AMERICAN EQUITY INVESTMENT LIFE HOLDING CO - FORM 8-K - EX-99.2 - FINANCIAL SUPPLEMENT

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EX-99.1 - PRESS RELEASE - AMERICAN EQUITY INVESTMENT LIFE HOLDING CO	a2017-12x31_ael8kexhibit991.htm
8-K - 8-K - AMERICAN EQUITY INVESTMENT LIFE HOLDING CO	a2017-12x31_ael8k.htm

Exhibit 99.2

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement

December 31, 2017



A.	Financial Highlights
	Condensed Consolidated Balance Sheets	1
	Consolidated Statements of Operations	2
	Quarterly Summary - Most Recent 5 Quarters	3
	Non-GAAP Financial Measures
	Reconciliation from Net Income to Non-GAAP Operating Income	4
	Summary of Adjustments to Arrive at Non-GAAP Operating Income	5
	Quarterly Summary - Reconciliation from Net Income to Non-GAAP Operating Income	6
	Quarterly Summary - Summary of Adjustments to Arrive at Non-GAAP Operating Income	7
	Capitalization/Book Value per Share	8
	Spread Results	9

B.	Product Summary
	Summary of Cost of Money for Deferred Annuities	9
	Annuity Account Balance Rollforward	9
	Annuity Deposits by Product Type	10
	Surrender Charge Protection and Account Values by Product Type	10
	Annuity Liability Characteristics	11

C.	Investment Summary
	Summary of Invested Assets	14
	Credit Quality of Fixed Maturity Securities	14
	Watch List Securities	14
	Fixed Maturity Securities by Sector	15
	Mortgage Loans on Commercial Real Estate	16

D.	Shareholder Information	17

E.	Research Analyst Coverage	18

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - December 31, 2017

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)



	December 31, 2017		December 31, 2016
Assets
Investments:
Fixed maturity securities:
Available for sale, at fair value	$	45,372,989	$	41,060,494
Held for investment, at amortized cost	77,041		76,825
Mortgage loans on real estate	2,665,531		2,480,956
Derivative instruments	1,568,380		830,519
Other investments	616,764		308,774
Total investments	50,300,705		44,757,568

Cash and cash equivalents	1,434,045		791,266
Coinsurance deposits	4,858,289		4,639,492
Accrued investment income	429,008		397,773
Deferred policy acquisition costs	2,714,523		2,905,377
Deferred sales inducements	2,001,892		2,208,218
Deferred income taxes	38,147		168,578
Income taxes recoverable	—		11,474
Other assets	254,127		173,726
Total assets	$	62,030,736	$	56,053,472

Liabilities and Stockholders' Equity
Liabilities:
Policy benefit reserves	$	56,142,673	$	51,637,026
Other policy funds and contract claims	282,884		298,347
Notes and loan payable	494,093		493,755
Subordinated debentures	242,565		241,853
Income taxes payable	34,285		—
Other liabilities	1,984,079		1,090,896
Total liabilities	59,180,579		53,761,877

Stockholders' equity:
Common stock	89,331		88,001
Additional paid-in capital	791,446		770,344
Accumulated other comprehensive income	724,599		339,966
Retained earnings	1,244,781		1,093,284
Total stockholders' equity	2,850,157		2,291,595
Total liabilities and stockholders' equity	$	62,030,736	$	56,053,472

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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - December 31, 2017

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)

(Unaudited)



	Three Months Ended December 31,						Year Ended December 31,
	2017			2016			2017			2016
Revenues:
Premiums and other considerations	$	8,537		$	12,233		$	34,228		$	43,767
Annuity product charges	56,388			48,275			200,494			173,579
Net investment income	512,709			475,633			1,991,997			1,849,872
Change in fair value of derivatives	661,993			95,391			1,677,871			164,219
Net realized gains on investments, excluding other than temporary impairment ("OTTI") losses	2,719			844			10,509			11,524
OTTI losses on investments:
Total OTTI losses	(2,485		)	(10,015		)	(2,758		)	(21,349		)
Portion of OTTI losses recognized in (from) other comprehensive income	(591		)	455			(1,872		)	(1,330		)
Net OTTI losses recognized in operations	(3,076		)	(9,560		)	(4,630		)	(22,679		)
Loss on extinguishment of debt	—			—			(18,817		)	—
Total revenues	1,239,270			622,816			3,891,652			2,220,282

Benefits and expenses:
Insurance policy benefits and change in future policy benefits	10,535			14,916			43,219			52,483
Interest sensitive and index product benefits	630,905			237,737			2,023,668			725,472
Amortization of deferred sales inducements	65,885			123,770			176,612			251,166
Change in fair value of embedded derivatives	290,890			(151,099		)	919,735			543,465
Interest expense on notes and loan payable	6,371			7,599			30,368			28,248
Interest expense on subordinated debentures	3,864			3,331			14,124			12,958
Amortization of deferred policy acquisition costs	93,716			175,526			255,964			374,012
Other operating costs and expenses	29,366			23,445			111,691			102,231
Total benefits and expenses	1,131,532			435,225			3,575,381			2,090,035
Income before income taxes	107,738			187,591			316,271			130,247
Income tax expense	70,935			66,795			141,626			47,004
Net income	$	36,803		$	120,796		$	174,645		$	83,243

