EX-99.2 3 a2014-06x30_ael8kexhibit992.htm FINANCIAL SUPPLEMENT 2014-06-30_AEL 8K Exhibit 99.2

Exhibit 99.2



AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement

June 30, 2014


A.
Financial Highlights
 
 
 
 
 
Non-GAAP Financial Measures
 
 
 
 
 
 
 
 
 
 
B.
Product Summary
 
 
 
 
 
 
 
 
 
C.
Investment Summary
 
 
 
 
 
 
 
 
 
D.
 
 
 
E.




AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2014

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
 
June 30, 2014
 
December 31, 2013
 
(Unaudited)
 
 
Assets
 
 
 
Investments:
 
 
 
Fixed maturity securities:
 
 
 
Available for sale, at fair value
$
29,317,572

 
$
26,610,447

Held for investment, at amortized cost
76,342

 
76,255

Equity securities, available for sale, at fair value
7,762

 
7,778

Mortgage loans on real estate
2,543,810

 
2,581,082

Derivative instruments
905,688

 
856,050

Other investments
221,459

 
215,042

Total investments
33,072,633

 
30,346,654

 
 
 
 
Cash and cash equivalents
1,464,533

 
897,529

Coinsurance deposits
3,085,340

 
2,999,618

Accrued investment income
304,041

 
301,641

Deferred policy acquisition costs
2,040,084

 
2,426,652

Deferred sales inducements
1,578,621

 
1,875,880

Deferred income taxes
73,564

 
301,856

Income taxes recoverable
26,934

 
—

Other assets
357,946

 
471,669

Total assets
$
42,003,696

 
$
39,621,499

 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
Liabilities:
 
 
 
Policy benefit reserves
$
37,876,044

 
$
35,789,655

Other policy funds and contract claims
391,979

 
418,033

Notes payable
474,361

 
549,958

Subordinated debentures
246,145

 
246,050

Income taxes payable
—

 
10,153

Other liabilities
1,101,357

 
1,222,963

Total liabilities
40,089,886

 
38,236,812

 
 
 
 
Stockholders' equity:
 
 
 
Common stock
74,089

 
70,535

Additional paid-in capital
538,472

 
550,400

Unallocated common stock held by ESOP
—

 
(631
)
Accumulated other comprehensive income
556,071

 
46,196

Retained earnings
745,178

 
718,187

Total stockholders' equity
1,913,810

 
1,384,687

Total liabilities and stockholders' equity
$
42,003,696

 
$
39,621,499




Page 1

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2014

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2014
 
2013
 
2014
 
2013
Revenues:
 
 
 
 
 
 
 
Premiums and other considerations (a)
$
9,123

 
$
11,551

 
$
16,454

 
$
24,635

Annuity product charges
29,247

 
23,511

 
54,519

 
44,992

Net investment income
370,882

 
336,143

 
740,887

 
665,833

Change in fair value of derivatives
270,883

 
64,040

 
319,376

 
438,002

Net realized gains (losses) on investments, excluding other than temporary impairment ("OTTI") losses
(2,230
)
 
15,689

 
(2,944
)
 
26,274

OTTI losses on investments:
 
 
 
 
 
 
 
Total OTTI losses
—

 
(2,775
)
 
—

 
(4,964
)
Portion of OTTI losses recognized from other comprehensive income
(594
)
 
—

 
(1,499
)
 
(1,048
)
Net OTTI losses recognized in operations
(594
)
 
(2,775
)
 
(1,499
)
 
(6,012
)
Loss on extinguishment of debt
(6,574
)
 
(589
)
 
(10,551
)
 
(589
)
Total revenues
670,737

 
447,570

 
1,116,242

 
1,193,135

 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
Insurance policy benefits and change in future policy benefits (a)
10,987

 
13,768

 
21,082

 
28,528

Interest sensitive and index product benefits (a)
367,774

 
333,001

 
684,966

 
556,171

Amortization of deferred sales inducements
55,349

 
120,536

 
56,015

 
149,367

Change in fair value of embedded derivatives
80,935

 
(408,409
)
 
173,554

 
(45,137
)
Interest expense on notes payable
9,121

 
6,780

 
19,385

 
14,028

Interest expense on subordinated debentures
3,024

 
3,018

 
6,032

 
6,027

Amortization of deferred policy acquisition costs
67,084

 
169,270

 
74,278

 
215,500

Other operating costs and expenses
20,887

 
24,851

 
39,972

 
44,371

Total benefits and expenses
615,161

 
262,815

 
1,075,284

 
968,855

Income before income taxes
55,576

 
184,755

 
40,958

 
224,280

Income tax expense
18,832

 
64,642

 
13,967

 
78,136

Net income
$
36,744

 
$
120,113

 
$
26,991

 
$
146,144

 
 
 
 
 
 
 
 
Earnings per common share
$
0.49

 
$
1.87

 
$
0.37

 
$
2.29

Earnings per common share - assuming dilution
$
0.46

 
$
1.71

 
$
0.34

 
$
2.09

Weighted average common shares outstanding (in thousands):
 
 
 
 
 
 
 
Earnings per common share
74,461

 
64,254

 
73,495

 
63,787

Earnings per common share - assuming dilution
79,518

 
70,382

 
79,583

 
69,882

(a)
We made an immaterial correction in the presentation of premiums, insurance policy benefits and change in future policy benefits and interest sensitive and index product benefits related to life contingent immediate annuities. We have revised the 2013 consolidated statement of operations above to be consistent with the 2014 presentation. These changes had no impact on our consolidated balance sheets, net income or stockholders' equity.

