(Mark One)
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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2012
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or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
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Iowa
(State or other jurisdiction of Incorporation)
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42-1447959
(I.R.S. Employer Identification No.)
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6000 Westown Parkway
West Des Moines, Iowa
(Address of principal executive offices)
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50266
(Zip Code)
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Registrant's telephone number, including area code:
(515) 221-0002
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||
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered
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Common stock, par value $1
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New York Stock Exchange
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Large accelerated filer
o
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Accelerated filer
x
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Non-accelerated filer
o
(Do not check if a smaller
reporting company)
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Smaller reporting company
o
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Exhibit 12.1
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Ratio of Earnings to Fixed Charges
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Exhibit 21.2
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Subsidiaries of American Equity Investment Life Holding Company
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Exhibit 23.1
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Consent of Independent Registered Public Accounting Firm
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Exhibit 31.1
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Certification
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Exhibit 31.2
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Certification
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Exhibit 32.1
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Certification
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Exhibit 32.2
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Certification
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Year Ended December 31,
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|||||||||||||||||||
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2012
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2011
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2010
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|||||||||||||||
Product Type
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Deposits
Collected
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Deposits
as a % of
Total
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Deposits
Collected
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Deposits
as a % of
Total
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Deposits
Collected
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Deposits
as a % of
Total
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|||||||||
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(Dollars in thousands)
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Fixed index annuities:
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Index strategies
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$
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2,225,902
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56
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%
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$
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2,839,295
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56
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%
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$
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2,401,891
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51
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%
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Fixed strategy
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1,208,324
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31
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%
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1,377,987
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27
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%
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1,551,007
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33
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%
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|||
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3,434,226
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87
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%
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4,217,282
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83
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%
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3,952,898
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84
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%
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|||
Fixed rate annuities
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348,049
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9
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%
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567,229
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11
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%
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544,193
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12
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%
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|||
Single premium immediate annuities
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164,657
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4
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%
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305,603
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6
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%
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171,628
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4
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%
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|||
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$
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3,946,932
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100
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%
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$
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5,090,114
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100
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%
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$
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4,668,719
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100
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%
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Financial Strength Rating
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Outlook Statement
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A.M. Best Company
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January 2011—current
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A-
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Stable
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November 2008—January 2011
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A-
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Negative
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August 2006—October 2008
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A-
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Stable
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Standard & Poor's
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October 2011—Current
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BBB+
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Stable
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September 2010—October 2011
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BBB+
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Positive
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July 2010—September 2010
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BBB+
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Stable
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July 2008—July 2010
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BBB+
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Negative
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•
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grant and revoke licenses to transact business;
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•
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regulate and supervise trade practices and market conduct;
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•
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establish guaranty associations;
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•
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license agents;
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•
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approve policy forms;
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•
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approve premium rates for some lines of business;
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•
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establish reserve requirements;
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•
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prescribe the form and content of required financial statements and reports;
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•
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determine the reasonableness and adequacy of statutory capital and surplus;
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•
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perform financial, market conduct and other examinations;
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•
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define acceptable accounting principles for statutory reporting;
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•
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regulate the type and amount of permitted investments; and
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•
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limit the amount of dividends and surplus note payments that can be paid without obtaining regulatory approval.
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•
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insurance company investments;
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•
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risk-based capital ("RBC") guidelines, which consist of regulatory targeted surplus levels based on the relationship of statutory capital and surplus, with prescribed adjustments, to the sum of stated percentages of each element of a specified list of company risk exposures;
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•
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the implementation of non-statutory guidelines and the circumstances under which dividends may be paid;
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•
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principles-based reserving;
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•
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product approvals;
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•
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agent licensing;
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•
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underwriting practices; and
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•
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life insurance and annuity sales practices.
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•
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our investment portfolio could incur additional other than temporary impairments;
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•
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our commercial mortgage loans could experience a greater amount of loss;
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•
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due to potential downgrades in our investment portfolio, we could be required to raise additional capital to sustain our current business in force and new sales of our annuity products, which may be difficult in a distressed market. If capital would be available, it may be at terms that are not favorable to us;
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•
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we may be required to limit growth in sales of our annuity products; and/or
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•
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our liquidity could be negatively affected and we could be forced to limit our operations and our business could suffer, as we need liquidity to pay our policyholder benefits, operating expenses, dividends on our capital stock, and to service our debt obligations.
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•
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Allianz Life Insurance Company of North America;
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•
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Aviva USA;
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•
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Security Benefit Life;
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•
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Great American Life Insurance Company;
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•
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Midland National Life Insurance Company; and
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•
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North American Company for Life and Health Insurance.
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•
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We must present the call options purchased to fund the annual index credits on our fixed index annuity products at fair value. The fair value of the call options is based upon the amount of cash that would be required to settle the call options obtained from the counterparties adjusted for the nonperformance risk of the counterparty. We record the change in fair value of these options as a component of our revenues. The change in fair value of derivatives includes the gains or losses recognized at expiration of the option term or upon early termination and changes in fair value for open positions.
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•
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The contractual obligations for future annual index credits are treated as a "series of embedded derivatives" over the expected life of the applicable contracts. Increases or decreases in the fair value of embedded derivatives generally correspond to increases or decreases in equity market performance and changes in the interest rates used to discount the excess of the projected policy contract values over the projected minimum guaranteed contract values. We record the change in fair value of these embedded derivatives as a component of our benefits and expenses in our consolidated statements of operations.
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High
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Low
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2012
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First Quarter
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$13.09
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$10.13
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Second Quarter
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$12.95
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$10.00
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Third Quarter
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$12.41
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$10.62
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Fourth Quarter
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$12.40
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$10.56
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2011
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First Quarter
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$13.93
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$11.27
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Second Quarter
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$13.53
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$11.91
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Third Quarter
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$13.22
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$8.01
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Fourth Quarter
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$11.82
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$8.05
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Year ended December 31,
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2012
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2011
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2010
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2009
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2008
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(Dollars in thousands, except per share data)
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Consolidated Statements of Operations Data:
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Revenues
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Annuity product charges
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$
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89,006
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$
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76,189
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$
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69,075
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$
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63,358
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$
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52,671
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Net investment income
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1,286,923
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1,218,780
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1,036,106
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932,172
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822,077
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|||||
Change in fair value of derivatives
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221,138
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(114,728
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)
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168,862
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216,896
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(372,009
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)
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Net realized gains (losses) on investments, excluding other than temporary impairment ("OTTI") losses
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(6,454
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)
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(18,641
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)
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23,726
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51,279
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5,555
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|||||
Net OTTI losses recognized in operations
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(14,932
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)
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(33,976
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)
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(23,867
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)
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(86,771
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)
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(192,648
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)
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Total revenues
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1,588,558
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1,139,775
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1,285,592
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1,188,913
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337,904
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|||||
Benefits and expenses
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Interest sensitive and index product benefits
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818,087
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775,757
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733,218
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347,883
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205,131
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|||||
Change in fair value of embedded derivatives
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286,899
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(105,194
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)
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130,950
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529,508
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(210,753
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)
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Amortization of deferred sales inducements and policy acquisition costs
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252,076
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215,259
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192,261
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128,008
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157,443
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|||||
Interest expense on notes payable and subordinated debentures
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41,937
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45,610
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37,031
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30,672
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39,218
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|||||
Interest expense on amounts due under repurchase agreements
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—
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30
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—
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534
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8,207
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|||||
Other operating costs and expenses
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95,495
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67,529
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114,615
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57,255
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|
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52,633
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|||||
Total benefits and expenses
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1,502,569
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|
1,006,861
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|
1,220,326
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1,102,749
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|
|
260,851
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|
|||||
Income before income taxes
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|
85,989
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|
|
132,914
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|
|
65,266
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|
|
86,164
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|
|
77,053
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|
|||||
Income tax expense
|
|
28,191
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|
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46,666
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22,333
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|
17,634
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|
|
61,106
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|||||
Net income
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|
57,798
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|
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86,248
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|
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42,933
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|
|
68,530
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|
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15,947
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Per Share Data:
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||||||||||
Earnings per common share
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$
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0.94
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$
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1.45
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$
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0.73
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$
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1.22
|
|
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$
|
0.30
|
|
Earnings per common share—assuming dilution
|
|
0.89
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1.37
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|
0.68
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|
|
1.18
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|
|
0.30
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|||||
Dividends declared per common share
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0.15
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0.12
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0.10
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|
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0.08
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|
|
0.07
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|||||
|
|
|
|
|
|
|
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|
||||||||||
Non-GAAP Financial Measures (a):
|
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|
||||||||||
Reconciliation of net income to operating income:
|
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|
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|
||||||||||
Net income
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|
$
|
57,798
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|
|
$
|
86,248
|
|
|
$
|
42,933
|
|
|
$
|
68,530
|
|
|
$
|
15,947
|
|
Net realized gains (losses) and net OTTI losses on investments, net of offsets
|
|
8,648
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|
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18,354
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|
|
379
|
|
|
(1,339
|
)
|
|
92,524
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|
|||||
Net effect of derivatives, embedded derivatives and other index annuity, net of offsets
|
|
34,161
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|
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29,051
|
|
|
38,167
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|
|
29,952
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|
|
(31,038
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)
|
|||||
Convertible debt extinguishment, net of income taxes
|
|
—
|
|
|
—
|
|
|
171
|
|
|
687
|
|
|
(5,702
|
)
|
|||||
Effect of counterparty default, net of offsets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,948
|
|
|
741
|
|
|||||
Litigation reserve, net of offsets
|
|
9,580
|
|
|
—
|
|
|
27,297
|
|
|
—
|
|
|
—
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|
|||||
Operating income
|
|
$
|
110,187
|
|
|
$
|
133,653
|
|
|
$
|
108,947
|
|
|
$
|
101,778
|
|
|
$
|
72,472
|
|
Operating income per common share
|
|
$
|
1.80
|
|
|
$
|
2.25
|
|
|
$
|
1.86
|
|
|
$
|
1.81
|
|
|
$
|
1.35
|
|
Operating income per common share—assuming dilution
|
|
1.69
|
|
|
2.12
|
|
|
