10-Q: American National Group Reports Strong Q3 Earnings, Strategic Portfolio Shifts

American National Group Inc. reported a significant turnaround in net income for Q3 2025, driven by increased investment income and cost optimization, alongside strategic adjustments to its insurance portfolio.

Summary

• Net income attributable to common stockholders for the three months ended September 30, 2025, was $208 million, a substantial improvement from a net loss of $299 million in the prior-year period.
• For the nine months ended September 30, 2025, net income attributable to common stockholders increased to $113 million from $58 million in the same period of 2024.
• Total revenues for Q3 2025 increased to $2,058 million from $2,004 million in Q3 2024, primarily due to higher net investment income and investment-related gains.
• Net investment income rose by $261 million to $1,285 million in Q3 2025 compared to Q3 2024, and by $1.3 billion to $3,720 million for the nine-month period, driven by increased assets under management and rotation into higher-yielding investment strategies.
• Investment related gains were $2 million in Q3 2025, a $130 million improvement from a $128 million loss in Q3 2024, largely due to the non-recurrence of realized losses from a prior-year reinsurance transaction.
• Operating expenses decreased by $72 million to $156 million in Q3 2025, benefiting from a non-recurring $27 million gain from the termination of American National's pension plan and ongoing cost optimization.
• Net premiums decreased by $322 million to $566 million in Q3 2025 and by $830 million to $2,207 million for the nine-month period, attributed to the phased withdrawal from non-core P&C business, reinsurance agreements in Life Insurance, and a decline in Pension Risk Transfer (PRT) related premiums.
• Total gross annuity sales increased by $722 million to $4.9 billion in Q3 2025 and by $4.0 billion to $12.9 billion for the nine-month period, driven by increased sales in fixed index and fixed rate retail annuity products and funding agreement backed notes (FABN) issuances.
• Total assets grew by $9.3 billion to $130.6 billion as of September 30, 2025, primarily due to net annuity inflows and increased investment purchases.
• The company completed the transfer of its Property & Casualty subsidiaries to Argo Group International Holdings, Inc. on October 1, 2025, and redeemed Series B preferred stock on October 6, 2025, using proceeds from newly issued junior subordinated notes.

Sentiment

Score: 8

Explanation: The company demonstrated strong financial performance with a significant turnaround in net income, robust growth in net investment income, and effective cost management. Strategic portfolio adjustments, including the P&C subsidiary transfer and life insurance channel optimization, indicate a clear focus on enhancing core business profitability and capital efficiency. While net premiums decreased due to these strategic shifts, the overall financial health and operational earnings (DOE) show positive momentum.

Positives

• Net income attributable to common stockholders significantly improved to $208 million in Q3 2025 from a $299 million loss in Q3 2024, and to $113 million for the nine-month period from $58 million in 2024.
• Net investment income increased by $261 million in Q3 2025 and by $1.3 billion for the nine-month period, reflecting growth in assets under management and successful rotation into higher-yielding investment strategies.
• Investment related gains improved by $130 million in Q3 2025, benefiting from the absence of prior-year realized losses.
• Operating expenses decreased by $72 million in Q3 2025 due to cost optimization efforts and a non-recurring $27 million benefit from a pension plan termination.
• Segment Distributable Operating Earnings (DOE) increased by $57 million to $464 million in Q3 2025 and by $471 million to $1,375 million for the nine-month period, indicating strong operational performance.
• Total assets increased by $9.3 billion to $130.6 billion, and total equity increased by $953 million to $10.98 billion, demonstrating balance sheet strength and growth.
• Total liquidity stood at $52.0 billion as of September 30, 2025, providing significant financial flexibility.
• The company was in compliance with all financial covenants and regulatory capital requirements (RBC) as of September 30, 2025.

Negatives

• Net premiums decreased by $322 million in Q3 2025 and by $830 million for the nine-month period, primarily due to strategic withdrawals from non-core P&C business, reinsurance agreements in Life Insurance, and a decline in PRT related premiums.
• Amortization of deferred policy acquisition costs, deferred sales inducements, and value of business acquired increased by $56 million in Q3 2025 and by $346 million for the nine-month period, reflecting the growth of the annuity business but also a higher expense.
• Change in fair value of market risk benefits increased by $176 million in Q3 2025 and by $332 million for the nine-month period, indicating higher liabilities due to interest rate and equity market impacts, as well as assumption updates.
• Interest sensitive contract benefits increased by $452 million for the nine months ended September 30, 2025, driven by growth in the annuity business, which represents a higher cost.
• The effective tax rate for the three and nine months ended September 30, 2025, was higher than the statutory rate of 21% due to a one-time adjustment related to the Bermuda corporate income tax.

