AMERICAN EQUITY INVESTMENT LIFE HOLDING CO - FORM 8-K - EX-99.2 - FINANCIAL SUPPLEMENT

Attached files

file	filename
8-K - 8-K - AMERICAN EQUITY INVESTMENT LIFE HOLDING CO	a2016-03x31_ael8k.htm
EX-99.1 - PRESS RELEASE - AMERICAN EQUITY INVESTMENT LIFE HOLDING CO	a2016-03x31_ael8kexhibit991.htm

Exhibit 99.2

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement

March 31, 2016



A.	Financial Highlights
	Condensed Consolidated Balance Sheets	1
	Consolidated Statements of Operations	2
	Quarterly Summary - Most Recent 5 Quarters	3
	Non-GAAP Financial Measures
	Reconciliation from Net Income (Loss) to Operating Income	3
	Summary of Adjustments to Arrive at Operating Income	4
	Quarterly Summary - Reconciliation from Net Income (Loss) to Operating Income	5
	Quarterly Summary - Summary of Adjustments to Arrive at Operating Income	6
	Capitalization/Book Value per Share	7
	Spread Results	8

B.	Product Summary
	Summary of Cost of Money for Deferred Annuities	8
	Annuity Account Balance Rollforward	8
	Annuity Deposits by Product Type	9
	Surrender Charge Protection and Account Values by Product Type	9
	Annuity Liability Characteristics	10

C.	Investment Summary
	Summary of Invested Assets	13
	Credit Quality of Fixed Maturity Securities	13
	Watch List Securities	14
	Fixed Maturity Securities by Sector	15
	Mortgage Loans on Commercial Real Estate	17

D.	Shareholder Information	18

E.	Research Analyst Coverage	19

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - March 31, 2016

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)



	March 31, 2016		December 31, 2015
Assets
Investments:
Fixed maturity securities:
Available for sale, at fair value	$	38,410,000	$	36,421,839
Held for investment, at amortized cost	76,672		76,622
Equity securities, available for sale, at fair value	7,813		7,828
Mortgage loans on real estate	2,471,435		2,435,257
Derivative instruments	387,469		337,256
Other investments	290,556		291,530
Total investments	41,643,945		39,570,332

Cash and cash equivalents	707,177		397,749
Coinsurance deposits	3,586,871		3,187,470
Accrued investment income	393,333		362,104
Deferred policy acquisition costs	2,667,185		2,905,136
Deferred sales inducements	2,047,763		2,232,148
Deferred income taxes	101,098		232,683
Income taxes recoverable	9,026		29,599
Other assets	106,538		112,171
Total assets	$	51,262,936	$	49,029,392

Liabilities and Stockholders' Equity
Liabilities:
Policy benefit reserves	$	47,456,425	$	45,495,431
Other policy funds and contract claims	314,068		324,850
Notes payable	393,482		393,227
Subordinated debentures	241,550		241,452
Other liabilities	623,095		629,897
Total liabilities	49,028,620		47,084,857

Stockholders' equity:
Common stock	82,155		81,354
Additional paid-in capital	635,732		630,367
Accumulated other comprehensive income	530,119		201,663
Retained earnings	986,310		1,031,151
Total stockholders' equity	2,234,316		1,944,535
Total liabilities and stockholders' equity	$	51,262,936	$	49,029,392

Page 1

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - March 31, 2016

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)

(Unaudited)



	Three Months Ended March 31,
	2016			2015
Revenues:
Premiums and other considerations	$	7,345		$	6,997
Annuity product charges	36,505			28,682
Net investment income	450,826			399,669
Change in fair value of derivatives	(74,065		)	(31,100		)
Net realized gains (losses) on investments, excluding other than temporary impairment ("OTTI") losses	2,687			4,879
OTTI losses on investments:
Total OTTI losses	(6,018		)	(132		)
Portion of OTTI losses recognized in (from) other comprehensive income	324			—
Net OTTI losses recognized in operations	(5,694		)	(132		)
Total revenues	417,604			408,995

Benefits and expenses:
Insurance policy benefits and change in future policy benefits	9,109			9,220
Interest sensitive and index product benefits	97,671			282,825
Amortization of deferred sales inducements	27,479			10,953
Change in fair value of embedded derivatives	265,857			51,213
Interest expense on notes payable	6,880			7,339
Interest expense on subordinated debentures	3,168			3,016
Amortization of deferred policy acquisition costs	49,713			14,286
Other operating costs and expenses	26,830			21,122
Total benefits and expenses	486,707			399,974
Income (loss) before income taxes	(69,103		)	9,021
Income tax expense (benefit)	(24,262		)	3,118
Net income (loss)	$	(44,841	)	$	5,903

