AEL Reports Additional "Other Than Temporary Impairments" for the Fourth Quarter of 2008.WEST DES MOINES, Iowa West Des Moines is a city in Polk, Dallas, and Warren counties in the U.S. state of Iowa. As of the 2000 census, the city population was 46,403; a special census taken in the spring of 2005 counted 51,744 residents. -- American Equity Investment Life Holding Company (NYSE NYSE See: New York Stock Exchange :AEL AEL Association Electronique Libre AEL Appalachia Educational Laboratory AEL Arabisch Europese Liga AEL Agence de l'Energie AEL Arab European League AEL Accessible Emission Limit AEL Acceptable Exposure Limit AEL Arquivo Edgard Leuenroth ), a leading underwriter of index and fixed rate annuities, announced that it recorded additional "other than temporary impairments" on certain residential mortgage backed securities ("RMBS RMBS Residential Mortgage-Backed Securities RMBS Rambus, Inc. (NASDAQ stock symbol) RMBS Russian Mortgage-Backed Securities ") for the fourth quarter of 2008. AEL previously reported the full mark-to-market decline in fair value (net of applicable offsets) of all available-for-sale securities, including these RMBS, in its preliminary balance sheet for December 31, 2008 as published February 25, 2009. The recognition of additional "other than temporary impairments" requires a reassignment of such declines in fair value (net of applicable offsets) from "accumulated other comprehensive loss" as reported in the preliminary balance sheet to "realized losses on investments" reported in the statement of operations See Income statement. for the fourth quarter of 2008. The additional other than temporary impairments recognized involve only RMBS and no impairments were recorded on any of the company's commercial mortgages. All such RMBS are performing in accordance with their terms with no defaults in any payments of principal and interest. Further, no defaults are expected in 2009 based on all facts and circumstances known to the company at this time. As discussed below, the requirement to record other than temporary impairment losses on these securities is based on an interpretation of the weight to be given to certain credit rating agency A credit rating agency (CRA) is a company that assigns credit ratings for issuers of certain types of debt obligations. In most cases, these issuers are companies, cities, non-profit organizations, or national governments issuing debt-like securities that can be traded on a data in making other than temporary impairment assessments under U.S. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "). As a result of the recognition of additional other than temporary impairment losses on investments, net income for the year ended December 31, 2008 was $20.8 million, compared to 2007 net income of $29.0 million. Changes in the final results for the fourth quarter of 2008 from the preliminary results previously reported are1: * Realized losses on investments increased to $95.7 million from $22.8 million with a corresponding decrease in net income (net of applicable offsets) from $4.2 million to a net loss of $22.1 million. * Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. increased to $16.1 million from $15.6 million. Operating income per diluted common share was unchanged at $0.29. * Book value per common share Book Value Per Common Share A measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly. Formula: outstanding decreased to $9.37 from $9.53. * NAIC NAIC See National Association of Investors Corporation (NAIC). risked-based capital ratio determined under statutory accounting principles The Statutory Accounting Principles are a set of accounting rules for insurance companies set forth by the National Association of Insurance Commissioners. They are used to prepare the statutory financial statements of insurance companies. remains unchanged at 347% as of December 31, 2008. With respect to RMBS, the determination under GAAP that an "other than temporary impairment" exists requires a comprehensive analysis of future projections of the performance of the collateral pools comprising the securities, including projected levels and severity of residential mortgage defaults within the pool. Each of the RMBS for which AEL recognized an other than temporary impairment in the fourth quarter of 2008 is in the highest tranche of the applicable mortgage collateral pool. Accordingly, subordinate tranches will absorb collateral losses within these pools to the full extent of such subordination. Under some scenarios, future losses may erode all subordination and result in a loss to the highest tranche. If such a projected loss is deemed to be "probable", the company is required to record an other than temporary impairment based on the fair value of the security regardless of whether the degree of such projected loss is small in relation to the decline in fair value of the security. The fair values of many RMBS and other securities have been severely impacted by the disorderly, illiquid Illiquid An asset or security that cannot be converted into cash very quickly (or near prevailing market prices). Notes: A house is a good example of an illiquid asset. See also: Cash, Liquidity Illiquid In the context of finance. and irrational market conditions arising from the global financial crisis. A future, contingent loss for AEL's RMBS was considered to be "probable" under interpretations of GAAP for assessing other than temporary impairments if there was published credit rating agency data which would support this conclusion. The determination of "probability" based on negative credit rating agency indications was required by GAAP even where such information was (i) inconsistent with the actual ratings assigned by the credit rating agencies Credit Rating Agencies Firms that compile information on and issue public credit ratings for a large number of companies. to the securities; (ii) inconsistent with other data published by the credit rating agency with respect to the securities; (iii) inconsistent with management's own comprehensive analysis of future projections of the RMBS collateral performance; (iv) not based on the most recent evidence regarding the actual levels of defaults and severity of defaults experienced by the specific RMBS collateral pool; and/or (v) based on information that had no transparency because the credit rating agency did not publish its underlying assumptions and data. AEL's management believes that the foregoing GAAP interpretation for "other than temporary impairment" assessments and the weight required by GAAP to be given certain credit rating agency data is unwarranted and unreasonable. As a result, AEL will continue to seek additional formal guidance regarding the interpretation of GAAP for other than temporary impairment assessments and/or seek to bring about change in such interpretation. CAUTION REGARDING FORWARD-LOOKING STATEMENTS This press release contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Forward-looking statements relate to future operations, strategies, financial results or other developments, and are subject to assumptions, risks and uncertainties. Statements such as "guidance", "expect", "anticipate", "believe", "goal", "objective", "target", "may", "should", "estimate", "projects" or similar words as well as specific projections of future results qualify as forward-looking statements. Factors that may cause our actual results to differ materially from those contemplated by these forward looking statements can be found in the company's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date the statement was made and the company undertakes no obligation to update such forward-looking statements. There can be no assurance that other factors not currently anticipated by the company will not materially and adversely affect our results of operations. Investors are cautioned not to place undue reliance on any forward-looking statements made by us or on our behalf. ABOUT AMERICAN EQUITY American Equity Investment Life Holding Company, through its wholly-owned operating subsidiaries, is a full-service underwriter of fixed annuity and life insurance products, with a primary emphasis on the sale of index and fixed rate annuities. The company's headquarters are located at 5000 Westown Parkway, West Des Moines, Iowa, 50266. The mailing address of the company is: P.O. Box 71216, Des Moines, Iowa “Des Moines” redirects here. For other uses, see Des Moines (disambiguation). Des Moines (pronounced /dɪˈmɔɪn/ in English, 50325. 1 For additional information see the company's revised Financial Supplement filed with Form 8-K and its Form 10-K both filed today. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion