EX-99.2 3 a2018-03x31_ael8kexhibit992.htm FINANCIAL SUPPLEMENT Exhibit

Exhibit 99.2



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement

March 31, 2018


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, 2018
Unaudited (Dollars in thousands)


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
 
March 31, 2018
 
December 31, 2017
Assets
 
 
 
Investments:
 
 
 
Fixed maturity securities:
 
 
 
Available for sale, at fair value
$
45,551,348

 
$
45,372,989

Held for investment, at amortized cost
77,043

 
77,041

Mortgage loans on real estate
2,699,637

 
2,665,531

Derivative instruments
847,741

 
1,568,380

Other investments
481,825

 
616,764

Total investments
49,657,594

 
50,300,705

 
 
 
 
Cash and cash equivalents
723,784

 
1,434,045

Coinsurance deposits
4,871,912

 
4,858,289

Accrued investment income
454,519

 
429,008

Deferred policy acquisition costs
3,039,311

 
2,714,523

Deferred sales inducements
2,219,597

 
2,001,892

Deferred income taxes
159,601

 
38,147

Other assets
175,006

 
254,127

Total assets
$
61,301,324

 
$
62,030,736

 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
Liabilities:
 
 
 
Policy benefit reserves
$
56,072,140

 
$
56,142,673

Other policy funds and contract claims
280,072

 
282,884

Notes payable
494,215

 
494,093

Subordinated debentures
242,667

 
242,565

Amounts due under repurchase agreements
137,223

 
—

Income taxes payable
72,191

 
34,285

Other liabilities
1,455,826

 
1,984,079

Total liabilities
58,754,334

 
59,180,579

 
 
 
 
Stockholders' equity:
 
 
 
Common stock
89,984

 
89,331

Additional paid-in capital
798,835

 
791,446

Accumulated other comprehensive income
399,982

 
724,599

Retained earnings
1,258,189

 
1,244,781

Total stockholders' equity
2,546,990

 
2,850,157

Total liabilities and stockholders' equity
$
61,301,324

 
$
62,030,736




Page 1


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2018
Unaudited (Dollars in thousands, except per share data)


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended 
 March 31,
 
2018
 
2017
Revenues:
 
 
 
Premiums and other considerations
$
9,053

 
$
9,402

Annuity product charges
50,723

 
43,572

Net investment income
510,784

 
485,597

Change in fair value of derivatives
(451,083
)
 
386,533

Net realized gains on investments, excluding other than temporary impairment ("OTTI") losses
302

 
2,338

OTTI losses on investments:
 
 
 
Total OTTI losses
(907
)
 
—

Portion of OTTI losses recognized in (from) other comprehensive income
—

 
(141
)
Net OTTI losses recognized in operations
(907
)
 
(141
)
Total revenues
118,872

 
927,301

 
 
 
 
Benefits and expenses:
 
 
 
Insurance policy benefits and change in future policy benefits
12,094

 
11,875

Interest sensitive and index product benefits
514,095

 
419,139

Amortization of deferred sales inducements
100,423

 
62,325

Change in fair value of embedded derivatives
(867,232
)
 
224,170

Interest expense on notes and loan payable
6,372

 
7,722

Interest expense on subordinated debentures
3,630

 
3,336

Amortization of deferred policy acquisition costs
140,639

 
89,678

Other operating costs and expenses
31,240

 
27,579

Total benefits and expenses
(58,739
)
 
845,824

Income before income taxes
177,611

 
81,477

Income tax expense
36,649

 
27,538

Net income
$
140,962

 
$
53,939

 
 
 
 
Earnings per common share
$
1.57

 
$
0.61

Earnings per common share - assuming dilution
$
1.55

 
$
0.60

 
 
 
 
Weighted average common shares outstanding (in thousands):
 
 
 
Earnings per common share
90,017

 
88,647

Earnings per common share - assuming dilution
91,139

 
89,976



Page 2


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2018
Unaudited (Dollars in thousands, except per share data)


Quarterly Summary - Most Recent 5 Quarters
 
Q1 2018
 
Q4 2017
 
Q3 2017
 
Q2 2017
 
Q1 2017
Revenues:
 
 
 
 
 
 
 
 
 
Traditional life insurance premiums
$
972

 
$
2,989

 
$
2,832

 
$
2,590

 
$
2,790

Life contingent immediate annuity considerations
8,081

 
5,548

 
5,737

 
5,130

 
6,612

Surrender charges
16,282

 
13,573

 
13,521

 
13,896

 
13,634

Lifetime income benefit rider fees
34,441

 
42,815

 
38,410

 
34,707

 
29,938

Net investment income
510,784

 
512,709

 
500,202

 
493,489

 
485,597

Change in fair value of derivatives
(451,083
)
 
661,993

 
362,525

 
266,820

 
386,533

Net realized gains on investments, excluding OTTI
302

 
2,719

 
1,579

 
3,873

 
2,338

Net OTTI losses recognized in operations
(907
)
 
(3,076
)
 
(464
)
 
(949
)
 
(141
)
Loss on extinguishment of debt (b)
—

 
—

 
(18,389
)
 
(428
)
 
—

Total revenues
118,872

 
1,239,270

 
905,953

 
819,128

 
927,301

 
 
 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
 
 
Traditional life insurance policy benefits and change in future policy benefits
821

 
1,528

 
1,898

 
2,020

 
2,185

Life contingent immediate annuity benefits and change in future policy benefits
11,273

 
9,007

 
8,925

 
7,966

 
9,690

Interest sensitive and index product benefits (c)
514,095

 
630,905

 
501,028

 
472,596

 
419,139

Amortization of deferred sales inducements (d)
100,423

 
65,885

 
14,707

 
33,695

 
62,325

Change in fair value of embedded derivatives
(867,232
)
 
290,890

 
229,702

 
174,973

 
224,170

Interest expense on notes and loan payable
6,372

 
6,371

 
7,597

 
8,678

 
7,722

Interest expense on subordinated debentures
3,630

 
3,864

 
3,502

 
3,422

 
3,336

Amortization of deferred policy acquisition costs (d)
140,639

 
93,716

 
23,023

 
49,547

 
89,678

Other operating costs and expenses
31,240

 
29,366

 
28,782

 
25,964

 
27,579

Total benefits and expenses
(58,739
)
 
1,131,532

 
819,164

 
778,861

 
845,824

Income before income taxes
177,611

 
107,738

 
86,789

 
40,267

 
81,477

Income tax expense (a)
36,649

 
70,935

 
29,832

 
13,321

 
27,538

Net income (a)(b)(c)(d)
$
140,962

 
$
36,803

 
$
56,957

 
$
26,946

 
$
53,939

 
 
 
 
 
 
 
 
 
 
Earnings per common share
$
1.57

 
$
0.41

 
$
0.64

 
$
0.30

 
$
0.61

Earnings per common share - assuming dilution (a)(b)(c)(d)
$
1.55

 
$
0.41

 
$
0.63

 
$
0.30

 
$
0.60

 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding (thousands):
 
 
 
 
 
 
 
 
 
Earnings per common share
90,017

 
89,308

 
89,069

 
88,897

 
88,647

Earnings per common share - assuming dilution
91,139

 
90,727

 
90,421

 
90,112

 
89,976

(a)
Q4 2017 includes income tax expense related to the revaluation of our deferred tax assets and liabilities using the new enacted federal tax rate resulting from the Tax Cuts and Jobs Act of 2017. The change in the federal income tax rate decreased net income and earnings per common share - assuming dilution by $35.9 million and $0.40 per share, respectively.
(b)
Q3 2017 includes a loss on the extinguishment of our 6.625% Notes due in 2021. The loss decreased net income and earnings per common share - assuming dilution by $10.8 million and $0.12 per share, respectively.
(c)
Q3 2017 includes expense from the revision of assumptions used in determining reserves held for lifetime income benefit riders. The impact increased interest sensitive and index product benefits by $21.6 million and decreased net income and earnings per common share - assuming dilution by $13.9 million and $0.15 per share, respectively.
(d)
Q3 2017 includes a benefit from unlocking which reduced amortization of deferred sales inducements and deferred policy acquisition costs by $34.3 million and $48.2 million, respectively, and increased net income and earnings per common share - assuming dilution by $53.1 million and $0.59 per share, respectively.

Page 3


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2018
Unaudited (Dollars in thousands, except per share data)


NON-GAAP FINANCIAL MEASURES
In addition to net income, we have consistently utilized non-GAAP operating income and non-GAAP 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. Non-GAAP operating income equals net income adjusted to eliminate the impact of items that fluctuate from quarter to quarter in a manner unrelated to core operations, and we believe measures excluding their impact are useful in analyzing operating trends. The most significant adjustments to arrive at non-GAAP operating income eliminate the impact of fair value accounting for our fixed index annuity business. These adjustments are not economic in nature but rather impact the timing of reported results. We believe the combined presentation and evaluation of non-GAAP operating income together with net income provides information that may enhance an investor’s understanding of our underlying results and profitability.
Reconciliation from Net Income to Non-GAAP Operating Income
 
Three Months Ended 
 March 31,
 
2018
 
2017
Net income
$
140,962

 
$
53,939

Adjustments to arrive at non-GAAP operating income: (a)
 
 
 
Net realized investment (gains) losses, including OTTI
23

 
(1,942
)
Change in fair value of derivatives and embedded derivatives - fixed index annuities
(78,818
)
 
10,977

Change in fair value of derivatives - debt
(1,832
)
 
(247
)
Income taxes
17,359

 
(3,105
)
Non-GAAP operating income
$
77,694

 
$
59,622

 
 
 
 
Per common share - assuming dilution:
 
 
 
Net income
$
1.55

 
$
0.60

Adjustments to arrive at non-GAAP operating income:
 
 
 
Net realized investment (gains) losses, including OTTI
—

 
(0.02
)
Change in fair value of derivatives and embedded derivatives - fixed index annuities
(0.87
)
 
0.12

Change in fair value of derivatives - debt
(0.02
)
 
—

Income taxes
0.19

 
(0.04
)
Non-GAAP operating income
$
0.85

 
$
0.66

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

Page 4


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2018
Unaudited (Dollars in thousands)


NON-GAAP FINANCIAL MEASURES
Summary of Adjustments to Arrive at Non-GAAP Operating Income
 
Three Months Ended 
 March 31,
 
2018
 
2017
Net realized investment gains and losses, including OTTI:
 
 
 
Net realized (gains) losses on investments, including OTTI
$
605

 
$
(2,197
)
Amortization of DAC and DSI
(582
)
 
255

Income taxes
(5
)
 
692

 
$
18

 
$
(1,250
)
Change in fair value of derivatives and embedded derivatives:
 
 
 
Index annuities
$
(157,811
)
 
$
22,443

Interest rate caps and swap
(1,832
)
 
(247
)
Amortization of DAC and DSI
78,993

 
(11,466
)
Income taxes
17,364

 
(3,797
)
 
$
(63,286
)
 
$
6,933



Page 5


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2018
Unaudited (Dollars in thousands, except per share data)


NON-GAAP FINANCIAL MEASURES
Quarterly Summary - Most Recent 5 Quarters
Reconciliation from Net Income to Non-GAAP Operating Income
 
Q1 2018
 
Q4 2017
 
Q3 2017
 
Q2 2017
 
Q1 2017
Net income (b)
$
140,962

 
$
36,803

 
$
56,957

 
$
26,946

 
$
53,939

Adjustments to arrive at non-GAAP operating income: (a)
 
 
 
 
 
 
 
 
 
Net realized investment (gains) losses, including OTTI
23

 
(676
)
 
(916
)
 
(1,559
)
 
(1,942
)
Change in fair value of derivatives and embedded derivatives -
fixed index annuities
(78,818
)
 
5,463

 
47,835

 
57,571

 
10,977

Change in fair value of derivatives - debt
(1,832
)
 
(1,085
)
 
(357
)
 
465

 
(247
)
Income taxes (b)
17,359

 
34,003

 
(16,281
)
 
(19,741
)
 
(3,105
)
Non-GAAP operating income (c)(d)(e)
$
77,694

 
$
74,508

 
$
87,238

 
$
63,682

 
$
59,622

 
 
 
 
 
 
 
 
 
 
Per common share - assuming dilution:
 
 
 
 
 
 
 
 
 
Net income
$
1.55

 
$
0.41

 
$
0.63

 
$
0.30

 
$
0.60

Adjustments to arrive at non-GAAP operating income:
 
 
 
 
 
 
 
 
 
Net realized investment (gains) losses, including OTTI
—

 
(0.01
)
 
(0.01
)
 
(0.02
)
 
(0.02
)
Change in fair value of derivatives and embedded derivatives - fixed index annuities
(0.87
)
 
0.06

 
0.52

 
0.64

 
0.12

Change in fair value of derivatives - debt
(0.02
)
 
(0.01
)
 
—

 
0.01

 
—

Income taxes
0.19

 
0.37

 
(0.18
)
 
(0.22
)
 
(0.04
)
Non-GAAP operating income (c)(d)(e)
$
0.85

 
$
0.82

 
$
0.96

 
$
0.71

 
$
0.66

(a)
Adjustments to net income to arrive at non-GAAP operating income are presented net of related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs where applicable.
(b)
Q4 2017 includes income tax expense related to the revaluation of our deferred tax assets and liabilities using the new enacted federal tax rate resulting from the Tax Cuts and Jobs Act of 2017 ("Tax Reform"). The change in the federal income tax rate decreased net income and earnings per common share - assuming dilution by $35.9 million and $0.40 per share, respectively. The impact of Tax Reform has been excluded from non-GAAP operating income.
(c)
Q3 2017 includes a loss on the extinguishment of our 6.625% Notes due in 2021. The loss decreased non-GAAP operating income and non-GAAP operating income per common share - assuming dilution by $10.8 million and $0.12 per share, respectively
(d)
Q3 2017 includes a benefit from unlocking which reduced amortization of deferred sales inducements and deferred policy acquisition costs by $31.3 million and $43.7 million, respectively, and increased non-GAAP operating income and non-GAAP operating income per common share- assuming dilution by $48.3 million and $0.53 per share, respectively.
(e)
Q3 2017 includes expense from the revision of assumptions used in determining reserves held for lifetime income benefit riders. The impact increased interest sensitive and index product benefits by $21.6 million and decreased non-GAAP operating income and non-GAAP operating income per common share - assuming dilution by $13.9 million and $0.15 per share, respectively.

Page 6


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2018
Unaudited (Dollars in thousands)


NON-GAAP FINANCIAL MEASURES
Summary of Adjustments to Arrive at Non-GAAP Operating Income
 
Q1 2018
 
Q4 2017
 
Q3 2017
 
Q2 2017
 
Q1 2017
Net realized gains on investments
$
(302
)
 
$
(2,719
)
 
$
(1,579
)
 
$
(3,873
)
 
$
(2,338
)
Net OTTI losses recognized in operations
907

 
3,076

 
464

 
949

 
141

Change in fair value of derivatives
707,589

 
(283,801
)
 
(130,150
)
 
(34,225
)
 
(201,974
)
Increase (decrease) in total revenues
708,194

 
(283,444
)
 
(131,265
)
 
(37,149
)
 
(204,171
)
 
 
 
 
 
 
 
 
 
 
Amortization of deferred sales inducements
(33,212
)
 
1,499

 
22,442

 
34,550

 
5,459

Change in fair value of embedded derivatives
867,232

 
(290,890
)
 
(229,702
)
 
(174,973
)
 
