Core Insights - Zacks Premium offers various tools for investors to enhance their stock market engagement and confidence [1] - The Zacks Style Scores are designed to help investors identify stocks with the highest potential for market outperformance over the next 30 days [1] Zacks Style Scores - **Value Score**: Focuses on identifying undervalued stocks using financial ratios like P/E, PEG, and Price/Sales [2] - **Growth Score**: Concentrates on a company's financial health and future growth potential, analyzing projected and historical earnings, sales, and cash flow [2] - **Momentum Score**: Targets stocks experiencing upward or downward trends, utilizing factors like price changes and earnings estimate revisions [2] - **VGM Score**: A composite score that combines Value, Growth, and Momentum Scores to identify stocks with the best overall characteristics [3] Zacks Rank - The Zacks Rank is a proprietary model that leverages earnings estimate revisions to guide investors in stock selection [4] - Stocks rated 1 (Strong Buy) have historically delivered an average annual return of +25.41% since 1988, significantly outperforming the S&P 500 [4] - The model categorizes over 800 stocks, making it essential for investors to filter based on their specific goals [4] Investment Strategy - To maximize returns, investors should focus on stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B [5] - Stocks with lower ranks, even if they have good Style Scores, may still face downward price pressure due to negative earnings outlooks [5] Company Spotlight: American Equity Investment (AEL) - American Equity Investment Life Insurance Company specializes in fixed index and fixed rate annuity products [6] - AEL currently holds a Zacks Rank of 3 (Hold) and has a VGM Score of A, indicating solid performance potential [6] - The company has seen a 0.4% increase in shares over the past four weeks, with positive earnings estimate revisions for fiscal 2023 [6][7]

designer491 Macro: In the 1970s Fed Chairman Arthur Burns, under pressure from President Nixon who was trying to get re-elected, cut interest rates. With the US off the gold standard, the result was a reignition of US Dollar inflation that plagued the rest of that decade. History may not repeat itself, but as Mark Twain said, "it often rhymes". In fact, so far it appears to be doing so. CPI history repeats (apolloacademy.com) The 2014 - 2024 inflation rate seems to be highly correlated with the 1966 - 1976 ...

UNITED STATES FORM 10-Q ☐ 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 (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, 2023 OR SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 American Equity Investment Life Holding Company (Exact name of registrant as specified in its char ...

Financial Performance - Total revenues for the three months ended June 30, 2023, were $851,639 thousand, a decrease from $1,514,187 thousand for the same period in 2022, reflecting a decline of about 43.7%[17] - Net income available to common stockholders for the three months ended June 30, 2023, was $344,444 thousand, down from $752,374 thousand in the same period of 2022, indicating a decrease of approximately 54.2%[17] - Earnings per common share for the three months ended June 30, 2023, were $4.43, compared to $8.13 for the same period in 2022, a decline of about 45.8%[17] - Net income for the three months ended June 30, 2023, was $355,146, compared to $763,289 for the same period in 2022, representing a decrease of approximately 53.5%[20] - For the six months ended June 30, 2023, net income was $199,255, down from $1,442,754 in the same period of 2022, indicating a decline of approximately 86.2%[20] - Net income available to common stockholders for the six months ended June 30, 2023, was $177.53 million, with earnings per common share of $2.20[159] - Net investment income of $542,685 thousand for the three months ended June 30, 2023, down from $592,308 thousand in the same period of 2022, a decrease of approximately 8.4%[17] - The company reported net realized losses on investments of $52,466 for the six months ended June 30, 2023, compared to $46,399 for the same period in 2022[93] Assets and Liabilities - Total assets increased to $77,645,425 thousand as of June 30, 2023, compared to $73,183,599 thousand as of December 31, 2022, representing a growth of approximately 6.7%[11] - Total liabilities increased to $75,050,384 thousand as of June 30, 2023, from $70,812,849 thousand as of December 31, 2022, reflecting an increase of about 5.2%[13] - Cash and cash equivalents rose significantly to $5,000,657 thousand as of June 30, 2023, compared to $1,919,669 thousand as of December 31, 2022, representing an increase of about 160.5%[11] - The balance of stockholders' equity as of June 30, 2023, was $2,595,041, a decrease from $3,627,547 as of June 30, 2022[24] Investment Performance - The company reported a change in net unrealized investment losses of $(421,329) for the three months ended June 30, 2023, compared to $(3,419,845) for the same period in 2022[20] - The company experienced a change in fair value of embedded derivatives amounting to $618,204 for the six months ended June 30, 2023, compared to a loss of $(2,279,633) in 2022[31] - The fair value of fixed index annuities embedded derivatives was $5,014,697 thousand as of June 30, 2023, compared to $5,836,312 thousand as of December 31, 2022, indicating a decline of about 14%[86] - The total fair value of fixed maturity securities available for sale was $32,323,907 as of June 30, 2023, with unrealized losses of $4,812,561[89] Policy Benefits and Reserves - Policy benefit reserves increased to $59,856,677 thousand as of June 30, 2023, from $58,781,836 thousand as of December 31, 2022, marking an increase of approximately 1.8%[13] - The liability for future policy benefits decreased to $309,234 thousand as of June 30, 2023, down from $318,677 thousand at the end of 2022, with a net liability after reinsurance recoverable of $327,521 thousand[140] - The expected future benefit payments for SPIA with life contingency are projected at $453,722 thousand as of June 30, 2023, compared to $467,627 thousand at the end of 2022[141] Shareholder Activities - The Company approved a share repurchase program totaling $900 million, with $500 million authorized on November 19, 2021, and an additional $400 million on November 11, 2022, to offset dilution from share issuance[164] - As of June 30, 2023, the Company repurchased approximately 31.2 million shares at an average price of $34.76 per share, with $276 million remaining under the share repurchase program[166] - Brookfield Asset Management acquired a 19.9% ownership interest in the Company, with an initial purchase of 9.9% at $37.00 per share and a subsequent purchase of 6,775,000 shares at $37.33 per share, resulting in total ownership of approximately 16%[163] Market Conditions and Risks - S&P placed all ratings for the Company on negative watch due to the merger announcement, while Fitch affirmed its "A-" financial strength rating and revised its outlook to "stable"[180][181] - The company has a diversified counterparty risk management strategy, purchasing derivatives from multiple counterparties with a minimum credit rating of A-[134] - The maximum credit exposure to any single counterparty is subject to concentration limits, with a total derivative collateral of $1.1 billion as of June 30, 2023, limiting potential economic loss to $68.5 million[135] Annuity and Investment Products - Total sales increased to $3.4 billion in the first half of 2023, with fixed index annuities representing $2.8 billion, and second-quarter sales of $2.0 billion, a 95% increase in fixed index annuity sales compared to the first quarter[179] - Annuity deposits for fixed index annuities reached $1.87 billion in Q2 2023, a 141% increase from $776 million in Q2 2022[186] - Withdrawals from annuity policies subject to surrender charges increased significantly to $600.1 million in Q2 2023 and $1,060.9 million for the six months ended June 30, 2023 compared to $190.1 million and $457.5 million for the same periods in 2022[196]

