Attached files
| file | filename |
|---|---|
| 8-K - AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY 8-K - AMERICAN EQUITY INVESTMENT LIFE HOLDING CO | a6621056.htm |
Exhibit 99.1
 FOR IMMEDIATE RELEASE
February 23, 2011
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For more information, contact:
Wendy C. Waugaman, Chief Executive Officer
(515) 457-1824, wcwaugaman@american-equity.com
John M. Matovina, Chief Financial Officer
(515) 457-1813, jmatovina@american-equity.com
Julie L. LaFollette, Director of Investor Relations
(515) 273-3602, jlafollette@american-equity.com
Debra J. Richardson, Chief Administrative Officer
(515) 273-3551, drichardson@american-equity.com
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American Equity Reports Fourth Quarter and
Fiscal Year 2010 Results
WEST DES MOINES, Iowa (February 23, 2011) – American Equity Investment Life Holding Company (NYSE: AEL), a leading underwriter of index and fixed rate annuities, today reported operating income1 for the year 2010 of $108.9 million, or $1.70 per diluted common share, an increase of 7% over 2009 operating income of $101.8 million or $1.75 per diluted common share. 2010 fourth quarter operating income was $26.4 million, or $0.41 per diluted common share, a decrease of 8% compared to 2009 fourth quarter operating income of $28.7 million or $0.48 per diluted common share.
Performance highlights for the fourth quarter and year of 2010 include:
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§
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2010 annuity sales of $4.7 billion ($4.2 billion net of coinsurance), and fourth quarter sales of $1.6 billion ($1.5 billion net of coinsurance) representing year over year growth of 27% and 73% for the year and quarter, respectively
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§
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2010 investment earnings of $1 billion and fourth quarter investment earnings of $278 million, representing year over year growth of 11% and 14% for the year and quarter, respectively
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§
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2010 investment spread margin over the cost of money on annuity deposits of 3.15% and fourth quarter spread of 3.14% compared to 2009 full year and fourth quarter spread of 3.04%
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§
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A risk-based capital (“RBC”) ratio of 350% at December 31, 2010, compared to 337% at December 31, 2009
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§
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Book value per outstanding common share of $16.07 at December 31, 2010, including Accumulated Other Comprehensive Income
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1 In addition to net income, American Equity has consistently utilized operating income, a non-GAAP financial measure commonly used in the life insurance industry, as an economic measure to evaluate its financial performance. See accompanying tables for reconciliations of net income to operating income and descriptions of reconciling items. See Company’s Annual Report on Form 10-K for a more complete discussion of the reconciling items and their impact on net income for the periods presented. Net income was $9.0 million and $42.9 million for the fourth quarter and full year of 2010, respectively, compared to $36.0 million and $68.5 million for the same periods in 2009.
Commented David J. Noble, founder and Executive Chairman of American Equity: “Since the onset of the global financial crisis in 2008, equity market uncertainty and low interest rates have driven the demand for safe money, principal-protected products such as index annuities. American Equity is more than meeting that demand, as demonstrated by our sales growth (net of coinsurance) of 43% in 2010, which built on top of 28% growth in 2009. Our total invested assets are now $19.8 billion as of December 31, 2010, an increase of 56% over that two-year period.”
RECORD INVESTMENT SPREAD DESPITE FALLING 2010 ASSET YIELDS
American Equity earned an investment spread margin of 3.14% over the cost of money on annuity liabilities for the fourth quarter of 2010. Although aggregate yield earned on invested assets for this quarter declined year over year to 6.02%, the cost of money also declined to 2.88%. In the fourth quarter, a total of $3.6 billion of new fixed income securities were purchased at an average yield of 5.35%.
The adjusted aggregate yield for the fourth quarter was 6.07%, after adjustments for nonrecurring items including the cost of holding excess cash balances, and the benefit of prepayment income on certain assets. The adjusted cost of money for the quarter was 2.94%, after adjusting for nonrecurring items including the benefit of holding excess call options on the applicable indexes.
In response to falling yields, American Equity announced rate cuts applicable to new annuity policies sold after January 10, 2011. Renewal rates on existing annuities remain unchanged. Yields on new investments are beginning to rise again, and in January 2011 new fixed income securities were purchased at an average yield of 5.41%. The company constantly monitors yield data, and will consider future rate increases should the trend of rising yields continue.
A.M. BEST AFFIRMS “A- EXCELLENT” RATING, UPGRADES OUTLOOK
In January 2011 A.M. Best Co. (“A.M. Best”) affirmed the “A- Excellent” financial strength ratings assigned to American Equity’s life subsidiaries, and upgraded the outlook for such ratings from negative to stable. As the basis for its decision A.M Best cited the company’s prominence in the indexed annuity marketplace, strong risk-adjusted capitalization, positive earnings trends, and defeat of the Securities and Exchange Commission Rule 151A.
As part of the rating process, the company’s newest life subsidiary, Eagle Life Insurance Company (“Eagle”), was assigned an “A- Excellent” rating. American Equity formed Eagle for the purpose of marketing index annuities through the broker-dealer distribution channel.
American Equity’s Chief Executive Officer and President Wendy C. Waugaman commented: “While we view the outlook upgrade as positive for the company, we continue to believe that our consistent, strong financial performance deserves recognition in the form of higher ratings.”
TRANSACTIONS TO SUSTAIN CAPITAL STRENGTH
American Equity remains very well-capitalized, with a risked-based capital ratio of 350% of company action level at December 31, 2010. The company remains opportunistic in exploring and implementing capital management strategies designed to maintain capital strength over a minimum three year period, and entered into two such transactions subsequent to the close of the quarter.
In February, 2011 American Equity entered into a binding letter of intent to complete a reinsurance transaction with Hannover Life Reassurance Company of America (“Hannover”) on or before March 31, 2011. This transaction is similar to prior surplus relief reinsurance agreements between American Equity and Hannover, and will provide a pre-tax surplus benefit to the company of approximately $50 million.
In addition, in January 2011, the company completed a new three-year revolving credit facility providing up to $160 million of borrowing capacity from a group of seven banks. While this facility may be used from time to time to support the regulatory capital of American Equity’s operating subsidiaries, the company would view such usage as short term in nature and would expect to refinance any such borrowings with a longer term source of capital. The principal purpose of the new facility is to provide a source of liquidity should holders of the company’s convertible senior notes elect to convert, which would require a payment in cash of a portion of the value of such notes.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to future operations, strategies, financial results or other developments, and are subject to assumptions, risks and uncertainties. Statements such as “guidance”, “expect”, “anticipate”, “believe”, “goal”, “objective”, “target”, “may”, “should”, “estimate”, “projects” or similar words as well as specific projections of future results qualify as forward-looking statements. Factors that may cause our actual results to differ materially from those contemplated by these forward looking statements can be found in the company’s Form 10-K filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date the statement was made and the company undertakes no obligation to update such forward-looking statements. There can be no assurance that other factors not currently anticipated by the company will not materially and adversely affect our results of operations. Investors are cautioned not to place undue reliance on any forward-looking statements made by us or on our behalf.
CONFERENCE CALL
American Equity will hold a conference call to discuss 2010 earnings on Thursday, February 24, 2011, at 10 a.m. CST. 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 1-800-573-4754, passcode 61820585 (international callers, please dial 1-617-224-4325). An audio replay will be available via telephone through March 17, 2011 1-888-286-8010, passcode 50661171 (international callers will need to dial 1-617-801-6888).
ABOUT AMERICAN EQUITY
American Equity Investment Life Holding Company, through its wholly-owned operating subsidiaries, is a full service under writer of a broad line of annuity and insurance products, with a primary emphasis on the sale of index and fixed rate annuities. American Equity Investment Life, a New York Stock Exchange Listed company (NYSE: AEL), is headquartered in West Des Moines, Iowa. For more information, visit www.american-equity.com.
