UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 2, 2016
AMERICAN EQUITY
INVESTMENT LIFE HOLDING COMPANY
(Exact Name of Registrant as Specified in its Charter)
Iowa | 001-31911 | 42-1447959 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Indentification No.) |
6000 Westown Parkway, West Des Moines, Iowa | 50266 |
(Address of Principal Executive Offices) | (Zip Code) |
(515) 221-0002
(Registrant's telephone number, including area code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
On November 2, 2016, the registrant issued a press release announcing its financial results for the quarter ended September 30, 2016, a copy of which is attached as Exhibit 99.1 and is incorporated herein by reference. The registrant's financial supplement for the quarter ended September 30, 2016, is attached as Exhibit 99.2 and is incorporated herein by reference.
The information, including exhibits attached hereto, furnished under this Item 2.02 shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, except as otherwise expressly stated in such filing.
Item 9.01. Financial Statements and Exhibits
(d) | Exhibits | |
The following exhibits are being furnished with this Form 8-K.
Exhibit Number | Description | |
99.1 | Press release dated November 2, 2016, announcing American Equity Investment Life Holding Company's financial results for the quarter ended September 30, 2016. | |
99.2 | American Equity Investment Life Holding Company's Financial Supplement for the quarter ended September 30, 2016. | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: November 2, 2016
AMERICAN EQUITY | |||
INVESTMENT LIFE HOLDING COMPANY | |||
By: | /s/ John M. Matovina | ||
John M. Matovina | |||
Chief Executive Officer and President | |||
EXHIBIT INDEX
Exhibit Number | Description | |
99.1 | Press release dated November 2, 2016, announcing American Equity Investment Life Holding Company's financial results for the quarter ended September 30, 2016. | |
99.2 | American Equity Investment Life Holding Company's Financial Supplement for the quarter ended September 30, 2016. | |
Exhibit 99.1
 | For more information, contact: | |
Steven D. Schwartz, Vice President-Investor Relations | ||
(515) 273-3763, sschwartz@american-equity.com | ||
FOR IMMEDIATE RELEASE | ||
November 2, 2016 | ||
American Equity Reports Third Quarter 2016 Results
Company Highlights
• | Third quarter 2016 net loss of $7.4 million or $0.09 per diluted common share |
• | Third quarter 2016 operating loss1 of $4.7 million or $0.05 per diluted common share |
• | Third quarter 2016 annuity sales of $1.5 billion, down 16% from third quarter 2015 |
• | Policyholder funds under management of $44.5 billion, up 1.9% from June 30, 2016 |
• | Third quarter 2016 investment spread of 2.57% |
• | Operating income1 return on average equity1 of 6.7% (trailing twelve months); excluding unlocking and assumption revisions, operating income1 return on average equity1 of 11.4% (trailing twelve months) |
• | Estimated risk-based capital (RBC) ratio of 338% (pro forma including $100 million capital contribution on October 3, 2016) compared to 336% at December 31, 2015 |
WEST DES MOINES, Iowa (November 2, 2016) - American Equity Investment Life Holding Company (NYSE: AEL), a leading issuer of fixed index annuities, today reported third quarter 2016 net loss of $7.4 million, or $0.09 per diluted common share, compared to net income of $97.3 million, or $1.19 per diluted common share, for third quarter 2015.
Operating loss1 for the third quarter of 2016 was $4.7 million, or $0.05 per diluted common share, compared to operating income of $45.9 million, or $0.56 per diluted common share, for third quarter 2015.
The third quarter 2016 net loss and operating loss1 were negatively affected by $52.9 million ($0.61 per diluted common share) and $52.6 million ($0.60 per diluted common share), respectively, for revisions to assumptions utilized in the determination of deferred policy acquisition costs, deferred sales inducements and the liability for future benefits to be paid under lifetime income benefit riders. Net income and operating income1 for the third quarter of 2015 were impacted by similar assumption revisions which decreased net income by $1.1 million ($0.01 per diluted common share) and operating income1 by $8.7 million ($0.10 per diluted common share).
In addition, the third quarter 2016 net loss and operating loss1 were increased by $1.3 million after tax or $0.02 per diluted common share for items that were discrete to the quarter. The discrete items included $1.1 million for income tax adjustments related to income earned in 2015 and the first half of 2016 and $0.2 million after tax for the write off of capitalized debt issuance costs associated with the Company's November 2013 revolving line of credit facility which was refinanced and terminated at the end of the third quarter.
POLICYHOLDER FUNDS UNDER MANAGEMENT UP 1.9% ON $1.5 BILLION OF SALES
Policyholder funds under management at September 30, 2016 were $44.5 billion, an $820 million or 1.9% increase from the end of the second quarter. Third quarter sales were $1.5 billion before coinsurance ceded and $1.1 billion after coinsurance ceded. Gross and net sales for the quarter were down sequentially and compared to the prior year third quarter with decreases ranging between 16% and 35%.
Commenting on sales, John Matovina, Chief Executive Officer and President, said: "Our pace of sales slowed in the quarter but we are still growing invested assets and policyholder funds under management. As we indicated in our second quarter commentary, we expected sales to moderate in the second half of this year following a very strong first six months. Sales by independent agents for American Equity Investment Life Insurance Company (American Equity Life) declined 26% sequentially with FIA sales down 15% and MYGA sales down 88%. Although formal FIA sales data for third quarter 2016 will not likely be released until later this month, our expectation is that the sequential decline in FIA sales by our independent agents was consistent with the overall market experience. MYGA sales by independent agents were 2.6% of total independent agent sales in the third quarter. That mix of FIA and MYGA sales by our independent agents is more in line with our historical experience than the first two quarters of this year."
Commenting on Eagle Life, Matovina added: “Expanding our Eagle Life business has been a key initiative for us which has been reinforced by the Department of Labor (DOL) conflict of interest fiduciary rule that becomes operational next April if not otherwise delayed or overturned through litigation. The rule favors sales of FIAs by broker-dealers and banks and poses significant challenges to sales of FIAs by independent agents. Eagle Life continued to gain traction during the third quarter. It added a new distribution relationship, bringing the total to 52 selling agreements, and began selling through a potentially significant bank relationship. That being said, the market environment in Eagle Life's distribution channels was more competitive in the third quarter and Eagle Life grew its invested assets and policyholder funds under management more slowly than in the second quarter. Sales were down 29% sequentially to $348 million, with FIA sales declining to $153 million from $190 million and MYGA sales declining to $195 million from $300 million."
Matovina continued: "The outlook for FIA sales for the next two quarters remains favorable. However, sales of FIAs by independent agents may come under pressure next year if the DOL rule becomes effective in the second quarter. We are encouraged by several of our NMO partners applying to the DOL to qualify as financial institutions under the Best Interest Contract exemption. However, the timing of approval of financial institution status, if granted, is uncertain as the DOL has not provided guidance on its process for qualification. We intend to continue to support our NMO partners and independent agents. We have filed traditional fixed rate annuity product forms and companion lifetime income benefit riders which we plan to introduce to the market by the beginning of 2017. We believe these products offer safety of principal and guaranteed lifetime income desired by retirement account holders, while qualifying for distribution under the less onerous PTE 84-24 exemption."
SPREAD DECLINES ON LOWER INVESTMENT YIELD; CASH BALANCE DECLINES
American Equity’s investment spread was 2.57% for the third quarter of 2016 compared to 2.62% for the second quarter of 2016 and 2.83% for the third quarter of 2015. On a sequential basis, the average yield on invested assets declined eight basis points while the cost of money declined three basis points..
Average yield on invested assets continued to be unfavorably impacted by the investment of new premiums and portfolio cash flows at rates below the portfolio rate and high cash balances. The average yield on fixed income securities purchased and commercial mortgage loans funded in the third quarter of 2016 was 3.31% compared to 3.95% and 4.14%, respectively, in the second and first quarters of 2016. The average balance for cash and short-term investments was $1.2 billion during the third quarter, compared to $1.1 billion in the second quarter of 2016 and $807 million in the first quarter of 2016. The unfavorable impact from the aforementioned items was partially offset by fee income from bond transactions and prepayment income which added four basis points to both third quarter 2016 and second quarter 2016 average yield on invested assets.
The aggregate cost of money for annuity liabilities decreased by three basis points to 1.89% in the third quarter of 2016 compared to 1.92% in the second quarter of 2016. This decrease reflected continued reductions in crediting rates. The benefit from over hedging the obligations for index linked interest was two basis points in the third quarter of 2016 compared to a nominal benefit in the second quarter of 2016.
Commenting on investment spread, John Matovina said: “We saw continued spread compression in the third quarter. Similar to the first two quarters of the year, the decrease in the cost of money from reductions in rates on our policy liabilities was less than the decrease in the average yield on investments that resulted from the investment of new premiums and portfolio cash flows in high quality investments with yields below our portfolio rate and the increase in average cash and short-term investment balances during the quarter."
