American Equity Investment Life Holding Company (NYSE:AEL) Q4 2018 Earnings Conference Call Transcript

Feb 07, 2019 • 09:00 am ET


American Equity Investment Life Holding Company (NYSE:AEL) Q4 2018 Earnings Conference Call Transcript


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Hello and welcome to American Equity Investment Life Holding Company's Fourth Quarter 2018 Conference Call. At this time for opening remarks and introductions, I would like to turn the call over to Julie LaFollette, coordinator of Investor Relations.

Julie LaFollette

Good morning and welcome to American Equity Investment Life Holding Company's conference call to discuss Fourth Quarter 2018 earnings. Our earnings release and financial supplement can be found on our website at Non-GAAP financial measures discussed on today's call and reconciliations of non-GAAP financial measures to the most comparable GAAP measures can be found in those documents.

Presenting on today's call are John Matovina, Chief Executive Officer, Ted Johnson, Chief Financial Officer, and Ron Grensteiner, President of American Equity Investment Life Insurance Company.

Some of the comments made during this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. There are a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Factors that could cause those actual results to differ materially are discussed in detail in our most recent filings with the SEC. An audio replay will be made available on our website shortly after today's call.

It is now my pleasure to introduce John Matovina.

John M. Matovina

Good morning and thank you, Julie. Thank you everyone for joining us on the call this morning. Our fourth quarter financial results remain strong helping us close out a record year. Non-GAAP operating income for the quarter was $90 million or $0.99 per share. And while that was flat with the third quarter exclusive of the benefit from actuarial reviews.

I would note that the third quarter results had a larger benefit from non-trendable investment spread items . So sequentially we should -- we did show some improvement. As a reminder, the three key metrics that drive our financial performance are growing our invested assets and policyholder funds under management, generating a high level of operating earnings on the growing asset base through investment spread and then minimizing impairment losses in our investment portfolio.

For the fourth quarter of 2018, we delivered 1% sequential growth and 5% trailing 12 month growth -- growth in policyholder funds under management. On a full year basis, we generated a 15.4% non-GAAP operating return on average equity excluding the impact of the actuarial assumption reviews and then excluding interest related losses from the investment realignment program, our investment impairment losses after the effects of deferred acquisition costs and income taxes were 0.4% of average equity. The growth in policyholder funds under management for the quarter was driven by $1.1 billion of gross sales. The launch of the AssetShield series on October 9th was successful and it now joins the IncomeShield series that was launched in the first quarter of 2018 as one of our top two selling products. You'll hear more about the sales environment and competition from Ron. We reported a sequential decrease in investment spread in the fourth quarter, primarily reflecting a lower