EX-99.2 3 a120930-aelx8kxexh992.htm FINANCIAL SUPPLEMENT 12.09.30-AEL-8K-Exh99.2

Exhibit 99.2



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement

September 30, 2012








AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement-September 30, 2012


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

 
September 30, 2012
 
December 31, 2011
 
(Unaudited)
 
 
Assets
 
 
 
Investments:
 
 
 
Fixed maturity securities:
 
 
 
Available for sale, at fair value
$
22,410,492

 
$
18,464,109

Held for investment, at amortized cost
76,048

 
2,644,206

Equity securities, available for sale, at fair value
61,604

 
62,845

Mortgage loans on real estate
2,724,321

 
2,823,047

Derivative instruments
577,784

 
273,314

Other investments
196,779

 
115,930

Total investments
26,047,028

 
24,383,451

 
 
 
 
Cash and cash equivalents
2,397,434

 
404,952

Coinsurance deposits
2,913,273

 
2,818,642

Accrued investment income
276,875

 
228,937

Deferred policy acquisition costs
1,639,791

 
1,683,857

Deferred sales inducements
1,234,471

 
1,242,787

Deferred income taxes
—

 
21,981

Income taxes recoverable
—

 
8,441

Other assets
88,901

 
81,671

Total assets
$
34,597,773

 
$
30,874,719

 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
Liabilities:
 
 
 
Policy benefit reserves
$
30,980,046

 
$
28,118,716

Other policy funds and contract claims
457,162

 
400,594

Notes payable
306,696

 
297,608

Subordinated debentures
245,825

 
268,593

Deferred income taxes
73,835

 
—

Income taxes payable
1,415

 
—

Other liabilities
817,841

 
380,529

Total liabilities
32,882,820

 
29,466,040

 
 
 
 
Stockholders' equity:
 
 
 
Common stock
61,548

 
57,837

Additional paid-in capital
493,797

 
468,281

Unallocated common stock held by ESOP
(2,931
)
 
(3,620
)
Accumulated other comprehensive income
712,186

 
457,229

Retained earnings
450,353

 
428,952

Total stockholders' equity
1,714,953

 
1,408,679

Total liabilities and stockholders' equity
$
34,597,773

 
$
30,874,719




Page 1



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement-September 30, 2012



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2012
 
2011
 
2012
 
2011
Revenues:
 
 
 
 
 
 
 
Traditional life insurance premiums
$
3,300

 
$
3,126

 
$
9,770

 
$
9,331

Annuity product charges
23,875

 
20,405

 
65,176

 
57,259

Net investment income
318,594

 
305,502

 
965,763

 
894,508

Change in fair value of derivatives
161,090

 
(333,621
)
 
269,404

 
(206,997
)
Net realized losses on investments, excluding other than temporary impairment ("OTTI") losses
(1,238
)
 
(17,292
)
 
(7,925
)
 
(19,339
)
OTTI losses on investments:
 
 
 
 
 
 
 
Total OTTI losses
—

 
(5,133
)
 
(2,156
)
 
(10,346
)
Portion of OTTI losses recognized from other comprehensive income
(1,686
)
 
(3,758
)
 
(3,389
)
 
(7,345
)
Net OTTI losses recognized in operations
(1,686
)
 
(8,891
)
 
(5,545
)
 
(17,691
)
Total revenues
503,935

 
(30,771
)
 
1,296,643

 
717,071

 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
Insurance policy benefits and change in future policy benefits
1,865

 
1,888

 
6,232

 
6,282

Interest sensitive and index product benefits (a) (d)
246,105

 
223,232

 
527,961

 
621,317

Amortization of deferred sales inducements (c)
7,709

 
(28,065
)
 
50,359

 
22,892

Change in fair value of embedded derivatives
188,201

 
(205,565
)
 
466,278

 
(138,225
)
Interest expense on notes payable
7,141

 
7,984

 
21,208

 
23,723

Interest expense on subordinated debentures
3,235

 
3,488

 
10,384

 
10,435

Interest expense on amounts due under repurchase agreements
—

 
—

 
—

 
5

Amortization of deferred policy acquisition costs (c)
25,954

 
(28,930
)
 
105,086

 
65,155

Other operating costs and expenses (b)
36,170

 
15,903

 
76,785

 
50,011

Total benefits and expenses
516,380

 
(10,065
)
 
1,264,293

 
661,595

Income (loss) before income taxes
(12,445
)
 
(20,706
)
 
32,350

 
55,476

Income tax expense (benefit)
(4,616
)
 
(7,638
)
 
10,949

 
18,927

Net income (loss) (a) (b) (c) (d)
$
(7,829
)
 
$
(13,068
)
 
$
21,401

 
$
36,549

 
 
 
 
 
 
 
 
Earnings (loss) per common share
$
(0.13
)
 
$
(0.22
)
 
$
0.35

 
$
0.62

Earnings (loss) per common share - assuming dilution (a) (b) (c) (d)
$
(0.13
)
 
$
(0.22
)
 
$
0.34

 
$
0.59

Weighted average common shares outstanding:
 
 
 
 
 
 
 
Earnings (loss) per common share
62,504

 
59,596

 
60,723

 
59,429

Earnings (loss) per common share - assuming dilution
65,262

 
62,698

 
65,232

 
62,783


(a), (b), (c), (d) - See notes on page 3.

