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Reinsurance and Policy Provisions | 12 Months Ended
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Dec. 31, 2013
Reinsurance Transactions [Abstract] |
Reinsurance and Policy Provisions | Reinsurance and Policy Provisions Coinsurance We have two coinsurance agreements with EquiTrust Life Insurance Company ("EquiTrust"), covering 70% of certain of our index and fixed rate annuities issued from August 1, 2001 through December 31, 2001, 40% of those contracts issued during 2002 and 2003 and 20% of those contracts issued from January 1, 2004 to July 31, 2004. The business reinsured under these agreements may not be recaptured. Coinsurance deposits (aggregate policy benefit reserves transferred to EquiTrust under these agreements) were $0.9 billion and $1.0 billion at December 31, 2013 and 2012, respectively. We remain liable to policyholders with respect to the policy liabilities ceded to EquiTrust should EquiTrust fail to meet the obligations it has coinsured. None of the coinsurance deposits with EquiTrust are deemed by management to be uncollectible. The balance due under these agreements to EquiTrust was $20.7 million and $9.2 million at December 31, 2013 and 2012, respectively, and represents the fair value of call options held by us to fund index credits related to the ceded business net of cash due to or from EquiTrust related to monthly settlements of policy activity and other expenses. We have two coinsurance agreements with Athene Life Re Ltd. ("Athene"), an unauthorized life reinsurer domiciled in Bermuda. One agreement cedes 20% of certain of our fixed index annuities issued from January 1, 2009 through March 31, 2010. The business reinsured under this agreement is not eligible for recapture until the end of the month following seven years after the date of issuance of the policy. The other agreement cedes 80% of our multi-year rate guaranteed annuities issued on or after July 1, 2009. The business reinsured under this agreement may not be recaptured. Coinsurance deposits (aggregate policy benefit reserves transferred to Athene under these agreements) were $2.1 billion and $1.9 billion at December 31, 2013 and 2012, respectively. We remain liable to policyholders with respect to the policy liabilities ceded to Athene should Athene fail to meet the obligations it has coinsured. The annuity deposits that have been ceded to Athene are being held in a trust and American Equity Life is named as the sole beneficiary of the trust. The assets in the trust are required to remain at a value that is sufficient to support the current balance of policy benefit liabilities of the ceded business on a statutory basis. If the value of the trust account would ever reach a point where it is less than the amount of the ceded policy benefit liabilities on a statutory basis, Athene is required to either establish a letter of credit or deposit securities in a trust for the amount of any shortfall. None of the coinsurance deposits with Athene are deemed by management to be uncollectible. The balance due under these agreements to Athene was $27.3 million and $14.0 million at December 31, 2013 and 2012, respectively, and represents the fair value of call options held by us to fund index credits related to the ceded business net of cash due from Athene related to monthly settlements of policy activity. Amounts ceded to EquiTrust and Athene under these agreements are as follows:
| Year Ended December 31,
| 2013 |  | 2012 |  | 2011
| (Dollars in thousands)
Consolidated Statements of Operations |  |  |  |  |
Annuity product charges | $ | 6,551 |  |  | $ | 6,796 |  |  | $ | 8,149 |
Change in fair value of derivatives | 60,876 |  |  | 17,106 |  |  | (2,771 | )
| $ | 67,427 |  |  | $ | 23,902 |  |  | $ | 5,378 |
Interest sensitive and index product benefits | $ | 117,934 |  |  | $ | 94,113 |  |  | $ | 99,724 |
Change in fair value of embedded derivatives | 2,898 |  |  | 9,373 |  |  | (12,428 | )
Other operating costs and expenses | 9,926 |  |  | 9,333 |  |  | 8,970 |
| $ | 130,758 |  |  | $ | 112,819 |  |  | $ | 96,266 |
Consolidated Statements of Cash Flows |  |  |  |  |
Annuity deposits | $ | (182,616 | ) |  | $ | (203,552 | ) |  | $ | (326,531 | )
Cash payments to policyholders | 208,345 |  |  | 208,437 |  |  | 204,116 |
| $ | 25,729 |  |  | $ | 4,885 |  |  | $ | (122,415 | )
Financing Arrangements We have two reinsurance transactions with Hannover Life Reassurance Company of America ("Hannover"), which are treated as reinsurance under statutory accounting practices and as financing arrangements under GAAP. The statutory surplus benefits under these agreements are eliminated under GAAP and the associated charges are recorded as risk charges and included in other operating costs and expenses in the consolidated statements of operations. The transactions became effective March 31, 2011 (the "2011 Hannover Transaction") and July 1, 2013 (the "2013 Hannover Transaction"). The 2011 Hannover Transaction terminates on March 31, 2016, and the statutory surplus benefit is reduced over a five year period and is eliminated upon termination. The 2011 Hannover Transaction is a coinsurance and yearly renewable term reinsurance agreement for statutory purposes and provided $49.2 million in net pretax statutory surplus benefit at inception