EX-99.2 3 a2014-03x31_ael8kexhibit992.htm FINANCIAL SUPPLEMENT 2014-03-31_AEL 8K Exhibit 99.2

Exhibit 99.2



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement

March 31, 2014


A.
Financial Highlights
 
 
 
 
 
Non-GAAP Financial Measures
 
 
 
 
 
 
 
 
 
 
B.
Product Summary
 
 
 
 
 
 
 
 
 
C.
Investment Summary
 
 
 
 
 
 
 
 
 
 
D.
 
 
 
E.





AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2014

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
 
March 31, 2014
 
December 31, 2013
 
(Unaudited)
 
 
Assets
 
 
 
Investments:
 
 
 
Fixed maturity securities:
 
 
 
Available for sale, at fair value
$
28,315,473

 
$
26,610,447

Held for investment, at amortized cost
76,298

 
76,255

Equity securities, available for sale, at fair value
7,767

 
7,778

Mortgage loans on real estate
2,584,583

 
2,581,082

Derivative instruments
790,396

 
856,050

Other investments
213,706

 
215,042

Total investments
31,988,223

 
30,346,654

 
 
 
 
Cash and cash equivalents
679,172

 
897,529

Coinsurance deposits
3,028,367

 
2,999,618

Accrued investment income
322,818

 
301,641

Deferred policy acquisition costs
2,210,694

 
2,426,652

Deferred sales inducements
1,713,246

 
1,875,880

Deferred income taxes
189,956

 
301,856

Other assets
412,020

 
471,669

Total assets
$
40,544,496

 
$
39,621,499

 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
Liabilities:
 
 
 
Policy benefit reserves
$
36,731,438

 
$
35,789,655

Other policy funds and contract claims
402,895

 
418,033

Notes payable
521,758

 
549,958

Subordinated debentures
246,097

 
246,050

Income taxes payable
18,062

 
10,153

Other liabilities
969,297

 
1,222,963

Total liabilities
38,889,547

 
38,236,812

 
 
 
 
Stockholders' equity:
 
 
 
Common stock
72,390

 
70,535

Additional paid-in capital
542,003

 
550,400

Unallocated common stock held by ESOP
(313
)
 
(631
)
Accumulated other comprehensive income
332,435

 
46,196

Retained earnings
708,434

 
718,187

Total stockholders' equity
1,654,949

 
1,384,687

Total liabilities and stockholders' equity
$
40,544,496

 
$
39,621,499




Page 1


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2014

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
 
Three Months Ended
March 31,
 
2014
 
2013
Revenues:
 
 
 
Premiums and other considerations (a)
$
7,331

 
$
13,084

Annuity product charges
25,272

 
21,481

Net investment income
370,005

 
329,690

Change in fair value of derivatives
48,493

 
373,962

Net realized gains (losses) on investments, excluding other than temporary impairment ("OTTI") losses
(714
)
 
10,585

OTTI losses on investments:
 
 
 
Total OTTI losses
—

 
(2,189
)
Portion of OTTI losses recognized from other comprehensive income
(905
)
 
(1,048
)
Net OTTI losses recognized in operations
(905
)
 
(3,237
)
Loss on extinguishment of debt
(3,977
)
 
—

Total revenues
445,505

 
745,565

 
 
 
 
Benefits and expenses:
 
 
 
Insurance policy benefits and change in future policy benefits (a)
10,095

 
14,760

Interest sensitive and index product benefits (a)
317,192

 
223,170

Amortization of deferred sales inducements
666

 
28,831

Change in fair value of embedded derivatives
92,619

 
363,272

Interest expense on notes payable
10,264

 
7,248

Interest expense on subordinated debentures
3,008

 
3,009

Amortization of deferred policy acquisition costs
7,194

 
46,230

Other operating costs and expenses
19,085

 
19,520

Total benefits and expenses
460,123

 
706,040

Income (loss) before income taxes
(14,618
)
 
39,525

Income tax expense (benefit)
(4,865
)
 
13,494

Net income (loss)
$
(9,753
)
 
$
26,031

 
 
 
 
Earnings (loss) per common share
$
(0.13
)
 
$
0.41

Earnings (loss) per common share - assuming dilution
$
(0.13
)
 
$
0.38

Weighted average common shares outstanding (in thousands):
 
 
 
Earnings (loss) per common share
72,519

 
63,314

Earnings (loss) per common share - assuming dilution
79,616

 
68,706

(a)
We made an immaterial correction in the presentation of premiums, insurance policy benefits and change in future policy benefits and interest sensitive and index product benefits related to life contingent immediate annuities. We have revised the 2013 consolidated statement of operations above to be consistent with the 2014 presentation. These changes had no impact on our consolidated balance sheets, net income (loss) or stockholders' equity.