Risks

• Results may differ from assumptions, estimates, and models used in financial reporting.
• Changes in interest rate conditions could negatively impact financial performance.
• Investment losses or failure to grow as quickly as expected due to market, credit, liquidity, concentration, default, and other risks.
• Increases in option costs could adversely affect profitability.
• Exposure to counterparty credit risks in derivative instruments and reinsurance agreements.
• Failures of third-party service providers to perform or comply with legal/regulatory requirements.
• Poor attraction and retention of customers or distributors due to competitors' greater resources, broader product arrays, and higher ratings.
• Failures of information technology and communication systems or security breaches.
• Credit or financial strength downgrades could impact business and funding costs.
• Inability to raise additional capital to support business growth on favorable terms.
• Deterioration of U.S. and global capital markets and economic conditions due to public health issues, political/social developments, or otherwise.
• Failure to authorize and pay dividends on preferred stock.
• Subsidiaries' inability to pay dividends or make other payments to the parent company.
• Failures in reinsurance, investment management, or third-party capital arrangements.
• Failure to prevent excessive risk-taking within the company.
• Failure of policies and procedures to protect from operational risks.
• Increased litigation, regulatory examinations, and tax audits.
• Changes to laws, regulations, accounting, and benchmarking standards.
• Takeover or combination delays or deterrence by laws, corporate governance documents, or change-in-control agreements.
• Effects of climate change or responses to it.
• Failure of efforts to meet environmental, social, and governance (ESG) standards and to enhance sustainability.
• Insurance risk, including significant deviations in mortality, morbidity, longevity, and policyholder behavior, could adversely affect business.

Future Outlook

The company continues to evaluate the impact of recently issued accounting standards (ASU 2023-09, ASU 2024-03, ASU 2025-06) and legislative changes, such as the Bermuda corporate income tax regime and the U.S. One Big Beautiful Bill Act, on its financial statements. While some ASUs are not anticipated to have a material impact on profitability, financial position, or cash flows, the company is still assessing the potential effects of others. Management's discussion and analysis includes forward-looking statements that are subject to various assumptions, risks, and uncertainties, which could cause actual results to differ materially from projections.

Management Comments

• The increase in net investment income was driven by the increase in assets under management due to growth of the business as well as the continued rotation into higher yielding investment strategies.
• The decrease in operating expenses was primarily driven by a non-recurring $27 million benefit realized from the termination of American National's pension plan, as well as ongoing cost optimization efforts.
• The increase in Annuities DOE is primarily attributable to increased investment income from our continued deployment into higher yielding investment strategies and a full period of earnings contributed from AEL, coupled with new business wins and higher spread earnings.
• The increase in Property and Casualty DOE was driven by improvements in our loss experience arising from underwriting actions implemented over the past twelve months.
• We continue to maintain a strong liquidity position across our segments, giving us flexibility to secure attractive investment opportunities.

Industry Context

The company's performance reflects broader trends in the insurance and annuity industry, including the impact of rising interest rates on investment income and the strategic repositioning of portfolios. The growth in annuity sales, particularly fixed index and fixed rate products, aligns with increased demand for retirement solutions in a volatile market. The strategic withdrawal from certain P&C and life insurance distribution channels indicates a focus on optimizing core business segments and improving underwriting profitability, a common strategy among insurers facing competitive pressures and evolving market dynamics. The transfer of P&C subsidiaries to an affiliate under the same parent company (Brookfield Wealth Solutions) suggests a larger group-level strategy for asset allocation and specialization.

Corporate Governance

Legal Proceedings

• The company's subsidiaries are defendants in various lawsuits concerning alleged breaches of contracts, employment matters, deceptive insurance sales and marketing practices, and other causes of action arising in the ordinary course of operations.
• Certain lawsuits include claims for compensatory and punitive damages.
• Management, after reviewing with legal counsel, believes the ultimate resultant liability, if any, would not have a material adverse effect on the statements of financial position, liquidity, or results of operations.
• The eventual outcome of litigation involves forward-looking speculation, and while the possibility of a material adverse judgment is currently believed to be remote, future facts and circumstances could alter this conclusion.
• Accruals for losses are established when probable and reasonably estimable, based on the lowest amount in the range of possible losses if no single estimate is more probable.

