AMERICAN EQUITY INVESTMENT LIFE HOLDING CO [AEL-PB] Filings

10-Q 1 ael-20230331.htm 10-Q ael-20230331

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 March 31, 2023


☐			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)


Iowa						42-1447959
(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 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 (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 filer	☐	Smaller 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 May 4, 2023, there were 77,941,257 shares of the registrant's common stock, $1 par value, outstanding.

TABLE OF CONTENTS


			Page
PART I — FINANCIAL INFORMATION
Item 1: Financial Statements:			2
Consolidated Balance Sheets			2
Consolidated Statements of Operations			4
Consolidated Statements of Comprehensive Income			5
Consolidated Statements of Changes in Stockholders’ Equity			6
Consolidated Statements of Cash Flows			7
Notes to Consolidated Financial Statements			9
Note 1. Significant Accounting Policies			9
Note 2. Fair Values of Financial Instruments			12
Note 3. Investments			19
Note 4. Mortgage Loans on Real Estate			24
Note 5. Variable Interest Entities			28
Note 6. Derivative Instruments			29
Note 7. Deferred Policy Acquisition Costs and Deferred Sales Inducements			32
Note 8. Policyholder Liabilities			33
Note 9. Notes and Loan Payable			40
Note 10. Commitments and Contingencies			40
Note 11. Earnings (Loss) Per Common Share and Stockholders' Equity			41
Note 12. Subsequent Events			42
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations			43
Item 3: Quantitative and Qualitative Disclosures about Market Risk			64
Item 4: Controls and Procedures			66

PART II — OTHER INFORMATION
Item 1: Legal Proceedings			66
Item 1A: Risk Factors			66
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds			67
Item 3: Defaults Upon Senior Securities			67
Item 4: Mine Safety Disclosures			67
Item 5: Other Information			67
Item 6: Exhibits			68

Signatures			69

Table of Contents

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)

(Unaudited)

	March 31, 2023		December 31, 2022 (a)
Assets
Investments:
Fixed maturity securities, available for sale, at fair value (amortized cost of $43,784,431 as of 2023 and $44,866,019 as of 2022; allowance for credit losses of $2,047 as of 2023 and $3,347 as of 2022)	$	39,555,624	$	39,804,617
Mortgage loans on real estate (net of allowance for credit losses of $45,626 as of 2023 and $36,972 as of 2022)	7,199,225		6,949,027
Real estate investments related to consolidated variable interest entities	1,164,879		1,056,063
Limited partnerships and limited liability companies (2023 and 2022 include $1,065,628 and $684,834 related to consolidated variable interest entities)	1,657,415		1,266,779
Derivative instruments	684,033		431,727
Other investments	1,157,162		1,817,085
Total investments	51,418,338		51,325,298

Cash and cash equivalents (2023 and 2022 include $39,016 and $27,235 related to consolidated variable interest entities)	2,777,852		1,919,669

Coinsurance deposits (net of allowance for credit losses of $5,334 as of 2023 and $8,737 as of 2022)	13,710,877		13,254,956

Market risk benefits	230,304		229,871

Accrued investment income (2023 and 2022 include $493 and $3,444 related to consolidated variable interest entities)	497,425		497,851
Deferred policy acquisition costs	2,772,175		2,773,643
Deferred sales inducements	2,044,349		2,045,683
Deferred income taxes	290,648		438,434
Income taxes recoverable	50,821		55,498
Other assets (2023 and 2022 include $19,349 and $10,690 related to consolidated variable interest entities)	702,937		642,696
Total assets	$	74,495,726	$	73,183,599

Table of Contents


AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share and per share data)

(Unaudited)

	March 31, 2023		December 31, 2022 (a)
Liabilities and Stockholders' Equity
Liabilities:
Policy benefit reserves	$	59,019,189	$	58,781,836
Market risk benefits	2,653,185		2,455,492
Other policy funds and contract claims	306,359		512,790

Notes and loan payable	790,413		792,073
Subordinated debentures	78,839		78,753



Funds withheld for reinsurance liabilities	6,984,409		6,577,426
Other liabilities (2023 and 2022 include $127,519 and $78,644 related to consolidated variable interest entities)	2,034,523		1,614,479
Total liabilities	71,866,917		70,812,849

