Form 8-K AMERICAN EQUITY INVESTME For: Aug 08
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 08, 2022
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
(Address of principal executive offices and zip code)
(515 ) 221-0002
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
On August 8, 2022, the registrant issued a press release announcing its financial results for the quarter ended June 30, 2022, a copy of which is attached as Exhibit 99.1 and is incorporated herein by reference. The registrant's financial supplement for the quarter ended June 30, 2022, is attached as Exhibit 99.2 and is incorporated herein by reference.
The information, including exhibits attached hereto, furnished under this Item 2.02 shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, except as otherwise expressly stated in such filing.
Item 9.01. Financial Statements and Exhibits
Exhibit Number | Description | |||||||
99.1 | ||||||||
99.2 | ||||||||
104 | The cover page from this Current Report on Form 8-K, formatted in Inline XBRL. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: August 8, 2022
AMERICAN EQUITY | |||||||||||
INVESTMENT LIFE HOLDING COMPANY | |||||||||||
By: | /s/ Axel Andre | ||||||||||
Axel Andre | |||||||||||
Chief Financial Officer and Executive Vice President | |||||||||||
Exhibit 99.1
For more information, contact: | ||||||||
Steven D. Schwartz, Vice President-Investor Relations | ||||||||
(515) 273-3763, sschwartz@american-equity.com | ||||||||
FOR IMMEDIATE RELEASE | ||||||||
August 8, 2022 |
American Equity Reports Strong Results as Investment Yield Improves
Company Highlights
•Q2 2022 net income available to common stockholders of $349.7 million, or $3.74 per diluted common share
•Non-GAAP operating income1 available to common stockholders for the second quarter 2022 was $91.1 million, or $0.98 per diluted common share
•Repurchased $189 million or 4.95 million common shares in Q2 2022 as we remain committed to our capital return plans even in the current macro-economic environment
•Private asset deployment momentum continues with approximately $1.4 billion sourced in the quarter
•Yield and investment spread expansion driven by strong residential real estate returns and floating rate assets
WEST DES MOINES, Iowa (August 8, 2022) – American Equity Investment Life Holding Company (NYSE: AEL), a leading issuer of fixed index annuities (FIAs) today reported on its second quarter 2022 results. These results include improved yields in the investment portfolio, continued progress with our "best-in-class" asset origination partners, and continued share repurchase activities in-line with our capital return goals for this year.
Non-GAAP operating income1 available to common stockholders for the second quarter of 2022 was $91.1 million, or $0.98 per diluted common share. Second quarter 2021 net loss available to common stockholders was $(65.6) million, or $(0.69) per diluted common share, and non-GAAP operating income1 available to common stockholders of $93.8 million, or $0.98 per diluted common share.
Quarterly non-GAAP operating income1 available to common stockholders declined slightly year-over-year. Results for the quarter just ended reflected a substantial increase in average yield on invested assets compared to the year ago period due to strong returns on partnership and other market value investments, the significant reduction in cash balances over the last twelve months with the rebalancing of the investment portfolio, and lower operating expenses. The benefit of higher yield was offset by increases in the cost of money, commensurate increases in the amortization of the deferred acquisition cost and deferred sales inducement assets, and the increase in the liability for future policy benefits to be paid for lifetime income benefit riders (LIBR).
For the second quarter of 2022, net investment income increased $93 million from the comparable quarter of 2021 reflecting an increase in average yield on investments resulting from strong returns from partnerships and other mark-to-market assets, lower cash balances, and the increase in allocation to higher yielding privately sourced assets to 16.6% of the investment portfolio.
Compared to the second quarter of 2021, the change in the liability for future policy benefits to be paid for LIBR increased by $62 million, driven by higher benefit utilization and lower index credits realized in the second quarter of this year compared to a benefit from strong index credits in the second quarter of last year related to the upside from equity market performance.
Compared to the second quarter of 2021, amortization of deferred policy acquisition and sales inducement costs increased by $32 million, primarily reflecting the substantial improvement in investment income and the decline in index credits year-over-year.
As of June 30, 2022, notional value2 under reinsurance agreements - generating six to seven years of "fee-like" return on asset (ROA) earnings - was $4.5 billion, up from $4.3 billion three months earlier .
STRONG INVESTMENT MANAGEMENT RESULTS
American Equity’s investment spread was 2.64% for the second quarter of 2022 compared to 2.51% for the first quarter of 2022 and 1.95% for the second quarter of 2021. On a sequential quarterly basis, the average yield on invested assets increased by 18 basis points - driven by the increase in short-term interest rates and lower allocation to cash and equivalents - while the cost of money increased 5 basis points. Adjusted investment spread excluding non-trendable items3 increased to 2.57% in the second quarter of 2022 from 2.45% in the first quarter of 2022.
Average yield on invested assets was 4.33% in the second quarter of 2022 compared to 4.15% in the first quarter of 2022. The average adjusted yield on invested assets excluding non-trendable items3 was 4.28% in the second quarter of 2022 compared to 4.12% in the first quarter of 2022. Relative to the prior quarter, the increase in the average adjusted yield in the second quarter of 2022 was primarily driven by an 8 basis point benefit due to higher short term rates and 9 basis points from the decrease in average cash balance. While the benefit from partnership income was lower than in the first quarter, this was mostly offset by appreciation in residential real estate assets. Partnerships and other mark-to-market assets contributed 20 basis points to average yield in the second quarter of 2022 in excess of rates of return assumed in our investment process.
Average cash and equivalents in the insurance companies' portfolios was $526 million compared to $1.7 billion for the first quarter. Cash and equivalents in the insurance companies' portfolios as of June 30, 2022 was $544 million or approximately 1% of the investment portfolio.
During the quarter, investment asset purchases totaled $2.0 billion and were made at an average rate of 4.88%, including approximately $1.4 billion of private assets at 5.10%.
2
American Equity CEO & President Anant Bhalla stated, "We continued to execute in our Investments pillar originating $1.4 billion of privately sourced assets as we worked closely with our "best-in-class" asset origination partners to bring these yield enhancing assets to 16.6% of our investment portfolio compared to 15.4% three months earlier. While this number increased meaningfully in the quarter, we are, and will continue to be, primarily opportunistic investors compared to others who may be more programmatic in deployment in various private asset sectors. Therefore, we will benefit from partnerships that allow us to allocate to the most attractive relative value sectors, driven by our tactical asset allocation as different private asset sectors reprice risk-return attractiveness in the going forward macro-environment. This is a good indicator of the strategic benefits and resilience we expect from our curated approach to private asset investing.”
The aggregate cost of money for annuity liabilities of 1.69% in the second quarter of 2022 was up 5 basis points compared to the first quarter of 2022, in line with market costs. The cost of money in the second quarter of 2022 was positively affected by 2 basis points of over-hedging of index-linked credits compared to 3 basis points of hedge gain in the first quarter of 2022.
SALES FOCUS ON FIA AND PRICING DISCIPLINE4
Second quarter sales were $781 million, of which 99%, or $776 million, were in fixed index annuities. This is in line with the company's focus strategy for driving low single-digit growth in FIA sales in 2022 as the macro-economic environment and interest rates go through a potential regime change based on Federal Reserve policy making action in light of sustained supply constraints in the economy and its outlook for balancing its mandate between stable prices and maximum employment. Compared to the second quarter of 2021, total enterprise FIA sales decreased 13% driven primarily by Eagle Life in the bank channel, while the Independent Marketing Organization (IMO) American Equity channel decreased 4%. On a sequential quarterly basis, FIA sales decreased 12% primarily due to lower sales in the IMO space.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
The forward-looking statements in this release or that American Equity uses on its conference call, such as ability, aim, anticipate, become, believe, can, continue, could, estimate, expect, exposure, forward, future, goal, grow, guidance, intend, introduce, likely, look to, may, might, need, opportunistic, opportunity, outlook, over time, plan, potential, predictable, prepare, proactive, project, ramp, risk, scenario, should, signal, strategy, stress test, target, then, to be, toward, trends, will, would, and their derivative forms and similar words, as well as any projections of future results, are based on assumptions and expectations that involve risks and uncertainties, including the "Risk Factors" the company describes in its U.S. Securities and Exchange Commission filings. The Company's future results could differ, and it has no obligation to correct or update any of these statements.
CONFERENCE CALL
American Equity will hold a conference call to discuss second quarter 2022 earnings on Tuesday, August 9, at 10:00 a.m. CDT.
The conference call will be webcast live on the Internet. Investors and interested parties who wish to listen to the webcast may register to access it on our IR website at https://ir.american-equity.com. An audio replay will also be available via the same link on our website shortly after the completion of the call for 30 days.
3
The call may also be accessed by telephone. Investors and interested parties may register for the call with the form available at this link, and upon submission (and via follow-up email) will receive the dial-in number and a unique PIN to access the call. Registration is available now or any time up to and during the time of the call. Registration is also available by visiting our IR website at https://ir.american-equity.com.
ABOUT AMERICAN EQUITY
At American Equity Investment Life Holding Company, we think of ourselves as The Financial Dignity CompanyTM that offers solutions designed to create financial dignity in retirement. Our policyholders work with independent agents, banks and broker-dealers, through our wholly-owned operating subsidiaries, to choose one of our leading annuity products best suited for their personal needs. To deliver on our promises to policyholders, American Equity has reframed its investment focus, building a stronger emphasis on insurance liability driven asset allocation as well as the origination and management of private assets. Our company is headquartered in West Des Moines, Iowa with satellite offices slated to open in 2022 in Charlotte, NC and New York, NY. For more information, please visit www.american-equity.com.
1 Use of non-GAAP financial measures, including those that isolate notable items, is discussed in this release in the tables that follow the text of the release.
2 Notional value represents the initial cash surrender value of business ceded subject to recurring fees under reinsurance agreements.
3 Non-trendable items are the impact of investment yield – additional prepayment income and cost of money effect of over (under) hedging as shown in our June 30, 2022 financial supplement on page 10, “Spread Results”.
4 For the purposes of this document, all references to sales are on a gross basis. Gross sales is defined as sales before the use of reinsurance.