Financial Performance - Total revenues for the three months ended March 31, 2023, were $662,548 thousand, a significant increase from $148,027 thousand in the same period of 2022[18]. - Net income (loss) available to American Equity Investment Life Holding Company common stockholders for the three months ended March 31, 2023, was $(166,913) thousand, compared to $668,546 thousand in the same period of 2022[18]. - The company reported total benefits and expenses of $854,447 thousand for the three months ended March 31, 2023, compared to $(716,633) thousand in the same period of 2022[18]. - Net income for the three months ended March 31, 2023, was a loss of $155,891 thousand, compared to a net income of $679,465 thousand for the same period in 2022, representing a significant decline[22]. - Comprehensive income for the three months ended March 31, 2023, was $553,910 thousand, compared to a comprehensive loss of $2,086,592 thousand for the same period in 2022[22]. - Earnings (loss) per common share for the three months ended March 31, 2023, was $(2.00), compared to $6.90 for the same period in 2022[18]. Assets and Liabilities - Total assets as of March 31, 2023, were $74,495,726 thousand, up from $73,183,599 thousand as of December 31, 2022[14]. - Total liabilities increased to $71,866,917 thousand as of March 31, 2023, compared to $70,812,849 thousand as of December 31, 2022[14]. - Total stockholders' equity attributable to American Equity Investment Life Holding Company increased to $2,605,485 thousand as of March 31, 2023, from $2,349,517 thousand as of December 31, 2022[14]. - Total stockholders' equity increased to $2,628,809 thousand as of March 31, 2023, from $2,370,750 thousand as of December 31, 2022[26]. Investment Income and Performance - The company reported net investment income of $561,323 thousand for the three months ended March 31, 2023, down from $567,423 thousand in the same period of 2022[18]. - The change in fair value of derivatives for the three months ended March 31, 2023, was $45,890 thousand, compared to $(477,519) thousand in the same period of 2022[18]. - The company reported realized gains on investments of $27,787 thousand for the three months ended March 31, 2023, compared to $13,127 thousand for the same period in 2022, indicating improved investment performance[29]. - The company reported total purchases and sales, net of $(26.3) million for fixed maturity securities during the reporting period[85]. - The company expects to recover amortized cost on all securities except those with recognized credit loss allowances, indicating a strong outlook for investment recovery[107]. Cash Flow and Liquidity - The company reported a net cash provided by operating activities of $865,043 thousand for the three months ended March 31, 2023, compared to $99,932 thousand for the same period in 2022, indicating a substantial increase[29]. - Cash and cash equivalents at the end of the period rose to $2,777,852, compared to $1,933,899 at the end of the previous year, reflecting improved liquidity[33]. - Net cash used in financing activities was $(811,361), compared to $(228,777) in the prior year, indicating increased cash outflows[33]. Policy Reserves and Benefits - Policy benefit reserves amounted to $59,019,189 thousand as of March 31, 2023, compared to $58,781,836 thousand as of December 31, 2022[14]. - The liability for future policy benefits was adjusted to $408,750 as of January 1, 2021, reflecting changes in accounting standards[40]. - The market risk benefits (MRBs) liability decreased to $2,225,484 post-adoption of new accounting standards, down from $2,547,231[42]. - Deferred policy acquisition costs increased to $3,408,505 post-adoption, up from $2,225,199, indicating higher costs associated with policy acquisition[43]. Derivatives and Fair Value Measurements - The company categorizes its financial instruments into three levels of fair value hierarchy, with Level 1 representing quoted prices in active markets for identical assets[53]. - The fair value of corporate securities as of March 31, 2023, is $23,401,001 thousand, a decrease from $24,161,921 thousand as of December 31, 2022[57]. - The total fair value of assets measured at fair value on a recurring basis as of March 31, 2023, is $46,041,671 thousand, compared to $45,024,575 thousand as of December 31, 2022[57]. - The fair value of fixed index annuities' embedded derivatives is estimated using projected policy contract values and minimum guaranteed contract values, with an expected cost of annual call options at 2.40% as of both March 31, 2023, and December 31, 2022[80]. Mortgage Loans and Credit Losses - The commercial mortgage loans outstanding principal was $3,570,314,000, showing an increase from $3,560,903,000 as of December 31, 2022[125]. - The agricultural mortgage loans outstanding principal increased to $609,026,000 from $567,630,000 as of December 31, 2022[128]. - The residential mortgage loans outstanding principal rose to $3,011,666,000 from $2,807,652,000 as of December 31, 2022[128]. - The ending allowance balance for credit losses increased to $45,626 thousand as of March 31, 2023, compared to $29,269 thousand as of March 31, 2022, reflecting a change in provision for credit losses of $8,654 thousand[133]. Variable Interest Entities (VIEs) - Consolidated Variable Interest Entities (VIEs) include real estate investments totaling $2,289,365 thousand as of March 31, 2023, with total liabilities of $127,519 thousand[153]. - The total carrying amounts of consolidated VIE assets increased from $1,782,266 thousand in December 31, 2022, to $2,289,365 thousand in March 31, 2023[153]. - The company has determined it is the primary beneficiary of various VIEs due to significant ownership and control over the entities[150]. Market Risk Benefits and Assumptions - The fair value of market risk benefits is reported at $2,225,621 thousand[201]. - The utilization assumption for policyholders is in the range of 0.04% - 78.75%, with a weighted average of 4.24%[201]. - The option budget assumption is projected between 1.65% - 2.50%, with a weighted average of 2.31%[201]. - Changes in significant inputs and assumptions during 2022 impacted the fair value measurement of market risk benefits[204].

