ael-202108050001039828false00010398282021-08-052021-08-050001039828us-gaap:CommonStockMember2021-08-052021-08-050001039828us-gaap:SeriesAPreferredStockMember2021-08-052021-08-050001039828us-gaap:SeriesBPreferredStockMember2021-08-052021-08-05
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 05, 2021
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
(Exact name of registrant as specified in its charter)
| | | | | | | | |
Iowa | 001-31911 | 42-1447959 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
6000 Westown Parkway
West Des Moines, IA 50266
(Address of principal executive offices and zip code)
(515) 221-0002
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common stock, par value $1 | | AEL | | New York Stock Exchange |
Depositary Shares, each representing a 1/1,000th interest in a share of 5.95% Fixed-Rate Reset Non-Cumulative Preferred Stock, Series A | | AELPRA | | New York Stock Exchange |
Depositary Shares, each representing a 1/1,000th interest in a share of 6.625% Fixed-Rate Reset Non-Cumulative Preferred Stock, Series B | | AELPRB | | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
On August 5, 2021, the registrant issued a press release announcing its financial results for the quarter ended June 30, 2021, a copy of which is attached as Exhibit 99.1 and is incorporated herein by reference. The registrant's financial supplement for the quarter ended June 30, 2021, is attached as Exhibit 99.2 and is incorporated herein by reference.
The information, including exhibits attached hereto, furnished under this Item 2.02 shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, except as otherwise expressly stated in such filing.
Item 9.01. Financial Statements and Exhibits
| | | | | | | | |
Exhibit Number | | Description |
99.1 | | |
99.2 | | |
104 | | The cover page from this Current Report on Form 8-K, formatted in Inline XBRL. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: August 5, 2021
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| AMERICAN EQUITY | |
| INVESTMENT LIFE HOLDING COMPANY | |
| | | |
| | | |
| By: | /s/ Scott A. Samuelson | |
| | Scott A. Samuelson | |
| | Vice President and Chief Accounting Officer | |
| | | |
DocumentExhibit 99.1
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| For more information, contact: |
|
Steven D. Schwartz, Vice President-Investor Relations |
(515) 273-3763, sschwartz@american-equity.com |
|
| | |
FOR IMMEDIATE RELEASE | | |
August 5, 2021 | | |
American Equity Reports Second Quarter 2021 Results
Company Highlights
•Second quarter 2021 annuity sales of $1.2 billion driven by strong growth in fixed index annuity (FIA) sales
•Policyholder funds under management increased by 1.5% to $56.6 billion
•Deployed $569 million in private assets in the quarter as part of plans to ramp to 30% asset allocation over time
•Share repurchase of $95.1 million, fully offsetting dilution from 4Q 2020 Brookfield equity issuance
•Second quarter 2021 net loss available to common stockholders of $(65.6) million or $(0.69) per diluted common share compared to net loss available to common stockholders of $(253.4) million, or $(2.76) per diluted common share, for the second quarter of 2020 driven in both periods by reductions in discount rates used in the calculation of fair value of fixed index annuity policy benefit reserves
•Second quarter 2021 non-GAAP operating income1 available to common stockholders of $93.8 million or $0.98 per diluted common share compared to $93.1 million, or $1.01 per diluted common share, for the second quarter of 2020
•Book value per common share of $60.46 at June 30, 2021; Book value per share excluding accumulated other comprehensive income (AOCI) of $38.59; Excluding both AOCI and net impact of accounting for fair value of derivatives and embedded derivatives, book value per share of $35.97
•Trailing twelve-month return on average common stockholders' equity of 17.5%; Trailing twelve-month non-GAAP operating return1 on average common stockholders' equity excluding average AOCI1 of (1.4)% based on reported results and 9.1% excluding impact of notable items2
WEST DES MOINES, Iowa (August 5, 2021) - American Equity Investment Life Holding Company (NYSE: AEL), a leading issuer of fixed index annuities (FIAs) today reported second quarter 2021 non-GAAP operating income1 available to common stockholders of $93.8 million, or $0.98 per diluted common share, compared to non-GAAP operating income1 available to common stockholders of $93.1 million, or $1.01 per diluted common share, for second quarter 2020.
The year-over-year increase in quarterly non-GAAP operating income1 available to common stockholders primarily reflected a decrease in the change in the liability for future policy benefits to be paid for lifetime income benefit riders (LIBR) offset by a decrease in investment spread and an increase in other operating costs and expenses.
Year-over-year, the change in liability for future policy benefits to be paid for LIBR decreased by $61 million. The positive difference between actual versus modeled expectations in the second quarter of 2021, primarily reflecting the level of equity index credits, reduced the increase in the liability for future policy benefits to be paid for LIBR by $29 million. By comparison, in the second quarter of 2020, actual versus modeled expectations increased the change in liability for future policy benefits to be paid for LIBR by $43 million.
Compared to the second quarter of 2020, amortization of deferred policy acquisition and sales inducement costs decreased $1 million. Actual versus modeled expectations in the second quarter of 2021, primarily reflecting the level of equity index credits, reduced amortization by $31 million. Amortization of deferred sales inducements and policy acquisition costs benefited by $28 million in the second quarter of 2020 from actual versus modeled expectations.
CONTINUED DEPLOYMENT INTO PRIVATE ASSETS AS PART OF RAMPING TO 30% ASSET ALLOCATION OVER TIME
American Equity’s investment spread was 1.95% for the second quarter of 2021 compared to 2.00% for the first quarter of 2021 and 2.39% for the second quarter of 2020. On a sequential basis, the average yield on invested assets decreased by 7 basis points while the cost of money fell by 2 basis points. Adjusted investment spread excluding non-trendable items3 declined to 1.81% in the second quarter of 2021 from 1.87% in the first quarter of 2021.
Average yield on invested assets was 3.51% in the second quarter of 2021 compared to 3.58% in the first quarter of 2021. The decrease in investment yield was primarily driven by an increase in the average level of liquidity in the investment portfolios of the life insurance companies. The average adjusted yield on invested assets excluding non-trendable items3 was 3.41% in the second quarter of 2021 compared to 3.47% in the first quarter of 2021.
The aggregate cost of money for annuity liabilities of 1.56% in the second quarter of 2021 was down 2 basis points from 1.58% in the first quarter of 2021. The cost of money in the second quarter of 2021 was positively affected by 4 basis points of over-hedging of index-linked credits compared to 2 basis point of hedge gain in the first quarter of 2021.
Commenting on investment activities, Anant Bhalla, Chief Executive Officer, said: "For the first time in our company's history, in the second quarter, we started leveraging our asset management partnerships to invest in single-family rental homes and middle market loans consistent with ramping towards the AEL 2.0 asset allocation strategy. Year-to-date, we have purchased over $800 million of privately-sourced alpha-generating assets — solid initial steps towards our plan of adding between $1 billion to $2 billion in private assets this year growing to a pace of 5% or greater of the portfolio in each subsequent year to evolve into our new asset allocation of 30% or greater in private assets. In the second quarter, we purchased $1.7 billion of new assets at an expected return of approximately 4.15%, net of third-party investment expenses. This included $569 million in private assets added in the quarter."
Bhalla continued: "For any strategy migration, there are short-term impacts for longer-term gains. For American Equity, this has manifested itself in higher cash balances. The decrease in average yield on investment assets was primarily attributable to a 7-basis point reduction from interest foregone due to an increase in the average amount of cash held in the life insurance company portfolios in the quarter. Cash and equivalents averaged $10.0 billion in the second quarter of 2021 compared to $8.6 billion in the first quarter of 2021. At June
30, cash and equivalents in the life insurance company portfolios were $10 billion. While we expect to continue to ramp up private assets with strong positive net cash flows in 2022, we are also planning to deploy most of the cash balances above our target cash levels into traditional fixed income investments over the next six months."
FUNDS UNDER MANAGEMENT INCREASE 1.5% ON $1.2 BILLION OF SALES DRIVEN BY FIA
Policyholder funds under management at June 30, 2021 were $56.6 billion, an $817 million, or 1.5% increase from March 31, 2021. Second quarter gross sales were $1,180 million, representing an increase of 111% from the second quarter 2020 sales level. On a sequential basis, gross sales decreased 52% from the all-time record level set in the first quarter of 2021. Compared to the first quarter of 2021, gross sales of fixed index annuities at American Equity Life increased 36% while Eagle Life sales rose 24%.
Commenting on sales, Bhalla stated: "Our strategy of growing fixed index annuity sales is working in both the American Equity and Eagle Life channels. As previously shared in our first quarter earnings call, our plan to pivot from multi-year fixed rate annuities for the remainder of the year to our refreshed line-up of fixed index annuities is bearing results. Based on preliminary industry estimates, this is the third quarter in a row that our fixed index annuity market share has increased, reflecting the upgrades we have made to our Go-to-Market franchise over the past year."
AMERICAN EQUITY COMPLETES INITIAL 9.1 MILLION SHARE REPURCHASE
In July, American Equity completed the repurchase of 9.1 million shares that began in November of last year to fully offset the impact of dilution from shares issued to Brookfield Asset Management Inc. The total buyback included repurchase of 3 million shares in the second quarter for a total of $95.1 million. Remaining share repurchase authorization is $236 million.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
The forward-looking statements in this release, such as believe, evolve, expect, intend, may, plan, ramping towards, strategy, or similar words, as well as specific projections of future results, are based on assumptions and expectations that involve risks and uncertainties, including the "Risk Factors" the company describes in its U.S. Securities and Exchange Commission filings. The Company's future results could differ, and it has no obligation to correct or update any of these statements.
CONFERENCE CALL
American Equity will hold a conference call to discuss second quarter 2021 earnings on Friday, August 6, at 10:00 a.m. CT. The conference call will be webcast live on the Internet. Investors and interested parties who wish to listen to the call on the internet may do so at www.american-equity.com.
The call may also be accessed by telephone at 855-865-0606, passcode 5148835 (international callers, please dial 704-859-4382). An audio replay will be available shortly after the call on American Equity's website. An audio replay will also be available via telephone through August 13, 2021 at 855-859-2056, passcode 5148835 (international callers will need to dial 404-537-3406).
ABOUT AMERICAN EQUITY
American Equity Investment Life Holding Company, through its wholly-owned subsidiaries, is a leading issuer of fixed index annuities through independent agents, banks and broker-dealers. American Equity Investment Life Holding Company, a New York Stock Exchange listed company (NYSE: AEL), is headquartered in West Des Moines, Iowa. For more information, please visit www.american-equity.com.
1 Use of non-GAAP financial measures is discussed in this release in the tables that follow the text of the release.
2 Pertinent notable items consist of $340,895 impact related to actuarial assumption updates made in Q3 2020. The presentation of notable items is intended to help investors better understand our results and to evaluate and forecast those results. For more information, see page 6 of our June 30, 2021 financial supplement.
