2 0 0 2 A N N U A L R E P O R T
P E O P L E
S E R V I C E
F U T U R E
Synergy may be defined as individuals
working together to achieve a common
goal. The synergy among our
employees creates a unified
organization that can achieve
efficiencies greater than those of our
competitors, ultimately benefiting our
shareholders, policyholders, and
producers. By emphasizing
productivity at every level of our
operation, we will remain an efficient,
flexible leader in our industry,
operating at competitive levels with
distinctive products and services.
Recognizing that the whole is only as
great as the sum of its parts, we
encourage—and expect—all
associates to challenge themselves to
grow and reach their maximum
professional potential.
In the face of technological challenges,
The keys to our continued growth and
changing family structures and an
profitability are the shared values that
evolving social and economic
form the common link for our people.
environment, we must remain
We must run as a cohesive whole in
thoroughly responsive to the needs of
order to achieve the service levels set
our customers. Each employee is an
forth. We will continue to create key
integral component in the delivery of
marketing alliances and establish
superior personal service, and
precision marketing initiatives. We
contributes to our overall success in
intend to build the highest value for
achieving this important goal. Our
our shareholders via sound long term
excellent service record can only be
investment strategies and consistent
attributed to the knowledge,
delivery of innovative
experience, and professionalism of our
products—ultimately fulfilling our
people.
responsibility to you and positioning us
well for the future.
W E ’ R E
T H E O N E
Individual commitment to excellence and achievement is
a non-negotiable standard. By testing new ways to meet
challenges and achieve excellence, we will better serve
our shareholders, policyholders, and producers.
A M E R I C A N E Q U I T Y 1999
P E O P L E S E R V I C E F U T U R E W E ’ R E T H E O N E ! 2
A M E R I C A N E Q U I T Y I N V E S T M E N T L I F E H O L D I N G C O M P A N Y
FINANCIAL HIGHLIGHTS
As of or for the year ended December 31, (dollars in thousands, except
per share data)
2002
2001
2000
For the Year
Total revenues
Total benefits and expenses
Income before income taxes, minority interests and cumulative effect
of change in accounting principle
Net income
$
279,713
250,762
$
180,376
170,923
$
114,615
99,997
28,951
14,207
9,453
872
14,618
4,784
At Year-End
Total assets
Policy benefit reserves
Notes payable
Amounts due to related party under General Agency Commission and
Servicing Agreement
Trust preferred securities issued by subsidiary trusts
Stockholders’ equity
Stockholders’ equity excluding net unrealized investment gains and losses
on available for sale securities
$ 6,042,266
5,452,365
43,333
$ 4,392,445
3,993,945
46,667
$ 2,528,126
2,099,915
44,000
40,345
100,486
77,478
46,607
100,155
42,567
76,028
99,503
58,652
89,422
76,098
75,528
Per common share data
Earnings per common share
Earnings per common share - assuming dilution
Dividends declared per common share
$
$
0.87
0.80
0.01
$
0.05
0.05
0.01
0.29
0.26
0.01
Other Financial Data
Life subsidiaries’ total assets
Life subsidiaries’ statutory capital and surplus
Life subsidiaries’ net gains (losses) from operations before income taxes
and realized capital gains (losses)
Life subsidiaries’ statutory net income (loss)
$ 5,430,919
227,199
$ 3,949,357
177,868
$ 2,146,938
145,048
53,535
26,010
(5,675)
(17,187)
9,190
10,420
1 A M E R I C A N E Q U I T Y 2002 P E O P L E S E R V I C E F U T U R E W E ’ R E T H E O N E !
A M E R I C A N E Q U I T Y I N V E S T M E N T L I F E H O L D I N G C O M P A N Y
2002
H I G H L I G H T S
(cid:1) Exceeded $$14 mmillion iin nnet iincome
(cid:1) Surpassed $$6.0 bbillion iin aassets
(cid:1) Exceeded $$2.4 bbillion iin nnew aannuity ddeposits
(cid:1) Expanded oour aagency fforce tto oover 441,000 llicensed aagents
(cid:1) Continued tto pprovide ssuperior sservice tto aall oof oour ccustomers
(cid:1) Developed aan iinternal pprogram tto aalign oour pproduction tto pprojected
2003 ccapital rrequirements
A M E R I C A N E Q U I T Y 2002 P E O P L E S E R V I C E F U T U R E W E ’ R E T H E O N E ! 2
A M E R I C A N E Q U I T Y I N V E S T M E N T L I F E H O L D I N G C O M P A N Y
20022 0 0 2
2 0 0 2
“Our insurance operations for the year 2002
continued to produce solid and
satisfactory results.”