###
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American Equity Investment Life Holding Company
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Net Income (Loss)/Operating Income (Unaudited)
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||||||||||||
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Three Months Ended
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Year Ended
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December 31,
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December 31,
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|||||||||||||||
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2010
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2009
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2010
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2009
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(Dollars in thousands, except per share data)
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Revenues:
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Traditional life and accident and health insurance premiums
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$ | 2,871 | $ | 3,135 | $ | 11,982 | $ | 12,654 | ||||||||
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Annuity product charges
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16,402 | 15,857 | 69,075 | 63,358 | ||||||||||||
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Net investment income
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277,876 | 243,244 | 1,036,106 | 932,172 | ||||||||||||
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Change in fair value of derivatives
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201,604 | 108,718 | 168,862 | 216,896 | ||||||||||||
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Net realized gains on investments, excluding other than
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||||||||||||||||
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temporary impairment ("OTTI") losses
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1,462 | 40,692 | 23,726 | 51,279 | ||||||||||||
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OTTI losses on investments:
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Total OTTI losses
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(3,197 | ) | (48,747 | ) | (19,544 | ) | (220,415 | ) | ||||||||
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Portion of OTTI losses recognized in (from) other comprehensive income
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(12,639 | ) | 25,632 | (4,323 | ) | 133,644 | ||||||||||
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Net OTTI losses recognized in operations
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(15,836 | ) | (23,115 | ) | (23,867 | ) | (86,771 | ) | ||||||||
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Loss on extinguishment of debt
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- | (3,773 | ) | (292 | ) | (675 | ) | |||||||||
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Total revenues
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484,379 | 384,758 | 1,285,592 | 1,188,913 | ||||||||||||
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Benefits and expenses:
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Insurance policy benefits and change in future policy benefits
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1,622 | 1,979 | 8,251 | 8,889 | ||||||||||||
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Interest sensitive and index product benefits
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148,376 | 140,855 | 733,218 | 347,883 | ||||||||||||
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Amortization of deferred sales inducements
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38,357 | 22,185 | 59,873 | 39,999 | ||||||||||||
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Change in fair value of embedded derivatives
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142,463 | 114,872 | 130,950 | 529,508 | ||||||||||||
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Interest expense on notes payable
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7,861 | 3,565 | 22,125 | 14,853 | ||||||||||||
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Interest expense on subordinated debentures
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3,700 | 3,741 | 14,906 | 15,819 | ||||||||||||
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Interest expense on amounts due under repurchase agreements
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- | 190 | - | 534 | ||||||||||||
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Amortization of deferred policy acquisition costs
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62,408 | 43,071 | 136,388 | 88,009 | ||||||||||||
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Other operating costs and expenses
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65,715 | 11,950 | 114,615 | 57,255 | ||||||||||||
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Total benefits and expenses
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470,502 | 342,408 | 1,220,326 | 1,102,749 | ||||||||||||
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Income before income taxes
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13,877 | 42,350 | 65,266 | 86,164 | ||||||||||||
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Income tax expense
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4,839 | 6,329 | 22,333 | 17,634 | ||||||||||||
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Net income
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9,038 | 36,021 | 42,933 | 68,530 | ||||||||||||
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Net realized gains and net OTTI losses on investments, net of offsets
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4,687 | (12,293 | ) | 379 | (1,339 | ) | ||||||||||
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Lawsuit settlement
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27,297 | - | 27,297 | - | ||||||||||||
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Convertible debt retirement, net of income taxes
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- | 2,207 | 171 | 687 | ||||||||||||
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Net effect of derivative and other index annuity, net of offsets
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(14,628 | ) | 2,779 | 38,167 | 33,900 | |||||||||||
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Operating income (a)
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$ | 26,394 | $ | 28,714 | $ | 108,947 | $ | 101,778 | ||||||||
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Earnings (loss) per common share
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$ | 0.15 | $ | 0.62 | $ | 0.73 | $ | 1.22 | ||||||||
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Earnings (loss) per common share - assuming dilution
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$ | 0.14 | $ | 0.60 | $ | 0.68 | $ | 1.18 | ||||||||
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Operating income per common share (a)
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$ | 0.45 | $ | 0.49 | $ | 1.86 | $ | 1.81 | ||||||||
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Operating income per common share - assuming dilution (a)
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$ | 0.41 | $ | 0.48 | $ | 1.70 | $ | 1.75 | ||||||||
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Weighted average common shares outstanding (in thousands):
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Earnings per common share
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58,757 | 58,143 | 58,507 | 56,138 | ||||||||||||
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Earnings per common share - assuming dilution
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65,054 | 60,946 | 64,580 | 58,915 | ||||||||||||
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American Equity Investment Life Holding Company
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Operating Income
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Three months ended December 31, 2010 (Unaudited)
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Adjustments
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Realized Gains
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Derivative
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and Other
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and Other
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Operating
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As Reported
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Adjustments
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Index Annuity
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Income (a)
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Reserves:
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Traditional life and accident and health insurance premiums
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$ | 2,871 | $ | - | $ | - | $ | 2,871 | ||||||||
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Annuity product charges
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16,402 | - | - | 16,402 | ||||||||||||
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Net investment income
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277,876 | - | - | 277,876 | ||||||||||||
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Change in fair value of derivatives
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201,604 | - | (172,203 | ) | 29,401 | |||||||||||
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Net realized gains on investments, excluding other than
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- | - | ||||||||||||||
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temporary impairment ("OTTI") losses
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1,462 | (1,462 | ) | - | - | |||||||||||
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Net OTTI losses recognized in operations
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(15,836 | ) | 15,836 | - | - | |||||||||||
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Total revenues
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484,379 | 14,374 | (172,203 | ) | 326,550 | |||||||||||
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Benefits and expenses:
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Insurance policy benefits and change in future policy benefits
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1,622 | - | - | 1,622 | ||||||||||||
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Interest sensitive and index product benefits
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148,376 | - | (56 | ) | 148,320 | |||||||||||
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Amortization of deferred sales inducements
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38,357 | 4,311 | (14,949 | ) | 27,719 | |||||||||||
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Change in fair value of embedded derivatives
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142,463 | - | (114,351 | ) | 28,112 | |||||||||||
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Interest expense on notes payable
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7,861 | - | - | 7,861 | ||||||||||||
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Interest expense on subordinated debentures
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3,700 | - | - | 3,700 | ||||||||||||
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Amortization of deferred policy acquisition costs
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62,408 | 8,514 | (20,134 | ) | 50,788 | |||||||||||
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Other operating costs and expenses
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65,715 | (48,000 | ) | - | 17,715 | |||||||||||
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Total benefits and expenses
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470,502 | (35,175 | ) | (149,490 | ) | 285,837 | ||||||||||
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Income before income taxes
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13,877 | 49,549 | (22,713 | ) | 40,713 | |||||||||||
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Income tax expense
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4,839 | 17,565 | (8,085 | ) | 14,319 | |||||||||||
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Net income
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$ | 9,038 | $ | 31,984 | $ | (14,628 | ) | $ | 26,394 | |||||||
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Earnings per common share
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$ | 0.15 | $ | 0.45 | ||||||||||||
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Earnings per common share - assuming dilution
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$ | 0.14 | $ | 0.41 | ||||||||||||
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(a)
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In addition to net income, we have consistently utilized operating income, operating income per common share and operating income per common share - assuming dilution, non-GAAP financial measures commonly used in the life insurance industry, as economic measures to evaluate our financial performance. Operating income equals net income adjusted to eliminate the impact of net realized gains and losses on investments including net OTTI losses recognized in operations and related deferred tax valuation allowance, loss on extinguishment of convertible debt, the settlement of a class action lawsuit, fair value changes in derivatives and embedded derivatives and the Lehman counterparty default on expired call options. Because these items fluctuate from quarter to quarter in a manner unrelated to core operations, we believe measures excluding their impact are useful in analyzing operating trends. We believe the combined presentation and evaluation of operating income together with net income (loss), provides information that may enhance an investor's understanding of our underlying results and profitability.