3 Non-trendable items are the impact of investment yield – additional prepayment income and cost of money effect of over (under) hedging as shown in our June 30, 2021 financial supplement on page 9, “Spread Results”.
###
American Equity Investment Life Holding Company
Unaudited (Dollars in thousands, except per share data)
Consolidated Statements of Operations
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Revenues: | | | | | | | |
Premiums and other considerations | $ | 14,595 | | | $ | 11,032 | | | $ | 27,808 | | | $ | 18,696 | |
Annuity product charges | 63,759 | | | 63,438 | | | 123,841 | | | 122,987 | |
Net investment income | 499,320 | | | 543,704 | | | 996,510 | | | 1,117,022 | |
Change in fair value of derivatives | 500,880 | | | 327,662 | | | 897,185 | | | (614,212) | |
Net realized losses on investments | (3,114) | | | (25,888) | | | (7,697) | | | (46,224) | |
| | | | | | | |
| | | | | | | |
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Loss on extinguishment of debt | — | | | — | | | — | | | (2,024) | |
Total revenues | 1,075,440 | | | 919,948 | | | 2,037,647 | | | 596,245 | |
| | | | | | | |
Benefits and expenses: | | | | | | | |
Insurance policy benefits and change in future policy benefits | 15,828 | | | 13,331 | | | 32,252 | | | 23,403 | |
Interest sensitive and index product benefits | 812,981 | | | 240,992 | | | 1,289,576 | | | 641,211 | |
Amortization of deferred sales inducements | (12,520) | | | (75,178) | | | 110,455 | | | (1,587) | |
Change in fair value of embedded derivatives | 273,713 | | | 1,126,935 | | | (8,700) | | | (123,126) | |
Interest expense on notes payable | 6,394 | | | 6,388 | | | 12,787 | | | 12,773 | |
Interest expense on subordinated debentures | 1,326 | | | 1,321 | | | 2,652 | | | 2,909 | |
| | | | | | | |
Amortization of deferred policy acquisition costs | (16,906) | | | (119,889) | | | 186,917 | | | 813 | |
Other operating costs and expenses | 65,050 | | | 41,951 | | | 120,915 | | | 85,577 | |
Total benefits and expenses | 1,145,866 | | | 1,235,851 | | | 1,746,854 | | | 641,973 | |
Income (loss) before income taxes | (70,426) | | | (315,903) | | | 290,793 | | | (45,728) | |
Income tax expense (benefit) | (15,732) | | | (68,474) | | | 62,803 | | | (41,246) | |
Net income (loss) | (54,694) | | | (247,429) | | | 227,990 | | | (4,482) | |
Less: Preferred stock dividends | 10,919 | | | 5,950 | | | 21,838 | | | 12,561 | |
Net income (loss) available to common stockholders | $ | (65,613) | | | $ | (253,379) | | | $ | 206,152 | | | $ | (17,043) | |
| | | | | | | |
Earnings (loss) per common share | $ | (0.69) | | | $ | (2.76) | | | $ | 2.16 | | | $ | (0.19) | |
Earnings (loss) per common share - assuming dilution | $ | (0.69) | | | $ | (2.76) | | | $ | 2.15 | | | $ | (0.19) | |
| | | | | | | |
Weighted average common shares outstanding (in thousands): | | | | | | | |
Earnings (loss) per common share | 94,801 | | | 91,803 | | | 95,265 | | | 91,724 | |
Earnings (loss) per common share - assuming dilution | 95,379 | | | 92,027 | | | 95,795 | | | 92,024 | |
American Equity Investment Life Holding Company
Unaudited (Dollars in thousands, except per share data)
NON-GAAP FINANCIAL MEASURES
In addition to net income (loss) available to common stockholders, we have consistently utilized non-GAAP operating income available to common stockholders and non-GAAP operating income available to common stockholders per common share - assuming dilution, non-GAAP financial measures commonly used in the life insurance industry, as economic measures to evaluate our financial performance. Non-GAAP operating income available to common stockholders equals net income (loss) available to common stockholders adjusted to eliminate the impact of items that fluctuate from quarter to quarter in a manner unrelated to core operations, and we believe measures excluding their impact are useful in analyzing operating trends. The most significant adjustments to arrive at non-GAAP operating income available to common stockholders eliminate the impact of fair value accounting for our fixed index annuity business. These adjustments are not economic in nature but rather impact the timing of reported results. We believe the combined presentation and evaluation of non-GAAP operating income available to common stockholders together with net income (loss) available to common stockholders provides information that may enhance an investor’s understanding of our underlying results and profitability.
Reconciliation from Net Income (Loss) Available to Common Stockholders to Non-GAAP Operating Income Available to Common Stockholders and Non-GAAP Operating Income Available to Common Stockholders, Excluding Notable Items
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Net income (loss) available to common stockholders | $ | (65,613) | | | $ | (253,379) | | | $ | 206,152 | | | $ | (17,043) | |
Adjustments to arrive at non-GAAP operating income available to common stockholders: (a) | | | | | | | |
Net realized gains/losses on financial assets, including credit losses | 2,912 | | | 18,492 | | | 6,428 | | | 34,841 | |
Change in fair value of derivatives and embedded derivatives - fixed index annuities | 200,767 | | | 423,590 | | | (96,867) | | | 303,136 | |
Change in fair value of derivatives - interest rate caps and swap | — | | | — | | | — | | | (848) | |
| | | | | | | |
| | | | | | | |
Income taxes | (44,278) | | | (95,599) | | | 19,516 | | | (72,897) | |
Non-GAAP operating income available to common stockholders | 93,788 | | | 93,104 | | | 135,229 | | | 247,189 | |
Impact of notable items (b) | — | | | — | | | — | | | (30,778) | |
Non-GAAP operating income available to common stockholders, excluding notable items | $ | 93,788 | | | $ | 93,104 | | | $ | 135,229 | | | $ | 216,411 | |
| | | | | | | |
Per common share - assuming dilution: | | | | | | | |
Net income (loss) available to common stockholders | $ | (0.69) | | | $ | (2.76) | | | $ | 2.15 | | | $ | (0.19) | |
Adjustments to arrive at non-GAAP operating income available to common stockholders: | | | | | | | |
Anti-dilutive effect of net loss | — | | | 0.01 | | | — | | | — | |
| | | | | | | |
Net realized gains/losses on financial assets, including credit losses | 0.03 | | | 0.20 | | | 0.07 | | | 0.38 | |
Change in fair value of derivatives and embedded derivatives - fixed index annuities | 2.10 | | | 4.60 | | | (1.01) | | | 3.30 | |
Change in fair value of derivatives - interest rate caps and swap | — | | | — | | | — | | | (0.01) | |
| | | | | | | |
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Income taxes | (0.46) | | | (1.04) | | | 0.20 | | | (0.79) | |
Non-GAAP operating income available to common stockholders | 0.98 | | | 1.01 | | | 1.41 | | | 2.69 | |
Impact of notable items | — | | | — | | | — | | | (0.33) | |
Non-GAAP operating income available to common stockholders, excluding notable items | $ | 0.98 | | | $ | 1.01 | | | $ | 1.41 | | | $ | 2.36 | |
Notable Items
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Notable items impacting non-GAAP operating income available to common stockholders: | | | | | | | |
| | | | | | | |
| | | | | | | |
Tax benefit related to the CARES Act | $ | — | | | $ | — | | | $ | — | | | $ | (30,778) | |
Total notable items (b) | $ | — | | | $ | — | | | $ | — | | | $ | (30,778) | |
(a)Adjustments to net income (loss) available to common stockholders to arrive at non-GAAP operating income available to common stockholders are presented net of related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs and accretion of lifetime income benefit rider (LIBR) reserves where applicable.
(b)Notable items reflect the after-tax impact to non-GAAP operating income available to common stockholders for certain items that do not reflect the company's expected ongoing operations. Notable items include the impact from actuarial assumption updates, certain initial uncapitalized costs to establish the AEL 2.0 strategy, and initial non-deferred impacts related to reinsurance transactions. The presentation of notable items is intended to help investors better understand our results and to evaluate and forecast those results.
American Equity Investment Life Holding Company
Unaudited (Dollars in thousands, except share and per share data)
Book Value per Common Share
| | | | | | | | | | | | | |
| Q2 2021 | | | | | | | | |
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| | | | | | | | | |
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| | | | | | | | | |
Total stockholders’ equity | $ | 6,295,735 | | | | | | | | | |
Equity available to preferred stockholders (a) | (700,000) | | | | | | | | | |
Total common stockholders' equity (b) | 5,595,735 | | | | | | | | | |
Accumulated other comprehensive income | (2,023,911) | | | | | | | | | |
Total common stockholders’ equity excluding AOCI (b) | 3,571,824 | | | | | | | | | |
Net impact of fair value accounting for derivatives and embedded derivatives | (242,423) | | | | | | | | | |
Total common stockholders’ equity excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives (b) | $ | 3,329,401 | | | | | | | | | |
| | | | | | | | | |
Common shares outstanding | 92,553,825 | | | | | | | | | |
| | | | | | | | | |
Book Value per Common Share: (c) | | | | | | | | | |
Book value per common share | $ | 60.46 | | | | | | | | | |
Book value per common share excluding AOCI (b) | $ | 38.59 | | | | | | | | | |
Book value per common share excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives (b) | $ | 35.97 | | | | | | | | | |
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| | | | | | | | | |
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(a)Equity available to preferred stockholders is equal to the redemption value of outstanding preferred stock plus share dividends declared but not yet issued.
(b)Total common stockholders' equity, total common stockholders' equity excluding AOCI and total common stockholders' equity excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives, non-GAAP financial measures, exclude equity available to preferred stockholders. Total common stockholders’ equity and book value per common share excluding AOCI, non-GAAP financial measures, are based on common stockholders’ equity excluding the effect of AOCI. Since AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale securities, we believe these non-GAAP financial measures provide useful supplemental information. Total common stockholders' equity and book value per common share excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives, non-GAAP financial measures, are based on common stockholders' equity excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives. Since the net impact of fair value accounting for our derivatives and embedded derivatives fluctuates from quarter to quarter and the most significant impacts relate to fair value accounting for our fixed index annuity business and are not economic in nature but rather impact the timing of reported results, we believe these non-GAAP financial measures provide useful supplemental information.
(c)Book value per common share including and excluding AOCI and book value per common share excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives are calculated as total common stockholders’ equity, total common stockholders’ equity excluding AOCI and total common stockholders' equity excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives divided by the total number of shares of common stock outstanding.
