| By Order of the Board of Directors Phyllis Zanghi
Secretary
West Des Moines, Iowa
April 28, 2021
PROXY STATEMENT
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY
Annual Meeting of Shareholders
June 10, 2021
Table of Contents
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Our Proxy Statement Annual Meeting and Proxy Solicitation Information
A Notice Regarding the Availability of Proxy Materials
American Equity Investment Life Holding Company, 6000 Westown Parkway, West Des Moines, Iowa 50266 (referred to inWe are providing this proxy statement, as the “Company” or as “we,” “our” or “us”) is using “notice and access” to distribute proxy materials to shareholders, which means this proxy statement and the Company’s Annual Report to Shareholders will be made available on the Internet instead of mailing a printed copy to each shareholder. Shareholders who receive a Notice of Internet Availability of Proxy Materials (the “Notice”) by mail will not receive a printed copy of these materials other than as described below. The Notice contains instructions as to how shareholders may access and review all of the important information contained in the materials on the Internet, including how to submit proxies. The Notice is first being mailed on or aboutdated April 28, 2021.
If you would prefer to receive a printed copy of the Company’s proxy materials, please follow the instructions for requesting printed copies included in the Notice. Shareholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. Choosing to receive future proxy materials by email will save the Company the cost of printing and mailing documents to shareholders and will reduce the impact of the annual meeting on the environment. A shareholder’s election to receive proxy materials by email will remain in effect until the shareholder terminates it.
General Information
This proxy statement is provided27, 2022, to the shareholders of the Company in connection with the solicitation of proxies by the Board of Directors for the annual meeting of shareholders to be held on June 10, 2021 (“2022 (Annual Meeting”Shareholder Meeting), at the time and place shown in the Notice of Annual Meeting of Shareholders, and at any adjournment. To obtain directions to the Annual Shareholder Meeting, you may contact us at our toll-free number: 1-888-221-1234.
We will bear all expenses in connection with this solicitation. Proxies may be solicited by the Board of Directors or management personally, telephonically or electronically. Voting RightsIn this proxy statement, "we," "our," "us," and their derivative forms, and the "Company," refer to American Equity Investment Life Holding Company.
Only shareholders of record as of the close of business on April 15, 2021 will be entitled to the notice of and to vote at the Annual Meeting. We have a single class of voting common stock, $1 par value per share (“Common Stock”), of which 95,472,614 shares were outstanding and entitled to vote on such date. Each share is entitled to one vote.
Shares present in person or represented by proxy at the Annual Meeting will be tabulated to determine if a quorum is present. A quorum is present if a majority of the votes entitled to be cast on a matter are represented for any purpose at the Annual Meeting. Votes withheld for any director, broker non-votes and abstentions represented at the Annual Meeting will be counted for quorum purposes. Votes will be tabulated under the supervision of Alliance Advisors, L.L.C., which has been designated by the Board of Directors as inspector of the election.
If your shares of Common Stock are held in the name of a bank, broker or other holder of record, you will receive instructions from that holder to vote your shares at the Annual Meeting. Contact your bank, broker or other holder of record directly if you have any questions. Even if you do not provide instructions, your bank, broker or other holder of record may vote your shares on certain “routine matters.” The New York Stock Exchange (“NYSE”) considers Proposal 2 to be a “routine matter.” As a result, without instructions from you, your broker is permitted to vote your shares on this matter at its discretion. A broker non-vote occurs when a broker does not vote on some matter because the broker has not received instructions from you and does not have discretionary voting power for that particular item. Proposals 1 and 3 are considered “non-routine matters” and, therefore, brokers may not vote on these matters unless they receive specific voting instructions from you.If you plan to attend the Annual Meeting and vote in person, you will have the opportunity to obtain a ballot when you arrive. If your shares of Common Stock are not registered in your own name and you plan to attend the Annual Meeting and vote your shares in person, you will need to contact the broker or agent in whose name your shares are registered to obtain a broker’s proxy card. You will need to bring the broker’s proxy card with you to the Annual Meeting in order to vote.
If you vote by proxy, the individuals named on the proxy card (your proxies) will vote your shares in the manner you indicate. If you sign, date and return the proxy card without indicating your instructions on how to vote your shares, the proxies will vote your shares as follows:
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“FOR” the election of the five director nominees;
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“FOR” the ratification of the appointment of Ernst & Young LLP (“EY”) as our independent registered public accounting firm for 2021; and
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“FOR” the approval of the compensation of our named executive officers as disclosed in this proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission (“SEC”).
If any other matter is presented at the Annual Meeting, your proxies will vote in accordance with their best judgment. At the time this proxy statement was printed, we knew of no other matters to be addressed at the Annual Meeting.
If you are a registered shareholder (that is, you own shares of Common Stock in your own name and not through a broker, nominee or in some other “street name”), you may vote by telephone, through the Internet or by obtaining a proxy card and returning it by mail. Please see the Notice for instructions on how to access the telephone and Internet voting systems. If you hold your shares in “street name,” your broker or other nominee will advise you on whether you may vote by telephone or through the Internet as an alternative to voting by proxy card.
A proxy may be revoked at any time prior to the close of voting at the Annual Meeting. Such revocation may be made in person at the Annual Meeting, by notice in writing delivered to the Corporate Secretary of the Company, by voting by telephone or through the Internet at a later date or by a proxy bearing a later date.
The Board of Directors urges you to take advantage of internet or telephone voting. Instructions are included in the Notice or the proxy card.
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Proposal 1—1
Election of Directors The Board of Directors presently consists of fourteen members. Each member of theOur Board of Directors has been appointed to one ofnominated three classes with three-yearcurrent directors whose terms expiring on a staggered basis. The terms of the five directors presently serving as the Class III Directors expire at the Annual Meeting.
The nominees to serve as Class III Directors are Brenda J. Cushing, Douglas T. Healy, David S. Mulcahy, and Sachin Shah. Each is nominated2022 annual shareholder meeting for a term of three years expiringnew terms ending at the 2025 annual meeting of shareholders in 2024, or until their respective successors are electedshareholder meeting:
•Anant Bhalla, also our President and qualified, subject to their prior death, resignation or removal.Chief Executive Officer; A.J. Strickland, who presently serves as a Class III Director, is nominated to serve as a Class I Director for a term of one year expiring at the annual meeting of shareholders in 2022, or until his successor is elected•Alan D. Matula, an independent director; and qualified, subject to his prior death, resignation or removal. In August 2020, the Company adopted a tenure/retirement provision in its Corporate Governance Guidelines that no person may be elected or reelected to the Board of Directors for a term during which that person would attain the age of eighty (80). While Mr. Strickland will attain his 80th birthday prior to the annual meeting of shareholders in 2022, the Board of Directors believes the Company and the Company’s shareholders would benefit from continuing to have Mr. Strickland’s knowledge and experience available through the date of such meeting and has agreed to waive this policy for Mr. Strickland for one year, in deference to, and completion of, the review discussed in the Corporate Governance section of this document.
Ms. Cushing and Messrs. Healy, Mulcahy, Shah, and Strickland are•Gerard D. Neugent, an independent under the requirements of the Sarbanes-Oxley Act of 2002 (“SOX”), and rules adopted by the SEC, as well as the corporate governance listing standards of the NYSE (“NYSE Rules”).director.
On August 26, 2020, the Board of Directors increased its size from twelve to thirteenShareholders elect directors effective September 8, 2020. Douglas T. Healy was appointed by the Board of Directors to fill the vacancy created by the increase in the number of directors and to serve on the Investment and Risk Committees. Mr. Healy’s initial term expires on the date of the Annual Meeting and he serves as a Class III Director.
Pursuant to the Investment Agreement executed by the Company and Brookfield Asset Management Inc. and Burgundy Acquisitions I Ltd. (collectively “Brookfield”) dated October 17, 2020, Brookfield received the right to appoint an individual to the Company’s Board of Directors. On November 30, 2020, the Board of Directors increased its size from thirteen to fourteen directors effective contemporaneously therewith. Brookfield’s designee, Sachin Shah, was appointed by the Board of Directors to fill the vacancy created by the increase in the number of directors. Mr. Shah’s initial term expires on the date of the Annual Meeting and he serves as a Class III Director.
The Board of Directors anticipates the nominees will serve. In the event a nominee is unable to do so, proxies will be voted for such substitute nominee as the Board of Directors in its discretion may recommend. Proxies will be voted for the election of the nominees unless the shareholder giving the proxy withholds authority or votes against any nominee.
Directors are elected by a plurality vote of the votes cast by the shares of our common stock entitled to vote at the Annual Meeting.2022 annual shareholder meeting.
TheOur Board of Directors unanimously recommends you vote FOR theits nominees, listed below.Mr. Bhalla, Mr. Matula, and Mr. Neugent.
Class III
Directors
Directors Nominated for a Term that Expires at the 20242025 Annual Meeting Anant Bhalla, 44, has served as a director since January 2020. Effective January 27, 2020, Mr. Bhalla was appointed our President, and effective March 1, 2020, he was appointed our Chief Executive Officer. Prior to that, Mr. Bhalla was a partner of Bhalla Capital Partners from March 2019 to January 2020. From 2016 until 2019, he served as Executive Vice President and Chief Financial Officer of Brighthouse Financial, Inc., an insurance and financial services company. From 2014 until 2016, he served as Chief Financial Officer of Retail Business for MetLife, a insurance and financial services company. Prior to MetLife, Mr. Bhalla served in numerous senior roles including Chief Risk Officer, Treasurer, and other management roles at Fortune 500 companies, including American International Group, Lincoln National Corporation, and Ameriprise Financial Services. Mr. Bhalla is also director of the Greater Des Moines Partnership, an economic and community development organization. Our Board of Directors concluded that Mr. Bhalla should serve as a director in light of his financial expertise, proven public company strategic leadership, and extensive knowledge of, and background in, our industry and business. Class I Alan D. Matula, 61, has served as a director since December 2015. He has served as the Chief Information Officer of Weber-Stephen Products LLC, a privately owned company that manufactures charcoal, gas and electric outdoor grills and accessories, since December 2015. Mr. Matula worked for the Royal Dutch Shell plc organization, an energy company, for over 30 years. During that time, he served in various information technology capacities for the parent company and several of its subsidiaries, including Chief Information Officer for Royal Dutch Shell plc from 2006 to 2015. Our Board of Directors concluded that Mr. Matula should serve as a director in light of his financial expertise, proven public company strategic experience as chief information officer overseeing technology and cyber-related risks, as well as his deep business experience. Nominating and Corporate Governance Committee, Audit and Risk Committee; Class I Gerard D. Neugent, 70, has served as a director since 2010. Mr. Neugent is a manager of William C. Knapp, LC, builders, since 2008. He also was a member of that company from 2008 until 2021 when he transferred his ownership of 4.8% to a trust for the benefit of his immediate family. He has served Knapp Properties, L.C. as Co-Chairman since 2017, and Knapp Properties, Inc. (Knapp Properties), a real estate development, management and brokerage business, as Chief Executive Officer from 2014 until 2020, as President from 2014 until 2017, and as President and Chief Operating Officer from 1993 until 2014. His primary duties there included real estate transactions, development and management. Mr. Neugent received his law degree from Drake University. Our Board of Directors concluded that Mr. Neugent should serve as a director in light of his experience in real estate and business management as well as his legal background. Investment Committee, Nominating and Corporate Governance Committee; Class I
Other Directors Joyce A. Chapman, 77, has served as a director since 2008. She worked for over 35 years with West Bank, West Des Moines, Iowa until her retirement in 2006. While at West Bank, Ms. Chapman served in various capacities related to bank administration and operations. Ms. Chapman served as a director for West Bank and West Bancorporation, Inc., a banking and trust services business, from 1975 until her retirement from its board in 2018. Ms. Chapman has served in numerous positions of leadership in philanthropic and banking industry organizations. Our Board of Directors concluded that Ms. Chapman should serve as a director in light of her experience in various organizations and her experience in the banking industry. Compensation and Talent Management Committee, Nominating and Corporate Governance Committee; Class II, term expires at the 2023 annual shareholder meeting Brenda J. Cushing, 57,58, has served as a director since March 2017. Ms. Cushing has been an independent insurance consultant since August 2015. From August 2014 to August 2015, Ms. Cushing served as Executive Vice President and Chief Financial Officer of Athene Holding Ltd., a retirement services company, and from October 2013 to August 2014, Ms. Cushing served as Executive Vice President and Chief Financial Officer of Athene USA Corp., a subsidiary of Athene Holding Ltd. From 2008 until its acquisition by Athene Holding Ltd. in 2013, Ms. Cushing served as Executive Vice President and Chief Financial Officer of Aviva USA Corp., a diversified financial company that offered long-term savings, insurance and retirement income products. Ms. Cushing is a certified public accountant (inactive) and has been involved in the insurance industry for over 25 years. Ms. Cushing’sCushing also serves as Director of MercyOne Des Moines (a medical center and hospital not-for-profit), Bankers Trust (a bank), and Merchants Bonding (a surety bond company). Our Board of Directors concluded that Ms. Cushing should serve as a director in light of her financial expertise and insurance company financial leadership for over two decades leddecades. Audit and Risk Committee, Compensation and Talent Management Committee; Class III, term expires at the 2024 annual shareholder meeting James M. Gerlach, 79, has served as a director since 1996. He served as our Executive Vice President from 1996 until his retirement in 2011. Prior to joining us, Mr. Gerlach served as Executive Vice President of American Life and Casualty Insurance Company, a wholly-owned insurance subsidiary of Statesman, and as Executive Vice President and Treasurer of Vulcan Life Insurance Company, an insurance subsidiary of American Life and Casualty Insurance Company. Mr. Gerlach was active in the insurance industry for over 45 years. Our Board of Directors to concludeconcluded that Ms. CushingMr. Gerlach should serve as a director in light of his knowledge of our operations as well as his years of experience in the Company.insurance industry. Member: Audit and Compensation CommitteesClass II, term expires at the 2023 annual shareholder meeting
Douglas T. Healy, 56,57, has served as a director since September 2020. Mr. Healy currently serves as a senior advisor to a number of companies in the financial, technology and non-profit sectors. Prior to his current activities, Mr. Healy had more than 30 years of senior leadership experience at major financial and asset management firms including Credit Suisse, AXA Investment Managers and CS First Boston andBoston. He has a deep knowledge of the insurance industry, | | | | | | | | | | 2021 Proxy Statement | | | 3 | |
investment strategy, and asset allocation. Mr. Healy is a Chartered Financial Analyst and also serves as Director and Treasurer of The Eagle Academy Foundation. Our Board of Directors concluded that Mr. Healy’sHealy should serve as a director in light of his financial and insurance expertise and asset management firm leadership for over 30 years ledyears. Investment Committee, Audit and Risk Committee; Class III, term expires at the 2024 annual shareholder meeting
Robert L. Howe, 79, has served as a director since 2005. He served the State of Iowa Insurance Division, the state's insurance regulator, from 1964 to 2002 in various capacities. He was named Deputy Commissioner and Chief Examiner in 1985 and served in that position until his retirement in 2002. During this time, Mr. Howe was responsible for the financial oversight of 220 domestic insurance companies. Since his retirement, Mr. Howe has been a self-employed insurance consultant. Mr. Howe served as a director of EMC National Life Company, from 2003 until 2007, and, from 2007 until 2018, as a director of EMC Insurance Group, an insurance organization. He also served as the designated financial expert on the board of directors of EMC Insurance Group. Mr. Howe is a certified financial examiner, certified insurance examiner, certified government financial manager and accredited insurance receiver. Our Board of Directors to concludeconcluded that Mr. HealyHowe should serve as a director in light of his experience in the financial oversight of insurance companies and his expertise in finance. Investment Committee, Audit and Risk Committee; Class II, term expires at the 2023 annual shareholder meeting William R. Kunkel, 65, has served as a director since June 2016. He served as General Counsel of the Company.Archdiocese of Chicago, a religious organization, from November 2016 until July 31, 2020. From 2012 through April 1, 2016, he served as our Executive Vice President, Legal and General Counsel. Prior to joining us, Mr. Kunkel was a partner at the law firm of Skadden, Arps, Slate, Meagher & Flom LLP for over 25 years, where he focused his practice on mergers and acquisitions, corporate finance and other corporate governance and securities matters. Our Board of Directors concluded that Mr. Kunkel should serve as a director in light of his experience as an executive of ours and as legal counsel to us, as well as his expertise in corporate governance and corporate finance. Member: Investment and Risk CommitteesClass II, term expires at the 2023 annual shareholder meeting
David S. Mulcahy, 68,69, has served as a director since 2011. He has served as theour independent Chairman of ourthe Board of Directors since April 2021 and served as the audit committee chairmanour Audit Committee Chairman from 2011 to 2021. Mr. Mulcahy is our Lead Independent Director. He previously served as a member of the Company’son our Board of Directors from 1996 to 2006. He also serves as a director of American Equity Investment Life Insurance Company of New York. Mr. Mulcahy has served as non-executive Board Chairman of the board of Workiva Inc. (NYSE: WK), a technology company, since June 2018, and as a member of theits board of directors since the initial public offering in 2014. He served as chairman of theits compensation committee from 2014 to 2018. Workiva Inc. is a provider of cloud-based platformcompliance and regulatory reporting solutions serving a global client base, including 75%some of the Fortune 500®.largest companies in the U.S. Mr. Mulcahy is the chairman of Monarch Materials Group, Inc., which manufactures and sells building products into the concrete construction industry. Mr. Mulcahy also serves as president and chairman of the board of directors of MABSCO Capital, Inc., which provides portfolio management services. Mr. Mulcahy is an active investor in private companies and previously managed private equity capital for numerous banks and insurance companies. He is a certified public accountant (inactive) who was a partner with Ernst & Young (EY), where he specialized in mergers and acquisitions. Mr. Mulcahy is a graduate of the University of Iowa. Our Board of Directors concluded that Mr. Mulcahy’sMulcahy should serve as a director in light of his valuable perspective and extensive background and experience in business management, financial reporting and accounting contribute valuable perspectiveaccounting. Nominating and experience to our Board of Directors and ledCorporate Governance Committee; Class III, term expires at the Board of Directors to conclude that Mr. Mulcahy should serve as a director of the Company. Member: Executive, Audit and Innovation & Technology Committees2024 annual shareholder meeting
Sachin Shah, 44,45, has served as a director since November 2020. Mr. Shah currently is Managing Partner, Chief Investment Officer of Brookfield Asset Management Inc., and Vice Chair of Brookfield Renewable Group. Since 2002, Mr. Shah has been with Brookfield Asset Management Inc., a leading global alternative asset manager with approximately $575 billion of assets under management across its real estate, infrastructure, renewable power, private equity, and credit strategies. He has held a variety of senior roles across thethat organization, including Chief Executive Officer of Brookfield Renewable Partners from 2015 to 2020. Mr. Shah’s financial and asset management expertise and experience led theOur Board of Directors to concludeconcluded that Mr. Shah should serve as a director in light of the Company.his financial and asset management expertise and experience. Class I Director Nominated for a Term ExpiringIII, term expires at the 2022 Annual Meeting2024 annual shareholder meeting A.J. Strickland, III
, 79, has served as a director since 1996. He has been the Thomas R. Miller Professor of Strategic Management in the Graduate School of Business at the University of Alabama since 1969. Dr. Strickland was a director of United Security Bancshares, Inc. from 2013 to 2017 and a director of Twenty Services, Inc. until March 2014. Dr. Strickland is also the co-author of many strategic management books and texts used at universities worldwide. In addition, he conducts frequent industry and competitive analyses of domestic and international firms. Dr. Strickland’s extensive knowledge of strategic management and the finance industry arising from his academic experience led the Board of Directors to conclude that Dr. Strickland should serve as a director of the Company.
Member: Compensation and Innovation & Technology CommitteesClass I Directors Whose Terms Expire at the 2022 Annual Meeting
Anant Bhalla, 43, has served as a director since January 2020. Effective January 27, 2020, Mr. Bhalla was appointed President of the Company, and effective March 1, 2020, he was appointed Chief Executive Officer. Prior to that, Mr. Bhalla was a partner of Bhalla Capital Partners from March 2019 to January 2020. From 2016 until 2019, he served as Executive Vice President and Chief Financial Officer of Brighthouse Financial, Inc. ("Brighthouse"). From 2014 until 2016, he served as Chief Financial Officer of Retail business for MetLife. Prior to MetLife, Mr. Bhalla served in numerous senior roles including Chief Risk Officer, Treasurer and other management roles at Fortune 500 companies, including American International Group, Lincoln National Corporation, and Ameriprise Financial Services ("Ameriprise Financial"). Mr. Bhalla’s financial expertise, proven public company strategic leadership, and extensive knowledge of, and background in, the Company’s industry and business led the Board of Directors to conclude that Mr. Bhalla should serve as a director of the Company.
Member: Executive and Investment Committees
John M. Matovina, 66, has served as a director since 2000. He served as non-executive Chairman from April 16, 2020 until April 1, 2021. He served as Chairman from April 2017 until April 15, 2020 and served as Chief Executive Officer
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and President of the Company from 2012 until March 1, 2020 and January 27, 2020, respectively. He served as Chief Financial Officer and Treasurer of the Company from 2009 to 2012 and as the Company’s Vice Chairman from 2003 to April 2017. Mr. Matovina was a private investor and a financial consultant from 1997 to 2003. From 1983 through 1996, he was a senior financial officer of The Statesman Group, Inc. (“Statesman”) and many of its subsidiaries, and, prior to Statesman’s acquisition in 1994, he served as Statesman’s Chief Financial Officer, Treasurer and Secretary. Mr. Matovina is a certified public accountant and has more than 30 years of experience in the life insurance industry. Mr. Matovina’s former role as Chief Executive Officer of the Company as well as his years of experience in, and extensive knowledge of, the life insurance industry led the Board of Directors to conclude that Mr. Matovina should serve as a director of the Company.
Member: Executive, Investment and Risk Committees
Alan D. Matula, 60, has served as a director since December 2015. He has served as the Chief Information Officer of Weber-Stephen Products LLC, a privately owned company which manufactures charcoal, gas and electric outdoor grills and accessories, since December 2015. Mr. Matula worked for the Royal Dutch Shell plc organization for over 30 years. During that time, he served in various information technology capacities for the parent company and several of its subsidiaries, including Chief Information Officer for Royal Dutch Shell plc from 2006 to 2015. Mr. Matula’s experience as Chief Information Officer overseeing technology and cyber-related risks as well as his deep business experience led the Board of Directors to conclude that Mr. Matula should serve as a director of the Company.
Member: Innovation & Technology and Risk Committees
Gerard D. Neugent, 69, has served as a director since 2010. He has served as Co-Chairman of Knapp Properties, L.C. since 2017 and served as Chief Executive Officer of Knapp Properties, Inc. (“Knapp Properties”) from 2014 until 2020 and President from 2014 to 2017 and served as President and Chief Operating Officer of Knapp Properties from 1993 until 2014. His primary duties include real estate transactions, development and management. Mr. Neugent received his law degree from Drake University. Mr. Neugent’s experience in real estate and business management as well as his legal background led the Board of Directors to conclude that Mr. Neugent should serve as a director of the Company.
Member: Nominating and Corporate Governance Committee
Class II Directors Whose Terms Expire at the 2023 Annual Meeting
Joyce A. Chapman, 76, has served as a director since 2008. She worked for over 35 years with West Bank, West Des Moines, Iowa until her retirement in 2006. While at West Bank, Ms. Chapman served in various capacities related to bank administration and operations. From 1975 until her retirement from the board in 2018, Ms. Chapman served as a director for West Bank and West Bancorporation, Inc. Ms. Chapman has served in numerous positions of leadership in philanthropic and banking industry organizations. Ms. Chapman’s leadership experience in various organizations and her experience in the banking industry led the Board of Directors to conclude that Ms. Chapman should serve as a director of the Company.
Member: Compensation and Nominating and Corporate Governance Committees
James M. Gerlach, 79, has served as a director since 1996. He served as Executive Vice President of the Company from 1996 until his retirement in 2011. Prior to joining the Company, Mr. Gerlach served as Executive Vice President of American Life and Casualty Insurance Company, a wholly-owned subsidiary of Statesman, and as Executive Vice President and Treasurer of Vulcan Life Insurance Company, a subsidiary of American Life and Casualty Insurance Company. Mr. Gerlach was active in the insurance industry for over 45 years. Mr. Gerlach’s knowledge of the Company’s operations as well as his years of experience in the insurance industry led the Board of Directors to conclude that Mr. Gerlach should serve as a director of the Company.
Member: Investment and Nominating and Corporate Governance Committees
Robert L. Howe, 78, has served as a director since 2005. He served the State of Iowa Insurance Division from 1964 to 2002 in various capacities. He was named Deputy Commissioner and Chief Examiner in 1985 and served in that position until his retirement in 2002. During this time, Mr. Howe was responsible for the financial oversight of 220 domestic insurance companies. Since his retirement, Mr. Howe has been a self-employed insurance consultant. Mr. Howe served as a director of EMC National Life Company from 2003 until 2007, and, from 2007 until 2018, Mr. Howe served as a director of EMC Insurance Group. He also served as the designated financial expert on the board of directors of EMC Insurance Group. Mr. Howe is a certified financial examiner, certified insurance examiner, certified government financial manager and accredited insurance receiver. Mr. Howe’s experience in the financial
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oversight of insurance companies and his expertise in finance led the Board of Directors to conclude that Mr. Howe should serve as a director of the Company.
Member: Audit and Executive Committees
Michelle M. Keeley, 56, has served as a director since 2020. She is a retired Executive Vice President of equities and fixed income investments for RiverSource Investments, LLC, the asset management division of Ameriprise Financial. Ms. Keeley worked for American Express and its publicly-traded spin-off, Ameriprise Financial, from 2002 to 2010. Prior to joining American Express, Ms. Keeley was a managing director with Zurich Global Assets from 1990 to 2002. In November 2014, Ms. Keeley was elected to serve as an independent director on the board of the Federal Home Loan Bank of Des Moines. Currently, she serves as chair of the human resources and compensation committee and a member of the finance and planning and executive committees for the board of the Federal Home Loan Bank of Des Moines. In 2015, Ms. Keeley became a director of the Bridge Builder Mutual Fund Series, an affiliated company of Edward Jones Financial Services. Ms. Keeley serves on all committees of the board of the Bridge Builder Mutual Fund Series. Ms. Keeley’s executive experience in capital markets and financial services, as well as her board experience with a bank and a mutual fund company led the Board of Directors to conclude that Ms. Keeley should serve as a director of the Company.
Member: Investment and Risk Committees
William R. Kunkel, 64, has served as a director since June 2016. He served as General Counsel of the Archdiocese of Chicago from November 2016 until July 31, 2020. From 2012 through April 1, 2016, he served as the Company’s Executive Vice President, Legal and General Counsel. Prior to joining the Company, Mr. Kunkel was a partner at the international law firm of Skadden, Arps, Slate, Meagher & Flom LLP for over 25 years, where he focused his practice on mergers and acquisitions, corporate finance and other corporate governance and securities matters. Mr. Kunkel’s experience as an executive of the Company and as legal counsel to the Company as well as his expertise in corporate governance and corporate finance led the Board of Directors to conclude that Mr. Kunkel should serve as a director of the Company.
Member: Nominating and Corporate Governance and Risk Committees
Director Qualifications and Experience TheOur Board of Directors believes that the director nominees and other directors possess skillsare knowledgeable, skilled, and qualificationsqualified to oversee our evolving business, and that are relevant to and cover the areas that impact the Company’s current and evolving business. Theour Board of Directors believes that the combination of the directors’ backgrounds and skills will result in a Board of Directors that continuescontinue to be well-equipped to vigorously exercise oversight responsibilities on behalf of the Company’s stakeholders.
The table below provides a summary of the skills and qualifications of each nominee and director:
its role. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Bhalla | | | Chapman | | | Cushing | | | Gerlach | | Gerlach | Healy | | | Howe | | | Keeley | | | Kunkel | | | Matovina | | | Matula | | | Mulcahy | | | Neugent | | Neugent | Shah | | | Strickland | | | Financial Services | | | | ✓ | ✓ | ✓ | | | | | ✓ | | | | | | ✓ | | | | | | | | | | | | ✓ | | | | | | | | | | | Insurance | ✓ | | | | | | ✓ | | | | | | | | | | | | | | | | | ✓ | ✓ | | | | | | | | | | | | | | | | | | | | | | Insurance | | | | ✓ | ✓ | | | | | | | | | | | | ✓ | | | | | | ✓ | | | | | | ✓ | | | | | | ✓ | | | | | | ✓ | | | | | | ✓ | | | | | | ✓ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Risk Management | ✓ | | | | ✓ | | | | | | | | | | | | ✓ | | | | | | | | | | | | ✓ | | | | | | | | | | | ✓ | ✓ | | | | | | ✓ | | | | | | | | | | | | ✓ | | | | | | ✓ | | | | | | ✓ | | | | | | | | | | | | | | | | Financial Reporting/Accounting | | | | ✓ | ✓ | | | | | ✓ | ✓ | | | | | | ✓ | | | | | | ✓ | | | | | | | | | | | | ✓ | | | | | | | | | | | | | | | | | | ✓ | | | | | | | | | | | | ✓ | | | | | | | | | | | | ✓ | | | | | | ✓ | | | | Brand and Marketing | | | | ✓ | ✓ | | | | | | ✓ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ✓ | | | | | | ✓ | | | | | | | | | | | | | | | | | | ✓ | | | | Executive Compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ✓ | | | | | | ✓ | | | | | | ✓ | | | | | | | | | | | | ✓ | | | | | | ✓ | | | | | | | | | | | | ✓ | | | | Human Resources/Talent Management | | | | ✓ | ✓ | ✓ | | | | | ✓ | | | | | Information Technology/Cybersecurity | | | | | | | | ✓ | | | | | | | | | | | | | | | | | | | | | | | | ✓ | | | | | | | | | | | | | | | | | | ✓ | | | | | | | | | | | | | | | | | | | | | | | | ✓ | | | | Information Technology/Cybersecurity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ✓ | | | | | | ✓ | | | | | | | | | | | | | | | | | | ✓ | | | | Investment Management/Asset Allocation | ✓ | | | | ✓ | | | | | | | | | | | | | | | | | | | | | | | | ✓ | | | | | | | | | | | | ✓ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ✓ | | | | | | | | | | Legal/Insurance Regulatory | ✓ | | | | ✓ | | | | | | | | | | | ✓ | ✓ | | | | | ✓ | ✓ | | | | | | ✓ | | | | | | ✓ | | | | | | ✓ | | | | | | ✓ | | | | | | ✓ | | | | | | | | | | | | ✓ | | | | | | ✓ | | | | | | | | | | | | | | | | Other Public Company Board Experience | | | | | | | | | | | ✓ | | | | | | | | | | | | | | | | | | | | | | | | ✓ | | | | | | ✓ | | | | | | | | | | | | | | | | | | | | | | | | ✓ | | | | | | | | | | | | ✓ | | | | | | ✓ | | |
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Board and Corporate Governance Information
Corporate Governance The Company is committed to the highest standards of business conductAs we described in our relationships internally and with outside parties. This requires conducting2021 proxy statement, our business in accordance with all applicable laws and regulations and in accordance with the highest standards of business conduct. The Company has established a Code of Business Conduct and Ethics (the “Code of Conduct”) to assure uniformity in standards of conduct. The Code of Conduct applies to the Company’s directors, officers and employees. The Code of Conduct is available as “Code of Conduct” under “Corporate Governance” accessible through the “Investor Relations” link on the Company’s website at www.american-equity.com. A copy of the Code of Conduct is available in print. Requests should be sent to the Corporate Secretary at 6000 Westown Parkway, West Des Moines, Iowa 50266.
In April 2021, the Board of Directors engaged a nationally recognized corporate governance expert as an independent consultant to perform a review of the Board of Directors’Board’s and its committees’ composition, tenure, charters, guidelines, and processes, informed by industry corporate governance best practices. AtA committee of independent directors worked with the requestindependent advisor to develop proposals to enhance our Board's ability to focus on long-term shareholder value through attention to strategy, risk, talent, metrics for prudent and active risk-taking, management oversight, and sustainability. Our Board adopted those recommendations.
Among other things, our Board: •considers its optimum size to be seven to nine directors, plus the Chief Executive Officer; •adopted a new retirement policy that directors will not stand for re-election at or after 75 years of age; •expects not to nominate or appoint (or to renominate upon end of current term) any of our former employees to the Board; •appointed only independent directors to each of the Board of Directors,Board’s standing committees; •established a working group of directors will work closelynew Audit and Risk Committee with responsibilities for our audit, information security, privacy, related person transaction, and operational, actuarial, and reputational risk oversight; •refreshed the Company's independent advisorsNominating and reportCorporate Governance Committee's responsibilities to enhance its findingsrole in director nominee selection, skill development, training, and make recommendations toself-assessment; •expanded the Board of Directors later in 2021, at which time the Board of Directors anticipates adopting suchfocus of the working group's recommendationsCompensation and Talent Management Committee on Chief Executive Officer and executive officer performance, evaluation, compensation, and succession, as well as on oversight of talent management, leadership, culture, and management of any risks from succession planning or compensation plans; and •appointed an independent director to chair the BoardInvestment Committee and expanded the committee’s focus on oversight of Directors may determine are inportfolio risk. We expect shortly to begin the best interestsprocess to choose a search firm to recruit director candidates, including those with a diversity of the Company and its shareholders.experience.
Board Leadership Structure Mr. Mulcahy serves as Chairman of the Board of Directors and Lead Independent Director. As ChairmanChair of theour Nominating and Corporate Governance Committee, and focuses on Board of Directors, Mr. Mulcahy’s focus is on board effectiveness governance and processes and facilitating the Board of Directors'in oversight of company strategy, risks, and performance management.performance. Mr. Mulcahy’s long-term serviceMulcahy is qualified to lead our Board in light of his tenure as a Board member of the Board of Directors, as well as hisand other public company board leadership, as well as his expertise in accounting, business building, and general management experience make him the appropriate leader of the Board of Directors. Mr. Mulcahy works with the other members of the Board of Directors to provide independent oversight of the Company.management. Among other things, Mr. Mulcahy serves as principalcoordinates liaison among the independent directors and senior management. Mr. Mulcahy alsomanagement and chairs executive sessions of the independent directors. Beginning in 2021, only independent directors are members of - and non-management directors.serve as the chair of - each of our Board committees. This promotes objective and effective committee oversight of management and achievement of the roles and goals our Board has assigned each committee.
Director Independence Our Board considers a director independent only if the director has no material relationship with us and our affiliates and is otherwise independent under New York Stock Exchange rules. Our Nominating and Corporate Governance Committee has adopted Categorical Standards on Director Independence, available on our website (www.american-equity.com), as guidelines for determining whether a relationship is material. The Board found Mr. Matula, Mr. Neugent, Ms. Chapman, Ms. Cushing, Mr. Healy, Mr. Howe, Mr. Mulcahy, and Mr. A.J. Strickland III (who is serving as a director until the annual shareholder meeting) independent. In so doing, our Board considered that Mr. Mulcahy serves on the Board of Directors of Workiva and is a less than 1% owner of that company. Workiva provides software and related services to us for drafting, managing, and filing information with the SEC and other accounting practices. Our Board also considered that Mr. Neugent is a director, manager,
officer, and an owner of Knapp Properties. That firm provides property management services for the (unaffiliated) owner of American Equity office space. The firm’s fee is 4% of gross rent. Mr. Neugent is also a member and manager of William C. Knapp LC, a 50% owner of property where we lease warehouse space. In no case does the director have a material interest in the transactions with us.
Board and Committee Meetings Each director attended at least 75% of our Board meetings and meetings of any Board committee on which the director served in 2021. All directors attended the 2021 annual shareholder meeting. We expect each of our directors to attend our 2022 Annual Shareholder Meeting. | | | | | | | Meetings
During 2021 | | Board of Directors | 6 | Audit and Risk Committee (1) | 10 | Compensation and Talent Management Committee (2) | 12 | | Nominating and Corporate Governance Committee | 5 | | Investment Committee | 5 |
(1) Includes both of its predecessors, the Audit Committee and the Risk Committee. (2) Includes its predecessor, the Compensation Committee. The Board as a whole took on the former responsibilities of the Innovation and Technology Committee and Executive Committee during 2021; as a result, neither committee met during the year.
Board of Directors’ Oversight of Risk Management TheOur effective risk management is fundamental to delivery of long-term value to shareholders, policyholders, and other stakeholders. Our Board of Directors oversees the Company’sour strategy and risk framework,management, as effective risk oversight is fundamental to delivering long-term value to shareholders. The Boardwell as the alignment of Directors,one with the assistanceother.
Each of itsour Board committees oversees that the Company’s business plans align to the Company’s overallhas a crucial role in risk appetite. management oversight: •The Board of DirectorsAudit and the committees review and approve the Company’sRisk Committee plays a central role overseeing our risk management governance structure, risk management taxonomy, risk appetite, statement, review significantand risk policies and regularly discuss with management the Company’s performance risk targets. While the Board of Directors has ultimate oversight responsibilityassessment guidelines for the risk management process, various committees of the Board of Directors also have responsibility for risk management. For example, the Audit Committee focuses on financial reporting risk, including internal controls. The Risk Committee focuses on non-financial risks, liquidity risk and insurance risk. Additionally, the Compensation Committee is responsible for creating incentives that encourage a level of risk-taking behavior consistent with the Company’s business strategy. Finally, the Investment Committee focuses on credit risk and market risk and investment policies and activities. The responsibility for the day-to-day management of risk and balancing risk-reward business decisions lies with the Chief Executive Officer and our management. The Company has an enterprise risk management (“ERM”) policy approved by the Board of Directors and implemented by an ERM Committee comprised of the Chief Risk Officer and other members of senior management who, among other things, review and discuss reports from other members of management regarding the Company’s risk management activities, including the areas management has identified as our major risk exposures, and the steps taken to monitor and manage those exposures. The Chief Executive Officer, Chief Risk Officer and ERM Committee are responsible for reporting the risk profile, risk trends and key risk metrics to the Risk Committee.
The Company has a Disclosure Committee comprised of (i) the Audit Committee Chair, who also serves as Chairman for the Disclosure Committee, (ii) the Chief Financial Officer, (iii) the Chief Accounting Officer and (iv) the General Counsel of the Company. The purpose of the Disclosure Committee is to assist senior officers of the Company in fulfilling the Company’s and their responsibilities regarding the identification and disclosurereview of risks that could have a material information aboutimpact on us.
•The Nominating and Corporate Governance Committee oversees governance risk management through its director succession planning, director nominee selection, and director education. •The Compensation and Talent Management Committee oversees our management of risks relating to our compensation arrangements, including how we avoid creating incentives to take excessive or inappropriate risks, as well as risks from continuity and orderly succession planning of our senior management. •The Investment Committee oversees risks related to our investment portfolio, including investment risk limits, risk appetite, and risk guidelines.
Board Committees
Nominating and Corporate Governance Committee The committee consists entirely of independent directors. The committee: •assesses the Companyskills, backgrounds, experience, independence, and expertise the accuracy, completenessboard needs and timelinessidentifies and recommends director nominees to the Board; •establishes a director orientation program; •reviews and advises our Board on ongoing director independence and conflicts of the Company’s financial reports, SEC reportsinterest; •develops and press releases concerning material matters.recommends corporate governance principles to our Board;
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•coordinates the Board and committee’s oversight of environmental, social and governance issues; Majority•reviews and recommends compensation of Independent Directors
Our Board of Directors presently includes fourteen members, and it has affirmatively determined the following twelve areCorporation’s independent under applicable requirements:
Joyce A. Chapman
Brenda J. Cushing
James M. Gerlach
Douglas T. Healy
Robert L. Howe
Michelle M. Keeley
William R. Kunkel
Alan D. Matula
David S. Mulcahy
Gerard D. Neugent
Sachin Shah
A. J. Strickland, III
Gerard D. Neugent is the Co-Chairman of Knapp Properties, L.C. which directly or through its affiliate, Knapp Properties, provides property management servicesdirectors to the ownerBoard;
•oversees the administration of our securities trading policies; •oversees the building where the Company has its principal executive offices in West Des Moines, Iowa. The aggregate amountcompletion of fees paid to Knapp Properties by the owner of the building with respect to the Company’s offices is immaterial in amount to both the Company and to Knapp Properties. Mr. Neugent owns through a family trust 4.72% of William C. Knapp, L.C., which is a 50% owner of West Lake Properties, L.C. West Lake Properties, L.C. owns a warehouse building, a portion of which is leased to the Company. The aggregate amount of rent and expenses relating to the warehouse space is immaterial in amount to both the Company and William C. Knapp, L.C. David S. Mulcahy is the independent Chairman of the Board, a director and shareholderofficer questionnaires;
•reviews the Board’s leadership structure; and •conducts an annual Board and committee assessment. See also "Board of Workiva Inc. The Company has entered into a subscription agreement with Workiva Inc. to utilize certain software. The fees paid to Workiva Inc. in 2020 pursuant toDirectors’ Oversight of Risk Management," above. You can find the subscription agreement are immaterial to the Company and to Workiva Inc. The independent directors meet in executive session as a part of all regular quarterly meetings of the Board of Directors and as part of other meetings of the Board of Directors when warranted. At each executive session, the independent Chairman and Lead Independent Director presides. The Board of Directors has adopted Corporate Governance Guidelines, which are available as “Guidelines”committee's charter under “Corporate Governance”"Corporate Governance" accessible through the “Investor Relations”"Investor Relations" link on our website at www.american-equity.com and arewww.american-equity.com. The charter is also available in print for any shareholder upon request.
Any interested parties desiring to communicate with a member (or all members) of the Board of Directors regarding the Company may directly contact such directors by mail or electronically. To communicate with the Board of Directors, any individual director or any group or committee of directors, correspondence should be addressed to the Board of Directors or any such individual director or group or committee of directors by either name or title. All mail correspondence should be sent to the Corporate Secretary at 6000 Westown Parkway, West Des Moines, Iowa 50266. All electronic correspondence should be sent to the Corporate Secretary at corpsecretary@american-equity.com. All correspondence received by the Corporate Secretary will be categorized
Compensation and then forwarded to the Board of Directors, the individual director or any group or committee of directors. Meetings and Committees of the Board of DirectorsTalent Management Committee
The Boardcommittee consists entirely of Directors met fifteen times in 2020,independent directors. The committee: •reviews and each of the directors attended at least 75% of the meetings of the Board of Directorsapproves compensation-related corporate goals and the committee meetingsobjectives for any committee on which he or she served during 2020. We currently have seven permanent committees, as described below. Under our Corporate Governance Guidelines, a | 8 | | | 2021 Proxy Statement | | | | | | | | | | |
director is invited and encouraged to attend the Annual Meeting. All directors attended the 2020 Annual Meeting of Shareholders, and participated telephonically due to the COVID-19 pandemic.
| Board Committee | | | Current Members | | | Meetings
During 2020 | | | Audit | | | Cushing, Howe, Mulcahy | | | 10 | | | Compensation | | | Chapman, Cushing, Strickland | | | 12 | | | Nominating & Corporate Governance | | | Chapman, Gerlach, Kunkel, Neugent | | | 4 | | | Executive | | | Bhalla(1), Howe, Matovina, Mulcahy | | | 2 | | | Investment | | | Bhalla(1), Gerlach, Healy(2), Keeley(3), Matovina | | | 3 | | | Risk | | | Healy(2), Keeley(3), Kunkel, Matovina, Matula | | | 8 | | | Innovation & Technology | | | Matula, Mulcahy, Strickland | | | 2 | |
(1)
Mr. Bhalla was appointed to the Board of Directors and became a member of the Executive and Investment Committees on January 27, 2020.
(2)
Mr. Healy was appointed to the Board of Directors and became a member of the Investment and Risk Committees on September 8, 2020.
(3)
Ms. Keeley was appointed to the Board of Directors and became a member of the Investment and Risk Committees on June 4, 2020.
The Audit Committee performs the following functions, among others: (i) assists the Board of Directors’ oversight of (a) the integrity of our financial statements and systems of internal control over financial reporting; (b) our compliance with legal and regulatory requirements as they pertain to the financial statements and annual audit process; (c) our independent registered public accounting firm’s qualifications and independence; and (d) the performance of our independent registered public accounting firm and our internal audit function; and (ii) prepares the annual report on audit disclosures required to be prepared by the Audit Committee pursuant to the rules of the SEC. The Audit Committee is governed by a written charter approved by the Board of Directors. The charter is available under “Corporate Governance” accessible through the “Investor Relations” link on our website at www.american-equity.com and is also available in print for any shareholder upon request. The annual report of the Audit Committee is set forth below.
The Audit Committee must include only directors who satisfy the independence requirements under SOX and the NYSE Rules. In addition, all Audit Committee members must have the ability to read and understand financial statements. The Board of Directors has determined that all members of the Audit Committee meet the applicable standards. In addition, the Board of Directors has determined that Ms. Cushing, Mr. Howe and Mr. Mulcahy are “audit committee financial experts,” as that term is defined under SOX.
The Compensation Committee performs the following functions, among others: (i) oversees the compensation and benefit plans and practices related to the Company’s Chief Executive Officer; (ii) oversees the compensation payable to thoseOfficer and other executive officers, identifiedevaluates their performance against such goals, and recommends their compensation for determination by our Board’s independent directors;
•when appropriate, assists our Board in the Company’s proxy statement who report directly to therecruiting a new Chief Executive Officer; (iii) Officer and in establishing related continuity, orderly succession, and contingency succession planning; •oversees the Company’s compensationour short-term and long-term incentive plans including cash incentive and equity-based plans; •oversees management’s processes and (iv) systems to attract, recruit, hire, train, develop, promote, and retain a talented and diverse workforce, and for the continuity and orderly succession of senior management; and •reviews and recommends to the Board of Directors the compensation of the Company’s non-employee directors. The Compensation Committee is governed by a written charter approved by the Board of Directors. The charter is available under “Corporate Governance” accessible through the “Investor Relations” link on our website at www.american-equity.comapproves its report and is also available in print for any shareholder upon request. The annual report of the Compensation CommitteeDiscussion & Analysis, each of which is set forth below.included in this proxy statement. See also "Board of Directors’ Oversight of Risk Management," above. The Compensation Committee has the authority to engage compensation consultants, independent legal counsel and other advisers as it deems necessary. The Compensation Committeecommittee has engaged Pearl Meyer & Partners, an independent compensation consultant (“(Pearl Meyer”Meyer), to provide. Pearl Meyer provided advice, and data with respect to compensation benchmarking and market practices. In 2020, Pearl Meyer advised the Compensation Committee regarding (i) base salaries of executive officers, (ii) short-term incentive compensation awards and (iii) long-term incentive compensation awards. In performing the annual assessment of the compensation consultant’s independence, the Compensation Committee haspractice data. The committee reviewed among other items, a letterinformation from Pearl Meyer addressing its independence and the independence of the members of the consulting team directly serving the Compensation Committee, including the following factors: (i)committee. This included the nature of anyits services providedto us other than to the Company by Pearl Meyer other than as described above; (ii) the amount ofcommittee or Board (which was none), our fees paid by the Company in relation to Pearl Meyer’sits total revenue; (iii) Pearl Meyer’srevenue, its conflict of interest policies and procedures, designed to prevent conflicts of interest; and (iv) the existence of any relevant business or personal relationshiprelationships or stock ownership that could impact the adviser’s independence. Pursuant to SEC and NYSE Rules, the Compensation Committee assessedincluding the independence of Pearl Meyerfactors set forth in February 2020 and determined Pearl Meyer is independent fromExchange Act Rule 10C-1. We believe that the Company’s management and that nofirm’s work has not raised any conflict of interest exists that would prevent Pearl Meyer from serving as an independent consultant for the Compensation Committee. | | | | | | | | | | 2021 Proxy Statement | | | 9 | |
Under the NYSE Rules, the Compensation Committee must be composed entirely of independent directors. The Board of Directors has determined that all members of the Compensation Committee meet the applicable standard.
The Nominating and Corporate Governance Committee performs the following functions, among others: (i) identifies and recommends to the Board of Directors individuals qualified to serve as directors of the Company; (ii) develops and recommends corporate governance principles for the Company as required by law; (iii) oversees the Chief Executive Officer succession planning process; and (iv) oversees the evaluation of the Board of Directors as a whole and the Company’s management. The Nominating and Corporate Governance Committeefirm is governed by a writtenindependent.
You can find the committee's charter approved by the Board of Directors. The charter is available under “Corporate Governance”"Corporate Governance" accessible through the “Investor Relations”"Investor Relations" link on our website at www.american-equity.com andwww.american-equity.com. The charter is also available in print for any shareholder upon request. Under the NYSE Rules, the Nominating
Compensation and Corporate Governance Committee must be composed entirely of independent directors. The Board of Directors has determined that all members of the Nominating and Corporate Governance Committee meet the applicable standard. The Executive Committee performs the following functions, among others: (i) except as prohibited by applicable law, exercises, between meetings of our Board of Directors, all of the powers and authority of the Board of Directors; (ii) reviews corporate matters presented, or to be presented, to our Board of Directors; and (iii) makes recommendations to the Board of Directors on policy matters.
The Investment Committee performs the following functions, among others: (i) oversees the Company's general investment strategies, objectives, standards and limitations; (ii) oversees the use of derivatives and the Company's general hedging strategy; and (iii) reviews and monitors investment performance. The Investment Committee is governed by a written charter approved by the Board of Directors.
The Risk Committee performs the following functions, among others: oversight of the Company’s (i) risk management governance structure; (ii) risk management taxonomy and risk assessment guidelines for risks that could have a material impact on the Company; and (iii) risk tolerance. The Risk Committee is governed by a written charter approved by the Board of Directors.
The Innovation & Technology Committee reviews, evaluates and makes recommendations concerning the Company’s innovation and technology strategy and capabilities in light of the Company’s long-term business strategy and goals. The Innovation & Technology Committee is governed by a written charter approved by the Board of Directors.
Information Regarding the Company’s Process for Identifying Director Nominees
The Company is committed to having a Board of Directors comprised of individuals who are accomplished in their fields, have the ability to make meaningful contributions to the Board of Directors’ oversight of the business and affairs of the Company and have an impeccable record and reputation for honest and ethical conduct. The Nominating and Corporate Governance Committee will consider candidates recommended by shareholders. In considering candidates submitted by shareholders, the Nominating and Corporate Governance Committee will take into consideration the needs of the Board of Directors and the qualifications of the candidate. The Nominating and Corporate Governance Committee may also take into consideration the number of shares held by the recommending shareholder and the length of time the shares have been held.
To have a candidate considered by the Nominating and Corporate Governance Committee, a shareholder must submit the recommendation in writing and in accordance with the requirements of our Amended and Restated Bylaws.
The Nominating and Corporate Governance Committee may apply several criteria in identifying nominees. At a minimum, the committee shall consider (i) whether each such nominee has demonstrated, by significant accomplishment in his or her field, an ability to make a meaningful contribution to the Board of Directors’ oversight of our business and affairs and (ii) the nominee’s reputation for honesty and ethical conduct in his or her personal and professional activities. Additional factors the Nominating and Corporate Governance Committee may consider include a candidate’s specific experiences and skills, relevant industry background and knowledge, time availability in light of other commitments, potential conflicts of interest, material relationships with us and independence from management. The Nominating and Corporate Governance Committee also seeks to have the Board of Directors comprised of a diversity of backgrounds and experience.
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CompensationTalent Management Committee Interlocks and Insider Participation
The Board of Directors has affirmatively determined Ms. Chapman, Ms. Cushing and Dr. Strickland are independent under the requirements of SOX and the NYSE Rules and do not have any relationships requiring disclosure under Item 404 of Regulation S-K. None of the Company’sour Compensation and Talent Management Committee members has ever been an officer or employee of the Companyours or any of its subsidiaries, and duringour subsidiaries. During our last fiscal year, none of our executive officersexecutives served on the compensation committee or board of directors of any company that had one or moreany executive officers who served on our Board of Directors or our Compensation and Talent Management Committee.
Audit and Risk Committee The committee consists entirely of independent directors. All committee members are able to read and understand financial statements. Ms. Cushing, Mr. Healy, Mr. Howe, and Mr. Matula are "audit committee financial experts," as that term is defined under United Stated Securities and Exchange Commission (SEC) rules. The committee oversees: •the integrity of our financial statements; •our compliance with legal and regulatory requirements pertaining to financial statements and annual audit process; •our independent auditors' qualifications and independence, and performance; •our independent auditors and internal audit function; and •many aspects of our our risk management. See "Board of Directors’ Oversight of Risk Management," above. The committee also reviews and approves its report included in this proxy statement. You can find the committee's charter under "Corporate Governance" accessible through the "Investor Relations" link on our website at www.american-equity.com. The charter is also available in print for any shareholder upon request.
Investment Committee The committee consists entirely of independent directors. The committee oversees our investment strategies, objectives, policies, practices and activities, including the performance of any third party investment sub-advisors. See also "Board of Directors’ Oversight of Risk Management," above.
Director Stock Ownership GuidelinesPolicies; Code of Ethics On February 28, 2020,Our Board's corporate governance guidelines assist it in exercising its responsibilities, and are designed to promote Board and committee effectiveness. You can find the Board of Directors adopted Stock Ownership Guidelines (the “Ownership Guidelines”) requiringguidelines under "Corporate Governance" through the directors"Investor Relations" link on our website at www.american-equity.com.
We require each independent director to own Common Stock equal in value tocommon stock of at least three times the director’s annual director cash retainer. Directors have seven years from the later of (i) the date of adoption of the Ownership Guidelines; and (ii) the date of the director’s appointment to the Board of Directors to obtain the required Common Stock ownership. Directors are required tomust retain 100%at least 75% of the net after-tax shares acquired from the vesting, settlement or exercise of equity awards until they meet the stock ownership level. Common StockWe measure stock ownership levels are measured annually on December 31 and shares will be valued at year-end using the highest per share price overwithin the prior 12-month period. Once a director meetspast twelve (12) months. Each of our independent directors has met the applicable stock ownership level, no further investmentrequirements. We prohibit our directors from pledging, hedging, or similar arrangements for our common stock that lock in Common Stock is requiredvalue without the full risks and rewards of stock ownership. We also prohibit them from buying our common stock on margin or borrowing against any account in which they own our common stock. In so doing, we aim to compensatepreserve the shareholder alignment from their stock ownership. Our director conflict of interest policy provides guidance to directors on how to recognize an actual, apparent, or potential conflict; how to disclose it to us; and how to proceed in light of an actual, apparent, or potential director conflict of interest. It also describes how the Nominating and Corporate Governance Committee will review and act on a reported conflict of interest, and what actions and remedies it may recommend our Board implement. As such, it provides the framework for directors, the committee, and the Board to address such situations promptly, consistently, and manner designed to protect us and our shareholders
We have established a subsequent decline inCode of Business Conduct and Ethics for our directors, chief executive officer, chief financial officer, chief accounting officer, other officers, and employees. The code explains how we expect everyone to conduct our business and how to determine the market value of those shares orright choices when presented with an ethical problem. You can find the code under "Corporate Governance" through the "Investor Relations" link on the Company’s website at www.american-equity.com. You may request a change in director annual cash retainer. All non-employee directors except Mr. Healy and Ms. Keeley, who were appointed in 2020, have met the requirementsprinted copy of the Ownership Guidelines. Under an arrangement between the parties, the restricted stock grantedCode of Conduct from our Corporate Secretary by mail at 6000 Westown Parkway, West Des Moines, Iowa 50266.
Related Person Transaction Disclosures We and our corporate affiliates enter into or continue related person transactions, as defined in respect of Mr. Shah’s service on theSEC rules, only when our Board of Directors approves as described below. No director participates in any review of any transaction where that director or any immediate family members is grantedthe related person. Our legal counsel advises the Board whether a proposed or amended transaction is a related person transaction. If so, our management or the related person submits the proposed transaction or amendment to the Audit and Risk Committee. The committee (or the chair, where awaiting full committee consideration would be impracticable), considers any facts and circumstances it determines relevant, such as the benefits to us, any impact on a director’s independence, the availability of other suppliers or customers, the terms of the transaction; and terms available to unrelated third parties or to customers generally. The committee approves the transaction only if it determines it is in, or not inconsistent with, our and our shareholders best interests. In addition, each first calendar quarter, the committee reviews any existing related person transactions that have a remaining term of more than six months or remaining amounts payable to or receivable from the Company of more than $120,000. The committee determines if it is in our and our shareholders' best interests for the transaction to continue. BlackRock, Inc. has publicly disclosed a greater than 5% beneficial interest in our common stock. During 2021, we paid BlackRock, Inc. fees of $8,130,594 for investment management services and to license a risk management analytics tool. Brookfield Asset Management Reinsurance Partners Ltd. has publicly disclosed a greater than 5% beneficial interest in our common stock. Mr. Shah is an employee or officer of one or more of it and its affiliate.affiliates (together, Brookfield). We have reinsurance and investment management arrangements with Brookfield. We received $4,231,057,388 in asset management fees and ceding commissions in exchange for premiums ceded net of benefits paid from Brookfield in 2021. In addition, in accordance with the terms of an agreement established in October, 2020, Brookfield purchased 6,775,000 shares of our common stock at $37.33 per share, for a total price of $252,910,750.
Director Compensation The CompensationWe paid the following 2021 compensation to our non-employee directors:
| | | | | | | | | | | | | Name | Fees Earned or
Paid in Cash
($) | Stock Awards ($) | Total
($) | | Joyce A. Chapman | 96,000 | 96,007 | 192,007 | | Brenda J. Cushing | 120,500 | 96,007 | 216,507 | | James M. Gerlach | 86,000 | 96,007 | 182,007 | | Douglas T. Healy | 90,000 | 96,007 | 186,007 | | Robert L. Howe | 99,250 | 96,007 | 195,257 | | Michelle M. Keeley | 90,500 | 96,007 | 186,507 | | William R. Kunkel | 92,000 | 96,007 | 188,007 | | Alan D. Matula | 93,750 | 96,007 | 189,757 | | David S. Mulcahy | 194,000 | 96,007 | 290,007 | | Gerard D. Neugent | 85,000 | 96,007 | 181,007 | John M. Matovina (1) | 95,500 | 96,007 | 191,507 | Sachin Shah (2) | 80,000 | 96,007 | 176,007 | | A.J. Strickland, III | 97,250 | 96,007 | 193,257 |
(1)Mr. Matovina served for a portion of 2021. (2)Mr. Shah has assigned his compensation to Brookfield.
Our Nominating and Corporate Governance Committee uses the Board of Director’s independent compensation consultant, Pearl Meyer, to provide advice and data with respect tofor non-employee director compensation including retainersdata and equity awards.advice. Pearl Meyer last provided a report in May 20202021 to the (then-named) Compensation Committee, which included recommendations fordetermined director compensation at the time. The report recommended increases in non-employee director compensation based on an evaluation of the compensation practices and data from the same peer group companies used to evaluate executive compensation. Non-employee director compensation is intended to approximate(which had been targeted at the 25th percentile of theour peer group.group in recent years) based on Pearl Meyer's evaluation of peer group compensation practices and data. Directors who are our employees receive no compensation for their service as directors. Each member of the Board of Directors who is not an employee of the Company receives the following:We pay each non-employee director:
•
$20,000a $20,000 per quarter as the cash retainerretainer; and
•
Anan annual restricted stock grant with a grant date value of approximately $96,000$96,000. In the table above, we report each restricted stock award at the $31.78 Financial Accounting Standards Board Accounting Standards Codification Topic 718 (ASC 718) grant date fair value (Grant Date Fair Value). For further information, please see Note 13 to the Consolidated Financial Statements in our Annual Report for 2021 on Form 10-K (our 2021 10-K). On June 10, 2021, we granted each director in the table above 3,021 shares of restricted stock. Ms. Keeley resigned from our board in 2022 and forfeited her award; all other shares remained outstanding as of year-end 2021 and are scheduled to vest on June 10, 2022.
TheWe pay our independent Chairman receives an additional $30,000 fee per quarter.
The Chairs of our committees receiveCommittee chairs and members earn (or earned) the following all amounts per quarter:additional quarterly fees prorated for service for a portion of a quarter):
• | | | | | | | | | | Chair
($) | Other Members
($) | | Current Committees: | | Audit and Risk | 10,500 | 3,000 | | Compensation and Talent Management | 3,750 | 1,500 | | Investment | 3,000 | 1,000 | | Nominating and Corporate Governance | 3,000 | 1,000 | | | | | Predecessor and Eliminated Committees: | | Audit | 10,500 | 3,000 | | Compensation | 3,750 | 1,500 | | Innovation and Technology | 2,250 | 750 | | Risk | 3,000 | 1,000 |
Audit Committee—$10,500
We did not grant any non-employee directors any stock options in 2021. As of year-end 2021, Ms. Chapman, Mr. Howe, and Mr. Neugent each held 14,000 exercisable stock options as a result of awards we granted our non-employee directors in earlier years.
•
Compensation Committee—$3,750
Selection of Director Nominees
•
Nominating and Corporate Governance Committee—$3,000
•
Risk Committee—$3,000
•
Innovation & Technology—$2,250
Non-Chair members of the Audit Committee, the Compensation Committee,In selecting nominees for election to our Board, the Nominating and Corporate Governance Committee will consider a candidate's background and qualifications, including experience, skills, expertise, diversity, integrity, character, business judgment, time availability in light of other commitments, dedication, conflicts of interest, demonstrated ability to make a meaningful contribution to the Risk CommitteeBoard's oversight, and reputation for honesty and ethical conduct. The committee may also consider a candidate's judgment, knowledge useful to the Innovation & Technology Committee receive an additional $3,000, $1,500, $1,000, $1,000 and $750 per quarter, respectively. Non-employee membersoversight of the Investment Committeebusiness, specific experiences and skills, relevant industry background and knowledge, time availability in light of other commitments, age, potential conflicts of interest, material relationships with us, and independence from us and our management. The committee may also seek a diversity of skills, backgrounds, ethnicity, experience, and expertise.
A shareholder may recommend a director candidate in writing in accordance with the Executive Committee receive an additional $1,000requirements of our Amended and $750 per quarter, respectively.Restated Bylaws. In the case of a candidate a shareholder recommends to the committee, the committee may also consider the needs of the Board, the number of shares the shareholder owns and how long the shareholder has owned them.
