Iowa | 001-31911 | 42-1447959 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Indentification No.) |
6000 Westown Parkway, West Des Moines, Iowa | 50266 |
(Address of Principal Executive Offices) | (Zip Code) |
(d) | Exhibits |
Exhibit Number | Description | |
99.1 | Press release dated November 5, 2012, announcing American Equity Investment Life Holding Company's financial results for the quarter ended September 30, 2012. | |
99.2 | American Equity Investment Life Holding Company's Financial Supplement for the quarter ended September 30, 2012. |
AMERICAN EQUITY | |||
INVESTMENT LIFE HOLDING COMPANY | |||
By: | /s/ John M. Matovina | ||
John M. Matovina | |||
Chief Executive Officer and President | |||
Exhibit Number | Description | |
99.1 | Press release dated November 5, 2012, announcing American Equity Investment Life Holding Company's financial results for the quarter ended September 30, 2012. | |
99.2 | American Equity Investment Life Holding Company's Financial Supplement for the quarter ended September 30, 2012. |
For more information, contact: | ||
John M. Matovina, Chief Executive Officer | ||
(515) 457-1813, jmatovina@american-equity.com | ||
Ted M. Johnson, Chief Financial Officer | ||
(515) 457-1980, tjohnson@american-equity.com | ||
FOR IMMEDIATE RELEASE | Julie L. LaFollette, Director of Investor Relations | |
November 5, 2012 | (515) 273-3602, jlafollette@american-equity.com | |
Debra J. Richardson, Chief Administrative Officer | ||
(515) 273-3551, drichardson@american-equity.com |
▪ | Annuity sales for the third quarter of 2012 were $982 million (before coinsurance) compared to second quarter 2012 annuity sales of $917 million (before coinsurance). |
▪ | Total invested assets grew to $26.0 billion (amortized cost basis = $23.4 billion). |
▪ | Investment spread for the third quarter of 2012 was 2.62% compared to 2.70% for the second quarter of 2012. |
▪ | Estimated risk-based capital (RBC) ratio at September 30, 2012 based upon trailing twelve months annuity sales remained above target at 336%. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||
Revenues: | |||||||||||||||
Traditional life and accident and health insurance premiums | $ | 3,300 | $ | 3,126 | $ | 9,770 | $ | 9,331 | |||||||
Annuity product charges | 23,875 | 20,405 | 65,176 | 57,259 | |||||||||||
Net investment income | 318,594 | 305,502 | 965,763 | 894,508 | |||||||||||
Change in fair value of derivatives | 161,090 | (333,621 | ) | 269,404 | (206,997 | ) | |||||||||
Net realized losses on investments, excluding other than temporary impairment ("OTTI") losses | (1,238 | ) | (17,292 | ) | (7,925 | ) | (19,339 | ) | |||||||
OTTI losses on investments: | |||||||||||||||
Total OTTI losses | — | (5,133 | ) | (2,156 | ) | (10,346 | ) | ||||||||
Portion of OTTI losses recognized from other comprehensive income | (1,686 | ) | (3,758 | ) | (3,389 | ) | (7,345 | ) | |||||||
Net OTTI losses recognized in operations | (1,686 | ) | (8,891 | ) | (5,545 | ) | (17,691 | ) | |||||||
Total revenues | 503,935 | (30,771 | ) | 1,296,643 | 717,071 | ||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits and change in future policy benefits | 1,865 | 1,888 | 6,232 | 6,282 | |||||||||||
Interest sensitive and index product benefits (a) (d) | 246,105 | 223,232 | 527,961 | 621,317 | |||||||||||
Amortization of deferred sales inducements (c) | 7,709 | (28,065 | ) | 50,359 | 22,892 | ||||||||||
Change in fair value of embedded derivatives | 188,201 | (205,565 | ) | 466,278 | (138,225 | ) | |||||||||
Interest expense on notes payable | 7,141 | 7,984 | 21,208 | 23,723 | |||||||||||
Interest expense on subordinated debentures | 3,235 | 3,488 | 10,384 | 10,435 | |||||||||||
Interest expense on amounts due under repurchase agreements | — | — | — | 5 | |||||||||||
Amortization of deferred policy acquisition costs (c) | 25,954 | (28,930 | ) | 105,086 | 65,155 | ||||||||||
Other operating costs and expenses (b) | 36,170 | 15,903 | 76,785 | 50,011 | |||||||||||
Total benefits and expenses | 516,380 | (10,065 | ) | 1,264,293 | 661,595 | ||||||||||
Income (loss) before income taxes | (12,445 | ) | (20,706 | ) | 32,350 | 55,476 | |||||||||
Income tax expense (benefit) | (4,616 | ) | (7,638 | ) | 10,949 | 18,927 | |||||||||
Net income (loss) (a) (b) (c) (d) | (7,829 | ) | (13,068 | ) | 21,401 | 36,549 | |||||||||
Net realized losses and net OTTI losses on investments, net of offsets | 1,415 | 8,988 | 5,823 | 12,738 | |||||||||||
Net effect of derivatives and other index annuity, net of offsets | 19,000 | 45,544 | 42,478 | 51,764 | |||||||||||
Litigation reserve, net of offsets | 9,580 | — | 9,580 | — | |||||||||||
Operating income (a) (b) (d) (e) | $ | 22,166 | $ | 41,464 | $ | 79,282 | $ | 101,051 | |||||||
Earnings (loss) per common share | $ | (0.13 | ) | $ | (0.22 | ) | $ | 0.35 | $ | 0.62 | |||||
Earnings (loss) per common share - assuming dilution (a) (b) (c) (d) | $ | (0.13 | ) | $ | (0.22 | ) | $ | 0.34 | $ | 0.59 | |||||
Operating income per common share | $ | 0.35 | $ | 0.70 | $ | 1.31 | $ | 1.70 | |||||||
Operating income per common share - assuming dilution (a) (b) (d) (e) | $ | 0.34 | $ | 0.67 | $ | 1.22 | $ | 1.62 | |||||||
Weighted average common shares outstanding (in thousands): | |||||||||||||||
Earnings (loss) per common share | 62,504 | 59,596 | 60,723 | 59,429 | |||||||||||
Earnings (loss) per common share - assuming dilution | 65,262 | 62,698 | 65,232 | 62,783 |
(a) | Nine months ended September 30, 2011 includes an adjustment recorded in the first quarter 2011 to single premium immediate annuity reserves which reduced interest sensitive and index product benefits by $4.2 million, increased net income and operating income by $2.7 million and increased earnings per common share - assuming dilution and operating income per common share - assuming dilution by $0.04 per share. |
(b) | See note (b) on page 2. |
(c) | See note (c) on page 2. |
(d) | See note (d) on page 3. |
(e) | See note (e) on page 3. |
Adjustments | |||||||||||||||
As Reported | Realized Losses and Other Adjustments | Derivatives and Other Index Annuity | Operating Income (a) (e) | ||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||
Revenues: | |||||||||||||||
Traditional life and accident and health insurance premiums | $ | 3,300 | $ | — | $ | — | $ | 3,300 | |||||||
Annuity product charges | 23,875 | — | — | 23,875 | |||||||||||
