Operating within the United States, AEL develops, markets, issues and administers its annuities and life insurance products. The portfolio of products for their annuity business includes fixed rate annuities, index annuities and variable annuities. The insurance portion of AEL provides traditional ordinary and term, universal life, and other interest-sensitive life insurance products.
As a provider of retirement solutions, the company is strict in following a set allocation of its assets, such as investing 93.9% into bonds with the lowest default probability and no exposure at all to junk bonds. AEL also prides itself on adhering to an ethical market code that includes competitiveness and clear and honest explanations of the services that the company provides.
An analysis of AEL fundamentals reveals sound financial standing, as exemplified by the trailing twelve month operating margin of 20.92% relative to the industry average of 13.27%. More impressively, the firm has a one year gross margin of 41.83%, significantly higher than its peer group average of 28.97%. With this performance, the company has earned a one year return on equity [ROE] of 13.55%.
Meanwhile, its tremendous growth can be evidenced in the year over year quarterly revenue growth of a remarkable 88.00%, the second highest in an industry that has a stagnant average of 13.30%. The firm has also posted record income of $75.5 million for 2006, a 76% increase over the previous year.
AEL has a low price to book (P/B) ratio of 1.21 relative to an industry average of 2.60 which points to further growth potential. At the same time, AEL has a price to earnings (P/E) ratio of 10.47 compared to the 12.78 industry average. With these fundamentals and valuation we continue to calculate an undervaluation in the market.
Full Disclosure: American Equity Investment Life Holding Co. [AEL] is a holding in the Clear Small Cap Value portfolio which is offered as a separate account. Mr. Corn is the founder and CEO of Clear Asset Management LLC and owns the stock directly as part of his portfolio holdings.
AEL 1-yr chart: