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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

For the transition period from                              to                             

Commission File Number: 0-25985

American Equity Investment Life Holding Company
(Exact name of registrant as specified in its charter)

5000 Westown Parkway, Suite 440
West Des Moines, Iowa 50266
(Address of principal executive offices)

(515) 221-0002
(Telephone)

(Former name, former address and former fiscal year, if changed since last report)

        Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes o    No ý

APPLICABLE TO CORPORATE ISSUERS:

        Shares of common stock outstanding at April 25, 2003:    14,438,452

PART I.—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
(Unaudited)

2

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in thousands, except per share data)
(Unaudited)

See accompanying notes.

3

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)

See accompanying notes.

4

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(Dollars in thousands, except per share data)
(Unaudited)

See accompanying notes.

5

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)

6

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)

See accompanying notes.

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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2003
(Unaudited)

1.    Basis of Presentation

        The accompanying unaudited consolidated financial statements of American Equity Investment Life Holding Company (the Company) have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and notes required by GAAP for complete financial statements. The unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring items, which are necessary to present fairly our financial position and results of operations on a basis consistent with the prior audited financial statements. Operating results for the three-month period ended March 31, 2003, are not necessarily indicative of the results that may be expected for the year ended December 31, 2003. For further information, refer to our consolidated financial statements and notes for the year ended December 31, 2002 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002.

        Certain amounts in the unaudited consolidated financial statements for the period ended March 31, 2002 have been reclassified to conform to the financial statement presentation for March 31, 2003 and December 31, 2002.

2.    General Agency Commission and Servicing Agreement

        The Company has a General Agency Commission and Servicing Agreement with American Equity Investment Service Company (the Service Company), wholly-owned by the Company's chairman, whereby, the Service Company acts as a national supervisory agent with responsibility for paying commissions to agents of the Company. This Agreement is more fully described in Note 8 to the Audited Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002.

        During the three months ended March 31, 2003 and 2002, the Company paid renewal commissions to the Service Company of $5.6 million and $5.5 million, respectively, which were used to reduce the amount due under the General Agency Commission and Servicing Agreement, and amounts attributable to imputed interest.

        As a source of funds, the Service Company borrowed money from the Company. At March 31, 2003 and December 31, 2002, the amounts receivable from the Service Company totaled $18.2 million and $20.5 million, respectively. Principal and interest are payable quarterly over five years from the date of the advance.

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3.    Earnings Per Share

        The following table sets forth the computation of earnings per common share and earnings per common share—assuming dilution:

        The effect of the convertible stock of the subsidiary trust has not been included in the computation of dilutive earnings per common share as the effect is antidilutive.

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        Management's discussion and analysis reviews our consolidated financial position at March 31, 2003, and the consolidated results of operations for the periods ended March 31, 2003 and 2002, and where appropriate, factors that may affect future financial performance. This analysis should be read in conjunction with the unaudited consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q, and the audited consolidated financial statements, notes thereto and selected consolidated financial data appearing in our Annual Report on Form 10-K for the year ended December 31, 2002.

        All statements, trend analyses and other information contained in this report and elsewhere (such as in filings by us with the Securities and Exchange Commission, press releases, presentations by us or our management or oral statements) relative to markets for our products and trends in our operations or financial results, as well as other statements including words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," and other similar expressions, constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results to be materially different from those contemplated by the forward-looking statements. Such factors include, among other things:

•

general economic conditions and other factors, including prevailing interest rate levels and stock and credit market performance which may affect (among other things) our ability to sell our

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products, our ability to access capital resources and the costs associated therewith, the market value of our investments and the lapse rate and profitability of policies

•

customer response to new products and marketing initiatives



•

mortality and other factors which may affect the profitability of our products



•

changes in Federal income tax laws and regulations which may affect the relative income tax advantages of our products



•

increasing competition in the sale of annuities



•

regulatory changes or actions, including those relating to regulation of financial services affecting (among other things) bank sales and underwriting of insurance products and regulation of the sale, underwriting and pricing of products



•

the risk factors or uncertainties listed from time to time in our private placement memorandums or filings with the Securities and Exchange Commission

Results of Operations

Three Months Ended March 31, 2003 and 2002

        New annuity deposits (net of reinsurance) were $199.2 million and $421.0 million for the three months ended March 31, 2003 and 2002, respectively. New annuity deposits before reinsurance totaled $319.2 million and $610.5 million for the three months ended March 31, 2003 and 2002, respectively. The reduction in new annuity deposits resulted from actions taken by us to manage our capital position, including reductions in our interest crediting rates on both new and existing annuities and suspension of sales of certain annuity products. We will continue to monitor our levels of production throughout 2003 and take such actions as we believe appropriate to help maintain our rate of production within the range that our statutory capital and surplus of our life subsidiaries will support.

        Premiums and deposits (after cancellations and net of reinsurance) collected during the three months ended March 31, 2003 and 2002, by product category, were as follows:

        For information related to our reinsurance agreements, see Note 5 of the Notes to Consolidated Financial Statements found in the Annual Report on Form 10-K.