American Equity Investment Life Holding Company
Unaudited (Dollars in thousands)
NON-GAAP FINANCIAL MEASURES
Average Common Stockholders' Equity and Return on Average Common Stockholders' Equity
Return on average common stockholders' equity measures how efficiently we generate profits from the resources provided by our net assets. Return on average common stockholders' equity is calculated by dividing net income available to common stockholders, for the trailing twelve months, by average equity available to common stockholders. Non-GAAP operating return on average common stockholders' equity excluding average accumulated other comprehensive income (AOCI) is calculated by dividing non-GAAP operating income (loss) available to common stockholders, for the trailing twelve months, by average common stockholders' equity excluding average AOCI. We exclude AOCI because AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale investments.
| | | | | |
| Twelve Months Ended |
| June 30, 2021 |
Average Common Stockholders' Equity Excluding Average AOCI | |
Average total stockholders' equity | $ | 5,607,712 | |
Average equity available to preferred stockholders | (700,000) | |
Average equity available to common stockholders | 4,907,712 | |
Average AOCI | (1,800,690) | |
Average common stockholders' equity excluding average AOCI | 3,107,022 | |
Impact of notable items on average common stockholders' equity excluding average AOCI | 170,448 | |
Average common stockholders' equity excluding average AOCI and notables | $ | 3,277,470 | |
| |
Net income available to common stockholders | $ | 861,140 | |
Adjustments to arrive at non-GAAP operating loss available to common stockholders: (a) | |
Net realized gains/losses on financial assets, including credit losses | 30,942 | |
Change in fair value of derivatives and embedded derivatives - fixed index annuities | (1,183,160) | |
Income taxes | 248,221 | |
Non-GAAP operating loss available to common stockholders | (42,857) | |
Impact of notable items (b) | 340,895 | |
Non-GAAP operating income available to common stockholders, excluding notable items | $ | 298,038 | |
| |
Return on Average Common Stockholders' Equity | |
Net income available to common stockholders | 17.5 | % |
| |
Return on Average Common Stockholders' Equity Excluding Average AOCI | |
| |
Non-GAAP operating loss available to common stockholders | (1.4) | % |
Non-GAAP operating income available to common stockholders, excluding notable items | 9.1 | % |
Notable Items
| | | | | |
| Twelve Months Ended |
| June 30, 2021 |
Notable items impacting Non-GAAP operating loss available to common stockholders: | |
| |
Impact of actuarial assumption updates | $ | 340,895 | |
| |
Total notable items (b) | $ | 340,895 | |
(a)Adjustments to net income available to common stockholders to arrive at non-GAAP operating loss available to common stockholders are presented net of related adjustments to amortization of deferred sales inducements (DSI) and deferred policy acquisition costs (DAC) and accretion of lifetime income benefit rider (LIBR) reserves where applicable.
(b)Notable items reflect the after-tax impact to non-GAAP operating loss available to common stockholders for certain items that do not reflect the company's expected ongoing operations. Notable items include the impact from actuarial assumption updates, certain initial uncapitalized costs to establish the AEL 2.0 strategy, and initial non-deferred impacts related to reinsurance transactions. The presentation of notable items is intended to help investors better understand our results and to evaluate and forecast those results.
Document
Exhibit 99.2
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement
June 30, 2021
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A. | Financial Highlights | |
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| Non-GAAP Financial Measures | |
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B. | Product Summary | |
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C. | Investment Summary | |
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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2021
Unaudited (Dollars in thousands)
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
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| June 30, 2021 | | December 31, 2020 (a) |
Assets | | | |
Investments: | | | |
Fixed maturity securities, available for sale, at fair value | $ | 46,659,256 | | | $ | 47,538,893 | |
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Mortgage loans on real estate | 4,299,945 | | | 4,165,489 | |
Real estate | 258,237 | | | — | |
Derivative instruments | 1,459,965 | | | 1,310,954 | |
Other investments | 962,305 | | | 590,078 | |
Total investments | 53,639,708 | | | 53,605,414 | |
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Cash and cash equivalents | 11,524,265 | | | 9,095,522 | |
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Coinsurance deposits | 4,441,950 | | | 4,844,927 | |
Accrued investment income | 397,393 | | | 398,082 | |
Deferred policy acquisition costs | 2,310,931 | | | 2,225,199 | |
Deferred sales inducements | 1,466,217 | | | 1,448,375 | |
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Income taxes recoverable | 41,019 | | | 862 | |
Other assets | 60,816 | | | 70,198 | |
Total assets | $ | 73,882,299 | | | $ | 71,688,579 | |
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Liabilities and Stockholders' Equity | | | |
Liabilities: | | | |
Policy benefit reserves | $ | 64,555,597 | | | $ | 62,352,882 | |
Other policy funds and contract claims | 233,987 | | | 240,904 | |
Notes payable | 495,955 | | | 495,668 | |
Subordinated debentures | 78,264 | | | 78,112 | |
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Deferred income taxes | 483,631 | | | 504,000 | |
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Other liabilities | 1,739,130 | | | 1,668,025 | |
Total liabilities | 67,586,564 | | | 65,339,591 | |
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Stockholders' equity: | | | |
Preferred stock, Series A | 16 | | | 16 | |
Preferred stock, Series B | 12 | | | 12 | |
Common stock | 92,554 | | | 95,721 | |
Additional paid-in capital | 1,604,535 | | | 1,681,127 | |
Accumulated other comprehensive income | 2,023,911 | | | 2,203,557 | |
Retained earnings | 2,574,707 | | | 2,368,555 | |
Total stockholders' equity | 6,295,735 | | | 6,348,988 | |
Total liabilities and stockholders' equity | $ | 73,882,299 | | | $ | 71,688,579 | |
(a)The December 31, 2020 balance sheet includes reclassifications from previously reported amounts for the correction of an immaterial error in the calculation of the impact of unrealized gains and losses on lifetime income benefit reserves which was determined in the first quarter of 2021. This is reflected in deferred policy acquisition costs, deferred sales inducements, policy benefit reserves, deferred income taxes and accumulated other comprehensive income
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2021
Unaudited (Dollars in thousands, except per share data)
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
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| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Revenues: | | | | | | | |
Premiums and other considerations | $ | 14,595 | | | $ | 11,032 | | | $ | 27,808 | | | $ | 18,696 | |
Annuity product charges | 63,759 | | | 63,438 | | | 123,841 | | | 122,987 | |
Net investment income | 499,320 | | | 543,704 | | | 996,510 | | | 1,117,022 | |
Change in fair value of derivatives | 500,880 | | | 327,662 | | | 897,185 | | | (614,212) | |
Net realized losses on investments | (3,114) | | | (25,888) | | | (7,697) | | | (46,224) | |
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Loss on extinguishment of debt | — | | | — | | | — | | | (2,024) | |
Total revenues | 1,075,440 | | | 919,948 | | | 2,037,647 | | | 596,245 | |
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Benefits and expenses: | | | | | | | |
Insurance policy benefits and change in future policy benefits | 15,828 | | | 13,331 | | | 32,252 | | | 23,403 | |
Interest sensitive and index product benefits | 812,981 | | | 240,992 | | | 1,289,576 | | | 641,211 | |
Amortization of deferred sales inducements | (12,520) | | | (75,178) | | | 110,455 | | | (1,587) | |
Change in fair value of embedded derivatives | 273,713 | | | 1,126,935 | | | (8,700) | | | (123,126) | |
Interest expense on notes payable | 6,394 | | | 6,388 | | | 12,787 | | | 12,773 | |
Interest expense on subordinated debentures | 1,326 | | | 1,321 | | | 2,652 | | | 2,909 | |
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Amortization of deferred policy acquisition costs | (16,906) | | | (119,889) | | | 186,917 | | | 813 | |
Other operating costs and expenses | 65,050 | | | 41,951 | | | 120,915 | | | 85,577 | |
Total benefits and expenses | 1,145,866 | | | 1,235,851 | | | 1,746,854 | | | 641,973 | |
Income (loss) before income taxes | (70,426) | | | (315,903) | | | 290,793 | | | (45,728) | |
Income tax expense (benefit) | (15,732) | | | (68,474) | | | 62,803 | | | (41,246) | |
Net income (loss) | (54,694) | | | (247,429) | | | 227,990 | | | (4,482) | |
Less: Preferred stock dividends | 10,919 | | | 5,950 | | | 21,838 | | | 12,561 | |
Net income (loss) available to common stockholders | $ | (65,613) | | | $ | (253,379) | | | $ | 206,152 | | | $ | (17,043) | |
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Earnings (loss) per common share | $ | (0.69) | | | $ | (2.76) | | | $ | 2.16 | | | $ | (0.19) | |
Earnings (loss) per common share - assuming dilution | $ | (0.69) | | | $ | (2.76) | | | $ | 2.15 | | | $ | (0.19) | |
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Weighted average common shares outstanding (in thousands): | | | | | | | |
Earnings (loss) per common share | 94,801 | | | 91,803 | | | 95,265 | | | 91,724 | |
Earnings (loss) per common share - assuming dilution | 95,379 | | | 92,027 | | | 95,795 | | | 92,024 | |
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2021
Unaudited (Dollars in thousands, except per share data)
Quarterly Summary - Most Recent 5 Quarters
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| Q2 2021 | | Q1 2021 | | Q4 2020 | | Q3 2020 | | Q2 2020 |
Revenues: | | | | | | | | | |
Traditional life insurance premiums | $ | 708 | | | $ | 706 | | | $ | 701 | | | $ | 708 | | | $ | 722 | |
Life contingent immediate annuity considerations | 13,887 | | | 12,507 | | | 9,578 | | | 9,699 | | | 10,310 | |
Surrender charges | 18,057 | | | 19,481 | | | 17,009 | | | 16,447 | | | 19,390 | |
Lifetime income benefit rider fees | 45,702 | | | 40,601 | | | 48,954 | | | 45,830 | | | 44,048 | |
Net investment income | 499,320 | | | 497,190 | | | 521,725 | | | 543,331 | | | 543,704 | |
Change in fair value of derivatives | 500,880 | | | 396,305 | | | 443,867 | | | 205,011 | | | 327,662 | |
Net realized losses on investments | (3,114) | | | (4,583) | | | (12,135) | | | (22,321) | | | (25,888) | |
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Total revenues | 1,075,440 | | | 962,207 | | | 1,029,699 | | | 798,705 | | | 919,948 | |
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Benefits and expenses: | | | | | | | | | |
Traditional life insurance policy benefits and change in future policy benefits | 502 | | | 1,049 | | | 1,091 | | | 655 | | | 702 | |
Life contingent immediate annuity benefits and change in future policy benefits | 15,326 | | | 15,375 | | | 11,975 | | | 12,618 | | | 12,629 | |
Interest sensitive and index product benefits (a) | 812,981 | | | 476,595 | | | 325,912 | | | 576,147 | | | 240,992 | |
Amortization of deferred sales inducements (b)(d) | (12,520) | | | 122,975 | | | 22,768 | | | 416,983 | | | (75,178) | |
Change in fair value of embedded derivatives (c)(d) | 273,713 | | | (282,413) | | | 568,836 | | | (1,732,497) | | | 1,126,935 | |
Interest expense on notes payable | 6,394 | | | 6,393 | | | 6,391 | | | 6,388 | | | 6,388 | |
Interest expense on subordinated debentures | 1,326 | | | 1,326 | | | 1,325 | | | 1,323 | | | 1,321 | |
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Amortization of deferred policy acquisition costs (b)(d) | (16,906) | | | 203,823 | | | 26,145 | | | 622,596 | | | (119,889) | |
Other operating costs and expenses | 65,050 | | | 55,865 | | | 55,321 | | | 42,738 | | | 41,951 | |
Total benefits and expenses | 1,145,866 | | | 600,988 | | | 1,019,764 | | | (53,049) | | | 1,235,851 | |
Income (loss) before income taxes | (70,426) | | | 361,219 | | | 9,935 | | | 851,754 | | | (315,903) | |
Income tax expense (benefit) | (15,732) | | | 78,535 | | | 1,193 | | | 184,554 | | | (68,474) | |
Net income (loss) (a)(b)(c)(d) | (54,694) | | | 282,684 | | | 8,742 | | | 667,200 | | | (247,429) | |
Less: Preferred stock dividends | 10,919 | | | 10,919 | | | 15,004 | | | 5,950 | | | 5,950 | |
Net income (loss) available to common stockholders (a)(b)(c)(d) | $ | (65,613) | | | $ | 271,765 | | | $ | (6,262) | | | $ | 661,250 | | | $ | (253,379) | |
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Earnings (loss) per common share | $ | (0.69) | | | $ | 2.84 | | | $ | (0.07) | | | $ | 7.20 | | | $ | (2.76) | |
Earnings (loss) per common share - assuming dilution (a)(b)(c)(d) | $ | (0.69) | | | $ | 2.82 | | | $ | (0.07) | | | $ | 7.17 | | | $ | (2.76) | |
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Weighted average common shares outstanding (thousands): | | | | | | | | | |
Earnings (loss) per common share | 94,801 | | | 95,735 | | | 92,904 | | | 91,861 | | | 91,803 | |
Earnings (loss) per common share - assuming dilution | 95,379 | | | 96,216 | | | 93,352 | | | 92,163 | | | 92,027 | |
(a)Q3 2020 includes expense from the revision of assumptions used in determining reserves held for lifetime income benefit riders. The impact increased interest sensitive and index products by $285.8 million and decreased both net income and net income available to common stockholders by $224.4 million and decreased earnings per common share - assuming dilution by $2.44 per share.