1.70
|
|
|
1.75
|
|
|
1.30
|
|
|
|
As of and for the Year Ended December 31,
|
||||||||||||||||||
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
||||||||||
|
|
(Dollars in thousands, except per share data)
|
||||||||||||||||||
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total investments
|
|
$
|
27,537,210
|
|
|
$
|
24,383,451
|
|
|
$
|
19,816,931
|
|
|
$
|
15,374,110
|
|
|
$
|
12,719,605
|
|
Total assets
|
|
35,133,478
|
|
|
30,874,719
|
|
|
26,426,763
|
|
|
21,312,004
|
|
|
17,081,740
|
|
|||||
Policy benefit reserves
|
|
31,773,988
|
|
|
28,118,716
|
|
|
23,655,807
|
|
|
19,336,221
|
|
|
15,809,539
|
|
|||||
Notes payable
|
|
309,869
|
|
|
297,608
|
|
|
330,835
|
|
|
316,468
|
|
|
247,750
|
|
|||||
Subordinated debentures
|
|
245,869
|
|
|
268,593
|
|
|
268,435
|
|
|
268,347
|
|
|
268,209
|
|
|||||
Accumulated other comprehensive income (loss) ("AOCI")
|
|
686,807
|
|
|
457,229
|
|
|
81,820
|
|
|
(30,456
|
)
|
|
(147,376
|
)
|
|||||
Total stockholders' equity
|
|
1,720,237
|
|
|
1,408,679
|
|
|
938,047
|
|
|
754,623
|
|
|
496,844
|
|
|||||
Other Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Life subsidiaries' statutory capital and surplus and asset valuation reserve
|
|
1,741,637
|
|
|
1,655,205
|
|
|
1,456,679
|
|
|
1,239,651
|
|
|
1,011,682
|
|
|||||
Life subsidiaries' statutory net gain from operations before income taxes and realized capital gains (losses)
|
|
182,057
|
|
|
344,538
|
|
|
322,133
|
|
|
253,146
|
|
|
129,046
|
|
|||||
Life subsidiaries' statutory net income (loss)
|
|
79,644
|
|
|
167,925
|
|
|
172,865
|
|
|
116,895
|
|
|
(7,073
|
)
|
|||||
Book value per share (b)
|
|
$
|
27.46
|
|
|
$
|
23.82
|
|
|
$
|
16.07
|
|
|
$
|
13.08
|
|
|
$
|
9.46
|
|
Book value per share, excluding AOCI (b)
|
|
16.49
|
|
|
16.09
|
|
|
14.67
|
|
|
13.61
|
|
|
12.27
|
|
(a)
|
In addition to net income, we have consistently utilized operating income, operating income per common share and operating income per common share—assuming dilution, non-GAAP financial measures commonly used in the life insurance industry, as economic measures to evaluate our financial performance. Operating income equals net income adjusted to eliminate the impact of net realized gains (losses) on investments including net OTTI losses recognized in operations and related deferred tax asset valuation allowance, fair value changes in derivatives and embedded derivatives, (gain) loss on extinguishment of convertible debt, the counterparty default on expired call options and litigation reserves. Because these items fluctuate from year to year in a manner unrelated to core operations, we believe measures excluding their impact are useful in analyzing operating trends. We believe the combined presentation and evaluation of operating income together with net income provides information that may enhance an investor's understanding of our underlying results and profitability.
|
(b)
|
Book value per share and book value per share 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. AOCI fluctuates from year to year due to unrealized changes in the fair value of available for sale investments. Shares outstanding include shares held by the NMO Deferred Compensation Trust and exclude unallocated shares held by our employee stock ownership plan—see note 11 to our audited consolidated financial statements.
|
•
|
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 fair value of our investments, which could result in impairments and other than temporary impairments, and certain liabilities, and the lapse rate and profitability of policies;
|
•
|
customer response to new products and marketing initiatives;
|
•
|
changes in the 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; and
|
•
|
the risk factors or uncertainties listed from time to time in our filings with the SEC.
|
|
|
Year Ended December 31,
|
||||
|
|
2012
|
|
2011
|
|
2010
|
Average yield on invested assets
|
|
5.28%
|
|
5.80%
|
|
6.06%
|
Aggregate cost of money
|
|
2.58%
|
|
2.77%
|
|
2.91%
|
Aggregate investment spread
|
|
2.70%
|
|
3.03%
|
|
3.15%
|
|
|
|
|
|
|
|
Impact of:
|
|
|
|
|
|
|
Investment yield - additional prepayment income
|
|
0.06%
|
|
—%
|
|
(0.04)%
|
Cost of money benefit from over hedging
|
|
0.01%
|
|
0.06%
|
|
0.10%
|
|
|
Year Ended December 31,
|
||||||||||
Product Type
|
|
2012
|
|
2011
|
|
2010
|
||||||
|
|
(Dollars in thousands)
|
||||||||||
Fixed index annuities:
|
|
|
|
|
|
|
||||||
Index strategies
|
|
$
|
2,225,902
|
|
|
$
|
2,839,295
|
|
|
$
|
2,401,891
|
|
Fixed strategy
|
|
1,208,324
|
|
|
1,377,987
|
|
|
1,551,007
|
|
|||
|
|
3,434,226
|
|
|
4,217,282
|
|
|
3,952,898
|
|
|||
Fixed rate annuities:
|
|
|
|
|
|
|
||||||
Single-year rate guaranteed
|
|
98,821
|
|
|
169,304
|
|
|
160,077
|
|
|||
Multi-year rate guaranteed
|
|
249,228
|
|
|
397,925
|
|
|
384,116
|
|
|||
Single premium immediate annuities
|
|
164,657
|
|
|
305,603
|
|
|
171,628
|
|
|||
|
|
512,706
|
|
|
872,832
|
|
|
715,821
|
|
|||
Total before coinsurance ceded
|
|
3,946,932
|
|
|
5,090,114
|
|
|
4,668,719
|
|
|||
Coinsurance ceded
|
|
203,734
|
|
|
326,531
|
|
|
478,963
|
|
|||
Net after coinsurance ceded
|
|
$
|
3,743,198
|
|
|
$
|
4,763,583
|
|
|
$
|
4,189,756
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(Dollars in thousands)
|
||||||||||
Increased (decreased) amortization of deferred sales inducements
|
$
|
(199
|
)
|
|
$
|
(4,979
|
)
|
|
$
|
270
|
|
Increased (decreased) amortization of deferred policy acquisition costs
|
3,738
|
|
|
(9,132
|
)
|
|
1,683
|
|
|||
Increased (decreased) net income
|
(2,243
|
)
|
|
9,088
|
|
|
(1,261
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(Dollars in thousands)
|
||||||||||
Increased (decreased) amortization of deferred sales inducements
|
$
|
2,451
|
|
|
$
|
(7,301
|
)
|
|
$
|
305
|
|
Increased (decreased) amortization of deferred policy acquisition costs
|
7,288
|
|
|
(12,106
|
)
|
|
1,430
|
|
|||
Increased (decreased) operating income
|
(6,285
|
)
|
|
12,498
|
|
|
(1,120
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(Dollars in thousands)
|
||||||||||
Call options:
|
|
|
|
|
|
||||||
Gain on option expiration
|
$
|
80,782
|
|
|
$
|
155,359
|
|
|
$
|
208,881
|
|
Change in unrealized gain (loss)
|
147,828
|
|
|
(248,941
|
)
|
|
(67,078
|
)
|
|||
2015 notes hedges
|
(2,488
|
)
|
|
(21,002
|
)
|
|
29,595
|
|
|||
Interest rate swaps
|
(4,261
|
)
|
|
(144
|
)
|
|
(2,536
|
)
|
|||
Interest rate caps
|
(723
|
)
|
|
—
|
|
|
—
|
|
|||
|
$
|
221,138
|
|
|
$
|
(114,728
|
)
|
|
$
|
168,862
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(Dollars in thousands)
|
||||||||||
Available for sale fixed maturity securities:
|
|
|
|
|
|
||||||
Gross realized gains
|
$
|
10,906
|
|
|
$
|
12,614
|
|
|
$
|
27,755
|
|
Gross realized losses
|
(562
|
)
|
|
(1,423
|
)
|
|
(2,575
|
)
|
|||
|
10,344
|
|
|
11,191
|
|
|
25,180
|
|
|||
Equity securities:
|
|
|
|
|
|
||||||
Gross realized gains
|
562
|
|
|
966
|
|
|
14,384
|
|
|||
Gross realized losses
|
—
|
|
|
—
|
|
|
(71
|
)
|
|||
|
562
|
|
|
966
|
|
|
14,313
|
|
|||
Mortgage loans on real estate:
|
|
|
|
|
|
||||||
Increase in allowance for credit losses
|
(16,832
|
)
|
|
(30,770
|
)
|
|
(15,225
|
)
|
|||
Other investments:
|
|
|
|
|
|
||||||
Gains on sale of real estate
|
5,149
|
|
|
377
|
|
|
—
|
|
|||
Impairment losses
|
(5,677
|
)
|
|
(405
|
)
|
|
(542
|
)
|
|||
|
(528
|
)
|
|
(28
|
)
|
|
(542
|
)
|
|||
|
$
|
(6,454
|
)
|
|
$
|
(18,641
|
)
|
|
$
|
23,726
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(Dollars in thousands)
|
||||||||||
Index credits on index policies
|
$
|
447,393
|
|
|
$
|
448,248
|
|
|
$
|
454,660
|
|
Interest credited (including changes in minimum guaranteed interest for fixed index annuities)
|
328,729
|
|
|
302,691
|
|
|
265,539
|
|
|||
Living income benefit rider
|
41,965
|
|
|
24,818
|
|
|
13,019
|
|
|||
|
$
|
818,087
|
|
|
$
|
775,757
|
|
|
$
|
733,218
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(Dollars in thousands)
|
||||||||||
Amortization of deferred sales inducements before gross profit adjustments
|
$
|
136,254
|
|
|
$
|
116,938
|
|
|
$
|
99,938
|
|
Gross profit adjustments:
|
|
|
|
|
|
||||||
Fair value accounting for derivatives and embedded derivatives
|
(45,010
|
)
|
|
(35,498
|
)
|
|
(39,213
|
)
|
|||
Net realized losses on investments, net OTTI losses recognized in operations
and litigation liability
|
(4,087
|
)
|
|
(9,659
|
)
|
|
(852
|
)
|
|||
Amortization of deferred sales inducements after gross profit adjustments
|
$
|
87,157
|
|
|
$
|
71,781
|
|
|
$
|
59,873
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(Dollars in thousands)
|
||||||||||
Amortization of deferred policy acquisition costs before gross profit adjustments
|
$
|
224,773
|
|
|
$
|
203,296
|
|
|
$
|
189,134
|
|
Gross profit adjustments:
|
|
|
|
|
|
||||||
Fair value accounting for derivatives and embedded derivatives
|
(53,296
|
)
|
|
(45,360
|
)
|
|
(48,332
|
)
|
|||
Net realized losses on investments, net OTTI losses recognized in operations
and litigation liability
|
(6,558
|
)
|
|
(14,458
|
)
|
|
(4,414
|
)
|
|||
Amortization of deferred policy acquisition costs after gross profit adjustments
|
$
|
164,919
|
|
|
$
|
143,478
|
|
|
$
|
136,388
|
|
|
December 31,
|
||||||||||||
|
2012
|
|
2011
|
||||||||||
|
Carrying
Amount
|
|
Percent
|
|
Carrying
Amount
|
|
Percent
|
||||||
|
(Dollars in thousands)
|
||||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
||||||
United States Government full faith and credit
|
$
|
5,154
|
|
|
—
|
%
|
|
$
|
4,678
|
|
|
—
|
%
|
United States Government sponsored agencies
|
1,772,025
|
|
|
6.5
|
%
|
|
4,368,053
|
|
|
17.9
|
%
|
||
United States municipalities, states and territories
|
3,578,323
|
|
|
13.0
|
%
|
|
3,333,383
|
|
|
13.7
|
%
|
||
Foreign government obligations
|
105,259
|
|
|
0.4
|
%
|
|
68,333
|
|
|
0.3
|
%
|
||
Corporate securities
|
14,542,860
|
|
|
52.8
|
%
|
|
10,167,188
|
|
|
41.7
|
%
|
||
Residential mortgage backed securities
|
2,888,113
|
|
|
10.5
|
%
|
|
2,703,290
|
|
|
11.1
|
%
|
||
Commercial mortgage backed securities
|
357,982
|
|
|
1.3
|
%
|
|
—
|
|
|
—
|
%
|
||
Other asset backed securities
|
998,508
|
|
|
3.6
|
%
|
|
463,390
|
|
|
1.9
|
%
|
||
Total fixed maturity securities
|
24,248,224
|
|
|
88.1
|
%
|
|
21,108,315
|
|
|
86.6
|
%
|
||
Equity securities
|
53,422
|
|
|
0.2
|
%
|
|
62,845
|
|
|
0.2
|
%
|
||
Mortgage loans on real estate
|
2,623,940
|
|
|
9.5
|
%
|
|
2,823,047
|
|
|
11.6
|
%
|
||
Derivative instruments
|
415,258
|
|
|
1.5
|
%
|
|
273,314
|
|
|
1.1
|
%
|
||
Other investments
|
196,366
|
|
|
0.7
|
%
|
|
115,930
|
|
|
0.5
|
%
|
||
|
$
|
27,537,210
|
|
|
100.0
|
%
|
|
$
|
24,383,451
|
|
|
100.0
|
%
|
|
December 31,
|
||||||||||||
|
2012
|
|
2011
|
||||||||||
Rating Agency Rating
|
Carrying
Amount
|
|
Percent of Fixed Maturity Securities
|
|
Carrying
Amount
|
|
Percent of Fixed Maturity Securities
|
||||||
|
(Dollars in thousands)
|
||||||||||||
Aaa/Aa/A
|
$
|
14,613,775
|
|
|
60.3
|
%
|
|
$
|
14,777,524
|
|
|
70.0
|
%
|
Baa
|
8,190,220
|
|
|
33.8
|
%
|
|
4,945,809
|
|
|
23.4
|
%
|
||
Total investment grade
|
22,803,995
|
|
|
94.1
|
%
|
|
19,723,333
|
|
|
93.4
|
%
|
||
Ba
|
365,102
|
|
|
1.5
|
%
|
|
257,585
|
|
|
1.2
|
%
|
||
B
|
79,789
|
|
|
0.3
|
%
|
|
169,112
|
|
|
0.8
|
%
|
||
Caa and lower
|
862,650
|
|
|
3.5
|
%
|
|
858,694
|
|
|
4.1
|
%
|
||
In or near default
|
136,688
|
|
|
0.6
|
%
|
|
99,591
|
|
|
0.5
|
%
|
||
Total below investment grade
|
1,444,229
|
|
|
5.9
|
%
|
|
1,384,982
|
|
|
6.6
|
%
|
||
|
$
|
24,248,224
|
|
|
100.0
|
%
|
|
$
|
21,108,315
|
|
|
100.0
|
%
|
NAIC Designation
|
|
NRSRO Equivalent Rating
|
1
|
|
Aaa/Aa/A
|
2
|
|
Baa
|
3
|
|
Ba
|
4
|
|
B
|
5
|
|
Caa and lower
|
6
|
|
In or near default
|
|
|
December 31, 2012
|
|
December 31, 2011
|
||||||||||||||||||||||||||
NAIC
Designation
|
|
Amortized
Cost
|
|
Fair Value
|
|
Carrying
Amount
|
|
Percentage
of Total
Carrying
Amount
|
|
Amortized
Cost
|
|
Fair Value
|
|
Carrying
Amount
|
|
Percentage
of Total
Carrying
Amount
|
||||||||||||||
|
|
(Dollars in thousands)
|
|
|
|
(Dollars in thousands)
|
|
|
||||||||||||||||||||||
1
|
|
$
|
13,737,381
|
|
|
$
|
15,250,560
|
|
|
$
|
15,250,560
|
|
|
62.9
|
%
|
|
$
|
14,359,272
|
|
|
$
|
15,486,571
|
|
|
$
|
15,469,765
|
|
|
73.3
|
%
|
2
|
|
7,838,186
|
|
|
8,533,121
|
|
|
8,533,121
|
|
|
35.2
|
%
|
|
4,894,739
|
|
|
5,272,759
|
|
|
5,272,759
|
|
|
25.0
|
%
|
||||||
3
|
|
398,294
|
|
|
387,222
|
|
|
401,789
|
|
|
1.7
|
%
|
|
335,642
|
|
|
315,406
|
|
|
331,996
|
|
|
1.6
|
%
|
||||||
4
|
|
53,879
|
|
|
56,151
|
|
|
56,151
|
|
|
0.2
|
%
|
|
26,674
|
|
|
23,989
|
|
|
23,989
|
|
|
0.1
|
%
|
||||||
5
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
4,932
|
|
|
5,756
|
|
|
5,756
|
|
|
—
|
%
|
||||||
6
|
|
5,375
|
|
|
6,603
|
|
|
6,603
|
|
|
—
|
%
|
|
3,226
|
|
|
4,050
|
|
|
4,050
|
|
|
—
|
%
|
||||||
|
|
$
|
22,033,115
|
|
|
$
|
24,233,657
|
|
|
$
|
24,248,224
|
|
|
100.0
|
%
|
|
$
|
19,624,485
|
|
|
$
|
21,108,531
|
|
|
$
|
21,108,315
|
|
|
100.0
|
%
|
Collateral Type
|
|
Principal
Amount
|
|
Amortized
Cost
|
|
Fair Value
|
||||||
|
|
(Dollars in thousands)
|
||||||||||
OTTI has not been recognized
|
|
|
|
|
|
|
||||||
Government agency
|
|
$
|
1,052,139
|
|
|
$
|
1,024,731
|
|
|
$
|
1,119,249
|
|
Prime
|
|
862,805
|
|
|
821,727
|
|
|
877,356
|
|
|||
Alt-A
|
|
40,631
|
|
|
41,164
|
|
|
41,685
|
|
|||
|
|
$
|
1,955,575
|
|
|
$
|
1,887,622
|
|
|
$
|
2,038,290
|
|
OTTI has been recognized
|
|
|
|
|
|
|
||||||
Prime
|
|
$
|
600,945
|
|
|
$
|
523,048
|
|
|
$
|
515,385
|
|
Alt-A
|
|
419,868
|
|
|
332,867
|
|
|
334,438
|
|
|||
|
|
$
|
1,020,813
|
|
|
$
|
855,915
|
|
|
$
|
849,823
|
|
Total by collateral type
|
|
|
|
|
|
|
||||||
Government agency
|
|
$
|
1,052,139
|
|
|
$
|
1,024,731
|
|
|
$
|
1,119,249
|
|
Prime
|
|
1,463,750
|
|
|
1,344,775
|
|
|
1,392,741
|
|
|||
Alt-A
|
|
460,499
|
|
|
374,031
|
|
|
376,123
|
|
|||
|
|
$
|
2,976,388
|
|
|
$
|
2,743,537
|
|
|
$
|
2,888,113
|
|
Total by NAIC designation
|
|
|
|
|
|
|
||||||
1
|
|
$
|
2,477,404
|
|
|
$
|
2,303,619
|
|
|
$
|
2,447,562
|
|
2
|
|
415,472
|
|
|
365,763
|
|
|
364,421
|
|
|||
3
|
|
48,054
|
|
|
43,778
|
|
|
44,734
|
|
|||
4
|
|
31,612
|
|
|
27,900
|
|
|
29,584
|
|
|||
6
|
|
3,846
|
|
|
2,477
|
|
|
1,812
|
|
|||
|
|
$
|
2,976,388
|
|
|
$
|
2,743,537
|
|
|
$
|
2,888,113
|
|
|
Number of
Securities
|
|
Amortized
Cost
|
|
Unrealized
Losses
|
|
Fair Value
|
|||||||
|
(Dollars in thousands)
|
|||||||||||||
December 31, 2012
|
|
|
|
|
|
|
|
|||||||
Fixed maturity securities, available for sale:
|
|
|
|
|
|
|
|
|||||||
United States Government sponsored agencies
|
6
|
|
|
$
|
977,196
|
|
|
$
|
(3,468
|
)
|
|
$
|
973,728
|
|
United States municipalities, states and territories
|
8
|
|
|
24,518
|
|
|
(125
|
)
|
|
24,393
|
|
|||
Corporate securities:
|
|
|
|
|
|
|
|
|||||||
Finance, insurance and real estate
|
19
|
|
|
276,235
|
|
|
(12,564
|
)
|
|
263,671
|
|
|||
Manufacturing, construction and mining
|
34
|
|
|
453,679
|
|
|
(5,584
|
)
|
|
448,095
|
|
|||
Utilities and related sectors
|
20
|
|
|
269,667
|
|
|
(9,399
|
)
|
|
260,268
|
|
|||
Wholesale/retail trade
|
11
|
|
|
113,032
|
|
|
(992
|
)
|
|
112,040
|
|
|||
Services, media and other
|
19
|
|
|
267,506
|
|
|
(3,085
|
)
|
|
264,421
|
|
|||
Residential mortgage backed securities
|
56
|
|
|
508,576
|
|
|
(27,728
|
)
|
|
480,848
|
|
|||
Commercial mortgage backed securities
|
12
|
|
|
163,565
|
|
|
(1,983
|
)
|
|
161,582
|
|
|||
Other asset backed securities
|
11
|
|
|
174,342
|
|
|
(2,973
|
)
|
|
171,369
|
|
|||
|
196
|
|
|
$
|
3,228,316
|
|
|
$
|
(67,901
|
)
|
|
$
|
3,160,415
|
|
Fixed maturity securities, held for investment:
|
|
|
|
|
|
|
|
|||||||
Corporate security:
|
|
|
|
|
|
|
|
|||||||
Insurance
|
1
|
|
|
$
|
76,088
|
|
|
$
|
(14,567
|
)
|
|
$
|
61,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Equity securities, available for sale:
|
|
|
|
|
|
|
|
|||||||
Services
|
1
|
|
|
$
|
10,125
|
|
|
$
|
(1,403
|
)
|
|
$
|
8,722
|
|
|
|
|
|
|
|
|
|
|||||||
December 31, 2011
|
|
|
|
|
|
|
|
|||||||
Fixed maturity securities, available for sale:
|
|
|
|
|
|
|
|
|||||||
United States municipalities, states and territories
|
1
|
|
|
$
|
3,545
|
|
|
$
|
(10
|
)
|
|
$
|
3,535
|
|
Foreign government obligations
|
1
|
|
|
14,524
|
|
|
(242
|
)
|
|
14,282
|
|
|||
Corporate securities:
|
|
|
|
|
|
|
|
|||||||
Finance, insurance and real estate
|
52
|
|
|
562,449
|
|
|
(52,186
|
)
|
|
510,263
|
|
|||
Manufacturing, construction and mining
|
31
|
|
|
226,113
|
|
|
(8,758
|
)
|
|
217,355
|
|
|||
Utilities and related sectors
|
28
|
|
|
226,551
|
|
|
(14,522
|
)
|
|
212,029
|
|
|||
Wholesale/retail trade
|
4
|
|
|
26,180
|
|
|
(1,382
|
)
|
|
24,798
|
|
|||
Services, media and other
|
9
|
|
|
47,937
|
|
|
(3,144
|
)
|
|
44,793
|
|
|||
Residential mortgage backed securities
|
95
|
|
|
1,077,045
|
|
|
(72,081
|
)
|
|
1,004,964
|
|
|||
Other asset backed securities
|
17
|
|
|
136,703
|
|
|
(5,611
|
)
|
|
131,092
|
|
|||
|
238
|
|
|
$
|
2,321,047
|
|
|
$
|
(157,936
|
)
|
|
$
|
2,163,111
|
|
Fixed maturity securities, held for investment:
|
|
|
|
|
|
|
|
|||||||
Corporate security:
|
|
|
|
|
|
|
|
|||||||
Insurance
|
1
|
|
|
$
|
75,932
|
|
|
$
|
(16,590
|
)
|
|
$
|
59,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Equity securities, available for sale:
|
|
|
|
|
|
|
|
|||||||
Finance, insurance and real estate
|
7
|
|
|
$
|
28,123
|
|
|
$
|
(4,345
|
)
|
|
23,778
|
|
NAIC Designation
|
|
Carrying Value of
Securities with
Gross Unrealized
Losses
|
|
Percent of
Total
|
|
Gross
Unrealized
Losses
|
|
Percent of
Total
|
||||||
|
|
(Dollars in thousands)
|
||||||||||||
December 31, 2012
|
|
|
|
|
|
|
|
|
||||||
1
|
|
$
|
1,992,406
|
|
|
61.5
|
%
|
|
$
|
(38,125
|
)
|
|
46.2
|
%
|
2
|
|
1,071,009
|
|
|
33.1
|
%
|
|
(23,969
|
)
|
|
29.1
|
%
|
||
3
|
|
157,464
|
|
|
4.9
|
%
|
|
(19,410
|
)
|
|
23.5
|
%
|
||
4
|
|
13,812
|
|
|
0.4
|
%
|
|
(299
|
)
|
|
0.4
|
%
|
||
5
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
||
6
|
|
1,812
|
|
|
0.1
|
%
|
|
(665
|
)
|
|
0.8
|
%
|
||
|
|
$
|
3,236,503
|
|
|
100.0
|
%
|
|
$
|
(82,468
|
)
|
|
100.0
|
%
|
December 31, 2011
|
|
|
|
|
|
|
|
|
||||||
1
|
|
$
|
1,229,962
|
|
|
54.9
|
%
|
|
$
|
(88,632
|
)
|
|
50.8
|
%
|
2
|
|
825,771
|
|
|
36.9
|
%
|
|
(56,551
|
)
|
|
32.4
|
%
|
||
3
|
|
165,902
|
|
|
7.4
|
%
|
|
(25,402
|
)
|
|
14.6
|
%
|
||
4
|
|
15,310
|
|
|
0.7
|
%
|
|
(3,026
|
)
|
|
1.7
|
%
|
||
5
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
||
6
|
|
2,098
|
|
|
0.1
|
%
|
|
(915
|
)
|
|
0.5
|
%
|
||
|
|
$
|
2,239,043
|
|
|
100.0
|
%
|
|
$
|
(174,526
|
)
|
|
100.0
|
%
|
|
Number of
Securities
|
|
Amortized
Cost
|
|
Fair Value
|
|
Gross
Unrealized
Losses
|
|||||||
|
(Dollars in thousands)
|
|||||||||||||
December 31, 2012
|
|
|
|
|
|
|
|
|||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|||||||
Investment grade:
|
|
|
|
|
|
|
|
|||||||
Less than six months
|
106
|
|
|
$
|
2,464,476
|
|
|
$
|
2,440,131
|
|
|
$
|
(24,345
|
)
|
Six months or more and less than twelve months
|
4
|
|
|
40,054
|
|
|
39,151
|
|
|
(903
|
)
|
|||
Twelve months or greater
|
14
|
|
|
165,718
|
|
|
155,618
|
|
|
(10,100
|
)
|
|||
Total investment grade
|
124
|
|
|
2,670,248
|
|
|
2,634,900
|
|
|
(35,348
|
)
|
|||
Below investment grade:
|
|
|
|
|
|
|
|
|||||||
Less than six months
|
23
|
|
|
110,435
|
|
|
108,531
|
|
|
(1,904
|
)
|
|||
Six months or more and less than twelve months
|
9
|
|
|
135,915
|
|
|
129,086
|
|
|
(6,829
|
)
|
|||
Twelve months or greater
|
41
|
|
|
387,806
|
|
|
349,419
|
|
|
(38,387
|
)
|
|||
Total below investment grade
|
73
|
|
|
634,156
|
|
|
587,036
|
|
|
(47,120
|
)
|
|||
Equity securities:
|
|
|
|
|
|
|
|
|||||||
Less than six months
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Six months or more and less than twelve months
|
1
|
|
|
10,125
|
|
|
8,722
|
|
|
(1,403
|
)
|
|||
Twelve months or greater
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total equity securities
|
1
|
|
|
10,125
|
|
|
8,722
|
|
|
(1,403
|
)
|
|||
|
198
|
|
|
$
|
3,314,529
|
|
|
$
|
3,230,658
|
|
|
$
|
(83,871
|
)
|
December 31, 2011
|
|
|
|
|
|
|
|
|||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|||||||
Investment grade:
|
|
|
|
|
|
|
|
|||||||
Less than six months
|
105
|
|
|
$
|
888,771
|
|
|
$
|
845,654
|
|
|
$
|
(43,117
|
)
|
Six months or more and less than twelve months
|
16
|
|
|
133,766
|
|
|
121,320
|
|
|
(12,446
|
)
|
|||
Twelve months or greater
|
32
|
|
|
333,116
|
|
|
304,408
|
|
|
(28,708
|
)
|
|||
Total investment grade
|
153
|
|
|
1,355,653
|
|
|
1,271,382
|
|
|
(84,271
|
)
|
|||
Below investment grade:
|
|
|
|
|
|
|
|
|||||||
Less than six months
|
15
|
|
|
193,472
|
|
|
180,373
|
|
|
(13,099
|
)
|
|||
Six months or more and less than twelve months
|
8
|
|
|
56,065
|
|
|
50,215
|
|
|
(5,850
|
)
|
|||
Twelve months or greater
|
63
|
|
|
791,789
|
|
|
720,483
|
|
|
(71,306
|
)
|
|||
Total below investment grade
|
86
|
|
|
1,041,326
|
|
|
951,071
|
|
|
(90,255
|
)
|
|||
Equity securities:
|
|
|
|
|
|
|
|
|||||||
Less than six months
|
4
|
|
|
17,123
|
|
|
15,004
|
|
|
(2,119
|
)
|
|||
Six months or more and less than twelve months
|
2
|
|
|
6,000
|
|
|
5,024
|
|
|
(976
|
)
|
|||
Twelve months or greater
|
1
|
|
|
5,000
|
|
|
3,750
|
|
|
(1,250
|
)
|
|||
Total equity securities
|
7
|
|
|
28,123
|
|
|
23,778
|
|
|
(4,345
|
)
|
|||
|
246
|
|
|
$
|
2,425,102
|
|
|
$
|
2,246,231
|
|
|
$
|
(178,871
|
)
|
|
Number of
Securities
|
|
Amortized
Cost
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
|||||||
|
(Dollars in thousands)
|
|||||||||||||
December 31, 2012
|
|
|
|
|
|
|
|
|||||||
Investment grade:
|
|
|
|
|
|
|
|
|||||||
Less than six months
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Six months or more and less than twelve months
|
1
|
|
|
20,000
|
|
|
15,379
|
|
|
(4,621
|
)
|
|||
Twelve months or greater
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total investment grade
|
1
|
|
|
20,000
|
|
|
15,379
|
|
|
(4,621
|
)
|
|||
Below investment grade:
|
|
|
|
|
|
|
|
|||||||
Less than six months
|
1
|
|
|
1,416
|
|
|
1,131
|
|
|
(285
|
)
|
|||
Six months or more and less than twelve months
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Twelve months or greater
|
3
|
|
|
9,324
|
|
|
7,148
|
|
|
(2,176
|
)
|
|||
Total below investment grade
|
4
|
|
|
10,740
|
|
|
8,279
|
|
|
(2,461
|
)
|
|||
|
5
|
|
|
$
|
30,740
|
|
|
$
|
23,658
|
|
|
$
|
(7,082
|
)
|
December 31, 2011
|
|
|
|
|
|
|
|
|||||||
Investment grade:
|
|
|
|
|
|
|
|
|||||||
Less than six months
|
9
|
|
|
$
|
83,332
|
|
|
$
|
56,501
|
|
|
$
|
(26,831
|
)
|
Six months or more and less than twelve months
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Twelve months or greater
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total investment grade
|
9
|
|
|
83,332
|
|
|
56,501
|
|
|
(26,831
|
)
|
|||
Below investment grade:
|
|
|
|
|
|
|
|
|||||||
Less than six months
|
4
|
|
|
38,506
|
|
|
29,076
|
|
|
(9,430
|
)
|
|||
Six months or more and less than twelve months
|
1
|
|
|
7,464
|
|
|
5,250
|
|
|
(2,214
|
)
|
|||
Twelve months or greater
|
3
|
|
|
78,945
|
|
|
61,440
|
|
|
(17,505
|
)
|
|||
Total below investment grade
|
8
|
|
|
124,915
|
|
|
95,766
|
|
|
(29,149
|
)
|
|||
|
17
|
|
|
$
|
208,247
|
|
|
$
|
152,267
|
|
|
$
|
(55,980
|
)
|
|
Available for sale
|
|
Held for investment
|
||||||||||||
|
Amortized
Cost
|
|
Fair Value
|
|
Amortized
Cost
|
|
Fair Value
|
||||||||
|
(Dollars in thousands)
|
||||||||||||||
December 31, 2012
|
|
|
|
|
|
|
|
||||||||
Due in one year of less
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Due after one year through five years
|
22,160
|
|
|
21,059
|
|
|
—
|
|
|
—
|
|
||||
Due after five years through ten years
|
623,802
|
|
|
617,848
|
|
|
—
|
|
|
—
|
|
||||
Due after ten years through twenty years
|
1,319,250
|
|
|
1,302,283
|
|
|
—
|
|
|
—
|
|
||||
Due after twenty years
|
416,621
|
|
|
405,426
|
|
|
76,088
|
|
|
61,521
|
|
||||
|
2,381,833
|
|
|
2,346,616
|
|
|
76,088
|
|
|
61,521
|
|
||||
Residential mortgage backed securities
|
508,576
|
|
|
480,848
|
|
|
—
|
|
|
—
|
|
||||
Commercial mortgage backed securities
|
163,565
|
|
|
161,582
|
|
|
—
|
|
|
—
|
|
||||
Other asset backed securities
|
174,342
|
|
|
171,369
|
|
|
—
|
|
|
—
|
|
||||
|
$
|
3,228,316
|
|
|
$
|
3,160,415
|
|
|
$
|
76,088
|
|
|
$
|
61,521
|
|
December 31, 2011
|
|
|
|
|
|
|
|
||||||||
Due in one year or less
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Due after one year through five years
|
18,066
|
|
|
16,725
|
|
|
—
|
|
|
—
|
|
||||
Due after five years through ten years
|
374,616
|
|
|
356,620
|
|
|
—
|
|
|
—
|
|
||||
Due after ten years through twenty years
|
359,672
|
|
|
319,977
|
|
|
—
|
|
|
—
|
|
||||
Due after twenty years
|
354,945
|
|
|
333,733
|
|
|
75,932
|
|
|
59,342
|
|
||||
|
1,107,299
|
|
|
1,027,055
|
|
|
75,932
|
|
|
59,342
|
|
||||
Residential mortgage backed securities
|
1,077,045
|
|
|
1,004,964
|
|
|
—
|
|
|
—
|
|
||||
Other asset backed securities
|
136,703
|
|
|
131,092
|
|
|
—
|
|
|
—
|
|
||||
|
$
|
2,321,047
|
|
|
$
|
2,163,111
|
|
|
$
|
75,932
|
|
|
$
|
59,342
|
|
|
December 31, 2012
|
||||||||
|
Amortized Cost
|
|
Carrying
Amount/Fair Value
|
|
Percent
of Total
Carrying
Amount
|
||||
|
(Dollars in thousands)
|
|
|
||||||
GIIPS (1)
|
$
|
224,380
|
|
|
$
|
237,613
|
|
|
1.0%
|
Asia/Pacific
|
102,885
|
|
|
115,282
|
|
|
0.5%
|
||
Non-GIIPS Europe
|
1,366,524
|
|
|
1,495,697
|
|
|
6.2%
|
||
Latin America
|
188,893
|
|
|
208,591
|
|
|
0.9%
|
||
Non-U.S. North America
|
639,746
|
|
|
722,447
|
|
|
3.0%
|
||
Australia & New Zealand
|
315,618
|
|
|
343,754
|
|
|
1.4%
|
||
Other
|
317,359
|
|
|
361,051
|
|
|
1.5%
|
||
|
$
|
3,155,405
|
|
|
$
|
3,484,435
|
|
|
14.5%
|
General Description
|
|
Number of
Securities
|
|
Amortized
Cost
|
|
Unrealized
Losses
|
|
Fair Value
|
|
Months in
Continuous
Unrealized
Loss Position
|
|
Months
Unrealized
Losses
Greater
Than 20%
|
||||||
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
||||||||||
Investment grade
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Finance
|
|
3
|
|
$
|
49,480
|
|
|
$
|
(7,911
|
)
|
|
$
|
41,569
|
|
|
16-25
|
|
0-14
|
Industrial
|
|
3
|
|
18,256
|
|
|
(1,086
|
)
|
|
17,170
|
|
|
17-28
|
|
0-28
|
|||
Below investment grade
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Industrial
|
|
1
|
|
20,611
|
|
|
(2,908
|
)
|
|
17,703
|
|
|
19
|
|
—
|
|||
|
|
7
|
|
$
|
88,347
|
|
|
$
|
(11,905
|
)
|
|
$
|
76,442
|
|
|
|
|
|
|
December 31, 2012
|
|||||
|
Principal Outstanding
|
|
Percent of Total Principal Outstanding
|
|||
|
(Dollars in thousands)
|
|
|
|||
Debt Service Coverage Ratio:
|
|
|
|
|||
Greater than or equal to 1.5
|
$
|
1,517,840
|
|
|
57.1
|
%
|
Greater than or equal to 1.2 and less than 1.5
|
604,512
|
|
|
22.7
|
%
|
|
Greater than or equal to 1.0 and less than 1.2
|
262,165
|
|
|
9.9
|
%
|
|
Less than 1.0
|
274,366
|
|
|
10.3
|
%
|
|
|
$
|
2,658,883
|
|
|
100.0
|
%
|
|
December 31,
|
||||||
|
2012
|
|
2011
|
||||
|
(Dollars in thousands)
|
||||||
Impaired mortgage loans with allowances
|
$
|
53,110
|
|
|
$
|
67,698
|
|
Impaired mortgage loans with no allowance for losses
|
27,765
|
|
|
63,023
|
|
||
Allowance for probable loan losses
|
(23,134
|
)
|
|
(23,664
|
)
|
||
Net carrying value of impaired mortgage loans
|
$
|
57,741
|
|
|
$
|
107,057
|
|
|
Payments Due by Period
|
||||||||||||||||||
|
Total
|
|
Less Than
1 year
|
|
1–3 Years
|
|
4–5 Years
|
|
After
5 Years
|
||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||
Annuity and single premium universal life products (1)
|
$
|
31,291,653
|
|
|
$
|
1,996,794
|
|
|
$
|
6,946,835
|
|
|
$
|
5,137,659
|
|
|
$
|
17,210,365
|
|
Notes payable, including interest payments (2)
|
380,210
|
|
|
14,564
|
|
|
365,646
|
|
|
—
|
|
|
—
|
|
|||||
Subordinated debentures, including interest payments (3)
|
624,159
|
|
|
11,438
|
|
|
22,875
|
|
|
22,875
|
|
|
566,971
|
|
|||||
Operating leases
|
11,294
|
|
|
1,493
|
|
|
2,957
|
|
|
2,515
|
|
|
4,329
|
|
|||||
Mortgage loan funding
|
37,946
|
|
|
37,946
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
32,345,262
|
|
|
$
|
2,062,235
|
|
|
$
|
7,338,313
|
|
|
$
|
5,163,049
|
|
|
$
|
17,781,665
|
|
(1)
|
Amounts shown in this table are projected payments through the year 2031 which we are contractually obligated to pay to our annuity policyholders. The payments are derived from actuarial models which assume a level interest rate scenario and incorporate assumptions regarding mortality and persistency, when applicable. These assumptions are based on our historical experience.
|
(2)
|
Period that principal amounts are due is determined by the earliest of the call/put date or the maturity date of each note payable.
|
(3)
|
Amount shown is net of equity investments in the capital trusts due to the contractual right of offset upon repayment of the notes.
|
Level 1 —
|
Quoted prices are available in active markets for identical financial instruments as of the reporting date. We do not adjust the quoted price for these financial instruments, even in situations where we hold a large position and a sale could reasonably impact the quoted price.
|
Level 2 —
|
Quoted prices in active markets for similar financial instruments, quoted prices for identical or similar financial instruments in markets that are not active; and models and other valuation methodologies using inputs other than quoted prices that are observable.
|
Level 3 —
|
Models and other valuation methodologies using significant inputs that are unobservable for financial instruments and include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in Level 3 are securities for which no market activity or data exists and for which we used discounted expected future cash flows with our own assumptions about what a market participant would use in determining fair value.