Earnings per common share	$	0.41		$	1.37		$	1.96		$	0.98
Earnings per common share - assuming dilution	$	0.41		$	1.35		$	1.93		$	0.97

Weighted average common shares outstanding (in thousands):
Earnings per common share	89,308			88,211			88,982			84,793
Earnings per common share - assuming dilution	90,727			89,178			90,311			85,605

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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - December 31, 2017

Quarterly Summary - Most Recent 5 Quarters (Unaudited)



	Q4 2017			Q3 2017			Q2 2017			Q1 2017			Q4 2016
	(Dollars in thousands, except per share data)
Revenues:
Traditional life insurance premiums	$	2,989		$	2,832		$	2,590		$	2,790		$	2,767
Life contingent immediate annuity considerations	5,548			5,737			5,130			6,612			9,466
Surrender charges	13,573			13,521			13,896			13,634			11,196
Lifetime income benefit rider fees	42,815			38,410			34,707			29,938			37,079
Net investment income	512,709			500,202			493,489			485,597			475,633
Change in fair value of derivatives	661,993			362,525			266,820			386,533			95,391
Net realized gains on investments, excluding OTTI	2,719			1,579			3,873			2,338			844
Net OTTI losses recognized in operations	(3,076		)	(464		)	(949		)	(141		)	(9,560		)
Loss on extinguishment of debt (b)	—			(18,389		)	(428		)	—			—
Total revenues	1,239,270			905,953			819,128			927,301			622,816

Benefits and expenses:
Traditional life insurance policy benefits and change in future policy benefits	1,528			1,898			2,020			2,185			2,026
Life contingent immediate annuity benefits and change in future policy benefits	9,007			8,925			7,966			9,690			12,890
Interest sensitive and index product benefits (c)	630,905			501,028			472,596			419,139			237,737
Amortization of deferred sales inducements (d)	65,885			14,707			33,695			62,325			123,770
Change in fair value of embedded derivatives	290,890			229,702			174,973			224,170			(151,099		)
Interest expense on notes and loan payable	6,371			7,597			8,678			7,722			7,599
Interest expense on subordinated debentures	3,864			3,502			3,422			3,336			3,331
Amortization of deferred policy acquisition costs (d)	93,716			23,023			49,547			89,678			175,526
Other operating costs and expenses	29,366			28,782			25,964			27,579			23,445
Total benefits and expenses	1,131,532			819,164			778,861			845,824			435,225
Income before income taxes	107,738			86,789			40,267			81,477			187,591
Income tax expense (a)	70,935			29,832			13,321			27,538			66,795
Net income (a)(b)(c)(d)	$	36,803		$	56,957		$	26,946		$	53,939		$	120,796

Earnings per common share	$	0.41		$	0.64		$	0.30		$	0.61		$	1.37
Earnings per common share - assuming dilution (a)(b)(c)(d)	$	0.41		$	0.63		$	0.30		$	0.60		$	1.35

Weighted average common shares outstanding (in thousands):
Earnings per common share	89,308			89,069			88,897			88,647			88,211
Earnings per common share - assuming dilution	90,727			90,421			90,112			89,976			89,178


(a)	Q4 2017 includes income tax expense related to the revaluation of our deferred tax assets and liabilities using the new enacted federal tax rate resulting from the Tax Cuts and Jobs Act of 2017. The change in the federal income tax rate decreased net income and earnings per common share - assuming dilution by $35.9 million and $0.40 per share, respectively.


(b)	Q3 2017 includes a loss on the extinguishment of our 6.625% Notes due in 2021. The loss decreased net income and earnings per common share - assuming dilution by $10.8 million and $0.12 per share, respectively.


(c)	Q3 2017 includes expense from the revision of assumptions used in determining reserves held for lifetime income benefit riders. The impact increased interest sensitive and index product benefits by $21.6 million and decreased net income and earnings per common share - assuming dilution by $13.9 million and $0.15 per share, respectively.


(d)	Q3 2017 includes a benefit from unlocking which reduced amortization of deferred sales inducements and deferred policy acquisition costs by $34.3 million and $48.2 million, respectively, and increased net income and earnings per common share - assuming dilution by $53.1 million and $0.59 per share, respectively.

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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - December 31, 2017

NON-GAAP FINANCIAL MEASURES

In addition to net income, we have consistently utilized non-GAAP operating income and non-GAAP 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. Non-GAAP operating income equals net income adjusted to eliminate the impact of items that fluctuate from quarter to quarter in a manner unrelated to core operations, and we believe measures excluding their impact are useful in analyzing operating trends. The most significant adjustments to arrive at non-GAAP operating income eliminate the impact of fair value accounting for our fixed index annuity business and the impact of the Tax Cuts and Jobs Act of 2017 ("Tax Reform"). The adjustment related to fair value accounting for our fixed index annuity business is not economic in nature but rather impacts the timing of reported results. We believe the combined presentation and evaluation of non-GAAP operating income together with net income provides information that may enhance an investor’s understanding of our underlying results and profitability.