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The following table provides compensation information for the last completed fiscal year ended December 31, 2020 for each member of the Board of Directors who served as a director for any part of such fiscal year and who was not an employee of the Company. Compensation for Mr. Matovina, who was an employee director for part of 2020 and who was a non-employee director for part of 2020, is reflected in the Summary Compensation Table and accordingly is excluded from the following table:
| | Name | | | Fees Earned or
Paid in Cash
($) | | | Stock Awards
($)(1) | | | All Other
Compensation
($) | | | Total
($) | | | | Joyce A. Chapman | | | | | 97,500 | | | | | | 96,390 | | | | | | — | | | | | | 193,890 | | | | | Brenda J. Cushing | | | | | 99,000 | | | | | | 96,390 | | | | | | — | | | | | | 195,390 | | | | | James M. Gerlach | | | | | 88,000 | | | | | | 96,390 | | | | | | — | | | | | | 184,390 | | | | | Douglas T. Healy | | | | | 22,000 | | | | | | 73,238 | | | | | | — | | | | | | 95,238 | | | | | Robert L. Howe | | | | | 116,000 | | | | | | 96,390 | | | | | | — | | | | | | 212,390 | | | | | Michelle M. Keeley | | | | | 44,000 | | | | | | 96,390 | | | | | | — | | | | | | 140,390 | | | | | William R. Kunkel | | | | | 93,500 | | | | | | 96,390 | | | | | | — | | | | | | 189,890 | | | | | Alan D. Matula | | | | | 93,500 | | | | | | 96,390 | | | | | | — | | | | | | 189,890 | | | | | David S. Mulcahy | | | | | 129,000 | | | | | | 96,390 | | | | | | — | | | | | | 225,390 | | | | | Gerard D. Neugent | | | | | 84,500 | | | | | | 96,390 | | | | | | — | | | | | | 180,890 | | | | | Debra J. Richardson(2) | | | | | 41,000 | | | | | | — | | | | | | — | | | | | | 41,000 | | | | | Sachin Shah(3) | | | | | — | | | | | | 55,188 | | | | | | — | | | | | | 55,188 | | | | | A. J. Strickland, III | | | | | 99,000 | | | | | | 96,390 | | | | | | — | | | | | | 195,390 | | |
(1)
Amounts reflect for each restricted stock award, the aggregate grant date fair value pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. For further information, please see Footnote 11 Retirement and Share-Based Compensation Plans in the Notes to Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2020. On June 4, 2020, each non-employee director then serving was granted 4,200 shares of time-based restricted stock, all of which remain outstanding as of December 31, 2020. The per share fair value at the grant date of June 4, 2020 was $22.95. The equity awards listed for Mr. Healy and Mr. Shah, each of whom were elected to the Board of Directors after June 4, 2020, reflect a pro-rated award granted in respect of each of their services anticipated from the dates of their election to the Board of Directors to the date of the 2021 annual meeting. The per share fair values at the grant date for Mr. Healy and Mr. Shah were $23.25 and $26.28, respectively. The vesting period for the restricted stock is the earlier of (a) one year from the grant date or (b) the date of the next annual meeting. There was no other unvested restricted stock held by the non-employee directors as of December 31, 2020.
(2)
Ms. Richardson did not stand for reelection at the 2020 Annual Meeting.
(3)
Under an arrangement between the parties, the compensation payable in respect of Mr. Shah’s service on the Board of Directors is payable to Brookfield or its affiliate.
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The following table provides information about outstanding shares of unvested restricted stock and unexercised stock options to acquire our Common Stock held by each member of the Board of Directors who is not an employee of the Company as of December 31, 2020. There were no unexercisable options held by a non-employee director as of such date.
| | Name | | | Number of Shares of
Unvested Restricted
Stock (#) | | | Number of Shares
Underlying Unexercised
Options (#) | | | | Joyce A. Chapman | | | | | 4,200 | | | | | | 29,000 | | | | | Brenda J. Cushing | | | | | 4,200 | | | | | | — | | | | | James M. Gerlach | | | | | 4,200 | | | | | | — | | | | | Douglas T. Healy | | | | | 3,150 | | | | | | — | | | | | Robert L. Howe | | | | | 4,200 | | | | | | 29,000 | | | | | Michelle M. Keeley | | | | | 4,200 | | | | | | — | | | | | William R. Kunkel | | | | | 4,200 | | | | | | — | | | | | Alan D. Matula | | | | | 4,200 | | | | | | — | | | | | David S. Mulcahy | | | | | 4,200 | | | | | | — | | | | | Gerard D. Neugent | | | | | 4,200 | | | | | | 29,000 | | | | | Sachin Shah(1) | | | | | 2,100 | | | | | | — | | | | | A. J. Strickland, III | | | | | 4,200 | | | | | | — | | |
(1)
Under an arrangement between the parties, the restricted stock granted in respect of Mr. Shah’s service on the Board is granted to Brookfield or its affiliate.
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Proposal 2—2
Ratification of Appointment
of Independent Registered
Public Accounting Firm TheOur Audit and Risk Committee has appointed Ernst & Young LLP (EY) our independent registered public accounting firm for 2022. We ask the shareholders to ratify this appointment. If the shareholders do not ratify the appointment, our Audit and Risk Committee will review the appointment taking into account the vote results. We expect EY representatives to attend our annual shareholder meeting, have the opportunity to make a statement if they wish, and be available to respond to appropriate questions.
Auditor Services and Fees We incurred the following fees to our independent registered public accounting firms: | | | | | | | | | | 2021 (1) | 2020 (1) | Audit fees (2) | $ | 2,842,708 | | $ | 2,271,483 | | Audit-related fees (3) | — | | 238,545 | | Tax fees (4) | 32,789 | | — | All other fees (5) | — | | 3,560 | | | Total | $ | 2,875,497 | | $ | 2,513,588 | |
(1)EY served as our independent registered public accounting firm for 2021. The Board of Directors requests that the shareholders ratify the appointment of EY. If the appointment of EY is not ratified by shareholders, our Audit Committee may investigate the reasons and consider approving another independent registered public accounting firm. KPMG LLP (“KPMG”(KPMG) served as our independent registered public accounting firm for our last two fiscal years. KPMG fees during the last two fiscal years were: | | | | | 2020 | | | 2019 | | | | Audit fees(1) | | | | $ | 2,271,483 | | | | | $ | 2,558,817 | | | | | Audit-related fees(2) | | | | | 238,545 | | | | | | 291,865 | | | | | Tax fees | | | | | — | | | | | | — | | | | | All other fees(3) | | | | | 3,560 | | | | | | 1,780 | | | | | Total | | | | $ | 2,513,588 | | | | | $ | 2,852,462 | | |
2020.
(1)
(2)Audit fees include fees associated with the annual consolidated financial statements audit, audit of internal control over financial reporting, the reviews of our quarterly reports on Form 10-Q, annual audits of certain of our subsidiaries and audits required by regulatory authorities.
(2)
(3)Audit-related fees primarily include comfort letters and consents related to debt and equity offerings and registration statements. (4)Tax fees include fees associated with consultation and advice related to compliance with tax related regulations, including tax sharing agreements, tax basis policyholder reserves, partnership tax basis differences and proposals around U.S. tax reform.
(3)
(5)All other fees consist of fees for access to KPMG’s Accounting Research Website.KPMG's accounting research website. Our Audit and Risk Committee appoints, evaluates, compensates, retains, and oversees EY's work.
The Audit andRisk Committee is responsible foror its chair must preapprove any service EY proposes to provide to us, and may do so only if it concludes the appointment, retention, compensationservices and oversight of the independent registered public accounting firm. Thefees are consistent with EY's continuing independence. Our Audit and Risk Committee has adopted policiesgeneral preapproval of categories of audit, audit-related, tax, and procedures for pre-approving services (audit and non-audit) and all other services and fees up to individual engagement and annual aggregate maximums. Audit and Risk Committee policy requires specific preapproval of all other services and fees. Each quarter, the Audit and Risk Committee reviews detailed descriptions of each generally preapproved service, each service for which management seeks specific preapproval, and an estimate of fees for each service. The committee chair may preapprove services performed byand fees for needs that arise between regularly scheduled committee meetings. The Audit and Risk Committee does not delegate its responsibilities to preapprove services to management. All of the independent registered public accounting firm. These policies2021 services and fees were adopted in compliancepreapproved consistent with SOX and rules adopted by the SEC thereunder. In accordance with such policies and procedures, the Audit Committee is required to pre-approve the audit and non-audit services performed by theabove. We ended KPMG's engagement as our independent registered public accounting firm in order to assure thaton November 16, 2020 and selected EY as the provision of such services does not impair the auditors’ independence. These services may include audit services, audit-related services, tax services and other services. Unless a type of service to be provided by thesubsequent independent registered public accounting firm has received general pre-approval, it will require specific pre-approval by theon November 16, 2020. Our Audit Committee. The Auditand Risk Committee has delegated to the Chairmanapproved this change. We had no disagreements with KPMG on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or procedure, for either of the Audit Committee specific pre-approval authority provided the estimated feepast two years or otherwise. None of KPMG's reports on our financial statements for any such engagement does not exceed $25,000. The Chairmaneither of the Audit Committee must report, for information purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting. Requests to provide services that require separate approval by the Audit Committee will be submitted to the Audit Committee by both the independent registered public accounting firm and the Chief Financial Officer and must includepast two years or otherwise contained an adverse opinion or a joint statementdisclaimer of opinion, or was qualified or modified as to whether, in their view, the requestuncertainty, audit scope, or application is consistent with the SEC’s rules on auditor independence. In fiscal year 2020, all of the servicesaccounting principles. Our Audit and fees described above were pre-approved by the Audit Committee. We anticipate that representatives of KPMG will be present at the Annual Meeting, will be available to respond to questions concerning the 2020 audit and are permitted to make a statement if they so desire.
If a quorum exists, action on this proposal will be approved if the votes cast favoring the proposal exceed the votes cast opposing the proposal.
The Board of Directors unanimously recommendsRisk Committee directors recommend you vote FOR the ratification of the appointment of EY as our independent registered public accounting firm for 2021.
2022. | 14 | | | 2021 Proxy Statement | | | | | | | | | | |
Audit and Risk Committee DisclosuresReport The responsibilities of the Audit and Risk Committee which are set forth in oversees: •the Audit Committee charter adopted by the Board of Directors, include providing oversight of the Company’s financial reporting process on behalf of the Board of Directors. Management is responsible for the Company’s financial reporting process, the preparation, presentation and integrity of the Company’sCompany's financial statements; •the Company's compliance with legal and regulatory requirements pertaining to financial statements and annual audit process; •the systems of internal control, including disclosure controlsCompany's independent auditors' qualifications and proceduresindependence, and performance; •the Company's independent auditors and internal control over financial reporting. The Company’s independent registered public accounting firm is responsible for performing an independent audit function; and •many aspects of the Company's risk management. EY audits the Company’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB) and issuingissues an opinion on the fair presentation of those consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”policies (GAAP), as well as issuing. EY also issues an opinion on the effectiveness of internal control over financial reporting. The Audit and Risk Committee is responsible for monitoringappoints, evaluates, compensates, retains and overseeing the conduct of these activities, appointing the Company’s independent registered public accounting firmoversees EY's work and for supervising the relationship between the Company and the independent registered public accounting firm. In fulfilling its oversight responsibilities, the Audit Committee meets regularly with managementEY and the independent registered public accounting firm,management, both jointly and separately. The Audit and Risk Committee reviewed and discussed the Company’s audited consolidated financial statements for the year ended December 31, 20202021 with management and KPMG, the Company’s independent registered public accounting firm.EY. The Audit Committeecommittee also reviewed Management’s Report on Internal Control over Financial Reporting and KPMG’sEY’s Report of Independent Registered Public Accounting Firm included in the Company’s Annual Report on Form 10-K for 20202021 filed with the SEC. The Audit Committeecommittee discussed with KPMGEY the matters required to be communicated to the Audit Committeeit by applicable Public Company Accounting Oversight BoardPCAOB standards. The Audit Committeecommittee received the written disclosures and letter from KPMGEY required by applicable requirements of the Public Company Accounting Oversight BoardPCAOB regarding the independent registered public accounting firm’s communications with the Audit Committeecommittee concerning independence, and has discussed EY's independence with KPMG its independence. KPMGit. EY confirmed in its letter that it is independent of the Company under all relevant professional and regulatory standards. Based on the review and discussions with management and KPMGEY referred to above, the Audit and Risk Committee recommended to the Board of Directors that the Company’s audited consolidated financial statements for the year ended December 31, 20202021 be included in the Company’s Annual Report on Form 10-K for 20202021 filed with the SEC. As specified in the Respectfully submitted,
Audit Committee charter, the Audit Committee is not responsible for preparing or certifying financial statements, for planning or conducting audits or for determining that the Company’s financial statements are complete and accurate and in accordance with U.S. generally accepted accounting principles. Such matters are the responsibility of management, and where applicable, the independent registered public accounting firm. In giving its recommendation to the Board of Directors, the AuditRisk Committee has relied on (i) management’s representation that such consolidated financial statements have been prepared with integrity and objectivity and in conformity with U.S. generally accepted accounting principles and (ii) the report of KPMG with respect to such consolidated financial statements. AUDIT COMMITTEE
Brenda J. Cushing, Chair
Douglas T. Healy Robert L. Howe Alan D. Matula
David S. Mulcahy
| | | | | | | | | | | | | 20212022 Proxy Statement | | | 15 | |
Advisory Vote
on Executive Officers and Compensation Executive Officers
Executive officersIn accordance with Section 14A of the Company do not have fixed terms and serve atSecurities Exchange Act of 1934 (the Exchange Act), we recommend shareholders approve the pleasure of the Board of Directors. For the fiscal year ended December 31, 2020, our executive officers are:following resolution:
John M. Matovina (age 66) served as Chief Executive Officer and President of"RESOLVED, the Company from 2012 until he resigned from those positions on March 1, 2020 and January 27, 2020, respectively. He served as Chairman of the Company from April 2017 until April 15, 2020, and served as non-executive Chairman from April 16, 2020 until April 1, 2021. Prior to becoming Chief Executive Officer and President, he served as Chief Financial Officer and Treasurer of the Company from 2009 until 2012 and as the Company’s Vice Chairman from 2003 until April 2017. Mr. Matovina is a certified public accountant and has more than 30 years of experience in the life insurance industry.
Anant Bhalla (age 43) has served as President of the Company since January 27, 2020 and as Chief Executive Officer of the Company since March 1, 2020. Prior to that, Mr. Bhalla was a partner of Bhalla Capital Partners from March 2019 to January 2020. From 2016 until 2019, he served as Executive Vice President and Chief Financial Officer of Brighthouse. From 2014 until 2016, he served as Chief Financial Officer of Retail business for MetLife. Prior to MetLife, Mr. Bhalla served in numerous senior roles including Chief Risk Officer, Treasurer and other management roles at Fortune 500 companies, including American International Group, Lincoln National Corporation, and Ameriprise Financial. Mr. Bhalla has over 20 years of experience in the life insurance industry.
Ted M. Johnson (age 51) has served as Chief Financial Officer and Treasurer of the Company since 2012. He served as Vice President-Controller of the Company from 2001 to 2012. Mr. Johnson is a certified public accountant and has over 25 years of experience in the life insurance industry.
Ronald J. Grensteiner (age 58) has served as Presidentshareholders of American Equity Investment Life InsuranceHolding Company approve, on an advisory basis, the Company’s primary wholly-owned life insurance subsidiary (“American Equity Life”), since 2009 and is an Executive Vice Presidentcompensation of the Company. He has more than 35 yearsnamed executive officers as disclosed pursuant to the compensation disclosure rules of experiencethe Security and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion in the life insurance industry.company’s 2022 Proxy Statement."
Jeffrey D. Lorenzen (age 55) has served as Executive Vice PresidentThe Compensation and Chief Risk Officer since January 2021. Prior to that, Mr. Lorenzen served as Executive Vice President and Chief Investment Officer since June 2015, and as Senior Vice President and Chief Investment Officer since 2009. Mr. Lorenzen has more than 20 years of experience inTalent Management Committee will take the life insurance industry.
Renee D. Montz (age 49) served as Executive Vice President and General Counsel from April 2016 to April 1, 2021 and as Corporate Secretary from July 2016 to April 1, 2021. She was Vice President and Deputy General Counsel from June 2014 to April 2016. Prior to joining the Company, Ms. Montz served in various roles at AEGON Asset Management, a global asset management company, from 2004 to 2014, including as General Counsel, AEGON USA Investment Management, LLC from January 2012 to June 2014. She has 25 years of legal experience and over 15 years of experience in the life insurance industry.
Jennifer L. Bryant (age 49) has served as Executive Vice President and Chief Human Resource Officer of American Equity Life since June 2017 and was Senior Vice President and Chief Human Resource Officer from October 2016 to June 2017. From May 2013 to October 2016, Ms. Bryant was Senior Vice President, Human Resources of Bankers Trust Company, a banking and financial institution. Ms. Bryant served as Human Resources Business Partner at Aviva USA from December 2008 to May 2013. She has over 20 years of human resources experience.
Scott A. Samuelson (age 48) has served as Vice President and Chief Accounting Officeroutcome of the Company since June 2017. Priorvote into account when considering future compensation arrangements, including those for the executive officers. Because the vote is advisory, the result will not be binding on the Compensation and Talent Management Committee and it will not affect, limit, or augment any existing compensation or awards.
We expect to that, Mr. Samuelson servedhold the next such vote at our 2023 annual meeting, as Vice President-Controllerwe currently provide our shareholders with the opportunity to vote on the compensation of the Company since 2012. Mr. Samuelson is a certified public accountantour named executive officers at each annual meeting.
Our Compensation and has over 20 years of experience in the life insurance industry.Talent Management Committee directors recommend you vote FOR this proposal. James L. Hamalainen (age 56) has served as Executive Vice President and Chief Investment Officer, Insurance since January 2021 and Client Solutions Officer of American Equity Life since July 2020. Prior to joining the Company, Mr. Hamalainen was Executive Vice President, Chief Risk Officer of Brighthouse from December 2016 to May 2020. Mr. Hamalainen served as Senior Vice President, Treasury and Investment Management at Ameriprise Financial from September 1991 to May 2016. He has over 25 years of experience in financial services.Additionally, Phyllis J. Zanghi (age 48) became an executive officer of the Company following the end of the fiscal year ended December 31, 2020. Ms. Zanghi has served as Executive Vice President, Chief Legal Officer and Secretary since April 1, 2021 and was Senior Vice President and General Counsel, U.S. Life Companies since October 2020. Prior to joining the Company, Ms. Zanghi was Head of Tax and Associate General Counsel of Brighthouse from August 2017 to October 2020 and held various positions at Metropolitan Life Insurance Company, including Senior Vice President of Tax and ERISA, from September 1998 until August 2017. She has over 20 years experience as a legal advisor in the life insurance industry.
| 16 | | | 2021 | | | | | | | 2022 Proxy Statement |
Executive Officers | | | | | | | | | | Name | Age | Position with the Company and Business Experience | | Anant Bhalla* | 44 | ![[MISSING IMAGE: lg_americanequity-pn.jpg]](https://files.docoh.com/DEF 14A/0001104659-21-056542/lg_americanequity-pn.jpg) •Partner of Bhalla Capital Partners, a private capital and asset management firm (March 2019 - January 2020) •Executive Vice President and Chief Financial Officer of Brighthouse Financial, a life insurance company (2016 – 2019) •Chief Financial Officer of Retail Business for MetLife, an insurance and financial services company (2014 – 2016) •Prior to MetLife, Mr. Bhalla served in numerous senior roles including Chief Risk Officer, Treasurer and other management roles at Fortune 500 companies, including American International Group (AIG), Lincoln National Corporation, and Ameriprise Financial, each an insurance and financial services company. •Mr. Bhalla has over 20 years of experience in the life insurance industry. | Axel André* | 46 | •Our Executive Vice President and Chief Financial Officer (September 7, 2021 – Present) •Executive Vice President and Chief Financial Officer of Jackson National, an insurance and financial services company (February 2020 – February 2021) •Previously Mr. André spent nearly 7 years at AIG. •Mr. André joined AIG initially as Chief Risk Officer for Individual Retirement, Group Retirement, and Institutional Markets. He was promoted to Chief Financial Officer of Individual Retirement at AIG, where he was responsible for overseeing all aspects of the finance and actuarial value chain for the Individual Retirement business, including asset-liability management, hedging, reporting and capital management. Prior to his time at AIG, Mr. André served as a Managing Director on the Global Insurance Strategies team at Goldman Sachs, a financial services firm. | | Ronald J. Grensteiner* | 59 | •President of American Equity Investment Life Insurance Company, our primary wholly-owned life insurance subsidiary (AE Life Insurance) (2009 – Present) •Our Executive Vice President (June 2011 – Present) •Mr. Grensteiner has more than 35 years of experience in the life insurance industry. | | James L. Hamalainen* | 57 | •Our Executive Vice President and Chief Investment Officer, Insurance (January 2021 – Present) •AE Life Insurance Chief Client Solutions Officer (July 2020 – Present) •Executive Vice President, Chief Risk Officer of Brighthouse Financial (December 2016 - May 2020) •Senior Vice President, Treasury and Investment Management at Ameriprise Financial (September 1991 - May 2016) •Mr. Hamalainen has over 25 years of experience in financial services. | Jeffrey D. Lorenzen*
| 56 | •Our Executive Vice President and Chief Risk Officer (January 2021 – Present), Executive Vice President and Chief Investment Officer (June 2015 – January 2021), and Senior Vice President and Chief Investment officer (2009 - June 2015) •Mr. Lorenzen has more than 30 years of experience in the life insurance industry. | | Dewayne Lummus | 52 | •Our Senior Vice President and Chief Accounting Officer (November 30, 2021 – Present) •Managing Director and Corporate Controller of Equitable Financial Life Insurance Company (November 2019 – November 2021) •Chief Financial Officer, Retail Financial Products at Teachers Insurance and Annuity Association of America (TIAA) (2015-2019) •Before 2015, Mr. Lummus was the deputy controller at TIAA and, prior to that, held various financial accounting and reporting positions with Voya (formerly ING), an insurance and financial services company. | | Phyllis Zanghi | 49 | •Our Executive Vice President, Chief Legal Officer and Secretary (April 1, 2021 – Present), Senior Vice President and General Counsel, U.S. Life Companies (October 2020 – Present), and Executive Officer (following the end of the fiscal year ended December 31, 2020) •Head of Tax and Associate General Counsel of Brighthouse Financial (August 2017 - October 2020) •Various positions including Senior Vice President of Tax and ERISA of Metropolitan Life Insurance Company (September 1998 - August 2017) •Ms. Zanghi has over 20 years of experience as a legal advisor in the life insurance industry. | Each executive's term of office with us ends no later than our Board meeting immediately following the Annual Shareholder Meeting. *Named executive officers. Asrequired by SEC rules, our former executives Ted M. Johnson and Tolga Uzuner are also named executive officers. |
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Compensation and Talent Management Committee Report Tolga UzunerThis report is furnished by the Company's Compensation and Talent Management Committee. The committee has reviewed the Compensation Discussion and Analysis ( (age 47) became an executive officerCD&A) in the Company’s 2022 proxy Statement and discussed it with management. Based on such review and discussion, the committee approved the CD&A and recommended that it be included in the 2022 proxy statement.
No portion of this report shall be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended (Securities Act), or the Securities Exchange Act of 1934, as amended (Exchange Act), through any general statement incorporating by reference in its entirety the proxy statement in which this report appears, except to the extent that the Company followingspecifically incorporates this report or a portion of it by reference. In addition, this report shall not be deemed to be "soliciting material" or to be "filed" under either the end ofSecurities Act or the fiscal year ended December 31, 2020. Mr. Uzuner has served as Chief Investment Officer, AssetExchange Act. Respectfully submitted, Compensation and Talent Management since January 2021. From May 2018 to January 2021, Mr. Uzuner was Chief Investment Officer of Austra Global, an investment management outsourcing company. Mr. Uzuner was a partner of Apollo Global Management from August 2013 to May 2018. Mr. Uzuner has over 20 years of investment management experience.Committee
A. J. Strickland, III, Chair Joyce A. Chapman Brenda J. Cushing
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Compensation Discussion and Analysis The Compensation Discussion and Analysis describes the Company’s compensation objectives and philosophy and our 2020 compensation program. It also reviews the outcomes, including the Company’s financial performance in 2020. Our named executive officers in 2020 were:
| Name: | | | Title: | | | John M. Matovina | | | Chairman, Chief Executive Officer and President | | | Anant Bhalla | | | Chief Executive Officer and President | | | Ted M. Johnson | | | Chief Financial Officer and Treasurer | | | Jeffrey D. Lorenzen | | | Executive Vice President and Chief Investment Officer | | | Renee D. Montz | | | Executive Vice President, General Counsel and Secretary | | | James L. Hamalainen | | | | | | Executive Vice President | | | | | | | | | | | | | | | | | | |
(1)
Mr. Matovina served as Chief Executive Officer and President of the Company until March 1, 2020 and January 27, 2020 respectively. Mr. Bhalla has served as Chief Executive Officer and President of the Company since March 1, 2020 and January 27, 2020, respectively.
1.What is our compensation philosophy?
(2)
Effective January 11, 2021, Mr. Lorenzen serves as Executive Vice President and Chief Risk Officer.
(3)
Ms. Montz resigned as Executive Vice President, General Counsel and Secretary on April 1, 2021 and continues to serve as legal advisor to the Chief Executive Officer and Chief Legal Officer until June 15, 2021 or an earlier date, if so determined under the terms of her separation agreement.
(4)
Effective January 11, 2021, Mr. Hamalainen serves as Executive Vice President and Chief Investment Officer, Insurance.
2020 Company Performance and Compensation Highlights
Excellent customer service teamed with the Company’s ability to offer innovative insurance products that provide principal protection and lifetime income continued to result in significant sales ofWe design our products despite the impact of the COVID-19 pandemic. In 2020, the Company’s sales were $3.7 billion which resulted in policyholder funds under management of $54.1 billion at December 31, 2020. We delivered net income available to common stockholders of $637.9 million, or $6.90 per common share-assuming dilution. Net income available to common stockholders was positively impacted by assumption updates related to the calculation of the change in fair value of embedded derivatives which was partially offset by the negative impact of assumption updates related to the calculations of deferred sales inducements, deferred policy acquisition costs and reserves held for lifetime income benefit riders. The most significant assumption updates in 2020 were to investment spread assumptions, including the net investment earned rate and crediting rates on policies due to the low interest rate environment experienced during 2020 and to lapse and partial withdrawal assumptions.
At our 2020 Annual Meeting of Shareholders, our shareholders cast an advisory vote (a “say-on-pay” vote) to approve the compensation of our named executive officers as disclosed in our proxy statement. Shareholders approved the say-on-pay proposal by an affirmative vote of 96% of the shares cast on that proposal.
Based on our 2020 annual performance achievements, the 2020 performance incentive cash payout for our Chief Executive Officer was 145% of his target amount and for our other named executive officers was 131%-142% of their target amounts. Based on our three-year performance achievements, our named executive officers (other than Messrs. Bhalla and Hamalainen) earned 128% of the target number of performance-based RSUs awarded to them for the 2018-2020 three-year performance period.
Compensation Philosophy and Overview
Our compensation policies and programs are designed to:
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attract and retain highly qualified and motivatedhigh-performing executive officers and employees;
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encouragemotivate and reward achievement of our annual and long-term goals;goals in pursuit of our business strategies; and
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align executive officers and employees interests with shareholders through stock-based compensation and stock ownership.ownership requirements.
2.What are our compensation practices? ☑We have a pay-for-performance culture. We determine our executives' compensation awards and payouts by our corporate and individual performance against financial and other goals aligned with our business strategies. ☑We base most of our executives' incentive awards on the value of our common stock. ☑We require our executives to continue in service over the course of years to receive long-term incentive payments. ☑We require our executives to own stock at amounts determined by their management level; they may not sell most of the net shares we have paid them until they do so. ☑We have a repayment policy that provides for clawback of executive incentive compensation overpayment when we have restated our financial statements due to wrongdoing. ☒ We do not provide incentives for our employees to take excessive risk; we use multi-year performance to determine long-term incentive payouts, and we have limits for payouts above maximum levels of returns. ☒ We do not allow employees to pledge, hedge, or borrow against our common stock. ☒ We do not provide defined benefit pension benefits or any supplemental executive retirement plan. ☒ We do not reprice or exchange underwater stock options, and may not do so without shareholder approval. ☒ We do not provide for any excise tax payment or tax gross-up for change-in-control related payments or provide tax gross-up for any perquisites or in-kind benefits. ☒ We do not offer our executives excessive perquisites.
| | | | | | | | | | | | | 20212022 Proxy Statement | | | 17 | |
Elements.3. The primaryWhat are the elements of our executives' compensation, forand why?
•We use base salary as a fixed form of compensation, and determine it using scope of responsibilities, individual performance and experience, and competitive data. We consider competitive data, each executive’s performance, length of service in the position and experience in determining base salaries. We increased Mr. Hamalainen's salary rate by 10%, effective January 1, 2022. We did not increase any of the other named executive officers for 2020 include: base pay; annual cash incentive compensation underofficers' salary rates at that time. •We use our Short-Term Performance Incentive Plan (the “Short-Term Plan”); and long-term equity incentive compensation through performance-based RSUs, time-based RSUs, performance-based options and time-based options granted under our 2016 Employee Incentive Plan (the “2016 Employee Incentive Plan”) and ourAmerican Equity Investment Life Holding Company Amended and Restated EquityShort-Term Incentive Plan (the “Amended(STIP) to motivate and Restatedreward performance relative to American Equity Incentive Plan”). The 2016 Employee Incentive Plan and individual goals during the Amendedperformance year that contribute to our long-term strategic success. We pay STIP awards in cash. •We use long-term incentives to reward executives for enduring success against key financial measures over time. We also use them to encourage executives to remain with us, as each vests only over the course of years. We pay most long-term incentives in shares of our common stock, which further directly aligns executives' interests with our shareholders. •We use severance pay and Restated Equity Incentive Plan are collectively, the (“Long-Term Plans”). | Element | | | Description | | | Purpose | | | Base Salary | | | Fixed level of annual cash compensation and basis for target incentive compensation awards | | | Compensate for job duties based on skill, tenure and market information | | | Annual Incentive | | | Targeted variable/at-risk compensation expressed as a percentage of base salary | | | Focus executives on annual corporate goals through performance-based pay | | | Long-Term Incentive | | | Variable/at-risk equity compensation in the form of RSUs based on three-year performance, time-based RSUs and time-based and performance-based stock options. | | | Align executives’ interests with shareholder interests and long-term results and promote retention | |
Program Highlights / Best Practicesrelated benefits to obtain a release of claims and smoother talent transitions.
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We use change-in-control benefits to retain key executives during potential corporate transactions and promote their focus on maximizing shareholder value during and after such a transaction. Pay for performance philosophy demonstrated through significant compensation opportunity•We provide executives with limited perquisites, principally in the form of transportation that maximizes their availability to provide services to us and to lead our business, or in the form of benefits to facilitate their relocation to our Des Moines, Iowa area headquarters.
