WEST DES MOINES, Iowa--(BUSINESS WIRE)--Feb. 25, 2009-- American Equity Investment Life Holding Company (NYSE: AEL), a leading underwriter of index and fixed rate annuities, today reported 2008 fourth quarter operating income¹ of $15.6 million, or $0.29 per diluted common share, compared to fourth quarter 2007 operating income of $17.0 million or $0.29 per diluted common share. Operating income for the year 2008 was a record $75.2 million, or $1.35 per diluted common share, compared to 2007 operating income of $64.9 million or $1.10 per diluted common share. Performance results for the fourth quarter and year of 2008 include:

• Annuity sales totaled $2.3 billion for the year 2008 and $553.8 million for the fourth quarter of 2008
• Net investment income climbed to a record $822.1 million for the year 2008 and a record $214.5 million for the fourth quarter of 2008
• Aggregate investment spread on annuity business reached a record 2.77% for the year 2008
• Book value per outstanding common share of $9.53 including Accumulated Other Comprehensive Loss

Preliminary net income for the fourth quarter of 2008 was $4.2 million compared to a net loss of $5.0 million for the same period in 2007. Preliminary net income for the year ended December 31, 2008 was $47.1 million compared to $29.0 million for 2007. Included in these results are net realized losses arising primarily from “other than temporary impairments” in invested assets of $22.8 million and $114.2 million for the quarter and year ending December 31, 2008, respectively. The Company continues to evaluate its invested assets to determine whether additional charges should be recognized for “other than temporary impairments” and final net income for the fourth quarter of 2008 and the year ended December 31, 2008 may reflect such additional charges. In addition, income tax expense for the fourth quarter of 2008 was increased by $8.1 million due to an increase in the valuation allowance on deferred tax assets.

INVESTMENT SPREADS CONTINUED TO IMPROVE

Income from invested assets, the largest component of American Equity’s revenues, reached a record high of $822.1 million in 2008, and the company’s aggregate yield on invested assets, which improved throughout the year, was 6.20% compared to 6.11% for 2007. During the fourth quarter of 2008 American Equity purchased approximately $1.1 billion of new bonds and other fixed maturity securities with an average yield of 6.79%. In addition, the company closed an aggregate of $83.8 million of new commercial mortgage loans during the fourth quarter of 2008 at an average yield of 6.42%. In contrast, the company received approximately $1.4 billion in proceeds from securities called or sold during the fourth quarter of 2008 and the average yield on such assets was 6.19%.

The cost of money on American Equity’s annuity liabilities declined throughout 2008 and fell to an aggregate of 3.43% compared to 3.50% for 2007. Thus, the improved overall yield on invested assets and lower cost of money on liabilities drove an increase in the aggregate spread to 2.77% for 2008, up from 2.61% for 2007. During the fourth quarter of 2008, the potential increase in operating earnings from wider investment spreads was offset by an increase of $14.8 million in amortization expense for deferred policy acquisition costs and deferred sales inducements ($9.6 million or $0.17 per diluted common share after taxes) for unlocking.

CAPITALIZATION REMAINED STEADY

American Equity’s capital adequacy for regulatory and rating agency purposes is based upon the capital and surplus of its life subsidiaries determined under statutory accounting rules. Statutory capital and surplus of the principal life subsidiary was $983 million at December 31, 2008, compared to $991 million at December 31, 2007. The company’s risk based capital ratio, which was estimated to be approximately 345% of company action level at September 30, 2008, remained unchanged at December 31, 2008.

While the company has realized losses from “other than temporary impairments” affecting several categories of investments, the gross amount of such write downs for all of 2008 was less than 1% of the total value of American Equity’s invested assets. Commented David J. Noble, Chairman of American Equity: “Our consistent commitment to avoiding credit risk serves us very well in this time of broad economic crisis. No one has been untouched by the problems plaguing the financial markets, but in my judgment American Equity has performed better than most. We expect the demand for safe money products like ours to be strong in 2009, and American Equity is well-positioned to capitalize on these opportunities.” American Equity has no exposure to subprime residential mortgage backed securities nor commercial mortgage backed securities. Its $2.3 billion of commercial mortgage loans include over 900 whole loans all of which were subjected to the company’s stringent underwriting standards. No loss has been incurred on any of American Equity’s commercial mortgage loans.

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 2008 earnings on Thursday, February 26, 2009, at 10 a.m. CST. Investors and interested parties may listen to the call by dialing 1-866-356-4279, passcode 74245204 (international callers, please dial 1-617-597-5394). An audio replay will be available via telephone through March 19, 2009 by calling 1-888-286-8010, passcode 67034308 (international callers will need to dial 1-617-801-6888).

ABOUT AMERICAN EQUITY

American Equity Investment life Holding Company, through its wholly-owned operating subsidiaries, is a full-service under writer of a broad line of annuity and insurance products, with a primary emphasis on the sale of fixed rate and index annuities. The company’s headquarters are located at 5000 Westown Parkway, West Des Moines, Iowa, 50266. The mailing address of the company is: P.O. Box 71216, Des Moines, Iowa 50325. For more information, visit our website www.american-equity.com.

¹ In addition to net income, American Equity has consistently utilized operating income, a non-GAAP financial measure commonly used in the life insurance industry, as an economic measure to evaluate its financial performance. See accompanying tables for reconciliations of net income to operating income and descriptions of reconciling items.

Source: American Equity Investment Life Holding Company

American Equity Investment Life Holding Company
John M. Matovina, 515-457-1813
Chief Financial Officer
jmatovina@american-equity.com
or
D. J. Noble, 515-457-1705
Chairman
dnoble@american-equity.com
or
Julie L. LaFollette, 515-273-3602
Director of Investor Relations
jlafollette@american-equity.com
or
Debra J. Richardson, 515-273-3551
Executive Vice President
drichardson@american-equity.com