ANG-PD 8-K
American National Group Inc. (ANG-PD)
8-K
2020-02-12
For: 2020-02-12
View Original
Added on
April 06, 2026
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): February 12, 2020
(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 February 12, 2020, the registrant issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2019, a copy of which is attached as Exhibit 99.1 and is incorporated herein by reference. The registrant's financial supplement for the fourth quarter and year ended December 31, 2019, 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
(d) Exhibits
The following exhibits are being furnished with this Form 8-K.
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: February 12, 2020
AMERICAN EQUITY | |||
INVESTMENT LIFE HOLDING COMPANY | |||
By: | /s/ John M. Matovina | ||
John M. Matovina | |||
Chief Executive Officer and President | |||
Exhibit 99.1
 | For more information, contact: | |
Steven D. Schwartz, Vice President-Investor Relations | ||
(515) 273-3763, [email protected] | ||
FOR IMMEDIATE RELEASE | ||
February 12, 2020 | ||
American Equity Reports Fourth Quarter and Full Year 2019 Results
Company Highlights
• | Fourth quarter 2019 net income of $220.2 million or $2.40 per diluted common share; Full year 2019 net income of $246.1 million or $2.68 per diluted common share |
• | Fourth quarter 2019 non-GAAP operating income1 of $125.8 million or $1.37 per diluted common share; Full year 2019 non-GAAP operating income1 of $548.2 million or $5.97 per diluted common share |
• | Fourth quarter 2019 annuity sales of $921 million |
• | Policyholder funds under management of $53.2 billion |
• | Fourth quarter 2019 investment spread of 2.77% |
• | Risk-based capital ratio at December 31, 2019 of 372% |
• | Issued $400 million of perpetual preferred stock |
• | Annual cash dividend of $0.30 per share |
WEST DES MOINES, Iowa (February 12, 2020) - American Equity Investment Life Holding Company (NYSE: AEL), a leading issuer of fixed index annuities (FIAs), today reported fourth quarter 2019 net income of $220.2 million, or $2.40 per diluted common share, compared to net income of $53.8 million, or $0.59 per diluted common share, for fourth quarter 2018. For the year ended December 31, 2019, net income was $246.1 million, or $2.68 per diluted common share, compared to $458.0 million, or $5.01 per diluted common share, for the year ended December 31, 2018.
Non-GAAP operating income1 for fourth quarter 2019 was $125.8 million, or $1.37 per diluted common share, compared to non-GAAP operating income1 of $90.3 million, or $0.99 per diluted common share, for fourth quarter 2018. For the year ended December 31, 2019, non-GAAP operating income1 was $548.2 million, or $5.97 per diluted common share, compared to $425.7 million, or $4.66 per diluted common share, for the year ended December 31, 2018. Non-GAAP operating return1 on average common stockholders' equity excluding average AOCI1 was 21.4% based on reported results and 17.0% excluding the impact of assumption revisions.
The year-over-year increases in quarterly non-GAAP operating income1 and non-GAAP operating income1 per share were primarily attributable to an increase in investment spread which benefited from active rate management and lower amortization of deferred policy acquisition costs and deferred sales inducements. The benefit from these items was partially offset by a greater increase in the liability for future benefits to be paid for lifetime income benefit riders. The decline in amortization and the increase in the liability for lifetime income benefit riders reflect the impact of third quarter 2019 revisions to the assumptions utilized in the determination of these items.
POLICYHOLDER FUNDS UNDER MANAGEMENT UP 0.5% ON $921 MILLION OF SALES
Policyholder funds under management at December 31, 2019 were $53.2 billion, a $283 million, or 0.5% increase from September 30, 2019. Fourth quarter gross and net sales were $921 million and $844 million, respectively, representing decreases of 18% and 19% from fourth quarter 2018 sales. On a sequential basis, gross and net sales decreased 29% and 31%, respectively.
Total sales by independent agents for American Equity Investment Life Insurance Company (American Equity Life) and total sales by broker-dealers and banks for Eagle Life Insurance Company (Eagle Life) decreased sequentially by 27% and 39%, respectively. Sales of fixed index annuities (FIAs) were down 32% sequentially to $833 million due to a 27% decrease in sales for American Equity Life and a 59% decrease for Eagle Life.
Commenting on sales, John Matovina, Chairman and Chief Executive Officer, said: "The decreases in gross sales in the independent agent channel were attributable to competitive rate dynamics in the market. Consistent with our long-standing principle of financial discipline, and in response to lower investment yields in the third quarter, we meaningfully lowered product rates and guaranteed income levels in mid-October. The competition did not act in a similar manner neither in terms of timing nor nature with regards to rates and guaranteed income."
Matovina continued: "In the bank and broker-dealer channels, Eagle Life had distinguished itself with its emphasis on offering attractive participation rates on the S&P 500 Index annual point-to-point strategy. However, the reductions we made to participation rates in October left us in a less competitive position for much of the quarter."
Commenting on the market environment and the outlook for FIA sales, Matovina added: "The market in each of our distribution channels continues to be competitive. However, with the uptick in investment yields during the fourth quarter, we increased caps and participation rates on our accumulation products in mid-December; putting us in a better competitive position than we were for much of the fourth quarter. Our October decreases in guaranteed income were not widely matched by the marketplace and we did not increase guaranteed income levels in December as we expect product pricing and returns for policies issued in 2020 to be negatively impacted by decreases in the prescribed valuation interest rates used to compute regulatory reserves. While in the near term this may be a sales head wind for us with respect to policies with lifetime income benefit riders, we expect competitors will ultimately adjust their guaranteed income pricing to recognize this factor, but the timing and size of any such adjustments is unclear at this time."
Matovina continued: " A significant initiative for Eagle Life in the fourth quarter was the launch of its guaranteed income product, the Eagle Select Income Focus. Distributors have shown substantial interest and several have already agreed to sell the product. We anticipate sales to materialize early in the second quarter . We also finalized a selling agreement with a large independent broker-dealer last quarter and expect to see sales in the near future from this distribution relationship."
INVESTMENT SPREAD INCREASES ON LOWER COST OF MONEY
American Equity’s investment spread was 2.77% for the fourth quarter of 2019 compared to 2.75% for the third quarter of 2019 and 2.56% for the fourth quarter of 2018. On a sequential basis, the average yield on invested assets decreased by 7 basis points while the cost of money fell by 9 basis points.
Average yield on invested assets was 4.52% in the fourth quarter of 2019 compared to 4.59% in the third quarter of 2019. This decrease was attributable to a decrease in the benefit from non-trendable investment income items from 13 basis points in the third quarter to 9 basis points in the fourth quarter of this year. The impact from the decline in short term yields on the $4.8 billion of floating rate instruments in the investment portfolio negatively affected average yield by 3 basis points.
The aggregate cost of money for annuity liabilities of 1.75% in the fourth quarter of 2019 was down 9 basis points from 1.84% in the third quarter of 2019. The cost of money benefited by 5 basis points from over hedging index-linked interest obligations, compared to 2 basis points in the third quarter of 2019.
Commenting on investment spread, Matovina said: “Excluding non-trendable investment spread items, investment spread increased 3 basis points sequentially. Once again, the driver of spread improvement was a decrease in the cost of money resulting from active management of our rates and further declines in option costs. Option costs decreased in the fourth quarter reflecting the actions taken in August and October to reduce caps and participation rates on new and renewal business. The trend of declining option costs, which began in December 2018, should extend further as we began reducing renewal rates on $29.7 billion of policyholder funds under management last month. Should yields available to us remain at current levels or the cost of money rise, we have flexibility to reduce our crediting rates and could decrease our cost of money by approximately 0.59% through further reductions in renewal rates to guaranteed minimums."
