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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): February 14, 2024
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
Identification No.) |
6000 Westown Parkway
West Des Moines, IA 50266
(Address of principal executive offices and 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:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
| Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
| Common stock, par value $1 | | AEL | | New York Stock Exchange |
| Depositary Shares, each representing a 1/1,000th interest in a share of 5.95% Fixed-Rate Reset Non-Cumulative Preferred Stock, Series A | | AELPRA | | New York Stock Exchange |
| Depositary Shares, each representing a 1/1,000th interest in a share of 6.625% Fixed-Rate Reset Non-Cumulative Preferred Stock, Series B | | AELPRB | | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
On February 14, 2024, the registrant issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2023, a copy of which is attached as Exhibit 99.1 and is incorporated herein by reference. The registrant's financial supplement for the fourth quarter and year ended December 31, 2023, 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
| | | | | | | | |
Exhibit Number | | Description |
| 99.1 | | |
| 99.2 | | |
| 104 | | The cover page from this Current Report on Form 8-K, formatted in Inline XBRL. |
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: February 14, 2024
| | | | | | | | | | | |
| | AMERICAN EQUITY | |
| | INVESTMENT LIFE HOLDING COMPANY | |
| | | | |
| | | | |
| By: | /s/ Axel Andre | |
| | Axel Andre | |
| | Executive Vice President and Chief Financial Officer | |
| | | | |
Exhibit 99.1
| | | | | | | | |
| For more information, contact: |
|
| Steven D. Schwartz, Head of Investor Relations |
| (515) 273-3763, sschwartz@american-equity.com |
|
| | |
| FOR IMMEDIATE RELEASE | | |
| February 14, 2024 | | |
American Equity Reports Record $7+ Billion Annual FIA Sales and Strong Financial Results to Cap a Historic 2023
Company Highlights
•Fourth quarter 2023 net loss available to common stockholders of $(475.9) million, or $(6.04) per diluted common share compared to net income of $21.7 million, or $0.25 per diluted common share for fourth quarter 2022 restated for the adoption of Accounting Standards Update 2018-12 — more commonly known as Long Duration Targeted Improvements (LDTI)
•Full year 2023 net income available to common stockholders of $166.9 million, or $2.06 per diluted common share compared to net income of $1.9 billion, or $20.50 per diluted common for full year 2022 restated for the adoption of LDTI
•Non-GAAP operating income available to common stockholders1 for the fourth quarter and full year 2023 of $159.6 million and $607.1 million, respectively, or $1.99 and $7.50 per diluted common share, respectively; Notable items2 negatively impacted per share results in the quarter and full year 2023 by $0.17 and $0.13, respectively
•For full year 2023, GAAP return on equity and non-GAAP operating return on equity1 of 8.4% and 18.7%, respectively
•Total fourth quarter sales4 of $2.0 billion, substantially all of which were in fixed index annuity (FIA) sales. Total FIA sales for 2023 were over $7.0 billion - an all-time record for American Equity - compared to 2020 FIA sales of $2.3 billion before the execution of the AEL 2.0 strategy
•Fourth quarter investment yield of 4.65%, up 35 basis points year-over-year, while the sequential change from the third quarter reflects lower-than-expected returns on market-to-market private assets
•Increase in private assets to 25.8% of the investment portfolio as of December 31, 2023, with an additional $7 billion of liquidity - or 15% of the investment portfolio - at year-end; Expect to have $10 billion of liquidity available to be redeployed opportunistically after the close of the planned merger with Brookfield Reinsurance (NYSE, TSX: BNRE) in the first half of 2024
WEST DES MOINES, Iowa (February 14, 2024) – American Equity Investment Life Holding Company (NYSE: AEL), a leading issuer of fixed index annuities, today reported strong fourth quarter 2023 results. Sales of fixed index annuities remained strong supported by the company's continued emphasis on its guaranteed retirement income product offerings.
American Equity's President and CEO, Anant Bhalla stated: "Supported by our strategy flywheel, American Equity had an outstanding 2023 capped off by our strong results in the fourth quarter. FIA sales for the year were a record $7.0 billion as our shareholder value of new business-focused guaranteed income products – IncomeShield and Eagle Select Income Focus – accounted for roughly 62% of premium deposits. Our in-house expertise in tactical asset allocation and asset manager selection positioned us to achieve a 26% allocation to private assets. We delivered a 23-basis point increase in yield compared to full year 2022 and 92 basis points of yield improvement compared to full year 2021, excluding non-trendable items3, despite lower than modeled returns on mark-to-market private assets this past year. In our view, our agreement to merge with Brookfield Reinsurance was an important marker in our transformation of the American Equity business model, delivering both shareholder value creation from the AEL 2.0 strategy and validation of our capabilities in insurance liability origination asset management. In the latter, we have proven out the ability to both source robust returns on private assets and then restructure these investments to deliver a superior return on equity for the insurance balance sheet. This strategy has created a more than three-fold increase in value for American Equity shareholders based on the average volume-weighted stock price of $17.86 in March 2020 while also returning approximately $1.1 billion to shareholders over that period over the ten quarters from the fourth quarter of 2020 to the first quarter of 2023."
Non-GAAP operating income available to common stockholders1 for the fourth quarter of 2023 was $159.6 million, or $1.99 per diluted common share, compared to non-GAAP operating income available to common stockholders1 of $195.5 million, or $2.45 per diluted common share, for the third quarter of 2023 and $141.7 million, or $1.64 per diluted common share, for the fourth quarter of 2022, restated for the adoption of LDTI. For the fourth quarter of 2023, non-GAAP operating income available to common stockholders1 was negatively affected by $13.3 million, or $0.17 per share, after taxes, from notable items2. Results in the third quarter of 2023 included positive notable items2 of $21.0 million, or $0.26 per share after taxes.
The year-over-year change in quarterly non-GAAP operating income available to common stockholders1, excluding the impact of notable items2, reflects higher net investment income and surrender charges, increased recurring fee revenue related to reinsurance, and a decrease in the quarterly change in the Market Risk Benefit liability.
Compared to the third quarter of 2023, quarterly non-GAAP operating income available to common stockholders1. excluding the impact of notable items2, decreased reflecting lower investment spread and increased other operating expenses. Notable items2 in the fourth and third quarters of 2023 reflect the special incentive compensation plan put in place in November 2022. Notable items2 in the third quarter also include the effect of actuarial assumption revisions.
For the fourth quarter of 2023, net investment income fell to $581 million, when adjusted to reflect non-GAAP operating income available to common stockholders1, from $585 million for the third quarter of 2023. Notable items2 totaled $3 million and $2 million in the fourth and third quarters of 2023, respectively, reflecting the allocation of quarterly expense associated with the strategic incentive compensation award made in November 2022. The $3 million decline in net investment income relative to the third quarter of 2023, adjusted to reflect non-GAAP operating income available to common stockholders1 and notable items2, reflects a 4-basis point decrease in effective yield on the investment portfolio.
Compared to the third quarter of 2023, fourth quarter surrender charge income increased $12 million to $58 million, reflecting both increased lapse activity associated with higher interest rates as well as cohort changes in policies being surrendered.
Outflows in the fourth quarter of 2023, including surrenders, income utilization, death benefits and partial withdrawals, increased $712 million from the third quarter of 2023 to $2.1 billion. The increase in outflows primarily reflects a $497 million increase in surrenders of multi-year guaranteed annuities (MYGA) driven by lapsation of such policies having three-year surrender charge periods that were sold in the fourth quarter of 2020. American Equity currently expects $1.5 billion to $2 billion of MYGA in-force to lapse in the first half of 2024, reflecting the corresponding scale of MYGA business with three-year surrender charge periods written by both American Equity Life and Eagle Life in late 2020 and early 2021.
As of December 31, 2023, account value of business ceded subject to fee income was $11.5 billion, down slightly from $11.6 billion three months earlier. This reflects a modification of the AEL 2.0 reinsurance strategy given the impending merger, as American Equity is now retaining all FIA new business on its balance sheet effective October 1, 2023, until the close of the merger. Flow reinsurance ceded subject to fee income in the fourth quarter of 2023 was just $44 million of account value reflecting the relatively low level of MYGA sales. Revenue associated with recurring fees under reinsurance agreements for the fourth quarter of 2023 totaled $28 million compared to $27 million for the third quarter of 2023, each as adjusted to reflect non-GAAP operating income available to common stockholders1.
Interest sensitive and index product benefits, as adjusted to reflect non-GAAP operating income available to common stockholders1, for the fourth quarter of 2023 reflected an $8 million increase in the cost of money for deferred annuities compared to the third quarter. Cost of money for deferred annuities in the fourth quarter benefited from $9 million of hedging gains compared to $6 million in the third quarter. In addition, interest sensitive and index product benefits adjusted to reflect non-GAAP operating income available to common stockholders1 for the third quarter of 2023 includes a benefit from notable items2 of $2 million reflecting the annual actuarial assumption revision process.
Compared to the third quarter of 2023, the change in the MRB liability increased by $31 million to $26 million when adjusted to reflect non-GAAP operating income available to common stockholders1. Third quarter change in MRB liability when adjusted to reflect non-GAAP operating income available to common stockholders1 included a benefit from notable items2 of $33 million reflecting the annual actuarial assumption revision process. For the fourth quarter, the change in the MRB liability adjusted to reflect non-GAAP operating income available to common stockholders1 was $6 million less than expected, consisting of a $12 million benefit from reserves released due to higher-than-expected surrenders and other policyholder behavior experience, offset by a $6 million less-than-expected benefit from amortization of net deferred capital market impact due to unfavorable fourth quarter capital market changes – primarily a lower discount rate as interest rates fell during the quarter. The change in the modeled expectation for the MRB liability, adjusted to reflect non-GAAP operating income available to common stockholders1, for the first quarter of 2024 is $42 million, based on current in-force. First quarter 2024 expected change in the MRB liability includes an expected benefit from the amortization of capital market impacts on the fair value of market risk benefits of $22 million.
Amortization of deferred policy acquisition and sales inducement cost was $123 million for the fourth quarter of 2023, in-line with modeled expectations. For the first quarter of 2024, the modeled expectation for deferred acquisition cost and deferred sales inducement amortization is $127 million before the effect of new sales and experience variances and excluding the potential application of purchase GAAP accounting.
Other operating costs and expenses adjusted to reflect non-GAAP operating income available to common stockholders1 for the fourth quarter of 2023 increased to $72 million, up $5 million from the third quarter. Notable items2 in the fourth and third of 2023 were $4 million and $7 million, pre-tax, respectively, both reflecting quarterly expense associated with the strategic incentive compensation award made in November 2022.
The effective tax rate on pre-tax operating income available for common stockholders1 for the fourth quarter of 2023 was 26.6% compared to the third quarter of 2023 tax rate of 21.9%. The income tax rate in the fourth quarter reflected approximately $12 million of additional expense primarily resulting from increased non-deductible compensation of which $8 million is considered a notable item as it was related to the strategic incentive compensation award made in November 2022.
INVESTMENT SPREAD DECREASES FROM PRIOR SEQUENTIAL QUARTER ON LOWER MARK-TO-MARKET PRIVATE ASSET RETURNS
American Equity’s investment spread was 2.64% for the fourth quarter of 2023 compared to 2.73% for the third quarter of 2023 and 2.54% for the fourth quarter of 2022. Excluding non-trendable items3, adjusted investment spread decreased to 2.56% in the fourth quarter of 2023 from 2.68% in the third quarter of 2023.
Average yield on invested assets was 4.65% in the fourth quarter of 2023 compared to 4.69% in the third quarter of 2023. The average adjusted yield on invested assets excluding non-trendable items3 was 4.64% in the fourth quarter of 2023 compared to 4.69% in the third quarter of 2023.
The return on mark-to-market private assets declined from the third quarter of 2023, and was $24 million, or 20 basis points of yield, less than assumed rates of return used in our investment process due to fair value changes on real estate and lower partnership income. This compares to a contribution that was $10 million, or 8 basis points of yield, less than assumed rates of return on such assets recognized in the third quarter. Fixed income investment yield increased 4 basis points from the third quarter to 4.65%.
During the fourth quarter of 2023, long-term investment asset purchases totaled $696 million and were made at an average expected rate of 8.61%.
The point-in-time yield on the portfolio at December 31, 2023, was 4.86%.
The aggregate cost of money for annuity liabilities of 2.01% in the fourth quarter of 2023 was up 5 basis points compared to the third quarter of 2023. The cost of money in the fourth quarter of 2023 reflects a seven-basis point benefit from the over-hedging of index-linked credits compared to a 5-basis point benefit in the third quarter of 2023. The 7-basis point increase in the adjusted cost of money compared to the third quarter is in line with increased market costs.
Cost of options in the fourth quarter of 2023 averaged 1.70% compared to 2.02% in the third quarter of 2023, reflecting both market effects on the cost of options for renewals as well as lower option costs on new sales resulting from mix shift towards lower option cost guaranteed retirement income products following the October 1, 2023, pause of the flow reinsurance agreement with Brookfield Reinsurance.
Net account balance growth in the fourth quarter was a positive $139 million, or 0.3% of account values. Index credits in the fourth quarter increased to $137 million from $121 million in the third quarter of 2023.
FIA SALES REMAIN STRONG BOLSTERED BY INCREASE IN GUARANTEED RETIREMENT INCOME PRODUCT SALES
Fourth quarter 2023 sales were $2.0 billion, substantially all of which were in fixed index annuities. Total enterprise FIA sales decreased 11% from the third quarter of 2023 but were up 153% compared to the fourth quarter of 2022. Despite the sequential quarterly decrease, the level of quarterly FIA sales was still the third highest in the company's history.
Compared to the third quarter of 2023, FIA sales at American Equity Life in the Independent Marketing Organization (IMO) channel fell 10%, while Eagle Life FIA sales through banks and broker-dealers fell 14%. The decrease in FIA sales relative to the third quarter was driven by lower sales in the accumulation product space.