(224,170
)
Amortization of deferred policy acquisition costs
(45,199
)
 
2,245

 
29,433

 
46,797

 
5,752

Increase (decrease) in total benefits and expenses
788,821

 
(287,146
)
 
(177,827
)
 
(93,626
)
 
(212,959
)
Increase (decrease) in income before income taxes
(80,627
)
 
3,702

 
46,562

 
56,477

 
8,788

Increase (decrease) in income tax expense
(17,359
)
 
(34,003
)
 
16,281

 
19,741

 
3,105

Increase (decrease) in net income
$
(63,268
)
 
$
37,705

 
$
30,281

 
$
36,736

 
$
5,683


Page 7


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2018
Unaudited (Dollars in thousands, except share and per share data)


Capitalization/Book Value per Share
 
Q1 2018
 
Q4 2017
 
Q3 2017
 
Q2 2017
 
Q1 2017
Capitalization:
 
 
 
 
 
 
 
 
 
Notes and loan payable
$
500,000

 
$
500,000

 
$
500,000

 
$
900,000

 
$
500,000

Subordinated debentures payable to subsidiary trusts
246,969

 
246,908

 
246,847

 
246,787

 
246,729

Total debt
746,969

 
746,908


746,847


1,146,787


746,729

Total stockholders’ equity
2,546,990

 
2,850,157

 
2,762,667

 
2,651,408

 
2,436,231

Total capitalization
3,293,959

 
3,597,065


3,509,514


3,798,195


3,182,960

Accumulated other comprehensive income (AOCI)
(399,982
)
 
(724,599
)
 
(659,491
)
 
(610,122
)
 
(424,543
)
Total capitalization excluding AOCI (a)
$
2,893,977

 
$
2,872,466


$
2,850,023


$
3,188,073


$
2,758,417

 
 
 
 
 
 
 
 
 
 
Total stockholders’ equity
$
2,546,990

 
$
2,850,157


$
2,762,667


$
2,651,408


$
2,436,231

Accumulated other comprehensive income
(399,982
)
 
(724,599
)

(659,491
)

(610,122
)

(424,543
)
Total stockholders’ equity excluding AOCI (a)
$
2,147,008

 
$
2,125,558


$
2,103,176


$
2,041,286


$
2,011,688

 
 
 
 
 
 
 
 
 
 
Common shares outstanding
89,983,823

 
89,331,087

 
88,948,986

 
88,756,072

 
88,645,741

 
 
 
 
 
 
 
 
 
 
Book Value per Share: (b)
 
 
 
 
 
 
 
 
 
Book value per share including AOCI
$
28.30

 
$
31.91


$
31.06


$
29.87


$
27.48

Book value per share excluding AOCI (a)
$
23.86

 
$
23.79


$
23.64


$
23.00


$
22.69

 
 
 
 
 
 
 
 
 
 
Debt-to-Capital Ratios: (c)
 
 
 
 
 
 
 
 
 
Senior debt / Total capitalization
17.3
%
 
17.4
%

17.5
%

28.2
%

18.1
%
Adjusted debt / Total capitalization
17.3
%
 
17.4
%
 
17.5
%
 
28.2
%
 
18.1
%
(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)
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.
(c)
Debt-to-capital ratios are computed using total capitalization excluding AOCI. Adjusted debt includes notes and loan 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, 2018
Unaudited (Dollars in thousands)


Spread Results
 
 
 
 
 
 
 
 
 
 
 
Q1 2018
 
Q4 2017
 
Q3 2017
 
Q2 2017
 
Q1 2017
Average yield on invested assets
4.36%
 
4.47%
 
4.43%
 
4.45%
 
4.48%
Aggregate cost of money
1.82%
 
1.72%
 
1.73%
 
1.73%
 
1.77%
Aggregate investment spread
2.54%
 
2.75%
 
2.70%
 
2.72%
 
2.71%
 
 
 
 
 
 
 
 
 
 
Impact of:
 
 
 
 
 
 
 
 
 
Investment yield - additional prepayment income
0.03%
 
0.11%
 
0.05%
 
0.07%
 
0.07%
Cost of money effect of over hedging
0.02%
 
0.08%
 
0.06%
 
0.06%
 
0.05%
 
 
 
 
 
 
 
 
 
 
Weighted average investments
$46,898,365
 
$46,031,966
 
$45,228,136
 
$44,379,879
 
$43,552,928
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
 
 
 
 
 
 
 
 
 
 
 
Q1 2018
 
Q4 2017
 
Q3 2017
 
Q2 2017
 
Q1 2017
Included in interest sensitive and index product benefits:
 
 
 
 
 
 
 
 
 
Index credits
$
423,940

 
$
526,200

 
$
375,019

 
$
371,623

 
$
321,880

Interest credited
55,067

 
59,065

 
62,725

 
62,930

 
65,178

Included in change in fair value of derivatives:
 
 
 
 
 
 
 
 
 
Proceeds received at option expiration
(425,557
)
 
(535,328
)
 
(382,949
)
 
(378,517
)
 
(326,552
)
Pro rata amortization of option cost
168,732

 
156,782

 
150,163

 
145,502

 
141,543

Cost of money for deferred annuities
$
222,182

 
$
206,719


$
204,958


$
201,538


$
202,049

 
 
 
 
 
 
 
 
