Attached files
| file | filename |
|---|---|
| EX-99.1 - PRESS RELEASE - AMERICAN EQUITY INVESTMENT LIFE HOLDING CO | a2020-09x30_ex991.htm |
| 8-K - 8-K - AMERICAN EQUITY INVESTMENT LIFE HOLDING CO | ael-20201029.htm |
Exhibit 99.2
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement
September 30, 2020
| A. | Financial Highlights | |||||||
| Non-GAAP Financial Measures | ||||||||
| B. | Product Summary | |||||||
| C. | Investment Summary | |||||||
| D. | ||||||||
| E. | ||||||||
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Unaudited (Dollars in thousands)
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2020 | December 31, 2019 | ||||||||||
| Assets | |||||||||||
| Investments: | |||||||||||
| Fixed maturity securities, available for sale, at fair value | $ | 51,700,743 | $ | 51,580,490 | |||||||
| Mortgage loans on real estate | 3,926,699 | 3,448,793 | |||||||||
| Derivative instruments | 874,741 | 1,355,989 | |||||||||
| Other investments | 495,740 | 492,301 | |||||||||
| Total investments | 56,997,923 | 56,877,573 | |||||||||
| Cash and cash equivalents | 2,656,632 | 2,293,392 | |||||||||
| Coinsurance deposits | 4,886,705 | 5,115,013 | |||||||||
| Accrued investment income | 452,647 | 472,826 | |||||||||
| Deferred policy acquisition costs | 2,163,003 | 2,923,454 | |||||||||
| Deferred sales inducements | 1,426,945 | 1,966,723 | |||||||||
| Income taxes recoverable | 34,773 | — | |||||||||
| Other assets | 46,448 | 47,571 | |||||||||
| Total assets | $ | 68,665,076 | $ | 69,696,552 | |||||||
| Liabilities and Stockholders' Equity | |||||||||||
| Liabilities: | |||||||||||
| Policy benefit reserves | $ | 60,109,669 | $ | 61,893,945 | |||||||
| Other policy funds and contract claims | 242,159 | 256,105 | |||||||||
| Notes payable | 495,528 | 495,116 | |||||||||
| Subordinated debentures | 78,037 | 157,265 | |||||||||
| Deferred income taxes | 512,428 | 177,897 | |||||||||
| Income taxes payable | — | 429 | |||||||||
| Other liabilities | 1,108,521 | 2,145,676 | |||||||||
| Total liabilities | 62,546,342 | 65,126,433 | |||||||||
| Stockholders' equity: | |||||||||||
| Preferred stock, Series A | 16 | 16 | |||||||||
| Preferred stock, Series B | 12 | — | |||||||||
| Common stock | 91,932 | 91,107 | |||||||||
| Additional paid-in capital | 1,510,987 | 1,212,311 | |||||||||
| Accumulated other comprehensive income | 2,112,111 | 1,497,921 | |||||||||
| Retained earnings | 2,403,676 | 1,768,764 | |||||||||
| Total stockholders' equity | 6,118,734 | 4,570,119 | |||||||||
| Total liabilities and stockholders' equity | $ | 68,665,076 | $ | 69,696,552 | |||||||
Page 1
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Unaudited (Dollars in thousands, except per share data)
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Premiums and other considerations | $ | 10,407 | $ | 5,152 | $ | 29,103 | $ | 14,688 | |||||||||||||||
| Annuity product charges | 62,277 | 63,647 | 185,264 | 177,313 | |||||||||||||||||||
| Net investment income | 543,331 | 590,412 | 1,660,353 | 1,719,418 | |||||||||||||||||||
| Change in fair value of derivatives | 205,011 | (20,042) | (409,201) | 440,472 | |||||||||||||||||||
Net realized gains (losses) on investments | (22,321) | 4,328 | (68,545) | (67) | |||||||||||||||||||
| Other than temporary impairment (OTTI) losses on investments: | |||||||||||||||||||||||
| Total OTTI losses | — | (101) | — | (1,099) | |||||||||||||||||||
| Portion of OTTI losses recognized from other comprehensive income | — | — | — | (215) | |||||||||||||||||||
| Net OTTI losses recognized in operations | — | (101) | — | (1,314) | |||||||||||||||||||
| Loss on extinguishment of debt | — | — | (2,024) | — | |||||||||||||||||||
| Total revenues | 798,705 | 643,396 | 1,394,950 | 2,350,510 | |||||||||||||||||||
| Benefits and expenses: | |||||||||||||||||||||||
| Insurance policy benefits and change in future policy benefits | 13,273 | 7,627 | 36,676 | 23,865 | |||||||||||||||||||
| Interest sensitive and index product benefits | 576,147 | 500,285 | 1,217,358 | 888,062 | |||||||||||||||||||
| Amortization of deferred sales inducements | 416,983 | (55,769) | 415,396 | (2,675) | |||||||||||||||||||
| Change in fair value of embedded derivatives | (1,732,497) | 212,278 | (1,855,623) | 1,306,163 | |||||||||||||||||||
| Interest expense on notes payable | 6,388 | 6,382 | 19,161 | 19,141 | |||||||||||||||||||
| Interest expense on subordinated debentures | 1,323 | 3,968 | 4,232 | 12,113 | |||||||||||||||||||
| Amortization of deferred policy acquisition costs | 622,596 | (120,934) | 623,409 | (45,856) | |||||||||||||||||||
| Other operating costs and expenses | 42,738 | 38,554 | 128,315 | 114,959 | |||||||||||||||||||
| Total benefits and expenses | (53,049) | 592,391 | 588,924 | 2,315,772 | |||||||||||||||||||
| Income before income taxes | 851,754 | 51,005 | 806,026 | 34,738 | |||||||||||||||||||
| Income tax expense | 184,554 | 13,645 | 143,308 | 8,798 | |||||||||||||||||||
| Net income | 667,200 | 37,360 | 662,718 | 25,940 | |||||||||||||||||||
| Less: Preferred stock dividends | 5,950 | — | 18,511 | — | |||||||||||||||||||
| Net income available to common stockholders | $ | 661,250 | $ | 37,360 | $ | 644,207 | $ | 25,940 | |||||||||||||||
| Earnings per common share | $ | 7.20 | $ | 0.41 | $ | 7.02 | $ | 0.28 | |||||||||||||||
| Earnings per common share - assuming dilution | $ | 7.17 | $ | 0.41 | $ | 7.00 | $ | 0.28 | |||||||||||||||
| Weighted average common shares outstanding (in thousands): | |||||||||||||||||||||||
| Earnings per common share | 91,861 | 91,252 | 91,770 | 91,081 | |||||||||||||||||||
| Earnings per common share - assuming dilution | 92,163 | 91,711 | 92,071 | 91,748 | |||||||||||||||||||
Page 2
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Unaudited (Dollars in thousands, except per share data)
Quarterly Summary - Most Recent 5 Quarters
| Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | |||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||
| Traditional life insurance premiums | $ | 708 | $ | 722 | $ | 823 | $ | 762 | $ | 778 | |||||||||||||||||||
| Life contingent immediate annuity considerations | 9,699 | 10,310 | 6,841 | 8,084 | 4,374 | ||||||||||||||||||||||||
| Surrender charges | 16,447 | 19,390 | 19,705 | 15,092 | 20,537 | ||||||||||||||||||||||||
| Lifetime income benefit rider fees | 45,830 | 44,048 | 39,844 | 47,630 | 43,110 | ||||||||||||||||||||||||
| Net investment income | 543,331 | 543,704 | 573,318 | 588,217 | 590,412 | ||||||||||||||||||||||||
| Change in fair value of derivatives | 205,011 | 327,662 | (941,874) | 466,434 | (20,042) | ||||||||||||||||||||||||
Net realized gains (losses) on investments | (22,321) | (25,888) | (20,336) | 7,029 | 4,328 | ||||||||||||||||||||||||
| Net OTTI losses recognized in operations | — | — | — | (17,412) | (101) | ||||||||||||||||||||||||
| Loss on extinguishment of debt | — | — | (2,024) | (2,001) | — | ||||||||||||||||||||||||
| Total revenues | 798,705 | 919,948 | (323,703) | 1,113,835 | 643,396 | ||||||||||||||||||||||||
| Benefits and expenses: | |||||||||||||||||||||||||||||
Traditional life insurance policy benefits and change in future policy benefits | 655 | 702 | 621 | 835 | 758 | ||||||||||||||||||||||||