Reconciliation from Net Income to Non-GAAP Operating Income (Unaudited)



	Three Months Ended December 31,						Year Ended December 31,
	2017			2016			2017			2016
	(Dollars in thousands, except per share data)
Net income (b)	$	36,803		$	120,796		$	174,645		$	83,243
Adjustments to arrive at non-GAAP operating income: (a)
Net realized investment (gains) losses, including OTTI	(676		)	6,436			(5,093		)	7,188
Change in fair value of derivatives and embedded derivatives - fixed index annuities	5,463			(103,444		)	121,846			56,634
Change in fair value of derivatives - debt	(1,085		)	(3,748		)	(1,224		)	(1,265		)
Litigation reserve	—			—			—			(1,957		)
Income taxes (b)	34,003			35,927			(5,124		)	(21,499		)
Non-GAAP operating income	$	74,508		$	55,967		$	285,050		$	122,344

Per common share - assuming dilution:
Net income	$	0.41		$	1.35		$	1.93		$	0.97
Adjustments to arrive at non-GAAP operating income:
Net realized investment (gains) losses, including OTTI	(0.01		)	0.07			(0.05		)	0.08
Change in fair value of derivatives and embedded derivatives - fixed index annuities	0.06			(1.16		)	1.35			0.66
Change in fair value of derivatives - debt	(0.01		)	(0.04		)	(0.01		)	(0.01		)
Litigation reserve	—			—			—			(0.02		)
Income taxes	0.37			0.41			(0.06		)	(0.25		)
Non-GAAP operating income	$	0.82		$	0.63		$	3.16		$	1.43


(a)	Adjustments to net income to arrive at non-GAAP operating income are presented net of related adjustments to amortization of deferred sales inducements (DSI) and deferred policy acquisition costs (DAC) where applicable.

(b)

Net income for the three months and year ended December 31, 2017 includes income tax expense related to the revaluation of our deferred tax assets and liabilities using the new enacted federal tax rate resulting from Tax Reform. The change in the federal income tax rate decreased net income and earnings per common share - assuming dilution by $35.9 million and $0.40 per share, respectively. The impact of Tax Reform has been excluded from non-GAAP operating income.

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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - December 31, 2017

NON-GAAP FINANCIAL MEASURES

Summary of Adjustments to Arrive at Non-GAAP Operating Income (Unaudited)



	Three Months Ended December 31,						Year Ended December 31,
	2017			2016			2017			2016
	(Dollars in thousands)
Net realized investment gains and losses, including OTTI:
Net realized (gains) losses on investments, including OTTI	$	357		$	8,716		$	(5,879	)	$	11,155
Amortization of DAC and DSI	(1,033		)	(2,280		)	786			(3,967		)
Income taxes	241			(2,290		)	1,813			(2,557		)
	$	(435	)	$	4,146		$	(3,280	)	$	4,631
Change in fair value of derivatives and embedded derivatives:
Index annuities	$	8,174		$	(255,710	)	$	270,809		$	89,759
Interest rate caps and swap	(1,085		)	(3,748		)	(1,224		)	(1,265		)
Amortization of DAC and DSI	(2,711		)	152,266			(148,963		)	(33,125		)
Income taxes	(2,170		)	38,217			(42,869		)	(19,637		)
	$	2,208		$	(68,975	)	$	77,753		$	35,732
Litigation reserve:
Change in litigation reserve recorded in other operating costs	$	—		$	—		$	—		$	(2,829	)
Amortization of DAC and DSI	—			—			—			872
Income taxes	—			—			—			695
	$	—		$	—		$	—		$	(1,262	)
Income taxes:
Impact of Tax Reform	$	35,932		$	—		$	35,932		$	—

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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - December 31, 2017

NON-GAAP FINANCIAL MEASURES

Quarterly Summary - Most Recent 5 Quarters (Unaudited)

Reconciliation from Net Income to Non-GAAP Operating Income



	Q4 2017			Q3 2017			Q2 2017			Q1 2017			Q4 2016
	(Dollars in thousands, except per share data)
Net income (b)	$	36,803		$	56,957		$	26,946		$	53,939		$	120,796
Adjustments to arrive at non-GAAP operating income: (a)
Net realized investment (gains) losses, including OTTI	(676		)	(916		)	(1,559		)	(1,942		)	6,436
Change in fair value of derivatives and embedded derivatives - fixed index annuities	5,463			47,835			57,571			10,977			(103,444		)
Change in fair value of derivatives - debt	(1,085		)	(357		)	465			(247		)	(3,748		)
Income taxes (b)	34,003			(16,281		)	(19,741		)	(3,105		)	35,927
Non-GAAP operating income (c)(d)(e)	$	74,508		$	87,238		$	63,682		$	59,622		$	55,967