Turning to the outlook for investment spread, Matovina added: "We expect investment spread in the fourth quarter to benefit from the substantial reinvestment of cash and short-term investments into higher yielding securities. As of September 30, 2016, cash and short-term investment balances had fallen to $652 million from $1.6 billion at the beginning of the quarter and decreased to $308 million by the end of October. On September 1, 2016, we began implementing renewal adjustments covering $16 - $17 billion of policyholder account values that should lower the overall cost of money by eight basis points when fully implemented. On December 6, 2016, we will begin applying renewal adjustments on $7.4 billion of additional policyholder account values. These adjustments will be implemented over the next 12 - 15 months on policy anniversary dates and are expected to reduce the 0.54% cost of money differential between existing rates and the guaranteed minimums we had at September 30, 2016."
EQUITY AND DEBT RAISES SUPPORT CAPITAL ADEQUACY
As previously reported, the Company raised $235 million of capital during the quarter. On August 1st, it physically settled its two equity forward sales agreements and received $134.7 million in net cash proceeds which were contributed to the capital and surplus of American Equity Life. On September 30, the Company entered into a credit agreement providing for a three-year $100 million term loan and a $150 million unsecured revolving credit facility maturing in September 2021. The interest rate on the term loan is currently 2.625% (3-month LIBOR plus 1.75%) and the term loan can be prepaid prior to maturity without penalty. Mandatory prepayments of the term loan are required with the net cash proceeds from any capital markets transaction as defined in the credit agreement. The revolving credit facility replaces the four year $140 million facility that was entered into in November 2013 and is available for general corporate purposes, including capital contributions to the Company's operating subsidiaries. No amounts are currently drawn on the revolving credit facility.
Including proceeds from the term loan, which were contributed to capital and surplus of American Equity Life on October 3, 2016, the estimated RBC ratio at September 30, 2016 was 338%.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to future operations, strategies, financial results or other developments, and are subject to assumptions, risks and uncertainties. Statements such as “guidance”, “expect”, “anticipate”, “believe”, “goal”, “objective”, “target”, “may”, “should”, “estimate”, “projects” or similar words as well as specific projections of future results qualify as forward-looking statements. Factors that may cause our actual results to differ materially from those contemplated by these forward looking statements can be found in the company’s Form 10-K filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date the statement was made and the company undertakes no obligation to update such forward-looking statements. There can be no assurance that other factors not currently anticipated by the Company will not materially and adversely affect our results of operations. Investors are cautioned not to place undue reliance on any forward-looking statements made by us or on our behalf.
CONFERENCE CALL
American Equity will hold a conference call to discuss third quarter 2016 earnings on Thursday, November 3, 2016 at 10:00 a.m. CDT. The conference call will be webcast live on the Internet. Investors and interested parties who wish to listen to the call on the Internet may do so at www.american-equity.com.
The call may also be accessed by telephone at 855-865-0606, passcode 95132764 (international callers, please dial 704-859-4382). An audio replay will be available shortly after the call on AEL’s website. An audio replay will also be available via telephone through November 10, 2016 at 855-859-2056, passcode 95132764 (international callers will need to dial 404-537-3406).
ABOUT AMERICAN EQUITY
American Equity Investment Life Holding Company, through its wholly-owned operating subsidiaries, issues fixed annuity and life insurance products, with a primary emphasis on the sale of fixed index and fixed rate annuities. American Equity Investment Life Holding Company, a New York Stock Exchange Listed company (NYSE: AEL), is headquartered in West Des Moines, Iowa. For more information, please visit www.american-equity.com.
1 Use of non-GAAP financial measures is discussed in this release in the tables that follow the text of the release.
###
American Equity Investment Life Holding Company
Consolidated Statements of Operations (Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||
Revenues: | |||||||||||||||
Premiums and other considerations | $ | 12,731 | $ | 8,335 | $ | 31,534 | $ | 25,369 | |||||||
Annuity product charges | 47,675 | 37,975 | 125,304 | 99,066 | |||||||||||
Net investment income | 463,583 | 436,085 | 1,374,239 | 1,253,930 | |||||||||||
Change in fair value of derivatives | 103,794 | (351,360 | ) | 68,828 | (405,484 | ) | |||||||||
Net realized gains (losses) on investments, excluding other than temporary impairment ("OTTI") losses | 5,256 | 1,159 | 10,680 | 10,362 | |||||||||||
OTTI losses on investments: | |||||||||||||||
Total OTTI losses | (4,554 | ) | (10,000 | ) | (11,334 | ) | (10,132 | ) | |||||||
Portion of OTTI losses recognized in (from) other comprehensive income | 1,575 | 4,771 | (1,785 | ) | 3,943 | ||||||||||
Net OTTI losses recognized in operations | (2,979 | ) | (5,229 | ) | (13,119 | ) | (6,189 | ) | |||||||
Total revenues | 630,060 | 126,965 | 1,597,466 | 977,054 | |||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits and change in future policy benefits | 15,065 | 10,959 | 37,567 | 32,629 | |||||||||||
Interest sensitive and index product benefits | 278,943 | 213,465 | 487,735 | 802,431 | |||||||||||
Amortization of deferred sales inducements | 69,245 | 65,807 | 127,396 | 152,278 | |||||||||||
Change in fair value of embedded derivatives | 144,404 | (414,724 | ) | 694,564 | (583,112 | ) | |||||||||
Interest expense on notes and loan payable | 6,887 | 7,283 | 20,649 | 21,976 | |||||||||||
Interest expense on subordinated debentures | 3,253 | 3,075 | 9,627 | 9,138 | |||||||||||
Amortization of deferred policy acquisition costs | 98,108 | 67,885 | 198,486 | 186,871 | |||||||||||
Other operating costs and expenses | 25,133 | 24,497 | 78,786 | 70,487 | |||||||||||
Total benefits and expenses | 641,038 | (21,753 | ) | 1,654,810 | 692,698 | ||||||||||
Income (loss) before income taxes | (10,978 | ) | 148,718 | (57,344 | ) | 284,356 | |||||||||
Income tax expense (benefit) | (3,558 | ) | 51,412 | (19,791 | ) | 98,302 | |||||||||
Net income (loss) | $ | (7,420 | ) | $ | 97,306 | $ | (37,553 | ) | $ | 186,054 | |||||
Earnings (loss) per common share | $ | (0.09 | ) | $ | 1.22 | $ | (0.45 | ) | $ | 2.39 | |||||
Earnings (loss) per common share - assuming dilution | $ | (0.09 | ) | $ | 1.19 | $ | (0.45 | ) | $ | 2.33 | |||||
Weighted average common shares outstanding (in thousands): | |||||||||||||||
Earnings (loss) per common share | 86,262 | 79,676 | 83,645 | 77,995 | |||||||||||
Earnings (loss) per common share - assuming dilution | 87,044 | 81,559 | 84,413 | 79,977 | |||||||||||
Page 1
American Equity Investment Life Holding Company
NON-GAAP FINANCIAL MEASURES
In addition to net income (loss), the Company has consistently utilized operating income (loss) and operating income (loss) per common share - assuming dilution, non-GAAP financial measures commonly used in the life insurance industry, as economic measures to evaluate its financial performance. Operating income (loss) equals net income (loss) adjusted to eliminate the impact of items that fluctuate from quarter to quarter in a manner unrelated to core operations. The most significant adjustments to arrive at operating income (loss) eliminate the impact of fair value accounting for our fixed index annuity business and are not economic in nature but rather impact the timing of reported results. The Company believes measures excluding their impact are useful in analyzing operating trends and the combined presentation and evaluation of operating income (loss) together with net income (loss) provides information that may enhance an investor’s understanding of its underlying results and profitability.
Reconciliation from Net Income (Loss) to Operating Income (Loss) (Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||
Net income (loss) | $ | (7,420 | ) | $ | 97,306 | $ | (37,553 | ) | $ | 186,054 | |||||
Adjustments to arrive at operating income (loss): (a) | |||||||||||||||
Net realized investment (gains) losses, including OTTI | (1,008 | ) | 2,542 | 752 | (2,835 | ) | |||||||||
Change in fair value of derivatives and embedded derivatives - index annuities | 9,400 | (83,410 | ) | 160,078 | (61,277 | ) | |||||||||
Change in fair value of derivatives and embedded derivatives - debt | (1,049 | ) | 2,575 | 2,483 | 2,746 | ||||||||||
Litigation reserve | (1,957 | ) | — | (1,957 | ) | — | |||||||||
Income taxes | (2,689 | ) | 26,903 | (57,426 | ) | 20,991 | |||||||||
Operating income (loss) (a non-GAAP financial measure) | $ | (4,723 | ) | $ | 45,916 | $ | 66,377 | $ | 145,679 | ||||||
Per common share - assuming dilution: | |||||||||||||||
Net income (loss) | $ | (0.09 | ) | $ | 1.19 | $ | (0.45 | ) | $ | 2.33 | |||||
Adjustments to arrive at operating income (loss): | |||||||||||||||
Anti-dilutive effect of net loss | — | — | 0.01 | — | |||||||||||
Net realized investment (gains) losses, including OTTI | (0.01 | ) | 0.03 | 0.01 | (0.03 | ) | |||||||||
Change in fair value of derivatives and embedded derivatives - index annuities | 0.11 | (1.02 | ) | 1.89 | (0.77 | ) | |||||||||
Change in fair value of derivatives and embedded derivatives - debt | (0.01 | ) | 0.03 | 0.03 | 0.03 | ||||||||||
Litigation reserve | (0.02 | ) | — | (0.02 | ) | — | |||||||||
Income taxes | (0.03 | ) | 0.33 | (0.68 | ) | 0.26 | |||||||||
Operating income (loss) (a non-GAAP financial measure) | $ | (0.05 | ) | $ | 0.56 | $ | 0.79 | $ | 1.82 | ||||||
(a) | Adjustments to net income (loss) to arrive at operating income (loss) are presented net of related adjustments to amortization of deferred sales inducements (DSI) and deferred policy acquisition costs (DAC) where applicable. |
Page 2
American Equity Investment Life Holding Company
NON-GAAP FINANCIAL MEASURES
Average Stockholders' Equity and Return on Average Equity (Unaudited)
Return on average equity measures how efficiently the Company generates profits from the resources provided by its net assets. Return on average equity is calculated by dividing net income (loss) and operating income (loss) for the trailing twelve months by average equity excluding average accumulated other comprehensive income ("AOCI"). The Company excludes AOCI because AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale investments.