Life contingent immediate annuity benefits and change in future policy benefits | 12,618 | 12,629 | 9,451 | 10,718 | 6,869 | ||||||||||||||||||||||||
| Interest sensitive and index product benefits (a) | 576,147 | 240,992 | 400,219 | 399,514 | 500,285 | ||||||||||||||||||||||||
| Amortization of deferred sales inducements (b)(d) | 416,983 | (75,178) | 73,591 | 91,260 | (55,769) | ||||||||||||||||||||||||
| Change in fair value of embedded derivatives (c)(d) | (1,732,497) | 1,126,935 | (1,250,061) | 147,879 | 212,278 | ||||||||||||||||||||||||
| Interest expense on notes payable | 6,388 | 6,388 | 6,385 | 6,384 | 6,382 | ||||||||||||||||||||||||
| Interest expense on subordinated debentures | 1,323 | 1,321 | 1,588 | 3,651 | 3,968 | ||||||||||||||||||||||||
| Amortization of deferred policy acquisition costs (b)(d) | 622,596 | (119,889) | 120,702 | 133,573 | (120,934) | ||||||||||||||||||||||||
| Other operating costs and expenses | 42,738 | 41,951 | 43,626 | 39,194 | 38,554 | ||||||||||||||||||||||||
| Total benefits and expenses | (53,049) | 1,235,851 | (593,878) | 833,008 | 592,391 | ||||||||||||||||||||||||
| Income (loss) before income taxes | 851,754 | (315,903) | 270,175 | 280,827 | 51,005 | ||||||||||||||||||||||||
| Income tax expense (benefit) (e) | 184,554 | (68,474) | 27,228 | 60,677 | 13,645 | ||||||||||||||||||||||||
| Net income (loss) (a)(b)(c)(d)(e) | 667,200 | (247,429) | 242,947 | 220,150 | 37,360 | ||||||||||||||||||||||||
| Less: Preferred stock dividends | 5,950 | 5,950 | 6,611 | — | — | ||||||||||||||||||||||||
| Net income (loss) available to common stockholders (a)(b)(c)(d)(e) | $ | 661,250 | $ | (253,379) | $ | 236,336 | $ | 220,150 | $ | 37,360 | |||||||||||||||||||
| Earnings (loss) per common share | $ | 7.20 | $ | (2.76) | $ | 2.58 | $ | 2.41 | $ | 0.41 | |||||||||||||||||||
| Earnings (loss) per common share - assuming dilution (a)(b)(c)(d)(e) | $ | 7.17 | $ | (2.76) | $ | 2.57 | $ | 2.40 | $ | 0.41 | |||||||||||||||||||
| Weighted average common shares outstanding (thousands): | |||||||||||||||||||||||||||||
| Earnings (loss) per common share | 91,861 | 91,803 | 91,644 | 91,314 | 91,252 | ||||||||||||||||||||||||
| Earnings (loss) per common share - assuming dilution | 92,163 | 92,027 | 92,021 | 91,883 | 91,711 | ||||||||||||||||||||||||
(a)Q3 2020 includes expense from the revision of assumptions used in determining reserves held for lifetime income benefit riders. The impact increased interest sensitive and index products by $285.8 million and decreased both net income and net income available to common stockholders by $224.4 million and decreased earnings per common share - assuming dilution by $2.44 per share.
Q3 2019 includes expense from the revision of assumptions used in determining reserves held for lifetime income benefit riders. The impact increased interest sensitive and index product benefits by $315.4 million and decreased both net income and net income available to common stockholders by $247.3 million and decreased earnings per common share - assuming dilution by $2.70 per share.
(b)Q3 2020 includes expense from the revision of assumptions which increased amortization of deferred sales inducements and deferred policy acquisition costs by $391.4 million and $589.2 million, respectively, and decreased both net income and net income available to common stockholders by $769.8 million and decreased earnings per common share - assuming dilution by $8.35 per share.
Q3 2019 includes a benefit from the revision of assumptions which reduced amortization of deferred sales inducements and deferred policy acquisition costs by $104.7 million and $193.0 million, respectively, and increased both net income and net income available to common stockholders by $233.4 million and increased earnings per common share - assuming dilution by $2.54 per share.
Page 3
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Unaudited (Dollars in thousands, except per share data)
(c)Q3 2020 includes a benefit from the revision of assumptions used in determining the embedded derivative component of our fixed index annuity policy benefit reserves. The impact decreased change in fair value of embedded derivatives by $2,111.1 million and increased both net income and net income available to common stockholders by $1,657.2 million and increased earnings per common share - assuming dilution by $17.98 per share.
Q3 2019 includes expense from the revision of assumptions used in determining the embedded derivative component of our fixed index annuity policy benefit reserves. The impact increased change in fair value of embedded derivatives by $28.2 million and decreased both net income and net income available to common stockholders by $22.1 million and decreased earnings per common share - assuming dilution by $0.24 per share.
(d)Q2 2020 includes a benefit from the revision of assumptions used in determining the embedded derivative component of our fixed index annuity policy benefit reserves. The impact decreased change in fair value of embedded derivatives by $230.1 million, increased amortization of deferred sales inducements and deferred policy acquisition costs by $36.7 million and $57.6 million, respectively, and decreased both net loss and net loss available to common stockholders by $106.5 million and reduced loss per common share - assuming dilution by $1.16 per share.
(e)Q1 2020 includes a tax benefit related to the provision of the Coronavirus Aid, Relief, and Economic Security Act, (“the CARES ACT”) which was signed into legislation on March 27, 2020 and allows net operating losses for 2018 through 2020 to be carried back to previous tax years in which a 35% statutory tax rate was in effect. The impact reduced income tax expense and increased both net income and net income available to common stockholders by $30.8 million and increased earnings per common share - assuming dilution by $0.33 per share.
Page 4
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Unaudited (Dollars in thousands, except per share data)
NON-GAAP FINANCIAL MEASURES
In addition to net income available to common stockholders, we have consistently utilized non-GAAP operating income (loss) available to common stockholders and non-GAAP operating income (loss) available to common stockholders per common share - assuming dilution, non-GAAP financial measures commonly used in the life insurance industry, as economic measures to evaluate our financial performance. Non-GAAP operating income (loss) available to common stockholders equals net income available to common stockholders adjusted to eliminate the impact of items that fluctuate from quarter to quarter in a manner unrelated to core operations, and we believe measures excluding their impact are useful in analyzing operating trends. The most significant adjustments to arrive at non-GAAP operating income (loss) available to common stockholders eliminate the impact of fair value accounting for our fixed index annuity business. These adjustments are not economic in nature but rather impact the timing of reported results. We believe the combined presentation and evaluation of non-GAAP operating income (loss) available to common stockholders together with net income available to common stockholders provides information that may enhance an investor’s understanding of our underlying results and profitability.
