American Equity Investment Life Holding Company

Welcome to American Equity Investment Lifeholding Company's first quarter 2022 conference call. At this time, for opening remarks and introductions, I would like to turn the call over to Julie Heidemann, Coordinator of Investor Relations. Ma'am, please go ahead.

Thank you. Good morning and welcome to American Equity Investment Lifeholding Company's conference call to discuss first quarter 2022 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 Nat Bala, Chief Executive Officer, and Axel Andre, Chief Financial Officer. Some of our comments will contain forward-looking statements which refer or relate to future results, many of which we have identified in our earnings release. Our actual results could significantly differ due to many risks, including the risk factors in our SEC filings. An audio replay will be made available on our website shortly after today's call. It is now my pleasure to introduce Anat Bala.

Thanks, Julie. Good morning and welcome to American Equity Investment Life Holding Company's conference call to discuss first quarter 2022 earnings. Our earnings release and financial supplement can be found on our website. Non-GAAP financial measures that Julie mentioned that we're going to be covering may have some forward-looking statements that Julie covered. So with that behind us, let's get into really talking about has how we think about the quarter, and the go-forward results. As I completed my two-year anniversary as CEO this past quarter, I'm pleased to see that we have achieved three core strategic outcomes. First, we've executed on all the critical building blocks that will unlock shareholder value from the AEL 2.0 business model across the strategy pillars we outlined, specifically go-to-market, investment management, and capital structure. Over the next eight to 12 quarters, we expect to complete our scaling up in private assets and bringing in third-party capital to realize the full potential of migrating to our capital-efficient business model that delivers a sustained superior ROE for our shareholders. Second, we delivered meaningful shareholder value creation, most notably in terms of more than doubling our market cap between March 31st, 2020 and March 31st, 2022. Additionally, there is growing conviction among most investors in valuing American equity based on a sum of parts metric that includes our investment spread earnings powered by private assets or our traditional ROE business and the fee generating capital light ROE business model. On the spread earning side, We continue to scale in private assets towards our overall goal of 30 to 40 percent asset allocation by increasing our allocation to 15.4 percent at the end of the quarter compared to 14.7 percent at the end of the last quarter. Third, we have strong affirmation from key business partner stakeholders in our industry value chain that being part of the new American equity ecosystem is a win-win formula. This should position AEL as a platform company that additional firms will want to join to accelerate their own business growth. This is visible in the multiple asset management partnerships we have entered into over the past two years. These partnerships may provide AEL shareholders economic upside from the asset managers growing non-AEL assets under management in addition to investment yield benefits from private assets. These should deliver hard-to-source private asset strategies for AEL's own balance sheet and for our reinsurance vehicles, thereby providing sustained, superior, risk-adjusted returns compared to public fixed-income securities. More specifically, Asset management partnerships we've entered into over the last two years cover sectors ranging from middle market credit with Adam Street Partners, lending to software and technology companies with recurring revenues with Monroe Capital, residential single-family real estate with Pretium, including co-owning asset origination and servicing platform companies, a new multifamily real estate investing joint venture with a leading player, and infrastructure assets and origination platforms with I2 Capital. Additionally, we are making progress with equity investors in reframing the general account annuity industry as a levered fund-to-fund business that can earn a more sustained double-digit return with a 30% to 40% allocation to private asset strategies with an overall asset leverage of 12 to 15 times. As we earn 100 to 150 basis points of spread over the cost of funds on these assets, those earnings will get split between AEL ROA business fee earnings and reinsurance sidecar equity investor returns. Looking forward, AEL over the next eight to 12 quarters will execute on the three core metrics we outlined in the deck in our last earnings call. specifically scaling our liability origination, private asset sourcing, and bringing in third-party capital for reinsurance vehicles. In parallel, to become the platform company we envision in both the insurance and asset management spaces, we are also significantly retooling the company on the inside, while prudently managing our expenses and continuing to return capital to shareholders. This is the foundational capability which, over the next few years, will meaningfully upgrade the company across every dimension of what we do. This will entail changing the systems and processes across our go-to-market and customer service areas, as well as core functional areas like finance, with a new general ledger or technology with a migration from traditional mainframes to the cloud to just list two examples. Legacy AEL 1.0 was ready for some upgrades even before embarking on AEL 2.0. And now that we are well on the way of scaling AEL 2.0, we are focusing some of our energy and resources on rebuilding the core of the company so that it can grow to multiples of its current scope and scale in the long term. On the people front, AAL has been hiring talent across the country with some focus on our hub locations in West Des Moines, Charlotte, and New York City. In order to attract and retain top talent, AAL has modified its compensation plans to be in line with the industry migrating all management-level employees to an annual cash bonus plan aligned with shareholder value realization metrics that drive a performance culture. Even though the macro environment is cloudier now than even at the start of the pandemic, we feel very good about AEL's robust balance sheet position. We remain committed to our capital return plans for 2022. Year to date through April 30th, we have repurchased $253 million of stock at an average price of $39.89. And we expect to repurchase in total approximately $700 million of stock for the full year, meeting our promised goal of capital return and fully offsetting dilution from issuance of shares for Brookfield Reinsurance as it grew its stake in American equity from 9.9% to just about 16% in early January. Moving on to business results in the first quarter, investment results and new business sales were in line with expectations we set out on our last earnings call. First quarter sales were $902 million, of which 98% or $883 million, were in fixed index annuities. This is in line with the company's focus strategy for 2022 sales. Compared to the first quarter of 2021, total company FIA sales increased 33%. FIA sales at American Equity Life increased 46%, while Eagle Life sales declined by 15%. On a sequential quarterly basis, FIA, or fixed index annuity sales, decreased 10.1% to $883 million, primarily due to lower sales in the bank and broker-dealer channel, while maintaining a leading market position in the independent marketing organization, or IMO space. As noted in our press release, we agreed with North End REIT a subsidiary of Brookfield Reinsurance, to expand the American Equity products driving the momentum of floor business under the 2021 Reinsurance Agreement to fulfill the $10 billion of capacity under that agreement. The addition of these new products, American Equity Life Estate Shield and Eagle Life Eagle Select Income Focus, will accelerate the increase in fee-like revenue streams for American equity that drive the ROA side of our business. We continue to focus our efforts on growing the income annuities business in 2022 to align with the tailwind of large unmet needs for Americans for income for life, to provide them a sustained means for realizing financial dignity, well beyond their prime earning years. Our investment management pillar is making strides. We successfully moved assets to our second partner for core fixed income investments, Corning Asset Management, for our newly formed AEL-RE Bermuda entity. Average investment yield for the quarter was 4.15%, driven by strong returns in mark-to-market assets, particularly for Pretium-related funds, and increased yield as excess cash was fully redeployed during the first quarter. We ended the quarter with 1.1% in cash in the insurance company's portfolio, with a portfolio book yield of 3.98% net. With that, I'll turn over to Axel to elaborate further and go over our financial results and associated drivers.