American Equity Investment Life Holding Company

Welcome to American Equity Investment Life Holding Company's first quarter 2023 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. Please go ahead.

Good morning and welcome to American Equity Investment Life Holding Company's conference call to discuss first quarter 2023 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 portions of our website. Presenting on today's call are Anat Bala, Chief Executive Officer, Jim Hamelainen, Chief Investment Officer, and Axel Andre, Chief Financial Officer. As a reminder, our financial results reflect the adoption of Accounting Standards Update 2018-12, more commonly known as Long Duration Targeted Improvements, or LDTI. Long Duration Targeted Improvement accounting guidance was adopted at the beginning of the year, and prior year results have been adjusted accordingly. 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.

ANANT BALA Thank you, Julie. Good morning and thank you all for your interest in American equity. Positive changes in the way we go to market have begun to bear fruit. In the first quarter of 2023, we had total sales of $1.4 billion, driven by a 23% sequential quarter increase in fixed index annuity sales to $964 million. At American Equity Life, FIA sales increased 16% from the fourth quarter of 2022 with solid gains in the sales of both income and accumulation products. Eagle Life sales increased 57% from the fourth quarter and 80% year over year. Periods of sustained capital markets uncertainty are a tailwind for our go-to-market strategies as lifetime income and principal protected accumulation products become more appealing for advisors and agents to position with their clients. In particular, the income story we've been telling over the past two years at both American Equity Life and Eagle Life resonates at this point in the economic cycle. In turn, this supports our reinsurance strategy. We had total income product sales of $528 million, up 12% from the fourth quarter of 2022, and 50%, 5-0 year over year, approximately 75% of which was reinsured. At American Equity Life, sales of income products were $427 million, up 12% from the fourth quarter of 2022, and 37% year over year. Eagle Life sold $100 million of select income focus, a quarterly record for us in the bank and broker-dealer channels. Backed by our new floor insurance agreement with 2603, which became effective February 8th, multi-year fixed rate annuity sales totaled $404 million between American Equity Life and Eagle Life. In the quarter, we seeded 228 million of these sales to 2603. While we seeded 100% of multi-year fixed rate annuity sales to 2603, up to $525 million annually, we do receive some fee income on account value seeded, but more importantly, it allows us to gain mind share in the bank channel that can translate into greater FIA sales. For 2023, we expect to meet or exceed our stated sales goal of $4 billion in FIA sales, while writing a meaningful amount of fixed-rate annuities at attractive cost to funds in this market. I'm pleased to share, through May 5th this quarter, total enterprise FIA sales are approximately $600 million. In investment management, we deployed another $1.3 billion in private assets at an expected return of 7.89%, bringing our total allocation of private assets to 24.2% compared to 22% at the end of the year and 15.5% at March 31st, 2022. Across sectors, we remain deliberate, focusing on underlying assets with resilient cash flows, even in a down cycle where the majority of return is delivered by underlying operating performance of the asset and not its terminal value. Additionally, we seek out private assets where there is an inherent advantage for an insurance balance sheet to own the assets to avoid competition with asset managers that use capital structures for private assets that rely on low cost leverage to justify buying lower yielding unlevered assets and or may assume multiple expansion on exit. In the current market, given the absence of low-cost public financing or securitization for managers, REITs, and private asset companies to fund real assets, American equity has an asset sourcing advantage. That is, significant tailwinds that allow us to be even more selective in making our risk selection underwriting decisions. In the first quarter, we emphasized residential mortgage loans and US middle market corporate loans and put significant dollars to work in infrastructure debt. I let Jim cover more specifics about the investment portfolio in just a few minutes. In our capital reinsurance pillar, fee generating reinsured balances increased to $10.2 billion from $9.6 billion driven by flow reinsurance on $634 million of account values, exceeding targets we outlined when we embarked on AEL 2.0 at the end of 2020. During the quarter, we executed the repurchase of 7.3 million common shares for $253 million, which includes $160 million of the $200 million accelerated stock repurchase program, or ASR, that we announced on March 20th. We expect to complete the ASR this summer to be followed by the return of an additional $87 million to shareholders through share repurchases and common stock dividends by year-end, effectively completing our promised capital return for both 2022 and 2023. With this, we will have repurchased 14.75 million shares or 16% of our common equity share count since January 1st, 2022. Including common stock dividends paid in the fourth quarter of 2021 and 2022, we will have returned $749 million or three quarters of a billion dollars to shareholders in excess of dilution from Brookfield Equity Branch 2 offerings That represents 27.4% of our market capitalization as of September 30th, 2021. Before I turn it over to Jim, I would like to say how pleased I am with the quarter's results. We reported operating earnings per share of $1.47 per share, including one notable item of 11 cents, despite a negative true up on our tax rate and some quarterly volatility in the returns on our mark-to-market investments. We increased investment spread by 12 basis points to 2.67% up from 2.54% in the fourth quarter of last year, demonstrating that AEL 2.0 can deliver top quartile investment returns for an insurance balance sheet. I'll now turn it over to Jim to talk about the investment portfolio results and resilience. Jim?