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American Equity Investment Life Holding Company
Financial Supplement
December 31, 2010
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A.
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Financial Highlights
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Condensed Consolidated Balance Sheets
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1
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Consolidated Statements of Operations
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2
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Operating Income
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||
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Year Ended December 31, 2010
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3
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Three Months Ended December 31, 2010
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4
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Quarterly Summary – Most Recent 5 quarters
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5
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Capitalization/ Book Value per Share
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6
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B.
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Product Summary
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Annuity Deposits by Product Type
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7
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Surrender Charge Protection and Account Values by Product Type
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7
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Annuity Liability Characteristics
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8
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Spread Results
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10
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C.
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Investment Summary
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Summary of Invested Assets
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10
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Credit Quality of Fixed Maturity Securities
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11
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Watch List Securities
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11
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Summary of Residential Mortgage Backed Securities
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12
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Mortgage Loans by Region and Property Type
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13
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D.
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Shareholder Information
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14
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E.
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Research Analyst Coverage
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15
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| American Equity Investment Life Holding Company | |
| Financial Supplement – December 31, 2010 | |
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
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December 31,
2010
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December 31,
2009
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Assets
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Investments:
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Fixed maturity securities:
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Available for sale, at fair value
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$ | 15,830,663 | $ | 10,704,131 | ||||
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Held for investment, at amortized cost
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822,200 | 1,635,083 | ||||||
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Equity securities, available for sale, at fair value
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65,961 | 93,086 | ||||||
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Mortgage loans on real estate
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2,598,641 | 2,449,778 | ||||||
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Derivative instruments
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479,786 | 479,272 | ||||||
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Other investments
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19,680 | 12,760 | ||||||
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Total investments
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19,816,931 | 15,374,110 | ||||||
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Cash and cash equivalents
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597,766 | 528,002 | ||||||
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Coinsurance deposits
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2,613,191 | 2,237,740 | ||||||
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Accrued investment income
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167,645 | 113,658 | ||||||
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Deferred policy acquisition costs
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1,747,760 | 1,625,785 | ||||||
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Deferred sales inducements
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1,227,328 | 1,011,449 | ||||||
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Deferred income taxes
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143,259 | 85,661 | ||||||
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Income taxes recoverable
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6,128 | 103,684 | ||||||
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Other assets
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106,755 | 231,915 | ||||||
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Total assets
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$ | 26,426,763 | $ | 21,312,004 | ||||
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Liabilities and Stockholders’ Equity
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Liabilities:
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Policy benefit reserves
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$ | 23,655,807 | $ | 19,336,221 | ||||
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Other policy funds and contract claims
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222,860 | 119,403 | ||||||
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Notes payable
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330,835 | 316,468 | ||||||
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Subordinated debentures
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268,435 | 268,347 | ||||||
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Other liabilities
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1,010,779 | 516,942 | ||||||
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Total liabilities
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25,488,716 | 20,557,381 | ||||||
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Stockholders’ equity:
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||||||||
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Common stock
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56,968 | 56,203 | ||||||
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Additional paid-in capital
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454,454 | 422,225 | ||||||
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Unallocated common stock held by ESOP
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(4,815 | ) | (5,679 | ) | ||||
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Accumulated other comprehensive income (loss)
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81,820 | (30,456 | ) | |||||
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Retained earnings
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349,620 | 312,330 | ||||||
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Total stockholders’ equity
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938,047 | 754,623 | ||||||
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Total liabilities and stockholders’ equity
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$ | 26,426,763 | $ | 21,312,004 | ||||
Page 1
| American Equity Investment Life Holding Company | |
| Financial Supplement – December 31, 2010 | |
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
|
Three Months Ended
December 31,
|
Year Ended
December 31,
|
|||||||||||||||
|
2010
|
2009
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2010
|
2009
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|||||||||||||
|
Revenues:
|
||||||||||||||||
|
Traditional life and accident and health insurance premiums
|
$ | 2,871 | $ | 3,135 | $ | 11,982 | $ | 12,654 | ||||||||
|
Annuity product charges
|
16,402 | 15,857 | 69,075 | 63,358 | ||||||||||||
|
Net investment income
|
277,876 | 243,244 | 1,036,106 | 932,172 | ||||||||||||
|
Change in fair value of derivatives
|
201,604 | 108,718 | 168,862 | 216,896 | ||||||||||||
|
Net realized gains on investments, excluding other than
temporary impairment (“OTTI”) losses
|
1,462 | 40,692 | 23,726 | 51,279 | ||||||||||||
|
OTTI losses on investments:
|
||||||||||||||||
|
Total OTTI losses
|
(3,197 | ) | (48,747 | ) | (19,544 | ) | (220,415 | ) | ||||||||
|
Portion of OTTI losses recognized in (from) other
comprehensive income
|
(12,639 | ) | 25,632 | (4,323 | ) | 133,644 | ||||||||||
|
Net OTTI losses recognized in operations
|
(15,836 | ) | (23,115 | ) | (23,867 | ) | (86,771 | ) | ||||||||
|
Loss on extinguishment of debt
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– | (3,773 | ) | (292 | ) | (675 | ) | |||||||||
|
Total revenues
|
484,379 | 384,758 | 1,285,592 | 1,188,913 | ||||||||||||
|
Benefits and expenses:
|
||||||||||||||||
|
Insurance policy benefits and change in future policy benefits
|
1,622 | 1,979 | 8,251 | 8,889 | ||||||||||||
|
Interest sensitive and index product benefits
|
148,376 | 140,855 | 733,218 | 347,883 | ||||||||||||
|
Amortization of deferred sales inducements
|
38,357 | 22,185 | 59,873 | 39,999 | ||||||||||||
|
Change in fair value of embedded derivatives
|
142,463 | 114,872 | 130,950 | 529,508 | ||||||||||||
|
Interest expense on notes payable
|
7,861 | 3,565 | 22,125 | 14,853 | ||||||||||||
|
Interest expense on subordinated debentures
|
3,700 | 3,741 | 14,906 | 15,819 | ||||||||||||
|
Interest expense on amounts due under repurchase agreements
|
– | 190 | – | 534 | ||||||||||||
|
Amortization of deferred policy acquisition costs
|
62,408 | 43,071 | 136,388 | 88,009 | ||||||||||||
|
Other operating costs and expenses
|
65,715 | 11,950 | 114,615 | 57,255 | ||||||||||||
|
Total benefits and expenses
|
470,502 | 342,408 | 1,220,326 | 1,102,749 | ||||||||||||
|
Income before income taxes
|
13,877 | 42,350 | 65,266 | 86,164 | ||||||||||||
|
Income tax expense
|
4,839 | 6,329 | 22,333 | 17,634 | ||||||||||||
|
Net income
|
$ | 9,038 | $ | 36,021 | $ | 42,933 | $ | 68,530 | ||||||||
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Earnings per common share
|
$ | 0.15 | $ | 0.62 | $ | 0.73 | $ | 1.22 | ||||||||
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Earnings per common share - assuming dilution (a)
|
$ | 0.14 | $ | 0.60 | $ | 0.68 | $ | 1.18 | ||||||||
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Weighted average common shares outstanding (in thousands):
|
||||||||||||||||
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Earnings per common share
|
58,757 | 58,143 | 58,507 | 56,138 | ||||||||||||
|
Earnings per common share - assuming dilution
|
65,054 | 60,946 | 64,580 | 58,915 | ||||||||||||
| (a) |
The numerator for earnings per common share - assuming dilution is equal to net income plus the after tax cost of interest on convertible subordinated debentures issued to a subsidiary trust. The after tax cost of such interest was $259 for the three months ended December 31, 2010 and December 31, 2009, $1,035 for the year ended December 31, 2010 and $1,037 for the year ended December 31, 2009.
|
Page 2
| American Equity Investment Life Holding Company | |
| Financial Supplement – December 31, 2010 | |
| Operating Income | |
| Year ended December 31, 2010 (Unaudited) | |
|
Adjustments
|
||||||||||||||||
|
As Reported
|
Realized Gains
and Other
Adjustments
|
Derivatives
and Other
Index Annuity
|
Operating
Income (a)
|
|||||||||||||
|
(Dollars in thousands, except per share data)
|
||||||||||||||||
|
Revenues:
|
||||||||||||||||
|
Traditional life and accident and health insurance premiums
|
$ | 11,982 | $ | – | $ | – | $ | 11,982 | ||||||||
|
Annuity product charges
|
69,075 | – | – | 69,075 | ||||||||||||
|
Net investment income
|
1,036,106 | – | – | 1,036,106 | ||||||||||||
|
Change in fair value of derivatives
|
168,862 | – | 35,711 | 204,573 | ||||||||||||
|
Net realized gains on investments, excluding other than
temporary impairment (“OTTI”) losses
|
23,726 | (23,726 | ) | – | – | |||||||||||
|
Net OTTI losses recognized in operations
|
(23,867 | ) | 23,867 | – | – | |||||||||||
|
Loss on extinguishment of debt
|
(292 | ) | 292 | – | – | |||||||||||
|
Total revenues
|
1,285,592 | 433 | 35,711 | 1,321,736 | ||||||||||||
|
Benefits and expenses:
|
||||||||||||||||
|
Insurance policy benefits and change in future policy benefits
|
8,251 | – | – | 8,251 | ||||||||||||
|
Interest sensitive and index product benefits
|
733,218 | – | (9,616 | ) | 723,602 | |||||||||||
|
Amortization of deferred sales inducements
|
59,873 | 852 | 39,213 | 99,938 | ||||||||||||
|
Change in fair value of embedded derivatives
|
130,950 | – | (101,355 | ) | 29,595 | |||||||||||
|
Interest expense on notes payable
|
22,125 | – | – | 22,125 | ||||||||||||
|
Interest expense on subordinated debentures
|
14,906 | – | – | 14,906 | ||||||||||||
|
Amortization of deferred policy acquisition costs
|
136,388 | 4,414 | 48,332 | 189,134 | ||||||||||||
|
Other operating costs and expenses
|
114,615 | (48,000 | ) | – | 66,615 | |||||||||||
|
Total benefits and expenses
|
1,220,326 | (42,734 | ) | (23,426 | ) | 1,154,166 | ||||||||||
|
Income before income taxes
|
65,266 | 43,167 | 59,137 | 167,570 | ||||||||||||
|
Income tax expense
|
22,333 | 15,320 | 20,970 | 58,623 | ||||||||||||
|
Net income
|
$ | 42,933 | $ | 27,847 | $ | 38,167 | $ | 108,947 | ||||||||
|
Earnings per common share
|
$ | 0.73 | $ | 1.86 | ||||||||||||
|
Earnings per common share – assuming dilution
|
$ | 0.68 | $ | 1.70 | ||||||||||||
| (a) |
In addition to net income, we have consistently utilized operating income, operating income per common share and operating income per common share - assuming dilution, non-GAAP financial measures commonly used in the life insurance industry, as economic measures to evaluate our financial performance. Operating income equals net income adjusted to eliminate the impact of net realized gains and losses on investments including net OTTI losses recognized in operations, loss on extinguishment of debt, the settlement of a class action lawsuit and fair value changes in derivatives and embedded derivatives. Because these items fluctuate from quarter to quarter in a manner unrelated to core operations, we believe measures excluding their impact are useful in analyzing operating trends. We believe the combined presentation and evaluation of operating income together with net income, provides information that may enhance an investor’s understanding of our underlying results and profitability.
|
|
Change in fair value of derivatives:
|
||||||||||||
|
Proceeds received at expiration
|
$ | 438,394 | $ | – | $ | 438,394 | ||||||
|
Cost of money for fixed index annuities
|
(260,970 | ) | – | (260,970 | ) | |||||||
|
Change in the difference between fair value and remaining
option cost at beginning and end of period
|
(8,562 | ) | 35,711 | 27,149 | ||||||||
| $ | 168,862 | $ | 35,711 | $ | 204,573 | |||||||
|
Index credits included in interest credited to account balances
|
$ | 454,660 | $ | 454,660 | ||||||||
Page 3
| American Equity Investment Life Holding Company | |
| Financial Supplement – December 31, 2010 | |
| Operating Income | |
| Three months ended December 31, 2010 (Unaudited) | |
|
Adjustments
|
||||||||||||||||
|
As Reported
|
Realized Gains
and Other
Adjustments
|
Derivatives
and Other
Index Annuity
|
Operating
Income (a)
|
|||||||||||||
|
(Dollars in thousands, except per share data)
|
||||||||||||||||
|
Revenues:
|
||||||||||||||||
|
Traditional life and accident and health insurance premiums
|
$ | 2,871 | $ | – | $ | – | $ | 2,871 | ||||||||
|
Annuity product charges
|
16,402 | – | – | 16,402 | ||||||||||||
|
Net investment income
|
277,876 | – | – | 277,876 | ||||||||||||
|
Change in fair value of derivatives
|
201,604 | – | (172,203 | ) | 29,401 | |||||||||||
|
Net realized gains on investments, excluding other than
temporary impairment (“OTTI”) losses
|
1,462 | (1,462 | ) | – | – | |||||||||||
|
Net OTTI losses recognized in operations
|
(15,836 | ) | 15,836 | – | – | |||||||||||
|
Total revenues
|
484,379 | 14,374 | (172,203 | ) | 326,550 | |||||||||||
|
Benefits and expenses:
|
||||||||||||||||
|
Insurance policy benefits and change in future policy benefits
|
1,622 | – | – | 1,622 | ||||||||||||
|
Interest sensitive and index product benefits
|
148,376 | – | (56 | ) | 148,320 | |||||||||||
|
Amortization of deferred sales inducements
|
38,357 | 4,311 | (14,949 | ) | 27,719 | |||||||||||
|
Change in fair value of embedded derivatives
|
142,463 | – | (114,351 | ) | 28,112 | |||||||||||
|
Interest expense on notes payable
|
7,861 | – | – | 7,861 | ||||||||||||
|
Interest expense on subordinated debentures
|
3,700 | – | – | 3,700 | ||||||||||||
|
Amortization of deferred policy acquisition costs
|
62,408 | 8,514 | (20,134 | ) | 50,788 | |||||||||||
|
Other operating costs and expenses
|
65,715 | (48,000 | ) | – | 17,715 | |||||||||||
|
Total benefits and expenses
|
470,502 | (35,175 | ) | (149,490 | ) | 285,837 | ||||||||||
|
Income before income taxes
|
13,877 | 49,549 | (22,713 | ) | 40,713 | |||||||||||
|
Income tax expense
|
4,839 | 17,565 | (8,085 | ) | 14,319 | |||||||||||
|
Net income
|
$ | 9,038 | $ | 31,984 | $ | (14,628 | ) | $ | 26,394 | |||||||
|
Earnings per common share
|
$ | 0.15 | $ | 0.45 | ||||||||||||
|
Earnings per common share – assuming dilution
|
$ | 0.14 | $ | 0.41 | ||||||||||||
| (a) |
In addition to net income, we have consistently utilized operating income, operating income per common share and operating income per common share - assuming dilution, non-GAAP financial measures commonly used in the life insurance industry, as economic measures to evaluate our financial performance. Operating income equals net income adjusted to eliminate the impact of net realized gains and losses on investments including net OTTI losses recognized in operations, the settlement of a class action lawsuit and fair value changes in derivatives and embedded derivatives. Because these items fluctuate from quarter to quarter in a manner unrelated to core operations, we believe measures excluding their impact are useful in analyzing operating trends. We believe the combined presentation and evaluation of operating income together with net income, provides information that may enhance an investor’s understanding of our underlying results and profitability.