Earnings (loss) per common share	$	(0.55	)	$	0.08
Earnings (loss) per common share - assuming dilution	$	(0.55	)	$	0.07
Weighted average common shares outstanding (in thousands):
Earnings (loss) per common share	82,129			77,042
Earnings (loss) per common share - assuming dilution	82,961			79,118

Page 2

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - March 31, 2016

Quarterly Summary - Most Recent 5 Quarters (Unaudited)



	Q1 2016			Q4 2015			Q3 2015			Q2 2015			Q1 2015
	(Dollars in thousands, except per share data)
Revenues:
Traditional life insurance premiums	$	2,634		$	2,891		$	2,664		$	2,659		$	2,703
Life contingent immediate annuity considerations	4,711			7,788			5,671			7,378			4,294
Surrender charges	14,565			10,543			13,104			11,413			11,554
Lifetime income benefit rider fees	21,940			26,559			24,871			20,996			17,128
Net investment income	450,826			438,262			436,085			418,176			399,669
Change in fair value of derivatives	(74,065		)	69,338			(351,360		)	(23,024		)	(31,100		)
Net realized gains (losses) on investments, excluding OTTI	2,687			(151		)	1,159			4,324			4,879
Net OTTI losses recognized in operations	(5,694		)	(13,347		)	(5,229		)	(828		)	(132		)
Total revenues	417,604			541,883			126,965			441,094			408,995

Benefits and expenses:
Traditional life insurance policy benefits and change in future policy benefits	1,545			2,044			1,730			1,971			1,931
Life contingent immediate annuity benefits and change in future policy benefits	7,564			10,785			9,229			10,479			7,289
Interest sensitive and index product benefits (b)(c)	97,671			165,622			213,465			306,141			282,825
Amortization of deferred sales inducements (a)(d)	27,479			57,112			65,807			75,518			10,953
Change in fair value of embedded derivatives	265,857			118,414			(414,724		)	(219,601		)	51,213
Interest expense on notes payable	6,880			6,873			7,283			7,354			7,339
Interest expense on subordinated debentures	3,168			3,101			3,075			3,047			3,016
Amortization of deferred policy acquisition costs (a)(d)	49,713			99,243			67,885			104,700			14,286
Other operating costs and expenses	26,830			25,731			24,497			24,868			21,122
Total benefits and expenses	486,707			488,925			(21,753		)	314,477			399,974
Income (loss) before income taxes	(69,103		)	52,958			148,718			126,617			9,021
Income tax expense (benefit)	(24,262		)	19,182			51,412			43,772			3,118
Net income (loss) (a)(b)(c)(d)	$	(44,841	)	$	33,776		$	97,306		$	82,845		$	5,903

Earnings (loss) per common share	$	(0.55	)	$	0.41		$	1.22		$	1.07		$	0.08
Earnings (loss) per common share - assuming dilution (a)(b)(c)(d)	$	(0.55	)	$	0.40		$	1.19		$	1.05		$	0.07
Weighted average common shares outstanding (in thousands):
Earnings (loss) per common share	82,129			81,733			79,676			77,237			77,042
Earnings (loss) per common share - assuming dilution	82,961			83,851			81,559			79,227			79,118


(a)	Q1 2016 includes expense from unlocking which increased amortization of deferred sales inducements and deferred policy acquisition costs by $17.9 million and $26.1 million, respectively, and increased the net loss and loss per common share- assuming dilution by $28.4 million and $0.35 per share, respectively.

(b)

Q4 2015 includes an adjustment to reserves for living income benefit riders which reduced interest sensitive and index product benefits by $1.9 million, which after related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs and income taxes, increased net income and earnings per common share-assuming dilution by $0.7 million and $0.01 per share, respectively.


(c)	Q3 2015 includes expense from the revision of assumptions used in determining reserves held for living income benefit riders. The impact increased interest sensitive and index product benefits by $18.3 million and decreased net income and earnings per common share - assuming dilution by $11.8 million and $0.14 per share, respectively.


(d)	Q3 2015 includes a benefit from unlocking which reduced amortization of deferred sales inducements and deferred policy acquisition costs by $5.6 million and $11.0 million, respectively, and increased net income and earnings per common share- assuming dilution by $10.7 million and $0.13 per share, respectively.

NON-GAAP FINANCIAL MEASURES

In addition to net income (loss), we have consistently utilized operating income 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 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. 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.