 
 
Weighted average liability balance outstanding
$
48,774,490

 
$
48,014,427

 
$
47,281,417

 
$
46,478,748

 
$
45,613,388

Annuity Account Balance Rollforward
 
 
 
 
 
 
 
 
 
 
 
Q1 2018
 
Q4 2017
 
Q3 2017
 
Q2 2017
 
Q1 2017
Account balances at beginning of period
$
48,400,755

 
$
47,628,099

 
$
46,934,736

 
$
46,022,759

 
$
45,204,015

Net deposits
930,734

 
874,952

 
826,885

 
1,060,638

 
1,002,509

Premium bonuses
43,670

 
41,098

 
46,982

 
62,848

 
65,244

Fixed interest credited and index credits
479,007

 
585,265

 
437,744

 
434,553

 
387,058

Surrender charges
(16,282
)
 
(13,573
)
 
(13,521
)
 
(13,896
)
 
(13,634
)
Lifetime income benefit rider fees
(34,441
)
 
(42,815
)
 
(38,410
)
 
(34,707
)
 
(29,938
)
Surrenders, withdrawals, deaths, etc.
(655,219
)
 
(672,271
)
 
(566,317
)
 
(597,459
)
 
(592,495
)
Account balances at end of period
$
49,148,224

 
$
48,400,755

 
$
47,628,099

 
$
46,934,736

 
$
46,022,759


Page 9


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2018
Unaudited (Dollars in thousands)


Annuity Deposits by Product Type
 
 
 
 
 
 
 
 
 
 
 
Q1 2018
 
Q4 2017
 
Q3 2017
 
Q2 2017
 
Q1 2017
American Equity:
 
 
 
 
 
 
 
 
 
Fixed index annuities
$
833,350

 
$
757,160

 
$
738,257

 
$
953,560

 
$
941,167

Annual reset fixed rate annuities
16,490

 
18,974

 
20,142

 
20,870

 
14,843

Multi-year fixed rate annuities
2,001

 
3,773

 
5,717

 
7,541

 
6,393

Single premium immediate annuities
10,630

 
7,909

 
6,505

 
4,981

 
5,551

 
862,471

 
787,816

 
770,621

 
986,952

 
967,954

Eagle Life:
 
 
 
 
 
 
 
 
 
Fixed index annuities
160,564

 
187,888

 
133,503

 
167,632

 
87,672

Multi-year fixed rate annuities
8,024

 
32,953

 
10,717

 
19,994

 
23,508

 
168,588

 
220,841

 
144,220

 
187,626

 
111,180

Consolidated:
 
 
 
 
 
 
 
 
 
Fixed index annuities
993,914

 
945,048

 
871,760

 
1,121,192

 
1,028,839

Annual reset fixed rate annuities
16,490

 
18,974

 
20,142

 
20,870

 
14,843

Multi-year fixed rate annuities
10,025

 
36,726

 
16,434

 
27,535

 
29,901

Single premium immediate annuities
10,630

 
7,909

 
6,505

 
4,981

 
5,551

Total before coinsurance ceded
1,031,059

 
1,008,657

 
914,841

 
1,174,578

 
1,079,134

Coinsurance ceded
89,695

 
125,796

 
81,451

 
108,959

 
71,074

Net after coinsurance ceded
$
941,364

 
$
882,861

 
$
833,390

 
$
1,065,619

 
$
1,008,060

Surrender Charge Protection and Account Values by Product Type
Annuity Surrender Charges and Net (of Coinsurance) Account Values at March 31, 2018:
 
 
Surrender Charge
 
Net Account Value
Product Type
 
Avg.
Years
At Issue
 
Avg.
Years
Remaining
 
Avg.
%
Remaining
 
Dollars in Thousands
 
%
Fixed Index Annuities
 
13.5
 
8.2
 
13.1%
 
$
47,098,120

 
95.8
%
Annual Reset Fixed Rate Annuities
 
10.8
 
4.3
 
7.5%
 
1,411,296

 
2.9
%
Multi-Year Fixed Rate Annuities
 
6.7
 
2.4
 
5.4%
 
638,808

 
1.3
%
Total
 
13.4
 
8.0
 
12.8%
 
$
49,148,224

 
100.0
%



Page 10


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2018
Unaudited (Dollars in thousands)


Annuity Liability Characteristics
Surrender Charge Percentages:
Fixed
Annuities
Account Value
 
Fixed Index
Annuities
Account Value
No surrender charge
$
752,501

 
$
2,318,604

0.0% < 2.0%
38,026

 
229,306

2.0% < 3.0%
15,842

 
222,682

3.0% < 4.0%
13,535

 
169,894

4.0% < 5.0%
24,181

 
532,196

5.0% < 6.0%
64,419

 
479,101

6.0% < 7.0%
62,386

 
798,791

7.0% < 8.0%
193,474

 
1,999,074

8.0% < 9.0%
214,763

 
2,036,165

9.0% < 10.0%
39,474

 
2,865,583

10.0% or greater
631,503

 
35,446,724

 
$
2,050,104

 
$
47,098,120

Surrender Charge Expiration By Year:
Fixed and
Fixed Index
Annuities
Account Value
 
