Subordinated Debentures

Our wholly-owned subsidiary trusts (which are not consolidated) have issued fixed rate and floating rate trust preferred securities and have used the proceeds from these offerings to purchase subordinated debentures from us. We also issued subordinated debentures to the trusts in exchange for all of the common securities of each trust. The sole assets of the trusts are the subordinated debentures and any interest accrued thereon. The interest payment dates on the subordinated debentures correspond to the distribution dates on the trust preferred securities issued by the trusts. The trust preferred securities mature simultaneously with the subordinated debentures. Our obligations under the subordinated debentures and related agreements provide a full and unconditional guarantee of payments due under the trust preferred securities. All subordinated debentures are callable by us at any time, except for the Trust II subordinated debt obligations.

Following is a summary of subordinated debt obligations to the trusts at December 31, 2012 and 2011:



	December 31,
	2012		2011		Interest Rate		Due Date
	(Dollars in thousands)
American Equity Capital Trust I	$	—	$	22,893	8%
American Equity Capital Trust II	76,259		76,090		5%		June 1, 2047
American Equity Capital Trust III	27,840		27,840		*LIBOR +	3.90%	April 29, 2034
American Equity Capital Trust IV	12,372		12,372		*LIBOR +	4.00%	January 8, 2034
American Equity Capital Trust VII	10,830		10,830		*LIBOR +	3.75%	December 14, 2034
American Equity Capital Trust VIII	20,620		20,620		*LIBOR +	3.75%	December 15, 2034
American Equity Capital Trust IX	15,470		15,470		*LIBOR +	3.65%	June 15, 2035
American Equity Capital Trust X	20,620		20,620		*LIBOR +	3.65%	September 15, 2035
American Equity Capital Trust XI	20,620		20,620		*LIBOR +	3.65%	December 15, 2035
American Equity Capital Trust XII	41,238		41,238		*LIBOR +	3.50%	April 7, 2036
	$	245,869	$	268,593

*—three month London Interbank Offered Rate

During 2012, we issued a notice of mandatory redemption of all of our 8% Convertible Junior Subordinated Debentures (the "Debentures") and American Equity Capital Trust I, the holder of all of the Debentures, issued notices of mandatory redemption of all of its 8% Convertible Trust Preferred Securities and all of its 8% Trust Common Securities. As a result of this mandatory redemption, $20.6 million principal amount (688,327 shares) of 8% Convertible Trust Preferred Securities were converted into 2,549,333 shares of our common stock and 38,001 shares of these trust preferred securities were settled in cash of approximately $1.1 million. The remaining 6,000 shares will be settled in cash of $0.2 million. During 2012, prior to the mandatory redemption, 4,000 shares of these trust preferred securities were converted into 14,814 shares shares of our common stock. During 2010, 2,010 shares of these trust preferred securities converted into 7,444 shares of our common stock. There were no conversions during 2011.

The principal amount of the subordinated debentures issued by us to American Equity Capital Trust II ("Trust II") is $100.0 million. These debentures were assigned a fair value of $74.7 million at the date of issue (based upon an effective yield-to-maturity of 6.8%). The difference between the fair value at the date of issue and the principal amount is being accreted over the life of the debentures. The trust preferred securities issued by Trust II were issued to Iowa Farm Bureau Federation, which owns more than 50% of the voting capital stock of FBL Financial Group, Inc. ("FBL"). The consideration received by Trust II in connection with the issuance of its trust preferred securities consisted of fixed income securities of equal value which were issued by FBL.