Page 2

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2014

Quarterly Summary - Most Recent 5 Quarters (Unaudited)
 
Q2 2014
 
Q1 2014
 
Q4 2013
 
Q3 2013
 
Q2 2013
 
(Dollars in thousands, except per share data)
Revenues:
 
 
 
 
 
 
 
 
 
Traditional life insurance premiums
$
2,854

 
$
2,804

 
$
2,452

 
$
2,493

 
$
2,913

Life contingent immediate annuity considerations
6,269

 
4,527

 
8,386

 
7,381

 
8,638

Surrender charges (a)
12,942

 
12,423

 
15,239

 
11,160

 
11,292

Lifetime income benefit rider fees
16,305

 
12,849

 
16,909

 
15,291

 
12,219

Net investment income
370,882

 
370,005

 
363,947

 
354,147

 
336,143

Change in fair value of derivatives
270,883

 
48,493

 
444,985

 
193,028

 
64,040

Net realized gains (losses) on investments, excluding OTTI
(2,230
)
 
(714
)
 
16,364

 
(2,077
)
 
15,689

Net OTTI losses recognized in operations
(594
)
 
(905
)
 
—

 
(222
)
 
(2,775
)
Loss on extinguishment of debt
(6,574
)
 
(3,977
)
 
(30,988
)
 
(938
)
 
(589
)
Total revenues
670,737

 
445,505

 
837,294

 
580,263

 
447,570

 
 
 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
 
 
Traditional life insurance policy benefits and change in future policy benefits
1,758

 
2,261

 
1,452

 
1,647

 
2,106

Life contingent immediate annuity benefits and change in future policy benefits
9,229

 
7,834

 
11,827

 
9,617

 
11,662

Interest sensitive and index product benefits (b)
367,774

 
317,192

 
390,956

 
325,740

 
333,001

Amortization of deferred sales inducements (c)
55,349

 
666

 
69,121

 
34,625

 
120,536

Change in fair value of embedded derivatives (d)
80,935

 
92,619

 
142,881

 
36,224

 
(408,409
)
Interest expense on notes payable
9,121

 
10,264

 
11,885

 
12,957

 
6,780

Interest expense on subordinated debentures
3,024

 
3,008

 
3,027

 
3,034

 
3,018

Amortization of deferred policy acquisition costs (c)
67,084

 
7,194

 
99,934

 
50,034

 
169,270

Other operating costs and expenses (e)(f)(g)
20,887

 
19,085

 
26,886

 
20,658

 
24,851

Total benefits and expenses
615,161

 
460,123

 
757,969

 
494,536

 
262,815

Income (loss) before income taxes
55,576

 
(14,618
)
 
79,325

 
85,727

 
184,755

Income tax expense (benefit)
18,832

 
(4,865
)
 
28,367

 
29,546

 
64,642

Net income (loss) (a)(b)(c)(d)(e)(f)(g)
$
36,744

 
$
(9,753
)
 
$
50,958

 
$
56,181

 
$
120,113

 
 
 
 
 
 
 
 
 
 
Earnings (loss) per common share
$
0.49

 
$
(0.13
)
 
$
0.73

 
$
0.86

 
$
1.87

Earnings (loss) per common share - assuming dilution (a)(b)(c)(d)(e)(f)(g)
$
0.46

 
$
(0.13
)
 
$
0.64

 
$
0.75

 
$
1.71

Weighted average common shares outstanding (in thousands):
 
 
 
 
 
 
 
 
 
Earnings (loss) per common share
74,461

 
72,519

 
69,416

 
65,129

 
64,254

Earnings (loss) per common share - assuming dilution
79,518

 
79,616

 
79,041

 
74,560

 
70,382

(a)
Q4 2013 includes a benefit of $4.7 million from surrender charges deducted from California policyholders surrendering their policies as a condition of receiving certain benefits in a national class action lawsuit settlement, which after related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs and income taxes, increased net income and earnings per common share - assuming dilution by $1.9 million and $0.02 per share, respectively.
(b)
Q3 2013 includes 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 by $1.8 million and increased net income and earnings per common share - assuming dilution by $1.1 million and $0.01 per share, respectively.
(c)
Q3 2013 includes benefit from unlocking which reduced amortization of deferred sales inducements and deferred policy acquisition costs by $11.1 million and $18.5 million, respectively, and increased net income and earnings per common share- assuming dilution by $19.1 million and $0.26 per share, respectively.
(d)
Q2 2014 includes a benefit of $62.6 million from the revision of assumptions used in determining fixed index annuity embedded derivatives, which after related adjustments to deferred sales inducements and deferred policy acquisition costs and income taxes, increased net income and earnings per common share - assuming dilution by $14.8 million and $0.19 per share, respectively.

