Schedule II—Condensed Financial Information of Registrant

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY (PARENT COMPANY)

Condensed Balance Sheets

(Dollars in thousands)



	December 31,
	2012			2011
Assets
Cash and cash equivalents	$	11,220		$	12,609
Equity securities of subsidiary trusts	7,398			8,196
Receivable from subsidiaries	535			747
Deferred income taxes	2,378			—
Federal income tax recoverable, including amount from subsidiaries	11,613			8,868
Other assets, including 2015 notes hedges	55,010			61,233
	88,154			91,653
Investment in and advances to subsidiaries	2,235,403			1,933,845
Total assets	$	2,323,557		$	2,025,498

Liabilities and Stockholders' Equity
Liabilities:
Notes payable	$	309,869		$	297,608
Subordinated debentures payable to subsidiary trusts	245,869			268,653
Deferred income taxes	—			460
Other liabilities, including 2015 notes embedded derivative	47,582			50,098
Total liabilities	603,320			616,819
Stockholders' equity:
Common stock	61,751			57,837
Additional paid-in capital	496,715			468,281
Unallocated common stock held by ESOP	(2,583		)	(3,620		)
Accumulated other comprehensive income	686,807			457,229
Retained earnings	477,547			428,952
Total stockholders' equity	1,720,237			1,408,679
Total liabilities and stockholders' equity	$	2,323,557		$	2,025,498

See accompanying note to condensed financial statements.

See accompanying Report of Independent Registered Public Accounting Firm.

Schedule II—Condensed Financial Information of Registrant (Continued)

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY (PARENT COMPANY)

Condensed Statements of Operations

(Dollars in thousands)



	Year Ended December 31,
	2012			2011			2010
Revenues:
Net investment income	$	565		$	298		$	295
Dividends from subsidiary trusts	403			427			455
Investment advisory fees	36,178			29,765			23,713
Surplus note interest from subsidiary	4,080			4,080			4,080
Realized gain on investments	—			18			13
Change in fair value of derivatives	(7,472		)	(21,146		)	27,059
Loss on extinguishment of debt	—			—			(292		)
Total revenues	33,754			13,442			55,323
Expenses:
Change in fair value of embedded derivatives	(2,488		)	(21,002		)	29,595
Interest expense on notes payable	28,479			31,633			22,125
Interest expense on subordinated debentures issued to subsidiary trusts	13,458			13,977			14,906
Other operating costs and expenses	8,228			7,307			6,013
Total expenses	47,677			31,915			72,639
Loss before income taxes and equity in undistributed income of subsidiaries	(13,923		)	(18,473		)	(17,316		)
Income tax benefit	(5,944		)	(7,407		)	(7,417		)
Loss before equity in undistributed income of subsidiaries	(7,979		)	(11,066		)	(9,899		)
Equity in undistributed income of subsidiaries	65,777			97,314			52,832
Net income	$	57,798		$	86,248		$	42,933

See accompanying note to condensed financial statements.

See accompanying Report of Independent Registered Public Accounting Firm.

Schedule II—Condensed Financial Information of Registrant (Continued)

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY (PARENT COMPANY)

Condensed Statements of Cash Flows

(Dollars in thousands)



	Year Ended December 31,
	2012			2011			2010
Operating activities
Net income	$	57,798		$	86,248		$	42,933
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Change in fair value of 2015 notes embedded conversion derivative	(2,488		)	(21,002		)	29,595
Provision for depreciation and amortization	2,382			2,395			1,270
Accrual of discount on equity security	(5		)	(5		)	(4		)
Equity in undistributed income of subsidiaries	(65,777		)	(97,314		)	(52,832		)
Amortization of premium on fixed maturity security	—			1,005			185
Accrual of discount on contingent convertible notes	12,261			13,024			7,761
Change in fair value of derivatives	7,472			21,002			(29,595		)
Realized (gain) loss on investments	—			(18		)	(13		)
Loss (gain) on extinguishment of debt	—			—			292
Accrual of discount on debenture issued to subsidiary trust	110			158			148
Share-based compensation	1,348			866			1,087
ESOP compensation	45			45			82
Deferred income tax benefit	(2,838		)	(4,355		)	(5,153		)
Changes in operating assets and liabilities:
Receivable from subsidiaries	1,205			1,596			(10		)
Federal income tax recoverable	(2,745		)	142			(2,296		)
Other assets	(549		)	1,702			(1,925		)
Other liabilities	(4,469		)	(1,562		)	3,708
Net cash provided by (used in) operating activities	3,750			3,927			(4,767		)

Investing activities
Capital contributions to subsidiaries	—			(2,450		)	(2,400		)
Purchase of fixed maturity security	—			(53,610		)	(50,260		)
Sales, maturities or repayments of fixed maturity securities—available for sale	—			52,623			50,088
Purchases of property, plant and equipment	—			—			(33		)
Net cash provided by (used in) investing activities	—			(3,437		)	(2,605		)

See accompanying note to condensed financial statements.

See accompanying Report of Independent Registered Public Accounting Firm.

Schedule II—Condensed Financial Information of Registrant (Continued)

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY (PARENT COMPANY)

Condensed Statements of Cash Flows (Continued)

(Dollars in thousands)



	Year Ended December 31,
	2012			2011			2010
Financing activities
Financing fees incurred and deferred	$	—		$	(1,566	)	$	(6,800	)
Proceeds from notes payable	—			—			200,000
Repayments of notes payable	—			(46,251		)	(156,641		)
Purchase of 2015 notes hedges	—			—			(37,000		)
Repayment of subordinated debentures	(1,141		)	—			—
Excess tax benefits realized from share-based compensation plans	6			28			31
Proceeds from issuance of common stock	5,370			4,686			6,123
Proceeds from issuance of warrants	—			—			15,600
Dividends paid	(9,374		)	(7,102		)	(5,829		)
Net cash provided by (used in) financing activities	(5,139		)	(50,205		)	15,484
Increase (decrease) in cash and cash equivalents	(1,389		)	(49,715		)	8,112
Cash and cash equivalents at beginning of year	12,609			62,324			54,212
Cash and cash equivalents at end of year	$	11,220		$	12,609		$	62,324
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest on notes payable	$	14,564		$	16,917		$	11,085
Interest on subordinated debentures	13,102			13,703			14,717
Non-cash financing activity:
Conversion of subordinated debentures	20,770			—			60

See accompanying note to condensed financial statements.

See accompanying Report of Independent Registered Public Accounting Firm.

Schedule II—Condensed Financial Information of Registrant (Continued)

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY (PARENT COMPANY)

Note to Condensed Financial Statements

December 31, 2012

1. Basis of Presentation

The accompanying condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto of American Equity Investment Life Holding Company (Parent Company).

In the Parent Company financial statements, its investment in and advances to subsidiaries are stated at cost plus equity in undistributed income (losses) of subsidiaries since the date of acquisition and net unrealized gains/losses on the subsidiaries' fixed maturity securities classified as "available for sale" and equity securities.

See notes 9 and 10 to the consolidated financial statements for a description of the Parent Company's notes payable and subordinated debentures payable to subsidiary trusts.