Weighted
Average
Surrender
Charge
Out of Surrender Charge
$
3,071,105

 
0.00
%
2018
493,943

 
2.44
%
2019
496,602

 
3.61
%
2020
845,159

 
5.49
%
2021
1,347,780

 
7.14
%
2022
1,960,056

 
8.50
%
2023
4,769,803

 
10.27
%
2024
5,277,373

 
11.67
%
2025
6,076,283

 
12.00
%
2026
5,111,147

 
13.32
%
2027
4,367,656

 
14.67
%
2028
2,843,790

 
16.25
%
2029
2,986,467

 
18.01
%
2030
2,745,553

 
18.42
%
2031
3,322,021

 
18.89
%
2032
2,046,147

 
19.32
%
2033
1,154,767

 
19.83
%
2034
232,572

 
19.96
%
 
$
49,148,224

 
12.82
%

Page 11


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2018
Unaudited (Dollars in thousands)


Annuity Liability Characteristics
Credited Rate vs. Ultimate Minimum Guaranteed Rate Differential:
Fixed
Annuities
Account Value
 
Fixed Index
Annuities
Account Value
No differential
$
952,117

 
$
1,517,682

› 0.0% - 0.25%
64,997

 
244,924

› 0.25% - 0.5%
248,637

 
3,914

› 0.5% - 1.0%
67,471

 
19,640

› 1.0% - 1.5%
11,801

 
—

1.00% ultimate guarantee - 2.52% wtd avg interest rate (a)
456,698

 
327,308

1.50% ultimate guarantee - 1.26% wtd avg interest rate (a)
158,204

 
4,218,934

2.00% ultimate guarantee - 1.86% wtd avg interest rate (a)
90,179

 
—

2.25% ultimate guarantee - 1.96% wtd avg interest rate (a)
—

 
1,024,234

3.00% ultimate guarantee - 2.15% wtd avg interest rate (a)
—

 
1,929,788

Allocated to index strategies (see tables that follow)
—

 
37,811,696

 
$
2,050,104

 
$
47,098,120

(a)
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, 2018 for fixed annuities and funds allocated to the fixed rate strategy for fixed index annuities would decrease by 0.17%.

Page 12


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2018
Unaudited (Dollars in thousands)


Annuity Liability Characteristics
FIXED INDEX ANNUITIES ACCOUNT VALUE - INDEX STRATEGIES
    
Annual Monthly Average and Point-to-Point with Caps
 
Minimum Guaranteed Cap
 
1%
 
3%
 
4%
 
7%
 
8% +
Current Cap
 
 
 
 
 
 
 
 
 
At minimum
$
1,556

 
$
97,216

 
$
2,691,926

 
$
84,808

 
$
199,615

1.75% - 3%
6,709,531

 
—

 
—

 
—

 
—

3% - 4%
971,592

 
13,390

 
—

 
—

 
—

4% - 5%
440,123

 
192,953

 
4,206,351

 
—

 
—

5% - 6%
442,181

 
149,746

 
37,242

 
—

 
—

6% - 7%
—

 
—

 
139

 
—

 
—

>= 7%
—

 
7,124

 
1,535

 
8,419

 
1,655

Annual Monthly Average and Point-to-Point with Participation Rates
 
Minimum Guaranteed Participation Rate
 
10%
 
20% - 25%
 
35%
 
50% +
Current Participation Rate
 
 
 
 
 
 
 
At minimum
$
611

 
$
418,631

 
$
125,236

 
$
144,011

< 20%
564,247

 
—

 
—

 
—

20% - 40%
917,836

 
185,437

 
—

 
—

40% - 60%
1,143,067

 
112,884

 
73,706

 
—

>= 60%
13,646

 
—

 
—

 
—

S&P 500 Monthly Point-to-Point - Minimum Guaranteed Monthly Cap = 1.0%
Current Cap
 
At minimum
$
342,852

1.10% - 1.30%
5,527,265

1.40% - 1.60%
4,923,924

1.70% - 2.00%
3,148,315

>= 2.10%
3,197

Volatility Control Index
 
Current Asset Fee
 
At Maximum
$
—

0.75% - 1.75%
255,114

2.25% - 2.75%
843,753

3.00% - 4.00%
2,212,876

If all caps and participation rates were reduced to minimum caps and participation rates and current asset fees were increased to their maximums, the cost of options would decrease by 0.65% based upon prices of options for the week ended April 10, 2018.

Page 13


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2018
Unaudited (Dollars in thousands)


Summary of Invested Assets
 
March 31, 2018
 
December 31, 2017
 
Carrying
Amount
 
Percent
 
Carrying
Amount
 
Percent
Fixed maturity securities:
 
 
 
 
 
 
 
United States Government full faith and credit
$
11,433

 
—
%
 
$
11,876

 
—
%
United States Government sponsored agencies
1,270,106

 
2.6
%
 
1,305,017

 
2.6
%
United States municipalities, states and territories
4,137,005

 
8.3
%
 
4,166,812

 
8.3
%
Foreign government obligations
231,671

 
0.5
%
 
239,360

 
0.5
%
Corporate securities
29,661,171

 
59.7
%
 
29,956,012

 
59.6
%
Residential mortgage backed securities
1,102,609

 
2.2
%
 
1,105,567

 
2.2
%
Commercial mortgage backed securities
5,596,882

 
11.3
%
 
5,544,850

 
11.0
%
Other asset backed securities
3,617,514

 
7.3
%
 
3,120,536

 
6.2
%
Total fixed maturity securities
45,628,391

 
91.9
%
 
45,450,030

 
90.4
%
Mortgage loans on real estate
2,699,637

 
5.4
%
 
2,665,531

 
5.3
%
Derivative instruments
847,741

 
1.7
%
 
1,568,380

 
3.1
%
Other investments
481,825

 
1.0
%
 
616,764

 
1.2
%
 
$
49,657,594

 
100.0
%
 
$
50,300,705

 
100.0
%
Credit Quality of Fixed Maturity Securities - March 31, 2018
NAIC Designation
 