Distribution Network - In 2022, agents contracted through four national marketing organizations accounted for approximately 58% of the annuity deposits and insurance premiums collected[41]. - American Equity Life has relationships with 50 national marketing organizations, through which nearly 28,638 independent agents are under contract[40]. - The company is pursuing a strategy to increase the efficiency of its independent agent distribution network by strengthening relationships with key IMOs[40]. - Eagle Life has 102 broker-dealer/firm selling agreements, with nearly 12,050 representatives appointed to distribute fixed index and fixed rate annuities[42]. - The company emphasizes high-quality service and prompt commission payments to agents, which is crucial for building strong distribution relationships[38]. Reinsurance Agreements - The company ceded $4.3 billion of certain in-force fixed indexed and fixed rate annuity product liabilities to AeBe ISA LTD under a reinsurance agreement effective October 1, 2022[57]. - Under the North End Re reinsurance treaty, American Equity Life is ceding 75% of certain fixed index annuities issued after July 1, 2021, with 70% on a modified coinsurance basis and 30% on a coinsurance basis[55]. - American Equity Life received a closing ceding commission of $70 million upon the execution of the reinsurance agreement with AeBe[57]. - The reinsurance agreement with AeBe includes a 75% funds withheld coinsurance and 25% coinsurance structure[57]. - American Equity Life entered into a reinsurance agreement with North End Re, ceding 70% of certain fixed indexed annuity product liabilities[54]. - The North End Re reinsurance treaty includes an annual ceding commission of 49 basis points and a management fee of 30 basis points[54]. - American Equity Life has three coinsurance agreements with Athene Life Re, covering various percentages of fixed index and multi-year rate guaranteed annuities[52]. - The company remains liable to policyholders for ceded liabilities should reinsurers fail to meet their obligations[58]. Financial Strength and Capital Management - A.M. Best, S&P, and Fitch have assigned American Equity Life a financial strength rating of A- with a stable outlook[45]. - American Equity Life has a statutory earned surplus of $2.0 billion as of December 31, 2022, allowing for dividend distributions of up to $369.3 million without prior regulatory approval in 2023[64]. - The ratio of total adjusted capital to the highest level at which regulatory action might be initiated was 415% as of December 31, 2022, indicating strong capital adequacy[69]. - American Equity Life's financial strength ratings are subject to periodic reviews and may change based on market conditions[49]. - The company can distribute up to $369.3 million as dividends without prior approval from the Iowa Insurance Commissioner in 2023[64]. Regulatory Environment - The company is subject to various state regulations regarding the payment of dividends and distributions, which are limited to statutory net gain from operations or a percentage of statutory surplus[64]. - The Financial Accounting Standards Board's revised guidance on long-duration insurance contracts will be effective for the company on January 1, 2023, impacting cash flow assumptions and liability calculations[75]. - The Iowa Insurance Division completed financial examinations of American Equity Life and Eagle Life for the five-year period ending December 31, 2018, with no adjustments made to their statutory financial statements[63]. - The company is subject to regulatory developments regarding insurer solvency and market conduct, which may affect its operations and financial stability[84]. - The NAIC's risk-based capital requirements serve as an early warning tool for regulators to identify weakly capitalized insurance companies[68]. Employee and Workforce Management - The company employs approximately 840 full-time team members as of December 31, 2022, with no employees covered by a collective bargaining agreement[89]. - Over 85% of employees chose coverage through the company's medical plan in 2022, with the company paying an average of 84% of participating employees' monthly medical premiums[91]. - The company matches 100% of team member contributions to the 401(k) plan up to 3% of eligible compensation and 50% up to the next 2%[92]. - Employees participated in thousands of hours of training through the Academy for Excellence and LinkedIn Learning in 2022[93]. Market and Economic Risks - The outbreak of COVID-19 has significantly disrupted distribution channels and may continue to affect economic activity and demand for the company's products[81]. - Rising interest rates may lead to increased policy surrenders, affecting net cash outflows and requiring asset sales at potentially disadvantaged prices[102]. - The company may face risks related to interest rate changes, which could impact investment spreads and policyholder behavior[101]. - Economic and capital markets may face downturns due to inflation, recession, and geopolitical conflicts, potentially impacting investment portfolio performance[120]. Competition and Market Position - The company faces significant competition from larger firms with greater financial resources and diversified product lines, which may impact customer choices[113]. - The company operates in a highly competitive industry, with its products competing against various alternatives offered by other financial institutions[43]. Compliance and Legal Risks - Increased litigation and regulatory scrutiny may arise, impacting compliance with insurance and securities laws[127]. - The SEC has proposed new climate-related disclosure rules that may significantly impact the company, requiring disclosures on governance of climate-related risks and greenhouse gas emissions[87]. - Changes in laws, regulations, and accounting standards may affect the company's operations and financial reporting[128]. - Climate change and related regulations may impact investment values and increase regulatory focus on climate-related risks[132].

Financial Position - Total assets decreased to $70,184,997 thousand as of September 30, 2022, down from $78,349,109 thousand as of December 31, 2021, representing a decline of approximately 10.4%[8] - Total liabilities decreased to $66,974,369 thousand as of September 30, 2022, compared to $72,025,982 thousand as of December 31, 2021, a reduction of about 7.1%[8] - Policy benefit reserves were $61,137,017 thousand as of September 30, 2022, down from $65,477,778 thousand as of December 31, 2021, indicating a decrease of approximately 6.4%[8] - Total stockholders' equity attributable to American Equity Investment Life Holding Company decreased to $3,207,698 thousand in 2022 from $6,323,127 thousand in 2021, a decline of about 49.3%[8] - Total stockholders' equity as of September 30, 2022, was $3,210,628, a decrease from $6,375,208 as of September 30, 2021, reflecting a decline of approximately 50%[24] Cash and Cash Equivalents - Cash and cash equivalents fell to $1,808,132 thousand in 2022 from $4,508,982 thousand in 2021, a significant drop of about 59.9%[8] - Cash and cash equivalents at the end of the period were $1,808,132, down from $12,684,793 at the end of the same period in 2021, marking a decrease of approximately 86%[30] - Cash and cash equivalents were reported at $1,808.1 million as of September 30, 2022, compared to $4,509.0 million as of December 31, 2021, indicating a decrease of about 60%[51] Income and Earnings - Net income for the three months ended September 30, 2022, was $312,601, representing a 104.5% increase from $152,865 in the same period of 2021[16] - For the nine months ended September 30, 2022, net income was $1,239,400, compared to $380,855 for the same period in 2021, representing an increase of approximately 226%[27] - Net investment income increased to $609,737 for the three months ended September 30, 2022, up 15.8% from $526,366 in the prior year[12] - Earnings per common share for the three months ended September 30, 2022, were $3.44, compared to $1.53 for the same period in 2021, reflecting a 125.5% increase[12] Investment Performance - The company reported accrued investment income of $516,649 thousand in 2022, up from $445,097 thousand in 2021, an increase of about 16%[8] - The company experienced a significant change in the fair value of embedded derivatives, resulting in a loss of $2,695,007 for the nine months ended September 30, 2022, compared to a loss of $545,104 in the same period of 2021[27] - The fair value of corporate securities was $26,894.1 million as of September 30, 2022, down from $34,660.2 million as of December 31, 