Net investment income | 318,594 | — | — | 318,594 | |||||||||||
Change in fair value of derivatives | 161,090 | — | (96,232 | ) | 64,858 | ||||||||||
Net realized losses on investments, excluding other than temporary impairment ("OTTI") losses | (1,238 | ) | 1,238 | — | — | ||||||||||
Net OTTI losses recognized in operations | (1,686 | ) | 1,686 | — | — | ||||||||||
Total revenues | 503,935 | 2,924 | (96,232 | ) | 410,627 | ||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits and change in future policy benefits | 1,865 | — | — | 1,865 | |||||||||||
Interest sensitive and index product benefits (d) | 246,105 | — | — | 246,105 | |||||||||||
Amortization of deferred sales inducements (c) | 7,709 | 1,306 | 26,972 | 35,987 | |||||||||||
Change in fair value of embedded derivatives | 188,201 | — | (186,362 | ) | 1,839 | ||||||||||
Interest expense on notes payable | 7,141 | — | — | 7,141 | |||||||||||
Interest expense on subordinated debentures | 3,235 | — | — | 3,235 | |||||||||||
Interest expense on amounts due under repurchase agreements | — | — | — | — | |||||||||||
Amortization of deferred policy acquisition costs (c) | 25,954 | 2,077 | 33,559 | 61,590 | |||||||||||
Other operating costs and expenses (b) | 36,170 | (17,532 | ) | — | 18,638 | ||||||||||
Total benefits and expenses | 516,380 | (14,149 | ) | (125,831 | ) | 376,400 | |||||||||
Income (loss) before income taxes | (12,445 | ) | 17,073 | 29,599 | 34,227 | ||||||||||
Income tax expense (benefit) | (4,616 | ) | 6,078 | 10,599 | 12,061 | ||||||||||
Net income (loss) (b) (c) (d) | $ | (7,829 | ) | $ | 10,995 | $ | 19,000 | $ | 22,166 | ||||||
Earnings (loss) per common share | $ | (0.13 | ) | $ | 0.35 | ||||||||||
Earnings (loss) per common share - assuming dilution (b) (c) (d) | $ | (0.13 | ) | $ | 0.34 |
(a) | In addition to net income, we have consistently utilized operating income, operating income per common share and operating income per common share - assuming dilution, non-GAAP financial measures commonly used in the life insurance industry, as economic measures to evaluate our financial performance. Operating income equals net income adjusted to eliminate the impact of net realized gains and losses on investments including net OTTI losses recognized in operations, litigation reserve and fair value changes in derivatives and embedded derivatives. Because these items fluctuate from quarter to quarter in a manner unrelated to core operations, we believe measures excluding their impact are useful in analyzing operating trends. We believe the combined presentation and evaluation of operating income together with net income, provides information that may enhance an investor’s understanding of our underlying results and profitability. |
(b) | Other operating costs and expenses for the three and nine months ended September 30, 2012 include $2.2 million and $7.2 million, respectively, of expense related to the impact of the prospective adoption (effective January 1, 2012) of revised accounting guidance for deferred policy acquisition costs. This change, including the impact on related amortization expense, increased the net loss and decreased operating income for the three months ended September 30, 2012 by $1.5 million, decreased net income and operating income for the nine months ended September 30, 2012 by $4.6 million, increased loss per common share - assuming dilution and decreased operating income per common share - assuming dilution for the three months ended September 30, 2012 by $0.02 per share, and decreased earnings per common share - assuming dilution and operating income per common share - assuming dilution for the nine months ended September 30, 2012 by $0.07 per share. |
(c) | Three and nine months ended September 30, 2012 include expense from unlocking which decreased amortization of deferred sales inducements by $0.2 million and increased amortization of deferred policy acquisition costs by $3.7 million, increased the net loss for the three months ended September 30, 2012 and decreased net income for the nine months ended September 30, 2012 by $2.2 million and increased loss per common share - assuming dilution for the three months ended September 30, 2012 and decreased earnings per common share - assuming dilution for the nine months ended September 30, 2012 by $0.03 per share. |
(d) | Three and nine months ended September 30, 2012 include a benefit from the revision of assumptions used in determining reserves held for living income benefit riders consistent with unlocking for deferred policy acquisition costs and deferred sales inducements. The impact decreased interest sensitive and index product benefits for the three and nine months ended September 30, 2012 by $2.2 million; reduced the net loss for the three months ended September 30, 2012, increased net income for the nine months ended September 30, 2012 and increased operating income for the three and nine months ended September 30, 2012 by $1.4 million; reduced loss per common share - assuming dilution for the three months ended September 30, 2012 and increased earnings per common share - assuming dilution for the nine months ended September 30, 2012 and operating income per common share - assuming dilution for the three months and nine months ended September 30, 2012 by $0.02 per share. |
(e) | Three and nine months ended September 30, 2012 includes expense from unlocking which increased amortization of deferred sales inducements by $2.4 million and amortization of deferred policy acquisition costs by $7.3 million which reduced operating income by $6.3 million and operating income per common share - assuming dilution by $0.09 per share. |
A. | Financial Highlights | |
Operating Income | ||
Nine Months Ended September 30, 2012 | ||
Three Months Ended September 30, 2012 | ||
B. | Product Summary | |
C. | Investment Summary | |
Fixed Maturity Securities by Sector | ||
D. | ||
E. |
September 30, 2012 | December 31, 2011 | ||||||
(Unaudited) | |||||||
Assets | |||||||
Investments: | |||||||
Fixed maturity securities: | |||||||
Available for sale, at fair value | $ | 22,410,492 | $ | 18,464,109 | |||
Held for investment, at amortized cost | 76,048 | 2,644,206 | |||||
Equity securities, available for sale, at fair value | 61,604 | 62,845 | |||||
Mortgage loans on real estate | 2,724,321 | 2,823,047 | |||||
Derivative instruments | 577,784 | 273,314 | |||||