(b)Q3 2020 includes expense from the revision of assumptions which increased amortization of deferred sales inducements and deferred policy acquisition costs by $391.4 million and $589.2 million, respectively, and decreased both net income and net income available to common stockholders by $769.8 million and decreased earnings per common share - assuming dilution by $8.35 per share.
(c)Q3 2020 includes a benefit from the revision of assumptions used in determining the embedded derivative component of our fixed index annuity policy benefit reserves. The impact decreased change in fair value of embedded derivatives by $2,111.1 million and increased both net income and net income available to common stockholders by $1,657.2 million and increased earnings per common share - assuming dilution by $17.98 per share.
(d)Q2 2020 includes a benefit from the revision of assumptions used in determining the embedded derivative component of our fixed index annuity policy benefit reserves. The impact decreased change in fair value of embedded derivatives by $230.1 million, increased amortization of deferred sales inducements and deferred policy acquisition costs by $36.7 million and $57.6 million, respectively, and decreased both net loss and net loss available to common stockholders by $106.5 million and reduced loss per common share - assuming dilution by $1.16 per share.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2021
Unaudited (Dollars in thousands, except per share data)
NON-GAAP FINANCIAL MEASURES
In addition to net income (loss) available to common stockholders, we have consistently utilized non-GAAP operating income available to common stockholders and non-GAAP operating income available to common stockholders per common share - assuming dilution, non-GAAP financial measures commonly used in the life insurance industry, as economic measures to evaluate our financial performance. Non-GAAP operating income available to common stockholders equals net income (loss) available to common stockholders adjusted to eliminate the impact of items that fluctuate from quarter to quarter in a manner unrelated to core operations, and we believe measures excluding their impact are useful in analyzing operating trends. The most significant adjustments to arrive at non-GAAP operating income available to common stockholders eliminate the impact of fair value accounting for our fixed index annuity business. These adjustments are not economic in nature but rather impact the timing of reported results. We believe the combined presentation and evaluation of non-GAAP operating income available to common stockholders together with net income (loss) available to common stockholders provides information that may enhance an investor’s understanding of our underlying results and profitability.
Reconciliation from Net Income (Loss) Available to Common Stockholders to Non-GAAP Operating Income Available to Common Stockholders and Non-GAAP Operating Income Available to Common Stockholders, Excluding Notable Items
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| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Net income (loss) available to common stockholders | $ | (65,613) | | | $ | (253,379) | | | $ | 206,152 | | | $ | (17,043) | |
Adjustments to arrive at non-GAAP operating income available to common stockholders: (a) | | | | | | | |
Net realized gains/losses on financial assets, including credit losses | 2,912 | | | 18,492 | | | 6,428 | | | 34,841 | |
Change in fair value of derivatives and embedded derivatives - fixed index annuities | 200,767 | | | 423,590 | | | (96,867) | | | 303,136 | |
Change in fair value of derivatives - interest rate caps and swap | — | | | — | | | — | | | (848) | |
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Income taxes | (44,278) | | | (95,599) | | | 19,516 | | | (72,897) | |
Non-GAAP operating income available to common stockholders | 93,788 | | | 93,104 | | | 135,229 | | | 247,189 | |
Impact of notable items (b) | — | | | — | | | — | | | (30,778) | |
Non-GAAP operating income available to common stockholders, excluding notable items | $ | 93,788 | | | $ | 93,104 | | | $ | 135,229 | | | $ | 216,411 | |
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Per common share - assuming dilution: | | | | | | | |
Net income (loss) available to common stockholders | $ | (0.69) | | | $ | (2.76) | | | $ | 2.15 | | | $ | (0.19) | |
Adjustments to arrive at non-GAAP operating income available to common stockholders: | | | | | | | |
Anti-dilutive effect of net loss | — | | | 0.01 | | | — | | | — | |
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Net realized gains/losses on financial assets, including credit losses | 0.03 | | | 0.20 | | | 0.07 | | | 0.38 | |
Change in fair value of derivatives and embedded derivatives - fixed index annuities | 2.10 | | | 4.60 | | | (1.01) | | | 3.30 | |
Change in fair value of derivatives - interest rate caps and swap | — | | | — | | | — | | | (0.01) | |
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Income taxes | (0.46) | | | (1.04) | | | 0.20 | | | (0.79) | |
Non-GAAP operating income available to common stockholders | 0.98 | | | 1.01 | | | 1.41 | | | 2.69 | |
Impact of notable items | — | | | — | | | — | | | (0.33) | |
Non-GAAP operating income available to common stockholders, excluding notable items | $ | 0.98 | | | $ | 1.01 | | | $ | 1.41 | | | $ | 2.36 | |
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2021
Unaudited (Dollars in thousands, except per share data)
Notable Items
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| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Notable items impacting non-GAAP operating income available to common stockholders: | | | | | | | |
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Tax benefit related to the CARES Act | $ | — | | | $ | — | | | $ | — | | | $ | (30,778) | |
Total notable items (b) | $ | — | | | $ | — | | | $ | — | | | $ | (30,778) | |
(a)Adjustments to net income (loss) available to common stockholders to arrive at non-GAAP operating income available to common stockholders are presented net of related adjustments to amortization of deferred sales inducements (DSI) and deferred policy acquisition costs (DAC) and accretion of lifetime income benefit rider (LIBR) reserves where applicable.
(b)Notable items reflect the after-tax impact to non-GAAP operating income available to common stockholders for certain items that do not reflect the company's expected ongoing operations. Notable items include the impact from actuarial assumption updates, certain initial uncapitalized costs to establish the AEL 2.0 strategy, and initial non-deferred impacts related to reinsurance transactions. The presentation of notable items is intended to help investors better understand our results and to evaluate and forecast those results.