- D.J. Noble
TO OUR SHAREHOLDERS
In our business, the difference between winners and losers is the level of
service and integrity delivered to customers. American Equity’s quality
service and high integrity continue to strengthen and maintain our current
relationships with policyholders and agents. These solid relationships helped
develop new opportunities for us and have led us to improved retention of
business, faster growth and a more competitive position in our industry.
(cid:2)
- D.J. NOBLE
Chairman and Chief Executive Officer
In 2002, public discussions surrounding misdeeds of certain major corporations in the United States have drawn a
great deal of attention and, as a result, new regulations were proposed or adopted as part of the Sarbanes-Oxley Act.
Some of the major components included in the Sarbanes-Oxley Act are:
• Management certification of reports
• Independence of the majority of the Board of Directors
• Independence and financial experience of audit committees
• Independence of outside auditors
• Focus on insider transactions
• Full disclosure of off-balance sheet transactions
• Accelerated filings of required reports
• Maintaining effective internal and disclosure controls
We at American Equity have thoroughly examined these newly implemented regulations. I am proud to report that
the implementations of these regulations DID NOT require any major changes in American Equity’s business culture
or practices. We will remain, as we always have been, an efficient and honorable leader in our industry.
3 A M E R I C A N E Q U I T Y 2002
P E O P L E S E R V I C E F U T U R E W E ’ R E T H E O N E !
CORPORATE PLAN
statutory basis resulting
in satisfactory ratios
American Equity(cid:146)s strategic Business Plan was
compared to gross revenues and total assets. Statutory
developed on a simple principle - we will aggressively
capital and surplus for the Life Company exceeded
increase our market share, sustain operating
$227.0 million
at December
31,
2002.
efficiencies and execute sound financial investing.
While the last 12 months were a challenging period in
MARKETING CULTURE
the financial markets with a dampened view in the
marketplace towards the insurance industry, we were
successful in completing several transactions to
provide adequate capital to support the business issued
by us. We fully intend to aggressively pursue
potential capital-raising ventures during 2003. The
successful completion of a capital transaction would
result in our review and enhancement of our Business
Plan and production goals.
MARKETING DEPARTMENT
David V. Rinehart, James Jones, Carl Davis, Dave Roepsch, Kevin R. Wingert, Ronald
J. Grensteiner, James M. Gerlach.
As we reviewed and enhanced our Business Plan, we
Our 2003 marketing plan continues to focus on our
contemplated and planned a reduction in the
core (cid:147)Principles of Excellence(cid:148).
production of new annuity deposits, particularly for
(cid:149) Long term growth potential for our
the year 2003, which is consistent with our long-term
shareholders
forecast. We have entered into a reinsurance
(cid:149) Wise investment strategies
agreement that will result in American Equity(cid:146)s net
(cid:149) Sound business philosophies
asset growth either remaining level or experiencing a
(cid:149) Innovative production with outstanding
controlled annual increase of up to 10%.
value to our consumers, agents and
FINANCIALS
shareholders
(cid:149) Superior levels of service
Consolidated GAAP assets are approximately $6.0
American Equity continues its aggressive marketing
billion. GAAP income, before tax and minority
campaign, targeting existing and new National
interests, was approximately $29.0 million compared
Marketing Organizations and agents while focusing
to $9.5 million for the year 2001. The Life Company(cid:146)s
on a diversified product line. We are convinced that
assets grew to over $5.4 billion, based on statutory
our (cid:147)relationship driven(cid:148) versus (cid:147)transaction oriented(cid:148)
accounting principles. Statutory income, before
culture produces superior results. The implementation
federal income tax and excluding capital gains and
of our marketing plan will continue to require
losses, was $53.5 million. General insurance
significant efforts by us.
expenses were favorable on both a GAAP and
A M E R I C A N E Q U I T Y 2002 P E O P L E S E R V I C E F U T U R E W E (cid:146) R E T H E O N E ! 4
PRODUCT PORTFOLIO
LICENSED AGENTS
The fixed annuity marketplace is currently undergoing
Our success in recruiting and retaining a highly
dynamic changes as a result of record low interest
motivated, professional sales force represents a vital
rates and unprecedented and extended equity and bond
key to our company’s achievements. At the end of
market volatility. American Equity has prided itself
2002, American Equity had licensed approximately
on product innovation and being responsive to
41,000 agents. American Equity enjoys one of the
changes in the marketplace. We differentiate our
highest agent productivity levels in the industry. We
products by focusing on guarantees, choices and
believe this is a result of our commitment to provide
flexibility. In the immediate future, the focus will be
superior levels of services, competitive compensation
on modifications to our current portfolio of traditional
and strong product integrity.
and equity-indexed products. In regards to the next
3-5 years, our average policyholder age is expected to
be approximately 67 years. Many of these consumers
will be very wary of equity markets regardless of their
performance, or lack thereof, given the losses over the
past three years. When public interest in the equity
50,000
40,000
30,000
20,000
markets does return, we expect to use the inherent
10,000
4,487
AGENTS
41,399
33,894
21,908
17,855
10,525
flexibility in our product design to keep our products
0
competitive.