Bhalla noted, "We continued to record strong FIA sales in the fourth quarter of 2023, despite lowering S&P 500 caps on our accumulation products late in the third quarter, in line with our product profitability targets in light of lower interest rates. We were particularly pleased that sales of income products, which we believe is the most attractive sector in the FIA marketplace, were up 4% from the third quarter on a total enterprise basis to nearly $1.5 billion. Income product sales are not as subject to churn as are accumulation products in a higher interest rate environment and have weighted average life duration characteristics that best match our at scale capabilities in originating and structuring private asset strategies."
Bhalla continued, "I could not be more proud of the efforts of my teammates in making 2023 a record sales year for FIAs with total deposits of just over $7 billion compared with FIA sales of $2.3 billion in 2020 – my first year as Chief Executive Officer. This was particularly gratifying as we celebrated our 28 years of existence and 20th anniversary as a public company."
CREDIT AND CAPITAL METRICS REMAIN STABLE
With regard to credit markets, Jim Hamalainen, Chief Investment Officer, added, "Credit metrics in the investment portfolio continued to be stable in the fourth quarter, and our core fixed income portfolio remains "A" rated. Net realized losses for the quarter totaled just $2 million. We saw very little deterioration in the commercial mortgage loan portfolio and all loans are current. Average loan-to-value of the commercial mortgage loan portfolio remained steady at 51%, and 82% of the portfolio maintains a debt service coverage ratio of 1.2x or higher. Looking specifically at our direct office mortgage loan exposure, we are considerably underweight relative to our peers at just 7% of the commercial mortgage loan portfolio. The average debt service coverage ratio on the office mortgage loan portfolio is 1.86x with an average loan-to-value ratio of 62%. We have only $2 million in principal amount of office mortgage loans maturing through the end of 2024 with just $30 million set to mature in 2025."
Hamalainen continued, "At year-end, the cash position in the investment portfolio totaled $7.4 billion and was over $9 billion at the end of January funded primarily through sales of the core fixed income portfolio and new annuity sales. Our considerable cash holdings will provide the company with substantial dry powder to take advantage of opportunities that may emerge in the private asset sector while helping to protect the company if macro-economic trends were to deteriorate or surrenders increase to greater than expected levels."
Effective October 1, 2023, the company completed its second Vermont-domiciled redundant reserve financing facility. Backed by a new relationship with a leading international reinsurer, the new facility reinsured approximately $550 million of in-force statutory reserves for lifetime income benefit guarantees resulting from sales of both American Equity Life's IncomeShield product and Eagles Life's Eagle Select Income Focus product freeing up approximately $450 million, pre-tax, of capital at close. In addition, the financing facility allows future new business to automatically benefit from the financing of redundant reserves, thereby enabling the capital-efficient growth of our guaranteed retirement income products going forward.
As of December 31, 2023, total adjusted capital at American Equity Life totaled $4.3 billion with estimated excess capital of approximately $800 million above rating agency requirements and an estimated risk-based capital ratio of 370% to 390%. Cash and equivalents at the holding company level was $560 million at year-end and $875 million at January 31, 2024 after a $320 million ordinary dividend paid by the life company to the holding company on January 16th.
PENDING MERGER WITH BROOKFIELD REINSURANCE
On July 5, 2023, Brookfield Reinsurance and American Equity announced that they had entered into a definitive agreement whereby Brookfield Reinsurance will acquire all outstanding shares of common stock of American Equity it does not already own in a cash and stock transaction that values AEL at approximately $4.3 billion.
Following approval of the transaction by shareholders at the special meeting held November 10, 2023, American Equity continues to expect the merger to close in the first half of 2024. Closing remains subject to the satisfaction of certain closing conditions customary for a transaction of this type, including receipt of insurance regulatory approvals in relevant jurisdictions.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
The forward-looking statements in this release such as believe, build, confident, continue, could, estimate, expect, exposure, future, grow, likely, maintain, may, might, model, opportunity, outlook, plan, potential, proposed, risk, scenario, should, trend, will, would, and their derivative forms and similar words, as well as any projections of future results, are based on assumptions and expectations that involve risks and uncertainties, including the "Risk Factors" the company describes in its U.S. Securities and Exchange Commission filings and as described in the "Cautionary Notice Regarding Forward-Looking Statements" in AEL's July 5, 2023 news release. The Company's future results and events could differ, and it has no obligation to correct or update any of these statements.
ABOUT AMERICAN EQUITY
At American Equity Investment Life Holding Company, our policyholders work with over 40,000 independent agents and advisors affiliated with independent market organizations (IMOs), banks and broker-dealers through our wholly-owned operating subsidiaries. Advisors and agents choose one of our leading annuity products best suited for their clients' personal needs to create financial dignity in retirement. To deliver on its promises to policyholders, American Equity has re-framed its investment focus — building a stronger emphasis on insurance liability driven asset allocation and specializing in alternate, private asset management while partnering with world renowned, public fixed income asset managers. American Equity is headquartered in West Des Moines, Iowa with additional
offices in Charlotte, NC, New York, NY and Miami, FL. 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.
2 Notable items reflect the increase (decrease) to non-GAAP operating income (loss) available to common stockholders for certain matters where more detail may help investors better understand, evaluate, and forecast results. Notable items are further discussed in the tables that follow the text of the release.
3 Non-trendable items are the impact of investment yield – additional prepayment income and cost of money effect of over (under) hedging as shown in our December 31, 2023 financial supplement on page 10, “Spread Results”.
4 For the purposes of this document, all references to sales are on a gross basis. Gross sales is defined as sales before the use of reinsurance.
###
American Equity Investment Life Holding Company
Unaudited (Dollars in thousands, except per share data)
Consolidated Statements of Operations
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
December 31, | | Year Ended
December 31, |
| 2023 | | 2022 | | 2023 | | 2022 |
| Revenues: | | | | | | | |
| Premiums and other considerations | $ | 2,657 | | | $ | 2,991 | | | $ | 11,967 | | | $ | 19,739 | |
| Annuity product charges | 96,947 | | | 61,666 | | | 315,496 | | | 230,354 | |
| Net investment income | 582,176 | | | 537,995 | | | 2,272,798 | | | 2,307,463 | |
| Change in fair value of derivatives | 353,443 | | | 22,243 | | | 259,046 | | | (1,138,128) | |
Net realized gains (losses) on investments | (2,065) | | | 14,411 | | | (99,203) | | | (47,848) | |
| Other revenue | 21,973 | | | 13,032 | | | 75,866 | | | 42,245 | |
| | | | | | | |
| Total revenues | 1,055,131 | | | 652,338 | | | 2,835,970 | | | 1,413,825 | |
| | | | | | | |
| Benefits and expenses: | | | | | | | |
| Insurance policy benefits and change in future policy benefits | 3,161 | | | 5,948 | | | 17,687 | | | 33,220 | |
| Interest sensitive and index product benefits | 193,439 | | | 57,626 | | | 567,423 | | | 554,871 | |
| | | | | | | |
| Market risk benefits (gains) losses | 241,998 | | | 33,490 | | | (14,546) | | | 3,684 | |
| | | | | | | |
| Amortization of deferred sales inducements | 50,346 | | | 45,966 | | | 192,252 | | | 181,970 | |
| Change in fair value of embedded derivatives | 977,178 | | | 342,409 | | | 1,143,576 | | | (2,352,598) | |
| Interest expense on notes and loan payable | 11,642 | | | 10,228 | | | 45,890 | | | 32,098 | |
| Interest expense on subordinated debentures | 1,341 | | | 1,335 | | | 5,355 | | | 5,331 | |
| Amortization of deferred policy acquisition costs | 72,428 | | | 66,831 | | | 279,700 | | | 284,011 | |
| Other operating costs and expenses | 75,250 | | | 62,389 | | | 301,581 | | | 239,526 | |
| Total benefits and expenses | 1,626,783 | | | 626,222 | | | 2,538,918 | | | (1,017,887) | |
Income (loss) before income taxes | (571,652) | | | 26,116 | | | 297,052 | | | 2,431,712 | |
Income tax expense (benefit) | (108,202) | | | (6,817) | | | 85,133 | | | 511,135 | |
Net income (loss) | (463,450) | | | 32,933 | | | 211,919 | | | 1,920,577 | |
Less: Net income available to noncontrolling interests | 1,545 | | | 361 | | | 1,389 | | | 358 | |
Net income (loss) available to American Equity Investment Life Holding Company stockholders | (464,995) | | | 32,572 | | | 210,530 | | | 1,920,219 | |
| Less: Preferred stock dividends | 10,919 | | | 10,919 | | | 43,675 | | | 43,675 | |
| Net income (loss) available to American Equity Investment Life Holding Company common stockholders | $ | (475,914) | | | $ | 21,653 | | | $ | 166,855 | | | $ | 1,876,544 | |
| | | | | | | |
Earnings (loss) per common share | $ | (6.04) | | | $ | 0.25 | | | $ | 2.10 | | | $ | 20.72 | |
Earnings (loss) per common share - assuming dilution | $ | (6.04) | | | $ | 0.25 | | | $ | 2.06 | | | $ | 20.50 | |
| | | | | | | |
| Weighted average common shares outstanding (in thousands): | | | | | | | |
Earnings (loss) per common share | 78,754 | | | 85,274 | | | 79,476 | | | 90,558 | |
Earnings (loss) per common share - assuming dilution | 78,754 | | | 86,402 | | | 80,952 | | | 91,538 | |
American Equity Investment Life Holding Company
Unaudited (Dollars in thousands, except per share data)
NON-GAAP FINANCIAL MEASURES
In addition to net income (loss) available to common stockholders, we have consistently utilized non-GAAP operating income available to common stockholders and non-GAAP operating income available to common stockholders per common share - assuming dilution, non-GAAP financial measures commonly used in the life insurance industry, as economic measures to evaluate our financial performance. Non-GAAP operating income available to common stockholders equals net income (loss) available to common stockholders 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 non-GAAP operating income available to common stockholders eliminate the impact of fair value accounting for our fixed index annuity business. These adjustments are not economic in nature but rather impact the timing of reported results. We believe the combined presentation and evaluation of non-GAAP operating income available to common stockholders together with net income (loss) available to common stockholders provides information that may enhance an investor’s understanding of our underlying results and profitability.
Reconciliation from Net Income (Loss) Available to Common Stockholders to Non-GAAP Operating Income Available to Common Stockholders
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
December 31, | | Year Ended
December 31, |
| 2023 | | 2022 | | 2023 | | 2022 |
Net income (loss) available to American Equity Investment Life Holding Company common stockholders | $ | (475,914) | | | $ | 21,653 | | | $ | 166,855 | | | $ | 1,876,544 | |
Adjustments to arrive at non-GAAP operating income available to common stockholders: | | | | | | | |
Net realized gains (losses) on financial assets, including credit losses | (2,277) | | | (19,460) | | | 91,615 | | | 48,264 | |
| Change in fair value of derivatives and embedded derivatives | 583,961 | | | 169,767 | | | 549,600 | | | (1,549,205) | |
| Capital markets impact on the change in fair value of market risk benefits | 216,214 | | | 2,309 | | | (122,094) | | | (393,617) | |
| Net investment income | (1,509) | | | 1,476 | | | (1,137) | | | 1,476 | |
| Other revenue | 5,969 | | | 5,969 | | | 23,876 | | | 5,969 | |
| Expenses incurred related to acquisition | 3,750 | | | — | | | 13,464 | | | — | |
| Income taxes | (170,603) | | | (39,998) | | | (115,116) | | | 401,838 | |
Non-GAAP operating income available to common stockholders | $ | 159,591 | | | $ | 141,716 | | | $ | 607,063 | | | $ | 391,269 | |
| Impact of excluding notable items (a) | $ | 13,255 | | | $ | — | | | $ | 10,755 | | | $ | 181,890 | |
| | | | | | | |
| Per common share - assuming dilution: | | | | | | | |
| Net income (loss) available to American Equity Investment Life Holding Company common stockholders | $ | (6.04) | | | $ | 0.25 | | | $ | 2.06 | | | $ | 20.50 | |
| Adjustments to arrive at non-GAAP operating income available to common stockholders: | | | | | | | |
| Anti-dilutive impact for losses (b) | 0.11 | | | — | | | — | | | — | |
| | | | | | | |
| Net realized gains (losses) on financial assets, including credit losses | (0.03) | | | (0.23) | | | 1.13 | | | 0.53 | |
| Change in fair value of derivatives and embedded derivatives | 7.28 | | | 1.96 | | | 6.79 | | | (16.92) | |
| Capital markets impact on the change in fair value of market risk benefits | 2.70 | | | 0.03 | | | (1.51) | | | (4.30) | |
| Net investment income | (0.02) | | | 0.02 | | | (0.01) | | | — | |
| Other revenue | 0.07 | | | 0.07 | | | 0.29 | | | 0.01 | |
| Expenses incurred related to acquisition | 0.05 | | | — | | | 0.17 | | | 0.06 | |
| Income taxes | (2.13) | | | (0.46) | | | (1.42) | | | 4.39 | |
Non-GAAP operating income available to common stockholders | $ | 1.99 | | | $ | 1.64 | | | $ | 7.50 | | | $ | 4.27 | |
| Impact of excluding notable items (a) | $ | 0.17 | | | $ | — | | | $ | 0.13 | | | $ | 1.99 | |
American Equity Investment Life Holding Company
Unaudited (Dollars in thousands, except per share data)
Notable Items
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
December 31, | | Year Ended
December 31, |
| 2023 | | 2022 | | 2023 | | 2022 |
Notable items impacting non-GAAP operating income available to common stockholders: | | | | | | | |
| Expense associated with strategic incentive award | $ | 13,255 | | | $ | — | | | $ | 38,323 | | | $ | — | |
| Impact of actuarial assumption updates | — | | | — | | | (27,568) | | | 181,890 | |
| | | | | | | |
| Total notable items (a) | $ | 13,255 | | | $ | — | | | $ | 10,755 | | | $ | 181,890 | |
(a)Notable items reflect the after-tax increase (decrease) to non-GAAP operating income available to common stockholders for certain matters where more detail may help investors better understand, evaluate, and forecast results.