NON-GAAP FINANCIAL MEASURES
Summary of Adjustments to Arrive at Non-GAAP Operating Income Available to Common Stockholders
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| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Net realized gains/losses on financial assets, including credit losses: | | | | | | | |
Net realized gains/losses on financial assets, including credit losses | $ | 2,862 | | | $ | 25,276 | | | $ | 7,589 | | | $ | 46,933 | |
Amortization of DAC and DSI and accretion of LIBR reserves | 50 | | | (6,784) | | | (1,161) | | | (12,092) | |
Income taxes | (626) | | | (3,995) | | | (1,382) | | | (7,526) | |
| $ | 2,286 | | | $ | 14,497 | | | $ | 5,046 | | | $ | 27,315 | |
Change in fair value of derivatives and embedded derivatives: | | | | | | | |
Fixed index annuities | $ | 331,268 | | | $ | 713,446 | | | $ | (162,531) | | | $ | 503,555 | |
Interest rate caps and swap | — | | | — | | | — | | | (848) | |
Amortization of DAC and DSI | (130,501) | | | (289,856) | | | 65,664 | | | (200,419) | |
Income taxes | (43,652) | | | (91,604) | | | 20,898 | | | (65,371) | |
| $ | 157,115 | | | $ | 331,986 | | | $ | (75,969) | | | $ | 236,917 | |
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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2021
Unaudited (Dollars in thousands, except per share data)
NON-GAAP FINANCIAL MEASURES
Quarterly Summary - Most Recent 5 Quarters
Reconciliation from Net Income (Loss) Available to Common Stockholders to Non-GAAP Operating Income (Loss) Available to Common Stockholders and Non-GAAP Operating Income Available to Common Stockholders, Excluding Notable Items
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| Q2 2021 | | Q1 2021 | | Q4 2020 | | Q3 2020 | | Q2 2020 |
Net income (loss) available to common stockholders | $ | (65,613) | | | $ | 271,765 | | | $ | (6,262) | | | $ | 661,250 | | | $ | (253,379) | |
Adjustments to arrive at non-GAAP operating income (loss) available to common stockholders: (a) | | | | | | | | | |
Net realized gains/losses on financial assets, including credit losses | 2,912 | | | 3,516 | | | 9,369 | | | 15,145 | | | 18,492 | |
Change in fair value of derivatives and embedded derivatives - fixed index annuities | 200,767 | | | (297,634) | | | 90,616 | | | (1,176,909) | | | 423,590 | |
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Income taxes | (44,278) | | | 63,794 | | | (21,996) | | | 250,701 | | | (95,599) | |
Non-GAAP operating income (loss) available to common stockholders (b)(c) | 93,788 | | | 41,441 | | | 71,727 | | | (249,813) | | | 93,104 | |
Impact of notable items (d) | — | | | — | | | — | | | 340,895 | | | — | |
Non-GAAP operating income available to common stockholders, excluding notable items | $ | 93,788 | | | $ | 41,441 | | | $ | 71,727 | | | $ | 91,082 | | | $ | 93,104 | |
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Per common share - assuming dilution: | | | | | | | | | |
Net income (loss) available to common stockholders | $ | (0.69) | | | $ | 2.82 | | | $ | (0.07) | | | $ | 7.17 | | | $ | (2.76) | |
Adjustments to arrive at non-GAAP operating income (loss) available to common stockholders: | | | | | | | | | |
Anti-dilutive effect of net loss | — | | | — | | | — | | | — | | | 0.01 | |
Anti-dilutive effect of operating loss | — | | | — | | | — | | | 0.01 | | | — | |
Net realized gains/losses on financial assets, including credit losses | 0.03 | | | 0.04 | | | 0.10 | | | 0.16 | | | 0.20 | |
Change in fair value of derivatives and embedded derivatives - fixed index annuities | 2.10 | | | (3.09) | | | 0.97 | | | (12.77) | | | 4.60 | |
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Income taxes | (0.46) | | | 0.66 | | | (0.23) | | | 2.71 | | | (1.04) | |
Non-GAAP operating income (loss) available to common stockholders (b)(c) | 0.98 | | | 0.43 | | | 0.77 | | | (2.72) | | | 1.01 | |
Impact of notable items | — | | | — | | | — | | | 3.70 | | | — | |
Non-GAAP operating income available to common stockholders, excluding notable items | $ | 0.98 | | | $ | 0.43 | | | $ | 0.77 | | | $ | 0.98 | | | $ | 1.01 | |
Notable Items
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| Q2 2021 | | Q1 2021 | | Q4 2020 | | Q3 2020 | | Q2 2020 |
Notable items impacting non-GAAP operating income (loss) available to common stockholders: | | | | | | | | | |
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Impact of actuarial assumption updates (c)(d) | $ | — | | | $ | — | | | $ | — | | | $ | 340,895 | | | $ | — | |
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Total notable items (b) | $ | — | | | $ | — | | | $ | — | | | $ | 340,895 | | | $ | — | |
(a)Adjustments to net income (loss) available to common stockholders to arrive at non-GAAP operating income (loss) available to common stockholders are presented net of related adjustments to amortization of deferred sales inducements (DSI) and deferred policy acquisition costs (DAC) and accretion of lifetime income benefit rider (LIBR) reserves where applicable.
(b)Q3 2020 includes expense from the revision of assumptions used in determining reserves held for lifetime income benefit riders. The impact increased interest sensitive and index products by $285.8 million and increased non-GAAP operating loss available to common stockholders and non-GAAP operating loss available to common stockholders per common share - assuming dilution by $224.4 million and $2.44 per share, respectively.
(c)Q3 2020 includes expense from the revision of assumptions which increased amortization of deferred sales inducements and deferred policy acquisition costs by $57.5 million and $91.0 million, respectively, and increased non-GAAP operating loss available to common stockholders and non-GAAP operating loss available to common stockholders per common share - assuming dilution by $116.5 million and $1.26 per share, respectively.
(d)Notable items reflect the after-tax impact to non-GAAP operating income available to common stockholders for certain items that do not reflect the company's expected ongoing operations. Notable items include the impact from actuarial assumption updates, certain initial uncapitalized costs to establish the AEL 2.0 strategy, and initial non-deferred impacts related to reinsurance transactions. The presentation of notable items is intended to help investors better understand our results and to evaluate and forecast those results.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2021
Unaudited (Dollars in thousands)
NON-GAAP FINANCIAL MEASURES
Summary of Adjustments to Arrive at Non-GAAP Operating Income (Loss) Available to Common Stockholders
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Q2 2021 | | Q1 2021 | | Q4 2020 | | Q3 2020 | | Q2 2020 |
Net realized losses on investments | $ | 3,114 | | | $ | 4,583 | | | $ | 12,135 | | | $ | 22,321 | | | $ | 25,888 | |
| | | | | | | | | |
Change in fair value of derivatives | 57,555 | | | (211,387) | | | (416,450) | | | (203,088) | | | (413,489) | |
| | | | | | | | | |
Increase (decrease) in total revenues | 60,669 | | | (206,804) | | | (404,315) | | | (180,767) | | | (387,601) | |
| | | | | | | | | |
Amortization of deferred sales inducements | 52,074 | | | (69,788) | | | 22,785 | | | (303,710) | | | 115,511 | |
Change in fair value of embedded derivatives | (273,713) | | | 282,413 | | | (568,836) | | | 1,732,497 | | | (1,126,935) | |
| | | | | | | | | |
Interest sensitive and index product benefits (a) | 227 | | | (145) | | | 761 | | | 1,298 | | | 612 | |
Amortization of deferred policy acquisition costs | 78,402 | | | (125,166) | | | 40,990 | | | (449,088) | | | 181,129 | |
| | | | | | | | | |
Increase (decrease) in total benefits and expenses | (143,010) | | | 87,314 | | | (504,300) | | | 980,997 | | | (829,683) | |
Increase in income (loss) before income taxes | 203,679 | | | (294,118) | | | 99,985 | | | (1,161,764) | | | 442,082 | |
Increase (decrease) in income tax expense (benefit) | 44,278 | | | (63,794) | | | 21,996 | | | (250,701) | | | 95,599 | |
Increase (decrease) in net income (loss) available to common stockholders | $ | 159,401 | | | $ | (230,324) | | | $ | 77,989 | | | $ | (911,063) | | | $ | 346,483 | |
(a)Interest sensitive and index product benefits adjustment reflects the change in the allowance for credit losses on our reinsurance recoverable/coinsurance deposits under a revised impairment model for financial assets measured at amortized cost which we were required to adopt on January 1, 2020. The change in this allowance is reflected in the net realized gains/losses of financial assets, including credit losses line in the other Non-GAAP financial measures tables in this financial supplement.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2021
Unaudited (Dollars in thousands, except share and per share data)
Capitalization/Book Value per Common Share
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Q2 2021 | | Q1 2021 | | Q4 2020 | | Q3 2020 | | Q2 2020 |
Capitalization: | | | | | | | | | |
Notes payable | $ | 500,000 | | | $ | 500,000 | | | $ | 500,000 | | | $ | 500,000 | | | $ | 500,000 | |
Subordinated debentures payable to subsidiary trusts | 78,264 | | | 78,187 | | | 78,112 | | | 78,037 | | | 77,964 | |
Total debt | 578,264 | | | 578,187 | | | 578,112 | | | 578,037 | | | 577,964 | |
Total stockholders’ equity (a) | 6,295,735 | | | 5,928,760 | | | 6,348,988 | | | 5,918,216 | | | 4,919,689 | |
Total capitalization (a) | 6,873,999 | | | 6,506,947 | | | 6,927,100 | | | 6,496,253 | | | 5,497,653 | |
Accumulated other comprehensive income (AOCI) (a) | (2,023,911) | | | (1,505,260) | | | (2,203,557) | | | (1,911,593) | | | (1,577,469) | |
Total capitalization excluding AOCI (b) | $ | 4,850,088 | | | $ | 5,001,687 | | | $ | 4,723,543 | | | $ | 4,584,660 | | | $ | 3,920,184 | |
| | | | | | | | | |
Total stockholders’ equity (a) | $ | 6,295,735 | | | $ | 5,928,760 | | | $ | 6,348,988 | | | $ | 5,918,216 | | | $ | 4,919,689 | |
Equity available to preferred stockholders (c) | (700,000) | | | (700,000) | | | (700,000) | | | (700,000) | | | (700,000) | |
Total common stockholders' equity (a)(d) | 5,595,735 | | | 5,228,760 | | | 5,648,988 | | | 5,218,216 | | | 4,219,689 | |
Accumulated other comprehensive income (a) | (2,023,911) | | | (1,505,260) | | | (2,203,557) | | | (1,911,593) | | | (1,577,469) | |
Total common stockholders’ equity excluding AOCI (d) | 3,571,824 | | | 3,723,500 | | | 3,445,431 | | | 3,306,623 | | | 2,642,220 | |
Net impact of fair value accounting for derivatives and embedded derivatives | (242,423) | | | (399,538) | | | (166,453) | | | (237,099) | | | 685,839 | |
Total common stockholders’ equity excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives (d) | $ | 3,329,401 | | | $ | 3,323,962 | | | $ | 3,278,978 | | | $ | 3,069,524 | | | $ | 3,328,059 | |
| | | | | | | | | |
Common shares outstanding | 92,553,825 | | | 95,482,733 | | | 95,720,622 | | | 91,931,837 | | | 91,595,066 | |
| | | | | | | | | |
Book Value per Common Share: (e) | | | | | | | | | |
Book value per common share (a) | $ | 60.46 | | | $ | 54.76 | | | $ | 59.02 | | | $ | 56.76 | | | $ | 46.07 | |
Book value per common share excluding AOCI (d) | $ | 38.59 | | | $ | 39.00 | | | $ | 35.99 | | | $ | 35.97 | | | $ | 28.85 | |
Book value per common share excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives (d) | $ | 35.97 | | | $ | 34.81 | | | $ | 34.26 | | | $ | 33.39 | | | $ | 36.33 | |
| | | | | | | | | |
Debt-to-Capital Ratios: (f) | | | | | | | | | |
Senior debt / Total capitalization | 10.3 | % | | 10.0 | % | | 10.6 | % | | 10.9 | % | | 12.8 | % |
Total debt / Total capitalization | 11.9 | % | | 11.6 | % | | 12.2 | % | | 12.6 | % | | 14.7 | % |
| | | | | | | | | |
| | | | | | | | | |
(a)Q2 2020 through Q4 2020 include the impact of a correction of an immaterial error in the calculation of the impact of unrealized gains and losses on lifetime income benefit reserves which was determined in Q1 2021. This had the impact of reducing AOCI as of December 31, 2020 by $225.7 million and decreased book value per common share by $2.35 compared to amounts previously reported.
(b)Total capitalization excluding AOCI, a non-GAAP financial measure, is based on stockholders' equity excluding the effect of AOCI.
(c)Equity available to preferred stockholders is equal to the redemption value of outstanding preferred stock plus share dividends declared but not yet issued.