•We use a broad-based 401(k) program to provide all of our eligible employees with an opportunity to save a portion of current compensation for retirement and other future needs and incent such savings with a company matching contribution. We also use a broad-based employee stock ownership plan (ESOP) to provide all of our eligible employees a stake in our common stock. All employees are eligible for health, dental, long-term disability, and life insurance in order to help them manage these risks for themselves and their families, and in order for us to compete for talent with other employers offering such benefits.
4.What mix of compensation elements do we use, and why? We use a mix of compensation for executives in order to promote a balance of retention, reward, and alignment. We allocated the overwhelming majority of our compensation for active named executive officers related to 2021 performance and service to incentive compensation rather than fixed pay. See the Executive Compensation section of "American Equity At-a-Glance," incorporated by reference into this CD&A, for an illustration. The value of the overwhelming majority of 2022 long-term incentive opportunities are subject to achievement of performance goals. A like overwhelming majority of these opportunities are stock-based. See the Executive Compensation section of the "American Equity At-a-Glance," incorporated by reference into this CD&A, for an illustration. We do not determine our 401(k) or ESOP benefits in relation to any of these compensation elements. Nor does compensation we granted for prior periods generally influence our decisions on new grants.
5.What were our key executive compensation measures for 2021, and why? We set 2021 goals for: •annuity deposits because we emphasize the quality of new business originated. Our strategy emphasizes our fixed index annuity business, and this goal helped strengthen that focus; •operating income per share, which excludes items that fluctuate unrelated to our core operational performance, such as the impact of fair value accounting for our fixed index annuity business that are not economic in nature but rather impact the timing of reported results, in order to emphasize profitable growth and to strengthen alignment with our shareholders (we also excluded index credits to reduce market-driven volatility unconnected from management decisions and efforts and notable items in order to better reflect our ongoing, underlying earnings potential, to provide an appropriate incentive for management actions and performance without factors that could exaggerate or reduce results for unrelated reasons, and to better align with investor expectations);
•investment spreads, which motivates senior leaders to manage the cost of money through rate setting on the one hand, and to manage book yield through investment activities on the other hand; and •individual goals that allow us to incent management behaviors particular to each executive that contribute to our overall performance.
6.What was our performance in 2021 against key compensation measures, and how did it produce performance factors for 2021 performance-based compensation payouts? •Our annuity deposits were $5.97 billion. We delivered operating income available to common stockholders, excluding index credits, of $2.62 billion and investment spread of $1.186 billion. •We produced this strong performance by, among other things, increasing fixed income annuity sales, investment portfolio private assets, and reinsurance. See the Executive Compensation section of American Equity At-a-Glance, incorporated by reference into this CD&A, for more details on our 2021 performance. •The three financial metrics above accounted for 70% of each executive's STIP opportunity. The remaining 30% was based on personal objectives, as summarized below: | | | | | | | | | | Executive Officer | Key Individual Performance Results | Resulting Individual Performance Factor | | Anant Bhalla | •Closed critical reinsurance transaction with Brookfield’s Cayman-based reinsurer with reserves split across in–force and new business. Set up captive insurance company in Vermont and closed reinsurance transaction with Hannover related to restructuring of legacy redundant reserve financing. •Demonstrated ability to operate and execute in multiple regulatory jurisdictions (Iowa, Vermont, Bermuda, Cayman). •In excess of $3.4 billion of 2021 sourced private assets on balance sheet, generated above maximum revenue goal while de-risking the portfolio in aggregate at the same time. •AEL CARES program implemented, providing a greater emphasis on donating to Diversity, Equity and Inclusion Initiatives. •Hired a new Chief Financial Officer and Chief Legal Officer and oversaw successful talent transitions for the Chief Investment Officer and Chief Risk Officer. | 200% of target | | Axel André | •Fast assimilation into the role and organization as a leader with fast transition from CEO / Interim-CFO. •Quickly assessed talent and made necessary talent decisions (e.g. Treasurer change, Chief Accounting Officer hire, Financial Planning & Analysis change). •Built out internal controls capability. | 133.3% of target | | James L. Hamalainen | •Launched three new competitive products that generated over $800 million in sales. •Executed a significant outsourcing project by taking on a $45 billion migration of assets from an internal team to Blackrock, in a seamless manner and putting more than $4 billion of cash to work with Blackrock. •In excess of $3.4 billion of 2021 sourced private assets on balance sheet, generated above maximum revenue goal while de-risking the portfolio in aggregate at the same time. | 183.3% of target | | Jeffrey D. Lorenzen | •$358M single family rental established with block trade + $1 billion Anchor loan block trade against a $500 million target. •Bermuda reinsurance entity fully executed and three capital efficient structured asset classes models developed and structure stress-tested. | 133.3% of target | | Ronald J. Grensteiner | •Focused on quality of sales. •Added 165 new Million Dollar Producers. | 100.0% of target |
•Because we exceeded our annual performance targets, and in light of their individual performance against their own goals, we made our Chief Executive Officer a STIP payout of 179% of his target, and we made payouts to our other active named executive officers of 149%-174% of their respective target amounts.
7.What compensation measures will we use for 2022-2024 long-term incentives, and why? We set goals for 2022-2024 Performance Restricted Stock Units (Performance RSUs) for: •observable increased fee revenue or capital release from reinsured liabilities, in order to ensure a focus on this key measure of growth of capital-light recurring fee-based revenues; and •operating return on average equity (excluding all other comprehensive income and Statement of Financial Accounting Standards (FAS) 133), because our management team's effective use of investors' capital is critically important. We selected reinsured liabilities to focus our executives on our critical strategy to grow capital-light recurring fee-based revenues. We selected return on equity to focus our executives on profitable and efficient growth and align them with shareholders' interests. We will weigh each metric at 50% of the total opportunity. We make the same exclusions to produce operating income to calculate return on equity for the same reasons we do so for annual performance. We exclude all other comprehensive income and FAS 133 from stockholders' equity to reduce market-driven volatility unconnected from management decisions and efforts. We set goals for 2022-2024 Deferred Long-Term Incentive Cash Plan awards for the return on 2022 private asset investments to encourage management to select private asset investments to produce strong medium- and long-term returns. We expect to disclose our performance against these long-term compensation measures in our first CD&A following the end of the three-year performance period.
8.What is a holistic view of the Committee's compensation decisions related to 2021 performance? We report this information on a basis different from the Summary Compensation Table, which shows information in the manner required of all companies by SEC rules. The Compensation and Talent Management Committee valued each element of compensation for each executive, and considered those elements in relation to one another, in February 2022 as follows: | | | | | | | | | | | | | | | | Name | Salary
($) | Short-Term Incentive
($) | Long-Term Incentive Opportunity
($) | Total Compensation
($) | | Anant Bhalla | 1,000,000 | | 2,684,702 | | 4,500,000 | | 8,184,702 | | | Axel André | 600,000 | | 530,515 | | 1,200,000 | | 2,330,515 | | | James L. Hamalainen | 550,000 | | 608,930 | | 990,000 | | 2,148,930 | | | Jeffrey D. Lorenzen | 508,000 | | 565,333 | | 635,000 | | 1,708,333 | | | Ronald J. Grensteiner | 500,000 | | 670,411 | | 625,000 | | 1,795,411 | |
We report the salary rate effective early 2022; we increased only Mr. Hamalainen's rate at that time. We report the STIP award for 2021 performance. We prorated Mr. André's award based on time in role in 2021. The long-term incentive amounts: •are the committee's compensation value of long-term incentive opportunities, the dollar amount that the committee divided among initial value of shares under stock-based awards and initial deferred cash award. •are unvested and may never be paid, and are subject to performance goals or stock value, or both. •are not reflected in the Summary Compensation Table for 2021. Rather, the stock-based awards will appear at Grant Date Fair Value in the 2023 proxy statement (for those executives named in that document), and the deferred cash long-term incentives will appear after determined. The total above is not calculated on the same basis as the "Total" column in the Summary Compensation Table.
9.What performance factors did we determine and apply for 2019-2021 performance-based long-term incentive three-year performance-based RSUs,compensation payouts? •As we illustrate in American Equity At-a-Glance (incorporated in this CD&A by this reference), our overall performance was, in aggregate, above target. •Our performance for operating return on average equity was between threshold and performance-basedtarget, and between target and maximum for average annual book value per share growth, for a total performance factor of 113.98%. (Target performance in both measures would have generated a performance factor of 100%, and at maximum would have generated 150%.) We excluded notable items from operating return on average equity; see the answer to question 5 above. We also excluded accumulated other comprehensive income (AOCI) from book value per share because it fluctuates unrelated to our core operational performance due to unrealized changes in the fair value of available-for-sale securities, in order to emphasize profitable growth and to strengthen alignment with our shareholders. •As a result, Mr. Grensteiner and Mr. Lorenzen, each earned 113.98% of the shares in their award. As we hired Mr. Bhalla, Mr. André, and Mr. Hamalainen after 2019, we had not granted them any 2019-2021 Performance RSUs.
10.What sign-on and other one-off compensation do we pay, and why? From time to time, we use sign-on payments and grants to attract the talent we need to reach our business goals. When we use cash payments, we require the executive to repay the full amount unless the executive remains with us for a prescribed term of at least one year. When we use grants of stock-based awards, we require the executive to remain with us for up to three years for the award to fully vest; in many cases, we use stock options, grantedwhich have no value whatsoever unless our common stock price increases. In so doing, we create a retention incentive and align the executive's interests with those of shareholders. Some of our executives received "Special Performance Vesting Stock Option Grants" in early 2021. For information on those grants, see our 2021 Proxy Statement.
11.What are our arrangements related to drive achievementseverance and change-in-control, and why? We use severance pay and related benefits to obtain a release of AEL 2.0 strategy.claims and smoother talent transitions. Our severance plan applies only in the case of involuntary termination of employment, which encourages retention. It determines severance pay based on a fixed formula that takes account of the employee's salary rate and either management level or number of years of employment, which rewards lengthier service. Depending on whether the employee has served a sufficient portion of the performance year, severance may also include a pro rata portion of STIP opportunity. We use change-in-control benefits to retain key executives during potential corporate transactions and promote their focus on maximizing shareholder value during and after such a transaction. Such severance is payable only in connection with the end of an executive's employment following a change in control. In no event is any executive's payment grossed-up on account of any excise or income taxes.
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Stock
12.What are our stock ownership guidelines, and post-vesting holding requirements.why? In order to further align our executives' interests with those of our shareholders, we require them to own a meaningful stake in our common stock. Our Chief Executive Officer must own five (5) times base salary rate, and must retain at least 75% of net shares acquired from settlement of stock awards or stock option exercises until meeting that requirement. Other executives must own three (3) times base salary rate and retain at least 50% of such net shares in like circumstances. We include time-based RSUs (Time RSUs) and one-third of exercisable stock options among the forms of stock ownership, and measure it annually at year-end using the highest price within the past twelve (12) months.
As of April 12, 2022, our Chief Executive Officer's ownership, and each of our other active named executive officers' ownership, was above the required ownership level (except for Mr. André, who joined us in 2021).
13.What are our policies on hedging, pledging, and recoupment, and why? We prohibit our executives from pledging, hedging, or similar arrangements for our common stock that lock in value without the full risks and speculationrewards of stock ownership. We also prohibit them from buying our common stock on margin or borrowing against any account in which they own our securities.common stock. In so doing, we aim to preserve the shareholder alignment from executive stock ownership.
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Clawback provisionsOur incentive compensation repayment policy applies if we should restate our financial statements due to material non-compliance with any financial reporting requirements under the federal securities laws due to embezzlement, fraud, breach of fiduciary duty, misconduct or gross negligence, and if it includes the restatement of a material incentive performance measure or target. In such a case, we may recalculate any amount of incentive compensation of current or former employees who were executives at the time covered by the restatement, forfeit such unearned amounts, and require reimbursement of such paid amounts. This policy advances our pay for cash and equity performance-basedperformance practices by clawing-back unearned incentive compensation.
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No repricing or exchange of underwater stock options without shareholder approval.
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No tax gross-ups upon our change in control.
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Limited perquisites for executive officers.
External Market Data.14.What are our stock-based award timing practices?
We do not grant awards to current or new employees in anticipation of the release of non-public information about us or any other company. We grant our executives annual stock-based awards in late February or early March. In doing so, we divide a compensation dollar value by the grant date closing price of our stock to determine the number of shares underlying the award and any stock option exercise price. We release our fourth quarter and full year financial results by mid-February, giving the market several days' time to digest this information before we make grants. On the rare occasions when we grant awards in connection with hiring an executive, we do so coincident with the hiring.
15.What are our compensation risk management practices? Each year, we analyze our compensation practices to ensure they do not provide incentives to take excessive risk. For 2022, we reviewed our corporate incentive compensation, including each of the compensation programs in which our executives participated and compensation specifically for employees who focus on sales origination. For each, we considered factors such as the performance measures, how payments are determined, the length of performance periods, and management controls designed to monitor and mitigate risks. As a result, we concluded that our compensation programs are not reasonably likely to have a materially adverse effect on us. We discussed our review and conclusions with our Compensation and Talent Management Committee.
16.How do we make our compensation decisions? In preparation for each year's compensation decisions: •Late in each year, our Chief Executive Officer proposes total STIP and long-term incentive opportunities for each executive for the following fiscal year to our Compensation and Talent Management Committee, based on budget, business conditions, and competitive compensation considerations. The committee, advised by our Chief Executive Officer, and its own independent consultant, considers the proposal and, if it agrees, approves it. •Early each year, our Chief Executive Officer meets with our Chief Financial Officer and others to determine the corporate financial goals for that fiscal year and for the coming three-year period in light of our strategy and other factors, such as business conditions, regulatory conditions, and market conditions, and discusses those goals with our Board. Based on those goals, our Chief Financial Officer proposes the corporate financial goals applicable to each executive for STIP and long-term incentive opportunities for that fiscal year and three-year period to our Compensation and Talent Management Committee. The committee, advised by our Chief
Executive Officer, Chief Financial Officer, Chief Legal Officer, and its own independent consultant, considers the proposal and, after make any changes it determines, approves it. •Our Chief Executive Officer prepares a draft of his or her own individual goals for that fiscal year in light of the executive's particular role, our strategy and other factors, such as business conditions, regulatory conditions, and market conditions. The Compensation and Talent Management Committee, advised by our Chief Human Resources Officer and its own independent consultant, considers the proposal and, after making any changes it determines, approves it. •Our Chief Executive Officer also meets with each executive early in each year to set individual goals for that executive for that fiscal year in light of the executive's particular role, our strategy, and other factors such as business conditions, regulatory conditions, and market conditions. Our Chief Human Resources Officer advises our Chief Executive Officer and other executives as they determine these goals. In order to make each year's compensation decisions: •Following each year, our Chief Financial Officer presents our performance results against corporate financial goals for that fiscal year and for the three-year period just ended, and the performance factors produced under STIP and each long-term incentive program by those results. The committee, advised by our Chief Financial Officer and its own independent consultant, considers the performance factor results and, if it agrees they are accurate, approves them. •Also following each year, our Chief Executive Officer reviews and rates the performance of each of our officers for the prior year, except for himself. Our Chief Human Resources Officer advises our Chief Executive Officer in this, except with respect to the performance of the Chief Human Resources Officer him or herself. Our Chief Executive Officer also meets with our Compensation and Talent Management Committee to discuss these ratings and the bases for them. The committee, advised by our Chief Executive Officer, the Chief Human Resources Officer (except with respect to his or her rating) and its own independent consultant, considers the ratings and, if it agrees, approves them. We use those individual ratings, as well as the corporate financial performance, to determine each executive's STIP award for that year. •In addition, following each year, our Chief Executive Officer reviews his or her own performance and drafts a description of accomplishments. The Compensation and Talent Management Committee, advised by our Chief Human Resources Officer and its own independent consultant, considers the description and a performance rating our Chief Human Resources Officer proposes, and changes it or approves it as proposed. We use that individual rating, as well as the corporate financial performance, to determine the Chief Executive Officer's STIP award for that year. Our Chief Human Resources Officer and the committee's independent consultant also discuss survey and benchmarking data related to executive compensation and other topics of interest from time to time. No executive has the authority to approve his or her own compensation or to grant STIP or long-term incentive awards to any executive officer.
17.What compensation market data do we review, and why? •Our Compensation and Talent Management Committee reviews and considers external market data provided by its independent consultant. For 2020,2021, the Compensation Committee engagedcommittee asked its independent consultant, Pearl Meyer, to conduct a study and provide advice and data with respect to compensation benchmarking and market practices for the Company’s named executive officers.our executives. Pearl Meyer provided a new complete study and report in the fourth quarter of 20192020 for use with all 20202021 compensation decisions.
•To develop a blended market consensus on base salary, target total cash compensation and target total direct compensation for the position of each named executive officer, Pearl Meyer utilized proxyused data from twelvethirteen publicly traded insurance companies, and compensation surveys, with a focus on financial services and insurance companies.companies, that it considers appropriate, and reviewed this list with the Compensation and Talent Management Committee. The twelve insurancethirteen companies it included in our peer group are shown below:were: | | | | | | | | | | AllianceBernstein Holding L.P. | | Horace Mann Educators Corporation | | American Financial Group, Inc. | | | Globe Life Inc. | Invesco Ltd. | | American National Group, Inc. | | | Horace Mann EducatorsKemper Corporation | | | Athene Holding Ltd. | | | Kemper Corporation | | | CNO Financial Group, Inc. | | | National Western Life Group, Inc. | | | FBL Financial Group, Inc. | | | Primerica, Inc. | | Brighthouse Financial, Inc. | FGL Holdings | | | Reinsurance Group of America, Incorporated | CNO Financial Group, Inc. | | Voya Financial, Inc. | | Globe Life Inc. | | |
For positions with a peer group and survey data source, •Pearl Meyer arrives at market consensus compensation that is equally weighted using the peer group and survey data. For positions having only a survey data source, Pearl Meyer uses the survey data to arrive at market consensus compensation. Pearl Meyer focused on companies having total
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assets targeted at $67 billion. Pearl Meyer usesalso used a variety of surveys with industry specific pay data for companies of similar size but neither management nor thethat it considers appropriate, without direction from management.
•Our Compensation and Talent Management Committee is aware of the specific surveys used or the specific companies that participate in the surveys. In using this external market data, the Compensation Committee’sanchored its pay positioning strategy is anchored at the 50th percentile of market consensus for base salary, target total cash compensation and target total direct compensation, but with competitive ranges that are wider forcompensation. For target total cash compensation and target total direct compensation. Thecompensation, the committee set competitive range isranges of 90-110% of the 50th percentile for base salary and 80%-120% of the 50th percentile for target total cash compensation and target total direct compensation. ThisThe competitive ranges allow for various levels of experience and tenure.
•The committee's strategy helps achieve pay and performance alignment with pay above the 50th percentile when performance goals are exceeded and below the 50th percentile when performance goals are not achieved. The competitive ranges allow for various levels of experience •Our Compensation and tenure. ThisTalent Management Committee reviews many factors in considering compensation decisions, this external market data is onlybeing just one of manythem. The committee also considers factors reviewed and considered by the Compensation Committee, with other relevant factors includingsuch as company performance, individual executive performance, individual executive experience, internal pay equity, executive retention, and succession planning. Accordingly, the committee does not necessarily set every pay element or individual executive pay level isfor each executive at the targeted market level. Pay Mix.
Based
18.What were our on say-on-pay results, and how did we consider them? At our 2021 annual shareholder meeting, our shareholders approved the annual compensation established under his offer letter, approximately 81% of Mr. Bhalla’s total annual compensation was considered variable based on achieving performance objectives. Taking into account the special bonus payable to Mr. Bhalla awarded in November 2020 and described below, 71% of Mr. Bhalla’s compensation for 2020 was considered variable based on achieving performance objectives. For 2020, with respect to each of our named executive officers in office on the last day of the year other than Mr. Bhalla, 68%-69% of target annual compensation is considered variable based on achieving performance objectives. Variable forms of compensation included in setting target annual compensation included amounts payable under the Short-Term Plan, performance-based RSUs and performance-based options. In addition, the mix of compensation for 2020 for the named executive officers other than the Chief Executive Officer as a group is well aligned with market data included in Pearl Meyer’s 2019 report. Compensation Elements and Decisions for 2020
CEO Transition. In January 2020, Mr. Bhalla was appointed as the Company’s President, and effective March 1, 2020 he was appointed to Chief Executive Officer. Under his offer letter, Mr. Bhalla was provided (i) an annual base salary of $850,000, (ii) a target annual bonus opportunity of 150%, and a maximum annual bonus opportunity of 300%, of his base salary, and (iii) an ability to receive annual equity grants under the Long-Term Plan equal to 275% of his base salary. These levels of base salary, target annual incentive and target long-term incentive placed Mr. Bhalla’s total target cash compensation and total target direct compensation within the competitive range and below the 50th percentile of the market consensus level based on the Pearl Meyer 2019 report. In addition, as part of the inducement for him to join the Company, Mr. Bhalla was granted (i) an option to purchase 50,000 shares of the Company’s Common Stock which vests on the fifth anniversary of the date of grant, and (ii) a grant of time-based RSUs with an aggregate value of $500,000, which vest in two equal annual installments on the first and second anniversaries of his commencement of employment, each subject to his continued employment through the applicable anniversary date.
For the period (March 1, 2020 to April 15, 2020) during which Mr. Matovina served as an employee following his resignation as Chief Executive Officer, his annual rate of base salary was reduced from $900,000 to $652,000, reflecting his reduced role. In anticipation of the transition of the Chief Executive Officer position, Mr. Matovina was not awarded any grants under the Long-Term Plan in 2020. As part of this transition, Mr. Matovina was awarded a special one-time retention bonus of $853,125 in consideration for his remaining an employee through April 15, 2020 to facilitate the smooth transition of his duties to Mr. Bhalla. The amount of the bonus took into account that Mr. Matovina would not receive any incentive compensation in respect of his services as an officer or employee during 2020.
Base Salary. In addition to the data provided by Pearl Meyer, in determining specific salaries for the named executive officers for 2020, the Compensation Committee considered each executive’s performance, length of service in the position and experience. In November 2019, the Compensation Committee approved modest increases of approximately 3% in the base salaries of all of the named executive officers (other than Mr. Matovina) thenwe disclosed in office to be effective January 1, 2020. These increases for our named executive officers were consistent with the percentage increase provided to our employees generally, and the increased amounts for named executives remained within the competitive range2021 Proxy Statement by an affirmative vote of 96.9% of the 50th percentile ofvotes cast. The vote was advisory and non-binding. However, our Compensation and Talent Management Committee discussed and considered the market consensus levels.vote in connection with its annual compensation decisions.
Short-Term Incentive Compensation for 2020.
In November 2019, the Compensation Committee approved the structure of the short-term cash incentive compensation program for 2020 (the “2020 Program”). Under the 2020 Program, each named executive officer had a threshold, target and maximum incentive opportunity expressed as a percentage of base salary as of December 31, 2020. Mr. Bhalla’s target total cash compensation for 2020 was
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Summary Compensation Table | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | Year | Salary
($) | Bonus
($) | Stock Awards ($) | Option Awards
($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total
($) | Anant Bhalla Chief Executive Officer & President, and former interim Chief Financial Officer | 2021 | 1,000,000 | | — | | 2,267,068 | | 1,596,052 | | 2,684,702 | | 78,004 | | 7,625,826 | | | 2020 | 795,512 | | 1,107,681 | | 2,854,608 | | 2,914,434 | | 1,716,537 | | 28,388 | | 9,417,160 | | Axel André Chief Financial Officer | 2021 | 191,527 | | 200,000 | | — | | 400,000 | | 530,515 | | 9,649 | | 1,331,692 | | Jeffrey D. Lorenzen Executive Vice President & Chief Risk Officer | 2021 | 508,000 | | — | | 569,600 | | 324,035 | | 565,333 | | 12,972 | | 1,979,941 | | | 2020 | 508,000 | | — | | 753,698 | | 489,950 | | 464,304 | | 22,678 | | 2,238,630 | | | 2019 | 493,000 | | — | | 682,881 | | — | | 575,947 | | 13,012 | | 1,764,840 | | Ronald J. Grensteiner President, American Equity Investment Life Insurance Company | 2021 | 500,000 | | — | | 485,901 | | 296,130 | | 670,411 | | 13,521 | | 1,965,964 | | | 2019 | 566,000 | | — | | 781,448 | | — | | 661,229 | | 13,855 | | 2,022,532 | | James L. Hamalainen Executive Vice President, Chief Investments Officer & Chief Client Solutions Officer | 2021 | 500,000 | | — | | 560,980 | | 181,247 | | 608,930 | | 11,887 | | 1,863,044 | | | 2020 | 242,939 | | 107,412 | | 480,081 | | 1,224,896 | | 497,096 | | 12,562 | | 2,564,986 | | Ted M. Johnson Former Chief Financial Officer | 2021 | 311,864 | | — | | 639,987 | | 207,711 | | — | | 9,937 | | 1,169,498 | | | 2020 | 573,000 | | — | | 847,924 | | 489,953 | | 536,247 | | 15,383 | | 2,462,507 | | | 2019 | 556,000 | | — | | 767,960 | | — | | 649,546 | | 13,772 | | 1,987,278 | | Tolga Uzuner Former Chief Investment Officer | 2021 | 319,070 | | — | | 721,880 | | 1,380,626 | | — | | 537,748 | | 2,959,324 | |
See the consolidated explanatory text following the Grants of Plan-Based Awards table.
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Grants of Plan-Based Awards in 2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options
(#) | Exercise or base price of option awards
($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) | | Name | Grant
Date | Threshold
($) | Target
($) | Maximum
($) | | Threshold
(#) | Target
(#) | Maximum
(#) | | Anant Bhalla | 2/25/2021 | — | | — | | — | | | — | | — | | — | | 27,372 | | — | | — | | 749,993 | | | 2/25/2021 | — | | — | | — | | | 27,373 | | 54,745 | | 109,490 | | — | | — | | — | | 1,500,013 | | | 1/4/2021 | — | | — | | — | | | — | | 43,724 | | — | | — | | — | | 26.72 | | 418,439 | | | 1/4/2021 | — | | — | | — | | | — | | 43,723 | | — | | — | | — | | 26.72 | | 427,611 | | | 2/25/2021 | — | | — | | — | | | — | | — | | — | | — | | 96,246 | | 27.40 | | 750,003 | | | 6/30/2021 | — | | — | | — | | | — | | — | | — | | 528 | | — | | — | | 17,062 | | | 1/1/2021 | 750,000 | | 1,500,000 | | 3,000,000 | | | — | | — | | — | | — | | — | | — | | — | | | Axel André | 9/7/2021 | — | | — | | — | | | — | | — | | — | | — | | 43,909 | | 32.35 | | 400,000 | | | 9/7/2021 | 166,849 | | 333,699 | | 667,397 | | | — | | — | | — | | — | | — | | — | | — | | | Jeffrey D. Lorenzen | 2/25/2021 | — | | — | | — | | | — | | — | | — | | 6,721 | | — | | — | | 184,155 | | | 2/25/2021 | — | | — | | — | | | 6,721 | | 13,442 | | 26,884 | | — | | — | | — | | 368,311 | | | 6/2/2021 | — | | — | | — | | | — | | 5,650 | | — | | — | | — | | 31.63 | | 68,930 | | | 6/2/2021 | — | | — | | — | | | — | | 5,649 | | — | | — | | — | | 31.63 | | 70,951 | | | 2/25/2021 | — | | — | | — | | | — | | — | | — | | — | | 23,632 | | 27.40 | | 184,154 | | | 6/30/2021 | — | | — | | — | | | — | | — | | — | | 462 | | — | | — | | 14,944 | | | 12/31/2021 | — | | — | | — | | | — | | — | | — | | 56 | | — | | — | | 2,191 | | | 1/1/2021 | 177,800 | | 355,600 | | 711,200 | | | — | | — | | — | | — | | — | | — | | — | | | Ronald J. Grensteiner | 2/25/2021 | — | | — | | — | | | — | | — | | — | | 5,703 | | — | | — | | 156,262 | | | 2/25/2021 | — | | — | | — | | | 5,703 | | 11,405 | | 22,810 | | — | | — | | — | | 312,497 | | | 6/2/2021 | — | | — | | — | | | — | | 5,650 | | — | | — | | — | | 31.63 | | 68,930 | | | 6/2/2021 | — | | — | | — | | | — | | 5,649 | | — | | — | | — | | 31.63 | | 70,951 | | | 2/25/2021 | — | | — | | — | | | — | | — | | — | | — | | 20,051 | | 27.40 | | 156,249 | | | 6/30/2021 | — | | — | | — | | | — | | — | | — | | 455 | | — | | — | | 14,709 | | | 12/31/2021 | — | | — | | — | | | — | | — | | — | | 63 | | — | | — | | 2,434 | | | 1/1/2021 | 225,000 | | 450,000 | | 900,000 | | | — | | — | | — | | — | | — | | — | | — | | | James L. Hamalainen | 2/25/2021 | — | | — | | — | | | — | | — | | — | | 6,615 | | — | | — | | 181,251 | | | 2/25/2021 | — | | — | | — | | | 6,615 | | 13,230 | | 26,460 | | — | | — | | — | | 362,502 | | | 2/25/2021 | — | | — | | — | | | — | | — | | — | | — | | 23,259 | | 27.40 | | 181,247 | | | 6/30/2021 | — | | — | | — | | | — | | — | | — | | 379 | | — | | — | | 12,257 | | | 12/31/2021 | — | | — | | — | | | — | | — | | — | | 128 | | — | | — | | 4,970 | | | 1/1/2021 | 175,000 | | 350,000 | | 700,000 | | | — | | — | | — | | — | | — | | — | | — | | | Ted M. Johnson | 2/25/2021 | — | | — | | — | | | — | | — | | — | | 7,581 | | — | | — | | 207,719 | | | 2/25/2021 | — | | — | | — | | | 7,581 | | 15,161 | | 30,322 | | — | | — | | — | | 415,411 | | | 2/25/2021 | — | | — | | — | | | — | | — | | — | | — | | 26,655 | | 27.40 | | 207,711 | | | 6/30/2021 | — | | — | | — | | | — | | — | | — | | 522 | | — | | — | | 16,856 | | | 1/1/2021 | 200,550 | | 401,100 | | 802,200 | | | — | | — | | — | | — | | — | | — | | — | | | Tolga Uzuner | 2/25/2021 | — | | — | | — | | | — | | — | | — | | 8,782 | | — | | — | | 240,627 | | | 2/25/2021 | — | | — | | — | | | 8,782 | | 17,564 | | 35,128 | | — | | — | | — | | 481,254 | | | 1/15/2021 | — | | — | | — | | | — | | 50,000 | | — | | — | | — | | 30.50 | | 562,500 | | | 1/15/2021 | — | | — | | — | | | — | | 50,000 | | — | | — | | — | | 30.50 | | 577,500 | | | 2/25/2021 | — | | — | | — | | | — | | — | | — | | — | | 30,879 | | 27.40 | | 240,626 | | | 1/11/2021 | 220,000 | | 440,000 | | 880,000 | | | — | | — | | — | | — | | — | | — | | — | |
See the consolidated explanatory text following this table.