|
|
Change in fair value of derivatives:
|
||||||||||||
|
Proceeds received at expiration
|
$ | 74,120 | $ | – | $ | 74,120 | ||||||
|
Cost of money for fixed index annuities
|
(72,242 | ) | – | (72,242 | ) | |||||||
|
Change in the difference between fair value and remaining
option cost at beginning and end of period
|
199,726 | (172,203 | ) | 27,523 | ||||||||
| $ | 201,604 | $ | (172,203 | ) | $ | 29,401 | ||||||
|
Index credits included in interest credited to account balances
|
$ | 73,235 | $ | 73,235 | ||||||||
Page 4
| American Equity Investment Life Holding Company | |
| Financial Supplement – December 31, 2010 | |
| Operating Income/Net Income | |
| Quarterly Summary – Most Recent 5 Quarters (Unaudited) | |
| Q4 2010 | Q3 2010 | Q2 2010 | Q1 2010 | Q4 2009 | ||||||||||||||||
|
(Dollars in thousands, except per share data)
|
||||||||||||||||||||
|
Revenues:
|
||||||||||||||||||||
|
Traditional life and accident and health insurance premiums
|
$ | 2,871 | $ | 3,181 | $ | 2,643 | $ | 3,287 | $ | 3,135 | ||||||||||
|
Annuity product charges
|
16,402 | 18,538 | 18,617 | 15,518 | 15,857 | |||||||||||||||
|
Net investment income
|
277,876 | 260,475 | 254,845 | 242,910 | 243,244 | |||||||||||||||
|
Change in fair value of derivatives
|
29,401 | 17,095 | 91,306 | 66,771 | 6,597 | |||||||||||||||
|
Total revenues
|
326,550 | 299,289 | 367,411 | 328,486 | 268,833 | |||||||||||||||
|
Benefits and expenses:
|
||||||||||||||||||||
|
Insurance policy benefits and change in future policy benefits
|
1,622 | 2,128 | 2,169 | 2,332 | 1,979 | |||||||||||||||
|
Interest sensitive and index product benefits
|
148,320 | 155,667 | 224,331 | 195,284 | 140,704 | |||||||||||||||
|
Amortization of deferred sales inducements
|
27,719 | 24,942 | 24,503 | 22,774 | 20,772 | |||||||||||||||
|
Change in fair value of embedded derivatives
|
28,112 | 1,483 | – | – | – | |||||||||||||||
|
Interest expense on notes payable
|
7,861 | 4,940 | 4,673 | 4,651 | 3,565 | |||||||||||||||
|
Interest expense on subordinated debentures
|
3,700 | 3,805 | 3,716 | 3,685 | 3,741 | |||||||||||||||
|
Interest expense on amounts due under repurchase agreements
|
– | – | – | – | 190 | |||||||||||||||
|
Amortization of deferred policy acquisition costs
|
50,788 | 47,754 | 46,417 | 44,175 | 41,732 | |||||||||||||||
|
Other operating costs and expenses
|
17,715 | 16,213 | 16,702 | 15,985 | 11,950 | |||||||||||||||
|
Total benefits and expenses
|
285,837 | 256,932 | 322,511 | 288,886 | 224,633 | |||||||||||||||
|
Operating income before income taxes
|
40,713 | 42,357 | 44,900 | 39,600 | 44,200 | |||||||||||||||
|
Income tax expense
|
14,319 | 14,795 | 15,692 | 13,817 | 15,486 | |||||||||||||||
|
Operating income (a)
|
26,394 | 27,562 | 29,208 | 25,783 | 28,714 | |||||||||||||||
|
Net realized gains and net OTTI losses on investments,
net of offsets
|
(4,687 | ) | 1,950 | (11 | ) | 2,369 | 12,293 | |||||||||||||
|
Lawsuit settlement
|
(27,297 | ) | – | – | – | – | ||||||||||||||
|
Convertible debt retirement, net of income taxes
|
– | – | (171 | ) | – | (2,207 | ) | |||||||||||||
|
Net effect of derivatives and other index annuity, net of offsets
|
14,628 | (8,998 | ) | (30,530 | ) | (13,267 | ) | (2,779 | ) | |||||||||||
|
Net income (loss)
|
$ | 9,038 | $ | 20,514 | $ | (1,504 | ) | $ | 14,885 | $ | 36,021 | |||||||||
|
Operating income per common share (a)
|
$ | 0.45 | $ | 0.47 | $ | 0.50 | $ | 0.44 | $ | 0.49 | ||||||||||
|
Operating income per common share – assuming dilution (a)
|
$ | 0.41 | $ | 0.45 | $ | 0.48 | $ | 0.43 | $ | 0.48 |
|
Earnings (loss) per common share
|
$ | 0.15 | $ | 0.35 | $ | (0.03 | ) | $ | 0.26 | $ | 0.62 | |||||||||
|
Earnings (loss) per common share – assuming dilution
|
$ | 0.14 | $ | 0.33 | $ | (0.03 | ) | $ | 0.25 | $ | 0.60 | |||||||||
|
Weighted average common shares outstanding (in thousands):
|
||||||||||||||||||||
|
Earnings (loss) per common share
|
58,757 | 58,564 | 58,427 | 58,225 | 58,143 | |||||||||||||||
|
Earnings (loss) per common share - assuming dilution
|
65,054 | 62,498 | 61,592 | 61,138 | 60,946 |
| (a) |
In addition to net income (loss), we have consistently utilized operating income, operating income per common share and operating income per common share - assuming dilution, non-GAAP financial measures commonly used in the life insurance industry, as economic measures to evaluate our financial performance. Operating income equals net income (loss) adjusted to eliminate the impact of net realized gains and losses on investments including net OTTI losses recognized in operations and related deferred tax valuation allowance, loss on extinguishment of debt, the settlement of a class action lawsuit and fair value changes in derivatives and embedded derivatives. Because these items fluctuate from quarter to quarter in a manner unrelated to core operations, we believe measures excluding their impact are useful in analyzing operating trends. We believe the combined presentation and evaluation of operating income together with net income (loss), provides information that may enhance an investor’s understanding of our underlying results and profitability.
|
Page 5
| American Equity Investment Life Holding Company | |
| Financial Supplement – December 31, 2010 | |
| Capitalization/ Book Value per Share | |
|
December 31,
2010
|
December 31,
2009
|
|||||||
|
(Dollars in thousands, except per share data)
|
||||||||
|
Capitalization:
|
||||||||
|
Notes payable
|
$ | 330,835 | $ | 316,468 | ||||
|
Subordinated debentures payable to subsidiary trusts
|
268,435 | 268,347 | ||||||
|
Total debt
|
599,270 | 584,815 | ||||||
|
Total stockholders’ equity
|
938,047 | 754,623 | ||||||
|
Total capitalization
|
1,537,317 | 1,339,438 | ||||||
|
Accumulated other comprehensive (income) loss (AOCL)
|
(81,820 | ) | 30,456 | |||||
|
Total capitalization excluding AOCL (a)
|
$ | 1,455,497 | $ | 1,369,894 | ||||
|
Total stockholders’ equity
|
$ | 938,047 | $ | 754,623 | ||||
|
Accumulated other comprehensive (income) loss
|
(81,820 | ) | 30,456 | |||||
|
Total stockholders’ equity excluding AOCL (a)
|
$ | 856,227 | $ | 785,079 | ||||
|
Common shares outstanding (b)
|
58,377,233 | 57,698,687 | ||||||
|
Book Value per Share: (c)
|
||||||||
|
Book value per share including AOCL
|
$ | 16.07 | $ | 13.08 | ||||
|
Book value per share excluding AOCL (a)
|
$ | 14.67 | $ | 13.61 | ||||
|
Debt-to-Capital Ratios: (d)
|
||||||||
|
Senior debt / Total capitalization
|
22.7 | % | 23.1 | % | ||||
|
Adjusted debt / Total capitalization
|
26.2 | % | 27.7 | % | ||||
| (a) |
Total capitalization, total stockholders’ equity and book value per share excluding AOCL, non-GAAP financial measures, are based on stockholders’ equity excluding the effect of AOCL. Since AOCL fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale investments, we believe these non-GAAP financial measures provide useful supplemental information.