(d)Total common stockholders' equity, total common stockholders' equity excluding AOCI and total common stockholders' equity excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives, non-GAAP financial measures, exclude equity available to preferred stockholders. Total common stockholders’ equity and book value per common share excluding AOCI, non-GAAP financial measures, are based on common stockholders’ equity excluding the effect of AOCI. Since AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale securities, we believe these non-GAAP financial measures provide useful supplemental information. Total common stockholders' equity and book value per common share excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives, non-GAAP financial measures, are based on common stockholders' equity excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives. Since the net impact of fair value accounting for our derivatives and embedded derivatives fluctuates from quarter to quarter and the most significant impacts relate to fair value accounting for our fixed index annuity business and are not economic in nature but rather impact the timing of reported results, we believe these non-GAAP financial measures provide useful supplemental information.
(e)Book value per common share including and excluding AOCI and book value per common share excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives are calculated as total common stockholders’ equity, total common stockholders’ equity excluding AOCI and total common stockholders' equity excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives divided by the total number of shares of common stock outstanding.
(f)Debt-to-capital ratios are computed using total capitalization excluding AOCI.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2021
Unaudited (Dollars in thousands)
Spread Results
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Six Months Ended June 30, | | | | | | | | | | |
2021 | | 2020 | | Q2 2021 | | Q1 2021 | | Q4 2020 | | Q3 2020 | | Q2 2020 |
3.54% | | 4.24% | Average yield on invested assets | 3.51% | | 3.58% | | 3.88% | | 4.10% | | 4.12% |
1.57% | | 1.73% | Aggregate cost of money | 1.56% | | 1.58% | | 1.63% | | 1.66% | | 1.73% |
1.97% | | 2.51% | Aggregate investment spread | 1.95% | | 2.00% | | 2.25% | | 2.44% | | 2.39% |
| | | | | | | | | | | | |
| | | Impact of: | | | | | | | | | |
0.11% | | 0.04% | Investment yield - additional prepayment income | 0.10% | | 0.11% | | 0.11% | | 0.10% | | 0.03% |
0.03% | | 0.02% | Cost of money effect of over (under) hedging | 0.04% | | 0.02% | | 0.01% | | 0.03% | | (0.01)% |
| | | | | | | | | | | | |
$56,352,021 | | $52,762,227 | Weighted average investments | $56,991,393 | | $55,712,648 | | $53,836,378 | | $53,024,798 | | $52,901,215 |
57,144,563 | | 52,963,914 | Ending investments | 57,144,563 | | 56,838,224 | | 54,587,072 | | 53,085,683 | | 52,963,914 |
Weighted average investments include fixed maturity securities at amortized cost and mortgage loans on real estate and other investments at carrying values as reflected in the consolidated balance sheets. The numerator for average yield on invested assets includes net investment income and the tax effect of investment income that is exempt from income taxes.
Summary of Cost of Money for Deferred Annuities
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Six Months Ended June 30, | | | | | | | | | | |
2021 | | 2020 | | Q2 2021 | | Q1 2021 | | Q4 2020 | | Q3 2020 | | Q2 2020 |
| | | Included in interest sensitive and index product benefits: | | | | | | | | | |
$ | 1,060,028 | | | $ | 376,815 | | Index credits | $ | 714,291 | | | $ | 345,737 | | | $ | 195,927 | | | $ | 174,747 | | | $ | 97,875 | |
119,114 | | | 95,541 | | Interest credited | 62,637 | | | 56,477 | | | 49,551 | | | 47,376 | | | 46,594 | |
| | | Included in change in fair value of derivatives: | | | | | | | | | |
(1,069,593) | | | (382,278) | | Proceeds received at option expiration | (720,474) | | | (349,119) | | | (197,921) | | | (178,405) | | | (97,015) | |
326,354 | | | 369,871 | | Pro rata amortization of option cost | 162,124 | | | 164,230 | | | 170,505 | | | 176,481 | | | 182,841 | |
$ | 435,903 | | | $ | 459,949 | | Cost of money for deferred annuities | $ | 218,578 | | | $ | 217,325 | | | $ | 218,062 | | | $ | 220,199 | | | $ | 230,295 | |
| | | | | | | | | | | | |
$ | 55,578,458 | | | $ | 53,244,580 | | Weighted average liability balance outstanding | $ | 56,221,809 | | | $ | 54,935,106 | | | $ | 53,531,441 | | | $ | 53,059,376 | | | $ | 53,214,255 | |
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2020
Unaudited (Dollars in thousands, except per share data)
Annuity Account Balance Rollforward
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Six Months Ended June 30, | | | | | | | | | | |
2021 | | 2020 | | Q2 2021 | | Q1 2021 | | Q4 2020 | | Q3 2020 | | Q2 2020 |
$ | 54,056,725 | | | $ | 53,233,898 | | Account balances at beginning of period | $ | 55,813,480 | | | $ | 54,056,725 | | | $ | 53,006,150 | | | $ | 53,112,600 | | | $ | 53,315,909 | |
3,578,854 | | | 1,224,778 | | Net deposits | 1,161,125 | | | 2,417,729 | | | 1,830,816 | | | 557,675 | | | 543,026 | |
49,663 | | | 47,262 | | Premium bonuses | 24,813 | | | 24,850 | | | 25,143 | | | 21,205 | | | 22,710 | |
1,179,142 | | | 472,356 | | Fixed interest credited and index credits | 776,928 | | | 402,214 | | | 245,478 | | | 222,123 | | | 144,469 | |
(37,538) | | | (39,095) | | Surrender charges | (18,057) | | | (19,481) | | | (17,009) | | | (16,447) | | | (19,390) | |
(86,303) | | | (83,892) | | Lifetime income benefit rider fees | (45,702) | | | (40,601) | | | (48,954) | | | (45,830) | | | (44,048) | |
(2,110,405) | | | (1,742,707) | | Surrenders, withdrawals, deaths, etc. | (1,082,449) | | | (1,027,956) | | | (984,899) | | | (845,176) | | | (850,076) | |
$ | 56,630,138 | | | $ | 53,112,600 | | Account balances at end of period | $ | 56,630,138 | | | $ | 55,813,480 | | | $ | 54,056,725 | | | $ | 53,006,150 | | | $ | 53,112,600 | |
| | | | | | | | | | | | |
$ | 2,007,394 | | | $ | 1,467,811 | | Lifetime income benefit rider reserves, excluding unrealized gain/loss adjustment | $ | 2,007,394 | | | $ | 1,973,223 | | | $ | 1,900,487 | | | $ | 1,821,169 | | | $ | 1,467,811 | |
Annuity Deposits by Product Type
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Six Months Ended June 30, | | | | | | | | | | |
2021 | | 2020 | | Q2 2021 | | Q1 2021 | | Q4 2020 | | Q3 2020 | | Q2 2020 |
| | | American Equity Life: | | | | | | | | | |
$ | 1,219,600 | | | $ | 1,058,962 | | Fixed index annuities | $ | 702,605 | | | $ | 516,995 | | | $ | 500,495 | | | $ | 432,602 | | | $ | 472,899 | |
3,823 | | | 4,647 | | Annual reset fixed rate annuities | 1,656 | | | 2,167 | | | 1,664 | | | 1,817 | | | 2,316 | |
834,866 | | | 452 | | Multi-year fixed rate annuities | 47,674 | | | 787,192 | | | 394,999 | | | 531 | | | 83 | |
29,389 | | | 15,482 | | Single premium immediate annuities | 15,430 | | | 13,959 | | | 7,774 | | | 10,205 | | | 10,084 | |
2,087,678 | | | 1,079,543 | | | 767,365 | | | 1,320,313 | | | 904,932 | | | 445,155 | | | 485,382 | |
| | | Eagle Life: | | | | | | | | | |
333,356 | | | 178,873 | | Fixed index annuities | 184,520 | | | 148,836 | | | 106,170 | | | 60,476 | | | 72,371 | |
337 | | | 58 | | Annual reset fixed rate annuities | 175 | | | 162 | | | — | | | 39 | | | 17 | |
1,193,622 | | | 5,180 | | Multi-year fixed rate annuities | 228,197 | | | 965,425 | | | 833,765 | | | 68,206 | | | 1,031 | |
1,527,315 | | | 184,111 | | | 412,892 | | | 1,114,423 | | | 939,935 | | | 128,721 | | | 73,419 | |
| | | Consolidated: | | | | | | | | | |
1,552,956 | | | 1,237,835 | | Fixed index annuities | 887,125 | | | 665,831 | | | 606,665 | | | 493,078 | | | 545,270 | |
4,160 | | | 4,705 | | Annual reset fixed rate annuities | 1,831 | | | 2,329 | | | 1,664 | | | 1,856 | | | 2,333 | |
2,028,488 | | | 5,632 | | Multi-year fixed rate annuities | 275,871 | | | 1,752,617 | | | 1,228,764 | | | 68,737 | | | 1,114 | |
29,389 | | | 15,482 | | Single premium immediate annuities | 15,430 | | | 13,959 | | | 7,774 | | | 10,205 | | | 10,084 | |
3,614,993 | | | 1,263,654 | | Total before coinsurance ceded | 1,180,257 | | | 2,434,736 | | | 1,844,867 | | | 573,876 | | | 558,801 | |
6,750 | | | 23,394 | | Coinsurance ceded | 3,702 | | | 3,048 | | | 6,277 | | | 5,996 | | | 5,691 | |
$ | 3,608,243 | | | $ | 1,240,260 | | Net after coinsurance ceded | $ | 1,176,555 | | | $ | 2,431,688 | | | $ | 1,838,590 | | | $ | 567,880 | | | $ | 553,110 | |
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2020
Unaudited (Dollars in thousands, except per share data)
Surrender Charge Protection and Account Values by Product Type
Annuity Surrender Charges and Net (of Coinsurance) Account Values at June 30, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Surrender Charge | | Net Account Value |