Per common share - assuming dilution:
Net income	$	0.41		$	0.63		$	0.30		$	0.60		$	1.35
Adjustments to arrive at non-GAAP operating income:
Net realized investment (gains) losses, including OTTI	(0.01		)	(0.01		)	(0.02		)	(0.02		)	0.07
Change in fair value of derivatives and embedded derivatives - fixed index annuities	0.06			0.52			0.64			0.12			(1.16		)
Change in fair value of derivatives - debt	(0.01		)	—			0.01			—			(0.04		)
Income taxes	0.37			(0.18		)	(0.22		)	(0.04		)	0.41
Non-GAAP operating income (c)(d)(e)	$	0.82		$	0.96		$	0.71		$	0.66		$	0.63


(a)	Adjustments to net income to arrive at non-GAAP operating income are presented net of related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs where applicable.

(b)

Q4 2017 includes income tax expense related to the revaluation of our deferred tax assets and liabilities using the new enacted federal tax rate resulting from Tax Reform. The change in the federal income tax rate decreased net income and earnings per common share - assuming dilution by $35.9 million and $0.40 per share, respectively. The impact of Tax Reform has been excluded from non-GAAP operating income.


(c)	Q3 2017 includes a loss on the extinguishment of our 6.625% Notes due in 2021. The loss decreased non-GAAP operating income and non-GAAP operating income per common share - assuming dilution by $10.8 million and $0.12 per share, respectively


(d)	Q3 2017 includes a benefit from unlocking which reduced amortization of deferred sales inducements and deferred policy acquisition costs by $31.3 million and $43.7 million, respectively, and increased non-GAAP operating income and non-GAAP operating income per common share- assuming dilution by $48.3 million and $0.53 per share, respectively.


(e)	Q3 2017 includes expense from the revision of assumptions used in determining reserves held for lifetime income benefit riders. The impact increased interest sensitive and index product benefits by $21.6 million and decreased non-GAAP operating income and non-GAAP operating income per common share - assuming dilution by $13.9 million and $0.15 per share, respectively.

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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - December 31, 2017

NON-GAAP FINANCIAL MEASURES

Summary of Adjustments to Arrive at Non-GAAP Operating Income (Unaudited)



	Q4 2017			Q3 2017			Q2 2017			Q1 2017			Q4 2016
	(Dollars in thousands)
Net realized gains on investments	$	(2,719	)	$	(1,579	)	$	(3,873	)	$	(2,338	)	$	(844	)
Net OTTI losses recognized in operations	3,076			464			949			141			9,560
Change in fair value of derivatives	(283,801		)	(130,150		)	(34,225		)	(201,974		)	(108,359		)
Decrease in total revenues	(283,444		)	(131,265		)	(37,149		)	(204,171		)	(99,643		)

Amortization of deferred sales inducements	1,499			22,442			34,550			5,459			(61,820		)
Change in fair value of embedded derivatives	(290,890		)	(229,702		)	(174,973		)	(224,170		)	151,099
Amortization of deferred policy acquisition costs	2,245			29,433			46,797			5,752			(88,166		)
Increase (decrease) in total benefits and expenses	(287,146		)	(177,827		)	(93,626		)	(212,959		)	1,113
Increase (decrease) in income before income taxes	3,702			46,562			56,477			8,788			(100,756		)
Increase (decrease) in income tax expense	(34,003		)	16,281			19,741			3,105			(35,927		)
Increase (decrease) in net income	$	37,705		$	30,281		$	36,736		$	5,683		$	(64,829	)

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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - December 31, 2017

Capitalization/Book Value per Share



	December 31, 2017			December 31, 2016
	(Dollars in thousands, except share and per share data)
Capitalization:
Notes and loan payable	$	500,000		$	500,000
Subordinated debentures payable to subsidiary trusts	246,908			246,671
Total debt	746,908			746,671
Total stockholders’ equity	2,850,157			2,291,595
Total capitalization	3,597,065			3,038,266
Accumulated other comprehensive income (AOCI)	(724,599		)	(339,966		)
Total capitalization excluding AOCI (a)	$	2,872,466		$	2,698,300

Total stockholders’ equity	$	2,850,157		$	2,291,595
Accumulated other comprehensive income	(724,599		)	(339,966		)
Total stockholders’ equity excluding AOCI (a)	$	2,125,558		$	1,951,629

Common shares outstanding (b)	89,331,087			88,016,188

Book Value per Share: (c)
Book value per share including AOCI	$	31.91		$	26.04
Book value per share excluding AOCI (a)	$	23.79		$	22.17

Debt-to-Capital Ratios: (d)
Senior debt / Total capitalization	17.4		%	18.5		%
Adjusted debt / Total capitalization	17.4		%	18.5		%


(a)	Total capitalization, total stockholders’ equity and book value per share excluding AOCI, non-GAAP financial measures, are based on stockholders’ equity excluding the effect of AOCI. Since AOCI fluctuates from quarter to quarter due to unrealized changes in the fair value of available for sale investments, we believe these non-GAAP financial measures provide useful supplemental information.