Related Party Transactions

• The company's insurance subsidiaries paid investment management fees of $56 million (Q3 2025) and $155 million (YTD 2025) to an affiliate of Brookfield Asset Management Ltd. (BAM).
• The company purchased related party investments totaling $3.1 billion (YTD 2025) and held investments in related parties of $11.3 billion as of September 30, 2025.
• Deposit agreements with BAMR US Holdings LLC (an indirect wholly-owned subsidiary of Brookfield Wealth Solutions) had balances of $646 million as of September 30, 2025.
• Freestone (an affiliated Bermuda reinsurer wholly owned by the Company) had a deposit of $262 million with Brookfield Treasury Management Inc. (a subsidiary of Brookfield Corporation) as of September 30, 2025.
• The company earned interest income of $3 million (Q3 2025) and $9 million (YTD 2025) from related party deposits.
• AEILIC's coinsurance agreement with North End Re (Cayman) SPC (a wholly-owned subsidiary of Brookfield Wealth Solutions) was terminated via a recapture agreement effective December 1, 2024.
• AEILIC and Eagle have modified coinsurance agreements with Freestone to reinsure a quota share of fixed rate, fixed indexed, and payout annuities.
• ANICO has modified coinsurance agreements with Freestone for various PRT, single premium immediate annuity, fixed deferred, and equity-indexed annuity businesses.

Stakeholder Impact

• Shareholders: Positive impact from significant net income turnaround and growth in Distributable Operating Earnings (DOE), indicating improved profitability and operational efficiency. Strategic shifts aim to enhance long-term value.
• Policyholders: Continued growth in annuity products and services, with policyholder account balances increasing. Market risk benefits are in place to protect against capital market risks.
• Employees: Cost optimization efforts and the termination of the American National pension plan (with a non-recurring benefit) may impact employee-related expenses and benefits.
• Customers: Strategic withdrawal from non-core P&C business and certain life insurance distribution channels may affect product availability for some customer segments, while focus on core offerings aims to improve service quality.
• Creditors: Increased long-term borrowings, but the company remains in compliance with financial covenants, indicating continued ability to meet obligations. The P&C subsidiary transfer was designed to be leverage neutral.
• Reinsurers: New and existing reinsurance agreements, including with Dai-ichi Frontier Life, impact risk sharing and business flow.

Next Steps

• Continue to evaluate the impact of new accounting pronouncements (ASU 2023-09, ASU 2024-03, ASU 2025-06) on financial statements.
• Monitor legislative changes, including the Bermuda corporate income tax regime and the U.S. One Big Beautiful Bill Act, and assess their impact.
• Integrate the P&C subsidiaries into Argo Group International Holdings, Inc. following the October 1, 2025 transfer.
• Manage the new coinsurance reinsurance agreement with Dai-ichi Frontier Life, effective October 1, 2025.
• Continue to manage and optimize the investment portfolio, including deploying cash and cash equivalents into higher-yielding strategies.
• Maintain compliance with minimum net worth covenants and regulatory capital requirements (RBC).

Key Dates

Recommendation

The company demonstrates a strong financial turnaround, reporting a significant increase in net income and Distributable Operating Earnings (DOE) for both the quarter and year-to-date periods. This improvement is largely driven by robust net investment income growth, effective cost optimization, and favorable investment-related gains. While net premiums decreased due to strategic portfolio adjustments, these actions, including the transfer of P&C subsidiaries and optimization of life insurance distribution, are aimed at enhancing long-term profitability and capital efficiency. The balance sheet shows healthy growth in assets and equity, supported by strong liquidity and compliance with financial covenants. These factors, combined with strategic capital raises to manage debt and preferred stock, position the company for continued growth and value creation, making it an attractive investment.

Keywords

Insurance, Annuities, Life Insurance, Property & Casualty, Financial Services, SEC Filing, 10-Q, Brookfield, Investment Income, Distributable Operating Earnings, Capital Management, Risk Management, Preferred Stock, Long-Term Borrowings