American Equity Investment Life pany(AEL) - 2021 Q3 - Quarterly Report

Financial Performance - Total revenues for the three months ended September 30, 2021, were $542.6 million, a decrease from $798.7 million in the same period of 2020, representing a decline of approximately 32.2%[14] - Net income for the three months ended September 30, 2021, was $152.9 million, compared to $667.2 million for the same period in 2020, reflecting a decrease of about 77.2%[14] - Comprehensive income for the three months ended September 30, 2021, was $85.9 million, significantly lower than $1.0 billion in the same period of 2020[18] - Earnings per common share for the three months ended September 30, 2021, were $1.53, down from $7.20 in the same period of 2020, a decline of approximately 78.7%[14] - Net income available to common stockholders for the three months ended September 30, 2021, was $141.9 million, a decrease of 78.6% from $661.3 million in the same period of 2020[164] Investment Income and Losses - Net investment income for the nine months ended September 30, 2021, was $1.5 billion, down from $1.7 billion in the same period of 2020, a decrease of about 8.3%[14] - The company reported a loss on the change in fair value of derivatives of $70.7 million for the three months ended September 30, 2021, compared to a gain of $205.0 million in the same period of 2020[14] - The company reported a net realized loss on investments of $2.8 million for the nine months ended September 30, 2021, compared to a loss of $68.5 million in the same period of 2020[14] - The change in fair value of embedded derivatives negatively impacted net income, with a decrease of $125,752 thousand in Q3 2021 compared to a decrease of $2,341,279 thousand in Q3 2020[202] Assets and Liabilities - Total stockholders' equity as of September 30, 2021, was $6,375,208, up from $5,918,215 as of September 30, 2020, indicating a growth of about 7.7%[22] - The total assets increased to $71,688,579, up from $71,389,674, reflecting an adjustment of $298,905[43] - The fair value of the company's fixed maturity securities, including corporate securities, was $31,021.89 million as of September 30, 2021, with gross unrealized gains of $3,695.00 million[78] - The total unrealized losses on fixed maturity securities were $3.6 billion as of September 30, 2021, reflecting the impact of the COVID-19 pandemic on credit markets[90] Cash Flow and Financing Activities - Net cash provided by operating activities for the nine months ended September 30, 2021, was $637,291, an increase from $355,231 in the same period of 2020, reflecting an increase of approximately 79.3%[24] - Net cash provided by investing activities for the nine months ended September 30, 2021, was $1,401,460, compared to $628,742 in 2020, indicating an increase of approximately 122.3%[24] - Net cash provided by financing activities was $1,550,520, a significant improvement from a net cash used of $(620,733) in the prior year[28] - Cash and cash equivalents at the end of the period reached $12,684,793, up 377% from $2,656,632 at the end of the previous year[28] Insurance and Policy Benefits - The company experienced a significant increase in insurance policy benefits, totaling $18.8 million for the three months ended September 30, 2021, compared to $13.3 million in the same period of 2020, an increase of about 41.5%[14] - The total benefits and expenses for the nine months ended September 30, 2021, were $2.1 billion, compared to $588.9 million in the same period of 2020, indicating a substantial increase[14] - Policy benefit reserves increased to $62,352,882, an adjustment of $584,636 from the previous report[43] Reinsurance and Strategic Initiatives - The company completed a reinsurance transaction with North End Re, which is expected to free up capital for potential shareholder returns and enhance investment income through higher yielding assets[182] - The company is implementing a new strategy called AEL 2.0, focusing on four key pillars: Go-to-Market, Investment Management, Capital Structure, and Foundational Capabilities[179] - The company finalized a reinsurance treaty with North End Re that covers a portion of in-force and new business, expected to drive higher return on equity through a capital-efficient earnings model[187] Market and Sales Performance - Fixed index annuity sales increased significantly, with American Equity Life reporting $727.6 million in sales for Q3 2021, up from $432.6 million in Q3 2020, representing a 68% increase[196] - Total annuity deposits before coinsurance ceded increased by 128% in Q3 2021 compared to Q3 2020, and by 168% for the nine months ended September 30, 2021 compared to the same period in 2020[196] - The company targets total sales of $5 billion to $6 billion in 2021, driven by new product offerings and increased sales of fixed index annuities[196] Credit Quality and Loan Portfolio - The company maintains a rigorous evaluation of credit quality indicators, including loan-to-value (LTV) and debt service coverage (DSC) ratios, to assess the risk in its mortgage loan portfolios[121] - The valuation allowance for commercial mortgage loans decreased to $17.7 million as of September 30, 2021, from $25.5 million on December 31, 2020, reflecting improved credit quality[116] - The commercial mortgage loan portfolio is diversified by geographic region, with the South Atlantic region representing 22.5% of the total portfolio as of September 30, 2021[110]