Other investments | 196,779 | 115,930 | |||||
Total investments | 26,047,028 | 24,383,451 | |||||
Cash and cash equivalents | 2,397,434 | 404,952 | |||||
Coinsurance deposits | 2,913,273 | 2,818,642 | |||||
Accrued investment income | 276,875 | 228,937 | |||||
Deferred policy acquisition costs | 1,639,791 | 1,683,857 | |||||
Deferred sales inducements | 1,234,471 | 1,242,787 | |||||
Deferred income taxes | — | 21,981 | |||||
Income taxes recoverable | — | 8,441 | |||||
Other assets | 88,901 | 81,671 | |||||
Total assets | $ | 34,597,773 | $ | 30,874,719 | |||
Liabilities and Stockholders' Equity | |||||||
Liabilities: | |||||||
Policy benefit reserves | $ | 30,980,046 | $ | 28,118,716 | |||
Other policy funds and contract claims | 457,162 | 400,594 | |||||
Notes payable | 306,696 | 297,608 | |||||
Subordinated debentures | 245,825 | 268,593 | |||||
Deferred income taxes | 73,835 | — | |||||
Income taxes payable | 1,415 | — | |||||
Other liabilities | 817,841 | 380,529 | |||||
Total liabilities | 32,882,820 | 29,466,040 | |||||
Stockholders' equity: | |||||||
Common stock | 61,548 | 57,837 | |||||
Additional paid-in capital | 493,797 | 468,281 | |||||
Unallocated common stock held by ESOP | (2,931 | ) | (3,620 | ) | |||
Accumulated other comprehensive income | 712,186 | 457,229 | |||||
Retained earnings | 450,353 | 428,952 | |||||
Total stockholders' equity | 1,714,953 | 1,408,679 | |||||
Total liabilities and stockholders' equity | $ | 34,597,773 | $ | 30,874,719 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Revenues: | |||||||||||||||
Traditional life insurance premiums | $ | 3,300 | $ | 3,126 | $ | 9,770 | $ | 9,331 | |||||||
Annuity product charges | 23,875 | 20,405 | 65,176 | 57,259 | |||||||||||
Net investment income | 318,594 | 305,502 | 965,763 | 894,508 | |||||||||||
Change in fair value of derivatives | 161,090 | (333,621 | ) | 269,404 | (206,997 | ) | |||||||||
Net realized losses on investments, excluding other than temporary impairment ("OTTI") losses | (1,238 | ) | (17,292 | ) | (7,925 | ) | (19,339 | ) | |||||||
OTTI losses on investments: | |||||||||||||||
Total OTTI losses | — | (5,133 | ) | (2,156 | ) | (10,346 | ) | ||||||||
Portion of OTTI losses recognized from other comprehensive income | (1,686 | ) | (3,758 | ) | (3,389 | ) | (7,345 | ) | |||||||
Net OTTI losses recognized in operations | (1,686 | ) | (8,891 | ) | (5,545 | ) | (17,691 | ) | |||||||
Total revenues | 503,935 | (30,771 | ) | 1,296,643 | 717,071 | ||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits and change in future policy benefits | 1,865 | 1,888 | 6,232 | 6,282 | |||||||||||
Interest sensitive and index product benefits (a) (d) | 246,105 | 223,232 | 527,961 | 621,317 | |||||||||||
Amortization of deferred sales inducements (c) | 7,709 | (28,065 | ) | 50,359 | 22,892 | ||||||||||
Change in fair value of embedded derivatives | 188,201 | (205,565 | ) | 466,278 | (138,225 | ) | |||||||||
Interest expense on notes payable | 7,141 | 7,984 | 21,208 | 23,723 | |||||||||||
Interest expense on subordinated debentures | 3,235 | 3,488 | 10,384 | 10,435 | |||||||||||
Interest expense on amounts due under repurchase agreements | — | — | — | 5 | |||||||||||
Amortization of deferred policy acquisition costs (c) | 25,954 | (28,930 | ) | 105,086 | 65,155 | ||||||||||
Other operating costs and expenses (b) | 36,170 | 15,903 | 76,785 | 50,011 | |||||||||||
Total benefits and expenses | 516,380 | (10,065 | ) | 1,264,293 | 661,595 | ||||||||||
Income (loss) before income taxes | (12,445 | ) | (20,706 | ) | 32,350 | 55,476 | |||||||||
Income tax expense (benefit) | (4,616 | ) | (7,638 | ) | 10,949 | 18,927 | |||||||||
Net income (loss) (a) (b) (c) (d) | $ | (7,829 | ) | $ | (13,068 | ) | $ | 21,401 | $ | 36,549 | |||||
Earnings (loss) per common share | $ | (0.13 | ) | $ | (0.22 | ) | $ | 0.35 | $ | 0.62 | |||||
Earnings (loss) per common share - assuming dilution (a) (b) (c) (d) | $ | (0.13 | ) | $ | (0.22 | ) | $ | 0.34 | $ | 0.59 | |||||
Weighted average common shares outstanding: | |||||||||||||||
Earnings (loss) per common share | 62,504 | 59,596 | 60,723 | 59,429 | |||||||||||
Earnings (loss) per common share - assuming dilution | 65,262 | 62,698 | 65,232 | 62,783 |
(a) | Nine months ended September 30, 2011 includes an adjustment recorded in the first quarter 2011 to single premium immediate annuity reserves which reduced interest sensitive and index product benefits by $4.2 million and increased net income and earnings per common share - assuming dilution by $2.7 million and $0.04 per share, respectively. |
(b) | Other operating costs and expenses for the three and nine months ended September 30, 2012 include $2.2 million and $7.2 million, respectively, of expense related to the impact of the prospective adoption (effective January 1, 2012) of revised accounting guidance for deferred policy acquisition costs. This change, including the impact on related amortization expense, increased the net loss and decreased operating income for the three months ended September 30, 2012 by $1.5 million, decreased net income and operating income for the nine months ended September 30, 2012 by $4.6 million, increased loss per commons share - assuming dilution and decreased operating income per common share - assuming dilution for the three months ended September 30, 2012 by $0.02 per share, and decreased earnings per common share - assuming dilution and operating earnings per common share - assuming dilution for the nine months ended September 30, 2012 by $0.07 per share. |
(c) | Three and nine months ended September 30, 2012 include expense from unlocking which decreased amortization of deferred sales inducements by $0.2 million and increased amortization of deferred policy acquisition costs by $3.7 million, increased the net loss for the three months ended September 30, 2012 and decreased net income for the nine months ended September 30, 2012 by $2.2 million and increased loss per common share - assuming dilution for the three months ended September 30, 2012 and decreased earnings per common share - assuming dilution for the nine months ended September 30, 2012 by $0.03 per share. |