(b)	Common shares outstanding at December 31, 2016 includes 15,058 shares held by the NMO Deferred Compensation Trust.


(c)	Book value per share including and excluding AOCI is calculated as total stockholders’ equity and total stockholders’ equity excluding AOCI divided by the total number of shares of common stock outstanding.


(d)	Debt-to-capital ratios are computed using total capitalization excluding AOCI. Adjusted debt includes notes and loan payable and the portion of the total subordinated debentures payable to subsidiary trusts outstanding (qualifying trust preferred securities) that exceeds 15% of total capitalization excluding AOCI.

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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - December 31, 2017

Spread Results



	Three Months Ended December 31,		Year Ended December 31,
	2017	2016	2017	2016
Average yield on invested assets	4.47%	4.47%	4.46%	4.51%
Aggregate cost of money	1.72%	1.85%	1.74%	1.90%
Aggregate investment spread	2.75%	2.62%	2.72%	2.61%

Impact of:
Investment yield - additional prepayment income	0.11%	0.07%	0.08%	0.06%
Cost of money effect of over hedging	0.08%	0.02%	0.06%	0.01%

Weighted average investments (in thousands)	$46,031,966	$42,654,828	$44,798,227	$41,103,504

Weighted average investments include fixed maturity securities at amortized cost and equity securities at cost. The numerator for average yield on invested assets includes net investment income and the tax effect of investment income that is exempt from income taxes.

Summary of Cost of Money for Deferred Annuities



	Three Months Ended December 31,						Year Ended December 31,
	2017			2016			2017			2016
	(Dollars in thousands)
Included in interest sensitive and index product benefits:
Index credits	$	526,200		$	125,911		$	1,594,722		$	267,995
Interest credited	59,065			68,790			249,898			267,472
Included in change in fair value of derivatives:
Proceeds received at option expiration	(535,328		)	(127,934		)	(1,623,346		)	(272,277		)
Pro rata amortization of option cost	156,782			140,426			593,990			560,955
Cost of money for deferred annuities	$	206,719		$	207,193		$	815,264		$	824,145

Weighted average liability balance outstanding (in thousands)	$	48,014,427		$	44,832,293		$	46,846,995		$	43,462,073

Annuity Account Balance Rollforward



	Three Months Ended December 31,						Year Ended December 31,
	2017			2016			2017			2016
	(Dollars in thousands)
Account balances at beginning of period	$	47,628,099		$	44,460,569		$	45,204,015		$	41,249,647
Net deposits	874,952			1,115,023			3,764,984			5,356,294
Premium bonuses	41,098			82,974			216,172			353,965
Fixed interest credited and index credits	585,265			194,701			1,844,620			535,467
Surrender charges	(13,573		)	(11,196		)	(54,624		)	(51,577		)
Lifetime income benefit rider fees	(42,815		)	(37,079		)	(145,870		)	(122,002		)
Surrenders, withdrawals, deaths, etc.	(672,271		)	(600,977		)	(2,428,542		)	(2,117,779		)
Account balances at end of period	$	48,400,755		$	45,204,015		$	48,400,755		$	45,204,015

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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - December 31, 2017

Annuity Deposits by Product Type



	Three Months Ended December 31,				Year Ended December 31,
Product Type	2017		2016		2017		2016
	(Dollars in thousands)
American Equity:
Fixed index annuities	$	757,160	$	1,139,287	$	3,390,144	$	5,114,178
Annual reset fixed rate annuities	18,974		17,869		74,829		64,317
Multi-year fixed rate annuities	3,773		12,671		23,424		450,474
Single premium immediate annuities	7,909		10,494		24,946		35,851
	787,816		1,180,321		3,513,343		5,664,820
Eagle Life:
Fixed index annuities	187,888		80,687		576,695		610,580
Multi-year fixed rate annuities	32,953		129,075		87,172		852,799
	220,841		209,762		663,867		1,463,379
Consolidated:
Fixed index annuities	945,048		1,219,974		3,966,839		5,724,758
Annual reset fixed rate annuities	18,974		17,869		74,829		64,317
Multi-year fixed rate annuities	36,726		141,746		110,596		1,303,273
Single premium immediate annuities	7,909		10,494		24,946		35,851
Total before coinsurance ceded	1,008,657		1,390,083		4,177,210		7,128,199
Coinsurance ceded	125,796		264,566		387,280		1,736,054
Net after coinsurance ceded	$	882,861	$	1,125,517	$	3,789,930	$	5,392,145

Surrender Charge Protection and Account Values by Product Type

Annuity Surrender Charges and Net (of Coinsurance) Account Values at December 31, 2017:



	Surrender Charge			Net Account Value
Product Type	Avg. Years At Issue	Avg. Years Remaining	Avg. % Remaining	Dollars in Thousands		%

Fixed Index Annuities	13.6	8.3	13.3%	$	46,333,960	95.7	%
Annual Reset Fixed Rate Annuities	10.7	4.4	7.5%	1,420,090		2.9	%
Multi-Year Fixed Rate Annuities	6.7	2.6	5.5%	646,705		1.4	%
Total	13.4	8.1	13.0%	$	48,400,755	100.0	%