Carrying
Amount
 
Percent
 
Rating Agency Rating
 
Carrying
Amount
 
Percent
1
 
$
27,984,297

 
61.3
%
 
Aaa/Aa/A
 
$
27,823,308

 
61.0
%
2
 
16,147,267

 
35.4
%
 
Baa
 
16,267,301

 
35.7
%
3
 
1,323,748

 
2.9
%
 
Ba
 
1,097,231

 
2.4
%
4
 
145,085

 
0.3
%
 
B
 
156,922

 
0.3
%
5
 
19,926

 
0.1
%
 
Caa
 
152,903

 
0.3
%
6
 
8,068

 
—
%
 
Ca and lower
 
130,726

 
0.3
%
 
 
$
45,628,391

 
100.0
%
 
 
 
$
45,628,391

 
100.0
%
Watch List Securities - March 31, 2018
General Description
 
Amortized
Cost
 
Unrealized
Gains (Losses)
 
Fair Value
 
Months Below Amortized Cost
Below investment grade
 
 
 
 
 
 
 
 
Corporate securities:
 
 
 
 
 
 
 
 
Consumer discretionary
 
$
25,974

 
$
(5,061
)
 
$
20,913

 
4 - 38
Energy
 
29,054

 
(6,538
)
 
22,516

 
2 - 43
Industrials
 
2,585

 
(785
)
 
1,800

 
41
Materials
 
3,990

 
1,172

 
5,162

 
—
Other asset backed securities:
 
 
 
 
 
 
 
 
Financials
 
6,036

 
(3,143
)
 
2,893

 
58 - 84
 
 
$
67,639

 
$
(14,355
)
 
$
53,284

 
 

Page 14


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2018
Unaudited (Dollars in thousands)


Fixed Maturity Securities by Sector
 
March 31, 2018
 
December 31, 2017
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
Available for sale:
 
 
 
 
 
 
 
United States Government full faith and credit and sponsored agencies
$
1,320,008

 
$
1,281,539

 
$
1,320,151

 
$
1,316,893

United States municipalities, states and territories
3,853,098

 
4,137,005

 
3,804,360

 
4,166,812

Foreign government obligations
227,617

 
231,671

 
228,214

 
239,360

Corporate securities:
 
 
 
 
 
 
 
Capital goods
2,482,603

 
2,561,017

 
2,405,102

 
2,570,734

Consumer discretionary
5,997,115

 
6,115,715

 
5,889,227

 
6,232,728

Energy
2,644,095

 
2,682,268

 
2,554,199

 
2,666,172

Financials
6,105,310

 
6,270,600

 
6,004,618

 
6,369,575

Industrials
301,841

 
301,765

 
283,915

 
291,174

Information technology
1,879,595

 
1,921,253

 
1,829,396

 
1,932,131

Materials
1,811,957

 
1,858,545

 
1,801,312

 
1,901,090

Other
989,366

 
1,016,899

 
989,641

 
1,052,676

Telecommunications
1,519,649

 
1,557,743

 
1,461,536

 
1,539,840

Transportation
1,242,529

 
1,268,859

 
1,152,637

 
1,218,964

Utilities
3,827,291

 
4,029,464

 
3,756,070

 
4,103,887

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency
626,594

 
651,417

 
628,320

 
668,641

Prime
292,470

 
304,648

 
269,407

 
282,360

Alt-A
124,968

 
146,544

 
130,757

 
154,566

Commercial mortgage backed securities:
 
 
 
 
 
 
 
Government agency
552,502

 
547,978

 
554,514

 
564,400

Non-agency
5,132,788

 
5,048,904

 
4,977,408

 
4,980,450

Other asset backed securities:
 
 
 
 
 
 
 
Auto
298,176

 
297,676

 
298,142

 
299,688

Financials
2,461,188

 
2,471,064

 
1,976,720

 
1,986,259

Industrials
238,523

 
242,894

 
243,859

 
251,321

Military housing
437,207

 
463,800

 
433,840

 
461,452

Other
144,323

 
142,080

 
123,414

 
121,816

 
$
44,510,813

 
$
45,551,348

 
$
43,116,759

 
$
45,372,989

Held for investment:
 
 
 
 
 
 
 
Corporate security - financials
$
77,043

 
$
69,441

 
$
77,041

 
$
76,460



Page 15


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2018
Unaudited (Dollars in thousands)


Mortgage Loans on Commercial Real Estate
 
March 31, 2018
 
December 31, 2017
 
Principal
 
Percent
 
Principal
 
Percent
Geographic distribution
 
 
 
 
 
 
 
