American Equity Investment Life pany(AEL) - 2021 Q4 - Annual Report

Distribution and Marketing - American Equity Life has relationships with 50 national marketing organizations, through which nearly 25,800 independent agents are under contract[37] - Agents contracted through two national marketing organizations accounted for approximately 25% of the annuity deposits and insurance premiums collected during 2021[38] - The states with the largest share of direct premium collected during 2021 were Florida (9.3%), Texas (7.5%), Ohio (6.2%), Pennsylvania (5.5%), and New Jersey (4.8%)[38] - Eagle Life has 84 broker-dealer/firm selling agreements, through which nearly 10,700 representatives are appointed[39] Reinsurance Agreements - American Equity Life has three coinsurance agreements with Athene Life Re Ltd., ceding 20% to 80% of certain annuity products issued between 2009 and 2014[50] - Effective July 1, 2021, American Equity Life entered into a reinsurance agreement with North End Re, ceding 70% of certain in-force fixed indexed annuity product liabilities[52] - The annual ceding commission from the North End Re reinsurance treaty is equal to 49 basis points for existing liabilities and 140 basis points for new sales[53] - American Equity Life follows the industry practice of reinsuring a portion of its annuity risks with third-party reinsurers to manage regulatory capital and risk[49] - American Equity Life has three coinsurance agreements with Athene, ceding 20% to 80% of various annuities issued between 2009 and 2016, with no new business ceded since January 1, 2021[50] - The company has two coinsurance agreements with EquiTrust, covering 70% to 20% of certain fixed index and fixed rate annuities issued from 2001 to 2004, with EquiTrust rated "B++" (Good) by A.M. Best[51] - Under the North End Re agreement, American Equity Life will receive an annual ceding commission of 49 basis points and a management fee of 30 basis points for the initial cash surrender value of liabilities ceded[52] - The company is ceding 75% of certain fixed index annuities issued after the North End Re agreement, with an annual ceding commission of 140 basis points for subsequent sales[53] Financial Strength and Capital - American Equity Life's financial strength ratings include an "A-" from A.M. Best and S&P, both with a stable outlook[43] - The company remains liable to policyholders for ceded liabilities should reinsurers fail to meet their obligations[54] - The 2019 Hannover Agreement was recaptured effective October 1, 2021, impacting the company's statutory surplus[55] - American Equity Life can distribute up to $407.9 million as dividends without prior approval from the Iowa Insurance Commissioner for 2022[63] - As of December 31, 2021, American Equity Life had a statutory earned surplus of $2.4 billion[63] - The ratio of total adjusted capital to the highest level at which regulatory action might be initiated was 400% as of December 31, 2021[67] - The company maintains a risk-based capital ratio of 400% as of December 31, 2021, indicating strong capital adequacy[67] - American Equity Life's statutory earned surplus was $2.4 billion as of December 31, 2021, allowing for dividend distributions of up to $407.9 million without prior approval[63] Regulatory Compliance - The Financial Accounting Standards Board's revised guidance on long-duration insurance contracts will be effective on January 1, 2023, with a transition date of January 1, 2021[72] - The company is subject to various state and federal regulations regarding privacy and cybersecurity, including the California Consumer Privacy Act[73] - The National Association of Insurance Commissioners' risk-based capital requirements serve as an early warning tool for regulators[66] - The company must analyze statutory reserves adequacy annually, with opinions submitted by qualified actuaries[68] - The DOL's new fiduciary regulation effective February 16, 2021, broadens the circumstances under which sales representatives could be considered fiduciaries under ERISA[76] - The company is adapting its business practices in response to evolving regulatory requirements, particularly regarding investment advice and fiduciary duties[76] Employee and Workforce Management - As of December 31, 2021, American Equity employed approximately 800 full-time team members, with less than 100 temporary or part-time workers[85] - Over 85% of employees chose coverage through the company's medical plan, with the company paying an average of 84% of participating employees' monthly medical premiums in 2021[89] - The company matches 100% of team member contributions to the 401(k) plan up to 3% of the employee's total eligible compensation and matches 50% of contributions up to the next 2%[90] - In 2021, over 70% of team members responded to a cultural advantage index survey, which helped identify areas for cultural improvement[87] - The company engaged over 90% of its workforce remotely during 2021 due to the COVID-19 pandemic, implementing safety protocols and offering free on-site vaccination[88] - The company has a long-standing Employee Stock Ownership Plan (ESOP) with semi-annual discretionary contributions for all employees after a minimum of six months of service[91] Community Engagement - The company supports community initiatives, sponsoring various awards and scholarships, and encouraging team members to volunteer in community-building efforts[93] Impact of COVID-19 - The COVID-19 pandemic has significantly disrupted distribution channels and may continue to affect product demand and investment portfolios[80]