Page 2



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement-September 30, 2012


Notes to Consolidated Statements of Operations


(a)
Nine months ended September 30, 2011 includes an adjustment recorded in the first quarter 2011 to single premium immediate annuity reserves which reduced interest sensitive and index product benefits by $4.2 million and increased net income and earnings per common share - assuming dilution by $2.7 million and $0.04 per share, respectively.
(b)
Other operating costs and expenses for the three and nine months ended September 30, 2012 include $2.2 million and $7.2 million, respectively, of expense related to the impact of the prospective adoption (effective January 1, 2012) of revised accounting guidance for deferred policy acquisition costs. This change, including the impact on related amortization expense, increased the net loss and decreased operating income for the three months ended September 30, 2012 by $1.5 million, decreased net income and operating income for the nine months ended September 30, 2012 by $4.6 million, increased loss per commons share - assuming dilution and decreased operating income per common share - assuming dilution for the three months ended September 30, 2012 by $0.02 per share, and decreased earnings per common share - assuming dilution and operating earnings per common share - assuming dilution for the nine months ended September 30, 2012 by $0.07 per share.
(c)
Three and nine months ended September 30, 2012 include expense from unlocking which decreased amortization of deferred sales inducements by $0.2 million and increased amortization of deferred policy acquisition costs by $3.7 million, increased the net loss for the three months ended September 30, 2012 and decreased net income for the nine months ended September 30, 2012 by $2.2 million and increased loss per common share - assuming dilution for the three months ended September 30, 2012 and decreased earnings per common share - assuming dilution for the nine months ended September 30, 2012 by $0.03 per share.
Three and nine months ended September 30, 2011 include benefit from unlocking which reduced amortization of deferred sales inducements by $5.0 million and amortization of deferred policy acquisition costs by $9.1 million, reduced the net loss for the three months ended September 30, 2011 and increased net income for the nine months ended September 30, 2011 by $9.1 million, reduced loss per common share - assuming dilution for the three months ended September 30, 2011 by $0.15 per share, and increased earnings per common share - assuming dilution for the nine months ended September 30, 2011 by $0.14 per share.
(d)
Three and nine months ended September 30, 2012 include a benefit from the revision of assumptions used in determining reserves held for living income benefit riders consistent with unlocking for deferred policy acquisition costs and deferred sales inducements. The impact decreased interest sensitive and index product benefits for the three and nine months ended September 30, 2012 by $2.2 million; reduced the net loss for the three months ended September 30, 2012, increased net income for the nine months ended September 30, 2012 and increased operating income for the three and nine months ended September 30, 2012 by $1.4 million; reduced loss per common share - assuming dilution for the three months ended September 30, 2012 and increased earnings per common share - assuming dilution for the nine months ended September 30, 2012 and operating income per commons share - assuming dilution for the three and nine months ended September 30, 2012 by $0.02 per share.

Page 3



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement-September 30, 2012


Operating Income
Nine months ended September 30, 2012 (Unaudited)
 
 
 
Adjustments
 
 
 
As Reported
 
Realized Losses and Other Adjustments
 
Derivatives and Other Index Annuity
 
Operating Income (a)
 
(Dollars in thousands, except per share data)
Revenues:
 
 
 
 
 
 
 
Traditional life insurance premiums
$
9,770

 
$
—

 
$
—

 
$
9,770

Annuity product charges
65,176

 
—

 
—

 
65,176

Net investment income
965,763

 
—

 
—

 
965,763

Change in fair value of derivatives
269,404

 
—

 
(293,814
)
 
(24,410
)
Net realized losses on investments, excluding other than temporary
   impairment ("OTTI") losses
(7,925
)
 
7,925

 
—

 
—

Net OTTI losses recognized in operations
(5,545
)
 
5,545

 
—

 
—

Total revenues
1,296,643

 
13,470

 
(293,814
)
 
1,016,299

 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
Insurance policy benefits and change in future policy benefits
6,232

 
—

 
—

 
6,232

Interest sensitive and index product benefits (d)
527,961

 
—

 
—

 
527,961

Amortization of deferred sales inducements (c)
50,359

 
2,628

 
49,609

 
102,596

Change in fair value of embedded derivatives
466,278

 
—

 
(471,851
)
 
(5,573
)
Interest expense on notes payable
21,208

 
—

 
—

 
21,208

Interest expense on subordinated debentures
10,384

 
—

 
—

 
10,384

Amortization of deferred policy acquisition costs (c)
105,086

 
4,456

 
62,144

 
171,686

Other operating costs and expenses (b)
76,785

 
(17,532
)
 
—

 
59,253

Total benefits and expenses
1,264,293

 
(10,448
)
 
(360,098
)
 
893,747

Income before income taxes
32,350

 
23,918

 
66,284

 
122,552

Income tax expense
10,949

 
8,515

 
23,806

 
43,270

Net income (b) (c) (d)
$
21,401

 
$
15,403

 
$
42,478

 
$
79,282

 
 
 
 
 
 
 
 
Earnings per common share
$
0.35

 
 
 
 
 
$
1.31

Earnings per common share - assuming dilution (b) (c) (d)
$
0.34

 
 
 
 
 
$
1.22


(a)
In addition to net income, we have consistently utilized operating income, operating income per common share and operating income per common share - assuming dilution, non-GAAP financial measures commonly used in the life insurance industry, as economic measures to evaluate our financial performance. Operating income equals net income adjusted to eliminate the impact of net realized gains and losses on investments including net OTTI losses recognized in operations, litigation reserve and fair value changes in derivatives and embedded derivatives. Because these items fluctuate from quarter to quarter in a manner unrelated to core operations, we believe measures excluding their impact are useful in analyzing operating trends. We believe the combined presentation and evaluation of operating income together with net income, provides information that may enhance an investor’s understanding of our underlying results and profitability.
(b)    See note (b) on page 3.
(c)
See note (c) on page 3 for discussion of the impact of unlocking on "As Reported" amounts and note (c) on page 7 for discussion of the impact of unlocking on "Operating Income" amounts.
(d)    See note (d) on page 3.
Change in fair value of derivatives:
 
 
 
 
 
 
 
Proceeds received at expiration
$
253,619

 
 
 
$
—

 
$
253,619

Cost of money for fixed index annuities
(272,456
)
 
 
 
—

 
(272,456
)
2015 notes hedges, interest rate swap and interest rate caps
(10,610
)
 
 
 
5,037

 
(5,573
)
Change in the difference between fair value and remaining
   option cost at beginning and end of period
298,851