Page 2


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2014

Quarterly Summary - Most Recent 5 Quarters (Unaudited)
 
Q1 2014
 
Q4 2013
 
Q3 2013
 
Q2 2013
 
Q1 2013
 
(Dollars in thousands, except per share data)
Revenues:
 
 
 
 
 
 
 
 
 
Traditional life insurance premiums
$
2,804

 
$
2,452

 
$
2,493

 
$
2,913

 
$
2,698

Life contingent immediate annuity considerations
4,527

 
8,386

 
7,381

 
8,638

 
10,386

Surrender charges (a)
12,423

 
15,239

 
11,160

 
11,292

 
11,502

Lifetime income benefit rider fees
12,849

 
16,909

 
15,291

 
12,219

 
9,979

Net investment income
370,005

 
363,947

 
354,147

 
336,143

 
329,690

Change in fair value of derivatives
48,493

 
444,985

 
193,028

 
64,040

 
373,962

Net realized gains (losses) on investments, excluding OTTI
(714
)
 
16,364

 
(2,077
)
 
15,689

 
10,585

Net OTTI losses recognized in operations
(905
)
 
—

 
(222
)
 
(2,775
)
 
(3,237
)
Loss on extinguishment of debt
(3,977
)
 
(30,988
)
 
(938
)
 
(589
)
 
—

Total revenues
445,505

 
837,294

 
580,263

 
447,570

 
745,565

 
 
 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
 
 
Traditional life insurance policy benefits and change in future policy benefits
2,261

 
1,452

 
1,647

 
2,106

 
1,735

Life contingent immediate annuity benefits and change in future policy benefits
7,834

 
11,827

 
9,617

 
11,662

 
13,025

Interest sensitive and index product benefits (b)
317,192

 
390,956

 
325,740

 
333,001

 
223,170

Amortization of deferred sales inducements (c)
666

 
69,121

 
34,625

 
120,536

 
28,831

Change in fair value of embedded derivatives
92,619

 
142,881

 
36,224

 
(408,409
)
 
363,272

Interest expense on notes payable
10,264

 
11,885

 
12,957

 
6,780

 
7,248

Interest expense on subordinated debentures
3,008

 
3,027

 
3,034

 
3,018

 
3,009

Amortization of deferred policy acquisition costs (c)
7,194

 
99,934

 
50,034

 
169,270

 
46,230

Other operating costs and expenses (d)(e)(f)
19,085

 
26,886

 
20,658

 
24,851

 
19,520

Total benefits and expenses
460,123

 
757,969

 
494,536

 
262,815

 
706,040

Income (loss) before income taxes
(14,618
)
 
79,325

 
85,727

 
184,755

 
39,525

Income tax expense (benefit)
(4,865
)
 
28,367

 
29,546

 
64,642

 
13,494

Net income (loss) (a)(b)(c)(d)(e)(f)
$
(9,753
)
 
$
50,958

 
$
56,181

 
$
120,113

 
$
26,031

 
 
 
 
 
 
 
 
 
 
Earnings (loss) per common share
$
(0.13
)
 
$
0.73

 
$
0.86

 
$
1.87

 
$
0.41

Earnings (loss) per common share - assuming dilution (a)(b)(c)(d)(e)(f)
$
(0.13
)
 
$
0.64

 
$
0.75

 
$
1.71

 
$
0.38

Weighted average common shares outstanding (in thousands):
 
 
 
 
 
 
 
 
 
Earnings (loss) per common share
72,519

 
69,416

 
65,129

 
64,254

 
63,314

Earnings (loss) per common share - assuming dilution
79,616

 
79,041

 
74,560

 
70,382

 
68,706

(a)
Q4 2013 includes a benefit of $4.7 million from surrender charges deducted from California policyholders surrendering their policies as a condition of receiving certain benefits in a national class action lawsuit settlement, which after related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs and income taxes, increased net income and earnings per common share - assuming dilution by $1.9 million and $0.02 per share, respectively.
(b)
Q3 2013 includes 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 by $1.8 million and increased net income and earnings per common share - assuming dilution by $1.1 million and $0.01 per share, respectively.
(c)
Q3 2013 includes benefit from unlocking which reduced amortization of deferred sales inducements and deferred policy acquisition costs by $11.1 million and $18.5 million, respectively, and increased net income and earnings per common share- assuming dilution by $19.1 million and $0.26 per share, respectively.
(d)
Q1 2014 includes a net benefit of $2.2 million from recognizing a decrease in an estimated class action litigation reserve based upon developments in the claim process for settlement of the class action and third party costs incurred during the quarter associated with administration of the settlement, which after related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs and income taxes, decreased net loss and loss per common share - assuming dilution by $0.9 million and $0.01 per share, respectively.

Page 3


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2014

(e)
Q4 2013 includes expense of $4.2 million from recognizing an increase in an estimated class action litigation reserve based upon developments in the claim process for settlement of the class action litigation and third party costs incurred during the quarter associated with administration of the settlement, which after related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs and income taxes, decreased net income and earnings per common share - assuming dilution by $1.9 million and $0.02 per share, respectively.
(f)
Q2 2013 includes expense of $8.5 million related to assessments received and future estimates of assessments from state guaranty fund associations related to the insolvency of Executive Life Insurance Company of New York, which after income taxes decreased net income and earnings per common share - assuming dilution by $5.5 million and $0.08 per share, respectively.
Q2 2013 includes a benefit of $3.2 million related to the final settlement of a litigation liability established in 2010, which after related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs and income taxes increased net income and earnings per common share - assuming dilution by $2.0 million and $0.03 per share, respectively.
NON-GAAP FINANCIAL MEASURES
In addition to net income (loss), we have consistently utilized operating income and operating income per common share - assuming dilution, non-GAAP financial measures commonly used in the life insurance industry, as economic measures to evaluate our financial performance. Operating income equals net income (loss) adjusted to eliminate the impact of net realized gains and losses on investments including net OTTI losses recognized in operations, fair value changes in derivatives and embedded derivatives, loss on extinguishment of debt and changes in litigation reserves. 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.
Reconciliation from Net Income (Loss) to Operating Income (Unaudited)
 