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total
|
||||||||
|
(Dollars in thousands)
|
||||||||||||||
December 31, 2012
|
|
|
|
|
|
|
|
||||||||
Priced via third party pricing services
|
$
|
75,592
|
|
|
$
|
24,101,390
|
|
|
$
|
—
|
|
|
$
|
24,176,982
|
|
Priced via independent broker quotations
|
—
|
|
|
32,492
|
|
|
—
|
|
|
32,492
|
|
||||
Priced via matrices
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Priced via other methods
|
—
|
|
|
14,272
|
|
|
1,812
|
|
|
16,084
|
|
||||
|
$
|
75,592
|
|
|
$
|
24,148,154
|
|
|
$
|
1,812
|
|
|
$
|
24,225,558
|
|
% of Total
|
0.3
|
%
|
|
99.7
|
%
|
|
—
|
%
|
|
100.0
|
%
|
||||
December 31, 2011
|
|
|
|
|
|
|
|
||||||||
Priced via third party pricing services
|
$
|
108,104
|
|
|
$
|
18,201,877
|
|
|
$
|
—
|
|
|
$
|
18,309,981
|
|
Priced via independent broker quotations
|
—
|
|
|
194,143
|
|
|
—
|
|
|
194,143
|
|
||||
Priced via matrices
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Priced via other methods
|
—
|
|
|
20,732
|
|
|
2,098
|
|
|
22,830
|
|
||||
|
$
|
108,104
|
|
|
$
|
18,416,752
|
|
|
$
|
2,098
|
|
|
$
|
18,526,954
|
|
% of Total
|
0.6
|
%
|
|
99.4
|
%
|
|
—
|
%
|
|
100.0
|
%
|
•
|
reported trading prices,
|
•
|
benchmark yields
|
•
|
broker-dealer quotes,
|
•
|
benchmark securities,
|
•
|
bids and offers,
|
•
|
credit ratings,
|
•
|
relative credit information, and
|
•
|
other reference data.
|
•
|
the length of time and the extent to which the fair value has been less than amortized cost or cost;
|
•
|
whether the issuer is current on all payments and all contractual payments have been made as agreed;
|
•
|
the remaining payment terms and the financial condition and near-term prospects of the issuer;
|
•
|
the lack of ability to refinance due to liquidity problems in the credit market;
|
•
|
the fair value of any underlying collateral;
|
•
|
the existence of any credit protection available;
|
•
|
our intent to sell and whether it is more likely than not we would be required to sell prior to recovery for debt securities;
|
•
|
our assessment in the case of equity securities including perpetual preferred stocks with credit deterioration that the security cannot recover to cost in a reasonable period of time;
|
•
|
our intent and ability to retain equity securities for a period of time sufficient to allow for recovery;
|
•
|
consideration of rating agency actions; and
|
•
|
changes in estimated cash flows of residential mortgage and asset backed securities.
|
•
|
future taxable income of the necessary character exclusive of reversing temporary differences and carryforwards;
|
•
|
future reversals of existing taxable temporary differences;
|
•
|
taxable income in prior carryback years; and
|
•
|
tax planning strategies.
|
(a)
|
Evaluation of Disclosure Controls and Procedures.
|
(b)
|
Management's Report on Internal Control over Financial Reporting.
|
(c)
|
Changes in Internal Control over Financial Reporting.
|
|
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
|
||
|
By:
|
|
/s/ JOHN M. MATOVINA
|
|
|
|
John M. Matovina,
Chief Executive Officer and President
|
Signature
|
|
Title (Capacity)
|
|
Date
|
|
|
|
|
|
/s/ JOHN M. MATOVINA
|
|
Chief Executive Officer, President and Director
(Principal Executive Officer)
|
|
March 7, 2013
|
John M. Matovina
|
|
|
|
|
/s/ TED M. JOHNSON
|
|
Chief Financial Officer and Treasurer
(Principal Financial Officer)
|
|
March 7, 2013
|
Ted M. Johnson
|
|
|
|
|
/s/ SCOTT A. SAMUELSON
|
|
Vice President—Controller
(Principal Accounting Officer)
|
|
March 7, 2013
|
Scott A. Samuelson
|
|
|
|
|
/s/ D.J. NOBLE
|
|
Executive Chairman and Director
|
|
March 7, 2013
|
D.J. Noble
|
|
|
|
|
/s/ JOYCE A. CHAPMAN
|
|
Director
|
|
March 7, 2013
|
Joyce A. Chapman
|
|
|
|
|
/s/ ALEXANDER M. CLARK
|
|
Director
|
|
March 7, 2013
|
Alexander M. Clark
|
|
|
|
|
/s/ JAMES M. GERLACH
|
|
Director
|
|
March 7, 2013
|
James M. Gerlach
|
|
|
|
|
/s/ ROBERT L. HILTON
|
|
Director
|
|
March 7, 2013
|
Robert L. Hilton
|
|
|
|
|
/s/ ROBERT L. HOWE
|
|
Director
|
|
March 7, 2013
|
Robert L. Howe
|
|
|
|
|
/s/ DAVID S. MULCAHY
|
|
Director
|
|
March 7, 2013
|
David S. Mulcahy
|
|
|
|
|
/s/ GERARD D. NEUGENT
|
|
Director
|
|
March 7, 2013
|
Gerard D. Neugent
|
|
|
|
|
/s/ DEBRA J. RICHARDSON
|
|
Director
|
|
March 7, 2013
|
Debra J. Richardson
|
|
|
|
|
/s/ A.J. STRICKLAND, III
|
|
Director
|
|
March 7, 2013
|
A.J. Strickland, III
|
|
|
|
|
/s/ HARLEY A. WHITFIELD
|
|
Director
|
|
March 7, 2013
|
Harley A. Whitfield
|
|
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
Consolidated Financial Statements:
|
|
Consolidated Balance Sheets
|
|
Consolidated Statements of Operations
|
|
Consolidated Statements of Comprehensive Income
|
|
Consolidated Statements of Changes in Stockholders' Equity
|
|
Consolidated Statements of Cash Flows
|
|
Notes to Consolidated Financial Statements
|
|
Schedules:
|
|
Schedule I—Summary of Investments—Other Than Investments in Related Parties
|
|
Schedule II—Condensed Financial Information of Registrant
|
|
Schedule III—Supplementary Insurance Information
|
|
Schedule IV—Reinsurance
|
|
Schedule V—Valuation and Qualifying Accounts
|
|
December 31,
|
||||||
|
2012
|
|
2011
|
||||
Assets
|
|
|
|
||||
Investments:
|
|
|
|
||||
Fixed maturity securities:
|
|
|
|
||||
Available for sale, at fair value (amortized cost: 2012 - $21,957,027 ; 2011 - $16,980,279)
|
$
|
24,172,136
|
|
|
$
|
18,464,109
|
|
Held for investment, at amortized cost (fair value: 2012 - $61,521 ; 2011 - $2,644,422)
|
76,088
|
|
|
2,644,206
|
|
||
Equity securities, available for sale, at fair value (cost: 2012 - $44,598 ; 2011 - $58,438)
|
53,422
|
|
|
62,845
|
|
||
Mortgage loans on real estate
|
2,623,940
|
|
|
2,823,047
|
|
||
Derivative instruments
|
415,258
|
|
|
273,314
|
|
||
Other investments
|
196,366
|
|
|
115,930
|
|
||
Total investments
|
27,537,210
|
|
|
24,383,451
|
|
||
|
|
|
|
||||
Cash and cash equivalents
|
1,268,545
|
|
|
404,952
|
|
||
Coinsurance deposits
|
2,910,701
|
|
|
2,818,642
|
|
||
Accrued investment income
|
261,833
|
|
|
228,937
|
|
||
Deferred policy acquisition costs
|
1,709,799
|
|
|
1,683,857
|
|
||
Deferred sales inducements
|
1,292,341
|
|
|
1,242,787
|
|
||
Deferred income taxes
|
—
|
|
|
21,981
|
|
||
Income taxes recoverable
|
—
|
|
|
8,441
|
|
||
Other assets
|
153,049
|
|
|
81,671
|
|
||
Total assets
|
$
|
35,133,478
|
|
|
$
|
30,874,719
|
|
|
|
|
|
||||
Liabilities and Stockholders' Equity
|
|
|
|
||||
Liabilities:
|
|
|
|
||||
Policy benefit reserves
|
$
|
31,773,988
|
|
|
$
|
28,118,716
|
|
Other policy funds and contract claims
|
455,752
|
|
|
400,594
|
|
||
Notes payable
|
309,869
|
|
|
297,608
|
|
||
Subordinated debentures
|
245,869
|
|
|
268,593
|
|
||
Deferred income taxes
|
49,303
|
|
|
—
|
|
||
Income taxes payable
|
4,756
|
|
|
—
|
|
||
Other liabilities
|
573,704
|
|
|
380,529
|
|
||
Total liabilities
|
33,413,241
|
|
|
29,466,040
|
|
||
|
|
|
|
||||
Stockholders' equity:
|
|
|
|
||||
Preferred stock, par value $1 per share, 2,000,000 shares authorized,
2012 and 2011 - no shares issued and outstanding
|
—
|
|
|
—
|
|
||
Common stock, par value $1 per share, 200,000,000 shares authorized; issued and outstanding:
2012 - 61,750,601 shares (excluding 5,127,379 treasury shares);
2011 - 57,836,540 shares (excluding 5,616,595 treasury shares)
|
61,751
|
|
|
57,837
|
|
||
Additional paid-in capital
|
496,715
|
|
|
468,281
|
|
||
Unallocated common stock held by ESOP; 2012 - 239,799 shares; 2011 - 336,093 shares
|
(2,583
|
)
|
|
(3,620
|
)
|
||
Accumulated other comprehensive income
|
686,807
|
|
|
457,229
|
|
||
Retained earnings
|
477,547
|
|
|
428,952
|
|
||
Total stockholders' equity
|
1,720,237
|
|
|
1,408,679
|
|
||
Total liabilities and stockholders' equity
|
$
|
35,133,478
|
|
|
$
|
30,874,719
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Traditional life insurance premiums
|
$
|
12,877
|
|
|
$
|
12,151
|
|
|
$
|
11,982
|
|
Annuity product charges
|
89,006
|
|
|
76,189
|
|
|
69,075
|
|
|||
Net investment income
|
1,286,923
|
|
|
1,218,780
|
|
|
1,036,106
|
|
|||
Change in fair value of derivatives
|
221,138
|
|
|
(114,728
|
)
|
|
168,862
|
|
|||
Net realized gains (losses) on investments, excluding other than temporary
impairment ("OTTI") losses
|
(6,454
|
)
|
|
(18,641
|
)
|
|
23,726
|
|
|||
OTTI losses on investments:
|
|
|
|
|
|
||||||
Total OTTI losses
|
(5,411
|
)
|
|
(20,180
|
)
|
|
(19,544
|
)
|
|||
Portion of OTTI losses recognized from other comprehensive income
|
(9,521
|
)
|
|
(13,796
|
)
|
|
(4,323
|
)
|
|||
Net OTTI losses recognized in operations
|
(14,932
|
)
|
|
(33,976
|
)
|
|
(23,867
|
)
|
|||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
(292
|
)
|
|||
Total revenues
|
1,588,558
|
|
|
1,139,775
|
|
|
1,285,592
|
|
|||
|
|
|
|
|
|
||||||
Benefits and expenses:
|
|
|
|
|
|
||||||
Insurance policy benefits and change in future policy benefits
|
8,075
|
|
|
7,870
|
|
|
8,251
|
|
|||
Interest sensitive and index product benefits
|
818,087
|
|
|
775,757
|
|
|
733,218
|
|
|||
Amortization of deferred sales inducements
|
87,157
|
|
|
71,781
|
|
|
59,873
|
|
|||
Change in fair value of embedded derivatives
|
286,899
|
|
|
(105,194
|
)
|
|
130,950
|
|
|||
Interest expense on notes payable
|
28,479
|
|
|
31,633
|
|
|
22,125
|
|
|||
Interest expense on subordinated debentures
|
13,458
|
|
|
13,977
|
|
|
14,906
|
|
|||
Interest expense on amounts due under repurchase agreements
|
—
|
|
|
30
|
|
|
—
|
|
|||
Amortization of deferred policy acquisition costs
|
164,919
|
|
|
143,478
|
|
|
136,388
|
|
|||
Other operating costs and expenses
|
95,495
|
|
|
67,529
|
|
|
114,615
|
|
|||
Total benefits and expenses
|
1,502,569
|
|
|
1,006,861
|
|
|
1,220,326
|
|
|||
Income before income taxes
|
85,989
|
|
|
132,914
|
|
|
65,266
|
|
|||
Income tax expense
|
28,191
|
|
|
46,666
|
|
|
22,333
|
|
|||
Net income
|
$
|
57,798
|
|
|
$
|
86,248
|
|
|
$
|
42,933
|
|
|
|
|
|
|
|
||||||
Earnings per common share
|
$
|
0.94
|
|
|
$
|
1.45
|
|
|
$
|
0.73
|
|
Earnings per common share - assuming dilution
|
$
|
0.89
|
|
|
$
|
1.37
|
|
|
$
|
0.68
|
|
Weighted average common shares outstanding (in thousands):
|
|
|
|
|
|
||||||
Earnings per common share
|
61,259
|
|
|
59,482
|
|
|
58,507
|
|
|||
Earnings per common share - assuming dilution
|
65,676
|
|
|
63,619
|
|
|
64,580
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
|
|
|
|
|
||||||
Net income
|
$
|
57,798
|
|
|
$
|
86,248
|
|
|
42,933
|
|
|
Other comprehensive income:
|
|
|
|
|
|
||||||
Change in net unrealized investment gains/losses (1)
|
348,627
|
|
|
571,301
|
|
|
170,919
|
|
|||
Noncredit component of OTTI losses (1)
|
4,571
|
|
|
6,251
|
|
|
1,813
|
|
|||
Other comprehensive income before income tax
|
353,198
|
|
|
577,552
|
|
|
172,732
|
|
|||
Income tax effect related to other comprehensive income
|
(123,620
|
)
|
|
(202,143
|
)
|
|
(60,456
|
)
|
|||
Other comprehensive income
|
229,578
|
|
|
375,409
|
|
|
112,276
|
|
|||
Comprehensive income
|
$
|
287,376
|
|
|
$
|
461,657
|
|
|
$
|
155,209
|
|
|
Common
Stock
|
|
Additional
Paid-in
Capital
|
|
Unallocated
Common
Stock Held
by ESOP
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Retained
Earnings
|
|
Total
Stockholders'
Equity
|
||||||||||||
Balance at December 31, 2009
|
56,203
|
|
|
422,225
|
|
|
(5,679
|
)
|
|
(30,456
|
)
|
|
312,330
|
|
|
754,623
|
|
||||||
Net income for the year
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
42,933
|
|
|
42,933
|
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
112,276
|
|
|
—
|
|
|
112,276
|
|
||||||
Conversion of $60 of subordinated debentures
|
7
|
|
|
49
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
56
|
|
||||||
Acquisition of 104,661 shares of common stock
|
(105
|
)
|
|
(1,119
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,224
|
)
|
||||||
Allocation of 80,224 shares of common stock by ESOP,
including excess income tax benefits
|
—
|
|
|
(23
|
)
|
|
864
|
|
|
—
|
|
|
—
|
|
|
841
|
|
||||||
Share-based compensation, including excess income tax
benefits
|
—
|
|
|
12,239
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,239
|
|
||||||
Issuance of 862,504 shares of common stock under
compensation plans, including excess income tax
benefits
|
863
|
|
|
5,483
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,346
|
|
||||||
Issuance of warrants
|
—
|
|
|
15,600
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,600
|
|
||||||
Dividends on common stock ($0.10 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,643
|
)
|
|
(5,643
|
)
|
||||||
Balance at December 31, 2010
|
56,968
|
|
|
454,454
|
|
|
(4,815
|
)
|
|
81,820
|
|
|
349,620
|
|
|
938,047
|
|
||||||
Net income for the year
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
86,248
|
|
|
86,248
|
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
375,409
|
|
|
—
|
|
|
375,409
|
|
||||||
Acquisition of 48,235 shares of common stock
|
(48
|
)
|
|
(436
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(484
|
)
|
||||||
Allocation of 110,955 shares of common stock by
ESOP, including excess income tax benefits
|
—
|
|
|
60
|
|
|
1,195
|
|
|
—
|
|
|
—
|
|
|
1,255
|
|
||||||
Share-based compensation, including excess income tax
benefits
|
—
|
|
|
10,320
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,320
|
|
||||||
Issuance of 916,329 shares of common stock under
compensation plans, including excess income tax
benefits
|
917
|
|
|
3,883
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,800
|
|
||||||
Dividends on common stock ($0.12 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,916
|
)
|
|
(6,916
|
)
|
||||||
Balance at December 31, 2011
|
57,837
|
|
|
468,281
|
|
|
(3,620
|
)
|
|
457,229
|
|
|
428,952
|
|
|
1,408,679
|
|
||||||
Net income for the year
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57,798
|
|
|
57,798
|
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
229,578
|
|
|
—
|
|
|
229,578
|
|
||||||
Conversion of $20,770 of subordinated debentures
|
2,564
|
|
|
17,027
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,591
|
|
||||||
Allocation of 96,294 shares of common stock by
ESOP, including excess income tax benefits
|
—
|
|
|
48
|
|
|
1,037
|
|
|
—
|
|
|
—
|
|
|
1,085
|
|
||||||
Share-based compensation, including excess income tax
benefits
|
—
|
|
|
6,904
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,904
|
|
||||||
Issuance of 1,349,914 shares of common stock under
compensation plans, including excess income tax
benefits
|
1,350
|
|
|
4,455
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,805
|
|
||||||
Dividends on common stock ($0.15 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,203
|
)
|
|
(9,203
|
)
|
||||||
Balance at December 31, 2012
|
$
|
61,751
|
|
|
$
|
496,715
|
|
|
$
|
(2,583
|
)
|
|
$
|
686,807
|
|
|
$
|
477,547
|
|
|
$
|
1,720,237
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
Operating activities
|
|
|
|
|
|
||||||
Net income
|
$
|
57,798
|
|
|
$
|
86,248
|
|
|
$
|
42,933
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Interest sensitive and index product benefits
|
818,087
|
|
|
775,757
|
|
|
733,218
|
|
|||
Amortization of deferred sales inducements
|
87,157
|
|
|
71,781
|
|
|
59,873
|
|
|||
Annuity product charges
|
(89,006
|
)
|
|
(76,189
|
)
|
|
(69,075
|
)
|
|||
Change in fair value of embedded derivatives
|
286,899
|
|
|
(105,194
|
)
|
|
130,950
|
|
|||
Increase in traditional life and accident and health insurance reserves
|
26,150
|
|
|
76,220
|
|
|
43,921
|
|
|||
Policy acquisition costs deferred
|
(403,411
|
)
|
|
(478,834
|
)
|
|
(402,607
|
)
|
|||
Amortization of deferred policy acquisition costs
|
164,919
|
|
|
143,478
|
|
|
136,388
|
|
|||
Provision for depreciation and other amortization
|
18,404
|
|
|
18,970
|
|
|
11,580
|
|
|||
Amortization of discounts and premiums on investments
|
(69,828
|
)
|
|
(154,483
|
)
|
|
(240,532
|
)
|
|||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
292
|
|
|||
Realized gains/losses on investments and net OTTI losses recognized in operations
|
21,386
|
|
|
52,617
|
|
|
141
|
|
|||
Change in fair value of derivatives
|
(221,138
|
)
|
|
112,608
|
|
|
(141,719
|
)
|
|||
Deferred income taxes
|
(52,336
|
)
|
|
(80,869
|
)
|
|
(118,048
|
)
|
|||
Share-based compensation
|
6,552
|
|
|
9,339
|
|
|
11,993
|
|
|||
Change in accrued investment income
|
(32,896
|
)
|
|
(61,292
|
)
|
|
(53,987
|
)
|
|||
Change in income taxes recoverable/payable
|
13,197
|
|
|
(2,307
|
)
|
|
97,550
|
|
|||
Change in other assets
|
(7,090
|
)
|
|
5,005
|
|
|
(26,516
|
)
|
|||
Change in other policy funds and contract claims
|
55,158
|
|
|
177,734
|
|
|
103,457
|
|
|||
Change in collateral held for derivatives
|
99,242
|
|
|
(215,775
|
)
|
|
35,075
|
|
|||
Change in other liabilities
|
5,927
|
|
|
(77,082
|
)
|
|
64,776
|
|
|||
Other
|
(857
|
)
|
|
59
|
|
|
812
|
|
|||
Net cash provided by operating activities
|
784,314
|
|
|
277,791
|
|
|
420,475
|
|
|||
|
|
|
|
|
|
||||||
Investing activities
|
|
|
|
|
|
||||||
Sales, maturities, or repayments of investments:
|
|
|
|
|
|
||||||
Fixed maturity securities—available for sale
|
3,298,623
|
|
|
3,705,605
|
|
|
4,568,499
|
|
|||
Fixed maturity securities—held for investment
|
2,618,207
|
|
|
219,372
|
|
|
1,585,267
|
|
|||
Equity securities—available for sale
|
13,604
|
|
|
2,958
|
|
|
46,187
|
|
|||
Mortgage loans on real estate
|
543,211
|
|
|
206,741
|
|
|
145,754
|
|
|||
Derivative instruments
|
483,362
|
|
|
506,057
|
|
|
492,058
|
|
|||
Short-term investments
|
—
|
|
|
—
|
|
|
600,000
|
|
|||
Other investments
|
33,601
|
|
|
2,274
|
|
|
—
|
|
|||
Acquisitions of investments:
|
|
|
|
|
|
||||||
Fixed maturity securities—available for sale
|
(8,266,692
|
)
|
|
(5,347,839
|
)
|
|
