American Equity Investment Life Holding Company (NYSE:AEL) Q2 2020 Earnings Conference Call - Final Transcript

Aug 06, 2020 • 11:00 am ET

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American Equity Investment Life Holding Company (NYSE:AEL) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Welcome to American Equity Investment Life Holding Company's Second Quarter 2020 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.

Executive
Julie LaFollette

Good morning, and welcome to American Equity Investment Life Holding Company's conference call to discuss second quarter 2020 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. Presenting on today's call are Anant Bhalla, Chief Executive Officer; Ted Johnson, Chief Financial Officer; and Jeff Lorenzen, Chief Investment Officer. During his portion of the call, Jeff Lorenzen will be referring to the financial and business facts overview slide deck available on our Investor Relations website at www.american-equity.com.

Some of the comments made during this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. 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 in our most recent 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 Anant Bhalla.

Executive
Anant Bhalla

Thank you, Julie. Good morning, everyone, and thank you for joining us this morning. While both the human cost of the COVID-19 pandemic and the associated broader macroeconomic environment remain uncertain, American Equity remains focused on its purpose of converting retail client savings into the dignity of a paycheck for life by providing secure retirement income and principal protected accumulation. We do this with general account annuity products that we bring to market through intermediaries across channels with a historically dominant position in the independent agent channel and with superior service at the lowest operating cost structure in our industry. The pandemic-induced uncertainties of 2020 make this a reset year for most industries. At American Equity, we have been focused on protecting our ways of working, starting with our employees and distribution partners and then our balance sheet. I'll cover more on that in a minute. But a strong defense will enable a renewed vigor in playing offense in the marketplace. Therefore, we are also using this time to reboot our business strategy for execution over the coming years.

To play a strong defense in the second quarter, we bolstered our balance sheet by raising an additional $300 million in preferred equity. This provides us a strong capital cushion to weather turbulence from ratings migrations in our investment portfolio. Jeff will touch on this in a bit later, but I want to note that ratings migrations and credit losses were well within the parameters we laid out on our first quarter call, negatively affecting our risk-based capital ratio by 9 points when taken together. The estimated risk-based capital ratio at