Published: November 08, 2010
American Equity Reports Third Quarter 2010 Operating Earnings of $27.6 Million or $0.45 Per Diluted Common Share
WEST DES MOINES, Iowa - (BUSINESS WIRE) - American Equity Investment Life Holding Company (NYSE: AEL), a leading
underwriter of index and fixed rate annuities, reported 2010 third
quarter operating income1 of $27.6 million, or $0.45 per
diluted common share, a 2% decrease compared to 2009 third quarter
operating income of $28.2 million, or $0.47 per common diluted share.
Highlights for the third quarter of 2010 and the first nine months of
2010 include:
-
American Equity's annuity sales (before coinsurance) increased 12% to
$3.1 billion for the first nine months of 2010 compared to $2.8
billion for the same period in 2009.
-
Invested assets at September 30, 2010 increased 15% to $18.5 billion
compared to $16.1 billion at September 30, 2009.
-
Investment spread on annuity liabilities was 3.09% for the third
quarter of 2010 compared to 3.13% for the same period in 2009.
-
Book value per share including accumulated other comprehensive income
of increased to $18.03 compared to $13.08 at December 31, 2009.
Net income for the third quarter of 2010 was $20.5 million, compared to
a net loss of $3.0 million for the same period in 2009.
AMERICAN EQUITY ANNUITY SALES AT ALL TIME HIGHS
Sales of new
annuities reached record levels during the third quarter of 2010 with
average monthly sales volumes exceeding $400 million per month. The
increase in the pace of sales reflects continued high demand for safe
money products as a result of market volatility as well as the
relatively lower rates available on competing products such as bank
certificates of deposit. In addition, rate reductions by competitors
helped drive a higher volume of sales to American Equity. Finally, the
demise of Securities and Exchange Commission Rule 151A has lifted an
impediment to sales caused by the uncertainty surrounding the impact of
that Rule on the index annuity market. Commented David J. Noble, Founder
and Executive Chairman of American Equity: "Our commitment to quality
products, excellent service and long term relationships with producers
and policyholders is the key to our success in sales. Our commitment to
quality assets and disciplined spread management is the key to our
success in earnings. American Equity has never been in a better position
to capitalize on these strengths."
In light of the continued growth in sales, management of American Equity
is focused on maintaining its regulatory capital at a level which would
exceed that required to maintain its "A-" (Excellent) rating from A.M.
Best Company. At September 30, 2010, American Equity's risked based
capital ratio (RBC) is approximately 363%, and thus remains well above
the company's target.
INVESTMENT SPREAD REMAINS STABLE DESPITE LOW INTEREST RATES
American
Equity achieved an aggregate investment spread (defined as the yield on
invested assets over the cost of money on annuity liabilities) of 3.09%
for the third quarter of 2010 compared to 3.13% for the same period last
year. This decline was primarily due to a heightened level of short-term
and temporary cash investments which averaged $884 million during the
third quarter of 2010. Due to the low interest rate environment, calls
for redemption of bonds held by the company remained high in the third
quarter of 2010, with $1.8 billion in securities called, sold or prepaid
with an average yield of 6.06%. Purchases of new securities during the
third quarter of 2010 included fixed maturity securities aggregating
$2.3 billion at an average yield of 5.39%. During this period the
company also funded $66 million of new commercial mortgage loans at an
average yield of 6.42%. The average yield on invested assets for the
third quarter of 2010 was 5.98% compared to 6.38% for the same period
last year, reflecting the low levels of market rates currently available
as well as a general tightening of credit spreads. The impact of
short-term and temporary cash investments on the average yield was a
reduction of approximately 0.27% based on the average rates for new
investments made during the quarter.