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to future operations, strategies, financial results or other developments, and are subject to assumptions, risks and uncertainties. Statements such as “guidance”, “expect”, “anticipate”, “believe”, “goal”, “objective”, “target”, “may”, “should”, “estimate”, “projects” or similar words as well as specific projections of future results qualify as forward-looking statements. Factors that may cause our actual results to differ materially from those contemplated by these forward looking statements can be found in the company’s Form 10-K filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date the statement was made and the company undertakes no obligation to update such forward-looking statements. There can be no assurance that other factors not currently anticipated by the company will not materially and adversely affect our results of operations. Investors are cautioned not to place undue reliance on any forward-looking statements made by us or on our behalf.
CONFERENCE CALL
American Equity will hold a conference call to discuss fourth quarter 2019 earnings on Thursday, February 13, 2020 at 9:00 a.m. CT. The conference call will be webcast live on the Internet. Investors and interested parties who wish to listen to the call on the internet may do so at www.american-equity.com.
The call may also be accessed by telephone at 855-865-0606, passcode 3083906 (international callers, please dial 704-859-4382). An audio replay will be available shortly after the call on American Equity's website. An audio replay will also be available via telephone through February 20, 2020 at 855-859-2056, passcode 3083906 (international callers will need to dial 404-537-3406).
ABOUT AMERICAN EQUITY
American Equity Investment Life Holding Company, through its wholly-owned subsidiaries, is a leading issuer of fixed index annuities through independent agents, banks and broker-dealers. American Equity Investment Life Holding Company, a New York Stock Exchange listed company (NYSE: AEL), is headquartered in West Des Moines, Iowa. For more information, please visit www.american-equity.com.
1 Use of non-GAAP financial measures is discussed in this release in the tables that follow the text of the release.
###
American Equity Investment Life Holding Company
Unaudited (Dollars in thousands, except per share data)
Consolidated Statements of Operations
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues: | |||||||||||||||
Premiums and other considerations | $ | 8,846 | $ | 4,430 | $ | 23,534 | $ | 26,480 | |||||||
Annuity product charges | 62,722 | 60,394 | 240,035 | 224,488 | |||||||||||
Net investment income | 588,217 | 554,355 | 2,307,635 | 2,147,812 | |||||||||||
Change in fair value of derivatives | 466,434 | (1,054,281 | ) | 906,906 | (777,848 | ) | |||||||||
Net realized gains (losses) on investments, excluding other than temporary impairment (OTTI) losses | 7,029 | 3,097 | 6,962 | (37,178 | ) | ||||||||||
OTTI losses on investments: | |||||||||||||||
Total OTTI losses | (17,412 | ) | (18,980 | ) | (18,511 | ) | (35,005 | ) | |||||||
Portion of OTTI losses recognized from other comprehensive income | — | — | (215 | ) | (1,651 | ) | |||||||||
Net OTTI losses recognized in operations | (17,412 | ) | (18,980 | ) | (18,726 | ) | (36,656 | ) | |||||||
Loss on extinguishment of debt | (2,001 | ) | — | (2,001 | ) | — | |||||||||
Total revenues | 1,113,835 | (450,985 | ) | 3,464,345 | 1,547,098 | ||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits and change in future policy benefits | 11,553 | 7,439 | 35,418 | 39,530 | |||||||||||
Interest sensitive and index product benefits | 399,514 | 255,700 | 1,287,576 | 1,610,835 | |||||||||||
Amortization of deferred sales inducements | 91,260 | (11,578 | ) | 88,585 | 222,201 | ||||||||||
Change in fair value of embedded derivatives | 147,879 | (804,026 | ) | 1,454,042 | (1,389,491 | ) | |||||||||
Interest expense on notes payable | 6,384 | 6,376 | 25,525 | 25,498 | |||||||||||
Interest expense on subordinated debentures | 3,651 | 4,041 | 15,764 | 15,491 | |||||||||||
Amortization of deferred policy acquisition costs | 133,573 | (8,750 | ) | 87,717 | 327,991 | ||||||||||
Other operating costs and expenses | 39,194 | 33,597 | 154,153 | 129,301 | |||||||||||
Total benefits and expenses | 833,008 | (517,201 | ) | 3,148,780 | 981,356 | ||||||||||
Income before income taxes | 280,827 | 66,216 | 315,565 | 565,742 | |||||||||||
Income tax expense | 60,677 | 12,393 | 69,475 | 107,726 | |||||||||||
Net income | $ | 220,150 | $ | 53,823 | $ | 246,090 | $ | 458,016 | |||||||
Earnings per common share | $ | 2.41 | $ | 0.59 | $ | 2.70 | $ | 5.07 | |||||||
Earnings per common share - assuming dilution | $ | 2.40 | $ | 0.59 | $ | 2.68 | $ | 5.01 | |||||||
Weighted average common shares outstanding (in thousands): | |||||||||||||||
Earnings per common share | 91,314 | 90,555 | 91,139 | 90,348 | |||||||||||
Earnings per common share - assuming dilution | 91,883 | 91,622 | 91,782 | 91,423 | |||||||||||
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, 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 December 31, | Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income | $ | 220,150 | $ | 53,823 | $ | 246,090 | $ | 458,016 | |||||||
Adjustments to arrive at non-GAAP operating income: (a) | |||||||||||||||
Net realized investment gains/losses, including OTTI | 7,606 | 9,525 | 7,361 | 45,450 | |||||||||||
Change in fair value of derivatives and embedded derivatives - fixed index annuities | (127,777 | ) | 36,186 | 373,221 | (72,181 | ) | |||||||||
Change in fair value of derivatives - interest rate caps and swap | (167 | ) | 1,276 | 1,247 | (1,892 | ) | |||||||||
Income taxes | 26,023 | (10,475 | ) | (79,736 | ) | (3,653 | ) | ||||||||
Non-GAAP operating income | $ | 125,835 | $ | 90,335 | $ | 548,183 | $ | 425,740 | |||||||
Per common share - assuming dilution: | |||||||||||||||
Net income | $ | 2.40 | $ | 0.59 | $ | 2.68 | $ | 5.01 | |||||||
Adjustments to arrive at non-GAAP operating income: | |||||||||||||||
Net realized investment gains/losses, including OTTI | 0.08 | 0.10 | 0.08 | 0.50 | |||||||||||
Change in fair value of derivatives and embedded derivatives - fixed index annuities | (1.39 | ) | 0.40 | 4.07 | (0.79 | ) | |||||||||
Change in fair value of derivatives - interest rate caps and swap | — | 0.01 | 0.01 | (0.02 | ) | ||||||||||
Income taxes | 0.28 | (0.11 | ) | (0.87 | ) | (0.04 | ) | ||||||||
Non-GAAP operating income | $ | 1.37 | $ | 0.99 | $ | 5.97 | $ | 4.66 | |||||||
(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. |
Page 2
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 and non-GAAP operating return on average common stockholders' equity are calculated by dividing net income and non-GAAP operating income, respectively, for the trailing twelve months by average total stockholders' equity excluding average equity available to preferred stockholders and average accumulated other comprehensive income (AOCI). We exclude AOCI because AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale investments.
