American Equity Investment Life Holding Company, of West Des Moines, a leading underwriter of index and fixed rate annuities, Thursday reported fourth quarter and 2012 net income. The company’s annual net income was down from $86.2 million to $57.8 million. That represents a drop per diluted common share from $1.37 to $0.89.

It reported fourth-quarter net income of $36.4 million , or $0.55  per diluted common share, compared to fourth quarter 2011 net income of $49.7 million  or $0.79  per diluted common share.

  David J. Noble , founder and Executive Chairman said in a news release: “2012 was a challenging year in a difficult interest rate environment.

“Sales for the year were just shy of $4 billion , the third best year in the company’s history, and contributed to a 13% increase in assets under management for the year. Similarly, our operating income was also the third highest in the company’s history and translated into an 11.1% return on average equity.

“Our fourth quarter sales were the highest quarterly amount in 2012 and, aided by a reduction in our effective income tax rate, fourth quarter operating income was also larger than the other three 2012 quarters. The low interest rate environment did results in calls of government agency securities that increased our cash and short-term investments substantially and caused our investment spread to narrow. However, we expect the investment spread to widen in 2013 as the cash and short-term investments are reinvested in higher yielding investments.”

Highlights for the fourth quarter of 2012 include:

  • Annuity sales (before coinsurance) for the fourth quarter of 2012 were $1.07 billion compared to third quarter 2012 annuity sales of $982 million.
  • Total invested assets grew to $27.5 billion (amortized cost basis = $25.1 billion).
  • Investment spread for the fourth quarter of 2012 was 2.59% compared to 2.62% for the third quarter of 2012.
  • Risk-based capital (RBC) ratio at December 31, 2012 remained above target at 332%.
For more information on the earnings report, click here.