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targeted at 91% of the 50th percentile of the market consensus level and the target total cash compensation for each of the other named executive officers was within the competitive range of the 50th percentile of the market consensus level.The short-term incentive compensation for fiscal year 2020 was paid based on achievement of threshold, target and maximum performance goals approved by the Compensation Committee. The 2020 Performance Measures were annuity deposits, non-GAAP operating income per share, and investment spread (the “2020 Company Performance Measures”) and for each named executive officer other than Mr. Bhalla, individual performance goals. Each 2020 Company Performance Measure is weighted at 33 1/3% for Mr. Bhalla, and at 25% for each other named executive officer entitled to a short-term incentive, with the remaining 25% of the award opportunity based on individual goals related to their respective areas of responsibility. The 2020 Company Performance Measures encompass key areas of Company performance that drive shareholder value and focus on growth in policyholder funds under management and financial performance.The 2020 Company Performance Measures were the same performance measures used in the prior year, with the exception of excluding the impact of actuarial assumption updates when determining non-GAAP operating income per share and the elimination of other than temporary impairments and realized losses as a performance measure. The determination to exclude the impact of actuarial assumption updates when determining non-GAAP operating income per share was made by the Compensation Committee in September 2020 due to changes in interest rates which are not within the control of management and have significant impact on actuarial assumptions.
Non-GAAP operating income per share excluding the impact of actuarial assumption updates is a performance measure used in our 2020 Program which is not a financial measure prepared in accordance with GAAP. For information on how we compute this non-GAAP financial measure please refer to Item 6. Selected Consolidated Financial Data and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Under the 2020 Program, threshold, target and maximum award opportunities for fiscal year 2020 were 75%, 150% and 300% of base salary, respectively, for Mr. Bhalla and 35%, 70% and 140% of base salary, respectively, for each other named executive officer entitled to receive a bonus under the 2020 Program.
The following table shows our targets and achievement for the Company Goals for 2020:
| | Metric | | | Threshold | | | Target | | | Maximum | | | Actual | | | | Annuity Deposits ($ millions) | | | | $ | 2,588 | | | | | $ | 3,450 | | | | | $ | 4,313 | | | | | $ | 3,682 | | | | | Non-GAAP Operating Income Per Share
Excluding the Impact of Actuarial Assumption Updates | | | | $ | 2.72 | | | | | $ | 3.63 | | | | | $ | 4.54 | | | | | $ | 4.44 | | | | | Investment Spread ($ millions) | | | | $ | 1,086 | | | | | $ | 1,237 | | | | | $ | 1,387 | | | | | $ | 1,266 | | |
For Mr. Bhalla, actual performance resulted in an award of 216% of his base salary as of December 31, 2020. For each of the named executive officers with individual performance objectives, such objectives resulted in awards expressed as a percentage of base salary as of December 31, 2020 ranging from 91%-99%. The amounts awarded to each named executive officer for 2020 are included inUnderstanding the Summary Compensation Table appearing in the Executive Compensation Tables section of this proxy statement.
Special Bonus Award for Mr. Bhalla. In November 2020, the Compensation Committee awarded Mr. Bhalla a one-time special achievement cash bonus of $1,000,000. In awarding the compensation, the Compensation Committee considered a variety of factors including (i) the exceptional level at which Mr. Bhalla performed in his first year as Chief Executive Officer, especially during the very challenging business environment in 2020, (ii) Mr. Bhalla’s significant contributions to the accelerated achievement of Company near-term and long-term objectives in 2020, and (iii) Mr. Bhalla’s cash compensation in 2020 being low when benchmarked against other chief executive officers at industry peers. In addition to rewarding Mr. Bhalla for his performance in 2020, the award serves as a retention incentive by stipulating that the full amount is subject to repayment if Mr. Bhalla were to voluntarily resign within 12 months, thereby reducing risk for the Company.
Long-Term Equity Compensation for the Three-Year Performance Period Ended December 31, 2020. In February 2021, the Compensation Committee certified the results for the performance-based RSUs granted to the named executive officers in March 2018 for the three-year performance period ended December 31, 2020. As indicated in the table that follows, the Company’s actual performance was between target and maximum for one of the performance measures and above maximum for the other performance measure. This resulted in 128.44% of the performance-based RSUs granted in 2018 being earned. Under the terms of the awards, if the performance level achieved for a performance measure is at target, 100% of the performance-based RSUs are earned for that
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performance measure, and at maximum 150% of the performance-based RSUs are earned, with mathematical interpolation for performance between such levels. Based on the achievement of the performance conditions, the number of shares of Common Stock earned by each named executive officer in settlement of the 2018-2020 performance-based RSUs was as follows: Mr. Matovina-31,006; Mr. Johnson-18,045; Mr. Lorenzen-16,001; and Ms. Montz-14,809. In addition, each of these named executive officers received a cash payment equivalent to the cumulative cash dividends on the number of shares of Common Stock earned for 2018-2020. As they were each hired in 2020, neither Mr. Bhalla nor Mr. Hamalainen held awards for the 2018-2020 performance period.
| | Metric | | | Threshold | | | Target | | | Maximum | | | Actual | | | | Book Value Per Share Growth | | | | | 6.3% | | | | | | 11.3% | | | | | | 16.3% | | | | | | 17.09% | | | | | Return on Average Equity | | | | | 6.7% | | | | | | 12.1% | | | | | | 17.5% | | | | | | 12.84% | | |
The Book Value Per Share Growth performance measure used in our 2018-2020 performance-based RSU program, is based on book value per share excluding accumulated other comprehensive income (“AOCI”), which is a non-GAAP financial measure. For information on how we compute this non-GAAP financial measure please refer to Item 6. Selected Consolidated Financial Data included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Return on Average Equity is determined by dividing non-GAAP operating income by average stockholders’ equity excluding AOCI and fair value changes in derivatives and embedded derivatives.
Long-Term Equity Compensation Awarded for 2020. In February 2020, the Compensation Committee awarded the named executive officers’ performance-based RSUs and time-based RSUs under the 2016 Employee Incentive Plan. In accordance with his offer letter, the total target award opportunity for Mr. Bhalla was set at 275% of his base salary at the date of grant. In accordance with his July 2020 offer letter, the total target award opportunity for Mr. Hamalainen was set at 145% of his base salary at the date of grant. Mr. Hamalainen’s award was made under the Amended and Restated Employee Incentive Plan. The total target incentive opportunity awarded for 2020 was equal to 145% of base salary at the date of grant for Messrs. Johnson and Lorenzen and 135% of base salary at the date of grant for Ms. Montz.
Performance-Based RSU Grant: The performance-based RSUs may pay out at threshold, target and maximum based upon performance goals approved by the Compensation Committee for the three-year period ending December 31, 2022. The performance-based RSUs performance measures are Book Value Per Share Growth, based on book value per share excluding AOCI and fair value changes in derivatives and embedded derivatives, and Return on Average Equity (“ROAE”), based on non-GAAP operating income excluding the impact of actuarial assumption updates and average stockholders’ equity excluding AOCI and fair value changes in derivatives and embedded derivatives, each weighted at 50% and measured independently. The target number of performance-based RSUs granted to Mr. Bhalla was equal to 220%, to Messrs. Johnson and Lorenzen was equal to 116%, to Ms. Montz was equal to 108%, and to Mr. Hamalainen was equal to 48%, respectively, of base salary on the grant date divided by the closing price of the Common Stock on the grant date. The award to Mr. Hamalainen was adjusted to reflect that he was hired in July 2020. The threshold, target and maximum numbers for performance-based RSUs that can be earned are included in the 2020 Grants of Plan-Based Awards table appearing in the Executive Compensation Tables section of this proxy statement. If the threshold performance level is not reached for a performance measure, none of the performance-based RSUs will be earned for that performance measure. If the threshold performance level is achieved for a performance measures, 50% of the performance-based RSUs will be earned for that performance measure. If the target performance level is achieved for a performance measure, 100% of the performance-based RSUs will be earned for that performance measure. If the maximum performance level is achieved for a performance measure, 150% of the performance-based RSUs will be earned for that performance measure. For performance between two stated levels of performance, the level of achievement is determined by mathematical interpolation. The performance-based RSUs are eligible for dividends, but dividends will only be paid on the performance-based RSUs that are earned. Earned dividends will be paid in cash. Subject to certain limited exceptions, including but not limited to, change in control, death, disability and retirement (as defined in the Long-Term Plans), the performance-based RSUs are forfeited without consideration upon termination of employment. Performance-based RSUs granted in 2020 are earned based on performance against the following performance metrics:
| | Metric | | | Below Threshold | | | Threshold | | | Target | | | Maximum | | | | Book Value Per Share Growth | | | | | —% | | | | | | 25% | | | | | | 50% | | | | | | 75% | | | | | ROAE | | | | | —% | | | | | | 25% | | | | | | 50% | | | | | | 75% | | | | | Aggregate Percentage Achievable at Each Performance Level | | | | | —% | | | | | | 50% | | | | | | 100% | | | | | | 150% | | |
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The specific performance goals for the three-year period ending December 31, 2022 will be disclosed in the proxy statement for 2023. At the time the performance goals were approved by the Compensation Committee, it was believed they reflected an appropriate degree of stretch but were attainable based on successful execution of the Company’s business plan and the realization of macro-economic and financial market conditions reasonably aligned with the Company’s expectations.
Time-Based RSU and Option Grants: In 2020, the number of time-based RSUs awarded to Mr. Bhalla was equal to 55%, Mr. Hamalainen was equal to 48%, Messrs. Johnson and Lorenzen was equal to 29% and Ms. Montz was equal to 27%, respectively, of base salary on the grant date divided by the closing price of the Common Stock on the grant date. Mr. Hamalainen’s time-based RSU grant includes RSUs Mr. Hamalainen received as part of his employment arrangement sign-on bonus that he received when he joined the Company in July 2020. The number of time-based RSUs awarded to the named executive officers is included in the 2020 Grants of Plan-Based Awards table appearing in the Executive Compensation Tables section of this proxy statement. The time-based RSUs vest on the earlier of: (i) three years after the grant date; and (ii) attainment of age 65 and following 10 years of service with the Company for awards granted under the 2016 Employee Incentive Plan. The time-based RSUs vest on the earlier of: (i) three years after the grant date; and (ii) attainment of age 55 and following 10 years of service with the Company for awards granted under the Amended and Restated Employee Incentive Plan. The time-based RSUs are eligible for dividends, but dividends will only be paid on the time-based RSUs that vest. Vested dividends will be paid in cash. Subject to certain limited exceptions, including but not limited to, change in control, death, disability and retirement (as defined in the Long-Term Plans), any unvested time-based RSUs are forfeited without consideration upon termination of employment. Mr. Hamalainen received a time-based option grant of 36,249 options as part of his employment arrangement sign-on bonus that he received when he joined the Company in July 2020. These time-based options vest on the third anniversary of the date of grant.
Special Performance Vesting Stock Option Grants. In addition, in November 2020, the Compensation Committee awarded Mr. Bhalla, each of the named executive officers and certain other employees a one-time stock option award. The one-time stock option award was granted to Mr. Bhalla, each of the named executive officers and certain other employees, to encourage their execution of the Company’s AEL 2.0 strategy without incenting undue risk taking. In awarding these options, the Compensation Committee considered a variety of factors including (i) the importance of the named executive officers and other employees in leading and executing the AEL 2.0 strategy, (ii) the need for additional retention strength for key talent in a highly competitive and acquisitive industry, and (iii) the absence of an incentive award (such as options linked with a performance target) that provides a reward for performance based exclusively on stock price appreciation in the annual equity grant mix that creates greater alignment with shareholders. These options are subject to both performance and service vesting conditions. None of these options will vest unless the Company’s stock price reaches $37.00 (based on a 30-day trading average) on or before the fifth anniversary of the grant date, an increase of 37% over the closing price of the Company's Common Stock on the date the options were granted (the “Stock Price Hurdle”). If the Company does not achieve the Stock Price Hurdle on or before the fifth anniversary of the grant date, the entire option award is forfeited. If the Stock Price Hurdle is met, 50% of these option awards will vest on the date the Stock Price Hurdle is satisfied or, if later, on the one-year anniversary of the grant date. The remaining 50% of these option awards will vest on the one-year anniversary of the date the first 50% of the option award becomes vested.
Under the terms of this special incentive, Mr. Bhalla received an option award of 244,050 options, Messrs. Johnson and Lorenzen received an option award of 49,565 options, and Ms. Montz and Mr. Hamalainen received an option award of 46,260 and 99,129 options, respectively. Mr. Bhalla’s award was limited to 244,050 options by the annual award limitation to any single individual during any single calendar year within the Company’s Amended and Restated Equity Incentive Plan. An additional option award was made on January 2, 2021 to Mr. Bhalla of 87,447 options. The Compensation Committee factored in the size of these awards when establishing Mr. Bhalla’s 2021 annual compensation.
Compensation Decisions Relating to 2021 Compensation
Base Salaries. In November 2020, the Compensation Committee approved a base salary increase for Mr. Bhalla of 17.65%, effective as of January 1, 2021. The increase in base salary reflected that Mr. Bhalla’s total compensation was below the 50th percentile of the market consensus level when benchmarked against an updated peer group for 2021. The base salaries for each of the other named executive officers were left unchanged.
Short-Term Incentive Compensation. In January 2021, the Compensation Committee approved the structure of the short-term incentive compensation program for 2021. The short-term incentive compensation for fiscal year 2021 will be paid, if earned, in cash, subject to the achievement of threshold, target and maximum performance goals approved by the Compensation Committee established with respect to annuity deposits (which includes a sales mix target, or alternatively, a reduced payout factor), non-GAAP operating income per share (excluding index credits, certain adjustments and notable items), and investment spread (excluding the impact of index credits) (the “2021
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Company Performance Measures”). The 2021 Company Performance Measures are weighted at 25% for annuity deposits, 25% for non-GAAP operating income per share, and 20% for investment spread, of the award opportunity, respectively. The remaining 30% of the award opportunity is based on individual goals related to Mr. Bhalla’s and each other named executive officer’s respective areas of responsibility. Attainment of each 2021 Company Performance Measure and individual goal is measured independently. Target and maximum award opportunities for fiscal year 2021 are 150% and 300% of base salary, respectively, for Mr. Bhalla and 70% and 140% of base salary, respectively, for each other named executive officer.
The 2021 Company Performance Measures are the same measures used in the 2020 Program except that non-GAAP operating income per share excludes index credits, certain adjustments and notable items and investment spread excludes the impact of index credits.
In April, the Compensation Committee approved threshold, target and maximum performance goals for the 2021 Company Performance Measures. The Compensation Committee is sensitive to having performance goals that reflect the appropriate balance between employee retention, motivation and reward and the interests of shareholders. Consistent with prior practice, the specific performance goals for the 2021 Company Performance Measures will be disclosed in next year’s proxy statement.
Long-Term Incentive Compensation. In January 2021, the Compensation Committee approved the structure of the long-term incentive compensation program for 2021 and in February 2021, the Compensation Committee granted performance-based RSUs and options to the named executive officers. The Compensation Committee set the applicable performance goals in April 2021. The performance-based RSUs may pay out at threshold, target and maximum based upon performance goals approved by the Compensation Committee for the three-year period ending December 31, 2023. The performance-based RSUs performance measures are ROAE (excluding index credits, certain adjustments, notable items, AOCI and fair value changes in derivatives and embedded derivatives) and Return of Capital to Shareholders, based on dividends, stock buybacks and acquisitions made in lieu of returning capital to shareholders, each weighted at 50% and measured independently. ROAE is the same performance measure used for performance-based RSUs for the three-year period ending December 31, 2022 except that it excludes index credits, certain adjustments and notable items. Return of Capital to Shareholders is replacing Book Value per Share to directly align with the AEL 2.0 strategy and associated guidance with respect to return of capital to shareholders. Consistent with prior practice, the specific performance goals for the 2021 long-term equity incentive compensation program will be disclosed in the proxy statement for 2024.
Certain adjustments and notable items excluded from the 2021 short-term and long-term incentive compensation performance measures referenced above were set by the Compensation Committee in April 2021. Adjustments include the impact of tax law and accounting rule changes. Notable items include specific categories identified by management and approved by the Compensation Committee. Notable items will be disclosed in the Company's quarterly financial supplements.
The target number of performance-based RSUs granted to the named executive officers was equal to the following percentages of their base salary on the grant date divided by the closing price of the Common Stock on the grant date: Mr. Bhalla-150%; Messrs. Hamalainen, Johnson and Lorenzen-73%; and Ms. Montz-67%. If the threshold performance level is not reached for a performance measure, none of the performance-based RSUs will be earned for that performance measure. If the threshold performance level is achieved for a performance measure, 50% of the performance-based RSUs will be earned for that performance measure. If the target performance level is achieved for a performance measure, 100% of the performance-based RSUs will be earned for that performance measure. If the maximum performance level is achieved for a performance measure, 200% of the performance-based RSUs will be earned for that performance measure. For performance between two stated levels of performance, the level of achievement is determined by mathematical interpolation. The performance-based RSUs are eligible for dividends, but dividends will only be paid on the performance-based RSUs that vest. Vested dividends will be paid in cash. Subject to certain limited exceptions, including but not limited to, change in control, death, disability and retirement (as defined in the Amended and Restated Equity Incentive Plan), the performance-based RSUs are forfeited without consideration upon termination of employment.
The Compensation Committee is sensitive to having performance goals that reflect the appropriate balance between employee retention, motivation and reward and the interests of shareholders.
In February 2021, the Compensation Committee granted time-based RSUs to the named executive officers. The number of time-based RSUs granted to the named executive officers was equal to the following percentages of their base salary on the grant date divided by the closing price of the Common Stock on the grant date; Mr. Bhalla-75%; Messrs. Hamalainen, Johnson and Lorenzen-36%; and Ms. Montz-34%. The time-based RSUs vest three years after the grant date. The time-based RSUs are eligible for dividends, but dividends will only be paid on the time-based RSUs that vest. Vested dividends will be paid in cash. Subject to certain limited exceptions, including but not limited to, change in control, death, disability and retirement (as defined in the Amended and Restated Equity Incentive Plan), the time-based RSUs are forfeited without consideration upon termination of employment.
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In February 2021, the Compensation Committee granted time-based options to the named executive officers. The number of time-based options granted to the named executive officers was equal to the following percentages of their base salary on the grant date; Mr. Bhalla-75%; Messrs. Hamalainen, Johnson and Lorenzen-36%; and Ms. Montz-34%. The time-based options have an exercise price of $27.40 per share, three year ratable vesting and a ten-year exercise term. Subject to certain limited exceptions, including but not limited to, change in control, death, disability and retirement (as defined in the Amended and Restated Equity Incentive Plan), the time-based options are forfeited without consideration upon termination of employment.
Additional Programs and Policies
Stock Ownership Guidelines. We emphasize long-term equity compensation in our total compensation package for all employees and particularly for senior officers. We believe this helps align the interests of employees and officers with shareholder interests and creates an incentive to build our Common Stock value. On February 28, 2020, the Board of Directors adopted Stock Ownership Guidelines applicable to the Company’s executive officers. The Chief Executive Officer is required to own Common Stock with a value equal to five times the Chief Executive Officer’s base annual salary. Each other executive officer is required to own Common Stock with a value equal to three times the executive officer’s base annual salary. Executive officers have seven years from the later of (i) the date of adoption of the Stock Ownership Guidelines; and (ii) the date they become an executive officer subject to Section 16 of the Securities Exchange Act of 1934, as amended, to obtain the required Common Stock ownership.
The executive officers are required to retain 100%, of the net after-tax shares acquired from the vesting, settlement or exercise of equity awards until they meet the stock ownership level. Common Stock ownership levels are measured annually on December 31 and shares will be valued at the highest per share price over the prior 12-month period. Once an executive officer meets the applicable stock ownership level, no further investment in Common Stock is required to compensate for a subsequent decline in the market value of those shares or a change in salary. All named executive officers other than Mr. Bhalla and Mr. Hamalainen, have met the requirements of the Stock Ownership Guidelines. Messrs. Bhalla and Hamalainen were hired in 2020.
Hedging and Pledging Policy. Our directors and executive officers are prohibited from engaging in forms of hedging or monetization transactions, such as certain types of forward contracts, equity swaps, collars, and exchange funds, which allow a shareholder to lock in much of the value of his or her stock holding without the full risks and rewards of stock ownership. In addition, directors and executive officers are prohibited from purchasing Company securities on margin or borrowing against any account in which shares of Common Stock are owned.
Incentive Compensation Repayment Policy. On February 28, 2020, the Board of Directors adopted an Incentive Compensation Repayment Policy (the “Repayment Policy”) covering cash and equity incentive compensation earned on the basis of performance. The Repayment Policy covers current and former employees of the Company who are or were subject to Section 16 of the Securities Exchange Act of 1934, as amended, at the time the incentive compensation was earned by such individual (the “Covered Individual”). In the event of a restatement of the financial statements of the Company due to material non-compliance with any financial reporting requirements under the federal securities laws due to an act of embezzlement, fraud, breach of fiduciary duty, misconduct or gross negligence by a Covered Individual that results in a performance measure or specified performance target being restated, the Board of Directors may lower the amount of incentive compensation that would have been earned by the Covered Individual andAs SEC rules require, reimbursement or forfeiture of such amounts in excess of the lowered amount.
Prohibition on Repricing. Our equity compensation plans prohibit us from reducing the exercise price of outstanding stock options or stock appreciation rights without shareholder approval.
Severance Plan. The Company has a severance plan to provide benefits to employees, including the named executive officers, whose employment is terminated by the Company due to reorganization or reduction in our workforce. Additional details on the terms of the severance plan are described under “Potential Payments Upon Termination or a Change in Control.”
Change in Control and Separation Arrangements. To promote retention of senior officers, we have entered into change in control agreements with a small group of our executives including each named executive officer. The terms of such agreements are described under “Potential Payments Upon Termination or a Change in Control”. We have no other written employment contracts or separation agreements with any of our named executive officers, other than with respect to Mr. Bhalla’s offer letter.
Other Compensation. All of our employees are eligible to participate in our 401(k) plan once they have completed thirty days of employment with us and attained age 18. We match 100% of employee contributions to the 401(k) plan up to 3% of the employee’s total eligible compensation and match 50% of employee contributions up to the next 2% of the employee’s total eligible compensation, subject to the limitations specified in the Internal Revenue Code of 1986 (the “Code”).
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Moreover, employees are eligible to participate in the Employee Stock Ownership Plan (“ESOP”). The principal purpose of the ESOP is to provide each eligible employee with an equity interest in the Company. Employees become eligible once they have completed a minimum of six months of service and their interests in the ESOP become 100% vested after two years of their service to the Company. The Company makes semi-annual discretionary contributions to the ESOP.
All of our employees are eligible for insurance benefits including health, dental, long-term disability and life insurance. Employees also have access to employer-sponsored annuities.
Limited perquisites are available for our named executive officers. The only perquisite available to our named executive officers that was not available to our other employees in 2020 was limited personal travel on the Company’s aircraft.
Other Compensation Considerations
Timing of Compensation Decisions. Base salaries and incentive compensation opportunities for executive officers are determined by the Compensation Committee at meetings held in the fourth quarter of the calendar year and the first two quarters of the next calendar year. Annual grants of equity awards are typically approved by the Compensation Committee in late February or early March. The grant date for equity awards is the same day as the Compensation Committee meeting and the number of shares for each equity grant is computed using the closing price of our Common Stock on the date of the Compensation Committee meeting. This timing and process is designed to ensure that our fourth quarter and full year financial results (typically released by mid-February) are fully disseminated in the market by the time the number of shares for equity grants is determined.
Risk Assessment. The Compensation Committee, with the assistance of Pearl Meyer, reviewed the Company’s compensation policies and practices and concluded that for 2020 the risks arising from the Company’s policies and practices are not reasonably likely to have a material adverse effect on the Company.
Tax Implications of Executive Compensation. Federal tax legislation passed in December 2017 repealed the “performance-based” exemption that previously allowed compensation over $1 million paid to certain executive officers to be deductible. In addition, the limitation on deductibility of compensation was expanded to include executive officers previously not subject to the limitation. As a result, for taxable years after December 31, 2017, compensation paid to our named executive officers in excess of $1 million will not be deductible unless it qualifies for limited transition relief applicable to certain arrangements in place as of November 2, 2017.
Notwithstanding changes in the tax deductibility requirements, the Compensation Committee believes that a significant portion of our executive officers’ compensation should be tied to measures of performance of our business and intends to continue to implement compensation programs that it believes are competitive and in the best interests of the Company and its shareholders.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
COMPENSATION COMMITTEE
A. J. Strickland, III, Chair
Joyce A. Chapman
Brenda J. Cushing
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Executive Compensation Tables
Summary Compensation Table
| | Name and Principal Position | | | Year | | | Salary
($) | | | Bonus
($) | | | Stock
Awards(1)(2)
($) | | | Non-Equity
Incentive Plan
Compensation(3)
($) | | | All Other
Compensation(4)
($) | | | Total
($) | | | | John M. Matovina
Chief Executive Officer
and President | | | | | 2020(5) | | | | | | 407,949 | | | | | | 853,125 | | | | | | 96,392 | | | | | | — | | | | | | 20,504 | | | | | | 1,377,970 | | | | | | | 2019 | | | | | | 900,000 | | | | | | — | | | | | | 2,024,999 | | | | | | 1,502,034 | | | | | | 32,639 | | | | | | 4,459,672 | | | | | | | 2018 | | | | | | 863,500 | | | | | | — | | | | | | 1,275,015 | | | | | | 1,372,568 | | | | | | 41,452 | | | | | | 3,552,535 | | | | | Anant Bhalla Chief Executive Officer and President | | | | | 2020 | | | | | | 795,512 | | | | | | 1,107,681 | | | | | | 5,751,942 | | | | | | 1,716,537 | | | | | | 45,488 | | | | | | 9,417,160 | | | | | Ted M. Johnson
Chief Financial Officer
and Treasurer | | | | | 2020 | | | | | | 573,000 | | | | | | — | | | | | | 1,320,777 | | | | | | 536,247 | | | | | | 32,483 | | | | | | 2,462,507 | | | | | | | 2019 | | | | | | 556,000 | | | | | | — | | | | | | 750,611 | | | | | | 649,546 | | | | | | 31,121 | | | | | | 1,987,278 | | | | | | | 2018 | | | | | | 538,500 | | | | | | — | | | | | | 780,668 | | | | | | 594,283 | | | | | | 36,702 | | | | | | 1,950,153 | | | | | Jeffrey D. Lorenzen
Exec. Vice President and
Chief Investment Officer | | | | | 2020 | | | | | | 508,000 | | | | | | — | | | | | | 1,226,548 | | | | | | 464,304 | | | | | | 39,778 | | | | | | 2,238,630 | | | | | | | 2019 | | | | | | 493,000 | | | | | | — | | | | | | 665,568 | | | | | | 575,947 | | | | | | 30,325 | | | | | | 1,764,840 | | | | | | | 2018 | | | | | | 477,500 | | | | | | — | | | | | | 624,268 | | | | | | 543,899 | | | | | | 35,237 | | | | | | 1,680,904 | | | | | Renee D. Montz
Exec. Vice President,
General Counsel and Secretary | | | | | 2020 | | | | | | 472,000 | | | | | | — | | | | | | 1,094,477 | | | | | | 434,842 | | | | | | 30,923 | | | | | | 2,032,242 | | | | | | | 2019 | | | | | | 458,000 | | | | | | — | | | | | | 618,283 | | | | | | 535,058 | | | | | | 29,686 | | | | | | 1,641,027 | | | | | | | 2018 | | | | | | 442,500 | | | | | | — | | | | | | 680,908 | | | | | | 473,148 | | | | | | 30,503 | | | | | | 1,627,059 | | | | | James L. Hamalainen Exec. Vice President and Chief Client Solutions Officer, American Equity Life | | | | | 2020 | | | | | | 242,939 | | | | | | 107,412 | | | | | | 1,704,977 | | | | | | 497,096 | | | | | | 12,562 | | | | | | 2,564,986 | | |
(1)
Except for Mr. Matovina, amounts for 2020 reflect grant date fair value pursuant to FASB ASC Topic 718 of performance-based RSUs (assuming target performance is the probable outcome), time-based RSUs, options and performance-based options, each as previously described above under “CEO Transition”, “Long-Term Equity Compensation for 2020” or “Special Performance Vesting Stock Option Grants” in the Compensation Discussion and Analysis. For further information, please see Note 11 Retirement and Share-based Compensation Plans in the Notes to Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Grant date fair value for the 2020 performance-based RSUs is $1,869,997 for Mr. Bhalla, $664,667 for Mr. Johnson, $589,278 for Mr. Lorenzen, $509,763 for Ms. Montz, and $240,022 for Mr. Hamalainen. Grant date fair value assuming payout at maximum performance would be $2,804,995 for Mr. Bhalla, $997,000 for Mr. Johnson, $883,917 for Mr. Lorenzen, $764,644 for Ms. Montz, and $360,033 for Mr. Hamalainen. Amounts for 2020 include awards of time-based RSUs with a grant date fair value of $967,510 for Mr. Bhalla, $166,160 for Mr. Johnson, $147,320 for Mr. Lorenzen, $127,434 for Ms. Montz, and $240,022 for Mr. Hamalainen. In addition, amounts for 2020 include options for Mr. Bhalla with a grant date fair value of $502,000 and for Mr. Hamalainen with a grant date fair value of $245,043 and performance-based options with a grant date fair value of $2,412,435 for Mr. Bhalla, $489,950 for Messrs. Johnson and Lorenzen, $457,280 for Ms. Montz and $979,890 for Mr. Hamalainen. See 2020 Grants of Plan-Based Awards below for additional information on the 2020 stock awards. For Mr. Matovina, the amount for 2020 reflects grant date fair value of time-based RSUs granted for his service as a non-employee director and its value is based on the fair market value of the stock on the date of grant.
(2)
Amounts for 2019 and 2018 reflect grant date fair value pursuant to FASB ASC Topic 718 of performance-based RSUs (assuming target performance is the probable outcome), time-based RSUs and restricted stock granted under the long-term equity compensation programs for those years.
(3)
Amounts for 2020 consist of cash awards earned under the Short-Term Plan previously described above under “Short-Term Incentive Compensation for 2020” in the Compensation Discussion and Analysis. Amounts for 2019 and 2018 consist of cash awards earned under the short-term incentive compensation programs applicable for 2019 and 2018.
(4)
Amounts for 2020 include $17,100 for each named executive officer (except Mr. Matovina and Mr. Hamalainen) for Company contributions to the ESOP. In addition, amounts for 2020 include $11,400 for each named executive officer (except Mr. Matovina) for the Company match of 401k contributions. In addition, amounts for 2020 include $16,522 for Mr. Bhalla, $19,831 for Mr. Matovina, and $7,618 for Mr. Lorenzen related to personal use of corporate aircraft.
(5)
Mr. Matovina’s salary total includes payments made to him as President & Chief Executive Officer of $265,949 and as a non-employee director of $142,000.
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The following table provides information regarding grants of plan-based awards including RSUs, stock options and non-equity compensation granted to the named executives during 2020.
