American Equity Investment Life Holding Company

First Quarter 2021 Conference Call. At this time, for opening remarks and introductions, I would like to turn the call over to Julie LaFollette, Coordinator of Investor Relations.

Good morning, and welcome to American Equity Investment Life Holding Company's conference call to discuss First Quarter 2021 earnings. Our earnings release and financial supplement can be found on our website at www.american-equity.com. Non-GAAP financial measures discussed on today's call and reconciliations of non-GAAP financial measures to the most comparable GAAP measures can be found in those documents or elsewhere on our investor relations portion of our website. Presenting on today's call are Anat Bala, Chief Executive Officer, and Ted Johnson, Chief Financial Officer. Some of the comments made during this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Indicated by terms such as estimate, expect, intend, over time, plan, potential, should, strategy, targeting, will, would, and working towards, there are a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Factors that could cause the actual results to differ materially are discussed in detail under risk factors in our filings with the SEC. An audio replay will be made available on our website shortly after today's call. It is now my pleasure to introduce Anat Bala.

Thank you, Julie. Good morning, and thank you all for your interest in American equity. Let me start with strategy execution. Today, we are delighted to report record progress in the execution in one of our four strategy pillars. Specifically, this pertains to our go-to-market area, which focuses on how we raise funding through general account annuity products sold to close to 700,000 retail clients. The AEL 2.0 business model, virtuous flywheel of success, starts with what has historically been an industry-leading, at-scale annuity funding origination platform. Over the past few years, this funding origination platform started to slow down in terms of growth in our core independent marketing organization channel. And we had limited success in penetrating the bank channel through our Eagle Life subsidiary. one of the focus areas in my first year as CEO was to revive origination capability and refresh how we go to market. This is critical for AEL to have a strategy flywheel that can spin faster with superior execution for shareholder value realization. It enables AEL to continue to be a growing franchise that originates long-term attractive funding for asset investing. We feel good about some of the retooling we have done in the go-to-market part of our business since last summer and continue to move forward to become a leading franchise in the general account annuity business in both IMO and and bank and broker-dealer distribution. This strength in go-to-market plus adding in access at scale to differentiated investment management capabilities over time as the second strategy pillar of the flywheel should enable American equity to be much more capital-light going forward. This capital-light outcome is enabled by the third strategy pillar, which is effective utilization of reinsurance to blend using both our own shareholder capital today with third-party capital through sidecar reinsurance vehicles to fund future growth of origination. We are working in 2021 to execute our previously announced reinsurance partnerships with Brookfield and Vardiyagam as they start to demonstrate the flywheel in motion. And we are in the process of building our own reinsurance platform in 2021 to further speed up the flywheel in future years with AEL directly accessing third-party capital, including potentially through sidecar-like vehicles. I expect to share more on the execution of our reinsurance and asset management efforts in the second and third quarter earnings calls, while my focus today will be on the go-to-market pillar. As I communicated on our last earnings conference call, 2021 will be a transitionary year for AEL's financial results as we migrate towards this new AEL 2.0 business model. We are migrating a fairly large plus billion dollar balance sheet from a legacy core fixed income strategy with relatively higher asset leverage to a new asset allocation approach encompassing lower asset leverage, capital structure optimization through reinsurance and third-party capital, and utilization of alpha assets to both improve sustainability of investment results in a low interest rate environment and delivers superior loss-adjusted net yield over time. The scaling of alpha assets is expected to be a multi-year journey with a couple of billion dollars of alpha assets added to our books each year. Like any strategy migration, there are short-term impacts for greater long-term gain. For AEL, This will manifest itself in running higher cash balances, somewhat accentuated by near-perfect timing of de-risking existing assets in the fourth quarter of 2020, as we pursue the closing of the Brookfield and Vardy Agam reinsurance transactions. We expect 2021 financial results to bear a significant amount of the transitionary effect of our fundamental strategy shift for long-term unlock for both our shareholders and policyholders. This value unlock is what we are vigilantly focused on. Therefore, we expect 2022 to be the first full year for investors to start to see the incremental financial benefits from AEL's new business model. In a few minutes, Ted will provide more details on our financial results and how this migration affected operating results. Getting to execution in our go-to-market pillar, in the first quarter, we recorded all-time record sales of $2.4 billion, up 32% from the fourth quarter of 2020 and 245% year-over-year. first quarter sales topped the previous quarterly record of $2.1 billion set in the fourth quarter of 2015, which we believe is an early indication of the potential from AEL's go-to-market franchise. We are targeting between $5 to $6 billion of sales for the total company this year, and we are well on our way. Although a majority of first quarter sales were in our multi-year fixed annuity products, we expect to focus our efforts for the rest of the year on the fixed index annuity product line, especially given our recent product refreshes in that area. At American Equity Life, quarterly sales of $1.3 billion were the highest level since the fourth quarter of 2015. Sales increased 46% sequentially and 122% compared to the first quarter of 2020. In February, we reintroduced a refreshed Acid Shield product that has quickly gained momentum, leading to a sequential 13% increase in accumulation deposits after just the first month of sales. The refreshed Acid Shield features two new proprietary indices, the Credit Suisse Tech Edge Index, and the Societe Generale Sentiment Index. We also added the existing Bank of America Destinations Index to the Refresh product. We are now offering these strategies for both one- and two-year terms. We also added enhanced rate riders to AssetShield, allowing policyholders to earn a greater cap of participation rate for an optional fee. we have seen a strong initial reaction to the product refresh as sales of AssetShield more than doubled in March compared to February. In particular, the new indices have been well received as 50% of March deposits went into the new strategies added to AssetShield in February. While one month is not a trend, the outlook for fixed index annuity sales at American Equity Life is much stronger and even the pre-pandemic levels in early 2021. In essence, momentum is on our side. Total sales at Eagle Life of $1.1 billion represented a 19% increase versus the fourth quarter of 2020 and a tenfold increase compared to the year-ago quarter. Fixed index annuity sales were up 40%, both sequentially and compared to a year ago. our overall product strategy resulted in positive benefits for both FIA sales and recruiting. Over the last six months, 1,400 representatives wrote their first piece of business with Eagle Life, increasing the number of current active bank and broker dealer advisors that have sold Eagle Life products by 36%. FIA sales at Eagle Life trended higher throughout the first quarter with solid growth in both February and March. On April 7th, we introduced our new Eagle Select Income Focus product, which will better address the growing demand for guaranteed lifetime income product in the bank and broker-dealer space. Eagle Life has recently been approved by PNC Bank on a combined entity basis. We have been at DPPVA prior to its merger with PNC. As we indicated on our fourth quarter 2020 earnings call, our plan has been to re-engage with distribution with a simpler multi-year fixed rate annuity product during COVID-19 and now pivot to driving growth through a revamped fixed index annuity product portfolio. We plan to continue to introduce innovative new products as we move through the AES 2.0 transformation, which will help us compete effectively, and grow our share of the annuity market. As the financial planning needs of Americans evolve, American equity is focused on providing our clients the dignity of a paycheck for life. I believe our commitment to this core mission statement will become recognized and appreciated in the market over time. This will help grow AEL in both channels and open up other market access opportunities for us in the future. Now turning to financial results. For the first quarter of 2021, we reported non-GAAP operating income of $41 million, or 43 cents per diluted common share. As expected, the first quarter results reflected many of the transitionary effects I mentioned earlier, in particular the effect of cash in the portfolio in excess of the target range. and the level of operating expenses. Now, I'll turn the call over to Ted to give more detailed analysis on a first quarter financial results.