 
 
 
(298,851
)
 
—

 
$
269,404

 
 
 
$
(293,814
)
 
$
(24,410
)
 
 
 
 
 
 
 
 
Index credits included in interest credited to account balances
$
253,490

 
 
 
 
 
$
253,490


Page 4



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement-September 30, 2012


Operating Income
Three months ended September 30, 2012 (Unaudited)
 
 
 
Adjustments
 
 
 
As Reported
 
Realized Losses and Other Adjustments
 
Derivatives and Other Index Annuity
 
Operating Income (a)
 
(Dollars in thousands, except per share data)
Revenues:
 
 
 
 
 
 
 
Traditional life insurance premiums
$
3,300

 
$
—

 
$
—

 
$
3,300

Annuity product charges
23,875

 
—

 
—

 
23,875

Net investment income
318,594

 
—

 
—

 
318,594

Change in fair value of derivatives
161,090

 
—

 
(96,232
)
 
64,858

Net realized losses on investments, excluding other than temporary
   impairment ("OTTI") losses
(1,238
)
 
1,238

 
—

 
—

Net OTTI losses recognized in operations
(1,686
)
 
1,686

 
—

 
—

Total revenues
503,935

 
2,924

 
(96,232
)
 
410,627

 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
Insurance policy benefits and change in future policy benefits
1,865

 
—

 
—

 
1,865

Interest sensitive and index product benefits (d)
246,105

 
—

 
—

 
246,105

Amortization of deferred sales inducements (c)
7,709

 
1,306

 
26,972

 
35,987

Change in fair value of embedded derivatives
188,201

 
—

 
(186,362
)
 
1,839

Interest expense on notes payable
7,141

 
—

 
—

 
7,141

Interest expense on subordinated debentures
3,235

 
—

 
—

 
3,235

Amortization of deferred policy acquisition costs (c)
25,954

 
2,077

 
33,559

 
61,590

Other operating costs and expenses (b)
36,170

 
(17,532
)
 
—

 
18,638

Total benefits and expenses
516,380

 
(14,149
)
 
(125,831
)
 
376,400

Income (loss) before income taxes
(12,445
)
 
17,073

 
29,599

 
34,227

Income tax expense (benefit)
(4,616
)
 
6,078

 
10,599

 
12,061

Net income (loss) (b) (c) (d)
$
(7,829
)
 
$
10,995

 
$
19,000

 
$
22,166

 
 
 
 
 
 
 
 
Earnings per common share
$
(0.13
)
 
 
 
 
 
$
0.35

Earnings per common share - assuming dilution (b) (c) (d)
$
(0.13
)
 
 
 
 
 
$
0.34


(a)
In addition to net income, we have consistently utilized operating income, operating income per common share and operating income per common share - assuming dilution, non-GAAP financial measures commonly used in the life insurance industry, as economic measures to evaluate our financial performance. Operating income equals net income adjusted to eliminate the impact of net realized gains and losses on investments including net OTTI losses recognized in operations, litigation reserve and fair value changes in derivatives and embedded derivatives. Because these items fluctuate from quarter to quarter in a manner unrelated to core operations, we believe measures excluding their impact are useful in analyzing operating trends. We believe the combined presentation and evaluation of operating income together with net income (loss), provides information that may enhance an investor’s understanding of our underlying results and profitability.
(b)
See note (b) on page 3.
(c)
See note (c) on page 3 for discussion of the impact of unlocking on "As Reported" amounts and note (c) on page 7 for discussion of the impact of unlocking on "Operating Income" amounts.
(d)    See note (d) on page 3.
Change in fair value of derivatives:
 
 
 
 
 
 
 
Proceeds received at expiration
$
152,716

 
 
 
$
—

 
$
152,716

Cost of money for fixed index annuities
(89,697
)
 
 
 
—

 
(89,697
)
2015 notes hedges, interest rate swap and interest rate caps
355

 
 
 
1,484

 
1,839

Change in the difference between fair value and remaining
   option cost at beginning and end of period
97,716

 
 
 
(97,716
)
 
—

 
$
161,090

 
 
 
$
(96,232
)
 
$
64,858

 
 
 
 
 
 
 
 
Index credits included in interest credited to account balances
$
152,150

 
 
 
 
 
$
152,150


Page 5



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement-September 30, 2012


Operating Income/Net Income
Quarterly Summary - Most Recent 5 Quarters (Unaudited)
 
Q3 2012
 
Q2 2012
 
Q1 2012
 
Q4 2011
 
Q3 2011
 
(Dollars in thousands, except per share data)
Revenues:
 
 
 
 
 
 
 
 
 
Traditional life insurance premiums
$
3,300

 
$
3,248

 
$
3,222

 
$
2,820

 
$
3,126

Annuity product charges
23,875

 
21,908

 
19,393

 
18,930

 
20,405

Net investment income
318,594

 
320,259

 
326,910

 
324,272

 
305,502

Change in fair value of derivatives
64,858

 
(65,164
)
 
(24,104
)
 
(1,275
)
 
12,411

Total revenues
410,627

 
280,251

 
325,421

 
344,747

 
341,444

 
 
 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
 
 
Insurance policy benefits and change in future policy benefits
1,865

 
2,250

 
2,117

 
1,588

 
1,888

Interest sensitive and index product benefits (d)
246,105

 
142,733

 
139,123

 
154,440

 
223,232

Amortization of deferred sales inducements (c)
35,987

 
33,141

 
33,468

 
31,521

 
24,279

Change in fair value of embedded derivatives
1,839

 
(24,163
)
 