Twelve Months Ended | |||
September 30, 2016 | |||
(Dollars in thousands) | |||
Average Stockholders' Equity 1 | |||
Average equity including average AOCI | $ | 2,436,560 | |
Average AOCI | (695,176 | ) | |
Average equity excluding average AOCI | $ | 1,741,384 | |
Net income (loss) | $ | (3,777 | ) |
Operating income | 116,518 | ||
Return on Average Equity Excluding Average AOCI | |||
Net income (loss) | (0.22 | )% | |
Operating income | 6.69 | % | |
1 - The net proceeds received from the Company's settlement of the two equity forward sales agreements in August 2016 are included in the computations of average stockholders' equity on a weighted average basis based upon the number of days they were available to the Company in the twelve month period. The weighted average amount is added to the simple average of (a) stockholders' equity at the beginning of the twelve month period and (b) stockholders' equity at the end of the twelve month period excluding the net proceeds received from the settlement of the two equity forward sales agreements in August 2016.
Page 3
Exhibit 99.2
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement
September 30, 2016
A. | Financial Highlights | |
Non-GAAP Financial Measures | ||
B. | Product Summary | |
C. | Investment Summary | |
D. | ||
E. | ||
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2016
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
September 30, 2016 | December 31, 2015 | ||||||
Assets | |||||||
Investments: | |||||||
Fixed maturity securities: | |||||||
Available for sale, at fair value | $ | 42,304,410 | $ | 36,421,839 | |||
Held for investment, at amortized cost | 76,773 | 76,622 | |||||
Equity securities, available for sale, at fair value | 7,843 | 7,828 | |||||
Mortgage loans on real estate | 2,419,230 | 2,435,257 | |||||
Derivative instruments | 706,007 | 337,256 | |||||
Other investments | 297,068 | 291,530 | |||||
Total investments | 45,811,331 | 39,570,332 | |||||
Cash and cash equivalents | 812,814 | 397,749 | |||||
Coinsurance deposits | 4,453,320 | 3,187,470 | |||||
Accrued investment income | 405,996 | 362,104 | |||||
Deferred policy acquisition costs | 2,370,781 | 2,905,136 | |||||
Deferred sales inducements | 1,800,435 | 2,232,148 | |||||
Deferred income taxes | — | 232,683 | |||||
Income taxes recoverable | 12,652 | 29,599 | |||||
Other assets | 180,892 | 112,171 | |||||
Total assets | $ | 55,848,221 | $ | 49,029,392 | |||
Liabilities and Stockholders' Equity | |||||||
Liabilities: | |||||||
Policy benefit reserves | $ | 50,814,665 | $ | 45,495,431 | |||
Other policy funds and contract claims | 302,849 | 324,850 | |||||
Notes and loan payable | 493,445 | 393,227 | |||||
Subordinated debentures | 241,751 | 241,452 | |||||
Deferred income taxes | 110,551 | — | |||||
Other liabilities | 1,072,098 | 629,897 | |||||
Total liabilities | 53,035,359 | 47,084,857 | |||||
Stockholders' equity: | |||||||
Common stock | 87,898 | 81,354 | |||||
Additional paid-in capital | 767,570 | 630,367 | |||||
Accumulated other comprehensive income | 963,796 | 201,663 | |||||
Retained earnings | 993,598 | 1,031,151 | |||||
Total stockholders' equity | 2,812,862 | 1,944,535 | |||||
Total liabilities and stockholders' equity | $ | 55,848,221 | $ | 49,029,392 | |||
Page 1
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2016
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues: | |||||||||||||||
Premiums and other considerations | $ | 12,731 | $ | 8,335 | $ | 31,534 | $ | 25,369 | |||||||
Annuity product charges | 47,675 | 37,975 | 125,304 | 99,066 | |||||||||||
Net investment income | 463,583 | 436,085 | 1,374,239 | 1,253,930 | |||||||||||
Change in fair value of derivatives | 103,794 | (351,360 | ) | 68,828 | (405,484 | ) | |||||||||
Net realized gains (losses) on investments, excluding other than temporary impairment ("OTTI") losses | 5,256 | 1,159 | 10,680 | 10,362 | |||||||||||
OTTI losses on investments: | |||||||||||||||
Total OTTI losses | (4,554 | ) | (10,000 | ) | (11,334 | ) | (10,132 | ) | |||||||
Portion of OTTI losses recognized in (from) other comprehensive income | 1,575 | 4,771 | (1,785 | ) | 3,943 | ||||||||||
Net OTTI losses recognized in operations | (2,979 | ) | (5,229 | ) | (13,119 | ) | (6,189 | ) | |||||||
Total revenues | 630,060 | 126,965 | 1,597,466 | 977,054 | |||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits and change in future policy benefits | 15,065 | 10,959 | 37,567 | 32,629 | |||||||||||
Interest sensitive and index product benefits | 278,943 | 213,465 | 487,735 | 802,431 | |||||||||||
Amortization of deferred sales inducements | 69,245 | 65,807 | 127,396 | 152,278 | |||||||||||
Change in fair value of embedded derivatives | 144,404 | (414,724 | ) | 694,564 | (583,112 | ) | |||||||||
Interest expense on notes and loan payable | 6,887 | 7,283 | 20,649 | 21,976 | |||||||||||
Interest expense on subordinated debentures | 3,253 | 3,075 | 9,627 | 9,138 | |||||||||||
Amortization of deferred policy acquisition costs | 98,108 | 67,885 | 198,486 | 186,871 | |||||||||||
Other operating costs and expenses | 25,133 | 24,497 | 78,786 | 70,487 | |||||||||||
Total benefits and expenses | 641,038 | (21,753 | ) | 1,654,810 | 692,698 | ||||||||||
Income (loss) before income taxes | (10,978 | ) | 148,718 | (57,344 | ) | 284,356 | |||||||||
Income tax expense (benefit) | (3,558 | ) | 51,412 | (19,791 | ) | 98,302 | |||||||||
Net income (loss) | $ | (7,420 | ) | $ | 97,306 | $ | (37,553 | ) | $ | 186,054 | |||||
Earnings (loss) per common share | $ | (0.09 | ) | $ | 1.22 | $ | (0.45 | ) | $ | 2.39 | |||||
Earnings (loss) per common share - assuming dilution | $ | (0.09 | ) | $ | 1.19 | $ | (0.45 | ) | $ | 2.33 | |||||
Weighted average common shares outstanding (in thousands): | |||||||||||||||
Earnings (loss) per common share | 86,262 | 79,676 | 83,645 | 77,995 | |||||||||||
Earnings (loss) per common share - assuming dilution | 87,044 | 81,559 | 84,413 | 79,977 | |||||||||||
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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2016
Quarterly Summary - Most Recent 5 Quarters (Unaudited)
Q3 2016 | Q2 2016 | Q1 2016 | Q4 2015 | Q3 2015 | |||||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||||||
Revenues: | |||||||||||||||||||
Traditional life insurance premiums | $ | 2,147 | $ | 2,398 | $ | 2,634 | $ | 2,891 | $ | 2,664 | |||||||||
Life contingent immediate annuity considerations | 10,584 | 9,060 | 4,711 | 7,788 | 5,671 | ||||||||||||||
Surrender charges | 13,819 | 11,997 | 14,565 | 10,543 | 13,104 | ||||||||||||||
Lifetime income benefit rider fees | 33,856 | 29,127 | 21,940 | 26,559 | 24,871 | ||||||||||||||
Net investment income | 463,583 | 459,830 | 450,826 | 438,262 | 436,085 | ||||||||||||||
Change in fair value of derivatives | 103,794 | 39,099 | (74,065 | ) | 69,338 | (351,360 | ) | ||||||||||||
Net realized gains (losses) on investments, excluding OTTI | 5,256 | 2,737 | 2,687 | (151 | ) | 1,159 | |||||||||||||
Net OTTI losses recognized in operations | (2,979 | ) | (4,446 | ) | (5,694 | ) | (13,347 | ) | (5,229 | ) | |||||||||
Total revenues | 630,060 | 549,802 | 417,604 | 541,883 | 126,965 | ||||||||||||||
Benefits and expenses: | |||||||||||||||||||
Traditional life insurance policy benefits and change in future policy benefits | 1,348 | 2,177 | 1,545 | 2,044 | 1,730 | ||||||||||||||
Life contingent immediate annuity benefits and change in future policy benefits | 13,717 | 11,216 | 7,564 | 10,785 | 9,229 | ||||||||||||||
Interest sensitive and index product benefits (b)(e)(f) | 278,943 | 111,121 | 97,671 | 165,622 | 213,465 | ||||||||||||||
