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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number : 001-31911
American Equity Investment Life Holding Company
(Exact name of registrant as specified in its charter)
Iowa42-1447959
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
6000 Westown Parkway
West Des Moines, Iowa 50266
(Address of principal executive offices, including zip code)
(515) 221-0002
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $1AELNew 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 AAELPRANew 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 BAELPRBNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filerSmaller reporting company
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of November 4, 2021, there were 92,513,517 shares of the registrant's common stock, $1 par value, outstanding.



TABLE OF CONTENTS
Page




PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share data)
September 30, 2021December 31, 2020
(Unaudited)
Assets
Investments:
Fixed maturity securities, available for sale, at fair value (amortized cost of $41,247,540 as of 2021 and $42,304,736 as of 2020; allowance for credit losses of $4,074 as of 2021 and $64,771 as of 2020)
$45,738,097 $47,538,893 
Mortgage loans on real estate (net of allowance for credit losses of $21,558 as of 2021 and $31,029 as of 2020)
4,288,742 4,165,489 
Real estate related to consolidated variable interest entities259,262  
Derivative instruments990,033 1,310,954 
Other investments1,021,226 590,078 
Total investments52,297,360 53,605,414 
Cash and cash equivalents (2021 includes $27,224 related to consolidated variable interest entities)
12,684,793 9,095,522 
Coinsurance deposits (net of allowance for credit losses of $2,697 as of 2021 and $1,888 as of 2020)
8,733,096 4,844,927 
Accrued investment income (2021 includes $309 related to consolidated variable interest entities)
413,370 398,082 
Deferred policy acquisition costs2,193,889 2,225,199 
Deferred sales inducements1,545,494 1,448,375 
Income taxes recoverable 862 
Other assets (2021 includes $1,503 related to consolidated variable interest entities)
449,961 70,198 
Total assets$78,317,963 $71,688,579 
Liabilities and Stockholders' Equity
Liabilities:
Policy benefit reserves$64,810,504 $62,352,882 
Other policy funds and contract claims229,199 240,904 
Notes payable496,101 495,668 
Subordinated debentures78,342 78,112 
Deferred income taxes426,176 504,000 
Income taxes payable39,478  
Other liabilities (2021 includes $12,191 related to consolidated variable interest entities)
5,862,955 1,668,025 
Total liabilities71,942,755 65,339,591 
Stockholders' equity:
Preferred stock, Series A; par value $1 per share; $400,000 aggregate liquidation preference; 20,000 shares authorized; issued and outstanding:
     2021 - 16,000 shares;
     2020 - 16,000 shares
16 16 
Preferred stock, Series B; par value $1 per share; $300,000 aggregate liquidation preference; 12,000 shares authorized; issued and outstanding:
     2021 - 12,000 shares;
     2020 - 12,000 shares
12 12 
Common stock; par value $1 per share; 200,000,000 shares authorized; issued and outstanding:
     2021 - 92,513,517 shares (excluding 9,936,715 treasury shares);
     2020 - 95,720,622 shares (excluding 6,516,525 treasury shares)
92,513 95,721 
Additional paid-in capital1,609,039 1,681,127 
Accumulated other comprehensive income1,956,974 2,203,557 
Retained earnings2,716,654 2,368,555 
Total stockholders' equity6,375,208 6,348,988 
Total liabilities and stockholders' equity$78,317,963 $71,688,579 
See accompanying notes to unaudited consolidated financial statements.
2


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)

Three Months Ended 
 September 30,
Nine Months Ended 
 September 30,
2021202020212020
Revenues:
Premiums and other considerations$15,841 $10,407 $43,649 $29,103 
Annuity product charges58,480 62,277 182,321 185,264 
Net investment income526,366 543,331 1,522,876 1,660,353 
Change in fair value of derivatives(70,701)205,011 826,484 (409,201)
Net realized gains (losses) on investments4,933 (22,321)(2,764)(68,545)
Other revenue7,644  7,644  
Loss on extinguishment of debt   (2,024)
Total revenues542,563 798,705 2,580,210 1,394,950 
Benefits and expenses:
Insurance policy benefits and change in future policy benefits18,756 13,273 51,008 36,676 
Interest sensitive and index product benefits817,014 576,147 2,106,590 1,217,358 
Amortization of deferred sales inducements(17,172)416,983 93,283 415,396 
Change in fair value of embedded derivatives(536,404)(1,732,497)(545,104)(1,855,623)
Interest expense on notes payable6,535 6,388 19,322 19,161 
Interest expense on subordinated debentures1,342 1,323 3,994 4,232 
Amortization of deferred policy acquisition costs(1,588)622,596 185,329 623,409 
Other operating costs and expenses56,518 42,738 177,433 128,315 
Total benefits and expenses345,001 (53,049)2,091,855 588,924 
Income before income taxes197,562 851,754 488,355 806,026 
Income tax expense44,697 184,554 107,500 143,308 
Net income152,865 667,200 380,855 662,718 
Less: Preferred stock dividends10,918 5,950 32,756 18,511 
Net income available to common stockholders$141,947 $661,250 $348,099 $644,207 
Earnings per common share$1.53 $7.20 $3.69 $7.02 
Earnings per common share - assuming dilution$1.53 $7.17 $3.67 $7.00 
Weighted average common shares outstanding (in thousands):
Earnings per common share92,478 91,861 94,326 91,770 
Earnings per common share - assuming dilution93,044 92,163 94,867 92,071 
See accompanying notes to unaudited consolidated financial statements.
3


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
Three Months Ended 
 September 30,
Nine Months Ended 
 September 30,
2021202020212020
Net income$152,865 $667,200 $380,855 $662,718 
Other comprehensive income (loss):
Change in net unrealized investment gains/losses (1)(85,990)420,547 (308,740)695,593 
Reclassification of unrealized investment gains/losses to net income (1)1,260 2,392 (3,391)9,810 
Other comprehensive income (loss) before income tax(84,730)422,939 (312,131)705,403 
Income tax effect related to other comprehensive income (loss)17,793 (88,816)65,548 (148,135)
Other comprehensive income (loss)(66,937)334,123 (246,583)557,268 
Comprehensive income$85,928 $1,001,323 $134,272 $1,219,986 
(1)Net of related adjustments to amortization of deferred sales inducements, deferred policy acquisition costs and policy benefit reserves
See accompanying notes to unaudited consolidated financial statements.
4


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in thousands)
(Unaudited)
Preferred
Stock
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income
Retained
Earnings
Total
Stockholders'
Equity
For the three months ended September 30, 2021
Balance at June 30, 2021$28 $92,554 $1,604,535 $2,023,911 $2,574,707 $6,295,735 
Net income for period— — — — 152,865 152,865 
Other comprehensive loss— — — (66,937)— (66,937)
Share-based compensation— — 6,109 — — 6,109 
Issuance of common stock—  (306)— — (306)
Treasury stock acquired, common— (41)(1,299)— — (1,340)
Dividends on preferred stock— — — — (10,918)(10,918)
Balance at September 30, 2021$28 $92,513 $1,609,039 $1,956,974 $2,716,654 $6,375,208 
Preferred
Stock
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income
Retained
Earnings
Total
Stockholders'
Equity
For the three months ended September 30, 2020
Balance at June 30, 2020$28 $91,595 $1,508,171 $1,577,469 $1,742,426 $4,919,689 
Net income for period— — — — 667,200 667,200 
Other comprehensive income— — — 334,123 — 334,123 
Share-based compensation— — 3,121 — — 3,121 
Issuance of common stock— 337 (305)— — 32 
Dividends on preferred stock— — — — (5,950)(5,950)
Balance at September 30, 2020$28 $91,932 $1,510,987 $1,911,592 $2,403,676 $5,918,215 
Preferred
Stock
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income
Retained
Earnings
Total
Stockholders'
Equity
For the nine months ended September 30, 2021
Balance at December 31, 2020$28 $95,721 $1,681,127 $2,203,557 $2,368,555 $6,348,988 
Net income for period— — — — 380,855 380,855 
Other comprehensive loss— — — (246,583)— (246,583)
Share-based compensation
— — 19,265 — — 19,265 
Issuance of common stock— 459 4,395 — — 4,854 
Treasury stock acquired, common— (3,667)(95,748)— — (99,415)
Dividends on preferred stock— — — — (32,756)(32,756)
Balance at September 30, 2021$28 $92,513 $1,609,039 $1,956,974 $2,716,654 $6,375,208 
Preferred
Stock
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income
Retained
Earnings
Total
Stockholders'
Equity
For the nine months ended September 30, 2020
Balance at December 31, 2019$16 $91,107 $1,212,311 $1,354,324 $1,768,764 $4,426,522 
Net income for period— — — — 662,718 662,718 
Other comprehensive income— — — 557,268 — 557,268 
Issuance of preferred stock12 — 290,248 — — 290,260 
Share-based compensation
— — 7,515 — — 7,515 
Issuance of common stock— 825 913 — — 1,738 
Cumulative effect of change in accounting principle
— — — — (9,295)(9,295)
Dividends on preferred stock— — — — (18,511)(18,511)
Balance at September 30, 2020$28 $91,932 $1,510,987 $1,911,592 $2,403,676 $5,918,215 
See accompanying notes to unaudited consolidated financial statements.
5


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Nine Months Ended 
 September 30,
20212020
Operating activities
Net income$380,855 $662,718 
Adjustments to reconcile net income to net cash provided by operating activities:
Interest sensitive and index product benefits2,106,590 1,217,358 
Amortization of deferred sales inducements93,283 415,396 
Annuity product charges(182,321)(185,264)
Change in fair value of embedded derivatives(545,104)(1,855,623)
Change in traditional life and accident and health insurance reserves19,487 6,507 
Policy acquisition costs deferred(243,711)(178,251)
Amortization of deferred policy acquisition costs185,329 623,409 
Provision for depreciation and other amortization3,985 3,857 
Amortization of discounts and premiums on investments18,438 37,110 
Realized gains/losses on investments2,764 68,545 
Distributions from equity method investments10,697 190 
Change in fair value of derivatives(826,484)409,201 
Deferred income taxes(12,276)171,265 
Loss on extinguishment of debt 2,024 
Share-based compensation19,265 7,515 
Change in accrued investment income(15,288)20,179 
Change in income taxes recoverable/payable40,340 (35,202)
Change in other assets(2,003)2,307 
Change in other policy funds and contract claims(15,971)(18,951)
Change in collateral held for derivatives(170,371)(506,735)
Change in collateral held for securities lending (494,368)
Change in other liabilities(141,230)(22,281)
Other(88,983)4,325 
Net cash provided by operating activities637,291 355,231 
Investing activities
Sales, maturities, or repayments of investments:
Fixed maturity securities, available for sale3,295,774 3,344,860 
Mortgage loans on real estate500,140 230,042 
Derivative instruments1,741,357 633,948 
Other investments12,008 3,238 
Acquisitions of investments:
Fixed maturity securities, available for sale(2,283,419)(2,279,427)
Mortgage loans on real estate(621,002)(723,154)
Real estate acquired(259,262) 
Derivative instruments(547,006)(557,709)
Other investments(422,070)(10,616)
Purchases of property, furniture and equipment(15,060)(12,440)
Net cash provided by investing activities1,401,460 628,742 
6


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in thousands)
(Unaudited)
Nine Months Ended 
 September 30,
20212020
Financing activities
Receipts credited to annuity policyholder account balances$4,879,283 $1,811,843 
Coinsurance deposits683,829 304,169 
Return of annuity policyholder account balances(3,861,391)(2,922,187)
Repayment of subordinated debentures (81,450)
Acquisition of treasury stock(99,415) 
Proceeds from issuance of preferred stock, net 290,260 
Proceeds from issuance of common stock, net4,854 1,738 
Change in checks in excess of cash balance(23,884)(6,595)
Preferred stock dividends(32,756)(18,511)
Net cash provided by (used in) financing activities1,550,520 (620,733)
Increase in cash and cash equivalents3,589,271 363,240 
Cash and cash equivalents at beginning of period9,095,522 2,293,392 
Cash and cash equivalents at end of period$12,684,793 $2,656,632 
Supplemental disclosures of cash flow information
Cash paid during period for:
Interest expense$15,000 $17,677 
Income taxes80,169 4,810 
Non-cash operating activity:
Deferral of sales inducements71,683 68,468 
See accompanying notes to unaudited consolidated financial statements.