16,751

 
23,899

 
(41,447
)
Interest expense on notes payable
7,141

 
7,072

 
6,995

 
7,910

 
7,984

Interest expense on subordinated debentures
3,235

 
3,563

 
3,586

 
3,542

 
3,488

Interest expense on amounts due under repurchase agreements
—

 
—

 
—

 
25

 
—

Amortization of deferred policy acquisition costs (c)
61,590

 
54,457

 
55,639

 
53,525

 
42,197

Other operating costs and expenses (b)
18,638

 
18,902

 
21,713

 
17,518

 
15,903

Total benefits and expenses
376,400

 
237,955

 
279,392

 
293,968

 
277,524

Operating income before income taxes
34,227

 
42,296

 
46,029

 
50,779

 
63,920

Income tax expense
12,061

 
14,940

 
16,269

 
18,177

 
22,456

Operating income (a) (b) (c) (d)
22,166

 
27,356

 
29,760

 
32,602

 
41,464

Net realized gains (losses) and net OTTI losses on investments,
   net of offsets
(1,415
)
 
(861
)
 
(3,547
)
 
(5,616
)
 
(8,988
)
Litigation reserve, net of offsets
(9,580
)
 
—

 
—

 
—

 
—

Net effect of derivatives and other index annuity, net of offsets
(19,000
)
 
(7,736
)
 
(15,742
)
 
22,713

 
(45,544
)
Net income (loss)
$
(7,829
)
 
$
18,759

 
$
10,471

 
$
49,699

 
$
(13,068
)
 
 
 
 
 
 
 
 
 
 
Operating income per common share (a)
$
0.35

 
$
0.46

 
$
0.50

 
$
0.55

 
$
0.70

Operating income per common share - assuming dilution (a) (b) (c) (d)
$
0.34

 
$
0.43

 
$
0.46

 
$
0.52

 
$
0.67

Earnings (loss) per common share
$
(0.13
)
 
$
0.31

 
$
0.18

 
$
0.83

 
$
(0.22
)
Earnings (loss) per common share - assuming dilution
$
(0.13
)
 
$
0.30

 
$
0.16

 
$
0.79

 
$
(0.22
)
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding (in thousands):
 
 
 
 
 
 
 
 
 
Earnings (loss) per common share
62,504

 
59,943

 
59,701

 
59,641

 
59,596

Earnings (loss) per common share - assuming dilution
65,262

 
64,254

 
65,930

 
63,582

 
62,698


(a), (b), (c) - See notes on page 7.

(d) - See note (d) on page 3.




Page 6



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement-September 30, 2012


(a)
In addition to net income (loss), we have consistently utilized operating income, operating income per common share and operating income per common share - assuming dilution, non-GAAP financial measures commonly used in the life insurance industry, as economic measures to evaluate our financial performance. Operating income equals net income (loss) adjusted to eliminate the impact of net realized gains and losses on investments including net OTTI losses recognized in operations, litigation reserve and fair value changes in derivatives and embedded derivatives. Because these items fluctuate from quarter to quarter in a manner unrelated to core operations, we believe measures excluding their impact are useful in analyzing operating trends. We believe the combined presentation and evaluation of operating income together with net income (loss), provides information that may enhance an investor’s understanding of our underlying results and profitability.
(b)
Other operating costs and expenses for the third, second and first quarters of 2012 include $2.2 million, $2.0 million and $3.0 million, respectively, of expense related to the impact of the prospective adoption (effective January 1, 2012) of revised accounting guidance for deferred policy acquisition costs. This change, including the impact on related amortization expense, decreased operating income for the third, second and first quarter of 2012 by $1.4 million, $1.3 million and $1.9 million, respectively, and reduced operating income per common share - assuming dilution for the third, second and first quarters of 2012 by $0.02, $0.02 and $0.03, respectively.
(c)
Three months ended September 30, 2012 includes expense from unlocking which increased amortization of deferred sales inducements by $2.4 million and amortization of deferred acquisition costs by $7.3 million and decreased operating income by $6.3 million and operating income per common share - assuming dilution by $0.09 per share.
Three months ended September 30, 2011 includes benefit from unlocking which reduced amortization of deferred sales inducements by $7.3 million and amortization of deferred acquisition costs by $12.1 million and increased operating income by $12.5 million and operating income per common share - assuming dilution by $0.20 per share.

Page 7



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement-September 30, 2012



Capitalization/Book Value per Share

    
 
September 30, 2012
 
December 31, 2011
 
(Dollars in thousands, except per share data)
Capitalization:
 
 
 
Notes payable
$
306,696

 
$
297,608

Subordinated debentures payable to subsidiary trusts
245,825

 
268,593

   Total debt
552,521

 
566,201

Total stockholders’ equity
1,714,953

 
1,408,679

Total capitalization
2,267,474

 
1,974,880

Accumulated other comprehensive income (AOCI)
(712,186
)
 
(457,229
)
Total capitalization excluding AOCI (a)
$
1,555,288

 
$
1,517,651

 
 
 
 
Total stockholders’ equity
$
1,714,953

 
$
1,408,679

Accumulated other comprehensive income
(712,186
)
 
(457,229
)
Total stockholders’ equity excluding AOCI (a)
$
1,002,767

 
$
951,450

 
 
 
 
Common shares outstanding (b)
62,393,059

 
59,131,995

 
 
 
 
Book Value per Share: (c)
 
 
 
Book value per share including AOCI
$
27.49

 
$
23.82

Book value per share excluding AOCI (a)
$
16.07

 
$
16.09

 
 
 
 
Debt-to-Capital Ratios: (d)
 
 
 
Senior debt / Total capitalization
19.7
%
 
19.6
%
Adjusted debt / Total capitalization
20.5
%
 
22.3
%

(a)
Total capitalization, total stockholders’ equity and book value per share excluding AOCI, non-GAAP financial measures, are based on stockholders’ equity excluding the effect of AOCI. Since AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale investments, we believe these non-GAAP financial measures provide useful supplemental information.
(b)
Common shares outstanding include shares held by the NMO Deferred Compensation Trust: 2012 - 1,139,702 shares; 2011 - 1,631,548 shares and exclude unallocated shares held by ESOP: 2012 - 294,770 shares; 2011 - 336,093 shares.
(c)
Book value per share including and excluding AOCI is calculated as total stockholders’ equity and total stockholders’ equity excluding AOCI divided by the total number of shares of common stock outstanding.
(d)
Debt-to-capital ratios are computed using total capitalization excluding AOCI. Adjusted debt includes notes payable and the portion of the total subordinated debentures payable to subsidiary trusts outstanding (qualifying trust preferred securities) that exceeds 15% of total capitalization excluding AOCI.


