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

FORM 10-Q

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

        Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Sections 12, 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 July 29, 2003: 14,331,088

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
(Dollars in thousands, except per share data)
(Unaudited)

        Total comprehensive income for the second quarter of 2003 was $15.5 million and was comprised of net income of $6.4 million and a decrease in net unrealized depreciation of available for sale fixed maturity securities and equity securities of $9.1 million.

        Total comprehensive income for the second quarter of 2002 was $77.6 million and was comprised of net income of $4.3 million and a decrease in net unrealized depreciation of available for sale fixed maturity securities and equity securities of $73.3 million.

See accompanying notes.

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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 (Continued)
(Dollars in thousands)
(Unaudited)

See accompanying notes.

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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 and six-month periods ended June 30, 2003, are not necessarily indicative of the results that may be expected for the year ended December 31, 2003. For further information, refer to the 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.

        In May 2003, the Financial Accounting Standards Board (FASB) issued Statement No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". This Statement establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. Statement No. 150 must be applied immediately to instruments entered into or modified after May 31, 2003 and to all other instruments that exist as of the beginning of the third quarter of 2003. Our company-obligated mandatorily redeemable preferred securities of subsidiary trusts, with an aggregate carrying value of $100.7 million at June 30, 2003, will be reclassified to liabilities upon adoption of this Statement. There will not be any adjustment to the carrying values of these instruments upon reclassification. Amounts previously classified as dividends from these financial instruments (approximately $1.9 million per quarter) will be recorded as interest expense upon adoption of Statement No. 150 on a prospective basis. The adoption of Statement No. 150 will not impact net income applicable to common stock or earnings per common share.

        In June 2003, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position (SOP) 03-1, "Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts". The SOP provides guidance on the accounting for sales inducements. We expect to adopt this SOP when it becomes effective in the first quarter of 2004 and will need to change our presentation of deferred expenses relating to sales inducements at the time.

        Certain amounts in the unaudited consolidated financial statements for the period ended June 30, 2002 have been reclassified to conform to the financial statement presentation for June 30, 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 six months ended June 30, 2003 and 2002, the Company paid renewal commissions to the Service Company of $11.1 million and $10.9 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 one of its sources of funds the Service Company borrowed money from the Company. At June 30, 2003 and December 31, 2002, the amounts receivable from the Service Company totaled $15.8 million and $20.5 million, respectively. Principal and interest are payable quarterly over the five years from the date of the advance.

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3.     Reinsurance

        The Company has given notice of termination and recapture of all reserves subject to a reinsurance agreement with a subsidiary of Swiss Reinsurance Company ("Swiss Re"). This agreement is more fully described in Note 5 to the Audited Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002. The termination and recapture is to be effective on September 30, 2003.

        The Company has also entered into a reinsurance transaction with Hannover Life Reassurance Company ("Hannover") to be effective on September 30, 2003. This transaction and the underlying agreement are similar to the transaction with Hannover that was entered into during 2002. The 2002 transaction with Hannover is more fully described in Note 5 to the Audited Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002.

        Each of these transactions are treated as reinsurance under statutory accounting practices and as financial reinsurance under GAAP. The statutory surplus benefit that will be eliminated by the termination of the Swiss Re agreement will be replaced by the statutory surplus benefit provided by the new Hannover agreement. The termination of the Swiss Re agreement will result in the full repayment of the expense allowance allowed under the agreement which was previously being repaid ratably over a five-year period and is reported in the consolidated balance sheets as "Amounts due to Reinsurer".

4.     Notes Payable

        The Company amended its credit agreement during August 2003. The amended agreement requires that the financial strength ratings for American Equity Investment Life Insurance Company issued by A.M. Best and Standard & Poor's may not be less than the current financial strength ratings of B++ and BBB+, respectively. The line of credit is more fully described in Note 7 to the Audited Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002.

5.     Retirement and Stock Compensation Plans

        During the second quarter of 2003, the Company created a Rabbi Trust, the NMO Deferred Compensation Trust (the "Trust") and contributed 1,262,136 shares of its common stock to the Trust to fund the vested share liability as of January 1, 2003 established under the American Equity Investment NMO Deferred Compensation Plan. This Plan is more fully described in Note 10 to the Audited Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002. In accordance with FASB's Emerging Issues Task Force Issue No. 97-14, "Accounting for Deferred Compensation Arrangements where Amounts Earned are Held in a Rabbi Trust and Invested", the stock held in the Trust is included as part of common stock issued and outstanding.

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6.     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.

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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

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 June 30, 2003, and the consolidated results of operations for the periods ended June 30, 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 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

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Results of Operations

Three and Six Months Ended June 30, 2003 and 2002

        Premiums and deposits (before and net of coinsurance) collected during the six months ended June 30, 2003 and 2002, by product category, were as follows:

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

        The reduction in annuity deposits in 2003 resulted from actions taken by us to manage our capital position, including reductions in our interest crediting rates on both new and existing annuities, reductions in sales commissions and suspension of sales of certain annuity products. We will continue to monitor our levels of production 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.

        Our net income increased 50% to $6.4 million for the second quarter of 2003, and 45% to $10.9 million for the six months ended June 30, 2003, compared to $4.3 million and $7.5 million for the same period in 2002. The growth in net income is directly tied to: (i) growth in our assets, (ii) decreases in interest crediting rates, and (iii) realized gains on sales of investments.