Reconciliation from Net Income Available to Common Stockholders to Non-GAAP Operating Income (Loss) Available to Common Stockholders
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Net income available to common stockholders | $ | 661,250 | $ | 37,360 | $ | 644,207 | $ | 25,940 | |||||||||||||||
| Adjustments to arrive at non-GAAP operating income (loss) available to common stockholders: (a) | |||||||||||||||||||||||
| Net realized gains/losses on financial assets, including credit losses | 15,145 | (3,175) | 49,986 | (245) | |||||||||||||||||||
Change in fair value of derivatives and embedded derivatives - fixed index annuities | (1,176,909) | 250,186 | (873,773) | 500,998 | |||||||||||||||||||
| Change in fair value of derivatives - interest rate caps and swap | — | (76) | (848) | 1,414 | |||||||||||||||||||
| Income taxes | 250,701 | (50,940) | 177,804 | (105,759) | |||||||||||||||||||
| Non-GAAP operating income (loss) available to common stockholders | $ | (249,813) | $ | 233,355 | $ | (2,624) | $ | 422,348 | |||||||||||||||
| Per common share - assuming dilution: | |||||||||||||||||||||||
| Net income available to common stockholders | $ | 7.17 | $ | 0.41 | $ | 7.00 | $ | 0.28 | |||||||||||||||
| Adjustments to arrive at non-GAAP operating income (loss) available to common stockholders: | |||||||||||||||||||||||
| Anti-dilutive effect of operating loss | 0.01 | — | — | — | |||||||||||||||||||
| Net realized gains/losses on financial assets, including credit losses | 0.16 | (0.04) | 0.54 | — | |||||||||||||||||||
Change in fair value of derivatives and embedded derivatives - fixed index annuities | (12.77) | 2.73 | (9.49) | 5.46 | |||||||||||||||||||
| Change in fair value of derivatives - interest rate caps and swap | — | — | (0.01) | 0.01 | |||||||||||||||||||
| Income taxes | 2.71 | (0.56) | 1.93 | (1.15) | |||||||||||||||||||
| Non-GAAP operating income (loss) available to common stockholders | $ | (2.72) | $ | 2.54 | $ | (0.03) | $ | 4.60 | |||||||||||||||
(a)Adjustments to net income available to common stockholders to arrive at non-GAAP operating income (loss) available to common stockholders are presented net of related adjustments to amortization of deferred sales inducements (DSI) and deferred policy acquisition costs (DAC) where applicable.
Page 5
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Unaudited (Dollars in thousands)
NON-GAAP FINANCIAL MEASURES
Summary of Adjustments to Arrive at Non-GAAP Operating Income (Loss) Available to Common Stockholders
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Net realized gains/losses on financial assets, including credit losses: | |||||||||||||||||||||||
| Net realized gains/losses on financial assets, including credit losses | $ | 21,023 | $ | (4,227) | $ | 67,956 | $ | 1,381 | |||||||||||||||
| Amortization of DAC and DSI | (5,878) | 1,052 | (17,970) | (1,626) | |||||||||||||||||||
| Income taxes | (3,271) | 3,151 | (10,797) | 2,518 | |||||||||||||||||||
| $ | 11,874 | $ | (24) | $ | 39,189 | $ | 2,273 | ||||||||||||||||
| Change in fair value of derivatives and embedded derivatives: | |||||||||||||||||||||||
| Fixed index annuities | $ | (1,935,585) | $ | 132,411 | $ | (1,432,030) | $ | 591,577 | |||||||||||||||
| Interest rate caps and swap | — | (76) | (848) | 1,414 | |||||||||||||||||||
| Amortization of DAC and DSI | 758,676 | 117,775 | 558,257 | (90,579) | |||||||||||||||||||
| Income taxes | 253,972 | (54,091) | 188,601 | (108,277) | |||||||||||||||||||
| $ | (922,937) | $ | 196,019 | $ | (686,020) | $ | 394,135 | ||||||||||||||||
Page 6
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Unaudited (Dollars in thousands, except per share data)
NON-GAAP FINANCIAL MEASURES
Quarterly Summary - Most Recent 5 Quarters
Reconciliation from Net Income (Loss) Available to Common Stockholders to Non-GAAP Operating Income (Loss) Available to Common Stockholders
| Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | |||||||||||||||||||||||||
| Net income (loss) available to common stockholders | $ | 661,250 | $ | (253,379) | $ | 236,336 | $ | 220,150 | $ | 37,360 | |||||||||||||||||||
| Adjustments to arrive at non-GAAP operating income (loss) available to common stockholders: (a) | |||||||||||||||||||||||||||||
| Net realized gains/losses on financial assets, including credit losses | 15,145 | 18,492 | 16,349 | 7,606 | (3,175) | ||||||||||||||||||||||||
Change in fair value of derivatives and embedded derivatives - fixed index annuities | (1,176,909) | 423,590 | (120,454) | (127,777) | 250,186 | ||||||||||||||||||||||||
| Change in fair value of derivatives - interest rate caps and swap | — | — | (848) | (167) | (76) | ||||||||||||||||||||||||
| Income taxes | 250,701 | (95,599) | 22,702 | 26,023 | (50,940) | ||||||||||||||||||||||||
| Non-GAAP operating income (loss) available to common stockholders (b)(c)(d) | $ | (249,813) | $ | 93,104 | $ | 154,085 | $ | 125,835 | $ | 233,355 | |||||||||||||||||||
| Per common share - assuming dilution: | |||||||||||||||||||||||||||||
| Net income (loss) available to common stockholders | $ | 7.17 | $ | (2.76) | $ | 2.57 | $ | 2.40 | $ | 0.41 | |||||||||||||||||||
| Adjustments to arrive at non-GAAP operating income (loss) available to common stockholders: | |||||||||||||||||||||||||||||
| Anti-dilutive effect of net loss | — | 0.01 | — | — | — | ||||||||||||||||||||||||
| Anti-dilutive effect of operating loss | 0.01 | — | — | — | — | ||||||||||||||||||||||||
| Net realized gains/losses on financial assets, including credit losses | 0.16 | 0.20 | 0.17 | 0.08 | (0.04) | ||||||||||||||||||||||||
Change in fair value of derivatives and embedded derivatives - fixed index annuities | (12.77) | 4.60 | (1.31) | (1.39) | 2.73 | ||||||||||||||||||||||||
| Change in fair value of derivatives - interest rate caps and swap | — | — | (0.01) | — | — | ||||||||||||||||||||||||
| Income taxes | 2.71 | (1.04) | 0.25 | 0.28 | (0.56) | ||||||||||||||||||||||||
| Non-GAAP operating income (loss) available to common stockholders (b)(c)(d) | $ | (2.72) | $ | 1.01 | $ | 1.67 | $ | 1.37 | $ | 2.54 | |||||||||||||||||||
(a)Adjustments to net income (loss) available to common stockholders to arrive at non-GAAP operating income (loss) available to common stockholders are presented net of related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs where applicable.
(a)Q3 2020 includes expense from the revision of assumptions used in determining reserves held for lifetime income benefit riders. The impact increased interest sensitive and index products by $285.8 million and increased non-GAAP operating loss available to common stockholders and non-GAAP operating loss available to common stockholders per common share - assuming dilution by $224.4 million and $2.44 per share, respectively.
Q3 2019 includes expense from the revision of assumptions used in determining reserves held for lifetime income benefit riders. The impact increased interest sensitive and index product benefits by $315.4 million and decreased non-GAAP operating income available to common stockholders and non-GAAP operating income available to common stockholders per common share - assuming dilution by $247.3 million and $2.70 per share, respectively.
(b)Q3 2020 includes expense from the revision of assumptions which increased amortization of deferred sales inducements and deferred policy acquisition costs by $57.5 million and $91.0 million, respectively, and increased non-GAAP operating loss available to common stockholders and non-GAAP operating loss available to common stockholders per common share- assuming dilution by $116.5 million and $1.26 per share, respectively.
Q3 2019 includes a benefit from the revision of assumptions which reduced amortization of deferred sales inducements and deferred policy acquisition costs by $184.9 million and $288.3 million, respectively, and increased non-GAAP operating income available to common stockholders and non-GAAP operating income available to common stockholders per common share- assuming dilution by $371.0 million and $4.05 per share, respectively.
(c)Q1 2020 includes a tax benefit related to the provision of the CARES ACT which was signed into legislation on March 27, 2020 and allows net operating losses for 2018 through 2020 to be carried back to previous tax years in which a 35% statutory tax rate was in effect. The impact reduced income tax expense and increased non-GAAP operating income available to common stockholders and non-GAAP operating income available to common stockholders per common share - assuming dilution by $30.8 million and $0.33 per share, respectively.
