American Equity Investment Life Holding Company (AEL)

Amortization of deferred policy acquisition costs decreased 57% to $34.6 million in the first quarter of 2009 compared to $80.7 million for the same period in 2008.  In general, amortization of deferred policy acquisition costs has been increasing each period due to the growth in our annuity business and the deferral of policy acquisition costs incurred with respect to sales of annuity products.  The anticipated increase in amortization from these factors has been affected by amortization associated with the application of SFAS 133 to our index annuity business and amortization associated with realized gains on investments and net impairment losses recognized in operations.

 

As discussed above, the application of SFAS 133 to our index annuity business creates differences in the recognition of revenues and expenses from derivative instruments including the embedded derivative liabilities in our index annuity contracts.  The gross profit adjustments resulting from the application of SFAS 133 to our index annuity business increased amortization by $1.0 million in the first quarter of 2009 and $51.7 million for the same period in 2008.  The gross profit adjustment from realized gains on investments and net impairment losses recognized in operations decreased amortization by $4.8 million for the three months ended March 31, 2009 and $0.6 million for the same period in 2008.  Excluding the amortization amounts attributable to the application of SFAS 133 and realized gains on investments and net impairment losses recognized in operations, amortization for the three months ended March 31, 2009 would have been $38.4 million compared to $29.6 million for the same period in 2008.

 

Amortization of deferred policy acquisition costs increased 114% to $19.3 million in the third quarter of 2008 and 95% to $118.6 million for the nine months ended September 30, 2008 compared to $9.0 million and $60.9 million for the same periods in 2007.  The nine months ended September 30, 2008 include the impact of unlocking discussed above.  In general, amortization of deferred policy acquisition costs has been increasing each period due to the growth in our annuity business and the deferral of policy acquisition costs incurred with respect to sales of annuity products.  The anticipated increase in amortization from these factors has been affected by amortization associated with the application of SFAS 133 to our index annuity business and in the 2008 periods, amortization associated with net realized losses on investments.

 

As discussed above, the application of SFAS 133 to our index annuity business creates differences in the recognition of revenues and expenses from derivative instruments including the embedded derivative liabilities in our index annuity contracts.  The gross profit adjustments resulting from the application of SFAS 133 to our index annuity business increased amortization by $5.7 million in the third quarter of 2008 and $49.9 million for the nine months ended September 30, 2008 compared to decreases of $18.8 million and $20.9 million for the same periods in 2007.  The gross profit adjustments from net realized losses on investments in 2008 decreased amortization by $19.6 million in the third quarter of 2008 and $30.3 million for the nine months ended September 30, 2008.  There was no effect on amortization from realized gains for the same periods in 2007.  Excluding the amortization amounts attributable to the application of SFAS 133 and realized gains and losses on investments, amortization for the third quarter of 2008 would have been $33.1 million and $99.0 million for the nine months ended September 30, 2008 compared to $27.7 million and $81.8 million for the same periods in 2007.

 

Amortization of deferred policy acquisition costs decreased 46% to $18.6 million in the second quarter of 2008, and increased 91% to $99.3 million for the six months ended June 30, 2008 compared to $34.4 million and $51.9 million for the same periods in 2007.  The 2008 periods include the impact of unlocking discussed above.  In general, amortization of deferred policy acquisition costs has been increasing each period due to the growth in our annuity business and the deferral of policy acquisition costs incurred with respect to sales of annuity products.  The anticipated increase in amortization from these factors has been affected by amortization associated with the application of SFAS 133 to our index annuity business and in the 2008 periods, amortization associated with net realized losses on investments.

 

As discussed above, the application of SFAS 133 to our index annuity business creates differences in the recognition of revenues and expenses from derivative instruments including the embedded derivative liabilities in our index annuity contracts.  The gross profit adjustments resulting from the application of SFAS 133 to our index annuity business decreased amortization by $7.6 million in the second quarter of 2008 and increased amortization by $44.1 million for the six months ended June 30, 2008 compared to an increase of $6.0 million and a decrease of $2.1 million for the same periods in 2007.  The gross profit adjustments from net realized losses on investments in 2008 decreased amortization by $10.1 million in the second quarter of 2008 and $10.8 million for the six months ended June 30, 2008.  There was no effect on amortization from realized gains for the same periods in 2007.  Excluding the amortization amounts attributable to the application of SFAS 133 and realized gains and losses on investments, amortization would have been $36.3 million and $65.9 million for the three months and six months ended June 30, 2008, respectively, compared to $28.4 million and $54.1 million for the same periods in 2007.