Stockholders' equity:
Preferred stock, Series A; par value $1 per share; $400,000 aggregate liquidation preference; 20,000 shares authorized; issued and outstanding: 2023 and 2022 - 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: 2023 and 2022 - 12,000 shares	12		12
Common stock; par value $1 per share; 200,000,000 shares authorized; issued and outstanding: 2023 - 77,753,194 shares (excluding 31,809,876 treasury shares); 2022 - 84,810,255 shares (excluding 24,590,353 treasury shares)	77,753		84,810
Additional paid-in capital	1,045,453		1,325,316
Accumulated other comprehensive loss	(3,036,429)		(3,746,230)
Retained earnings	4,518,680		4,685,593
Total stockholders' equity attributable to American Equity Investment Life Holding Company	2,605,485		2,349,517
Noncontrolling interests	23,324		21,233
Total stockholders' equity	2,628,809		2,370,750
Total liabilities and stockholders' equity	$	74,495,726	$	73,183,599

(a)Certain prior period amounts have been recast. See Note 1 - Significant Accounting Policies for more information.

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended March 31,
		2023		2022 (a)
Revenues:
Premiums and other considerations		$	4,137	$	10,078
Annuity product charges		62,591		52,355
Net investment income		561,323		567,423
Change in fair value of derivatives		45,890		(477,519)
Net realized losses on investments		(27,787)		(13,127)
Other revenue		16,394		8,817

Total revenues		662,548		148,027

Benefits and expenses:
Insurance policy benefits and change in future policy benefits (remeasurement gains (losses) of future policy benefit reserves of $354 for 2023 and $637 for 2022)		7,208		13,615
Interest sensitive and index product benefits		57,911		287,917

Market risk benefits (gains) losses		183,694		191,893

Amortization of deferred sales inducements		46,601		45,085
Change in fair value of embedded derivatives		404,440		(1,393,649)
Interest expense on notes and loan payable		11,018		6,425
Interest expense on subordinated debentures		1,336		1,317
Amortization of deferred policy acquisition costs		68,235		72,969
Other operating costs and expenses		74,004		57,795
Total benefits and expenses		854,447		(716,633)
Income (loss) before income taxes		(191,899)		864,660
Income tax expense (benefit)		(36,008)		185,195
Net income (loss)		(155,891)		679,465
Less: Net income available to noncontrolling interests		103		—
Net income (loss) available to American Equity Investment Life Holding Company stockholders		(155,994)		679,465
Less: Preferred stock dividends		10,919		10,919
Net income (loss) available to American Equity Investment Life Holding Company common stockholders		$	(166,913)	$	668,546


Earnings (loss) per common share		$	(2.00)	$	6.90
Earnings (loss) per common share - assuming dilution		$	(2.00)	$	6.83

Weighted average common shares outstanding (in thousands):
Earnings (loss) per common share		83,417		96,866
Earnings (loss) per common share - assuming dilution		83,417		97,953

(a)Certain prior period amounts have been recast. See Note 1 - Significant Accounting Policies for more information.

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)


	Three Months Ended March 31,
		2023		2022 (a)
Net income (loss)		$	(155,891)	$	679,465
Other comprehensive income (loss):
Change in net unrealized investment gains/losses		851,731		(4,015,830)
Change in current discount rate for liability for future policy benefits		(4,791)		32,998
Change in instrument-specific credit risk for market risk benefits		70,005		480,410
Reclassification of unrealized investment gains/losses to net income		(18,463)		1,459
Other comprehensive income (loss) before income tax		898,482		(3,500,963)
Income tax effect related to other comprehensive income (loss)		(188,681)		734,906
Other comprehensive income (loss)		709,801		(2,766,057)
Comprehensive income (loss)		$	553,910	$	(2,086,592)

(a)Certain prior period amounts have been recast. See Note 1 - Significant Accounting Policies for more information.

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

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 Loss		Retained Earnings		Noncontrolling Interest		Total Stockholders' Equity
For the three months ended March 31, 2023
Balance at December 31, 2022	$	28	$	84,810	$	1,325,316	$	(3,746,230)	$	4,685,593	$	21,233	$	2,370,750
Net income (loss) for period	—		—		—		—		(155,994)		103		(155,891)
Other comprehensive income	—		—		—		709,801		—		—		709,801

Share-based compensation	—		—		9,904		—		—		—		9,904
Issuance of common stock	—		211		(3,842)		—		—		—		(3,631)
Treasury stock acquired, common	—		(7,268)		(285,925)		—		—		—		(293,193)