Reconciliation from Net Income (Loss) to Operating Income (Unaudited)



	Three Months Ended March 31,
	2016			2015
	(Dollars in thousands, except per share data)
Net income (loss)	$	(44,841	)	$	5,903
Adjustments to arrive at operating income: (a)
Net realized investment (gains) losses, including OTTI	745			(1,819		)
Change in fair value of derivatives and embedded derivatives - index annuities	63,477			43,657
Change in fair value of derivatives and embedded derivatives - debt	1,617			1,077
Operating income (a non-GAAP financial measure)	$	20,998		$	48,818

Per common share - assuming dilution:
Net income (loss)	$	(0.55	)	$	0.07
Adjustments to arrive at operating income:
Anti-dilutive effect of net loss	0.01			—
Net realized investment (gains) losses, including OTTI	0.01			(0.02		)
Change in fair value of derivatives and embedded derivatives - index annuities	0.76			0.55
Change in fair value of derivatives and embedded derivatives - debt	0.02			0.02
Operating income (a non-GAAP financial measure)	$	0.25		$	0.62


(a)	Adjustments to net income (loss) to arrive at operating income are presented net of income taxes and where applicable, are net of related adjustments to amortization of deferred sales inducements (DSI) and deferred policy acquisition costs (DAC).

Page 3

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - March 31, 2016

NON-GAAP FINANCIAL MEASURES

Summary of Adjustments to Arrive at Operating Income (Unaudited)



	Three Months Ended March 31,
	2016			2015
	(Dollars in thousands)
Net realized investment gains and losses, including OTTI:
Net realized (gains) losses on investments, including OTTI	$	3,007		$	(4,747	)
Amortization of DAC and DSI	(1,852		)	1,926
Income taxes	(410		)	1,002
	$	745		$	(1,819	)
Change in fair value of derivatives and embedded derivatives:
Index annuities	$	203,584		$	163,648
Interest rate caps and swap	2,764			1,841
Amortization of DAC and DSI	(106,035		)	(97,112		)
Income taxes	(35,219		)	(23,643		)
	$	65,094		$	44,734

Page 4

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - March 31, 2016

NON-GAAP FINANCIAL MEASURES

Quarterly Summary - Most Recent 5 Quarters (Unaudited)

Reconciliation from Net Income (Loss) to Operating Income



	Q1 2016			Q4 2015			Q3 2015			Q2 2015			Q1 2015
	(Dollars in thousands, except per share data)
Net income (loss)	$	(44,841	)	$	33,776		$	97,306		$	82,845		$	5,903
Adjustments to arrive at operating income: (a)
Net realized investment (gains) losses, including OTTI	745			5,538			1,639			(1,649		)	(1,819		)
Change in fair value of derivatives and embedded derivatives - index annuities	63,477			11,675			(54,535		)	(29,274		)	43,657
Change in fair value of derivatives and embedded derivatives - debt	1,617			(848		)	1,506			(977		)	1,077
Operating income (a non-GAAP financial measure) (b)(c)(d)(e)	$	20,998		$	50,141		$	45,916		$	50,945		$	48,818

Operating income per common share - assuming dilution (b)(c)(d)(e)	$	0.25		$	0.60		$	0.56		$	0.64		$	0.62


(a)	Adjustments to net income (loss) to arrive at operating income are presented net of income taxes and where applicable, are net of related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs.


(b)	Q1 2016 includes expense from unlocking which increased amortization of deferred sales inducements and deferred policy acquisition costs by $18.1 million and $26.3 million, respectively, and decreased operating income and operating income per common share- assuming dilution by $28.6 million and $0.35 per share, respectively.

(c)

Q4 2015 includes an adjustment to reserves for living income benefit riders which reduced interest sensitive and index product benefits by $1.9 million, which after related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs and income taxes, increased operating income and operating income per common share-assuming dilution by $0.5 million and $0.01 per share, respectively.


(d)	Q3 2015 includes a benefit from unlocking which reduced amortization of deferred sales inducements and deferred policy acquisition costs by $0.5 million and $4.3 million, respectively, and increased operating income and operating income per common share- assuming dilution by $3.1 million and $0.04 per share, respectively.


(e)	Q3 2015 includes expense from the revision of assumptions used in determining reserves held for living income benefit riders. The impact increased interest sensitive and index product benefits by $18.3 million and decreased operating income and operating income per common share - assuming dilution by $11.8 million and $0.14 per share, respectively.