|
| (b) |
Common shares outstanding include shares held by the NMO Deferred Compensation Trust: 2010 -1,855,835 shares; 2009 - 2,022,800 shares and exclude unallocated shares held by ESOP: 2010 - 447,048 shares; 2009 - 527,272 shares.
|
| (c) |
Book value per share including and excluding AOCL is calculated as total stockholders’ equity and total stockholders’ equity excluding AOCL divided by the total number of shares of common stock outstanding.
|
| (d) |
Debt-to-capital ratios are computed using total capitalization excluding AOCL. Adjusted debt includes notes payable and the portion of the total subordinated debentures payable to subsidiary trusts outstanding (qualifying trust preferred securities) that exceeds 15% of total capitalization including AOCL.
|
Page 6
| American Equity Investment Life Holding Company | |
| Financial Supplement – December 31, 2010 | |
| Annuity Deposits by Product Type | |
|
Three Months Ended
December 31,
|
Year Ended
December 31,
|
|||||||||||||||
|
Product Type
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
|
|
(Dollars in thousands)
|
|||||||||||||||
|
Fixed Index Annuities:
|
|
|
|
|
||||||||||||
|
Index Strategies
|
$ | 871,622 | $ | 372,102 | $ | 2,401,891 | $ | 1,535,477 | ||||||||
|
Fixed Strategy
|
459,711 | 386,907 | 1,551,007 | 1,849,833 | ||||||||||||
|
|
1,331,333 | 759,009 | 3,952,898 | 3,385,310 | ||||||||||||
|
Fixed Rate Annuities:
|
||||||||||||||||
|
Single-Year Rate Guaranteed
|
134,561 | 36,633 | 331,705 | 113,511 | ||||||||||||
|
Multi-Year Rate Guaranteed
|
88,590 | 104,301 | 384,116 | 178,737 | ||||||||||||
|
|
223,151 | 140,934 | 715,821 | 292,248 | ||||||||||||
|
Total before coinsurance ceded
|
1,554,484 | 899,943 | 4,668,719 | 3,677,558 | ||||||||||||
|
Coinsurance ceded
|
76,665 | 234,640 | 478,962 | 749,260 | ||||||||||||
|
Net after coinsurance ceded
|
$ | 1,477,819 | $ | 665,303 | $ | 4,189,757 | $ | 2,928,298 | ||||||||
| Surrender Charge Protection and Account Values by Product Type |
|
Annuity Surrender Charges and Net (of coinsurance) Account Values at December 31, 2010
|
||||||||||||||||||||
|
Surrender Charge
|
Net Account Value
|
|||||||||||||||||||
|
Product Type
|
Avg.
Years
At Issue
|
Avg.
Years
Remaining
|
Avg.
%
Remaining
|
Dollars in
Thousands
|
%
|
|||||||||||||||
|
Fixed Index Annuities
|
14.3 | 11.0 | 16.1 | % | $ | 18,423,555 | 91.0 | % | ||||||||||||
|
Single-Year Fixed Rate Guaranteed Annuities
|
10.9 | 4.6 | 7.4 | % | 1,325,154 | 6.5 | % | |||||||||||||
|
Multi-Year Fixed Rate Guaranteed Annuities
|
6.6 | 2.2 | 4.9 | % | 502,526 | 2.5 | % | |||||||||||||
|
Total
|
13.9 | 10.3 | 15.2 | % | $ | 20,251,235 | 100.0 | % | ||||||||||||
Page 7
| American Equity Investment Life Holding Company | |
| Financial Supplement – December 31, 2010 | |
| Annuity Liability Characteristics | |
|
|
Fixed
Annuities
Account Value
|
Fixed Index
Annuities
Account Value
|
||||||
|
|
(Dollars in thousands)
|
|||||||
|
SURRENDER CHARGE PERCENTAGES (1):
|
|
|
||||||
|
No surrender charge
|
$ | 359,519 | $ | 330,456 | ||||
|
0.0% < 2.0%
|
30,374 | 46,432 | ||||||
|
2.0% < 3.0%
|
92,958 | 105,413 | ||||||
|
3.0% < 4.0%
|
40,020 | 165,577 | ||||||
|
4.0% < 5.0%
|
239,380 | 424,337 | ||||||
|
5.0% < 6.0%
|
47,646 | 308,184 | ||||||
|
6.0% < 7.0%
|
132,449 | 257,258 | ||||||
|
7.0% < 8.0%
|
84,604 | 283,917 | ||||||
|
8.0% < 9.0%
|
197,814 | 233,496 | ||||||
|
9.0% < 10.0%
|
202,518 | 568,644 | ||||||
|
10.0% or greater
|
400,398 | 15,699,841 | ||||||
|
|
$ | 1,827,680 | $ | 18,423,555 | ||||
|
|
||||||||
|
|
Fixed and
|
Weighted
|
||||||
|
|
Fixed Index
|
Average
|
||||||
|
|
Annuities
|
Surrender
|
||||||
|
|
Account Value
|
Charge
|
||||||
|
|
(Dollars in
thousands)
|
|||||||
|
SURRENDER CHARGE EXPIRATION BY YEAR
|
||||||||
|
Out of Surrender Charge
|
$ | 689,975 | 0.00 | % | ||||
|
2011
|
272,862 | 2.52 | % | |||||
|
2012
|
412,614 | 3.64 | % | |||||
|
2013
|
578,684 | 4.66 | % | |||||
|
2014
|
611,898 | 5.84 | % | |||||
|
2015
|
635,429 | 7.58 | % | |||||
|
2016
|
818,232 | 8.79 | % | |||||
|
2017
|
904,787 | 10.08 | % | |||||
|
2018
|
905,930 | 12.20 | % | |||||
|
2019
|
639,691 | 12.73 | % | |||||
|
2020
|
969,483 | 13.97 | % | |||||
|
2021
|
615,713 | 14.94 | % | |||||
|
2022
|
1,107,723 | 17.20 | % | |||||
|
2023
|
4,008,406 | 19.46 | % | |||||
|
2024
|
4,176,609 | 19.69 | % | |||||
|
2025
|
1,254,175 | 19.49 | % | |||||
|
2026
|
1,630,848 | 19.98 | % | |||||
|
2027
|
18,176 | 20.00 | % | |||||
|
|
$ | 20,251,235 | 15.22 | % | ||||
Page 8
| American Equity Investment Life Holding Company | |
| Financial Supplement – December 31, 2010 | |
| Annuity Liability Characteristics | |
|
|
Fixed
Annuities
Account Value
|
Fixed Index
Annuities
Account Value
|
||||||
|
|
(Dollars in thousands)
|
|||||||
|
APPLICABLE GUARANTEE PERIOD:
|
|
|
||||||
|
Annual reset (2)
|
$ | 1,608,976 | $ | 18,407,060 | ||||
|
Multi-year (3 - 7 years)
|
218,704 | 16,495 | ||||||
|
|
$ | 1,827,680 | $ | 18,423,555 | ||||
|
ULTIMATE MINIMUM GUARANTEE RATE:
|
|
|
||||||
| 1.50% | $ | – | $ | 6,868 | ||||
| 2.00% | 320,025 | 1,185 | ||||||
| 2.20% | 4,336 | 76,119 | ||||||
| 2.25% | 6,008 | 5,061,330 | ||||||
| 2.25% (3) | 187,941 | 968,749 | ||||||
| 3.00% (4) | 1,247,455 | 1,370,221 | ||||||
| 3.00% (5) | – | 10,658,825 | ||||||
| 3.50% (6) | – | 280,258 | ||||||
| 4.00% | 61,915 | – | ||||||
| $ | 1,827,680 | $ | 18,423,555 | |||||
|
CREDITED RATE (INCLUDING BONUS INTEREST) VS.
