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Notes Payable | 3 Months Ended
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Mar. 31, 2014
Debt Disclosure [Abstract] |
Notes Payable | Notes Payable The 5.25% Contingent Convertible Senior Notes due December 15, 2029 (the "2029 notes") are accounted for separately as a liability component and an equity component in the consolidated balance sheets. The carrying amount of the 2015 notes and the 2029 notes, the carrying amount of the equity component of the 2029 notes and the amount by which the if-converted value exceeds the outstanding principal for both the 2015 notes and the 2029 notes are as follows:
| March 31, 2014 |  | December 31, 2013
| September 2015 Notes |  | December 2029 Notes |  | September 2015 Notes |  | December 2029 Notes
| (Dollars in thousands)
Notes payable: |  |  |  |  |  |  |
Principal amount of liability component | $ | 91,951 |  |  | $ | 37,032 |  |  | $ | 91,951 |  |  | $ | 68,373 |
Unamortized discount | (5,712 | ) |  | (1,513 | ) |  | (6,623 | ) |  | (3,743 | )
Net carrying amount of liability component | $ | 86,239 |  |  | $ | 35,519 |  |  | $ | 85,328 |  |  | $ | 64,630 |
Additional paid-in capital: |  |  |  |  |  |  |
Carrying amount of equity component |  |  | $ | 4,983 |  |  |  |  | $ | 15,586 |
Amount by which the if-converted value exceeds principal | $ | 83,860 |  |  | $ | 56,960 |  |  | $ | 104,403 |  |  | $ | 113,169 |
The discount is being amortized over the expected lives of the notes, which is the maturity date of September 15, 2015 for the 2015 notes and the first put/call date of December 15, 2014 for the 2029 notes. The effective interest rates during the discount amortization periods are 8.9% and 11.9% on the 2015 notes and the 2029 notes, respectively. The interest cost recognized in operations for the convertible notes, inclusive of the coupon and amortization of the discount and debt issue costs, was $3.4 million and $7.2 million for the three months ended March 31, 2014 and 2013, respectively. We are required to include the dilutive effect of the 2029 notes in our diluted earnings per share calculation. Because these notes include a mandatory cash settlement feature for the principal amount, incremental dilutive shares will only exist when the fair value of our common stock at the end of the reporting period exceeds the conversion price per share of $9.57. At March 31, 2014 and 2013, the conversion premium of the 2029 notes was dilutive and the effect has been included in diluted earnings per share for the three months ended March 31, 2014 and 2013. The 2015 notes and the 2015 notes hedges are excluded from the dilutive effect in our diluted earnings per share calculation as they are currently to be settled only in cash. During the first quarter of 2014, we extinguished $31.3 million principal amount of our 2029 notes. Total consideration paid to holders of the 2029 notes consisted of $54.6 million in cash and and $23.2 million in shares of our common stock (946,793 shares). The carrying value of the 2029 notes at extinguishment was $29.9 million which resulted in a loss of $2.3 million on extinguishment of debt, net of income taxes. Subsequent to March 31, 2014, we extinguished $1.9 million principal amount of our 2029 notes for $4.5 million in cash. The carrying value of the 2029 notes at extinguishment was $1.8 million which resulted in a loss of $0.1 million, net of income taxes. In addition, we extinguished $32.5 million principal amount of our 2015 notes. Total consideration paid to holders of the 2015 notes consisted of $33.3 million in cash and $27.0 million in shares of our common stock (1,225,845 shares). The carrying value of the 2015 notes at extinguishment was $30.5 million which resulted in a loss of $2.6 million, net of income taxes. In 2013, we entered into a $140 million unsecured revolving line of credit agreement with five banks for which the revolving period is four years. The interest rate is floating at a rate based on our election that will be equal to the alternate base rate (as defined in the credit agreement) plus the applicable margin or the adjusted LIBOR rate (as defined in the credit agreement) plus the applicable margin. We also pay a commitment fee based on the available unused portion of the credit facility. The applicable margin and commitment fee rate are based on our credit rating and can change throughout the period of the credit facility. Based upon our current credit rating, the applicable margin is 1.00% for alternate base rate borrowings and 2.00% for adjusted LIBOR rate borrowings, and the commitment fee is 0.35%. Under this agreement, we are required to maintain a minimum risk-based capital ratio at our subsidiary, American Equity Investment Life Insurance Company ("American Equity Life"), of at least 275%, a maximum ratio of adjusted debt to total adjusted capital of 0.35, and a minimum level of statutory surplus at American Equity Life equal to the sum of 1) 80% of statutory surplus at September 30, 2013, 2) 50% of the statutory net income for each fiscal quarter ending after September 30, 2013, and 3) 50% of all capital contributed to American Equity Life after September 30, 2013. The agreement contains an accordion feature that allows us, on up to three occasions and subject to credit availability, to increase the credit facility by an additional $50 million in the aggregate. We also have the ability to extend the maturity date by an additional one year past the initial maturity date of November 22, 2017 with the consent of the extending banks. There are currently no guarantors of the credit facility, but certain of our subsidiaries must guarantee our obligations under the credit agreement if such subsidiaries guarantee other material amounts of our debt. No amounts were outstanding at March 31, 2014 and December 31, 2013. As part of our investment strategy, we enter into securities repurchase agreements (short-term collateralized borrowings). The maximum amount borrowed during the three months ended March 31, 2014 was $138.7 million. We had no borrowings under repurchase agreements during the three months ended March 31, 2013. When we do borrow cash on these repurchase agreements, we pledge collateral in the form of debt securities with fair values approximately equal to the amount due and we use the cash to purchase debt securities ahead of the time we collect the cash from selling annuity policies to avoid a lag between the investment of funds and the obligation to credit interest to policyholders. We earn investment income on the securities purchased with these borrowings at a rate in excess of the cost of these borrowings. Such borrowings averaged $27.5 million for the three months ended March 31, 2014. The weighted average interest rate on amounts due under repurchase agreements was 0.15% for the three months ended March 31, 2014.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 19, 20, 22 -Article 5 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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