Twelve Months Ended | |||
December 31, 2019 | |||
Average Common Stockholders' Equity Excluding Average AOCI | |||
Average total stockholders' equity | $ | 3,484,610 | |
Average equity available to preferred stockholders | (200,000 | ) | |
Average AOCI | (722,745 | ) | |
Average common stockholders' equity excluding average AOCI | $ | 2,561,865 | |
Net income | $ | 246,090 | |
Non-GAAP operating income | $ | 548,183 | |
Return on Average Common Stockholders' Equity Excluding Average AOCI | |||
Net income | 9.61 | % | |
Non-GAAP operating income | 21.40 | % | |
Page 3
Exhibit 99.2
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement
December 31, 2019
A. | Financial Highlights | |
Non-GAAP Financial Measures | ||
B. | Product Summary | |
C. | Investment Summary | |
D. | ||
E. | ||
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2019
Unaudited (Dollars in thousands)
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2019 | December 31, 2018 | ||||||
Assets | |||||||
Investments: | |||||||
Fixed maturity securities, available for sale, at fair value | $ | 51,580,490 | $ | 45,923,727 | |||
Mortgage loans on real estate | 3,448,793 | 2,943,091 | |||||
Derivative instruments | 1,355,989 | 205,149 | |||||
Other investments | 492,301 | 355,531 | |||||
Total investments | 56,877,573 | 49,427,498 | |||||
Cash and cash equivalents | 2,293,392 | 344,396 | |||||
Coinsurance deposits | 5,115,013 | 4,954,068 | |||||
Accrued investment income | 472,826 | 468,729 | |||||
Deferred policy acquisition costs | 2,923,454 | 3,535,838 | |||||
Deferred sales inducements | 1,966,723 | 2,516,721 | |||||
Deferred income taxes | — | 291,169 | |||||
Income taxes recoverable | — | 26,537 | |||||
Other assets | 47,571 | 60,608 | |||||
Total assets | $ | 69,696,552 | $ | 61,625,564 | |||
Liabilities and Stockholders' Equity | |||||||
Liabilities: | |||||||
Policy benefit reserves | $ | 61,893,945 | $ | 57,606,009 | |||
Other policy funds and contract claims | 256,105 | 270,858 | |||||
Notes payable | 495,116 | 494,591 | |||||
Subordinated debentures | 157,265 | 242,982 | |||||
Amounts due under repurchase agreements | — | 109,298 | |||||
Deferred income taxes | 177,897 | — | |||||
Income taxes payable | 429 | — | |||||
Other liabilities | 2,145,676 | 502,725 | |||||
Total liabilities | 65,126,433 | 59,226,463 | |||||
Stockholders' equity: | |||||||
Preferred stock | 16 | — | |||||
Common stock | 91,107 | 90,369 | |||||
Additional paid-in capital | 1,212,311 | 811,186 | |||||
Accumulated other comprehensive income (loss) | 1,497,921 | (52,432 | ) | ||||
Retained earnings | 1,768,764 | 1,549,978 | |||||
Total stockholders' equity | 4,570,119 | 2,399,101 | |||||
Total liabilities and stockholders' equity | $ | 69,696,552 | $ | 61,625,564 | |||
Page 1
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2019
Unaudited (Dollars in thousands, except per share data)
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues: | |||||||||||||||
Premiums and other considerations | $ | 8,846 | $ | 4,430 | $ | 23,534 | $ | 26,480 | |||||||
Annuity product charges | 62,722 | 60,394 | 240,035 | 224,488 | |||||||||||
Net investment income | 588,217 | 554,355 | 2,307,635 | 2,147,812 | |||||||||||
Change in fair value of derivatives | 466,434 | (1,054,281 | ) | 906,906 | (777,848 | ) | |||||||||
Net realized gains (losses) on investments, excluding other than temporary impairment (OTTI) losses | 7,029 | 3,097 | 6,962 | (37,178 | ) | ||||||||||
OTTI losses on investments: | |||||||||||||||
Total OTTI losses | (17,412 | ) | (18,980 | ) | (18,511 | ) | (35,005 | ) | |||||||
Portion of OTTI losses recognized from other comprehensive income | — | — | (215 | ) | (1,651 | ) | |||||||||
Net OTTI losses recognized in operations | (17,412 | ) | (18,980 | ) | (18,726 | ) | (36,656 | ) | |||||||
Loss on extinguishment of debt | (2,001 | ) | — | (2,001 | ) | — | |||||||||
Total revenues | 1,113,835 | (450,985 | ) | 3,464,345 | 1,547,098 | ||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits and change in future policy benefits | 11,553 | 7,439 | 35,418 | 39,530 | |||||||||||
Interest sensitive and index product benefits | 399,514 | 255,700 | 1,287,576 | 1,610,835 | |||||||||||
Amortization of deferred sales inducements | 91,260 | (11,578 | ) | 88,585 | 222,201 | ||||||||||
Change in fair value of embedded derivatives | 147,879 | (804,026 | ) | 1,454,042 | (1,389,491 | ) | |||||||||
Interest expense on notes payable | 6,384 | 6,376 | 25,525 | 25,498 | |||||||||||
Interest expense on subordinated debentures | 3,651 | 4,041 | 15,764 | 15,491 | |||||||||||
Amortization of deferred policy acquisition costs | 133,573 | (8,750 | ) | 87,717 | 327,991 | ||||||||||
Other operating costs and expenses | 39,194 | 33,597 | 154,153 | 129,301 | |||||||||||
Total benefits and expenses | 833,008 | (517,201 | ) | 3,148,780 | 981,356 | ||||||||||
Income before income taxes | 280,827 | 66,216 | 315,565 | 565,742 | |||||||||||
Income tax expense | 60,677 | 12,393 | 69,475 | 107,726 | |||||||||||
Net income | $ | 220,150 | $ | 53,823 | $ | 246,090 | $ | 458,016 | |||||||
Earnings per common share | $ | 2.41 | $ | 0.59 | $ | 2.70 | $ | 5.07 | |||||||
Earnings per common share - assuming dilution | $ | 2.40 | $ | 0.59 | $ | 2.68 | $ | 5.01 | |||||||
Weighted average common shares outstanding (in thousands): | |||||||||||||||
Earnings per common share | 91,314 | 90,555 | 91,139 | 90,348 | |||||||||||
Earnings per common share - assuming dilution | 91,883 | 91,622 | 91,782 | 91,423 | |||||||||||
Page 2
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2019
Unaudited (Dollars in thousands, except per share data)
Quarterly Summary - Most Recent 5 Quarters
Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 | Q4 2018 | |||||||||||||||
Revenues: | |||||||||||||||||||
Traditional life insurance premiums | $ | 762 | $ | 778 | $ | 799 | $ | 829 | $ | 845 | |||||||||
Life contingent immediate annuity considerations | 8,084 | 4,374 | 3,327 | 4,581 | 3,585 | ||||||||||||||
Surrender charges | 15,092 | 20,537 | 19,480 | 16,456 | 15,710 | ||||||||||||||
Lifetime income benefit rider fees | 47,630 | 43,110 | 41,220 | 36,510 | 44,684 | ||||||||||||||
Net investment income | 588,217 | 590,412 | 570,568 | 558,438 | 554,355 | ||||||||||||||
Change in fair value of derivatives | 466,434 | (20,042 | ) | 76,045 | 384,469 | (1,054,281 | ) | ||||||||||||
Net realized gains (losses) on investments, excluding OTTI | 7,029 | 4,328 | (3,832 | ) | (563 | ) | 3,097 | ||||||||||||
Net OTTI losses recognized in operations | (17,412 | ) | (101 | ) | (1,213 | ) | — | (18,980 | ) | ||||||||||
Loss on extinguishment of debt | (2,001 | ) | — | — | — | — | |||||||||||||
Total revenues | 1,113,835 | 643,396 | 706,394 | 1,000,720 | (450,985 | ) | |||||||||||||
Benefits and expenses: | |||||||||||||||||||
Traditional life insurance policy benefits and change in future policy benefits | 835 | 758 | 576 | 878 | 731 | ||||||||||||||
Life contingent immediate annuity benefits and change in future policy benefits | 10,718 | 6,869 | 6,363 | 8,421 | 6,708 | ||||||||||||||
Interest sensitive and index product benefits (a) | 399,514 | 500,285 | 251,103 | 136,674 | 255,700 | ||||||||||||||