(d) | Three and nine months ended September 30, 2012 include a benefit from the revision of assumptions used in determining reserves held for living income benefit riders consistent with unlocking for deferred policy acquisition costs and deferred sales inducements. The impact decreased interest sensitive and index product benefits for the three and nine months ended September 30, 2012 by $2.2 million; reduced the net loss for the three months ended September 30, 2012, increased net income for the nine months ended September 30, 2012 and increased operating income for the three and nine months ended September 30, 2012 by $1.4 million; reduced loss per common share - assuming dilution for the three months ended September 30, 2012 and increased earnings per common share - assuming dilution for the nine months ended September 30, 2012 and operating income per commons share - assuming dilution for the three and nine months ended September 30, 2012 by $0.02 per share. |
Adjustments | |||||||||||||||
As Reported | Realized Losses and Other Adjustments | Derivatives and Other Index Annuity | Operating Income (a) | ||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||
Revenues: | |||||||||||||||
Traditional life insurance premiums | $ | 9,770 | $ | — | $ | — | $ | 9,770 | |||||||
Annuity product charges | 65,176 | — | — | 65,176 | |||||||||||
Net investment income | 965,763 | — | — | 965,763 | |||||||||||
Change in fair value of derivatives | 269,404 | — | (293,814 | ) | (24,410 | ) | |||||||||
Net realized losses on investments, excluding other than temporary impairment ("OTTI") losses | (7,925 | ) | 7,925 | — | — | ||||||||||
Net OTTI losses recognized in operations | (5,545 | ) | 5,545 | — | — | ||||||||||
Total revenues | 1,296,643 | 13,470 | (293,814 | ) | 1,016,299 | ||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits and change in future policy benefits | 6,232 | — | — | 6,232 | |||||||||||
Interest sensitive and index product benefits (d) | 527,961 | — | — | 527,961 | |||||||||||
Amortization of deferred sales inducements (c) | 50,359 | 2,628 | 49,609 | 102,596 | |||||||||||
Change in fair value of embedded derivatives | 466,278 | — | (471,851 | ) | (5,573 | ) | |||||||||
Interest expense on notes payable | 21,208 | — | — | 21,208 | |||||||||||
Interest expense on subordinated debentures | 10,384 | — | — | 10,384 | |||||||||||
Amortization of deferred policy acquisition costs (c) | 105,086 | 4,456 | 62,144 | 171,686 | |||||||||||
Other operating costs and expenses (b) | 76,785 | (17,532 | ) | — | 59,253 | ||||||||||
Total benefits and expenses | 1,264,293 | (10,448 | ) | (360,098 | ) | 893,747 | |||||||||
Income before income taxes | 32,350 | 23,918 | 66,284 | 122,552 | |||||||||||
Income tax expense | 10,949 | 8,515 | 23,806 | 43,270 | |||||||||||
Net income (b) (c) (d) | $ | 21,401 | $ | 15,403 | $ | 42,478 | $ | 79,282 | |||||||
Earnings per common share | $ | 0.35 | $ | 1.31 | |||||||||||
Earnings per common share - assuming dilution (b) (c) (d) | $ | 0.34 | $ | 1.22 |
(a) | In addition to net income, we have consistently utilized operating income, operating income per common share and operating income per common share - assuming dilution, non-GAAP financial measures commonly used in the life insurance industry, as economic measures to evaluate our financial performance. Operating income equals net income adjusted to eliminate the impact of net realized gains and losses on investments including net OTTI losses recognized in operations, litigation reserve and fair value changes in derivatives and embedded derivatives. Because these items fluctuate from quarter to quarter in a manner unrelated to core operations, we believe measures excluding their impact are useful in analyzing operating trends. We believe the combined presentation and evaluation of operating income together with net income, provides information that may enhance an investor’s understanding of our underlying results and profitability. |
(c) | See note (c) on page 3 for discussion of the impact of unlocking on "As Reported" amounts and note (c) on page 7 for discussion of the impact of unlocking on "Operating Income" amounts. |
Change in fair value of derivatives: | |||||||||||||
Proceeds received at expiration | $ | 253,619 | $ | — | $ | 253,619 | |||||||
Cost of money for fixed index annuities | (272,456 | ) | — | (272,456 | ) | ||||||||
2015 notes hedges, interest rate swap and interest rate caps | (10,610 | ) | 5,037 | (5,573 | ) | ||||||||
Change in the difference between fair value and remaining option cost at beginning and end of period | 298,851 | (298,851 | ) | — | |||||||||
$ | 269,404 | $ | (293,814 | ) | $ | (24,410 | ) | ||||||
Index credits included in interest credited to account balances | $ | 253,490 | $ | 253,490 |
Adjustments | |||||||||||||||
As Reported | Realized Losses and Other Adjustments | Derivatives and Other Index Annuity | Operating Income (a) | ||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||
Revenues: | |||||||||||||||
Traditional life insurance premiums | $ | 3,300 | $ | — | $ | — | $ | 3,300 | |||||||
Annuity product charges | 23,875 | — | — | 23,875 | |||||||||||
Net investment income | 318,594 | — | — | 318,594 | |||||||||||
Change in fair value of derivatives | 161,090 | — | (96,232 | ) | 64,858 | ||||||||||
Net realized losses on investments, excluding other than temporary impairment ("OTTI") losses | (1,238 | ) | 1,238 | — | — | ||||||||||
Net OTTI losses recognized in operations | (1,686 | ) | 1,686 | — | — | ||||||||||
Total revenues | 503,935 | 2,924 | (96,232 | ) | 410,627 | ||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits and change in future policy benefits | 1,865 | — | — | 1,865 | |||||||||||
Interest sensitive and index product benefits (d) | 246,105 | — | — | 246,105 | |||||||||||
Amortization of deferred sales inducements (c) | 7,709 | 1,306 | 26,972 | 35,987 | |||||||||||
Change in fair value of embedded derivatives | 188,201 | — | (186,362 | ) | 1,839 | ||||||||||
Interest expense on notes payable | 7,141 | — | — | 7,141 | |||||||||||
Interest expense on subordinated debentures | 3,235 | — | — | 3,235 | |||||||||||
Amortization of deferred policy acquisition costs (c) | 25,954 | 2,077 | 33,559 | 61,590 | |||||||||||
Other operating costs and expenses (b) | 36,170 | (17,532 | ) | — | 18,638 | ||||||||||
Total benefits and expenses | 516,380 | (14,149 | ) | (125,831 | ) | 376,400 | |||||||||
Income (loss) before income taxes | (12,445 | ) | 17,073 | 29,599 | 34,227 | ||||||||||
Income tax expense (benefit) | (4,616 | ) | 6,078 | 10,599 | 12,061 | ||||||||||