The cost of money on annuity liabilities declined to 2.89% for the third
quarter of 2010 compared to 3.25% for the same period in 2009. This
decline is primarily due to lower costs on options purchased to fund
index credits on index annuities as well as gains received on options in
excess of crediting liabilities. The impact of gains on such over
hedging was approximately 0.11%. Adjusted for the impact on yield from
short-term and temporary cash investments and the impact on the cost of
money from over hedging, the aggregate investment spread for the third
quarter of 2010 would have been approximately 3.25%. Investment yield
and aggregate investment spread for the third quarter of 2010 also
included 0.06% from incremented prepayment income.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This press
release contains forward-looking statements within the meaning of The
Private Securities Litigation Reform Act of 1995. Forward-looking
statements relate to future operations, strategies, financial results or
other developments, and are subject to assumptions, risks and
uncertainties. Statements such as "guidance," "expect," "anticipate,"
"believe," "goal," "objective," "target," "may," "should," "estimate,"
"projects," or similar words as well as specific projections of future
results qualify as forward-looking statements. Factors that may cause
our actual results to differ materially from those contemplated
by these forward looking statements can be found in the company's Form
10-K filed with the Securities and Exchange Commission. Forward-looking
statements speak only as of the date the statement was made and the
company undertakes no obligation to update such forward-looking
statements. There can be no assurance that other factors not currently
anticipated by the company will not materially and adversely affect our
results of operations. Investors are cautioned not to place undue
reliance on any forward-looking statements made by us or on our behalf.
CONFERENCE CALL
American Equity will hold a conference call
to discuss third quarter 2010 earnings on Tuesday, November 9, 2010, at
10 a.m. CST. The conference call will be webcast live on the Internet.
Investors and interested parties who wish to listen to the call on the
Internet may do so at www.american-equity.com.
The call may also be accessed by telephone at 866-202-4683, passcode
87096638 (international callers, please dial 617-213-8846). An audio
replay will be available shortly after the call on AEL's web site. An
audio replay will also be available via telephone through November 30,
2010 by calling 888-286-8010, passcode 36295664 (international callers
will need to dial 617-801-6888).
ABOUT AMERICAN EQUITY
American Equity Investment Life
Holding Company, through its wholly-owned operating subsidiaries, is a
full service underwriter of annuity and life insurance products, with a
primary emphasis on the sale of index and fixed rate annuities. The
company's headquarters are located at 6000 Westown Parkway, West Des
Moines, Iowa, 50266. The mailing address of the company is: P.O. Box
71216, Des Moines, Iowa 50325.
1 In addition to net income, American Equity has consistently
utilized operating income, a non-GAAP financial measure commonly used in
the life insurance industry, as an economic measure to evaluate its
financial performance. See accompanying tables for the reconciliation of
net income (loss) to operating income and a description of reconciling
items. See the Company's Quarterly Report on Form 10-Q for a more
complete discussion of the reconciling items and their impact on net
income (loss) for the periods presented.
|
American Equity Investment Life Holding Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)/Operating Income (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
(Dollars in thousands, except per share data)
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
Traditional life and accident and health insurance premiums
|
|
|
$
|
3,181
|
|
|
$
|
3,166
|
|
|
$
|
9,111
|
|
|
$
|
9,519
|
|
|
Annuity product charges
|
|
|
|
18,538
|
|
|
|
15,835
|
|
|
|
52,673
|
|
|
|
47,501
|
|
|