Page 5

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - March 31, 2016

NON-GAAP FINANCIAL MEASURES

Summary of Adjustments to Arrive at Operating Income (Unaudited)



	Q1 2016			Q4 2015			Q3 2015			Q2 2015			Q1 2015
	(Dollars in thousands)
Net realized (gains) losses on investments	$	(2,687	)	$	151		$	(1,159	)	$	(4,324	)	$	(4,879	)
Net OTTI losses recognized in operations	5,694			13,347			5,229			828			132
Change in fair value of derivatives	(59,509		)	(132,818		)	322,406			116,627			114,843
Decrease (increase) in total revenues	(56,502		)	(119,320		)	326,476			113,131			110,096

Amortization of deferred sales inducements	48,002			(3,075		)	(12,644		)	(23,306		)	38,686
Change in fair value of embedded derivatives	(265,857		)	(118,414		)	413,583			215,659			(50,646		)
Amortization of deferred policy acquisition costs	59,885			(22,175		)	3,830			(30,593		)	56,500
Increase (decrease) in total benefits and expenses	(157,970		)	(143,664		)	404,769			161,760			44,540
Increase (decrease) in income (loss) before income taxes	101,468			24,344			(78,293		)	(48,629		)	65,556
Increase (decrease) in income tax expense	35,629			7,979			(26,903		)	(16,729		)	22,641
Increase (decrease) in net income (loss)	$	65,839		$	16,365		$	(51,390	)	$	(31,900	)	$	42,915

Page 6

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - March 31, 2016

Capitalization/Book Value per Share



	March 31, 2016			December 31, 2015
	(Dollars in thousands, except per share data)
Capitalization:
Notes payable:
July 2021 Notes	$	400,000		$	400,000
Subordinated debentures payable to subsidiary trusts	246,504			246,450
Total debt	646,504			646,450
Total stockholders’ equity	2,234,316			1,944,535
Total capitalization	2,880,820			2,590,985
Accumulated other comprehensive income (AOCI)	(530,119		)	(201,663		)
Total capitalization excluding AOCI (a)	$	2,350,701		$	2,389,322

Total stockholders’ equity	$	2,234,316		$	1,944,535
Accumulated other comprehensive income	(530,119		)	(201,663		)
Total stockholders’ equity excluding AOCI (a)	$	1,704,197		$	1,742,872

Common shares outstanding (b)	82,170,385			81,584,091

Book Value per Share: (c)
Book value per share including AOCI	$	27.19		$	23.83
Book value per share excluding AOCI (a)	$	20.74		$	21.36

Debt-to-Capital Ratios: (d)
Senior debt / Total capitalization	17.0		%	16.7		%
Adjusted debt / Total capitalization	17.0		%	16.7		%


(a)	Total capitalization, total stockholders’ equity and book value per share excluding AOCI, non-GAAP financial measures, are based on 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 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: 2016 - 15,058 shares; 2015 - 230,012 shares


(c)	Book value per share including and excluding AOCI is calculated as total stockholders’ equity and total stockholders’ equity excluding AOCI divided by the total number of shares of common stock outstanding.


(d)	Debt-to-capital ratios are computed using total capitalization excluding AOCI. 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 excluding AOCI.

Page 7

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - March 31, 2016

Spread Results



	Three Months Ended March 31,
	2016	2015
Average yield on invested assets	4.58%	4.74%
Aggregate cost of money	1.93%	1.97%
Aggregate investment spread	2.65%	2.77%

Impact of:
Investment yield - additional prepayment income	0.08%	0.01%
Cost of money effect of over hedging	—%	0.07%

Weighted average investments (in thousands)	$39,465,521	$33,812,366

Weighted average investments include fixed maturity securities at amortized cost and equity securities at cost. 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



	Three Months Ended March 31,
	2016			2015
	(Dollars in thousands)
Included in interest sensitive and index product benefits:
Index credits	$	6,531		$	197,603
Interest credited	62,702			63,048
Included in change in fair value of derivatives:
Proceeds received at option expiration	(6,742		)	(202,582		)
Pro rata amortization of option cost	139,766			118,801
Cost of money for deferred annuities	$	202,257		$	176,870

Weighted average liability balance outstanding (in thousands)	$	41,884,781		$	35,917,036

Annuity Account Balance Rollforward



	Three Months Ended March 31,
	2016			2015
	(Dollars in thousands)
Account balances at beginning of period	$	41,249,647		$	35,363,041
Net deposits	1,628,753			1,202,798
Premium bonuses	107,674			93,590
Fixed interest credited and index credits	69,233			260,651
Surrender charges	(14,565		)	(11,554		)
Lifetime income benefit rider fees	(21,940		)	(17,128		)
Surrenders, withdrawals, deaths, etc.	(498,887		)	(420,364		)
Account balances at end of period	$	42,519,915		$	36,471,034