Amortization of deferred sales inducements (b) | 91,260 | (55,769 | ) | 19,785 | 33,309 | (11,578 | ) | ||||||||||||
Change in fair value of embedded derivatives (c) | 147,879 | 212,278 | 327,562 | 766,323 | (804,026 | ) | |||||||||||||
Interest expense on notes payable | 6,384 | 6,382 | 6,380 | 6,379 | 6,376 | ||||||||||||||
Interest expense on subordinated debentures | 3,651 | 3,968 | 4,057 | 4,088 | 4,041 | ||||||||||||||
Amortization of deferred policy acquisition costs (b) | 133,573 | (120,934 | ) | 29,946 | 45,132 | (8,750 | ) | ||||||||||||
Other operating costs and expenses | 39,194 | 38,554 | 37,426 | 38,979 | 33,597 | ||||||||||||||
Total benefits and expenses | 833,008 | 592,391 | 683,198 | 1,040,183 | (517,201 | ) | |||||||||||||
Income (loss) before income taxes | 280,827 | 51,005 | 23,196 | (39,463 | ) | 66,216 | |||||||||||||
Income tax expense (benefit) | 60,677 | 13,645 | 4,606 | (9,453 | ) | 12,393 | |||||||||||||
Net income (loss) (a)(b)(c) | $ | 220,150 | $ | 37,360 | $ | 18,590 | $ | (30,010 | ) | $ | 53,823 | ||||||||
Earnings (loss) per common share | $ | 2.41 | $ | 0.41 | $ | 0.20 | $ | (0.33 | ) | $ | 0.59 | ||||||||
Earnings (loss) per common share - assuming dilution (a)(b)(c) | $ | 2.40 | $ | 0.41 | $ | 0.20 | $ | (0.33 | ) | $ | 0.59 | ||||||||
Weighted average common shares outstanding (thousands): | |||||||||||||||||||
Earnings (loss) per common share | 91,314 | 91,252 | 91,103 | 90,883 | 90,555 | ||||||||||||||
Earnings (loss) per common share - assuming dilution | 91,883 | 91,711 | 91,785 | 91,744 | 91,622 | ||||||||||||||
(a) | Q3 2019 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 $315.4 million and decreased net income and earnings per common share - assuming dilution by $247.3 million and $2.70 per share, respectively. |
(b) | Q3 2019 includes a benefit from unlocking which reduced amortization of deferred sales inducements and deferred policy acquisition costs by $104.7 million and $193.0 million, respectively, and increased net income and earnings per common share - assuming dilution by $233.4 million and $2.54 per share, respectively. |
(c) | Q3 2019 includes expense from the revision 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 $28.2 million and decreased net income and earnings per common share - assuming dilution by $22.1 million and $0.24 per share, respectively. |
Page 3
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2019
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 December 31, | Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income | $ | 220,150 | $ | 53,823 | $ | 246,090 | $ | 458,016 | |||||||
Adjustments to arrive at non-GAAP operating income: (a) | |||||||||||||||
Net realized investment gains/losses, including OTTI | 7,606 | 9,525 | 7,361 | 45,450 | |||||||||||
Change in fair value of derivatives and embedded derivatives - fixed index annuities | (127,777 | ) | 36,186 | 373,221 | (72,181 | ) | |||||||||
Change in fair value of derivatives - interest rate caps and swap | (167 | ) | 1,276 | 1,247 | (1,892 | ) | |||||||||
Income taxes | 26,023 | (10,475 | ) | (79,736 | ) | (3,653 | ) | ||||||||
Non-GAAP operating income | $ | 125,835 | $ | 90,335 | $ | 548,183 | $ | 425,740 | |||||||
Per common share - assuming dilution: | |||||||||||||||
Net income | $ | 2.40 | $ | 0.59 | $ | 2.68 | $ | 5.01 | |||||||
Adjustments to arrive at non-GAAP operating income: | |||||||||||||||
Net realized investment gains/losses, including OTTI | 0.08 | 0.10 | 0.08 | 0.50 | |||||||||||
Change in fair value of derivatives and embedded derivatives - fixed index annuities | (1.39 | ) | 0.40 | 4.07 | (0.79 | ) | |||||||||
Change in fair value of derivatives - interest rate caps and swap | — | 0.01 | 0.01 | (0.02 | ) | ||||||||||
Income taxes | 0.28 | (0.11 | ) | (0.87 | ) | (0.04 | ) | ||||||||
Non-GAAP operating income | $ | 1.37 | $ | 0.99 | $ | 5.97 | $ | 4.66 | |||||||
(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 - December 31, 2019
Unaudited (Dollars in thousands)
NON-GAAP FINANCIAL MEASURES
Summary of Adjustments to Arrive at Non-GAAP Operating Income
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net realized investment gains and losses, including OTTI: | |||||||||||||||
Net realized gains/losses on investments, including OTTI | $ | 10,383 | $ | 15,883 | $ | 11,764 | $ | 73,834 | |||||||
Amortization of DAC and DSI | (2,777 | ) | (6,358 | ) | (4,403 | ) | (28,384 | ) | |||||||
Income taxes | (1,643 | ) | (2,374 | ) | 875 | (12,282 | ) | ||||||||
$ | 5,963 | $ | 7,151 | $ | 8,236 | $ | 33,168 | ||||||||
Change in fair value of derivatives and embedded derivatives: | |||||||||||||||
Fixed index annuities | $ | (222,927 | ) | $ | 212,253 | $ | 368,650 | $ | (42,394 | ) | |||||
Interest rate caps and swap | (167 | ) | 1,276 | 1,247 | (1,892 | ) | |||||||||
Amortization of DAC and DSI | 95,150 | (176,067 | ) | 4,571 | (29,787 | ) | |||||||||
Income taxes | 27,666 | (8,101 | ) | (80,611 | ) | 16,077 | |||||||||
$ | (100,278 | ) | $ | 29,361 | $ | 293,857 | $ | (57,996 | ) | ||||||
Worthless stock deduction: | |||||||||||||||
Income taxes | $ | — | $ | — | $ | — | $ | (7,448 | ) | ||||||
Page 5
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2019
Unaudited (Dollars in thousands, except per share data)
NON-GAAP FINANCIAL MEASURES
Quarterly Summary - Most Recent 5 Quarters
Reconciliation from Net Income (Loss) to Non-GAAP Operating Income
Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 | Q4 2018 | |||||||||||||||
Net income (loss) | $ | 220,150 | $ | 37,360 | $ | 18,590 | $ | (30,010 | ) | $ | 53,823 | ||||||||
Adjustments to arrive at non-GAAP operating income: (a) | |||||||||||||||||||
Net realized investment gains/losses, including OTTI | 7,606 | (3,175 | ) | 2,625 | 305 | 9,525 | |||||||||||||
Change in fair value of derivatives and embedded derivatives - fixed index annuities | (127,777 | ) | 250,186 | 99,868 | 150,944 | 36,186 | |||||||||||||
Change in fair value of derivatives - interest rate caps and swap | (167 | ) | (76 | ) | 854 | 636 | 1,276 | ||||||||||||
Income taxes | 26,023 | (50,940 | ) | (22,346 | ) | (32,473 | ) | (10,475 | ) | ||||||||||
Non-GAAP operating income (b)(c) | $ | 125,835 | $ | 233,355 | $ | 99,591 | $ | 89,402 | $ | 90,335 | |||||||||
Per common share - assuming dilution: | |||||||||||||||||||
Net income (loss) | $ | 2.40 | $ | 0.41 | $ | 0.20 | $ | (0.33 | ) | $ | 0.59 | ||||||||
Adjustments to arrive at non-GAAP operating income: | |||||||||||||||||||
Net realized investment gains/losses, including OTTI | 0.08 | (0.04 | ) | 0.03 | — | 0.10 | |||||||||||||
Change in fair value of derivatives and embedded derivatives - fixed index annuities | (1.39 | ) | 2.73 | 1.09 | 1.64 | 0.40 | |||||||||||||
Change in fair value of derivatives - interest rate caps and swap | — | — | 0.01 | 0.01 | 0.01 | ||||||||||||||
Income taxes | 0.28 | (0.56 | ) | (0.24 | ) | (0.35 | ) | (0.11 | ) | ||||||||||
Non-GAAP operating income (b)(c) | $ | 1.37 | $ | 2.54 | $ | 1.09 | $ | 0.97 | $ | 0.99 | |||||||||