Amortization of deferred sales inducements (c)(d)(g) | 69,245 | 30,672 | 27,479 | 57,112 | 65,807 | ||||||||||||||
Change in fair value of embedded derivatives | 144,404 | 284,303 | 265,857 | 118,414 | (414,724 | ) | |||||||||||||
Interest expense on notes and loan payable | 6,887 | 6,882 | 6,880 | 6,873 | 7,283 | ||||||||||||||
Interest expense on subordinated debentures | 3,253 | 3,206 | 3,168 | 3,101 | 3,075 | ||||||||||||||
Amortization of deferred policy acquisition costs (c)(d)(g) | 98,108 | 50,665 | 49,713 | 99,243 | 67,885 | ||||||||||||||
Other operating costs and expenses (a) | 25,133 | 26,823 | 26,830 | 25,731 | 24,497 | ||||||||||||||
Total benefits and expenses | 641,038 | 527,065 | 486,707 | 488,925 | (21,753 | ) | |||||||||||||
Income (loss) before income taxes | (10,978 | ) | 22,737 | (69,103 | ) | 52,958 | 148,718 | ||||||||||||
Income tax expense (benefit) | (3,558 | ) | 8,029 | (24,262 | ) | 19,182 | 51,412 | ||||||||||||
Net income (loss) (a)(b)(c)(d)(e)(f)(g) | $ | (7,420 | ) | $ | 14,708 | $ | (44,841 | ) | $ | 33,776 | $ | 97,306 | |||||||
Earnings (loss) per common share | $ | (0.09 | ) | $ | 0.18 | $ | (0.55 | ) | $ | 0.41 | $ | 1.22 | |||||||
Earnings (loss) per common share - assuming dilution (a)(b)(c)(d)(e)(f)(g) | $ | (0.09 | ) | $ | 0.18 | $ | (0.55 | ) | $ | 0.40 | $ | 1.19 | |||||||
Weighted average common shares outstanding (in thousands): | |||||||||||||||||||
Earnings (loss) per common share | 86,262 | 82,517 | 82,129 | 81,733 | 79,676 | ||||||||||||||
Earnings (loss) per common share - assuming dilution | 87,044 | 83,184 | 82,961 | 83,851 | 81,559 | ||||||||||||||
(a) | Q3 2016 includes a benefit of $2.8 million based upon developments in the claims process associated with a lawsuit settlement, which after related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs and income taxes, decreased the net loss and loss per common share - assuming dilution by $1.1 million and $0.01 per share, respectively. |
(b) | Q3 2016 includes expense from the revision of assumptions used in determining reserves held for living income benefit riders. The impact increased interest sensitive and index product benefits by $42.0 million and increased the net loss and loss per common share - assuming dilution by $27.1 million and $0.31 per share, respectively. |
(c) | Q3 2016 includes expense from unlocking which increased amortization of deferred sales inducements and deferred policy acquisition costs by $17.9 million and $22.1 million, respectively, and increased the net loss and loss per common share- assuming dilution by $25.8 million and $0.30 per share, respectively. |
(d) | Q1 2016 includes expense from unlocking which increased amortization of deferred sales inducements and deferred policy acquisition costs by $17.9 million and $26.1 million, respectively, and increased the net loss and loss per common share- assuming dilution by $28.4 million and $0.35 per share, respectively. |
(e) | Q4 2015 includes an adjustment to reserves for living income benefit riders which reduced interest sensitive and index product benefits by $1.9 million, 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 $0.7 million and $0.01 per share, respectively. |
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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2016
(f) | Q3 2015 includes expense from the revision of assumptions used in determining reserves held for living income benefit riders. The impact increased interest sensitive and index product benefits by $18.3 million and decreased net income and earnings per common share - assuming dilution by $11.8 million and $0.14 per share, respectively. |
(g) | Q3 2015 includes a benefit from unlocking which reduced amortization of deferred sales inducements and deferred policy acquisition costs by $5.6 million and $11.0 million, respectively, and increased net income and earnings per common share- assuming dilution by $10.7 million and $0.13 per share, respectively. |
NON-GAAP FINANCIAL MEASURES
In addition to net income (loss), we have consistently utilized operating income (loss) and operating income (loss) 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 (loss) equals net income (loss) adjusted to eliminate the impact of items that fluctuate from quarter to quarter in a manner unrelated to core operations, and we believe measures excluding their impact are useful in analyzing operating trends. The most significant adjustments to arrive at operating income (loss) eliminate the impact of fair value accounting for our fixed index annuity business and are not economic in nature but rather impact the timing of reported results. We believe the combined presentation and evaluation of operating income (loss) together with net income (loss) provides information that may enhance an investor’s understanding of our underlying results and profitability.
Reconciliation from Net Income (Loss) to Operating Income (Loss) (Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||
Net income (loss) | $ | (7,420 | ) | $ | 97,306 | $ | (37,553 | ) | $ | 186,054 | |||||
Adjustments to arrive at operating income (loss): (a) | |||||||||||||||
Net realized investment (gains) losses, including OTTI | (1,008 | ) | 2,542 | 752 | (2,835 | ) | |||||||||
Change in fair value of derivatives and embedded derivatives - index annuities | 9,400 | (83,410 | ) | 160,078 | (61,277 | ) | |||||||||
Change in fair value of derivatives and embedded derivatives - debt | (1,049 | ) | 2,575 | 2,483 | 2,746 | ||||||||||
Litigation reserve | (1,957 | ) | — | (1,957 | ) | — | |||||||||
Income taxes | (2,689 | ) | 26,903 | (57,426 | ) | 20,991 | |||||||||
Operating income (loss) (a non-GAAP financial measure) | $ | (4,723 | ) | $ | 45,916 | $ | 66,377 | $ | 145,679 | ||||||
Per common share - assuming dilution: | |||||||||||||||
Net income (loss) | $ | (0.09 | ) | $ | 1.19 | $ | (0.45 | ) | $ | 2.33 | |||||
Adjustments to arrive at operating income (loss): | |||||||||||||||
Anti-dilutive effect of net loss | — | — | 0.01 | — | |||||||||||
Net realized investment (gains) losses, including OTTI | (0.01 | ) | 0.03 | 0.01 | (0.03 | ) | |||||||||
Change in fair value of derivatives and embedded derivatives - index annuities | 0.11 | (1.02 | ) | 1.89 | (0.77 | ) | |||||||||
Change in fair value of derivatives and embedded derivatives - debt | (0.01 | ) | 0.03 | 0.03 | 0.03 | ||||||||||
Litigation reserve | (0.02 | ) | — | (0.02 | ) | — | |||||||||
Income taxes | (0.03 | ) | 0.33 | (0.68 | ) | 0.26 | |||||||||
Operating income (loss) (a non-GAAP financial measure) | $ | (0.05 | ) | $ | 0.56 | $ | 0.79 | $ | 1.82 | ||||||
(a) | Adjustments to net income (loss) to arrive at operating income (loss) are presented net of related adjustments to amortization of deferred sales inducements (DSI) and deferred policy acquisition costs (DAC) where applicable. |
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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2016
NON-GAAP FINANCIAL MEASURES
Summary of Adjustments to Arrive at Operating Income (Loss) (Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Net realized investment gains and losses, including OTTI: | |||||||||||||||
Net realized (gains) losses on investments, including OTTI | $ | (2,277 | ) | $ | 4,070 | $ | 2,439 | $ | (4,173 | ) | |||||
Amortization of DAC and DSI | 1,269 | (1,528 | ) | (1,687 | ) | 1,338 | |||||||||
Income taxes | 358 | (903 | ) | (267 | ) | 1,006 | |||||||||
$ | (650 | ) | $ | 1,639 | $ | 485 | $ | (1,829 | ) | ||||||