1997
1998 11999
22000 22001 22002
Year
PRODUCT APPROVALS
In 2002, our Compliance Department gained approval
STATE LICENSING
of 368 separate forms in 47 jurisdictions. The
We are licensed to conduct business in 46 states and
Compliance Department’s objective has always been
the District of Columbia.
to support the corporate Business Plan by obtaining
product approvals quickly and providing information
and methods to keep our company in line with the
regulatory environment. But not only must our
products meet regulatory standards, they must also
deliver
the profitability we expect
for our
shareholders.
5 A M E R I C A N E Q U I T Y 2002
P E O P L E S E R V I C E F U T U R E W E ’ R E T H E O N E !
PRODUCTION
between agents and the company is our “public”
Annuity deposits for 2002, before reinsurance,
website and “interactive agent” website.
exceeded $2.4 billion, matching our production in
2001. FBL Financial Group, Inc., through one of its
The public website contains financial and investor
life insurance subsidiaries, has reinsured $838 million
information, as well as general product descriptions to
of our 2002 production. I am of the firm opinion that
help educate web- visitors about our company. The
American Equity’s unique position in the marketplace
website also provides information promoting the
is causing agents to continue to seek our company as
their carrier.
n
o
i
l
l
i
M
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
PRODUCTION
$2,425
$2,435
$815
$843
$378
$142
1997
1998 11999 22000 22001 22002
Year
advantages
of
owning an annuity.
The website also
allows
individuals
to
contact
us
directly via e-mail.
We feel this helps
decrease expenses and enhances service to our
policyholders by providing 24-hour access to the
company.
During 2002, we made several crediting rate
adjustments along with adjustments to our sales costs
Our interactive agent website contains much more
to reflect current market conditions.
specific information available only by secured login to
our licensed agents. It provides commission schedules,
NATIONAL GUARD INSURANCE PROGRAM
product forms, service forms, illustration software,
One of our long-term successes is our relationships
company videos and sales brochures. Agents can also
with state National Guard Associations. American
order supplies online. By making this information
Equity remains the largest life insurance carrier for
available over the Internet, we reduce shipping,
members of the National Guard offering a program of
handling, storage and printing costs, all while providing
group term life insurance. We currently service 25
24-hour a day, 7-day a week access to this information.
state National Guard Associations. We anticipate the
addition of two major state associations in 2003.
We are currently in the process of enhancing our
TECHNOLOGY
www.american-equity.com
We consider technology to be a strategic asset shaping
the way we do business. Our most visible use of
technology to facilitate the working relationship
interactive agent website to allow access to other very
important information that will continue to improve the
agent’s ability to conduct business.
A M E R I C A N E Q U I T Y 2002 P E O P L E S E R V I C E F U T U R E W E ’ R E T H E O N E ! 6
INVESTMENT PORTFOLIO
profile that is in conformity with the Business Plan’s
profit projections.
The following table represents our fixed maturity
securities by NAIC designations and the equivalent
rating of the nationally recognized securities rating
organizations.
TOTAL CASH AND INVESTMENTS
NAIC-2
NAIC-3
NAIC-4
Mtg Loan
Cash &
Other
FIXED MATURITY SECURITIES
NAIC
Designation
1
2
3
4
5
6
Rating Agency
Equivalent
Aaa/Aa/A
Baa
Ba
B
Caa and lower
In or near default
Percent
94.3%
4.7%
0.8%
0.2%
-
-
guaranteed mortgage-backed securities at December
NAIC-1
INVESTMENT DEPARTMENT
Front Row - L to R: Angel Thomason; Joyana Pilquist; Pam Reinert; Joshua Lohmeier.
Back Row - L to R: James M. Gerlach; Alex S. Travis; Bob Kunnen; Bryan Borchert.
Approximately 80% and 69% of our total invested
assets were in United States Government and agency
fixed maturity securities including government
31, 2002 and 2001, respectively. Corporate securities
represented 7.8% at December 31, 2002, compared to
14.5% at December 31, 2001 of our total invested
assets, respectively. There are no other significant
concentrations in the portfolio by type of security or
by industry.