Page 3

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2014

(e)
Q1 2014 includes a net benefit of $2.2 million from recognizing a decrease in an estimated class action litigation reserve based upon developments in the claim process for settlement of the class action and third party costs incurred during the quarter associated with administration of the settlement, which after related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs and income taxes, decreased net loss and loss per common share - assuming dilution by $0.9 million and $0.01 per share, respectively.
(f)
Q4 2013 includes expense of $4.2 million from recognizing an increase in an estimated class action litigation reserve based upon developments in the claim process for settlement of the class action litigation and third party costs incurred during the quarter associated with administration of the settlement, which after related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs and income taxes, decreased net income and earnings per common share - assuming dilution by $1.9 million and $0.02 per share, respectively.
(g)
Q2 2013 includes expense of $8.5 million related to assessments received and future estimates of assessments from state guaranty fund associations related to the insolvency of Executive Life Insurance Company of New York, which after income taxes decreased net income and earnings per common share - assuming dilution by $5.5 million and $0.08 per share, respectively.
Q2 2013 includes a benefit of $3.2 million related to the final settlement of a litigation liability established in 2010, which after related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs and income taxes increased net income and earnings per common share - assuming dilution by $2.0 million and $0.03 per share, respectively.
NON-GAAP FINANCIAL MEASURES
In addition to net income, we have consistently utilized operating income 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, fair value changes in derivatives and embedded derivatives, loss on extinguishment of debt and changes in litigation reserves. 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.
Reconciliation from Net Income to Operating Income (Unaudited)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2014
 
2013
 
2014
 
2013
 
(Dollars in thousands, except per share data)
Net income
$
36,744

 
$
120,113

 
$
26,991

 
$
146,144

Adjustments to arrive at operating income: (a)
 
 
 
 
 
 
 
Net realized investment (gains) losses, including OTTI
1,361

 
(3,574
)
 
1,925

 
(6,378
)
Change in fair value of derivatives and embedded derivatives - index annuities
(4,115
)
 
(81,351
)
 
39,593

 
(70,378
)
Change in fair value of derivatives and embedded derivatives - debt
(1,053
)
 
(3,302
)
 
456

 
(4,038
)
Litigation reserve
—

 
(1,969
)
 
(916
)
 
(1,969
)
Extinguishment of debt
5,518

 
345

 
7,912

 
345

Operating income (a non-GAAP financial measure)
$
38,455

 
$
30,262

 
$
75,961

 
$
63,726

 
 
 
 
 
 
 
 
Per common share - assuming dilution:
 
 
 
 
 
 
 
Net income
$
0.46

 
$
1.71

 
$
0.34

 
$
2.09

Adjustments to arrive at operating income:
 
 
 
 
 
 
 
Net realized investment (gains) losses, including OTTI
0.01

 
(0.05
)
 
0.02

 
(0.09
)
Change in fair value of derivatives and embedded derivatives - index annuities
(0.05
)
 
(1.15
)
 
0.50

 
(1.00
)
Change in fair value of derivatives and embedded derivatives - debt
(0.01
)
 
(0.05
)
 
—

 
(0.06
)
Litigation reserve
—

 
(0.03
)
 
(0.01
)
 
(0.03
)
Extinguishment of debt
0.07

 
—

 
0.10

 
—

Operating income (a non-GAAP financial measure)
$
0.48

 
$
0.43

 
$
0.95

 
$
0.91

(a)
Adjustments to net income to arrive at operating income are presented net of income taxes and where applicable, are net of related adjustments to amortization of deferred sales inducements (DSI) and deferred policy acquisition costs (DAC).

Page 4

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2014

NON-GAAP FINANCIAL MEASURES
Summary of Adjustments to Arrive at Operating Income (Unaudited)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2014
 
2013
 
2014
 
2013
 
(Dollars in thousands)
Net realized investment gains and losses, including OTTI:
 
 
 
 
 
 
 
Net realized (gains) losses on investments, including OTTI
$
2,824

 
$
(12,914
)
 
$
4,443

 
$
(20,262
)
Amortization of DAC and DSI
(719
)
 
7,265

 
(1,465
)
 
10,358

Income taxes
(744
)
 
2,075

 
(1,053
)
 
3,526

 
$
1,361

 
$
(3,574
)
 
$
1,925

 
$
(6,378
)
Change in fair value of derivatives and embedded derivatives:
 
 
 
 
 
 
 
Index annuities
$
(16,176
)
 
$
(311,590
)
 
$
151,305

 
$
(274,700
)
2015 notes, note hedge and warrants
(4,231
)
 
—

 
(4,231
)
 
—

Interest rate caps and swap
2,431

 
(5,642
)
 
5,010

 
(6,852
)
Amortization of DAC and DSI
12,710

 
186,732

 
(89,093
)
 
166,492

Income taxes
98

 
45,847

 
(22,942
)
 
40,644

 
$
(5,168
)
 
$
(84,653
)
 
$
40,049

 
$
(74,416
)
Litigation reserve:
 
 
 
 
 
 
 
Change in litigation reserve recorded in other operating costs
$
—

 
$
(3,212
)
 
$
(2,212
)
 
$
(3,212
)
Amortization of DAC and DSI
—

 
156

 
795

 
156

Income taxes
—

 
1,087

 
501

 
1,087

 
$
—

 
$
(1,969
)
 
$
(916
)
 
$
(1,969
)
Extinguishment of debt:
 
 
 
 
 
 
 
Loss on extinguishment of debt
$
6,574

 
$
589

 
$
10,551

 
$
589

Income taxes
(1,056
)
 
(244
)
 
(2,639
)
 
(244
)
 