###
4
American Equity Investment Life Holding Company
Unaudited (Dollars in thousands, except per share data)
Consolidated Statements of Operations
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Revenues: | |||||||||||||||||||||||
Premiums and other considerations | $ | 3,831 | $ | 14,595 | $ | 13,909 | $ | 27,808 | |||||||||||||||
Annuity product charges | 55,514 | 63,759 | 107,869 | 123,841 | |||||||||||||||||||
Net investment income | 592,308 | 499,320 | 1,159,731 | 996,510 | |||||||||||||||||||
Change in fair value of derivatives | (506,181) | 500,880 | (983,700) | 897,185 | |||||||||||||||||||
Net realized losses on investments | (33,272) | (3,114) | (46,399) | (7,697) | |||||||||||||||||||
Other revenue | 9,195 | — | 17,784 | — | |||||||||||||||||||
Total revenues | 121,395 | 1,075,440 | 269,194 | 2,037,647 | |||||||||||||||||||
Benefits and expenses: | |||||||||||||||||||||||
Insurance policy benefits and change in future policy benefits | 7,091 | 15,828 | 19,729 | 32,252 | |||||||||||||||||||
Interest sensitive and index product benefits | 234,855 | 812,981 | 607,517 | 1,289,576 | |||||||||||||||||||
Amortization of deferred sales inducements | 90,446 | (12,520) | 233,991 | 110,455 | |||||||||||||||||||
Change in fair value of embedded derivatives | (885,984) | 273,713 | (2,279,633) | (8,700) | |||||||||||||||||||
Interest expense on notes payable | 6,461 | 6,394 | 12,886 | 12,787 | |||||||||||||||||||
Interest expense on subordinated debentures | 1,346 | 1,326 | 2,663 | 2,652 | |||||||||||||||||||
Amortization of deferred policy acquisition costs | 142,354 | (16,906) | 367,780 | 186,917 | |||||||||||||||||||
Other operating costs and expenses | 59,923 | 65,050 | 118,043 | 120,915 | |||||||||||||||||||
Total benefits and expenses | (343,508) | 1,145,866 | (917,024) | 1,746,854 | |||||||||||||||||||
Income (loss) before income taxes | 464,903 | (70,426) | 1,186,218 | 290,793 | |||||||||||||||||||
Income tax expense (benefit) | 104,327 | (15,732) | 259,419 | 62,803 | |||||||||||||||||||
Net income (loss) | 360,576 | (54,694) | 926,799 | 227,990 | |||||||||||||||||||
Less: Net income (loss) available to noncontrolling interests | (4) | — | (4) | — | |||||||||||||||||||
Net income (loss) available to American Equity Investment Life Holding Company stockholders | 360,580 | (54,694) | 926,803 | 227,990 | |||||||||||||||||||
Less: Preferred stock dividends | 10,919 | 10,919 | 21,838 | 21,838 | |||||||||||||||||||
Net income (loss) available to American Equity Investment Life Holding Company common stockholders | $ | 349,661 | $ | (65,613) | $ | 904,965 | $ | 206,152 | |||||||||||||||
Earnings (loss) per common share | $ | 3.78 | $ | (0.69) | $ | 9.56 | $ | 2.16 | |||||||||||||||
Earnings (loss) per common share - assuming dilution | $ | 3.74 | $ | (0.69) | $ | 9.46 | $ | 2.15 | |||||||||||||||
Weighted average common shares outstanding (in thousands): | |||||||||||||||||||||||
Earnings (loss) per common share | 92,544 | 94,801 | 94,693 | 95,265 | |||||||||||||||||||
Earnings (loss) per common share - assuming dilution | 93,375 | 95,379 | 95,652 | 95,795 |
Page 1
American Equity Investment Life Holding Company
Unaudited (Dollars in thousands, except per share data)
NON-GAAP FINANCIAL MEASURES
In addition to net income (loss) available to common stockholders, we have consistently utilized non-GAAP operating income available to common stockholders and non-GAAP operating income available to common stockholders per common share - assuming dilution, non-GAAP financial measures commonly used in the life insurance industry, as economic measures to evaluate our financial performance. Non-GAAP operating income available to common stockholders equals net income (loss) available to common stockholders adjusted to eliminate the impact of items that fluctuate from quarter to quarter in a manner unrelated to core operations, and we believe measures excluding their impact are useful in analyzing operating trends. The most significant adjustments to arrive at non-GAAP operating income available to common stockholders eliminate the impact of fair value accounting for our fixed index annuity business. These adjustments are not economic in nature but rather impact the timing of reported results. We believe the combined presentation and evaluation of non-GAAP operating income available to common stockholders together with net income (loss) available to common stockholders provides information that may enhance an investor’s understanding of our underlying results and profitability.
Reconciliation from Net Income (Loss) Available to Common Stockholders to Non-GAAP Operating Income Available to Common Stockholders and Non-GAAP Operating Income Available to Common Stockholders, Excluding Notable Items
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Net income (loss) available to American Equity Investment Life Holding Company common stockholders | $ | 349,661 | $ | (65,613) | $ | 904,965 | $ | 206,152 | |||||||||||||||
Adjustments to arrive at non-GAAP operating income available to common stockholders: (a) | |||||||||||||||||||||||
Net realized losses on financial assets, including credit losses | 31,572 | 2,912 | 41,857 | 6,428 | |||||||||||||||||||
Change in fair value of derivatives and embedded derivatives | (367,145) | 200,767 | (970,499) | (96,867) | |||||||||||||||||||
Income taxes | 77,056 | (44,278) | 204,717 | 19,516 | |||||||||||||||||||
Non-GAAP operating income available to common stockholders | 91,144 | 93,788 | 181,040 | 135,229 | |||||||||||||||||||
Impact of notable items (b) | — | — | — | — | |||||||||||||||||||
Non-GAAP operating income available to common stockholders, excluding notable items | $ | 91,144 | $ | 93,788 | $ | 181,040 | $ | 135,229 | |||||||||||||||
Per common share - assuming dilution: | |||||||||||||||||||||||
Net income (loss) available to American Equity Investment Life Holding Company common stockholders | $ | 3.74 | $ | (0.69) | $ | 9.46 | $ | 2.15 | |||||||||||||||
Adjustments to arrive at non-GAAP operating income available to common stockholders: | |||||||||||||||||||||||
Net realized losses on financial assets, including credit losses | 0.34 | 0.03 | 0.44 | 0.07 | |||||||||||||||||||
Change in fair value of derivatives and embedded derivatives | (3.93) | 2.10 | (10.15) | (1.01) | |||||||||||||||||||
Income taxes | 0.83 | (0.46) | 2.14 | 0.20 | |||||||||||||||||||
Non-GAAP operating income available to common stockholders | 0.98 | 0.98 | 1.89 | 1.41 | |||||||||||||||||||
Impact of notable items | — | — | — | — | |||||||||||||||||||
Non-GAAP operating income available to common stockholders, excluding notable items | $ | 0.98 | $ | 0.98 | $ | 1.89 | $ | 1.41 |
(a)Adjustments to net income (loss) available to common stockholders to arrive at non-GAAP operating income available to common stockholders are presented net of related adjustments to amortization of deferred sales inducements (DSI) and deferred policy acquisition costs (DAC) and accretion of lifetime income benefit rider (LIBR) reserves where applicable.
(b)Notable items reflect the after-tax impact to non-GAAP operating income available to common stockholders for certain items that do not reflect the company's expected ongoing operations. Notable items primarily include the impact from actuarial assumption updates. The presentation of notable items is intended to help investors better understand our results and to evaluate and forecast those results.
Page 2
American Equity Investment Life Holding Company
Unaudited (Dollars in thousands, except share and per share data)
Book Value per Common Share
Q2 2022 | |||||
Total stockholders’ equity attributable to American Equity Investment Life Holding Company | $ | 3,882,217 | |||
Equity available to preferred stockholders (a) | (700,000) | ||||
Total common stockholders' equity (b) | 3,182,217 | ||||
Accumulated other comprehensive income (AOCI) | 1,387,968 | ||||
Total common stockholders’ equity excluding AOCI (b) | 4,570,185 | ||||
Net impact of fair value accounting for derivatives and embedded derivatives | (1,031,257) | ||||
Total common stockholders’ equity excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives (b) | $ | 3,538,928 | |||
Common shares outstanding | 90,168,512 | ||||
Book Value per Common Share: (c) | |||||
Book value per common share | $ | 35.29 | |||
Book value per common share excluding AOCI (b) | $ | 50.68 | |||
Book value per common share excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives (b) | $ | 39.25 | |||
(a)Equity available to preferred stockholders is equal to the redemption value of outstanding preferred stock plus share dividends declared but not yet issued.
(b)Total common stockholders' equity, total common stockholders' equity excluding AOCI and total common stockholders' equity excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives, non-GAAP financial measures, exclude equity available to preferred stockholders. Total common stockholders’ equity and book value per common share excluding AOCI, non-GAAP financial measures, are based on common stockholders’ equity excluding the effect of AOCI. Since AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale securities, we believe these non-GAAP financial measures provide useful supplemental information. Total common stockholders' equity and book value per common share excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives, non-GAAP financial measures, are based on common stockholders' equity excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives. Since the net impact of fair value accounting for our derivatives and embedded derivatives fluctuates from quarter to quarter and the most significant impacts relate to fair value accounting for our fixed index annuity business and are not economic in nature but rather impact the timing of reported results, we believe these non-GAAP financial measures provide useful supplemental information.
(c)Book value per common share including and excluding AOCI and book value per common share excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives are calculated as total common stockholders’ equity, total common stockholders’ equity excluding AOCI and total common stockholders' equity excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives divided by the total number of shares of common stock outstanding.
Page 3
American Equity Investment Life Holding Company
Unaudited (Dollars in thousands)
NON-GAAP FINANCIAL MEASURES
Average Common Stockholders' Equity and Return on Average Common Stockholders' Equity
Return on average common stockholders' equity measures how efficiently we generate profits from the resources provided by our net assets. Return on average common stockholders' equity is calculated by dividing net income available to common stockholders, for the trailing twelve months, by average equity available to common stockholders. Non-GAAP operating return on average common stockholders' equity excluding average accumulated other comprehensive income (AOCI) and average net impact of fair value accounting for derivatives and embedded derivatives is calculated by dividing non-GAAP operating income available to common stockholders, for the trailing twelve months, by average common stockholders' equity excluding average AOCI and average net impact of fair value accounting for derivatives and embedded derivatives. We exclude AOCI because AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale investments. We exclude the net impact of fair value accounting for derivatives and embedded derivatives as the amounts are not economic in nature but rather impact the timing of reported results.
Twelve Months Ended | |||||
June 30, 2022 | |||||
Average Common Stockholders' Equity Attributable to American Equity Investment Life Holding Company, Excluding Average AOCI and Average Net Impact of Fair Value Accounting for Derivatives and Embedded Derivatives | |||||
Average total stockholders’ equity | $ | 5,088,976 | |||
Average equity available to preferred stockholders | (700,000) | ||||
Average equity available to common stockholders | 4,388,976 | ||||
Average AOCI | (317,972) | ||||
Average common stockholders' equity excluding average AOCI | 4,071,004 | ||||
Average net impact of fair value accounting for derivatives and embedded derivatives | (636,840) | ||||
Average common stockholders' equity excluding average AOCI and average net impact of fair value accounting for derivatives and embedded derivatives | 3,434,164 | ||||
Impact of notable items on average common stockholders' equity excluding average AOCI and average net impact of fair value accounting for derivatives and embedded derivatives | 39,018 | ||||
Average common stockholders' equity excluding average AOCI, average net impact of fair value accounting for derivatives and embedded derivatives and notables | $ | 3,473,182 | |||
Net income available to American Equity Investment Life Holding Company common stockholders | $ | 1,129,130 | |||
Adjustments to arrive at non-GAAP operating income available to common stockholders: (a) | |||||
Net realized losses on financial assets, including credit losses | 45,728 | ||||
Change in fair value of derivatives and embedded derivatives | (1,060,922) | ||||
Income taxes | 222,385 | ||||
Non-GAAP operating income available to common stockholders | 336,321 | ||||
Impact of notable items (b) | 78,036 | ||||
Non-GAAP operating income available to common stockholders, excluding notable items | $ | 414,357 | |||
Return on Average Common Stockholders' Equity Attributable to American Equity Investment Life Holding Company | |||||
Net income available to common stockholders | 25.7 | % | |||
Return on Average Common Stockholders' Equity Attributable to American Equity Investment Life Holding Company, Excluding Average AOCI and Average Net Impact of Fair Value Accounting for Derivatives and Embedded Derivatives | |||||
Non-GAAP operating income available to common stockholders | 9.8 | % | |||
Non-GAAP operating income available to common stockholders, excluding notable items | 11.9 | % |
Notable Items | Twelve Months Ended | ||||
June 30, 2022 | |||||
Notable items impacting non-GAAP operating income available to common stockholders: | |||||
Impact of actuarial assumption updates | $ | 78,036 | |||
Total notable items (b) | $ | 78,036 |
(a)Adjustments to net income available to common stockholders to arrive at non-GAAP operating income available to common stockholders are presented net of related adjustments to amortization of deferred sales inducements (DSI) and deferred policy acquisition costs (DAC) and accretion of lifetime income benefit rider (LIBR) reserves where applicable.