Press and rating agencies have been very vocal
regarding the asset quality of companies designated
In 2001, American Equity developed a commercial
as “insurance industry”. I ask you to seriously
mortgage loan program. This program has been very
remember that 99% of our fixed maturity securities
successful since its inception. At December 31, 2002,
are investment grade with over 80% of that
we held $334 million of mortgage loans. The
percentage
in
government
related
issues.
mortgage loans are diversified as to property type,
Approximately 95% of our investment purchases
geographical location and loan size.
during 2002, other than our commercial mortgage
loan program, were government agency paper, which
carried a yield allowing us to meet our Business Plan
targeted spreads. We intend to follow this part of our
Business Plan that contemplates our assets to
intentionally have very little credit risk with a yield
7 A M E R I C A N E Q U I T Y 2002 P E O P L E S E R V I C E F U T U R E W E ’ R E T H E O N E !
OUR PEOPLE
Professional, responsible, motivated...these are words that I use to describe the American Equity family. These
individuals work together to make our vision a reality.
“We encourage our people to constantly improve our products, our delivery,
our technology and, of course, our customer service. Each year, we build
on our past successes.”
We stay focused, we take care of business and we take care of our policyholders, agents and shareholders. That has
been our goal from the beginning and it will continue to be our goal in the future.
On behalf of our Board of Directors and our employees, thank you for your confidence and support.
Sincerely,
D.J. Noble
Chairman and Chief Executive Officer
“Our business philosophy is simple...Through sound financial management, prudent
investment and development of innovative products and services, we will position ourselves
as one of the leaders within the insurance and financial services industry.”
A M E R I C A N E Q U I T Y 2002 P E O P L E S E R V I C E F U T U R E W E ’ R E T H E O N E ! 8
A M E R I C A N E Q U I T Y I N V E S T M E N T L I F E H O L D I N G C O M P A N Y
THE BESTInsurance Management Team
L E A D I N G T H E W A Y
LIFE COMPANY MANAGEMENT TEAM
Front Row - L to R: Judith K. Karcher; Brent Mardis; Terry A. Reimer; Debra J. Richardson; Kevin R. Wingert; James M. Gerlach; Ronald J. Grensteiner; Chad A Padgett.
Second Row - L to R: Tami Schafroth; David Psotka; Maria Connett; Lesa Glendenning; Gay Colyn; Jamie Moher; Camille Rasmussen; Jean Burt; Joyana Pilquist; Jill Oxberger;
Nelda Lamp; Paulette Philpott; Christy Olson; Linda Bennett; Cheri White; Bev Wignall; Nia Vassilonikolidakis; Joshua Lohmeier.
Back Row - L to R: Marlys Van Manen; Lisa McQuerrey; Joe Wanzek; Pam Knight; David V. Rinehart; David Lowe; Dave Roepsch; Lloyd Hill; Alex S. Travis; Bryan Borchert;
Carl Davis; Bruce Norton; Aaron Cottrell; James P. Jones; Kevin L. Pevestorf.
*Not pictured: D.J. Noble, Harley Whitfield, Jerry Holtz, Libby Clark, Ted Johnson, Wendy L. Carlson.
“We will speak as one voice, act as one being, put one and only
one face forward for all to see. That face will be developed to
bring maximum impact and favorable response in the
marketplace.”
9 A M E R I C A N E Q U I T Y 2002
P E O P L E S E R V I C E F U T U R E W E ’ R E T H E O N E !
A M E R I C A N E Q U I T Y I N V E S T M E N T L I F E H O L D I N G C O M P A N Y
OUR PEOPLE
Deliver
THE BOARD
of Directors
H O L D I N G C O M P A N Y
“We value the ongoing leadership of our
D.J. Noble, 71, Chairman of the Board, President and Treasurer.
Over 50 years’ experience in the insurance industry.
distinguished Board of Directors, who provide
American Equity with sound counsel, personal
integrity and solid judgment drawing from
extensive experience.”
THE BOARD
of Directors
John C. Anderson, 39, Doctor of Chiropractic Medicine
James M. Gerlach, 60, Executive Vice President. Over 35 years’
financial and management experience.
Robert L. Hilton, 74, Insurance Consultant
John M. Matovina, 48, Private Investor
Ben T. Morris, 57, President, CEO and Director, Sanders Morris
Harris, Inc.
David S. Mulcahy, 50, Principal, MABSCO Capital, Inc. and
Chairman, Monarch Manufacturing Company. Over 20 years’
experience in the accounting industry.