7


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)

1. Significant Accounting Policies
Consolidation and Basis of Presentation
The accompanying consolidated financial statements of American Equity Investment Life Holding Company ("we", "us", "our" or the "Company") have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. The consolidated financial statements include a variable interest entity (“VIE”) in which we are the primary beneficiary. All of the adjustments in the consolidated financial statements are normal recurring items which are necessary to present fairly our financial position and results of operations on a basis consistent with the prior audited consolidated financial statements. Operating results for the three and nine month periods ended September 30, 2021 are not necessarily indicative of the results that may be expected for any other period, including for the year ended December 31, 2021. All significant intercompany accounts and transactions have been eliminated. The preparation of financial statements requires management estimates and assumptions using subjective and complex judgments that frequently require assumptions about matters that are inherently uncertain. Our actual results could differ from these estimates. For further information related to a description of areas of judgment and estimates and other information necessary to understand our financial position and results of operations, refer to the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2020.
Real Estate Investments
Beginning in the second quarter of 2021, we held residential real estate investments through consolidation of an investment company VIE. Residential real estate investments are reported at fair value and the change in fair value on these investments is reported in net income as a component of net investment income. Fair values of residential real estate are initially based on the cost to purchase the properties and subsequently based on a discounted cash flow methodology. See Note 3 – Fair Values of Financial Instruments for more information on the determination of fair value. The residential real estate investments are leased to renters through operating lease arrangements. Rental income is recognized on a straight-line basis over the term of the respective leases.
Variable Interest Entities
We have relationships with various special purpose entities and other legal entities that must be evaluated to determine if the entities meet the criteria of a VIE. This assessment is performed by reviewing contractual, ownership and other rights and requires use of judgment. First, we determine if we hold a variable interest in an entity by assessing if we have the right to receive expected losses and expected residual returns of the entity. If we hold a variable interest, then the entity is assessed to determine if it is a VIE. An entity is a VIE if the equity at risk is not sufficient to support its activities, if the equity holders lack a controlling financial interest or if the entity is structured with non-substantive voting rights. In addition to the previous criteria, if the entity is a limited partnership or similar entity, it is a VIE if the limited partners do not have the power to direct the entity’s most significant activities through substantive kick-out rights or participating rights. A VIE is evaluated to determine the primary beneficiary. The primary beneficiary of a VIE is the enterprise with (1) the power to direct the activities of a VIE that most significantly impact the entity's economic performance and (2) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. When we are the primary beneficiary, we are required to consolidate the entity in our financial statements. We reassess our involvement with VIEs on a quarterly basis. For further information about VIEs, refer to Note 6 – Variable Interest Entities.
Adopted Accounting Pronouncements
There were no accounting pronouncements that were adopted during the current period.
In June 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update (“ASU”) that significantly changed the impairment model for most financial assets that are measured at amortized cost and certain other instruments from an incurred loss model to an expected loss model that requires these assets be presented at the net amount expected to be collected. In addition, credit losses on available for sale debt securities are recorded through an allowance account subsequent to the adoption of this ASU.  We adopted this ASU on January 1, 2020. The adoption of this ASU resulted in an increase in our mortgage loan allowance for credit losses of $8.6 million and the recognition of an allowance for credit losses on our reinsurance recoverable/coinsurance deposits balances of $3.2 million on the date of adoption. Retained earnings was decreased by $9.3 million, which reflects the net of tax impact of the increase in the mortgage loan allowance for credit losses and the recognition of an allowance for credit losses on our reinsurance recoverable/coinsurance deposits balances on the date of adoption.
8