Page 8



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement-September 30, 2012



Annuity Deposits by Product Type
    
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
Year Ended December 31,
Product Type
 
2012
 
2011
 
2012
 
2011
 
2011
 
 
(Dollars in thousands)
Fixed Index Annuities:
 
 
 
 
 
 
 
 
 
 
Index Strategies
 
$
547,230

 
$
701,796

 
$
1,568,989

 
$
2,075,800

 
$
2,839,295

Fixed Strategy
 
315,029

 
317,091

 
885,589

 
986,724

 
1,377,987

 
 
862,259

 
1,018,887

 
2,454,578

 
3,062,524

 
4,217,282

Fixed Rate Annuities:
 
 
 
 
 
 
 
 
 
 
Single-Year Rate Guaranteed
 
22,413

 
37,195

 
78,041

 
118,084

 
169,304

Multi-Year Rate Guaranteed
 
45,037

 
116,768

 
205,934

 
279,407

 
397,925

Single premium immediate annuities
 
52,315

 
94,514

 
140,265

 
257,995

 
305,603

 
 
119,765

 
248,477

 
424,240

 
655,486

 
872,832

Total before coinsurance ceded
 
982,024

 
1,267,364

 
2,878,818

 
3,718,010

 
5,090,114

Coinsurance ceded
 
36,539

 
94,412

 
167,986

 
230,620

 
326,531

Net after coinsurance ceded
 
$
945,485

 
$
1,172,952

 
$
2,710,832

 
$
3,487,390

 
$
4,763,583


Surrender Charge Protection and Account Values by Product Type
Annuity Surrender Charges and Net (of coinsurance) Account Values at September 30, 2012:
    
 
 
Surrender Charge
 
Net Account Value
Product Type
 
Avg.
Years
At Issue
 
Avg.
Years
Remaining
 
Avg.
%
Remaining
 
Dollars in Thousands
 
%
 
 
 
 
 
 
 
 
 
 
 
Fixed Index Annuities
 
14.2
 
10.5
 
16.1%
 
$
24,701,911

 
92.5
%
Single-Year Fixed Rate Guaranteed Annuities
 
11.1
 
4.7
 
8.0%
 
1,442,821

 
5.4
%
Multi-Year Fixed Rate Guaranteed Annuities (a)
 
6.2
 
1.9
 
4.6%
 
567,632

 
2.1
%
Total
 
13.9
 
10.0
 
15.4%
 
$
26,712,364

 
100.0
%
(a) 55% of Net Account Value is no longer in multi-year rate guarantee period and can be adjusted annually.



Page 9



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement-September 30, 2012



Annuity Liability Characteristics
    
 
 
Fixed
Annuities
Account Value
 
Fixed Index
Annuities
Account Value
 
 
(Dollars in thousands)
SURRENDER CHARGE PERCENTAGES:
 
 
 
 
No surrender charge
 
$
539,662

 
$
528,685

0.0% < 2.0%
 
42,977

 
199,301

2.0% < 3.0%
 
156,979

 
190,087

3.0% < 4.0%
 
27,684

 
364,953

4.0% < 5.0%
 
51,942

 
231,792

5.0% < 6.0%
 
24,021

 
241,653

6.0% < 7.0%
 
164,751

 
201,962

7.0% < 8.0%
 
207,805

 
482,862

8.0% < 9.0%
 
172,189

 
643,403

9.0% < 10.0%
 
119,927

 
485,815

10.0% or greater
 
502,516

 
21,131,398

 
 
$
2,010,453

 
$
24,701,911


    
 
 
Fixed and
Fixed Index
Annuities
Account Value
 
Weighted
Average
Surrender
Charge
 
 
(Dollars in thousands)
 
 
SURRENDER CHARGE EXPIRATION BY YEAR:
 
 
 
 
Out of Surrender Charge
 
$
1,068,347

 
—
%
2012
 
93,847

 
1.89
%
2013
 
490,384

 
2.20
%
2014
 
542,505

 
3.60
%
2015
 
580,886

 
5.32
%
2016
 
833,417

 
6.95
%
2017
 
987,789

 
8.04
%
2018
 
846,098

 
10.29
%
2019
 
598,293

 
10.91
%
2020
 
933,850

 
12.35
%
2021
 
1,241,197

 
14.10
%
2022
 
1,721,029

 
15.92
%
2023
 
3,817,649

 
18.36
%
2024
 
4,146,752

 
19.07
%
2025
 
3,191,739

 
19.00
%
2026
 
2,441,514

 
19.10
%
2027
 
1,950,225

 
19.64
%
2028
 
1,207,179

 
19.99
%
2029
 
19,664

 
20.00
%
 
 
$
26,712,364

 
15.39
%

Page 10



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement-September 30, 2012


Annuity Liability Characteristics
    
 
 
Fixed
Annuities
Account Value
 
Fixed Index
Annuities
Account Value
 
 
(Dollars in thousands)
CREDITED RATE (INCLUDING BONUS INTEREST) VS. ULTIMATE MINIMUM GUARANTEED RATE DIFFERENTIAL:
 
 
 
 
No differential
 
$
597,146

 
$
698,131

› 0.0% - 0.25%
 
421,578

 
601,658

› 0.25% - 0.5%
 
136,168

 
100,309

› 0.5% - 1.0% (a)
 
329,731

 
1,139,412

› 1.0% - 1.5% (a)
 