Page 7
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Unaudited (Dollars in thousands)
NON-GAAP FINANCIAL MEASURES
Summary of Adjustments to Arrive at Non-GAAP Operating Income (Loss) Available to Common Stockholders
| Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | |||||||||||||||||||||||||
| Net realized (gains) losses on investments | $ | 22,321 | $ | 25,888 | $ | 20,336 | $ | (7,029) | $ | (4,328) | |||||||||||||||||||
| Net OTTI losses recognized in operations | — | — | — | 17,412 | 101 | ||||||||||||||||||||||||
| Change in fair value of derivatives | (203,088) | (413,489) | 1,039,322 | (370,973) | (79,943) | ||||||||||||||||||||||||
| Increase (decrease) in total revenues | (180,767) | (387,601) | 1,059,658 | (360,590) | (84,170) | ||||||||||||||||||||||||
| Amortization of deferred sales inducements | (303,710) | 115,511 | (29,683) | (37,374) | (57,408) | ||||||||||||||||||||||||
| Change in fair value of embedded derivatives | 1,732,497 | (1,126,935) | 1,250,061 | (147,879) | (212,278) | ||||||||||||||||||||||||
| Interest sensitive and index product benefits (a) | 1,298 | 612 | (1,321) | — | — | ||||||||||||||||||||||||
| Amortization of deferred policy acquisition costs | (449,088) | 181,129 | (54,446) | (54,999) | (61,419) | ||||||||||||||||||||||||
| Increase (decrease) in total benefits and expenses | 980,997 | (829,683) | 1,164,611 | (240,252) | (331,105) | ||||||||||||||||||||||||
| Increase in income (loss) before income taxes | (1,161,764) | 442,082 | (104,953) | (120,338) | 246,935 | ||||||||||||||||||||||||
| Increase (decrease) in income tax expense (benefit) | (250,701) | 95,599 | (22,702) | (26,023) | 50,940 | ||||||||||||||||||||||||
| Increase (decrease) in net income (loss) available to common stockholders | $ | (911,063) | $ | 346,483 | $ | (82,251) | $ | (94,315) | $ | 195,995 | |||||||||||||||||||
(a)Interest sensitive and index product benefits adjustment reflects the change in the allowance for credit losses on our reinsurance recoverable/coinsurance deposits under a revised impairment model for financial assets measured at amortized cost which we were required to adopt on January 1, 2020. The change in this allowance is reflected in the net realized gains/losses of financial assets, including credit losses line in the other Non-GAAP financial measures tables in this financial supplement.
Page 8
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Unaudited (Dollars in thousands, except share and per share data)
Capitalization/Book Value per Common Share
| Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | |||||||||||||||||||||||||
| Capitalization: | |||||||||||||||||||||||||||||
| Notes payable | $ | 500,000 | $ | 500,000 | $ | 500,000 | $ | 500,000 | $ | 500,000 | |||||||||||||||||||
| Subordinated debentures payable to subsidiary trusts | 78,037 | 77,964 | 77,893 | 159,272 | 247,362 | ||||||||||||||||||||||||
Total debt | 578,037 | 577,964 | 577,893 | 659,272 | 747,362 | ||||||||||||||||||||||||
| Total stockholders’ equity | 6,118,734 | 5,062,059 | 3,522,757 | 4,570,119 | 4,126,716 | ||||||||||||||||||||||||
| Total capitalization | 6,696,771 | 5,640,023 | 4,100,650 | 5,229,391 | 4,874,078 | ||||||||||||||||||||||||
| Accumulated other comprehensive income (AOCI) | (2,112,111) | (1,719,839) | (219,974) | (1,497,921) | (1,639,429) | ||||||||||||||||||||||||
Total capitalization excluding AOCI (a) | $ | 4,584,660 | $ | 3,920,184 | $ | 3,880,676 | $ | 3,731,470 | $ | 3,234,649 | |||||||||||||||||||
| Total stockholders’ equity | $ | 6,118,734 | $ | 5,062,059 | $ | 3,522,757 | $ | 4,570,119 | $ | 4,126,716 | |||||||||||||||||||
| Equity available to preferred stockholders (b) | (700,000) | (700,000) | (400,000) | (400,000) | — | ||||||||||||||||||||||||
Total common stockholders' equity (c) | 5,418,734 | 4,362,059 | 3,122,757 | 4,170,119 | 4,126,716 | ||||||||||||||||||||||||
| Accumulated other comprehensive income | (2,112,111) | (1,719,839) | (219,974) | (1,497,921) | (1,639,429) | ||||||||||||||||||||||||
Total common stockholders’ equity excluding AOCI (c) | 3,306,623 | 2,642,220 | 2,902,783 | 2,672,198 | 2,487,287 | ||||||||||||||||||||||||
Net impact of fair value accounting for derivatives and embedded derivatives | (237,099) | 685,839 | 353,853 | 448,924 | 549,202 | ||||||||||||||||||||||||
Total common stockholders’ equity excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives (c) | $ | 3,069,524 | $ | 3,328,059 | $ | 3,256,636 | $ | 3,121,122 | $ | 3,036,489 | |||||||||||||||||||
| Common shares outstanding | 91,931,837 | 91,595,066 | 91,497,841 | 91,107,555 | 91,006,950 | ||||||||||||||||||||||||
Book Value per Common Share: (d) | |||||||||||||||||||||||||||||
| Book value per common share (c) | $ | 58.94 | $ | 47.62 | $ | 34.13 | $ | 45.77 | $ | 45.35 | |||||||||||||||||||
| Book value per common share excluding AOCI (c) | $ | 35.97 | $ | 28.85 | $ | 31.73 | $ | 29.33 | $ | 27.33 | |||||||||||||||||||
Book value per common share excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives (c) | $ | 33.39 | $ | 36.33 | $ | 35.59 | $ | 34.26 | $ | 33.37 | |||||||||||||||||||
Debt-to-Capital Ratios: (e) | |||||||||||||||||||||||||||||
| Senior debt / Total capitalization | 10.9 | % | 12.8 | % | 12.9 | % | 13.4 | % | 15.5 | % | |||||||||||||||||||
| Total debt / Total capitalization | 12.6 | % | 14.7 | % | 14.9 | % | 17.7 | % | 23.1 | % | |||||||||||||||||||
(a)Total capitalization excluding AOCI, a non-GAAP financial measure, is based on stockholders' equity excluding the effect of AOCI.
(b)Equity available to preferred stockholders is equal to the redemption value of outstanding preferred stock plus share dividends declared but not yet issued.
(c)Total common stockholders' equity, total common stockholder's equity excluding AOCI and total common stockholders' equity excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives, non-GAAP financial measures, exclude equity available to preferred stockholders. Total common stockholders’ equity and book value per common share excluding AOCI, non-GAAP financial measures, are based on common stockholders’ equity excluding the effect of AOCI. Since AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale securities, we believe these non-GAAP financial measures provide useful supplemental information. Total common stockholders' equity and book value per common share excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives, non-GAAP financial measures, are based on common stockholders' equity excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives. Since the net impact of fair value accounting for our derivatives and embedded derivatives fluctuates from quarter to quarter and the most significant impacts relate to fair value accounting for our fixed index annuity business and are not economic in nature but rather impact the timing of reported results, we believe these non-GAAP financial measures provide useful supplemental information.
(d)Book value per common share including and excluding AOCI and book value per common share excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives are calculated as total common stockholders’ equity, total common stockholders’ equity excluding AOCI and total common stockholders' equity excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives divided by the total number of shares of common stock outstanding.
(e)Debt-to-capital ratios are computed using total capitalization excluding AOCI.