A.J. Strickland, III, 61, Professor of Strategic Management at the
University of Alabama.
L I F E C O M P A N Y
Harley A. Whitfield, 72, Of Counsel, Whitfield & Eddy, P.L.C.
Kevin R. Wingert, 45, President of Life Company. Over 20 years’
marketing experience.
(cid:3)(cid:3) (cid:3)(cid:3)(cid:3)(cid:3)
[ L E F T T O R I G H T, F R O N T T O B A C K ]
Jack W. Schroeder, 77, Vice Chairman. Over 50 years’
experience in the insurance industry.
D. J. Noble, 71, Chairman of the Board, Chief Executive Officer.
Over 50 years’ experience in the insurance industry.
William J. Oddy, 59, Chief Executive Officer, Farm Bureau Life
Insurance Company. Over 30 years’ experience in the insurance
industry.
James M. Gerlach, 60, Executive Vice President and Chief
Marketing Officer. Over 35 years’ financial and management
experience.
Debra J. Richardson, 46, Senior Vice President and Secretary.
Over 20 years’ experience in the insurance industry.
Terry A. Reimer, 57, Executive Vice President, Treasurer and Chief
Operating Officer. Over 30 years’ accounting and management
experience.
David S. Mulcahy, 50, Principal, MABSCO Capital, Inc. and
Chairman, Monarch Manufacturing Company. Over 20 years’
experience in the accounting industry.
Kevin R. Wingert, 45, President. Over 20 years’ marketing
experience. [inset]
A M E R I C A N E Q U I T Y 2002 P E O P L E S E R V I C E F U T U R E W E ’ R E T H E O N E !
10
A M E R I C A N E Q U I T Y I N V E S T M E N T L I F E H O L D I N G C O M P A N Y
(cid:3)(cid:3) (cid:3)(cid:3)(cid:3)(cid:3)
S h a r e h o l d e r a n d G r o u p I n f o r m a t i o n
TRANSFER AGENT
American Equity welcomes your comments and interest.
For change of name or address, to replace lost stock certificates or any other questions contact:
Debra J. Richardson, Senior Vice President & Secretary
American Equity Investment Life Holding Company
5000 Westown Parkway, Suite 440
West Des Moines, Iowa 50266
(515) 457-1704 or 1-888-221-1234 ext. 1704
Cusip Numbers: 025676 10 7 Common Stock
(cid:3)(cid:3) (cid:3)(cid:3)(cid:3)(cid:3)
AMERICAN EQUITY GROUP OF COMPANIES
AA MM EE RR II CC AA NN EE QQ UU II TT YY II NN VV EE SS TT MM EE NN TT LL II FF EE HH OO LL DD II NN GG CC OO MM PP AA NN YY
AA MM EE RR II CC AA NN EE QQ UU II TT YY II NN VV EE SS TT MM EE NN TT LL II FF EE II NN SS UU RR AA NN CC EE CC OO MM PP AA NN YY
AA MM EE RR II CC AA NN EE QQ UU II TT YY II NN VV EE SS TT MM EE NN TT LL II FF EE II NN SS UU RR AA NN CC EE CC OO MM PP AA NN YY OO FF NN EE WW YY OO RR KK ,, II NN CC ..
(cid:3)(cid:3) (cid:3)(cid:3)(cid:3)(cid:3)
ADDRESS
STREET ADDRESS
5000 Westown Parkway
Suite 440
West Des Moines, Iowa 50266
INDEPENDENT AUDITORS
Ernst & Young LLP
801 Grand Avenue, Suite 3400
Des Moines, IA 50309
(515) 243-2727
PREFERRED MAILING ADDRESS
P.O. Box 71216
Des Moines, Iowa 50325
CONTACT AMERICAN EQUITY
1-888-221-1234
Fax (515) 221-9989
TELEPHONE NUMBERS
(515) 221-0002
WATS: 1-888-221-1234
FAX: (515) 221-9989
WEB SITE
www.american-equity.com
11 A M E R I C A N E Q U I T Y 2002
P E O P L E S E R V I C E F U T U R E W E ’ R E T H E O N E !
A M E R I C A N E Q U I T Y I N V E S T M E N T L I F E H O L D I N G C O M P A N Y
S h a r e h o l d e r a n d G r o u p I n f o r m a t i o n
TRANSFER AGENT
For Financial Information,
please see
December 31, 2002
Form 10-K
5000 WESTOWN PARKWAY, SUITE 440
WEST DES MOINES, IOWA 50266
(515) 221-0002
(888) 221-1234
w w w. a m e r i c a n - e q u i t y. c o m