New Accounting Pronouncements
In August 2018, the FASB issued an ASU that revises certain aspects of the measurement models and disclosure requirements for long duration insurance and investment contracts. The FASB’s objective in issuing this ASU is to improve, simplify, and enhance the accounting for long-duration contracts. The revisions include updating cash flow assumptions in the calculation of the liability for traditional life products, introducing the term ‘market risk benefit’ ("MRB") and requiring all contract features meeting the definition of an MRB to be measured at fair value, simplifying the method used to amortize deferred policy acquisition costs and deferred sales inducements to a constant basis over the expected term of the related contracts rather than based on actual and estimated gross profits and enhancing disclosure requirements. While this ASU is effective for us on January 1, 2023, the transition date (the remeasurement date) is January 1, 2021. Early adoption of this ASU is permitted. We are in the process of evaluating the impact this guidance will have on our consolidated financial statements.
9

2. Revision of Immaterial Misstatement in Prior Year Financial Statements
Management identified an error in the Company's historical financial statements as further described below. In accordance with the guidance set forth in SEC Staff Accounting Bulletin No. 99, Materiality, and SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, management concluded that the error was not material to the consolidated financial statements as presented in the Company's quarterly and annual financial statements that had been previously filed in the Company's Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K. As a result, amendment of such reports is not required. The Company revised the previously issued annual consolidated financial statements for 2020 in this Form 10-Q to correct this error.
The corrected immaterial error was in the calculation of the impact of unrealized gains and losses on lifetime income benefit reserves as of December 31, 2020 determined in the first quarter of 2021. This immaterial error resulted in an increase in the lifetime income benefit reserves which are included in policy benefit reserves in the consolidated balance sheet, an increase in the deferred policy acquisition costs and deferred sales inducements and a decrease in deferred income taxes with an offsetting change in accumulated other comprehensive income which is a component of total stockholders' equity. The immaterial error had no impact on the consolidated statement of operations or consolidated statement of cash flows.
The effect of the revisions on the Company's previously issued financial statements are provided in the tables below. Amounts throughout the consolidated financial statements and notes thereto have been adjusted to incorporate the revised amounts, where applicable. The following tables reconcile selected lines from the Company's year-end December 31, 2020 consolidated balance sheet and the three and nine months ended September 30, 2020 consolidated statement of comprehensive income from the previously reported amounts to the revised amounts.
Revised Consolidated Balance SheetYear Ended December 31, 2020
As ReportedAdjustmentAs Revised
(Dollars in thousands)
Assets
Deferred policy acquisition costs$2,045,812 $179,387 $2,225,199 
Deferred sales inducements1,328,857 119,518 1,448,375 
Total assets71,389,674 298,905 71,688,579 
Liabilities and Stockholders' Equity
Liabilities:
Policy benefit reserves61,768,246 584,636 62,352,882 
Deferred income taxes564,003 (60,003)504,000 
Total liabilities64,814,958 524,633 65,339,591 
Stockholders' equity:
Accumulated other comprehensive income2,429,285 (225,728)2,203,557 
Total stockholders' equity6,574,716 (225,728)6,348,988 
Total liabilities and stockholders' equity71,389,674 298,905 71,688,579 
Revised Consolidated Statement of Comprehensive IncomeThree Months Ended September 30, 2020
As ReportedAdjustmentAs Revised
(Dollars in thousands)
Other comprehensive income:
Change in net unrealized investment gains/losses (1)$494,154 $(73,607)$420,547 
Other comprehensive income before income tax496,546 (73,607)422,939 
Income tax effect related to other comprehensive income(104,274)15,458 (88,816)
Other comprehensive income392,272 (58,149)334,123 
Comprehensive income1,059,472 (58,149)1,001,323 
Nine Months Ended September 30, 2020
As ReportedAdjustmentAs Revised
(Dollars in thousands)
Other comprehensive income:
Change in net unrealized investment gains/losses (1)$767,646 $(72,053)$695,593 
Other comprehensive income before income tax777,456 (72,053)705,403 
Income tax effect related to other comprehensive income(