Galveston, TX — American National Group, Inc. (NASDAQ: ANAT) and subsidiaries (collectively, the “Company”) announced net income for the third quarter of 2021 of $51.0 million or $1.90 per diluted share, compared to net income of $171.1 million or $6.36 per diluted share for the same period in 2020.
Net income for the third quarter of 2021 was $120.1 million lower than net income for the same period in 2020 primarily because gains on equity securities were $119.6 million less in the third quarter of 2021. In addition, an increase in realized investment earnings of $21.9 million during the third quarter of 2021 was offset by a reduction in after-tax adjusted net operating income of $22.4 million.
Net gains on equity securities were $0.5 million or $0.02 per diluted share in the third quarter of 2021, compared to $120.1 million or $4.47 per diluted share for the same period in 2020, reflecting more favorable market conditions for the appreciation of our investment in equities during the third quarter of 2020.
Net realized investment earnings for the third quarter of 2021 were $37.9 million or $1.41 per diluted share, compared to net realized investment earnings of $16.0 million or $0.60 per diluted share for the same period in 2020. The increase in net realized investment earnings was primarily attributable to an increase in earnings from investment funds as well as a reduction in the credit loss related to our commercial mortgage loans due to improved market conditions during the third quarter of 2021.
After-tax adjusted net operating income for the third quarter of 2021 was $12.6 million or $0.47 per diluted share, compared to $35.0 million or $1.29 per diluted share for the same period in 2020. The decrease reflects lower earnings in our property and casualty business due to the impact of Hurricane Ida and an increase in claim frequency on our personal automobile products as well as an operating loss in our life insurance business from increased death claims as a result of the COVID-19 pandemic.
Net income for the nine months ended September 30, 2021 was $449.2 million or $16.71 per diluted share compared to net income of $161.2 million or $5.99 per diluted share for the same period in 2020.
Net income for the nine months ended September 30, 2021 was $288.0 million greater than net income for the same period in 2020 primarily because of a $150.9 million increase in realized investment earnings, a $117.7 million increase in gains on equity securities and a $19.4 million increase in after-tax adjusted net operating income.
Net gains on equity securities for the nine months ended September 30, 2021 were $211.2 million or $7.86 per diluted share, compared to net gains on equity securities of $93.5 million or $3.48 per diluted share for the same period in 2020 due to significantly more favorable market conditions in 2021 for investments in equity securities. The after-tax net gains on equity securities for the nine months ended September 30, 2020 were affected by the negative impact on financial markets associated with the COVID-19 pandemic.
Net realized investment earnings for the nine months ended September 30, 2021 were $97.8 million or $3.64 per diluted share, compared to net realized investment losses of $53.1 million or $1.98 per diluted share for the same period in 2020. The increase in net realized investment earnings is primarily driven by the aforementioned favorable change in the credit loss and earnings from investment funds.
After-tax adjusted net operating income for the nine months ended September 30, 2021 was $140.2 million or $5.21 per diluted share, compared to $120.8 million or $4.49 per diluted share for the same period in 2020. The increase in adjusted net operating income reflects improved earnings in our annuity segment from our equity indexed annuity products and an increase in the earnings from our corporate and other segment due to increased investment earnings, partially offset by lower earnings in our life segment due to adverse mortality experience.
For the nine months ended September 30, 2021, total life insurance in force increased by $6.8 billion to $135.1 billion and book value per share increased $10.74 to $250.94.
Update Regarding Pending Merger with Brookfield Asset Management Reinsurance Partners Ltd.
As previously announced, on August 6, 2021, the Company entered into a merger agreement with Brookfield Asset Management Reinsurance Partners Ltd. (“Brookfield Reinsurance”) and its wholly-owned merger subsidiary. Subject to the conditions set forth in the merger agreement, at the closing of the transaction, the Company will become a wholly owned subsidiary of Brookfield Reinsurance and each then-outstanding share of the Company’s common stock will be converted into the right to receive $190.00 per share in cash, for total merger consideration of approximately $5.1 billion. As previously disclosed, the merger is expected to close in the first half of 2022.
Shortly after the merger agreement was executed, the Company’s two largest stockholders delivered written consents that adopted the merger agreement. Because those two stockholders hold approximately 59.8% of the Company’s outstanding shares of common stock, no further stockholder approval is required in connection with the transactions contemplated by the merger agreement. As a result, after those stockholder consents were delivered, the Company’s board of directors no longer had the right to consider unsolicited competing acquisition proposals from third parties or to exercise a “fiduciary out” and no such third-party proposal has been received.
On September 17, 2021, the Company began mailing the definitive information statement and appraisal rights notice to the Company’s stockholders, and that document is available in the EDGAR system on the SEC’s website at www.sec.gov. As disclosed in the definitive information statement, any stockholder who wished to demand appraisal rights for its shares was required to deliver its demand no later than October 7, 2021, the 20th day after the information statement was first mailed to stockholders. Prior to that deadline, the Company received only one purported appraisal demand, which was submitted by the owner of 2,000 shares of common stock (less than 0.01% of the Company’s outstanding shares).
On August 27, 2021, the Company and Brookfield Reinsurance filed the required notifications for antitrust clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”). The waiting period under the HSR Act expired on September 27, 2021.
Because (i) the required stockholder approval for the merger has been obtained, (ii) the information statement and appraisal rights notice has been sent to stockholders and (iii) the HSR Act waiting period has expired, the only remaining significant closing condition is the receipt of the required regulatory approval from the insurance authorities in Texas, Missouri, New York, Louisiana, and California. On September 3, 2021, Brookfield Reinsurance made the required Form A filings with each of these state insurance regulators, and those regulators are reviewing the filings.
GAAP Reconciliation of Non-GAAP Measures A reconciliation of GAAP net income to adjusted net operating income, a non-GAAP measure, is shown in the table below:
American National Consolidated Financial Highlights
(Preliminary & Unaudited in millions, except per share data)