ULTIMATE MINIMUM GUARANTEED RATE DIFFERENTIAL
(7):
|
|
|
||||||
|
No differential
|
$ | 73,031 | $ | 4,827 | ||||
| › 0.0% - 0.25% | 898,342 | 1,055,771 | ||||||
| › 0.25% - 0.5% | 130,139 | 369,593 | ||||||
| › 0.5% - 1.0% (8) | 307,498 | 1,137,766 | ||||||
| › 1.0% - 1.5% (8) | 92,763 | 60,256 | ||||||
| › 1.5% - 2.0% | 136,208 | 2,894 | ||||||
| › 2.0% - 2.5% | 18,493 | – | ||||||
| › 2.5% - 3.0% | 75,465 | – | ||||||
|
1.50% ultimate guarantee - 2.50% wtd avg interest rate (9)
|
– | 1,485 | ||||||
|
2.00% ultimate guarantee - 2.87% wtd avg interest rate (9)
|
95,741 | – | ||||||
|
2.25% ultimate guarantee - 2.91% wtd avg interest rate (9)
|
– | 1,477,488 | ||||||
|
3.00% ultimate guarantee - 3.16% wtd avg interest rate (9)
|
– | 3,083,785 | ||||||
|
Cumulative floor
|
– | 11,229,690 | ||||||
| $ | 1,827,680 | $ | 18,423,555 | |||||
|
(1)
|
In addition, $961,370 (52.6%) of the Fixed Annuities Account Value have market value adjustment protection.
|
|
(2)
|
The contract features for substantially all of the Fixed Index Annuities Account Value provide for the annual reset of contractual features that effect the cost of money. The contract features for less than .5% of the Fixed Index Annuities Account Value are reset every two years.
|
|
(3)
|
Products have a guarantee of 2.25% for the first 10 years, and 3.00% thereafter.
|
|
(4)
|
Products have a guarantee of 3.00% on 100% of the premium.
|
|
(5)
|
Products have a guarantee of 3.00% on less than 100% of the premium.
|
|
(6)
|
Rates applicable to the minimum guaranteed surrender value are 3.50% for the first 5 years, and 3.00% thereafter (applied to less than 100% of the annuity deposits received). Minimum guaranteed rates for amounts allocated to the fixed rate strategy are 2.25% for the first 10 years, and 3.00% thereafter.
|
|
(7)
|
Recent issues may contain bonus interest rates ranging from 1.0% to 3.0%.
|
|
(8)
|
$187,941 of Fixed Annuities Account Value have a guarantee of 2.25% for the first 10 years and 3% thereafter. They begin increasing in 2014. $669,111 of Index Annuities Account Value is in fixed rate strategies that have a guarantee of 2.25% for the first 10 years and 3% thereafter. They begin increasing in 2014.
|
|
(9)
|
The minimum guaranteed interest rate for the fixed rate or the fixed rate strategy is 1.0%. The ultimate guaranteed rate is applied on less than 100% of the premium.
|
Page 9
| American Equity Investment Life Holding Company | |
| Financial Supplement – December 31, 2010 | |
| Spread Results | |
|
|
Year Ended
December 31,
|
|||||||
|
|
2010
|
2009
|
||||||
|
Average yield on invested assets
|
6.06% | 6.30% | ||||||
|
Cost of money:
|
||||||||
|
Aggregate
|
2.91% | 3.26% | ||||||
|
Cost of money for fixed index annuities
|
2.86% | 3.24% | ||||||
|
Average crediting rate for fixed rate annuities:
|
||||||||
|
Annually adjustable
|
3.26% | 3.26% | ||||||
|
Multi-year rate guaranteed
|
3.74% | 3.88% | ||||||
|
Investment spread:
|
||||||||
|
Aggregate
|
3.15% | 3.04% | ||||||
|
Fixed index annuities
|
3.20% | 3.06% | ||||||
|
Fixed rate annuities:
|
||||||||
|
Annually adjustable
|
2.80% | 3.04% | ||||||
|
Multi-year rate guaranteed
|
2.32% | 2.42% | ||||||
| Summary of Invested Assets |
|
|
December 31, 2010
|
December 31, 2009
|
||||||||||||||
|
|
Carrying
Amount
|
Percent
|
Carrying
Amount
|
Percent
|
||||||||||||
|
|
(Dollars in thousands)
|
|||||||||||||||
|
Fixed maturity securities:
|
|
|
|
|
||||||||||||
|
United States Government full faith and credit
|
$ | 4,388 | 0.1 | % | $ | 3,310 | – | |||||||||
|
United States Government sponsored agencies
|
3,750,065 | 18.9 | % | 5,557,971 | 36.2 | % | ||||||||||
|
United States municipalities, states and territories
|
2,367,003 | 11.9 | % | 355,634 | 2.3 | % | ||||||||||
|
Corporate securities
|
7,652,850 | 38.6 | % | 3,933,198 | 25.6 | % | ||||||||||
|
Residential mortgage backed securities
|
2,878,557 | 14.6 | % | 2,489,101 | 16.2 | % | ||||||||||
|
Total fixed maturity securities
|
16,652,863 | 84.1 | % | 12,339,214 | 80.3 | % | ||||||||||
|
Equity securities
|
65,961 | 0.3 | % | 93,086 | 0.6 | % | ||||||||||
|
Mortgage loans on real estate
|
2,598,641 | 13.1 | % | 2,449,778 | 15.9 | % | ||||||||||
|
Derivative instruments
|
479,786 | 2.4 | % | 479,272 | 3.1 | % | ||||||||||
|
Other investments
|
19,680 | 0.1 | % | 12,760 | 0.1 | % | ||||||||||
|
|
$ | 19,816,931 | 100.0 | % | $ | 15,374,110 | 100.0 | % | ||||||||
Page 10
| American Equity Investment Life Holding Company | |
| Financial Supplement – December 31, 2010 | |
| Credit Quality of Fixed Maturity Securities - December 31, 2010 |
|
NAIC
Designation
|
Carrying
Amount
|
Percent
|
Rating Agency
Rating
|
Carrying
Amount
|
Percent
|
|||||||||||||||
|
|
(Dollars in thousands)
|
|
(Dollars in thousands)
|
|||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| 1 | $ | 12,262,263 | 73.6 | % |
Aaa/Aa/A
|
$ | 11,599,255 | 69.7 | % | |||||||||||
| 2 | 4,012,076 | 24.1 | % |
Baa
|
3,725,920 | 22.4 | % | |||||||||||||
| 3 | 348,256 | 2.1 | % |
Ba
|
294,200 | 1.8 | % | |||||||||||||
| 4 | 19,178 | 0.1 | % | B | 69,033 | 0.4 | % | |||||||||||||
| 5 | 6,262 | 0.1 | % |
Caa and lower
|
959,437 | 5.7 | % | |||||||||||||
| 6 | 4,828 | – |
In or near default
|
5,018 | – | |||||||||||||||
| $ | 16,652,863 | 100.0 | % | $ | 16,652,863 | 100.0 | % | |||||||||||||
| Watch List Securities - December 31, 2010 |
|
General Description
|
Amortized
Cost
|
Unrealized Losses
|
Fair Value
|
Months Below
Amortized Cost
|
||||||||||||
|
|
|
|
||||||||||||||
|
Corporate bonds:
|
|
|
|
|
||||||||||||
|
Finance, insurance and real estate companies
|
$ | 10,260 | $ | (660 | ) | $ | 9,600 | 0 - 45 | ||||||||
|
U.S. retail company
|
10,479 | (1,304 | ) | 9,175 | 67 | |||||||||||
|
|