126,156

 
29,965

› 1.5% - 2.0%
 
156,786

 
2,343

› 2.0% - 2.5%
 
4,034

 
—

› 2.5% - 3.0%
 
41,377

 
—

1.00% ultimate guarantee - 2.34% wtd avg interest rate (b)
 
15,037

 
—

1.50% ultimate guarantee - 1.83% wtd avg interest rate (b)
 
73,807

 
1,875,020

2.00% ultimate guarantee - 2.70% wtd avg interest rate (b)
 
108,633

 
—

2.25% ultimate guarantee - 2.76% wtd avg interest rate (b)
 
—

 
1,598,258

3.00% ultimate guarantee - 2.96% wtd avg interest rate (b)
 
—

 
3,184,572

Allocated to index strategies (see tables that follow)
 
—

 
15,472,243

 
 
$
2,010,453

 
$
24,701,911

(a)
$168,643 of Fixed Annuities Account Value have a guarantee of 2.25% for the first 10 years and 3.00% thereafter. They begin increasing in 2014. $652,668 of Index Annuities Account Value is in fixed rate strategies that have a guarantee of 2.25% for the first 10 years and 3.00% thereafter. They begin increasing in 2014.    
(b)
The minimum guaranteed interest rate for the fixed rate or the fixed rate strategy is 1.00%. The ultimate guaranteed rate is applied on less than 100% of the premium.


Page 11



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement-September 30, 2012


Annuity Liability Characteristics

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

 
$
1,832

 
$
667,860

 
$
53,230

 
$
284,563

3% - 3.25%
1,155,764

 
—

 
—

 
—

 
—

4% - 5%
11,564

 
120,023

 
1,362,111

 
—

 
—

5% - 6%
—

 
6,360

 
2,167,561

 
—

 
—

6% - 7%
—

 
—

 
3,215,506

 
—

 
—

>= 7%
—

 
12,612

 
234,805

 
135,663

 
89,452


    
Annual Monthly Average and Point-to-Point with Participation Rates
 
Minimum Guaranteed Participation Rate
 
10%
 
25%
 
35%
 
50% +
Current Participation Rate
(Dollars in thousands)
At minimum
$
19

 
$
330,059

 
$
172,776

 
$
201,506

< 20%
98,934

 
—

 
—

 
—

20% - 40%
80,005

 
498,900

 
—

 
—

40% - 60%
—

 
176,467

 
141,458

 
1,287

>= 60%
—

 
23,760

 
19,081

 
16,627


    
S&P 500 Monthly Point-to-Point - Minimum Guaranteed Monthly Cap = 1% (Dollars in thousands)

Current Cap
 
At minimum
$
8,996

1.6% - 1.8%
1,220,397

2.0% - 2.4%
1,628,490

>= 2.4%
1,324,580


If all caps and participation rates were reduced to minimum caps and participation rates, the cost of options would decrease by 0.63% based upon prices of options for the week ended October 16, 2012.


Page 12



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement-September 30, 2012



Spread Results
    
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
Year Ended December 31,
 
 
2012
 
2011
 
2012
 
2011
 
2011
Reported Amounts
 
 
 
 
 
 
 
 
 
 
Average yield on invested assets
 
5.17%
 
5.70%
 
5.36%
 
5.81%
 
5.80%
Aggregate cost of money
 
2.55%
 
2.75%
 
2.60%
 
2.77%
 
2.77%
Aggregate investment spread
 
2.62%
 
2.95%
 
2.76%
 
3.04%
 
3.03%
 
 
 
 
 
 
 
 
 
 
 
Adjustments
 
 
 
 
 
 
 
 
 
 
Investment yield - temporary cash investments
 
0.29%
 
0.11%
 
0.23%
 
0.09%
 
0.07%
Investment yield - additional prepayment income
 
(0.04)%
 
—%
 
(0.04)%
 
—%
 
—%
Cost of money effect of (under) over hedging
 
0.01%
 
0.05%
 
0.01%
 
0.07%
 
0.06%
 
 
 
 
 
 
 
 
 
 
 
Adjusted Amounts
 
 
 
 
 
 
 
 
 
 
Average yield on invested assets
 
5.42%
 
5.81%
 
5.55%
 
5.90%
 
5.87%
Aggregate cost of money
 
2.56%
 
2.80%
 
2.61%
 
2.84%
 
2.83%
Aggregate investment spread
 
2.86%
 
3.01%
 
2.94%
 
3.06%
 
3.04%
 
 
 
 
 
 
 
 
 
 
 


Summary of Invested Assets
    
 
September 30, 2012
 
December 31, 2011
 
Carrying
Amount
 
Percent
 
Carrying
Amount
 
Percent
 
(Dollars in thousands)
Fixed maturity securities:
 
 
 
 
 
 
 
United States Government full faith and credit
$
5,205

 
—
%
 
$
4,678

 
—
%
United States Government sponsored agencies
1,958,737

 
7.5
%
 
4,368,053

 
17.9
%
United States municipalities, states and territories
3,571,462

 
13.7
%
 
3,333,383

 
13.7
%
Foreign government obligations
98,825

 
0.4
%
 
43,228

 
0.2
%
Corporate securities
13,319,047

 
51.1
%
 
10,192,293

 
41.8
%
Residential mortgage backed securities
2,565,959

 
9.9
%
 
2,703,290

 
11.1
%
Commercial mortgage backed securities
78,912

 
0.3
%
 
—

 
—
%
Other asset backed securities
888,393

 
3.4
%
 
463,390

 
1.9
%
Total fixed maturity securities
22,486,540

 
86.3
%
 
21,108,315

 
86.6
%
Equity securities
61,604

 
0.2
%
 
62,845

 
0.2
%
Mortgage loans on real estate
2,724,321

 
10.5
%
 
2,823,047

 
11.6
%
Derivative instruments
577,784

 
2.2
%
 
273,314

 
1.1
%
Other investments
196,779

 
0.8
%
 
115,930

 
0.5
%
 
$
26,047,028

 
100.0
%
 
$
24,383,451

 
100.0
%



Page 13



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement-September 30, 2012



Credit Quality of Fixed Maturity Securities - September 30, 2012
    
NAIC Designation
 
Carrying
Amount
 
Percent
 
Rating Agency Rating
 
Carrying
Amount
 
Percent
 
 
(Dollars in thousands)
 