(b)Notable items reflect the after-tax impact to non-GAAP operating income available to common stockholders for certain items that do not reflect the company's expected ongoing operations. Notable items primarily include the impact from actuarial assumption updates. The presentation of notable items is intended to help investors better understand our results and to evaluate and forecast those results.
Page 4
Exhibit 99.2
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement
June 30, 2022
A. | Financial Highlights | |||||||
Non-GAAP Financial Measures | ||||||||
B. | Product Summary | |||||||
C. | Investment Summary | |||||||
D. | ||||||||
E. |
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2022
Unaudited (Dollars in thousands)
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2022 | December 31, 2021 | ||||||||||
Assets | |||||||||||
Investments: | |||||||||||
Fixed maturity securities, available for sale, at fair value | $ | 45,323,775 | $ | 51,305,943 | |||||||
Mortgage loans on real estate | 6,228,616 | 5,687,998 | |||||||||
Real estate investments | 672,475 | 337,939 | |||||||||
Derivative instruments | 200,781 | 1,277,480 | |||||||||
Other investments | 2,112,169 | 1,767,144 | |||||||||
Total investments | 54,537,816 | 60,376,504 | |||||||||
Cash and cash equivalents | 1,287,225 | 4,508,982 | |||||||||
Coinsurance deposits | 8,600,297 | 8,850,608 | |||||||||
Accrued investment income | 492,539 | 445,097 | |||||||||
Deferred policy acquisition costs | 3,474,319 | 2,222,769 | |||||||||
Deferred sales inducements | 2,380,288 | 1,546,073 | |||||||||
Deferred income taxes | 76,936 | — | |||||||||
Income taxes recoverable | 135,241 | 166,586 | |||||||||
Other assets | 678,605 | 232,490 | |||||||||
Total assets | $ | 71,663,266 | $ | 78,349,109 | |||||||
Liabilities and Stockholders' Equity | |||||||||||
Liabilities: | |||||||||||
Policy benefit reserves | $ | 62,280,575 | $ | 65,477,778 | |||||||
Other policy funds and contract claims | 522,763 | 226,844 | |||||||||
Notes payable | 496,552 | 496,250 | |||||||||
Subordinated debentures | 78,584 | 78,421 | |||||||||
Deferred income taxes | — | 541,972 | |||||||||
Funds withheld for reinsurance liabilities | 2,936,366 | 3,124,740 | |||||||||
Other liabilities | 1,465,040 | 2,079,977 | |||||||||
Total liabilities | 67,779,880 | 72,025,982 | |||||||||
Stockholders' equity: | |||||||||||
Preferred stock, Series A | 16 | 16 | |||||||||
Preferred stock, Series B | 12 | 12 | |||||||||
Common stock | 90,169 | 92,514 | |||||||||
Additional paid-in capital | 1,507,601 | 1,614,374 | |||||||||
Accumulated other comprehensive income (loss) | (1,387,968) | 1,848,789 | |||||||||
Retained earnings | 3,672,387 | 2,767,422 | |||||||||
Total stockholders' equity attributable to American Equity Investment Life Holding Company | 3,882,217 | 6,323,127 | |||||||||
Noncontrolling interests | 1,169 | — | |||||||||
Total stockholders' equity | 3,883,386 | 6,323,127 | |||||||||
Total liabilities and stockholders' equity | $ | 71,663,266 | $ | 78,349,109 |
Page 1
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2022
Unaudited (Dollars in thousands, except per share data)
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Revenues: | |||||||||||||||||||||||
Premiums and other considerations | $ | 3,831 | $ | 14,595 | $ | 13,909 | $ | 27,808 | |||||||||||||||
Annuity product charges | 55,514 | 63,759 | 107,869 | 123,841 | |||||||||||||||||||
Net investment income | 592,308 | 499,320 | 1,159,731 | 996,510 | |||||||||||||||||||
Change in fair value of derivatives | (506,181) | 500,880 | (983,700) | 897,185 | |||||||||||||||||||
Net realized losses on investments | (33,272) | (3,114) | (46,399) | (7,697) | |||||||||||||||||||
Other revenue | 9,195 | — | 17,784 | — | |||||||||||||||||||
Total revenues | 121,395 | 1,075,440 | 269,194 | 2,037,647 | |||||||||||||||||||
Benefits and expenses: | |||||||||||||||||||||||
Insurance policy benefits and change in future policy benefits | 7,091 | 15,828 | 19,729 | 32,252 | |||||||||||||||||||
Interest sensitive and index product benefits | 234,855 | 812,981 | 607,517 | 1,289,576 | |||||||||||||||||||
Amortization of deferred sales inducements | 90,446 | (12,520) | 233,991 | 110,455 | |||||||||||||||||||
Change in fair value of embedded derivatives | (885,984) | 273,713 | (2,279,633) | (8,700) | |||||||||||||||||||
Interest expense on notes payable | 6,461 | 6,394 | 12,886 | 12,787 | |||||||||||||||||||
Interest expense on subordinated debentures | 1,346 | 1,326 | 2,663 | 2,652 | |||||||||||||||||||
Amortization of deferred policy acquisition costs | 142,354 | (16,906) | 367,780 | 186,917 | |||||||||||||||||||
Other operating costs and expenses | 59,923 | 65,050 | 118,043 | 120,915 | |||||||||||||||||||
Total benefits and expenses | (343,508) | 1,145,866 | (917,024) | 1,746,854 | |||||||||||||||||||
Income (loss) before income taxes | 464,903 | (70,426) | 1,186,218 | 290,793 | |||||||||||||||||||
Income tax expense (benefit) | 104,327 | (15,732) | 259,419 | 62,803 | |||||||||||||||||||
Net income (loss) | 360,576 | (54,694) | 926,799 | 227,990 | |||||||||||||||||||
Less: Net income (loss) available to noncontrolling interests | (4) | — | (4) | — | |||||||||||||||||||
Net income (loss) available to American Equity Investment Life Holding Company stockholders | 360,580 | (54,694) | 926,803 | 227,990 | |||||||||||||||||||
Less: Preferred stock dividends | 10,919 | 10,919 | 21,838 | 21,838 | |||||||||||||||||||
Net income (loss) available to American Equity Investment Life Holding Company common stockholders | $ | 349,661 | $ | (65,613) | $ | 904,965 | $ | 206,152 | |||||||||||||||
Earnings (loss) per common share | $ | 3.78 | $ | (0.69) | $ | 9.56 | $ | 2.16 | |||||||||||||||
Earnings (loss) per common share - assuming dilution | $ | 3.74 | $ | (0.69) | $ | 9.46 | $ | 2.15 | |||||||||||||||
Weighted average common shares outstanding (in thousands): | |||||||||||||||||||||||
Earnings (loss) per common share | 92,544 | 94,801 | 94,693 | 95,265 | |||||||||||||||||||
Earnings (loss) per common share - assuming dilution | 93,375 | 95,379 | 95,652 | 95,795 |
Page 2
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2022
Unaudited (Dollars in thousands, except per share data)
Quarterly Summary - Most Recent 5 Quarters
Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | Q2 2021 | |||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||
Traditional life insurance premiums | $ | 691 | $ | 675 | $ | 677 | $ | 697 | $ | 708 | |||||||||||||||||||
Life contingent immediate annuity considerations | 3,140 | 9,403 | 13,876 | 15,144 | 13,887 | ||||||||||||||||||||||||
Surrender charges | 15,345 | 15,541 | 13,638 | 16,481 | 18,057 | ||||||||||||||||||||||||
Lifetime income benefit rider fees | 40,169 | 36,814 | 46,672 | 41,999 | 45,702 | ||||||||||||||||||||||||
Net investment income | 592,308 | 567,423 | 514,599 | 526,366 | 499,320 | ||||||||||||||||||||||||
Change in fair value of derivatives | (506,181) | (477,519) | 522,251 | (70,701) | 500,880 | ||||||||||||||||||||||||
Net realized gains (losses) on investments | (33,272) | (13,127) | (10,478) | 4,933 | (3,114) | ||||||||||||||||||||||||
Other revenue (a) | 9,195 | 8,589 | 8,026 | 7,644 | — | ||||||||||||||||||||||||
Total revenues | 121,395 | 147,799 | 1,109,261 | 542,563 | 1,075,440 | ||||||||||||||||||||||||
Benefits and expenses: | |||||||||||||||||||||||||||||
Traditional life insurance policy benefits and change in future policy benefits | 785 | 765 | 624 | 798 | 502 | ||||||||||||||||||||||||
Life contingent immediate annuity benefits and change in future policy benefits | 6,306 | 11,873 | 16,351 | 17,958 | 15,326 | ||||||||||||||||||||||||
Interest sensitive and index product benefits (b) | 234,855 | 372,662 | 574,816 | 817,014 | 812,981 | ||||||||||||||||||||||||
Amortization of deferred sales inducements (c) | 90,446 | 143,545 | 59,409 | (17,172) | (12,520) | ||||||||||||||||||||||||
Change in fair value of embedded derivatives (d) | (885,984) | (1,393,649) | 186,802 | (536,404) | 273,713 | ||||||||||||||||||||||||
Interest expense on notes payable | 6,461 | 6,425 | 6,259 | 6,535 | 6,394 | ||||||||||||||||||||||||
Interest expense on subordinated debentures | 1,346 | 1,317 | 1,330 | 1,342 | 1,326 | ||||||||||||||||||||||||
Amortization of deferred policy acquisition costs (c) | 142,354 | 225,426 | 82,999 | (1,588) | (16,906) | ||||||||||||||||||||||||
Other operating costs and expenses | 59,923 | 58,120 | 66,279 | 56,518 | 65,050 | ||||||||||||||||||||||||
Total benefits and expenses | (343,508) | (573,516) | 994,869 | 345,001 | 1,145,866 | ||||||||||||||||||||||||
Income (loss) before income taxes | 464,903 | 721,315 | 114,392 | 197,562 | (70,426) | ||||||||||||||||||||||||
Income tax expense (benefit) | 104,327 | 155,092 | 21,255 | 44,697 | (15,732) | ||||||||||||||||||||||||
Net income (loss) (b)(c)(d) | 360,576 | 566,223 | 93,137 | 152,865 | (54,694) | ||||||||||||||||||||||||
Less: Net income (loss) available to noncontrolling interests | (4) | — | — | — | — | ||||||||||||||||||||||||
Net income (loss) available to American Equity Investment Life Holding Company stockholders (b)(c)(d) | 360,580 | 566,223 | 93,137 | 152,865 | (54,694) | ||||||||||||||||||||||||
Less: Preferred stock dividends | 10,919 | 10,919 | 10,919 | 10,918 | 10,919 | ||||||||||||||||||||||||
Net income (loss) available to American Equity Investment Life Holding Company common stockholders (b)(c)(d) | $ | 349,661 | $ | 555,304 | $ | 82,218 | $ | 141,947 | $ | (65,613) | |||||||||||||||||||
Earnings (loss) per common share | $ | 3.78 | $ | 5.73 | $ | 0.89 | $ | 1.53 | $ | (0.69) | |||||||||||||||||||
Earnings (loss) per common share - assuming dilution (b)(c)(d) | $ | 3.74 | $ | 5.67 | $ | 0.88 | $ | 1.53 | $ | (0.69) | |||||||||||||||||||
Weighted average common shares outstanding (thousands): | |||||||||||||||||||||||||||||
Earnings (loss) per common share | 92,544 | 96,866 | 92,479 | 92,478 | 94,801 | ||||||||||||||||||||||||
Earnings (loss) per common share - assuming dilution | 93,375 | 97,953 | 93,378 | 93,044 | 95,379 |
(a)Other revenue consists of $3.0 million in Q2 2022, $2.9 million in Q1 2022, $2.8 million in Q4 2021 and $2.7 million in Q3 2021 related to asset liability management fees and $6.2 million in Q2 2022, $5.7 million in Q1 2022, $5.3 million in Q4 2021 and $4.9 million in Q3 2021 related to amortization of the deferred gain associated with the cost of reinsurance. The deferred gain, which is recorded in Other liabilities on the Consolidated Balance Sheets, was $372.3 million and $321.7 million at June 30, 2022 and December 31, 2021, respectively. The deferred gain consists primarily of a difference between liabilities ceded and assets transferred and the present value of the ceding commissions offset by a reduction in deferred policy acquisition costs associated with the in-force business ceded.