Page 9
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Unaudited (Dollars in thousands)
Spread Results
| Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | ||||||||||||||||||||||||||||||||
| 4.20% | 4.53% | Average yield on invested assets | 4.10% | 4.12% | 4.36% | 4.52% | 4.59% | |||||||||||||||||||||||||||||||
| 1.71% | 1.87% | Aggregate cost of money | 1.66% | 1.73% | 1.72% | 1.75% | 1.84% | |||||||||||||||||||||||||||||||
| 2.49% | 2.66% | Aggregate investment spread | 2.44% | 2.39% | 2.64% | 2.77% | 2.75% | |||||||||||||||||||||||||||||||
| Impact of: | ||||||||||||||||||||||||||||||||||||||
| 0.06% | 0.06% | Investment yield - additional prepayment income | 0.10% | 0.03% | 0.06% | 0.12% | 0.11% | |||||||||||||||||||||||||||||||
| 0.03% | 0.04% | Cost of money effect of over (under) hedging | 0.03% | (0.01)% | 0.05% | 0.05% | 0.02% | |||||||||||||||||||||||||||||||
| $52,849,751 | $50,716,178 | Weighted average investments | $53,024,798 | $52,901,215 | $52,623,239 | $52,141,459 | $51,529,850 | |||||||||||||||||||||||||||||||
Weighted average investments include fixed maturity securities at amortized cost and mortgage loans on real estate and other investments at carrying values as reflected in the consolidated balance sheets. The numerator for average yield on invested assets includes net investment income and the tax effect of investment income that is exempt from income taxes.
Summary of Cost of Money for Deferred Annuities
| Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | ||||||||||||||||||||||||||||||||
Included in interest sensitive and index product benefits: | ||||||||||||||||||||||||||||||||||||||
| $ | 551,562 | $ | 310,020 | Index credits | $ | 174,747 | $ | 97,875 | $ | 278,940 | $ | 277,798 | $ | 92,343 | ||||||||||||||||||||||||
| 142,917 | 147,425 | Interest credited | 47,376 | 46,594 | 48,947 | 49,482 | 49,511 | |||||||||||||||||||||||||||||||
Included in change in fair value of derivatives: | ||||||||||||||||||||||||||||||||||||||
| (560,683) | (320,381) | Proceeds received at option expiration | (178,405) | (97,015) | (285,263) | (284,624) | (95,491) | |||||||||||||||||||||||||||||||
| 546,352 | 592,857 | Pro rata amortization of option cost | 176,481 | 182,841 | 187,030 | 188,984 | 195,354 | |||||||||||||||||||||||||||||||
| $ | 680,148 | $ | 729,921 | Cost of money for deferred annuities | $ | 220,199 | $ | 230,295 | $ | 229,654 | $ | 231,640 | $ | 241,717 | ||||||||||||||||||||||||
| $ | 53,182,845 | $ | 52,007,003 | Weighted average liability balance outstanding | $ | 53,059,376 | $ | 53,214,255 | $ | 53,274,905 | $ | 53,092,419 | $ | 52,682,886 | ||||||||||||||||||||||||
Annuity Account Balance Rollforward
| Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | ||||||||||||||||||||||||||||||||
| $ | 53,233,898 | $ | 51,053,450 | Account balances at beginning of period | $ | 53,112,600 | $ | 53,315,909 | $ | 53,233,898 | $ | 52,950,937 | $ | 52,414,835 | ||||||||||||||||||||||||
| 1,782,453 | 3,822,410 | Net deposits | 557,675 | 543,026 | 681,752 | 838,761 | 1,216,720 | |||||||||||||||||||||||||||||||
| 68,467 | 140,959 | Premium bonuses | 21,205 | 22,710 | 24,552 | 36,983 | 46,968 | |||||||||||||||||||||||||||||||
| 694,479 | 457,445 | Fixed interest credited and index credits | 222,123 | 144,469 | 327,887 | 327,280 | 141,854 | |||||||||||||||||||||||||||||||
| (55,542) | (56,473) | Surrender charges | (16,447) | (19,390) | (19,705) | (15,092) | (20,537) | |||||||||||||||||||||||||||||||
| (129,722) | (120,840) | Lifetime income benefit rider fees | (45,830) | (44,048) | (39,844) | (47,630) | (43,110) | |||||||||||||||||||||||||||||||
| (2,587,883) | (2,346,014) | Surrenders, withdrawals, deaths, etc. | (845,176) | (850,076) | (892,631) | (857,341) | (805,793) | |||||||||||||||||||||||||||||||
| $ | 53,006,150 | $ | 52,950,937 | Account balances at end of period | $ | 53,006,150 | $ | 53,112,600 | $ | 53,315,909 | $ | 53,233,898 | $ | 52,950,937 | ||||||||||||||||||||||||
Page 10
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Unaudited (Dollars in thousands)
Annuity Deposits by Product Type
| Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | ||||||||||||||||||||||||||||||||
| American Equity Life: | ||||||||||||||||||||||||||||||||||||||
| $ | 1,491,564 | $ | 3,293,458 | Fixed index annuities | $ | 432,602 | $ | 472,899 | $ | 586,063 | $ | 765,180 | $ | 1,054,796 | ||||||||||||||||||||||||
| 6,464 | 9,402 | Annual reset fixed rate annuities | 1,817 | 2,316 | 2,331 | 1,843 | 2,340 | |||||||||||||||||||||||||||||||
| 983 | 1,307 | Multi-year fixed rate annuities | 531 | 83 | 369 | 306 | 593 | |||||||||||||||||||||||||||||||
| 25,687 | 7,129 | Single premium immediate annuities | 10,205 | 10,084 | 5,398 | 4,873 | 3,314 | |||||||||||||||||||||||||||||||
| 1,524,698 | 3,311,296 | 445,155 | 485,382 | 594,161 | 772,202 | 1,061,043 | ||||||||||||||||||||||||||||||||
| Eagle Life: | ||||||||||||||||||||||||||||||||||||||
| 239,349 | 579,119 | Fixed index annuities | 60,476 | 72,371 | 106,502 | 67,784 | 166,081 | |||||||||||||||||||||||||||||||
| 97 | 193 | Annual reset fixed rate annuities | 39 | 17 | 41 | 6 | — | |||||||||||||||||||||||||||||||
| 73,386 | 151,572 | Multi-year fixed rate annuities | 68,206 | 1,031 | 4,149 | 81,041 | 79,000 | |||||||||||||||||||||||||||||||
| 312,832 | 730,884 | 128,721 | 73,419 | 110,692 | 148,831 | 245,081 | ||||||||||||||||||||||||||||||||
| Consolidated: | ||||||||||||||||||||||||||||||||||||||
| 1,730,913 | 3,872,577 | Fixed index annuities | 493,078 | 545,270 | 692,565 | 832,964 | 1,220,877 | |||||||||||||||||||||||||||||||
| 6,561 | 9,595 | Annual reset fixed rate annuities | 1,856 | 2,333 | 2,372 | 1,849 | 2,340 | |||||||||||||||||||||||||||||||
| 74,369 | 152,879 | Multi-year fixed rate annuities | 68,737 | 1,114 | 4,518 | 81,347 | 79,593 | |||||||||||||||||||||||||||||||
| 25,687 | 7,129 | Single premium immediate annuities | 10,205 | 10,084 | 5,398 | 4,873 | 3,314 | |||||||||||||||||||||||||||||||
| 1,837,530 | 4,042,180 | Total before coinsurance ceded | 573,876 | 558,801 | 704,853 | 921,033 | 1,306,124 | |||||||||||||||||||||||||||||||
| 29,390 | 212,641 | Coinsurance ceded | 5,996 | 5,691 | 17,703 | 77,399 | 86,090 | |||||||||||||||||||||||||||||||
| $ | 1,808,140 | $ | 3,829,539 | Net after coinsurance ceded | $ | 567,880 | $ | 553,110 | $ | 687,150 | $ | 843,634 | $ | 1,220,034 | ||||||||||||||||||||||||
