American Equity Investment Life Holding Company (NYSE: AEL), a leading underwriter of fixed rate and index annuities, today reported 2009 first quarter operating income¹ of $23.3 million, or $0.42 per diluted common share, an increase of 38% over adjusted² 2008 first quarter operating income of $16.9 million, or $0.29 per diluted common share. Financial highlights include:

• Annuity sales increased 27% to $652.8 million for the first quarter of 2009 compared to first quarter 2008 annuity sales of $514.6 million.
• Net investment income increased 13% to $220.7 million for the first quarter of 2009 compared to first quarter 2008 net investment income of $195.5 million.
• Book value per outstanding common share was $9.67 including Accumulated Other Comprehensive Loss.
• Early adoption of a new other than temporary impairment accounting standard increased retained earnings by $25.2 million as of January 1, 2009, reflecting a reduction in realized losses from “other than temporary impairments” recorded in prior periods.
• American Equity successfully introduced a new fixed index annuity product which now represents over 50% of the company’s new annuity sales.

Net income for the first quarter of 2009 was $26.5 million, compared to adjusted net income of $48.1 million for the same period in 2008. Net income for the first quarter of 2008 was impacted by the company’s adoption of SFAS No. 157, Fair Value Measurements, which resulted in a material reduction in the fair value measurement of the embedded derivative component of the company’s policy benefit reserves, and a corresponding increase in net income of $40.7 million.

STRONG DEMAND FOR FIXED ANNUITIES

The global financial crisis and low interest rates have resulted in a high level of demand for fixed index and fixed rate annuity products. American Equity, the number three all time writer of fixed index annuities, saw ascending sales during the first quarter of 2009, with the number of pending applications for new products increasing nearly three fold. This trend appears to be extending into the second quarter of 2009 with higher than average April sales, although the extent to which the trend will be sustained for the balance of 2009 is uncertain. Fixed annuities are particularly attractive in this time of financial turmoil because they offer protection from market volatility for the full value of policyholder accounts including principal and all annually credited interest.

Commented David J. Noble, Chairman: “We expect 2009 to be a year of remarkable growth in our industry. Our history of careful attention to asset quality and capital adequacy provide us with an ideal foundation for this opportunity. We will be relentless in our efforts to maintain financial strength and capital adequacy as needed to support our growth.” American Equity is exploring a variety of initiatives to increase sales capacity including an industry-leading program to restructure sales agent commission payments.

EARNINGS GROWTH FROM STEADY SPREAD MANAGEMENT

The 38% growth in operating earnings for the first quarter of 2009 compared to the same period in 2008 is a direct reflection of American Equity’s growth in invested assets, improving yields on invested assets and reduction in the cost of money on its annuity liabilities. On an amortized cost basis, invested assets grew 8% from $12.9 billion at March 31, 2008 to $14.0 billion at March 31, 2009. The aggregate yield on invested assets improved from 6.14% for the first quarter of 2008 to 6.30% for the same period in 2009, while the cost of money on annuity liabilities declined from 3.55% to 3.33%. The net result was a 15% improvement in the gross investment spread from 2.59% for the first quarter of 2008 to 2.97% for the first quarter of 2009.

Throughout 2008 and continuing into 2009 American Equity has experienced a high level of bonds called for redemption, particularly in its holdings of U.S. agency securities. Because corporate credit spreads have widened significantly during this same period, the company has been able to redeploy redemption proceeds into other assets classes, including principally high grade corporate and prime residential mortgage backed securities (“RMBS”), with improvements in overall yields and without exposure to significant additional credit risk.

The financial crisis and related ratings actions have affected the fair value of a portion of the company’s invested assets, including in particular its Alt-A RMBS and perpetual preferred securities; however, the company is well-positioned to hold such securities until valuations recover and actual economic losses experienced have been relatively minor. With respect to its commercial mortgage loans, which include over 900 individual loans with an average loan size of $2.5 million, the company has experienced no losses to date and substantially all of such loans continue to perform in accordance with their terms (foreclosure proceedings have been initiated in two cases and the company expects to recover the full amount of its principal, interest and costs in such proceedings). Further, the company has analyzed stress scenarios, including increased levels of delinquencies and defaults, which indicate that future loss exposure in such stress scenarios may be less than 10 basis points of aggregate mortgage loan values.