(8,544,788
|
)
|
|||
Fixed maturity securities—held for investment
|
—
|
|
|
(1,940,163
|
)
|
|
(745,207
|
)
|
|||
Equity securities—available for sale
|
—
|
|
|
—
|
|
|
(10,125
|
)
|
|||
Mortgage loans on real estate
|
(386,507
|
)
|
|
(481,680
|
)
|
|
(317,250
|
)
|
|||
Derivative instruments
|
(379,592
|
)
|
|
(395,938
|
)
|
|
(331,263
|
)
|
|||
Short-term investments
|
—
|
|
|
—
|
|
|
(599,746
|
)
|
|||
Other investments
|
(86,569
|
)
|
|
(77,955
|
)
|
|
(456
|
)
|
|||
Purchases of property, furniture and equipment
|
(738
|
)
|
|
(5,265
|
)
|
|
(5,318
|
)
|
|||
Net cash used in investing activities
|
(2,129,490
|
)
|
|
(3,605,833
|
)
|
|
(3,116,388
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
Financing activities
|
|
|
|
|
|
||||||
Receipts credited to annuity and single premium universal life policyholder account balances
|
$
|
3,782,275
|
|
|
$
|
4,784,511
|
|
|
$
|
4,497,091
|
|
Coinsurance deposits
|
4,885
|
|
|
(122,415
|
)
|
|
(267,638
|
)
|
|||
Return of annuity policyholder account balances
|
(1,575,340
|
)
|
|
(1,494,554
|
)
|
|
(1,465,434
|
)
|
|||
Financing fees incurred and deferred
|
—
|
|
|
(1,566
|
)
|
|
(6,800
|
)
|
|||
Proceeds from notes payable
|
—
|
|
|
—
|
|
|
200,000
|
|
|||
Repayments of notes payable
|
—
|
|
|
(46,251
|
)
|
|
(156,641
|
)
|
|||
Purchase of 2015 notes hedges
|
—
|
|
|
—
|
|
|
(37,000
|
)
|
|||
Repayment of subordinated debentures
|
(1,141
|
)
|
|
—
|
|
|
—
|
|
|||
Acquisition of common stock
|
—
|
|
|
(484
|
)
|
|
(1,224
|
)
|
|||
Excess tax benefits realized from share-based compensation plans
|
481
|
|
|
1,061
|
|
|
480
|
|
|||
Proceeds from issuance of common stock
|
5,741
|
|
|
4,686
|
|
|
6,124
|
|
|||
Proceeds from issuance of warrants
|
—
|
|
|
—
|
|
|
15,600
|
|
|||
Change in checks in excess of cash balance
|
1,071
|
|
|
17,156
|
|
|
(13,238
|
)
|
|||
Dividends paid
|
(9,203
|
)
|
|
(6,916
|
)
|
|
(5,643
|
)
|
|||
Net cash provided by financing activities
|
2,208,769
|
|
|
3,135,228
|
|
|
2,765,677
|
|
|||
Increase (decrease) in cash and cash equivalents
|
863,593
|
|
|
(192,814
|
)
|
|
69,764
|
|
|||
Cash and cash equivalents at beginning of year
|
404,952
|
|
|
597,766
|
|
|
528,002
|
|
|||
Cash and cash equivalents at end of year
|
$
|
1,268,545
|
|
|
$
|
404,952
|
|
|
$
|
597,766
|
|
|
|
|
|
|
|
||||||
Supplemental disclosures of cash flow information
|
|
|
|
|
|
||||||
Cash paid during the year for:
|
|
|
|
|
|
||||||
Interest expense
|
$
|
27,666
|
|
|
$
|
30,650
|
|
|
$
|
25,802
|
|
Income taxes
|
67,450
|
|
|
129,250
|
|
|
143,748
|
|
|||
Income tax refunds received
|
512
|
|
|
466
|
|
|
101,395
|
|
|||
Non-cash operating activity:
|
|
|
|
|
|
||||||
Deferral of sales inducements
|
306,659
|
|
|
385,123
|
|
|
370,714
|
|
|||
Non-cash investing activity:
|
|
|
|
|
|
||||||
Real estate acquired in satisfaction of mortgage loans
|
26,324
|
|
|
20,978
|
|
|
7,408
|
|
|||
Mortgage loan on real estate sold
|
—
|
|
|
1,215
|
|
|
—
|
|
|||
Non-cash financing activities:
|
|
|
|
|
|
||||||
Conversion of subordinated debentures
|
20,770
|
|
|
—
|
|
|
60
|
|
|
|
Year Ended December 31,
|
||||||||||
Product Type
|
|
2012
|
|
2011
|
|
2010
|
||||||
|
|
(Dollars in thousands)
|
||||||||||
Fixed index annuities:
|
|
|
|
|
|
|
||||||
Index strategies
|
|
$
|
2,223,652
|
|
|
$
|
2,835,422
|
|
|
$
|
2,312,720
|
|
Fixed strategy
|
|
1,206,784
|
|
|
1,375,321
|
|
|
1,472,576
|
|
|||
|
|
3,430,436
|
|
|
4,210,743
|
|
|
3,785,296
|
|
|||
Fixed rate annuities
|
|
148,105
|
|
|
247,237
|
|
|
232,832
|
|
|||
Single premium immediate annuities (SPIA)
|
|
164,657
|
|
|
305,603
|
|
|
171,628
|
|
|||
Life insurance
|
|
12,877
|
|
|
12,151
|
|
|
11,982
|
|
|||
|
|
$
|
3,756,075
|
|
|
$
|
4,775,734
|
|
|
$
|
4,201,738
|
|
|
December 31,
|
||||||||||||||
|
2012
|
|
2011
|
||||||||||||
|
Carrying
Amount
|
|
Fair Value
|
|
Carrying
Amount
|
|
Fair Value
|
||||||||
|
(Dollars in thousands)
|
||||||||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
||||||||
Available for sale
|
$
|
24,172,136
|
|
|
$
|
24,172,136
|
|
|
$
|
18,464,109
|
|
|
$
|
18,464,109
|
|
Held for investment
|
76,088
|
|
|
61,521
|
|
|
2,644,206
|
|
|
2,644,422
|
|
||||
Equity securities, available for sale
|
53,422
|
|
|
53,422
|
|
|
62,845
|
|
|
62,845
|
|
||||
Mortgage loans on real estate
|
2,623,940
|
|
|
2,848,235
|
|
|
2,823,047
|
|
|
3,030,308
|
|
||||
Derivative instruments
|
415,258
|
|
|
415,258
|
|
|
273,314
|
|
|
273,314
|
|
||||
Other investments
|
163,193
|
|
|
163,517
|
|
|
79,109
|
|
|
76,648
|
|
||||
Cash and cash equivalents
|
1,268,545
|
|
|
1,268,545
|
|
|
404,952
|
|
|
404,952
|
|
||||
Coinsurance deposits
|
2,910,701
|
|
|
2,678,232
|
|
|
2,818,642
|
|
|
2,549,025
|
|
||||
Interest rate caps
|
3,247
|
|
|
3,247
|
|
|
—
|
|
|
—
|
|
||||
2015 notes hedges
|
43,105
|
|
|
43,105
|
|
|
45,593
|
|
|
45,593
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Liabilities
|
|
|
|
|
|
|
|
||||||||
Policy benefit reserves
|
31,452,496
|
|
|
26,264,831
|
|
|
27,842,770
|
|
|
23,407,540
|
|
||||
Single premium immediate annuity (SPIA) benefit reserves
|
455,167
|
|
|
469,768
|
|
|
397,248
|
|
|
412,998
|
|
||||
Notes payable
|
309,869
|
|
|
422,175
|
|
|
297,608
|
|
|
376,370
|
|
||||
Subordinated debentures
|
245,869
|
|
|
218,283
|
|
|
268,593
|
|
|
233,809
|
|
||||
2015 notes embedded derivative
|
43,105
|
|
|
43,105
|
|
|
45,593
|
|
|
45,593
|
|
||||
Interest rate swaps
|
4,261
|
|
|
4,261
|
|
|
—
|
|
|
—
|
|
Level 1—
|
Quoted prices are available in active markets for identical financial instruments as of the reporting date. We do not adjust the quoted price for these financial instruments, even in situations where we hold a large position and a sale could reasonably impact the quoted price.
|
Level 2—
|
Quoted prices in active markets for similar financial instruments, quoted prices for identical or similar financial instruments in markets that are not active; and models and other valuation methodologies using inputs other than quoted prices that are observable.
|
Level 3—
|
Models and other valuation methodologies using significant inputs that are unobservable for financial instruments and include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in Level 3 are securities for which no market activity or data exists and for which we used discounted expected future cash flows with our own assumptions about what a market participant would use in determining fair value.
|
|
Total
Fair Value
|
|
Quoted
Prices in
Active
Markets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
|
(Dollars in thousands)
|
||||||||||||||
December 31, 2012
|
|
|
|
|
|
|
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
||||||||
Available for sale:
|
|
|
|
|
|
|
|
||||||||
United States Government full faith and credit
|
$
|
5,154
|
|
|
$
|
5,154
|
|
|
$
|
—
|
|
|
$
|
—
|
|
United States Government sponsored agencies
|
1,772,025
|
|
|
—
|
|
|
1,772,025
|
|
|
—
|
|
||||
United States municipalities, states and territories
|
3,578,323
|
|
|
—
|
|
|
3,578,323
|
|
|
—
|
|
||||
Foreign government obligations
|
105,259
|
|
|
—
|
|
|
105,259
|
|
|
—
|
|
||||
Corporate securities
|
14,466,772
|
|
|
33,131
|
|
|
14,433,641
|
|
|
—
|
|
||||
Residential mortgage backed securities
|
2,888,113
|
|
|
—
|
|
|
2,886,301
|
|
|
1,812
|
|
||||
Commercial mortgage backed securities
|
357,982
|
|
|
—
|
|
|
357,982
|
|
|
—
|
|
||||
Other asset backed securities
|
998,508
|
|
|
378
|
|
|
998,130
|
|
|
—
|
|
||||
Equity securities, available for sale: finance, insurance and real estate
|
53,422
|
|
|
36,928
|
|
|
16,494
|
|
|
—
|
|
||||
Derivative instruments
|
415,258
|
|
|
—
|
|
|
415,258
|
|
|
—
|
|
||||
Cash and cash equivalents
|
1,268,545
|
|
|
1,268,545
|
|
|
—
|
|
|
—
|
|
||||
Interest rate caps
|
3,247
|
|
|
—
|
|
|
3,247
|
|
|
—
|
|
||||
2015 notes hedges
|
43,105
|
|
|
—
|
|
|
43,105
|
|
|
—
|
|
||||
|
$
|
25,955,713
|
|
|
$
|
1,344,136
|
|
|
$
|
24,609,765
|
|
|
$
|
1,812
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
2015 notes embedded derivative
|
$
|
43,105
|
|
|
$
|
—
|
|
|
$
|
43,105
|
|
|
$
|
—
|
|
Interest rate swap
|
4,261
|
|
|
—
|
|
|
4,261
|
|
|
—
|
|
||||
Fixed index annuities—embedded derivatives
|
3,337,556
|
|
|
—
|
|
|
—
|
|
|
3,337,556
|
|
||||
|
$
|
3,384,922
|
|
|
$
|
—
|
|
|
$
|
47,366
|
|
|
$
|
3,337,556
|
|
December 31, 2011
|
|
|
|
|
|
|
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
||||||||
Available for sale:
|
|
|
|
|
|
|
|
||||||||
United States Government full faith and credit
|
$
|
4,678
|
|
|
$
|
4,678
|
|
|
$
|
—
|
|
|
$
|
—
|
|
United States Government sponsored agencies
|
1,799,779
|
|
|
—
|
|
|
1,799,779
|
|
|
—
|
|
||||
United States municipalities, states and territories
|
3,333,383
|
|
|
—
|
|
|
3,333,383
|
|
|
—
|
|
||||
Foreign government obligations
|
68,333
|
|
|
—
|
|
|
68,333
|
|
|
—
|
|
||||
Corporate securities
|
10,091,256
|
|
|
58,827
|
|
|
10,032,429
|
|
|
—
|
|
||||
Residential mortgage backed securities
|
2,703,290
|
|
|
—
|
|
|
2,701,192
|
|
|
2,098
|
|
||||
Other asset backed securities
|
463,390
|
|
|
370
|
|
|
463,020
|
|
|
—
|
|
||||
Equity securities, available for sale: finance, insurance and real estate
|
62,845
|
|
|
44,229
|
|
|
18,616
|
|
|
—
|
|
||||
Derivative instruments
|
273,314
|
|
|
—
|
|
|
273,314
|
|
|
—
|
|
||||
Cash and cash equivalents
|
404,952
|
|
|
404,952
|
|
|
—
|
|
|
—
|
|
||||
2015 notes hedges
|
45,593
|
|
|
—
|
|
|
45,593
|
|
|
—
|
|
||||
|
$
|
19,250,813
|
|
|
$
|
513,056
|
|
|
$
|
18,735,659
|
|
|
$
|
2,098
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
2015 notes embedded derivative
|
$
|
45,593
|
|
|
$
|
—
|
|
|
$
|
45,593
|
|
|
$
|
—
|
|
Fixed index annuities—embedded derivatives
|
2,530,496
|
|
|
—
|
|
|
—
|
|
|
2,530,496
|
|
||||
|
$
|
2,576,089
|
|
|
$
|
—
|
|
|
$
|
45,593
|
|
|
$
|
2,530,496
|
|
•
|
reported trading prices,
|
•
|
benchmark yields,
|
•
|
broker-dealer quotes,
|
•
|
benchmark securities,
|
•
|
bids and offers,
|
•
|
credit ratings,
|
•
|
relative credit information, and
|
•
|
other reference data.
|
|
Year Ended December 31,
|
||||||
|
2012
|
|
2011
|
||||
|
(Dollars in thousands)
|
||||||
Available for sale securities
|
|
|
|
||||
Beginning balance
|
$
|
2,098
|
|
|
$
|
2,702
|
|
Principal returned
|
(300
|
)
|
|
(393
|
)
|
||
(Amortization)/accretion of premium/discount
|
67
|
|
|
66
|
|
||
Total gains (losses) (unrealized/realized):
|
|
|
|
||||
Included in other comprehensive income
|
250
|
|
|
443
|
|
||
Net OTTI losses recognized in operations
|
(303
|
)
|
|
(720
|
)
|
||
Ending Balance
|
$
|
1,812
|
|
|
$
|
2,098
|
|
|
Year Ended December 31,
|
||||||
|
2012
|
|
2011
|
||||
|
(Dollars in thousands)
|
||||||
Fixed index annuities—embedded derivatives
|
|
|
|
||||
Beginning balance
|
$
|
2,530,496
|
|
|
$
|
1,971,383
|
|
Premiums less benefits
|
765,942
|
|
|
919,375
|
|
||
Change in unrealized losses (gains), net
|
41,118
|
|
|
(360,262
|
)
|
||
Ending balance
|
$
|
3,337,556
|
|
|
$
|
2,530,496
|
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
||||||||
|
(Dollars in thousands)
|
||||||||||||||
December 31, 2012
|
|
|
|
|
|
|
|
||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
||||||||
Available for sale:
|
|
|
|
|
|
|
|
||||||||
United States Government full faith and credit
|
$
|
4,590
|
|
|
$
|
564
|
|
|
$
|
—
|
|
|
$
|
5,154
|
|
United States Government sponsored agencies
|
1,763,789
|
|
|
11,704
|
|
|
(3,468
|
)
|
|
1,772,025
|
|
||||
United States municipalities, states and territories
|
3,116,678
|
|
|
461,770
|
|
|
(125
|
)
|
|
3,578,323
|
|
||||
Foreign government obligations
|
86,099
|
|
|
19,160
|
|
|
—
|
|
|
105,259
|
|
||||
Corporate securities
|
12,930,173
|
|
|
1,568,223
|
|
|
(31,624
|
)
|
|
14,466,772
|
|
||||
Residential mortgage backed securities
|
2,743,537
|
|
|
172,304
|
|
|
(27,728
|
)
|
|
2,888,113
|
|
||||
Commercial mortgage backed securities
|
354,870
|
|
|
5,095
|
|
|
(1,983
|
)
|
|
357,982
|
|
||||
Other asset backed securities
|
957,291
|
|
|
44,190
|
|
|
(2,973
|
)
|
|
998,508
|
|
||||
|
$
|
21,957,027
|
|
|
$
|
2,283,010
|
|
|
$
|
(67,901
|
)
|
|
$
|
24,172,136
|
|
Held for investment:
|
|
|
|
|
|
|
|
||||||||
Corporate security
|
$
|
76,088
|
|
|
$
|
—
|
|
|
$
|
(14,567
|
)
|
|
$
|
61,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity securities, available for sale:
|
|
|
|
|
|
|
|
||||||||
Finance, insurance and real estate
|
$
|
44,598
|
|
|
$
|
10,227
|
|
|
$
|
(1,403
|
)
|
|
$
|
53,422
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2011
|
|
|
|
|
|
|
|
||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
||||||||
Available for sale:
|
|
|
|
|
|
|
|
||||||||
United States Government full faith and credit
|
$
|
4,084
|
|
|
$
|
594
|
|
|
$
|
—
|
|
|
$
|
4,678
|
|
United States Government sponsored agencies
|
1,780,401
|
|
|
19,378
|
|
|
—
|
|
|
1,799,779
|
|
||||
United States municipalities, states and territories
|
2,981,699
|
|
|
351,694
|
|
|
(10
|
)
|
|
3,333,383
|
|
||||
Foreign government obligations
|
60,809
|
|
|
7,766
|
|
|
(242
|
)
|
|
68,333
|
|
||||
Corporate securities
|
9,092,737
|
|
|
1,078,511
|
|
|
(79,992
|
)
|
|
10,091,256
|
|
||||
Residential mortgage backed securities
|
2,618,040
|
|
|
157,331
|
|
|
(72,081
|
)
|
|
2,703,290
|
|
||||
Other asset backed securities
|
442,509
|
|
|
26,492
|
|
|
(5,611
|
)
|
|
463,390
|
|
||||
|
$
|
16,980,279
|
|
|
$
|
1,641,766
|
|
|
$
|
(157,936
|
)
|
|
$
|
18,464,109
|
|
Held for investment:
|
|
|
|
|
|
|
|
||||||||
United States Government sponsored agencies
|
$
|
2,568,274
|
|
|
$
|
16,806
|
|
|
$
|
—
|
|
|
$
|
2,585,080
|
|
Corporate security
|
75,932
|
|
|
—
|
|
|
(16,590
|
)
|
|
59,342
|
|
||||
|
$
|
2,644,206
|
|
|
$
|
16,806
|
|
|
$
|
(16,590
|
)
|
|
$
|
2,644,422
|
|
Equity securities, available for sale:
|
|
|
|
|
|
|
|
||||||||
Finance, insurance and real estate
|
$
|
58,438
|
|
|
$
|
8,752
|
|
|
$
|
(4,345
|
)
|
|
$
|
62,845
|
|
|
Available for sale
|
|
Held for investment
|
||||||||||||
|
Amortized
Cost
|
|
Fair Value
|
|
Amortized
Cost
|
|
Fair Value
|
||||||||
|
(Dollars in thousands)
|
||||||||||||||
Due in one year or less
|
$
|
39,743
|
|
|
$
|
41,276
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Due after one year through five years
|
679,050
|
|
|
765,237
|
|
|
—
|
|
|
—
|
|
||||
Due after five years through ten years
|
4,655,968
|
|
|
5,049,957
|
|
|
—
|
|
|
—
|
|
||||
Due after ten years through twenty years
|
5,608,423
|
|
|
6,134,359
|
|
|
—
|
|
|
—
|
|
||||
Due after twenty years
|
6,918,145
|
|
|
7,936,704
|
|
|
76,088
|
|
|
61,521
|
|
||||
|
17,901,329
|
|
|
19,927,533
|
|
|
76,088
|
|
|
61,521
|
|
||||
Residential mortgage backed securities
|
2,743,537
|
|
|
2,888,113
|
|
|
—
|
|
|
—
|
|
||||
Commercial mortgage backed securities
|
354,870
|
|
|
357,982
|
|
|
—
|
|
|
—
|
|
||||
Other asset backed securities
|
957,291
|
|
|
998,508
|
|
|
—
|
|
|
—
|
|
||||
|
$
|
21,957,027
|
|
|
$
|
24,172,136
|
|
|
$
|
76,088
|
|
|
$
|
61,521
|
|
|
December 31,
|
||||||
|
2012
|
|
2011
|
||||
|
(Dollars in thousands)
|
||||||
Net unrealized gains on available for sale fixed maturity securities and equity securities
|
$
|
2,223,933
|
|
|
$
|
1,488,237
|
|
Adjustments for assumed changes in amortization of deferred policy acquisition costs and deferred sales inducements
|
(1,201,974
|
)
|
|
(819,476
|
)
|
||
Deferred income tax valuation allowance reversal
|
22,534
|
|
|
22,534
|
|
||
Deferred income tax benefit
|
(357,686
|
)
|
|
(234,066
|
)
|
||
Net unrealized gains reported as accumulated other comprehensive income
|
$
|
686,807
|
|
|
$
|
457,229
|
|
|
|
December 31,
|
||||||||||||||
|
|
2012
|
|
2011
|
||||||||||||
NAIC
Designation
|
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
||||||||
|
|
(Dollars in thousands)
|
||||||||||||||
1
|
|
$
|
13,737,381
|
|
|
$
|
15,250,560
|
|
|
$
|
14,359,272
|
|
|
$
|
15,486,571
|
|
2
|
|
7,838,186
|
|
|
8,533,121
|
|
|
4,894,739
|
|
|
5,272,759
|
|
||||
3
|
|
398,294
|
|
|
387,222
|
|
|
335,642
|
|
|
315,406
|
|
||||
4
|
|
53,879
|
|
|
56,151
|
|
|
26,674
|
|
|
23,989
|
|
||||
5
|
|
—
|
|
|
—
|
|
|
4,932
|
|
|
5,756
|
|
||||
6
|
|
5,375
|
|
|
6,603
|
|
|
3,226
|
|
|
4,050
|
|
||||
|
|
$
|
22,033,115
|
|
|
$
|
24,233,657
|
|
|
$
|
19,624,485
|
|
|
$
|
21,108,531
|
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
||||||||||||||||||
|
Fair Value
|
|
Unrealized
Losses
|
|
Fair Value
|
|
Unrealized
Losses
|
|
Fair Value
|
|
Unrealized
Losses
|
||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||||
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
United States Government sponsored agencies
|
$
|
973,728
|
|
|
$
|
(3,468
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
973,728
|
|
|
$
|
(3,468
|
)
|
United States municipalities, states and territories
|
24,393
|
|
|
(125
|
)
|
|
—
|
|
|
—
|
|
|
24,393
|
|
|
(125
|
)
|
||||||
Corporate securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Finance, insurance and real estate
|
177,962
|
|
|
(4,126
|
)
|
|
85,709
|
|
|
(8,438
|
)
|
|
263,671
|
|
|
(12,564
|
)
|
||||||
Manufacturing, construction and mining
|
426,120
|
|
|
(4,303
|
)
|
|
21,975
|
|
|
(1,281
|
)
|
|
448,095
|
|
|
(5,584
|
)
|
||||||
Utilities and related sectors
|
221,044
|
|
|
(5,187
|
)
|
|
39,224
|
|
|
(4,212
|
)
|
|
260,268
|
|
|
(9,399
|
)
|
||||||
Wholesale/retail trade
|
101,790
|
|
|
(784
|
)
|
|
10,250
|
|
|
(208
|
)
|
|
112,040
|
|
|
(992
|
)
|
||||||
Services, media and other
|
264,421
|
|
|
(3,085
|
)
|
|
—
|
|
|
—
|
|
|
264,421
|
|
|
(3,085
|
)
|
||||||
Residential mortgage backed securities
|
220,622
|
|
|
(8,679
|
)
|
|
260,226
|
|
|
(19,049
|
)
|
|
480,848
|
|
|
(27,728
|
)
|
||||||
Commercial mortgage backed securities
|
161,582
|
|
|
(1,983
|
)
|
|
—
|
|
|
—
|
|
|
161,582
|
|
|
(1,983
|
)
|