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        Premiums and deposits (after cancellations and before reinsurance) collected during the three months ended March 31, 2003 and 2002, by product category, were as follows:

        Our net income increased 37% to $4.5 million for the first quarter of 2003, compared to $3.3 million for the same period in 2002. The growth in net income is directly tied to: (i) growth in our assets (ii) increased investment earnings on such assets and (iii) decreases in interest crediting rates.

        Traditional life and accident and health insurance premiums increased 23% to $3.6 million for the first quarter of 2003, compared to $2.9 million for the same period in 2002. These changes are principally attributable to increases in sales of life insurance products.

        Annuity and single premium universal life product charges (surrender charges assessed against policy withdrawals and mortality and expense charges assessed against single premium universal life policyholder account balances) increased 90% to $5.7 million for the first quarter of 2003, compared to $3.0 million for the same period in 2002. These increases are principally attributable to the growth in our annuity business and correspondingly, an increase in annuity policy withdrawals subject to surrender charges. Withdrawals from annuity and single premium universal life policies including free partial withdrawals were $119.9 million for the three months ended March 31, 2003 compared to $66.3 million for the same period in 2002.

        Net investment income increased 34% to $90.6 million in the first quarter of 2003, compared to $67.6 million for the same period in 2002. This increase is principally attributable to the growth in our annuity business and corresponding increases in our invested assets. Invested assets (amortized cost basis) increased 24% to $5,171.7 million at March 31, 2003 compared to $4,161.5 million at March 31, 2002, while the weighted average yield earned on average invested assets was 7.00% for the three months ended March 31, 2003 compared to 6.82% for the same period in 2002.

        Realized gains (losses) on investments consisted of net realized gains of $0.2 million in the first quarter of 2003 compared to realized losses of $1.1 million for the same period in 2002. In the first quarter of 2003, net realized gains included: (i) realized gains of $3.4 million and realized losses of $0.3 million on the sale of certain corporate fixed maturity and equity securities and (ii) the writedown of $2.9 million in the fair value of a security in recognition of an "other than temporary" impairment. In the first quarter of 2002, net realized losses of $1.1 million included: (i) realized gains of

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$0.9 million on the sale of certain corporate fixed maturity and equity securities and (ii) the writedown of $2 million in the fair value of a security in recognition of an "other than temporary" impairment.

        Change in fair value of derivatives that we hold to fund the annual index credits on our equity index annuities was a decline of $14.0 million in the first quarter of 2003, compared to a decline of $9.7 million for the first quarter of 2002. The difference between the change in fair value of derivatives between the two quarters is primarily due to the performance of the indexes upon which our call options are based. The change in fair value of derivatives arises from SFAS No. 133, which requires that we mark to market the purchased call options we use to fund the annual index credits on our equity index annuities. We include this as a component of our revenues. See Critical Accounting Policies—Derivative Instruments—Equity Index Products included in Management's Discussion and Analysis found in the Annual Report on Form 10-K.

        Traditional life and accident and health insurance benefits remained level at $2.3 million in the first quarter of 2003 compared to the same period in 2002.

        Interest credited to account balances increased 48% to $53.7 million in the first quarter of 2003, compared to $36.2 million for the same period in 2002. This increase is principally attributable to the increase in our annuity liabilities, and also by the increased costs of funding the minimum guaranteed interest credited on our equity index policies, as described below. Such increases were offset in part by a series of interest crediting rate cuts we implemented in 2002 in connection with our spread management process.

        Changes in the weighted average crediting rates for our annuity liabilities are summarized as follows:

        The above crediting rates on our fixed rate annuities includes both multi-year rate guaranteed and annually adjustable rate products. Such rates are disclosed with and without the impact of first-year bonuses paid to policyholders. Generally such bonuses are deducted from the commissions paid to sales agents on such products and deferred as policy acquisition costs. With respect to our equity index annuities, the weighted average option costs represent the expenses we incur to fund the annual index credits on the equity index business. Gains realized on such options are recorded as part of the change in fair value of derivatives, and are also reflected as an expense in interest credited to annuity policyholder account balances. In addition to the cost of options to fund the annual index credits on the equity index business, we credited to policyholder accounts minimum guarantees during the three months ended March 31, 2003 and 2002 on these contracts. The estimated weighted average cost of credits to policyholder accounts for these minimum guarantees on these contracts during the three months ended March 31, 2003 and 2002 was 0.27% and 0.29%, respectively. See Critical Accounting Policies—Derivative Instruments—Equity Index Products and Note 1 of the Notes to Consolidated Financial Statements found in the Annual Report on Form 10-K.

        Change in fair value of embedded derivatives decreased 64% to $1.9 million in the first quarter of 2003, compared to $5.3 million for the three months ended March 31, 2002. These amounts arise from SFAS No. 133, which requires recognition of the change in estimated fair value of equity index annuity reserves. Under SFAS No. 133, the annual crediting liabilities on our equity index annuities are treated as a "series of embedded derivatives" over the life of the applicable contracts. We are required to estimate the fair value of these future liabilities by projecting the cost of the annual options we will purchase in the future to fund the index credits. See Critical Accounting Policies—Derivative

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Instruments—Equity Index Products and Note 1 of the Notes to Consolidated Financial Statements found in the Annual Report on Form 10-K.