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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - December 31, 2017

Annuity Liability Characteristics



	Fixed Annuities Account Value		Fixed Index Annuities Account Value
	(Dollars in thousands)
SURRENDER CHARGE PERCENTAGES:
No surrender charge	$	764,653	$	2,220,767
0.0% < 2.0%	43,062		292,754
2.0% < 3.0%	16,954		210,079
3.0% < 4.0%	12,820		174,964
4.0% < 5.0%	23,941		469,479
5.0% < 6.0%	50,130		478,592
6.0% < 7.0%	65,577		674,898
7.0% < 8.0%	122,180		1,565,020
8.0% < 9.0%	297,953		1,937,314
9.0% < 10.0%	46,263		2,574,246
10.0% or greater	623,262		35,735,847
	$	2,066,795	$	46,333,960



	Fixed and Fixed Index Annuities Account Value		Weighted Average Surrender Charge
	(Dollars in thousands)
SURRENDER CHARGE EXPIRATION BY YEAR:
Out of Surrender Charge	$	2,985,420	0.00	%
2018	665,233		2.36	%
2019	505,493		3.95	%
2020	854,872		5.73	%
2021	1,357,844		7.47	%
2022	1,977,098		8.82	%
2023	4,813,325		10.56	%
2024	5,255,527		12.06	%
2025	6,080,254		12.34	%
2026	5,027,350		13.73	%
2027	4,324,191		14.97	%
2028	2,370,181		17.32	%
2029	2,994,818		18.20	%
2030	2,755,760		18.50	%
2031	3,313,669		18.99	%
2032	1,953,275		19.49	%
2033	1,132,282		19.98	%
2034	34,163		20.00	%
	$	48,400,755	13.01	%

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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - December 31, 2017

Annuity Liability Characteristics



	Fixed Annuities Account Value		Fixed Index Annuities Account Value
	(Dollars in thousands)
CREDITED RATE VS. ULTIMATE MINIMUM GUARANTEED RATE DIFFERENTIAL:
No differential	$	972,268	$	1,584,301
› 0.0% - 0.25%	67,082		255,775
› 0.25% - 0.5%	248,654		4,446
› 0.5% - 1.0%	67,792		24,154
› 1.0% - 1.5%	11,923		—
1.00% ultimate guarantee - 2.67% wtd avg interest rate (a)	447,168		258,150
1.50% ultimate guarantee - 1.23% wtd avg interest rate (a)	160,166		4,455,133
2.00% ultimate guarantee - 1.85% wtd avg interest rate (a)	91,742		—
2.25% ultimate guarantee - 1.96% wtd avg interest rate (a)	—		1,065,450
3.00% ultimate guarantee - 2.15% wtd avg interest rate (a)	—		2,023,289
Allocated to index strategies (see tables that follow)	—		36,663,262
	$	2,066,795	$	46,333,960


(a)	The minimum guaranteed interest rate for the fixed rate or the fixed rate strategy is 1.00%. The ultimate guaranteed rate is applied on less than 100% of the premium.

If all crediting rates were reduced to minimum guaranteed rates (subject to limitations imposed by ultimate minimum guaranteed rates where applicable) the weighted average crediting rate as of December 31, 2017 for fixed annuities and funds allocated to the fixed rate strategy for fixed index annuities would decrease by 0.17%.

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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - December 31, 2017

Annuity Liability Characteristics

FIXED INDEX ANNUITIES ACCOUNT VALUE - INDEX STRATEGIES



Annual Monthly Average and Point-to-Point with Caps
	Minimum Guaranteed Cap
	1%		3%		4%		7%		8% +
Current Cap	(Dollars in thousands)
At minimum	$	1,732	$	99,805	$	2,755,745	$	86,833	$	203,423
1.75% - 3%	6,838,653		—		—		—		—
3% - 4%	1,005,369		15,464		—		—		—
4% - 5%	408,384		202,556		4,292,070		—		—
5% - 6%	436,650		154,499		37,846		—		—
6% - 7%	—		—		139		—		—
>= 7%	—		7,784		1,543		8,480		2,024



Annual Monthly Average and Point-to-Point with Participation Rates
	Minimum Guaranteed Participation Rate
	10%		20% - 25%		35%		50% +
Current Participation Rate	(Dollars in thousands)
At minimum	$	601	$	422,460	$	126,318	$	146,469
< 20%	551,866		—		—		—
20% - 40%	921,685		190,074		—		—
40% - 60%	948,379		115,221		76,625		—
>= 60%	13,674		—		—		—



S&P 500 Monthly Point-to-Point - Minimum Guaranteed Monthly Cap = 1.0%
(Dollars in thousands)
Current Cap
At minimum	$	109,371
1.10% - 1.30%	4,946,669
1.40% - 1.60%	5,205,202
1.70% - 2.00%	3,017,689
>= 2.10%	15,623



Volatility Control Index
(Dollars in thousands)
Current Asset Fee
At Maximum	$	—
0.75% - 1.75%	213,810
2.25% - 2.75%	828,426
3.00% - 4.00%	1,738,697

If all caps and participation rates were reduced to minimum caps and participation rates and current asset fees were increased to their maximums, the cost of options would decrease by 0.59% based upon prices of options for the week ended January 16, 2018.