||||||
Other asset backed securities
|
145,238
|
|
|
(2,242
|
)
|
|
26,131
|
|
|
(731
|
)
|
|
171,369
|
|
|
(2,973
|
)
|
||||||
|
$
|
2,716,900
|
|
|
$
|
(33,982
|
)
|
|
$
|
443,515
|
|
|
$
|
(33,919
|
)
|
|
$
|
3,160,415
|
|
|
$
|
(67,901
|
)
|
Held for investment:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Corporate security:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Insurance
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
61,521
|
|
|
$
|
(14,567
|
)
|
|
$
|
61,521
|
|
|
$
|
(14,567
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Equity security, available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Services
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,722
|
|
|
$
|
(1,403
|
)
|
|
$
|
8,722
|
|
|
$
|
(1,403
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
United States municipalities, states and territories
|
$
|
3,535
|
|
|
$
|
(10
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,535
|
|
|
$
|
(10
|
)
|
Foreign government obligations
|
—
|
|
|
—
|
|
|
14,282
|
|
|
(242
|
)
|
|
14,282
|
|
|
(242
|
)
|
||||||
Corporate securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Finance, insurance and real estate
|
363,909
|
|
|
(36,575
|
)
|
|
146,354
|
|
|
(15,611
|
)
|
|
510,263
|
|
|
(52,186
|
)
|
||||||
Manufacturing, construction and mining
|
201,762
|
|
|
(7,131
|
)
|
|
15,593
|
|
|
(1,627
|
)
|
|
217,355
|
|
|
(8,758
|
)
|
||||||
Utilities and related sectors
|
174,251
|
|
|
(7,576
|
)
|
|
37,778
|
|
|
(6,946
|
)
|
|
212,029
|
|
|
(14,522
|
)
|
||||||
Wholesale/retail trade
|
15,523
|
|
|
(188
|
)
|
|
9,275
|
|
|
(1,194
|
)
|
|
24,798
|
|
|
(1,382
|
)
|
||||||
Services, media and other
|
27,688
|
|
|
(249
|
)
|
|
17,105
|
|
|
(2,895
|
)
|
|
44,793
|
|
|
(3,144
|
)
|
||||||
Residential mortgage backed securities
|
295,352
|
|
|
(19,920
|
)
|
|
709,612
|
|
|
(52,161
|
)
|
|
1,004,964
|
|
|
(72,081
|
)
|
||||||
Other asset backed securities
|
115,542
|
|
|
(2,863
|
)
|
|
15,550
|
|
|
(2,748
|
)
|
|
131,092
|
|
|
(5,611
|
)
|
||||||
|
$
|
1,197,562
|
|
|
$
|
(74,512
|
)
|
|
$
|
965,549
|
|
|
$
|
(83,424
|
)
|
|
$
|
2,163,111
|
|
|
$
|
(157,936
|
)
|
Held for investment:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Corporate security:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Insurance
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
59,342
|
|
|
$
|
(16,590
|
)
|
|
$
|
59,342
|
|
|
$
|
(16,590
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Equity securities, available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Finance, insurance and real estate
|
$
|
20,028
|
|
|
$
|
(3,095
|
)
|
|
$
|
3,750
|
|
|
$
|
(1,250
|
)
|
|
$
|
23,778
|
|
|
$
|
(4,345
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(Dollars in thousands)
|
||||||||||
Fixed maturity securities held for investment carried at amortized cost
|
$
|
14,783
|
|
|
$
|
40,668
|
|
|
$
|
(7,233
|
)
|
Investments carried at fair value:
|
|
|
|
|
|
||||||
Fixed maturity securities, available for sale
|
$
|
731,279
|
|
|
$
|
1,275,061
|
|
|
$
|
417,318
|
|
Equity securities, available for sale
|
4,417
|
|
|
(369
|
)
|
|
(5,380
|
)
|
|||
|
735,696
|
|
|
1,274,692
|
|
|
411,938
|
|
|||
Adjustment for effect on other balance sheet accounts:
|
|
|
|
|
|
||||||
Deferred policy acquisition costs and deferred sales inducements
|
(382,498
|
)
|
|
(697,140
|
)
|
|
(239,206
|
)
|
|||
Deferred income tax asset
|
(123,620
|
)
|
|
(202,143
|
)
|
|
(60,456
|
)
|
|||
|
(506,118
|
)
|
|
(899,283
|
)
|
|
(299,662
|
)
|
|||
Change in net unrealized gains/losses on investments carried at fair value
|
$
|
229,578
|
|
|
$
|
375,409
|
|
|
$
|
112,276
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(Dollars in thousands)
|
||||||||||
Fixed maturity securities
|
$
|
1,112,296
|
|
|
$
|
1,048,376
|
|
|
$
|
875,894
|
|
Equity securities
|
3,090
|
|
|
3,315
|
|
|
5,299
|
|
|||
Mortgage loans on real estate
|
176,354
|
|
|
172,731
|
|
|
159,193
|
|
|||
Cash and cash equivalents
|
2,243
|
|
|
554
|
|
|
621
|
|
|||
Other
|
6,348
|
|
|
4,020
|
|
|
1,636
|
|
|||
|
1,300,331
|
|
|
1,228,996
|
|
|
1,042,643
|
|
|||
Less investment expenses
|
(13,408
|
)
|
|
(10,216
|
)
|
|
(6,537
|
)
|
|||
Net investment income
|
$
|
1,286,923
|
|
|
$
|
1,218,780
|
|
|
$
|
1,036,106
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(Dollars in thousands)
|
||||||||||
Available for sale fixed maturity securities:
|
|
|
|
|
|
||||||
Gross realized gains
|
$
|
10,906
|
|
|
$
|
12,614
|
|
|
$
|
27,755
|
|
Gross realized losses
|
(562
|
)
|
|
(1,423
|
)
|
|
(2,575
|
)
|
|||
|
10,344
|
|
|
11,191
|
|
|
25,180
|
|
|||
Equity securities:
|
|
|
|
|
|
||||||
Gross realized gains
|
562
|
|
|
966
|
|
|
14,384
|
|
|||
Gross realized losses
|
—
|
|
|
—
|
|
|
(71
|
)
|
|||
|
562
|
|
|
966
|
|
|
14,313
|
|
|||
Mortgage loans on real estate:
|
|
|
|
|
|
||||||
Increase in allowance for credit losses
|
(16,832
|
)
|
|
(30,770
|
)
|
|
(15,225
|
)
|
|||
Other investments:
|
|
|
|
|
|
||||||
Gains on sale of real estate
|
5,149
|
|
|
377
|
|
|
—
|
|
|||
Impairment losses on real estate
|
(5,677
|
)
|
|
(405
|
)
|
|
(542
|
)
|
|||
|
(528
|
)
|
|
(28
|
)
|
|
(542
|
)
|
|||
|
$
|
(6,454
|
)
|
|
$
|
(18,641
|
)
|
|
$
|
23,726
|
|
|
December 31,
|
||||||
|
2012
|
|
2011
|
||||
|
(Dollars in thousands)
|
||||||
Fixed maturity securities, available for sale
|
$
|
4,691
|
|
|
5,852
|
|
|
Mortgage loans on real estate
|
2,783
|
|
|
4,064
|
|
||
Real estate owned
|
1,270
|
|
|
5,257
|
|
||
|
$
|
8,744
|
|
|
$
|
15,173
|
|
•
|
the length of time and the extent to which the fair value has been less than amortized cost or cost;
|
•
|
whether the issuer is current on all payments and all contractual payments have been made as agreed;
|
•
|
the remaining payment terms and the financial condition and near-term prospects of the issuer;
|
•
|
the lack of ability to refinance due to liquidity problems in the credit market;
|
•
|
the fair value of any underlying collateral;
|
•
|
the existence of any credit protection available;
|
•
|
our intent to sell and whether it is more likely than not we would be required to sell prior to recovery for debt securities;
|
•
|
our assessment in the case of equity securities including perpetual preferred stocks with credit deterioration that the security cannot recover to cost in a reasonable period of time;
|
•
|
our intent and ability to retain equity securities for a period of time sufficient to allow for recovery;
|
•
|
consideration of rating agency actions; and
|
•
|
changes in estimated cash flows of residential mortgage and asset backed securities.
|
|
|
|
|
Discount Rate
|
|
Default Rate
|
|
Loss Severity
|
||||||||||||
Sector
|
|
Vintage
|
|
Min
|
|
Max
|
|
Min
|
|
Max
|
|
Min
|
|
Max
|
||||||
Year ended December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Prime
|
|
2005
|
|
6.5
|
%
|
|
7.7
|
%
|
|
8
|
%
|
|
19
|
%
|
|
40
|
%
|
|
50
|
%
|
|
|
2006
|
|
5.8
|
%
|
|
7.6
|
%
|
|
9
|
%
|
|
19
|
%
|
|
40
|
%
|
|
55
|
%
|
|
|
2007
|
|
6.1
|
%
|
|
7.3
|
%
|
|
11
|
%
|
|
38
|
%
|
|
40
|
%
|
|
60
|
%
|
Alt-A
|
|
2004
|
|
5.8
|
%
|
|
5.8
|
%
|
|
11
|
%
|
|
11
|
%
|
|
60
|
%
|
|
60
|
%
|
|
|
2005
|
|
5.6
|
%
|
|
8.7
|
%
|
|
12
|
%
|
|
38
|
%
|
|
5
|
%
|
|
55
|
%
|
|
|
2006
|
|
6.0
|
%
|
|
6.0
|
%
|
|
32
|
%
|
|
46
|
%
|
|
55
|
%
|
|
60
|
%
|
|
|
2007
|
|
6.2
|
%
|
|
7.0
|
%
|
|
31
|
%
|
|
55
|
%
|
|
55
|
%
|
|
65
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Year ended December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Prime
|
|
2005
|
|
5.8
|
%
|
|
7.9
|
%
|
|
6
|
%
|
|
19
|
%
|
|
40
|
%
|
|
55
|
%
|
|
|
2006
|
|
6.4
|
%
|
|
7.6
|
%
|
|
8
|
%
|
|
15
|
%
|
|
45
|
%
|
|
60
|
%
|
|
|
2007
|
|
5.8
|
%
|
|
7.9
|
%
|
|
8
|
%
|
|
30
|
%
|
|
40
|
%
|
|
60
|
%
|
|
|
2008
|
|
6.6
|
%
|
|
6.6
|
%
|
|
13
|
%
|
|
13
|
%
|
|
45
|
%
|
|
45
|
%
|
Alt-A
|
|
2004
|
|
5.8
|
%
|
|
5.8
|
%
|
|
11
|
%
|
|
11
|
%
|
|
50
|
%
|
|
50
|
%
|
|
|
2005
|
|
5.7
|
%
|
|
7.7
|
%
|
|
11
|
%
|
|
32
|
%
|
|
5
|
%
|
|
55
|
%
|
|
|
2006
|
|
6.0
|
%
|
|
7.3
|
%
|
|
23
|
%
|
|
47
|
%
|
|
50
|
%
|
|
60
|
%
|
|
|
2007
|
|
6.2
|
%
|
|
7.4
|
%
|
|
29
|
%
|
|
59
|
%
|
|
50
|
%
|
|
70
|
%
|
|
Number of Securities
|
|
Total OTTI Losses
|
|
Portion of OTTI Losses Recognized from Other Comprehensive Income
|
|
Net OTTI Losses Recognized in Operations
|
|||||||
|
(Dollars in thousands)
|
|||||||||||||
Year ended December 31, 2012
|
|
|
|
|
|
|
|
|||||||
Fixed maturity securities, available for sale:
|
|
|
|
|
|
|
|
|||||||
Corporate securities:
|
|
|
|
|
|
|
|
|||||||
Finance
|
1
|
|
|
$
|
(1,765
|
)
|
|
$
|
—
|
|
|
$
|
(1,765
|
)
|
Retail
|
1
|
|
|
(622
|
)
|
|
—
|
|
|
(622
|
)
|
|||
Residential mortgage backed securities
|
39
|
|
|
(3,024
|
)
|
|
(9,521
|
)
|
|
(12,545
|
)
|
|||
|
41
|
|
|
$
|
(5,411
|
)
|
|
$
|
(9,521
|
)
|
|
$
|
(14,932
|
)
|
|
|
|
|
|
|
|
|
|||||||
Year ended December 31, 2011
|
|
|
|
|
|
|
|
|||||||
Fixed maturity securities, available for sale:
|
|
|
|
|
|
|
|
|||||||
Residential mortgage backed securities
|
66
|
|
|
$
|
(19,420
|
)
|
|
$
|
(13,796
|
)
|
|
$
|
(33,216
|
)
|
Equity securities, available for sale:
|
|
|
|
|
|
|
|
|||||||
Finance
|
1
|
|
|
(760
|
)
|
|
—
|
|
|
(760
|
)
|
|||
|
67
|
|
|
$
|
(20,180
|
)
|
|
$
|
(13,796
|
)
|
|
$
|
(33,976
|
)
|
|
|
|
|
|
|
|
|
|||||||
Year ended December 31, 2010
|
|
|
|
|
|
|
|
|||||||
Fixed maturity securities, available for sale:
|
|
|
|
|
|
|
|
|||||||
Corporate securities:
|
|
|
|
|
|
|
|
|||||||
Finance
|
1
|
|
|
$
|
(822
|
)
|
|
—
|
|
|
(822
|
)
|
||
Retail
|
1
|
|
|
(1,576
|
)
|
|
—
|
|
|
(1,576
|
)
|
|||
Residential mortgage backed securities
|
30
|
|
|
(17,146
|
)
|
|
(4,323
|
)
|
|
(21,469
|
)
|
|||
|
32
|
|
|
$
|
(19,544
|
)
|
|
$
|
(4,323
|
)
|
|
$
|
(23,867
|
)
|
|
Year Ended December 31,
|
||||||
|
2012
|
|
2011
|
||||
|
(Dollars in thousands)
|
||||||
Cumulative credit loss at beginning of year
|
$
|
(119,095
|
)
|
|
$
|
(96,893
|
)
|
Credit losses on securities for which OTTI has not previously been recognized
|
(12,365
|
)
|
|
(4,141
|
)
|
||
Additional credit losses on securities for which OTTI has previously been recognized
|
(2,567
|
)
|
|
(29,075
|
)
|
||
Accumulated losses on securities that were disposed of during the period
|
—
|
|
|
11,014
|
|
||
Cumulative credit loss at end of year
|
$
|
(134,027
|
)
|
|
$
|
(119,095
|
)
|
|
Amortized Cost
|
|
OTTI Recognized in Other Comprehensive Income
|
|
Change in Fair Value Since OTTI was Recognized
|
|
Fair Value
|
||||||||
|
(Dollars in thousands)
|
||||||||||||||
December 31, 2012
|
|
|
|
|
|
|
|
||||||||
Fixed maturity securities, available for sale:
|
|
|
|
|
|
|
|
||||||||
Corporate securities
|
$
|
10,599
|
|
|
$
|
(2,151
|
)
|
|
$
|
5,676
|
|
|
$
|
14,124
|
|
Residential mortgage backed securities
|
855,915
|
|
|
(177,604
|
)
|
|
171,514
|
|
|
849,825
|
|
||||
Equity securities, available for sale:
|
|
|
|
|
|
|
|
||||||||
Finance, insurance and real estate
|
9,976
|
|
|
—
|
|
|
9,668
|
|
|
19,644
|
|
||||
|
$
|
876,490
|
|
|
$
|
(179,755
|
)
|
|
$
|
186,858
|
|
|
$
|
883,593
|
|
December 31, 2011
|
|
|
|
|
|
|
|
||||||||
Fixed maturity securities, available for sale:
|
|
|
|
|
|
|
|
||||||||
Corporate securities
|
$
|
3,347
|
|
|
$
|
(2,151
|
)
|
|
$
|
4,818
|
|
|
$
|
6,014
|
|
Residential mortgage backed securities
|
999,024
|
|
|
(187,126
|
)
|
|
125,502
|
|
|
937,400
|
|
||||
Equity securities, available for sale:
|
|
|
|
|
|
|
|
||||||||
Finance, insurance and real estate
|
12,019
|
|
|
—
|
|
|
8,110
|
|
|
20,129
|
|
||||
|
$
|
1,014,390
|
|
|
$
|
(189,277
|
)
|
|
$
|
138,430
|
|
|
$
|
963,543
|
|
|
|
December 31,
|
||||||
|
|
2012
|
|
2011
|
||||
|
|
(Dollars in thousands)
|
||||||
Principal outstanding
|
|
$
|
2,658,883
|
|
|
$
|
2,856,011
|
|
Loan loss allowance
|
|
(34,234
|
)
|
|
(32,964
|
)
|
||
Deferred prepayment fees
|
|
(709
|
)
|
|
—
|
|
||
Carrying value
|
|
$
|
2,623,940
|
|
|
$
|
2,823,047
|
|
|
December 31,
|
||||||||||||
|
2012
|
|
2011
|
||||||||||
|
Principal
|
|
Percent
|
|
Principal
|
|
Percent
|
||||||
|
(Dollars in thousands)
|
||||||||||||
Geographic distribution
|
|
|
|
|
|
|
|
||||||
East
|
$
|
732,762
|
|
|
27.5
|
%
|
|
$
|
719,231
|
|
|
25.2
|
%
|
Middle Atlantic
|
155,094
|
|
|
5.8
|
%
|
|
169,240
|
|
|
5.9
|
%
|
||
Mountain
|
387,599
|
|
|
14.6
|
%
|
|
411,054
|
|
|
14.4
|
%
|
||
New England
|
26,385
|
|
|
1.0
|
%
|
|
36,815
|
|
|
1.3
|
%
|
||
Pacific
|
320,982
|
|
|
12.1
|
%
|
|
309,693
|
|
|
10.8
|
%
|
||
South Atlantic
|
458,802
|
|
|
17.3
|
%
|
|
493,764
|
|
|
17.3
|
%
|
||
West North Central
|
370,168
|
|
|
13.9
|
%
|
|
487,693
|
|
|
17.1
|
%
|
||
West South Central
|
207,091
|
|
|
7.8
|
%
|
|
228,521
|
|
|
8.0
|
%
|
||
|
$
|
2,658,883
|
|
|
100.0
|
%
|
|
$
|
2,856,011
|
|
|
100.0
|
%
|
Property type distribution
|
|
|
|
|
|
|
|
||||||
Office
|
$
|
666,467
|
|
|
25.1
|
%
|
|
$
|
777,343
|
|
|
27.2
|
%
|
Medical Office
|
136,764
|
|
|
5.1
|
%
|
|
175,580
|
|
|
6.1
|
%
|
||
Retail
|
677,951
|
|
|
25.5
|
%
|
|
635,916
|
|
|
22.3
|
%
|
||
Industrial/Warehouse
|
692,637
|
|
|
26.1
|
%
|
|
710,426
|
|
|
24.9
|
%
|
||
Hotel
|
94,045
|
|
|
3.5
|
%
|
|
139,193
|
|
|
4.9
|
%
|
||
Apartment
|
219,335
|
|
|
8.2
|
%
|
|
187,548
|
|
|
6.6
|
%
|
||
Mixed use/other
|
171,684
|
|
|
6.5
|
%
|
|
230,005
|
|
|
8.0
|
%
|
||
|
$
|
2,658,883
|
|
|
100.0
|
%
|
|
$
|
2,856,011
|
|
|
100.0
|
%
|
|
Year Ended December 31,
|
||||||||||||||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||||||||||||||
|
Specific Allowance
|
|
General Allowance
|
|
Specific Allowance
|
|
General Allowance
|
|
Specific Allowance
|
|
General Allowance
|
||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||||
Beginning allowance balance
|
$
|
(23,664
|
)
|
|
$
|
(9,300
|
)
|
|
$
|
(13,224
|
)
|
|
$
|
(3,000
|
)
|
|
$
|
(5,266
|
)
|
|
$
|
—
|
|
Charge-offs
|
15,562
|
|
|
—
|
|
|
14,030
|
|
|
—
|
|
|
4,267
|
|
|
—
|
|
||||||
Recoveries
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Provision for credit losses
|
(15,032
|
)
|
|
(1,800
|
)
|
|
(24,470
|
)
|
|
(6,300
|
)
|
|
(12,225
|
)
|
|
(3,000
|
)
|
||||||
Ending allowance balance
|
$
|
(23,134
|
)
|
|
$
|
(11,100
|
)
|
|
$
|
(23,664
|
)
|
|
$
|
(9,300
|
)
|
|
$
|
(13,224
|
)
|
|
$
|
(3,000
|
)
|
|
|
December 31,
|
|||||||||
|
|
2012
|
|
2011
|
|
2010
|
|||||
|
|
(Dollars in thousands)
|
|||||||||
Individually evaluated for impairment
|
|
$
|
53,110
|
|
|
$
|
67,698
|
|
|
31,027
|
|
Collectively evaluated for impairment
|
|
2,605,723
|
|
|
2,788,313
|
|
|
2,583,838
|
|
||
Total loans evaluated for impairment
|
|
$
|
2,658,833
|
|
|
$
|
2,856,011
|
|
|
2,614,865
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2012
|
|
2011
|
|
2010
|
||||||
|
|
(Dollars in thousands)
|
||||||||||
Real estate owned at beginning of period
|
|
$
|
36,821
|
|
|
$
|
19,122
|
|
|
$
|
12,268
|
|
Real estate acquired in satisfaction of mortgage loans
|
|
26,324
|
|
|
20,978
|
|
|
7,408
|
|
|||
Additions
|
|
398
|
|
|
387
|
|
|
352
|
|
|||
Sales
|
|
(23,825
|
)
|
|
(3,027
|
)
|
|
—
|
|
|||
Impairments
|
|
(5,677
|
)
|
|
—
|
|
|
(542
|
)
|
|||
Depreciation
|
|
(869
|
)
|
|
(639
|
)
|
|
(364
|
)
|
|||
Real estate owned at end of period
|
|
$
|
33,172
|
|
|
$
|
36,821
|
|
|
$
|
19,122
|
|
|
December 31,
|
||||||
|
2012
|
|
2011
|
||||
|
(Dollars in thousands)
|
||||||
Credit Exposure--By Payment Activity
|
|
|
|
||||
Performing
|
$
|
2,597,440
|
|
|
2,743,068
|
|
|
In workout
|
26,723
|
|
|
67,425
|
|
||
Delinquent
|
—
|
|
|
6,595
|
|
||
Collateral dependent
|
34,720
|
|
|
38,923
|
|
||
|
$
|
2,658,883
|
|
|
$
|
2,856,011
|
|
|
30 - 59 Days
|
|
60 - 89 Days
|
|
90 Days and Over
|
|
Total Past Due
|
|
Current
|
|
Collateral Dependent Receivables
|
|
Total Financing Receivables
|
||||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||||||||
Commercial Mortgage Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
December 31, 2012
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,624,113
|
|
|
$
|
34,720
|
|
|
$
|
2,658,833
|
|
December 31, 2011
|
$
|
3,378
|
|
|
$
|
—
|
|
|
$
|
6,595
|
|
|
$
|
9,973
|
|
|
$
|
2,807,115
|
|
|
$
|
38,923
|
|
|
$
|
2,856,011
|
|
|
Recorded Investment
|
|
Unpaid Principal Balance
|
|
Related Allowance
|
|
Average Recorded Investment
|
|
Interest Income Recognized
|
||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||
December 31, 2012
|
|
|
|
|
|
|
|
|
|
||||||||||
Mortgage loans with an allowance
|
$
|
29,976
|
|
|
$
|
53,110
|
|
|
$
|
(23,134
|
)
|
|
$
|
37,480
|
|
|
$
|
1,946
|
|
Mortgage loans with no related allowance
|
27,765
|
|
|
27,765
|
|
|
—
|
|
|
27,696
|
|
|
1,664
|
|
|||||
|
$
|
57,741
|
|
|
$
|
80,875
|
|
|
$
|
(23,134
|
)
|
|
$
|
65,176
|
|
|
$
|
3,610
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
||||||||||
Mortgage loans with an allowance
|
$
|
44,034
|
|
|
$
|
67,698
|
|
|
$
|
(23,664
|
)
|
|
$
|
53,617
|
|
|
$
|
3,284
|
|
Mortgage loans with no related allowance
|
63,023
|
|
|
63,023
|
|
|
—
|
|
|
60,974
|
|
|
3,509
|
|
|||||
|
$
|
107,057
|
|
|
$
|
130,721
|
|
|
$
|
(23,664
|
)
|
|
$
|
114,591
|
|
|
$
|
6,793
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
|
||||||||||
Mortgage loans with an allowance
|
$
|
17,803
|
|
|
$
|
31,027
|
|
|
$
|
(13,224
|
)
|
|
$
|
24,062
|
|
|
$
|
656
|
|
Mortgage loans with no related allowance
|
81,994
|
|
|
81,994
|
|
|
—
|
|
|
82,535
|
|
|
4,921
|
|
|||||
|
$
|
99,797
|
|
|
$
|
113,021
|
|
|
$
|
(13,224
|
)
|
|
$
|
106,597
|
|
|
$
|
5,577
|
|
•
|
borrower is in default,
|
•
|
borrower has declared bankruptcy,
|
•
|
there is growing concern about the borrower's ability to continue as a going concern,
|
•
|
borrower has insufficient cash flows to service debt,
|
•
|
borrower's inability to obtain funds from other sources, and
|
•
|
there is a breach of financial covenants by the borrower.