East
$
563,593

 
20.8
%
 
$
548,067

 
20.5
%
Middle Atlantic
166,782

 
6.2
%
 
163,485

 
6.1
%
Mountain
317,872

 
11.7
%
 
308,486

 
11.5
%
New England
12,146

 
0.5
%
 
12,265

 
0.5
%
Pacific
482,593

 
17.8
%
 
466,030

 
17.4
%
South Atlantic
613,999

 
22.7
%
 
609,736

 
22.8
%
West North Central
315,339

 
11.6
%
 
324,808

 
12.2
%
West South Central
235,028

 
8.7
%
 
241,438

 
9.0
%
 
$
2,707,352

 
100.0
%
 
$
2,674,315

 
100.0
%
 
 
 
 
 
 
 
 
Property type distribution
 
 
 
 
 
 
 
Office
$
270,066

 
10.0
%
 
$
283,926

 
10.6
%
Medical office
32,902

 
1.2
%
 
34,338

 
1.3
%
Retail
1,051,749

 
38.8
%
 
1,040,028

 
38.9
%
Industrial/Warehouse
703,892

 
26.0
%
 
677,770

 
25.3
%
Apartment
471,097

 
17.4
%
 
462,897

 
17.3
%
Mixed use/other
177,646

 
6.6
%
 
175,356

 
6.6
%
 
$
2,707,352

 
100.0
%
 
$
2,674,315

 
100.0
%
 
 
 
 
 
 
 
 
 
March 31, 2018
 
December 31, 2017
 
 
 
 
Credit exposure - by payment activity
 
 
 
 
 
 
 
Performing
$
2,705,957

 
$
2,670,657

 
 
 
 
In workout
1,395

 
1,436

 
 
 
 
Delinquent
—

 
—

 
 
 
 
Collateral dependent
—

 
2,222

 
 
 
 
 
2,707,352

 
2,674,315

 
 
 
 
Specific loan loss allowance
(696
)
 
(1,418
)
 
 
 
 
General loan loss allowance
(5,800
)
 
(6,100
)
 
 
 
 
Deferred prepayment fees
(1,219
)
 
(1,266
)
 
 
 
 
 
$
2,699,637

 
$
2,665,531

 
 
 
 


Page 16


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2018


Shareholder Information
Corporate Offices:
American Equity Investment Life Holding Company
6000 Westown Parkway
West Des Moines, IA 50266
Inquiries:
Steven Schwartz, Vice President-Investor Relations
(515) 273-3763, sschwartz@american-equity.com
Common Stock and Dividend Information:
New York Stock Exchange symbol: “AEL”
 
High
 
Low
 
Close
 
Dividend Declared
2018
 
 
 
 
 
 
 
First Quarter
$35.79
 
$28.90
 
$29.36
 
$0.00
 
 
 
 
 
 
 
 
2017
 
 
 
 
 
 
 
First Quarter
$28.00
 
$21.66
 
$23.63
 
$0.00
Second Quarter
$26.65
 
$22.23
 
$26.28
 
$0.00
Third Quarter
$29.43
 
$25.43
 
$29.08
 
$0.00
Fourth Quarter
$32.54
 
$28.06
 
$30.73
 
$0.26
 
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
 
First Quarter
$23.65
 
$12.65
 
$16.80
 
$0.00
Second Quarter
$16.96
 
$12.77
 
$14.25
 
$0.00
Third Quarter
$18.32
 
$13.07
 
$17.73
 
$0.00
Fourth Quarter
$23.41
 
$15.39
 
$22.54
 
$0.24
Transfer Agent:
Computershare Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940-0310
Phone: (877) 282-1169
Fax: (781) 575-2723
www.computershare.com
Annual Report and Other Information:
Shareholders may receive when available, without charge, a copy of American Equity’s Annual Report, SEC filings and/or press releases by calling Steven Schwartz, Vice President-Investor Relations, at (515) 273-3763 or by visiting our web site at www.american-equity.com.



Page 17


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - March 31, 2018


Research Analyst Coverage
Erik Bass
Autonomous Research US LP
(646) 561-6248
ebass@autonomous.com
Randy Binner
B. Riley FBR, Inc.
(703) 312-1890
rbinner@fbr.com
Daniel Bergman
Citi Research
(212) 816-2132
daniel.bergman@citi.com
Thomas Gallagher
Evercore ISI
(212) 446-9439
thomas.gallagher@evercoreisi.com
Alex Scott
Goldman Sachs & Co. LLC
(917) 343-7160
alex.scott@gs.com
Pablo Singzon II
JP Morgan
(212) 622-2295
pablo.s.singzon@jpmorgan.com

 

Ryan Krueger
Keefe, Bruyette & Woods
(860) 722-5930
rkrueger@kbw.com
C. Gregory Peters
Raymond James & Associates, Inc.
(727) 567-1534
greg.peters@raymondjames.com
Kenneth S. Lee
RBC Capital Markets, LLC
(212) 905-5995
kenneth.s.lee@rbccm.com
John Barnidge
Sandler O'Neill & Partners, L.P.
(312) 281-3412
jbarnidge@sandleroneill.com
Mark Hughes
SunTrust Robinson Humphrey
(615) 748-4422
mark.hughes@suntrust.com
John Nadel
UBS Investment Bank
(212) 713-4299
john.nadel@ubs.com



Page 18