(a) | Adjustments to net income (loss) 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) | Q3 2019 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 $315.4 million and decreased non-GAAP operating income and non-GAAP operating income per common share - assuming dilution by $247.3 million and $2.70 per share, respectively. |
(c) | Q3 2019 includes a benefit from unlocking which reduced amortization of deferred sales inducements and deferred policy acquisition costs by $184.9 million and $288.3 million, respectively, and increased non-GAAP operating income and non-GAAP operating income per common share- assuming dilution by $371.0 million and $4.05 per share, respectively. |
Page 6
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2019
Unaudited (Dollars in thousands)
NON-GAAP FINANCIAL MEASURES
Summary of Adjustments to Arrive at Non-GAAP Operating Income
Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 | Q4 2018 | |||||||||||||||
Net realized (gains) losses on investments | $ | (7,029 | ) | $ | (4,328 | ) | $ | 3,832 | $ | 563 | $ | (3,097 | ) | ||||||
Net OTTI losses recognized in operations | 17,412 | 101 | 1,213 | — | 18,980 | ||||||||||||||
Change in fair value of derivatives | (370,973 | ) | (79,943 | ) | (108,662 | ) | (524,567 | ) | 1,017,555 | ||||||||||
Increase (decrease) in total revenues | (360,590 | ) | (84,170 | ) | (103,617 | ) | (524,004 | ) | 1,033,438 | ||||||||||
Amortization of deferred sales inducements | (37,374 | ) | (57,408 | ) | 49,101 | 35,494 | 77,745 | ||||||||||||
Change in fair value of embedded derivatives | (147,879 | ) | (212,278 | ) | (327,562 | ) | (766,323 | ) | 804,026 | ||||||||||
Amortization of deferred policy acquisition costs | (54,999 | ) | (61,419 | ) | 71,497 | 54,940 | 104,680 | ||||||||||||
Increase (decrease) in total benefits and expenses | (240,252 | ) | (331,105 | ) | (206,964 | ) | (675,889 | ) | 986,451 | ||||||||||
Increase in income (loss) before income taxes | (120,338 | ) | 246,935 | 103,347 | 151,885 | 46,987 | |||||||||||||
Increase (decrease) in income tax expense (benefit) | (26,023 | ) | 50,940 | 22,346 | 32,473 | 10,475 | |||||||||||||
Increase (decrease) in net income (loss) | $ | (94,315 | ) | $ | 195,995 | $ | 81,001 | $ | 119,412 | $ | 36,512 | ||||||||
Page 7
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2019
Unaudited (Dollars in thousands, except share and per share data)
Capitalization/Book Value per Common Share
Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 | Q4 2018 | |||||||||||||||
Capitalization: | |||||||||||||||||||
Notes payable | $ | 500,000 | $ | 500,000 | $ | 500,000 | $ | 500,000 | $ | 500,000 | |||||||||
Subordinated debentures payable to subsidiary trusts | 159,272 | 247,362 | 247,294 | 247,227 | 247,161 | ||||||||||||||
Total debt | 659,272 | 747,362 | 747,294 | 747,227 | 747,161 | ||||||||||||||
Total stockholders’ equity | 4,570,119 | 4,126,716 | 3,497,475 | 2,939,537 | 2,399,101 | ||||||||||||||
Total capitalization | 5,229,391 | 4,874,078 | 4,244,769 | 3,686,764 | 3,146,262 | ||||||||||||||
Accumulated other comprehensive (income) loss (AOCI) | (1,497,921 | ) | (1,639,429 | ) | (1,049,984 | ) | (513,697 | ) | 52,432 | ||||||||||
Total capitalization excluding AOCI (a) | $ | 3,731,470 | $ | 3,234,649 | $ | 3,194,785 | $ | 3,173,067 | $ | 3,198,694 | |||||||||
Total stockholders’ equity | $ | 4,570,119 | $ | 4,126,716 | $ | 3,497,475 | $ | 2,939,537 | $ | 2,399,101 | |||||||||
Equity available to preferred stockholders (c) | (400,000 | ) | — | — | — | — | |||||||||||||
Total common stockholders' equity (b) | 4,170,119 | 4,126,716 | 3,497,475 | 2,939,537 | 2,399,101 | ||||||||||||||
Accumulated other comprehensive (income) loss | (1,497,921 | ) | (1,639,429 | ) | (1,049,984 | ) | (513,697 | ) | 52,432 | ||||||||||
Total common stockholders’ equity excluding AOCI (b) | $ | 2,672,198 | $ | 2,487,287 | $ | 2,447,491 | $ | 2,425,840 | $ | 2,451,533 | |||||||||
Common shares outstanding | 91,107,555 | 91,006,950 | 90,936,324 | 90,784,123 | 90,369,229 | ||||||||||||||
Book Value per Common Share: (d) | |||||||||||||||||||
Book value per common share (b) | $ | 45.77 | $ | 45.35 | $ | 38.46 | $ | 32.38 | $ | 26.55 | |||||||||
Book value per common share excluding AOCI (b) | $ | 29.33 | $ | 27.33 | $ | 26.91 | $ | 26.72 | $ | 27.13 | |||||||||
Debt-to-Capital Ratios: (e) | |||||||||||||||||||
Senior debt / Total capitalization | 13.4 | % | 15.5 | % | 15.7 | % | 15.8 | % | 15.6 | % | |||||||||
Total debt / Total capitalization | 17.7 | % | 23.1 | % | 23.4 | % | 23.5 | % | 23.4 | % | |||||||||
(a) | Total capitalization excluding AOCI, a non-GAAP financial measure, is based on stockholders' equity excluding the effect of AOCI. |
(b) | 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 total common stockholder's equity excluding AOCI, non-GAAP financial measures, exclude equity available to preferred stockholders. |
(c) | Equity available to preferred stockholders is equal to the redemption value of outstanding preferred stock plus share dividends declared but not yet issued. |
(d) | Book value per common share including and excluding AOCI is calculated as total common stockholders’ equity and total common stockholders’ equity excluding AOCI divided by the total number of shares of common stock outstanding. |
(e) | Debt-to-capital ratios are computed using total capitalization excluding AOCI. |
Page 8
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2019
Unaudited (Dollars in thousands)
Spread Results
Year Ended December 31, | ||||||||||||
2019 | 2018 | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 | Q4 2018 | ||||||
4.52% | 4.47% | Average yield on invested assets | 4.52% | 4.59% | 4.51% | 4.48% | 4.51% | |||||
1.84% | 1.87% | Aggregate cost of money | 1.75% | 1.84% | 1.88% | 1.90% | 1.95% | |||||
2.68% | 2.60% | Aggregate investment spread | 2.77% | 2.75% | 2.63% | 2.58% | 2.56% | |||||
Impact of: | ||||||||||||
0.06% | 0.08% | Investment yield - additional prepayment income | 0.08% | 0.11% | 0.04% | 0.01% | 0.09% | |||||
0.03% | 0.05% | Cost of money effect of over hedging | 0.05% | 0.02% | 0.04% | 0.02% | 0.03% | |||||
$51,072,498 | $48,104,780 | Weighted average investments | $52,141,459 | $51,529,850 | $50,709,966 | $49,908,718 | $49,258,548 | |||||
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
Year Ended December 31, | ||||||||||||||||||||||||||
2019 | 2018 | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 | Q4 2018 | ||||||||||||||||||||
Included in interest sensitive and index product benefits: | ||||||||||||||||||||||||||
$ | 587,818 | $ | 1,285,555 | Index credits | $ | 277,798 | $ | 92,343 | $ | 161,752 | $ | 55,925 | $ | 157,999 | ||||||||||||
196,907 | 214,166 | Interest credited | 49,482 | 49,511 | 50,478 | 47,436 | 53,559 | |||||||||||||||||||
Included in change in fair value of derivatives: | ||||||||||||||||||||||||||
(605,005 | ) | (1,307,755 | ) | Proceeds received at option expiration | (284,624 | ) | (95,491 | ) | (166,430 | ) | (58,460 | ) | (162,433 | ) | ||||||||||||
781,841 | 739,558 | Pro rata amortization of option cost | 188,984 | 195,354 | 199,006 | 198,497 | 198,999 | |||||||||||||||||||
