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Reinsurance and Policy Provisions | 9 Months Ended
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Sep. 30, 2021
Reinsurance Disclosures [Abstract] |
Reinsurance and Policy Provisions | Reinsurance and Policy Provisions Brookfield Effective July 1, 2021 American Equity Investment Life Insurance Company (“American Equity Life”) entered into a reinsurance agreement with North End Re (Cayman) SPC (“North End Re”) (North End Re reinsurance treaty), a wholly owned subsidiary of Brookfield Asset Management Reinsurance Partners Ltd. (“Brookfield Reinsurance”) to reinsure approximately $4,327.1 million of in-force fixed indexed annuity product liabilities as of the effective date of the reinsurance agreement, 70% on a modified coinsurance (“modco”) basis and 30% on a coinsurance basis. The liabilities reinsured on a coinsurance basis will be secured by assets held in both a statutory and supplemental trust (collectively referred to as the “trusts”). The liabilities reinsured on a modco basis will be secured by a segregated modco account in which the assets are maintained by American Equity Life. American Equity Life transferred cash of $2,645.5 million to the segregated modco account and $1,133.8 million to the statutory trust at close of this reinsurance agreement on October 8, 2021. American Equity Life will receive an annual ceding commission equal to 49 basis points and the Company will receive an annual asset liability management fee equal to 30 basis points calculated based on the initial cash surrender value of liabilities ceded. Such fees are fixed and contractually guaranteed for six years with the additional and final seventh year payment being contingent on certain performance obligations for both parties. The initial net present value of the ceding commission related to the in-force business was $114.1 million. As part of the North End Re reinsurance treaty, American Equity Life is also ceding 75% of certain fixed index annuities issued after the effective date of the agreement, 70% on a modco basis and 30% on a coinsurance basis to North End Re. On sales subsequent to the effective date of the North End Re reinsurance treaty, American Equity Life will receive an annual ceding commission equal to 140 basis points and the Company will receive an annual asset liability management fee equal to 30 basis points calculated based on the initial cash surrender value of liabilities ceded. Such fees are fixed and contractually guaranteed for six years with the additional and final seventh year payment being contingent on certain performance obligations for both parties. The initial net present value of the ceding commission related to the third quarter of 2021 flow business was $12.9 million. In addition, American Equity Life will receive certain acquisition cost reimbursements and an on-going annual expense reimbursement on each policy subject to the reinsurance agreement for the entirety of the policy duration. As a result of the North End Re reinsurance treaty, there is a deferred gain of $292.9 million which is recorded in Other Liabilities as of September 30, 2021. This deferred gain represents the unamortized portion of the cost of reinsurance related to the in-force business and new business in the third quarter which will be amortized over the life of the underlying reinsured policies. The deferred gain consists primarily of the difference between liabilities ceded and assets transferred as part of the reinsurance agreement and the present value of the ceding commissions previously noted offset by a reduction in deferred policy acquisition costs associated with the the in-force business ceded. American Equity Life remains liable to policyholders with respect to the policy liabilities ceded to North End Re should North End Re fail to meet the obligations it has reinsured. The assets in the trusts and modco account 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. The assets in the trusts and modco account are subject to investment management agreements between American Equity Life and North End Re. As of September 30, 2021, coinsurance deposits (aggregate policy benefits reserves transferred to North End Re under these agreements) were $4.5 billion. The balance due under these agreements to North End Re was $4.2 billion which is recorded in Other Liabilities at September 30, 2021, which is comprised of a $2.9 billion modco payable, $1.1 billion payable to the statutory trust and $0.2 billion of a reinsurance payable resulting from quarterly settlement of policyholder activity and call options. Amounts ceded to North End Re under these agreements are as follows:
| Three and Nine Months Ended September 30, |  |
| 2021 |  |
| (Dollars in thousands) |  |
Consolidated Statements of Operations |  |  |
Annuity product charges | $ | 6,857 |  |  |
Change in fair value of derivatives | (12,187) |  |  |
| $ | (5,330) |  |  |
Interest sensitive and index product benefits | $ | 39,506 |  |  |
Change in fair value of embedded derivatives | (49,357) |  |  |
| $ | (9,851) |  |  |
Separate from the reinsurance transaction, Brookfield Asset Management (including its affiliates, "Brookfield), has an aggregate approximate 9.5% interest in the Company's outstanding common stock as of September 30, 2021. Brookfield has an existing agreement to purchase additional shares of the Company’s common stock for up to a total equity interest of 19.9% (and not less than a 15% equity interest), subject to required regulatory approvals and satisfaction of other customary closing conditions.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -URI http://asc.fasb.org/topic&trid=2303980 + Details
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