Three Months Ended
March 31,
 
2014
 
2013
 
(Dollars in thousands,
except per share data)
Net income (loss)
$
(9,753
)
 
$
26,031

Adjustments to arrive at operating income:
 
 
 
Net realized investment (gains) losses, including OTTI (a)
564

 
(2,804
)
Change in fair value of derivatives and embedded derivatives - index annuities (a)
43,708

 
10,973

Change in fair value of derivatives and embedded derivatives - debt (a)
1,509

 
(736
)
Litigation reserve (a)
(916
)
 
—

Extinguishment of debt (a)
2,394

 
—

Operating income (a non-GAAP financial measure)
$
37,506

 
$
33,464

 
 
 
 
Per common share - assuming dilution:
 
 
 
Net income (loss)
$
(0.13
)
 
$
0.38

Adjustments to arrive at operating income:
 
 
 
Anti-dilutive effect of net loss
0.01

 
—

Net realized investment (gains) losses, including OTTI
—

 
(0.04
)
Change in fair value of derivatives and embedded derivatives - index annuities
0.55

 
0.16

Change in fair value of derivatives and embedded derivatives - debt
0.02

 
(0.01
)
Litigation reserve
(0.01
)
 
—

Extinguishment of debt
0.03

 
—

Operating income (a non-GAAP financial measure)
$
0.47

 
$
0.49

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

Page 4


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2014

NON-GAAP FINANCIAL MEASURES
Summary of Adjustments to Arrive at Operating Income (Unaudited)
 
Three Months Ended
March 31,
 
2014
 
2013
 
(Dollars in thousands)
Net realized investment gains and losses, including OTTI:
 
 
 
Net realized (gains) losses on investments, including OTTI
$
1,619

 
$
(7,348
)
Amortization of DAC and DSI
(746
)
 
3,093

Income taxes
(309
)
 
1,451

 
$
564

 
$
(2,804
)
Change in fair value of derivatives and embedded derivatives:
 
 
 
Index annuities
$
167,481

 
$
36,890

Interest rate caps and swap
2,579

 
(1,210
)
Amortization of DAC and DSI
(101,803
)
 
(20,240
)
Income taxes
(23,040
)
 
(5,203
)
 
$
45,217

 
$
10,237

Litigation reserve:
 
 
 
Change in litigation reserve recorded in other operating costs
$
(2,212
)
 
$
—

Amortization of DAC and DSI
795

 
—

Income taxes
501

 
—

 
$
(916
)
 
$
—

Extinguishment of debt:
 
 
 
Loss on extinguishment of debt
$
3,977

 
$
—

Income taxes
(1,583
)
 
—

 
$
2,394

 
$
—



Page 5


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2014

NON-GAAP FINANCIAL MEASURES
Quarterly Summary - Most Recent 5 Quarters (Unaudited)
Reconciliation from Net Income (Loss) to Operating Income
 
Q1 2014
 
Q4 2013
 
Q3 2013
 
Q2 2013
 
Q1 2013
 
(Dollars in thousands, except per share data)
Net income (loss)
$
(9,753
)
 
$
50,958

 
$
56,181

 
$
120,113

 
$
26,031

Adjustments to arrive at operating income:
 
 
 
 
 
 
 
 
 
Net realized investment (gains) losses, including OTTI (a)
564

 
(6,214
)
 
890

 
(3,574
)
 
(2,804
)
Change in fair value of derivatives and embedded derivatives -
index annuities (a)
43,708

 
(23,419
)
 
(4,907
)
 
(81,351
)
 
10,973

Change in fair value of derivatives and embedded derivatives -
debt (a)
1,509

 
(4,290
)
 
7,136

 
(3,302
)
 
(736
)
Litigation reserve (a)
(916
)
 
1,988

 
—

 
(1,969
)
 
—

Extinguishment of debt (a)
2,394

 
20,823

 
548

 
345

 
—

Operating income (a non-GAAP financial measure) (b)(c)(d)(e)
$
37,506

 
$
39,846

 
$
59,848

 
$
30,262

 
$
33,464

 
 
 
 
 
 
 
 
 
 
Operating income per common share - assuming dilution (b)(c)(d)(e)
$
0.47

 
$
0.50

 
$
0.80

 
$
0.43

 
$
0.49

(a)
Adjustments to net income (loss) to arrive at operating income are presented net of income taxes and where applicable, are net of related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs.
(b)
Q4 2013 includes a benefit of $4.7 million from surrender charges deducted from California policyholders surrendering their policies as a condition of receiving certain benefits in a national class action lawsuit settlement, which after related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs and income taxes, increased operating income and operating income per common share - assuming dilution by $2.0 million and $0.02 per share, respectively.
(c)
Q3 2013 includes a benefit from unlocking which reduced amortization of deferred sales inducements and deferred policy acquisition costs by $12.6 million and $20.4 million, respectively, and increased operating income and operating income per common share- assuming dilution by $21.3 million and $0.29 per share, respectively.
(d)
Q3 2013 includes 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 by $1.8 million and increased operating income and operating income per common share - assuming dilution by $1.1 million and $0.01 per share, respectively.
(e)
Q2 2013 includes expense of $8.5 million related to assessments received and future estimates of assessments from state guaranty fund associations related to the insolvency of Executive Life Insurance Company of New York, which after income taxes decreased operating income and operating income per common share - assuming dilution by $5.5 million and $0.08 per share, respectively.