(b)Q4 2021 includes expense from the update of assumptions used in determining reserves held for lifetime income benefit riders. The impact increased interest sensitive and index products by $10.5 million and decreased both net income and net income available to common stockholders by $8.2 million and decreased earnings per common share - assuming dilution by $0.09 per share.
Page 3
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2022
Unaudited (Dollars in thousands, except per share data)
Q3 2021 includes expense from the update of assumptions used in determining reserves held for lifetime income benefit riders. The impact increased interest sensitive and index products by $233.2 million and decreased both net income and net income available to common stockholders by $183.0 million and decreased earnings per common share - assuming dilution by $1.97 per share.
(c)Q4 2021 includes expense from the update of assumptions which increased amortization of deferred sales inducements and deferred policy acquisition costs by $6.3 million and $6.9 million, respectively, and decreased both net income and net income available to common stockholders by $10.4 million and decreased earnings per common share - assuming dilution by $0.11 per share
Q3 2021 includes a benefit from the update of assumptions which decreased amortization of deferred sales inducements and deferred policy acquisition costs by $51.4 million and $52.6 million, respectively, and increased both net income and net income available to common stockholders by $81.7 million and increased earnings per common share - assuming dilution by $0.88 per share.
(d)Q4 2021 includes expense from the update of assumptions used in determining the embedded derivative component of our fixed index annuity policy benefit reserves. The impact increased change in fair value of embedded derivatives by $3.5 million and decreased both net income and net income available to common stockholders by $2.7 million and decreased earnings per common share - assuming dilution by $0.03 per share.
Q3 2021 includes a benefit from the update of assumptions used in determining the embedded derivative component of our fixed index annuity policy benefit reserves. The impact decreased change in fair value of embedded derivatives by $125.8 million and increased both net income and net income available to common stockholders by $98.7 million and increased earnings per common share - assuming dilution by $1.06 per share.
Page 4
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2022
Unaudited (Dollars in thousands, except per share data)
NON-GAAP FINANCIAL MEASURES
In addition to net income (loss) available to common stockholders, we have consistently utilized non-GAAP operating income available to common stockholders and non-GAAP operating income available to common stockholders per common share - assuming dilution, non-GAAP financial measures commonly used in the life insurance industry, as economic measures to evaluate our financial performance. Non-GAAP operating income available to common stockholders equals net income (loss) available to common stockholders adjusted to eliminate the impact of items that fluctuate from quarter to quarter in a manner unrelated to core operations, and we believe measures excluding their impact are useful in analyzing operating trends. The most significant adjustments to arrive at non-GAAP operating income available to common stockholders eliminate the impact of fair value accounting for our fixed index annuity business. These adjustments are not economic in nature but rather impact the timing of reported results. We believe the combined presentation and evaluation of non-GAAP operating income available to common stockholders together with net income (loss) available to common stockholders provides information that may enhance an investor’s understanding of our underlying results and profitability.
Reconciliation from Net Income (Loss) Available to Common Stockholders to Non-GAAP Operating Income Available to Common Stockholders and Non-GAAP Operating Income Available to Common Stockholders, Excluding Notable Items
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Net income (loss) available to American Equity Investment Life Holding Company common stockholders | $ | 349,661 | $ | (65,613) | $ | 904,965 | $ | 206,152 | |||||||||||||||
Adjustments to arrive at non-GAAP operating income available to common stockholders: (a) | |||||||||||||||||||||||
Net realized losses on financial assets, including credit losses | 31,572 | 2,912 | 41,857 | 6,428 | |||||||||||||||||||
Change in fair value of derivatives and embedded derivatives | (367,145) | 200,767 | (970,499) | (96,867) | |||||||||||||||||||
Income taxes | 77,056 | (44,278) | 204,717 | 19,516 | |||||||||||||||||||
Non-GAAP operating income available to common stockholders | 91,144 | 93,788 | 181,040 | 135,229 | |||||||||||||||||||
Impact of notable items (b) | — | — | — | — | |||||||||||||||||||
Non-GAAP operating income available to common stockholders, excluding notable items | $ | 91,144 | $ | 93,788 | $ | 181,040 | $ | 135,229 | |||||||||||||||
Per common share - assuming dilution: | |||||||||||||||||||||||
Net income (loss) available to American Equity Investment Life Holding Company common stockholders | $ | 3.74 | $ | (0.69) | $ | 9.46 | $ | 2.15 | |||||||||||||||
Adjustments to arrive at non-GAAP operating income available to common stockholders: | |||||||||||||||||||||||
Net realized losses on financial assets, including credit losses | 0.34 | 0.03 | 0.44 | 0.07 | |||||||||||||||||||
Change in fair value of derivatives and embedded derivatives | (3.93) | 2.10 | (10.15) | (1.01) | |||||||||||||||||||
Income taxes | 0.83 | (0.46) | 2.14 | 0.20 | |||||||||||||||||||
Non-GAAP operating income available to common stockholders | 0.98 | 0.98 | 1.89 | 1.41 | |||||||||||||||||||
Impact of notable items | — | — | — | — | |||||||||||||||||||
Non-GAAP operating income available to common stockholders, excluding notable items | $ | 0.98 | $ | 0.98 | $ | 1.89 | $ | 1.41 |
(a)Adjustments to net income (loss) available to common stockholders to arrive at non-GAAP operating income available to common stockholders are presented net of related adjustments to amortization of deferred sales inducements (DSI) and deferred policy acquisition costs (DAC) and accretion of lifetime income benefit rider (LIBR) reserves where applicable.
(b)Notable items reflect the after-tax impact to non-GAAP operating income available to common stockholders for certain items that do not reflect the company's expected ongoing operations. Notable items primarily include the impact from actuarial assumption updates. The presentation of notable items is intended to help investors better understand our results and to evaluate and forecast those results.
Page 5
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2022
Unaudited (Dollars in thousands)
NON-GAAP FINANCIAL MEASURES
Summary of Adjustments to Arrive at Non-GAAP Operating Income Available to Common Stockholders
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Net realized losses on financial assets, including credit losses: | |||||||||||||||||||||||
Net realized losses on financial assets, including credit losses | $ | 37,054 | $ | 2,862 | $ | 50,779 | $ | 7,589 | |||||||||||||||
Amortization of DAC and DSI and accretion of LIBR reserves | (5,482) | 50 | (8,922) | (1,161) | |||||||||||||||||||
Income taxes | (6,788) | (626) | (8,999) | (1,382) | |||||||||||||||||||
$ | 24,784 | $ | 2,286 | $ | 32,858 | $ | 5,046 | ||||||||||||||||
Change in fair value of derivatives and embedded derivatives: | |||||||||||||||||||||||
Fixed index annuities | $ | (275,057) | $ | 331,268 | $ | (919,820) | $ | (162,531) | |||||||||||||||
Reinsurance contracts | (199,422) | — | (401,866) | — | |||||||||||||||||||
Interest rate swaps | 3,666 | — | 3,666 | — | |||||||||||||||||||
Amortization of DAC and DSI | 103,668 | (130,501) | 347,521 | 65,664 | |||||||||||||||||||
Income taxes | 83,844 | (43,652) | 213,716 | 20,898 | |||||||||||||||||||
$ | (283,301) | $ | 157,115 | $ | (756,783) | $ | (75,969) | ||||||||||||||||
Page 6
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2022
Unaudited (Dollars in thousands, except per share data)
NON-GAAP FINANCIAL MEASURES
Quarterly Summary - Most Recent 5 Quarters
Reconciliation from Net Income (Loss) Available to Common Stockholders to Non-GAAP Operating Income Available to Common Stockholders and Non-GAAP Operating Income Available to Common Stockholders, Excluding Notable Items
Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | Q2 2021 | |||||||||||||||||||||||||
Net income (loss) available to American Equity Investment Life Holding Company common stockholders | $ | 349,661 | $ | 555,304 | $ | 82,218 | $ | 141,947 | $ | (65,613) | |||||||||||||||||||
Adjustments to arrive at non-GAAP operating income available to common stockholders: (a) | |||||||||||||||||||||||||||||
Net realized (gains) losses on financial assets, including credit losses | 31,572 | 10,285 | 7,771 | (3,900) | 2,912 | ||||||||||||||||||||||||
Change in fair value of derivatives and embedded derivatives | (367,145) | (603,354) | (14,544) | (75,879) | 200,767 | ||||||||||||||||||||||||
Income taxes | 77,056 | 127,661 | 383 | 17,285 | (44,278) | ||||||||||||||||||||||||
Non-GAAP operating income available to common stockholders (b)(c) | 91,144 | 89,896 | 75,828 | 79,453 | 93,788 | ||||||||||||||||||||||||
Impact of notable items (d) | — | — | 21,235 | 56,801 | — | ||||||||||||||||||||||||
Non-GAAP operating income available to common stockholders, excluding notable items | $ | 91,144 | $ | 89,896 | $ | 97,063 | $ | 136,254 | $ | 93,788 | |||||||||||||||||||
Per common share - assuming dilution: | |||||||||||||||||||||||||||||
Net income (loss) available to American Equity Investment Life Holding Company common stockholders | $ | 3.74 | $ | 5.67 | $ | 0.88 | $ | 1.53 | $ | (0.69) | |||||||||||||||||||
Adjustments to arrive at non-GAAP operating income available to common stockholders: | |||||||||||||||||||||||||||||
Net realized (gains) losses on financial assets, including credit losses | 0.34 | 0.11 | 0.08 | (0.04) | 0.03 | ||||||||||||||||||||||||
Change in fair value of derivatives and embedded derivatives | (3.93) | (6.16) | (0.15) | (0.82) | 2.10 | ||||||||||||||||||||||||
Income taxes | 0.83 | 1.30 | — | 0.18 | (0.46) | ||||||||||||||||||||||||
Non-GAAP operating income available to common stockholders (b)(c) | 0.98 | 0.92 | 0.81 | 0.85 | 0.98 | ||||||||||||||||||||||||
Impact of notable items (d) | — | — | 0.23 | 0.61 | — | ||||||||||||||||||||||||
Non-GAAP operating income available to common stockholders, excluding notable items | $ | 0.98 | $ | 0.92 | $ | 1.04 | $ | 1.46 | $ | 0.98 |
Notable Items
Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | Q2 2021 | |||||||||||||||||||||||||
Notable items impacting non-GAAP operating income available to common stockholders: | |||||||||||||||||||||||||||||
Impact of actuarial assumption updates (b)(c) | $ | — | $ | — | $ | 21,235 | $ | 56,801 | $ | — | |||||||||||||||||||
Total notable items (d) | $ | — | $ | — | $ | 21,235 | $ | 56,801 | $ | — |
(a)Adjustments to net income (loss) available to common stockholders to arrive at non-GAAP operating income available to common stockholders are presented net of related adjustments to amortization of deferred sales inducements (DSI) and deferred policy acquisition costs (DAC) and accretion of lifetime income benefit rider (LIBR) reserves where applicable.