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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - December 31, 2017

Summary of Invested Assets



	December 31, 2017				December 31, 2016
	Carrying Amount		Percent		Carrying Amount		Percent
	(Dollars in thousands)
Fixed maturity securities:
United States Government full faith and credit	$	11,876	—	%	$	11,805	—	%
United States Government sponsored agencies	1,305,017		2.6	%	1,344,787		3.0	%
United States municipalities, states and territories	4,166,812		8.3	%	3,926,950		8.8	%
Foreign government obligations	239,360		0.5	%	236,341		0.5	%
Corporate securities	29,956,012		59.6	%	27,191,243		60.8	%
Residential mortgage backed securities	1,105,567		2.2	%	1,254,835		2.8	%
Commercial mortgage backed securities	5,544,850		11.0	%	5,365,235		12.0	%
Other asset backed securities	3,120,536		6.2	%	1,806,123		4.0	%
Total fixed maturity securities	45,450,030		90.4	%	41,137,319		91.9	%
Mortgage loans on real estate	2,665,531		5.3	%	2,480,956		5.5	%
Derivative instruments	1,568,380		3.1	%	830,519		1.9	%
Other investments	616,764		1.2	%	308,774		0.7	%
	$	50,300,705	100.0	%	$	44,757,568	100.0	%

Credit Quality of Fixed Maturity Securities - December 31, 2017



NAIC Designation	Carrying Amount		Percent		Rating Agency Rating	Carrying Amount		Percent
	(Dollars in thousands)					(Dollars in thousands)
1	$	28,274,379	62.2	%	Aaa/Aa/A	$	27,909,879	61.4	%
2	15,869,219		34.9	%	Baa	16,048,610		35.3	%
3	1,158,001		2.5	%	Ba	1,035,676		2.3	%
4	117,542		0.3	%	B	130,857		0.3	%
5	20,927		0.1	%	Caa	134,586		0.3	%
6	9,962		—	%	Ca and lower	190,422		0.4	%
	$	45,450,030	100.0	%		$	45,450,030	100.0	%

Watch List Securities - December 31, 2017



General Description	Amortized Cost		Unrealized Gains (Losses)			Fair Value		Months Below Amortized Cost
	(Dollars in thousands)
Below investment grade
Corporate securities:
Energy	$	29,055	$	(4,966	)	$	24,089	7 - 56
Industrials	2,500		(150		)	2,350		38
Materials	3,990		770			4,760		—
Telecommunications	2,100		480			2,580		—
Other asset backed securities:
Financials	6,141		(3,524		)	2,617		55 - 81
	$	43,786	$	(7,390	)	$	36,396

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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - December 31, 2017

Fixed Maturity Securities by Sector



	December 31, 2017				December 31, 2016
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Available for sale:
United States Government full faith and credit and sponsored agencies	$	1,320,151	$	1,316,893	$	1,380,204	$	1,356,592
United States municipalities, states and territories	3,804,360		4,166,812		3,626,395		3,926,950
Foreign government obligations	228,214		239,360		229,589		236,341
Corporate securities:
Capital goods	2,405,102		2,570,734		2,248,219		2,332,625
Consumer discretionary	5,889,227		6,232,728		5,485,150		5,643,308
Energy	2,554,199		2,666,172		2,439,809		2,453,649
Financials	6,004,618		6,369,570		5,377,810		5,552,349
Industrials	283,915		291,174		186,684		187,191
Information technology	1,829,396		1,932,131		1,718,190		1,759,229
Materials	1,801,312		1,901,090		1,767,460		1,797,013
Other	989,641		1,052,676		1,009,390		1,037,307
Telecommunications	1,461,536		1,539,840		1,472,094		1,507,943
Transportation	1,152,637		1,218,964		1,105,324		1,133,087
Utilities	3,756,070		4,103,887		3,523,083		3,710,711
Residential mortgage backed securities:
Government agency	628,320		668,641		648,752		693,805
Prime	254,627		266,875		323,878		338,761
Alt-A	130,757		154,566		166,557		193,018
Re-Remic	14,780		15,485		27,757		29,251
Commercial mortgage backed securities:
Government agency	554,514		564,400		559,850		560,726
Non-agency	4,977,408		4,980,450		4,862,405		4,804,509
Other asset backed securities:
Auto	298,142		299,688		240,297		237,678
Financials	1,976,720		1,986,259		865,235		866,203
Industrials	243,859		251,321		216,712		219,917
Military housing	433,840		461,452		339,186		351,903
Other	123,414		121,816		132,095		128,592
Utilities	—		—		1,830		1,830
Redeemable preferred stock - financials	—		5		—		6
	$	43,116,759	$	45,372,989	$	39,953,955	$	41,060,494
Held for investment:
Corporate security - financials	$	77,041	$	76,460	$	76,825	$	68,766