$
5,518

 
$
345

 
$
7,912

 
$
345



Page 5

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2014

NON-GAAP FINANCIAL MEASURES
Quarterly Summary - Most Recent 5 Quarters (Unaudited)
Reconciliation from Net Income (Loss) to Operating Income
 
Q2 2014
 
Q1 2014
 
Q4 2013
 
Q3 2013
 
Q2 2013
 
(Dollars in thousands, except per share data)
Net income (loss)
$
36,744

 
$
(9,753
)
 
$
50,958

 
$
56,181

 
$
120,113

Adjustments to arrive at operating income:
 
 
 
 
 
 
 
 
 
Net realized investment (gains) losses, including OTTI (a)
1,361

 
564

 
(6,214
)
 
890

 
(3,574
)
Change in fair value of derivatives and embedded derivatives -
index annuities (a)
(4,115
)
 
43,708

 
(23,419
)
 
(4,907
)
 
(81,351
)
Change in fair value of derivatives and embedded derivatives -
debt (a)
(1,053
)
 
1,509

 
(4,290
)
 
7,136

 
(3,302
)
Litigation reserve (a)
—

 
(916
)
 
1,988

 
—

 
(1,969
)
Extinguishment of debt (a)
5,518

 
2,394

 
20,823

 
548

 
345

Operating income (a non-GAAP financial measure) (b)(c)(d)(e)
$
38,455

 
$
37,506

 
$
39,846

 
$
59,848

 
$
30,262

 
 
 
 
 
 
 
 
 
 
Operating income per common share - assuming dilution (b)(c)(d)(e)
$
0.48

 
$
0.47

 
$
0.50

 
$
0.80

 
$
0.43

(a)
Adjustments to net income (loss) to arrive at operating income are presented net of income taxes and where applicable, are net of related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs.
(b)
Q4 2013 includes a benefit of $4.7 million from surrender charges deducted from California policyholders surrendering their policies as a condition of receiving certain benefits in a national class action lawsuit settlement, which after related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs and income taxes, increased operating income and operating income per common share - assuming dilution by $2.0 million and $0.02 per share, respectively.
(c)
Q3 2013 includes a benefit from unlocking which reduced amortization of deferred sales inducements and deferred policy acquisition costs by $12.6 million and $20.4 million, respectively, and increased operating income and operating income per common share- assuming dilution by $21.3 million and $0.29 per share, respectively.
(d)
Q3 2013 includes 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 by $1.8 million and increased operating income and operating income per common share - assuming dilution by $1.1 million and $0.01 per share, respectively.
(e)
Q2 2013 includes expense of $8.5 million related to assessments received and future estimates of assessments from state guaranty fund associations related to the insolvency of Executive Life Insurance Company of New York, which after income taxes decreased operating income and operating income per common share - assuming dilution by $5.5 million and $0.08 per share, respectively.




Page 6

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2014

NON-GAAP FINANCIAL MEASURES
Summary of Adjustments to Arrive at Operating Income (Unaudited)
 
Q2 2014
 
Q1 2014
 
Q4 2013
 
Q3 2013
 
Q2 2013
 
(Dollars in thousands)
Net realized (gains) losses on investments
$
2,230

 
$
714

 
$
(16,364
)
 
$
2,077

 
$
(15,689
)
Net OTTI losses recognized in operations
594

 
905

 
—

 
222

 
2,775

Change in fair value of derivatives
(95,852
)
 
57,039

 
(209,083
)
 
25,448

 
91,374

Loss on extinguishment of debt
6,574

 
3,977

 
30,988

 
938

 
589

Increase (decrease) in total revenues
(86,454
)
 
62,635

 
(194,459
)
 
28,685

 
79,049

 
 
 
 
 
 
 
 
 
 
Amortization of deferred sales inducements
(10,749
)
 
43,435

 
(27,797
)
 
(6,765
)
 
(82,583
)
Change in fair value of embedded derivatives
(77,876
)
 
(113,021
)
 
(104,953
)
 
39,526

 
408,606

Amortization of deferred policy acquisition costs
(1,242
)
 
58,319

 
(38,189
)
 
(9,849
)
 
(111,570
)
Other operating costs and expenses
—

 
2,212

 
(4,248
)
 
—

 
3,212

Increase (decrease) in total benefits and expenses
(89,867
)
 
(9,055
)
 
(175,187
)
 
22,912

 
217,665

Increase (decrease) in income (loss) before income taxes
3,413

 
71,690

 
(19,272
)
 
5,773

 
(138,616
)
Increase (decrease) in income tax expense
1,702

 
24,431

 
(8,160
)
 
2,106

 
(48,765
)
Increase (decrease) in net income (loss)
$
1,711

 
$
47,259

 
$
(11,112
)
 
$
3,667

 
$
(89,851
)

Page 7

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2014

Capitalization/Book Value per Share
 
June 30, 2014
 
December 31, 2013
 
(Dollars in thousands, except per share data)
Capitalization:
 
 
 
Notes payable:
 
 
 
September 2015 Notes
$
43,083

 
$
85,328

December 2029 Notes
31,278

 
64,630

July 2021 Notes
400,000

 
400,000

Subordinated debentures payable to subsidiary trusts
246,145

 
246,050

   Total debt
720,506

 
796,008

Total stockholders’ equity
1,913,810

 
1,384,687

Total capitalization
2,634,316

 
2,180,695

Accumulated other comprehensive income (AOCI)
(556,071
)
 