2020 Grants of Plan-Based Awards
| | | | | | | | | | | Estimated Future
Payouts Under
Non-Equity Incentive Plan
Awards(1) | | | Estimated Future
Payouts Under
Equity Incentive Plan
Awards(2) | | | All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#) | | | Grant
Date Fair
Value of
Stock
Awards(8)
($) | | | | Name | | | Grant
Date | | | Threshold
($) | | | Target
($) | | | Maximum
($) | | | Threshold
(#) | | | Target
(#) | | | Maximum
(#) | | | | John M. Matovina | | | | | 6/4/2020(3) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 4,200 | | | | | | 96,392 | | | | | Anant Bhalla | | | | | 1/27/2020(4) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 9,364 | | | | | | 250,019 | | | | | | | 1/27/2020(4) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 9,363 | | | | | | 249,992 | | | | | | | 1/27/2020(5) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 50,000 | | | | | | 502,000 | | | | | | | 2/27/2020 | | | | | | — | | | | | | — | | | | | | — | | | | | | 17,444 | | | | | | 69,776 | | | | | | 104,664 | | | | | | — | | | | | | 1,869,997 | | | | | | | 2/27/2020(6) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 17,444 | | | | | | 467,499 | | | | | | | 11/19/2020(7) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 122,025 | | | | | | 1,193,405 | | | | | | | 11/19/2020(7) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 122,025 | | | | | | 1,219,030 | | | | | | | N/A | | | | | | 212,500 | | | | | | 1,275,000 | | | | | | 2,550,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | Ted M. Johnson | | | | | 2/27/2020 | | | | | | — | | | | | | — | | | | | | — | | | | | | 6,200 | | | | | | 24,801 | | | | | | 37,202 | | | | | | — | | | | | | 664,667 | | | | | | | 2/27/2020(6) | ��� | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 6,200 | | | | | | 166,160 | | | | | | | 11/19/2020(7) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 24,783 | | | | | | 242,378 | | | | | | | 11/19/2020(7) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 24,782 | | | | | | 247,572 | | | | | | | N/A | | | | | | 50,138 | | | | | | 401,100 | | | | | | 802,200 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | Jeffrey D. Lorenzen | | | | | 2/27/2020 | | | | | | — | | | | | | — | | | | | | — | | | | | | 5,497 | | | | | | 21,988 | | | | | | 32,982 | | | | | | — | | | | | | 589,278 | | | | | | | 2/27/2020(6) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 5,497 | | | | | | 147,320 | | | | | | | 11/19/2020(7) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 24,783 | | | | | | 242,378 | | | | | | | 11/19/2020(7) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 24,782 | | | | | | 247,572 | | | | | | | N/A | | | | | | 44,450 | | | | | | 355,600 | | | | | | 711,200 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | Renee D. Montz | | | | | 2/27/2020 | | | | | | — | | | | | | — | | | | | | — | | | | | | 4,755 | | | | | | 19,021 | | | | | | 28,532 | | | | | | — | | | | | | 509,763 | | | | | | | 2/27/2020(6) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 4,755 | | | | | | 127,434 | | | | | | | 11/19/2020(7) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 23,130 | | | | | | 226,211 | | | | | | | 11/19/2020(7) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 23,130 | | | | | | 231,069 | | | | | | | N/A | | | | | | 41,300 | | | | | | 330,400 | | | | | | 660,800 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | James L. Hamalainen | | | | | 7/7/2020 | | | | | | — | | | | | | — | | | | | | — | | | | | | 2,730 | | | | | | 10,920 | | | | | | 16,380 | | | | | | — | | | | | | 240,022 | | | | | | | 7/7/2020(6) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 10,920 | | | | | | 240,022 | | | | | | | 7/7/2020(5) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 36,249 | | | | | | 245,043 | | | | | | | 11/19/2020(7) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 49,565 | | | | | | 484,746 | | | | | | | 11/19/2020(7) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 49,564 | | | | | | 495,144 | | | | | | | N/A | | | | | | 43,750 | | | | | | 350,000 | | | | | | 700,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
(1)
These awards represent the estimated payout under the short-term cash incentive compensation program applicable for fiscal year 2020 previously described above under “Short-Term Incentive Compensation for 2020” in the Compensation Discussion and Analysis. The actual cash incentive compensation earned is reflected above in the Summary Compensation Table in the column titled “Non-Equity Incentive Plan Compensation.”
(2)
These awards represent the estimated payout of performance-based RSUs applicable for fiscal year 2020 previously described above under “Long-Term Equity Compensation Awarded for 2020” in the Compensation Discussion and Analysis. The number of performance-based RSUs granted that will be earned is dependent on the achievement of certain threshold, target and maximum performance goals for the three year period ending December 31, 2022. 50% of the performance-based RSUs granted will be earned if the Company meets threshold for each performance goal, 100% of the performance-based RSUs will be earned if the Company meets target for each performance goal and 150% of the performance-based RSUs will be earned if the Company meets maximum for each performance goal. The performance-based RSUs are eligible for dividends, but dividends will only be paid on the performance-based RSUs that vest. Vested dividends will be paid in cash.
(3)
This award represents the grant date fair value of the restricted stock award granted to Mr. Matovina for his service as a non-employee director. The vesting period for the restricted stock is the earlier of (a) one year from the grant date or (b) the date of the next annual meeting.
(4)
These awards represent the time-based RSU grants for fiscal year 2020 that were granted to Mr. Bhalla previously described above under “CEO Transition” in the Compensation Discussion and Analysis. These time-based RSUs vest on the first and second anniversaries of Mr. Bhalla’s commencement of employment.
(5)
Mr. Bhalla’s award represents stock options to purchase shares of the Company’s Common Stock that were granted to Mr. Bhalla during fiscal year 2020 previously described above under “CEO Transition” in the Compensation Discussion and Analysis. Mr. Bhalla’s stock options have a five-year vesting period. Mr. Hamalainen’s award represents stock options to purchase shares of the Company’s Common Stock that were granted to Mr. Hamalainen during fiscal year 2020 previously described above under “Long-Term Equity Compensation Awarded for 2020” in the Compensation Discussion and Analysis. Mr. Hamalainen’s stock options have a three-year vesting period. These options were granted to Mr. Bhalla and Mr. Hamalainen as inducements for them to join the Company.
| | | | | | | | | | 2021 Proxy Statement | | | 27 | |
(6)
These awards represent the time-based RSU grants for fiscal year 2020 previously described above under “Long-Term Equity Compensation Awarded for 2020” in the Compensation Discussion and Analysis. The time-based RSUs vest on the earlier of: (i) three years after the grant date; and (ii) attainment of age 65 and following 10 years of service with the Company for awards granted under the 2016 Employee Incentive Plan. The time-based RSUs vest on the earlier of: (i) three years after the grant date; and (ii) attainment of age 55 and following 10 years of service with the Company for awards granted under the Amended and Restated Employee Incentive Plan. The time-based RSUs are eligible for dividends, but dividends will only be paid on the time-based RSUs that vest. Vested dividends will be paid in cash.
(7)
These awards represent options to purchase shares of the Company’s Common Stock that were granted to encourage the execution of the Company’s AEL 2.0 strategy during fiscal year 2020 previously described above under “Special Performance Vesting Stock Option Grants” in the Compensation Discussion and Analysis These options are subject to both performance and service vesting conditions. None of these options will vest unless the Company’s stock price reaches $37.00 (based on a 30-day trading average) on or before the fifth anniversary of the grant date, an increase of 37% over the closing price of the Company's Common Stock on the date the options were granted (the “Stock Price Hurdle”). If the Company does not achieve the Stock Price Hurdle on or before the fifth anniversary of the grant date, the entire option award is forfeited. If the Stock Price Hurdle is met, 50% of the option award will vest on the date the Stock Price Hurdle is satisfied or, if later, on the one-year anniversary of the grant date. The remaining 50% of the option award will vest on the one-year anniversary of the date the first 50% of the option award vested.
(8)
Reflects grant date fair value of the performance-based RSUs, time-based RSUs and stock options pursuant to FASB ASC Topic 718. Grant date fair value was calculated using the closing market price of the Common Stock of $26.70 for awards granted on 1/27/2020, $26.80 for awards granted on 2/27/2020, $22.95 for awards granted on 6/4/2020 and $21.98 for awards granted on 7/7/2020. Amounts for the performance-based RSUs assume target performance is the probable outcome.
The following table provides information about unvested stock options to acquire Common Stock, unvested performance-based RSUs, unvested time-based restricted stock and unvested time-based RSUs granted to named executive officers. Vesting schedules applicable to such awards are as follows:
•
Stock options granted in connection with the hiring of Mr. Bhalla have a 5-year vesting period and stock options granted in connection with the hiring of Mr. Hamalainen have a 3-year vesting period, subject to the executive’s continued employment through the applicable vesting date.
•
As described above, the options granted in November 2020 are subject to both performance and service vesting conditions. None of these options will vest unless the Company's stock price reaches $37.00 (based on a 30-day trading average) on or before the fifth anniversary of the grant date (the “Stock Price Hurdle”). If the Company does not achieve the Stock Price Hurdle on or before the fifth anniversary of the grant date, the entire option award is forfeited. If the Stock Price Hurdle is met, 50% of the option award will vest on the date the Stock Price Hurdle is satisfied or, if later, on the one-year anniversary of the grant date. The remaining 50% of the option award will vest on the one-year anniversary of the date the first 50% of the option award vested.
•
The performance-based RSUs vest at the end of the applicable three-year performance period and are paid out upon approval by the Compensation Committee of attainment of performance levels for the applicable three-year period. Subject to certain limited exceptions, including but not limited to, change in control, death, disability and retirement (as defined in the 2016 Employee Incentive Plan and the Amended and Restated Equity Incentive Plan), the performance-based RSUs are forfeited without consideration upon termination of employment.
•
The time-based restricted stock and time-based RSUs vest on the earlier of: (i) three years after the grant date; and (ii) attainment of age 65 and following 10 years of service with the Company for awards granted under the 2016 Employee Incentive Plan; and (iii) attainment of age 55 and following 10 years of service with the Company for awards granted under the Amended and Restated Employee Incentive Plan. Subject to certain limited exceptions, including but not limited to, change in control, death, disability and retirement (as defined in the 2016 Employee Incentive Plan and the Amended and Restated Equity Incentive Plan), the time-based restricted stock and time-based RSUs are forfeited without consideration upon termination of employment.
| 28 | | | 2021 Proxy Statement | | | | | | | | | | |
| | | | | Outstanding Equity Awards at December 31, 2020 | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | | | Name | | | Grant
Date | | | Vesting
Date | | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | | Option
Exercise
Price ($) | | | Option
Expiration
Date | | | Number of
Shares or
Units of
Stock That
Have Not
Vested (#) | | | Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(1) | | | Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or Other
Rights
That
Have Not
Vested (#) | | | Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested ($)(1) | | | | John M. Matovina(5) | | | | | 2/27/2018 | | | | | | —(2) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 48,281 | | | | | | 1,335,452 | | | | | | | 2/28/2019 | | | | | | —(3) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 55,450 | | | | | | 1,533,747 | | | | | | | 6/4/2020 | | | | | | 6/4/2021 | | | | | | — | | | | | | — | | | | | | — | | | | | | 4,200 | | | | | | 116,172 | | | | | | — | | | | | | — | | | | | Anant Bhalla | | | | | 1/27/2020 | | | | | | 1/27/2025 | | | | | | 50,000 | | | | | | 26.70 | | | | | | 1/27/2030 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | | 1/27/2020 | | | | | | 1/27/2021 | | | | | | — | | | | | | — | | | | | | — | | | | | | 9,364 | | | | | | 259,008 | | | | | | — | | | | | | — | | | | | | | 1/27/2020 | | | | | | 1/27/2022 | | | | | | — | | | | | | — | | | | | | — | | | | | | 9,363 | | | | | | 258,981 | | | | | | — | | | | | | — | | | | | | | 2/27/2020 | | | | | | —(4) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 69,776 | | | | | | 1,930,004 | | | | | | | 2/27/2020 | | | | | | 2/27/2023 | | | | | | — | | | | | | — | | | | | | — | | | | | | 17,444 | | | | | | 482,501 | | | | | | — | | | | | | — | | | | | | | 11/19/2020 | | | | | | 11/19/2021(7) | | | | | | 122,025 | | | | | | 27.05 | | | | | | 11/19/2030 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | | 11/19/2020 | | | | | | 11/19/2022(7) | | | | | | 122,025 | | | | | | 27.05 | | | | | | 11/19/2030 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | Ted M. Johnson | | | | | 2/27/2018 | | | | | | — (2) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 21,074 | | | | | | 582,907 | | | | | | | 2/27/2018 | | | | | | 2/27/2021 | | | | | | — | | | | | | — | | | | | | — | | | | | | 3,512 | | | | | | 97,142 | | | | | | — | | | | | | — | | | | | | | 2/28/2019 | | | | | | —(3) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 18,973 | | | | | | 524,793 | | | | | | | 2/28/2019 | | | | | | 2/28/2022 | | | | | | — | | | | | | — | | | | | | — | | | | | | 4,743 | | | | | | 131,191 | | | | | | — | | | | | | — | | | | | | | 2/27/2020 | | | | | | —(4) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 24,801 | | | | | | 685,996 | | | | | | | 2/27/2020 | | | | | | 2/27/2023 | | | | | | — | | | | | | — | | | | | | — | | | | | | 6,200 | | | | | | 171,492 | | | | | | — | | | | | | — | | | | | | | 11/19/2020 | | | | | | 11/19/2021(7) | | | | | | 24,783 | | | | | | 27.05 | | | | | | 11/19/2030 | | | | | | — | | | | | ��� | — | | | | | | — | | | | | | — | | | | | | | 11/19/2020 | | | | | | 11/19/2022(7) | | | | | | 24,782 | | | | | | 27.05 | | | | | | 11/19/2030 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | Jeffrey D. Lorenzen | | | | | 2/27/2018 | | | | | | — (2) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 18,687 | | | | | | 516,882 | | | | | | | 2/27/2018 | | | | | | 2/27/2021 | | | | | | — | | | | | | — | | | | | | — | | | | | | 3,115 | | | | | | 86,161 | | | | | | — | | | | | | — | | | | | | | 2/28/2019 | | | | | | —(3) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 16,823 | | | | | | 465,324 | | | | | | | 2/28/2019 | | | | | | 2/28/2022 | | | | | | — | | | | | | — | | | | | | — | | | | | | 4,206 | | | | | | 116,338 | | | | | | — | | | | | | — | | | | | | | 2/27/2020 | | | | | | —(4) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 21,988 | | | | | | 608,188 | | | | | | | 2/27/2020 | | | | | | 2/27/2023 | | | | | | — | | | | | | — | | | | | | — | | | | | | 5,497 | | | | | | 152,047 | | | | | | — | | | | | | — | | | | | | | 11/19/2020 | | | | | | 11/19/2021(7) | | | | | | 24,783 | | | | | | 27.05 | | | | | | 11/19/2030 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | | 11/19/2020 | | | | | | 11/19/2022(7) | | | | | | 24,782 | | | | | | 27.05 | | | | | | 11/19/2030 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | Renee D. Montz(6) | | | | | 2/27/2018 | | | | | | — (2) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 17,295 | | | | | | 478,380 | | | | | | | 2/27/2018 | | | | | | 2/27/2021 | | | | | | — | | | | | | — | | | | | | — | | | | | | 2,883 | | | | | | 79,744 | | | | | | — | | | | | | — | | | | | | | 2/28/2019 | | | | | | —(3) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 15,628 | | | | | | 432,270 | | | | | | | 2/28/2019 | | | | | | 2/28/2022 | | | | | | — | | | | | | — | | | | | | — | | | | | | 3,907 | | | | | | 108,068 | | | | | | — | | | | | | — | | | | | | | 2/27/2020 | | | | | | —(4) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 19,021 | | | | | | 526,121 | | | | | | | 2/27/2020 | | | | | | 2/27/2023 | | | | | | — | | | | | | — | | | | | | — | | | | | | 4,755 | | | | | | 131,523 | | | | | | — | | | | | | — | | | | | | | 11/19/2020 | | | | | | 11/19/2021(7) | | | | | | 23,130 | | | | | | 27.05 | | | | | | 11/19/2030 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | | 11/19/2020 | | | | | | 11/19/2022(7) | | | | | | 23,130 | | | | | | 27.05 | | | | | | 11/19/2030 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | James L. Hamalainen | | | | | 7/7/2020 | | | | | | 7/7/2023 | | | | | | 36,249 | | | | | | 21.98 | | | | | | 7/7/2030 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | | 7/7/2020 | | | | | | —(4) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 10,920 | | | | | | 302,047 | | | | | | | 7/7/2020 | | | | | | 2/27/2023 | | | | | | — | | | | | | — | | | | | | — | | | | | | 10,920 | | | | | | 302,047 | | | | | | — | | | | | | — | | | | | | | 11/19/2020 | | | | | | 11/19/2021(7) | | | | | | 49,565 | | | | | | 27.05 | | | | | | 11/19/2030 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | | 11/19/2020 | | | | | | 11/19/2022(7) | | | | | | 49,564 | | | | | | 27.05 | | | | | | 11/19/2030 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
(1)
Calculated based on the closing market price of the Common Stock on December 31, 2020, which was $27.66.
(2)
The unearned shares included in this row represent performance-based RSUs awarded during 2018. As our performance as of the end of 2020 for the related performance period exceeded the target performance goals, these awards are shown at maximum (150% of target). These awards vested at 128.44% of target based on actual performance over the three-year period ended December 31, 2020, as certified by the Compensation Committee on February 27, 2021.
(3)
The unearned shares included in this row represent performance-based RSUs awarded during 2019. As our performance as of the end of 2020 for the related performance period would have resulted in a payout near target, these awards are shown at target. However, the amount, if any, of these awards that will be paid out will depend upon the actual performance over the full three-year performance period ending December 31, 2021, and the Compensation Committee’s certification of the performance.
(4)
The unearned shares included in this row represent performance-based RSUs awarded during 2020. As our performance as of the end of 2020 for the related performance period would have resulted in a payout near target, these awards are shown at target. However, the amount, if any, of these awards that will be paid out will depend upon the actual performance over the full three-year performance period ending December 31, 2022, and the Compensation Committee’s certification of the performance.
(5)
Mr. Matovina’s 2020 grant is related to his service on the Company's Board of Directors. As Mr. Matovina was an employee until his retirement in 2020, his grant of time-based restricted stock is reflected in the above table and not in the Director Compensation table.
(6)
Pursuant to the terms of a separation agreement with Ms. Montz entered into on April 1, 2021, all of her then outstanding long-term incentive awards will remain outstanding and entitled to vest on the same basis as though she had remained employed by the Company.
(7)
The options granted in November 2020 are subject to both performance and service vesting conditions. None of these options will vest unless the Company’s stock price reaches the Stock Price Hurdle (based on a 30-day trading average) on or before the fifth anniversary of the grant date. If the
| | | | | | | | | | 2021 Proxy Statement | | | 29 | |
Company does not achieve the Stock Price Hurdle on or before the fifth anniversary of the grant date, the entire option award is forfeited. If the Stock Price Hurdle is met, 50% of the option award will vest on the date the Stock Price Hurdle is satisfied or, if later, on the one-year anniversary of the grant date. The remaining 50% of the option award will vest on the one-year anniversary of the date the first 50% of the option award vested.
Option Exercises and Stock Vested
Set forth below are the stock option exercises and the stock vested for the named executive officers during 2020.
| | | | | Option Awards | | | Stock Awards | | | | Name | | | Number of
Shares
Acquired
on
Exercise
(#) | | | Value
Realized
on Exercise
($) | | | Number of
Shares
Acquired
on Vesting
(#) | | | Value
Realized
on Vesting
($) | | | | John M. Matovina | | | | | 27,750 | | | | | | 660,772 | | | | | | 23,347 | | | | | | 625,700 | | | | | Anant Bhalla | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | Ted M. Johnson | | | | | — | | | | | | — | | | | | | 19,047 | | | | | | 485,567 | | | | | Jeffrey D. Lorenzen | | | | | — | | | | | | — | | | | | | 16,993 | | | | | | 434,097 | | | | | Renee D. Montz | | | | | — | | | | | | — | | | | | | 15,686 | | | | | | 400,710 | | | | | James L. Hamalainen | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Potential Payments Upon Termination or a Change in Control
Aside from the change in control agreements described below, we have no employment contracts or separation agreements with any of our named executive officers.
As described above in the Compensation Discussion and Analysis and reported in the Summary Compensation Table a number of 2021 elements that the executives have not earned and may never be paid to them. Some or all of the Performance RSUs, Time RSUs, and stock options may never become payable or may ultimately have a value that differs substantially from what is reported here. The same is the case, in whole or in part, for awards reported for 2020 and 2019.
In the text below, we refer to the Summary Compensation Table above as the Summary Table and Grants of Plan-Based Awards in 2021 table as the Grants Table. We have reported in the Summary Table information for each executive for each of the past three year(s) each was a named executive officer in the proxy statement immediately following that year. We have reported 2021 information in the Grants Table for each executive named in this proxy statement. Salary We have reported the amount of base salary each executive earned in each year indicated in the Summary Table. Bonus We have reported Mr. Matovina receivedAndré's cash sign-on payment for 2021 in the Summary Table. Mr. André must repay this amount if he voluntarily leaves us before his first anniversary. See our earlier proxy statements for information on "Bonus" amounts reported in the Summary Table for earlier years. Non-Equity Incentives We have reported each executive's STIP threshold, target, and maximum potential awards for 2021 in the Grants Table. The Summary Table shows each executive's actual resulting 2021 STIP award. See our earlier proxy statements for non-equity incentive information we have reported in the Summary Table for earlier years. Stock Awards We have reported the aggregate Grant Date Fair Value of all stock awards granted to each executive in each year indicated in the Summary Table. See our earlier proxy statements for more information on Stock Awards we have reported in the Summary Table for earlier years. We have included the following Stock Awards for each executive on the Summary Table: •Performance RSUs at a stay retention bonus2021 Grant Date Fair Value of $853,125 pursuant$27.40 per share using target performance. The February 25, 2021 rows of the Estimated Future Payouts Under Equity Incentive Plan Awards columns of the Grants Table show the threshold, target, and maximum potential number of shares the executive may earn, depending on our three-year performance against established performance goals. Executives holding Performance RSUs accrue cash-payable dividend equivalents, payable if and when the award vests. We granted Performance RSUs under the American Equity Investment Life Holding Company Amended and Restated Equity Incentive Plan (the Equity Plan). •Time RSUs at a Grant Date Fair Value of $27.40 per share. We have reported the number of shares in these awards in the February 25, 2021 rows of the Grants Table All Other Stock Awards column. All Time RSUs vest in full on the third anniversary of their grant date. Executives holding Time RSUs accrue cash-payable dividend equivalents, payable if and when the award vests. We granted Performance RSUs under the Equity Plan. •ESOP shares at Grant Date Fair Value of $32.32 per share for awards in the June 30, 2021 rows, and $38.92 per share for awards in the December 31, 2021 rows, the closing prices of a share of our common stock on the dates in 2021 the shares were deposited into that plan for each executive. To the extent the Grant Date Fair Value of any of these awards is based on assumptions, see Note 13 to his retirementthe Consolidated Financial Statements in our 2021 10-K for more information.
Option Awards We have reported the Grant Date Fair Value of each stock option granted to each executive in each year indicated in the Summary Table. The Grants Table also shows the exercise price of each stock option we granted in 2021, which in each case was the closing price of a share of our common stock on the grant date. We granted all 2021 stock options under the Equity Plan. See our earlier proxy statements for more information on Option Awards we have reported in the Summary Table for earlier years. We have included the following Option Awards for each executive on the Summary Table: •Special Performance Vesting Stock Options at a Grant Date Fair Value per option indicated in the January 4 ($9.57 and $9.78), January 15 ($11.25 and $11.55), and June 2 ($12.20 and $12.56) rows of the Estimated Future Payouts Under Equity Incentive Plan Awards columns of the Grants Table, which show the number of stock options the executive may be able to exercise if we meet the performance conditions. For information on those grants, see our 2021 proxy statement. We granted these stock options under the Equity Plan. •Time-Based Stock Options at a Grant Date Fair Value per option indicated in the February 25 ($7.79) and September 7 ($9.11) rows of the All Other Option Awards column of the Grants Table, which show the number of stock options the executive may be able to exercise. All Time-Based Stock Options vest in thirds on the first three anniversaries of their grant date. We granted Performance RSUs under the Equity Plan. For information on the assumptions on which the Grant Date Fair Value of these stock options are based, see Note 13 to the Consolidated Financial Statements in our 2021 10-K. All Other Compensation We have reported the following 2021 All Other Compensation for each executive, as applicable: •employer matching contributions of up to $11,600 to each executive's 401(k) plan accounts; •holiday gift payments of up to $2,000 we gave each of our employees based on length of service with us, including amounts for each employee to produce a targeted amount net of taxes; •severance pay of approximately $410,000 to Mr. Uzuner in exchange for a final separation agreement, in accordance with our severance plan; •a cash relocation allowance of approximately $33,000 to Mr. Uzuner; and •perquisites and personal benefits for each executive for whom the Company.company's aggregate incremental cost for all such items exceeded $10,000 in 2021 in accordance with SEC rules, including: ◦limited personal air travel on a plane we lease, which we provide to executives in order to promote availability to colleagues and external business contacts and other business use of travel time during the trip, as well as conservation of travel time; ◦personal commercial air travel, primarily for an executive hired from outside the U.S. who retained a foreign residence and family, in order to attract the executive and facilitate working for us until relocation to U.S. could have been arranged (at a cost of $83,928 for Mr. Matovina’s changeUzuner; Mr. Uzuner's other perquisites and personal benefits cost approximately $500); ◦relocation services in control agreement, including hisorder to facilitate executives moving themselves and their families to the Des Moines area (at a cost of $57,363 for Mr. Bhalla; Mr. Bhalla's other perquisites and personal benefits cost approximately $8,700), and ◦no reportable perquisites for Mr. André, Mr. Lorenzen, Mr. Grensteiner, Mr. Hamalainen, and Mr. Johnson.
Outstanding Equity Awards at Year-End 2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | Stock awards | | Name | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | Anant Bhalla | 50,000 | | 26.70 | 01/27/2030 | | | | | | | | 122,025 | 27.05 | 11/19/2030 | | | | | | | | 122,025 | 27.05 | 11/19/2030 | | | | | | | | 43,724 | 26.72 | 01/04/2031 | | | | | | | | 43,723 | 26.72 | 01/04/2031 | | | | | | | 96,246 | | 27.40 | 02/25/2031 | | | | | | | | | | | | 54,179 | 2,108,647 | | | | | | | | | | | 214,154 | 8,334,874 | | Axel André | 43,909 | | 32.35 | 09/07/2031 | | | | | | | Jeffrey D. Lorenzen | 23,632 | | 27.40 | 02/25/2031 | | | | | | | | 24,783 | | 27.05 | 11/19/2030 | | | | | | | | 24,782 | | 27.05 | 11/19/2030 | | | | | | | | 5,650 | | 31.63 | 06/02/2031 | | | | | | | | 5,649 | | 31.63 | 06/02/2031 | | | | | | | | | | | | 16,424 | 639,222 | | | | | | | | | | | 85,101 | 3,312,111 | | Ronald J. Grensteiner | 20,051 | | 27.40 | 02/25/2031 | | | | | | | | 5,650 | | 31.63 | 06/02/2031 | | | | | | | | 5,649 | | 31.63 | 06/02/2031 | | | | | | | | | | | | 16,374 | 637,276 | | | | | | | | | | | 86,841 | 3,379,832 | | James L. Hamalainen | 36,249 | | 21.98 | 07/07/2030 | | | | | | | 23,259 | | 27.40 | 02/25/2031 | | | | | | | | 49,565 | 27.05 | 11/19/2030 | | | | | | | | 49,564 | 27.05 | 11/19/2030 | | | | | | | | | | | | 17,535 | 682,462 | | | | | | | | | | | 42,840 | | 1,667,333 | | | Tolga Uzuner | | 50,000 | | 30.50 | 11/15/2031 | | | | | | | | 50,000 | | 30.50 | 11/15/2031 | | | | | |
Option Awards None of these stock options was exercisable as of December 31, 2021. In each case, the stock option's expiration date is the tenth anniversary of its grant date and its exercise price is the closing price of a share of our common stock on the grant date. Except as otherwise provided below, each executive must maintain continued service in order to attain and retain the right to receive an amount equalexercise each option, unless we agree otherwise.
The stock options in the "Equity Incentive Plan Awards" column are "Special Performance Vesting Stock Option Grants" in 2020 or early 2021. For information on those grants, see our 2021 proxy statement. As of December 31, 2021, we had not yet met the performance conditions for executives to exercise those stock options. We subsequently met the performance condition in early 2022. Awardholders forfeit these options upon end of employment, unless the termination is (i) due to death, Disability (as defined in the Equity Plan), Retirement (as defined in that plan), or a full gross-up for any excise tax incurred by him as a result of receiving change in control payments, terminated upon his retirement on April 16, 2020. Since he has ceased his service as an officer and employee, Mr. Matovina is not eligible for any additional termination or change in control paymentswe initiate other than thosefor Cause (as defined in that may apply pursuantplan), or (ii) we offer the awardholder a separation agreement that becomes final. The right to exercise the termsother stock options is scheduled to vest on the following schedule: | | | | | | | Expiration Date | Vesting Schedule | | January 27, 2030 | 100% on fifth anniversary of grant date | | September 7, 2031 | 1/3 on each of the first three anniversaries of grant date | | February 25, 2031 | 1/3 on each of the first three anniversaries of grant date | | July 7, 2030 | 100% on third anniversary of grant date |
Stock Awards None of anythese awards were vested or paid as of December 31, 2021, and remained subject to continued service (in some cases through a 2024 date), unless we agree otherwise. In each case, the hypothetical market value of the unvested awards is based on the closing price of a share of our common stock on December 31, 2021.
Each of these awards accrued dividend equivalents in 2021 payable in cash if and when the award agreement undervests: | | | | | | | Executive | 2021 Accrued
Dividend Equivalent
($) | | Anant Bhalla | 96,270 | | | Jeffrey D. Lorenzen | 48,250 | | | Ronald J. Grensteiner | 51,672 | | | James L. Hamalainen | 21,882 | |
The awards in the 2016 Employee"Equity Incentive Plan. Accordingly, referencesPlan Awards" column are Performance RSUs granted in one or more of 2019, 2020, and 2021, depending on the executive and when he began employment with us. Each is scheduled to vest at the end of a three-year performance period beginning in the year of grant, subject to continued service and our Compensation and Talent Management Committee's determination of our performance against set goals for the period. Each is reported assuming the maximum performance factor will apply. The other awards are Time RSUs granted in one more of 2019, 2020, and 2021, depending on the executive and when he began employment with us. Each is scheduled to vest, subject to continued service, in thirds on the first three anniversaries of grant date.
Option Exercises and Stock Vested in 2021 | | | | | | | | | | | | | | Stock Awards | | Name | | Number of Shares
Acquired on Vesting
(#) | Value
Realized on
Vesting
($) | | Anant Bhalla | | 9,364 | | 274,084 | | | Jeffrey D. Lorenzen | | 19,116 | | 528,175 | | | Ronald J. Grensteiner | | 21,963 | | 606,838 | | | Ted M. Johnson | | 21,557 | | 595,620 | |
We have reported the "Value Realized on Vesting" at the number of shares of our common stock that vested for each executive in 2021 multiplied by the closing price per share on the vesting date (or, if the vesting date was not a business day, the immediately prior business day). No stock awards vested for Mr. André, Mr. Hamalainen, or Mr. Uzuner in 2021. None of the named executive officers under this heading, exercised any stock options during 2021.