in 2011. Pursuant to the terms of this agreement, pretax statutory surplus was reduced by $11.3 million, $11.8 million and $9.2 million in 2013, 2012 and 2011, respectively, and is expected to be reduced as follows: 2014—$10.8 million and 2015—$10.3 million and 2016—$2.5 million. These amounts include risk charges equal to 1.25% of the pretax statutory surplus benefit as of the end of each calendar quarter. Risk charges attributable to this agreement were $1.3 million, $1.8 million and $1.7 million during 2013, 2012 and 2011, respectively. The 2013 Hannover Transaction is a yearly renewable term reinsurance agreement for statutory purposes covering 45.6% of waived surrender charges related to penalty free withdrawals, deaths and lifetime income benefit rider payments as well as lifetime income benefit rider payments in excess of policy fund values on certain business. We may recapture the risks reinsured under this agreement as of the end of any quarter after June 30, 2016. However, the agreement, as amended, makes it punitive to us if we do not recapture the business ceded no later than the first quarter of 2018. The reserve credit recorded on a statutory basis by American Equity Life was $288.2 million at December 31, 2013. We pay quarterly reinsurance premiums under this agreement with an experience refund calculated on a quarterly basis and a risk charge equal to 1.25% of the pretax statutory surplus benefit as of the end of each calendar quarter. Risk charges attributable to the 2013 Hannover Transaction were $7.0 million during 2013. The 2013 Hannover Transaction replaces a similar reinsurance agreement with Hannover that was entered into in 2005 (the "2005 Hannover Agreement") which was recaptured simultaneously with entering into the 2013 Hannover Transaction. The 2005 Hannover Agreement was a yearly renewable term reinsurance agreement for statutory purposes covering 47% of waived surrender charges related to penalty free withdrawals and deaths on certain business. The reserve credit recorded on a statutory basis by American Equity Life was $180.3 million at December 31, 2012 under the 2005 Hannover Agreement. Risk charges attributable to the 2005 Hannover Transaction were $5.4 million, $9.9 million and $8.6 million during 2013, 2012 and 2011, respectively. Prior to its recapture in 2013, we had a coinsurance and yearly renewable term reinsurance agreement for statutory purposes that provided $29.5 million in net pretax statutory surplus benefit at inception in 2008 (the "2008 Hannover Transaction"). Pursuant to the terms of this agreement, pretax statutory surplus was reduced by $6.9 million and $6.8 million in 2013 and 2012, respectively. These amounts include risk charges equal to 1.25% of the pretax statutory surplus benefit as of the end of each calendar quarter. Risk charges attributable to the 2008 Hannover Transaction were $0.1 million, $0.5 million and $0.8 million during 2013, 2012 and 2011, respectively. Indemnity Reinsurance In the normal course of business, we seek to limit our exposure to loss on any single insured and to recover a portion of benefits paid under our annuity, life and accident and health insurance products by ceding reinsurance to other insurance enterprises or reinsurers. Reinsurance contracts do not relieve us of our obligations to our policyholders. To the extent that reinsuring companies are later unable to meet obligations under reinsurance agreements, our life insurance subsidiaries would be liable for these obligations, and payment of these obligations could result in losses to us. To limit the possibility of such losses, we evaluate the financial condition of our reinsurers, and monitor concentrations of credit risk. No allowance for uncollectible amounts has been established against our asset for amounts receivable from other insurance companies as none of the receivables are deemed by management to be uncollectible.

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- Definition The entire disclosure pertaining to the existence, magnitude and information about insurance that has been ceded to or assumed from another insurance company, including the methodologies and assumptions used in determining recorded amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 310 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6485557&loc=d3e21549-158491 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 13 -Article 7 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6486672&loc=d3e27261-158547 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6486672&loc=d3e27374-158547 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6480758&loc=d3e6811-158387 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6480758&loc=d3e6816-158387 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 6 -Article 7 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 210 -Section S99 -Paragraph 1 -Subparagraph (SX 210.7-03.6,13) -URI http://asc.fasb.org/extlink&oid=6879938&loc=d3e572229-122910 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 55 -Paragraph 13 -URI http://asc.fasb.org/extlink&oid=6588590&loc=d3e27795-158548 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 55 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=6588590&loc=d3e27703-158548 + Details
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