Change in fair value of derivatives and embedded derivatives: | |||||||||||||||
Index annuities | $ | 29,145 | $ | (93,752 | ) | $ | 345,469 | $ | (27,466 | ) | |||||
Interest rate caps and swap | (1,049 | ) | 2,575 | 2,483 | 2,746 | ||||||||||
Amortization of DAC and DSI | (19,745 | ) | 10,342 | (185,391 | ) | (33,811 | ) | ||||||||
Income taxes | (3,742 | ) | 27,806 | (57,854 | ) | 19,985 | |||||||||
$ | 4,609 | $ | (53,029 | ) | $ | 104,707 | $ | (38,546 | ) | ||||||
Litigation reserve: | |||||||||||||||
Change in litigation reserve recorded in other operating costs | $ | (2,829 | ) | $ | — | $ | (2,829 | ) | $ | — | |||||
Amortization of DAC and DSI | 872 | — | 872 | — | |||||||||||
Income taxes | 695 | — | 695 | — | |||||||||||
$ | (1,262 | ) | $ | — | $ | (1,262 | ) | $ | — | ||||||
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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2016
NON-GAAP FINANCIAL MEASURES
Quarterly Summary - Most Recent 5 Quarters (Unaudited)
Reconciliation from Net Income (Loss) to Operating Income (Loss)
Q3 2016 | Q2 2016 | Q1 2016 | Q4 2015 | Q3 2015 | |||||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||||||
Net income (loss) | $ | (7,420 | ) | $ | 14,708 | $ | (44,841 | ) | $ | 33,776 | $ | 97,306 | |||||||
Adjustments to arrive at operating income (loss): (a) | |||||||||||||||||||
Net realized investment (gains) losses, including OTTI | (1,008 | ) | 605 | 1,155 | 8,572 | 2,542 | |||||||||||||
Change in fair value of derivatives and embedded derivatives - index annuities | 9,400 | 53,129 | 97,549 | 17,221 | (83,409 | ) | |||||||||||||
Change in fair value of derivatives and embedded derivatives - debt | (1,049 | ) | 768 | 2,764 | (1,449 | ) | 2,574 | ||||||||||||
Litigation reserve | (1,957 | ) | — | — | — | — | |||||||||||||
Income taxes | (2,689 | ) | (19,108 | ) | (35,629 | ) | (7,979 | ) | 26,903 | ||||||||||
Operating income (loss) (a non-GAAP financial measure) (b)(c)(d)(e)(f)(g) | $ | (4,723 | ) | $ | 50,102 | $ | 20,998 | $ | 50,141 | $ | 45,916 | ||||||||
Per common share - assuming dilution: | |||||||||||||||||||
Net income (loss) | $ | (0.09 | ) | $ | 0.18 | $ | (0.55 | ) | $ | 0.40 | $ | 1.19 | |||||||
Adjustments to arrive at operating income (loss): | |||||||||||||||||||
Anti-dilutive effect of net loss | — | — | 0.01 | — | — | ||||||||||||||
Net realized investment (gains) losses, including OTTI | (0.01 | ) | — | 0.01 | 0.10 | 0.03 | |||||||||||||
Change in fair value of derivatives and embedded derivatives - index annuities | 0.11 | 0.64 | 1.18 | 0.21 | (1.02 | ) | |||||||||||||
Change in fair value of derivatives and embedded derivatives - debt | (0.01 | ) | 0.01 | 0.03 | (0.02 | ) | 0.03 | ||||||||||||
Litigation reserve | (0.02 | ) | — | — | — | — | |||||||||||||
Income taxes | (0.03 | ) | (0.23 | ) | (0.43 | ) | (0.09 | ) | 0.33 | ||||||||||
Operating income (loss) (a non-GAAP financial measure) (b)(c)(d)(e)(f)(g) | $ | (0.05 | ) | $ | 0.60 | $ | 0.25 | $ | 0.60 | $ | 0.56 | ||||||||
(a) | Adjustments to net income (loss) to arrive at operating income (loss) are presented net of related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs where applicable. |
(b) | Q3 2016 includes expense from unlocking which increased amortization of deferred sales inducements and deferred policy acquisition costs by $18.1 million and $21.5 million, respectively, and increased the operating loss and operating loss per common share- assuming dilution by $25.5 million and $0.29 per share, respectively. |
(c) | Q3 2016 includes expense from the revision of assumptions used in determining reserves held for living income benefit riders. The impact increased interest sensitive and index product benefits by $42.0 million and increased the operating loss and operating loss per common share - assuming dilution by $27.1 million and $0.31 per share, respectively. |
(d) | Q1 2016 includes expense from unlocking which increased amortization of deferred sales inducements and deferred policy acquisition costs by $18.1 million and $26.3 million, respectively, and decreased operating income and operating income per common share- assuming dilution by $28.6 million and $0.35 per share, respectively. |
(e) | Q4 2015 includes an adjustment to reserves for living income benefit riders which reduced interest sensitive and index product benefits by $1.9 million, 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 $0.5 million and $0.01 per share, respectively. |
(f) | Q3 2015 includes a benefit from unlocking which reduced amortization of deferred sales inducements and deferred policy acquisition costs by $0.5 million and $4.3 million, respectively, and increased operating income and operating income per common share- assuming dilution by $3.1 million and $0.04 per share, respectively. |
(g) | Q3 2015 includes expense from the revision of assumptions used in determining reserves held for living income benefit riders. The impact increased interest sensitive and index product benefits by $18.3 million and decreased operating income and operating income per common share - assuming dilution by $11.8 million and $0.14 per share, respectively. |
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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2016
NON-GAAP FINANCIAL MEASURES
Summary of Adjustments to Arrive at Operating Income (Loss) (Unaudited)
Q3 2016 | Q2 2016 | Q1 2016 | Q4 2015 | Q3 2015 | |||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Net realized (gains) losses on investments | $ | (5,256 | ) | $ | (2,737 | ) | $ | (2,687 | ) | $ | 151 | $ | (1,159 | ) | |||||
Net OTTI losses recognized in operations | 2,979 | 4,446 | 5,694 | 13,347 | 5,229 | ||||||||||||||
Change in fair value of derivatives | (116,308 | ) | (170,795 | ) | (59,509 | ) | (132,818 | ) | 322,406 | ||||||||||
Decrease (increase) in total revenues | (118,585 | ) | (169,086 | ) | (56,502 | ) | (119,320 | ) | 326,476 | ||||||||||
Amortization of deferred sales inducements | 8,934 | 28,027 | 48,002 | (3,075 | ) | (12,644 | ) | ||||||||||||
Change in fair value of embedded derivatives | (144,404 | ) | (284,303 | ) | (265,857 | ) | (118,414 | ) | 413,583 | ||||||||||
Amortization of deferred policy acquisition costs | 8,670 | 32,688 | 59,885 | (22,175 | ) | 3,830 | |||||||||||||
Other operating costs and expenses | 2,829 | — | — | — | — | ||||||||||||||
Increase (decrease) in total benefits and expenses | (123,971 | ) | (223,588 | ) | (157,970 | ) | (143,664 | ) | 404,769 | ||||||||||
Increase (decrease) in income (loss) before income taxes | 5,386 | 54,502 | 101,468 | 24,344 | (78,293 | ) | |||||||||||||
Increase (decrease) in income tax expense | 2,689 | 19,108 | 35,629 | 7,979 | (26,903 | ) | |||||||||||||
Increase (decrease) in net income (loss) | $ | 2,697 | $ | 35,394 | $ | 65,839 | $ | 16,365 | $ | (51,390 | ) | ||||||||
Page 7
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2016
Capitalization/Book Value per Share
September 30, 2016 | December 31, 2015 | ||||||
Capitalization: | |||||||
Notes and loan payable | $ | 500,000 | $ | 400,000 | |||
Subordinated debentures payable to subsidiary trusts | 246,615 | 246,450 | |||||
Total debt | 746,615 | 646,450 | |||||
Total stockholders’ equity | 2,812,862 | 1,944,535 | |||||
Total capitalization | 3,559,477 | 2,590,985 | |||||
Accumulated other comprehensive income (AOCI) | (963,796 | ) | (201,663 | ) | |||
Total capitalization excluding AOCI (a) | $ | 2,595,681 | $ | 2,389,322 | |||
Total stockholders’ equity | $ | 2,812,862 | $ | 1,944,535 | |||