$ | 961,561 | $ | 931,524 | Cost of money for deferred annuities | $ | 231,640 | $ | 241,717 | $ | 244,806 | $ | 243,398 | $ | 248,124 | ||||||||||||
$ | 52,278,357 | $ | 49,855,778 | Weighted average liability balance outstanding | $ | 53,092,419 | $ | 52,682,886 | $ | 52,009,407 | $ | 51,328,715 | $ | 50,832,984 | ||||||||||||
Annuity Account Balance Rollforward
Year Ended December 31, | ||||||||||||||||||||||||||
2019 | 2018 | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 | Q4 2018 | ||||||||||||||||||||
$ | 51,053,450 | $ | 48,400,755 | Account balances at beginning of period | $ | 52,950,937 | $ | 52,414,835 | $ | 51,603,979 | $ | 51,053,450 | $ | 50,612,519 | ||||||||||||
4,661,171 | 3,967,928 | Net deposits | 838,761 | 1,216,720 | 1,425,325 | 1,180,365 | 1,040,857 | |||||||||||||||||||
177,942 | 179,465 | Premium bonuses | 36,983 | 46,968 | 48,370 | 45,621 | 44,450 | |||||||||||||||||||
784,725 | 1,499,721 | Fixed interest credited and index credits | 327,280 | 141,854 | 212,230 | 103,361 | 211,558 | |||||||||||||||||||
(71,565 | ) | (65,644 | ) | Surrender charges | (15,092 | ) | (20,537 | ) | (19,480 | ) | (16,456 | ) | (15,710 | ) | ||||||||||||
(168,470 | ) | (158,844 | ) | Lifetime income benefit rider fees | (47,630 | ) | (43,110 | ) | (41,220 | ) | (36,510 | ) | (44,684 | ) | ||||||||||||
(3,203,355 | ) | (2,769,931 | ) | Surrenders, withdrawals, deaths, etc. | (857,341 | ) | (805,793 | ) | (814,369 | ) | (725,852 | ) | (795,540 | ) | ||||||||||||
$ | 53,233,898 | $ | 51,053,450 | Account balances at end of period | $ | 53,233,898 | $ | 52,950,937 | $ | 52,414,835 | $ | 51,603,979 | $ | 51,053,450 | ||||||||||||
Page 9
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2019
Unaudited (Dollars in thousands)
Annuity Deposits by Product Type
Year Ended December 31, | ||||||||||||||||||||||||||
2019 | 2018 | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 | Q4 2018 | ||||||||||||||||||||
American Equity Life: | ||||||||||||||||||||||||||
$ | 4,058,638 | $ | 3,560,881 | Fixed index annuities | $ | 765,180 | $ | 1,054,796 | $ | 1,211,004 | $ | 1,027,658 | $ | 944,097 | ||||||||||||
11,245 | 45,636 | Annual reset fixed rate annuities | 1,843 | 2,340 | 3,614 | 3,448 | 5,574 | |||||||||||||||||||
1,613 | 3,581 | Multi-year fixed rate annuities | 306 | 593 | 566 | 148 | 332 | |||||||||||||||||||
12,002 | 23,813 | Single premium immediate annuities | 4,873 | 3,314 | 1,747 | 2,068 | 2,893 | |||||||||||||||||||
4,083,498 | 3,633,911 | 772,202 | 1,061,043 | 1,216,931 | 1,033,322 | 952,896 | ||||||||||||||||||||
Eagle Life: | ||||||||||||||||||||||||||
646,903 | 660,401 | Fixed index annuities | 67,784 | 166,081 | 235,558 | 177,480 | 162,847 | |||||||||||||||||||
199 | 1,555 | Annual reset fixed rate annuities | 6 | — | 66 | 127 | 484 | |||||||||||||||||||
232,613 | 109,096 | Multi-year fixed rate annuities | 81,041 | 79,000 | 47,004 | 25,568 | 12,802 | |||||||||||||||||||
879,715 | 771,052 | 148,831 | 245,081 | 282,628 | 203,175 | 176,133 | ||||||||||||||||||||
Consolidated: | ||||||||||||||||||||||||||
4,705,541 | 4,221,282 | Fixed index annuities | 832,964 | 1,220,877 | 1,446,562 | 1,205,138 | 1,106,944 | |||||||||||||||||||
11,444 | 47,191 | Annual reset fixed rate annuities | 1,849 | 2,340 | 3,680 | 3,575 | 6,058 | |||||||||||||||||||
234,226 | 112,677 | Multi-year fixed rate annuities | 81,347 | 79,593 | 47,570 | 25,716 | 13,134 | |||||||||||||||||||
12,002 | 23,813 | Single premium immediate annuities | 4,873 | 3,314 | 1,747 | 2,068 | 2,893 | |||||||||||||||||||
4,963,213 | 4,404,963 | Total before coinsurance ceded | 921,033 | 1,306,124 | 1,499,559 | 1,236,497 | 1,129,029 | |||||||||||||||||||
290,040 | 413,222 | Coinsurance ceded | 77,399 | 86,090 | 72,487 | 54,064 | 85,279 | |||||||||||||||||||
$ | 4,673,173 | $ | 3,991,741 | Net after coinsurance ceded | $ | 843,634 | $ | 1,220,034 | $ | 1,427,072 | $ | 1,182,433 | $ | 1,043,750 | ||||||||||||
Surrender Charge Protection and Account Values by Product Type
Annuity Surrender Charges and Net (of Coinsurance) Account Values at December 31, 2019:
Surrender Charge | Net Account Value | ||||||||||||
Product Type | Avg. Years At Issue | Avg. Years Remaining | Avg. % Remaining | Dollars in Thousands | % | ||||||||
Fixed Index Annuities | 12.9 | 6.9 | 11.0% | $ | 51,200,043 | 96.2 | % | ||||||
Annual Reset Fixed Rate Annuities | 9.6 | 3.4 | 6.2% | 1,421,259 | 2.7 | % | |||||||
Multi-Year Fixed Rate Annuities | 4.2 | 0.7 | 1.9% | 612,596 | 1.1 | % | |||||||
Total | 12.7 | 6.7 | 10.8% | $ | 53,233,898 | 100.0 | % | ||||||
Page 10
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2019
Unaudited (Dollars in thousands)
Annuity Liability Characteristics
Surrender Charge Percentages: | Fixed Annuities Account Value | Fixed Index Annuities Account Value | |||||
No surrender charge | $ | 809,540 | $ | 2,646,816 | |||
0.0% < 2.0% | 13,700 | 226,563 | |||||
2.0% < 3.0% | 9,894 | 481,526 | |||||
3.0% < 4.0% | 59,363 | 1,484,260 | |||||
4.0% < 5.0% | 54,923 | 1,157,238 | |||||
5.0% < 6.0% | 90,011 | 2,553,299 | |||||
6.0% < 7.0% | 285,493 | 1,134,898 | |||||
7.0% < 8.0% | 67,225 | 5,126,742 | |||||
8.0% < 9.0% | 38,681 | 3,915,131 | |||||
9.0% < 10.0% | 106,631 | 4,192,664 | |||||
10.0% or greater | 498,394 | 28,280,906 | |||||
$ | 2,033,855 | $ | 51,200,043 | ||||
Surrender Charge Expiration By Year: | Fixed and Fixed Index Annuities Account Value | Weighted Average Surrender Charge | ||||
Out of Surrender Charge | $ | 3,456,356 | 0.00 | % | ||
2020 | 741,765 | 2.58 | % | |||
2021 | 1,219,601 | 4.33 | % | |||
2022 | 1,747,549 | 5.46 | % | |||
2023 | 4,244,073 | 6.00 | % | |||
2024 | 5,256,078 | 8.30 | % | |||
2025 | 5,918,598 | 9.31 | % | |||
2026 | 5,266,175 | 10.84 | % | |||
2027 | 4,462,910 | 12.25 | % | |||
2028 | 4,781,322 | 13.12 | % | |||
2029 | 6,000,531 | 14.28 | % | |||
2030 | 2,578,809 | 17.11 | % | |||
2031 | 3,144,762 | 17.86 | % | |||
2032 | 2,145,751 | 18.30 | % | |||
2033 | 1,252,193 | 18.75 | % | |||
2034 | 699,504 | 19.33 | % | |||
2035 | 317,921 | 20.00 | % | |||
$ | 53,233,898 | 10.78 | % | |||
Page 11
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2019
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 | $ | 958,763 | $ | 1,334,400 | |||
› 0.0% - 0.25% | 51,338 | 168,517 | |||||
› 0.25% - 0.5% | 241,152 | 5,826 | |||||
› 0.5% - 1.0% | 37,957 | 12,745 | |||||
› 1.0% - 1.5% | 11,704 | — | |||||
1.00% ultimate guarantee - 2.39% wtd avg interest rate (a) | 456,845 | 671,589 | |||||
1.50% ultimate guarantee - 1.20% wtd avg interest rate (a) | 145,717 | 3,425,873 | |||||
1.75% ultimate guarantee - 1.98% wtd avg interest rate (a) | 49,359 | 461,336 | |||||
2.00% ultimate guarantee - 1.85% wtd avg interest rate (a) | 81,020 | — | |||||
2.25% ultimate guarantee - 1.84% wtd avg interest rate (a) | — | 815,101 | |||||
3.00% ultimate guarantee - 2.05% wtd avg interest rate (a) | — | 1,566,836 | |||||
Allocated to index strategies (see tables that follow) | — | 42,737,820 | |||||
$ | 2,033,855 | $ | 51,200,043 | ||||
(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 December 31, 2019 for fixed annuities and funds allocated to the fixed rate strategy for fixed index annuities would decrease by 0.16%.
