American Equity Investment Life : 3Q20 Financial Supplement
10/29/2020 | 04:40pm EST
Exhibit 99.2
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement
September 30, 2020
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 Available to Common Stockholders to Non-GAAP
5
Operating Income (Loss) Available to Common Stockholders
Summary of Adjustments to Arrive at Non-GAAP Operating Income (Loss) Available to
6
Common Stockholders
Quarterly Summary - Reconciliation from Net Income (Loss) Available to Common
7
Stockholders to Non-GAAP Operating Income (Loss) Available to Common Stockholders
Quarterly Summary - Summary of Adjustments to Arrive at Non-GAAP Operating
8
Income (Loss) Available to Common Stockholders
Capitalization/Book Value per Common Share
9
Spread Results
10
B.Product Summary
Summary of Cost of Money for Deferred Annuities
10
Annuity Account Balance Rollforward
10
Annuity Deposits by Product Type
11
Surrender Charge Protection and Account Values by Product Type
11
Annuity Liability Characteristics
12
Investment Summary
Summary of Invested Assets
15
Credit Quality of Fixed Maturity Securities
15
Watch List Securities
16
Fixed Maturity Securities by Sector
17
Mortgage Loans on Real Estate
18
D.
Shareholder Information
19
E.
Research Analyst Coverage
20
Table of Contents
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
Table of Contents
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
Nine Months Ended
September 30,
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
Table of Contents
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
655
702
621
835
758
benefits
Life contingent immediate annuity benefits and change in future policy
12,618
12,629
9,451
10,718
6,869
benefits
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
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.
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.
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Table of Contents
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Unaudited (Dollars in thousands, except per share data)
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.
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.
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.
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Table of Contents
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
Nine Months Ended
September 30,
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
(1,176,909)
250,186
(873,773)
500,998
index annuities
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
(12.77)
2.73
(9.49)
5.46
index annuities
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
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.
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Table of Contents
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
Nine Months Ended
September 30,
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
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Table of Contents
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 -
(1,176,909)
423,590
(120,454)
(127,777)
250,186
fixed index annuities
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
$
(249,813)
$
93,104
$
154,085
$
125,835
$
233,355
(b)(c)(d)
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
(12.77)
4.60
(1.31)
(1.39)
2.73
index annuities
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
$
(2.72)
$
1.01
$
1.67
$
1.37
$
2.54
(b)(c)(d)
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.
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.
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.
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
Table of Contents
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
$
(911,063)
$
346,483
$
(82,251)
$
(94,315)
$
195,995
stockholders
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.
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Table of Contents
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
(237,099)
685,839
353,853
448,924
549,202
derivatives
Total common stockholders' equity excluding AOCI and the net
impact of fair value accounting for derivatives and embedded
$
3,069,524
$
3,328,059
$
3,256,636
$
3,121,122
$
3,036,489
derivatives (c)
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
$
33.39
$
36.33
$
35.59
$
34.26
$
33.37
fair value accounting for derivatives and embedded derivatives (c)
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 %
Total capitalization excluding AOCI, a non-GAAP financial measure, is based on stockholders' equity excluding the effect of AOCI.
Equity available to preferred stockholders is equal to the redemption value of outstanding preferred stock plus share dividends declared but not yet issued.
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.
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.
Debt-to-capitalratios are computed using total capitalization excluding AOCI.
Page 9
Table of Contents
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
Table of Contents
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
Avg.
Avg.
Avg.
Dollars in
Product Type
Years
Years
%
%
At Issue
Remaining
Remaining
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
Table of Contents
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Unaudited (Dollars in thousands)
Annuity Liability Characteristics
Fixed
Fixed Index
Surrender Charge Percentages:
Annuities
Annuities
Account Value
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
Fixed and
Weighted
Fixed Index
Average
Surrender Charge Expiration By Year:
Annuities
Surrender
Account Value
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
Table of Contents
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2020
Unaudited (Dollars in thousands)
Annuity Liability Characteristics
Fixed
Fixed Index
Credited Rate vs. Ultimate Minimum Guaranteed Rate Differential:
Allocated to index strategies (see tables that follow)
-
42,682,783
$
2,047,567
$
50,958,583
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
Table of Contents
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
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
Table of Contents
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
Percent
Carrying
Percent
Amount
Amount
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
Table of Contents
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
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
Table of Contents
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
Fair
Amortized
Fair
Cost
Value
Cost
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
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
Table of Contents
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.
American Equity Investment Life Holding Company published this content on 29 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 October 2020 21:39:09 UTC
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