For the three months ended December 31, 2023 and 2022, non-GAAP operating income (loss) available to common stockholders would increase $13.3 million and $0.0 million, respectively, if we were to exclude the impact of notable items.
For the year ended December 31, 2023 and 2022, non-GAAP operating income (loss) available to common stockholders would increase $10.8 million and $181.9 million, respectively, if we were to exclude the impact of notable items.
(b)For periods with a loss, dilutive shares were not included in the calculation as inclusion of such shares would have an anti-dilutive effect.
American Equity Investment Life Holding Company
Unaudited (Dollars in thousands, except share and per share data)
Book Value per Common Share
| | | | | | | | | | | | | |
| Q4 2023 | | | | | | | | |
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| Total stockholders’ equity attributable to American Equity Investment Life Holding Company | $ | 3,023,260 | | | | | | | | | |
| Equity available to preferred stockholders (a) | (700,000) | | | | | | | | | |
| Total common stockholders' equity (b) | 2,323,260 | | | | | | | | | |
| Accumulated other comprehensive (income) loss (AOCI) | 2,979,657 | | | | | | | | | |
| Total common stockholders’ equity excluding AOCI (b) | 5,302,917 | | | | | | | | | |
| Net impact of fair value accounting for derivatives and embedded derivatives | (1,240,397) | | | | | | | | | |
| Net capital markets impact on the fair value of market risk benefits | (698,808) | | | | | | | | | |
Total common stockholders’ equity excluding AOCI and the net impact of fair value accounting for fixed index annuities (b) | $ | 3,363,712 | | | | | | | | | |
| | | | | | | | | |
| Common shares outstanding | 79,337,818 | | | | | | | | | |
| | | | | | | | | |
| Book Value per Common Share: (c) | | | | | | | | | |
| Book value per common share | $ | 29.28 | | | | | | | | | |
| Book value per common share excluding AOCI (b) | $ | 66.84 | | | | | | | | | |
| Book value per common share excluding AOCI and the net impact of fair value accounting for fixed index annuities (b) | $ | 42.40 | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
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(a)Equity available to preferred stockholders is equal to the redemption value of outstanding preferred stock plus share dividends declared but not yet issued.
(b)Total common stockholders' equity, total common stockholders' equity excluding AOCI and total common stockholders' equity excluding AOCI and the net impact of fair value accounting for fixed index annuities, non-GAAP financial measures, exclude equity available to preferred stockholders. Total common stockholders’ equity and book value per common share excluding AOCI, non-GAAP financial measures, are based on common 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 securities, we believe these non-GAAP financial measures provide useful supplemental information. Total common stockholders' equity and book value per common share excluding AOCI and the net impact of fair value accounting for fixed index annuities, non-GAAP financial measures, are based on common stockholders' equity excluding AOCI and the net impact of fair value accounting for fixed index annuities. Since the net impact of fair value accounting for our fixed index annuity business is not economic in nature but rather impact the timing of reported results, we believe these non-GAAP financial measures provide useful supplemental information.
(c)Book value per common share including and excluding AOCI and book value per common share excluding AOCI and the net impact of fair value accounting for fixed index annuities are calculated as total common stockholders’ equity, total common stockholders’ equity excluding AOCI and total common stockholders' equity excluding AOCI and the net impact of fair value accounting for fixed index annuities divided by the total number of shares of common stock outstanding.
American Equity Investment Life Holding Company
Unaudited (Dollars in thousands)
NON-GAAP FINANCIAL MEASURES
Average Common Stockholders' Equity and Return on Average Common Stockholders' Equity
Return on average common stockholders' equity measures how efficiently we generate profits from the resources provided by our net assets. Return on average common stockholders' equity is calculated by dividing net income available to common stockholders, for the trailing twelve months, by average equity available to common stockholders. Non-GAAP operating return on average common stockholders' equity excluding average accumulated other comprehensive income (AOCI) and average net impact of fair value accounting for fixed index annuities is calculated by dividing non-GAAP operating income available to common stockholders, for the trailing twelve months, by average common stockholders' equity excluding average AOCI and average net impact of fair value accounting for fixed index annuities. We exclude AOCI because AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale investments. We exclude the net impact of fair value accounting for fixed index annuities as the amounts are not economic in nature but rather impact the timing of reported results.
| | | | | |
| Twelve Months Ended |
| December 31, 2023 |
| Average Common Stockholders' Equity Attributable to American Equity Investment Life Holding Company, Excluding Average AOCI and Average Net Impact of Fair Value Accounting for Fixed Index Annuities | |
| Average total stockholders’ equity | $ | 2,686,389 | |
| Average equity available to preferred stockholders | (700,000) | |
| Average equity available to common stockholders | 1,986,389 | |
| Average AOCI | 3,362,944 | |
| Average common stockholders' equity excluding average AOCI | 5,349,333 | |
| Average net impact of fair value accounting for derivatives and embedded derivatives | (1,446,283) | |
| Average net capital markets impact on the fair value of market risk benefits | (649,833) | |
| Average common stockholders' equity excluding average AOCI and average net impact of fair value accounting for fixed index annuities | $ | 3,253,217 | |
| |
| |
| |
| Net income available to American Equity Investment Life Holding Company common stockholders | $ | 166,855 | |
| Adjustments to arrive at non-GAAP operating income available to common stockholders: | |
| Net realized losses on financial assets, including credit losses | 91,615 | |
| Change in fair value of derivatives and embedded derivatives | 549,600 | |
| Capital markets impact on the change in fair value of market risk benefits | (122,094) | |
| Net investment income | (1,137) | |
| Other revenue | 23,876 | |
| Expenses incurred related to acquisition | 13,464 | |
| Income taxes | (115,116) | |
| Non-GAAP operating income available to common stockholders | $ | 607,063 | |
| Impact of excluding notable items (a) | $ | 10,755 | |
| |
| Return on Average Common Stockholders' Equity Attributable to American Equity Investment Life Holding Company | |
| Net income available to common stockholders | 8.4 | % |
| |
| Return on Average Common Stockholders' Equity Attributable to American Equity Investment Life Holding Company, Excluding Average AOCI and Average Net Impact of Fair Value Accounting for Fixed Index Annuities | |
| |
| Non-GAAP operating income available to common stockholders | 18.7 | % |
| | | | | |
| Notable Items | Twelve Months Ended |
| December 31, 2023 |
| Notable items impacting non-GAAP operating income available to common stockholders: | |
| Expense associated with strategic incentive award | $ | 38,323 | |
| Impact of actuarial assumption updates | (27,568) | |
| |
| Total notable items (a) | $ | 10,755 | |
(a)Notable items reflect the after-tax increase (decrease) to non-GAAP operating income available to common stockholders for certain matters where more detail may help investors better understand, evaluate, and forecast results.
Exhibit 99.2
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement
December 31, 2023
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| A. | Financial Highlights | |
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| Non-GAAP Financial Measures | |
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| B. | Product Summary | |
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| C. | Investment Summary | |
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| D. | | |
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| E. | | |
Effective January 1, 2023, American Equity Investment Life Holding Company (the “Company”) adopted Accounting Standards Update 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI). The Company applied this guidance as of the transition date of January 1, 2021, and retrospectively adjusted prior period amounts to reflect the new guidance. The prior period numbers within this financial supplement have been recast, to the extent impacted by LDTI, from the original financial supplements published by the Company.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2023
Unaudited (Dollars in thousands)
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| December 31, 2023 | | December 31, 2022 |
| Assets | | | |
| Investments: | | | |
| Fixed maturity securities, available for sale, at fair value | $ | 34,780,482 | | | $ | 39,804,617 | |
| Mortgage loans on real estate | 7,537,594 | | | 6,949,027 | |
| Real estate investments | 1,334,247 | | | 1,056,063 | |
| Limited partnerships and limited liability companies | 1,089,591 | | | 1,266,779 | |
| Derivative instruments | 1,207,288 | | | 431,727 | |
| Other investments | 2,277,822 | | | 1,817,085 | |
| Total investments | 48,227,024 | | | 51,325,298 | |
| | | |
| Cash and cash equivalents | 9,772,586 | | | 1,919,669 | |
| | | |
| Coinsurance deposits | 14,582,728 | | | 13,254,956 | |
| | | |
| Market risk benefits | 479,694 | | | 229,871 | |
| | | |
| Accrued investment income | 459,332 | | | 497,851 | |
| Deferred policy acquisition costs | 3,070,280 | | | 2,773,643 | |
| Deferred sales inducements | 2,367,224 | | | 2,045,683 | |
| Deferred income taxes | 152,652 | | | 438,434 | |
| Income taxes recoverable | 37,854 | | | 55,498 | |
| Other assets | 768,928 | | | 642,696 | |
| Total assets | $ | 79,918,302 | | | $ | 73,183,599 | |
| | | |
| Liabilities and Stockholders' Equity | | | |
| Liabilities: | | | |
| Policy benefit reserves | $ | 60,901,641 | | | $ | 58,781,836 | |
| Market risk benefits | 3,146,554 | | | 2,455,492 | |
| Other policy funds and contract claims | 188,856 | | | 512,790 | |
| | | |
| Notes and loan payable | 785,443 | | | 792,073 | |
| Subordinated debentures | 79,107 | | | 78,753 | |
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| Funds withheld for reinsurance liabilities | 8,596,373 | | | 6,577,426 | |
| Other liabilities | 3,172,554 | | | 1,614,479 | |
| Total liabilities | 76,870,528 | | | 70,812,849 | |
| | | |
| Stockholders' equity: | | | |
| Preferred stock, Series A | 16 | | | 16 | |
| Preferred stock, Series B | 12 | | | 12 | |
| Common stock | 79,338 | | | 84,810 | |
| Additional paid-in capital | 1,071,103 | | | 1,325,316 | |
| Accumulated other comprehensive loss | (2,979,657) | | | (3,746,230) | |
| Retained earnings | 4,852,448 | | | 4,685,593 | |
| Total stockholders' equity attributable to American Equity Investment Life Holding Company | 3,023,260 | | | 2,349,517 | |
| Noncontrolling interests | 24,514 | | | 21,233 | |
| Total stockholders' equity | 3,047,774 | | | 2,370,750 | |
| Total liabilities and stockholders' equity | $ | 79,918,302 | | | $ | 73,183,599 | |
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2023
Unaudited (Dollars in thousands, except per share data)
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
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| Three Months Ended
December 31, | | Year Ended
December 31, |
| 2023 | | 2022 | | 2023 | | 2022 |
| Revenues: | | | | | | | |
| Premiums and other considerations | $ | 2,657 | | | $ | 2,991 | | | $ | 11,967 | | | $ | 19,739 | |
| Annuity product charges | 96,947 | | | 61,666 | | | 315,496 | | | 230,354 | |
| Net investment income | 582,176 | | | 537,995 | | | 2,272,798 | | | 2,307,463 | |
| Change in fair value of derivatives | 353,443 | | | 22,243 | | | 259,046 | | | (1,138,128) | |
Net realized gains (losses) on investments | (2,065) | | | 14,411 | | | (99,203) | | | (47,848) | |
| Other revenue | 21,973 | | | 13,032 | | | 75,866 | | | 42,245 | |
| | | | | | | |
| Total revenues | 1,055,131 | | | 652,338 | | | 2,835,970 | | | 1,413,825 | |
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| Benefits and expenses: | | | | | | | |
| Insurance policy benefits and change in future policy benefits | 3,161 | | | 5,948 | | | 17,687 | | | 33,220 | |
| Interest sensitive and index product benefits | 193,439 | | | 57,626 | | | 567,423 | | | 554,871 | |
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| Market risk benefits (gains) losses | 241,998 | | | 33,490 | | | (14,546) | | | 3,684 | |
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| Amortization of deferred sales inducements | 50,346 | | | 45,966 | | | 192,252 | | | 181,970 | |
| Change in fair value of embedded derivatives | 977,178 | | | 342,409 | | | 1,143,576 | | | (2,352,598) | |