Accumulated other comprehensive income | (963,796 | ) | (201,663 | ) | |||
Total stockholders’ equity excluding AOCI (a) | $ | 1,849,066 | $ | 1,742,872 | |||
Common shares outstanding (b) | 87,913,510 | 81,584,091 | |||||
Book Value per Share: (c) | |||||||
Book value per share including AOCI | $ | 32.00 | $ | 23.83 | |||
Book value per share excluding AOCI (a) | $ | 21.03 | $ | 21.36 | |||
Debt-to-Capital Ratios: (d) | |||||||
Senior debt / Total capitalization | 19.3 | % | 16.7 | % | |||
Adjusted debt / Total capitalization | 19.3 | % | 16.7 | % | |||
(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: 2016 - 15,058 shares; 2015 - 230,012 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 - September 30, 2016
Spread Results
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2016 | 2015 | 2016 | 2015 | ||||
Average yield on invested assets | 4.46% | 4.79% | 4.52% | 4.77% | |||
Aggregate cost of money | 1.89% | 1.96% | 1.91% | 1.96% | |||
Aggregate investment spread | 2.57% | 2.83% | 2.61% | 2.81% | |||
Impact of: | |||||||
Investment yield - additional prepayment income | 0.04% | 0.14% | 0.05% | 0.08% | |||
Cost of money effect of over hedging | 0.02% | 0.02% | 0.01% | 0.05% | |||
Weighted average investments (in thousands) | $41,693,486 | $36,518,093 | $40,586,396 | $35,124,768 | |||
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 September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Included in interest sensitive and index product benefits: | |||||||||||||||
Index credits | $ | 126,653 | $ | 101,170 | $ | 142,084 | $ | 515,675 | |||||||
Interest credited | 69,715 | 62,519 | 198,682 | 187,946 | |||||||||||
Included in change in fair value of derivatives: | |||||||||||||||
Proceeds received at option expiration | (128,293 | ) | (103,750 | ) | (144,343 | ) | (529,196 | ) | |||||||
Pro rata amortization of option cost | 140,286 | 130,956 | 420,529 | 374,466 | |||||||||||
Cost of money for deferred annuities | $ | 208,361 | $ | 190,895 | $ | 616,952 | $ | 548,891 | |||||||
Weighted average liability balance outstanding (in thousands) | $ | 44,050,773 | $ | 38,863,688 | $ | 43,005,333 | $ | 37,358,304 | |||||||
Annuity Account Balance Rollforward
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Account balances at beginning of period | $ | 43,640,978 | $ | 38,117,343 | $ | 41,249,647 | $ | 35,363,041 | |||||||
Net deposits | 1,114,817 | 1,718,755 | 4,241,271 | 4,640,646 | |||||||||||
Premium bonuses | 74,784 | 127,220 | 270,991 | 346,410 | |||||||||||
Fixed interest credited and index credits | 196,368 | 163,689 | 340,766 | 703,621 | |||||||||||
Surrender charges | (13,819 | ) | (13,104 | ) | (40,381 | ) | (36,071 | ) | |||||||
Lifetime income benefit rider fees | (33,856 | ) | (24,871 | ) | (84,923 | ) | (62,995 | ) | |||||||
Surrenders, withdrawals, deaths, etc. | (518,703 | ) | (478,998 | ) | (1,516,802 | ) | (1,344,618 | ) | |||||||
Account balances at end of period | $ | 44,460,569 | $ | 39,610,034 | $ | 44,460,569 | $ | 39,610,034 | |||||||
Page 9
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2016
Annuity Deposits by Product Type
Three Months Ended September 30, | Nine Months Ended September 30, | Year Ended December 31, | ||||||||||||||||||
Product Type | 2016 | 2015 | 2016 | 2015 | 2015 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Fixed index annuities | $ | 1,291,236 | $ | 1,764,179 | $ | 4,504,784 | $ | 4,748,612 | $ | 6,791,689 | ||||||||||
Annual reset fixed rate annuities | 13,877 | 8,425 | 46,448 | 32,612 | 45,182 | |||||||||||||||
Multi-year fixed rate annuities | 225,937 | 45,032 | 1,161,527 | 132,249 | 214,356 | |||||||||||||||
Single premium immediate annuities | 11,730 | 8,921 | 25,357 | 27,085 | 32,752 | |||||||||||||||
Total before coinsurance ceded | 1,542,780 | 1,826,557 | 5,738,116 | 4,940,558 | 7,083,979 | |||||||||||||||
Coinsurance ceded | 416,233 | 98,881 | 1,471,488 | 272,827 | 471,822 | |||||||||||||||
Net after coinsurance ceded | $ | 1,126,547 | $ | 1,727,676 | $ | 4,266,628 | $ | 4,667,731 | $ | 6,612,157 | ||||||||||
Surrender Charge Protection and Account Values by Product Type
Annuity Surrender Charges and Net (of Coinsurance) Account Values at September 30, 2016:
Surrender Charge | Net Account Value | ||||||||||||
Product Type | Avg. Years At Issue | Avg. Years Remaining | Avg. % Remaining | Dollars in Thousands | % | ||||||||
Fixed Index Annuities | 13.8 | 9.0 | 14.3% | $ | 42,369,303 | 95.3 | % | ||||||
Annual Reset Fixed Rate Annuities | 10.8 | 3.6 | 7.5% | 1,416,343 | 3.2 | % | |||||||
Multi-Year Fixed Rate Annuities | 6.6 | 2.9 | 5.7% | 674,923 | 1.5 | % | |||||||
Total | 13.6 | 8.8 | 13.9% | $ | 44,460,569 | 100.0 | % | ||||||
Page 10
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2016
Annuity Liability Characteristics
Fixed Annuities Account Value | Fixed Index Annuities Account Value | ||||||
(Dollars in thousands) | |||||||
SURRENDER CHARGE PERCENTAGES: | |||||||
No surrender charge | $ | 776,102 | $ | 1,596,107 | |||
0.0% < 2.0% | 11,638 | 676,660 | |||||
2.0% < 3.0% | 46,169 | 70,526 | |||||
3.0% < 4.0% | 35,888 | 464,095 | |||||
4.0% < 5.0% | 54,517 | 114,561 | |||||
5.0% < 6.0% | 72,837 | 451,844 | |||||
6.0% < 7.0% | 58,033 | 436,029 | |||||
7.0% < 8.0% | 67,284 | 458,314 | |||||
8.0% < 9.0% | 94,677 | 1,262,936 | |||||
9.0% < 10.0% | 307,600 | 1,771,409 | |||||
10.0% or greater | 566,522 | 35,066,821 | |||||
$ | 2,091,267 | $ | 42,369,302 | ||||
Fixed and Fixed Index Annuities Account Value | Weighted Average Surrender Charge | |||||
(Dollars in thousands) | ||||||
SURRENDER CHARGE EXPIRATION BY YEAR: | ||||||
Out of Surrender Charge | $ | 2,372,209 | 0.00 | % | ||
2016 | 220,108 | 1.61 | % | |||
2017 | 783,356 | 1.96 | % | |||
2018 | 722,608 | 4.36 | % | |||
2019 | 539,567 | 5.85 | % | |||
2020 | 900,010 | 7.80 | % | |||
2021 | 1,378,466 | 9.23 | % | |||
2022 | 2,018,728 | 10.89 | % | |||
2023 | 4,801,715 | 12.67 | % | |||
2024 | 5,364,094 | 13.90 | % | |||
2025 | 5,894,593 | 14.20 | % | |||
2026 | 4,424,030 | 15.18 | % | |||
2027 | 2,728,745 | 17.55 | % | |||
2028 | 2,422,450 | 18.26 | % | |||
2029 | 3,029,702 | 18.64 | % | |||
2030 | 2,562,884 | 19.09 | % | |||
2031 | 2,851,489 | 19.64 | % | |||
2032 | 1,422,141 | 19.99 | % | |||
2033 | 23,674 | 20.00 | % | |||
$ | 44,460,569 | 13.91 | % | |||
Page 11
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2016
Annuity Liability Characteristics
Fixed Annuities Account Value | Fixed Index Annuities Account Value | ||||||
(Dollars in thousands) | |||||||
CREDITED RATE VS. ULTIMATE MINIMUM GUARANTEED RATE DIFFERENTIAL: | |||||||
No differential | $ | 929,513 | $ | 1,185,311 | |||
› 0.0% - 0.25% | 168,222 | 54,273 | |||||
› 0.25% - 0.5% | 237,554 | 128,337 | |||||
› 0.5% - 1.0% | 136,326 | 758,001 | |||||
› 1.0% - 1.5% | 12,554 | 1,940 | |||||
› 1.5% - 2.0% | 1,379 | — | |||||
› 2.0% - 2.5% | 31 | — | |||||
1.00% ultimate guarantee - 2.71% wtd avg interest rate (a) | 367,420 | 124,476 | |||||
1.50% ultimate guarantee - 1.32% wtd avg interest rate (a) | 141,609 | 4,881,972 | |||||
2.00% ultimate guarantee - 2.24% wtd avg interest rate (a) | 96,659 | — | |||||
2.25% ultimate guarantee - 2.29% wtd avg interest rate (a) | — | 1,296,283 | |||||
3.00% ultimate guarantee - 2.49% wtd avg interest rate (a) | — | 2,509,866 | |||||
Allocated to index strategies (see tables that follow) | — | 31,428,843 | |||||
$ | 2,091,267 | $ | 42,369,302 | ||||
(a) | 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 September 30, 2016 for fixed annuities and funds allocated to the fixed rate strategy for fixed index annuities would decrease by 0.32%.