|
•
|
assets used to satisfy debt are less than our recorded investment,
|
•
|
interest rate is modified,
|
•
|
maturity date extension at an interest rate less than market rate,
|
•
|
capitalization of interest,
|
•
|
delaying principal and/or interest for a period of three months or more, and
|
•
|
partial forgiveness of the balance or charge-off.
|
Geographic Region
|
|
Number of Mortgage Loans
|
|
Principal Balance Outstanding
|
|
Specific Loan Loss Allowance
|
|
Net Carrying Amount
|
||||||
|
|
|
|
(Dollars in thousands)
|
|
|
||||||||
Year ended December 31, 2012:
|
|
|
|
|
|
|
|
|
||||||
East
|
|
1
|
|
$
|
4,208
|
|
|
$
|
(1,425
|
)
|
|
$
|
2,783
|
|
Mountain
|
|
10
|
|
28,786
|
|
|
(1,702
|
)
|
|
27,084
|
|
|||
South Atlantic
|
|
9
|
|
23,358
|
|
|
(5,047
|
)
|
|
18,311
|
|
|||
East North Central
|
|
1
|
|
2,232
|
|
|
(467
|
)
|
|
1,765
|
|
|||
West North Central
|
|
3
|
|
9,466
|
|
|
(2,328
|
)
|
|
7,138
|
|
|||
|
|
24
|
|
$
|
68,050
|
|
|
$
|
(10,969
|
)
|
|
$
|
57,081
|
|
|
|
|
|
|
|
|
|
|
||||||
Year ended December 31, 2011:
|
|
|
|
|
|
|
|
|
||||||
East
|
|
3
|
|
$
|
8,489
|
|
|
$
|
(2,115
|
)
|
|
$
|
6,374
|
|
Mountain
|
|
10
|
|
29,539
|
|
|
(1,637
|
)
|
|
27,902
|
|
|||
South Atlantic
|
|
11
|
|
28,676
|
|
|
(6,339
|
)
|
|
22,337
|
|
|||
West North Central
|
|
1
|
|
1,937
|
|
|
(269
|
)
|
|
1,668
|
|
|||
|
|
25
|
|
$
|
68,641
|
|
|
$
|
(10,360
|
)
|
|
$
|
58,281
|
|
|
December 31,
|
||||||
|
2012
|
|
2011
|
||||
|
(Dollars in thousands)
|
||||||
Assets
|
|
|
|
||||
Derivative instruments
|
|
|
|
||||
Call options
|
$
|
415,258
|
|
|
$
|
273,314
|
|
Other assets
|
|
|
|
||||
2015 notes hedges
|
43,105
|
|
|
45,593
|
|
||
Interest rate caps
|
3,247
|
|
|
—
|
|
||
|
$
|
461,610
|
|
|
$
|
318,907
|
|
Liabilities
|
|
|
|
||||
Policy benefit reserves—annuity products
|
|
|
|
||||
Fixed index annuities—embedded derivatives
|
$
|
3,337,556
|
|
|
$
|
2,530,496
|
|
Other liabilities
|
|
|
|
||||
2015 notes embedded derivative
|
43,105
|
|
|
45,593
|
|
||
Interest rate swaps
|
4,261
|
|
|
—
|
|
||
|
$
|
3,384,922
|
|
|
$
|
2,576,089
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(Dollars in thousands)
|
||||||||||
Change in fair value of derivatives:
|
|
|
|
|
|
||||||
Call options
|
$
|
228,610
|
|
|
$
|
(93,582
|
)
|
|
$
|
141,803
|
|
2015 notes hedges (see note 9)
|
(2,488
|
)
|
|
(21,002
|
)
|
|
29,595
|
|
|||
Interest rate swaps
|
(4,261
|
)
|
|
(144
|
)
|
|
(2,536
|
)
|
|||
Interest rate caps
|
(723
|
)
|
|
—
|
|
|
—
|
|
|||
|
$
|
221,138
|
|
|
$
|
(114,728
|
)
|
|
$
|
168,862
|
|
Change in fair value of embedded derivatives:
|
|
|
|
|
|
||||||
2015 notes embedded derivative (see note 9)
|
$
|
(2,488
|
)
|
|
$
|
(21,002
|
)
|
|
$
|
29,595
|
|
Fixed index annuities—embedded derivatives
|
289,387
|
|
|
(84,192
|
)
|
|
101,355
|
|
|||
|
$
|
286,899
|
|
|
$
|
(105,194
|
)
|
|
$
|
130,950
|
|
|
|
|
|
|
|
December 31,
|
||||||||||||||
|
|
|
|
|
|
2012
|
|
2011
|
||||||||||||
Counterparty
|
|
Credit Rating (S&P)
|
|
Credit Rating (Moody's)
|
|
Notional
Amount
|
|
Fair Value
|
|
Notional
Amount
|
|
Fair Value
|
||||||||
|
|
|
|
|
|
(Dollars in thousands)
|
||||||||||||||
Bank of America
|
|
A
|
|
A3
|
|
$
|
568,786
|
|
|
$
|
16,533
|
|
|
$
|
2,340,213
|
|
|
$
|
43,481
|
|
Barclays
|
|
A+
|
|
A2
|
|
3,463,777
|
|
|
103,929
|
|
|
2,419,339
|
|
|
60,903
|
|
||||
BNP Paribas
|
|
A+
|
|
A2
|
|
2,207,097
|
|
|
60,301
|
|
|
2,533,301
|
|
|
48,293
|
|
||||
Citibank, N.A.
|
|
A
|
|
A3
|
|
2,878,588
|
|
|
67,592
|
|
|
—
|
|
|
—
|
|
||||
Credit Suisse
|
|
A+
|
|
A1
|
|
936,625
|
|
|
21,518
|
|
|
1,423,802
|
|
|
27,464
|
|
||||
Deutsche Bank
|
|
A+
|
|
A2
|
|
886,688
|
|
|
20,787
|
|
|
384,420
|
|
|
7,697
|
|
||||
HSBC
|
|
AA-
|
|
Aa3
|
|
295,520
|
|
|
6,539
|
|
|
348,674
|
|
|
4,557
|
|
||||
J.P. Morgan
|
|
A+
|
|
Aa3
|
|
735,016
|
|
|
21,940
|
|
|
2,109,019
|
|
|
27,961
|
|
||||
Morgan Stanley
|
|
A
|
|
Baa1
|
|
1,590,505
|
|
|
40,113
|
|
|
244,180
|
|
|
7,375
|
|
||||
UBS
|
|
A
|
|
A2
|
|
—
|
|
|
—
|
|
|
39,147
|
|
|
240
|
|
||||
Wells Fargo (Wachovia)
|
|
AA-
|
|
Aa3
|
|
$
|
2,060,903
|
|
|
$
|
56,006
|
|
|
$
|
2,227,235
|
|
|
$
|
45,343
|
|
|
|
|
|
|
|
$
|
15,623,505
|
|
|
$
|
415,258
|
|
|
$
|
14,069,330
|
|
|
$
|
273,314
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|||||||||
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|||||||
Maturity Date
|
|
Notional Amount
|
|
Receive Rate
|
|
Pay Rate
|
|
Counterparty
|
|
Fair Value
|
|
Fair Value
|
|||||||
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|||||||||
March 15, 2021
|
|
$
|
85,500
|
|
|
*LIBOR
|
|
2.415
|
%
|
|
SunTrust
|
|
$
|
(4,261
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|||||||||
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|||||||
Maturity Date
|
|
Notional Amount
|
|
Floating Rate
|
|
Cap Rate
|
|
Counterparty
|
|
Fair Value
|
|
Fair Value
|
|||||||
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|||||||||
July 7, 2021
|
|
$
|
40,000
|
|
|
*LIBOR
|
|
2.50
|
%
|
|
SunTrust
|
|
$
|
1,634
|
|
|
$
|
—
|
|
July 8, 2021
|
|
12,000
|
|
|
*LIBOR
|
|
2.50
|
%
|
|
SunTrust
|
|
490
|
|
|
—
|
|
|||
July 29, 2021
|
|
27,000
|
|
|
*LIBOR
|
|
2.50
|
%
|
|
SunTrust
|
|
1,123
|
|
|
—
|
|
|||
|
|
$
|
79,000
|
|
|
|
|
|
|
|
|
$
|
3,247
|
|
|
$
|
—
|
|
|
December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(Dollars in thousands)
|
||||||||||
Balance at beginning of year
|
$
|
1,683,857
|
|
|
$
|
1,747,760
|
|
|
$
|
1,625,785
|
|
Costs deferred during the year:
|
|
|
|
|
|
||||||
Commissions
|
399,001
|
|
|
463,889
|
|
|
390,631
|
|
|||
Policy issue costs
|
4,410
|
|
|
14,945
|
|
|
11,976
|
|
|||
Amortization
|
(164,919
|
)
|
|
(143,478
|
)
|
|
(136,388
|
)
|
|||
Effect of net unrealized gains/losses
|
(212,550
|
)
|
|
(399,259
|
)
|
|
(144,244
|
)
|
|||
Balance at end of year
|
$
|
1,709,799
|
|
|
$
|
1,683,857
|
|
|
$
|
1,747,760
|
|
|
December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(Dollars in thousands)
|
||||||||||
Balance at beginning of year
|
$
|
1,242,787
|
|
|
$
|
1,227,328
|
|
|
$
|
1,011,449
|
|
Costs deferred during the year
|
306,659
|
|
|
385,123
|
|
|
370,714
|
|
|||
Amortization
|
(87,157
|
)
|
|
(71,781
|
)
|
|
(59,873
|
)
|
|||
Effect of net unrealized gains/losses
|
(169,948
|
)
|
|
(297,883
|
)
|
|
(94,962
|
)
|
|||
Balance at end of year
|
$
|
1,292,341
|
|
|
$
|
1,242,787
|
|
|
$
|
1,227,328
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(Dollars in thousands)
|
||||||||||
Consolidated Statements of Operations
|
|
|
|
|
|
||||||
Annuity product charges
|
$
|
6,796
|
|
|
$
|
8,149
|
|
|
$
|
9,063
|
|
Change in fair value of derivatives
|
17,106
|
|
|
(2,771
|
)
|
|
19,408
|
|
|||
|
$
|
23,902
|
|
|
$
|
5,378
|
|
|
$
|
28,471
|
|
|
|
|
|
|
|
||||||
Interest sensitive and index product benefits
|
$
|
94,113
|
|
|
$
|
99,724
|
|
|
$
|
96,872
|
|
Change in fair value of embedded derivatives
|
9,373
|
|
|
(12,428
|
)
|
|
3,373
|
|
|||
Other operating costs and expenses
|
9,333
|
|
|
8,970
|
|
|
8,948
|
|
|||
|
$
|
112,819
|
|
|
$
|
96,266
|
|
|
$
|
109,193
|
|
Consolidated Statements of Cash Flows
|
|
|
|
|
|
||||||
Annuity deposits
|
$
|
(203,552
|
)
|
|
$
|
(326,531
|
)
|
|
$
|
(478,962
|
)
|
Cash payments to policyholders
|
208,437
|
|
|
204,116
|
|
|
211,324
|
|
|||
|
$
|
4,885
|
|
|
$
|
(122,415
|
)
|
|
$
|
(267,638
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(Dollars in thousands)
|
||||||||||
Consolidated statements of operations:
|
|
|
|
|
|
||||||
Current income taxes
|
$
|
80,527
|
|
|
$
|
127,535
|
|
|
$
|
140,381
|
|
Deferred income taxes (benefits)
|
(52,336
|
)
|
|
(80,869
|
)
|
|
(118,048
|
)
|
|||
Total income tax expense included in consolidated statements of operations
|
28,191
|
|
|
46,666
|
|
|
22,333
|
|
|||
Stockholders' equity:
|
|
|
|
|
|
||||||
Expense (benefit) relating to:
|
|
|
|
|
|
||||||
Change in net unrealized investment losses
|
123,620
|
|
|
202,143
|
|
|
60,456
|
|
|||
Share-based compensation
|
(392
|
)
|
|
(1,061
|
)
|
|
(480
|
)
|
|||
Total income tax expense included in consolidated financial statements
|
$
|
151,419
|
|
|
$
|
247,748
|
|
|
$
|
82,309
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(Dollars in thousands)
|
||||||||||
Income before income taxes
|
$
|
85,989
|
|
|
$
|
132,914
|
|
|
$
|
65,266
|
|
|
|
|
|
|
|
||||||
Income tax expense on income before income taxes
|
$
|
30,096
|
|
|
$
|
46,520
|
|
|
$
|
22,843
|
|
Tax effect of:
|
|
|
|
|
|
||||||
Tax exempt net investment income
|
(1,876
|
)
|
|
—
|
|
|
—
|
|
|||
Other
|
(29
|
)
|
|
146
|
|
|
(510
|
)
|
|||
Income tax expense
|
$
|
28,191
|
|
|
$
|
46,666
|
|
|
$
|
22,333
|
|
Effective tax rate
|
32.8
|
%
|
|
35.1
|
%
|
|
34.2
|
%
|
|
December 31,
|
||||||
|
2012
|
|
2011
|
||||
|
(Dollars in thousands)
|
||||||
Deferred income tax assets:
|
|
|
|
||||
Policy benefit reserves
|
$
|
1,698,831
|
|
|
$
|
1,472,653
|
|
Other than temporary impairments
|
8,177
|
|
|
9,072
|
|
||
Derivative instruments
|
—
|
|
|
21,429
|
|
||
Other policyholder funds
|
10,860
|
|
|
9,946
|
|
||
Litigation settlement accrual
|
7,351
|
|
|
—
|
|
||
Deferred compensation
|
14,659
|
|
|
15,576
|
|
||
Net operating loss carryforwards
|
16,783
|
|
|
14,818
|
|
||
Other
|
7,192
|
|
|
6,351
|
|
||
Gross deferred tax assets
|
1,763,853
|
|
|
1,549,845
|
|
||
Deferred income tax liabilities:
|
|
|
|
||||
Deferred policy acquisition costs and deferred sales inducements
|
(1,425,266
|
)
|
|
(1,266,042
|
)
|
||
Net unrealized gains on available for sale fixed maturity and equity securities
|
(357,686
|
)
|
|
(234,066
|
)
|
||
Convertible senior notes
|
(6,665
|
)
|
|
(10,917
|
)
|
||
Derivative instruments
|
(18,280
|
)
|
|
—
|
|
||
Investment income items
|
(2,588
|
)
|
|
(4,315
|
)
|
||
Other
|
(2,671
|
)
|
|
(12,524
|
)
|
||
Gross deferred tax liabilities
|
(1,813,156
|
)
|
|
(1,527,864
|
)
|
||
Net deferred income tax (liability) asset
|
$
|
(49,303
|
)
|
|
$
|
21,981
|
|
•
|
during the
5
business day period after any
10
consecutive trading day period (the “measurement period”) in which the trading price per
$1,000
principal amount of notes was less than
98%
of the product of the last reported sale price of our common stock and the applicable conversion rate on such trading day;
|
•
|
during any calendar quarter commencing after December 31, 2010, the Notes may be converted if the last reported price of the common stock for at least
20
trading days (whether or not consecutive) during the period of
30
consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to
130%
of the applicable conversion price on each applicable trading day. The “last reported sale price” means the closing sale price per share (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on that date as reported in composite transactions for the New York Stock Exchange; or
|
•
|
upon the occurrence of specified corporate transactions.
|
•
|
during any fiscal quarter, if the closing sale price of our common stock for at least
20
trading days in the period of
30
consecutive trading days ending on the last trading day of the fiscal quarter preceding the quarter in which the conversion occurs is more than
120%
of the conversion price of the notes in effect on that 30th trading day;
|
•
|
we have called the notes for redemption and the redemption has not yet occurred; or
|
•
|
upon the occurrence of specified corporate transactions.
|
|
|
December 31, 2012
|
|
December 31, 2011
|
||||||||||||||||||||
|
|
September 2015 Notes
|
|
December 2029 Notes
|
|
December 2024 Notes
|
|
September 2015 Notes
|
|
December 2029 Notes
|
|
December 2024 Notes
|
||||||||||||
|
|
(Dollars in thousands)
|
|
(Dollars in thousands)
|
||||||||||||||||||||
Notes payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Principal amount of liability component
|
|
$
|
200,000
|
|
|
$
|
115,839
|
|
|
$
|
28,243
|
|
|
$
|
200,000
|
|
|
$
|
115,839
|
|
|
$
|
28,243
|
|
Unamortized discount
|
|
(21,944
|
)
|
|
(12,269
|
)
|
|
—
|
|
|
(28,906
|
)
|
|
(17,568
|
)
|
|
—
|
|
||||||
Net carrying amount of liability component
|
|
$
|
178,056
|
|
|
$
|
103,570
|
|
|
$
|
28,243
|
|
|
$
|
171,094
|
|
|
$
|
98,271
|
|
|
$
|
28,243
|
|
Additional paid-in capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Carrying amount of equity component
|
|
|
|
$
|
15,586
|
|
|
$
|
22,637
|
|
|
|
|
$
|
15,586
|
|
|
$
|
22,637
|
|
||||
Amount by which the if-converted value exceeds principal
|
|
$
|
—
|
|
|
$
|
30,382
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,846
|
|
|
$
|
—
|
|
|
December 31,
|
|
|
|
|
|
||||||
|
2012
|
|
2011
|
|
Interest Rate
|
|
Due Date
|
|||||
|
(Dollars in thousands)
|
|
|
|
|
|
||||||
American Equity Capital Trust I
|
$
|
—
|
|
|
$
|
22,893
|
|
|
8%
|
|
|
|
American Equity Capital Trust II
|
76,259
|
|
|
76,090
|
|
|
5%
|
|
June 1, 2047
|
|||
American Equity Capital Trust III
|
27,840
|
|
|
27,840
|
|
|
*LIBOR +
|
3.90%
|
|
April 29, 2034
|
||
American Equity Capital Trust IV
|
12,372
|
|
|
12,372
|
|
|
*LIBOR +
|
4.00%
|
|
January 8, 2034
|
||
American Equity Capital Trust VII
|
10,830
|
|
|
10,830
|
|
|
*LIBOR +
|
3.75%
|
|
December 14, 2034
|
||
American Equity Capital Trust VIII
|
20,620
|
|
|
20,620
|
|
|
*LIBOR +
|
3.75%
|
|
December 15, 2034
|
||
American Equity Capital Trust IX
|
15,470
|
|
|
15,470
|
|
|
*LIBOR +
|
3.65%
|
|
June 15, 2035
|
||
American Equity Capital Trust X
|
20,620
|
|
|
20,620
|
|
|
*LIBOR +
|
3.65%
|
|
September 15, 2035
|
||
American Equity Capital Trust XI
|
20,620
|
|
|
20,620
|
|
|
*LIBOR +
|
3.65%
|
|
December 15, 2035
|
||
American Equity Capital Trust XII
|
41,238
|
|
|
41,238
|
|
|
*LIBOR +
|
3.50%
|
|
April 7, 2036
|
||
|
$
|
245,869
|
|
|
$
|
268,593
|
|
|
|
|
|
|
|
Year Ended December 31,
|
||||||||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||||||||
|
Directors and Retirement Eligible Employees
|
|
Non-Retirement Eligible Employees
|
|
Directors and Retirement Eligible Employees
|
|
Non-Retirement Eligible Employees
|
|
Directors and Retirement Eligible Employees
|
|
Non-Retirement Eligible Employees
|
||||||
Average risk-free interest rate
|
0.76
|
%
|
|
1.36
|
%
|
|
1.66
|
%
|
|
2.00
|
%
|
|
2.17
|
%
|
|
2.99
|
%
|
Dividend yield
|
1.1
|
%
|
|
1.3
|
%
|
|
0.8
|
%
|
|
1.0
|
%
|
|
0.8
|
%
|
|
0.8
|
%
|
Average expected life (years)
|
5
|
|
|
8
|
|
|
5
|
|
|
8
|
|
|
5
|
|
|
8
|
|
Volatility
|
62.5
|
%
|
|
50.9
|
%
|
|
66.1
|
%
|
|
52.0
|
%
|
|
75.7
|
%
|
|
75.7
|
%
|
|
Year Ended December 31,
|
|||||||
|
2012
|
|
2011
|
|
2010
|
|||
Average risk-free interest rate
|
0.51
|
%
|
|
0.58
|
%
|
|
1.44
|
%
|
Dividend yield
|
1.2
|
%
|
|
1.2
|
%
|
|
0.8
|
%
|
Average expected life (years)
|
3.75
|
|
|
3.75
|
|
|
3.75
|
|
Volatility
|
41.1
|
%
|
|
67.2
|
%
|
|
68.0
|
%
|
|
Number of
Shares
|
|
Weighted-Average
Exercise Price
per Share
|
|
Total
Exercise
Price
|
|||||
|
(Dollars in thousands, except per share data)
|
|||||||||
Outstanding at January 1, 2010
|
3,142,189
|
|
|
$
|
8.79
|
|
|
$
|
27,620
|
|
Granted
|
1,794,200
|
|
|
8.76
|
|
|
15,726
|
|
||
Canceled
|
(120,000
|
)
|
|
8.64
|
|
|
(1,037
|
)
|
||
Exercised
|
(695,539
|
)
|
|
8.80
|
|
|
(6,122
|
)
|
||
Outstanding at December 31, 2010
|
4,120,850
|
|
|
8.78
|
|
|
36,187
|
|
||
Granted
|
1,486,850
|
|
|
12.99
|
|
|
19,309
|
|
||
Canceled
|
(177,500
|
)
|
|
9.66
|
|
|
(1,714
|
)
|
||
Exercised
|
(585,350
|
)
|
|
8.00
|
|
|
(4,685
|
)
|
||
Outstanding at December 31, 2011
|
4,844,850
|
|
|
10.13
|
|
|
49,097
|
|
||
Granted
|
1,558,900
|
|
|
7.60
|
|
|
11,854
|
|
||
Canceled
|
(28,050
|
)
|
|
8.74
|
|
|
(245
|
)
|
||
Exercised
|
(643,250
|
)
|
|
8.77
|
|
|
(5,642
|
)
|
||
Outstanding at December 31, 2012
|
5,732,450
|
|
|
9.61
|
|
|
$
|
55,064
|
|
|
|
Stock Options Outstanding
|
|
Stock Options Vested
|
||||||||||||||
Range of
Exercise Prices
|
|
Number of
Awards
|
|
Remaining
Life (yrs)
|
|
Weighted-Average
Exercise Price
Per Share
|
|
Number of
Awards
|
|
Remaining
Life (yrs)
|
|
Weighted-Average
Exercise Price
Per Share
|
||||||
$5.07 - $9.16
|
|
1,500,000
|
|
|
3.59
|
|
$
|
7.70
|
|
|
1,500,000
|
|
|
3.59
|
|
$
|
7.70
|
|
$9.49 - $11.46
|
|
2,714,350
|
|
|
5.56
|
|
10.35
|
|
|
2,218,350
|
|
|
5.34
|
|
10.47
|
|
||
$11.88 - $14.34
|
|
1,518,100
|
|
|
5.37
|
|
12.97
|
|
|
1,413,100
|
|
|
5.12
|
|
13.03
|
|
||
$5.07 - $14.34
|
|
5,732,450
|
|
|
5.00
|
|
10.35
|
|
|
5,131,450
|
|
|
4.77
|
|
10.36
|
|
|
Year Ended December 31,
|
|||||||
|
2012
|
|
2011
|
|
2010
|
|||
|
(Dollars in thousands)
|
|||||||
American Equity Life
|
82,039
|
|
|
169,365
|
|
|
177,311
|
|
|
December 31,
|
||||||
|
2012
|
|
2011
|
||||
|
(Dollars in thousands)
|
||||||
American Equity Life
|
$
|
1,658,929
|
|
|
$
|
1,597,018
|
|
|
December 31,
|
||||||
|
2012
|
|
2011
|
||||
|
(Dollars in thousands)
|
||||||
Total adjusted capital
|
$
|
1,741,638
|
|
|
$
|
1,655,205
|
|
Company Action Level RBC
|
524,928
|
|
|
479,023
|
|
||
Ratio of adjusted capital to Company Action Level RBC
|
332
|
%
|
|
346
|
%
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(Dollars in thousands, except per share data)
|
||||||||||
Numerator:
|
|
|
|
|
|
||||||
Net income—numerator for earnings per common share
|
$
|
57,798
|
|
|
$
|
86,248
|
|
|
$
|
42,933
|
|
Interest on convertible subordinated debentures (net of income tax benefit)
|
517
|
|
|
1,034
|
|
|
1,035
|
|
|||
Numerator for earnings per common share—assuming dilution
|
$
|
58,315
|
|
|
$
|
87,282
|
|
|
$
|
43,968
|
|
Denominator
:
|
|
|
|
|
|
||||||
Weighted average common shares outstanding (1)
|
61,258,825
|
|
|
59,482,349
|
|
|
58,506,804
|
|
|||
Effect of dilutive securities:
|
|
|
|
|
|
||||||
Convertible subordinated debentures
|
1,348,447
|
|
|
2,727,084
|
|
|
2,729,514
|
|
|||
Convertible senior notes
|
2,515,067
|
|
|
848,164
|
|
|
2,904,571
|
|
|||
Stock options and deferred compensation agreements
|
553,312
|
|
|
561,898
|
|
|
438,834
|
|
|||
Denominator for earnings per common share—assuming dilution
|
65,675,651
|
|
|
63,619,495
|
|
|
64,579,723
|
|
|||
|
|
|
|
|
|
||||||
Earnings per common share
|
$
|
0.94
|
|
|
$
|
1.45
|
|
|
$
|
0.73
|
|
Earnings per common share—assuming dilution
|
$
|
0.89
|
|
|
$
|
1.37
|
|
|
$
|
0.68
|
|
(1)
|
Weighted average common shares outstanding include shares vested under the NMO Deferred Compensation Plan and exclude unallocated shares held by the ESOP.