Page 6


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2014

NON-GAAP FINANCIAL MEASURES
Summary of Adjustments to Arrive at Operating Income (Unaudited)
 
Q1 2014
 
Q4 2013
 
Q3 2013
 
Q2 2013
 
Q1 2013
 
(Dollars in thousands)
Net realized (gains) losses on investments
$
714

 
$
(16,364
)
 
$
2,077

 
$
(15,689
)
 
$
(10,585
)
Net OTTI losses recognized in operations
905

 
—

 
222

 
2,775

 
3,237

Change in fair value of derivatives
57,039

 
(209,083
)
 
25,448

 
91,374

 
(299,494
)
Loss on extinguishment of debt
3,977

 
30,988

 
938

 
589

 
—

Increase (decrease) in total revenues
62,635

 
(194,459
)
 
28,685

 
79,049

 
(306,842
)
 
 
 
 
 
 
 
 
 
 
Amortization of deferred sales inducements
43,435

 
(27,797
)
 
(6,765
)
 
(82,583
)
 
7,447

Change in fair value of embedded derivatives
(113,021
)
 
(104,953
)
 
39,526

 
408,606

 
(335,174
)
Amortization of deferred policy acquisition costs
58,319

 
(38,189
)
 
(9,849
)
 
(111,570
)
 
9,700

Other operating costs and expenses
2,212

 
(4,248
)
 
—

 
3,212

 
—

Increase (decrease) in total benefits and expenses
(9,055
)
 
(175,187
)
 
22,912

 
217,665

 
(318,027
)
Increase (decrease) in income (loss) before income taxes
71,690

 
(19,272
)
 
5,773

 
(138,616
)
 
11,185

Increase (decrease) in income tax expense
24,431

 
(8,160
)
 
2,106

 
(48,765
)
 
3,752

Increase (decrease) in net income (loss)
$
47,259

 
$
(11,112
)
 
$
3,667

 
$
(89,851
)
 
$
7,433


Page 7


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2014

Capitalization/Book Value per Share
 
(a) Pro-forma
March 31, 2014
 
March 31, 2014
 
December 31, 2013
 
(Dollars in thousands, except per share data)
Capitalization:
 
 
 
 
 
Notes payable:
 
 
 
 
 
September 2015 Notes
$
55,757

 
$
86,239

 
$
85,328

December 2029 Notes
33,706

 
35,519

 
64,630

July 2021 Notes
400,000

 
400,000

 
400,000

Subordinated debentures payable to subsidiary trusts
246,097

 
246,097

 
246,050

   Total debt
735,560

 
767,855

 
796,008

Total stockholders’ equity
1,657,654

 
1,654,949

 
1,384,687

Total capitalization
2,393,214

 
2,422,804

 
2,180,695

Accumulated other comprehensive income (AOCI)
(332,435
)
 
(332,435
)
 
(46,196
)
Total capitalization excluding AOCI (b)
$
2,060,779

 
$
2,090,369

 
$
2,134,499

 
 
 
 
 
 
Total stockholders’ equity
$
1,657,654

 
$
1,654,949

 
$
1,384,687

Accumulated other comprehensive income
(332,435
)
 
(332,435
)
 
(46,196
)
Total stockholders’ equity excluding AOCI (b)
$
1,325,219

 
$
1,322,514

 
$
1,338,491

 
 
 
 
 
 
Common shares outstanding (c)
74,100,576

 
72,874,731

 
71,369,474

 
 
 
 
 
 
Book Value per Share: (d)
 
 
 
 
 
Book value per share including AOCI
$
22.37

 
$
22.71

 
$
19.40

Book value per share excluding AOCI (b)
$
17.88

 
$
18.15

 
$
18.75

 
 
 
 
 
 
Debt-to-Capital Ratios: (e)
 
 
 
 
 
Senior debt / Total capitalization
23.8
%
 
25.0
%
 
25.8
%
Adjusted debt / Total capitalization
23.8
%
 
25.0
%
 
25.8
%
(a)
Pro-forma March 31, 2014 amounts include the impact of convertible debt retirements completed in April 2014. The convertible debt retirements resulted in a net decrease in notes payable of $32,295 and a net increase in stockholders' equity of $2,705.
(b)
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.
(c)
Common shares outstanding include shares held by the NMO Deferred Compensation Trust: 2014 - 543,120 shares; 2013 - 892,688 shares and excludes unallocated shares held by the ESOP: 2014 - 58,618 shares; 2013 - 58,618 shares.
(d)
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.
(e)
Debt-to-capital ratios are computed using total capitalization excluding AOCI. Adjusted debt includes notes payable and the portion of the total subordinated debentures payable to subsidiary trusts outstanding (qualifying trust preferred securities) that exceeds 15% of total capitalization excluding AOCI.

