American Equity Investment Life pany(AEL) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1: Financial Statements This section presents unaudited condensed consolidated financial statements for periods ended June 30, 2025, covering financial position, operations, comprehensive income, equity changes, cash flows, and detailed notes on accounting policies, investments, and segment reporting Condensed Consolidated Statements of Financial Position Total assets increased to $126.3 billion by June 30, 2025, from $121.2 billion at year-end 2024, driven by investments, while total liabilities and equity also saw growth Condensed Consolidated Statements of Financial Position (Unaudited) | Account | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | | Total investments | $84,848 | $80,755 | | Cash and cash equivalents | $12,104 | $11,330 | | Total assets | $126,345 | $121,221 | | Policyholders' account balances | $86,934 | $83,079 | | Total liabilities | $116,128 | $111,193 | | Total equity | $10,217 | $10,028 | Condensed Consolidated Statements of Operations Q2 2025 net income attributable to common stockholders decreased to $141 million from $244 million in Q2 2024, with H1 2025 showing a net loss of $95 million due to lower premiums, derivative changes, and non-recurring tax benefits Condensed Consolidated Statements of Operations (Unaudited) | Metric (in millions) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $2,186 | $2,115 | $4,525 | $3,785 | | Total benefits and expenses | $1,994 | $2,157 | $4,591 | $3,684 | | Net income (loss) before income taxes | $192 | $(42) | $(66) | $101 | | Income tax expense (benefit) | $38 | $(289) | $(17) | $(260) | | Net income (loss) | $154 | $247 | $(49) | $361 | | Net income (loss) attributable to common stockholder | $141 | $244 | $(95) | $357 | Condensed Consolidated Statements of Comprehensive Income Comprehensive income attributable to the company significantly decreased to $146 million in Q2 2025 from $759 million in Q2 2024, mainly due to smaller unrealized investment gains Condensed Consolidated Statements of Comprehensive Income (Unaudited) | Metric (in millions) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $154 | $247 | $(49) | $361 | | Total other comprehensive income (loss) | $(6) | $503 | $324 | $554 | | Comprehensive income attributable to American National Group Inc. | $146 | $759 | $270 | $922 | Condensed Consolidated Statements of Changes in Equity Total equity increased to $10.22 billion by June 30, 2025, from $10.03 billion at year-end 2024, driven by other comprehensive income despite a net loss and preferred stock redemptions - Total equity increased by $189 million during the first six months of 2025, primarily due to positive other comprehensive income of $324 million, which more than offset the net loss of $49 million[26] Condensed Consolidated Statements of Cash Flows Net cash from operations was $1.2 billion for H1 2025, with $3.1 billion used in investing and $2.7 billion provided by financing, resulting in a $774 million net increase in cash and cash equivalents Six Months Ended June 30 Cash Flow Summary (Unaudited) | Activity (in millions) | 2025 | 2024 | | :--- | :--- | :--- | | Cash flows provided by operating activities | $1,206 | $1,377 | | Cash flows (used in) provided by investing activities | $(3,138) | $7,675 | | Cash flows provided by financing activities | $2,706 | $1,651 | | Net change in cash and cash equivalents | $774 | $10,703 | Notes to Condensed Consolidated Financial Statements This section provides detailed disclosures on the company's organization post-AEL merger, significant accounting policies, investment portfolios, fair value measurements, reinsurance, insurance liabilities, the AEL acquisition, segment performance, and commitments - On May 7, 2024, American National Group, LLC merged with American Equity Investment Life Holding Company (AEL), with AEL surviving and being renamed American National Group Inc. Financial statements prior to this date represent American National as the accounting acquirer[35][36] - The company's available-for-sale fixed maturity securities portfolio grew to a fair value of $48.9 billion as of June 30, 2025, up from $47.3 billion at year-end 2024, with corporate debt securities comprising the largest portion[45] - The acquisition of AEL on May 2, 2024, involved a total consideration of $4.53 billion, resulting in the recognition of $7.24 billion in Value of Business Acquired (VOBA) and $662 million in goodwill[134][140] - The company operates through three segments: Annuities, Property and Casualty (P&C), and Life Insurance. As of June 30, 2025, the Annuities segment held the vast majority of assets ($112.3 billion) and liabilities ($102.8 billion)[189][195][201] Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance for Q2 and H1 2025, highlighting decreased net income due to tax