2021, representing a decline of approximately 22%[51] - The total unrealized losses on corporate securities as of September 30, 2022, were $(4.10) billion[92] Credit Losses and Provisions - The allowance for credit losses on mortgage loans increased to $35,604 thousand in 2022 from $24,024 thousand in 2021, representing a rise of approximately 48.1%[8] - The company reported a net credit loss provision release of $1.49 million for the three months ended September 30, 2022[96] - The total amount of credit losses not previously recorded added to the allowance was $439,000 for the period[108] - The company maintains a valuation allowance believed adequate to absorb estimated expected credit losses based on amortized cost[119] Derivatives and Hedging - The company entered into interest rate swaps designated as fair value hedges in Q2 2022, with hedge accounting applied to offset changes in fair value of the hedged assets[37] - Derivative instruments designated as hedging instruments include interest rate swaps with a notional value of $408,369 thousand and a fair value of $32,620 thousand as of September 30, 2022[151] - The company reported a net loss of $25,747 thousand related to interest rate swaps for the three months ended September 30, 2022[157] Shareholder Actions - The company has repurchased approximately 22.7 million shares of common stock at an average price of $34.63 per share since the inception of the share repurchase program in 2020, with $213 million remaining under the program as of September 30, 2022[181] - Dividends paid on Series A and Series B preferred stock totaled $5.9 million and $5.0 million for the three months ended September 30, 2022, respectively[178] Strategic Initiatives - The company has established a strategy called AEL 2.0, focusing on investment management and capital structure to enhance profitability and operational efficiency[193] - The company plans to migrate to a capital-efficient business model with increased fee-like earnings and scale investments into higher returning private assets[197] - Fitch affirmed an "A-" financial strength rating for the company and revised its outlook to "stable" from "negative" on its financial strength ratings[199]

Financial Performance - Total revenues for the three months ended June 30, 2022, were $121,395, a significant decrease from $1,075,440 in the same period of 2021[12]. - The company reported a net income of $360,576 for the three months ended June 30, 2022, compared to a net loss of $(54,694) in the same period of 2021[12]. - Earnings per common share for the three months ended June 30, 2022, were $3.78, a recovery from a loss of $(0.69) in the same quarter of the previous year[12]. - For the six months ended June 30, 2022, net income was $926,799, compared to $227,990 for the same period in 2021, representing an increase of approximately 307%[24]. - The company reported a net income of $349.7 million for the three months ended June 30, 2022, compared to a net loss of $65.6 million for the same period in 2021[173]. - Net income available to common stockholders increased to $349.7 million in Q2 2022, compared to a loss of $(65.6) million in Q2 2021[200]. - For the six months ended June 30, 2022, net income available to common stockholders rose to $905.0 million from $206.2 million in the same period of 2021[200]. Assets and Liabilities - Total assets decreased from $78,349,109 thousand as of December 31, 2021, to $71,663,266 thousand as of June 30, 2022, representing a decline of approximately 8.6%[8]. - Total liabilities decreased from $72,025,982 thousand to $67,779,880 thousand, a reduction of about 5.2%[8]. - Total stockholders' equity attributable to American Equity Investment Life Holding Company decreased from $6,323,127 thousand to $3,882,217 thousand, a significant drop of about 38.6%[8]. - Cash and cash equivalents decreased from $4,508,982 thousand to $1,287,225 thousand, a decline of approximately 71.5%[8]. - Total investments decreased from $60,376,504 thousand to $54,537,816 thousand, a decline of about 9.7%[8]. - The company reported a total stockholders' equity of $5,172,170 as of June 30, 2022, compared to $5,928,760 at the same time in 2021[20]. - Total stockholders' equity as of June 30, 2022, was $3,883,386, a decrease from $6,323,127 at the end of 2021, reflecting a decline of about 38.6%[24]. Investment Performance - Net investment income increased to $592,308 for the three months ended June 30, 2022, compared to $499,320 in the prior year, reflecting a growth of approximately 18%[12]. - The average yield on invested assets increased to 4.33% for the three months ended June 30, 2022, compared to 3.51% for the same period in 2021[195]. - The investment spread measured in dollars was $362.5 million for Q2 2022, up from $277.2 million in Q2 2021[202]. - The aggregate investment spread improved to 2.64% for the three months ended June 30, 2022, up from 1.95% in the prior year[195]. - Investment income for Q2 2022 was positively impacted by strong returns on partnerships and other mark-to-market assets[202]. Changes in Reserves and Derivatives - Policy benefit reserves decreased from $65,477,778 thousand to $62,280,575 thousand, reflecting a decline of approximately 3.4%[8]. - The company reported a significant change in the fair value of embedded derivatives, with a loss of $2,279,633 for the six months ended June 30, 2022, compared to a loss of $8,700 in 2021[27]. - The fair value of the embedded derivative component of fixed index annuity policy benefit reserves is based on projected policy contract values and minimum guaranteed contract values[70]. - The total liabilities for fixed index annuities - embedded derivatives, net, were $5,836,312,000 as of June 30, 2022[150]. - The net change in fair value of derivatives not designated as hedging instruments for the six months ended June 30, 2022, was $(977,378,000)[159]. Shareholder Activities - The company has repurchased approximately 18.5 million shares at an average price of $34.20 per share since the inception of the share repurchase program[178]. - As of June 30, 2022, the company had $367 million remaining under its share repurchase program[178]. - The company issued $500 million in senior unsecured notes due 2027, bearing interest at 5.0% per year[167]. - The company paid dividends totaling $6.0 million and $4.9 million on Series A and Series B preferred stock, respectively, for the three months ended June 30, 2022[175]. - An additional 6,775,000 shares were issued to Brookfield at $37.33 per share, increasing Brookfield's ownership to approximately 16% of the company's common stock[193]. Credit Quality and Loan Performance - The company maintains a valuation allowance based on estimated expected credit losses, which is believed to be adequate by management[118]. - The allowance for credit losses was $6.2 million as of June 30, 2022, reflecting the company's assessment of potential credit risks[92]. - The company utilizes structured product models to assess potential credit losses, incorporating cash flow projections and security seniority[102]. - The average loan-to-value (LTV) ratio for commercial mortgage loans was 62% as of June 30, 2022, compared to 54% for the previous year[128]. - The company reported no charge-offs for the periods reviewed, indicating stable credit quality[121].

PART I — FINANCIAL INFORMATION [Item 1: Financial Statements](index=4&type=section&id=Item%201%3A%20Financial%20Statements) This section presents the unaudited consolidated financial statements, covering balance sheets, operations, comprehensive loss, equity changes, cash flows, and detailed notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased by **$3.45 billion** to **$74.90 billion**, while total liabilities decreased by **$2.30 billion** to **$69.73 billion**, leading to a **$1.15 billion** reduction in stockholders' equity | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | Change (in thousands) | | :----- | :---------------------------- | :------------------------------- | :-------------------- | | Total Assets | $74,899,344 | $78,349,109 | $(3,449,765) | | Total Liabilities | $69,727,174 | $72,025,982 | $(2,298,808) | | Total Stockholders' Equity | $5,172,170 | $6,323,127 | $(1,150,957) | | Fixed maturity securities, available for sale | $49,662,120 | $51,305,943 | $(1,643,823) | | Cash and cash equivalents | $1,933,899 | $4,508,982 | $(2,575,083) | | Policy benefit reserves | $63,730,995 | $65,477,778 | $(1,746,783) | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Net income significantly increased by **$283.5 million** to **$566.2 million**, despite a substantial **$814.4 million** decrease in total