American Equity Investment Life Holding Company (NYSE: AEL), a leading underwriter of fixed-rate and index annuities, today reported 2008 second quarter operating income¹ of $18.7 million, or $0.33 per diluted common share, an increase of 14% over 2007 second quarter operating income of $16.3 million, or $0.28 per diluted common share. Financial highlights include:

• Annuity sales of $648.0 million during the second quarter of 2008, an increase of 4% over second quarter 2007 annuity sales of $622.5 million
• Investment spread on annuity business of 2.76% for the second quarter of 2008 compared to 2.59% for the first quarter 2008
• Book value per outstanding common share² of $12.77 (excluding Accumulated Other Comprehensive Loss)

Net income for the second quarter of 2008 was $4.8 million, or $0.09 per diluted common share, compared to net income of $20.6 million, or $0.35 per diluted common share for the same period in 2007. Net income for the second quarter of 2008 was reduced by $8.9 million for recognition of “other than temporary impairments” on invested assets resulting in realized losses, net of taxes and adjustments to the amortization of deferred policy acquisition costs and deferred sales inducements, and by $5.6 million for net valuation adjustments in the derivatives and embedded derivatives associated with American Equity’s index annuity business.

CONTINUED SALES MOMENTUM

New sales of American Equity’s annuity products remained strong in the second quarter of 2008, with sales exceeding $200 million per month for each month during the quarter. This momentum has continued into July, 2008, with sales again expected to exceed $200 million. New annuity sales in 2008 have been predominantly sales of American Equity’s multi-strategy index annuities. Allocations of new premium to the fixed-rate strategy within the index products increased to 37% of deposits received in the first six months of 2008 compared to 27% in the first six months of 2007. Commented David J. Noble, Chairman, Chief Executive Officer and President of American Equity, “We are very proud of the fact that no American Equity annuity holder has ever lost a dime of contract value due to market volatility. Nearly every day brings news of the capital crises affecting our nation, but our annuity holders need not worry about the safety of their index and fixed-rate annuity savings. This is one of the great values that insurance products like index annuities bring to the market for principal-protected savings alternatives.”

On June 25, 2008, the Securities and Exchange Commission adopted proposed rule 151A which would change the legal status of index annuities from insurance to securities. If adopted in its present form, the earliest the rule would become effective is late 2009, and it applies prospectively only to sales of index annuities after the effective date. The proposed rule appears to be having little effect on new sales currently. American Equity believes the rule reflects fundamental inaccuracies and misperceptions about index annuities, how they are marketed and how they are regulated by state insurance departments. Regardless of whether the rule is adopted, American Equity intends to be prepared to market a registered index annuity through the broker dealer distribution channel, and the company is working with its independent insurance agents and national marketing organizations to adapt to this potential change. In addition, American Equity will enhance its product offerings in fixed-rate annuities, for which the company anticipates continued market demand.

STEADY IMPROVEMENT IN GROSS INVESTMENT SPREADS

American Equity’s gross investment spread on aggregate annuity reserves was 2.76% for the second quarter of 2008, compared to 2.59% for the first quarter of 2008. This improvement reflects both enhanced yields on invested assets as well as a steady decrease in the cost of money for the company’s annuity liabilities. Second quarter 2008 aggregate yield on invested assets was 6.20% compared to 6.14% for the first quarter of 2008. During the second quarter American Equity purchased new fixed income securities totaling $1.26 billion with an average yield of 6.66% and made new commercial mortgage loans totaling $185.6 million with an average yield of 6.13%. Fixed income securities called or sold during the second quarter totaled $1.01 billion with an average yield of 6.53%.

The aggregate cost of money declined to 3.44% in the second quarter of 2008 compared to 3.55% in the first quarter of 2008. This reduction, which began in the first quarter of 2008, was driven primarily by lower costs of one-year call options purchased to fund the index credits on American Equity’s index annuities, and reflects rate cuts implemented during 2007 in response to increasing volatility and corresponding increases in option costs for that year.