Page 8


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2014

Spread Results
 
Three Months Ended
March 31,
 
2014
 
2013
Average yield on invested assets
4.95%
 
5.01%
Aggregate cost of money
2.18%
 
2.33%
Aggregate investment spread
2.77%
 
2.68%
 
 
 
 
Impact of:
 
 
 
Investment yield - additional prepayment income
0.05%
 
0.08%
Cost of money effect of (under) over hedging
—%
 
0.03%
 
 
 
 
Weighted average investments (in thousands)
$30,002,658
 
$26,382,116
Weighted average investments include fixed maturity securities at amortized cost and equity securities at cost. The numerator for average yield on invested assets includes net investment income and the tax effect of investment income that is exempt from income taxes.
Summary of Cost of Money for Deferred Annuities
 
Three Months Ended
March 31,
 
2014
 
2013
 
(Dollars in thousands)
Included in interest sensitive and index product benefits:
 
 
 
Index credits
$
230,378

 
$
135,341

Interest credited
69,827

 
74,417

Included in change in fair value of derivatives:
 
 
 
Proceeds received at option expiration
(227,958
)
 
(135,225
)
Pro rata amortization of option cost
102,024

 
88,855

Cost of money for deferred annuities
$
174,271

 
$
163,388

 
 
 
 
Weighted average liability balance outstanding (in thousands)
$
31,928,538

 
$
28,060,075

Annuity Account Balance Rollforward
 
Three Months Ended
March 31,
 
2014
 
2013
 
(Dollars in thousands)
Account balances at beginning of period
$
31,535,846

 
$
27,669,669

Net deposits
865,405

 
872,329

Premium and interest bonuses
72,687

 
73,898

Fixed interest credited and index credits
300,205

 
209,758

Surrender charges
(12,423
)
 
(11,502
)
Lifetime income benefit rider fees
(12,849
)
 
(9,979
)
Surrenders, withdrawals, deaths, etc.
(427,639
)
 
(353,695
)
Account balances at end of period
$
32,321,232

 
$
28,450,478


Page 9


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2014

Annuity Deposits by Product Type
 
 
Three Months Ended
March 31,
 
Year Ended December 31,
Product Type
 
2014
 
2013
 
2013
 
 
(Dollars in thousands)
Fixed Index Annuities:
 
 
 
 
 
 
Index Strategies
 
$
642,266

 
$
604,641

 
$
2,861,977

Fixed Strategy
 
203,538

 
243,129

 
1,020,447

 
 
845,804

 
847,770

 
3,882,424

Fixed Rate Annuities:
 
 
 
 
 
 
Single-Year Rate Guaranteed
 
15,240

 
19,910

 
71,944

Multi-Year Rate Guaranteed
 
54,587

 
47,256

 
205,978

Single premium immediate annuities
 
5,286

 
14,980

 
52,142

 
 
75,113

 
82,146

 
330,064

Total before coinsurance ceded
 
920,917

 
929,916

 
4,212,488

Coinsurance ceded
 
50,226

 
42,607

 
182,616

Net after coinsurance ceded
 
$
870,691

 
$
887,309

 
$
4,029,872

Surrender Charge Protection and Account Values by Product Type
Annuity Surrender Charges and Net (of coinsurance) Account Values at March 31, 2014:
 
 
Surrender Charge
 
Net Account Value
Product Type
 
Avg.
Years
At Issue
 
Avg.
Years
Remaining
 
Avg.
%
Remaining
 
Dollars in Thousands
 
%
 
 
 
 
 
 
 
 
 
 
 
Fixed Index Annuities
 
14.1
 
9.9
 
15.6%
 
$
30,342,038

 
93.9
%
Single-Year Fixed Rate Guaranteed Annuities
 
11.1
 
4.3
 
8.0%
 
1,431,842

 
4.4
%
Multi-Year Fixed Rate Guaranteed Annuities (a)
 
6.3
 
1.7
 
4.4%
 
547,352

 
1.7
%
Total
 
13.9
 
9.5
 
15.1%
 
$
32,321,232

 
100.0
%
(a)
40% of Net Account Value is no longer in multi-year guarantee period and can be adjusted annually.


Page 10


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2014

Annuity Liability Characteristics
 
Fixed
Annuities
Account Value
 
Fixed Index
Annuities
Account Value
 
(Dollars in thousands)
SURRENDER CHARGE PERCENTAGES:
 
 
 
No surrender charge
$
661,371

 
$
901,447

0.0% < 2.0%
28,358

 
321,533

2.0% < 3.0%
32,859

 
87,365

3.0% < 4.0%
28,091

 
345,218

4.0% < 5.0%
116,931

 
257,746

5.0% < 6.0%
59,308

 
492,375

6.0% < 7.0%
181,175

 
215,568

7.0% < 8.0%
169,938

 
638,822

8.0% < 9.0%
61,738

 
438,489

9.0% < 10.0%
80,283

 
508,580

10.0% or greater
559,142

 
26,134,895

 
$
1,979,194

 
$
30,342,038

 
Fixed and
Fixed Index
Annuities
Account Value
 
Weighted
Average
Surrender
Charge
 
(Dollars in thousands)
 
 
SURRENDER CHARGE EXPIRATION BY YEAR:
 
 
 