Net income (loss) (b) (c) (d) | $ | (7,829 | ) | $ | 10,995 | $ | 19,000 | $ | 22,166 | ||||||
Earnings per common share | $ | (0.13 | ) | $ | 0.35 | ||||||||||
Earnings per common share - assuming dilution (b) (c) (d) | $ | (0.13 | ) | $ | 0.34 |
(a) | In addition to net income, we have consistently utilized operating income, operating income per common share and operating income per common share - assuming dilution, non-GAAP financial measures commonly used in the life insurance industry, as economic measures to evaluate our financial performance. Operating income equals net income adjusted to eliminate the impact of net realized gains and losses on investments including net OTTI losses recognized in operations, litigation reserve and fair value changes in derivatives and embedded derivatives. Because these items fluctuate from quarter to quarter in a manner unrelated to core operations, we believe measures excluding their impact are useful in analyzing operating trends. We believe the combined presentation and evaluation of operating income together with net income (loss), provides information that may enhance an investor’s understanding of our underlying results and profitability. |
(b) | See note (b) on page 3. |
(c) | See note (c) on page 3 for discussion of the impact of unlocking on "As Reported" amounts and note (c) on page 7 for discussion of the impact of unlocking on "Operating Income" amounts. |
Change in fair value of derivatives: | |||||||||||||
Proceeds received at expiration | $ | 152,716 | $ | — | $ | 152,716 | |||||||
Cost of money for fixed index annuities | (89,697 | ) | — | (89,697 | ) | ||||||||
2015 notes hedges, interest rate swap and interest rate caps | 355 | 1,484 | 1,839 | ||||||||||
Change in the difference between fair value and remaining option cost at beginning and end of period | 97,716 | (97,716 | ) | — | |||||||||
$ | 161,090 | $ | (96,232 | ) | $ | 64,858 | |||||||
Index credits included in interest credited to account balances | $ | 152,150 | $ | 152,150 |
Q3 2012 | Q2 2012 | Q1 2012 | Q4 2011 | Q3 2011 | |||||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||||||
Revenues: | |||||||||||||||||||
Traditional life insurance premiums | $ | 3,300 | $ | 3,248 | $ | 3,222 | $ | 2,820 | $ | 3,126 | |||||||||
Annuity product charges | 23,875 | 21,908 | 19,393 | 18,930 | 20,405 | ||||||||||||||
Net investment income | 318,594 | 320,259 | 326,910 | 324,272 | 305,502 | ||||||||||||||
Change in fair value of derivatives | 64,858 | (65,164 | ) | (24,104 | ) | (1,275 | ) | 12,411 | |||||||||||
Total revenues | 410,627 | 280,251 | 325,421 | 344,747 | 341,444 | ||||||||||||||
Benefits and expenses: | |||||||||||||||||||
Insurance policy benefits and change in future policy benefits | 1,865 | 2,250 | 2,117 | 1,588 | 1,888 | ||||||||||||||
Interest sensitive and index product benefits (d) | 246,105 | 142,733 | 139,123 | 154,440 | 223,232 | ||||||||||||||
Amortization of deferred sales inducements (c) | 35,987 | 33,141 | 33,468 | 31,521 | 24,279 | ||||||||||||||
Change in fair value of embedded derivatives | 1,839 | (24,163 | ) | 16,751 | 23,899 | (41,447 | ) | ||||||||||||
Interest expense on notes payable | 7,141 | 7,072 | 6,995 | 7,910 | 7,984 | ||||||||||||||
Interest expense on subordinated debentures | 3,235 | 3,563 | 3,586 | 3,542 | 3,488 | ||||||||||||||
Interest expense on amounts due under repurchase agreements | — | — | — | 25 | — | ||||||||||||||
Amortization of deferred policy acquisition costs (c) | 61,590 | 54,457 | 55,639 | 53,525 | 42,197 | ||||||||||||||
Other operating costs and expenses (b) | 18,638 | 18,902 | 21,713 | 17,518 | 15,903 | ||||||||||||||
Total benefits and expenses | 376,400 | 237,955 | 279,392 | 293,968 | 277,524 | ||||||||||||||
Operating income before income taxes | 34,227 | 42,296 | 46,029 | 50,779 | 63,920 | ||||||||||||||
Income tax expense | 12,061 | 14,940 | 16,269 | 18,177 | 22,456 | ||||||||||||||
Operating income (a) (b) (c) (d) | 22,166 | 27,356 | 29,760 | 32,602 | 41,464 | ||||||||||||||
Net realized gains (losses) and net OTTI losses on investments, net of offsets | (1,415 | ) | (861 | ) | (3,547 | ) | (5,616 | ) | (8,988 | ) | |||||||||
Litigation reserve, net of offsets | (9,580 | ) | — | — | — | — | |||||||||||||
Net effect of derivatives and other index annuity, net of offsets | (19,000 | ) | (7,736 | ) | (15,742 | ) | 22,713 | (45,544 | ) | ||||||||||
Net income (loss) | $ | (7,829 | ) | $ | 18,759 | $ | 10,471 | $ | 49,699 | $ | (13,068 | ) | |||||||
Operating income per common share (a) | $ | 0.35 | $ | 0.46 | $ | 0.50 | $ | 0.55 | $ | 0.70 | |||||||||
Operating income per common share - assuming dilution (a) (b) (c) (d) | $ | 0.34 | $ | 0.43 | $ | 0.46 | $ | 0.52 | $ | 0.67 | |||||||||
Earnings (loss) per common share | $ | (0.13 | ) | $ | 0.31 | $ | 0.18 | $ | 0.83 | $ | (0.22 | ) | |||||||
Earnings (loss) per common share - assuming dilution | $ | (0.13 | ) | $ | 0.30 | $ | 0.16 | $ | 0.79 | $ | (0.22 | ) | |||||||
Weighted average common shares outstanding (in thousands): | |||||||||||||||||||
Earnings (loss) per common share | 62,504 | 59,943 | 59,701 | 59,641 | 59,596 | ||||||||||||||
Earnings (loss) per common share - assuming dilution | 65,262 | 64,254 | 65,930 | 63,582 | 62,698 |
(a) | In addition to net income (loss), we have consistently utilized operating income, operating income per common share and operating income per common share - assuming dilution, non-GAAP financial measures commonly used in the life insurance industry, as economic measures to evaluate our financial performance. Operating income equals net income (loss) adjusted to eliminate the impact of net realized gains and losses on investments including net OTTI losses recognized in operations, litigation reserve and fair value changes in derivatives and embedded derivatives. Because these items fluctuate from quarter to quarter in a manner unrelated to core operations, we believe measures excluding their impact are useful in analyzing operating trends. We believe the combined presentation and evaluation of operating income together with net income (loss), provides information that may enhance an investor’s understanding of our underlying results and profitability. |
