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American Equity Investment Life Holding Company (NYSE: AEL), a leading underwriter of index and fixed rate annuities, today reported fourth quarter 2012 net income of $36.4 million, or $0.55 per diluted common share, compared to fourth quarter 2011 net income of $49.7 million or $0.79 per diluted common share. Net income for the full year 2012 was $57.8 million, or $0.89 per diluted common share compared to 2011 net income of $86.2 million or $1.37 per diluted common share.
Non-GAAP operating income
1 for the fourth quarter of 2012 was $30.9 million, or $0.47 per diluted common share, compared to fourth quarter 2011 non-GAAP operating income
1 of $32.6 million or $0.52 per diluted common share. Non-GAAP operating income
1 for the year 2012 was $110.2 million, or $1.69 per diluted common share, compared to 2011 non-GAAP operating income
1 of $133.7 million or $2.12 per diluted common share.
Highlights for the fourth quarter of 2012 include:
Annuity sales (before coinsurance) for the fourth quarter of 2012 were $1.07 billion compared to third quarter 2012 annuity sales of $982 million.
Total invested assets grew to $27.5 billion (amortized cost basis = $25.1 billion).
Investment spread for the fourth quarter of 2012 was 2.59% compared to 2.62% for the third quarter of 2012.
Risk-based capital (RBC) ratio at December 31, 2012 remained above target at 332%.
1 In addition to net income, we have consistently utilized operating income 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. See accompanying tables for reconciliations of net income to operating income and descriptions of reconciling items. See Company’s Annual Report on Form 10-K for a more complete discussion of the reconciling items and their impact on net income for the periods presented. Because these items fluctuate from period to period 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, provides information that may enhance an investor’s understanding of our underlying results and profitability.
Commenting on results, David J. Noble, founder and Executive Chairman said: “2012 was a challenging year in a difficult interest rate environment. Sales for the year were just shy of $4 billion, the third best year in the company’s history, and contributed to a 13% increase in assets under management for the year. Similarly, our operating income was also the third highest in the company’s history and translated into an 11.1% return on average equity. Our fourth quarter sales were the highest quarterly amount in 2012 and, aided by a reduction in our effective income tax rate, fourth quarter operating income was also larger than the other three 2012 quarters. The low interest rate environment did results in calls of government agency securities that increased our cash and short-term investments substantially and caused our investment spread to narrow. However, we expect the investment spread to widen in 2013 as the cash and short-term investments are reinvested in higher yielding investments.”