 

Amortization of deferred policy acquisition costs increased 359% to $80.7 million in the first quarter of 2008 compared to $17.6 million for the same period in 2007.  In general, amortization of deferred policy acquisition costs has been increasing each period due to the growth in our annuity business and the deferral of policy acquisition costs incurred with respect to sales of annuity products.  The anticipated increase in amortization from these factors has been affected by amortization associated with the application of SFAS 133 to our index annuity business.  As discussed above, the application of SFAS 133 to our index annuity business creates differences in the recognition of revenues and expenses from derivative instruments including the embedded derivative liabilities in our index annuity contracts.  The gross profit adjustments resulting from the application of SFAS 133 to our index annuity business increased amortization by $51.7 million in the first quarter of 2008 and decreased amortization by $8.1 million for the same period in 2007.  Excluding these amounts, amortization for the three months ended March 31, 2008 would have been $29.6 million compared to $25.7 million for the same period in 2007.  The comparisons between years are also affected by amortization associated with realized gains (losses) on investments.  The gross profit adjustments from net realized gains (losses) on investments decreased amortization by $0.6 million for the three months ended March 31, 2008 and had no effect on amortization for the same period in 2007.

 

Amortization of deferred policy acquisition costs decreased 21% to $9.0 million in the third quarter of 2007 and 10% to $60.9 million for the nine months ended September 30, 2007 compared to $11.5 million and $67.6 million for the same periods in 2006.  In general, amortization of deferred policy acquisition costs has been increasing each period due to the growth in our annuity

 

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Amortization of deferred policy acquisition costs increased 35% to $34.4 million in the second quarter of 2007, and decreased 7% to $51.9 million for the six months ended June 30, 2007 compared to $25.4 million and $56.1 million for the same periods in 2006.  In general, amortization of deferred policy acquisition costs has been increasing each period due to the growth in our

 

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Amortization of deferred policy acquisition costs increased 33% to $15.2 million in the third quarter of 2007 and 8% to $73.1 million for the nine months ended September 30, 2007 compared to $11.5 million and $67.6 million for the same periods in 2006.  In general, amortization of deferred policy acquisition costs has been increasing each period due to the growth in our annuity

 

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Amortization of deferred policy acquisition costs increased 59% to $40.3 million in the second quarter of 2007, and 3% to $57.9 million for the six months ended June 30, 2007 compared to $25.4 million and $56.1 million for the same periods in 2006.  In general, amortization of deferred policy acquisition costs has been increasing each period due to the growth in our annuity

 

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business and the deferral of policy acquisition costs incurred with respect to sales of annuity products.  The anticipated increase in amortization from these factors has been affected by amortization associated with the application of SFAS 133 to our index annuity business.  As discussed above, the application of SFAS 133 to our index annuity business creates differences in the recognition of revenues and expenses from derivative instruments including the embedded derivative liabilities in our index annuity contracts.  The gross profit adjustments resulting from the application of SFAS 133 to our index annuity business increased amortization by $11.9 million in the second quarter of 2007 and $3.8 million for the six months ended June 30, 2007 compared to $0.9 million and $8.8 million for the same periods in 2006.  Excluding these amounts, amortization for the second quarter of 2007 would have been $28.4 million and $54.1 million for the six months ended June 30, 2007 compared to $24.5 million and $47.3 million for the same periods in 2006.

Amortization of deferred policy acquisition costs decreased 43% to $17.6 million in the first quarter of 2007, compared to $30.8 million for the same period in 2006.  In general, amortization of deferred policy acquisition costs has been increasing each period due to the growth in our annuity business and the deferral of policy acquisition costs incurred with respect to sales of annuity products.  The anticipated increase in amortization from these factors has been affected by amortization associated with the application of SFAS 133 to our index annuity business.  As discussed above, the application of SFAS 133 to our index annuity business creates differences in the recognition of revenues and expenses from derivative instruments including the embedded derivative liabilities in our index annuity contracts.  The gross profit adjustments resulting from the application of SFAS 133 to our index annuity business decreased amortization by $8.1 million in the first quarter of 2007 and increased amortization by $7.9 million for the same period in 2006.  Excluding these amounts, amortization for the three months ended March 31, 2007

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would have been $25.7 million compared to $22.9 million for the same period in 2006.

Amortization of deferred policy acquisition costs increased 39% to $94.9 million in 2006 and 1% to $68.1 million in 2005 from $67.9 million in 2004. In general, amortization has been increasing each period due to the growth in our annuity business. The comparisons between periods are also affected by amortization associated with net realized gains (losses) on investments and amortization associated with the application of SFAS 133 to our index annuity business. The gross profit adjustments from realized gains (losses) on investments increased amortization by $0.5 million in 2006, decreased amortization by $2.7 million in 2005 and had no impact in 2004. As discussed above, the application of SFAS 133 to our index annuity business creates differences in the recognition of revenues and expenses from derivative instruments including the embedded derivative liabilities in our index annuity contracts. The gross profit adjustments resulting from the application of SFAS 133 to our index annuity business decreased amortization by $6.7 million in 2006 and $9.1 million in 2005 and increased amortization by $5.0 million in 2004.