(b) | Other operating costs and expenses for the third, second and first quarters of 2012 include $2.2 million, $2.0 million and $3.0 million, respectively, of expense related to the impact of the prospective adoption (effective January 1, 2012) of revised accounting guidance for deferred policy acquisition costs. This change, including the impact on related amortization expense, decreased operating income for the third, second and first quarter of 2012 by $1.4 million, $1.3 million and $1.9 million, respectively, and reduced operating income per common share - assuming dilution for the third, second and first quarters of 2012 by $0.02, $0.02 and $0.03, respectively. |
(c) | Three months ended September 30, 2012 includes expense from unlocking which increased amortization of deferred sales inducements by $2.4 million and amortization of deferred acquisition costs by $7.3 million and decreased operating income by $6.3 million and operating income per common share - assuming dilution by $0.09 per share. |
September 30, 2012 | December 31, 2011 | ||||||
(Dollars in thousands, except per share data) | |||||||
Capitalization: | |||||||
Notes payable | $ | 306,696 | $ | 297,608 | |||
Subordinated debentures payable to subsidiary trusts | 245,825 | 268,593 | |||||
Total debt | 552,521 | 566,201 | |||||
Total stockholders’ equity | 1,714,953 | 1,408,679 | |||||
Total capitalization | 2,267,474 | 1,974,880 | |||||
Accumulated other comprehensive income (AOCI) | (712,186 | ) | (457,229 | ) | |||
Total capitalization excluding AOCI (a) | $ | 1,555,288 | $ | 1,517,651 | |||
Total stockholders’ equity | $ | 1,714,953 | $ | 1,408,679 | |||
Accumulated other comprehensive income | (712,186 | ) | (457,229 | ) | |||
Total stockholders’ equity excluding AOCI (a) | $ | 1,002,767 | $ | 951,450 | |||
Common shares outstanding (b) | 62,393,059 | 59,131,995 | |||||
Book Value per Share: (c) | |||||||
Book value per share including AOCI | $ | 27.49 | $ | 23.82 | |||
Book value per share excluding AOCI (a) | $ | 16.07 | $ | 16.09 | |||
Debt-to-Capital Ratios: (d) | |||||||
Senior debt / Total capitalization | 19.7 | % | 19.6 | % | |||
Adjusted debt / Total capitalization | 20.5 | % | 22.3 | % |
(a) | Total capitalization, total stockholders’ equity and book value per share excluding AOCI, non-GAAP financial measures, are based on stockholders’ equity excluding the effect of AOCI. Since AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale investments, we believe these non-GAAP financial measures provide useful supplemental information. |
(b) | Common shares outstanding include shares held by the NMO Deferred Compensation Trust: 2012 - 1,139,702 shares; 2011 - 1,631,548 shares and exclude unallocated shares held by ESOP: 2012 - 294,770 shares; 2011 - 336,093 shares. |
(c) | Book value per share including and excluding AOCI is calculated as total stockholders’ equity and total stockholders’ equity excluding AOCI divided by the total number of shares of common stock outstanding. |
(d) | Debt-to-capital ratios are computed using total capitalization excluding AOCI. Adjusted debt includes notes payable and the portion of the total subordinated debentures payable to subsidiary trusts outstanding (qualifying trust preferred securities) that exceeds 15% of total capitalization excluding AOCI. |
Three Months Ended September 30, | Nine Months Ended September 30, | Year Ended December 31, | ||||||||||||||||||
Product Type | 2012 | 2011 | 2012 | 2011 | 2011 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Fixed Index Annuities: | ||||||||||||||||||||
Index Strategies | $ | 547,230 | $ | 701,796 | $ | 1,568,989 | $ | 2,075,800 | $ | 2,839,295 | ||||||||||
Fixed Strategy | 315,029 | 317,091 | 885,589 | 986,724 | 1,377,987 | |||||||||||||||
862,259 | 1,018,887 | 2,454,578 | 3,062,524 | 4,217,282 | ||||||||||||||||
Fixed Rate Annuities: | ||||||||||||||||||||
Single-Year Rate Guaranteed | 22,413 | 37,195 | 78,041 | 118,084 | 169,304 | |||||||||||||||
Multi-Year Rate Guaranteed | 45,037 | 116,768 | 205,934 | 279,407 | 397,925 | |||||||||||||||
Single premium immediate annuities | 52,315 | 94,514 | 140,265 | 257,995 | 305,603 | |||||||||||||||
119,765 | 248,477 | 424,240 | 655,486 | 872,832 | ||||||||||||||||
Total before coinsurance ceded | 982,024 | 1,267,364 | 2,878,818 | 3,718,010 | 5,090,114 | |||||||||||||||
Coinsurance ceded | 36,539 | 94,412 | 167,986 | 230,620 | 326,531 | |||||||||||||||
Net after coinsurance ceded | $ | 945,485 | $ | 1,172,952 | $ | 2,710,832 | $ | 3,487,390 | $ | 4,763,583 |
Surrender Charge | Net Account Value | ||||||||||||
Product Type | Avg. Years At Issue | Avg. Years Remaining | Avg. % Remaining | Dollars in Thousands | % | ||||||||
Fixed Index Annuities | 14.2 | 10.5 | 16.1% | $ | 24,701,911 | 92.5 | % | ||||||
Single-Year Fixed Rate Guaranteed Annuities | 11.1 | 4.7 | 8.0% | 1,442,821 | 5.4 | % | |||||||
Multi-Year Fixed Rate Guaranteed Annuities (a) | 6.2 | 1.9 | 4.6% | 567,632 | 2.1 | % | |||||||
Total | 13.9 | 10.0 | 15.4% | $ | 26,712,364 | 100.0 | % |
Fixed Annuities Account Value | Fixed Index Annuities Account Value | |||||||
(Dollars in thousands) | ||||||||
SURRENDER CHARGE PERCENTAGES: | ||||||||
No surrender charge | $ | 539,662 | $ | 528,685 | ||||
0.0% < 2.0% | 42,977 | 199,301 | ||||||
2.0% < 3.0% | 156,979 | 190,087 | ||||||
3.0% < 4.0% | 27,684 | 364,953 | ||||||
4.0% < 5.0% | 51,942 | 231,792 | ||||||
5.0% < 6.0% | 24,021 | 241,653 | ||||||
6.0% < 7.0% | 164,751 | 201,962 | ||||||
7.0% < 8.0% | 207,805 | 482,862 | ||||||
8.0% < 9.0% | 172,189 | 643,403 | ||||||
9.0% < 10.0% | 119,927 | 485,815 | ||||||
10.0% or greater | 502,516 | 21,131,398 | ||||||
$ | 2,010,453 | $ | 24,701,911 |
Fixed and Fixed Index Annuities Account Value | Weighted Average Surrender Charge | ||||||
(Dollars in thousands) | |||||||
SURRENDER CHARGE EXPIRATION BY YEAR: | |||||||
Out of Surrender Charge | $ | 1,068,347 | — | % | |||
2012 | 93,847 | 1.89 | % | ||||
2013 | 490,384 | 2.20 | % | ||||
2014 | 542,505 | 3.60 | % | ||||
2015 | 580,886 | 5.32 | % | ||||
2016 | 833,417 | 6.95 | % | ||||
2017 | 987,789 | 8.04 | % | ||||
2018 | 846,098 | 10.29 | % | ||||
2019 | 598,293 | 10.91 | % | ||||
2020 | 933,850 | 12.35 | % | ||||
2021 | 1,241,197 | 14.10 | % | ||||
2022 | 1,721,029 | 15.92 | % | ||||
2023 | 3,817,649 | 18.36 | % | ||||
2024 | 4,146,752 | 19.07 | % | ||||
2025 | 3,191,739 | 19.00 | % | ||||
2026 | 2,441,514 | 19.10 | % | ||||
2027 | 1,950,225 | 19.64 | % | ||||
2028 | 1,207,179 | 19.99 | % | ||||