Page 12
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2016
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 | $ | 1,718 | $ | 69,508 | $ | 1,762,800 | $ | 48,725 | $ | 222,040 | |||||||||
1.75% - 3% | 4,518,324 | — | — | — | — | ||||||||||||||
3% - 4% | 2,605,257 | 33,485 | — | — | — | ||||||||||||||
4% - 5% | 191,918 | 186,084 | 3,696,787 | — | — | ||||||||||||||
5% - 6% | 352,471 | 133,955 | 1,809,884 | — | — | ||||||||||||||
6% - 7% | — | — | 19 | — | — | ||||||||||||||
>= 7% | — | 16,156 | 776 | 63,987 | 14,593 | ||||||||||||||
Annual Monthly Average and Point-to-Point with Participation Rates | |||||||||||||||
Minimum Guaranteed Participation Rate | |||||||||||||||
10% | 20% - 25% | 35% | 50% + | ||||||||||||
Current Participation Rate | (Dollars in thousands) | ||||||||||||||
At minimum | $ | 431 | $ | 430,299 | $ | 134,033 | $ | 155,323 | |||||||
< 20% | 403,854 | — | — | — | |||||||||||
20% - 40% | 775,128 | 198,530 | — | — | |||||||||||
40% - 60% | 532,633 | 123,270 | 92,672 | — | |||||||||||
>= 60% | 4,785 | — | — | — | |||||||||||
S&P 500 Monthly Point-to-Point - Minimum Guaranteed Monthly Cap = 1.0% | |||
(Dollars in thousands) | |||
Current Cap | |||
At minimum | $ | 15,742 | |
1.20% - 1.40% | 3,875,048 | ||
1.45% - 1.70% | 2,756,316 | ||
1.80% - 2.00% | 2,787,266 | ||
>= 2.10% | 912,713 | ||
Volatility Control Index | |||
(Dollars in thousands) | |||
Current Asset Fee | |||
At Maximum | $ | — | |
0.75% - 1.75% | 149,851 | ||
2.25% - 2.75% | 1,205,334 | ||
3.00% - 3.50% | 938,071 | ||
If all caps and participation rates were reduced to minimum caps and participation rates and current asset fees were increased to their maximums, the cost of options would decrease by 0.64% based upon prices of options for the week ended October 18, 2016.
Page 13
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2016
Summary of Invested Assets
September 30, 2016 | December 31, 2015 | ||||||||||||
Carrying Amount | Percent | Carrying Amount | Percent | ||||||||||
(Dollars in thousands) | |||||||||||||
Fixed maturity securities: | |||||||||||||
United States Government full faith and credit | $ | 418,465 | 0.9 | % | $ | 471,256 | 1.3 | % | |||||
United States Government sponsored agencies | 1,472,904 | 3.2 | % | 1,398,611 | 3.5 | % | |||||||
United States municipalities, states and territories | 4,052,210 | 8.8 | % | 3,755,367 | 9.5 | % | |||||||
Foreign government obligations | 254,420 | 0.6 | % | 212,565 | 0.5 | % | |||||||
Corporate securities | 27,992,430 | 61.1 | % | 23,879,016 | 60.3 | % | |||||||
Residential mortgage backed securities | 1,358,174 | 3.0 | % | 1,462,072 | 3.7 | % | |||||||
Commercial mortgage backed securities | 5,310,156 | 11.6 | % | 4,174,396 | 10.5 | % | |||||||
Other asset backed securities | 1,522,424 | 3.3 | % | 1,145,178 | 2.9 | % | |||||||
Total fixed maturity securities | 42,381,183 | 92.5 | % | 36,498,461 | 92.2 | % | |||||||
Equity securities | 7,843 | — | % | 7,828 | — | % | |||||||
Mortgage loans on real estate | 2,419,230 | 5.3 | % | 2,435,257 | 6.2 | % | |||||||
Derivative instruments | 706,007 | 1.5 | % | 337,256 | 0.9 | % | |||||||
Other investments | 297,068 | 0.7 | % | 291,530 | 0.7 | % | |||||||
$ | 45,811,331 | 100.0 | % | $ | 39,570,332 | 100.0 | % | ||||||
Credit Quality of Fixed Maturity Securities - September 30, 2016
NAIC Designation | Carrying Amount | Percent | Rating Agency Rating | Carrying Amount | Percent | |||||||||||
(Dollars in thousands) | (Dollars in thousands) | |||||||||||||||
1 | $ | 27,489,043 | 64.9 | % | Aaa/Aa/A | $ | 27,509,994 | 64.9 | % | |||||||
2 | 13,679,587 | 32.3 | % | Baa | 13,278,853 | 31.3 | % | |||||||||
3 | 1,063,846 | 2.5 | % | Ba | 931,771 | 2.2 | % | |||||||||
4 | 124,317 | 0.3 | % | B | 147,965 | 0.4 | % | |||||||||
5 | 18,839 | — | % | Caa | 59,636 | 0.1 | % | |||||||||
6 | 5,551 | — | % | Ca and lower | 452,964 | 1.1 | % | |||||||||
$ | 42,381,183 | 100.0 | % | $ | 42,381,183 | 100.0 | % | |||||||||
Page 14
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2016
Watch List Securities - September 30, 2016
General Description | Amortized Cost | Unrealized Losses | Fair Value | Months Below Amortized Cost | ||||||||||
(Dollars in thousands) | ||||||||||||||
Investment grade | ||||||||||||||
Corporate securities: | ||||||||||||||
Utilities | $ | 10,452 | $ | (4,023 | ) | $ | 6,429 | 13 | ||||||
Other asset backed securities: | ||||||||||||||
Financials | 2,218 | (1,153 | ) | 1,065 | 66 | |||||||||
Utilities | 4,995 | (1,805 | ) | 3,190 | 1 | |||||||||
$ | 17,665 | $ | (6,981 | ) | $ | 10,684 | ||||||||
Below investment grade | ||||||||||||||
Corporate securities: | ||||||||||||||
Energy | $ | 45,044 | $ | (10,668 | ) | $ | 34,376 | 25 - 41 | ||||||
Industrials | 4,981 | (3,181 | ) | 1,800 | 23 | |||||||||
Materials | 29,772 | (3,518 | ) | 26,254 | 15 - 44 | |||||||||
Telecommunications | 2,171 | (686 | ) | 1,485 | 27 | |||||||||
Other asset backed securities: | ||||||||||||||
Financials | 4,854 | (3,209 | ) | 1,645 | 40 | |||||||||
$ | 86,822 | $ | (21,262 | ) | $ | 65,560 | ||||||||
$ | 104,487 | $ | (28,243 | ) | $ | 76,244 | ||||||||
Page 15
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2016
Fixed Maturity Securities by Sector
September 30, 2016 | December 31, 2015 | ||||||||||||||
Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Available for sale: | |||||||||||||||
United States Government full faith and credit and sponsored agencies | $ | 1,827,263 | $ | 1,891,369 | $ | 1,856,786 | $ | 1,869,867 | |||||||
United States municipalities, states and territories | 3,548,586 | 4,052,210 | 3,422,667 | 3,755,367 | |||||||||||
Foreign government obligations | 233,825 | 254,420 | 210,953 | 212,565 | |||||||||||
Corporate securities: | |||||||||||||||
Consumer discretionary | 2,099,757 | 2,273,231 | 1,983,595 | 2,012,874 | |||||||||||
Consumer staples | 1,874,753 | 2,062,630 | 1,612,382 | 1,649,408 | |||||||||||
Energy | 2,692,289 | 2,773,070 | 2,622,284 | 2,410,184 | |||||||||||
Financials | 5,809,449 | 6,265,900 | 4,955,851 | 5,134,209 | |||||||||||
Health care | 2,012,020 | 2,240,504 | 1,944,109 | 2,007,107 | |||||||||||
Industrials | 3,456,068 | 3,776,857 | 3,236,836 | 3,295,598 | |||||||||||
Information technology | 1,918,390 | 2,049,504 | 1,689,259 | 1,694,466 | |||||||||||
Materials | 1,853,284 | 1,965,256 | 1,732,123 | 1,624,073 | |||||||||||
Telecommunications | 625,722 | 671,452 | 543,689 | 547,424 | |||||||||||
Utilities | 3,409,769 | 3,837,247 | 3,277,402 | 3,427,041 | |||||||||||
Residential mortgage backed securities: | |||||||||||||||
Government agency | 668,231 | 755,536 | 687,515 | 741,431 | |||||||||||
Prime | 365,024 | 386,461 | 474,756 | 493,096 | |||||||||||
Alt-A | 192,465 | 216,177 | 204,714 | 227,545 | |||||||||||
Commercial mortgage backed securities: | |||||||||||||||
Government agency | 553,433 | 595,614 | 359,273 | 370,966 | |||||||||||
Other | 4,567,928 | 4,714,542 | 3,878,992 | 3,803,430 | |||||||||||
Other asset backed securities: | |||||||||||||||
Consumer discretionary | 117,140 | 116,850 | 62,852 | 61,759 | |||||||||||
Energy | 8,009 | 8,676 | 8,143 | 9,097 | |||||||||||
Financials | 1,138,936 | 1,160,432 | 816,906 | 821,343 | |||||||||||
Industrials | 213,903 | 224,870 | 223,414 | 231,678 | |||||||||||
Telecommunications | 7,838 | 8,406 | 13,789 | 14,575 | |||||||||||
Utilities | 4,995 | 3,190 | 5,420 | 6,726 | |||||||||||
Redeemable preferred stock - financials | — | 6 | — | 10 | |||||||||||
$ | 39,199,077 | $ | 42,304,410 | $ | 35,823,710 | $ | 36,421,839 | ||||||||
Held for investment: | |||||||||||||||
Corporate security - financials | $ | 76,773 | $ | 75,547 | $ | 76,622 | $ | 65,377 | |||||||
Page 16
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2016
Fixed Maturity Securities by Sector
Energy and Metals & Mining
In the table on the previous page, oil and metals and mining exposure is reflected within the foreign government, energy, material, utilities, and industrial sectors. Our privately placed available for sale fixed maturity securities at September 30, 2016 total $175.1 million fair value ($176.6 million amortized cost) in Energy and $43.4 million fair value ($45.6 million amortized cost) in Metals & Mining and are not included in the following tables.