(b)Q4 2021 includes expense from the update of assumptions used in determining reserves held for lifetime income benefit riders. The impact increased interest sensitive and index products by $10.5 million and decreased both non-GAAP operating income available to common stockholders and non-GAAP operating income available to common stockholders per share - assuming dilution by $8.2 million and $0.09 per share, respectively.
Q3 2021 includes expense from the update of assumptions used in determining reserves held for lifetime income benefit riders. The impact increased interest sensitive and index products by $233.2 million and decreased both non-GAAP operating income available to common stockholders and non-GAAP operating income available to common stockholders per share - assuming dilution by $183.0 million and $1.97 per share, respectively.
(c)Q4 2021 includes expense from the update of assumptions which increased amortization of deferred sales inducements and deferred policy acquisition costs by $7.7 million and $8.8 million, respectively, and decreased non-GAAP operating income available to common stockholders and non-GAAP operating income available to common stockholders per common share - assuming dilution by $13.0 million and $0.14 per share, respectively.
Q3 2021 includes a benefit from the update of assumptions which decreased amortization of deferred sales inducements and deferred policy acquisition costs by $73.8 million and $87.0 million, respectively, and increased non-GAAP operating income available to common stockholders and non-GAAP operating income available to common stockholders per common share - assuming dilution by $126.2 million and $1.36 per share, respectively.
(d)Notable items reflect the after-tax impact to non-GAAP operating income available to common stockholders for certain items that do not reflect the company's expected ongoing operations. Notable items primarily include the impact from actuarial assumption updates. The presentation of notable items is intended to help investors better understand our results and to evaluate and forecast those results.
Page 7
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2022
Unaudited (Dollars in thousands)
NON-GAAP FINANCIAL MEASURES
Summary of Adjustments to Arrive at Non-GAAP Operating Income Available to Common Stockholders
Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | Q2 2021 | |||||||||||||||||||||||||
Net realized (gains) losses on investments | $ | 33,272 | $ | 13,127 | $ | 10,478 | $ | (4,933) | $ | 3,114 | |||||||||||||||||||
Change in fair value of derivatives | 415,171 | 546,442 | (215,961) | 411,330 | 57,555 | ||||||||||||||||||||||||
Increase (decrease) in total revenues | 448,443 | 559,569 | (205,483) | 406,397 | 60,669 | ||||||||||||||||||||||||
Amortization of deferred sales inducements | (37,179) | (90,361) | (4,506) | (17,682) | 52,074 | ||||||||||||||||||||||||
Change in fair value of embedded derivatives | 885,984 | 1,393,649 | (186,802) | 536,404 | (273,713) | ||||||||||||||||||||||||
Interest sensitive and index product benefits (a) | (2,569) | 143 | 971 | (944) | 227 | ||||||||||||||||||||||||
Amortization of deferred policy acquisition costs | (62,220) | (150,793) | (8,373) | (31,602) | 78,402 | ||||||||||||||||||||||||
Increase (decrease) in total benefits and expenses | 784,016 | 1,152,638 | (198,710) | 486,176 | (143,010) | ||||||||||||||||||||||||
Increase (decrease) in income (loss) before income taxes | (335,573) | (593,069) | (6,773) | (79,779) | 203,679 | ||||||||||||||||||||||||
Increase (decrease) in income tax expense (benefit) | (77,056) | (127,661) | (383) | (17,285) | 44,278 | ||||||||||||||||||||||||
Increase (decrease) in net income (loss) available to common stockholders | $ | (258,517) | $ | (465,408) | $ | (6,390) | $ | (62,494) | $ | 159,401 |
(a)Interest sensitive and index product benefits adjustment reflects the change in the allowance for credit losses on our reinsurance recoverable/coinsurance deposits. The change in this allowance is reflected in the net realized (gains) losses of financial assets, including credit losses line in the other Non-GAAP financial measures tables in this financial supplement.
Page 8
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2022
Unaudited (Dollars in thousands, except share and per share data)
Capitalization/Book Value per Common Share
Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | Q2 2021 | |||||||||||||||||||||||||
Capitalization: | |||||||||||||||||||||||||||||
Notes payable | $ | 500,000 | $ | 500,000 | $ | 500,000 | $ | 500,000 | $ | 500,000 | |||||||||||||||||||
Subordinated debentures payable to subsidiary trusts | 78,584 | 78,502 | 78,421 | 78,342 | 78,264 | ||||||||||||||||||||||||
Total debt | 578,584 | 578,502 | 578,421 | 578,342 | 578,264 | ||||||||||||||||||||||||
Total stockholders’ equity attributable to American Equity Investment Life Holding Company | 3,882,217 | 5,171,086 | 6,323,127 | 6,375,208 | 6,295,735 | ||||||||||||||||||||||||
Total capitalization | 4,460,801 | 5,749,588 | 6,901,548 | 6,953,550 | 6,873,999 | ||||||||||||||||||||||||
Accumulated other comprehensive income (AOCI) | 1,387,968 | (63,706) | (1,848,789) | (1,956,974) | (2,023,911) | ||||||||||||||||||||||||
Total capitalization excluding AOCI (a) | $ | 5,848,769 | $ | 5,685,882 | $ | 5,052,759 | $ | 4,996,576 | $ | 4,850,088 | |||||||||||||||||||
Total stockholders’ equity attributable to American Equity Investment Life Holding Company | $ | 3,882,217 | $ | 5,171,086 | $ | 6,323,127 | $ | 6,375,208 | $ | 6,295,735 | |||||||||||||||||||
Equity available to preferred stockholders (b) | (700,000) | (700,000) | (700,000) | (700,000) | (700,000) | ||||||||||||||||||||||||
Total common stockholders' equity (c) | 3,182,217 | 4,471,086 | 5,623,127 | 5,675,208 | 5,595,735 | ||||||||||||||||||||||||
Accumulated other comprehensive income | 1,387,968 | (63,706) | (1,848,789) | (1,956,974) | (2,023,911) | ||||||||||||||||||||||||
Total common stockholders’ equity excluding AOCI (c) | 4,570,185 | 4,407,380 | 3,774,338 | 3,718,234 | 3,571,824 | ||||||||||||||||||||||||
Net impact of fair value accounting for derivatives and embedded derivatives | (1,031,257) | (750,229) | (274,981) | (265,018) | (242,423) | ||||||||||||||||||||||||
Total common stockholders’ equity excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives (c) | $ | 3,538,928 | $ | 3,657,151 | $ | 3,499,357 | $ | 3,453,216 | $ | 3,329,401 | |||||||||||||||||||
Common shares outstanding | 90,168,512 | 95,019,904 | 92,513,517 | 92,513,517 | 92,553,825 | ||||||||||||||||||||||||
Book Value per Common Share: (d) | |||||||||||||||||||||||||||||
Book value per common share | $ | 35.29 | $ | 47.05 | $ | 60.78 | $ | 61.34 | $ | 60.46 | |||||||||||||||||||
Book value per common share excluding AOCI (c) | $ | 50.68 | $ | 46.38 | $ | 40.80 | $ | 40.19 | $ | 38.59 | |||||||||||||||||||
Book value per common share excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives (c) | $ | 39.25 | $ | 38.49 | $ | 37.83 | $ | 37.33 | $ | 35.97 | |||||||||||||||||||
Debt-to-Capital Ratios: (e) | |||||||||||||||||||||||||||||
Senior debt / Total capitalization | 8.5 | % | 8.8 | % | 9.9 | % | 10.0 | % | 10.3 | % | |||||||||||||||||||
Total debt / Total capitalization | 9.9 | % | 10.2 | % | 11.4 | % | 11.6 | % | 11.9 | % | |||||||||||||||||||
(a)Total capitalization excluding AOCI, a non-GAAP financial measure, is based on stockholders' equity excluding the effect of AOCI.
(b)Equity available to preferred stockholders is equal to the redemption value of outstanding preferred stock plus share dividends declared but not yet issued.
(c)Total common stockholders' equity, total common stockholders' equity excluding AOCI and total common stockholders' equity excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives, non-GAAP financial measures, exclude equity available to preferred stockholders. Total common stockholders’ equity and book value per common share excluding AOCI, non-GAAP financial measures, are based on common stockholders’ equity excluding the effect of AOCI. Since AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale securities, we believe these non-GAAP financial measures provide useful supplemental information. Total common stockholders' equity and book value per common share excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives, non-GAAP financial measures, are based on common stockholders' equity excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives. Since the net impact of fair value accounting for our derivatives and embedded derivatives fluctuates from quarter to quarter and the most significant impacts relate to fair value accounting for our fixed index annuity business and are not economic in nature but rather impact the timing of reported results, we believe these non-GAAP financial measures provide useful supplemental information.
(d)Book value per common share including and excluding AOCI and book value per common share excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives are calculated as total common stockholders’ equity, total common stockholders’ equity excluding AOCI and total common stockholders' equity excluding AOCI and the net impact of fair value accounting for derivatives and embedded derivatives divided by the total number of shares of common stock outstanding.