Page 12
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2019
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 | $ | 1,434 | $ | 91,846 | $ | 4,810,024 | $ | 67,045 | $ | 158,331 | |||||||||
1.75% - 3% | 8,374,483 | — | — | — | — | ||||||||||||||
3% - 4% | 264,045 | 12,531 | — | — | — | ||||||||||||||
4% - 5% | 786,914 | 224,780 | 1,644,751 | — | — | ||||||||||||||
5% - 6% | 601,161 | 195,814 | 32,070 | — | — | ||||||||||||||
6% - 7% | — | — | 422 | — | — | ||||||||||||||
>= 7% | 10,895 | 6,819 | 710 | 5,961 | 183 | ||||||||||||||
Annual Monthly Average and Point-to-Point with Participation Rates | |||||||||||||||
Minimum Guaranteed Participation Rate | |||||||||||||||
10% | 20% - 25% | 35% | 50% + | ||||||||||||
Current Participation Rate | |||||||||||||||
At minimum | $ | 980 | $ | 368,796 | $ | 101,284 | $ | 108,619 | |||||||
< 20% | 772,874 | — | — | — | |||||||||||
20% - 40% | 1,026,625 | 161,404 | — | — | |||||||||||
40% - 60% | 3,119,243 | 93,718 | 59,843 | — | |||||||||||
60% - 100% | 449,364 | — | — | — | |||||||||||
> 100% | 364,083 | — | — | — | |||||||||||
S&P 500 Monthly Point-to-Point - Minimum Guaranteed Monthly Cap = 1.0% | |||
Current Cap | |||
At minimum | $ | 1,704,610 | |
1.10% - 1.30% | 7,695,584 | ||
1.40% - 1.60% | 2,319,064 | ||
1.70% - 2.00% | 434,754 | ||
>= 2.10% | 1,653 | ||
Volatility Control Index | |||
Current Asset Fee | |||
At Maximum | $ | — | |
0.75% - 1.75% | 406,445 | ||
2.25% - 2.75% | 210,571 | ||
3.00% - 3.50% | 3,155,631 | ||
3.75% - 4.50% | 1,579,560 | ||
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 0.70% based upon prices of options for the week ended January 29, 2020.
Page 13
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2019
Unaudited (Dollars in thousands)
Summary of Invested Assets
December 31, 2019 | December 31, 2018 | ||||||||||||
Carrying Amount | Percent | Carrying Amount | Percent | ||||||||||
Fixed maturity securities: | |||||||||||||
United States Government full faith and credit | $ | 161,765 | 0.3 | % | $ | 11,652 | — | % | |||||
United States Government sponsored agencies | 625,020 | 1.1 | % | 1,138,529 | 2.3 | % | |||||||
United States municipalities, states and territories | 4,527,671 | 7.9 | % | 4,126,267 | 8.3 | % | |||||||
Foreign government obligations | 205,096 | 0.3 | % | 230,274 | 0.5 | % | |||||||
Corporate securities | 32,536,839 | 57.2 | % | 28,371,514 | 57.4 | % | |||||||
Residential mortgage backed securities | 1,575,664 | 2.8 | % | 1,202,159 | 2.4 | % | |||||||
Commercial mortgage backed securities | 5,786,279 | 10.2 | % | 5,379,003 | 10.9 | % | |||||||
Other asset backed securities | 6,162,156 | 10.8 | % | 5,464,329 | 11.1 | % | |||||||
Total fixed maturity securities | 51,580,490 | 90.6 | % | 45,923,727 | 92.9 | % | |||||||
Mortgage loans on real estate | 3,448,793 | 6.1 | % | 2,943,091 | 6.0 | % | |||||||
Derivative instruments | 1,355,989 | 2.4 | % | 205,149 | 0.4 | % | |||||||
Other investments | 492,301 | 0.9 | % | 355,531 | 0.7 | % | |||||||
$ | 56,877,573 | 100.0 | % | $ | 49,427,498 | 100.0 | % | ||||||
Credit Quality of Fixed Maturity Securities - December 31, 2019
NAIC Designation | Carrying Amount | Percent | Rating Agency Rating | Carrying Amount | Percent | |||||||||||
1 | $ | 30,122,657 | 58.4 | % | Aaa/Aa/A | $ | 30,662,644 | 59.4 | % | |||||||
2 | 20,316,911 | 39.4 | % | Baa | 19,833,309 | 38.4 | % | |||||||||
3 | 977,191 | 1.9 | % | Ba | 821,902 | 1.6 | % | |||||||||
4 | 112,534 | 0.2 | % | B | 81,407 | 0.2 | % | |||||||||
5 | 45,205 | 0.1 | % | Caa | 95,676 | 0.2 | % | |||||||||
6 | 5,992 | — | % | Ca and lower | 85,552 | 0.2 | % | |||||||||
$ | 51,580,490 | 100.0 | % | $ | 51,580,490 | 100.0 | % | |||||||||
Watch List Securities - December 31, 2019
General Description | Amortized Cost | Unrealized Gains (Losses) | Fair Value | Months Below Amortized Cost | ||||||||||
Below investment grade | ||||||||||||||
Corporate securities: | ||||||||||||||
Consumer discretionary | $ | 52,654 | $ | (3,575 | ) | $ | 49,079 | 0 - 59 | ||||||
Energy | 38,386 | (5,742 | ) | 32,644 | 0 - 64 | |||||||||
Industrials | 563 | (363 | ) | 200 | 7 | |||||||||
Materials | 3,990 | 560 | 4,550 | — | ||||||||||
Other asset backed securities: | ||||||||||||||
Financials | 977 | 261 | 1,238 | — | ||||||||||
Industrials | 8,364 | (2,420 | ) | 5,944 | 50 | |||||||||
$ | 104,934 | $ | (11,279 | ) | $ | 93,655 | ||||||||
Page 14
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2019
Unaudited (Dollars in thousands)
Fixed Maturity Securities by Sector
December 31, 2019 | December 31, 2018 | ||||||||||||||
Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||
Available for sale: | |||||||||||||||
United States Government full faith and credit and sponsored agencies | $ | 763,164 | $ | 786,785 | $ | 1,220,340 | $ | 1,150,181 | |||||||
United States municipalities, states and territories | 4,147,343 | 4,527,671 | 3,880,703 | 4,126,267 | |||||||||||
Foreign government obligations | 186,993 | 205,096 | 226,860 | 230,274 | |||||||||||
Corporate securities: | |||||||||||||||
Capital goods | 2,550,750 | 2,794,986 | 2,491,620 | 2,485,845 | |||||||||||
Consumer discretionary | 6,082,974 | 6,658,120 | 5,742,182 | 5,665,192 | |||||||||||
