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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of
1934
Date of Report (Date of earliest event reported): October 8,
2021
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
(Exact name of registrant as specified in its charter)
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Iowa |
001-31911 |
42-1447959 |
(State or other jurisdiction
of incorporation) |
(Commission File Number) |
(IRS Employer
Identification No.) |
6000 Westown Parkway
West Des Moines, IA 50266
(Address of principal executive offices and zip code)
(515) 221-0002
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last
report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
☐
Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Common stock, par value $1 |
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AEL |
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New York Stock Exchange |
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Depositary Shares, each representing a 1/1,000th interest in a
share of 5.95% Fixed-Rate Reset Non-Cumulative Preferred Stock,
Series A |
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AELPRA |
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New York Stock Exchange |
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Depositary Shares, each representing a 1/1,000th interest in a
share of 6.625% Fixed-Rate Reset Non-Cumulative Preferred Stock,
Series B |
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AELPRB |
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New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of
1933
(§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange
Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
☐
Item 8.01 Other Events.
American Equity Investment Life Holding Company (“American Equity”)
continues to execute its strategic transformation into a hybrid,
diversified financial services firm with a balanced mix of both
traditional investment spread business backed by its own
risk-bearing equity capital, coupled with growing its base of
fee-like earnings by ceding liabilities to reinsurance vehicles
with risk-bearing equity capital provided by third party, permanent
capital partners. The latter is part of American Equity’s building
out a return-on-assets business model which is a capital-efficient
way to fuel future growth.
On October 8, 2021, an American Equity affiliate (“American Equity
Life”) closed on a reinsurance transaction with a protected cell of
North End Re (Cayman) SPC (“North End Re”), a wholly owned
subsidiary of Brookfield Asset Management Reinsurance Partners Ltd.
(“Brookfield Reinsurance”) (NYSE, TSX: BAMR). The reinsurance
transaction is effective July 1, 2021.
American Equity Life will cede approximately $4.0 billion of
statutory liabilities, representing 100% of in-force IncomeShield
annuities as of the effective date. As part of the reinsurance
transaction, American Equity Life will transfer cash and
equivalents of $3.8 billion, which is equal to the cash surrender
value of the ceded liabilities as of the effective date. American
Equity Life and its affiliates will receive an annual recurring fee
of 79 basis points, comprised of both a ceding commission of 49
basis points and an asset liability management fee of 30 basis
points, each fixed for all future years and calculated based on the
initial ceded cash surrender value of statutory liabilities. These
annually-recurring fees will be fixed and are
contractually-guaranteed for six years. The additional and final
seventh year payment is contingent on certain future performance
obligations by both parties. American Equity Life will also receive
ongoing expense reimbursement on each policy for the entirety of
the policy duration.
Under the flow reinsurance terms, American Equity Life will also
cede 75% of its future IncomeShield sales or other mutually agreed
products for a maximum of $6.0 billion of statutory liabilities. On
future products with specifications similar to those of
IncomeShield being sold as of the effective date of the
transaction, American Equity Life and its affiliates will receive
an annual recurring fee of 170 basis points, comprised of both a
ceding commission of 140 basis points and an asset liability
management fee of 30 basis points, each fixed for all future years
and calculated based upon the initial ceded cash surrender value of
statutory liabilities. These annually recurring fees will be fixed
and are contractually guaranteed for six years. The additional and
final seventh year payment is contingent on certain performance
obligations for both parties. Additionally, American Equity Life
will receive some acquisition cost reimbursement upfront and an
ongoing, annual expense reimbursement on each policy for the
entirety of the policy duration.
A portion of the liabilities will be ceded on a funds withheld
under a modified coinsurance basis, and the remainder of the
liabilities will be ceded on a co-insurance basis with assets held
in a market value trust. Additionally, the treaty will be
capitalized with over-collateralization requirements, including
management of the required capital to support the reinsured
liabilities based on risk-based capital requirements. As part of
the ongoing monitoring of the reinsurance agreement, Brookfield
Reinsurance will have certain disclosure obligations to American
Equity.
Under the terms of the agreement, American Equity Life has
mutually-agreed upon recapture rights upon the occurrence of
certain events. North End Re may terminate the reinsurance if
American Equity fails to make required payments of premium.
Additionally, either party may terminate the transaction solely
with respect to new business, if the other party is not in material
compliance with its obligations under certain of the transaction
documents (following notice and a cure period), or upon the earlier
of (a) American Equity Life’s cession of $6.0 billion of statutory
liabilities of IncomeShield or other agreed upon products and (b) 6
years from the effective date of the reinsurance
agreement.
The transaction exceeds American Equity’s previous profitability
expectations. American Equity expects it will produce recurring,
multi-year fee-like cash income of 97 basis points per annum on a
weighted average basis for first $5.0 billion of ceded business,
compared to its prior estimate of 90 basis points per
annum.
Separate from the above transaction, Brookfield Asset Management
(including its affiliates, “Brookfield”) previously disclosed on
June 28, 2021 an aggregate approximate 9.5% equity interest in
American Equity. Brookfield has an existing agreement to purchase
additional shares of American Equity’s common stock for up to a
total equity interest of 19.9% (and not less than a 15% equity
interest), subject to receipt of required regulatory approvals and
satisfaction of other customary closing conditions.
The forward-looking statements in this disclosure, such as expects,
estimate, future, into, growing, may, transformation, and will, are
based on assumptions and expectations that involve risks and
uncertainties, including the "Risk Factors" American Equity
describes in its U.S. Securities and Exchange Commission filings.
American Equity's future results could differ, and it has no
obligation to correct or update any of these
statements.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly
authorized.
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AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY |
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Date: October 12, 2021 |
By: |
/s/ Phyllis Zanghi |
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Phyllis Zanghi |
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Executive Vice President and Chief Legal Officer |
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