Nonqualified Deferred Compensation in 2021 | | | | | | | | | | | | | Name | Plan Name | Aggregate Earnings in Last FY
($) | Aggregate Balance at Last FYE
($) | | Ronald J. Grensteiner | American Equity Marketing Officers Deferred Compensation Agreement | 50,670 | | 175,140 | |
Under a 1998 agreement, Mr. Grensteiner has a stock-payable deferred bonus. The "aggregate earnings" in 2021 are the change in the market price of our common stock during the year of the 4,500 shares payable (the result of a 3-for-1 stock split since the date of the agreement). The shares are payable upon the end of Mr. Grensteiner's employment. Consistent with SEC rules, none of the earnings or aggregate balance have appeared in our previous Summary Compensation Tables.
Potential Payments Upon Termination or a Change in Control | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Severance Benefits | | Change in Control Severance Benefits | | Name | Salary-Based
($) | STIP-Based
($) | COBRA Subsidy
($) | Out-placement
($) | | Salary-Based
($) | STIP-Based
($) | Stock Options
($) | RSUs
($) | Group Benefits
($) | | Anant Bhalla | 1,000,000 | 1,500,000 | 15,000 | 30,000 | | 3,000,000 | 4,500,000 | 5,683,481 | 10,443,521 | 60,234 | | Axel André | 600,000 | 1,050,000 | 15,000 | 30,000 | | 1,200,000 | 2,100,000 | 288,482 | — | 10,087 | | Jeffrey D. Lorenzen | 508,000 | 355,600 | 15,000 | 30,000 | | 1,524,000 | 1,066,800 | 942,947 | 3,951,333 | 51,598 | | Ronald J. Grensteiner | 500,000 | 450,000 | 15,000 | 30,000 | | 1,500,000 | 1,350,000 | 313,357 | 4,017,108 | 60,234 | | James L. Hamalainen | 550,000 | 825,000 | 15,000 | 30,000 | | 1,100,000 | 1,650,000 | 2,058,663 | 2,349,795 | 35,837 |
,
Severance Benefits The left side of table above shows the Severance Benefits each active named executive officer would have received if we had involuntarily terminated his employment with eligibility on December 31, 2021 and any required separation agreement had become final. In light of the hypothetical completion of 2021 performance, we assume we would have paid 2021 STIP in the normal course and do not include Mr. Matovina.any such amounts in the table above. All payments would have been made net of tax withholding; none of the named executive officers is entitled to a tax gross-up. Under the terms of his offer letter, Mr. Bhalla is eligible for severance if he is terminated other than for Cause, death or disability. "Cause" generally includes (i) willful and continued failure to substantially perform Mr. Bhalla's duties (other than due to incapacity due to physical or mental illness); (ii) conviction of, or entering of a guilty plea or a plea of no contest to, a felony; (iii) willful engagement in illegal conduct or gross misconduct; or (iv) material failure to comply with the Company'sCompany’s policies or rules, or any agreement between the Company and Mr. Bhalla. Mr. Bhalla is not eligible for such severance benefits if he fails to sign a general release and waiver of claims as part of a termination agreement that contains standard provisions including a non-disparagement provision and/or if he does not allow the release and waiver to become fully effective. The severance payable under Mr. Bhalla'sBhalla’s offer letter iswould have equaled (a) twenty-four (24) months of Mr. Bhalla's base salary and (b) Mr. Bhalla's Short-Term Performance Incentive Plan2021 STIP target bonus opportunity for the year in which his employment terminates. Mr. Bhalla would have received a severance benefit in the amount of $2,975,000 had he qualified for such benefits on December 31, 2020.opportunity. Each of the other named executive officers are eligible for severance under our American Equity Transition Benefit Plan (the Transition Plan) if we determined that we had involuntarily terminated the Company’s severance plan if they are terminated because of a reduction ofexecutive due to job elimination, job modification, or realignment in the Company’s workforce or elimination of their position, function or operation. They are not eligible for such severance benefits if they take a comparable job with the Company, failpoor fit. The Severance Benefits would have been equal to sign a release of claims, do not remain in compliance with Company policies, fail to abide by all applicable confidentiality, non-solicitation, non-disclosure and non-compete policies, as applicable, and/or other specified reasons. The severance payable under the severance plan is two52 weeks of base paysalary, plus the executive's COBRA benefits continuation contribution rate for each yearthe first 12 months after termination of employment, plus outplace assistance at our cost of no more than $30,000. Change in Control Severance Benefits The right side of the eligible recipient’s service withtable above shows the Company. The severance plan has a minimum benefit of twelve weeks and a maximum benefit of 26 weeks of base pay. The following is the severance benefit that theChange in Control Severance Benefits each active named other executive officersofficer would have received if we had they qualified for such benefits on December 31, 2020: Mr. Johnson-$286,500; Mr. Lorenzen-$214,923; Ms. Montz-$127,077 and Mr. Hamalainen-$115,384. On April 1, 2021, Ms. Montz entered into a separation agreement with the Company under which she agreed to remain in the Company’s employ through June 15, 2021 to effect an orderly transition of her responsibilities.
| 30 | | | 2021 Proxy Statement | | | | | | | | | | |
Ms. Montz also agreed to be bound by covenants for the benefit of the Company, including an agreement not to provide services to certain specified entities through the end of 2022. In consideration of these commitments, the Company agreed that her outstanding long-term incentive awards will continue to vest on the same basis as though she had remained employed, and will pay her, in four quarterly installments following her termination, the following cash benefits: (i) the base salary, based on her annual rate of $472,000, she would have received had she remained employed through March 31, 2022 (i.e., for 9 1/2 months following her termination date), (ii) $413,000, which is equal to 125% of her target annual incentive opportunity for 2021, and (iii) $15,000 in respect of the cost of continuing her medical benefits coverage. These benefits are in lieu of, and not in addition to, any benefits that would have been payable under the Company’s severance plan.
Subject to certain limited exceptions, if a named executive officer experiences a termination of employment with the Company that is not in connection withsuffered a change in control or due to death, disability, retirement or a qualifying termination under the Company’s severance plan as describe above, theon December 31, 2021 and each named executive officer would be entitled only to the following payments and benefits, which are provided pursuant to the terms of the plan or contract governing such payment or benefit or are otherwise applicable to all Company employees (such payments and benefits, the “Accrued Amounts”):
•
Accrued and unpaid base salary through the termination date (two week notice of termination by either the employer or employee is required),had ended employment with no right to receive any cash bonus or incentive amounts not earned prior to notice of termination;
•
The right to exercise vested stock options within thirty or sixty days of the termination date dependingseverance eligibility on the terms of the stock options;
•
Distribution of the executive’s 401(k) account and ESOP account;
•
COBRA benefits, if elected, for the purchase of medical and dental insurance; and
•
The right to convert group life insurance to an individual policy without proof of insurability, at the executive’s ongoing expense.
that date.
We entered into change in control agreements with a small group of senior executives, including each of the active named executive officers, whichofficers. Each is filed as an exhibit to our 2021 10-K. Under these agreements, we would providehave provided payments and benefits to them if theirupon end of employment with the Company terminates under certain circumstances following a “changechange in control” (as defined below) of the Company.control. Such circumstance includes the executive’swould have included discharge without “Cause” (as defined below)Cause or voluntary resignation by the executive for “Good Reason” (as defined below). We refer to such a termination of employment as a “QualifyingGood Reason. Active named executive officers who had received Change in Control Termination”. If any of the named executive officers receive change in control payments, they are ineligible toSeverance would not receive severance under the Company’s severance plan.Transition Plan. A “changeUnder the agreements:
•a "change in control” is defined to include: (i) the acquisition by any personcontrol" includes certain concentrations of 35% of the combined voting power of the Company; (ii)our ownership, certain changes in a majority of the directors originally on theour Board of Directors (and withmembers, certain designated successors) ceasing to constitute a majority of the Board of Directors; (iii) a mergermergers with another entity, in which the Company’s voting securities cease to represent at least 50% of the combined voting power of the surviving entity; or (iv) the saleand certain sales of substantially all of the assets of the Company.our assets. “Cause” under the change in control agreements•"Cause" generally includes (i) the executive’s willful and continued failure to substantially perform the executive’s duties (other than a failure resulting from the executive’s incapacity due to physical or mental illness), after a written demand for substantial performance from the Board of Directors; (ii) the final conviction of the executive of, or an entering of a guilty plea or a plea of no contest by the executive to, a felony; or (iii) the
willful engaging by the executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. “•"Good Reason”Reason" generally means any of the following without the executive’s consent and subject to certain notice and cure periods: (i) subject to certain exceptions, the assignment to the executive of any duties inconsistent with the executive’s position, including any change in status, authority, duties or responsibilities or any other action that results in a material diminution in such status, authority, duties or responsibilities; (ii) a reduction in the executive’s base salary; (iii) the relocation of the executive’s office to a location more than 50 miles from the executive's current office location;West Des Moines, Iowa; (iv) unless a plan providing a substantially similar compensation or benefit is substituted, (a) the Company’s failure to continue in effect any fringe benefit or compensation plan, retirement plan, life insurance plan, health and accident plan or disability plan in which the executive is participating prior to the change in control which adversely affects the executive’s total compensation in a material manner, or (b) the Company’s action that adversely affects the executive’s participation in or materially reduces or deprives him of his benefits under, such plans; or (v) the Company’s failure to obtain the assumption of the change in control agreement in writing by a successor.
During the term of the change in control agreement and during the period in which the executive iswould have been entitled to receive base salarysalary-based payments, the executive may notwould have been prohibited from (i) solicitsoliciting or enticeenticing any other employee to leave us or our affiliates | | | | | | | | | | 2021 Proxy Statement | | | 31 | |
to go to work for any competitor, or (ii) requestrequesting or adviseadvising a customer or client of ours or our affiliates to curtail or cancel its business relationship with us or our affiliates. If a Qualifying Change in Control Termination of a named executive officer occurs within thirty-six months following a change in control (or twenty-four months, in the case of Mr. Hamalainen), the named executive officerSeverance Benefits would be entitled to receive the following, in addition to the Accrued Amounts described above:have included:
•
Base salary payments forequal to three years (or two years, in the case of Mr. Hamalainen), payable in installments for Mr. Bhalla and payable in a lump sum for Mr. Johnson, Mr. Lorenzen, Ms. MontzAndré and Mr. Hamalainen;Hamalainen);
•
A cash lump sum equal to the amount of the target annual bonus that the executive would receive for the year in which the executive’s termination occurs, prorated through the date of termination;
•
Aa cash lump sum equal to three times (or two times, in the case offor Mr. André and Mr. Hamalainen) the executive’s target annual bonus;STIP award;
•
Automaticautomatic vesting of unvested stock options (we reported these at year-end 2021 closing stock price less option exercise price), unvested shares of time-based restricted stock, unvested performance-basedTime RSUs and Performance RSUs at target performance levels (we report these at year-end 2021 closing stock price); and unvested time-based RSUs; and
•
Continuationcontinuation of health, dental and life insurance benefits during the salary continuation period.period, which we report at our estimated cost.
EachAll payments would have been made net of tax withholding; none of the named executive officer’s change in control agreements provide that ifofficers is entitled to a tax gross-up. If an executive's payments and benefits provided to them would constitutehave been an “excess"excess parachute payment”payment" for purposes of Section 280G of the Code, theywe would have their payments and benefits reduced Change in Control Severance Benefits to the highest amount that could be paid without triggering Section 280G of the Code or, if greater, receive the after-tax amount of the payment taking into account the excise tax imposed under Section 4999 of the Code and any applicable federal, state and local taxes. None of the named executiveamounts above includes the impact of any such reduction.
Mr. Johnson We entered into a separation agreement with our former Chief Financial Officer, Ted M. Johnson in 2021. Under the agreement, Mr. Johnson separated from employment effective July 16, 2021 and released employment-related claims. The agreement includes various other provisions beneficial to us, including: (i) 18-month non-solicitation of our employees, contractors, and others; (ii) 18-month non-compete, limited to specified firms; (iii) cooperation on our matters; (iv) non-disparagement of us and our associates (we also agreed to inform our officers is entitledand directors not to an excise tax gross-updisparage Mr. Johnson); (v) maintaining confidentiality; and (vi) no assistance to a third party in a dispute with us, except as required by law or pursued by a regulator. Mr. Johnson did not meet his obligations under the termsagreement, which resulted in non-payment of these agreements.the benefits of his agreement. The following table sets forth the estimated amount of compensation each named executive officer would receive uponMr. Uzuner
We entered into a Qualifying Change in Control Termination that took place on December 31, 2020. No target annual bonus amounts are included for the year of termination since such bonus amounts are earned for a termination occurring on December 31. | | | | | Potential Payments Upon Termination or Change in Control | | | | Name | | | Base
Salary Payment
($) | | | Bonus(1)
($) | | | Value of
Acceleration
of Stock
Options(2)
($) | | | Value of
Acceleration
of Restricted
Stock and
Restricted
Stock Units(3)
($) | | | Excise Tax
Gross Up
($) | | | Group
Insurance
Benefits
($) | | | Total
($) | | | | Anant Bhalla | | | | | 2,550,000 | | | | | | 3,825,000 | | | | | | 196,871 | | | | | | 2,084,112 | | | | | | — | | | | | | 99,452 | | | | | | 8,755,435 | | | | | Ted M. Johnson | | | | | 1,719,000 | | | | | | 1,203,300 | | | | | | 30,235 | | | | | | 1,661,250 | | | | | | — | | | | | | 90,447 | | | | | | 4,704,232 | | | | | Jeffrey D. Lorenzen | | | | | 1,524,000 | | | | | | 1,066,800 | | | | | | 30,235 | | | | | | 1,472,955 | | | | | | — | | | | | | 87,445 | | | | | | 4,181,435 | | | | | Renee D. Montz(4) | | | | | 1,416,000 | | | | | | 991,200 | | | | | | 28,219 | | | | | | 1,325,796 | | | | | | — | | | | | | 87,445 | | | | | | 3,848,660 | | | | | James L. Hamalainen | | | | | 1,000,000 | | | | | | 700,000 | | | | | | 266,363 | | | | | | 378,730 | | | | | | — | | | | | | 58,521 | | | | | | 2,403,614 | | |
(1)
2020 bonus amount is three times (two times for Mr. Hamalainen) the target annual bonusseparation agreement with our former Chief Investment Officer, Asset Management, Tolga Uzuner, under the 2020 Program described aboveTransition Plan in 2021. We offered and paid Mr. Uzuner benefits as determined under “Short-Term Incentive Compensation for 2020” in the Compensation DiscussionTransition Plan and Analysis.his Special Performance Vesting Stock Options.
(2)
Our stock option awards provide for automatic vesting upon a change in control or upon death or disability. These values were calculated based on the difference between the exercise price of the options and the closing price of the Common Stock on December 31, 2020.
(3)
Our time-based restricted stock awards, performance-based RSU awards and time-based RSU awards provide for automatic vesting upon a change in control or upon death or disability. For information concerning unvested time-based restricted stock, performance-based RSUs and time-based RSUs, see “Outstanding Equity Awards at December 31, 2020” in the Executive Compensation Tables. These values were calculated based on the closing market price of the Common Stock on December 31, 2020 and the assumption that the target number of shares for performance-based RSUs vest.
(4)
Ms. Montz ceased to be eligible to receive benefits under her change in control agreement upon execution of her separation agreement.
CEO Pay Ratio We are required toSEC rules require that we disclose the ratio of the median annual total compensation of all employees (except our Chief Executive Officer) to the annual total compensation of our Chief Executive Officer. ForOfficer to that of the purposesmedian employee. We and other companies use reasonable estimates, assumptions, and methods consistent with SEC rules to prepare information that we believe best fits our circumstances, rather than a rigid, uniform approach. As a result, we believe that comparisons between this information and other companies' disclosure will not necessarily be useful.
Since we added a significant number of this disclosure,employees in 2021, our median employee is different from whom we used to calculate our pay ratio for 2020. To identify our median employee, we identified everyone we consider an employee under relevant U.S. tax rules during 2021, which covered approximately 930 entirely U.S.-based employees. We totaled each employee's salary earnings in 2021 and cash incentives paid during 2021, and annualized for employees who served for only part of 2021. We did not make any cost-of-living adjustments or account for any regional pay differences. We calculated our median employee’s total compensation under the median employee, excludingSEC rules required for our Chief Executive Officer based on the Summary Compensation Table. We then added $18,073, our payroll as of December 31, 2020,cost for company-provided group medical insurance for our Chief Executive Officer, and have compared$17,124 on the same basis for our median employee. Using this methodology, our median employee’s compensation with that payable to Mr. Bhalla. The median employee was determined using a consistently applied compensation measure, which was total cash compensation from January 1, 2020 through December 31, 2020. Total cash compensation included salary, bonus and holiday gift | 32 | | | 2021 Proxy Statement | | | | | | | | | | |
compensation. As permitted by the SEC rules, we annualized only the compensation for those employees who worked on a full-time, permanent basis but were hired after January 1, 2020. The median employee for 20202021 was different from the median employee for 2019 following significant hiring by the Company in 2020. The consistently applied compensation measure,$104,681 and our Chief Executive Officer’s 2021 total cash compensation was identical for 2020 and 2019.
For 2020, the annualized compensation$7,643,899. The resulting ratio of our Chief Executive Officer was $9,609,258 andOfficer’s total compensation to the compensation of our median employee total compensation was $83,924, resulting in a CEO pay ratio of 114:approximately 73:1.
The 2020 pay ratio calculation includes one-time sign-on awards that Mr. Bhalla received when he was hired by the Company in January 2020.
This ratio represents a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll records and the methodology described above. Significant flexibility is provided to companies in determining their median employee, and our ratio may not be useful for comparison to those reported by other companies, including those in our peer group and industry. | | | | | | | | | | | | | 20212022 Proxy Statement |
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Additional Information Proposal 3—Advisory Vote on Executive Compensation2022 Shareholder Meeting Information
As discussed in “Compensation Discussion and Analysis
,” our compensation policies and programs
Accessing Proxy Materials We are designed to attract and retain highly qualified and motivated executive officers and employees, encourage and reward achievementmailing a hard copy Notice of our annual and long-term goals and encourage executive officers and employees to become shareholders with interests aligned with thoseInternet Availability of other shareholders. The primary elements of compensation for most of our executive officers include: (1) base pay; (2) annual cash incentive compensation; and (3) long-term equity compensation. A substantial portion of the compensation awarded each yearProxy Materials (the Notice) to our executive officers is variable basedshareholders on achieving performance objectives. This compensation structure is central to the Company’s ability to attract, retain and motivate individuals who can achieve superior financial results. Please refer to “Compensation Discussion and Analysis” for an overview of the compensation of the Company’s named executive officers. A primary focus of the Compensation Committee is whether the Company’s executive compensation program serves the best interests of the Company’s shareholders. At the Company’s 2020 Annual Meeting, 96% of the votes cast by shareholders approved the executive compensation program described in the proxy statement for that meeting.
Pursuant to Section 14A of the Securities Exchange Act of 1934 (the “Exchange Act”), weor about April 28, 2022. We are asking for shareholder approval of the compensation of our named executive officers as disclosed inmaking this proxy statement and our Annual Report to Shareholders available on the Internet instead of mailing a printed copy to each shareholder. The Notice includes instructions to access and review all of the information contained in accordance with SEC rules under “Compensation Discussion and Analysis,”these documents on the related compensation tables andInternet, as well as how to submit a proxy on the narrative discussion following the compensation tables. This vote is not intended to address any specific item of compensation, but rather the overall compensationInternet.
To request a printed copy of our proxy materials, follow the Notice instructions. Shareholders may request to receive either hard copy proxy materials or electronically by email, and either choice will remain in effect until the shareholder terminates it. Choosing to receive proxy materials by email will save paper, printing costs, and mailing costs, and will conserve resources.
Voting Only shareholders as of the close of business on the record date, April 12, 2022, will be entitled to vote at the 2022 Annual Shareholder Meeting. If you vote by proxy, the individuals named executive officerson the proxy card will vote your shares in the manner you indicate. If you are a registered shareholder (that is, you own shares in your own name and not through a bank, broker, or another record holder), you may vote without attending the policiesmeeting in person by telephone, through the Internet, or by completing a paper proxy card and practices describedreturning it by mail. Please see the Notice of Annual Meeting in this document or your proxy statement. Accordingly, we askcard for instructions on how to access the telephone and Internet voting systems. If you hold your shares in "street name" through a bank, broker, or other record holder, including through our shareholdersESOP, your record holder will advise you how you can vote without attending the meeting in person. You may revoke your proxy at any time prior to the close of voting at the Annual Shareholder Meeting, either in person at the Annual Shareholder Meeting, by writing delivered to our Corporate Secretary, by telephone, or through the Internet, by withdrawing your proxy or granting a proxy bearing a later date. If you return the proxy card without indicating your instructions on how to vote onyour shares, the following resolution:proxies will vote your shares as follows: “RESOLVED,•FOR the shareholders of American Equity Investment Life Holding Company approve, on an advisory basis, the compensationelection of the Company’s named executive officers as disclosed inthree director nominees;
•FOR the Company’s Proxy Statement for the 2021 Annual Meeting of Shareholders pursuant to the compensation disclosure rulesratification of the Securitiesappointment of EY as our independent registered public accounting firm for 2022; and Exchange Commission, including the Compensation Discussion and Analysis, the 2020 Summary Compensation Table and the other related tables and disclosures.” This vote is advisory and not binding on the Company, the Compensation Committee or the Board of Directors. The Board of Directors and Compensation Committee value the opinions of the Company’s shareholders. To the extent there is a significant vote against the named executive officer compensation as disclosed in this proxy statement, we will consider those shareholders’ concerns, and the Board of Directors and Compensation Committee will evaluate whether any actions are necessary to address those concerns. We currently provide our shareholders with the opportunity to vote on the compensation of our named executive officers at each annual meeting.
If a quorum exists, action on this proposal will be approved if the votes cast favoring the proposal exceed the votes cast opposing the proposal.
The Board of Directors unanimously recommends you vote •FOR the approval of the compensation of our named executive officers as disclosed in this proxy statement.
If any other matter is presented at the Annual Shareholder Meeting, your proxies will vote in accordance with their best judgment. At the time this proxy statement pursuantwas printed, we knew of no other matters to be addressed at the compensation disclosure rulesAnnual Shareholder Meeting. If you attend the Annual Shareholder Meeting in person, you may either vote by proxy in advance as described above or you may vote in person at the Annual Shareholder Meeting. We encourage you to vote by telephone or through the internet using the instructions in the Notice of the SEC.Internet Availability of Proxy Materials and on your proxy card.
| 34 | | | 2021 | | | | | | | 2022 Proxy Statement | | | | | | | | | | |
Attending the Annual Shareholder Meeting in Person TABLE OF CONTENTSShareholders may attend the Annual Shareholder Meeting in person. If you or your proxy plan to attend the Annual Shareholder Meeting in person and your share ownership is registered in your own name (i.e., you are a "record holder"), you may indicate your plans to do so when you submit your proxy in advance. We maintain a list of record holders entitled to be present and vote at the Annual Shareholder Meeting, which will be available for inspection by record holders at our principal executive offices beginning approximately two days after we provide notice of that meeting and at the Annual Shareholder Meeting. If you plan to attend the meeting, please bring proof of identity; feel free to also bring documentation of your ownership, e.g., printout of Computershare records, in case need arises.
If you plan to attend in person and you hold your shares in "street name" through a bank, broker, or other record holder, including through our ESOP, contact the bank, broker or other record holder in whose name your shares are registered to obtain a broker’s proxy card and bring it with you to the Annual Shareholder Meeting.Additional Information
Human Capital
ThroughoutHouseholding
The SEC permits companies and intermediaries, such as a brokerage firm or a bank, to satisfy the Company’s 25-year history,delivery requirements for Notices and proxy materials with respect to two or more shareholders sharing the same address by delivering only one Notice or set of proxy materials to that address. This "householding" saves paper, printing costs, and mailing costs, and conserves resources. Certain of our shareholders whose shares are held in street name and who have consented to householding will receive only one Notice or set of proxy materials per household. If you would like to receive a separate set of proxy materials now or in the future, or if your household is currently receiving multiple copies of the same items and you would like to receive only a single copy at your address in the future, please contact Investor Relations, at 6000 Westown Parkway, West Des Moines, Iowa 50266 (1-888-221-1234, ext. 3602) and indicate your name, the name of each of your brokerage firms or banks where your shares are held, and your account numbers.
Quorum and Votes Required We will have a quorum at our Annual Shareholder Meeting if a majority of the shares issued and outstanding and entitled to cast votes on at least one matter at the meeting is present in person or by proxy. Shares whose vote is abstained, withheld for any director, and broker non-votes, will count for quorum purposes. We have appointed Alliance Advisors, L.L.C. inspector of the election. Our by-laws provide for confidential voting. In accordance with our articles of incorporation, stockholders do not have the right to cumulate their votes for the election of directors. If you hold shares in the name of a bank, broker or another record holder, your record holder will provide instructions on how to vote your shares. Your record holder may exercise discretion to vote your shares on Proposal 2, a "routine matter," even if you provide no instructions. Proposals 1 and 3 are not "routine matters;" record holders may not vote your shares on these matters unless you give them voting instructions. Assuming a quorum is present, directors will be elected (Proposal 1) by a plurality of the votes cast by the shares entitled to vote, and each of the other proposals will be approved if the votes cast in favor exceed the votes cast opposing. In each case, any abstentions and broker non-votes will have no effect on the outcome. We expect to announce preliminary voting results at the Annual Shareholder Meeting and publish preliminary or final voting results in a Form 8-K within four business days following the meeting. If only preliminary voting results are available for reporting in the Form 8-K, the Company has upheldwill amend the ethos of our founder, “It’s not aboutForm 8-K to report final voting results within four business days after the building, the charter or the policy form… it’s about the people.” In 2020, the Company began an exciting journey with a new chief executive officer and a new strategy, AEL 2.0. The Company leveraged its people-first focus with commitments to hiring, developing and retaining talented team members as evidenced by the Company’s 7.7% year over year increase in full time employees, diversification of its employee base from 10 states to 27, and a 92% retention rate.final voting results are known. As of December 31, 2020, the Company employed 655 full-time and two part-time team members. During 2020, 101 employees were hired at the following levels: 8 senior leaders, 12 managers, 78 staff and 3 interns. 95% of the Company’s employees are located in Iowa with 5% employed at locations outside of Iowa. All Company employees are located in the United States, and none are represented by a labor union or covered by a collective bargaining agreement. As of December 31, 2020, the Company engaged 38 independent contractors.Before the onset of COVID-19, approximately 97% of the Company’s team members worked in its two central office locations. The Company acted quickly to protect team member health and safeguard its business by sending approximately 91% of the workforce to work remotely. Safety protocols and facility upgrades were implemented for the essential on-site team members, and a COVID-19 care program comprised of COVID-related paid time off, updated benefits, and management best practices was implemented. Return to office planning has since commenced, with a core ten person cross-functional team meeting weekly to establish policies and practices to facilitate effective return to office and plan for the future of work.
Engagement and Alignment. For the tenth year in a row, the Company was honored in 2020 as a Top Iowa Workplace. This designation was based solely on employee feedback gathered through a third-party survey administered by employee engagement technology partner, Energage, LLC. The Company emerged as a Top Workplace based on 15 drivers of engaged cultures, including alignment, execution and connection.
As the Company introduced the AEL 2.0 strategy, culture remained in focus. Town hall meetings and chief executive officer video updates ensured all team members were clear on direction, priorities, and the collaborative spirit essential to success. In late 2020, 84% of the population responded to a culture survey conducted by an external resource, Partners in Leadership. Responses indicated cultural strengths in team member alignment, development and engagement. 85% of respondents would recommend the Company to friends and family as a great place to work and 81% of respondents agree with the direction the organization is headed. Partners in Leadership conducted four culture workshops to identify the belief shifts required to achieve AEL 2.0. The Company has since initiated a three-year plan to deploy culture champions, engage all team members and ensure our culture continues to strengthen and evolve at pace with our strategy.
To support a culture of co-celebration and encouragement, the Company maintains a Recognition Rewards program. During 2020, 92% of employees participated in the program tallying over 1,700 unique recognitions. Managers are provided with dedicated engagement funds for team events and celebrations and hosted highly attended drive-thru events that safely enabled team members to stay connected. The Company’s employee volunteer program, Difference Makers, and its Volunteer Time Off Program supported the Company’s commitment to community.
The Company has worked to bring together team members from diverse backgrounds and wants all voices to be heard. A series of three internal learning and listening opportunities to spark courageous conversations regarding diversity, equity and inclusion among team members and executive leadership were held. The Company also participated in the United Way Equity Challenge and offered Unconscious Bias training. This work culminated in insights that inspired the expansion of our mission with a long-term commitment to reinforcing societal equity and a holistic approach to inclusion. This starts with a commitment to playing a pivotal role in transforming the local communities in addition to enhancing the Company’s recruiting, retention and development practices. As of December 31, 2020, 36% of the Company’s Board of Directors and 56.4% of its employees, including 47.9% of manager and above employees, self-identified as women and minority individuals.
The Company’s competitive compensation programs are foundational to creating strategy alignment, activating performance, and celebrating collective success with every team member. The Company’s employee benefits package and engagement programs send a strong message of company commitment to team members.
Compensation and Benefits. The Company consistently assesses the current labor market to refine its compensation program. The base salary structure is driven by competitive market analysis relative to functional job requirements. As evidence of our competitive pay positioning, our average comp-ratio is approximately 102% of
| | | | | | | | | | | | | 20212022 Proxy Statement | | | 35 | |
salary range midpoint. Every team member is aligned to company strategy through a role-appropriate incentive compensation plan that pays out commensurate with the achievement of personal and/or organizational success measures depending upon position.
The Company’s employee benefits programs are designed to support its growing workforce’s evolving needs. Healthcare options for benefit-eligible employees aim to maintain affordable team member contribution and proactively promote physical and mental well-being. In 2020, 89% of employees elected coverage through Company sponsored medical plans; 90% of employees elected coverage through the Company sponsored dental plan; and 74% of employees elected coverage through the Company sponsored vision plan. The Company pays an average of 84% of the monthly medical premium.
In addition, the Company updated its free mental and behavioral health resources in 2020, including on-demand webinars through a web-based vendor. As of December 31, 2020, 27% of team members had utilized the program.
Team members are eligible to participate in the Company’s 401(k) plan once they have completed thirty days of employment and attained age 18. The Company matches 100% of team member contributions to the 401(k) plan up to 3% of the employee’s total eligible compensation and matches 50% of employee contributions up to the next 2% of the employee’s total eligible compensation, subject to the limitations specified in the Code.
The Company makes semi-annual discretionary contributions to the ESOP, which creates shareholder aligned equity interest in the Company for eligible employees. Employees become eligible once they have completed a minimum of six months of service, and their interests in the ESOP become 100% vested after two years of service to the Company.Supplementary Information
Talent Development.