Net investment income
|
|
|
|
260,475
|
|
|
|
241,471
|
|
|
|
758,230
|
|
|
|
688,928
|
|
|
Change in fair value of derivatives
|
|
|
|
93,980
|
|
|
|
121,507
|
|
|
|
(32,742
|
)
|
|
|
108,178
|
|
|
Net realized gains on investments, excluding other than
|
|
|
|
|
|
|
|
|
|
|
temporary impairment ("OTTI") losses
|
|
|
|
11,298
|
|
|
|
5,510
|
|
|
|
22,264
|
|
|
|
10,587
|
|
|
OTTI losses on investments:
|
|
|
|
|
|
|
|
|
|
|
Total OTTI losses
|
|
|
|
(2,160
|
)
|
|
|
(94,216
|
)
|
|
|
(16,347
|
)
|
|
|
(171,668
|
)
|
|
Portion of OTTI losses recognized in other comprehensive income
|
|
|
|
(1,830
|
)
|
|
|
49,641
|
|
|
|
8,316
|
|
|
|
108,012
|
|
|
Net OTTI losses recognized in operations
|
|
|
|
(3,990
|
)
|
|
|
(44,575
|
)
|
|
|
(8,031
|
)
|
|
|
(63,656
|
)
|
|
Gain (loss) on extinguishment of debt
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(292
|
)
|
|
|
3,098
|
|
|
Total revenues
|
|
|
|
383,482
|
|
|
|
342,914
|
|
|
|
801,213
|
|
|
|
804,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits and expenses:
|
|
|
|
|
|
|
|
|
|
|
Insurance policy benefits and change in future policy benefits
|
|
|
|
2,128
|
|
|
|
2,737
|
|
|
|
6,629
|
|
|
|
6,910
|
|
|
Interest sensitive and index product benefits
|
|
|
|
159,155
|
|
|
|
75,288
|
|
|
|
584,842
|
|
|
|
207,028
|
|
|
Amortization of deferred sales inducements
|
|
|
|
5,184
|
|
|
|
(8,081
|
)
|
|
|
21,516
|
|
|
|
17,814
|
|
|
Change in fair value of embedded derivatives
|
|
|
|
114,823
|
|
|
|
259,737
|
|
|
|
(11,513
|
)
|
|
|
414,636
|
|
|
Interest expense on notes payable
|
|
|
|
4,940
|
|
|
|
3,370
|
|
|
|
14,264
|
|
|
|
11,288
|
|
|
Interest expense on subordinated debentures
|
|
|
|
3,805
|
|
|
|
3,841
|
|
|
|
11,206
|
|
|
|
12,078
|
|
|
Interest expense on amounts due under repurchase agreements
|
|
|
|
-
|
|
|
|
100
|
|
|
|
-
|
|
|
|
344
|
|
|
Amortization of deferred policy acquisition costs
|
|
|
|
45,795
|
|
|
|
(2,972
|
)
|
|
|
73,980
|
|
|
|
44,938
|
|
|
Other operating costs and expenses
|
|
|
|
16,213
|
|
|
|
13,961
|
|
|
|
48,900
|
|
|
|
45,305
|
|
|
Total benefits and expenses
|
|
|
|
352,043
|
|
|
|
347,981
|
|
|
|
749,824
|
|
|
|
760,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
|
31,439
|
|
|
|
(5,067
|
)
|
|
|
51,389
|
|
|
|
43,814
|
|
|
Income tax expense (benefit)
|
|
|
|
10,925
|
|
|
|
(2,089
|
)
|
|
|
17,494
|
|
|
|
11,305
|
|
|
Net income (loss)
|
|
|
|
20,514
|
|
|
|
(2,978
|
)
|
|
|
33,895
|
|
|
|
32,509
|
|
|
Net realized gains and net OTTI losses on investments, net of offsets
|
|
|
|
(1,950
|
)
|
|
|
11,491
|
|
|
|
(4,308
|
)
|
|
|
10,954
|
|
|
Convertible debt retirement, net of income taxes
|
|
|
|
-
|
|
|
|
-
|
|
|
|
171
|
|
|
|
(1,520
|
)
|
|
Net effect of derivative and other index annuity, net of offsets
|
|
|
|
8,998
|
|
|
|
19,640
|
|
|
|
52,795
|
|
|
|
31,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (a)
|
|
|
$
|
27,562
|
|
|
$
|
28,153
|
|
|
$
|
82,553
|
|
|
$
|
73,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share
|
|
|
$
|
0.35
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.58
|
|
|
$
|
0.59
|
|
|
Earnings (loss) per common share - assuming dilution
|
|
|
$
|
0.33
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.56
|
|
|
$
|
0.57
|
|
|
Operating income per common share (a)
|
|
|
$
|
0.47
|
|
|
$
|
0.49
|
|
|
$
|
1.41
|
|
|
$
|
1.32
|
|
|
Operating income per common share - assuming dilution (a)
|
|
|
$
|
0.45
|
|
|
$
|
0.47
|
|
|
$
|
1.34
|
|
|
$
|
1.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share
|
|
|
|
58,564
|
|
|
|
58,030
|
|
|
|
58,422
|
|
|
|
55,462
|
|
|
Earnings per common share - assuming dilution
|
|
|
|
62,498
|
|
|
|
60,833
|
|
|
|
62,246
|
|
|
|
58,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
American Equity Investment Life Holding Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2010 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
Realized Gains
|
|
Derivative
|
|
|
|
|
|
|
|
|
and Convertible
|
|
and Other
|
|
Operating
|
|
|
|
|
As Reported
|
|
Debt
|
|
Index Annuity
|
|
Income (a)
|
|
|
|
|
(Dollars in thousands, except per share data)
|
|
Reserves:
|
|
|
|
|
|
|
|
|
|
|