(46,196
)
Total capitalization excluding AOCI (a)
$
2,078,245

 
$
2,134,499

 
 
 
 
Total stockholders’ equity
$
1,913,810

 
$
1,384,687

Accumulated other comprehensive income
(556,071
)
 
(46,196
)
Total stockholders’ equity excluding AOCI (a)
$
1,357,739

 
$
1,338,491

 
 
 
 
Common shares outstanding (b)
74,631,863

 
71,369,474

 
 
 
 
Book Value per Share: (c)
 
 
 
Book value per share including AOCI
$
25.64

 
$
19.40

Book value per share excluding AOCI (a)
$
18.19

 
$
18.75

 
 
 
 
Debt-to-Capital Ratios: (d)
 
 
 
Senior debt / Total capitalization
22.8
%
 
25.8
%
Adjusted debt / Total capitalization
22.8
%
 
25.8
%
(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: 2014 - 543,120 shares; 2013 - 892,688 shares and excludes unallocated shares held by the ESOP: 2014 - 0 shares; 2013 - 58,618 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 - June 30, 2014

Spread Results
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2014
 
2013
 
2014
 
2013
Average yield on invested assets
4.83%
 
4.94%
 
4.89%
 
4.98%
Aggregate cost of money
2.13%
 
2.24%
 
2.15%
 
2.28%
Aggregate investment spread
2.70%
 
2.70%
 
2.74%
 
2.70%
 
 
 
 
 
 
 
 
Impact of:
 
 
 
 
 
 
 
Investment yield - additional prepayment income
0.01%
 
0.05%
 
0.03%
 
0.06%
Cost of money effect of (under) over hedging
0.03%
 
0.06%
 
0.01%
 
0.04%
 
 
 
 
 
 
 
 
Weighted average investments (in thousands)
$30,779,699
 
$27,253,801
 
$30,391,178
 
$26,818,283
Weighted average investments include fixed maturity securities at amortized cost and equity securities at cost. The numerator for average yield on invested assets includes net investment income and the tax effect of investment income that is exempt from income taxes.
Summary of Cost of Money for Deferred Annuities
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2014
 
2013
 
2014
 
2013
 
(Dollars in thousands)
Included in interest sensitive and index product benefits:
 
 
 
 
 
 
 
Index credits
$
277,464

 
$
241,801

 
$
507,842

 
$
377,142

Interest credited
69,432

 
75,852

 
139,259

 
150,268

Included in change in fair value of derivatives:
 
 
 
 
 
 
 
Proceeds received at option expiration
(278,771
)
 
(244,758
)
 
(506,729
)
 
(379,983
)
Pro rata amortization of option cost
106,245

 
89,542

 
208,269

 
178,397

Cost of money for deferred annuities
$
174,370

 
$
162,437

 
$
348,641

 
$
325,824

 
 
 
 
 
 
 
 
Weighted average liability balance outstanding (in thousands)
$
32,812,886

 
$
28,994,148

 
$
32,370,712

 
$
28,527,112

Annuity Account Balance Rollforward
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2014
 
2013
 
2014
 
2013
 
(Dollars in thousands)
Account balances at beginning of period
$
32,321,232

 
$
28,450,478

 
$
31,535,846

 
$
27,669,672

Net deposits
1,002,911

 
1,074,184

 
1,868,316

 
1,946,513

Premium and interest bonuses
83,270

 
91,033

 
155,957

 
164,931

Fixed interest credited and index credits
346,896

 
317,653

 
647,101

 
527,410

Surrender charges
(12,942
)
 
(11,292
)
 
(25,365
)
 
(22,794
)
Lifetime income benefit rider fees
(16,305
)
 
(12,219
)
 
(29,154
)
 
(22,198
)
Surrenders, withdrawals, deaths, etc.
(420,522
)
 
(372,019
)
 
(848,161
)
 
(725,716
)
Account balances at end of period
$
33,304,540

 
$
29,537,818

 
$
33,304,540

 
$
29,537,818


Page 9

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2014

Annuity Deposits by Product Type
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
Year Ended December 31,
Product Type
 
2014
 
2013
 
2014
 
2013
 
2013
 
 
(Dollars in thousands)
Fixed Index Annuities:
 
 
 
 
 
 
 
 
 
 
Index Strategies
 
$
781,238

 
$
764,437

 
$
1,423,504

 
$
1,369,078

 
$
2,861,977

Fixed Strategy
 
214,615

 
285,416

 
418,153

 
528,545

 
1,020,447

 
 
995,853

 
1,049,853

 
1,841,657

 
1,897,623

 
3,882,424

Fixed Rate Annuities:
 
 
 
 
 
 
 
 
 
 
Single-Year Rate Guaranteed
 
17,160

 
20,404

 
32,400

 
40,314

 
71,944

Multi-Year Rate Guaranteed
 
22,063

 
48,291

 
76,650

 
95,547

 
205,978

Single premium immediate annuities
 
7,140

 
16,824

 
12,426

 
31,804

 
52,142

 
 
