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American Equity Reports Second Quarter 2013 Results

Paragraph beneath SPREAD IMPROVES AS CASH AND SHORT-TERM INVESTMENTS REDUCED, first sentence should read: American Equity’s investment spread for the second quarter of 2013 increased to 2.70% compared to 2.68% for the first quarter of 2013 (sted American Equity’s investment spread for the first quarter of 2013 increased to 2.70% compared to 2.68% for the first quarter of 2013).

The corrected release reads:

AMERICAN EQUITY REPORTS SECOND QUARTER 2013 RESULTS

American Equity Investment Life Holding Company (NYSE: AEL), a leading underwriter of index and fixed rate annuities, today reported second quarter 2013 net income of $120.1 million, or $1.71 per diluted common share, compared to second quarter 2012 net income of $18.8 million, or $0.30 per diluted common share.

Non-GAAP operating income 1 for the second quarter of 2013 was $30.3 million, or $0.43 per diluted common share, compared to second quarter 2012 non-GAAP operating income 1 of $27.4 million or $0.43 per diluted common share.

Second quarter 2013 net income and non-GAAP operating income 1 includes an after tax charge of $5.5 million or $0.08 per diluted common share to cover assessments from state guaranty fund associations related to the insolvency of Executive Life Insurance Company of New York (“ELNY”). Excluding this charge, second quarter 2013 non-GAAP operating income 1 was $35.8 million, or $0.51 per diluted common share.

Highlights for the second quarter of 2013 include:

  • Pre-charge non-GAAP operating income 1 per share of $0.51 up 19% compared to second quarter 2012.
  • Annuity sales (before coinsurance) were $1.1 billion compared to first quarter 2013 annuity sales of $930 million.
  • Total invested assets were $29.1 billion (amortized cost basis = $27.9 billion).
  • Investment spread was 2.70% compared to 2.68% for the first quarter of 2013.
  • Estimated risk-based capital (RBC) ratio at June 30, 2013 remained above target at 324%.
  • Book value per share (excluding accumulated other comprehensive income) increased to $18.66 at June 30, 2013 compared to $16.84 at March 31, 2013.

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 Quarterly Report on Form 10-Q 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: “Second quarter 2013 financial results were very satisfactory. Assets under management grew 4% from last quarter which includes sales of $1.1 billion. Our operating income 1 per share, exclusive of the charge for the ELNY state guaranty fund assessments, grew 19% year over year and translated into an 11.1% return on average equity for the trailing 12 months. And most importantly, our investment spread for the quarter was 2.70% and we made significant progress investing our excess cash and short-term investments into higher yielding investments.”

SPREAD IMPROVES AS CASH AND SHORT-TERM INVESTMENTS REDUCEDAmerican Equity’s investment spread for the second quarter of 2013 increased to 2.70% compared to 2.68% for the first quarter of 2013. Second quarter 2013 investment spread and average yield on invested assets continued to be affected by the impact of high levels of low yielding cash and short-term investments during the quarter. The average yield on invested assets including the excess cash and short-term investments balances was 4.94% for the second quarter of 2013 compared to 5.01% in the first quarter of 2013 and 5.34% in the second quarter of 2012.

American Equity reduced the average balance for excess cash and short-term investments to $1.7 billion in the second quarter of 2013 from $1.8 billion in the first quarter of 2013 and $2.7 billion in the fourth quarter of 2012. The average balance in the second quarter of 2012 was $1.45 billion. The growth of this balance in 2012 was primarily attributable to calls of U.S. Government agency securities. At June 30, 2013, the Company held $816 million in excess cash and short-term investments compared to $1.3 billion and $2.2 billion at March 31, 2013 and December 31, 2012, respectively.

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