2029 | 19,664 | 20.00 | % | ||||
$ | 26,712,364 | 15.39 | % |
Fixed Annuities Account Value | Fixed Index Annuities Account Value | |||||||
(Dollars in thousands) | ||||||||
CREDITED RATE (INCLUDING BONUS INTEREST) VS. ULTIMATE MINIMUM GUARANTEED RATE DIFFERENTIAL: | ||||||||
No differential | $ | 597,146 | $ | 698,131 | ||||
› 0.0% - 0.25% | 421,578 | 601,658 | ||||||
› 0.25% - 0.5% | 136,168 | 100,309 | ||||||
› 0.5% - 1.0% (a) | 329,731 | 1,139,412 | ||||||
› 1.0% - 1.5% (a) | 126,156 | 29,965 | ||||||
› 1.5% - 2.0% | 156,786 | 2,343 | ||||||
› 2.0% - 2.5% | 4,034 | — | ||||||
› 2.5% - 3.0% | 41,377 | — | ||||||
1.00% ultimate guarantee - 2.34% wtd avg interest rate (b) | 15,037 | — | ||||||
1.50% ultimate guarantee - 1.83% wtd avg interest rate (b) | 73,807 | 1,875,020 | ||||||
2.00% ultimate guarantee - 2.70% wtd avg interest rate (b) | 108,633 | — | ||||||
2.25% ultimate guarantee - 2.76% wtd avg interest rate (b) | — | 1,598,258 | ||||||
3.00% ultimate guarantee - 2.96% wtd avg interest rate (b) | — | 3,184,572 | ||||||
Allocated to index strategies (see tables that follow) | — | 15,472,243 | ||||||
$ | 2,010,453 | $ | 24,701,911 |
(a) | $168,643 of Fixed Annuities Account Value have a guarantee of 2.25% for the first 10 years and 3.00% thereafter. They begin increasing in 2014. $652,668 of Index Annuities Account Value is in fixed rate strategies that have a guarantee of 2.25% for the first 10 years and 3.00% thereafter. They begin increasing in 2014. |
(b) | The minimum guaranteed interest rate for the fixed rate or the fixed rate strategy is 1.00%. The ultimate guaranteed rate is applied on less than 100% of the premium. |
Annual Monthly Average and Point-to-Point with Caps | |||||||||||||||||||
Minimum Guaranteed Cap | |||||||||||||||||||
1% | 3% | 4% | 7% | 8% + | |||||||||||||||
Current Cap | (Dollars in thousands) | ||||||||||||||||||
At minimum | $ | — | $ | 1,832 | $ | 667,860 | $ | 53,230 | $ | 284,563 | |||||||||
3% - 3.25% | 1,155,764 | — | — | — | — | ||||||||||||||
4% - 5% | 11,564 | 120,023 | 1,362,111 | — | — | ||||||||||||||
5% - 6% | — | 6,360 | 2,167,561 | — | — | ||||||||||||||
6% - 7% | — | — | 3,215,506 | — | — | ||||||||||||||
>= 7% | — | 12,612 | 234,805 | 135,663 | 89,452 |
Annual Monthly Average and Point-to-Point with Participation Rates | |||||||||||||||
Minimum Guaranteed Participation Rate | |||||||||||||||
10% | 25% | 35% | 50% + | ||||||||||||
Current Participation Rate | (Dollars in thousands) | ||||||||||||||
At minimum | $ | 19 | $ | 330,059 | $ | 172,776 | $ | 201,506 | |||||||
< 20% | 98,934 | — | — | — | |||||||||||
20% - 40% | 80,005 | 498,900 | — | — | |||||||||||
40% - 60% | — | 176,467 | 141,458 | 1,287 | |||||||||||
>= 60% | — | 23,760 | 19,081 | 16,627 |
S&P 500 Monthly Point-to-Point - Minimum Guaranteed Monthly Cap = 1% (Dollars in thousands) | |||
Current Cap | |||
At minimum | $ | 8,996 | |
1.6% - 1.8% | 1,220,397 | ||
2.0% - 2.4% | 1,628,490 | ||
>= 2.4% | 1,324,580 |
Three Months Ended September 30, | Nine Months Ended September 30, | Year Ended December 31, | ||||||||
2012 | 2011 | 2012 | 2011 | 2011 | ||||||
Reported Amounts | ||||||||||
Average yield on invested assets | 5.17% | 5.70% | 5.36% | 5.81% | 5.80% | |||||
Aggregate cost of money | 2.55% | 2.75% | 2.60% | 2.77% | 2.77% | |||||
Aggregate investment spread | 2.62% | 2.95% | 2.76% | 3.04% | 3.03% | |||||
Adjustments | ||||||||||
Investment yield - temporary cash investments | 0.29% | 0.11% | 0.23% | 0.09% | 0.07% | |||||
Investment yield - additional prepayment income | (0.04)% | —% | (0.04)% | —% | —% | |||||
Cost of money effect of (under) over hedging | 0.01% | 0.05% | 0.01% | 0.07% | 0.06% | |||||
Adjusted Amounts | ||||||||||
Average yield on invested assets | 5.42% | 5.81% | 5.55% | 5.90% | 5.87% | |||||
Aggregate cost of money | 2.56% | 2.80% | 2.61% | 2.84% | 2.83% | |||||
Aggregate investment spread | 2.86% | 3.01% | 2.94% | 3.06% | 3.04% | |||||
September 30, 2012 | December 31, 2011 | ||||||||||||
Carrying Amount | Percent | Carrying Amount | Percent | ||||||||||
(Dollars in thousands) | |||||||||||||
Fixed maturity securities: | |||||||||||||
United States Government full faith and credit | $ | 5,205 | — | % | $ | 4,678 | — | % | |||||
United States Government sponsored agencies | 1,958,737 | 7.5 | % | 4,368,053 | 17.9 | % | |||||||
United States municipalities, states and territories | 3,571,462 | 13.7 | % | 3,333,383 | 13.7 | % | |||||||
Foreign government obligations | 98,825 | 0.4 | % | 43,228 | 0.2 | % | |||||||
Corporate securities | 13,319,047 | 51.1 | % | 10,192,293 | 41.8 | % | |||||||
Residential mortgage backed securities | 2,565,959 | 9.9 | % | 2,703,290 | 11.1 | % | |||||||
Commercial mortgage backed securities | 78,912 | 0.3 | % | — | — | % | |||||||
Other asset backed securities | 888,393 | 3.4 | % | 463,390 | 1.9 | % | |||||||
Total fixed maturity securities | 22,486,540 | 86.3 | % | 21,108,315 | 86.6 | % | |||||||
Equity securities | 61,604 | 0.2 | % | 62,845 | 0.2 | % | |||||||
Mortgage loans on real estate | 2,724,321 | 10.5 | % | 2,823,047 | 11.6 | % | |||||||
Derivative instruments | 577,784 | 2.2 | % | 273,314 | 1.1 | % | |||||||
Other investments | 196,779 | 0.8 | % | 115,930 | 0.5 | % | |||||||
$ | 26,047,028 | 100.0 | % | $ | 24,383,451 | 100.0 | % |
NAIC Designation | Carrying Amount | Percent | Rating Agency Rating | Carrying Amount | Percent | |||||||||||
(Dollars in thousands) | (Dollars in thousands) | |||||||||||||||
1 | $ | 14,591,003 | 64.9 | % | Aaa/Aa/A | $ | 13,889,605 | 61.8 | % | |||||||
2 | 7,538,539 | 33.6 | % | Baa | 7,214,242 | 32.1 | % | |||||||||
3 | 316,752 | 1.4 | % | Ba | 254,342 | 1.1 | % | |||||||||
4 | 32,361 | 0.1 | % | B | 188,838 | 0.9 | % | |||||||||
5 | 4,006 | — | % | Caa and lower | 818,111 | 3.6 | % | |||||||||
6 | 3,879 | — | % | In or near default | 121,402 | 0.5 | % | |||||||||
$ | 22,486,540 | 100.0 | % | $ | 22,486,540 | 100.0 | % |
General Description | Amortized Cost | Unrealized Losses | Fair Value | Months Below Amortized Cost | ||||||||||
(Dollars in thousands) | ||||||||||||||
Corporate bonds: | ||||||||||||||
Finance | $ | 68,975 | $ | (10,040 | ) | $ | 58,935 | 7 - 22 | ||||||
Industrial | 38,877 | (6,553 | ) | 32,324 | 14 - 25 | |||||||||
$ | 107,852 | $ | (16,593 | ) | $ | 91,259 |
Collateral Type | Principal Amount | Amortized Cost | Fair Value | |||||||||
(Dollars in thousands) | ||||||||||||
