPIs

Metric	Q2 2023	Q3 2023
Index Credits ($USD Millions)	$65.5	$120.9
Surrender Charge Income ($USD Millions)	$33.8	$45.6
Outflows (surrenders, withdrawals, etc.) ($USD Billions)	$1.251	$1.360
Net Deposits ($USD Billions)	$1.175	$1.366
Cost of Options (%)	1.93	2.02
Cash & Cash Equivalents ($USD Billions)	$5.001	$10.188 (consolidated balance sheet); $6.8B held in investment portfolio liquidity build

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Enterprise FIA Sales	FY 2023	$5–6B (Q2’23)	“Over $7B” (Q3’23)	Raised
Monthly Sales Run-Rate	Oct 2023	N/A	>$0.75B	New disclosure
Private Assets Allocation Target	Long-term	30–40% target reiterated	30–40% target reiterated	Maintained
MRB Modeled Change	Q3 2023 vs Q4 2023	Q3 exp. ~$41.5M (pre actuarial)	Q4 exp. ~$32M (incl. $28M amortization benefit)	Lowered for Q4
DAC/DSI Amortization (modeled)	Q3 2023 vs Q4 2023	Q3 exp. ~$117M	Q4 exp. ~$123M	Raised
Effective Tax Rate (Operating)	Forward	Not provided	Not provided	N/A
Dividends	Forward	Not provided	Not provided (Q3 declared $0.00 historically)	N/A

Earnings Call Themes & Trends

Note: AEL did not hold an earnings call for Q3 2023 due to the pending Brookfield Reinsurance merger; themes below reflect management disclosures across Q1, Q2, and the Q3 press materials .

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3 2023)	Trend
Private Asset Allocation	Q1/Q2: ramp to ~24–25%; >$12B sourced; point‑in‑time yield ~4.77% at Q2 end	25% allocation; plan to deploy post‑merger toward 30–40% target; average yield 4.69%	Positive ramp, target reiterated
Reinsurance “fee‑like” revenues	Q1: AV subject to fees $10.156B; fees $22.4M	AV subject to fees $11.593B; fees $26.7M	Growing balances and fees
Sales mix (income vs accumulation)	Q1: total enterprise MYGA boosted by new flow treaty	Income products $1.4B (+28% q/q); accumulation up 3%; Eagle Life income +67% q/q	Mix skew to income
Investment spread & yield	Q1/Q2: spread 2.67%/2.57%; yield 4.48%/4.42%	Spread 2.73%; yield 4.69%	Improving sequentially
Liquidity & cash build	Q2: built to $5.4B; expected $7–10B over next quarters	$6.8B cash (investment portfolio), 13.6% of portfolio; opportunistic deployment post‑close	Elevated, protective stance
Credit portfolio health	Q2: A‑ rated; limited office exposure; First Republic loss ($44M)	“Core fixed income A‑ rated”; office 8% of CML; DSCR 1.86x; minimal maturities through 2025	Stable risk metrics
MRB & actuarial assumptions	Q1/Q2: modeled MRB change guidance; notable items from strategic award	MRB change decreased; actuarial updates provided benefits; detailed Q4 MRB/DAC modeling updates	Modeling clarity improving
Brookfield Reinsurance merger	Announced July 5; expected H1 2024 close	H1 2024 close; special shareholder meeting Nov 10	On track

Management Commentary

CEO (Anant Bhalla): “We have delivered on every aspect of our strategy flywheel…25% allocation to private assets…liquidity of $6.8B…we expect this liquidity to be deployed opportunistically after the close of the planned merger transaction…target of 30–40% [private assets]…‘fee‑like’ annualized run‑rate earnings north of $100M…non‑GAAP operating ROE of 18.6%” .
CEO on product momentum: “We achieved record FIA sales…income product sales…up 28% from the second quarter…Total enterprise FIA sales in October were over $750 million…” .
CIO (Jim Hamalainen): “Credit metrics…remained stable…Total net realized losses…~$45M were almost entirely interest rate‑related as we raised liquidity…considerably underweight office at just 8% of the commercial mortgage loan portfolio…average DSCR 1.86x” .

Q&A Highlights

No Q3 earnings call was held given the pending Brookfield Reinsurance transaction, so there was no Q&A session this quarter .

Estimates Context

We attempted to retrieve S&P Global consensus EPS and revenue estimates for Q3 2023, Q2 2023, and Q1 2023, but the SPGI/Capital IQ mapping for AEL was unavailable in our tool, so Wall Street consensus could not be displayed. As a result, comparison vs estimates is not provided this quarter (consensus data unavailable via S&P Global for AEL using our interface).
Implications: Given stronger non‑GAAP operating EPS ($2.45) and record FIA sales in Q3, sell‑side models may need upward revisions for fee revenue run‑rate, investment spread assumptions, and FY2023 sales trajectory; however, we cannot quantify the magnitude without consensus data .

Key Takeaways for Investors

Sales momentum and mix shift: Record $2.214B consolidated FIA deposits, with income products leading ($1.4B), supporting earnings durability and fee economics .
Spread tailwind into Q4: Average yield up to 4.69% and spread at 2.73% despite higher option costs and cost of money; Q4 MRB modeling indicates expected ~$32M change with $28M amortization benefit .
Capital‑light flywheel: Reinsured balances at $11.6B with recurring fees of $26.7M in Q3, underpinning “fee‑like” earnings scalability .
Liquidity as strategic optionality: $6.8B cash in the portfolio positions AEL to deploy into private assets post‑merger (target 30–40%), potentially enhancing yield/spread further .
Credit risk contained: A‑ rated core portfolio; office exposure just 8% of CML; strong DSCR and limited near‑term maturities reduce downside tail risks .
Guidance reset higher: FY2023 sales expected “over $7B”; October sales >$750M indicate Q4 run‑rate strength, a potential near‑term positive sentiment driver .
Merger timeline: Shareholder vote Nov 10; expected H1 2024 close could be the primary stock catalyst and may constrain standalone guidance granularity near term .

Appendix: Additional Data Points

Notable items in Q3: actuarial assumption updates provided a benefit (market risk benefits decreased by $63.3M; EPS +$0.62), while embedded derivative assumption updates were a headwind (EPS −$0.83) .
Effective tax rate on pre‑tax operating income: 21.9% in Q3 vs 20.8% in Q2 .
Book value per common share excluding AOCI and fixed index annuity fair value impacts: $40.82 (Q3) vs $39.35 (Q2) .

Sources: AEL Q3 2023 8‑K press release and financial supplement ; Q2 2023 8‑K press release and supplement ; Q1 2023 8‑K press release and supplement ; Q3 2023 sales announcement/no-call notice .

American National Group Inc. (AEL)·Q3 2023 Earnings Summary