Product Type | | Avg. Years At Issue | | Avg. Years Remaining | | Avg. % Remaining | | Dollars in Thousands | | % |
Fixed Index Annuities | | 12.6 | | 6.0 | | 9.6% | | $ | 51,385,857 | | | 90.7 | % |
Annual Reset Fixed Rate Annuities | | 8.8 | | 2.5 | | 4.8% | | 1,404,922 | | | 2.5 | % |
Multi-Year Fixed Rate Annuities | | 3.9 | | 2.9 | | 8.4% | | 3,839,359 | | | 6.8 | % |
Total | | 12.0 | | 5.7 | | 9.4% | | $ | 56,630,138 | | | 100.0 | % |
Annuity Liability Characteristics | | | | | | | | | | | |
Surrender Charge Percentages: | Fixed Annuities Account Value | | Fixed Index Annuities Account Value |
No surrender charge | $ | 868,177 | | | $ | 3,247,984 | |
0.0% < 2.0% | 23,222 | | | 762,507 | |
2.0% < 3.0% | 60,396 | | | 2,973,108 | |
3.0% < 4.0% | 87,053 | | | 2,297,534 | |
4.0% < 5.0% | 105,067 | | | 2,414,801 | |
5.0% < 6.0% | 90,957 | | | 2,779,431 | |
6.0% < 7.0% | 51,880 | | | 2,841,897 | |
7.0% < 8.0% | 57,271 | | | 3,745,345 | |
8.0% < 9.0% | 61,158 | | | 3,596,109 | |
9.0% < 10.0% | 3,418,114 | | | 3,471,007 | |
10.0% or greater | 420,986 | | | 23,256,134 | |
| $ | 5,244,281 | | | $ | 51,385,857 | |
| | | | | | | | | | | |
Surrender Charge Expiration By Year: | Fixed and Fixed Index Annuities Account Value | | Weighted Average Surrender Charge |
Out of Surrender Charge | $ | 4,116,161 | | | 0.00 | % |
2021 | 617,148 | | | 2.77 | % |
2022 | 1,584,961 | | | 3.04 | % |
2023 | 4,879,266 | | | 4.97 | % |
2024 | 6,234,060 | | | 6.06 | % |
2025 | 6,190,943 | | | 6.72 | % |
2026 | 5,905,338 | | | 8.53 | % |
2027 | 4,368,969 | | | 10.23 | % |
2028 | 4,672,067 | | | 11.27 | % |
2029 | 5,917,422 | | | 12.67 | % |
2030 | 3,934,688 | | | 14.62 | % |
2031 | 3,836,507 | | | 15.95 | % |
2032 | 1,965,637 | | | 17.69 | % |
2033 | 1,136,036 | | | 18.22 | % |
2034 | 716,311 | | | 18.68 | % |
2035 | 339,938 | | | 19.18 | % |
2036 | 155,185 | | | 19.74 | % |
2037 | 59,501 | | | 20.00 | % |
| $ | 56,630,138 | | | 9.38 | % |
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2021
Unaudited (Dollars in thousands)
Annuity Liability Characteristics
| | | | | | | | | | | |
Credited Rate vs. Ultimate Minimum Guaranteed Rate Differential: | Fixed Annuities Account Value | | Fixed Index Annuities Account Value |
No differential | $ | 978,718 | | | $ | 1,174,031 | |
› 0.00% - 0.25% | 45,864 | | | 135,475 | |
› 0.25% - 0.50% | 229,188 | | | 6,647 | |
› 0.50% - 1.00% | 9,153 | | | 1,095 | |
› 1.00% - 1.50% | 10,998 | | | — | |
| | | |
| | | |
| | | |
| | | |
1.00% ultimate guarantee - 2.13% wtd avg interest rate (a) | 3,716,931 | | | 1,102,168 | |
1.50% ultimate guarantee - 1.08% wtd avg interest rate (a) | 135,477 | | | 3,052,600 | |
1.75% ultimate guarantee - 1.72% wtd avg interest rate (a) | 48,616 | | | 507,653 | |
2.00% ultimate guarantee - 1.85% wtd avg interest rate (a) | 69,336 | | | — | |
2.25% ultimate guarantee - 1.64% wtd avg interest rate (a) | — | | | 641,376 | |
3.00% ultimate guarantee - 1.95% wtd avg interest rate (a) | — | | | 1,303,391 | |
Allocated to index strategies (see tables that follow) | — | | | 43,461,421 | |
| $ | 5,244,281 | | | $ | 51,385,857 | |
(a)The minimum guaranteed interest rate for the fixed rate or the fixed rate strategy ranges from 0.5% - 1.75%. The ultimate guaranteed rate is applied on less than 100% of the premium.
If all crediting rates were reduced to minimum guaranteed rates (subject to limitations imposed by ultimate minimum guaranteed rates where applicable) the weighted average crediting rate as of June 30, 2021 for fixed annuities and funds allocated to the fixed rate strategy for fixed index annuities would decrease by 0.12%.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2021
Unaudited (Dollars in thousands)
Annuity Liability Characteristics
FIXED INDEX ANNUITIES ACCOUNT VALUE - INDEX STRATEGIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Annual Monthly Average and Point-to-Point with Caps |
| Minimum Guaranteed Cap |
| 1% | | 3% | | 4% | | 7% | | 8% + |
Current Cap | | | | | | | | | |
At minimum | $ | 1,273 | | | $ | 100,565 | | | $ | 4,932,913 | | | $ | 58,112 | | | $ | 130,834 | |
1.75% - 3% | 8,951,323 | | | — | | | — | | | — | | | — | |
3% - 4% | 338,626 | | | 2,058 | | | — | | | — | | | — | |
4% - 5% | 1,760,633 | | | 208,598 | | | 1,009,494 | | | — | | | — | |
5% - 6% | 693,286 | | | 185,423 | | | 28,041 | | | — | | | — | |
6% - 7% | 1,116 | | | — | | | 741 | | | — | | | — | |
>= 7% | 9,550 | | | 8,660 | | | 615 | | | 4,769 | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Annual Monthly Average and Point-to-Point with Participation Rates |
| Minimum Guaranteed Participation Rate |
| 10% | | | | 20% - 25% | | 35% | | 50% + |
Current Participation Rate | | | | | | | | | |
At minimum | $ | 252,030 | | | | | $ | 457,082 | | | $ | 83,979 | | | $ | 88,543 | |
< 20% | 1,599,918 | | | | | — | | | — | | | — | |
20% - 40% | 3,872,612 | | | | | 252,766 | | | 5,965 | | | — | |
40% - 60% | 1,293,438 | | | | | 28,723 | | | 44,382 | | | — | |
60% - 100% | 1,006,567 | | | | | — | | | — | | | — | |
> 100% | 754,602 | | | | | — | | | — | | | — | |
| | | | | |
S&P 500 Monthly Point-to-Point - Minimum Guaranteed Monthly Cap = 1.0% |
Current Cap | |
At minimum | $ | 1,918,300 | |
1.10% - 1.30% | 6,179,584 | |
1.40% - 1.60% | 2,006,652 | |
1.70% - 2.00% | 299,836 | |
>= 2.10% | 12,790 | |
| | | | | |
Volatility Control Index | |
Current Asset Fee | |
At Maximum | $ | — | |
0.75% - 1.75% | 360,092 | |
2.00% - 2.75% | 177,105 | |
3.00% - 3.50% | 1,063,320 | |
3.75% - 5.25% | 3,164,913 | |
If all caps and participation rates were reduced to minimum caps and participation rates and current asset fees were increased to their maximums, the cost of options would decrease by 0.72% based upon prices of options for the week ended July 2, 2021.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2021
Unaudited (Dollars in thousands)
Summary of Invested Assets
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
| Carrying Amount | | Percent | | Carrying Amount | | Percent |
Fixed maturity securities: | | | | | | | |
United States Government full faith and credit | $ | 38,879 | | | 0.1 | % | | $ | 39,771 | | | 0.1 | % |
United States Government sponsored agencies | 1,046,186 | | | 2.0 | % | | 1,039,551 | | | 1.9 | % |
United States municipalities, states and territories | 3,700,225 | | | 6.9 | % | | 3,776,131 | | | 7.0 | % |
Foreign government obligations | 197,330 | | | 0.4 | % | | 202,706 | | | 0.4 | % |
Corporate securities | 31,455,817 | | | 58.6 | % | | 31,156,827 | | | 58.1 | % |
Residential mortgage backed securities | 1,192,423 | | | 2.2 | % | | 1,512,831 | | | 2.8 | % |
Commercial mortgage backed securities | 4,175,517 | | | 7.8 | % | | 4,261,227 | | | 8.0 | % |
Other asset backed securities | 4,852,879 | | | 9.0 | % | | 5,549,849 | | | 10.4 | % |
Total fixed maturity securities | 46,659,256 | | | 87.0 | % | | 47,538,893 | | | 88.7 | % |
Mortgage loans on real estate | 4,299,945 | | | 8.0 | % | | 4,165,489 | | | 7.8 | % |
Real estate | 258,237 | | | 0.5 | % | | — | | | — | % |
Derivative instruments | 1,459,965 | | | 2.7 | % | | 1,310,954 | | | 2.4 | % |
Other investments | 962,305 | | | 1.8 | % | | 590,078 | | | 1.1 | % |
| $ | 53,639,708 | | | 100.0 | % | | $ | 53,605,414 | | | 100.0 | % |
Credit Quality of Fixed Maturity Securities - June 30, 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
NAIC Designation | | Carrying Amount | | Percent | | Rating Agency Rating | | Carrying Amount | | Percent |
1 | | $ | 25,937,900 | | | 55.6 | % | | Aaa/Aa/A | | $ | 27,097,912 | | | 58.1 | % |
2 | | 19,387,062 | | | 41.6 | % | | Baa | | 18,570,085 | | | 39.8 | % |
3 | | 1,135,994 | | | 2.4 | % | | Ba | | 800,364 | | | 1.7 | % |
4 | | 147,401 | | | 0.3 | % | | B | | 82,971 | | | 0.2 | % |
5 | | 29,418 | | | 0.1 | % | | Caa | | 46,470 | | | 0.1 | % |
6 | | 21,481 | | | — | % | | Ca and lower | | 61,454 | | | 0.1 | % |
| | $ | 46,659,256 | | | 100.0 | % | | | | $ | 46,659,256 | | | 100.0 | % |
Watch List Securities - June 30, 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
General Description (a) | | Amortized Cost | | Allowance for Credit Losses | | Amortized Cost, Net of Allowance | | Net Unrealized Gains (Losses), Net of Allowance | | Fair Value |
Corporate securities - Public securities | | $ | 69,739 | | | $ | (10,033) | | | $ | 59,706 | | | $ | 1,318 | | | $ | 61,024 | |
Corporate securities - Private placement securities | | 103,189 | | | (690) | | | 102,499 | | | 1,652 | | | 104,151 | |
Residential mortgage backed securities | | 6,739 | | | (120) | | | 6,619 | | | (69) | | | 6,550 | |
Commercial mortgage backed securities | | 46,059 | | | — | | | 46,059 | | | (3,441) | | | 42,618 | |
| | | | | | | | | | |
Collateralized loan obligations | | 9,989 | | | — | | | 9,989 | | | (1,113) | | | 8,876 | |