| Interest expense on notes and loan payable | 11,642 | | | 10,228 | | | 45,890 | | | 32,098 | |
| Interest expense on subordinated debentures | 1,341 | | | 1,335 | | | 5,355 | | | 5,331 | |
| Amortization of deferred policy acquisition costs | 72,428 | | | 66,831 | | | 279,700 | | | 284,011 | |
| Other operating costs and expenses | 75,250 | | | 62,389 | | | 301,581 | | | 239,526 | |
| Total benefits and expenses | 1,626,783 | | | 626,222 | | | 2,538,918 | | | (1,017,887) | |
Income (loss) before income taxes | (571,652) | | | 26,116 | | | 297,052 | | | 2,431,712 | |
Income tax expense (benefit) | (108,202) | | | (6,817) | | | 85,133 | | | 511,135 | |
Net income (loss) | (463,450) | | | 32,933 | | | 211,919 | | | 1,920,577 | |
Less: Net income available to noncontrolling interests | 1,545 | | | 361 | | | 1,389 | | | 358 | |
Net income (loss) available to American Equity Investment Life Holding Company stockholders | (464,995) | | | 32,572 | | | 210,530 | | | 1,920,219 | |
| Less: Preferred stock dividends | 10,919 | | | 10,919 | | | 43,675 | | | 43,675 | |
Net income (loss) available to American Equity Investment Life Holding Company common stockholders | $ | (475,914) | | | $ | 21,653 | | | $ | 166,855 | | | $ | 1,876,544 | |
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Earnings (loss) per common share | $ | (6.04) | | | $ | 0.25 | | | $ | 2.10 | | | $ | 20.72 | |
Earnings (loss) per common share - assuming dilution | $ | (6.04) | | | $ | 0.25 | | | $ | 2.06 | | | $ | 20.50 | |
| | | | | | | |
| Weighted average common shares outstanding (in thousands): | | | | | | | |
Earnings (loss) per common share | 78,754 | | | 85,274 | | | 79,476 | | | 90,558 | |
Earnings (loss) per common share - assuming dilution | 78,754 | | | 86,402 | | | 80,952 | | | 91,538 | |
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2023
Unaudited (Dollars in thousands, except per share data)
Quarterly Summary - Most Recent 5 Quarters
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Q4 2023 | | Q3 2023 | | Q2 2023 | | Q1 2023 | | Q4 2022 |
| Revenues: | | | | | | | | | |
| Traditional life insurance premiums | $ | 2,041 | | | $ | 1,842 | | | $ | 629 | | | $ | 698 | | | $ | 626 | |
| Life contingent immediate annuity considerations | 616 | | | 815 | | | 1,887 | | | 3,439 | | | 2,365 | |
| Surrender charges | 57,876 | | | 45,550 | | | 33,777 | | | 26,542 | | | 22,030 | |
| Lifetime income benefit rider fees | 39,071 | | | 38,766 | | | 37,865 | | | 36,049 | | | 39,636 | |
| Net investment income | 582,176 | | | 586,614 | | | 542,685 | | | 561,323 | | | 537,995 | |
| Change in fair value of derivatives | 353,443 | | | (383,026) | | | 242,739 | | | 45,890 | | | 22,243 | |
| Net realized gains (losses) on investments | (2,065) | | | (44,672) | | | (24,679) | | | (27,787) | | | 14,411 | |
| Other revenue (a) | 21,973 | | | 20,763 | | | 16,736 | | | 16,394 | | | 13,032 | |
| | | | | | | | | |
| Total revenues | 1,055,131 | | | 266,652 | | | 851,639 | | | 662,548 | | | 652,338 | |
| | | | | | | | | |
| Benefits and expenses: | | | | | | | | | |
| Traditional life insurance policy benefits and change in future policy benefits (b) | (118) | | | 3,623 | | | 940 | | | 1,206 | | | 944 | |
| Life contingent immediate annuity benefits and change in future policy benefits (c) | 3,279 | | | (1,430) | | | 4,185 | | | 6,002 | | | 5,004 | |
| Interest sensitive and index product benefits | 193,439 | | | 193,686 | | | 122,387 | | | 57,911 | | | 57,626 | |
| | | | | | | | | |
| Market risk benefits (gains) losses (d) | 241,998 | | | (296,114) | | | (144,124) | | | 183,694 | | | 33,490 | |
| | | | | | | | | |
| Amortization of deferred sales inducements | 50,346 | | | 48,354 | | | 46,951 | | | 46,601 | | | 45,966 | |
| Change in fair value of embedded derivatives (e) | 977,178 | | | (451,806) | | | 213,764 | | | 404,440 | | | 342,409 | |
| Interest expense on notes payable | 11,642 | | | 12,003 | | | 11,227 | | | 11,018 | | | 10,228 | |
| Interest expense on subordinated debentures | 1,341 | | | 1,340 | | | 1,338 | | | 1,336 | | | 1,335 | |
| Amortization of deferred policy acquisition costs | 72,428 | | | 70,561 | | | 68,476 | | | 68,235 | | | 66,831 | |
| Other operating costs and expenses | 75,250 | | | 76,630 | | | 75,697 | | | 74,004 | | | 62,389 | |
| Total benefits and expenses | 1,626,783 | | | (343,153) | | | 400,841 | | | 854,447 | | | 626,222 | |
| Income (loss) before income taxes | (571,652) | | | 609,805 | | | 450,798 | | | (191,899) | | | 26,116 | |
| Income tax expense (benefit) | (108,202) | | | 133,691 | | | 95,652 | | | (36,008) | | | (6,817) | |
| Net income (loss) (b)(c)(d)(e) | (463,450) | | | 476,114 | | | 355,146 | | | (155,891) | | | 32,933 | |
| Less: Net income (loss) available to noncontrolling interests | 1,545 | | | (42) | | | (217) | | | 103 | | | 361 | |
| Net income (loss) available to American Equity Investment Life Holding Company stockholders (b)(c)(d)(e) | (464,995) | | | 476,156 | | | 355,363 | | | (155,994) | | | 32,572 | |
| Less: Preferred stock dividends | 10,919 | | | 10,918 | | | 10,919 | | | 10,919 | | | 10,919 | |
| Net income (loss) available to American Equity Investment Life Holding Company common stockholders (b)(c)(d)(e) | $ | (475,914) | | | $ | 465,238 | | | $ | 344,444 | | | $ | (166,913) | | | $ | 21,653 | |
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| Earnings (loss) per common share | $ | (6.04) | | | $ | 5.96 | | | $ | 4.43 | | | $ | (2.00) | | | $ | 0.25 | |
| Earnings (loss) per common share - assuming dilution (b)(c)(d)(e) | $ | (6.04) | | | $ | 5.82 | | | $ | 4.36 | | | $ | (2.00) | | | $ | 0.25 | |
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| Weighted average common shares outstanding (thousands): | | | | | | | | | |
| Earnings (loss) per common share | 78,754 | | | 78,034 | | | 77,767 | | | 83,417 | | | 85,274 | |
| Earnings (loss) per common share - assuming dilution | 78,754 | | | 79,952 | | | 78,928 | | | 83,417 | | | 86,402 | |
(a)Other revenue consists of reinsurance related fee revenue including asset liability management fees and amortization of the deferred gain associated with the cost of reinsurance.
(b)Q3 2023 includes expense from the update of assumptions used in determining the deferred profit liability. The impact increased traditional life insurance policy benefits and change in future policy benefits by $2.3 million and decreased both net income and net income available to common stockholders by $1.8 million and decreased earnings per common share - assuming dilution by $0.02 per share.
(c)Q3 2023 includes benefit from the update of assumptions used in determining the liability for future policyholder benefits. The impact decreased life contingent immediate annuity benefits and change in future policy benefits by $4.6 million and increased both net income and net income available to common stockholders by $3.6 million and increased earnings per common share - assuming dilution by $0.05 per share.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2023
Unaudited (Dollars in thousands, except per share data)
(d)Q3 2023 includes benefit from the update of assumptions used in determining the reserves held for market risk benefits. The impact decreased market risk benefits (gains) losses by $63.3 million and increased both net income and net income available to common stockholders by $49.7 million and increased earnings per common share - assuming dilution by $0.62 per share.
(e)Q3 2023 includes expense from the update of assumptions used in determining the embedded derivative component of our fixed index annuity policy benefit reserves. The impact increased change in fair value of embedded derivatives by $84.4 million and decreased both net income and net income available to common stockholders by $66.2 million and decreased earnings per common share - assuming dilution by $0.83 per share.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2023
Unaudited (Dollars in thousands, except per share data)
NON-GAAP FINANCIAL MEASURES
In addition to net income (loss) available to common stockholders, we have consistently utilized non-GAAP operating income available to common stockholders and non-GAAP operating income available to common stockholders per common share - assuming dilution, non-GAAP financial measures commonly used in the life insurance industry, as economic measures to evaluate our financial performance. Non-GAAP operating income available to common stockholders equals net income (loss) available to common stockholders 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 non-GAAP operating income available to common stockholders eliminate the impact of fair value accounting for our fixed index annuity business. These adjustments are not economic in nature but rather impact the timing of reported results. We believe the combined presentation and evaluation of non-GAAP operating income available to common stockholders together with net income (loss) available to common stockholders provides information that may enhance an investor’s understanding of our underlying results and profitability.
Reconciliation from Net Income (Loss) Available to Common Stockholders to Non-GAAP Operating Income Available to Common Stockholders
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| Three Months Ended
December 31, | | Year Ended
December 31, |
| 2023 | | 2022 | | 2023 | | 2022 |
Net income (loss) available to American Equity Investment Life Holding Company common stockholders | $ | (475,914) | | | $ | 21,653 | | | $ | 166,855 | | | $ | 1,876,544 | |
Adjustments to arrive at non-GAAP operating income available to common stockholders: | | | | | | | |
Net realized gains (losses) on financial assets, including credit losses | (2,277) | | | (19,460) | | | 91,615 | | | 48,264 | |
| Change in fair value of derivatives and embedded derivatives | 583,961 | | | 169,767 | | | 549,600 | | | (1,549,205) | |
| Capital markets impact on the change in fair value of market risk benefits | 216,214 | | | 2,309 | | | (122,094) | | | (393,617) | |
| Net investment income | (1,509) | | | 1,476 | | | (1,137) | | | 1,476 | |
| Other revenue | 5,969 | | | 5,969 | | | 23,876 | | | 5,969 | |
Expenses incurred related to acquisition | 3,750 | | | — | | | 13,464 | | | — | |
| Income taxes | (170,603) | | | (39,998) | | | (115,116) | | | 401,838 | |
Non-GAAP operating income available to common stockholders | $ | 159,591 | | | $ | 141,716 | | | $ | 607,063 | | | $ | 391,269 | |
| Impact of excluding notable items (a) | $ | 13,255 | | | $ | — | | | $ | 10,755 | | | $ | 181,890 | |
| | | | | | | |
| Per common share - assuming dilution: | | | | | | | |
Net income (loss) available to American Equity Investment Life Holding Company common stockholders | $ | (6.04) | | | $ | 0.25 | | | $ | 2.06 | | | $ | 20.50 | |
Adjustments to arrive at non-GAAP operating income available to common stockholders: | | | | | | | |
| Anti-dilutive impact for losses (b) | 0.11 | | | — | | | — | | | — | |
| | | | | | | |
Net realized gains (losses) on financial assets, including credit losses | (0.03) | | | (0.23) | | | 1.13 | | | 0.53 | |
| Change in fair value of derivatives and embedded derivatives | 7.28 | | | 1.96 | | | 6.79 | | | (16.92) | |
| Capital markets impact on the change in fair value of market risk benefits | 2.70 | | | 0.03 | | | (1.51) | | | (4.30) | |
| Net investment income | (0.02) | | | 0.02 | | | (0.01) | | | — | |
| Other revenue | 0.07 | | | 0.07 | | | 0.29 | | | 0.01 | |
Expenses incurred related to acquisition | 0.05 | | | — | | | 0.17 | | | 0.06 | |
| Income taxes | (2.13) | | | (0.46) | | | (1.42) | | | 4.39 | |
Non-GAAP operating income available to common stockholders | $ | 1.99 | | | $ | 1.64 | | | $ | 7.50 | | | $ | 4.27 | |
| Impact of excluding notable items (a) | $ | 0.17 | | | $ | — | | | $ | 0.13 | | | $ | 1.99 | |
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2023
Unaudited (Dollars in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
December 31, | | Year Ended
December 31, |
| 2023 | | 2022 | | 2023 | | 2022 |
Notable items impacting non-GAAP operating income available to common stockholders: | | | | | | | |
| Expense associated with strategic incentive award | $ | 13,255 | | | $ | — | | | $ | 38,323 | | | $ | — | |
| Impact of actuarial assumption updates | — | | | — | | | (27,568) | | | 181,890 | |
| | | | | | | |
| Total notable items (a) | $ | 13,255 | | | $ | — | | | $ | 10,755 | | | $ | 181,890 | |
(a)Notable items reflect the after-tax increase (decrease) to non-GAAP operating income available to common stockholders for certain matters where more detail may help investors better understand, evaluate, and forecast results.
For the three months ended December 31, 2023 and 2022, non-GAAP operating income (loss) available to common stockholders would increase $13.3 million and $0.0 million, respectively, if we were to exclude the impact of notable items.
For the year ended December 31, 2023 and 2022, non-GAAP operating income (loss) available to common stockholders would increase $10.8 million and $181.9 million, respectively, if we were to exclude the impact of notable items.
(b)For periods with a loss, dilutive shares were not included in the calculation as inclusion of such shares would have an anti-dilutive effect.