ACCOUNTING CHANGES

The company’s financial statements for the first quarter of 2009 include the impact of several changes in accounting under U.S. generally accepted accounting principles. These include (i) FASB Staff Position (“FSP”) No. FAS 157-4, “Determining the Fair Value When the Volume and Level of Activity for the Asset or Liability has Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4”); (ii) FSP No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-than-Temporary Impairments” (FSP FAS 115-2 and FAS 124-2); and (iii) FSP No. APB 14-1, “Accounting for Convertible Debt Instruments that May be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”).

While the adoption of FSP FAS 157-4 had no effect on the company’s balance sheet at March 31, 2009, the adoption of FSP FAS 115-2 and FAS 124-2 resulted in an increase in retained earnings of $25.2 million and an increase in the accumulated other comprehensive loss of $20.1 million as of January 1, 2009. This adjustment reflects the cumulative net effect of removing from “other than temporary impairment” loss treatment the aggregate decline in value on previously impaired securities determined to be market related and not credit related.

Under FSP APB 14-1, the company was required to account for its indebtedness under its 5.25% senior convertible notes in a manner that reflects the company’s nonconvertible debt borrowing rate in the recognition of interest expense. Pursuant to its provisions, FSP APB 14-1 has been applied retrospectively to all prior periods beginning with the fourth quarter of 2004 (when the notes were issued) and resulted in an increase in interest expense for all such periods. The amount of such increase in the first quarter of 2009 was $0.9 million.

SEC NOTICE OF POSSIBLE CIVIL ACTION

On May 4, 2009, the company, its Chairman and its Chief Executive Officer and President received a Wells Notice from the Staff of the Enforcement Division of the Securities and Exchange Commission. The Notice, which is a statement of intention to recommend civil action, is a further step in a previously disclosed formal investigation initiated by the Staff in the fourth quarter of 2007. The company was informed that the Wells Notice relates to the company’s disclosures in its 2004, 2005 and 2006 proxy statements concerning the effects of transactions involving American Equity Investment Service Company. The company believes these proxy statements accurately disclosed all material information and strongly disagrees with the Staff’s recommendation on this matter. The company will continue to pursue a potential resolution of this matter before the Staff makes its formal recommendation to the SEC, and will vigorously defend any action brought by the SEC, but the company cannot predict the outcome or timing of this matter.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act 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 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.

CONFERENCE CALL

American Equity will hold a conference call to discuss first quarter 2009 earnings on Thursday, May 7, 2009, at 10 a.m. CDT. The conference call will be webcast live on the Internet. Investors and interested parties who wish to listen to the call on the Internet may do so at www.american-equity.com. The call may also be accessed by telephone at 866-713-8565, passcode 60562678 (international callers, please dial 617-597-5324). An audio replay will be available shortly after the call on AEL’s web site. An audio replay will also be available via telephone through May 28, 2009 by calling 888-286-8010, passcode 64823654 (international callers will need to dial 617-801-6888).

ABOUT AMERICAN EQUITY

American Equity Investment life Holding Company, through its wholly-owned operating subsidiaries, is a full-service under writer of a broad line of annuity and insurance products, with a primary emphasis on the sale of fixed rate and index 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 50325. For more information, visit our website www.american-equity.com.

¹ In addition to net income, American Equity has consistently utilized operating income, a non-GAAP financial measure commonly used in the life insurance industry, as an economic measure to evaluate its financial performance. See accompanying tables for the reconciliation of net income to operating income and a description of reconciling items.

² All prior period financial statements have been adjusted pursuant to the provisions of FASB Staff Position No. APB 14-1 which was effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. See more complete discussion later in this news release.

John M. Matovina, Chief Financial Officer
515-457-1813
jmatovina@american-equity.com
or
D. J. Noble, Chairman
515-457-1705
dnoble@american-equity.com
or
Julie L. LaFollette, Director of Investor Relations
515-273-3602
jlafollette@american-equity.com
or
Debra J. Richardson, Executive Vice President
515-273-3551
drichardson@american-equity.com