OTTI has not been recognized | ||||||||||||
Government agency | $ | 641,422 | $ | 590,724 | $ | 693,914 | ||||||
Prime | 945,241 | 900,427 | 947,156 | |||||||||
Alt-A | 42,240 | 42,814 | 42,905 | |||||||||
$ | 1,628,903 | $ | 1,533,965 | $ | 1,683,975 | |||||||
OTTI has been recognized | ||||||||||||
Prime | $ | 626,695 | $ | 551,983 | $ | 543,988 | ||||||
Alt-A | 434,107 | 347,132 | 337,996 | |||||||||
$ | 1,060,802 | $ | 899,115 | $ | 881,984 | |||||||
Total by collateral type | ||||||||||||
Government agency | $ | 641,422 | $ | 590,724 | $ | 693,914 | ||||||
Prime | 1,571,936 | 1,452,410 | 1,491,144 | |||||||||
Alt-A | 476,347 | 389,946 | 380,901 | |||||||||
$ | 2,689,705 | $ | 2,433,080 | $ | 2,565,959 | |||||||
Total by NAIC designation | ||||||||||||
1 | $ | 2,403,998 | $ | 2,176,085 | $ | 2,314,091 | ||||||
2 | 263,528 | 238,012 | 232,812 | |||||||||
3 | 18,135 | 16,407 | 17,184 | |||||||||
6 | 4,044 | 2,576 | 1,872 | |||||||||
$ | 2,689,705 | $ | 2,433,080 | $ | 2,565,959 |
September 30, 2012 | December 31, 2011 | ||||||||||||||
Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Available for sale: | |||||||||||||||
United States Government full faith and credit and sponsored agencies | $ | 1,944,152 | $ | 1,963,942 | $ | 1,784,485 | $ | 1,804,457 | |||||||
United States municipalities, states and territories | 3,096,008 | 3,571,462 | 2,981,699 | 3,333,383 | |||||||||||
Foreign Government obligations | 81,126 | 98,825 | 36,373 | 43,228 | |||||||||||
Corporate securities: | |||||||||||||||
Consumer discretionary | 1,152,602 | 1,316,919 | 885,834 | 992,042 | |||||||||||
Consumer staples | 739,139 | 853,753 | 614,531 | 701,192 | |||||||||||
Energy | 1,314,331 | 1,500,671 | 1,042,956 | 1,166,284 | |||||||||||
Financials | 2,253,788 | 2,480,059 | 1,802,745 | 1,862,573 | |||||||||||
Health care | 772,026 | 915,403 | 667,014 | 765,274 | |||||||||||
Industrials | 1,331,926 | 1,525,169 | 1,029,933 | 1,151,961 | |||||||||||
Information technology | 788,769 | 876,234 | 486,545 | 547,195 | |||||||||||
Materials | 923,774 | 1,024,836 | 562,272 | 627,405 | |||||||||||
Military housing | 5,326 | 5,366 | 5,331 | 5,482 | |||||||||||
Telecommunications | 347,640 | 389,779 | 251,202 | 268,924 | |||||||||||
Utilities | 1,996,280 | 2,326,113 | 1,727,993 | 1,988,764 | |||||||||||
Residential mortgage backed securities: | |||||||||||||||
Government agency | 590,724 | 693,914 | 449,720 | 547,987 | |||||||||||
Prime | 1,452,410 | 1,491,144 | 1,738,702 | 1,761,890 | |||||||||||
Alt-A | 389,946 | 380,901 | 429,518 | 393,413 | |||||||||||
Commercial mortgage backed securities | 78,682 | 78,912 | — | — | |||||||||||
Other asset backed securities: | |||||||||||||||
Consumer discretionary | 20,064 | 21,622 | 18,061 | 18,512 | |||||||||||
Consumer staples | 34,775 | 38,259 | 5,000 | 5,038 | |||||||||||
Energy | 8,312 | 9,113 | 8,338 | 8,680 | |||||||||||
Financials | 491,991 | 506,003 | 160,994 | 162,892 | |||||||||||
Industrials | 96,433 | 102,143 | 57,547 | 61,285 | |||||||||||
Military housing | 150,718 | 156,819 | 142,903 | 152,549 | |||||||||||
Telecommunications | 7,335 | 8,680 | 7,334 | 8,435 | |||||||||||
Utilities | 14,434 | 16,700 | 14,762 | 17,221 | |||||||||||
Other | 26,318 | 29,054 | 27,570 | 28,778 | |||||||||||
Redeemable preferred stock - financials | 26,985 | 28,697 | 40,817 | 39,265 | |||||||||||
$ | 20,136,014 | $ | 22,410,492 | $ | 16,980,179 | $ | 18,464,109 | ||||||||
Held for investment: | |||||||||||||||
United States Government sponsored agencies | $ | — | $ | — | $ | 2,568,274 | $ | 2,585,080 | |||||||
Corporate security - financials | 76,048 | 63,759 | 75,932 | 59,342 | |||||||||||
$ | 76,048 | $ | 63,759 | $ | 2,644,206 | $ | 2,644,422 |
September 30, 2012 | December 31, 2011 | ||||||||||||||
Principal | Percent | Principal | Percent | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Geographic distribution | |||||||||||||||
East | $ | 719,407 | 26.0 | % | $ | 719,231 | 25.2 | % | |||||||
Middle Atlantic | 156,828 | 5.7 | % | 169,240 | 5.9 | % | |||||||||
Mountain | 404,803 | 14.7 | % | 411,054 | 14.4 | % | |||||||||
New England | 26,763 | 1.0 | % | 36,815 | 1.3 | % | |||||||||
Pacific | 325,936 | 11.8 | % | 309,693 | 10.8 | % | |||||||||
South Atlantic | 500,232 | 18.1 | % | 493,764 | 17.3 | % | |||||||||
West North Central | 406,511 | 14.7 | % | 487,693 | 17.1 | % | |||||||||
West South Central | 222,381 | 8.0 | % | 228,521 | 8.0 | % | |||||||||
$ | 2,762,861 | 100.0 | % | $ | 2,856,011 | 100.0 | % | ||||||||
Property type distribution | |||||||||||||||
Office | $ | 702,796 | 25.5 | % | $ | 777,343 | 27.2 | % | |||||||
Medical Office | 143,971 | 5.2 | % | 175,580 | 6.1 | % | |||||||||
Retail | 699,190 | 25.3 | % | 635,916 | 22.3 | % | |||||||||
Industrial/Warehouse | 699,690 | 25.3 | % | 710,426 | 24.9 | % | |||||||||
Hotel | 106,596 | 3.9 | % | 139,193 | 4.9 | % | |||||||||
Apartment | 208,099 | 7.5 | % | 187,548 | 6.6 | % | |||||||||
Mixed use/other | 202,519 | 7.3 | % | 230,005 | 8.0 | % | |||||||||
$ | 2,762,861 | 100.0 | % | $ | 2,856,011 | 100.0 | % | ||||||||
September 30, 2012 | December 31, 2011 | ||||||||||||||
(Dollars in thousands) | |||||||||||||||
Credit Exposure - By Payment Activity | |||||||||||||||
Performing | $ | 2,682,471 | $ | 2,743,068 | |||||||||||
In workout | 44,371 | 67,425 | |||||||||||||
Delinquent | — | 6,595 | |||||||||||||
Collateral dependent | 36,019 | 38,923 | |||||||||||||
2,762,861 | 2,856,011 | ||||||||||||||
Specific loan loss allowance | (26,422 | ) | (23,664 | ) | |||||||||||
General loan loss allowance | (11,600 | ) | (9,300 | ) | |||||||||||
Deferred prepayment fees | (518 | ) | — | ||||||||||||
$ | 2,724,321 | $ | 2,823,047 |
High | Low | Close | Dividend Declared | ||||
2012 | |||||||
First Quarter | $13.09 | $10.13 | $12.77 | $0.00 | |||
Second Quarter | $12.95 | $10.00 | $11.01 | $0.00 | |||
Third Quarter | $12.36 | $10.72 | $11.63 | $0.00 | |||
2011 | |||||||
First Quarter | $13.93 | $11.27 | $13.12 | $0.00 | |||
Second Quarter | $13.53 | $11.91 | $12.71 | $0.00 | |||
Third Quarter | $13.22 | $8.01 | $8.75 | $0.00 | |||
Fourth Quarter | $11.82 | $8.05 | $10.40 | $0.12 | |||
2010 | |||||||
First Quarter | $10.99 | $6.65 | $10.65 | $0.00 | |||
Second Quarter | $11.64 | $8.53 | $10.32 | $0.00 | |||
Third Quarter | $11.19 | $9.19 | $10.24 | $0.00 | |||
Fourth Quarter | $13.01 | $10.11 | $12.55 | $0.10 |