Surrender Charge Protection and Account Values by Product Type
Annuity Surrender Charges and Net (of Coinsurance) Account Values at September 30, 2020:
| Surrender Charge | Net Account Value | |||||||||||||||||||||||||||||||
| Product Type | Avg. Years At Issue | Avg. Years Remaining | Avg. % Remaining | Dollars in Thousands | % | |||||||||||||||||||||||||||
| Fixed Index Annuities | 12.8 | 6.5 | 10.4% | $ | 50,958,583 | 96.1 | % | |||||||||||||||||||||||||
| Annual Reset Fixed Rate Annuities | 9.3 | 3.0 | 5.6% | 1,407,450 | 2.7 | % | ||||||||||||||||||||||||||
| Multi-Year Fixed Rate Annuities | 6.3 | 1.6 | 4.9% | 640,117 | 1.2 | % | ||||||||||||||||||||||||||
| Total | 12.6 | 6.3 | 10.2% | $ | 53,006,150 | 100.0 | % | |||||||||||||||||||||||||
Page 11
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Unaudited (Dollars in thousands)
Annuity Liability Characteristics
| Surrender Charge Percentages: | Fixed Annuities Account Value | Fixed Index Annuities Account Value | |||||||||
| No surrender charge | $ | 825,721 | $ | 2,846,232 | |||||||
| 0.0% < 2.0% | 16,822 | 275,001 | |||||||||
| 2.0% < 3.0% | 31,469 | 1,545,053 | |||||||||
| 3.0% < 4.0% | 59,817 | 1,957,048 | |||||||||
| 4.0% < 5.0% | 64,727 | 1,805,901 | |||||||||
| 5.0% < 6.0% | 266,924 | 3,077,161 | |||||||||
| 6.0% < 7.0% | 52,592 | 1,435,413 | |||||||||
| 7.0% < 8.0% | 88,886 | 5,094,333 | |||||||||
| 8.0% < 9.0% | 52,049 | 3,819,840 | |||||||||
| 9.0% < 10.0% | 126,967 | 3,747,742 | |||||||||
| 10.0% or greater | 461,593 | 25,354,859 | |||||||||
| $ | 2,047,567 | $ | 50,958,583 | ||||||||
| Surrender Charge Expiration By Year: | Fixed and Fixed Index Annuities Account Value | Weighted Average Surrender Charge | |||||||||
| Out of Surrender Charge | $ | 3,671,953 | 0.00 | % | |||||||
| 2020 | 260,408 | 2.64 | % | ||||||||
| 2021 | 1,189,431 | 3.32 | % | ||||||||
| 2022 | 1,684,517 | 4.22 | % | ||||||||
| 2023 | 4,107,017 | 5.02 | % | ||||||||
| 2024 | 5,043,124 | 6.58 | % | ||||||||
| 2025 | 6,007,714 | 8.08 | % | ||||||||
| 2026 | 5,177,748 | 9.75 | % | ||||||||
| 2027 | 4,428,208 | 11.38 | % | ||||||||
| 2028 | 4,690,673 | 12.28 | % | ||||||||
| 2029 | 5,973,173 | 13.60 | % | ||||||||
| 2030 | 3,513,420 | 15.54 | % | ||||||||
| 2031 | 2,944,267 | 17.59 | % | ||||||||
| 2032 | 2,010,489 | 18.17 | % | ||||||||
| 2033 | 1,158,686 | 18.58 | % | ||||||||
| 2034 | 712,963 | 19.05 | % | ||||||||
| 2035 | 317,288 | 19.58 | % | ||||||||
| 2036 | 115,071 | 20.00 | % | ||||||||
| $ | 53,006,150 | 10.19 | % | ||||||||
Page 12
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Unaudited (Dollars in thousands)
Annuity Liability Characteristics
| Credited Rate vs. Ultimate Minimum Guaranteed Rate Differential: | Fixed Annuities Account Value | Fixed Index Annuities Account Value | |||||||||
| No differential | $ | 959,589 | $ | 1,261,845 | |||||||
| › 0.0% - 0.25% | 48,555 | 147,586 | |||||||||
| › 0.25% - 0.5% | 236,229 | 3,353 | |||||||||
| › 0.5% - 1.0% | 23,109 | 9,729 | |||||||||
| › 1.0% - 1.5% | 11,476 | — | |||||||||
| 1.00% ultimate guarantee - 1.99% wtd avg interest rate (a) | 502,678 | 891,202 | |||||||||
| 1.50% ultimate guarantee - 1.11% wtd avg interest rate (a) | 141,632 | 3,261,157 | |||||||||
| 1.75% ultimate guarantee - 1.71% wtd avg interest rate (a) | 49,229 | 535,629 | |||||||||
| 2.00% ultimate guarantee - 1.85% wtd avg interest rate (a) | 75,070 | — | |||||||||
| 2.25% ultimate guarantee - 1.69% wtd avg interest rate (a) | — | 730,120 | |||||||||
| 3.00% ultimate guarantee - 1.98% wtd avg interest rate (a) | — | 1,435,179 | |||||||||
| Allocated to index strategies (see tables that follow) | — | 42,682,783 | |||||||||
| $ | 2,047,567 | $ | 50,958,583 | ||||||||
(a)The minimum guaranteed interest rate for the fixed rate or the fixed rate strategy ranges from 0.5% - 1.75%. The ultimate guaranteed rate is applied on less than 100% of the premium.
If all crediting rates were reduced to minimum guaranteed rates (subject to limitations imposed by ultimate minimum guaranteed rates where applicable) the weighted average crediting rate as of September 30, 2020 for fixed annuities and funds allocated to the fixed rate strategy for fixed index annuities would decrease by 0.13%.
Page 13
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Unaudited (Dollars in thousands)
Annuity Liability Characteristics
FIXED INDEX ANNUITIES ACCOUNT VALUE - INDEX STRATEGIES
| Annual Monthly Average and Point-to-Point with Caps | |||||||||||||||||||||||||||||
| Minimum Guaranteed Cap | |||||||||||||||||||||||||||||
| 1% | 3% | 4% | 7% | 8% + | |||||||||||||||||||||||||
| Current Cap | |||||||||||||||||||||||||||||
| At minimum | $ | 1,346 | $ | 102,171 | $ | 4,992,952 | $ | 62,425 | $ | 142,594 | |||||||||||||||||||
| 1.75% - 3% | 8,636,011 | — | — | — | — | ||||||||||||||||||||||||
| 3% - 4% | 265,296 | 3,638 | — | — | — | ||||||||||||||||||||||||
| 4% - 5% | 1,013,946 | 217,323 | 1,238,010 | — | — | ||||||||||||||||||||||||
| 5% - 6% | 510,330 | 182,458 | 28,498 | — | — | ||||||||||||||||||||||||
| 6% - 7% | — | — | 444 | — | — | ||||||||||||||||||||||||
| >= 7% | 10,580 | 6,771 | 716 | 5,402 | — | ||||||||||||||||||||||||
| Annual Monthly Average and Point-to-Point with Participation Rates | |||||||||||||||||||||||
| Minimum Guaranteed Participation Rate | |||||||||||||||||||||||
| 10% | 20% - 25% | 35% | 50% + | ||||||||||||||||||||
| Current Participation Rate | |||||||||||||||||||||||
| At minimum | $ | 94,543 | $ | 396,064 | $ | 89,508 | $ | 96,074 | |||||||||||||||
| < 20% | 918,295 | — | — | — | |||||||||||||||||||
| 20% - 40% | 1,742,696 | 177,087 | 838 | — | |||||||||||||||||||
| 40% - 60% | 2,697,494 | 89,741 | 55,280 | — | |||||||||||||||||||
| 60% - 100% | 649,591 | — | — | — | |||||||||||||||||||
| > 100% | 494,672 | — | — | — | |||||||||||||||||||
| S&P 500 Monthly Point-to-Point - Minimum Guaranteed Monthly Cap = 1.0% | |||||
| Current Cap | |||||
| At minimum | $ | 2,083,877 | |||
| 1.10% - 1.30% | 6,752,359 | ||||
| 1.40% - 1.60% | 1,882,049 | ||||
| 1.70% - 2.00% | 279,564 | ||||
| >= 2.10% | 4,773 | ||||
| Volatility Control Index | |||||
| Current Asset Fee | |||||
| At Maximum | $ | — | |||
| 0.75% - 1.75% | 352,651 | ||||
| 2.25% - 2.75% | 205,570 | ||||
| 3.00% - 3.50% | 1,745,345 | ||||
| 3.75% - 5.00% | 2,970,283 | ||||
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 0.75% based upon prices of options for the week ended September 30, 2020.