revenues, primarily due to changes in derivative fair values | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | | :----- | :------------------ | :------------------ | :-------------------- | | Total Revenues | $147,799 | $962,207 | $(814,408) | | Total Benefits and Expenses | $(573,516) | $600,988 | $(1,174,504) | | Net Income | $566,223 | $282,684 | $283,539 | | Net Income available to common stockholders | $555,304 | $271,765 | $283,539 | | Earnings per common share | $5.73 | $2.84 | $2.89 | | Change in fair value of derivatives | $(477,519) | $396,305 | $(873,824) | | Change in fair value of embedded derivatives | $(1,393,649) | $(282,413) | $(1,111,236) | [Consolidated Statements of Comprehensive Loss](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) The company reported a comprehensive loss of **$1.22 billion**, an **$803.2 million** increase from the prior year, driven by a significant **$1.79 billion** other comprehensive loss | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | | :----- | :------------------ | :------------------ | :-------------------- | | Net Income | $566,223 | $282,684 | $283,539 | | Other comprehensive loss | $(1,785,083) | $(698,297) | $(1,086,786) | | Comprehensive Loss | $(1,218,860) | $(415,613) | $(803,247) | [Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Total stockholders' equity decreased by **$1.15 billion** to **$5.17 billion**, primarily due to a **$1.79 billion** other comprehensive loss, partially offset by net income and common stock issuance | Metric | Balance at Dec 31, 2021 (in thousands) | Balance at Mar 31, 2022 (in thousands) | Change (in thousands) | | :----- | :------------------------------------- | :------------------------------------- | :-------------------- | | Total Stockholders' Equity | $6,323,127 | $5,172,170 | $(1,150,957) | | Net income for period | — | $566,223 | $566,223 | | Other comprehensive loss | — | $(1,785,083) | $(1,785,083) | | Issuance of common stock | — | $251,538 | $251,538 | | Treasury stock acquired, common | — | $(179,396) | $(179,396) | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities decreased by **$371.9 million**, while investing activities shifted from providing **$120.7 million** to using **$2.45 billion**, resulting in a **$2.58 billion** decrease in cash and cash equivalents | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | | :----- | :------------------ | :------------------ | :-------------------- | | Net cash provided by operating activities | $99,932 | $471,881 | $(371,949) | | Net cash provided by (used in) investing activities | $(2,446,238) | $120,729 | $(2,566,967) | | Net cash provided by (used in) financing activities | $(228,777) | $1,398,993 | $(1,627,770) | | Increase (decrease) in cash and cash equivalents | $(2,575,083) | $1,991,603 | $(4,566,686) | | Cash and cash equivalents at end of period | $1,933,899 | $11,087,125 | $(9,153,226) | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations of significant accounting policies, fair value measurements, investments, mortgage loans, variable interest entities, derivatives, notes payable, commitments, and earnings per share [Note 1. Significant Accounting Policies](index=10&type=section&id=Note%201.%20Significant%20Accounting%20Policies) This note outlines the basis of financial statement presentation, including GAAP compliance, VIE consolidation, management estimates, FHLB membership, and the impact of a new accounting pronouncement on long-duration contracts - The company's consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and include variable interest entities (VIEs) where the company is the primary beneficiary[29](index=29&type=chunk) - American Equity Investment Life Insurance Company became a member of the Federal Home Loan Bank (FHLB) in Q1 2022, gaining access to collateralized borrowings and funding agreements, which require pledging qualified assets as collateral[30](index=30&type=chunk) - A new FASB ASU, effective January 1, 2023 (transition date January 1, 2021), will revise measurement models and disclosure requirements for long-duration insurance and investment contracts, including fair value measurement for 'market risk benefits' and simplified amortization for deferred policy acquisition costs and sales inducements. The company is evaluating its impact[31](index=31&type=chunk) [Note 2. Fair Values of Financial Instruments](index=11&type=section&id=Note%202.%20Fair%20Values%20of%20Financial%20Instruments) This note details fair value measurements using a three-level hierarchy, compares carrying amounts to fair values, and reconciles Level 3 assets and liabilities, highlighting significant changes in fixed index annuities embedded derivatives | Metric | March 31, 2022 Carrying Amount (in thousands) | March 31, 2022 Fair Value (in thousands) | December 31, 2021 Carrying Amount (in thousands) | December 31, 2021 Fair Value (in thousands) | | :----- | :-------------------------------------------- | :--------------------------------------- | :----------------------------------------------- | :------------------------------------------ | | Fixed maturity securities, available for sale | $49,662,120 | $49,662,120 | $51,305,943 | $51,305,943 | | Mortgage loans on real estate | $5,734,872 | $5,792,356 | $5,687,998 | $5,867,227 | | Derivative instruments | $642,413 | $642,413 | $1,277,480 | $1,277,480 | | Policy benefit reserves | $63,342,037 | $56,478,030 | $65,076,041 | $56,375,076 | | Fixed index annuities - embedded derivatives | $6,770,915 | $6,770,915 | $7,964,961 | $7,964,961 | - The fair value hierarchy categorizes financial instruments into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (significant unobservable inputs requiring management judgment)[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :----- | :------------------ | :------------------ | | Fixed index annuities - embedded derivatives (Beginning balance) | $7,964,961 | $7,938,281 | | Fixed index annuities - embedded derivatives (Ending balance) | $6,770,915 | $7,680,951 | | Change in fair value, net (Fixed index annuities - embedded derivatives) | $(1,308,123) | $(377,121) | - A **100 basis point increase** in discount rates for embedded derivatives would decrease their fair value by **$499.4 million**, while a **100 basis point decrease** would increase it by **$578.3 million**, impacting operations through changes in fair value and amortization of deferred costs[66](index=66&type=chunk) [Note 3. Investments](index=17&type=section&id=Note%203.%20Investments) This note provides a detailed breakdown of fixed maturity securities by amortized cost, fair value, unrealized gains/losses, and credit quality, noting a significant increase in gross unrealized losses due to rising treasury yields | Metric | March 31, 2022 Amortized Cost (in thousands) | March 31, 2022 Fair Value (in thousands) | December 31, 2021 Amortized Cost (in thousands) | December 31, 2021 Fair Value (in thousands) | | :----- | :------------------------------------------- | :--------------------------------------- | :---------------------------------------------- | :------------------------------------------ | | Total fixed maturity securities | $49,364,915 | $49,662,120 | $46,999,183 | $51,305,943 | | Gross Unrealized Gains | $1,671,507 | N/A | $4,421,976 | N/A | | Gross Unrealized Losses | $(1,367,725) | N/A | $(112,370) | N/A | | Allowance for Credit Losses | $(6,577) | N/A | $(2,846) | N/A | - **98%** of the fixed maturity portfolio was rated investment grade (NAIC Class 1 and 2) at both March 31, 2022, and December 31, 2021[74](index=74&type=chunk) | NAIC Designation | March 31, 2022 Fair Value (in thousands) | December 31, 2021 Fair Value (in thousands) | | :--------------- | :--------------------------------------- | :------------------------------------------ | | 1 | $28,064,072 | $28,785,839 | | 2 | $20,701,013 | $21,396,020 | | 3 | $748,881 | $941,210 | | 4 | $122,867 | $147,160 | | 5 | $3,259 | $15,357 | | 6 | $22,028 | $20,357 | - Gross unrealized losses on fixed maturity securities increased significantly from **$(112.4) million** at December 31, 2021, to **$(1.37 billion)** at March 31, 2022, primarily due to rising U.S. Treasury yields[69](index=69&type=chunk)[227](index=227&type=chunk) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :----- | :------------------ | :------------------ | | Beginning balance | $2,846 | $64,771 | | Additions for credit losses not previously recorded | $4,161 | $816 | | Change in allowance on securities with previous allowance | $(430) | $621 | | Ending balance | $6,577 | $59,698 | [Note 4. Mortgage Loans on Real Estate](index=23&type=section&id=Note%204.