Page 8

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - March 31, 2016

Annuity Deposits by Product Type



	Three Months Ended March 31,				Year Ended December 31,
Product Type	2016		2015		2015
	(Dollars in thousands)
Fixed index annuities	$	1,688,002	$	1,227,240	$	6,791,689
Annual reset fixed rate annuities	16,705		11,050		45,182
Multi-year fixed rate annuities	385,032		69,502		214,356
Single premium immediate annuities	5,314		8,532		32,752
Total before coinsurance ceded	2,095,053		1,316,324		7,083,979
Coinsurance ceded	460,986		104,994		471,822
Net after coinsurance ceded	$	1,634,067	$	1,211,330	$	6,612,157

Surrender Charge Protection and Account Values by Product Type

Annuity Surrender Charges and Net (of coinsurance) Account Values at March 31, 2016:



	Surrender Charge			Net Account Value
Product Type	Avg. Years At Issue	Avg. Years Remaining	Avg. % Remaining	Dollars in Thousands		%

Fixed Index Annuities	13.8	9.3	14.6%	$	40,551,525	95.4	%
Annual Reset Fixed Rate Annuities	10.9	3.7	7.6%	1,415,355		3.3	%
Multi-Year Fixed Rate Annuities	6.6	2.2	4.8%	553,035		1.3	%
Total	13.6	9.0	14.2%	$	42,519,915	100.0	%

Page 9

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - March 31, 2016

Annuity Liability Characteristics



	Fixed Annuities Account Value		Fixed Index Annuities Account Value
	(Dollars in thousands)
SURRENDER CHARGE PERCENTAGES:
No surrender charge	$	749,631	$	1,408,205
0.0% < 2.0%	20,004		604,083
2.0% < 3.0%	66,243		60,981
3.0% < 4.0%	17,927		613,167
4.0% < 5.0%	83,544		50,744
5.0% < 6.0%	99,191		496,695
6.0% < 7.0%	52,059		349,596
7.0% < 8.0%	75,349		451,147
8.0% < 9.0%	63,087		799,216
9.0% < 10.0%	189,932		1,508,335
10.0% or greater	551,423		34,209,356
	$	1,968,390	$	40,551,525



	Fixed and Fixed Index Annuities Account Value		Weighted Average Surrender Charge
	(Dollars in thousands)
SURRENDER CHARGE EXPIRATION BY YEAR:
Out of Surrender Charge	$	2,157,836	0.00	%
2016	561,017		1.68	%
2017	822,093		2.83	%
2018	753,039		5.22	%
2019	557,964		6.74	%
2020	920,345		8.40	%
2021	1,307,581		9.80	%
2022	1,979,260		11.70	%
2023	4,875,328		13.61	%
2024	5,417,282		14.63	%
2025	5,927,385		14.80	%
2026	3,340,155		16.31	%
2027	2,772,459		17.97	%
2028	2,465,002		18.43	%
2029	3,050,597		18.89	%
2030	2,207,432		19.34	%
2031	2,821,795		19.89	%
2032	574,244		20.00	%
2033	9,101		20.00	%
	$	42,519,915	14.25	%

Page 10

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - March 31, 2016

Annuity Liability Characteristics



	Fixed Annuities Account Value		Fixed Index Annuities Account Value
	(Dollars in thousands)
CREDITED RATE VS. ULTIMATE MINIMUM GUARANTEED RATE DIFFERENTIAL:
No differential	$	930,692	$	1,153,626
› 0.0% - 0.25%	183,397		52,150
› 0.25% - 0.5%	220,541		148,253
› 0.5% - 1.0%	148,196		716,787
› 1.0% - 1.5%	42,679		1,655
› 1.5% - 2.0%	1,367		—
› 2.0% - 2.5%	73		—
1.00% ultimate guarantee - 2.67% wtd avg interest rate (a)	209,781		59,673
1.50% ultimate guarantee - 1.38% wtd avg interest rate (a)	131,908		4,139,923
2.00% ultimate guarantee - 2.26% wtd avg interest rate (a)	99,756		—
2.25% ultimate guarantee - 2.3% wtd avg interest rate (a)	—		1,222,720
3.00% ultimate guarantee - 2.52% wtd avg interest rate (a)	—		2,423,414
Allocated to index strategies (see tables that follow)	—		30,633,324
	$	1,968,390	$	40,551,525


(a)	The minimum guaranteed interest rate for the fixed rate or the fixed rate strategy is 1.00%. 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 March 31, 2016 for fixed annuities and funds allocated to the fixed rate strategy for fixed index annuities would decrease by 0.36%.