        Interest expense on notes payable decreased 22% to $0.4 million for the first quarter of 2003, compared to $0.6 million for the same period in 2002. This decrease is attributable to a decrease in the amounts due, and also to a decrease in the average interest rate.

        Interest expense on General Agency Commission and Servicing Agreement decreased 13% to $0.9 million for the first quarter of 2003, compared to $1.1 million for the same period in 2002. The decrease was principally attributable to a decrease in the amounts due under General Agency Commission and Servicing Agreement.

        Interest expense on amounts due under repurchase agreements was $0.4 million for the first quarter of 2003. There was no interest expense on amounts due under repurchase agreements for the first quarter of 2002 as no borrowings were outstanding during the quarter.

        Amortization of deferred policy acquisition costs increased 60% to $11.5 million in the first quarter of 2003, compared to $7.2 million for the same period in 2002. This increase is primarily due to growth in our annuity business as discussed above. See Notes 1and 4 of the Notes to Consolidated Financial Statements found in the Annual Report on Form 10-K.

        Other operating costs and expenses increased 89% to $6.2 million in the first quarter of 2003, compared to $3.3 million for the same period in 2002. This increase is principally attributable to increases in marketing expenses, employees and related salaries and costs of employment due to growth in our annuity business. In addition, during the first quarter of 2002 we received a refund of approximately $0.5 million as a result of the cancellation of our agents convention scheduled for the week of September 11, 2001, which reduced our other operating costs and expenses for that period.

        Income tax expense increased 46% to $2.4 million in the first quarter of 2003, compared to $1.6 million for the same period in 2002. The increase is principally due to an increase in pretax income. Our effective tax rate rates for the three months ended March 31, 2003 and 2002 were 27% and 24%, respectively. These effective income tax rates varied from the applicable statutory federal income tax rate of 35% principally due to: (i) the impact of earnings attributable to company-obligated mandatorily redeemable preferred securities of subsidiary trusts; and (ii) the impact of state taxes on the federal income tax expense. See Note 6 of the Notes to Consolidated Financial Statements found in the Annual Report on Form 10-K.

Financial Condition

Investments

        Cash and investments increased to $5,387.9 million at March 31, 2003 compared to $5,327.8 million at December 31, 2002 as a result of the growth in our annuity business discussed above offset by a decrease in the fair value of our available for sale fixed maturity and equity securities. At March 31, 2003, the fair value of our available for sale fixed maturity and equity securities was $51.2 million less than the amortized cost of those investments, compared to $44.8 million at December 31, 2002. At March 31, 2003, the market value of our fixed maturity securities held for investment exceeded the amortized cost by $1.1 million, compared to $1.8 million at December 31, 2002. The increase in the net unrealized investment losses at March 31, 2003 compared to December 31, 2002 is related to an increase of approximately 20 basis points in market interest rates. Such unrealized losses are recognized in the accumulated other comprehensive loss component of stockholders' equity, net of related changes in the amortization of deferred policy acquisition costs and deferred income taxes. The resulting deferred income tax asset has been reviewed by management and no related valuation allowance was considered necessary at March 31, 2003. However, if management

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were to determine that an allowance was required in subsequent 2003 quarters, such amounts would increase the accumulated other comprehensive loss component of stockholders' equity.

        Our investment portfolio is summarized in the tables below:

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        The amortized cost and estimated fair value of fixed maturity securities and equity securities at March 31, 2003 and December 31, 2002 that were in an unrealized loss position were as follows:

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        The amortized cost and estimated fair value of fixed maturity securities at March 31, 2003 and December 31, 2002, by contractual maturity, that were in an unrealized loss position are shown below. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. All of our mortgage-backed and asset-backed securities provide for periodic payments throughout their lives, and are shown below as a separate line.

        The table below presents our fixed maturity securities by NAIC designation and the equivalent ratings of the nationally recognized securities rating organizations.

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        Approximately 77% and 80% of our total invested assets were in United States Government and agency fixed maturity securities including government guaranteed mortgage-backed securities at March 31, 2003 and December 31, 2002, respectively. Corporate securities represented approximately 7% and 8% at March 31, 2003 and December 31, 2002 of our total invested assets, respectively. There were no other significant concentrations in the portfolio by type of security or by industry.

        At March 31, 2003 and December 31, 2002, the fair value of investments we owned that were non-investment grade or not rated was $47.0 million and $51.9 million, respectively. The unrealized losses on investments we owned that were non-investment grade or not rated at March 31, 2003 and December 31, 2002, was $18.2 million and $19.8 million, respectively.

        At March 31, 2003 and December 31, 2002, we identified certain invested assets which have characteristics (i.e. significant unrealized losses compared to book value and industry trends) creating uncertainty as to our future assessment of other than temporary impairments which are listed below by length of time these invested assets have been in an unrealized loss position. We have excluded from this list securities with unrealized losses which are related to market movements in interest rates.