46,363

 
85,519

 
121,476

 
167,665

 
330,064

Total before coinsurance ceded
 
1,042,216

 
1,135,372

 
1,963,133

 
2,065,288

 
4,212,488

Coinsurance ceded
 
32,165

 
44,572

 
82,391

 
87,179

 
182,616

Net after coinsurance ceded
 
$
1,010,051

 
$
1,090,800

 
$
1,880,742

 
$
1,978,109

 
$
4,029,872

Surrender Charge Protection and Account Values by Product Type
Annuity Surrender Charges and Net (of coinsurance) Account Values at June 30, 2014:
 
 
Surrender Charge
 
Net Account Value
Product Type
 
Avg.
Years
At Issue
 
Avg.
Years
Remaining
 
Avg.
%
Remaining
 
Dollars in Thousands
 
%
 
 
 
 
 
 
 
 
 
 
 
Fixed Index Annuities
 
14.1
 
9.8
 
15.5%
 
$
31,332,363

 
94.1
%
Single-Year Fixed Rate Guaranteed Annuities
 
11.1
 
4.2
 
8.0%
 
1,430,751

 
4.3
%
Multi-Year Fixed Rate Guaranteed Annuities (a)
 
6.2
 
1.6
 
4.3%
 
541,426

 
1.6
%
Total
 
13.9
 
9.4
 
15.0%
 
$
33,304,540

 
100.0
%
(a)
37% of Net Account Value is no longer in multi-year guarantee period and can be adjusted annually.


Page 10

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2014

Annuity Liability Characteristics
 
Fixed
Annuities
Account Value
 
Fixed Index
Annuities
Account Value
 
(Dollars in thousands)
SURRENDER CHARGE PERCENTAGES:
 
 
 
No surrender charge
$
660,353

 
$
984,720

0.0% < 2.0%
29,431

 
304,566

2.0% < 3.0%
43,735

 
81,231

3.0% < 4.0%
28,719

 
395,529

4.0% < 5.0%
113,285

 
246,878

5.0% < 6.0%
70,305

 
563,324

6.0% < 7.0%
175,198

 
213,928

7.0% < 8.0%
143,325

 
629,294

8.0% < 9.0%
64,681

 
438,532

9.0% < 10.0%
76,096

 
519,710

10.0% or greater
567,049

 
26,954,651

 
$
1,972,177

 
$
31,332,363

 
Fixed and
Fixed Index
Annuities
Account Value
 
Weighted
Average
Surrender
Charge
 
(Dollars in thousands)
 
 
SURRENDER CHARGE EXPIRATION BY YEAR:
 
 
 
Out of Surrender Charge
$
1,645,073

 
0.00
%
2014
216,425

 
1.84
%
2015
523,280

 
2.89
%
2016
765,809

 
4.35
%
2017
928,713

 
5.74
%
2018
832,928

 
7.88
%
2019
601,665

 
8.81
%
2020
917,542

 
10.52
%
2021
1,199,626

 
12.22
%
2022
2,044,302

 
14.27
%
2023
5,055,566

 
16.03
%
2024
4,750,116

 
17.08
%
2025
3,187,935

 
18.03
%
2026
2,751,240

 
18.36
%
2027
2,875,088

 
18.76
%
2028
2,109,792

 
19.21
%
2029
1,957,866

 
19.75
%
2030
925,496

 
19.98
%
2031
16,078

 
20.00
%
 
$
33,304,540

 
14.95
%

Page 11

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2014

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
$
779,057

 
$
857,398

› 0.0% - 0.25%
288,241

 
406,592

› 0.25% - 0.5%
175,399

 
101,301

› 0.5% - 1.0% (a)
256,478

 
875,570

› 1.0% - 1.5% (a)
89,493

 
21,550

› 1.5% - 2.0%
88,756

 
1,986

› 2.0% - 2.5%
74

 
—

1.00% ultimate guarantee - 2.48% wtd avg interest rate (b)
81,417

 
—

1.50% ultimate guarantee - 1.6% wtd avg interest rate (b)
108,457

 
3,001,784

2.00% ultimate guarantee - 2.56% wtd avg interest rate (b)
104,805

 
—

2.25% ultimate guarantee - 2.57% wtd avg interest rate (b)
—

 
1,352,323

3.00% ultimate guarantee - 2.81% wtd avg interest rate (b)
—

 
2,701,768

Allocated to index strategies (see tables that follow)
—

 
22,012,091

 
$
1,972,177

 
$
31,332,363

(a)
$26,960 of Fixed Annuities Account Value have a guarantee of 2.25% for the first 10 years and 3.00% thereafter. They began increasing in 2014. $447,660 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 began 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.
If all crediting rates were reduced to minimum guaranteed rates (subject to limitations imposed by ultimate minimum guaranteed rates where applicable) the weighted average crediting rate as of June 30, 2014 for fixed annuities and funds allocated to the fixed rate strategy for fixed index annuities would decrease by 0.52%.