Page 11

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - March 31, 2016

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	(Dollars in thousands)
At minimum	$	1,817	$	26,506	$	1,633,352	$	50,584	$	244,058
1.75% - 3%	3,695,132		—		—		—		—
3% - 4%	2,805,335		83,215		—		—		—
4% - 5%	141,691		143,422		3,754,456		—		—
5% - 6%	285,852		102,364		2,208,809		—		—
6% - 7%	—		—		41		—		—
>= 7%	—		16,165		1,477		70,584		16,046



Annual Monthly Average and Point-to-Point with Participation Rates
	Minimum Guaranteed Participation Rate
	10%		20% - 25%		35%		50% +
Current Participation Rate	(Dollars in thousands)
At minimum	$	582	$	444,619	$	144,888	$	169,865
< 20%	347,867		—		—		—
20% - 40%	715,404		217,674		—		—
40% - 60%	333,799		131,843		97,781		283
>= 60%	4,818		—		—		—



S&P 500 Monthly Point-to-Point - Minimum Guaranteed Monthly Cap = 1.0%
(Dollars in thousands)
Current Cap
At minimum	$	16,326
1.2% - 1.9%	9,152,213
2.0% - 2.3%	1,289,672
>= 2.4%	14,945



Volatility Control Index
(Dollars in thousands)
Current Asset Fee
At Maximum	$	—
0.75% - 1.75%	129,392
2.25% - 2.75%	1,253,793
3.00%	745,329

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 0.58% based upon prices of options for the week ended April 20, 2016.

Page 12

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - March 31, 2016

Summary of Invested Assets



	March 31, 2016				December 31, 2015
	Carrying Amount		Percent		Carrying Amount		Percent
	(Dollars in thousands)
Fixed maturity securities:
United States Government full faith and credit	$	473,402	1.2	%	$	471,256	1.3	%
United States Government sponsored agencies	1,566,287		3.8	%	1,398,611		3.5	%
United States municipalities, states and territories	3,883,737		9.3	%	3,755,367		9.5	%
Foreign government obligations	221,861		0.5	%	212,565		0.5	%
Corporate securities	25,245,140		60.6	%	23,879,016		60.3	%
Residential mortgage backed securities	1,432,353		3.5	%	1,462,072		3.7	%
Commercial mortgage backed securities	4,503,261		10.8	%	4,174,396		10.5	%
Other asset backed securities	1,160,631		2.8	%	1,145,178		2.9	%
Total fixed maturity securities	38,486,672		92.5	%	36,498,461		92.2	%
Equity securities	7,813		—	%	7,828		—	%
Mortgage loans on real estate	2,471,435		5.9	%	2,435,257		6.2	%
Derivative instruments	387,469		0.9	%	337,256		0.9	%
Other investments	290,556		0.7	%	291,530		0.7	%
	$	41,643,945	100.0	%	$	39,570,332	100.0	%

Credit Quality of Fixed Maturity Securities - March 31, 2016



NAIC Designation	Carrying Amount		Percent		Rating Agency Rating	Carrying Amount		Percent
	(Dollars in thousands)					(Dollars in thousands)
1	$	25,264,168	65.6	%	Aaa/Aa/A	$	24,978,026	64.9	%
2	12,223,107		31.8	%	Baa	12,038,516		31.3	%
3	903,557		2.4	%	Ba	838,831		2.2	%
4	86,816		0.2	%	B	99,856		0.3	%
5	1,537		—	%	Caa and lower	373,398		1.0	%
6	7,487		—	%	In or near default	158,045		0.3	%
	$	38,486,672	100.0	%		$	38,486,672	100.0	%

Page 13

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - March 31, 2016

Watch List Securities - March 31, 2016



General Description	Amortized Cost		Unrealized Gains (Losses)			Fair Value		Months Below Amortized Cost
	(Dollars in thousands)
Investment grade
Corporate securities:
Financials	$	20,000	$	(3,102	)	$	16,898	55
Other asset backed securities:
Financials	2,507		(752		)	1,755		60
	$	22,507	$	(3,854	)	$	18,653
Below investment grade
Corporate securities:
Energy	$	45,067	$	(17,706	)	$	27,361	19 - 35
Materials	39,274		(8,550		)	30,724		9 - 38
Industrials	4,980		(2,755		)	2,225		17
Telecommunications	2,100		(562		)	1,538		21
Other asset backed securities:
Financials	8,335		(6,446		)	1,889		34
	$	99,756	$	(36,019	)	$	63,737
	$	122,263	$	(39,873	)	$	82,390