|
Period
|
|
Number of
Shares
|
|
Range of
Exercise Prices
|
|||
|
|
|
|
Minimum
|
|
Maximum
|
|
Year ended December 31, 2012
|
|
1,522,100
|
|
|
$11.35
|
|
$14.34
|
Year ended December 31, 2011
|
|
2,290,200
|
|
|
$10.65
|
|
$14.34
|
Year ended December 31, 2010
|
|
1,945,500
|
|
|
$8.75
|
|
$14.34
|
|
|
Quarter ended
|
||||||||||||||
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
||||||||
|
|
(Dollars in thousands, except per share data)
|
||||||||||||||
2012
|
|
|
|
|
|
|
|
|
||||||||
Premiums and product charges
|
|
$
|
22,615
|
|
|
$
|
25,156
|
|
|
$
|
27,175
|
|
|
$
|
26,937
|
|
Net investment income
|
|
326,910
|
|
|
320,259
|
|
|
318,594
|
|
|
321,160
|
|
||||
Change in fair value of derivatives
|
|
259,161
|
|
|
(150,847
|
)
|
|
161,090
|
|
|
(48,266
|
)
|
||||
Net realized gains (losses) on investments, excluding OTTI losses
|
|
(6,076
|
)
|
|
(611
|
)
|
|
(1,238
|
)
|
|
1,471
|
|
||||
Net OTTI losses recognized in operations
|
|
(2,881
|
)
|
|
(978
|
)
|
|
(1,686
|
)
|
|
(9,387
|
)
|
||||
Total revenues
|
|
599,729
|
|
|
192,979
|
|
|
503,935
|
|
|
291,915
|
|
||||
Net income (loss)
|
|
10,471
|
|
|
18,759
|
|
|
(7,829
|
)
|
|
36,397
|
|
||||
Earnings (loss) per common share
|
|
0.18
|
|
|
0.31
|
|
|
(0.13
|
)
|
|
0.58
|
|
||||
Earnings (loss) per common share—assuming dilution
|
|
0.16
|
|
|
0.30
|
|
|
(0.13
|
)
|
|
0.55
|
|
||||
2011
|
|
|
|
|
|
|
|
|
||||||||
Premiums and product charges
|
|
$
|
19,878
|
|
|
$
|
23,181
|
|
|
$
|
23,531
|
|
|
$
|
21,750
|
|
Net investment income
|
|
292,128
|
|
|
296,878
|
|
|
305,502
|
|
|
324,272
|
|
||||
Change in fair value of derivatives
|
|
148,653
|
|
|
(22,029
|
)
|
|
(333,621
|
)
|
|
92,269
|
|
||||
Net realized gains (losses) on investments, excluding OTTI losses
|
|
(1,193
|
)
|
|
(854
|
)
|
|
(17,292
|
)
|
|
698
|
|
||||
Net OTTI losses recognized in operations
|
|
(6,571
|
)
|
|
(2,229
|
)
|
|
(8,891
|
)
|
|
(16,285
|
)
|
||||
Total revenues
|
|
452,895
|
|
|
294,947
|
|
|
(30,771
|
)
|
|
422,704
|
|
||||
Net income (loss)
|
|
31,343
|
|
|
18,274
|
|
|
(13,068
|
)
|
|
49,699
|
|
||||
Earnings (loss) per common share
|
|
0.53
|
|
|
0.31
|
|
|
(0.22
|
)
|
|
0.83
|
|
||||
Earnings (loss) per common share—assuming dilution
|
|
0.48
|
|
|
0.28
|
|
|
(0.22
|
)
|
|
0.79
|
|
|
Quarter ended
|
||||||||||||||
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
||||||||
|
(Dollars in thousands)
|
||||||||||||||
2012
|
$
|
16,279
|
|
|
$
|
5,058
|
|
|
$
|
18,106
|
|
|
$
|
(8,270
|
)
|
2011
|
(2,945
|
)
|
|
9,747
|
|
|
45,868
|
|
|
(21,313
|
)
|
Column A
|
|
Column B
|
|
Column C
|
|
Column D
|
||||||
Type of Investment
|
|
Amortized
Cost(1)
|
|
Fair
Value
|
|
Amount at
which shown
in the balance
sheet
|
||||||
|
|
(Dollars in thousands)
|
||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
||||||
Available for sale:
|
|
|
|
|
|
|
||||||
United States Government full faith and credit
|
|
$
|
4,590
|
|
|
$
|
5,154
|
|
|
$
|
5,154
|
|
United States Government sponsored agencies
|
|
1,763,789
|
|
|
1,772,025
|
|
|
1,772,025
|
|
|||
United States municipalities, states and territories
|
|
3,116,678
|
|
|
3,578,323
|
|
|
3,578,323
|
|
|||
Foreign government obligations
|
|
86,099
|
|
|
105,259
|
|
|
105,259
|
|
|||
Corporate securities
|
|
12,930,173
|
|
|
14,466,772
|
|
|
14,466,772
|
|
|||
Residential mortgage backed securities
|
|
2,743,537
|
|
|
2,888,113
|
|
|
2,888,113
|
|
|||
Commercial mortgage backed securities
|
|
354,870
|
|
|
357,982
|
|
|
357,982
|
|
|||
Other asset backed securities
|
|
957,291
|
|
|
998,508
|
|
|
998,508
|
|
|||
|
|
21,957,027
|
|
|
24,172,136
|
|
|
24,172,136
|
|
|||
Held for investment:
|
|
|
|
|
|
|
||||||
Corporate security
|
|
76,088
|
|
|
61,521
|
|
|
76,088
|
|
|||
Total fixed maturity securities
|
|
22,033,115
|
|
|
$
|
24,233,657
|
|
|
24,248,224
|
|
||
Equity securities, available for sale:
|
|
|
|
|
|
|
||||||
Non-redeemable preferred stocks
|
|
29,955
|
|
|
30,120
|
|
|
30,120
|
|
|||
Common stocks
|
|
14,643
|
|
|
23,302
|
|
|
23,302
|
|
|||
Total equity securities
|
|
44,598
|
|
|
53,422
|
|
|
53,422
|
|
|||
Mortgage loans on real estate
|
|
2,623,940
|
|
|
2,848,235
|
|
|
2,623,940
|
|
|||
Derivative instruments
|
|
196,106
|
|
|
415,258
|
|
|
415,258
|
|
|||
Other investments
|
|
196,366
|
|
|
|
|
|
196,366
|
|
|||
Total investments
|
|
$
|
25,094,125
|
|
|
|
|
|
$
|
27,537,210
|
|
(1)
|
On the basis of cost adjusted for repayments and amortization of premiums and accrual of discounts for fixed maturity securities and short-term investments, original cost for derivative instruments and unpaid principal balance less allowance for credit losses for mortgage loans.
|
|
December 31,
|
||||||
|
2012
|
|
2011
|
||||
Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
11,220
|
|
|
$
|
12,609
|
|
Equity securities of subsidiary trusts
|
7,398
|
|
|
8,196
|
|
||
Receivable from subsidiaries
|
535
|
|
|
747
|
|
||
Deferred income taxes
|
2,378
|
|
|
—
|
|
||
Federal income tax recoverable, including amount from subsidiaries
|
11,613
|
|
|
8,868
|
|
||
Other assets, including 2015 notes hedges
|
55,010
|
|
|
61,233
|
|
||
|
88,154
|
|
|
91,653
|
|
||
Investment in and advances to subsidiaries
|
2,235,403
|
|
|
1,933,845
|
|
||
Total assets
|
$
|
2,323,557
|
|
|
$
|
2,025,498
|
|
|
|
|
|
||||
Liabilities and Stockholders' Equity
|
|
|
|
||||
Liabilities:
|
|
|
|
||||
Notes payable
|
$
|
309,869
|
|
|
$
|
297,608
|
|
Subordinated debentures payable to subsidiary trusts
|
245,869
|
|
|
268,653
|
|
||
Deferred income taxes
|
—
|
|
|
460
|
|
||
Other liabilities, including 2015 notes embedded derivative
|
47,582
|
|
|
50,098
|
|
||
Total liabilities
|
603,320
|
|
|
616,819
|
|
||
Stockholders' equity:
|
|
|
|
||||
Common stock
|
61,751
|
|
|
57,837
|
|
||
Additional paid-in capital
|
496,715
|
|
|
468,281
|
|
||
Unallocated common stock held by ESOP
|
(2,583
|
)
|
|
(3,620
|
)
|
||
Accumulated other comprehensive income
|
686,807
|
|
|
457,229
|
|
||
Retained earnings
|
477,547
|
|
|
428,952
|
|
||
Total stockholders' equity
|
1,720,237
|
|
|
1,408,679
|
|
||
Total liabilities and stockholders' equity
|
$
|
2,323,557
|
|
|
$
|
2,025,498
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Net investment income
|
$
|
565
|
|
|
$
|
298
|
|
|
$
|
295
|
|
Dividends from subsidiary trusts
|
403
|
|
|
427
|
|
|
455
|
|
|||
Investment advisory fees
|
36,178
|
|
|
29,765
|
|
|
23,713
|
|
|||
Surplus note interest from subsidiary
|
4,080
|
|
|
4,080
|
|
|
4,080
|
|
|||
Realized gain on investments
|
—
|
|
|
18
|
|
|
13
|
|
|||
Change in fair value of derivatives
|
(7,472
|
)
|
|
(21,146
|
)
|
|
27,059
|
|
|||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
(292
|
)
|
|||
Total revenues
|
33,754
|
|
|
13,442
|
|
|
55,323
|
|
|||
Expenses:
|
|
|
|
|
|
||||||
Change in fair value of embedded derivatives
|
(2,488
|
)
|
|
(21,002
|
)
|
|
29,595
|
|
|||
Interest expense on notes payable
|
28,479
|
|
|
31,633
|
|
|
22,125
|
|
|||
Interest expense on subordinated debentures issued to subsidiary trusts
|
13,458
|
|
|
13,977
|
|
|
14,906
|
|
|||
Other operating costs and expenses
|
8,228
|
|
|
7,307
|
|
|
6,013
|
|
|||
Total expenses
|
47,677
|
|
|
31,915
|
|
|
72,639
|
|
|||
Loss before income taxes and equity in undistributed income of subsidiaries
|
(13,923
|
)
|
|
(18,473
|
)
|
|
(17,316
|
)
|
|||
Income tax benefit
|
(5,944
|
)
|
|
(7,407
|
)
|
|
(7,417
|
)
|
|||
Loss before equity in undistributed income of subsidiaries
|
(7,979
|
)
|
|
(11,066
|
)
|
|
(9,899
|
)
|
|||
Equity in undistributed income of subsidiaries
|
65,777
|
|
|
97,314
|
|
|
52,832
|
|
|||
Net income
|
$
|
57,798
|
|
|
$
|
86,248
|
|
|
$
|
42,933
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
Operating activities
|
|
|
|
|
|
||||||
Net income
|
$
|
57,798
|
|
|
$
|
86,248
|
|
|
$
|
42,933
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
||||||
Change in fair value of 2015 notes embedded conversion derivative
|
(2,488
|
)
|
|
(21,002
|
)
|
|
29,595
|
|
|||
Provision for depreciation and amortization
|
2,382
|
|
|
2,395
|
|
|
1,270
|
|
|||
Accrual of discount on equity security
|
(5
|
)
|
|
(5
|
)
|
|
(4
|
)
|
|||
Equity in undistributed income of subsidiaries
|
(65,777
|
)
|
|
(97,314
|
)
|
|
(52,832
|
)
|
|||
Amortization of premium on fixed maturity security
|
—
|
|
|
1,005
|
|
|
185
|
|
|||
Accrual of discount on contingent convertible notes
|
12,261
|
|
|
13,024
|
|
|
7,761
|
|
|||
Change in fair value of derivatives
|
7,472
|
|
|
21,002
|
|
|
(29,595
|
)
|
|||
Realized (gain) loss on investments
|
—
|
|
|
(18
|
)
|
|
(13
|
)
|
|||
Loss (gain) on extinguishment of debt
|
—
|
|
|
—
|
|
|
292
|
|
|||
Accrual of discount on debenture issued to subsidiary trust
|
110
|
|
|
158
|
|
|
148
|
|
|||
Share-based compensation
|
1,348
|
|
|
866
|
|
|
1,087
|
|
|||
ESOP compensation
|
45
|
|
|
45
|
|
|
82
|
|
|||
Deferred income tax benefit
|
(2,838
|
)
|
|
(4,355
|
)
|
|
(5,153
|
)
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||||||
Receivable from subsidiaries
|
1,205
|
|
|
1,596
|
|
|
(10
|
)
|
|||
Federal income tax recoverable
|
(2,745
|
)
|
|
142
|
|
|
(2,296
|
)
|
|||
Other assets
|
(549
|
)
|
|
1,702
|
|
|
(1,925
|
)
|
|||
Other liabilities
|
(4,469
|
)
|
|
(1,562
|
)
|
|
3,708
|
|
|||
Net cash provided by (used in) operating activities
|
3,750
|
|
|
3,927
|
|
|
(4,767
|
)
|
|||
|
|
|
|
|
|
||||||
Investing activities
|
|
|
|
|
|
||||||
Capital contributions to subsidiaries
|
—
|
|
|
(2,450
|
)
|
|
(2,400
|
)
|
|||
Purchase of fixed maturity security
|
—
|
|
|
(53,610
|
)
|
|
(50,260
|
)
|
|||
Sales, maturities or repayments of fixed maturity securities—available for sale
|
—
|
|
|
52,623
|
|
|
50,088
|
|
|||
Purchases of property, plant and equipment
|
—
|
|
|
—
|
|
|
(33
|
)
|
|||
Net cash provided by (used in) investing activities
|
—
|
|
|
(3,437
|
)
|
|
(2,605
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
Financing activities
|
|
|
|
|
|
||||||
Financing fees incurred and deferred
|
$
|
—
|
|
|
$
|
(1,566
|
)
|
|
$
|
(6,800
|
)
|
Proceeds from notes payable
|
—
|
|
|
—
|
|
|
200,000
|
|
|||
Repayments of notes payable
|
—
|
|
|
(46,251
|
)
|
|
(156,641
|
)
|
|||
Purchase of 2015 notes hedges
|
—
|
|
|
—
|
|
|
(37,000
|
)
|
|||
Repayment of subordinated debentures
|
(1,141
|
)
|
|
—
|
|
|
—
|
|
|||
Excess tax benefits realized from share-based compensation plans
|
6
|
|
|
28
|
|
|
31
|
|
|||
Proceeds from issuance of common stock
|
5,370
|
|
|
4,686
|
|
|
6,123
|
|
|||
Proceeds from issuance of warrants
|
—
|
|
|
—
|
|
|
15,600
|
|
|||
Dividends paid
|
(9,374
|
)
|
|
(7,102
|
)
|
|
(5,829
|
)
|
|||
Net cash provided by (used in) financing activities
|
(5,139
|
)
|
|
(50,205
|
)
|
|
15,484
|
|
|||
Increase (decrease) in cash and cash equivalents
|
(1,389
|
)
|
|
(49,715
|
)
|
|
8,112
|
|
|||
Cash and cash equivalents at beginning of year
|
12,609
|
|
|
62,324
|
|
|
54,212
|
|
|||
Cash and cash equivalents at end of year
|
$
|
11,220
|
|
|
$
|
12,609
|
|
|
$
|
62,324
|
|
Supplemental disclosures of cash flow information
|
|
|
|
|
|
||||||
Cash paid during the year for:
|
|
|
|
|
|
||||||
Interest on notes payable
|
$
|
14,564
|
|
|
$
|
16,917
|
|
|
$
|
11,085
|
|
Interest on subordinated debentures
|
13,102
|
|
|
13,703
|
|
|
14,717
|
|
|||
Non-cash financing activity:
|
|
|
|
|
|
||||||
Conversion of subordinated debentures
|
20,770
|
|
|
—
|
|
|
60
|
|
Column A
|
|
Column B
|
|
Column C
|
|
Column D
|
|
Column E
|
||||||||
|
|
Deferred policy
acquisition
costs
|
|
Future policy
benefits,
losses, claims
and loss
expenses
|
|
Unearned
premiums
|
|
Other policy
claims and
benefits
payable
|
||||||||
|
|
(Dollars in thousands)
|
||||||||||||||
As of December 31, 2012:
Life insurance
|
|
$
|
1,709,799
|
|
|
$
|
31,773,988
|
|
|
$
|
—
|
|
|
$
|
455,752
|
|
As of December 31, 2011:
Life insurance
|
|
$
|
1,683,857
|
|
|
$
|
28,118,716
|
|
|
$
|
—
|
|
|
$
|
400,594
|
|
As of December 31, 2010:
Life insurance
|
|
$
|
1,747,760
|
|
|
$
|
23,655,807
|
|
|
$
|
—
|
|
|
$
|
222,860
|
|
Column A
|
|
Column F
|
|
Column G
|
|
Column H
|
|
Column I
|
|
Column J
|
||||||||||
|
|
Premium
revenue
|
|
Net
investment
income
|
|
Benefits,
claims,
losses and
settlement
expenses
|
|
Amortization
of deferred
policy
acquisition
costs
|
|
Other
operating
expenses
|
||||||||||
|
|
(Dollars in thousands)
|
||||||||||||||||||
As of December 31, 2012:
Life insurance
|
|
$
|
101,883
|
|
|
$
|
1,286,923
|
|
|
$
|
1,200,218
|
|
|
$
|
164,919
|
|
|
$
|
137,432
|
|
As of December 31, 2011:
Life insurance
|
|
$
|
88,340
|
|
|
$
|
1,218,780
|
|
|
$
|
750,214
|
|
|
$
|
143,478
|
|
|
$
|
113,169
|
|
As of December 31, 2010:
Life insurance
|
|
$
|
81,057
|
|
|
$
|
1,036,106
|
|
|
$
|
932,292
|
|
|
$
|
136,388
|
|
|
$
|
151,646
|
|
Column A
|
|
Column B
|
|
Column C
|
|
Column D
|
|
Column E
|
|
Column F
|
|||||||||
|
|
Gross amount
|
|
Ceded to
other
companies
|
|
Assumed
from
other
companies
|
|
Net amount
|
|
Percent of
amount
assumed
to net
|
|||||||||
|
|
(Dollars in thousands)
|
|||||||||||||||||
Year ended December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Life insurance in force, at end of year
|
|
$
|
2,350,473
|
|
|
$
|
4,742
|
|
|
$
|
61,488
|
|
|
$
|
2,407,219
|
|
|
2.55
|
%
|
Insurance premiums and other considerations:
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Annuity product charges
|
|
$
|
93,472
|
|
|
$
|
6,796
|
|
|
$
|
—
|
|
|
$
|
86,676
|
|
|
—
|
|
Traditional life and accident and health insurance premiums
|
|
12,525
|
|
|
364
|
|
|
716
|
|
|
12,877
|
|
|
5.56
|
%
|
||||
|
|
$
|
105,997
|
|
|
$
|
7,160
|
|
|
$
|
716
|
|
|
$
|
99,553
|
|
|
0.72
|
%
|
Year ended December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Life insurance in force, at end of year
|
|
$
|
2,469,428
|
|
|
$
|
4,692
|
|
|
$
|
65,197
|
|
|
$
|
2,529,933
|
|
|
2.58
|
%
|
Insurance premiums and other considerations:
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Annuity product charges
|
|
$
|
84,338
|
|
|
$
|
8,149
|
|
|
$
|
—
|
|
|
$
|
76,189
|
|
|
—
|
|
Traditional life and accident and health insurance premiums
|
|
11,777
|
|
|
348
|
|
|
722
|
|
|
12,151
|
|
|
5.94
|
%
|
||||
|
|
$
|
96,115
|
|
|
$
|
8,497
|
|
|
$
|
722
|
|
|
$
|
88,340
|
|
|
0.82
|
%
|
Year ended December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Life insurance in force, at end of year
|
|
$
|
2,505,280
|
|
|
$
|
3,147
|
|
|
$
|
69,734
|
|
|
$
|
2,571,867
|
|
|
2.71
|
%
|
Insurance premiums and other considerations:
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Annuity product charges
|
|
$
|
78,138
|
|
|
$
|
9,063
|
|
|
$
|
—
|
|
|
$
|
69,075
|
|
|
—
|
|
Traditional life and accident and health insurance premiums
|
|
11,811
|
|
|
711
|
|
|
882
|
|
|
11,982
|
|
|
7.36
|
%
|
||||
|
|
$
|
89,949
|
|
|
$
|
9,774
|
|
|
$
|
882
|
|
|
$
|
81,057
|
|
|
1.09
|
%
|
|
Balance January 1,
|
|
Charged to Costs and Expenses
|
|
Translation Adjustment
|
|
Write-offs/Payments/Other
|
|
Balance December 31,
|
||||||||||
|
(Dollars in thousands
|
||||||||||||||||||
Year Ended December 31, 2012
|
|
|
|
|
|
|
|
|
|
||||||||||
Valuation allowance on mortgage loans
|
$
|
(32,964
|
)
|
|
$
|
(16,832
|
)
|
|
$
|
—
|
|
|
$
|
15,562
|
|
|
$
|
(34,234
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Year Ended December 31, 2011
|
|
|
|
|
|
|
|
|
|
||||||||||
Valuation allowance on mortgage loans
|
$
|
(16,224
|
)
|
|
$
|
(30,770
|
)
|
|
$
|
—
|
|
|
$
|
14,030
|
|
|
$
|
(32,964
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Year Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
||||||||||
Valuation allowance on mortgage loans
|
$
|
(5,266
|
)
|
|
$
|
(15,225
|
)
|
|
$
|
—
|
|
|
$
|
4,267
|
|
|
$
|
(16,224
|
)
|
Exhibit No.