 
 
 
 
(Dollars in thousands)
 
 
1
 
$
14,591,003

 
64.9
%
 
Aaa/Aa/A
 
$
13,889,605

 
61.8
%
2
 
7,538,539

 
33.6
%
 
Baa
 
7,214,242

 
32.1
%
3
 
316,752

 
1.4
%
 
Ba
 
254,342

 
1.1
%
4
 
32,361

 
0.1
%
 
B
 
188,838

 
0.9
%
5
 
4,006

 
—
%
 
Caa and lower
 
818,111

 
3.6
%
6
 
3,879

 
—
%
 
In or near default
 
121,402

 
0.5
%
 
 
$
22,486,540

 
100.0
%
 
 
 
$
22,486,540

 
100.0
%

Watch List Securities - September 30, 2012
General Description
 
Amortized
Cost
 
Unrealized
Losses
 
Fair Value
 
Months Below Amortized Cost
 
 
(Dollars in thousands)
 
 
Corporate bonds:
 
 
 
 
 
 
 
 
Finance
 
$
68,975

 
$
(10,040
)
 
$
58,935

 
7 - 22
Industrial
 
38,877

 
(6,553
)
 
32,324

 
14 - 25
 
 
$
107,852

 
$
(16,593
)
 
$
91,259

 
 



Page 14



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement-September 30, 2012


Summary of Residential Mortgage Backed Securities
    
Collateral Type
 
Principal
Amount

 
Amortized
Cost
 
Fair Value
 
 
(Dollars in thousands)
OTTI has not been recognized
 
 
 
 
 
 
Government agency
 
$
641,422

 
$
590,724

 
$
693,914

Prime
 
945,241

 
900,427

 
947,156

Alt-A
 
42,240

 
42,814

 
42,905

 
 
$
1,628,903

 
$
1,533,965

 
$
1,683,975

OTTI has been recognized
 
 
 
 
 
 
Prime
 
$
626,695

 
$
551,983

 
$
543,988

Alt-A
 
434,107

 
347,132

 
337,996

 
 
$
1,060,802

 
$
899,115

 
$
881,984

Total by collateral type
 
 
 
 
 
 
Government agency
 
$
641,422

 
$
590,724

 
$
693,914

Prime
 
1,571,936

 
1,452,410

 
1,491,144

Alt-A
 
476,347

 
389,946

 
380,901

 
 
$
2,689,705

 
$
2,433,080

 
$
2,565,959

Total by NAIC designation
 
 
 
 
 
 
1
 
$
2,403,998

 
$
2,176,085

 
$
2,314,091

2
 
263,528

 
238,012

 
232,812

3
 
18,135

 
16,407

 
17,184

6
 
4,044

 
2,576

 
1,872

 
 
$
2,689,705

 
$
2,433,080

 
$
2,565,959





Page 15



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement-September 30, 2012



Fixed Maturity Securities by Sector
 
September 30, 2012
 
December 31, 2011
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
 
(Dollars in thousands)
Available for sale:
 
 
 
 
 
 
 
United States Government full faith and credit and sponsored agencies
$
1,944,152

 
$
1,963,942

 
$
1,784,485

 
$
1,804,457

United States municipalities, states and territories
3,096,008

 
3,571,462

 
2,981,699

 
3,333,383

Foreign Government obligations
81,126

 
98,825

 
36,373

 
43,228

Corporate securities:
 
 
 
 
 
 
 
Consumer discretionary
1,152,602

 
1,316,919

 
885,834

 
992,042

Consumer staples
739,139

 
853,753

 
614,531

 
701,192

Energy
1,314,331

 
1,500,671

 
1,042,956

 
1,166,284

Financials
2,253,788

 
2,480,059

 
1,802,745

 
1,862,573

Health care
772,026

 
915,403

 
667,014

 
765,274

Industrials
1,331,926

 
1,525,169

 
1,029,933

 
1,151,961

Information technology
788,769

 
876,234

 
486,545

 
547,195

Materials
923,774

 
1,024,836

 
562,272

 
627,405

Military housing
5,326

 
5,366

 
5,331

 
5,482

Telecommunications
347,640

 
389,779

 
251,202

 
268,924

Utilities
1,996,280

 
2,326,113

 
1,727,993

 
1,988,764

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency
590,724

 
693,914

 
449,720

 
547,987

Prime
1,452,410

 
1,491,144

 
1,738,702

 
1,761,890

Alt-A
389,946

 
380,901

 
429,518

 
393,413

Commercial mortgage backed securities
78,682

 
78,912

 
—

 
—

Other asset backed securities:
 
 
 
 
 
 
 
Consumer discretionary
20,064

 
21,622

 
18,061

 
18,512

Consumer staples
34,775

 
38,259

 
5,000

 
5,038

Energy
8,312

 
9,113

 
8,338

 
8,680

Financials
491,991

 
506,003

 
160,994

 
162,892

Industrials
96,433

 
102,143

 
57,547

 
61,285

Military housing
150,718

 
156,819

 
142,903

 
152,549

Telecommunications
7,335

 
8,680

 
7,334

 
8,435

Utilities
14,434

 
16,700

 
14,762

 
17,221

Other
26,318

 
29,054

 
27,570

 
28,778

Redeemable preferred stock - financials
26,985

 
28,697

 
40,817

 
39,265

 
$
20,136,014

 
$
22,410,492

 
$
16,980,179

 
$
18,464,109

Held for investment:
 
 
 
 
 
 
 
