Schedule II—Condensed Financial Information of Registrant

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY (PARENT COMPANY)

Condensed Balance Sheets

(Dollars in thousands)



	December 31,
	2013			2012
Assets
Cash and cash equivalents	$	252,541		$	11,220
Equity securities of subsidiary trusts	7,403			7,398
Receivable from subsidiaries	1,158			535
Deferred income taxes	15,734			2,378
Federal income tax recoverable, including amount from subsidiaries	11,551			11,613
Other assets, including 2015 notes hedges	131,424			55,010
	419,811			88,154
Investment in and advances to subsidiaries	1,889,648			2,235,403
Total assets	$	2,309,459		$	2,323,557

Liabilities and Stockholders' Equity
Liabilities:
Notes payable	$	549,958		$	309,869
Subordinated debentures payable to subsidiary trusts	246,050			245,869
Other liabilities, including 2015 notes embedded derivative	128,764			47,582
Total liabilities	924,772			603,320
Stockholders' equity:
Common stock	70,535			61,751
Additional paid-in capital	550,400			496,715
Unallocated common stock held by ESOP	(631		)	(2,583		)
Accumulated other comprehensive income	46,196			686,807
Retained earnings	718,187			477,547
Total stockholders' equity	1,384,687			1,720,237
Total liabilities and stockholders' equity	$	2,309,459		$	2,323,557

See accompanying note to condensed financial statements.

See accompanying Report of Independent Registered Public Accounting Firm.

Schedule II—Condensed Financial Information of Registrant (Continued)

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY (PARENT COMPANY)

Condensed Statements of Operations

(Dollars in thousands)



	Year Ended December 31,
	2013			2012			2011
Revenues:
Net investment income	$	130		$	565		$	298
Dividends from subsidiary trusts	361			403			427
Investment advisory fees	44,469			36,178			29,765
Surplus note interest from subsidiary	4,080			4,080			4,080
Realized gain on investments	—			—			18
Change in fair value of derivatives	144,012			(7,472		)	(21,146		)
Loss on extinguishment of debt	(32,515		)	—			—
Total revenues	160,537			33,754			13,442
Expenses:
Change in fair value of embedded derivatives	141,974			(2,488		)	(21,002		)
Interest expense on notes payable	38,870			28,479			31,633
Interest expense on subordinated debentures issued to subsidiary trusts	12,088			13,458			13,977
Other operating costs and expenses	8,163			8,228			7,307
Total expenses	201,095			47,677			31,915
Loss before income taxes and equity in undistributed income of subsidiaries	(40,558		)	(13,923		)	(18,473		)
Income tax benefit	(13,880		)	(5,944		)	(7,407		)
Loss before equity in undistributed income of subsidiaries	(26,678		)	(7,979		)	(11,066		)
Equity in undistributed income of subsidiaries	279,961			65,777			97,314
Net income	$	253,283		$	57,798		$	86,248

See accompanying note to condensed financial statements.

See accompanying Report of Independent Registered Public Accounting Firm.

Schedule II—Condensed Financial Information of Registrant (Continued)

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY (PARENT COMPANY)

Condensed Statements of Cash Flows

(Dollars in thousands)



	Year Ended December 31,
	2013			2012			2011
Operating activities
Net income	$	253,283		$	57,798		$	86,248
Adjustments to reconcile net income to net cash provided by operating activities:
Change in fair value of 2015 notes embedded conversion derivative	141,974			(2,488		)	(21,002		)
Provision for depreciation and amortization	2,831			2,382			2,395
Accrual of discount on equity security	(5		)	(5		)	(5		)
Equity in undistributed income of subsidiaries	(279,961		)	(65,777		)	(97,314		)
Amortization of premium on fixed maturity security	—			—			1,005
Accrual of discount on contingent convertible notes	12,417			12,261			13,024
Change in fair value of derivatives	(144,012		)	7,472			21,002
Realized gain on investments	—			—			(18		)
Loss on extinguishment of debt	32,515			—			—
Accrual of discount on debenture issued to subsidiary trust	181			169			158
Share-based compensation	1,407			1,348			866
ESOP compensation	110			45			45
Deferred income tax benefit	(5,202		)	(2,838		)	(4,355		)
Other	(3,608		)	—			—
Changes in operating assets and liabilities:
Receivable from subsidiaries	995			1,205			1,596
Federal income tax recoverable	62			(2,745		)	142
Other assets	(1,945		)	(549		)	1,702
Other liabilities	20,131			(4,528		)	(1,562		)
Net cash provided by operating activities	31,173			3,750			3,927

Investing activities
Capital contributions to subsidiaries	—			—			(2,450		)
Purchase of fixed maturity security	—			—			(53,610		)
Sales, maturities or repayments of fixed maturity securities—available for sale	—			—			52,623
Net cash used in investing activities	—			—			(3,437		)

See accompanying note to condensed financial statements.

See accompanying Report of Independent Registered Public Accounting Firm.

Schedule II—Condensed Financial Information of Registrant (Continued)

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY (PARENT COMPANY)

Condensed Statements of Cash Flows (Continued)

(Dollars in thousands)



	Year Ended December 31,
	2013			2012			2011
Financing activities
Financing fees incurred and deferred	$	(11,942	)	$	—		$	(1,566	)
Proceeds from notes payable	415,000			—			—
Repayments of notes payable	(234,154		)	—			(46,251		)
Net proceeds from settlement of notes hedge and warrants	22,170			—			—
Repayment of subordinated debentures	—			(1,141		)	—
Excess tax benefits realized from share-based compensation plans	159			6			28
Proceeds from issuance of common stock	31,764			5,370			4,686
Dividends paid	(12,849		)	(9,374		)	(7,102		)
Net cash provided by (used in) financing activities	210,148			(5,139		)	(50,205		)
Increase (decrease) in cash and cash equivalents	241,321			(1,389		)	(49,715		)
Cash and cash equivalents at beginning of year	11,220			12,609			62,324
Cash and cash equivalents at end of year	$	252,541		$	11,220		$	12,609
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest on notes payable	$	13,758		$	14,564		$	16,917
Interest on subordinated debentures	11,850			13,102			13,703
Non-cash financing activity:
Conversion of subordinated debentures	—			20,770			—
Common stock issued in extinguishment of debt	117,463			—			—

See accompanying note to condensed financial statements.

See accompanying Report of Independent Registered Public Accounting Firm.

Schedule II—Condensed Financial Information of Registrant (Continued)

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY (PARENT COMPANY)

Note to Condensed Financial Statements

December 31, 2013

1. Basis of Presentation

The accompanying condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto of American Equity Investment Life Holding Company (Parent Company).

In the Parent Company financial statements, its investment in and advances to subsidiaries are stated at cost plus equity in undistributed income (losses) of subsidiaries since the date of acquisition and net unrealized gains/losses on the subsidiaries' fixed maturity securities classified as "available for sale" and equity securities.

See Notes 9 and 10 to the consolidated financial statements for a description of the Parent Company's notes payable and subordinated debentures payable to subsidiary trusts.