(e)Debt-to-capital ratios are computed using total capitalization excluding AOCI.
Page 9
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2022
Unaudited (Dollars in thousands)
Spread Results
Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||
2022 | 2021 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | Q2 2021 | ||||||||||||||||||||||||||||||||
4.24% | 3.54% | Average yield on invested assets | 4.33% | 4.15% | 3.80% | 3.91% | 3.51% | |||||||||||||||||||||||||||||||
1.66% | 1.57% | Aggregate cost of money | 1.69% | 1.64% | 1.51% | 1.51% | 1.56% | |||||||||||||||||||||||||||||||
2.58% | 1.97% | Aggregate investment spread | 2.64% | 2.51% | 2.29% | 2.40% | 1.95% | |||||||||||||||||||||||||||||||
Impact of: | ||||||||||||||||||||||||||||||||||||||
0.04% | 0.11% | Investment yield - additional prepayment income | 0.05% | 0.03% | 0.12% | 0.12% | 0.10% | |||||||||||||||||||||||||||||||
0.02% | 0.03% | Cost of money effect of over hedging | 0.02% | 0.03% | 0.14% | 0.08% | 0.04% | |||||||||||||||||||||||||||||||
$54,748,602 | $56,352,021 | Weighted average investments | $54,768,966 | $54,728,239 | $54,407,554 | $53,781,352 | $56,991,393 | |||||||||||||||||||||||||||||||
54,699,422 | 57,144,563 | Ending investments | 54,699,422 | 54,838,509 | 54,617,968 | 54,197,140 | 57,144,563 |
Weighted average investments include fixed maturity securities at amortized cost and mortgage loans on real estate and other investments at carrying values as reflected in the consolidated balance sheets. The numerator for average yield on invested assets includes net investment income and the tax effect of investment income that is exempt from income taxes.
Summary of Cost of Money for Deferred Annuities
Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||
2022 | 2021 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | Q2 2021 | ||||||||||||||||||||||||||||||||
Included in interest sensitive and index product benefits: | ||||||||||||||||||||||||||||||||||||||
$ | 296,783 | $ | 1,060,028 | Index credits | $ | 72,398 | $ | 224,385 | $ | 442,568 | $ | 475,292 | $ | 714,291 | ||||||||||||||||||||||||
122,104 | 119,114 | Interest credited | 60,770 | 61,334 | 63,974 | 62,804 | 62,637 | |||||||||||||||||||||||||||||||
Included in change in fair value of derivatives: | ||||||||||||||||||||||||||||||||||||||
(303,207) | (1,069,593) | Proceeds received at option expiration | (75,115) | (228,092) | (459,982) | (489,902) | (720,474) | |||||||||||||||||||||||||||||||
325,472 | 326,354 | Pro rata amortization of option cost | 165,375 | 160,097 | 153,399 | 150,262 | 162,124 | |||||||||||||||||||||||||||||||
$ | 441,152 | $ | 435,903 | Cost of money for deferred annuities | $ | 223,428 | $ | 217,724 | $ | 199,959 | $ | 198,456 | $ | 218,578 | ||||||||||||||||||||||||
$ | 53,048,016 | $ | 55,578,458 | Weighted average liability balance outstanding | $ | 52,940,739 | $ | 53,155,293 | $ | 53,064,893 | $ | 52,644,622 | $ | 56,221,809 |
Page 10
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2022
Unaudited (Dollars in thousands, except per share data)
Annuity Account Balance Rollforward
Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||
2022 | 2021 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | Q2 2021 | ||||||||||||||||||||||||||||||||
$ | 53,191,277 | $ | 54,056,725 | Account balances at beginning of period | $ | 53,119,291 | $ | 53,191,277 | $ | 52,938,493 | $ | 56,630,138 | $ | 55,813,480 | ||||||||||||||||||||||||
— | — | Reserves ceded - in-force | — | — | — | (4,279,394) | — | |||||||||||||||||||||||||||||||
53,191,277 | 54,056,725 | Account balance at beginning of period, net of reinsurance ceded | 53,119,291 | 53,191,277 | 52,938,493 | 52,350,744 | 55,813,480 | |||||||||||||||||||||||||||||||
1,237,291 | 3,578,854 | Net deposits | 562,366 | 674,925 | 815,890 | 1,090,461 | 1,161,125 | |||||||||||||||||||||||||||||||
46,689 | 49,663 | Premium bonuses | 23,547 | 23,142 | 23,476 | 22,021 | 24,813 | |||||||||||||||||||||||||||||||
418,887 | 1,179,142 | Fixed interest credited and index credits | 133,168 | 285,719 | 506,542 | 538,096 | 776,928 | |||||||||||||||||||||||||||||||
(30,886) | (37,538) | Surrender charges | (15,345) | (15,541) | (13,638) | (16,481) | (18,057) | |||||||||||||||||||||||||||||||
(76,983) | (86,303) | Lifetime income benefit rider fees | (40,169) | (36,814) | (46,672) | (41,999) | (45,702) | |||||||||||||||||||||||||||||||
(2,023,717) | (2,110,405) | Surrenders, withdrawals, deaths, etc. | (1,020,300) | (1,003,417) | (1,032,814) | (1,004,349) | (1,082,449) | |||||||||||||||||||||||||||||||
$ | 52,762,558 | $ | 56,630,138 | Account balances at end of period | $ | 52,762,558 | $ | 53,119,291 | $ | 53,191,277 | $ | 52,938,493 | $ | 56,630,138 | ||||||||||||||||||||||||
$ | 2,491,096 | $ | 2,007,394 | Lifetime income benefit rider reserves, excluding unrealized gain/loss adjustment | $ | 2,491,096 | $ | 2,396,587 | $ | 2,311,842 | $ | 2,245,040 | $ | 2,007,394 |
Notional Values Subject to Recurring Fees Under Reinsurance Agreements
Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||
2022 | 2021 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | Q2 2021 | ||||||||||||||||||||||||||||||||
$ | 4,083,301 | $ | — | Cash surrender value of business ceded at beginning of period subject to recurring fees | $ | 4,264,133 | $ | 4,083,301 | $ | 3,900,540 | $ | 3,736,355 | $ | — | ||||||||||||||||||||||||
374,434 | — | Cash surrender value of business ceded during the period subject to recurring fees | 193,602 | 180,832 | 182,761 | 164,185 | — | |||||||||||||||||||||||||||||||
$ | 4,457,735 | $ | — | Cash surrender value of business ceded at end of period subject to recurring fees (a) | $ | 4,457,735 | $ | 4,264,133 | $ | 4,083,301 | $ | 3,900,540 | $ | — | ||||||||||||||||||||||||
0.30% | — | Asset liability management fee | 0.30% | 0.30% | 0.30% | 0.30% | — | |||||||||||||||||||||||||||||||
0.64% | — | Weighted average ceding commission fee | 0.64% | 0.60% | 0.57% | 0.53% | — |
(a)The business ceded to Brookfield Asset Management Re receives an annual ceding commission equal to 49 basis points for business written before July 1, 2021 and 140 basis points for business written after July 1, 2021 and an annual asset liability management fee of 30 basis points calculated based on initial cash surrender value of liabilities ceded. These annual fees are fixed and contractually guaranteed for six years with the additional and final seventh year payment being contingent on certain performance obligations for both parties.
Page 11
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2022
Unaudited (Dollars in thousands)
Annuity Deposits by Product Type
Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||
2022 | 2021 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | Q2 2021 | ||||||||||||||||||||||||||||||||
American Equity Life: | ||||||||||||||||||||||||||||||||||||||
$ | 1,427,676 | $ | 1,219,600 | Fixed index annuities | $ | 671,696 | $ | 755,980 | $ | 806,238 | $ | 727,641 | $ | 702,605 | ||||||||||||||||||||||||
2,202 | 3,823 | Annual reset fixed rate annuities | 1,140 | 1,062 | 848 | 1,462 | 1,656 | |||||||||||||||||||||||||||||||
2,830 | 834,866 | Multi-year fixed rate annuities | 485 | 2,345 | 6,640 | 14,196 | 47,674 | |||||||||||||||||||||||||||||||
16,526 | 29,389 | Single premium immediate annuities | 3,073 | 13,453 | 14,145 | 16,282 | 15,430 | |||||||||||||||||||||||||||||||
1,449,234 | 2,087,678 | 676,394 | 772,840 | 827,871 | 759,581 | 767,365 | ||||||||||||||||||||||||||||||||
Eagle Life: | ||||||||||||||||||||||||||||||||||||||
231,128 | 333,356 | Fixed index annuities | 104,374 | 126,754 | 176,101 | 187,611 | 184,520 | |||||||||||||||||||||||||||||||
7 | 337 | Annual reset fixed rate annuities | — | 7 | 13 | — | 175 | |||||||||||||||||||||||||||||||
2,463 | 1,193,622 | Multi-year fixed rate annuities | 123 | 2,340 | 40,901 | 362,769 | 228,197 | |||||||||||||||||||||||||||||||
233,598 | 1,527,315 | 104,497 | 129,101 | 217,015 | 550,380 | 412,892 | ||||||||||||||||||||||||||||||||
Consolidated: | ||||||||||||||||||||||||||||||||||||||
1,658,804 | 1,552,956 | Fixed index annuities | 776,070 | 882,734 | 982,339 | 915,252 | 887,125 | |||||||||||||||||||||||||||||||
2,209 | 4,160 | Annual reset fixed rate annuities | 1,140 | 1,069 | 861 | 1,462 | 1,831 | |||||||||||||||||||||||||||||||
5,293 | 2,028,488 | Multi-year fixed rate annuities | 608 | 4,685 | 47,541 | 376,965 | 275,871 | |||||||||||||||||||||||||||||||
16,526 | 29,389 | Single premium immediate annuities | 3,073 | 13,453 | 14,145 | 16,282 | 15,430 | |||||||||||||||||||||||||||||||
1,682,832 | 3,614,993 | Total before coinsurance ceded | 780,891 | 901,941 | 1,044,886 | 1,309,961 | 1,180,257 | |||||||||||||||||||||||||||||||
429,015 | 6,750 | Coinsurance ceded | 215,452 | 213,563 | 214,851 | 203,218 | 3,702 | |||||||||||||||||||||||||||||||
$ | 1,253,817 | $ | 3,608,243 | Net after coinsurance ceded | $ | 565,439 | $ | 688,378 | $ | 830,035 | $ | 1,106,743 | $ | 1,176,555 |
Surrender Charge Protection and Account Values by Product Type
Annuity Surrender Charges and Net (of Coinsurance) Account Values at June 30, 2022:
Surrender Charge | Net Account Value | |||||||||||||||||||||||||||||||