NON-GAAP FINANCIAL MEASURES
Summary of Adjustments to Arrive at Non-GAAP Operating Income Available to Common Stockholders
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
December 31, | | Year Ended
December 31, |
| 2023 | | 2022 | | 2023 | | 2022 |
Net realized gains (losses) on financial assets, including credit losses: | | | | | | | |
Net realized gains (losses) on financial assets, including credit losses | $ | (2,277) | | | $ | (19,460) | | | $ | 91,615 | | | $ | 48,264 | |
| Income taxes | 490 | | | 4,183 | | | (19,697) | | | (10,377) | |
| $ | (1,787) | | | $ | (15,277) | | | $ | 71,918 | | | $ | 37,887 | |
| Change in fair value of derivatives and embedded derivatives: | | | | | | | |
| Fixed index annuities | $ | 314,777 | | | $ | 89,662 | | | $ | 373,608 | | | $ | (1,129,326) | |
| Reinsurance contracts | 269,184 | | | 78,594 | | | 185,088 | | | (439,502) | |
| Interest rate swaps | — | | | 1,511 | | | (9,096) | | | 19,623 | |
| Income taxes | (122,841) | | | (42,083) | | | (113,885) | | | 329,188 | |
| $ | 461,120 | | | $ | 127,684 | | | $ | 435,715 | | | $ | (1,220,017) | |
| Capital market impact on the fair value of market risk benefits: | | | | | | | |
| Capital markets impact on the change in fair value of market risk benefits | $ | 194,164 | | | $ | (16,236) | | | $ | (207,682) | | | $ | (449,887) | |
| Amortization of capital markets impact on the fair value of market risk benefits | 22,050 | | | 18,545 | | | 85,588 | | | 56,270 | |
| Income taxes | (46,486) | | | (498) | | | 26,250 | | | 84,627 | |
| $ | 169,728 | | | $ | 1,811 | | | $ | (95,844) | | | $ | (308,990) | |
| Net investment income: | | | | | | | |
| Income associated with assets transferred under reinsurance treaty | $ | (1,509) | | | $ | 1,476 | | | $ | (1,137) | | | $ | 1,476 | |
| Income taxes | 324 | | | (317) | | | 244 | | | (317) | |
| $ | (1,185) | | | $ | 1,159 | | | $ | (893) | | | $ | 1,159 | |
| Other revenue: | | | | | | | |
| Amortization of deferred fees associated with reinsurance treaties | $ | 5,969 | | | $ | 5,969 | | | $ | 23,876 | | | $ | 5,969 | |
| Income taxes | (1,283) | | | (1,283) | | | (5,133) | | | (1,283) | |
| $ | 4,686 | | | $ | 4,686 | | | $ | 18,743 | | | $ | 4,686 | |
Other operating costs and expenses: | | | | | | | |
Expenses incurred related to acquisition | $ | 3,750 | | | $ | — | | | $ | 13,464 | | | $ | — | |
| Income taxes | (807) | | | — | | | (2,895) | | | — | |
| $ | 2,943 | | | $ | — | | | $ | 10,569 | | | $ | — | |
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2023
Unaudited (Dollars in thousands, except per share data)
NON-GAAP FINANCIAL MEASURES
Quarterly Summary - Most Recent 5 Quarters
Reconciliation from Net Income (Loss) Available to Common Stockholders to Non-GAAP Operating Income Available to Common Stockholders
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Q4 2023 | | Q3 2023 | | Q2 2023 | | Q1 2023 | | Q4 2022 |
| Net income (loss) available to American Equity Investment Life Holding Company common stockholders | $ | (475,914) | | | $ | 465,238 | | | $ | 344,444 | | | $ | (166,913) | | | $ | 21,653 | |
Adjustments to arrive at non-GAAP operating income available to common stockholders: | | | | | | | | | |
| Net realized (gains) losses on financial assets, including credit losses | (2,277) | | | 46,771 | | | 22,737 | | | 24,384 | | | (19,460) | |
| Change in fair value of derivatives and embedded derivatives | 583,961 | | | (115,747) | | | (124,816) | | | 206,202 | | | 169,767 | |
| Capital markets impact on the change in fair value of market risk benefits | 216,214 | | | (290,558) | | | (184,700) | | | 136,950 | | | 2,309 | |
| Net investment income | (1,509) | | | (1,746) | | | 4,609 | | | (2,491) | | | 1,476 | |
| Other revenue | 5,969 | | | 5,969 | | | 5,969 | | | 5,969 | | | 5,969 | |
Expenses incurred related to acquisition | 3,750 | | | 9,714 | | | — | | | — | | | — | |
| Income taxes | (170,603) | | | 75,879 | | | 59,373 | | | (79,765) | | | (39,998) | |
Non-GAAP operating income available to common stockholders (c)(d)(e) | $ | 159,591 | | | $ | 195,520 | | | $ | 127,616 | | | $ | 124,336 | | | $ | 141,716 | |
| Impact of excluding notable items (a) | $ | 13,255 | | | $ | (20,958) | | | $ | 8,892 | | | $ | 9,566 | | | $ | — | |
| | | | | | | | | |
| Per common share - assuming dilution: | | | | | | | | | |
| Net income (loss) available to American Equity Investment Life Holding Company common stockholders | $ | (6.04) | | | $ | 5.82 | | | $ | 4.36 | | | $ | (2.00) | | | $ | 0.25 | |
| Adjustments to arrive at non-GAAP operating income available to common stockholders: | | | | | | | | | |
| Anti-dilutive impact for losses (b) | 0.11 | | | — | | | — | | | 0.03 | | | — | |
| | | | | | | | | |
| Net realized (gains) losses on financial assets, including credit losses | (0.03) | | | 0.58 | | | 0.29 | | | 0.29 | | | (0.23) | |
| Change in fair value of derivatives and embedded derivatives | 7.28 | | | (1.44) | | | (1.58) | | | 2.43 | | | 1.96 | |
| Capital markets impact on the change in fair value of market risk benefits | 2.70 | | | (3.63) | | | (2.34) | | | 1.62 | | | 0.03 | |
| Net investment income | (0.02) | | | (0.02) | | | 0.06 | | | (0.03) | | | 0.02 | |
| Other revenue | 0.07 | | | 0.07 | | | 0.08 | | | 0.07 | | | 0.07 | |
| Expenses incurred related to acquisition | 0.05 | | | 0.12 | | | — | | | — | | | — | |
| Income taxes | (2.13) | | | 0.95 | | | 0.75 | | | (0.94) | | | (0.46) | |
| Non-GAAP operating income available to common stockholders (c)(d)(e) | $ | 1.99 | | | $ | 2.45 | | | $ | 1.62 | | | $ | 1.47 | | | $ | 1.64 | |
| Impact of excluding notable items (a) | $ | 0.17 | | | $ | (0.26) | | | $ | 0.11 | | | $ | 0.11 | | | $ | — | |
Notable Items
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Q4 2023 | | Q3 2023 | | Q2 2023 | | Q1 2023 | | Q4 2022 |
Notable items impacting non-GAAP operating income available to common stockholders: | | | | | | | | | |
| Expense associated with strategic incentive award | $ | 13,255 | | | $ | 6,610 | | | $ | 8,892 | | | $ | 9,566 | | | $ | — | |
| Impact of actuarial assumption updates | — | | | (27,568) | | | — | | | — | | | — | |
| | | | | | | | | |
| Total notable items (a) | $ | 13,255 | | | $ | (20,958) | | | $ | 8,892 | | | $ | 9,566 | | | $ | — | |
(a)Notable items reflect the after-tax increase (decrease) to non-GAAP operating income available to common stockholders for certain matters where more detail may help investors better understand, evaluate, and forecast results. For the three months ended December 31, 2023, September 30, 2023, June 30, 2023, March 31, 2023 and December 31, 2022, non-GAAP operating income available to common stockholders would increase $13.3 million, decrease $21.0 million, increase $8.9 million and $9.6 million, respectively, if we were to exclude the impact of notable items.
(b)For periods with a loss, dilutive shares were not included in the calculation as inclusion of such shares would have an anti-dilutive effect.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2023
Unaudited (Dollars in thousands, except per share data)
(c)Q3 2023 includes expense from the update of assumptions used in determining the deferred profit liability. The impact increased traditional life insurance policy benefits and change in future policy benefits by $2.3 million and decreased non-GAAP operating income available to common stockholders by $1.8 million and decreased non-GAAP operating earnings per common share - assuming dilution by $0.02 per share.
(d)Q3 2023 includes benefit from the update of assumptions used in determining the liability for future policyholder benefits. The impact decreased life contingent immediate annuity benefits and change in future policy benefits by $4.6 million and increased non-GAAP operating income available to common stockholders by $3.6 million and increased non-GAAP operating earnings per common share - assuming dilution by $0.05 per share.
(e)Q3 2023 includes benefit from the update of assumptions used in determining the reserves held for market risk benefits. The impact decreased market risk benefits (gains) losses by $32.8 million and increased non-GAAP operating income available to common stockholders by $25.8 million and increased non-GAAP operating earnings per common share - assuming dilution by $0.32 per share.
NON-GAAP FINANCIAL MEASURES
Summary of Adjustments to Arrive at Non-GAAP Operating Income Available to Common Stockholders
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Q4 2023 | | Q3 2023 | | Q2 2023 | | Q1 2023 | | Q4 2022 |
| Net realized (gains) losses on investments | $ | 2,065 | | | $ | 44,672 | | | $ | 24,679 | | | $ | 27,787 | | | $ | (14,411) | |
| Net investment income | (1,509) | | | (1,746) | | | 4,609 | | | (2,491) | | | 1,476 | |
| Other revenue | 5,969 | | | 5,969 | | | 5,969 | | | 5,969 | | | 5,969 | |
| Change in fair value of derivatives | (393,217) | | | 336,059 | | | (338,579) | | | (198,239) | | | (172,643) | |
| Increase (decrease) in total revenues | (386,692) | | | 384,954 | | | (303,322) | | | (166,974) | | | (179,609) | |
| | | | | | | | | |
| Change in fair value of embedded derivatives | (977,178) | | | 451,806 | | | (213,764) | | | (404,440) | | | (342,409) | |
| Market risk benefits (gains) losses | (216,214) | | | 290,558 | | | 184,700 | | | (136,950) | | | (2,309) | |
| Interest sensitive and index product benefits (a) | 4,342 | | | (2,099) | | | 1,943 | | | 3,402 | | | 5,048 | |
| Other operating costs and expenses | (3,750) | | | (9,714) | | | — | | | — | | | — | |
| Increase (decrease) in total benefits and expenses | (1,192,800) | | | 730,551 | | | (27,121) | | | (537,988) | | | (339,670) | |
| Increase (decrease) in income (loss) before income taxes | 806,108 | | | (345,597) | | | (276,201) | | | 371,014 | | | 160,061 | |
| Increase (decrease) in income tax expense benefit | 170,603 | | | (75,879) | | | (59,373) | | | 79,765 | | | 39,998 | |
| Increase (decrease) in net income (loss) available to common stockholders | $ | 635,505 | | | $ | (269,718) | | | $ | (216,828) | | | $ | 291,249 | | | $ | 120,063 | |
(a)Interest sensitive and index product benefits adjustment reflects the change in the allowance for credit losses on our reinsurance recoverable/coinsurance deposits. The change in this allowance is reflected in the net realized (gains) losses of financial assets, including credit losses line in the other Non-GAAP financial measures tables in this financial supplement.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2023
Unaudited (Dollars in thousands, except share and per share data)
Capitalization/Book Value per Common Share
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Q4 2023 | | Q3 2023 | | Q2 2023 | | Q1 2023 | | Q4 2022 |
| Capitalization: | | | | | | | | | |
| Notes and loan payable | $ | 800,000 | | | $ | 800,000 | | | $ | 800,000 | | | $ | 800,000 | | | $ | 800,000 | |
| Subordinated debentures payable to subsidiary trusts | 79,107 | | | 79,017 | | | 78,927 | | | 78,839 | | | 78,753 | |
Total debt | 879,107 | | | 879,017 | | | 878,927 | | | 878,839 | | | 878,753 | |
| Total stockholders’ equity attributable to American Equity Investment Life Holding Company | 3,023,260 | | | 2,053,576 | | | 2,571,915 | | | 2,605,485 | | | 2,349,517 | |
| Total capitalization | 3,902,367 | | | 2,932,593 | | | 3,450,842 | | | 3,484,324 | | | 3,228,270 | |
| Accumulated other comprehensive loss (AOCI) | 2,979,657 | | | 4,425,695 | | | 3,425,248 | | | 3,036,429 | | | 3,746,230 | |
Total capitalization excluding AOCI (a) | $ | 6,882,024 | | | $ | 7,358,288 | | | $ | 6,876,090 | | | $ | 6,520,753 | | | $ | 6,974,500 | |
| | | | | | | | | |
| Total stockholders’ equity attributable to American Equity Investment Life Holding Company | $ | 3,023,260 | | | $ | 2,053,576 | | | $ | 2,571,915 | | | $ | 2,605,485 | | | $ | 2,349,517 | |
| Equity available to preferred stockholders (b) | (700,000) | | | (700,000) | | | (700,000) | | | (700,000) | | | (700,000) | |
Total common stockholders' equity (c) | 2,323,260 | | | 1,353,576 | | | 1,871,915 | | | 1,905,485 | | | 1,649,517 | |
| Accumulated other comprehensive loss | 2,979,657 | | | 4,425,695 | | | 3,425,248 | | | 3,036,429 | | | 3,746,230 | |
Total common stockholders’ equity excluding AOCI (c) | 5,302,917 | | | 5,779,271 | | | 5,297,163 | | | 4,941,914 | | | 5,395,747 | |
| Net impact of fair value accounting for derivatives and embedded derivatives | (1,240,397) | | | (1,689,153) | | | (1,587,599) | | | (1,490,297) | | | (1,652,169) | |
| Net capital markets impact on the fair value of market risk benefits | (698,808) | | | (866,530) | | | (638,442) | | | (493,452) | | | (600,958) | |
Total common stockholders’ equity excluding AOCI and the net impact of fair value accounting for fixed index annuities (c) | $ | 3,363,712 | | | $ | 3,223,588 | | | $ | 3,071,122 | | | $ | 2,958,165 | | | $ | 3,142,620 | |
| | | | | | | | | |
| Common shares outstanding | 79,337,818 | | | 78,974,095 | | | 78,047,941 | | | 77,753,194 | | | 84,810,255 | |
| | | | | | | | | |
Book Value per Common Share: (d) | | | | | | | | | |
| Book value per common share | $ | 29.28 | | | $ | 17.14 | | | $ | 23.98 | | | $ | 24.51 | | | $ | 19.45 | |
| Book value per common share excluding AOCI (c) | $ | 66.84 | | | $ | 73.18 | | | $ | 67.87 | | | $ | 63.56 | | | $ | 63.62 | |
| Book value per common share excluding AOCI and the net impact of fair value accounting for fixed index annuities (c) | $ | 42.40 | | | $ | 40.82 | | | $ | 39.35 | | | $ | 38.05 | | | $ | 37.05 | |
| | | | | | | | | |
Debt-to-Capital Ratios: (e) | | | | | | | | | |
| Senior debt / Total capitalization | 11.6 | % | | 10.9 | % | | 11.6 | % | | 12.3 | % | | 11.5 | % |
| Total debt / Total capitalization | 12.8 | % | | 11.9 | % | | 12.8 | % | | 13.5 | % | | 12.6 | % |
| | | | | | | | | |
| | | | | | | | | |
(a)Total capitalization excluding AOCI, a non-GAAP financial measure, is based on stockholders' equity excluding the effect of AOCI.
(b)Equity available to preferred stockholders is equal to the redemption value of outstanding preferred stock plus share dividends declared but not yet issued.