Page 14
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Unaudited (Dollars in thousands)
Summary of Invested Assets
| September 30, 2020 | December 31, 2019 | ||||||||||||||||||||||
| Carrying Amount | Percent | Carrying Amount | Percent | ||||||||||||||||||||
| Fixed maturity securities: | |||||||||||||||||||||||
| United States Government full faith and credit | $ | 38,739 | 0.1 | % | $ | 161,765 | 0.3 | % | |||||||||||||||
| United States Government sponsored agencies | 1,074,978 | 1.9 | % | 625,020 | 1.1 | % | |||||||||||||||||
| United States municipalities, states and territories | 3,805,086 | 6.7 | % | 4,527,671 | 7.9 | % | |||||||||||||||||
| Foreign government obligations | 209,233 | 0.4 | % | 205,096 | 0.3 | % | |||||||||||||||||
| Corporate securities | 33,457,290 | 58.7 | % | 32,536,839 | 57.2 | % | |||||||||||||||||
| Residential mortgage backed securities | 1,623,073 | 2.8 | % | 1,575,664 | 2.8 | % | |||||||||||||||||
| Commercial mortgage backed securities | 5,478,783 | 9.6 | % | 5,786,279 | 10.2 | % | |||||||||||||||||
| Other asset backed securities | 6,013,561 | 10.5 | % | 6,162,156 | 10.8 | % | |||||||||||||||||
| Total fixed maturity securities | 51,700,743 | 90.7 | % | 51,580,490 | 90.6 | % | |||||||||||||||||
| Mortgage loans on real estate | 3,926,699 | 6.9 | % | 3,448,793 | 6.1 | % | |||||||||||||||||
| Derivative instruments | 874,741 | 1.5 | % | 1,355,989 | 2.4 | % | |||||||||||||||||
| Other investments | 495,740 | 0.9 | % | 492,301 | 0.9 | % | |||||||||||||||||
| $ | 56,997,923 | 100.0 | % | $ | 56,877,573 | 100.0 | % | ||||||||||||||||
Page 15
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Unaudited (Dollars in thousands, except per share data)
Credit Quality of Fixed Maturity Securities - September 30, 2020
| NAIC Designation | Carrying Amount | Percent | Rating Agency Rating | Carrying Amount | Percent | |||||||||||||||||||||||||||
| 1 | $ | 28,981,733 | 56.1 | % | Aaa/Aa/A | $ | 29,855,053 | 57.8 | % | |||||||||||||||||||||||
| 2 | 20,682,645 | 40.0 | % | Baa | 19,893,094 | 38.5 | % | |||||||||||||||||||||||||
| 3 | 1,684,689 | 3.3 | % | Ba | 1,573,650 | 3.0 | % | |||||||||||||||||||||||||
| 4 | 248,133 | 0.5 | % | B | 224,170 | 0.4 | % | |||||||||||||||||||||||||
| 5 | 80,048 | 0.1 | % | Caa | 65,386 | 0.1 | % | |||||||||||||||||||||||||
| 6 | 23,495 | — | % | Ca and lower | 89,390 | 0.2 | % | |||||||||||||||||||||||||
| $ | 51,700,743 | 100.0 | % | $ | 51,700,743 | 100.0 | % | |||||||||||||||||||||||||
Watch List Securities - September 30, 2020
| General Description (a) | Amortized Cost | Allowance for Credit Losses | Amortized Cost, Net of Allowance | Net Unrealized Losses, Net of Allowance | Fair Value | |||||||||||||||||||||||||||
| Corporate securities - Public securities | $ | 202,148 | $ | (51,430) | $ | 150,718 | $ | (23,736) | $ | 126,982 | ||||||||||||||||||||||
| Corporate securities - Private placement securities | 350,537 | (1,615) | 348,922 | (22,957) | 325,965 | |||||||||||||||||||||||||||
| Residential mortgage backed securities | 59,491 | (1,221) | 58,270 | (501) | 57,769 | |||||||||||||||||||||||||||
| Commercial mortgage backed securities | 250,545 | (7,353) | 243,192 | (47,711) | 195,481 | |||||||||||||||||||||||||||
| Other asset backed securities | 69,738 | — | 69,738 | (8,780) | 60,958 | |||||||||||||||||||||||||||
| Collateralized loan obligations | 74,805 | — | 74,805 | (14,081) | 60,724 | |||||||||||||||||||||||||||
| $ | 1,007,264 | $ | (61,619) | $ | 945,645 | $ | (117,766) | $ | 827,879 | |||||||||||||||||||||||
(a)The watch list consists of all fixed maturity securities we have determined contain elevated credit risk, including those we have taken credit losses on.
Page 16
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Unaudited (Dollars in thousands)
Fixed Maturity Securities by Sector
| September 30, 2020 | December 31, 2019 | ||||||||||||||||||||||
| Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||||||||||
| Available for sale: | |||||||||||||||||||||||
| United States Government full faith and credit and sponsored agencies | $ | 1,060,685 | $ | 1,113,717 | $ | 763,164 | $ | 786,785 | |||||||||||||||
| United States municipalities, states and territories | 3,265,276 | 3,805,086 | 4,147,343 | 4,527,671 | |||||||||||||||||||
| Foreign government obligations | 187,036 | 209,233 | 186,993 | 205,096 | |||||||||||||||||||
| Corporate securities: | |||||||||||||||||||||||
| Capital goods | 2,488,172 | 2,878,641 | 2,550,750 | 2,794,986 | |||||||||||||||||||
| Consumer discretionary | 6,091,509 | 7,064,666 | 6,082,974 | 6,658,120 | |||||||||||||||||||
| Energy | 2,654,458 | 2,774,360 | 2,499,030 | 2,677,646 | |||||||||||||||||||
| Financials | 6,543,633 | 7,381,859 | 6,737,325 | 7,323,150 | |||||||||||||||||||
| Government non-guaranteed | 539,175 | 626,339 | 539,639 | 606,308 | |||||||||||||||||||
| Industrials | 276,391 | 318,454 | 311,269 | 336,537 | |||||||||||||||||||
| Information technology | 1,741,574 | 2,043,842 | 1,868,131 | 2,051,175 | |||||||||||||||||||
| Materials | 1,719,670 | 1,959,090 | 1,818,048 | 1,961,033 | |||||||||||||||||||
| Other | 339,301 | 399,050 | 439,171 | 469,344 | |||||||||||||||||||
| Telecommunications | 1,488,146 | 1,728,726 | 1,510,836 | 1,664,350 | |||||||||||||||||||
| Transportation | 1,564,354 | 1,680,426 | 1,486,540 | 1,603,997 | |||||||||||||||||||
| Utilities | 3,920,669 | 4,601,837 | 3,978,459 | 4,390,193 | |||||||||||||||||||
| Residential mortgage backed securities: | |||||||||||||||||||||||
| Government agency | 571,424 | 656,909 | 591,100 | 646,787 | |||||||||||||||||||
| Prime | 847,250 | 867,660 | 793,357 | 815,916 | |||||||||||||||||||
| Alt-A | 84,538 | 98,504 | 93,281 | 112,961 | |||||||||||||||||||
| Commercial mortgage backed securities: | |||||||||||||||||||||||
| Government agency | 400,366 | 458,466 | 414,626 | 437,420 | |||||||||||||||||||
| Non-agency | 5,098,391 | 5,020,317 | 5,176,541 | 5,348,859 | |||||||||||||||||||
| Other asset backed securities: | |||||||||||||||||||||||