Energy | 2,499,030 | 2,677,646 | 2,543,114 | 2,468,545 | |||||||||||
Financials | 6,737,325 | 7,323,150 | 6,046,859 | 6,054,591 | |||||||||||
Government non-guaranteed | 539,639 | 606,308 | 564,912 | 578,657 | |||||||||||
Industrials | 311,269 | 336,537 | 302,078 | 298,620 | |||||||||||
Information technology | 1,868,131 | 2,051,175 | 1,794,676 | 1,781,800 | |||||||||||
Materials | 1,818,048 | 1,961,033 | 1,771,359 | 1,759,325 | |||||||||||
Other | 439,171 | 469,344 | 434,228 | 432,739 | |||||||||||
Telecommunications | 1,510,836 | 1,664,350 | 1,604,307 | 1,594,978 | |||||||||||
Transportation | 1,486,540 | 1,603,997 | 1,438,723 | 1,428,378 | |||||||||||
Utilities | 3,978,459 | 4,390,193 | 3,749,080 | 3,822,844 | |||||||||||
Residential mortgage backed securities: | |||||||||||||||
Government agency | 591,100 | 646,787 | 604,998 | 636,632 | |||||||||||
Prime | 793,357 | 815,916 | 420,350 | 434,991 | |||||||||||
Alt-A | 93,281 | 112,961 | 109,275 | 130,536 | |||||||||||
Commercial mortgage backed securities: | |||||||||||||||
Government agency | 414,626 | 437,420 | 442,287 | 438,063 | |||||||||||
Non-agency | 5,176,541 | 5,348,859 | 5,049,984 | 4,940,940 | |||||||||||
Other asset backed securities: | |||||||||||||||
Auto | 403,860 | 411,371 | 315,439 | 318,616 | |||||||||||
Energy | 7,495 | 8,603 | — | — | |||||||||||
Financials | 4,967 | 5,493 | 8,322 | 8,931 | |||||||||||
Industrials | 167,466 | 171,273 | 217,358 | 216,724 | |||||||||||
Collateralized loan obligations | 4,787,402 | 4,612,694 | 4,579,467 | 4,320,168 | |||||||||||
Military housing | 471,621 | 539,029 | 438,350 | 464,071 | |||||||||||
Other | 407,558 | 413,693 | 134,319 | 135,819 | |||||||||||
$ | 48,238,946 | $ | 51,580,490 | $ | 46,131,190 | $ | 45,923,727 | ||||||||
Page 15
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2019
Unaudited (Dollars in thousands)
Mortgage Loans on Commercial Real Estate
December 31, 2019 | December 31, 2018 | |||||||||||||
Principal | Percent | Principal | Percent | |||||||||||
Geographic distribution | ||||||||||||||
East | $ | 645,991 | 18.7 | % | $ | 586,773 | 19.9 | % | ||||||
Middle Atlantic | 284,597 | 8.2 | % | 168,969 | 5.7 | % | ||||||||
Mountain | 389,892 | 11.3 | % | 357,642 | 12.1 | % | ||||||||
New England | 9,152 | 0.3 | % | 9,418 | 0.3 | % | ||||||||
Pacific | 655,518 | 19.0 | % | 521,363 | 17.7 | % | ||||||||
South Atlantic | 751,199 | 21.7 | % | 694,599 | 23.5 | % | ||||||||
West North Central | 302,534 | 8.7 | % | 291,890 | 9.9 | % | ||||||||
West South Central | 420,031 | 12.1 | % | 321,810 | 10.9 | % | ||||||||
$ | 3,458,914 | 100.0 | % | $ | 2,952,464 | 100.0 | % | |||||||
Property type distribution | ||||||||||||||
Office | $ | 250,287 | 7.3 | % | $ | 268,932 | 9.1 | % | ||||||
Medical office | 29,990 | 0.9 | % | 33,467 | 1.1 | % | ||||||||
Retail | 1,225,670 | 35.4 | % | 1,091,627 | 37.0 | % | ||||||||
Industrial/Warehouse | 896,558 | 25.9 | % | 762,887 | 25.8 | % | ||||||||
Apartment | 858,679 | 24.8 | % | 600,638 | 20.3 | % | ||||||||
Agricultural | 51,303 | 1.5 | % | 25,000 | 0.9 | % | ||||||||
Mixed use/other | 146,427 | 4.2 | % | 169,913 | 5.8 | % | ||||||||
$ | 3,458,914 | 100.0 | % | $ | 2,952,464 | 100.0 | % | |||||||
December 31, 2019 | December 31, 2018 | |||||||||||||
Credit exposure - by payment activity | ||||||||||||||
Performing | $ | 3,458,914 | $ | 2,952,464 | ||||||||||
In workout | — | — | ||||||||||||
Delinquent | — | — | ||||||||||||
Collateral dependent | — | — | ||||||||||||
3,458,914 | 2,952,464 | |||||||||||||
Specific loan loss allowance | (229 | ) | (229 | ) | ||||||||||
General loan loss allowance | (8,950 | ) | (8,010 | ) | ||||||||||
Deferred prepayment fees | (942 | ) | (1,134 | ) | ||||||||||
$ | 3,448,793 | $ | 2,943,091 | |||||||||||
Page 16
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2019
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, [email protected]
Common Stock and Dividend Information:
New York Stock Exchange symbol: “AEL”
High | Low | Close | Dividend Declared | ||||
2019 | |||||||
First Quarter | $33.57 | $26.34 | $27.02 | $0.00 | |||
Second Quarter | $30.91 | $25.84 | $27.16 | $0.00 | |||
Third Quarter | $27.80 | $20.16 | $24.20 | $0.00 | |||
Fourth Quarter | $30.96 | $21.75 | $29.93 | $0.30 | |||
2018 | |||||||
First Quarter | $35.79 | $28.90 | $29.36 | $0.00 | |||
Second Quarter | $37.16 | $27.06 | $36.00 | $0.00 | |||
Third Quarter | $38.57 | $34.51 | $35.36 | $0.00 | |||
Fourth Quarter | $36.39 | $25.27 | $27.94 | $0.28 | |||
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 | |||
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 17
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2019
Research Analyst Coverage
Erik Bass
Autonomous Research US LP
(646) 561-6248
Randy Binner
B. Riley FBR, Inc.
(703) 312-1890
Daniel Bergman
Citi Research
(212) 816-2132
Thomas Gallagher
Evercore ISI
(212) 446-9439
Alex Scott
Goldman Sachs & Co. LLC
(917) 343-7160
Pablo Singzon II
JP Morgan
(212) 622-2295
Ryan Krueger
Keefe, Bruyette & Woods
(860) 722-5930
C. Gregory Peters
Raymond James & Associates, Inc.
(727) 567-1534
Mark A. Dwelle
RBC Capital Markets, LLC
(804) 782-4008
John Barnidge
Sandler O'Neill & Partners, L.P.
(312) 281-3412
Mark Hughes
SunTrust Robinson Humphrey
(615) 748-4422
Page 18