$ | 20,739 | $ | (1,964 | ) | $ | 18,775 | |||||||||
Page 11
| American Equity Investment Life Holding Company | |
|
Financial Supplement – December 31, 2010
|
|
| Summary of Residential Mortgage Backed Securities |
|
Collateral Type
|
NAIC
Designation
|
Principal
Amount
|
Amortized
Cost
|
Fair
Value
|
||||||||||||
|
|
|
(Dollars in thousands)
|
||||||||||||||
|
OTTI has not been recognized
|
|
|
|
|
||||||||||||
|
Government agency
|
1 | $ | 341,430 | $ | 308,917 | $ | 307,939 | |||||||||
|
Prime
|
1 | 1,661,865 | 1,573,960 | 1,634,953 | ||||||||||||
|
|
2 | 1,500 | 1,480 | 1,363 | ||||||||||||
|
|
3 | 52,677 | 51,239 | 45,499 | ||||||||||||
|
Alt-A
|
1 | 55,022 | 54,512 | 56,072 | ||||||||||||
|
|
2 | 5,123 | 5,216 | 4,708 | ||||||||||||
|
|
$ | 2,117,617 | $ | 1,995,324 | $ | 2,050,534 | ||||||||||
|
OTTI has been recognized
|
||||||||||||||||
|
Prime
|
1 | $ | 135,747 | $ | 123,053 | $ | 115,519 | |||||||||
|
|
2 | 331,762 | 304,578 | 279,488 | ||||||||||||
|
|
3 | 62,145 | 58,765 | 52,738 | ||||||||||||
|
Alt-A
|
1 | 260,021 | 224,492 | 212,030 | ||||||||||||
|
|
2 | 183,992 | 146,413 | 125,259 | ||||||||||||
|
|
3 | 49,314 | 43,343 | 40,287 | ||||||||||||
|
|
6 | 4,709 | 4,060 | 2,702 | ||||||||||||
|
|
$ | 1,027,690 | $ | 904,704 | $ | 828,023 | ||||||||||
|
Total by collateral type
|
||||||||||||||||
|
Government agency
|
$ | 341,430 | $ | 308,917 | $ | 307,939 | ||||||||||
|
Prime
|
2,245,696 | 2,113,075 | 2,129,560 | |||||||||||||
|
Alt-A
|
558,181 | 478,036 | 441,058 | |||||||||||||
|
|
$ | 3,145,307 | $ | 2,900,028 | $ | 2,878,557 | ||||||||||
|
Total by NAIC designation
|
||||||||||||||||
|
|
1 | $ | 2,454,085 | $ | 2,284,934 | $ | 2,326,513 | |||||||||
|
|
2 | 522,377 | 457,687 | 410,818 | ||||||||||||
|
|
3 | 164,136 | 153,347 | 138,524 | ||||||||||||
|
|
6 | 4,709 | 4,060 | 2,702 | ||||||||||||
|
|
$ | 3,145,307 | $ | 2,900,028 | $ | 2,878,557 | ||||||||||
Page 12
| American Equity Investment Life Holding Company | |
|
Financial Supplement – December 31, 2010
|
|
|
Mortgage Loans by Region and Property Type
|
|
|
December 31, 2010
|
December 31, 2009
|
||||||||||||||
|
|
Carrying
Amount
|
Percent
|
Carrying
Amount
|
Percent
|
||||||||||||
|
|
(Dollars in thousands)
|
|||||||||||||||
|
Geographic distribution
|
|
|
|
|
||||||||||||
|
East
|
$ | 618,250 | 23.6 | % | $ | 560,256 | 22.9 | % | ||||||||
|
Middle Atlantic
|
172,443 | 6.6 | % | 168,246 | 6.9 | % | ||||||||||
|
Mountain
|
402,965 | 15.4 | % | 388,940 | 15.8 | % | ||||||||||
|
New England
|
42,695 | 1.6 | % | 44,541 | 1.8 | % | ||||||||||
|
Pacific
|
247,254 | 9.5 | % | 216,382 | 8.8 | % | ||||||||||
|
South Atlantic
|
496,606 | 19.0 | % | 464,077 | 18.9 | % | ||||||||||
|
West North Central
|
419,002 | 16.0 | % | 410,883 | 16.7 | % | ||||||||||
|
West South Central
|
215,650 | 8.3 | % | 201,719 | 8.2 | % | ||||||||||
|
|
2,614,865 | 100.0 | % | 2,455,044 | 100.0 | % | ||||||||||
|
Loan loss allowance
|
(16,224 | ) | (5,266 | ) | ||||||||||||
|
|
$ | 2,598,641 | $ | 2,449,778 | ||||||||||||
|
Property type distribution
|
|
|
|
|
||||||||||||
|
Office
|
$ | 683,404 | 26.1 | % | $ | 664,701 | 27.1 | % | ||||||||
|
Medical Office
|
166,930 | 6.4 | % | 145,390 | 5.9 | % | ||||||||||
|
Retail
|
589,369 | 22.5 | % | 564,023 | 23.0 | % | ||||||||||
|
Industrial/Warehouse
|
666,908 | 25.5 | % | 610,279 | 24.9 | % | ||||||||||
|
Hotel
|
151,516 | 5.8 | % | 155,594 | 6.3 | % | ||||||||||
|
Apartments
|
131,682 | 5.1 | % | 122,854 | 5.0 | % | ||||||||||
|
Mixed use/other
|
225,056 | 8.6 | % | 192,203 | 7.8 | % | ||||||||||
|
|
2,614,865 | 100.0 | % | 2,455,044 | 100.0 | % | ||||||||||
|
|
(16,224 | ) | (5,266 | ) | ||||||||||||
|
|
$ | 2,598,641 | $ | 2,449,778 | ||||||||||||
Page 13
| American Equity Investment Life Holding Company | |
|
Financial Supplement – December 31, 2010
|
|
|
Shareholder Information
|
Corporate Offices:
American Equity Investment Life Holding Company
6000 Westown Parkway
West Des Moines, IA 50266
Inquiries:
D.J. Noble, Executive Chairman
(515) 457-1703, dnoble@american-equity.com
Debra J. Richardson, Executive Vice President and Secretary
(515) 273-3551, drichardson@american-equity.com
John M. Matovina, Vice Chairman, Chief Financial Officer and Treasurer
(515) 457-1813, jmatovina@american-equity.com
Common Stock and Dividend Information:
New York Stock Exchange symbol: “AEL”
|
|
|
|
|
|
|
|
Dividend
|
|
|
High
|
|
Low
|
|
Close
|
|
Declared
|
|
2010
|
|
|
|
|
|
|
|
|
First Quarter
|
$10.99
|
|
$6.65
|
|
$10.65
|
|
$0.00
|
|
Second Quarter
|
$11.64
|
|
$8.53
|
|
$10.32
|
|
$0.00
|
|
Third Quarter
|
$11.19
|
|
$9.19
|
|
$10.24
|
|
$0.00
|
|
Fourth Quarter
|
$13.01
|
|
$10.11
|
|
$12.55
|
|
$0.10
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
First Quarter
|
$7.40
|
|
$2.96
|
|
$4.16
|
|
$0.00
|
|
Second Quarter
|
$8.86
|
|
$4.01
|
|
$5.58
|
|
$0.00
|
|
Third Quarter
|
$8.65
|
|
$5.24
|
|
$7.02
|
|
$0.00
|
|
Fourth Quarter
|
$8.40
|
|
$6.10
|
|
$7.44
|
|
$0.08
|
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 Julie L. LaFollette, Investor Relations, at (515) 273-3602 or by visiting our web site at www.american-equity.com.
Page 14
| American Equity Investment Life Holding Company | |
|
Financial Supplement – December 31, 2010
|
|
|
Research Analyst Coverage
|
Steven Schwartz
Raymond James & Associates, Inc.
(312) 612-7686
steven.schwartz@raymondjames.com
Paul Sarran, Mark Finkelstein
Macquarie (USA) Equities Research
(312) 660-9137 paul.sarran@macquarie.com
(312) 660-9179 mark.finkelstein@macquarie.com
Randy Binner
Friedman, Billings, Ramsey & Co., Inc.
(703) 312-1890
rbinner@fbr.com
Edward Shields
Sandler O’Neill & Partners
(312) 281-3487
eshields@sandleroneill.com
Mark Hughes
SunTrust Robinson Humphrey
(615) 748-5680
mark_hughes@rhco.com
Page 15