(c)Total common stockholders' equity, total common stockholders' equity excluding AOCI and total common stockholders' equity excluding AOCI and the net impact of fair value accounting for fixed index annuities, non-GAAP financial measures, exclude equity available to preferred stockholders. Total common stockholders’ equity and book value per common share excluding AOCI, non-GAAP financial measures, are based on common 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 securities, we believe these non-GAAP financial measures provide useful supplemental information. Total common stockholders' equity and book value per common share excluding AOCI and the net impact of fair value accounting for fixed index annuities, non-GAAP financial measures, are based on common stockholders' equity excluding AOCI and the net impact of fair value accounting for fixed index annuities. Since the net impact of fair value accounting for our fixed index annuity business is not economic in nature but rather impact the timing of reported results, we believe these non-GAAP financial measures provide useful supplemental information.
(d)Book value per common share including and excluding AOCI and book value per common share excluding AOCI and the net impact of fair value accounting for fixed index annuities are calculated as total common stockholders’ equity, total common stockholders’ equity excluding AOCI and total common stockholders' equity excluding AOCI and the net impact of fair value accounting for fixed index annuities divided by the total number of shares of common stock outstanding.
(e)Debt-to-capital ratios are computed using total capitalization excluding AOCI.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2023
Unaudited (Dollars in thousands)
Spread Results
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year Ended
December 31, | | | | | | | | | | |
| 2023 | | 2022 | | Q4 2023 | | Q3 2023 | | Q2 2023 | | Q1 2023 | | Q4 2022 |
| 4.55% | | 4.34% | Average yield on invested assets | 4.65% | | 4.69% | | 4.42% | | 4.48% | | 4.30% |
| 1.90% | | 1.71% | Aggregate cost of money | 2.01% | | 1.96% | | 1.85% | | 1.81% | | 1.76% |
| 2.65% | | 2.63% | Aggregate investment spread | 2.64% | | 2.73% | | 2.57% | | 2.67% | | 2.54% |
| | | | | | | | | | | | |
| | | Impact of: | | | | | | | | | |
| 0.01% | | 0.03% | Investment yield - additional prepayment income | 0.01% | | —% | | 0.01% | | —% | | 0.01% |
| 0.04% | | 0.01% | Cost of money effect of over hedging | 0.07% | | 0.05% | | 0.03% | | —% | | —% |
| | | | | | | | | | | | |
| $ | 49,485,288 | | | $ | 53,225,871 | | Weighted average investments | $ | 49,682,210 | | | $ | 49,528,255 | | | $ | 49,125,197 | | | $ | 49,304,219 | | | $ | 50,040,228 | |
| 49,705,986 | | | 49,811,623 | | Ending investments | 49,705,986 | | | 49,658,435 | | | 49,398,076 | | | 48,852,319 | | | 49,811,623 | |
Weighted average investments include fixed maturity securities at amortized cost and mortgage loans on real estate and other investments at carrying values as reflected in the consolidated balance sheets. 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.
Investment Yields
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year Ended
December 31, | | | | | | | | | | |
| 2023 | | 2022 | | Q4 2023 | | Q3 2023 | | Q2 2023 | | Q1 2023 | | Q4 2022 |
| | | Investment income: | | | | | | | | | |
| $ | 2,150,881 | | | $ | 2,108,088 | | Fixed income (a) | $ | 544,245 | | | $ | 539,584 | | | $ | 533,930 | | | $ | 533,122 | | | $ | 511,077 | |
| 102,472 | | | 200,349 | | Mark-to-market private asset income (a) | 32,910 | | | 40,900 | | | 9,035 | | | 19,627 | | | 26,816 | |
| $ | 2,253,353 | | | $ | 2,308,437 | | Total non-GAAP investment income (b) | $ | 577,155 | | | $ | 580,484 | | | $ | 542,965 | | | $ | 552,749 | | | $ | 537,893 | |
| | | | | | | | | | | | |
| | | Investment yield: | | | | | | | | | |
| 4.59% | | 4.08% | Fixed income investment yield | 4.65% | | 4.61% | | 4.57% | | 4.52% | | 4.26% |
| 3.97% | | 12.95% | Mark-to-market private asset yield | 4.52% | | 6.12% | | 1.48% | | 3.61% | | 5.29% |
| 4.55% | | 4.34% | Total investment yield | 4.65% | | 4.69% | | 4.42% | | 4.48% | | 4.30% |
| | | | | | | | | | | | |
| | | Weighted average investments: | | | | | | | | | |
| $ | 46,901,060 | | | $ | 51,678,469 | | Fixed income investments | $ | 46,766,942 | | | $ | 46,853,771 | | | $ | 46,684,803 | | | $ | 47,129,120 | | | $ | 48,012,311 | |
| 2,584,228 | | | 1,547,402 | | Mark-to-market private assets | 2,915,268 | | | 2,674,484 | | | 2,440,394 | | | 2,175,099 | | | 2,027,917 | |
| $ | 49,485,288 | | | $ | 53,225,871 | | Total weighted average investments | $ | 49,682,210 | | | $ | 49,528,255 | | | $ | 49,125,197 | | | $ | 49,304,219 | | | $ | 50,040,228 | |
(a)Net of investment expenses.
(b)Non-GAAP investment income is comprised of GAAP Net investment income adjusted to remove income associated with cash held by the Parent Company for corporate activities and to gross up income related to the tax benefit of tax exempt investment income, in addition to the adjustments shown in the reconciliation of Net Income (Loss) to Non-GAAP Operating Income on page 5. The net impact of these adjustments were $3,512 thousand in Q4 2023, $4,384 thousand in Q3 2023, $4,329 thousand in Q2 2023, $6,083 thousand in Q1 2023, and $1,578 thousand in Q4 2022, respectively.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2023
Unaudited (Dollars in thousands, except per share data)
Summary of Cost of Money for Deferred Annuities
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year Ended
December 31, | | | | | | | | | | |
| 2023 | | 2022 | | Q4 2023 | | Q3 2023 | | Q2 2023 | | Q1 2023 | | Q4 2022 |
| | | Included in interest sensitive and index product benefits: | | | | | | | | | |
| $ | 326,471 | | | $ | 305,292 | | Index credits | $ | 136,537 | | | $ | 120,894 | | | $ | 65,507 | | | $ | 3,533 | | | $ | 3,861 | |
| 236,403 | | | 240,889 | | Interest credited | 61,306 | | | 61,546 | | | 57,235 | | | 56,316 | | | 56,402 | |
| | | Included in change in fair value of derivatives: | | | | | | | | | |
| (344,876) | | | (312,133) | | Proceeds received at option expiration | (145,076) | | | (126,750) | | | (69,449) | | | (3,601) | | | (4,061) | |
| 682,918 | | | 647,132 | | Pro rata amortization of option cost | 186,052 | | | 175,603 | | | 163,992 | | | 157,271 | | | 154,463 | |
| $ | 900,916 | | | $ | 881,180 | | Cost of money for deferred annuities | $ | 238,819 | | | $ | 231,293 | | | $ | 217,285 | | | $ | 213,519 | | | $ | 210,665 | |
| | | | | | | | | | | | |
| $ | 47,330,279 | | | $ | 51,558,865 | | Weighted average liability balance outstanding | $ | 47,487,836 | | | $ | 47,280,339 | | | $ | 47,086,271 | | | $ | 47,266,672 | | | $ | 47,802,219 | |
Annuity Account Balance Rollforward
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year Ended
December 31, | | | | | | | | | | |
| 2023 | | 2022 | | Q4 2023 | | Q3 2023 | | Q2 2023 | | Q1 2023 | | Q4 2022 |
| $ | 47,504,615 | | | $ | 53,191,277 | | Account balances at beginning of period | $ | 47,419,417 | | | $ | 47,143,582 | | | $ | 47,031,605 | | | $ | 47,504,615 | | | $ | 51,913,689 | |
| — | | | (4,068,761) | | Reserves ceded - in-force | — | | | — | | | — | | | — | | | (3,810,982) | |
| 47,504,615 | | | 49,122,516 | | Account balance at beginning of period, net of reinsurance ceded | 47,419,417 | | | 47,143,582 | | | 47,031,605 | | | 47,504,615 | | | 48,102,707 | |
| 5,223,294 | | | 2,347,315 | | Net deposits | 1,949,552 | | | 1,366,125 | | | 1,174,953 | | | 732,664 | | | 613,084 | |
| 513,793 | | | 107,691 | | Premium bonuses | 160,506 | | | 171,164 | | | 136,856 | | | 45,267 | | | 33,617 | |
| 562,874 | | | 546,181 | | Fixed interest credited and index credits | 197,843 | | | 182,440 | | | 122,742 | | | 59,849 | | | 60,263 | |
| (163,745) | | | (72,699) | | Surrender charges | (57,876) | | | (45,550) | | | (33,777) | | | (26,542) | | | (22,030) | |
| (151,751) | | | (157,655) | | Lifetime income benefit rider fees | (39,071) | | | (38,766) | | | (37,865) | | | (36,049) | | | (39,636) | |
| (5,930,590) | | | (4,388,734) | | Surrenders, withdrawals, deaths, etc. | (2,071,881) | | | (1,359,578) | | | (1,250,932) | | | (1,248,199) | | | (1,243,390) | |
| $ | 47,558,490 | | | $ | 47,504,615 | | Account balances at end of period | $ | 47,558,490 | | | $ | 47,419,417 | | | $ | 47,143,582 | | | $ | 47,031,605 | | | $ | 47,504,615 | |
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2023
Unaudited (Dollars in thousands, except per share data)
MRB Liability
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year Ended
December 31, | | | | | | | | | | |
| 2023 | | 2022 | | Q4 2023 | | Q3 2023 | | Q2 2023 | | Q1 2023 | | Q4 2022 |
| $ | 1,521,954 | | | $ | 2,362,947 | | MRB balance at beginning of period | $ | 1,468,271 | | | $ | 1,587,694 | | | $ | 1,632,918 | | | $ | 1,521,954 | | | $ | 1,762,629 | |
| — | | | (326,524) | | Reserves ceded - in-force | — | | | — | | | — | | | — | | | (331,020) | |
| 8,572 | | | 7,429 | | Issuances | 10,774 | | | (3,052) | | | (2,071) | | | 2,921 | | | 1,230 | |
| 124,374 | | | 66,198 | | Interest accrual | 29,086 | | | 32,355 | | | 33,374 | | | 29,559 | | | 23,910 | |
| 117,185 | | | 117,486 | | Attributed fees collected | 31,387 | | | 29,354 | | | 28,247 | | | 28,197 | | | 29,585 | |
| — | | | — | | Benefits payments | — | | | — | | | — | | | — | | | — | |
| (185,333) | | | (449,887) | | Effect of changes in interest rates and equity markets | 183,192 | | | (284,238) | | | (202,709) | | | 118,422 | | | (16,236) | |
| (82,111) | | | 263,830 | | Effect of changes in assumptions and policyholder behavior | (12,463) | | | (70,544) | | | (974) | | | 1,870 | | | (5,023) | |
| 330,251 | | | (519,525) | | Effect of changes in instrument specific credit risk | 124,645 | | | 176,702 | | | 98,909 | | | (70,005) | | | 56,879 | |
| 1,834,892 | | | 1,521,954 | | MRB balance at end of period, net (a) | 1,834,892 | | | 1,468,271 | | | 1,587,694 | | | 1,632,918 | | | 1,521,954 | |
| | | | | | | | | | | | |
| 887,646 | | | 765,552 | | MRB net deferred capital markets impact, end of period | 887,646 | | | 1,103,860 | | | 813,302 | | | 628,602 | | | 765,552 | |
| $ | 2,722,538 | | | $ | 2,287,506 | | Non-GAAP MRB balance, end of period (b) | $ | 2,722,538 | | | $ | 2,572,131 | | | $ | 2,400,996 | | | $ | 2,261,520 | | | $ | 2,287,506 | |
(a)The MRB balance is the MRB liability net of the MRB asset and reinsurance recoverable asset associated with the ceded MRB. The reinsurance recoverable asset associated with the ceded MRB is included in coinsurance deposits on the Consolidated Balance Sheet.
(b)Non-GAAP MRB balance is comprised of the GAAP MRB balance adjusted for the pre-tax cumulative effect of the deferral of capital markets impact on the fair value of MRB. See page 9 for the non-GAAP definition and reconciliation of total common stockholders' equity to total common stockholders' equity excluding AOCI and the net impact of fair value accounting for fixed index annuities which includes the adjustment for the after-tax cumulative effect of the deferral of capital markets impact on the fair value of MRB.