CONTINUED STRONG ASSET QUALITY

While valuations have declined in certain asset sectors over the last 12 months, the quality of American Equity’s invested assets remains strong with over 99% of fixed income securities rated investment grade or higher, and 89% rated A or higher. The quality of American Equity’s commercial mortgage loans, totaling $2.2 billion at June 30, 2008 or 16.8% of total invested assets, has also remained consistently high, with no defaults, delinquencies or restructurings. American Equity has no exposure to subprime residential mortgages, and its investments in “Alt-A” residential mortgage loan pools are all in the highest available tranches of such pools with no exposure to adjustable rate mortgage loans and no leverage related to those investments.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to future operations, strategies, financial results or other developments, and are subject to assumptions, risks and uncertainties. Statements such as “guidance,” “expect,” “anticipate,” “believe,” “goal,” “objective,” “target,” “may,” “should,” “estimate,” “projects,” or similar words as well as specific projections of future results qualify as forward-looking statements. Factors that may cause our actual results to differ materially from those contemplated by these forward looking statements can be found in the company’s Form 10-K filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date the statement was made and the company undertakes no obligation to update such forward-looking statements. There can be no assurance that other factors not currently anticipated by the company will not materially and adversely affect our results of operations. Investors are cautioned not to place undue reliance on any forward-looking statements made by us or on our behalf.

CONFERENCE CALL

American Equity will hold a conference call to discuss second quarter 2008 earnings on Thursday, July 31, 2008, at 10 a.m. CDT. The conference call will be webcast live on the Internet. Investors and interested parties who wish to listen to the call on the Internet may do so at www.american-equity.com. The call may also be accessed by telephone at 1-866-356-4441, passcode 85146842 (international callers, please dial 1-617-597-5396). An audio replay will be available shortly after the call on AEL’s web site. An audio replay will also be available via telephone through August 21, 2008 by calling 1-888-286-8010, passcode 86101638 (international callers will need to dial 1-617-801-6888).

ABOUT AMERICAN EQUITY

American Equity Investment Life Holding Company, through its wholly-owned operating subsidiaries, is a full-service underwriter of a broad line of annuity and insurance products with a primary emphasis on the sale of fixed-rate and index annuities. The company’s headquarters are located at 5000 Westown Parkway, West Des Moines, Iowa, 50266. The mailing address of the company is: P.O. Box 71216, Des Moines, Iowa, 50325. For more information, visit our website www.american-equity.com.

¹ In addition to net income, American Equity has consistently utilized operating income, a non-GAAP financial measure commonly used in the life insurance industry, as an economic measure to evaluate its financial performance. Operating income equals net income adjusted to eliminate the impact of (i) net realized gains and losses on investments; and (ii) the impact of SFAS 133, dealing with the fair value changes in derivatives and embedded derivatives. Because these items fluctuate from quarter to quarter in a manner unrelated to core operations, American Equity believes a measure excluding their impact is useful in analyzing operating trends. American Equity believes the combined presentation and evaluation of operating income together with net income, provides information that may enhance an investor’s understanding of American Equity’s underlying results and profitability. A reconciliation of net income to operating income is provided in the accompanying tables.

² Book value per outstanding share excluding Accumulated Other Comprehensive Loss (“AOCL”), a non-GAAP financial measure, is calculated as total stockholders’ equity excluding AOCL divided by the total number of shares of common stock outstanding.

American Equity Investment Life Holding Company
Debra J. Richardson, 515-273-3551
Sr. Vice President
drichardson@american-equity.com
or
John M. Matovina, 515-457-1813
Vice Chairman
jmatovina@american-equity.com
or
D. J. Noble, 515-457-1705
Chairman
dnoble@american-equity.com
or
Julie L. LaFollette, 515-273-3602
Investor Relations
jlafollette@american-equity.com