United States municipalities, states and territories | | 19,044 | | | (3,347) | | | 15,697 | | | — | | | 15,697 | |
| | $ | 254,759 | | | $ | (14,190) | | | $ | 240,569 | | | $ | (1,653) | | | $ | 238,916 | |
(a)The watch list consists of all fixed maturity securities we have determined contain elevated credit risk, including those we have taken credit losses on.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2021
Unaudited (Dollars in thousands)
Fixed Maturity Securities by Sector
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
| Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
Available for sale: | | | | | | | |
United States Government full faith and credit and sponsored agencies | $ | 1,046,316 | | | $ | 1,085,065 | | | $ | 1,032,936 | | | $ | 1,079,322 | |
United States municipalities, states and territories | 3,219,847 | | | 3,700,225 | | | 3,236,767 | | | 3,776,131 | |
Foreign government obligations | 177,087 | | | 197,330 | | | 177,062 | | | 202,706 | |
Corporate securities: | | | | | | | |
Capital goods | 2,301,510 | | | 2,664,988 | | | 2,295,927 | | | 2,721,465 | |
Consumer discretionary | 5,902,440 | | | 6,818,683 | | | 5,674,845 | | | 6,734,249 | |
Energy | 1,984,088 | | | 2,241,563 | | | 2,140,768 | | | 2,359,893 | |
Financials | 6,174,256 | | | 6,960,264 | | | 5,971,097 | | | 6,877,472 | |
Government non-guaranteed | 496,339 | | | 576,083 | | | 539,148 | | | 632,178 | |
Industrials | 377,724 | | | 423,507 | | | 276,352 | | | 319,823 | |
Information technology | 1,639,715 | | | 1,872,439 | | | 1,556,654 | | | 1,840,942 | |
Materials | 1,598,844 | | | 1,826,924 | | | 1,543,032 | | | 1,803,501 | |
Other | 292,504 | | | 340,499 | | | 315,628 | | | 370,204 | |
Telecommunications | 1,543,432 | | | 1,758,859 | | | 1,340,484 | | | 1,582,329 | |
Transportation | 1,334,560 | | | 1,481,455 | | | 1,362,858 | | | 1,511,499 | |
Utilities | 3,880,356 | | | 4,490,553 | | | 3,728,403 | | | 4,403,272 | |
Residential mortgage backed securities: | | | | | | | |
Government agency | 498,757 | | | 558,512 | | | 549,677 | | | 627,201 | |
Prime | 538,257 | | | 547,174 | | | 771,031 | | | 788,933 | |
Alt-A | 69,907 | | | 86,737 | | | 79,248 | | | 96,697 | |
Commercial mortgage backed securities: | | | | | | | |
Government agency | 393,427 | | | 439,822 | | | 398,141 | | | 447,726 | |
Non-agency | 3,584,388 | | | 3,735,695 | | | 3,721,509 | | | 3,813,501 | |
Other asset backed securities: | | | | | | | |
Auto | 227,504 | | | 234,719 | | | 258,286 | | | 266,065 | |
Energy | 7,198 | | | 8,506 | | | 7,301 | | | 8,946 | |
Financials | 4,441 | | | 4,303 | | | 4,441 | | | 3,911 | |
Industrials | 41,544 | | | 43,250 | | | 60,894 | | | 61,147 | |
Collateralized loan obligations | 3,535,477 | | | 3,486,402 | | | 4,255,839 | | | 4,112,318 | |
Military housing | 468,218 | | | 538,845 | | | 464,684 | | | 538,356 | |
Other | 513,952 | | | 536,854 | | | 541,724 | | | 559,106 | |
| $ | 41,852,088 | | | $ | 46,659,256 | | | $ | 42,304,736 | | | $ | 47,538,893 | |
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2021
Unaudited (Dollars in thousands)
Mortgage Loans on Real Estate
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
| Principal | | Percent | | Principal | | Percent |
Geographic distribution: commercial mortgage loans | | | | | | | |
East | $ | 676,448 | | | 19.6 | % | | $ | 699,741 | | | 19.5 | % |
Middle Atlantic | 294,619 | | | 8.5 | % | | 281,971 | | | 7.9 | % |
Mountain | 373,129 | | | 10.8 | % | | 391,025 | | | 10.9 | % |
New England | 24,475 | | | 0.7 | % | | 24,774 | | | 0.7 | % |
Pacific | 650,256 | | | 18.8 | % | | 659,743 | | | 18.4 | % |
South Atlantic | 779,690 | | | 22.5 | % | | 832,739 | | | 23.3 | % |
West North Central | 263,600 | | | 7.6 | % | | 266,050 | | | 7.4 | % |
West South Central | 397,662 | | | 11.5 | % | | 424,111 | | | 11.9 | % |
| $ | 3,459,879 | | | 100.0 | % | | $ | 3,580,154 | | | 100.0 | % |
| | | | | | | |
Property type distribution: commercial mortgage loans | | | | | | | |
Office | $ | 292,968 | | | 8.5 | % | | $ | 297,065 | | | 8.3 | % |
Medical Office | 17,718 | | | 0.5 | % | | 20,584 | | | 0.6 | % |
Retail | 1,116,376 | | | 32.3 | % | | 1,187,484 | | | 33.2 | % |
Industrial/Warehouse | 911,293 | | | 26.3 | % | | 929,325 | | | 25.9 | % |
Apartment | 948,161 | | | 27.4 | % | | 939,084 | | | 26.2 | % |
Mixed use/Other | 173,363 | | | 5.0 | % | | 206,612 | | | 5.8 | % |
| $ | 3,459,879 | | | 100.0 | % | | $ | 3,580,154 | | | 100.0 | % |
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2021
Unaudited (Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 |
| Commercial | | Agricultural | | Residential | | Total |
Credit exposure - by payment activity | | | | | | | |
Performing | $ | 3,459,879 | | | $ | 277,427 | | | $ | 565,053 | | | $ | 4,302,359 | |
In workout | — | | | — | | | — | | | — | |
Delinquent | — | | | — | | | 8,585 | | | 8,585 | |
| | | | | | | |
Principal outstanding | 3,459,879 | | | 277,427 | | | 573,638 | | | 4,310,944 | |
| | | | | | | |
Unamortized discounts and premiums, net | — | | | — | | | 16,212 | | | 16,212 | |
Deferred fees and costs, net | (1,409) | | | (708) | | | 1,487 | | | (630) | |
Amortized cost | 3,458,470 | | | 276,719 | | | 591,337 | | | 4,326,526 | |
| | | | | | | |
Valuation allowance | (22,498) | | | (454) | | | (3,629) | | | (26,581) | |
Carrying value | $ | 3,435,972 | | | $ | 276,265 | | | $ | 587,708 | | | $ | 4,299,945 | |
| | | | | | | |
| December 31, 2020 |
| Commercial | | Agricultural | | Residential | | Total |
Credit exposure - by payment activity | | | | | | | |
Performing | $ | 3,580,154 | | | $ | 245,807 | | | $ | 366,047 | | | $ | 4,192,008 | |
In workout | — | | | — | | | — | | | — | |
Delinquent | — | | | — | | | 273 | | | 273 | |
| | | | | | | |
Principal outstanding | 3,580,154 | | | 245,807 | | | 366,320 | | | 4,192,281 | |
| | | | | | | |
Unamortized discounts and premiums, net | — | | | — | | | 5,212 | | | 5,212 | |
Deferred fees and costs, net | (1,266) | | | (634) | | | 925 | | | (975) | |
Amortized cost | 3,578,888 | | | 245,173 | | | 372,457 | | | 4,196,518 | |
| | | | | | | |
Valuation allowance | (25,529) | | | (2,130) | | | (3,370) | | | (31,029) | |
Carrying value | $ | 3,553,359 | | | $ | 243,043 | | | $ | 369,087 | | | $ | 4,165,489 | |
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2021
Shareholder Information
Corporate Offices:
American Equity Investment Life Holding Company
6000 Westown Parkway
West Des Moines, IA 50266
Inquiries:
Steven Schwartz, Vice President-Investor Relations
(515) 273-3763, sschwartz@american-equity.com
Common Stock and Dividend Information:
New York Stock Exchange symbol: “AEL”
| | | | | | | | | | | | | | | | | | | | | | | |
| High | | Low | | Close | | Dividend Declared |
2021 | | | | | | | |
First Quarter | $32.54 | | $26.21 | | $31.53 | | $0.00 |
Second Quarter | $33.68 | | $29.18 | | $32.32 | | $0.00 |
| | | | | | | |
| | | | | | | |
| | | | | | | |
2020 | | | | | | | |
First Quarter | $34.16 | | $9.07 | | $18.80 | | $0.00 |
Second Quarter | $27.09 | | $14.76 | | $24.71 | | $0.00 |
Third Quarter | $27.32 | | $19.06 | | $21.99 | | $0.00 |
Fourth Quarter | $34.25 | | $22.37 | | $27.66 | | $0.32 |
| | | | | | | |
2019 | | | | | | | |
First Quarter | $33.57 | | $26.34 | | $27.02 | | $0.00 |
Second Quarter | $30.91 | | $25.84 | | $27.16 | | $0.00 |
Third Quarter | $27.80 | | $20.16 | | $24.20 | | $0.00 |
Fourth Quarter | $30.96 | | $21.75 | | $29.93 | | $0.30 |
Transfer Agent:
Computershare Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940-0310
Phone: (877) 282-1169
Fax: (781) 575-2723
www.computershare.com
Annual Report and Other Information:
Shareholders may receive when available, without charge, a copy of American Equity’s Annual Report, SEC filings and/or press releases by calling Steven Schwartz, Vice President-Investor Relations, at (515) 273-3763 or by visiting our website at www.american-equity.com.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2021
Research Analyst Coverage
Erik Bass
Autonomous Research US LP
(646) 561-6248
ebass@autonomous.com
Daniel Bergman
Citi Research
(212) 816-2132
daniel.bergman@citi.com
Wilma Burdis
Credit Suisse Securities
Equity Research | Life Insurance
(919) 306-1023
wilma.burdis@credit-suisse.com
Thomas Gallagher
Evercore ISI
(212) 446-9439
thomas.gallagher@evercoreisi.com
Pablo Singzon II
JP Morgan
(212) 622-2295
pablo.s.singzon@jpmorgan.com
Ryan Krueger
Keefe, Bruyette & Woods
(860) 722-5930
rkrueger@kbw.com
Bob Huang
Morgan Stanley Research
(212) 761-6136
Bob.Huang@morganstanley.com
John Barnidge
Piper Sandler & Co.
(312) 281-3412
John.Barnidge@psc.com
C. Gregory Peters
Raymond James & Associates, Inc.
(727) 567-1534
greg.peters@raymondjames.com
Mark A. Dwelle
RBC Capital Markets, LLC
(804) 782-4008
mark.dwelle@rbccm.com
Mark Hughes
Truist Securities
(615) 748-4422
mark.hughes@research.truist.com