Account Values Subject to Recurring Fees Under Reinsurance Agreements
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year Ended
December 31, | | | | | | | | | | |
| 2023 | | 2022 | | Q4 2023 | | Q3 2023 | | Q2 2023 | | Q1 2023 | | Q4 2022 |
| $ | 9,642,336 | | | $ | 4,660,690 | | Account value of business ceded subject to fee income at beginning of period | $ | 11,592,667 | | | $ | 10,863,738 | | | $ | 10,155,767 | | | $ | 9,642,336 | | | $ | 5,612,098 | |
| — | | | 4,068,761 | | In-force account value ceded subject to fee income | — | | | — | | | — | | | — | | | 3,810,982 | |
| 2,369,765 | | | 1,045,600 | | Premiums on business ceded subject to fee income | 44,171 | | | 870,021 | | | 821,413 | | | 634,160 | | | 351,971 | |
| (523,974) | | | (132,715) | | Disbursements on business ceded subject to fee income | (148,711) | | | (141,092) | | | (113,442) | | | (120,729) | | | (132,715) | |
| $ | 11,488,127 | | | $ | 9,642,336 | | Account value of business ceded subject to fee income at end of period | $ | 11,488,127 | | | $ | 11,592,667 | | | $ | 10,863,738 | | | $ | 10,155,767 | | | $ | 9,642,336 | |
| | | | | | | | | | | | |
| $ | 99,742 | | | $ | 48,214 | | Non-GAAP operating revenue associated with recurring fees (a) | $ | 27,942 | | | $ | 26,732 | | | $ | 22,705 | | | $ | 22,363 | | | $ | 19,001 | |
(a)Non-GAAP operating revenue associated with recurring fees is comprised of GAAP Other Revenue adjusted for the amortization of gains on assets transferred under a reinsurance transaction. See page 7 for the reconciliation of Net Income (Loss) to Non-GAAP Operating Income and page 8 for the summary of adjustments to arrive at Non-GAAP Operating Income.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2023
Unaudited (Dollars in thousands)
Annuity Deposits by Product Type
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year Ended
December 31, | | | | | | | | | | |
| 2023 | | 2022 | | Q4 2023 | | Q3 2023 | | Q2 2023 | | Q1 2023 | | Q4 2022 |
| | | American Equity Life: | | | | | | | | | |
| $ | 5,470,434 | | | $ | 2,692,141 | | Fixed index annuities | $ | 1,547,595 | | | $ | 1,715,362 | | | $ | 1,471,638 | | | $ | 735,839 | | | $ | 637,021 | |
| 2,053 | | | 5,329 | | Annual reset fixed rate annuities | 276 | | | 250 | | | 834 | | | 693 | | | 1,856 | |
| 216,172 | | | 56,511 | | Multi-year fixed rate annuities | 9,979 | | | 13,127 | | | 37,032 | | | 156,034 | | | 49,216 | |
| 1,224 | | | 18,935 | | Single premium immediate annuities | 309 | | | 210 | | | 278 | | | 427 | | | 494 | |
| 5,689,883 | | | 2,772,916 | | | 1,558,159 | | | 1,728,949 | | | 1,509,782 | | | 892,993 | | | 688,587 | |
| | | Eagle Life: | | | | | | | | | |
| 1,563,992 | | | 479,279 | | Fixed index annuities | 430,689 | | | 498,431 | | | 406,273 | | | 228,599 | | | 145,772 | |
| 3,039 | | | 380 | | Annual reset fixed rate annuities | — | | | — | | | 1,770 | | | 1,269 | | | 230 | |
| 349,616 | | | 82,581 | | Multi-year fixed rate annuities | 7,839 | | | 10,616 | | | 82,932 | | | 248,229 | | | 65,434 | |
| 1,916,647 | | | 562,240 | | | 438,528 | | | 509,047 | | | 490,975 | | | 478,097 | | | 211,436 | |
| | | Consolidated: | | | | | | | | | |
| 7,034,426 | | | 3,171,420 | | Fixed index annuities | 1,978,284 | | | 2,213,793 | | | 1,877,911 | | | 964,438 | | | 782,793 | |
| 5,092 | | | 5,709 | | Annual reset fixed rate annuities | 276 | | | 250 | | | 2,604 | | | 1,962 | | | 2,086 | |
| 565,788 | | | 139,092 | | Multi-year fixed rate annuities | 17,818 | | | 23,743 | | | 119,964 | | | 404,263 | | | 114,650 | |
| 1,224 | | | 18,935 | | Single premium immediate annuities | 309 | | | 210 | | | 278 | | | 427 | | | 494 | |
| 7,606,530 | | | 3,335,156 | | Total before coinsurance ceded | 1,996,687 | | | 2,237,996 | | | 2,000,757 | | | 1,371,090 | | | 900,023 | |
| 2,382,012 | | | 968,906 | | Coinsurance ceded | 46,826 | | | 871,661 | | | 825,526 | | | 637,999 | | | 286,445 | |
| $ | 5,224,518 | | | $ | 2,366,250 | | Net after coinsurance ceded | $ | 1,949,861 | | | $ | 1,366,335 | | | $ | 1,175,231 | | | $ | 733,091 | | | $ | 613,578 | |
Surrender Charge Protection and Account Values by Product Type
Annuity Surrender Charges and Net (of Coinsurance) Account Values at December 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Surrender Charge | | Net Account Value |
| Product Type | | Avg.
Years
At Issue | | Avg.
Years
Remaining | | Avg.
%
Remaining | | Dollars in Thousands | | % |
| Fixed Index Annuities | | 12.0 | | 4.9 | | 8.2% | | $ | 42,708,093 | | | 89.8 | % |
| Annual Reset Fixed Rate Annuities | | 7.2 | | 1.4 | | 3.0% | | 1,119,156 | | | 2.4 | % |
| Multi-Year Fixed Rate Annuities | | 4.1 | | 1.2 | | 6.1% | | 3,731,241 | | | 7.8 | % |
| Total | | 11.2 | | 4.6 | | 7.9% | | $ | 47,558,490 | | | 100.0 | % |
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2023
Unaudited (Dollars in thousands)
Annuity Liability Characteristics
| | | | | | | | | | | |
| Surrender Charge Percentages: | Fixed
Annuities
Account Value | | Fixed Index
Annuities
Account Value |
| No surrender charge | $ | 1,201,886 | | | $ | 5,291,934 | |
| 0.0% < 2.0% | 74,758 | | | 2,821,053 | |
| 2.0% < 3.0% | 13,799 | | | 2,747,252 | |
| 3.0% < 4.0% | 7,551 | | | 823,508 | |
| 4.0% < 5.0% | 6,799 | | | 2,787,498 | |
| 5.0% < 6.0% | 55,957 | | | 1,807,736 | |
| 6.0% < 7.0% | 370,963 | | | 2,240,692 | |
| 7.0% < 8.0% | 2,470,779 | | | 1,840,104 | |
| 8.0% < 9.0% | 331,773 | | | 4,252,724 | |
| 9.0% < 10.0% | 154,684 | | | 3,135,064 | |
| 10.0% or greater | 161,448 | | | 14,960,528 | |
| $ | 4,850,397 | | | $ | 42,708,093 | |
| | | | | | | | | | | |
| Surrender Charge Expiration By Year: | Fixed and
Fixed Index
Annuities
Account Value | | Weighted
Average
Surrender
Charge |
| Out of Surrender Charge | $ | 6,493,820 | | | 0.00 | % |
| | | |
| 2024 | 3,569,836 | | | 4.42 | % |
| 2025 | 4,672,248 | | | 3.17 | % |
| 2026 | 4,340,338 | | | 5.01 | % |
| 2027 | 3,690,236 | | | 6.04 | % |
| 2028 | 3,811,466 | | | 7.59 | % |
| 2029 | 3,765,240 | | | 9.03 | % |
| 2030 | 3,956,253 | | | 10.46 | % |
| 2031 | 3,531,481 | | | 12.80 | % |
| 2032 | 3,278,755 | | | 13.57 | % |
| 2033 | 5,072,207 | | | 16.08 | % |
| 2034 | 629,134 | | | 17.39 | % |
| 2035 | 324,974 | | | 18.08 | % |
| 2036 | 187,883 | | | 18.50 | % |
| 2037 | 118,697 | | | 19.00 | % |
| 2038 | 99,474 | | | 19.50 | % |
| 2039 | 16,448 | | | 20.00 | % |
| $ | 47,558,490 | | | 7.88 | % |
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 December 31, 2023 for the $11.8 billion of account value of fixed annuities and funds allocated to the fixed rate strategy for fixed index annuities would decrease by 0.25%.
If all caps and participation rates were reduced to minimum caps and participation rates and current asset fees were increased to their maximums on the $35.8 billion of account value allocated to index strategies, the cost of options would decrease by 1.55% based upon prices of options for the week ended December 31, 2023.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2023
Unaudited (Dollars in thousands)
Summary of Invested Assets
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2023 | | December 31, 2022 |
| Carrying
Amount | | Percent | | Carrying
Amount | | Percent |
| Fixed maturity securities: | | | | | | | |
| U.S. Government and agencies | $ | 171,141 | | | 0.4 | % | | $ | 169,071 | | | 0.4 | % |
| States, municipalities and territories | 3,075,024 | | | 7.7 | % | | 3,822,943 | | | 8.5 | % |
| Foreign corporate securities and foreign governments | 408,936 | | | 1.0 | % | | 616,938 | | | 1.4 | % |
| Corporate securities | 16,076,506 | | | 40.0 | % | | 20,201,774 | | | 44.8 | % |
| Residential mortgage backed securities | 1,208,317 | | | 3.0 | % | | 1,366,927 | | | 3.0 | % |
| Commercial mortgage backed securities | 2,624,123 | | | 6.5 | % | | 3,447,075 | | | 7.6 | % |
| Other asset backed securities | 5,202,395 | | | 12.9 | % | | 5,155,254 | | | 11.4 | % |
| Total fixed maturity securities | 28,766,442 | | | 71.5 | % | | 34,779,982 | | | 77.1 | % |
| Mortgage loans on real estate | 7,231,667 | | | 18.0 | % | | 6,778,977 | | | 15.0 | % |
| Real estate investments | 1,334,247 | | | 3.3 | % | | 1,056,063 | | | 2.3 | % |
| Limited partnerships and limited liability companies | 1,089,591 | | | 2.7 | % | | 1,266,779 | | | 2.8 | % |
| Derivative instruments | 1,207,288 | | | 3.0 | % | | 431,727 | | | 1.0 | % |
| Other investments | 590,271 | | | 1.5 | % | | 829,900 | | | 1.8 | % |
| Total investments, net of modified coinsurance investments | 40,219,506 | | | 100.0 | % | | 45,143,428 | | | 100.0 | % |
| Coinsurance investments (a) | 8,007,518 | | | | | 6,181,870 | | | |
| Total investments | $ | 48,227,024 | | | | | $ | 51,325,298 | | | |
(a)Investments held by American Equity Life in a segregated account to support liabilities reinsured under both coinsurance with funds withheld and modified coinsurance reinsurance agreements.
Credit Quality of Fixed Maturity Securities - December 31, 2023
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
NAIC Designation (b) | Amortized
Cost | | Carrying
Amount | | Percent | | Rating Agency Rating (b) | Amortized
Cost | | Carrying
Amount | | Percent |
| 1 | $ | 19,330,614 | | | $ | 17,116,519 | | | 60.1 | % | | Aaa/Aa/A | $ | 19,237,683 | | | $ | 17,030,736 | | | 59.8 | % |
| 2 | 11,895,433 | | | 10,680,088 | | | 37.5 | % | | Baa | 12,036,591 | | | 10,801,336 | | | 37.9 | % |
| 3 | 517,425 | | | 476,419 | | | 1.7 | % | | Ba | 539,417 | | | 489,286 | | | 1.7 | % |
| 4 | 168,694 | | | 147,692 | | | 0.5 | % | | B | 144,657 | | | 128,150 | | | 0.4 | % |
| 5 | 88,581 | | | 68,538 | | | 0.2 | % | | Caa | 21,295 | | | 18,497 | | | 0.1 | % |
| 6 | 9,400 | | | 10,132 | | | — | % | | Ca and lower | 30,504 | | | 31,383 | | | 0.1 | % |
| 32,010,147 | | | 28,499,388 | | | 100.0 | % | | | 32,010,147 | | | 28,499,388 | | | 100.0 | % |
| Coinsurance investments (a) | 6,277,105 | | | 6,014,040 | | | | | Coinsurance investments (a) | 6,277,105 | | | 6,014,040 | | | |
| $ | 38,287,252 | | | $ | 34,513,428 | | | | | | $ | 38,287,252 | | | $ | 34,513,428 | | | |
(a)Investments held by American Equity Life in a segregated account to support liabilities reinsured under both coinsurance with funds withheld and modified coinsurance reinsurance agreements.