Page 12

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2014

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
$
923

 
$
11,409

 
$
826,247

 
$
34,124

 
$
260,851

2.5% - 3%
1,078,104

 
—

 
—

 
—

 
—

3% - 4%
2,638,993

 
43,639

 
—

 
—

 
—

4% - 5%
19,847

 
82,548

 
1,523,598

 
—

 
—

5% - 6%
39,624

 
7,084

 
3,345,754

 
—

 
—

6% - 7%
—

 
—

 
2,131,159

 
—

 
—

>= 7%
—

 
11,696

 
22,617

 
114,599

 
60,814

    
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
$
346

 
$
335,543

 
$
174,777

 
$
201,525

< 20%
262,242

 
—

 
—

 
—

20% - 40%
362,019

 
456,182

 
—

 
—

40% - 60%
221

 
163,747

 
119,857

 
1,315

>= 60%
2,158

 
—

 
—

 
—


S&P 500 Monthly Point-to-Point - Minimum Guaranteed Monthly Cap = 1% (Dollars in thousands)
Current Cap
 
At minimum
$
15,935

1.45% - 1.8%
4,283,191

2.0% - 2.3%
2,895,872

>= 2.3%
470,752


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 July 22, 2014.


Page 13

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2014

Summary of Invested Assets
 
June 30, 2014
 
December 31, 2013
 
Carrying
Amount
 
Percent
 
Carrying
Amount
 
Percent
 
(Dollars in thousands)
Fixed maturity securities:
 
 
 
 
 
 
 
United States Government full faith and credit
$
38,483

 
0.1
%
 
$
42,925

 
0.2
%
United States Government sponsored agencies
1,185,341

 
3.6
%
 
1,194,289

 
3.9
%
United States municipalities, states and territories
3,506,198

 
10.6
%
 
3,306,743

 
10.9
%
Foreign government obligations
192,963

 
0.6
%
 
91,557

 
0.3
%
Corporate securities
19,263,717

 
58.3
%
 
17,309,292

 
57.1
%
Residential mortgage backed securities
1,870,565

 
5.7
%
 
1,971,960

 
6.5
%
Commercial mortgage backed securities
2,296,096

 
6.9
%
 
1,735,460

 
5.7
%
Other asset backed securities
1,040,551

 
3.1
%
 
1,034,476

 
3.4
%
Total fixed maturity securities
29,393,914

 
88.9
%
 
26,686,702

 
88.0
%
Equity securities
7,762

 
—
%
 
7,778

 
—
%
Mortgage loans on real estate
2,543,810

 
7.7
%
 
2,581,082

 
8.5
%
Derivative instruments
905,688

 
2.7
%
 
856,050

 
2.8
%
Other investments
221,459

 
0.7
%
 
215,042

 
0.7
%
 
$
33,072,633

 
100.0
%
 
$
30,346,654

 
100.0
%
Credit Quality of Fixed Maturity Securities - June 30, 2014
NAIC Designation
 
Carrying
Amount
 
Percent
 
Rating Agency Rating
 
Carrying
Amount
 
Percent
 
 
(Dollars in thousands)
 
 
 
 
 
(Dollars in thousands)
 
 
1
 
$
18,519,001

 
63.0
%
 
Aaa/Aa/A
 
$
18,072,679

 
61.5
%
2
 
10,305,239

 
35.1
%
 
Baa
 
10,000,688

 
34.0
%
3
 
503,121

 
1.7
%
 
Ba
 
466,331

 
1.6
%
4
 
65,857

 
0.2
%
 
B
 
100,947

 
0.3
%
5
 
—

 
—
%
 
Caa and lower
 
553,210

 
1.9
%
6
 
696

 
—
%
 
In or near default
 
200,059

 
0.7
%
 
 
$
29,393,914

 
100.0
%
 
 
 
$
29,393,914

 
100.0
%
Watch List Securities - June 30, 2014
General Description
 
Amortized
Cost
 
Unrealized
Gains (Losses)
 
Fair Value
 
Months Below Amortized Cost
 
 
(Dollars in thousands)
 
 
Corporate bonds:
 
 
 
 
 
 
 
 
Finance
 
$
20,000

 
$
(4,589
)
 
$
15,411

 
34
Industrial
 
22,350

 
(3,615
)
 
18,735

 
20 - 46
Industrial
 
15,843

 
1,151

 
16,994

 
 
 
 
$
58,193

 
$
(7,053
)
 
$
51,140

 
 

Page 14

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2014

Fixed Maturity Securities by Sector
 
June 30, 2014
 
December 31, 2013
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
 
(Dollars in thousands)
Available for sale:
 
 
 
 
 
 
 
United States Government full faith and credit and sponsored agencies
$
1,238,377

 
$
1,223,824

 
$
1,358,628

 
$
1,237,214

United States municipalities, states and territories
3,188,026

 
3,506,198

 
3,181,032

 
3,306,743

Foreign government obligations
181,120

 
192,963

 
86,112

 
91,557

Corporate securities:
 
 
 
 
 
 
 
Consumer discretionary
1,515,954

 
1,617,144

 
1,533,993

 
1,532,694

Consumer staples
1,282,816

 
1,367,745

 
1,246,744

 
1,250,351

Energy
2,139,305

 
2,292,437

 
1,992,411

 
2,011,334

Financials
3,397,244

 
3,632,307

 
3,179,964

 
3,233,930

Health care
1,524,044

 
1,620,752

 
1,458,757

 
1,458,946

Industrials
2,230,067

 
2,387,576

 
2,045,490

 
2,039,544

Information technology
1,154,487

 
1,210,700

 
1,163,159

 
1,145,674

Materials
1,491,820

 
1,574,833

 
1,405,603

 
1,381,880

Telecommunications
515,143

 
548,050

 
472,250

 
473,517

Utilities
2,665,687

 
2,935,804

 
2,643,747

 
2,705,147

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency
683,525

 
730,075

 
677,394

 
679,518

Prime
798,253

 
845,829

 
907,881

 
964,443

Alt-A
265,455

 
294,661

 
310,638

 
327,999

Commercial mortgage backed securities:
 