United States Government sponsored agencies
$
—

 
$
—

 
$
2,568,274

 
$
2,585,080

Corporate security - financials
76,048

 
63,759

 
75,932

 
59,342

 
$
76,048

 
$
63,759

 
$
2,644,206

 
$
2,644,422



Page 16



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement-September 30, 2012


Mortgage Loans on Commercial Real Estate
    
 
 
September 30, 2012
 
December 31, 2011
 
 
Principal
 
Percent
 
Principal
 
Percent
 
 
(Dollars in thousands)
Geographic distribution
 
 
 
 
 
 
 
 
East
 
$
719,407

 
26.0
%
 
$
719,231

 
25.2
%
Middle Atlantic
 
156,828

 
5.7
%
 
169,240

 
5.9
%
Mountain
 
404,803

 
14.7
%
 
411,054

 
14.4
%
New England
 
26,763

 
1.0
%
 
36,815

 
1.3
%
Pacific
 
325,936

 
11.8
%
 
309,693

 
10.8
%
South Atlantic
 
500,232

 
18.1
%
 
493,764

 
17.3
%
West North Central
 
406,511

 
14.7
%
 
487,693

 
17.1
%
West South Central
 
222,381

 
8.0
%
 
228,521

 
8.0
%
 
 
$
2,762,861

 
100.0
%
 
$
2,856,011

 
100.0
%
 
 
 
 
 
 
 
 
 
Property type distribution
 
 
 
 
 
 
 
 
Office
 
$
702,796

 
25.5
%
 
$
777,343

 
27.2
%
Medical Office
 
143,971

 
5.2
%
 
175,580

 
6.1
%
Retail
 
699,190

 
25.3
%
 
635,916

 
22.3
%
Industrial/Warehouse
 
699,690

 
25.3
%
 
710,426

 
24.9
%
Hotel
 
106,596

 
3.9
%
 
139,193

 
4.9
%
Apartment
 
208,099

 
7.5
%
 
187,548

 
6.6
%
Mixed use/other
 
202,519

 
7.3
%
 
230,005

 
8.0
%
 
 
$
2,762,861

 
100.0
%
 
$
2,856,011

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
September 30, 2012
 
December 31, 2011
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
Credit Exposure - By Payment Activity
 
 
 
 
 
 
 
 
Performing
 
$
2,682,471

 
$
2,743,068

 
 
 
 
In workout
 
44,371

 
67,425

 
 
 
 
Delinquent
 
—

 
6,595

 
 
 
 
Collateral dependent
 
36,019

 
38,923

 
 
 
 
 
 
2,762,861

 
2,856,011

 
 
 
 
Specific loan loss allowance
 
(26,422
)
 
(23,664
)
 
 
 
 
General loan loss allowance
 
(11,600
)
 
(9,300
)
 
 
 
 
Deferred prepayment fees
 
(518
)
 
—

 
 
 
 
 
 
$
2,724,321

 
$
2,823,047

 
 
 
 


Page 17



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement-September 30, 2012


Shareholder Information
Corporate Offices:
American Equity Investment Life Holding Company
6000 Westown Parkway
West Des Moines, IA 50266
Inquiries:
D. J. Noble, Executive Chairman    
(515) 457-1703, dnoble@american-equity.com
Debra J. Richardson, Executive Vice President and Secretary
(515) 273-3551, drichardson@american-equity.com        
John M. Matovina, Chief Executive Officer and President
(515) 457-1813, jmatovina@american-equity.com
Ted M. Johnson, Chief Financial Officer and Treasurer
(515) 457-1980, tjohnson@american-equity.com
Common Stock and Dividend Information:
New York Stock Exchange symbol: “AEL”
    
 
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Low
 
Close
 
Dividend Declared
2012
 
 
 
 
 
 
 
First Quarter
$13.09
 
$10.13
 
$12.77
 
$0.00
Second Quarter
$12.95
 
$10.00
 
$11.01
 
$0.00
Third Quarter
$12.36
 
$10.72
 
$11.63
 
$0.00
 
 
 
 
 
 
 
 
2011
 
 
 
 
 
 
 
First Quarter
$13.93
 
$11.27
 
$13.12
 
$0.00
Second Quarter
$13.53
 
$11.91
 
$12.71
 
$0.00
Third Quarter
$13.22
 
$8.01
 
$8.75
 
$0.00
Fourth Quarter
$11.82
 
$8.05
 
$10.40
 
$0.12
 
 
 
 
 
 
 
 
2010
 
 
 
 
 
 
 
First Quarter
$10.99
 
$6.65
 
$10.65
 
$0.00
Second Quarter
$11.64
 
$8.53
 
$10.32
 
$0.00
Third Quarter
$11.19
 
$9.19
 
$10.24
 
$0.00
Fourth Quarter
$13.01
 
$10.11
 
$12.55
 
$0.10
Transfer Agent:
Computershare Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940-0310
Phone: (877) 282-1169    
Fax: (781) 575-2723
www.computershare.com
Annual Report and Other Information:
Shareholders may receive when available, without charge, a copy of American Equity’s Annual Report, SEC filings and/or press releases by calling Julie L. LaFollette, Investor Relations, at (515) 273-3602 or by visiting our web site at www.american-equity.com.




Page 18



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement-September 30, 2012


Research Analyst Coverage

Steven Schwartz
Raymond James & Associates, Inc.
(312) 612-7686
steven.schwartz@raymondjames.com

Randy Binner
Friedman, Billings, Ramsey & Co., Inc.
(703) 312-1890
rbinner@fbr.com

Edward Shields
Sandler O’Neill & Partners
(312) 281-3487
eshields@sandleroneill.com

Mark Hughes
SunTrust Robinson Humphrey
(615) 748-5680
mark_hughes@rhco.com

Daniel Furtado
Jefferies & Company, Inc.
(415) 229-1569
dfurtado@jefferies.com

Paul Sarran, Mark Finkelstein
Evercore Partners
(312) 445-6440 mark.finkelstein@evercore.com
(312) 445-6441 paul.sarran@evercore.com



Page 19