%20Mortgage%20Loans%20on%20Real%20Estate) The mortgage loan portfolio, totaling **$5.73 billion**, is detailed by type and geographic region, with an increased valuation allowance and rising past-due amounts in residential mortgage loans | Loan Type | March 31, 2022 Carrying Value (in thousands) | December 31, 2021 Carrying Value (in thousands) | | :-------- | :------------------------------------------- | :----------------------------------------------- | | Commercial mortgage loans | $3,581,412 | $3,610,576 | | Agricultural mortgage loans | $462,529 | $406,480 | | Residential mortgage loans | $1,690,931 | $1,670,942 | | Total Mortgage loans | $5,734,872 | $5,687,998 | | Metric | 2022 (in thousands) | 2021 (in thousands) | | :----- | :------------------ | :------------------ | | Beginning allowance balance | $(24,024) | $(31,029) | | Change in provision for credit losses | $(5,245) | $2,515 | | Ending allowance balance | $(29,269) | $(28,514) | | Loan Type | Current (in thousands) | 30-59 days past due (in thousands) | 60-89 days past due (in thousands) | Over 90 days past due (in thousands) | Total (in thousands) | | :-------- | :--------------------- | :--------------------------------- | :--------------------------------- | :----------------------------------- | :------------------- | | Commercial mortgage loans | $3,605,999 | $0 | $0 | $0 | $3,605,999 | | Agricultural mortgage loans | $463,087 | $0 | $0 | $0 | $463,087 | | Residential mortgage loans | $1,565,375 | $88,914 | $28,303 | $12,463 | $1,695,055 | - There were no mortgage loans classified as Troubled Debt Restructuring (TDR) at March 31, 2022, or December 31, 2021[123](index=123&type=chunk) [Note 5. Variable Interest Entities](index=28&type=section&id=Note%205.%20Variable%20Interest%20Entities) The company consolidates certain VIEs in real estate and limited partnership funds where it is the primary beneficiary, while also holding investments in unconsolidated VIEs where it is not - The company consolidates two real estate investment entities and two limited partnership feeder funds (infrastructure credit and tech-centric middle-market loans) as VIEs where it is the primary beneficiary due to significant ownership and control[124](index=124&type=chunk)[125](index=125&type=chunk) | Metric | March 31, 2022 Total Assets (in thousands) | March 31, 2022 Total Liabilities (in thousands) | December 31, 2021 Total Assets (in thousands) | December 31, 2021 Total Liabilities (in thousands) | | :----- | :----------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :----------------------------------------------- | | Real estate investments | $543,435 | $64,598 | $363,229 | $20,168 | | Limited partnership funds | $350,621 | $0 | $168,711 | $0 | | Total | $894,056 | $64,598 | $531,940 | $20,168 | - The company has investments in unconsolidated VIEs, including special purpose vehicles for middle market loans and a residential business purpose loan originator, where it provides debt funding but is not the primary beneficiary[127](index=127&type=chunk)[128](index=128&type=chunk) | Investment Type | March 31, 2022 Carrying Value (in thousands) | March 31, 2022 Maximum Exposure to Loss (in thousands) | December 31, 2021 Carrying Value (in thousands) | December 31, 2021 Maximum Exposure to Loss (in thousands) | | :-------------- | :------------------------------------------- | :----------------------------------------------------- | :---------------------------------------------- | :-------------------------------------------------------- | | Fixed maturity securities, available for sale | $481,348 | $481,348 | $459,681 | $459,681 | | Other investments | $345,000 | $345,000 | $345,000 | $345,000 | [Note 6. Derivative Instruments](index=29&type=section&id=Note%206.%20Derivative%20Instruments) Derivative instruments, primarily call options for fixed index annuities, are not designated for hedge accounting, with fair value changes recognized immediately in operations, showing significant decreases in both derivative assets and embedded derivative liabilities - All derivatives are recognized at fair value in the consolidated statements of operations as they do not qualify for hedge accounting[130](index=130&type=chunk) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----- | :---------------------------- | :------------------------------- | | Derivative instruments (Assets) | $642,413 | $1,277,480 | | Fixed index annuities - embedded derivatives, net (Liabilities) | $6,770,915 | $7,964,961 | | Reinsurance related embedded derivative (Liabilities) | $(204,806) | $(2,362) | | Metric | 2022 (in thousands) | 2021 (in thousands) | | :----- | :------------------ | :------------------ | | Change in fair value of derivatives | $(477,519) | $396,305 | | Change in fair value of embedded derivatives | $(1,393,649) | $(282,413) | - The company manages counterparty credit risk for call options by purchasing from multiple highly-rated financial institutions and utilizing credit support agreements for collateral[135](index=135&type=chunk)[137](index=137&type=chunk) [Note 7. Notes Payable](index=31&type=section&id=Note%207.%20Notes%20Payable) The company has **$500 million** in senior unsecured notes due in 2027, bearing 5.0% interest, with an amortized carrying value of **$496.4 million** | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----- | :---------------------------- | :------------------------------- | | Principal (Senior notes due 2027) | $500,000 | $500,000 | | Unamortized debt issue costs | $(3,371) | $(3,537) | | Unamortized discount | $(204) | $(213) | | Total | $496,425 | $496,250 | [Note 8. Commitments and Contingencies](index=31&type=section&id=Note%208.%20Commitments%20and%20Contingencies) The company accrues liabilities for probable and estimable litigation, holds unfunded commitments of **$1.2 billion** to limited partnerships, and has **$200 million** in FHLB funding agreements collateralized by **$940.7 million** in securities - The company establishes accrued liabilities for litigation and regulatory matters when loss contingencies are both probable and estimable, continuously monitoring developments[143](index=143&type=chunk) | Commitment Type | Amount (in millions) | | :-------------- | :------------------- | | Limited partnerships | $1,200 | | Fixed maturity securities | $13.4 | - As of March 31, 2022, the company had **$200 million** in FHLB funding agreements outstanding, collateralized by **$940.7 million** in fixed maturity securities[144](index=144&type=chunk) [Note 9. Earnings Per Common Share and Stockholders' Equity](index=32&type=section&id=Note%209.%20Earnings%20Per%20Common%20Share%20and%20Stockholders%27%20Equity) Diluted EPS increased to **$5.67** for Q1 2022 from **$2.82** for Q1 2021, Brookfield Asset Management increased its common stock ownership to **16%**, and the company continued its share repurchase program with **$556 million** remaining | Metric | 2022 | 2021 | | :----- | :--- | :--- | | Earnings per common share | $5.73 | $2.84 | | Earnings per common share - assuming dilution | $5.67 | $2.82 | - Brookfield Asset Management increased its common stock ownership to approximately **16%** in January 2022 through a second purchase of **6,775,000 shares** at **$37.33 per share**[150](index=150&type=chunk)[168](index=168&type=chunk) - The company repurchased **4.5 million shares** of common stock in Q1 2022 at an average price of **$39.29**, with **$556 million** remaining under its **$1 billion** share repurchase program as of March 31, 2022[153](index=153&type=chunk)[169](index=169&type=chunk) [Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202%3A%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the company's financial condition and results for Q1 2022 versus Q1 2021, covering business overview, profitability drivers, detailed operations, financial condition, and regulatory developments [Our Business and Profitability](index=34&type=section&id=Our%20Business%20and%20Profitability) The company specializes in fixed and fixed index deferred annuities, with profitability driven by investment spreads, portfolio management, lifetime income benefit rider pricing, option cost control, and expense management, guided by the AEL 2.0 strategy - The company specializes in selling individual fixed and fixed index deferred annuities, primarily through independent marketing organizations (IMOs), catering to retirement needs for wealth accumulation and income for life[158](index=158&type=chunk)[162](index=162&type=chunk) - Profitability is largely dependent on investment spreads, managing investment portfolio risks (interest rate changes, credit losses), pricing lifetime income benefit riders, controlling option costs for fixed index