 
 
 
 
 
 
Government agency
300,716

 
310,551

 
302,063

 
288,495

Other
1,948,680

 
1,985,545

 
1,519,925

 
1,446,965

Other asset backed securities:
 
 
 
 
 
 
 
Consumer discretionary
72,441

 
75,241

 
86,788

 
86,633

Energy
8,249

 
9,431

 
8,268

 
8,922

Financials
716,088

 
713,478

 
709,900

 
688,737

Industrials
202,798

 
217,446

 
215,873

 
225,212

Telecommunications
14,836

 
16,940

 
14,835

 
16,714

Utilities
5,814

 
8,015

 
6,275

 
8,258

Redeemable preferred stock - financials
—

 
27

 
1

 
20

 
$
27,540,945

 
$
29,317,572

 
$
26,527,731

 
$
26,610,447

Held for investment:
 
 
 
 
 
 
 
Corporate security - financials
$
76,342

 
$
66,571

 
$
76,255

 
$
60,840



Page 15

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2014

Mortgage Loans on Commercial Real Estate
 
June 30, 2014
 
December 31, 2013
 
Principal
 
Percent
 
Principal
 
Percent
 
(Dollars in thousands)
Geographic distribution
 
 
 
 
 
 
 
East
$
774,014

 
30.1
%
 
$
765,717

 
29.4
%
Middle Atlantic
145,663

 
5.7
%
 
156,489

 
6.0
%
Mountain
328,284

 
12.8
%
 
356,246

 
13.7
%
New England
14,700

 
0.6
%
 
21,324

 
0.8
%
Pacific
303,922

 
11.8
%
 
317,431

 
12.2
%
South Atlantic
500,612

 
19.5
%
 
483,852

 
18.5
%
West North Central
338,343

 
13.1
%
 
351,794

 
13.5
%
West South Central
165,412

 
6.4
%
 
154,845

 
5.9
%
 
$
2,570,950

 
100.0
%
 
$
2,607,698

 
100.0
%
 
 
 
 
 
 
 
 
Property type distribution
 
 
 
 
 
 
 
Office
$
533,472

 
20.8
%
 
$
590,414

 
22.6
%
Medical office
104,025

 
4.0
%
 
125,703

 
4.8
%
Retail
729,497

 
28.4
%
 
711,364

 
27.3
%
Industrial/Warehouse
681,540

 
26.5
%
 
673,449

 
25.8
%
Hotel
43,784

 
1.7
%
 
61,574

 
2.4
%
Apartment
340,621

 
13.2
%
 
291,823

 
11.2
%
Mixed use/other
138,011

 
5.4
%
 
153,371

 
5.9
%
 
$
2,570,950

 
100.0
%
 
$
2,607,698

 
100.0
%
 
 
 
 
 
 
 
 
 
June 30, 2014
 
December 31, 2013
 
 
 
 
Credit Exposure - By Payment Activity
 
 
 
 
 
 
 
Performing
$
2,559,419

 
$
2,593,276

 
 
 
 
In workout
2,213

 
6,248

 
 
 
 
Delinquent
—

 
—

 
 
 
 
Collateral dependent
9,318

 
8,174

 
 
 
 
 
2,570,950

 
2,607,698

 
 
 
 
Specific loan loss allowance
(17,282
)
 
(16,847
)
 
 
 
 
General loan loss allowance
(9,300
)
 
(9,200
)
 
 
 
 
Deferred prepayment fees
(558
)
 
(569
)
 
 
 
 
 
$
2,543,810

 
$
2,581,082

 
 
 
 


Page 16

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2014

Shareholder Information
Corporate Offices:
American Equity Investment Life Holding Company
6000 Westown Parkway
West Des Moines, IA 50266
Inquiries:
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
Debra J. Richardson, Executive Vice President and Secretary
(515) 273-3551, drichardson@american-equity.com        
Common Stock and Dividend Information:
New York Stock Exchange symbol: “AEL”
 
High
 
Low
 
Close
 
Dividend Declared
2014
 
 
 
 
 
 
 
First Quarter
$26.42
 
$18.84
 
$23.62
 
$0.00
Second Quarter
$25.15
 
$20.97
 
$24.60
 
$0.00
 
 
 
 
 
 
 
 
2013
 
 
 
 
 
 
 
First Quarter
$15.03
 
$12.33
 
$14.89
 
$0.00
Second Quarter
$16.60
 
$14.03
 
$15.70
 
$0.00
Third Quarter
$21.42
 
$15.64
 
$21.22
 
$0.00
Fourth Quarter
$26.46
 
$20.01
 
$26.38
 
$0.18
 
 
 
 
 
 
 
 
2012
 
 
 
 
 
 
 
First Quarter
$13.09
 
$10.13
 
$12.77
 
$0.00
Second Quarter
$12.95
 
$10.00
 
$11.01
 
$0.00
Third Quarter
$12.41
 
$10.62
 
$11.63
 
$0.00
Fourth Quarter
$12.40
 
$10.56
 
$12.21
 
$0.15
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 17

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - June 30, 2014

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

Page 18