Page 14

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - March 31, 2016

Fixed Maturity Securities by Sector



	March 31, 2016				December 31, 2015
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Available for sale:
United States Government full faith and credit and sponsored agencies	$	1,989,631	$	2,039,689	$	1,856,786	$	1,869,867
United States municipalities, states and territories	3,448,482		3,883,737		3,422,667		3,755,367
Foreign government obligations	210,964		221,861		210,953		212,565
Corporate securities:
Consumer discretionary	2,043,765		2,148,671		1,983,595		2,012,874
Consumer staples	1,675,379		1,795,837		1,612,382		1,649,408
Energy	2,658,529		2,507,203		2,622,284		2,410,184
Financials	5,084,360		5,389,610		4,955,851		5,134,209
Health care	1,965,825		2,120,505		1,944,109		2,007,107
Industrials	3,308,860		3,472,200		3,236,836		3,295,598
Information technology	1,727,715		1,791,739		1,689,259		1,694,466
Materials	1,736,236		1,713,322		1,732,123		1,624,073
Telecommunications	569,190		599,170		543,689		547,424
Utilities	3,343,935		3,630,202		3,277,402		3,427,041
Residential mortgage backed securities:
Government agency	682,293		763,027		687,515		741,431
Prime	435,655		451,729		474,756		493,096
Alt-A	195,827		217,597		204,714		227,545
Commercial mortgage backed securities:
Government agency	424,551		454,301		359,273		370,966
Other	4,048,301		4,048,960		3,878,992		3,803,430
Other asset backed securities:
Consumer discretionary	61,736		60,891		62,852		61,759
Energy	8,082		8,225		8,143		9,097
Financials	840,032		843,132		816,906		821,343
Industrials	219,295		228,458		223,414		231,678
Telecommunications	12,696		13,544		13,789		14,575
Utilities	5,447		6,381		5,420		6,726
Redeemable preferred stock - financials	—		9		—		10
	$	36,696,786	$	38,410,000	$	35,823,710	$	36,421,839
Held for investment:
Corporate security - financials	$	76,672	$	67,672	$	76,622	$	65,377

Page 15

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - March 31, 2016

Fixed Maturity Securities by Sector

Energy and Metals & Mining

In the table on the previous page, oil and metals and mining exposure is reflected within the foreign government, energy, material, utilities, and industrial sectors. Our privately placed available for sale fixed maturity securities at March 31, 2016 total $168.6 million fair value ($185.4 million amortized cost) in Energy and $37.6 million fair value ($46.1 million amortized cost) in Metals & Mining and are not included in the following tables.



	March 31, 2016
Sector and Subsector	Amortized Cost		Fair Value		Unrealized Gain (Loss)			Average Credit Rating
	(Dollars in thousands)
Energy
Independent	$	499,826	$	453,307	$	(46,519	)	Baa
Integrated	491,548		490,397		(1,151		)	A
Oil field services	405,265		349,100		(56,165		)	Baa
Refining	104,656		103,499		(1,157		)	Baa
Midstream	754,709		705,376		(49,333		)	Baa
Government owned no guarantee	284,224		292,638		8,414			A
Metals & Mining	562,019		506,579		(55,440		)	Baa
Total Energy and Metals & Mining	$	3,102,247	$	2,900,896	$	(201,351	)	Baa



	Amortized Cost at March 31, 2016
	Energy
NRSRO Rating	Independent		Integrated		Oil field services		Refining		Midstream		Government Owned No Guarantee		Metals & Mining		Total
	(Dollars in thousands)
Aaa	$	—	$	59,947	$	—	$	—	$	—	$	—			$	59,947
Aa	—		168,245		28,286		—		—		19,910		—		216,441
A	89,462		78,831		107,536		12,110		90,885		214,438		76,590		669,852
Baa	364,126		149,300		176,212		92,546		629,792		25,260		287,934		1,725,170
Ba	32,195		35,225		93,231		—		34,032		—		129,862		324,545
B	14,043		—		—		—		—		24,616		61,141		99,800
Below B	—		—		—		—		—		—		6,492		6,492
	$	499,826	$	491,548	$	405,265	$	104,656	$	754,709	$	284,224	$	562,019	$	3,102,247



	Fair Value at March 31, 2016
	Energy
NRSRO Rating	Independent		Integrated		Oil field services		Refining		Midstream		Government Owned No Guarantee		Metals & Mining		Total
	(Dollars in thousands)
Aaa	$	—	$	63,710	$	—	$	—	$	—	$	—	$	—	$	63,710
Aa	—		173,482		28,476		—		—		21,913		—		223,871
A	91,078		79,032		113,354		11,267		92,924		228,483		74,871		691,009
Baa	326,874		143,433		147,831		92,232		589,309		25,042		273,015		1,597,736
Ba	26,045		30,740		59,439		—		23,143		—		112,418		251,785
B	9,310		—		—		—		—		17,200		40,686		67,196
Below B	—		—		—		—		—		—		5,589		5,589
	$	453,307	$	490,397	$	349,100	$	103,499	$	705,376	$	292,638	$	506,579	$	2,900,896

