After a 20% decline YTD, lower sales expectations and convertible tender dilution issues are baked into the stock, says FBR, upgrading American Equity Investment Life (AEL) to Outperform with $25 price target.
Analyst Randy Binner notes valuation - which peaked earlier this year at 11.5x 2015 EPS estimates and 1.4x book value - is back to 8.2x EPS and 1.1x book.
"We remain bullish on growth prospects for the indexed annuity product, which is AEL's specialty, as it still comprises only 15% of industry annuity sales. AEL's entrance into the broker/dealer channel for the first time could materially augment sales this year and serve as a new sales contributor as indexed annuity distribution evolves."
American Equity Investment Life Holding Company is engaged in the development and sale of index and fixed rate annuity products. The Company is a full service underwriter of fixed annuity and life insurance products.