changes and derivative valuations, strong annuity sales, and a solid financial condition with increased assets and liquidity Results of Operations Q2 2025 net income decreased to $152 million from $255 million year-over-year, primarily due to tax expense and derivative valuations, while H1 2025 reported a net loss of $54 million amid declining net premiums - The decrease in Q2 2025 net income was primarily due to tax expense compared to a significant tax benefit in 2024 related to the Bermuda corporate income tax, along with increased amortization of VOBA and unfavorable movements in insurance-related derivatives[225] Gross Annuity Sales (in millions) | Annuity Type | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Retail | $3,622 | $3,077 | $6,546 | $3,897 | | Institutional | $662 | $272 | $1,544 | $944 | | Total | $4,284 | $3,349 | $8,090 | $4,841 | Distributable Operating Earnings Total Segment Distributable Operating Earnings (DOE) grew to $408 million in Q2 2025 from $289 million in Q2 2024, driven by Annuities segment growth, despite a decrease in Life Insurance DOE Segment Distributable Operating Earnings (DOE) (in millions) | Segment | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Annuities | $372 | $246 | $779 | $351 | | Life Insurance | $40 | $63 | $72 | $120 | | Property and Casualty | $(4) | $(20) | $60 | $29 | | Total Segment DOE | $408 | $289 | $911 | $500 | Financial Condition Total assets increased by $5.1 billion to $126.3 billion by June 30, 2025, driven by annuity inflows and investment fair value movements, strengthening the company's financial condition - Total assets increased by $5.1 billion in the first half of 2025, driven by net annuity inflows, investment purchases, and favorable fair value movements on the equity securities portfolio[254] Liquidity and Capital Resources Total liquidity increased to $49.9 billion by June 30, 2025, with cash and cash equivalents rising by $774 million, maintaining a strong capital position and compliance with NAIC RBC standards Total Liquidity (Non-GAAP, in millions) | Component | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $12,104 | $11,330 | | Liquid financial assets | $36,398 | $32,947 | | Undrawn credit facilities | $1,351 | $881 | | Total liquidity | $49,853 | $45,158 | - The company is in compliance with all capital requirements as of June 30, 2025, including the NAIC's Risk Based Capital (RBC) standards[276] Item 3: Quantitative and Qualitative Disclosures About Market Risk The company manages primary market risks, including interest rate, foreign currency, and credit risk, through an ALM framework, diversification, derivatives, and mitigates insurance and operational risks via reinsurance and internal controls - The company's significant market risks are primarily associated with interest rates, foreign currency exchange rates, and credit risk. These are managed through an asset liability management (ALM) framework and the use of derivatives[285][290] - Insurance risk related to mortality, longevity, and policyholder behavior is managed through underwriting and the use of reinsurance[295][296] Item 4: Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[301] - No material changes were made to the company's internal control over financial reporting during the quarter ended June 30, 2025[302] PART II - OTHER INFORMATION Item 1: Legal Proceedings The company is involved in various ordinary course lawsuits, but management anticipates no material adverse effect on financial condition or results of operations from their ultimate liability - The company is a defendant in various lawsuits arising from the ordinary course of business, but management does not expect the outcomes to have a material adverse effect on its financial statements[206][303] Item 1A: Risk Factors This section refers to the detailed discussion of risk factors presented in the company's 2024 Annual Report on Form 10-K - For a discussion of factors that may affect the company's business, this report refers to the 'Risk Factors' section in the 2024 Annual Report on Form 10-K[304] Item 2: Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - None reported[305] Item 3: Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None reported[306] Item 5: Other Information No directors or officers adopted or terminated any Rule 10b5-1 trading plans or other non-Rule 10b5-1 trading arrangements during the quarter - No directors or officers adopted or terminated any Rule 10b5-1 trading plans during the three months ended June 30, 2025[308] Item 6: Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, indentures, and officer certifications required by the Sarbanes-Oxley Act - The report includes exhibits such as corporate governance documents, indentures for senior notes, and certifications from the CEO and CFO as required by Sections 302 and 906 of the Sarbanes-Oxley Act[310]