annuities, and managing operating and acquisition expenses[161](index=161&type=chunk) - The AEL 2.0 strategy aims to capitalize on annuity origination by implementing an "open architecture" investment management platform, partnering with specialized asset managers, and scaling investments into higher-returning private assets (goal: **30-40% allocation** over time)[164](index=164&type=chunk)[165](index=165&type=chunk)[167](index=167&type=chunk) | Metric | 2022 | 2021 | | :----- | :--- | :--- | | Average yield on invested assets | 4.15% | 3.58% | | Aggregate cost of money | 1.64% | 1.58% | | Aggregate investment spread | 2.51% | 2.00% | - Average yield on invested assets increased due to strong returns on partnerships and other mark-to-market assets, lower cash balances, and increased private asset allocation, while the aggregate cost of money rose due to higher option costs[172](index=172&type=chunk) [Results of Operations for the Three Months Ended March 31, 2022 and 2021](index=37&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202022%20and%202021) Net income available to common stockholders increased significantly to **$555.3 million**, primarily due to higher net investment income and decreased fair value changes in embedded derivatives, despite a **63%** decrease in total annuity deposits before coinsurance ceded | Product Type | 2022 (in thousands) | 2021 (in thousands) | Change (%) | | :----------- | :------------------ | :------------------ | :--------- | | Fixed index annuities | $882,734 | $665,831 | 33% | | Multi-year fixed rate annuities | $4,685 | $1,752,617 | -99.7% | | Total before coinsurance ceded | $901,941 | $2,434,736 | -63% | | Net after coinsurance ceded | $688,378 | $2,431,688 | -72% | - Net income available to common stockholders increased to **$555.3 million** in Q1 2022 (vs. **$271.8 million** in Q1 2021), driven by higher net investment income and a decrease in the change in fair value of embedded derivatives[177](index=177&type=chunk) - Non-GAAP operating income available to common stockholders increased to **$89.9 million** in Q1 2022 (vs. **$41.4 million** in Q1 2021), primarily due to an increase in aggregate investment spread[181](index=181&type=chunk)[186](index=186&type=chunk) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | | :----- | :------------------ | :------------------ | :-------------------- | | Net investment income | $567,423 | $497,190 | $70,233 | - The average yield on invested assets increased to **4.15%** in Q1 2022 (vs. **3.58%** in Q1 2021), attributed to strong returns on partnerships, lower cash balances, and private asset allocation[190](index=190&type=chunk) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | | :----- | :------------------ | :------------------ | :-------------------- | | Salary and benefits | $36,187 | $27,953 | $8,234 | | Risk charges | $2,880 | $12,042 | $(9,162) | | Total other operating costs and expenses | $58,120 | $55,865 | $2,255 | [Financial Condition](index=44&type=section&id=Financial%20Condition) The company's investment strategy prioritizes high credit quality and growing private asset allocation, with the fixed maturity portfolio seeing increased unrealized losses due to rising interest rates, while liquidity is managed through cash flows, investments, and FHLB access [Investments](index=44&type=section&id=Investments) The investment portfolio, primarily fixed maturity securities (**84.8%**), is shifting towards private assets, maintaining high investment grade quality (**98.2%**), but experienced a substantial increase in gross unrealized losses in Q1 2022 due to rising treasury yields - The investment strategy aims to maximize current income and total return through active management, primarily in high credit quality fixed maturity securities, while aligning with insurance statutes and supporting liabilities[212](index=212&type=chunk) - As part of AEL 2.0, the company plans to increase its allocation to private assets by partnering with asset managers in sectors like commercial/residential real estate, infrastructure debt, and middle market lending[213](index=213&type=chunk) | Investment Type | March 31, 2022 Carrying Amount (in thousands) | March 31, 2022 Percent | December 31, 2021 Carrying Amount (in thousands) | December 31, 2021 Percent | | :-------------- | :-------------------------------------------- | :--------------------- | :----------------------------------------------- | :------------------------ | | Total fixed maturity securities | $49,662,120 | 84.8% | $51,305,943 | 85.0% | | Mortgage loans on real estate | $5,734,872 | 9.8% | $5,687,998 | 9.4% | | Real estate investments | $510,188 | 0.9% | $337,939 | 0.6% | | Derivative instruments | $642,413 | 1.1% | $1,277,480 | 2.1% | | Other investments | $1,999,113 | 3.4% | $1,767,144 | 2.9% | | Total investments | $58,548,706 | 100.0% | $60,376,504 | 100.0% | | Rating Agency Rating | March 31, 2022 Percent of Fixed Maturity Securities | December 31, 2021 Percent of Fixed Maturity Securities | | :------------------- | :-------------------------------------------------- | :----------------------------------------------------- | | Aaa/Aa/A | 55.9% | 55.2% | | Baa | 42.3% | 42.6% | | Total investment grade | 98.2% | 97.8% | | Total below investment grade | 1.8% | 2.2% | | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----- | :---------------------------- | :------------------------------- | | Amortized Cost | $23,860,589 | $7,923,204 | | Unrealized Losses, Net of Allowance | $(1,367,725) | $(112,370) | | Fair Value | $22,486,287 | $7,807,988 | - The increase in unrealized losses from December 31, 2021, to March 31, 2022, was primarily due to an increase in treasury yields (**10-year U.S. Treasury yields rose from 1.52% to 2.32%**)[227](index=227&type=chunk) - The company recognized **$7.4 million** in credit losses during Q1 2022, primarily from a corporate security (**$3.8 million**) and structured securities (**$3.7 million**) that it intended to sell[249](index=249&type=chunk) [Mortgage Loans on Real Estate](index=52&type=section&id=Mortgage%20Loans%20on%20Real%20Estate) The mortgage loan portfolio, totaling **$5.76 billion** at March 31, 2022, is diversified across commercial, agricultural, and residential segments. Commercial and agricultural loans have a combined average loan-to-value ratio of **51.9%**, reflecting conservative underwriting. While commercial and agricultural loans are current, residential mortgage loans show significant amounts past due (over **$129 million** combined for 30+ days past due) - The company's mortgage loan portfolio totaled **$5.76 billion** at March 31, 2022, comprising commercial (**$3.61 billion**), agricultural (**$463.1 million**), and residential (**$1.70 billion**) segments[255](index=255&type=chunk) - The combined average loan-to-value ratio for commercial and agricultural mortgage loans was **51.9%** at March 31, 2022, indicating conservative underwriting policies[252](index=252&type=chunk) | Loan Type | Current (in thousands) | 30-59 days past due (in thousands) | 60-89 days past due (in thousands) | Over 90 days past due (in thousands) | Total (in thousands) | | :-------- | :--------------------- | :--------------------------------- | :--------------------------------- | :----------------------------------- | :------------------- | | Commercial mortgage loans | $3,605,999 | $0 | $0 | $0 | $3,605,999 | | Agricultural mortgage loans | $463,087 | $0 | $0 | $0 | $463,087 | | Residential mortgage loans | $1,565,375 | $88,914 | $28,303 | $12,463 | $1,695,055 | [Derivative Instruments](index=53&type=section&id=Derivative%20Instruments) Derivative instruments, mainly call options for fixed index annuities, are not designated for hedge accounting, meaning fair value changes are immediately recognized in operations. The fair value of these options is determined by counterparty settlement amounts adjusted for nonperformance risk - Derivative instruments, mainly call options for fixed index annuities, do not qualify for hedge accounting, so changes in fair value are recognized immediately in the consolidated statements of operations[257](index=257&type=chunk)[258](index=258&type=chunk) - The fair value of call options is based on settlement amounts from counterparties, adjusted for their nonperformance risk, which is determined by credit default swap rates[257](index=257&type=chunk) [Liquidity and Capital Resources](index=53&type=section&id=Liquidity%20and%20Capital%20Resources) The company's insurance subsidiaries maintain adequate cash flows from annuity deposits and investment income to meet obligations. The parent company relies on dividends and payments from subsidiaries