Dividends on preferred stock	—		—		—		—		(10,919)		—		(10,919)
Contributions from noncontrolling interests	—		—		—		—		—		1,988		1,988
Balance at March 31, 2023	$	28	$	77,753	$	1,045,453	$	(3,036,429)	$	4,518,680	$	23,324	$	2,628,809

	Preferred Stock		Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Income		Retained Earnings		Noncontrolling Interest		Total Stockholders' Equity
For the three months ended March 31, 2022 (a)
Balance at December 31, 2021	$	28	$	92,514	$	1,614,374	$	3,192,547	$	2,839,254	$	—	$	7,738,717
Net income for period	—		—		—		—		679,465		—		679,465
Other comprehensive loss	—		—		—		(2,766,057)		—		—		(2,766,057)

Share-based compensation	—		—		5,596		—		—		—		5,596
Issuance of common stock	—		6,958		244,580		—		—		—		251,538
Treasury stock acquired, common	—		(4,452)		(174,944)		—		—		—		(179,396)

Dividends on preferred stock	—		—		—		—		(10,919)		—		(10,919)
Contributions from noncontrolling interests	—		—		—		—		—		1,084		1,084
Balance at March 31, 2022	$	28	$	95,020	$	1,689,606	$	426,490	$	3,507,800	$	1,084	$	5,720,028

(a)Certain prior period amounts have been recast. See Note 1 - Significant Accounting Policies for more information.

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)


	Three Months Ended March 31,
	2023		2022 (a)
Operating activities
Net income (loss)	$	(155,891)	$	679,465
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Interest sensitive and index product benefits	57,911		287,917
Amortization of deferred sales inducements	46,601		45,085
Annuity product charges	(62,591)		(52,355)
Change in fair value of embedded derivatives	404,440		(1,393,649)

Change in traditional life and accident and health insurance reserves	1,720		(30,313)
Policy acquisition costs deferred	(66,767)		(56,897)
Amortization of deferred policy acquisition costs	68,235		72,969
Provision for depreciation and other amortization	3,025		2,250
Amortization of discounts and premiums on investments	13,450		(258)
Realized gains/losses on investments	27,787		13,127

Change in fair value of derivatives	(45,890)		477,519
Deferred income taxes	(40,895)		184,840

Share-based compensation	9,904		5,596
Change in accrued investment income	426		(38,805)
Change in income taxes recoverable/payable	4,677		519
Change in other assets	(34,940)

AMERICAN EQUITY INVESTMENT LIFE HOLDING CO [AEL-PB] Filings
AMERICAN EQUITY INVESTMENT LIFE HOLDING CO [AEL] Filings
AMERICAN EQUITY INVESTMENT LIFE HOLDING CO [AEL-PA] Filings
10-Q	[2023-05-10]
10-K	[2023-02-28]
10-Q	[2022-11-08]
10-Q	[2022-08-09]
10-Q	[2022-05-09]
10-K	[2022-03-01]
10-Q	[2021-11-09]
10-Q	[2021-08-09]
10-Q	[2021-05-10]
10-K	[2021-03-01]
10-Q	[2020-11-06]
10-Q	[2020-08-10]
10-Q	[2020-05-11]
10-K	[2020-02-25]
10-Q	[2019-11-08]
10-Q	[2019-08-08]
10-Q	[2019-05-08]
10-K	[2019-02-22]
10-Q	[2018-11-06]
10-Q	[2018-08-08]
10-Q	[2018-05-08]
10-K	[2018-02-23]
10-Q	[2017-11-09]
10-Q	[2017-08-07]
10-Q	[2017-05-09]
10-K	[2017-02-27]
10-Q	[2016-11-09]
10-Q	[2016-08-09]
10-Q	[2016-05-10]
10-K	[2016-02-26]
10-Q	[2015-11-09]
10-Q	[2015-08-10]
10-Q	[2015-05-07]
10-K	[2015-02-27]
10-Q	[2014-11-10]
10-Q	[2014-08-08]
10-Q	[2014-05-08]
10-K	[2014-03-03]
10-Q	[2013-11-08]
10-Q	[2013-08-08]
10-Q	[2013-05-08]
10-K	[2013-03-07]
10-Q	[2012-11-09]
10-Q	[2012-08-06]
10-Q	[2012-05-07]
10-K	[2012-03-01]

AMERICAN EQUITY INVESTMENT LIFE HOLDING CO [AEL-PB] Filings

AMERICAN EQUITY INVESTMENT LIFE HOLDING CO [AEL] Filings

AMERICAN EQUITY INVESTMENT LIFE HOLDING CO [AEL-PA] Filings