(b)The table excludes residual tranche securities that are not rated with an amortized cost of $250,210 and carrying amount of $267,054 as of December 31, 2023.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2023
Unaudited (Dollars in thousands)
Watch List Securities - December 31, 2023
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| General Description (a) | | Amortized
Cost | | Allowance for Credit Losses | | Amortized Cost, Net of Allowance | | Net Unrealized Gains (Losses), Net of Allowance | | Fair Value |
| States, municipalities and territories | | $ | 22,715 | | | $ | — | | | $ | 22,715 | | | $ | (5,491) | | | $ | 17,224 | |
| Corporate securities - Public securities | | 31,502 | | | — | | | 31,502 | | | (768) | | | 30,734 | |
| Corporate securities - Private placement securities | | 5,180 | | | (3,412) | | | 1,768 | | | (58) | | | 1,710 | |
| Residential mortgage backed securities | | 55,054 | | | — | | | 55,054 | | | (8,050) | | | 47,004 | |
| Commercial mortgage backed securities | | 139,961 | | | — | | | 139,961 | | | (27,340) | | | 112,621 | |
| Other asset backed securities | | 1,524 | | | — | | | 1,524 | | | 131 | | | 1,655 | |
| Collateralized loan obligations | | 159,600 | | | (618) | | | 158,982 | | | (19,980) | | | 139,002 | |
| | $ | 415,536 | | | $ | (4,030) | | | $ | 411,506 | | | $ | (61,556) | | | $ | 349,950 | |
(a)The watch list consists of all fixed maturity securities we have determined contain elevated credit risk, including those on which we have taken credit losses.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2023
Unaudited (Dollars in thousands)
Fixed Maturity Securities by Sector
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2023 | | December 31, 2022 |
| Amortized
Cost | | Fair
Value | | Amortized
Cost | | Fair
Value |
| Available for sale: | | | | | | | |
| U.S. Government and agencies | $ | 172,683 | | | $ | 171,141 | | | $ | 173,638 | | | $ | 169,071 | |
| States, municipalities and territories | 3,615,861 | | | 3,075,024 | | | 4,356,191 | | | 3,822,943 | |
Foreign corporate securities and foreign governments | 471,188 | | | 408,936 | | | 680,263 | | | 616,938 | |
| Corporate securities: | | | | | | | |
| Capital goods | 1,180,367 | | | 1,036,451 | | | 1,601,113 | | | 1,395,595 | |
| Consumer discretionary | 3,613,225 | | | 3,121,655 | | | 5,086,479 | | | 4,320,219 | |
| Energy | 881,404 | | | 811,482 | | | 1,219,370 | | | 1,111,891 | |
| Financials | 5,795,094 | | | 5,198,811 | | | 6,467,052 | | | 5,634,229 | |
| Government non-guaranteed | 167,059 | | | 145,579 | | | 202,740 | | | 179,440 | |
| Industrials | 16,966 | | | 16,206 | | | 166,061 | | | 138,999 | |
| Information technology | 963,228 | | | 835,461 | | | 1,344,461 | | | 1,160,067 | |
| Materials | 834,268 | | | 722,468 | | | 1,169,188 | | | 1,021,288 | |
| Telecommunications | 1,047,936 | | | 882,396 | | | 1,306,495 | | | 1,090,868 | |
| Transportation | 899,832 | | | 803,538 | | | 1,100,681 | | | 975,393 | |
| Utilities | 2,838,788 | | | 2,437,216 | | | 3,620,946 | | | 3,115,520 | |
| Other | 66,440 | | | 65,243 | | | 58,184 | | | 58,265 | |
| Residential mortgage backed securities: | | | | | | | |
| Government agency | 732,557 | | | 689,920 | | | 806,999 | | | 754,349 | |
| Prime | 352,524 | | | 299,353 | | | 387,838 | | | 334,613 | |
| Alt-A | 52,923 | | | 52,493 | | | 54,910 | | | 58,091 | |
| Non-qualified mortgage | 156,648 | | | 148,516 | | | 169,847 | | | 157,960 | |
| Other | 17,759 | | | 18,035 | | | 62,235 | | | 61,914 | |
| Commercial mortgage backed securities: | | | | | | | |
| Government agency | 144,372 | | | 134,737 | | | 170,307 | | | 157,903 | |
| Non-agency | 2,892,601 | | | 2,489,386 | | | 3,668,300 | | | 3,289,172 | |
| Other asset backed securities: | | | | | | | |
| Auto | 239,142 | | | 237,596 | | | 44,450 | | | 41,896 | |
| Consumer discretionary | 544,455 | | | 520,327 | | | 122,068 | | | 118,843 | |
| Financials | 307,150 | | | 285,018 | | | 283,238 | | | 252,493 | |
| Collateralized loan obligations | 3,503,091 | | | 3,410,445 | | | 4,071,929 | | | 3,775,347 | |
| Other | 752,796 | | | 749,009 | | | 1,005,440 | | | 966,675 | |
| 32,260,357 | | | 28,766,442 | | | 39,400,423 | | | 34,779,982 | |
| Coinsurance investments (a) | 6,277,105 | | | 6,014,040 | | | 5,465,596 | | | 5,024,635 | |
| $ | 38,537,462 | | | $ | 34,780,482 | | | $ | 44,866,019 | | | $ | 39,804,617 | |
(a)Investments held by American Equity Life in a segregated account to support liabilities reinsured under both coinsurance with funds withheld and modified coinsurance reinsurance agreements.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2023
Unaudited (Dollars in thousands)
Mortgage Loans on Real Estate
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2023 | | December 31, 2022 |
| Principal | | Percent | | Principal | | Percent |
| Property type distribution | | | | | | | |
| Commercial mortgage loans: | | | | | | | |
| Office | $ | 239,086 | | | 3.3 | % | | $ | 277,767 | | | 4.1 | % |
| | | | | | | |
| Retail | 784,047 | | | 10.9 | % | | 878,352 | | | 13.0 | % |
| Industrial/Warehouse | 895,966 | | | 12.4 | % | | 853,215 | | | 12.6 | % |
| Apartment | 965,474 | | | 13.4 | % | | 893,910 | | | 13.2 | % |
| Hotel | 280,733 | | | 3.9 | % | | 285,271 | | | 4.2 | % |
| Mixed Use/Other | 76,039 | | | 1.0 | % | | 200,756 | | | 3.0 | % |
| Agricultural mortgage loans | 581,287 | | | 8.1 | % | | 567,630 | | | 8.4 | % |
| Residential mortgage loans | 3,384,737 | | | 47.0 | % | | 2,807,652 | | | 41.5 | % |
| 7,207,369 | | | 100.0 | % | | 6,764,553 | | | 100.0 | % |
| Coinsurance investments (a) | 308,859 | | | | | 171,633 | | | |
| $ | 7,516,228 | | | | | $ | 6,936,186 | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Commercial | | Agricultural |
| Amortized
Cost | | Average
LTV | | Amortized
Cost | | Average
LTV |
| As of December 31, 2023: | | | | | | | |
| Debt Service Coverage Ratio: | | | | | | | |
| Greater than or equal to 1.5 | $ | 2,256,505 | | | 50% | | $ | 259,384 | | | 50% |
| Greater than or equal to 1.2 and less than 1.5 | 388,135 | | | 58% | | 186,598 | | | 51% |
| Greater than or equal to 1.0 and less than 1.2 | 456,845 | | | 47% | | 17,216 | | | 53% |
| Less than 1.0 | 136,172 | | | 53% | | 116,435 | | | 45% |
| 3,237,657 | | | 51% | | 579,633 | | | 49% |
| Coinsurance investments (a) | 307,342 | | | 51% | | — | | | —% |
| $ | 3,544,999 | | | 51% | | $ | 579,633 | | | 49% |
| | | | | | | |
| As of December 31, 2022: | | | | | | | |
| Debt Service Coverage Ratio: | | | | | | | |
| Greater than or equal to 1.5 | $ | 2,358,793 | | | 53% | | $ | 266,695 | | | 45% |
| Greater than or equal to 1.2 and less than 1.5 | 505,644 | | | 61% | | 236,589 | | | 48% |
| Greater than or equal to 1.0 and less than 1.2 | 475,315 | | | 50% | | 15,075 | | | 39% |
| Less than 1.0 | 44,756 | | | 66% | | 47,604 | | | 33% |
| 3,384,508 | | | 54% | | 565,963 | | | 45% |
| Coinsurance investments (a) | 170,050 | | | 61% | | — | | | —% |
| $ | 3,554,558 | | | 54% | | $ | 565,963 | | | 45% |
(a)Investments held by American Equity Life in a segregated account to support liabilities reinsured under both coinsurance with funds withheld and modified coinsurance reinsurance agreements.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2023
Unaudited (Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2023 |
| Commercial | | Agricultural | | Residential | | Total |
| Credit exposure - by payment activity | | | | | | | |
| Performing | $ | 3,241,345 | | | $ | 568,691 | | | $ | 3,287,763 | | | $ | 7,097,799 | |
| In workout | — | | | — | | | — | | | — | |
| Delinquent | — | | | 12,596 | | | 96,974 | | | 109,570 | |
| Principal outstanding | 3,241,345 | | | 581,287 | | | 3,384,737 | | | 7,207,369 | |
| | | | | | | |
| Unamortized discounts and premiums, net | (902) | | | — | | | 65,802 | | | 64,900 | |
| Deferred fees and costs, net | (2,786) | | | (1,654) | | | 558 | | | (3,882) | |
| Amortized cost | 3,237,657 | | | 579,633 | | | 3,451,097 | | | 7,268,387 | |
| | | | | | | |
| Valuation allowance | (16,487) | | | (2,590) | | | (17,643) | | | (36,720) | |
| Carrying value | 3,221,170 | | | 577,043 | | | 3,433,454 | | | 7,231,667 | |
| | | | | | | |
| Coinsurance investments (a) | 305,927 | | | — | | | — | | | 305,927 | |
| $ | 3,527,097 | | | $ | 577,043 | | | $ | 3,433,454 | | | $ | 7,537,594 | |
| | | | | | | |
| December 31, 2022 |
| Commercial | | Agricultural | | Residential | | Total |
| Credit exposure - by payment activity | | | | | | | |
| Performing | $ | 3,389,271 | | | $ | 564,495 | | | $ | 2,773,251 | | | $ | 6,727,017 | |
| In workout | — | | | — | | | — | | | — | |
| Delinquent | — | | | 3,135 | | | 34,401 | | | 37,536 | |
| Principal outstanding | 3,389,271 | | | 567,630 | | | 2,807,652 | | | 6,764,553 | |
| | | | | | | |
| Unamortized discounts and premiums, net | — | | | — | | | 55,917 | | | 55,917 | |
| Deferred fees and costs, net | (4,763) | | | (1,667) | | | 1,909 | | | (4,521) | |
| Amortized cost | 3,384,508 | | | 565,963 | | | 2,865,478 | | | 6,815,949 | |
| | | | | | | |
| Valuation allowance | (22,428) | | | (1,021) | | | (13,523) | | | (36,972) | |
| Carrying value | 3,362,080 | | | 564,942 | | | 2,851,955 | | | 6,778,977 | |
| | | | | | | |
| Coinsurance investments (a) | 170,050 | | | — | | | — | | | 170,050 | |
| $ | 3,532,130 | | | $ | 564,942 | | | $ | 2,851,955 | | | $ | 6,949,027 | |
(a)Investments held by American Equity Life in a segregated account to support liabilities reinsured under both coinsurance with funds withheld and modified coinsurance reinsurance agreements.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2023
Shareholder Information
| | | | | | | | | | | | | | | | | |
| A.M. Best | | S&P | | Fitch |
| Financial Strength Ratings | | | | | |
| American Equity Investment Life Insurance Company | A- (watch) | | A- (watch) | | A- (stable) |
| American Equity Investment Life Insurance Company of New York | A- (watch) | | A- (watch) | | A- (stable) |
| Eagle Life Insurance Company | A- (watch) | | A- (watch) | | A- (stable) |
| | | | | |
| Credit Ratings | | | | | |
| American Equity Investment Life Holding Company | bbb- (watch) | | BBB- (watch) | | BBB |
| Senior unsecured debt | bbb- (watch) | | BBB- | | BBB- |
| Perpetual, non-cumulative preferred stock | bb (watch) | | BB | | BB |
Corporate Offices:
American Equity Investment Life Holding Company
6000 Westown Parkway
West Des Moines, IA 50266
Inquiries:
Steven Schwartz, Head of Investor Relations
(515) 273-3763, sschwartz@american-equity.com
Common Stock and Dividend Information:
New York Stock Exchange symbol: “AEL”
| | | | | | | | | | | | | | | | | | | | | | | |
| High | | Low | | Close | | Dividend Declared |
| 2023 | | | | | | | |
| First Quarter | $48.37 | | $31.57 | | $36.49 | | $0.00 |
| Second Quarter | $53.68 | | $35.22 | | $52.11 | | $0.00 |
| Third Quarter | $54.44 | | $51.73 | | $53.64 | | $0.00 |
| Fourth Quarter | $56.09 | | $52.70 | | $55.80 | | $0.00 |
| | | | | | | |
| 2022 | | | | | | | |
| First Quarter | $44.49 | | $35.05 | | $39.91 | | $0.00 |
| Second Quarter | $42.18 | | $32.65 | | $36.57 | | $0.00 |
| Third Quarter | $43.55 | | $33.22 | | $37.29 | | $0.00 |
| Fourth Quarter | $46.76 | | $28.05 | | $45.62 | | $0.36 |
| | | | | | | |
| 2021 | | | | | | | |
| First Quarter | $32.54 | | $26.21 | | $31.53 | | $0.00 |
| Second Quarter | $33.68 | | $29.18 | | $32.32 | | $0.00 |
| Third Quarter | $33.79 | | $27.12 | | $29.57 | | $0.00 |
| Fourth Quarter | $39.88 | | $29.46 | | $38.92 | | $0.34 |
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, Head of Investor Relations, at (515) 273-3763 or by visiting our website at www.american-equity.com.
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Financial Supplement - December 31, 2023
Research Analyst Coverage
Thomas Gallagher
Evercore ISI
(212) 446-9439
thomas.gallagher@evercoreisi.com
Suneet Kamath
Jefferies
(212) 778-8602
skamath@jefferies.com
Ryan Krueger
Keefe, Bruyette & Woods
(860) 722-5930
rkrueger@kbw.com
John Barnidge
Piper Sandler & Co.
(312) 281-3412
John.Barnidge@psc.com
Wilma Burdis
Raymond James & Associates, Inc.
(727) 567-9371
wilma.burdis@raymondjames.com
Mark Hughes
Truist Securities
(615) 748-4422
mark.hughes@research.truist.com
Cover Page
|
Feb. 14, 2024 |
| Entity Information [Line Items] |
|
| Document Type |
8-K
|
| Document Period End Date |
Feb. 14, 2024
|
| Entity Registrant Name |
AMERICAN EQUITY INVESTMENT LIFE HOLDING CO
|
| Entity Incorporation, State or Country Code |
IA
|
| Entity File Number |
001-31911
|
| Entity Tax Identification Number |
42-1447959
|
| Entity Address, Address Line One |
6000 Westown Parkway
|
| Entity Address, City or Town |
West Des Moines
|
| Entity Address, State or Province |
IA
|
| Entity Address, Postal Zip Code |
50266
|
| City Area Code |
515
|
| Local Phone Number |
221-0002
|
| Written Communications |
false
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false
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false
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false
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false
|
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0001039828
|
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false
|
| Common Stock |
|
| Entity Information [Line Items] |
|
| Title of 12(b) Security |
Common stock, par value $1
|
| Trading Symbol |
AEL
|
| Security Exchange Name |
NYSE
|
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|
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|
| Title of 12(b) Security |
Depositary Shares, each representing a 1/1,000th interest in a share of 5.95% Fixed-Rate Reset Non-Cumulative Preferred Stock, Series A
|
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AELPRA
|
| Security Exchange Name |
NYSE
|
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|
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|
| Title of 12(b) Security |
Depositary Shares, each representing a 1/1,000th interest in a share of 6.625% Fixed-Rate Reset Non-Cumulative Preferred Stock, Series B
|
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AELPRB
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NYSE
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