for its liquidity needs. Regulatory restrictions limit subsidiary dividend payments, but American Equity Life has significant statutory earned surplus. The company also has access to FHLB borrowings and a new credit agreement - Insurance subsidiaries have adequate cash flows from annuity deposits and investment income, supported by a highly liquid investment portfolio and a target of **1-2%** of the portfolio in cash and cash equivalents[259](index=259&type=chunk) - The parent company's liquidity depends on dividends and payments from subsidiaries, which are subject to state regulatory restrictions, including minimum solvency requirements and limits on dividend amounts[260](index=260&type=chunk)[261](index=261&type=chunk) - American Equity Life had **$2.5 billion** in statutory earned surplus at March 31, 2022, and can distribute up to **$407.9 million** in dividends without prior approval from the Iowa Insurance Commissioner for 2022[262](index=262&type=chunk) - The company established a new five-year **$300 million** unsecured delayed draw term loan in February 2022 for general corporate liquidity, in addition to FHLB membership providing access to collateralized borrowings[264](index=264&type=chunk)[265](index=265&type=chunk) [Regulatory Developments](index=54&type=section&id=Regulatory%20Developments) Proposed regulatory changes by S&P, the Iowa Insurance Division, and the SEC (cybersecurity, climate, trading plans) could significantly impact the company's asset valuation, capital requirements, disclosures, costs, and operations - S&P has proposed changes to insurance company capital analysis, potentially requiring re-evaluation of assets, capital restructuring, or increased capital holdings due to new discounting rules for unrated assets[267](index=267&type=chunk) - The Iowa Insurance Division proposed changes to admitted asset laws to align with NAIC models, which could allow new admitted assets and alter investment limitations, with legislative consideration expected in 2023[267](index=267&type=chunk) - The SEC proposed new cybersecurity disclosure rules, requiring disclosure of material incidents within four days and annual reporting on risk management, governance, and board expertise[268](index=268&type=chunk) - The SEC proposed new climate-related disclosure rules, mandating reporting on governance, strategy impacts, risk management, GHG emissions, and climate-related financial statement metrics, with attestation requirements for large accelerated filers[269](index=269&type=chunk) - The SEC also proposed new rules for Rule 10b5-1 trading plans, including a **30-day** "cooling off" period and limits on concurrent plans, along with daily disclosure of securities repurchases[270](index=270&type=chunk) [Item 3: Quantitative and Qualitative Disclosures about Market Risk](index=54&type=section&id=Item%203%3A%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Interest rate risk is the primary market risk, managed by aligning investment cash flows with liabilities and using models, where a **10%** interest rate increase could decrease fixed maturity securities' fair value by **$1.01 billion**, though crediting rates on most annuities are adjustable - Interest rate risk is the primary market risk, impacting product profitability and investment fair values, with profitability depending on the spread between investment yields and credited rates on insurance liabilities[273](index=273&type=chunk) - The company manages interest rate risk by aligning investment portfolio cash flow characteristics with insurance liabilities and using models to simulate cash flows under various interest rate scenarios[274](index=274&type=chunk) - A hypothetical **10% increase** in interest rates (**24 basis points**) is estimated to decrease the fair value of fixed maturity securities by approximately **$1.01 billion**, resulting in a **$416.6 million** decrease in accumulated other comprehensive income and stockholders' equity[275](index=275&type=chunk) - Approximately **92%** of annuity liabilities are subject to annual adjustment of crediting rates at the company's discretion (subject to minimum guarantees), with **18%** currently at minimum guaranteed rates[276](index=276&type=chunk) - The company uses call options to fund annual index credits on fixed index annuities, managing the risk of future option costs by adjusting caps, participation rates, and asset fees within contractual limits[278](index=278&type=chunk) [Item 4: Controls and Procedures](index=57&type=section&id=Item%204%3A%20Controls%20and%20Procedures) As of March 31, 2022, disclosure controls and procedures were effective, ensuring timely and accurate reporting, with no material changes to internal control over financial reporting during the quarter - As of March 31, 2022, the company's disclosure controls and procedures were deemed effective in recording, processing, summarizing, and reporting information required under the Exchange Act[280](index=280&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2022[281](index=281&type=chunk) PART II — OTHER INFORMATION [Item 1: Legal Proceedings](index=58&type=section&id=Item%201%3A%20Legal%20Proceedings) Information on legal proceedings is incorporated by reference from Note 8 - Commitments and Contingencies in the unaudited consolidated financial statements - Information on legal proceedings is incorporated by reference from Note 8 - Commitments and Contingencies in the unaudited consolidated financial statements[283](index=283&type=chunk) [Item 1A: Risk Factors](index=58&type=section&id=Item%201A%3A%20Risk%20Factors) A detailed discussion of risk factors affecting the business is available in Part I, Item 1A of the company's 2021 Annual Report on Form 10-K - A detailed discussion of risk factors affecting the business is available in Part I, Item 1A of the company's 2021 Annual Report on Form 10-K[284](index=284&type=chunk) [Item 2: Unregistered Sales of Equity Securities and Use of Proceeds](index=58&type=section&id=Item%202%3A%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In January 2022, **6.78 million** common shares were issued to Brookfield Reinsurance in an unregistered sale, and the company repurchased **4.45 million** shares for approximately **$179.4 million** during Q1 2022 - In January 2022, **6,775,000 common shares** were issued to Brookfield Reinsurance at **$37.33 per share** in an unregistered sale, exempt under Section 4(a)(2) of the Securities Act[285](index=285&type=chunk) | Period | Total Number of Shares Purchased (shares) | Average Price Per Share (dollars) | Dollar Value That May Yet Be Under Program (in thousands) | | :----- | :---------------------------------------- | :-------------------------------- | :-------------------------------------------------------- | | January 1, 2022 - January 31, 2022 | 1,066,600 | $41.75 | $691,054 | | February 1, 2022 - February 28, 2022 | 1,545,923 | $41.32 | $627,176 | | March 1, 2022 - March 31, 2022 | 1,839,628 | $38.56 | $556,236 | | Total | 4,452,151 | N/A | N/A | - From January 1 through April 30, 2022, the company repurchased approximately **6.3 million common shares** for about **$250 million**[288](index=288&type=chunk) [Item 4: Mine Safety Disclosures](index=58&type=section&id=Item%204%3A%20Mine%20Safety%20Disclosures) The company states that there are no mine safety disclosures - No mine safety disclosures are applicable[288](index=288&type=chunk) [Item 5: Other Information](index=58&type=section&id=Item%205%3A%20Other%20Information) The company states that there is no other information to disclose - No other information is reported in this section[288](index=288&type=chunk) [Item 6: Exhibits](index=59&type=section&id=Item%206%3A%20Exhibits) This section lists the exhibits filed with the report, including various performance-based and time-based restricted stock unit award agreements, amendments to incentive plans, certifications, and iXBRL financial statements. It also includes a note regarding reliance on statements in contracts and other exhibits - The exhibits include various employee incentive plan agreements (restricted stock units, short-term incentive plan, deferred long-term incentive cash plan), certifications from the CEO and CFO, and iXBRL formatted financial statements[291](index=291&type=chunk) - A cautionary note advises that representations and warranties in exhibits are for party benefit, may be qualified by disclosures, apply different materiality standards, and are only as of the agreement date[290](index=290&type=chunk) [Signatures](index=60&type=section&id=Signatures) The report was signed by Dewayne Lummus, Senior Vice President and Chief Accounting Officer, on May 9, 2022