September 30, 2016 | ||||||||||||||
Sector and Subsector | Amortized Cost | Fair Value | Unrealized Gain (Loss) | Average Credit Rating | ||||||||||
(Dollars in thousands) | ||||||||||||||
Energy | ||||||||||||||
Independent | $ | 505,553 | $ | 506,918 | $ | 1,365 | Baa | |||||||
Integrated | 497,369 | 532,324 | 34,955 | A | ||||||||||
Oil field services | 405,148 | 385,393 | (19,755 | ) | Baa | |||||||||
Refining | 119,571 | 126,823 | 7,252 | Baa | ||||||||||
Midstream | 760,316 | 790,623 | 30,307 | Baa | ||||||||||
Government owned no guarantee | 308,695 | 336,258 | 27,563 | A | ||||||||||
Metals & Mining | 559,112 | 583,469 | 24,357 | Baa | ||||||||||
Total Energy and Metals & Mining | $ | 3,155,764 | $ | 3,261,808 | $ | 106,044 | Baa | |||||||
Amortized Cost at September 30, 2016 | ||||||||||||||||||||||||||||||||
Energy | ||||||||||||||||||||||||||||||||
NRSRO Rating | Independent | Integrated | Oil field services | Refining | Midstream | Government Owned No Guarantee | Metals & Mining | Total | ||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Aaa | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Aa | — | 228,200 | — | — | — | 44,662 | — | 272,862 | ||||||||||||||||||||||||
A | 89,493 | 84,765 | 90,631 | 500 | 90,842 | 214,194 | 76,594 | 647,019 | ||||||||||||||||||||||||
Baa | 369,837 | 149,192 | 185,220 | 119,071 | 635,467 | 25,264 | 287,846 | 1,771,897 | ||||||||||||||||||||||||
Ba | 46,223 | 35,212 | 100,235 | — | 34,007 | — | 129,897 | 345,574 | ||||||||||||||||||||||||
B | — | — | 29,062 | — | — | 24,575 | 54,092 | 107,729 | ||||||||||||||||||||||||
Below B | — | — | — | — | — | — | 10,683 | 10,683 | ||||||||||||||||||||||||
$ | 505,553 | $ | 497,369 | $ | 405,148 | $ | 119,571 | $ | 760,316 | $ | 308,695 | $ | 559,112 | $ | 3,155,764 | |||||||||||||||||
Fair Value at September 30, 2016 | ||||||||||||||||||||||||||||||||
Energy | ||||||||||||||||||||||||||||||||
NRSRO Rating | Independent | Integrated | Oil field services | Refining | Midstream | Government Owned No Guarantee | Metals & Mining | Total | ||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Aaa | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Aa | — | 249,998 | — | — | — | 47,087 | — | 297,085 | ||||||||||||||||||||||||
A | 93,882 | 88,981 | 98,603 | 551 | 99,269 | 242,485 | 83,669 | 707,440 | ||||||||||||||||||||||||
Baa | 369,909 | 159,716 | 183,741 | 126,272 | 658,477 | 25,936 | 304,529 | 1,828,580 | ||||||||||||||||||||||||
Ba | 43,127 | 33,629 | 83,138 | — | 32,877 | — | 129,763 | 322,534 | ||||||||||||||||||||||||
B | — | — | 19,911 | — | — | 20,750 | 49,452 | 90,113 | ||||||||||||||||||||||||
Below B | — | — | — | — | — | — | 16,056 | 16,056 | ||||||||||||||||||||||||
$ | 506,918 | $ | 532,324 | $ | 385,393 | $ | 126,823 | $ | 790,623 | $ | 336,258 | $ | 583,469 | $ | 3,261,808 | |||||||||||||||||
Page 17
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2016
Mortgage Loans on Commercial Real Estate
September 30, 2016 | December 31, 2015 | |||||||||||||
Principal | Percent | Principal | Percent | |||||||||||
(Dollars in thousands) | ||||||||||||||
Geographic distribution | ||||||||||||||
East | $ | 652,230 | 26.9 | % | $ | 698,113 | 28.5 | % | ||||||
Middle Atlantic | 155,249 | 6.4 | % | 160,261 | 6.6 | % | ||||||||
Mountain | 231,561 | 9.5 | % | 252,442 | 10.3 | % | ||||||||
New England | 12,834 | 0.5 | % | 13,161 | 0.5 | % | ||||||||
Pacific | 387,212 | 16.0 | % | 355,268 | 14.5 | % | ||||||||
South Atlantic | 474,238 | 19.5 | % | 456,227 | 18.6 | % | ||||||||
West North Central | 319,341 | 13.2 | % | 313,120 | 12.8 | % | ||||||||
West South Central | 195,240 | 8.0 | % | 201,317 | 8.2 | % | ||||||||
$ | 2,427,905 | 100.0 | % | $ | 2,449,909 | 100.0 | % | |||||||
Property type distribution | ||||||||||||||
Office | $ | 321,297 | 13.2 | % | $ | 396,154 | 16.2 | % | ||||||
Medical office | 54,129 | 2.2 | % | 77,438 | 3.2 | % | ||||||||
Retail | 825,490 | 34.0 | % | 790,158 | 32.2 | % | ||||||||
Industrial/Warehouse | 677,342 | 27.9 | % | 686,400 | 28.0 | % | ||||||||
Hotel | 1,142 | 0.1 | % | 3,361 | 0.1 | % | ||||||||
Apartment | 376,189 | 15.5 | % | 352,971 | 14.4 | % | ||||||||
Mixed use/other | 172,316 | 7.1 | % | 143,427 | 5.9 | % | ||||||||
$ | 2,427,905 | 100.0 | % | $ | 2,449,909 | 100.0 | % | |||||||
September 30, 2016 | December 31, 2015 | |||||||||||||
Credit Exposure - By Payment Activity | ||||||||||||||
Performing | $ | 2,426,284 | $ | 2,438,341 | ||||||||||
In workout | 1,621 | 11,568 | ||||||||||||
Delinquent | — | — | ||||||||||||
Collateral dependent | — | — | ||||||||||||
2,427,905 | 2,449,909 | |||||||||||||
Specific loan loss allowance | (1,327 | ) | (7,842 | ) | ||||||||||
General loan loss allowance | (6,200 | ) | (6,300 | ) | ||||||||||
Deferred prepayment fees | (1,148 | ) | (510 | ) | ||||||||||
$ | 2,419,230 | $ | 2,435,257 | |||||||||||
Page 18
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2016
Shareholder Information
Corporate Offices:
American Equity Investment Life Holding Company
6000 Westown Parkway
West Des Moines, IA 50266
Inquiries:
Steven Schwartz, Vice President-Investor Relations
(515) 273-3673, sschwartz@american-equity.com
Common Stock and Dividend Information:
New York Stock Exchange symbol: “AEL”
High | Low | Close | Dividend Declared | ||||
2016 | |||||||
First Quarter | $23.65 | $12.65 | $16.80 | $0.00 | |||
Second Quarter | $16.96 | $12.77 | $14.25 | $0.00 | |||
Third Quarter | $18.32 | $13.07 | $17.73 | $0.00 | |||
2015 | |||||||
First Quarter | $29.62 | $25.46 | $29.13 | $0.00 | |||
Second Quarter | $29.90 | $25.06 | $26.98 | $0.00 | |||
Third Quarter | $30.02 | $22.36 | $23.31 | $0.00 | |||
Fourth Quarter | $28.30 | $22.55 | $24.03 | $0.22 | |||
2014 | |||||||
First Quarter | $26.42 | $18.84 | $23.62 | $0.00 | |||
Second Quarter | $25.15 | $20.97 | $24.60 | $0.00 | |||
Third Quarter | $25.25 | $21.69 | $22.88 | $0.00 | |||
Fourth Quarter | $29.75 | $21.36 | $29.19 | $0.20 | |||
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 Steven Schwartz, Vice President-Investor Relations, at (515) 273-3763 or by visiting our web site at www.american-equity.com.
Page 19
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - September 30, 2016
Research Analyst Coverage
John Nadel
Credit Suisse
(212) 325-4016
john.nadel@credit-suisse.com
Thomas Gallagher
Evercore ISI
(212) 446-9439
thomas.gallagher@evercoreisi.com
Randy Binner
Friedman, Billings, Ramsey & Co., Inc.
(703) 312-1890
rbinner@fbr.com
Pablo Singzon II
JP Morgan
(212) 622-2295
pablo.s.singzon@jpmorgan.com
C. Gregory Peters
Raymond James & Associates, Inc.
(727) 567-1534
greg.peters@raymondjames.com
Kenneth S. Lee
RBC Capital Markets, LLC
(212) 905-5995
kenneth.s.lee@rbccm.com
John Barnidge
Sandler O'Neill & Partners, L.P.
(312) 281-3412
jbarnidge@sandleroneill.com
Mark Hughes
SunTrust Robinson Humphrey
(404) 926-5072
mark.hughes@suntrust.com
Page 20