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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - December 31, 2017

Mortgage Loans on Commercial Real Estate



	December 31, 2017						December 31, 2016
	Principal			Percent			Principal		Percent
	(Dollars in thousands)
Geographic distribution
East	$	548,067		20.5		%	$	635,434	25.5	%
Middle Atlantic	163,485			6.1		%	151,640		6.1	%
Mountain	308,486			11.5		%	235,932		9.5	%
New England	12,265			0.5		%	12,724		0.5	%
Pacific	466,030			17.4		%	385,683		15.5	%
South Atlantic	609,736			22.8		%	519,065		20.8	%
West North Central	324,808			12.2		%	325,447		13.1	%
West South Central	241,438			9.0		%	224,694		9.0	%
	$	2,674,315		100.0		%	$	2,490,619	100.0	%

Property type distribution
Office	$	283,926		10.6		%	$	308,578	12.4	%
Medical office	34,338			1.3		%	50,780		2.1	%
Retail	1,040,028			38.9		%	886,942		35.6	%
Industrial/Warehouse	677,770			25.3		%	700,644		28.1	%
Apartment	462,897			17.3		%	375,837		15.1	%
Mixed use/other	175,356			6.6		%	167,838		6.7	%
	$	2,674,315		100.0		%	$	2,490,619	100.0	%

	December 31, 2017			December 31, 2016
Credit exposure - by payment activity
Performing	$	2,670,657		$	2,489,028
In workout	1,436			1,591
Delinquent	—			—
Collateral dependent	2,222			—
	2,674,315			2,490,619
Specific loan loss allowance	(1,418		)	(1,327		)
General loan loss allowance	(6,100		)	(7,100		)
Deferred prepayment fees	(1,266		)	(1,236		)
	$	2,665,531		$	2,480,956

Page 16

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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - December 31, 2017

Shareholder Information

Corporate Offices:

American Equity Investment Life Holding Company

6000 Westown Parkway

West Des Moines, IA 50266

Inquiries:

Steven Schwartz, Vice President-Investor Relations

(515) 273-3763, sschwartz@american-equity.com

Common Stock and Dividend Information:

New York Stock Exchange symbol: “AEL”



	High	Low	Close	Dividend Declared
2017
First Quarter	$28.00	$21.66	$23.63	$0.00
Second Quarter	$26.65	$22.23	$26.28	$0.00
Third Quarter	$29.43	$25.43	$29.08	$0.00
Fourth Quarter	$32.54	$28.06	$30.73	$0.26

2016
First Quarter	$23.65	$12.65	$16.80	$0.00
Second Quarter	$16.96	$12.77	$14.25	$0.00
Third Quarter	$18.32	$13.07	$17.73	$0.00
Fourth Quarter	$23.41	$15.39	$22.54	$0.24

2015
First Quarter	$29.62	$25.46	$29.13	$0.00
Second Quarter	$29.90	$25.06	$26.98	$0.00
Third Quarter	$30.02	$22.36	$23.31	$0.00
Fourth Quarter	$28.30	$22.55	$24.03	$0.22

Transfer Agent:

Computershare Trust Company, N.A.

P.O. Box 43010

Providence, RI 02940-0310

Phone: (877) 282-1169

Fax: (781) 575-2723

www.computershare.com

Annual Report and Other Information:

Shareholders may receive when available, without charge, a copy of American Equity’s Annual Report, SEC filings and/or press releases by calling Steven Schwartz, Vice President-Investor Relations, at (515) 273-3763 or by visiting our web site at www.american-equity.com.

Page 17

Table of Contents

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

Financial Supplement - December 31, 2017

Research Analyst Coverage

Erik Bass

Autonomous Research US LP

(646) 561-6248

ebass@autonomous.com

Daniel Bergman

Citi Research

(212) 816-2132

daniel.bergman@citi.com

Thomas Gallagher

Evercore ISI

(212) 446-9439

thomas.gallagher@evercoreisi.com

Randy Binner

B. Riley FBR, Inc.

(703) 312-1890

rbinner@fbr.com

Alex Scott

Goldman Sachs & Co. LLC

(917) 343-7160

alex.scott@gs.com

Pablo Singzon II

JP Morgan

(212) 622-2295

pablo.s.singzon@jpmorgan.com

Ryan Krueger

Keefe, Bruyette & Woods

(860) 722-5930

rkrueger@kbw.com

C. Gregory Peters

Raymond James & Associates, Inc.

(727) 567-1534

greg.peters@raymondjames.com

Kenneth S. Lee

RBC Capital Markets, LLC

(212) 905-5995

kenneth.s.lee@rbccm.com

John Barnidge

Sandler O'Neill & Partners, L.P.

(312) 281-3412

jbarnidge@sandleroneill.com

Mark Hughes

SunTrust Robinson Humphrey

(615) 748-4422

mark.hughes@suntrust.com

Page 18

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