Traditional life and accident and health insurance premiums
|
|
|
$
|
3,181
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,181
|
|
Annuity product charges
|
|
|
|
18,538
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,538
|
|
Net investment income
|
|
|
|
260,475
|
|
|
|
-
|
|
|
|
-
|
|
|
|
260,475
|
|
Change in fair value of derivatives
|
|
|
|
93,980
|
|
|
|
-
|
|
|
|
(76,885
|
)
|
|
|
17,095
|
|
Net realized gains on investments, excluding other than
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
temporary impairment ("OTTI") losses
|
|
|
|
11,298
|
|
|
|
(11,298
|
)
|
|
|
-
|
|
|
|
-
|
|
Net OTTI losses recognized in operations
|
|
|
|
(3,990
|
)
|
|
|
3,990
|
|
|
|
-
|
|
|
|
-
|
|
Total revenues
|
|
|
|
383,482
|
|
|
|
(7,308
|
)
|
|
|
(76,885
|
)
|
|
|
299,289
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits and expenses:
|
|
|
|
|
|
|
|
|
|
|
Insurance policy benefits and change in future policy benefits
|
|
|
|
2,128
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,128
|
|
Interest sensitive and index product benefits
|
|
|
|
159,155
|
|
|
|
-
|
|
|
|
(3,488
|
)
|
|
|
155,667
|
|
Amortization of deferred sales inducements
|
|
|
|
5,184
|
|
|
|
(1,991
|
)
|
|
|
21,749
|
|
|
|
24,942
|
|
Change in fair value of embedded derivatives
|
|
|
|
114,823
|
|
|
|
-
|
|
|
|
(113,340
|
)
|
|
|
1,483
|
|
Interest expense on notes payable
|
|
|
|
4,940
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,940
|
|
Interest expense on subordinated debentures
|
|
|
|
3,805
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,805
|
|
Amortization of deferred policy acquisition costs
|
|
|
|
45,795
|
|
|
|
(2,295
|
)
|
|
|
4,254
|
|
|
|
47,754
|
|
Other operating costs and expenses
|
|
|
|
16,213
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,213
|
|
Total benefits and expenses
|
|
|
|
352,043
|
|
|
|
(4,286
|
)
|
|
|
(90,825
|
)
|
|
|
256,932
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
|
31,439
|
|
|
|
(3,022
|
)
|
|
|
13,940
|
|
|
|
42,357
|
|
Income tax expense
|
|
|
|
10,925
|
|
|
|
(1,072
|
)
|
|
|
4,942
|
|
|
|
14,795
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
20,514
|
|
|
$
|
(1,950
|
)
|
|
$
|
8,998
|
|
|
$
|
27,562
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share
|
|
|
$
|
0.35
|
|
|
|
|
|
|
$
|
0.47
|
|
Earnings per common share - assuming dilution
|
|
|
$
|
0.33
|
|
|
|
|
|
|
$
|
0.45
|
|
|
|
|
|
|
|
|
(a) In addition to net income (loss), we have consistently
utilized operating income, operating income per common share and
operating income per common share - assuming dilution, non-GAAP
financial measures commonly used in the life insurance industry,
as economic measures to evaluate our financial performance.
Operating income equals net income (loss) adjusted to eliminate
the impact of net realized gains and losses on investments
including net OTTI losses recognized in operations and related
deferred tax valuation allowance, gain (loss) on extinguishment of
convertible debt, fair value changes in derivatives and embedded
derivatives and the Lehman counterparty default on expired call
options. Because these items fluctuate from quarter to quarter in
a manner unrelated to core operations, we believe measures
excluding their impact are useful in analyzing operating trends.
We believe the combined presentation and evaluation of operating
income together with net income (loss), provides information that
may enhance an investor's understanding of our underlying results
and profitability.
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American Equity Investment Life Holding Company
Wendy C.
Waugaman, 515-457-1824
Chief Executive Officer
wcwaugaman@american-equity.com
or
John
M. Matovina, 515-457-1813
Chief Financial Officer
jmatovina@american-equity.com
or
Julie
L. LaFollette, 515-273-3602
Director of Investor Relations
jlafollette@american-equity.com
or
Debra
J. Richardson, 515-273-3551
Chief Administrative Officer
drichardson@american-equity.com
Copyright © 2012, Business Wire, Inc., All rights reserved. Copyright © 2012, NewsBlaze, Daily News
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