To support employees in reaching their full potential
Shares Outstanding We have a single class of voting common stock, $1 par value per share, of which 94,316,132 shares were outstanding at close of business on the record date, and building progressive careers,therefore entitled to vote at the Company encourages and invests in a wide variety of professional development opportunities and in-role stretch assignments. Approximately 6600 hours of training were delivered internally through the Company’s Academy for Excellence. In addition, team members accessed 794 hours of real-time LinkedIn Learning Content. The Company also provides accessAnnual Shareholder Meeting. Each share is entitled to a wide variety of external seminars, degree and certificate programs.one vote. Talent development is a key leadership accountability, and in 2020, all direct reports to the chief executive officer had a portion of their short-term incentive tied to maximizing the impact of their function by establishing and implementing a target operating model, building team capacity, capability and succession, and enhancing personal leadership effectiveness.
| 36 | | | 2021 Proxy Statement | | | | | | | | | | |
Security Ownership of Management The following table reports beneficial ownership of our common stock as of April 12, 2022, to the best of our knowledge.
| | | | | | | | | | | | | | | | Amount and Nature of Common Stock Beneficial Ownership | | | Name of Beneficial Owner* | Common Stock
(#) | Exercisable Stock Options and Deferred Shares
(#) | Total
(#) | Series A Preferred Stock (#) | | Anant Bhalla | 28,281 | 197,831 | 226,112 | — | | Axel André | — | — | — | — | | Jeffrey D. Lorenzen | 58,912 | 38,310 | 97,222 | — | | Ronald J. Grensteiner | 88,303 | 16,834 | 105,137 | — | | James L. Hamalainen | 3,511 | 57,318 | 60,829 | 2,000 | | Tolga Uzuner | — | 50,000 | 50,000 | — | | Ted M. Johnson | 63,710 | — | 63,710 | — | | David S. Mulcahy | 121,460 | — | 121,460 | — | | Joyce A. Chapman | 51,549 | — | 51,549 | — | | Brenda J. Cushing | 16,021 | — | 16,021 | — | | James M. Gerlach | 232,688 | — | 232,688 | — | | Douglas T. Healy | 38,658 | — | 38,658 | — | | Robert L. Howe | 72,378 | 9,000 | 81,378 | — | | William R. Kunkel | 59,246 | — | 59,246 | — | | Alan D. Matula | 29,241 | — | 29,241 | — | | Gerard D. Neugent | 41,240 | 14,000 | 55,240 | — | | Sachin Shah | 5,121 | — | 5,121 | — | | A.J. Strickland, III | 293,121 | — | 293,121 | — | | All active directors and executive officers, including but not limited to those active individuals listed above, as a group | 1,140,204 | 359,192 | 1,499,396 | 2,000 |
*As of April 12, 2022, no director, director nominee, or executive officer, beneficially owned 1% or more of the total outstanding shares of our common stock or series A preferred stock. All active directors and executive officers, including but not limited to those active individuals listed in this table, as a group beneficially owned 1.59% of our common stock outstanding as of April 12, 2022.
Security Ownership of Certain Beneficial Owners
The following table sets forthpersons have reported to the SEC beneficial ownership of more than five percent of our Common Stockoutstanding common stock. | | | | | | | | | | Name and address of beneficial owner | Amount and Nature of Beneficial Ownership | Percent of Class (6) | Macquarie Group Limited (1) 50 Martin Place Sydney New South Wales, Australia | 5,141,543 | 5.55% | The Vanguard Group (2) 100 Vanguard Blvd. Malvern, PA 19355 | 9,899,977 | 10.7% | Dimensional Fund Advisors LP (3) 6300 Bee Cave Road Building One Austin, TX 78746 | 6,710,570 | 7.3% | BlackRock, Inc. (4) 55 East 52nd Street New York, NY 10055 | 13,268,080 | 14.3% | Brookfield Asset Management Reinsurance Partners Ltd. (5) 73 Front Street, 5th Floor Hamilton, HM 12 Bermuda | 15,886,163 | 16% |
(1)This information is based solely on a Schedule 13G/A filed with the SEC on February 11, 2022 by Macquarie Group Limited, which reported beneficial ownership as of MarchDecember 31, 2021 by: (i) each director and nominee for director; (ii) our chief executive officer, our chief financial officer and each2021. (2)This information is based solely on a Schedule 13G/A filed with the SEC on February 9, 2022 by The Vanguard Group, which reported beneficial ownership as of our other three most highly compensated executive officers; (iii) all executive officers, directors and nominees for directorsDecember 31, 2021. (3)This information is based solely on a Schedule 13G/A filed with the SEC on February 8, 2022 by Dimensional Fund Advisors LP, which reported beneficial ownership as a group; and (iv) each shareholder known by us to be the beneficial owner of more than 5% of our Common Stock. On March 31, 2021, there were 95,482,733 shares of Common Stock outstanding. | | | | | Shares Beneficially
Owned(1) | | | Options included in
Number of Shares
Beneficially Owned(2) | | | | Name of Beneficial Owner | | | Number | | | Percent | | | | John M. Matovina | | | | | 257,903 | | | | | | * | | | | | | — | | | | | Ted M. Johnson(3) | | | | | 127,753 | | | | | | * | | | | | | — | | | | | Jeffrey D. Lorenzen(3) | | | | | 81,910 | | | | | | * | | | | | | — | | | | | Renee D. Montz(3) | | | | | 54,268 | | | | | | * | | | | | | — | | | | | Anant Bhalla(3) | | | | | 73,884 | | | | | | * | | | | | | — | | | | | Jim L. Hamalainen(3) | | | | | 20,535 | | | | | | * | | | | | | — | | | | | Joyce A. Chapman | | | | | 52,114 | | | | | | * | | | | | | 14,000 | | | | | Brenda J. Cushing | | | | | 13,000 | | | | | | * | | | | | | — | | | | | James M. Gerlach | | | | | 229,667 | | | | | | * | | | | | | — | | | | | Douglas T. Healy | | | | | 3,150 | | | | | | * | | | | | | — | | | | | Robert L. Howe | | | | | 84,500 | | | | | | * | | | | | | 29,000 | | | | | Michelle M. Keeley | | | | | 4,200 | | | | | | * | | | | | | — | | | | | William R. Kunkel | | | | | 56,225 | | | | | | * | | | | | | — | | | | | Alan D. Matula | | | | | 26,220 | | | | | | * | | | | | | — | | | | | David S. Mulcahy | | | | | 118,439 | | | | | | * | | | | | | — | | | | | Gerard D. Neugent(4) | | | | | 102,522 | | | | | | * | | | | | | 14,000 | | | | | Sachin Shah(5) | | | | | 2,100 | | | | | | * | | | | | | — | | | | | A. J. Strickland, III | | | | | 290,100 | | | | | | * | | | | | | — | | | | | All executive officers, directors and nominees for director as a
group (22 persons)(3) | | | | | 1,819,786 | | | | | | 1.90% | | | | | | 57,000 | | | | | 5% Owners: | | | | | | | | | | | | | | | | | | | | | | BlackRock, Inc
55 East 52nd Street
New York, NY 10055(6) | | | | | 13,524,283 | | | | | | 14.16% | | | | | | | | | | | The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355(7) | | | | | 10,323,472 | | | | | | 10.81% | | | | | | | | | | | Dimensional Fund Advisors LP
Building One
6300 Bee Cave Road Austin, TX 78746(8) | | | | | 7,246,887 | | | | | | 7.59% | | | | | | | | | | | Macquarie Group Limited
50 Martin Place
Sydney, New South Wales, Australia(9) | | | | | 5,017,811 | | | | | | 5.26% | | | | | | | | | | | Brookfield Asset Management Inc.
Brookfield Place
18 Bay Street, Suite 300 Toronto,
Ontario M5J 2T3(10) | | | | | 9,106,042 | | | | | | 9.54% | | | | | | | | |
*
Less than 1%.
| | | | | | | | | | 2021 Proxy Statement | | | 37 | |
(1)
Beneficial ownership is determined in accordance with Rule 13d-3 of the Exchange Act and generally includes voting and investment power with respect to securities, subject to community property laws, where applicable.
(2)
This column includes stock options granted pursuant to the 2011 Directors Stock Option Plan that are exercisable within sixty (60) days of MarchDecember 31, 2021.
(3)
Ownership includes shares held in our ESOP as follows: Mr. Bhalla—625 shares; Mr. Hamalainen—0 shares; Mr. Johnson—14,139 shares; Mr. Lorenzen—12,496 shares; Ms. Montz—4,776 shares. The total ownership of shares held in the ESOP by the executive officers(4)This information is 56,872 shares.
(4)
Mr. Neugent is the trustee ofbased solely on a trust which holds 50,303 shares of Common Stock.
(5)
Under an arrangement between the parties, the restricted stock granted in respect of Mr. Shah’s service on the Board is granted to Brookfield or its affiliate.
(6)
Based on the Schedule 13G/A filed with the SEC on January 26, 2021,27, 2022 by BlackRock, Inc., BlackRock, Inc.which reported sole voting power with respect to 13,388,796 shares, sole dispositive power with respect to 13,524,283 shares and no shared voting or dispositive power.beneficial ownership as of December 31, 2021.
(7)
Based(5)This information is based solely on thea Schedule 13G/13D/A filed with the SEC on February 10, 2021, by The Vanguard Group, The Vanguard Group reported no sole voting power, sole dispositive power with respect to 10,154,617 shares, shared dispositive power with respect to 168,810 shares and shared voting power with respect to 92,605 shares.
(8)
Based on the Schedule 13G/A filed with the SEC on February 12, 2021, by Dimensional Fund Advisors LP, Dimensional Fund Advisors LP reported sole voting power with respect to 7,054,028 shares, sole dispositive power with respect to 7,246,887 shares and no shared voting or dispositive power.
(9)
Based on the Schedule 13G/A filed with the SEC on February 12, 2021, by Macquarie Group Limited, Macquarie Group Limited reported sole voting power of Macquarie Investment Management Holdings Inc. with respect to 4,995,065 shares, sole voting power of Macquarie Investment Management Group Limited with respect to 4,006 shares, sole dispositive power of Macquarie Investment Management Holdings Inc. with respect to 4,995,065 shares, sole dispositive power of Macquarie Investment Management Group Limited with respect to 4,006 shares and no shared voting or dispositive power.
(10)
Based on the Schedule 13D filed with the SEC on December 2, 2020,January 14, 2022 by Brookfield Asset Management Inc.Reinsurance Partners Ltd., Brookfield Asset Management Inc.which reported no sole voting power, no sole dispositive power, shared voting power with respect to 9,106,042 shares, and shared dispositive power with respect to 9,106,042 shares.
Equity Plan Information
The following table sets forth informationbeneficial ownership as of December 31, 2020 concerning plans and arrangements the Company has with its directors, officers, employees and independent insurance agents under which they have received equity-based rights to receive sharesJanuary 7, 2022.
(6)Percentage of Common Stock. The Company has granted or reserved options, restricted stock and RSUs under the 2011 Directors Stock Option Plan, the 2012 Independent Insurance Agent Stock Option Plan (“2012 Agent Plan”), the Amended and Restated 2014 Independent Insurance Agent Restricted Stock and Restricted Stock Unit Plan (“2014 Agent Plan”), the 2016 Employee Incentive Plan and the Amended and Restated Equity Incentive Plan. | | | | | Equity Plan Information | | | | Plan Category | | | Number of securities
to be issued
upon exercise of
outstanding options,
warrants and rights(1)
(#) | | | Weighted-average
exercise price of
outstanding options,
warrants and rights(2)
($) | | | Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding securities
reflected in column (a))
(#) | | | | | | | (a) | | | (b) | | | (c) | | | | Equity compensation plans approved by shareholders | | | | | 1,597,722 | | | | | | 25.23 | | | | | | 3,485,509 | | | | | Equity compensation plans not approved by
shareholders | | | | | 355,150 | | | | | | 24.79 | | | | | | — | | | | | Total | | | | | 1,952,872 | | | | | | 25.10 | | | | | | 3,485,509 | | |
class as reported in schedules described in footnotes (1) - (5).
(1)
Includes performance-based RSUs (assuming target performance goals are met) granted to employees that have not been earned as of December 31, 2020 as well as RSUs granted under the 2014 Agent Plan that have not been earned as of December 31, 2020.
(2)
Weighted-average exercise price does not take into account performance-based RSUs granted that have not been earned as of December 31, 2020.
The 2012 Agent Plan included in the “Equity compensation plans not approved by shareholders” line in the table above is intended to benefit the Company and its shareholders by assisting the Company’s wholly-owned operating subsidiary, American Equity Life, in attracting and retaining certain independent agents of outstanding ability and to align the interests of such independent agents with those of the Company’s shareholders by increasing their long-term financial stake in the Company’s continued success through the use of stock options. The 2012 Agent Plan provided for the issuance of up to an aggregate of 5,500,000 shares of Common Stock. The 2012 Agent Plan has terminated as to future awards without affecting the validity of options outstanding. The 2012 Agent Plan is administered by the Company’s Executive Committee. The Executive Committee has the authority to determine sales production criteria for the receipt of awards, the terms of all awards and provisions relating to vesting and any other terms and conditions or restrictions the Executive Committee deems appropriate. Options awarded under the 2012 Agent Plan are not transferable other than by will or the laws of descent and distribution. If there is a Change in Control, as defined in the 2012 Agent Plan, or the independent insurance agent dies, the vesting of all outstanding options will accelerate and any other restrictions will lapse.
| 38 | | | 2021 | | | | | | | 2022 Proxy Statement | | | | | | | | | | |
2023 Shareholder Meeting Information Related Person Transaction Disclosures
It is our policy to enter into or ratify Related Person Transactions (as defined below) only when the Board of Directors, acting through our Audit Committee or as otherwise described herein, determines that the Related Person Transaction in question is in, or is not inconsistent with, the best interests of the Company and its shareholders, including but not limited to situations where the Company may obtain products or services of a nature, quantity or quality, or on other terms, not readily available from alternative sources or when the Company provides products or services to related persons on an arm’s length basis on terms comparable to those provided to unrelated third parties or on terms comparable to those provided to employees generally. Therefore, the Company has adopted the procedures below for the review, approval or ratification of Related Person Transactions.
To deal with the potential conflicts inherent in such transactions, our Audit Committee adopted a written policy regarding Related Person Transactions. For the purposes of this policy, a “Related Person Transaction” is a transaction, arrangement, or relationship (or any series of similar transactions, arrangements, or relationships) in which the Company was, is, or will be a participant and the amount involved exceeds $120,000, and in which any related person had, has, or will have a direct or indirect material interest, and a “related person” means:
•
any person who is, or at any time since the beginning of our last fiscal year was, a director or executive officer of the Company or a nominee to become a director of the Company;
•
any person who is known to be the beneficial owner of more than 5% of any class of our voting securities;
•
any immediate family member of any of the foregoing persons; and
•
any firm, corporation, or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest.
Any proposed transaction with a related person shall be consummated or amended only if the following steps are taken:
•
Counsel (either inside or outside) will assess whether the proposed transaction is a Related Person Transaction for purposes of this policy.
•
If counsel determines that the proposed transaction is a Related Person Transaction, the proposed transaction shall be submitted to the Audit Committee for consideration at the next committee meeting or, in those instances in which counsel, in consultation with the Chief Executive Officer or the Chief Financial Officer, determines that it is not practicable or desirable to wait until the next committee meeting, to the Chairman of the Audit Committee (who has been delegated authority to act between committee meetings).
•
The Audit Committee, or where submitted to the Chairman of the committee, the Chairman, shall consider all of the relevant facts and circumstances available to the committee or the Chairman, including (if applicable) but not limited to: (i) the benefits to the Company; (ii) the impact on a director’s independence in the event the related person is a director, an immediate family member of a director, or an entity in which a director is a partner, shareholder, or executive officer; (iii) the availability of other suppliers or customers for comparable products or services; (iv) the terms of the transaction; and (v) the terms available to unrelated third parties or to employees generally.
•
The Audit Committee (or the Chairman) shall approve only those Related Person Transactions in, or not inconsistent with, the best interests of the Company and its shareholders, as the committee (or the Chairman) determines in good faith. The Audit Committee or Chairman, as applicable, shall convey the decision to counsel, who shall convey the decision to the appropriate persons within the Company.
At the Audit Committee’s first meeting of each fiscal year, the committee shall review any previously approved Related Person Transactions that remain ongoing and have a remaining term of more than six months or remaining amounts payable to or receivable from the Company of more than $120,000. Based on all relevant facts and circumstances, taking into consideration the Company’s contractual obligations, the committee shall determine if it is in the best interests of the Company and its shareholders to continue, modify, or terminate the Related Person Transaction.
No member of the Audit Committee shall participate in any review, consideration, or approval of any Related Person Transaction with respect to which such member or any of his or her immediate family members is the related person.
During fiscal year 2020, the Company had the following Related Person Transaction:
BlackRock, Inc. (“BlackRock”) provides investment management services and licenses a risk management analytics tool to the Company. BlackRock is a shareholder known by the Company to be the beneficial owner of more than 5% of the Company’s Common Stock as set forth in the Security Ownership of Management and Certain Beneficial Owners section of this proxy statement. For 2020, the Company paid BlackRock and its affiliates an aggregate of $2,095,893 in the form of investment management and license fees.
| | | | | | | | | | 2021 Proxy Statement | | | 39 | |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) ofRule 14a-8 under the Exchange Act generally requiresestablishes the officerseligibility requirements and directors ofthe procedures a reporting company, and persons who own more than ten percent ofshareholder must follow for a registered class ofshareholder’s proposal to be included in a reportingpublic company’s equity securities, to file reports of beneficial ownership and changes in beneficial ownership withproxy materials. Any such proposal for the SEC. Based solely on our review of the copies of such reports2023 annual shareholder meeting must be received by us or upon written representations received from certain reporting persons, we believe that during 2020, our officers, directors and ten-percent shareholders complied with all Section 16(a) filing requirements applicable to them other than one late Form 4 filing by Jennifer L. Bryant.
Shareholder Proposals for the 2022 Annual Meeting
Shareholder proposals to be considered for inclusion in our proxy statement for the annual meeting to be held in 2022 or shareholder proposals to be presented from the floor of the meeting must be submitted in writing to theat American Equity Corporate Secretary, 6000 Westown Parkway, West Des Moines, Iowa 50266, and must comply with SEC rules to be eligible for inclusion in our proxy materials for our 2022 meeting.
A shareholder may present a proposal for inclusion in our proxy statement if such shareholder (i) is a record or beneficial owner of at least one percent or $2,000 in value of shares entitled to be voted at the meeting and has held the shares for at least one year prior to the time the proposal is submitted; and (ii) continues to own the shares through the date of the meeting. Any such proposal must be received by us prior to December 29, 2021.28, 2022.
In addition, under our Amended and Restated Bylaws, a shareholder who desires to present a proposal or nomination of director from the floor of the 2022 Annual Meeting of Shareholders2023 annual shareholder meeting must submit the proposal or nomination of director to the Corporate Secretary andat the address above. Any such proposal must be delivered (or mailed and received) between March 11, 202212, 2023 and April 11, 2022.2023. Any such proposal must set forth as to each matter such shareholder proposes to bring before the 2023 annual shareholder meeting (i) a brief description of the business desired to be brought before the annual shareholder meeting and the reasons for conducting such business at the annual shareholder meeting, (ii) the name and record address of such shareholder, (iii) the class or series and number of shares of capital stock of the Company which are owned beneficially or of record by such shareholder, (iv) a description of all arrangements or understandings between such shareholder and any other person or persons (including their names) in connection with the proposal of such business by such shareholder and any material interest of such shareholder in such business, and (v) a representation that such shareholder intends to appear in person or by proxy at the annual shareholder meeting to bring such business before the meeting. The deadline for notice of solicitation of proxies in support of non-registrant director nominees for our 2023 annual shareholder meeting is April 11, 2023.
Shareholder Communications with the Board Shareholders may communicate with the Company through itsus by writing to our Investor Relations Department by writing to Investor Relations at 6000 Westown Parkway, West Des Moines, Iowa 50266. Shareholders interested in communicating with our Board of Directors, any committee of the Board of Directors, any individual director, or any group of directors should send written correspondence to American Equity Investment Life Holding Company Board of Directors, c/o Corporate Secretary, 6000 Westown Parkway, West Des Moines, Iowa 50266. Assuming our Corporate Secretary concludes that the communication discusses business or other matters relevant to our Board's activities, we will distribute a copy (or summary) of it to the addressees. Householding;
Proxy Solicitation Costs We have retained Alliance Advisors, LLC to assist with the solicitation of proxies from shareholders and will pay a fee of approximately $20,610, plus expenses, for these services. We will also reimburse banks, brokers, and other record holders for their costs of sending our proxy materials to beneficial owners. Our directors, officers or other employees also may solicit proxies from shareholders in person, or by telephone, facsimile transmission or other electronic means of communication, but will not receive any additional compensation for such services.
Equity Compensation Plan Information at December 31, 2021 | | | | | | | | | | | | | Plan Category | Number of securities
to be issued
upon exercise of
outstanding options,
warrants and rights
(#) | Weighted-average
exercise price of
outstanding options,
warrants and rights
($) | Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding securities
reflected in column (a))
(#) | | (a) | (b) | (c) | | Equity compensation plans approved by security holders | 2,929,443 | 27.84 | 1,924,101 | | Total | 2,929,443 | 27.84 | 1,924,101 |
Column (a) in the table above includes outstanding Performance RSUs (assuming target performance), Time RSUs, and stock options. For more information on Performance RSUs, see Note 13 to the Consolidated Financial Statements in our 2021 10-K. Column (b) is the weighted-average exercise price of stock options. At year-end 2021, we had awards outstanding under the 2011 Directors Stock Option Plan, the Amended and Restated 2014 Independent Insurance Agent Restricted Stock and Restricted Stock Unit Plan, the 2016 Employee Incentive Plan, and the Equity Plan. Our plans have formulae for increasing the number of shares available for issuance where no shares (or fewer than the number of shares originally issuable) are settled for an award and in case of certain repurchases, stock dividends and distributions, recapitalization, spin-offs, and other extraordinary transactions.
Our 2021 10-K Our 2021 Annual Report on Form 10-K The SEC permits companies and intermediaries, such as a brokerage firm or a bank, to satisfy the delivery requirements for Notices and proxy materials with respect to two or more shareholders sharing the same address by delivering only one Notice or set of proxy materials to that address. This process, which is commonly referred to as “householding,” can effectively reduce our printing and postage costs.
Certain of our shareholders whose shares are held in street name and who have consented to householding will receive only one Notice or set of proxy materials per household. If you would like to receive a separate set of proxy materials in the future, or if your household is currently receiving multiple copies of the same items and you would like to receive only a single copy at your address in the future, please contact Investor Relations, at 6000 Westown Parkway, West Des Moines, Iowa 50266 (1-888-221-1234, ext. 3602) and indicate your name, the name of each of your brokerage firms or banks where your shares are held, and your account numbers.
Simultaneously with the mailing of this proxy statement to certain of our shareholders, we are mailing our 2020 Annual Report and Form 10-K to shareholders of record on April 28, 2021. The Annual Report and Form 10-K are available online at www.american-equity.com.
Any shareholder who desires to obtain additional copies, free of charge, of our Annual Report on Form 10-K for the year ended December 31, 2020 (including our audited consolidated financial statements and financial statement schedules), as filed with the SEC, is available online at www.american-equity.com under "Investor Relations." Any shareholder who wants a hard copy, free of charge, may contact Investor Relations at 6000 Westown Parkway, West Des Moines, Iowa 50266 (1-888-221-1234, ext. 3602).
Forward Looking Statements This proxy statement may contain or incorporate by reference information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events and do not relate strictly to historical or current facts. They use words and terms such as advance, believe, coming, commitment, estimate, expect, future, goal, likely, may, remain, schedule, shortly, should, target, will, would, and other words and terms of similar meaning or that are otherwise tied to future periods or future performance, in each case in all derivative forms. They include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, future sales efforts, future expenses, the outcome of contingencies such as legal proceedings, and future trends in operations and financial results. Many factors determine our results, and they involve unpredictable risks and uncertainties. Our forward-looking statements depend on our assumptions, our expectations, and our understanding of the economic environment, but they may be inaccurate and may change. We do not guarantee any future performance. Our results could differ materially from what we express or imply in forward-looking statements. We identify some of the risks and uncertainties that may cause such differences in our 2021 10-K, any Quarterly Reports on Form 10-Q, or any Current Reports on Form 8-K we filed with the SEC after we filed our 2021 10-K, as well as in our other filings, under the captions "Note Regarding Forward-Looking Statements" or "Risk Factors." We do not undertake any obligation to publicly correct or update any forward-looking statement if we later become aware that such statement is not likely to be achieved. Please consult any further SEC disclosures we make on related subjects.
| 40 | | | 2021 | | | | | | | 2022 Proxy Statement | | | | | | | | | | |
Appendix A
Non-GAAP and Other Financial Disclosures ![[MISSING IMAGE: tm212400d1-proxy_1annualbw.jpg]](https://files.docoh.com/DEF 14A/0001104659-21-056542/tm212400d1-proxy_1annualbw.jpg) Proxy —In this proxy statement, we present certain measures of our performance not calculated in accordance with accounting principles generally accepted in the United States of American Equity Investment Life Holding CompanyProxy Solicited by Board of Directors for Annual Meeting - June 10, 2021Anant Bhalla, David S. Mulcahy and Phyllis J. Zanghi, or any one of them, each with(GAAP). We believe that these non-GAAP financial measures enhance the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Shareholdersunderstanding of American Equity Investment Life Holding Companyand its performance by highlighting the results of operations and the underlying profitability drivers of the business. The non-GAAP financial measures should not be viewed as substitutes for the most directly comparable financial measures calculated in accordance with GAAP. Reconciliations of these non-GAAP financial measures to be heldthe most directly comparable GAAP financial measures are included in this section.
Non-GAAP operating income available to common stockholders equals net income (loss) available to common stockholders adjusted to eliminate the impact of items that fluctuate from quarter to quarter in a manner unrelated to core operations, and we believe measures excluding their impact are useful in analyzing operating trends. The most significant adjustments to arrive at non-GAAP operating income available to common stockholders include: •elimination of the impact of fair value accounting for our fixed index annuity business. The impact from these items are not economic in nature but rather impact the timing of reported results; •elimination of the impact of index credits on June 10, 2021 orthe reserve for lifetime income benefit riders. The impact of this item creates market-driven volatility not connected to management decisions and efforts; and •elimination of the impact of notable items which primarily relate to actuarial assumption updates. The impact of these items do not reflect the company's expected ongoing operations. Reconciliation from Net Income (Loss) Available to Common Stockholders to Non-GAAP Operating Income Available to Common Stockholders and Non-GAAP Operating Income Available to Common Stockholders, Excluding Index Credits and Notable Items | | | | | | | 2021 | | Net income (loss) available to common stockholders | $ | 430,317 | | | Adjustments to arrive at non-GAAP operating income available to common stockholders: (a) | | | Net realized losses on financial assets, including credit losses | 10,299 | | | Change in fair value of derivatives and embedded derivatives | (187,290) | | | Income taxes | 37,184 | | | Non-GAAP operating income available to common stockholders | 290,510 | | | Impact of index credits (a) | (121,184) | | | Impact of notable items | 78,036 | | | Non-GAAP operating income available to common stockholders, excluding index credits and notable items | $ | 247,362 | | | | | Per common share - assuming dilution: | | | Net income (loss) available to common stockholders | $ | 4.55 | | | Adjustments to arrive at non-GAAP operating income available to common stockholders: | | | Net realized losses on financial assets, including credit losses | 0.11 | | | Change in fair value of derivatives and embedded derivatives | (1.98) | | | Income taxes | 0.39 | | | Non-GAAP operating income available to common stockholders | 3.07 | | | Impact of index credits | (1.28) | | | Impact of notable items | 0.83 | | | Non-GAAP operating income available to common stockholders, excluding index credits and notable items | $ | 2.62 | |
(a)Adjustments to net income (loss) available to common stockholders to arrive at any postponement or adjournment thereof.This proxy when properly executed will be votednon-GAAP operating income available to common stockholders are presented net of related adjustments to amortization of deferred sales inducements (DSI) and deferred policy acquisition costs (DAC) and accretion of lifetime income benefit rider (LIBR) reserves where applicable.
Total common stockholders’ equity and book value per common share excluding accumulated other comprehensive income (AOCI) are non-GAAP financial measures which are based on common stockholders’ equity excluding the effect of AOCI. Since AOCI fluctuates from quarter to quarter due to unrealized changes in the manner you direct on the reverse side. If you sign this proxy but provide no directions asfair value of available for sale securities, we believe these non-GAAP financial measures are useful in analyzing operating trends.
Reconciliation from Total Stockholders' Equity to how to vote your shares for one or more of the proposals, then we will cast your votes under this proxy FOR all of the nominees listed in Proposal 1 and FOR Proposals 2 and 3.In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting.(Continued and to be voted on reverse side.)PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED.Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held June 10, 2021.The Proxy Statement and our 2020 Annual Report are available at: http://viewproxy.com/americanequity/2021Total Common Stockholders' Equity Excluding AOCI | | | | | | | | | | 12/31/2018 | 12/31/2021 | | Total stockholders' equity | 2,399,101 | 6,323,127 | | Equity available to preferred stockholders | - | (700,000) | | Total common stockholders' equity | 2,399,101 | 5,623,127 | | Accumulated other comprehensive income | 52,432 | (1,848,789) | | Total common stockholders' equity excluding AOCI | 2,451,533 | 3,774,338 | | | | | Common shares outstanding | 90,369,229 | 92,513,517 | | | | | Book value per common share | 26.55 | 60.78 | | Book value per common share excluding AOCI | 27.13 | 40.80 | | | | | Average book value per common share growth | | 42.98% | | Average book value per common share growth excluding AOCI | | 16.80% |
 ![[MISSING IMAGE: tm212400d1-proxy_2annualbw.jpg]](https://files.docoh.com/DEF 14A/0001104659-21-056542/tm212400d1-proxy_2annualbw.jpg) Annual Meeting Proxy CardUsing a black ink pen, mark your votes with an X as shown inProposals — The Board recommends a vote “FOR” all nominees listed in Proposal 1 and “FOR” Proposals 2 and 3.2.To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2021. FOR AGAINST ABSTAIN3.To approve, on an advisory basis, the compensation of our named executive officers. FOR AGAINST ABSTAINNote: To transact such other business as may properly come before the meeting.I plan on attending the meeting Please sign exactly as name appears below. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If signing for a corporation or partnership, authorized person should sign full corporation or partnership name and indicate capacity in which they sign.Date: CONTROL NUMBER SignatureSignature (if held jointly) PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED.PROXY VOTING INSTRUCTIONSPlease have your 11 digit control number ready when voting by Internet or TelephoneInternet voting is available through 1:00 A.M. Central Time on June 10, 2021.INTERNETVote Your Proxy on the Internet:Go to www.AALvote.com/AELHave your proxy card available when you access the above website. Follow the prompts to vote your shares.TELEPHONEVote Your Proxy by Phone:Call 1 (866) 804-9616Use any touch-tone telephone to vote your proxy. Have your proxy card available when you call. Follow the voting instructions to vote your shares.MAILVote Your Proxy by Mail:Mark, sign, and date your proxy card, then detach it, and return it in the postage-paid envelope provided.
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