Amortization of deferred policy acquisition costs decreased 21% to $11.5 million in the third quarter of 2006 and increased 44% to $67.6 million for the nine months ended September 30, 2006 compared to $14.4 million and $47.1 million for the same periods in 2005. In general, amortization has been increasing each period due to the growth in our annuity business. However, the comparisons between periods are also affected by amortization associated with the application of SFAS 133 to our index annuity business as discussed above. The gross profit adjustments resulting from the application of SFAS 133 to our index annuity business decreased amortization by $15.2 million for the third quarter of 2006 and $6.3 million for the nine months ended September 30, 2006 compared to decreases in amortization of $4.0 million and $9.8 million for the same periods in 2005.

Amortization of deferred policy acquisition costs increased 59% to $25.4 million in the second quarter of 2006, and 72% to $56.1 million for the six months ended June 30, 2006 compared to $16.0 million and $32.7 million for the same periods in 2005.  These increases were primarily due to additional annuity deposits as discussed above.  The comparison between periods is also affected by amortization associated with the application of SFAS 133 to our index annuity business as discussed above.  The gross profit adjustments resulting from the application of SFAS 133 to our index annuity business increased amortization by $0.9 million for the second quarter of 2006 and $8.8 million for the six months ended June 30, 2006 compared to decreases of $4.0 million and $5.8 million for the same periods in 2005.

Amortization of deferred policy acquisition costs increased 85% to $30.8 million in the first quarter of 2006, compared to $16.7 million for the same period in 2005.  This increase is primarily due to additional annuity deposits as discussed above.  The comparison between periods is also affected by amortization associated with the application of SFAS No. 133 to our index annuity business as discussed above.  The gross profit adjustments resulting from the application of SFAS No. 133 to our index annuity business increased amortization by $7.9 million in the first quarter of 2006 and reduced amortization by $1.8 million for the same period in 2005.

 

Amortization of deferred policy acquisition costs increased 1% to $68.1 million in 2005 and 43% to $67.9 million in 2004 from $47.5 million in 2003. These increases are primarily due to additional annuity deposits as discussed above. The comparisons between years are further effected by amortization associated with net realized capital gains and losses and amortization associated with the application of SFAS No.133 to our index annuity business. Net realized capital gains and losses reduced amortization in 2005 by $2.7 million and increased amortization in 2003 by $3.1 million. As discussed above, the application of SFAS No. 133 to our index annuity business creates differences in the recognition of revenues and expenses from derivative instruments including the embedded derivative liabilities in our index annuity contracts. As a result, gross profits used to compute the amortization of deferred policy acquisition costs are adjusted to reflect the application of SFAS No. 133 to our index annuity business. These gross profit adjustments reduced amortization in 2005 and 2003 and increased amortization in 2004 as follows: 2005 - $(9.1) million; 2004 - $5.0 million; 2003 - $(1.5) million.

Amortization of deferred policy acquisition costs increased 43% to $67.9 million in 2004 and 40% to $47.5 million in 2003 from $34.1 million in 2002.  These increases are primarily due to additional annuity deposits as discussed above.  Additional amortization associated with net realized gains on investments for the year ended December 31, 2003 was $3.1 million.  The application of SFAS No. 133 resulted in a $5.0 million increase in amortization in 2004, a decrease in amortization of $1.5 million in 2003, and an increase in amortization of $1.4 million in 2002.

 

Amortization of deferred policy acquisition costs decreased 13% to $14.4 million in the third quarter of 2005 and increased 1% to $47.1 million for the nine months ended September 30, 2005 compared to $16.6 million and $46.4 million for the same periods in 2004.  Amortization for the three month and nine month periods ended September 30, 2005 was reduced by $2.3 million as a result of the net realized capital losses for those periods.  The application of SFAS No. 133 resulted in decreases in amortization of $4.0 million and $9.8 million for the three months and nine months ended September 30, 2005, respectively, compared to increases of $0.2 million and $0.8 million for the same periods in 2004.  These amounts offset the increase in amortization attributable to the growth in the annuity liabilities outstanding for the third quarter of 2005 and significantly reduced such amounts for the nine months ended September 30, 2005.

 

Amortization of deferred policy acquisition costs increased 7% to $16.0 million in the second quarter of 2005, and 9% to $32.7 million for the six months ended June 30, 2005 compared to $14.9 million and $29.9 million for the same periods in 2004.  These increases were primarily due to additional annuity deposits as discussed above.  The application of SFAS No. 133 resulted in a $4.0 million decrease in amortization in the second quarter of 2005 and a decrease of $5.8 million for the six months ended June 30, 2005 compared to a decrease of $0.3 million and an increase of $0.7 million for the same periods in 2004.

 

Amortization of deferred policy acquisition costs increased 11% to $16.7 million in the first quarter of 2005, compared to $15.0 million for the same period in 2004.  This increase is primarily due to additional annuity deposits as discussed  above.  The application of SFAS No. 133 resulted in a $1.8 million decrease in amortization in the first quarter of 2005  and an increase in amortization of $1.0 million in the first quarter of 2004.