Product Type | Avg. Years At Issue | Avg. Years Remaining | Avg. % Remaining | Dollars in Thousands | % | |||||||||||||||||||||||||||
Fixed Index Annuities | 12.7 | 5.1 | 8.2% | $ | 47,188,701 | 89.4 | % | |||||||||||||||||||||||||
Annual Reset Fixed Rate Annuities | 8.3 | 2.0 | 3.9% | 1,384,261 | 2.6 | % | ||||||||||||||||||||||||||
Multi-Year Fixed Rate Annuities | 4.0 | 2.1 | 7.7% | 4,189,596 | 8.0 | % | ||||||||||||||||||||||||||
Total | 11.8 | 4.8 | 8.1% | $ | 52,762,558 | 100.0 | % |
Page 12
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2022
Unaudited (Dollars in thousands)
Annuity Liability Characteristics
Surrender Charge Percentages: | Fixed Annuities Account Value | Fixed Index Annuities Account Value | |||||||||
No surrender charge | $ | 890,066 | $ | 4,002,141 | |||||||
0.0% < 2.0% | 80,608 | 2,182,310 | |||||||||
2.0% < 3.0% | 85,097 | 4,490,359 | |||||||||
3.0% < 4.0% | 66,281 | 1,448,618 | |||||||||
4.0% < 5.0% | 22,612 | 2,996,812 | |||||||||
5.0% < 6.0% | 38,838 | 3,028,489 | |||||||||
6.0% < 7.0% | 55,540 | 2,991,878 | |||||||||
7.0% < 8.0% | 86,532 | 2,821,646 | |||||||||
8.0% < 9.0% | 3,472,176 | 3,148,328 | |||||||||
9.0% < 10.0% | 476,797 | 3,827,571 | |||||||||
10.0% or greater | 299,310 | 16,250,549 | |||||||||
$ | 5,573,857 | $ | 47,188,701 |
Surrender Charge Expiration By Year: | Fixed and Fixed Index Annuities Account Value | Weighted Average Surrender Charge | |||||||||
Out of Surrender Charge | $ | 4,892,207 | 0.00 | % | |||||||
2022 | 806,005 | 2.22 | % | ||||||||
2023 | 4,577,887 | 3.74 | % | ||||||||
2024 | 6,098,987 | 4.96 | % | ||||||||
2025 | 5,763,003 | 5.09 | % | ||||||||
2026 | 6,161,558 | 7.06 | % | ||||||||
2027 | 4,302,999 | 8.58 | % | ||||||||
2028 | 3,916,687 | 9.70 | % | ||||||||
2029 | 4,160,709 | 11.02 | % | ||||||||
2030 | 2,862,230 | 13.46 | % | ||||||||
2031 | 4,082,998 | 14.18 | % | ||||||||
2032 | 2,630,456 | 15.16 | % | ||||||||
2033 | 1,101,022 | 17.67 | % | ||||||||
2034 | 697,161 | 18.22 | % | ||||||||
2035 | 359,787 | 18.71 | % | ||||||||
2036 | 175,784 | 19.20 | % | ||||||||
2037 | 113,186 | 19.74 | % | ||||||||
2038 | 59,892 | 20.00 | % | ||||||||
$ | 52,762,558 | 8.05 | % |
Page 13
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2022
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 | $ | 991,377 | $ | 1,065,694 | |||||||
› 0.00% - 0.25% | 26,514 | 112,894 | |||||||||
› 0.25% - 0.50% | 216,280 | 6,142 | |||||||||
› 0.50% - 1.00% | 5,449 | 546 | |||||||||
› 1.00% - 1.50% | 7,493 | — | |||||||||
1.00% ultimate guarantee - 2.12% wtd avg interest rate (a) | 4,087,549 | 1,037,428 | |||||||||
1.50% ultimate guarantee - 1.07% wtd avg interest rate (a) | 127,549 | 2,761,442 | |||||||||
1.75% ultimate guarantee - 1.83% wtd avg interest rate (a) | 47,730 | 305,864 | |||||||||
2.00% ultimate guarantee - 1.78% wtd avg interest rate (a) | 63,916 | — | |||||||||
2.25% ultimate guarantee - 1.60% wtd avg interest rate (a) | — | 561,905 | |||||||||
3.00% ultimate guarantee - 1.89% wtd avg interest rate (a) | — | 1,146,147 | |||||||||
Allocated to index strategies (see tables that follow) | — | 40,190,639 | |||||||||
$ | 5,573,857 | $ | 47,188,701 |
(a)The minimum guaranteed interest rate for the fixed rate or the fixed rate strategy ranges from 0.5% - 1.75%. The ultimate guaranteed rate is applied on less than 100% of the premium.
If all crediting rates were reduced to minimum guaranteed rates (subject to limitations imposed by ultimate minimum guaranteed rates where applicable) the weighted average crediting rate as of June 30, 2022 for fixed annuities and funds allocated to the fixed rate strategy for fixed index annuities would decrease by 0.14%.
Page 14
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2022
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 | $ | 1,147 | $ | 86,501 | $ | 4,757,927 | $ | 52,346 | $ | 117,456 | |||||||||||||||||||
1.75% - 3% | 7,469,760 | — | — | — | — | ||||||||||||||||||||||||
3% - 4% | 486,643 | 1,869 | — | — | — | ||||||||||||||||||||||||
4% - 5% | 2,079,812 | 348,382 | 615,850 | — | — | ||||||||||||||||||||||||
5% - 6% | 331,851 | 116,495 | 12,806 | — | — | ||||||||||||||||||||||||
6% - 7% | 7,394 | — | 264 | — | — | ||||||||||||||||||||||||
>= 7% | 7,455 | 14,700 | 338 | 4,448 | — |
Annual Monthly Average and Point-to-Point with Participation Rates | |||||||||||||||||||||||
Minimum Guaranteed Participation Rate | |||||||||||||||||||||||
10% | 20% - 25% | 35% | 50% + | ||||||||||||||||||||
Current Participation Rate | |||||||||||||||||||||||
At minimum | $ | 170,917 | $ | 520,089 | $ | 71,601 | $ | 83,809 | |||||||||||||||
< 20% | 1,654,041 | — | — | — | |||||||||||||||||||
20% - 40% | 3,365,652 | 296,062 | 5,379 | — | |||||||||||||||||||
40% - 60% | 530,652 | 13,364 | 34,767 | — | |||||||||||||||||||
60% - 100% | 1,269,558 | — | — | — | |||||||||||||||||||
> 100% | 1,499,608 | — | — | — |
S&P 500 Monthly Point-to-Point - Minimum Guaranteed Monthly Cap = 1.0% | |||||
Current Cap | |||||
At minimum | $ | 1,745,374 | |||
1.10% - 1.30% | 5,909,781 | ||||
1.40% - 1.60% | 1,502,494 | ||||
1.70% - 2.00% | 359,853 | ||||
>= 2.10% | 22,687 |
Volatility Control Index | |||||
Current Asset Fee | |||||
At Maximum | $ | — | |||
0.75% - 1.75% | 350,326 | ||||
2.00% - 2.75% | 162,982 | ||||
3.00% - 3.50% | 653,082 | ||||
3.75% - 5.25% | 3,271,729 |
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 0.86% based upon prices of options for the week ended July 1, 2022.
Page 15
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2022
Unaudited (Dollars in thousands)
Summary of Invested Assets
June 30, 2022 | December 31, 2021 | ||||||||||||||||||||||
Carrying Amount | Percent | Carrying Amount | Percent | ||||||||||||||||||||
Fixed maturity securities: | |||||||||||||||||||||||
U.S. Government and agencies | $ | 186,491 | 0.3 | % | $ | 1,078,746 | 1.8 | % | |||||||||||||||
States, municipalities and territories | 4,390,844 | 8.0 | % | 3,927,201 | 6.5 | % | |||||||||||||||||
Foreign corporate securities and foreign governments | 969,883 | 1.8 | % | 402,545 | 0.7 | % | |||||||||||||||||
Corporate securities | 29,825,798 | 54.7 | % | 34,660,234 | 57.4 | % | |||||||||||||||||
Residential mortgage backed securities | 1,391,707 | 2.6 | % | 1,125,049 | 1.9 | % | |||||||||||||||||
Commercial mortgage backed securities | 4,188,392 | 7.7 | % | 4,840,311 | 8.0 | % | |||||||||||||||||
Other asset backed securities | 4,370,660 | 8.0 | % | 5,271,857 | 8.7 | % | |||||||||||||||||
Total fixed maturity securities | 45,323,775 | 83.1 | % | 51,305,943 | 85.0 | % | |||||||||||||||||
Mortgage loans on real estate | 6,228,616 | 11.4 | % | 5,687,998 | 9.4 | % | |||||||||||||||||
Real estate investments | 672,475 | 1.2 | % | 337,939 | 0.6 | % | |||||||||||||||||
Derivative instruments | 200,781 | 0.4 | % | 1,277,480 | 2.1 | % | |||||||||||||||||
Other investments | 2,112,169 | 3.9 | % | 1,767,144 | 2.9 | % | |||||||||||||||||
Total investments | 54,537,816 | 100.0 | % | 60,376,504 | 100.0 | % | |||||||||||||||||
Modified coinsurance investments | 2,911,733 | 3,101.833 | |||||||||||||||||||||
Investments, net of modified coinsurance investments | $ | 51,626,083 | $ | 58,609,360 |
Credit Quality of Fixed Maturity Securities - June 30, 2022
NAIC Designation | Carrying Amount (a) | Percent | Rating Agency Rating | Carrying Amount (a) | Percent | |||||||||||||||||||||||||||
1 | $ | 25,453,818 | 58.9 | % | Aaa/Aa/A | $ | 25,316,525 | 58.6 | % | |||||||||||||||||||||||
2 | 16,967,885 | 39.2 | % | Baa | 17,099,172 | 39.5 | % | |||||||||||||||||||||||||
3 | 630,715 | 1.5 | % | Ba | 629,536 | 1.5 | % | |||||||||||||||||||||||||
4 | 117,336 | 0.2 | % | B | 104,137 | 0.2 | % | |||||||||||||||||||||||||
5 | 40,995 | 0.1 | % | Caa | 23,137 | 0.1 | % | |||||||||||||||||||||||||
6 | 27,334 | 0.1 | % | Ca and lower | 65,576 | 0.1 | % | |||||||||||||||||||||||||
$ | 43,238,083 | 100.0 | % | $ | 43,238,083 | 100.0 | % |
(a)Excludes fixed maturity securities related to reinsurance business ceded under a modified coinsurance agreement of $2,085,692 as of June 30, 2022.
Watch List Securities - June 30, 2022
General Description (a) | Amortized Cost | Allowance for Credit Losses | Amortized Cost, Net of Allowance | Net Unrealized Gains (Losses), Net of Allowance | Fair Value | |||||||||||||||||||||||||||
States, municipalities and territories | $ | 19,062 | $ | (1,834) | $ | 17,228 | $ | 16 | $ | 17,244 | ||||||||||||||||||||||
Corporate securities - Public securities | 16,526 | — | 16,526 | (731) | 15,795 | |||||||||||||||||||||||||||
Corporate securities - Private placement securities | 10,417 | (3,743) | 6,674 | (945) | 5,729 | |||||||||||||||||||||||||||
Residential mortgage backed securities | 31,586 | (610) | 30,976 | (1,882) | 29,094 | |||||||||||||||||||||||||||
Commercial mortgage backed securities | 84,362 | — | 84,362 | (1,934) | 82,428 | |||||||||||||||||||||||||||
Other asset backed securities | 48,739 | — | 48,739 | (236) | 48,503 | |||||||||||||||||||||||||||
$ | 210,692 | $ | (6,187) | $ | 204,505 | $ | (5,712) | $ | 198,793 |
(a)The watch list consists of all fixed maturity securities we have determined contain elevated credit risk, including those we have taken credit losses on.