Out of Surrender Charge
$
1,562,818

 
0.00
%
2014
336,812

 
1.73
%
2015
530,464

 
3.25
%
2016
778,827

 
4.74
%
2017
938,531

 
6.20
%
2018
838,778

 
8.29
%
2019
602,401

 
9.22
%
2020
917,481

 
10.79
%
2021
1,205,534

 
12.45
%
2022
2,054,001

 
14.59
%
2023
5,044,448

 
16.43
%
2024
4,402,810

 
17.52
%
2025
3,188,735

 
18.29
%
2026
2,749,481

 
18.45
%
2027
2,863,871

 
18.87
%
2028
1,922,243

 
19.34
%
2029
1,932,360

 
19.88
%
2030
444,809

 
19.98
%
2031
6,828

 
20.00
%
 
$
32,321,232

 
15.07
%

Page 11


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2014

Annuity Liability Characteristics
 
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
$
758,786

 
$
771,761

› 0.0% - 0.25%
293,015

 
523,321

› 0.25% - 0.5%
165,955

 
33,657

› 0.5% - 1.0% (a)
286,201

 
971,422

› 1.0% - 1.5% (a)
92,721

 
21,590

› 1.5% - 2.0%
94,769

 
1,981

› 2.0% - 2.5%
73

 
—

› 2.5% - 3.0%
1,329

 
—

1.00% ultimate guarantee - 2.49% wtd avg interest rate (b)
76,857

 
—

1.50% ultimate guarantee - 1.63% wtd avg interest rate (b)
104,587

 
2,911,985

2.00% ultimate guarantee - 2.58% wtd avg interest rate (b)
104,901

 
—

2.25% ultimate guarantee - 2.65% wtd avg interest rate (b)
—

 
1,397,438

3.00% ultimate guarantee - 2.87% wtd avg interest rate (b)
—

 
2,780,802

Allocated to index strategies (see tables that follow)
—

 
20,928,081

 
$
1,979,194

 
$
30,342,038

(a)
$42,484 of Fixed Annuities Account Value have a guarantee of 2.25% for the first 10 years and 3.00% thereafter. They began increasing in 2014. $530,157 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 began 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.
If all crediting rates were reduced to minimum guaranteed rates (subject to limitations imposed by ultimate minimum guaranteed rates where applicable) the weighted average crediting rate as of March 31, 2014 for fixed annuities and funds allocated to the fixed rate strategy for fixed index annuities would decrease by 0.56%.

Page 12


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2014

Annuity Liability Characteristics
FIXED INDEX ANNUITIES ACCOUNT VALUE - INDEX STRATEGIES
    
Annual Monthly Average and Point-to-Point with Caps
 
Minimum Guaranteed Cap
 
1%
 
3%
 
4%
 
7%
 
8% +
Current Cap
(Dollars in thousands)
At minimum
$
851

 
$
11,563

 
$
740,134

 
$
36,191

 
$
262,305

2.5% - 3%
1,061,268

 
—

 
—

 
—

 
—

3% - 4%
2,370,344

 
18,544

 
—

 
—

 
—

4% - 5%
20,008

 
103,496

 
1,660,988

 
—

 
—

5% - 6%
21,239

 
4,055

 
2,638,988

 
—

 
—

6% - 7%
—

 
—

 
2,783,224

 
—

 
—

>= 7%
—

 
11,182

 
39,819

 
117,584

 
68,365

    
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
$
231

 
$
337,202

 
$
174,591

 
$
203,723

< 20%
248,285

 
—

 
—

 
—

20% - 40%
312,823

 
461,954

 
—

 
—

40% - 60%
221

 
164,894

 
124,768

 
1,317

>= 60%
1,018

 
—

 
—

 
—


S&P 500 Monthly Point-to-Point - Minimum Guaranteed Monthly Cap = 1% (Dollars in thousands)
Current Cap
 
At minimum
$
15,297

1.45% - 1.8%
3,537,742

2.0% - 2.3%
2,588,433

>= 2.3%
775,663


If all caps and participation rates were reduced to minimum caps and participation rates, the cost of options would decrease by 0.64% based upon prices of options for the week ended April 15, 2014.


Page 13


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2014

Summary of Invested Assets
 
March 31, 2014
 
December 31, 2013
 
Carrying
Amount
 
Percent
 
Carrying
Amount
 
Percent
 
(Dollars in thousands)
Fixed maturity securities:
 
 
 
 
 
 
 
United States Government full faith and credit
$
43,300

 
0.1
%
 
$
42,925

 
0.2
%
United States Government sponsored agencies
1,299,454

 
4.1
%
 
1,194,289

 
3.9
%
United States municipalities, states and territories
3,437,313

 
10.7
%
 
3,306,743

 
10.9
%
Foreign government obligations
144,023

 
0.4
%
 
91,557

 
0.3
%
Corporate securities
18,517,485

 
57.9
%
 
17,309,292

 
57.1
%
Residential mortgage backed securities
1,928,555

 
6.0
%
 
1,971,960

 
6.5
%
Commercial mortgage backed securities
1,976,589

 
6.2
%
 
1,735,460

 
5.7
%
Other asset backed securities
1,045,052

 
3.3
%
 
1,034,476

 
3.4
%
Total fixed maturity securities
28,391,771

 
88.7
%
 
26,686,702

 
88.0
%
Equity securities
7,767

 
—
%
 
7,778

 
—
%
Mortgage loans on real estate
2,584,583

 
8.1
%
 
2,581,082

 
8.5
%
Derivative instruments
790,396

 
2.5
%
 
856,050

 
2.8
%
Other investments
213,706

 
0.7
%
 
215,042

 
0.7
%
 
$
31,988,223

 
100.0
%
 
$
30,346,654

 
100.0
%
Credit Quality of Fixed Maturity Securities - March 31, 2014
NAIC Designation
 
Carrying
Amount
 
Percent
 
Rating Agency Rating
 
Carrying
Amount
 
Percent
 
 
(Dollars in thousands)
 
 
 
 
 
(Dollars in thousands)
 