| Auto | 338,688 | 345,538 | 403,860 | 411,371 | |||||||||||||||||||
| Energy | 7,312 | 9,104 | 7,495 | 8,603 | |||||||||||||||||||
| Financials | 4,441 | 4,205 | 4,967 | 5,493 | |||||||||||||||||||
| Industrials | 142,356 | 139,366 | 167,466 | 171,273 | |||||||||||||||||||
| Collateralized loan obligations | 4,771,492 | 4,437,907 | 4,787,402 | 4,612,694 | |||||||||||||||||||
| Military housing | 466,333 | 549,996 | 471,621 | 539,029 | |||||||||||||||||||
| Other | 519,975 | 527,445 | 407,558 | 413,693 | |||||||||||||||||||
| $ | 47,132,615 | $ | 51,700,743 | $ | 48,238,946 | $ | 51,580,490 | ||||||||||||||||
Page 17
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Unaudited (Dollars in thousands)
Mortgage Loans on Real Estate
| September 30, 2020 | December 31, 2019 | ||||||||||||||||||||||
| Principal | Percent | Principal | Percent | ||||||||||||||||||||
| Geographic distribution: commercial mortgage loans | |||||||||||||||||||||||
| East | $ | 701,945 | 18.6 | % | $ | 645,991 | 18.7 | % | |||||||||||||||
| Middle Atlantic | 284,211 | 7.5 | % | 284,597 | 8.2 | % | |||||||||||||||||
| Mountain | 447,623 | 11.8 | % | 389,892 | 11.3 | % | |||||||||||||||||
| New England | 24,921 | 0.6 | % | 9,152 | 0.3 | % | |||||||||||||||||
| Pacific | 788,267 | 20.9 | % | 655,518 | 19.0 | % | |||||||||||||||||
| South Atlantic | 781,906 | 20.7 | % | 751,199 | 21.7 | % | |||||||||||||||||
| West North Central | 297,526 | 7.9 | % | 302,534 | 8.7 | % | |||||||||||||||||
| West South Central | 451,918 | 12.0 | % | 420,031 | 12.1 | % | |||||||||||||||||
| $ | 3,778,317 | 100.0 | % | $ | 3,458,914 | 100.0 | % | ||||||||||||||||
| Property type distribution: commercial mortgage loans | |||||||||||||||||||||||
| Office | $ | 250,523 | 6.6 | % | $ | 250,287 | 7.3 | % | |||||||||||||||
| Medical Office | 21,022 | 0.6 | % | 29,990 | 0.9 | % | |||||||||||||||||
| Retail | 1,199,877 | 31.8 | % | 1,225,670 | 35.4 | % | |||||||||||||||||
| Industrial/Warehouse | 959,819 | 25.4 | % | 896,558 | 25.9 | % | |||||||||||||||||
| Apartment | 941,858 | 24.9 | % | 858,679 | 24.8 | % | |||||||||||||||||
| Agricultural | 208,303 | 5.5 | % | 51,303 | 1.5 | % | |||||||||||||||||
| Mixed use/Other | 196,915 | 5.2 | % | 146,427 | 4.2 | % | |||||||||||||||||
| $ | 3,778,317 | 100.0 | % | $ | 3,458,914 | 100.0 | % | ||||||||||||||||
| September 30, 2020 | December 31, 2019 | ||||||||||||||||||||||
| Commercial | Residential | Total | Total | ||||||||||||||||||||
| Credit exposure - by payment activity | |||||||||||||||||||||||
| Performing | $ | 3,778,317 | $ | 171,163 | $ | 3,949,480 | $ | 3,458,914 | |||||||||||||||
| In workout | — | — | — | — | |||||||||||||||||||
| Delinquent | — | 771 | 771 | — | |||||||||||||||||||
| Collateral dependent | — | — | — | — | |||||||||||||||||||
| Principal outstanding | 3,778,317 | 171,934 | 3,950,251 | 3,458,914 | |||||||||||||||||||
| Unamortized discount | — | (2,838) | (2,838) | ||||||||||||||||||||
| Deferred fees and costs, net | (1,827) | 392 | (1,435) | (942) | |||||||||||||||||||
| Amortized cost | 3,776,490 | 169,488 | 3,945,978 | 3,457,972 | |||||||||||||||||||
| Valuation allowance | (17,429) | (1,850) | (19,279) | (9,179) | |||||||||||||||||||
| Carrying value | $ | 3,759,061 | $ | 167,638 | $ | 3,926,699 | $ | 3,448,793 | |||||||||||||||
Page 18
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Shareholder Information
Corporate Offices:
American Equity Investment Life Holding Company
6000 Westown Parkway
West Des Moines, IA 50266
Inquiries:
Steven Schwartz, Vice President-Investor Relations
(515) 273-3763, sschwartz@american-equity.com
Common Stock and Dividend Information:
New York Stock Exchange symbol: “AEL”
| High | Low | Close | Dividend Declared | ||||||||||||||||||||
| 2020 | |||||||||||||||||||||||
| First Quarter | $34.16 | $9.07 | $18.80 | $0.00 | |||||||||||||||||||
| Second Quarter | $27.09 | $14.76 | $24.71 | $0.00 | |||||||||||||||||||
| Third Quarter | $27.32 | $19.06 | $21.99 | $0.00 | |||||||||||||||||||
| 2019 | |||||||||||||||||||||||
| First Quarter | $33.57 | $26.34 | $27.02 | $0.00 | |||||||||||||||||||
| Second Quarter | $30.91 | $25.84 | $27.16 | $0.00 | |||||||||||||||||||
| Third Quarter | $27.80 | $20.16 | $24.20 | $0.00 | |||||||||||||||||||
| Fourth Quarter | $30.96 | $21.75 | $29.93 | $0.30 | |||||||||||||||||||
| 2018 | |||||||||||||||||||||||
| First Quarter | $35.79 | $28.90 | $29.36 | $0.00 | |||||||||||||||||||
| Second Quarter | $37.16 | $27.06 | $36.00 | $0.00 | |||||||||||||||||||
| Third Quarter | $38.57 | $34.51 | $35.36 | $0.00 | |||||||||||||||||||
| Fourth Quarter | $36.39 | $25.27 | $27.94 | $0.28 | |||||||||||||||||||
Transfer Agent:
Computershare Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940-0310
Phone: (877) 282-1169
Fax: (781) 575-2723
www.computershare.com
Annual Report and Other Information:
Shareholders may receive when available, without charge, a copy of American Equity’s Annual Report, SEC filings and/or press releases by calling Steven Schwartz, Vice President-Investor Relations, at (515) 273-3763 or by visiting our website at www.american-equity.com.
Page 19
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Research Analyst Coverage
Erik Bass
Autonomous Research US LP
(646) 561-6248
ebass@autonomous.com
Randy Binner
B. Riley FBR, Inc.
(703) 312-1890
rbinner@fbr.com
Daniel Bergman
Citi Research
(212) 816-2132
daniel.bergman@citi.com
Thomas Gallagher
Evercore ISI
(212) 446-9439
thomas.gallagher@evercoreisi.com
Pablo Singzon II
JP Morgan
(212) 622-2295
pablo.s.singzon@jpmorgan.com
Ryan Krueger
Keefe, Bruyette & Woods
(860) 722-5930
rkrueger@kbw.com
Bob Huang
Morgan Stanley Research
(212) 761-6136
Bob.Huang@morganstanley.com
John Barnidge
Piper Sandler & Co.
(312) 281-3412
John.Barnidge@psc.com
C. Gregory Peters
Raymond James & Associates, Inc.
(727) 567-1534
greg.peters@raymondjames.com
Mark A. Dwelle
RBC Capital Markets, LLC
(804) 782-4008
mark.dwelle@rbccm.com
Mark Hughes
SunTrust Robinson Humphrey
(615) 748-4422
mark.hughes@suntrust.com
Page 20