Page 16
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2022
Unaudited (Dollars in thousands)
Fixed Maturity Securities by Sector
June 30, 2022 | December 31, 2021 | ||||||||||||||||||||||
Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||||||||||
Available for sale: | |||||||||||||||||||||||
U.S. Government and agencies | $ | 178,840 | $ | 186,491 | $ | 1,046,029 | $ | 1,078,746 | |||||||||||||||
States, municipalities and territories | 4,598,477 | 4,390,844 | 3,495,563 | 3,927,201 | |||||||||||||||||||
Foreign corporate securities and foreign governments | 1,010,706 | 969,883 | 380,646 | 402,545 | |||||||||||||||||||
Corporate securities: | |||||||||||||||||||||||
Capital goods | 2,332,614 | 2,210,292 | 2,357,470 | 2,694,887 | |||||||||||||||||||
Consumer discretionary | 6,899,906 | 6,340,590 | 6,396,009 | 7,210,975 | |||||||||||||||||||
Energy | 1,877,428 | 1,789,043 | 2,120,185 | 2,365,991 | |||||||||||||||||||
Financials | 8,971,317 | 8,297,022 | 8,043,912 | 8,761,157 | |||||||||||||||||||
Government non-guaranteed | 239,119 | 221,568 | 471,015 | 541,233 | |||||||||||||||||||
Industrials | 333,175 | 295,524 | 465,334 | 514,635 | |||||||||||||||||||
Information technology | 2,212,643 | 2,070,221 | 1,885,278 | 2,083,179 | |||||||||||||||||||
Materials | 1,661,002 | 1,562,281 | 1,702,910 | 1,906,150 | |||||||||||||||||||
Telecommunications | 1,854,290 | 1,674,266 | 1,750,183 | 1,937,493 | |||||||||||||||||||
Transportation | 1,313,110 | 1,236,962 | 1,344,629 | 1,486,405 | |||||||||||||||||||
Utilities | 4,371,715 | 4,066,683 | 4,197,063 | 4,756,922 | |||||||||||||||||||
Other | 60,680 | 61,346 | 350,641 | 401,207 | |||||||||||||||||||
Residential mortgage backed securities: | |||||||||||||||||||||||
Government agency | 834,785 | 825,205 | 455,136 | 500,698 | |||||||||||||||||||
Prime | 411,491 | 379,909 | 537,559 | 544,084 | |||||||||||||||||||
Alt-A | 58,159 | 71,175 | 59,129 | 75,361 | |||||||||||||||||||
Non-qualified mortgage | 81,122 | 75,560 | — | — | |||||||||||||||||||
Other | 40,440 | 39,858 | 4,954 | 4,906 | |||||||||||||||||||
Commercial mortgage backed securities: | |||||||||||||||||||||||
Government agency | 182,476 | 175,541 | 380,339 | 415,026 | |||||||||||||||||||
Non-agency | 4,260,374 | 4,012,851 | 4,328,539 | 4,425,285 | |||||||||||||||||||
Other asset backed securities: | |||||||||||||||||||||||
Auto | 49,418 | 48,737 | 218,106 | 222,364 | |||||||||||||||||||
Consumer discretionary | 132,319 | 129,571 | — | — | |||||||||||||||||||
Financials | 298,414 | 283,978 | 4,441 | 4,887 | |||||||||||||||||||
Collateralized loan obligations | 3,774,251 | 3,504,950 | 3,861,962 | 3,817,352 | |||||||||||||||||||
Other | 429,756 | 403,424 | 1,142,151 | 1,227,254 | |||||||||||||||||||
$ | 48,468,027 | $ | 45,323,775 | $ | 46,999,183 | $ | 51,305,943 |
Page 17
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2022
Unaudited (Dollars in thousands)
Mortgage Loans on Real Estate
June 30, 2022 | December 31, 2021 | ||||||||||||||||||||||
Principal | Percent | Principal | Percent | ||||||||||||||||||||
Geographic distribution: commercial mortgage loans | |||||||||||||||||||||||
East | $ | 562,705 | 15.6 | % | $ | 614,406 | 16.9 | % | |||||||||||||||
Middle Atlantic | 293,754 | 8.1 | % | 293,494 | 8.1 | % | |||||||||||||||||
Mountain | 442,861 | 12.3 | % | 452,818 | 12.5 | % | |||||||||||||||||
New England | 62,910 | 1.7 | % | 60,172 | 1.6 | % | |||||||||||||||||
Pacific | 859,389 | 23.8 | % | 863,879 | 23.8 | % | |||||||||||||||||
South Atlantic | 844,862 | 23.4 | % | 785,679 | 21.6 | % | |||||||||||||||||
West North Central | 211,508 | 5.9 | % | 235,864 | 6.5 | % | |||||||||||||||||
West South Central | 330,970 | 9.2 | % | 326,819 | 9.0 | % | |||||||||||||||||
$ | 3,608,959 | 100.0 | % | $ | 3,633,131 | 100.0 | % | ||||||||||||||||
Property type distribution: commercial mortgage loans | |||||||||||||||||||||||
Office | $ | 404,964 | 11.2 | % | $ | 315,374 | 8.7 | % | |||||||||||||||
Medical Office | 10,549 | 0.3 | % | 10,827 | 0.3 | % | |||||||||||||||||
Retail | 944,423 | 26.2 | % | 1,016,101 | 28.0 | % | |||||||||||||||||
Industrial/Warehouse | 889,113 | 24.6 | % | 924,779 | 25.4 | % | |||||||||||||||||
Apartment | 865,637 | 24.0 | % | 864,580 | 23.8 | % | |||||||||||||||||
Hotel | 286,271 | 7.9 | % | 283,500 | 7.8 | % | |||||||||||||||||
Mixed Use/Other | 208,002 | 5.8 | % | 217,970 | 6.0 | % | |||||||||||||||||
$ | 3,608,959 | 100.0 | % | $ | 3,633,131 | 100.0 | % |
Page 18
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2022
Unaudited (Dollars in thousands)
June 30, 2022 | |||||||||||||||||||||||
Commercial | Agricultural | Residential | Total | ||||||||||||||||||||
Credit exposure - by payment activity | |||||||||||||||||||||||
Performing | $ | 3,608,959 | $ | 568,180 | $ | 2,031,120 | $ | 6,208,259 | |||||||||||||||
In workout | — | — | — | — | |||||||||||||||||||
Delinquent | — | — | 20,185 | 20,185 | |||||||||||||||||||
Principal outstanding | 3,608,959 | 568,180 | 2,051,305 | 6,228,444 | |||||||||||||||||||
Unamortized discounts and premiums, net | — | — | 38,303 | 38,303 | |||||||||||||||||||
Deferred fees and costs, net | (5,681) | (1,716) | 1,654 | (5,743) | |||||||||||||||||||
Amortized cost | 3,603,278 | 566,464 | 2,091,262 | 6,261,004 | |||||||||||||||||||
Valuation allowance | (24,244) | (664) | (7,480) | (32,388) | |||||||||||||||||||
Carrying value | $ | 3,579,034 | $ | 565,800 | $ | 2,083,782 | $ | 6,228,616 | |||||||||||||||
December 31, 2021 | |||||||||||||||||||||||
Commercial | Agricultural | Residential | Total | ||||||||||||||||||||
Credit exposure - by payment activity | |||||||||||||||||||||||
Performing | $ | 3,633,131 | $ | 408,135 | $ | 1,645,905 | $ | 5,687,171 | |||||||||||||||
In workout | — | — | — | — | |||||||||||||||||||
Delinquent | — | — | 7,005 | 7,005 | |||||||||||||||||||
Principal outstanding | 3,633,131 | 408,135 | 1,652,910 | 5,694,176 | |||||||||||||||||||
Unamortized discounts and premiums, net | — | — | 22,143 | 22,143 | |||||||||||||||||||
Deferred fees and costs, net | (4,629) | (1,136) | 1,468 | (4,297) | |||||||||||||||||||
Amortized cost | 3,628,502 | 406,999 | 1,676,521 | 5,712,022 | |||||||||||||||||||
Valuation allowance | (17,926) | (519) | (5,579) | (24,024) | |||||||||||||||||||
Carrying value | $ | 3,610,576 | $ | 406,480 | $ | 1,670,942 | $ | 5,687,998 |
Page 19
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2022
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 | ||||||||||||||||||||
2022 | |||||||||||||||||||||||
First Quarter | $44.49 | $35.05 | $39.91 | $0.00 | |||||||||||||||||||
Second Quarter | $42.18 | $32.65 | $36.57 | $0.00 | |||||||||||||||||||
2021 | |||||||||||||||||||||||
First Quarter | $32.54 | $26.21 | $31.53 | $0.00 | |||||||||||||||||||
Second Quarter | $33.68 | $29.18 | $32.32 | $0.00 | |||||||||||||||||||
Third Quarter | $33.79 | $27.12 | $29.57 | $0.00 | |||||||||||||||||||
Fourth Quarter | $39.88 | $29.46 | $38.92 | $0.34 | |||||||||||||||||||
2020 | |||||||||||||||||||||||
First Quarter | $34.16 | $9.07 | $18.80 | $0.00 | |||||||||||||||||||
Second Quarter | $27.09 | $14.76 | $24.71 | $0.00 | |||||||||||||||||||
Third Quarter | $27.32 | $19.06 | $21.99 | $0.00 | |||||||||||||||||||
Fourth Quarter | $34.25 | $22.37 | $27.66 | $0.32 |
Transfer Agent:
Computershare Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940-0310
Phone: (877) 282-1169
Fax: (781) 575-2723
www.computershare.com
Annual Report and Other Information:
Shareholders may receive when available, without charge, a copy of American Equity’s Annual Report, SEC filings and/or press releases by calling Steven Schwartz, Vice President-Investor Relations, at (515) 273-3763 or by visiting our website at www.american-equity.com.
Page 20
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2022
Research Analyst Coverage
Erik Bass
Autonomous Research US LP
(646) 561-6248
ebass@autonomous.com
Andrew Kligerman
Credit Suisse Securities
(919) 593-7737
andrew.kligerman@credit-suisse.com
Thomas Gallagher
Evercore ISI
(212) 446-9439
thomas.gallagher@evercoreisi.com
Daniel Bergman
Jefferies
(617) 345-8688
dbergman@jefferies.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
Nigel Dally
Morgan Stanley Research
(212) 761-4132
Nigel.Dally@morganstanley.com
John Barnidge
Piper Sandler & Co.
(312) 281-3412
John.Barnidge@psc.com
C. Gregory Peters
Raymond James & Associates, Inc.
(727) 567-1534
greg.peters@raymondjames.com
Mark A. Dwelle
RBC Capital Markets, LLC
(804) 782-4008
mark.dwelle@rbccm.com
Mark Hughes
Truist Securities
(615) 748-4422
mark.hughes@research.truist.com
Page 21
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