 
1
 
$
17,755,174

 
62.6
%
 
Aaa/Aa/A
 
$
17,363,658

 
61.2
%
2
 
10,059,679

 
35.4
%
 
Baa
 
9,632,099

 
33.9
%
3
 
516,812

 
1.8
%
 
Ba
 
493,445

 
1.7
%
4
 
58,988

 
0.2
%
 
B
 
130,440

 
0.5
%
5
 
—

 
—
%
 
Caa and lower
 
580,719

 
2.0
%
6
 
1,118

 
—
%
 
In or near default
 
191,410

 
0.7
%
 
 
$
28,391,771

 
100.0
%
 
 
 
$
28,391,771

 
100.0
%

Page 14


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2014

Watch List Securities - March 31, 2014
General Description
 
Amortized
Cost
 
Unrealized
Gains (Losses)
 
Fair Value
 
Months Below Amortized Cost
 
 
(Dollars in thousands)
 
 
Corporate bonds:
 
 
 
 
 
 
 
 
Finance
 
$
20,000

 
$
(4,945
)
 
$
15,055

 
31
Industrial
 
49,459

 
(6,399
)
 
43,060

 
17 - 43
Industrial
 
9,341

 
501

 
9,842

 
 
 
 
$
78,800

 
$
(10,843
)
 
$
67,957

 
 
Summary of Residential Mortgage Backed Securities
Collateral Type
 
Principal
Amount
 
Amortized
Cost
 
Fair Value
 
 
(Dollars in thousands)
OTTI has not been recognized
 
 
 
 
 
 
Government agency
 
$
740,739

 
$
680,210

 
$
712,171

Prime
 
493,044

 
466,940

 
496,855

Alt-A
 
30,286

 
30,612

 
30,757

 
 
$
1,264,069

 
$
1,177,762

 
$
1,239,783

OTTI has been recognized
 
 
 
 
 
 
Prime
 
$
443,620

 
$
382,950

 
$
395,341

Alt-A
 
344,556

 
270,449

 
293,431

 
 
$
788,176

 
$
653,399

 
$
688,772

Total by collateral type
 
 
 
 
 
 
Government agency
 
$
740,739

 
$
680,210

 
$
712,171

Prime
 
936,664

 
849,890

 
892,196

Alt-A
 
374,842

 
301,061

 
324,188

 
 
$
2,052,245

 
$
1,831,161

 
$
1,928,555

Total by NAIC designation
 
 
 
 
 
 
1
 
$
1,926,031

 
$
1,715,122

 
$
1,810,443

2
 
81,762

 
76,931

 
78,690

3
 
42,101

 
37,448

 
38,342

4
 
—

 
—

 
—

6
 
2,351

 
1,660

 
1,080

 
 
$
2,052,245

 
$
1,831,161

 
$
1,928,555


Page 15


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2014

Fixed Maturity Securities by Sector
 
March 31, 2014
 
December 31, 2013
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
 
(Dollars in thousands)
Available for sale:
 
 
 
 
 
 
 
United States Government full faith and credit and sponsored agencies
$
1,402,611

 
$
1,342,754

 
$
1,358,628

 
$
1,237,214

United States municipalities, states and territories
3,186,473

 
3,437,313

 
3,181,032

 
3,306,743

Foreign government obligations
136,116

 
144,023

 
86,112

 
91,557

Corporate securities:
 
 
 
 
 
 
 
Consumer discretionary
1,551,557

 
1,611,005

 
1,533,993

 
1,532,694

Consumer staples
1,278,575

 
1,331,868

 
1,246,744

 
1,250,351

Energy
2,062,551

 
2,148,352

 
1,992,411

 
2,011,334

Financials
3,260,833

 
3,414,019

 
3,179,964

 
3,233,930

Health care
1,533,623

 
1,594,986

 
1,458,757

 
1,458,946

Industrials
2,183,057

 
2,282,092

 
2,045,490

 
2,039,544

Information technology
1,163,672

 
1,190,898

 
1,163,159

 
1,145,674

Materials
1,450,553

 
1,483,804

 
1,405,603

 
1,381,880

Telecommunications
510,463

 
527,096

 
472,250

 
473,517

Utilities
2,667,922

 
2,857,029

 
2,643,747

 
2,705,147

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency
680,210

 
712,171

 
677,394

 
679,518

Prime
849,890

 
892,196

 
907,881

 
964,443

Alt-A
301,061

 
324,188

 
310,638

 
327,999

Commercial mortgage backed securities:
 
 
 
 
 
 
 
Government agency
301,383

 
297,821

 
302,063

 
288,495

Other
1,702,042

 
1,678,768

 
1,519,925

 
1,446,965

Other asset backed securities:
 
 
 
 
 
 
 
Consumer discretionary
73,223

 
75,327

 
86,788

 
86,633

Energy
8,258

 
9,149

 
8,268

 
8,922

Financials
715,037

 
706,289

 
709,900

 
688,737

Industrials
215,374

 
228,912

 
215,873

 
225,212

Telecommunications
14,836

 
16,880

 
14,835

 
16,714

Utilities
6,305

 
8,495

 
6,275

 
8,258

Redeemable preferred stock - financials
—

 
38

 
1

 
20

 
$
27,255,625

 
$
28,315,473

 
$
26,527,731

 
$
26,610,447

Held for investment:
 
 
 
 
 
 
 