|
|
Description
|
3.1
|
|
Articles of Incorporation, including Articles of Amendment (Incorporated by reference to Exhibit 3.1 to Form 10-Q for the period ended June 30, 2000 filed on August 14, 2000)
|
3.2
|
|
Articles of Amendment to Articles of Incorporation (Incorporated by reference to the Registration Statement on Form S-1, File No. 333-108794, including all pre-effective amendments thereto)
|
3.3
|
|
Articles of Amendment to Articles of Incorporation (Incorporated by reference to Exhibit 3.3 to the Registration Statement on Form S-3 filed on January 15, 2008)
|
3.4
|
|
Third Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.1 to Form 8-K filed on September 2, 2008)
|
3.5
|
|
Articles of Amendment to Articles of Incorporation (Incorporated by reference to Exhibit 3.5 to Form 10-Q for the period ended June 30, 2011 filed on August 5, 2011)
|
4.8
|
|
Indenture dated October 29, 1999 between American Equity Investment Life Holding Company and Wilmington Trust Company (as successor in interest to West Des Moines State Bank), as trustee (Incorporated by reference to the Registration Statement on Form S-1, File No. 333-108794, including all pre-effective amendments thereto)
|
4.9
|
|
Trust Preferred Securities Guarantee Agreement dated October 29, 1999 between American Equity Investment Life Holding Company and Wilmington Trust Company (as successor in interest to West Des Moines State Bank), as trustee (Incorporated by reference to the Registration Statement on Form S-1, File No. 333-108794, including all pre-effective amendments thereto)
|
4.10
|
|
Trust Common Securities Guarantee Agreement dated October 29, 1999 between American Equity Investment Life Holding Company and West Des Moines State Bank, as trustee (Incorporated by reference to the Registration Statement on Form S-1, File No. 333-108794, including all pre-effective amendments thereto)
|
4.10-A
|
|
Instruments of Resignation, Appointment and Acceptance, effective September 12, 2006, among American Equity Investment Life Holding Company, Wilmington Trust Company, West Des Moines State Bank and Delaware Trust Company, National Association (formerly known as First Union Trust Company, National Association) (Incorporated by reference to Exhibit 4.10A to Form 10-K for the year ended December 31, 2008 filed on March 16, 2009)
|
4.11
|
|
Indenture dated December 16, 2003, between American Equity Investment Life Holding Company and Wilmington Trust Company, as trustee (Incorporated by reference to Exhibit 4.11 to Form 10-K for the year ended December 31, 2003 filed on March 4, 2004)
|
4.12
|
|
Guarantee Agreement dated December 16, 2003, between American Equity Investment Life Holding Company and Wilmington Trust Company, as trustee (Incorporated by reference to Exhibit 4.12 to Form 10-K for the year ended December 31, 2003 filed on March 4, 2004)
|
4.13
|
|
Indenture dated April 29, 2004, between American Equity Investment Life Holding Company and JP Morgan Chase Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.23 to Form 10-Q for the period ended June 30, 2005 filed on August 4, 2005)
|
4.14
|
|
Guarantee Agreement dated April 29, 2004, between American Equity Investment Life Holding Company and JP Morgan Chase Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.24 to Form 10-Q for the period ended June 30, 2005 filed on August 4, 2005)
|
4.15
|
|
Indenture dated September 14, 2004, between American Equity Investment Life Holding Company and JP Morgan Chase Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.13 to Form 10-Q for the period ended September 30, 2004 filed on November 9, 2004)
|
4.16
|
|
Guarantee Agreement dated September 14, 2004, between American Equity Investment Life Holding Company and JP Morgan Chase Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.14 to Form 10-Q for the period ended September 30, 2004 filed on November 9, 2004)
|
4.17
|
|
Indenture dated December 22, 2004, between American Equity Investment Life Holding Company and JP Morgan Chase Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.17 to Form 10-K for the year ended December 31, 2004 filed on March 14, 2005)
|
4.18
|
|
Guarantee Agreement dated December 22, 2004, between American Equity Investment Life Holding Company and JP Morgan Chase Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.18 to Form 10-K for the year ended December 31, 2004 filed on March 14, 2005)
|
4.19
|
|
Indenture dated December 6, 2004 between American Equity Investment Life Holding Company and US Bank National Association, as trustee (Incorporated by reference to Exhibit 4.19 to Form 10-K for the year ended December 31, 2004 filed on March 14, 2005)
|
4.20
|
|
Registration Rights Agreement dated December 6, 2004 by and among American Equity Investment Life Holding Company, Deutsche Bank Securities Inc., Raymond James & Associates, Inc., and Advest, Inc. (Incorporated by reference to Exhibit 4.20 to Form 10-K for the year ended December 31, 2004 filed on March 14, 2005)
|
4.23
|
|
Indenture dated June 15, 2005 between American Equity Investment Life Holding Company and JP Morgan Chase Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.23 to Form 10-Q for the period ended June 30, 2005 filed on August 4, 2005)
|
4.24
|
|
Guarantee Agreement dated June 15, 2005 between American Equity Investment Life Holding Company and JP Morgan Chase Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.24 to Form 10-Q for the period ended June 30, 2005 filed on August 4, 2005)
|
4.25
|
|
Indenture dated August 4, 2005 between American Equity Investment Life Holding Company and JP Morgan Chase Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.25 to Form 10-Q for the period ended September 30, 2005 filed on November 4, 2005)
|
4.26
|
|
Guarantee Agreement dated August 4, 2005 between American Equity Investment Life Holding Company and JP Morgan Chase Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.26 to Form 10-Q for the period ended September 30, 2005 filed on November 4, 2005)
|
4.27
|
|
Indenture dated December 15, 2005 between American Equity Investment Life Holding Company and JP Morgan Chase Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.27 to Form 10-K for the year ended December 31, 2005 filed on March 14, 2006)
|
4.28
|
|
Guarantee Agreement dated December 15, 2005 between American Equity Investment Life Holding Company and JP Morgan Chase Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.28 to Form 10-K for the year ended December 31, 2005 filed on March 14, 2006)
|
Exhibit No.
|
|
Description
|
4.31
|
|
Amended and Restated Indenture dated July 7, 2006 between American Equity Investment Life Holding Company and Wells Fargo Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.31 to Form 10-Q for the period ended September 30, 2006 filed on November 3, 2006)
|
4.32
|
|
Amended and Restated Guarantee Agreement dated July 7, 2006 between American Equity Investment Life Holding Company and Wells Fargo Delaware Trust Company, as trustee (Incorporated by reference to Exhibit 4.32 to Form 10-Q for the period ended September 30, 2006 filed on November 3, 2006)
|
4.33
|
|
Indenture dated December 22, 2009 between American Equity Investment Life Holding Company and U.S. Bank National Association, as trustee (Incorporated by reference to Exhibit 4.1 to Form 8-K filed on December 23, 2009)
|
4.34
|
|
Indenture dated September 22, 2010 between American Equity Investment Life Holding Company and U.S. Bank National Association, as trustee (Incorporated by reference to Exhibit 4.1 to Form 8-K filed on September 28, 2010)
|
10.3
|
|
Deferred Compensation Agreements between American Equity Investment Life Holding Company and
|
|
|
(a) James M. Gerlach dated June 6, 1996 (Incorporated by reference to the Registration Statement on Form 10 filed on May 6, 1999)
|
|
|
(b) Terry A. Reimer dated November 11, 1996 (Incorporated by reference to the Registration Statement on Form 10 filed on May 6, 1999)
|
|
|
(c) David S. Mulcahy dated December 31, 1997 (Incorporated by reference to the Registration Statement on Form 10 filed on May 6, 1999)
|
10.4
|
|
2000 Employee Stock Option Plan (Incorporated by reference to Exhibit 10.7 to Form 10-Q for the period ended June 30, 2000 filed on August 14, 2000)
|
10.5
|
|
2000 Director Stock Option Plan (Incorporated by reference to Exhibit 10.8 to Form 10-Q for the period ended June 30, 2000 filed on August 14, 2000)
|
10.6
|
|
Retirement Benefit Agreement, dated as of June 4, 2009, between American Equity Investment Life Holding Company and David J. Noble (Incorporated by reference to Exhibit 10.1 to Form 8-K filed on June 9, 2009)
|
10.7
|
|
American Equity Investment Life Holding Company 2009 Employee Incentive Plan (Incorporated by reference to Exhibit 10.2 to Form 8-K filed on June 9, 2009)
|
10.8
|
|
Coinsurance Agreement dated December 19, 2001, including First Amendment dated February 26, 2002 between American Equity Investment Life Insurance Company and EquiTrust Life Insurance Company (Incorporated by reference to Exhibit 10.10 to Form 10-K for the year ended December 31, 2001 filed on April 1, 2002)
|
10.9
|
|
Coinsurance Agreement dated December 29, 2003 between American Equity Investment Life Insurance Company and EquiTrust Life Insurance Company (Incorporated by reference to Exhibit 10.10-A to Form 10-K for the year ended December 31, 2003 filed on April 1, 2002)
|
10.10
|
|
First Amendment to Coinsurance Agreement dated July 30, 2004 between American Equity Investment Life Insurance Company and EquiTrust Life Insurance Company (Incorporated by reference to Exhibit 10.10-B to Form 10-Q for the period ended June 30, 2004 filed on August 4, 2004)
|
10.11
|
|
Form of Change in Control Agreement between American Equity Investment Life Holding Company and each of John M. Matovina and Debra J. Richardson (Incorporated by reference to the Registration Statement on Form S-1, File No. 333-108794, including all pre-effective amendments thereto)
|
10.11-A
|
|
Form of Amendment to Change in Control Agreement between American Equity Investment Life Holding Company and each of John M. Matovina and Debra J. Richardson
|
10.14
|
|
2005 Coinsurance and Yearly Renewable Term Reinsurance Agreement effective October 1, 2005, between American Equity Investment Life Insurance Company and Hannover Life Reassurance Company of America (Incorporated by reference to Exhibit 10.22 to Form 10-Q for the period ended March 31, 2006 filed on May 8, 2006)
|
10.15
|
|
Amendment I, effective January 1, 2006, to 2005 Coinsurance and Yearly Renewable Term Reinsurance Agreement effective October 1, 2005, between American Equity Investment Life Insurance Company and Hannover Life Reassurance Company of America (Incorporated by reference to Exhibit 10.23 to Form 10-Q for the period ended March 31, 2006 filed on May 8, 2006)
|
10.16
|
|
Amendment II, effective January 1, 2006, to 2005 Coinsurance and Yearly Renewable Term Reinsurance Agreement effective October 1, 2005, between American Equity Investment Life Insurance Company and Hannover Life Reassurance Company of America (Incorporated by reference to Exhibit 10.24 to Form 10-Q for the period ended March 31, 2006 filed on May 8, 2006)
|
10.18
|
|
American Equity Investment Life Holding Company Independent Insurance Agent Stock Option Plan (Incorporated by reference to Exhibit 10.26 to Form 10-Q for the period ended September 30, 2007 filed on November 2, 2007)
|
10.19
|
|
Coinsurance and Yearly Renewable Term Reinsurance Agreement dated December 31, 2008 between American Equity Investment Life Insurance Company and Hannover Life Reassurance Company of America (Incorporated by reference to Exhibit 10.20 to Form 10-K for the year ended December 31, 2008 filed on March 16, 2009)
|
10.20
|
|
Amendment III, effective April 1, 2009, to the 2005 Coinsurance and Yearly Renewable Term Reinsurance Agreement effective October 1, 2005, between American Equity Investment Life Insurance Company and Hannover Life Reassurance Company of America (Incorporated by reference to Exhibit 10.28 to Form 10-Q for the period ended June 30, 2009 filed on August 10, 2009)
|
10.21
|
|
Coinsurance Agreement effective July 1, 2009, between American Equity Investment Life Insurance Company and Athene Life Re Ltd (Treaty #070109) (Incorporated by reference to Exhibit 10.29 to Form 10-Q for the period ended September 30, 2009 filed on November 9, 2009)
|
10.22
|
|
Coinsurance Agreement effective July 1, 2009, between American Equity Investment Life Insurance Company and Athene Life Re Ltd (Treaty #08042009) (Incorporated by reference to Exhibit 10.29 to Form 10-Q for the period ended September 30, 2009 filed on November 9, 2009)
|
10.26
|
|
Purchase Agreement, dated December 17, 2009, between American Equity Investment Life Holding Company and FBR Capital Markets & Co. (Incorporated by reference to Exhibit 10.1 to Form 8-K filed on December 23, 2009)
|
10.27
|
|
Amendment IV, effective October 1, 2009, to the 2005 Coinsurance and Yearly Renewable Term Reinsurance Agreement effective October 1, 2005, between American Equity Investment Life Insurance Company and Hannover Life Reassurance Co. of America (Incorporated by reference to Exhibit 10.30 to Form 10-K for the year ended December 31, 2009 filed on March 9, 2010)
|
Exhibit No.
|
|
Description
|
10.28
|
|
Amended Retirement Benefit Agreement, dated as of March 29, 2010, between American Equity Investment Life Holding Company and David J. Noble (Incorporated by reference to Exhibit 10.1 to Form 8-K filed on April 2, 2010)
|
10.30
|
|
American Equity Investment Life Holding Company Short-Term Performance Incentive Plan (Incorporated by reference to Exhibit 10.2 to Form 10-Q for the period ended September 30, 2010 filed on November 9, 2010)
|
10.33
|
|
2010 Independent Insurance Agent Stock Option Plan (Incorporated by reference to Exhibit 99.1 to the Registration Statement on Form S-3 filed on December 15, 2010)
|
10.34
|
|
Credit Agreement dated January 28, 2011 among American Equity Investment Life Holding Company, JPMorgan Chase Bank, National Association, Suntrust Bank and Deutsche Bank Securities, Inc. (Incorporated by reference to Exhibit 10.34 to Form 10-K for the year ended December 31, 2010 filed on March 10, 2011)
|
10.35
|
|
Amendment V, effective November 18, 2010, to the 2005 Coinsurance and Yearly Renewable Term Reinsurance Agreement effective October 1, 2005, between American Equity Investment Life Insurance Company and Hannover Life Reassurance Co. of America (Incorporated by reference to Exhibit 10.35 to Form 10-K for the year ended December 31, 2010 filed on March 10, 2011)
|
10.36
|
|
Transition and Severance Agreement between James M. Gerlach and American Equity Investment Life Insurance Company, dated February 20, 2012 (Incorporated by reference to Exhibit 10.36 to Form 10-K for the year ended December 31, 2011 filed on March 1, 2012)
|
10.37
|
|
American Equity Investment Life Holding Company 2011 Director Stock Option Plan (Incorporated by reference to Appendix A to Schedule 14A Definitive Proxy Statement for the 2011 annual meeting of stockholders filed on April 25, 2011)
|
10.38
|
|
Second Amendment to Coinsurance Agreement effective August 1, 2001 between American Equity Investment Life Insurance Company and EquiTrust Life Insurance Company (Incorporated by reference to Exhibit 10.36 to Form 10-Q for the period ended September 30, 2011 filed on November 7, 2011)
|
10.39
|
|
Second Amendment to Coinsurance Agreement effective January 1, 2004 between American Equity Investment Life Insurance Company and EquiTrust Life Insurance Company (Incorporated by reference to Exhibit 10.37 to Form 10-Q for the period ended September 30, 2011 filed on November 7, 2011)
|
10.40
|
|
2012 Independent Insurance Agent Stock Option Plan (Incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-3 filed on August 23, 2012)
|
10.41
|
|
Form of Change in Control Agreement between American Equity Investment Life Holding Company and each of Ted M. Johnson, Ronald J. Grensteiner and William R. Kunkel (Incorporated by reference to Exhibit 10.1 to Form 8-K filed on December 13, 2012)
|
10.42
|
|
Form of Change in Control Agreement between American Equity Investment Life Holding Company and Jeffrey D. Lorenzen
|
Exhibit No.
|
|
Description
|
12.1
|
|
Ratio of Earnings to Fixed Charges
|
21.2
|
|
Subsidiaries of American Equity Investment Life Holding Company
|
23.1
|
|
Consent of Independent Registered Public Accounting Firm
|
31.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
31.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
32.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
1.
|
Section 4.A.(ii) shall be revised to replace the word “pro-rationed” with “pro-rated” and to add the following clause at the end: “, payable at the same time bonuses are paid to other executives at the Company”.
|
2.
|
Section 4.A.(iv) shall be revised to add the following clause at the end: “, payable within five days following the Date of Termination”.
|
3.
|
The following section shall be added as a new Section 21 of the CIC Agreement and numbering with respect to the subsequent section shall be adjusted accordingly:
|
4.
|
Except as modified by this Amendment, the CIC Agreement is hereby confirmed in all respects.
|
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
|
|
EXECUTIVE
|
|
|
|
|
|
|
By:
|
|
By:
|
|
|
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2012
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||
Consolidated income before income taxes
|
$
|
132,914
|
|
|
$
|
132,914
|
|
|
$
|
65,266
|
|
|
$
|
86,164
|
|
|
$
|
77,053
|
|
Interest sensitive and index product benefits and amortization of deferred sales inducements
|
905,244
|
|
|
847,538
|
|
|
793,091
|
|
|
387,882
|
|
|
235,836
|
|
|||||
Interest expense on notes payable
|
28,479
|
|
|
31,633
|
|
|
22,125
|
|
|
14,853
|
|
|
19,773
|
|
|||||
Interest expense on subordinated debentures
|
13,458
|
|
|
13,977
|
|
|
14,906
|
|
|
15,819
|
|
|
19,445
|
|
|||||
Interest expense on amounts due under repurchase agreements and other interest expense
|
—
|
|
|
30
|
|
|
—
|
|
|
534
|
|
|
8,207
|
|
|||||
Interest portion of rental expense
|
697
|
|
|
665
|
|
|
648
|
|
|
570
|
|
|
459
|
|
|||||
Consolidated earnings
|
$
|
1,080,792
|
|
|
$
|
1,026,757
|
|
|
$
|
896,036
|
|
|
$
|
505,822
|
|
|
$
|
360,773
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest sensitive and index product benefits and amortization of deferred sales inducements
|
$
|
905,244
|
|
|
$
|
847,538
|
|
|
$
|
793,091
|
|
|
$
|
387,882
|
|
|
$
|
235,836
|
|
Interest expense on notes payable
|
28,479
|
|
|
31,633
|
|
|
22,125
|
|
|
14,853
|
|
|
19,773
|
|
|||||
Interest expense on subordinated debentures
|
13,458
|
|
|
13,977
|
|
|
14,906
|
|
|
15,819
|
|
|
19,445
|
|
|||||
Interest expense on amounts due under repurchase agreements and other interest expense
|
—
|
|
|
30
|
|
|
—
|
|
|
534
|
|
|
8,207
|
|
|||||
Interest portion of rental expense
|
697
|
|
|
665
|
|
|
648
|
|
|
570
|
|
|
459
|
|
|||||
Combined fixed charges
|
$
|
947,878
|
|
|
$
|
893,843
|
|
|
$
|
830,770
|
|
|
$
|
419,658
|
|
|
$
|
283,720
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Ratio of consolidated earnings to fixed charges
|
1.1
|
|
|
1.1
|
|
|
1.1
|
|
|
1.2
|
|
|
1.3
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Ratio of consolidated earnings to fixed charges, both excluding interest sensitive and index product benefits and amortization of deferred sales inducements
|
4.1
|
|
|
3.9
|
|
|
2.7
|
|
|
3.7
|
|
|
2.6
|
|
|
State of Incorporation
|
Insurance Subsidiaries:
|
|
American Equity Investment Life Insurance Company
|
Iowa
|
American Equity Investment Life Insurance Company of New York
|
New York
|
Eagle Life Insurance Company
|
Iowa
|
Noninsurance Subsidiaries:
|
|
American Equity Investment Service Company
|
Iowa
|
American Equity Properties, L.C.
|
Iowa
|
American Equity Capital, Inc.
|
Iowa
|
American Equity Capital Trust I
|
Iowa
|
American Equity Capital Trust II
|
Iowa
|
American Equity Capital Trust III
|
Iowa
|
American Equity Capital Trust IV
|
Iowa
|
American Equity Capital Trust V
|
Iowa
|
American Equity Capital Trust VI
|
Iowa
|
American Equity Capital Trust VII
|
Iowa
|
American Equity Capital Trust VIII
|
Iowa
|
American Equity Capital Trust IX
|
Iowa
|
American Equity Capital Trust X
|
Iowa
|
American Equity Capital Trust XI
|
Iowa
|
American Equity Capital Trust XII
|
Iowa
|
AERL, L.C.
|
Iowa
|
American Equity Advisors, Inc.
|
Iowa
|
1.
|
I have reviewed this annual report on Form 10-K of American Equity Investment Life Holding Company;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
March 7, 2013
|
By:
|
|
/s/ JOHN M. MATOVINA
|
|
|
|
|
John M. Matovina, Chief Executive Officer and President
(Principal Executive Officer)
|
1.
|
I have reviewed this annual report on Form 10-K of American Equity Investment Life Holding Company;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
March 7, 2013
|
By:
|
|
/s/ TED M. JOHNSON
|
|
|
|
|
Ted M. Johnson, Chief Financial Officer and Treasurer
(Principal Financial Officer)
|
1.
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934;
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
March 7, 2013
|
By:
|
|
/s/ JOHN M. MATOVINA
|
|
|
|
|
John M. Matovina, Chief Executive Officer and President
(Principal Executive Officer)
|
1.
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934;
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
March 7, 2013
|
By:
|
|
/s/ TED M. JOHNSON
|
|
|
|
|
Ted M. Johnson, Chief Financial Officer and Treasurer
(Principal Financial Officer)
|