        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 59% to $5.5 million for the second quarter of 2003, and 73% to $11.2 million for the six months ended June 30, 2003 compared to $3.5 million and $6.5 million for the same periods 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 were $236.8 for the six months ended June 30, 2003 compared to $145.1 million for the same period in 2002.

        Net investment income increased 10% to $84.2 million in the second quarter of 2003, and 21% to $174.8 million for the six months ended June 30, 2003 compared to $76.6 million and $144.2 million for the same periods in 2002. These increases are principally attributable to the growth in our annuity business and corresponding increases in our invested assets. Invested assets (amortized cost basis) increased 20% to $5,499.4 million at June 30, 2003 compared to $4,574.0 million at June 30, 2002, while the weighted average yield earned on average invested assets was 6.72% for the six months ended June 30, 2003 compared to 6.92% for the same period in 2002.

        Realized gains (losses) on the sale of investments were $7.6 million in the second quarter of 2003 compared to $0.6 million for the same period in 2002. For the six months ended June 30, 2003, we had realized gains of $7.8 million compared to realized losses of $0.5 million for the same period in 2002. In the first six months of

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2003, realized gains of $7.8 million included: (i) net realized gains of $10.7 million on the sale of certain corporate fixed maturity and equity securities and (ii) the write down of $2.9 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 index annuities was an increase of $33.1 million in the second quarter of 2003, and an increase of $19.1 million for the six months ended June 30, 2003 compared to a decline of $34.3 million and a decline of $44.0 million for the same periods in 2002. The difference between the change in fair value of derivatives between the periods 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 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.

        Interest credited to account balances increased 31% to $56.1 million in the second quarter of 2003, and 39% to $109.8 million for the six months ended June 30, 2003 compared to $42.8 million and $79.0 for the same periods in 2002. These increases are principally attributable to the increase in annuity liabilities, and also to the increased costs of funding the minimum guaranteed interest credited on our index policies, as described below. Such increases were offset in part by several reductions in interest crediting rates that we implemented in 2003 and 2002 in connection with our spread management process.

        Weighted average crediting rates as of June 30, 2003 and 2002 for our annuity liabilities, are summarized as follows:

        The above weighted average crediting rates for our fixed rate annuities include multi-year rate guaranteed, annually adjustable rate products and the portion of index annuity liabilities allocated to an annually adjustable fixed rate option. 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 index annuities, index costs represent the expenses we incur to fund the annual index credits and minimum guaranteed interest credited on the 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 index business, we credited to policyholder accounts minimum guarantees during the six months ended June 30, 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 six months ended June 30, 2003 and 2002 was 0.27% and 0.24%, respectively. See Critical Accounting Policies—Derivatives 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 increased to $39.3 million in the second quarter of 2003 and to $41.2 million for the six months ended June 30, 2003 compared to ($22.8) million and ($17.4) million for the same periods in 2002. These amounts arise from SFAS No. 133, which requires recognition of the change in estimated fair value of index annuity reserves. Under SFAS No. 133, the annual crediting liabilities on our 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 index credits. 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.

        Amortization of deferred policy acquisition costs increased 44% to $15.4 million in the second quarter of 2003, and 50% to $26.9 million for the six months ended June 30, 2003 compared to $10.8 million and $17.9 million for the same periods in 2002. This increase is due to growth in our annuity business as discussed above. Additional amortization associated with realized gains on investments sold during the second quarter of 2003 was $3.7 million in the second quarter and first six months of 2003. See Notes 1 and 4 of the Notes to Consolidated Financial Statements found in the Annual Report on Form 10-K.

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        Other operating costs and expenses totaled $6.6 million in the second quarter of 2003 compared to $6.7 million for the same period in 2002. Other operating costs and expenses increased 29% to $12.8 million for the six months ended June 30, 2003 compared to $9.9 million for the same periods 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 the first six months of 2002.

        Income tax expense increased 56% to $3.4 million in the second quarter of 2003, and 52% to $5.7 million for the six months ended June 30, 2003 compared to $2.2 million and $3.8 million for the same periods in 2002. The increase is principally due to an increase in pretax income. Our effective tax rate for the second quarter of 2003 and the six months ended June 2003 were 29% and 28%, respectively compared to 26% and 25% for the same periods in 2002. 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 $5,585.5 million at June 30, 2003 compared to $5,327.8 at December 31, 2002 as a result of the growth in our annuity business discussed above and a decrease in the unrealized loss on our available for sale fixed maturity and equity securities. At June 30, 2003, the fair value of our available for sale fixed maturity and equity securities was $19.0 million less than the amortized cost of those investments, compared to $44.8 million at December 31, 2002. At June 30, 2003, the amortized cost of our fixed maturity securities held for investment exceeded the market value by $2.5 million, compared to $1.8 million at December 31, 2002. The decrease in the net unrealized investment losses at June 30, 2003 compared to December 31, 2002 is related to a decrease of approximately 30 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.

        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 June 30, 2003 and December 31, 2002 that were in an unrealized loss position were as follows:

        The amortized cost and estimated fair value of fixed maturity securities at June 30, 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

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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.