Corporate security - financials
$
76,298

 
$
64,920

 
$
76,255

 
$
60,840



Page 16


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2014

Mortgage Loans on Commercial Real Estate
 
March 31, 2014
 
December 31, 2013
 
Principal
 
Percent
 
Principal
 
Percent
 
(Dollars in thousands)
Geographic distribution
 
 
 
 
 
 
 
East
$
793,717

 
30.4
%
 
$
765,717

 
29.4
%
Middle Atlantic
152,712

 
5.9
%
 
156,489

 
6.0
%
Mountain
343,166

 
13.1
%
 
356,246

 
13.7
%
New England
20,977

 
0.8
%
 
21,324

 
0.8
%
Pacific
313,896

 
12.0
%
 
317,431

 
12.2
%
South Atlantic
488,622

 
18.7
%
 
483,852

 
18.5
%
West North Central
343,660

 
13.2
%
 
351,794

 
13.5
%
West South Central
153,630

 
5.9
%
 
154,845

 
5.9
%
 
$
2,610,380

 
100.0
%
 
$
2,607,698

 
100.0
%
 
 
 
 
 
 
 
 
Property type distribution
 
 
 
 
 
 
 
Office
$
557,029

 
21.3
%
 
$
590,414

 
22.6
%
Medical Office
122,807

 
4.7
%
 
125,703

 
4.8
%
Retail
729,056

 
27.9
%
 
711,364

 
27.3
%
Industrial/Warehouse
690,442

 
26.5
%
 
673,449

 
25.8
%
Hotel
47,138

 
1.8
%
 
61,574

 
2.4
%
Apartment
313,330

 
12.0
%
 
291,823

 
11.2
%
Mixed use/other
150,578

 
5.8
%
 
153,371

 
5.9
%
 
$
2,610,380

 
100.0
%
 
$
2,607,698

 
100.0
%
 
 
 
 
 
 
 
 
 
March 31, 2014
 
December 31, 2013
 
 
 
 
Credit Exposure - By Payment Activity
 
 
 
 
 
 
 
Performing
$
2,591,196

 
$
2,593,276

 
 
 
 
In workout
7,956

 
6,248

 
 
 
 
Delinquent
—

 
—

 
 
 
 
Collateral dependent
11,228

 
8,174

 
 
 
 
 
2,610,380

 
2,607,698

 
 
 
 
Specific Loan Loss Allowance
(16,462
)
 
(16,847
)
 
 
 
 
General Loan Loss Allowance
(8,800
)
 
(9,200
)
 
 
 
 
Deferred prepayment fees
(535
)
 
(569
)
 
 
 
 
 
$
2,584,583

 
$
2,581,082

 
 
 
 


Page 17


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2014

Shareholder Information
Corporate Offices:
American Equity Investment Life Holding Company
6000 Westown Parkway
West Des Moines, IA 50266
Inquiries:
John M. Matovina, Chief Executive Officer and President
(515) 457-1813, jmatovina@american-equity.com
Ted M. Johnson, Chief Financial Officer and Treasurer
(515) 457-1980, tjohnson@american-equity.com
Debra J. Richardson, Executive Vice President and Secretary
(515) 273-3551, drichardson@american-equity.com        
Common Stock and Dividend Information:
New York Stock Exchange symbol: “AEL”
 
High
 
Low
 
Close
 
Dividend Declared
2014
 
 
 
 
 
 
 
First Quarter
$26.42
 
$18.84
 
$23.62
 
$0.00
 
 
 
 
 
 
 
 
2013
 
 
 
 
 
 
 
First Quarter
$15.03
 
$12.33
 
$14.89
 
$0.00
Second Quarter
$16.60
 
$14.03
 
$15.70
 
$0.00
Third Quarter
$21.42
 
$15.64
 
$21.22
 
$0.00
Fourth Quarter
$26.46
 
$20.01
 
$26.38
 
$0.18
 
 
 
 
 
 
 
 
2012
 
 
 
 
 
 
 
First Quarter
$13.09
 
$10.13
 
$12.77
 
$0.00
Second Quarter
$12.95
 
$10.00
 
$11.01
 
$0.00
Third Quarter
$12.41
 
$10.62
 
$11.63
 
$0.00
Fourth Quarter
$12.40
 
$10.56
 
$12.21
 
$0.15
Transfer Agent:
Computershare Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940-0310
Phone: (877) 282-1169
Fax: (781) 575-2723
www.computershare.com
Annual Report and Other Information:
Shareholders may receive when available, without charge, a copy of American Equity’s Annual Report, SEC filings and/or press releases by calling Julie L. LaFollette, Investor Relations, at (515) 273-3602 or by visiting our web site at www.american-equity.com.



Page 18


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2014

Research Analyst Coverage
Steven Schwartz
Raymond James & Associates, Inc.
(312) 612-7686
steven.schwartz@raymondjames.com
Randy Binner
Friedman, Billings, Ramsey & Co., Inc.
(703) 312-1890
rbinner@fbr.com
Edward Shields
Sandler O’Neill & Partners
(312) 281-3487
eshields@sandleroneill.com
Mark Hughes
SunTrust Robinson Humphrey
(615) 748-5680
mark_hughes@rhco.com
Daniel Furtado
Jefferies & Company, Inc.
(415) 229-1569
dfurtado@jefferies.com
Mark Finkelstein
Evercore Partners
(312) 445-6440
mark.finkelstein@evercore.com



Page 19