American Equity Investment Life Holding Company (NYSE: AEL), a leading underwriter of index and fixed rate annuities, today reported second quarter 2012 operating income 1 of $27.4 million, or $0.43 per diluted common share, compared to second quarter 2011 operating income of $29.0 million, or $0.45 per diluted common share.
Highlights for the second quarter of 2012 include:
- Annuity sales for the second quarter of 2012 were $917 million (before coinsurance) compared to first quarter 2012 annuity sales of $979 million (before coinsurance).
- Total invested assets grew 20% to $25.4 billion at June 30, 2012 compared to $21.2 billion at June 30, 2011. On an amortized cost basis, total invested assets grew 13% to $23.3 billion at June 30, 2012 compared to $20.5 at June 30, 2011.
- Investment spread for the second quarter of 2012 was 2.70% compared to 2.93% for the first quarter of 2012. Adjusted investment spread for the second quarter of 2012 was 2.95%, slightly below the 3.00% target.
- Estimated risk-based capital (“RBC”) ratio at June 30, 2012 based upon trailing twelve months annuity sales remained above target at 337%. Estimated RBC at June 30, 2012 based upon annualization of first half 2012 annuity sales was 347%.
- Book value per outstanding common share (excluding Accumulated Other Comprehensive Income) grew to $16.34 at June 30, 2012 compared to $16.24 at March 31, 2012 and $16.09 at December 31, 2011.
SPREAD RESULT IMPACTED BY CASH
American Equity’s investment spread for the second quarter of 2012 continued to be affected by the impact of holding excess cash during the quarter. The average excess cash balance for the second quarter of 2012 was $1.4 billion compared to $759 million for the first quarter of 2012 with the foregone investment income from holding such excess cash balance estimated at 0.27% for the second quarter of 2012 compared to 0.14% for the first quarter of 2012. The excess cash balance is primarily attributable to calls of U.S. Government agency and other securities which totaled $2.8 billion in the first six months of 2012 with an average yield of 5.33%. The high level of excess cash may persist for several more quarters as the Company holds $1.8 billion of U.S. Government agency securities at interest rates of 4.00% or higher that are likely to be called in the second half of 2012 and another $728 million of such securities that are callable in the first six months of 2013.