Page 16

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - March 31, 2016

Mortgage Loans on Commercial Real Estate



	March 31, 2016						December 31, 2015
	Principal			Percent			Principal		Percent
	(Dollars in thousands)
Geographic distribution
East	$	697,469		28.1		%	$	698,113	28.5	%
Middle Atlantic	158,337			6.4		%	160,261		6.6	%
Mountain	243,453			9.8		%	252,442		10.3	%
New England	13,053			0.5		%	13,161		0.5	%
Pacific	382,616			15.4		%	355,268		14.5	%
South Atlantic	470,729			18.9		%	456,227		18.6	%
West North Central	324,748			13.1		%	313,120		12.8	%
West South Central	193,377			7.8		%	201,317		8.2	%
	$	2,483,782		100.0		%	$	2,449,909	100.0	%

Property type distribution
Office	$	399,139		16.1		%	$	396,154	16.2	%
Medical office	76,686			3.1		%	77,438		3.2	%
Retail	773,741			31.1		%	790,158		32.2	%
Industrial/Warehouse	698,385			28.1		%	686,400		28.0	%
Hotel	3,308			0.1		%	3,361		0.1	%
Apartment	362,222			14.6		%	352,971		14.4	%
Mixed use/other	170,301			6.9		%	143,427		5.9	%
	$	2,483,782		100.0		%	$	2,449,909	100.0	%

	March 31, 2016			December 31, 2015
Credit Exposure - By Payment Activity
Performing	$	2,475,671		$	2,438,341
In workout	1,678			11,568
Delinquent	—			—
Collateral dependent	6,433			—
	2,483,782			2,449,909
Specific loan loss allowance	(5,750		)	(7,842		)
General loan loss allowance	(6,000		)	(6,300		)
Deferred prepayment fees	(597		)	(510		)
	$	2,471,435		$	2,435,257

Page 17

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - March 31, 2016

Shareholder Information

Corporate Offices:

American Equity Investment Life Holding Company

6000 Westown Parkway

West Des Moines, IA 50266

Inquiries:

John M. Matovina, Chief Executive Officer and President

(515) 457-1813, jmatovina@american-equity.com

Ted M. Johnson, Chief Financial Officer and Treasurer

(515) 457-1980, tjohnson@american-equity.com

Debra J. Richardson, Executive Vice President and Secretary

(515) 273-3551, drichardson@american-equity.com

Common Stock and Dividend Information:

New York Stock Exchange symbol: “AEL”



	High	Low	Close	Dividend Declared
2016
First Quarter	$23.65	$12.65	$16.80	$0.00

2015
First Quarter	$29.62	$25.46	$29.13	$0.00
Second Quarter	$29.90	$25.06	$26.98	$0.00
Third Quarter	$30.02	$22.36	$23.31	$0.00
Fourth Quarter	$28.30	$22.55	$24.03	$0.22

2014
First Quarter	$26.42	$18.84	$23.62	$0.00
Second Quarter	$25.15	$20.97	$24.60	$0.00
Third Quarter	$25.25	$21.69	$22.88	$0.00
Fourth Quarter	$29.75	$21.36	$29.19	$0.20

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 18

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - March 31, 2016

Research Analyst Coverage

Steven Schwartz

Raymond James & Associates, Inc.

(312) 612-7686

steven.schwartz@raymondjames.com

Randy Binner

Friedman, Billings, Ramsey & Co., Inc.

(703) 312-1890

rbinner@fbr.com

Mark Hughes

SunTrust Robinson Humphrey

(615) 748-5680

mark_hughes@rhco.com

John Barnidge

Sandler O'Neill & Partners, L.P.

(312) 281-3412

jbarnidge@sandleroneill.com

Erik J. Bass

Citigroup Global Markets, Inc.

(212) 816-5257

erik.bass@citi.com

Pablo Singzon II

JP Morgan

(212) 622-2295

pablo.s.singzon@jpmorgan.com

Kenneth S. Lee

RBC Capital Markets, LLC

(212) 905-5995

kenneth.s.lee@rbccm.com

Page 19

Attached files

Stock widget

Investing forum

AMERICAN EQUITY INVESTMENT LIFE HOLDING CO Reports